KRUK Group Presentation

KRUK
Group
KRUK Group
Presentation
2014
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
2
KRUK – leader on an attractive market
Market leader
in Central Europe
•
•
•
•
Poland − market leader with 15 years of operating history
Romania − debt purchase market leader with six years of operating history
Czech Republic and Slovakia − successful market entry in 2011
Plans to expand business into other foreign markets
Young and attractive
market
The young European debt purchase market has been growing at a brisk pace for
the past few years. KRUK has been purchasing debt portfolios for over ten years
now, and is among the most experienced players in the industry. Banks are
increasingly looking to sell their non-performing consumer loans, and the
market is expanding into new mortgage and corporate debt selling segments.
Competitive advantage
KRUK enjoys a competitive advantage, gained from its innovative amicable
settlement approach, combination of debt collection and debt purchase
businesses, and long-standing experience in debt portfolio valuation, purchase
and collection.
Good track record
KRUK is a dynamically growing (net profit CAGR of 50% in 2007−2013), and
highly profitable business (ROE of 24% in 2013) with a strong cash generation
ability (cash EBITDA of PLN 344m in 2013*).
Stable team of
performance-driven staff
The founding shareholder and President of the Management Board of KRUK
S.A., together with a supporting team of managers, have been at the Company's
helm for over a dozen years, and jointly hold almost 15% of its shares.
Source: KRUK S.A.
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt
3
During its first three years as a listed company, KRUK increased its net profit by
171%, and its share price has gained 108% since the IPO
2010
2011
2012
2013
CAGR
Net profit
(PLNm)
36.1
66.4
81.2
97.8
39.4%
EPS
(PLN)
2.34
4.03
4.80
5.77
35.1%
ROE
27.4%
27.9%
25.6%
23.5%
-
100
90
80
KRUK S.A. share price since the IPO
KRU
82.76
70
60
50
40
30
2011-05-10
2013-12-30
4
2013 was another year of dynamic growth: net profit up by 20%, cash EBITDA up
by 18%, with ROE at 24%
Cash from debt collection activities (PLNm)
Financial performance (PLNm)
406
578
Revenue from debt collection
outsourcing
484
33
Cash from purchased debt
portfolios
382
41
Cash EBITDA*
146
29
126
72
117
140
2007
2008
2009
PLNm
344
212
90
ROE
64
18%
9
2012
98
104
341
2011
164
129
451
198
2010
274
538
42
83
20
36
63
44
Revenue
Net profit
292
242
182
343
40
2013
2007
28%
22%
17
2008
23%
24
2009
28%
66
26% 81
2011
2012
2010
’13/’12 CAGR ’07-’13
2007
2012
2013
Revenue
63.6
343.0
405.6
18%
36%
EBIT
11.5
136.7
152.9
12%
54%
Cash EBITDA*
34.2
292.3
344.3
18%
47%
Net profit
8.7
81.2
97.8
20%
50%
Retail debt as at the end of the year, millions of cases
(debt collection outsourcing and purchased portfolios)
Nominal value of debt as at the end of the year, PLNbn
(debt collection outsourcing and purchased portfolios)
Accumulated recoveries from purchased debt
portfolios (PLNm)
Source: KRUK S.A. *Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt portfolios
* including personnel under employment contracts and civil law contracts
24%
36
number of employees*
2013
2007
2013
change
1.1
2.8
155%
4.7
22.8
385%
157
1,943
1,138%
751
2,335
211%
5
The KRUK Management Board is the most experienced team on the market
Performance-driven managers
Effective incentive schemes
Piotr Krupa, President and CEO
Founding shareholder and President of the Management
Board since 1998.
Michał Zasępa, Management Board Member, Finance and Risk
Member of the KRUK Supervisory Board since 2005. Joined the
Management Board in 2010, responsible for finance, risk,
investor relations, infrastructure and logistics.
Agnieszka Kułton, Management Board Member, Purchased
Portfolio Operations
Joined KRUK in 2002, initially as debt trading and debt
collection specialist; in 2003-2006 served as Debt Collection
Director. Member of the Management Board since 2006.
Management Board Members' average time with the
Company: 11 years
Large group of managers who are also Company
shareholders
Strong focus on staff training and development
15% of shares held by Members of
the KRUK Management Board
Piotr Krupa
13,01%
Other Board
Members
1,35%
Urszula Okarma, Management Board Member, Portfolio
Purchases and Debt Collection Outsourcing
With KRUK since 2002, as Director of the Telephone Collection
Department, and Director of the Financial Institutions Division.
Member of the Management Board since 2006.
Iwona Słomska, Management Board Member, Human
Resources, Marketing and Public Relations
With KRUK since 2004, initially as Marketing and PR Director;
since 2009 also responsible for HR as Member of the
Management Board.
Aviva OFE
11,35%
Others
54,26%
ING PTE*
10,78%
Generali OFE**
9,25%
Source: KRUK S.A.
