B2 Impact : B2Holding Interim Report Q1 2016

First quarter report 2016

B2Holding

Condensed Interim Consolidated Financial Information

First quarter 2016

Highlights first quarter 2016

• Gross cash collection of NOK 413 million (279)
• Portfolio acquisitions of NOK 448 million (64)
• Positive cash flow from operations NOK 135 million (102)

(Comparable numbers for Q1 2015 in brackets)

(In NOK `000s)	Quarter 1		Quarter 1	Change	Full year
		2016		2015	%	2015
Net operating revenues	279,107		230,199	21.2 %	1,076,239
Operating profit	84,766		89,410	‐5.2 %	377,204
Profit margin	30.4 %		38.8 %		35.0 %
Profit for the	period after tax	‐1,887		‐8,679	78.3 %	198,175
Earnings per share, basic and diluted					0.63
‐0.01		‐0.03
Cash flow from operating activities	135,194		101,749	32.9 %	591,123
Operating cash flow per share	0.43		0.33		1.90
Portfolio acquisitions	447,985		64,131	598.5 %	1,358,266
Cash collection from purchased
loan portfolios	413,059		279,118	48.0 %	1,339,083

Operational review

The high activity B2Holding experienced in the fourth quarter 2015, continued in the first quarter of 2016. The new year started with the acquisition of a large retail unsecured portfolio in Poland with a face value of approximately EUR 400 million. Furthermore, the first quarter of 2016 showed increased activity in both secured and combined portfolios (consisting of both secured and unsecured claims).

The Group successfully acquired portfolios for a purchase price of NOK 448 million in the first quarter. The Group acquired portfolios in nearly all markets where it has presence and this confirms that the current geographic footprint is a solid platform for further growth.

The positive development in the Nordics has continued, and performance is strong. Portfolio purchase activities are high, mainly based on forward flow and frame agreements.

In Poland and Romania, changes in the legal system have caused some delay in payments. We expect this to have a temporarily effect on the revenues.

In the Balkans, we see a strong pipeline of new portfolios. The organisation is growing as a result of higher activity. A significant secured portfolio was acquired in the fourth quarter of 2015 and staffing of our

work out teams is being developed in the local markets. We see an increasing number of secured portfolios being offered for sale.

As announced in the fourth quarter presentation, B2Holding had signed a term sheet in connection with the acquisition of a new platform. This transaction has now been concluded, and a Sale and Purchase Agreement was signed on May 4th 2016. Expected closing is May 31st 2016. The acquired company is Debt Collection Agency AD (DCA), one of the two leading players in Bulgaria, and with a fully owned subsidiary in Romania. The DCA Group has approximately 125 employees in Bulgaria and 25 employees in Romania. DCA is a debt purchaser with collection on owned portfolios, mainly retail unsecured. DCA has an ERC of approximately EUR 40 million and the face value of acquired portfolios is approximately EUR 180 million. Through the acquisition of DCA, B2Holding will even further strengthen its position as one of the leading players in the Balkans. We see DCA as an excellent platform for further growth in the region.

During this quarter, B2Holding established a new office in Prague, and hired key personnel for analysis of secured assets.

The Group will continue to focus on streamlining its operations and taking advantage of adoption of best practice within the Group.

