Good morning to everyone, and welcome to Allfunds preliminary financial results presentation for the full year 2021. Thank you for joining us today. Before we begin, I would like to point out that our press release, the results presentation and supplemental exhibit information can be found under the IR section in our website at allfunds.com. This call is being broadcast live, and a replay will be available on our website during the day. Please note that reported figures are unaudited, and for 2021 figures, those are affected by M&A impact of recent BNP acquisition. However, to facilitate comparisons, we have provided pro forma figures. I encourage you to review on page two the cautionary statements for customary disclosures. In addition, please refer to slides in appendix to see further additional information.
As a reminder, we aim to spend 30 minutes for the presentation and 30 minutes available for Q&A afterwards. Joining me on today's presentation are Juan Alcaraz, Allfunds Chief Executive Officer, and Amaury Dauge, the company's CFO. Juan and Amaury will provide a company update, as well as an overview on the company's full year preliminary financial results. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may get back in the queue if you have additional questions. Of course, the investor relations team will be available to take any calls after that. With that, let me hand it over to our CEO, Mr. Alcaraz.
Thank you, Silvia. Thank you very much. Good morning to everyone, and of course, thank you very much for being with us today. Before I start, I would like to introduce you to Álvaro Perera, who will, I mean, succeed Amaury Dauge as our new CFO starting first week of April. Congratulations, Alvaro. Let's start. 2021 was an amazing year for Allfunds. It's been our record year when we see all the KPIs, all the metrics. As you can see in this slide, the AuA growth was amazing. We went, I mean, we grew 29%, reaching EUR 1.5 trillion.
We made more than EUR 500 million in revenues, which means a growth of 36.5%. Our EBITDA was also fantastic. I mean, EUR 367 million, which implies a growth of 40%, okay? Our EBITDA margin also grew from 71% in 2021 up to 73%. Apart from numbers, you know, which of course, you know, Amaury will enter into much more detail, I think it's important to mention that 2021 was a fantastic year when we talk about winning markets. That to me is extraordinarily important, because that proves that our value proposition is still unique and is, and that our value proposition is differential. Last year, we were able to onboard 85 new clients, distributors, which is also a record figure.
I think also it's important to point out that almost half of them come from direct competitors. Again, reinforces the message of our unique value proposition. We were also able to migrate EUR 67 billion from new clients, which is also a record figure for the company, you know? Also, I think it's interesting to see that these clients are coming from all around the world. Our value proposition works not just in some countries, but all around the world. We also had a very good year in strengthening our value proposition. We made important investments in order to enhance Connect, our digital ecosystem, launching new versions of Telemetrics, launching new versions of Nextportfolio.
We also were able to close some strategic partnerships, in order, again, to enhance, Allfunds value proposition like Allfunds Blockchain or the access to, private equity funds, no? I mean, liquid products, no? My main takeaway is that our full year 2021 results are well ahead of our IPO guidance, and we also envision a strong 2022 outlook, no? Despite the current market volatility, you know? If we enter into some more details, here you see that our three main, levers of growth when we talk about assets, were extraordinarily strong. You can see how the flows coming from existing clients went up in EUR 84 billion. Again, a record figure. Migration, 67. New assets coming from new clients, again, also a record figure.
Also market performance was extraordinarily good, no? With EUR 78 billion, no? All these numbers helped the company, no, to grow up to 41.4% when we define as Allfunds traditional business, no? On top of these assets, you can see the growth of the dealing and execution portfolio coming mainly from the BP2S deal that went from EUR 412 billion end of 2020 up to EUR 439 billion December 2021, a 6.6% growth that take us to this 29% growth in assets that I described before. Well, again, a very strong organic and growth of our assets. The market helped, without any doubt.
The market was positive and that contributed to the growth of the company last year. If we isolate the effect of the market, of the positive market, you can see that the company was able to gather EUR 151 billion again of organic growth, which is more than two times what I mean double the amount that we reached two years ago, 2020, which was also a record figure compared to 2019. Again, extraordinary organic growth compared to our historic track record, which demonstrates you know that the business and the flywheel effect is getting traction.
In this slide, what we try to show to you is how our numbers compare with the industry, with the indexes, because I think it's important, you know, to contextualize all these numbers and all this growth. As you see, we grew in the last five years. The CAGR growth of the company is around 19% compared to the 11% growth of MSCI index, 2% of Barclays Aggregate Index, and 7% of the European fund industry. More precise, when we see 2021 evolution, remember the 29% growth of Allfunds compares with a 19% growth of the UCITS fund industry. We are gaining market share compared to the market?
We are going from the 9.9% that we had of market share in 2020 to 10.4% in 2021. We are doing all our best, you know, to keep on bringing and enhancing, you know, new distributors, new fund houses, and therefore, you know, strengthening the global network of partners that we have at Allfunds. As you can see here, we have combining distributors and fund houses, 2000 partners around the world helping and contributing to well, to strengthen our value proposition around the world.
