Good afternoon. My name is Michal Zasepa. I'm CFO at KRUK, and it's my pleasure to present Q1 results of 2025. I'm using the presentation that is available on our website. This was a good first quarter of the year and a good start. We earned PLN 252 million, which is somewhat more than we budgeted for the start of the year. It is less than we earned in the first quarter of 2024, for the good reasons, last year was a record high level of revaluation. This year, we probably will see revaluation to be spread more evenly across quarters. Also, because of that, we'll see net profits to be more evenly spread over the quarters. If you look at the underlying P&L elements, recoveries were strong. Costs were somewhat lower than planned in terms of overhead.
This result was better than planned despite the fact that we had higher legal costs than we budgeted, and they were higher in Spain and in Italy. On the other hand, we had an extra gain on Wonga, which came from an important synergy. We see better collections on Wonga's portfolios, which are serviced by KRUK. In accounting, it was required that we raise our recovery curve, and that affected the net results, with about PLN 17 million of additional gain for this quarter. Overall, looking at the business, we're happy with this result, and we are excited to continue to grow. We keep our expectation that 2025 will be another growth year for the company. Looking at recoveries, you have a picture where Poland and Romania are performing superbly, 100% or a little above 100% of operating plan.
You have Italy, which is right on spot, our plan, and you have Spain, which underperformed on operating plan, especially in January, but later improved in February and March, remained below operating plan, but was right on accounting curve forecast. On total, you see that we exceeded, by about 6%, our accounting curve. Investments were relatively modest for the first quarter, as expected. We expect more investments to come in the next couple of quarters. We sustain our guidance of about PLN 2.5 billion of investment for the full year. Please bear in mind that, on the top of this PLN 230 million, we already have secured forward flow investments for about PLN 500 million in 2025. We expect, as you hear, lower investments this year, this PLN 2.5 billion than last year. That comes from the fact that last year we had very high market share.
We expect to have somewhat lower market share this year. Also, we will be more selective in our investments in Spain because of difficulties with the legal system there. We will be watching how the situation evolves. If you look at some of the cost items, we had somewhat lower overhead costs than we expected. That comes from some of the delays in infrastructure and in IT costs. Also, some deferred timing of the cost of relocations. KRUK has a new head office in Wrocław. If you are in Poland, we invite you to come and visit. It's a very nice place to work. Some of the costs are also cost savings.
On the other hand, we had, as I mentioned, higher legal fees in Spain and in Italy than initially anticipated in our budget. Now, on slide 10, you see segment analysis, super performance on EBITDA and cash EBITDA in Poland and Romania. You can see EBITDA in Italy, stable year on year, despite the fact that we grew assets. This is because high legal costs in the specific first quarter of 2025. There is no reason to worry here. In Spain, the results are depressed by lower than recoveries than the operating plan and also by these additional legal costs. It is about PLN 18 million of additional legal fees that we incurred in Spain in the first quarter of 2025, which would have otherwise been invested throughout the entire year.
These results should also improve in the following quarter. Looking at Poland, it's been a slow quarter, as expected in terms of new investments, but second, third, and fourth quarters should be much better than planned, than this, what you see here. It was a superb quarter for our recoveries. As a result, we were able to once again positively revalue our assets. Please expect this trend to continue throughout 2025 and beyond. In Romania, a good start in investment, PLN 75 million. We see more opportunities to deploy capital this year in Romania than a year before. We also continue to see strong recovery trends, another quarter of strong positive revaluation, very good results overall, as you see here. Italy, we already made some investments here. We have some forward flow contracts.
The competition possibly is somewhat higher this year than it was last year, but still, we expect to realize our investment budget and see good profitability. You see another quarter of positive revaluation, which also bodes well for the future quarters. The results for Q1, as I mentioned, are burdened with higher than average legal costs that occurred in Q1. That comes with specificity of the portfolios that we bought. Finally, we have Spain, where we will be more selective in terms of investments. We were in the first quarter. Recoveries were below expectations because they were below operating plan. They were right on the accounting curve plan. That is why there was no reason to change the forecast for future recoveries. We are now waiting to see the results of April.
