Moltiply Group S.p.A. (MOL) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the presentation of Gruppo MutuiOnline First Half 2021 Results Conference Call. As a reminder, all participants are in listen-only mode. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Marco Pescarmona, Chairman; Mr. Alessandro Fracassi, CEO; and Mr. Francesco Manchanda, CFO. Please go ahead.

Thank you and welcome, everybody, to our results call. We will rely as always on the presentation that today was put on our website a bit late at 4:00, but you should have it. And we will move to Page 17 of the presentation with the first half highlights. You will also see that we have made some slight changes to the format of our presentation. We hope this is a bit better. In terms of revenues in the first half of 2021, we did EUR 158.8 million, which is up 32.2% compared to the 120.1% -- EUR 120.1 million of the first half of 2020. And the mix is 59% from the BPO division and 41% for the Broking division. Below the revenue chart is the EBITDA chart, which is new. But we think it's useful now to look at EBITDA because we have altered intangible asset amortization linked to acquisitions that make the EBIT picture a little bit clear than it used to be. So we now also have EBITDA in the presentation. So EBITDA for the first half 2021 is EUR 44.6 million, which is up 30.2% compared to the EUR 34.3 million of the first half of 2020. And the EBITDA margin is more or less stable at 28.1%, which compares to 28.5% on the same period of last year. The EBIT is EUR 31.6 million and that's up 14.6% year-on-year compared to the EUR27.6 million of the first half of 2020. And as I was saying, this is a bit less significant. So I will not comment too much on this because of the PPA amortization effect. Looking at the net income, which, of course, derives from the EBIT. This is EUR 23.4 million in the first half of 2021 and that's up 14.9% year-on-year compared to the EUR 20.4 million in the first half of 2020. On the next page, you have the performance of the Broking division in the 6 months. The Broking division had revenues of EUR 65.3 million, which is up 29.1% year-on-year compared to the EUR 50.6 million of the first half of 2020. EBITDA for the Broking division was EUR 23.1 million. That's up 17.8% year-on-year compared to the EUR 19.6 million of the first half of 2020. EBITDA margin is 35.4%, which compares to the 38.8% of the previous year. EBIT is EUR 20.2 million, which is up 11.7% compared to the EUR 18.1 million of the previous year. This is affected by the purchase price allocation effect of SOS Tariffe. So it's just a bit less meaningful. Now, I will give some comments also on what's behind this performance and also the outlook of the division. And then, we'll do later the BPO part. So in terms of where this performance comes from, obviously, it's a strong performance year-on-year, but you can also see that the second quarter was weaker than the first one in a year-on-year comparison. And the main factor that was a drag to our performance, actually, it was a net negative compared to last year, was e-commerce price comparison. Last year, we had an incredible second quarter with very strong revenues and limited -- I mean, marketing costs, at least in proportion to the revenues in part also because Amazon was kind of out of the advertising market. So they were only supplying basic goods. So we had incredible performance that actually made Q2 of last year a very good quarter overall for our Broking division. And this year, not only this was -- we no longer have these exceptional circumstances, but our understanding is that the e-commerce market, as soon as people could go again, shopping at shopping malls, et cetera, in April, for a while, there was a decline, a significant decline of e-commerce sales. At least, this is for the anecdotal evidence that we have points to. So we had also weak market for this. On the other hand, we had growth in mortgages. We had growth in insurance. Also, other businesses like personal loans had growth, even if we invested a lot more to propel this growth. And of course, there was growth in utilities, but this is because of the changing consolidation area because on a like-for-like basis, the market was down because the first half of 2020 was exceptional for this market. So that's what's behind our performance. Now, to look at the expected performance for the second half of the year, it's useful to look also the mortgage market. And we know that the mortgage market was up year-on-year in Q2 2021. Here, we are talking about closed loans. And of course, April and part of May were months of lockdown last year, so you couldn't close the transaction. Then, there was a very strong June in which what had been postponed to a certain extent was closed. But still, it was last year, a strange quarter. In fact, if you look at the originations, looking at the Assofin data. You see that they were up year-on-year by 73.4% in April, 26.7% in May and 17.3% in June. And especially April, this is really due to the fact that last year, it was impossible to close in April. And the total growth of the market for the quarter was a combination of -- was 34.1% year-on-year, and this breaks down to 56.2% growth in purchase mortgages and a drop of 13.8% in other mortgages, mainly remortgages. So we already have a visible slowdown in -- or declining remortgages for the market. The data from the CRIF credit bureau which are a bit more forward looking show growth of credit bureau inquiries of 85% in April, 40% in May, but then they saw a reduction of 4.5% in June 2021. And what is safe to assume is that, we'll see for the remainder of 2021 an acceleration, significant acceleration in the top of remortgages. While for purchase mortgages, we think that this will follow the evolution of the real estate market. The outlook there remains favorable. However, there are some signals of a possible slowdown. So this is the outlook for the mortgage market. Looking at our Broking division again, we can expect to see weakness in Mortgage Broking because our Mortgage Broking business line is non-reliant on the mortgages than the other just in the market. So here again, it will be a balance of the evolution of purchase mortgages. And it could be, let's say, stable [indiscernible] a little, but stability is the most likely outcome. But that will be, I mean, we will have that significant decline in remortgages that will affect us. So it's quite likely that we will see declining of revenues and declining contribution to the operating income of our Mortgage Broking business line. On the other hand, we see growth in Consumer Loan Broking. We had growth in the Q2, but also strength significantly. And we'll continue, we think, to see good growth in the second half of the year. Also insurance growth, which was -- which declined in Q1, Q2, et cetera, we expect that to continue to perform well for the rest of the year, both in terms of revenue and EBIT contribution. E-commerce price comparison was, as we explained in detail, quite weak year-on-year in Q2. But we think that the situation has materially improved. In fact, in June, the organic visibility of Trovaprezzi improved a lot. This can be seen, for instance, with [ SISTRIX ]. And so this will be quite helpful. We think that the e-commerce market is still going through a phase of weakness, but we think that thanks to some of this improvement of organic visibility, also some changes that we have made to the marketing mix and the interventions we have made, we expect to see a contribution in the second half that is stable or slightly up year-on-year for e-commerce type comparisons. Finally, Telco & Energy Comparison. Again, here, there is a positive contribution, but this comes from a change in consolidation area. This will continue for the rest of the year. The like-for-like drop that we saw in the first half is likely to decrease significantly. So we don't expect, overall, to see growth at least for the short-term in this business on a like-for-like basis, but we think the gap will -- I mean, the gap is gradually easing. And this is, to a large extent, due to the evolution of demand. So this is all for the Broking division. So Alessandro will take over with the BPO division.

