Earnings Call: H1 2021

Jul 29, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Azimut Holdings First Half twenty twenty one Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Gabriel De Blais, Chief Executive Officer of Atemi Holdings. Please go ahead, sir. Thank you very much, and welcome to everyone. We'll go as always quickly through the presentation and leave you as much time as possible for Q and A. If we can start on Slide number four, key highlights of the first semester twenty twenty one. We are still delivering a very positive net weighted average performance to clients of in excess of 5% and in excess of the benchmark. Net total assets at record level as well as the inflows that we have gathered through the first semester of 12,900,000,000.0. This includes also the recent and announced acquisition in the private markets in The U. S, Pathlight as well as the Kennedy U. S. Lift out of the team. And this is something that we have already plugged in to provide you the most updated number. First half net profit of $226,000,000, and we will go into the detail through the presentation of how this has been generated. Turning to the next slide, we wanted to provide you with an update of our private market initiative. It's been now a couple of years of strong work in this area with a global footprint that has been created. In Italy, we have ADVOORTE BEREMPREZA launched official launched in 2019. The company was operating since 2015. In 2019, we had EUR 600,000,000 in assets under management. Today, we are at EUR 2,100,000,000.0 with a very diversified product range and 30 employees, of which 25 investment professionals. These are people that we have hired throughout those years in order to be able to be a credible player in the private market space. Not only to that, we also have third party agreements with selected counterparties. Among those, we mentioned Black Blackstone, Peninsula and Muzinich, with whom we have delegated investment management agreement. On the right hand side, ADEMUTH Alternative Capital Partners, our U. S. Company that is operating since 2019. The first transaction was completed in July 2020 and now has 1,400,000,000.0 of pro rata assets under management, whereby the pro rata means we only plug in those numbers, the 20% on average assets under management of our affiliate company. The first transaction, as I said, Kennedy Lewis, it's an opportunity product credit manager. We are already starting to unlock their expertise throughout our distribution system. When we bought the company, the business had 2,100,000,000.0 in assets under management. High cost, 12.5% so far behind the backing of the Bezos and Morris families. They are launching in the fundraising phase of their fund. Actually, yesterday, they have told me that they will be completing their first investment by mid August, and we're very excited about this initiative, and we are presenting this initiative throughout our distribution system, both in Italy and in The U. S. The latest one latest addition is Pathlight, an asset based lending product credit manager, 1,400,000,000.0. Clearly, here, we have to still work with them to create a parallel fund or vehicles in order to distribute their capabilities throughout our network. Moving to slide number six, recurring revenues. As you can see, we are trying to provide you a bit more color on how numbers have been built up throughout the first semester, excluding or highlighting the change in the perimeter due to M and A where clearly, Sanctuary plays a role. Revenues are up 19%, up to $566,000,000, of which in the same perimeter, if we consider if we exclude the M and A transactions, we are up 14%. The breakdown, you can see this on the bottom of the slide, left hand side. And I would like to stress to you the fact that if you add the insurance revenues and the management fees, we're speaking about more than 90% of our fees coming from these two sources that tend to be quite recurring. On the right hand side, margins margin trend as well as the contribution on a quarterly basis. Clearly, in the first quarter, we had sanctuary only for one month, whereas there is the full impact in the second quarter of Sanctuary as well as the other M and A transactions that were completed. The basis point trend is rather stable. We're quite pleased with that. And this obviously excludes the impact of sanctuary, so we did it on a like for like basis. Turning to the next slide. On the cost side, distribution costs are up 5% as far as the same perimeter is concerned. If we add on top the M and A impact, we reach 200,000,000 in the semester of total distribution cost. Whereas in the SG and A line, we are confirming or reaffirming for this quarter as well and the semester a rather stable on a like for like basis trend in terms of SG and A. If we include the change in the perimeter of the last twelve months, the number goes up to 117,000,000. Costincome ratio stays rather flattish as far as the quarter on over quarter trend. And I would say, again, a decent control in terms of where costs are going on a like for like basis. Next slide, net profit. We are up 58% to $226,000,000, 30,000,000 come from the tax goodwill realignment. Alessandro will go into the details, but this is basically what we had announced at the end of sorry, with the full year numbers of 2020 that we were going into analysis of a potential adoption of a tax law that was drafted towards the end of last year that would have generated eventually such an impact on our numbers, and we plug this in the second quarter of this year. Needless to say that recurring net profit is going up substantially. And even excluding the goodwill realignment, we're quite pleased with where the numbers are going. Remember that when we did our Investor Day back in 2019, we were assuming recurring profit on an average basis and based on the then mix of EUR 50,000,000 per quarter. I guess, here, it's good to remember those numbers and see where we're going. On the right hand side, $226,000,000 so far. We have a significant potential performance fees to be cashed in, which we are accruing on a non on a daily basis. And this is a good starting point for the remainder of the year and to actually reaffirm that when we set targets, we tend to set targets that are quite challenging to achieve. But if the business goes in the right direction and all the people work together to achieve those number, then these numbers become achievable by our company. Turning to the next slide, a snapshot of our inflows and AUM. We are reaching record levels, benefit and courtesy of the market indeed, but also a strong inflow activity. So far, we are at 76,000,000,000 almost. If you include the private market initiative closed in July, we are in excess of the EUR €76,000,000,000 in terms of assets. 