Introduction & Market Context
KRUK SA (WSE:KRU), Europe’s self-proclaimed largest debt collection company by market capitalization, presented its unaudited Q1 2025 financial results on April 28, 2025. The company reported mixed performance with strong recovery growth but declining profits amid rising operational costs. With a market capitalization of PLN 7.3 billion as of March 31, 2025, KRUK continues to expand its international footprint, with 62% of investments and 59% of recoveries now coming from markets outside Poland.
Quarterly Performance Highlights
KRUK delivered a complex financial picture in Q1 2025, with growing recoveries and revenues contrasted by declining profits and investments. The company reported PLN 923 million in recoveries from purchased portfolios, an 8% year-over-year increase, while net profit fell 26% to PLN 252 million compared to the same period last year.
As shown in the following comprehensive overview of key financial metrics:
The decline in net profit occurred despite revenue growth, primarily due to a 25% increase in operating and administrative expenses. Meanwhile, new portfolio investments decreased by 32% year-over-year to PLN 229 million, reflecting a more selective approach in the current market environment.
Cash EBITDA, a key performance metric for debt collection companies, showed modest growth of 2% year-over-year, reaching PLN 618 million. The company maintained a solid return on equity (ROE) of 21% on a last-twelve-months basis.
Detailed Financial Analysis
KRUK’s revenue from purchased debt portfolios grew by 4% year-over-year to PLN 715 million, driven by both higher interest income and positive revaluation of projected recoveries. Interest income on debt portfolios increased from PLN 437 million to PLN 530 million, while revaluation of projected recoveries totaled PLN 133 million.
The following breakdown illustrates the company’s revenue and profit dynamics:
The significant decline in net profit was primarily attributable to rising costs. Operating and administrative expenses increased by PLN 79 million (+25% year-over-year), with court fees and employee expenses being the main contributors. The ratio of operating expenses to recoveries rose to 28% from 23% in the previous year, with the increase in court fees most pronounced in Spain due to accelerated debt cases.
Finance costs also increased by PLN 20 million year-over-year, though this was partially offset by decreasing EURIBOR rates and a positive effect from interest rate hedges amounting to PLN 16 million.
Geographic Segment Performance
KRUK’s international expansion continues to be a key growth driver, with markets outside Poland accounting for 59% of total recoveries in Q1 2025. Italy showed particularly strong performance with recoveries reaching PLN 227 million, a 16% year-over-year increase, representing 25% of the group’s total recoveries.
The following chart details the company’s recovery and investment activity across markets:
Romania remained an important investment market, accounting for 33% of the group’s total expenditure on new portfolios (PLN 75 million), while Italy represented 32% (PLN 74 million). Poland, the company’s home market, still delivered solid recovery growth of 9% year-over-year to PLN 379 million, representing 41% of total group recoveries.
KRUK’s consumer finance operations also showed strong growth, with Wonga’s revenue increasing by 52% year-over-year to PLN 60 million, driven by 71,000 cash loans disbursed during the quarter.
Balance Sheet and Financing
KRUK maintained a solid financial position with equity representing 41% of the group’s financing sources. The carrying amount of investments in debt portfolios reached PLN 10.4 billion, accounting for 89% of the group’s assets and representing an 18% increase year-over-year.
The company’s debt ratios showed a slight increase, with the net debt to equity ratio at 1.3x (compared to 1.2x in Q1 2024) and the net debt to cash EBITDA ratio at 2.6x (up from 2.3x). However, these remain well below the maximum contractual levels of 3.0x and 4.0x respectively.
As illustrated in the following financing structure overview:
KRUK follows a strategy of repaying debt using existing assets without the need for debt rollover. As of the end of March 2025, available credit lines totaled PLN 4.0 billion, with undrawn facilities of PLN 0.6 billion. The company also issued PLN-denominated bonds worth PLN 100 million during the quarter.
The company’s estimated remaining collections (ERC) stood at PLN 22.8 billion, providing visibility on future cash flows:
Strategic Initiatives and Outlook
KRUK continues to emphasize its ESG commitments, with 58% of senior managerial positions held by women. The company received an Ethical Audit Certificate from the Association of Financial Companies in Poland and was recognized in several awards, including topping the Puls Biznesu daily’s ranking of listed companies in the "Management Expertise" category.
The company’s ESG strategy focuses on four key areas:
Looking ahead, KRUK appears well-positioned to navigate the challenging economic environment with its diversified geographic presence, strong balance sheet, and established market position. However, the rising cost base and declining investment rate may present challenges to profitability in the near term if these trends continue.
The company’s ability to maintain strong recovery performance while managing operating expenses will be crucial for returning to profit growth in future quarters. Meanwhile, its international diversification strategy continues to deliver results, reducing reliance on any single market and providing multiple avenues for growth.
Full presentation:
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