Earnings Call: H2 2020

Feb 11, 2021

Ladies and gentlemen, welcome to the Leontec Full Year 2020 Results Conference Call. I'm Constantino, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dominik Rugli, Head of Investor Relations, Communication and Marketing of Leontic. Please go ahead. Good morning, everyone, and welcome to the press conference call of Leontic's full year 2020 results. All presentation materials as well as the annual reports can be found in the Investor Relations section of our website since this morning, 6:30 a. M. In the same section, we have also published a comparison of Zeno's consensus summary versus our actual results. Here with me today are Chief Executive Officer, Lukas Ulflin and Deputy CEO and Chief Financial Officer, Marco Amato. We will start the presentation with an overview of the highlights of 2020. Will then discuss the financial performance of 2020, continued by an update on our business and strategic priorities before closing the presentation with a summary and outlook. The presentation will last about 50 minutes, after which we are happy to take questions. We intend to close the conference call at 10:30 a. M. It is now my pleasure to hand over to our CEO, Lukas Hofer. Thank you very much, Dominik. Good morning, ladies and gentlemen, your shareholders, analysts and media representatives. Before we start today's presentation, I would like to quickly look back at Mid 2018. If you recall, at that time, we shared with you our plans regarding the journey we were embarking on as a company, A journey to overcome certain limitations we faced and to grow and transform our business. A Transformation completed by a set of strategic priorities that we have diligently executed in the last few years. In 2020, the results of these efforts Resulted in major strategic progress with our investments starting to bear fruit. Let me please start Now on Page 4 of the presentation by expanding on our progress. 2020 was a pivotal The year in which we achieved significant progress against our strategy as promised 3 years ago, Despite the global pandemic and unprecedented market turmoil in March and April this year. At the same time, the OnTeq improved its profitability in the second half of twenty twenty after challenging first half of the year Impacted by the onset of the COVID-nineteen pandemic, we reported on this extensively when we The second half of the year was particularly driven by a wake up 4th quarter where we reported CHF 80,000,000 in economic revenues. As a result, The Young Tax Group net profit in the second half of the year improved to CHF 34,400,000 compared to $5,500,000 in the first half and up 6% from the prior year period. Our shareholders' equity also remains strong with about €648,000,000 at the end of 2020. At the same time, we are also reporting to you today that our Board of Directors will The process is to present increasing the distribution to shareholders at the upcoming Annual General Meeting, which will take place at the end of March this year, saw a dividend per share of CHF 0.75. Looking at our strategic progress, I can confidently say today that strategically 2020 was the best year Let me now highlight some progress Before going into more detail later in the presentation, Shift is up and running With 7 hedging providers connected to the platform, in addition to Opelion, tech being hedging Providers for our clients are facing 8 counterparties and contributing to 9% of the balance sheet line turnover we have reached in the second half of twenty twenty. We have signed cooperation agreements with 4 new white labeling partners and initiated 2 content and technology enhancing Lastly, as part of our growth strategy to strengthen our presence in these regions, we have opened new sales offices In Milano and Dubai this year. Let's now move on to Page 5. 2020 has also shown how Leontay can withstand one of the most severe capital market shocks End global pandemics in mobile history, steering through the difficult periods of market stress, which, if you want, was both a straight scenario becoming ready both from a financial market And obviously, for a very active and extending platform like ours was A straight test, which I think we have withstood with remarkable resilience. Throughout the period of this market strength, we had the strength of our Cyence business Becoming very clear, we were certainly helped by our capital position and the robust And effective infrastructure and business continuity management we have put in place before the onset of the crisis. Important, our platform has remained available to our employees, stakeholders and particularly our clients without Any nature of faults is during the entire period, it enabled our business to remain up and running, Our employees to seamlessly transition to remote working arrangements and our colleagues on the sales facing clients to serve those clients at all times throughout the year. In this environment and on the back of increased Activity on the client side, we were able to report for the year 2020 a record fee income of 335,000,000 up 26% from 2019. Particularly pleased, I am with the feedback we have received from our clients on our consistent service, both in the first and second half of the year. But in particular, I had some very complementary comments from major clients when it came to the Very turbulent years weeks of March April, when at some times we saw highly liquid markets Being much less liquid and when despite these external restrictions, Leon takes consistently And without brakes offer these clients fullness liquidity on all products traded through the platform. As a result, we do have our times available at all times. We proactively engage with them in conversations and new business. And I'm also proud to see that on the back of those conversations in the dark days of 2020 We saw clients confidently engaged in new business transactions, which obviously, with hindsight benefits, have turned Very profitable in terms of performance record, helped by high end markets starting Sometimes, little too late March onwards. We process record levels of secondary market rates, Client transactions and life cycle events inflated more than 2,500 client portfolios On our platform links, we will cancel that a bit later today. Moving on to Page 6. We have tried on this page to visualize our progress over the last 3 years. And as I said before, 2020 was the best year ever in Lilonget's history when it came to strategic Development, and we believe that this didn't just happen coincidentally. What we think 2020 shows is that A focused execution of strategic priorities eventually pays off. And we see Early signs of our execution but also significant investments in new growth Projects which we have embarked on since 2018 become ready. Take, for example, Jeep. We told you in 'eighteen that Jeep would be up and running in 2020 and that it was vital for our future because, obviously, it's Reducing our hedging exposure on our own balance sheet and thus Making the business in many ways more scalable. 