37% spend outside of the domestic market. The number is incredibly high. And remember that, again, when we did our Investor Day, we were trailing at something like 20%, and we were assuming that this number would reach 35% by 2024. And once again, when we say things, we then tend to deliver them, if not overcome them. Private markets at EUR 3,500,000,000.0 so far, up from EUR 2,000,000,000 at the 2020. And year to date, net inflow of EUR 12,900,000,000.0, again, including the initiative closed in July on the private market side. EUR 5,500,000,000.0 of organic growth with a mix of Italy and foreign operation, which we'll see in a minute. Once again, life insurance alternative and mutual funds make up 86% of our AUM breakdown. This is something that some of you had requested for quite some time. We have provided this snapshot of breakdown of the inflows in terms of Italy and all the different, let me say, the three macro areas in which we operate. So Europe, Middle East, and Africa, Asia Pacific region, and The Americas, as well as for transparency reasons, we are plugging in the M and A effect, which is mainly driven by Sanctuary, the Australian operation as well as Pathlight as far as the private market is concerned. As you can see, our foreign operations have collected so far EUR 3,500,000,000.0 and Italy 2,000,000,000. On the Italian side, we're very pleased with the mix that we are delivering. There is clearly not the full impact on those numbers due to the fact that some of our products are in the fundraising phase on the private market side, and therefore, you don't exactly see the the full activity and the benefit on the numbers exactly when when we have to post our quarterly results. As far as the $300,000,000 of custody or not internally managed products on the Italian side, this is mainly driven by the effect of the recruitment activity, which is proceeding well. And the first movement is through administrative assets. Turning to the next slide, a bit of details on private markets. We are at €3,500,000,000 as I said, very diversified across different strategies, across countries. And we will be continuing to launch and close funds in the coming months. Four products that we are high pleased to highlight in terms of the new initiatives that will have already reached our network in terms of fundraising capabilities. Hypost, as I was mentioning before, is the first initiative with with our friends that we can deliver to our network both in Italy and abroad. We are committing to reach at least 50,000,000 US dollar in terms of fundraising. Blackstone, we have completed a partnership with with them on on one of their products, and we are participating in the closing of their second Asian fund following the successful launch that they had of their first fund. Here, the target is to reach some at maximum 150,000,000. As far as Peninsula is concerned, we have launched some months ago a European long term investment fund, and now we are launching a Raif fund for professional investors. Last but not least, we are expanding our know how and partnership also with an Israeli very successful VC company, Sweetwood. They are managing a a fund of fund, and we will be launching soon sorry. It's already launched a fund that invest in the second in terms of size VC market in the world, and we are targeting 150,000,000, both in Italy as well as throughout all our distribution systems. Next slide. Very quickly, nothing to highlight, I would say, if not the usual breakdown in terms of assets as well as geographical footprint. When and we would like to, on the following slide, provide you with a bit of color on Pathlight. They are a leading private credit manager with $1,400,000,000 focused on asset based loans secured on a first or second lien basis. And they have, I would say, achieved successful unlevered IRR between 1418%. The team is working together since quite a long time, and they have a very diversified and solid investor base. They're actually in their second fund fundraising phase, and and they are expecting to close this in the coming months reaching or exceeding their original target. Just as a reminder, what are we doing in The US? We're acquiring minority stake in GP companies, and this will benefit the flow of revenues, recurring revenues, as well as carried interest that we will be able to achieve. And which we it provides us with the expertise as well as geographical diversification for the effort that we're putting into raising private market funds. Clearly, for Antimote, the Passai deal has the benefit in terms pro rata assets under management that we're consolidating, almost EUR 300,000,000 as well as we will receive quarterly distribution from profit as because this company charges carried interest with an American approach. As I said just earlier, the team is working together for quite some time, very consolidated and with a very solid track record in the industry. It's an industry, this one, in which they operate that has quite a significant barrier to entry. So it's either you have the content, the relationship, and the knowledge on how to structure this transaction, or it can be extremely complicated to step in. As a quest to transparency, we are providing you some details as far as sanctuary is concerned, some key metrics of a company that is actually in its ramping up phase still because they are completing very solid transactions in terms of bringing independent advisers into their system. So the the AUM evolution is quite significant between the day in which we closed the transaction and today. And we will see in a minute where it is they are sourcing their deals. Cumulated monthly revenues that are quite three times the ones that they had in February as far as June is concerned. Clearly, here, there is a lag effect because AUM are transitioning and are building up. So the full impact will be seen in the following month, quarters, provided that they are unable to keep growing, which is actually the opposite of what's happening. As a consequence, net new money growth is on the high end with an annualized net inflows in terms of assets, which trends towards 50, if not more percent as far as June is concerned. We are working with them to start and this is why the there is one sentence involved, which is the integration between production and distribution and, therefore, cross selling AdSimon's global team products, starting clearly from the private market footprint that we have in The U. S. And understanding with them how we can provide them with further investment solutions to close the gap between production and distribution. Clearly, we want to continue to continue for them to be able to increase the number of RIAs as well as the participation in the business that they are buying. As you can see in the following slide, they are transitioning gross assets of 5,300,000,000.0. 