Good morning everyone and welcome to B2 Impact's fourth quarter presentation. My name is Rasmus Hansson. I will moderate the Q& A and some practical information for those of you who want to answer questions live. You can use the link for the dial in link and we will also answer questions in the chat. For those of you who pose questions there. We will then start with the live questions in the Q& A and with that I will give the word to our CEO Trond Kristian Andreassen.
Thank you Rasmus and good morning everyone. As this is my first presentation, I would like to use the opportunity to shortly introduce myself. I started in B2 Impact first of December last year. Most of my career I worked in the finance industry with different positions as CEO. After four years in the Board of B2 Impact, I was enthusiastic to step in as a CEO. My first two months has been good. I'm impressed by the level of competence and positive atmosphere in the group. Together with the team, I'm really looking forward reaching new targets and create value for the shareholders.
Digging into the full year 2024 highlights, I'm pleased that we can present strong collection performance combined with expenses and interest costs continuing to trend down. That's the main drivers for earnings of NOK 1.57 per share and a proposed dividend of NOK 1.50 per share. We reached our investment target of NOK 2.5 billion signed in 2024. Looking forward, we have already committed investments of NOK 1.2 billion through forward flows and Q1 investments.
Later in the presentation we will come back with further details regarding 2025 priorities. Looking into more key figures for the full year 2024, you can see the cash collection of NOK 5,284 and cash EBITDA of NOK 4,175 compared with last year. The difference is mainly driven by the 2023 Q4 sale, our largest asset in Croatia. The unsecured performance is up 208% of the latest forecast and adjusted net profit ends with NOK 579 compared with NOK 483 last year. The leverage ratio is still at a low level of 2.2.
The outcome of focusing on unsecured assets has the last years changed the secured part from 29% down to 14% of the total estimated remaining collections. The investment target of EUR 3 billion for 2025 is mainly unsecured business.
In a setup where we only expect a marginal increase in costs. The total number of FTEs has continued to trend down compared with increased use of optimization, digitalization and AI. The unsecured collection per FTE has increased. Significantly. That's the reason for our increasingly scalable cost base. I'm convinced that our highly competent people will create an even more dynamic operation going forward.
We dig more into the financial performance and I hand over to André.
Thanks a lot, Trond Kristian, and good morning to everyone listening in.
During the quarter you will see that we have had a financial development that reflects the strategic direction we have pursued over the last four years. Strong improvements in unsecured collection performance, growth in unsecured and declining ERC in secured operational cost reductions and significantly lower interest cost.
In the same quarter last year we had very strong cash collections from secured NPLs, mainly driven by the sale of our collection of our largest claim as well as high REO sales. In the same quarter this year you will see that we've had more modest secured collection impact and 6% growth in unsecured collections.
The result is a slightly lower top line but a stronger bottom line allowing for sustainable high dividends and we will elaborate more on this during the presentation. On page eight. We look at the financial highlights for the quarter and for the full year 2024.
We are very pleased to be able to present further improvements in the unsecured collection performance. Performance came in at 110% for the quarter and 108% for the full year. We continue to see the same trend into the first quarter of 2025. Secured collections are down compared to last year, again mainly driven by our largest claim collected of NOK approximately 500 million and higher REO sales last year.
The total operating expenses was down 5% in the quarter, with personnel cost down 6%. During the fourth quarter we have seen a further reduction in FTEs which will impact operating cost also in the coming quarters. At the beginning of 2024 we presented a target to significantly reduce our run rate interest cost and we are very pleased to be able to present also in the last quarter that we are overshooting this target.
During the fourth quarter we have also completed a bond tap of EUR 100 million at a margin of 3.47%. This will further improve our savings program on interest cost. In the quarter, the interest costs were down 28% compared to the same period last year and we expect further decline also in the first quarter of 2025.
That's already touched upon. Our investments are within our target range and we have signed investments for the full year of 2025 of NOK 2.5 billion.
