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 Quarter 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Luca Mirabelli, Head of Investor Relations of Anima Holding. Please go ahead, sir.

Yes. A very good afternoon also. And welcome to the call also on behalf of Anima. We're here to comment, a very good first quarter which was apparently well received by the markets, along with some indications about what's to come that you might have seen in our presentation. Without any further wait, I will give the floor to Alessandro Melzi, Chief Executive Officer and General Manager of Anima. Please, Alessandro.

Thank you, Luca, and hi, everybody. So let's start with our presentation. As always, Page 3. With the -- in the first quarter, we reached almost EUR 194 billion of assets. This is EUR 2.1 billion up quarter-on-quarter and plus 1% approximately versus the year-end 2023. In the first quarter, we registered excellent retail inflows. We are very happy about that, mainly from our partner banks. While we registered a negative inflows/outflows on the institutional component, mainly explained by the low economic impact wrapping component. We will get back on it. Very solid weighted average performance of our product substantially in line with Italian average. Looking at the numbers, we were able to register important total revenues, approximately EUR 122 million, plus 51% if compared to Q1 2023. This was mainly due to performance fees component, but not only, also thanks to increase in recurring revenues. EBITDA margin at 66.3% (sic) [ 76.3% ], notwithstanding the increase in cost due to the acquisition Castello, I would say, because Kairos is not consolidated yet. As always, resilient cash flow. The free cash flow yield remains at a double-digit rate net of time deposits. Page 4, our asset by segment. Nothing in particular to be outlined if compared to year-end 2023. Page 5. As I was saying, the weighted average performance of our assets is substantially in line with the market industry, with the Italian industry. A little bit below this explain -- properly explained by the more conservative overall asset mix of the company if compared to the market, mainly less equity compared to the industry. Page 6, net flows breakdown by quarter. Demand still focus -- still continue to focus on the fixed income products. Equity appetite is still low, as you can see from our numbers. We register -- we do recurrent service on the final client on the market, and we registered a strong increase in the investment appetite from our clients, final clients. But still on the equity side, we see a conservative approach. Anyway, I mean, we were able to register important flows on the bond component. While the outflows are mainly literally connected to the disappearing wrapping. And we have a slide on it and we already talked about that the year-end presentation. In any case, the change in mix is not expected to have measurable effects, negative effects. As you will see, on the contrary, we are experiencing a slight increase in overall profitability. Page 7, always on flows, as I was saying before and as you can see from the slide, we are raising money on more [ juicy ] asset classes while outflows are concentrated focus on the -- or comes from the very poor asset classes such as the wrapping component and Class I insurance mandates. As explained several times, wrapping our funds of the house investing in other funds of the house mainly because of investment management efficiency, a more efficient investment management process. But in any case, given that from a regulatory standpoint, we cannot duplicate fees. The loss in terms of management fees is limited to the excess of fees of the underlying fund compared to the mother fund. In most cases, this component is 0. Page 8, the numbers. Net revenues up 18%. This includes also the Castello component that wasn't there last year in Q1. Corporate expenses increases, again, also because of the Castello component that is consolidated in Q1 2024. In any case, the EBITDA is up plus 60% if compared to last year, almost EUR 93 million in the quarter. If you look at the net income, plus 75% if compared to last year, almost EUR 53 million in the quarter. As I already said before, looking at the right side of the page, the profitability -- the average profitability of our assets is slightly increasing, even not considering the Class I insurance mandate that of course dilutes our average profitability. This is, I think, is an important sign of our resiliency in terms of assets today in terms of profitability of our assets. And also, as I said more than once, I think this is explained by the fact that, even if we are losing money on the equity component, the bond component with positive interest rates is a better price to the client base, therefore sustaining the overall profitability of the company. Looking at cost below EBITDA -- not below EBITDA but looking at cost before. Cost/income ratio is increasing, this is mainly due to the fact that we are strengthening our elite business that has a different cost structure and also to the new labor contract that we is entering in full force this year. Below the EBITDA, we continue to exploit the increase in interest rates, investing -- positively investing our liquidity, both on our funds, but also on time deposits and current accounts. If you look at the Castello in the first quarter, we see a low contribution of Castello in terms of profitability in Q1, but this is also due to the certain cost/revenue seasonality of the company. So this is slightly different from what we see on the historical business of Anima that has no seasonality basically. Page 9, personnel expenses. Fixed costs in line with the last quarter, if you compare the quarter with 2023 Q1, of course, as we said before, we have the discontinuity of Castello. Variable cost increased because of a provision for -- full year provision for bonuses related to performance fees registered in the quarter. Net financial income, Page 10. As already said, we are trying to take benefit -- some benefit from higher interest rates. Of course, we not a bank. But still, we were able in the lain the past quarter to improve continuously the item in our income statement coming from the investment of our liquidity. If you look at the comparison with Q1 2023, there is also the discontinuity related to the debt repayment of last June. Net financial position. As you know, this company is always generating a massive amount of cash. We continue to do so. Our net financial position in Q1 is already reflecting also the booking of the almost EUR 80 million dividend to be paid in May and already