KRUK S A : net profit increased by one third to more...

27/04/2017

The KRUK Group, Polish leader of the debt management market in Central Europe, has published its performance figures for Q1 2017.

• In Q1 2017, the KRUK Group earned PLN 80.1m in net profit, which represents a 32% increase year on year and its best result historically. In Q1 alone, KRUK generated net profit close to one-third of its full-year net profit for 2016.
• The KRUK Group invested PLN 213.5m (up 234% year on year) in 15 debt portfolios with a total nominal value of PLN 3.8bn. Altogether, 90% of the investments were made abroad − in Romania, the Czech Republic, Slovakia, Germany, and Italy.
• Recoveries from purchased debt reached PLN 309.3m (up 42% year on year). For the first time in the Company's history, recoveries from foreign markets were higher than recoveries of Polish debts.
• In Q1 2017, the KRUK Management Board resolved to recommend to the General Meeting a dividend of PLN 2 per share (totalling approximately PLN 37.5m) to be paid from the 2016 profit. Decision on dividend payment is due on May15th 2017.
• In Q1 2017, KRUK shares were selected for inclusion in the prestigious WIG30 index, and are on the short reserve list for WIG20. Already after the end of Q1, the Company's market capitalisation for the first time ever exceeded the PLN 5bn mark.

Key consolidated financial results for Q1 2017

(*) Cash EBITDA = EBIT + recoveries from purchased portfolios - revenues from purchased portfolios.
(**) excluding the issue of 1m new shares worth PLN 215m in December 2016.

Presentation of Q1 2017 results

'After the great beginning of the year we are on track to achieve our objectives for 2017. In the first quarter, we focused on efficiency improvement, very high (for the beginning of a year) purchases and further business growth in Western Europe. Portfolios purchased outside of Poland represented 90% of total purchases made, while recoveries from foreign portfolios accounted for more than 50%. I expect the trend to continue, as we are still expanding our operations in new markets. We are actively hiring in Italy and Spain − at the end of the quarter, we already had more than 200 staff in these two countries. I believe that month after month will unlock further potential of our new markets,' said Piotr Krupa, President of KRUK S.A.

New investments and geographical expansion

In Q1 2017, the KRUK Group invested PLN 213.5m in 15 debt portfolios with a total nominal value of PLN 3.8bn. This represents an increase of 234% on the corresponding period of last year and 17% on the entire 2016. 90% of the purchases were made abroad − in Romania, the Czech Republic, Slovakia, Germany, and Italy.

The purchase of a portfolio of 73 thousand cases from Banca IFIS was KRUK's largest investment made in Italy in a single transaction. From the moment it entered the Italian market to the end of Q1 2017, the KRUK Group purchased unsecured retail debt portfolios from the country's largest banks for a total of PLN 458.3m.

'Our geographical diversification is gaining momentum, as financial institutions across Europe are increasingly interested in selling their debt portfolios. The European Central Bank has recently suggested that finding a solution to the bad debt problem will be its priority for 2017. Such solution is necessary, because high levels of bad debt are a threat to the continent's banking system. We are ready for that challenge. With our broad geographical and product portfolio, we are well placed to participate in numerous auctions and make the best purchases. We are supported by our effective financing structure and comfortable balance-sheet position permitting further investments. Our net debt to equity ratio is 1.1x, making us the least leveraged debt collection business in Europe,' Piotr Krupa said.

Highest recoveries ever

Recoveries from purchased debt reached PLN 309.3m in Q1 2017, up 42% year on year and 6% quarter on quarter. It was the Company's highest quarterly result ever, an effect of successful investments and favourable macroeconomic climate. For the first time in the Company's history, recoveries from foreign markets were higher than recoveries of Polish debts. Romania, where KRUK is the market leader, accounted for the largest portion of the recoveries, but the contribution of new Western European markets, namely Italy, Germany and Spain, was also significant.

Planned dividend

On March 28th 2017, the Management Board of KRUK S.A. decided to recommend to the General Meeting that a dividend of PLN 2 per share (approximately PLN 37.5m in total) be distributed to the shareholders from consolidated net profit earned in 2016. The balance of the net profit will be allocated to statutory reserve funds. If the shareholders approve the recommendation, this will be the third consecutive year of dividend payment by the Company.

The Management Board is of the opinion that the dividend distribution and amount will not affect the Group's overriding plans for further business growth, as they take into account the Group's future financing requirements, as well as its current debt level and overall financial condition. On March 29th, the Supervisory Board issued a favourable opinion on the recommendation. Decision on dividend payment will be taken by the Annual General Meeting, to be held on May 15th 2017.