The KRUK Group

KRUK
Group
KRUK
Presentation of Q1 2013 results
KRUK Group
May 2013
Agenda
Introduction
Operating activities
Financial performance
Appendices
2
In Q1 2013, KRUK generated a net profit of PLN 19.7m, up 41% on Q1 2012, and
invested PLN 49m in new debt portfolios
I
The Group's net profit rose by 41% yoy, from PLN 14.0m in Q1 2012 to PLN 19.7m in Q1 2013.
II
Expenditure on debt portfolios in Q1 2013 amounted to PLN 49m, that is nearly four times more
than in Q1 2012. The Group purchased 12 portfolios with a total nominal value of PLN 368m,
including 3 debt portfolios in Poland, 5 in Romania and 4 in the Czech Republic and Slovakia.
III
In Q1 2013, recoveries from purchased debt portfolios amounted to more than PLN 118m, up by
9% on the corresponding period of 2012. Debt payments in Poland and the Czech Republic were
lower than expected, whereas in Romania they were higher than expected.
IV
In Q1 2013, KRUK invested in its debt collection processes, expanding the network of field
consultants and bringing more cases to court, which led to an increase in operating expenses.
V
In Q1 2013, KRUK generated more than PLN 9m of gross profit on debt collection outsourcing, up
201% on Q1 2012 thanks to improved results on corporate debt collection outsourcing.
VI
In January-April, KRUK issued PLN 120m of bonds. In the case of the most recent issue, worth PLN
60m, KRUK reduced the financing cost from 4.60pp to 4.20pp above 3M WIBOR.
VII
In Q1 2013, the Company's market capitalisation exceeded PLN 1bn. On April 3rd 2013, after
having held its investment for ten years, Enterprise Investors sold its holding of 24.83% of KRUK
shares. The group of significant shareholders, holding more than 5% of the Company's share
capital, was joined by institutional investors ING PTE* and AMPLICO PTE** pension funds.
3
* Jointly ING OFE and ING DFE, managed by ING PTE S.A.
** Jointly Amplico OFE and MetLife Amplico DFE, managed by Amplico PTE S.A.
Q1 results: stable debt repayments, strong investments in portfolios and very
good result on debt collection outsourcing
Purchased debt portfolios
Debt collection outsourcing
Revenues, PLNm
Cash recoveries, PLNm
Q1 2013
Q1 2013
118.3
Q1 2012
Q1 2012
108.1
Q1 2011
14.3
8.6
Q1 2011
66.2
9.7
Gross profit, PLNm
Investments, PLNm
Q1 2013
Q1 2012
48.9
Q1 2013
12.3
Q1 2011
PLNm
Q1 2012
69.2
Q1 2011
9.2
3.1
3.5
Change
Change
Q1 2011 Q1 2012 vs.
Q1 2012 Q1 2013 vs.
Q1 2011
Q1 2012
Q1 2013
FY 2012
Performance
of 2012
result
Revenue
53.2
50%
79.9
20%
95.9
343.0
28%
EBIT
18.1
58%
28.6
19%
33.9
136.7
25%
cash EBITDA*
42.6
61%
68.5
9%
74.8
292.3
26%
Net profit
14.1
-1%
14.0
41%
19.7
81.2
24%
4
Source: KRUK S.A.; * Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt portfolios
Agenda
Introduction
Operating activities
Financial performance
Appendices
5
Considerable increase in investments – in Q1 2013 the KRUK Group invested PLN
49m, nearly four times more than in Q1 2012
Nominal value of purchased debt (PLNm)
Q1 2013
Q1 2013
368
Q4 2012
Q3 2012
1400
Q1 2012
890
216
49
Q4 2012
1079
Q2 2012
Investments in new debt portfolios (PLNm)
120
Q3 2012
93
Q2 2012
Q1 2012
84
12
The KRUK Group actively invested on the debt markets in Poland, the Czech Republic and Slovakia. In the first quarter of the year, the
Group purchased 12 portfolios, predominantly banks’ retail receivables, including three in Poland, four in the Czech Republic and
Slovakia, and five in Romania.
6
Source: KRUK S.A.
