Morning. This is the Chorus Call conference operator. Welcome, and thank you for joining The doValue Nine-month 2022 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. Alberto Goretti, Head of Investor Relations of doValue. Please go ahead, sir.
Good morning, all. I'm pleased to welcome you to Our Nine-month 2022 Results Presentation. As usual, I'm here with Andrea Mangoni, our CEO, and Manuela Franchi, our General Manager of Corporate Functions and CFO. Andrea will walk you through the developments of doValue business activity since the beginning of the year, and then Manuela will give you an update on our financial performance. Andrea will then wrap up with some final remarks. As usual, following the presentation, we will be glad to answer all your questions. Andrea, over to you.
Thank you, Alberto, and welcome to all of you. Let's start from page three of the presentation. We are very proud of the financial results we are presenting today. These results are the outcome of our sound acquisition strategy, our intense business origination activity, as well as our financial discipline in managing the cost base. Both gross revenues and EBITDA are showing double-digit growth year-on-year, with net income has doubled compared to the first nine months of 2021. Our cash flow generation has accelerated in the Q1 , and we are posting a very conservative net debt to EBITDA ratio below our leverage target of two-three times.
Collection has been resilient in the first nine months of the year, outperforming the trajectory in gross book value, and once again demonstrating the strength of our business model across cycles. In terms of other key activity, we are getting closer to our GBV targets for the year, and we have seen a first sign of acceleration of forward flow in the Q3 compared to the H1 of the year. A first sign of growing at low rates for corporates and individuals across Southern Europe. Breaking down on each region. In Italy, we have improved our collection rate, now standing at 2.6% and achieving historical highs. We continue to proactively manage our cost base to protect profitability.
In the Hellenic region, we have successfully arranged more than EUR 1 billion secondary NPL transactions, retaining the servicing mandate with the new investors, and the region continues to perform extremely well compared to budget and local competitors. In Iberia, we have now successfully completed the off-boarding process of the Sareb portfolio and made strong progress with the reorganization plan. Also, we are seeing positive signs of new business wins, like the management of a new portfolio by Fortress and the launch of new initiatives, including an important private project for the management of early arrears related to SMEs with a top-tier Spanish bank. Now moving to page four. Our strong performance in the first nine months has been strongly driven by the Hellenic region, which has posted outstanding results, both in terms of top-line growth and EBITDA.
Both the NPL and REO businesses have supported the growth profile. As a reminder, the REO business was launched in Greece only one year ago, supported by the experience of the Spanish colleagues. Italy has contributed positively to our results, with a very strong cost control activity yielding double-digit EBITDA growth on the back of low single-digit gross revenues increase. The turnaround in Spain is progressing well, having achieved almost a 20% account reduction in the first nine months of the year. The run rate benefits of the reorganization process are slightly delayed by a couple of quarters because we decided to go through a less expensive but more progressive restructuring process. All in all, this approach allows for higher NPV compared to the collective dismissal process.
We're still managing the post-Sareb scenario has been a key priority for the team, both in terms of portfolio servicing and personnel organization. The team in Spain can now fully focus on extracting more value out of the existing portfolio managed, of course, sometimes through investors and winning new business, further diversify our revenue base. Moving to page five, as you can see, collections have held up well in the first nine months of the year, and in particular, they performed better than the associated GBV trajectory. In Italy, collections grew by 4% year-on-year, posting an eight percentage point positive spread compared to GBV trend, which has decreased by 4% in the same period.
This is also in line with the feedback from our investor clients and master servicers we are working with, which confirm to us that our collection performance is better than the one of our competitors. Auction activity on our portfolios in Italy is up 7%, year-on-year, supporting our collection performance. In particular, as there is a customary delay between completion of auctions and collection of one year on average. More generally, in recent months, we have seen a growing importance of secondary sales transactions in the Italian market in the process of higher extrajudicial processes. The trend on judicial versus extrajudicial process might actually invert as the macro slowdown starts to be felt by corporates and households, pushing the debtors towards judicial processes.
