Equita achieves €65 million in Net Revenues, the best first nine months since the IPO. Net Profits above €13 million. Results in line with shareholders remuneration targets and dividend targeted to €0.35 per share in 2023

• Equita achieves €65 million in Net Revenues, the best first nine months since IPO. Net Profits above €13 million

• Board of Directors to target the distribution of a dividend of €0.35 per share in 2023, based on its expectations for the fiscal year 2022 and in line with shareholder remuneration targets announced in the Equita 2024 business plan

Milan, November 10th, 2022

Andrea Vismara, Chief Executive Officer at Equita, commented: “Thanks to our leading and strong position, the Group achieved a positive and resilient performance in the first nine months of 2022 We have continued to invest in the diversification of the Group’s product offering and in the strengthening of the team welcoming new senior professionals. At the same time, we have continued to preserve our capital solidity as a key feature of the Group, even in a challenging market environment.”

“Net Revenues reached €65 million and Net Profits surpassed €13 million as of 30 September 2022. Combined with our outlook for the rest of the year, these figures allow us to confirm the shareholder remuneration targets announced in the three-year business plan and to consider the distribution of a dividend of €0.35 per share, in line with what was paid out in 2022”.

The Board of Directors of Equita Group S.p.A. (the “Company” and, together with its subsidiaries, “Equita” or the “Group”) approved the first nine months results of the Group as of 30 September 2022.

Consolidated Net Revenues (divisional breakdown)

Consolidated Net Revenues reached €64.6 million in 9M’22, up 5% year-on-year (€61.6 million in 9M’21). In the same period, Net Revenues linked to clients were up 15%, from €54.0 million in 9M’21 to €61.9 million in 9M’22[1]. This figure is the best nine-month period since the IPO in terms of Net Revenues.

The strong focus on business diversification and the positioning achieved by Equita in the Italian market has allowed the Group to record growing Net Revenues in 9M’22 despite the difficult geopolitical and macroeconomic situation that has impacted capital markets worldwide.

The Global Markets division – which includes Sales & Trading, Client Driven Trading & Market Making and Directional Trading – recorded Net Revenues of €27.1 million in 9M’22 (€32.5 million in 9M’21, -17%). Within this, Net Revenues linked to business with clients only [2] ended 9M’22 with €25.4 million (€25.8 million in 9M’21, -2%), almost in line with the previous year while outperforming the wider market, which was affected by lower levels of investor activity, especially in Q2’22 and Q3’22.

Focusing on the brokerage activities on behalf of clients – where Equita ranked again among the top brokers in the 2022 Institutional Investor’s survey [3] – the trading floor confirmed its strong position in the domestic market, recording significant market shares in all relevant segments (8% on the Italian Stock Exchange – Euronext Milan, 13% on Euronext Growth Milan, 9% on bonds and 8% on equity options). In the same period, the whole market volumes on cash equities were down 9% and volumes on bonds were down 10% (9M’22 vs 9M’21) in Italy [4].

Sales & Trading revenues net of commissions and interest expenses reached €16.4 million in 9M’22 (€16.9 million in 9M’21, -3%) while Client Driven Trading & Market Making [5] net revenues came in at €9.0 million (€8.9 million in H9M’21, +1%). Directional Trading recorded €1.7 million in Net Revenues in 9M’22, in line with the historical average but significantly lower than the performance of the previous year (€6.7 million in H9M’21, -74%), driven by the comparison with an extraordinarily strong market performance in the first half of 2021. The Directional Trading performance recorded in 9M’22 includes the incomes of a €22 million fixed income portfolio built between July and September 2022 and to be held till maturity, to profit from the market opportunity offered by some interesting corporate bonds.

In Q3’22, the Global Markets division recorded a decrease in net revenues year-on-year, from €7.7 million to €7.1 million (-7%) due to the positive performance of Directional Trading in 2021 and the weak investor trading activity on markets over the summer.

