Earnings Call: H1 2015

Jul 23, 2015

This is the Chorus Call conference operator. Welcome and thank you for joining the Azimut Holdings First Half twenty fifteen Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be a question and answer session in English followed by another question and answer session in Italian only, which will be translated for our English participants. Should anyone need assistance during the conference call, At this time, I would like to turn the conference over to Mr. Pietro Giuliani, President and CEO of the Azimut Group. Please go ahead, sir. Thank you. Good afternoon to everybody. Thanks for being here. Here in Milan, we are leaving about 40 Celsius degrees, so the weather is very hot. I hope this presentation will not be at the same level of the weather. Jokes apart, each presentation is constituted by figures and facts on one side and charts and possibilities on the other side. According to our habits, we give the preference to figures and facts rather than charts and possibilities. Let's skip to Page number four. First half for the group and best net profit in our story. We had total revenues of $415,000,000 in six months, and it's done by recoveries fees and strong variable fees too. Net profit is the highest again in the group story, 180,000,000, up to 120% versus 2014. We had a solid second quarter coupled with a record first quarter. Net financial position against figures, $340,000,000, up 12% versus first half twenty fourteen. Robust net financial position post dividend payment on top of EUR 100,000,000 in terms of dividend paid. Page number five, again figures. We have assets under management 35,200,000,000.0. Total assets increased by 17% in the 2015. Thanks to net inflows about 4,000,000,000 in six months helped by EUR 1,600,000,000.0 of abroad operations. Net weight leverage performance close to 5% at the June, today is on top of 6%. This performance is contributing for about 1,300,000,000.0 of increased assets under management. We have doubled total assets in three point five years. We have just done in the last five years, we doubled our assets under management. Tailwinds are helping to deliver in the last three point five years and again double of asset under management. Basics, now I want to devote six page to the console press release responsible of a drop of about 10% of the stock. I don't bore you with all the words you can read it, but I won't underline only again facts and figure. Well, please give a look to the red characters, a half of the right side of Page six. In 02/2005, we delivered, we have just done ten years ago when we were close to IPO process. We faced a change in rules by regulator. Bank of Italy changed the rule for Italian funds that at that time was on top of 80% of our total assets under management. Well, at that time, we repriced our products. And you see under the red characters that we repriced from 120%, 180% the price of Italian products at the time to one hundred fifty two fifty, two fifty basis points on our equity funds. We have just done on 80% of our customer, we repriced. We have kept all our customers. I'm amazed that nobody can remember it. We get the customer. We get the distribution system. So we can reprice without troubles. We have just done and if necessary, we can do again figures, look at the price, it's just written because we have just done. And facts just happened. Page number seven. Well, if our performance fees are so unfair, I'm speaking about me, but a lot of colleagues are in the same position. But I speak about me, as CEO of this company, after the new rules of the shareholder facts, I have invested 100 percent of the EUR 40,000,000 I cashed net of taxes because we pay taxes into absolute Luxembourg funds. So 100% of what I have cashed, I have invested in our Luxembourg funds without any discount on performance fees. So if these things is so unfair I'm the king of silly guys if I invest all this money in these products. And I have always done, I've always invest in the products of our company. Again, this is a fact, it's not a chart. Page eight, we are speaking about what? Performance fees have a dimension of fifty, sixty basis points. I mean 0.50.6% per annum on asset under management. So it's not materially impacting net returns for customers. If we are delivering on top of 6% net of this huge 0.5%, 0.6%, I mean, it's not so terrible. Even group net profit compared to the indices is not colossal. We are speaking about a portion that we have just repriced when we were forced in Italy, and we are ready to reprice if and only if we will be forced in Europe. No problem. We have just done. Page nine. Let's keep in the shows of our customers. Well, year to date, our customers are enjoying 6%, on top of 6%, 200 basis points after fees on top of industry average year to date. Let's give a look to the left side of Page nine. It was an article, one of the lot of articles that discuss about the fee, the cost of the product. Well, we are always well ranked in terms of cost because in our mind cost needs for buying quality. Well, we have, as a more trend in America, 5.4% as total expense ratio calculated by the paper. Well, after it, at this terrible total expense ratio, our customer enjoyed 20%, the highest net return to customers. And we were ranked two by Azimutrend, 4.5 in term of total expense ratio, but we ranked 15% net to customer in the year. This is not chart. It's again facts figures route by papers, by press. Page 10. Let's make longer the horizon, midterm. Three years ago or something