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Good day, and welcome to the conference call on the Publication MLP Results First Half Year 2020. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Andreas Herzog. Please go ahead, sir.
Thank you, operator. Good afternoon, ladies and gentlemen, and a warm welcome to the presentation of our financial results for the first half year 2020. All documents, including today's presentation are on our website. Here with me is our Chief Financial Officer, Reinhard Loose, who will firstly comment on our business development in the first 6 months. Afterwards, we will be happy to answer your questions. So, now I would like to hand it over to Reinhard.
Thank you, Andreas, and good afternoon, ladies and gentlemen. The IP group was able to continue its growth trend and increased total revenue for the first half of the year to a new record levels since the sale of our own insurance subsidiaries in 2005. This was achieved despite the anticipated negative effects of the coronavirus pandemic on individual business areas. Above all, those fields of consulting that we have paid great attention in the last few years with the ones that made an important contribution to the overall very positive development. These are wealth management, non-life insurance, and real estate brokerage. As already communicated at the end of July at 18.8 million euro earnings before interest and taxes EBIT, after the first 6 months were significantly up on the previous years to date.We also made good progress in terms of acquiring new consultants, which is a key sector for our future growth. Indeed, we now have over 2,000 consultants for the first time in many years, and around 100 consultants more than one year ago. In light of the successful development in the first half of the year, we now expect to reach the upper end of the EBIT corridor forecast for the financial year of 34 million to 42 million. You can find an overview on revenue development on Slide 5 of the presentation. Total revenue increased by 9% to 359 million euro. Considering the second quarter on its own, revenue rose by 9% to 165.3 million euro. The breakdown for consulting area showed the strongest growth rate in the first half of the year were recorded in real estate brokerage, in which revenue virtually doubled to 16.1 million euros in the period from January to July, following the first-time consolidation of Deutsch and Lemobile in Q3 2019. The pleasing development is also continuing in this consulting field. Alongside the business that is (INAUDIBLE), with more than 6,000 affiliated broker, more and more MLP consultants, and now also successfully positioning in the topic of real estate as investment with their clients with a full scope consulting approach. Alongside brokerage, we have now also established the project business, above all, in the fast-growing segment of senior citizen housing and care. Deutsche Lemobile is employing a structured process with multiple testing steps to acquire properties or lands, which is then used to build properties together with construction companies or project partners. A dedicated project enterprise is founded for each project here. The process of selling individual units through the affiliated brokers at Deutsch Lemobile, and of course also through our MLP consultants, starts as soon as construction permit is granted. Adopting this approach helps us reduce capital expansion. Risk is then essentially limited to the land acquired, which we initially included in our balance sheet. In this way, we expect being able to carry out 10 projects a year with a volume of 15 million to 20 million euros each. This applies to a settled stage, which we expect from 2022 onwards. Wealth management is up 15% after the first half of 2020 in comparison with the same period in the previous year. We are also benefiting from several years of systematically strengthening wealth management here, after recognizing its growing importance and early stage, both for our clients and for the -- for the success of our business. The acquisition and further development of our group subsidiary, as well as the strengthened offering for MLP's private clients, we have taken some key steps here. And with this private client business, we've already been convincing our clients with a fee-like model since 2012.Unlike most institutes in the market, as a bank, we also pass on all retro sessions that are made available by product providers to our clients. In non-life insurance, we recorded an 8% rise. This was supported by positive development, both at our group subsidiary, DOMCURA and an MLP's private client business. Revenue from health insurance increased by 6% to 25.2 million euro in the first 6 months. Despite operating in market conditions that were not always easy, we can also reflect on continuous development throughout past quarters here. The loans and mortgages field of consulting were able to virtually compensate all of the drop in revenue suffered in the opening quarter after the first 6 months, the pronounced increase of 13% in the second quarter. The consequences of the coronavirus pandemic could be felt especially in outage provision. As expected, this, in particular, affected the occupational pension provision business, as very few companies are currently reaching decisions regarding new provision concepts. The situation is also compounded by the fact that new client acquisitions declined in the first half of the year due to the coronavirus pandemic, which will have a negative impact due to revenue in the first--in the field of private outage provision over the second half of 2020. Total outage provision revenue in the first half of the year was 78.9 million euro. Regarding the assets under management and the pause of stock value. MLP