Dovalue SpA

MIL:DOV

Earnings Call Transcript

[Operator]

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the doValue Preliminary Full Year 2023 Financial Results Conference Call.

[Operator Instructions]

At this time, I would like to turn the conference over to Mr. Daniele Della Seta, M&A and Investor Relations of doValue. Please go ahead, sir.

[Daniele Seta, executive]

Thank you. Good morning, ladies and gentlemen, and welcome to the doValue full year 2023 Results Conference Call. My name is Daniele Della Seta, and I serve as the Group Head of M&A and Investor Relations. I'm glad to be here in [indiscernible] today accompanied by Manuela Frankie, our Group CEO; and Davide Soffieti, our Group CFO. Together, we will discuss the key developments within the group and the market for 2023 as well as provide a detailed overview of our financial performance over the past 12 months. Following the presentation, we look forward to addressing any questions you may have. Within that, I would now hand over to Manuela.

[Manuela Franchi, executive]

Thank you, Daniele. It's a pleasure for me to share our full year 2023 results with you. This past year has been challenging for sector characterized by an uncertain macro environment and dynamic credit markets. Despite these [ outlooks ], thanks to the dedication of our employees and the trust of our clients, doValue has emerged as a resilient force within the industry. We successfully secured EUR 11 billion in new GBVs. These achievement underscores our ability to navigate through complexities and reinforce our position as a solid player in the market.

As we highlighted in our last quarterly presentation, 2023 has been a difficult year for both services and debt purchasers, marked by a decrease in LTL origination within primary markets. Despite these challenges, doValue continue to serve its position as a leading European servicer. We reached our 2023 guidance on EBITDA and maintain one of the industry's lowest net leverage ratios, which we will discuss in more detail after.

In 2023, the economic landscape was partially stabilized by household fund and savings and significant fiscal spending by the EU and its member state which helped to mitigate the effects of strict term monetary policies. However, we anticipate a shift in late '24 to '25 as the cushion provided by pandemic savings dwindles and the reimplementation of new fiscal views encourage every indebted countries to reduce their debt and cut fiscal spending. This reduction in support is expected to impact households and corporates alike leading to slower economic growth across most European markets.

Such conditions along with the lagged effect on sustained interest rates are hinting to normalization from the exceptionally low levels of bankruptcies observed in the last 2 years, subsequently driving an increase in the [indiscernible] transaction margin to 37.1% from 37% in 2022. Moving to the presentation on Page 3, we show our main achievements in 2023. EBITDA, excluding nonrecurring items, reached EUR 178 million, aligning with the company guidance and slightly improving the EBITDA margin to 57.1% from 57 in 2022.

Maintaining this level of profitability, particularly near marked by departure of a significant client like Sareb and a downturn in new business volume presented a considerable challenge. We successfully navigated this period thanks to our resilient and flexible operating model, a direct outcome of our transformation plan. Despite unfavorable conditions for new NPL generation, we managed to secure EUR 11 billion in new gross book value under management, not paid, keeping our total managed GBV at EUR 116.4 billion as of December '24, down from EUR 120.5 billion in January. This was achieved even after accounting for substantial collection, disposal and write-offs with a total of EUR 15.9 billion.

The fourth quarter confirmed even in this uncertain scenario to perform strongly, marking a positive momentum. This shows up, especially looking at the plus 13.5% quarterly increase in gross revenue and EBITDA margin at 43.3%, gaining 2 percentage points on a quarterly basis, as we have anticipated in November in the context of our 3Q 2023 results. Regarding the regional performance, both Spain and the Hellenic region showed double-digit EBITDA growth in Q4 with a robust plus 15.8% and plus 44.4% quarterly growth, respectively. To further increase profitability, we are rationalizing our portfolio companies and disposing operational in less profitable or suboptimal size business like Portugal and real estate development in Spain.

Even after distributing a general dividend of EUR 48 million in 2023 and covering not regarding transaction related to the exercise of the put option by Santander of EUR 21 million, doValue's debt-to-EBITDA ratio remained at 2.7x, which is consistent with our financial policy and ranked among the lowest in the industry. Given our stable EBITDA and cash flow, we consider this level to be manageable even in the context of volatile markets.

Last but not least, we are in the final stages of preparing our new business plan, which we look forward to presenting to investors on March 21, 2024, where we plan to share with you our vision for doValue for the next macro cycle.

Moving now to Page 4. I'm glad to show our main KPIs delivered in 2023 with respect to our guidance communicated in November. As you can see, we have essentially met all the targets with a significant effort in Q4. As for the outlook of 2024, we are in the final stages of finalizing our new Capital Markets Day for the period of '24/'26, which will include our financial partners and key performance indicators for the upcoming 3 years ensuring we have a clear road map for success. I can anticipate that '24 is set to be a pivotal year for doValue dedicated to transformation and strategic investments designed to establish a solid foundation for growth in '24 and '26.

Our focus will be on implementing initiatives that will drive long-term valuation. As we execute our transformation program, please note that while we will be undertaking further initiatives across all regions, the full impact of our cost savings may not be immediately apparent in the first half of the year. We ask our investors to read our interim 2024 results with this context in mind.

