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Q3 Third quarter presentation Oslo, 6 November 2019 Four main - PowerPoint PPT Presentation

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Q3 Third quarter presentation Oslo, 6 November 2019 Four main focus areas going forward STRONGER FOCUS ON SECURED 1 Organizational changes within secured including additional specialized resources and stronger head office involvement and

  1. Q3 Third quarter presentation Oslo, 6 November 2019

  2. Four main focus areas going forward STRONGER FOCUS ON SECURED 1 Organizational changes within secured including additional specialized resources and stronger head office involvement and ▪ oversight IMPROVE EFFICIENCY IN OPERATIONS 2 Automation of manual processes, digitalization and standardization of platforms ▪ Cost to collect trending down – still room for improvement ▪ INCREASE SERVICING REVENUES THROUGH FUNDS AND JVs MANAGEMENT 3 Improved utilization of platforms by third party capital – considerable interest for new co-investment structures ▪ Expected growth area going forward ▪ FOCUS INVESTMENTS IN SELECTED GROWTH AREAS 4 Concentrate investments by targeting selected markets/areas with growth potential and competitive advantage ▪ Ongoing strategic process which includes geographic focus ▪ | 2

  3. Highlights Q3 2019 Key financials All-time high Gross Cash Gross Cash Collections Cash EBITDA Total revenues Collections and Cash EBITDA 880 1,386 1,062 Leverage ratio down from 3.2x (Q2 2019) to 3.0x verifying a solid debt service capacity NOK million NOK million NOK million Earnings per share NOK 0.44 Equity ratio 24.1% up from Net profit Portfolio purchases Leverage ratio 23.4% in last quarter 181 1,231 3.0x NOK million NOK million Definitions on page 26-27 | 3

  4. Highlights Q3 2019 Servicing fees and other income increased by 9% to NOK 126m (NOK 115m Q3 2018) Volume Portfolio purchases of NOK 1,231m (NOK 988 in Q3 2018) growth Total revenues up 18% to NOK 880m (NOK 746 in Q3 2018) Gross cash collections up 36% to NOK 1,386m (NOK 1,022m in Q3 2018) Effectiveness & Cash EBITDA increased by 37% to NOK 1,062m (NOK 778m in Q3 2018) Efficiency Cost to collect (CtC) trending downwards to 22.4% (24.6% in Q3 2018) Focus on investments with improved IRRs Capital & Funding Good debt service capacity with leverage ratio of 3.0x Waiver from banks secures sufficient headroom until March 2020 – Expecting to be aligned with all covenants in due time New organizational structure separating the recovery and collection processes Operations Continued focus on co-investment structures to further utilize platform scalability – partnership with Waterfall extended to the Nordics | 4

  5. New Group organizational structure Improve execution and Strengthening the links Increase transparency and operational efficiency between Head Office and risk management business units | 5

  6. Secured portfolios moving in the right direction 29% Secured claims (corporate, SMEs and Actions in Q3 Results retail) share of the total ERC per Q3 2019 Ongoing reformation of the asset management teams with new Further progress and good interest regarding co-investment mindset and recovery expertise structures and JVs on existing and new secured portfolios - New case strategies for 60% of the Estimated Remaining Recovery Recovery Support Team operative and well-functioning (ERR) The strategic changes already yield positive results in the secured Improved tools are in place to better monitor the pipeline of portfolios resolutions and settlements for secured claims Vintage of secured purchases and recoveries in Central Europe & South East Europe 1) Recoveries (NOK 000’) Purchases Signing Year (NOK 000’) 2014 2015 2016 2017 2018 YTD Q3 2019 Total 80 045 5 017 67 480 39 712 46 038 65 303 22 881 246 431 2014 387 624 18 333 112 017 86 569 127 392 72 863 417 173 2015 2016 841 075 137 678 254 530 294 410 251 930 938 547 2017 1 374 618 63 277 304 083 263 049 630 409 1 316 444 157 271 383 393 540 665 2018 3 999 806 5 017 85 812 289 406 450 413 948 459 994 116 2 773 225 Subtotal 69 % of total amount invested in secured portfolios in CE and SEE has been recovered 1) Excluding the Group’s share of portfolios acquired and held in joint ventures | 6

  7. Unsecured collections performing well overall 71% Unsecured retail B2Holding has entered into a partnership with Waterfall Asset Management for co-investments in portfolios share of the total ERC per Q3 2019 unsecured portfolios in the Nordic region - Co- investments increase the Group’s servicing fees and utilize scale effect on platforms Several initiatives to improve collection strategies and process efficiencies (including automation), leading to steady improvement of Cost to Collect Increasingly attractive pipeline and market opportunities Historic unsecured collection performance vs initial forecast Annual unsecured portfolio purchases (EUR million) Yearly back book performance vs. initial forecast 109,0 % 110% 108% 105,5 % 106% 103,6 % 103,3 % 102,8 % 104% 346 102% 100,1 % 265 264 100% 98% 178 96% 113 72 94% 2014 2015 2016 2017 2018 YTD Q3 2019 | 7

