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. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. 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.
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 Rome today, accompanied by Manuela Franchi, our Group CEO, and Davide Soffietti, 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 will now hand over to Manuela.
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 our sector, characterized by an uncertain macro environment and dynamic trading markets. Despite the stressors, 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 GBV. This 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 NPL origination within primary markets. Despite these challenges, doValue continues to assert its position as a leading European servicer.
We reached our 2023 guidance on EBITDA and maintain one of the industry lowest net leverage ratios, which we will discuss in more detail after. In 2023, the economic landscape was partially stabilized by household funded savings and significant fiscal spending by the EU and its member states, which helped to mitigate the effects of stricter monetary policies. However, we anticipate a shift in late 2024 to 2025, as the cushion provided by pandemic savings dwindles and the reimplementation of new fiscal rules encourages every indebted country to reduce their debts 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 a normalization from the exceptionally low levels of bankruptcies observed in the last two years, subsequently driving an increase in NPL transactions. Moving to the presentation on page 3, we show our main achievements in 2023. EBITDA, excluding non-recurring guidance, reached EUR 178 million, aligning with the company guidance and slightly improving the EBITDA margin to 37.1% from 37% in 2022. Maintaining this level of profitability, particularly marked by the 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, NPL, keeping our total managed GBV at EUR 116.4 billion as of December 2023 , down from EUR 120.5 billion in January. This was achieved even after accounting for substantial collection, disposal, and write-off with a total of EUR 13.9 billion. The fourth quarter confirmed, even in this uncertain scenario, to perform strongly, marking a positive momentum. This shows our, especially looking at the +13.5% quarterly increase in gross revenue and an EBITDA margin at 43.3%, gaining two percentage points on a quarterly basis, as we had anticipated in November in the context of our 3Q 2023 results. Regarding regional performance, both Spain and the Hellenic region showed double-digit EBITDA growth in Q4, with a robust +13.8% and +44.4% quarterly growth, respectively.
To further increase profitability, we are rationalizing our portfolio companies and disposing of operations in less profitable or suboptimal-sized businesses, like Portugal and real estate development in Spain. Even after distributing a generous dividend of EUR 48 million in 2023 and covering a non-recurring transaction related to the exercise of a put option by Santander of EUR 21 million, doValue net debt to EBITDA ratio remained at 2.7 times, which is consistent with our financial policy and ranks among the lowest in the industry. Given our stable EBITDA in 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 21st, 2024, where we plan to share with you our vision for doValue for the next macro cycle.
Moving now to page four, 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 2024-2026, which will include our financial targets and key performance indicators for the upcoming three years, ensuring we have a clear roadmap for success. I can anticipate that 2024 is set to be a pivotal year for doValue, dedicated to transformation and strategic investments, designed to establish a solid foundation for growth in 2024 and 2026. Our focus will be on implementing initiatives that will drive long-term value creation.
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 dividends for 2024, 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 sound leverage structure, while upholding our commitment to shareholder return. Finally, let me anticipate that a relevant part of the business plan will be driven by our effort to diversify the revenues beyond NPLs. This diversification strategy is key to our resilience and long-term profitability. In page 5, we outline in greater detail our resilient and diversified growth path.
Following two significant acquisitions, doValue now operates across three key macro regions. Activities 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 only 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 that hold 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 observe an exceptional revenue growth led by ongoing derisking efforts by these banks and favorable macro environments for collection. We envision upcoming large transactions to sustain future trends and intend to capitalize on a robust revenue stream and explore untapped 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 environments impacting negatively on collection. Therefore, doValue started diversifying by focusing on new asset classes, such as an unlikely-to-pay position and granular portfolio, as well as a more flexible operating model. In the next years, revenue will be driven by asset diversification, business development and state-guaranteed, and small SMEs' loans and positioning to exploit robust market recovery.
As for Spain, the region recorded declining gross revenue due to matching effects of low NPL generation and loss of Sareb contracts, which produced negative effects until 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 Team4 Collection & Consulting , a debt collection agency which will allow doValue to insert collection of mortgages unsecured and be more competitive with non-banking 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 two to three times, even after EUR 108 million return to shareholders has cumulated dividend distribution in the last three years. Turning now to page six.