Regarding our dividend for '24, we will take a prudent approach evaluating the distribution once the business plan will be approved. This will ensure that we maintain financial flexibility, protect some level structure while upholding our commitment to shareholder returns. Finally, let me anticipate that the relevant part of the business plan will be driven by our efforts to diversify the revenues beyond NPLs. This diversification strategy is key to our resilience and long-term profitability.

On Page 5, we outline in greater detail our resilient and diversified growth path. Following to significant acquisition, doValue now operates across 3 key macro regions: Italy, Spain and the Hellenic one. While these regions are collectively categorized under the umbrella of Southern Europe, it's important to recognize that each has its own distinct economic cycle and market dynamics. This has resulted in a diversified revenue stream with the Hellenic region contributing most to our growth.

Meanwhile, the activities in Italy and Spain have been more subdued each for its specific region. This regional diversification not fully mitigates our risk but also positions us to capitalize on the varying economic cycle of each region. While Italy is currently experiencing slower activity, Italy and Spain are very large economies with [indiscernible] full potential for future growth, which could effectively compensate for any potential deceleration in the smaller Hellenic region, ensuring sustained overall performance for doValue. In the Hellenic region, we observed an exceptional revenue growth led by ongoing derisking efforts by these banks and favorable macro environment for collection.

We envision upcoming a large transaction to sustain our future trends and intend to capitalize on robust revenue stream and explore and tap market potential. As for the Italian region, we recorded minus 5% CAGR in gross revenue due to lower-than-expected new business inflows as well as challenging environment impacting negatively on collection. Therefore, doValue started diversifying by focusing on new asset classes such as the likely to pay positions and granular portfolio as well as more flexible operating model.

In the next year, revenue will be driven by asset diversification, business development of state transit and small SME's loans and positioning to exploit robust market recovery. As for Spain, the region recorded a decline in gross revenue due to matching effects of low NPL generation and loss of sales contracts, which produced negative effects on -- in the third quarter. Nonetheless, in 2023, Spain onboarded new clients and investors for EUR 0.8 billion. We estimate future growth in Spain to be achievable, mainly by proactive business development. A first step was the acquisition of Team 4 Collection and Consulting, a debt collection agency, which will allow doValue to ensure collection of [indiscernible] unsecured and be more competitive with nonbanking customers such as utilities.

Once more, let me remind you that this diversified setup has been achieved in the context of constrained net leverage always within the target range of 2 to 3x even after EUR 108 million return to shareholders accumulated dividend distribution in the last 3 years.

Turning now to Page 6. Here, you find the segment split of gross revenue by region. In the Hellenic region, we recorded EUR 251 million revenue for full year 2023. That is minus 0.8% growth year-on-year, while on a quarterly basis, the value recorded EUR 80 million, marking a strong plus 51.4% growth quarter-on-quarter, driven mainly by [ title ] portfolio sales. Real estate revenue jumped to EUR 15.6 million driven by strong auction activity. Let's remind out that the real estate business was 0 in 2021. And that was a startup then. A significant increase in ancillary revenues was also recorded. The comparison year-on-year of this revenues is affected by big disposal fee collected in 3Q 2022.

Italy suffered for concurrent weak collections, older vintages and low real estate prices and leave it at the new business, collection of new portfolio increased by 54% and UTP also more than doubled, thanks to the continuous ramp up of the [indiscernible], a notable achievement that has allowed Italy to contain the decline in revenue and the increase in ancillary by 17.7%, which now stands at EUR 42 million. Spain revenue accounted for EUR 68 million in full year 2023, decreasing by 41.1% year-on-year, yet recording plus 2.1%, excluding negative impacts from [indiscernible].

Revenues in the quarter of 2023 recorded EUR 21 million with a plus 5.3% growth quarter-on-quarter. Such revenue growth was indeed achieved despite Sareb offboarding and challenging environment or [ recollection ] in the country due to higher interest rates and purchase affordability, which are negative affecting the real estate market. Spain reported positive new GBV intake worth EUR 0.8 billion from new clients, among which Fortress, Sabadell and CaixaBank, compensating lower-than-expected flows from Santander. Moreover, after successful onboarding of Sabadell contracts, we signed as a new pilot agreement with CaixaBank. Though still small, these contracts are ramping up and the assessment of the commercial effort of our Spanish subsidiary of Sareb offboarding. It's important to note that Spanish bank have outsourced only limited extent over the last 10 years on the LTL side. So the opportunity for farther outsourcing is tangible.

On Page 7, we underscore the strategic shift doValue is undertaken to fortify revenue stability against the backdrop of declining NPL volumes. As you can see from the pie chart, there's been a notable progression from '23 -- from '22 to '23. Our diversified revenue, which extend beyond NPLs, an increase from 51% to 53% of gross revenue. highlighting a deliberate shift towards a broader revenue base.

Specifically, ancillary revenue in Italy saw a significant year-on-year increase of 17.7%, reaching EUR 42.3 million. This is a remarkable considering the contraction in GBV and FPL volumes. Such resilience illustrated successful decoupling from the core business and are the layer of stability to our revenue stream. Increased growth in ancillary revenue is more pronounced with a sixfold increase to EUR 14.1 million.