* Jointly ING OFE and ING DFE, managed by ING PTE S.A. ** as at June 27th 2013 - the date of the General Meeting
*** Jointly Amplico OFE and MetLife Amplico DFE, managed by Amplico PTE S.A.
6
KRUK – business model and milestones
KRUK Group's milestones
– innovation leader
KRUK Group's business model
banks
insurers
telecom
operators
cable TV
operators
other
media
2000 Launch of the debt collection business
2001 Introduction of the 'success only fee' in CMS
Debt portfolio market emerges – decision to raise new equity
Debt collection
outsourcing
Debt purchase
debt collection process
shared debt collection platform, tools and infrastructure
(IT, telco, call centre)
2003
2005
Decision to replicate business model outside of Poland
2007
Consumer
KRUK the CMS market leader***
Enterprise Investors invests USD 21m (PEF IV)
Purchase of first debt portfolio
First securitisation process in Poland
Branch opened in Wałbrzych
Business
Entry into the Romanian market
Acquisition of Rejestr Dłużników ERIF BIG S.A.
Innovative approach to debtors
2008
2010
We help people pay their debts
as 76% of all debtors are willing to pay their overdue
liabilities*
2011
2012
Amicable settlement solutions (voluntary settlement
or litigation) introduced on a mass scale
Legislative change – operation of Rejestr Dłużników
ERIF
TV commercials as a mass debt collection tool
Prospects of a large supply of NPL
IPO on the WSE
Entry into the Czech market
Development of the KRUK Group's business in
Slovakia
Source: KRUK S.A. *Długi jako wstydliwy problem (Debt as a shameful problem), CBnZE, 03/2010, ** Of total debt in collection in 2009, according to IBnGR, *** In terms of the nominal value of debt
7
Unique debt collection strategy
Flexible approach to debtors and use of marketing tools offer tangible benefits
LARGE-SCALE AMICABLE SETTLEMENT STRATEGY
• KRUK as a friendly institution, helping with
debt settlement issues; encouragement to
contact KRUK
• Instalment-based repayment is the
Company's key operating strategy
• Extensive field adviser network
• Use of Rejestr Długów ERIF BIG (ERIF
Debtor Register, a credit reference agency)
to maintain payment discipline
OBJECTIVES:
Company image revamp:
more lenient, ready to settle
amicably
Company perception:
debt collection is associated
with KRUK
• Guides for debtors published in the press
• KRUK's advertising campaign with an
educational and image-building agenda, as
well as the Idea Placement initiative
targeted at indebted persons were both
globally-unique solutions
Improved efficiency
Improved cost efficiency
Amicable settlement improves effectiveness by 10-20% on the
typical approach.
Thanks to amicable settlements, the Company does not have to
contact debtors as often. In 2013, the share of costs in
recoveries was 29% (compared to 30% in 2011 and 27% in
2012).
Stable cash flows
Higher awareness of KRUK
Repayments under settlements are more stable and predictable
than those made on the basis of verbal declarations. In 2013,
the share of repayments under settlements was 62%.
KRUK has the highest brand awareness of the debt collection
companies in Poland (total recognition of 54% compared with
the top competitor's 11%) and Romania (35% and 16%,
respectively).*
8
*Source: Report on TNS's survey on awareness of debt collection companies among Poles in December 2013.
Report on TNS CSOP Romania's survey on awareness of debt collection companies in Romania in December 2013.
Effective tools to ensure consistent approach to debtors
ERIF Debtor Register and Raven Law Firm
RAVEN – Poland’s leading debt collection law
firm, with 379 employees, supports the KRUK
Group and its clients and has developed a proven
platform for cooperation with debt enforcement
officers.
ERIF collects and provides information on
debtors, as well as on consumers who are timely
payers. There are only three such credit
reference agencies in Poland.
Number of cases filed and amounts recovered
• Database with over 1.7m records on debtors
• Ability to use the agency as a debt collection support tool since
June 14th 2010:
Debtor control = ERIF entry + amicable settlement
process
Efficient pressure-exerting tool for time-barred debts
ERIF’s improved effectiveness means higher
effectiveness of the Group’s debt collection processes
Building a positive credit history of people who have
repaid their debt under settlement
Recovered
amount
(PLNm) 300
Number of
cases ('000)
350
number of cases −credit management
300
number of cases − debt purchase
250
Recoveries (debt purchase and credit
management)
250
200
200
150
150
100
100
50
50
ERIF – an effective tool
0
0
2007
Several million debtors entered in the credit reference agency's
databases over the next few years
Growing scale and effectiveness of ERIF's use
Opening to other client types (creditors) and cases whose data
may be entered in the database
Higher demand for credit reference information
2008
2009
2010
2011
2012
2013
Launch of e-Court and electronic simplified procedures in 2010:
Lower unit cost of court proceedings
Streamlined administration procedures and duration of
proceedings cut by nearly one-third (48 days)
Changes introduced in the electronic simplified procedures in
2013 reduced the effectiveness of Polish courts, which will
increase the role of KRUK's amicable approach.
