Anima Holding SpA
MIL:ANIM
Earnings Call Analysis
Q4-2023 Analysis
Anima Holding SpA
The company saw a noteworthy ascent in assets under management (AUM), climbing by EUR 14.4 billion year-on-year to reach a total of EUR 191 billion by year's end. Investment performance was commendably solid, aligning with the Italian average albeit with a lesser emphasis on equities in the asset mix.
While the company grappled with negative flows in the low-impact wrapping category and excluding traditional insurance Class 1, there was a positive uptick on other fronts. A change in mix along with other factors nudged revenues up year-on-year, not including performance fees. Margins remained relatively unaffected by this mix shift, and the company maintained a strong EBITDA margin at 72%.
The company's profitability saw some marginal adjustments, chiefly due to mix effects. However, the consolidated net income impressively surged by 24% compared to the previous year, suggesting a robust financial performance.
Despite the challenges of 2023, the company exited the year with a strengthened position and enters 2024 with greater optimism, enhanced by improved performance fee prospects and encouraging January inflows.
The company has made strategic moves, such as the Kairos acquisition, to diversify its product offerings and tap into high-net-worth individuals. This acquisition, complemented by the Castello one, integrates 4.7 million of assets and approximately 20 private bankers managing EUR 2 billion in assets. The company sees this as a promising avenue for growth, with potential to further reinforce the asset base.
In response to anticipated declines in net interest margins, banking partners are pivoting more towards asset management and bancassurance. The company's networks are registering positive results, indicating a discernible shift in strategy which is expected to continue.
Balancing the twin objectives of investor yield and strategic flexibility, the company proposed an increased dividend of EUR 0.25 per share and continues to contemplate share buybacks, all while keeping an eye on potential M&A opportunities. Performance fee prospects for January outperformed those of the previous year, offering an auspicious start.
With the inclusion of Kairos, cost-income ratios are poised to expand but remain a focal point of management. They remain cognizant of the inflationary pressures and have developed a collective agreement likely to result in a EUR 400,000 year-over-year increase for 2024.
You don't have any saved screeners yet
Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Anima Holding Full Year 2023 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Luca Mirabelli, Head of IR. Please go ahead, sir.
Thank you. Very good afternoon to everyone connected. We are conscious that it's going to be a busy day for many of you. So without any further delay, I would like to give the mic to our CEO and General Manager, Alessandro Melzi D'Eril, who will comment on the results we announced today. Please, Alessandro.
Thank you, Luca. Hi, everybody, and thank you for attending our conference call. So I will start from -- with our presentation, as always, Page 2, summary highlights. First of all, AUM up EUR 14.4 billion year-on-year, reaching EUR 191 billion of assets at the end of the year. We registered negative flows in the low-impact wrapping category. We'll get back on it in the next slide. We are positive on all the other categories, excluding the traditional insurance Class 1.
Very solid weighted average performance, substantially in line with the Italian leverage, notwithstanding our historical lower component of equity in our asset mix. If you look at the financials, we strongly generated performance fees in the last quarter of the year, in particular in December. Total revenues are -- excluding performance fees indicates up year-on-year, also thanks to a change in mix and other revenues. The EBITDA margin is at 72% despite some increase in operating costs, mainly due to the acquisitions we -- the one concluded -- completed in 2023 of Castello and labor costs. Strong cash flow, as always, that remains in terms of free cash flow at double digit. Page 3, our assets by segment, there are no particular news. Just a remark that if you look at the institutional, we have the alternative fund that we have 4% approximately of the total. As I was saying before, this is linked to the completion of the Castello acquisition in July 2023. Page 4, our investment performance, substantially in line with the Italian industry, a little bit below. But if you look at the funds breakdown by category, you can clearly see our lower component of equities compared to the market -- to the industry. So I would say that the performance of our funds was absolutely in line, if not better, if compared to the -- to our competitors.
Page 5, looking at the net flows breakdown by quarter. Looking at the last quarter, we saw the repositioning towards fixed income slowing down a little bit. Equity appetite has not picked up yet. So we are waiting for it. The flexible component, as we said more than once, is largely connected to the so called wrapping. We have a slide on it. But in any case, this change in mix is not expected and is not having a particular effect on margins. Page 6, we try to provide some more insight in terms of the company assets and the profitability of these assets. On the left side of the page, you can see the type of assets that we manage, so the type of clients whom we sell our products, fund user -- institutional fund users, retail clients, pension funds and institutional mandates. So these categories registered plus EUR 1 billion in terms of net inflows in 2023. And these categories have a higher profitability compared to the rest. Fund users are the most profitable, then retail clients and the pension funds and institutional mandates.
