Earnings Call: Q3 2018

Nov 8, 2018

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Azimut Holdings Third Quarter twenty eighteen 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. Sergio Albarelli, Managing Director and Chief Executive Officer of Ademut Holdings. Please go ahead, sir. Thank you so much, and welcome, everybody. We're going to present today our quarterly results ending September 2018. So let me start straight to the point, 2018 priorities. As you can see, we're presenting you some ideas about five very important topics, which are seemingly changing the way we're doing business and impacting our profitability going forward. The first area I would like to address is private markets. The second one is the evolution of our advisory business. The third one is SA network and the evolution in hiring. Number four, Informational. And number five, Fintech, which is a pretty general title, but it's all about the operating system which we run our business nowadays. Speaking to the first one, as you know, we launched a few years ago AVEO VIDERA and PRESA, which is aimed in supporting more and medium sized companies. As of today, we have roughly EUR $05,000,000,000 in various products, either private equity or venture capital, with a very aggressive target of €4,000,000,000 AUM with 18 new products to be launched in the pipeline over the next ten years. This is a consequence of the revolution in the company. We hired a new CEO. We are reorganizing company itself. The business plan has been recently approved, and that's the reason why we are presenting it today. Number two is advisory. Lots of questions received in the last few months about MiP II implementation, how things are evolving, what about you and blah, blah, blah. But very simply, we're not starting today because we launched advisory services back in 2014. And as of today, we have EUR 1,300,000,000.0 in assets regarding the various sub items of the advisory channel. It's tailor made solution for clients, and mean it. It's really tailor made. It's not standardized and not, let me say, generalized, but really tailored. I need to say it's all about recurring fees for us, but very importantly, it's in the return of clients. Going forward, the evolution on MiFID II, the evolution in the market, we do believe we have a say in this field. And the numbers are there, and I will be more verbal in a few minutes. Number three, the evolution of our financial agent network. We are 1.4 new hires as much as Italy is concerned in 2018. That's the record as much as our activity. I would say our performance is much better than the industry year to date. We have the opportunity to attack competitors and attract talent. And I will drill down this 1.4 within the various activities of wealth managers, financial agents and so on. Number four, International. The underlying P and L is showing improving trends, significant improving trends. We're going to present you today some data regarding Australia, Brazil. Australia is our second largest market with EUR 4,600,000,000.0 and is generating profits. Brazil stands at EUR 3,700,000,000.0 despite all what's going on over there, you may like it or not, and also the net profit situation. Number five, fintech. Obviously, Arduino is a company which is centered around financial agents and well managers. So the transformation of our IT model means, number one, that we already made significant investments in the last few months, dating back 2016. We are actually running over 60 different projects on top of the one we already terminated in both 2016 and 2018. And it's all about focus on volatility, digital enabling, scalability and automation. There will be benefits for both people working in the organization for the organization itself because it's going to be streamlined and for clients as well. Let me stick to point number one, private market. Alternatives are implementing our strategy, and we plan on a significant expansion into broader markets. The reason is benefiting all stakeholders, I. E, not just Admiral, but clients, our distributors, I. E, our agents and our shareholders as well. Reason, very simply, stable, recurring, healthy fees, long term commitments. It's a new tool. You may probably question about the definition of two, but as a matter of fact, these are tools in the hands of the brave. They're very important at the end of what managers we have today in order to see prospect and increasing client and revising portfolio allocation. The way we're moving is to make sure that otherwise, retail access to those products will be impossible. Absolute is going in a pretty new direction. Most of our products will be retail ish or very retail, not aiming just to be top clients and top institutions, but it will really go down to retail investment. And this is something some people call it, as you can see, democratization of the products, but in essence means better and larger access access to investment opportunities for a wide range of clients. We need to say positive contribution to performance in the clients portfolio, diversification, long term commitment and not to forget talking about venture capital, private equity, private debt there's a social impact. Basically, we are committing and investing in the real economy while banks are under pressure. This is absolutely very impressive. The integrated platform we're talking about, if we go clockwise, we're talking about corporate finance, supporting investment strategies, debt advisory, filing and renegotiation of any form of debt. And when I say any form of debt, I really mean it. Treasury solutions through admin with asset management and partnership with banking institutions and club deal of venture capital. As you probably remember, we launched months ago a vehicle called IP Cloud, and the aim is to replicate situation like this one. The purpose, promote the introduction of liquidity into the real economy and offer opportunity for expected enhanced performance and value creation. Then how to make it through the product range, we go from impact funds, funds of funds, private debt, corporate cash to permanent capital, IPO prebooking, private equity and venture capital. As you can see, it's a pretty vast and large and deep product range. No need to say that we made investments in this area. We are already planning hiring analysts and portfolio managers. The operational support in ADJUMO leader and PRESLA will be strengthened through agreements with the parent company sorry, with a sister company, Ardeneut Capital Management, about operating processes, compliance, anti money laundering and so on. Sticking now to item number two, Admin Advisory business. As you can see from the histogram chart, has been pretty good and fees as well have been pretty good. The numbers are not yet exciting, but they are very good in terms of growth, in terms of penetration within our product range, in terms of understanding of our financial agents and well managers about what advisory can do. How is it structured? We have an advisory committee. We have an advisory team, and then we go down to the well managers. Going to greater diversification for fully customized solution, privileged access, maximum control, improve your relationship. Let me touch one point, which is pretty important here. MiFi two is starting to be effective next year, but if you plan it properly, you started thinking about it years and years ago. And if you think about launching a service like this one back in 2014, presenting it to our network and gradually growing to more than 1,000,000,000 in order to be ready for the revolution means proper planning has been made. It's a very difficult environment, no need to say. Markets, as all you know, are in a totally different situation than a few years ago. So the quality of advice would be key. It will be determinant. I would say it will be the other part of any strategy of the financial group in the next few years. If you do it well and if you have proper infrastructure, that means IT, operations, portfolio managers and agents, you may be successful. In order to be successful as well, you need to extend your network of financial agents. And as you can see in item number three, there's a record one for new agents entering into our network. The breakdown is pretty interesting. 