Welcome to the Intrum Q3 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now I will hand the conference over to President and CEO, Johan Åkerblom, and CFO, Masih Yazdi. Please go ahead.
Good morning, everyone, and welcome to this Q3 presentation. I am here with Masih, and we will take you through the results, and then we will open up for Q&A. If we start with the highlights of the quarter, it feels like it is a Q2 event, but we actually did close the capital raise and the asset sale in Q3. That together, coupled with cost control, moves the Servicing leverage to 4.5x. We started the year at 5.7x, and we have set out the course towards 3.0x in 2028. The negative trend on the income side unfortunately continues from H1, and the drivers of that is mainly that we have development not according to plan in Germany and U.K. The German development has led that we have taken a goodwill impairment of SEK 1.5 billion.
It also means that the goodwill that we used to have in Germany is now completely written off. As we said already in Q2, we have accelerated the Operational Excellence program, and we are now working on a plan to take us towards SEK 11 billion on total cost already in 2027. The cost base on a rolling 12 months in Q3 is SEK 11.8 billion, and we started the year at SEK 12.3 billion.
The investment pace has developed better than expected. We are underwriting SEK 670 million onto our balance sheet in the quarter, and we have done so with an investment IRR of 17% blended, which is actually higher than we expected, both in terms of volume and the returns, which is a very good sign, and it shows that we can hopefully get to replenishing levels at some stage, and then make sure that the book stays flat.
The Servicing margin is flat year-on-year, and we stay at 25%, and we are here targeting 30%-35% in 2030. If we move on and talk about the Servicing, as I said, the margins remain stable, and you will get a bit more details later on from Masih. The organic growth, as in Q2 in the Traditional markets, can only partly offset the natural decline that we have in the Specialised markets. But the two big deviations are U.K. and Germany. The Traditional markets, excluding Germany, they grew 3% in the quarter, organic growth, and the margins remain stable. The trend that we have had in the first half sort of continues into Q3. To give a little bit more details on what has happened, we had a plan.
We think that the plan delivers, but we have two things that are standing out on the negative side. Traditional markets, we see growth. We see the decline in Greece, Italy, and Spain pretty much in line where we expected. But when we don't get the forecasted growth in U.K. and Germany, but rather having a decline in those two markets, that leads to an overall negative effect. Those are the two outliers that we didn't have in the original plan. Obviously, we are now taking measures to address that. In Germany, we have strengthened the management team during the year. We have a new commercial lead that starts next week or the week after. In Germany, we have a new management. Sorry, in U.K., we have a new managing director that joined us 1st of September.
He's coming from Coeo, and he has a very strong commercial focus. We have also recruited a new commercial lead that started after summer in the U.K. On top of that, we have also increased the sales capacity, the new sales capacity of more than 30% across the board, and we have now a much more structured and focused approach on our commercial performance. We will continue to take actions to improve the way we execute on the top line. What we have also done during the quarter is we have accelerated the Operational Excellence program. We had a plan from the beginning to do seven countries in 2026. We started the year with a central OpEx team that has fairly limited capacity. We have now recruited a number of people so we can broaden the program across almost the entire group.
We are now covering 17 countries this year. That also means that we will see more effects, and we will have quicker effects in general. This is also why we are now working on a plan to get to a total cost base of SEK 11 billion in 2027, and we'll come back with more details when we have our Q4 results. Last but not least, on the investing side, the collections continue to be in line with our forecast or slightly above actually. We land the quarter at 101. We are at 107 versus the original forecast. More importantly, the volumes have increased already the same quarter as we closed the capital raise. This is one of the benefits with having a stronger balance sheet and more financial flexibility.
We are keeping a blended IRR of 17% in the quarter, and our investment levels are already now at the same level as they were in 2025. As I think we said before, and we will continue to repeat, we have an aim to reach replenishing levels, which is around SEK 3 billion annually, while maintaining the return requirements that we have. When expanding the volumes, we do expect that we will not be able to stay at 17%, 18% as we have been over the last quarters, but rather the return requirements will slightly go down, but they will still be sufficient enough for us to deploy capital. I think with that, I will hand over to Masih to take you through the financials.
Thank you, Johan. Looking at slide eight and looking at the group financials. In addition to what Johan already have said, just a few points. On the cost side, we have obviously an elevated level. A lot of that is driven by the impairment in Germany as well as other items affecting comparability. Those other items total around SEK 150 million during the quarter and is very much related to the acceleration of the OpEx program we are doing.
