Anima Holding SpA

MIL:ANIM

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ANIMA Holding First Quarter 2022 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.

[Alessandro d'Eril, executive]

Thank you very much. Hi, everybody, and thank you for attending our first quarter 2022 conference call. As always, I will start with our presentation. And in particular, I would start from Page 4. Summary highlights for the first quarter. In terms of AUM, we are plus 8% if compared to last year, even though we have a decrease -- we show a decrease of assets as compared to end of last year. This was, of course, impacted by negative market trends and in particular, by -- in the low profitable Class I mandates.

Net new money in the first 3 months was positive by EUR 700 million compared with minus EUR 300 million over last year, in the first 3 months of last year. And the mutual funds' performance is a positive in a sense that is well above the average of the Italian industry, although it's negative in an absolute terms, of course.

Looking at the income statement. Total revenues are down 29% if compared to first quarter last year. This is fully explained by the absolute high watermark performance fees at almost 0 in the first quarter of this year. If you look at fixed fees, we are up 7% as compared to last year, and I believe this is the most important thing in this context.

EBITDA, EUR 67.7 million, minus 33% as compared to last year, again, fully impacted by performance fees. I would like to highlight that the EBITDA remained well above 70% of the top line.

Net profit, EUR 30 million, approximately minus 47% as compared to last year, impacted by performance fees, as always, but also about a high tax rate in the quarter, close to 40%, and this is due to the higher intercompany dividend paid by the operating subsidiary. This is fully and fully impacting the quarter and will be normalized during the year.

Page 5. Looking at our business by segment. Retail, 49% of AUM, almost EUR 96 billion of assets. Most important position, BAMI, 31% of the total and BMPS 15% -- 15.4% of the total.

Looking at institutional, no major changes in the composition. Institutional, a little bit more than EUR 100 billion of assets, 91% of which focus on concentrate -- on Class I mandates. Another important position in pension funds, 6% of the total.

Page 6. What -- looking at this quarter, ANIMA flows, our flows were not affected by the market turmoil with the same magnitude as in the first quarter of 2020 with the explosion of the pandemic. And this is very important for us because in a difficult environment with a strongly negative beta that we cannot control, of course. ANIMA has demonstrated again the strength of its business model and, in particular, on products consistently with the last year, as we said since probably 5 years today. We focused again on balanced solutions target date funds and open ended, with a gradual increase in the equity exposure and on PAC, so accumulation plan. This is -- as we always said, this is the appropriate proposition for our type of client, and this has protected the capital of our clients in such a volatile environment.

In terms of performances, the weighted average performance is steadily above the industry average. We've selected outperformances on some products that also provided important flows in terms of net new money, namely European and global equities.

Services, our business model. We -- as you know, we focused always in our story, in our history of training and support to distributor and this has reduced, in our opinion, the panic selling due to the situation, the volatile situation and the context that we faced in the last years -- in the last months.

Page 7. Talking about solutions and products. Here, we got an example that are the PicPac funds proved to be very resilient in such an environment, both in the last 2 months, but also in 2020 with the COVID outbreak. So this strategy aimed at building a global equity portfolio within the fund in a certain time frame in order to not expose the client to the market timing, but reducing the volatility and increasing the equity component of our portfolio during time -- 12, 18 months.

The fund is a smart accumulation mechanism. Of course, our product portfolio managers manages these -- the ramp-up of the equity component and that's proved to be very efficient and very appropriate for our client base. As of March 2022, these strategies raised EUR 1.1 billion of assets.

If you go to performances, as we said before, the weighted average performance during the first quarter is above the Italian industry average of almost 1 point percentage. So again, we continue to perform very well if compared to the rest of the market.

Looking at the breakdown. We always said that we want to focus because this is what we believe is more appropriate for our client base on balance and flexible. And as looking at the comparison with the Italian industry, we see that our core of our offer is in these 2 asset classes. And we will continue to focus there.

Page 9. Some example of products that worked very well. European equities is a total return strategy that proved to be very resilient in 2020 and again, proved this year to be an important strategy. We are raised very well on this strategy and this is performing very well compared to the rest of the market. With this strategy, we are also going abroad in order to raise money from institutionals.

But given that we are -- we have many strategies working very well, moreover, on the equity side, also here, another example, Valore Globale is a global value equity. Very well performing since the beginning of the year, outperforming the rest of the market.

This is to say that ANIMA is also -- I mean, is not only an industrialized machine but has also strong capabilities and skills inside because we continue to invest in our production capabilities.

Services is to support the other leg of our business model. Again, we intensified our presence with our distributors in this period because it is exactly when the volatility increase and the context is tougher that we need to be closer to our distributor. In fact, when the outbreak of the Ukraine crisis came up, we started and we intensified our activity with 9 post on ANIMA blogs, 2 ANIMA Flash. This is only in one week basically when the war started.

