Good morning and welcome to B2Holding quarterly presentation. I'm Erik Just Johnsen, and with me today, I have André Adolfsen, CFO of B2Holding. This is the first live presentation since February 2020. It's good to be back, and it's good to also present it live again. Let's move to the highlights of the quarter. The unsecured collection continued on a solid performance. We were 102% above the curves, and we also see that recoveries from the secured business is doing very well, both in timing as well as values. We collect more for the claims that we anticipated. Also, on the REO side, we had the best quarter in REO sales. This were announced also last year. We said that we anticipated to sell around NOK 300 million in REOs for the whole year.
I can announce that year to date, we have already achieved over 50% of the REOs sales that was anticipated. The REO sales are moving very well. On the operational side, we have been restructuring multiple jurisdictions to be able to do co-investment and joint ventures in efficient way and also to drive scalability in the secured markets. We'll get back to this a little bit later. The closing of the PIMCO transaction announced previous quarter is anticipated within short time. This will give B2Holding around in the neighborhood of EUR 200 million or right below that due to the collection in the meantime. We have during the quarter signed a refinancing or new we have signed a term sheet with our three banks, DNB, Nordea, and Swedbank, that consist of our RCF facility.
We have signed this agreement, and we have a very good cooperation with those three banks. I can announce that we have signed an agreement that one gives us higher value, NOK 100 million more in RCF, so it increases from NOK 510 million to NOK 610 million. It also extends the facility to 2025. We have a lower margin on the facility. Fourth, we also have a higher flexibility. We can now take out the bond falling due in November this year and a bond falling due in May next year. The bridge loan is included then under the RCF. A very good facility or changed or refinancing that we've been doing. Now, the refinancing, it must be said the refinancing was possible.
If you look at the financial situation for B2Holding today compared to two years, we have been also paying down over NOK 3 billion of debt in this way, in this period that we've been having. That made it possible also to come to a better financing with the banks. The refinancing also give us good headroom to do investments in the period to come, even if we take out the bond in November with the money. We have good headroom, both to refinancing the bond that is falling due in November, as well as doing the investment that is anticipated in this year. We will, however, be disciplined and continue to do selective investment.
If you look back, we have been having extremely good returns on investment done in 2020 and 2021, and we will continue to see that we will look at the return on our investment as the major criteria. Furthermore, we on the capital side, there has been a new dividend policy that has been announced. The board has approved a new dividend policy that we will be able to distribute either dividend in cash or do also a share buyback up to 50% of our net result for the year. Now, moving to the key figures for the quarter, we see on the cash collections, very good, NOK 1.2 billion. That's 100 million more than what we experienced last quarter.
The REO sales, as we can see, picked up very well, and the margin that we have received on the sale of those REOs been 30%. Thirty percent above book value. We do actually realize very good profit on the sale of the REOs these days. As I said, we targeted NOK 300 million for the year, and we are already year to date at over 50%. Now, the cash EBITDA was NOK 934 million. If you take in constant currency terms, we're at the same level as last year. We have an FX that is impacting our cash flow with around 4%.
In constant currency terms, more or less at the same level as last year. As I said, the portfolio purchases, NOK 239 million, do not reflect what we feel and what we see in the marketplace. There is more portfolios coming out, and we also see a higher activity level. Now, at the end of the quarter, we have already bought and committed portfolios for NOK 700 million. If we stop buying portfolios now, we will end up with NOK 700 million about for the year. Good also, closing off portfolios that will also come as due to our forward flow streams. Now, as I said, on the market side, we see the market really picking up. We see more activity, and also the pipeline is increasing.
We have a higher pipeline now at the end of this quarter than we had at the end of the quarter in the year-end. We also see the number of portfolios transacting are increasing. There is a good pipeline. We do look at more portfolios, and the sizes of the portfolios are rather, let's say, on a bigger size. We see both unsecured and secured portfolios coming to market that we currently are looking at. We anticipate to invest around NOK 3 billion for this year. That is based on what we see as a pipeline and our expectation to the development in the market and our hit rate. Given that if the market improves considerably and we see a favorable market development, we can also increase beyond that, as I said previously.
Now comes a little bit what we have been announcing previously, but it's getting together now. We have a new corporate structure is taking place. On the first side here, we have the unsecured markets. We are still going to drive scalability and invest in those markets to a larger extent than we did previously. This is where we can see that we have also now room to invest more, and we have a scalability on that platform. Then we have the secured market, the master servicing. And the master servicing, those countries falling in there has been under reconstruction. We established the master servicing entity and a special servicing entity with a brand of Veraltis.
