4Q16 – net income in line with expectations; low indirect/direct costs, but higher tax expense
Kruk posted net profit of PLN 63m for 4Q16 (-15% qoq, +43% yoy) yesterday (28 February), in line with our expectations and 3% above the market consensus. The beat vs. our estimates came from: i) lower costs in the debt purchase segment (+2% qoq, +6% yoy); ii) higher other income/expenses, due to a release of provisions (PLN 3.8m); iii) higher revaluations (+89% qoq, +57% yoy); and iv) higher revenues from debt management (+19% yoy, +17% yoy). On a negative note, the effective income tax expense was above our expectations, at 38% in 4Q16. However, we highlight that this increase was due to the company changing the allocation of a provision for tax at source from taxes and charges to taxes. Overall, we read the results as positive, and supportive for our investment thesis and recent upgrade to BUY (Poland_Financials_Kruk_Upgraded to BUY_17Feb2017.pdf, (866 KB)).Kruk SA. Kruk SA is a Poland-based company, which is engaged in the business support industry. The Company is a multi-operator, which offers loss prevention and debt collection services. The Company divides its business into two main operating segments: Debt Purchase, including acquisition of non-performing debt portfolios, and Debt Collection Outsourcing, offering fee-based collection of debt on client's behalf, focused on consumer and corporate loans. The Company provides services to financial institutions and large corporate customers. It manages receivables of banks, credit intermediaries, leasing companies and digital platform providers, among others. The Company's operating activities concentrate in a number of countries, such as Poland, Romania, Czech Republic, Slovakia and Spain. The Company's subsidiaries include Kruk Deutschland GmbH, Presco Investments Sarl and Espand Soluciones de Gestion y Recuperacion de Deuda SL, among others.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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