60% is something that was already being transitioned, and they are capable of the teams that they are hiring of bringing 90% plus of the AUM. They already have LOIs signed for additional 1,200,000,000.0 going forward, and we expect them to continue to grow. This is exactly the reason why we provided the vast majority of the money into the business because they were seeing a strong potential for growth and for attracting these RIAs that are shifting away from the traditional wholesale model into independent structures. Moving to asset management. Wanted to provide you with a bit of a snapshot as far as our innovation process is concerned. We've done quite significant achievements in the first half. But I would say since 2019, since the reorganization of the product range and onwards, We have launched our first token. It's the first security token and asset in the asset management sector. We have really strengthened our neo lending activity. This is the synthetic bank project where we are basically providing a bridge between private market funds and the needs of SMEs through technology, implementing fintech approach and on on the digital asset side. We are actually quite proud to be the first asset management company in Luxembourg to have received the authorization to manage virtual asset strategies as well as leverage on the funds DLT platform in order to use technology as an investment opportunity, but as well as the capability to become even more efficient in as far as operational processes are concerned. So through the platform, we will be able to reduce cost and improve efficiency as far as the asset management back end is concerned. The Alto range is another initiative we have and we're quite proud based on the PIPE approach. We have launched two additional products, Alto Italia and Alto Venture that are quite interesting as far as our client base is concerned. Further to this, Peach and Tohuno is is something we have announced during the first semester. We took a 30% stake in a company that we know very well that has been working with us for many years. We are a corner investor in some of their products, and we want to further leverage our respective expertise in order to create a European investment platform supporting innovation and supporting SMEs with a tech driven footprint. ESG, it's an element that we are never forgetting. Optimum sustainable is now alive and kicking. 40%, if not more, of the Luxembourg fund range is following ESG criteria in their investment strategies, and we have implemented the shareholder directive across all our asset management companies in Luxembourg and in Italy. Private market, last but not least, as I said, very successful so far, and we're trying to leverage our internal expertise as well as our third party's expertise. Following slide, there is a bit of a snapshot of ADEMO Direct, which is part of the synthetic bank project or the neo lending project, which basically becomes the bridge between our funds, our private market funds, and the SMEs. We are more and more pushing into bringing closer the real economy and private savings and extracting an interesting return for our investors. So far, we have generated $450,000,000 of financing. Remember that we were speaking about a target of $1,200,000,000 in the period up to 2025. Next slide. We have a net weighted average performance, which is quite which we're quite pleased of, 5.2% net of our cost. And in February, we have delivered to our clients 16% of net weighted performance, which is something that clients are happy about and an additional reason for actually revisiting the asset allocation as far as traditional investments are concerned. So to kind of crystallize the returns generated so far and then move to asset classes that can deliver superior returns in the medium to long term as private market funds. Following slide, same picture as always, and we are overperforming the average of the industry with a good contribution also coming from our foreign operations. Italy, the network is recruiting significant people so far year to date, 96, and 12% growth of the network in just over three years. You can see some statistics, but I would refrain from commenting them. And if you have any questions, please ask them at the end of the presentation. I will turn to Lestandro for the financial as usual, and then we're going to the outlook. Yeah. Thank you, Gabriela. We can move to slide 24. As you actually, as we always do, we can, let's say, give you a bit of color on the numbers. So here, you have the consolidated income statement. As we always do, let's start from the consolidated net profit, $226,000,000. It's around EUR 83,000,000 if we compare it with the first half twenty twenty. And even if we, let's say, take out the effect of the EUR 30,000,000 coming from the tax realignment, we are absolutely, let's say, positive and satisfied of the of the first half results. And so so if we compare the second quarter twenty twenty one with the second quarter twenty twenty, Again, here, I think we have the effect of the tax, we can I mean, we reached EUR 99,000,000 of net profit? We are EUR 5,000,000 above the second quarter twenty twenty. And also, if you consider the effect of the variable fees on this quarter compared to the 2020 that we have EUR 40,000,000 less. And also, there was a positive effect on the interest income coming from the variation of the fair value. Here, the gap, I mean, that we create in the 2021 is more significant. It's again back on line by line without spending too much time. In total revenue, we increased by EUR 90,000,000. In operating cost, there is an increase of EUR 41,000,000, and the operating profit increased by EUR 50,000,000. And the profit before tax, we are above EUR 62,000,000 