Azimut Holding Spa Ord

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Azimut Holding Full Year 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 Plei, CEO of Azimut Holdings. Please go ahead, sir.

Thank you very much and good afternoon to everyone. As always, we'll go through the slides as quickly as we can and leave as much as possible for Q&A. If we start and jump to slide number four, we have summarized what has been achieved by the company in the last four years in terms of delivery of every target. This is also based on a history which is slightly longer, which means that in the last 20 years, the company since being listed has always delivered on its targets. In these last four years, we have set the specific annual targets of inflows and net profits And we are happy to say we have always delivered them accordingly. Turning to slide number five, we have a deep dive into the key metrics of the five past years. And you can see how assets have increased on average by 12%, thanks also to 43 billion of accumulated net inflows in the same period. We're very happy on the development of our private market initiative. Since the beginning of this venture, assets have grown 14 times to 8.1 billion euros and increasing in the coming months. As far as clients are concerned, the weighted net average performance, i.e. net of cost, is 12%, if not more. during a period which we experienced still some years of negative interest rates and then a normalization effect that came out from central bank with increasing rates and draining of the liquidity. As far as net profit is concerned, 2.2 billion of accumulated net profit in the five years and a dividend of of 825 million. The latest one is a proposal of 1.4 euro per share as far as 2023 is concerned. Moving on, not much to say on slide number six. Average assets have increased 7% year-on-year. This is a number that will help us in understanding the development also of the revenues going forward. Turning to slide number seven, net flows, as we have commented in the last couple of quarters during 2023, as far as Italy is concerned, we have had the issue with one institutional client that has drained significant flows out of money market products. and a network that has been able to overcome and offset completely this outflow. If we look into the foreign expansion as far as EMEA is concerned, we would like to point out a good development of the flows out of Turkey for 1.1 billion and Monaco for 290 million, thanks to the hiring of some private bankers. Looking to Asia Pacific, Australia has been the dominant player down there with 1.9 billion of net flows in the year, of which 1.2 billion coming from M&A, which you can see in the column to the right. Moving to the Americas, US $3.7 billion of flows, of which $1.3 billion are related to the acquisition of Kennedy Capital Management at mid-February 2023. And then a development which has been quite positive for Mexico with more than $450 million of net flows, which is partly offset from the outflows that we have seen during 2023 as far as Brazil is concerned, which has been inverted from August to December 2023, following the turning point we observed during the summer. 6.9 billion, the total AUM, which we concluded in 2023. Moving to slide number eight, assets have reached $90.8 billion at the end of 2023. In terms of geographical speed, I have to say there is not much any difference between the full year and the nine months, so I won't spend any time. As far as February is concerned, 2024, as we announced this morning together with the press release of the full year results, we have collected in the two months of 2024, 860 million, and assets have reached 93.7 billion. Moving to slide number nine, this is something that we have also discussed several times in the past since the changes in the fee pricing to our Luxembourg-based funds. we were pointing out how we were moving from a situation in which volatility and performance-related revenues would have diminished over time, and effectively this is the second year in a row where you can see that the bulk of the revenues is coming from recurring revenues, whereas performance fees component is a vast minority. And this is something we think will be with us and will stay with us also in the coming years. Moving to the deep dive of the results in the full year 2023, we start with the revenues. We have closed the year with 1.3 billion revenues, of which 1.138 of recurring revenues, a development of 8% year over year, As far as the variable fees, 18 million compared to 46, and insurance fees of 111 in full year 2023. If we try to explain the development year over year, recurring fees, there is an increase of 84 million. Net of sanctuary, of course, of which this is equally split between Italy and the foreign business. As far as Italy is concerned, 32 million comes from the new distribution, so the new fee structure, whereas private markets and organic growth amount to more than 11 million. If I look at the foreign operations of the $40 million linked to the increase year-over-year of the recurring fees, $24 million is explained by the new perimeter out of Australia, where we have completed several acquisitions during 2023, and the rest being $19 million of organic growth as far as recurring revenues is concerned, with notable countries of not to mention Turkey, 7 million, and Brazil, the private markets related development, 4 million development in full year 2023. Moving to performance fees, as it is mentioned in the slide, the Fulcrum had a negative contribution of 16 million over 2023. which has been offset by the good performance coming from our discretionary portfolio out of Italy for $14 million. And the Middle East, so Turkey, Egypt, has contributed $15 million of performance fees. If I look at the delta coming from the insurance revenue line, which is... $15 million or, if you prefer, $18 million net of the restatement of the IFRS 17. This is explained by the performance fee element for almost $15 million and then the recurring business growth, which has increased by $4 million. As far as the other revenue line, the development is mainly driven by the development and activities of our corporate and investment banking business for roughly speaking $4 million. Moving to the cost side, we closed the year with $725 million of total cost, a development increase of 7%, which is roughly speaking in line with the guidelines that we had given at the beginning of the year. If we want to deep dive as well on the distribution cost, there is an increase year-over-year of $13 million, of which $12 million is related to some severance payments to Italian FAs, and this is something we have commented several times in the past. We were benefiting in the past a smaller contribution coming from the yield curve, whereas when this stabilizes, there is the inversion, and this is what we have seen over 2023. Moving to the variable compensation in two FAs in selected countries abroad, this accounts for a $6 million increase year over year. Whereas in terms of lower rebates and other elements within the distribution cost, there is a saving of $6 million year-over-year. SG&A line, an increase of $46 million, of which, if you prefer, restated for the IFRS 17. Once again, there is a difference of $44 million year-over-year. of which $38 million is explained by our foreign business, which we can break down further into a new perimeter out of Australia, $19 million, and organic growth for $19 million. As far as Italy is concerned, there is an increased year-over-year of $5 million, of which the bulk is the new perimeter, so there is a good... flat development of the underlying business in Italy. DNA and provisions, we had the release of several aspects during the year, which produced a saving year over year. As you can see, we have broken down also on the slide the bulk of the distribution costs related to Italy and international as well as SG&A, and you can see how the vast majority, 91% of distribution costs belongs to Italy, whereas this is equally split or almost equally split when we look at SG&A. Moving to slide number 12, EBIT margin, not much to say. We have continued on the