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 Full Year 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Melzi, CEO. Please go ahead, sir.

Thank you very much. Hi to everybody, and thank you for attending our full year 2022 conference call for our full year results. . I will start as always from the presentation, so Page 4, some highlight. End of the year, assets under management, EUR 177 billion, EUR 1.6 billion of net new money during the year. Steady margins notwithstanding the strong impact coming from the decrease in assets under management, so the market affecting our assets. Positive flows, especially thanks to the diversification of our net flows and our source of distribution and from PACs from commercial plan. Negative WAP, of course, in line with the average of the Italian industry. Looking at the financials. Fixed fees, almost stable if compared to 2021. The top line was impacted, of course, from performance fees that decreased significantly compared to last year. EBITDA margin as usual, above 70%, thanks to the resiliency of our top line and cost efficiency. The drop in net profit is also partially explained by the tax relief of last year on the goodwill impacted -- positively impacted the result by EUR 24 million approximately. Cash flow continues to be strong and important, enabling us to remunerate our shareholders with more than 60% payout, plus an additional 5% in cancellation of shares. Page 5, our business by segment, as always, nothing to be particularly outlined, 50% of retail and 50% for institutional. This is our breakdown of assets. Page 6, looking on the performance of our funds. We are more or less in line with the Italian industry for the full year. And we -- if you look at the funds breakdown by category, we continue to be skewed towards a flexible and balanced funds. This is our characteristics. So we are very much focused on transferring bonds given also the characteristics of our client base. Page 7, new product launches in the year. I think this is an important slide because it shows how the vitality of our distribution network was strong also in 2022. The year was tough. We know that the negative performance has affected all asset classes, but we have been able to launch 23 new target date funds with gross inflows of EUR 4.5 billion, demonstrating, as I said, the vitality of our distribution networks. In January 2023, we restarted as well with important new funds that collected already more than EUR 300 million of gross flows. Page 8. And this gross flows and this activity was sustained by the activity that we do recurrently with our distributors and where we pushed even more in 2022 because we believe that it's very important for us to stay close to our clients in this moment where it's difficult to explain to the client the situation and where we have to put the phase in front of them. As you can see, we did events -- virtual events more than 256 new contents. But also, we have rebound in our activity in presence, more than 400 meetings with more than 10,000 attendees during the year. Of course, we also continue to provide -- to serve the B2B services, it's called, of course, center to our clients, with over 150,000 calls answered during the year. As you can see in the last years, we improved dramatically our activity in line with the size that we begin the quarter. Page 9, sustainability. We continue to strongly invest in the sector. And we believe it's very important, and we want to continue to push on that. We upgraded during the year existing funds from Article 6 to Article 8, 38 funds involved, approximately EUR 26 billion of assets reconverting to Article 8 funds. More than 40% of our AUM now are under Article 8 regulation. But not only regulation and reclassifications, but also training and education. We continue to invest in training and educational activities inside and outside the company. This is also our second year of publishing the sustainability report on a voluntary basis that is also audited. So we continue to push a lot on that. And ANIMA Net Zero, this is our first Article 9 funds that was launched in December 2022. We adopt science based targets to select the companies in the portfolio. Page 10, an update on the agreement that we reached at the end of last year with Crédit Agricole Italy. So as you may remind, we -- as a company, we have a historical agreement with the Credito Valtellinese. We signed the acquisition of their former asset management company in 2012 with an agreement -- with a 15-year's agreement. Given the merger between Credito Valtellinese and Crédit Agricole, we have to sit down in order to reshape our relationship with the new group. We had an agreement, of course, not being subject to change from [indiscernible] as we always said. And therefore, we were able to shape it with them, keeping our original duration throughout 2027 and reshaping the closes of the agreement in order to preserve the industrial value of the original partnership. We are very happy from that because we think that we can, of course, Crédit Agricole is one of them only. So the pivotal position on the network could be will be for sure. But we will be there. We are one of their partners, and we have very happy with the agreement that we found. We also been able to negotiate a commitment to keep our AUM at least at the same level at beginning of 2023 throughout all the duration of the results. Page 11, this is, if you want, a highlight of the agreements we have in place. Just to remind you what are the characteristics of the different agreements: Banca Popolare di Brasilica, Banco BPM, Monte dei Paschi, Crédit Agricole Italy and Poste Italiane. Some numbers, Page 13. So if you look at P&L, in terms of net revenues, we are substantially flat if compared to last year, EUR 8 million less -- EUR 7 million less. The strong impact drive came from the performance fees. As we said before, last year was our record year, and this year was our lower year. So we went from the start to the bottom. Total revenues, minus 28%. Total expenses is substantially flat. But for EBITDA, minus 34% to EUR 255 million approximately. Net income, EUR 121 million, approximately, minus 49% if compared to last year. If you look at the margins, the margins are substantially stable in spite of negative returns in the richest asset classes. This was driven also from the decrease on the Class I AUM with the lower profitability. Cost/income, excluding performance fees, remains at the best European level among asset managements. This demonstrating our capability in all situations to keep costs strictly under control. Tax rate, it means high mainly due to the fact that we paid an interco dividend at the beginning of this year significantly dividend insisting on the results of 2021. And therefore, we have a higher tax rate for this year. And if you compare the tax rate with 2021, it's also impacted, as I said before, by the tax relief and goodwill, that positively impacted 2021 by EUR 24 million. Page 14, margins. I was saying before that the decrease in the lower profitability assets on Class I mandate impacted the average profitability. But we have also to say that if we look at the bottom on the left side of the page, the table, we look at the