Kruk S.A. — Interim / Quarterly Report 2020

Nov 10, 2020

Raport kwartalny – Skrócone śródroczne jednostkowe sprawozdanie finansowe

Financial highlights

Financial highlights	PLN '000		EUR '000
For the period	Jan 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated	Jan 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated
Revenue	94,845	128,314	21,352	29,781
Operating profit/(loss)	(45,846)	(45,247)	(10,321)	(10,502)
Profit/(loss) before tax	98,241	250,210	22,116	58,072
Net profit/(loss) for owners of the Parent	34,551	244,596	7,778	56,769
Net cash from operating activities	(3,275)	(23,788)	(737)	(5,521)
Cash recoveries	(26,935)	(31,450)	(6,064)	(7,299)
Net cash from investing activities	375,133	103,080	84,450	23,924
Net cash from financing activities	(367,892)	(80,631)	(82,820)	(18,714)
Net change in cash	3,966	(1,339)	893	(311)
Diluted earnings per share	1.79	12.66	0.40	2.94
Average number of shares ('000)	18,972	18,911	18,972	18,911
Earnings per share	1.82	12.93	0.41	3.00
	Sep 30 2020 unaudited	Dec 31 2019 Restated	Sep 30 2020 unaudited	Dec 31 2019 Restated
As at
Total assets	3,765,341	3,883,104	831,789	911,848
Non-current liabilities	1,089,380	1,638,160	240,651	384,680
Current liabilities	610,125	286,518	134,781	67,281
Equity	2,065,837	1,958,426	456,357	459,886
Share capital	18,972	18,972	4,191	4,455
Book value per ordinary share	108.89	103.23	24.05	24.24

The financial highlights have been translated into the euro as follows:

items of or related to the statement of profit or loss and the statement of cash flows have been translated using the arithmetic mean of mid rates quoted by the National Bank of Poland for the last day of each month in the period; the exchange rates thus calculated are:

for the reporting period	4.4420
for the comparative period	4.3086

items of or related to the statement of financial position have been translated using the mid-rate quoted by the National Bank of Poland for the end of the reporting period; the exchange rates thus calculated are:

at the end of the reporting period	4.5268
at end of the comparative period	4.2585

$$\,^2$$

1. Statement of financial position

As at Sep 30 2020

Assets Cash and cash equivalents 17,778 13,812 7,812 8.14. Trade receivables from related 18,106 28,198 20,999 8.13. entities Trade receivables from other 3,828 3,365 3,548 8.13. entities Investments 322,020 346,330 327,592 7. Other receivables 98,989 51,834 15,863 8.13. Derivatives - 3,799 32 8.10. Hedging instruments - 420 - 8.9. Inventories 28,079 30,294 30,831 Property, plant and equipment 39,943 34,944 32,463 Intangible assets 13,715 15,084 15,642 Equity-accounted investments in 3,218,601 3,350,341 3,456,201 8.11. subsidiaries Other assets 4,282 4,683 4,293 Total assets 3,765,341 3,883,104 3,915,276 Equity and liabilities Liabilities	Jan 1 2019 Restated
	9,151
	21,814
	2,811
	149,667
	7,223
	1,450
	-
	27,260
	16,169
	16,547
	3,320,121
	4 173
	3,576,386
Trade and other payables 59,783 73,882 79,434 8.15.	62,948
Derivatives 21,045 - 6,901 8.10.	-
Hedging instruments 6,932 3,924 - 8.9.	3,870
Employee benefit obligations and 20,686 21,323 20,076 8.16. provisions	19,199
6,074 690 1,291 Income tax payable	12,295
Borrowings, other debt securities 1,496,652 1,784,605 1,828,020 8.8. and leases	1,731,998
Deferred tax liability 88,333 40,254 14,678 8.7.	13,722
1,699,504 1,924,678 1,950,400 Total liabilities	1,844,032
Equity
1, 972 18,972 18,931 Share capital	18,887
307,192 307,192 303,711 Share premium	300,097
(17,441) 78 (8,840) Hedging reserve	(3,869)
62,582 (30,219) 21,189 Translation reserve	(53,769)
Other capital reserves 197,210 104,582 103,633	94,924
1,497,322 1,557,821 1,526,252 Retained earnings	1,376,084
2,065,837 1,958,426 1,964,876 Total equity	1,732,354
Equity
and 3,765,341 3,883,104 3,915,276 liabilities	3,576,386

