The KRUK Group (WSE ticker: KRU), Central Europe’s leading debt management company, has published its performance figures for H1 2015:
- Net profit reached PLN 107.7m, which is more than 70% of that earned in the entire 2014 and the best result in KRUK’s history; revenues rose by 9% year on year to PLN 286.8m;
- Cash recoveries from purchased debt portfolios amounted to PLN 399m, up by 13% from H2 2014 and 10% from H1 2014, previously the best period in this respect;
- Companies of the KRUK Group invested PLN 222m in 30 debt portfolios with a total nominal value of PLN 2.3bn, expenditure grew by 47% compared with H2 2014 and by 165% year on year (excluding mortgage-backed debt portfolios purchased in 2014);
- Soon after the end of H1 2015, KRUK concluded a historic agreement to purchase consumer debts in Germany, with a total nominal value to reach EUR 37.5m over the next 15 months; the first of those debts are already being collected and the first settlements have already been signed.
- In H1 2015, KRUK issued PLN 113m worth of bonds and in July it entered into a PLN 100m new revolving facility agreement with mBank.
- H1 2015 was also the first time KRUK paid out dividend − a total of PLN 25.9m (PLN 1.5 per share) from the 2014 profit was distributed to the shareholders.
Consolidated financial highlights of the KRUK Group for H1 2015
|(PLNm)||H1 2015||Change 15/14||H1 2014||2014||% of 2014|
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios - revenue from collection of purchased debt
“In the first half of 2015, we broke two of our previous records. The first one was the level of cash recoveries from purchased debt portfolios − it reached PLN 399m, surpassing the H1 2014 figure, which until then had been our best result ever, by 10%. This helped us break the second record − our net profit gained 8% compared with a year earlier. This improving financial performance is an effect of sound investments, supported by our operating strategy and ongoing efficiency enhancement efforts. Also the work done by our contact centre and field consultants continued to contribute to the much higher than expected cash recoveries. Our H1 2015 performance figures are yet another evidence that treating debtors as clients that we offer help to is the right strategy to follow, also from the financial point of view,” said Piotr Krupa, President of the Management Board of KRUK S.A.
Large investment in new portfolios and record-high cash recoveries
In H1 2015, companies of the KRUK Group invested impressive PLN 222m in 30 debt portfolios with a total nominal value of PLN 2.3bn. In Q2 2015 alone, the outlays reached PLN 177m, with the nominal value of the purchased portfolios amounting to PLN 1.8bn. The KRUK Group bought new debt portfolios in Poland, Romania, the Czech Republic and Slovakia.
“We are present in five countries now, operating across the entire range of debt types. This is why the auctions we take part in are very diversified. Coupled with efficient organisation and good access to financing, this makes us well placed to succeed on the highly competitive debt portfolio purchase market. We are not slowing down whatsoever. On the contrary, we are speeding up our business to further expand on the existing markets and successfully enter new territories”, Piotr Krupa comments.
The large investments made in recent quarters translate into growing cash recoveries from the purchased debt portfolios. In H1 2015, they reached PLN 399m, i.e. PLN 39m more than in H1 2014, the period which up until then had seen the best results.
“Our unique business model and efficiency improvement measures contribute to the level of cash recoveries. The macroeconomic environment also has a positive effect. KRUK clients benefit from the growing labour market and salaries, which makes them more willing and ready to pay their outstanding debts. The signs of improvement are seen not only in Poland, but also in the other markets where we operate,” Piotr Krupa says.
Historic transaction in Germany
Soon after the end of H1 2015, the KRUK Group concluded an agreement to purchase consumer debts in Germany. The agreement was made for an indefinite term, with the nominal value of the debt to be purchased over the next 15 months estimated at EUR 37.5m.
Under the agreement, the KRUK Group purchases debt portfolios that are typical for its business – the agreement covers only unsecured retail debt with an average nominal value per debt not exceeding EUR 3 thousand. The portfolios include high-quality debt cases that on average are only several months delinquent.
“We are focusing on the first cases now, making the first phone calls and sending letters. Although it is still too early to evaluate our performance there, we can already see that the experience we gained on the largest Central European markets will prove useful in Germany. Only several days after we entered that market, the first settlements were signed”, Piotr Krupa said.
Access to large financing and first dividend payment
With its strong liquidity base, KRUK is ready to make further investments. In H1 2015, KRUK allotted bonds of two Series, Series Z1 and Series W1, under a PLN 100m private note placement and a PLN 13.4m public issue. They bear interest at a variable rate of 3M WIBOR + 3.1pp p.a. and a fixed rate of 4.5% p.a., respectively. After the end of H1 2015, the KRUK Group and mBank entered into an agreement for flexible financing of up to PLN 100m. Together with this agreement, the total amount of credit facilities available to KRUK went up to PLN 440m, of which almost PLN 340m had been drawn by the end of H1 2015. The ratio of net debt to equity stood at 1.1 at the end of H1 2015, much below the current covenants requiring the level of 2.5.
“We have access to very competitive financing options and can still markedly increase our indebtedness. The group of banks and investors ready to finance our business is steadily growing. However, a decision whether to increase our indebtedness will depend on our needs and investment opportunities on the market,” Piotr Krupa comments.
H1 2015 was also marked by the first dividend payment in KRUK’s history. Shareholders of KRUK S.A. approved the Management Board’s recommendation, resolving to pay out dividend of PLN 1.5 per share from net profit earned in 2014. The total dividend amount was PLN 25.9m
“I am pleased to see the Company share a part of its profits with the shareholders. That’s what sound businesses should do. For the time being, we do not plan to make any other dividend payments. Such decisions are always taken after a close analysis of the situation and our key priority, which is the Group’s further growth,” Piotr Krupa concludes.