Record-high investment makes us fly

The KRUK Group, Polish leader of the debt management market in Central Europe, has published its performance figures for the first three quarters of 2016:

• In Q1−Q3 2016, net profit reached PLN 186m, up 16% year on year, representing 91% of the full-year 2015 result. In the third quarter alone, net profit came in at PLN 74m, up 48% on the previous quarter.
• Recoveries from purchased debt portfolios reached PLN 701m, up 16% year on year. In the second quarter of 2016, KRUK reported PLN 255m in recoveries, representing an 11% rise year on year. It was the best quarterly performance on record, with the growth in recoveries primarily driven by 2016 investments and a constructive macro environment.
• In the first three quarters of 2016, the KRUK Group invested PLN 936m in 60 debt portfolios with a total nominal value of PLN 6.4bn. The expenditure rose 220% year on year. KRUK expects the supply of debt portfolios for sale to remain strong in the fourth quarter of 2016 and the first quarter of 2017.
• After the end of Q3, KRUK made another investment in Italy. It acquired a portfolio of cases with a total nominal value of EUR 930m, or approximately PLN 4bn. Since its first investment in the Italian market in November 2015, KRUK has acquired portfolios worth PLN 5.9bn in nominal terms.
• KRUK is developing its organisation in Italy and is set to acquire a debt collection company it has worked with for the past few months on portfolio valuations and debt management. The firm has a headcount of 34, and it earned EUR 2.2m in consolidated revenue for 2015.
• In the first three quarters of 2016, KRUK issued PLN 643m-worth of new bonds in a retail public offering (PLN 300m) and in an institutional private placement (PLN 258m). After the end of the third quarter, KRUK privately placed a further PLN 150m-worth of bonds, which pay interest at the same rate as the previous issues.
• Given the robust supply of debt portfolios and to support the organisation’s growth in Western Europe through acquisition of small and medium-sized debt collection companies, the Management Board of KRUK decided to propose to its shareholders a share capital increase by up to 1 million shares (5.6% of the existing share capital).

Key consolidated financial results for Q1−Q3 2016

“The last three quarters were a period of our strong growth, both in our established markets and in Western European countries − Germany, Italy, and Spain. We still have two months of hard work ahead of us. However, our performance figures at the end of the third quarter already show that 2016 will be a very successful year for us. By the end of September, recoveries exceeded PLN 700m. To compare, in the entire 2015, they amounted to PLN 825m. We made a record-high expenditure of nearly PLN 1bn on our six European markets, and this money, which is already starting to deliver returns, will support our performance in the future. On the new markets we also rely on our amicable settlement model, with debt repayment arranged in manageable instalments. I believe that our customer-friendly approach will be a factor encouraging Western Europeans to contact KRUK,” said Piotr Krupa, President of the Management Board of KRUK S.A.

Another record-high level of recoveries and investments

At PLN 257m, cash recoveries from purchased debt portfolios in Q3 2016 were 25% higher year on year, marking the best result in KRUK’s history. Between January and September, recoveries totalled PLN 701m.

“Historically, the third quarter is not usually a period of particularly strong performance for us. It was different this year, as the last three months turned out to be the best ever. This is a good outlook for the last quarter,” Piotr Krupa said.

In Q3 2016, KRUK spent PLN 205m on 16 new debt portfolios with a nominal value of PLN 2bn. All purchases made by KRUK by the end of September already totalled PLN 936m, which was spent on 60 portfolios on six European markets: Poland, Romania, the Czech Republic, Germany, Spain and Italy.

More than 160,000 debts acquired in Italy and plan to acquire a debt management company

As regards investment, KRUK was very active in Italy. Since its first investment on the Italian market in November 2015, the company has acquired portfolios with a nominal value of PLN 5.9bn. The number of cases acquired there has already exceeded 160,000. The last of these transactions was effected already after the end of the third quarter. KRUK acquired a portfolio of cases with a total nominal value of EUR 930m, or approximately PLN 4bn.

KRUK is set to acquire a company it has worked with for the past few months on portfolio valuations and debt management. Acquisition and integration of a company with 34 staff members is to support the expansion of KRUK’s operations in Italy. The company’s 2015 revenue was PLN 9.5m.

“Italy is attractive for us in terms of the size of its unsecured debt sale market and potential returns. We have already marked our presence as a key entity operating on and investing in this relatively young market. After a few successful investments in debt portfolios, we are strongly focused on expanding our operations in Italy. We want to support the recruitment and transition processes by the acquisition of an appropriate credit management company. Now we are preparing a transaction to acquire a company we have worked with for a number of months on portfolio valuations and debt management. This period gave as an opportunity not only to gain more insight into the organisation itself, but first and foremost to get to know the people we will be joined by soon. These 34 persons make up an excellent team that will join KRUK to have even more success in Italy. The company has operated in Italy since the early 1990s and has extensive experience in providing credit management services to financial institutions, involving both amicable settlement and court proceedings. The already commenced successful integration of the company with the KRUK team should give us strong foundations and step up the development of a leading organisation in Italy”, said Piotr Krupa.

Planned share capital increase

Given the robust supply of debt portfolios and to support the organisation’s growth in Western Europe through acquisition of small and medium-sized debt collection companies, the Management Board of KRUK decided to propose to its shareholders a share capital increase by up to 1 million shares (5.6% of the existing share capital).

“The decision to issue new shares is dictated by KRUK’s expansion, both in Central Europe and in the new markets of Western Europe. This is the direction we took two years ago when we adopted the strategy for 2015−2019. Today, we have a unique opportunity to become one of the few Polish companies that developed and established their organisations on the largest − and also the most demanding − European markets. The increasing supply of debt portfolios and the new opportunities to acquire foreign companies may boost our organisation’s growth. That is why we want to be ready to grasp potential investment opportunities, and the share issue is to help us do it. With our high cash flows from day-to-day activities and reasonable debt financing, we will continue to expand KRUK’s footprint in Europe, making the best of what the market offers,” Piotr Krupa said.

Decision on private placement of the shares will be taken by the Extraordinary General Meeting on November 29th.