On the underlying basis, the costs are developing slightly ahead of plan, given the fact that we have had a consolidation of the Savoy portfolio, which increases the cost base for 2026 by about SEK 300 million, which would take our cost target for the year to around SEK 12 billion. Right now, we are trending slightly below that, and we expect to end the year below the SEK 12 billion level.
On the net financial expense, it is now coming down on an underlying basis. If you look at the cash component of it, that is obviously driven by the capital raise and the asset sale, which reduces the debt level. We are seeing a positive impact there. That positive impact should be a bit larger going forward, as the liquidity management in the quarter has not been optimal due to the fact that we have done tenders and bought back bonds. We have had to hold more liquidity on deposit accounts rather than to fully use the capital to reduce the debt. We should see further tailwinds on the cash component of the net financial expense in Q4 and onwards, marginally offset with the higher interest rates, which is only affecting our RCF and not the other debt as the other debt is on a fixed coupon basis.
Then you can see that there has been a few one-offs on the net financial expense, mainly related to the bond buybacks that we did for 2027 that were bought back above 100. There is a negative effect there, and then we pay the consent fee to the RCF holders when we did the asset sale, which also has a negative effect. Move to the next page, which is on the Servicing income. Johan has gone through most of the things here with the negative development on the external income. At the same time, we have had good cost control, which means that the margin is stable in terms of the 12-month outlook. But year-on-year, we see an improvement of the margin going from 22% to 24% this quarter. Moving to the investing P&L.
There is a pretty large decrease if you look at the adjusted EBIT, and that is very much related to the consolidation of Savoy, which typically seasonally has a very weak Q3. Cost level in Savoy is at just over SEK 100 million in Q3, with income being less than that. There is actually a negative contribution for Savoy. That typically changes quite a bit in Q4, where Savoy has its seasonally strongest quarter. We expect the cost level to be approximately the same in Q4, but with income and collections more than doubling. The negative effect we have in Q3 from this consolidation would reverse in Q4 and be a positive effect instead. Here we should also mention that the EBIT is stronger, compared to last year, very much related to the asset sale of the Orange portfolio that led to a capital gain of about SEK 430 million.
On the portfolio investments that Johan mentioned, which is SEK 617 million in the quarter, we think the outlook looks pretty good for Q4, and we expect to be able to be above that level with similar levels of returns in the next quarter. That is going to be dependent on one or two deals that could be binary, but assuming that everything goes according to plan, we expect to be able to improve volumes further. On the cost development on the next slide, obviously we have had a good development over the past couple of years, with personnel expenses coming down by 20% and other costs by 14%. We are obviously continuing to work on this. We expect this development to continue and accelerate a bit in 2027 compared to development we have seen in 2026.
You can already see in the Q3 numbers that there is a slightly larger decline of the FTE base in Q3 versus what we have seen in the last couple of quarters. That should accelerate further, going forward. This has led to some restructuring costs that we have taken in Q3, and we expect these costs to be clearly higher in Q4, which will enable us to transform the business faster. Again, we will come back with further details, but the plan is to approach about towards SEK 11 billion in total cost in 2027. If I summarize the quarter, obviously the main priority for us as a company is to delever. We are doing that right now, obviously helped with the capital raise and the asset sale, but going forward, the deleveraging will be fully driven by the organic development.
We have had this large goodwill impairment in Germany, and we are accelerating the Operational Excellence program. On the Servicing side, we continue to see, unfortunately, the negative external income development, mainly driven by U.K. and Germany, but we are able to offset that by reducing the cost level and therefore keeping the margin largely flat. On the investing side, we see an acceleration of investments. We expect that acceleration to continue. For now, returns are stable at high levels. We expect returns to come down, but still be at sufficiently good levels for us to do these investments. With that, we will stop and open up for Q&A.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Please limit your questions to two per turn. The next question comes from Patrik Brattelius from ABG. Please go ahead.
Thank you. Can you hear me?
Yes.
Perfect. Good morning. My first question is on Servicing. You had a chart there on slide four explaining the difference. Could you break it down a little bit on the underlying dynamics here? You flagged that Traditional markets is improving and growing while Greece, Italy, Spain and U.K., Germany are reducing. Can you talk about a little bit how you see the risk of more markets moving in the same direction as the markets that are falling in growth or the opposite way? What needs to change in the U.K. and the German market in order for them to come back to growth? The underlying dynamics in your view here.
