Good morning, everyone, and welcome to the B2 Impact Second Quarter Presentation. Before we start the presentation, just some practical information. As always, we will start with the live questions in the Q&A, and then we will follow up with questions in the activity feed for those posting questions online. With that, I will leave the word to you, Trond Kristian.
Thank you, Rasmus, and good morning, everyone. Welcome to the Q2 2025 Presentation. As you know, the key figures were pre-announced in our market update on July 21st. Today, we will focus on new updates and the positive adjusted targets for 2025. In our previous communications, we emphasized that B2 Impact continues to deliver stable growth combined with strong yield. Q2 is yet another quarter that provides solid comfort to this development. I would also like to emphasize that the underlying results are significantly stronger than last year when the large divestment of our lending business in Poland took place. We hope this presentation will give you a clear understanding of our position and outlook. I'm pleased to announce continued very strong collection and ERC growth. Investment activity on track with NOK 2.1 billion committed for 2025.
Real sales have reached NOK 155 million by the end of Q2, and last year we made 330 . I'm really pleased to announce that we expect NOK 600-NOK 800 million for this year. I'm also happy to announce that the integration of Raltis and B2 Impact is well on track. Adjusted earnings per share is tracking ahead of full year targets, and our new financial targets will just underline our strong position. The estimated remaining collection, what we call ERC, is essentially our industry's oil reservoir, and we have had internal discussions on how to communicate the upside to the market. B2 Impact 's ERC is developing positively, and we expect and are already seeing positive revaluations going forward.
You will later see that the ERC is reported to NOK 26 billion, with the risk that our CFO, André Adolfsen, will end my life, is probably about NOK 30 billion. The key point supporting this view is our consistent outperformance on expected collections, most recently at 112%. We continue strong cost discipline with FTEs trending down, while collections per employee are steadily increasing. This positive trend is expected to continue as our investment in technology remains a top priority. The potential is significant, and we are only at the beginning of this journey. As mentioned, real sales are currently trending well above our 2025 target. The key strength of our accelerated real sales strategy is that it enables deleveraging while reallocating capital into unsecured portfolios, driving substantial growth in ERC and earnings per share going forward.
This performance underlines the robustness of our strategy and reinforces our commitment to creating long-term shareholder value. We are well on track to meet our investment target with NOK 2.1 billion already committed year to date. As mentioned, the conservative ERC has increased from NOK 23-NOK 26 billion. As a result of these strong figures, including real performance, we are pleased to announce that our revised 2025 investment target will be raised from 3 billion to between 3.5 and 4 billion. I will then hand over to our CFO, André, for more flavor.
Thank you, Trond Kristian. Good morning to everyone listening in. Given that we released a commercial update back on July 21st, the presentation today will hopefully provide some additional flavor on the underlying development so far this year. Even more importantly, clear guidance and expectations for the remainder of the year, including updated financial targets. Before we go into the financial details, I would like to remind you that in Q2 last year, we divested our lending business in Poland with a solid profit, which impacts comparable numbers. Throughout the presentation, we will focus on the underlying development, and I will comment on deviations based on comparable numbers, excluding the impact of the same. Now moving to page eight and the financial highlights of the quarter. We are, of course, pleased to be able to announce that we are tracking well ahead of our initial financial targets for 2025.
Cash collections in the second quarter was up 9% compared to the same quarter last year, with unsecured collections growing by 12%. The collection performance in unsecured has reached a consistent and sustainable high level, which indicates, as Trond Kristian pointed out, a notable upside in our current ERC. R eflected in this quarter with a positive revaluation of NOK 73 million compared to NOK 30 million last year. We expect this trend to continue, and I will come back to how this will impact financials going forward later in the presentation. The total underlying operating expenses in the quarter were down 3% compared to last year, and this is despite 9% growth in cash collection and inflationary pressure on the cost base, leading to a 19% underlying growth in EBIT. This reflects our long-term focus on improving our cost efficiency and drive scalability on our cost base.
In terms of cash EBITDA, cash EBITDA was up 10% compared to last year, mainly driven by the growth in unsecured collections. Contribution from real sales was year to date NOK 155 million at the end of Q2. For the remainder of 2025, we expect an additional NOK 450 million- NOK 650 million on top of this to contribute to cash EBITDA and further reduce leverage in the coming quarters. Interest expense was down 21% compared to the same quarter last year, significantly contributing to a net profit and earnings per share growth of 65% compared to last year. Earnings per share was NOK 0.91 per share in the first half of the year, and tracking well ahead of our full year target of NOK 1.5. We are consequently updating and increasing our financial targets for 2025.
