Interim report January - March 2015 May 6, 2015 Stable earnings geared for growth
Introduction to Hoist Finance Introduction Established in 1994, Hoist Finance is a leading debt restructuring partner to international banks Main focus is the acquisition and management of bank-originated non-performing unsecured consumer loans (NPLs) 20 year track record of successfully acquiring and collecting on more than 1,550 NPL portfolios Amicable collection process striving for sustainable repayment plans Licensed and supervised by the SFSA with access to cost-efficient deposit funding base, HoistSpar, in Sweden (98% of deposits covered by Swedish deposit guarantee scheme) Diversified funding through senior and subordinated unsecured bonds in SEK and EUR Clear focus on debt purchase and FIs 17% Pan-European presence in nine countries Funding operations (HoistSpar) and Headquarter 20% Debt Purchasing and Debt Collection operations 12% Carrying value (1) 8.8bn 24% 27% PRODUCT MIX (2) Revenue Q1 2015 TYPE OF DEBT (3) Carrying value 31 March 2015 Third-party collections & Other 10% Trade & Other 4% Debt Purchase 90% Financial Institutions (FI) 96% Focus on bank originated debt 1) Including run off portfolio of consumer loans and portfolios contained in joint venture 2) Third-party collections and other ratio defined as revenue from servicing divided by total revenues 3) Financial institutions ratio defined as unsecured B2C FI debt to total. Trade & Other include unsecured B2C Retail, Secured and Other 2
Solid business model with over 20 years of experience Hoist Finance acquires non-performing consumer loans primarily from banks which are collected in a responsible manner and provide for stable and predictable cash flows over a long time period 2-3x Loans Loans Loans Loans Loans Loans 1. Contact 2. Open dialogue 5 10% of face value 3. Agreement Purchase price 1-2 years 3-4 years 5-6 years 7-8 years 9-10 years Cash collections Hoist Finance is a leading debt restructuring partner to international banks Optimised model for collections, both in-house and outsourced collection High earnings visibility due to strong track record of collections Portfolios from well reputed international banks Diversified presence we are where our clients are Debt portfolios based on responsible origination Liquidity and economy of scale benefits Focus on compliance, reputation and ethical behaviour Diversified funding 3
Amicable settlements AMICABLE AND RESPECTFUL COLLECTIONS Collection model shaped over 20 years of collections on own books Can pay Will pay Process payment Will not pay Legal enforcement Small installments debtors can afford, long term solutions Cannot pay Nominal payment Diarise INSTALMENT PLANS VS. ONE-OFF COLLECTIONS (1) Amicable approach to facilitate better consumer recovery and provide stable cash flows One-off 13% 1. Contact 2. Open Dialogue In-house collection model, complemented by preferred partners in selected markets 3. Agreement Instalment plans 87% Flexible full service offerings adapted to client needs 4
Highlights Q1 Key events during the quarter Successful listing on Nasdaq Stockholm with broad interest from Swedish and international investors With substantially improved capital adequacy and strong liquidity we are now well positioned for continued growth Q1 well in line with our expectations with stable earnings Negative impact from one-off items in Q1 costs IPO related cost (SEK 78M, whereof 45M over P&L) Hedging derivatives (SEK 20M) Seasonality effect on portfolio investments Newly acquired platforms in Italy and Poland are well integrated and performing according to plan S 5
First quarter key financial highlights Gross cash collections (SEK million) EBIT (adjusted for IPO costs) (SEK million) +33% 161 +48% 791 121 536 Q1 2014 Q1 2015 Q1 2014 Q1 2015 Total revenue (SEK million) Portfolio acquisitions (SEK million) 358 +40% 499 434-37% 273 Q1 2014 Q1 2015 Q1 2014 Q1 2015 6
Seasonality in portfolio acquisitions Prerequisites Outcome SEK million 3 500 The timing of our portfolio investments are uneven during the year. In 2014 47% of our investments came in the fourth quarter of the year 3 000 2 500 This has an impact on collections, cash flow, capital ratios end earnings. 2 000 1 500 1 000 Therefore we tend to see the highest growth in EBIT in the second half of the year 500 0 2013 2014 2015 Q1 Q2 Q3 Q4 7