of similar, two point five years ago, so in twenty fifteen twenty thirteen, okay, beginning on 2013, we are performing more than 1% above industry per annum. And it's only 1% because in this period, we are avoiding the Italy risk because we have less treasury bonds, Italian treasury bonds, generally speaking, less government treasury bonds versus industry. So we reduced the risk of customer, but we went on to overperform the competition by on top of 1% per year after this monster called performance fees. And if you want, give a look to longer than twenty years. Let's start from the beginning of this month of performance fees, 1992. Well, in this period, we again overperformed of about 1% above industry parameters, including Internet crisis two thousand and eight. In all this case, at the end of the day, we are over performing. So this is figures measuring fact. All the rest is chart. We are running a risk of changing in use is not a risk. When rule change, we will deliver a reprice exactly as we have just done on 80%, I repeat, percent of the assets under management of our capital. Page 13, breakdown of last number of funds. You know it's only update. Page 14, total equity. Again, we are not happy, only 38%. We are growing by flexible funds. We have a lot of cash because we could face suddenly a change in financial markets. We have a lot of corporate bonds. And you see, we have less than 6% of government bonds. So we are working as an international asset manager. We have not only Italian treasury bonds that gave a lot of happiness in the last years, but in the future, you never know. So we work as an international asset manager. Page 15, you see the breakdown. Again, as fixed income, you see how we are working and trusting more corporate than governments. I am speaking about all the governments, not a specific one. Page 17, distribution. The tailwinds are so strong that we perform exactly as the industry. Normally, we overcame. Now we are performing at the same level. Page 18, quantity does not mean quality. We ranked number one in Italy in term of productivity, I mean, net inflows per financial advisers, euros 0, euros 0. To bubble size, it's the number of financial advisers. You see we rank one. And if you prefer, Page 19, we rank one with the same indicator, net inflows per financial advisers, where the bubble size is net inflows here today. So you see how quality and Italian operations are focused by all the top management of the company. We regarded we enjoy tailwinds and we delivered ranking number one, the best productivity in terms of network in Italy, again figures. I give the floor to Marco for the financials. Thank you, Pietro. Good afternoon, all of you. As usually, I go through the consolidated P and L. Recurring fees are quite stable, so €123,000,000 per quarter. In the 2015, performance fees have been satisfactory even though lower than the 2015, amounting to €34,500,000 Insurance revenues are quite stable, and so total revenues are higher up to €414,000,000 Distribution costs in the second quarter are higher, but we have more incentive cost for recruiting of financial advisers. General administrative costs in the second quarter are perfectly in line with the costs that we had in the first quarter, something higher, but it's mainly due to new companies consolidated line by line in the second quarter. Interest income, far poor in the second against €127,000,000 realized in the 2015, but it's mainly due to the lower performance fees got in the 2015. Because, as I mentioned before, the management fees are perfectly in line with the 2015 higher. So the in the first half, the net profit is amounting to €180,000,000 That is the best profit forever. The net financial position on the following page, notwithstanding, we have paid €103,000,000 as ordinary dividends is amounting to €340,000,000 the net financial position. So we are continuing to generate a lot of cash, thanks to the very strong results achieved. And thanks to this, our financial position now is very, very strong. And I remind you that we continue to keep the 7.2% as own shares and these shares are the underlying shares to the convertible bonds. So I give the floor again to Pietro for the outlook. Thank you. Thank you, Marco. Well, last page about summary on outlook. We can call the new normal because it's normal and it's not a pity that we go on to crash all the previous record. And so about financial results, what's then? Record first half results in terms of superior growing AUM, healthy markets, especially first quarter and sound marginality. Well, outlook, we are forced to update the full year 2015 net profit by an increasing of the floor. Three months ago, we say net profit full year between EUR 200 and 300. Now we are forced to say the floor is $2.20. We keep 300. We are still focusing on managing core costs, including, of course, acquisition extraordinary items. In terms of production, I told you 6% in term of weighted average performance, 2% on top of competitors. And the last product we have launched in one month, we reached more than EUR 600,000,000 in terms of assets under management. I'm speaking about arbitrage fund, the first European uses working in this way. Outlook, we go on in delivering performance on top of industry. And after the summer, we go on to increase by new products our portfolio. In terms of distribution, what's done, maintain the leadership in financial advisor productivity, high run rate on net inflows. And I remember you, it's some years that we are focused on quality rather