Anima Holding SpA

MIL:ANIM

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ANIMA Holding's First Quarter 2023 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the.

Conference over to Mr. Alessandro Melzi, CEO of Anima Holding. Please go ahead, sir.

[Alessandro d'Eril, executive]

Thank you very much. Thank you, everybody, for attending our Q1 2023 conference call. As usual, I'll bring you through our presentation, and then I'll leave you -- we'll have some time for a Q&A session.

So I will start from Page 4 of the presentation with some highlights First of all, just to highlight that the total EM increased by approximately EUR 5 billion in the quarter. This is good news in respect of what happened last year. Net flows are influenced by a repositioning of our client base. We pull more towards fixed income products. We had -- we suffered an exit of a large mandate pension fund mandate in the quarter that affected our institutional net flows.

If you look at the performance back to black. So the average performance in the quarter is positive. We have established stable margins even though we suffered a decrease in fees because of lower average AUM in the quarter. Total revenues anyway, ex performance fees were up both in respect -- in terms of profitability, in terms of this point were up both on Q-on-Q year-on-year. This is also thanks to the gross flows and the connected trading and administrative fees. The EBITDA is stable over 70% in terms of margin, thanks to our resilience on the top line and our cultural cost efficiency. Brazilian cash flow, the company continued to generate a high amount of cash as demonstrated last year and we'll continue to do so for 2023.

Page 5, looking at the structure of ANIMA. We had some -- we have some change to highlight in the last -- that happened in the last period. If you look at the shareholder structure, first of all, we have some new entry in the last 2, 3 months. As you can see from the chart, BAMI is still the largest shareholder with almost 22% of the capital. Poste Italiane, 11.6%. Fondo Strategico Italiano entered in our shareholder base in February to a reverse accelerated building 9.5%. An Caltagirone Group, 3.4%. All the shareholders have expressed director, at least a director in the renewal of our board in March. So we have a composition of the board today that is expressing and is representing clearly our shareholder base.

The governance is still very much independent. The Chairman plus other 6 directors are independent, over 11 directors. If you look at the structure of the group, we also had some change in terms of companies in the sense that we merged effective since 1st of January 2023. ANIMA Asset Manager Limited, so our Irish company is now ANIMA ALTERNATIVE. And hopefully, in the next few weeks, we'll be able to close our Castello acquisition that we released in February. 80% of the company will be acquired and now we are only waiting for the approval of Bank of Italy.

Business by segment, Page 6, 50-50 Retail and Institutional, nothing particular to be highlighted, as always, BAMI and the MPS representing the largest part of our retail business.

Page 7, looking at the performance of our funds. The WAP is below the average of the industry in the quarter. This is mainly due to the lower equity exposure of the company compared to the sector. We, as you know, ANIMA, as highlighted in the right part of the chart -- of the page on the chart, the key focus of our assets is on flexible and balanced with bond increasing in the last period, and then we'll get back on it.

Page 8, flows. If you look at the highest part on this page, I think that one of the key elements of the quarter is that we are back to -- we are positive on the retail, excluding the wrap component, and then we'll look at wrap more in detail. But I think this is a very important sign because we are seeing that our client base is still active. There is a lot of gross activity and the networks are keeping maintaining the -- retain the assets pretty well, even if we take into consideration the period and that is not easy for the sector. But I think this is a clear positive sign also for the in the future.

On the institutional side, as we said before, we suffer a loss of a large mandate. It's not explaining on the lowest part of the page. Pension fund, we lost a EUR 400 million mandate on the pension fund side, and this affected clearly the net flows of the quarter.

Page 9. Looking more in detail in terms of asset classes. Net flows, as you can see, highlight repositioning towards fixed income. This was expected by the increase of interest rates. We will get back structuring products, full fixed income products. And I think that this could be -- for us, is not negative because as we always said, I mean, we are a company with a large component of fixed income and heavy positive interest rates is a positive [indiscernible] for us. We suffered last year, of course, because of the mark to market, but today, we look at the future in a positive way.

Flexible funds, negative. This is due to the wrap as we -- as I said before, we have a negative component coming from wrap because the drop in our mind is used by the company. So the investment of our funds to the house is used to manage in a more efficient way the equity component to the moving targeted funds. Given the EBIT component within targeted funds is decreasing significantly. We suffer outflows coming from this component with wrap. But we have to highlight that this component is in terms of profitability, is not affecting the company because we cannot be charge fees to the client if we invest in funds of the house. Looking at the equity flows remain positive thanks to the strong effort we did in the last years on the accusation plan.

