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Edited Transcript of CERV.MI earnings conference call or presentation 30-Jul-19 3:30pm GMT

Half Year 2019 Cerved Group SpA Earnings Call

Milano Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Cerved Group SpA earnings conference call or presentation Tuesday, July 30, 2019 at 3:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrea Mignanelli

Cerved Group S.p.A. - CEO & Director

* Giovanni Sartor

Cerved Group S.p.A. - Head of Administration & Audit and CFO

* Pietro Giovanni Masera

Cerved Group S.p.A. - Head of Corporate Development & IR

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Conference Call Participants

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* Andrea Lisi

Equita SIM S.p.A., Research Division - Research Analyst

* Andreas Markou

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Michele Baldelli

Exane BNP Paribas, Research Division - VP of Equity Research of Italian Mid Cap

* Rajesh Kumar

HSBC, Research Division - Analyst

* Simonetta Chiriotti

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Cerved Group First Half 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Pietro Masera, Head of Corporate Development and Investor Relations. Please go ahead, sir.

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Pietro Giovanni Masera, Cerved Group S.p.A. - Head of Corporate Development & IR [2]

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Thank you very much. Hello, everyone. Thanks for joining the call today. It's Pietro Masera, and I'm here with Andrea Mignanelli, CEO; and Giovanni Sartor, CFO. Purpose of the call today is to provide you an update on our Q2 and H1 results.

And at this point, I'll leave the word to Andrea Mignanelli.

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [3]

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Hello, everybody. Thank you for being here today with us.

Before get into the details, let me start with a few initial comments regarding financial performance till June 2019 and some strategic initiatives on the way. Regarding financial performance, as you can see on the executive summary page, overall figures in H1 are satisfactory and I would say on track to deliver expected results for full year 2019.

In particular, revenues are up 20 -- 10.4%, of which 3.6% organic; adjusted EBITDA growth of 6.5% (sic) [6.4%], of which 1.5% organic. Operating cash flow grew by 5.7%. Adjusted net income increased by 12.5%, and leverage increased only marginally to 2.7x EBITDA due to the dividends paid in May. Clearly, all of the above are based on IFRS 16, for which we have provided all the relevant backup information for you.

Overall, I believe we are on track to deliver our expected results for 2019, although the H1 results are -- still reflected limited growth in the Corporate division, lower than expected. As you will see the forthcoming slides, this segment is expected to have stronger performance in the second half of the year. With respect to M&A activities, I'm quite pleased to be able to announce 3 transactions recently happened, the largest of which was signed this morning, MBS Consulting. And we have also another -- a number of other initiatives that we are working on. So at least in terms of our M&A, I feel that the actions we have undertaken are already producing the expected results. I will comment a bit more on each of these M&A deals when we come to the relevant business division.

Now going to Page 7. So we see divisional results. Once again, I have to say we are not satisfied with the EBITDA in the Credit Information and Marketing Solutions divisions, which are declining by 2.4% and 4.2%, respectively, although the largest drop in absolute terms in the Credit Info side. But as we will explain a bit more in detail in the call, we think we can return to a satisfactory trajectory by the end of the year, and we have valid arguments to support this [view]. On a more positive note, we are continuing to do quite well in the Credit Management division, which increased EBITDA by almost 40%. Clearly, we are still seeing some benefits from the changing perimeter. However, also the underlying organic results are quite positive.

Now let's go to page -- to Slide 9 on Credit Info results -- sorry, Page 8. Results of the Credit Information division are still below our long-term trajectory. The main issue relates to the limited growth in the topline, particularly on the Corporate division, and this leads to the decline in EBITDA given our fixed cost base. The results of the Corporate division are still reflecting the disruptive effect of creating a single sales force for both in Business Info and Credit Collection. I already explained the reasons for this in the past. The fact that we are merging sales force, we are making one single contract, and we are adjusting the system now. And all of this is planned from a technical standpoint. And although revenues are not showing the positive effects, in terms of sales, we already have some positive results.