inflows in terms of asset classes. The mix is favorable because we have decreased on bond and flexible, but we have strong increases in terms of net new money and balanced fund, equity and cash. So overall, the profitability was substantially flat, also if you look at the mix of the different asset classes in terms of [indiscernible]. Page 15, net management fees. Of course, on the left side of the page, were impacted by the negative market effect. So we reached the -- I mean, we got back to a level of the first quarter of 2020. And management fees are back to a normalized level after the pandemic. If we build on personnel expenses, we can see a slight increase in the fixed component. This slight increase is driven by investments in HR and also in new part of the alternative business that we are investing. Variable composition is bringing down the cost reflecting decline on the financials of the group, if compared to 2021. Profitability, Page 16. I think it's interesting to align that the -- even though in absolute terms, of course, we have the decrease on our numbers. If you look more in depth that profitability, excluding performance fees, of course, we registered in the last 3 years a positive trend. So I think that the favorable product mix in terms of net new money and the higher depreciation also of low fees Class 1 mandates, this slight increase. The other fees increased due to higher volumes of commercial activities. So we have a positive element there. Operating expense is almost flat during the period. As a result of these items, of course, the EBITDA increased, showed the positive trend of increase during these 3 years, demonstrating once again the strong resiliency of this company in different market situations. Page 17, the cost efficiency. On the left side, we can see the total cost -- personnel cost. Total personnel cost was decreased mainly because of the lower variable compensation awarded during the year. If you look at the operating expenses showed on the right side of the page, we have a slight increase because of several elements. One of this is the business development. So we got back to a significant level of investments on marketing activities that we were -- that we stopped basically during the COVID -- in the pandemic period. So marketing and new FDs, as we said before, for new areas such as automotive and -- in order to increase our SKUs and competencies moreover on the investment side. On the rest of the cost, we have limited cost inflation mainly due to the utilities cost, so energy cost and into providers because of the trend of the dollar. Page 18, net financial position. In 2022, we had -- the net financial position is impacted by EUR 95 million of dividends paid, EUR 95 million of buyback, EUR 74 million of tax paid. We continue to generate a strong amount of cash. The company is cash generative, we demonstrated so in the last 10 years. And this cash generation enabled us to keep flexibility for possible extraordinary transactions, new buyback of treasury cancellation and debt reduction as we did this year. Shareholders' remuneration. We wanted to highlight -- Page 19, sorry. A few characteristics in terms of shareholders' remuneration of our group. In 2017, we did an M&A when we bought Aletti Gestielle with the growing concern of Poste Italiane for a total consideration of EUR 970 million. We partly financed these acquisitions for a capital increase in March 2018 of EUR 300 million. In '19 -- in 2019 -- between 2019 and 2022, we carried out buybacks for a total of EUR 221 million, and we canceled more than 2/3 of the share issued in March 2018. On top of that, ANIMA paid ordinary dividends each year for a total amount of EUR 320 million, so basically giving back more than their proceeds of the issue of March 2018, with the dividend yield stable between -in the region of 6%. So this is, in our mind, is to demonstrate our capability to remunerate the capital of our shareholders and also the stability of the remuneration that we provided in these years. Page 20, we provided some details in terms of cancellation of shares. As we said, we propose to the AGM the share cancellation of 5% of the capital -- of the share capital bringing the total outstanding number of shares to EUR 329 million of shares approximately. Okay. So some final remarks. First of all, how was this year? I mean, I think that we went through one of the toughest year for our industry for sure in the last 10, but also, if you look a little bit backward. ANIMA, we were able to achieve net new money, solid financial returns, and we provide a double-digit rate remuneration to our shareholders. On top of that, we believe that if we look forward, we continue to -- given this year that was a year of resiliency of resistance, if you look at 2023, we still have EUR 2 trillion of deposits on current account in Italy with a significant upside. In the previous financial crisis, the system suffered for significant outflows. I think in 2022, the system demonstrated an incredible maturity in this respect. And I think out positive element of the -- for the rebound are still there. Higher interest rates provides more returns for our clients. And higher interest rate means no more pressure on margins. So in this year, in 2022, we suffered because of the rapid -- very rapid adjustment of interest rates. I think that in the medium run, this is positive for our industry and for the company. We continue to have -- to keep a high amount of cash in the balance sheet, advancing our flexibility for pursuing important shareholder remuneration, opportunistic M&A and why not, more structural is potentially linked to the banking consolidation when and it will happen. Page 23, the last slide. We wanted also to talk about our strategic partnerships because I think that it's important the agreement we signed with Credito Valtellinese -- Crédit Agricole Italy. This is the second change of control with 1 of our partners we experienced. The first was the one of Banca Popolare di Milano when was merged with Banco Popolare in 2016. And last year happened to Credito Valtellinese with Crédit Agricole. I think that the important -- the relevant aspect of that is that we were able in both situations to renegotiate the agreement to keep our assets and to keep our relationship, being able to bring our capabilities on the table and our experience in managing this type of agreements. In the case of Banca Popolare di Milano, we end up buying Aletti Gestielle. In this case, we end up signing a new agreement with Crédit Agricole Italy. But I think that our capability to manage this agreement and the legal framework of this agreement demonstrated to be important, strong and resistant. Of course, we have another big -- one of our key partners, that is Banca Monte dei Paschi. There are no change on contract clauses on the agreement that we have. We see what will happen in the next year or 2, so probably given the Monte dei Paschi is the one -- that is part of the consolidation process. We believe the value, we believe that ANIMA know how to manage this type of activity for the banks in particular. And I think we'll be able to do so also in the future. So I thank you all, and I remain fully available for questions.

