Earnings Call: Q2 2021

Aug 5, 2021

Good morning. This is the Corusco conference operator. Welcome and thank you for joining the Duvalier First Half twenty twenty one Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Alberto Goretti, Head of Investor Relations of Duvalho. Please go ahead, sir. Good morning, ladies and gentlemen. As the new Head of Investor Relations, I'm proud to welcome you to Duvalu's first half twenty twenty one financial results presented by our CEO, Andre Mangoni and our Group CFO and General Manager of Corporate Functions, Manuela Franchi. Andrea will take you through the latest developments on Duvalu's business positioning and economic results before handing over to Manuela to speak further on our financials. Following the presentation, we will be glad to answer any of your questions. Now let me pass it over to Andrea. Thank you, Alberto, and welcome on board. Good morning, everyone, and thank you for joining us today. Starting from Page 2 of the first half twenty twenty one result presentation, I would like to comment on the positive developments we have achieved in the recent weeks as well as to remind some of the thinking behind our vision for Duvalio as a leading and reliable service area for the financial industry. At the very start, At the very start, 2021 was all about rebound and the normalization of business conditions after an unprecedented crisis which struck the society on a global scale. Nevertheless, we never stopped focusing on business development and organic growth, working in positioning Duvelio as the go to service of banks and investors even in a post COVID world. As you know, we expected that despite a strong rebound of the GDP growth, the winter sector and segments of the economy will be still struggling to cope with an uneven recovery and at the end of supporting measures from the governments. This is why our forward flow contracts across 4 countries continue to underpin our asset under management, adding €2,000,000,000 of GBV despite several moratorium still in place, reaching the target of the full year 6 months in advance. New mandate winning the stretch is very satisfactory with €5,200,000,000 of new business, especially in Italy, where we command a solid 75% market share on the new gas assigned to 3rd party service, a testament of our leadership and quality of service growing our market share in the sector. Taking into account forward flows and new mandates, we are adding €7,000,000,000 of GBV, which is more than enough to replenish collections and write off for the first half. Stabilizing the asset under management without any extraordinary transaction. Also, we are participating in a consortium with Fortress and Bain, which has been selected as the preferred bidder for the Frontier portfolio. It means €6,000,000,000 with an exclusivity window, which will likely lead to a binding agreement very soon. Financial results and operating results were also satisfactory. Gross revenues stood at $245,000,000 and EBITDA ex NRI at $73,000,000 in the first half of 2021 with a strong growth year over year, respectively, of 44% sorry 54% and 104 percent, driven by the consolidation of Duvalu Greece and a pickup of the collections activity, which was severely impacted in the last 15 days of March 2020 and the whole 2nd Q last year. Also on a pro form a basis, good growth is confirmed. We are particularly proud of the results of Duvalier Greece, which is showing better than expected collections and higher profitability than buy side case. Net income is also growing along with EBITDA despite higher D and A and financial charges related to acquisition, highlighting the financial sustainability of our M and A strategy. On the back of the results and favorable market condition, we worked rapidly to improve our financial structure by issuing new 3 €100,000,000 notes to refinance our existing banking facility to sustain the average duration of our debt structure. We are very proud of the strong interest drawn from this deal, which added top tier institutions to our investor base. Cash generation continued to be sustained in 2nd Q even after a partial reversal of net working capital, low seasonality in payment of €2,001,000,000 dividend. 21. 21,000,000. Sorry. It's it was an open, but it's just 21,000,000. Okay. In fact, we further reduced our leverage ratio from 2.6x at the end of 2020 to 2.4x on the back half of stable net debt and a pickup in LTM EBITDA, a trend which will continue as we head toward the end of the year. On Page 3, we show a focus of the new AUM coming from forward flows and new servicing mandates in first half. As you may remember, we forecasted a conservative target of €2,000,000,000 for 2021 to account for moratoria and other debt relief measures still in place in our market whose lift offs and FX were not predictable yet. First half ended with forward flow of €2,000,000,000 already reaching the full year target, highlighting how signs of distress are still lingering in the economies as certain supporting measures are being rolled over. In fact, the shock caused by COVID will have long lasting consequences for the industry and we are seeing our major clients keeping on carry out their derisking process with important transaction where Duvelio can claim a leadership position. First half, 