Analysis of Consolidated Revenues

In the first nine months of 2020 the Group’s Revenues decrease by -2.6%, reaching Euro 350.3 million compared to Euro 361.1 million in the first nine months 2019 (-7.2% organic).

Divisional revenues declined by 3.0% reaching Euro 350,3 million.

  • The revenues of the Risk Management Business Unit decreased by 3.9%, from Euro 205.6 million in 2019 to Euro 197.5 million in 2020:
  • The Corporates business segment recorded a decrease compared to the first semester of 2019 (-10.3%); the negative impact of the lockdown on the territorial network led to the interruption of many commercial negotiations, to which a fall in consumption due to the induced effect of the total blockage of business on the majority of corporate customers was added;
  • The Financial Institutions segment recorded an increase compared to 2019 (+3.8%). The increase is mainly due to the positive and countertrending impact on services related to the Fondo di Garanzia which benefited greatly from the measures provided for by the Decreto Liquidità, mitigating the drop in the Real Estate Appraisals and Cadastral Survey service lines, most affected by the block of activities.
  • The revenues of the Growth Services Business Unit grew from Euro 29.1 million in 2019 to Euro 41.8 million in 2020 (+43.5%) compared to the previous period, mainly:
    • as a result of the consolidation of the MBS Consulting Group acquired in August 2019;
    • as a result of the increases realized in the “Artificial Intelligence” service line, both on the Corporates segment and the Financial Institutions segment, with particular reference to the Atoka platform, created by the subsidiary SpazioDati.
  • The revenues of the Credit Management Business Unit decreased from Euro 126.4 million in 2019 to Euro 111.0 million in 2020, for a total decrease of Euro 15.4 million, equal to -12.1%. This Business Unit, which benefited from the entry of the two companies acquired in 2019, began to suffer the impact of Covid-19 from the closure of activities in the courts and land registries, which led to a slowdown in judicial recovery activities.

Analysis of Consolidated Adjusted EBITDA

The Consolidated Adjusted EBITDA of Euro 143.9 million in the first nine months 2020 decreased by 10.5% with respect to the prior period of 2020 (-13.1% on an organic basis). The Adjusted EBITDA margin was 41.1% in 2020, compared to 44.5% in the prior year.

The slight reduction in margins is essentially attributable to the Risk Business Unit, where the decline in revenues was not reflected in the operating leverage, due to the higher incidence of fixed overheads.

Analysis of quarterly Adjusted EBITDA

In the third quarter of 2020, the Group’s Adjusted EBITDA stood at Euro 44.6 million, down by 10.4% compared to the third quarter of 2019 (-11.5% on an organic basis).

Analysis of Consolidated Net Income

At September 30, 2020, the Consolidated Net Income was Euro 32.4 million.

Adjusted Consolidated Net Income before minority interests – which excludes non-recurring expenses and income, the amortized cost of loans, the amortization of the capital gains allocated resulting from business combinations, the adjustment of the fair value of the options and the tax effect of previous items – stood at Euro 68.0 million, a decrease of 9.4% compared to Euro 74.9 million in the first nine months of 2019.

Covid-19 impacts and 2020 outlook

  • Business resilience confirmed by the limited decline in Revenues and the usefulness of our services offered to manage credit risks also in the weak phases of the economic cycle;
  • At the moment it is believed that the Group is able to close the 2020 financial year with Revenues and Adjusted EBITDA of approx. Euro 480m and Euro 200m respectively; these forecasts could undergo changes due to exceptionally negative and unpredictable impacts deriving from the significant recovery of infections;
  • In light of the current uncertainty related to the COVID-19 emergency, we consider it appropriate to postpone our third Investor Day to the first half of 2021 for an update on the strategy and financial targets.

Andrea Mignanelli, Chief Executive Officer of the Group, commented: “Cerved confirmed the solidity of its core business: following a limited decline in revenues in the lockdown phase, returning to growth in the third quarter in the Risk Management and Growth Services business units. The company has once again proved to be resilient, in a phase in which our Covid-assessment services have enabled banks and businesses to reduce uncertainty in evaluating their counterparties.

In a very difficult period, we closed the first nine months of the year with a limited decline in revenues. In the Risk Management business unit, we recorded significant growth in the Financial Institutions segment, thanks to our new services which support banks in the provision of loans guaranteed by the Fondo Centrale di Garanzia. In the Corporate segment, Covid-assessment products partially offset the lower utilisation of services. In Growth Services we are increasing revenues both by external lines from the consolidation of the companies acquired in 2019 in the consulting business, and also internally from Atoka services which will become a growth engine in the future. The decline in Cred Credit Management is mainly due to the slowdown in court activities during the lockdown, which will result in some of the revenue streams being deferred over time.

The new wave of infections will result in a more difficult environment in the next months. However, we are confident in confirming our solidity: we have already demonstrated that we can operate in full smart working without losing productivity and the lockdown measures that lie ahead are less severe than those of March. The resilience of the business and the final results as at 30 September allow us to believe that the Group will be able to close the 2020 financial year with Revenues and Adjusted EBITDA of around Euro 480 m and Euro 200 m respectively. In light of the current uncertainty related to the evolution of the emergency, we consider it appropriate to postpone our third Investor Day to the first half of 2021 for an update on our strategy and financial targets.”

Source:  Cerved Group Earnings Release