Meanwhile, in Italy, UTP revenue has more than doubled, thanks to the ramp-up of the effect of the fall in GBV. [indiscernible] the Hellenic region has reported a remarkable 42.7% increase in REO revenues demonstrating our ability to extract more revenues from the same GBV in a stable market. It's important to note that the decline in REO revenue at the group level was primarily due to the loss of the Sareb contract. The strategic diversification of revenue is not only a buffer against this current market volatility, but also position us well to capitalize on future market upturns and benefit from growth in our different sectors. Regions currently experiencing slower growth such as Italy and Spain, have the potential to rebound and contribute positively in the future.

Now let's turn to Page 8. for an analysis of the GBV intake during 2023, highlighting new mandates onboarded across our 3 regions. The Hellenic region onboarded EUR 4.5 billion gross book value of new mandates. In particular, they onboarded the [ Sky ] portfolio in September, taking part into the largest state of the [ NMPE ] portfolio ever did by Greek Bank South, [indiscernible], and the second largest transaction in Cyprus. From Tier 2, it was worth EUR 1 billion on board and GBV was originated in the context of an up securitization by National Bank of Greece and represents a continuation of a successful partnership with the second week systems bank. In the end, we imported an overall EUR 1.1 billion GBV of secondary market transactions, mainly composed by disposal from [indiscernible] portfolio recaptured in the secondary market.

In Italy, doValue successfully imported EUR 1 billion GBV of new mandates and realized the acquisition of [indiscernible] worth EUR 0.5 billion of GBV composed by UTP from 2 banks, and successful onboarding of other smaller branches. Gross book value intake in Spain accounted for EUR 0.8 billion. Forward flow in place with UniCredit, Euro Bank and [indiscernible] Santander, generated a comprehensive EUR 3.4 billion GBV of new inflows. To sum up new mandates and follow up flow intake by value accounted for EUR 9.7 billion GBV in full year '23 to which we add another EUR 0.9 billion GBV of committed portfolio among which [indiscernible] origination -- securitization in Italy for EUR 350 million announced in December, but to be onboarded in the first quarter of 2024. Moreover, in the first 2 months of '24, we already secured another 2 mandates for EUR 1.4 billion, including one with the fifth banking group in Greece.

Turning to Page 9. I'd like to draw your attention to our key milestone of the transformation with an overview of the main targets of our 2022/'24 business plan that have already been achieved and those we are set to accomplish. In '22, we centralized group IT services that launched the first wave of application rationalization, which creates the basis for the corporate data platform. These actions have been implemented and that are instrumental in announcing our technological platform, marked the Phase 1 of our digital transformation journey.

Moving into '23, we commenced the second wave of application rationalization and this year is also about deepening group regional synergies, which are ongoing and moving into the third phase of enhancing our technological platforms adding AI and predictive analytics to the project. We are proud to report that our focus on improving client service, recovery capabilities and sales competencies has led to a confirmed run rate of EUR 25 million in savings per annum after '24.

This includes optimization that already resulted in cost avoidance of EUR 8 million achieved by '23. Testament of this is also the workforce dynamic decreased by 300 units of FTE and reduced average cost per FTE by 2% despite inflationary revenue and higher ratio of GBV per FTE by 2%. Our investment in transformation between '22 and '24 was initially estimated at EUR 55 million. However, through diligent management and strategic foresight, we have managed to reduce this forecast to EUR 35 million, demonstrating our efficiency and commitment to financial prudence while maintaining our transformation targets unchanged.

Each milestone represents not just a tick box in our plan, but the step forward in reinforcing our market position, enhancing our service quality and driving sustainable growth.

Moving to Slide 10. I would like to address our capital structure and upcoming debt maturities. The slide shows gross debt positions alongside our available cash reserves. [ Novelis ] currently in a position of comfort with EUR 270 million in liquidity reserves. This is composed of cash on end and projected cash generation over the next 18 months in addition to undrawn RCF revolving credit facilities.

This robust liquidity framework ensures coverage of our EUR 265 million gross debt maturity during August 25. It's important to note that doValue is actively monitoring the market to align with our comprehensive financial strategy, which includes considering [ refinancing ] option well as of maturities in the best interest of company and stakeholders. Recently, our BB rating was confirmed by leading rating agency which resonates with the market confidence in our financial markets and stability. There are non-maintenance covenants filed to our bonds, affording us a considerable flexibility.

Our financial discipline is faster evidenced by the ample headroom we maintain against both the incurrence covenants and the maintenance covenants of our RCF. With the average cost of debt at 4.2% and the year 2023 leverage ratio of 2.7x, we are not all in line with our guidance, but also one of the lowest leverage in the sector.

In summary, we are best prepared to meet our financial obligations and are positioned for strategic options to maintain and strengthen our capital structure. We remain committed to our financial health ensuring we continue to operate from a position of stability and strength. With that, I will now hand over to Davide with a closer look to our financials.

[Davide Soffietti, executive]

Thank you, Manuela, and good morning to all of you. Moving to Page 12. We have here a summary of the key financials for the fourth quarter and the full year. As already mentioned by Manuela, the quarter showed a positive momentum, partially offsetting weakness in the third Q. As usual, we are showing basis variations, both including and excluding Sareb in order to align the performance of the business on an organic basis.