It's important to remember that the improvement of the efficiency of the public administration, including courts, is a key condition for the allocation of the NextGenerationEU funds, and it's also a priority of the current government. Under previous governments, targeted actions gave them notable results, with recovery times shortened by 10% on average and direct impact on collections performance. In the Hellenic region, the trending collections mirrors the trend in GBV. The collection profile is expected to accelerate in Q4, also considering the completion in late October of Project Virgo, secondary NPL trade for EUR 450 million of GBV out of Frontier, for which doValue has maintained the servicer with still recording a sales fee for the transaction.
The strong collection performance in Greece has continued beyond the end of September, with collection increasing by 4% in October compared to September and by 9%-10% in the first day of November versus October. In Iberia, collections in aggregate have held up better than the overall trend in GBV. REO sales have been particularly strong and are up 6% year-on-year, while NPL collection has been relatively weaker as they've been affected by the Sareb NPL portfolio off-boarding process that has been completed at the beginning of the Q3 . Moving to page 6, we have continued to add new GBV in the last few months with few notable wins.
In particular, as you know, we have been awarded the Frontier II HAPS securitization from National Bank of Greece in July, which will be onboarded in the Q1 of 2023, and the NPL secondary disposal to EOS, where we maintained the servicing mandate. In Greece, we are also working on another important secondary NPL transaction out of the Cairo portfolios to Intrum called Project Souq. We should complete in early 2023 and, where once again, we will be retaining the servicing mandate post-disposal. Again, we work with other investors, even our competitors. In Spain, the EUR 300 million portfolio from Fortress is a first positive sign of our ability to secure new mandates among investors in the region.
We believe Fortress is likely to be a key player in Spain in the next few months, considering they have set up a dedicated office in Madrid last May. All in all, despite the postponement of the Ariadne portfolio to 2023, and few mandates won by AMCO in Italy, which will potentially be a servicing opportunity in 2023, we are continuing to make strong progress vis-à-vis our GBV intake targets, culminating in total approximately EUR 9 billion of GBV so far in 2022. Moving to page 7. We are possibly at an important junction in the market whereby default rates are starting to increase, albeit from a low base.
Recent studies, such as the one published by CRIF in late October, report a double-digit increase in default rates since the beginning of the year, in particular related to corporates. The default rates for joint stock company and sole proprietorship are getting closer to the 2% level, which is consistent to the mid-case scenario as presented in our Capital Markets Day back in January. Same happens for other key country, such as Greece and Spain. In addition, Stage two loans on banks' balance sheet remain high at 13%-14% in Italy and Greece, and at 7% in Spain. Potentially a precursor of more NPEs to come.
Broadly, we expect that the combination of a material slowdown in GDP in 2023, persistent inflation, rising financing costs, stringent banking regulation, and more limited room for support by governments, will lead to more defaults by SMEs and households, which will feed our GBV pipeline for the medium term. On the other hand, we expect our collection performance in 2023 to remain relatively resilient, as shown by our track record during previous cycles. As a reminder, most of the GBV that we manage is made up of mid- to large-ticket, mostly secured by real estate assets thus providing a solid base for our collection activity. Also, the real estate auction market is less sensitive to interest rates, and therefore, we expect a lower impact by the repricing in the mortgage market.
Volumes are going up even in recent months. Moving to page eight. In terms of pipeline, we are currently seeing approximately EUR 19 billion of portfolio looking for a service in the near term, roughly equally split across the three regions in which we operate. Mandates are relatively large in both Italy and in the Hellenic region. As we saw, the pipeline in Iberia EUR 1 billion loans, and the projected plan is that a significant portion will be outsourcing to third party servicers. Now let me hand it over to Manuela to cover the financial results in more details.
Thank you, Andrea, and good morning to all of you. Moving to page 10. As mentioned, our financial results have been particularly strong for the first nine months of 2022. The collection performance has been extremely resilient, both versus the corresponding trend in GBV, but also in terms of our ability to collect in a difficult macro environment characterized by slowing growth, inflation, and increased financing costs. Collections standing at EUR 3.9 billion for the first nine months of 2022 have in fact declined by only 3% versus a GBV decline of 9%. GBV stood at EUR 157 billion at the end of September 2022.