We have also signed quite a bit of new forward flows in the quarter and in addition to investments already made in the first quarter of 2025, we already have a committed investment level of NOK 1.2 billion for 2025. As a reference we had NOK 700 million at the beginning of 2024. The earnings per share for the full year came in at NOK 1.57, which is up 24% compared to the same period in 2023.
Based on our strong development, the Board proposed the dividend of NOK 1.50 per share for the financial year 2024. On page nine we elaborate a bit more on the collection details and as mentioned we continue to see a strong and further improved unsecured collection performance. Throughout 2024 we have seen a positive trend taking the full year collection performance to 108% compared to 105% last year. Despite several positive curve revisions during the year.
Secured collections are down in the quarter as expected with our largest claim collected last year and I'll share some more details on this on the next slide. REO sales was also lower than last year and normally fluctuates between the quarters. The margin to book value continued to be strong with REO sold around 40% above book value.
On page 10 we would like to share some more details on the ERC growth as well as collection development in 2024. During 2024 we have been able to more than replenish the decline in secured ERC with growth in unsecured ERC demonstrated on the left hand side of page 10. The profile of unsecured NPLs is less front-end loaded than secured but provides longer-term stability in our cash flows.
We saw in the fourth quarter a growth in unsecured collection of 6%. We expect this growth to improve further in the coming quarters with more than 10% growth in unsecured ERC in the quarter.
In terms of secured collections, this has declined, obviously driven by no new investments, which is in line with our communicated investment strategy and of course the large claim collected at the end of 2023.
In 2025 we should on average expect to see a higher contribution from secured per quarter than in the fourth quarter, but given that secured now only make up 14% of remaining collections, we may see more volatility between the quarters.
Moving to page 11 and the cash earnings, for the first time in 2024 we saw cash earnings being negative following a high investment level in the quarter. When we look at the full year, we see that cash earnings are positive with more than NOK 200 million even after assumed investment level of NOK 2.5 billion and dividends of NOK 479 million. Meaning we have more than funded our investment level and dividends through operational cash flow and with significantly lower expected interest cost. In 2025 this capacity will increase even further.
Moving to operating expenses, the total operating expenses again were down 5% in the quarter despite considerable inflationary pressure. Personnel cost was down 6% and is expected to further decline in the coming period. In the quarter we have booked non-recurring items of NOK 116 million. The majority of this is related to severance pay following FTE reductions both in the third and the fourth quarter which will impact costs in the coming period.
In addition, we have a non-cash provision of approximately NOK 60 million in the fourth quarter, provisioned for further restructuring planned in 2025 and beyond and we will come back with further details during the course of 2025. So the key takeaway here is costs are coming down and we have done quite a lot of further actions both in the fourth quarter and will continue in 2025 to. Drive down cost and improve efficiency.
In terms of investments, we have had a very active quarter. We have signed investments in the fourth quarter taking the full year level to above EUR 2.5 billion. All investments were unsecured NPLs. In addition we have as we touched upon NOK 1.2 billion already committed for 2025.
As of today February 2025 including all signed investments. The ERC is currently north of NOK 26 billion providing a solid base for growth in unsecured collections.
On the next page we would like to highlight a bit more the change in ERC profile as well as the growth in ERC that we have seen over the last four years. Trond Kristian already touched upon this, but back in 2019 almost 30% of the ERC was related to secured NPLs which is by nature more front-end loaded than unsecured.
We want to highlight that this has been very favorable for us as we have been able to deliver the business quickly. Over the last four years we have seen ERC also growing by 9% driven by investments in unsecured which today make up 86% of the remaining collections. Given the low leverage that we have today, this offers a unique position for B2 Impact.
Our replenishment CapEx need, given the change in ERC profile, has been reduced. Our earnings transparency has been increased, and together with lower operational and interest costs, it allows us to distribute sustainable high dividends and grow investments without issuing new debt going forward.
