Q2 2026 Kruk SA Earnings Call
Speaker #1: For KRUK Q2, 6 months 2026 results. I will share the presentation. This presentation is available on the website, and during my commentary please ask questions in the Q&A section here in the Teams application, and I will refer to them after I complete the commentary to the presentation.
Speaker #1: So, let's start. The 6 months of 2026 meant a 555 million zloty of net profit, a solid result. However, you see that there is no growth versus 6 months of last year, so the growth we expect will come in the second half.
Speaker #1: Of this year, cash EPDA grew healthy by 8%. Our recoveries grew by 5%. Our assets grew by 12%, which means there will be more revenue growth from those assets.
Speaker #1: In the future, the business is indebted at a similar level like last year, 2.6, so a healthy level for our representing still a potential to increase if we need it.
Speaker #1: So overall, this second quarter and 6 months we believe was a solid result, although we hope for somewhat better results. One of the reasons why there is this results was not better was depreciation of the Romanian currency versus euro.
Speaker #1: Another reason was that we planned somewhat higher recoveries, not significantly but a small few percent higher recoveries and there is no one significant reasons why we didn't achieve it, but the fact is we missed some of those recoveries.
Speaker #1: However, if you look at the recovery plan, it was healthy at about 5% of the active forecast, the so-called accounting forecast, so no need to worry about possible negative revaluation.
Speaker #1: The question is, what is the upside? How much more can we recover above? If you look at investments, we secured about 860 million of new investments this is still not even a half of what we expect to invest this year.
Speaker #1: We sustained our expectation that we will be able to deploy about 2.5 billion zloty in portfolios this year. However, that's our comment on the market slides.
Speaker #1: The market is competitive. This net results and the dividend payout of about 20 zlotys per shares meant that the business had a 19% return on equity.
Speaker #1: You see the revenue growth, which is relatively insignificant but, as I said, we hope the second half of the year will be better. You see lower costs versus last year, specifically legal costs are lower and this is a consequence of certain life cycle of legal costs where we intensify sending cases to legal system at certain point of time.
Speaker #1: Of owning portfolio later on, recoveries grow or sustained at a certain level. The costs drop. No more cases that are sent to the court and the margin grows nicely.
Speaker #1: The financial cost decreased and this is a results of the effect of the hedging instruments which played to our advantage. In the 6 months we had a gain of about 53 million zloty, so relatively high impact.
[Company Representative] (KRUK): Of this year. Cash EBITDA grew healthy by 8%. Our recoveries grew by 5%, our assets grew by 12%, which means there will be more revenue growth from those assets in the future. The business is indebted at a similar level like last year, at 2.6, a healthy level for representing still a potential to increase if we need it. Overall, this Q2 and six months, we believe, was a solid result, although we hoped for somewhat better results. One of the reasons why this result was not better was depreciation of Romanian currency versus EUR. Another reason was that we planned somewhat higher recoveries, not significantly, about a small 2% higher recoveries. There is no one significant reason why we would not achieve it. But the fact is, we missed some of those recoveries.
[Company Representative] (KRUK): Of this year. Cash EBITDA grew healthy by 8%. Our recoveries grew by 5%, our assets grew by 12%, which means there will be more revenue growth from those assets in the future. The business is indebted at a similar level like last year, at 2.6, a healthy level for representing still a potential to increase if we need it. Overall, this Q2 and six months, we believe, was a solid result, although we hoped for somewhat better results. One of the reasons why this result was not better was depreciation of Romanian currency versus euro. Another reason was that we planned somewhat higher recoveries, not significantly, about a small 2% higher recoveries. There is no one significant reason why we would not achieve it. But the fact is, we missed some of those recoveries.
Speaker #1: Of this year, cash EPDA grew healthily by 8%. Our recoveries grew by 5%. Our assets grew by 12%, which means there will be more revenue growth from those assets.
Speaker #1: The business is well capitalized. The indebtedness is contained. The business shows a healthy growth on assets as you see here on the slides. And as just to remind you, apart from business as usual, the company is conducting two major transformational projects.
Speaker #1: In the future, the business is indebted at a similar level like last year, 2.6. We’re healthy. Level for our representing still a potential to increase if we need it.
Speaker #1: One is the replacements of the IT system which really is about processing engineering and IT system replacements. We are advanced more or less as planned.
Speaker #1: So overall, this second quarter and six months, we believe, had solid results, although we had hoped for somewhat better numbers. One of the reasons why these results were not better was the depreciation of the Romanian currency versus the euro.
Speaker #1: In this project, an important milestone was achieved by the company in July when NVP, so minimum viable project, for the new system in Poland was released.
Speaker #1: So first batches of a few hundred cases went through the process and now we're learning what was on this exercise and improving what needs to be improved.
Speaker #1: Another reason was that we planned somewhat higher recoveries—not significantly, but a small 2% higher recoveries. And there's no one significant reason why we didn't achieve it, but the fact is we missed some of those recoveries.
Speaker #1: So things are going well, although this is a difficult and very complex product. And the second initiative is our reorganization into becoming alternative investment fund, some time in 2027 possibly.
Speaker #1: However, if you look at the recovery plan, it was healthy at about 5% of the active forecast data, so-called accounting forecast. So no need to worry about possible negative revaluation.
[Company Representative] (KRUK): However, if you look at the recovery plan, it was healthy at about 5% of the active forecast debt, the so-called accounting forecast, so no need to worry about possible negative evaluation. The question is, what is the upside? How much more can we recover above? If you look at investments, we secured about 860 million of new investments. This is still not even a half of what we expect to invest this year. We sustained our expectation that we will be able to deploy about PLN 2.5 billion in portfolio this year. However, as our comment on the market slides, the market is competitive. This net results and the dividend payout of about PLN 20 per shares, amends that the business had a 19% return on equity. You will see the revenue growth, which is relatively insignificant.
