Current Report No. 9/2020: Expenditure on and recoveries from debt portfolios and the impact of the epidemic on the KRUK Group's results

In line with the adopted disclosure policy, KRUK S.A. announces the expenditure on debt portfolios and recoveries from the management of purchased portfolios purchased by the KRUK Group (Group).

Q1 2020

Recoveries in Q1 2020 were 11,8% higher than in Q1 2019 and 0,4% higher than in Q4 2019. At the same time, the KRUK Group recorded a negative variance in actual recoveries relative to the operating targets in March 2020. n Spain and Italy, and in the last days of March and early April also in Romania and Poland.  The Company’s Management Board expects that the epidemic and its implications will have an adverse impact on recoveries from purchased debt portfolios in Poland and other countries where the Group operates over the remainder of 2020. Therefore, the Management Board expects a downward revaluation of its debt portfolios in Q1 2020. The epidemic situation may also adversely affect the performance of Wonga and Novum companies.

As at the date of issue of this report, the Management Board cannot determine the scale of the negative impact the coronavirus outbreak may have on the Group’s financial results, including in particular the revaluation of the debt portfolios for Q1 2020. In view of the above, in Current Report No. 8/2020 of April 6th 2020, the Management Board announced that the release date of Q1 2020 results was changed from May 7th 2020 to May 28th 2020 to give it more time to gather information, analyse it and accurately reflect it in the KRUK Group’s results for that period.

The Company also reports that the KRUK Group continues its operations on each of its markets and in every line of business. The Group’s liquidity at the end of Q1 2020 was stable. As at March 31st 3020, the KRUK Group’s cash and cash equivalents amounted to PLN 230m, up by PLN 80m on December 31st 2019. The available lines of credit reached PLN 712m as at March 31st 2020, having grown by PLN 156m compared with December 31st 2019.

The Management Board is considering various scenarios and intends to manage KRUK’s operations in a way which will minimise any adverse effect on KRUK’s assets and financial performance. Initiatives are being taken to reduce costs in the second quarter.

At the same time the Management Board aims to prepare the Group for full-scale investment activity when the pandemic threat ends.