wasn't only able to make up for the decline associated with the coronavirus crisis, but even set a new record high of 39.6 billion as of 30th of June. In this context, the MLP group not only benefited from the upward trend in the market and highly successful in management of investment concepts, but also from successful new business, both at Feri and MLP banking. The alternative assets managed by FERI, including private equity and hedge funds, also recorded an increase to almost 9 billion euro. (INAUDIBLE) is important, more important than ever that FERI offers know-how and corresponding services that are in demand among institutional investors. At the same time, concepts managed by FERI, which have been successfully pursuing innovative volatility strategies for years, also enjoying good development. We had already mentioned the performance fees associated with these and their contribution to our total revenue in our preliminary publication. We were also able to further increase the stock value of non-life insurance up in the first half of the year to 419.4 million euro. The recurring revenue that this creates lands our business special stability. Let us now move on to the income statement on slide eight. At 18.8 million euro, MLP recorded a significant increase in EBIT over the same period in the previous year. This was driven primarily by the significant increase in EBIT to 8.1 million euro that was recorded in the second quarter. In addition, the successful operating performance that I've already described, claims for VAT refunds from previous years were also settled by the tax authorities and recognizing income in the second quarter of 2020, and EBIT contribution of 3.4 million euro was recorded as a special effect resulting from this. The next slide shows our balance sheet. At the balance sheet date, shareholders' equity slightly declined from 437.4 euro 423.7 million. This can be partially attributed to the fact that we distributed around 23 million euro in dividends to our shareholders at the end of June. The core capital ratio was 18.9% on the reporting date, meaning that we remain very well positioned. As it stands today, we are also anticipating a similar level at the end of the year. As some of you may remember, I already highlighted our turnaround in terms of growth and consulting numbers during the last presentation of our quarterly results. Slide 11 shows that MLP already implemented a sustainable reversal of trends in 2018, which can be attributed to the intensified new consultant acquisition process, particularly the young segment. This represents an important growth lever for MLP. With our intensified recruiting process, we are also increasingly filling a gap that is appearing in the market, and is likely to keep growing quite significantly. According to a recent survey undertaken by EY value (SP), consolidation is likely to have a truly dramatic effect over the next 5 years, particularly in the broker market. Indeed, the most extreme scenario, the survey expects almost one in 4 brokerage companies to exit the market. This figure is even more severe among tied agents. The reasons for this are already known. Alongside retirement due to old age, and the often futile search for a successor in small brokerage offices, it is being driven by increasing business channels. Above all regulatory requirements and not least the investment in digitization that are needed to keep pace with industry developments. In terms of market consolidation, the coronavirus is acting like an accelerate year. In fact, MLP is countering this development in the consulting market, also in the second half of 2020. Some 2014 client consultants were working for MMP as of June 30. It has been 13 years that the company has had this many consultants on board. With this latest increase, we have also once again surpassed the 2,000 mark of MLP consultants. In addition, we remain optimistic regarding the coming months as MLP is still anticipating further year-on-year gains on the number of client consultants. We are currently expecting increase between 2,200 and 2,280 by the end of 2022. However, it remains important for us not to accept any compromises in terms of the quality of our (INAUDIBLE), and we are therefore investing a great deal in qualification and further training at our MLP Corporate University. Just a few weeks ago, we expanded our offer in cooperation with the University of Applied Science at (INAUDIBLE) at the Berlin (INAUDIBLE) Business School to include a financial coach certificate degree course. We are thereby offering MLP consultants a further development opportunity that is not otherwise available to the market in this form. The number of family clients served by our consultants as of the 30th of June rose slightly over the preceding quarter to 552,400. At 8,400, the gross number of newly acquired family clients in the first half of the year was slightly below the previous year's level of 3,800. Although new client acquisition at MLP was still above the previous year as of the 31st of March, the effects of the coronavirus pandemic became more apparent in the second quarter. However, with the increasing opportunities for our consultants to be, again, personally present, and prospective clients we expect to see renewed upturn in new client acquisition in the coming months. Slightly more than 26% of our family clients were initiated online the first half of the year. The number of corporate and institutional clients served in the MLP group also rose slightly to 21,900. Let us now move on to our outlook. Having successfully fended off the negative effects associated with the coronavirus in the first half of the year, and above all, the second quarter, we will continue to do exactly that in the second half of the year. We will remain