[Company Representative] (KRUK): However, if you look at the recovery plan, it was healthy at about 5% of the active forecast debt, the so-called accounting forecast, so no need to worry about possible negative evaluation. The question is, what is the upside? How much more can we recover above? If you look at investments, we secured about 860 million of new investments. This is still not even a half of what we expect to invest this year. We sustained our expectation that we will be able to deploy about PLN 2.5 billion in portfolio this year. However, as our comment on the market slides, the market is competitive. This net results and the dividend payout of about PLN 20 per shares, amends that the business had a 19% return on equity. You will see the revenue growth, which is relatively insignificant.
Speaker #1: Second half of this year and this process is also going on plan. Let's take a look at the results for segments. This is a summary slide which shows where we are.
Speaker #1: The question is, what is the upside? How much more can we recover above? If you look at investments, we secured about 860 million of new investments. This is still not even half of what we expect to invest this year.
Speaker #1: In terms of investments, this 864 million zloty is a growth versus last year, but this is somewhat below our expectations. We hope we will be able to achieve a much better results in the second half.
Speaker #1: Of this year. Therefore, we sustained this guideline of 2.5 billion, but we want to tell you the market remains competitive especially in Poland and Romania.
Speaker #1: We sustained our expectation that we will be able to deploy about PLN 2.5 billion, not even portfolios this year. However, as our comment on the market slides, the market is competitive.
Speaker #1: So the risk was rather on the downside. It's lower it's less likely that we will exceed the target unless somewhat more likely that we will have some shortage versus this target.
Speaker #1: This net result and the dividend payout of about 20 zlotys per share meant that the business had a 19% return on equity.
Speaker #1: If we decide as we did in the first half of this year, not to compromise on the IRRs, on the expected returns on portfolios, which is the plan.
Speaker #1: You'll see the revenue growth, which is relatively insignificant, but as I said, we hope the second half of the year will be better. You also see lower costs.
Speaker #1: Recoveries were strong but we hope there would be a few dozens millions more than the results you see. The revenue was somewhat negatively affected by the depreciation of Romanian lei.
[Company Representative] (KRUK): But as I said, we thought H2 of the year would be better. You see lower costs versus last year. Specifically, legal costs are lower, and this is a consequence of certain life cycle of legal costs, where we intensify sending cases to the legal system at certain point of time of owning portfolio. Later on, recoveries grow or are sustained at certain level, the cost drop, no more cases that are sent to the court and the margin, the EBITDA, it grows nicely. The financial cost decreased, and this is a result of the effect of the hedging instruments, which played to our advantage. In this six months, we had a gain of about PLN 53 million, so relatively high impact. The business is well capitalized. The indebtedness is contained. The business shows a healthy growth on assets, as you see here on the slides.
[Company Representative] (KRUK): But as I said, we thought H2 of the year would be better. You see lower costs versus last year. Specifically, legal costs are lower, and this is a consequence of certain life cycle of legal costs, where we intensify sending cases to the legal system at certain point of time of owning portfolio. Later on, recoveries grow or are sustained at certain level, the cost drop, no more cases that are sent to the court and the margin, the EBITDA, it grows nicely. The financial cost decreased, and this is a result of the effect of the hedging instruments, which played to our advantage. In this six months, we had a gain of about PLN 53 million, so relatively high impact. The business is well capitalized. The indebtedness is contained. The business shows a healthy growth on assets, as you see here on the slides.
Speaker #1: Compared to last year, specifically, legal costs are lower, and this is a consequence of the life cycle of legal costs, where we intensify sending cases to the legal system at a certain point in time.
Speaker #1: That cost us roughly 59 million zlotys. What I'm very happy about is a significant improvement of recoveries and profitability of the Spanish business in the second quarter.
Speaker #1: Of only portfolio later on. Recoveries grow or are sustained at a certain level, the costs drop. No more cases are sent to the court, and the margin grows nicely.
Speaker #1: I think we've gone a long way from January 2026 to today. The legal process, how we manage it, the results of it are much better today than they used to be.
Speaker #1: As expected, as we were communicating to you after first quarter of this year. Therefore, we are ready to come back to buying more portfolios in the second half.
Speaker #1: The financial costs decreased, and this is a result of the effect of the hedging instruments, which played to our advantage. In the six months, we had a gain of about 53 million zlotys.
Speaker #1: Of this year. It's also good to see that all of our markets were profitable. If you look across the board here on EBITDA, Poland showed a healthy growth, Romania showed good profitability but depressed.
Speaker #1: So, relatively high impact. The business is well capitalized, the indebtedness is contained. The business shows healthy growth on assets, as you see here on the slides.
Speaker #1: But by the depreciation of the currency, Italy showed a very nice growth. I mentioned Spain, France, is not doing very well after very successful amicable process.
Speaker #1: And just as a reminder, apart from business as usual, the company is conducting two major transformational projects. One is the replacement of the IT system, which really is about process engineering and IT system replacements.
[Company Representative] (KRUK): Just to remind you, apart from business as usual, the company is conducting two major transformational projects. One is the replacement of the IT system, which really is about process engineering and IT system replacements. We are advanced more or less as planned in this project. An important milestone was achieved by the company in July when MVP, so minimum viable product for the new system in Poland was released. So first batches of a few hundred cases went through the process, and now we are learning on this exercise and improving what needs to be improved. So things are going well, although this is a difficult and very complex project. The second initiative is our reorganization into becoming alternative investment fund sometime in 2027, possibly H2 of the year, and this process is also going on plan.
[Company Representative] (KRUK): Just to remind you, apart from business as usual, the company is conducting two major transformational projects. One is the replacement of the IT system, which really is about process engineering and IT system replacements. We are advanced more or less as planned in this project. An important milestone was achieved by the company in July when MVP, so minimum viable product for the new system in Poland was released. So first batches of a few hundred cases went through the process, and now we are learning on this exercise and improving what needs to be improved. So things are going well, although this is a difficult and very complex project. The second initiative is our reorganization into becoming alternative investment fund sometime in 2027, possibly H2 of the year, and this process is also going on plan.
Speaker #1: Now the legal process continues to be somewhat disappointed but again this is early stage. We are learning what to improve when we start to build our operational presence possibly sometime next year.
