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 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. Please go ahead, sir.

Thank you. A very warm welcome to everyone connected, and thank you especially for devoting your attention to our results on a midsummer day. Without any further waste of time, I would leave the floor to Alessandro Melzi, our CEO, for his initial remarks. And then, of course, we will open the line to your questions. Thank you, Alessandro, you can go ahead.

Thank you. Thank you, Luca. Hi, everybody. Thank you for attending our midyear conference call. I will bring you through our presentation as always. So I will start from Page 2 from the [ line ]. First of all, an almost EUR 198 billion of assets reached, plus 7% if compared to end of first semester last year, EUR 13 billion up if compared year-on-year. The net inflows registered slightly negative, EUR 300 million. But this is, as we said more than once during this year, is affected by minus EUR 2.1 billion of flows in the so-called wrapping category, a low-economic-impact category of assets that is not linked to our commercial effort. We will get back on it. If we do not consider and we do not consider actually this wrapping component, the commercial trend is very positive as we weren't seeing since quite a while. Our performance in terms of fund is substantially in line with the industry category, and we are doing pretty well. And this has brought our funds -- many of our funds above [ HWM mark in loan ]. If you look at financials, almost EUR 240 million of total revenues, plus 47% if compared to last year. Of course, this is thanks also to generation of performance fees that continued throughout the second quarter. And it's also thanks to the consolidation of 2 months of [ Kairos ] and 6 months of Castello. EBITDA, EUR 176 million approximately of adjusted EBITDA, plus 50% approximately as compared to last year. Margin slightly diluted at 73.6% due to acquisitions that has a higher cost income compared to our historic [ at Anima ]. Almost EUR 119 million of net profit, plus -- almost plus 90% if compared to last year. Excellent cash flow generation. As always, we know that this company is generating a massive amount of cash. The free cash flow remains almost at double digit net of deposits. If you go to Page 3, just to show you the new group structure after the inclusion in the perimeter of Kairos. Basically, under the umbrella -- the Anima Holding umbrella today, we have several brands. First of all, Anima, our [ historical ] company, has more than 100 retail distribution agreements, mainly focusing in managing this type of agreements, so mainly serving an upfront client base and a certain type of institutional, namely in pension funds, typically in Asia and Italy. Kairos, one of Italy's most renowned asset management brands, a brand very much focused on the [ network ] individuals, private banking, [ centered on portfolio ] management, and we will continue to focus the company and the brand in this target market. All our alternative illiquid world, Anima Alternative plus Castello managing real estate and other illiquid type of assets, EUR 4.4 billion of assets today, focusing again, in terms of client base, on a certain type of institutionals and [ network ] individuals or all [ networked ] individuals. Looking at our assets, Page 4, the split of our AUM, let's say that we changed a little bit the highlight of our assets in order to represent also the type of client underlying our distribution model. Basically, we decided to split into B2C, B2B2C and B2B. So this is -- I think this is more clear also for you to better understand how our assets are distributed. On top of that, of course, we also included Kairos and -- on all the Alternative assets. What I believe this table shows is that Anima has been able to diversify in the last years its source of assets and source of revenues, and we'll continue to do so. Growing and diversifying, these are our targets for the future. Looking at Page 5, mutual funds in terms of investment performance, slightly below the industry average. As I said before, this is absolutely explained by a different asset mix. We know that our client base is more conservative. And of course, the performance in our asset mix is in line with our client profile. Page 6, in terms of net flows breakdown, we have some first sign of equity comeback in the second quarter. As you can see from the table, we are slightly positive in terms of equity fundraising. I think as I said more than once, I think this will increase with a decrease of interest rates. Of course, interest rates, the decrease in interest rates is decreasing the interest for fixed income solution for [ pure ] fixed income solutions, and this will increase and [ bump ] back the demand for [ freight ] solutions. The flexible negative number is absolutely explained and fully connected to the wrapping category, and that we will see in a couple of pages. Page 7. As I said before, the overall number is not showing the reality of our commercial