doValue S.p.A. (DOV) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the doValue First Half 2024 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Daniele Della Seta, Investor Relations of doValue. Please go ahead, sir.

Good morning, and welcome to doValue First Half 2024 Results Conference Call. I'm Daniele Della Seta, Head of IR at doValue. Joining you from Rome, along with Manuela Franchi, our Group CEO; and Davide Soffietti, our Group CFO. In the last 6 months, there were 2 major impactful announcements, the unveiling of our industrial plan for 2024-2026, and the signing of a binding agreement for the acquisition of Gardant. Those 2 events are each 1 part of our unique growth strategy. And today, we will emphasize how the company is focusing on the 2 legs. We will delve into the group and market development since the year began, including an update on the execution of our business plan and the announced M&A transaction. As usual, Davide will focus on our financial performance for the first half. At the conclusion of our presentation, we will be pleased to address any questions you may have. Let me start now handing over to Manuela to get started.

Thank you, Daniele. It is with great pleasure that I present our first half results. This semester has been nothing short of eventful, occurring during a very unique phase of the economic cycle. Our team and the Board have been laser-focused on capitalizing on opportunities arising from consolidation and executing our business plan, which will continue to chart the course of our company growth. Let's now get started with the presentation by diving into our first half 2024 business plan highlights on Page 4. On the EBITDA side, I'm pleased to report that our EBITDA for the first half of the year has exceeded our internal budget, reaching EUR 67 million, thanks to diversification of revenues and our extreme cost discipline. As usual, due to seasonality, much of our results for the full year will depend on the second half and particularly on the timing of closing for certain portfolio sales. On the business side, we have witnessed strong new business momentum in the first half with EUR 7.5 billion of new business, of which EUR 4.5 billion coming from forward flow or contracts we did not manage before, spanning from Stage 2 to NPL, secured and granular unsecured. This achievement comes in a market characterized by very few NPL disposals and [ low profits ] from banks and asset quality. doValue was able to focus on a niche area of the market and leverage its leadership position to secure a substantial share of NPE transaction. We are confident that we will reach our target of EUR 8 billion annually, contributing to a significant increase in our gross book value and higher collection rate due to the [ rejuvenating ] of our GBV. Our quarterly cash flow dynamics have been positive thanks to expected working capital action, resulting in a net cash flow of EUR 57.6 million in Q2. This contributes to maintaining stable leverage within our financial policy, and that's been a key focus for our equity story as part of the new business plan. We are proud to have maintained a corporate rating of BB/stable outlook despite a wave of severe downgrades among our peers. Such rating has been confirmed also post the announcement of the acquisition of Gardant. This is a statement to the strength of our business model, especially in times of higher interest rates. The Gardant acquisition is progressing smoothly and on track to close the deal by 2024. Actual timing will depend on the receiving authorities. As told in the past, this strategic acquisition will significantly enhance our business capabilities and market position. We have successfully completed the optimization of our perimeter with the disposal of operation in Portugal and the closure of AdSolum. These steps are aligned with our strategic focus on core profitable areas and operational efficiency. In summary, we are on track to deliver our business plan targets and capitalize on the upcoming Gardant transaction, setting a solid foundation for continued growth and success. Moving now to Page 5, let's explore our outlook for NPE production, focusing on trends illustrated in the graph on this slide. As mentioned in the previous quarterly call, the declines in NPE stock on balance sheet have been possible only thanks to functional and efficient distressed debt ecosystem where services like doValue play a crucial role. Over the past 10 years, NPE cumulative net flows has been in negative territory due to substantial disposal and weak NPE generation. However, starting from 2023, this trend has inverted and is accelerating as we move towards 2024. Borrowers are being impacted by restrictive