Cash recoveries in Q1 2013 from purchased debt portfolios were stable
compared to Q1 2012; KRUK observes a worsening situation of debtors in Poland
and implements initiatives leading to operating effectiveness enhancement
Revenue (PLNm)
and costs (as % of recoveries)
Recoveries (PLNm)
KRUK's expenditure on debt
portfolios (PLNm)
Q1 2013
Q1 2013
118.3
Q1 2013
Q4 2012
Q4 2012
119.4
Q4 2012
Q3 2012
116.0
Q3 2012
Poland
Q3 2012
Q2 2012
0
50
100
150
76.5
107.8
Q2 2012
70.6
Q1 2012
108.1
Q1 2012
69.8
0
50
100
150
32%
86.2
Q2 2012
Romania
Q1 2012
79.5
0
30%
25%
25%
28%
50
100
In Q1 2013, recoveries increased by PLN 10m relative to Q1 of the previous year. Recoveries in Poland and Czech Republic were lower
than expected. In Poland, we observe a lower effectiveness of recovery due to worsening situation of debtors. Recoveries in Romania
were higher than expected due to improved operating efficiency.
Higher share of costs in the value of recoveries from debt portfolios purchased in Q1 2013 is attributable to a higher number of cases
taken to court in late 2012/early 2013 and an increase in costs incurred with a view to improving operational efficiency in the long
term.
7
Source: KRUK S.A.
In the first quarter KRUK launched new campaigns designed to promote
amicable settlement solutions in Poland, Romania, the Czech Republic and
Slovakia.
POLAND
ROMANIA
THE CZECH REPUBLIC AND SLOVAKIA
Embedded marketing of amicable
settlement in “Barwy Szczęścia” - one
of the most popular TV series.
Folk music singer, Sofia Vicoveanca,
becomes the face of KRUK's campaign
in Romania.
Czech
Republic
and
Slovakia:
Educational campaign run in the press,
marketing materials mailed to clients,
press conferences.
8
Source: KRUK S.A.
In Q1 2013, the KRUK Group generated a record gross profit on debt collection
outsourcing of PLN 9m
Nominal value of debt outsourced for
collection (PLNm) and commission fees
charged (% of nominal value)
Gross profit on debt collection
outsourcing (PLNm)
Revenue (PLNm) and gross margin
on debt collection outsourcing (% of
revenue)
Poland
620
Q1 2013
2.3%
Q1 2013
773
Q4 2012
799
Q3 2012
1.2%
1.0%
911 0.8%
Q2 2012
816
Q1 2012
0
500
1000
1.1%
14.3
Q4 2012
9.3
Q3 2012
7.6
Q2 2012
7.3
Q1 2012
47%
37%
5
36%
10
Q1 2013
9.2
Q4 2012
4.3
Q3 2012
2.9
Q2 2012
29%
8.6
0
64%
15
2.1
Q1 2012
3.1
0
5
10
In Q1 2013, the nominal value of debts outsourced to the Group for fee-based collection was PLN 620m, 24% less than in the
corresponding period of 2012. The lower nominal value of such debts was attributable to the fact that the Group accepted for
collection a significantly larger number of cases with lower average debt balances, which, however, made it possible to achieve higher
than expected effectiveness.
The Group achieved higher revenue and gross margin from debt collection outsourcing in Q1 2013, mainly as a result of completion of
a several-year long process of collection of receivables in the area of corporate debt services provided to investors.
9
Source: KRUK S.A.
Agenda
Introduction
Operating activities
Financial performance
Appendices
10
The KRUK Group – income statement by business lines (presentation format)
PLNm
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q1 2013 vs. Q1
2012
297%
DEBT PORTFOLIOS PURCHASED
Expenditure on debt portfolios
Recoveries
12.3
83.9
92.7
120.3
48.9
108.1
107.8
116.0
119.4
118.3
79.9
79.4
85.8
97.9
95.9
20%
14%
INCOME STATEMENT
Operating income
69.8
70.6
76.5
86.2
79.5
including revaluation
-5.6
-0.7
3.7
7.2
1.0
Debt collection outsourcing
8.6
7.3
7.6
9.3
14.3
66%
Other products and services
1.5
1.5
1.7
2.4
2.1
33%
42.5
46.1
50.3
55.2
50.6
19%
Debt portfolios purchased
Gross profit
Gross margin
53%
58%
59%
56%
53%
39.3
44.0
47.3
50.3
41.2
5%
Debt collection outsourcing
3.1
2.3
2.7
4.3
9.2
201%
Other products and services
0.1
-0.2
0.4
0.6
0.2
107%
EBITDA
30.1
33.5
38.0
42.5
36.1
20%
EBITDA margin
38%
42%
44%
43%
38%
NET PROFIT
14.0
18.2
21.8
27.1
19.7
net profit margin
18%
23%
25%
28%
21%
CASH EBITDA*
68.5
70.7
77.5
75.7
74.8
10.1%
9.5%
9.7%
9.9%
9.0%
Debt portfolios purchased
Revenue to fair value of purchased debt portfolios
41%
9%
11
Source: KRUK S.A.