if we compare to the first half twenty twenty. The recurring fees is a significant increase compared to the 2020, about EUR 77,000,000. Here, the difference in coming is coming from EUR 21,000,000 is the new perimeter. If we consider the acquisition of Sanctuary and the acquisition that we perform in in Australia, this is how so most plain the variation in terms of of new perimeter. But then also, we had a significant increase for 47,000,000 coming from, let's say, the standard business, and then 7,000,000 are coming from the the international business of what what it's already existing. Variable fees decreased by EUR 12,000,000. If we focus the effect of the variable fees in the first half twenty twenty one, we have up to around EUR 20,000,000, 21,000,000 coming from the Luxembourg business, so the crystallization method. And then EUR 6,000,000 are coming from the international business. On other income, we have, again, a significant variation if we compare it with 2020. This is coming from Century again. So the acquisition performed in the 2021. But also something is coming from what we call and we already call in the presentation as Synthetic Bank. So this is something that we're coming I mean, it is coming up as contributing the P and L, and probably, we will see a better, let's say, each impact in the future. It's about the insurance revenue. We have a variation of EUR 18,000,000. Again, here, the variation is coming EUR 6,000,000 from the recurring fees and EUR 12,000,000 from variable fees. At the level of the cost, distribution cost, the 25,000,000 more compared to 2020. So again, if we give you more details, around 12,000,000 are coming from the international business and the evolution of the new perimeter. And EUR 3,000,000 is coming from the Italian business, I would say. So the financial adviser directly linked to the evolution of our recurring fees that we were mentioning before. On personnel and SG and A, 13,000,000 more. To avoid any issue for this line that you see increasing for 30,000,000. It's, again, here, the effect of the acquisition in Australia and as well in The U. S. So taking out the variation of the new perimeter, costs are essentially flat. So again, here, we are demonstrating Q on Q the attention of some cost and the discipline that we are still keeping starting from 2019. The other line are to me moving under the operating profit, the interest income is mainly explained with a mix of impacts that are coming from the fair value options, coming from the variation of the fair value of our liquidity that is invested in that on our own funds, and then dividend coming from the minority stake. The other line, let's say, that are almost in line. Therefore, I will not spend time. Just few second on the income tax. Yes. You have 5,000,000 of impact in terms of what we paid for the realignment of the goodwill. So 3% of 150,000,000. So the aggregate variation that you that you see is explained by this EUR 5,000,000. And on the deferred tax, you have EUR 35,000,000 coming from, again, this effect of the realignment. Moving to Slide 25. You have the net financial position. We are back to a positive net financial position if we compare it with June 2020. We are positive despite the fact that we paid the dividend. So it's I mean, the cash generation that we are doing, performing is very important and significant. Cash and cash equivalent increased compared to the twenty twenty December by EUR 20,000,000. And also during six months, we paid back EUR 7,500,000.0 to the loan BPM. You can see at the beginning of the slide that there is a variation between December 2020 and December 2021. I'm going to leave back to Gabriela that will give you a bit of focus on the debt. Thank you, Alessandro. So turning to the following slide, we wanted to picture where we are in terms of debt maturity and potential future actions that we will be taking. As we have seen so far, we're still highly cash generative. We now have three outstanding debt, one that would be fully repaid by the end of the year, 45,000,000 left of the senior bank loan. Then we have 350,000,000 bond that was launched to finance the growth between 2017 and 2021, which will be fully repaid by March 2022. And then we have the remaining one, the 500,000,000 bond that we launched in December 2019, which will be probably repaid when it would fall due. As you see on the on the bottom of the slide in red, we have basically very low ratios as far as net or gross debt to EBITDA. And this compares with the feature approach, which basically doesn't include any performance fee in in their rating approach, and therefore, the metrics that they use are quite more stringent than the actual situation of of the business. Moving to the summary and the outlook. We have four point main points. We initially the momentum is is continuing to improve. As you have seen margin wise, there is a solid trend, and we're confirming the numbers of q one. The quality of of the inflows is what is what matters to us because through this, we are able to change the future performance of clients. Clients eventually, at an industry level, are losing money on their bond side, and this is probably not very well perceived because of the equity component that is clearly benefiting portfolios. We have been able to so far year to date, we are up one one and a half percent as far as our returns on the bond component. So we have been able to, through a strong diversification and selection of of the different driver of performance within the bond component will actually perform pretty well. Last point on Italy, we are one of a kind network based on partnership and entrepreneurial approach, and we are probably the one only advisory network that is bringing to our retail clients private market investments. As far as the international is concerned, trends are encouraging. We've been trying to discuss this with you for quite some time now. We were seeing an acceleration, and the acceleration is happening. Even excluding the performance fee component, the business is across all the different locations in which we are operating is building up. And we clearly need to focus our attention on further integration between asset management and distribution in our key markets. This is something that will be quite a theme over the next years. The global team is now deploying and creating synergies and opportunities of cross selling as far as markets and products are concerned. Private markets, three