Cerved S p A : Risultati al 31 marzo 2021 - Transcript

Cerved Group S.P.A.

"First Quarter 2021 Results Conference Call"

Wednesday, May 12, 2021, 17:30 CET

MODERATORS: ANDREA MIGNANELLI, CHIEF EXECUTIVE OFFICER

EMANUELE BONA, CHIEF FINANCIAL OFFICER

PIETRO MASERA, HEAD OF STRUCTURED FINANCE AND

INVESTOR RELATIONS

OPERATOR:Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Cerved Group First Quarter 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. Pietro Masera, Head of Structured Finance and Investor Relations. Please go ahead, sir.

PIETRO MASERA: Thank you. Hello, everyone, thank you very much for joining the call today. It's Pietro Masera speaking, and I am here with Andrea Mignanelli, our CEO and Emanuele Bona, CFO. The purpose of today's call is to provide you with an update on Cerved's first quarter results to March 2021, and at this point, I'll leave the word to Andrea Mignanelli.

ANDREA MIGNANELLI: Thank you, Pietro, and hello, everybody. Let's go on Page 2, the Executive Summary. In summary, I'll start the slide with the Q1 results we showed this strong improvement in our largest core business areas which is Risk Intelligence which is now bouncing back from a very tough 2020, with very strong growth rate for both the corporate and the banking segments.

Marketing Intelligence shows a minor decline, albeit largely due to a lower number of MBS projects with completion in Q1 2021 compared to Q1 last year. MBS, our advisory firm is however working full steam and all consultants are very busy and we expect a strong year.

Credit Management is still suffering pandemic as we saw in Q1 last year. timeline versus the external context.

from dynamics related to the Results in this division reflect a

Looking more into detail at Q1 results on Slide #3…#2 sorry, we have revenues grew almost 2% both on a reported basis and organically although with different trends within the 3 business units. We will look in more detail in the next few pages.

Adjusted EBITDA was basically flat, once again with different trends within the business unit. Operating cash flow jumped plus 51% reflecting the gathered normalization of DSO in '21 compared to 2020 which witnessed a deterioration of the net working capital.

Adjusted net income declined marginally by minus 1.9% not too meaningful for earning this year, in the year, and leveraged improved from

2.9 times year end to 2.7 times, thanks to solid cash generation and improvement in net working capital situation due to strong collection of receivables.

In the following pages, we will look at each of these variables on a divisional basis. A few other aspects are highlighted in the Executive Summary, Macro and COVID-19. The situation is finally getting better again, after having deteriorated starting from October last year, fingers crossed and between vaccination and the European recovery plan, things will really begin to get better for Italy, which suffered tremendously from the COVID-19 outbreak, and we expect that this will also have a positive effect for Cerved.

Investor Day, I would say that as you know we made a tremendous effort in preparing the Investor Day which we presented on March 26th and also with a strategy and the targets are clear for investors and analysts. I would say that Q1 results are pretty much in line with our expectations, although

it's been very early days just one quarter out of 3 years. In any event, so far so good and we are focusing on delivering the Q2 results now.

Let's move to the next page. This page is a brief note of the voluntary tender offer similarly to our approach in the Investor day; today's presentation focuses exclusively on the Q1 results. We will not be taking any questions regarding the tender offer. I do however remind the markets that the Board is currently evaluating and assessing the offer and its relevant terms and conditions. The Board will provide the market with a statement and it will be published before the beginning of the tender period, and such statement will provide all the information useful for shareholders to probably evaluate the offer.

Let's go now to Page 5, the macro highlights. On Slide #5, we have updates on some of the tables where we normally provide macro data, and the situation has significantly improved since Q3 last year. However, the Italian economy lost about 9% of GDP in 2020, and returning to pre- COVID GDP levels will probably take place sometime in 2023. And we saw early growth prospects are around 3.14% to 4% for each '21 and '22. So unfortunately, still a lot of companies in difficulty and this does not help anybody and not certainly a business like Cerved.

Moving to Page 7, we see a snapshot of the divisional results for Q1. Risk Intelligence, as I indicated earlier, is effectively bouncing back from a very tough 2020. Frankly, we have never seen the division growing double-digit and a portion of this growth is compensating for what we lost in 2020. In fact Q1 2020 contracted by 7.4%, with the initial impact of the pandemic. But nevertheless, results are very positive and let's now look at each of the financial institutions and corporate segments in more detail. Financial institutions are once again continuing to do great and frankly

better than expected. This segment grew by an excellent 15% and this is a combination of 2 key factors.

The core business information and rating and analytics segments, which account for about 80% of total revenues, continue to register a positive growth rate, which is comforting, even they did not contract during the pandemic. Recall that this is a very resilient business, given how mission- critical it's for banks. The situation is looking quite good, and although we see some headwinds from bank consolidation, we also see some positive impacts from product innovation and up-selling.

The other area, which is doing very well is subsidized finance, which is services to help the banking system cope with the liquidity decree, to boost liquidity and new lending to SMEs. As we saw in the macro overview, there are been some €150 billion of public guarantees and Cerved has worked out about €6 billion. We did take a cautious view that this revenue stream would have declined a bit in 2021, but for now, we are doing better than expected. Recall that most contracts are multi-year and then there continues to be a lot of new guarantees and loans, which are being issued.

Last but not least, the real estate segment was fairly flattish compared to last year. As we've been occurring for the last few years, the results are a combination of growth within appraisal and a decline within repo which is the land registry checks and cadastral [ph] information. As a positive point, the Italian banking system is now fairly healthy and has a lot of liquidity, and this is sustaining the volume of mortgages being issued and this provides a good tailwind to us.

Let's now a look into corporate. Corporates also doing quite well and really bouncing back, growing by 8.8% in Q1, also in the case…in this