Intrum : Report Q221 Eng

Intrum is setting the standard by codifying industry leading practices into 10 key principles for ethical and sound debt collection - we are leading the way

Interim report

Second quarter, 2021

• Revenues increased to SEK 4,424 M (3,885) and adjusted revenues increased to SEK 4,422 M (3,882). Adjusted oper- ating earnings (EBIT) increased to SEK 1,594 M (1,345).
• Cash EBITDA increased to SEK 2,966 M (2,709) and avail- able liquidity at the end of the quarter amounted to SEK 16,790 M (10,975). Net debt/RTM cash EBITDA decreased to 4.1x (4.4x).
• Cash EBIT increased to SEK 1,413 (1,294), cash RoIC to 7.9 per cent (7.0) and cash earnings per share (Cash EPS) were SEK 5.67 (7.98).
• For the Credit Management Services segment cash EBIT increased to SEK 411 M (374) and the adjusted operating margin decreased to 23 per cent (24). The segment cash RoIC for the quarter was 8.5 per cent (7.5).
• For Strategic Markets cash EBIT increased to SEK 572 M (525) and the adjusted operating margin decreased to 26 per cent (27). The segment cash RoIC for the quarter was 14.4 per cent (11.9).
• For Portfolio Investments cash EBIT increased to SEK 925 M (775), cash RoIC was 10.3 per cent (8.6) and total portfo- lio investments made amounted to SEK 2,051 M (1,299) for the quarter.

Second quarter, 2021

							Rolling
	Second quarter			6 months		12 months	Full year
	Apr-June	Apr-June	Change	Jan-June	Jan-June	Change	July 2020-
SEK M, unless otherwise indicated	2021	2020	%	2021	2020	%	June 2021	2020
Revenues	4,424	3,885	14	8,625	7,218	19	18,255	16,848
Adjusted revenues	4,422	3,882	14	8,620	7,852	10	17,499	16,731
Operating earnings (EBIT)	1,563	1,348	16	3,094	1,807	71	5,982	4,695
Adjusted operating earnings (EBIT)	1,594	1,345	19	3,126	2,440	28	6,424	5,738
Earnings per share, SEK	6.48	5.39	20	12.54	4.81	161	22.91	15.18
Cash EBITDA	2,966	2,709	9	5,678	5,342	6	11,943	11,607
Cash EBIT	1,413	1,294	9	2,778	2,399	16	5,959	5,580
Cash EPS, SEK	5.67	7.98	-29	11.34	10.21	11	26.22	25.28
Cash RoIC, %	7.9	7.0	0.9 ppt	7.9	6.4	1.5 ppt	8.4	7.7
Net debt/RTM cash EBITDA, x							4.1	4.0
Cash EBIT: Credit Management Services	411	374	10	807	820	-2	1,583	1,596
Cash EBIT: Strategic Markets	572	525	9	1,217	845	44	2,911	2,539
Cash EBIT: Portfolio Investments	925	775	19	1,754	1,609	9	3,335	3,190
Total portfolio investments made	2,051	1,299	58	3,790	2,972	28	5,947	5,129
Carrying value of portfolio investments	35,629	34,945	2	35,629	34,945	2	35,629	33,305
Adjusted return on portfolio investments, (ROI), %	15	11	4 ppt	15	11	4 ppt	13	12

Q2 in brief Comment by the President and CEOGroup overview Segment overview Financial report Other information Definitions About Intrum

Intrum  Interim report, second quarter 2021

2

Comment by the President and CEO

Record cash collections and a landmark partnership

Intrum concluded the first half of 2021 with ever increasing support from the megatrends highlighted at the capital markets day in late 2020. During the second quarter we achieved record cash collections in our Portfolio Investments segment and based on a very strong servicing pipeline we entered into a number of significant new agreements. Servicing transactions won include a landmark partnership with Svenska Handelsbanken in Sweden, completing our servicing coverage of the six largest Nordic financial institutions, as well as a sizeable servicing contract in our Strategic Markets in the context of a co-investment with DEVA Capital, adding assets under management to our Italian platform.

