The KRUK Group (WSE Ticker: KRU), Central Europe's leading credit management company, posted a record-high PLN 40m in net profit for Q1 2014.
KRUK Group performance in Q1 2014:
- Record-high net profit of PLN 40m (41% of net profit for the whole of 2013), up 103% year on year and 127% quarter on quarter
- Expenditure on debt portfolios at an all-time high of PLN 269m, including PLN 230m on the purchase of a mortgage portfolio with total nominal value of PLN 710m
- from Getin Bank Recoveries from purchased debt portfolios at PLN 154m, up 30% year on year − in line with forecasts and comparable to the record-high recoveries from Q4 2013 EBIT
- at PLN 51.4m, up 52% year on year
KRUK Group – consolidated financial highlights
|PLNm||Q1 2014||Q1 2013||change|
|Operating profit (EBIT)||51.4||33.9||+52%|
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt.
“In the first quarter of 2014, our net profit more than doubled relative to the first quarter of 2013, and soared 127% quarter on quarter. Recoveries from purchased debt portfolios were high, at PLN 154m, having increased 30% year on year. These excellent recovery figures are the effect of our amicable settlement strategy and the improving financial situation of households in the countries where KRUK operates. We are also maintaining effective cost discipline, even with our significant expenditure on the continuing media campaign targeted at debtors. The purpose of this educational campaign, run in the first quarter in the mass media in Poland and Romania, has been to motivate and encourage debtors to contact KRUK to agree on possible repayment plans. We advocate amicable settlements involving the repayment of debt in manageable instalments − a solution increasingly popular with debtors. Our performance at the beginning of Q2 was also very positive as we finalised the sale of a secured debt portfolio, realising a PLN 18.7m gain on the transaction, which was recognised in the books in the second quarter of 2014. The transaction was executed as part of our secured portfolio management process,” said Piotr Krupa, President of the KRUK Management Board.
In Q1 2014, the KRUK Group also recorded record-high expenditure on new debt portfolios of PLN 269m. To note, the most substantial investments in the past, made in Q2 2012, totalled PLN 249m.
The purchase of a mortgage debt portfolio for PLN 230m was the largest investment into a single debt portfolio not only in Q1 2014, but also in the Group's entire operating history. With this transaction, KRUK has entered a promising segment of the mortgage-backed debt purchase market, which will complement the Group's previous operating segments of consumer and corporate debt.
“As the first mortgage debt purchase transaction on such a large scale in Poland, the acquisition of the debt portfolio from Getin Bank was undoubtedly the first quarter's most important event. The portfolio with a nominal value of PLN 710m, purchased for PLN 230m, has been KRUK's highest-value debt portfolio transaction so far. We expect banks will now be more willing to sell mortgage debt. KRUK is well prepared – we have access to financing and appropriate organisational resources enabling us to actively participate in this market's growth. It should be noted that, by acquiring mortgage-backed debt, KRUK positions itself as being a partner for banks, providing them with effective support in solving the problem of excessively indebted individuals who pay their mortgages irregularly. All three parties involved will benefit from such transactions,” continued Mr Krupa, President of the KRUK Management Board.
In Q1 2014, the KRUK Group secured financing under a new 10-year credit facility of PLN 260m, which may be used to purchase debt portfolios in all of the Group's current markets. This financing, which doubled the Group's available credit, will come as a flexible tool in acquiring new debt portfolios. As at the end of Q1 2014, the KRUK Group's combined credit facilities amounted to PLN 470m (with PLN 90m already drawn), while the value of its bonds in issue was PLN 555m. The Group's interest-bearing debt stood at PLN 589m at the end of Q1 2014, against PLN 652m at the end of Q4 2013. Its debt ratio (net interest-bearing debt to equity) fell from 1.6 at the end of Q4 2013 to 1.3 at the end of Q1 2014. KRUK's credit management business contributed PLN 8m in revenue, generating a gross profit of PLN 2.8m in Q1 2014.
The nominal value of debts accepted for collection was PLN 696m in the period. To compare, Q1 2013 revenue and gross profit in the credit management segment amounted to PLN 14.3m and PLN 9.2m, respectively. The change in KRUK’s results from Q1 2013 to Q1 2014 is attributable to the robust performance of the corporate credit management segment in Q1 2013. The credit management market is highly competitive, but KRUK continues to perform well by leveraging its high operating efficiency.