Earnings Call: Q2 2021

Jul 22, 2021

Thank you. Good morning, everyone, and welcome to this presentation. So my name is Anders Engdahl, and I'm the CEO of Intrum, and I'm here together today with Michael Ladderner, our CFO. And today, I'm pleased to present the results of the Q2 for Intrum. Overall, the Q2 was a solid quarter demonstrating the progress that we're making on our strategic plan towards 1 interim, towards our financial targets and towards sustainable organic growth. So if we turn to Page 3 of the presentation. So to summarize the highlights of the Q2. 1st and foremost, we see the Q2 was a record collections quarter, but we also saw accelerating deployment in terms of new investment. We saw record collections in the portfolio investment business with over SEK3 1,000,000,000 collected, which is up 23% year over year. We invested over SEK2 1,000,000,000 in new portfolios during the quarter. But beyond that, we have now committed investments totaling SEK6 billion for the full year 2021 at attractive returns. What's most noteworthy to my mind is the broad based performance across our footprint both in terms of back book performance where all countries performed in excess of our active forecast and in terms of broad based deployment where no single country stands out in terms of concentration. Secondly, we see gradual normalization in our servicing businesses and a few landmark transactions that are noteworthy that we have been able to win this quarter. CMS and Strategic Markets, our servicing businesses, continued the path to normalization and we do now see improving new case inflows. We also start to see the conversion of our record pipeline into new signed transactions, including a few landmark transactions such as the agreement with Selska Handelsbanken in Sweden and DIVA Capital as an example in Italy, supporting the organic growth ambitions that we pursue. Thirdly, our 1 Interim Transformation Program is well underway. We continue to deliver on our transformation plan where we now enter a very intense face. During the Q2, we opened the 3rd of our 3 global front offices in South of Spain and now all three centers are live, serving 11 countries with today in total 115 agents. We will now gradually scale them up to full efficient scale over the coming 12 to 18 months. During the quarter, we also migrated our 1st secured portfolio into our new global IT platform. And finally, during the quarter, we launched our 10 principles for ethical and sound collections. These principles are a codification of our operating principles and practices and apply to all employees across all markets, where fair treatment is a cornerstone to creating sustainable value for stakeholders and society. And if we turn to Page 4. Looking at our segments, and we start with our servicing segments. The macro recovery is coming through with an associated rebound in consumption underway. This is, of course, supported by the successful rollout Destination Programs across European jurisdictions. As consumer confidence returns, consumption is expected to increase and normalize. And with that new case inflow is expected to revert to normalized levels as well, both in terms of number of cases I'm the average value of those cases. Improving business climate also paves the way for successful resolutions on existing cases, enhancing the Solution Rates. In terms of new business, we continue to see a strong pipeline and pipeline conversion into signed contracts that supports our objective of sustainable growth in our capital light servicing businesses. So to summarize, the combination of increasing case inflow from existing clients, improving solution rates on existing cases at an accelerating pace of new client signings bodes well for servicing growth into 2022 beyond. Then if we turn to Page 5. On the portfolio investment side, we have very strong momentum. Our connection performance remains very strong with broad based outperformance versus our expectations, both in terms of unsecured and secured exposures. Of course, this is supported by the improving macro recovery and the ability to achieve settlements, resolutions and asset disposals has underpinned this strong performance. In addition, as we set out at the end of last year, we now start to see a material increase in the level of portfolio sales activity among our clients, which is evidenced also by the level of portfolio sales in the market overall in the first half of this year. At interim, we have now in total of SEK6 1,000,000,000 of committed investment volume for this year and we continue to see a high level of activity going into the second half. Underwriting returns remain stable at attractive mid teen levels. And beyond the short term, we expect that supply will continue to increase with a particular focus on SME exposures. This backdrop bodes well for Interim's ability to continue to grow the investment business at double digit growth rate in line with our financial targets. If