Good afternoon, my name is Michał Zasępa, and I will present results for six months of 2024 for the KRUK Group. Thank you for taking time to see this presentation. I'm now making available the presentation. This presentation is also available on our website, and I will refer to the slides that you will see. You also have an option for Q&A. Please ask questions throughout the presentation. I will come back to them after I finish presentation and respond to your questions. This is my pleasure to say, this is the best six months in the history of the company. We have earned 603 million PLN. This is 14% increase year on year.
This is better than expected when we were making budget plans for 2024, and this is more or less in line, what we expected, when we also talked to you about, after Q1. So we are on plan, likely to have another record year in terms of net profit for the entire 2024. The Cash EBITDA was record high. You can see here 11% increase. The recoveries overall consolidated level were on plan, 16%, significantly beating the Active Accounting Forecast as expected. Investments in new portfolios were 900. This is a decrease versus last year, but as expected, we this year were targeting about 2.5 billion zloty investments, and we are on a good track to achieve that. EPS is also growing nicely.
You see here 14% growth. In Q2, we paid out another dividend, 18 PLN per share. Return on equity remains very high, one of the highest in the industry at 26%. So the company is in the growth phase, and we are expecting this trend to continue. If you look at our leverage, it's well contained. We still have enough space to continue to grow. Looking at some of the highlights, we continue to be currently the highest market cap company in our industry in the world, even though we are lowest valued company in our history on price-to-earnings ratio.
As I said, another dividend. Now they total 1.5 billion zloty, all accumulated dividends paid by the company in the history, which, you know, is a nice addition to the share price growth that we've had. We continue to be stronger abroad. Now, more than 60% of our investments are in countries other than Poland and close to that in terms of recoveries. We will talk more in the future about how we transform the company in terms of technology. This will be a main pillar for our growth strategy for the next four years, and I'll come back to that. This year, also, we got a few awards from the capital market, so thank you for your trust. They are mentioned here.
So overall, this has been a very good period for us. If we look closer at recoveries, you can see here a split. Poland gave us about 40%, while Romania about 20%, 40-something came from other countries, and this share is, of course, increasing following the investments. If you see how these recoveries matched our Active Accounting Forecast, it was another beat of 13% versus the accounting plan, which is as expected by us. I will tell about it later. We had very good results in three big countries, our three big markets, which is Poland, Romania and Italy, and we were below plan in Spain.
In terms of investment, it's a relatively slow six months, given that this 900 million is less than 50% of this 2.5 billion, which remains our target. This is as expected, and we think getting to 2.5 billion is quite realistic target. Although, of course, there are still many transactions we'll need to win in the second half of this year. The market overall is somewhat more competitive than it was last year, but still, it's a relatively good environment. We continue to invest money, expecting high-teens % IRR, which is as expected. If you look at some of the most important elements of our P&L, revenues were supported by another quarter of significant positive revaluation overall for the company.
OpEx is growing fast, 20% growth year on year. If you look into detail, there is a significant growth in legal fees and court fees. This is as expected, and it follows large investments that we made in 2023, partly 2022, and other years. This growth requires sending many thousands of cases through legal process, and we expense it fully through the P&L. And please expect that this relatively higher level of court fees and legal fees will continue for Q3 and Q4. If you look at salaries, which is the most important cost element in our business, they grew by 10%, which is also as expected.
Actually, it's a little below the budget, but this growth is mostly coming from salary growth as we continue to be in a tight labor market, especially in Poland and Romania. But also we grow somewhat the base of our employees following the big investments we made in portfolios in 2023. There is also a significant growth of financial costs, which comes from growth of scale of funding. We are comfortable here in terms of access to debt. We were quite successful in obtaining new funding from the banks, and we still expect new additional funding from banking loans to be completed in second half of this year, which limits our appetite for bond issues. Although, we do not exclude that we will go to the bond market in the second half of this year.
But that will depend on the specific situation and how much the banks will increase, and how much money we'll need for new portfolios. A few words more about technology. There's three main areas where we want the technology to change. The first is lead time, understood as let's make technology work, so we can accelerate the cash flow by processing certain functions in the collection, certain parts of collection process faster. And this is possible, and we'll be doing efforts, making efforts to achieve that.