In this context, gross revenue has grown by 10% year-on-year, reaching EUR 426 million, driven by strong NPL and REO performance at group level, as well as supported by ancillary activities, in particular in Italy. The result is also notable if we consider that the first nine months of 2021 were positively affected by the EUR 4 million capital gain on the Relais note. EBITDA ex NRI has grown by 51% year-on-year, reaching EUR 152 million, as the strong performance in gross revenue has been compounded by a notable effect in containing costs, in particular on the HR side. This is important to decrease our operating leverage.
The EBITDA margin for the first nine months of the year stood at close to 56%, a 5.6 percentage point increase versus last year. The strong growth in EBITDA ex NRI, coupled with a reduction in D&A and provision, has supported a strong increase in net income ex NRI, which has more than doubled versus last year, reaching EUR 46 million. Therefore already standing within our guidance range for the full year of EUR 45 million-EUR 50 million given to you last August. Net debt has also decreased versus one year ago, thanks to the EUR 58 million cash flow generated in the Q3 of 2022. This was already anticipated to you in our conference call in August. Leverage currently stands at 1.8x below the bottom of the range of our two-three times leverage target.
Moving now to page eleven. In the first nine months of the year, we have added EUR 10 billion of new GBV, of which EUR 1.7 billion comes from forward flows and EUR 8.3 billion from new mandates awarded and onboarded. The collection performance has been strong at EUR 3.9 billion, and the ratio between collection and write-offs has remained broadly stable at 55-45%. During the first nine months of the year, our clients have sold EUR 5 billion of portfolio, and in most cases we have been indemnified by them. All in all, at the end of September, our GBV was EUR 157 billion, already reflecting the off-boarding of the Sareb NPL portfolio for EUR 10 billion.
We also have a tail of EUR 4 billion of mandates awarded and not yet onboarded, which in particular include Frontier II for EUR 1 billion, Project Sky for EUR 2.2 billion and Project NIX Spain for EUR 300 million. The EUR 4 billion figure does not include the EUR 1 billion secondary NPL disposal in Greece, Project Virgo and Project Souq, as those will be recorded in terms of collection and GBV in full Q and Q1 respectively. As mentioned, the Sareb NPL portfolio has been off-boarded in Q3 while the Sareb REO portfolio has been off-boarded at the beginning of Q4, and therefore at the end of 2022, you will see the full exit of Sareb from our books.
Now on page 12, we show that we have achieved a 10% gross revenue growth year-on-year, with double-digit growth in our NPL business and high single digit growth in our REO business. In addition, ancillary revenue provided a strong support to our performance in the first nine months of the year, in particular in Italy. Gross revenue stood at EUR 426 million for the first nine months of the year, versus EUR 386 million one year ago. Our Italian business posted a solid 3% growth in gross revenue reaching EUR 153 million, which can be read as 7% growth if we exclude the Relais capital gain booked in Q1 2021. The performance in Italy was mostly driven by growth in our UTP activity as well as in ancillary services.
As a reminder, the Q3 of 2021 was a very strong quarter in Italy as it was positively impacted by several portfolio disposals. We are planning same portfolio disposal for Q4 2022, which will support our collection activity for the full year. The Hellenic region posted a 43% growth in gross revenue, reaching EUR 193 million, with NPL REO and ancillary servicing supporting such growth. On the other hand, the lower performance on the UTP business is mainly driven by the Project Mexico securitization completed at the end of 2021 and which now entails a lower curing activity. In Iberia, gross revenue declined by 18% year-on-year, which is in line with the collection profile in the region and in turn driven by the 38% decline in GBV.