These two charts just prove the traction that is getting both the onboarding of new distributors with these 85 new clients and the same coming with fund houses almost with a record figure that we achieved in 2020. Let's talk a little bit more about the clients that as I said at the beginning, it's not all about numbers because the numbers are, in the end, it's a consequence of the business that we do on a daily, well, every day. It's our business as usual and this is where I think that also 2021 was an excellent and extraordinary year for the company. These 85 new clients come from 30 different countries.
These EUR 67 billion of new assets coming from new clients, as I said at the beginning, almost 50% of these assets, okay, come from direct competitors, okay? Which, as I said before, it's important to point out this, no, because this proves that our value proposition, well, is still unique and it's our job, okay, to keep on increasing the gap between our value proposition and our competitor value proposition. By region, you see that we have been able to bring distributors, new clients from all around the world, from Americas, from Asia, EMEA, everywhere in the world. Something also important is that the size of the clients.
I mean, we prefer to focus on mid-sized clients rather than just target, you know, one big client, in one specific country. I think that everything is about diversification, no? We are super keen and happy with the way we approach, no, the market, no? Bringing clients from around the world, mid-size, type of distributors that need to enter into open architecture or that they are working with a competitor and they decide to move to Allfunds, platform, no? Thanks to, again, that they perceive, no, that we have something differential and unique, no? When we talk about asset management companies, as you can see in the chart, well, this is pretty exceptional. You see that, France, no, and also Sweden are pretty important in, in last year numbers, okay?
It's a result of the M&A, you know, that we did in 2020 and 2021. What about our subscription-based revenues, no? The revenues that come basically from Connect, no, and our digital services. I think we also have very good news, no? As you see, we grew 45% our revenues, coming from, as I said, mainly from our digital services. You can also see that our average monthly users of Connect grew 32%, no? From 5,400 in 2020 to be above 7,000. It's very important to take into account that these are professional investors, okay? Connect is closed to the end customer, not to the public, so we're talking about portfolio managers, fund selectors, private bankers.
These are the people that are using our digital ecosystem, no? We believe that the growth has been also extraordinarily good. Connect. We keep on working on the strategy that I mentioned to all of you during the IPO roadshow. Our four main models, Fund Solutions, Wealth Solution, Regulatory Solutions, and data analytics. We keep on working in the three strategies, no, that I explained, no, almost a year ago, no? Three ways of reinforcing Connect by in-house developments, by strategic alliances. Best example probably is iCapital, no? Reinforcing our product range with illiquids, and also through inorganic growth, okay?
Which is something that we take very seriously and that we are really on top of, well, working on potential deals to also reinforce Connect. Just let me give you a very quick update of BNP Paribas integration. The biggest transformational deal that we started at the end of 2020. Just to tell you that we are on track. We are on track with the wealth management platform, so all the BNP Paribas distributors in France. We are on track with all the Banca Corrispondente business that we acquired in Italy, October 2020, and we are on track with all the migration of the FDS assets to Allfunds' platform.
Also regarding this deal, there has always been a lot of interest, no, from investors regarding to try to seize, no, the opportunity of what we call client conversion, no? Or client upselling opportunity, no? When we discussed about Q3 results, I committed to give you a guidance, okay, regarding and to seize the opportunity, no, regarding this opportunity. This is the result, no, of all the meetings that we have had with FDS clients, okay? So you can see that out of a book of EUR 439 billion, well, the assets that we believe are in scope are around EUR 140 billion, out of which we estimate a success ratio between 25%-30%, okay?
When we talk about Banca Corrispondente, so the Italian business, we are talking about EUR 80 billion of assets in scope and an estimated success ratio of 40%-45%. This takes us to the following key numbers. Already closed EUR 29 billion as of December 2021, and therefore, you know, when you apply all this estimated success ratio to the 220 billion of total potential conversion, it takes you to an additional EUR 50 billion of probability of converting all these assets to our traditional and full service model. Which means having these assets under our distribution agreements with the fund houses, okay? I think it's a pretty good number.
When we started, you know, well, we didn't know exactly, you know, what we were going to find. For me to be around EUR 80 billion of opportunity, I'm pretty happy, you know, with this number, no. If we move on, well, as I said at the beginning, 2021 has also been a year of well, of doing, of trying, you know, to to enhance our value proposition. Again, until now, we were not offering to our clients access to illiquid solutions, to illiquid products. Thanks to the recent partnership that we closed with iCapital, now our clients and Allfunds can offer a one-stop solution in both liquid and illiquid products. We also finalizing all the setup of our sub-advisory platform with more than 27 mandates.
In fact, we are about to obtain the license for our ManCo. Today, we have our ManCo outsourced to a third party. We will have our own ManCo in the coming weeks, and this is going to allow us to offer new services to our partners, like, for instance, dedicated private label solutions. Or also be able to offer to fund houses that want to establish in Europe, so to have their SICAV in Europe, I don't know, US firms, Asian firms, you know. We will be able to give them fund hosting services. Finally, regarding blockchain and our digital assets, I think very good news because we were able to successfully execute the first tokenized fund in the Spanish industry.