As we see on the slide, sales grew only 1.5% in Q1, but then they're already growing at 8.4% in Q2. So overall, a plus 5% growth for the first 6 months in 2019. Clearly, we will see the translation of sales into revenues in the next coming months. And therefore, we have a positive outlook for H2 on the Corporate division.

Also, the bank segment is showing a decline of 0.8% in H1, but this includes second quarter, which grew margin at 0.1%, which is a significant improvement versus the first quarter, which contracted minus 1.7%. So also, this also gives us some confidence in saying that we can return to a fairly neutral situation by the end of the year.

This now takes me to EBITDA, which is showing a decline of minus 2.4% for the first half of the year. Clearly, we're not happy with this, of course, and we expect this result will materially improve in the second half thanks to the revenue increase that I described before in Corporate and bank segments. As I said also in the Q1 call, we already took a number of initiatives on cost control also in this division, and we will see the first results in H2 also when revenue increase will start kicking in some operational leverage.

Given all of the above and confirming that 2019 results will be back-ended, for the full year, we are sticking to our target in terms of division growth as we indicated in the Investor Day.

Also here, we managed to close a small M&A deal with the acquisition of Mitigo Servizi. This company provides back-office services to financial institutions and corporates within the field of subsidized finance, and that's how it works. Basically, the government offers numerous subsidies to SMEs in the form of lower-funding cost from banks. In order for this to be achieved, the bank has to ensure that the corporate is compliant, and this requires a number of back-office functions, which are provided by Mitigo to the bank. And this functions as a strong synergy with our core credit information database is the rationale for the acquisition. [reasonable] price financially, but it allows Cerved to access this interesting and fast-growing niche.

I will also comment on the acquisition of MBS, which is more material M&A deal. We just closed today. And let me provide you some more color. Our Credit Information business is gradually shifting more and more from providing data and information towards providing turnkey services and solutions for our clients. And in this context, it's always more and more important to enrich our product offering with value-added advisory services and advanced analytics. Basically, as I explained to many of you during face-to-face meetings and the calls in the past few months, we really need somebody -- serve the last mile, somebody being able to deliver our data and technology to the clients at client sites. And that's why I mentioned to many of you that we were seeking a deal in the advisory space. And finally, we got it done and we are very happy with that. This permits us not only to allow our clients to make a better use of the data that we provide to them but also allows us to interact with our clients at a higher, more strategic level. And this also makes the interaction between us and our clients much more enduring and embedded. Not only do we want to sell data, we also want to have people on the ground [within our] clients helping them to create value, so bringing solutions to clients, not only services [and things.]

MBS Consulting is a leader in Italy in providing strategic advice and change management services and has a leading position in the insurance and banking sector and is readily -- rapidly, sorry, gaining traction in the [addition] banking industrial sector. It's a fairly young company with a very strong and motivated group of partners, who in a limited period of time have exceeded EUR 20 million of revenues.

As some of you may know, we started our own internal advisory team a couple of years ago but creating an advisory team with significant sales takes years. So the acquisition of MBS will allow us to skip forward in -- on this -- in this space and be faster in executing our strategy. We see strong synergies between MBS and Cerved to the extent that we will be able to offer them privileged access to our client base in our industries where they're not known yet as well as to capitalize on each others' respective proprietary assets. The transaction integrates Cerved Group's expertise in the fields of big data, analytics and digital with MBS' consulting competencies, strategic advisory and change management

The structure of the transaction is very much in line with prior M&A we have done in the recent past. At closing, we acquire a controlling stake with put and call mechanism, which will allow Cerved to reach complete control in the medium to long-term, aligning interest and creating incentive for overperformance to all the firm's partners. The deal will close in the next couple of days, and we register a cash outflow of EUR 21.3 million for the absolute majority of voting rights and 30.7% of the economics. The total [EBIT] corresponds to a multiple in line with our recent transaction.