trend that we observed during the last couple of years, there is a good development in the recurring margin, which has increased steadily from 20% in 2014 up to 43% in 2023. If we go at an EBIT level and net profit on slide 13, We have maintained a very good and solid profitability level with the 45% EBIT margin and then increasing the EBIT to $587 million. For your reference, we have broken down the finance income line to give you more light on what's in there. As you can see, there is the dividend contribution, of which the vast majority, $16 million, comes from our USGP-staking business and Kennedy Capital. Then we have... The realized and unrealized gains on our investment, which accounts for $37 million, and then some net interest charges for $7 million, given the returns we earn on our cash. At an adjusted net profit level, bottom of the slide, we closed the year with $554 million. We are simply adjusting for year 2023 to neutralize the effect of the tax settlement, which we discussed last year, for $19 million, and the IFRS 17 impact, which is negligible given a more conservative approach that we have taken and we have developed over the course of the last quarters. As far as margins are concerned, we closed the year with 53 basis points of net profit margin at an adjusted basis, a five basis point improvement vis-à-vis the year before. Moving to slide 14, this is another way of looking at things, and this is something on which we base our dividend policy, as you know. We reached 389 million of recurring net profit, two times the level of 2019 and the highest in the firm's history. And based on this number, we have decided to pay out 50% dividend. in line with our policy and which we will discuss later. In the next three, four slides, we have broken down what we were showing to you in terms of the four verticals. We have preferred to split this into different slides in order to give you a better picture and more details. As you can see, there is quite a stable average AUM out of Italy while we are benefiting from growth in terms of international and private markets. Slide 16, on the revenue line, there is stability in Italy with very solid margins, whereas we are growing both internationally as well as private markets. with the latter with a very interesting margin profile, which we are very happy to achieve. Last but not least, the FinTech Award is contributing nicely in terms of revenues, and we expect this to continue in the future. Moving to the EBIT vertical, as you can see, Italy is benefiting from the lower variable cost and some other cost-containment measures and still express a 49% EBIT margin. International, we are discounting some investments and changing perimeters that distort a bit the picture. which will normalize on a run rate basis as we go forward, assuming no further addition in terms of M&A and so on. Private markets, as well, a good evolution. Consider that in the private market, we do have a bit of a distortion here due to some costs linked to our U.S. presence that are recognized above EBIT. whereas some earnings come below EBIT. But we'll see this adjustment as we move to the next slide. In terms of net profit, as you can see, private markets still runs with a 59 basis point margin. Italy stands at 79 net profit margin, also thanks to the unrealized and realized gains on our own investment. And our international business is rather stable in terms of margins, and there is a growth in the net profit, which is not as strong as one would expect on a year-on-year comparison, but there has been some effect due to the sanctuary deconsolidation which occurred last year. Moving to the business update. As you know, on slide 20, we have completed during the course of Q4 the setup of NOVA Investment Management. So the structure is fully compliant, operational, with funds approved. and launched. There are 12 usage funds that have been authorized as of 28th of December. Four funds have already been actively distributed on the Unicredit One Market platform, and you can see the names and the details of these four funds. Three more are in the IPO phase, and we expect, or better, Unicredit expect to complete this phase during the month of March. And then the other four or five funds will complete the offering that, as I mentioned, is composed of 12 usage funds. As you can imagine, initially, these products, and as we've mentioned in the past, will be managed thanks to the capabilities of Admin Global Team, and over time, NOVA will become independent in terms of investment management capabilities. Moving to slide 21, as we have had the chance to discuss in some occasions, starting from 1st January 2024, we will begin to consolidate the inflows that NOVA will generate. This is going to fall into the front line of our monthly update that you typically receive. As far as the accounting treatment instead, this is the earning streams coming from this partnership fall within the IFRS 10, and this principle is quite articulated in terms of control of an entity and the impact of the consolidation that we have to take into account. We can discuss certainly this later, but effectively what it will produce is that we will account for a service fee in the recurring revenue line, and then there is going to be another component below the operating profit line in the finance income coming from the partnerships. All in all, the element of these two components of fees or income will contribute to the bottom line for an average 50 basis points, which is what we have stated during the course of 2023. Moving to slide number 22, there is the usual picture of the performance net to customers, net of our cost, which is roughly speaking 20% over the last four years and in excess of 80 to 100 basis points vis-a-vis customers. the industry. Not much to say on slide 23. There is the usual snapshot of our breakdown of the funds, of the Luxembourg-based funds, whereas on slide 24, you can see a focus on our Italian client base. This is something we have mentioned several times in our discussion and conversation with you, but we would like, we wanted to provide you the details of the number here where we show that Clients that normally invest more than 500,000 euros with us have increased over time, reaching almost 60%. Another way of looking at things in Italy is the average total assets under management of financial advisors and wealth managers on slide 25. And you can see how this has developed over time. from 2019 to 2023 for the different categories of banker and financial advisor. Clearly, one thing that is interesting to note, which we tend to stress quite a lot also in our internal conversation with advisors and managers in the network is the fact that teams, when they group They work together. They tend to control more assets and develop more quickly their asset base. Slide 26, this is the usual snapshot. As we mentioned, $8.1 billion, with Italy being the largest market, then the U.S. with our GP staking business, and last but not least, Brazil, which is really developing its expertise in the private market segments. more than 70 products and 13.3% of the assets, which is well on track to achieve our 15% target. Slide 27, the usual snapshot, no big change. I just want to mention here that the private debt has slightly decreased in favor of real assets, thanks to some closing that we had on our infrastructure funds. ESG update, something that we take a lot of attention, especially internally and in managing our products. We have set up an additional team to basically coordinate all the different aspects of the business when it comes to ESG. This is built with very solid competencies and people that have been working with Azimut and within the group for a very long period of time. On the right-hand side of the slide, instead, you see how there has been a development in the asset base with funds that are Article 8 or 8+, that have grown twice, two times, sorry, from $7 billion to $14 billion. in the last four years, and of that we can mention that almost 30% of the recurring revenues that the group generates are coming from these funds. I will leave now the floor to Alessandro for the full-year financials.

