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 First Half 2023 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, everybody, and thank you for attending our first half conference call. Well, I will start, as always, with our presentation. Maybe we'll bring you to Page 4, highlights of the first half 2023. We are now at the semester where we had EUR 185 billion of assets almost, end of July, EUR 180 billion of assets. Net new money negative on the first 6 months, but we communicated today the net new money for July EUR 531 million. So the net new money on the first 7 months of the year is turning positive. If you look at the performance of our assets, the weighted average performance is positive year-to-date, only a few basis points below the Italian average. This is mainly explained by a lower level of WAP if compared to the system. Positive margin trend, even though the top line is affected by a lower contribution of performance fees, lower if compared to last year and low in absolute terms. Total revenue margins ex performance fees is up to 17.6 basis points, which compared to last year, 17.2. This is mainly due to the gross flows -- the profitability of gross flows and trading and administrative fees. EBITDA over 70% -- above 70%, thanks to the resilient top line and the resilient top line and [ capability ] to keep costs under control. Cash flow, as always, very high and very strong, robust cash flow with a free cash flow yield remaining at double-digit rate. Page 5, business by segment. Nothing to be highlighted in particular. We have a stable business mix in term by client, 50% -- 50-50 between Retail and Institutional. Page 6, the performance of our assets. As I said before, the weighted average performance is slightly below the system. This is mainly explained by our asset mix. And this brings us to the right side of the page. If you look at funds breakdown by category, as always, we have an overweight, on flexible and balanced funds where -- we've flexible and balanced funds, we also have a component of equity, of course. But we are underweight as compared to the Italian industry in terms of pure equity. Page 7. If you look at the flows in the Q2, we continue with the stronger position towards fixed income. We already said that in the Q1 presentation. We see the clients moving towards fixed income in general. They are -- they do appreciate this type of solutions, and so we are offering a lot of this type of funds. We have another slide on that. Equity is mainly driven by -- the equity investment is mainly driven by PACs, so accumulation plan with monthly installment or an underlying unit of Unit Linked menu. The negative net money performance for flexible funds is mainly driven -- as realized already in the Q1, mainly driven by the wrap trend. So basically, we were investing, we expanded more than once. When we do -- when we structure aggregate funds, typically, we invest the equity component through [indiscernible] of the house. Given that this equity component is shrinking and we are basically structuring funds -- fully fixed income funds, we are not investing anymore in this wrap component -- equity wrap component that therefore is reducing. So this flexible component is shrinking, but we also highlight that when we invest in terms of funds, we cannot duplicate fees. Therefore, we cannot double charge the client. Therefore, these outflows are mainly a profitability close to 0. Page 8. We are -- this is our top 10 funds in terms of net new money in the first 6 months of the year. Typically, these funds are fixed income funds where they can also invest in part in equity up to 20% typically, but as you can see, the gross flows are important in certain funds. This tells us that the system -- I mean, the vitality of our distribution networks are very high. We have a strong preference for fixed income products, as I was saying before. And another positive is that pressure on fixed income products, especially in terms of fees on fixed income product is off the table, we also saw potential given the -- especially for our clients that are far higher than before. Total customer charges broadly stable because of a mix of different taxes. So we are charging a little bit more on the fixed income component. We have there -- we are a little bit less of cost for them coming from the investments in terms of funds. Page 9, new banking partnership. As you can see, these are the partnership we signed with medium-sized regional banks in Italy in the last years. We have been able, in addition to our long-term strategic partners such as BAMI, BMPS and [indiscernible], we have been able to sign 7 new agreements in the past 36 months. The last one signed was in July. This is very important for us also because what we are seeing is that once we bring out the regime, this type of partnership results are strongly positive. In the last 6, all the -- in the first 6 months of the year, all these partnerships are positive in terms of net new money. On Page 10, if you look at the coverage of our commercial network and our partnerships. Today, we can leverage on 18% of all bank branches around the country with a strong presence in the wealthiest area of the country. These are our partners. So we are very happy of being so present in Italy, and we believe that we'll be able to enlarge furthermore our commercial distribution network. On number, page 12, the consolidated P&L. Total revenues are down 7%. This may explain the net revenues by net management fees declining because of lower average assets under management as compared to last year. This was fully expected by us. Performance fees down in respect to 2022, as we already discussed that more than once. Performance fees this year are particularly tough, and so we registered only EUR 2 million in the first 6 months. Looking at cost, increased -- slightly increasing. We'll get back to it, and we will discuss it more on that. EBITDA minus 12%, EUR 116 million approximately in absolute terms. Below EBITDA, positive signs coming from the fact that we have the possibility and the opportunity to invest liquidity in a more, let's say, worthwhile way compared to the past. We are registering an important positive sign coming from deposits and other investments such as government bonds, et cetera. But we have a slide on that. Adjusted net income, also thanks to a lower tax