2,001 ended with a solid intake of €5,200,000,000 of new mandates, adding to the onboarding of the Icon portfolio for €2,600,000,000 We're on track to reach the target of new mandates of €7,000,000,000 to €9,000,000,000 for 2021. New GBV was especially good in the Italian gas market where we have been awarded with over €3,000,000,000 in Q2, a €75,000,000 market share on the new GACS mandate from year to date. We are particularly proud of this result as the Italian GACS market is considered one of the most competitive. While in the past, we felt pressure on margins owing new entrants, We are now reaping the fluids of a consistent strategy aimed at keeping the above high when it comes to quality of services and performances. As the consolidation of the banking sector in our key market is gaining place, we will see more disposal of portfolio and possibly favorable developments for Duvalho as our partners have solid institutions with acquisitive strategy in the consolidation game, which could add additional flows for Duvelio in the future. On Project Frontier, as you have known from the press, we are partnering with Fortress and Bain. Our consortium has been selected as preferred bidder with major chances to be awarded the contracts in the coming weeks. Project Frontier would represent a game changer as this is the only major HAPS transaction in Greece, which will be awarded in the open market without any exclusive agreement or platform sales. On Page 4, we want to give you some updates on the ongoing normalization process of our collection operations. In the left part of the chart, you have monthly collection for 2019, so pre COVID 2020 affected by COVID from March onwards and 2021 in Italy and Spain. Greece has been excluded being difficult to have constant and comparable perimeter within that time frame. In Italy, collections in the first half are up 23% versus the same period of 2020, but still down 50% against the pre COVID level of 2019. Social distancing measures are still affecting the normal functioning of courts And the moratoria on evictions and foreclosures is preventing us to collect properly certain secured portfolio. With this respect, one very positive development has been the sentence of the constitutional court, which has declared unlawful the freeze on evictions paving the way to a healthier environment for collections on secured portfolio from July 22. Moreover, the vaccination campaign is allowing to increase the number of hearings due to more limited social distancing measures. As per Spain, ARIO's sales are less affected by course activity and foreclosure. That's why collection had recovered and it exceeded year to date 2019 by 8%, while they are up 76% on the same period of 2020. In the right side of the slide, we resume the status of the supporting measures in the jurisdiction where we operate. The legislation is still very favorable and supportive for debtors, although in a less widespread and more violent way. Moving to key financial figures on Slide 5. You will notice how the post COVID recovery is consolidating with a solid accelerating growth in both revenues, EBITDA and net income. Gross revenues were up 54% to 2.54% was plus 47% in Q1. While year on year is benefiting from comparison with a semester which include only one most of due value Greece, even performing first half twenty twenty for the acquisition of Duvalu Greece, results are showing a positive trend with gross revenues up 40%, thanks to Duvalu Greece, which is performing ahead of business plan. The profitability in first half was good with EBITDA amounting to EUR 73,000,000 and an healthy 29% EBITDA margin over this semester. As collection will grow faster, adding to seasonally stronger quarters, we think this is a solid base to reach pre COVID profitability levels. Also net income items grew significantly, swinging from a negative result of 8 €1,000,000 to a profit of €14,000,000 despite higher financial changes and the D and A originating from our acquisitions. This is thanks to our healthy approach to M and A with financial sustainable and accretive acquisition even with a very conservative approach when it comes to purchasing price allocations. If sequential and year over year growth will stay the same in 2nd part of the year, supported by the further relaxation of distancing emissions and the pickup in economic activity, we will be well on track to reach consensus figures for 2021. Moving to Slide 6. I would like to point out how the positive cash generation feature of 20 20, which is resulting from a shift to professional investors, customers and consolidation of Duvalier Greece is continuing to underpin our balance sheet. In the first half, operating cash flow was at €37,000,000 and net cash flow in first half stood at €23,000,000 bringing our leverage ratio on a pro form a basis to 2.4x with €88,000,000 net debt even after payment of 2,001 dividend sorry, 2021 dividend. This is a faster improvement versus 2.6x net leverage ratio as March 31. On the back of these results, we further strengthened our financial structure with the insurance of €300,000,000 notes refinancing our banking facility. The issuance which drove significant interest and was 2.7x oversubscribed will allow us to be more flexible to deploy our M and A strategy and to