Yes. So for the BPO division, if you don't mind, we go back again to Page 19 and so we can look at the big numbers. As you see, revenues for the first half of the year are up 34 [Technical Difficulty]. Okay. Hope everyone can hear me. So we are up to -- as I said, we are up 34.5% year-on-year, which leads us from EUR 79.5 million to EUR 93.5 million. Obviously, this result is due to the fact that we are including, for 2021, also the acquisition of Gruppo Lercari in the perimeter. But even as we see -- as we will see later in an year. So if we did not include the insurance business line, we would have seen a growth of over 15% in terms of revenues with the other business lines. So we are clearly in a good period. It's also fair to say that we are comparing to H1 of 2020. And in Q2 2020, we had the most significant impact of the -- in business line of the restrictions to business activities due to the pandemic. If we look at the EBITDA level, we also here see good news. So we see an increase both of total terms with a growth of 46.8% year-on-EUR 14.7 to EUR 21.5 million. And the growth is more than proportional to the one-off net of revenue. So we see also an increase of the margin at the EBITDA level. As Marco has already commented, instead at an EBIT level, we see a much smaller growth, and we also see an EBIT margin decrease. It still goes to the PPA, purchase price allocation effect of Gruppo Lercari, but also to the impairment of the intangible, which is related to the value of our, let's say, legacy insurance operations, which we are now integrating within Gruppo Lercari and the restructuring and dismantling of what we are doing and moving it to Gruppo Lercari has created a necessity to see this -- to do this impairment. Then, if we now go to Page 23, we can talk about the outlook for the remaining part of the year. As I've already commented, we're actually pretty happy of what has happened in H1. And even if you go at a quarterly level, you see that Q2 is basically growing smoothly, although with differences in the different business lines, both relative to Q2 2020, but also relative to quarter-on-quarter to Q1. So overall, what we do expect is to see a second part of the year that will probably bring results that are very similar to what we have seen in the first half. You will have to discount the seasonality factor between Q2 and Q4, but overall, we expect the second part of the year to bring the good -- same good results that we have seen in the first half of the year. Now, let's look at the different business line and see the different evolutions. Mortgage BPO is going very well in H1 relative to last year. Although, we are starting to see, as also Marco has commented, the reduction in the mortgage refinancing. And as you know, this part impacts, especially our para-notary services, which have a lower EBITDA margins than the traditional outsourcing activities. But anyway, this -- the revenues in this area are going down. By contrast, traditional services in Mortgage BPO are growing and they are growing both because the other part of the market is growing, but also for some, let's call it, share of market growth -- the market share growth because we have gained some new customers. We already told you last year. ING is restarting. And therefore, we are also seeing that contribution. And also some clients are going very well relative to last year. So there are these two contrasting trends. And overall, we expect the results at the end of 2021 to be over those of 2020. On the real estate services, we are also seeing a good trend and the acceleration that we have seen in the first half will continue also in the second half and this is thanks to a higher level of real estate valuations. This is thanks to the fact that finally our Intesa contract has reached the regime level of volumes. And also, thanks to the Ecobonus related activities, which did not deliver as much as we hoped, but they are definitely contributing to the growth of this business line. By the way, the reason why it is not contributing as much as we hoped is also because as you know, as you can read in the newspaper relative to these incentives that have been particularly cumbersome. And even if there was a lot of demand, it hasn't delivered a lot of banking activity, at least until now. Going to Loans BPO, this is probably the only area where we will see a reduction relative to last year. Although, frankly, I see this first out of 2020 is very good news because we basically were very, very close to the results of last year, at least in this first half, proving that we have been resilient to the normalization of the market in the SME guaranteed loans, which, as you might remember, was what gave us a boost last year because it's a market that boomed, we were able to enter it, and then to deliver exceptional growth last year. So actually, we're doing better than we expected. But anyway, at the end of 2021, we will post a turnover, which will be below 2020, which was again a record year, it will be probably single-digit decrease, but there will be a decrease there relative to last year. Insurance BPO, obviously, has a very, very positive comparison, but that's just because we are now a significant presence in the market, thanks to the acquisition of Gruppo Lercari. Anyway, within 2021, we are seeing good news and the good news are growth of the second quarter relative to the first quarter. So on a like-for-like basis. And also, the new business coming in, so let's say, the leading indicator show growth relative to 2020. With regard to investment services, we are seeing basically a small growth in H1 21 relative to last year. But the second part of the year, we will see an acceleration. And this is because we will see during 2021, the gradual growth of the revenues coming from new services that we have sold, thanks to a new contract, which we told you about at -- commenting the last year results. So also here, the outlook is positive and getting better. Leasing and Rental BPO is continuing to perform better than what we expected. You remember that last year we had an exceptional last quarter, which was due to some one-off activities. These activities have actually also continued in 2021. And so we now have a better outlook than the one we gave you at the beginning of this year. We expect the results by the end of the year to be in line or even above the one of 2020. I guess this ends my review of the BPO division. And so I hand it back to Marco for further comments.