If you look at the wrapping -- under the wrapping that -- as we said more than once, this is -- these are funds invested by funds of the house. We cannot duplicate fees in Italy because of regulatory constraints. Therefore, these assets has, say, a very limited impact in terms of profitability. And we registered on these assets, minus EUR 1.2 billion in terms of flows in 2023. Plus -- minus EUR 4 billion, these are probably linked to the Class I insurance mandates. This is the lowest profitability asset class that we manage. These assets are mainly linked to demand that we have come with profitability a little bit over [indiscernible]. Page 7, if you look at the consolidated P&L, revenues -- consolidated revenues are up EUR 333 million compared to last year of EUR 326 million. The most important component in terms of revenues is registered by performance fees, almost EUR 35 million. We benefited in December of the decrease of interest rates, registering a significant amount of the yearly performance fees.
If you look at the EBITDA, EUR 266 million, up compared to last year. We also, for your benefit, let's say, show 2023 of Anima, excluding Castello, so consolidated excluding Castello. In net income, EUR 149 million, plus 24% if compared to last year. If you look at the profitability on the right side of the page, profitability, excluding Class I insurance increasing -- slightly increasing, excluding Class I insurance is slightly decreasing. These effects are marginal effects coming from mix effects, I would say.
In general, our -- I see our profitability is substantially stable also going forward because we have a dilution coming from the fact that equity registered negative performances in 2022 and in terms of performances or asset performance and a negative performance in terms of inflows in 2023.
On the other hand, we have the full fixed -- our product's full fixed income, and in general, our imponent of fixed income that's in our portfolio that is repricing because of the increase of interest rates. So these 2 effects seems to have provided a substantially stable effect on our margins.
If you look at the cost/income ratio, the cost/income is increasing a little bit. This is mainly due to the acquisition of Castello. Castello is an alternative business. Of course, the margins are different, both on the top line and on the net income as compared to the traditional asset management business.
The other effect is coming from the new labor contracts. We apply the credit contract, and therefore, we had increases like everybody in the sector. If you look at below the EBITDA, we had a positive impact from the mark-to-market of group -- of the group's liquidity invested in our UCITS funds and the positive contribution because of the group liquidity invested in liquidity and the unwinding of a hedging derivative on the financing we closed last June. Page 8, just to give you help in order to reconcile the results from 2022 to 2023. The effects from the EUR 120.8 million of net income of 2022, we have an increase in terms of EBITDA. The only invested -- our investment portfolio, as I was mentioning 2 minutes ago, is on liquidity, the unwinding of the derivative on the financing -- on the banking, financing we closed in June. And then negative effects of tax and small other effects. And of course, the Castello -- the contribution of Castello since July 2023 when we closed the transaction. It's not a full year result for Castello.
Page 9, if you look at performance fees, after a tough 2022, we closed more normalized 2023, if you can say. And we enter into 2024 with a better situation if compare it to last year. This graph will show on the right side of the page that we have 34% -- we had at the beginning of the year 34% of assets above high watermark, 16% within 2% distance from the high watermark. The situation has changed slightly beginning of June -- beginning in January. But in substance, this is the picture. We have more than 50% of the assets as of today above the high watermark or within 2% as a distance from the watermark.
Page 10, personnel expenses. As I was saying, we had some driver that brought upward the cost of our personnel costs. We had a modest increase in FTEs of Anima at Anima level, let's say, old perimeter. We consolidated Castello, and this has brought personnel cost to the company. And of course, we had to apply the new banking collective contract. The impact in Q4 is EUR 400,000. The run rate impact in 2024 will be more or less EUR 800,000. Variable costs, mainly linked to the results of the company and the performance fees registered in the last part of the year. Page 11. Net financial income. We already mentioned this is the quarterly evolution of the management of our liquidity basically and what we've been able to achieve in terms of net interest that more than counterbalanced the cost we have on the debt and our bond outstandings.
Page 12, net financial position. End of the year, we are positive by -- consolidated level, we are positive by EUR 5 million, notwithstanding the -- in the year, we have been able to pay EUR 70 million of dividend, May. We repaid EUR 82 million of debt, as I was -- as I said before, in June. EUR 62 million for the acquisition of Castello in July, and EUR 45 million of share buyback during the year.