than quantity. Outlook is to go on in recruiting based on quality and we are going on to attract new customer. Thanks to Libera and Precia Tour, remember, is our corporate project regarding Italian entrepreneurs. Expansion, we have completed three acquisitions in Australia proceeding ahead of schedule. Outlook, we continue growing Assisted business, while we foresee two new companies by year end. And today, the assets under management growing in a strong way in Italy. Anyway, on top of it, we are growing faster out of Italy because today, the assets under management is at 12% of total assets moving closer towards 50% by 2019. I am speaking about the business plan guidelines. About the implementation and regulation and framework, we are working to obtain by year end the reorganization process to use for growth, external acquisition as well as returns to shareholders by buybacks and dividends. We are still working and we are going on to discuss with our authority. Thank you for your attention and my colleagues and me are disposal for Q and A session. Thanks to everybody. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session in English. Italian participants will be taken afterwards. Anyone who wishes to ask a question may press star and one on their touch tone telephone. To remove yourself from the question queue, please press star and 2. The first question is from Mr. Hubert Lam of Bank of America Merrill Lynch. Please go ahead sir. Mr. Hubert Lam from Merrill Lynch. Go ahead. Afternoon. A couple of questions. Firstly, on performance fees. Have you spoken to the CONSOB? Just wondering if you know what the next steps are from their side or from the regulators on the performance fee issues, if there are any next steps? And also, ultimately, do you see performance fees changing? Second question has to do with mitigation performance fees. If you believe that performance fees would change, would you proactively change them before you're required to do so? And third question has to do with capital. Is there any update in terms of the timing of the approval of the reorganization? Will it happen by year end or earlier? And also, what are your priorities for them? Is it mainly M and A first, then capital return or vice versa? Thanks. Okay. About concept, spoke with the top of concept at the beginning of this week. And the meeting was very friendly. And what they told us is that if to capture a problem of European use, So I didn't have the feeling that we will have other actions by concept in this direction, I mean, in the direction of changing of the views. What they do and they are right is to remember to everybody that is existing some use. And I show you that we are always following this use is more than twenty years that we are working by this pricing, by our performance fees. And in any case, we act only in the interest of customers. So good meeting with concept, no concern may shows. Second answer, answer, well, we are liberals. So we prefer to have all the marketing mix opportunities. I mean, the pricing, we won't have the freedom to decide the pricing. And if our pricing is different from the majority of our competitors, we are happy about it. So we have a clarity that some customer could appreciate. I showed you that I appreciate to pay less in term of fixed management fees and variable fees might be higher, but I pay with when I have money. And in the shows of a customer, this is a very good point, but it's not an idea or a theory. It's the result of twenty five years in Italian markets by this pricing. So I think that we will not change on base of our decision, the price of our products. If we are forced, we will do exactly as we have just done in Italy ten years ago. About the time of reorganization to make free our capital, We are in the hands of Bank of Italy. Unfortunately, I can speak with them, but I cannot force them according the time of delivery. What I think is that is reasonable, is strongly reasonable to obtain an authorization before the end of this year. About the use of capital, we are open to buy something, to make some Italian strong joint ventures and to go on to buy out of Italy As well, if we have not interesting opportunities, we go on to pay dividends higher and higher. And when we solve the problem with the CRD4, the rule we are subject to today by buyback program. Okay. The next question is from Mr. Chris Turner of Goldman Sachs. Please go ahead, sir. Yeah. Good afternoon, everyone. Two questions from me, please. Firstly, you mentioned you have two acquisitions in the year end. I presume they're going to be global as well. And you touched upon this actually in your previous question, but a bit more color would be good about how you think about deploying this capital outside of Italy versus inside of Italy. Are there not small bolt on deals that you can do in Italy, perhaps in a market that is a market you know better rather than the Australian market, number one? And then secondly, I'm afraid coming back to the performance fee concept issue. When you will be launching new products over the next year, two years, will this make you think about deploying a different performance fee structure or maybe issuing more products than domiciling them in Italy? Or will it be business as usual in regards to new products? Thank you. Okay. Thank you for questions. Well, have an opportunistic approach. We try to buy what is more useful for the future and we think normally as a long term futures too of our company. I mean that if we have good opportunities in Italy