Let's move to Page 13 to have a better look at the GBV dynamic. Our gross book value has declined marginally compared to the end of 2023. Mainly due to lower-than-expected new NPL volumes in the market and with a strong performance for collection activities and increasing disposals made like the [indiscernible] portfolio and sales of secondary increase. It is important to note that doValue has been able to recapture approximately 35% of the disposed GBV through secondary transactions in Greece or primary transaction on GBV disposal by besting customer space. The GBV has, however, been supported by [ poor ] flows from our personal banks, which, nevertheless, has been soft [indiscernible] because of the lower volumes from Santander.

Our business development efforts are visible in the new mandate secured of EUR 7.2 billion of GBV despite lagging the jump of this of the past. Please note that in 2023, the company has won or boarded over 27 new mandates, a best overlook [indiscernible]. In general, given the growing importance of secondary transactions, we expect the collection profile to become more lumpy and more concentrated in the fourth quarter of the year. The collection rate stands at 4.6% despite of the end of the year, improving by [indiscernible] on 6 percentage points from the 4% recorded at the end of 2022.

Moving to Slide 14. Gross revenues in 2023 declined by 13% year-over-year to EUR 406 million and increased by 13.5% in the fourth quarter. The comparison versus last year is affected by the indemnity fee on the Mexico portfolio recorded in the third quarter of 2022. While the first quarter is showing a positive growth [indiscernible] from higher collection increase. Excluding Sareb's, the comparison between 2023 and 2022 showed a decrease of 4.6%. In Italy, the rent is declined by 10% because of lower collection from older gas partially composited by pickup in collection from newer gas [indiscernible] between the 2021 and 2022 which have shown an increase in collection by 34%.

NPL decline was partially offset by growth in TP, up more than 100% over the previous year and by a 70.7% increase in ancillary revenues. Performance in Greece was strong with collections up 27% year-on-year and despite the distorting effect of the Mexican [indiscernible] in 2022. REO, the ancillary now represents 17.5% of [indiscernible] revenues versus 9.2% in '22. Gross revenues stay declined over the previous year due to lower collection in light of the [indiscernible] and [indiscernible] in REO prices.

Moving to Slide 15, we show the results of our cost discipline measures in sourcing strategy and the structuring process in place. We continue to optimize and reduce our [indiscernible], both leverage on a different portfolio mix Sareb offboarding with the lower dependence of size of GBV [indiscernible] as well as resourcing some activity. [indiscernible], our single largest cost items were reduced by 9.6 percentage year-on-year to EUR 192 million, mainly driven by the equity reduction in Iberia related to the [indiscernible] restructuring program. In Italy, HR costs were also reduced partially thanks to the one-off release of the [indiscernible] plan allocation for the previous CEO and the lower desirable compensation needed [indiscernible].

Cost containment initiatives were [indiscernible] partially by first tranche renewal of labor contract in Italy by 15%. HR costs increased marginally in the Hellenic region due to the onboarding of new portfolio. Other operating costs declined by 20% over the previous year with different contribution to [indiscernible] regions. On Slide 16, we see how the combination of lower gross values coupled with the significant cost efficiency issues put in place enabled us to achieve an EBITDA of EUR 178 million, decreasing 11.5% year-over-year and by 5.1% excluding Sareb with an improved margin of 57.1%, 1 percentage point above the previous year despite the decrease in revenues for the boarding of Sareb and the inflationary pressures across the board.

As mentioned earlier, in 2022, we recorded a significant benefit from the Mexico portfolio, which still -- in the year-on-year comparison. In Italy, EBITDA declined as a result of lower revenues as well as EUR 14 billion of group costs, which are consistent with past [indiscernible]. The Hellenic region contributed strongly to the group's EBITDA and will now account for more than 80% of the group results, also including the effect of the maximum in 2022. In Iberia, the positive impact of the higher collection rate and the material cost efficiency signatures partially compensate reduced inflows of NPL in the lower impact of REO from due to the decline in the added [indiscernible] prices.

We are glad that the Spanish region has already range [indiscernible] to profitability 1 year after the onboarding of Sareb. On Page 17, we show the performance across our regions. Adding to what we have already mentioned, commenting on the financials, it is worth noting that 0.5 percentage points improvement in the collection rate, which [ reached ] 4.6%, supported by improvement in the Hellenic region in Spain.

Commenting on the mechanism, ex NRI, showed on Slide 18, the performance is similar to the one for EBITDA, a strong fourth quarter in [indiscernible] year-over-year and declining net income year-on-year. And the net income was here impacted by an increase in net provisions mainly related to redundancy and by a significant impairment of finished goods and product initiations. Please note that the latter impairment is a one-off following the approval of the new preliminary new business plan for the Spanish bank [indiscernible] is the net result of 2023 would be impacted positively by EUR 22 million is the value paid achieved before the final approval of 2023 financial statement. [indiscernible] are currently held in escrow by the Spanish approver.

Moving on to Slide 19, we generated a positive cash flow from operation in 2023 of EUR 79.4 million, which compares to a positive result of EUR 83.6 million in 2022. We are quite satisfied with the efforts we are putting in place for managing working capital across all of our regions, which will enable us to materially reduce the working capital absorption versus the last year.