Regional overview Germany and Austria Comments SEK million Q1 2015 Q1 2014 Change Full year 2014 Gross cash collections 252 154 63% 724 Total revenue 108 101 7% 446 Gross cash collections up 63%. We have successfully realized a sale of a large secured asset EBIT margin down as it suffers from fast amortizing performing book acquired in 2012. Adjusting for this the EBIT margin is stable Portfolio acquisitions up from last year EBIT 41 46-11% 195 EBIT-margin, (%) 38 46-8 pp 44 Carrying value 1 2 137 1 807 18% 2 232 120-month ERC 2 3 686 3 188 16% 3 817 1) Including run-off portfolio of consumer loans 2) Excluding run-off portfolio of consumer loans 8
Regional overview France, Belgium and the Netherlands Comments SEK million Q1 2015 Q1 2014 Change Full year 2014 Gross cash collections 178 158 13% 733 Total revenue 74 55 36% 256 EBIT improved by 80% predominantly driven by the Netherlands Restructuring in France running according to plan and cost. Guyancourt site will be closed down mid summer Portfolio purchase down as a large portfolio was acquired in the Netherlands in Q1 2014 EBIT 25 14 80% 61 EBIT-margin, (%) 34 26 8 pp 24 Carrying value 2 124 1 968 8% 2 194 120-month ERC 3 398 3 279 4% 3 512 9
Regional overview UK Comments SEK million Q1 2015 Q1 2014 Change Full year 2014 Gross cash collections 152 133 14% 527 Total revenue 146 110 33% 458 Cash collections up by 14% as a result of a growing book Increased litigation activities undertaken which will support cash collections going forward however slightly affecting margins short term Slow quarter in terms of purchasing EBIT 46 38 21% 181 EBIT-margin, (%) 31 34-3 pp 40 Carrying value 1 869 1 317 42% 1 798 120-month ERC 3 399 2 450 39% 3 391 10
Regional overview Italy Comments SEK million Q1 2015 Q1 2014 Change Full year 2014 Gross cash collections 123 50 146% 261 Total revenue 80 26 205% 170 EBIT 40 17 137% 64 Gross cash collections up 146% as a result of the strong investment level last year EBIT margin back-on-track following the acquisition of TRC August last year No further acquisitions in Q1 as focus has been on integrating the large portfolio purchased in December last year EBIT-margin, (%) 50 65-15 pp 37 Carrying value 1 108 294 278% 1 181 120-month ERC 2 234 455 391% 2 407 11
Regional overview Poland Comments SEK million Q1 2015 Q1 2014 Change Full year 2014 Gross cash collections 86 41 112% 296 Total revenue 75 54 40% 279 EBIT 55 42 31% 202 Navi Lex integrated and all contracts managed by external DCAs transferred in-house EBIT margin coming down somewhat as following the acquisition of Navi Lex, but remains at very attractive level Portfolio purchase have marginally increased year on year EBIT-margin, (%) 73 78-5 pp 72 Carrying value 1 254 810 55% 1 182 120-month ERC 2 521 1 586 59% 2 449 12
Financial highlights SEK M Quarter 1 2015 Quarter 1 2014 Change % Gross cash collections 791 536 48 Net revenue from acquired loans 435 306 42 Total revenue 499 358 40 EBIT 115 121-5 Costs in connection to the listing in the income statements 45 - n/a EBIT adjusted for costs in connection to the listing 161 121 32 EBIT margin adjusted for costs in connection to the listing, per cent 32 34-2 pp Financial net - whereof net income from financial transactions -108-20 -71 3 51 n/a Profit before tax 7 50-86 Profit before tax, adjusted for costs in connection to the listing 52 50 4 Net profit for the period 4 39-91 Portfolio acquisitions 273 434-37 Return on equity, % 1 19-18 pp 31 Mar 2015 31 Mar 2014 Change % Carrying value of acquired loans, SEK M 1 8,827 6,579 34 Gross ERC 120 months, SEK M 2 15,238 10,958 39 Total capital ratio, % 17.13 9.18 8 pp CET-1 ratio, % 14.33 5.68 9 pp Liquidity ratio, % 61 48 13 pp 1) Including run-off portfolio of consumer loans and portfolios contained in joint venture 2) Excluding run-off portfolio of consumer loans and portfolios contained in joint venture 13