The macro environment we have experienced in the spring and early summer was in general positive, as we have seen a number of steps to open up the economies throughout Europe. I sincerely hope this indicates that recovery and normalisation can build on increasingly solid ground in Europe during the third quarter and that the reported cluster outbreaks of Covid-19 cases, as well as any extended restrictions, will be kept contained. With the recent developments we continue to be cautiously optimistic on the trajectory of the pandemic recovery in general and a gradual improvement of our business climate in particular.

For the second quarter we recorded a foreign exchange adjusted cash revenues growth of 17 per cent and cash EBIT growth of 9 per cent year over year. Group leverage remained at 4.1x net debt to RTM cash EBITDA and the RTM cash EPS at the end of the second quarter amounted to SEK 26.22.

All global front offices open and operational

Our transformation towards ONE Intrum is progressing according to plan and during the quarter our third, and last, global front office opened in Malaga, Spain. Our global front offices now cover 11 countries, serviced by 115 agents performing circa 31,000 daily contact attempts.

In addition to the physical front offices, we are piloting a virtual front office concept. The virtual front office enables efficiency gains and cost synergies for the remaining local front

office agents by connecting them to the global front offices and leveraging their state-of-the-art technology and best practices. Another important milestone was achieved this quarter when the first secured portfolio was migrated to the global platform.

We are now entering a phase of accelerated case migra- tion, significantly increasing the total volume of cases on the global platform. This process is closely monitored and coordinated by the global transformation office that, to date, has successfully migrated more than one million cases, generating very few exceptions. I am excited to enter this fast paced migration phase as it will accelerate our transformation to one platform and demonstrate our increased efficiency and ability to globally serve our clients.

Landmark transaction and positive new case inflow developments

We have seen our pipeline grow and interest in our credit management services resurface over the last year. During the quarter we closed some important transactions, including a landmark servicing partnership with Svenska Handelsbanken in Sweden. By adding Svenska Handelsbanken, we now work with all six large financial institutions in the Nordics and this new contract highlights our long-term sustainable growth ambition in the region. As regards new case inflows we continue to see encouraging developments at a varying pace across our footprint. In particular the number of new cases, as a lead indicator, continues to increase while we expect average case values and ultimately revenues to follow with a lag.

Cash EBIT for the CMS segment is up 10 per cent compared to last year and return on invested capital is at 8.5 per cent and has been on a positive trajectory throughout the quarter.

Solid quarter against normalisation backdrop

Strategic Markets delivered a stronger second quarter compared to last year and ended the quarter on a positive trajectory. Notably for the segment, the real estate market in Spain continues to

"Servicing transactions won include a landmark partnership with Svenska Handelsbanken in Sweden, completing our servicing coverage of the six largest Nordic financial institutions, as well as a sizeable servicing contract in our Strategic Markets"

Q2 in brief Comment by the President and CEOGroup overview Segment overview Financial report Other information Definitions About Intrum

Intrum  Interim report, second quarter 2021

3

be characterised by high sales volumes and our servicing activity also remains high. In Greece, our business continues to deliver according to the initial business plan. In Italy, the market is characterised by a gradual return to normality and we expect that ending the debt moratorium during the autumn will be another step for the market to continue to address the non-performing exposures in the financial system.

The cash EBIT came in 9 per cent above the second quarter last year and the return on invested capital was 14.4 per cent for the second quarter, up 2.5 percentage points compared to last year.

Record cash generation and attractive market opportunities Our Portfolio Investments segment had a record quarter when it comes to gross cash collections. For the first time our gross cash collections came in above SEK 3 bn and in relation to the active forecast the segment had a strong performance at an index of 116 per cent. During the quarter we invested more than SEK 2 bn, which is almost 60 per cent above last year's investments and 30 per cent above the replenishment rate. At the end of the first half of the year, we have already invested, or committed to invest, c. SEK 6 bn for the full year, which reflects the increasing market activity where clients are more proactively addressing their overdue receivables and an element of catch up from a slower 2020. During the quarter we closed two securitisation transactions amounting to a joint venture investment of SEK 280 M with Piraeus Bank, our partner in Greece. The structures are by nature off balance sheet and have a separate capital structure to be eligible for the Hellenic Asset Protection Scheme (HAPS), a Greek state guarantee provided to the senior part of the capital struc- ture. The transactions showcase the close partnership with Piraeus and also represent our first investment under the HAPS scheme. In addition to the investment in the notes, Intrum Hellas

will continue to service the assets under these portfolios.