Absorption by working capital, a change of other asset liabilities as [indiscernible] by 24%, more than proportionally than deducting EBITDA. We expect working capital to divest to positive in the first quarter of 2024 due to cash in secondary [ fees ] closer than in the last quarter 2023. The dividend payment of EUR 48 million and seasonal tax payment scheduling rate as well as the interest paid on the bond in Q3 2023 and dividend record from [indiscernible] to the minority shareholders and payment for the put option on [indiscernible] EUR 21 million classified under asset investment has led to a negative free cash flow of EUR 45.4 million in 2023 compared to a negative free cash flow of EUR 28.1 million in 2022.

Moving to Slide 20. Realize the main items that impact on the change in other assets and liabilities. We have released on provision [indiscernible]. These assets will be lower in the following years. We have redundancy amount linked to the recycling of operational making it [indiscernible], and we will continue to optimize and reduce extra cost thanks to the investment we are doing to improve efficiency. We have ramped on the [indiscernible] that will be stable over the next few years. We have the release of the previous REO bonds. Post resulting it would be significantly reducing in the last year. Then we have other one-off cash-out items for the [ receipt ] investment in Spain for the upfront payment. All this amount will be reduced in the following years.

I leave the floor to Manuela for the final remarks.

[Manuela Franchi, executive]

In closing, I'd like to summarize the key points from our 2023 results which reflects both the resilience and an ability of the value in a year that has presented numerous challenging challenges across the industry. Firstly, we successfully secured the EUR 11 billion in new gross book value. The statement to our strong market position and the effectiveness of our business strategy, even as we navigated the offboarding of a significant client and the general downturn in new business. Our EBITDA for the year, excluding nonrecurring guidance, stood at EUR 178 million, in line with our guidance and marking a slight improvement in our EBITDA margin to 57.1%.

This has been achieved through our flexible operating model and comprehensive transformation plan, which has positioned us to maintain profitability even in the middle of challenging market conditions. Our regional performance has shown robust growth, particularly in the Hellenic region, and we have managed to maintain a strong net debt-to-EBITDA ratio of 2.7x, demonstrating financial discipline and commitment to maintain a strong balance sheet.

Looking ahead to '24, we are preparing to present our new business plan, which we will focus on transformation and strategic investments to lay the ground for future growth. We remain digital and adaptable, ready to capitalize on opportunities as we anticipate shifts in the economic landscape. As we continue to diversify our revenue stream, our aim is not only to mitigate risk, but also to ensure we are well positioned for sustainable growth in the years to come. Our achievements in '23 across [indiscernible] and regions underscore our commitment to delivering value to our shareholders and setting the stage for continued success. We have a very long-term strategy and our business plan will be the basis for the future trajectory. Thank you, and we are available for questions.

[Operator]

[Operator Instructions] The first question is from [ Atul Rakel ] with Citi.

[Unknown Analyst]

A couple of questions from me, mainly on revenues and on growth, if I may. So on revenue, when I look at the slide that you provided, I would like to have more color, if possible, on your expectation for collection for next year because the trend has been different among the different geographies and within the geography among the different portfolios.

So if you can give us some color on how do you see collection developing, that will be very useful. And the other is on the book value and the gross book value and the pipeline. If I look at Slide 8, you indicated potential pipeline? And if I apply the market share that you indicate, the pipeline would be for 2024 broadly stable with what you have achieved in 2023. Does this make sense to you? And also if you can give us some breakdown of the pipeline, what is primary secondary NPL versus UTP, like some color on what do you expect the market to be? The second point is on the growth and clearly, you mentioned that the dividend will be looked within your financial framework and dividend distribution history. But I'm thinking like when we think about M&A, which could be a key factor for extra growth. How do you assess your potential fire power? And what would be the main guidelines that you think in terms of guide you think to look for opportunities?

[Manuela Franchi, executive]

Going on the first point on the collection side, clearly, we will give more details in the upcoming plan, but we are aiming for achieving more than 5% collection rate for -- from the level of today. And this is mostly driven by the activities we have carried out in all the countries to announce the collection, the efficiency of our operating models, which are the basis for the asset managers to collect. But also because we have seen a delay in 2023 that we expect to recover by the beginning of this year. For example, you might remember that in 2023, there's been a lot of core strikes [indiscernible], also which has stopped second collection.

Despite it, we focused on the cost side that we were able to recover most of the downside. But this collection are not lost. And that's the activities now is back to normality, we will recover these amounts. On the slide regarding the GBV pipeline, we are putting the expectation for the next 18 months. We see a different mix between primary and secondary by market. But we try to be conservative for 2024, even assuming for our objectives new business, which will below the 1 of this year.

But the positive thing is the quality of that GBV, which is going to be higher. This is an important point to detach the revenue performance from the GBV dynamic. The quality of the GBV is very critical. So we see a lot of primary transaction in the Greek market this year. Of the EUR 1.4 billion, which we have already secured in Greece in the first 2 months of the year are clearly coming from Greece. And you know that the collection rate and the profitability of the this book is higher so in Greece this year, we see mostly primary but also relevant secondary transaction. In the Italian market, we see mostly a secondary transaction, while in Spain, the opportunity is more on the primary side.