2020, soon forward, We believe we have delivered on the promise. Again, bear in mind that Chip only went live in the middle of the year As a full functioning technology platform, and of course, we expect higher turnover And higher share of business going through ship in the years to come than in 2020. We also told you In 'eighteen, of our intention is to focus on our clients' digital experience, links and our A and C Gateway has made major progress in 2020. And as time goes by, we are increasingly seeing the Share of client business executed through this digitalized platforms increase. We told you about our regional growth strategy. And on the back of this, have opened new offices in Milan and Dubai to cover the Middle East in 2020. We told you that we were in discussions with potential newcomers. Many of You asked repeatedly when we would announce those. We told you that you should please There with us that it was taking time, but conversations were ongoing. And clearly, 2020 has shown Those conversations turning into signed agreements. We are in the process of launching this 4 new white paper So we expect 2021 for all of them to see new product issuances. We are, of course, also in parallel conversations We also started collaborations with BlackRock And with Google Cloud, which will help us further leverage on this ecosystem and digital platforms The on-site is expanding on. We finally expanded on our products offering. We launched New investment theme trackers where we cooperate with finance on VirTrax, with Morningstar and the market And this sort of content partnerships will certainly also continue going forward. So all in all, the trend of focus, the execution that we have been diligently working on for the past 3 years And that is starting to become visible. We will continue. We will continue to invest, which explains why our cost guidance For 2021 is increasing. And as we continue to invest, we obviously also expect over time for these investments to I would like to pause for a second and thank all of the employees of Leontag for the very focused execution, In particular, in 2020, when it sometimes there were other concerns on the mind of all of us than just Business related issues that I'm very pleased to see the strong commitment and strong support I'm seeing all our colleagues showing progress we undertake and that's another reason why I'm personally quite positive about the outlook of the business going forward. With that, I'd like to go on to Page 7. In the Last 14 years since starting the OnTeq in 2,007 as a very focused expert of Structural Structural Products, we have developed into more than just an expert of structured products. So namely, first, We are today a provider of investment solutions, and we offer 1 of the largest universal structure products With over 2,000 underlines that include major asset classes as well as fund derivatives, cryptocurrencies, These dramatic indices, there are 3 being notably strong growth areas where the firm expects to do Significantly more business in the coming years. At the same time, Our offering is very much a function of the big technology investments we have made throughout our 14 years. And those investments have enabled us to become a leading technology platform, which supports issuance So hundreds of products a day and of large amount of client transactions every day. So the provider of investment solutions on the date of the leading technology platform is clearly one pillar, but it's not the only one. As a second pillar, we are a service and technology provider for banks And insurance companies and have by now successfully established a white labeling business model With state of the art services in the areas of structured investment products as well as savings and retirement solutions. And as we expect the pressure on both bank and the insurance companies in terms of The macro environment, which is clearly now defined by low interest rates, if not negative interest rates In all major currencies to continue, we believe that the need for leading banks and insurance companies to rely On highly specialized and focused outsourcing partners when it comes to certain of their own client offerings will increase, And we believe as a specialized service and technology provider to those institutions, we are very well positioned To play a role in this further, I would almost call it, megatrend, we believe has been exacerbated by the Macro environment, again, defines below interest rates. 3rd, we are By now, clearly, a marketplace for structured products where it becomes almost irrelevant what Leontec as an institution does In terms of product offering, as well the key point is that the Leontec marketplace enables our clients On a one stop shop principle to lead parties, not all of the structure platform flow through this Platform. We have built a multi issue platform, have connected to 30 issues And are connecting those 30 shows with over 1,000 clients. You add to that highly innovative and as far as I know today, unique offering we have on the ship side. You enable your clients to really be in a position to have base execution on any 0 bonds embedded in a structured For that, they can just choose the 0 bond of their choice. And of course, through Schief, they can then also marry that 0 bond with The best execution on the aeronautics element. All of these efforts are still in its infancy. We onboarded those 30 platform issuers in the last 12 months. And ship, as I've explained before, has only been up and running in the middle of 2020. So whilst at this stage, you might still think that this is a small offer, it's probably The area where I personally see the highest growth to come, and we will certainly continue the significant Investments we have made in the last 4 years into our marketplace and into ship and the related services that are offered. I just name one potential avenue where we see a lot of potential but have not yet been able to grasp that potential. And that's obviously all the data relating to these transactions happening on the marketplace. Finally, as a 4th pillar, the OpEx is savings and retirement solution platforms. We have today Already more than 50,000 policies, service through that platform. Clearly, again, here we offer service for our B2B clients, but ultimately for them to then offer those products to their end clients. So it's a B2B4C service offering Well, we again believe that there is a lot of further potential. So in summary, these four areas In many ways, key trims are connected, but at the same time, stand alone core pillars on which we feel quite positive in terms of future potential. With that, I would like to transition now to our financial performance. I hand over to our Deputy CEO and CFO, Marco Amato. Thank you, Lucas. Good morning and warm welcome to all participants from my side. Let's move into the LRP expansion I would like to start by highlighting to you today that Leanderbeg has fully recovered from the COVID-nineteen impact, which negatively impacted, in particular, our hedging results The chart on the left hand side of Slide 9 highlights that we are back on track in terms of delivering total operating income. You can see here that total operating income notably improved from the first half of twenty twenty CHF 231 1,000,000. Our net profit, which you will see at the right hand side, is back in line with the track record built throughout 2018 end 2019. After reporting CHF 5,500,000 in bottom line in H1 2020, Group net profit improved significantly to CHF 34,000,000 up 6% compared to the H2 2019 results. For the full year, group net profit totaled €39,900,000 compared to €52,700,000 in 2019. Now looking at the weekly revenue development on Page 10, let me continue to provide you with a fully transparent illustration of the business development on a weekly basis. After challenging first half of twenty twenty, which we reported on 6 months ago, Leopoldik had a soft good start to the second half of the year with a slower than usual summer period extending well into September as you can see from the graph. Our retail performance further stabilized in October, but client demand was lower than in the prior year period. This was mainly on the back of investor uncertainty due to concerns about the 