Solid recoveries from purchased portfolios in Poland and Romania; strong H1 2019 cash EBITDA

KRUK has published H1 2019 financial results:

• H1 2019 net profit came in at PLN 167.0m, representing 51% of the full-year 2018 figure. It was also 12% lower than in the corresponding period of last year. Net profit for Q2 2019 amounted to PLN 69.1m.
• In H1 2019, recoveries from purchased debt portfolios amounted to PLN 874.3m, representing 55% of the previous year’s figure. In the second quarter, KRUK recorded recoveries of PLN 447.6m, its best quarterly performance ever.
• In H1 2019, the KRUK Group invested PLN 308.9m in debt portfolios with a total nominal value of PLN 3.3bn. The value of investments in the second quarter reached PLN 129.5m, and the nominal value of purchased debt was PLN 1.9bn. The investments included a debt assignment transaction with Getback Recovery S.R.L. on the Romanian secondary market. KRUK expects returns on these investments to be higher than on the purchases made in the last two years.
• In H1 2019, KRUK issued bonds (both in public and private placements) with a total nominal value of PLN 190m, confirming Polish investors’ interest in its debt instruments. With a net interest-bearing debt to equity ratio of 1.3x and flexible access to financing, KRUK is well positioned to increase its investment activity in Poland, Romania and other European countries.
• On June 25th, in line with the Management Board’s recommendation, the KRUK General Meeting resolved to pay dividend for 2018, of PLN 5 per share (PLN 94.7m in total). The payment was made on July 10th 2019. It was the fifth consecutive dividend payment (the first distribution from profits was made by KRUK in 2014). In total, the Company has paid out PLN 287.6m in dividends.

“We closed the first half of this year with recoveries in excess of PLN 874m and strong cash EBITDA. All four geographical segments, namely Poland, Romania, Italy and other markets, contributed to these solid results. In Poland and Romania, we recorded strong recoveries, and – while investments were slightly lower than expected – we anticipate they will deliver returns above those reported in 2016–2018. In Italy we put investments on hold, focusing on the efforts to improve and further develop the collection process” said Piotr Krupa, KRUK CEO.

Wonga’s contribution to KRUK results

KRUK’s H1 2019 consolidated results include Wonga’s results for May and June, as the company’s entire issued share capital was acquired by KRUK on April 30th 2019. In May and June, Wonga provided financing of PLN 72m, having sold 39,100 products, which translated into a loan portfolio of PLN 112.0m as at the end of H1 2019. Revenue and EBITDA for May and June were in line with the estimates underlying the company’s pre-transaction business plan, amounting to PLN 9.7m and PLN -0.4m, respectively.

“Wonga’s financial performance in the first months is in line with the expectations at the time of acquisition. The team focuses on building a low-risk customer portfolio. We are monitoring developments in the company’s business as well as market shifts in Poland that may potentially lead to significant changes on the non-bank consumer loan market. Wonga focuses on attracting customers with a low risk profile, expanding its operations in this very segment,” said Mr Krupa.

Successful bond offering After the end of H1 2019, KRUK fully placed the first issue of public bonds under the Sixth Bond Issue Programme. In the PLN 25m offering, over one thousand investors placed subscription orders for a total of PLN 55.8m. The reduction rate was over 55%. KRUK offered 5-year Series AJ1 bonds with an estimated floating interest rate of 5.22% per annum in the first interest period (3M WIBOR plus a margin of 3.5pp).

“A bond issue carried out during summer holidays that generates an over twofold oversubscription will go down as one of the biggest successes on the Polish public bond market in years. The strong demand demonstrates investors’ trust in KRUK, reinforcing our commitment to remain active on the public bond market,” noted Piotr Krupa.