The KRUK Group – income statement by geographical segments (presentation
format)
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q1 2013 vs. Q1
2012
79.9
79.4
85.8
97.9
95.9
20%
Poland
56.8
55.8
60.1
67.5
59.1
4%
Foreign markets
23.1
23.7
25.7
30.4
36.8
59%
Gross profit
42.5
46.1
50.3
55.2
50.6
19%
Gross margin
53%
58%
59%
56%
53%
-1%
25.8
29.5
32.4
36.9
27.8
8%
PLNm
INCOME STATEMENT
Operating income
Poland
Foreign markets
16.7
16.6
17.9
18.3
22.7
36%
-12.7
-12.3
-12.2
-13.0
-13.9
10%
EBITDA
30.1
33.5
38.0
42.5
36.1
20%
EBITDA margin
38%
42%
44%
43%
38%
0%
Finance costs
12.8
12.4
13.1
13.2
13.6
6%
NET PROFIT
14.0
18.2
21.8
27.1
19.7
41%
Net margin
18%
23%
25%
28%
21%
17%
General and administrative expenses
12
Source: KRUK S.A.
KRUK – key cash flow data (presentation format)
PLNm
Cash flows from operating activities:
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
58.9
52.9
72.0
55.9
63.8
Recoveries from debtors - purchased debt portfolios
108.1
107.8
116.0
119.4
118.3
Operating costs - purchased debt portfolios
-30.5
-26.6
-29.2
-36.1
-38.4
3.1
2.3
2.7
4.3
9.2
-12.7
-12.3
-12.2
-12.9
-13.9
-9.1
-18.3
-5.2
-18.8
-11.3
-14.3
-85.7
-100.2
-123.1
-51.7
-12.3
-83.9
-94.0
-119.0
-48.9
-2.0
-1.7
-6.3
-4.1
-2.8
-41.8
26.4
41.1
64.4
14.3
Increase in borrowings and lease liabilities
61.9
66.9
111.1
133.7
89.8
Issue of bonds
70.0
50.0
0.0
70.0
60.0
-143.6
-48.9
-5.5
-124.5
-134.8
Redemption of bonds
-15.9
-39.6
-60.0
-5.0
0.0
Other financing cash flow
-14.3
-2.1
-4.5
-9.8
-0.7
2.8
-6.4
12.9
-2.7
26.4
Operating margin – debt collection outsourcing
General and administrative expenses
Other operating cash flow
Cash flows from investing activities:
Expenditure on purchase of debt portfolios
Other investing cash flow
Cash flows from financing activities:
Decrease in borrowings and lease liabilities
Net cash flows:
13
Source: KRUK S.A.
KRUK – selected balance-sheet items (presentation format)
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
22.7
23.8
25.4
27.5
27.4
752.8
796.7
853.5
943.9
986.7
692.8
739.9
785.4
873.4
888.3
39.0
32.6
45.5
42.7
69.2
775.5
820.5
878.9
971.4
1,014.1
253.4
271.2
288.6
317.6
339.6
146.5
164.7
186.4
213.5
233.2
522.2
549.3
590.3
653.8
674.5
35.9
54.1
159.7
169.0
124.6
412.2
423.1
362.8
427.4
487.6
775.5
820.5
878.9
971.4
1,014.1
Interest-bearing debt
448.1
477.2
522.5
596.4
612.2
Net interest-bearing debt
PLNm
ASSETS
Non-current assets
Current assets
including: Investments in purchase of debt portfolios
Cash
Total assets
EQUITY AND LIABILITIES
Equity
including: Retained earnings
Liabilities
including: Borrowings and leases
Bonds
Total equity and liabilities
RATIOS
409.2
444.7
477.1
553.7
543.0
Net interest-bearing debt to equity
1.6
1.6
1.7
1.7
1.6
Interest-bearing debt to 12-month cash EBITDA*
1.7
1.7
1.7
1.9
1.8
14
Source: KRUK S.A.
