Good afternoon or good morning. Welcome to a call conference for KRUK Group. My name is Michał Zasępa. It's my pleasure to host you to this meeting. I'll be using the presentation which is available on our website since yesterday. Please let me guide you through the Q4 or full year 2025 results. In the meantime, and after my presentation, please use the Q&A the functionality here in Teams to ask your questions. I will answer them after the presentation. Let's start. 2025 is a record year for the business. If you look at operating profit measures, such as EBITDA, Cash EBITDA, there is a healthy growth of 12%. It's also 12% that our assets grew by.
The net profit growth is much smaller, and the result for that is taxation. There was a release in tax assets. Last year, there was more tax that we paid or created additional reserve provision for deferred tax assets this year. Fundamentally, this has been a healthy growth for 2025, despite the fact that during 2025, Romanian lei depreciated versus euro and Polish zloty, which cost us about PLN 41 million. Despite the fact that we have increasingly invested and spent money on digital transformation, the OpEx for the digital transformation, which started at the beginning of 2025, was for the year about PLN 30 million. You have this PLN 70 million of additional costs that occurred in 2025 and depressed our results.
Still, the business grew by about 12% on operating level and on to profit before tax level. We ended that the year with PLN 11.6 billion of portfolio worth on our balance sheet, again, 11% growth, with healthy indebtedness level at 2.6, net debt to cash EBITDA, with record high recoveries, investments, moderate, somewhat lower than our initial plan. They were PLN 2.2 million, but on the other hand, with decent return, you will see later in this presentation, we assumed 2.3x money return on the investments we made back in 2025. Overall, a decent year, although it's fair to say, we budgeted for higher growth, we have not realized fully our plans.
Let's look at the long-term horizon. You may see here that this was a year where we added PLN 2.2 billion, which is less than in the 2 previous years. Please remember, in that business, there is this strong inertia that allows us to continue to recognize the profit and revenue growth a few years after the purchases. That's why this level of investment, especially if it's on good return, should not undermine our ability to grow the business in the future. The business is very strong in terms of cash flow. You can see a healthy growth of Cash EBITDA throughout the years and also in 2025. Also, our recoveries level and the...
for the total consolidated group level were showed very healthy growth. This has been excellent results in Poland, Romania, good results in Italy, relatively weak results in Spain and in France, but the total was quite satisfactory. We finished the year with 20% return on equity, as expected, despite the fact that our net profit was somewhat lower than budgeted. If you look at slide number 5, it shows a split of the recoveries. You may see Poland contributed about 40%. The recoveries on total were good. They were also in each of the quarters of 2025 and in Q4 above.
The accounting, this conservative forecast that we had, this percentage is single digits, and it should remain single digits. In 2025, we invested across all 5 of our markets, Poland, Romania, Spain, Italy, and France. The biggest single market for us was Italy, and this year we faced somewhat higher competition than in previous years, but this is also the worth to consider in context of decreasing interest rates. Our expectations for returns did not decrease.
The market went down somewhat with IRR expectations because interest run-rates went down. Also because in some of the markets, after two years of dominance of KRUK, some of our competitors were more brave and possibly wanted to invest more. We let them do it given that we've realized our goals. The results, we believe, they are quite healthy, although not as good as we wished for at the beginning of this year. You once again see here that on all the levels, apart the net profit, the growth was double digit.
The costs increased, operating costs increased year-over-year. This increase was driven by salary increases, which grew in line with the market. Also, as I mentioned, there is an additional increase coming from digital transformation, roughly 30 million PLN, and some increase in legal costs. Finance costs grew as well because we had more debt. On the other hand, the interest rates in decrease set off some of that increase, and also we had a positive impact of hedging instruments, totaling about 60 million PLN. Once again, our revenues in that year were negatively affected by depreciation of RON. Despite that Romanian results were excellent for the year, which you will see in a minute.
The company is very well capitalized. We enjoy good access to debt, both from banks and the bond investors. We are ready to continue to deliver on our strategy, which calls for increasing investments, but also increase in recoveries above what you see in estimated recoveries. This conservative accounting forecast, which calls for the digital transformation realization in the next couple of years, and I will touch on that in a few moments. This is a look at the segment business lines performance across our markets. In 2025, you, as I said, you saw very good deployment of into portfolio purchases in Italy, where we enjoyed, again, a leading position.
