Anima Holding SpA (ANIM) Earnings Call Transcript & Summary

Everyone connected, ladies and gentlemen, I'm very grateful that you found the time to follow Anima's results on such a busy day full with company results and other news. Without any further wait, I would like to give the microphone to Alessandro Melzi, our Chief Executive Officer and General Manager, who will comment the figures that we just published for you. And of course, we will wait for your questions at the end. Please, Alessandro.

Thank you, Luca. Thank you, everybody, for attending our conference call, and hi, everybody. Well, I'll bring you through, take you through our presentation as always. I'll start from Page three with the highlights of our nine months 2024. We reached at the end of September EUR 203 billion of assets. It is not our highest level in our history but is very close to it. We've actually AuM up EUR 19 billion approximately year-on-year. This was due to market effect, of course, but also to inflows that were particularly strong in our retail component, in particular, from our partner banks. Institutional category was satisfactory in the nine months. Just to remind you that we registered in the period, minus EUR 2.6 billion of funds underlying our funds, the category that we call wrapping, but we will get back to it. Positive performance of our funds with several funds above the high watermark, as you can also see from our important level of performance fees this year. In fact, in Q3, we continue to generate performance with a significant level of performance fees. The EBITDA margin is stably over 70%, notwithstanding the acquisitions that we closed in particular Kairos from the 2nd of May and Castello last year that impacted dilutive effect to the margin, and this was fully expected. We continue to generate a significant amount of cash, as always, but we will get back to it. Page four, just to remind you, our group structure after the two acquisitions. Today, Anima Holding is the company leading the group and the listed company. As we already said, but I would like to remind you that our strategy is to focus with the Anima brand and we are with our company, the largest one with EUR 193 billion of assets. We will continue to focus on retail and affluent, on the retail and affluent client base, mainly served through our banking and retail distribution networks. Kairos and our alternative business unit will focus more on institutional and high net worth individuals. Today, as you can see, we almost, we have more than EUR 10 billion of assets already in this business unit. We continue -- we expect a strong growth from the companies from these type of businesses. Page five. If you look at the split of our assets, on the left side of the page, we have, we show the retail. We intend as retail B2C and B2B2C. We reached EUR 105 billion of assets, 51% of the total with this type of clients. The pure institutional, the B2B on the right side of the page, EUR 99 billion of assets. Page six, our performances. We are very close to the Italian average. The slight underperformance is fully explained by our more conservative asset mix in respect of the Italian industry. This is one of our characteristics. Of course, we are more skewed towards flexible and balanced funds and bond with less pure equity funds. And this is driven by the demand of our clients, of course. Page seven. Even though the equity component is not our main asset class, we are seeing that equity appetite from the retail customers is increasing in the last two quarters, as you can see from our net inflows. And this is driven also by the rate cut that is, and will continue, we believe, in the next few months, will provide more appetite for equity risk in respect to the fixed income component that was in the last couple of years was basically the sole asset class sold. On the flexible outflows, as you can see on the blue chart, the blue bar is fully explained by the wrapping category. Page eight. If you look a little bit more into that in our net inflows of the year, EUR 3.3 billion comes from fund users, retail clients, pension funds & other institutional mandates. As I already said, all the basically the outflows are explained by the wrapping component, funds underlying funds and Class 1 insurance mandates. So, all the outflows basically have very low, if not meaningless profitability for the company. All the inflows are focused on the more juicy asset classes for us. Just to remind you, the vast majority of wrapping is represented by funds underlying our funds and mainly on target-date funds products. Page nine. Looking at a little bit more at our retail component. This is the B2C, purely the B2C. So if you want the most interesting and juicy component of our flows. This is the strongest year in the last 9. We almost reached EUR 1.8 billion. And I think that this is a really important qualitative indicator for our inflows. These inflows comes from mainly from our strategic and commercial banks partners and demonstrate the interest of the client, if you want the renewed interest of the client in our solutions and also the interest of our distributor in getting back to commissions and looking at commissions with more interest if compared to the last couple of years. If you look also at the trend of interest rates that this is the main driver for the demand of clients and our distributors, I think that this is a trend that will continue in the next few months at least. Page 10, not only the macro is driving the demand of our distributor and clients, but also I think our capability to stay in the market and the appreciation from our partners of the job that Anima is able to do every day. This is a slide showing a sample of almost 1,000 representatives interviewed by an independent company doing this job for Anima a couple of times a year. And as you can see, the interest and the support provided by Anima is increasingly perceived as important by our distributor and our clients. And I think that this is a key element of the success of our company in doing our retail business. Page 11, some numbers. We changed a little bit the way we show the numbers to you. We, basically, the first column is the nine months statutory. Then we also included a like-for-like nine months and of course, the last year nine months. Looking