Equita strengthens client business across all divisions in Q1'22. Expressions of interest to acquire a minority stake in Equita

• Net Revenues from business with clients to €18.5 million (+8% vs Q1’21)

• Consolidated Net Revenues to €18.6 million (-8% vs Q1’21, due to the comparison with the above average results of Directional Trading in 2021)

• Net Profits post-minorities to €3.8 million, with 21% profit margin

• A group of Equita shareholders informed the Board of Directors they have received expressions of interest from a group of families, entrepreneurs and institutions to purchase a minority stake of c.a. 12% from management

Milan, 12 May 2022

Andrea Vismara, Chief Executive Officer at Equita, commented: “The first quarter is clear evidence of our ability to grow business with clients, also in challenging geopolitical and macroeconomic environment. We have been able to strengthen the role of leading independent Italian investment bank and we see an interesting pipeline of transactions for the coming months, driven by the desire of corporates and entrepreneurs to relaunch their businesses after the pandemic”.

“The results of the first three months of 2022 are in line with the strategic objectives of the Equita 2024 business plan. Our priorities remain to grow and consolidate the business with clients, as well as remunerate our shareholders. If we look to the first quarter performance and the reserves set aside in the past, expected remuneration to shareholders is aligned to what we announced to the market: an average dividend per year of at least €0.30 per share”.

“We appreciate the expressions of interest the management has received from families, entrepreneurs and institutions to acquire a minority stake in Equita. This is a demonstration of the good job the management has done over the years”.

The Board of Directors of Equita Group S.p.A. (the “Company” and, together with its subsidiaries, “Equita” or the “Group”) approved the first quarter results of the Group as of 31 March 2022.

Consolidated Net Revenues (divisional breakdown)

Net revenues linked to clients were up 8%, from €17.2 million in Q1’21 to €18.5 million in Q1’22 [1]. Consolidated Net Revenues reached €18.6 million, down from €20.3 million in Q1’21 (-8%) due to the comparison with the previous year result of the Directional Trading that recorded its strongest performance since IPO (above historical average, driven by the exceptional upward trends in financial markets in Q1’21).

The Global Markets division – which includes Sales & Trading, Client Driven Trading & Market Making and Directional Trading – recorded net revenues of €10.0 million in Q1’22 (€12.5 million in Q1’21, -20%).

Considering Net Revenues linked to business with clients only (Sales & Trading and Client Driven Trading & Market Making, and excluding Directional Trading), Global Markets grew by 4%, from €9.7 million in Q1’21 to €10.1 million in Q1’22, recording the second best Q1 since IPO thanks to the diversification strategy adopted by the management over the years.

In Q1’22 Equita maintained its strong positioning in the brokerage of financial instruments on behalf of clients, confirming relevant market shares in all key instruments: 8% on the Italian Stock Exchange – Euronext Milan, 11% on Euronext Growth Milan, 8% on bonds and 8% on equity options. In the same period, market volumes on cash equities were up 12% (Q1’22 vs Q1’21) and volumes on bonds were down 36% (Q1’22 vs Q1’21) [2].

Sales & Trading revenues, net of commissions and interest expenses, rose to €6.5 million in Q1’22 (€6.1 million in Q1’21, +6%) while Client Driven Trading & Market Making [3] net revenues came in at €3.7 million, in line with the previous year (€3.6 million in Q1’21, +1%). Directional Trading recorded
€-0.1 million net revenues in Q1’22 (€2.8 million in Q1’21) with the performance affected by the market downturn of February and March 2022 that followed the outbreak of the war in Ukraine.