33% of these new agents are coming from banks. You probably remember we launched a significant project called Banking Revolution aiming exactly at hiring people coming from banks. Still a healthy 50% is coming from competitors, SI Networks. 13 is coming from what we're talking about millennials, I. E, very young professionals with growth opportunities in front of them where we are planning to invest in training and support. 4% is made by others, I. E, insurance agents, as an example. This is an answer to some of the, I wouldn't say criticism, but my comments we received about what's going on in hiring in Azure. Very simply, all the good planning and all the good activity already done in 2017 and 2018, early twenty eighteen, is generating now the numbers. Hiring people is not like posting something on the Internet. It takes time. You need to analyze. You need to go deeper into the ability of each financial agents you are talking to in order to understand if they're good or not. You need to understand how flexible are clients or financial agents in order to relocate. And it is not a question about performance or not performance on the existing portfolio. It's a question about the credibility of the financial agents and the ability of this person to generate performance for the end client. So the process may be longer, but if you do it well, these are the numbers we're talking about. International business, pretty healthy, pretty good, 2,000,000,000 net new money in nine months, entirely organic. So once again, criticism about why we're going abroad and what's the reason why. Well, the numbers are here to demonstrate that if you do it properly, you can do pretty good things. 31% of our business, as much as assets is based in Europe and Middle East and North Africa, 31% in Brazil, Mexico, Chile and United States, 38% is Asia Pacific, with obviously Australia having the lion's share. Plus 8% year to date, 100% organic. Please consider also the negative impact coming from the evolution in the market. So the number that could have been much better, but that's the market. Nothing we can do about that. Case study. We're presenting you some pretty interesting items about Australia and Brazil. Australia means $7,400,000,000 in four years of operation, very strong local talent and good market opportunity. Strong talent means local people hiring and getting into as remote the best professionals in the market. If you see on the right hand side of the chart, you can see the geographical breakdown of our presence. And it's very interesting to note that we're not talking about only the main areas in Sydney and Melbourne, we're talking about geographical dispersion in the ability of our business model to be presented Australia wide to a wide range of clients. The team is made by three different operations: Asimov NGA, the leading platform in order to calibrate financial planning accounting firms in Australia Avita Sistante, Australian financial services licensed entity with six multi manager funds and 12 manager accounts for the Australian markets and Sigma Funds Management. It's a value style Australian equity boutique we established back in 2009 by some ex Credit Suisse asset management team. Left hand side, bottom side of the chart, the growth, pretty impressive. Not too much to say. The annual growth rate, 117. But more important than this, strategic priorities. First of all, next generation technology. You cannot be successful in a market like Australia if you are not part of the leading pack as much as technology. Leadership and governance. This is a federated model. You need strong governance in order to make sure that everything is run properly. Common backbone, the infrastructure which is supporting all these various entities becoming part of the Adyenov Group is based on a backbone which is made common to each and every one of them. Succession, because we're thinking about how to make sure that entrepreneurs will be able in this business to pass over business going forward, profitable growth in organic and sustainable acquisition. If we stick to these priorities and we keep performing as we are in order to make sure that they are consistently on our radar screen, I think that going forward, this business will be probably generating even much better numbers that we're talking today. No need to say, the Australian market is pretty different from the rest of the markets we're talking about. It's in a fee based advisory business driven. There is obviously some institutional opportunities over there. The annual contribution to Australians to financial assets is very important. So comparing this business with the rest of the organization, need some caveats. And I'm quite sure that all you know perfectly what the caveats are. Talking about Brazil, which is our third largest market, let me start with the left hand side bottom of the chart of the slide. You can see the chart, an impressive growth. It's not like Australia, only because it's slightly longer than we're talking about. It's 42% on CAGR. But nonetheless, with EUR 3,700,000,000.0 in Brazil, we are a significant player over there. Most of our funds at BetaQuest, which is one of the two entities we're talking about, are best in class. We're talking about equities. We're talking about longshore. We're talking about macro and fixed income. We're talking about some very sophisticated type of products like arbitrage and impact. In a word, it's an award winning situation. A large number of our portfolio manager, a large number of our funds have been awarded of best fund in Australia in, sorry, in Brazil, best portfolio manager in Brazil and going forward. As you think about it, it's evident. The success of this company has always been top performers, top people in distribution and in portfolio management. Avimod Brazil Wealth Management is the future of focus on wealth management. We have a proprietary sales force, very similar to what we have today. The breakdown of our presence in Brazil is on the right hand side of the slide, where we have local offices in Belo Horizonte, Salvador, Cifre and so on. Pretty important to say, while obviously Sao Paulo Del Brazil is the largest financial center and most of the richness and wealthness of the company of the countries over there, we recently opened up an office in Rio De Janeiro with a local partnership. They are now part of our organization. And we do believe that going forward, this will be as successful as Sao Paulo has been. Last comment, you can see on the right hand side of the chart, bottom part of it, services and offering. This is what we're doing over there. Segmentation is the name of the game in Brazil, like in most of our markets. And aiming in order to offer FX solution, retirement planning, standard asset allocation goes to more sophisticated situation like portfolio consolidation services, customer investment solution and financial planning. In this case, all this is possible because operations and technology in our Brazilian operation is state of the art. Last point, point number five, fintech, evolution of our system. We started back in 2017 a process in order to transform the IT model that we are supporting our distribution since longer. The idea that guided us was very simple. If you talk about digitalization just as a way of automatization of existing process, you may gain some