Good morning, everyone. Welcome to the Q1 presentation. Earlier this year, we presented our financial targets, and I am pleased to announce that Q1 marks another successful quarter, and we are tracking ahead of the target. The results clearly demonstrate the strength of our strategy, the quality of our portfolios, and our disciplined approach to investment and capital allocation. Not at least, it demonstrates the implementation of technology and AI, and the strong performance by our operations throughout the group. I would like to repeat a message. We aim to remain a solid company with a well-balanced capital structure. This enable us to combine attractive dividend yield with solid growth and moderate leverage. In our view, an optimal combination. Importantly, the market is large, and the strategy gives us the flexibility to continuously prioritize and select portfolios that fit our business model and meet our return requirements.
I would also like to repeat that our strategy places us in a strong position to consider larger opportunities as they arise in the market. We do hope this presentation clearly demonstrates that B2 Impact will continue to deliver high return to the shareholders. We continue to deliver strong momentum across the business with results that clearly demonstrate the strength of our strategy, the quality of our portfolios, and the disciplined execution by our teams. Looking at the Q1 highlights, we can present strong results across all our key metrics. Earnings per share growth of 53%. Operating expenses down. A strong collection performance of 114% supports a very conservative ERC. High investment activity year to date. Dividend for 2025 of NOK 1.9 to be paid out June 3rd. In summary, strong development in all key financials and up from last year.
With this EPS growth, high level of investments, and low leverage, we are in a very strong position. The high activity in the first quarter has continued into the second quarter. We have NOK 1.8 billion invested and committed year to date, and we are trending ahead of our full-year investment target. Importantly, the market remains large and attractive across our markets. Our strategy gives us the flexibility to continuously select portfolios with best risk-adjusted returns. Our pipeline is diversified and support our full-year target. Unsecured ERC growth of 12% is a strong development. With our performance in collections, the actual ERC is sustainable, higher, and we remain confident that the real value in our book exceeds what you see in the reported numbers. That will continue to have a positive impact going forward.
The unsecured collection performance of 114% is due to excellent execution and strategy by our teams and operations. We see a significant increase in unsecured collection per FTE year-over-year. Thanks to our focused investments in technology, the number of FTEs continues to trend down, while collection per employee continues to trend up. This positive trend is expected to continue. Investments in technology remains one of our top priorities. We are accelerating the deployment of AI-supported automation. The potential ahead is significant. B2 Impact is well positioned to adapt to new technology in an effective way. The result is highly scalable cost base with the capacity to handle increased portfolio volumes. This is probably the most important development for our business going forward. We wanted to repeat our financial targets and our clear focus on shareholder distributions, combined with a disciplined approach to credit risk.
Our financial targets clearly support continued growth in distributions. We are targeting EPS growth of at least 30% over the period, return on equity above 60% within the period, and a leverage ratio below 2.5x, while targeting total investments above NOK 10 billion. Based on these targets and our capital allocation priorities, we expect total dividends of NOK 9 per share for the period 2025 to 2028. This is a clear demonstration of how strong earnings growth, disciplined risk management, and capital efficiency translate directly into attractive and sustainable returns for our shareholders. I will then hand over to our CFO, André, for more flavor.
Thank you to Kristian and Rasmus. Good morning, everyone, including all our colleagues listening in this morning. We are pleased to report that our financial performance is tracking well ahead of our targets. In the first quarter, we continued to build on the key value drivers we have communicated over the recent quarters, growth in unsecured collection, sustainable high collection performance, highly scalable cost base, and lower cost of funding. Briefly, before we go through the financial details, I wanted to highlight that in the quarter we saw a negative currency impact on the P&L of around 2%, and close to 6% on the balance sheet, following a strengthening of the Norwegian kroner compared to euro and Polish zloty. Unsecured collection performance improved further in the quarter, coming in at 114%. We continued to see the same trend also so far in the second quarter.
We delivered double-digit growth in both unsecured collection and ERC, with 10% growth in collection and 12% growth in ERC, or 2 percentage points higher in constant currency. Operating expenses were down 4%, despite the 10% growth in unsecured collections and inflationary pressure. Now this clearly demonstrates the scalability of our cost base and our long-term efforts in driving efficiency through automation. The result of this is an EBIT growth of 24% and an EPS growth of 53% in the quarter compared to the same quarter last year. Interest costs continued to trend down in the quarter, supporting the strong EPS growth. Our solid funding position has been confirmed by an improved credit rating in the quarter, coming in at BB.
