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's First Half 2022 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.

Hi to everybody. Thank you very much for attending our first half conference call -- 2022 first conference call. And I would say that we can go directly to our presentation, as always. I will start from Page 4 and some highlight of our first semester. In the first 6 months of 2022, we showed steady margins and increasing net management fees even though, as we know, AUM were impacted by negative market trend, like many of us, both for -- in terms of equity and fixed income performance. We showed positive net flows of almost EUR 1 billion in the first half, even though, as I said, we reduced a negative WAP for mutual funds in the region of minus 0.5%. Looking at the financials, fixed fees are up 4% versus last year's first 6 months. Of course, if you look at total revenues, we are strongly impacted by the performance fees on absolute return funds that were not meaningful in the first 6 months. EBITDA margin still above 70%. This is always thanks to our top line and cost -- top line resiliency and cost efficiency. Strong cash flow that enabled us to restart our buyback with an additional EUR 30 million that will end probably by October 2022. Page 5, the business by segment. Retail -- or reclassified business by segment. Retail at 49% of AUM, BAMI accounting -- as the first name of number of clients, accounting approximately for 31% of the retail assets; BMPS, approximately 16%. Institutional, 51% of AUM, EUR 93 billion approximately. Page 6, looking at the performance. We continue to overperform the Italian industry, minus 9.5%, as I said before, versus minus 10.7% of the Italian industry. So we did pretty well, I think, and we'll get back to it. And in terms of funds breakdown, as always, overexposed to flexible and balanced as compared to the industry. Page 7. Okay. We wanted to show you the performance of our range of mutual funds in the semester. First of all, I would like to highlight that we don't have assets with more than 20% losses. And as we will see, we are probably one of the few. And we have 6% of AUM in positive ground. Looking at this table, at this chart, on the y-axis, we show the AUM. So the bubble size is the AUM of the fund. On the x-axis is the -- we show the year-to-date return. And so we -- and this shows what I said so that we have on red the 6% of assets in positive ground. And we don't have any assets exceeding minus 20% in terms of performance. If you look to Page 8. As I was saying, this is a table showing a comparison of ANIMA performance in the first 6 months compared with the peers, the main peers, domestic and international, distributing in Italy. So these are only assets distributing in Italy, the Italian market and with AUM in mutual funds about EUR 30 billion. As you can see and as shown is its main, I think, characteristics, so the ability to protect the capital of our clients in particularly volatile environment. As you can see, our average return is minus 9.5%. Of course, it's not positive, but this is what the market has provided. And -- but we don't have assets with a disastrous performance, and we have also quite a significant percentage of assets in positive ground. So I think that we did our business, our job in these first 6 months for the year. Page 9. So what concerns the scenario that we are going to face now from now on in terms of interest rates? So a scenario where interest rates are higher than in the last years. I would like to remind you what we did in the past because I think it's important to see what we will be do probably in the future. Back in 2011, ANIMA launched a strategy called Traguardo. This was a targeted fund with 5- to 7-year maturity. But of course, we are taking advantage of high interest rates on -- especially on BTPs, diversifying the portfolio and providing return to our clients. We started in 2011, and between 2011 and 2014, we reached over EUR 10 billion on these strategies. Again, in 2018, when the rates hiked, we restarted the strategy and we launched [ 3 ] Traguardo. So this is something that we take out of the closet when we have these situations. And this is what we are doing again now. Page 10. Always on this Traguardo. At the time when we launched the strategy, the investors were disoriented in terms of portfolio allocation. And we were able to launch 34 products in less than 4 years, as I said, reaching more than EUR 10 billion of assets. These are simple solutions delivering positive performances to our clients, and we are also granting fee generation for our distribution networks. During time -- this is the graph on the right side of the page, at the bottom. During time, the flows trend highlight how clients consolidated their performances. And then they moved out of this strategy to enter into new strategies. This is clear between 2014 and 2015. Page 11. What we -- as I said, what we are doing now, we got back to the strategy. This is not the only strategy we are working on, but it's something that we believe is particularly suitable for our clients in this period and in this environment. We already launched a new Traguardo, one -- almost EUR 300 million collected in 5 weeks. At this time, in this period, we also introduced in the portfolio an equity component that we believe can provide a better performance in the medium run for our clients. And the clients got more used to that in the last years. So I think that this is the way ANIMA is reacting, is adapting to the new scenario, and that will help us in raising money in the next few months. Let's