Hello everyone, and welcome to the KRUK third quarter 2022 results call, and thank you for your patience. My name is Daisy, and I'll be coordinating your call today. You'll have the opportunity to ask a question at the end of the presentation. If you would like to register a question, please press star followed by one on your telephone keypad, or if you have joined us online, please use the written box. I would now like to hand the call over to your host, Marta Wasilewska from Wood & Co to begin. Marta, please go ahead.
Good afternoon, everybody. My name is Marta Wasilewska, and I represent Wood & Company, the host of this call. Thank you for finding the time to join us and listen to Michał Zasępa, CFO of KRUK. Now without any delay, Michał, floor is yours.
Thank you, Marta. We'll use the presentation, which is available on our website on last quarter results, and I'll be telling you the slides I'm looking at when I comment the results. I'm now looking at slide number three, and I'm happy to tell you that this is a record time for KRUK if you look at net profit. We have PLN 677 million. We also have the first ever results in terms of cash EBITDA and the best three quarters we've ever had in terms of purchases of new portfolios and recoveries from those portfolios. This we've been achieving at a relatively modest indebtedness, 1.8 x net debt to cash EBITDA, achieving, I believe, quite decent return on equity in the company.
Looking at the back book, you know, the base for our current profitability, for liquidity comfort, we continue to say we see no difficulties in recovering on any markets. We, at this point, see no effect of possible macro slowdowns which of course makes us very, very happy at this point, as we all read news about the effect on us. On the other hand, if you look at the new books, the front books, we are in process of significant and further investments in portfolios this year. This PLN 1.3 billion of portfolios we have bought is already significantly lower by a few hundred million złoty than what we have already for our history.
I am comparing it to the last year investments of over PLN 1.7 billion. We don't know for sure, but it looks like it's quite probable we'll be beating that number. The question is: Will we invest below PLN 2 billion this year of newly [audio distortion]. It looks good. Although, of course, we have entered a time of increased costs from increasing inflation and higher costs of debt because of higher interest rates. This is something we will need to face and try to think how to build greater potential on revenues to offset in the subsequent quarters. I look now at slide number four, where you have some other important achievements we've had. Just to remind you, we are a dividend-paying company.
This year, we paid close to PLN 250 million, roughly in dividends or buyback. We are likely to continue stick to the dividend policy we introduced last year, which says at least 30% of profit shall be paid out to shareholders. Another important element of our focus this year is technological [audio distortion]. Three major which are examples of that. Already, over 40% of amicable recoveries are done through online payment. That's a nice increase over the past couple of quarters and years. We also have an increasing number of our customers using our internet telephone.
Most of these agreements today, even if they are signed in a physical meeting, is signed actually without the use of paper, which also means less costs and less time. This technological development is about speeding up the process and also making better informed decisions. What process, what communication to use. Raise your attention to is we are now a bit more vocal about our ESG achievements. One of these achievements we're quite proud of is that without any actions we are a very well-balanced company in terms of gender. 63% of our top managers are women at the group, which is quite unique if I compare us to the other companies I know.
[audio distortion] Monday, I believe, will be part of the WIG20, which also marks our 12 years as a publicly listed company. We are today among those top 20 publicly listed companies in that country. Looking further, if you look now at business on slide number six, you see that we are moving towards a great t hree quarters of this year, only somewhere below 50% came from Poland. You see an increasing share of Italy and Spain. If you look below, the share of new investments shows the trend for the recovery that will be followed at some point by that over 60% of the investment.
That is reflecting our growing confidence in our ability to make money in Italy and Spain, and also our ability to collect more and more effectively, and as a result, our ability to place more competitive pricing in those. [audio disortion] Most important measures, we're happy with the results on every market. We've beat our operating plan goals on all of the markets in consumer unsecured, actually in other asset classes as well. We significantly beat the planned investments, investment level for those three quarters. As I said, the Q4 looks quite promising, and it has a high chance to end as a record -high year for our investment this year. Although the competition is strong, nothing is given for free.