rate as compared to last year, tax income flat as compared -- adjusted net income and net income -- adjusted net income flat as compared to 2022, and net income plus 6% if compared to the first half 2022. Looking at margins. The margin trend is slightly up. The main reasons for that are the federal product mix on gross flows, as I said before, the focus on actively managed products and fixed income flows being directed towards more, let's say, product with higher fees for us for fixed income or balanced solutions. That, of course, has a better profitability for the company. Cost/income excluding performance fees always remaining at that level if compared to European asset management. Page 13. On the left side of the page, management fees gradually recovering. We are on a positive path, and we believe that we will be able to continue like this, so recoveries compared to the past and after the slowdown driven by the decrease in assets. Right part of the page, looking at the HR cost, personnel cost, we have an increase in terms of fixed salary. This is mainly driven by some seasonality in HR training. Expenses will be partially absorbed during the year and on the fact that we continue to invest in mainly front office sales and on the alternative business. Then on cost, Page 14, left part of the page. As you can see, we have a slight increase in cost. This is mainly driven -- entirely driven by the new marketing expenses. We are getting back to pre-COVID level of investments in marketing activities. We also, as I said more than once, we don't want to -- we want to continue to push in this respect because we know the [indiscernible] that we are building up with our distributor in this period. This is something that will move back results once the situation will stabilize and will normalize for the asset management business. If you look at the liquidity on the right side of the page, instead the liquidity and debt management, as I was saying before, we were able to better exploit our liquidity sitting on current accounts, having interest income on cash, very impressive in H1 and also reimbursing, let's say, in advance the banking debt we have outstanding and taking benefit of the hedging position on this debt by EUR 4 million approximately. So we-- let's say that we were able to more than cover the interest expenses on that in the first semester. Page 15. Look at the net financial position. Net financial position in first half, as always, is reflecting the payment of dividends in May by -- of EUR 71 million. And debt repayment in June, this is not affected. The net financial position is affecting the gross debt position, the net repayment in June by -- advanced debt repayment by EUR 82 million. The cash generation will continue, is continuing and will continue also this year. This will allow us to keep our -- [ continue the ] flexibility on possible extraordinary transactions and new buybacks, eventually also share -- possible share count reduction. Buyback 16 -- the Page 16. So in line with our past commitment to grant additional remuneration to our shareholders also for shares buyback, we -- the Board resolved to start with a new tranche of buyback of EUR 30 million that will be live in the next few days. We will start -- I don't know if already today -- we will start today. And we'll continue for probably, let's say, an estimate end of October. The share buyback, we decided to restart the share buyback because, as we said more than once, we want to -- for our shareholders, we want to grant a dividend that is 50% -- as a flow of 50% of reported consolidated net income. As you know then, sometimes we go a little bit over this type of guidance but on top of that, if we have the possibility, always keeping our flexibility in terms of extraordinary transactions for the company. We want to -- also we want to increase the shareholders' remunerations through buybacks and potentially also for cancellation of shares at the end of the year. We already did so in the past. We -- as you can see here from the slide, we -- in the last few years, we delivered quite significant returns to our shareholders. And we canceled 14% of the share capital in the last 3 years. Page 18, some final remarks. So the messages are that we continue with strong cash flow generation. We will deliver so, and we know that this company is very strong in cash generation and providing resilient and consistent results. We have some additional support for the net profit coming from the management of liquidity. This news is a good news for us. The positive performance of funds is also, let's say if you want, allowing us to stay in the market and to continue to do our business in the best way possible with our distributor and clients. We are -- let's say that the fixed income that we know that is also a competitor in terms of Italian Govies sold to the client, there is also a positive underlying for our funds. As we always said in our business, in the fixed income without [indiscernible] the client is impossible because you cannot provide any return to the clients and it's difficult to charge fees if you don't provide any type of returns. Having the more interest [indiscernible] and the possibility to structure products with full fixed income products with Govies, Corporate bonds, this is -- I think this is beneficial for us in the medium run, having the possibility to provide suitable products for our type of clients with interesting profitability for the company. Finally, second half start with some good news. We were able, after having received the authorization with Bank of Italy to close the deal with Castello, so we closed the 80% share capital acquisition of Castello. And we also started with a very good July, more than EUR 500 million of net new money. This was very important because this is driven mainly by the Retail, in particular, by gross flows on fixed income products sold to the client base and from the contribution of the alternative business still not only in the second closing of our second [indiscernible] fund that contributed for more than [ EUR 100 ] in the month in terms of net new money. Finally, as I already said, we decided to restart the buyback program with EUR 30 million from now on till probably end of October. So I hope I provided you with the key messages for this semester, and I'm fully available for your questions.