Speaker #1: We are advanced more or less as planned. In this project, an important milestone was achieved by the company in July, when MVP—so, minimum viable product—for the new system in Poland was released.
Speaker #1: In France. The cash flow generation has been very strong as evidenced here by this one almost 0.4 billion zloty of cash in a deal.
Speaker #1: Let's look now at the market by market. In Poland, the volume of portfolios offered on the market was relatively small. This 3 billion. However, these were portfolios of high value so there were not many secondary markets usually much cheaper transaction but more bigger banking type portfolios which represent high recovery potential and comment high prices but also competition.
Speaker #1: So, the first batches of a few hundred cases went through the process, and now we're learning what was in this exercise and improving what needs to be improved.
Speaker #1: So things are going well, although this is a difficult and very complex product. And the second initiative is our reorganization into becoming an alternative investment fund, sometime in 2027, or possibly the second half of this year.
Speaker #1: And this process is also going according to plan. Let's take a look at the results for the segments. This is a summary slide which shows where we are.
Speaker #1: For these portfolios were high and this is evidenced by this price of 34%. In this quite competitive environment we did not compromise on the returns and we decided to give up some of the portfolios and as a result our market share is lower than we started with.
[Company Representative] (KRUK): Let's take a look at the results per segment. This is a summary slide which shows where we are. In terms of investment, this 864 million PLN is a growth versus last year. But this is somewhat below our expectations. We hope we will be able to achieve a much better result in H2 of this year. Therefore, we sustain this guideline of 2.5 billion. But we want to tell you, the market remains competitive, especially in Poland and Romania. The risk was rather on the downside. It's less likely that we'll exceed this target, and it's somewhat more likely that we'll have some shortage versus this target if we decide, as we did in the H1 of this year, not to compromise on the IRRs, on the expected returns on portfolios, which is the plan.
[Company Representative] (KRUK): Let's take a look at the results per segment. This is a summary slide which shows where we are. In terms of investment, this 864 million PLN is a growth versus last year. But this is somewhat below our expectations. We hope we will be able to achieve a much better result in H2 of this year. Therefore, we sustain this guideline of 2.5 billion. But we want to tell you, the market remains competitive, especially in Poland and Romania. The risk was rather on the downside. It's less likely that we'll exceed this target, and it's somewhat more likely that we'll have some shortage versus this target if we decide, as we did in the H1 of this year, not to compromise on the IRRs, on the expected returns on portfolios, which is the plan.
Speaker #1: In terms of investments, this 864 million zloty is a growth versus last year, but this is somewhat below our expectations. We hope we will be able to achieve much better results in the second half.
Speaker #1: We hope the second half of the year will be better for us. In Poland. The results were very good for the business as you see here recoveries revaluation one of the highest in the past couple of quarters and we're quite happy with the underlying profitability.
Speaker #1: ...of this year. Therefore, we sustained this guideline of PLN 2.5 billion, but we want to tell you the market remains competitive, especially in Poland and Romania.
Speaker #1: So the risk was rather on the downside. It's lower than—it's less likely that we'll exceed the target, and it's somewhat more likely that we will have some shortage versus this target.
Speaker #1: So it also shows you being a big business in Poland but also in other markets we can afford not to participate quarter to quarter with cyclical changing competitive environment.
Speaker #1: If we decide, as we did in the first half of this year, not to compromise on the IRRs—on the expected returns on portfolios—which is the plan.
Speaker #1: We can press the gas pedal in less competitive market and press the brake pedal in more competitive markets. And this is how we optimized deployment of our capital.
Speaker #1: Recoveries were strong, but we hoped there would be a few dozen million more than the results you see. The revenue was somewhat negatively affected by the depreciation of the Romanian leu.
Speaker #1: In Q2. As usual. In Romania the supply was similar to what it was last year. The market also offered usually the big banking portfolios and again as similar as in Poland competition level was quite high.
[Company Representative] (KRUK): Recoveries were strong, but we hoped there would be a few dozens millions more than the results you see. The revenue was somewhat negatively affected by the depreciation of the Romanian lei. That cost us roughly 50 million PLN. What I'm very happy about is the significant improvement of recoveries and profitability of the Spanish business in Q2. I think we've come a long way from January 2026 to today. The legal process, how we manage it, the results of it, are much better today than they used to be. As expected, as we were communicating to you after Q1 of this year, therefore, we are ready to come back to buying more portfolios in H2 of the year. It's also good to see that all of our markets were profitable.
[Company Representative] (KRUK): Recoveries were strong, but we hoped there would be a few dozens millions more than the results you see. The revenue was somewhat negatively affected by the depreciation of the Romanian lei. That cost us roughly 50 million PLN. What I'm very happy about is the significant improvement of recoveries and profitability of the Spanish business in Q2. I think we've come a long way from January 2026 to today. The legal process, how we manage it, the results of it, are much better today than they used to be. As expected, as we were communicating to you after Q1 of this year, therefore, we are ready to come back to buying more portfolios in H2 of the year. It's also good to see that all of our markets were profitable.
Speaker #1: That cost us roughly 59 million zlotys. What I'm very happy about is a significant improvement in recoveries and profitability of the Spanish business in the second quarter.
Speaker #1: And this is evidenced by this high price versus normal for the 6%. We had about 40% share in that market in the six months.
Speaker #1: The first six months of 2026. The results were depressed by the depreciation of lei that goes straight into P&L. Line as course despite that the business was still quite highly profitable but we hope this revaluation this depreciation of the currency is was a one-off event that happened exactly when the government lost the maturity backing from the majority of the parliament.
Speaker #1: I think we've gone a long way from January 2026 to today. The legal process, how we manage it, and the results of it are much better today than they used to be.
Speaker #1: As expected, as we were communicating to you after the first quarter of this year, we are now ready to come back to buying more portfolios in the second half of this year.
Speaker #1: It's also good to see that all of our markets were profitable. If you look across the board here on EBITDA, Poland showed healthy growth; Romania showed good profitability, but this was depressed by the depreciation of the currency.