28 videos and webinar commenting markets' behaviors and 19 dem sent to promote videos, webinars, posts and analysis. This was all done in order to be closer to our distributor and help them to keep clients avoiding panic selling.

Let's go through the financials, Page 12. The P&L. Well, total revenues down 29%, as I said before, reaching almost EUR 89 million in the quarter. This is properly explained -- almost fully explained by performance fees. Net revenues up plus 7%, EUR 86 million.

EBITDA, EUR 67.7 million, down 33% if compared to last year. Net income, EUR 30 million, minus 47%. Looking at margins on the right side of the page. The good news is that total margins showed a strong resiliency mainly due to the fact -- I mean, the capabilities of to raise on more richest asset classes. And of course, also explained by a significant reduction in the Class 1 AUM that increased the average profitability.

If you look at the cost to income, again, strong capabilities of the company to keep costs under control and to improve the cost to income, excluding performance fees once again. OpEx ratio 4.2 basis points, 4.6 last year.

Last, tax rate, 39% in the quarter. As I said at the beginning, this is due to the increase in intercompany dividend. So the intercompany dividend is paid in the quarter by the operating company to the holding. This is fully taxed in the quarter and it is a one-off in the year. Therefore, the tax rate will normalize during the year. We expect a 34% tax rate for the full year 2022.

Page 13, a focus on management fees. Net fees, management fees, well, the trend reflects lower AUM in the quarter due to the negative market effect that was impacted for almost EUR 7 billion in the quarter.

Placement fees, back to normalized level, as we said end of last year after 2020, fully impacted by the pandemic.

If you look at the cost of the personnel expenses, nothing to top line, moderate cost inflation, the fixed component, variable compensation with an expectation with -- I mean, in our expectation of a lower level compared to last year due to a significant decrease in performance fees.

Net financial position. We continue to generate cash, strong amount of cash. This cash generation is -- I mean, the aim of generating cash for us is flexibility for possible extraordinary transactions, debt reduction, gross debt reduction and additional buyback and share cancellation. We keep, as we did in the last year, we confirm the idea that the cash will be focused on paying dividend with our guidance of 50% of the consolidated net income, with addition -- potentially with additional buyback and share cancellation if we don't see potential M&A income.

Page 15. Performance fee. Given the fact that we wanted to outline a little bit where we are on performance fees, given the strong decrease in the quarter. Just to remind you that the performance fees that we see in our income statement during the year, our performance fees coming from High Water Mark methodology. While at year-end, we register all-in-one performance fees coming from -- driving from benchmark funds.

At the end of Q1, we had and we still have a significant amount of AUM close to the High Water Mark. So we see a potential still in the year to catch important performance fees. Of course, not comparable with last year, but still we see a room to increase significantly this item. We will have to see how markets will evolve and how we'll be able to go through this market.

Closing remarks. Well, we are in a negative beta environment, of course, and this is something that we cannot drive in any way. So we -- but we are also used. Two years ago, we had the pandemic, now we do have the war. And we have to do our job also in negative market conditions.

I think that the results of the company in the quarter are very good. Of course, we see a lot of minus signs, but this is due to the fact that last year, we had an extraordinary Q1. Moreover, on performance fees, as we explained already.

In a negative EBITDA environment, I think that, ANIMA again has been able to deliver positive alpha results. Net flows remain positive across the entire period, and we already released the net flows of retail at positive by almost EUR 400 million. So we continue like this.

Solid investment performance. We are above the industry, and we have some selected outperformances that can help in driving the net flows.

Cost of production and cost income, always strictly under control. We are an industrialized machine with a strong cost discipline, and we will continue to keep this cost discipline also going forward.

ANIMA is -- remain something unique, I think. We have specific skills. We are a sort of boutique but set as a very efficient operating machine, an industrialized machine always remain.

So ANIMA has a unique position in Italy. We have an incredible and unique distribution network and strong capabilities in the company. We are a very lean industrialized machine with a strong and huge network -- distribution network in Italy. So everything will happen in the sector. We know that the financial sector is undergoing strong changes in consolidation process. Everything that will happen, I think, will be an opportunity for ANIMA because ANIMA is some -- is a value, I mean, for every potential combination or transaction.

This is how we look at the sector today. And I thank you for your time, and I remain fully available for your questions.

[Operator]

[Operator Instructions] The first question is from Luigi De Bellis with Equita.

[Luigi De Bellis, analyst]

I have 3 questions. The first one is on the Monte Paschi distribution agreement. Can you provide us an update on the strategy regarding this strategic partner? We have seen some press article talking about the possibility to participate to the capital increase. Can you clarify on this?

