Azimut Holding Spa Ord

Good afternoon. This is the Coral School conference operator. Welcome and thank you for joining the Azimuth Holding 9-month 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Gabriele Blei, CEO of Azimuth Holding. Please go ahead, sir.

Thank you very much. Good afternoon to everyone. As always, we will go through the presentation and leave as much time as possible for Q&A. So we'll start from page number four. You have a snapshot of the key results up to the nine months of 2023, 5 billion in net inflows. If we consider also the month of October, as you've seen a couple of days ago, we stand at 5.4 billion, vis-a-vis the target that we have between six to eight billion for the full year. Total revenues of 965 million. We will see this in more detail later, but we have observed the linear development, especially on the recurring fees component, despite the market volatility 431 million of EBIT ahead of the consensus that we have shared with you and last but not least 349 million of adjusted net profit which as we have discussed in the first half results excludes the tax settlement that we have shared with you in April 2023, as well as the impact of IFRS 17. So we try to clean these up from the non-recurrent items. Moving to slide number five, the usual snapshot of assets. Clearly, diversification is delivering its benefit with all areas contributing to our flows, despite the one-off effect that we have in Italy, which we will see in a minute. Slide number six, as I was just mentioning, we have 43 million out of our Italian franchise. This, however, has to discount 925 million of outflows in the first nine months, mainly from the institutional investor that we have mentioned several times in the past quarterly presentation, as well as the crop divestment from our own investment in the first semester. This is clearly offset by flows from our financial advisors in Italy as well as other institutional and direct clients that have been able to offset this negative contribution. Turning to EMEA, we have continued to see a positive development out of Turkey with flows that account for slightly more than 800 million euros in the first nine months. and Monaco that is benefiting from the recruitment of private bankers for almost 300 million, whereas Switzerland we have a bit of outflows down there. As far as APEC is concerned, the bulk of the numbers are driven by Australia with 700 million of which almost 200 million, the 194 that you see on the M&A column is linked to the Australian business. Turning to The Americas, we have a solid contribution from the U.S. of 3.4 billion, of which 1.3 billion has been the consolidation of Kennedy Capital that you see in the M&A column. And clearly Mexico is still benefiting from positive flows for slightly more than 400 million euros. whereas in Brazil as we have able to discuss over the last course we recorded up to July negative flows which have been for are in the process of being partly upset since August with with positive flows so we have a had three months of consecutive positive flows for roughly speaking 200 million euros accumulated between August and October. Moving to slide number seven, snapshot of the revenues. I will focus my attention on the nine-month results. Alessandro later on will try to give you some detail on the quarterly trends. results of recurring revenues that are up 9% year-over-year to $856 million. There is a positive development vis-à-vis 2022 of $74 million in terms of recurrent revenues. We can split this into 23 million coming from the new perimeter, mainly linked to the Australian M&A transactions. We have then a new distribution fee that we mentioned in the past several times of 35 million positive, and then the international business that is contributing for 14 million positive. When it comes to private market, we have a contribution that is positive in the nine months for almost $7 million, with revenues accounting for 11% now. This has been partly offset from the contractions in fees on third-party funds and insurance products, as well as some switch from our usage funds into our private market products. If we turn to our insurance revenue, 84 million, there is a positive development of 16 million compared to a year before, of which 3 million we can link this to recurring revenues, whereas the rest, I would say almost 11 million comes from performance fees. Lastly, the big delta that you see on the performance fees is basically linked to the fact that in 2022, in the first quarter, we had the crystallization of the performance fees under the old methodology, whereas this year we are giving back some performance fees to clients linked to the Fulcrum mechanism, which is partly offset by performance fees from our foreign business for 8 million euros. On the quarterly results, just to mention a few things, there is a linear development in the quarter of recurrent revenues, and this is... However, despite very challenging markets in the quarter, which have slightly eroded the margin, the average margin, nothing that concerns us too much. It's the usual fluctuations in a very short period of observation that is a consequence of markets and mixed effect. Moving through the cost side, on slide number eight, we have total cost in the nine months for $534 million, up 8%. If we dig into the details, as we have done for the revenues, as far as the distribution costs are concerned, they are increasing by 1% to $287 million in the nine months. We have observed a flat environment when it comes to the distribution cost, whereby given what I was mentioning to you, the recurrent revenues are basically flat in Italy. We are not observing any major swings down there. The bulk of the increase is explained by 4 million of higher severance payments to Italian financial advisory that is basically linked to the flattening of the yield curve. Turning to the SG&A, we have 227 million as the nine months 2023, so a progression of 41 million vis-à-vis the year before. This is explained 20 million so almost half of that by the new perimeter which the bulk account is accounted for the Australian evolution of the perimeter and the rest of the 41 million so 21 million is explained by organic growth from our international business and 7.5 million of, sorry, of that 21 million, 17.5 million is explained by the international business evolution. However, 7.5 million of this 17.5 million is linked to FX movements from all the different countries in which we operate. So not really industrial cost increase from a year before. In terms of DNA, this is what we have mentioned in the first half result presentation. There has been a release of provisions. I wouldn't spend too much time on mentioning anything else. If not, turning to the Q3 numbers where you see contraction in the distribution cost, there is a bit of seasonality clearly in Q3, but As we have mentioned before, flat rebate to the network in Italy. We have had lower overheads in the quarter, as well as lower severance payments, which is contrary to the nine months, simply because there has been an uptick in the quarter of the yield curve. And as we have commented in the past, this produced a contraction in the severance payments. Moving to slide number nine. This is the results at an EBIT level. We end up the nine months of 2023 with $431 million, or if you prefer a margin. of 45%, which is basically stable with a year ago, adjusted clearly by the consolidation of sanctuary. And when we observe the net profit evolution, as we were mentioning before, we have adjusted this to reflect the real profitability of the business, which stands at 349 million. That excludes the one of tax impact and the IFRS 17. This translates into a margin of 55 basis points, which is clearly, we're very pleased with that, especially