Now moving to Page 10 on Marketing Solutions. Honestly, performance for the first half is -- was below our expectation, even though we are -- we were expecting a slow start for the year and for the situation to improve gradually throughout the year. And we, in fact, implemented a number of initiatives, in particular, aggregating all the activities under a single manager with all the operational levers, as I described to you in Q1. But is actually taking some time, and this disruption is not taking the results yet. Probably, we did not acknowledge soon enough that sales compression on the legacy business, and the, let's say, elasticity of internal cost to revenues is not such that will allow us to absorb a shock in lower revenues. But we are honestly working very hard on this to go back to a good shape by year-end.

With respect to the sales force, we made a number of changes and we expect them to impact on Q3 and Q4 with positive results in the latter part of the year. We currently see sign of improvement in the sales, let's say, similarly to what is happening in the Corporate segment. However, it takes time for such improvement to creep into revenues. Also note that the database services for instance, have a revenue recognition policies whereby revenues are evenly allocated over the life of the subscription agreement, which is typically 1 year.

In any event, the slowdown of the Marketing Solution division is mainly centered around the legacy business, as I said. And in particular, the industry analysis, market intelligence, lead generation segments. These segments have a significant fixed base cost and is a -- and this explains why EBITDA contracted in absolute terms, not only in relative terms.

On the other hand, the other portion of the legacy business are doing quite well, in particular the marketing databases, which are benefiting from the SpazioDati offering. And on a positive note, the digital marketing companies are doing well. In particular, Pro Web Consulting is continuing to deliver very strong performance.

In summary, I think that so far, we have taken the right steps and the situation will improve. We need to give a little more time to the new management team and the sales force, but we also watch very carefully the situation to ensure results are in line with expectation. We're also keen on acquiring other M&A targets to expand our footprint, and we expect the new management team is focusing on selected targets starting from now.

Now go page to -- let's go to Page 11 on Credit Management. I'll give you an overview on performance to H1 and then move to a more strategic aspects, including the acquisition of Euro Legal Service and the early termination of Monte Paschi. Now with respect to performance, 2019 began with a strong Q1, but also Q2 is continuing to do quite well. Year-to-date, we've seen growth in revenue of 31%; EBITDA, 39%. Clearly, Q2 was not as strong as Q1. But recall that the first-time consolidation impact of Juliet eroded during the course of Q2, so a lot of the results in Q2 is organic.

Performance was positive in all segments. Total AUMs further increased to EUR 53.3 billion, and the increase reflects some new contracts with amount to about EUR 2 billion of assets under management, which we onboarded in the course of 2019. Fingers crossed for a number of other initiatives, which can further increase AUMs by the end of the year.

Now moving to a more strategic aspect. We kicked -- have kicked off a few projects to create further growth opportunities for the division in the medium to long-term. Our current reference market continues to grow even if the pace is going down, and we are keen to identify new markets in which we can grow. In Q1 call -- in the Q1 call, I had indicated, in particular, purchasing credit collection platforms, done with Euro Legal Service, and partnering with players who are purchasers of NPLs and looking at deals abroad, in line with what we did with Eurobank Property Services in Q1. So we have initiatives underway for each of this. But at the present, I cannot be too specific.

Now I am moving to Page 12. We have a snapshot of Euro Legal and MPS, Monte Paschi de Siena. As we indicated in the executive summary, we're happy that we closed a deal for the acquisition of Euro Legal Services. The business is very synergistic with Cerved, in particular in the corporate receivables space, in which Cerved is a leading market player with almost 2,000 clients and about EUR 20 million in revenue. Euro Legal is specialized in extrajudicial consumer finance fee collection, and they will complement Cerved's focus on home collection. Hence, we have identified a number of synergies which are commercial, operational and also cost-related. Cerved is buying 100% stake for a price of EUR 6 million with further earn-outs up to EUR 6 million. This allows us to align objective incentives with the founder of the business for the medium term, and the business generates revenue of about EUR 4 million and EBITDA margin of about 40%, so in line with the profitability of our division overall.