remunerate our shareholder still within the parameter of a very prudent financial policy, which distinguishes us from a more leveraged and risky player in the credit management sector. As per M and A, after the first investment in a Brazilian fintech named Kerobitar, we are reviewing other interesting targets in the Proptech and Big Data sector. Sector. After digesting our Greek and Spanish acquisitions, we've leveraged hitting south of 2.5x, we will monitor closer in market consolidation opportunities in Italy and Spain. M and A is not a purpose in itself. Our main filter will always be shareholders value creation And we will not pursue external growth at any cost for the sake of deploying capital. I will now hand over to Manuela, who will take you through the first half of twenty twenty one results in more detail. Manuela, the floor is yours. Thank you, Andrea, and good morning, everyone. Starting from Page 8, we are pleased with these results, which show a consolidating recovery path and a start of a sustained growth in profitability. With our leadership position in the most attractive markets of credit management and the sum of balance sheet with access to that capital markets, Duvelu is ready to fully benefit from a post COVID environment, with the first half bringing already tangible results. In 2021, GBV reached €159,500,000,000 making us the clear number 1 independent servicing in Southern Europe. GBV substantially stable despite strong collection in the semester with new mandates and forward flows stabilizing asset under management with balancing flows across all countries and asset classes. Adding awarded mandated to be onboarded yet, GDV would stand at a record €163,700,000,000 Gross revenue are up 54% to €254,000,000 sustained by continuous pickup of collection and the larger consolidation perimeter. The cost base is increasing due to the larger perimeter, including Duvelio, Greece, but is slower on a relative basis, thanks to the ongoing cost reduction program. EBITDA ex NRI has reached EUR 73,000,000 with plus 1 0 4 percent growth year on year and an EBITDA margin of 29%, up from EUR 22 percent of the first half twenty twenty and in line with the EBITDA margin of 1st Q 'twenty one despite seasonally weakness of first half. Bottom line is healthy with net income at NRI at a positive 8,500,000 dollars driven by higher EBITDA and partially offset by higher D and A and financial charges. On D and A and bottom line, let me remind that we allocate much of our purchase price to the SLA contracts, which depreciate in a predictable and planned way. This is a non monetary item of $38,300,000 in first half twenty twenty one. Cash flow generation continues to be strong After payment of a $21,000,000 dividend despite an expected reversal of the positive net working capital dynamic, which is normally in the first half following advanced payment cashed in in 4Q 'twenty, deleveraging has been above expectation with net debt to pro form a EBITDA on a reported basis limited at 2.4x from 2.6x at 2020. On Page 9, we describe the moving parts of our GBV. On the positive side, we have added EUR 2,000,000,000 of GBV coming from forward flow agreements, automatic transfer of FPL and earlier rears coming to us each month from our 4 main banking partners, having already reached the 2nd €2,000,000,000 target for the full year despite the extension of the moratoria and measures to support the economy in Europe. We will definitely exceed targets for this component. First half 'twenty one ended with a solid intake of new contracts of EUR 8,600,000,000 including the onboarding of the ICON portfolio for €2,600,000,000 won in 2020, €1,900,000,000 of contracts onboarded and won in the last semester and €3,400,000,000 of secured contracts in the 1st semester of 2021 yet to be onboarded. This makes the target of new mandates 1 of €7,000,000,000 to €9,000,000,000 in 2021 within reach. And please remember that these targets does not include Frontier, and we don't include in this target contract already won in 2020 and of course, that in 2021. New GDP was evenly distributed across countries and asset classes with EUR 1,100,000,000 of new NPL in Spain coming from Spanish banks EUR 3,400,000,000 new mandates in Italy, mainly GACS and EUR 200,000,000 in the Atlantic region. Andres already mentioned that Frontier, which would bring total GBV under management very close to €170,000,000,000 mark. Collection were at €2,700,000,000 picking up pace in the 3rd quarter, while write offs were at just €900,000,000 and sales by banking clients at €1,000,000,000 In conclusion, gross book value under management continues to develop positively, topping €163,700,000,000 when including 1 mandate to be onboarded. On Slide 10, we summarize the key certification of our AUMs. Year after year, we achieved greater diversification by market, asset class and client, while maintaining the distinctive features of being one of the most secured corporate portfolio in the industry. We now cover all the most attractive markets in Europe while also being diversified. Italy is under 50% after the recent developments in inflows. In our client base, you find the top systemic banks and investors in the region. So this should translate not only in the ability by Duvelio to capture a significant portion of