taking into account the volatile market environment. Moving to slide 11, we just wanted to give you a quick update on our international business. at our two-day convention with our international colleagues, more than 250 colleagues joined from our 18 offices around the world in Mexico. It was a very interesting two-day event where we have been able to reiterate the target, so the 150 million annualized net profit target from the end of 2024. as well as the increase in profitability that has to be driven out of the key markets, Australia and the US mainly, as well as the focus on continuing with the stronger integration between production and distribution, which is effectively what we have been doing in Italy for quite some time. We also presented some key initiatives. Among others, we would like to mention some three private market products that will be distributed globally to our institutional investor base. One is effectively the application of the model of the GP staking that we have done with our prop money. Another product is the distribution of the automotive heritage fund that you have probably seen in the press as well as mentioned in our presentation in the past quarterly results. And the other fund is a fund that is called Hybrid Growth, which gives access to the US venture capital deal flow. Turning to two slides, this one and the next one, we just wanted to give you a snapshot of why we are present in Australia and the underlying dynamics of those markets because we continue to see very interesting developments even going forward. In Australia, you have this superannuation scheme, which is clearly quite large, 3.5 trillion Australian dollars, and growing year after year. even the way the scheme has been designed, it will continue to grow year after year. Our focus is on the affluent segment of the market, which is a segment that is growing and needs advice. And when we see the dynamics of this industry, we see that there is a decreasing number of advisors in the industry. So there is a concentration of wealth for each advisor on the one side. And on the other side, clients are in need for more and more professional advisors. So effectively, some of our colleagues believe that there can be a higher profitability per client that we will be able to achieve over time in Australia, given these trends that we are observing. On an industry level, we see that there are many financial advice firms or accounting practices down there that are still operating, and we are clearly one of the key market players capable of attracting practices and delivering growth and the clear benefits of managing the succession planning within these practices. So we have all the premises to keep growing our asset base that today stands at 12 billion Australian dollars, 164 financial advisors and 130 transactions completed since 2015, including consolidation among practices. So all this will lead us to being willing to remain present in these markets as a key shareholder of our subsidiary. But at the same time, we are constantly assessing and evaluating exactly as we have done in Brazil or in the U.S. with Sanctuary, the potential of strategic partnership that may lead to the opening up of the shareholding to a financial investor and potentially over time an IPO. Same thing goes for the US where we have similar dynamics, an industry that is expected to grow significantly over the next 10 years and an industry that has seen already quite a big shake-up in the composition of the main players because as you can observe, the independent financial advisor platform has increased to more than doubling the share of the market. We have clearly, even there, a focus on the affluent investor base, and those clients are willing more and more to have professional advice. Sanctuary is clearly an independent platform that is obviously capable and still is doing the attractive, sorry, the consolidation of financial advisories and we aim with them to achieve further and further integration and scale to increase profitability today. Sanctuary is a platform that was founded in 2018 and today it has almost 25 billion of US dollars in assets, 80 partner firms, and 300 plus advisors. And as we have mentioned for Australia, the same concept goes here in terms of actively managing our participation in Sanctuary. Moving to slide 14, the usual snapshot. As you can see, US and Australia account for almost two thirds of our AUM internationally. So the clear focus of what we just mentioned is justifying our actions. Slide 15, no big news here. It's not that you're seeing a development of the asset base, which is 13 times what we had at the beginning of 2020. And we are pleased with the fact that The private market evolution is not just an effect that we have in Italy and the US, given the strategy that we have deployed, but it is something also that we are starting to observe in other emerging markets in which we operate, being Brazil and Turkey some of the places where we have production capabilities in this segment. As far as the private market as of September, $7.7 billion, almost just slightly in excess of 13%. Nothing major has changed in terms of composition, either geographically or by asset class, and we keep going on with our strategy. Slide 17, the update on the GP staking, as you probably have came across in the news, Kennedy Lewis has been able to close its third fund for 4.1 billion. It's their biggest fund despite the challenging period. They had to increase their target and increase the hard cap that they have faced. Since our entry, the company has grown six times in terms of assets. They continue to be extremely profitable and competent in managing this after-class. On the other spectrum hypothesis on the private equity side, again, since our entry, the evolution of the AUM has increased six times, and we have recently uplifted our stake in in hypos to 15%. We have the options to reach up to 25%. And we have welcomed Mark and David as our, not just partners, but shareholders also in Antima Holding. Slide 18, an update on UniCredit. As we are almost one year from the announcement back in December 2022. As we have mentioned back then, there was going to be a period in 2023 of licensing and the setup of the operations. We are almost done with all of that. The license has been granted on the 20th of October 2023. There are now the last round of comments on the prospectus for the first 12 funds. We're almost done with that, and we expect to go ahead by the end of November. This clearly leads us to the ramp-up phase of supporting Unicredit in the preparation of the marketing materials in light of several planned internal initiatives that they have, and therefore perfectly on time with our original schedule, we expect to the green light in terms of asset gathering activity starting from Q1 2024. As a gentle reminder, this transaction should lead us to generate similar profitability level to the one that we generate out of Italy. Slide 19, not much difference here. We just probably are further increasing the fixed income exposure at the expense of cash, given the higher yields that we can receive on this asset class. On slide 20, there is a kind of a different and new representation of the breakdown of the portfolio by geography and asset classes. You see how the 48% in equities has been split by geography, as well as the 49% that you have seen in the previous slide between corporates and sovereigns. and I leave you to dig into all these details. Weighted average performance on the next slide, no much news. Despite the volatile market, we keep overperforming over a medium term the market, and we continue to approach an active management of the portfolios. I will turn now to Alessandro for a deep dive on the financials and then get it back later.

