Anima Holding SpA (ANIM) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Anima Holding Full Year 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Melzi D'Eril, CEO of Anima Holding. Please go ahead, sir.

Thank you very much. Hi to everybody. Good afternoon. Thank you for joining our 2021 conference call for our full year results. As always, I will start with our presentation from Page 4, some highlights. First of all, we reached with the end of this year, the highest year-end level in our history, 4x the level of the IPO in 2014. And this thanks to market organic growth and market performance. In 2021, net flows were very strong and was the best result since 2015, mainly driven by the retail demand for investment solutions. For the 8th year since the IPO, our performance of mutual funds remain well above the average of the Italian industry. Record high amount for revenues, driven by recurring fees and high contribution of performance fees, of course. EBITDA continued to remain well above 70% of the top line with strong cost efficiencies -- cost efficiency demonstrated. Best net profit in our history, allowing to push on shareholders' remunerations as we see. Page 5, our business by segment. We decided to review our way to report our business by segment. This was the page that we showed in the last years. Page 6, there is a reclassified way to look at the business by segment. Why we decided to do so, because we believe that there are businesses that are -- that have the same logic in terms of commercial dynamics and must be shown together, while the institutional has different dynamics and different relationships. And so we would like to look at the retail and institutional in a different way as compared to the past. What we are including within the retail? Mutual funds, so typically, all our strategic partners, for instance; unit-linked, so the underlying business of a part of our insurance relationships and the same management business of mutual funds. So mutual funds managed by Anima with [indiscernible] will be with, for instance, BancoPosta Fondi SGR instead of the [indiscernible]. Page 7, a look at flows. And using this reclassification for 2021, we see that the retail flows were EUR 4.9 billion in the year. And this was mainly driven by target date, ESG funds and equity funds -- pure equity funds with EUR 800 million approximately of the net inflows that, I would say, is a remarkable result for the year. Strategic partner, and this is very important. In my opinion, we're close to -- closed the year with EUR 800 million positive in terms of net flows compared with minus EUR 1.6 billion of last year. Unit-linked business, EUR 1.1 billion positive. On top of that, we are also taking into consideration the [ drafting ] component included in the insurance business. Poste Italiane, high contribution for 2021. We realized EUR 1.5 billion of net flows excluding the funds dedicated to their network and end users underlying unit-linked insurance or life insurance products. Institutional flows, EUR 1.2 billion, also driven by treasury finance mandates for corporates. This is a product that is very important in this period given the low level of interest rates and difficulties of corporate interest in a proper manner. Page 8, our new partnerships. After Sparkasse in 2020, this year, we have been able to sign 4 new partnerships with banks, traditional banks, smaller as compared to our main strategic partners, but still very important; Credito Popolare, Banca Valsabbina, Banco Desio and CiviBank. Adding more than 500 branches -- bank branches to our existing network that we have with our strategic partners. We think that -- and we always said that our strategy must be to expand in the banking channel also with small, medium-sized banks where our capability to bring value -- bring our services is very important for them, and the competition is lower than in other segments. So this is something where we are working on and 2021 was a successful year. Looking at Page 9, only just to have a look at our distribution network. With these new partnerships, we added 2.2% of Italian branches to our network, reaching a market share of 17.5% of the total branches, of course, without considering the agreement with Poste Italiane that covers additional [ 1000 ] new branches. Page 10, our performance. As always, we -- also in 2021, we have been able to strongly outperform the Italian industry, notwithstanding the differences in the asset mix and, in particular, the fact that our underexposure or [indiscernible] compared to the average of the sector. So again, I think that our talent provides a very good service to our clients. Page 12, our consolidated P&L. Total revenues reached EUR 475 million, plus 25% as compared to last year. This was driven, of course, by net revenues and by performance fees. We reached our historical return in terms of performance fees, more than EUR 140 million. EBITDA, plus 30%, EUR 388 million. Apart from the revenues, we've also been able to keep our corporate expenses, as always, I would say, strictly under control, EUR 86.6 million. Net income, EUR 238.6 million, plus 55% -- 54% as compared to 2020. If you look at our profitability on the right side of the page, our total margin increase driven by organic growth with a good overall product mix and performance effect of the AUM, especially in the richest component on the contrary of 2020, where we were hit by the negative performance of March 2020. If you look at cost, further improvement in our cost/income ratio, excluding performance fees. As I was saying before, demonstrating our capabilities to keep costs strictly under control. OpEx ratio on average, stable at 4.4 basis points. And last note, just to remind that this year, we -- as we said during the year, we were positively impacted by EUR 24 million, approximately, one-off tax relief on intangibles. Page 14, looking at net fees. We can see a clear positive trend in management fees increasing. If we look at the recurring management fees on the graph on the left side of the page, we see an increase also in the last quarter. If we look at the total net fees, they are decreasing, but only because we had a strong contribution in Q3 driven by placement fees that we see on target date funds. But this year, 2021, we were able to get back to a normalized level as compared to the weak level reached in 2020 due to the pandemic. Compensation, variable compensation. We reached a higher level of variable compensation, mainly due to the very strong contribution of performance fees, the record level of performance fees [indiscernible]. Page 14, efficiency. We already said and we continue to say that Anima has strong capabilities in exploiting the operating leverage of this business. And I think that also this year, we have been able to demonstrate so. Back in 2018, after the announcement of the several M&A deals we did in that year, Aletti Gestielle, BAMI insurance mandates, going concern of Poste Italiane, our guidance for the EBITDA margin, excluding performance fees, was between 11 and 12 basis points. We have been able to overperform, in 2021, this guidance. And this is thanks to revenue increase and, again, strong capabilities to keep costs under control. But this strong efficiency is also very important in order to be able to catch businesses sometimes with a lower profitability, but again, a lower profitability as a face value, but given our efficiency and our capability to expand the operating leverage, still very impressing for us. Page 15, LTIP. We -- I mean, this year, given the strong results, we reviewed the expectations on our long-term incentive plan for management -- for managers. Just to remind you that, in particular, one of the KPIs, EPS -- adjusted EPS was at a starting level 3x the 2017 adjusted EPS. And our goal for this year was a 30.5% increase target for -- we check in 2021. And then another 35.5% increase for 2022. This year, we will reach -- we reached the KPI 100% and of course, the likelihood to reach the same level next year has dramatically increased. Needless to say that we reviewed the [ compartmentalization ] of this item in our income statement, increasing the value, as described in our slides. Net financial position. 