Why I said it, we -- I need a point before, which is quite important and where we see headroom to grow. The Spanish market on the NPL side has had historically very low outsourcing. The only bank which really outsource NPL was Santander. Now the other banks, Caixa, Sabadell and the minor ones are opening to higher outsourcing levels. And there, the opportunity is open because also the others are not covering -- didn't have mandates before. The only major competitor in the Spanish market, which offers services to banks is [ Intrum ] which you know the situation. And the other players, our own players which tend to work with funds.

So we see an opportunity. And that's why in 2023, the management team is very focused on gaining momentum with the other banks. On the other side, we continue to assist our investor clients from which we have gained a relevant mandates during '23. But these clients are all buying primary portfolio, not secondary. On the last question, if I understood correctly, because the voice was not very clear. You are asking how we will see the dividend distribution vis-a-vis the M&A for power. Clearly, in our plan, we will not include any M&A transaction. It's going to be on an ordinary basis. So you will be able to assess any upside to that coming from potential opportunities. The primary importance is to maintain a sustainable leverage structure.

So for us, is the primary driver and also accretive transaction. So we will do only transaction, which will be in these boundaries in a very clear way. The dividends will be compounded in these 3 items dilemma. Now it's very important to consider that the dividend policy was set in the beginning of 2022 when also the interest rates were lower and the aligning of the primary market because of the bank's expectation to increase the NPL ratio to the market conditions were delivering a much higher now transaction in the market. Clearly, it has to be [ reduced ] in the context of the new market conditions. I hope I have addressed all your points.

[Operator]

The next question is from Luigi Tramontana with Banca Akros.

[Luigi Tramontana, analyst]

Two questions from my side. The first one is on the diversification of your revenues. You did very well on ancillary income last year. Can you please explain to us which are the drivers for the ancillary revenues growth we have to look at in order for us to -- to better understand how -- which growth we have to expect for the coming years? And the second one is on the cash flow dynamics given that the other items were pretty relevant last year, some EUR 24 million, EUR 25 million of cash out. You are indicating that the this amount will be reduced in the following years, but I would like to understand by which amount. So we have done this to expect that this will have or minus 10%, 20%?

[Manuela Franchi, executive]

On the first question, the remarkable growth in the ancillary, which has grown to EUR 64 million from EUR 48 million is really the result of the dedicated commercial efforts and strategic direction that we have put in our business plan '22/'24 because we were envisioning obviously, in the traditional market, some softening. This plan was designed to optimize the revenue generation from the current GBV.

So selling to current clients new products and getting new clients for new products. So to be more specific, on the ancillary revenue stream, we benefit from a mix of recurring sources, such as the market servicing and the legal services, which provide a stable income base. We capitalize on opportunity related to specific projects, including due diligence and data remediation, which are more variable and depends on the activity of the year, which contribute directly to our overall growth.

And on this year, we have a specific initiative that we will describe during the Capital Markets Day, where we want to launch advisory services on the -- for investors, given that the competencies and the quality of the CIMA is very much appreciated by the market so we talked about creating a business out of it. Looking at, we are committed to sustain this momentum by further diversifying beyond the traditional NPL. One of the main drivers has been also the real estate activity in Greece. I mentioned before that it was a first half in 2021. And it's now an important reality in the market. Clearly, the UTP have gained momentum and they're yielding the higher collection and the higher profitability that, that business would deserve.

We are excited about the future profit of this segment, and we would give you all the details in the upcoming plan of how we move this to the further level, which is a growth up to 40% of the total by 2026. I'll leave Davide to answer on the cash flow.

[Davide Soffietti, executive]

Yes. Thank you, Manuela, On cash flow, we -- Slide 20, mainly to highlight the main items. And for sure with the Capital Markets Day, we will give more detailed guidance. But for 2024, we expect -- we should have the CapEx. It will be higher. That's the one we had in 2023, probably in around EUR 25 million. We still have redundancy costs because as we are saying that we continue to reduce in the -- invest in the efficiencies, be much higher of this year will be probably around EUR 20 million.

So we still have a recurring cost -- the IFRS 16 [ rent ] will be around EUR 15 million to EUR 60 million as of the 2023. The change in net working capital, we are working to reduce this EUR 11 million, EUR 12 million, minus EUR 12 million in 2023 to roughly 0 at the end of 2024. And on the other assets, we expect no material change something in the region of minus EUR 5 million. This will be quite stable during our next 3 years from.

[Operator]

The next question is from Simonetta Chiriotti with Mediobanca.

[Simonetta Chiriotti, analyst]

Just one question from my side. Looking at your GBV, the -- you said that you have secured [ EUR 0.9 billion ] of assets plus EUR 1.4 billion in the first 2 months of 2024. Considering the time that is required to onboard assets, what do you think -- what should we expect? I mean in terms of assets onboarded in 2024? And what do you expect in terms of flows from the banks? Do you think that the level of 2023 can be confirmed? Or should we expect something different?