Thank you, Gabriele. As we already provided you a deep dive of the full-year 23 numbers, I will focus on the last quarter, sorry, of the 2023. In particular, as you can see from the slide 30, total revenue increased by 25 million. The operating cost increased by 14 million with a net result of the operating profit that increased by 11 million. As you can see and follow also the note, the recurring fees decreased by 3.7 million. This is impacted by a mixed effect of the asset allocation and as well due to private market allocation. On variable fees, we have a positive contribution on the quarter of 22.5 million compared to the negative amount of the third quarter. This is thanks to the positive performance of the individual management portfolio, but as well also the positive contribution from the international business, in particular from Turkey. Again, on the other income, 3 million more compared to the last quarter, and this is explained by a positive contribution that improved particularly in the last quarter from the new lending activities from what we call the investment banking. The insurance revenue is slightly below the result of the third quarter, $1.3 million less. This is due to lower performance fees compared to the previous quarter, and also HSL is slightly below the results from the recurring fees. In terms of cost, distribution costs increased by $10 million. Here again, following the note, we have a tiger severance payment to the Italian financial advisor linked to the yield curve. And as well, we had tiger variable compensation to the financial advisor from the international business thanks to the great results that we reached during the year. On personal and SG&A, also considering we have an increase of $6 million compared to the third quarter, but as well we have less cost from the depreciation and amortization. And again, here we have a combination of the effect coming from additional and variable compensation on our portfolio manager global team. And as well, the release of few provision on a legal case that we conclude positively, therefore we recover. In general, we can see a stable operating margin of 45% and three basis points less if we focus on the difference between third quarter and fourth quarter. Moving to next slide, we have the second part of the P&L. probably may say to consider the negative contribution of the finance income of almost 6 million negative. This is including the reverse of the positive effect of the IFRS 17. That was impacting positively in the previous quarter. And this negative effect of the reversal has been offset by dividends from our partnership, $5 million, and also the positive interest rate that we earn from our liquidity. We are almost flat on the non-operating costs and the financial expenses. So in general, also looking to the last, let's say, line of the P&L, so considering the net profit adjusted because we have the reversal of the 10 million from the IFRS, let's say that the difference is not so significant if we compare to the last quarter. Moving to next slide, so looking to the net financial position, we have 392 million positive, 100 million more compared to the last year. The variation could be reconciled starting from the net profit before tax of 625 million. Then we can take out the impact of the dividends, 234 million. the M&A activities, 182 million, and also if we take out the effect of the payment of tax of 126 million, we reach 83 million of results. That is almost 100 of difference. I mean, simply consider that at the level of the finance income, we have also positive effect, as we said at the beginning, from non-valuation, I mean, no realized effect on the valuation Therefore, I mean, this effect now goes to the cash. I'm going to leave again to Gabriele.