Thank you, Gabriele. We can move to slide 23. As Gabriele said at the beginning, we will focus on the quarter-long quarter variation. Also, following how we built the slide, so we specifically note additional comments on the nine months 2023, there are four. Back to the variation of the quarter, starting from the operating profit, as you can see, we have a variation of almost $10 million positive compared to the second quarter. This has been obtained thanks to an increase of $5 million in terms of total revenue, and on the other side, we had less operating costs for $4.4 million. Starting from the revenue, the main variations are allocated from the insurance revenue with 3 million positive thanks to an increase in terms of recurring revenues. So again, thanks to our growth in terms of asset management and as well of 2.6 million generated from additional performance during the quarter. We have positive increase in terms of other income. The recurring fees are almost flat or negative for 0.5 million. This is a combination of two effects. On one side, the positive side is the continuing increase from the international business. On the other side, we have a slightly negative effect in terms of market effect and also asset mix of our clients. Last for the revenues are the variable fees that are negative of almost 3 million. We are impacted negatively by the new mechanism for 4.7 million, but this has been netted by positive effect of the variable fees generated by our international business, in particular from Turkey and Brazil. At the level of the cost, as I was saying, 4.4 million less compared to the second quarter. This is, again, a combination of two effects. On the distribution cost, we have almost 7.5 million less compared to the second quarter. As we said at the beginning, explaining mainly by lower overheads and severance payments, so lower compared to the previous quarter. And on the administrative cost, we have 2.6 million more. This is mainly driven by an effect-to-effect link to an accounting of hyperinflation, so following the YAS 29 rules that we applied. Moving to the next slide, so moving to the below, the operating profit. Probably the main line that we should give you more details is the finance income. Also in this quarter we have a positive effect of 14 million. This can be reconciled considering 2.2 million of positive effect from our fair value option mechanism. 5.6 million are generated by our alternative capital partners, GP Staking, so the business that we have built in the U.S., and additional 7.5 million are realized and are realized again on our liquidity management that we actually manage also in Italy, but also from our international countries. The non-operating income are back to, let's say, a normal contribution to the P&L. As you may remember, the second quarter was impacted by the write-off of the discontinuation of the new front-end program for our KFA in Italy. At the level of the basis point, I mean, net profit margin in terms of basis points, we have one basis point more compared to the second quarter, and significantly we increased if we compare the nine months 2023 with the nine months 2022. Moving to the net financial position, so slide 25. We are positive, almost 360 million, almost, I mean, more than 100 million compared to June 23. This variation can be explained taking consideration. So starting from the 250 on June, we should add the net profit before tax of the quarter, sorry, so 156 million. and taking negatively the effect of the tax advance for 25 million and additional 15 million in terms of M&A activities, we are almost there in terms of reconciliation and the numbers that we have disclosed. Also, we put the global effect, I mean, following the nine months in terms of M&A dividends and taxes, just a reminder of our main use of cash during the nine months. I'm going to leave it back to Gabriele for the conclusion.