It was a good year in Poland, although we did invest less than last year. There you could see that our investment discipline limited somehow, somewhat our appetite for portfolios. Our market share from this year was lower. We had, on the other hand, excellent year in Romania, and we withdrew from some of the tenders, especially for banking portfolios in Spain, waiting for more stability in our collection process, and especially more stability in the performance of Spanish court. If it wasn't for Spain, we would achieve our planned target of PLN 2.5 billion investment. Still, this PLN 2.2 billion comes a decent IRR, so we're satisfied with this result.
You can also see that we optimize between markets to get the maximum NPV, to get the maximum IRR from the deployed capital. That's why we decided to decrease some of the investments in Poland, or not to be more aggressive in lowering our expected return in Poland. On the other hand, we could achieve the desired return level in other markets, Romania and Italy. That's why you're seeing bigger investments there. You can see that all of our four markets are profitable with good EBITDA. We were happy with great results from Poland, great results from Romania, despite the fact that there is a decrease versus year-on-year. That comes from just decreased amortization of our very profitable portfolio.
We also very happy to see record results, almost PLN 300 million of EBITDA. From Italy, we are not happy with the results in Spain. We hoped we expected higher results. Still, the business continues to be profitable in 2025, achieving this PLN 130 million of EBITDA for the full year. We made a write-down of our assets in France, and some write-down of our assets in Slovakia, in process of exit, and I will comment that on the subsequent slides. Overall, this picture shows a strong, a solid, I think, growth, double-digit growth from EBITDA and Cash EBITDA, year-to-year, as you see here. Now a commentary to the market.
In Poland, our assessment of the market size was that it was in almost exactly the same as in two previous years. About PLN 2.1 billion was deployed in Poland for consumer unsecured portfolios, of which about 25% was bought for us. This likely gives us number one position, although it's a notably lower market share than a year ago and two years ago. You may look at this, that 2024 was an exceptionally exceptional year for our market share. Poland continues to be very competitive market.
It's still a position in 2025 that gives us number one, which shows we are number one, but it's also an outcome of the fact that after a few years of strong market position, some of our competitors had more appetite to increase their deployment in Poland. Also, decrease of interest rates naturally decreases or increases pressure on the IRR. Overall, we made good investments in Poland, achieving this level of market share. The results in Poland, in terms of recoveries, performance of the bank, were excellent. You can see that in the numbers here. You can see it in the value of positive revaluation that we recognize in Q4, over PLN 120 million, and we expect that this trend continues.
in the following quarters and likely years, for the Polish market. In Romania, the market grew significantly year on year. You can see that it's our estimate is about PLN 800 million, compared to PLN 500 million last year, of which we took great majority of 70% market share. It's a very satisfying result. The results in terms of financial performance are also very good. You may see that the revaluation was somewhat lower than in some quarters of last year, I want to tell you, this is the outcome of the fact that we have raised the recoveries so much that this potential for future positive revaluation is lower now than it was a year or two years ago.
We still expect to continue to see positive revaluation, but on a level closer to the level you've been observing in Q3 or Q4 2025, in subsequent quarters and few years. Overall, the business is going very well, and in 2026, we hope to be close to the investment level we've seen in 2025 in Poland. I should add, in Poland, our plan assumes that we will grow investments versus last year. In Italy, the market also grew compared to previous year, 2.3 billion PLN, and we're very satisfied with this market share, although it's lower than in 2023, 2024, but indeed, it was extremely high in those years.
In terms of performance, this performance was good, not as good to allow us to recognize positive revaluation in the past two quarters. You can see that it was more or less zero for Q3 and Q4. If the recoveries go in line with our operating targets, which means they need to exceed the forecast, the accounting forecast, we should come back to positive revaluation in following quarters. This is uncertain, but this is something we would like to achieve. Overall, the situations in Italy is good, stable, you may have read that we have already secured a significant portfolio on that market in 2020, 2026.