9
Source: KRUK S.A., RAVEN Law Firm
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
10
KRUK’s competitive advantages
Amicable settlement strategy for
debt collection
-
Indebted individuals are treated as consumers
Higher recoveries, greater predictability of recoveries and enhanced cost efficiency
Operating activities supported by advertising campaigns and ERIF
Synergy between debt collection
outsourcing and debt purchase
-
Both products are addressed to the same group of clients – sales synergy
Common platform for both products – operational synergy
Mitigation of risk related to debt portfolio purchases thanks to additional statistical
information obtained from the debt collection outsourcing business
-
311 debt portfolios purchased and over 1,800 debt portfolios valued since the
launch of business
The KRUK Group boasts unmatched know-how in debt valuation, purchase and
management
Experience in valuation
and purchase of debts
-
-
Economies of scale
-
The purchased portfolios comprise 2.7m debtors and debt with the nominal value of
PLN 17.9bn
Because of the scale of KRUK’s operations and its amicable settlement strategy, TV
commercials and doorstep collection are effective collection tools
The large scale of KRUK’s operations enables cost optimisation and extensive use of
statistics to support business decisions
Successful expansion
on foreign markets
-
Leading position on the Romanian debt collection market
Entry into the Czech and Slovakian markets in 2011
Availability of debt financing
-
Nominal value of bonds outstanding as at the end of 2013 was PLN 575m
PLN 215m available for Group financing needs under bank borrowings
11
* including personnel under employment contracts and civil law contracts – as at December 31st 2012
KRUK – first-choice provider of debt collection outsourcing services for banks
Debt collection oursourcing
Overdue debt portfolio
Auction for debt collection outsourcing
services – selection of a debt collector
Acceptance of cases and initiation of
collection process with use of KRUK's tools
Three-month debt collection process
Uncollected debt cases returned
to the client
• KRUK has been providing debt collection outsourcing
services since 1999
• KRUK has been providing these services continuously
to nine out of the ten largest financial institutions in
Poland since 2003*
• In Poland, KRUK provides debt collection outsourcing
services to 46 financial institutions**
• KRUK works with seven of the ten largest banks in
Romania, providing debt collection outsourcing
services and purchasing debt
• KRUK also works with three of the six largest banks in
the Czech Republic and three of the four largest banks
in Slovakia, providing debt collection outsourcing
services and purchasing debt
• Numerous debt portfolios outsourced for collection
are subsequently auctioned by banks – debt collectors
with experience in debt collection outsourcing have a
competitive edge during debt auctions
12
Source: KRUK S.A.* Banks and loan brokers; **Cooperation in debt collection outsourcing services and debt purchase
KRUK – superior experience in portfolio valuation
Debt purchase and management process
• KRUK has been purchasing debt continuously since
December 2002
Debt portfolio auction
• By the end of 2013, KRUK had purchased over 311 debt
portfolios with a total nominal value of PLN 17.9bn
• Over a dozen or so years, KRUK has assembled a unique
database of 2.7m debtors in Poland and abroad
KRUK's valuation of the debt portfolio
• KRUK normally purchases debt portfolios from the
institutions to which it provides debt collection
outsourcing services
Number of cases purchased by KRUK (cumulatively, in thousands)
Purchase of debt portfolio
2 363
Amicable settlement
process
1 947
ERIF entry and
court
collection
1 339
713
2010
2011
2012
968
236
2013
94
2004
Fair value of
purchased debt
portfolios
(PLNm)
150
263
719
873
1,054
Growth
-1%
75%
173%
22%
21%
Source: KRUK S.A.
862
423
Purchased debt portfolios drive up future profit
2009
2 700
2005
2006
2007
2008
2009
2010
2011
2012
2013
Over the ten years of its operation in the debt purchase
segment, KRUK has handled 2.7m debt cases
13
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
14
High volume of non-performing bank loans in Poland and Romania...
Romania
Poland
Non-performing bank loans in Poland (PLNm)
in 2006-2013*
Non-performing bank loans in Romania (PLNm)
in 2007-2013*
35 000
35 000
30 000
30 000
25 000
25 000
20 000
20 000
15 000
15 000
10 000
10 000
5 000
5 000
0
0
2006
2007
2008
Consumer
2009
2010
Mortgage (retail)
2011
2012
Corporate
2013
2007
2008
2009
2010
2011
2012
2013
Impaired loans (total)
Poland and Romania in 2013: a high volume of NPLs to be put up for sale on the Polish and Romanian markets in the next few
years.
