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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon. It is the Chorus Call conference operator. Welcome, and thank you for joining the ANIMA Holding 9 Months 2018 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Marco Carreri, CEO of ANIMA Holding. Please go ahead, sir.
Hello, everybody, and thank you for attending to our conference call. Let me start, as usual, from Page 4 for some highlights regarding our company, starting with commercial.
Growth AUM to above EUR 100 billion, thanks to contribution positive internal flows around the EUR 900 million that in a year like the one that we are facing is not so bad consider we represent around more than 7% to the total Italian industry net new money to be compared to with our market share is equal to 4.5% at the beginning of the period. Moving to financials. Robust growth, up [indiscernible] to 34% internal net commission, thanks to a successful M&A activity in particular, with a net income up 24% and adjusted net income up 37% for EUR 124 million. Let me remark the quality also internal net commission that this is highly slightly above the results achieved at full year last year and also on 9 months 2017. And the cost of cost/income, well above 26%. You could move to the second section. On Page 6, you have the AUM evolution that, as I mentioned before, around the EUR 4 billion, of which EUR 944 million related to the insurance mandate acquired from BAMI from July 1 this year and the improvement in term overflows is depending on around the EUR 500 million from retail and around EUR 400 million from the institutional component. Let me remark the robust improvement of the retail component that just to remind, the last year was EUR 300 million on a full year basis. If we moved to Page 7, we have the business by segment and the breakdown, news of breakdown. No news, no particular news on the retail, just to highlight that the weight of BAMI went up to 50.3% from the historical less than 49%. While, if we move to the institutional component, we see the strong increase of insurance component representing at the end of September around 40% of the total institutional business, thanks to the, already mentioned, insurance mandate of BAMI acquired. Page 8. We have the mutual fund flows breakdown, showing, once again, our product offering strategy focused on selling balanced and flexible product in order to have a more diversified portfolio for our customers, so outflows from bond and cash more than offset by the positive flows on these 2 asset classes. If we move to Page 9, we have that -- this -- the -- this is other pages dealing with the 3 successful factor of our company that we call as the 3P. That means performance, product valuation and personal support and training services. If we look at the performance of the company, even if it's negative for around 80 basis points at the end of September, you can see the magnitude of the outperformance if compared with the rest of the industry. And let me also remark the lower volatility of our performance based on -- this is fully consistent with our strategy at the highest exposure on flexible, balanced fund and the lower exposure on this tail of the asset class product offering. Moving to Page 10. We show you the master plan of the target date issuance during the year so you can evaluate the high level of industrialization of our product launch process. And also, let me say, the effectiveness in several net new money attractiveness if we consider 3 items that we've done this year, so in income, thematic and multi-strategy. In total, we attracted more than EUR 6.4 billion, well distributed with the industry. We followed the old solution proposed to our investors. Page 11. An update on PIR solutions. Approximately EUR 850 million in there what we show a slowdown compared to the solid growth that we had during 2017 with the adverse return depending on the market and the reviews, deceleration in these flows. But on the right side of the chart, you can see the net new money mutual fund in Paris industry and our capacity to decrease our net new market share.
Page 12, moving to the third pillar of our business model. I mean the Personalized support and training services. We consider the training activity as a key part of our ongoing support to our distributors to get their advisory and sales activity more effectiveness. In the chart, you can see the main activity we provide during the year and some figure concerning event and participants. You see the unfolds of the dimension of these activities that we spent.
On the ground support with around 640 events. That means around 4 events per working days.
Remote Live & On-Demand, we dedicated a call center that receive and answer more than 80,000 calls.
Accademia ANIMA, that is our training center in our firm that we made residential program for partner but also Accademia Roadshow for Poste Italiane, more than 900 participants.
And Thematic Roadshow dealing with behavioral finance and a roadshow devoted to approaching MiFID II with more than 1,600 attendees.
Let me stress, this activity on MiFID II, that is crucial in a year like this, having the next year -- at the beginning of this next year. Transparency on cost, we carried out around 11 training events for our strategic partners. This include the new regulatory framework and the activity to be done. So in particular, we developed items such as transparency and new reporting and advisory as the value of distribution. Let me say that in the remaining part of the year, we scheduled other events for involving not less than 2,000 relationship managers. I think that my first part is concluded, so I give the floor to Alessandro Melzi, our General Manager, for discussing about financials.