[Manuela Franchi, executive]

So on the onboarding this -- the portfolio that you mentioned are going to be onboarded quite soon, given that we were working on them at the end of last year. So the mandates came at the beginning of January. So the Italian one, [indiscernible] 30 will be onboarded by March. Of the EUR 1.4 billion, EUR 0.5 billion has already been onboarded the last week and the remaining EUR 0.9 billion we expect between March and April. I indicated before that regarding the total asset of the year, we expect less than last year. Just to say to be on the conservative side, where we sold, last year it was EUR 11 billion, the -- most of the remaining parts, the onboarding will happen in the last part of the year. So we expect to gain them during the course of Q2 and the Q4. Just to remind you that the [indiscernible], which is now sold out that will have the binding bids on April.

So after that, it will take time to sign the portfolio and then negotiate contracts and then on board. This is one big component also of that. So the final estimate, we will provide in a month's time, but I expect it to be below EUR 10 million with 20%, 30% composition from forward flow and the rest from new mandates -- being it secondary and primary mix.

[Operator]

The next question is from David Giuliano with Equita.

[Davide Giuliano, analyst]

I have just some of them. The first one on the balance sheet. Can you give us some color on the increase -- of the significant increase in trade receivable and payables in 4Q 2023? What is the reason for this growth? And how much of your available cash is the drawn part of the RCF? The second one is on GBV pipeline according to rumors in recent days.

UniCredit would be in talks with a competitor about the forward flow contract for the management of NPL. Can you provide us with the [ EBPA ] impact you expect from the possible nonrenewal -- nonrenewal of the partnership with UniCredit? What strategies do you have in mind to support GBV in Italy and with the NPL flows?

And the last one is on -- also is on Italy, 2023 was a non-brilliant year for Italy with revenues down 10% and EBITDA minus 30% with a positive performance of ancillary revenues. Despite the negative performance, GBV remained essentially stable. What caused this decline in P&L performance? Can you elaborate maybe just on the vintage of GBV in Italy? And what are your strategies to renew the GBV stock in the future in Italy?

[Davide Soffietti, executive]

The first question, the increase in capital is related to the stronger third/fourth quarter we had the country mainly [indiscernible], as you say, we have a huge amount of disposal fees where we mature the revenues again, the quarter that we [indiscernible] especially in the bank from an investor to [ endorse ] our revenue. So we will benefit from these collections with [indiscernible] in the first half of the -- this is why we increase -- [indiscernible] don't do this, we did a good work to reducing the level of [indiscernible] to collect and improve level for looking capital in cash. In terms of balance sheet and at the end of the year, we had just [ initiated ] a EUR 15 million of [indiscernible].

[Manuela Franchi, executive]

Regarding UniCredit. This is a topic we have discussed also in previous calls. We have estimated -- this relates only to the flow agreement that today produces the float for around EUR 600 million per annum. The contract ends end of 2025 so this close are secured up to then. And then the contracts assumes that you will manage the stock and the runoff. So it's not disappearing the stock, but potentially only the flow. The impact we had estimated in 2026 already communicated, was the EUR 1.5 million of EBITDA. Clearly, we prepare for the situation proactively already before, and therefore, this would be in that scenario completely absorbed. Anyhow, I mean, we cannot provide any other details and these are always press rumors, which we cannot comment further.

Now in terms of the Italian scenario, we are not relying -- this is a primary and secondary pipeline on Page 8, does not include the [indiscernible] is not for the portion on top for the EUR 4 billion. So the opportunities we see are when I say secondary, because these are a portfolio already in the market from all competitors from state institutions that will be outsourced or where there will be system solutions. To give you an example, the guarantees from the NTG to loans or other state entities that you know and also that transaction where our competitors are losing contracts, we haven't lost any. And these contracts are already moving to other players and potentially us. So this is where we see more this. We are not including here the activities we are doing on the Stage 2 and the earlier years, which will be on top. And where we have specific projects where we have already engaged banks in the trial process. And we will include them in the ancillary revenue -- in the other revenues, which will sustain the growth of that market, which we discussed just earlier on.

[Operator]

The next question is from Nikita Fedyuk with Sound Point.

[Nikita Fedyuk, analyst]

I think so my question on UniCredit has been answered, as I understand the impact is [ 1.5 million ] after 2025.

[Manuela Franchi, executive]

'26. You're referring to UniCredit?

[Nikita Fedyuk, analyst]

Yes.

[Manuela Franchi, executive]

Yes, '26 because the contract ends end of '25.

[Nikita Fedyuk, analyst]

Okay. And what's the GBV associated with this contract?

[Manuela Franchi, executive]

It's only the flow. So it would be -- today, it's around EUR 600 million per year. It depends what is going to be in the future. Obviously, it's a variable number. It depends on market conditions.

[Davide Soffietti, executive]

The stock we maintain to be around EUR 1 billion.

[Manuela Franchi, executive]

The stock which we maintain is around EUR 1 billion. Clearly, we would like to see the numbers at the end of 2025, but that will remain -- we have estimated around at the end of '25 around EUR 1.5 billion stock, which remains.

[Nikita Fedyuk, analyst]

And so we understand the dynamics, is it -- like is there any reason why you don't want to keep this contract? Or is just -- they're trying to see whoever pays in the last -- like lease and it becomes unprofitable to maintain these contracts?