Thank you, Alessandro. Thank you very much. Capital management and returns, slide number 33. As you have probably seen in the press release, we're proposing a dividend to the AGM fund. for the AGM approval of 1.4 per share. I just want to remind you that this is 50% of the implied payout of the recurring EPS, which is exactly within the boundaries of our dividend policy and implies a dividend yield of 5.1%. This comes in a year in which, 2024, by December, we will repay 500 million of outstanding bonds, which is the last remaining bit that we have outstanding, which was taken out back in 2019. Moving to slide 34. Of the 1.4 euro per share, we have decided to propose a 1 euro per share in cash and 40 cents in shares. The number of shares that will be dedicated to the dividend has been set on the closing price of yesterday, 6th of March. and will not be adjusted upward or downward on the ex-dividend date. As you can appreciate, we do still see significant growth prospects for the group. We still believe that the stock is undervalued, and for this reason, all of us tied to Timone and locked up in the shareholders' agreement are confident that the value of these shares will increase over time. Moving to the outlook, we are just summarizing the key targets and outlook. We confirm net inflows for 2024 in excess of $7 billion, also thanks to several partnerships that we have, and a $500 million net profit target for the end of 2024. Private markets, once again, we reiterate the 15% AUM target at the end of this year. And as far as international is concerned, we are aiming to improve further the profitability, especially from key markets, and therefore reach the annualized run rate of the 150 million target by December 2024. As far as M&A is concerned, we are, as we probably mentioned at an high-level basis during the last conference call, we are in the process of finalizing some deals with new investors in some key foreign markets. There are some very interesting discussions we are having and this will lead to the unlock of substantial value in some of our strategic investment while remaining at the same time invested in several of these ventures in order to benefit from future upside. Lastly, as we just mentioned, the repayment of the 500 million bond, which concludes our presentation. Thank you very much, and we are happy to take any questions.