financial conditions and the macroeconomic cycle is pointing towards a possible downturn. Although the figure refers to Europe and the amount of net inflows has been modest, the trend is clear and significant. Focusing on the doValue core market on Page 6, let's analyze the figures for each region. Starting with Italy, we see an inversion of the NPL trend with a 1.5% increase in Q1 '24. This change highlights the shift in the market dynamic. The implementation of the NPL secondary market EU directive is expected to increase the liquidity of portfolio traded in secondary markets, which will further influence these uptrends. In Greece, there has been a substantial 14% growth in NPL stock in Q1 despite the high number of disposals. The NPL ratio of less significant banks remained substantially higher compared to the EU average. Greek banks are benefiting from very high net interest income and margin which is helping to build [ solidly a discussion ] in case they decide to sell portfolio. This is increasing Greek banks' loss absorption capacity, which we think will incentivize them to execute the remaining NPE transaction now rather than later. Moving to Cyprus, since 2023, we have observed early signals of distress in the rate of loans migration across Stage 1, 2 and 3. Despite the slight decline in NPL stock by EUR 0.3 billion from Q4 '22, the NPL ratio remains above the average by 0.6 percentage points. Approximately [ 30 ]% of NPLs in Cyprus are held by less significant institutions, indicating a concentration of risk within smaller financial entities. In Spain, we see a continued deterioration in bank asset quality with notable increase in NPL in construction and mortgage lending throughout 2023. The lack of a developed NPL servicing ecosystem in Spain has led to high and rising levels of bad loans in absolute terms. Additionally, there was a 3.6% increase in NPL stock in Q1, reflecting ongoing challenges in the market. The inversion of the NPL trend across various European markets underscored the importance of a robust and efficient distressed debt ecosystem. Servicers like doValue play a critical role in managing this shift and ensuring stability within the financial system. As we move forward, the strategic initiatives we have implemented will position us to capitalize on these market dynamics as we have observed already with new volumes materializing in the first half of '24. Moving now to Page 7, on to our GBV intake, let's take a closer look at the date as of June 30, 2024. We have successfully onboarded and committed a total of EUR 7.5 billion in GBV. This includes EUR 3 billion in new mandates, EUR 1.5 billion in forward flows and EUR 3 billion in committed contracts, of which EUR 2.7 billion are secondary deals that [ want to ] increase the overall GBV stock. All these elements have driven an increase in GBV for the first time after many quarters, demonstrating a positive market trajectory for services. Breaking this down by region, in the Hellenic region, we onboarded EUR 1.6 billion within the Hellenic region. We have seen a strong intake of new mandates from both banks and investors amounting to a total of EUR 1.3 billion in GBV. Secondary mandates have also underpinned this growth with EUR 240 million in GBV added in addition to EUR 2.4 billion of committed secondary mandates. In Spain, we secured around EUR 1 billion. Our market-oriented approach in Spain is yielding significant results with new business intake in first half '24 doubling compared to first half '23. We have seen solid new business generation from both the banks and investors. In Italy, we onboarded EUR 350 million. We secured a EUR 300 million NPL mandate from Popolari Bank and an additional EUR 300 million in Stage 2 UTP contributed to the Efesto fund, which is the committed GBV to be onboarded. These figures highlight the strength and breadth of our operations across different markets. Looking ahead, we have a robust pipeline of potential deals totaling EUR 57 billion over the next 18 months. The value is not very different from the past because deals [ assigned ] have been replaced by new deals. In Spain, almost all potential deals are ongoing as market sales, primarily from Spanish banks. In Italy, we have a pipeline with EUR 14 billion potentially coming from state-owned related entities and a EUR 1 billion from funds and investors. Approximately 28% of this GBV consists of portfolio sales and the rest primary sales. In the Hellenic region, we anticipated around EUR 5 billion of potential deals in mixed UTP and NPL with over EUR 6 billion coming from funds or nonbank investors. You might have seen the new deals allocated on Alphabet to 3 funds, including Bain and Fortress. We are in close conversation