at the percentage increases, I think that the most important thing is that we were able to increase our net revenues both year-on-year and more importantly, probably on year-on-year like-for-like, 20% year-on-year, 11% plus on the like-for-like. Total revenues, of course, increased even more 48%, 37% and this is mainly, is driven entirely by performance fees that increased significantly this year. If you look at the EBITDA adjusted level, we are almost at plus 50% if compared to last year. Net income, plus 78% if compared to last year, both on the like-for-like and on the statutory change. Looking at the margins on the right side of the page, I think this is a key element. Our profitability of AuM increased for several factors, mix improvement, pricing of new products and of course, the consolidation of Castello and Kairos that brings an average, a higher average profitability. On the cost/income side, the ratio ex performance fees is still among the industry lowest. The increase compared to our last reporting is fully explained by the consolidation of the acquired companies, as we already said and explained in the last calls. Tax rate, 28% approximately year-to-date. This is explained by a couple of items, the badwill income from Kairos, the dividends, intercompany dividends and the step-up of goodwill related to the Castello acquisition with a net benefit of EUR 6 million. Page 12. Net income bridge to explain the big jump that we registered in net income if compared to last year. The major elements are performance fees, of course, as we already said, almost EUR 64 million in the nine months. Other EBITDA, this is the increase in revenues, other revenues and management fees of almost EUR 20 million. And then other major policies items, the badwill revenue and the BMPS revenue BMPS dividend, as you may remind, we hold a 1% stake in the bank. We subscribed the capital increase a couple of years ago, and this is the first year of dividend that we saw. Page 13, revenues by quarter. I think it's very important to underline the structural increase in our other income item. This is explained by the internalization of some service rendered by providers on the mutual fund side, and this is structural. Placement fees increased in respect to the last years, and this is thanks to the gross placement activity, the very important gross placement activity done in the nine months. But again, also on the recurring fees at the recurring fees level, we see structural increase explained by asset mix, product pricing and the newly acquired companies with a higher top line profitability. Personnel expenses, Page 14. Costs are stable after the Q4 of last year, spike explained by the renewal of national labor contract. We apply the credit labor contract. So, we saw the increase as all the banks and all the financial sector in Italy. Apart from that, then we see that the, let's say, the item is absolutely stable. We have an increase in the variable component, and this is entirely related to the very good results of the year and in particular, the performance fees item registered in the nine months. Of course, this is an estimate. Page 15, financial position. The company continued to generate a huge amount of cash as we always did. We continue to be able to pay back our shareholders. This year, we paid almost EUR 80 million of dividend in May. We closed EUR 40 million share buyback in September. And we believe that we'll be able to continue to do so, even being able to catch strategic opportunities always focusing on strengthening our business and allowing us to be able to grow more in the future. Page 16, we wanted to show you a little bit, with a little bit more of details our return on liquidity, the liquidity that we manage on our balance sheet. As you can see, we have a cost, and this is the cost related to the outstanding bond for almost EUR 580 million. But we also wanted to show you the capability of the company to manage revenues from the liquidity, and this is driven by interest rates, of course, and the managing of our own portfolio invested in Anima. And in the last, let's say, in the third quarter did particularly well. Page 17, some closing remarks. I would say that we continue to improve our asset mix as a company. Class 1 insurance mandates and the wrapping category are optically showing negative flows for the company. But in reality, these are the low -- the less profitable asset classes that we manage. And so, in terms of average profitability, we are increasing our average profitability, increasing our capability to generate revenues on the most juicy asset classes. Of course, market effect on AuM benefit from rate cuts. And we believe that this will continue for the next few months if the interest rates will go further down as we expect. Castello brought a structural increase in share of alternative funds in liquid assets. We have a totally different dynamics also in terms of inflows and also in terms of stability of the assets if compared to our historical business. I think this is very important in terms of commercial synergy we can have on certain type of clients, mainly institutional and high net worth and ultra-net worth individuals, we will continue to push in this direction. Kairos, one year since the signing, we signed the deal in November last year. We already have EUR 1 billion more than what we bought. I think that the acquisition will be a successful, a very successful acquisition. Of course, we are diversifying our business also with Kairos. We still have to do a lot of work, but we are in the right direction. Internalization of fund services, we already talked about it. This is, it's over. It's over the, let's say, the process, but the profitability will continue. The increased profitability will continue and will remain there. Total firepower for our M&A activity. We said EUR 500 million a few months ago, looking at our capability to generate cash and to do our ordinary activity. Today, we estimate we have EUR 600 million of firepower potential. This is post expected 2024 dividend. End of my messages, we confirm our 75% shareholder remuneration commitment, dividend plus buyback over a 5-year period. The first year, basically, we already did it, and we will continue like that. I thank you, and I'll remain fully available for your questions.

