Directors’ report

The nature of the business and its operations

B2Holding’s vision is to find solutions to help manage debt problems for private and corporate customers and serve an important role in the value chain for the banking and financial ecosystem, and thereby benefit of the society as a whole.

The vision is driven by various countries’ initiatives to encourage financial institutions to divest their non-performing loans and facilitate for a well-functioning debt servicing industry to bridge the gap that non-performing loans create in the financial value chain.

B2Holding ASA is a Norwegian public limited company with organisation number 992 249 986 with its registered business address and headquarter in Stortingsgaten 22, 0161 Oslo, Norway. B2Holding ASA has since 8 June 2016 been listed on Oslo Stock Exchange and included in the Oslo Stock Exchange Benchmark Index (“OSEBX”) since 1 December 2016.

B2Holding ASA (“the Company”) is the parent company of the B2Holding consolidated group of companies (together “the Group” or “B2Holding”) and since the incorporation of the company in 2011, the Group has grown into a pan-European debt service provider.

The Group is a debt solution provider for both customers with unsecured and secured loans consisting of consumer credits, residential credits, and credits to small and medium-sized enterprise (“SMEs”) and corporate customers. In addition, the Group provides services for third-party debt collection, credit information and project management as a full-service provider of debt management and servicing for co-investors, financial partners and customers.

During 2019, the Board of Directors announced a new strategic direction, where the main pillars are profitable growth through focused investments in core markets and strengthening the Group’s servicing capabilities. The growth will be maintained and supported through co-investments, full collection/recovery servicing, forward flow deals and a preference for core countries. The new strategy will transform the Group towards a more cost-efficient model and leverage the Group’s servicing capabilities by increasing assets under management. In order to facilitate for the new strategy, the organization was reorganized to create a clearer distinction between asset classes and increase operational focus. In addition, a separate risk management function with improved control was implemented.

B2Holding has a strong position in a European NPL market with significant opportunities. At the end of 2019, the Group had offices in 23 European countries. With access to the largest NPL markets in Europe, the Group wants to focus on investments in markets with growth potential that are of strategic importance.

The strategy aims to enable balanced growth, develop our core platforms and services and allow for a more cost-efficient operating model while attaining better return on invested capital.

There are significant NPL volumes in existing geographical markets which we predict will grow in the coming year due to, among other effects of current COVID-19 crises. The Group is focusing on increased market penetration in core markets through a combination of own portfolio investments and co-investments where suitable. Such co-investment structures with servicing agreements for portfolios have during 2019 been established in Sweden, Croatia, Greece and continued in 2020 in Cyprus as well as with a partnership agreement in Italy.

The Group’s core business of unsecured loans (67 % of the gross cash collection and 71.8 % of the ERC) performed better than our expectations with gross collection 6,5 % above the initial forecasted collection curve. The market for unsecured portfolio acquisitions is stable with good pipeline visibility. However, we predict that the effect of the COVID-19 crises will be higher growth in volumes than the investors’ appetite. Thus, resulting in more favourable terms for the investors than we have seen in recent years.

There is a continued focus on improving collection strategies in order to achieve higher effectiveness and economies of scale with focus going forward on technology acceleration. As seen already in the matured markets, there is an increased share of forward flow transactions across geographies driven by stronger vendor relationships. Forward flow contracts support stable cash-flow with low-risk and high efficiency. In order to increase operational focus and control, Adam Parfiniewicz (former Regional Director of Poland, Finland and the Baltics) was appointed Head of Unsecured Asset Management in October 2019.

During 2019, the Group experienced challenges with the timing and value of the expected remaining recovery (ERR) on its secured portfolios in Croatia, Bulgaria and Romania. This resulted in one-off net write downs of NOK 388 million in second quarter 2019. As a result of the write downs, the Company has initiated projects to improve and strengthen the governance and compliance functions during the second half of 2019. These projects include organizational changes hereunder new reporting lines, strengthening of the risk management, legal and compliance functions. The projects initiated in 2019 will continue going forward, and the goal is to finalize this work in 2020.

Furthermore, to prevent such challenges in the future, the Group has introduced new underwriting procedures and is taking a more conservative approach to the booking of collection curves. Recovery teams across the Group have been strengthened with additional specialized resources as well as establishing a Recovery Support Team; a team of recovery experts who support local teams in finding the right strategies for maximizing the value in secured portfolios.

The organizational changes and new recovery strategies within secured asset management have started to show positive effects but will lead to some volatility in gross cash collection going forward. By year-end 2019 approximately 75 % of total amount of NOK 3,999.8 million invested in secured portfolios in Central and South East Europe has been recovered. George Christoforou (former Regional Director Central Europe and South East Europe) was appointed Head of Secured Asset Management in October 2019.

Gross cash collection of secured portfolios in 2019 was NOK 1,696.3 million which is 40.0 % higher compared to NOK 1,211.3 million last year. The ERC for secured portfolios by year end is NOK 6,712 million or 28.2 % of the Group’s total ERC.