2nd wave of COVID-nineteen and the tensions in the runoff to the U. S. Elections. Following that, we saw a strong pickup in client demand from mid November onwards until year end, resulting in the best quarter results in LENVICT's history With economic revenues of CHF 80,000,000 as mentioned already by UCORZ. On the cost side on Page 11, I'd like to note here that Leontay significantly invested both in initiatives in 2020 at Welles in hiring. Our stock grew from 508 to 5 19 FT feet feet feet feet feet feet feet feet feet feet feet feet Es year on year. Yet our total operating expenses remained in line with our guidance at CHF197.9 million for 2020. I'm also pleased to report the notable progress we have made on our new joint initiative in Lisbon, which is being implemented in a phased approach. In Phase 1, which commenced in the first half of twenty twenty, we established a service office setup, employing a handful of external IT development personnel as well as other shared service functions. We hired by now 20 employees in 2020 as part of Phase 1. Phase 2 consists of Remtech Setting up its own office and legal entity and hiring up to 100 designated roles along the entire value chain. We expect to open this new office in 2021 and complete Phase 2 by the end of 2022. We expect them to see enhanced cost efficiency through the optimization of our customer expense cost structure from 2022 onwards. Let's turn now to Page 12. On Page 12, you will see the results of our Investment Solutions business line. You can see that margins both for Emtek and its platform partners remained elevated in the second half year of twenty twenty. This is mainly due to the fact that following the onset Of COVID-nineteen in the first half of the year, we took the decision to limit activities in the high turnover, low margin flow business, in particular with OTC Auctions and Leverage Certificates. Furthermore, we saw that the overall pricing levels became less competitive Following the market turmoil in March, allowing us to price more conservatively our product and charge a slightly higher margin. These circumstances are also one of the key drivers behind the decrease in turnover in the Platform Partner business to €14,800,000,000 in 2020 compared to a very strong prior year period performance of €18,800,000,000 Looking at our own issued products, so the neon tech product, we reported platform assets reached a record of €4,900,000,000 as of the end of year 2020, which is an increase of 20% compared to the end of 2019. We generated turnover of €11,600,000,000 in 2020, which is up 1% from the prior year. This conflict development is also part of the result of our investment grade rating that we obtained in January Okay. Now, Insurance and Wealth Dynamics Solutions business line on Page 13, you can see that the number of outstanding unique linked products continue to increase. Even though somewhat slowly, it is a consistent increase with a 9% increase to almost 52,000 policies from the end 2019 to the end of 2020. The net fee income, which you see depicted on the right hand side, was significantly impacted by the long term interest rate environment in 2020. Furthermore, as LEMPIC depends on the external distribution channels of its insurance partners and insurance brokers, communication and meetings with potential end clients have been severely impacted by the COVID-nineteen pandemic also affecting our fee income development. As you can see, the net fee income in the second half of the year dropped significantly compared to the first half of twenty twenty. But this was also due to It was also due to and still on the back of the one off revenues that we reported in the context of our 2019 and third half twenty twenty results, which reflects the effect of changes in the future service obligations. To put this into context, The 30 year SwissBanc's 4th traded negatively with long term interest rates persistently below 0 throughout most of 2020. This is the first time in history that this happened and the unprecedented market environment put high pressure on the product condition competing with products not directly linked to the market rates. We see this below the euro trend to break in 2021, and we remain confident Let's now continue on Page 14 with a look at Lantec's capital base. Over the past years, Lendlyk has built up a strong shareholders' equity. Looking at the left chart, you can see that our shareholders' equity decreased slightly from CHF 662,000,000 to CHF 647,000,000 at the end of 2020. This compares to a capital base of approximately CHF 400,000,000 from 3 years ago. Since the beginning of 2020, LEMPAD has been operating under a new regulatory framework for securities firms. The new capital requirement of €20,000,000 was again to be exceeded as of the 31st December 2020. And looking at the chart on the right, you can see you see that we report a €25,900,000 decrease in our deferred fee income to €75,900,000 as of the end of the year 2020. This is on the back of a review of the estimates Inherent in the revenue recognition model for fee income in the Investment Solutions division to take account of the increasingly competitive market environment in recent years. We reported on this FX already in the first half year twenty twenty. Overall and to conclude, we reported strong capital base, Which we define as aggregate amount for both shareholders' equity and deferred fee income together and totaling EUR 723,000,000 in 2020. I would like to turn now to discuss how this number is relevant for Laertec Capital Management and also dividend policy on Page 15. I'm pleased to report to you today that in line with Lantec's conservative dividend policy, The LENVETY Board of Directors will propose a shareholder distribution of $0.75 per share for the financial year 2020 to the Annual General Meeting, which will take place on the 31st March 2021. This is a 50% increase from the €0.50 For share distribution for 2019 and to be paid in equal amounts out of returned earnings and capital contribution reserves. Today, we are also providing transparency about our ambition to move to a progressive dividend policy. As a prerequisite, we're targeting for our capital base, which just for clarity's sake includes also the deferred fee income to reach the CHF800 million area by the end of 2021. This area is defined as the range of plusminus3% of the level indicated. Once the threshold is reached, we intend to transition to a progressive dividend policy and intend to propose A shareholder distribution of more than €0.75 per share for financial year 2021. Thereafter, we aim to maintain a minimum capital base in the €800,000,000 area and foresee payout ratio of over 50% of net profit for the financial year 2022 and onwards. Before I conclude, I want to leave you with 3 takeaway messages. 1st, LENFE is back on track financially and we have recovered our profitability, putting it back in line with what we delivered with half years in the prior year and also 2018. 