new mandates in the market and showed by the recent market developments, but also to establish a long partnership with shareholders such as Fortress and Bain. We believe that to our clients, which are consolidators in the banking industry, will have also benefit to our future inflows by eventually consolidating the inflows of the targets. With this respect, please note that GBV size is not necessarily a good proxy for value at stake as different portfolio carry different profitability. We received a lot of inquiry on the Ferev contract, and we can now announce that the renegotiation process has officially started at the end of July and is expected to complete by the beginning of 2022. On Page 11, we look at the main components of revenues. On the left hand side, outsourcing fees are stable. On the right hand side, we highlight a key point of our business model. Base C are up 1.4x in absolute terms compared to the first half of twenty twenty, thanks to the inclusion of the value Greece and slightly down from 39% to 35% as a percentage of total gross revenue. Thanks to our exposure to markets such as the Iberia region and the Atlantic region with much higher average fees, The basic component is now a significant part of our P and L, which has moved volatility not only in the long term period like COVID, but also seasonality different quarters. A focus on cost on Page 12. We have built an operating platform based on skilled asset managers and a scalable IT platform, meaning that our cost base is mostly fixed with high degree of operating leverage. With collection volume growing dramatically versus 2020, we can deploy operating leverage with a and reduce the impact of HR and SG and A costs. On relative term, every cost item has reduced comparing to first half 'twenty. HR costs are steady as a percentage of gross revenue compared to the 1st Q. As well, our outsourcing partnership with IBM is continuing to yield its results implying lower IT costs. On Slide 15, the main results by geographic area, although Andrea already commented on the monthly collection. Collection rates, which are on an LCM basis, continue to increase in 2021, following up on the recovery trend started in the second half of twenty twenty. Stock collection rate for the whole group increased from 3.3% in 1st Q to 3.7% to H1. Please note that the data on the stock collection is impacted by the inclusion of the Alpha portfolio in Sybros of EUR 4,000,000,000 which is not computed as stock GBV due to the decision of Alpha to dispose it in 2022 and present structurally lower collection rates compared to other portfolio in the Atlantic region. One key element stemming from this slide is the accretive contribution of Duvalu Greece in group margin. In the region, we are already at 46 percent EBITDA margin, continuing to grow profitability in line with our acquisition business plan. Next, on Slide 14, the working capital and net financial position. Working capital has increased slightly by about €8,000,000 in first half, lower than expected due to concentrated bank payment at year end 2020. Net of this effect, our operation continues to show very low net working capital requirement due to structural client shift to our investors and by international expansion in Greece, where a portion of our fees are prepaid quarterly. Regarding net debt, I would highlight that leverage is developing even better than our expectation in this semester. Now that we have refinanced the banking facility with another high bond issuance, we have all the flexibility and headroom to weather temporary drop in EBITDA or fund the M and A transaction without having to ask for a waiver. On this, let me point to Slide 15, where we show an updated debt capital structure. We have no cash outlayed and no refinancing needs until 2021, when our first 2016,000,000 bond will expire and 2026 when another bullet payment for 300,000,000 in 2026 will come due for repayment of our 2nd bond issuance. Even after accounting for recent cash outlays for the repayment of the Spanish tax claim and the dividend, our cash position stands at EUR 156,000,000 dollars complemented by Andron RCS for approximately €85,000,000 Let me remind you the reason for the refinancing of our banking facility. Rational for senior facility agreement refinancing in 2021 were: 1st, as noted, the removal of the financial maintenance covenants associated with the banking facility, which allows for more flexibility still within our financial policy for M and A and dividends and reduce liquidity risk in case of a sudden drop in the EBITDA. 2nd, market conditions were really good, and we managed to significantly increase in the duration of our debt, while only increasing the cost by 65 bps. 3rd, as a result of no principal payment until 2025, we will be able to file cash to deploy for M and A transaction or if an opportunity will come for dividends. 