and a half billion with a very good presence in The United States. This didn't exist up to a year ago. Now it's real, and it's 42%. And it's something that we will be pursuing further because it brings a lot of benefits in terms of know how and potential deployment of the cash that we will be raising from our clients. Last but not least, business of private market clearly brings us recurring and stable fees. And when it happens, carried interest that will have the benefit of cashing in and will build up the net profit of the future. Capital management, dividend buybacks, this is something that we'll continue going forward. Since the IPO, we have always paid dividends. We have started to be active on on buybacks since many years, and this are done this is done in a very opportunistic approach. So far, up to today, we have paid 1,600,000,000.0 cash return to shareholders in the form of dividends since the IPO. On top of that, we had delivered 400,000,000 of buybacks for a total of 2,000,000,000 out of EUR 2,600,000,000.0 of net profit generated since the IPO. Deleveraging is something that we have discussed many times. It's ongoing, thanks to the sound cash flow generation. We are going to remain focused on our deleveraging approach because we want to show discipline in leveraging and deleveraging the balance sheet. On the very last slide, and this is something that we are not very not very open we do, but we discussed this internally, and we decided that it was about time to say something vis a vis our targets that are still questioned by the market. We believe that with the results that we have achieved up to the 2021 of $226,000,000 And the recurring business as well as the performance fees that we have accrued, we can move to a target that provided market remains kind of normal, will range between 350,000,000 and 500,000,000. The higher end of the spectrum is increasingly higher than the 350,000,000 target, and this is mainly linked with the courtesy of performance fees that we will be able to generate up when the year will close. As far as net inflows are concerned, we had stated the target of 4,500,000,000.0, obviously, excluding the consolidation of the 7,000,000,000 of Sanctuary. We are now at 4,800,000,000.0 and expect the year to close under normal market conditions, clearly, to at least $6,000,000,000 of net new money. I will close it here and leave you time for Q and A. Thank you. Thank you, sir. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Giovanni Razzoli of Deutsche Bank. Please go ahead. Good afternoon to everybody. Thank you for taking my questions. The first question is about the your target in terms of net income. Can you share with us what are the performance fees which you have yet accrued as of today, so to have an idea of the sensitivity of the target to changing market conditions? The second question relates to your net financial position. You are generating a lot of cash, excluding there has been the dividend payment in the second quarter. And the market is increasingly focusing on the dividend of the companies. Given the trajectories of your earnings, I was wondering and the fact that you plan to reduce quite significantly your gross debt in the next couple of quarters, I was wondering whether you may consider the introduction of the interim dividend as some of your peers already do? And the third question, allow me to ask you this. We've seen yesterday one of your competitors sterilizing the losses on some of the clients' investments. What are your views there? Are there any position that you see at risk? Or any comments on that would be useful. Thank you. Thank you. Let me start from the last one because this is something we are focused on since the very beginning of the business. We've always argued one thing with our clients, with investors, with the market. We wanted to be an integrated player between production and distribution, not because it was an easy way to find higher margins, but because we wanted to know where we were putting and investing the client's money. And we wanted to understand how our distribution system could market certain products to our clients and build an asset allocation that had to be in line and has to be always in line with the client's expectations. When you start to outsource either the production or the distribution, you lose grip. And when you lose grip, something bad can happen. Probably, it's not that bad for our competitors, but for us, an independent player, our reputation vis a vis our clients and the the market is the most important asset we have. So, honestly, we're not concerned by what happened. I mean, certain problems can always occur, but we are more focused on retaining and delivering on the strategy based on a sound business model that we create and keeps the full integration. This is why we have we went abroad by proposing a similar model where it was possible. And this is why we insist on our Italian franchise based on production and distribution. On your second question, the introduction of an interim dividend, it's something possible. It is something that is creates a bit more bureaucracy because of paperwork that you need to do. It is something that we will or we may discuss and and analyze going forward. So far, we had up to last year of profit and loss that was driven by the strong contribution in performance fees, which were which was clearly something that we couldn't anticipate and therefore would hinder the possibility to have an interim dividend. Going forward, it's something that we can consider. But so far, it's not, let me say, at the top of the agenda, but we we would certainly put our heads on that. Target on on on the net income. I guess there is a slide on page let me see in the highlights where we see where we show the numbers of three fifty compared to the two twenty six, page eight, and the potential performance fees that we can cash in. It's not a ran we didn't use random numbers. These are underlying real numbers behind, and I would leave you to get estimate how much performance we since this is a number that we don't speak even with our our wife or daughters because it is a well kept secret since we would be able to understand how much money we will be cashing in on the December 31. Besides the joke, it's it's a significant number. It's a number that is the result of a significant performance to clients, And we can just manage this in a way to retain the overperformance that we have vis a vis the