Agenda
Introduction
Operating activities
Development directions
Financial performance
Appendices
15
KRUK – structure of debt and bond redemption schedule
BONDS (PLNm)*
Q1 2013
Issued
Q2-Q4
2013
2014
2015
2016
2017
102
130
41
154
60
385
255
214
60
0
60
Redeemed
Bonds outstanding at end of period
486
* Data based on nominal amounts
BANK BORROWINGS
(PLNm)
Total bank borrowings
Investment credit
facilities
Revolving credit
facilities
Credit facilities made
available by banks
Amount
outstanding as
at
Mar 31 2013
260
126
25
9
235
117
16
Source: KRUK S.A.
KRUK – selected material events subsequent to Q1 2013
Bonds
On April 15th 2013, the Management Board of KRUK S.A. adopted resolutions to issue
Series P4 and Series R1 unsecured bonds, under which the Company decided to issue:
• up to 40,000 Series P4 unsecured bearer bonds, with a par value of PLN 1,000 per
bond, maturing 48 months after their allotment date
• up to 20,000 Series R1 unsecured bearer bonds, with a par value of PLN 1,000 per
bond, maturing 48 months after their allotment date
The issue proceeds will be used to finance the acquisition of debt portfolios by the
KRUK Group or to refinance the Company's debt.
For more information, see Current Report No. 30/2013.
17
Source: KRUK S.A.
Market of consumer debt portfolios in Poland and Romania
ROMANIA
POLAND
PLNbn
Nominal value of retail debts
8,0
Expenditure
7,0
Nominal value of retail debts
25%
PLNbn
Expenditure
6,0
7.4
Average prices*
6.9
20%
6,0
25%
Average prices*
5,0
20%
16.9%
5,0
14.5%
4,0
14.0%
12.3%
12.2%
3.5
2,0
2.7
1.2
2.0
1,0
0.3
0.4
0.3
1.0
5%
0%
2008
2009
2010
2011
8.0%
5.5%
1,0
0.4
0,0
2007
15%
15.0%
10%
3.1
2,0
4,0
3,0
11.0%
3,0
15%
1.2
2.5
7.8%
2.1
10%
2.5
6.1%
1.3
0.2
0.1
0.2
0.2
0.2
0,0
2012
Source: KRUK S.A., IBnGR.
* Average price as % of nominal value.
** consumer portfolios = unsecured debt owed to natural persons + non-mortgage-backed debt owed to SMEs
5%
0%
2008
2009
2010
2011
2012
18
Market of consumer debt portfolios in the Czech Republic and Slovakia and
corporate debt portfolios in Poland
POLAND – CORPORATE DEBT
PORTFOLIOS
THE CZECH REPUBLIC AND SLOVAKIA
PLNbn
2,0
Nominal value of retail debts
Expenditure
Average prices*
Nominal value of corporate debts
PLNbn
25%
Expenditure
4,0
6.5%
1.8
1,5
20%
19.0%
Average prices*
3,0
3.8
5,0%
4.2%
2,0
0.3
5%
1.3%
1.0
0%
0.25
0.03
4,0%
3,0%
2.0
3.0%
1,0
0.03
0,0
2.1
3.0%
10%
0,5
6,0%
5.5%
15%
1,0
7,0%
2,0%
1.2
1.1
0.03
0.05
0.1
0,0
2012
Source: KRUK S.A.
* Average price as % of nominal value.
** consumer portfolios = unsecured debt owed to natural persons + non-mortgage-backed debt owed to SMEs
1,0%
0,0%
2007
2008
2009
2010
2011
2012
19
Debt collection outsourcing market
ROMANIA
POLAND
PLNbn
PLNbn
Nominal value of consumer debts* outsourced for
collection in a given year
14
Nominal value of consumer debts** outsourced for
collection in a given year
14
12
12
11.6
10
10.3
10
9.7
8
8
7.2
6
6
4
4
4.0
4.5
3.7
2
4.5
3.2
2
2.7
1.6
0
0
2007
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
The debt collection outsourcing market continues to be a strategic operating segment for the KRUK Group as a source of stable
revenue streams and an effective tool for building relationships with banks.