productivity, but this is nothing new and nothing exciting. Digitalization means you took the opportunity to revise the operational model. You reanalyze processes and procedures. You eliminate bottlenecks. And in order to transform them in digital services, you will achieve productivity. So the principles, the guiding principle of our model revolution has been modularity, digital enabling, scalability and automation. Three targets, and I mentioned you right at the beginning of our conversation, improved financial customers' experience, simplify life and work of our networks and financial agents and obviously, reducing the operational load throughout the supply chain. In 2018, we already introduced, for example, simplification of our digital signature and activation of digital services to clients, new full digital onboarding process for prospective clients. In 2019, we're ready to launch digitalization and communication and official report for clients and very operate new open distribution platform and redesign our processes in a front to back logic. For those of you who are in love with technology, this means a brand new company, a brand new backbone of our operational system. All this has been designed internally and have been built internally. Obviously, we're using suppliers for software and technology. But it's important to say that we're revising internally the way we are operating. And we do believe that the day we will be launching officially the system will be above competition significantly. Now sticking to the numbers. The first nine months of twenty eighteen have been considering what's going on in the market is pretty good. Our total assets are EUR52.4 billion, up 8% versus the same period of the last year. Italy, billion international, EUR13.5 Net inflows, 3,600,000,000.0 versus €3,900,000,000 and strong organic contribution, as I mentioned to you before, from our overseas business. More to come from International in the next few years. Financial results. Our total revenues are up 8% versus the same period last year, up to 189,900,000.0. Our net profit, 39,300,000.0, up 12% versus EUR 35,000,000 in the third quarter twenty seventeen. In the nine months, we have total revenues above the $565,000,000 versus $591,000,000 same period last year. Recurring revenue, this is important, 05/21, up 5% versus 2017. Despite the disappearing of a significant portion of performance fees, our recurring revenues are up, which is a confirmation of the sustainability of the business model, the sustainability of our product range and the way we operate. We're talking also about net profit, almost EUR 112,000,000 versus EUR 156,000,000 in the same period 2017. Most of the difference is due to lower variable fees. On corporate development, as I mentioned before, the kick of the project project sorry, the private market project through Agnes Dibarem Preza, a new CEO. We recently announced yesterday, if I remember well with the press release, a EUR 4,000,000,000 target and 18 new products to be launched. On financials, we completed further EUR 10,000,000 buyback tranche, a total of 110,000,000 since January 2017. And we do believe with the continued expansion we experienced in Australia up to EUR 7,400,000,000.0, we continue going forward. Evolution of our assets under management, nothing I can add to what I said you before, but please consider the following. This picture is a picture which is supposed to stay, I. E, the validity of our presence in mutual funds, in discretionary portfolio management, in insurance product and so on and so on, is not just based on what we're doing here locally in the Italian market, but we see a significant contribution going forward from international assets. Now I'm talking about 26% of international versus the total. Sticking to performance, the numbers are still in our favor. Our net WAP is above the market average. As you can see from the chart, it has been consistently superior for a long period of time. Translate down, a good increase in equity, growing from 10% to 10.6%. This, at the expenses of flexible, going down almost 1%. We had more or less stable bonds, and we had a slight increase in bonds that raised slightly. We're talking about 0.4%. Cash, pretty stable. If we go to the underlying assets, total equity stable, 44%. Obviously, this is due to market condition, evolution to client mode, evolution to redemption and subscription going forward. Also on the bond side, we're talking about 33.2%, very much in line with the previous figure. Italian equity, 6%. Even if it's about a 10% decrease is negligible as much as percentage terms. If we go to diversification, geographical diversification, Euros 29% North America, pretty good from 20.8% to 23.3 Emerging markets, increase, others more or less in line. The only thing we can highlight for you is a slight decrease 1% in Asia Pacific. On the fixed income side, we're talking about an investment grade, more or less in line with high yield. We're talking about hybrid going down with clients favoring different investments and our portfolio managers as well. And we have an increase in sugar and funds, mostly due to some investments almost on a tactical basis on the Italian government. Please remember, a few years ago, for those of you who were already part of the business, we had a very nice campaign talking about the opportunity in investing in some at the time risky assets. And as of today, our portfolio managers who are pretty brave and active are taking actions in the same direction. Talking about net inflows, absolute is above the average Italian industry. We're talking about 11.9%. Industry average is minus 1.3%. More interesting for you, as we believe, is the breakdown of the hiring process in those four sorry, in those first nine months of 2018. 144 is the total. Pretty interesting to see. Wealth managers, EUR 19,000,000, average age 55, average assets EUR 41,000,000, with managed funds in the region of 78% of the portfolio. On the banking and resolution side, even if the numbers are smaller, I. E, talking about 16 individuals, average age is pretty younger, 41 average assets lower, but very importantly, managed funds, 85%. So we have plenty of growth in front of us over there. Millennials, extremely interesting, very young, very small portfolio, very well managed, talking about 77% on managed. Financial advisors, bread and butter of our business, slightly higher aged in banking revolution. We're talking about 52%, but very much in line with the average age we have in our network. Average portfolio of 15%, lower than the one we have today on average, but opportunities in front of us because they will be running their business in a completely new, more professional and effective way. 82% of portfolio already invested in Managed Assets. No big changes regarding geographical distribution. We're highlighting for you something probably you might already be aware of, but I think it's pretty interesting. We have a truly unique positioning in the high density market. First of all, if we compare Italy versus the rest of the world, we're talking about 8% versus a similar 8% in The United States on composite growth. If we talk about the numbers of millionaires, despite all the taxes that the Italians are forced to pay, we're talking about an increase in a significant number, talking about 17.3%. The evolution of this situation as a consequence on Avimod, as you can see from the chart, compound growth, 13.2 versus 4.1. And let me say all these numbers, which I obviously leave you in order to analyze in deeper terms, are talking about the way we are in this business, it's always to be on the front line of the opportunities and on the ability to generate significant returns. Our position has always been very strong in this field. The numbers are growing significantly in the market despite