with the 3 funds to secure servicing mandates on this portfolio. Another key pillar of our business plan related to diversification towards non-NPL revenue. Let me give you some updates on how the group is progressing towards expanding its business in servicing a broader scope of asset classes, positioning itself as a credit management company, on Page 8. As shown in the pie chart, 53% of our revenue are derived from asset classes other than NPL, demonstrating the strength and the [ veracity ] of our business model such as real estate, UTP and ancillary services. This is what we call the engine to growth in our business plan where we achieve notable targets. On UTP, we have now EUR 8 billion in GBV under servicing with 26% in Italy and 74% in Greece, increasing significantly after Gardant. On early arrears, we are managing EUR 700 million in Spain -- in Greece, sorry, particularly with Eurobank, in addition to new contracts in Spain with Sabadell and the BBVA. On performing loans, we signed our first Stage 2 mandate with top-tier banks accounting for EUR 300 million. And we have EUR 200 million in contracts with Spanish banks on granular nonbanks' unsecured tickets. On average, these products enjoy an EBITDA margin of 45% to 50%, which is superior to NPL of circa 35%. We are also progressing on the execution of special projects that will diversify further the role of doValue in the credit business. As promised in March, during the presentation of our business plan, we have set up a company in Greece called finThesis focused on the brokerage of auctions and real estate financing to bolster demand for assets and capture new revenue streams. We believe this structure will allow us to better exploit the significant opportunity and margin we see in this business in Greece, benefiting from greater flexibility and control in executing our strategic vision and capturing the full potential of this promising market segment. On advisory services, another new initiative is doAdvise, a company also set in [indiscernible] 2024. It's already operating with 4 mandates and expected to generate third-party revenue of over EUR 1 million in 2024 and be profitable. Associated to these projects, we are developing predictive models across all countries, piloting this initiative to announce our credit management capabilities. Our strategic diversification beyond NPL into UTP, REO, performing loans and ancillary services, along with new business lines like mortgage broking and advisory services, position us strongly for future growth. This diversified approach not only mitigates risk but also opens up new opportunities for revenue generation and market expansion. Now let's turn to the slide on the Gardant transaction. On Page 9, we outlined the key steps and time line for the acquisition, along with the necessary regulatory and corporate action. Our regulatory filings will include submission to several key authorities such as Bank of Italy, Consob and the National Central Banks and FDI regulators. Funding of regulatory approval will drive timing of closing and the necessary corporate actions, which will be prepared in parallel in order to optimize timing. We have called an EGM to report several important items, including the reverse stock split updated to our bylaw, increasing the number of Board of Director members to include the new shareholders and approving the reserve capital increase for the purchase of Gardant. A reverse stock split will be executed while shareholders will receive 1 share for every 5 shares they currently own. As you know, a part of the transaction will involve a share component for the seller of Gardant. This will be executed through a cashless transaction zero-coupon, convertible notes of nominal EUR 80 million, which will automatically convert into new issued shares of doValue corresponding to 20% of the new company at closing, 20 million shares, or 4 million after the reverse stock split. The implicit conversion value of doValue shares will be EUR 4 based on actual share count, EUR 20 after reverse stock split. We anticipate the closing of the Gardant acquisition to occur by year-end, subject to successful completion of all preceding [ debts ] and regulatory approvals. Following the closing, we will proceed with the EUR 150 million rights issue. This will be unconditionally backed by our anchor shareholders, Fortress, Bain and at that point Elliott, for approximately EUR 82.5 million and supported by a pre-underwriting agreement by banks for the remaining EUR 67.5 million. The final underwriting will be contingent upon the conditions set in the pre-underwriting agreement and [ customary ] conditions. Now let me hand over to Davide to cover the financials in more details.

