Gruppo MutuiOnline SpA
MIL:MOL
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Good afternoon. This is the conference call operator. Welcome, and thank you for joining the presentation of Gruppo MutuiOnline Third Quarter 2019 Results Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Marco Pescarmona, Chairman; Mr. Alessandro Fracassi, CEO; and Mr. Francesco Masciandaro, CFO of Gruppo MutuiOnline. Please go ahead.
Thank you, and welcome, everybody. This is Marco Pescarmona. We will refer to our presentation, as usual, which can be found on our website. And we start from Page 15 with the Q3 highlights. And in Q3, we see revenues of EUR 48.6 million for the group, which is up 10.8% compared to EUR 43.9 million in Q3 2018.
On the operating income side, we have EUR 11 million of EBIT, which is basically flat compared to EUR 11 million in the same period of last year. This corresponds to an EBIT margin of 22.7% in Q3 2019 while it was 25% in Q3 2018. Net income is EUR 7.6 million in Q3 2019, which is down 7.6% year-on-year compared to the EUR 8.2 million of Q3 2018. And this means also a lower net income margin of 15.7% compared to 18.8% last year. And obviously, this difference is mostly due, as you see if you look at the tables, to financial items and taxation, which, by the way, in the Q3 is still an estimate.
On the next page, you'll see the performance by division. And here you see what drives the evolution of revenues and operating income. Revenues of the Broking Division, in particular, are EUR 19.5 million in Q3 2019, and that's up 7.6% compared to the EUR 18.2 million of Q3 '18. While the BPO -- and this is all organic. While the BPO Division sees revenues of EUR 29.1 million, which is up 13.1% compared to the EUR 25.7 million of Q3 2018. And this also benefits from the entry of Eagle & Wise, the appraisal company, into the consolidation process, more or less.
And on the EBIT side, you see that the Broking Division contributed in Q3 2019 for EUR 5.6 million, which is up significantly, 25.5%, compared to the EUR 4.5 million of Q3 2018; while the BPO Division is contributing for EUR 5.4 million, which is down 16.5% compared to the EUR 6.5 million of Q3 2018. And obviously, the margins are also changing. And in Q3 2019, the Broking Division posts an EBIT margin of 28.9% of revenues, which compares to 24.7% for Q3 2018; while the BPO Division posts a margin of 18.6%, which compares to 25.2% Q3 of last year.
But of course, here, we also have to take into account that last year we were not amortizing yet the purchase price allocation, mainly the intangibles of -- coming from the acquisition of Agenzia Italia. So it's not a fair comparison. The comparison if we looked at EBITDA would be much more favorable.
Then in terms of the 9 months, we will comment very quickly. You see that we still remain, on Page 17, up in terms of revenue by 21.1% year-on-year and by 7.5% in terms of EBIT year-on-year. And finally, also in terms of net income, we're up 12.8% year-on-year.
And on Page 18, you see in the 9 months, we are strong. And you see revenues for the Broking Division are up 9.9% year-on-year in the 9 months while they're up almost 30% year-on-year for the BPO Division. Here also, it's worth mentioning that in 2018, Agenzia Italia was not consolidated for Q1. So this is also explaining the increase. In terms of operating income, the Broking Division is up by 7.8% year-on-year and the BPO Division is up by 7.1% year-on-year. So they're, more or less, in line.
And so this is in terms of numbers. And what is, we would say, more important is that the evolution of the Italian residential mortgage market is better than what we had anticipated even at the beginning of September. Basically, we had seen in the first half of 2019 a declining -- a slowing down and then declining mortgage market both in terms of remortgages, which was expected; and also in terms of purchase mortgages, possibly due to the fact that people were becoming a little bit agitated because of the political instability and the economic situation.
And then, however, what happened is that at the end of the summer, long-term interest rates that are basically the drivers of the interest rates on Italian mortgages went down to extremely low levels. And so we started seeing products at very competitive rates in the market again, making it sensible to refinance and also very compelling to obtain a mortgage. Of course, it was already compelling at 2% 30-year APR, but at 1% 30-year APR, it's more -- even more compelling.
So basically, we started seeing a recovery in mortgage demand, which became visible throughout the third quarter. We even mentioned this in our -- in the documents of our STAR conference presentation. And basically, if we look at the public data, we see that -- if we look at Assofin, which are basically the actual origination volumes, these volumes were down year-on-year in double digit in July, in August, in September, mostly -- both due to purchase mortgages and, more importantly, to a 30% drop-off in mortgages.
So in the data, this was what was visible in terms of originations. But in terms of forward-looking indicator like credit bureau inquiries, we see that the number was down 7% year-on-year in August and started going up slightly, 1%, in September and up significantly, 18.4%, in October 2019. And of course, we started seeing things along this line in our internal numbers. And actually, as you all know, we are -- especially on the broking side, we are a bit overexposed compared to the market to the mortgages. So we could see this very well.
And so the outlook, which was -- even in September, we said that we would see a decline in especially Mortgage Broking revenues year-on-year because, last year, Q4 was, for instance, very strong. And Q3 being very strong as well, we said we expected a decline. Now the outlook is materially better because all this demand that we are seeing will start having an impact in Q4 and possibly be getting back at the beginning of 2020. So impossible -- regarding Q4, it's difficult to say because we -- it takes a while before demand translates into revenues, but certainly, it will improve the performance. And in terms of 2020, this is likely to give us growth for Q1.
Obviously, this is an impact -- a stronger impact on broking, favorable impact but could also have a positive impact on BPO. So this is the most important piece of information. Of course, we don't know how long it will last, but we see that we are going to benefit from low interest rates for a while now.