As part of the new strategy, the Group is actively pursuing further co-investments to gain access to a larger pipeline and utilize the Group’s servicing platform. At the end of 2019, the Group has established co-investments for portfolios in Romania, Greece, Croatia and Sweden and further co-investments are under consideration. Two new partnerships have been concluded in 2020 with Banca Sella for Italy and Waterfall for Cyprus.

The ability to transact with reputable investors creates unique advantages for B2Holding with regards to

  • a more flexible purchasing capacity (ability to participate in large deals across many geographies)
  • the opportunity to leverage the servicing platforms by acting as servicer of portfolios for investment partners and
  • the ability to manage the risk versus return by adjusting the Group’s exposure regardless of transaction sizes.

The total portfolio purchases in 2019, excluding portfolios purchased in JVs, was NOK 3,409.4 million which is a 45.1 % reduction from 6,212.6 million in 2018. The allocation of portfolio investments in 2019 ended with 61.8 % to Northern Europe (NOK 2,108.3 million – an increase of 12 % from 2018). Northern Europe is the largest region with 36 % of the ERC (30 % in 2018). There is a reduced exposure in Central Europe to 20 % (26 % in 2018) and in South East Europe to 9 % (10 % in 2018) in terms of ERC, while Poland and Western Europe are unchanged with 16 % and 12 % respectively.

Northern Europe collections continued to perform well in 2019 and increased from NOK 1,147.4 million in 2018 to NOK 1,579.5 million in 2019 (37.7 %) mainly due to increased collections in Sweden, Denmark and Latvia. The gross cash collection in 2019 is mainly from unsecured portfolios (99.3 %).

Revenue from purchased portfolios were up NOK 243.5 million (43.1 %) to NOK 808 million mainly due to increased portfolio purchases year on year (increase of NOK 224 million). Other revenues were NOK 3 million higher (NOK 138.3 million) than in 2018.

On 11 December 2019 a portfolio was sold to a new joint venture company with Waterfall Asset Management in Sweden. The Group has a 30 % share in the co-investment structure which will increase servicing revenues going forward.

The Net credit gain from purchased portfolios was NOK 44.1 mill compared to a loss of NOK 8.7 million for 2018 mainly due to higher collection above estimates of NOK 83.3 million in 2019. Cost to collect increased due to 42 additional FTEs (377 FTEs by year end) and external cost related to increased collections, but the cost to collect percentage improved to 14.7 % (18.0 %).

Cash EBITDA 2019 ended at NOK 1,348.2 million, up NOK 391.1 million (40.9 %) from 2018.

Central Europe increased collections by NOK 209.4 million (18.3 %) and has a stable cost level, while revenues from purchased portfolios were down NOK 461 million following the one-off write down in second quarter 2019.

In January 2019 the Group entered into a co-investment structure with DDM Group for a 50/50 joint venture with secured corporate loans in Croatia with a face value of EUR 800 million acquired from HETA Asset Resolution.

Cash EBITDA increased by NOK 166.7 million (17.5 %) due to increased collections and a stable cost to collect percentage of 17.7 % (16.1 % in 2018). The number of FTEs in the region by year end was 307.

Western Europe increased collections by NOK 319.3 million to NOK 621.7 (105.6 %) and revenues from purchased portfolio were up NOK 219.0 million (97.2 %). Net actualisation / revaluation was positive NOK 125.4 million in 2019 mainly due to positive revaluation of secured portfolios in Italy. Cost to collect ratio was reduced by 4 % point to 27.1 % in 2019. The increase in other cost is mainly related to the acquisition of Acreditia in Spain. The number of FTEs by year end is 625, which is a small increase from last year due to new business in Spain.

Cash EBITDA increased with NOK 230.2 million to NOK 457.6 and operating profit increased by NOK 119 million (86.2 %) mainly due to portfolio purchases and increased efficiency with in-house recoveries in Italy.

South East Europe increased collections by NOK 151.7 million (28.9 %) with a steady cost level, however total revenues from purchased portfolio were NOK 224.3 million (down NOK 235.6 million from 2018) following negative net actualisation/revaluation charges mainly relating to the one-off write downs of secured portfolios in Bulgaria and Romania. The number of FTEs increased from 480 last year to 592 in 2019 due to moving the Greek portfolios in-house and strengthened teams in Romania.

Cash EBITDA increased by NOK 190.0 million (61.3 %) due to portfolio purchases. Profit from joint ventures increased by NOK 9.8 million (20.6 %) to NOK 57.5 million due to the establishment of two joint ventures during 2018.

Poland shows steadily increasing collections and lower cost to collect ratio versus 2018. Total collection in 2019 was NOK 970.0 million which is 10.5 % higher than same period last year. Revenue from purchased portfolios were up by NOK 84.3 million (16.8 %) to NOK 586.9 million despite that portfolio purchases year on year was reduced by 39.0 % to NOK 400.7 million in 2019.