Veraltis is a pure servicer, and Veraltis will position in the countries that it's been, and it has a very good position in those countries to also see to that we can invest more in joint ventures and co-investment structures. It will be our own profit center, and we have a strong belief that it will grow and where we see considerable value at this entity created. The master servicing will service our own portfolios as well as joint ventures and as well as also 3PC contracts that will be serviced. Now, on the portfolio side, on the secured markets, we will concentrate mainly on JVs and other constructions that we will actually be able to invest more and also then scale the operation in Veraltis. JV and co-investment partnership would drive scalability and the servicing side in these markets.
Total capacity for investment, as we can see it now, is around NOK 530 million. We have very good capacity to invest in the unsecured markets. Also we have a reinvestment entity that is created with PIMCO that will also reinvest the cash flow coming from that entity and in the secured. We have also flexibility to participate in joint ventures with companies like PIMCO and so on. We are in very good position now to take advantage of the market that we see coming and we believe is a good market going forward. Now, we've been doing restructuring and we have been going through restructuring over the past years, especially over the past six-seven months in the secured markets. The restructuring has resulted in leaner and more efficient platforms across the group.
We also see after restructuring, we are able to achieve scalability on all platforms that we have. There is a few that we still are looking at to be even improve it more. Generally, I would say on the majority of our platform, we have good scalability as of today. Also, it allows us for better capital allocation, supporting off-balance sheet funding. This will drive servicing revenue and de-risk the balance sheet of B2Holding. The restructuring is very positive, and we stand now with a good financial flexibility and also good position to take care of what we see as a good market going forward. Now I will then leave the word over to André to take us through the financial numbers.
Thank you, Erik.
Let me just first echo what Erik said. It's obviously very good to finally be able to present in front of an audience and not just in front of the camera as we have done now for almost two years. Before we go into the financials and the details of the quarter, there's one important factor that I would like to highlight which impacts the result, not just in the quarter, but also for the full year. We have communicated and guided earlier that we will have an impact on our cash metrics based on the repossession strategies that we have and that we have pursued. When we repossess an asset, we will have a collection effect on the P&L, which has no cash effect. We repossess an asset, we put it on the balance sheet.
When we actually sell this asset or the REO, we will have a limited impact on the P&L, but we will have a very positive impact on the cash metrics, meaning cash EBITDA or cash revenue. You will see that in the results in this quarter, but you will also see it in the result for the full year of 2022. You may remember back in Q4, we guided for collections for 2022. In that guidance, we had a target of REO sales of NOK 300, and that will consequently lead to a higher cash collection than gross collection this year. It's very important to notice that the cash impact is very noticeable from the sale of these REOs. With that in mind, let's have a look at the details.
Erik also mentioned that we have a negative FX impact of 4% on the P&L in the quarter compared to last year. Cash collections, which is built up by our unsecured collections, the cash received on secured portfolios, not the repossession because that is no cash effect, and the REOs, which is to us a secured collection but booked in a different way in the balance sheet, and the cash coming from our JVs. The total cash collection was down 3% in constant currency compared to last year. The main deviation from last year is coming from one large secured collection last year of more than NOK 150 million. That distorts the picture slightly compared to last year.
When we're comparing this to the previous quarter, Q4 of last year, the cash collections are up 7% quarter over quarter. The underlying collection performance has been very strong in the quarter. We have seen unsecured collections continue on a positive trend at 102% of our curves or the latest forecast. On secured collections came in at 151%, which is notably above the curve. You may also remember that we revised the secured curves in the fourth quarter in connection with the transaction with PIMCO. We also communicated in the Q4 presentation that these curves are on the conservative side.
Throughout the year of 2022, you will most likely see a continued over-performance compared to the curves, but not necessarily to the same extent as we saw in the first quarter. REO sales was very strong in the first quarter, which we also communicated back in the fourth quarter. It came in at NOK 136 million with a margin of 30% to the book value. Cash EBITDA was NOK 934 million, which is down 4% in constant currency compared to last year. The main deviation again is coming from this one large claim that we collected last year of NOK 150 million.
If we compare it to the fourth quarter of last year again, we are up from NOK 862 million to NOK 934 million in this, in the first quarter of 2021. In the quarter, we booked some NRIs related to the restructuring that Erik went through. We have fully restructured our secured business within nine jurisdictions, and we have established a master servicer in these jurisdictions. The NRIs in the quarter amounted to NOK 40 million. Going back to my point earlier regarding repossessions and when we sell the REOs. When you look at the first quarter and compare it with the fourth quarter of last year, you clearly see the effect. Adjusted EBIT is more or less in line with what we saw in the fourth quarter.