benchmark, and it will clearly depend on the market movements between now and the end of the year. Thank you. My pleasure. The next question is from Domenico Santoro of HSBC. Hi there. It's Domenico. Just a few question on the perimeter change. Maybe I'll go one by one, if you don't mind. If I look at the distribution cost and the way of changing because of the different consolidation, I get that I mean, a major portion of these revenues are currently, you know, paid out to financial advisers more than 80%. Is it correct or I'm doing something wrong? And also when I look at the s g and a, it looks like at the moment, the perimeter that you have consolidated is in heavy losses. So I'm just wondering whether the Q2 includes some one off in terms of SG and A. And then I have other questions. On on the distribution cost, you're right. This is the level more or less of the the the the rebate that is paid out of of Sanctuary, and it's something that is in line with the with market standards. Clearly, what is missing within Sanctuary and within our US system is always the integration between production distribution that will increase the overall margin that we can extract. I'm not sure I understood your question on the SG and A. Can you can you just be more specific? Sure. Sorry. Sorry about that. I apologize. If I sum up, you know, the distribution cost and the, SG and A that you have consolidated in h one because of the change in perimeter and comparing to the revenues that you consolidate, this business, it looks like it's in heavy losses. So I'm just wondering whether in reality, SG and A includes in the second quarter some specific one off due to the consolidation of the different entities abroad? Done. We're just reconstructing the number. Domenico, we are rebuilding the numbers so that we can provide you with the with an answer. We can go ahead with the questions, and as soon as we have the number, we'll we'll provide you with the answer. Understand. Thank you very much. Sorry. Sorry. I mean, sorry for getting confused. Not at all. No. Not at all. I mean, also based on the on the answer that I will get, can we just look, prospectively how, you know, the contribution of Century will, be in the future? If, my calculation is correct, it depends which amount of assets, I consider with inception, which were probably 7,000,000,000 or as of now, that are much more than a billion. The profitability of Century is around sixty, seventy basis points depending on the level. So I mean, it's not a mystery that all these assets are basically AUC. So I'm just wondering how shall we consider in the future the margin changing on the EUR 9,000,000,000 given that you essentially are going to remix the asset of Century, more equity and less profitable assets? Okay. Well, Sanctuary is clearly a business that is receiving an enormous amount of assets, thanks to the investment they're making. And they are we are expecting them to be slightly negative in terms of net profit, some couple of millions in 2021, which is mainly driven by the fact that assets that are transitioned do not immediately generate fees and those assets then have to be requalified as well as we need to increase the penetration of our own product. And so the expectation we have for full year is basically not relevant as far as our numbers are concerned. But then from 2022, based on the current assumptions that we have in terms of addition of assets and RIAs will start to generate profit. How much profit will they generate is also a reflection of how quickly we will be able to use products that we manage and manufacture by ourselves. And clearly, this will not directly impact the number of sanctuary, but will be profitability that we will see in our other affiliates in The US or anywhere else in the world. So overall, 2021 should not be a year in which we will see a positive contribution to net profit, but very limited in terms of negative impact. And 2022, instead, everything else being the same and based on the assumptions on which we're working with them, we start to ramp up and generate incremental profit contribution. Understand. A final question on your guidance on net profit for this year. If, I make up the numbers, you know, for performance fees and also for one off, which was the one, the fiscal one off, I get an h two, which is lower in absolute terms compared to the h one, if my calculation is all wrong. So I'm just wondering whether this is due again to the, you know, consolidation of the perimeter abroad that is still in losses? Or is due to seasonality on the distribution cost? Or any one of that you might consider that you might want to comment? Well, it's mix of things. And I don't know what is the number you are implying in terms of second half. But as far as our thinking goes, we had clearly implemented the second half that has July, August, September that tend to be softer month in terms of activity. And, therefore, potentially, we can see not exactly the same rate of growth we have achieved in the first half. Clearly, if we achieve those net profit target as it happened last year and some of you were kind of surprised, we will have to pay our people because of extraordinary numbers well above our expectations, and we have variable compensation packages that trigger extra or excess payment in terms of variable bonuses. So and then the last point is we don't want to fully bet where markets will be going now. So we were on the conservative side in terms of our recurring net profit, which eventually has may may fluctuate between what we are considering today. And if market will not have a strong correction or a correction, will be the number that we will be able to achieve at at year end. So there is good visibility on the on the low end of the of the range. The higher end is clearly impacting the market and a number of different dynamics we're seeing as far as top line and costs are concerned. Understand. Thank you very much. Thanks for the patience. Hold on, Domenico. I think we have the answer to your first question. Alessandro will provide you with the the exact reconstruction of the numbers. Yeah. So let's start from the slide six that you were mentioning, but, I mean, keep also the, let's say, the Slide 24. That's as I was saying at the beginning, the valuation of the recurring fees, I was saying that there is a valuation of 76 77,000,021 coming from the new perimeter. Right? So there I mean, you have the effect of the new perimeter that is