Nov 05, 2021 / 09:30AM GMT
Operator
Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the doValue 9 months 2021 Financial Results Conference Call. (Operator Instructions) 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.
Alberto Goretti -
Thank you. Good morning, ladies and gentlemen. I'm pleased to welcome you all to doValue 9 months 2021 Results Presentation. I'm here with our CEO, Andrea Mangoni, and our Group CFO and General Manager of Corporate Functions, Manuela Franchi. In the first part of the presentation, Andrea will walk you through the latest development of doValue business activity. In the second part of the presentation, Manuela will give you an overview of the financial performance of doValue. Andrea will then wrap up to the Street our financial guidance for 2021 and to give you some final remarks. Following the presentation, we will be glad to answer any of your questions. Andrea, over to you.
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
Thank you, Alberto. Good morning, everyone, and thanks for joining us today. Starting from Page 3 of the presentation. So far this year, we made very good progress in terms of inflows, in particular in terms of mandates from existing customers under our forward flow agreements, but also in terms of mandates from new clients. Including Project Frontier in Greece, we have totaled EUR 14 billion of additional gross book value in 2021 so far, a record level for doValue. Project Frontier in Greece is a landmark mandate for doValue, as it allowed us to start the relationship with National Bank of Greece, the only sizable Greek bank which has not sold its credit servicing activity. With Project Frontier, doValue becomes the undisputed leading independent servicer in Greece with EUR 32 billion of GBV. And we are now best positioned for future HAPS securitization in the country.
The financial performance for the first 9 months of the year has been strong, reflecting a normalization of the trading conditions across the geographies in which we operate. Plus the accretive contribution of the FPS acquisition closed in mid-2020 and fully included in our 9 months results for 2021. Project Mexico illustrates our ability to offer bespoke solution to strategic clients through pricing, underwriting and reselling of complex portfolios. We have been able to structure and execute a successful transaction for Eurobank, allowing us to retain a key servicing mandate whilst, at the same time, booking [approx fit] on the sales of the notes.
Following the acquisition of 10% stake in QueroQuitar in May, we are adding today another important element to our M&A strategy with the acquisition of a 15% stake in BidX1, an Irish prop-tech company specialized in online real estate options. The transaction is consistent with our strategy of increasing growth through targeted acquisition of high-growth company -- companies in adjacent sectors to our traditional credit servicing activities.
Moving to Page 4. Here with a summary of the mandates won so far this year. In particular, the forward flow agreements in place with some of our clients continue to contribute to supporting our gross book value in the tune of approximately EUR 1 billion per quarter. In addition, in 2021 year-to-date, we have won mandates from new clients from -- for EUR 5.6 billion in total which including also the EUR 5.7 billion related to the Project Frontier, brings us to a total additional book value of EUR 14 billion secured in 2021 year-to-date.
All in all, we have already exceeded the targets we have set for 2021 until beginning of the year in terms of forward flow. And we are working towards also meeting the target in terms of new mandates.
Moving to Page 5. As anticipated, securing Project Frontier is an important step for doValue. The transaction represents the first securitization of National Bank of Greece, and it was awarded through a very competitive process. The consortium composed by Bain Capital, Fortress and ourselves won not only by submitting a competitive price to NBG but also due to our credibility and operational track record. Project Frontier might represent the first of a series of securitization by National Bank of Greece, which is the only sizable bank in Greece, which has not sold its credit servicing operation. NBG still has an NPE ratio close to 13%.
On Page 6, Project Mexico represents for us a successful transaction on a number of fronts. Firstly, we have managed to retain a servicing mandate for a sizable portfolio in a strategic market. Secondly, through our deep knowledge of the portfolio itself, we managed to offer a competitive backstop to Eurobank. And in line with our strategy of being a pure servicer to resell the portfolio in the market in an auction process, ultimately achieving a net capital gain. Lastly, the difference in fee structure due to the securitization of the portfolio is compensated by the payment of our contractual indemnity from Eurobank in the fourth quarter of 2021.
As a reminder, a similar transaction was structured with UniCredit between the end of 2020 and the beginning of 2021 in the context of the securitization of the EUR 1.6 billion relay portfolio, where doValue also booked a net capital gain.