Of course, there are still a few possibilities which are uncertain. We'll see how well we do on those several auctions of our portfolios we're facing in the next several weeks. On slide number seven, I'll also tell you that if you look at three-quarter results and this PLN 677 million, please expect that our Q4 will be stable, but rather will be one of the weakest quarters in terms of net profit for reasons which are planned for us and have to do with recognition of revaluation and some other costs. This is something we were expecting and we planned. In terms of revenue, because of strong recoveries, the...
... for this quarter is relatively modest compared to other quarters. It's somewhat over PLN 60 million. But the remaining potential for future revaluation remains still is quite significant. You most likely you'll see it in the next couple of years as it continues to be revealed in our P&L. Three quarters, as we see, 70%. 70% is concerned with the next six months as it stands here. If you look at the costs, you can see they are growing, unfortunately, quite fast. Compared to last year, the increase on operating and administrative costs was 23%, which is a higher pace of portfolios. This requires increased amount of work and also legal costs.
It's well substantiated reason to have higher costs, and it's a positive. There's also negative coming from inflation and major financial costs. We need to catch up with the labor market and the fast increase in salaries, especially in Poland, but also in Romania and in Czech Republic, to less degree, but also to some degree in Spain and Italy. For us, because we cannot just increase prices to our customers and increase the cash flow and recoveries. We do have certain protection against inflation on the longer term horizon, as in most of the countries, except for Romania. The value and the nominal value of the debt that we're pursuing is increasing in time w ith the interest, late payment interest, and this late payment interest is correlated to the value of interest rates in a given country.
For example, in Poland, this late interest is currently about 12%, but that means possible more recoveries in a few years, not today, and the costs are increasing today. Offsetting this, we need to find more ways to optimize costs, to automate costs, invest more in IT to eventually see less people cost on our P&L. Or extract more value from the back book or rather, and increase somewhat the expected returns on the newly bought portfolios. This is all of the areas we'll be pursuing.
If you look at the finance cost, there is also a significant increase coming from two facts. One is the increase of the value of the debt as we increase the spend on purchase portfolios and other increase in the interest rates in Poland and also in Eurozone. This is something we are mitigating by also signing hedging transactions. We have significantly hedged significantly Polish zloty debt, swapping it to euro fixed rate instruments. At this point, it affects the cost of funding for Poland in the following quarters. We are also thinking currently the EURIBOR exposure is not hedged in the group at all. Likely in Q4, we will make such a transaction to hedge it partly.
In doing this, we will also limit ex-FX exposure. We will use on with the base instruments to have the coverage for the hedge possible further increases of interest rates on our business. The business is well-funded. I'm looking now at slide eight. If you look at the covenants of net debt to equity or cash EBITDA to debt, these are relatively low. If you look at the interest coverage ratio, the covenant which says how many times is cash EBITDA greater than the current service of debt has gone down over past year due to increases of interest rates. It used to be 16, now it's at this point 10.5. This is today the first binding covenant tool that we have.
That's also a reason why we want to hedge partly our exposure to EURIBOR to prevent a situation of negative effect of significant future increases of EURIBOR on the business. [audio distortion] continue to buy portfolios. I'm also happy that in times of somewhat worse access to debt funding on Polish bonds, we were able to convince several banks to increase their exposures in KRUK. Those discussions lasted a few months, and most of them ended sometime in September. Now we are better prepared to continue to invest in the environment that looks to be quite good. I mean, there already is some degree in Romania, and less so yet in Poland. I think the Polish market will also follow suit at some point.
On slide number nine, I'm drawing your attention to the fact we are increasingly focused on automation, online solutions, cloud-based solutions. [audio distortion] using more data to have better, more effective communication with in-depth customer. That's something we will be investing in our resources, money, brains, that will require likely some additional costs to be verified, tested in the next couple of quarters. Clearly we see this is an area of further possible significant optimization and possibly also a competitive advantage. We strengthen our organization this year to tackle these opportunities. You see here that, for the first time in a few years, Italy and Spain are making over 50% of the investment.