The company continues to generate a massive amount of cash. We have a very solid balance sheet that allows us to look at extraordinary transactions. We have pressure to do to deals more over now that we did it -- we have done to these in 1 year, but we continue to monitor the market, and we are ready to catch all the possible impressive opportunities that may arise. And of course, buyback and remuneration for our shareholders and possible share count reduction. Just to remind, in the last 4 years, we canceled 14% of the share capital following the buybacks. Page 13, the Kairos acquisition, we signed on November 16, 2023, the acquisition of 100% of the share capital of Kairos Partners SGR. You may have read something on newspaper. Kairos is an asset management company, invest managing open-ended fund, so we will fund institutional mandates and some liquid product.
The strategists and the clients are fully complementary to what Anima does. They manage -- Kairos managed 4.7 million of assets as of December 2023. The company employs 110 people between employees, between Milan and Rome. On top of that, Kairos has also business, let's say, wealth management business with approximately 20 private bankers, managing EUR 2 billion of assets, approximately. Large part of this portfolio -- private banking portfolios are invested in Kairos products. So I think that this could be a very interesting opportunity for Anima to gain an access to some high-net individual in order to sell our products, of course, and to better understand the market dynamics. Looking at the new group structure, the Anima SGR continues to be the heart of the business, EUR 187 billion of assets on the left side; Kairos, and this will continue -- Anima will continue to do the historical business with strong inquiry with retail distribution and several institutional relationship. Anima is an industrialized machine to do this business. I think that we demonstrated during the years that we are of class in doing our business. But we wanted also to gain more access to a segment of clients where we were less present, namely family offices and high-net-worth individuals and user -- institutional fund users, financial advisers networks. So the segment of the market where we were weaker historically. And I think that with Kairos and our alternative franchise that we are building up, we can get more -- we are more competitive in attracting assets from this type of -- from these segments. So Kairos will be -- its brand is very well known in Italian -- not only in Italy -- in the Italian market, focusing on high-end retail and institutional clients, and of course, trying also to leverage on the selected team of private bankers, as I was saying before. And then the -- all the alternative work made of 2 companies, Anima Alternative that they mainly manages private credit funds and Castello, mainly focusing on real estate funds. So this is a platform that we -- I spoke about it more than once. We will try to leverage this platform further developing additional strategies in order to be able to serve larger type and number of clients. Page 15, dividend for the year, our proposal. We will propose on the 27th of February, that is we have scheduled our Board to call the AGM of end of March. The dividend proposal will be EUR 0.25 per share, up if compared to last year, 53% in terms of dividend payout on net consolidated -- registered consolidated net income.
To make our last slide, if you look at, found title for the slide, recharging completed. It's not like Fabrizio probably in terms of fantasy, but it's very close to him. Net inflows were what we see. I think that we had a tough 2023 for the [indiscernible] sector. At Anima, we resisted very well because apart from the Class 1 traditional insurance that for us is, let's say, not particularly impressed in terms of profitability and the rating factor. We registered very well on the retail, but not only also on the institutional side. I think that the normalization of interest rates -- and let's say, not -- I mean, we don't have even to touch level -- lower level, but what we need is to start with a decent -- to decrease in interest rates. And I think we are very close, if not -- if we are not already there because the network, if they see the movement, if they see the direction, they start to push on the asset management business because it's key for them to find an additional way to make also commissions to substitute net interest margin. So what we are seeing already in January is consistent across all networks, consistent movement, positive movement on the asset management business. And I think that this may continue during the year if, of course, the direction of the interest rates would be the one already started in December. Performances, as I was saying before, decrease in interest rates has already provided some sign of what this could entail for a company like Anima because in -- with a strong movement in December, we have been able to increase our assets to register important performance fees. And I think that this could be a very important trend also for the year incoming.
Alternative assets. Castello is an important acquisition for us in this segment because with Castello and Anima Alternative, we now have a platform we wish to build up to become an important player in this area. I think this is a synergy with our strategy -- with our sales strategy on the rest of the business. As of today, Anima has the capability to reach the entire, let's say, client base, institutional and low retail in the country and not only in the country because we also started selling our products abroad. And I think that having a more complete and wide range of products is key to have success in doing so. New opportunities. Of course, as I said before, Kairos is very close to the strategy that we already started in the alternative in the sense that Kairos with its brand and its capabilities is very important in helping us to be competitive in client segments where historically we were weaker. And I think that on top of that, having selected private banking network could help us in better understanding certain type of client segments, and also, we are not distributing our products, liquid and illiquid.