Spain, last, but last, but not least, the market significantly decreased year-on-year. We believe this is partly due to the uncertainty in legal system among across Spain. The courts were working slower, and there was uncertainty how long such a situation will persist. In that market, also, KRUK stopped buying the big banking portfolios, so we resorted to buying smaller consumer finance portfolios, which are not as much affected by the legal process. That's why we only invested there a fraction of what we invested in the previous two years, and we had about 12% market share. The performance on that, on that business in 2024 and Q through four was below our expectations.
Still, our recoveries were more or less close to the accounting forecast, and you can see that in that situation, the revaluation was more or less zero for this last year and also, Q4. The business was profitable in each of the quarters and also in Q4 2025. We have ambitions for the, for the business to generate significantly more money in the, in the future. The situation in the legal system, across courts in Spain, is that the reorganization is complete in sense of creating these new departments and making the final structure for the courts. It's the beginning of the process of digging into those delayed thousands or hundreds, maybe, of thousands of cases that lie in Spanish courts and wait, and wait to be, to be processed.
This acceleration needs to happen this year, we hope, and we think it's realistic that we will see it happening, only we don't know exactly what the pace will be and where we'll see that exactly in 2026. It's a stabilization, but on a relatively low level of course, effectiveness, and with an expectation from our side that this situation will change positively in 2026. When this happens, we will be able to resort to buying more, and we have plans to buy, to invest in Spain this year, significantly more than in last year than this PLN 122, but less than in 2024. Somewhere in between will be our target investment market. When exactly, how big it will be, it will depend on how the situation evolves.
In the meantime, we don't wait and sit. We don't, you know, sit and wait for the results. We're focused on what we can improve internally. We're also testing an alternative legal process, which used to be longer, more expensive, but now may prove to be more successful. It could be that we'll be building also some upside to current revenue forecast by exploiting those alternative legal processes, plus introducing some improvements in our operating process, which is always possible. Hopefully, that will build our, improve our profitability for the coming years. We stand by Spain. We bet still our money on that market. We believe we will make it work and come back to higher profitability in the future.
Finally, other markets, please note that these numbers entail France, but also Czech, Slovakia, and Germany, the three markets that we're exiting, and France, the only market which we are developing among this group. Germany, we have fully exited in 2025, so we don't have assets anymore. Czech and Slovakia, we are on plan to exit these markets in 2026. We made a few sales of our assets on that market. Some of those sales were at profit, and some of the sales that we made for Slovakian assets in Q4 was actually at loss. Part of this EBITDA loss that you hear, a few million of that is coming from the sale of Slovak portfolios.
Majority of the loss comes from negative revaluation of our some of the French portfolios. Another comment to that. You probably realize entering a new market in NPL is a high-risk operation. That's why, and also, you know, having gone through these processes on some other markets, we limit this high risks by limiting our investment deployment in size. That's why we invest in that market 100, as you see here, in 2024, PLN 90 million or PLN 115 is in 2025. We indeed can expect that the performance of those portfolios will...
can be significantly different than our initial assumptions, especially that we don't have operations there, especially that we rely on the valuation of these portfolios provided by third party with the servicers. We are in a situation where after one and a half years being there, we had very positive and better-than-expected performance on amicable process. That built our positive EBITDA for that business in the 2024 and 2025. Sometime in 2025, in the H2 of 2025, we noticed that some of the cases from some of the portfolios, after they enter the legal process, do not deliver as much as expected. That means the courts behave differently than assumed. That also means that there may be a high level of imprecision in the valuation.
It underestimated amicable part, overestimated the legal part. This is normal. This is a normal phenomenon for newly bought portfolios. We make now a reduction in our expectations for recoveries. We defer some of the expected payments for future. We also manage our servicers. We have retained second servicers, sometimes in 2026, and we compare both how they do in the legal process, and we go on. This situation is, in our view, not a significant obstacle. It happens usually on new markets. It's happened sometimes on old markets, on some portfolios. We carry on. We just try to learn from the situation as much as possible to include that learning in future investments and in improving our operations.