Thank you, Manuela, and good morning to all of you. So let's dig down with the financials of this quarter. Moving to Page 11, we have here a summary of the financials for the first half of the year. As already mentioned by Manuela, the first half was better than our expectation for EBITDA. Gross revenues are down 50.7% (sic) [ 5.7% ] versus first half 2023 due to delayed sales in Greece and a challenging macro environment. This was conterbalanced by higher ancillary and diversified revenue. New business intake is beginning to pick up, but due to onboarding timing is not yet impacting our top line. As you already know, in the past, we have been proactive in managing our cost base, which has a sizable variable component, even for HR costs. EBITDA at EUR 67 million exceeded management's expectation for the first half. Please remember that the first half of 2023 was positively impacted by the release of a provision of the former CEO's variable compensation while the first half of 2024 has been characterized by significant wage inflation in Italy for the renewal of the national advancing contract. Net income, ex-NRI, has been positively impacted by lower SG&A and provision, which helped counterbalance the lower EBITDA, while net income reported was positively impacted by EUR 23 million positive components related to the Spanish Tax Claim [indiscernible]. Moving to Page 12, here we present the components of our GBV movement in the first quarter. Overflows amounted to EUR 1.5 billion, on track to meet our guidance of EUR 2 billion for the full year. On top of that, in the semester, we have awarded EUR 3 billion of new mandates. Collections stood at about EUR 2.1 billion. As you can appreciate, disposals came to EUR 1.6 billion. We also have a committed mandate for around EUR 300 million, excluding EUR 3.7 billion of additional and secondary transactions, which, although contributing to revenue generation, will not increase the size of GBV. New GBV is offset by corresponding disposals in that case. Moving now to Page 13, here is the most detailed breakdown for our gross revenues by region. Gross revenues were overall down to EUR 240 million versus EUR 226 million in '23. I remind you that we are not considering revenues from Portugal for both first half '23 and first half '24 as we are closer to the sale of that business unit. In Italy, gross revenues were slightly lower by 2.7% year-on-year, mainly due to ROE and UTP collections impacted positively in the first half of 2023 by a sizable disposal. This was partially compensated by a very positive performance of ancillaries [indiscernible]. In the Hellenic region, gross revenues declined by 2.7% year-on-year, dragged down by lower revenues in the region impacted by delays in disposal, partially compensated by higher revenues in Cyprus. As usual, growth in REO and other diversified revenues helped further build the revenues. In Spain, the lower revenues are mainly related to lower stock of REO GBV and a challenging real estate market. Moving to Page 14, we continue to proactively and effectively manage our cost base, both in terms of personnel costs as well as IT and SG&A. Operating expenses, excluding NRIs, have remained broadly stable year-on-year at EUR 125 million. [ This specific growth ] comes despite the significant one-off effect which reduced the HR costs in the first half of '23 stemming from provision release for the former CEO's variable compensation in '23 of EUR [ 5.9 ] million, and despite wage inflation in Italy, plus 15% at the renewal of the contract. Overall, we have maintained a strong cost discipline across the group, particularly in Spain, where we achieved a minus 16.4% reduction in operating costs, attaining profitability despite declining revenues. HR costs were stable versus '23 despite unfavorable comparison to the amount of [indiscernible] 2023. This was achieved also thanks to the completion of 172 incentivized exits, resulting in a running savings of EUR 8.8 million. In summary, we are confident that our [ transformation ] program and cost discipline will allow us to maintain solid and resilient margins. Moving now to Page 15, EBITDA, ex-NRI, for [ the first half ] was EUR 67.4 million, higher than our expectation. This is down 17.5% versus the previous year and mainly driven by lower revenues and unfavorable cost comparison in 2023. As revenue from disposal will likely pick up in the second half, we are confident we'll restore normal stability and catch up with our guidance. The EBITDA margin for the Hellenic region was notably impacted by lower disposal, [ past ] the level of 2023. Despite this, we have managed to partially offset these effects with savings in operation costs. We expect the EBITDA margin in Greece to largely restore to around [ 50 ]% with an increased focus on disposals in the coming quarter. In Italy, despite the low wage, inflation, and other economic challenges, we saw a resilient performance thanks to substantial savings on HR costs and to ancillary revenues growth. For Spain, the result was close to break-even despite a drop of EUR 6 million in revenues versus the previous year. This was driven also by postponement to the second half of 2024 in variable fee recognition and the underperformance in REO, partially offset by Santander NPL. Moving to Page 16, we show how our EBITDA is turning into positive reported net income of EUR 15.5 million or EUR 6.9 million net income NRI. Starting from a lower EBITDA, the net income was positively impacted by lower provisions and the lower [indiscernible] in addition to the positive one-off effect of the Spanish Tax Claim for EUR 23 million. Moving to Page 17, let's have a look on the cash flow dynamic. In the first half, we recorded a solid EUR 19.6 million cash flow from operations with the significant cash generated in the second quarter. Improved cash conversion was driven mainly by normalization of other assets and liabilities, in line with our business plan, stable CapEx and low net working absorption. When looking at the base of other asset liabilities dynamics, you may notice the cash-outs