Page 10, rate environment, as I was saying before. If you look at the chart, these are the funds that we -- on the left side is a fund launched last year. On the right side is a newly launched fund that raised EUR 1 billion single fund. As you clearly can see the portfolio of the funds skew towards fixed income on the one launch this year, meaning that we have returns is on the fixed income component, clients are asking for protection, and this is what we are structuring for the clients. And as you can see from the EUR 1 billion growth from the fund is something that is very well seen by the networks and the fund themselves.

Page 11. Getting back for a moment on the wrap component. As I was saying the wrap is used by a company to invest moreover mainly on the targets funds to invest the equity part of the asset allocation. So if we want to -- in a targeted fund, if you want to cover the equity component, we do it buying funds of house. We cannot able charge the fees. So this has no impact on the profitability of the company. Of course, this may affect optically the net flows of the company. And this will go forward in the next few months because it's difficult to exactly make a preview of how the wrap will go given that we are -- we continue to structure new funds, full fixed income funds, and we have a decrease in terms of EBIT component within target days.

Numbers, Page 13. A highlight of our consolidated P&L Total revenues decreased by 9% following the decrease of average AUMs. EBITDA minus 13%. Net income, flat, and then we'll get back to it. If you look at the margins, the margin was slightly positive, and this is mainly due to a favorable product mix and gross flows, focus on actively managed products. We have a very small component of [indiscernible] in fixed income that is not only include -- I mean the component of fixed income is not only invested by our clients, full fixed income products, but also through balance funds with our historical solutions, the most sold to our client base.

Looking at the cost income and our capabilities to keep costs under control. We continue to be at the top in terms of European peers in terms of efficiency. The cost income, excluding performance fees is still attractive. And this cost income shows excluding performance risk, but including bonuses and variable compensation. Interesting to highlight that we got back to a positive trend in terms of investments of the liquidity and mark-to-market of our liquidity investors in our funds.

I think the net income is flat. In effect, we had a positive contribution of lower taxes paid because last year in mind, we said that we had a very high taxation coming from the fact that the dividend distributed intra group last year, we're insisting on a very high net income of 2021. This year, we have the country of this effect. So the dividend group dividend distributed comes from a net income or I think with 2022 net income that is far lower, and therefore, we are paying less taxes during the year. In other words, we -- our tax rate is getting back to a more normalized level.

Page 14, management fees. Net fees reflects lower AUM in the quarter compared to the first quarter of 2012. This is fully explained by the fact slight increase in fixed component of salaries of personal costs. This is mainly due to investments in HR from office sales and the alternative business, as you know, is a key investment for the group.

Page 15. Looking at EBITDA and cost efficiency. EBITDA performance fees increased quarter-on-quarter, notwithstanding the higher variable compensation approvals and mainly due to our cost efficiencies. In fact, if you look at the cost efficiencies and the cost under control and the capability to keep cost under control on the right side of the page, you can clearly see that the increase in operating expenses is fully explained by the investments in marketing.

We continue to invest in marketing activities because we believe that this is the moment to be very close to our distributor and this will bring, I think, important results in the next near future once the situation will stabilize.

Page 16, net financial position. The consolidated net financial position includes the EUR 71 million dividends to be paid in May '23 already approved by the AGM. It does not include instead the EUR 60 million we will pay by the 80% of Castello, though this is still subject as we were saying to the operation of Bank of Italy. In any case, our robust cash generation and cash position allows the company to have a strong facility in terms of extraordinary transactions, buybacks -- potential buybacks and treasury consolidation and potential debt reduction.

Well, for final remarks, Page 18. I think that the first quarter of this year is characterized, I mean, it showed once again our strong resiliencies in terms of margins and cash flow. [indiscernible] is around 0, but with, I think, a strong positive highlighted by the fact that we are positive on the retail side. And this is clearly for us, very important. As we said before and as we showed in the institutional side, we may have sometimes bumpy flows, but we believe that we came back to a positive path during the year.

The main part of the year, the focus of the company will be pursuing and continue to pursue growth without the priority in our top line. We are very soon and we will keep a strong eye on that. Tighter cost control, because this is something that we have to be focused on also given the inflationary pressure that we have. And then organic growth and the alternatives.

I want also to highlight something regarding the last 3 years because looking at what we did in the last 3 years in my first mandate, I think this is also an important starting point for what we for what we have in mind for the next 3. Starting from the retail segment, one of our key goals was to bring the positive or stabilize our retail segment and even in a volatile and very difficult environment, we have been able to bring back the retail to a growth path. We have been able to stabilize a very important relationship, one with [indiscernible] where we bought back flows to positive. And we have managed the change of control of players that we have been able to sign in December a revised agreement with Credit Agricole Italy and now we bought back to growth path, the relationship with them. So we are very happy with that.

We have been able to sign 6 new 5 years partnerships that are bringing impressive results. And we are fairly confident that we'll be able to sign additional partnership in the next few weeks.