Clearly, we have many other initiatives on the way, are quite confidential, so I cannot provide you further details. However, I want -- do want to stress the point that we have a very busy pipeline.

Now let me provide some more color on the early termination of the contract with Monte Paschi. On Slide 13, we have laid out the key content of the agreement. And it clearly -- it reflects exactly what we indicated in terms of impact to Cerved in 2019 and the next couple of years. Not good news, obviously, but I trust that the other strategic initiatives we have in place will allow us to more than compensate for the Juliet agreement phasing out.

So with this, I'm done with the divisional analysis. And I leave it to Giovanni Sartor, the CFO, for the section on financials.

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Giovanni Sartor, Cerved Group S.p.A. - Head of Administration & Audit and CFO [4]

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Good afternoon and thanks, Andrea.

So moving on to Slide 14 and skipping comments on revenues and EBITDA, which has been already covered by Andrea. The main aspect to point out regard the financial impact to the early termination of the Monte Paschi contract. As we provide you the key ingredients, all of which are justifying there's no recurring. We accounted EUR 40 million for Monte Paschi, which was a contract for indemnity for the early termination of the contract. We then wrote off EUR 58.8 million, which was the purchase price allocation of the underlying servicing contract. The net effect before tax accounting is equal to EUR 18.8 million for the income statement. On a cash basis, we expect to receive EUR 40 million in Q3 this year, which unfortunately will be tax [spend away], leaving a net cash amount of about EUR 29 million.

In any event, adjusted net profit, so excluding the early termination, increased by 12.5% versus H1 last year, and this was also possible thanks to the lower tax charges thanks to the Patent Box incentives.

Page 15, the net working capital. You can immediately see it increased to 11% of revenues, adjusted to reflect the 2018 and '19 acquisition on a full-year basis. There is an increase compared to 9% in 2018, yet this is due to: first, the increased contribution of the Credit Management division, which has a higher working capital intensiveness. And in fact, in H1 2018, the Credit Management represented 30% of revenues, which increased to 35% in H1 2019. And the second, the temporary increase regarding invoices to be issued in the Credit Info business. Reasonably, this problem will be set by the year-end. So yes, there is some increase in working capital but I'd say in line with the business mix.

Moving on to Slide 16. The operating cash flow was a plus 5.8% for the first half for the year and followed a very strong Q1. Interestingly, the impact on the change in net working capital is fairly minor compared to previous quarters, whereas the changing other assets and liabilities is much more relevant. This is almost totally due to timing difference in the VAT payment. Overall, for the full year, we can still reasonably expect operating cash flow growth to be roughly in line with the underlying EBITDA growth.

Last but not least, moving to Slide 19. Financial indebtedness as of June 2019 was 2.7x the EBITDA based on the LTM EBITDA, which on a pro forma basis also includes the full impact of the closed deals. And clearly, all is based on IFRS 16. Despite the payment of EUR 58 million dividends, we are still below our 3x long-term leverage target, so we can also continue to benefit from savings in cash interest rates.

At this point, we have completed our presentation, so let's open for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Andreas Markou with Berenberg.

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Andreas Markou, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [2]

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So I have a few of them. First one, on Credit Management. Can you break down the EUR 1.4 billion of new NPLs you onboarded so far this year? And can you also give us a bit of information about any new NPLs you expect to onboard in H2?

The second question is about your -- again, about the Credit Management division and how do you see growth going forward. So you're obviously doing a bit of M&A on the Credit Collection side and on the ancillary services, which kind of shows that you are focusing a bit away from the NPL/UTP segment. Would that be fair to say? Are you focusing more on credit collection and ancillary services growth going forward? Or do you intend to do more M&A on the NPLs segment?