Here, you find the segment split of gross revenue by region. In the Hellenic region, we record EUR 251 million revenue for full year 2023. That is -7.0% growth year-on-year, while on a quarterly basis, doValue recorded EUR 80 million, marking a strong +31.4% growth quarter-on-quarter, driven mainly by Cairo portfolio sales. Real estate revenue jumped to EUR 15.6 million driven by strong auction activity. Let's remind us that the real estate business was zero in 2021, and it was a startup then. A significant increase in ancillary revenues was also recorded. The comparison year-on-year of Greece revenues is affected by big disposal fee collected in 3Q 2022. Italy suffered from concurrent weak collections, older vintages, and low real estate prices, and limited new business.
Collections on new portfolios increased by 34%, and UTP also more than doubled thanks to the continuous ramp-up of Efesto Fund, a notable achievement that has allowed Italy to contain the decline in revenue with the increase in ancillary by 17.7%, which now stands at EUR 42 million. In Spain, revenues accounted for EUR 68 million in full year 2023, decreasing by 41.1% year-on-year, yet recording +2.1% excluding negative impacts from Sareb loss. Revenues in the quarter 2023 recorded EUR 21 million, with +5.3% growth quarter-on-quarter. Such revenue growth was indeed achieved despite Sareb offboarding and challenging environments on real collections in the country due to higher interest rates and purchaser affordability, which are negatively affecting the real estate market. Spain recorded positive new GBV intake, worth EUR 0.8 billion, from new clients, among which Fortress, EOS, Sabadell, and CaixaBank, compensating lower-than-expected flows from Santander.
Moreover, after successful onboarding of Sabadell contracts, we signed also a new pilot agreement with CaixaBank. Though still small, these contracts are ramping up and are testament to the commercial efforts of our Spanish subsidiary post-Sareb offboarding. It's important to note that Spanish banks have outsourced only limited extent over the last 10 years on the NPL side, so the opportunity for further outsourcing is tangible. On page 7, we underscore the strategic shift doValue has undertaken to fortify revenue stability against the backdrop of declining NPL volumes. As we can see from the pie chart, there has been notable progression from 2022 to 2023. Our diversified revenue, which extends beyond NPLs, has increased from 31% to 33% 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 remarkable considering the contraction in GBV and NPL volumes. Such resilience illustrates a successful decoupling from the core business and adds a layer of stability to our revenue stream. In Greece, the growth in ancillary revenue is more pronounced, with a six-fold increase to EUR 14.1 million. Meanwhile, in Italy, UTP revenue has more than doubled thanks to the ramp-up of the Efesto portfolio in new GBV. Significantly, the Hellenic region has reported a remarkable 42.7% increase in real 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 real revenue at the group level was primarily due to the loss of the Sareb contract.
This strategic diversification of revenue is not only a buffer against current market volatility but also positions us well to capitalize on future market upturns and benefit from growth in other asset 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 three regions. The Hellenic region onboarded EUR 4.5 billion of gross book value of new mandates. In particular, we onboarded the Sky portfolio in September, taking part in the largest sale of an NPE portfolio ever did by Greek banks, Alpha Bank, and the second-largest transaction in Cyprus.
Frontier II, worth EUR 1 billion onboarded GBV, was originated in the context of an HAPS securitization by the National Bank of Greece and represents a continuation of a successful partnership with the second Greek systemic bank. In the end, we onboarded an overall EUR 1.1 billion GBV of secondary market transactions, mainly composed by disposal from Cairo portfolio recaptured in the secondary market. In Italy, doValue successfully onboarded EUR 1 billion GBV of new mandates, and we highlight the acquisition of Efesto worth EUR 0.5 billion of GBV, composed by UTP from two banks, and successful onboarding of other smaller branches. Gross book value intakes in Spain accounted for EUR 0.8 billion. Forward flow in place with UniCredit, Eurobank, and KEDIPES and Santander generated a comprehensive EUR 3.4 billion GBV of new inflows.
