Good morning and welcome to Q4 presentation for B2 Impact. I'm Erik Johnsen and with me today going through the financial numbers will be André Adolfsen as usual, CFO of B2 Impact. Let's go straight to the quarterly update as well as the summary for the year. We see in the last quarter we've been having a very good performance on unsecured portfolios as we were throughout the year of 2022. We also see that the secured recovery of NOK 553 including REOs of NOK 173 million was very good for the quarter. We have the strongest cash EBITDA in the history of B2 Impact, and it's been very, very good, and it's been good throughout also 2022 which I will come back to some of the next slides. We have been going through deleveraging.
Now we are starting increasing and our purchases and ERC are now again growing in B2Holding. The board is going to propose for the general assembly a cash dividend of EUR 20 and a share buyback of for EUR two, total EUR 62, for the general assembly in May. Throughout 2022, we had a reconstruction of our secured business as well as we have been doing efficiency programs in our remaining markets. This has resulted in lower cost and we see that now we are at the very end of at least restructuring of the secured markets and we are now stabilizing at a lower cost level than we did have previously. We have established Veraltis Asset Management in the secured market, master and special service they are.
We also see that throughout 2022 we have a group alignment. We've been able to have a cross-border function in several of our sectors, meaning that we have a better human resources utilization and also better expertise in many of the fields. This has improved our cost base but also improved our efficiency in the year that passed. Last I want to remind you we are an industry leader in ESG. Systemlytics came and named us number one in the industry for a second year in a row. ESG is important for B2 Impact and we improved our scoring in 2022 as well. Key figures for B2 Impact. We see that our cash collection was NOK 1.4 billion for the year.
Also cash EBITDA, NOK 1.14 billion for in the quarter. That was a fantastic quarter for B2Holding. REO sales, NOK 173 million for the quarter, which was above anticipation and also what will be shown later, we still have a good margin on our REO sales of I think 30% for the quarter. Investments includes two portfolios that was purchased in the end of Q4 in December. Due to accounting policies we need to book it in the first quarter, it's included in this number NOK 435 million, the total purchase for the year is NOK 1.2 billion.
Indicating what we were saying that we were going to increase our purchases and therefore also what we will see is that our ERC has increased during the quarter and the ERC or the development of ERC has turned. This graph I think has been shown previously. I think this graph summarizes quite a bit what B2 Impact has been going through. We have been going through reorganization of secured market as well as doing the efficiency and effectiveness in our other markets. We have a lower level of cost established in B2 Impact. At the same time we have deleveraged quite a bit. NOK 4 billion we have deleveraged throughout this period. We see the cash EBITDA despite lower purchases throughout the period, the cash EBITDA has been stable.
We have been getting more out of our portfolios and we've been using that to delever our company. What's important now is that to see the last three Q the tide has turned. We are starting investing more. Our ERC and book value of our investment is increasing. We are increasing our investment at the lower cost level than we did previously. The tide has turned. We are now in a growing state again and we can do that due to the fact that we have the best balance sheet and a financial position that we are solid we can actually start growing again at a good rate without raising our leverage ratio and at that level to a large extent. Now, there's been a lot of talks of course in the past Q about the macroeconomic development.
It should be said that our industry as a whole has shown in the past to be very resilient through downturns. Through the cycles, this industry has been very good. Inflatiionary pressure is expected. This is from Oxford Economics. They expect that inflationary pressure will level off, shown in the upper hand graph, will level off in the years to come. Coming down in 2023, but also going into 2024 and 2025, it will level off. At the same time, we see that GDP growth in the year that's coming or this year is going to be low. It's anticipated to be low, and it will vary somewhat between the different countries that we are in. Generally, it's going to be quite low. The projections also going forward is improving.
Even though we go into a slower GDP growth, the labor markets still are anticipated by Oxford Economics to be resilient. There they're going to be not that high increase in unemployment that previously one would expect. This is good for our industry. As I said, they anticipate somewhat better macroeconomic development going forward. What does this mean for B2 Holding? We should remember our portfolios when we buy, we buy for 10 year+ . Short term economic and macroeconomic volatility do not disturb our collection to a very large degree. That's what's been shown in the past when going through different cycles. We do not see any big hits on our collections, and we do not expect that this time either.