2021 was a strong year in terms of financials. And as you know, we have a very high cash conversion as a company. This meant a strong cash generation in the year, enabling us to start the additional buyback and share cancellation in the next AGM, debt reduction, but maintaining relevant flexibility for a possible extraordinary transactions. So I think that the strong remuneration we are proposing for our shareholders is still absolutely coherent in order to keep our capability to exploit further potential extraordinary growth. Page 17. Focus on shareholders' remuneration. We already talked about our capability to generate cash despite the operating leverage. Our focus remains remuneration using all the tools that we have, namely ordinary cash dividends, buybacks and share cancellation. Moreover, we were [ stuck ] that we feel undervalued compared to our Italian peers, but also European peers. In the slide, we show the remuneration that we provided since the IPO. I think that we always kept a very high and very interesting yield for our shareholders. This year, given the results, we could try -- we will try to do our best. Page 18. In fact, we keep our principle of distributing a minimum of 50% of our consolidated reported net income, keeping the rest of the cash in order to exploit potential M&A opportunities and/or for additional share buybacks in order to increase the yield for our shareholders. This year, we propose to distribute EUR 121 million approximately for shareholders with -- it will be in 2 different ways; EUR 0.28 per share paid in cash, a little bit over 6% in terms of yield on the 2021 average market capital. On top of that, we already started, this afternoon, a buyback of EUR 25 million. This buyback will -- I mean the shares of this buyback will be canceled. In terms of shares evolution, in fact, we also proposed to the AGM a 6% share cancellation. As we said when we launched the buyback in October, the Board was -- the orientation of the Board was to cancel these shares coming from the buyback and this is 3.6% of the share capital. We will add on top an estimated 1.3%, probably today is a little bit higher on the share capital coming from the new buyback launched this afternoon. And then we will pop up with a rounding of approximately 1% of existing treasury shares. The calculation of treasury shares is on the right side of the page, but this is to say that we would like to provide a strong message to the market in terms of focus on shareholders' remuneration by the management of the company. Okay. So some, let's say, closing remarks. First of all, 2022 outlook. It's very difficult to talk about our outlook today. So I will focus on what we have to do in terms of product development. We will bring -- we will follow several initiatives following the needs of our strategic partners. First of all, we increased strongly our asset under management, Article 8, from current 5% to approximately 40% of our existing funds. We will focus, as always, confirming our model and target date funds. The main features will be thematic, gradual equity exposure increased, sort of cumulation plan [indiscernible] target date. And primo passo, to attract liquidity from people that need to be brought on the asset management -- on asset management. In terms of thematic funds, we will try to exploit some trends, environmental, demographic and consumers and technology. We will need that focus in terms of ESG products. As of today, all Anima funds are already screened as under ESG as a consequence of our -- of the subscription of the PRI 2018 from our company. In the second quarter of this year, we will increase the ESG requirements for several products, approximately 34 existing products, bringing them from Article 6 to Article 8 and reaching for EUR 30 billion of assets of this product as more stringent ESG criteria. New product launches, of course, we are expected in order to increase further more this component of ESG products, in particular, in our ESaloGo system of funds that was launched in April 2020. Page 33 - 23, just to give you an idea of the product machine that Anima uses because sometimes I think that Anima is perceived as a company, I mean sitting on distribution agreements while we are an industrialized machine to do this business. And sometimes, I like to remind it. And just to give you an idea on the massive amount of work done by our structure, our people, you can see the maturities of funds during 2022. So we'll close -- we'll -- 44 funds will reach the end of their life. And then we have mergers and liquidations, and then we have more than 60 new launches of funds. Some closing remarks. More focus on 2021. This was a positive year for everybody. 2021 for our sector, of course, was very, very positive. But I think that Anima provides [indiscernible], I mean was able to use fair value to provide the results that I showed you in the presentation. First of all, we were able to turn back to positive our retail flows. This was something that we set as a target at the beginning of the year. And I think it's one of the key success of the company in 2021. We were able to sign a new commercial partnership, as we said before, in the open banking channel in order to offset potential other -- problem in other smaller networks. We were able to deliver a very strong and very solid funds' performance to our clients and to our distributors. And this is very important for us because, of course, we are an asset management. And I think that providing a good performance with a very competitive pricing scheme for the domestic retail market, as we have done, is a good way to define growth and sustainability in the next future. Finally, our decision that we -- I showed you in terms of dividend distribution and buyback with a share count -- that is consistent with share count reduction. I think that is a strong message that we want to provide to the market in terms of focus that we have on shareholders' remuneration. And I think that we'll be able also in the future to continue to provide interesting yield to our shareholders, even though in a normalized scenario with lower contribution of performance, please. I thank you, and I'm fully available for questions.