The Net credit gain from purchased portfolio was positive NOK 44.5 million compared to a loss of NOK 15,8 million for 2018 mainly due to higher collection above estimates of NOK 51.9 million in 2019. Cost to collect improved from 34.3 % to 33.1 % due to higher gross cash collection combined with reduction in FTEs. The reduction of 114 FTEs was related to restructuring and efficiency initiatives implemented during 2019.

On 15 August 2019, the Board of Directors announced that Olav Dalen Zahl stepped down from his position as CEO of the Company. The Group’s CFO Erik J. Johnsen was appointed interim CEO from the same date and was on 5 February 2020 appointed permanent CEO of B2Holding ASA. The new Group Executive Management announced on 9 October 2019 will ensure improved transparency, risk management and compliance throughout the organization and contribute to long-term cost efficiency on a Group level.

Funding structure and financing

The Group’s funding structure has significant financial flexibility and satisfactorily liquidity reserves. B2Holding is working to reduce the leverage level during 2020 in order further improve the financial flexibility.

On 28 May 2019 the Group issued a new EUR 200 million unsecured bond loan with maturity 28 May 2024 at an interest rate of 6.35 %. The new bond was assigned with a B1 and BB- rating from Moody’s and S&P respectively and was listed on the Oslo Stock Exchange on 22 October 2019. In addition, the Group has four listed senior unsecured bond loans for a total of EUR 725 million. The financial covenants in relation to all five bond loans were aligned after approval from a joint Bondholders’ meeting on 21 May 2019. The Group holds EUR 21 million in treasury bonds.

The Group holds an EUR 510 million senior secured revolving credit facility (RCF) with DNB Bank ASA, Nordea Bank AB and Swedbank AB with an ultimate maturity date as of 31 May 2022. The Group complied with the original financial covenants under the RCF as of 31.12.2019 with a reported equity ratio (excluding book value of IFRS 16 right-of-use asset) of 25.2 % (minimum 25.0 %), Total Loan to Value ratio of 74.2 % (max 75.0 %) and Leverage ratio of 2.86x (max 4.0x). From 28 February 2020 the RCF will have more flexible covenants implying that the ratios can be set aside in one financial quarter until 31 May 2022.

The Group has NOK 2.1 billion in available investment capacity at the end of the year adjusted for deferred payment for portfolio purchases of NOK 121 million, in addition to a strong operating cash flow from gross cash collections of purchased loan portfolios.

The first bond loan of EUR 150 million (issued in Dec 2015) matures December 2020 and is classified as short-term borrowing. The bond carries a “make whole” clause and there is headroom under the RCF to refinance the bond on maturity. EUR 210 million of the RCF was unutilised at 31.12.2019.

On 21 March 2019, the Board of Directors of B2Holding ASA signed an upstream, cross-border merger plan with its 100 % owned Dutch subsidiary Ultimo Netherland BV with the purpose to simplify the corporate structure by transferring the operations and ownership of Ultimo Netherland BV to the Company. The merger transaction was completed on 21 August 2019 with a positive book equity effect of NOK 276 million for the Company.

Financial statements

The Board of Directors is of the opinion that the annual financial statements provide a true and fair view of the net assets, financial position and result of B2Holding ASA and the Group for the year. The Group’s consolidated financial statements are presented in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU.

Profit and loss

The Group recorded a full year operating profit of NOK 107.2 million for the year 2019, after the net write down of NOK 388 million in Q2 and one-off cost of NOK 39 million in Q4 compared to NOK 648.7 million in 2018. The cost to collect was 22.5 % which is a reduction from 24.6 % last year mainly due to focus on operational efficiency.

Operating revenues for the year amounted to NOK 2,873.8 million compared to NOK 2,905.6 million in 2018, a decrease of NOK 31.8 mill due to the portfolio write-off of NOK 388 million) Revenues from purchased loan portfolios amounted to NOK 2,313.0 million (NOK 2,701.0 million adjusted for the one-off net write downs) compared to NOK 2,479.5 million in 2018. The increase in adjusted revenues was driven by high activity in portfolio acquisitions in existing markets in 2019.

Operating expenses, excluding depreciation and amortisation and impairment losses, increased with NOK 309.3 million (21.0 %) in 2019 compared to 2018 mainly due to increased activity in the Group.

The number of FTEs in the Group was 2,517 at the end of 2019, a net increase of 97 during the year. The FTE numbers have increased in all regions except for Poland where FTEs have decreased due to continuous efficiency programs. The main increase is due to expansion in South East Europe with additional employees in Bulgaria, Greece and Romania. Going forward the number of FTEs is expected to be reduced as a result of the ongoing efficiency programs and the planned reduction of regional footprint

Net financial items ended at NOK 793.7 million, of which interest expenses on interest bearing debt amounted to NOK 770.5 million and a net foreign exchange loss of NOK 11.9 million. The Net foreign exchange gain is mainly related to unrealised exchange losses on internal financing of the Group.