approved by our AGM on March 28. Our robust cash generation, we will continue to provide to our shareholders a strong remuneration moderation and keeping -- I mean, allowing the company to keep strategic flexibility in order to be starting a transaction in order to be able to grow and to exploit potential opportunities on the market. In fact, Page 12, on May 2, we closed the deal with Kairos. So we received at the beginning of April, the Bank of Italy authorization so we're able to complete the deal a few days ago. Just a slight -- a short recap on Kairos. Kairos is one of the -- Italy's most renewed asset management brand with EUR 4.7 billion of assets and almost 100 employees. The activity of Kairos is mainly almost entirely an open-ended fund in institutional mandates. They some liquid, but today, less important in terms of number and assets. We strongly believe that the strategies and the client segments managed by Kairos today are complementary to what we do in Anima. And this is why we decided to go for this acquisition. Kairos also have a private banking network with 23 bankers managing altogether almost EUR 2 billion of assets. A large part of these private banking assets are invested in Kairos products. And if you want, this small network is our first step in the direct distribution. Of course it's strongly focused on high net worth individuals. We don't want to compete with our distributor, as we always said. So we'll keep on a certain market segment, high end in terms of client. But I think it's very important for us in order to keep the -- as exclusive the Kairos brand. And in order to better understand what is -- how this type of market think and how this type of market behaves. Page 13. So the idea of the Kairos acquisition and the alternative project is to be able to better serve different client segments if compared to what we historically do in Anima. What we want to do is to exploit the commercial strength of all companies and in particular the commercial strength of Anima to exploit commercial synergies also in Kairos and in the, let's say, in the alternative business units. In fact, if you look at the slide, today, we will keep 3 different brands, Anima for this -- what our historical brand is type of business, Kairos and then Castello, Anima Alternative. We have different companies and brands to target different type of customers. Anima will continue to focus on the affluent customer base, mainly managed by our bank partners and institutional investors mandates for cash, pension funds, et cetera. Kairos will mainly focus on upper affluent, private high net worth individuals family offices, as I said before, from users in Italy and abroad. Castello, Anima Alternative, let's say Castello. Mainly institutional investors, high net worth individuals and family office. So if you want, Kairos and Castello will do more similar businesses if compared to what Anima does today. Products will -- all the factors we do will produce products that better fits with the customer needs. And of course, we will try to exploit all the synergies, let's say, on the back -- on the operational side of all the companies. So we bring digitalization to all the 3 companies, to all the 3 businesses. We'll try to integrate as much as possible providers, payer contracts, and everything that is the operational platform on which all the 3 companies rely. And of course, this is very important for us, we will centralize as much as possible the risk process -- I mean control and risk processes. As coming to numbers in terms of what we believe we can extract from these acquisitions. Page 14. We recently worked on our new strategic plan for the next few years. And we strongly believe that the liquid business plus Kairos could double their assets over 5 years and making 4x in terms of EBITDA. Of course, these are 2 different businesses, the liquid and the Kairos, but I think that both assets will bring -- will be able to bring growth to our group and profitability. As I said before, exploiting the commercial capabilities of the Anima Group. Within this growth, we think that we'll be able also to increase, I mean, and bring growth and to create growth within the Kairos private banker business. We expect to double the assets also in this segment of our overall group through organic growth and recruitment. And we think that we will be able to do so, exploiting an integration of Anima products and strategies, including alternative investments. We will try -- we will succeed also in recruiting new private bankers, but we will also try to create organic growth with our existing network of bankers. Also providing to them a new platform from a technological standpoint and additional value-added services. Page 15 for what concern the shareholder remuneration. We decided to integrate in our guidance to the market both dividend and buyback. This will imply that we'll pay to shareholder -- I mean, we'll continue to pay to shareholders. We will keep our dividend payout policies of 50% of group net income as a floor to be paid for dividend to our shareholders. But we also said that we will be able to pay, through dividend and buyback, a 75% of group net income in a 5-year period, so accumulated over 5-years. In order to stay in line with this new guidance, we also approved today EUR 40 million new buyback that will start soon in the next few days and in line with the AGM approval of March for the recurrent AGM approval for buybacks from our AGM. Closing remarks to summarize. We registered a Q1 -- a very positive Q1 both in terms of retail net inflows that we were the strongest in years. So this is very important for us. And of course, also in terms of economics, thanks to -- as we said before, thanks to performance fees, but also thanks to structural improvements of our recurrent management fees -- or revenues, I would say. We expect the new ventures, so the liquid project, and Kairos, including the private banker component, to be significant growth drivers in years to come for our group. We decided to -- therefore, we decided to announce shareholder remuneration policy formalizing, at the end of the day, what we did in the last years. And therefore, as I said before, increasing to 75% of group net income over 5 years, our guidance to the market in terms of shareholder's remuneration. And to demonstrate our willingness to pursue this type of shareholder's remuneration, we restarted with a new buyback of EUR 40 million that, soon after the ex-dividend date of May 20. So from the 21, 22, we'll start with the buyback. So thank you all for attending our call. I remain fully available to your questions. And let's go.