Thank you, Marco. Hello to everybody. As you know, I'm going bring you through a detailed review of our P&L, Page 15.
Total revenues, up 38%, up to almost EUR 246 million. EBITDA is compared, of course, to the 9 month of 2017 and taking into consideration the full consolidation of this year. I would like you to see there clearly. EBITDA, plus 40%, up to EUR 182 million. D&A, just a quick on that, the increase is mainly due to the intangibles related to the acquisition we completed last year -- end of last year. And net income, up with 24%, reaching the EUR 97 million. Adjusted net income, plus 37%, EUR 124 million.
Looking at the right side of the page here for -- in terms of profitability. This year, we have been able to keep the profitability stable, even increasing it. Moreover, on the retail side, notwithstanding the decrease we experienced on the institution outside mainly due to the anticipated loss of the EUR 1.2 billion mandate related to large institutional volume.
Looking at the cost/income. The cost/income remain very low, even if M&A synergies are still to be extracted given that, as we see later on, we feel we have been very much focused on execution, but in the whole, exploiting in terms of the P&L of the synergies to come next year. Page 16, consolidated net financial position. The NFP at 9 months, EUR 167 million approximately. This does not reflect the EUR 120 million we paid end of October to close the deal -- the expected closing of the deal with Poste. We -- just to remark that we paid back the first tranche of financing EUR 15 million in June 2018. Page 17. Just to remind you on the conditions of our gross debt. I don't get back to this. Just for you as a reminder.
Page 18, buyback program. The board has today resolved to present to the AGM -- to an AGM, the debt program up to 10% issued share capital. Of course, according to Italian law, the board can only, as we said, execute the buyback if approved by the AGM. The idea is maximum 18 months. Of course, we would say we will -- the limit would be 10% even if the idea is to start with a buyback in the region of 3%. ANIMA Treasury will be -- shares will be used to avoid dilution from the LTIP or in future M&A transaction. And we would like to remark that in the last -- in the first 4 years of listing of the company, ANIMA returned to shareholders almost EUR 260 million through ordinary dividends, notwithstanding the large acquisitions we executed. Page 19. As I said before, a focus on M&A execution. As we said since the beginning of the year, 2018 was a year of focus on execution on what we've done -- what we signed last year. We believe that we have done all we said at the beginning of the year, probably also ahead of our expectations. We closed the deal December 2017. We executed the capital increase March to April 2018. 1st of July, we closed the deal on the insurance mandate of BAMI. Start of the management of that is in the 1st of July. 1st of November, we closed the deal, and we started the management of the additional life insurance mandate of Poste. 1st of December, we expect to close the merger of Aletti in ANIMA also from a formal standpoint. So as we said, we are ahead of our expectations. What's important now is we will close the execution of the acquisitions signed last year.
Page 20. Also just to look at our growth in the last year since the IPO, basically, beginning of 2014. We would like to remark the capability of the company to explore it. We have done a growth in the first years of this cycle and growing 1.6x approximately, the industry -- outperforming the industry. When the market became tougher, we have been able to execute M&A deals and to exploit the new opportunities, increasing significantly new ANIMA and leveraging on our capabilities to integrate platforms.
I'll give the floor to Marco for his final remarks.
Thank you, Alessandro. It's now time to go toward the closing remarks and the Q&A section. But before conclusion, let me spend -- let me say a couple of minutes commenting something that in the past few weeks, we had the opportunity to discover someone among you trying to address some concern about our competitive. In fact, we don't see that there is an issue, but let me say more at itself of prejudice. So I would like to move to 3 pages, starting to Page 22.
The prejudice, in our opinion, is that ANIMA is considered like, let me say, a BTP house. It's certain that we have, basically, a fixed income house in particular, having around 80% of direct fixed income component in the portfolio of our customers that historically are represented by bondholders. And -- but what we are doing successfully is to move towards the product offering. We've very well focused on the flexible solution and balanced fund, helping this transition for the customer, actively managing the products and also, let me say, reducing the exposure to Italian Govies decrease, let me say, from -- in 5 years' time, from 43% to around 25%. And if you look on the right side of the page, you can see that the overperformance versus Italian industry grew more than the spread rose.
