Alternative performance measures (APMs) are financial measures of past or future earnings trends, financial position or cash flow that are not defined in the applicable accounting regulatory framework (IFRS), in the Capital Requirements Directive (CRD IV), or in the EU’s Capital Requirement Regulation number 575/2013 (CRR). APMs are used by Hoist Finance, along with other financial measures, when relevant for monitoring and describing the financial situation and for providing additional useful information to users of the financial statements. These measures are not directly comparable with similar performance measures that are presented by other companies. C&I ratio, Return on equity, Collection performance and Adjusted EBITDA are alternative performance measures that provide information on Hoist Finance’s profitability. “Estimated Remaining Collections” is Hoist Finance’s estimate of the gross amount that can be collected on acquired loan portfolios. Definitions of alternative performance measures and other key figures are presented below. The financial fact book, available on hoistfinance.com/investors/financial-information, provides details on the calculation of key figures.
As from 2021 Hoist Finance no longer monitors “Acquired loans” and only monitors “Acquired loan portfolios”. This reflects Hoist Finance internal monitoring process, as items that are not included in “Acquired loan portfolios” are immaterial. Finally, Hoist Finance removed Net interest income margin as a performance measure to monitor profitability and instead began monitoring the measures “Collection performance” and “Direct contribution” at transition to the new segment reporting. As from Q2 2021 Hoist Finance has removed the measure Portfolio growth due to that it is not monitored internally.
Performance measures according to IFRS and other regulations
Average number of employees
Average number of employees during the year converted to full-time posts (FTEs). The calculation is based on the total average number of FTEs per month divided by the year’s twelve months.
Basic earnings per share
Net profit for the year, adjusted for interest on capital instruments recorded in equity, divided by the weighted average number of outstanding shares.
Diluted earnings per share
Net profit for the year, adjusted for interest on capital instruments recorded in equity, divided by the weighted average number of outstanding shares after full dilution.
Return on assets (only presented yearly in accordance with FFFS 2008:25)
Net result for the year as a percentage of total assets at the end of the year.
Weighted average number of shares outstanding
Weighted number of shares outstanding plus potential dilutive effect of warrants outstanding.
Acquired loan portfolios
An acquired loan portfolio consists of a number of defaulted and non-defaulted consumer loans and SME loans that arise from the same originator.
Cash EBITDA
EBIT (operating earnings), less depreciation and amortization (“EBITDA”) adjusted for net of collections and interest income from acquired loan portfolios.
C/I ratio
Total operating expenses in relation to Total operating income and Profit from shares and participations in joint ventures.
Collection performance
Actual collections for the period adjusted for contractual and timing adjustments, divided by estimated collections.
Direct contribution
Direct contribution is the sum of total operating income minus direct costs directly attributable to each business line.
Fee and commission income
Fees for providing debt management services to third parties.
Gross 180-months ERC
“Estimated Remaining Collections” – the company’s estimate of the gross amount that can be collected on the loan portfolios currently owned by the company. The assessment is based on estimates for each loan portfolio and extends from the following month through the coming 180 months. The estimate for each loan portfolio is based on the company’s extensive experience in processing and collecting over the portfolio’s entire economic life.
Internal funding
The internal funding cost is determined per portfolio applying the following monthly interest rate: (1+annual interest)^(1/12)-1.
Items affecting comparability
Items that interfere with comparison due to the irregularity of their occurrence and/or size as compared with other items.
Legal collection
Legal collections relate to the cash received following the initiation of Hoist Finance’s litigation process. This process assesses customers’ solvency and follows regulatory and legal requirements.
Net interest income margin
Net interest income for the period, calculated on a full-year basis, in relation to the period’s average Acquired loan portfolios, calculated as the period average based on quarterly values during the period.
Portfolio acquisitions
Acquired loan portfolios during the period that consists of defaulted and non-defaulted consumer loans and SME loans.
Portfolio revaluation
Changes in the portfolio value based on revised estimated remaining collections for the portfolio.
Return on assets (only presented yearly in accordance with FFFS 2008:25)
Net result for the year as a percentage of total assets at the end of the year.
Return on equity
Net profit for the period adjusted for accrued unpaid interest on AT1 capital calculated on annualized basis, divided by equity adjusted for AT1 capital reported in equity, calculated as an average for the year based on a quarterly basis.
Definitions – According to the EU Capital Requirements Regulation no 575/2013 (CRR)
Additional Tier 1 capital
Capital instruments and associated share premium reserves that fulfil the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council and that may accordingly be included in the Tier 1 capital.
Capital requirements – Pillar 1
Minimum capital requirements for credit risk, market risk and operational risk.
Capital requirements – Pillar 2
Capital requirements beyond those stipulated in Pillar 1.
Common Equity Tier 1
Capital instruments and associated share premium reserves that fulfil the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council, and other equity items that may be included in CET1 capital, less regulatory dividend deduction and deductions for items such as goodwill and deferred tax assets.
Common Equity Tier 1 ratio
Common Equity Tier 1 in relation to total risk exposure amount.
Leverage ratio
An institution's total exposure measure in relation to Tier 1 capital.
Liquidity coverage ratio (LCR)
A mandatory requirement for banks within the EU, whereby an institution must hold a sufficiently large buffer of liquid assets to be able to withstand actual and simulated cash outflows for a period of 30 days while experiencing heavy liquidity stress.
Liquidity reserve
Hoist Finance’s liquidity reserve is a reserve of high-quality liquid assets which is used to carry out planned acquisitions of loan portfolios and to secure the Company’s short term capacity to meet payment obligations in the event of lost or impaired access to regularly available funding sources.
Net stable funding ratio (NSFR)
Measures an institution’s amount of available stable funding to cover its required stable funding under normal and stressed conditions in a one-year perspective.
Own funds
Sum of Tier 1 capital and Tier 2 capital.
Risk-weighted exposure amount
The risk weight of each exposure multiplied by the exposure amount.
Tier 1 capital
The sum of CET1 capital and AT1 capital.
Tier 1 capital ratio
Tier 1 capital as a percentage of the total risk exposure amount.
Tier 2 capital
Capital instruments and associated share premium reserves that the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council and that may accordingly be included in the funds.
Total capital ratio
Own funds as a percentage of the total risk exposure amount.
Non-Financial Definitions
Non-performing loans (NPLs)
A loan that is deemed to cause probable credit losses including individually assessed impaired loans, portfolio assessed loans past due more than 60 days and restructured portfolio assessed loans. Hoist Finance primarily purchases loans that are credit-impaired on initial recognition.
Number of employees (FTEs)
Number of employees at the end of the period converted to full-time posts (FTEs).
SME
A company that employs fewer than 250 people and has either annual turnover of EUR 50 million or less or a balance sheet total of EUR 43 million or less.