we turn to Page 6. We recently launched our 10 principles for ethical and sound collection. For Interim, as industry leader in our market in Europe. It is vital of vital importance for us and to our clients that we on our clients behalf treat their customers fairly. The 10 principles is a codification of our global standards of practice the but we have already operated with these for many years and which apply to all our agents interacting with our customers. Ultimately fair and ethical treatment is a cornerstone to creating sustainable value for stakeholders and society and our ambition is that these principles can serve as a basis for an industry standard in the future. Interim welcomes all initiatives to create harmonized rules and regulations across Europe for equal treatment of customers. We'll turn to Page 7. Our 1 interim transformation program is progressing in line with plan. During the first half of twenty twenty one, we've made significant progress in our transformation program. As I mentioned in the beginning, we're now live with all our 3 global front offices in Athens, in Bucharest and in Malaga and they are now serving in total 11 countries. We expect to scale these centers up to efficient scale over the coming 12 to 18 months. In addition, we're now also piloting a virtual global front office concept where in markets where the employee cost does not warrant moving the staff. We will operate these local staff as an extension to the global front offices in order to make sure that we benefit from the scale, the technology and that we align the best practices across our entire footprint front office footprint. And this concept, if successful, will be prevalent especially in Eastern Europe. If we look at the KPIs of the program, they are on track and we've now spent approximately 49% of the expected total program budget, which is approximately 5% lower than anticipated at this point. This does not mean that we will spend less in total than anticipated, but the timing of certain expenses is delayed. Then if we turn to Page 8. In terms of case migrations, we remain ahead of plan. And this quarter, we have not planned to migrate substantial volumes, as you can see on the chart on the upper side of Page 8. This quarter, we have digested the learnings from the 1st large scale migrations we made at the end of Q1, and we're now well prepared for the acceleration of migrations during the second half. FDA cost to collect is largely on track with minor variations and we remain on track to deliver the 20% reduction in FDA cost to collect by the end of 2023. And with that, I will now hand it over to Michael, who can take you through the financials of this quarter. Thank you, Anders, and good morning, everyone. I'm now turning to Page 10, Group Key Financials. Q2 was a solid quarter, During which we continue to deliver improving cash metrics, cash revenues, cash EBITDA, cash EBIT and cash ROIC compared to Q2 2020 As well as on a rolling 12 month versus full year basis. While COVID-nineteen remains a topic, We have, however, seen a significant reopening of societies and increase in business and consumer confidence and activity, Supporting the path to gradual normalization. Cash revenues in constant currency Grew by 17% versus Q2 2020 to $5,600,000,000 or 12% including the currency effect. Cash EBITDA increased by 9% to just under $3,000,000,000 On a rolling 12 month basis, cash EBITDA came in at $11,943,000,000 showcasing the positive development in underlying cash generation relative to Q1 as well as the year end. Cash EBIT for the quarter came in at $1,413,000,000 up 9% versus the same quarter last year. When looking at recurring cash earnings and cash EPS, dollars 685,000,000 or £5,700,000 per share for the quarter, respectively, We see a decrease compared to Q2 2020, driven by phasing of cash net financials and tax, which we expect to even out over the course of the year. Cash ROIC for the quarter was 7.9% and on a rolling 12 month basis, we again continued to improve returns. We are now at 8.4% versus 7.7% at year end. The leverage ratio remained stable at 4.1x compared to the Q1 with both cash EBITDA and net debt up during the quarter, also due to the dividend paid in May. It is also worth noting that we see and expect a more normal seasonal pattern in 2021 with a slower summer period and increased activity into the year end Compared to the COVID-nineteen related slump in Q2 2020 and the more even split between Q3 and Q4 2020. We continue to execute and deliver on the gradual path to normalization we first mentioned at our Capital Markets Day last year, focusing on transformation and organic growth, areas where we have made good progress during the Q2 as highlighted by Anders earlier. Now turning to Page 11. I would really like to highlight the significant operating leverage made evident by our results. The year over year rolling 12 month cash revenues growth of 5% translates into cash EBITDA growth of 8%, An