The return on invested capital for the segment increased to 10.3 per cent, from 8.6 per cent last year reflecting the attractive market conditions we have experienced over the last twelve months. We expect the market backdrop to remain favourable.

Sustainability at the core of our business

The pandemic has had a big impact on many businesses across Europe but many have also seized the opportunity to think differently and are optimistic about the future. In our European Payment Report 2021, published in June, 45 per cent of the c. 11,500 companies surveyed said that they are more

enthusiastic about growth than they have been for a long time. Many are planning initiatives where, as an example, dealing with late payments is prioritised. Nearly 80 per cent deem long payment terms and the implications of debtors paying late to be problematic.

As a credit management company, we are playing an important role in the financial ecosystem, bringing value to both our clients and their customers by supporting the latter to pay their unpaid debts. As part of our efforts to treat everyone in line with our values - Empathy, Ethics, Solutions and Dedication - we have developed a detailed set of guidelines, the Treating Customers Fairly Instruction, that is applied across our operations. It is based on 10 key principles for ethical and sound debt collection services. These are robust principles that we believe should be a standard for our industry.

We are also very proud of the recognition we have gained during the first half of 2021 for our sustainability work. Sustainalytics's (a Morningstar company) ESG Risk Rating of Intrum improved from

24.5 (medium risk) in 2019 to 12.8 (low risk) and MSCI rates Intrum AA on a AAA-CCC scale.

With our efforts to help our clients receive payment for their goods and services, while treating our customers in an ethical and responsible manner, we make a difference and support growth. We are set to lead the way to fair and ethical collections and prof- itable organic growth.

Outlook

With a backdrop of higher savings rates amongst European con- sumers, increasing optimism amongst our clients and high level of economic stimuli, our business environment is set to continue to gradually improve throughout the year. I am very proud of how the organisation is managing both the important ongoing transformation of our company and at the same time relentlessly continuing to serve our clients and customers.

For the remaining half of the year, we will fully focus on the transformation as case migration accelerates and we expect a constructive development across the segments as we observe increasing client activity and opportunities, supporting our organic growth trajectory.

Stockholm, July 2021

Anders Engdahl

President & CEO

"We are playing an important role in the financial ecosystem. As part of our efforts to treat everyone in line with our values, we have developed a detailed set of guidelines, the Treating Customers Fairly Instruction, applied across our operations"

Q2 in brief Comment by the President and CEO Group overviewSegment overview Financial report Other information Definitions About Intrum

Intrum  Interim report, second quarter 2021

4

Group overview

Development during the second quarter

Revenues and operating earnings

Revenues for the quarter increased 14 per cent to SEK 4,424 M (3,885), with organic growth accounting for 19 per cent, revaluations for 0 per cent and currency effects for -5 per cent. The share of revenues denominated in EUR amounted to 61 per cent (61).

Operating earnings (EBIT) for the quarter amounted to SEK 1,563 M (1,348), with items affecting comparability of SEK -31 M

(3). The adjusted operating earnings, excluding items affecting comparability, increased to SEK 1,594 M (1,345).

Items affecting comparability

Operating earnings for the quarter included items affecting comparability of SEK -31 M (3). Portfolio revaluations amounted to SEK 3 M, items affecting comparability attributable to joint ventures to SEK -27 M and other items affecting comparability to SEK -6 M.

Net financial items

Net financial items for the quarter amounted to SEK -517 M (-482). Net interest amounted to SEK -441 M (-413), interest cost on leasing liabilites to SEK -10 M (-10), exchange rate differences to SEK 2 M (3) and other financial items to SEK -69 M (-62).

Earnings for the period and taxes

The tax expense for the quarter was SEK 235 M, representing

22.5 per cent of earnings before tax. Net earnings for the quar- ter amounted to SEK 810 M (671), corresponding to earnings per share of SEK 6.48 (5.39) before and after dilution.

The company's assessment is that the tax expense will, over the next few years, be around 20-25 per cent of earnings before tax for each year, excluding the outcome of any tax disputes.