15
Source: NBP, National Bank of Romania
* As at the end of the year
...and in the Czech Republic and Slovakia
Czech Republic
Slovakia
Non-performing bank loans in the Czech Republic (PLNm)
in 2008-2013*
Non-performing bank loans in Slovakia (PLNm)
in 2009-2013*
14 000
14 000
12 000
12 000
10 000
10 000
8 000
8 000
6 000
6 000
4 000
4 000
2 000
2 000
0
0
2008
2009
Consumer
2010
2011
Mortgage (retail)
2012
Corporate
2013
2009
Consumer
2010
2011
Mortgage (retail)
2012
2013
Corporate
The Czech Republic and Slovakia in 2013: consistently high volume of non-performing bank loans
16
Source: National Bank of Czech Republic, National Bank of Slovakia
* As at the end of the year
Annual capital expenditure in the Polish retail consumer debt market* remains
over PLN 1bn
Bank Debt
Bank and Non-Bank Debt
Consumer NPLs in Poland (PLNbn)
2013
2013
28.6
2012
Nominal value (PLNbn) and average prices
of portfolios offered for sale (%)
2012
30.4
2011
32.0
2011
2010
33.0
2010
2009
2007
0
10
20
30
40
17%
3.5
11%
12%
2.9
15%
2.0
0
5
10
2013
1.0
2012
1.0
1.2
2011
0.4
2010
12%
2.4
2007
11.0
14%
6.9
2008
13.0
11%
7.4
2009
23.0
2008
9.4
Expenditure on debt
portfolios (PLNbn)
2009
0.3
2008
0.4
2007
0.3
0
0,5
1
1,5
As at the end of 2013, the nominal value of consumer NPLs in Poland fell to PLN 28.6bn, as a result of dynamic debt sales by
banks. Expenditure on consumer debt portfolios remained relatively stable on 2012.
17
Source: NBP; KRUK S.A.
*consumer portfolios = unsecured retail debt + non-mortgage-backed SME debt
Supply of retail consumer debt* in Romania has stabilised at over PLN 2.5bn of
nominal value
Bank Debt
The National Bank of Romania
does not disclose any information
on consumer NPLs in Romania
Bank and Non-Bank Debt
Nominal value (PLNbn) and
average prices of portfolios
offered for sale (%)
2013
2.6
2012
2.5
2011
2.5
10%
2009
1.3
2008
1.2
0
8%
2011
8%
2010
3
0.2
0.2
0.1
2009
15%
2
0.2
2012
6%
1
0.3
2013
6%
2.1
2010
Expenditure on
debt portfolios
(PLNbn)
0.2
2008
0,0
0,1
0,2
0,3
In 2013, banks in Romania offered higher quality portfolios, which, next to increased market competition, had the strongest
impact on auction prices.
18
Source: KRUK S.A., National Bank of Romania
*Consumer portfolios = unsecured retail debt + non-mortgage-backed SME debt
The value of retail consumer NPL portfolios* in the Czech Republic and in
Slovakia has remained stable for the last four years
Bank Debt
Bank and Non-Bank Debt
Consumer NPLs in the Czech
Republic and Slovakia (PLNbn)
2013
6.8
2012
6.9
2011
6.7
2010
6.8
0
2
Nominal value (PLNbn) and
average prices of portfolios
offered for sale (%)
21%
1.5
6
8
0
1
0.3
19%
1.8
4
Expenditure on
debt portfolios
(PLNbn)
2
0.3
0,0
0,1
0,2
0,3
0,4
The Czech market is characterised by higher prices of unsecured consumer debt compared with the prices in Poland and Romania
because of the higher quality of cases offered (shorter delinquency periods).
19
Source: KRUK S.A., central banks of the Czech Republic and Slovakia
*Consumer portfolios = unsecured retail debt + non-mortgage-backed SME debt
Stable level of corporate NPLs in Poland, with expenditure of PLN 60m
Bank Debt
Bank Debt
2013
32.0
2012
32.0
1.8
26.9
2010
27.2
1.1
25.6
1.2
0
10
0.11
5%
0.05
2.1
14.1
2008
4%
0.03
3%
0.03
1%
30
40
0
1
0.25
7%
2
20
0.06
4%
3.8
2011
2009
Expenditure on debt
portfolios (PLNbn)
Nominal value (PLNbn) and
average prices of portfolios
offered for sale (%)
Corporate NPLs in Poland (PLNbn)
2
3
4
0,0
0,1
0,2
0,3
In 2013, the value of corporate NPLs remained at a historic high of PLN 32bn, with a concurrent fall in the supply of debt offered
for sale and in debt portfolio prices.
20
Source: NBP; KRUK S.A.
Stable supply on the Polish debt collection outsourcing market in 2013, with
supply in Romania back to 2010-2011 levels
ROMANIA
POLAND
PLNbn
Nominal value of consumer debts* outsourced for
collection in a given year
14
PLNbn
12
12
11.6
10
Nominal value of consumer debts** outsourced for
collection in a given year
14
10.3
9.7
9.7
8
10
8
7.2
6
6
4
4.0
4
4.5
3.7
2
4.5
3.2
2
4.4
2.7
1.6
0
0
2007
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
As in 2012, in 2013 Polish entities outsourced the collection of debt with a total nominal value of PLN 9.7bn. In the Group’s opinion,
the debt collection outsourcing markets in Poland and Romania are highly competitive.