Then, of course, we'll be observing the trends in May and June to see if this new regulation called MASC, MASC, which aims at making the legal process in Italy more effective in the mid to long term, but initially it may further delay the case processing in courts in Spain, will affect us or not, because it requires one additional step of obligatory mediation between the creditor and debtor that needs to be done. If it's not successful, the documentation from this process needs to be sent to court. So far, we see no effect of this new law, which came into force on the 1st of April, but it's too early to have final conclusions on that. We will probably wait to see May and June. So far, let's say this risk could have not materialized.
We'll see, in the future. Overall, this is a temporary risk. We're quite confident that Spain will be our good and attractive and profitable market with this uncertainty we're still encountering in Q2. Once again, we have accelerated sending the legal cases to courts in Spain so that they are not obliged to go through these MASC procedures. That meant about PLN 18 million of additional legal costs that will not occur now in Q2, Q3, and Q4 in total. The results will be better by that PLN 18 million than what we had budgeted in the following quarters of 2025. The other markets, which is France, Czechoslovakia, and Germany, performed fine. Just to remind you, we are developing our business in France, so please expect investments there.
All of these investments in Q1, this PLN 47 million, are our new investments in France, which is doing well. We are in process of exiting and selling our assets, closing our operations, closing our companies, on the other markets, enjoying good profitability in the meantime. Wonga and Novum performed just fine. Of course, there is this extraordinary gain coming from revaluation of recovery curve in Wonga, but that is an important business element. The fact that we are able to do this proves that the synergy between Wonga and KRUK is even stronger than we anticipated, and it bodes well for the profitability of that business in the future. Novum also had another good quarter, although it is a small, small business. Overall, we are quite happy with how the results pan out for Q1.
We are, you know, doing our best to move ahead strongly on the digital transformation. I may say I'm proud of KRUK managers to organize their work well and to deliver everything that was planned in terms of the goals for this first quarter. It's a busy schedule and a lot of work. We are, in the next coming months, deciding on some key technology partners, for example, providing us a workflow system. We're very advanced in selecting such a partner. There are many other initiatives that are undergoing, but it's fair to admit it's an early on process. It just started, but it's a good start of this transformation process.
Just to remind you, the goal is to make a state-of-the-art IT infrastructure, further optimizing our processes and allowing us to earn even better in the horizon for the next four, five, five years. Maybe a word of commentary on the power outage of Spain. On this note, I apologize for my informal outfit today. I was stuck in Lisbon. My flight was canceled yesterday, but I am happy to say that our business in Spain did not suffer much because of this outage. All of our data were safely stored in the outside centers, data centers, which proved their worth. Nothing bad happened. Our people needed to go home after one and a half hours yesterday because there was no electricity in the building, but we resumed full work today in the morning.
We do not expect any significant negative effects because of this huge outage that happened throughout the Iberian Peninsula. On this slide 22, you see our credit facilities. We enjoy very good access to that funding. We're talking to banks about enlarging the exposures, and we're also quite successfully placing bonds to Polish retail investors. It's a very comfortable situation now on the Polish debt market, so it's not a constraint at all this year. I think this is all of the highlights. I would welcome your questions, please. Questions tab. I have the first question. Who are the competitors that you're seeing getting aggressive in your key markets? Would you be able to comment on that? It's the usual, it's the usual club. I wouldn't say they're aggressive.
I would say, they are a bit, you know, more brave this year in some instances, than the others. As you may know, some of our competitors were constrained last year and previous year because of the restructuring, the liquidity constraints. There is no, you know, one or second clear biggest competitor, but, but, you know, we, we see companies, like, B2 Holding, like Hoist, like Banca IFIS in Spain, like Link Financial, in, a few of our, countries that are quite active. There is also EOS, Intrum with the money of Cerberus is also becoming more active. PRA as well. All of those biggest, European, or, or, or American companies are present and from time to time winning portfolios from us. Sometimes we are winning from them. I would say it's business as usual. We had a high market share in 2024, 2023.