Financial statements

Profit and loss

Operating profit
NOK million
Operating revenues
NOK million
Operating expences
NOK million
Cost to collect

Cash flows and cash collection

Gross cash collections increased in 2019 with NOK 1,204.7 million (30.1 %) to NOK 5,202.0 million due to significant increase in purchased loan portfolios and activity. The gross cash collections increased in all the Group’s geographical segments.

Cash flow from operating activities for the year ended at NOK 2,872.3 million, NOK 581.7 million (25.4 %) higher than the same period in 2018. The difference between operating cash flows and the operating profit of NOK 958.6 million was mainly related to high cash collection from purchased loan portfolios offset by unrealised foreign exchange balances, paid taxes and timing differences. Cash flow from investment activities ended at NOK 3,624.0 million mainly due to net cash flow for purchased loan portfolios of NOK 3,116.9 million. Net cash flow from financing activities in the period ended at NOK 674,3 million after issuing a EUR 200 million senior unsecured bond loan in May.

Balance sheet and liquidity

Total assets at 31 December 2019 amounted to NOK 16,941.6 million compared to NOK 16,173.7 million in 2018. The equity amounted to NOK 4,236.8 million (after dividend of NOK 184.5 million) and the equity ratio was 25.0 % compared to 26.9 % at 31 December 2018 (dividend paid in 2018 was NOK 122.0 million).

Total book value of purchased loan portfolios ended at NOK 13,419.7 million end of December 2019 (after one-off net write down), which is at the same level as year-end 2018 (NOK 13,346.1 million).

Net interest-bearing debt as of 31 December 2019 was NOK 11,379.3 million compared to NOK 10,430.6 last year.

Cash and cash equivalents amounted to NOK 355.9 million at the balance sheet date compared to NOK 397.7 million at the end of 2018. The Group’s liquidity situation and the ability to finance future investments are adequate.

Parent company

B2Holding ASA, the parent company, recorded a full year loss of NOK 156.5 million after positive changes in deferred tax of NOK 18.8 million compared to a profit of NOK 911.1 million in 2018. The difference from 2018 is mainly due to net gain on other investments in 2018 compared to a net loss of NOK 61.7 million in 2019. Interest income from group companies accounted for 496.3 mill in 2019 compared to NOK 404.7 million in 2018. After an EUR 200 million bond issue in May 2019 and increase in long term loans to group companies of NOK 688.9 million, net cash flow for the year ended negative at NOK 5.4 million compared to a surplus of NOK 2.5 million for 2018.

Total assets at 31 December 2019 amounted to NOK 13,137.3 million compared to NOK 11,452.6 million in 2018. The equity amounted to NOK 3,791,7 million and the book equity ratio was 28.9 %.

Cash and cash equivalents amounted to NOK 5.9 million at the balance sheet date compared to NOK 11.2 million at the end of 2018. Of this amount, NOK 4.9 million were restricted balances. The Company’s liquidity situation, ability to finance future investments, meeting its obligation and the solidity of the parent company are adequate and satisfactory.

Financial and other risks

The foundation for the Board of Directors’ work with risk management is the Internal Control and Risk Management Policy. B2Holding’s approach to risk management is to generate sustainable value for the shareholders through managing exposures to credit, market, operational and liquidity risks. Effective risk management and internal control ensure shareholders’ value.

In 2019, the Group’s risk management work was strengthened through a new central risk management function on Group level under a Chief Risk Officers who has the operational responsibility for the risk management in the Group. In addition, the compliance and legal work were combined into a separate Legal and Compliance function under the Chief Legal and Compliance Officer.

The risk management function will follow recognized risk management principles and manages the development of the Group-wide enterprise risk management framework including periodic risk mapping and reporting, thus ensuring a common understanding of risks, transparency, follow-up and coordination.

To further support the risk management principles, the Company, in consultation with the Audit Committee, will establish an Internal Audit function that shall report to the Audit Committee. The recruitment of an Internal Audit is in process.

When the Internal Audit position is in place and fully operative, the Company’s risk management system will follow the risk management principles in line with the three lines of defence model. Full three-line of defence models are already incorporated and implemented in subsidiaries that are licensed and under supervision by local authorities.

The Group’s scope of business is to generate value for its shareholders through controlled exposure to credit risks based on its expertise in the process of acquiring and managing non-performing loans. Risks such as liquidity, operational and market risk should be minimized but balanced, as far as it is economically justifiable. Other types of risk such as management, regulatory and reputational risk are addressed through the Group’s governance and compliance policies.

The CEO and the Heads of Unsecured and Secured Asset Management are responsible for and shall ensure that all business units operate and develop in accordance with B2H’s risk management and internal control policy and routines.

The Board of Directors annually reviews the Group’s most important risk areas and its approach to address the identified risk.

The Group depends on authorisations and licenses from various authorities. We face regulatory risk with respect to changes in laws and regulations that may affect the markets where we operate and thereby our business prospects.

From a regulatory perspective, the different jurisdictions that B2Holding operates in approaches the issue of NPLs in different ways. The business units are licensed to operate as one or more of the following: portfolio purchaser, portfolio owner, collection company, credit information provider or, as a lender. The license requirements remain under the supervision of the relevant local operation.