Even though one should be a little bit cautious due to the fact that we have seen inflation rate and also interest rates increasing quite a bit. We do not expect that to have big effect on us. The short term uncertainty, of course, and also interest rates and increases, so on, will be reflected in the pricing of the portfolios. We also will see then somewhat of the participants will delay maybe selling some of the portfolios due to the fact that their anticipation doesn't meet their expectation in the beginning. They will take some time before some of the portfolios come out.
What we, when talking to the different banks, we see that throughout Europe and the market that we have are exposed in, we see that the banks are reporting also they're reporting other places the underlying credit quality expect to deteriorate and also create new NPL volumes. What does that mean? It means that what we see is the Stage two are increasing. Stage two loans are loans that are just before becoming NPLs, and those Stage two loans has been increasing throughout Europe. There is anticipated as the year pass or the year go on, you will see that more NPLs are being created from those loans. That's what the banks are expecting. Going into portfolio purchases and investment. We have throughout this period and also in 2022 having a capital discipline.
We've been having a very good return on our portfolio purchased in 2022, also in 2021 and the portfolio purchased in 2020. The capital discipline and so on has been very good. We see that investment that we did in 2022, and we also announced that we were going to increase the investment. Now the investment is up at NOK 2.6 billion. As shown previously, we also see then the book has started growing and the tide has turned. The ERC is growing quite substantially that Andrea will also show. As I said, the higher cost of funding will be reflected in the portfolio pricing.
Also, some of the participants, some of the vendors will possibly delay some of the sales of some portfolios until they have adjusted themselves to the market conditions that is prevailing now. However, when that is said, we see that also the portfolio pipeline that we have in the market is quite good. We are happy about the pipeline in our major markets that we can see. Now, in 2022, we invested NOK 2.6 billion. Going out of the year, we have also seen that the forward flow commitment that we have coming into 2023 is NOK 400 million, a higher level than we had last year.
In addition, in the beginning of this year, we have closed another couple of deals that gives this level even higher as the year has already started. We do anticipate our investments to be higher than 2022 levels. Of course, risk/return consideration and capital discipline definitely is a key momentum for B2Holding. We do believe that our investments will increase and therefore also our ERC and our book value will increase in the year to come. On that note, I'll let Andrea take over and go through the financial performance.
Thank you, Erik. I think before we go into the details, I want to reiterate what we said in the previous quarter. You will see in this quarter a very strong quarter in terms of cash metrics, but with a more limited impact on the IFRS reported numbers, meaning net profit, and I'll come back to that. Two key topics that we follow closely is obviously inflationary pressure on our cost base, as well as the funding cost.
Hopefully during the presentation you will see that during the year, we have been able to improve our margins due to cost savings already incurred during our restructuring process, as well as a good hedging strategy applied over many years, which puts us in a position where the blended margin of the company is not significantly impacted by increase in interest rates. Summing up the quarter, we have a fantastic cash flow quarter with the strongest cash collections we've seen to date in the company. We have refinanced our bonds. We have increased purchases during the quarter. We've taken the total investments up to NOK 2.6 billion, but maintained a leverage ratio still at below 2.4.
We've also amended the dividend policy, as Erik has pointed out, which allows us to increase distribution to our shareholders based on a good underlying cash performance in the company. Looking at the cash collections for the quarter and for the full year, we continue to see underlying strong collections within unsecured, with full year performance of 103.4%. Secured cash collection, very strong at the end of the year. REOs coming in at NOK 173 million in the quarter, as well as cash collection from JVs, very strong at NOK 188 million for the quarter, which takes us to a growth on cash collections in the quarter of 28% and more than 6% for the full year. This drives also growth in our cash EBITDA.
We guided in a trading update around NOK 1.1 billion. We are at NOK 1.14 billion in the quarter, which is 32% up compared to last year, 6% up for the full year. Cash revenue is up 5% for the full year, implying an improved margin, underlying margin for the business for the full year. I'll come back to cost in one of my later slides. On the net profits, I mentioned that we do have a couple of impacts in this quarter compared to last year, which is important to understand. We have a negative impact on the mark-to-market value of our hedging instruments, and we also have negative FX impact in the quarter. Both of these are non-cash.