Second is let's personalize more or hyper-personalize our communication with the customer, and therefore, be more effective in our work, and this will be also made possible through better technology and more iterations, more testing, which communication strategy is best. Third pillar is let's respond to customer needs, and let's create more easy ways for the customers to serve their debts themselves without interaction with human. This change, these three pillars will be driving the change into the next couple of years. We will be investing increasing amounts of money into this technology, but we will be expecting to make a good return on these investments.
This project and this strategy will span over four years, and we'll talk more in details about it by the end of this year, when we will also present to the market our strategy for the next four years. If you look at results per segments, you see here that in twenty-six months of 2024, we mostly invested in Poland here, 354 million PLN, following in Italy, and relatively little in Romania, and about 117 million PLN in Spain. That picture is satisfactory, but it will change much for the second part of the year, likely. We see a lot of potential to add investments in Poland.
We know that we'll add significant portfolio in Spain, already, and we're looking forward to investing significantly more in second half of the year in Romania. We don't expect to make some big investments in Italy again. So this situation looks good, and as I said, even though competition is somewhat higher, we are able to deploy money at very decent IRR. If you look at cash EBITDA, the results overall shows good growth everywhere, including Spain. If you look at EBITDA, three markets performed excellent, which is Poland, Romania, and Italy. And because we had a revaluation, a negative revaluation and also a significant increase in legal fees in Spain, the EBITDA dropped for six months of this year compared to last year. More detailed about it in a few slides.
Overall, if you look at this picture, once again, the total result is in line with our ambitions and plans that we updated after first quarter. This is better than the budget, but in line with what we put in our plans sometime in May and June, which bodes well for the full year. Now, a few words of commentary about each of the markets. If you look at Poland, the market was relatively stable. Please remember, this big supply in 2023 was partly one of secondary market transactions. Without that, the market is more or less comparable. In that market, we invested to have about 35% or 40% market share, if you look at unsecured retail debt, debt only.
So we likely are the leader on that market, and we see more potential in the second half of this year. If you look at the Polish results, as I mentioned, recoveries were excellent. They grew quarter to quarter, exceeded significantly our active forecast and somewhat our operating plans. Therefore, you can see another quarter of very strong revaluation and good, good results on the portfolio profitability. If you look at Romania, the market was relatively modest in size for this first six months. Still, we remained a very active buyer, with PLN 170 million zloty deployed, which gave us about 50% market share for the six months. We expect more supply in the second half of this year.
Q2 in Romania was another excellent quarter for results, for recoveries, hence another positive revaluation, and hence a very good profitability that you see here. Both Poland and Romania showed no signs of weakness going forward. Italy, you can see here a relatively good supply of portfolios, in our space of consumer unsecured. We had about 35% market share, which is quite satisfactory for us. It probably gives us a market-leading position, and we're very proud that this possibly was the best quarter in terms of profitability in our history. In Italy, PLN 71 million of EBITDA, largest in this horizon you see here on this slide, a positive revaluation, decent profitability, and again, a trend that does not show any sign of weakness.
In terms of Spanish market, the supply was somewhat contained, modest in the first six months, but that already changed with some big portfolios coming on market in July. We were quite successful on this supply here. For the six months, we had 31% share, which again is possibly number one position in consumer unsecured retail. We are not satisfied with the results for Q2. Obviously, we had a loss on EBITDA. We treat it as an accident, and a materialization of risks that happens from time to time, but not something that changes our view on the very good perspective we have on the Spanish market.
Now, what happened in detail is that some time ago, we bought, for the first time, one big banking portfolio, and this portfolio was performing initially for the first couple of several months above plan, but for the past couple of months, performed below plan, and based on that performance, we made a decision to write it down. The more concrete reasons for that is that we had an outside problem with the provider of direct debit service, so this service was not provided to us for more than 45 days, which negatively affected amicable process, but also resulted in those cases, many thousands of cases, not being sent as planned to the legal process. A delay was caused. That was one reasons for the problem, and this problem is dealt with already.