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B2Holding

Condensed Interim Consolidated Financial Information

First quarter 2016

Financial Summary

First Quarter 2016

The Group recorded an operating profit of NOK 84.8 million in the first quarter 2016. This is a reduction of NOK 4.6 million (‐5.2%) compared to the first quarter of 2015 and a reduction of NOK 23.5 million (‐21.7%) compared to the fourth quarter of 2015. The operating profit for the first quarter of 2016 is negatively impacted by a delay in the set‐up of the organisation related to secured portfolios in the Balkans. The gross cash collection in the Balkans was extended out in time resulting in a negative effect on reported interest revenue of approximately NOK 30 million in the first quarter 2016. From 1 January 2016 a new law was passed in Poland that limits the number of cases a single bailiff office can process in a year, resulting in a temporary backlog of claims in Poland. Furthermore, a new law related to legal collection in Romania was implemented in the first quarter of 2016. The legal changes in Poland and Romania resulted in delayed cash collection with a negative impact on reported interest revenue with approximately NOK 20 million in the first quarter of 2016. At present there are still uncertainties regarding the timeframe before the Polish bailiff system is back on track. The Romanian changes in bailiff regulation are expected to prolong the legal collection process in Romania and somewhat increase the legal cost of collection going forward. Net operating revenues is also negatively impacted by adjustment of future portfolio cash flow estimates of NOK 16 million, mostly related to the new law passed in Romania and a change in collection curves related to secured portfolios in the Balkans. Non‐recurring costs related to ongoing IPO process is recognised as operating expenses with NOK

8.8 million. The remaining operating segments had a higher cash flow on existing portfolios than expected in the first quarter of 2016.

(Quarterly operating profit in NOKm)

Net operating revenues for the quarter amounted to NOK 279.1 million, an increase of NOK 48.9 (21.2%) from the first quarter of 2015. Before adjusted for portfolio revaluations the revenue from purchased loan portfolios totalled NOK 249.5 million compared to NOK 196.0 million in the first quarter of 2015. The increase is mainly a result of high activity in portfolio acquisitions in second half of 2015 and first quarter of 2016, partly offset by

the bailiff situation in Poland and delayed cash collection in Balkans. Of the total revenue of NOK 279.1, NOK 23.8 million is related to commission and collection fees from external collection, a minor decrease from NOK 24.8 million in the same period in 2015. Other revenues amounted to NOK 21.9 million an increase of NOK 12.4 million due to increased activity in TAKTO Poland within consumer lending.

Gross cash collections from purchased loan portfolios ended in the quarter at NOK 413.1 million. This corresponds to an increase of NOK 133.9 million compared to the same period in 2015.

(Quarterly gross cash collection in NOKm)

Operating expenses, excluding depreciation and amortisation of tangible and intangible fixed assets, amounted to NOK 187.0 million, which is an increase of NOK 52.3 (38,8%) million compared to the first quarter of 2015. The increase is mainly due to general increase in the Group organisation and activity. Number of employees (measured in FTEs) increased from 961 at beginning of the first quarter 2015 to 1 186 at the end of first quarter 2016. The increase in FTEs is mainly related to employees involved in the collection process in the Balkans and in Poland.

Net financial items ended in the first quarter with a net expense of NOK 78.9 million, of which NOK 50 million interest expenses related to the external financing of the Group and NOK 27.2 million in net realised and unrealised exchange loss.

Due to loss in net financial items and tax expenses that offset the operating profit of NOK 84.8 million, profit for the period after tax ended with a loss of NOK 1.9 million. Adjusted net profit, before non‐recurring operational and financial items (net of tax), was NOK 6.9 million.

Operating cash flow of NOK 135.2 million in the period was NOK 33.5 million higher than the same period in 2015. This was mainly due to increased cash collection of NOK 133.9 million, which was partially offset by increased interest payments and working capital items. Cash flow used in investing activities ended at NOK 611.6 million in the quarter compared to NOK 81.4 million in the same quarter of 2015. The increase is due to higher activity in purchasing loan portfolios and payment of contingent considerations to former owners of acquired subsidiaries. Portfolio acquisitions totalled NOK 448

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B2Holding

Condensed Interim Consolidated Financial Information

First quarter 2016

million in the quarter mainly attributable to portfolio purchases in Poland, Finland and Sweden.

(Portfolio acquisition 2015 in NOKm)

Net cash flow from financing activities in the period ended on NOK 0.6 million. Interest bearing loans amounted at the end of the quarter to NOK 2,470.6 million compared to NOK 2,526.1 million at year‐end 2015.