what's going on on financial situation and economy, and our positioning is there. We are wealthier than the average client base. Our average portfolio size for financial agent constantly increased 13%, as I mentioned before, And something that I will never be tired to underlying interest stress, we are totally focused on portfolio management. We do only portfolio management. We're talking about nothing at all on conflict of interest. We're not talking about deposits. We're not talking about custodians. We're not talking about like this. So we are focused on the best part of the economy. We are talking on the best part of the financial markets. We are talking about our ability to stay front running on base. On financials, let me, as usual, pass the opportunity down to Alessandro Vangrotti, our CFO, to highlight for you some details about our profit and loss. Thank you, Lisandro. Thank you, Sergio. So let's start from the bottom line of the income statement. Therefore, the consolidated net profit is today, the September 2018, 112,000,000 compared to EUR 156,000,000 of the nine months of 2017. As you can see, we have a decrease by EUR 44,000,000. This is already said by Sergio at beginning. During the presentation, the result is mainly explained by the negative variation of the variable fees. But let's go through the, let's say, the main element of the P and L. So total revenue, we have a decrease of EUR 26,000,000, so from EUR $592,000,000 of 2017 to EUR $565,000,000 of 2018. But as you can see, again, here, we have EUR 49,000,000 of variation negative variation of the variable fees, but at the same time, we reduced its negative impact, thanks to the recurring fees, where we are really strong with a positive variation of EUR 25,000,000. This is again thanks to our stronger evolution of the assets under management. It's a significant evolution of our business in Italy and abroad. Going through the operating costs. Here, we have an increase of EUR 19,000,000. At the level of the distribution cost, we have EUR 2,000,000 less compared to last year, 2017, thirty September. But again, here, it's a combination of the evolution of the group in terms of assets under management, acquiring new financial advisers, as already described. But at the same time, we have the benefit of the new principles IFRS 15 already described in the previous closing. At the level of the personnel and SG and A costs, we have the significant valuation of EUR 20,000,000. But again, here is a link to what has been already said before by Sergio. So the investment, the evolution of the group and to all what we are doing for the evolution of the business. At the level of the interest income, maybe the main element that can be, let's say, shared with you. We can see that we have a negative valuation of EUR 7,000,000, therefore I mean, positive for us. This, if you remember, in 2017, we had the one off impact of the buyback of the convertible bond. Therefore, now we have less cost. That's it, I would say. So focusing on quarter on quarter, we can see that the result increased by EUR 4,000,000. Again, here, the main element, I think, is the recurring fees that is pleasing very, very good. On the level of the net financial position, the total debt decreased by €10,000,000 This is due to the reimbursement of cash tranche of the senior loan. At the level of the cash and cash equivalent, we have a decrease of EUR 189,000,000 compared to the December. So if we compare the net financial position, we move from a positive value of €135,000,000 compared to today that is negative of €43,000,000 And if you remember in June, we were negative by 57,000,000 As usual, if we try to reconcile the evolution of our net financial position, so starting from December, that it was EUR 135,000,000, as already said, we include the result. Therefore, we should reach EUR $247,000,000. But then this amount to be reduced by the significant and important dividend that we paid in May, so EUR 131,000,000. 82,000,000 of stamp duty and policyholder tax advance, EUR 40,000,000 of buyback, 23,000,000 of acquisition. Thank you, Alessandro. Moving to our summary and outlook. At least from our side, our business model is strong. We have resilient net inflows, sound financial result despite volatile market. Our current fees are a demonstration of it. So even if we're talking about a significant absence of performance fees, which has always been an element of criticism versus adulthood. Our numbers can demonstrate that the machine is up or running. The business model is going fine. And going forward, we will in my respect to a really even better situation. Our global expansion is showing significantly material results. The 2,000,000,000 in the net sales generated by international operation are a solid demonstration of it, and they are totally offsetting a very tough domestic market. Let me touch one point. Once again, talking talking about P and L for international doesn't mean an international strategy may be judged on a quarterly basis. It's a long term process. Any informational group going outside the main market took years and years in order to generate first numbers bottom line. So what we're talking about here is demonstration of long term planning. We've always been talking about long term planning. We've always been talking about being a presence in our markets. The numbers we're talking about today for Australia and for Brazil are a demonstration that we can build step by step significant market presence over there, creating a business model which has no peers in the market. The Italian business is bouncing back with some strong recruitment across the various channels as demonstrated you before. Despite what's going on in politics and economy, the private wealth in Italy still remains today one of the most attractive in Europe. Maybe there will be less new money available in the market, maybe it will be a question of cannibalization between competitors. Nonetheless, the numbers demonstrate that there are still great opportunities in our domestic market in all our investments about hiring new people, launching new products, revising an operational goal into their direction, I. E, exploiting the maximum we can a very strong and solid market. We're focusing on improving profitability. We're increasing the net interest of financial agents for the next few quarters. Obviously, as I mentioned to some of you and even in a couple of calls in the past, a very strong effort has been put in place and will put in place going forward about making sure that our financial agents will be even more productive and profitable there today. We're going to support them, and the ones who are not unfortunately at par will not be part anymore of the Agimus family. Independence for many banking group is proving to be a strong attention from talent acquisition. Lots of the people we hire from banks see the independence they have within Asimov and independence of Asimov itself and the strong arguments to go and look for prospects and to make sure that the clients will be understanding that independence means no conflict of interest, lower fees for them, better opportunities going forward. Tough performance year to date despite being much better than the Italian industry. Performance is a key element. We're talking about a performance business. We're not talking about just servicing some clients with more ideas. We're talking about making sure they will be wealthier going forward. We are significantly considering how to strengthen our operations in portfolio management. We're talking about, as you remember, regarding our product range. It will be key to make sure that we're going to stay above our competitors. The performance will be looked very carefully in order to assess not what's the best product going forward, but what's the best combination of