Thank you, Alessandro. Great job. And last slide very quickly on slide 27. There is just a reiteration of the targets. As you can see, nothing has been changed. As we had the chance to mention on several occasions, we are all very much focused every time on working and doing everything we can to deliver the targets that have been announced, and we stick to those targets. Thank you very much.

Excuse me, sir. Are you ready for questions?

Yes, we are.

All right. Thank you. This is the Coral School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Lam Hubert, excuse me, from Hubert Lam with Bank of America. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. I've just got a couple of clarification questions and another question. Firstly, I think you mentioned a few times already on the commission expenses for the quarter, $91 million, it was a bit lower than expected. I know you mentioned lower overheads and severance payments, but at the same time, it feels like it's still a bit lower than expected. Just wondering how much seasonality is in this number and how should we think about this number going forward? Should we have it creeping up closer to Q2's number of like 100 million? That's the first question. The second question, clarification also on the fees. So you have recurring fees that were flat quarter on quarter, but at the same time, your average AUM did go up. I think you mentioned that the fee margin is volatile, but I'm just wondering what's contributed to the quarter. How should we think about it, either this quarter or also going forward? And lastly, I guess on the flows, you had another month in October where you had institutional outflows coming from Italy. I know they are driven by low margins in money market funds, but it's continued on. I'm just wondering how much of this is left to go and anything to talk about, anything to say about it. Thank you.