This is the Chorus Call conference operator. [Operator Instructions] The first question is from Azzurra Guelfi of Citi.

A couple of questions from me. One is on the sensitivity of your P&L to move in the market. If you can share with us what a 10% move in the market would mean for fees, variable compensation and ultimately bottom line? The second one would be on dividend. I hear your comment about the capability of keeping a high shareholder remuneration. But shall we think that the future of dividend policy will be a mix between cash and buyback? And could you indicate if depending on market volatility, you could see an absolute increase of the EPS?

Well, first of all, I'll start from the second question, the [indiscernible]. In terms of mix of remuneration, first of all, is almost probably 2 years that we [ shake ] the market, but we -- our guidance in terms of dividend is 50% of our reported net income. And on top of that, if we don't see M&A coming, we may increase yield of the market with share buybacks and cancellation of the shares. So I think that this is what we have done. Last year, we canceled almost 3% of the share capital and we launched the buyback. This year, we did the same because we were able to do so without closing any venue for growth in terms of M&A. So this is our mindset today, and so we will continue like this. In terms of EPS, for EPS for next year, given that our guidance will remain 50% of our reported net income, let's say, I don't know. It will depend very much on how the year will go on. Looking at the sensitivity of our income statement on markets, it's a very, very complicated question in the sense that, of course, we rely a lot on markets. If the market -- if our assets were down 10%, this, of course, will affect our revenues, but very much depends on which assets are losing and which are keeping the value. So it is -- I don't have a shortcut for this question, sorry.

The next question is from Domenico Santoro of HSBC.

A couple of questions on numbers. In particular, it would be nice actually to get the decline in assets. I know that this number probably might be public in a couple of days. But just to understand how much was the market performance over the last couple of weeks, how much assets you sold -- sorry, your lost. And whether you have seen significant outflows also from your banking partner, that would be nice to know. On the -- on positive side, if I haven't made the calculation wrongly, there was kind of a significant increase of assets in Q4. So unless I'm mistaken, I was just wondering whether there was -- the inflows that you mentioned were concentrated in the quarter. I mean why the assets increased so much? And then also given volatility, it would be nice for us to get a sense of the level of inflows that you would expect for this year.

