Cerved S p A : Results as of September 30th, 2021 - Transcript

Cerved Group SpA

"Q3 2021 Results Conference Call"

Friday, November 12, 2021, 17:30 CET

MODERATORS: ANDREA MIGNANELLI, CHIEF EXECUTIVE OFFICER

EMANUELE BONA, CHIEF FINANCIAL OFFICER

OPERATOR:Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Cerved Group Q3 2021 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing "*" and "0" on their telephone.

At this time, I would like to turn the conference over to Mr. Andrea Mignanelli, Chief Executive Officer of Cerved. Please go ahead, sir.

ANDREA MIGNANELLI: Thank you very much all for joining this call today. This is Andrea Mignanelli, CEO, and with me there is Emanuele Bona, CFO. The purpose of this call is to provide you with an update on Cerved results to 30th September 2021.

So as an introductory comment, I would say that year-to-date results to September are satisfactory on a consolidated basis, and Cerved is returning to the growth trajectory as indicated in our guidance in 2023. Data Intelligence, ahead of plan and the Credit Management division behind schedule.

Now let me take you through the key messages in the executive summary on Slide #4. The situation in Italy is picking up very well, thanks to a series of factors, namely vaccination rates are among the highest worldwide, and consumer confidence and industrial output and exports are all registering solid indicators, and also as you may know, Italy has secured [indiscernible] as part of the next generation EU plan.

So all this has led to an upward revision of expectation on the rebound of the channel economy. However some elements of uncertainty remain, first of all linked to the risk of a fourth wave of the pandemic, which is

already manifesting itself in the Northern European countries, and from an economic point of view to the tensions on raw materials due to the shortage of certain goods and the rising prices, which could slow down the recovery in the next few months.

Now, as mentioned a second ago, set of results on a consolidated basis. Revenues grew by 3.1% on an organic basis with the Data Intelligence perimeter already ahead of 2019 result. Adjusted EBITDA grew at an even higher rate of 3.6% on an organic basis, and once again the Data Intelligence perimeter is well above pre-COVID levels.

Operating cash flow jumped 20% consistently with what we reported for H1, reflecting the gradual normalization of DSO in '21 compared to the 2020 which witnessed a deterioration of networking capital. Adjusted net income grew by 10.5%, mainly thanks to the underlying growth in EBITDA and the lower amortization.

And finally leverage further improved to 2.5 times compared to 2.9 times the year end, thanks to solid cash generation and an improvement in networking capital, due to strong collection of receivables.

Let me now give you a quick heads-up on shareholder meetings and the tender offer, although these aspects are not covered within the scope of this presentation, and we will not comment on them during the course of the Q&A at the end of the call. So if you have any queries on this, please contact our Investor Relations department on [e-mail].

We have 2 Shareholder Meetings on the agenda, the first for the 25th of November to appoint a new Board of Directors to modify the minimal number of Directors in the by law, and following the request submitted by the shareholders, Maven Investment Partners and Berry Street Capital, to

integrate the agenda with the proposal of distribution to the shareholders of an extraordinary dividend of €0.5 for each outstanding share. And the second Shareholder Meeting will be on February 11th, 2022 to approve the merger of Cerved Group into Castor Bidco.

Regarding the tender offer, as we indicated in the presentation, Castor Bidco reached a stake of 78.9% at the end of the tender offer on September 9th, which has subsequently increased to 89.2% as of 28th of October. All the relevant documentation is available on our website, either in the governance or in the investor relations tabs, as appropriate.

Now, let me move to Slide 8, which provides our customary view of our results in the first 9 months, broken down by business unit. But before getting into the 3 key divisions, let me spend a few minutes on the Data Intelligence business, which includes Risk Intelligence and Marketing Intelligence, and which is our core business.

In a nutshell, we have already overcome the impact of the pandemic, which took a toll on our 2020 results. This is very satisfactory results, which I am keen on highlighting and which we'll look into further. As backup, please also refer to Slide 19, which has all the divisional figures from 2019 to 2021 broken down by division and between Data Intelligence and Credit Management. This is very useful to compare our current rating with pre-pandemic levels.

Risk Intelligence is our largest division and we have already seen with H1 results, this division has continued to bounce back from a very tough 2020. The division grew by 6.2% in revenues termed [ph] year-to-date and is already up 2% compared to 2019.

Let's now look at each of the financial institutions and corporate segments in more detail. Financial institutions are once again continuing to degrade [ph] and this is on top of 2020, which grew nicely compared to 2019 and despite the pandemic, this segment grew by 5.1% in the first 9 months, and this is a combination of 3 key factors, which we already indicated with the H1 result presentation.

So first is the core business information and analytics segment continue to register a positive growth rate, which is comforting given that they did not contract during the pandemic? Another area, which is continued to perform very well is Subsidized Finance, in particular services to our banking system cope with a liquidity decree to boost liquidity and new lending, especially to SME. Ratings are also doing quite well, recall that this is a very distinctive offering we have and we have the largest rating agency in Europe by number of ratings clearly focus on the SME sector.

Last but not least, the Real Estate segment is slightly below last year, has just been occurring for the last few years real estate is [indiscernible] on one end appraisals have been a gross story since last…since at least 2014, whereas on the other hand, cadastral surveys, which includes land registry checks and cadastral information has been declining.

Now, let's look into Corporate Segment, which has also been doing quite well and really continue to bounce back growing by 7.2%, following the plus 9.8% in H1. The current growth rates are satisfactory, but we are still behind 2019 level, so it will take some more time to fully recover from the impact of the pandemic in 2020.

A quick comment on client segmentation, as we indicate in H1 call, the SME client base was very much more impacted by the pandemic than our