Overall, revenue in Iberia stood at EUR 100 million in the first nine months of the year. While the NPL collection performance was affected by the Sareb off-boarding process, the REO performance proved to be more resilient. The decline in outsourcing fee, both in absolute and relative terms, is both driven by the different revenue mix but also by the insourcing of some activities, in particular in Italy. Moving now to OpEx. Operating expenses, excluding non-recurring items, have increased by 2% year-on-year to EUR 228 million and decline as a percentage of gross revenue from 58%-54%. In particular, strong effort was put in containing HR costs, which remained stable year-on-year on absolute terms, but declining as a percentage of revenue from 41%-37%.
This is particularly remarkable considering the current inflationary environment. The number of SPs at group level have declined by 1% year-on-year as the 1% reduction in Italy and 15% reduction in Iberia was partly compensated by 10% increase in SP in the Hellenic region linked to the frontier onboarding. Other costs have also remained broadly stable as a percentage of gross revenue, with the absolute increase in both IT and G&A costs partially attributable to the local transformation processes. As a quick update on the transformation on the following page, we wanted to remind you that the overall program initially involved was of EUR 55 million of investment in the 2022 to 2024 periods.
We aim to achieve a run rate of 25-30 million EUR saving from 2024 onwards. We have actually reduced the investment to EUR 45 million due to better negotiation with suppliers, further rationalization of the program, and the fact that we no longer need to satisfy Sareb's specific requirement on system and back office, which made a relevant investment for this year. In the last three months, we have increased the level of committed investment from more than 40% to more than 55%, or 80% for 2022. We have achieved an overall completion level to 65% for 2022. The program is progressing well, is on track and with our expectation at group and local levels are satisfied.
Some notable action taken so far in 2022 have been, the merger of the NPL platform in Italy in January, the onboarding of Frontier II in February, the establishment of a central procurement department in Spain and Cyprus, the transfer of local IT resources to the group IT for the creation of ONE doValue IT to undertake all IT centralized services, the initialization of the operation hub implementation, the launch of a common security roadmap across the group, and the creation of a group data warehouse. Moving to page 15 now. The 10% growth in the gross revenue and the flatter profile of operating expenses resulted in a 51% growth in the EBITDA ex NRI, with a widening of the EBITDA margin from 30% to 36%.
EBITDA ex NRI for the first nine months of the year stood at EUR 152 million compared to EUR 116 million one year ago. In particular, in Italy, the top line growth of 3% and the strong cost control discipline, in particular on the HR side, resulted in a 26% EBITDA growth. Italy posted EUR 55 million of EBITDA ex NRI in the first nine months of the year. In the Hellenic region, the gross revenue growth of 43% resulted in a 77% EBITDA growth, despite the increase in FTE related to Project Frontier onboarding. The Hellenic region posted EUR 115 million of EBITDA ex NRI in the first nine months of the year.
In Iberia, EBITDA ex NRI decreased by 90% to EUR 2 million, reflecting the 58% reduction in GDP, the 18% reduction in gross revenue, and a cost structure which on one end sees a reduction in HR costs, but on the other end is still affected by the local transformation program, which is absorbing cash flow and negatively affecting the P&L. The relatively high cost base in Iberia in the Q3 of 2022 is due to the conscious decision of not going through a collective dismissal process for the employee working on the Sareb portfolio, but to manage situation on one-to-one basis. This means that many people have left proactively. We have been able to cherry-pick asset managers and better manage costs. All in all, we will have a higher saving going forward and a lower restructuring cost up front.
The effect is a positive on an EBITDA basis. Moving to page 16, you can see our regional performance, which is relatively consistent with what's said so far. The Italian business remains stable, also for considering the partial absorption of group costs. The Hellenic region is currently supporting both growth and margin in line with our 2022/2024 business plan. The business in Iberia is in the middle of a turnaround with Sareb now fully behind us, a reorganization which well advanced and few tangible sign of new business wins with key clients. Collection rate at group level is at 4% with the last twelve months ended in September 2022, broadly stable to the level of 4.2% recorded in June 2022.