The margin on EBIT level is coming down from 41%-40% in the first quarter this year. When you look at the cash EBITDA, it is up from NOK 862 million last quarter, and you can see that the cash margin is improving from 68%-70%. This is the effect of the REO sales, and you will continue to see that throughout 2022. Investments came in at NOK 239 million in the first quarter. As Erik pointed out, this does not reflect the activity level that we have seen in the first quarter.
It's quite clear that the market is coming closer to a normalization of what we saw pre-pandemic. Our pipeline is clearly much stronger than we saw in the beginning of last year, and we have closed some forward flows in the first quarter, which will impact the rest of the year. We also signed agreements where we have made payments in the beginning of the second quarter. The activity level is quite high, and at the end of the first quarter, we have invested and committed capital of more than NOK 700 million. I would also like to point out that if you adjust for the non-recurring items, the return on equity in the quarter for the last 12 months would have been 12.5%.
Moving to the next slide, we elaborate a bit more on the collection performance. Again, unsecured continuing on a positive trend at 102% of the latest forecast. It is also very interesting to see that, in constant currency, the collections in the first quarter is exactly in line with the fourth quarter of last year, and the fourth quarter is a seasonally strongest quarter, a stronger quarter than the first quarter, meaning the underlying collection performance is very strong, and we have seen efficiency improvements in unsecured throughout 2021 and 2020. I mentioned earlier that this was the way, if you look at the secured collections, this was the strongest cash collection quarter that we have had. The reason for that is the REO sales.
On the bottom left, you see the impact of secured collections of EUR 188 million in cash and REO cash of EUR 136 million. I mentioned the large collection we had last year, which is, you know sometimes we get large secured collections which impacts the result, positive or negative. This is underlying the strongest quarter we've had in cash collection. It's important to mention that, and I will come back to it also later in the presentation. Some more color on the REOs. In the quarter, we sold REOs of EUR 136 million. This is at the 30% margin to the book value. Erik pointed it out earlier, we have a target of 300 for the year, which is communicated to the market.
Going out of April, we're already above the level we had last year, which was NOK 164 million. We are more than 50% covered on the full year target and when we go out of April. On the next slide, we elaborate a bit more on the cash development. As mentioned, good cash flow in the quarter. On the left-hand side, you see the development from cash EBITDA, adjusted for the investment and for the financial obligations in the quarter. Cash earnings in the first quarter came in at NOK 479 million, and we've utilized that to further reduce leverage to 2.3 compared to 2.6 last year. Now let's dive a bit more into the cash collections and how the cost has developed throughout the quarter.
On the left-hand side, you see the cash collections, which I mentioned was built up by the unsecured collection, the secured cash collection, the REOs, and all the cash coming from our joint ventures. In constant currency, you can see that this is the strongest quarter we've had over the last four quarters. In Q1 last year, we had this one large payment of NOK 150 million. Underlying, this is our strongest cash collection quarter. On the cost side, we have seen activity picking up, but we've also seen inflation throughout the period. We have continued to be very disciplined on cost. On the right-hand side, you see the last twelve-month Opex is actually down in the quarter. We have had our strongest cash collection quarter.
We have maintained a low cost base, sustained lower cost base, and this is within a quarter where we have restructured our secured business. This is something to all the colleagues out there, a quarter and a result that we should be very proud of. Some more color on the investment side. Before I go into the investments, I just want to highlight on the left-hand side, you see how the ERC has developed over the last year or so. ERC for the business is down, but we have communicated to the market over the last quarters that despite that decline, we will see a higher cash EBITDA and cash metrics for the business, which is mainly related to the REO sold. There's a couple of reasons why the ERC is down.
Obviously, we have not invested up to the level of the amortization, but we have seen on unsecured that we're able to collect more on a lower base. We also adjusted the secured curves in the fourth quarter, and as mentioned, you should consider that to be on the conservative side. A good example, again, of what we have guided the market towards earlier is that the ERC is significantly down from Q4 to Q1, but the cash EBITDA is up. This is a trend you should expect to see throughout 2022. On the investment side, as mentioned, we did investments of NOK 239 million, which is 100% unsecured in this quarter. It's a mix of forward flows and one-offs, approximately 50-50.
Again, important to mention that we have signed several forward flows and contracts that were paid in the beginning of Q2. At the end of the quarter, we have a committed and invested amount of more than NOK 700 million for the full year. The pipeline for the first quarter is seasonally very strong. Over to the capital structure. We are very pleased to be able to announce that we have agreed to refinance the RCF at very favorable terms. We are now able to utilize the RCF facility to take out all our short-term maturities. Firstly, we have rolled the existing bridge facility of NOK 50 million into the RCF.