Thank you, Hubert. So starting from the first one on question, on call, sorry. As you know, there is a bit of seasonality in Q3. However, as far as the evolution of the distribution cost, so the rebate to the network out of the management fee that are charged to the clients, there is a perfect relationship. And as we have had the chance to discuss, the 40% is what FAs receive. And this is exactly what we are seeing on Q3. So there has not been any change there. It's really been a consequence of lower overheads across the board that has resulted in some savings that, as you may recall, we did mention this during the first part of the year that we were taking some actions on the network to generate some savings. As far as the guidance on this line, I would say that not knowing where the market will end up between now and the end of the year, I would assume that the average of the first three quarters is a good indication of where we can end up and therefore the implicit Q4 distribution cost. As far as the recurrent fees, once again, markets have been quite hectic during July, August, September. So we have seen what in several locations we referred as short-term margin variation given to potentially lower risk appetite, a more conservative stance, less activity from clients and so on. So clearly we have seen average assets going up, but the bulk of the average assets going up, I would say, is ex-Italy, and therefore there is not such a direct impact on our management fees out of our Luxembourg funds. Guidance, I would expect, oh, I'm sorry, before I forget, so we add the clarifications. There has been a drop of, roughly speaking, five basis points in our average margin in Q3. So, something that we have observed already in the past that has been reabsorbed later on. So, nothing to be concerned about. As far as the expectation for Q3, sorry, for Q4, we might see a continuation this environment, and therefore an ongoing linear development in our management fees and recurring fees in total is what we would be expecting. We haven't seen further major shifts up or down in the first month of October. November has been roughly stable so far, so we would be expecting the same trend to continue. On the institutional flow, this is a very interesting topic because You know, after all, if this institution would have told us we're taking away X amount of money and we'll do this in one month, this would have probably made us a bit angry and we would have had to explain this. But we would have closed this discussion and didn't have to keep on repeating ourselves. They didn't do that. they decided to take out gradually every single month since the first quarter a specific amount which is constant month after month and therefore this is dragging on they're almost done because there is unless they go negative but there has not been this this is not on the table and therefore we expect them to complete their actions between year end. Funny enough, in the month of October, we also had another institutional investor of a minor magnitude, but that communicated to us that they were rebalancing their positions given that they were in positive performance with our discretionary accounts. But it is what it is. We cannot complain. Sometimes the institutional base suffers this environment, whereas in good years they can contribute significantly to our yearly target.

Great. Thank you.

My pleasure.

The next question is from Elena Perini with Intesa San Paolo. Please go ahead.

Yes, good afternoon and thank you very much for taking my questions. Can you hear me?

Perfectly.

Okay, perfect. I've got some questions about your Australian business. If I understood correctly, you mentioned the possibility of having a financial partner entering in your business and then the fact that you could also go for an IPO. I don't know exactly because my line was a bit disturbed at the moment. So if you can elaborate a bit more on this. And in Australia, I've got another question about your press release on net inflows. Two days ago, you were mentioning in other transactions, so I was wondering about the amount of assets that acquisition carried on. And then I was looking at your net financial position on slide 25. Basically, it seems that all the net profit that you generated in the period went to increase the net financial position because... There was a strong improvement since June, so just a few words on it. And finally, you were mentioning on slide 24 a right of charge of $9 million related to the discontinuation of the new front-end program for FAV in Italy. So, if you can explain a bit because I cannot remember exactly what it does refer to. Thank you very much.