It's natural that this year some of our competitors would like to bite back and get some more portfolios. Another question. Do you see signs that banks want to further decrease the risk exposures of the lending portfolio following the recent market volatility? In other words, there could be positive consequences for KRUK as a result of the recent tariff volatility through more attractive than portfolio purchases opportunities. No, I don't see any direct impact of that. Please remember we operate in a relatively stable supply environment. Banks are regularly selling consumer unsecured debt portfolios because the provisioning loss imposes on them the necessity of writing them off. They also have their process. It's a relatively straightforward, fast collection process. They mostly sell as early as their strategy calls for.
The only change may be French market, which where this propensity of selling has been increasing, but I don't see any direct effect of the tariff war on our business, on the bank's propensity. I do see a stable and as expected supply of portfolios on the market. Another question. Could you share your plans for issuing bonds in the nearest future? We may be active in the next months on the Polish bond market, but I will not be disclosing any details of that now. We likely will not be active on the European or Nordic bond markets in the next couple of months because we probably will have cheaper options of funding still in Poland. Another question. Do you expect the higher legal costs for Spain and Italy to continue in the upcoming quarters? Go from the back book that we have.
In Spain, we virtually sent all of the cases we could, that were available. Of course there will be some, but there will be less in Italy. Probably it's not extreme, but also Q1 was specifically high. I don't have a forecast for that in front of me. Some part of this answer will depend on what we will, what will we buy, what kind of cases will we buy in the next months of 2025. Overall, you can treat Q1 of 2025 as an extraordinary high legal costs situation, which should look better. It's not better or worse, but this cost may be lower or to the proportion of our assets on those markets than in Q1. Another question. Do you maintain your investments plan for this year? Yes.
This PLN 2.5 billion of investments continues to be our, our guidance. If you ask us, okay, what's your guidance for profit growth? Of course, we don't give a forecast, but we guide you to look at the, at the, assumptions for the new option plan, option stock plan, stock option plan for the management of KRUK , which calls for a minimum of 12% growth on the, profit before tax. This is our minimum threshold, which we should, which we would like to exceed this year. Another question. How do we think about Spain? Hypothetically, what needs to happen for you to go back to your original recovery expectations as of 2024 beginning, I mean, before the revaluations? We would need to see that the cases were successfully admitted to, to the process, to the, to the legal process, which we believe will happen.
We assumed in our 2024 Q4 revaluation that 90% of this change in the forecast is a loss and only 10% is a deferral in time. The upside is it will not be 90% loss. It will be 10% loss or 0% loss. Only the money will come later in time. That is a possibility and an upside to the current revaluation, to the current situation of the value of the assets. However, if that happens, we will not recognize it instantly, you know, in Q3 or Q4 2025. It will be watching the path of how it will progress, and it will take us a few years to recognize it. This additional revenue will be coming through recoveries, delta of recoveries to the accounting curve, and maybe some positive revaluations every now and since.
That is a positive situation. It is possible, a possible scenario that we will regain everything of that. There will be some loss of money in terms of time value of money, but in cash flow terms, it may be that we will recover everything or more than we initially thought. We saw the situation many times. We are not certain of that. As usually, we are conservative in accounting. There is still uncertainty. If you ask me in three, four years, will you do well with the portfolios you bought in Spain in 2022, 2023, 2024? I am pretty sure we will be on the positive side and with good NPVs and decent, high 10% IRRs. A final question from one investor regarding the forward flow.
Could you please provide us breakout of the countries that make up the forward flow agreements? We don't give that detail, but most of that from, top of my head, is coming from Italy, where this is most frequent, a little bit from Spain, but it's a tiny bit, and some from Romania, and virtually almost nothing or close to nothing from other markets. From what I see, these were all of the questions. I'll give you another 10 seconds to ask some more. There are no more questions. In that situation, thank you very much for your interest in KRUK and your time. I wish you good investment decisions in those volatile times. We're moving ahead. We think our situation is quite stable and we're optimistic about our prospects. Thank you and goodbye.