We also have the option to carve out a part of the RCF to take out the bond maturing in November of this year and the bond maturing in May 2023. We have extended the maturity of the RCF to May 2025, and we have additionally also increased the facility line with EUR 100 million, giving us enough flexibility to take advantage of the favorable market conditions we see going forward. With the current leverage the company has today, we will have a margin on the RCF, which is 50 basis points lower than what we have today. We're very happy with this result, and I think this really shows the development the company has had throughout the pandemic. We have de-leveraged significantly, we have taken down our cost base, and we have improved efficiency throughout the business.
This is a clear result of that underlying performance. When the refinancing is in place and the PIMCO funding is closed during this quarter, we will have NOK 400 million available on the RCF and the bonds. We'll have additionally NOK 130 million from the reinvestment facility with PIMCO available to invest in the market. This is excluding operational cash flow, which you have seen in this quarter, is very strong, and we expect that trend to continue in the next quarters. With that, Erik, I leave the word back to you.
Thank you, André. Closing remarks. We see that we have been restructuring, and that gives us a very good, you know, flexibility also going forward to invest more and have the scalability that we also see is available now on the platforms. Collection and recoveries going into the Q2, it is good. It continues in the same level that we saw in Q1, and we are happy about the collection, and it's a positive trend. We have improved the RCF. We are financially good, we are solid, and we are able now to cover the maturities on the bonds and have the flexibility on the financial side also to participate in a good market that we anticipate. We have a new dividend policy that was announced.
Gives us the flexibility also with, are we going to give cash dividend or are we going to do share buyback? It's going to be up to 50% if that is what the board wants. Also, we see a better pipeline. We see more activity and the portfolios coming somewhat on the unsecured has been coming in sizes. That is good. We see also that going forward, we anticipate this to continue. The activity level is there and we have both the financial situation and we have the platforms that are efficient now to take this activity level and actually handling them in an efficient way. On that note, we open for Q&A.
If you have any questions, please, André will help us and Cosmos will come around with a microphone to ask the question then.
Thank you both. We have a few questions online, but I think we will start with those who actually joined us here in person. I expect some analyst questions there. Jan Erik, you can start, and please use the microphone.
Thank you. Jan Erik Gjerland from ABG. You said, on the investment side that it's a good pipeline ahead. Could you shed some more light into what you expect yourself and what kind of commitment you are sort of working on? You said you have committed already NOK 700 million so far. So it's more about to, towards the total guiding of NOK 3 billion. How far have you sort of reached
Far and what is, how much are you really working on? Because this is the catch up on your ERC as well, of course, and see if that should increase or not, versus the future collection, I would say. Thank you.
Yeah. When it comes to the ERC or what we expect on the pipeline, we have NOK 700 million and we anticipate that we can come up to around NOK 3 billion. If the markets improve further, I do also anticipate we can go beyond that. So far, we say that it's reasonable to think that we are in the neighborhood of NOK 3 billion. We are working on several projects currently, but I don't wanna go into detail on the project and when it's closing. Some is closing in Q2, but also we see that the activity will pick up in Q3 and Q4. That's the general normal trend. We have been given indications by the banks that there will come portfolios to market.
The size of those portfolios will vary, but we also anticipate that more and more banks will actually come to market with portfolios. We have seen a strong pipeline in the Nordics. We have also seen some good pipeline coming up in Poland, but also in the area of Central Europe and SEE, we see that there is good pipeline and also good opportunities. Of course, those we are discussing also with partnerships. We feel the market is coming more and more back to normality, and we believe also that the banks also will have the backstop in mind. They have been telling us that they have that in mind to also come out with the new portfolios related to that.
If I can just add to that. You mentioned ERC and building up ERC. Back to my point regarding the REOs and the development you see on secured collections, we do not have to reinvest enough to increase the ERC to be able to deliver a strong growth in cash EBITDA. That is an important factor to notice. If we don't need to say that replenishment CapEx need to be enough to compensate the amortization for us to have growth in cash EBITDA.
Håkon Astrup from DNB Markets. Start with one more high level question. How do you see the impact from the higher interest rate impacting both your, let's say, financial costs, but also the collection side? Can you start with that?
Well, if we start with the collection and then André Adolfsen will also help me out here. The collection side, we have seen no impact yet. If you look at historically, the business has been going through cycles, and it's also been going through financial crises. To a large extent, those crises have not impacted collection in a large degree. Never done it in the past. This inflation rate that is increasing that much, Oxford Economics, when we talk to them, they said that this is mainly supply driven, sort of parameter. I believe the inflation will go down. That's their view.