Last but not least, M&A capabilities. Even if we did 2 acquisitions in 2023, of course, this will -- let's say, will be a tough job for the management in the next few months in order to integrate and put and to try to exploit as much as possible of the synergies that we see in putting together all these assets. But we remain, of course, very active in the sector. We have done in our history several acquisitions. We know how to do it. And we continue to be -- to scout the market to see if there are interesting opportunities to further increase our capabilities and our, of course, size in terms of assets and potentials in terms of markets. This is also from the strong and robust cash generation of the company that will allow us also to provide significant remuneration to our shareholders, as we've always done -- as we always did in the last year since we listed.
So thank you all, and I'm fully available for questions.
[Operator Instructions] The first question is from Gian Luca Ferrari of Mediobanca.
3 questions for me. One is on the way you communicate flows. We saw last year that on targeted funds having BTPs as underlying we got all the outflows from former products having your funds as underlying, while at the end of the day what matters is the fact that the client is buying a fund or a targeted fund. So any chance you can move from the underlying asset view to the main product view or not in the future?
Second one is, I didn't see in your slide deck any referral to January flows, if you can anticipate or communicate what was the performance in January? And the third and final one is on Kairos. And in particular, 2 things. Yes, you said you are complementary with them. At the same time, you have some funds that are in complete overlap. So I was wondering if you are planning to streamline a bit the product offer and merge funds that are basically having the same strategy. And second, it seems to me from what you are saying that you value a lot the private banking side of Kairos and the access to family offices and high-net-worth individuals. So I was wondering if you have any target on those 20 private bankers, where this number can go in the near term?
Gian Luca, well, thank you for your questions. Well, the way to communicate flows, we are thinking about it because there are, I mean, several different views, and it's always difficult to provide a clear and -- a clear communication to the market because, of course, then there is the Assogestioni map that is coming out every month with data that should be fully aligned to the rest of the sector. So it's not easy to have a communication that is clear for everybody. So we will make some thought and we'll try to be as much as possible complete and to provide you with the relevant details to also to make models and to foresee the future. January flows, the trends are -- and we will try in the communication of tomorrow, the trends are what I said during my presentation. So we still have this wrapping noise. While the underlying, in terms of retail flows are very positive. So the -- I'm seeing -- we started well. So tomorrow, we'll come out with the press release, and we will try to make clarities on these 2 trends.
Kairos, well, we are -- of course, Kairos -- the transaction is not closed yet. We are working with them in order to assess what they have, what we have and also to have a plan -- an action plan by, let's say, the closing date.
Streamlining, as of today, we have some products that could be potentially in overlap even though, for instance, I have in mind, probably there are that -- let's say, are in the same market, but with different approach to the investment. So let's see, but to be honest, I don't see a particular, let's say, need requirements to streamline the product offering. We will try to bet more than -- on top of that, probably we will try to focus the 2 companies on different type of products. So we may decide to bring some strategies in Kairos and vice versa. So we'll try to focus the 2 companies on different type of products and investment capabilities.
No, no. I was wondering if the 20 private bankers you expect to reinforce that part of the asset.
Well, the 20 private banks, as I said, I think these are a very interesting opportunity for us. Of course, we will never become a private banking network because this should be -- would be also in conflict with our distributor, so -- but I think that there is room from 20 to grow, for sure. We are working on this strategy and on the numbers, and when I'll have more clear ideas, I'll share with you.
The next question is from Alberto Villa of Intermonte SIM.
The first one is on the inflows outlook for 2024. Of course, I'm not expecting you to give us a precise guidance, but I was wondering if we can have some more color on your discussions with the banking partners and how confident you are they are pushing more actively towards managed assets and if you really expect given the rate environment remains volatile in the short term, but probably heading towards a reduction in interest rates, if this could be really the inflection point for your inflows? And if you're confident the banking networks you work with are maybe demanding you new products or actively marketing products to -- in order to catch this opportunity.
The second question is on the massive cash generation. You're continuing to experience is very good news. Is that potentially allowing you to be even more generous on the dividends and the buybacks going forward, so the dividend payout ratio maybe -- could be increased in the future? Or you prefer to maintain flexibility for other opportunities to deploy cash?
Finally, on the performance fees, I understand that you are in a much better position now than a few months ago. Maybe you can share with us what is the January performance fees harvesting you had? And that's it.