[Company Representative] (KRUK): If you look across the board here on EBITDA, Poland showed a healthy growth. Romania showed good profitability, but depressed by the depreciation of the currency. Italy showed a very nice growth, I mentioned. Spain, France is not doing very well. Very successful. The amicable process, now the legal process continues to be somewhat disappointed with this result. But again, this is early stage. We are learning what to improve when we start to build our operational presence, possibly sometime next year in France. The cash flow generation has been very strong, as evidenced here by this one, almost 400 million PLN of cash EBITDA. Let's look now at market by market. In Poland, the volume of portfolios offered on the market was relatively small, this 3 billion.
[Company Representative] (KRUK): If you look across the board here on EBITDA, Poland showed a healthy growth. Romania showed good profitability, but depressed by the depreciation of the currency. Italy showed a very nice growth, I mentioned. Spain, France is not doing very well. Very successful. The amicable process, now the legal process continues to be somewhat disappointed with this result. But again, this is early stage. We are learning what to improve when we start to build our operational presence, possibly sometime next year in France. The cash flow generation has been very strong, as evidenced here by this one, almost 400 million PLN of cash EBITDA. Let's look now at market by market. In Poland, the volume of portfolios offered on the market was relatively small, this 3 billion.
Speaker #1: The issue is not resolved yet. We don't know whether we'll be heading toward early elections in Romania or there will be a new majority forming a new government without the elections.
Speaker #1: We don't expect Romania to appreciate but we also have no reason to believe depreciations will become anytime soon. Italy a relatively I would say similar level of supply than in the past years.
Speaker #1: Italy showed very nice growth. I mentioned Spain. France is not doing very well after a very successful amicable process; now the legal process continues to be somewhat disappointing.
Speaker #1: But again, this is early stage. We are learning what to improve when we start to build our operational presence, possibly sometime next year in France.
Speaker #1: As you see here much lower price versus nominal which is mostly driven by quality of this portfolio. It's lower potential for recoveries but also to some degree lower competition on that market.
Speaker #1: The cash flow generation has been very strong, as evidenced here by this one—almost 0.4 billion zloty—of cash in the deal. Let's look now at the market by market.
Speaker #1: That's our relative assessment compared to Poland and Romania. And you may see that on that market advantage of their more benign competitive environment and commanded majority of the markets with 55%.
Speaker #1: In Poland, the volume of portfolios offered on the market was relatively small—about PLN 3 billion. However, these were portfolios of high value. So there were not many secondary markets, which usually involve much cheaper transactions, but rather bigger, banking-type portfolios, which represent high recovery potential and command high prices. Also, competition for these portfolios was high.
[Company Representative] (KRUK): However, these were portfolios of high value, so there were not many secondary markets, usually much cheaper transactions, but more bigger banking-type portfolios, which represent high recovery potential and command high prices. Also competition for these portfolios were high, and this is evidenced by this price of 34%. In this quite competitive environment, we did not compromise on the returns, and we decided to give up some of the portfolios, and as a result, our market share is lower than we started with. We hope H2 of the year will be better for us in Poland. The results were very good for the business. As you see here, recoveries, revaluation, one of the highest in the past couple of quarters, and we're quite happy with the underlying profitability.
[Company Representative] (KRUK): However, these were portfolios of high value, so there were not many secondary markets, usually much cheaper transactions, but more bigger banking-type portfolios, which represent high recovery potential and command high prices. Also competition for these portfolios were high, and this is evidenced by this price of 34%. In this quite competitive environment, we did not compromise on the returns, and we decided to give up some of the portfolios, and as a result, our market share is lower than we started with. We hope H2 of the year will be better for us in Poland. The results were very good for the business. As you see here, recoveries, revaluation, one of the highest in the past couple of quarters, and we're quite happy with the underlying profitability.
Speaker #1: Market share. And we're very happy with this month. And the results are solid. In terms of recoveries you can see revaluation which is relatively high for Italian markets compared to previous quarters and also good profitability.
Speaker #1: And this is evidenced by this price of 34%. In this quite competitive environment, we did not compromise on the returns, and we decided to give up some of the portfolios, and as a result our market share is lower than we started with.
Speaker #1: In Italy apart from steady supply of on the primary market we may also look at some secondary market deals which may be interesting for us.
Speaker #1: So apart from this relatively stable supply on the primary market there are also some opportunities for us to increase our deployments to participation in the secondary market.
Speaker #1: We hope the second half of the year will be better for us in Poland. The results were very good for the business, as you see here. Recoveries revaluation was one of the highest in the past couple of quarters.
Speaker #1: And Spain in terms of market it was small. You can see about 300 million zloty deployed in that market in consumer unsecured only. Very low prices.
Speaker #1: And we're quite happy with the underlying profitability. So it also shows you, being a big business in Poland, but also in other markets, that we can afford not to participate quarter to quarter with a cyclically changing competitive environment.
[Company Representative] (KRUK): It also shows you, being a big business in Poland, but also in other markets, we can afford not to participate quarter to quarter with cyclical changing competitive environment. We can press the gas pedal in less competitive markets and press the brake pedal in more competitive markets. This is how we optimized deployment of our capital in Q2, as usual. In Romania, the supply was similar to what it was last year. The market also offered usually the big banking portfolios. Again, as similar as in Poland, competition level was quite high, and this is evidenced by this high price versus nominal 46%. We had about 40% share in that market in the first 6 months of 2026. Results were depressed by the depreciation of lei, and that goes straight into P&L line, as you can see here.
[Company Representative] (KRUK): It also shows you, being a big business in Poland, but also in other markets, we can afford not to participate quarter to quarter with cyclical changing competitive environment. We can press the gas pedal in less competitive markets and press the brake pedal in more competitive markets. This is how we optimized deployment of our capital in Q2, as usual. In Romania, the supply was similar to what it was last year. The market also offered usually the big banking portfolios. Again, as similar as in Poland, competition level was quite high, and this is evidenced by this high price versus nominal 46%. We had about 40% share in that market in the first 6 months of 2026. Results were depressed by the depreciation of lei, and that goes straight into P&L line, as you can see here.