In 2013, the share of sold cases in the total value of cases outsourced to debt collection agencies increased in line with the prevalent
trend for selling debt rather than managing it.
Source: KRUK S.A.
* Consumer cases in Poland = unsecured and mortgage-backed retail debt
** Consumer cases in Romania = unsecured retail debt
21
In 2013, KRUK’s share in the regional debt purchase and debt collection
outsourcing market was over 20%
Nominal value of debts outsourced for
collection in Poland and Romania (PLNbn)
and market share (%)
Purchased debt portfolios in Poland,
Romania, the Czech Republic and
Slovakia (PLNm) and market share (%)
2013
367
2012
309
569
36%
194
2009
33%
44
2008
0
100
200
300
400
500
600
KRUK is the leader of the debt purchase markets in Poland and
Romania.
27%
2011
4.3
2010
29%
3.7
23%
3.1
2008
19%
22%
3.3
2009
12%
104
3.1
2012
19%
2011
2010
2013
22%
26%
1.4
0
21%
1
2
3
4
5
KRUK maintained a strong market share of over 20% in the
highly competitive debt collection outsourcing segment.
Group's share of the debt purchase markets in individual countries
by expenditure (2013)
19%
8%
49%
Poland
Source: KRUK S.A.
Romania
Czech
Republic/Slovakia
22
KRUK is the leading Polish debt collection company
In Poland, in 2013the KRUK Group acquired debts with a total nominal value of
PLN 5.1bn, more than the aggregate value of debts managed by its three
largest competitors, according to a Gazeta Giełdy Parkiet daily ranking*.
In 2013, the KRUK Group purchased debt with a nominal value of PLN 2.4bn,
representing 21% of the total nominal value of debt portfolios put up for sale in
Poland.
Structure of the Polish debt collection outsoutcing
market in 2013
Other
41%
EGB
Investments
8%
In 2013, the nominal value of debts outsourced to the Group for collection was
more than PLN 2.7bn. The second largest player in Gazeta Giełdy Parkiet's
ranking achieved less than 40% of that figure.
10 000
28%
GK Best
Kaczmarski Casus Finanse
8%
e-Kancelaria
3%
Inkasso
5%
7%
Structure of the Polish debt market in 2013 by nominal value of debt (PLNm)*
8 000
4,013
6 000
4 000
2,358
5,082
2 000
2,753
2,500
0
KRUK
Ultimo
803
321
362
744
341
764
GK Best
Casus Finanse
EGB Investments
Debt outsourced for collection
Debt purchased
822
24
Navi Group
*The ranking covers entities which provided Gazeta Giełdy Parkiet with data on the nominal value of debt outsourced for collection, and debt purchased; the 'other' item is KRUK's
estimate of the balance of the market share.
Source: own research, based on the 'The great challenge facing the debt collection market' article (Wielki test przed branżą windykacyjną), published in Gazeta Giełdy Parkiet on
February 8th 2014, and KRUK S.A.’s own estimates.
Other
23
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
24
Debt purchase business - dynamic growth on four markets
KRUK's expenditure on
debt portfolios (PLNm)
538
367
2013
303
341
569
2011
356
451
309
2012
Revenue (PLNm) and
costs
(as % of recoveries)
Recoveries (PLNm)
230
194
198
2010
140
54
2009
118
28.5%
27.0%
30.2%
30.7%
32.7%
85
Poland
104
2008
Czech Republic and
Slovakia
73
2007
0
117
Romania
200
400
600
72
63
0
41
200
400
600
0
29.6%
29.1%
50 100 150 200 250 300 350 400
25
Source: KRUK S.A.
KRUK - Historical recovery to expenditure curve for 2005-2013 and Expected
Remaining Collections (ERC**)
Weighted average recovery rate for
portfolios acquired in calendar years
Investments made in 2005-2013
Total
1Y
2Y
3Y
4Y
5Y
6Y
7Y
8Y
9Y
274%
24%
47%
39%
38%
30%
22%
25%
30%
19%
9Y+
+
Weighted average recovery rate for portfolios
purchased in 2005-2013
60%
Recovery to expenditure
ratio: 274%
Discount rate*: 40%
40%
20%
0%
1
2
3
4
5
6
7
8
Factors having a bearing on the recovery curve:
•Effectiveness of the collection tools used
•Effectiveness of conciliation activities, including telephone calls,
doorstep collection, and media communication
•Effectiveness of court collection
•Effectiveness of the credit reference agency Rejestr Dłużników
ERIF BIG
•Debtor behaviour
•Macroeconomic situation
•Legal environment
9
Recoveries from purchased debt portfolios (as at the end of 2013)
PLNm
Recoveries
Historical
(to the end of
2013)
1,943
Expected
(ERC**) as at
Dec 31 2013
2,105
*Discount rate = annualised IRR based on half-yearly cash flow, assuming investment in portfolios in the middle of a calendar year
** ERC - estimated remaining 10-year undiscounted collections from purchased portfolios
Source: KRUK S.A.