effort and the reality of our results because if you look at the B2C retail net inflows, basically the distribution through banks of our products, we are registering numbers that we weren't seeing since 2015. So we did -- the first half is better than the last 8 years, basically, the full year of the last 8. This is very important to me because this is showing the healthiness of our numbers of our results of this semester. And this is coming mainly from our strategic and commercial partners, banks. But it is also a demonstration of the stronger interest of clients, of the client base for managed solutions. And again, of course, I think this will become even more stable and sustainable with a further decrease in interest rates. Page 8, looking at profitability. Again, looking at where our flows come from, large part of flows comes from higher-profitability clients and users with their clients, typically banks, pension funds and institutional mandates. While the asset that we lost, the wrapping component, so funds of funds of the house or Class I insurance mandates are assets with a very low profitability, negligible or very low profitability. Just to remind you, the wrapping component, basically, this -- the vast majority of wrapping outflows represented by funds underlying other funds of the group. [ Equally targeted ] historically, we are investing the equity component through a funds-of-funds mechanism, given that in the last couple of years, we only sold -- we were able only to sell full fixed-income-targeted funds. We had the [ expiration ] of these older funds with duplication of assets, while the [ inflows ] were only accounting for one because they were -- we hadn't this mechanism of funds-of-funds investments. Page 9, consolidated P&L. As I said before, almost EUR 240 million of revenues, plus 47%. This includes a couple of months of Kairos and 6 months of Castello as compared to last year. And of course, there is a strong contribution, EUR 46 million of performance fees. While last year, the contribution was negligible. [ Other ] expenses affected as the revenues component by the 2 acquisitions by the consolidation of the change of perimeter basically. EBITDA adjusted plus 51% if compared to last year, always including the 2 acquisitions. Another thing to remark on dividends. At the bottom of the table, these are dividends from the -- from our stake in Monte dei Paschi. As you may remind, we subscribed, a couple of years ago, the capital increase. We still own approximately a 1% stake in the bank, and the EUR 3 million are the dividend paid by the bank for the first time since years. Net income, EUR 118 -- almost EUR 119 million, almost plus 90 percentage compared to last year. Looking at the right side of the page, margins, the profitability of AUM increased. This is explained by a mix factor, very important, I think, a favorable asset mix factor. And of course, it's further boosted by Castello and Kairos that has an average profitability higher than the Anima one. Looking at cost. We increased the top line, but we also bought in, with the acquisitions, company with a higher-cost income if compared to Anima, and this is slightly increasing our cost-income ratio ex-performance fees that still remain among one of the industry's lowest. Net financial income, just to remind you that in 2023, we had -- we registered a EUR 4 million one-off revenue because we decided to unwind the [ way ] we closed bank financing with the unwinding of the hedging derivative. And this year, of course, we don't have any extraordinary. The net financial income is basically the investment of our liquidity in term deposit [ and income ] accounts and B2Bs. Looking at tax rate, the tax rate is unusually low. This is explained by a badwill income that is not taxable. The badwill is related to the Kairos acquisition and lower level of dividend coming from subsidiaries and the related taxation and a step-up of goodwill related to the Castello acquisition. We decided to, again, do to pay in advance taxes that will provide you -- would provide us with a long-term benefit in terms of taxation. And this is registered with a net income increase or lower taxation of EUR 6 million in the semester. Page 10. Just to give you a net income bridge to be more clear of differences -- on differences from last year to 2024. I would say that the main explanation to the jump in terms of net income are performance fees that are important and other EBITDA, of course. Other EBITDA meaning increase in revenues, net commissions and other revenues and the badwill revenue that I already explained. Page 11. The total revenues, ex-performance fees. This will be -- is a table showing the trend of our total revenues by quarter. All sources of revenues are increasing following, of course, the asset trend. There is a structural increase in other income since the beginning of 2024 following the internalization of some services of some back-office services that we [ internalize ], and this has brought a significant increase in terms of revenues. These