increase in cash EBIT of 19% and recurring cash earnings growth of 44%. Key contributors to this positive development are continued strength in our portfolio investment segment as well as gradual normalization in credit management services As well as Strategic Markets, but more about that later. Also like for like replenishment CapEx increased versus the preceding quarter as the rolling 12 month money on money multiples decreased to 2.1 times compared to 2.18 times in Q1, What is up versus Q2 2020? The decrease in recurring cash earnings compared to Q1 was due to higher cash net financials and tax. With the phasing of interest payments reset over the course of last year and an uneven distribution of cash taxes paid, the The recurring cash earnings yield on total shareholders' equity came in at 14%. In summary, we're continuing our path of Growing recurring consolidated cash EPS by more than 10% on average per annum as set out in our medium term financial targets. Now turning to the segments, I'm looking at Page 12. In CMS, the inflection point we mentioned at the end of Q1 is now quite visible in the data, which I will come to in a minute. Cash revenues came in at just over $1,000,000,000 down 1% versus the 2nd quarter last the in constant currency with cash EBIT at $411,000,000 up 10%. The segment cash ROICs increased by a percentage point the to 8.5% compared to Q2 2020. The important point to note here though is that when looking at the rolling 12 month cash EBIT Development. I'm looking at the chart on the bottom right. We see the gradual reduction from Q2 2020 as COVID-nineteen started to impact close. The inflection points in Q1 2021 and the momentum towards gradual normalization in Q2 2021 With rolling 12 month cash CMS cash EBIT up to 1,583,000,000 During the Q2, we continued to see improving inflows in terms of number of cases. We expect an increase of case values the follow as consumption patterns gradually normalize. The compounding of these factors over time will drive revenues and therefore Together with the positive operating leverage, a continued improvement in the rolling 12 month cash EBIT trajectory. This is also further supported by the commercial success in signing new servicing clients that Anders just mentioned With benefits into 2022 and beyond. Looking at Page 13. Strategic markets continued its solid trajectory with a strong performance in Greece, a positive revenue development in Spain, which is increasingly broad based, the But yet again also supported by an outstanding result from real estate servicing as well as a more gradual normalization in Italy. Just to provide some context in Italy and the gradual normalization, particularly in terms of the efficiency of the legal system which we rely on. During the Q1, we saw an efficiency gap of circa minus 30% versus pre COVID levels. This has improved to about minus 20% During Q2, we continue to actively monitor and manage developments, but would like to note the significant potential inherent in Italy over the coming periods, also with that moratoria set to expire in autumn. Cash revenues increased by 9% or 15% in constant currency to 1,315,000,000 versus the same quarter last year. Cash EBIT also increased by 9% to $572,000,000 compared to Q2 2020. The The quarterly segment cash ROIC came in at 14.4% for Q2, up 2.5 percentage points versus Q2 last year. On a rolling 12 month basis, it now stands at 18%. Now on to portfolio investments on Page 14. Portfolio investments went from strength to strength during the Q2, continuing on from the Q1 as well as the end of 2020. We achieved record cash collections of more than $3,000,000,000 during the quarter, corresponding to performance versus collection expectations, the active forecast of 116% for the quarter. The strong result was extremely broad based across geographies As well as asset classes, with virtually all jurisdictions delivering a performance ahead of expectations. Cash revenues increased by 20% the to $3,265,000,000 compared to Q2 2020. Cash EBITDA also increased by 20% the $2,402,000,000 for the same period. Cash EBIT increased 19% versus Q2 2020 and came in at $925,000,000 supported by the strong collection performance As well as the higher rolling 12 month money on money multiple, resulting in a relatively lower replenishment CapEx. We made portfolio investments of $2,051,000,000,000 during the Q2 and have invested $3,800,000,000 year to date. Combined with the circa $2,200,000,000 we have already committed for the second half, this puts our current deployment for 2021 at the circa $6,000,000,000 at this stage. During Q2, we also executed joint venture investments of $280,000,000 in securitization structures in Greece, supported by the Hercules Asset Protection Scheme and sponsored by our partner Pireos Bank. The The securitized assets were previously part of our servicing perimeter in Greece and continue to be so in full also post the securitization. Now looking at Page 15. The spread