4th, we managed to obtain a teller structure, which would become unsecured and unguaranteed automatically if the next year upon refinancing of the SSN 2025 allows for faster flexibility. Moreover, we keep strong relationship with our banks through our RCF lines. Finally, comment on net debt on Page 16. Just highlighting our healthy cash flow generation at €23,000,000 in the semester. Capital expenditures stood at €7,000,000 in line with expectation and historical average in relative terms to our sales. We have already talked about net working capital. Net debt at the end of June is negatively impacted by the payment of the dividend for EUR 19,000,000 cash out and positively by the divestment of certain securitization notes, both at 2020 and subsequently sold with a capital gain in February 2021. Thank you to everyone. We are now available for questions. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Borja Ramirez of Citi. Please go ahead. Good morning. Thank you for your time. I have two questions. Firstly, there seems to be to have been an improvement in the collections during the month of June, which is very encouraging. Could you provide more details on this and also for the outlook into the second half of the year? And linked to this, if you could kindly provide any indications for revenues for the year as the consensus expectations could possibly not be capturing all of your potential? My second question is, you beat your forward flows target for 2021 already and have potential to beat the target for gross book value flows from new contracts for the year. Also given the bank's planned NPL disposals that have been indicated in the recent Q2 results. Do you expect the new mandates for a second half of the year to be better than the €5,200,000,000 achieved so far? And if this is the case, could you provide any updated gross book value inflows target? Thank you. Good morning, Borca. Going back to your question, on improved collection in June, this is due to several factors. 1, as highlighted in the chart where we show the performance of Spain, Spain is now out of restriction in terms of limitation to activities in the course. And also, the vaccination has probably started more efficiently than in Italy. Therefore, the number of hearings and the activity in the on the legal side has been very strong and trying to recover also the past, so 2020 performance. On the RIIO side, as mentioned before, this is was not affected by those measures. So all in all, the results in Spain on the RIIO and the collection side have been outperforming our expectation. Greece has continued on the over performance that was already there in the 1st Q. While Italy has been more aligned with budget given that the measures on vaccination and on the first half mortgage have only been effective at the end of June. So we will be we will see a stronger improvement after June on the Italian side. In terms of outlook for the year, while we confirm EBITDA consensus, we think probably the mix between the revenue and the cost could be a bit of higher revenue and slightly higher cost, confirming the net levels we have said. On the cost side, the only points we would stress the attention are well known in the sense that we have flagged in the past, but we still see analysts probably underestimating a bit the HR component. Considering that in last year, we had benefits from EUR 3,400,000 for follow schemes in Italy, which reduced the HR cost by that amount and by the HR cost by that amount and by a significant reduction in the variable HR cost at 6% for 2020 over total HR cost base compared to 16% in the year before. So obviously, these line items will go back to similar levels this year without the EUR 3,400,000 addition. Moving now to your second question. We are confident that the EUR 7,000,000,000 to EUR 9,000,000,000 targets will be reached. We don't feel like over going over giving additional estimates on top of this because taking into account that as you have appreciated now for some time, our business in terms of mandates won takes time up to the revenue recognition. So it starts with the phase of pitching, winning the business, preparing the transaction, which takes especially for GACs 4 to 5 months and then the onboarding phase, which can depending on the clients, depending on the type of portfolio and the complexity of the size can take between 2 6 months. So taking that into account, the activity that was done in the first half has proven very successful. We have a pipeline still for the second half. And we have Frontier, which is not an ethical execution in case we achieve a successful outcome. So all in all, these two items would bring the positive and extraordinary results of 2021. I put let's stress on Frontier why it's a complex execution. You are moving a portfolio from a bank, which has never been securitized before, has never done securitization before to a new servicer and also to new investors. But we are also doing here an IT change. So completely moving also the core banking platform to a new one, more efficient and in line with Italian IT platform. So to have a common platform on the core banking side across the 3 major countries, Italy, Greece now and Spain next year, so to leverage and improve and reduce the IT cost for next year, reduce back office costs to manage it and the positive consequence of the case. So all in all, from an operating standpoint, quite challenging but rewarding at the end of the journey. Very clear. Thank you very much. The next question is from Nicolas Binda of Intermonte. Please go ahead. Good morning. Thank you for the presentation. I have three questions. The first one is looking at the early repayment of a back end loan. I was