To sum up, new mandates and forward flow intake by doValue accounted for EUR 9.7 billion GBV in full year 2023, to which we add another EUR 0.9 billion GBV of committed portfolios, among which Luzzatti multi-originator securitization in Italy for EUR 350 million, announced in December but to be onboarded in the first quarter of 2024. Moreover, in the first two months of 2024, we already secured another two mandates for EUR 1.4 billion, including one with the fifth banking group in Greece. Turning to page nine, I'd like to draw your attention to our key milestone of doTransformation, with an overview of the main targets of our 2022-2024 business plan that have already been achieved and those we are set to accomplish. In 2022, we centralized group IT services and launched the first wave of application rationalization, which creates the basis for the corporate data platform.
This action has been implemented and is instrumental in announcing our technological platform marked as phase one of our digital transformation journey. Moving into 2023, we commenced the second wave of application rationalization, and this year is also about deepening group and regional synergies, which are ongoing and moving into the third phase of announcing our technological platforms, adding AI and predictive analytics to the project. We have also reported 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 2024. This includes optimization that already resulted in cost avoidance of EUR 8 million, achieved by 2023. 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 2022 and 2024 was initially estimated at EUR 55 million. Aware of 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 a 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. doValue is currently in a position of comfort with EUR 270 million in liquidity reserves. This is composed of cash on hand and projected cash generation over the next 18 months, in addition to undrawn RCFs, revolving credit facilities.
This robust liquidity framework ensures coverage of our EUR 265 million gross debt maturity during August 2025. It's important to note that doValue is actively monitoring the market to align with our comprehensive financial strategy, which includes considering various refinancing options well ahead of maturities in the best interests of company and stakeholders. Recently, our BB rating was confirmed by a leading rating agency, which resonates with the market's confidence in our financial markets and stability. There are no maintenance covenants tied to our bonds, affording us considerable flexibility. Our financial discipline is further 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 a year 2023 leverage ratio of 2.7x, we are not only in line with our guidance but also one of the lowest leveraged in the sector.
In summary, we are best prepared to meet our financial obligation and our position for strategic action 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.
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 quarters show a positive momentum, partially offsetting weakness in the third Q. As usual, we are showing patterns of variations both including and excluding Sareb in order to highlight 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 2022, mainly due to lower-than-expected new NPL volumes in the market and to a strong performance for collection activity and increasing disposals mainly linked to the Cairo portfolio and sales of secondary in Greece. 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 transactional GBV disposed by banking customers in Spain. The GBV has, however, been supported by poorer flows from our partner banks, which, nevertheless, has been softened this year because of lower volumes from Santander. Our business development efforts are visible in the new mandates secured for EUR 7.2 billion GBV, despite lacking the jump on this of the past. Please note that in 2023, the company has won or onboarded over 27 new mandates on that lower average size.
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%, as of the end of the year, improving by 0.6 percentage points from the 4% recorded at the end of 2022. Moving to slide 14, gross revenues in 2023 declined by 13% year-on-year to EUR 486 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 past quarter is showing a positive growth stemming from higher collection in Greece. Excluding Sareb, the comparison between 2023 and 2022 shows a decrease of 4.6%.
In Italy, the revenues declined by 10% because of lower collection from older GACS, partially compensated by a pickup in collection from newer GACS onboarded in 2021 and 2022, which are showing an increase in collection by 34%. NPL decline was partially offset by growth in UTP, up more than 100% over the previous year and by a 70.7% increase in ancillary revenues. Performance in Greece was strong, with collection up to 27% year-on-year and despite the distorting aspects of the Mexican indemnity in 2022. REO and ancillary now represent 17.5% of Hellenic region revenues versus 9.2% in 2022. Gross revenues in Spain declined over the previous year due to lower collection in light of the Sareb onboarding and to a deceleration in REO prices.