In terms of interest cost and funding. On page 15 as you can see on the bottom left graph the interest cost has continued to decline throughout the year with a significant drop of 28% in the fourth quarter following a full bond refinancing. In addition, as I touched upon earlier, we have also made a bond tap of EUR 100 million in the fourth quarter. This was done at the margin of 3.47%, which is the lowest in the company's history. We consequently expect a further reduction in interest costs in 1Q25 with approximately NOK 10-15 million.
The current capital structure provides a lot of flexibility. Access to liquidity and we have no short term maturities. Summing up the financial part of the presentation on page 16, we would like to give you some guidance on our financial ambitions for 2025. We target an investment level of at least NOK 3 billion, with more than NOK 1.2 billion already committed for 2025.
I would like to add that we also expect unsecured collection performance to remain strong and further improve. Should this trend continue, we may see further positive revisions going forward. Despite the higher investment level, we target a leverage below 2.5. Lastly, we target to maintain the proposed dividend level of NOK 1.5 per share in dividends also in 2025, to be paid in 2026.
With that, I leave the word back to you to Trond Kristian.
Thank you, André.
Just a short summary. In today's presentation you have heard that B2 Impact has a continued solid and. Improving performance. Combined with a scalable cost base and a low cost of debt. We are able to propose a dividend of NOK 1.5. Already well on our way to achieve our investment target of 2025. We are confident to deliver attractive returns to the shareholders in the future.
With those words. Rasmus, we will open up for questions.
If you wish to ask a question, please dial key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial six on your telephone keypad.
We will then start with Håkon Astrup from DNB Markets. The floor is yours.
Thank you. Rasmus, good morning. Thank you for taking the questions. Two questions from me. The first one on the cost base going forward. You mentioned some initiatives that you are planning to make and you've seen that the number of FTEs and the efficiency in the business has improved. What can we expect here going forward? Can you give some data points on perhaps FTE following or some data points on potential FTE reductions or how much the cost base can come down from where we are today? That's the first question and then last question. Trond Kristian, as you are the new CEO, you talked a little bit about it, but can you give some more insight into anything that you would like to do differently from what B2 Impact has been doing before?
Maybe I can start on the cost side. We have not provided any specific targets on this, so I won't be able to share any specific details.
Obviously we are continuously seeking to improve both our cost base as well as efficiency, meaning our potential to add volume without increasing cost. Obviously we are targeting, at least in the short term, a decline in costs. As touched upon, we've already seen a reduction in FTEs in the fourth quarter. It's not all about reducing the cost base. It's also obviously mitigating inflation. The key for us is that we have changed our cost base and we continue to change the cost base to be much more focused on utilizing data, technology, and actions that will help us increase the scalability, meaning grow the business with only marginal costs going forward. We're quite clear that we believe we can grow the business now going forward without adding.
Without adding anything but marginal cost.
Yes. On your second question to me. I w ould say that. The change in the group. In terms of focusing on secured, sorry, unsecured is actually meaning quite a different focus and kind of organization. It's much easier for us to create an even more lean organization focusing only on the unsecured part. So that's my main focus, to f ocus on core areas, to focus on the unsecured part and also to develop the operational organization according to that.
Perfect. Thank you so much.
Thank you. We give the word to Gustav Larsson from Arctic. Gustav.
Good morning and thank you for taking my question. I only have one here. You have a new investment target of NOK 3 billion per year and a new dividend policy today. Can you just comment on how this compares to your replenishment rate CapEx and the target of distributing 100% of net profit? What I'm asking is, does, look, if you maintain the same dividend level for 2025, does this imply lower than 100% of adjusted net profit given that you're investing NOK 3 billion per year?
Gustav, I don't hear you that well, so maybe if I try to repeat the question, you can let me know if I understood. You're asking if we're able to invest EUR 3 billion and pay dividends and still maintain the level of leverage below 2.5 or did I understand your question correctly?
Yeah, well.