are part of the actions that we did in the last couple of years in order to extract further efficiency at company level in difficult periods. Looking at personnel expenses, Page 12. Costs are stable apart from variation of perimeter, of course. We registered a spike in the last year 4 quarter due to the new national labor contract, as you may remind. But apart from that now, we are on a stable trend. Variable component is, of course, related to the -- despite is related to the trend of performance fees to the strong increase of performance fees compared to last year. Page 13, net financial income will continue to improve. We have been able to continue to extract value from the investment of the liquidity sitting on current accounts of the company. I think this is, as I said before, for the back office activity. I think this is the demonstration of our capability as a company to maximize the value in all the situations, in all the market situations because I think the company has a DNA of trying to extract value from all the income-statement items in all the situations. Page 14, consolidated NFP. Basically, the trend of our NFP is following the trend of our income statement. So strong generation of the company. Cash generation of the company is demonstrated year-to-year. And the NFP that we are registering here, reporting here includes the payment of dividend in May to shareholders, almost EUR 80 million of dividend, EUR 14 million of [indiscernible] share buyback. This is part of the ongoing EUR 40 million program. Today, we reached EUR 25 million of buyback. So we are in line with the -- with our expectations. The buyback probably will be terminated -- will be completed by mid-September approximately. EUR 7 million of substitute tax and so on and so forth. I think that the -- as I said, I'm always saying that, but I strongly believe so, is the our NFP leaves the company open to all the strategic potential development. So extraordinary transactions, so we have, I think, still a huge probability to pursue potential additional transactions, of course, if available. Page 15, closing remarks. I think that we did a very positive first half from all point of views. We worked very well in the last 2 years, the difficult years, of course, as we all know; and now we are reaping the fruits of the work that we've done. Net inflows outstanding in quantity because, as I said before, this was the best looking at our retail. B2C was the best year since 2015. In quality because, of course, we are raising money where we need to raise money, where it's more profitable, where we -- it's more important for us and for the future of the company. This is also shown by the AUM profitability because we are improving our product mix, and we believe it's not a short-time brand. Castello is bringing -- well, we did a lot of work, a massive amount of work in integrating the company in the last year. We launched successful initiatives. We are launching, in Castello, Anima Alternative, several illiquid initiatives. We're working a lot with a big synergy -- a huge synergy within the group in order to exploit all our selling capabilities and product capabilities. Of course, Castello is also bringing a higher profitability, so -- and a different trend in the -- of assets with more stability. So we are very happy with the acquisition. Kairos as well, I think that Luca said a certified bargain. But I think this, of course, is a [ bargain ]. And I think that we started very well. The company is reacting very well to the acquisition. We have been able to stabilize the situation where the previous -- let's say, previous shareholder, I mean, left the company a little bit without a leadership, coming from the shareholder. And I think that we are now stabilizing the situation, reinvesting in people, technology, and we'll continue to do so in order to relaunch the company that has a brand very important in the country and with a strong potential. Fiscal optimization. I mean, it's not only fiscal optimization. As I said, this company has a DNA in order to exploit all the potential opportunities laying on the table. On the fiscal side, the [ cost ] is [ investing ] liquidity. So we -- I think that our company is very good in exploiting at best the weapon as in hand. Cash flow, another demonstration, again, of our capability to generate cash. The company has always been generating a massive amount of cash also in difficult years. Now, we are benefiting from a different market environment, from different results. We will continue, and we will increase our cash flow generation capability. And of course, as a derivative of cash flow generation, today, we have an unleveraged branch balance sheet that give us all the flexibility, the potential flexibility in order to catch potential opportunities on the market, in terms of acquisition and remunerating our shareholders accordingly and in line with the guidance that we provided -- absolutely in line with the guidance we provided in May. So happy to hear your question. And go ahead, please.