[Operator Instructions] The first question is from Gian Luca Ferrari with Mediobanca.

Alessandro, four questions for me. The first once is on the EUR 531 million net inflows in July. If you can tell us how much is coming from Poste Italiane. It seems very outlier in this period. So I wanted to understand what is the impact from Poste. The second is the variable cost, HR costs are up 14% year-on-year despite much lower performance fees and much lower net inflow. So I was wondering if we have a deferral of previous bonuses that are having an impact here or what is explaining this increase in bonuses? The third point is on Castello and the private debt funds you already have. What's next here in alternatives? Are you planning something in private equity? Or do you want to expand more in the real estate, real assets? So a bit of color on what is the strategy here on alternatives. And the final once is on performance fees, if you can give us a sort of guidance considering where you are and where it's a distance from benchmarks and watermarks here.

Okay. So Gian Luca, thank you very much for your questions. Well, July net new money, as I said, main contributors full fixed income products mainly driven by distribution of Poste Italiane. So we did Poste Italiane. We are out with a product that is doing very, very well. With a single product, we are over EUR 500 million with them. And therefore, there is a part -- big part of the retail come from them in the region of EUR 300 million in the month. Then there is more than EUR 100 million from alternative and then other things, other distributors. Looking at -- talking about HR, the variable cost, yes, there is the usage component, I mean, the usage accruals component. There is -- making a little bit more difficult to read the data because there is EUR 1.2 million of accruals and differences with H1 2022. So basically if we normalizing the data, we would have had EUR 1.2 million more last year. So this is the difference. This is why you're seeing where data is compared to 2022. If you look at the alternative business, private -- well, our strategy is to create -- as I said in other calls is to create an Italian platform to do the alternative business multi-asset class, ideally a leading Italian platform, able to provide different products to our client base. The products that we believe are more closer to our DNA are, for sure, private credit in general. So it could be real estate credit, SMI credit, et cetera, real estate, infrastructure. Within infrastructure, for instance, renewable energy where Castello has already positioned with free funds under management. So these are the main strategies that we are targeting. Private equity is, I think, in terms of DNA is a little bit more difficult and also is more crowded as in terms of competition in Italy. So we are -- this is not our first target. Let's see if some interesting opportunity may arise, but for the time being, this is not our first priority. Performance fees, providing guidance is not easy, as you know. Let's say that in terms of watermark fund, we are 1.5%, 2% in the -- on our major flagship of 1.5%, 2% from a watermark -- on the watermark. On targeted funds, we may catch something. I think that we see more performance fees coming, we need to see a movement in terms of interest rates downwards by 40 to 50 basis points. Instead, I think that for the time being -- I mean, for this year, we will see good numbers.

The next question is from Alberto Villa with Intermonte.

A couple of questions. One, back to the net inflows in July, very strong. I was wondering what was the underlying, let's say, organic in sense -- in the sense that obviously, we have had a lot of volatility in 2023 with negative months, positive months like July. I was wondering if you can comment on the current outlook for retail monthly inflows. Where do you see the inflows, let's say, being more, let's say, recurring compared to what we have seen so far in terms of retail? And if there is any institutional positive or negative that should -- we should take into consideration going into the second part of the year just to understand, let's say, how to model potential number for the net inflows this year? And the second one is on the slide you shown the new agreement with the banks. I was wondering what is the potential going forward for, let's say, future inflows coming from these new agreements? And if there are, in your view, opportunities for new agreements in the short term?