Speaker #1: So also showing you that the portfolio that were sold was rather of low quality. We started to buy some portfolios in Q2 investing their not much and heading 80% market share but we know already will be more active in the second half of this year.
Speaker #1: We can press the gas pedal in less competitive markets and press the brake pedal in more competitive markets. This is how we optimize the deployment of our capital.
Speaker #1: In Q2, as usual, in Romania the supply was similar to what it was last year. The market also usually offered the big banking portfolios, and again, as in Poland, the competition level was quite high.
Speaker #1: After the results improve and we have more credibility now to see that our improvements in the process and improve is there is visible it's confirmed by two quarters of results and also there's more stability in the new system in Spain that we observed.
Speaker #1: And this is evidenced by this high price versus normal for the 6%. We had about 40% share in that market in the six months.
Speaker #1: And you can see a nice improvement of results. On EBITDA and the gross profit and also steady growth of recoveries in the environment where we didn't add much portfolios and our value of portfolios also did not grow.
Speaker #1: The first six months of 2026. The results were depressed by the depreciation of the leu, as demonstrated in the P&L line you see here. Of course, despite that, the business was still quite highly profitable.
Speaker #1: So hopefully whatever problems we've had in Spain the problems are already behind and if you ask me can we still improve of the performance on Spain I would say yes.
[Company Representative] (KRUK): Of course, despite that, the business was still quite highly profitable. But we hope this revaluation, the depreciation of the currency was a one-off event that happened exactly when the government lost the backing from the majority of the parliament. The issue is not resolved yet. We do not know whether we will be heading towards early elections in Romania, or there will be a new majority forming a new government without the elections. We do not expect Romanian lei to appreciate, but we also have no means to believe depreciations will become anytime soon. Italy, a relatively, I would say, similar level of supply than in the past years. As you see here, much lower price versus nominal, which is mostly driven by quality of this portfolio. It is lower potential for recoveries, but also considerably lower competition on that market. That is our relative assessment compared to Poland and Romania.
[Company Representative] (KRUK): Of course, despite that, the business was still quite highly profitable. But we hope this revaluation, the depreciation of the currency was a one-off event that happened exactly when the government lost the backing from the majority of the parliament. The issue is not resolved yet. We do not know whether we will be heading towards early elections in Romania, or there will be a new majority forming a new government without the elections. We do not expect Romanian lei to appreciate, but we also have no means to believe depreciations will become anytime soon. Italy, a relatively, I would say, similar level of supply than in the past years.
Speaker #1: But we hope this revaluation, the depreciation of the currency is was a one-off event that happened exactly when the government lost the maturity backing from the majority of the parliament.
Speaker #1: There is this potential I don't know when it will come whether in the next few months or the next few quarters but we see potential for further improvement especially on the middle classes.
Speaker #1: The issue is not resolved yet. We don't know whether we'll be heading toward early elections in Romania, or if there will be a new majority forming a new government.
Speaker #1: In other markets just to remind you this is France the market that will be developing and this is the remnants of our assets in Czech Slovakia and Germany the markets were exiting or we have already exited.
Speaker #1: Without the elections, we don't expect Romania to appreciate, but we also have no means to believe depreciations will come anytime soon. Italy—a relatively, I would say, similar level of supply than in the past years.
Speaker #1: As I mentioned in France after very good performance on any double part we continue to see relatively weak results on legal process. This is not significant for the results.
Speaker #1: It's a significant lesson of course for the future. For what we can improve in the process and what data we collect but it's fair to say that we'll be able to use much of that knowledge only when we start to build our operational presence in France which likely will not happen this year but hopefully will happen in the following year.
Speaker #1: As you see here, much lower price versus nominal, which is mostly driven by the quality of this portfolio. It’s lower potential for recoveries, but also, to some degree, lower competition in that market.
[Company Representative] (KRUK): As you see here, much lower price versus nominal, which is mostly driven by quality of this portfolio. It is lower potential for recoveries, but also considerably lower competition on that market. That is our relative assessment compared to Poland and Romania.
Speaker #1: That's our relative assessment compared to Poland and Romania. And you may see that on that market, advantage of the March benign competitive environment, and commanded majority of the market with 55%.
[Company Representative] (KRUK): You may see that on that market, we took advantage of very modest, benign competitive environment and we commanded majority of the market with 55% market share, and we are very happy with that business. The results are solid, in terms of recoveries. You can see revaluation, which is relatively high for Italian markets compared to previous quarters, and also good profitability. In Italy, apart from steady supply on the primary market, we may also look at some secondary market deals which may be interesting for us. Apart from this relatively stable supply on the primary market, there are also some opportunities for us to increase our deployments through participation in the secondary market. Spain, in terms of market, it was small. You can see about PLN 300 million deployed in that market in consumer unsecured only.
[Company Representative] (KRUK): You may see that on that market, we took advantage of very modest, benign competitive environment and we commanded majority of the market with 55% market share, and we are very happy with that business. The results are solid, in terms of recoveries. You can see revaluation, which is relatively high for Italian markets compared to previous quarters, and also good profitability. In Italy, apart from steady supply on the primary market, we may also look at some secondary market deals which may be interesting for us. Apart from this relatively stable supply on the primary market, there are also some opportunities for us to increase our deployments through participation in the secondary market. Spain, in terms of market, it was small. You can see about PLN 300 million deployed in that market in consumer unsecured only.
Speaker #1: Our lending business performed relatively well. We had 27 million of EBITDA just to remind you we have three lines of lending business. One line in Poland in Poland and one in Romania a startup that took over the lending assets with little lending assets we had in Romania and it's now starting on the open market for the past couple of months to lend.
Speaker #1: Market share. And we're very happy with this month, and the results are solid. In terms of recoveries, you can see revaluation, which is relatively high for the Italian markets compared to previous quarters, and also good profitability.
Speaker #1: We are in the middle of a marketing campaign and we have good ambitions to grow our business there in Romania coping the good practices from Poland and also adapting to Romania conditions.
Speaker #1: In Italy, apart from steady supply on the primary market, we may also look at some secondary market deals, which may be interesting for us.