The collection rate in Italy increased by 0.1 percentage point in the last three months, currently at 2.6%, so going back to the top historical levels. The collection rate in the Hellenic region remains stable at 5%, and the collection rate in Iberia was impacted by the off-boarding of Sareb NPL portfolio. Net income on page 17 has increased by three times year-on-year to EUR 59 million. Excluding non-recurring items, we moved to EUR 46 million. Growth was driven by the increase in EBITDA, compounded by lower D&A and lower provision compared to last year. This is a trend we anticipated to you in the past, because most D&A is linked to depreciation of main forward flow contracts.
Non-recurring items above EBITDA stood at only EUR 2.4 million, as mainly referred to the consulting fees, while non-recurring items below EBITDA were at EUR 6.1 million pre-tax and pre-minorities, and mainly relate to redundancy plans and litigation, partially offset by reimbursements from an insurance claim. In terms of Sareb organization costs, please note that EUR 6 million were paid in the Q3 , and we expect a further EUR 3 million to be paid in the Q4 . We expect some of the redundancy costs will be paid in the Q1 of 2023, still being below the total EUR 15 million.
Moving to page eighteen, the business generated EUR 58 million of cash flow in the Q3 , which coupled with the EUR 59 million cash absorption in the H1 of the year, bring the total cash absorption for the first nine months of 2022 to EUR 21 million. CapEx spend increased to EUR 14 million in the first nine months of 2022, with EUR 4 million being spent in Q3, on top of the EUR 10 million spent in the H1 . In line with our transformation plan, we expect CapEx to accelerate in Q4 in a similar fashion to what we have seen in 2021.
We are glad to show a normalization of our net working capital dynamic, while the European payment arrangements, together with leasing payments, VAT payments, and redundancy payments, still affect our cash flow in the net other assets and liabilities. As discussed in a number of instances, the European payment scheme will partially normalize in 2023, with fees being paid as they are accrued. Moving to page 19. Our financial structure remains very conservative in terms of leverage, maturity profile, liquidity, and RCF lines available. We have reached a 1.8x leverage level on the back of strong cash flow generation in the Q3 and growth in EBITDA in the last twelve months being below the two-three times leverage target.
As a reminder, both Fitch and S&P confirmed our BB rating before summer, with Fitch improving our outlook to BB positive. As mentioned, we expect net debt to remain stable in the Q4 . Now let me hand over to Andrea for the final remarks.
Thank you, Manuela. As you have seen, we have made very good progress with our nine months results, which allow us to reiterate our guidance for 2022. There can be upside in terms of net income, dividend and net financial position. I'm proud of the results achieved so far from the group and perfectly in line with what we promised at the Capital Markets Day in January, notwithstanding the changed macro environment. This has been possible primarily thanks to the relative strengths of each region and management teams, and the support received from each part of the group, which contributes to the overall targets and sustainability going forward.
Thanks to all of you for your attention, and let me hand it over to Alberto to start the Q&A session.
Thank you very much, Andrea. Let's get started with the Q&A. As usual, press star one to register your questions. We'll take them one by one. Maybe we can take the first question from Nicholas Binda at Intermonte. Nicholas, over to you.
Hi, good morning. Thank you for the presentation. I have three questions. The first one is related to the full year 2022 guidance. Factoring the solid Q3 results, why don't you revise upward the guidance, even because the implied Q4 suggests a quantum drop in revenues and EBITDA? On Italy, could you provide us more color about the main dynamics of the quarter as the quarterly performance decline quantum? Finally, on the NPL segment, what are you observing in terms of clients' activity and NPL prices? Thank you.
I will take the first one. In terms of guidance, despite the important results we presented today. We are prudent in terms of EBITDA, because of the current economic slowdown, and the possible impact the slowdown will have on the switch of our collection from extrajudicial to judicial. This is why we are prudent. We are working hard to offset this risk, increasing the productivity of our asset management team. This is the main reason why we are prudent in terms of EBITDA.