26
KRUK performs well on the competitive debt collection outsourcing market
Nominal value of debt outsourced for
collection (PLNbn) and commission
fees (% of nominal value)
2013
2.8
2012
3.0
2011
2010
3.0
2009
0.5
1
0.3 1.0%
2011
2
3
4
1.7%
5
38%
32.9
43%
41%
44.1
43%
41.8
2008
32%
28.7
0
10
20
30
40
Gross profit on debt
collection outsourcing
(PLNm)
18.7
2013
12.4
2012
41.0
2009
Romania 1.2%
47%
39.9
2010
1.2%
Czech
Republic
1.1 0.3
0
2012
0.7
Poland
2.6
2008
1.0%
0.3
4.0
2013
1.3%
0.3
Revenue (PLNm) and gross margin
on debt collection outsourcing (% of
revenue)
2011
17.7
2010
18.2
2009
17.7
9.2
2008
50
0
5
10
15
20
Numerous debt portfolios outsourced for collection are subsequently auctioned by banks – KRUK's knowledge and experience as
the debt collection outsourcing market leader give it a competitive edge during debt auctions.
The debt collection outsourcing market is highly competitive, but KRUK performs well by leveraging its economies of scale and
high operating efficiency.
27
Source: KRUK S.A.
KRUK 2009-2013 – fast-growing and highly profitable with strong cash flows
2009
2010
2011
2012
2013
’13/’12
CAGR
’09-’13
-54
140
-194
198
-569
341
-309
451
-367
538
19%
19%
61%
40%
129
85
6
42
2
164
118
10
44
2
274
230
20
41
3
343
303
5
33
7
406
356
-13
40
10
18%
17%
-382%
21%
40%
33%
43%
Gross profit
Gross margin
Own debt portfolios
Debt collection outsourcing
Other products and services
57
44%
39
18
1
75
45%
57
18
-1
144
52%
127
18
-1
194
57%
181
12
1
223
55%
202
19
2
15%
41%
12%
51%
96%
51%
1%
16%
EBITDA
EBITDA margin
NET PROFIT
net profit margin
35
27%
24
18%
47
28%
36
22%
101
37%
66
24%
144
42%
81
24%
162
40%
98
24%
13%
47%
20%
42%
ROE
EPS (PLN)
23%
1.5
28%
2.3
28%
4.0
26%
4.8
24%
5.8
20%
40%
CASH EBITDA*
Revenue/fair value of purchased debt portfolios
Revaluation/fair value of purchased debt portfolios
90
56%
4.2%
127
45%
4.0%
212
32%
2.7%
292
35%
0.5%
344
34%
-1.3%
18%
40%
PLNm
DEBT PORTFOLIOS PURCHASED
expenditure on debt portfolios
recoveries
PROFIT AND LOSS STATEMENT
Operating income
Own debt portfolios
including revaluation
Debt collection outsourcing
Other products and services
-1%
49%
28
*Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt
KRUK – over five years, the fair value of acquired portfolios went up from PLN
152m to over PLN 1bn
PLNm
2008
2009
2010
2011
2012
2013
Non-current assets
21.0
15.3
18.8
23.8
27.5
33.9
190.6
192.6
298.7
776.6
943.9
1,128.9
152.2
150.4
263.2
718.7
873.4
1,053.9
25.1
23.8
20.8
36.2
42.7
35.3
211.7
207.9
317.6
800.5
971.4
1,162.8
76.5
100.0
130.3
238.4
317.6
415.6
48.5
71.9
106.3
132.5
213.5
311.2
135.1
107.9
187.3
562.1
653.8
747.3
90.5
46.2
25.2
118.0
169.0
112.9
16.6
16.6
96.9
359.0
427.4
574.5
211.7
207.9
317.6
800.5
971.4
1,162.8
107.1
62.8
122.1
477.0
596.4
687.5
82.0
1.1
1.2
39.0
0.4
0.4
101.4
0.8
0.8
440.8
1.8
2.1
553.7
1.7
1.9
652.2
1.6
1.9
Current assets
including: Investments in debt portfolio purchases
Cash
Total assets
EQUITY AND LIABILITIES
Equity
including: Retained earnings
Liabilities
including: Borrowings and leases
Bonds
Total equity and liabilities
RATIOS
Interest-bearing debt
Net interest-bearing debt
Net interest-bearing debt to equity
Net interest-bearing debt to 12-month cash EBITDA*
29
Source: KRUK S.A., *Cash EBITDA = EBITDA + recoveries from purchased debt portfolios – revenue from collection of purchased debt portfolios
KRUK – strong cash flows (presentation format)
2010
2011
2012
2013
124.1
197.8
239.8
290.8
Recoveries from debtors - purchased debt portfolios
197.9
341.1
451.3
537.7
Operating costs - purchased debt portfolios
-60.7
-103.2
-122.3
-153.4
18.2
17.5
12.4
18.7
-28.1
-41.2
-50.2
-60.4
-3.2
-16.5
-51.4
-51.8
-201.0
-578.3
-323.3
-381.9
-194.0
-568.8
-309.3
-367.2
-7.0
-9.5
-14.1
-14.7
73.9
396.0
90.0
83.6
17.2
194.9
373.7
617.4
Issue of bonds
112.0
291.0
190.0
250.0
Decrease in borrowings and lease liabilities
-37.9
-103.9
-322.5
-675.2
Redemption of bonds
-34.0
-30.0
-120.5
-101.5
16.6
44.1
-30.7
-7.1
-3.0
15.4
6.5
-7.5
Cash flows from operating activities:
Operating margin - debt collection outsourcing
Administrative expenses
Other operating cash flow
Cash flows from investing activities:
Expenditure on debt portfolio purchases
Other investing cash flow
Cash flows from financing activities:
Increase in borrowings and lease liabilities
Other financing cash flow
Net cash flows:
30
Source: KRUK S.A.