It's the first time that this happens, you know, using blockchain technology. In summer, we will also launch our new solution for transfers called FAST in Spain and in Italy. Apart from this, you know, we have several business labs with custodians, with transfer agents and with fund houses. In order, in my opinion, you know, in some way to disrupt the industry in dealing and execution to make it much more efficient. Again, this is our commitment with both our distributors and with our fund houses to help them to be more efficient. Finally, before we start with the numbers, well, the company, we have a clear ESG-embedded, you know, strategy in the company.
We are aligned with the major ESG international standards, and we have integrated ESG, you know, at all levels of the organization. We take ESG very seriously as a company. Also when we look at the new products, new services, and new tools that we launch, we are also reinforcing, you know, the ESG components. With this, I'm gonna ask my colleague, Amaury. If you can please walk us through the full year results. Thank you, Amaury.
Thank you, Juan, and good morning, everyone. It's a pleasure to walk you through our preliminary unaudited 2021 financials. As you've seen in the previous slides, we have delivered a very strong first year as a listed company, and I will now run you through the key financial figures and explain the main underlying drivers of this solid performance. Before going into the detail, though, let's look at the main drivers of our business again. All of these drivers are in advance or in line with the IPO guidance we provided a few months ago last year. First, the strong activity in 2021, which was fueled by all of our growth engines, enabled a revenue growth of 36.5% to EUR 506 million net revenues.
Second, the highly scalable nature of Allfunds business also allowed for an even higher growth of our EBITDA to 40%. Our EBITDA margin for the period stood at 73%, and this is to be compared to a 71% margin in 2020, and an objective of reaching 75% in the midterm. As a side note, we are focusing on adjusted EBITDA, which excludes separately disclosed items such as integration and IPO-related costs as well as other one-offs. Thanks to these positive dynamics, Allfunds illustrative normalized cash flows stood at EUR 228 million in 2021, to be compared to EUR 171 million in 2020. While we increased our overall CapEx to support the ongoing transformation of our group and integrate recently acquired activities, maintenance CapEx remained at around 3% of net revenues.
If we focus now on net revenues, our net platform's revenues were up 36% versus 2020 pro forma to be looked in conjunction with an AUA growth of 29% over the period. Platform revenues benefited from strong tailwinds in the first half of the year, as you know, especially on the front of market performance, flows from existing clients, and a high average margin, which was driven by higher than usual transaction-based revenues. Our H2 revenues also grew by 33% on a year-on-year basis, with commission-led revenues up 37% from EUR 141 million to EUR 193 million. While transaction revenues returned in the second half of the year to what we believe is a more normalized level, they were up 20% versus H2 of 2020.
Subscription-based revenues also registered a strong performance in 2021 on the back of additional clients that joined our platform and new product launches. These two factors combined led to a higher engagement of customers. As a result, subscription revenues grew by 45% in 2021, and H2 2021 was even up 48% when compared to H2 of the previous year. We believe that there is still a lot of additional runway for our subscription-based activity. At the end of 2021, 86% of distributors were on Connect, whereas for fund houses, the penetration was at 25%. As stated during the IPO, our objective in the midterm is to have subscription revenues representing 10% of the group's total revenues.
In 2021, these stood at 4%, as they did in 2020, but this is more attributable to the strong performance we experienced on the side of the platform revenues. Focusing on margin now. There are a couple of key messages that I would like to share with you today. First, our business has demonstrated strong margin resilience, with average margin of 3.6 basis points for the year, versus 3 basis points in 2020 or 3.3 basis points as reported with pro forma figures at the IPO. Second, now that the integration of acquired business is well underway, we felt it was time to make a change in the way of reporting margins to better reflect the way we look ourselves at our business.
From now on, you will see AuA related to the traditional platform business and AuA related to dealing and execution only. Previously, the BNPP other category included AuA from which other services were provided beyond dealing and execution. With this new reporting, we are really separating the traditional platform service from the pure dealing and execution, and both of them come at a different margin. However, the traditional platform service with a margin of 5.1 basis points now represents over 70% of total AuAs. We expect that this trend is what is driving the overall strength of our business. Looking at our expenses now, they have increased. See that. Next. Yeah.
Looking at our expenses, they have increased by 30%, which is EUR 33 million during the period, of which EUR 25 million is linked to an increase in staff cost. This increase is a result of a couple of factors. First, change of scope, one with the staff that was transferred from BNP as a result of the transaction. Second, with a long-term incentive plan. As discussed at the time of the IPO, we have implemented an LTIP to promote long-term value creation and foster talent retention. Staff costs also include a higher bonus accrual, which is in line with the group's performance, and some one-off items, such as the end of the deferral of bonuses for senior employees on a going-forward basis. We have also increased our expenses in IT and comms by about EUR 6 million.