[Operator Instructions] Yes, please. So if we can open. I know that we already have some registered askers. So this will be the time to open the Q&A session. Please go ahead.

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

Yes. The first one is on the B2C retail flows, the EUR 1.15 billion at Page 7. I know you don't usually comment about your distributors, but I was wondering if we can see the contribution more of BAMI or Paschi? Or it is equally split? Or if you can give us a bit of color on that? The second is on the improvement in margins ex-Castello, ex-Kairos. You mentioned in the chart that there is a better mix explaining this. But actually, if I look at the asset mix on Page 5, the same chart last year was showing more flexible and lower bond funds. So in terms of breakdown by category, what has gone up is the percentage of bond funds in the mix. So how should we read this improvement in margins? Is there maybe a link to an entry fee component of target maturity products or there is any other reading of that increasing margins? The last one is, on your speech, you mentioned lower dividends from subsidiaries to explain the decline in the tax rate, if I understood correctly. Can you elaborate a bit more what is the incidence of this lower dividend upstream? And why it was so, given that numbers were certainly better this semester?

Luca, here I am. On net flows, well, BAMI and Paschi are doing very well, both of them. But we have to say that also our partners [ critical ] Italy and all the smaller banks are doing very well, so far better than last year. So I would say that the trend is coherent, looking at all our set of partners. Of course, BAMI and Monte are contributing -- given also the size and importance for us, contributing the largest part of the positive number. If you look at margin mix, well, the mix, first of all, what I meant with the mix is that given that we had a decrease in the Class 1 large mandates we have, traditional life insurance, this has brought an increase, given the lower profitability of -- these [ assets ] have brought an increase of our average profitability. But elaborating a little bit on that, it's true that we lost more flexible, and we -- and today, we have more fixed income -- as a category, more fixed-income product than flexible. But first of all, the flexible that we lost were mainly related to the wrapping component with very low profitability for us, almost negligible. Second point, the fixed income component. Fixed income categories today are richer because if compared to the previous situation where we had zero or negative interest rates, today, we are able to launch fixed-income products into the target date with an increased pricing, absolutely sustainable by the expected return of these funds, but an increased pricing far higher than before. So these are the elements that are sustaining or increasing our average profitability.

Is there also an entry fee component in the target maturity?

Yes, there is an entry fee component, but -- this is shown on Page 11. The net placement fees, this is the part of -- this is basically what we retain when we place target date. So as you can see, I mean, yes, of course, it increased compared to the previous year. So there is a slight increase, but is a part of the explanation. The lower -- the dividend [ infra ] grupo, the [indiscernible] dividend, looking at the notes that Luca is -- do you want to explain it?

Yes. Although I have to partially contradict you, so I hope that I still have a job after this. But the [ infra ] group dividends are actually raising the tax rate a little bit, not to a very significant level. But they pertain to, of course, to the previous year. So this year, the holding company received roughly EUR 200 million versus the EUR 180 million in the last year. And the dividends, of course, are not shown in the P&L, but they are subject to taxes. So they do marginally increase the tax rate. The dividend that Alessandro had in his mind was the Banca -- the MPS dividend, Monte Paschi dividend which is taxed at a much lower rate than our regular revenues, at around 4%. So that dividend has actually a dilutive effect on our tax rate. And I will send my CV around and hope that he will be kind.

If Luca is happy with the answer, you still have a job.

Next question is from Alberto Villa, Intermonte.

Going back to inflows, clearly, a strong first half of the year for retail. Are you expecting this trend to continue? Maybe you can anticipate something about what has happened in July? And yesterday in the presentation, Poste was also outlining a very strong net inflows into asset management in the first half and was pointing out that in the second part of the year, there will be probably less asset management and more insurance. I was wondering if you will capture this opportunity also on the insurance side from Poste. The second question is on the -- still on inflows. Should we expect the fund -- underlying fund component that will continue to have the same, let's say, amount of magnitude in the coming months, where we should expect this factor to decline, going forward? And the last one is related to the performance fees that clearly were very strong. Maybe -- I was wondering if there is any contribution from the acquisition in terms of performance fees? And how should we model in the future the potential contribution that could come from Kairos, specifically in terms of performance? It is all end of the year is our -- maybe you can elaborate a little bit on how we should look at this, going forward.