And third is on your marketing division. I mean this has been a division which has struggled through time. Obviously, now you're taking a lot of steps, you said, to fix that, and we should be seeing some results by year-end. I'm guessing maybe hypothetical question, if the initiatives that you are now taking do not bear fruit by year-end, what -- do you think that you might even exit this division? Or what else do you think can be done here?

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [3]

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Yes. Thank you for your questions. First, in terms of inflows, the majority of the new assets come from the acquisition of the portfolio done by one of our investor's clients. And then the remaining part, so let's say 80% comes from that source and then 20% comes from normal inflows of like several smaller portfolios.

In terms of the strategy on Credit Management, I wouldn't say we are shifting away from banking NPL. But as you know, we are probably the only player in this space which is very well-diversified, [multi-liner,] multiclient. So we have a strong presence in the banking NPL business but also in other related services such as credit collection, consumer, legal service, real estate, master services and so forth. So it makes sense for us to balance growth in all this because depending on the time and the opportunities, there may be growth options in various aspects. And we are chasing all of them. So I wouldn't say we are phasing out from UTP and banking NPLs. We are just capturing the opportunity as they come.

And last, I will comment on the Marketing Solution. I am very -- I do feel very strong about the market opportunity. The more I go and talk to senior bankers and large clients at corporations, the more I understand they have a basic need of growth. In order to grow, they need solutions, marketing services, data analysis and so forth. And so we want to become a full-fledged providers of these services to them. So the fact that we are struggling is not an excuse, and I actually see a lot of opportunities there. That's why I am investing a considerably -- a considerable amount of time and effort and internal resources to seize this segment to revamp it. We will revamp it through internal operations as well as M&A or strategic alliances or anything that is required to do so.

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Andreas Markou, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [4]

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Maybe a quick follow-up on the Credit Management division. Would you be interested in -- if any other platforms go for sale in Greece, potentially? Will that be of interest to you?

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [5]

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In Greece, you say?

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Andreas Markou, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [6]

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Yes.

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [7]

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Yes, of course. Yes. Greece, it's like -- they're not like -- a very large amount of potential targets in Greece. Two are gone and 2 are left. And so -- and one of which is more likely than the others, I would say, Alpha Bank. It's more likely the -- than the other. And therefore, yes, as much as we were keen to go after the Eurobank transaction, we'll be keen to pursue any other opportunities. Our appetite is the same as the 3 weeks ago when we were in the final stage of negotiation with Eurobank for FPS.

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Operator [8]

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The next question is from Rajesh Kumar with HSBC.

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Rajesh Kumar, HSBC, Research Division - Analyst [9]

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Can I just try and understand growth rates in the Business Information segment? How much of the slowdown in the financial segment is due to pricing, pricing renegotiations versus volume of consumption?

And on the corporate side, you indicated that the sales volumes are up 5%. Can you remind us how the bridge between sales and revenue works in that segment? And how the churn rates are affecting the revenue recognition as well?

And finally, on Credit Management, if you could have some color on how the pipeline discussions are progressing in Italy and in Greece? That would be great.

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [10]

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Yes. Regarding the bank -- the banking Credit Information side, I don't know exactly how. I cannot be extremely precise on your question. What I can say is that we have -- roughly every year, we wake up and we have about 10% of total revenues eroding because contracts terminate, there is a contraction and pricing reduction and so forth. And so the sales force is obliged to grow by 10% in order to keep the balance on revenues. We are actually going quite in line with budget because -- with expectations because we expected a very kind of flat 2019 on banking. So although we are not overenthusiastic about this almost 0% growth, it is what it is. And the network is -- the sales network is doing a good job at substituting some declining products, especially in the real estate services, with other products more in the analytics and, let's say, decision systems space. So I see a shift towards a bit more sophisticated product. And that's why we are keen to see the results of our acquisition, the strategic consulting firm, MBS, because we believe that going together with MBS to clients will increase -- will improve our value proposition to clients.