In addition, B2Holding participates in managing its regulatory risk by actively participating in various industry associations that develop standards and best practices and promote the role of the industry in supporting the health and viability of the financial system.

Reputational risk is of great importance in the Group’s relationship with banks, clients, customers, employees, investors, regulators and other stakeholders. Negative reputation regarding the Group or the industry in general may have an adverse effect on the Group’s customers, employee loyalty, clients willingness to sell and the investors willingness to invest. Such reputational risks are continuously addressed. Internal controls, together with the Group’s common Code of Conduct and compliance and governance policies contribute to improving B2Holding’s reputation as a recognised industry player, a good employer, and a reliable business partner. The implementation of common Code of Conduct throughout the Group is one of many steps to manage the reputation risk.

Reference is made to the Risk management report describing the risk management structure in more detail and this chapter constitutes an integral part of the Directors’ Report.

Management risk

The Group is organised into two business lines, Unsecured and Secured Asset Management. These are supervised by the Head of Unsecured Asset Management and the Head of Secured Asset Management, who report directly to the Group CEO and are responsible for all business units. Business lines are operating and developing in accordance with B2Holding’s risk management framework and are subject to internal controls. The Group’s investment management, legal, tax, risk, compliance, project management and controlling teams support the business lines and local operations in conducting their business and with assessing and managing their risk.

Potential governance risks related to managing an international, decentralised organisation in multiple countries, has partly been reduced through Group level functions, policies and processes covering direct oversight of business lines, investment management, legal, tax, risk, compliance, project management and financial control to ensure appropriate control mechanisms and service to the local operations.

The Group Executive Management (GEM) team consisting of the CEO, the heads of the business lines and the heads of Group functions (Finance, Legal & Compliance, Investments, Risk, M&A and Investor Relations, Corporate Development, Personnel, Improvement & Restructuring) is an advisory body to the CEO and a management forum for monitoring risk elements across functions.

Regulatory risk

The Group depends on authorisations and licenses from various authorities. We face regulatory risk with respect to changes in laws and regulations that may affect the markets where we operate and thereby our business prospects.

From a regulatory perspective, the different jurisdictions that B2Holding operates in approach the issue of NPLs in different ways. The business units are licensed to operate as one or more of the following: portfolio purchaser, portfolio owner, collection company, credit information provider or, as a lender. The license requirements remain under supervision of the relevant local operation.

In addition, B2Holding participates in managing its regulatory risk by actively participating in various industry associations that develop standards and best practices and promote the role of the industry in supporting the health and viability of the financial system.

Credit risk

A large part of the Group’s assets consists of portfolios of purchased consumer and corporate receivables, both unsecured and secured, which were non-performing when acquired by the Group.  In other words, previous creditors have already attempted and failed to collect amounts due following initial or numerous non-payments. All acquisitions are based on careful valuations to predict future net collections and are approved via the Investment process as illustrated on page 15. B2Holding constantly aims to reduce the risk through applying extensive experience and using the Company’s proprietary database consisting of detailed analytical data based on a constantly growing history of NPL portfolios. It is crucial for the Group’s business to achieve an overall rate of collection above that reflected in the prices paid. While B2Holding believes that the recoveries on the Group’s loan portfolios will be in excess of the amount paid, amounts recovered may be less than targeted. Credit risk is monitored, analysed and controlled by Group’s local business operations and by the central business control units.

Market risk

The market risk is the risk arising from unexpected movements in exchange rates and interest rates.
Foreign exchange risk that has an impact on B2Holding’s financial statements arises mainly as a result of:

  • The currency used in the consolidated financial statements is different from the reporting currency of the subsidiaries (translation risk).
  • Assets and liabilities of the Group are denominated in different currencies and certain revenue and costs arise in different currencies (transaction risk).

B2Holding’s accounts are denominated in NOK, while a large part of the Group’s business is carried out in EUR, SEK, DKK, PLN, HRK, RON, BGN, CZK and other currencies. The Group’s receivables portfolios (assets) are mainly denominated in foreign currencies. The Group’s net borrowing adjusted for currency derivatives is made in relevant currencies reflecting the underlying expected cash flow from the loans and receivables. Thus, the Group is exposed to both translation and transaction risk.

Furthermore, in each of the jurisdictions where the Group is present, all revenue and most of the expenses are in local currency. Accordingly, any significant movements in the relevant exchange rates may have a material effect on the Group’s business, results of operations, or financial conditions.

To mitigate the currency risk the Group uses a multi-currency bank facility and bond loans denominated in EUR, effectively establishing an operational hedge by financing acquired portfolios in the same currency as the repayments expected from portfolios. However, portfolios acquired in for example Croatia, the Czech Republic, Bulgaria and Romania are financed by EUR due to limited possibilities for medium and long-term hedging arrangements when borrowing in those currencies. Croatia and Bulgaria have pegged their currency to the EUR within a limited band.