This evolution of our cost base is both a reflection of our continued investment in the future of the company, as well as the scaling nature of our business. Looking at our EBITDA now, we've been through most of those metrics. I would just like to insist on the fact that this positive jaws effect that we have experienced is a result of the exceptional AuA growth we had in 2021, combined with higher margin that translated into higher levels of revenues with some control on the cost side. Moving to the CapEx. Again, we told you already that, you know, as usual, we're splitting CapEx between maintenance and transformational. CapEx amounted to EUR 27 million in the year versus EUR 20 million for the past year.
This growth was mainly driven by the integration work performed following the BNPP transaction, as well as the continued development of our digital offering and our blockchain capabilities. This slide is showing you, again, as usual, the bridge to reported figures. In 2021, we have booked EUR 114 million of exceptional items affecting the adjusted EBITDA. In line with IPO guidance again, the cost of the IPO themselves stood at EUR 21 million, and TSAs and restructuring from the Credit Suisse and BNPP acquisitions amounted to around EUR 53 million. The other non-recurring items include M&A-related expenses and staff-related one-offs. Finally, most of the other one-offs which are affecting the adjusted profit after tax are the PPA amortization charges of EUR 139 million, and this has increased versus last year due to the acquisition of BNPP. Turning now to the cash flow generation.
The pro forma normalized free cash flow amounted to EUR 228 million for the full year, demonstrating that Allfunds is a high cash generating business. Please note that in this slide we have normalized the cash tax expense, meaning that we have removed the impact of the Italian tax step-up to get again to an illustrative cash flow level. We've covered most of the metrics of 2021. What we would like to do now is to turn a bit our attention to what is ahead of us. Given the market volatility and performance, we wanted to provide you with some visibility on the evolution of our AUA since the beginning of the year versus a couple of benchmarks.
As you can see in these charts, AUA is quite resilient when compared to overall market performance. Year to date, Allfunds has decreased 3.4%, which is significantly better than other indices like MSCI, S&P 500, and STOXX Europe 600. This resilience is a result of the diversification of the business, as Juan pointed out, in terms of asset classes, but also geographies and client base. It's also the result of the other drivers of growth of Allfunds, such as new client migration, that will continue to support our expansion even during market headwinds. Now looking at the outlook, and you know, how are we doing versus, again, the IPO guidance that was provided back in April.
Given the industry in which we operate and the continued expansion of our business proposal, we had decided at IPO to provide you with a midterm as well as a long-term guidance, rather than an annual one. We operate in an industry with short-term factors that are out of our control, but we firmly believe that these do not impact the long-term prospects of Allfunds.
If we look at our first year as a listed company, again, we can see that the 2021 performance has been well ahead of the guidance provided at the IPO. How is 2022 shaping up for us? First, we do not think it makes a lot of sense in the current environment, and especially in light of the recent events, to elaborate too much on short-term market evolutions. Here we are making a very simple assumption. We are looking at a theoretical scenario where markets will be flat in 2022, implying a gradual recovery of markets from now on to the end of the year versus 2021. We would like to show you what impact such a scenario would have on our performance.
Platform revenue margin would be between 3.3 basis points-3.5, again, versus IPO guidance of 3.3. Net revenue growth would be around 10% in 2022 under such scenario, and implying a higher than 20% CAGR between 2020 and 2022. Again, that was the CAGR provided at IPO, so we would be beating the IPO guidance. EBITDA margins would be maintained at the 72-73 level on track to reach the 75% in the midterm. Irrespective of market evolution, we expect our other KPIs to move as follows. D&A will stand at EUR 30 million, reflecting increased investment in our digital proposition and continued transformation.
The effective tax rate will move towards the bottom of the IPO range as 27% as we start to take advantage of the tax step up. Obviously, this would be potentially affected by growth in our various geographies. Then the payout ratio, which we have indicated that for this year will be at the low end of the range we have provided at IPO, i.e., 20%-40% of adjusted profit. We expect that for 2022, this would move from to the low to mid-range, of course, depending on M&A initiative that we may run during the year. Before we turn to Q&A, I would like to leave you with a few key messages that you see here on this slide.
In both good and more challenging market environments, the fundamentals of Allfunds investment case remain very strong. We are a leading global scaled wealth tech with superior financial profile. We're offering a unique value proposition to our customers through our one-stop shop, continuous innovation and charging model, and we operate in a large and high-growth market. Thanks for your attention and let's now open the Q&A.
Thank you, Juan. Thank you, Amaury. As Amaury said, let's move on to questions. Operator, can you please proceed with the first question and state the name and the company, please?
Absolutely. Our first question today comes from Tom Mills of Jefferies. Tom, your line is open. Please go ahead.
Oh, good morning, guys.
Good morning.