Unfortunately, at this point, in France, we don't have full control of our operations. We don't have operations, so this, our ability to improve is also lower than on the markets where we have a servicer. This, on the other hand, we don't need to cover all of the overhead cost of having operations there, being still a small scale company on the French market. We will continue to buy at small scale in France in 2026, and try to learn as much and improve as much as we can from this situation where we found ourselves then in 2025. A word about our lending business.
We presented from now on, we will present it as one group level loan business, because Wonga Poland is now a mother company of Novum, the lending company that was focused on KRUK customers. Also, Wonga Poland acquired from KRUK Group, its Romanian entity lending to customers, and started to lend money on the open markets to new customers. Now, Wonga is the brand for the lending activity across KRUK Group, being present on two business lines in Poland, open market and closed KRUK customers in Poland, and open market and KRUK customers in Romania. I'm happy to tell you, this was a very good year for that business. We earned PLN 117 million EBITDA in 2025. In terms of funding access, the situation looks good.
In 2025, we successfully increased value of our credits and banking from the banks. We also saw a very good market for bond issues. That situation persists in 2026. Please expect us to also strengthen our access to that funding this year. Although it's not a year where we would need a lot of money, coming, you know, from the analysis of our cash flow, not so much of our bonds are coming due in 2025, actually none. However, it could be that we'll decide to resort to call option for some of the bonds, calculating whether it's profitable or not for specific issues.
That moment may come because of the difference in interest rates, now and from a few years ago. We are well-funded, and we will use most likely banking credits and Polish bond issues to finance our growth this year. On this slide, I draw your attention to these, figures, which show, the expected, money multiple, or gross IRR at all the investments we made in a given year. You can see it's about 21% for 2025, or 2-3x money, a decent result. It's lower than in 2024 for two reasons.
First is indeed somewhat higher competition, our returns are subject to pressure from fall in decrease in the interest rates. Second, a higher percentage of our investments is coming from countries where we have a longer curve, namely Italy versus Poland. Also that means that the money multiple and IRR is similar, but the gross IRR is overall on IRR, on operating level, we made our budgetary plans. Also, you may have seen that we decided to invest somewhat less, but at a better IRR, which is I think a safer scenario. Moving on. I want to also draw your attention to this slide.
The graphic representations or the slides below, where we add another year for recoveries, which shows the strength of the back book. This 22nd year of our recoveries portfolios or subsequent year, gave very satisfactory performance across those old vintages of portfolios, which tell us this curve has been flat and nothing indicates that it's going down soon. That's a very positive news that those recoveries are remarkably resilient. On this slide, I want to comment how advanced we are for implementation, realization of our strategy for the period of 2025, 2029. Please remember, the most important element of this strategy is to deliver on the net profit growth.
Here we don't give you a guidance, but we guide you to what our shareholders approved for the incentive plan for the company and for the board, which calls for 12% annual profit before tax growth every year in that period. We would like to achieve that, and we did achieve it in 2025. The elements of the plan call for PLN 15 billion of investments. We are on way to realize it, please understand it is a benchmark. If we can realize our profit goals by investing not 15, by PLN 13 billion with decent IRRs, that's even better scenario for us. The PLN 15 billion is not a goal in itself. It's...
Of course, we need to grow investments to continue to grow long term, but it's really a range of possibilities, and at this point, this 15 billion PLN, we believe, is still possible to achieve. More important, I think, is what do we think and what do we see about the possibility of exceeding the accounting remaining, the estimated remaining recovery, so this accounting forecast for recoveries. For the first time, in 2025, we showed you a picture where we said, "Listen, our ERC stands at PLN 21 billion, but the management's plan, this ambitious operating plan, stays at 8 billion PLN more, at PLN 29 billion ." In this presentation, we give you a situation, a snapshot of situation as of now, a year later.
The situation is that currently, our ERC stands at 26 billion PLN, our operating plan is again PLN 8 billion above. Despite the fact that we recognized PLN 500 million of positive revaluation, raising our accounting curve, despite the fact that we achieved PLN 225 million of recoveries above 2025 accounting forecasts. The difference, this PLN 8 billion difference between accounting and operating plan, did not decrease as planned. It actually stayed at 8 billion PLN. Why? Because we saw, we identified additional potential of recoveries on our backbook, on portfolios that we have purchased over the past 20 years, not on the ones we bought in 2025. It's a significant positive situation, and we also tell you, most of that additional, roughly 1 billion PLN, comes from Poland, sometimes later in the curve. Why it's coming?