Page 20. We also worked a lot in terms of visibility of the company. And I think that we got some results in terms of attention of our shareholders and ability to invest furthermore in the company. Banco BPM in the 3 years invested both more than 5%, a little bit more than 5% stake in the company. Fondo Strategico Italiano decided to invest buying a 9% stake and the Caltagirone Group bought an additional 2% stake in the company. This is without taking into consideration the cancellation of shares bought back by the company itself.

Page 21, in terms of shareholder remuneration, we already highlighted this feature in the final year results presentation. But between 2019 and 2022, we carried out buybacks for a total of more than EUR 200 million 2021, and we canceled more than 2/3 of the share issues issued in 2019 when we did a capital increase to finance almost EUR 1 billion acquisitions at the time. On top of that, we have been able to pay more than EUR 300 million of dividends, bringing our dividend yield stable and close to 6%. So I think that this -- the company has been able to grow to pull back the shareholders and also developing itself in terms of from a strategic standpoint this '22.

We have a strong focus on alternatives. There is a new way is a new growth path for us. We already discussed and publicly that we wanted to expand in this segment, and we established ANIMA in 2020 when we started our journey. In 2020, we also set a target for -- to reach EUR 2 million to EUR 3 million in 3 years also for M&A. And we have been able to reach this target because of closing the delivery of Castello in the range of EUR 4.2 billion of assets in the segment, covering private debt, real estate renewable energy and real estate credit. We want to do more. We will continue to do so. And I think that this is, in any case, is a very interesting potential of the company.

So I'm done, I'm finished. So I'm fully available for your questions.

[Operator]

[Operator Instructions] The first question is from Elena Perini from Intesa Sanpaolo.

[Elena Perini, analyst]

I actually come with 2 questions. The first one is on the outlook on net inflows for the following months. You said in the press release of April that are positive in the short term. So can you expect that the following months could replicate the results of April, which was, if I remember well, the first month of positive sign for mutual funds for AUM. That's one.

The second question is on your need on gross cash? Can you give us some indications on the level of the sales? And then the third one is about a press article that we read this morning reported by [ MS ] in investments by Castello n in the real estate, I imagine that this belongs to the former strategy of the company. So I would expect them in the following years to refocus on the alternative side ex real estate. Could you elaborate a bit on this?

[Alessandro d'Eril, executive]

Okay. Starting from the outlook. Well, I'm fairly positive over on the retail side, as I was saying, because I'm seeing that the networks are reacting -- are defending pretty well and are pushing even though we know that we are in a difficult period, we have the competition of the BTPs. So it's not easy. But I'm fairly positive because I'm seeing that we are slightly positive almost on all network, on all channels, even though slightly positive. We tell you that in a more stable situation, we can get back to an interesting growth.

If you look at the institutional apart from the Class 1 traditional life insurance, we suffered the loss of a large mandate, it happens. Sometimes you win, sometimes you lose. And we expect to have in back to positive. And so I'm not worried at all. And I think that we can do better in the remaining months. Difficult, to be honest, to give you a number. And we also -- this component -- this wrap component that is not affecting the profitability because it's basically 0 impact in terms of profitability. But is still difficult to understand how it will go because the brand, we have different brands. On one hand, we have this component, the equity component invested by our funds and is going to 0 because we are starting full fixed income 30-day funds.

On the other hand, we have other positive potential positive on the wrap, and this could be a little bit more difficult to be foreseen. In terms of gross cash in, we are -- on average, today, we reached 2.5% yield in terms of investment of our liquidity. So we are we're happy in a way that we go back to a positive returns coming from the cash that we have there.

The press article -- well, yes, Castello is pursuing its strategy. The strategy was set before our deal. We talked daily with them, of course, because we have been signing the closing, but I don't expect that kind of problem. So we are already working together to develop the strategy and the company. This is a type of investment the one I mean in the article. So that one of the type of investments that brought Castello EUR 4 billion of assets. I think that we will continue in this direction.

We try not only to develop the real estate, but we will try also to enlarge the asset classes, the manages the classes, bringing on board teams or maybe in the future doing some other acquisitions. So this is the direction in the sector, and we are very happy because we think that the deal and the company, our ops companies, and they give us the as an exposure to new asset classes managed and to -- and we have -- and I think that we can -- we'll be able to exploit sales synergies putting together our projects with the new asset classes that we are managing, and we'll need to manage it.

[Elena Perini, analyst]

Okay. A follow-up, if I may. You mentioned because the line was not so good, 2.5% yield?

[Alessandro d'Eril, executive]

Yes. 2.5?

[Elena Perini, analyst]

And this is on the EUR 650 million approximately of cash that you had at the end of March?

[Alessandro d'Eril, executive]

On average, yes. On average.

[Operator]

The next question is from Alberto Villa from Intermonte.