Source: KRUK S.A.
* consumer cases in Poland = unsecured and mortgage-backed debt owed to natural persons
* consumer cases in Romania = unsecured debt owed to natural persons
20
KRUK – business model and milestones
KRUK Group's milestones
– innovation leader
KRUK Group's business model
banks
insurers
telecom
operators
Debt collection
outsourcing
cable TV
operators
other
media
debt purchase
debt collection process
shared debt collection platform, tools and infrastructure
(IT, telco, call centre)
2000 Launch of the debt collection outsourcing business
2001 Introduction of the “success only fee” in CMS
Debt portfolio market emerges – decision to raise new
equity
2003 KRUK as the CMS market leader***
Enterprise Investors invests USD 21m (PEF IV)
Purchase of the first debt portfolio
2005 First securitisation process in Poland
Branch launched in Wałbrzych
Decision to replicate business outside of Poland
2007
Consumer
Business
Entry into the Romanian market
Acquisition of Rejestr Dłużników ERIF BIG S.A. (credit
reference agency)
Innovative approach to debtors
2008
We help people pay their debts
as 76% of all debtors are willing to pay their overdue
liabilities*
Source: KRUK S.A.
* Długi jako wstydliwy problem, CBnZE, 03/2010 (Debt as a shameful problem),
** of total debt in collection in 2009, according to IBnGR,
*** in terms of the nominal value of debt
Amicable settlement solutions (voluntary settlement
or litigation) introduced on a mass scale
2010 Legislative changes - operation of RD ERIF (credit
reference agency)
TV commercials as a debt collection tool designed to
Prospects of a large supply of NPL
reach mass audiences
2011 IPO on the WSE
Entry into the Czech market
2012 Business development in Slovakia
21
Key macroeconomic data
Average RON/PLN exchange rate since 2008
1,20
1,15
1,10
1,05
1,00
0,95
0,90
0,85
0,80
2008-01-02
Average CZK/PLN exchange rate since 2008
2010-01-02
2011-01-02
2012-01-02
2013-01-02
Average EUR/PLN exchange rate since 2008
0,20
0,19
0,18
0,17
0,16
0,15
0,14
0,13
0,12
0,11
0,10
2008-01-02
2009-01-02
5,00
4,80
4,60
4,40
4,20
4,00
3,80
3,60
3,40
3,20
3,00
2009-01-02
2010-01-02
2011-01-02
2012-01-02
2013-01-02
2008-01-02
2009-01-02
2010-01-02
2011-01-02
2012-01-02
2013-01-02
22
Source: KRUK S.A.; NBP
How does KRUK recognise revenue from purchased debt portfolios?
Purchased debt – division into interest and principal
for each purchased debt portfolio, the discount rate
(IRR for recovery) is calculated based on projected
recoveries,
the product of the discount rate for a given debt
portfolio and the portfolio's fair value is recognised
as revenue in a period,
the difference between recoveries and revenue
reduces the portfolio's fair value in the balance sheet
(debt portfolio amortisation),
each debt portfolio is reviewed quarterly, any
changes in the actual or projected recoveries or
expenses are used to remeasure fair value based on
the original discount rate, and the difference is
recognised in P&L as revaluation.
Example calculation of recoveries and
revenue from purchased debt portfolio
PERIOD
0
purchase value
1
2
3
Σ
70
70
70
110
100
planned recoveries -100
discount rate
49%
valuation at
beginning of
period
100
79
47
-
recoveries:
70
70
70
210
- revenue
/interest/
49
38
23
110
- amortisation
21
32
47
100
valuation at end of
period
outcome of
planned recoveries
and purchase price
79
47
0
-
product of value
and discount rate
difference between
recoveries and
revenue
starting value
reduced by
amortisation
23
Source: KRUK S.A.; NBP
KRUK
Group
KRUK
KRUK S.A.
POLAND
ul. Legnicka 56, 54-204 Wrocław
[email protected], www.kruk.eu
FOR INVESTORS: www.kruksa.pl/dla-inwestora