3

2. Statement of profit or loss

For the reporting period January 1st – September 30th 2020

PLN '000	Note	Jan 1-Sep 30 2020 unaudited	Jul 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated, corrected	Correction	Jan 1-Sep 30 2019 unaudited Restated, published	Jul 1-Sep 30 2019 unaudited Restated
Revenue including interest income	8.1.	94,845	34,822	128,314	-	128,314	48,700
calculated using the effective interest rate method		13,883	4,218	15,289	-	15,289	5,273
including revaluation of debt portfolios		1,174	897	10,455	-	10,455	2,925
Other income	8.2.	16,189	8,371	1,431	-	1,431	200
		111,034	43,193	129,745	- -	129,745	48,900
Employee benefits expense	8.3.	(101,116)	(37,488)	(111,005)	-	(111,005)	(35,333)
Depreciation and amortisation		(13,586)	(4,432)	(14,208)	-	(14,208)	(4,728)
Services		(24,910)	(8,105)	(24,786)	-	(24,786)	(8,023)
Other expenses	8.4.	(17,268)	(5,824)	(24,994)	-	(24,994)	(8,976)
		(156,879)	(55,848)	(174,993)	-	(174,993)	(57,060)
Operating loss		(45,846)	(12,656)	(45,247)	(10,455)	(34,792)	(8,159)
Finance income	8.5.	16,050	4,541	6,295	-	6,295	(1,144)
Finance costs	8.6.	(75,515)	(20,414)	(65,285)	-	(65,285)	(28,168)
Net finance costs		(59,465)	(15,873)	(58,990)	-	(58,990)	(29,312)
Share of profit/(loss) of equity accounted investees		203,552	145,075	354,447	-	354,447	117,285
Profit/(loss) before tax	8.7.	98,241	116,547	250,210	(10,455)	260,665	79,814
Income tax		(63,690)	(62,703)	(5,614)	-	(5,614)	(2,037)
Net profit/(loss) for period		34,551	53, 844	244,596	(10,455)	255,051	77,777
Earnings/(loss) per share
Basic (PLN)		1.82	2.84	12.93	0.56	13.49	4.11
Diluted (PLN)		1.79	2.80	12.66	0.54	13.20	4.03

3. Statement of comprehensive income

For the reporting period January 1st – September 30th 2020

PLN '000

	Jan 1-Sep 30 2020 unaudited	Jul 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated, corrected	Correction	Jan 1-Sep 30 2019 unaudited Restated, published	Jul 1-Sep 30 2019 unaudited Restated
Net profit/(loss) for period	34,551	53,844	244,596	(10,455)	255,051	77,777
Other comprehensive income Items that may be reclassified subsequently to profit or loss
Cash flow hedges Exchange differences on	(17,519)	1,630	(4,971)	-	(4,971)	(9,666)
translating foreign operations	92,801	19,828	74,958	-	74,958	63,894
Other comprehensive income for
the period, net	75,282	21,458	69,987	-	69,987	54,228
Total comprehensive income for period	109,833	75,302	314,583	(10,455)	325,038	132,005

4. Statement of changes in equity

For the reporting period ended September 30th 2019

PLN '000	Share capital	Share premium	Hedging reserve, corrected	Correction	Hedging reserve, published	Translation reserve	Other capital reserves	Retained earnings	Total equity
Total equity as at Jan 1 2019 (restated)	18,887	300,097	(3,869)	-	(3,869)	(53,769)	94,924	1,376,309	1,732,579
Comprehensive income for the period
Net profit/(loss) for period	-	-	-	-	-	-	-	244,596	244,596
Exchange differences on translating foreign
operations	-	-	-	-	-	74,958	-	-	74,958
Measurement of hedging instruments	-	-	(4,971)	-	(4,971)	-	-	-	(4,971)
Total comprehensive income for period	-	-	(4,971)	3,869	(8,840)	74,958	-	244,596	314,583
Contributions from and distributions to owners
- Payment of dividends	-	-	-	-	-	-	-	(94,653)	(94,653)
- Share-based payments	-	-	-	-	-	-	8,709	-	8,709
- Issue of shares	44	3,614	-	-	-	-	-	-	3,658
Total contributions from and distributions to
owners	44	3,614	-	-	-	-	8,709	(94,653)	(82,286)
Total equity as at Sep 30 2019, restated	18,931	303,711	(8,840)	3,869	(12,709)	21,189	103,633	1,526,252	1,964,876

