Stronger growth, new challenges: EOS' Directors look back on the financial year 2017/18.
The Board of Directors’ review of an outstanding financial year. They explain how EOS Consolidated has stood out against strong competition.
Klaus Engberding – Chairman of the EOS Group’s Board of Directors.
» The EOS Group has seen strong development during the recent financial year. I am not just thinking of the excellent results. To me, success is much more. Above all, I am referring to the EOS Group’s progress with digitisation and cultural change. How we work together and the way we develop new ideas at EOS is crucial to me. In this respect, we are laying the foundation for our future success. With our new motto ‘For a debt-free world’, we have established a mindset at the EOS Group that is unique in the industry. Each and every day, we are giving defaulting payers a fair chance to pay off their debts. This underscores our goal of remaining the quality market leader in receivables management.
Our new vision opens up additional scope for action: ‘We are a globally connected financial investor driven by technology and entrepreneurial spirit’. In recent years, we have increasingly acquired defaulting debt and thus expanded our role as an investor. We want to further consolidate this in the future. We are supported by the development of a modern IT facility, in which we are making the largest investment worldwide in the history of the EOS Group. In future, we will use advanced analytics on a group-wide level with the Center of Analytics. Data analyses are the prerequisite for the functioning of our self-learning debt collection software, which allows us to carry out the best next action individually for each defaulting payer.
But digital technology is just one of the keys to our future successful development. We are creating the basis for collaborative, flexible and sustainable work in many areas. By giving our employees greater scope in decision-making, we become more agile and more efficient. This enables us to make our decisions better and more quickly. At the same time, we are embedding a modern mindset at EOS. We are strengthening the entrepreneurial spirit. For me, the courage to try something new and the confidence that we will be successful is the essence of the new attitude of EOS.
With high-quality services and digital technologies, we are committed to pursuing our goal of maintaining our leadership position in the industry. Performance, digitisation and cultural change are the central building blocks of our future success. «
Dr Andreas Witzig – Member of the EOS Group’s Board of Directors and responsible for the Western European and North American regions.
» With an increase in revenue of 46.4 per cent, we again achieved an outstanding result in the Western European region during the past financial year. Overall, we generated EUR 240.4 million in revenue. One reason is the positive operating performance in France, Belgium, Spain and Switzerland. In France and Belgium, the increase in revenue is due to the first full-year inclusion of the Contentia Group of companies which were acquired in July 2016. In addition, the companies in France, Spain, Belgium and EOS Switzerland contributed two additional months to revenue as a result of the harmonisation of the financial year.
High investments in debt purchases in France and Spain during the financial year 2016/17 also had an extremely positive effect on revenue development. Earnings before taxes (EBT) were significantly higher than in previous years.
Adjusted for Portugal, investments in debt purchase are moderately above budget. Since EOS Consolidated does not operate its own subsidiary in Portugal, a partner company processes the assets we acquire there. In particular, the companies in France, Spain and Denmark clearly were capable of exceeding their planned investments despite a persistently difficult market environment.
In the North American region sales were unfortunately below the level of the previous financial year. In the USA, the contract for handling government student loans expired at the beginning of the financial year. However, we were able to achieve a slight increase in revenues in the healthcare sector. In Canada, sales and earnings were significantly higher than in the previous financial year and above projections. For the first time, we also invested in receivables purchases there.«
Andreas Kropp – Member of the EOS Group’s Board of Directors and responsible for the German market.
» In Germany, we are pleased about the significant growth in revenue during the 2017/18 financial year. At EUR 327.5 million, there was a 7.2 per cent increase over the previous year‘s figure. Earnings before taxes (EBT) also greatly exceeded our expectations. One of the factors contributing to this very positive development was the strong operating performance of EOS Health Honorarmanagement, the result of which was above both the target and the previous year.
In the area of unsecured debt collection, we were able to exceed the previous year‘s result, despite the planned increase in costs. EOS benefited here from its many years of experience and excellent reputation.