Now in terms of -- the second question was on corporate, was on sales versus revenues. Rather than a split, it's actually a consequence. So today's sales means that our agents are selling point that can be used by clients over the next 12 months as consumption for services. And so as this consumption materialize, sales transform into revenues. So the indicators that sales are increasing, it's a good indicators because, of course, it means that we are getting more cash from clients to buy services. And this cash will convert into revenues over the next 12 months. So all in all, it's a good indicator. And revenues come after sales, if I'm clear enough.

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Rajesh Kumar, HSBC, Research Division - Analyst [11]

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Very clear. The only missing part is the churn number because when you get churn, you also crystallize revenues from that customer. So any change in the trend in the churn numbers? Typically, it's, what, 5% to 7%?

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [12]

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Yes. Churn is in the range of 5%. And one of the good signals that we are observing from February onwards is that finally, the number of new clients is growing. And therefore, we are offsetting the decrease in number of clients. As you may recall in the past, our problem was that we had more or less -- we were more or less flat on the number of clients. So finally, we have inverted this trend, and we are getting positive on clients.

Now, these new clients are buying points and this new point will be converted into revenues and then -- how it works in our business especially for SME clients, it requires the sales agent to visit the client more than once not only for the sale but also to stimulate consumption. That's why our Corporate Director spends a lot of time to, let's say, train the sales force not only to chase new clients but also to nurture clients and teach them, so to speak, how to use our services and -- in order to increase consumption of points.

Finally, in terms of Credit Management, I cannot be too specific about the pipeline. As you can imagine, there are few deals and not all of them are public transactions, so with processes. But we -- I think we are doing a good job at being in contact with a number of clients with different needs, some of them even a bit more like creative than in the past. So not only pure outsourcing contracts, but also sometimes, they are interested in our IT solutions. Some other times, they are interested in our -- some of our services. And so I believe that the way the company is organized with this 5 business leaders managing different P&Ls and different business units, very synergistic to each other, it will continue to be a growth engine for the division. And it will provide a healthy growth. Clearly, not as much as in the past. But still, I guess that if you look at the guidance we gave in June 2018, we are still above that guidance. And so we stick to the -- we stick to it.

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Operator [13]

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Your next question is from Simonetta Chiriotti with Mediobanca.

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Simonetta Chiriotti, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [14]

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Two questions from my side. The first one, just to understand when the newly acquired company will be consolidated and how, line-by-line, or how will you consolidate this company?

And second question, more strategic in the Credit Management. We have recently seen some large, very large deals in the UTP space. They are going to be finalized soon. Which is your position on this segment that is apparently growing very fast in Italy?

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Pietro Giovanni Masera, Cerved Group S.p.A. - Head of Corporate Development & IR [15]

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Simonetta, it's Pietro. On the M&A, obviously, Euro Legal and Mitigo, they -- the deals are already closed, and they are fully consolidated [to about] 100%. MBS, we purchased the absolute majority of voting rights, okay? So it's consolidated line-by-line, okay? And the closing should be within the next few days. So that's -- I mean we have less than 50% in economics, but we have all the voting rights. So there's no [doubt] about the consolidation.

And for the other question, I'll give it back to Andrea.

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [16]

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So can you -- sorry, Simonetta, could you just please remind me the second question?

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Simonetta Chiriotti, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [17]

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Yes. On UTP, we have seen recent news flow on large deals on this side. Do you think that Cerved may play a role also in this segment?

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [18]

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Yes. Yes. Yes. I mean we know that -- we know there are very few -- very large deals on the segment, which I consider a bit specific because they are stemming out a very specific situation, and I'm fine with that -- in meaning that it's a new industry arising. And therefore, I understand that the first situations may be a bit like bilateral, so they are -- as they are currently. On the other hand, I believe that the intrinsic activities that you need in order to manage on a vast scale UTPs require a good understanding of companies, prediction of the financial sustainability of companies, information and vast workforce with credit knowledge and industry knowledge to manage complex cases.