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
31
KRUK's development strategy: maintain the leading position on existing markets,
further enhance operational efficiency, expand on foreign markets and launch
new products
•
Higher recoveries
from existing
portfolio
New investments on
existing markets
New foreign
markets
Growth of credit
information and
lending businesses
•
KRUK manages a debt portfolio whose total nominal value at the time of purchase was PLN
17.9bn. KRUK's objective is to become more effective in getting through to the debtors from
this portfolio and thus improve its cash recovery rates, which will provide the potential for
higher profits from assets already held.
KRUK estimates the value of future undiscounted cash flows from purchased debt portfolios at
approximately PLN 2.1bn (as at the end of 2013).
KRUK plans to:
• consolidate its position on the unsecured retail debt purchase market
• increase purchase and collection of non-performing mortgage-backed debts
• increase purchase and collection of non-performing corporate debts
• develop its debt collection outsourcing business
•
•
•
•
KRUK seeks to expand its presence on new markets by developing debt portfolio purchase and
debt collection outsourcing businesses through organic growth or acquisitions of local firms.
KRUK plans to enter a new foreign market in 2014, and further markets in the future.
KRUK plans to develop RD ERIF BIG SA as an independent credit reference agency, and also as
an increasingly more effective debt collection tool.
KRUK plans to develop the lending business based on its debtor database.
32
At the end of 2013, KRUK held 311 debt portfolios with a nominal value of PLN
17.9bn and fair value of over PLN 1bn
Potential of the KRUK Group's operational
assets
Debt portfolios
[PLNm]
2009
2010
2011
2012
2013
Nominal value of purchased
debt portfolios
1,712
2,164
4,469
3,585
3,791
Accumulated nominal value
of purchased debt portfolios
3,909
6,072
10,542
14,126
17,917
Cash recoveries
140
198
341
451
538
Accumulated cash
recoveries
415
612
954
1,405
1,943
Fair value
150
263
719
873
1,054
6
10
20
5
-13
Fair value revaluation
Share of the amount of
revaluation in fair value
4.2%
4.0%
2.7%
0.5%
-1.3%
Operational initiatives undertaken by the
KRUK Group with a view to enhancing its
effectiveness in debt recovery
Development of the field adviser network in
Poland, Romania and the Czech Republic
Development of court collection in Romania
Enhancement of the effectiveness of marketing
measures providing access to indebted persons
Increase of the operating scale and awareness
of RD ERIF BIG S.A.
33
Source: KRUK S.A.