and we are looking for and we have very good contacts. I personally know quite totally all the CEO of Italian banks Populari. So we have no problem if someone of these guys has serious intention to do something to talk with them. And we are looking for, we are fully open, and we are happy to do it. You remember that EUR $250,000,000 in terms of convertible bond were issued because we were very close to buy EUR 10,000,000,000 of assets under management of an important bank, an important Italian bank, where we will work together by a joint venture through their distribution system of subsidiaries helped by our fund managers. So we are open and we are looking for in Italy. But at the same time and with the same interest, we are looking for new good companies and new good emerging markets out of Italy. Australia, for instance, is going well. And I hope to be able to tell you something of good before twelve months about results we can achieve in Australia too. So we are sitting in a long term perspective, but it's not excluded that we have not to wait a long term perspective to show some material results. So we go on to invest. First of all, in Italy, and we do by an organic growth, but we are open and looking for external growth at the same time of foreign growth. But the second question, absolutely, we don't change the pricing of new products. It's twenty five years that we have this kind of price. In Italy, it's appreciated by our customers. They are educated not to look at cost, but to look at net performance after cost. So all the products we are going to launch have the normal pricing we have always had. If something change in terms of fuel, we are just ready and we have just done ten years ago, so no problem. We get the customer and we can reprice without any kind of problem. Thank you. And thank you for the very clear answer. If I may just ask one follow-up question in terms of how your clients are reacting to the current market environment. Obviously, on Italian bonds have risen in the last few months. Have you seen a change in behavior? Do you expect that change in behavior in terms of what your clients are buying to change? Do they need perhaps more financial advice than they did six months ago? Any color around that would be very useful. Thank you. Our customers are very happy because they know very well because we have quarterly at least a quarterly meeting with them, with each of them by our financial advisers, they know very well that they have not run the risk of Italian or European's bond. So the Greece problems are rightly undervalued by our customers because they know that we are not so fully exposed to this risk. So they are quite unhappy. And as you see, all the customer in Italy, including our customers too, are reacting to the low yield of the government bonds and to the low yield of cash account. So it's because of it that the tailwinds of asset management in Italy is still strong. We are happy about it. The new normal is that each month, we are delivering at least €250,000,000 per month. And this is not normal because one years ago, two years ago, our results each month are not the same. And it's because of it that sometimes when I see some figures delivered by our competitors only based on bank subsidiaries, I'm not so sure that they will be consistent in the future. I know the financial advisers' behavior. I think that in Italy, we will have a long term growth of asset manager of asset management because customers are happy by this new form of investment and the banks are promoting this form. But when you have to face a crisis, I think that the behavior of a network of financial adviser of private bankers is strongly different from the reaction of a normal bank employee. That's a very clear answer. Thank you. You're welcome. There are no more questions in English. We will now begin the question and answer session in Italian with a live translation for our English speaking participants. The first question by Mathieu Gilotti with Equitas SIM. Good afternoon, ladies and gentlemen. I have two questions to ask. First question, now in your opinion, why has CONSOB issued this press release? Now and why has it issued the press release in this moment? Have they given you any explanation since you met them? Second question for the CFO, Marco. The insurance revenues, can you remind me, is this what is it? Is this recurring revenues? Is this the technical result of the insurance companies? Can you tell me what in the insurance revenues is, what the components of the insurance revenues are? Thank you. Now, of course, we met the concept people and I'm not authorized to say whatever we discussed during that meeting. As a matter of fact, it was a very informal meeting and so I am not in a position to tell you what was discussed in detail. Now as I said, however, that meeting was very friendly, was very constructive, and it was very obvious that it was to be like that. However, I can kind of guess if the regulator decides to come out with a press release of this kind, well perhaps this is due to the fact that somebody else is saying things which are not correct or not appropriate. So for this reason perhaps the concept came out with a press release highlighting things that we know are correct and as a way also to answer some statements issued by somebody else which in the long term could cause damages. Now if you read carefully what Konsopp stated in the press release, while Konsopp is only reminding us that there are rules, but nothing has changed. Perhaps that was a way to