Now we do have all of this. So I do not see why -- how can like an industry -- like could it be developed without having Cerved as a key player? So I'm patient, as I have always been in the past. And as soon as the industry will start of -- sort of standardize a little bit and new deal flow will arise, we'll be a player. We are not an investor. But as you -- as we understand clearly, being investor is not the only way to be active in this space. So we will be active at the very same way as we are active in performing loans management, real estate -- the [structural] real estate management, legal service, nonperforming loans management, large or small. So I think we do have all the skills required to do the job. As the industry will develop a bit more -- in a more standard fashion, we'll be there capturing our fair share.

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Operator [19]

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The next question is from Andrea Lisi with Equita.

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Andrea Lisi, Equita SIM S.p.A., Research Division - Research Analyst [20]

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Just one question from my side. We see that there are rumors on consolidation of the NPL market in Italy. And with the market that is approaching its maturities, it's normal that some players will merge together and others, there will be some M&A. And I want to ask you which role will be -- Cerved will play in the consolidation of the Italian market of NPL?

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [21]

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Yes. I think we are in a lucky position because we belong to a listed group-- sorry, the Cerved credit division. I still have my old hat on my head. So I have a new one now. So the Credit Management division belongs to a listed group. It's a financially very robust -- financially and operationally very robust company, and it's an independent company with no legacy assets and no strategic shareholder in the NPL space.

So these 3 characteristics give us the opportunity to play a threefold strategy. We could be a buyer. Up until 3 months -- 3 weeks ago, we were bidding for a very large target increase with a multi -- several hundred million euros investment potential there. So we could be a buyer of another player. We could be a seller because we are a company and we need to optimize our values. So if the buyer comes and makes a good offer for our asset, we could be a seller or we could play a role in creating a larger player and eventually consider an exit in 2 years' time. As I do not think that at the moment Credit Management is big enough for being spinned off as it is and IPO-ed because it's too small for an IPO as a stand-alone business. So technically, we have 3 alternatives. And last but not least, we can keep an asset that is nicely growing at 30% CAGR still this year.

So we are flexible. We are very well aware of what is happening on the market, and we will do our job in assessing the best opportunities.

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Operator [22]

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(Operator Instructions) The next question is from Michele Baldelli with Exane.

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Michele Baldelli, Exane BNP Paribas, Research Division - VP of Equity Research of Italian Mid Cap [23]

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I have just a question on the newly acquired companies. Can you provide some details about the contribution to profitability that these companies, in particular, the last one, will have on your P&L, please?

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Pietro Giovanni Masera, Cerved Group S.p.A. - Head of Corporate Development & IR [24]

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Yes. Hi, Michele. So -- well Mitigo is actually very small, so as it is, it's fairly marginal, a few hundred thousand maybe in terms of EBITDA but it's pretty marginal. Euro Legal, I think we gave a detail of about 40% EBITDA and about EUR 4 million in sales. MBS is, I'd say, if -- in terms of EBITDA contribution, I'd say something between mid- and high single digits. The structure is unfortunately very complex. There are different categories of shareholders with different valuations. So you can't exactly take the price dividing it by the share that we acquired, also because there's cash. But let's say in terms of the EBITDA contribution, as I mentioned, MBS, something around mid- to high single digit, and we'll consolidate for, I guess, about 5 months this year. So that's the rough estimate of where we stand.

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Operator [25]

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(Operator Instructions) Gentlemen, there are no more questions registered at this time.

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Andrea Mignanelli, Cerved Group S.p.A. - CEO & Director [26]

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Thank you all. Thank you very much for being here. I wish you all a good summer, and I probably meet you back in September. Thank you very much. Bye-bye.

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Operator [27]

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