Thank you, Elena. Thank you very much. So, actually, starting from the write-off charge. As we have explained in the first half results, we were in the process of investing and changing the front-end system that the Italian network employs. We had several checkpoints before starting the rollout on a selected number of advisors, and we have observed quite a significant gap between the objectives that we were aiming to achieve with this new front-end system and what the platform was actually capable of delivering to us. So instead of continuing to invest and spend time and money, which we believed not the right use of our resources, we decided to stop the project altogether and focus on other alternatives that we are considering. So this is what explains the write-off. On the net financial position, the reconciliation that you can have, besides the general comment that it is correct, this business has a very high cash conversion, so Thank God this is reconfirmed every quarter, but if we start from the 255 million of net financial position, you add up the net profit before tax of 156 million, you strip out tax advances for 25 million and 15 million of M&A, you get to essentially what is the change from June to September in terms of increase of the net financial position. I think I wouldn't add anything else, but if you have further clarification, we're happy to take them. As far as Australia is concerned, we're mentioning to you this because we believe that we have done a decent job. This job has been recognized by a number of recognition from our colleagues down there and member firms. These are the key assets of what we do. On top of that, we have been receiving every now and then request to sit around the table and discuss. There is nothing material and concrete but it was worth mentioning that the international business is something in which we see a lot of value. We have invested a lot of time and resources and at some point all these efforts will be recognized not just by us, but market value that would lead to potential evolution of either the shareholding or the strategy and the business evolution of our local businesses. Australia is large for us. It's a significant segment of our international exposure. And we think... We want to continue to remain invested there, but eventually if we can accelerate similarly to what has been done in Brazil, despite being unfortunate, but this was not driven by the JV which has paid, but by market environment that has been turning against us, we think we can continue to evolve our local business down there.

Okay, thank you. And what about the last transaction that you mentioned two days ago in the NetInflow's press release?

Oh, sorry, I just forgot this one. It was for around 400 million of euros in assets under management linked to the latest transactions. which is accounted in the assets under administration, just to be precise.

Okay, thank you very much.

My pleasure.

The next question is from Luigi Tabellis with Equita. Please go ahead.

Yes, good afternoon. Thank you for taking my question. The first one is on Italy flows. So can you provide your view on the private market inflows expectation for Q4 and early 2024, so based on your visibility on this. The second question on the international business, Australia in particular, so can you give us more color on the perimeter of Australia in terms of EBITDA and net income? The third question on the capital allocation strategy, so you have 350 million roughly of net cash, so can you elaborate on your priority in terms of dividend by back-end or debt repayment? And the last question on the tax rate for 2024, because the global minimum tax will start from 2024, so do you expect any impact for Azimuth for 2024 from these new regulations? Thank you.

Thank you. So starting from the tax, I was just asking Alessandro, but he can jump in the conversation. The discussion at the country level is that this is going to start from 2025, probably not 2024, but there are many moving parts and we are, as you are, probably observing the unfolding of a clear decision about that from a number of different countries. As far as ourselves, We stick to what we told you a year ago, which is a guidance that we had to increase from the 15% that was historically set at the time of the IPO in 2004 to the new guidance, which stands at 22% from this year onwards. so that we take into account the fact that the world has decided to introduce a minimum tax of 15%. Moving backwards on your other questions, distribution policy and the priority of the use of cash. Once again, I'm sorry to be repetitive, but we have taken a commitment. The commitment has been to A, repay the debt. This expires in December 2024, so we have $500 million to repay. B, we have taken a commitment to distribute between 50% to 70% of the recurrent net earnings, and this is what we stick to. And three, we have the optionality to perform any buyback at any point in time given the approval we have received from the AGM. These are the three important aspects to bear in mind when we consider the use of cash that we are generating. On top of all that there is our willingness to continue to invest in the business which also can come through any M&A transaction that we can finance with our internal cash generation, or if of a material size, decide other options. On the Australian business, the business is profitable, is growing significantly in terms of fees that we generate. We are still reinvesting significantly and therefore M&A transactions are to some extent impacting the short-term profitability. So if we were to stop this, the profit would increase over time. Having said that, as we have tried to explain through the slide we showed you, there is still significant opportunity to grow the business from where we stand into something that is much larger nationwide and of a very attractive level. The reality is that today we are completing transactions that are of a significant higher than the ones we were doing in the very first years because the platform is more attractive, because we are a credible player, because the management team down there has done a fantastic job. So probably all these things are attracting interest, and eventually we can discuss potential evolution over time together with you. Private market, we are in the process of laying out the product pipeline for 2024. Clearly this has to take into account the general environment which sees softer flows in the last couple of quarters. more conservative stance from clients, also due to the fact that Italians, despite having a significant share of Italian government bonds, they still like this asset class without diversifying and benefiting from asset classes that can deliver higher returns over time. So we will take all these concepts into account when we will be formulating The net profit, but better, the net inflow target for 2024, we will certainly communicate to you what is our expectations in terms of private market offering. So far this year, we have collected in Italy almost a billion of net new money into private markets, the rest coming from the U.S.