Okay. Yes, I think we are almost done. Let me make a comment on the net financial position on Page 42. You can see that our net financial position compared to the end of December of last year is a bit worse, but that's because we -- basically, we paid dividends. We paid some deferred -- we made some deferred payments for the acquisition, in particular, Lercari. And most importantly, we had material changes in net working capital. Basically, we are in a normalization, but favorable, let's say, net working capital situation at the end of 2020, mostly because of our Leasing/Rental BPO business, where we had a lot of advances from clients to pay stamp duty, vehicle stamp duty on their behalf. So we had all this money in cash. We had the liability, which is not part of a net financial position. And we said this would normalize and it has normalized. So we are back to a more normal condition in terms of net working capital. But anyway, what is important to say is we have significant cash. Our bank borrowings are almost all non-current. And what you see here is -- and then, also, we also paid for Zoorate small companies affiliate, EUR 2 million. And here, what you see under other non-current financial liabilities is basically the liabilities for the puts and calls on minority -- for minorities that we have. And the Cerved shares are not in the net financial position. Now, we disclose our -- we tender our shares to the Casper -- to Casper. And so we receive around EUR 60 million more or less. So we will have even more cash in the net financial position, which is approaching 0 and its gives us a lot of strength and flexibility that we don't know exactly to what use -- we can put this money. Now the banks are asking us to pay for the deposits, but anyway, we'll see. So that's the likely evolution of the net financial position. And this ends the presentation, and we can open it to Q&A.