The Investment Banking division grew Net Revenues from €23.8 million in 9M’21 to €31.5 million in 9M’22 (+32%), boosted by the positive performance of M&A advisory and Debt Advisory & Restructuring. This positive result in Net Revenues confirms the strong position of the Group in the domestic market and was achieved under difficult market circumstances. Equity Capital Markets transactions in Italy were down in terms of number of deals and volumes (from 41 in 9M’21 and €5.9 billion volume to 28 in 9M’22 and €2.7 billion volume, -32% and -54% respectively). Debt Capital Markets recorded a similar performance (deals declined from 50 in 9M’21 and €33 billion volume to 25 in 9M’22 and €16,4 billion volume, -50% and -50% respectively, considering corporate issues only). M&A in Italy suffered too, with number of deals declining to 781 in 9M’22 (906 in 9M’21, -14%) and volumes to €56 billion (€71 billion in 9M’21, -21%).[6]

Despite the challenging market conditions, in the third quarter of 2022 Equita completed several high-profile mandates as financial advisor, assisting – inter alia – Engineering in the acquisition of a 43% stake in Be Shaping the Future (also acting as appointed intermediary in the takeover of the company following the acquisition), Ariston Holding in the acquisition of CENTROTEC Climate Systems, ALA in the acquisition of SCP – Sintersa and in the acquisition’s funding process, SEA in the sale of SEA Energia to the A2A Group. In addition, the Equita K Finance team assisted Sirti in the sale of Sirti Energia to Mutares SE, Caprari in the transaction with Ambienta to establish Wateralia and in the integration with Calpeda, and Tollegno 1900 in the sale of its yarn branch to Indorama Ventures.

In Q3’22 the Investment Banking division recorded solid growth in Net Revenues (+24% vs Q3’21, from €5.8 million to €7.1 million), driven by the performance of the M&A Advisory teams at Equita SIM and Equita K Finance.

The Alternative Asset Management division recorded €5.9 million in Net Revenues in 9M’22 (€5.2 million in 9M’21, +13%) with assets under management reaching €1.0 billion as of 30 September 2022 (€1.1 billion as of 31 December 2021, -12%). Revenues linked to asset management fees – Portfolio Management, Private Debt and Private Equity – were up 13% year on year, from €4.4 million in 9M’21 to €5.0 million in 9M’22. Growth was mainly driven by the additional fees coming from the new, second private debt fund (Equita Private Debt Fund II or EPD II, which closed its fundraising in June 2022 with €237 million in commitments, well-above the €200 million target initially announced) and the PIR alternative private equity fund launched in June 2021 (Equita Smart Capital – ELTIF, that as of 30 September 2022 surpassed €61 million in commitments). The Investment Portfolio[7], equal to approximately €11.3 million as of 30 September 2022 contributed to the Alternative Asset Management results with €1.0 million Net Revenues in 9M’22 (€0.9 million in 9M’21). 9M’22 figures include a significant capital gain realised in August 2022 following a divestment by Equita Private Debt Fund.

In Q3’22 the Alternative Asset Management division recorded €1.9 million in Net Revenues (€2.0 million in Q3’21, -7%). Revenues linked to asset management fees reached €1.2 million (€1.8 million in Q3’21, -32%). This result was impacted by the equalisation fee paid by investors of EPD II in Q3’21 following the fundraising round, and the non-recurring fee assigned to investors in Q3’22 to extend the fundraising period of EPD II, which allowed Equita to further increase the size of the fund (€237 million final closing vs €200 million expected). Excluding such non-recurring items, in Q3’22 Net Revenues were up 36% and management fees were up 12% year on year.

The Research Team – which ranked again 1st in the 2022 Institutional Investor survey for the quality of its Mid & Small Caps research and 2nd in the overall ranking – continued to support all business areas of the Group, assisting institutional investors with research reports and insights on more than 120 Italian companies, approximately 96% of the total Italian market capitalisation, and 40 foreign listed companies. The team has also added several debt instruments to its coverage, building a significant presence in the fixed income domain and expanding to more than 15 fixed income issuers.