Moving to slide 16, we show the results of our cost discipline measures in sourcing strategy and restructuring process in Spain. We continue to optimize and reduce our outsourcing activity both leveraged on a different portfolio mix for Sareb onboarding, with lower dependence on size of GBV managers, as well as in sourcing some activity. HR costs, our single largest cost item, were reduced by 9.6% year-on-year to EUR 192 million, mainly driven by the FTE reduction in ERE related to the post-Sareb restructuring program. In Italy, HR costs were also reduced, partially thanks to the one-off release of the LTIP allocation for the previous CEO and the lower variable compensation linked to the results counterbalanced. Cost containment measures were counterbalanced 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 a new portfolio. Other operating costs declined by 20% over the previous year with different contributions from the three regions. On slide 16, we see how the combination of lower gross revenues coupled with significant cost efficiency measures put in place enabled us to achieve an EBITDA of EUR 178 million, decreasing 11.5% year-on-year and by 5.1% excluding Sareb, with an improving margin of 37.1%, one percentage point above the previous year despite the decrease in revenues for the onboarding of Sareb and the inflationary pressures across the board. As mentioned earlier, in 2022, we recorded a significant indemnity from the Mexico portfolio, which steals the year-on-year comparison. In Italy, EBITDA declined as a result of lower revenues as well as EUR 14 million of group costs, which are consistent with past practices.
The Hellenic region contributes strongly to the group EBITDA and now accounts for more than 80% of the gross results, also including the effects of the Mexican indemnity in 2022. In Italy, the positive impact of the higher collection rate and the material cost efficiency measures partially compensate, reducing the inflows of NPL and the lower impact from REOs due to the declining real estate prices. We are glad that the Spanish region has already returned to profitability one 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 net income XNRI shown on slide 18, the performance is similar to the one observed for EBITDA, a strong fourth quarter year-on-year and declining net income year-on-year. In the net income, it was heavily impacted by an increase in net provisions mainly related to redundancy and year-on-year. Repayment is a one-off following approval of a preliminary new business plan for Spain, and that's why the next results of 2023 would still be impacted positively by EUR 22 million if doValue Spain receives the sum due to Apollo before the final approval of 2023 financial statements. The sums are currently held in escrow by the Spanish court.
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 would enable us to materially reduce the working capital absorption versus last year. Absorption by working capital and change of other assets and liabilities has decreased by 24%, more than proportionally than the drop in EBITDA. We expect working capital to revert to positive in the third quarter of 2024 due to cash in secondary sales fees closed in the last quarter of 2023.
The dividend payment of EUR 48 million and personal tax payment schedule increase, as well as interest paid on the bond in Q3 2023 and dividend decrease from doValue Greece to the minority shareholder and payment for the put option on doValue Spain EUR 21 million classified under equity investment has led to a negative free cash flow of EUR 45.4 million in 2023, comparing to a negative free cash flow of EUR 248.1 million in 2022. Moving to slide 20, we highlight the main items that impact on the change in other assets and liabilities. We have release of provision curing fee. These items will be lower in the following years. We have redundancy amount linked to the resizing of operations, mainly in Spain, and we will continue to optimize and reduce HR costs thanks to the investment we are doing to improve efficiency.
We have rents on a quarter that will be stable over the next year. We have the release of the previous CEO bonds. Both of these items will be significantly reducing in the next year. Then we have other one-off cash-out items for real estate investment in Spain for Tierra fund payments. All these amounts will be reduced in the following years. I leave the floor to Manuela for the final remarks.
In closing, I'd like to summarize the key points from our 2023 results, which reflect both the resilience and adaptability of doValue in a year that has presented numerous challenges across the industry. Firstly, we successfully secured EUR 11 billion in new gross book value, a statement to our strong market position and the effectiveness of our business strategy, even as we navigated the onboarding of a significant client and the general downturn in new business.
Our EBITDA for the year, excluding non-recurring regarding guidance, stood at EUR 178 million, in line with our guidance and marking a slight improvement in our EBITDA margin to 37.1%. 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 2.7 times, demonstrating financial discipline and commitment to maintain a strong balance sheet. Looking ahead to 2024, we are preparing to present our new business plan, which will focus on transformation and strategic investment to lay the ground for future growth. We remain vigilant and adaptable, ready to capitalize on opportunity 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 2023 across all metrics 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.