Thanks very much for the presentation and congratulations on the results. I just wondered if you could say a little bit more about the partnership that you've put in place with iCapital and obviously you've now launched with Carlyle as a kind of cornerstone player and product provider there. Can you talk a little bit about your kind of nearer term ambitions there, you know, who else you'd like to see signed up? Perhaps just elaborate on what we could expect there. Thanks very much. Thank you.
Hi, Tom. Thank you very much for your question. Well, we published the go live, you know, of this initiative a couple of weeks ago, which means that we have opened the new service really recently. I mean, last week, okay? What I can tell you is that our clients, especially, you know, private banks for a high net worth individual segment, okay, in all around the world, you know, are, I believe, you know, that happy, you know, with the fact that Allfunds has opened, you know, our platform to deal with illiquids product, okay?
The number that I can give you, but again, this is last week, is that around 100 of our close to 900 distributors or 100 distributors have asked our sales teams, you know, to start discussing how to start working, you know, with or through our platform, you know, and this partnership. I think that's pretty good news, but again, really recent. As you know, what we are trying to do is to reduce all the complexity of accessing illiquids products. That's our main goal, to facilitate the access of these products, you know, to our clients.
We also have an exclusive agreement, you know, with iCapital, because, you know, we want to put focus on this initiative. Also the pricing, you know, is, I believe, pretty interesting, you know, for our clients, you know, that want to trade these products through Allfunds, you know. We are gonna need at least a couple of quarters, you know, in order to know the size, you know, of the opportunity, to tell you the truth. It's too recent.
That's understood. Thanks very much, Juan.
Our next question today comes from Arnaud Giblat of BNP Paribas. Please go ahead.
Hello. Yes, it's Arnaud Giblat here from BNP. I've got a question and a follow-up, please. If I could follow up on the private markets initiative. Are you gonna be doing the structuring, the feeder funds, et cetera? In which case, there's probably quite a bit of upside, I think, on the potential revenue margin. More generally, do you have a longer list of asset managers that are ready to sell through you? My second question is with regard to the drop in revenue margin in H2 versus H1. I mean, roughly we calculate 3.4 basis points for H2 versus 3.8 in H1.
Understood that transactions could be a component part of that reduction. Could you maybe walk us through what's happened between H2 and H1? Thank you.
Okay, I'll take the first one, Arnaud. We are not going to enter into structuring, you know, these feeders. I mean, this is a iCapital, you know, task. What we do is to try to, as I said before, no, to simplify the access, you know, to this product that until now at least for European investors was pretty complicated, no. No, we are not entering into that business with illiquids in this moment, no. We will probably do it for long-only products, no, through our, as I mentioned before, our fund hosting new service, no. Regarding the number of products, you know, it's going to depend more on iCapital, again, that they keep on placing new GPs, new feeders in the platform.
We have started with three, but you know, we are expecting to see new GPs joining the platform. I cannot give you a number, but I think around 10-15 GPs or new products will join on an annual basis, at least. The second question I'm gonna ask Amaury you know to
Yeah.
To cover it.
Hello, Arnaud. Yes, you're right, and your calculation is correct. The average margin decrease in H2, you know, as anticipated, if you remember, right? Because we, when we published our H1 numbers, we knew that the margin would decline. The main drivers which led to such a decline was, on one hand, the transaction revenues. We had experienced very strong local paying agent, more notably activity in H1. That returned to what we believe is a more normalized level, as I just said. Again, knowing that it's hard to talk about normalization in an environment that is difficult to normalize, number one. With a company that, you know, keeps on changing.
You remember that a lot of the LP activity comes from BNP as well. We had one before the BNP acquisition, but it has significantly increased with the BNP transaction. The second impact, which is also something that we have flagged, you know, hopefully consistently, throughout the engagement with investors and analysts, is regarding migrations, right? Sometimes we migrate clients that comes with a higher margin, and sometimes they come at a lower margin. Again, you know, I'm sure you will have heard me say that this is specifically why we never look at the margin independently from the AUA evolution. A very low margin, you know, if we were. You know, we always take this example with Juan.
If we were signing a client in the U.K., where traditionally the margins are lower, which would be 100 billion of AUA, which would come at a significantly lower margin and potentially affecting the overall margin of the group, it would still make a lot of sense from a PNL perspective, right? Whenever we're looking at the evolution of this driver, we should look at it in conjunction with the evolution of AUA. 2021 has been very strong in migrations. You know, just to summarize, we had guided correctly here, and we're providing a revised guidance again for going forward, where we believe we're going to be at or above what we said at IPO.
That makes sense. Thank you very much.
Okay.
The next question comes from Philip Middleton of Bank of America. Please go ahead, Philip.
Yes, good morning, and thank you for the call. I wondered, this is probably along the same lines as the last question, but if you look at your guidance for the yield you're getting from the BNP assets you're converting, that looks on a significantly lower margin than your existing book. I wondered if you could talk about that a little, please. Why are you talking about two basis points for that book?