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

I have a few questions. The first one is on Slide 14. I was wondering if you can share with us what was the pro forma 2023 EBITDA and AUM. You consider setting the target for 2028. And also related to that, given that you discussed internally the targets for 2028, if you have any additional target that you can share with us maybe in terms of inflows expectations or EBITDA for the group, that would be wonderful. The second question is on the net inflows for April which were positive. I was wondering if there is a significant contribution from mandates and how are developing the distribution channels? So maybe some more color on what's going on in terms of banking partners and so on for inflows and your expectations for the coming months. The third question is on performance fees, which were solid in the first quarter. April performance was less brilliant due to markets. I was wondering if April was a positive month for performance fees, and which was the contribution you're expecting from April performance, please.

Okay. Alberto, let's start. I'll start from the net inflows on April. Yes, we're positive. We continue to register solid inflows on the retail component. We are very happy on that. So basically, all our partners are performing very well, in particular, Monte Paschi and Banco. But also the smaller channels are contributing -- positively contributing to the performance. Looking at the institutional component. We had inflows from a mandate that we won with CaixaBank. This was public -- went public last month with CaixaBank a few months ago. So we had to implement the operational part. We started in March, and we had the flows also on April. And this offset the wrapping component present also in April. So we are seeing a positive number also thanks to that. In any case, the most important part, I believe, is the strong and consistent performance of our banking partners. Performance fees. We did pretty well in April. You said -- it's difficult to provide guidance on performance fees because markets are very -- if we'll be able to foresee what will happen, we probably won't be here...

Maybe the April number?

The April number. No, I cannot come public with the April number. But it was positive. Hold on 1 second. All right. The -- looking at the numbers of the 3 entities, let's say, Anima Alternative, Castello and Kairos, altogether, they have more or less EUR 9 billion of assets and EUR 9 million EBITDA. So this is the underlying of the Slide 14, as you asked. In terms of additional targets for the group. Yes, of course, we did an exercise for the entire group. We -- to be honest, I'm a little bit skeptical in going public with a specific target because our business is very much volatile. And so of course, our industrial plan envisage several actions that we will do in the next few years. So we have clear ideas on what we have to do, but I prefer not to disclose a target because the volatility of our business. I mean -- let's say there is an indication -- an internal indication for us to follow strategic guidelines. Anyway, if you look at Slide 15, maybe I wasn't clear on that. We -- what we envisage is to pay, as I said, 75% of net income over a 5-year period. And these accounts, in our numbers, accounts approximately half of the current market cap paid over 5 years. So if you want, you can do a reverse engineering of it.

The next question is from Gian Luca Ferrari with Mediobanca.

Three for me, please. One is on the increase in margins in the quarter. I think this is not driven by flows because, as you said, flows are still in fixed income products. So should we read this increase in margin as a different mix between retail and institutional? Is that the only explanation? The second is on the other revenues. I think you are mentioning some internalization of some fund services. Can you explain a bit more, what are these services? And if I got it right, we should plug in our models at least EUR 10 million a year more revenues going forward. So the EUR 42.6 million of last year is really more as EUR 52-plus million from now on? The third and final one is the pipeline on Kairos on the private bankers you aim at recruiting. If you can share with us the target you have in mind, where you think these private bankers will come from, if you have targeted a profile of these persons you want to recruit. And yes, a bit of color also on that would be great.