This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time.
The first question is from Azzurra Guelfi with Citi. Please go ahead.
Hi. Good morning. A couple of questions for me, mainly on revenues and on growth, if I may. So on revenue, when I look at the slide that you provide, 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 geography and within the geography among the different portfolios. So if you can give us some color on how do you see collection developing, that would 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 indicate a 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, NPLs versus UTP, 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 at within your financial framework and dividend distribution history. But I'm thinking when we think about M&A, which could be a key factor for extra growth, how do you assess your potential firepower and what would be the main guidelines that you think in terms of guide you to look for opportunities?
Thank you. Thank you, Azzurra, for your question. 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 from the level of today.
This is mostly driven by the activities we have carried out in all the countries to enhance the collection efficiency of our operating models, which are the basis for the asset manager 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 have been a lot of court strikes across all the countries, strikes also of notaries, which have stopped certain collection. Despite it, we focused on the growth side and we were able to recover most of the downside. But these collections are not lost. And as the activities now are back to normality, we will recover these amounts. On the slide regarding the GBV pipeline, we are putting here 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 be low the one 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 two months of the year, are clearly coming from Greece. And you know that the collection rate and the profitability of the Greek book is higher. So in Greece this year, we see mostly primary but also relevant secondary transaction.
In the Italian market, we see mostly secondary transaction, while in Spain, the opportunity is more on the primary side. Why I said it? I made 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 outsourced NPL was Santander. Now, the other banks, CaixaBank, 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 are all players which tend to work with funds.
So we see an opportunity, and that's why in 2023, the management team has very focused on gaining momentum, focused on gaining momentum with the other banks. On the other side, we continue to assist our investor clients from which we gain relevant mandates during 2023. 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-à-vis the M&A firepower. 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, it's the primary driver and also a creative 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 three 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 dynamic of the primary market because of the banks' expectation to increase the MPR ratio due to macro conditions were delivering much higher transaction in the market. Clearly, it has to be revisited in the context of the new market conditions. I hope I've addressed all your points.
The next question is from Luigi Tramontana with Banca Akros. Please go ahead.
Yes. Good morning. Thanks for the presentation. Two questions on 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 better understand 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 24-25 million of cash out, you are indicating that this amount will be reduced in the following years, but I would like to understand by which amount. So we have to expect that this will halve or minus 10%-20%. Thank you.
Thank you, Luigi. On the first question, the remarkable growth in the ancillary, which has drawn to EUR 64 million from EUR 48 million, is really the result of the dedicated commercial efforts and strategic direction that we had put in our business plan 2022-2024 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 master 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 depend on the activity of the year, which contribute directly to our overall growth.
On this, we have a specific initiative that we will describe during the Capital Markets Day where we want to launch advisory services for investors, given that the competencies and the quality of the team is very much appreciated by the market. We talked about creating a business out of it. Looking ahead, 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 startup in 2021, and it's now an important reality in the market. Clearly, the UTP have gained momentum and are yielding the higher collection and the higher profitability that that business deserves.
We are excited about the future prospect of this segment, and we will give you all the details in the upcoming plan of how we move these to the further level, which is a growth up to 40% of the total by 2026. I leave Davide to answer on the cash flow.
Yeah. Thank you, Manuela. On cash flow, we included 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 that will be higher. That's the one we had in 2023, probably in the round of EUR 25 million. We still have redundancy costs because, as we are saying, we are continuing to reduce and invest in efficiencies. That will be much higher of this year. It will be probably around EUR 20 million.
We still have recurring costs. The IFRS rent will be around EUR 15 million-EUR 16 million as of 2023. The change in net working capital, we are working to reduce this EUR 11 million, EUR 12 million, -EUR 12 million we have in 2023 to roughly zero at the end of 2024. On the other items, we expect non-material change something in the region of -EUR 5 million. This will be quite stable during our next three-year plan.