Now looking at the detailed outlook for the 2 divisions. For the Broking Division what we say is that while in Q3 2019, we have been suffering from the decrease of mortgage demand of the previous quarters, so we have an improving outlook. And the reasons are what we just mentioned about the recovery of the mortgage market and the fact that we are continuing to improve the E-commerce Price Comparison business.
Regarding Mortgage Broking, revenues were down year-on-year in Q2 -- Q3 2019 as expected, but the situation looks brighter than what we originally saw, given a challenging year-on-year comparison. Consumer loans is where we continue to see weakness. However, we are doing also a lot of things. We will also change the organization and so on. And we are reversing this trend for 2020, and we are working on this.
Regarding Insurance Broking, we see growth here, a continuation of the growth of the previous quarter. The other thing is we are also spending more money on marketing. And we expect to continue to see growth in the coming quarters.
Finally, we confirm the positive news and expectations about E-Commerce Price Comparison. Here, the improvement doesn't come from organic traffic, where we continue to have issues with visibility in Google Shopping that takes a lot of visibility away from price comparison websites. But we have worked on the product. We'll work on the cost structures. We'll work on the pricing. And just thanks to this better, I would say, management -- decisive management of the business, we have been able anyway to increase revenues and also to increase the bottom line, which is what we said we expected to achieve. So this is confirmed.
Regarding the BPO Division, here, the results overall for the 9 months are in line with what we said in the past. And we see significant growth in turnover. A large part is due to the enlargement of the consolidation area.
If you only look at Q3 2019 you see, however, that the operating margin, even in absolute terms, contracted. And here, we see a slowdown in Mortgage BPO. And you know we -- one of our main clients for Mortgage BPO was, say, frozen by the Bank of Italy. They are currently not allowed to take new customers. And for -- but we're allowed to keep the pipeline. So for a while, this frozen client still produced revenues, and then the full impact of this situation became visible in Q3 2019. And obviously, we have the issue of how to manage production capacity, whether to keep it or cut it completely. So in any case, Q3 was a quarter with overcapacity, which had an impact. And also, the comparison is with a relatively good quarter for last year.
In terms of expectations for BPO for Q4 of 2019, they'll be remaining in line with what we said in the past, with the exception of Mortgage BPO where we are likely to benefit from the recovery of the market, which was visible -- started to be visible, as we said, in September. So our business outlook remains unchanged. Basically, the -- for real estate services, the valuations and secured loans -- the CQ loans and also for Leasing/Rental BPO, here, we expect to see growth, in particular, due to new contracts.
Investment Services BPO, which is what we used to call Asset Management BPO, is expected to be stable year-on-year. And on the other hand, we see a weak situation for Insurance BPO, where we expect to be down year-on-year in terms of services.
So this is the end of the presentation. And so I return the lead to the operator to see if there are questions. Please go ahead.
[Operator Instructions] The first question is from Filippo Prini with Kepler.
I've got 4 questions, very brief. The first one is on the revenues of the Broking Division, just a confirmation. Does the 7.6% of revenue growth achieved in the third quarter already include in your numbers the worst of the mortgage demand, the double-digit decline that you mentioned before, hence we would expect, going forward, a higher growth rate thanks to the marginally better outlook on mortgage? The second is on the Mortgage BPO. Could you quantify how many euro millions of lost revenues have cost you the frozen status of one banking client that is unable to acquire new clients in Italy?
And 2 remaining, very brief. Could you give us an outlook on the net working capital for the end of the year given that it's increased already thanks to -- due to [indiscernible] in the third quarter? And the last one on the stake in Cerved. By chance, have you sold a few shares of Cerved in the quarter? Or are you still unchanged in your stake?
Okay. Let's see. We'll go one by one. Maybe on one on the last year exactly, assuming -- because we didn't hear you completely. But regarding the revenues of the Broking Division in Q3, probably Q3 in terms of the impact from the previous decline of the mortgage market was the worst point because, basically, in Q3, we were really -- we were not really able to benefit from -- or only very, very marginally from the recovering demand. So I would say Q4 will potentially look better. Obviously, this answer is a bit difficult, however, because Q4 of last year was extremely strong. So Q4 of this year, we'll see an impact of the bounce-back in demand, but the comparison will remain against a super strong quarter. And...
I'll answer on the BPO mortgages. Well, without giving a precise figure as they more or less refer to one client, but let's say that the overall size was in the neighborhood of 10%. So in the quarter where it's hurting fully, that's the impact. And I think we've had -- it was okay in quarter 1. Quarter 2, we -- it started declining. And then in Q3 and Q4, we'll see the overall impact. When I say 10%, I mean 10% of the Mortgage BPO revenues, so if you look at that. I hope we answered your question.
Yes, yes, that's perfect.
And just let me say we didn't write -- we still have no news on when and whether the bank will be able to start originating new contracts again.
Okay. Regarding our stake in Cerved, we are normally not going to comment on this unless we have to do it for regulatory reasons. But I would say the stake has not changed materially in the third quarter. Finally, we would ask you to repeat the question about...
Yes. So very briefly, if you can give us an idea on what's your expectation on net working capital in absolute or relative terms to revenues at year-end.
Well, we are not able to give you a forecast now. I mean we would expect to see something in line with our usual trend. That would be my best estimate now in terms of working capital compared to annual turnover and so on or turnover of the last quarter, let's say. So I cannot give you a figure, but we don't see any particular reasons in terms of business mix, business model, relationship with our clients why this should change.
[Operator Instructions] Gentlemen, there are no more questions registered at this time.
Okay. Then we thank everybody for participating to our call, and we'll -- as always, we are available for one-on-ones, if you'd like. Thanks a lot.
Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.