[Operator Instructions] The first question is from Alberto Villa of Intermonte.

I have 3 questions. The first one is regarding the distribution agreement with Crédit Agricole. Thanks for sharing a few details on that. Was wondering if you can tell us how it's gone last year and if the assets are stable, excluding the performance compared to the beginning of the year, which I understand is the aim of the agreement from now onwards until the 2027. And in the case, how should we expect to work the adjustment mechanism you have agreed upon with the bank? The second one is on, well, what happened with other players on the market. So I'm referring to the agreement announced by UniCredit and Azimut to set up a new asset management company. I was wondering if you had been involved in any negotiation with the bank for this kind of agreement or what has happened, if any involving ANIMA on that? And finally, on the capital shareholders' remuneration. Should we then expect, excluding any major M&A., parts of buyback -- pace of buyback that is similar to what we have seen so far in the last 3 years?

Thanks, Alberto. First of all, let's start from the distributional side. Last year was a tough year. We were negative by more than EUR 400 million. And therefore, this is on the net inflows. We were negotiating. I hope and I think that the signing of this agreement will change the sign of our net interest with them. How it works? It works that they will have to -- I mean, for the agreement, we fixed, as reference level of asset management, excluding performance -- market performance, the level of assets end of 2021. So basically, we will have to recover the 2022 performance and then keeping flat the assets, excluding the net market effect. So this is how it works. Azimut and UniCredit, no, we are not being called by UniCredit on that. So we weren't -- we didn't negotiate, but we didn't discussed in any manner, I mean, the topics. So we read it on the newspaper. I don't have any further comment on it. In terms of buybacks, let's say that it will not have a strategic development on the table. As we said in the last few years, we will try to remunerate -- we will remunerate, we'll not try. We'll remunerate our shareholders with the mix of dividend and potentially buybacks. And the amount we receive, we have to think about it. We'll see how the year is gone. But for sure, the idea is to remunerate for dividends, buyback and buyback with the cancellation of shares as we did in the last years, where we end up, we canceled in the last 3 or 4 years, 14% of the share capital.

The next question is from Elena Perini of Intesa Sanpaolo.

I've got 3 questions. The first one is the fact related to the discussions on potential ban of inducement. We have read in the press about all the debate at European Commission level. What's your view on that? And how could you address the potential cancellation of inducements? The second one is related to the potential guidance on cost and tax rate for the current year. And if you can update us on what you see as a development for net inflows in the coming months and the level of performance fees in the past month, if you have had any?