Thank you, Alberto, for your questions. Well, net new money trend. Well, yes, for sure, this year, the monthly net inflows were a little bit bumpy. I also believe that the monthly inflows, I've always said that it is very difficult to look at monthly inflows and to understand the trend because in [indiscernible] business with the Institutional, Retail, this may vary significantly month by month. For instance, this year, as we talked about it more than once, we lost at the beginning of the year reminded by EUR 400 million. Not taking the consideration of this mandate would have been positive by almost EUR 1 million. So it depends very much on. It's usual looking at the monthly close to make an estimate. And anyway, I think that the positive sign and the important sign of the -- of our inflows in July is the demonstration of the capability of the company to stay in the market also in a different market -- in the difficult market condition to stay in the market and to work with our clients. If you look at the sector, as you know, the [ suggesting macro ] is minus EUR 18 billion, if I remember well, in the first semester. So we are doing far better than the average of the market. And I believe that we will be able to continue so in the second part of the year. So I expect to close positive, for sure, our -- in terms of net new money, saying of how much is very difficult because we are not in a clear path for the sector. So we are resisting very well. We are working very well with a lot of our partners. We are doing a lot of gross inflows. Just to give you an idea, we are positive on monthly [indiscernible], slightly negative on [ money ], but positive on the issuance component. So we are strongly positive Poste Italiane. So we are working a lot with our partners, and we see that there is a lot of vitality in the network. I think that we would need a little bit more of visibility in a decreasing trend of interest rates. This will be beneficial for performance fees but also for the trend of the sector and in relation with the clients. [indiscernible] to be more precise in terms of answer. Looking at agreements, with new partners, we expect to be able to sign additional partnerships, yes, in the next few months. In terms of potential, we -- these partnerships today can -- I mean, we have a potential of raising in terms of gross flows EUR 600 million, EUR 700 million per year. And I think that we should target to reach EUR 1 billion -- EUR 1.2 billion of gross flows coming from our partners. This could be a potential in terms of net new money per year of [ EUR 200 ], [ EUR 300 million ], maybe [ EUR 400 million ] at some point of net new money per year coming from these partnerships altogether. And I think this could be a very impressing potential for us.

Next question is from Elena Perini with Intesa Sanpaolo.

I've got 2 questions. The first one is about your recurring fees. Considering that net inflows seem to accelerate and the current prospects, market conditions, would you expect recurring fees to improve on a quarterly basis in the next quarters? And then the second question is on Castello. I was wondering if you can update us on your targets in terms of assets under management for the next few years with reference to the alternatives. And what we can expect in terms of net income contribution in full swing from this acquisition.

Sorry, Elena. So first question, fees. Yes, on fees, yes, we expect the management fees to grow quarter-by-quarter because the trend now is of growing assets under management. In terms of net new money, as we said, we are on the right path. And in terms of profitability, the profitability is increasing. So absolutely, yes, we expect increased quarter-over-quarter fees. The second question is on Castello. Well, we are -- at the moment, we're working on the new industrial plan of the group. That, of course, has a big part also in terms of alternative. And therefore, I would prefer spoke about targets -- long-term targets on this part of the business in November when I'll have more -- let's say, having done more work in terms of internal work and strategies and in terms of the targets. So I would -- I will give you an appointment in a few months.

The next question is from Luigi De Bellis with Equita.

Just 2 quick questions. The first one on the cost, could update us on the outlook for cost evolution in 2023 and beyond? And on fixed rate, labor costs have increased by 10% year-on-year, what should you anticipate for the upcoming quarters? The second question, the product pipeline. Do you have plans to launch new particularly products in the second half of the year and early 2024? What are you focusing on? So just some color on the product pipeline.

Luigi, well, in terms of cost, as I said, I mean, we are seeing an increase in cost on the administrative expenses driven by marketing investments so entirely explained the marketing investments. And we want for the moment to keep the pressure in terms of positive pressure with our partners. And so we well -- we want to continue to invest in on this magnitude. In terms of personnel cost, we invested as well, and this is reflected by the increase in cost. There, we see the -- some seasonality as explained in terms of training of resources. So this will be partially reabsorbed in the last part of the year. There, we'll continue to invest, but also looking for some efficiency in order to, let's say, take out of the table part of the pressure that we saw in the last year because, I mean, we invested partially. And we also had some inflation pressure beginning of this year that we had to face in some way. So we -- I don't see a trend of the increase, of course, in this path, absolutely. I think that we'll bring back the increase in cost in terms of personnel costs to our, let's say, historical path that was 2%, 3% per year. Of course, not taking into consideration extraordinary transactions, but this is clear. The product pipeline. Product pipeline, of course, we have in pipeline more than one product. Let's say that we'll continue to focus on product fixed income link, if you want. We have new solutions for our partners that we are studying and there are already -- some of the solutions they're ready to launched. But I can't tell you. I'll tell you once we will have launched the solutions.

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

Okay. So thank you, everybody, for attending our conference call. And I wish you to have holidays for the one of you that will be able to do so. And see you in 3 months. Thank you very much. Bye-bye.

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