for IFRS-16 that were mostly anticipated in the first half, EUR 10 million versus EUR 6 million expected for the full year. The redundancies cash-out are lower than expected and the release of provision with no monetary effect of EUR 3.1 million. Moving to Page 18, we discuss our net debt and leverage position, which reflects our commitment to a conservative financial strategy. Our leverage has remained stable at 2.9x. Significant cash inflows related to arbitration with Altamira Asset Management has offset some of the large outflows tied to a large payment and [indiscernible]. The cash position of the company increased to EUR 110 million, which, together with the undrawn RCF, gives the company a liquidity buffer of around EUR 200 million. Looking ahead, the refinancing of current maturities will be addressed in the context of the upcoming M&A transaction, ensuring that our financial maneuvers align with our strategic growth and acquisition plans. Including the previous line, the group will have total RCF lines in the region of EUR 125 million after the [indiscernible] transaction. Moving to Page 19, here you have a summary of our regional performance and their key metrics. All in all, the group collection rate decreased [ essentially ] to 4.2% versus 4.4% for last year, which is expected to improve and [ will move ] towards to the end of 2024 when we'll [ account ] higher disposals in Greece and [ will onboard new mandates ]. Our EBITDA at the group level continues to be strongly supported by the performance in the Hellenic region. Turning our section now to our guidance for 2024 and the impact of the Gardant transaction, let's take a detailed look at where we stand on Page 21. As we navigate in a very challenging environment, [ we need ] to close the landmark transaction that will also involve raising capital in the market. It is crucial for us to keep you constantly updated on our guidance and the impact of the transaction as we move into the second half of the year in a [indiscernible] market. As you know, seasonality [ affecting ] our business has skewed towards the fourth quarter. So the first half is not always a reliable proxy for the full year. However, we have already identified some trends that [indiscernible] us to fine-tune our guidance for 2024. Gross revenues, for the first half of 2024, our gross revenues reached EUR 214 million. This is a bit lower than expected due to delays in closing certain disposal transactions [ in Greece ] and the lower collection rate caused by a challenging environment for collection but offset by strong [ monetary ] revenue contribution versus expectations. In this context, we are revising our guidance for the full year revenues to EUR 460 million to EUR 480 million from EUR 480 million to EUR 490 million. Our gross book value at the end of the first half 2024 stands at approximately EUR 118 million. We are confident that, at the end of the year, as collection and disposal will intensify, the GBV will be underpinned by solid partner new business intake, which is now exceeding expectation. This is why we are maintaining our target of EUR 150 million for the year, but confident to do better. On EBITDA, despite softer revenues, thanks to effective expense management, our EBITDA, excluding nonrecurring items, for the first half is EUR 67 million, which is higher than our expectation for the first half. However, much of the results for the full year will depend on the second half and the timing of certain disposals. Given the delayed [ registers ] in the first half, we only [indiscernible] slightly from previous [indiscernible] lending to a range of EUR 155 million to EUR 165 million EBITDA. Our financial leverage is currently at 2.9x EBITDA. Cash generation continues to be solid with cash conversion in line with expectation. However, a lower EBITDA [ denominator ] could possibly lead to a net leverage between 2.8 to 3x EBITDA. About the new mandates and future flows, we have secured EUR 4.5 billion in new mandates and future flows in the first half of 2024. And we are on track to achieve our annual target of approximately EUR 8 billion with significant transactions in the pipeline. Please note that the new mandate target excludes secondary transactions. The guidance has been updated on a stand-alone basis. The impact of the Gardant acquisition on our P&L will depend on the closing date, which we expect in the last quarter of 2024. We anticipate it to be negligible as it will cover only 1, 2 months. The impact on the balance sheet will be fully recognized at closing and will include the amount of debt directed for the acquisition, cash directed to the right issue and the cash position accumulated by Gardant in 2024. doValue will be retain this cash thanks to the customary locked-box mechanism. Finally, let's [indiscernible] 2026, including the Gardant acquisition, on Page 22. As you can appreciate from the numbers, the company in 2026 will benefit not only from the additional EBITDA contributor of Gardant with a '26 EBITDA target in the range of EUR 240 million to EUR 255 million, but also from higher conversion rates and lower tax shares. Target for '26 has not changed. Overall, we forecast an operating cash flow of approximately EUR 130 million in '26, which will translate into free cash flow to [ fund ] dividend [indiscernible] payment of around EUR 90 million, EUR 95 million, assuming interest expenses of EUR 35 million to EUR 40 million. Here, we try to explain cash flow generation in more detail [indiscernible]. More importantly, our leverage will be between 1.3x and 1.5x pre-M&A before dividend, which provides a comfortable level. This leverage allows us [indiscernible] to create [ pay ] for shareholder remuneration, [ size ] growth opportunities and maintain a cushion to withstand market volatility. We are confident that the acquisition will not only contribute to our financials, increasing our 2026 targets and cash flow generation, but also adds an important strategic layer to accelerate the integration within our industrial plan. Thank you all. We now take your questions.

