Record recoveries from purchased debt portfolios of the KRUK Group
The KRUK Group, leader of the debt management market in Central Europe (WSE Ticker: KRU) has once again posted very strong results, as disclosed by the just-released consolidated financial figures for 2013:
- Recoveries from purchased debt portfolios of PLN 538m, up 19% year on year, including PLN 155m in Q4 alone;
- Revenue of PLN 405.6m, up 18% on 2012;
- Net profit of PLN 97.8m, up 20% year on year, a record-high result for the Group;
- Investments in debt portfolios of PLN 367m, up 19% year on year;
- Purchase of 65 debt portfolios with a total nominal value of almost PLN 3.8bn;
- An almost 22% share of the debt purchase market in the Group’s markets;
- Fair value of purchased debt portfolios of PLN 1,054m, compared with PLN 873m as at the end of 2012; 24% return on equity (ROE);
- 2.7m cases with a total nominal value of nearly PLN 18bn purchased since the beginning of KRUK's operations.
KRUK Group – consolidated financial highlights
| PLNm | 2013 | 2012 | change |
|---|---|---|---|
| Revenue | 405.6 | 343.0 | 18.3% |
| Operating profit (EBIT) | 152.9 | 136.7 | 11.9% |
| Cash EBITDA* | 344.3 | 292.3 | 17.8% |
| Net profit | 97.8 | 81.2 | 20% |
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt
Commentary
"2013 was a record year for our financial results, and importantly our financial performance again improved year on year – since 2008, the Group’s revenue has risen 291% (CAGR of 31%), and its net profit 486% (CAGR of 42%). In the same period, our EBIT and EBITDA have also grown, by 517% and 493%, respectively. Our ability to achieve above-average returns on equity is as important to us as the ability to continuously improve our financial performance and profitability. Therefore, I consider the return on equity of 24% reported by the Group for 2013 to be our great success," said Piotr Krupa, President of the KRUK Management Board.
We were able to deliver this robust financial performance as a result of investments in debt portfolios in 2011-2013. In that period, the KRUK Group spent over PLN 1.2bn to buy new debt portfolios. Our 2013 investments in debt portfolios were PLN 367m, up 19% on 2012. The total nominal value of the portfolios purchased by the Group was PLN 17.9bn as at the end of 2013, up 21% on the end of 2012. All of the investments made to-date provide a solid foundation for continued growth of our results and cash flows in the years ahead.
Fee-based credit management services
In 2013, KRUK's credit management business generated a gross profit of PLN 18.7m, which was higher by 51% year on year. The nominal value of debts accepted for collection was PLN 3.1bn as at the end of 2013. The higher gross profit in 2013 was largely due to the final collection of a large corporate debt in Q1 2013, as well as strong performance of the consumer debt segment throughout the year.
Market position
The KRUK Group retained its strong position on the Polish debt management market in 2013. According to a Gazeta Giełdy Parkiet ranking, the nominal value of debts accepted for collection or purchased by the KRUK Group in Poland during the year reached PLN 5.1bn, giving KRUK the top position among the surveyed Polish debt management companies.
According to in-house estimates, the KRUK Group also leads the Polish credit management market, with a 28% share. In 2013, the Group provided its credit management services to 9 of the top 10 banks in the country.
On its three foreign markets, Romania, the Czech Republic and Slovakia, the KRUK Group invested a total of PLN 161m in new debt portfolios in 2013. To compare, the Group had invested PLN 85m throughout 2012. This means that its investments outside of the domestic market grew nearly 89% in 2013.
"We significantly increased our presence in Romania. In 2013, the Group's expenditure on debt portfolios on that market amounted to almost PLN 133m, up 128% on 2012. Our investments allowed us to secure a 49% share in the Romanian debt purchase market, and consolidate our leading position on the country’s credit management market," added Mr Krupa.
Recoveries
The amicable settlement strategy consistently implemented by the KRUK Group has substantially improved the stability of its debt recoveries and provides the Group with a competitive advantage over other players in the sector. In 2013, recoveries were over PLN 537m, up 19% on 2012. The positive effect of the amicable settlement strategy is also confirmed by the structure of recoveries: in 2013, over 62% of recoveries were made under the strategy.
Rejestr Dłużników ERIF and NOVUM Finance
KRUK’s Rejestr Dłużników ERIF (ERIF Debtor Register) is one of Poland’s four licensed credit reference agencies. As at January 2nd 2014, the Register's database contained 1.78m records, showing debts with a total nominal value of PLN 9.8bn, a 32% and 40% year-on-year increase, respectively. Revenue derived from ERIF’s information services in 2013 was PLN 6.8m, a year-on-year increase of 39%.
In order to diversify its revenue sources, in 2013 the KRUK Group also worked on developing a short-term cash loan service for former debtors who have a track record of repaying their liabilities to the KRUK Group in a timely manner. During the year, the KRUK Group advanced more than 10,000 cash loans marketed through its subsidiary Novum Finance. The total value of the loans was PLN 17.5m. Revenue from the Novum project posted for the full year 2013 amounted to PLN 4.7m.