If we start with U.K. and Germany, U.K., if we look at the background, U.K. comes from a history of acquisitions, right? There was a big acquisition done a couple of years ago, and then we've been working on that integration. Then unfortunately, we had one of our larger clients that was acquired and then they decided to move the Servicing during last year. We were expecting that we could offset part of that with new clients coming in. That transition has just taken longer. We've also been, to be fair, we haven't had sort of a firm leadership because we've had the last MD left during 2024, and the new MD now started this fall. So U.K. is now continuing its integration and continuing its transition from a BPO to a more Traditional NPL player.
With that, we also expect that the effects we're taking will start showing, going forward. Germany is another story. Germany, there we have operational issues, and we're basically rebuilding the platform. We're changing the infrastructure. Germany is more an effect of sort of not being able to have the right setup in order to facilitate growth. We thought that we had that. Now when we have spent more time with Germany and we also have the sort of the new management working on it, we can clearly see that there needs to be a complete rebuild, and that's what we're doing. Coming to your question around do we have other markets, the bulk of our markets on the Traditional side, they are organically built. They have no sort of legacy of big acquisitions, big mergers.
They also have seen a number of quarters in a row where we see growth. You have Greece, Italy, and Spain, which I think we all know how they've been built up and what the history is. There we have a very good view on how they will develop going forward. I think that's how we see it. If we would have had U.K. and Germany performing according to our plan, then the negative income growth that we are now seeing in Q3 would have been much less of an issue.
Thank you. Going back a little bit to the financial plan laid out in Q4, we discussed the flat development in Servicing to then gradually increasing and accelerating later on. We have now talked that it will rather shrink in 2026. How should we think about the growth trajectory from 2026? Are you aiming for more flat ambition in 2027, or do you still believe that you can start to achieve growth looking into 2027?
Hi, Patrik. I'll take that one. I think given that development so far this year has been more negative than we expected, we want to be a bit humble in terms of giving any forecast for 2027. What I can say at this point in terms of our expectations is that we expect the Traditional markets to continue to grow going forward, and we expect the Southern European markets, Greece, Spain, and Italy, to on average, continue to have a decay. At the same time, when you look at the U.K. and Germany, we believe that going into next year, the comps will be easier. We believe that we're approaching the trough in those two markets, so the comps will be easier for those two.
I think the goodwill impairment in Germany and not doing the same thing in the U.K. gives some indication as well that in Germany, we probably have a larger structural challenge to grow, whereas in the U.K., we believe that this is more cyclical and in the long term, we have a plan, and we have more conviction that that market can grow. What a net effect of all of this is we'll have to come back with, but in terms of the overall development, it's difficult to see that it's going to be as negative as this year as, again, it's driven largely by two markets where we've seen most of the headwinds already, and it's difficult to see that those headwinds continue into 2027.
Okay, fair enough. Thanks so much.
The next question comes from Björn Olsson from SEB. Please go ahead.
Hi, guys. First, extrapolating basically your baseline growth trajectory from here with the EUR 11 billion target 2027, how should we view the Servicing margin impact then? I understand that it's moving parts, but still from your baseline perspective, are you defending the margin or do you expect it to pick up?
Hi, Björn. Well, if you look at this year, we've had a clearly worse development on the Servicing top line than we expected. Despite that, we've been able to keep the margin largely flat. It's actually marginally up quarter-on-quarter despite this negative organic growth. Obviously, going into next year, we don't expect the organic growth to be as negative as it is now, and simultaneously we're accelerating the cost reductions. In terms of our expectations, that dynamic should lead to the margin going up. Obviously, overall it's the combination of the margin and the income you generate that is most important. You can always defend a high margin, but if your income is coming down simultaneously, you're just generating less cash flows. Obviously, we want to see an improvement of the margin simultaneously as the income improves.
But overall, I would say that our expectation is that the margin will go up next year as the cost reduction should be larger than any downside risk we have on the income side.
Okay, that's clear. Then just second, you sort of hinted that you in Q3 had roughly SEK 150 million in redundancy costs and that this will be higher in Q4. Could you give any flavor of the size in Q4?
Well, as we say in the presentation, we're working on the plan. It's not finalized yet, and it's going to be finalized in December when it's approved by the board. So as long as that's not the case, we can't give you a firm number. I think I can say at this point, it will be clearly higher than what we had in Q3. We've just started the work, and we've been able to take the restructuring that we have already identified. But there'll be more of that coming in Q4. You'll have to wait until that report before you see the full disclosure of that number.
Fair enough. Thanks.
The next question comes from Johan Ekblom from UBS. Please go ahead.