between our cost of funds and the last 12 month average unlevered underwriting IRR now stands at a healthy 4.4 times. During Q2, we issued a €1,500,000,000 MTN bond, which settled on the 1st July. Proceeds were used to redeem the outstanding 20 €22,000,000 €150,000,000 on July 15. Regarding the newly issued MTN bond, We were able to take advantage of a conducive market environment and achieve an attractive pricing inside relevant reference curves. At the end of Q2, we had available liquidity of $17,000,000,000 and no significant upcoming debt maturities prior to 2024. Turning to Page 16 and focusing on progress towards our medium term financial targets. Rolling 12 month cash ROIC continues to improve and now stands at 8.4% versus a target of greater than 10%. Recurring consolidated rolling 12 month cash EPS is exhibiting strong growth and now stands at SEK 26.2 per share, in line with our target ambition of more than 10% growth on average per annum. As regards leverage, we reiterate our ambition to reach the 3.8x area by year end 2021 and meet our targets of a leverage ratio between 2.5x and the 3.5x by year end 2022. Overall, we continue to make progress towards achieving our medium term financial targets, supported by executing on our key priorities, transformation and organic growth. And now over to you, Anders, for the final remarks. Thank you, Michael. So if we turn to Page 18 and to summarize the key messages from the Q2. With the recent developments, we continue to be cautiously optimistic on the trajectory of the pandemic recovery in general the gradual improvement of our business climate in particular. We continue to see improving client and customer sentiment, supporting the continued normalization across our business segments, especially CMS and Strategic Markets. In CMS, we expect to see gradual normalization of U. K. Inflows and our strong pipeline conversion to add to the growth outlook into next year and beyond. In strategic markets, we see continued solid performance with strong delivery from our Greek business and our real estate business in Spain where our Italian business, which has experienced a delayed recovery, is expected to gradually go back to full operating capacity. Our investment business continues to have very strong momentum, displaying strong back book performance an accelerating deployment pace at attractive mid teen returns. And lastly, our 1 interim transformation program remains on track and we're now during the second half of twenty twenty one accelerating the case migration into our new global technology environment. So all in all, transformation is on track and we're setting the company on course for sustainable organic growth. And with that, we open it up for questions. Thank you. The We have a question from the line of Julia Varesco from JPMorgan. Please go ahead. Good morning. Thank you for the presentation. My first question is on strategic markets. The There seems to be some margin softness here relative to the recent quarters, even though the revenue development was kind of stable on Q1. Could you please add some color on what drove this? Are there any mix original effects, maybe still mainly the drugs in Italy that you mentioned? And how should we think about the rest of the year here? So last year in the second half in strategic markets you delivered quite a solid margin. What do you expect for the rest of 2021 year on year? My second question is on the FTE cost to collect. So that seems to have gone up slightly quarter on quarter. So what was the key reason behind this? And more broadly, with inflation currently On everyone's mind. Could you give us some insight on what you're seeing in terms of wage cost increases? And then finally, you mentioned you expect a meaningful acceleration in case migration in the second half of the year. The Should we assume that this holds some risks, maybe some short term inefficiencies? Or do you expect it all to run on track as the Has been so far with the program in general. Thank you. Julia, I'll take the first question. And it's a very good question. When I think about the strategic markets, I always feel it's best to look at the RTM development And how that is moving, given that there is always fluctuations quarter to quarter. And I think overall, there you will see a gradual improvement over time with obviously a dip in 2020 that was COVID induced. And that's really the trajectory that we built the And continue to work with. When I think about the second half, I would go back to what I said in my presentation that last year the It was obviously a bit special, given COVID and we saw more equal distribution between Q3 and Q4 in terms of the outcome. I would argue for this year, we expect to see a more normal seasonal pattern, So which means a bit slower during the summer and then a stronger acceleration into the end of the year. Then in terms of the other couple of questions, Giuliano. I think on the FDA cost to collect, again, there's