Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hoist Finance AB (FRA:4HF, Financial) reported a strong profit before tax of SEK383 million for Q2 2024.
- The company achieved a return on equity (ROE) of 18%, with an underlying ROE of around 15%, aligning with their core financial target.
- Hoist Finance AB (FRA:4HF) closed SEK2.2 billion in investments during the quarter, marking the third consecutive quarter of such high investment levels.
- The company has a solid pipeline for the rest of the year, with SEK2 billion in portfolios already signed post-quarter closing.
- The collection performance remained strong at 106%, indicating effective operational improvements and a healthy portfolio.
Negative Points
- The company incurred restructuring costs in Germany, Italy, the Netherlands, Belgium, and Cyprus, impacting overall profitability.
- There were significant non-recurring costs, including SEK30 million for IT in-sourcing and SEK20 million for strategic work, which may not be sustainable.
- The increased liquidity reserves required for the new specialized debt restructure (SDR) status are expected to add SEK70 million in annual funding costs.
- The funding cost on average is plateauing, and while it is expected to gradually decrease, it remains a concern in the current interest rate environment.
- The company faces challenges in maintaining the high collection performance, as the current 106% is not considered the new normal.
Q & A Highlights
Q: Could you comment on both the primary and secondary market outlook ahead?
A: We see a solid pipeline and it looks very strong for Q3 and Q4. The primary market appears more active in the second half of the year, with significant activity in Germany, the UK, France, Italy, Spain, and the Nordics. (Harry Vranjes, CEO)
Q: Is the SEK2 billion in deals closed so far in Q3 an indication of a higher run rate compared to previous quarters?
A: We signed, but haven't closed yet. It's a lumpy business between quarters. We are pricing in a disciplined way, and this year, it's been falling our way with a strong pipeline. (Christian Wallentin, Deputy CEO & CFO)
Q: How sustainable is the continued collection performance above expectations?
A: We aim for stable and predictable performance. While we can't promise the same strong performance will continue, we expect collection performance above 100% to persist as long as we maintain a positive tilt in the book. (Christian Wallentin, Deputy CEO & CFO)
Q: How does the Board balance between continued buybacks and reinstating an annual dividend?
A: We will address this in our Capital Markets Update. We are committed to creating shareholder value, and the exact form will be discussed further. (Christian Wallentin, Deputy CEO & CFO)
Q: Regarding the increased liquidity reserves, is the SEK70 million additional funding cost per year a gross or net number?
A: This is a net cost. The SDR status is the most cost-efficient solution, adding value to the outlook beyond 2024. (Christian Wallentin, Deputy CEO & CFO)
Q: Is it possible to redeem existing securitizations early with the new SDR status?
A: Many securitizations have call features once the notes become a certain size. We will review these securitizations as they reach those levels, preferring not to build more on complex structures. (Christian Wallentin, Deputy CEO & CFO)
Q: How should we think about the starting base for costs from Q3?
A: The majority of the SEK40 million annualized IT savings will hit Q3. The nonrecurring costs highlighted in the bridge will not recur, so the cost base will be lower. (Christian Wallentin, Deputy CEO & CFO)
Q: Is there anything nonrecurring in the SEK25 million other income excluding the SEK150 million gain from divesting portfolios?
A: Other income includes servicing revenue from our small servicing business in Italy. We also have slight positive revaluations on the book, which may continue if the book remains healthy. (Christian Wallentin, Deputy CEO & CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