2nd, our cost remains well under control and we're making good progress with our nearshoring initiatives, which will improve our cost efficiency from 2022 onwards. And last but not least, we are proposing a 50% increase in shareholder distribution for 2020 and are providing transparency about our ambition to transition to Progresi's dividend policy. With that, I hand back over to you, Lukas. Thank you, Marco. Let's now take a look at our business and strategy As I presented to you in the beginning of this call, Yantech has made significant achievements, both in terms of establishing a certain financial track record, notwithstanding, obviously, the COVID impact Experiencing the first half year in 2020 and also visible there, but also in terms of Our business model and comprehensive offering. We feel confident that our business model For structural products coupled with attractive markets, which is structurally benefiting from a low interest rate environment, has positioned us well today to now deliver attractive and sustainable returns to our shareholders going forward. Let's look at Page 18 and talk first about the attractive market we see. So markets that you see on the left hand side, we are HDC, which is ultimately the global wealth market, has clearly shown a strong growth compounded year in year out at roughly 12%. Likewise, the market turnover for structured products in Switzerland has been growing 13% each year. We are taking this approach. We are obviously active in other markets too, but the Swiss structure product market is both well researched and published, And we use that data as a proxy given that about onethree of our business activities are in Switzerland. We are and remain convinced that Structural Products should play an important part when it comes to Considering asset allocation in a portfolio context for Investo and therefore, I've used those, well, market growth numbers to illustrate the, I would say, macro picture in terms of the development. What has fundamentally changed with the decrease of U. S. Dollar interest rates in 2020 Is the structural macro situation now all major currencies Showing low, respectively, negative interest rate, which makes obviously The issues around investments in a trade different payoff structures, respect The underlying is increasingly difficult. We have seen similar developments in Gen 10 starting much earlier than in Europe and the U. S. And we have seen on the back of each of them becoming the world's largest market for structured investment products, a trend which we believe structurally will continue in Europe and in the U. S. As well. And in this environment, we believe We are well positioned with our expertise and our offering. Clearly, on the right hand side of this chart, You see that when it comes to Switzerland, as reported by the Swiss Exchange, We ranked overall 3rd place, covering 9% of the market share. And when it comes to yield enhancement products, We have been consistent in the last 10 years ranked number 1 as with a 32% Market share, these are obviously data based on leases product at the We've exchanged our own OTC products, non leased products. So you have to use those numbers With the self and caution because they are not entirely representing the market, but they give a good indication of our relative position. With that, I would like to go on to Page 19. We have built, as I said at the beginning over the years, Altium, to a service and technology platform, have created a marketplace that connects and enables investors And providers of investment and retirement solutions. On the Investo side, we have numerous Different financial intermediaries in over 50 different markets across Europe, Asia, Middle East and Latin America. We work with more than 1,000 clients, which are financial intermediaries. They could be Private, regional or universal banks, independent asset managers, independent financial advisers, family offices And other institutional investors. We do not service any clients. We bring those intermediaries together with providers of structured products and savings solutions We have today on the platform 10 white cabling partners, 4 of them behind the process of onboarding. I referred to that before. And furthermore, we offer nowadays products from 20 3rd party stores, which includes Societe and General. I named those 2 as we have created in 20 20 to both of them automated connectivity between our marketplace and their respective pricing platforms. It's important because it increases the velocity of decision making at the end of our clients. And as technology developments will continue, we believe the automated collection So the technology platform of the 3rd party issues will obviously continue. With Societe Generale and Barclays, we have 2 Renowned market participants now collected and obviously providing their respective pricing to our client base on a daily basis. So if you then add on top the neon tech issue. So our historical business activity, we can Confidently showed to clients now the availability of 31 different providers on the platform. We think that's quite an attractive marketplace for any potential clients to consider. As we've heard through sheet before, we have now 7 leading investment banks connected as hedging counterparties that I said also before. E. ON said, in addition, obviously, always provides prices. So investors and clients get a selection of 8 prices when they go through the Chit platform. We have added 2 content and technology names of BlackRock and Google Cloud. It works today together with 3 products, Carlos locally in Switzerland. That's the market and so we adjust. And we have also added warning star to the content provider universe. We will obviously continue adding additional content And technology enhances in the coming years. So again, 2020 shows the beginning of a trend. It doesn't show at all the end of our admissions. So these investors and providers brought together on our technology platform Brings us to the marketplace. Core application on the marketplace are the LINKS platform, the SHIP platform And the Omega platform, it's a word you have not heard from us. Often, Omega is our new proprietary savings and retirement platform. And I'm confident that we'll talk about that a little bit more in the future. We are clearly replicating this technology Enhancing idea, we have executed on the Investment Solutions side into our second business line, Investment and Wealth Planning Solutions and Delta Technologies platform is Romica. Obviously, in internal development and obviously, also in internal name, we have given to it. If we then move on to The next Page 20. What we are trying to show you here is the execution and Achievements of our strategy in 2020. So again, and I apologize if I'm a bit repetitive, 2020 ships became fully operational. We have also enabled Additional underlines on ships. So it's not just that ship became operational, but we have expanded the ship Service, universe and debt expansion will continue. I'll come to that in a second again. And The progress we have seen on chip has obviously also been evident in the increased share of the LNG line turnover, which has on a year On year basis, gone from 3% to 9%, so roughly tripled in terms of share, and we would expects that this share of marketorship internally will obviously continue. On wings, we introduced new functionality throughout the year, including a new portfolio allocation features for clients. We have now more than 1500 users as being active links users and have Rolled Outlinks has an application. You can download that through iStore functionality In 20 different countries, which gives our clients access to LINKS anytime, anywhere. I'd like to stress again, this Link's platform is not a service offering today to end clients. We don't service retail clients. So the 1500 users has to be understood as individuals within our 1,000 client universe. So TPK employees of the financial intermediaries I've referred to before. Also in 2020, we signed new Operation agreements with Post Finance Basel, Continental Bank, Bank Internationale Luxembourg and France Merchant Bank, a division of First Friends Additionally, we launched projects to develop and market structure products on the BlackRock and I share Fund Universe as underlying assets and started the collaboration with