On the investment side, we have signed NOK 742 million in the first quarter and have, as of today, signed and committed volume for 2026 of NOK 1.8 billion, providing good earning visibility for the year. I will come back to our expectations for 2026 later in the presentation. Finally, the board has proposed a dividend for 2025 of NOK 1.9 per share. And I will comeback to our expectations for 2026 later in the presentation. We continue to see a positive trend in our unsecured collection performance across our markets. Despite positive revaluations over the recent years, the performance has increased to 114%, demonstrating that the underlying improvement in performance is sustainable. Unsecured collection again grew by 10% compared to the same quarter last year. This is driven by both growth in investments over the period and the improved performance on our back book.
Cash collections from secured portfolios were in line with our expectations in the quarter. We have made limited new investments in secured portfolios over the recent years and have focused our capital allocation on unsecured portfolios where we have high cost scalability and visibility. The REO book value has come down by 35% compared to the same period last year, following an accelerated activity in terms of sales. This reflects our continued progress in monetizing the secured book and reallocating capital into unsecured portfolios to drive earnings growth. Despite the 35% lower book value, we had REO sales of NOK 61 million in the quarter, up from NOK 53 million last year, and coming in at a very strong margin of 47% in the quarter. I will provide some more guidance on the full year expectation when we come to the financial section.
Cash earnings over the last 12 months demonstrate our ability to grow the business while maintaining a low leverage ratio. We are currently in a very strong position where our operating cash flow is supporting double-digit collection growth, attractive dividends, high investment activity, all while keeping the leverage at a low level. As you can see on the bottom right of the slide, we have a leverage today of 2 x the cash EBITDA. Combining that with our strong operational cash flow and liquidity reserves, we are well-positioned to continue our growth trajectory without issuing any new debt. The scalability of our cost base, we mentioned that a couple of times. I just want to highlight that this is one of the most important value drivers for the recent EPS growth.
Operating expenses in the quarter were down 4% compared to the same quarter last year, while at the same time we're growing the unsecured collections by 10%. The underlying operating expense ratio is consequently trending down, reflecting our long-term focus on improving efficiency and driving scalability through automation. Now, the group has spent many years automating operation, and the outcome that we see today is that the gross return on our new investments is effectively equal to the net return on the P&L. This is supporting significantly higher EPS growth than collection or top-line growth. Investments in the quarter, as already mentioned, came in at NOK 742 million. Now this is a strong number in what is typically a seasonally slower quarter for investment.
Majority of investments were unsecured, and the geographical distribution reflects our approach of selecting portfolios where we have the strongest competitive position and cost scalability. I also want to reiterate the consistent overperformance we see in our unsecured portfolios. There is a notable upside in our current ERC that will support our financials through higher collection performance and positive revaluations in the coming period. We have further strengthened our financial position and reduced the cost of debt during the first quarter. We completed a EUR 200 million tap at the credit spread of 3.22%, and the hedging ratio currently stands at 66% with an average duration of around 2.5 years. Also, our credit rating, as mentioned, has been upgraded to BB, a recognition of the market's confidence in our credit profile and the consistent financial performance over time.
In terms of liquidity, we hold a reserve of approximately EUR 400 million, in addition to operational cash flow, providing capacity to fund our investment targets without issuing new debt. The liquidity combined with our strong cash earnings provide ample headroom to also accelerate investments when attractive opportunities arise. Following up on the financial targets already presented by Trond Kristian. Just a quick recap that we target at least 30% EPS growth in the period from 2026 to 2028, with investments above NOK 10 billion in the period, and the return on equity after dividends above 16% in the period. On this slide, we have broken down the three-year financial targets to an indicated target for 2026 and an updated estimate for the full year. Earnings per share in the first quarter was very strong and is tracking well ahead of last year and also above the full-year target.
The current outlook, based on what we see in the first quarter and expectations for the rest of the year, clearly indicates an EPS that's tracking above the full-year target. Return on equity adjusted for dividends is also on track to deliver above the target of 14% during this year and above 16% during the business plan period. On investments we have already spent and committed NOK 1.8 billion for this year. Now with an active market and a strong pipeline, we expect the seasonal weighting towards the second half of the year to support investments above the full-year target and consequently support further earnings growth going into 2027 and 2028. The leverage ratio currently stands at 2 x cash EBITDA, well within the target of being below 2.5x.