a bit of variations quarter to quarter. I think underlying, we see that we are on track on delivering on the trajectory based on the transformation benefits that we see coming through. We are on plan with the transformation program at large and delivering on those benefits, including both the front office migrations and the case migrations in the new global platform. So I would just also highlight that Q2 last year, which was a point that came out of the rolling 12 months. Patent was a particularly low point given the sort of very short term actions taken during Q2. But the trajectory along the curve is definitely intact. In terms of inflation, at the moment, we do not see any underlying inflationary pressures on wages across the markets. And I think with the actions we're taking with the transformation program and really benefiting from the economies of scale that we will extract throughout the platform. We are able to mitigate significantly any such underlying pressures that may come through. So we're obviously aware of it and planned around that. But for the moment, it is not something that is causing a concern. Thank you, Anders. Then finally, in terms of case migrations, you're right. I mean, we are, as you can see from the trajectory that we laid out at the time of the Capital Markets Day. We have a significant increase if you look on a quarter by quarter basis. To date, we are ahead of our plan, given the large scale of migrations we did mid half year mid first half year. The second half of the year, we are expecting we have a target of approximately 12,000,000 cases migrated at the end of the year, which means that we have a more significant volume to be moved in the second half. And we're taking the time now to make sure that we're all very well prepared across markets where most of that volume will come from. So we expect a very intense effort on that during the second half. Thank you very much. That's helpful. But can I just make sure that I understand the metric which you report for FTE cost to collect? I understand that the underlying trajectory is online and kind of the plan for targeted savings the Is on plan, but if there is a step up between Q1 that you showed in the presentation slide then and currently, Is this step up not meaningful in your view? Is there anything at all short term that changed that the Has just caused that slight deviation between the quarters? Julia, I think it's a technical change in the sense that the The metric you see is rolling 12 month metric. So the quarter that came out was Q2 last year, which due to the short term measures, as Anders laid out, was particularly low. So in terms of the sort of the underlying trends from Q1 to Q2, there was no change. It was just the fact that 1 quarter came off and we added a new quarter in. Okay, that's helpful. Thank you. Our next question comes from the line of Jacob Hesselweig from SAB. Please go ahead. Hi, good morning. Just a quick question. When we look at your over collections, it was 105% in Q1 and 160% in this quarter. What is the normalized level like going forward? How should we think about it, especially when you said you expect seasonality to come back in the second half of this year? And then my second question is, if you just could let us know a little bit about your Polish business structure, if it involves the same type of fund structure as one of your peers. How then is the Swedish Tax Authorities have asked you any questions regarding this structure? Thanks. Perhaps if I can start with the first question. In terms of outperformance, there is, I mean, two points. I think one is, as we talked about during the Q1 as well, we saw a significant improvement and inflection and going into recovery mode during the Q1. And we've seen continued very strong performance throughout the second quarter. Secondly is the more normal seasonality pattern that we have during the year, where particularly Qs 2 and 4 tend to be stronger, seasonally stronger than Q3 and 1. I think what we see this year is a reversal to more normal seasonality pattern throughout the year. So there's, I guess, 2 factors to consider in that in total. But in terms of if you look back, we have, for a very long time, continued to deliver consistent outperformance to our active forecast. And I would think that they've been in the range of 5% to 10% over a long period of time. And that all that we see now is a we're confident that we can continue to deliver in line with historic performance. But you will have some seasonality factors playing in throughout the quarters. On Poland specifically, all I can say there is that the investment set up and structures that we use Are such that they conform to local legislation so that we can invest and do it in accordance with the rules that are prevalent at any given point in time. I don't think there is much more to add to this question. Okay. Thank you. Our next question comes from the line of Robby Adal from Kepler