That likely will continue in the future as we are able to get there to a higher market share than before. Recoveries, as I said, were on plan on every market out of the six or from other markets. If you look at EBITDA, all of the countries are contributing positively with the exception of Spain, but this is the history of the corporate portfolios we wrote down in quarter number two, which I treat as a one-off event. Q3 expenditures on portfolios are somewhat disappointing. This is due to the two facts. We have increased our expectations for returns because of the increased cost of funding in Poland. Secondly, Polish market remains to be quite competitive.
This may partly be the reason for our very high market share last year. Some of our competitors probably were more motivated than us to buy portfolios this year, but that reflects this reality of very high of next year. We're not, you know, so concerned. We have a very good book of portfolios of PLN 2.6 billion. There are still several nice opportunities in Q4. Let's see how the year ends. Overall, this has been a very good quarter for Poland, for the debt management business, but also for Wonga, as I will tell you in a minute. If you look at Romania, similar level of investment, but this time we're quite happy. Very happy with recoveries, as well.
They were so good that they. Well, they allowed us to again recognize a positive revaluation, although this time more modest than in previous quarters. This business remains to be very highly profitable. You can see this measure of portfolio profitability at high 47%. The Q4 prospects for Q4 look quite promising in terms of new books. The new expenditures over PLN 400 million and still a few interesting transactions on horizon. Very good recoveries, both on unsecured consumer, which represents 85%-90% of the business and on the remaining corporate portfolios. Another quarter of positive revaluation, a nice PLN 11 million, as you see here, and quite good profitability of 29%.
Few interesting opportunities still possible for this year, which we are pursuing, a modest positive revaluation from a consumer unsecured of PLN 4 million. We see a growing trend of profitability on that [audio distortion]. Very good quarter if you look at recoveries. Modest investments. That's, you know, the downside. We didn't find more opportunities to buy their very good profitability for the Q3. If you look at Wonga, the three quarters for this year were very good for the business. We doubled at the door. This year looks to be the record year for the company. The big challenge ahead, the change of the legislation that is very likely to happen from the beginning of next year. The company has a plan.
It's in process of implementation of new product offering under the new legislation, which cuts the limits for non-interest costs. The new year will be a test how well these products are accepted by customers, where the competition will be. You know, we come prepared as best as we can into somewhat turbulent, uncertain 2023. I believe we have one of the best teams on that market. We have loyal clientele of more than 50,000 or 60,000 clients. I think we have good potential to also continue the business in more difficult [audio distortion]. Take a look at slide number 19. You see the full results for Q3.
Please expect Q4 to be a bit more modest in terms of net profitability, as I mentioned. Single digits as a result of high investment in debt portfolios and therefore lower than planned. Transfers of funds from these investment companies that we operate to mother company, and that directly means lower tax to be paid. Overall it's a good ground to continue to grow the business in 2023. I will now look at slide 23 when you have the updated estimated remaining collection curve. You can see that the total is PLN 12 billion.
You see here that 70% of the change of the forecast concerns the next six months, which means the long tail of this curve remains likely to be modified positively in the next years as we continue this trend of recoveries. If you look at slide number 24, you can see here this PLN 1 billion of available credit facilities to be used for further portfolio purchases. You can see a relatively good level of flexibility on cash flow coming from the fact that there is not so many redemptions on bonds coming up in 2023 or 2024. It looks like we are in a good situation in what may [audio distortion].
If you are interested in what we do in managing our ESG, we are now happy to show you more of the initiatives. That's slide 26. I will not cover that in this call. I invite you international investors, after summer, I was happy to meet over 50 people, in few locations in the U.S., in London. Actually, Wood accompanied me on most of those meetings, and I was happy to see good interest to meet and people to consider mostly to buy our stock again, as many of these investors have invested in us in, you know, many years. Some sold their shares. I think predominant majority made good times or more difficult times. We are aware of uncertainty coming from higher inflation, higher interest rates.