Thank you. The first question is really thinking around leverage and your refinancing plans. It has been a difficult market over the last two or three months, and we have seen significant increase in high yield credit spreads, et cetera. How has this impacted how you think about the refinancing? I guess there is relatively little left for 2027, but when you think about the optionality you have and timing of dealing with the 2028s, et cetera. Maybe if you can talk a little bit about that. The second question would be around Spain specifically. There have been some press stories that you are looking to potentially sell the majority of your Spanish business. Do you have any comment to that? Then just if I could bring that back to, I think Masih said in Q2 that the Spanish business is significantly less profitable than the Servicing business overall.
Is that still a valid comment, or did I misremember that?
Yeah. Hi, Johan. I will have Masih start on the first one, and then I will take the second.
Yeah. On the leverage and the refinancing, you are right. The market has clearly become more negative over the last couple of months. I think one positive aspect of that is that we did refinancing in July when the market still was strong, and we were able to refinance the 1.5 lien bonds that we had maturing in 2027 at sufficiently good levels. In the market we have today, there are very few high-yield issuers that go out in the market. You have that over the course of a year that happens a couple of times, so you have to be prepared for the market not being really open to you. I will just repeat what we have said about the refinancing. We have a bond maturing in 2027 that is about EUR 190 million .
We have liquidity to cover that, and we will do that when that comes due, and we will not refinance that. The next refinancing need we have is for 2028, so that is almost two years away. We are working on that refinancing. We have said in the past that the RCF we have will be materially smaller when we refinance it, and we will make up for the shortfall of the small RCF by issuing bonds. The market we have now is not a market where we will do that in. Irrespective of what plans we could have had in the past, it is not a market we will refinance in because the financial cost of that will be too large.
But typically what happens is that you have these kind of episodes in a year, couple of months with a very sort of lukewarm market with less activity, and you have to be patient and wait for the market to recover and become better. The aim for us is to refinance before the RCF and the bond in 2028 becoming current, which is by next summer. We feel that we have at least time until then to finalize that refinancing. Obviously it is difficult to say that the market will be the way it is now for another nine months. Hopefully we will be in a better market at that point. We have a plan if we look at it now that will help us delever in the next couple of quarters. We think that we have an organic plan that will enable that.
Hopefully both the market will be better, and we will also be in a better position as a company to refinance when that comes due.
Is there anything preventing you from buying back 2028 bonds at a discount?
No, there's nothing preventing us from doing that. We can do tenders. We can buy back bonds 2028, 2029, and 2030s. We are obviously looking at that. We mentioned that we did that in Q3, during Q3, and we're looking into doing that as well. There are no decision being made on if we buy and how much we buy and what bonds we buy. We need to manage that together with the liquidity need we have. I think what's changed marginally since we did the last tender, spreads are wider, so it's cheaper to buy back. Simultaneously we've seen more activity on the investment side than we expected back then. It's a balance between having liquidity to do those investments and the returns you can expect on those investments, and the returns you can expect on buyback bonds.
Obviously we keep looking at this and we'll be optimistic in what we choose, but I think the change really is that we see a bigger potential to invest more than we expected a few months ago.
Okay. On the second one, which is around Spain. There will always be rumors in the market, and in general, we don't comment on rumors. I think we said before that we have an organic plan, and the organic plan is our base case. Obviously if things happen where we can extract value as we have done, for example, with the sale of the Orange portfolio, the backlog we sold to Brocc, we will obviously explore it. You're right, the Spanish Servicing market has, in general, a lower margin than the average margin we have in Servicing overall.
Thank you.
The next question comes from Ermin Keric from DNB Carnegie. Please go ahead.
Good morning. If we start on the cost execution, it looks like you are talking about it taking about one year to execute, and you are talking about SEK 11 billion of full-year costs for next year. What do you expect the run rate to be by the end of 2027 then?
Hi, Ermin. The run rate approaching SEK 11 billion, given the fact that is sort of the average level for next year. The run rate by the end of the year should be lower. It gives us a good foundation to move into 2028 with a good cost trajectory. Exactly what the run rate will be, I cannot say at this point. As we said, we are working on the plans, and we have not finalized those yet. I think a good assumption is that we will move into 2028 roughly having around 1,000 fewer FTEs than we have today.
Got it. Thanks. Then on the organic development, you are talking about increasing sales capacity. I think you talked about 30%.
Yeah.
How long lead times do you expect for that to actually come to any fruition that is visible in the top line?
We assume if you hire someone on the new sales side, it usually takes between six and 12 months, depending on first of all, their experience, their network, but it also a little bit dependent on the outside factors like are there big tenders in the market? It is not only dependent on our internal capacities, it is also depending on the demand in the market and the cadence and the pace of bigger Servicing contracts being out there.
