Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dovalue SpA (DOVXD, Financial) reported an EBITDA of EUR67 million for the first half of 2024, exceeding internal budget expectations due to revenue diversification and cost discipline.
- The company secured EUR7.5 billion in new business, with EUR4.5 billion from forward flow contracts, demonstrating strong market momentum despite challenging conditions.
- Dovalue SpA (DOVXD) maintained a corporate rating of BB/stable outlook, showcasing the strength of its business model amidst industry downgrades.
- The acquisition of Gardant is progressing smoothly and is expected to enhance business capabilities and market position significantly.
- The company has a robust pipeline of potential deals totaling EUR57 billion over the next 18 months, indicating strong future growth prospects.
Negative Points
- Gross revenues for the first half of 2024 were down 5.7% compared to the same period in 2023, due to delayed sales in Greece and a challenging macroeconomic environment.
- The EBITDA margin in the Hellenic region was notably impacted by lower disposals, affecting overall profitability.
- Net income was positively impacted by a one-off effect related to a Spanish Tax Claim, indicating reliance on non-recurring items for profitability.
- The company revised its full-year revenue guidance downward to EUR460 million to EUR480 million from EUR480 million to EUR490 million due to delays in certain transactions.
- The financial leverage remains high at 2.9 times EBITDA, which could pose risks if revenue growth does not meet expectations.
Q & A Highlights
Q: Can you elaborate on the cash generation expectations for the second half, particularly regarding other assets and liabilities, and the impact of net working capital?
A: Davide Soffietti, Chief, Group Finance, explained that cash generation is in line with expectations, with a slight improvement in the first half. For other liabilities, they expect similar figures to the first half, with a lower redundancy amount due to the Gardant transaction. IFRS 16 outflows are expected to reach EUR16-17 million by year-end. Net working capital is anticipated to range from minus EUR5 million to zero, influenced by secondary sales and onboarding timing.
Q: Regarding Spain, when will the benefits of large inflows in the first half be realized, and what can be expected in terms of operating performance?
A: Manuela Franchi, CEO, noted that the strategic decision to acquire a specialized service for digital collections has allowed capturing small ticket unsecured flows. The system and personnel are already in place, so increased volume will positively impact the P&L without additional costs. The market trends indicate increasing NPL production, and similar agreements with other banks are being pursued.
Q: What margins can be expected from the new TP contribution from the Efesto Fund and the Alphabet portfolio?
A: Manuela Franchi highlighted that the recovery rates for Stage 2 loans are typically 80-90%, with profitability margins around 45-50%. The Alphabet portfolio allocation is complete, with Bain and Fortress acquiring 70% of the book. Discussions are ongoing to finalize agreements, and additional portfolios related to Attica Bank are being pursued.
Q: How is the competitive environment evolving in Italy, especially with recent acquisitions and news flow?
A: Manuela Franchi stated that market consolidation is positive for servicers, creating economies of scale and pricing power. doValue has gained market share in Italy and Greece, while Spain remains fragmented. The focus is on increasing exposure to banks and diversifying client base.
Q: What is your view on sector consolidation, given the current market conditions and inflows?
A: Manuela Franchi acknowledged that consolidation makes sense in a market with lower volumes, as it allows for synergies and scale efficiencies. The Italian market is moving towards consolidation, with doValue and Gardant combining to enhance operating leverage and diversify revenue streams. The focus is on maintaining a strong cost base and capturing upside as market flows increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