products. And that's the aim of the product range revision. Areas we focus going forward, private markets, that's number one. Absolute terms, we are investing money. We're hiring people because we do believe the long term products with different market valuation, with different condition will be enhancing profitability of our clients. Backbone of the company, second key element, optimization, revision of our processes is not just an element of making sure that there will be better productivity, but also the running the business will be more effective and there will be less cost involved. Obviously, we maintain focus on growth as well as bottom line reserve over the overseas. And color, as promised, will be given in 2019, starting from today with some flashes in the business we have in Australia and Brazil. Last point, once again, we are always open for opportunistic M and A in those areas where we do not have strong competencies. It may be portfolio management. It may be some other areas. Last comments. A very quick update on our business plan. Not too much to say. Total assets, predefined. Net inflows, predefined. Dividend policy, let me remember let me remind you, we paid EUR 131,000,000 cash and EUR 131,000,000 in share this year for a total of $262,000,000 which is a pretty impressive number. The only area where we still have to run a bit, we're talking about the net profit. As you can see, we have an indication of an annualized net profit, but the numbers today are talking we are at EUR112 million. I thank you very much. I would love to pass over and open up for questions, whoever might pose some brand new ideas for the company to be discussed. Okay. Thank you, sir. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question comes from Mr. Hubert Lam of Bank of America. I've got three questions. Firstly, on your plan to grow your private market assets by $4,000,000,000 Just wondering if you can give a sense in terms of timing of that. I know it's a ten year plan, but when should we start to expect to see the flows coming from this? And assume also that you would have to spend to hire new personnel before the platform, etcetera. So when should we how how much cost do you think are associated with this? And when should we start to speed the cost, coming, needed, for this investment? It's the first question. The second question is on, your flows. It seems like still much of your managed flows are still coming from your international business rather than domestic. Just wanted to give a sense on the domestic flows. Is it mainly due to the sort of macro situation which is suppressing the flows? Or is there anything, specific? Because if you look at the hires you've done this year, seem to be quite a bit adviser hires this year seem to be quite a bit. I'm just a little bit surprised it hasn't led to, stronger domestic flows, coming from the new hires. And lastly, on international business, I know you're at this point, you're still quite shy in terms of saying how profitable the international business is. But just I know by then just looking at your the growth and the success of Brazil and Australia, which you mentioned today, just wondering if you can give us a sense to the profitability or the contribution of those two regions on your earnings. Thank you. Thank you, Rupert. Let me start with the first one of your question about the private market business we are strengthening right now. It's not by chance that I say strengthening because this plan is based on an existing backbone, I. E, Agimil Libera and Preza. Agimil Libera and Preza was launched on on a vision on intuition six years ago. It's been built up gradually. We have gradually educated our financial agents and well managers in talking about something they were not used to. I'm talking about investments which are not the standard long funds. As you can imagine, this, has a cost on the one side, but there's a great opportunity because today, if you go and look to some of our competitors, which have been pretty verbal and loud about what they're doing what they're doing, in reality, they are doing nothing. It's been a statement, nothing more, nothing less. What we say today is very simple. We hired a new chief executive officer, a very experienced guy in the business. The guy has been crafting with the top management of the organization a business plan, a very aggressive business plan for the next ten years because if you launch a product with seven year maturity, obviously, the business plan has to be very long in front of you. So we're talking about something that is supposed to build up eighteen, one eight different funds, ranging from the equity to the debt, the combination of the products and so on and so on. No need to say, and I think you would be not apologizing, but understanding me, it's not the case to disclose openly which are the products we're gonna launch, how many can managers and analysts we're gonna hire, how much money we'll be investing here today because, basically, it means putting all our cards on the table and showing our competitors what we're doing. What we can do is to tell you that the plan is serious. It would be financed internally. The plan, it's a combination of our existing expertise plus new expertise we are bringing in from outside, and it will take a while before our competitors will be able just even to think about what we're doing today. 18 funds may sound something like, aggressive or probably a bit too loud to some people. In reality, it's not. Because in front of ten years of opportunities, talking about 18 funds in order to assess today what's supposed to be the investment needs of our clients means we are pretty rational. Think about for a second one of our brand new product, the private debt fund. A product like this one, you are supposed to stay in for a few years. Five seven makes sense. It will give you the opportunity to diversify. It will give you the opportunity to look for a different profitability of our of your portfolio. It is based on the one hand side on existing resources. On the other hand side, it is based on new resources we hired and a new combination of our portfolio management expertise with external portfolio management expertise. In essence, what I'm telling you is this is an area that lots of people were reluctant to consider as a key element of our strategy. And today, on the basis of $500,000,000 of assets already existing, we are saying we are serious. We are investing even more over there. Obviously, we'll be made on a gradual basis. We're not going to hire 15 people tomorrow. We're going to start hiring a few people, launching a few products, making sure that our agents and managers will understand them in order to put those portfolios sorry, those funds into managed portfolios and advised portfolios. In essence, what you're gonna see in this area is to be one of the best contributors to our profitability going forward. This is, I know, a strong statement, but otherwise, we would not have said we're to raise in ten years' time EUR 4,000,000,000. If you compare the EUR 4,000,000,000 with the existing business in the Italian market, it's a significant number. If I can stick to your question number two about the net interest in the domestic market and what has been the impact of financial agents. Let me start with the latter. Hiring an agent is a very long process, as I mentioned to you before. It doesn't mean that an agent hired in February with a portfolio of 25 millions day one, immediately took 25 millions into admin. It takes a while. That's why I was referring to the ability of these people paying in the business gradually, making sure that the clients are happy and so on and so on. So even if you hire 144 people in 2018, nine months, the numbers are supposed to get in on a gradual basis, and we're gonna see the benefit of