Elena, let's start from the ban on inducement. How I see the situation is that the ban on inducement in my opinion is something that is negative, is negative for the system and for the entire system, meaning the clients and the operators. This experiment was -- have being done by this member in U.K., where the FSA also released the report where we clearly see that the lower part of the market of clients, so the clients with less money were abandon in terms of advisory by networks. And I think this is a strong negative point and in respect of system. And of course, this will be disruptive potentially in the long run for -- also for the system distribution, production in the asset management. For what concerns, I'm not positive as you can understand. And I think for what concerns ANIMA, we have a lot of agreements in place. I think that such change in the market will be fairly protected. We need, of course, to reshape our relationship with all the distributors a little bit, but I'm not worried about that too much because we have our agreements, and they will continue to stay in place. This is something that, in any case, will never happened in today. It's something that we would entail a period of our transition for sure. Let's see what will happen. In any case, I would like also to apply and to remind that our profitability on average on retail is 26 basis points. So I think this protects significantly our business and our probability to stay on [indiscernible]. Cost interest rate. Cost -- well, cost, we see the system of cost inflation. I mean, continue to change the inflation. So that we see some cost inflation on cost. We can see it also in the last part of the year. Historically, as far as I can see, is still something in the, let's say, low part of, let's say, low single-digit in any case something not dramatic, in any case there is some cost inflation coming from energy, coming from dollar, even though we see that this trend may revert also suddenly. Let's see. In terms of tax rate, the tax rate expected, our guidance for 2023 is below the 2022 in the region of, let's say, 33%. And finally, net inflows. Well, net inflows, what I can say is not easy to make estimate of inflows also this year because the situation is still fairly bumpy. But what we can say is that we started the year pretty well, even though we reduced EUR 34 million of net inflows, this is driven by a mandate -- an institutional mandate that we lost, only partially compensated by other institutional inflows. When we look at the net inflows on a monthly basis, this may happen, as we always said. But just to give you an idea, on the retail side, we were positive. And so this is actually is a sign -- is a positive sign for us. The market now resulting, let's say, depends very much on how the stability of the markets of the system during the year. In terms of performance fees, still, I mean nothing to top line, in particular. We closed the year registering performance fees on the benchmark front. As you know, on the benchmark front, you can register and catch the performance fees only once a year at the end of the year. For what concern the I got them upfront, so the top level and absolute preferred funds, it's still not easy because the distance from both the market there is still some -- we are still, of course, important distances from both the market. Even though what we may expect is that through new funds potentially catching performance fees, we may have some satisfaction during the year.

The next question is from Domenico Santoro of HSBC.

Just a couple of questions from my side. First of all, can you give us a bit of sense how the net financial charges can be this year given that you have now a significant amount of cash and given that interest rates, they went up significantly? You might invest this at a higher rate, at higher yield, and this could offset the charges on the other side on your liabilities? Or alternatively, you can tell us whether you expect to change again the mix of your liabilities and save a little bit of money. Just how much could be this line in 2023? Then another question on margins. I wonder if the market performance in the first part of the year, in January, helped you a bit to recover margins to a recovery margin in the first part of the year given the slippage in the fourth quarter. And then a question on the payout. I understand, I mean, you want to remunerate more, all things equal, by buyback or dividend. I wonder whether the 60% payout ratio is something sustainable for the -- in our model in case, again, nothing changes.

Okay. Well, interest rates, I see an upside, it's competitive because all our debt is fixed. So we have the bonds outstanding, we have fixed interest rates and remaining part of banking debt, EUR 80 million, approximately, that is fully covered. So no interest rates risk as of today until we'll have the need to refinance, of course. That is faraway still. And what may happen is that last year, we registered a negative performance of our liquidity invested in our funds. We lost approximately EUR 4 million. And there, I see a potential upside because we are investing at the moment our liquidity through funds and deposits piece. So we are investing in different instrument that may provide more interest returns for 2023. If you look at the margins, yes, the answer is yes, in the first part of the year, we are recovering part of what we lost in the last part of 2022 because in December -- November, December 2022, we registered a negative performance for two asset classes. And therefore, we are recovering part of that in the first part of the year. So absolutely, we -- this will be beneficial. In terms of remuneration, I would stick to our guidance -- the long term guidance in terms of dividend of 50% of our reported consolidated net income. Even though as we demonstrated more than once, we will try look at the situation at the time, we'll try to remunerate as much as possible our shareholders.

[Operator Instructions] The next question is from Luigi De Bellis from Equita SIM.

Just one question on the M&A. Can you provide us an update on the strategy? You mentioned the possible external growth for both on opportunistic basis in a context of mergers between banking groups. Can you elaborate on the first point, I mean, opportunistic opportunities in which sector or category?

Well, yes, opportunistic means that in particular, what we are looking for, as always, is the solution potentially, but this is mainly linked to the consolidation process, not only but mainly linked to the consolidation process. And this is not only because, for instance, we signed with Monte dei Paschi another partnership. You know that we are pushing a lot on partnership with medium-size Italian banking group. In this case, it's not an M&A, but it's an enlargement to our distribution networks. We continue to look for potentially additional skills. So teams that may be -- teams that has people, but also companies with potential interesting strategies. And on top of that also, there is linked skills and competencies. We may look also the alternative business where, as you know, we are expanding organically as of today, but we are open to see if there are opportunities, interesting opportunities in Italy, I would say, in order to accelerate this growth path.

Mr. Melzi, there are no more questions registered at this time.

Okay. Thank you very much to all of you for attending our 2022 full year conference call, and see you in 2 months. Thank you very much. Bye-bye.