7

For the reporting period ended December 31st 2019

PLN '000	Share capital	Share premium	Hedging reserve	Translation reserve	Other capital reserves	Retained earnings	Total equity
Total equity as at Jan 1 2019 (restated)	18,887	300,097	(3,869)	(53,769)	94,924	1,376,084	1,732,354
Comprehensive income for the period
Net profit/(loss) for period	-	-	-	-	-	386,517	386,517
Exchange differences on translating foreign operations	-	-	-	23,550	-	(110,127)	(86,577)
Measurement of hedging instruments	-	-	3,947	-	-	-	3,947
Total comprehensive income for period	-	-	3,947	23,550	-	276,390	303,887
Contributions from and distributions to owners
- Payment of dividends	-	-	-	-	-	(94,653)	(94,653)
- Share-based payments	-	-	-	-	9,658	-	9,658
- Issue of shares	85	7,095	-	-	-	-	7,180
Total contributions from and distributions to owners	85	7,095	-	-	9,658	(94,653)	(77,816)
Total equity as at Dec 31 2019 (restated)	18,972	307,192	78	(30,219)	104,582	1,557,821	1,958,426

For the reporting period ended September 30th 2020

PLN '000	Share capital	Share premium	Hedging reserve	Translation reserve	Other capital reserves	Retained earnings	Total equity
Equity as at Jan 1 2020 (restated)	18,972	307,192	78	(30,219)	104,582	1,557, 821	1,958,426
Comprehensive income for the period
Net profit/(loss) for period	-	-	-	-	-	34,551	34,551
Exchange differences on translating foreign operations	-	-	-	92,801	-	-	92,801
Measurement of hedging instruments	-	-	(17,519)	-	-	-	(17,519)
Total comprehensive income for period	-	-	(17,519)	92,801	-	34,551	109,833
Contributions from and distributions to owners
- Share-based payments	-	-	-	-	(2,422)	-	(2,422)
- Allocation of profit to capital reserve for buyback of shares					95,050	(95,050)	-
Total contributions from and distributions to owners	-	-	-	-	92,628	(95,050)	(2,422)
Total equity as at Sep 30 2020	18,972	307,192	(17,441)	62,582	197,210	1,497,322	2,065,837

5. Statement of cash flows

For the reporting period January 1st – September 30th 2020
PLN '000	Jan 1-Sep 30 2020 unaudited	Jul 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated, corrected	Correction	Jan 1-Sep 30 2019 unaudited Restated, corrected, published	Jul 1-Sep 30 2019 unaudited Restated, corrected	Correction	Jul 1-Sep 30 2019 unaudited Restated, published
Cash flows from operating activities
Net profit/(loss) for period Adjustments	34,551	53,844	244,596	-	244,596	77,777	-	77,777
Depreciation of property, plant and equipment	9,529	3,090	9,174	-	9,174	3,011	-	3,011
Amortisation of intangible assets	4,056	1,341	4,017	-	4,017	1,304	-	1,304
Net finance income/costs	65,992	22,784	73,076	-	73,076	(33,263)	-	(33,263)
Share of profit/(loss) of equity-accounted investees	(203,552)	(145,075)	(354,447)	(354,447)	-	(117,285)	(117,285)	-
(Gain)/loss on sale of property, plant and equipment	(759)	(225)	6	-	6	51	-	51
Equity-settled share-based payments	(2,422)	1,238	8,709	-	8,709	2,379	-	2,379
Income tax	63,690	62,703	5,614	-	5,614	2,037	-	2,037
Change in investments	7,190	1,003	612	-	612	2,958	-	2,958
Change in inventories	2,215	2,929	(3,499)	-	(3,499)	(3,517)	-	(3,517)
Change in trade and other receivables	41,221	18,452	(8,562)	-	(8,562)	145,227	-	145,227
Change in prepayments and accrued income	401	(1,400)	(120)	-	(120)	(1,746)	-	(1,746)
Change in trade and other payables, excluding financial liabilities	(14,537)	(10,664)	16,486	-	16,486	1,420	-	1,420
Change in employee benefit obligations	(637)	(20)	877	-	877	(2,313)	-	(2,313)
Income tax paid	(10,213)	(3,265)	(20,325)	-	(20,325)	(4,562)	-	(4,562)
Net cash from operating activities	(3,275)	6,735	(23,788)	-	(23,788)	73,477	-	73,477
Cash flows from investing activities
Interest received	36	9	71	-	71	26	-	26
Loans	(32,700)	(3,000)	(213,393)	-	(213,393)	(49,301)	-	(49,301)
Sale of intangible assets and property, plant and equipment	2,238	523	2,745	-	2,745	1,112	-	1,112
Dividends received	18,918	(4,510)	13,189	-	13,189	3,689	(280,181)	283,870