We see that also when it comes to the inflation impact, we also see there is a lot of government schemes in different countries to take away some of the inflationary pressure on food and also on oil and oil related, energy related inflationary pressure. There has been tax schemes in some countries also taking care of some of the lower income population. We do not believe that it's going to impact us too much on the collection side. However, we do believe that to a larger degree there, if this continues, there will be more portfolios coming to market. That has been indicated by the banks.
Are there some geographies that you are more concerned about than others given the current outlook?
Well, it's difficult to say at this point in time. Of course, the Nordic countries where we have very good system and also where employment rate is high and everything is working quite well, we are not worried about the collection generally. Due to the economic situation for some of the countries, other places, that impact might be a little bit higher, but it remains to be seen. It's a little bit too early, and we talk to people that has good view on the economic side, like Oxford Economics, to support us also in looking at and also following the trends, what's happening in the marketplace. You want to add something?
Well, the rising interest rates, I think we both know the effect of that. The good thing is that we are more than 90% covered on hedging the interest rate of up to 100 basis points.
Perfect. Very clear. Then on the cost side, should we expect any more restructuring expenses going into Q2 and Q3 on the back of, say, the PIMCO deal and the master servicing setup?
I'm happy you asked the question because I forgot to mention it. We did have some cost in the fourth quarter. We've seen the peak of the cost in the first quarter, but we will also incur cost during the second quarter as we come closer to funding of the transaction. You could expect the cost to come down in the second quarter, but then probably closer to what we saw in the first quarter.
Hopefully in no way-
Sorry, in the fourth quarter.
Yeah. Sorry, one more time.
Closer to what we saw in the fourth quarter, not the first quarter.
Yeah. No, we should not expect anything in Q3 and Q4?
No.
Perfect. The last question from me on the REO side. You mentioned that you already now you are above 50% of your old outlook. Have you revised your outlook or should we still expect the-
I can tell you that the ambition is higher.
Perfect. Thank you.
Anyone else? Okay, we will continue with the questions online. For a couple of questions from Joachim Svingen. I believe we have answered his first question regarding change in consumer behavior as a result of inflation in the markets. Let's move to the second. Should we expect cost to collect to trend around 19%-21% also in the coming quarters?
Yeah. In terms of cost to collect in %, it's to be honest not something we track to a large extent internally. We focus on the actual cost base. What you saw in the first quarter is that the cost to collect in % was up compared to previous quarters. That is purely because the REOs is not part of the calculation. The cost, as you saw, was actually lower than last year, but the cost to collect in % is up. I think you should focus more on the actual cost base, which we have during the pandemic been able to take down to a much more sustainable scalable level than what we had pre-pandemic.
There are a bit of a critical question. I think we should allow for that as well. The question is as follows: In Q1 2021, you guided a secured collection of NOK 2.243 million in the twelve months to come. You realized NOK 1,150 or 51% of the guided collection. In fact, you have never reached the twelve-month forward figure in 2019, 2020 and 2021. Despite the performance, you have not written down the secured portfolios. This doesn't add up. How do you fund the lack of a write-down?
That's not correct, actually, because we did an adjustment in the fourth quarter where we adjusted timing, not value of the secured assets. As mentioned earlier, we have been slightly conservative in that approach in connection with the senior financing with PIMCO, and we expect to trend during this year above the updated ERC.
A question about market development. In your fourth quarter presentation, you highlighted end of the moratoria and the prudential backstop as key drivers for increased supply portfolios. Can you give some color on the development of these drivers?
Well, we've been having discussions with banks. They say this will actually affect them. Of course, when the backstop takes. Well, actually it was three years in May or April 2022. It was three years since the backstop comes in. Takes a little bit of time to accumulate, but we expect it not only during 2022, but going into 2023, it's gonna increase. You have to also look at when the backstop occurs, they also want to get rid of some of the older things that they already have on the books. It's going to increase the portfolios and the development portfolios.
What we anticipate, as we have said previously, is that the banks will sell more often, more frequent, and also smaller portfolios than what they have been doing in the past. That's what we've been told by the banks, so we will anticipate that to occur. The development is gonna increase going forward. It's not going to be immediate, but it's going to, you see, that will increase the volumes coming to market later in the year and beginning of next year.
Very good. I think we have some additional questions here from Nordea as well, but I think they've been covered already regarding restructuring cost in Q2 and interest hedges on the floating rate of the RCF.
Very good.
Okay. Thank you.
Well, thank you very much, everybody, and thank you for coming in and being here in person. It's good to actually be presenting to somebody instead of just looking at the camera. Thank you very much.
Thank you.