resolute in taking the opportunities presented to us by our markets. As already communicated at the end of April, we are anticipating EBIT of 34 billion to 42 billion euro. Following the successful development in the first half year, we are now expecting to reach the upper end of this range. Nevertheless, we expect market conditions to remain challenging as a result of the coronavirus pandemic, particularly in occupational pension provision. In old age provision, we are sticking to our performance analysts, that revenue will remain stable or display a slight downward trend. The last 2 quarters, the fourth quarter in particular, are traditionally extremely important here. Unfortunately, however, no normalization is yet inside, particularly in the feed of occupational pension provision. As it stands today, wealth management could potentially record a slight growth in revenue for the year. This is thanks to the very successful development in the second quarter and the revenue increase of around 15% after the first 6 months. However, there is definitely a risk of the market becoming highly volatile, primarily due to the coronavirus pandemic and political uncertainties. This is reflected in our classification as stable. In the loans and mortgages field of consulting, we are also anticipating stable development and will likely remain at the previous year's extremely high level. In real estate brokerage, we uphold our forecast of strong growth, although, we still expect this to be slightly less dynamic than originally anticipated at the start of the year. Building licenses for planned projects are taking even longer to issue as a result of the coronavirus. This is likely to lead to slightly later revenue recognition. Our revenue expectations also remain unchanged in the fields of non-life insurance and health insurance. Nevertheless, we could continue to face market-related risks if the coronavirus pandemic leads to even greater macroeconomic appeals. Let us now go to the midterm planning for the MLP Group, starting with our annual press conference at the beginning of March. I have already presented this slide to you on 1 or 2 occasions. It shows that our objective is to take MLP to the next level in terms of earnings over the course of the next three years. Indeed, we are still planning EBIT of between 75 million and 85 million euro for 2022. Ladies and gentlemen, please now allow me to finish with a brief summary. MSP is currently doing well despite the coronavirus pandemic. We enjoyed strong growth in sales revenue in the first half of the year, and also significantly increased earnings. This is already a sound basis for the rest of the year. We will also remain resolute in the second half of the year and take the opportunities that the market presents to us. The diversity of our revenue basis, which we have worked hard to achieve in the last few years, and the high stability of our business will benefit us quickly here. At the same time, we are working with great focus on reaching our mid-term planning targets. Our earnings drivers, above all acquisition of new consultants, are continuing to develop according to schedule. So we are happy to once again confirm our mid-term planning. Mani, thanks for your time. I'm now happy to take any questions.
[Operator Instructions] Our first question today comes from Michael Haid of Commercebank.
Two questions; first on the performance fees, 10.6 million, I think it was in the second quarter, and 11 million in the first half, very high. Can you elaborate a little bit about the nature of these performance fees? Also, does it come from the Q2 performance, the asset performance in the second quarter or from--does it go back over a longer period, for instance, twelve months period? Second question, a balance sheet question. In the banking segment, I noticed that the risk provisions have reversed from the first quarter. In the first quarter, you had minus 3.1 million, in the second quarter, plus 0.8. What are the underlying reasons for this release? Can you elaborate a little bit on that?
Yes, of course, Mr. Haid. Thank you for the questions. On the performance fee, what is the nature? The nature, more or less, there's the 2 funds, which I think you know quite well, the Optoflex and the equity flex, both have high watermark concepts. And therefore, obviously, due to the good performance in the second quarter, but related to the history of the funds overall, these high watermarks were hit or beaten in the second quarter. And therefore, at the end of the second quarter, 30th of June, is the date when the high water marks were relevant on this stage. We were able to--yes, to gain these performance fees of almost 2 point--or around 2.6 million euro for these 2 funds.This--the performance fees and banking, the risk provision. In the risk provision in the bank, obviously, the main point and the most important point is the normal, let's say, risk provision for loans. But you also have in this line, valuation points for some bonds and some funds. And due to the positive performance in the second quarter, this valuation had a positive impact to the P&L, and therefore, the line risk provision in the second quarter has a positive figure.
Okay. So underlying these provisions for loans, that has not changed that much. It's more--it comes more from valuation?
It comes only from valuation that's positive valuations, yes.
Our next question comes from Philip Hessler of Pareto Securities.
Yes. Philip Hessler for Pareto; I have 2 questions as well. Firstly, on the net flows, could you please give us the figures for Q2, if possible, split between FERI and MLP? And then on the real estate brokerage fees, which were very strong in Q2 and also H1, could you give us the contribution from Deutschland and Lemobile for Q2.
