Kruk debt collector to develop business in France, looks at US and UK markets

"We will continue to grow, we want to not only grow but share the dividend in the years to come. We want to do this with a safe level of leveraging for the company, focusing mainly on those businesses and geographies that we know are successful," said the company's CEO Piotr Krupa.

"Doubling the profit, doubling the balance sheet is absolutely feasible and we will work on it," he added.

Kruk said that the base plan in its new strategy for 2025-2029 is to grow organically and focus on five large markets in Europe - Poland, Romania, Italy, Spain and France. Kruk reported that potential new markets in the longer term are the UK and the US.

"We have already taken steps to learn a little bit more about how the UK and the US, these two largest markets for the sale of unsecured retail receivables, operate," said Kruk's board member Michal Zasepa.

"From what we see, in these markets, portfolio returns are no lower than what we are seeing, and perhaps in the US they are now higher," he added.

In its strategy, Kruk assumed the possibility of investing around PLN 15 billion in debt portfolios over a period of five years in the current markets including France.

Company representatives said that since 2019, the company has invested PLN 11.1 billion (EUR 2.6 bln) and achieved PLN 15.1 billion (EUR 3.54 bln) in portfolio repayments. In the last two years, the average annual expenditure on portfolios was around PLN 3 billion (EUR 702.6 mln).

Kruk said that after record investments in 2023 and 2024, it plans lower investments in 2025 (around PLN 2.5 billion or EUR 585.5 mln) and growth in the following years.

"This will be a strategy that builds on the experience of previous years plus increases our potential with the new market where we started investing last year," Kruk's board member Urszula Okarma said.

"At the moment the repayments from the portfolios there are higher than what we had assumed. France is another home for Kruk, it's a market where we intend to invest," she added.

In December 2023, the group signed an agreement to acquire its first debt portfolios in France. Kruk is investing in unsecured retail receivables and working with local servicers. In total, the group acquired 13 portfolios in 2024 at an expenditure of PLN 83 million (EUR 19.44 mln).

"My bet is that in 10 years France will be the largest European market in terms of supply of retail debt portfolios," CEO Krupa said.

Kruk reported that it expects organic supply growth in this market. Since 2021, the level of NPLs there has increased by 21 percent and unsecured retail debt alone by 18.2 percent. The level of unsecured retail NPLs in France is the highest in the EU, with an NPL ratio similar to other Western European markets.

Kruk said on Friday that it has increased the balance of portfolios acquired from PLN 4.1 billion (EUR 960.2 mln) at the beginning of 2019 to PLN 9.7 billion (EUR 2.3 bln) at the end of September 2024.

Kruk is now targeting a doubling of the balance sheet value of the portfolios it holds from PLN 10 billion (EUR 2.34 bln) at the end of September 2024 to PLN 20 billion (EUR 4.68 bln) at the end of 2029.

The company said that it aims to develop pathways during the strategy period and make the repayment target on its currently held debt portfolio at PLN 29 billion (EUR 6.8 bln) realistic over the next 20 years.

"This is an ambitious plan, (...) some percentage of this amount may find its way into our revenues through a positive update in the next four to five years of this strategy," Kruk's board member Zasepa said.

"In all likelihood, the era of positive, high upgrades is not coming to an end at Kruk. We see this potential being the highest in our history," he added.

Investments in digital transformation are expected to amount to around PLN 500 million (EUR 117.1 mln) over a five-year period. Kruk expects a minimum 20 percent IRR return on the investment, with a breakeven point after the strategy horizon (after 2029).

"The next four years will be Kruk's big digital transformation," Kruk's CEO Piotr Krupa said.

Kruk wants to build a new analytics and technology ecosystem; the company will apply the latest technologies - AI and cloud solutions.

Company representatives reported on Friday that Kruk wants, among other things, to reduce the time to break even of its portfolio by one year (i.e. by 20 percent). The percentage of payments obtained in amicable and hybrid processes originating from customer self-service is also to increase significantly.

Kruk wants to have a total of more than 20 million cases acquired at the beginning of 2030 (it currently has around 13 million). At the same time, it assumes only a slight increase in employment. It wants the group's workforce to be no more than 4,000 (FTE) at the end of the strategy period.

seb/ ao/ han/