With an investment level expected in the range of NOK 3.5-NOK 4 billion, leverage well below NOK 2.5, supported by the strong real sales expected for the second half, and increased dividends to NOK 1.5 to 1.7 per share. Moving on to page nine and some more details on the collections in the quarter and for the rest of the year. We continue to see improvements in the collection performance on our unsecured portfolios across all our markets, despite positive revaluations. We expect this trend not just to be sustainable, but to improve further in the coming periods. Unsecured collection performance was, as you can see on the top left, 112% in the quarter, with growth in collection of 12% and ERC of 11%, indicating an increase in impact also from our new investments. Secured cash collections, including the reals and our joint ventures, was flat compared to last year.
For the remainder of the year, we expect this to increase significantly, in particular from sale of reals. As mentioned, we expect cash or sale of reals of NOK 600 million-NOK 800 million for the full year. As of today, we have already booked well north of NOK 500 million. Moving to page 10 and the cash flow for the quarter. Cash earnings came in in the second quarter at NOK 105 million after paid investments, including some deferred payments from Q1, interest cost, and tax. Despite having a limited tailwind from security reals in the two first quarters, we continue to see a level of cash earnings supporting our targeted investment level and a maintained low leverage. At the end of the quarter, leverage stood at 2.4.
In the coming quarters, we expect leverage to be in the range of NOK 2.1-NOK 2.2, depending on the investment level, well below the targeted 2.5. Moving then on to page 11 and the operating expenses. Comparable operating expenses were down 3% in the second quarter compared to the same period last year. This is despite 9% total growth in cash collection. The main takeaway we would like to leave on this slide is that the total cost base has been reduced by almost 4% compared to last year. We are in the same period growing our unsecured collection by 12%. This demonstrates the increased scalability we have on our platforms, confirming what Trond Kristian presented earlier related to collections per FTE. In terms of investments, our investments in the second quarter came in at NOK 450 million, but this does not reflect the actual activity level.
As you could see from the deferred payments in the cash flow slide, we did pay for investments in Q2 that were closed late in the first quarter, and we have also closed some important investments early in the third quarter. We consequently have year to date around NOK 2.1 billion already committed in terms of investments for the full year. On the ERC side, I would like to reiterate again that we see a significant upside based on the current collection trend, and the need to extend the collection period on many of our legacy portfolios. Page 13 and funding position. On the funding side, we have extended the RCF by one year in the quarter without any additional cost. Interest costs are down 21% compared to the same quarter last year, reflecting the successful refinancing plan we started last year.
Current liquidity reserve and the expected strong cash flow for the rest of the year provides substantial room for increased investment levels this year and a maintained low leverage in the range of NOK 2.1-NOK 2.2. Moving to page 14, and probably the key highlight for this quarter are updated financial targets. We said back in the Q1 presentation that we are on track to deliver and outperform our financial targets for the year, and we are pleased to be able to confirm that today and provide updated targets for 2025. Investment target is increased to a range between NOK 3.5 and NOK 4 billion compared to previous targets of at least NOK 3 billion. Leverage ratio will remain well below NOK 2.5 billion, and the dividend target is increased to NOK 1.5 billion to NOK 1.7 billion compared to NOK 1.5 billion previously.
We also add some additional guidance on real sales for the rest of the year of NOK 600 to 800 million, supporting maintained low leverage and an increased investment level. We also guide on the expected levels of portfolio revaluations. This is very important for us because the current trend in collection performance that we see, it will end up in more portfolios being triggered for revaluations. Going forward, we expect an annual level to be at least in the area of NOK 150 million-NOK 200 million of positive revaluations in the coming years, being book value increase. To sum up the financial part of the presentation, we see a significant upside in our current ERC. This will result in further improvements in our collection performance and positive portfolio revaluations. High real sales rest of the year will support increased investment target combined with a low leverage.
The dividend target is increased. I would like to point out that the current development and targets will have a positive impact, of course, also on 2026 financials and support further growth in earnings per share and dividend potential going forward. We will come back with more tangible targets for 2026 at a later stage.