Yes, Mr. Hessler, of course. I will give you the next flows as always, not for the quarter, but if you allow me to give you for the first half, and then you can use the numbers for the first quarter, and you can calculate it. We have inflows of overall gross inflows of 2.9 billion euro for the whole company, thereof 2 billion to FERI, and outflows of 1.3 billion euro, thereof 1 billion for FERI. And the performance overall was around 1 billion negative in this period, which comes then to net inflows of 1.5 billion in the first half of the year.This concerning the net flow question--thank you for asking this question regularly, that shows that I can prepare. And the real estate, as you all know, the real estate business in MLP itself was growing and is growing regularly and very strong year-by-year and quarter-to-quarter. That means that in the end, from this overall revenues around 2/3 coming from MLP and one-third from Deutsche Lemobile.
So 2/3 from the growth on the--from the overall number from the…
From the overall number. Okay. 2/3 of the revenues are coming from MLP consultants and one-third from Dutch Lemobile partners, just--does that answer your question?
Yes, it does. Maybe if I can ask a follow-up question--not a follow up actually, but a first question on the occupational pension business. If I have understood you correctly, that you don't expect a short-term recovery for this. So for H2, we can expect this business to remain challenging? How do you see 2021? Do you expect a recovery for 2021, or is it--do you expect it to remain difficult?
Of course, the correct answer to this depends a lot of the development of the coronavirus and especially of the development of employment rate and how the situation of the companies is. In general, our hypothesis is that in 2021, as the official numbers also suggests, we will see an upturn increase in development and occupation. Again, and then that means for us that in 2021, we also expect this segment to grow again. But for the rest of the year, we see this as challenging.
Our next question comes from Andreas Schafer of Bankhaus Lampe.
I have just 2 questions. One is on the deposit volume you get from your clients. I mean, you have already got some 250 million more in the first half of this year. So could you tell us a bit what is the burden from the negative ECB rates on this? And the second point, I got the impression that except for old age provision, there seemed to be no negative impact from COVID at all when I look at the growth rates in your commissions and fees. Could you confirm that there is--would the growth have been even stronger without the impact of COVID 19?
Hello, Mr. Schafer. Just to understand your last question correctly, this question goes on the commission overall?
Exactly, except for old-age provision? I got the impression, if I look at the growth rate, that there has been no negative impact at all.
Yes. That's indeed, more or less the effect. They're starting from a negative point--as the finance guy, I always start from a negative point. Definitely, except next to old-age provision, there are some delays also in real estate. We would have expected, and we saw that that the real estate, the question, could we visit a flat or something like this, went down in the second quarter. Therefore, there are some negative effects. And you also--please keep in mind that the commission will finally get, for a successful brokerage of real estate, is not--when we have the commission in June, it doesn't mean that the business of the communication with the client starts one month earlier, but it's 4, 5, 6 months' time to develop, find the financing and so on. Therefore, we are--and that's what I said, we are less optimistic for the second quarter. We still are optimistic, as we will see a strong growth, but we would have expected an even stronger growth without the crisis. These are for these 2 fields. On other fields was more indifferent or even more quite the opposite, as many banks, for example, also reported during the last days in the area of wealth management of investing in shares. We saw all-time highs in flows and opening of new accounts, especially in April and also in May. And this was, for us, let's say, something like a positive effect out of these. We saw due to the fact that positive outflow of our digitalization, that we had from the first moment on the ability to work not only internally, but also in the consulting areas, to work from home to work via video conferences. We had more consulting base with our customers in the--during the coronavirus than we had in the respective time of the year before. And therefore, in general, there was--next to the few points I mentioned in the beginning, not--no negative impact overall.This perhaps, overall, to how we fight at the moment with or against the virus, as I said, the digitization helps us and the proximity to the customer helps us a lot. There is one effect, which we saw a little bit also in the first--or in the second quarter, and we might see perhaps in the next months. The work, the consultant consulting to our existing customer works more or less as good as it worked not before, but it's more difficult to find new customers, and this is also a challenge now for the upcoming months. This was the longer answer. The other answer will be shorter. You asked concerning the growth of our deposits on the balance sheet of the bank. In general, we tend to have here the idea to have the deposits of our customers in a relatively liquid basis. That means we park a lot of the money at the ECB or at other banks. That means the contribution for this more than 200 million euro, is negative. And negative, not with the ECB rate of 0.5, but in general, you will calculate something like average now for the last month of 0.25 in or 0.3. [indiscernible]
Yes, yes. And what are you--I mean, do you have any sort of plans to, let's say, limit the net flows, deposit flows? I think it's really getting--I would say, the velocity is getting faster and faster in which you get new money on board?