B2Holding is exposed to changes in interest rates since the Group’s debt has an element of floating interest rate. The Group employs hedging strategies that enable B2Holding to, within certain limits, hedge its interest exposure and hence monitor and reduce overall interest rate risk exposure.

Operational currency exposure is constantly monitored and relevant hedging arrangements are assessed and applied in accordance with Group’s risk policies.

Operational risk

Operational risk is a broad area, including the risk of loss from failed internal processes, people, IT systems or external events. Operational risk has increased in scope over the years due to the growth in the number of portfolios owned as well as to the acquisition of collection platforms and the building of new platforms. Operational risks arise as a result of system implementations and integrations, various legal and tax frameworks and differences between B2Holding’s subsidiary companies and country cultures.

B2Holding manages these risks through the implementation of a Group-wide risk management framework. The risk management framework was previously tested in one of the Group’s subsidiaries, with a full roll-out started in 2019 and scheduled for completion during 2020. Additional mitigation of operational risks will be achieved by the on-going implementation of the Group-wide governance system.

Involvement and participation in local management bodies, integration of business lines under dedicated central functions, Group policies and guidelines for key business areas, implementation of operational reporting, and comprehensive risk identification and monitoring are further measures aimed to mitigate operational risks.

The exposure to operational risks will continue to be met by further development of the risk management framework, including the tracking of key risk indicators and internal training in the year to come.

Liquidity risk

B2Holding’s liquidity requirements consist mainly for the funding of purchased portfolios, operating expenses, taxation and interest payments. The Group’s principal sources of liquidity are net cash generated from its operating activities, borrowings under the five bond loans and the revolving credit facility and share capital increases. The Group’s multi-currency revolving credit facility and five bond loans ensure necessary funding to meet future payment obligations.

The capital threshold for equity is set at a minimum consolidated book equity ratio of 25 %, and the minimum liquidity capacity is set to an equivalent of NOK 200 million on a consolidated basis. Based on the Group’s capacity to assume risk, the thresholds are determined by the Board of Directors. B2Holding’s risk control function monitors and ensures that the Group does not assume risk that exceeds the risk capacity and limits.

The Board considers the Group’s liquidity reserves, RCF utilisation capacity and cash generated from operations to be adequate and flexible enough for covering financial obligations when they fall due as well as meeting its business priorities.

People and equality

Full-time equivalents (FTEs)

Environment and employees

Administration and personnel

There were 179 (3 %) days of sick leave in the parent company B2Holding ASA in 2019 compared to 115 (3 %) last year.

Throughout 2019, no accidents resulting in serious injury or material damage have been reported. The workplace environment is considered to be positive and improvements are made on a continuous basis. B2Holding ASA, the Group’s head office located in Oslo, had 27 employees at the end of the year, of which 13 were women and 14 were men. At 31 December 2019, the Board of Directors consisted of five members of which two were women and three were men. Of two deputy board members, there is one woman and one man.

Equality and discrimination

The B2Holding Group has 2,781 employees at year-end comprised of 1,857 women and 924 men. The total number of full-time employee equivalents was 2,517 of which 1,646 women and 871 men, compared to 2,420 FTEs in 2018 of which 1,574 women and 846 men. The Group aims to be a workplace where there is gender equality. The Group employs a policy where no discrimination is allowed.

The Norwegian Anti-discrimination Act aims to promote equal opportunities and rights, and prevent discrimination based on ethnicity, nationality, lineage, skin colour, language, religion or spiritual affiliation. The Group works actively, purposefully, and systematically to promote and ensure that the Group adheres to the fundamental principles laid out by the Anti-discrimination Act. These activities are targeted in recruitment, wage and working conditions, promotion, development, and protection against harassment.

The Group strives to be a workplace where no discrimination is made as a result of mental disability or physical limitations. The Group works to design and facilitate the physical environment in a way so that it can be accessible to as many as possible. Employees and applicants with physical disabilities will receive individual solutions in order to facilitate their workplace environment and responsibilities.

Corporate responsibility (CSR)

Under section 3-3a and 3-3c of the Norwegian Accounting Act, B2Holding is required to report on its corporate responsibility and selected related issues. The Corporate Responsibility report on page 16 is based on the principles described in “Oslo Stock Exchange guidance on the reporting of corporate responsibility” from July 2018 and this report is an integrated part of the Directors’ report.

B2Holding is a vital part of the credit ecosystem, bridging the gap between the lending industry and individuals and company borrowers unable to meet their obligations. This is a challenge for all parties in the ecosystem: for the lending industry which does not get paid; social aspects for individuals in financial difficulties; the survival basis for companies employing individuals, and thus; ripple effects for the society as a whole.

B2Holding’s approach to and work with corporate responsibility and environmental issues was strengthened through establishing a new central Corporate Development function under Head of Corporate Development lead by the previously Regional Director Western Europe. In the new role in Group Management, this function will coordinate the Group’s sustainability initiatives and be responsible for planning, implementing, following-up and the further development of the Group’s sustainability programme.