[Operator Instructions] The first question is from Davide Giuliano of Equita.

I have 3. The first 1 on cash generation. Can you remind us what you expect for second half regarding other assets and liability items in particular, just to double check, is there anything to consider beyond the redundancies and the IFRS leases. And on net working capital, I see that it's linked to portfolio sales spending, onboarding. Can you elaborate a bit more on the negative impact in the first half of the year? The second one on Spain, we saw large inflows in the first half of the year. When will we start to see the benefits of these inflows? What can we expect in the second half in terms of operating performance? And the third one, what margins in relation to gross book value can we expect for the new TP contribution from the Efesto Fund and on the Alphabet portfolio, if can you give us A little bit more color on that.

Thank you, Davide. I will take the first question. On cash generation, we are in line with our expectations. Also, we are a little bit better in the first half. And what we have already [indiscernible] during the Capital Market Day. On the other liabilities, we expect that will have mainly what you have seen in the first half. As you see in the first half was EUR 8.4 million that is little below our target in our business, we have EUR 20 million -- EUR 30 million, we expect to have a lower amount of this amount redundancy because of the Gardant transaction will probably reduce the exit to [indiscernible] roughly. . On IFRS 16, we confirm our guidance as we explained during the presentation today, we are already at EUR 10 million outflow. It is 65% over the full year amount. We expect to pay at the end of the year EUR 16 million to EUR 17 million of IFRS 16. In terms of net working capital, it would be in the range of minus EUR 5 million to 0. These are in fact depends on the secondary sales -- have question, when [indiscernible], We are entitled to register the revenues as soon as the investor sign the contract, but we can collect the invoice we issue when the portfolio has been onboarded by the clients. So we need to wait onboarding and then we have to wait the [indiscernible]. This is why in Italy the invoices of the secondary phase is not collected after 3 months [indiscernible] but is collected usually by in the 6 months rather than 9 months depending of the on boarding timing but it is adjusted in the collection that is the under control.