Cheuvreux. Please go ahead. Yes. Good morning. Thanks for the presentation. So back to the portfolio investments and outperformance, I think you said 160% in the quarter. But At Zengdahl, the revaluations of the portfolios were, I think, net 3, if I saw correctly. Wasn't the change that you made, the accounting change that you made earlier at the end of last year supposed to make the revaluations, I guess, more volatile over quarters, but to on the the And I reduced the outperformance or the deviation in performance to the forecast. The Just comment on that, please. Sure. It's a very good question. What I would say is we did a very thorough the at the end of the last year, and we talked about it in the context of the Q4 results. What that also means is that we looked at the most likely path over the coming quarters years. Now obviously, things are developing somewhat better in PI as evidenced by the outperformance that we're showing. But in order to sort of take that more fully into the forecast. We need more time. We have a very robust revaluation process that's run by our risk team. And as that performance solidifies, it will filter also into the book value over time. All right. Thanks. And then back to the performance of strategic markets quarter on quarter. You said that it's best to look at the rolling 12 month development, but just To get a sense of the fluctuations between the quarters in order to try to forecast Still in the coming quarters. What is actually driving the fluctuations in the margin quarter on quarter is that sort of in court Resolutions that come in chunks with the costs or what is the driver? I mean, if you look at the underlying, you have a seasonality pattern also there, where we tend to see a significant amount of resolutions, in particular, coming through prior to the summer break, so in the months leading up to summer, I mean, mainly going into the Q2 numbers as well as the months leading up to year end. So from that perspective, Q2 and Q4 tend to be more active quarters generally. I think with for this year, I think, the obviously, it's still we have the underlying dynamic of the recovery coming through. But then, I would say, as we go more into normalization, the more ordinary seasonal pattern will prevail. So you will have some fluctuations quarter to quarter. And therefore, as Michael points out, looking at the rolling 12 months development and the positive trajectory that we are seeing in the rolling 12 months development as we move forward, I think just a better way to look at the totality of that picture. All right. Thanks. And then more of a high level question. You said that the new volumes that you would expect to come out In the market of NPLs is centered perhaps around SME Loans. So what are your I mean, I guess this is sort of a new sort of a new environment to before. And Just reflecting on what's your capabilities are in the SME space and how These assets are structured or they're collateralized or un collateralized And the process for collecting them, I mean, is that mainly in cork or amicable or yes? I would say, if you look at our capability set, we have broad based capabilities to work with BKB loans or SME loans throughout our footprint, and that we have been doing for a long time. I think what we're seeing now is a mix question where this is becoming a bigger part of the mix compared to historically in terms of defaults and requirements for recovery. Looking at the types, we will see both unsecured and secured SME coming through. I think one so that's the one point is the mix point and from a kind of relative volume point of view. But certainly, from a capability point of view, we have that in most of our markets. The I think the other point is around the aging. As I think what we are seeing now is our clients wanting us to engage with them and support them at an earlier stage in the NPE cycle, meaning that we are getting involved earlier and where we see, I mean, audio labeling UTP in some markets, but early stage, unlike the payloads, becoming also an important sort of part of the recovery cycle. So earlier engagement and growing that part of our business franchise. It's something that we foresee going forward. All right. And On the SMEs, would you say it's mainly amicable collections or in court collections? Well, it's both. I mean, obviously, we tend to and want to try to achieve amicable resolutions or recoveries to the greatest extent possible, but part of it, depending on the state and the viability, particularly when you look at an SME, you need to look at the viability of that business. It may also end up in a legal resolution. But our default setting is always to try to start with finding an amicable solution. All right. Thank you very much. Our next question comes from the line of Joakim Singen from Arctic. Please go ahead. Yes. Good morning and thanks for taking our questions. I was just I have 3 as well. The first one is related to committed CapEx, which