see some number, Page 13, our P&L. In terms of revenues, net revenues were up 4% as compared to last year. Performance fees, let's say, negligible as compared to last year. Last year was an incredible year. Our historic -- we did our historic record in terms of performance fees cashed during the year. And this year, we are doing at the moment probably our historic negative record given the scenario that we are facing in terms of market performance. Total expenses, minus 4%, from EUR 44 million of last year to EUR 42 million this year. So this is to demonstrate as always our capability to keep the costs more than in this period, strictly under control. EBITDA, EUR 132 million approximately. And the net income, almost EUR 60 million for the 6 months. Just note on the other income, this includes also the negative mark to market of our liquidity invested in mutual funds -- in our mutual funds, of course. Right side of the page, margins. The margins are stable, notwithstanding the negative returns in richest asset classes like equities, of course. But this is also due to the negative performance of Class I AUM, where we actually -- very low profitability. And so we have stability in the margins. And this is, let's say, I think, is also good news because demonstrate, again, the resiliency of our company also in this difficult and complex environment. Cost/income, further improvement in the cost/income, excluding performance fees. And then tax rate, 36% in the first half. This is particularly high, but this is just seasonality related to the intercompany dividend paid at the end of the first quarter. This will normalize during the year. Page 14, again on margin. This slide shows the effect of rising interest rates on our AUM in terms of value, and therefore, margins. But I would also like to highlight that if you look at the assets ex Class I, so mutual funds, the component -- the drop significantly. I mean the mix of these assets is very interesting, is the table on the left side on the bottom, because as you can see, of course, we are negative on bond and on flexible, but we were able to be positive into cash flows, equity and balanced funds. And this, of course, sustain our margins on this part of the business. Page 15. Net fees and personnel expenses. Management fees in the quarter, reflecting the lower AUM, and with product mix on new sales, substantially stable, as I said before. Placement fees, good news, back to a normalized level after the weak performance is realized during pandemic. In terms of costs, in -- personnel costs, in particularly, moderate cost inflation in the -- very moderate cost inflation in the fixed component, and of course, variable compensation down because of good performance fees items. If you look at -- consider our NFP position, Page 16. We continue to generate a significant amount of cash, of course, in the semester. In H1, we were able to pay EUR 95 million of dividends, EUR 51 million of buyback and more than EUR 60 million of tax. I think that our cash generation continues to grant our flexibility for potential extraordinary transactions, but also ongoing and new buybacks and treasury shares cancellation, as we already said in the past, of course, debt reduction. Looking at debt, Page 17. We wanted to show that we don't have impact on our debt structure from the rate -- from an interest rate hike. Our debt is fully hedged on the bank loan side and is fixed for consumer to bond outstanding. Okay. Let's go to my closing remarks. I think that in a complex situation, because the last 6 months were not easy for nobody or us, I think that ANIMA showed a set of results in Q2 absolutely in line with the one of Q1, resilient and very solid. Our performances for our funds and our assets under management provided less volatile range of returns across all asset classes, and this is, I think, is one of the goal of our company, given also the client base we have. So we have to reduce losses in such a volatile and difficult period for our clients. And sometimes, we will lose a point on the upside, of course. In terms of net flows, we are still positive. We are EUR 1 billion positive. We are seeing a market that -- I mean, we experienced a slowdown in May and June, but I don't think this is a trend. I think this is a bumpy and volatile situation. So we may have an amount that is slightly negative, amount that is slightly positive. So I don't see a clear trend. While -- I think there is a lot of opportunities still on the market because the clients, as opposed to the past where we experienced panic selling many times, are demonstrating a much mature approach to the market. We are -- many of them, they are increasing their liquidity positions, but I think with the idea to get back on the market -- on investments as soon as the situation will, let's say, normalize a little bit. So I think that the opportunity is still there. Nobody is running away. And I think that the clients will get back to investment position, I hope, soon. The business model, again, as said, resiliency. This is a valuable business model. We are facing, like all of us, a difficult context. We know how to face it. We already did more than once in the past. Our company is able to generate an important cash flow. And as we said, we strongly believe in our company. We already approved -- we approved 15 days ago a new buyback of EUR 30 million with possible future share cancellation in order to increase the capital return for our shareholders also in tougher years like this one. So I think that I'm done. And I'm happy to answer to your questions. Thank you very much.