In terms of the spain inflows, I think this is the result of the strategic decision last year to buy [indiscernible], which is specialized services on digital collections for small ticket, this company allows with CRM to capture a lot of those small ticket unsecured flow that we have secured with the new contracts with Sabadell and BBVA. So in the second part, clearly, with the trends in the market in terms of increasing NPL production, you have seen the statistics, which we have shown in the first part of the presentation. We expect this flow to go up. And we are finding similar agreements with other banks. So in terms of operating performance, clearly, the system and the people are already set up. So the increase in volume will not determine an additional cost, but will all flow through the P&L in a positive manner. In terms of the contribution to the activity in Italy. We are very proud to have moved in the higher part of the loans type. So more on the performing space, which have also much higher recovery rates. So banks are starting to discuss active management of early arrears and stage 2 loans. We have developed there also new systems and new technologies. Usually, they tend to have recovered in the order of 80% to 90% with the peak also just below 100. so this will announce recoveries, but also the profitability on this as we have mentioned on one of the pages, it's more in the order of 45% to 50%. Last, on the Alphabet, the allocation of the portfolio is now completed. On all the 3 tranches of the book. Two of them have been allocated to Bain and Fortress, which represents 70% of the book. As you know, Fortress and Bain in the Hellenic region only work -- mostly work with us. So we are confident that to finalize the agreement with them by the third quarter. Also, we are discussing with the investor who has acquired the last portfolio also potentially for that mandate. In the market, there are other portfolio also related to the [indiscernible] book. As you have seen, this these 2 banks have announced a couple of weeks ago, merger agreements, which also includes a sale disposal and securitization of a portfolio. We are well positioned there, given that in the first half of the year, we already awarded EUR 500 million from that [indiscernible bank. So all in all, we are positive on the intake of new business in the second half related to this area, too.

[Operator Instructions] The next question is a follow-up from David Giuliano of Equita.

I take the opportunity to ask another question on Italy. In particular, first quarter was up year-on-year in terms of gross revenues, while second Q was slightly down. I think it's related to lower collection this regard, the second Q was very strong last year. What do you see in terms of business momentum and is Gardant performance in line with your expectation?

In Italy, the nature of our book is mostly today driven by close portfolios, so stock agreements. The for the dynamic on the stock follows the vintage of it. So you can improve and grow the collection as you have the new portfolio. But this is also the driver of why we have focused a lot on the diversification angle and we pushed significantly the other revenue streams. In Italy, we have a pretty diversified revenue products going from real estate services, legal services, admin services for securitization vehicles data services as well as the offers we are now producing for the Stage 2 loans. -- before Gardant transaction, we see these 2 elements to grow -- to moving in a direction, which will balance each other. With given, obviously, we are going to add [indiscernible] agreements with banks 1 which includes a very profitable UTP business. as we said, the business of Gardant is very similar to ours in terms of margin, which will drive also the rejuvenation of the book. on top of the fact that we are in [indiscernible] it with the addition of early arrears and potentially stage 2 loans on which we are very focused

Next question is from Simonetta Chiriotti of Mediobanca.

So my question is if you -- on the general competitive environment, in Italy, we have seen finally the finalization of the acquisition of [indiscernible] there has been news flow on into in the last weeks and so on. So if you could give us an idea of how is the competitive environment evolving in Italy and more in general terms in the market where you operate?

The market is consolidating, and this is a positive factor for services because as we have seen in markets with very high concentring like Greece, Clearly, you create an economies of scale by adding volumes. And there is a much more pricing power on the side of services. So we see positively the dynamic of consolidation, both obviously for our transaction and also potentially doValue was going to combine with Gardant. We haven't seen -- we have gained market share in Italy in the last 6 months as well as in Greece. In Spain, the market remains somewhat fragmented. We are not seeing big shifts in terms of ownership of services because many of the services are owned by private equity, which also own the portfolio they're managing. They see the entire size through the combination of the 2. This could happen more in the last part of the year or next year. That's why we are focused there on increasing our exposure to banks, by diversifying not only with Santander, which is already a traditional historical client for us, but also going towards the main local big banks like Sabadell, the BBVA and Caixa.