This was NOK 20 million in the Q- , but +NOK 30 million last year. We have a NOK 50 million swing on net profit in the quarter comparing to last year. Like for like, we are at the same level as last year, but the impact of cash from JVs is zero on the P&L. The underlying net profit of the company is significantly stronger in this quarter compared to last year. We signed investments in the quarter, as Erik mentioned, of NOK 1.2 billion. We've reported NOK 769 million. Due to technicalities, we cannot book the additional NOK 435 million in the Q4 as this was an investment in notes where we acquired notes from one of our existing co-investors. These are portfolios that we know extremely well.
We service them today. They will have immediate ERC and collection impact from January. Despite the increase in investments, we've seen leverage come down to 2.26 in the quarter. Adjusted for the additional investments, as I just mentioned, we are at 2.37. I mentioned the amendments of the dividend policy. We have proposed the board has proposed a distribution of NOK 239 million or NOK 0.62 per share. This is split in dividend of NOK 0.2 per share and NOK 0.42 per share in a share buyback program. Moving to the next slide, some more details on the collection performance in the quarter and for the year.
As mentioned, we see continued strong old performance on our unsecured portfolios. 101.4% in the Q4, 103.4% for the full year. Just want to mention that the Q3 of this year was slightly stronger than expected as tax refunds in some of our markets came in the Q4 as, sorry, in the Q3 instead of the Q4, meaning you have to see the two Q combined. We've seen a positive development into January and have a seasonally very strong performance of 103% in January. Cash from secured, as mentioned, very strong at the end of the year.
We've seen REOs sales of NOK 173 million, with a very solid margin of 33% in the quarter, and a full year sales number of NOK 581, which is significantly above the expected level we guided at NOK 500, with a total margin for the year of 48% above the booked value of these assets. This impacts our Cash earnings. Cash earnings positive at NOK 99 million, despite an investment level of NOK 769 and paid interest and tax. We have a positive cash earning in the quarter. Leverage, as mentioned, comes down despite the increased investment level and demonstrates the strong cash quarter that we had in the fourth quarter. Again, adjusted for the signed purchases at the end of the year, the leverage is 2.37 at the end of 2022.
On the left-hand side, you see the positive trend we've mentioned on cash cash collection with a very strong end to the year, showing growth in constant currency of 25% compared to last year. This obviously drives cost with higher activity and higher collections. For the full year, our cost level is up 5% while cash collections is up 6%. We have been able to increase our margin throughout the year despite inflationary pressure. The personnel expenses are flat compared to last year, which is a clear demonstration of the impact of the restructuring process that we have done in our secured markets. Some more details on the investments in the quarter.
Adjusting again for these signed investments we made at the end of the year, the NOK 1.2 billion in the quarter and the NOK 2.6 billion for the full year now drives a growth from Q3 - Q4 in ERC of 11% for the group. During the quarter, we made investments in all our jurisdictions, and I want to highlight that we made not a co-investment but a co-underwritten investment in Western Europe together with PIMCO in the quarter. We have conducted extensive refinancing of our bonds over the last six months. We issued a bond in September 2023, EUR 150 million, and we tapped an additional EUR 150 million in February 2024. That takes the 2026 maturity up to EUR 300 million.
We repaid our 2022 maturity in October 2022, we have now called and will repay the 2023 maturity in March 2023. The numbers on this slide are adjusted for these events and are also adjusted for the additional investments of EUR 435 million, which we made early January 2023. Going out to February, we have a liquidity reserve of around EUR 320 million, as well as expected strong operational cash flows coming from also growth in ERC going forward, which puts us in a good position to continue our investment growth without a notable increase in leverage. A final note, I want to give you a brief introduction to a new reporting structure that we will implement during 2023. We will go from reporting on regions and unsecured, secured to reporting split on investments and servicing.
This is much more aligned with how we drive our business and is also very much aligned with the recent restructuring where we split assets and servicing in our secured markets. We will of course come back to analysts and investors with more information and guide you in how we want to structure this. Of course, we will provide pro forma figures for comparison going forward. With that, I leave the word back to you Erik.
Yeah. Thank you, Albert. We are at the summary. As we said, it's been solid cash performance. Collection has been going very well, not only last quarter, but also for the whole year. We have been getting more out of our portfolios than we anticipated at beginning of last year. Cash EBITDA for last quarter was very good. Cash EBITDA for the whole year is also very good. We've been able to do that also by reorganization and also keeping our costs down and reducing our cost levels. What is good also to see that finally now the ERC is starting growing again. We grow the ERC, we grow our investment at the lower cost level. That is important also to notice.