this expansion going forward, the last quarter and the next two quarters, quarter one and quarter two in 2019. The net inflows, well, everybody knows what's going on in financial markets. Everybody knows about the, let me say, nervousness of some market participants to what's going on in Italy. Some clients, obviously, are worried that they are not just clients of us. They are clients in the market, I. Clients of Bank of Generali, Feneco, Alliance and so on and so on. It's a slowdown in the business, and we are not the worst one to see this type of situation. It's a slowdown who are supposed to be sorry, which is supposed to be longer than expected, I cannot tell you nowadays, we need to see some reaction to, a, general market conditions b, what's going on in The U. S. Financial markets and c, obviously, no need to say, and it's not just impacting Italy, it's impacting Europe, what is supposed to be the outcome of the European elections going forward in the 2019. International business, you're right. We are on the way to provide color about P and L. And today, we gave you a demonstration of what's behind it. We didn't disclose yet the total P and L of neither Australia nor Brazil because it would have been displacing the attention to the key element here, which is the growth in the business. AVIMUK is a growth company with growing assets. Our ability in gathering assets worldwide is unparalleled. It's above the competition. So we stick to the fact that we are still the company which has been able to do this in the past and can do this in the future. It's important to first give you a picture of our ability in doing this. And then, as promised in 2019, we will be providing you an idea on how all these assets are going to generate margins and bottom line profits. But I'm glad to say or I would like to say, if you honestly should comment the isotogram charts about Australia and Brazil, probably you will not have too many examples to compare with our ability in generating those numbers worldwide. Not too many companies can show a type of growth in the Australian market of above 100% or 40% in Brazil like we did. Thank you. The next question is from Mr. Alberto Villa of Intermonte. Please go ahead, sir. Yes. Good afternoon to everyone. A few questions from my side as well, and thank you for the, let's say, presentation of the different initiatives that you are exploring to boost your business. Just to come back to Libre and Preza and advisory, I just wonder if you can give us an idea what is the let's say, if a new customer comes in and wants to subscribe a liberate price of product, a fund, etcetera. How how does compare with the traditional offering of your products in terms of pricing? Is that a big difference in terms of recurring fees? I guess it does not contribute to to performance fees. So I want I wonder if you can give us an idea what what is the pricing there and also for the advisory service? The second question is on Slide 12 on FinTech. You're presenting a series of initiatives you are planning to deploy in the coming months and quarters. I was wondering if we know that you had already stepped up in the IT cost in 2017. If we have to plan for more costs or investments, how should we look at it in terms of, let's say, the impact on the P and L in terms of potential increase in costs? And so if you can give us an idea of a run rate for quarterly SG and A in 2019. And my third question is on the net financial position. You have now a net debt of around €40,000,000 I was wondering if you can give us a bridge of what happened in the last quarter in terms of how much you invested in buybacks and how much eventually cost for new acquisitions? And if the net debt position you have right now is creating any burden if we look forward to, let's say, future buybacks and dividend cash dividend payments in the future? Thank Thank you. You, Alberto. Let me start with your first question about pricing and how our agents will be able to offer their clients products like this one. Obviously, no need to say, products like this tends to be likely to a bit more expensive than the standard long only type of equity of fixed income products. No need to say because the complexity of the underlying management strategy, the complexity of the instruments we're talking about and securities, the complexity, no need to say about the operation behind it. So, even if we're not talking about something which is going to be extremely more expensive, no need to say $1 in the traditional Adrived funds will be generating a bit less than a new dollar into the new Adrived Lidar Empreza products. Is this sustainable going forward? My answer is yes, because these products are aiming to a much better and different performance behavior. They will be offering the opportunity to our clients to invest in those asset classes and areas, which have been almost forbidden to them in the last few years. Diversification in traditional asset classes proved to be good for a long amount of time. But nowadays, where all financial classes, all financial assets are moving into the same direction, the only opportunity we're offering to clients today is to keep their money into something brand new, which doesn't mean riskier or more complicated. It means new in terms of products, in terms of performance behavior, in terms of long term commitment of their investments to both their portfolio ability and the Agenus ability to generate long term returns. The two costs we're talking about here is not just about hiring portfolio managers or making sure that infrastructure in Azimoliba and Tresa is up to par with a very important task. The two costs here is to make sure that all our one point seven zero zero zero agents, people live, will be feeling comfortable in offering these products to the end clients. They might perceive the opportunity. They might see something in front of their clients. So well, this is not enough. We need to help them in order to assess clients' needs to relocate portion of the money into these products because they will be generating better performance going forward to the end clients. No need to say I'm talking about training. I'm talking about what we're to offer to our agents in order to be effective in building our portfolio where a significant contribution in the performance generation will come from something nontraditional. But that said, and you will apologize me if I'm getting into polymix. Is this something new versus offering in the past alternatives? I mean, a few years ago, everybody was talking about hedge funds to be offered to the private clients and so on and so on. All the questions were all about the pricing and the training and so on and so. Well, let me start with the following. The market went through this type of situation already in the past. Mistakes were committed, I need to say. We are in a much better situation because we started offering this type of products long time ago. And most of our agents are already aware on how those products are supposed to be managed and how they are supposed to be offered to the end client. Now the question is to help financial agents to assess exactly what is supposed to be the portion, the proportion alternatives into client portfolio. And it's not a question about pricing at all, even if the two will start kicking in January. It's a question about really helping the clients understanding what the best asset allocation on the long term. And that's why we're talking to our people stressing two points. Point number one, don't stay in product like this one for one or two years. You need to stay for longer. Point number two, you need to be above product sorry, market cycles in order to see effectiveness for these products. No need to say, it's an educational process for both agents and clients. It's a long term process. But if