Cash flow and investments

Cash revenues increased to SEK 5,591 M (4,977). Cash EBITDA and cash EBIT increased to SEK 2,966 M (2,709) and SEK 1,413 M (1,294) respectively. Cash EPS for the quarter amounted to

SEK 5.67 per share (7.98). Cash EBIT corresponds to a return on invested capital (cash RoIC) of 7.9 per cent (7.0) for the quarter. For the rolling twelve months cash revenues increased to 21,990 (20,897), cash EBIT to 5,959 (5,018) and cash RoIC to 8.4 per cent (6.8).

Assets and financing

Total assets at the end of the quarter amounted to SEK 83,278 M, compared to SEK 84,837 M at the end of the second quarter of the preceding year. Net debt amounted to SEK 49,309 M (49,716). Net debt in relation to the RTM cash EBITDA stands at 4.1x compared to 4.4x at the end of the second quarter 2020, the reduction comes from both increasing RTM cash EBITDA as well as a lower net debt. By the end of the second quarter Intrum had SEK 3,724 M (1,254) outstanding commercial paper, the increase reflects a more positive short term credit sentiment and the proceeds have been used to repay drawings under the revolving credit facility. At the end of the quarter SEK 3,975 (9,226) M of Intrum's credit facility was utilised.

Cash revenues, SEK M							Cash EBIT, SEK M							Cash RoIC, %
Cash revenues rolling 12 months, SEK M	Cash EBIT rolling 12 months, SEK M		Cash RoIC rolling 12 months, %
					5,601				5,591						1,659												9.2
			5,549
					5,249																			8.7
							1,523
	4,977
																			1,413												7.9
																												7.8
																		1,365
													1,294
			21,527		21,377		21,376		21,990														7.0
	20,897
															5,477		5,581		5,840		5,959						7.4		7.7		8.2		8.4
													5,018										6.8
	Q 2		Q 3		Q 4		Q 1		Q 2				Q 2		Q 3		Q 4		Q 1		Q 2				Q 2		Q 3		Q 4		Q 1		Q 2
	2020		2020		2020		2021		2021				2020		2020		2020		2021		2021				2020		2020		2020		2021		2021

Net Debt/RTM cash EBITDA

4.4x
4.2x		4.1x	4.1x
	4.0x

Q 2	Q 3	Q 4	Q 1	Q 2
2020	2020	2020	2021	2021

Q2 in brief Comment by the President and CEO Group overview Segment overviewFinancial report Other information Definitions About Intrum

Intrum  Interim report, second quarter 2021

5

Segment overview

Credit Management Services, Strategic Markets and Portfolio Investments

Key figures, Q2 2021

	Credit Management	Strategic	Portfolio	Group
SEK M	Services	Markets	Investments	items	Group
Cash revenues	1,012	1,315	3,265	-	5,591
Reported segment earnings	367	370	1,303	-477	1,563
Items affecting comparability	1	3	50	-23	31
Adjusted segment earnings	367	373	1,353	-499	1,594
Depreciation and amortisation	61	216	2	45	325
EBITDA	428	586	1,305	-431	1,888
Portfolio amortisation	-	-	1,120	-	1,120
Adjustment earnings from joint ventures	-	-	-95	-	-95
Adjustment cash flow from joint ventures	-	-	50	-	50
Items affecting comparability	1	3	22	-23	3
Cash EBITDA	429	589	2,402	-454	2,966
Replenishment capex	-	-	-1,477	-	-1,477
Other capex	-18	-17	-	-41	-76
Cash EBIT	411	572	925	-495	1,413
Cash financial items					-368
Cash tax normalised					-361
Recurring consolidated cash earnings					685
Average number of shares outstanding					121
Cash EPS, SEK					5.67
Average invested capital	19,381	15,841	35,888	235	71,345
Cash RoIC, %	8.5	14.4	10.3	-	7.9
Revenues	1,572	1,416	2,098	-661	4,424
Items affecting comparability	-	-	-3	-	-3
Adjusted revenues	1,572	1,416	2,095	-661	4,422
Reported segment earnings	367	370	1,303	-477	1,563
Depreciation and amortisation	61	216	2	45	325
Items affecting comparability	1	3	50	-23	31
Adjusted EBITDA	429	589	1,355	-454	1,919
Depreciation and amortisation	-61	-216	-2	-45	-325
Adjusted segment earnings	367	373	1,353	-499	1,594