wondering if these will generate some one off on P and L in the 2nd part of the year. The second one is on the net financial position. I noticed that the change in other assets and liabilities generated EUR 20,000,000 negative impact in the 1st part of the year. So I was wondering if you could provide us some color on this and your expectation for the remaining part of the year. And finally, on the Frontier project, I was wondering if giving the potential benefit that drive from the project Frontier will start from 2022 or there could be some impacts also in 2021 given the complexity of the business and the project? Thank you. I will take the last one. And no, Frontier will have no impact this year in terms of EBITDA. We can have some onboarding costs in the last quarter of the year, but it would be not material. So the impact of the project on the EBITDA will start on the 1st Q of 2022. Going to your other two questions, by the earlier repayment of the banking facility, we don't have prepayment costs, so no cash effect because our facility was pretty flexible so that it allowed early repayment with no transaction cost. The only non cash item you will see is around EUR 5,000,000 related to the amortized cost of the facility. As you have noticed in the past, we used to have in the interest cost line 2 components: 1, the actual cash interest and second was the initial cost to set up the facility, which was sustained in one case in 2019 and the other in 2020, which is cashed out in the year it was the cost was taken, but it's amortized over life. This obviously disappears with the dismantling of the facility, and the cash and the noncash effect is the one I mentioned. The network net financial position impact related to assets and liabilities, it suggests reference to the upfront fee in Greece. As you know, in Greece, we received at the beginning of the quarter the upfront payment for the base fee. In the specific case, it's actually paid at the end of the previous quarter. So it's paid at 31st December 2020. So the impact of this effect in 2021 is captured by these line items. Thank you. The next question is from Andrea Lizzie of Equita. Please go ahead. Hi, good morning. The first question is on the relation between collection and revenues in particular. We saw a significant increase in collection year on year in Italy and Spain looking at the first half of the year that in some way was not completely or not equally reflected in the increase in revenues. So just wanted to understand better which are the drivers and in particular if based on the figures of collection, this is a strong basis to then accelerate on the revenue side in the second half and then reaching the target of EBITDA? The second question is if you can provide us an update on the fee level of the new mandates you got in Italy and Greece and if it is consistent with your estimates and with the historical level. The third question is on the EBITDA margin in Italy that in the quarter was still below 20%. I think that there is still some seasonality here. But what do you expect for Italy in terms of EBITDA margin for the full year? The third question is on Greece. If I look at the data on collection, I see some slowdown in the collection quarter on quarter from EUR 400,000,000 to EUR 300,000,000. So just wanted to understand which are the drivers, if there is a seasonality reason for that? And last very last question is on D and A, if you can provide us an update of the amount of D and A in the 2nd part of the year. Thank you. Good morning, Andrea. Going back to 1 by 1, the Italy and Spain collection and how they play into the numbers, take into account that obviously, with a shift to some of the banking portfolios to being GAAP portfolios. GAAP portfolio has profitability, which have fees which are lower than banking portfolio, and this is captured in the indemnity we sometimes receive when the clients are already ours. But when you instead onboard the new clients only with a gas contract, you tend to have the gas have traditionally lower fees. What we are experiencing is actually an improvement in the new GACs, which are awarded at prices which are above those awarded in the last 2 years. The same applies to Spain. So in Spain, we have a couple of 2 or 3 contracts that have been added both in Q2 and in the 2nd Q. They one represented a shift from Banco Santander to an investor, which has added on top additional stock that Santander was not managing without. All in all, obviously, the fees of investor are applied rather than Santander fees, which are both contracts. So obviously, they yield a higher profitability. Going back to your second question on fee level of new mandates, actually, if we look to gas mandates visavisgas mandates 2021 versus 2019 or investment dates 2021 versus 2019 2020, the fees are growing. But they cannot be compared to the fees that you earn on banking portfolios, which come with the acquisition of a platform with the price paid upfront and therefore they have enhanced a higher fee scheme. Then on the EBITDA margin of Italy, take into account that Italy has also the holding cost. So we have created a structure, a group structure where we moved, tried less to hire from the market, but rather to utilize our internal workforce and people who have certain