On Page 7 here are some more details regarding the acquisition of a 15% stake in BidX1, the leading pan-European prop-tech company in the online real estate auction segment. Through its own platform, BidX1 takes care of the entire sale process of the property, including the provision of contractual documentation, visits to the property and the finalization of the purchase following the auction. The strategic relevance of the acquisition for doValue is the potential to build a more stipulated ecosystem of value-added services supporting our NPL and REO activities and the potential to improve and optimize our business further.
All in all, going forward, we plan to allocate some of the cash flow generated by our traditional credit servicing activity to the acquisition of minority or controlled stakes in high-growth business in our defense sectors with the aim of further diversifying our activities and support the sustained long-term growth of our business.
Moving to Page 8. The key message here is that we are very close to a full normalization of the regulatory framework in our relevant markets both in terms of moratoria and also in terms of the lifting of foreclosure restrictions. In addition, court activity in Italy is accelerating significantly in 2021 compared to 2020, and it's approaching 2019 level.
Slide 9 is on collection improved market condition are also reflected in our collection performance in both Italy and Spain. In line with the figures already disclosed for the first half of 2021, the collection performance in the first 9 months of 2021 sees Italy reducing the distance to 2019 and Spain having already surpassed the pre-COVID levels. When looking at the third quarter collections, both Italy and Spain are ahead compared to 2019 level.
As a reminder, Greece is not included here because of the limited comparability between years in terms of the scope of FPS activity pre and post acquisition by doValue. We expect a certain normalization of activity in the fourth quarter of 2021.
Moving to Page 10. We are proud that MSCI has increased our ECG (sic) [ESG] rating from A to AA reaching the top end of the financial services industry. We are particularly proud of the fact that ESG ratings recognizes our improved workforce management practices as well as the enhancement made in order to mitigate cybersecurity risk.
All in all, doValue is very focused on ESG and sustainability. And we are in the process of formalizing our sustainability strategy will be published in 2022.
Now let me hand it over to Manuela for the second part of the presentation.
Manuela Franchi - doValue S.p.A. - CFO
Thank you, Andrea. Good morning, everyone. Moving to Page 12. Here, you have the summary of the main KPIs for the first 9 months of 2021. As anticipated by Andrea, the first 9 months displayed strong growth both on a reported basis and on a pro forma basis, confirming that the post-COVID recovery is well underway and that we are close to normalized trading conditions. The trend is also confirmed that when looking at performance of the third quarter of 2021 versus the third quarter of 2020.
In particular, gross revenue in the third quarter of '21 were up 12% versus the third quarter of 2020. We expect a further acceleration of performance in the quarter 4 of 2021, considering that the typical seasonality of our business will be further compounded by the post-COVID normalization process and the recognition of the Mexico indemnity fee. In particular, it's worth highlighting that indemnity fees has been a recurring element of our activity that have been booked as gross revenue from an accounting point of view. Indemnity fees have accounted on average for EUR 20 million per annum in the 2017-2020 period and also likely to contribute to the 2021, '22 P&L for similar amounts.
As a reminder indemnity fees are received by doValue from clients when portfolios are sold or securitized in order to compensate the value for the loss of reduction in fees. So the net present value of the future cash flows of the contract do not change, but there is an upfront which will balance the lower revenue and lower fees going forward.
Moving to Page 13. The movement in gross book value reflects on the positive side, the mandate won in 2020 and onboarded in '21, such as the Icon portfolio in Greece as well as the mandates won and onboarded in '21 including EUR 2.7 billion of forward flow and EUR 1.9 billion of new mandates won in '21 and already onboarded as of September 30.
In terms of write-offs and disposals, the main item here is related to the EUR 3.5 billion Saturn portfolio from Alpha Bank in Cyprus. As a reminder, Project Saturn was initially announced in October '19, and it originally entailed the management of EUR 4.3 billion Saturn NPL and REO portfolio plus future flows generated by Alpha Bank in Cyprus with no upfront payment and no people onboarding.
In the first part of '21, Alpha Bank decided to sell the NPL portfolio of the Saturn book accounting for EUR 3.5 billion because the difference vis a vis the EUR 4.3 billion had already been collected as of this date. And doValue role was transforming in an advisory role in preparation of the disposal of the portfolio as it commonly happens when banks want to deleverage their balance sheet. We will try to be best positioned with investors to retain the management of the NPL portfolio, which we already are managing until the end of the sale process.
As previously described, the Mexico transaction with Eurobank in Greece is neutral from a GDP point of view. Gross book value decreased in the first 9 months of 2021. While we have a EUR 10 million of new mandates that will be onboarded in the next few months, including project Frontier, which will more than compensate the recent write-offs and disposals.