Look, well, July, we did very well. I think that the trend is continuing, as far as I can see. The performance in terms of net inflows is solid. We continue to raise money, and the banks -- the activity is very -- is continuing. We are doing very well also on the -- we did very well in the last period also on institutional component. So I think July is strong. Poste, we do not account Poste as B2C. So the number, the EUR 1.1 billion that we showed before is not including Poste. With Poste, we did a product that did very well in the last 3 months. They -- as they said, of course, they will focus more, and we know that -- I mean, they told us that we'd focus more on the insurance component for the last part of the year, but we work with them also on the part. So I'm not particularly worried. And in any case, this is not affecting the B2C item that we showed before. But I'm positive with Poste to do -- to continue to work very well. And I'm positive also to be to a positive number from here to the end of the year with them, not considering the [ like ] traditional component, the [indiscernible]. [indiscernible], yes, should be decreasing and is decreasing a little bit. What will be [ planned ] underlying on this component is, I mean, how can we stop this component to affect us, is -- well, we -- first of all, we need to -- a little bit the interest rates to go down in order to restart with products include target date, including an [ equity ] component. And we are also -- we also started managing the [ yield ] component of these funds through a funds-of-funds mechanism. So this will probably counterbalance a little bit this item. I think that for this year, we will continue to have this component affecting our numbers. Probably with a lower magnitude, but still, this noise will be there for the next few months. In terms of performance fees coming from Kairos, yes, there is a contribution. It's not a huge contribution. It's also because we have to consider that we only have 2 months of Kairos included in our...

Okay. Seems like we also received a question via e-mail regarding the contribution of Kairos to the commissions. I believe this is the perfect time to disclose them as expected because it was largely proportional to the numbers that we announced about Kairos at the time of the acquisition. The total commissions were in the range of EUR 5 million, of which a little bit more than EUR 1 million was in performance fees and the remainder was in management fees for the 2 months, exactly. This is 1/5 of the regular year, of course, talking about management fees. In terms of performance fees, time will tell. Sorry, if you -- don't know if you need to complete...

No, no, no, I'm fine. Okay.

Next question is from Filippo Prini, Kepler.

A couple of questions. First, on your variable cost, is it correct that at some point, the variable cost -- should there be a sort of cap and performance fee on [indiscernible] you should not reflect the same level of variable costs that you have seen in the first semester? And the second is mostly clarification. Could you confirm that the 50% dividend payout will apply to also add this [ one-off ] component of the second quarter, I mean, the badwill of Kairos and the fiscal [ take-up ] of goodwill of Castello?

On variable cost, there is a cap, yes, there's a cap. Of course, there is a regulatory cap for bonuses. And for -- and then there are, let's say, certain type of mechanism of payout to managers related to the funds they are managing. I think that the -- I mean, we are absolutely not close to the cap as of today. So -- but there is still [ free ] space for the bonuses to grow, of course, if we see more revenues coming -- more performance fees coming. The 50% guidance, of course, is applied to the, as I said, the register consolidated net income, so also including the extraordinary components.

The next question is from Adele Palama, UBS.

A couple of questions from me. So the first one is if you can give us a guidance on the other revenues, given that the run rate seems to be higher and in line with the previous quarter. And then I -- so this question was already asked, but just a clarification on the management fee margin expansion. I mean, do you expect the 17 basis points to remain sort of stable from this point onwards? Or -- and if there is any impact from the management fee of the AUM from Kairos on that expansion? And that's it.

Well, the guidance on other revenues, the other revenues are sort of linear. So we expect more or less a -- I mean because there are several components within the other revenues, but they should be -- the revenue profile should be linear during the year, more or less. Of course, also related to the assets, but if the assets, we continue to grow or stay there, you should expect the trend of the other revenues to continue as in the first part of the year. On the management fees, what was the question?

The margin expansion...

The margin expansion -- of course, yes, we should expect actually a little bit of increase -- technical increase coming from the fact that we'll consolidate Kairos that has a higher margin. In terms of topline, we will consolidate Kairos on the full year. It's a small effect, apart from Kairos and swing in the Class 1 traditional life insurance that is difficult for me to forecast. Apart from that, I don't expect a major increase from now on.

Okay. Can I add another question, sorry, into the other expenses, which is the contribution from Kairos for the quarter ?