The next question is from Fabrizio Bernardi of Intermonte.

Thank you for the presentation. We have been having a few presentations by the banks more or less 15 in a couple of days. So it was a busy season. The messages that we got from the banks is that the asset quality is not deteriorating so far. So maybe in the next couple of months, maybe worse or worsening, let's say. So my question is that what is your view on consolidation of the sector, I mean, apart from Gardant, which is now something, let's say, almost done. I was wondering whether you can give us your view about the consolidation of the sector. It seems to me that the sector is now let's say, not empty, but a little bit short in terms of inflows, about NPEs, whatever they are sort past due UTP or whatever it is. And so the collectors are trying to manage this problem merging in order to create efficiency about OpEx about SG&A and so on. . So I was wondering, which is your view, literally in a qualitative way, I'm not asking you whether you may have other targets apart from Gardant or not? But if you think that we have already seen interim maybe moving in this way. I know that they are fairly different versus the value. But I was asking you I'm asking you if you think that consolidation in this part of, let's say, diversified financials can move on forward in a more aggressive way?

Thank you, Fabrizio. The reality is that it's -- I mean what the bank said, I can see the point of view. I mean they have a much stronger balance sheet than in the past. The reality, no, we want to give figures that we have already absorbed in the sense that you can see from the order intake, we are more than enough way to our target for the year, and we are confident we will pass this target this year. So even in a market which has less close, but which we have already included in our business plan, reducing the intake assumption for the year. we will do better than that because the new inflows are little by little going up. Now to your question about consolidation, I agree that in a market where there are no massive volumes as in the past, it makes sense to exploit the synergies of scale, which derived from a combination of platforms. The Italian market is firmly moving in that direction. If you remember, the traditional chart of price, which tracks the sector, which was showing the main players a year ago doValue [indiscernible] if it's limited and fire probably in disorder, if I remember correctly. Now it's seeing the combination of doValue and Gardant -- sorry, [indiscernible] has seen in the reporting, they try to be consolidated of the NPL portfolio and the report almost 0 exposure. [indiscernible] focus on the internal business from the last reporting, they are downsizing the books, trying to accelerate collection you're left with eventually with 3 main players, which will be a products and into and potentially from how it will move in the overall scheme of things. Clearly, the operating leverage is a key factor in this combination, together with the diversification of revenues. I think we are all working, and we have progress, I would say, faster than others -- in the amount of non-NPL revenues in the Italian market and active management of the cost base, even a [indiscernible] transaction as this is the way you can face lower flow markets. But the market is repositioning at our biggest flows. So we are very glad to have repositioned the cost base with a higher operating leverage, so that when flows pick up and in this market, this is happening already also on the UniCredit portfolio as well as we observe on the Gardant forward flow agreements with the 2 major banks. This will create an upside in the margin, which is more relevant than in the past.

Okay. One last question, if I can do a top up. When we can assume the Gardant deal so the capital increase for [indiscernible] and the right issue to be finalized when -- which is the date. I know there is a slide, but I would like you to comment on the timing because the point is that you are in a limbo that is not very good from a financial standpoint because investors are clearly questioning about what is going to happen. So we need to know when the finish line is coming.

Yes. Fabrizio, we are working actively to get this approval as soon as possible. You might appreciate that we have several of them from [indiscernible] empower all the local central banks. Our plan is to have these approvals by mid-October and launch the capital increase soon after. As you have seen, we already conveyed the AGM to have all these things happening in a very short time frame soon after we get the approvals. So this [indiscernible] I think, for 11th of September, so all [indiscernible] and the submission and the interaction with the authorities is undergoing as well as, obviously, with Consob for the filing of the prospective

Gentlemen, there are no more questions registered at this time.

One last note. We appreciate a lot your attention in this part of the year. I know we came with our results a little bit later than others, and we wish you very good holidays and a good break over the summer.