Thank you very much.

My pleasure.

The next question is from Alberto Villa with Intermonte. Please go ahead.

Good afternoon. Some question from my side as well. I was wondering, well, looking at the opportunities to grow the inflows going forward, you now sit on more than 27 billion of assets under custody. I was wondering if you are working actively trying to let's say, increase the profitability of these assets under custody. And I was wondering if you can give us an idea what is the different profitability you are getting on these assets in the different geographies. The second question is on the unit credit. I appreciate your respecting the timeline to start the operations. I was wondering if you are starting already to, let's say, interact with the bank, the distribution, etc., to prepare the network for the product, or you're expecting to do that in early 2024. And another question is on clarification on the guidance of 500 million for 2024. You also indicate this target of 150 million coming from the international business. I was trying to understand and figure out how the two numbers are interacting. It means that 350 is without the international and so the international basically is net of minorities and of any other things that we might consider when we bake this number into the net profit guidance for the group. Finally, another question on the cost inflation you're expecting for 2024 on an organic basis.

Thank you. Starting from the assets under administration, yes, correct, the number is 27 billion. However, I would like to specify that the bulk of these assets belong to the business in the U.S., Sanctuary, as well as our Australian business, Azimuth NGA. So these are in assets under administration because the bulk of these assets are not in in-house products. So the correct allocation is there. As far as Italy is concerned, the level of assets under administration has not grown dramatically, so it's pretty much constant. As you can recall, we use assets under administration, especially when we recruit financial advisors. They bring the assets and then they reconvert those assets for the portion that they can into our own funds. So I would say it's not such a big issue for us as for others, although there has been moments and there might be moments also in the future in which the level of assets under administration of our Italian network has increased and the increase has then been converted over time into managed products. But we haven't seen a dramatic movement there. As far as the Unicredit is concerned, we are at their side supporting them for whatever they need in terms of marketing material, in terms of explanation of the 12 products that will start to be distributed through their network. but they are in full control of their distribution network, they are in full control of the activities that they want to deploy and we stand next to them for whatever they might need from us. We are just the product platform. The question on the 150 million, how does it reconcile with the 500 million? As it is mentioned, I think, in the slide, the 150 million is based on the annualized net profit from our international business starting from the last month of 2024. So you shouldn't be extrapolating the $150 million from the $500 million, but we expect that the run rate from, say, December 2024 onwards would lead us to achieve $150 million of net profit from our international operations. And then you have to excuse, no, the cost side, the cost expectations for 2024, I would leave that to, let's before close 2023, and we will formulate all the guidance as usual in January when it comes to expectations for next year. But I would say that the big driver still remains the attainment of the 500 million of net profit, which would mean an increase on average of 50 million per year since 2019. Thank you. My pleasure.

The next question is from Filippo Prini with Kepler. Please go ahead.