Moving to Page 14. Our gross book value remains highly diversified in terms of clients, geographies, security and business types. As previously anticipated, the Sareb contract currently representing 15% of our gross book value expires in July 2022 and represents around EUR 50 million of revenue in 2021 and EUR 20 million of EBITDA. The RFP process for the Sareb contract has started last summer, and we are participating and keen to be retained as one of the services. We believe that Sareb is going to shortlist candidates between November and December 2021, with the final negotiation leading to an appointment in February or March '22. The time between March and July of next year is going to be used by Sareb and the selected services to upgrade the operating model and perform any inboarding procedures required.
We understand Sareb is keen to reduce the number of services from the current 4, to 2 or 3 services. So that will be a chance for doValue to increase its slice of the total GBV as found by Sareb if confirmed as servicer.
Although we are already one of the largest servicers of the Sareb book, managing EUR 24 billion of the total EUR 88.5 billion. We believe fees are going to be materially reduced by Sareb with a strong steel power collection fee as opposed to base fee also light of the end of Sareb initial in 2027.
All of these elements make us quite cautious regarding the likely profitability of the Sareb contract in its new form. A few months ago, we have estimated the third contract that they, as I mentioned before, contribute for around EUR 20 million to go down EUR 7 million, EUR 8 million contribution in 2022.
Now based on the latest feedback from Sareb they not take into account the potential negative impact of some initial setup costs that will be required. We believe that the contribution of Sareb on 2022 EBITDA is likely to be minimal, while there will be an increase in 2023. The new contract is likely to run from 2022 to close to maturity of Sareb institutional mandates.
In parallel, in recent years, we have complemented our historical core NPL products, with our higher-margin segments such as REO UTP and (inaudible) which offer more favorable fee levels and structure, especially on UTP and earlier years. This segment, this part representing 21% of our GBV represents also 30% of our 9 months 2021 revenues. In particular, the direct margin attributable to UTP and earlier is 94% approximately 2, 3 basis points higher than traditional NPL business. Only in Q3 2021, we won EUR 250 million of real estate mandates in Italy, which is on top of the EUR 1 billion already managed in Portugal and Cyprus. All in all, real estate is an area which we expanded leveraging on Altamira capabilities and fully deploying the Altamira platform outside Spain.
In addition, our UTP business in Italy is also growing and currently sitting at more than EUR 800 million of GBV on top of the EUR 8 billion already managed in Greece.
Moving to Page 15. Gross revenue in the first 9 months of 2021, grew by 57% on a reported basis or 15% on a pro forma basis, considering the contribution of the FPS acquisition since the beginning of 2020. The growth trend is also confirmed comparing the third quarter of '21 with the third quarter of 2020, which are comparable from a perimeter point of view with gross revenue growing by 12%. In terms of gross revenue breakdown, we confirm that the increase of base fee as a percentage of gross revenue versus recent history is in line with the higher base of our Spanish, Cypriot and Greek contracts compared to Italy.
Collection fees are also growing in absolute and relative terms, reflecting the improved collection performance across all regions. Page 16 shows operating expenses, which in the first 9 months of '21 grew by 25% on a reported basis or by 15% on a pro forma basis. The increase is mainly due to the end of the special condition that characterized 2020, which implies lower bonuses paid to employees and positive contribution by the Italian state through the GACS integration scheme. The cost base is now normalized in 2021, with bonuses being paid again and the GACS integration scheme no longer available.
Moving to Page 17. Collection performance is improving in all regions, yielding a 30 basis point improvement in collection rates on a consolidated basis in the last 3 months, and 90 basis points improvement compared to the end of 2020. Whilst the revenue contribution of the region is comparable from an absolute point of view, it's quite apparent that the Greek and Cypriot regions contributed very positively to the overall marginality of doValue group.
This is a feature which is likely to characterize our business going forward as the Italian business fully recovers. Spain will deal with the taper negotiation in 2022, and Greece will tackle an attractive pipeline of potential new mandates in the next few quarters.
Moving to Page 18. This is just to give a historical perspective on collection rates by countries, demonstrating how the post-COVID recovery is now pretty much achieved across all regions with current collection rates only 20 bps away from the ones in December '19.
These levels are likely to be reached in the next few months as the accumulated backlog of activity by the courts is absorbed.