We see this stability across the old backbook portfolios in recoveries, even after 10, 12, 13, 15 years. It's quite positive, and it tells you, despite significant revaluations, we did not decrease this potential to go above forecast recoveries forecasted in our accounting plan for the next 20 year. We made the 20% ROE target as expected. We are on the way to build our assets to PLN 20 billion. In this time, the assets grew by 12%. We continue to go through digital transformation, from this PLN 500 million earmark for this project. We spent already about PLN 70 million, 40% OpEx, 60% CapEx.
Our leverage is contained within the plan. I think we can say all of the boxes are ticked here in terms of strategy implementation. On this slide, we once again tell you this difference between operating and accounting target. There's no new information above what I told you a minute ago. I'll go further. Finally, on this slide 18, we tell you a bit more detail about what we have achieved technically in terms of building this new digital IT ecosystem. This is a very important year, 2026, where the system, this newly created operating system, will already be tested on the first portfolios in Poland.
It will be the minimum viable product, so it will not be fully operational, but it will already test sometime in the H2 of 2026, whether the system works, what needs to be improved. Once again, the full functionality here, we want to achieve by 2029, and the benefits, which we believe will be significant, from implementation of this new system in Poland, Romania, Italy, Spain, and potentially later in the new markets, will come after 2029. We are well advanced in that process. It's a difficult process. It's an investment in future. It's an investment with a payoff beyond the strategy level, but we believe it's very important for the success of that business in the long term, and we're really excited about what we are building at the company.
Uh, and, uh, just a reminder, you may have read that in January, uh, we have, uh, we announced that, uh, we will be reorganizing the group to fit it better for a company with very significant element, uh, element of investment in NPL. Uh, KRUK wants to become an alternative, uh, investment company, a publicly listed alternative investment company, by end of twenty twenty-seven. It's a significant reorganization. We believe it will help us manage risk better. It will make us stronger. It will be a more regulated, more safe business. We believe, uh, better fitted, uh, to, uh, to realize our investments and investments plans, and we started to work on that. Uh, and we'll need probably two shareholders' approvals during that process.
First, to break up KRUK into operating company, headquarter and investments company, and second, to merge this investments company into a licensed investment fund, sometimes in 2027. We are in process of preparing for that. The good information is we have good feedback from the regulator, and we have good feedback from our biggest shareholders to continue to work on that path, and I think a good understanding of all the regulator and supervising bodies. I think this is the most important information at this point, and I'll be very happy now to take your questions. I'll now look at the Q&A section. Okay, you are asking how the new structure will affect us in terms of taxation.
My answer to that would be, first of all, this reorganization is done for business reasons, so that we are better prepared to be a company that deploys in the next 5 years, this PLN 15 million, and does it mitigating the investment risk, does it with better regulatory oversight, and does it with good investment discipline. If we deliver on this planned change, the side effect could be that our taxing, tax situation remains as it is currently, which means we continue to pay 19% tax from the profits that the company has made. Where our securitization funds profits are taxed when they are transferred to the mother company, when we pay out the dividend, or we pay back, we redeem our bonds.
The side effect of that, of the transformation, will be that if we get positive opinion from the Polish tax authorities, our securitization companies will not be subject to Pillar Two, to Pillar Two Global taxation. There will not be an additional tax on the top of this 19% that we're paying. One more comment regarding globe, not relating to the reorganization, is that we have informed you a year ago that we could be subject to global taxation from 2027. Now we know we will not be because in 2025, we have not exceeded the threshold of EUR 750 million of revenues, which is this threshold to qualify.
Which means that we know for sure that neither in 2026 nor in 2027, we'll be subject to this to the taxation. You're also asking: What was the reason behind changing incentive program underlying benchmark from EPS to profit before tax after 2024? The reasons for that was uncertainty related to global taxation. We didn't know what exactly, how this will affect us, and therefore, we agreed with the shareholders that for this particular period of time of this uncertainty, it's more reasonable to have this threshold at the lower, below tax, which of course, matter for 2025, but later on, you know, we should achieve similar levels of growth, both on net profit and profit before tax.