[Alberto Villa, analyst]

Congratulation for the appointment. I was just wondering if the new Board with the new shareholders also represented in the board, is, let's say, pursuing any different strategy from the past? You already mentioned in the presentation that will be in continuity, but maybe the entrance of these new shareholders may add something to the picture of the company strategy going forward that would be helpful if you can elaborate. And then secondly, in general, the -- there are many challenges, et cetera, discussions on the potential ban on inducement, et cetera, if you can update us on your thoughts on those matters?

[Alessandro d'Eril, executive]

Alberto, well, in terms of new shareholders, Well, first of all, we are working on the strategy of the company for the next few years. We started to work in these days. So at board level, we will set the strategy. I think that the new shareholders that even also the current -- the previous shareholders, I think that I hope that we like the company to grow because this is one of the key goal since ever. So we -- I think that all our shareholders can add and can bring value. In terms of strategy, I don't have anything plate in the sense that we have to discuss the strategy with the Board, and we will set our goals in the last few months for the 3 years coming.

And we are adding, of course, to have such a large -- I mean, this type of shareholders, the new and the previous one. because of understanding, because of their financial power. So we think that this is a plus -- a strong plus for the company to have such as older as a and the fit, I would say.

In terms of an engagement, where we are, as far as I understand, is that we are waiting for the Irish commissioners to come out with -- from the commission to come out with a proposal of directive. This should happen if I remember well, 24th of May but postponed the we were supposed to do something at the beginning of April. Now we postpone the day to 24th of May. My view is that what -- I mean, what the commission has declared is, I do not agree with a position. I think that the current system and the current model is not perfect. We all know, we work a lot to get it better.

We changed a lot the phase of the sector and more to come. I think that rebates will be disruptive for the sector and for the clients. Because we have to remind that banning the rebates, the experiences that we can see in U.K., in U.S., I mean, there are totally different markets as compared to Continental Europe. Experiences have positive and negatives. But the negatives are that the lower part of the client base is totally abandoned the sector. And in countries like Italy and Continental European way with I would say, a lower financial culture, general financial project that this could be a fact for the client significant.

What we expect is that they will make a proposal. I don't think -- I mean they said they will not go for the bank. They speaking because the commission is expiring at the beginning of next year. I don't think they have a lot of time. And therefore, we expect not to see anything disruptive to come out because they will need to get the approval and the approval of the parliament and the commission itself. So this is what I see and what we are discussing is a association level anyway until May, we don't have anything sure.

[Operator]

The next question is from [indiscernible] from Citi.

[Unknown Analyst]

I have 2. Just 1 on flows set in terms of retail clients, I mean, what is the risk appetite after the is there any secular shift that we are seeing? And on that only, is there any difference from the different networks, meaning like [indiscernible] in terms of flows? And then one follow-up in terms of cost outlook for this year. In last quarter, you told us it would be around low single digits, so it has changed or still maintaining the same?

[Alessandro d'Eril, executive]

Sorry, I have to complain, but the line is very much disturbed so I wasn't able to get your questions. If you can repeat the questions because actually the line is very much disturbed. So it's very difficult to get that.

[Unknown Analyst]

I wanted to check in terms of behavior of retail clients, I mean, what are the risk appetite? Are they just acing for yields? Or are you seeing any secular shift in how they invest? And then any difference from the different networks? ANIMA is like [indiscernible] Italia I mean, flows when it comes from them? And then my second question is basis on cost. Last quarter, you said low single digits for 2023. So is this still unchanged? Or you're seeing any update on that, please?

[Alessandro d'Eril, executive]

Right. Okay. In terms of risk appetite of the clients, as I highlighted in the presentation, clients are moving forward in fixed income. So we are getting better fixed income. They ask for protection. In fact, apart from the trend that we are seeing in the market of people buying directly [indiscernible] but the -- what we are seeing in terms of products sold by the networks, these products are the full fixed income, a far lower equity component. So this is what we are seeing.

And the networks, they are following these trends. Maybe they are also leading these trends. because they don't have a clear view over on the equity side. What we are discussing with them is always we launched fixed income products, if we launch, for instance, targeted funds. And the equity component must be covered through a collection plan. So a collection plan on one hand, there is the right product, the most suitable products for our client base to invest in the market, we believe. And on the other hand, 30-day funds fixed income. With diversification, of course, this means govies, corporate, et cetera.

If you look at cost, the low single-digit guidance, I think that is still -- I mean we continue to see it as reach more. We will continue to focus on it. We -- even more tougher in the next few months. So yes.

[Operator]

[Operator Instructions] Mr. Melzi, there are no more questions registered at this time.

[Alessandro d'Eril, executive]

Okay. Many thanks. Thank you to -- thank you for your attention and see you at the 6 months in July. Bye-bye.

[Operator]

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