The Group aims to find solutions to help manage debt problems for private and corporate customers and to serve an important role in the value chain for the banking and financial ecosystem for the benefit of the society as a whole. We believe that corporate responsibility will have consequences for B2Holding’s financial performance and long-term value creation, and the Board is committed to act sustainably when conducting the Group’s business. The Group focuses on its financial partners and the various regulatory bodies as key stakeholder groups given the fundamental impact they have on our business.

Through our operations, we help manage society’s debt problems and aim to contribute to a stable financial ecosystem. A well-functioning debt servicing industry is important and relevant for bridging the gap in the financial value chain.

B2Holding aims to maintain and build long-term relationships and be regarded as a trustworthy and qualified partner in dialogue with local authorities and preferred employer. The number of reported complaints for the Group in 2019 was at a very low level, like last year, and all complaints were addressed during the year.

The Board of Directors wishes to thank all employees for all support and efforts made for the achieved results and progress in 2019.

Corporate governance

Risk Management and internal control

The Corporate Governance report on page 23 constitutes an integral part of the Directors’ report. B2Holding ASA is subject to corporate governance reporting requirements under section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance (“the Code”) most recently revised on 17 October 2018, as well as section 7 on the Continuing Obligations applicable for all of the Group’s financial instruments listed on Oslo Stock Exchange. B2Holding reports no deviations from the Code.

The Board of Directors considers good corporate governance as a prerequisite for a transparent, efficient and effective company in the interest of its shareholders as well as for running a balanced management control system internally with clear responsibilities and active procedures in a decentralised organization. As a result of the write downs in 2019, the Company has initiated projects to improve the structure and the quality of the Company’s risk and compliance programmes on Group level. During this process the Company discovered that there is room for improvement related to certain aspects of our business, and changes have been initiated. In autumn 2019, the new positions Chief Risk Officer and Chief Legal & Compliance Officer were established. Projects for further development and improvement of these areas are initiated and results achieved within 2019. The projects will be continued in 2020. For further details, please see the Risk management chapter.

The Annual General Meeting adopts the Instruction for its Nomination Committee submitting proposals for the election of the members of the Board and the Chair of the Board, fees to the members and the Chair of the Board and for the members of committees within the Board of Directors.

At B2Holding ASA’s Annual General Meeting on 25 May 2018, Jon Harald Nordbrekken, Per Kristian Spone, Niklas Wiberg in addition to deputy board members Grethe Wittenberg Meier and Kjetil Garstad were elected for the period until the Annual General Meeting in 2020. At B2Holding ASA’s General Meeting on 24 May 2019, Kari Skeidsvoll Moe and Adele Bugge Norman Pran were elected for the period until the annual general meeting in 2021.

The Board of Directors established the Audit Committee after the Annual General Meeting on 24 May 2019 with Per Kristian Spone as the leader and Adele Bugge Norman Pran as a committee member. The external auditor, EY, will participate in meetings with the Audit Committee when matters falling within the scope of the external auditors’ responsibilities are considered.

The Board of Directors established the Remuneration Committee after the Annual General Meeting on 24 May 2019 with Kari Skeidsvoll Moe as the leader and Niklas Wiberg as a Committee member.

The objective for the adopted Internal Control and Risk Management Policy is to manage, rather than eliminate, exposure to risks related to the successful conduct of the Company’s business and to support the quality of its financial reporting. Effective risk management and good internal control contribute to securing shareholders’ investment in the Company and the Company’s assets.

The Company’s scope of business is to generate values for the shareholders through its expertise in the debt purchase and servicing of non-performing unsecured and secured loans and hence manage or cover unacceptable risks involved with performing its business.

It is important to perform ethical and sustainable business practices, reliable and transparent financial reporting and to comply with all regulations, requirements and industry standards in all countries where B2Holding operates. Corporate Governance in B2Holding is about how the Board of Directors and Management conduct the affairs, actions and policies to preserve and develop the Company’s values and ethical footprint. As described above, projects were initiated in 2019 in order to further improve the governance and compliance programmes.

The Company is divided into two main business lines: unsecured asset management and secured asset management. The Head of Unsecured Asset Management and Head of Secured Asset Management together with the Group’s CEO with support from professional Group functions, are responsible for and shall ensure that all business units operate and develop in accordance with B2Holding’s standards of conducting the business, the governance policies and the Code of Conduct to the benefit of our stakeholders.

The Board actively adheres to good corporate governance standards and will at all times ensure that B2Holding complies with the requirements of section 3-3b of the Accounting Act and the Code. This is done by ensuring that the topic of good governance is an integral part of the decision-making process in matters dealt with by the Board. B2Holding’s corporate governance principles are subject to annual review and discussion by the Board. The progress of the project to improve governance in the Group is reported to the Board on a regular basis.

For investment in and evaluation of loan portfolios, the Board of Directors has established policies for an internal control framework including an investment committee and an investment office in Luxembourg. This framework is established to control the specific operational risks and risks related to financial reporting of purchased loan portfolios.

The management prepares monthly consolidated financial reports that are sent to the Board of Directors. When the Group’s quarterly financial reports are to be presented, the Audit Committee reviews the reports prior to the board meeting.