Speaker #1: So apart from this relatively stable supply on the primary market, there are also some opportunities for us to increase our deployments through participation in the secondary market.
Speaker #1: The business is profitable. The Romanian business probably will be lost making this year as expected as we incur startup costs and marketing costs but hopefully in two years it will be also profitable like the Polish business.
Speaker #1: And Spain, in terms of market, it was small. You can see about 300 million zloty deployed in that market in consumer unsecured only. Very low prices.
Speaker #1: So overall good results with some pinch of salt that we did count on them being somewhat better. We expect a better second half than the first half.
Speaker #1: So, also showing you that the portfolios that were sold were rather of low quality. We started to buy some portfolios in Q2, investing there not much and having 80% market share, but we know already we will be more active in the second half of this year.
[Company Representative] (KRUK): Very low prices, so also showing you that the portfolio that was sold was rather of low quality. We started to buy some portfolios in Q2, investing there, not much, and having 80% market share. But we know already we will be more active in the second half of this year after the results improvement and get more credibility now to see that our improvements in the process, and improvement is there, it is visible. It is confirmed by 2 quarters of results. Also there is more stability in the legal system in Spain that we observed. You can see a nice improvement of results on EBITDA and the gross profit and also steady growth of recoveries in the environment where we did not add much portfolios and our volume of portfolios also did not grow. Hopefully, whatever problems we have had in Spain, the problems are already behind.
[Company Representative] (KRUK): Very low prices, so also showing you that the portfolio that was sold was rather of low quality. We started to buy some portfolios in Q2, investing there, not much, and having 80% market share. But we know already we will be more active in the second half of this year after the results improvement and get more credibility now to see that our improvements in the process, and improvement is there, it is visible. It is confirmed by 2 quarters of results. Also there is more stability in the legal system in Spain that we observed. You can see a nice improvement of results on EBITDA and the gross profit and also steady growth of recoveries in the environment where we did not add much portfolios and our volume of portfolios also did not grow. Hopefully, whatever problems we have had in Spain, the problems are already behind.
Speaker #1: In terms of profitability but please bear in mind the biggest sensitivity on whether we'll grow by this or other percent for the full year will be whether our recoveries will be two, three percent smaller or higher versus our plans.
Speaker #1: We will put all the efforts to make the best results. Possible the business is well funded. We get good access to debt. Our dividend policy is in place.
Speaker #1: After the results improve, and we have more credibility now to see that our improvements in the process and improvement are visible. It's confirmed by two quarters of results, and also there's more stability in the real system in Spain that we observe.
Speaker #1: We are changing our infrastructure again infrastructure our legal infrastructure to allow the business to continue to grow for the next 10, 5 years. Thank you for listening to this commentary and now I'll be very happy to take your questions.
Speaker #1: And you can see a nice improvement of results on EBITDA and the gross profit, and also steady growth of recoveries in an environment where we didn't add many portfolios and our value of portfolios also did not grow.
Speaker #1: Let's see. What are the questions? I see first one. Can you help us understand if you're able to continue with the near 20% IRRs for your first half 2026 debt purchases?
Speaker #1: So hopefully, whatever problems we've had in Spain are already behind us, and if you ask me, can we still improve the performance in Spain, I would say yes.
Speaker #1: 20% IRRs I expect you refer to the gross IRR we have here in this presentation. And the question and the answer would be out expect the IRR for the full 2026 to be at similar level than 2025 maybe it's somewhat lower level but not significant.
[Company Representative] (KRUK): If you ask me, can we still improve the performance in Spain, I would say yes. There is this potential. I do not know when it will come, whether in the next few months or in the next few quarters, but we see potential there for further improvement, especially on the legal costs. In other markets, just to remind you, this is France, this is the market that we will be developing, and this is the remnants of our assets in Czech Republic, Slovakia and Germany, the markets we are exiting or we have already exited. As I mentioned, in France, after very good performance on NPL part, we continue to see relatively weak results on legal process. This is not significant for the results. It is a significant lesson, of course, for the future, for what we can improve in the process and what data we collect.
[Company Representative] (KRUK): If you ask me, can we still improve the performance in Spain, I would say yes. There is this potential. I do not know when it will come, whether in the next few months or in the next few quarters, but we see potential there for further improvement, especially on the legal costs. In other markets, just to remind you, this is France, this is the market that we will be developing, and this is the remnants of our assets in Czech Republic, Slovakia and Germany, the markets we are exiting or we have already exited. As I mentioned, in France, after very good performance on NPL part, we continue to see relatively weak results on legal process. This is not significant for the results. It is a significant lesson, of course, for the future, for what we can improve in the process and what data we collect.
Speaker #1: There is this potential. I don't know when it will come, whether in the next few months or the next few quarters, but we see potential there for further improvement, especially among the middle classes.
Speaker #1: In other markets, just to remind you, this is France, the market that we'll be developing. And these are the remnants of our assets in the Czech Republic, Slovakia, and Germany—the markets we're exiting, or we have already exited.
Speaker #1: So of course I don't know how we will invest exactly for the full year but I would expect that this number is still 20 something but maybe not close to 21 but more close to 20.
Speaker #1: As I mentioned, in France, after a very good performance on any double part, we continue to see relatively weak results on legal process. This is not significant for the results.
Speaker #1: And let's see what it is in six months. Another question please explain why recoveries are growing slower versus the current value of portfolio which is growing a double digit.
Speaker #1: It's a significant lesson, of course, for the future—for what we can improve in the process and what data we collect. But it's fair to say that we'll be able to use much of that knowledge only when we start to build our operational presence in France, which likely will not happen this year, but hopefully will happen in the following year.
Speaker #1: This is because we are buying assets with recovery curves assumed at 20 years and with cash flow break even of about six years. So these recoveries are relatively spread flat for a long period of time.