Moving to the second prejudice. We are considered like a proxy of Italian banks. We saw the correlation with BAMI around 0.7, sharing the very same dooms and glooms. What link us to the banks is the ability to intercept savings of Italians. The importance of fee generation in banking business will remain a pillar for the bank strategy, having very low result in terms of margins. And ANIMA is clearly a material positive contributor in this area. Let me also say that ANIMA is completely clean in terms of the balance sheet, not being impacted by any lending activities, MPL and and so on. Next prejudice. The prejudice after a certain size, the scale economies rapidly reduce or even disappear, thus the consolidator the profile of ANIMA will stop generating value. As Alessandro mentioned before, we were able to combine organic and inorganic growth depending from the period. What we're certain that we make M&A deal only when it creates value. That means that they must fit with our profile, so creating the opportunities, getting more access to distribution capabilities, improving product offering but also reduce production costs. And let me say that, in an industry under margin pressure, we are going to improve the operating lever. And we can demonstrate that, as you can see to the samples on the right side of the page, that this operating leverage is cut or, let me say, is fully in place. Now I can go to closing remarks. Just to conclude that we are going to finalize this year, and more than a year passed in terms of market condition. But clearly, it was a year we declare, do we have a lot of this executed and were those executed efficiently and profitably. It's also the fifth year in which the company has been listed. Let me say that if we compare what the company was in 2014 and now, I could see that we've made strong improvement on both financials and commercial agreement and then lastly, with distribution. If you look at the main figures, we basically more than doubled the assets. We have a market share that is more than the 1.5x than the one that we had in 2014. Same for EBITDA. If we look at retail distribution network, we have the 3, 4 branches referring to the new BAMI that moved from the former BPN group. Adding also the Banco Popolare Puoi Di Certificato to our agreement. And in particular, we focused on the growth in terms of a lasting distribution side on the institutional business through the agreement signed with Poste and insurance mandate and BAMI with also the insurance mandate.
So in this scenario, what we are saying, that the company didn't change at all. The profile is to remain a company very well supporting the alignment -- the banks through an alignment and convergence of different needs. But what we can see and we evaluate the chain weekly or the profile of the company and also the solidity, diversification and profitability that appear to us much stronger than it was 5 years ago.
So just to conclude, we believe that, clearly, we are not more supported by tailwinds. We have to face a difficult period for the entire industry on a global basis, but we keep expecting positive flows due to this model that we were able to enlarge in terms of product offering but in particular in terms of distribution platform and commercial agreements.
2019 also reflect the full year of these agreements, that not only today sold only partially in place, and we believe that they can go to full speed next year.
Just to conclude that we now, after a year of opening, we are open eyes or are now in positive growth M&A activities that would be clearly in line with our role of aggregator, and that could speed up, as it happened in the past, by a challenging market environment.
I think that's -- I will conclude it, so it's now time for the Q&A section. We are available for your questions.
[Operator Instructions] The first question comes from [ Gianluca Ferrari ] with Mediobanca.
I go back to Page 23 on the fact that ANIMA is a proxy of the banks, which is something you try to demonstrate that it is not true. My -- let me play a bit the devil's advocate role. If I look at your 3 strategic partners, BAMI, MPS and Creval, they are the 3 banks with the lowest amount of cash deposited to the ACB. Now there is a lot of discussion around the liquidity of Italian banks. It seems that all CEOs are in denial that there is a problem with this respect, but we also know that the political situation in Italy is not very quiet at the moment, let's put it in this way. So don't you fear that going forward banks might go under pressure with this respect and your 3 strategic partners might face some problems more than other banks and this could create some troubles in their capabilities to the other asset management? They will be probably more focused on something else. What is your comment behind this? Or do you think this could be a problem going forward or not? And the second question is on the buyback you announced today. It looks quite big, 10% of the total capital. Can you tell us how this will be implemented in terms of speed? Also, because I think you have a 1.8x the EBITDA. So probably, at the very beginning, it will not be very strong and then probably if we go full speed in the second part of 2019. Is this rating correct? Or you will start immediately and it will be linear in the 18 months or even with a stronger phase at the very beginning, taking advantage of the current low share price valuation?