The proposed dividend, some adjustment to the dividend policy, it leaves us with enabling to have EUR 62 per share dividend in cash and share buyback program, which we believe is accretive to our investors. We will maintain capital discipline going forward. There is also we have good opportunities to participate in the market. The balance sheet is strong and our cash flow is strong, we will also through the latest issues of the bond, we have enough capital, we have a very good capital base to participate in a good market that we also believe is going to be in 2023. That was the latest remark that we have, and we are open now for questions.
Thank you, Erik and Andre. We will then open for questions. Vegard is first, so we'll leave the word to you.
Thank you. On the financing side, you mentioned last quarter, the amount of interest rate hedging you had. Is it possible to give us an updated figure for what you had in place in Q4 and also what you have now going into 2023?
Sure. We had 54% at the end of the quarter. We will have that level at least until Q3. I also want to highlight that the blended margin that we paid in the quarter on our outstanding debt was 5%, including the floating interest rate was 6.9% in the quarter. Into the first quarter, you will see our interest rate caps, which is capped at 1% in EUR, will have a higher impact going into the first quarter than in the fourth quarter. Positive impact that is, of course.
Okay, thank you. On the operational cost side, could you give some more detail to what you see and how you or what we should think about the cost level of your operations in 2023?
Sure. I mean, if you look at the Q4 , there was an increase in costs, which is why I focused on the full year. The Q4 is, we had an increase which is mainly driven by activity. That is why also we focus on the fixed cost base, which is more or less flat year-over-year. The activity driven cost was up in the Q4 . A lot of these costs will not continue into 2023. Clearly, there is inflationary pressure for us as everyone else, both on salaries as well as vendors and being auditors or whatever.
We have an impact of the restructuring process, which you clearly see for the full year, which is not fully reflected yet. We still have positive impacts coming from the restructuring process, which will mitigate some of the inflationary pressure going into next year. Clearly there is, of course, pressure on salary expenses in our company as with others.
Is it possible to be more concrete on that? What kind of inflationary pressure do you see on average for your workforce and, on the FTE side, how many FTEs do you expect to be by the end of next year?
We cannot give you that information, but I can clearly tell you that we have initiatives in place to limit the impact on cost as much as possible.
Okay. Thank you.
Håkon Astrup from DNB Markets. One question on the collection side. You are describing an environment with higher Stage two loans from the banks and also higher NPLs. How do you think that environment will impact your back book of NPLs? Will that also have a negative impact there?
Our focus is mostly on new investments. That is where we see the potential challenge going forward. Main challenge, obviously, we monitor the back book as much as we can. We have not seen an impact yet.
Mm-hmm
on our collections. As I pointed out, we also see a good start to 2023, actually stronger than we expected, on the unsecured side. What we do see is a deteriorating quality of loans going forward, as Erik pointed out.
Mm-hmm
...in discussion with banks, which puts us in a position where we obviously try to reflect this in our new investments.
Okay. As of now, you're not seeing the unsecured performance, say edging below 100%?
, if you look back , in history, there has been r- little impact on, on, on collections going through the cycle. Now , I don't think we should be as, you know, forefront that, that believe that inflationary pressure or maybe interest rates are not going to have an impact on us at all. But so far it has not been impacting our performance. We, we've also shown, throughout, throughout the year that our collection has been quite well above a hundred percent. And, we, we believe that our margin on that is still going to be, looking good for going forward. So, our anticipation is that we will, strong collections going forward, but you know, you're never certain, you can't be. But history shows that, that we are performing well throughout cycles.
We have strong beliefs that we will continue to show good performance.
Thank you.
Thank you and good morning. Just to follow up on Håkon's question on the Stage 2, you mentioned. Given that we are at close to full employment in most of your markets-
Mm.
I'm assuming, do you see these portfolios coming mostly on the SME secured side or do you think we'll see retail consumer loans also going to market?
In the discussions with the banks, they're seeing that, Stage two loans, what they're seeing, they have not seen yet too much impact on retail secured.
Mm.
market. They're seeing quite a bit impact on the SME market. That has been, the impact there has been stronger than they sort of anticipated. However, they believe also that the savings and so on that the people has done has been able to be able them for paying on the loans, especially related to mortgage loans. They do believe, however, that there will be a larger impact as the year progresses within that. That's what they're telling us, that they believe that is going to be somewhat higher impact as the year progresses. That's what we're saying.