Negligible. EUR 40,000.

Yes, around EUR 40,000, so negligible.

The next question is from Azzurra Guelfi, Citi.

Two quick questions. One is on cash flow. You have demonstrated the still-strong capital generation. And I was wondering if you would prefer to consider -- or if you see opportunity for other [ floor ] acquisition to further strengthening your strategy into Alternative, for example? Or if you would be more inclined on capital return? The second one is on Kairos, and it's really more a color on than number. Is there anything that surprised you once you have started to consolidate Kairos and you are now into the company? And how this is reacting? And how do you think you can accelerate the asset growth and efficiency?

Azzurra, well, acquisitions, let's say, acquisitions are in our DNA. We -- sometimes I say we are content to grow because I believe that in this sector, size matters. It's important to have a critical mass in order to be able to compete. So I think we will continue to scout and look for opportunities. Given the acquisition we have done in the last years, today, we are able to look at different type of acquisitions. So we are not only looking for the typical Anima target companies, asset management companies related to or linked to distribution that could be acquired and integrated very quickly with strong cost synergies, but always targeting the same market, the same type of clients, to be simple. But now, we also may look at potential target on the Alternative business in order to enlarge our platform [ to ] exploit synergies on the asset classes we already manage or looking at potential boutique to strengthen the [ arabilities ], for instance, in order to be able to sell -- to have more weapon to compete and more power to [indiscernible] our clients as well as, for instance, increasing our -- this is one of our targets, increasing our private banking network, of course, always targeting [ ultrahigh-net-worth ] individuals, but maybe also adding new colleagues in order to be able to catch additional assets. So these are targets that we have in mind. We do have nothing concrete today. We are working a lot in the integration of the companies we acquired. So we already have many things to do. Preference, we don't have a preference of doing acquisition or remunerating our shoulders. We want to do both. We know that we have and we want to remunerate our shareholders. I think we have the opportunities to do so, and we will continue in this direction. Colleagues are reminding me that we did a very small -- no, we're not doing it. We're looking at small, a very small acquisitions in the real estate, for instance, just to give you an idea; that will be closed in the next few days, very small shop in investment, just to give you an idea. But this is just to give you -- just to tell you that we are active in several types of market today. Kairos, what we found in the company, no surprises. I think that -- I mean we knew Kairos pretty well. We also -- the person working Kairos, we -- Italian market is small, so we know each other pretty well. We have been able to retain all the most important people, all the people that we wanted to retain. So no surprises from this standpoint. We did -- the mood has changed very quickly in a positive direction. So I think that all -- we have all the underlying to do very well. Now we have to work. I mean it's only 2 months.

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

Just one question left for me on Kairos and Anima just a follow-up. If you can elaborate on your expectation on the evolution of asset under management net inflows by year-end for the 2 entities? If -- do you expect a material contribution to net inflows already this year or next year?

You mean Castello on one side and Kairos on the other, I suppose? Okay. Well, the positive contribution of net inflows is already there. Castello is positive, Kairos is positive, 2 months, but is positive. Not big numbers, but I mean we are happy to see that in proportion to their sizes, these are important signs and important contribution. What we released to the market and we said to the market in terms of target in our first quarter call that we expect to double the size of the asset of this -- of the -- let's say, of the Kairos plus Alternative perimeter in 5 years and doing -- in terms of [ EBITDA ] during times 4. This is our target that we believe is receivable. The signs that we are seeing from the first month, the first year of Castello -- because of Castello, very positive. And so we are absolutely -- we strongly believe that we can reach these targets.

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

Okay. Thank you. Well, we think that we delivered most of the messages that we wanted to deliver. We hope that will be well received by the market. As usual, the Investor Relations office is available for any inquiries or in-depth analysis of any of the topics that we touched on today. So I would like to take the chance to thank Alessandro for his time today. Thank you, especially you and the audience, for your time today. And the next appointment will be on November 6 for our 9 months results, which hopefully are going to be at least as exciting as this.

Thanks. Thank you. Bye-bye.