This is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Lam Hubert with Bank of America. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. I've got three of them. Firstly, Gabriele, can you explain Elaborate more about what you say about the M&A, where you're saying you're finalizing deals with investors to unlock value. I'm just wondering what specifically you mean by this and what it would involve. It sounds quite interesting. That's the first question. The second question is on NOVA. Thank you for the update on that. Can you quantify how much NOVA contributed to both the January and February flows? February flows were pretty good. I'm just wondering how much of that was driven by NOVA, if any at all. And last question is on the fee margin, which fell, I think, quite a little more than expected in Q4. I was wondering if you could explain a bit what drove that and how you expect fee margins to be from that level in the first quarter and into 2024. Thank you.

Thank you Hubert. Sure. So I'll start backwards from the fee margin fall. What we have recorded in Q4 is a slight erosion of three basis points vis-a-vis third quarter. If you recall, on the third quarter of 2023, the erosion has been six basis points. So roughly speaking, the erosion during 2023 has been of nine basis points, which falls within, if you want, the boundary of the plus, minus, 10, 15 basis points we typically refer to. when it comes to potential impact on our fee margin due to asset allocation, market effects, et cetera, et cetera. So there has been a slight erosion. We don't think this is an indication of any change vis-à-vis our commitment to clients to generate performance. And therefore, we are still believing that over time this trend trend will be inverted also thanks to the fact that we are continuing our development in the private market segment which as you have seen in the slides are contributing with significant margins to our revenues and consider there is always a bit of a time lag between the closing of a private market fund or a club deal, and when they effectively start to generate the fee margin. As far as NOVA is concerned, I think I'll try to answer in this way, and this is very important for us given that The partnership with Unicredit started a year ago. It meant for us and for them a lot of work during 2023 to make it possible. And now that we are starting to truly work together on the execution of this partnership, we will never want to create problems or anticipate a disclosure during a period in which they are in a potential negotiation phase with their existing provider of asset management services. So we have decided to respect their willingness to maintain very conservative approach when it comes to providing a monthly update. And therefore, for the time being, we will stick to supporting them in the execution, which means raising assets which are coming through. And as you can expect, there is an element of education and training towards new products that the network has to digest, and then there is the rollout of the full capability of asset gathering that Unicredit has on 7 million customers that we wouldn't ever have been able to address. On the M&A, Well, yes. I mean, we are at an interesting development of a couple of negotiations, which means in a few markets, we have developed our presence. We have been able to establish a brand. The numbers are there for all of us to be satisfied and believe that in the future we can do even more but as we have argued several times we can do more and quicker if we potentially enlarge the partnership to strategic industrial or financial investors and therefore we are in the process of trying to evaluate and assess some opportunities to print a value on a couple of our investment, which means that finally also the market can appreciate the intrinsic value of some of our investment while retaining a stake in order to continue to contribute to the growth of the project that we have developed over time. as well as benefiting from future potential re-evaluation vis-a-vis the print that we will be able to have today if these deeds are going to be concluded. But I'm sure that we will be in a position to be a lot more clear in terms of rationale and numbers when effectively those transactions are going to be completed. And I'm sure in the coming quarters, we will be able to be in that position. Great. Thank you so much. Thank you very much.