You're also asking: Is it fair to assume that our reorganization is converging the group to an asset management company, seeking a license for that? It is true, although it will be a specialized asset management company, a company specialized in asset, in NPL purchases. You know, we will change the mindset in which we will say, "This is the investment company, and of course, our most important goal is to maximize NPV on the deployed capital." We also are an investment company that wholly owns the servicing companies, and their job is to maximize the value on the portfolios that we have given them to service.
Now, it allows us to be to make decision about deployment and optimization of the process at different places, and it makes our lives a bit easier not to have the risk of affecting our operating, operational agenda by our investment decision, or vice versa. It also opens the door to thinking that if we are on that market, relying only on our own servicer, is this the ideal situation forever, or should we champion challenge our own servicer to see whether we could improve it somehow by looking at what other servicers are doing? That would be especially useful in the new markets or where, in the markets where we don't feel yet we are the best servicer on the market.
Overall, you should understand that this reorganization is not a change of strategy. We are and will remain to be an NPL company, but we are indeed a company where most value is done by this decision to deploy billions of PLN and, you know, soon billions of EUR in some periods of time. We are actually, in this reorganization, achieving a structure that we have in all the other countries but Poland, because when you look at KRUK Group today, in, for example, Spain, there is local Spanish servicer, but there is a securitization fund in Malta making the investments. If you look at Italy, it's similar differentiation. Only in Poland, we have one company, KRUK S.A., who is servicer, headquarter, and investment company.
We want to separate that. We believe it will be good idea long term to for our risk management. You're also asking: How much money do we want to deploy in 2026? You know, please understand, it's always a certain range of possibilities. I would say more than in 2025. Why more than in 2025? Because we plan to come back to buying more in Spain, the results could be somewhere between, you know, PLN 2.4 billion and PLN 2.7 billion in 2026. You're also asking specifically about when do you want to return to investing in Spain? The answer is in 2026, I would say possibly in H2 of this year, but it will really be dependent on what we see in recoveries, what we see in market opportunities.
You're also asking, why do we have higher effective tax rates in Q4? Please understand that a big element of our tax is deferred taxation. We have an accounting rule that says, based on the planned cash flows, twice a year, where the management board approves the budget or the business plan, the budget, sometimes in December, the business plan, sometimes in June, we look at the next three years, and we see how much money do we need to transfer to the Polish mother company, and while transferring this money, we'll pay tax. Then we say, "Okay, so that will be the transfers, that will be the tax. How much is our provision for that?" If the provision is lower than it should be, we increase. We increase the provision.
If it happens that the provision is already bigger than what we planned, we decrease the provision, hence the volatility. In 2024, in Q4, we released the provision because our business plan changed. In Q4 2025, we increased provision. Please look at the deferred tax assets, and you take a look also at the cash tax that we're paying, both are available in our financial statements, to see that those are really driven by different situations. Please understand that we have this volatility, which is not intentional. It's a product. It's a derivative of the change in our cash flow plan for the next 3 years. Again, in the long term, we will pay 19% or high teen % effective tax rates on all of the profits we make.
In the mid to short term, it will depend on whether we are stable or we are returning the money to the mother company or reinvesting the money in our securitization funds, where, in which situation we can enjoy a period of time where our effective tax rate is significantly below 19%. Guidance on portfolio purchases in 2026, I answered that already. Let me see if there are any more questions. You're asking, do we want to increase investments in France in 2026, despite longer recoveries? We're thinking about investing a similar amount of money this year, roughly as last year. It means contained investments, not significant growth, partly because of the issues that we have seen.
You're asking about incentive program, does it mean that in the next future incentive programs, you will come back to EPS? Yes. Yes, because it is the best measure given situation in taxation environment is stable. I don't see more questions. I'll wait a second to see if it happens that I didn't answer your question exactly, please follow up with the IR team. We'll be happy to take it. I don't see more questions now, in which case, thank you very much for your interest and time today. Have a good afternoon, and I hope to see you on roadshow or company conferences. Thank you very much. Goodbye now.