Lindorff
Q2 2016 Presentation
Today’s Presenters
Klaus-Anders Nysteen
CEO
Trond Brandsrud
CFO
2
Agenda
1. Operational Update and Key Highlights
2. Financial Update
3. Concluding remarks and Q&A
Operational Update & Key Highlights
Key highlights Q2 and H1 2016
Continued profitable growth
● Revenue growth of 29% (31% in constant currency) and Adj. EBITDA1 growth of 34%
● ERC increased 27% YoY. Collection performance at 113% of forecast
● Transformational acquisition of Aktua
● Positive trend in the underlying 3PC business
● New receivable financing solution for the Payment product – EUR 30m released
1
excluding non-recurring items
5
Market and Operational Update
Dynamic and positive market conditions
● Financial Institutions important for growth, selling more NPLs and earlier in the cycle
● Competitive market with a positive outlook
● Industry consolidation continues
● Strengthened secured servicing platform and added Real Estate Servicing as a new business area
● Established investment vehicle in Ireland for co-investing in Debt Purchasing
● Continued focus on operational improvements - LBS currently 200 FTEs up 65 from start of year
6
Continued profitable growth
Adjusted EBITDA1
Net Revenue
EURm
EURm
+29%
+34%
165
118
128
88
Q2 2015
Q3 2015
1 Excluding
Q4 2015
non-recurring items
Q1 2016
Q2 2016
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
7
Aktua overview and value proposition
Aktua
● Founded in 2008
● More than 20 offices across Spain
● ~400 employees
● Provides mainly secured NPL servicing and RES (Real Estate
Servicing)
● Industry leading database and analytics for real estate valuation
● Long term contracts with leading financial institutions in Spain
NPL Servicing
● Collection/Servicing on secured non performing loans (mainly
real estate)
● Secured NPL is the largest portion of the NPL market
● Increase opportunity span for co-investments in the NPL market
● Reinforces Lindorff’s market leading position in Spain
● Strengthen relationship with the largest financial institution clients
in Spain
● Long term stable cash flows with high visibility
Transaction
● Closed June 1st
● Enterprise value of EUR 313m
● Financed outside the restricted group
•
Roll over financing of EUR 194m
•
PIK loan facility of EUR 30m
Real Estate Servicing
● Servicing, maintenance and sale of real estate owned by the
client
● Expand Lindorff’s value proposition within Debt Collection
services
● Complementary to NPL servicing
● Potential for roll-out to other geographic markets
8
Maintaining a well balanced Business mix
Diversified geographical revenue distribution
Product Split (Last Twelve Months) 1
Geographical revenue split (Last Twelve Months) 1
4%
10 %
4%
17 %
21 %
51 %
45 %
12 %
2%
7%
26 %
Debt Purchasing
1 Includes
Debt Collection
one month of Aktua revenue
Other Products
Denmark
Italy
Poland
ECE
Netherlands
Spain
Germany
Norway
Sweden
9
Increasingly diversified geographic profile
ERC
3PC Revenue (Last Twelve Months) 1
10 %
25 %
12 %
18 %
20 %
20 %
31 %
7%
10 %
30 %
31 %
26 %
78 %
67 %
Q2 2014
Q2 2015
Nordics
1 Includes
Central Europe
one month of Aktua revenue
59 %
Q2 2016
Southern Europe
52 %
49 %
Q2 2014
Q2 2015
Nordics
Central Europe
54 %
Q2 2016
Southern Europe
10
Financial Update
High double digit revenue growth
Net Revenue
EURm
+16%
● Investments in Debt Purchasing EUR 398m LTM
300
● Collection performance of 113% for the quarter
258
● Positive trend in 3PC
● Acquisition of Aktua in Spain
+29%
165
128
Q2 2015
Q2 2016
2015 YTD
2016 YTD
12
Continued profitable growth
Adjusted EBITDA1
EURm
+25%
● Investments in Debt Purchasing and
maintained high collection performance
205
11
● Strong underlying operational efficiency
● The acquisition of Aktua in Spain
88
4
36
48
Q2 2015
EBITDA
1 Excluding
non-recurring items
164
10
+34%
118
6
76
67
39
118
72
Q2 2016
Amortisation and revaluation
87
2015 YTD
2016 YTD
Non-recurring items
13
Debt Collection Revenue and Segment Earnings
Segment Earnings1
Net Revenue
EURm
EURm
+6%
181
+14%
191
5
27
62
74
Q2 2015
Q2 2016
External Collection
Internal Collection
+33%
55
106
5
27
89
78
53
52
+19%
90
41
129
133
2015 YTD
2016 YTD
Q2 2015
Q2 2016
2015 YTD
2016 YTD
Real Estate Servicing
● Positive trend in underlying 3PC business from improved
collection efficiency
● Improved profitability from increased collection efficiency and
completed restructuring initiatives
● Entry into RES through the acquisition of Aktua
1
Includes a margin on commission from Debt Purchasing
14
Debt Purchasing Revenue and Segment Earnings
Segment Earnings
Net Revenue
EURm
EURm
+23%
+33%
149
86
3
7
122
2
5
+30%
46
79
1
56
1
5
61
4
Q2 2015
Existing portfolios
64
+46%
139
32
2016 YTD
Q2 2015
114
73
Q2 2016
New portfolios
2015 YTD
Q2 2016
2015 YTD
2016 YTD
Revaluations/other