Yes. We started with--at the beginning of the year, we started with negative interest rates for an amount of customers. We have the, let's say, positive effect for our overall business. We have a negative effect on the balance sheet, but we see a positive effect of, let's say, our overall proximity to the customer. And one result of this, that is that more of the MLP customers open their running accounts at MLP, and not only just one running account, but also the accounts where the salary goes, and we have a 17% increase of salary accounts in the first 6 months.And this, in general, for us, we see as a positive sign costs, as I said, this underlines the proximity between the customer and MLP. But it has, at the moment, a negative effect that it brings additional volume to our balance sheet. And therefore, we try to find the right mixture between limiting, for example, via negative interest rates, and on the other side, continue to attract customers that they continue to do business, obviously, not only with the account because we don't want to have customers to just have an account, but you know that we not only try to, but also, the result is that these customers work with us in several other divisions. And therefore, this is something like an investment for the overall customer relations.
Our next question comes from [ Cristian Salas ] of [indiscernible].
I've got a couple of questions here. So first of all, could you please talk a little bit about the segment performance, especially in orders provision over--yes, throughout the quarter in Q2? So, have you seen an initial demand shock in probably in April, and have you seen a recovery in May--or in May and June? And maybe in this regard, where we are in current trading in Q3 would also be helpful. And secondly, we saw that at retail brokers like Flat X, for example, saw really strong growth rates in Q2 given the higher volatility in the market. So it would be interesting to hear whether you have also been able to benefit from this?Thirdly, the question on the guidance, obviously, because the upper end of the guidance is implying a 30% EBIT decline in H2 year-over-year. So, I know a lot of this depends on Q4, but are you expecting or anticipating any negative cost items in H2 already now? And then 2 follow-ups, please, what's the asset under management figure for FERI standalone in H1, and what's explaining the 3% operating health insurance in Q2?
Okay. Thank you, [ Mr. Salas ], for your question. I'll try to go through the list; old-age provision. The only provision more or less started good in the first 2 months, and then with the beginning of the crisis, it went down, especially, as we already mentioned, the occupational pension area. And this, more or less, going down stable. There is until now, no sign of recovery. And therefore, as I also explained earlier, we are not too optimistic about the segments for the overall year and also not for the second quarter. As you know, it used to be our most important segment. And therefore, this negative trend definitely has some impact for MLP overall despite the fact that in all the other segments, the development is quite positive.One positive point is concerning your next question. You asked about the inflows. And I also would like to reiterate here that Q2 was, for us, one of the most successful quarters concerning inflows. We had all-time highs in opening new accounts for our asset and for our customers in there. And therefore, the net inflows, as I also said, with around 1.5 billion euros, are in the group overall, and as well as only in FERI as well as only in MLP are quite positive. Therefore, what you have heard from the market is also valid here for MLP.The outlook--I think the outlook gives something like the mirror to the uncertainty about this pandemic will continue. Obviously, I think the volatility there is quite high. To be quite honest, when we first gave the profit warning after the first, let's say, weeks of the crisis, I personally would have not expected to see the DAX at 30,000 in August. And therefore, if this continues, then the results, especially at the management might be more positive. But on the other side, I think there are so many risks also for a downturn that we stick to, and continue to do this overall outlook, and only increase that we say we think we will see the upper end of what we said, going more into the--to see more before the second number. And then a three. And you asked, if I see--or have a concrete hint for a negative effect coming in the second quarter, for example, high negative cost issues, definitely we not. I think the--during, of course--and you know that this is one of our strategic pillars. We will continue with our cost management. And therefore, we won't see the negative effect from costs to our P&L, I think, special there for the second half of the year. Then you asked for the asset under management of FERI standalone. At the 30th of June, we are--FERRI is at 33.3 billion euros there. And your last question was concerning health insurance. I think--and I didn't mention this before, but during the corona crisis, everyone thinks about health. As you start thinking of health, you ask--start asking yourself, am I perfectly covered against everything, which can harm my health? And in some cases, the answer seems to leave that there can be some improvement. And therefore, to speak less--in more in concrete numbers, we definitely saw a higher interest from our customers to speak with their consultants, about their health insurance. And this ended in a higher contract number.
[Operator Instructions] At this time we have no further questions.
So, thank you, operator. If there still might be some questions left, or arise later, please do not hesitate to contact our IR team. We appreciate you attending our call today and wish you a pleasant remaining day. Thank you, and please stay healthy.
Thank you. Bye-bye.
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.