  8. Well positioned to support the new strategic direction Northern Europe Poland Western Europe Central Europe South East Europe Market position Top 3 Top 3 Top 10 Top 3 Top 3 ERC 1) Q3’19 NOK 8.89bn NOK 3.70bn NOK 3.03bn NOK 5.81bn NOK 3.28bn Total NOK 24.7bn 36 % 15% 12% 24% 13% 1% 8% 25% 31% % of ERC 1) 35% Secured vs. Secured 65% 69% 75% Unsecured 23% 92% 99% 77% Unsecured Third Party ✓ ✓ ✓ ✓ Servicing #FTEs Q3’19 379 601 615 315 582 Total 2,534 2) 1) Including the Group’s share of portfolio purchased and held in joint ventures 2) Total #FTEs include 42 FTEs in central functions | 8

  9. Capital structure with prudent leveraging Status Staggered maturity with ample liquidity headroom Funding structure with sound leverage levels, significant financial flexibility EUR millions and supporting liquidity reserves I+3.25- E+7.50% E+7.00% E+4.25% E+4.75% E+6.35% 3.75% Leverage ratio down to 3.0x 510 - Target to stabilize below 3.0x in 2020 Positive development in the ratios covered by the waiver - 200 200 200 Equity ratio at 24.2 % and Total Loan To Value at 75.4% 175 150 325 Public rating (Corporate Family Rating) - S&P: BB- and Moody’s: Ba3 2015/2020 2016/2021 2022 1 2017/2022 2018/2023 2019/2024 Repurchasing of Bonds EUR 182m 2 liquidity reserves supporting further portfolio acquisitions - EUR 15,2m repurchased in Q3 at average price of 94,51 (par 100) - EUR 21m in Treasury bonds Bond Loan covenants RCF covenants Interest coverage Leverage Secured loan to value Equity Ratio 3 Total Loan to Value 4 76.5% 4.9x 4.8x 4.9x 76.2% 75.4% 73.2% 65% 4.0x 4.0x 3.2x 3.0x 3.0x 27.3% 23.5% 23.6% 24.2% 75% 23% 19% 17% 25% Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2 ’19 Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2’19 Q3’19 Q3’19 1) Springing maturity from March 2021 when less than EUR 175m outstanding in Bond 1 and Bond 2 2) As of 30 September 2019. Calculated as EUR 165m undrawn existing RCF plus EUR 20m undrawn overdraft plus EUR 32m cash on balance sheet less NOK 200m (EUR 20m) in cash reserves less deferred payment for portfolio purchases of EUR 15m. 3) Total Equity over Total Assets | 9 excluding book value of IFRS 16 right-of-use assets. 4) Net Debt adj. for Vendor Loan, Earn Out and FX Hedge MTM over Assets (Portfolio, JV, loan receivables, REO and goodwill)

  10. Financial performance | 10

  11. Third quarter summary Financial summary NOKm 2019 Q3 2018 Q3 % change Total revenues excl. net credit gain/(loss) 845 799 6 % Net credit gain/(loss) from purchased loan portfolios 36 -53 Total Revenues 880 746 18 % EBITDA 415 382 9 % Operating profit (EBIT) 387 370 5 % Profit margin 44 % 50 % Cash Revenue 1,527 1,141 34 % Cash EBITDA 1,062 778 37 % Cash margin 70 % 68 % Profit for the period after tax (PAT) 181 159 14 % Earnings per share (EPS) 0.44 0.39 13 % Cash flow from operating activities 775 686 13 % Operating cash flow per share 1.89 1.68 12 % Portfolio purchases 1) 1,231 988 25 % Cash collection from portfolios 1,386 1,022 36 % 1) Including the Group’s share of portfolios purchased in SPVs and joint ventures | 11

  12. Strong quarterly result Income statement Comments 2019 2018 2019 2018 2018 NOKm EBITDA includes non-recurring Q3 Q3 9 months 9 months Audited items due to restructuring costs Interest income from purchased loan portfolios 703 680 2,021 1,861 2,537 Net credit gain/loss purchased loan portfolios 36 -53 -383 -60 -58 Profit from shares, associated companies and JVs 16 4 53 24 48 Financial income of NOK 8 million Other operating revenues 126 115 364 328 378 related to repurchase of Total revenues 880 746 2,054 2,153 2,906 outstanding bond loans External costs of services provided -121 -91 -323 -266 -363 Financial expenses include a loss Personnel costs -227 -173 -659 -498 -692 of NOK 5 million due to a decrease Other operating expenses -117 -100 -323 -299 -417 in the market value of the Group’s Depreciation and amortisation -28 -13 -82 -38 -56 interest rate derivatives caused by Operating profit (EBIT) 387 370 667 1,052 1,378 a negative shift in long-term interest rate curves Financial income 8 2 11 4 5 Financial expenses -211 -166 -609 -429 -618 Net exchange gain (loss) 11 -19 -5 4 44 Net financial items -192 -183 -604 -421 -570 Profit before tax 195 186 64 631 808 Income tax expense -14 -28 -47 -139 -159 Net profit 181 159 17 492 649 Cash revenue 1,141 3,181 4,424 1,527 4,324 Cash EBITDA 1,062 778 3,019 2,118 2,952 EBITDA 415 382 749 1,090 1,434 | 12

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