[Company Representative] (KRUK): It is fair to say that we will be able to use much of that knowledge only when we start to build our operational presence in France, which likely will not happen this year, but hopefully will happen in the following year. Our lending business performed relatively well. We had EUR 27 million of EBITDA. Just to remind you, we have three lines of lending business, Novum in Poland, Wonga in Poland and Novum Romania, a startup that took over the lending assets, the little lending assets we had in Romania. It is now starting on the open market for the first couple of months to lend. We are in the middle of a marketing campaign, and we have good ambitions to grow our business there in Romania, copying the good practices from Poland and also adapting to Romanian conditions. The business is profitable.
[Company Representative] (KRUK): It is fair to say that we will be able to use much of that knowledge only when we start to build our operational presence in France, which likely will not happen this year, but hopefully will happen in the following year. Our lending business performed relatively well. We had EUR 27 million of EBITDA. Just to remind you, we have three lines of lending business, Novum in Poland, Wonga in Poland and Novum Romania, a startup that took over the lending assets, the little lending assets we had in Romania. It is now starting on the open market for the first couple of months to lend. We are in the middle of a marketing campaign, and we have good ambitions to grow our business there in Romania, copying the good practices from Poland and also adapting to Romanian conditions. The business is profitable.
Speaker #1: Our lending business performed relatively well. We had €27 million, and we lost EBITDA. Just to remind you, we have three lines of lending business: one line in Poland, another line in Poland, and one line in Romania—a startup that took over the little lending assets we had in Romania.
Speaker #1: So that's why the growth of assets is quicker than the growth of recoveries in the first years after acquisition. And this is something that is evolutionary coming from first realization that we are in a business which where recoveries are much longer and there is much more recoveries than we initially thought some years ago.
Speaker #1: And it's now starting on the open market for the past couple of months to lend. We are in the middle of the marketing campaign.
Speaker #1: And we have good ambitions to grow our business there in Romania, copying the good practices from Poland and also adapting to Romanian conditions.
Speaker #1: And because competition is paying for these assets today a relatively high price you saw the numbers for Romania and Poland for fresh banking portfolios the market face now 30 something or even 40 something percent.
Speaker #1: The business is profitable. The Romanian business probably will be loss-making this year, as expected, as we incur startup costs and marketing costs. But hopefully, in two years, it will also be profitable like the Polish business.
[Company Representative] (KRUK): The Romanian business probably will be loss-making this year as expected, as we incur startup costs and marketing costs. Hopefully in two years it will be also profitable like the other business. Overall, good results with some pinch of salt that we did count on them being somewhat better. We expect a better H2 than the H1 in terms of profitability. Please bear in mind, the biggest sensitivity on whether we will grow by this or other percent for the full year will be whether our recoveries will be 2%, 3% smaller or higher versus our plans. We will put all the efforts to make the best results possible. The business is well-funded. We get good access to debt. Our dividend policy is in place.
[Company Representative] (KRUK): The Romanian business probably will be loss-making this year as expected, as we incur startup costs and marketing costs. Hopefully in two years it will be also profitable like the other business. Overall, good results with some pinch of salt that we did count on them being somewhat better. We expect a better H2 than the H1 in terms of profitability. Please bear in mind, the biggest sensitivity on whether we will grow by this or other percent for the full year will be whether our recoveries will be 2%, 3% smaller or higher versus our plans. We will put all the efforts to make the best results possible. The business is well-funded. We get good access to debt. Our dividend policy is in place.
Speaker #1: And we can still make this 20% IRR and 2.3 times money but over a really long period of time. And this is today's economics which is driven by competition.
Speaker #1: So overall, good results, with a pinch of salt that we did count on them being somewhat better. We expect a better second half than the first half.
Speaker #1: So it's not surprising us. The difference between reported EBITDA and cash EBITDA where is the difference coming from? Well this is a different specific for the industry the EBITDA the accounting EBITDA is not a good measure for cash flow for operating cash flow because it only incorporates the so-called interest revenue not recoveries.
Speaker #1: In terms of profitability, please bear in mind that the biggest sensitivity on whether we'll grow by this or another percent for the full year will be whether our recoveries are two or three percent smaller or higher.
Speaker #1: Versus our plans, we will put all the effort to achieve the best results possible. The business is well funded, and we have good access to debt.
Speaker #1: By subtracting revenue with recoveries we get cash EPDA which is a better representation of operating cash flow of the business. It should not be understood as something you say here potential for future recognition.
Speaker #1: Our dividend policy is in place. We are changing our infrastructure again—our legal infrastructure—to allow the business to continue to grow for the next 5 to 10 years.
[Company Representative] (KRUK): We are changing our infrastructure again, our legal infrastructure, to allow the business to continue to grow for the next five years. Thank you for listening to this commentary. Now I will be very happy to take your questions. Let us see, what are the questions? I see the first one. Can you help us understand if you are able to continue with near 20% IRRs for your H1 2026 debt purchases? 20% IRRs, I expect you refer to the gross IRR we have here in this presentation. The answer would be, I would expect the IRR for the full 2026 to be at similar level than 2025, maybe at somewhat lower level, but not significant.
[Company Representative] (KRUK): We are changing our infrastructure again, our legal infrastructure, to allow the business to continue to grow for the next five years. Thank you for listening to this commentary. Now I will be very happy to take your questions. Let us see, what are the questions? I see the first one. Can you help us understand if you are able to continue with near 20% IRRs for your H1 2026 debt purchases? 20% IRRs, I expect you refer to the gross IRR we have here in this presentation. The answer would be, I would expect the IRR for the full 2026 to be at similar level than 2025, maybe at somewhat lower level, but not significant.
Speaker #1: Thank you for listening to this commentary, and now I'll be very happy to take your questions. Let's see, what are the questions? I see the first one.
Speaker #1: So it's just a difference between recovery and revenue. Revenue in our accounting is the difference between recoveries from a given portfolio and the purchase price.
Speaker #1: Can you help us understand if you're able to continue with the near 20% IRRs for your first-half 2026 debt purchases? When you mention 20% IRRs, I expect you're referring to the gross IRR we have here in this presentation.
Speaker #1: So it's a net revenue. Recoveries so if we buy a portfolio for 100 and we collect 220 the revenue is 120 but recoveries are 220.
Speaker #1: The difference is 100 which is a purchase price for the portfolio. Please refer in we have a revenue recognition slide in our deck and the contact the IR if this is not clear.
