KRUK’s solid performance in H1 2016: robust increase in recoveries and record-high investments across six European markets

The KRUK Group (WSE ticker: KRU), Polish leader of the debt management market in Central Europe, has published its performance figures for H1 2016:

• In the first half of the year, KRUK purchased 31 debt portfolios with an aggregate nominal value of PLN 6.4bn for PLN 727m. Total investments rose over three times on the corresponding period of 2015.
• After the end of H1 2016, KRUK finalised a transaction in a project carried out by International Finance Corporation (part of the World Bank) in Romania, purchasing a debt portfolio with a nominal value of PLN 2.6bn. With the Romanian investment included, KRUK’s year-to-date contracted expenditure amounts to approximately PLN 0.9bn.
• Recoveries from purchased debt portfolios came in at PLN 446m, up 12% year on year. In Q2 alone, KRUK delivered recoveries of PLN 230m, which is the best quarterly result in the Company’s history. The nominal value of KRUK’s portfolio reached nearly PLN 33.0bn at the end of H1 2016.
• Net profit reached PLN 111.3m in the first half of 2016, up 3% year on year.
• In the first half of 2016, KRUK issued three series of five-year bonds with a total value of PLN 265m, bearing interest at 3M WIBOR + 3.15pps, which were offered in a public offering, and carried out private placements of three series of bonds with a value of PLN 257.9m, bearing interest at 3M WIBOR + from 2.5pps (three-year bonds) to 3.25pps (six-year bonds).
• After the end of H1 2016, KRUK launched its first-ever issue of bonds denominated in the euro, with a nominal value of EUR 20m and fixed-rate interest of 3% per annum. The aim of the issue is to build financing pathways for the KRUK Group to support its development in Western Europe.
• In the first half of 2016, the Annual General Meeting of KRUK passed a resolution to pay out PLN 35.8m, or PLN 2 per share, as dividend to the shareholders. The payment date was July 29th. Last year, the dividend amount was PLN 25.9m, or PLN 1.5 per share.
• On August 11th 2016, KRUK’s market capitalisation for the first time exceeded PLN 4bn (USD 1bn). Since KRUK’s IPO on the WSE more than five years ago, its share price has grown 500%, and since the beginning of the year − by more than 40%.

“We are a Polish-owned company, employing nearly 2,000 people in Poland alone. After more than ten years from our establishment, we have made it to the top league of the European financial sector. Our amicable collection strategy, whereby settlement agreements are signed with clients to arrange debt repayment in instalments, has become very popular in Central Europe and has been gradually gaining popularity also in Western European countries. In the first half of this year, we took further steps to build our reputation not only in our region, but also in Germany, Italy and Spain. The investments of nearly PLN 1bn that we have made in our six markets are the best proof of our efforts. I am confident that by further following this development path, we will continue to deliver for our shareholders and bondholders in the future,” said Piotr Krupa, President of the Management Board of KRUK S.A.

Key consolidated financial results for H1 2016

Large investments in Poland and further international expansion

In the first half of the year, KRUK purchased 31 debt portfolios with an aggregate nominal value of PLN 6.4bn for PLN 727m. The investment amount was three times higher year on year and included, among other transactions, acquisition of a PLN 2.7bn portfolio from P.R.E.S.C.O. and purchase of a PLN 1.5bn portfolio from Italian bank Monte dei Paschi di Siena.

KRUK has pressed on with international expansion. Besides the transaction in Italy, it purchased a small debt portfolio, with a nominal value of PLN 13m, from BIGBANK AS Consumer Finance in Spain. The investment marks the first important step in KRUK’s expansion onto one of Europe’s largest debt markets.

After the end of H1 2016, KRUK finalised a transaction as part of a project carried out in consortium with International Finance Corporation (part of the World Bank) in Romania. It acquired a debt portfolio with a nominal value of PLN 2.6bn from the Eurobank Group in what was the largest and most important transaction ever on the unsecured consumer debt market in this part of Europe.

“Our partnering up with a global institution like the World Bank is a proof that we, a Polish company from Wrocław, have become a recognised and equal player among the largest international organizations. Looking at the potential of the Romanian market as well as of other Western and Central European countries, we see there is still a lot to be done for us. Being invited to take part in the largest bilateral transactions opens up new opportunities and options,” says Piotr Krupa.

With the Romanian investment included, KRUK’s year-to-date contracted expenditure amounts to approximately PLN 0.9bn. Thus, after eight months of 2016, KRUK beat its historical record for new investments. Currently, KRUK actively invests across seven European markets − Poland, Romania, the Czech Republic, Slovakia, Germany, Italy and Spain. In the first half of the year, KRUK saw considerable interest of banks and financial institutions in selling debt portfolios. The trend is expected to continue in H2 2016.

Another record-high level of repayments

The first half of 2016 was also a period when recoveries from purchased debt portfolios grew again in all the KRUK Group’s markets, to PLN 446m, up 12% year on year. In Q2 alone, KRUK delivered recoveries of PLN 230m, which is the best quarterly result in the Company’s history.

“It was the fifth quarter in a row when recoveries from purchased debt portfolios exceeded PLN 200m. This was an effect of our unique strategy and focusing on the indebted individuals as the most important clients. We will not rest on our laurels but will expand our operations, including on our new markets: Germany, Italy and Spain. We already see that our unique strategy, combined with the diligence and effort of KRUK employees, is yielding fruit and will be increasingly appreciated in Western European countries,” Piotr Krupa said.

Strong financial base

In the first half of the year, KRUK issued three series of five-year bonds, offered in a public offering, with a total value of PLN 265m, bearing interest at 3M WIBOR + 3.15pps. Nearly 3,000 investors placed subscription orders for KRUK bonds valued at PLN 711m.

“Placing PLN 265m worth of bonds, under a PLN 300m programme, on the public market is a great success of KRUK as a solid issuer. The total demand was nearly three times higher than the value of the offered bonds, confirming Polish investors’ great interest in our securities. We definitely intend to develop cooperation with public market investors and are considering the launch of a fourth public bond issue programme,” said KRUK President.

Concurrently, KRUK continues to increase its activity in the area of private placements of securities with financial institutions. In H1 2016, it issued three series of bonds with a value of PLN 258m, bearing interest at 3M WIBOR + from 2.5pps (three-year bonds) to 3.25pps (six-year bonds).

After the end of H1 2016, KRUK made its first-ever private placement of bonds denominated in the euro, with a nominal value of EUR 20m and fixed interest of 3%. The project was a response to institutional investors’ demand for such instruments and is designed to support KRUK’s international expansion. The Company intends to raise more financing for its business in the euro, also through offerings addressed to retail investors.

Second dividend in the Company’s history

On May 9th 2016, the Annual General Meeting of KRUK passed a resolution on the allocation of the Company’s 2015 net profit in line with the Management Board’s recommendation. It was decided that a part of the net profit, i.e. PLN 35.5m, would be distributed among the shareholders as dividend of PLN 2 per share, and the remaining PLN 0.4m would be allocated to statutory reserve funds. The dividend record date was July 8th 2016 and the payment date was July 29th 2016. The dividend was paid on 17,744,216 KRUK S.A. shares.

The Management Board is of the opinion that a distribution of this amount will not affect the Group’s overriding plan for further business growth, as the dividend decision and the dividend amount take into account the Group’s future investment financing requirements, as well as its current debt level and overall financial standing.