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BEST sums up the first quarter of 2020: high claim repayments, financial results affected by higher costs and portfolio revaluation

Repayments from managed claim portfolios due to BEST Capital Group in Q1 2020 amounted to PLN 77.8 million, which is the best quarterly result in the Company’s history. Operating revenues in that period amounted to PLN 63.8 million, operating profit was PLN 22.5 million, and net profit attributed to BEST’s shareholders was PLN 12.0 million. The Group’s results were negatively affected by the revaluation of claim portfolios as well as high court and enforcement costs.

 

– The first quarter of this year was another quarter in a row when we achieved high repayments from the managed claims, although for a long time we have hardly invested in any new portfolios. This shows the growing efficiency of our operating activities and the adequate selection of effective debt collection strategies – commented Krzysztof Borusowski, President of the Management Board of BEST.

 

Total repayments from the claim portfolios managed by BEST in the first quarter of 2020 amounted to PLN 86.6 million, up by 29% compared to the same period of 2019, while repayments due to BEST Capital Group were PLN 77.8 million, up by 33% year-on-year.

 

BEST Group’s operating revenues in the first quarter of this year amounted to PLN 63.8 million, which is comparable to the same period of 2019 (PLN 64.7 million). The revaluation of claim portfolios amounting to more than PLN 7 million had an adverse impact on the reported revenues and, as a consequence, on our operating profit. This non-cash event affected only the Italian market. BEST Capital Group’s operating revenues from the Polish market increased by 21% YOY to PLN 69.1 million.

 

Another factor with an adverse effect on the operating profit were the operating expenses which were higher than a year ago. In the first quarter of 2020, they amounted to PLN 41.4 million, of which as much as PLN 16.1 million were court and enforcement fees incurred by BEST Group in order to secure assets and generate higher revenues from claims held in the future. The costs on that account were more than 130% higher than in the same period of 2019. The operating expenses, except court and enforcement fees, increased in the first quarter of this year by 11% YOY, mainly as a result of higher labour costs.

 

– For a number of years, we have seen many changes in legislation concerning the rules and costs of debt collection. As a result of the court and enforcement costs in the first quarter of this year being more than twice as high as last year, we need to constantly work on improving our operational excellence and efficiency. We also need to invest in qualified staff and state-of-the-art technologies that will enable us not only to be more flexible in adapting to the changing legislation and automate our processes, but also to innovate. Although this may seem costly at first glance, ultimately they are bringing us savings now and we are expecting even more in the future – explained Krzysztof Borusowski.

 

In connection with the higher costs, the operating profit of BEST Capital Group in the first quarter of 2020 amounted to PLN 22.5 million (compared to PLN 35.2 million a year earlier), and the net profit attributed to BEST’s shareholders was PLN 12.0 million (compared to 20.5 million PLN a year before).

 

In the last quarter, BEST Capital Group punctually redeemed bonds with a nominal value of PLN 60 million, which, combined with high repayments from claim portfolios, translated into a decrease of the main debt ratio (net debt / equity) to a very low level of 0.96. At the end of March this year, BEST Capital Group had cash amounting to PLN 101.8 million on its accounts.

 

In the second quarter, BEST is continuing the deleveraging by redeeming bonds worth PLN 50 million and starting a programme of buying own bonds for redemption, and for this purpose it allocated up to PLN 25 million (so far about PLN 10 million has been used). By the end of the year, bond redemptions wort around PLN 87 million are planned.

 

BEST is in a good position before the next planned investments in claim portfolios, expecting a higher supply of portfolios from the banking sector for several quarters at the beginning of the new economic cycle.

 

– As a result of events related to the COVID-19 epidemic, the claims trading market has come to a standstill. We are expecting to see recovery at the end of this year and next year, when the banking sector will review its non-performing loan portfolio. Now we are very selective about new investments. We seek to effectively use portfolios which we purchased in the previous years, and of which we know that they are predictable – said Marek Kucner, Vice-President of the Management Board of BEST.

 

In the first quarter of this year, BEST Capital Group purchased only one non-performing debt portfolio for PLN 1.5 million.

 

 

Selected operating and financial results of BEST Capital Group

(PLN million)

Q1 2020

Q1 2019

change YOY

Repayments of portfolios held, including:

86.6

67.0

29%

   due to BEST Capital Group

77.8

58.4

33%

Operating revenues

63.8

64.7

(1%)

Operating profit

22.5

35.2

(36%)

Net profit, of which:

16.4

25.3

(35%)

   attributed to BEST’s Shareholders

12.0

20.5

(41%)

Full cash EBITDA

47.8

39.8

20%

 

 

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