Google Cloud. Lastly, we have expanded our product offering by adding products on systematic indices and extended our Underlying universe for XB managed certificates. We continue to improve the operational efficiency of our AMC Gateway, so the technical platform, which allows our clients to seamlessly execute and transact On A and C, and we have entirely redesigned the A and C client portal. Again, efforts We'll explain the cost line related to the significant investments in the last years and of course investments we will continue On the back of our belief that, for example, in particular, the A and C business line growth will continue And there is a good position for beyond take so as when it comes to that service offering to our clients. Finally, And that's probably right now a bit of a hot topic, but it's something we are very consistently focused on in the last Yes, on the belief that the trends relating for cryptocurrencies is only the beginning of a larger Technology revolution happening. We have significantly expanded our efforts in offering trade off certificates Of a larger range of cryptocurrencies, which includes today Bitcoin, Bitcoin Cash, eSolar, Litecoin and Ripple, We are, as we speak, continuing offering our clients new payoffs. We have been, I believe, the growth first, Who has offered out 10 days ago an out strike product on Bitcoin. So if you want an exotic payoff on an innovative new underlying, which As such, has not existed in the market before. So we will clearly continue offering our clients Interesting products on the cryptocurrencies. You see just between December 'nineteen December 'twenty, what I would call an exponential growth of about 500% in terms of Outstanding volumes on our platform. We have obviously seen this growth continuing into the 1st weeks of 2021. And it might continue. It might also reduce in terms of investor appetite for certain period. The message I'd like to convey to you today is that our service offering and our focus on cryptocurrencies On AMC, on digitalized product offerings on chip, on the marketplace, will continue No matter what the short term trends in a given report they might suggest. We have obviously also used 2020, I said that before, to launch new theme related products Where we have Jean Dark with Finan from the Upshaft Morningstar in the market. Our AMC business has significantly increased In size, that's also important in terms of fee income distribution we charge on AOCs, which are typically Open end certificates an annual fixed fee on the total outstanding volumes. So we are very much Expanding and diversifying into an annuity based fee business, which It's a nice addition to our Investment Solutions business and our PAS business, the labor gain being much more annuity based fee related. Now while I'm quite proud of these 2020 achievements when it comes to the strategy achievements, We obviously have large plans for 2021. With that, I'd like to go on to the next page, please. So on Page 21, you see our priorities and targets for 2021, again, centering around the same initiatives. We will continue to add new payoffs and product features to the platform. We believe that will enable us to also see higher Percentage of balance sheet light products being transacted through the platform. We will also use 2021 We expand our AMC offering and related product initiatives. For Linx, we plan to go live with our pricing module, which will replace our Click and Trade platform Constructor. Constructor was launched by us probably about 2013. By now, whilst it Has been very successful. It's in many ways all technology. She links it in many ways the technology of the future. I'm very pleased to see that from a technology point of view, we concluded the biggest investments in 20 We will furthermore, As I said many times during this presentation, focus on AMC and integrate the AMC portal into links. So we are Making sure that our different digital efforts will not be eventually ending up at client's desk Through different applications, but all be wrapped up in one lead application. And as we Spend links with further functionalities, we will obviously also think of how we can integrate links Into our white label partners in a fully white label manner. Our platform partner business will hopefully continue to expand as we will not only launch the sales Products in 2021 with the 4 partners announced during the year, but we will hopefully also be able to announce several Last but not least, We will make sure that our product offering will continue. I said it Many times, AMC, if it's a growth initiative, we see a lot of traction with clients on The systemic thinking this is universe we have built up over the last 12 months. We are talking Clients about quantitative investment strategies and, of course, about fund derivatives and In the last few weeks, in particular, about cryptocurrencies. Finally, we have not Not surprisingly, been unaffected by the very big We want to not just be part of these developments, but to make sure that we can become for Our stakeholders, including shareholder sales, is one of the key Companies to consider when it comes to companies executing on sustainability efforts. There is a lot of The odds around that effort and at this stage, we'd probably be a little bit Short on the road, I think when it comes to sustainability, companies have to be measured by actions. At this stage, we'd like to communicate to you all that We will use 2021 to fundamentally redefine the intake from a sustainability point of view To make sure that when it comes to the relevant ESG criteria, we meet any relevant threshold To the extent possible, we would then say on 2 words when we can demonstrate to you what we have done and would This consequently also intend to publish for the 12th time in our history a sustainability report next year to better with Yes, you will report. So on to Page 23, summary and outlook. We don't take his own take on track financially. It doesn't come as a surprise for Marco and myself, we have told you in the first half year that we and still are as unhappy as you have been about the first half Yes, results that we clearly told you the reasons why the results were what they were. Like to stress that despite everything, we still showed Profitable numbers and we told you that these are one off effects. We understand That some of your questions, but I chose one of the facts. I responded to that, that You shouldn't listen to words I conveyed to you, but by to actions, I think the action we have seen in the second half speaks for itself, and we hope that actions you will see in the coming half will also speak for themselves. So We are back on track financially and are reiterating what we said to you middle of the year. 20.20 1st half was I've never seen such one off effects materialize in the first 13 years of neon tech's history, and I certainly haven't seen them materialize in the second half, and I absolutely do not expect them to materialize In 2021, having said so, of course, I can't predict future. And of course, If they were to materialize, we would face those challenges with a very strong balance sheet and a business model, which will be able to withstand such shocks as we have clearly proven in the first half. On the back of our improved Performance in particularly on the back of a record quarter in Q4, we have been able to show again normalized Profitability, together with the clear communication about our total capital Targets we believe we are able to achieve by the end of this year of area CHF800 1,000,000. We will maintain for now a conservative dividend policies, which we are doing by Increasing nevertheless