You're right, Philip. Right? Again, just to set the picture again for everyone, right? We're talking here about the FDS activity, where we make a fee that is you know extremely low, and again, this was known fact, and the potential for converting those clients to you know to a more regular activity. And yes, indeed, we believe that on average the yield that we will be getting from those clients, because of the very nature of the activity, will be closer to two basis points, again, on average, right? I mean, we have a different bag of clients in there. This is an average. But on average, it's going to be two basis points.
I don't know if I can say much more at this stage.
Yeah. No, probably we can point out that in the case of Banca Corrispondente, then also this EUR 80 billion of assets in scope, we are estimating to convert around 45%. I mean, this volume is pretty concentrated, Philippe, in very big distributors in Italy, which means that they have extraordinary good and competitive terms with the fund houses. Okay? And as you know, when we talk about this client conversion in Italy, for instance, we already have the business. What we are doing now is convincing these clients to convert to our distribution agreements. But in many cases, in Banca Corrispondente, there is more a kind of a guided open architecture. So distributors concentrate not in hundreds of fund houses, you know, but more in 30, 50 key fund houses, and they have very good terms. Okay?
That's why apart from the margin that we make with the traditional Banca Corrispondente, all the trading, you know, we believe that we are just gonna be able to put an extra two basis points on top of it. This is regarding, for instance, the Italian business, no? And the FDS business. Well, it's split all around Europe, no? And what we see is that they are already working with other platforms, no? It's, I mean, we need to offer extraordinary competitive prices, and that's why I believe or we believe, we estimate that it's gonna be a little bit below, you know, our traditional margin with our existing book. That's what we talk about these two basis points. Okay?
Juan, if you allow me, you know, maybe one more word. This is good news for us, right? I mean, I just wanna make sure that the stage is set correctly. You remember that, you know, at IPO, this was not factored in.
Yeah.
because as Juan, you know, said a number of times, we were looking at exploring the mine, trying to see if there was anything we could find in there, right? We have found something.
Mm-hmm.
That's good news. It was not in the business plan. That's not the main. You know, that was never meant to be the main engine of growth of the company. The main engines are the client migration, where we've been very successful in 2021 and expect to continue to be that successful. Client flows, market performance when it's there, and this comes on top of all of this, right? We are being very active with this book. We're going to try to convert it quickly throughout 2022 or by the end of Q1.
Mm.
you know, again, to position that correctly, I think that this is good news.
Yeah, completely agree. Yeah.
Okay.
Okay. Okay. Thank you very much.
Our next question in the queue today comes from Greg Simpson of BNP Paribas. Please go ahead, Greg.
Hi, it's Greg Simpson from BNP. The first question would be just on slide 28. Thank you for the color on the business performance year-to-date. AUA down 3.4%. Can you provide any color on your experience around flows year-to-date? I'm guessing the pipeline of migrations remains healthy, but what are you kind of seeing amongst existing client flows? And how do you think they'll behave in this kind of market volatility? I've got a follow-up as well.
Yeah. Thank you, Greg. I don't know if I can disclose this organic growth year to date. No, probably I cannot talk about the specific number, but you know what? I can give you some color, no? What I can tell you is that at least for the moment, what we are seeing is that our client base is not redeeming. It's pretty stable on the organic side. No? What is in our hands is to bring new clients. No? We are, as you can imagine, focusing on migrations, on convincing new clients to join our platform. No?
In this respect, I think that, again, in 2022, market volatility should not affect at all, you know, our migrations pipeline. In fact, it has really nothing to do. I think this is much more related, you know, to our ability to enhance our value proposition and convince clients, no, as we did last year, to move to our platform, no? In fact, all this volatility, we saw it in 2020, no? It helps Allfunds because we see a clear effect of flight to quality, no? Distributors want to work with the number one platform. For the moment, investors, Allfunds investors, stable, not redeeming, and Allfunds suffering, of course, because of the market effect.
As Amaury mentioned before, you see that we have a very good cushion when we talk about, you know, how the volatility, how the drop of the equity market affects Allfunds. You see it here, no? We have good levers, you know, to compensate or to mitigate the drop of our assets linked to the market performance, no? You see there are more around 50%, you know, cushion, or at least 50% cushion, no? Whenever we start seeing migrations to kick in into the platform, you know, during the year, I believe that we will even improve this number.
Thanks. Just a follow-up would be, are you seeing much change in the competitive landscape with the large custodians having completed their acquisitions, now Clearstream and Euroclear, you know, is there more competition for new clients? Do you still think there's the potential to do M&A? Just any kind of color on that kind of competitive landscape would be really helpful. Thank you.
Yeah. Well, that's a very good question. I think I can talk about 2021 and in 2021 because these are facts, you know, it's fact-based, no? As I said before, it was the best year of the company in bringing new clients and almost half of the new clients came from our direct competitors, where all these names. Well, not names, but, you know, all these new competitors are included in this list, no. This is what we saw last year. Yes, in theory, we have stronger competitors.