Balance sheet Balance sheet structure Q1 2015 Balance sheet development SEK million SEK million Q1 2015 Q1 2014 Change Cash and interest-bearing securities 7 429 4 622 61% Acquired loans 1 8 827 6 579 34% Cash and Interest-bearing Securities 7 429 44% Liquidity Reserve 7 455 Floating Deposits Other assets 593 266 123% Total 16 849 11 467 47% 608 Other Liabilities Deposits 12 317 9 100 35% Senior unsecured debt 1 464 729 101% Acquired Loans 8 827 52% Termfunding 4 863 1 464 1-3 Year Deposits Senior Unsecured Debt Subordinated debt 334 330 1% Other liabilities 608 460 32% Shareholders equity 2 126 848 151% Total 16 849 11 467 47% 334 Subordinated Debt Other Assets 593 2 126 Shareholders Equity (incl. Tier 1) 1) Including run-off portfolio of consumer loans and portfolios held in joint venture 14
Hoist Finance in a low interest rate environment Recent development Impact on financial net Near term outlook Strive for diverse funding, reducing mismatch Hedging strategy Lowering offered deposit rates Net deposit inflows with mix moving towards term deposits EUR-bond issued Falling rates impacting mark- to market valuation We anticipate this effect to unwind in the medium term Instant effect on Flex accounts, gradual effect on term deposits Term deposits in favor of Flex Further bond issues unlikely Periods of deposit outflow would not jeopardize liquidity level Receiving even more modest yield on liquidity Low risk profile Short tenor 15
Funding structure, capital- and liquidity ratios Funding structure Capital ratios 13% 2% 9% 8% 3% 7% 21% Equity Subordinated debt Senior unsecured debt 1-3 Year deposits 14,3% 5,7% 15,1% 7,2% 17,1% 9,2% 30% Floating deposits 46% 61% CET 1 ratio Tier 1 capital ratio Total capital ratio Q1 2015 Q1 2014 Liquidity ratios Q1 2015 Q1 2014 Improved capital ratios 61% 48% Improved maturity matching Strong liquidity ratio Liquidity ratio Q1 2015 Q1 2014 16
Our strategy and financial targets Cornerstones of our strategy Our financial targets TO CONTINUE TO POSITION THE COMPANY AS THE LEADING DEBT RESTRUCTURING PARTNER TO INTERNATIONAL BANKS Strengthen platform in current markets and continue European expansion Maintain business focus and underwriting discipline Optimize collection strategies with primary focus on in-house collections Utilize embedded operating leverage to increase efficiency Maintain solid capital and liquidity positions Profitability Capitalization Dividend policy By utilizing our operating leverage we aim to achieve an EBIT margin of above 40% in the medium term Common equity Tier 1 capital (CET1) ratio to exceed 12% with potential to temporarily go below as a result of large portfolio or goodwill acquisitions As we continue to foresee substantial acquisition opportunities in our markets we will initially aim to distribute around 25 30% of our net profit as dividend over the medium term. Given the historically strong cash flow generation of our business, our long term aim is to distribute around 50% of the annual net profit as dividend 17
Outlook Continued focused strategy on profitable growth and geographical expansion Well placed to capture growth opportunities in the market Positive trend with substantial amount of portfolios in pipeline Target for FY 2015: purchase volumes in line with or higher than 2014 18
Key takeaways Q1 well in line with our expectations with stable earnings Seasonality effect on portfolio investments Impact from financial items and one-off cost related to IPO Newly acquired platforms well integrated and performing according to plan Very strong balance sheet 19
Appendix
Cash flow (incl. Adjusted EBITDA) Adjusted EBITDA reconciliation Adjusted EBITDA development SEK million Q1 2015 Q1 2014 Full Year 2014 SEK million Net profit for the period 4 39 180 1 793 + income taxes 4 11 38 + portfolio revaluations 3 0 15 - interest income (excl. Interest from run-off performing portfolio) -5-10 -52 + interest expense 93 84 345 +/- net result from financial transactions 20-3 18 + depreciation and amortisation 11 7 30 EBITDA 130 128 574 +27% + amortisation on run-off portfolio 20 31 91 + amortisation on acquired loan portfolios 356 240 1128 Adjusted EBITDA 506 399 1 793 399 506 Capital expenditure PPE and IT -13-6 -79 Operating cash flow 493 393 1 714 Net interest expenses (excl. Interest from run-off performing portfolio) -88-74 -293 Operating cash flow after financing expenses 405 319 1 421 Q1 2014 Q1 2015 Full year 2014 Portfolio acquisitions 273 434 3227 21