[Manuela Franchi, executive]

I mean it's -- as in every contract, there are bids for contracts where like we did with did with Sareb, we did with others, where you bid on profitability, on performance, taking into account that these are -- in the current market context, the contracts which are -- both are very limited. These are only based on just participating to auction. So like in other case, so it depends on the counterparty and the criteria they are using for the allocation of the final contract. There are others in the past that we have won. So it really depends on what are the key criteria of the bank to allocate it. You participate that to auctions with all the banks and the funds. Now to give you, obviously, other points, there are people working on that contract. So we will clearly now make efficiencies if this was going to happen at the end of 2025.

[Nikita Fedyuk, analyst]

Okay, right. Understood. And question on the dividends and then equity purchases. I'm sorry if I missed it, but was there decision made already on the amount of the dividends and like equity purchases that's going to happen in 2024?

[Manuela Franchi, executive]

On the dividend, we haven't done the distribution in '24. As we said, we will communicate our updated dividend policy and strategy for dividends in the upcoming business plan presentation. We clearly distributed a relevant amount of dividends, EUR 108 million in the last 3 years based on the original policy, which assumed a 20% EPS CAGR starting from the 2021 11%. So if your question is regarding 2024, we indicated that we will communicate the next month.

[Nikita Fedyuk, analyst]

Okay. Next month, understood. And then last question on addressing the upcoming maturities, as I understand. So yes, could you comment on what's happening on this front?

[Manuela Franchi, executive]

We have indicated that we -- first, we have covered these maturities with the cash production, the cash on balance and the RCF. So this is just to -- on the conservative side. On the other side, we see interest rates going down, although our market is experiencing some different trends on the secondary side. But we want to -- we are investigating different sources of refinancing because if there are other options, which are -- which provide a lower cost, for example, the bank which now this has to be considered. So they want to be proactive, and we are currently very proactive in assessing all the sources and the cheapest option to refinance.

[Nikita Fedyuk, analyst]

Understood. And is there any timing when we should expect this should happen?

[Manuela Franchi, executive]

Yes. We would -- we want to be in line with the rating agency indications, which is at least 12 months size of the maturity. The first maturity is August 2025.

[Nikita Fedyuk, analyst]

Okay, right. So you're saying that it will happen before July?

[Manuela Franchi, executive]

Yes.

[Operator]

The next question is a follow up from Simonetta Chiriotti from Mediobanca.

[Simonetta Chiriotti, analyst]

In the press release, the reason mentioned about 2024 being an year of transition and rationalization and so on. And in the presentation, you mentioned that some positive impact will not be visible in the first part of the year. And I know that in a month time, you will provide more details, but I was wondering if you can comment a bit more on the trends for 2024.

[Davide Soffietti, executive]

As we were saying, we are duly investing in efficiency, and we are also continuing to reduce our main cost [ pattern ]. And then -- so this is [indiscernible] already executing the [indiscernible] because this time will happen and during 2024, the cost and impact will be visible all in the second half of 2024 and we'll be on our way on to 2025. This year, if we are right in our main cost, which are cost has been [indiscernible] a lot, but it was also impacted by a positive one off items was built in the interest of revision of the [indiscernible]. It will be not anymore in 2024.

[Manuela Franchi, executive]

In fact, the action we are pursuing are all obviously running savings -- to give you an indication of what we've been completed already in the first Q. We now have -- we will complete by March, the exit from the real estate development business, which was contributing a negative EBITDA. We will complete by the second [indiscernible] exit from Portugal, which was -- which also didn't have a positive contribution.

And we are doing an exit program in Spain, which will complete by the end of February, so this month. So already from -- which is quite relevant, and we just achieved an agreement with the unions last week. So there are -- the effects will already come from March. What we were referring is the full effect obviously, it's going to take a bit longer. But the cost for this redundancy will be impacting the first Q.

[Operator]

[Operator Instructions] The next question is from Marco Gironi from T. Rowe Price. Please go ahead.

[Marco Gironi, analyst]

Just following on from the last question about the 2024 year of transition and the phasing of cost savings and having a difficult comp in the first half of '24. Just to be clear, is your aspiration still to at least keep EBITDA flat for the year. So the recovery you have in earnings in the second half would be offset a slightly slow start in the first half, is the kind of profile we're thinking broadly about, I'm talking EBITDA.

[Manuela Franchi, executive]

Not necessarily flat, but not to this. I mean, we will not necessarily be flat, Marco. As you have seen in the last quarter of the year, we concentrated a lot of transactions. So we are anticipating a certain transactions, which we expected in the second half, like the mandates I mentioned, they are coming on board much earlier. But there are other effects which are typical of the second half. So we need to wait these 2 elements. But I do not say that it will be flat.

[Marco Gironi, analyst]

Understood. And would you give us a bit more detail when we speak again in a month's time at Capital Market.

[Manuela Franchi, executive]

Yes, yes, definitely, definitely. We will give those details. We also want to be conservative in the approach given also the dynamic of the share price and the pension, obviously on the sector, it's very important all the objectives and targets are achieved. That's why I prefer not to sell to aggressive targets.

[Operator]

[Operator Instructions] Mr. Della Seta, there are no more questions registered at this time.

[Manuela Franchi, executive]

We appreciate your attention, and thanks for joining us for those who can next March 21.

[Operator]

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