our dividend payout ratio by 50% to CHF0.75 a share. And that, as Marco laid out, conservative dividend policy will eventually transition into Before closing, I would like to briefly also address today's announcements when it comes to Jochen Kuhn and him stepping down from his role as member of the Onpexy Check Executive Committee and Head of IWPS, our second business line. Jochen joined Leontec in 2017 to lead and further develop Leontec's insurance We are all in particular, I'm very grateful to Norgen for his contributions in building our ClearPlex Business in this area over the last 4 years, I think, together with the team, he has laid a strong foundation. And I look forward Not just managing myself the unit going forward, but together with the team Lead that unit into some concrete execution steps On which I hope we will be able to communicate in the course of the 4th year in the future. With that, the floor is open for questions. Back to you, Dominik. Thank you, Lucas. Also thank you, Marco, for the presentation. As I said, we are happy to start the Q and A session now. The first question is from the line of Regli Daniel with Octavian. Please go ahead. Hello. Good morning and thanks for the presentation and So congratulations from my side to, on one hand, the clarity you provided on the capital targets And also for your H2 results. Nonetheless, I have a couple of questions. I have to be specific for, I will Ask them 1 by 1, if you could look A3. And then I would like to start with A question on this management action. You did obviously limit turnover on the low margin and high volume business. This actually kind of as a surprise to me. And my question there is a bit what Has triggered this? Was this a capital consideration? Or was this a consideration with regards to trading Hedging results, firstly and secondly, is this still in place that you're limiting this kind of Turnover, so what should we expect for H1 'twenty one, do we? Shall we answer And then you ask the next questions or do you want to ask all four questions and we answered it yet. I thought it's better if you answer directly and then I Continue with the next questions. No problem. As long as you then don't come up with additional questions, I'll try Good morning, Daniel, and thank you for your kind words. I appreciate it. Okay. You also understand we are facing different stakeholders. And the key and core stakeholder, It would be a bit strange if I went out Together with Marco, we developed the year and was just to then say we are going to limit turnover on raw margin, turnover volumes because it's obviously affecting some of our clients we are in contact with. And that sort of management discretion, we will keep and want to keep going forward. So I can also now give you Any reasonable predictions of what we do because that's our baby job of assessing how A crazy if we want to be with regard to certain flow. High turnover, low margin flow is not the best flow at all to have. It also brings some diversification benefits to our auto flow. But of course, it is a bit a function of the overall market Reality and also a bit of function of our ability to then unload that flows To other market participants, and what we have seen following the COVID related events was a General tryouts in almost all sort of markets, and it took them time for one market after the other to become more liquid again. Capital was never a consideration at all on our side. I think the number of things for our sales capital is not limiting us. What was here more consideration when we made those decisions was the general outlook. And it wasn't so clear to At least myself that the normalization we have seen happening in the last few months would happen As it did, clearly, it was helped by vaccine and the good news around that. But again, we are not scientists, And we are not trying to predict markets. We are trying to manage the OpEx. So in the context of potentially additional COVID related crisis In the context of potentially additional negative hedging Related effects, particularly when it comes to liquidity of available markets, willingness of counterparties To take on such flow, it was a prudent thing to be a little bit less, How shall I put it? Forthcoming when it came to this flow. As time goes by, there's no such a discussion by counterparty. You can ensure that we expect that we will again be more flexible when it comes to debt flow. The effect will be a decrease in margin, There'll be an increase in turnover. But unfortunately, we are not in a position to now just guide you for the first I think as a general trend, you should expect that our margins will come down. That's something we already told you in the first half. And as a general trend, you can certainly also expect that the turnover will normalize in terms of the headline figure. Okay. So, say, what is the normalized turnover numbers you have in mind? What should we look at if you talk about normalized H1 'nineteen or H2 'nineteen ramp? Well, I would say normalize is a bit the trajectory we saw, and we see if you take out the full related events. Okay. The second question, you already started on discussing margins. Obviously, these two Things are offsetting each other a bit, but what would kind of be the The adjusted margin would you have in a normalized environment in H2? And what is kind of your expected margin for 2021, I understand that you cannot give a clear guidance, but just give us kind of an indication where Margins could lend all respectively. What was your exit margin of 2020, if you want? So I think, Daniel has highlighted also, I think as part of the presentation, we would have expected a margin for 2020, which would be below the 118 basis points that we reported now, if you would have not taken that decision for especially after the COVID impact, So definitely something around roughly 100 basis points than 100 basis points. And for the future, I think as highlighted by Lukas, we expect margins to still Perhaps based on different aspects, which we call it kind of influencing in particularly also And also the market, say, the market development, it's very difficult to predict margins going forward. So I would say, Yes, they will probably still go to a drop, but it's very difficult to give you a clear guidance for the future. Otherwise, we will have certainty down the road. Okay. And maybe the third question is regarding the dividend policy. And again, my compliments to provide Clarity today, if you you were talking about the payout ratio of more than 50% after you have achieved your capital target, which does not seem as aggressive as it sounded 1 year ago. Can you maybe give me some further detail what kind of payout ratio you have in mind, let's say, for a normal here after you as the Chief Capital Partner. Look, it's a good question, and it's probably the only question where I can Rightfully say so, it's a decision the Board takes, and it's not the decision the CEO should try to take and place ahead of time. I think what is clear, Daniel, is that the statement above 50% means above 50%. We also very much refer here to a dividend policy, and we do not refer per se So shareholder return policy and as we have seen with some other companies, you can obviously do other things and just The dividend such as, for example, share buybacks to be specific. And then, of course, I think also as Leon Tate and I said that I think in an interview A year ago, when we started our conservative dividend policy, we want to have some continuity in the dividend payment. So It will not be, for example, an area wise, I believe, to just link it to a net profit line And then we give dividend