The second question on the inflows. We have seen strong inflows in April. You mentioned the positive outlook for the coming quarters. Can you elaborate on this? Some colors about the mix between retail and institutional. And the last question, can you remind us what happened with Credito Valtellinese after the acquisition of Credit Agricole and the main difference compared to the BAMI contract?

[Alessandro d'Eril, executive]

Well, Monte dei Paschi distribution agreement. Well, Monte dei Paschi, as you may find in last year, we were discussing before their -- before starting their discussions with UniCredit, we are discussing with them a potential strengthening of our relationships. And this was in the context of, let's say, [ push out ] for our company.

We are still open to discuss with the bank. I mean we are always open to discuss with our partners in order to strengthen our position on the network. And this has always a price.

And so let's see. I don't have anything else to say. We are not -- as of today, we are not discussing with them any particular item. They are, as far as I understand, that they are working in their industrial plan. We will see in the next few months.

For the time being, the real important thing for our company is that our relationship with the bank is very good. We are doing very well. We are significantly positive with the bank since the beginning of the year. So we are happy with the relationship, and we have to continue like that.

Inflows. Well, inflows, we are positive looking at our reclassified composition of AUM. We are strongly positive on the retail side since the beginning of the year, almost entirely -- I mean, the net new money is almost entirely coming from the retail. And we are positive because we are doing -- we continue to do pretty well. Of course, will depend a lot on the evolution of the context that we cannot control, and it's very difficult today to make forecast on what will happen from a geopolitical standpoint.

Therefore, if the situation will remain like this, more or less, I think that there is room to grow because in a context to where markets are more volatile, where -- we know that we saw a negative performance of all the fixed income arena since the beginning of the year, one of the worst in the history.

So we have some negative but we know that there is a massive amount of money that has to be deployed. And with higher inflation, this is a strong cost for clients. So there is, I think, a strong underlying push to invest. And this, I believe, is something that will help the industry in the next few months. Of course, the geopolitical environment is something that may change the situation.

Creval. Creval, well, the merger has happened. I mean I think it's in place since 26th of April. Our agreement is still there. We are discussing with the bank some adjustment to our agreement in order to be -- keep our position in the network. Of course, alongside to the other partner they have.

I hope that we'll be able to be more precise in the next few weeks.

[Operator]

The next question is from Elena Perini with Intesa Sanpaolo.

[Elena Perini, analyst]

Yes. I've got one question on your margins. You were good in the [indiscernible] quarter and you have explained, this was due to the fact that the decline in the AUM was mainly affecting the Class I insurance business. What is the outlook that you have for your margins for the remaining part of the year? Or at least for the second quarter, also considering that you talked about a strong contribution from the retail on the net inflows?

[Alessandro d'Eril, executive]

Well, I'm positive on the margins because I see a good development of our net inflows. So I mean, we are raising money on -- we are raising rich money. We have to see what will happen in terms of markets because, of course, the market effect on the richest asset classes may affect the average margin. So apart from that, that I cannot control. But looking at our -- the mix that the client -- the mix of product we are selling to the clients and the net inflows that are coming, I am positive on margins.

[Operator]

The next question is from Alberto Villa with Intermonte.

[Alberto Villa, analyst]

A couple of questions from my side. You mentioned during -- when commenting on net inflows that most of the net inflows are coming from the retail. I was wondering if you can give us an update on the outlook for the institutional. Since last time we spoke, if there is any opportunity for new mandates? Or on the contrary, any mandate that might go out that you are aware of in the coming months?

And in the institutional segment, if you see -- how do you see the margins evolution, if any? The second one is on the -- well, some general comments on the last sentence of your presentation, which discussed about the potential positive of combination or consolidation in the Italian banking industry where we touch base many times on that. I understand, but if there is any additional thoughts as of today would be helpful.

[Alessandro d'Eril, executive]

Well, on institutional, I don't have any -- I don't have news or, let's say, something close to be done on the institutional, both on the positive or negative side. So we don't have mandates. We are not about to lose mandates. And also on the positive side, we are running in auctions, but as always, I don't have anything already in hand.

Looking at margins. Again, on institutional, I don't see -- I mean, we see particular pressures or upside. So I would assume that margins on institutional will remain -- apart from the market effect, will remain stable this year.

Consolidation, I don't have particular additional thoughts on that. There are many things undergoing. And many of the things are out of our control. What we can deliver are results, and I hope and I believe we will continue to do so.

As I said, the company is a very good company with a unique positioning. And therefore, we will see once things will happen.

[Operator]

The next question is from Domenico Santoro with HSBC.

[Domenico Santoro, analyst]

It's Domenico, HSBC. A couple of questions, just probably more follow-up, on the question before the colleagues. First of all, on margin, I appreciate -- I mean, to understand what you expect. But I just want to understand more what happened in April? I guess you have a little bit of visibility on the margins monthly. Given that the market effect was more visible in March, I'm just wondering what you're experiencing in terms of margin in April. If it is stability because of the mix of products that you are distributing, they are in a way of setting the market effect, the market performance, which was negative again in April? Or you start to see some deterioration there?

