KRUK after Q1-Q3 2017: Robust net profit, recoveries of nearly one billion and new investments

The KRUK Group, Polish leader in debt management in Central Europe, has published its financial results for the first three quarters of 2017.

• The Group generated a net profit of PLN 291.3m, representing 117% of the net profit figure it reported for the whole of 2016. In the third quarter alone, net profit reached PLN 74.3m and was 18% higher year on year.
• Recoveries from own portfolios rose to PLN 994.0m, the highest result in the Group’s history. The third quarter was the greatest contributor (PLN 346.8m), showing 19% growth year on year. The majority of the debt repayments came from customers outside Poland.
• The KRUK Group purchased 85 new portfolios, investing a total of PLN 766.5m in debts with a nominal value of PLN 10.0bn. In the third quarter alone, investments reached PLN 260.1m, of which nearly 60% was spent in Poland. With a net debt-to-equity ratio at 1.1x, there is enough room on KRUK’s balance sheet to accommodate further investments.
• In Q1-Q3 2017, KRUK worked on building its sources of financing: the Group issued two series of euro-denominated notes with a total value of PLN 168.4 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 2017, KRUK signed a revolving credit facility agreement with a syndicate of four banks, including the Norwegian DNB Bank, BZ WBK, mBank, and ING Bank Śląski. The multi-currency EUR 250m facility may be used to purchase or refinance debt portfolios in European markets other than Poland.

Consolidated financial highlights for Q1-Q3 2017

(*) Cash EBITDA = EBIT + recoveries from own portfolios - revenue from own portfolios
(**) Excluding the issue of 1m new shares with a value of PLN 215 million in December 2016

Results presentation: https://en.kruk.eu/media/article/file/kruk_results_presentation_1_3q2017.pdf 

“After the first three quarters, our net profit figure equals net earnings for the whole of 2016 so we are comfortably entering the final straight this year. As a Management Board working to long-term objectives, we are already thinking about achieving our strategic plans in the coming years - maintaining earnings per share growth of at least 15%, while ensuring return on equity of at least 20%,” said Piotr Krupa, CEO of KRUK S.A. “From the operational point of view, we place great emphasis on the development of our organisation in Italy. The number of KRUK Group employees on the Apennine Peninsula has been growing fast: at the beginning of the year it was about 40 people, while today the headcount is more than 200. We are strongly motivated to continue growth of our Italian team. We are also rolling out a number of operational processes which do not require higher staff numbers but simply take some time to get completed. Once put in place, they will also vastly enhance KRUK’s operational capabilities.

New investments

As at the end of September, purchases made by KRUK totalled PLN 766.5m. For this amount, KRUK bought 85 portfolios in 7 European countries, including Poland, Romania, the Czech Republic, Slovakia, Germany, Spain and Italy, with an aggregate nominal value in excess of PLN 10.0bn. In the third quarter alone, KRUK invested PLN 150m in ten debt portfolios in Poland. The largest portfolio originated from Getin Noble Bank, and had a nominal value of PLN 420m.

After the end of the quarter, the Group acquired debt portfolios with a nominal value of PLN 4.0bn from Lehman Brothers’ BISON NS FIZ investment fund. The transaction was completed in mid-October.

“We are very satisfied with the sizeable investments we made in Poland over the last few months. We invariably participate in all auctions and pick the best portfolios for us in Poland. However, competition on the domestic market continues to be particularly fierce, which makes it hard to find many investments offering reasonable returns. Fortunately, with the geographical diversification of our business we are able to invest in the other six European markets where we are present. We are also actively looking for alternative opportunities. The acquisition of the BISON investment fund from Lehman Brothers, with corporate debt totalling PLN 4bn in terms of nominal value, is a case in point.” said Piotr Krupa.

Highest amount of recoveries in the Group’s history

Recoveries from own portfolios amounted to PLN 994.0m, topping the total 2016 figure. The third quarter was the key contributor, generating PLN 346.8m, the highest result on KRUK’s record.

“Total recoveries over the past 12 months reached PLN 1.1bn, with more than half of this amount repaid by customers outside Poland. We continue to benefit from the improving macroeconomic conditions in all European markets, particularly in Poland and Romania. I expect that along with growing investments in Western Europe, the distribution of debt repayments will further diversify, reducing our exposure to the business environment of a single country,” said Piotr Krupa.