We also expect REO sales this year of around NOK 300 million, providing additional capacity for investment growth combined with growth in dividends.
Thank you, André. We trust this presentation has highlighted our unique position. After another great quarter, I would also like to express my gratitude to all B2 Impact employees for their contribution to our strong results. We are confident in our ability to deliver continued attractive and increasing returns and remaining well-positioned to capture opportunities in the market. The drive within our company is strong, and I want to assure all our shareholders that we are not resting on the success we have achieved. Our results only motivate us to work even harder going forward. We have a highly committed organization with strong execution capabilities and a clear focus on creating long-term value. Said that, we move into the Q&A section. Rasmus?
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.
Thank you, AI. We will, as usual, start with the live questions. I will give the word to Rickard Hellman from Nordea. Rickard, the floor is yours.
Thank you, and good morning. I would like to start to discuss a little bit around the OpEx, which is quite impressive that you are lowering that one despite the increased collections. Is it possible to distinguish a little bit between what is automation, what is actually lower collections on secured claims, which I believe will also lower the OpEx, a little bit around, and also increased overcollection, which probably also are cost-light in that sense? Do you understand what I'm trying to figure out here, a little bit between the different factors affecting the costs?
Of course, Rickard, there's no 100% answer to this question. There are quite many variables in play, as you already pointed out yourself. The clear takeaway here is that this is improved efficiency through automation. We are taking down costs in the markets where we are not investing anymore in secured to mitigate the lower collections. In the other markets, we are also taking down costs, but at the same time growing investments. The clear majority of this impact is related to the scalability of the cost base and automation.
Okay. Yeah, I see. That's good, of course. If you look at servicing, which of course, have other factors affecting the profitability, but there appears that you have grown your OpEx despite lower volumes. Is there other things that are impacting this profitability?
You're referring to the segment notes?
Yeah, exactly.
Most of what we do is internal servicing. This is not related to external servicing and cost increasing. This may vary from quarter- to- quarter. This is, of course, it's just internal allocation. This may vary. Looking at the total, as you already pointed out, the costs are down 4%, while at the same time increasing collections double-digit in unsecured. This is just based on allocation and has no impact on the total picture.
Okay. No, I see. I guess with automation, you should, of course, also even small improve your efficiency in your servicing leg as well.
Again, this is our internal business, so it's only based on allocation between the business lines. The total cost of operation is down while collection is up. The servicing unit, which is servicing our own portfolios, has improved its efficiency in the quarter.
Okay. I get you. Thank you.
Sure.
Thank you. It looks like we have no more live questions. We will move to the questions posted in the feed. We will start with Fredrik Støle from ABG. Question is, you mentioned AI earlier. Could you give some examples of how you use it in your day-to-day work today, and how you see your use of AI developing going forward?
That's a very broad question, and to be honest, quite difficult to give a very short answer because it's very many elements, and it differs from market to market. All we are talking about at the moment is how can we do things in more quality using AI, and how can we save cost by automate processes. That is all over the place. Very difficult actually to point out special areas. Yeah, you saw the slide of collection per FTE. This is what we have already done based on automation. AI is just accelerating the automation level we can achieve. It's just building on what we have already done and hopefully quicker, faster and cheaper, continue the automation trend that we already see in the business.
Okay. Thank you. We will then move to Jakov Semaskevic from SpareBank 1 Markets. In Q1 2026, unsecured ERC fell 5% quarter-on-quarter to NOK 26.6 billion despite the quarter's high investments. Could you comment on the factors behind this decline or was it primarily driven by currency effects?
Decline from?
Fourth quarter.
Yeah. I think seasonality-wise, Q4 is by far the most active quarter in terms of investment. What you normally should see is that Q1 ERC is either flat or trending slightly down compared to Q4. If you take out the currency impact in the first quarter, because the Norwegian kroner has strengthened significantly versus EUR compared to the fourth quarter, the ERC is actually up by 1.2%.
Very good. That was all for the Q&A. That's probably a sign that the presentation was very clear. Thank you to Kristian and André for a very good presentation. We can then just remind everyone that we have our AGM tomorrow and the Q2 presentation on August 20th. We look forward to see you all again in the near future.
Thank you.
Thank you.