Moving to Slide 19. Cash flow for the first 9 months of '21, and in particular the third quarter of '21, is affected by certain one-off items, which really impacted the cash flow conversion metrics. In particular, the favorable payment terms we die with Eurobank in 2020 at the time of the closing of the FPS acquisition, have positively impacted the cash flows of '21 fees, which were cashed in at the end of '20. In addition, the cash generation in the third quarter of '21 was affected by the payment of the EUR 53 million Spanish tax claim and a EUR 5 million share buyback.
The leverage levels at 2.6x at the end of September has already reduced to 2.4x in mid-October, and we expect leverage to further reduce down to 2x by year-end.
Moving to Page 20. The bond issue completed in July this year and the full reimbursement of the bank debt facility related to the acquisition of Altamira and greatly improved the profile of our debt structure.
Moving from a mix of bullet and we're starting in that profile to an exclusively bullet profile, which is bringing a meaningful benefit in terms of cash flow generation to our business.
Our last bond issued in July 2021, and with maturity in '26 currently trades with a hint of maturity of 3.2%, which gives you a proxy for our current cost of debt. Our average debt maturity is approximately 4.4 years.
Now let me hand over to Andrea, again, for his closing remarks.
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
Thanks, Manuela. Just to conclude on Page 22, I wanted to give you an indication in terms of where we expect to close the year on the main financial metrics. We estimate that we will close the year with gross revenues in the range of EUR 565 to EUR 575 million and with EBITDA ex NRI in the range of EUR 190 million EUR 195 million in line with the current consensus estimates. As already mentioned, we expect leverage to decrease towards 2x level by year-end. In terms of dividend, we intend to set the 2021 dividend payable in 2022 in order to provide shareholders with an attractive and sustainable remuneration.
In particular, we believe that we will be in a position to recommend our Board of Directors to set a 2021 dividend of at least EUR 0.50 per share, which will provide a sustainable basis for a medium-term dividend policy. In terms of medium-term outlook for 2022, we expect performance to be affected by the Sareb renegotiation with minimal contribution from the Frontier portfolio. Both Sareb and Frontier will have a positive impact from 2023 onwards. When it comes to market activity, we estimate new NPEs formation to be close to EUR 90 billion in 2022 in the 5 markets in which we operate, corresponding to new market opportunity for us in the region of EUR 30 billion, EUR 35 billion. We are currently involved in several processes in our country of reference, some of which of relevant size, including the 3 opportunities ranking between EUR 3 billion and EUR 6 billion each in the Atlantic region post Frontier, which we'll hopefully secure in 2022.
More details around our midterm outlook and financial targets will be presented in a dedicated Capital Market Day, which will be held in the second half of January 2022. And I think in January, we can give you some positive news, both in terms of growth and dividend payment.
So thank you for your time and attention. We can now start the Q&A section.
Questions and Answers:
Operator(Operator Instructions)
The first question is from Nicholas Binda with Intermonte SIM.
Nicholas Binda - Intermonte SIM S.p.A., Research Division - Research Analyst
I have 3 questions. The first one is on your guidance, in particular on net debt. I was wondering if you could tell us what kind of assumption in terms of net working capital and other assets and liabilities evolution you are assuming in the fourth quarter? The second one is on the operational side, Looking at the country's figures I noticed that the EBITDA margin in Spain is still at 20% in the third quarter, while in Italy, it surged above 25%. I was wondering if you could provide some update on what kind of expectation you expecting in the next quarters? And finally, on Sareb, if you could the repeat your expectation of the contribution for 2022 and onwards.
Manuela Franchi - doValue S.p.A. - CFO
Nicholas, I'll go through your question. On net debt, the drivers of the net working capital are net working capital change, which will increase from around EUR 144 million in the 9 months 2021 by around EUR 15 million to EUR 20 million to year-end. This is in line with the growth of revenue, while we expect on the other asset liability at this stage, neutral to null effect.
On the contribution of Sareb. In -- as I mentioned during my presentation, we expect that the EUR 20 million contribution 2020 will be for the contract is won, pretty - neutral to slightly positive for 2022 and then recovering because the effect of the new fee is balanced by also the costs that are going to be faced for the activation of new operating model that Sareb is requesting for the new services. And obviously, the migration costs in case -- because there will be portfolio shifts even if you keep the contracts among the remaining services.
The -- obviously, these one-off effects for 2023 will disappear with a pickup from them from there, although at lower levels of profitability than the historical one.