answer some other statements that were made on a personal basis, which however might have affected the market. And so I think that this is one of the reasons why concept came out with that document. Perhaps there will be other documents or perhaps there are some other reasons which I cannot imagine myself or which we did not discuss. But since you asked that question, this is the answer I think I can feel confident in giving you Marco's second question. Well, in the insurance revenues, we put whatever is coming from the insurance companies. You have premiums, you have mathematical reserves, you have management fees and other fees. We group them together in insurance revenues. Otherwise, it would, if you wish, dilute our P and L, which is not the P and L of an insurance company. Now, of course, we follow the Bank of Italy templates or if you wish rules. And in one single line, we expose our insurance revenues in our P and L. Thank you. Now the next question by Ms. Irina Perini with Banca IMI. Please ma'am, you have the floor. Yes, ma'am. You have the floor. Now looking at your charts, I can see looking at your charts, we could not hear the first part of the question. Ms. Perini, could you repeat it? Can you hear me now? Yes, I can hear you now quite well. Now I have a question about the management fees. And it is true that your mix has deteriorated in the second Q of the year with equities going down slightly. However, if you consider the growth of your assets, I would have expected the equities equity investments to increase. Well, I'd like you perhaps to tell me something about this and perhaps can you tell us what we can expect in the next quarters? Then I have another question about your cash. I'd like to know what the main items are that over and above the payments of dividends, all the other items that led your net financial position to go down to €340,000,000 at the June? And then about costs, I'd like to know whether the costs that we are looking at in this moment, euros 66,000,000, euros 67,000,000 in the 2015, well, is this level of costs what we have to expect in the next two quarters as well? Thank you. Thank you. Let me start with the third question and then I will leave Marco to answer your questions altogether. Now as far as costs are concerned, we hope costs to grow up. Why do I say this? Well, in our case, costs tend to coincide with investments in our case unlike what happens with our competitors. So basically our costs are tantamount to investments. So I hope costs go up because this means that we are going to invest. But if something happens like what we had in 02/2008, well, back then our costs were cut heavily because most of our costs are variable. And we also reached an agreement with our personnel stopping payment of bonuses on a yearly basis. And so this is what I can tell you about costs, meaning that our structure coincides with our investment structure. But this being said, our cost structure is very, very flexible. I don't know any company in Italy and the ones that I know abroad too cannot be compared to our cost structure being so flexible. And I'm referring of course to companies operating in our industry. Marco, you have now the floor. Well, management fees have grown by EUR 1,000,000 and the same applies to insurance revenues. Well, I would put these two items together. The insurance component, thanks to the launch of new products, is becoming stronger and stronger. So margin growth ought to be associated to management fees and insurance revenues. If you put these two things together, you'll get to a couple of million euros. Well, not too much, but you need to take into account also the market trends in the second part of in the second quarter of the year. As to costs, well, we have basically consolidation costs in Q1. We also had management or variable costs risk management In the second quarter of the year, the biggest item underlying costs is related to the consolidation of companies. As we said, investments have been made and we have consolidation costs. As to cash, generated €180,000,000 of net profit in six months, which is mostly cash. And the growth or the trend in cash is related to this and dividends as well as certainly related to cash. Is that clear, Ms. Perini? Thank you. The next question by Federico Salerno with MainFirst. I have two questions. The first one about the shareholder agreement that you have in place based on the communication that we have received so far. Is that shareholder agreement going to be renewed for next year? And then a second question about distribution costs, which are around 50%, which is largely below the average of the previous quarters. That going to be the normalized level or should we expect this item to go up in the next quarters? Thank you very much. Thank you for your question. What I have bad news about the shareholders' agreement, is going to be renewed. So basically, the shareholders' agreement has been automatically renewed because opinion to the contrary was to be given or was to be communicated within the July 7. We received no communication. And in this manner, the shareholders' agreement is going to be explicitly renewed for the next three years starting from next year. As to distribution costs, perhaps Marco will tell you something about. While distribution costs are in line with the distribution cost of Q1, if you take an average of €75,000,000 per quarter, something more or less, that's going to be the average. So the payout is, however, in line with what the industry is. We have to say