we are successful over there and the reason why competitors are copying us, it is because we have already been successful, it is because we are serious about it. We're not just launching one or two products and say we don't have some alternatives to be offered to our clients. Not at all. We had a totally separated and exclusively dedicated division called ADVO LIVRA and PRESA in order to make sure that there will be benefit for all stakeholders into this business. Sticking to your question number two, Fintech. Yes, we started long time ago in making investments in the, let me say, revolution of our IT and operational system. I can provide you some, Alejandro, correct me if I'm talking about from 2016, 2016, something like €20,000,000 that we already invested into our revolution. Obviously, this is about investments, I. E, an infrastructure, software licenses, full time equivalent employees dedicated to this project, etcetera, etcetera. The aim is to be effective. The aim is to be productive. The aim is to make sure that the system will be fully digital, enabling our clients and agents to be online and execute orders and trades real time without any paper evolution. On PSN, that's a nice position. Alexander, would you like to speak in? Yes. I think, following your question, think that the main element that we can share in terms of reconciliation is €10,000,000 of buyback, almost €6,000,000 of acquisition, 2,000,000 more on stamp duty, and we paid back also the €2,400,000 per dividend to our foundation. I think that should be the reconciliation that you need. Okay. Just a follow-up if I a couple of follow ups, if I may. One quickly on the fintech. Is there any really any cost that we can assume are associated with this, let's say, IT investments in the SG and A going forward? And the second one, it's a question related to the 144 people you have recruited so far this year. If I look at Slide 21, this makes up for €2,500,000,000 more or less of assets associated. I was wondering if these assets have already been transferred, so are already in the number of the net inflows we have seen at the October? Or if these are expected to, let's say, represent a tailwind for the net inflows over the following months? Thank you, Alberto. I'm leaving to Alessandro. But here, we're talking about now, I would say, a discussion about how investments and costs should be treated in PLN and statement of accounts. Yes. I mean, I would say, since we are talking about investments, for sure, we are going to see an increase on the amortization costs. So looking back to the P and L as you want to, let's say, have a look and you want to look forward, for sure, are going to have an increase on the amortization and as well on personnel G and A, which is a few billion euros, let me say, going lower. But it's a combination of new investments that will come again and at the same time saving costs from the actual one that we are putting in place. Alberto, apologies. Your second question was about? Was about the 144,000,000 recruitment that you had this year. If I look at Slide 21, you detail the also the average asset for the different clusters, and it adds up to around €2,500,000,000 of assets associated with these new advisers. I was wondering if this amount have already been included in, let's say, transfer to Adzeemut. And so part of the net interest figures we have seen so far this year? Or if an important part of this amount, a significant one, is yet to be included in the net interest figures? Well, as you can imagine from what I told you at the very beginning, a portion of it because this is a picture that we took about BSA in the moment they were hired by Abzimuth. As you remember, it's a question about timing to bring in the business. For sure, you can allocate into the net flows that you see in 2018 nowadays, the assets that we gained from the acquisition of Sofia. And we're talking about here roughly around 40 different professionals to grow in. So in the numbers, you have, for sure, the assets immediately came into our business, thanks to the acquisition of Sofia itself. Okay. Okay. Thank you. So we a few more, I mean, to come in the coming months. So this should increase the visibility on net inflows. If if our financial agents will be able to transfer the large majority of their portfolio, and obviously, market condition will not deteriorate, But obviously, this is a target we have in front of us. Everything is depending on the one hand side about their ability in convincing clients. And on the other hand side, the markets will not guide away from where they are today. Okay. Thank you very much. Pleasure, Alberto. The next question is from Elena Spirini of Banca Aimee. Please go ahead, madam. Yes. Good afternoon. I have three questions. The first one is on your position in Turkey. There has been quite a turmoil in the country. So are you expecting some write downs or some hurt to your business? What are you currently seeing in the country? Then I would like to ask you if you can provide us with the performance fees that you recorded on Italian funds in the fourth quarter last year. And what kind of level would you expect for this year? And then coming back on the IT investments, I was wondering if you can at least provide us with the range of potential expenses in this. You already indicated that we will see an increase in both D and A and G and A, but I would like to ask you if you can provide us at least with the range of the amount of money that we are talking about. Thank you. Thank you, Elena. Well, I don't like, but apologies, I need to contradict you because we didn't talk about increasing G and A going forward. We talked about we incurred some expenses and some investments regarding our operations and technology. And obviously, there will be some expenses as well in 2019 in order to materialize and finalize what we're talking about. But not necessarily, there needs an increase in G and A, not at all. So let me start this point. And in quarter one and quarter two, where we're going to have a better numbers regarding the overall investment that we came through. But please remember what Alessandro said before about costs, expenses on the one side and investments on the other hand side because we need to step in with depreciation and amortization as well, we can be more effective in providing you some information. On the performance fee, let me let me understand properly your question. It's about the Italian funds? Yes. Yes. The Italian funds, sir. So we're talking about roughly speaking 10,000,000 Okay. Less less there. And your first question, apologies if I go vice versa, $3.02 1, Turkey. Honestly, despite all what's going on in Turkey, I. E, the valuation, difficulties in non financial markets, economic conditions getting tough and so on and so on, Let me use a proxy to describe what's going on over there. If you look at interest rates on deposits, they had a peak during the summer, and then gradually, they went down. All the comments regarding the ability or inability about the new finance minister in order to manage what's going on over there were totally dissipated by his speech with Vale Indonesia a few weeks ago. The guy stood up and made clear what was going on over there. There was no plan about capital control. There was no plan about nationalization or whatever. That said, situation, I didn't say it came back to normality because still lots of eyes are on therapy. But at least on our side, despite all happened in 2018, our business is fine. Our business is fine. Our assets are above the beginning of the year. Our team over there is stable. We made some selection in order to get rid of nonperforming agents inside the organization. Our portfolio managers are confident that things are getting better, and we are there to stay, very simply. I have not the