The next question is from Giovanni Razzoli with Deutsche Bank. Please go ahead.

Good afternoon to everybody. Thank you for taking my three questions, which One is on the dividend distribution, the other is on the tax rate, and the third is on NOVA. Can you elaborate, please, a bit more on your dividend distribution? Because I think that the market is a little bit surprised by the reduction of the cash component of the payment in favor of the distribution of treasury shares. If I'm not mistaken, the cash payout has been cut to 35% more or less with the balance represented by the distribution of treasury shares. What is the rationale for such a move which in my view has caught the market a little bit off guard? And shall we see this as a new standard for the coming years? So if I look to the 500 million euro net profit for 2024, shall we assume that the cash component is going to remain unchanged vis-a-vis what we have just announced today? I understand that this is a little bit very early as a question, but from a strategic point of view, shall we look at this benchmark of payout, cash payout as a new reference point for the future. The second question relates, sorry, a detail on the slide number 31 about the tax rate when you say that the performance fee, the booking of the performance fee resulted into an higher tax rate as they were recorded into high tax rate countries. My mistake, but I thought that performance fees would have been booked mostly in Luxembourg and Ireland. I cannot reconcile your comment here as those countries should be with lower taxation or is my understanding wrong? So there are other geographies where those performance we were booked. And the last point on your pipeline of product distribution on one market platform with Nova, I'm surprised to see that you do not expect to launch private market funds in that platform because clearly you are, I would say in Italy for sure the market leader for those products, you pioneered the launch of this asset class. So I would have expected to see also these products into the one market platform for unique credit. I haven't seen this. Is there a rationale for this or shall we expect something for the end of this year? Thank you.

Thank you, Giovanni.

Also in this case, I'll go backwards. As far as Nova is concerned, Over time, it might be possible, but not at the beginning, meaning when we started the discussion and we envisaged the partnership, we focused and we agreed to focus with Unicredit on usage product only. liquid products. At the beginning, as you can see from the range we have launched initially, these are, I wouldn't call them plain vanilla fun, but not sophisticated or complicated products to understand and market to their customer base. We rest on our internal capabilities, which means that they can refer potentially to the track record of our investment profession and our fund range when it comes to marketing activities. Private market is an angle, as we have mentioned in the past, to further develop the partnership, as well as many other things that if we are successful in developing NOVA, we could think of implementing together with Unicredit. and its extensive reach in Italy and even outside of Italy. Tax rate, just maybe to clarify here on this point, the bulk of the performance fees have been generated in discretionary accounts in Italy, and the tax charge in Italy is higher relative to Luxembourg. On top of that, we have generated performance fees out of Turkey and Brazil, where tax rate is in the region of 30 to 40 percent. So what Alessandro was saying before is, unfortunately, the regions of the world where performance fees have been generated have pushed higher in the quarter the tax rate vis-à-vis a normal scenario. Having said that, if you look at the full year number, excluding the one-off tax charge, we are still looking at the 21% tax rate, which is well in line with the new guidelines we have given a couple of years ago of 22 to 23%. Dividend distribution, maybe just to clarify, Here, the cash component is one euro per share, will not change, and this is what people will receive, investors, sorry, will receive during the month of May. This translates into a cash component of 71%, as of, or assuming that the 6th of March, the price of the shares of the 6th of March remain unchanged. The share component of 40 cents is what we have decided to provide to our investors as additional component because we still think that shares have a significant value. And I referred to Pietro's comment in the press release if we imagine this company in a year or several years time, this share component, if held, will be valued a lot more than what it is valued today. We are long-term shareholders. We're happy with receiving shares and hold them. And I think that with 2024, We have completed the cycle of the dividend policy, and by the end of this year, we have to repay the 500 million bond, and therefore, this has been taken into account when formulating a dividend policy, bearing in mind the several projects that are involving us, both in terms of human capital as well as financial resources.