And then on the cost, I guess that if this year is difficult there will be, of course, more attention to cost. So I'm surprised to see variable expenses booked in the quarter given that there is a relationship, if my understanding is correct, between performance fees and this kind of cost. So I'm just wondering whether this is accounting-wise, just something that you booked in expectation of a part of performance fees that you expect to book in the -- at the end of the year during the year. And if there is no performance fees at all, there might be some sort of clawback on that side.

[Alessandro d'Eril, executive]

Right. So Domenico, margins, well, looking at April, given that we are at the fourth of May, it's difficult for me to tell you how will be the trend exactly on April. I don't expect major changes. We had a negative market effect on assets. Of course, I don't believe this would impact significantly the average profitability. So I would say that this is why I'm still positive. And on top of that, I'm seeing the net inflows that are going in the right direction in the sense on more [ richest ] asset classes.

So I wouldn't expect, as of today, impact -- significant impact on the margins. So I would be more -- I could be more precise in the due course of the second quarter, of course.

If I look at cost, the variable is -- the variable accounted in the quarter are not paid, of course, all the variables are paid at the end of the year. So this is the idea that a sort of estimate that we do. The bonuses are not only to portfolio managers, they are not only linked to performance fees. So there are many other elements that can affect the bonuses. For instance, the capability of the company, this is public, so the capability of the company to match the budget targets.

We are conservative in doing this accounting during the year. So we may see at the end of the year if the results would be particularly disappointing, a further decrease in the item as of today is our best estimate, I'd say.

[Domenico Santoro, analyst]

Can I just follow up on your stand on the retail side? I understand that the inflows were positive again in April. This is my understanding. But do you start to see marketing stability to affect more seriously going forward? So there is a level of resistance that might be broken. Or I mean from -- also from the chat with your colleagues, I mean, inflows they continue without any sort of worries?

[Alessandro d'Eril, executive]

Domenico, I think that if we'll remain in a situation that is reasonably stable, close, we will continue to come. If the situation will be -- I mean, it depends very much from the geopolitical situation. As of today, with such an uncertainty, we are already in an uncertain situation, but I think that also in this situation, we can continue to grow and to raise money. If we see something worse, I'm not sure, of course.

So as of today, I can tell you that we are continuing to raise money, and I don't see major changes in the flows.

[Operator]

The next question is from Angeliki Bairaktari with Autonomous Research.

[Angeliki Bairaktari, analyst]

Three questions from my side, please. First of all, can you give us the split of the retail and institutional flows under the old classification, if at all possible, for Q1 2022 and also for April, if that's something that you can disclose?

Second question, in light of the Credit Agricole investment in BAMI, can you -- I would be interested in hearing your thoughts on the implications for ANIMA. And there have been some press articles indicating that Credit Agricole is looking to partner with BAMI on the insurance front. Can you remind us what is the current sort of setup that you have with BAMI with regards to the insurance products that network sales, in particular, unit linked? And if the underwriting were to be taken up by Credit Agricole, would you then have to form a partnership with that bank for unit linked in particular?

And last question, how involved is Poste, one of your main shareholders, in your strategy? And would they have a veto power if you were to engage in more transformational M&A going forward?

[Alessandro d'Eril, executive]

Well, first question, the answer is no. It's that we don't release the data in different ways. So now we reshaped our way to communicate and this is the way we want to bring in the future.

If you look at Credit Agricole, Credit Agricole, well, let's start from the insurance. Our agreement with Banco -- with BAMI on the insurance is that have an agreement that provides us the exclusivity to manage the underlying of all the insurance products distributed by BAMI network until 2038. So regardless who is the partner, we have the right to manage the underlying of the -- of all the insurance products distributed by the bank.

Therefore, if Credit Agricole will sign a partnership with Banco, if Banco will decide to do a joint venture with Credit Agricole or someone else, we will continue to work with the new joint venture like we are doing today.

I don't have other thoughts on the Credit Agricole buying stake in Banco. So I mean, this is looking at our agreement, our agreement with BAMI and our relationship with BAMI is very solid, and we are continuing to work very well. The agreements last 2037 on the mutual fund side and 2038 on the insurance side.

Poste, they don't have any particular veto. The -- Poste is a shareholder with 11% stake. They appointed, in the last Board of Directors appointed 2 years ago, 2 Independent Director, representing their own list for the Board. Absolutely, they don't have any -- they are shareholders like all the others, so they don't have veto on transactions.

[Operator]

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

[Alessandro d'Eril, executive]

Okay. So thank you very much to everybody. Thank you for your time, and see you to the H1 results in July. Thank you very much. Bye-bye.