you now say is around SEK6 1,000,000,000 for the year. Could you shed some light into your expectations for the full year, I. E, how much more than SEK 6 should we Account for and the second one is relating to the deal with Sanskar Handelsbanken. Could you indicate what kind of volumes this adds? And then the final one is just relating to your expectations for the Increase in NPLs across your markets. If I remember correctly, you said at your CMD 6 months ago that you expected it to increase 2 to 2.5 times. You still believe this will occur and it's not, could you give an update? Thanks. In terms of the full year deployment pace, what we've said and which we also stand by is that we are expecting this year to go back to deployment pace, which is consistent with a growth rate on our investment business in line with our financial targets double digit growth on the investment business. That means that unlike last year where we were at replacement rates, this year, we're expecting it to go into above a replacement rate consistent with double digit growth. Then in terms of the Handelsbanken contract that we highlight, that's one example of a very important contract for us. It's a sizable contract where we are sole provider the Turhamniskbanken across what they do in Sweden. And it's strategically important for us and not and also think highlight that we're now a provider to all the 6 systemic banks in the Nordic region and our ability to really develop our franchise with these key financial institutions in the Nordics and across Europe. And it also, from an organic growth point of view, is an important addition. And obviously, we have a very large number of contracts that we signed in total, but this is a large and important one that we highlight for that reason. In terms of the macro outlook. And in terms of the NPL formation, we have no reason to change our outlook and our expectation in terms of NPL formation in total post COVID. I think what we're seeing now and what is consistent with what we discussed at the Capital Markets Day is that the funnel from performing to subperforming to nonperforming starting to work its way through that funnel. And the first step of that is the clear signs of increasing of Stage 2 loans and that we expect that to transmit into a significant increase in nonperforming loans as we work our way in towards the end of this year and into 2022. The exact timing is always difficult to predict. But in terms of total quantum, there's no reason for us to believe that it won't come through or that we would change our expectation of the total amount. That's great. Thanks. We have a question from the line of Wolfgang Felix from Sarea. Please go ahead. Yes, good morning. Thank you. The Also a question on the portfolio segment. As very much on the same topic of acquisition of new Folios going forward. Can you give us a feeling of the quantum of portfolio purchases that you're sort of envisaging, I. E. But how much are you looking to possibly grow your book value ultimately on a net basis over the next 12 to 16 18 months. Or yes, how should we think about That ultimately is going to have a bearing on your leverage ratio in the short term obviously, but what are you sort of planning for? Yes, thank you. As I also commented upon just before, in terms of deployment pace, we foresee a deployment pace that supports double digit growth on the investment side, which includes then double digit growth in the book value. So I think if you look at our total book of in the €3,500,000,000 area, that's how much in excess of the replacement rate that we need to deploy in order to achieve that. In terms of the leverage ratio, we're obviously balancing the deployment pace, but we see it to be consistent with the double digit growth rate on the investment side with meeting the guidance that Michael gave in terms of the 5.8 sorry, the 3.8 times area towards the end of this year and 3.5 or lower by the end of 2022. So we see that to go well together. And that as so I think we've said before, we're not expecting to increase the amount total amount of borrowings, but the cash EBITDA growth that comes from the growth trajectory that we're on will support that deleverage. Okay. I'll do my math on that. I'll try and triangulate. And the The other comment you've made was there was an earlier question on it already. The 116% outperformance that Your posting, I mean, it looks very good. Can you again perhaps repeat what Was it the driver of that? Is it that, I don't know, people generally have some savings that they've made during the pandemic? Or is it a timing Zeng or what drives that now? I think if we look at the composition of our Portfolio Collections. We as we've said, throughout the pandemic, we've had a very solid performance on our payment plans. They continue to deliver. I think what we've seen increasingly as we've been entering into recovery during the first half of this year is the number of resolutions increasing and