Thank you. My pleasure.

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

Yes. Good afternoon. Thank you for taking my questions. Actually, I've got three questions. The first one is on NOVA. Do you expect any extraordinary costs potentially weighing on a reported basis on your 50-bit profitability targets on the funds that you have launched for this year? The second question is on your net profit target for 2024. I assume that it is calculated on the application of IFRS 17. Even considering that in 2023 over the full year, the impact was basically not material. And then the third quarter is about your expectations for 2024 on distribution and operating costs in terms of year-on-year growth or bids on revenues or something like that. Thank you very much.

Thank you very much, and I'll continue with the trend of going backwards, so distribution and SG&A. As far as distribution costs are concerned, as you probably remember, the bulk of that line is related to the remuneration of financial advisors, which is based on 40% management fee, which is not going to be changed. So this is going to go hand in hand with the recurring revenue evolution that you will factor in in terms of 2024 numbers. We do think that our intention is to grow and generate inflows out of our FA network in Italy, so we expect this trend to be quite linear in terms of progression. We do remind you that there is historical quarterly seasonality, which means typically There is the second and fourth quarter that tend to be more heavier than the first and the third quarter in any given year. Personal NSG&A. Based on a same perimeter assumption, our projection is to grow them in the region of 7 to 10% year over year, which is consistent with what has been the evolution over the course of the past years, bearing in mind that this implies that we have to additionally increase net profit by 50 million, which means that we need to remunerate people and invest in our capabilities to reach that 500 million target. The 500 million target does not take into account any impact from IFRS 17, as you have seen with 2023 numbers. We are working on the assumption of netting off the effect, positive or negative, from the bottom line. As far as NOVA extra cost, no, we don't think that There is any extra cost. Of course, you have to think of our 50 basis point net profit contribution from NOVA resting on a certain asset mix that has to be there in order to generate the 50 basis point. This is why we're saying since several quarters that on average the expectation is 50 basis points. And then, of course, when it comes to the setup phase of NOVA, but this is true for any new initiative, you do need a scale economy in order to be able to match the cost base. But this is something that is going to be very minor given the

uh the activity that unit credit is is undergoing okay thank you very much my pleasure the next question is from alberto villa with intermontesim please go ahead good afternoon um i have a couple of questions uh on the two items i believe are the most interesting uh today One is the NOVA again and the M&A. On NOVA, if we look at slide 21, you are showing how it should split the contribution. I was wondering if you can give us a ballpark of the split between service fee and net result of partnership, so the two components that will contribute to the P&L from NOVA. Considering the agreement you signed with Unicredit and the possibility for the bank to grow up to 80% in 2028 in NOVA, if you confirm that the expected contribution after such an event will remain similar, so 50 basis points for Azimuth, although I guess with the different methodology to book this contribution and then I think it's going to come as an associate or minority but I wanted to check with you if I'm not wrong on that. And the second one on the potential M&A to unlock value seems interesting. Is there any specific region where you think there are more opportunities on that front? Thank you.

Thank you very much. So the M&A, if I don't recall wrongly, we mentioned in the nine-month presentation two markets, which were Australia and the U.S., and these are the regions in which potentially some of the transaction may occur. As far as NOVA is concerned, the split between the service fee and what will come below the operating profit line is something that I would refer as strictly confidential between us and Unicredit, and unless they authorize us to disclose something, we will keep it as that. When it comes to what happens if Unicredit exercises the 80% or up to 80% of the call option after the first five years, then we will earn on 20% of the net profit if they exercise, again, on 80%. And we will take 20% of the earnings of NOVA, of any earnings that they will generate, up until the exercise of the call and put options, the second ones, will take place. I don't think it's good for us to speculate how much net profit NOVA will generate from year six onwards. So, again, I will leave it at that.

Okay, thank you. Thanks.

Mr. Blay, there are no more questions registered at this time.

So thank you very much for your time and your questions. Myself and my colleagues remain at your disposal for any further follow-up. Bye-bye.