[ Gianluca ], Alessandro speaking. I'll start from the buyback. As I mentioned before, the idea is to have an approval from AGM up to 10% in order to have the opportunity in the period to use them to buyback or, for instance, for M&A and et cetera. The idea is to start in the case with a buyback of 3%, in the region of the 3%, and then we'll see. So the idea is to start with an amount that for 2018 absolutely manageable from a financial standpoint, and then we look at the market.
[ Gianluca ], it's Marco. About your first question, we already see some potential headwinds and if the condition remains challenging for Italy and, in particular for the banking sector, clearly. However, if we compare the situation there that we would have to face now compared with the one that we faced in 2011, we believe there are some differentiation. In particular, first of all, we believe that the banks continue to be very focused on fee generation. They cannot do something different, also having no markdown on deposit. Second, we believe that [indiscernible] program could be extended [indiscernible] get a better funding there that we mentioned. And third, the client have higher awareness of [indiscernible] availability of bank bonds, so it will be much more difficult for bank to place bonds on retail customer than in institutional market.
Your next question comes from Mike Werner from UBS.
Two questions from me. First, on the synergies related to the Aletti acquisition earlier this year. I believe you guided to EUR 6 million to EUR 7 million or so in terms of cost synergies. I was just wondering what the realized synergy run rate has been through the first 9 months of this year. And then on the second question, I just want to confirm with regards to the buyback and the use of capital that this would not have any impact on your current dividend policy.
Mike, Alessandro speaking. I'll start on the buyback, move through always from the second. Now the buyback, the currency market situation, we believe, to keep a stable guidance on the dividend policy, so 50% of reported consolidated net income. Synergies, we believe that we are on track in expecting synergies. So we may say that, more or less, we almost reached, in terms of run rate, the level that we expect in terms of extraction of synergies.
The next question comes from Elena Perini with Banca IMI.
I have got 2 questions. The first one is on the guidance you provided in the second quarter conference call about secondary net inflows. Are you stick to your EUR 1.5 billion guidance for the second half? And then talking about M&A, you mentioned that you are again ready to look at something in this respect. Can you tell us something about potential size? Are you looking about other big deals or something to, I don't know, complete your product range and current competencies?
Elena, this is Marco. For your first question about the guidance, we can confirm our EUR 1.5 billion of net new money. We are around EUR 1.2 billion, EUR 1.24 billion, EUR 1.250 billion. At the moment, we are -- this guidance is clearly net the dollar inflows regarding the so-called traditional life insurance of Poste being the magnitude of the mandates that we can consider separately, also considering the low profitability of this mandate. So the start -- the first week of November is positive, so we can confirm the current guidance as actual. Moving to the -- your second question. Clearly, we -- just let me say that we have to evaluate different aspect. And so first of all, our role of aggregator, we want to continue through possible M&A activities referring to companies that it was to, in some ways, enlarge our distribution capabilities. That is the first goal that we have to meet because as we -- our successful business model is based on this. Clearly, we have not -- we cannot ignore that being an operator with a huge amount of institutional component, we have to increase subsidies in areas of investment capability. It's not covered right now. On this issue, we have 2 different options that probably could be combined. The perception is to acquire capabilities from outside. The second is to go to find solutions in terms of combination with other entities that can bring to our company the competence that we need for bidding with this aspect. So let me say that, usually, we are very flexible on these. And probably, the combination of the 2 will be something that we can explore, also in particular on some asset classes like a product which we are start investing a couple of months ago.
Your next question is from Filippo Prini with Kepler.
Three brief questions. The first is on the weighted average performance. Could you give us an update for what you presented in the slides? It seems this figure was based on September, and things have changed awhile since the [indiscernible]. The second point is on -- if you can confirm that on this stake which is BAMI is not active, the lock-up that it was announced when you will renew with the agreement of 9.9%.
Filippo, this is Marco. About the weighted average performance updated to end of November, clearly -- October, I'm sorry. Clearly, it was not a good month for the markets, financial markets. We closed at the end of October with a performance negative of 2.88%. We compared with [indiscernible] index minus 3.86%, so 1 point better than the industry. Let me remind that the 1st week of November was particularly positive for the market, in particular for the equity market.