Consolidated Profit & Loss (Reclassified)

 Personnel costs increased from €28.9 million in 9M’21 to €30.0 million in 9M’22 (+4%) following the positive performance in Net Revenues. The Compensation/Revenue ratio was 46.5% (46.7% in 9M’21) and the number of professionals reached 184 as of 30 September 2022 (173 as of 31 December 2021 and 172 as of 30 September 2021). Other operating costs increased from €13.4 million in 9M’21 to €14.1 million in 9M’22 (+5%). Information Technology expenses were up 5% year-on-year, mainly driven by investments in upgrades on the Global Markets IT platform which improved client service. Trading fees increased by 6%. Other costs were up 4%, from €6.6 million in 9M’21 to €6.9 million in 9M’22, mainly due to the gradual return to in-presence marketing activities with clients such as roadshows and conferences. The Cost/Income ratio[8] was 68% in 9M’22, slightly lower than the 69% recorded in 9M’21.

Consolidated Profit Before Taxes was €20.5 million in 9M’22 (€19.2 million in 9M’21, +7%) and represents the best 9M result since IPO in terms of pre-tax profitability. Consolidated Net Profit post-minorities was €13.1 million in 9M’22 (€14.0 million in 9M’21, -7%) with post-tax margin at 20% (23% in 9M’21).

The year-on-year difference between Consolidated Profit Before Taxes and Consolidated Net Profit post-minorities was mainly due to the normalisation of the tax rate (29% in 9M’22 vs a lower-than-average 25% tax rate in 9M’21 which benefitted from the consolidation of Equita K Finance in 2021), and the solid performance of Equita K Finance in 2022 compared to 2021, with a significant impact on minorities.

On an adjusted basis, considering the result of the activities with clients only [9], Consolidated Net Profit post-minorities increased 8% (€12.1 million in 9M’22 vs €11.1 million in 9M’21) and represented the best 9M period since the IPO.

In the third quarter, Consolidated Net Profit post-minorities was up 8%, from €2.6 million in Q3’21 to €2.8 million in Q3’22.

Consolidated Shareholders’ Equity and Buyback Program

Consolidated Shareholders’ Equity was €98.7 million as of 30 September 2022 and the Average Return on Tangible Equity (ROTE) was 38%. The capital strength of the Group was confirmed among the highest in the market, with an IFR ratio above 4.3 times the minimum requirements, pursuant to the EU 2033/19 Regulation (IFR).

The IFR ratio as of 30 September 2022 includes the capital requirements linked to the buyback program approved by the Shareholders’ Meeting on 28 April 2022 and by the Bank of Italy on 12 July 2022. The buyback program entails a maximum amount of 1,000,000 ordinary shares and is due in October 2023. Excluding the impact of the buyback program, the IFR ratio is 4.8 times the minimum requirements.

In the third quarter of 2022 the Company launched the first tranche of the program for a maximum amount of 300,000 ordinary shares and as of today has purchased 11,688 ordinary shares, equal to 0.02% of the share capital.

Outlook 2022

For the fourth quarter of 2022, the management of the Group expects uncertainty on markets to continue due to the rising concerns about inflation, the war in Ukraine and more restrictive monetary policies that will be adopted by central banks in the coming months. The Group’s performance – that last year recorded the best fourth quarter since IPO thanks to above average Investment Banking net revenues driven by a relevant number of capital markets mandates closed in the last months of 2021(€14.8 million in Q4’21 vs €6.9 million on average in the period Q4’17-Q4’20)  and significant performance fees in the Alternative Asset Management division (€4.5 million) – is expected to achieve in Q4’22 results more in line with the historical average and to continue to perform resiliently in the market benefitting from Equita’s leading position as broker and financial advisor in capital markets transactions and M&A in Italy. In Q4’22, performance fees are unlikely due to the negative performance of financial markets to date this year.

Considering the results of the first nine months of 2022 and expectations on the last quarter of the year, 2022 full year results are expected to be in line with the strategic targets of the Group and the Shareholders’ remuneration targets set out in the three-year business plan announced last 17 March 2022.

The Board of Directors – absent significant changes in the market – will consider to submit a dividend proposal of €0.35 per share to the next Shareholders’ Meeting, in line with the dividend distribution of 2022 and to be paid out in two tranches.

Based on the earnings per share recorded in 9M’22 (ca. €0.278) and considering the Net Profits expected in Q4’22, this proposal would be achievable without distributing the resources that have been retained since the IPO. Those resources will therefore offer solidity to the future dividends, in line with the targets set out in the three-year business plan.[10]