consistent with the total revenue. I mean, what we show in the total revenue of slide six. What we missed to show is that I mean, it's again, as I was saying for for the other income, you can see that there is a bit of spike from the first half twenty twenty and the first half twenty twenty one because there was, let's say, 3,500,000.0 coming from sanctuary. So what we did is that we don't show the brokerage fees in terms of other income of new perimeter. So we just show the new perimeter coming from the recurring fees. So I mean, this EUR 4,000,000, let's say, EUR 3,500,000.0 increase for the total revenue from one side from the new perimeter. And then if you move to the cost that you, again, were saying, the EUR 17,800,000.0, it's, let's say, right number in terms of new payment, consider also the SG and A, but there is also a one off impact coming let's say, one off impact. There is a significant increase from the Singapore business that provide also the effect on the revenue that is around EUR 5,500,000.0. Sorry. Just to clarify, this is a one off on costs, right, on SG and despite on trial? On the distribution costs, yes. That is not showed up in terms of numbers because it's coming from, let's say, the actual business that was already included also in the total revenue, right? All right. I will follow-up with Dore. Thank you very much. The next question is from Hubert Lam of Bank of America. Hi, guys. Good afternoon. Just got a couple of questions. Firstly, again, on Sanctuary. I just wanted to clarify, Gabriela, what you said on it in terms of profitability. Correct me if wrong, you said that you expect it to be breakeven more or less this year and, possibly profitable next year. Is that the case? And if so, I just wonder what the magnitude in terms of profitability could be, over the next couple of years, if possible. Thank you. The other question is on the dividend. Given that this year will be a big year on profits as you revised upwards your guidance, would you consider raising your dividend above last year's €1 dividend? It seems even if after paying the debt, you'll still have sufficient cash. Just wondering if this is a possibility? Thank you. Thank you, Hubert. As far as the expectation on Sanctuary 2021, yes, it's a year in which they will see probably a loss of a couple of million and that we will consolidate everything else being the same, which means given the plans, the growth plans that they are delivering now as we know it. As far as 2022, the expectation is very much linked to the investment opportunities. But based on the assumptions that we are discussing with them and the buildup of the assets and what we are doing in terms of cross selling, we do expect a contribution that will start to be material in terms of our net profit, depending on what you take. But if you take $350,000,000, which is the original target, it will probably be in excess of 5%. Okay. And on the dividend? Yes. On the dividend, this is something very trivial. And I would say it's a bit early to say and to put forward our intention as far as dividend are concerned. Clearly, we have a good net financial position so far. We have some commitment that will be coming up soon. But if the cash flow generation will be important and we will not see significant additional investment opportunities, I guess that the Board will thoroughly discuss whether we will be able to increase what we have paid this year on 2020 net profit. So let's see how we will close the year, The the the the impact coming from performance fees is significant, and we will not know this number until the end of the year. So the intention is, as we stated many times, to finance the growth of the business. And because the business now has a need to maintain or retain significant amount of cash, Although we need to repay the debt, we can pay dividends. As you have explained to us several times, it's we need to provide market with dividend guidance that increases over time eventually if our profit increases over time. We have gone through between 2019 and today, the change in the performance fee methodology, which has a big impact as far as our P and L is concerned. And because of that, we are all of us resetting our expectations as far as the net profit generation and how much we can pay out as far as dividend are concerned. So there is not the willingness to retain too much cash, but there is the willingness to have a good capital structure and dividend payout that is sustainable over the long term. Okay then. Thank you. The next question is from Elena Perini of Intesa Sanpaolo. Yes. Afternoon. First of all, I would like to have a clarification about your Slide number four. When you talk about net inflows for €12,900,000,000 you basically add to the €12,000,000,000 you had in the first half. The announcement in a transaction with Pathlight Capital and latest Kennedy Lewis team lift off as you mentioned in this slide. So I suppose that inflows coming from Italian activities and other activities are excluded. So if you can give us also some view on how net inflows have gone this month for the other areas. And then another question on your net inflow guidance. Actually, you provided an updated guidance of €6,000,000,000 excluding Sanctuary Wealth. Well, it seems to me to have read in your presentation that you are already at €5,500,000,000 on a recurring basis. So don't you think that your guidance is a bit too low considering that you still have five months ahead? Thank you. Thank you, Elena. Yes, we will you're correct. We have not provided yet the numbers as far as the other operations are concerned in terms of the July numbers, Italy and rest of the world. We are still finalizing the numbers and the month is still has still three days to go. I can anticipate that July probably because of some seasonality as well as some planned redemption from institutional investors that clearly when they come in a single month, they lower the figure will not be in terms of contribution similar to June. Nevertheless, we will still see positive number, but let us close the the figures. And I assume during the first week or ten days of August that we will be able to publish the figures for for July. As far as the guidelines, guys, when we provide you guidelines, it's always too high. Then when we update it, it's always too low. It's not that we want to be too much aggressive or too much conservative. The problem is we don't know where the market will go. We have seen