[Operator Instructions] The first question is from the line of Ferrari, Gian Luca of Mediobanca.

The first question is on the July flows. If you can give us an indication, given the negative trend in June. What is July looking like? And the second thing linked to that is I understood recently that you commented that BMPS, in particular, was improving. I know you don't like to comment on each individual distributor, but I was wondering if from Monte Paschi, we are getting good news on that. The second question is on the mark-to-market on your top liquidity, if you can update on how much you invested in your funds. And where is this liquidity invested in terms of mix or particular products? So where you have exposure. And the final question is on new products. You presented Traguardo, the diversion. I was wondering if you have other new products in the pipeline and eventually which kind of products are clients asking these days, something with capital transaction or what else is in the name of clients these days.

Thank you, Gian Luca. Right. Okay. In terms of July, we are doing pretty well. I think that -- I hope that we will close positive. Of course, we don't have visibility on the last few days of the month, but we are doing pretty well. As I said, we -- I mean, we may -- like June, slightly negative. I hope July, slightly positive. We are there. It's not a trend yet, but I mean, this is also to say that there is a strong resiliency also on the part of the clients. BMPS performance is a good performance. I mean we are continuing to perform pretty well. So we are very happy. And we don't provide the number, but they're positive and they're doing well. The mark-to-market of our overall investment. So we invest -- we have invested approximately EUR 19 million now of liquidity in our funds. I mean these funds were, let's say, not risky funds. It's a typical investment of treasury. As you know, we had a massive movement of interest rates that impacted also the most, let's say, conservative funds. We -- at 30 of June, we realized the performance -- a mark-to-market on the performance of around minus 5%. We -- as of today, we are in the region of minus 4%. So we already recovered some part of this negative performance. We hope that, let's see, that we'll be able to do better in the second line, second half. In terms of new products, apart from targeted funds, Traguardo-like, there are already a sort of a form of protection for the clients. We are proposing a lot of product with accumulation plan -- or accumulation plan or targeted funds with component of accumulation of the equity side. And we are able to continue to propose ESG products. In terms of guaranteed products, we are not yet structuring such type of products, even though I hear in the market that this wave is coming back because clients are scared. And so let's say that I think that protect products or guaranteed products may come back on the shares. Let's see, we are not structuring such -- these type of products yet.

The next question is from the line of Villa, Alberto with Intermonte.

A couple of questions. First one is on Slide 14, where you show the pattern of invested money for the different categories of funds. I was wondering what is driving the positive performance of balanced funds, if that's maybe driven by new products or if there is any specific reason behind that. And the performance of also equity funds is positive. If there is any drive by single network that are focusing on those specific funds in particular or something that can explain this kind of trend and if you think this is going to continue [ for the remainder ] of the year. And the second question is on Monte dei Paschi. They announced the intention to carry on with the capital increase. In the meantime, we have but another government crisis in Italy. I was wondering if you have carried out any new discussion with Monte dei Paschi regarding eventually being involved in the capital increase or anything on the distribution agreement you have with Monte dei Paschi that you are negotiating right now.

Well, in terms of what is the main driver of the positive performance in terms of net new money for equity and balanced funds, this comes from part from the accumulation plan. As we always said, we pushed a lot on the accumulation plan in the last years. Today, accumulation plan accounts for us approximately EUR 1 billion of net new money per year. So this is -- I think this is the main driver of the net new money for this kind of product. This is very important, as we always said -- important for the client because it's the right way to invest, I think, on the market for our type of client and is, of course, is positive also in terms of net new money for us. MPS capital increase. Well, let's say that, as you know, last year, we were discussing with them in July last year, so a potential, let's say, intervention with different technical possible tools in order to provide capital then. But in exchange, on the other end, we were asking for a stronger, let's say, commercial relationship between us. We -- I spoke in the last month with Luigi Lovaglio, and I know him also because he was -- when he was in Creval, we were partnered with them also there. And we -- I provided our availability to discuss the potential structure of transactions as we did with the previous management. As of today, I don't have anything to tell in the sense that we don't have updates. So I know that they are -- I mean, I read that they are pursuing the process for the capital increase. And let's see, I don't have any further news.