In fact, I really believe we can improve our performance both in terms of cash flow generation and net financial position and net result of the company. This is why I said before, this better result in terms of net income of the company will probably drive to an increase in our dividend payment. I will leave the floor to Manuela for the second question.
Regarding the question on the impact of the servicer in Italy. The Q3 2022 versus Q3 2021 is affected by the fact that in Q3 2021 we sold a number of portfolio in Italy on behalf of our clients, and therefore Q3 2021 was exceptionally strong. We expect to do some portfolio disposal in Italy in Q2 2022. Some of them were planned for Q3 2022, but we shifted them by one quarter. It's really, you know, where you concentrate these extraordinary sale that drives the comparison. On the last question around the NPL segment. We have referenced the client activity, which has been intensifying on the judicial side.
As you know, during COVID time, we have pushed significantly on the judicial route, given, you know, the slowness and the difficulties of the judicial system. Now we see an opposite trend. On the other side, the auction activity, which is run by the court, has increased substantially. There are public statistics on that front, but we have referenced 7% growth, you know, year-on-year. Usually, when you have auctions, this drives the collection of the following 9-12 months. We see this effect to have positive results also for 2023. You also asked about pricing levels. The portfolio transaction has been done at pricing not very different from past years.
This is mostly because, banks and services have become much more sophisticated in terms of instruments they offer to protect value. For example, the Atlante fund is a very good representation of that. Given the structure, and the de-recognition effect on the bank balance sheet, if you contribute to these funds, you are able to contribute almost at net book value, that you're not, you know, suffering from even a lower market condition. There have been some transactions in the open market, but in Italy, some of them were placed by AMCO. As you know, AMCO has lower returns than the rest of the funds. This has protected the valuation of the banks on that front.
There were specific events where, you know, the pricing has not been affected. The other transaction we have seen in the other markets, Greece, and also, Spain, have not seen material differences vis-a-vis the last performance. Because, you know, they have been sustained by relevant real estate business both on the Greek front, which we mentioned, and also on the Iberia side, given that our GBV is mostly secured. This is an important factor because NPL is mostly as an underlying the real estate. The real estate market is fortunately still sustained in terms of number of transaction, which offset some deterioration on the price of real estate.
I think also, Nicholas, the Virgo and Souq secondary NPL trade in Greece are quite important data point, and these are quite sizable.
It's a total of EUR 1 billion GBV. They were, you know, structured over the summer. The deal completed in the end of October. Souq complete in the Q1 2023. So they're very important data point regarding the soundness of the NPL market, despite the corrections we've all seen, you know, year to date on the listed markets.
Thank you very much.
Okay, maybe we can take the next question from Andrea Lisi from Equita. Andrea, over to you.
Yeah. Hi, thank you for taking my question. The first one is on Greece. I want to better understand the stronger performance in Greece, which was incredibly strong. Just understand the drivers, and what also do you expect for the Q4 , considering that the collections are further improving versus September. If there is something that maybe is not repeatable, or portfolio seasonality in the Q3 and your expectation for the Q4. The second question is on Spain. There were some rumors on an interest for a servicer there.
Just to understand the strategy here also on the M&A side, and how do you think that the scale will be important, especially considering the exit of the contract from Sareb. Then another question is just to understand for our model to understand how do you approach the evolution of D&A during the last part of the year. The last couple of question is if you can repeat the amount of restructuring costs and redundancy plans related to Sareb for the last quarter. Why did you say that net debt increase remains stable in the last quarter? Just for prudence reasons or because there is something that is expected to revert?
Andrea, on Greece, the strong performance is especially on the risk forming side on the ERB book, where we have good fees on that segment. Also we have effects from the Project Mexico contract, which, as you know, we negotiated last year given that it became a securitization. Moving to a lower fee scheme has brought us an effect on revenue to offset the difference in the fee scheme. This effect was partially counted in 2021 and partially in this quarter of 2022, which has now completed.