[Operator Instructions] The first question today comes from Luigi De Bellis.

I have 4 questions. The first one is on the flows. So, what is the trend in October and the expectation for Q4, both institutional and retail? Second question on the cost side. What is your outlook for operating cost in Q4 and 2025? The third question on the performance fees. So, could we see some performance fees in Q4 to help the top line also in the last quarter? And the last question, can you provide an update on the expected contribution from Kairos and Castello in terms of net inflows. So, you mentioned EUR 1 billion of growth of Kairos in terms of total asset. How much is net inflows net of market effect? And has the number of private bankers remained stable since the acquisition?

Okay. Well, I'll start from the last one. Private bankers of Kairos, they all remained. Let's say, as far as I understand, they are happy with the new project, and they are all with us. Now the challenge for us, and we're already working on that will be to attract others to join the project. The contribution of the 2 companies, as of today, they are both positive in terms of net inflows. Kairos since the closing, 2nd of May and Castello year-to-date. So, they are contributing positively, both of them. Let me check year-to-date. So, we jointly, they are contributing more than EUR 600 million of net inflows in the year. That for us is a good number. Of course, our aspiration is to do better, but we are happy; I mean, this pretty young acquisition is already positively contributing to us. Performance fees, we expect performance fees also in the fourth quarter. How much is always difficult, but we already been able to cash in some. We hope we'll do something more from now on to the end of the year. October well, the trend of net inflows are very similar, very similar to what we saw in the first part of the year. I see the retail still strong. And I think that this trend will continue because the decrease in interest rate is benefiting, as I said before, let's say, the willingness of clients to invest in our managed solution and the willingness of banks and distribution networks to push more on commissions. So I continue to stay positive on that. In terms of cost, as I said before, of course, the 2 acquisitions are dilutive in terms of cost income for us. Castello this year is fully I mean; the impact of Castello is fully reflected by our numbers this year. The impact of Kairos is not fully reflected because Kairos is consolidated since the 2nd of May. Therefore, we will have a further worsening of our cost income given that Kairos has a cost income higher than the average of the group.

Our next question now comes from Alberto Villa from Intermonte SIM S.p.A

One question is on the very high firepower you have for M&A, EUR 600 million. I was wondering if you are actively looking at opportunities or it is something that is more like a, let's say, long-term possibility or maybe you already identified something interesting that you might be chase in the future to enlarge your, let's say, offering of investment strategies or something in the distribution as well. The second question is more like let's say, a question on what you're expecting as a run rate for the other income the last 2 quarters, can we take it as a sort of run rate for the future in terms of other income? And finally, on the tax rate, it was low for the reason you explained. So, I was wondering if you can give us an idea of the tax rate you're expecting for the full year and also for 2025.

Sorry, Alberto, but Lucas, I'm probably unmuting the new system. All right. Starting from the M&A, we are always active. I mean we screen the market in Italy and abroad in order to see if there are some opportunities not to be missed. And moreover, today, we can also look at different type of acquisitions because we are not only looking at potential strengthening or increasing our distribution power, but we're also looking at potential opportunities on the alternative side and also on the private banking side. So we are looking at things around, not particularly relevant in terms of size, but interesting for potential further development of our business model. So yes, the answer is we continue to be active on that.

Sorry, Alessandro, if I may, it's Italy or also something out of Italy?

Today, it's mainly Italy. Even though we are scouting also small things in Europe to strengthen some of our capabilities. But today, the more, if you want, concrete things are in Italy. The run rate of other revenues, yes, you can take the last 2 quarters. This is a good proxy of what you can expect. Well, tax rate for this year, we estimate 29% approximately. Next year, 32%, more or less in line with our historical tax rate if we don't have particular one-off items.

Currently, we do not have any questions queued. So, we will wait just a few moments to give everyone the opportunity to raise their hand. As there are no further questions, I will now hand back to the speakers for any final comments before bringing this presentation to a close. Thank you. Please go ahead.

Thank you, Rebecca, and thanks to everyone who attended. And once again, we realized that this presentation fell on a very busy day. We do not have a next appointment yet because our financial calendar will be announced probably in early December or as soon as the Board will decide on it. Anyway, it will be a pleasure to see you again. And if we don't have an opportunity to meet in the near future, please accept my best wishes for the holiday season. Thank you.

Thank you all, and bye-bye.