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
Just to clarify this point on Sareb. The estimation, Manuela -- Manuela just said, are on a stand-alone basis. It means if the size of the contract will be the same size of the contract we have under management right now. The competitive process of Sareb, the aim of Sareb is reduce the number of players from 4 to 3 or 2. So if we will win the Sareb contract, we will probably have a couple of impacts. The first one is negative because of the reduction in the fee Manuela explained before. But the second could be positive because of the increase in the size of the contract. So we put in our current estimation just the first of the -- of these 2 effects, the negative one, the negative one. But I hope we can be back to you in January during our Capital Market Day from some positive update on Sareb, both in terms of short list and in terms of the size, the contract we can, in theory, win.
Operator
The next question is from Andrea Lisi with Equita.
Andrea Lisi - Equita SIM S.p.A., Research Division - Research Analyst
Several questions...
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
Sorry, sorry, sorry. I think we missed the question on the EBITDA margin in Spain. The question is right because the EBITDA margin is still lower than our expectation. But we think we will recover in the last Q of the year, reaching our target for 2021.
Alberto Goretti -
We can move on to the next questions.
Operator
Okay. So the next question is from Andrea Lisi with Equita.
Andrea Lisi - Equita SIM S.p.A., Research Division - Research Analyst
First question is on the indemnity from the Mexico project. If you can quantify the amount of the indemnity. So the magnitude of that and also the amount of the capital gain utilized from the disposal of the notes related to the Mexico project. And if we should see them also in the fourth quarter and if you consider them as recurring revenues or in some way nonrecurring so not to be included in the recurring EBITDA. Then the second question is again on Sareb. You, at 1 point, talked about EUR 7 million, EUR 8 million contribution. I missed if -- if this EUR 7 million, EUR 8 million contribution were related to the possible contribution after 2022, so starting from 2023 onwards? Or are they assessed to something else? So if you can elaborate a bit more on that? Then still on Spain. I wanted to -- I would like to understand better the correlation that exists between the collection activity and the EBITDA because I see that collection activity has surpassed the pre-COVID levels but EBITDA does not. So if you can elaborate on that on what are you observing there? And then last question is if -- I know that you said that you will provide new guidance in your Capital Market Day. But if at the current environment, given what you're observing in the market are able to provide some early indication on 2022, assuming everything else is same, for example, assuming that Sareb will expire in June 2022 as it is today with the news.
Manuela Franchi - doValue S.p.A. - CFO
Andrea, on the indemnity of Mexico as well as the remaining indemnity of the year, we confirm the contribution, which is similar to the contribution the same category has had in the last 3 years between '17 and '20, which was around EUR 20 million per annum. Because as you have seen, not only we shifted Mexico, but we also have other disposals that traditionally is business that have been occurring this year. For example, disposal of portfolio from Intesa, the usual UniCredit disposals and the likes. In terms of capital gain on the notes, we are at around EUR 3 million, which is pretty much similar also to the relay transaction, which was around EUR 4 million.
This is also a very good results for our business because we are diversifying even more on the underwriting space with internalizing all the capabilities that usually are executed by consultants and advisory firms that help them to sell their portfolios to our clients. And now we do all of these internally with other specialized people who do the underwriting, the pitching the contract negotiation and the structuring of this transaction without any external support.
In terms of recurring versus nonrecurring, the indemnity being it is not exceptional compared to the past, would be part of the revenue, but we thought it's helpful to highlight which has been the contribution historically because it's important to understand and to explain in a more clear way than probably we have done in the past that every time you receive an indemnity, you either are losing the portfolio because it's sold through a third party. Or if you are maintaining it, you are maintaining it at lower fees because you are basically the activity of the portfolio remains the same. But you are upfronting a piece of the revenue with the indemnity which offsets the difference in the fees from the current status, which is difficulties of the bank clients and bank clients have been paid to get this contract to market fees for securitization, which are not paid. In the Mexico case, we have the benefit of also retaining and plant receiving the indemnity. On the Fed contribution the EUR 7 million, EUR 8 million, I wanted to match the guidance that we gave in the past of saying that Sareb in theory with the negotiation at levels which were in line with the 2019 contract of [Aya], we're going to bring the contribution from the original EUR 20 million to around the EUR 7 million to EUR 8 million. It's not the level at which we would settle for -- in the steady state for 2023, given that probably the fees are going to be a touch lower than the EBITDA of -- than of the fees of the original Aya contract because of the competitive dynamics without an increase, as Andreas said, on the GBV side. So we expect something a bit lower than the EUR 7 million, EUR 8 million. The EUR 7 million, EUR 8 million was to explain the previous indication.