that the availability of and the possibility to do resolutions has increased. That includes also secured asset classes, which has been a bit slower to recover from that perspective, but where we see now very high degree of activity in resolutions also in the secured books. So it's the sort of the addition of that, that has helped drive continued strong performance of our portfolio investment book. Is that in part because perhaps courts are open again? And or is it What drives the Definitely, the court availability helps and liquidity in real estate markets Health. And I think also general positive consumer and business sentiment the and that point towards recovery also helps. So I think that all the 3 components have been supportive in the availability or the ability for us to achieve those resolutions and continuing to do so. Okay. Thank you. Our next question comes from the line of Edmond Kerik from Carnegie. Please go ahead. Good morning and thanks Thank you for taking the questions. So to start with perhaps on this contract with Handelsbanken, Given it's a big contract and it's sort of reputable counterparty, should we Expect any difference in margin compared to kind of other contracts in general in the market. Good morning, Eirmann. I mean, we don't comment on the specifics on the individual contracts, but what I can say is that it contributes to the conversion of our pipeline that we've been talking about. We've been seeing very good demand for particular for new clients for servicing contracts. And we're now seeing that being converted into signed contracts, and that will deliver growth for us for the coming periods. So from that perspective, it's part of that picture. And we don't make comments on individual contract terms, as you can appreciate. Got it. Absolutely. Then in terms of the fluctuations that's been discussed on the Societe Markets margin, does that have to do anything with kind of termination fees? I know you've been buying a few portfolios from Piraeus, I suppose somewhere either in the The purchase price or in strategic markets, you probably compensated when that's taken out of the servicing perimeter. And should we expect more of those types of contributions in the coming quarters since you've done a few more of those transactions more recently? Armin, thank you for that question. You mentioned the Piraeus transaction specifically. As I mentioned in my presentation, obviously, the assets that were now put into the securitization structure, which we have also invested into in JV format in terms of the junior and mezzanine notes. These assets were part of the perimeter before and they continue to be part of the perimeter. So we used to service them and we still service those assets. The I think as regards termination fee events in general in the strategic markets, they're very much a feature of the business. And they come at given points in time. They're there to protect our franchise over time. Yeah, I appreciate that. But I suppose from kind of a modeling perspective just to understand when the margin is fluctuating, those piece would basically be 100% margin. But yes, I understand that that's hard to really guide for when those events might occur. I would argue from a margin perspective to just go back to what we said before that it is really the best to look at the rolling 12 month margin to see the direction that we're moving into. The Got it. Then perhaps just one last question. You mentioned that there's sort of more of a mix Towards maybe SMEs than it's been before, but also it's pressure claims than perhaps historically. Does that impact returns anyhow? I would imagine that pressure would be less complex and lower margin, but on the other hand, SMEs, UTPs, etcetera, are more complex. So does that sort of offset each other? Or is there anything to keep in mind there? I think from a returns perspective, we continue to see an attractive market Environment and Continued Increase in Supply. And we, as I commented upon, continue to see and foresee the current sort of mid teens return level continuing. There's nothing to suggest that, that the change meaningfully. I think what is important, though, is that as we work through the recovery I'm going to a in the end, a post pandemic environment that these volumes will continue to support particularly of both the servicing and the investment businesses for quite a long time. And as I commented upon before, we have the competence set and the capability across our footprint to meet this. You're right. In terms of freshness, it is generally fresher claims. And with fresher claims, you tend to have a little bit more cash flow earlier than with more matured claims. Got it. That's all for me. Thank you very much. Thank you. There are no further questions at this time. So I hand back to the speakers for any closing remarks. Well, thank you so much all for joining the presentation and thank you for the questions. And I wish you all a very nice summer.