Well, I'll start from the last one. Well, let's say that, first of all, the next few months, we will focus in reinvesting in the platform and services within Kairos in order to be able to be more attractive for bankers and clients. We -- therefore, we believe that we'll be able to go on the market in 2025. And the profile, what the profile is, I think, will be similar to the banker we already have in our company. So we look for high-profile bankers with as much as possible important assets. So we don't want to we want to stay on, as I said before, high-end market segment, also because we don't want to get in competition with our distributors. So we want to stay in a market segment where typically clients are multibank. And where -- I mean, the perception of competition from the Anima group to our clients is -- and there is no perception of competition, basically. If you look at the other revenues, the answer is yes. We -- in terms of numbers. So we -- you can plug in with your models, at least EUR 10 million of additional revenues per year. These revenues comes from, as you rightly said, re-internalization of, I'd say, any recalculation activities at fund level. And yes, I wouldn't add anything. On margins, I would say that, yes, you have a little bit of increase of margins coming from new assets, of course, because this comes from last year also all the new targeted funds repriced -- all fixed income funds and repriced if compared to the past. There is also a little bit of asset mix of -- between retail and retail is performing very well in terms of inflows and market effects and institutional.

The next question is from Luigi De Bellis with Equita SIM.

Two questions for me. The first 1 is on Kairos. So what do you expect as a contribution in 2024 in terms of net management fees and cost? What management margins compared to the group average? And can you elaborate on the main strategic priorities in the next 12 months of the new acquired company? The second question on flows. So when do you expect the headwinds related to the wrapping to normalized? And if we can expect -- or do you expect some new institutional mandate tenders in the coming months to positively impact the flows?

Okay. Well, margin of Kairos, let's say that Kairos is a company that in terms of net management fees last year, was slightly below breakeven. And with performance fees, they were able to stay at least a bit above. So what we expect is to have, from Kairos as of today at current assets, a contribution probably a little bit above the breakeven overall, and we expect to exploit significant levers of the company, so increasing in assets and exploiting the fact that we are already have the cost base up and running to catch this growth. The margin -- overall margin of Kairos in terms of client is between 45 bps, so higher than the average margin of Anima. So I don't know if I answered to your question. In terms of project, the project is clearly, as I said, is to position the brand and the company to high-end segment of client base. So we are targeting, with Kairos, ideally private banking segment, family offices, from user in Italy and abroad. So also financial advisors networks. So area where Anima today is present, we have the access. We have -- we also sell to this type of segment, but we were on table in the past to succeed as we did in the retail affluent segment. So we -- our expectation all is to exploit as much as possible the Kairos brand to be able to lock in these market segments. I wouldn't have anything. Do you have additional questions?

No, no, it's clear.

And the second question was...

When will wrappings normalize?

Normalization of wrapping.

And new tenders for institutional mandates coming up?

All right. Wrapping, we expect to normalize, let's say, within the end of the first half. So we are working on it. And we -- and also looking at the market trend, we believe that will normalize pretty soon. In terms of tenders on institutional mandates, yes, there are tenders. This year, there are quite few tenders. Of course, it's difficult to say we'll be able to win or not also because we have tenders also on our existing mandates. So the -- let's say, if we'll be able to do positive on that. Now I think that we'll be able to do so, but it's difficult to make -- to give you an estimate.

[Operator Instructions] The next question is from Adele Palama with UBS.

A quick question on tax rate. I've seen that it's a little bit higher than the fourth quarter. Is there any one-off there? And what's the guidance for the year?

Yes. We -- there is a one-off that is the L'ACE. I don't know how to translate it in English. A tax incentive on capital retention that was canceled by the government, and this impacted the -- overall, I think on a full year impact -- the impact is approximately EUR 2.5 million. And this is already spread across the entire year. So you're already seeing that regardless of its positioning in the calendar. This is basically let's say tax reduction on capital reinvested in the company that used to be in place until last year and was discontinued by the current government starting from 2024. This is not just about Anima, it's, I would say, a regulatory change.

Okay. And sorry, can I do a follow-up on the margin. I didn't catch what's the expectation of the evolution of the margin -- of Anima margin. Like the 16.7%, do you expect that to be stable or to increase?

Well, we believe that, if you look at the -- at our current perimeter, we believe that the margin could remain stable. So we expect margin to remain stable. We may have some slight increase, also driven by the full consolidation of Kairos that is accretive, even though in small numbers. So this, I would say at least stable with some upside.

Okay. Just a quick follow-up on the tax deduction. It's called L'ACE, which means aiuto alla crescita economica; a help to economic growth. And it is basically a deduction of the theoretical yield of capital which is reinvested in the company. It's just to push more companies to reinvest. Not that we needed an incentive, but of course, we did benefit from the tax deduction. And it will not be there starting from this year.

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

Very good. Hopefully, this is not a sign of a lack of interest, but a sign that we answered all the questions properly. Time will tell. Anyway, thanks to everybody for attending today. the next appointment will be on July 31, I feel hot just mentioning that date, for our half year results. And we hope to have you on the line at that time as well. Thank you.

Thank you. Thank you very much.