Got it. Lastly, you touched upon it a little bit already, but could you discuss a little bit more on your thinking between the balance, doing bond buybacks and investments of new portfolios? If you see the 17% IRR currently, how much more can debt come down before you feel that it is not really worthwhile given where your incremental funding costs are right now if we just look at market pricing?
Yeah. You are right. It is a balancing act. It is a balancing act between the returns we get and what we can get in terms of buyback bonds. It depends on what kind of investments we are doing. Again, we can always invest on our own book, or we can co-invest together with Brocc. If we co-invest, we get Servicing revenues as well, which gives you an uptick on the IRR. So it is not a sort of clear science around it.
We have said that we will invest only when it is sufficiently above the funding cost that we have. So that still holds. We will try to strike a balance, so we will not invest at a pace that does not allow us to take debt down nominally. That is something we want to do quarter by quarter to reduce the debt in absolute terms, but also reducing the leverage.
But at the same time, we want to keep the investment pace at a sufficiently high level for the investment income to not be a large headwind for us. But again, it is not scientific in the sense that we know the exact number. It depends on what kind of investments we are doing, what kind of Servicing revenues that also can generate, but obviously on where our bond is trading as well. So the balance will be reduce debt, improve leverage, but also have as little headwind on the investment income as possible.
Fair enough. Thank you very much.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Sameer Shah from Citigroup. Please go ahead.
Hi there. Thanks for the question. Just go back to the specific point on the debt side and your plan for refinancing the RCF. Just in terms of potential timing for any future tenders, can you just confirm that you could launch whenever you wanted based on when it's the best use of capital? The second question is specific point in the new bond that you issued, which is the 2031 1.5 liens, you have the concept of an incurrence ratio test. My understanding is that so long as the current second lien debt remains outstanding, you can't make use of that 3.5x ratio. Can you advise of the plan on how you can incur that incremental debt to help with the lower RCF size? Thanks.
Thanks, Sameer. Your sound was pretty low, so I'm not sure if I caught everything you said. On the RCF refinancing potential tenders, I think the only sort of balancing act there is that the more tenders we do, the less liquidity we would have, and therefore that would put a limit on how much we could reduce the RCF when we have a new RCF in place. We have to find that balance there. That's what we're thinking about. Right now, the planning scenario is that the RCF will be probably less than half than the current RCF, and then we need to think about then how much liquidity do we need to enable that, and how large of a bond do we need to issue when we reduce the RCF to half of the current level. That's the balancing act we have in mind.
Other than that, I can't really comment on it. On the 2031 bond that we issued, when our leverage is below 3.5x, we can issue new bonds. Any outstanding bonds that we have today on the second lien layer, we can refinance that on the 1.5 lien layer. That's correct. I'm not sure if that answered your question, but there's no limitation on us doing that if the leverage is below 3.5x.
No, but just to be clear, that had to be your total leverage, not just 1.5 lien leverage?
Yes, that's the total leverage.
Fine. Out of today, you couldn't incur more 1.5 lien debt to refi the second liens?
Exactly.
Okay, thanks.
The next question comes from Robert Dinic from DNB Carnegie. Please go ahead.
Good morning, guys, and thank you for taking my question. Just one from me, and it's that one of your large Servicing peers has stated that they will target some of your tenders, specifically Intrum, Danske, and Piraeus over the coming few years. My question is, how have you accounted for these sort of large tenders in your business plan? Have you assumed that you win them? If yes, at what margin compared to today? Thank you.
I think we know what you're referring to. First of all, some of those contracts have already been prolonged, so they're not even on the market. Secondly, we take a probability approach on any big contracts and how we can roll them over. At the same time, we also take a realistic approach on what margin we can assume. Some of those contracts have very healthy margins. Some of those contracts have very unhealthy margins. So it's a pretty mixed bag of opportunities.
Thank you. Maybe just one final question. On the 1.5 lien, the refi. Is there any limitation in the second lien docs in your understanding for doing new 1.5 lien bonds?
Yeah, there is limitation, as we said before. So we can only do it if the leverage is below 3.5 x. Overall, indeed, for the second lien you have to ask for consent to put anything in front of them. So that's the limitation, yeah.
Understood. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you for listening. Thank you for taking the time. Thank you for the questions. We will speak again when we report our Q4 numbers in January, if I am not mistaken. Or actually, I think it is February. Sorry. Beginning of February. Have a great day, everyone. Thank you and bye.