We are somewhat under pressure of increasing financial and operating costs because of interest rates or inflation. We believe we still have possibilities to grow the revenues from the back book and also to invest at increasing IRRs. Expect a solid Q4 at this point. Thank you for listening. Operator, please help us now with the questions.
Of course. If anyone would like to register a question, please press star followed by one on your telephone keypad. Or if you have joined us online, please use the written chat box. If you would like to withdraw your question, please press star followed by one. As a reminder, that's star followed by one on your telephone keypad or the written chat box online if you would like to register a question. We have no questions in the queue. I'll hand back over for any closing remarks.
Thank you very much for your time and listening. To change the strategy. One remark on the buyback proposal that we have asked our shareholders to vote on next Wednesday. This is a tool that is not a tool that we want to implement or use immediately. This is a right to do the buyback program, which always have to be approved by Supervisory Board. [audio distortion] is significantly undervalued. We used to have such tool already for several years. The right to use this tool had expired. We proposed to investors to renew on terms similar to previously outlined. You know, the shareholders will decide whether this tool should be something we have for some bad times. Thank you very much for listening and-
We have now since had a registered question. It reads...
Very well.
Good afternoon, and thank you for your presentation. Are you in a position to provide any 2023 outlook now?
2023 outlook is, I can tell you that in terms of investments, we are preparing for another good year. If the investment could be a target that will be setting for ourselves for the following year. This may be a year with at least as good profitability on the bottom line as this year. A lot depends on, you know, how much we'll buy this year and what the net results will be eventually for this year. I'm not sure how, you know, able we will be to show growth because of the inflationary pressure and financing cost pressures.
Again, this in some scenarios it will be possible, if the back book or [audio distortion]. We will, you know, consolidate our position further on the Spanish and Italian market, work on further improvement of profitability on those two markets, a nd build potential to grow profitability, net profit in the mid- to long-term horizon. Even if the inflation and interest rates will mean somewhat less or slower growth of profit in the near future, 2023, for example, that may be, I think, offset with good investment in the longer potential. I'm not today prepared to give you a more precise outlook, because release the Q4 numbers and the budget is approved by our Supervisory Board, and we know what the plan is for next year. Overall, you know, it looks like anyway it will, it should be a good year for us, 2023.
Thank you. We have had another question registered. It reads: Do you see any funding issues emerging for your competitors in some of the countries of your operations? Do you expect increasing unemployment going forward?
Increasing unemployment. From the observations of the key markets that we have, i n Poland, in Romania, in Czech Republic, the labor markets remains very tight. It would need to be a really significant change of macroeconomic outlook for this to change. I expect some increase in unemployment, but that may actually be good for the economy, as today, Polish economy, in my view, is constrained with inadequate supply of labor. Of course, you know, there is a scenario where things get very bad and we'll see significant growth of unemployment. I don't think it's a scenario that has high probability today. In terms of access to funding of our competitors, this is interesting because I think this may be the issue for 2023.
You may know, you may see that KRUK is leveraged at the level of roughly 50% of what many of our competitors are, which means they are much closer to covenants than we are. If interest rates in Eurozone will move up above, you know, 3%, I think some of those or some of our competitors at some point may be very close to this covenant and may be constrained in further expansion of their balance sheets. That will be good times. I think that could be good times for KRUK with our relatively low level of indebtedness. I think the money will be available for the quality companies, o nly not all of the companies for covenant or cash flow reasons will be able to tap it.
That's a good situation for a company which is relatively low leverage like KRUK.
Great. Thank you. This is all the questions we have today. I'd like to thank everyone for joining the call. You may now disconnect your lines, and have a lovely day.
Thank you very much. Goodbye.