The next question is from the line of [ Lee David ] with [ Lizard Investors. ]

My first question is just on the labor cost inflation in the current environment. I know the fixed portion of your personnel costs are being [ put in fly, right, ] but the variable portion kind of fluctuates. Can you just give us some sense like how is the inflation impacting you guys on the labor side? And I have another follow-up.

Well, let's say that in Italy, I think that the labor -- well, the inflation translates into labor cost inflation with more difficulties in a longer-term period. So as of today, we are not experiencing a strong pressure, to say. I would say that we are not experiencing pressure in general. And so I think that I don't see particular risk at least for this year. Let's see how the situation will evolve and how inflation will go in the next few months. For what concern the variable compensation, variable compensation, as we always said, in our company are strictly linked to performances of funds and of the company. And I guess this year, unfortunately, variable compensation will be down.

Yes. And also on a previous question, I didn't quite understand your answer. Just regarding Monte Paschi, how that's impacting you guys? And also just in general, I mean you have contracts with a few of these really big key partners, banks, right? And also obviously, Italy going through banking consolidation and restructuring, I don't quite understand. How are you guys being impacted during any of those?

Well, in general, our main contracts, let's say, BAMI and Monte dei Paschi -- for what concern BAMI, we have a very long and solid agreement. The agreement is -- lasts until 2037 in mutual funds and 2038 on the insurance part of the business. As we always said, the business agreement was negotiated in 2017 when we bought Aletti. So in this agreement, let's say, we put all our goodwill in managing this type of agreements. So in an agreement that protects us, I think, in all scenarios, and therefore, everything may happen in terms of consolidation with BAMI, I see it as an upside for us. On top of that, BAMI is also, of course, shareholders of the company with 21% of the share capital. For what concern Monte dei Paschi, the agreement is a little bit more vintage because we structured the agreement in 2010. The agreement will last until 2030. We have less structural protections if compared to the one we -- that we have with BAMI. And therefore, let's say -- again, this is our -- part of our business. When we have an option, if we have it, to negotiate further an agreement in order to have the most strong and maybe longer agreement, we'll try to catch this type of opportunities. If we have the opportunity to sit down with Monte dei Paschi to discuss such a scenario, we'll do it because this is part, as I said, of our business as a management team. And in exchange, this was the -- when we were discussing last year, this was the idea. In exchange, of course, we will be happy to help Monte dei Paschi in terms of capital. Let's see. This was what we were discussing last year. It was public. We -- as I said, we provided our availability to discuss. There is -- I mean, there are many, many details in potential transactions like this one. We provided our availability to discuss, and that's it. As of today, I don't have any news to comment on.

Okay. And maybe last question from my end. How is the interest rate -- obviously, interest rate is going up and really, you guys having your own low macro environment change. I'm just kind of curious how -- in this interest rate environment, how is the local Italian macro impacting your business or any new products you can offer in this current environment to kind of reverse the negative -- slight negative [indiscernible] trends in June.

Well, let's say, the -- I always said that interest rates -- low or negative interest rates for us are a poison because -- I mean, for the international sector and for a company like us, like ours, where we have 70% approximately of the assets invested in fixed income, having negative or 0 interest rates, it's tough to provide returns to our clients. It's tough to apply commissions. So in the medium and long run, I see a more normalized level of interest rates as a positive for us, no doubt. Of course, we have to face a transitional period because interest rates -- I mean, what we were wishing for was an increasing interest -- there was -- increasing interest rates. Instead, the movement was very important in a very short time period, and this has impacted strongly the AUM value and probably also psychologically a little bit declined. So the clients are more scared in potential different scenarios. So in general, I see it as a positive in the medium and long run. We were trying to say with the slides on Traguardo, we already faced situations where we had interest rate at 4%, 5% for Italian Govies and we were able to raise massive amount of money, providing very interesting returns to our clients. Of course, we have to face this period where the strong negative performance from the fixed income component hit the clients.

Next question is from the line of Bairaktari, Angeliki with Autonomous Research.