that very often our competitors have a hierarchical structure. In the case of FAs of Adjinut, however, we don't have this kind of hierarchical structure and our FAs earn something more. So you don't expect therefore this payout to the network to go up to 65%, 70% as it was a couple of years ago. No, we don't expect the payout to go up. But then you don't have to consider acquisition costs, because acquisition costs is a mix of different items. And it is not only represented by acquisition costs sorry, distribution costs. Acquisition costs include the different items like marketing costs and so on and so forth and also distribution costs. Now the next question by Alberto Villa with MainFirst. It's actually Intermonte, not MainFirst. Now good evening. I have a couple of questions to ask. What about the shareholders' agreement? I mean, we haven't seen you after you changed the rules of the shareholders agreement. I'd like to know what is happening. You still have some residual 4% that could be sold and which could be become free float or can you tell me whether all of the members of the shareholder agreement, whether they're going to sell or they will continue like this? In other words, can you tell us something about the new shareholder agreement? And then apart from this, I'd like to know I'd like to understand what the reaction is inside the organization. Have you been able perhaps to provide some reassurance to those who felt underrepresented in the old shareholder agreement. So I'd like to have some color about this. Another question to the CEO. I read something in the paper that you are willing to reinvest money in ANZIM, perhaps through a payback program. Now another question. The tax rate is quite low. I wonder whether for this year too, a 15%, one-five percent can still be considered the worst case. In my opinion, your tax rate is slightly lower. I'm asking you what should we expect for the future? And then another question about minorities. I have seen an increase under minorities. I'd like to know whether there is something specific that led net profit for minorities to go up in Q2? And then another question about assets profitability. 12% of your assets are outside of Italy, are in foreign markets. Perhaps it will be interesting to start modeling in a different manner the profitability of the two classes of investments. I'd like to have some indication about the distribution costs of asset outside of Italy, which I realize it's made up of a mix of different countries. Okay, thank you. Let me take the questions which are appropriate for me. Let's start from the shareholders' agreement. What I have to say that there is a lot of satisfaction about the fact that the shareholders' agreement has been renewed and the fact that the agreement has been renewed means that everybody is happy, the old ones and the new ones. Do I say this? Because we thought that with the close of the lockup of the shares, we thought the old ones were going to sell, which did not happen. Now as to the figures, and I'm just kind of trying to remember things off my mind, what is emerging and what we wanted to emerge after the restructuring of the governance, corporate governance of Alzemit. And therefore, what we wanted for the new shareholders' pact is that the locked shares are about 5%, which are going to grow through preferred shares. Now there is a residual remaining 10%, which is free and which can be sold in any moment with the exception of the 4% you mentioned before and which is under a lockup clause until November. This is about those who partially adhered to the ADD. But apart from this, let me be clear. We now have 5% locked shares, which rules the shareholders agreement and which will probably is going to grow going forward through preferred shares. And then we have a 10%, which is free and I could only not take into account when thinking about the governance of the shareholders agreement. But this 10% belongs to Timone Finucaria, which is part of the shareholders agreement. Timone Finucaria, I'd like to remind you, manages free shares and locked shares. Now the free shares and especially the newly issued shares are subject to the report, which is to be communicated to the shareholders. Let's say that the shareholders' agreement today is accounts for 15% of the capital of the company. What is locked is 5%, which is going to grow going forward, as I said, through preferred shares. Now as to my personal repurchase of shares, I said it and you know me, I tend to do what I state. I don't have a figure in my mind at the moment. What I have, however, clear in my mind is that I had the opportunity to get out of the locked up shares, not because I needed to get out of the locked up shares, but I had the opportunity to do that. Why do I say this? Instead of giving in the next twenty years, bad news, whenever I got out of the locked up chairs, I decided to take out my part within the organization and I intend to bring the money back whenever this is needed. And this perhaps will run counter to those hysterical investors that usually tend to buy when it is not the case and who surely sell shares when it is not really appropriate. And I'm referring to what we witnessed last week. So what am I going to do? When I say when I see long term trends, when things are not going very well, well, at that point, I would have the opportunity to buy shares not so much to make money, but to give some messages to the market, trying to make the market understand that it's doing something wrong. So I think I can leave I