On the collection of the Spanish contract vessels EBITDA it's also there. You might remember that in the past, there have been portfolios sold off in Spain. So the level at which the new fee scheme also with portfolio retained are contributed is at lower levels -- securitization level rather than banking, especially when Santander is selling. That is why you see similar collection vis-a-vis 2019, but a lower contribution to profitability. On the overall guidance for 2022, I leave it to Andrea to comment.
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
The main question mark for 2022 is Sareb both the impact of the new fee on our P&L. And as I said before, the hypothetical positive impact of the new size of the contract. Leaving aside Sareb, we are positive on 2022, both in terms of growth and in terms of dividend policy. But I really prefer to postpone this answer, a more detailed answer to January in our Capital Market Day.
Operator
The next question is from Andreas Markou with Berenberg.
Andreas Markou - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
So 2 of them. The first one is basically on what you mentioned on the possibility in Spain, basically lower fees going forward for the new contracts you're getting. Is it fair to assume that the margins in Spain will basically remain much lower compared to what they were pre-COVID, not only because of Sareb, but also because of the lower fees on the new contract? And my understanding is that this is the case with Italy as well. So if we think historically, you were doing margins of higher than 30%, both in Spain and in Italy. So basically, going forward, a more normalized margin for both regions could be something closer to 25% or like high 20s? That's the first one.
And then the second one is, I respect your previous answer saying that basically you're going to give us a bit more detail about FY '22 guidance in January, but if I may dig a bit deeper here. So my understanding is that you are kind of expecting more or less flat EBITDA year-on-year from -- versus '21. And -- which is about 10% cut to consensus. And then if I think the cut consensus, my view is that this is driven partly by Sareb, also by the lower fees you're getting because of the Mexico transaction. And maybe also by the third reason, the third reason, what I mentioned earlier, basically lower profitability going forward in Spain and Italy versus pre-COVID situation. Can you maybe comment on this? And maybe also just give us a few preliminary thoughts on EBITDA growth for '23 and '24. So do you still expect to show some growth at the group level at the EBITDA level in '23 and '24?
Manuela Franchi - doValue S.p.A. - CFO
Andreas, on the Spain fees, yes, any time there is a switch from a bank book to a securization book, there is always a different fee set. As you know, they are -- the first one is basically the NPV of the price paid, reflecting higher than fee market levels. So for example, in Italy, when we have shifted from EUR 14 billion in 2016, '17 of UniCredit book, which had a certain set of fees today, which is less than EUR 5 billion of UniCredit book, all the shift that's been done at our securitization structure, which are different. Now if we compare the fees, for the same type of counterparties. So bank vis-a-vis banks, securitization vis-a-vis securitization and investors vis-a-vis investors, we have a positive trend actually. We will show in the Capital Markets Day, how this has moved for each of these categories, based on late fees and collection fee over the last -- since 2017 because the markets due to the consolidation effect and to the flight to quality effect. So focusing on better quality services, especially from COVID afterwards as an improvement on the fee structure.
So structurally lower in Spain where the effect is more recent. In the Italian case is a bit different because the Italian sheet towers new contractor has started earlier. So we have started earlier also the process of decreasing the cost base. So this has been partially compensated and this effect with the increase in collection on next year, and going forward, we'll see a improvement in profitability from this level to the target level.
So we have always mentioned that in the medium term, we see the target level to approach the 40% level, and we confirm that amount. On the guidance after as Andrea, has indicated, -- the -- we prefer to give more details in the Capital Master Day, but we see growth after 2022 of EBITDA based on the level of 2021, '22 because of the shift in mix to more profitable products, the relevant contribution from Greece and the higher -- and the work that has been done and will continue to be done on the cost base to become more flexible, but to reach a breakeven point, which is lower than the current.
And you can appreciate that this has already happened in the last couple of years. In terms of your reference to consensus, we must say that in the past, we gave guidance on the 2021 consensus. So the 2022 for many unanswered, it did not include also our indication of the lower profitability on Sareb moving from the historical to the 4% contribution that we mentioned.