Okay. Alberto, thank you for the questions. For 2024 guidance, difficult to provide a number, but I can tell you my feeling talking to the banks and looking at their general results. Well, today, the banks -- I mean, they're all saying the same thing, namely that they want to push more on asset management and bancassurance because they expect net interest margins to go down. They don't know the timing, but everybody is preparing to do so.
If I look at January, I have to say that across all our networks, so with main partners but not only, results are positive for them. So I see -- and for some of them also we have a very interesting number and more live. So I would say that if you look at January, the -- we started very well in this respect. And I think that we see something that has changed. So this is the first good sign. This is what I can say. And of course, what the messages I'm getting from the banks is that they want to continue in doing so. Then, I think that the trends and the -- and how the interest rates will go is key in assessing what will be the performance for the banks.
Cash -- well, cash dividends and buybacks, let's say, on the dividend guidance, we are not thinking at changing our guidance -- informal guidance of at least 50% of consolidated net income, while we will continue to take into consideration, and actually, in the last 6 years, we also executed the buybacks during the year. Because our idea is to pay an interesting yield to our investors, increasing the shareholders' remuneration via buyback and cancellation of shares at the end of the year, of course, if we don't see M&A coming or reasonably coming. So this is where we are, and we will decide in terms of cancellation of shares for this year on the 27th of February.
And the buyback, of course, we will get the approval -- we'll try to get the approval from the AGM for 10% as always. And then, during the year, the Board of Directors will decide when to activate a buyback program. In terms of performance fees, we started January better than last year. So we almost doubled the number of September -- where we were at September last year in Q3. So it's not a huge number, but it's far better than last year. So hopefully, we will continue in this direction.
The next question is from Filippo Prini of Kepler.
A couple of questions. First on performance fee in Q4 2023. Could you tell us, please, how much of them is coming from funds at high watermark and then how much of them coming from the standard benchmark?
And the second question is on the split between fixed and variable cost of Castello SGR. I see that the share of variable cost into their -- in Castello is higher than in Anima. So if you can explain a little bit how these variable costs are generated to which variable to which KPIs are linked?
Filippo, well, performance fees in Q4, basically, we registered performance -- almost the entire performance fees registered were on high watermark funds. I think that we did EUR 1.5 million on benchmark funds approximately -- no, EUR 3 million, sorry. EUR 3 million in benchmark funds and the rest in the watermark funds. These are a watermark with an order rate in any case.
Castello SGR, the variable component that we registered, this is not the variable component for the 5 months, basically, but is the variable component for Q4 -- basically, we are registering the variable component for the full year.
The next question is from Elena Perini of Intesa Sanpaolo.
Actually, I have only 1 question, and it is still on costs. I was wondering if you can provide some guidance on the costs for the current year, also considering that at a certain point of time, you will also consolidate Kairos SGR. So we have, it is true, a lower inflation rate compared to last year for the SG&A, but we had the contract renewal in the banking sector and so on. So if you can elaborate a bit on those components.
Well, the -- well, on the SG&A, as you are rightly mentioning, we have less inflation in terms of inflationary depression. For our concern, the collective agreement that we have contracted, as I said during the presentation, the full year impact in 2024 will be plus EUR 400,000 if compared to 2023.
In terms of -- if you look in general, in terms of cost, including the contribution of Kairos, our cost-income will increase for sure because Kairos, in any case, is a company that is at breakeven, including performance fees as of today. So it's a company that is under scale and that we have to, let's say, relaunch in terms of revenues and assets to be attracted. So this will have a slight impact in terms of cost-income on the group, for sure. Of course, we will provide the number as soon as we have the closing. So for the Q3, we will provide you with all the numbers.
Meanwhile, we have a minor correction on Alessandro's answer to the Elena Perini's second question about Castello variable costs. Substantially, it is true that what you see in Q4 does not represent a run rate that you could project over a normal year. It does have some significant skew towards the end of the year. Main KPI is the generation of EBITDA of Castello. However, it is not correct to say that it represents an entire full year on Q4. There is a significant skew though. And the run rate for the next quarters will probably show that more clearly. I hope this is acceptable. I was about to say the same thing. If there is anyone who wants to ask further questions or if Filippo has any further questions, we are here. So apparently, we either satisfied all curiosities or we bored everyone to death. In both cases our next appointment will be for the Q1 results on May 6, and we are looking forward for -- to a very large participation as just like today. Thanks, everyone for attending.
Thank you all. Thank you for attending the call. Bye-bye.