In the practice, we do not lose clients and we keep on bringing new clients to the company, you know, to the platform, and again, record numbers. What is gonna happen in the future? I don't know. Well, in theory, competition should be tougher, no? Because of course, you know, we see that they are in some way trying to replicate our business model, no. When you analyze the movement that they made, it's They have a clearer strategy of replicating a business model of Allfunds that has been unique for two decades, no.
Well, we are not going to stay still, as you can imagine, and that's why I'm always obsessed with enhancing our value proposition, with being much closer to our clients to understand their pain points and to keep on running in order to be better every day, you know?
Thank you. Our next question today comes from Angeliki Bairaktari of Autonomous. Your line is open.
Good morning. Thanks for taking my questions. First of all, on the BNP conversions, slide 16, thank you so much for providing that additional information. Can I just check, do I understand correctly that the potential that you see now for further conversions amounts to EUR 50 billion, which you mentioned, could happen by Q1 2023? Is there anything that you think you could achieve after 2023 or is that broadly based on what you see and sort of the AUA in scope that you see, sort of the maximum potential conversions, those EUR 50 billion? Second question on operating expenses. Can you give us some guidance on sort of the cost growth that you expect in 2022 and beyond? As...
This would help us, especially because I know you provide guidance on the EBITDA margin, but obviously revenues tend to be volatile and also more market-dependent. I presume that you have already an idea with regards to sort of the cost trajectory for 2022 and perhaps how flexible are costs, is the cost base. Could you adjust your cost base this year if revenues are sort of not progressing to the extent that you expect because of markets? Third question, can you just confirm, will you be paying a dividend to ordinary shareholders out of 2021 earnings? Or shall we expect dividend to resume from next year onwards? Thank you.
Very good. Let me start with the client conversion, and Amaury will cover the-
I'll take that, yeah.
Thank you. Okay. Well, we're talking about EUR 80 billion, and we wanted to put a deadline, okay? Because I'm sure that if we come here and we tell you that, you know, that it's gonna take us three years, you know, to convert, probably is not what you were expecting, no? That's why, you know, we have put a deadline in some way, no, this Q1 of 2023. The team now is committed to deliver these assets for Q1 2023. This doesn't mean at all that we are going to stop the client conversion plan.
In fact, I'm sure you know that in 2023, clients that probably today, you know, are not 100% convinced to move to our distribution agreements because of whatever reason, you know, potentially in 2023 might decide to do it. Okay? This EUR 80 billion, so the 29 already converted, plus the EUR 50 billion that we put in this slide, are the ones where the sales team, you know, has a clear focus on achieving this conversion in the next or during the next 12 months. Okay? This is an open process, and we'll keep on working to convert more assets, absolutely.
Thanks. If we look at your question regarding operating expenses. Yes, we do expect those expenses to continue to grow in 2022, because of the investments we're making, right? And because we want to, you know, we don't want to, I mean, at least for the moment, right? We'll see how the year will unfold. We don't want to overreact to those short-term events. We have a trajectory. This business is doing great. You see that even in a context of flat market, we would be growing our top line, so we need to continue to think about what should come afterwards.
Basically the expense increase will come first from the fact that, you know, we always start with, you know, having to take into account the full year impact of what was done the previous year. Second, we have a couple of expenses such as LTIP. You know, we talked about the LTIP, and I think that all investors were very supportive of this. As you know, this is building up throughout the years, right? Because we will be launching one every year. Until we come to a steady state, that will represent an increase. More importantly, it will be about hiring a few people on the digital side, continuing to reinforce our infrastructure and so on, and preparing for the future.
To what extent are these costs flexible? They are, of course, but I think that the tricky question and what management together with the board, of course, will have to decide is, again, trying to make sure that we do not overreact to short-term events and put at risk the long-term growth of the company, right? Because we want to continue to grow our digital platform. We want to invest in areas, you know, in the relationship and so on. That's necessary to support the growth side. We're not in a game where we have to worry about a contraction of our activity on the long-term, right? This is not at all the case.
We'll be looking at expenses in a way as usual, and this is what Juan had done during COVID, making sure that, you know, we were holding back on what was not necessary. Again, this will be a balanced and very focused approach. Now with regard to dividend, you know, this is, of course, will be subject to, you know, to the board and then to the general assembly decision. Yeah, to be clear, we do intend to distribute a dividend for 2021 numbers, as we said at IPO, right? This will be on a pro rata basis, right? Not for the full year, but from the IPO onwards for nine months or so.
As we guided, you know, do expect that this will be towards the low end of the range for this first year because we want to, you know, we want to make sure that, you know, as we continue to grow, we will also continue to expand this line. As you can see, it's what we're saying in our 2022 scenario. For 2022, this would be moving from low to the mid-range. Again, depending on what activities we'll be conducting, yeah, during the year.