Well, starting from close of this year. Well, we started [indiscernible] 2021. We did EUR 200 million -- plus EUR 200 million in January, notwithstanding the exit of EUR 200 million on an institutional mandate. And we closed February in EUR 400 million region. So I think that as of today, we didn't see strong -- I mean we didn't see any effect of the current situation yet. I don't know what will happen. It's too early. So looking at -- in terms of guidance, I don't have a guidance today. What I can say is that the retail is performing very well and seems to be still very strong. Let's see because we know that the situation will continue like this and the uncertainty will continue to be very high. I don't know what will be the effect on the net flows. In terms of performance, we did...

We were negative 3% mid of February. To get the performance at the end of February, we have to wait more because [indiscernible]. So tomorrow, we will have an idea of end of February [indiscernible].

So the 3% is year-to-date, right?

Year to date as of February 15.

February 15. So we don't have still the last 15 days -- less than 15 days, 10 days. And then in Q4, Q4 flows, yes, we're very strong. Absolutely. We had inflows from mainly a couple of insurance clients with a large mandate and rest were flows coming from being reclassified as we showed before.

So is it related to Poste specifically?

[indiscernible] Poste did very well in the last part of the year.

Can I also ask a follow-up on margin? I mean given what is happening in the quarter, I guess -- I mean the performance is negative but also your mix of products is changing in favor of B2B2C. How should we expect margin to move in this quarter? Would you expect a decline -- significant decline because of the equity mix or more stable because of the mix of products?

Well, in this quarter -- I mean in Q1, we have done pretty well in terms of net inflows from the retail. So in this respect, we have a favorable mix effect. But we know that when we have a decline in terms of equity, this affects always our profitability. So I may expect some effect on profitability. We wouldn't be surprised.

The next question is from Elena Perini of Intesa Sanpaolo.

Yes. I've got actually 2 questions. The first one is, if you can provide us with your net inflows according to your previous classification between retail and institutional level? I think that Slide 7 is in line with the new classification that you provided in the previous slide. And then on cost, do you feel some tensions related to inflation or something like this?

Thank you, Elena. Well, in terms of net inflows in 2021, with our previous reclassification, the retail was positive EUR 300 million and the rest was institutional of [ 5.8 ], 2021. If you look at cost, no cost, I mean impact -- we are not impacted by inflation or increase of energy cost or this type of change, I mean, very marginally. Today, I don't see -- probably the only thing that probably is too early, we have more cost coming from -- this year coming from marketing activities. But on the other hand, probably depending on performance fees, but -- probably we have less variable compensation related to performance fees. So I don't see the cost -- pressure on -- particular pressure on cost.

The next question is from Filippo Prini of Kepler.

I got 2 questions, if I may. The first one is on the reclassification of inflows between retail and institutional. Could you give us also, based on new classification, the split for 2020 just to compare the EUR 4.9 billion retail with what would be the retail reclassification in 2020 and also for institutional? And the last one is on cost -- operating cost. I've seen that despite the right performance fee, the variable component of cost in Q4 has been only EUR 2.5 million. So just asking if -- should we expect just a huge effect of higher variable compensation in the beginning of 2022?

Well, retail and institutional -- well, last -- 2021, I said EUR 300 million positive retail, [ 5.8 ] institutional. 2020 was minus EUR 2.2 billion retail, plus [ 2.9 ] institutional. And second question was cost -- variable compensation -- no, variable compensation, it's over. These variable compensations for 2021. Now we will start. But the point is that the seasonality of variable compensation during the year is also due to the fact that it's an estimate that we made. So the last quarter, we may hold the adjustment to the variable compensation. So it's not always really -- you can have something quarter-to-quarter. But this compensation were for 2021. So 2022, we have to be in the [ blur ] again.

The next question is from Gian Luca Ferrari of Mediobanca.

A very quick one. Can you give us an indication of the exposure to the U.S. dollar? And if you have eventually exposure to rubles?

Well, U.S. dollar, to be honest, I don't have the numbers here. Our exposure in terms of -- due to Russian activities in terms of asset and currency, disposition in January is 0 or very low. On absolute funds, 0. On benchmark funds, we have a very limited exposure, sorry, in line with the benchmark or below the benchmark, no more than 2.5% in the emerging funds.

The next question is from Alberto Villa of Intermonte SIM.

I have a question on the closing remark you mentioned during the presentation on new commercial partnerships in the open banking. I was wondering if you can comment on, if you already have some visibility on this new partnership and what is the magnitude of business that presumably you can generate from this segment. And in general, if you can comment on this segment in terms of the outflows you have suffered in the recent past and the profitability of this segment compared to the others.

