The KRUK Group (WSE ticker: KRU), operating in the debt management market in Central Europe, has published its performance figures for the first three quarters of 2014, showing:
- a record-high net profit of PLN 126.1m (129% of the 2013 full-year figure) – up 57% year on year;
- high recoveries from purchased debt portfolios of PLN 528m, up 38% year on year, and 98% of recoveries in the whole of 2013, marking an all-time high for recoveries;
- a strong cash EBTIDA* of PLN 369.1m – up 51% year on year; a high return on equity (ROE) of 25.9%;
- expenditure on debt portfolios totalling PLN 355m – up 25% year on year, including PLN 230m on a mortgage debt portfolio purchased from Getin Bank;
- in total, investments after the first three quarters of 2014 represented 97% of the investment expenditure made in the whole of 2013;
- fair value of purchased debt portfolios of PLN 1.22bn, compared with PLN 1.05bn at the end of 2013;
- in Q3 2014, KRUK established KRUK Deutschland GmbH, a new company based in Berlin; the subsidiary's core business will be management of debt portfolios purchased by the KRUK Group entities in the German market;
- in October 2014, KRUK obtained its first ever financing denominated in the euro (up to the equivalent of PLN 70m) from BZ WBK under an existing credit facility agreement;
- at the end of Q3, the Group's net debt to equity ratio was only 1.2, which is expected to facilitate a further increase in investments and international expansion.
KRUK Group – consolidated financial highlights
|PLNm||Q1-Q3 2014||Q1-Q3 2013||change||2013||% of 2013 result|
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt
“KRUK has continued to develop and to improve its financial performance. Our financial results for the first three quarters of 2014 are the best in the Group's history. The net profit of more than PLN 126m is nearly 57% higher year on year, representing almost 130% of KRUK's net earnings for the whole of 2013. This year we have also seen record-high recoveries from the debt portfolios purchased by KRUK, at PLN 528m. Although the fourth quarter figures are yet to be seen, our year-to-date results are very close to those we reported for the whole of 2013. At the same time, we are seeing considerable interest in our services among entities offering debt portfolios for sale. December is particularly likely to bring a large transaction volume, as we are expecting the award of a number of tenders announced by banks in Poland and Romania. KRUK has been actively participating in all the tenders currently under way,” - said Piotr Krupa, President of the Management Board of KRUK S.A.
Expansion on foreign markets
In the third quarter of the year, KRUK established a subsidiary in Germany − KRUK Deutschland GmbH, thus launching its operations in a new foreign market, which, compared with the Polish market, is four times larger in terms of value of consumer loans advanced and substantially larger in terms of expenditure incurred on debt portfolios.
“In our opinion the German market is very attractive. We are also pleasantly surprised by the positive reception of our company by the banks selling debt portfolios in Germany. We are actively involved in the tenders currently under way on this market, and there are good chances that the first transaction may be closed by the end of this year,” said Piotr Krupa.
Debt collection outsourcing business
KRUK's debt collection outsourcing business contributed PLN 23.9m in revenue, generating a gross profit of PLN 9.3m in Q1-Q3 2014. In the same period, the nominal value of debts accepted for collection was PLN 2.3bn. KRUK's debt collection outsourcing business is profitable and generates a stable revenue stream. Financing As at the end of September 2014, the KRUK Group's combined credit facilities amounted to PLN 430m (with PLN 240m already drawn), while the value of its bonds in issue was PLN 475m. The Group's net interest-bearing debt at the end of September was PLN 677m, compared with PLN 759m at the end of H1 2014. The debt ratio (net interest-bearing debt to equity) amounted to 1.2 at the end of September, compared with 1.4 at the end of June 2014.
In October, KRUK obtained its first ever financing denominated in the euro from BZ WBK under an existing credit facility agreement (up to the equivalent of PLN 70m), which may be used by the Group to finance its international expansion. In the same month, KRUK executed a five-year revolving credit facility agreement with BNP Paribas for up to PLN 30m, marking the beginning of its cooperation with the bank in the area of financing.
Marketing and educational campaigns
The KRUK Group has been conducting a broad media campaign in Poland and in Romania targeted at indebted individuals. Brief advertising spots showing the impact of indebtedness on family live are broadcast over public and private television channels. The same message is conveyed over the Internet and through educational publications featured in consumer and local magazines and newspapers. As part of a product placement campaign, “Father Matthew” (“Ojciec Mateusz”), a popular TV series broadcast in Poland, featured a theme related to entering into an arrangement to repay debt by instalments via the e-KRUK online platform (a form of settlement used at KRUK). In the Czech Republic and Slovakia, the Group is engaged in extensive PR activities.