Thank you, André. We trust this presentation has highlighted our strong position. I would really like to express my appreciation to the secured team in Central Europe for developing and executing such an effective strategy. We are confident in delivering attractive shareholders' returns while also remaining ready to capture opportunities in M&A and the secondary deal market. I would also like to express my gratitude to all B2 Impact employees for their contribution to our great result and for your commitment to developing the business. With that, I hand over to you again, Rasmus, for the Q&A session.
Thank you.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.
With that, we will start the Q&A, and we will kick off with those calling in.
The next question comes from Ulrik Zurker from Nordea. Please go ahead.
Good morning, and thank you for taking my questions. I have a couple here. I just wondered if Trond could maybe expand a bit on what he's saying that, you know, the ERC could be over NOK 30 billion. That's 20% up from at least from the current level. What are the drivers here? Why do you believe that? I see that the overcollection on the unsecured is like that's half of what you're saying the ERC could be understated with. The other one there is that obviously, if you have such an upside on the ERC and you're guiding on, you're actually guiding on very low revaluation annually, like just a little bit over 1%. Is that extremely conservative? Is there some accounting stopping you, or what's going on?
It was kind of a long question, but I'll try to start with the ERC, which was probably the main part of the question. Actually, for us, this ERC is quite easy, but we recognize in the market and among the environment we are in that it's necessarily not that easy to understand. What we see is that our goal is to have a realistic or kind of conservative approach because this is a long-term collection we have to deal with. By that, we always would like to be on the conservative side. At the moment, and as you can see in the past, we are steadily overperforming, and that is a very good sign that our ERC is too conservative. We also reevaluate everything all the time.
This is also backed by our analytic view, so we are very confident that it is conservative, and that is a very good situation to be in. At the moment, we are probably on the kind of too conservative, and that's the reason for why we pointed it out this time. As André mentioned, we will continue to probably do something with that in the next quarters.
I need to add a couple of things there, Ulrik. First of all, the increase we're discussing on revaluations is not the ERC, it's book value. Obviously, ERC is much higher than book value. We closed finally the final portfolios related to Solva in July, which is an ERC slightly above half a billion. 30 divided by 26.5 is 12%, and we are performing at 12% above the curve. Only our collection performance, I would say, reflects this upside, and we need to step by step do revisions over time to, first of all, follow our principles, which is triggered portfolios that meet the requirements for revaluations. Of course, we need to step by step do revisions and see that we perform along with the new curves. It's not 20% upside we're discussing. We're discussing in the area of 12%, which is where we are today.
Given the revaluation you're guiding on, let's just say a little bit over 1% then, at the current trends, you will also continue to report overcollection at the current trend?
We will, but it's not 1%. It's close to NOK 200 million for three years. That's NOK 600 million of book value.
Yeah, I just meant annually. Okay, I think I get it. Sorry for taking time here, I was just looking or wondering if the two things on the real sales, could we expect that sort of level to carry over into 2026, or are there some one-offs there? Secondly, on the portfolio investment that you're doing, is it your opinion that like IRRs have stabilized now, or do we still see, could we see an uptick in IRRs?
That's a long question. Where do we start? We don't comment on IRRs. Yes, we've said that many times before. Can you repeat the first part of your question, Ulrik?
Yeah, that was just on the Rio level. You say NOK 600 million- NOK 800 million this year. I was just wondering if that could be a match next year.
We will come back with targets for 2026 at a later stage. The clear ambition is to, as pointed out by Trond Kristian , accelerate real sales when possible. Obviously, we'll not leave money on the table. If we find opportunities to accelerate sales, we will do that to drive cash flow to reinvest more into the unsecured business.
Okay, congratulations with a good report, and that's all from me. Thank you.
Thank you.
The next question comes from Gustav Larsen from Arctic Securities. Please, go ahead.
Good morning, and congratulations on the strong report. I have two questions, mainly. The increased investment level now to NOK 3.5-NOK 4 billion per year for 2025, do you consider this to be a one-off for 2025 due to the acceleration of real sales that enables higher investments, or do you think this is a sustainable level going forward as well?
