KRUK’s net profit up by 27%
KRUK Group (WSE: KRU), the leader of the debt management market in Central Europe, has published its performance figures for the first three quarters of 2015:
- Net profit for Q1−Q3 2015 stood at PLN 160.2m, up by 27% year on year. The figure represents 106% of net profit earned in 2014. Revenue for Q1−Q3 2015 increased to PLN 449.2m, up by 22% year on year.
- Recoveries from purchased debt portfolios amounted to PLN 604.7m, which represents 85% of total recoveries in 2014 and an 14% growth year on year. In Q3 2015 alone, recoveries amounted to PLN 206.0m – up 23% year on year.
- In Q1−Q3 2015, the Group entities invested PLN 292.3m in 48 debt portfolios with the total nominal value of PLN 2.9bn. In Q3 2015 alone, the Group invested PLN 70.1m in debt portfolios with a nominal value of PLN 606.7m. The Group purchased its first debt portfolios in Germany and is taking part in further auctions.
- The KRUK Group is currently running three major projects: closing the purchase of a portfolio with a nominal value of PLN 718m from PKO BP, signing an investment agreement with P.R.E.S.C.O., and completing negotiations with International Finance Corporation on a joint investment project in Romania.
- The Group has carried out a thorough analysis and confirmed the attractiveness of two new geographical markets characterised by high debt supply – Italy and Spain.
- In Q3, the total amount of credit facilities available to the Group went up to PLN 560m, including PLN 140m that can be drawn in the euro.
- The financial situation of the KRUK Group allows it to remain highly active on the debt portfolio purchase market, with the ratio of net debt to equity at 1.0x at the end of Q3, the lowest level since Q1 2011.
- After the end of the third quarter, KRUK S.A. decided to issue bonds in a private placement, with a nominal value of up to PLN 100m.
- In October, KRUK’s annual report was recognised in the ‘most useful’ category of The Best Annual Report 2014 competition, organised by the Accounting and Tax Institute.
KRUK Group – consolidated financial highlights for Q1−Q3 2015
| (PLNm) | Q1−Q3 2015 | Change 15/14 | Q1−Q3 2014 | 2014 | % of 2014 |
|---|---|---|---|---|---|
| Revenue | 449.2 | 22% | 367.5 | 487.9 | 92% |
| EBIT | 191.5 | 15% | 166.1 | 208.2 | 92% |
| Cash EBITDA* | 391.5 | 6% | 369.1 | 489.0 | 80% |
| Net profit | 160.2 | 27% | 126.1 | 151.8 | 106% |
| ROE rolling | 25% | - | 26% | 26% | - |
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt
“We still have two months of hard work ahead of us. However, at the end of the third quarter, we can say that 2015 will be a very successful year for us. Our efficient business model, coupled with the unique amicable settlement strategy, continue to drive the Group’s performance. There is still room for improvement, though, and our goal is to reshape the Polish and European debt collection market so that debtors are treated as key clients. The success of our company proves that the strategy we have employed benefits each of the parties involved,” said Piotr Krupa, President of the Management Board of KRUK S.A.
Record-high cash recoveries and sound investments
Improved performance in the first three quarters of 2015 is attributable to higher recoveries from purchased debt portfolios, which stood at PLN 605m, up by 14% year on year. In Q3 alone, KRUK reported PLN 206m in recoveries.
“Strong recoveries follow directly from our business model and sound investments, but we must also bear in mind the favourable macroeconomic environment,” said Piotr Krupa.
The first three quarters of 2015 was also a busy period in terms of investment activity. Companies of the KRUK Group purchased 48 debt portfolios with a nominal value of PLN 2.9bn for PLN 292m. In Q3 alone, KRUK invested PLN 70m in portfolios with a nominal value of PLN 607m, purchased in all its markets, including Germany.
Ongoing projects
The KRUK Group is currently running a number of promising projects. After the end of Q3 2015, the KRUK Group won an auction to purchase a mixed debt portfolio with a nominal value of PLN 718m from PKO BP. It is the second largest portfolio in terms of nominal value to have been purchased by KRUK this year, and the third largest portfolio in the history of the KRUK Group in all markets where it is present.
In the second half of August, the KRUK Group took further crucial steps to open secondary debt purchase market. P.R.E.S.C.O. and the Group agreed on the key terms for the acquisition of 100% of shares in Presco Investments S.à r.l, which holds a debt portfolio with a total nominal value of PLN 2.7bn, purchased in Poland. The parties have agreed on a maximum price of PLN 220m, less adjustments provided for in the agreement. KRUK and P.R.E.S.C.O have already obtained transaction clearance from the President of the Polish Office of Competition and Consumer Protection (UOKiK), which had been a precondition to the consummation of the deal.
At the end of July, the KRUK Group’s Romanian subsidiary was selected by the International Finance Corporation (a World Bank Group organisation) as an operating partner for a potential investment project involving the establishment (jointly with other entities) of an SPV to negotiate the purchase of unsecured retail debts in Romania. The total amount of expenditure to be incurred by the entities participating in the project is estimated at up to EUR 65m, with the IFC’s share not to exceed EUR 35m.
“We are currently in the process of closing three major transactions. The timing, however important, is not our top priority. What we want to achieve the most is to complete the transactions in a way satisfactory to each of the parties concerned. It is possible that some of the transactions will be completed in 2016. That would give the Group a head start into the new year, because the current one − considering the investments and recoveries after the three quarters − has already proved a huge success. However, the transactions have not blunted our appetite and we remain actively involved in the auctions under way. Debt supply is strong and we stay alert,” said Piotr Krupa.
New markets
To expand the product portfolio, the Group has carried out a thorough analysis and confirmed the attractiveness of two new geographical markets characterised by high debt supply – Italy and Spain.
“We continue to pursue our strategy for 2015−2019, under which we strive to achieve the position of one of Europe’s three leading debt management companies. To this end, we have thoroughly analysed the two markets we are most interested in entering, that is Italy and Spain. The markets are very promising and KRUK will start to organise its operations there,” said Piotr Krupa.
According to KRUK, the total supply of non-performing unsecured debt in Italy and Spain is several times larger than in Poland. The Company expects that banks and financial institutions will continue to sell debt portfolios.
“I assume that we will make first investments in one of the markets in the second half of 2016. We intend to continue with our strategy on the German market, which is to thoroughly consider each investment opportunity and select only the best ones, given the early stage of our operations,” said Piotr Krupa.
Solid financing
The KRUK Group’s readiness to make further investments in each country where it operates is supported by solid financing. In Q3, the total amount of credit facilities available to the Group went up to PLN 560m, including PLN 140m that can be drawn in the euro. After the end of the third quarter, KRUK S.A. decided to issue bonds in a private placement, with a nominal value of up to PLN 100m.
“We expect the continuation of high debt supply in each country where we are present, and the availability of financing gives us a major advantage during auctions,” added Piotr Krupa.
The financial situation of the KRUK Group allows it to remain highly active on the debt portfolio purchase market, with the ratio of net debt to equity at 1.0x at the end of Q3, the lowest level since Q1 2011.