So that is the primary reason for some of the discrepancy between the 2020 to consensus you have mentioned and the new indication. Just to give an example, the EUR 20 million historical are at levels versus the guidance -- the past guidance of EUR 7 million to EUR 8 million is already EUR 12 million difference that was not captured by some analysts.
Andreas Markou - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
Sorry, just to confirm, we are all on the same page on Sareb. So the EUR 20 million is Sareb for 2021? Or 2020? That's the first one. And then...
Manuela Franchi - doValue S.p.A. - CFO
'21.
Andreas Markou - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
'21. Okay. Yes. So Sareb will -- so the renegotiation starts in July '22. So effectively until July, you would still be getting the same fee structure. So roughly, it's actually 5 months next year plus the cost impact. So for '22, the impact of Sareb EUR 10 million, let's say, EUR 12 million, given that you have the operational cost. So if I look at consensus, this was at EUR 216 million for '22 obviously did not include Frontier. So roughly if we include Frontier, that's EUR 220 million. So going down from EUR 220 million to EUR 193 million, which is consensus EBITDA for this year, that's EUR 27 million impact. So if we say that Sareb next year is EUR 12 million, that's less than half of the impact. So can you explain what is wrong in my calculations or if I'm missing anything?
Manuela Franchi - doValue S.p.A. - CFO
The consensus was EUR 215 million and the guidance is in line with this year, which is EUR 195 million. So the difference is EUR 20 million. Now we said that the Sareb was EUR 20 million last year, and the old guidance was EUR 7 million to EUR 8 million, which we have for the full year, which we -- which included, obviously, the timing of the ending of the contract. While we -- so a difference of EUR 12 million, which we are not seeing. The EUR 7 million to EUR 8 million could be reduced slightly because of the fee negotiation dynamic. Plus you have the onboarding costs, which are only for 2022 on Sareb specifically.
And then on the Frontier point. Frontier, we gave an indication that it's contributing around EUR 5 million per annum, but it's going to be on Page 5 of the deck. But you have the onboarding cost of 2022. Plus you have the onboarding only in the middle of the first half. So you have half of this amount for 2022 offset partially by the onboarding cost. This should explain you the EUR 20 million difference.
Operator
(Operator Instructions) The next question is a follow-up from Andrea Lisi with Equita.
Andrea Lisi - Equita SIM S.p.A., Research Division - Research Analyst
Just a follow-up, looking at the slide of Project Frontier. In one point there is a written that you can retain a certain upside on the meta in your notes. If you can elaborate a bit more on that and which potentially be the entity of this upside?
Manuela Franchi - doValue S.p.A. - CFO
Yes. The structure of the notes give us an additional kicker, which sometimes we tend to have with investor clients. We have also in some of the securitization in Italy. This is a further upside that the investors provide when there is a performance above the business -- the underwriting business plan. So if this is achieved on top of your collection -- the usual collection fee you have additional fee paid. The NPV of those is around EUR 5 million to EUR 6 million in the medium term.
Andrea Lisi - Equita SIM S.p.A., Research Division - Research Analyst
And sorry, just really last follow-up is on the average fee -- in the new average fee in project Mexico? How much do you expect to lose on a recurring basis in terms of revenues from that?
Manuela Franchi - doValue S.p.A. - CFO
Taking into account that Mexico is EUR 3.2 billion book and in the fees in the market in Greece are above 20 bps of base fee. So here, we are talking about half of these fees, so still above the -- even the Spanish levels and the Italian levels, but in line with the other things after utilization in the big market.
Operator
(Operator Instructions) The next question is a follow-up from Andreas Markou with Berenberg.
Andreas Markou - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
One more from me on M&A. So you mentioned last time about some platforms in Italy and Spain currently on the market. Is it still on your agenda that we might see some large-scale M&A of you guys consolidating the Italian end or the Spanish market potentially sometime towards the end of the next year when also your balance sheet position would be at an even better shape?
Manuela Franchi - doValue S.p.A. - CFO
Yes. The M&A market is open in these countries, but we want to achieve a level of stability and both in terms of market conditions and in terms of leverage, which is evident with the targets we have indicated. And always making a very total analysis between the risk and rewards of any acquisition vis-a-vis distribution of dividends to shareholders, which is a key question that we always ask ourselves. We think that Spain is a market where we need to wait the dynamics of Sareb, because Sareb we will really create a divide between services, we are going to keep the contracts and not. Because despite the lower profitability, strategically, it's -- the relevance in terms of size of the people working on this contract, the infrastructure and the investments make you a much more relevant player in the market, vis-a-vis others which are going to weaken, eventually and will have a knock-on effect on the players not winning it in terms of eventually losing those other mandates.
