Strong performance and expansion in Western Europe

KRUK, the Polish leader of Central Europe’s debt management market, has published its performance figures for 2017:

• Recoveries from purchased debt portfolios amounted to PLN 1.4bn, up 38% year on year. More than half of that sum was collected in foreign markets, with the share of Western European countries, particularly Italy, growing in overall recoveries.
• PLN 977m, down 24% relative to 2016, was invested by KRUK to purchase a total of 139 new portfolios with a nominal value of PLN 16.4bn. Despite very competitive prices in Poland, KRUK managed to invest PLN 275m on its home market.
• At PLN 837m, the Company’s cash EBITDA was a third higher than in the previous year, reflecting its strong cash position.
• The Group’s net profit came at an all-time high of PLN 295m, a 19% increase year on year. In Q4 2017 alone, the Group recorded weaker performance, with 4m in net profit, due mainly to negative portfolio revaluations on the Italian market and an increase in the tax rate.
• With the net debt to equity ratio at 1.2x, KRUK remains one of the least leveraged businesses, boasting one of the industry’s healthiest balance sheets.
• The KRUK Management Board has proposed a dividend payment in the total amount of PLN 94m or PLN 5 per share.

Key consolidated financial results

(*) - Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt

“Looking back, we can see behind us a year of strong growth in our two key markets, Poland and Romania. Significant past investments, coupled with a unique amicable settlement strategy and high operational efficiency, translated into growing recoveries from our purchased debt portfolios. In our new markets of Italy, Spain and Germany, we brought in our know-how while adapting our processes to the local social conditions and legal frameworks,” said Piotr Krupa, KRUK’s CEO.

Highest ever recoveries and more investments

Recoveries from KRUK’s purchased debt portfolios in 2017 amounted to PLN 1.4bn, up by 38% on the previous year, representing the Group’s all-time record. In Q4 2017 alone, KRUK saw recoveries of PLN 375m.

At the same time, KRUK invested PLN 977m in new debt portfolios with an aggregate nominal value of PLN 16.4bn. KRUK was active on all its seven markets, making the largest investments in Italy (29%), Poland (approximately 28% of total investment expenditure in 2017), and Romania (27%).

KRUK spreads its wings across Western Europe

In 2017, investments in Italy totalled PLN 287m. As a result, the carrying amount of the Italian portfolio at year-end was in excess of PLN 0.5bn. KRUK’s efforts were focused on building an operational engine.

“We have been enhancing our adaptive capacities month after month. In 2017, in Italy, we successfully completed the integration of Credit Base, our previous partner in portfolio valuations and debt management. In the past few months, our team has grown tenfold. We now employ 230 staff, the vast majority of whom are consultants – some of them working in the field – and lawyers. We are entering into new settlement agreements, which contribute to a steady growth in recoveries. A few months ago, we also launched our own litigation procedure, which allows us to handle court cases independently,” said Piotr Krupa.

KRUK also invested PLN 78m in Spain, supporting the organisation’s foreign expansion with the acquisition of a local company.

“The number of employees in Spain doubled over the year, to 230, and the merger with Grupo Espand, acquired last year, was successfully completed. Our structures and processes in Spain allow us to handle all types of unsecured cases, including both consumer and corporate debts. The local contact centre provides support with respect to all purchased portfolios, while over 30 field consultants cover the four regions of the country that we perceive as key to our business,” added Piotr Krupa.

The industry’s healthiest balance sheet

In 2017, KRUK worked to expand its sources of financing: it issued two series of euro-denominated notes with a total value of PLN 168.4m and increased the total amount of available credit facilities to PLN 1.7bn at the end of Q3, of which 75% can also be drawn in the euro. In Q3, KRUK signed a EUR 250m revolving facility agreement with a syndicate of four banks. The proceeds can be used by KRUK for investments outside Poland.

“We have managed to secure first-rate financing terms on the back of our robust balance sheet. With the net debt to equity ratio at 1.2x, we are one of the least leveraged companies in the debt management industry. This gives us a negotiating edge with banks and investors,” added Piotr Krupa.

Dividend of close to PLN 100m

The KRUK Management Board has decided to recommend to the General Meeting a dividend payment in the total amount of PLN 94m, or PLN 5 per share. The proposed payout has already been approved by the Supervisory Board. It will be KRUK’s fourth dividend distribution since it was listed on the WSE. So far, it has distributed a total of PLN 98.9m.

“Given the Group’s low leverage and high levels of generated cash, payment of such dividend will not impede our plans to invest in new portfolios. Our balance sheet allows us to distribute profit, while maintaining an ambitious pace of growth. I believe the best listed companies should not only grow strongly, but should also share their profits with shareholders,” noted Piotr Krupa.