The effect of the underlying business progressing very well on a specific segment where the fees are particularly good and the effect of the change in the structure of Mexico, which was already structured in this way since the deal was done last year. In Spain, you're referring to rumors regarding a deal related to subsidiary of Santander. We don't comment on market rumor. It's in fact thought that the Spanish servicing market is in need of consolidation given its fragmentation, and will be our responsibility to analyze eventually any potential opportunity that would be accretive to our shareholders. On the last point, Alberto will provide you with a specific reference.
Yes, on D&A, we expect to book between EUR 20 million and EUR 25 million in the Q4 , which should bring the total to about, you know, EUR 70 million for the year. Regarding Sareb, what we mentioned is that, you know, the total amount that we plan to associate to the restructuring charges is up to EUR 15 million. Although as time progresses, we are probably gonna spend lower than EUR 15 million. We spent EUR 6 million in Q3. That was the first charge. We expect to spend EUR 3 million in Q4, so the total will be EUR 9 million. There will be a residual pay for Q1, possibly Q2 next year.
I think at the end of the day, it will be, you know, lower than the EUR 15 million amount that we initially envisaged. That's because, as mentioned, we went through a different route to restructure the team there, which takes a bit more time, but overall, gives a one-off charge which is lower. From an NPV point of view, it's value creating. The last point on net debt, essentially we expect net debt to remain relatively stable in Q4. As you know, we are gonna ramp up CapEx in the last quarter as we did last year. We still have a bit to go in terms of the expenditure on the transformation.
Some of the Sareb as well cost will be impacting the P&L in Q4. In all, we expect to end the year at 2.2x. That EBITDA also because, you know, EBITDA was normalized the last few months, EBITDA counted as of September 2022 is a very high number. It takes into account two very strong quarters, Q3 this year and Q4 last year. That's it.
Thank you. Just, if you can, elaborate on your expectation for Greece, in terms of performance for the last quarter. Thank you.
The Greek performance will be ahead of our budget, compensating other countries' performance. All in all, you have seen, you know, the chart we presented in the business plan presentation, where there was already significant growth expected for Greece for the whole year. We haven't given a specific guidance for Greece only, but only directional chart. Let's say they are probably going to be 5%-10% higher than that result. This is in the best case scenario. Also because, as we said, the Q3 was exceptionally good, also for these two elements which I described.
In a normalized budget, you don't necessarily plan for that in advance. Apart from the Mexico piece, which was obviously planned. Therefore, we assume that the Q4 will be much more in line with the previous quarters and normalize the effect of the fourth. All in all, you know, five to 10 ahead of the indication we gave for Greece at the Capital Markets Day.
Thank you.
Okay. The next question comes from Monica Pierotti, Mediobanca. Monica, it's you.
Hello. Good morning. My first question is on the different collection strategy that is required in 2023 for the growth in judicial versus non-judicial collection. I'm wondering if in general terms this means a lower collection path and thus more cost. Overall, if the judicial collection strategy is less profitable in general terms. The second question is regarding M&A. There was a good progression in cash flow in this quarter. You have given an M&A strategy.
The question is, entering a weaker economic environment, do you think that it will be easier to close deals or you see a different, a difficult environment also for M&A? Thank you.
Okay. On the first question. The main difference between judicial and extra-judicial collection is not on the cost side because the cost of the lawyer responsible for the judicial procedure is up to our client. So the main difference is timing. We do not wanna destroy the value of our portfolio, accelerating the extra-judicial transaction if the price of the transaction itself is not the right one because of the macro environment. So if our collection will significantly switch from extra-judicial to judicial, we will protect the intrinsic value of our portfolio, the portfolio we have under management. But in terms of timing, we will collect late.
This is why I say this is the main reason why we are prudent. On your second question on M&A, we are actively monitoring the M&A market. The financial position of our company is rock solid. I really believe, as we said during our previous conference call, the market in Europe will need consolidation. M&A is and will be one of our main priorities.
Okay. Thank you, Andrea. Monica, any other questions from you or?
I'm okay. Thank you.
All right. I don't see any further question in the queue. Thank you very much for having been with us for this call, and have a good day. Bye-bye.
Bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.