I would probably say that closer to NOK 4 billion would be slightly above what would be the sustainable run rate investment level. Based on the cash flow we see today, NOK 3.5 billion would absolutely be a level we could be at and maintain a low leverage. For us, the main takeaway here should be that we reinvest the excess cash that we have accelerated in terms of real sales into unsecured portfolios. The impact on EPS will be very accretive for next year, as the impact on the P&L from real sales is quite limited. It's the sales proceed minus the book value, while the portfolios will have immediate positive impact, obviously on collection with quite limited costs and funding or interest increases. In all the worst, this will lead to probably higher dividend.
Perfect. Thank you. Okay, so year to date, EPS is already more than half of your annual target, and we have some seasonality towards the end of the year with Q4 normally seeing some higher activity. Are there any higher costs, other items that will hold back your EPS in the second half of the year, or are you very conservative here on the new targets as well?
We're realistic. It's a combination: increased investment level combining with low leverage, and there's a reason why there is a range of 1.5 to 1.7. Obviously, if we find significant opportunities to grow the business, we can move within the range. The target is obviously to grow EPS as much as possible. It is a balance going forward where we want to keep the high yield, at the same time grow the business. That is the key to keep the leverage down, and by that, it is a balance.
Okay, thank you very much for your questions and for your answers, Barry.
Thank you.
We will then move on to the questions posted in the chat. We will then start off with some questions from Frederic Størle from ABG. He has three questions. We will start with the first one. Is there any reason for why you did not lift your EPS target?
We implicitly did, given that we increased the dividend target.
Good. Second question. Can you give some more details to how your investments are going so far in Q3? We usually see less investments during Q3. Should we expect most of the lifted target to be invested during Q4?
This is always a timing issue. This year, the first quarter was seasonally very active. It's not necessarily that every year. Q2 was very active, but part of the investments came into the third quarter. We should focus on the full year, and the full year target is NOK 3.5 to 4 billion. Of course, if we can get that in Q3, great. As you point out, seasonality is normally skewed towards the fourth quarter.
Thank you. We have a final question from Frederic. On slide 10, you show the bridge from cash EBITDA to cash earnings. What drove the negative other effect of NOK 356 million? You mentioned deferred payments.
Yes, that is investments we closed in Q1, but paid for in the second quarter.
Thank you. That was all from Frederic. We move on to a question from John Beveridge. Can you please explain the impact of AI-driven strategies on collections?
Yes, that's a big question. Honestly, as I said, we have just started the journey. I think we have improved a lot in automatization and digitalization, but there is a lot to dig into. I think our industry is really able to adapt to all this new technology. We are working on a large plan for how to implement going forward and to actually have a more detailed view of the outcome. It's a bit too early, but we are working on it, and we will see how to communicate it to the market when we have finalized our investigations. We are working in parallel with everything we can do, but at the same time, it's complex, and we need to have a long-term plan in this field.
Thank you, Trond Kristian. We move on to Jakobsen Askewich from SpareBank 1. How do you see the investment pipeline in the second half of 2025? Should we expect more investment made in Q4 or an even split between Q3 and Q4? I guess you've already answered that. He also asked a follow-up question. Can you briefly comment on the competition for new NPL investments you see in the market?
I think if we look at all our markets on average, it is absolutely a market where we can source very attractive returns these days. It is different from market to market, as always, but in general, we see a very attractive market for us.
Thank you. We have a final question from Silvius Schmeimann. Is the overcollection driven mainly by your conservative view on ERC, or do you see something has structurally improved for the portfolios you hold?
I think if we go, it may be a long answer, but if we go all the way back to 2020 and 2021, our collection performance was slightly above the curve or above the ERC. We have seen improvements over the last two to three years and consistent improvements in our core markets, as well as some of the markets where we have not performed as expected. We have done significant initiatives to improve that. We're seeing partly our own efficiency improve, but we also see that inflation and the ability to pay has clearly increased in many of the markets, which is also favorable for collections. It is a combination of many things, but we see that it's sustainable. We also see that the trend in collection is very flat on our backbook, excluding our new investments, and that the curve or the ERC is going down.
There is a clear difference in the trend versus our ERC, which needs to be reflected going forward in, first of all, higher collection performance, but that needs to be adjusted with positive revaluations. We expect that to increase in the coming period.
Very good. That concludes the Q&A and also concludes the second quarter presentation. Thank you, Trond Kristian and André , and thank you to all of you that have listened in. If you have additional questions, you can contact me. My contact details are on the last slide. We will see you again on the Q3 presentation on November 6th. Thank you, everyone.