Filippo, Alessandro speaking. For your concern with the agreement on the lock-up with BAMI, the agreement is conditional upon the change in the governance of the group approved by the AGM. We are still discussing the issue internally if we'll be able quickly to present to the AGM some change in the governance. This may happen. Apart from that, so as of today, the answer is the lock-up is not in place, of course, notwithstanding -- just referring to public declaration of BAMI, we remark that they stated to be keen. They will be there to keep the stake in ANIMA so we are happy with that.
Your next question is from Alberto Villa with Intermonte.
A couple of questions. The first one is on the cost base. Of course, your cost/income is already very efficient at 28%, excluding performance fees. I was wondering if you can give us a guidance on 2019 considering the synergies you are extracting from the deal with Aletti if we can expect the pressure to go down, and if you can give us an idea what are your expectations in terms of operating costs. Second one is on the same slide, Slide 15, on the margins. There was a nice improvement at the retail level. I guess, as you stated, it's mostly driven by Aletti consolidation. So I was wondering if you give us an idea what was the, let's say, like-for-like for the pre-deal ANIMA margins and what was the, let's say, impact coming from a late-deal consolidation.
Alberto, Alessandro speaking. Starting from the profitability, what I will say is that the profitability on Aletti was beneficial for the group on the retail side because of the asset mix. They brought to us a little bit more aggressive, if you want, and I would say that because of the large production they've done and they continue to do on the target base. And what I can say in terms of profitability, we always said that we've been able to keep stable and also to improve the profitability, we expect in the next 2 to 3 years and in case of pressure on the margins on this. But we believe there is something absolutely manageable and indicates we're happy to see that, as of today, this pressure -- I mean we have been able to manage absolutely with this pressure.
Sorry, just a clarification. So on 2018, let's say, excluding Aletti, the retail margins have gone down? And how much?
This is a really difficult question because, as of today, the production of this year even [indiscernible] that we -- the production was made only once. I mean we were selling product of BAMI and Aletti, but considering all the funds as the same product for that offering.
If I can add something. Alberto, it's Marco speaking, I show you in Page 8, internal flows, you can see that we are successful in asset class. It's more profitable than the one that we received in terms of outflows. That's also -- I would ask you to consider more than EUR 6 billion outflows in target date fund in less than 1 year that usually are very profitable for us. So let me say we don't have any figure, as Alessandro mentioned. But clearly, we believe that we made a very good job in term of capacity to keep the margin and the profitability high.
Look, because -- the cost/income, hopefully, we'll be able to decrease the cost/income because income will increase. But in terms of guidance on the cost, it's too early. What we can say is that, as of today, is that, as I mentioned before answering tonight, is that the run rate of the synergies we were able to extract this year is already in line with our expectations, probably it's a bit about -- the expectation was EUR 5 million at compared to market, and so we'll continue in this action next year. I can't give you yet the guidance on operating cost results.
Okay. But there are no -- I mean, at this stage, there are no events that we should bear in mind in the future that may increase cost like additional training or anything or commercial campaign specifically that could inflate costs?
No, no.
Your next question is from Giuseppe Mapelli with Equita.
Yes, I have only a clarification on your agreement with Poste. If you can remind us what are the main economics of this agreement. Because if I remember well, there are no minimum guaranteed in terms of float but only in terms of asset under management. And then some color on your feeling and expectation about this partnership.
Okay. On Poste question, the deal is -- you're right, we don't have a commitment in term of volumes. We have a commitment in terms of market share on the traditional life insurance and on the management of mutual funds. The economics, as we mentioned, the Poste is very low. On the traditional life insurance, it's just fine. On the rest -- I mean, on the move of the management of mutual funds, given there are some management -- some investment management mandates, is low double digits.
About central -- about the relationship with Poste, let me say that the relationship remain very good in terms of quality of relationship but then also in terms of number, figures. We are cooperating very successfully in mutual funds and unit linked. About this year, we collected around EUR 1.2 billion in term of targeting, and we are fully aligned with this. The first half was particularly good. The second half started less good. I believe that the deceleration was fully caused the good situation in the country that, in some ways, there was less confidence, therefore the distributor and client invest in mutual fund products. So fully in line with the trend of the industry as a whole.
[Operator Instructions] Mr. Carreri, there are no more questions registered at this time.
So I think that we have concluded. So thank you, everybody, for having attended our conference call. We remain available for additional questions in the coming days. And goodbye, everybody, and have a good weekend.
Thank you very much. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.