Quarterly report - Interim condensed financial statements 10

Disposal of financial assets	350,141	101,045	436,835	-	436,835	283,870	-	283,870
Purchase of intangible assets and property, plant and equipment	(5,424)	(1,816)	(9,546)	-	(9,546)	(2,552)	-	(2,552)
Acquisition of shares in subsidiaries	(20,764)	(4,404)	(155,241)	-	(155,241)	(107,730)	-	(107,730)
Repayments	62,688	18,677	28,420	-	28,420	8,527	-	8,527
Net cash from investing activities	375,133	106,524	103,080	-	103,080	137,640	-	137,640
Cash flows from financing activities				-			-
Net proceeds from issue of shares	25,000	25,000	3,658	-	3,658	63	-	63
Redemption of debt securities	-	-	215,000	-	215,000	25,000	-	25,000
Increase in borrowings	202,419	(26,919)	664,730	-	664,730	170,622	-	170,622
Repayment of borrowings	(523,915)	(99,445)	(662,352)	-	(662,352)	(263,058)	-	(263,058)
Payments under finance lease contracts	(6,005)	(2,909)	(7,306)	-	(7,306)	(1,673)	-	(1,673)
Dividends paid	-	-	(94,653)	-	(94,653)	(94,653)	-	(94,653)
Redemption of debt securities	(13,360)	-	(136,388)	-	(136,388)	(86,388)	-	(86,388)
Interest paid	(52,031)	(11,329)	(63,320)	-	(63,320)	(17,656)	-	(17,656)
Net cash from financing activities	(367,892)	(115,601)	(80,631)	-	(80,631)	(267,743)	-	(267,743)
Total net cash flows	3,966	(2,342)	(1,339)	-	(1,339)	(56,626)	-	(56,626)
Cash and cash equivalents at beginning of period	13,812	20,119	9,151	-	9,151	64,437	-	64,437
Cash and cash equivalents at end of period	17,778	17,778	7,812	-	7,812	7,812	-	7,812

Reconciliation of effective tax rate

PLN '000	Jan 1-Sep 30 2020 unaudited	Jan 1-Sep 30 2019 unaudited Restated, corrected	Correction	Jan 1-Sep 30 2019 unaudited Restated, published
Profit/(loss) before tax	98,241	250,210	(10,455)	260,665
Income tax recognised in profit or loss Profit/(loss) before tax for the period (at 19% tax rate)	(63,690) 98,241	(5,614) 250,210	- (10,455)	(5,614) 260,665
Tax calculated at the tax rate applicable in Poland (19%) Effect of non-deductible expenses and changes in deferred	(18,666)	(47,540)	1,986	(49,526)
tax1	(45,024)	41,926	(1,986)	43,912
	(63,690)	(5,614)	-	(5,614)
Effective tax rate	64,83%	2,24%		2,15%

¹including PLN 58,936 thousand of the established provision for deferred tax resulting from the changes in assumed payments of income in the next 36 months from subsidiaries to KRUK S.A. what accounts for 90% of the impact on the effective tax rate for the period 1st January 2020 - 30th September.