International listed companies in KRUK’s peer group
Net profit (PLNm)
growth
EPS (PLN)
growth
Equity (PLNm)
ROE
Intrum Justitia***
Net profit (PLNm)
growth
EPS (PLN)
Growth
Equity (PLNm)
ROE
Net profit (PLNm)
growth
EPS (PLN)
growth
Portfolio Recovery***
Equity (PLNm)
ROE
Arrow Global***
Net profit (PLNm)
growth
EPS (PLN)
growth
Equity (PLNm)
ROE
2008
16.7
1.10
76.5
22%
208.8
2.63
1,132.5
18%
138.2
3.02
865.1
16%
2009
23.5
41%
1.48
35%
98.3
24%
208.3
0%
2.61
-1%
1,205.1
17%
135.0
-2%
2.92
-3%
1,022.4
13%
2010
36.1
54%
2.34
58%
130.3
28%
213.7
3%
2.68
3%
1,218.2
18%
225.1
67%
4.42
52%
1,494.9
15%
2011
66.4
84%
4.03
72%
238.4
28%
261.3
22%
3.27
22%
1,330.1
20%
308.3
37%
5.94
34%
1,814.9
17%
21.4
0.2
15.3
2012
81.2
22%
4.80
19%
317.6
26%
276.1
6%
3.46
6%
1,411.8
20%
384.3
25%
7.51
26%
2,159.1
18%
47.9
124%
0.4
133%
63.8
75%
* Market capitalisation as at August 25th 2014
** P/E ratio calculated on the basis of the last four reported quarters
*** Data translated at the USD/PLN, SEK/PLN and GBP/PLN exchange rates quoted by the National Bank of Poland for August 26th 2014
Source: KRUK S.A., financial reports of Intrum Justitia, Portfolio Recovery and Arrow Global
2013
97.8
20%
5.77
20%
415.6
24%
42%
LTM
147.2
39%
8.64
40%
529.2
Market capitalisation (PLNm)*
P/E**
387.2
13%
40%
4.87
13%
41%
1,567.8
7%
25%
Market capitalisation (PLNm)*
P/E**
539.2
31%
40%
10.61
29%
41%
2,649.9
25%
20%
Market capitalisation (PLNm)*
P/E**
76.8
61%
0.5
43%
534.8
14%
Market capitalisation (PLNm)*
P/E**
1 610.6
10.9
408.3
CAGR (’08-’13)
5.26
1 361.9
7 686.1
18.8
549.2
10.90
3 017.3
9 171.4
16.7
95.0
0.54
612.6
2 198.9
23.2
34
Agenda
Introduction
Operating activities
Market position
Financial performance
Strategy and summary
Appendices
35
KRUK - 2013 awards and distinctions
Second place in the European Small and Mid-Cap Awards 2013 competition, in the Most
Internationally Minded Newcomer category.
This competition is held on the initiative of the European Commission, leading European stock
exchanges and European Issuers to encourage small and medium-sized companies to enter
capital markets through IPOs.
The White List - Gold Certificate
A certificate awarded in recognition of the Company’s 8-year presence on the Wrocław
Commercial Chamber’s White List.
Dynamic Company
A distinction awarded by Bisnode Polska to the most dynamic businesses on the Polish market.
Business Sharks 2013
A distinction awarded by the ‘Rynek Kapitałowy’ economic magazine for leading the market and
setting a strong course in the ocean of business.
Mr Piotr Krupa, KRUK S.A.’s CEO, was ranked among the 25 best managers in finance.
A distinction in the ranking put together by the ‘Home & Market’ economic magazine, awarded
in recognition of continuous efforts to observe ethical norms, values and standards in the debt
management sector.
36
Key macroeconomic data
Poland
12,00%
10,00%
10,0%
8,00%
8,0%
6,00%
6,0%
4,00%
4,0%
2,00%
Romania
12,0%
5.2%
4.1%
3.6%
2.2%
1.6%
0.8%
0.8%
1.2%
1.7%
2.7%
2,0%
0,0%
0,00%
0.6%
-0.1%
1.0%
1.2%
1.5%
-0.2%
-2,0%
GDP growth rate (%)
Inflation (%)
Czech Republic
9,0%
7,0%
5,0%
3,0%
0.8%
1,0%
-1,0%
-3,0%
-0.3%
-0.9%
-1.2%
-1.4%
-2.3%
GDP growth rate (%)
Unemployment (%)
-1.7%
-1.2%
18,0%
16,0%
14,0%
12,0%
10,0%
8,0%
6,0%
4,0%
2,0%
0,0%
Inflation (%)
Unemployment (%)
Slovakia
2.6%
2.1%
1.7%
0.7%
0.7%
0.8%
0.9%
1.3%
-5,0%
GDP growth rate (%)
Inflation (%)
Unemployment (%)
GDP growth rate (%)
Inflation (%)
Unemployment (%)
37
Source: OECD and TradingEconomics.
Exchange rates
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
Average EUR/PLN exchange rate since 2008
Average CZK/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
5,00
4,80
4,60
4,40
4,20
4,00
3,80
3,60
3,40
3,20
3,00
38
Source: KRUK S.A.; NBP.
KRUK – debt structure and bond redemption schedule
BONDS (PLNm)*
Issued
Redeemed
Bonds outstanding at end of period
2012
2013
2014
2015
2016
2017
2018
190
120
427
250
102
575
130
445
41
404
154
250
135
115
115
-
* 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
Dec 31 2013
215
102
5
1
210
101
39
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. Changes, if
any, in actual or projected recoveries or costs prompt
fair value revaluation at the original discount rate,
and the difference is recognised in P&L as
revaluation.
Example calculation of recoveries and
revenue from a purchased debt portfolio
PERIOD
0
purchase value
1
2
3
Σ
70
70
70
110
47
-
100
planned recoveries -100
discount rate
49%
valuation at
beginning of
period
100
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
79
47
0
-
product of value
and discount rate
difference
between
recoveries and
revenue
initial value
reduced by
amortisation
40
Source: KRUK S.A.; NBP
KRUK
Group
KRUK S.A.
POLAND
ul. Legnicka 56, 54-204 Wrocław
ir@kruksa.pl, www.kruk.eu
FOR INVESTORS: www.kruksa.pl/dla-inwestora