line itself to some extent a bit volatile. But the inherent message here is that, a, the Ontac is very well capitalized b, we will Very soon, assuming our risk profile does not change, which obviously, we are assuming, we are in a position where we don't need to further Increase our total capital base and see the combination of all of that will allow us to hopefully Turn to a quite attractive return on shareholder approach. But again, It is kind of inappropriate now to be too specific on such a number, which anyway the Board will decide when time comes taking into account all sort So some considerations, you can rightfully assume the Board to consider that before making a proposal to shareholders. Okay. Thanks a lot. And then my last question is on the cost line. Obviously, we have seen Cost inflation of about 5% annually over the last year and now we see another 5% cost inflation For 2021, this is kind of what we should factor into our models going forward? Or We at one point expect this cost inflation to slow down. Thanks, Daniel. I'll take that question. And I think over the last few years, the investments that we have done have been quite I think they will also pay out in terms of top line and bottom line development. We have also indicated for 2021, yes, You would have to assume that costs will still increase. We have at the same time also recognized that this trend, we need to do something about it. And that's why we launched the new shoring initiative in Portugal, Lisbon specifically, to also address this one concern. And I think we're progressing pretty well. And also today as part of the presentation, we highlight that we would expect They caused synergy to come in starting then 20 22 to also reflect this with respect to our view on the personal expense side. So I think my answer in essence is for 2021, yes. Then hopefully starting 2020 onwards, We will obviously see the FX of the list and new shoring initiatives to kick in on our cost line. Okay. Thanks a lot. The next question This is from the line of Bruno Andrew with Credit Suisse. Please go ahead. Lukas, two questions on Ship. You said Chip makes the business more scalable. Could you split the 9% in kind of real Chip And in back to back hedging and in other contributions? And then second one on chip, You said that you see the highest growth to come from ship going forward. Is it kind of incorrect to think Doug wants you to see a steeper start at the beginning of the launch of such a platform and not a rather linear And then low growth rate. Thank you, Andreas. Of course, we know the breakdown to your first question, but there is a reason we don't show The breakdown, and that has nothing to do with transparency to you. It has to do with our us being a no stick to what Ultimate flow becomes balance sheet light. So the KPI we have given So the entire team which has consolidated all the efforts is the balance sheet light turnover. The biggest share of that turnover is shipped, But I hope you understand that we don't want to go into the specific SaaS disclosure because it's really relevant as far as we Our concerns, what counts is that the client does a transaction which is not impacting the balance sheet of Beyond Finance. We obviously also having SSI comment now 20 Partners on the 3rd party issuance want to be able to also have cease and flow with these And they would, by nature, not have their products going through ships. So a third party issuer is offering his balance sheet together with this derivative element. And therefore, it is quite critical for us that we look at All the SaaS sections of the balance sheet light turnover have been successful. So I hope I don't just see our team deliver Jeep's turnover increased but also the turnover increase on products by third party issues, etcetera. On the growth question, it is probably, at the beginning, slow and linear and hopefully, over Time accelerating. So it's not, as you put it, the other way around. So I would expect it more to be a hockey stick Experience then the other way around, but in all fairness, we are only at the beginning. And maybe at the end, I tell you, look, it has been linear. Hopefully, it will not Why is that? Simply because, obviously, ship on day 1 is not what ship will be 2 years later. We are continuously Spending the underlying universe of products which can be shipped, we are also adding, as we have done in the last few months, additional hedging partners. As we told you that we'll eventually be limited because we want all of the existing hedging partners to have a good experience in terms of business flow. But it's as the platform expands, as the flexibility expands, as we are also better able to understand Restrictions clients might have and as we are addressing those, I would expect volume to increase. The next question is from the line of JMS Michael with JMS Investment. Please go ahead. Hi. Good morning, gentlemen. I have a question regarding the capital allocation and the capital management on your Slides 1415. The base for your capital management It's obviously the target of €800,000,000 that you want to reach. That is a combination of the shareholders' equity And the deferred fees. So you start from CHF 723,000,000 if I understand that correctly, which gives you a GAAP of CHF 77,000,000 to reach the target of CHF 800,000,000 Now if we add back the dividend, Roughly CHF 10,000,000, we were at CHF 87,000,000, a peg of CHF 87,000,000 to bridge in 2021. And now in 2020, you had 2 major negative items, this allocation to OCI and the negative deferred fee income, which kind of reduced the impact from the net profit contribution. Now in 'twenty one, will these Two items be positive or will they be neutral at least in order to get to the €800,000,000 €87,000,000 as a guess to the €800,000,000 is quite a number. If Thank you very much for the question. Good morning. It's a very good question, and I'll let our CFO answer it. Nevertheless, I'd like to point out to you the footnote 2 of Page 15, which shows that We define area as a range of plusminus3%. So your €800,000,000 is in and off the range. And of If you deduct the €24,000,000 number calculation you have just done on the phone, you have to be adjusted by that number. Now with regard to the The specifics of your question, Marco? I think actually it's a very good question. And the negative impact on the 3rd fee income that we I've seen in 2020 was on the back of estimates that we changed from an accounting perspective. So as of today, I would not expect some changes to happen in 2021. We do that on a regular basis. We do this assessment and see if we have the right assumptions underlying or authorized judgments underlying our Estimates, but it's something I would not expect to change in 2021. So that one you can expect the deferred fee income might change depending on Production of our fee income, it might be slightly higher and slightly lower, but that would not be a significant change as we have it in 2020. On the OCI, you have seen it, you see that also from our tables and changes of our net equity. There has been a quite significant In 2020 from the movement of the U. S. Dollar against the Swiss franc, as you know, we keep a quite significant position Of our equity also in U. S. Dollar, this has negatively impacted our OCI and that's obviously something which is very difficult to predict depending on the movement of U. S. Dollar. You might still have the movement there as well. Okay. Yes. Thank you. Next question is from the line of Nenith Mata with UBS. Please go ahead. Yes. Good morning. I have three questions, please. Firstly, on your comments regarding a good start into 2021. Could