We have a different provider now. The second problem is that we saw that banks, not the banks, but the courts in Spain were slower in sending us cash than before, for some reason. It may be still some effect of strikes that already were closed many months ago, but for some reason, might have somewhat affected the functioning of courts or some other reasons. The fact is, the value of the money that the courts were supposed to send us significantly increased. A few times increase we saw in the past couple of months, so hopefully that will change and improve in the next couple of months. The third reason is portfolio-related reason. That was the first transactions with this bank, a big transactions.
The characteristics of this portfolio are somewhat different, somewhat less favorable to us than we expected, and therefore the curve is different, and there is less money now than we expected. This risk happens from time to time. Only in this situation, it happened for a big portfolio, and you see the results. Once again, we don't see this as a fundamental problem. It is, of course, a problem. It's a problem for making, you know, the budget of EBITDA for Spain this year, but it does not change our view almost at all about the future profitability of the business.
This portfolio, even after the write-down, is still yielding a good 10% of IRR, and hopefully we will still be able to improve our profitability overall in Spain, and we'll see much more often positive revaluation in the future than not. One more comment. Negative revaluation per portfolio is something common in the business. Every year we have some portfolios in every market that we write down, and of course, many more, we increase this revaluation. Only in this situation, the revaluation was concerning a very big portfolio, and that's why you see it here.
On the other hand, there's many other portfolios in Spain that overall are overperforming, and we'll write them up this quarter and will be possibly continuing to do so in the next couple of quarters and years. If you look at other markets, which comprise Germany, Czech, Slovakia, and France, the performance is very good. You see here the first signs of the French business going well, because it represents a significant portion of the growth. The results actually doubled year to year and quarter to quarter, if you look at EBITDA. So we continue to plan our efforts to plan our entry into France market by the end of this year, and we'll agree a business case, and then we'll be able to present it to the market.
So far, the results are very encouraging. Wonga and Novum, our cash loan businesses, had another good quarter. You see here a modest increase in profitability in both businesses, so we're satisfied with this result. In summary, it was a very good six months. It was a good quarter. Of course, the results for the second quarter is worse than the first quarter, but this was expected. The first quarter was extraordinary good. Please look at these results from the perspective of more than one quarter, ideally a year, 12-4 quarters. This six months tells us we are well on plan to deliver our targets, target growth of profit for the full year.
Of course, we don't know how much we'll fully invest, what the recoveries will be, but we see that July was on plan already, and we don't see any significant weaknesses in this first couple of weeks of August. We're well-funded. We see good supply of portfolios, so things look good here. If you look at funding, we continue to be modestly leveraged. We, as I said, have very good access to debt funding coming from banks. If we need additional money, we may enter the bond market.
If you look at the bond redemptions, the situation looks also very comfortable from our point of view, so it's one of the best period for us in excess of debt, if we need it, we will use it. And another comment I want to make is about regulation. As you may know, twenty twenty-four is a year where NPL Directive is being implemented locally within EU countries. Things are going well. Here, this directive has been already implemented in majority of the countries that we're in, with neutral effect on us. We're still at the effect, and we're still expecting it to be implemented in Poland, Italy, and Spain, and at this point, we expect this to be neutral. So there is no news on this front, which is good.
We are not aware of any other debt collection laws that could affect the value of our bank book at this point. And one other thing I want to point your attention to is something we also mentioned in our report for Q2, is a tax regulation, which is pan-European. It's called GloBE or Pillar Two, and it's a law that will be implemented in Europe soon, coordinated by OECD countries.
This law tells that if you are a big business, and big business is defined as a business with annual consolidated revenue in excess of EUR 750 million, and if your effective tax rate, as calculated in your financial consolidated statements, is lower than 15%, then looking at each of your companies in all countries, you need to pay more up to this 15% to have this minimal effective taxation rate. However, if you operate in less than six jurisdictions or up to six jurisdictions, you have a safe harbor law not to be bound by this law for another five years. Now, this law does not concern us now because we don't qualify, because so far our revenue is below EUR 750 million.
But if we look in the future, likely in the future, we will cross this threshold, and we will be obliged to look at this law. We will likely have an option of taking advantage of this, say, safe harbor. So it's a possibility that even if we grow nicely, then we will not be obliged to pay this tax for another seven years or so. But there is uncertainty how the business will be, what the law exactly will be, because it has not been yet passed in Poland. We know the directive, we know the draft. We have certain concerns that the draft is not very clear.