Speaker #1: And the question and the answer would be, I would expect the IRR for the full 2026 to be at a similar level to 2025. Maybe it's at a somewhat lower level, but not significantly.
Speaker #1: I'm checking if there are any other questions. I don't see them at this point. I see no further questions. Therefore I thank you very much.
Speaker #1: So of course, I don't know how we will invest exactly for the full year, but I would expect that this number is still 20-something, but maybe not close to 21—more close to 20.
[Company Representative] (KRUK): So, of course, I do not know how we will invest exactly for the full year, but I would expect that this number is still 20-something, but maybe not close to 21, but more across to 20. Let us see what it is in six months. Another question. Please explain why recoveries are growing slower versus the carrying value of portfolio, which is growing double digits. This is because we are buying assets with recovery curves assumed at 20 years and with a cash flow breakeven of about six years. So these recoveries are relatively spread flat for a long period of time. That is why the growth of asset is quicker than the growth of recoveries in the first years after acquisition.
[Company Representative] (KRUK): So, of course, I do not know how we will invest exactly for the full year, but I would expect that this number is still 20-something, but maybe not close to 21, but more across to 20. Let us see what it is in six months. Another question. Please explain why recoveries are growing slower versus the carrying value of portfolio, which is growing double digits. This is because we are buying assets with recovery curves assumed at 20 years and with a cash flow breakeven of about six years. So these recoveries are relatively spread flat for a long period of time. That is why the growth of asset is quicker than the growth of recoveries in the first years after acquisition.
Speaker #1: And let's see what it is in six months. Another question: please explain why recoveries are growing more slowly compared to the current value of the portfolio, which is growing at double digits.
Speaker #1: This is because we are buying assets with recovery curves assumed at 20 years, and with cash flow break-even of about six years. So these recoveries are relatively spread flat for a long period of time.
Speaker #1: So that's why the growth of assets is quicker than the growth of recoveries in the first years after acquisition. And this is something that is evolutionary, coming from the first realization that we are in a business where recoveries are much longer.
[Company Representative] (KRUK): This is something that is evolutionary, coming from first realization that we are in a business where recoveries are much longer, and there is much more recoveries than we initially thought some years ago. Because competition is paying for these assets today at relatively high price, you saw the numbers for Romania and Poland for fresh banking portfolios, the market pays now 37% or even 40-something percent. We can still make this 20% IRR and 2.3 times money, but over a really long period of time. This is today's economics, which is driven by competition. So it is not surprising us. The difference between the reported EBITDA and the cash EBITDA, where is the difference coming from? Well, this is a difference specific for the industry.
[Company Representative] (KRUK): This is something that is evolutionary, coming from first realization that we are in a business where recoveries are much longer, and there is much more recoveries than we initially thought some years ago. Because competition is paying for these assets today at relatively high price, you saw the numbers for Romania and Poland for fresh banking portfolios, the market pays now 37% or even 40-something percent. We can still make this 20% IRR and 2.3 times money, but over a really long period of time. This is today's economics, which is driven by competition. So it is not surprising us. The difference between the reported EBITDA and the cash EBITDA, where is the difference coming from? Well, this is a difference specific for the industry.
Speaker #1: And there is much more in recoveries than we initially thought some years ago. And because competition is paying for these assets today at a relatively high price—you saw the numbers for Romania and Poland for fresh banking portfolios—the market pays now thirty-something, or even forty-something percent.
Speaker #1: And we can still make this 20% IRR and 2.3 times money, but over a really long period of time. And this is today's economics, which is driven by competition.
Speaker #1: So it's not surprising to us. The difference between reported EBITDA and cash EBITDA—where is the difference coming from? So this is a difference specific to the industry.
Speaker #1: The EBITDA, the accounting EBITDA, is not a good measure for cash flow, for operating cash flow, because it only incorporates the so-called interest revenue, not recoveries.
[Company Representative] (KRUK): The accounting EBITDA is not a good measure for operating cash flow because it only incorporates the so-called interest revenue, not recoveries. By subtracting revenue with recoveries, we get cash EBITDA, which is a better representation of operating cash flow of the business. It should not be understood as something, you say here, potential for future recognition. So it is just a difference between. If we buy a portfolio for 100 and we collect 220, the revenue is 120, but recoveries are 210. The difference is 100, which is a purchase price of a portfolio. Please refer, we have a revenue recognition slide in our deck, and contact the IR if this is not clear. I am checking if there are any other questions. I do not see them at this point. I see no further questions. Therefore, I thank you very much for your interest in the company.
[Company Representative] (KRUK): The accounting EBITDA is not a good measure for operating cash flow because it only incorporates the so-called interest revenue, not recoveries. By subtracting revenue with recoveries, we get cash EBITDA, which is a better representation of operating cash flow of the business. It should not be understood as something, you say here, potential for future recognition. So it is just a difference between. If we buy a portfolio for 100 and we collect 220, the revenue is 120, but recoveries are 210. The difference is 100, which is a purchase price of a portfolio. Please refer, we have a revenue recognition slide in our deck, and contact the IR if this is not clear. I am checking if there are any other questions. I do not see them at this point. I see no further questions. Therefore, I thank you very much for your interest in the company.
Speaker #1: By subtracting revenue with recoveries, we get cash EPDA, which is a better representation of the operating cash flow of the business. It should not be understood as something—you say here—potential for future recognition.
Speaker #1: So, it's just a difference between... So if we buy a portfolio for 100 and we collect 220, the revenue is 120, but recoveries are 220.
Speaker #1: The difference is 100, which is the purchase price for the portfolio. Please refer to the revenue recognition slide in our deck, and contact IR if this is not clear.
Speaker #1: I'm checking if there are any other questions. I don't see them at this point. I see no further questions. Therefore, I thank you very much for your interest in the company.
[Company Representative] (KRUK): If you have any follow-up queries, please contact the IR. Thank you. Have a good day.
[Company Representative] (KRUK): If you have any follow-up queries, please contact the IR. Thank you. Have a good day.