Mm.
Those loans that are in Stage two might fall into the bucket of NPL as the year progresses.
Okay. Thank you. Can I have two more?
Absolutely.
Thank you. The portfolio purchased at the end of the year that will be booked in Q1, which market was that? I don't know if you specified which country or which segment that was in.
That was a South Eastern market.
Okay.
Yeah.
Related to that, which markets do you think will be more attractive in 2023? Do you... I know it all depends.
Yeah, I think it all depends.
... where do you think we'll see volumes and where are prices currently more attractive?
We've seen the prices, adjusting somewhat in most of our markets. We have, as we reported in last quarter, we had a net IRR that was growing around 2% point than on average. We're seeing, most of the markets adjusting a little bit to the inflationary pressure and the interest rates hikes that has been coming. We, we are still believe that our biggest markets, the Northern Europe and Poland, are still going to be strong markets going forward. Of course there's where we have the scalable market as well, the scalable operations. We also see other markets are popping up now with new portfolios coming and we see good opportunities in other markets.
In some markets we cannot go into detail, but in some markets we see higher and faster adjustments than in other markets that is still more competitive. Luckily we are in a position that we have a printout that we can actually shift a little bit where investments are more.
Mm
accreted to our portfolio, let's say return as a whole.
Just one final. Okay. Okay. Thank you. Just a bit more technical one. I think we might have discussed this before, so I apologize. In the secured ERC profile, just the spike there in year two in Central Europe, I think you have NOK 1.1 billion in year two in your profile. Is that a few large claims or is that... How confident are you in that NOK 1.1 billion in the timing? I'm assuming you're confident in the level, is that a few large claims that are impacting that one?
It's both. It's obviously several granular cases, and we also have some larger cases which in one of them someone may have commented in the history of the company. That's, it's a combination. I think we can say that we're quite comfortable with our current ERC on secured.
Okay. Thank you very much.
Any more questions from the audience? We go to the online questions. Not too many this time. One, we will start with Jan-Erik from ABG. Could you give us some more insight on the breakdown of the cost of collection increase and general loan cost?
The cost to collect increase is based on activity. Let me just point out that if you look at the cost to collect in % that we report is based on gross and not cash collection. There you do not have any impact on from sale of REOs or the cash from JVs. The cost based on our cash collected is below 20% in the quarter and is lower than what we have seen over the last couple of years. The underlying cost base is, as Erik mentioned, is lower, but we do see activity based cost increase when we have such an increase in collection. The margin for the full year is slightly improved compared to last year.
Again, that's despite inflationary pressure across our markets.
We have, so far one final question, which I believe is from an investor, Lars Erik Hanson. Financial expense was NOK 209 million in Q4 versus NOK 153 in Q3. Which factors drive the increase, and which level should we expect per quarter going forward?
The interest expense in the quarter was NOK 179 million, which is the interest on our outstanding debt, as well as the commitment fee on our revolving facilities. We had, as mentioned, several non-cash items impacting net financials, which are not interest costs. The actual interest cost in the quarter was NOK 179 million. I gave you some guidance in terms of what margin we paid on our outstanding debt in the quarter. That was 5%. Total 6.9%, including floating rate. Going forward, we are 54% hedged at the cap of 1% on floating interest rate.
Another question coming in here about the investment. You mentioned that we had co-underwritten with PIMCO. The question is, could you please give some additional color on the co-investment with PIMCO mentioned earlier?
Which co?
I think he's referring to the co-underwritten investment. Maybe.
Sure.
more color on the.
I cannot comment on the.
-investment facility.
Cannot comment on the specific portfolio. That is an investment which is done through the facility that we have together with PIMCO. The cash flow on the portfolios that we have ring-fenced, which is non-recourse to B2, the cash flows coming from those portfolios can be reinvested in a revolving facility for the first 18 months. We co-underwrite the portfolios together in these markets.
I think that was all. Again, if you have additional questions, you can of course contact me. My contact details is on our website. We will say thank you to Erik and André, and we will meet again on May 16, I think, is Q1. Thank you.
Right. May sixteen. Thank you very much, everybody. Have a nice day.