The Board of Directors annually reviews the strategic plan. In addition, as part of the preparation for the strategic discussion, the Board also reviews the Group risks.


Nomination Committee

B2Holding’s Nomination Committee is stated in the Articles of association. The Nomination Committee shall have three members, including the head of the committee. As to the composition of the Nomination Committee, the interests of the shareholders will be considered, and the majority of the members shall be independent of the Board of Directors and of the executive management. The Chair of the Board and CEO shall be invited to a minimum of one meeting of the Nomination Committee before it gives its final recommendation. They will have the right to address the committee but have no voting rights.

The Nomination Committee shall propose and present candidates for election to the Board at the Annual General Meeting. The instruction for the Nomination Committee was approved by the Extraordinary General Meeting on 19 May 2016 after which each member of the Nomination Committee shall act for two years. At B2Holding ASA’s Annual General Meeting on 24 May 2019, Ole Grøtterud (leader), Albert Collet and Egil Dahl were elected for a period until the Annual General Meeting in 2021.

Due to the Covid-19 virus outbreak and measures implemented to prevent further spread of the virus, the Board of Directors will for the Annual General Meeting in May 2020 request shareholders to refrain from attending in person and use the possibility of casting advance votes or voting by proxy instead.


The parent company’s share capital at 31 December 2019 amounted to NOK 41.0 million. Total equity for the Group at 31 December 2019 was NOK 4,236.8 million corresponding to an equity ratio of 25.0 %. Considering the nature and scope of B2Holding’s business, the Board of Directors considers that the Company has adequate equity.

Going concern

The annual accounts have been prepared on a going concern basis and in the opinion of the Board of Directors the accounts provide a fair representation of the Company’s business and financial results. The Board of Directors confirms that the going concern assumption has been satisfied.


During 2019 market conditions improved with less price pressure and an increasing supply of portfolios. Looking ahead, there are significant NPL volumes in existing geographical markets which we predict will grow in the coming year due to among other the effects of current COVID-19 pandemic and subsequent measures.

The Group expects that regulatory changes in 2019 initiated by the European Central Bank, such as the prudential backstop effective from April, will result in banks making portfolios available for purchase earlier and in higher volumes than historically.

As part of the renewed strategy the Group is in a process to reduce its footprint in certain non-core markets, allowing for strengthened focus on core markets. The Group has and will continue to have presence in most of the largest markets for non-performing loans in Europe.

B2Holding will continue to focus on co-investments in existing markets which is expected to increase servicing revenues.

After a period with strong growth the Group is in a phase with strong focus on increased efficiency, operational improvements and delivering the financial targets. By leveraging on the existing collection platforms, streamlining and automating processes, in addition to centralization of some functions, profitability and cash flow is expected to increase further going forward.

Outbreak of Covid-19 pandemic

As of writing this report, the Coronavirus disease (Covid-19) outbreak has been declared a global pandemic by the World Health Organisation (WHO), causing countries and organizations, including B2Holding, to implement extraordinary measures to mitigate risk of infection and further spread of the virus.

The Group has followed all precautionary measures imposed by local health authorities in the countries where the Group has presence, in order to protect employees, their families and the local communities in general. The Group’s entities have moved most functions to home offices and is able to ensure business continuity.

B2Holding closely monitors the impact of the COVID-19 pandemic, including local government measures in all countries with operations and the effects on the global financial market. As of publication of this report, the liquidity situation and balance sheet position of the Group are assessed to be satisfactory and controllable and meets the requirements under the loan agreements. The Group has temporary reduced portfolio purchases to a minimum in order to preserve liquidity going forward.

Governmental measures like lockdown and forced closedown of businesses, have among others an effect on local bailiffs and court systems as well as for many customers who will find themselves in a more challenging and uncertain financial situation. In this respect, the Group’s values emphasizing both ethical and responsible collections, are fundamental and more important than ever. B2Holding has implemented a detailed protocol when contacting the customers, as well as a script for identifying and following up those that have been affected with the pandemic so that B2Holding can offer ad-hoc solutions for them.

The Group is committed to find amicable solutions and conduct the business in an ethical and responsible manner in all situations and is placing the safety and wellbeing of its employees as a priority.

The full extent, consequences and duration of the Covid-19 pandemic is not possible to predict. However, the implemented restrictions to prevent the spread of the Covid-19 pandemic will undoubtedly have a severe negative impact on our economies.

Annual profits and distributions

The Board has proposed to allocate the 2019 loss of NOK 156.5 million of the parent company B2Holding ASA as follows:

Transfer from retained earnings    NOK  156,549,000
Total distributions                            NOK  156,549,000


Oslo, 29 April 2020
Jon H. Nordbrekken
Chairman of the Board
Adele Bugge
Norman Pran
Board Member
Niklas Wiberg
Board Member
Per Kristian Spone
Board Member
Kari Skeidsvoll Moe
Board Member
Erik J. Johnsen
Chief Executive Officer