First of all, I noticed that the share of other banks within your retail AUM has declined from 3.8% in the first quarter to 3.1% in the second quarter. So I was just wondering whether there was any particular outflow in that channel. I know it's small, but the quarter-on-quarter difference is quite notable. Second question, can you give us an update on the relationship that you have at the moment with Credit Agricole now that they have fully integrated Creval? And what should we expect for that distribution channel going forward? And last question, perhaps if you can give us an update on the net flows that you have seen in the second quarter from the Banco BPM network.

Okay. First of all, well, the other banks' amount of assets. Well, here, there is a reclassification because we migrated Credit Agricole Italy with Creval. Let's say that Credit Agricole Creval is -- today is one bank. Before, we had another bank, Credit Agricole Italy and Creval separated. So now we joined Credit Agricole and Creval. And so we decreased the other bank's component. For what concern Credit Agricole relationship, we are -- I mean, we are -- let's say that we are discussing with them -- well, they merged the banks. So they merged Credit Agricole Italy and Creval. Today, our agreement apply to the new bank. So we are there. We are discussing some arrangement to the agreement in order to let the agreement more, let's say, applicable for them and for us. And I hope that we'll be able to reach an agreement. I mean, in principle, we already reached an agreement, but we are, let's say, struggling between legals and compliances in order to find the right solutions, the right, let's say, contractor solution. And I hope that we will reach it definitely in the next couple of months, let's say, considering that in August, in Italy [indiscernible] off. What was the other question?

Net flows in Banco BPM for the second quarter?

Yes, sorry. Net flows in Banco BPM, well, they are not performing very well in terms of net new money. They -- we are slightly negative, but more on the mutual funds side, but we are positive on the insurance component. So overall, we are positive, but the performance is not aligned on our and on their expectations. Of course, the situation is not so easy for all of us. And so we are -- let's say, we are resisting. Anyway, between mutual funds and unit-linked, we are positive.

The next question is from the line of Prini, Filippo with Kepler.

I've got 2 questions. The first one is on the inflows you recorded in the first semester. Could you possibly spread them between gross inflows or redemption, even both part figures are fine for me. And the second question is on your service remuneration. Does it remain the dividend policy of paying a 50% payout in reported net profit also on top of the 2 buybacks that are in place and have been closed this year and also considering the potential participation with the capital increase of Monte Paschi?

Well, I start on the dividend. Of course, for the dividend, our guidance in terms of dividend will remain there. So 50% of consolidated reported net profit will remain, notwithstanding any extraordinary transactions or the buyback. The buyback goes on top. So it's something that -- we do it is because it goes on top. In terms of inflows, gross and net redemptions, we don't provide this data, Filippo, sorry. And sorry, just to complete one of the answers I provided before because I forgot to say, with Credit Agricole, we were also happy in this period because we are, let's say, discussing with them and we restart -- relaunch products on their networks. We launched a new targeted fund on June. That is, let's say, raising money. And so the performance on the network is getting better.

The next question is from the line of De Bellis, Luigi with Equita.

Two quick questions. The first one, on the management fee margin, if you can provide a guidance for the next couple of quarters considering the current environment. And the second one, on the new ANIMA Traguardo fund, do you have a target in terms of gross inflows for the products in the next 12-month time frame?

Luigi, well, the answer is no, no because margins, it's difficult to provide a guidance. Let's say if you look at the inflows, the guidance is stability -- absolute stability. So we are not seeing any decrease in terms of margins deriving from the net inflows we are having, we are experiencing. Of course, the margins could be impacted by the AUM performance, as we saw in the last period. Important movement, for instance, on interest rate -- on the interest rates would affect the large mandates we have in Poste that has a very low profitability, and this, for instance, impact -- may impact strongly the average profitability. So in general, I would say, stability, apart from the market effect. In terms of Traguardo, I don't have an answer yet because we have to see. It's too difficult today to provide a guidance in terms of inflows. What we see is that, as I said before, in the past, between 2011, 2014, we were able to do a massive amount of this product. In 2018, when the interest rates went up because of changing governance as always, again, we were able to restart this type of products, and we did 3 products, very interesting products. Let's see. It depends on how we stabilize the interest rates and how it will be the situation in general.

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

Okay. Thank you very much. Thank you to all of you for attending our conference call, and let's see in 3 months. Thank you very much, and have a good summer.

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