expertise to move them to the group functions. Obviously, we are shifting therefore some thoughts from countries to group. Anyhow, we see improvement in the EBITDA margin of Italy to around 30% margin. And this is due to the fact that obviously, collection are seasonal. So the first half has lower collection, while the cost base is pretty much stable over time. And Italy, this is the other country, has the highest HR cost base. This is a fact this is the result of the fact that we inherited employees from banks, Intesa and UniCredit from the original Itar Fundiario and UniCredit transaction, which have an average cost higher than the average cost of employees of the Iberia region and the Hellenic region. I hope to have fully explained this aspect. Moving now to the quarterly collection trend. If you look last year to this year, last year in the second year, there was a particular effort by the courts to push for cash release, which usually happens in normal times at the end of the year. This is was because the courts could not do other activities. So they focus just on relinquish cash out of the procedures which were already closed to the lenders. This activity has not been done in the 2nd Q of 2021 given that courts are doing their normal activities, I. E, to do trials and to try to close new procedures rather than relinquish cash from the old. This will happen as traditionally in the 2nd part of the year. This explains you the 2nd Q2 2nd Q distance. While in terms of D and A, the guidance for the full year is on Page 52, and the indication is around 50 to 70. This is for the full year and takes into effect into consideration the fact that we have now closed also the PPA for the Obviously, the range is broad, but I would point to the middle of this range. And probably, we are talking about another EUR 25,000,000 on top of ordinary D and A for the second part. While there is a range, this as you might recall, we have a D and A that is linked to the collection. So we have the value of the contract that goes down with D and A by how much collection we do. So it's a curved trajectory. So more we do collection in the second half, higher will be the D and A because the consumption of the portfolio will be higher. Okay. So 50 to 70 now, is that right? I would say mid of 50 to 70 is the guidance. Okay. Thank you. The next question is from Andreas Marcu of Berenberg. Please go ahead. Hi, everyone. Thanks very much for the presentation and for taking my questions. 2 of them. The first one is on the collections, especially in Italy. So for Q1, this was 1.9 percent, which increased to 2% for H1. Can you first confirm that you expect to get to 2.3% to 2.4% by the end of the year or beginning of the year? Thank you. Yes, the pickup in the second part is important because of the things we said before, Andreas. The cost activity with the ability to accelerate on First South redemption and auction is a very important tool to get to close some transaction. And also the number of hearings is speeding up. The European Court decision is quite extraordinary because not only Italy was due to end the moratorium, the auction already at the end of June. But the Court was even saying it was unlawful, the fact that you have stopped banks from being able to recover and therefore you should now speed up on the activities that have been stopped so far. That's why they should increment their the cost should be incremental their run-in number of trials and options. Because Andreas, as Manuela said before, the main driver of our expected growth in the second Q will be, 1st of all, the acceleration in the productivity of the course, and this is crucial. And the second point, the second driver is about restriction. But even if the regulation will stay stable in the second Q, with a significant acceleration in the core productivity, we will reach our target because we are significantly increasing our performance. So we are confident. We are confident. But again, the main point is the acceleration of the in the productivity of the course. Okay. That's very clear. Thank you. And my second and final question is on Spain, so profitability. So if we look at collections for Q1 versus H1, so if I remember correctly, the collection rate in Q1 was something like 4 point something percent. This has significantly increased in Q2. So you're now very close to 5%, I believe. You also mentioned earlier about all the positive dynamics in Spain. However, margin is actually stable to the Q1 and H1 margin. And when I was looking at the breakdown of the cost, it looks like personnel costs are also relatively high for Spain. So can you maybe discuss a little bit on what's going on in Spain profitability wise and if there is scope for margin improvement? Thank you. You are fully right, Andrea. So the point is our performance in Spain in terms of collections revenues is positive. But we are late in reducing our fixed cost base, mainly personnel. But we are working there on it. And I think you can expect some better results from Spain in the second half of the year in terms of cost reduction. Ms. Franke, gentlemen, there are no more questions registered at this time. Thank you very much for your attention, and we wish you all good holidays. Bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.