In the processing of receivables secured by property and the purchase of real estate, the results in Germany clearly surpassed that of the previous year. Investments in this area of operations were below the very high level of the previous year. This was due to very aggressive price competition and a high one-off investment in the property-backed segment during the 2016/17 financial year. The investment volume in unsecured debt collection was lower than in the previous year. The German fiduciary debt collection market continues to have low margins. Here we will proceed to focus on high-quality and sustainable services in the future.
In the year under review, we again invested heavily in the development of the new receivables management software ‘Best Next Inkasso’. We will gradually introduce this system from 2018 to 2022. As a result, the business and operational processes of German B2C debt collection companies are changing fundamentally. With the help of this new technology, we will significantly increase the productivity and speed of our debt collection processes. This brings advantages for customers and defaulting payers alike. As the largest market within the EOS Group, this will continue to make a major contribution to the high level of earnings in the future. «
Marwin Ramcke – Member of the EOS Group’s Board of Directors and responsible for the Eastern European region.
» At EUR 183.2 million, revenues in the Eastern European region in the past financial year were at their highest level in the history of EOS Consolidated to date. We were able to increase the already excellent level of the previous year by 39.4 per cent. This growth was due in particular to the significant growth in revenue from debt purchases in Croatia and Hungary. Russia was also able to improve its revenue due to a strong improvement in the performance of purchased receivables. And so too, the companies in Poland and Romania exceeded the high sales level of the previous year. In addition, earnings before taxes (EBT) reached a new high. Record figures in Croatia, Hungary and Romania and the positive development in the Czech Republic, Russia, Slovakia and Poland significantly bolstered the excellent result. In addition, some companies contributed 14 months to the annual result due to the harmonisation of the financial year.
We have once again substantially boosted investments in receivables purchases in Eastern Europe even compared with the already very high level of the previous year. Above all, the acquisitions in Croatia, Bulgaria and Hungary were well above projections. Investments in Romania, Slovakia, Poland and Serbia were also higher than in the previous year. The strategy of investing in secured non-performing loans (NPLs), which began at the end of 2016 is paying off here. We are expanding our capacities for processing secured NPL portfolios in an increasing number of Eastern European countries.
With our ‘Kollecto plus’ software, we are also focusing on the smart management of receivables packages in Eastern Europe and are continuously expanding that business. This is how we will ensure our competitiveness in the future. «
Justus Hecking-Veltman – Member of the EOS Group’s Board of Directors and Chief Financial Officer.
» An outstanding financial year – that is how EOS Consolidated’s 2017/18 results can be summed up. Due to very strong operational performance, earnings before taxes (EBT) were 39 per cent above the previous year at EUR 271.5 million. This substantially exceeded expectations. In line with EBT, EOS Consolidated also significantly increased its revenue to EUR 795 million, 19.8 per cent more than 2016/17. As we switched the financial year for EOS Consolidated as a whole to February 28th, 30 companies in Western and Eastern Europe contributed to the revenue development with two additional months.
EOS has once again held its own in a very competitive environment. In the debt purchase segment, the majority of the world’s leading players increased their investments in the purchase of non-performing loans. Low inflation rates, base interest rates and an expansive monetary policy are depressing the yield expectations of many investors, including those outside the industry. As their liquidity position grows at the same time, competition and price pressure increase. At EUR 0.5 billion, EOS Consolidated’s investment volume in receivables purchases remains at a high level. Over the past three years, we have invested heavily in strong portfolios internationally. We benefit from our many years of experience in the valuation of unsecured receivables and also from the fact that we have expanded our expertise in the valuation and processing of secured receivables packages in numerous regions.
In the future, we want to expand our investments even further. We see the purchase of secured non-performing receivables as a priority area for growth. At the same time, we will increasingly examine acquisitions in other asset classes. We also will use our extensive experience in the valuation and development of property for direct investments in real estate.
In order to be able to assess portfolios even better and to outsource their processing in an increasingly efficient manner, we are continuously investing in our IT systems and will make even greater use of the potential for managing them by means of analytical processes. In this way we increase our efficiency and secure our performance rate and competitiveness for the future. «