in certain moments so far that the volatility can come and be rather strong. And the visibility we have is limited because of a number of variables that we are not controlling that are kind of new. The market is still digesting all the variants from the COVID nineteen and the impact that this has on the economies and so on and so forth. We set six plus, and this plus means a lot to us and to our expectations in terms of capabilities to generate net inflows. We have launched a number of new funds in the private market segment that if are going to be successful, will deliver growth, but most importantly, will deliver a different asset allocation. So all in all, I leave it to you to assess and verify whether we will be significantly higher than EUR 6,000,000,000 or just slightly higher than EUR 6,000,000,000. Okay. Thank you. And if I may add another question, do you have any worries in a medium term perspective about the global minimum corporate tax? Thank you. Well, they've set this We have our long term target since 2004 at 15%. Some years, we were below. Some years, we were at 15%. And as always, we are trying to assess ways to maintain this. And for the time being and for the foreseeable future, we expect this to be achievable. If things will change and the context the overall context will change, we will clearly proactively adapt our business model. So far, we can only reaffirm our intention to maintain under 15% long term. The next question is from Angeliki Vairaktari of Autonomous Research. Good afternoon. Thanks for taking my questions. Just three two on my side, please. First of all, on Slide eight, you show the $169,000,000 recurring net profit for the first half, which implies a run rate of around 85,000,000 net profit for the quarter, which is a step up from the around $50,000,000 that you had guided for a few quarters ago. So would you say that now the €85,000,000 is a good run rate that we should be sort of using or having in mind going forward, excluding any performance fees, of course? And what would be a sustainable level of net income for 2022 and beyond? Is $3.50 now the new minimum? And what would be sort of the potential growth for that? And second question, the European Union is in the process of doing a study on inducements and whether those are fair to retail customers at the moment. Do you have any concerns with regards to a potential ban on inducements or stricter rules with regards to disclosure of rebates, etcetera? Thank you. Okay. So on the recurring profit, we have set 50,000,000 as as something that was the base. Back then, the company was smaller. Markets went through different phases. Today, especially in the first semester, we have benefited from a trend in the market and therefore, a mix effect that has been very beneficial. However, I have to always assume and remind to all of us that if the environment we're living is the new normal, then there is a higher chance that the number you have said can be the base. But if this environment in terms of financial market is not the new normal for the foreseeable future, then we will have volatility as it has always been the case because assets are impacted, because clients move to a less aggressive mix and because of other variables. So I think we are very all very pleased with what is happening. And as far as the global asset management industry is benefiting from all the players are benefiting from very good conditions. And there is, as I mentioned, probably in the first quarter or full year presentation, a perfect alignment of the stars. We all know that this can change and this has and will have an impact on the numbers that we generate. This is not to be just conservative or cautious or something else, but it's something that we need to remind because then if I tell you the straight answer is yes, 85,000,000, then you will tell me in a couple of quarters between now and when it's going to happen because it will happen that I said EUR 85,000,000 as the base. I don't know where the base will be because the base depends on on many variables. Clearly, our intention is to work on the asset allocation of clients and to make sure that the recurring component of our revenues stays high and we can maintain a good mix as far as our products and client exposures are concerned. The following question on was on sorry. It was on the rebates that you paid to financial advisers. There is this is a standard practice in the in the in the European Union, and the commission is currently doing a study, which, I'm not mistaken, will be will be published in the coming quarters with regards to how fair those rebates are between different countries in the European Union. And also, they will look the impact of the inducements in countries where those have been banned like The UK and The Netherlands. Is that a concern for you? We we have the president of asthma make a statement saying that there could be scope for stricter rules on rebates and inducements for retail investors? Well, you know, the the I leave the regulators the the comments. And what what I can say is the the more we are integrated, the better is for clients. You can see this in terms of our performance performance You can see this in terms of avoiding making potential or causing potential problems within the client's portfolio and avoiding investing in dodgy instruments. And because this is done through the integration of production and distribution, we pay our people a portion of what they generate. As as always, if something changes and fundamentally eliminate the the basic principles on on how we build the business model, we will clearly assess the impact and eventually adopt changes. I think we've demonstrated that we are quite flexible in terms of receiving regulatory changing and adapting to these regulatory changes provided that our business is that of managing clients' money and providing them performance. And then when it moves to our stakeholders, we need to provide returns, and that's that's what we do for for living. There are other people that for living do laws and new legislation, and we simply need to understand the impact of these pieces of legislations. Thank you. Mr. Blay, there are no more questions registered at this time, sir. Well, thank you very much. My colleagues and myself are available for the follow-up. And should you have any doubt, please reach out. And a very good summary to those of you that will be in the summary zone, and we'll speak soon. Bye bye.