[Operator Instructions] The first question is from Aleksandra Arsova with Equita.

Some questions from my end. First of all, on the Broking Mortgage division, so you mentioned the strong growth in the first half of the year. So just if you can provide us the growth rate in the first half. And then, when you speak about a decline expected for the second half of the year, do you expect something more in the mid-single digit, low double digit, just to have your best sentiment on this? Then a similar question for the first half of the year in the e-commerce revenues, just to know the growth rate in the first half, if you have the precise number. Then EBITDA margins and cost increase. The EBITDA margins were declining, both in the Broking and in the BPO, I expect, mostly because of marketing costs. So just if you can confirm this and if we may expect this evolution of EBITDA margin also for the rest of the year. Then, another couple of more technical questions. So I read in it. Sure. This last question. Which margin are you referring to? And if you're talking about booking or the BPO, you were referring to. So okay. A, in general, was, of course, the margin for the broking store margin was declining, let's say, to 35%, if I'm correct. So if this is related to marketing costs and how this will evolve? Okay. Okay. Then just a couple of more technical questions. So I read in -- yes? Sure.

The last question. Which margin are you referring to? And if you are talking about [Technical Difficulty].

Okay. General was -- of course, the margin for -- the Broking side margin was declining, let's say, to 35% if I am correct. So if this is related to marketing cost and how this will evolve?

Okay.

Okay. Then just a couple of more technical questions. So I read that the PPA effect in the D&A, in the first half was about $6 million. So just to have the number in the second quarter alone? And then another one, the tax rate. I saw this increase to almost 31%. So I think this is related to the impact that you are paying due to the [ revaluation ] of intangible assets you had last year. So just if we have to expect the same tax rate for the full year and if you will be back to a lower tax rate in the coming years?

Okay. Well, let's start from the question on mortgage broking. Well, the -- we had a slowing growth rate in Q2 compared to Q1. And for the second half of the year, it's really difficult to make a forecast. As we said, it will be a combination of a steep decline. So that would mean high double-digit for remortgages and accelerating throughout the second half of the year while we could have possibly stable or growing figures for purchase mortgages. For us, remortgages are quite important. We are overweight in mortgages compared to the market. So it's easy to expect a double-digit impact, maybe, it's really hard to say. Obviously, it will not go from growth to a very deep decline. But low double digit, for instance, is something that I think is quite reasonable. And then, as you know, as time passes, we will give more information with the Q3 results, et cetera, we'll have better visibility. And in terms of e-commerce and in general, in terms of the margin, the EBITDA margin of the Broking division, we have spent more money on marketing this year than last year in some cases, because of exceptional circumstances, in other cases, just because we were more aggressive. And by the way, in some areas, we did some fine tuning. So part of the interventions we made on e-commerce price comparison was a tuning of the marketing expenditure. Basically, we saw that the market was quite weak and some things were not so effective, mostly because of the interest of the market. So for instance, we were doing TV advertising and we slowed that down significantly because knowing that it was not so responsive, it didn't make sense to do it. So I think there, it will be a combination. But anyway, that's the main driver. The unit revenues have not changed. So the main thing that changes in the Broking division is how much you spend in the proportion of revenues. And certainly, we spend -- we were more aggressive with marketing. Then -- sorry, can you repeat the question on the PPA? If it's going to be the same in or...

Yes, because it was EUR 6 million, I think, in the first half, and I wanted the proportion in the second quarter, yes.

Because I think it's going to be the same in all the quarters of the year, more or less.

[indiscernible] in the first quarter.

Yes. Okay. The first quarter was an estimate. And then, we did the actual calculation with the auditors, et cetera, at the end of the first half, but the estimate was good. And I think you take the first half figure and you double it and you have the full year figure. And in terms of tax rate, that's our best estimate for now. It's not so meaningful because this is not the actual -- the cash tax rate. This is sort of a theoretical tax rate because then, we will pay half of the tax or a significant portion of it with the deferred tax asset that we have. So let's say we made an estimate by the book. So that's the most -- the best estimate we can make right now and we will see next year exactly where we get. But again, while in the past, our tax item was more or less a [ cash upside ] and now a lot of this will be paid out of the big deferred tax asset that we have.