think a residual number of years allowing me to make these investments without any problem. Now as to your question about minorities, and I will leave Marco to take the questions about tax rate. Well, minorities are usually related to foreign operations. Now the fact that we have minorities, it means that somebody who is doing profits does exist. So minorities are growing because the more we buy companies where we don't have 100% of control, while you have minorities there. I'd like to know whether there are some specific countries which are making profits abroad. Well, let me see. Yes, of course, we have countries which are making profits. Now we avoided to disclose things about this because we have companies abroad who are running and make it are making all efforts to come to a breakeven. So for this reason, we do not want to penalize these companies saying, in these countries, I'm making profit and other countries are not making profits. It would not be nice because everybody is working well and everybody is making a lot of efforts to reach breakeven. There are companies, as I said, that are going quite well and are making profits about with exception of European countries or over and above European country companies, we then have Brazil, Turkey and others. There are a lot of companies which are making profits. We do not disclose these data specifically and perhaps we should do that going forward. And I'd like also to give some data about costs, revenues abroad. And we will do that when we have something material to disclose. It's not nice to say something because we are excited because we have good things. And then the next few quarters, we will have to keep quiet. So now we as I said, we have companies making profits. This is why we have these minority items. Now and then we have most of our investments in Italy and then we have some investments abroad. And we know that everybody is saying, why don't you stay in Italy, the market is favorable, why do you waste your efforts abroad? Well, we believe in what we are doing. And if you are patient, you will see that our foreign operations will be part of the targets that we communicate. Well, that starting from scratch or starting with small companies in emerging countries, what I mean say you have to kind of take care of a lot of volatility. And so we would like to reach a point when we can present the data without having to explain why we have run into a given volatility, which is not really affecting the net profit of that company. So we want to wait to have some stabilization and have something that we can disclose without causing some confusion. The tax rate, now the tax rate is around 12%, 1%, 2%. So as we said in the past few months, we are talking with the revenues office. And we actually have reached an agreement or rather the Revenues Office has issued a ruling and nothing should change. So 15% is the highest tax rate for this year as well. Thank you. Thank you very much. The next question by Mr. Bernardi with Fidentiis. Sir, you have the floor. I have a question about the corporate governance. You said the shareholder agreement has been renewed and will be there for the next three years. So this means that the Board, which is going to be renewed next year, will not change greatly? Thank you. Well, I don't know whether your question is driven by rumors, which are fueled by the competition who keeps saying that I'm old and I am about to retire. Well, if that's the reason why you're asking this question, be clear, I am not going to retire. I am not tired of working. I don't think I am surrounded by people who do not appreciate my work or who do not esteem what I did. So this is what I can tell you, half jokingly and half seriously, we are not seeing any major discontinuity inside of the board. But I really would not like to start this kind of speculation about these things. What matters to me are parts and figures, as I said, more than once during the presentation. All the rest is rumors or statements issued by somebody else that I don't really care for. Next question by Luca Orsini with One Investment. Good afternoon. I have a couple of questions to ask, if I may. The first question, since now since the shareholder agreement has been renewed. When you renew the Board, how many Board members, how many directors will the minorities have? Then second thing, I'd like to congratulate you for reinvesting the money in the company that you manage. Now we did not hear you well. No, the second was not a question. It was just a way to congratulate you for reinvesting the money in the company that you manage. Thank you very much. As a matter of fact, I heard I had heard what you said. I just wanted to make you repeat the congratulation. No, I'm joking. We couldn't hear it. Now as to the Board members, I am not an expert in corporate governance matters. As you know, I also came out in the press by saying that I do not really believe a lot in sophisticated forms of corporate governance. I have no idea at the moment. I don't think anything will change. We will present our slate for the Board and then we shall have independent Board members, independent directors. I can see my colleagues are nodding. I don't think that anything will change, that nothing will change versus the past. Thank you. And thank you very much for congratulating me. Thank you. Mr. Giuliani, there are no questions from the conference call. Well, thank you very much for attending this conference call. Have a nice evening, and we'll hear you soon. Thank you very much.