The next question is from Simonetta Chiriotti with Mediobanca. Please go ahead.
Thank you. Good morning, Noel. Just one question from my side. Looking at your GBV, you said that you have secured EUR 0.9 billion of assets plus EUR 1.4 billion in the first two 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?
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? Thank you.
So on the onboarding, 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 beginning of January. So the Italian one, Luzzatti, will be onboarded by March. Of the EUR 1.4 billion, EUR 0.5 billion has already been onboarded last week, and the remaining EUR 0.9 billion we expect between March and April. I indicated before that regarding the total assets of the year, we expect less than last year, just to be on the conservative side, where we so last year was around EUR 11 billion. Most of the remaining part, the onboarding, will happen in the last part of the year.
So we expect to gain them during the course of Q2 and Q4. Just to remind you that the old Ariadne project, which is now called Alpha, that will have the binding bids on April. So after that, it will take time to assign the portfolio and then negotiate contracts and then onboard. 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 billion with 20%-30% composition from forward flow and the rest from new mandates, being it secondary or primary mix. Thank you.
The next question is from Domenico Ghilotti with Equita. Please go ahead.
Well, good morning. Thank you for taking my question. I have just some of them.
The first one on the balance sheet, can you give us some color on the significant increase in trade receivable and payables in Q4 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 and the 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 EBITDA impact you expect from the possible non-renewal of the partnership with UniCredit? What strategies do you have in mind to support GBV in Italy with the NPL flows? And the last one also is on Italy. 2023 was a non-brilliant year for Italy with revenues down 10% and the 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? Thank you.
The first question, the increase in working capital is related to the strong third quarter we had for the country, mainly in Greece. As you say, we have a huge amount of disposal fees where we make sure the revenues again report that we need to cash in the price from an investor to invoice our revenue. So we will benefit from this collection of these invoices in the first half of the year. This is why we increase. Although this, we did a good work to reducing the working capital that's passed to improve the way to transform the working capital in cash.
In terms of balance sheet and RCF, at the end of the year, we had just used EUR 15 million of RCF, EUR 1.5 million in Greece. All the other RCF are not drawn. These are the questions with these topics.
Regarding UniCredit, this is a topic we have discussed also in previous calls. This relates only to the flow agreement that today produces flows for around EUR 600 million per annum. The contract ends end of 2025, so these flows are secured up to then. And then the contract assumes that you will manage the stock until runoff. So it's not disappearing the stock, but potentially only the flow. The impact we had estimated in 2026, already communicated, was EUR 1.5 million of EBITDA. Clearly, we prepare for the situation proactively already before. And therefore, this would be, in that scenario, completely absurd.
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. It does not include the forward flow. It's not for the portion on top for the EUR 4 billion. So the opportunities we see are when I say secondary because these are portfolio already in the market from our competitors or from state institutions that will be outsourced or where there will be systemic solutions. To give you an example, the guarantees from the GACS to loans or other state entities that you know, and also GACS 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 deals.
We are not including here the activities we are doing on the Stage 2 and the early arrears , which will be on top, and where we have specific projects where we have already engaged banks in the trial process. And we would include them in the ancillary revenue, in the other revenues, which will sustain the growth of debt buckets, which we discussed just earlier on.
The next question is from Nikita Sedyuk with Sound Point. Please go ahead.
Thank you. I think so my question on UniCredit has been answered. As I understand, the impact is EUR 1.5 million after 2025. 2026. You're referring to UniCredit?
Yeah. Yeah, 2026 because the contract ends end of 2025.
Okay. And what's the GBV associated to this contract?
It's only the flow. So 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 macro conditions. T
he stock for today is around EUR 1 billion.
The stock, which we'll maintain, is around EUR 1 billion. Clearly, we will have to see the numbers at the end of 2025, but that will remain. We have estimated around at the end of 2025, around EUR 1.5 billion stock, which remains.