I think we covered all the questions.

The next question is from Filippo Prini with Kepler.

Yes. I got 4 brief questions. The first one is on the request of the mortgages from the data of CRIF bureau. I understand that the worsening of the trend supported June and August has to do with the plunge of the -- more so in the [ para-notary refinancing ]. But can you make understand if the first time mortgages remain positive, so still year-on-year growth compared to the past year? The second is on BPO mortgages. Can we say that all the negative effects from the merger will be Intesa Sanpaolo completely factored in your margin? So basically, we should not expect any further -- is there any negative impact on this business line from the condition of the two banks? A third one, just curiosity. I see that you didn't provide the breakdown by division or the details of the business line. Could we expect to have this breakdown on an annual basis? And the final one is on share, but just a clarification. When you will tender the shares at the end of the offer. Would you book a capital gain like you did when you sold the shares of Cerved from the market in the first part of the year? And if the case, the reference price is still EUR 7.5?

Okay. We'll do the questions in order.

On the BPO? You asked about Broking...

First one was purchase mortgages for Broking.

Yes, go ahead.

Yes. We gave an outlook based on what we see now of stability. We see -- we said that we've seen a slowdown. So clearly, there was growth in the good growth in the early part of the year, but also because of the comparison. And now that's no longer the case. We have some positive indicators like the average mortgage amount has increased, so that is helping. And I think that for now, from what we see, et cetera, stability is a reasonable expectation. Then again -- something better or -- we are conservative, but it could be also something worse, but it really depends on the evolution of the real estate. Last year, you really had things that were delayed for a while. So a lot of applications, for instance, maybe came in June or July because people had to wait. So maybe the stability we see is only short-term effect. It's really -- I think we are linked to what the market will do and that would be the main driver in the short term. So again, stability, I would say, broadly speaking.

Relating to Mortgages BPO, in Q2, we have already seen any impact of the merger, in particular, the fact that IWBank was under Fideuram and therefore, they stopped originating online mortgages is something that we have already seen in Q2. And so that is the only thing I would say for BPO mortgages that has in -- of some significance. And so therefore, it's already factored in its impact. And when I said that I expect Q2 -- I'm sorry, H2 to still to be not as good as H1, but still, the whole here will be better than last year. I think I'll give you a good indication of where we will end for -- as a trend in 2021.

Regarding the breakdown of...

By the way, Mortgage BPO grew in H1. We're not disclosing this time the figure, but it's between 15% and 20%. So...

And regarding the breakdown of the revenues by business line, we used to give that figure twice a year and the full year results and half year results. And we have decided to change that and we will keep giving the figures only once a year and the full year results. And that's mostly for competitive reasons. So you will have -- in the half year, you'll have the same type of information that we give for the quarter. So qualitative indications of how things evolved in the particular business line, but not actual figure of the revenues. We think it's in the interest of the company to proceed like this. Finally, Cerved.

Now that's the number -- the evolution of share of Cerved as of June 30, we have the capital gain already booked at the value as of June 30. But the value, the capital gain is moved in equity at a value of 9.8%. So the price of the -- the remaining capital gain will be certainly booked in the P&L. And I think that in our presentation of the full year number, probably all the capital gain compared to the value as of the beginning of the year and the value was EUR 7.45 per share. Probably the entire capital gain will be represented in the P&L. But I'm not so sure because we have to study very well this representation and also after support of the audit company in this point. But for the number represented in the last year report, the capital gain is in equity for the price per share of EUR 9.8.

Yes, of course. When I talk about capital gain on profit and loss, I was making reference to the gain on the shares sold during the year, not the figure seen on your portfolio.

Yes. That's all the share because in this year, we have not sold any -- we have not sold share during this year.

No, we did.

Yes.

EUR 1.6 million.

Yes, yes, EUR 1.6 Million.

Yes, yes, in March. In March we sold some. And that's [indiscernible], yes, shareholding.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

All right. Perfect. Thanks then for participating to our call and we'll see you at the next call in November I think.

And we're always able for any one-on-one meeting that you would or calls that you might require. Thank you. Bye-bye.

Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.