● Growth driven by all time high investments LTM
● Strong collection performance of 113% of forecast in Q2
● Contribution from co-investment in Lithuania
● Acquisition of Casus Finanse (Poland) and Cross Factor (Italy)
15
Money-on-Money multiple increases as portfolios mature
Business Case M-o-M
Current M-o-M
3.2
2.8
2.5
2.3
2.7
2.8
2.6
2.5
2.3
2.3
2.3
2.0
2.0
<2006
2006-2009
2.4 2.4
2.3 2.2
2010
2011
2012
2013
2014
2.0
2015
2016
16
Debt Purchasing – high collection performance drives profitability
Estimated Remaining Collection (ERC 180 months)
Investments in Debt Purchasing (Last Twelve Months)
450
400
350
300
250
200
150
100
50
0
398
3 000
2 493
2 500
1 964
2 000
202
1 500
1 000
500
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
0
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Collection on Own Portfolios vs. Forecast
Return in Debt Purchasing (Last Twelve Months)
Average:105%
16 %
109 %
109 %
20 %
17 %
16 %
104 %
99 %
103 %
101 %
98 %
105 %
103 % 102 %
110 % 107 % 104 % 113 %
104 % 106 %
12 %
8%
4%
0%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
17
Pro forma Adjusted EBITDA (last twelve months)
461
391
70
20
153
217
EBITDA
1 Non-recurring
2
Portfolio Amortization
and Revaluations
Non-Recurring Items1
Adjusted EBITDA
excl. NRI’s
Pro Forma
adjustments LTM2
items include restructuring costs such as site consolidation, severance pay, and consultancy fees related to M&A (including Aktua) and funding
Includes pro-forma effect for the BMN carve-out from Q4 2015 and the acquisitions of Casus Finanse, Cross Factor and Aktua
Pro-forma Adj. EBITDA
18
Leverage Ratio
● Leverage for the restricted Group down to 5.5x
● Leverage including Aktua 5.1x
● Indicative leverage given full twelve month
impact from portfolio acquisitions and Aktua
would have been ~4.8x
● The RCF draw as of Q2 was EUR 270m out of
EUR 329m
Net Debt to LTM Proforma Adjusted EBITDA1
7.0
5.7
6.0
5.1
5.6
5.3
5.5
5.6
5.0
5.1
4.0
3.0
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
NET Debt/LTM Adjusted EBITDA excl. NRI's
Including Aktua
1
Includes pro-forma effect for the BMN carve-out from Q4 2015 and the acquisitions of Casus Finanse, and Cross Factor
19
RCF and available liquidity
● Available liquidity for the restricted Group
(excluding Aktua) as of Q2 2016 was EUR
67m
● RCF capacity of EUR 329m1 as of Q2 2016
● Interest rate on the RCF was EURIBOR +
3.50%
● Cash outside restricted Group was EUR 19m
● New financing of EUR 30m not included in Q2
1
Calculated as 18.4% of ERC 84 months per Q2 2016
Available liqudity
RCF capacity Q2 2016
- Amount drawn
- Amount allocated to guarantees
Available RCF
Q2 2016
329
-270
-25
34
+ Cash total Group
Available liquidity total Group
52
86
- Cash Aktua Group
Available liquidity restricted Group
19
67
20
Concluding remarks and Q&A
Concluding remarks and outlook
● Continued profitable growth and strong cash
generation
● Added significant new and accretive business
● Improved collection efficiency
● Good cost control with operational improvements
● Co-investment vehicle enabling balanced growth
with limited capital exposure
● Strong pipeline of portfolios, carve outs and M&A
opportunities
● Maintain pricing and capital discipline
Photo: Eurostars hotels, Creative Commons
22
Q&A
Appendix
ERC split the next 180 months
Estimated Remaining Collection (ERC)
EURm
450
400
350
300
250
200
150
100
50
0-12
13-24
25-36
37-48
49-60
61-72
73-84
85-96
97-108 109-120 121-132 133-144 145-156 157-168 169-180
25
Sustaining an attractive M-o-M multiple
Gross Money-on-Money multiples per Vintage
Portfolio Performance by Vintage
Vintage
Purchase
Price
Collections
to Date
180-Month
Gross ERC
Total
Estimated
Collections
A
B
C
B + C
Total Gross
Cash-on-cash
Multiple
Business Case M-o-M
( B + C )/ A
Current M-o-M
3.2
Pre 2006
360
993
176
1169
3.2x
2006-2009
266
563
127
691
2.5x
2.8
2.5
2010
221
368
249
617
2.8x
2011
117
212
115
327
2.8x
2012
235
329
290
619
2.6x
2013
155
151
200
351
2.3x
2014
275
188
427
615
2.2x
2015
395
118
689
807
2.0x
2016
961
9
220
229
2.4x
Total
2120
2931
2493
5425
2.6x
1 Including
2.8
2.6
2.5
2.3
2.3
2.3 2.3
20062009
2.4 2.4
2.3 2.2
2.0 2.0
2.0
<2006
Consistent Performance of Portfolio
2.7
2010
2011
2012
2013
2014
2015
Money-on-Money Multiple lift-up as Portfolios Mature2
the value of portfolios obtained through the acquisition of Cross Factor in Italy
Close to 90% of Lindorff owned portfolios are acquired from Financial Intuitions (FI). Because the ticket size is larger in FI than in Telco/Retail, we manage to establish long term payment
plans with debtors. We are consequently able to extend the ERC period beyond 180 months. This, together with our strong collection performance on old debt, drives an uplift in the Moneyon-Money multiple as portfolios mature
2
2016
26