For example, we don't see in this Polish draft a clear statement that if we pay tax on our securitization vehicles, when we transfer the money from the Polish entity or international entity to KRUK S.A. to pay the dividend or repay the bonds, and we pay the tax, that we can compensate this tax under this new regime law. We don't say that. We don't see that, so that's why we ask questions, and we, through associations, we participate in talks with the government. We hope we expect and hope that, you know, those things will be clarified, but I'm mentioning it, because it's a very far-reaching regulation that is really changing the landscape for, you know, many businesses, many big businesses, and we may qualify for that.
Right now, we don't expect to pay this tax, but this situation may change, and we may have more clarity in the future, and then we'll be able to tell you, so my advice at this point is, please make sure in your model, in terminal value, you have this 19% corporate income tax in KRUK, because this law increases the chances that in mid to long term, this will be the case, so this is my summary. Overall, we're quite optimistic about the business, committed to the business, and you know, hopeful that this will be another very good year for KRUK. Thank you for listening, and now I will look at questions and try to answer them as best as I can.
The first question says: Do you see negative trends in recoveries especially after July and August? Overall, no. We see positive trend in Poland, Romania, Italy has continued. We are still somewhat below operating plan in Spain, but as expected, after this review in June. Another question: How do you see your competitive position taking into account difficulties by peers? You know, you saw the market shares, which show we are number one in all those four countries, most likely. I don't have, you know, full picture, but, you know, market share between 30% and 50% is indicating we're number one. So, and then I look at the IRR that we expect from this capital deployed, and it's quite good. So our competitive situation is strong.
Still, I would say we see some more money chasing portfolios than last year. Despite the fact that some of our peers are less active, there is other capital that comes in and fills in the gap, so there is no significant gap, you know, we need to work hard to get good IRRs and lose some portfolios, which are traded, in our view, at relatively lower the IRR. Overall, competition somewhat increases. Another question: When will we know your strategy, what should we expect? So we commit to communicate the new strategy by the end of this year.
This new strategy, to give you some hint, will likely say we plan, within the next 4 to 5 years, to invest about between PLN 12 billion and PLN 15 billion in portfolios, so doubling the, you know, doubling the business, because this is how much we invested so far for the past 25 years, and we want to invest similar amount of money in the next 4 to 5 years. So it's a significant growth of balance sheet and scale. And we need, and we want to transform technology in KRUK to be able to do it much more efficiently than we have now. That will involve significant investment, but expected good payback from these investments in the horizon of 4, a bit more than 4 years or more.
Another question: Could you say anythi ng about the accumulated performance of the Spanish portfolio since acquisition? Yes, so overall, you know, we started buying in 2015, 2016. Overall, this performance is good. There is maybe one mid-size portfolio that yields a relatively low return, and the remaining ones are double digits, mid-teens or more. There are some portfolios yielding today, and I'm talking now about our best estimate operating plan, which is more ambitious than Active Accounting Forecast. So some portfolios would be yielding even more, the high teens or over 20%. So overall, this performance is good and increasing and improving, and this one banking portfolio that we wrote down is more of an exception of the rule, but still, after being written down, it's still mid-teens% IRR.
So it's quite okay. Can you say anything about the provider you had... Sorry, I need to see more, in Spain, and if there is any chance to get compensation for this issue? I don't know if we can get any compensation for that. To give you a bit more detail about that, we struggled for the first couple of years in Spain to get quality direct debit service, as some of the banks were unwilling to provide it with that. Likely, this was because of the industry, that the Spanish industry or banks had bad rep, bad opinion about the industry, and direct debit is like granting a credit line. And therefore, we had the service provided by a fintech, by a less reliable company than the banks.
Now, the situation changed. We are much bigger. We had a good competitive offering now for the direct debit service, and this service is now provided by a reputable Spanish bank. So I think this problem will not appear in the future. Another question: Have you seen any improvements in the throughput from Spanish banks in the start of Q3? I'm not exactly sure what you mean. If you say, if you mean throughput, meaning supply of portfolios, then I would say it was already seen. We saw some big portfolios, and we succeeded in securing them already in the beginning of Q3, and there may be some more coming in Q3 or Q4.