Thank you. So we understand the dynamics. Is there any reason why you don't want to keep this contract, or it's just they're trying to see whoever paying the last lease back , and it becomes unprofitable to maintain this contract?
I mean, as in every contract, there are bids for contracts where we 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 bought are very limited.
These are only based on just participating to auction. So like in other cases so I mean, 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 banks to allocate it. You participate to auctions with all the banks and the funds. Now, to give you, obviously, another point, 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.
Okay. Right. Understood. Thank you. The question on the dividends and then equity purchases. I'm sorry if I missed it, but was the decision made already on the amount of the dividends and equity purchases that's going to happen in 2024?
On the dividends, we haven't done the distribution in 2024. 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 that 20% DPS CAGR are starting from the 2021 level. So if your question is regarding 2024, we indicated that we will communicate the next month.
Okay. Next month. Understood. And then last question on addressing upcoming maturities. As I understand so yeah, could you comment on what's happening on this front?
We have indicated that first, we have covered these maturities with the cash production, the cash on balance, and the RCF. So this is just 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 are investigating different sources of refinancing because if there are other options which provide lower cost, for example, the bank, this has to be considered. So we want to be proactive, and we are currently very proactive in assessing all the sources and the cheapest option to refinance.
Understood. And is there any timing when we should expect this should happen?
Yeah. We want to be in line with the rating agency indications, which is at least 12 months ahead of the maturity. The first maturity is August 2025.
Okay. Right. So you're saying that it will happen before July 2025?
Yeah.
Understood. Thank you.
The next question is a follow-up from Simonetta Chiriotti with Mediobanca. Please go ahead.
Yes. Thank you for taking my question. In the press release, there is a mention about 2024 being a year of transition and rationalization and so on. And in the presentation, you mentioned that some positive impacts will not be visible in the first part of the year. I know that in a month's time, you will provide more details, but I was wondering if you can comment a bit more on the trends for 2024. Thank you.
No. As we were saying, we are continuing to invest in efficiency, and we are also continuing to reduce our main cost side and the HR. And so this is also already executing. But because of the time it will happen during 2024, the cost and impact will be visible only in the second part of 2024, and we'll be run rate on 2025.
This year, as we realized, our main cost, HR cost, has been reduced a lot, but it was also impacted by a positive one-off item: the release of the provision for the LTIP. It will not be anymore in 2024.
In fact, the actions we are pursuing are all, obviously, run-rate savings. To give you an indication of what will be completed already in the first quarter, we will complete by March the exit from the real estate development business, which was contributing negative EBITDA. We will complete by the second quarter the exit from Portugal, which also didn't have a positive contribution. And we are doing an exit program in Spain, which we'll complete by the end of February, so this month, which is quite relevant. And we just achieved an agreement with unions last week. So the effect will already come from March.
What we were referring is the full effect, obviously, is going to take a bit longer. But the cost for this redundancy will be impacting the first quarter.
For any further questions, please press star and one on your telephone. Once again, if you wish to ask a question, please press star and one on your telephone. The next question is from Marco Gironi from T. Rowe Price. Please go ahead.
Hi. Can you hear me? Yes. 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 2024, just to be clear, is your aspiration still to at least keep EBITDA flat for the year so the recovery you'll have in earnings in the second half would be offset the slightly slow start in the first half?
Is this the kind of profile we're thinking broadly about? I'm talking EBITDA.
Not necessarily flat, but not to this, I mean, it will not necessarily be flat, Marco. As you have seen, in the last quarter of the year, we concentrate a lot of transactions. So we are anticipating 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 two elements. But I cannot say that it will be flat.
Understood. And would you give us a bit more detail when we speak again in a month's time?
Yeah. Yeah. Definitely. Definitely. We will give the details.
We also want to be conservative in the approach given also the dynamic of the share price and the attention, obviously, on the sector. It's very important that all the objectives and targets are achieved. That's why I prefer not to sell to aggressive targets.
For any further questions, please press star and one on your telephone. Mr. Della Seta, there are no more questions registered at this time.
We appreciate your attention, and thanks for joining us for those who can next March 21st.
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