Well, I start from the last one. Profitability, very similar to the one we have with our strategic partners, so retail profitability. Visibility on new partnerships, we are working on it. Let's say that our internal goal was to sign a couple of partnerships per year. Last year, we did 4. I hope that we will continue this year with at least 2, but it's still too early. But this is our goal. In terms of contribution of these partnerships, I think that -- I presume once we'll be able to have 8 to 10 partnerships signed, we would expect flows in terms of EUR 115 million per year, something like that. That is something that for us on the retail is -- are important numbers anyway.

Okay. And if I can -- may follow-up on the outlook of the institutional mandates in terms of and in and out beginning of the year for 2022, is there anything that you are expecting to lose in terms of mandates and something maybe or the pipeline, in general, if you can comment on that.

No, as of today, we don't have particular outflows expected and also in close to. I mean we are working on our pipeline, but we don't have anything [indiscernible].

The next question is from Angeliki Bairaktari of Autonomous Research.

First of all, on the management fee margin evolution quarter-on-quarter, that was -- I estimate that there was a slight decline in Q4 relative to Q3 and that looks to be attributable to placement fees. So was the Q3 number -- amount of placement fee somewhat extraordinary in your view? And should we take sort of the -- what should be the level going forward for 2022? And second question, you mentioned that you are planning on converting a lot of your Article 6 funds into Article 8 this year, also in preparation for the MiFID II questionnaires that will now have to incorporate also ESG. Can you give us a little bit of color with regards to sort of how you are preparing and what have your discussions been with your strategic partners and other retail distributors with regards to these MiFID II questionnaires? Do you think that they will be disruptive for the sector this year, especially with regards to retail flows?

Well, first of all, management fees -- management placement fees, sorry. Placement fees, I always said in the past that our normalized level of placement fees stays between EUR 12 million and EUR 16 million per year, very much depending on the gross production of our partners. There is -- I mean, we can -- I mean we can try to estimate, but it's always difficult to provide a single number. So I prefer to provide you a range. This year, in 2021, we were over EUR 12 million. So we got back, as we said in the presentation, to a normalized level in our year, even though we had some part of the year still with branches more closed than other years. So -- I mean the pandemic was still there. So we can do a little bit better than that, yes, I think, let's see. It's difficult to provide an estimate for this year. The point was that in 2020, the level was very low. If you look at this number quarter-to-quarter, given that -- the number, we count the number when we close the launch of a single product that typically stays open for 60 days. It very much depends if the products fall in a quarter or the other. So it is very difficult to say that the Q3 was extraordinary because it's not probably. It is better to look at the full year in terms of number and saying that EUR 12-point-something million in terms of placement fees was more normal than before. I don't know if I answer to your question.

Yes. That's very clear.

The second question was ESG. Well, we are working with our distributors. I think -- I don't expect disruptions from this process. I think that if we manage MiFID II, we'll be able to manage also this part of -- this ESG process. And we are already talking to them and trying to set the flows -- information [indiscernible] these requirements.

If I may just follow up on the cost. I think you already provided some answers to some earlier questions. But is it fair to assume that the cost evolution going forward will be at around 5% growth every year?

5% growth every year, it seems to be a little bit high, in the sense that our guidance is always excluding variable cost -- variable compensation, that it depends very much on the performance of the company. We always said and I think that the numbers demonstrate so a low single digit. 5% is a little bit higher.

The next question is from Fabrizio Bernardi of Bestinver.

Just quite a few questions about what we're reading in the press in the last few weeks. There are many, many options regarding our shareholders, especially the biggest ones. My question is about what would you like to choose, if you could, let's say, decide about this, in the sense that any shareholder can tie up with a French peer or with a very big Italian peer or with another bank, which is very, very similar to it. So just -- I mean I don't want you to give any figures. But if we'd like to extract more value from Anima, which kind of peer would you like to choose in case of an M&A deal? Because I think there are too many options on the [indiscernible] described as a very valuable option to be used by the main shareholder for consolidation and I think we all agree about that. So the question is that would you like to have a big domestic peer, a nondomestic peer or a bank like the size of the new shareholder?

Well, the last thing you said -- the last thing you said is the most important for me, in the sense that what I have to do as a manager is to try to put Anima in the middle of the games. And when people say Anima is a very good company, very interesting, et cetera, I mean this for me is very important and we are happy for that. I think that Anima is a little jewel in the sector. And I think that there are -- many counterparties are interested in Anima. And this is the only thing I have to do, and I want to look at. And then what will happen -- I mean, there are too many scenarios in newspapers in these days in the last months. So I don't want to comment on that.

[Operator Instructions] Mr. Melzi D'Eril, there are no more questions registered at this time.

So thank you very much to all of you, and see you for the first quarter in May. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.