But it's another specificity of the Spanish portfolio market, is that those portfolios tend to be not many in terms of numbers and relatively big, which makes it more tricky, for example, when we have, you know, a problem, temporary problem with one of those portfolios. But overall, you know, after Q3, likely we'll see a good level of investments in Spain that we'll say, which is quite satisfactory for the full year. So we probably will be increasing our investments more in other countries, and other countries, I mean, Poland and Romania. Is there any opportunity for... I'm sorry, I just lost sight of the questions. I see them again. Okay. Is there any opportunity for us to expand, enter into countries out of Europe?
Of course, it's an option, but looking at the market now, I would say there is still plenty of things we can achieve in those four countries, and there is France, which is quite encouraging. Beyond that, we don't have any concrete plans, but I want to mention, there's two big markets that we like and we are not present in. It's UK and the US, and likely at some point we'll take a look at them. Beyond that, of course, there's possibilities, but we have no view of those other non-European markets at this point. Could you elaborate more on technological transformation and goals, deadlines, stability, and costs as expected? We will elaborate on that, but please be patient.
We will be able to tell more detail when we talk about the strategy in the second part of this year. Somewhere towards the Q4, we'll be able to tell you more and more concrete details about that. That is in the making now. Another question, is group planning a bond issue, and when? So we don't know when the next bond issue will be. As I told you, we're quite happy with increased funding from the banks. Possibly, there will be more money coming from banks still in Q3, and depending on how much and what we will need, we'll decide about the debt issue. So it may be that will not be a frequent issuer of bonds in the next two quarters. In the longer term, I think yes, but this is undecided at this point.
So, you know, we'll see how reality unfolds and react. Another question, you have mentioned the growing OpEx costs, and number of employees. You're also investing a lot in IT and automation. Will there be a time that you'll be able to reduce headcount on IT investments? Could you comment on the new market expansion? Let's take those two. So, if you look at the growth of the balance sheet, which is in an approximation of how much work we have, and the growth of FTEs, you can see that the growth of FTEs is much smaller than the growth of balance sheet of business. In the future, in this next four years, likely this will be even more visible.
So we think we'll be able to grow the asset base by 100% at, you know, to double it, but likely we'll need maybe 20% growth of FTEs to achieve that, and the answer will be technology, automation of processes. We will be doing much more technology and technological processes, so I don't think the number of IT personnel will decrease, but I think we'll be able to make use of these resources that we have in a much more effective way once this transformation is completed. And another question was the new market expansion. So, you have purchased portfolios in France. Should we expect more investments there already in second half of 2024? As you may remember, we have bought one forward flow agreement, two years agreement, from BNP Paribas Group.
This investment is going very well. You see this already in results in other markets. We may decide to buy another portfolio this year. It will not be very significant, and we see some other potentials, too. As planned in the second half of this year, likely toward the end of the year, we will decide on the business case, how to enter French market, and possibly at similar time, a strategy will be able to confirm it, what we plan to do. But all things today encourage us to continue our work on the French market. You also ask, shall we assume the Q2 profitability, understand about the French market as good guide for third and fourth quarter? Possibly. Possibly.
Of course, it's, you know, there is the Slovak and Czech and German assets there combined, and but the French market is rather accelerating, while those others are more stagnant. Do tech transformation means considerably increased R&D expenses in the next quarters? Yes. Likely starting from twenty twenty-five. Possibly a lot of them will be capitalized, but we don't have the details of that yet, and that's also that we'll be able to tell you more concretely when we communicate about the strategy toward the end of this year. Again, this transformation should have a very high NPV and good return on increased recoveries or in decreased costs or accelerated recoveries. I think I covered all of the questions. I'll just wait a moment to see if nothing else pops out.
Yes, I think I covered all of them. Well, thank you very much for your time and interest in our company. Hopefully, you will be able to meet me or my IR team on the road, and if you need any further assistance, have questions, please always remember to contact us. You have our contact details here on the presentation. Thank you, and have a good day!