Corporate matters

Outlook

B2Holding strategy going forward remains unchanged. Our focus is to further strengthen our position as one of the leading Pan‐European players in the NPL industry, and we see high activity in the regions where we operate. We see a continuous push from the national central banks and the ECB for banks to continue to deleverage and clean up their balance sheets. As a result, the volume of portfolios offered for sale, is increasing in several of the regions where we operate.

B2Holding will continue to expand geographically, but focus going forward will also be to streamline existing operations. Furthermore, B2Holding will be looking to expand its investment capacity, among others through the planned IPO in second quarter of 2016, but also through debt financing when available. We believe that 2016 will be an active year, and the pipeline we currently see confirms this.

The board emphasizes that every assessment of future conditions necessarily involves an element of uncertainty.

Board of directors, B2Holding AS, 6 May 2016

The Group concluded in November 2015 a new senior secured multi‐currency revolving credit facility (RCF) of EUR 260 million with DNB Bank ASA and Nordea Bank Norge ASA. In parallel with this refinancing, the Group's legal structure was streamlined for future bank debt funding at a sub‐holding level with a ring‐fenced and cost efficient funding structure at reduced margin.

In addition to the RCF, the Group issued in December 2015 a EUR 150 mill senior unsecured bond loan in order to support the growth strategy of the Group. As per 31 March 2016 the Group had NOK 1.3 billion in available investment capacity.

The EUR 150 million bond loan was listed on Oslo Stock Exchange on 3 March 2016 and the Group is continuing the preparations for a listing of its shares on the Oslo Stock Exchange, with a targeted listing in the second quarter of 2016, depending on market conditions.

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B2Holding

Condensed Interim Consolidated Financial Information

First quarter 2016

Consolidated statement of profit or loss and other comprehensive income

All figures in NOK`000s unless otherwise stated

			2016	2015	2015
	Notes	Quarter 1	Quarter 1	Full year
Interest income on purchased loan portfolios		249,453	195,953	909,544
Revenue from external collection		23,775	24,828	104,101
Other operating revenues		21,902	9,498	57,296
			295,130	230,279	1,070,941
Changes in portfolio cashflow estimates		‐16,023	‐80	5,298
Net operating revenues	3	279,107	230,199	1,076,239
External cost of services provided		‐52,627	‐40,047	‐189,304
Personnel costs		‐80,888	‐55,728	‐294,184
Depreciation of tangible fixed assets		‐2,340	‐1,815	‐8,529
Amortisation of intangible assets		‐4,994	‐4,275	‐19,424
Other operating expenses		‐53,491	‐38,924	‐187,594
Total operating expenses		‐194,341	‐140,789	‐699,035
Operating profit	3	84,766	89,410	377,204
Share of results in associated companies				230
Net realised and unrealised exchange gains			‐27,259	‐66,581	34,189
Other interest income		695	1,890	2,200
Other interest expenses		‐50,940	‐19,389	‐104,582
Other financial items		‐1,436	‐2,136	‐65,941
Net financial items		‐78,940	‐86,216	‐133,904
Profit for the period before tax		5,826	3,194	243,300
Income tax payable		‐9,272	‐6,639	‐41,646
Change in deferred taxes		1,558	‐5,234	‐3,479
Profit for the period after tax		‐1,887	‐8,679	198,175
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations		‐5,748	42,181	78,586
Total comprehensive income for the period, net of
tax		‐7,635	33,502	276,761
Profit for the year after tax attributable to:
Parent company shareholders		‐1,840	‐8,846	197,211
Non‐controlling interests		‐47	167	964
Total comprehensive income for the year, net of tax
attributable to:
Parent company shareholders		‐7,608	33,299	275,852
Non‐controlling interests		‐27	203	909
Earnings per share attributable to parent company
shareholders (in NOK):
Basic and diluted		‐0.01	‐0.03	0.63

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