So to approach consolidation in this moment when these things are not clear, gives you not enough visibility on the cost you are awarded but too from the private, which should settle any transaction that need to take into account what are the remaining contracts that the services will be left with beyond the Sareb itself. So this is a key question. Then I wouldn't underestimate the transition we are doing also to other revenue contributors that are building growth in our story. You have seen that if we only stayed with a pure NPL servicing the profitability gain we are getting with the new products would not be there.
Today, with 30% of revenue coming from non-NPL products, and with this growing percentage build-out also the other investments we are making, this is -- will be a relevant factor after -- from 2022 onwards. BidX1 is a quite strategic investment in the sense that it's a platform which not only operates on NPL assets but also on the farming assets. It operates not only in the countries where we are present but also outside these countries. And from a native perspective, and it goes through all the chain of the sale of assets. So it's very close to what we do -- what we need on our assets to even further announce the sale and the commercialization of our -- of the REO we manage in all the countries now because we are active with our platform -- the REO platform in other countries. -- they are very present inside it, for example, what the REO activity is proficient.
They are very active with also our competitors in Spain where the REO business is extremely critical. And they are deploying their capabilities in Italy. So coupled with our now the platform in the Italian market, this could be a very successful instrument notwithstanding the independent growth with other clients and in other segments, which is the performing real estate asset sale, which have their own trajectory on the loan. Andrea might want to add anything on the strategic assets.
Andrea Mangoni - doValue S.p.A. - Group CEO & Director
Yes. Andreas, on the consolidation process on Spain as Manuela said before, the M&A market is completely frozen because of the Sareb building process. And it will probably accelerate after the conclusion of the building process itself because the process will literally reshape the market. On Italy, I think the situation is completely different from a year ago because as Manuela said before, in the Italian market, we are experiencing a strong flight to quality effect.
Just to give you an example, this year, we won, I think, 4 out of 6 transactions in the market. But most importantly, we won this more or less 35% of the GBV without any reduction in the fees we offer to the originator. So the flight to quality is important. And I think the pressure on the margin came to an end. So we are positive on a stand-alone basis in terms of profitability because of these couple of factors, flight to quality and stable, or even higher fee. But I think this dynamic will have an effect on the consolidation process because some of our competitors are at risk in terms to be put out on the market.
Operator
(Operator Instructions) The next question is a follow-up from Andrea Lisi with Equita.
Andrea Lisi - Equita SIM S.p.A., Research Division - Research Analyst
Sorry, last one. About the pipeline you see you said EUR 13 billion, EUR 15 billion, is that for the next year, right, or for the following years?
Manuela Franchi - doValue S.p.A. - CFO
This is 2022, Andrea. In the analysis of the market done by third parties estimated the total addressable market of EUR 90 billion next year. In terms of new NP production. Obviously, vis-a-vis NP production, we are cleaning that number out of flows that go naturally to the excluded services of professional banks. We are taking out securitization, which are going to the servicers who already manage that book. So we are just mentioning in the EUR 30 billion, EUR 35 billion, what we see as potential new opportunity on which the competitors and us are working on. I referenced also 3 active projects in Southern -- in the Hellenic region upside of EUR 3 billion to EUR 6 billion coming from 2 in Greece after Frontier -- likely to have Frontier too, (inaudible) in the Cyprus Hellenic bank, the southern portfolio coming to market. Bank of Cyprus process. So it's -- these markets have -- has now already under discussion, so it's not prospective trades, but are trades in the market already, very, very active pipeline.
Operator
(Operator Instructions) Gentlemen, there are no more questions registered at this time.
Alberto Goretti -
Thank you very much then, and have a good weekend. Goodbye.
Operator
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Call participants:
Corporate ParticipantsAlberto Goretti
Andrea Mangoni, doValue S.p.A. - Group CEO & Director
Manuela Franchi, doValue S.p.A. - CFO
Conference Call Participants
Andrea Lisi, Equita SIM S.p.A., Research Division - Research Analyst
Andreas Markou, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
Nicholas Binda, Intermonte SIM S.p.A., Research Division - Research Analyst
Refinitiv StreetEvents Transcript
Q3 2021 Dovalue SpA Earnings Call
Nov 05, 2021 / 09:30AM GMT