you clarify a little bit what exactly do you mean by that? Is this relative to a record Q4 or Relative to a more of a normalized rate in terms of fee income. Secondly, The €800,000,000 targeted capital base, could you perhaps discuss What would make actually this number change? What are the synergies here? And in which scenarios would you require, let's say, substantially larger capital base than That's €800,000,000 And thirdly, if you could just talk a little bit more about the opportunities The Ovego platform might have a future that will be helpful. Thank you. Thank you very much, Matti. Good morning to you. Just I missed, unfortunately, the first part of your first question. Were you asking about the starting to 2021? Yes. Actually, I would ask about a bit more color on the start in 2021. Is this relative to a Good start. Is that relative to Q4 'twenty? Or is that relative to Q1 Last year were a more normalized quarter. Just if you could help us understand. A good question. And I was afraid last night when I drove phone that someone would ask me that question. Look, I think the simple answer is it's a good start, Full stop. Of course, if any other business, we have certain cyclicality. So it would be wrong So benchmark generally against the December, for example. So if I just very broadly answer, I've seen this business now perform for 14 years, and I've seen 14 starts and to have 14 years. And Compared to these 4% starts, it's a good start. But that's totally all I can say. Is that okay? Yes, that's okay. Now on the target, the capital base, I can answer that very simply and it's kind of self explanatory. We don't expect that the 800,000,000 number is changing. But of course, we can't because of this guidance now take away any strategic So I guess on the positive side, If our balance sheet light turnover goes to an incredibly high number and we would probably say, Now you will let us, okay, what's happening on the negative side, and it's Difficult to predict that because I don't see us strategically undertaking anything which could Change that, but to take an example, and that's really not the message that we are considering anything in that direction. But of course, If you all of us are starting to do a big acquisition and have a lot of goodwill on the books, you would also have You look at your capital base differently, but we do not carry goods along the books. So today, the numbers we report are very much Cash like equivalents on our balance sheet. But of course, strategically in 3 years, the Board Once you decide such a step, then you would also want to revise the capital outlook. And that's really what is footnote. Footnote tries to cover, I. E, this is a clear guidance, but of course, strategically speaking, the on-site keeps flexibility to consider Have I answered your question? Absolutely. Yes, that was helpful. Very good. And then on Omega, Omega, I think, It's an Eric from leasing Technology Development. The IWPS team and Jochen has Successfully embarked on the platform is standing. I think the potential is very large, but the potential is Absolutely reliant on us on boarding B2B4C partners as we are not Going after the end clients, our sales. So the potential is such that we could in a highly fully scalable way offer So many more policies than we have today on the platform, but it's reliant, as I said, on us onboarding new partners. And if To allow, I'll be more specific, and I hope I will be able to be more specific if and when we would announce such make such announcements. Should we fail to make such announcements, then we have a great technology, but scalability needs to be deployed for it to have any meaning. Thank you. The next question is from the line of Huber Retho with Research Partners. Please go ahead. Yes, good morning. Thanks for taking my question and also congratulations for my side on your Rob, off the results as well as on the strategic progress you have made over the past year. Now I'll take these 2 questions. One of the things, Arvind, relates to your margin again. I mean you have demonstrated that you can match Your margins now with 3rd party products increasing as a share of your turnover, how should we think of Investment Solutions margins, our margin going forward. That's the first one. And then the second Question relates to capital requirement. I wonder how likely do you see it that the new Maybe less Anglo Saxon Cinema had the regulatory environment reverse back to the disadvantage of the Neotech's data model With higher and stricter capital requirements. Okay. Thanks for the question. I think just to make sure on the first question, because I think we already talked about margin and margin outlook and how we could see the margin development in the future. Did you have a specific question on the partner margin development? Yes. I wonder what's going to be the impact of the 3rd party products that you are trading over your platform, what impact that will have Maybe longer term after 2021 on your margin. I don't think it will have a significant impact. If any, I think it would contribute same outlook as we I spoke before that the margin was slightly decreased over time and the 3rd party products would also contribute to this. But I think it won't be a In part, as we still have most of our turnover generated with basically our partnerships or corporations that we have in place. Okay. Interesting. Thank you. Okay. So I'll take on the technical question. You will Appreciate that CleonTech is in no position. There's also no insight in any plans that our many regulators around the world My guess, when it comes to regulations, and certainly, that applies with regard to the specifics of your question. What I can generally say is That the change in law, which was a change defined by the legislative nature in Switzerland And then, of course, reflected by some frequent ordinances by FINRA, but the starting point is the law. He's aligning the Swiss regulatory regime when it comes to security dealers without end clients' accounts We have security dealers through international law. So if you look at security dealers in the U. S, in Japan to take 2 Markets where we are you have a lot of such market participants. Then the Swiss environment has aligned itself To those legislations and also regulatory regimes and not the way around. So that's just the first observation I can make. And I personally would therefore believe that there is some stability in that Thank no provisions, but again, that's an opinion and not at all an educated view. The second point I'd like to make is that the capital regime requirement to us is €20,000,000 With the €800,000,000 guidance in terms of capital base, we are significantly exceeding that by any metrics you'd like to apply. We were regulated under the old regime until the end of 2019 and had a core equity Tier one ratio without any high risk capital instruments in the balance sheet of well over 20%. And of course, should there be such a change, I. E. You go to extreme, we are regulated as we were regulated before again, You would expect that we would subject to a customary transition phase. Again, we're absolutely capable Of complying with any such regime. It also has to be said that Chip Originally was designed as a project to take care of the capital, the lesson that That additional growth has on our business, and we are obviously continuing to expand on ships. So if anything, I think in the future, we would actually be better positioned to Very good. Thank you all for your questions. We have no further questions on this call. With that, I'd like everybody For their attention and participation, and we wish you all a good day.