Good afternoon. Two questions. One on Unicredit and one on your financial position. On Unicredit, you still guide or give indication of 50 bps of margin AUM. When Unicredit presented its future result, they mentioned their ambition to increase their fee payout from 70 to more than 80%. Taking these assumptions of Unicredit, is it fair that to have this margin, the The funds on asset management should have a fee for the client in the region of 2.5 to 3%. And still a follow-up on Unicredit. From next year, will you disclose on a monthly basis the inflows coming from the network of Unicredit or not? And the question on your net financial position is that on basically the return on your cash. From the $14 million of interest income in the third quarter, taking out the contribution from GP staking and taking out contribution from fair value option, we land to around $5-6 million. This will be the return you should get every quarter from your cash from investment with this level of rate. Thank you.

Okay, so on the Unicredit transaction, we stick to the 50 basis point on average as net profit margin for Adzimuth because this is consistent with what Unicredit has communicated to the market in terms of rebate that they would receive for their distribution efforts. So we probably have an advantage here because We have built the transaction a year ago with this assumption being very clear in our minds and in their minds and in their requests, and therefore there is no swings or change that we will face. Clearly, given that we will be launching 12 products, the allocation among products will or may shift up and down the average margin that we will actually be able to receive. But again, this does not depend on us. It depends on their distribution capabilities. It depends on their asset allocation. And we cannot drive this if not recommending what is, in our view, the correct asset allocation and exposure to different asset classes vis-a-vis clients. As far as the next year net inflows, let me say that this is something that we are still discussing with Unicredit. We have some few months before eventually we have to start disclosing something. But given the importance for both parties in being able to disclose numbers, We will make sure that any representation is as fair as possible and as frequent as possible. Clearly, you have to put ourselves and yourselves into their shoes. They have ongoing negotiations with several counterparties, so we do not want to push them to do something that creates problems. Net financial position, the return on our cash, yes, I think Alessandro mentioned before, in the quarter we have achieved 3 million of net interest from the cash. As the market conditions change, these may change, so potentially I wouldn't take a strong view on repeating this every single quarter or even higher than this level, but it very much depends on whatever market conditions we are able to find and negotiate with financial institutions where our cash is sitting. Thank you.

The next question is from Carlo Tomaselli with Societe Generale. Please go ahead.

Yes, good afternoon. Thanks for the presentation and taking my questions. I have two, please. The first one is on ESG AUM amount, if you could share with us the latest number, and in terms of Article 8 and Article 9, if any. The second one, again, on Unicredit, the NOVA JV Are you able at this point to share a sense of where you could learn in terms of AUM at 2024, please, under normal market conditions? Thank you.

So we are just recovering the ESG data. We have... So Article 9, we don't have any funds that are Article 9. So this is something that responds to the first question. And Article 8, the last number I remember, was in the region of 53% of our Luxembourg fund, which means basically $12.5 billion. Unicredit, I'm really sorry not to be able to provide you with a clear answer here. But as you can imagine, we're very pleased that finally we are discussing about products, commercial activities with them. But unfortunately, we don't control their distribution effort. We can only make sure that they have everything they need in order to start the commercial activities and the training and education of their network around the product and how we envisage the use of the product in an asset allocation concept. It is very, very hard for us at this time to give you a bold number on 2024 guidance. Although we have... let's call it medium non-official target that we have discussed with them, which is a quite interesting number. But again, let's start the marketing, let's start to see the first numbers, and then we will be pleased to discuss with you if all the assumptions we have been envisaging when building this agreement are materializing in line or above or below expectations.

Very nice, thanks.

Thank you very much.

Gentlemen, Mr. Blay, there are no more questions registered at this time. I turn the conference back to you for the closing remarks.

Well, thank you very much, Alessandro and I. Thank you for your attention and questions, and we're happy to take any further follow-up offline. Have a very pleasant day, afternoon, or evening. Bye-bye.