Bancherul - BANCI / ENGLISH / KRUK Group reported net profit reached PLN 54m in Q3 2012

Press release:

PLN 22m (24 m RON **) net profit in Q3/ 2012 - up by 67% YoY.
KRUK enhances its position in Slovakia

Bucharest, 3rd December: KRUK Group, the leader of the receivables management market in Poland, presented the financial results for the period Q1 - Q3 / 2012:

- in the first three quarters of 2012 the KRUK Group reported in excess of PLN 245m (270m RON) in revenues and PLN 217m (239m RON) in cash EBITDA*, respectively up by 29% and by 41% on the corresponding period of last year

- cumulative net profit generated in the first three quarters of 2012 reached PLN 54m (60m RON)

- in the period from the beginning of the year to the end of September 2012, cash payments on debts purchased by KRUK reached PLN 332m (366m RON), up by 42% year on year

- from January to September 2012 KRUK invested PLN 190m (209m RON) in debt purchases, including PLN 94m (104m RON) only in the third quarter of 2012

- in August 2012 KRUK started the provision of third party debt collection services in Slovakia. Since 2011, KRUK has purchased debts with a total nominal value of around PLN 95m (105m RON) on the Slovak market, including around PLN 40m (44m RON) worth of debts purchased in October 2012.

“ The third quarter was a very successful period in terms of financial results as well as business development of the KRUK Group. We recorded an increase in investment in receivables purchases in comparison with the second quarter, while keeping our debt ratio at a safe level. Our cash flows are very stable. The share of cash payments from customers (debtors) has been growing and after three quarters of this year already constitutes 97% of payments made in the entire 2011. We also feel satisfaction about our developing business on the new foreign market. "In August we signed a contract for the servicing of bank receivables in Slovakia and in October we purchased two debt portfolios with a total nominal value of PLN 40m (44m RON)," says Piotr Krupa, KRUK SA CEO.

The Slovak market resembles the Czech market in many ways. KRUK's operations in Slovakia are managed from the Czech Republic, where the company has a subsidiary. KRUK's subsidiary in the Czech Republic also has Slovak employees. In accordance with KRUK Group estimates, investment outlay on the Slovak market stands at around PLN 50m (55m RON). The size of the market is comparable to the Hungarian one. Prices of non-performing debts in Slovakia are lower than in the Czech Republic, mainly because the portfolios offered include more delinquent debts.

"Growing its business in Slovakia is for KRUK a natural next step after the company has entered the Czech market. Our time-proven business model can be successfully implemented in Slovakia and additionally we do not have to set up any new offices because operations will be managed by our Czech subsidiary which includes a large share of Slovak employees. We hope that in time, the effectiveness of KRUK's original pro-settlement strategy will make us a leader of the receivables management market in Slovakia and the Czech Republic," says Piotr Krupa.

In the first three quarters of 2012, the KRUK Group purchased a total of 36 debt portfolios on the Polish, Romanian and Czech markets. The above deals included 23 retail debt portfolios and 5 corporate portfolios purchased from financial institutions and 8 retail portfolios acquired from other entities.

Total investment outlay of the KRUK Group reached PLN 190m (209m RON), of which PLN 94m (104m RON) was spent only in the third quarter of 2012. The nominal value of debts purchased by the KRUK Group in the first three quarters of 2012 stands at PLN 2.5bn (2.8bn RON).

"Given the relatively high prices, our priority is to maximize return on investment. We currently have on our balance sheet portfolios with a total fair value of PLN 785m (865m RON) which we treat as a very solid base to achieve satisfactory financial results in the next years. Nevertheless, we have both financial and operational capacity to purchase new debt portfolios from banks and from other institutions and we are an active bidder in tendering processes," says Piotr Krupa.
Currently, the prices of debt portfolios offered for sale have stabilised, which is mainly caused by a lower quality of the debts sold.

Competition between debt purchasers remains high, but it may become less severe as the access of smaller entities to financing becomes more difficult. Problems of other market players with access to financing may turn out to be an opportunity for KRUK to increase the scale of operations. The company's growth will also be implemented via expansion into new foreign markets. "We are now interested in large, developing markets where banks are selling their receivables on a large scale or are quickly growing their consumer lending. In time, the quality of the portfolios will naturally deteriorate creating room for receivables management companies. We are very interested in expanding into countries with various business cycles," says Piotr Krupa.

Since 2010 the KRUK Group has been conducting educational and marketing campaigns on TV, in the printed media and in the internet. The purpose of the campaigns is to offer financial education to people with debts and to reinforce the effects of the company's pro-settlement collection strategy.

KRUK's educational and marketing efforts have been appreciated by experts and the company has been awarded in the most prestigious competitions. In Poland, KRUK received Effie Award 2012 for the best campaign in the Banking category and in Romania, KRUK International, branch of KRUK Group was awarded in three categories in the PR Romania Awards 2012 competition: Gold award for "Corporate Communication" and "Communication of financial products and services" categories and Silver award in the "PR for marketing – new products and new services" category.

KRUK is the originator of the "Our Debts" educational campaign under which every year on the 17th of November KRUK organises the nationwide Day Without Debts. “The purpose of the campaign is to educate the public in the management of household finances and to show possible ways out of debt. This year, the Day Without Debts will be celebrated for the first time in three countries simultaneously: in Poland (for the fourth time), Romania (for the second time) and in the Czech Republic (for the first time)” said Isabela Iacob (pictured), Director General of KRUK International.

*cash EBITDA = EBITDA + payments on purchased debt portfolios – collection revenues on purchased debt portfolios.
** BNR exchange rate used: 1,1020 RON = 1 PLN as at 30th September