opportunity yet to meet the finance minister. There was a meeting plan a few weeks ago that, unfortunately, was canceled due to a sudden complication on their side in order to prepare the meeting in Bali. But I'm quite confident that the day I will see the government in Turkey, they will be reconfirming me their intention to be a pretty open financial market with no capital control. We're not feeling anything about making sure that our operation of the area is under threat. So I'm pretty confident over there. And for your information, I traveled to Turkey three times in the last few months in order to make sure that everything is up and running properly. Okay. Thank you very much for your clarifications. Thank you, Elena. The next question is from Filippo Prini of Kepler. Please go ahead, sir. Yes. Good afternoon. I've got two questions. The first one is on the payout of the network. I've seen that you have recruited more financial adviser than one, yes, before even Net of Sofia. So I was wondering if you can guide us to the trend of the payout of the network for the next year if you should assume it's to stay stable 45% to be a bit higher? And the second point is on the basically the asset allocation of the client. Remember that during the previous conference call, you mentioned that you would have suggested client maybe to increase on the longer term exposure to equity. Given what you present today in a slide, basically in the first slide of private markets on, should the new initiative bring in guard to consider a different asset allocation? Maybe no more increases pull to equity buyer toward basically the alternative market? Thank Thank you, Filippo. Well, obviously, longer term, we're talking about more allocation to alternatives, that's a matter of fact. But it is not supposed to come at the expenses of equity. And even if 10.6% versus previous 10% may sound not, let me say, overly exciting, no need to say, and when I say no need to say, I'm serious about it. If you consider what's going on in the markets in the last two weeks and months, this level of equity investments prove that our clients are there that our suggestion has been properly understood, and the portfolio allocation is supposed to be healthier going forward. As much as your question about the payout, no, I don't see, and we are not planning anything different going forward. And even if we have brand new clients sorry, brand new colleagues, 40 colleagues coming from Sofia, they will be adapting to our standard practice. And as of today, our payout is not supposed to come sorry, is not supposed to change going forward. Okay. Thank you. So very briefly to be sure to understand. So basically, what we've seen in terms of fee payout in the last two quarters, also with new revision should be considered as a sort of steady rate Absolutely. Also for next Many thanks. Pleasure. Thank you, Filippo. The next question is from Federico Braga of UBS. Please go ahead, sir. Hello, and thanks for taking my question. Actually, just one follow-up question left for me. Again, on Slide 12, please. When you mentioned the new open distribution platform for 2019, can you give us a little bit more color on what you mean by a new open distribution platform? It means that we'll push more also you will have your financial advisers also selling third party distribution funds. And if yes, this will be mainly for those clients under advisory contracts or in general, if you can give us a little bit more color on this aspect as well. Thank you very much. Thank you, Federico. No. The open distribution platform means the platform itself, it's open, I. It's not rigid, and we can plug in any type of supplier or software or operational items that we love to. Because for a long time, platforms, especially managing companies like us, has been pretty rigid. They've been pretty close to the evolution in the market. And that's one of the difficulties when we go from non automatized to digitalization. We took intentionally the decision to have an open platform, which means it is based on a technology which is in evolution made by players in the market, and it is not rigid. I'll give you an example. Under the new platform, we can plug in various type of banking providers, as an example, or we can choose one supplier for CRM and two months later change it and attach a brand new one. We can attach the sorry, we can attach facilities in order to, for example, have live chats between clients and agents or between agents providing alerts for market situation condition, etcetera, etcetera. So we're not talking about commercial strategy here. We're just talking about the technicalities of the platform. Open distribution platform doesn't mean more third party funds, means the opportunity of the platform to bring in different suppliers. Thank you. Pleasure, Frederico. The next question is from Gianluca Ferrari of Mediobanca. Please go ahead, sir. Yes. Hi. Good afternoon, everyone. Three questions from my side. The first one is on AdriMut Max, which is a solution you had since 2014. If I read correctly Page seven, on average, on Admiral Max, you gain 120 basis points, more or less. Now the question is, are you going to offer Admiral Max even to clients, I guess, below the €1,000,000 threshold? And this could have a dilutive effect on the overall profitability? Or it will remain a service, a product dedicated to really high net worth individuals with a negligible dilution to your margins? The second question is if you can give us the net weighted average performance of your clients at the October. And third, I admit I'm a bit confused about your dividend policy now. So we saw last year the €2 dividend. The official guidance is €65.75 on the earnings per participation capital. So I know we are still in Q3, but in three months, we will have the full year 2018 dividend. What should we expect? Should we expect the dividend calculated in the 75%, 85% of the earnings per participation capital or there is a new guidance? Thank you. Thank you, Gianluca. Well, let me start with your first question about the advisory service. And I think it's a good proposal going down from the EUR 1,000,000 makes a lot of sense. Yes, it's a plan that we have in our mind. No need to say, it's the evolution of MiFi two and the evolution in the market. So even if today, most of the clients, as you can see, not in Agnomer, but in the market itself, are very healthy clients looking for fee based type of services. Going forward, this pressure will be lower and lower. Don't get me wrong. It doesn't mean we're going to be like UK in a few months, but probably we're going to see even smaller clients accepting the idea as well as they pay a doctor to make a visit. They need to pay financial adviser to need some consultancy. Performance of clients, well, this is a metric that we do not disclose. It is something that I don't see very frequently in the market, so you will apologize if I'm not alluding to it. As much as the dividend, I can tell you, we see those responding about what is supposed to be the next dividend for absolute after a very healthy two years. But to be very transparent, I think we're going to communicate this going forward with a very nice press statement. Okay. Thank you very much. Pleasure. Thank you, there are no questions registered at this time, sir. Thank you. Thank you very much to not just our friends and colleagues who pose us questions, but everybody attending the conference call. Obviously, Vittorio and I are more than happy to take more questions and to provide more color about the numbers. I do believe that today, despite market conditions, the numbers are very good and very strong, and we are well positioned going forward. Thank you very much, and very good evening to everybody. Thank you. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.