Thank you.
Thanks.
Our next question in the queue comes from Andrew Coombs of Citi. Please go ahead, Andrew.
Yes, good morning. Thanks for the presentation. 3 questions from me. Firstly, on slide 29 and the scenario that you've put out there. If I look at the end AUA at the end of 2021, if I look at the midpoint of your 3.3-3.5 basis points gross margin guidance, and do a back of the envelope calculation, it seems to suggest that if you're only looking for 10% growth, you are assuming that, or in your scenario, you're assuming that net new money runs below the 7%-11% range you've seen over the last kind of 3 six-month periods. So just wanted to check if that was the case. Are you assuming net new money run rate closer to mid-single digit, close to 5% in that scenario?
That's the first question. Second question on slide 16, on the BNP deal on migration. You talk about an extra EUR 50 billion opportunity in terms of assets at 2 basis points, so give or take EUR 10 million of revenues. That compares to EUR 25 million in revenues that I think you derived last year. Just trying to work out if there's any ancillary revenue opportunity on top of that EUR 10 million that you're guiding to, given that it's quite a step down from what you achieved last year. Final question just on the sub-advisory business. Obviously that's been delayed. You were hoping to start last year, now coming through in 2022. You previously talked about a EUR 50 billion pipeline and recognizing 20% in year one.
Is that still the case even on this delayed timetable? Thank you.
Thank you, Andrew. Yeah. Let's start with the first one, and I'm sure I'm gonna forget the second one when I'm done. Silvia, you will remind it to me, please.
I'll take the third one.
Okay. With regard to your back-of-the-envelope calculation, not quite, right? The answer is not quite. Again, what's very difficult, you know, we thought hard about this scenario that we would be providing today, again, in light of recent events and so on. The big difficulty is not only to come to an expectation of market performance, but also, you know, what would be the impact on client flows. We feel that migration is completely within our control, right? We feel very bullish about this going forward as we, you know, have delivered in 2021.
You know, something else which comes to complexify a bit the picture is what pace of recovery or what's happening, right, during the year. Here in your calculation, and that's where, you know, the back of the envelope might be a bit misleading, is that this scenario anticipate that there is a progressive recovery on a decrease that took place at the beginning of the year, right? The impact is compounded by the fact that, you know, the recovery is only progressive. To try to answer your question, we do expect migration to remain strong. In this theoretical scenario, we had modeled client flows to be flattish, if I'm not mistaken, right?
Flattish.
Yeah, flattish. That's for the first question. The second one, Silvia, please.
The BNP conversion.
Yeah.
Compares the EUR 10 million, roughly EUR 10 million of two basis points compares to EUR 25 million of revenues that we said. Are there any ancillary revenues on top of that?
Well, I mean, on the BNP conversion, we will be expecting, you know, to also potentially convert them on the Connect side, right? But more importantly, again, remember that, you know, we said that, but to make sure it's clear, BNP deal was about LPA and was about getting a footprint in France, right? This is helping us further establish our, you know, our local activity in France and will again generate this, you know, this flywheel effect in a new geography or in a geography where we were not as strong in the past.
No, I think this extra EUR 80 billion at these two basis points is on top of all the margin business that we make in Italy in Banca Corrispondente, which is much higher than two basis points. This is on top. Plus, as Amaury mentioned, yes, we can also make cross-selling digital, I mean, cross-selling of digital services, absolutely. In relation or regarding the FDS book, as Amaury said, I think we never gave, you know, a number because we didn't know, okay? And this is a result of sitting, I mean, of approaching all the clients that work with BP2S.
This is additional, I mean, and on top of any number that we gave in previous meetings with you guys, no. Regarding sub-advisory, well, again, you gave us a number, no? This is not a 2022 number, because in 2021 when we talked about this new business opportunity during the IPO, we didn't talk about 2022 or 2021, no. I think it was a clear midterm guidance. Midterm guidance means, you know, three years. We are still very positive, you know, with this initiative.
It is true that it has taken more time, you know, to obtain all the regulatory approvals for launch, I mean, in order to have the SICAV, to have the mandates, and now to have the ManCo. We are still very keen, you know, with the initiative. With our clients, I think that they see in Allfunds this, as I said before, this obsession for keeping on enhancing our value proposition, for meeting and trying, you know, to reduce all their pain points, you know, with sub-advisory, with illiquids, with blockchain. This is a long-term strategy, you know. It's all about, again, reinforcing our value proposition and being the unique provider for our clients when we talk about open architecture.
That's what it really drives all these initiatives.
Thank you.
Thank you very much. It has been a pleasure to host you today. We would like to thank you, Amaury, for this journey. We wish you all the best.
Thank you.
Good luck, Álvaro, and see you next quarter for our trading update. Thank you very much. Goodbye.
Thank you very much.
Thank you, guys.
Thank you, Amaury.