Yes, that is one question you can answer, of course. I am just asking, if you are investing NOK 3 billion, growing the business, and you are maintaining dividend for 2025 at NOK 1.5. Does that mean that your target is lower than 100% of adjusted net profit for 2025?
Understood. The clear. Policy that the board has issued today is that we can distribute up to 100% and the target of 1.5 in dividend per share reflects.
Around 100% payout. Yes.
Okay.
Can you also comment on new EUR 3 billion investments? How does this compare to your replenishment rate?
This will be notably above our replenishment rate. As you've seen, we've been able to more than replenish our ERC and actually grow the ERC with investment levels that we have shown.
Just north of EUR 2 billion and up to EUR 2.5 billion. It depends on what you want to replenish, if it's ERC or if it's bottom line. For us, we've been able to replenish the ERC at the level of around EUR 2.5 billion. EUR 3 billion will clearly deliver growth in ERC. As I have touched upon in the presentation, it does not necessarily mean growth in top line because you see secured declining but unsecured increasing. The bottom line, based on the lower cost level and the nature of the unsecured assets, as well as the lower interest expense, we expect the lower top line to deliver a notably higher bottom line.
Okay, thank you very much.
Sure. Thank you, Gustav.
That concludes our live questions. We have a few questions in, i n the f eed here. We will start with, Jakov Semaskevic from SpareBank 1 Markets .
The company had a strong OpEx cutting trajectory from Q1 to Q3 2024. In Q4, all OpEx components increased quarter on quarter. Looking ahead, should we treat Q4 as a one off? Should we model future OpEx development based on year on year decreases rather than quarter on quarter changes?
Sequentially or year-over-year? What? Not sure I understood the question.
I can repeat. The company had a strong OpEx cutting trajectory from Q1 to Q3 2024. In Q4, all OpEx components increased quarter- on- quarter.
Looking ahead, should we treat Q4 as a one off? Or should we model future OpEx development based on year on year decreases rather than quarter- on- quarter changes?
In general, I would always look at each quarter comparing to the same quarter last year. As we always see seasonality both in cost and collections in terms of quarters. I would model based on a full year cost level and the decline that we saw in the fourth quarter was 5% compared to the same quarter last year. I would for sure model a decline in cost based on the development we saw in the quarter compared to the same quarter last year.
A second question from [inaudible] c an you e laborate on a decision to enter and focus on the Norwegian NPL market. Previously this market was not a key focus area for B2 Impact. What role this shift in strategy?
Yes, we acquired, a s presented, Svea's back book in the Nordics, including Sweden, Finland, and Norway, representing an increase in the ERC at around EUR 100 million. Included in the transaction was the Norwegian platform which further strengthened our position in the Nordics.
Additional question, can you comment at what levels the company hedged interest on that?
On average it's a pproximately 100 basis points below the current floating interest rates in terms of euros, in terms of Euribor rates.
Very good. We move to Jan Erik Gjerland from ABG. Can I get some more details into the results from the secured portfolio, both today's results and going forward? I think you elaborated a bit on that. You may give some more color.
More comments than what's already shared on secured collections?
Yeah, no, I think we, I think we covered it. Obviously, we have fluctuations between the quarters. The ERC in secured is now significantly lower than it's been historically, and we've been collecting the largest assets to a large extent. As I touched upon, we will expect to see on average a higher contribution per quarter, but we may see more volatility between the quarters.
One additional question from Jakov from SpareBank 1 Markets, can you please provide a breakdown on unsecured performance with regard to geographies and what is your performance outlook for 2025?
We have not shared before any details on geography in terms of performance, but I think we can say that we see across the board very strong performance. We've also had some markets where we don't perform up to the level that we want and others where we see very strong performance. The current performance reflects quite a bit of improvements in the markets that we have seen not deliver up to the level that we expect, which is part of also explaining the improvements in collection performance.
Very good. That concludes the Q& A. Thank you to and thank you to everyone who was listening. We look forward to see you again on the Q1 presentation in May.