The Investment Banking division grew net revenues from €6.1 million in Q1’21 to €6.7 million in Q1’22 (+9%), thanks to the positive performance of Equity Capital Markets and M&A advisory activities. Growth was achieved in a challenging geopolitical and macroeconomic environment, both at global and at Italian level, driven by the outbreak of the war in Ukraine. Equity Capital Markets transactions in Italy were down in terms of number of deals and volumes (from 14 in Q1’21 with €2.8 billion to 10 in Q1’22 with €0.9 billion, -29% and -68% respectively). Debt Capital Markets recorded a similar performance (deals declined from 21 in Q1’21 with €12.1 billion to 12 in Q1’22 with €7.9 billion, -43% and -35% respectively, in terms of corporate issues only). M&A in Italy suffered too, with number of deals declining to 239 in Q1’22 (298 in Q1’21, -20%) and volumes to €16.8 billion (€30.2 billion in Q1’21, -44%).[4]

Despite the difficult market framework, in the first three months of 2022, Equita completed several high-profile mandates acting– inter alia – as sole global coordinator and sole bookrunner in the €90 million capital increase launched by CY4GATE (the largest accelerated bookbuilding in Italy since November 2019), appointed intermediary in the tender offer for SITI B&T shares (in addition to the role of Equita K Finance as financial advisor of Barbieri & Tarozzi Holding in the tender offer), financial advisor to CEIT in the sale of the company to Circet, financial advisor to BIP in the acquisition of Monticello Consulting in the United States and financial advisor to GF Garden – assisted by Equita K Finance – in the sale of the company to EXEL Industries.

The Alternative Asset Management division recorded €1.8 million net revenues in Q1’22 (€1.6 million in Q1’21, +13%) with assets under management reaching €1.1 billion as of 31 March 2022, almost in line with 2021 year-end. Revenues linked to asset management fees (Portfolio Management, Private Debt and Private Equity) were up 28% year on year, from €1.3 million in Q1’21 to €1.7 million in Q1’22. Growth was mainly driven by the additional fees coming from the new, second private debt fund (Equita Private Debt Fund II which completed its first closing in 2020 and closed additional commitments in 2021 and 2022) and the new PIR alternative private equity fund launched in June 2021 (Equita Smart Capital – ELTIF that as of 31 March 2022 reached €60 million of commitments). The Investment Portfolio[5], equal to approximately €10 million as of 31 March 2022, contributed to the Alternative Asset Management results with €0.1 million net revenues in Q1’22 (€0.3 million in Q1’21).

The Research Team continued to support all business areas of the Group, assisting institutional investors with research reports and insights on more than 120 Italian (≈96% of the total Italian market capitalisation) and 40 foreign listed companies. The team has also added several debt instruments to the coverage (building a significant presence in the fixed income domain) expanding it to more than 15 fixed income issuers.

Consolidated Profit & Loss (Reclassified)

Personnel costs decreased from €9.7 million in Q1’21 to €8.5 million in Q1’22 (-13%) due to the performance of Net Revenues. The Compensation/Revenues ratio was 46% (47% in Q1’21), and the number of professionals reached 176 as of 31 March 2022 (176 as of 31 December 2021). Other operating costs moved from €4.4 million in Q1’21 to €4.6 million in Q1’22 (+5%). Trading fees increased by 5%, following the performance of Global Markets revenues linked to clients’ activities. Information Technology expenses were up 7% year-on-year, mainly driven by investments in upgrades of the technological platform and aimed at improving service to clients. Other costs slightly increased (+3%), from €2.0 million in Q1’21 to €2.1 million in Q1’22, mainly due to the gradual return to in-presence marketing activities with clients such as roadshows and conferences. The Cost/Income ratio[6] was 70% in Q1’22, almost in line with the 69% recorded in Q1’21.

Consolidated Net Profit pre-minorities was €4.0 million in Q1’22 (€4.4 million in Q1’21, -9%) with the post-tax margin reaching 21%, in line with the previous year. Consolidated Net Profit post-minorities was €3.8 million in Q1’22 (€4.5 million in Q1’21, -14%) with the post-tax margin at 21% (vs 22% in Q1’21). The difference between the 2022 and 2021 results was driven by the comparison effect of the Directional Trading and the improved performance of Equita K Finance in Q1’22 compared to Q1’21, with impacts on minorities.

On an adjusted basis, considering the results of the activities with clients only – thus excluding from 2022 and 2021 figures the impacts of Directional Trading and Investment Portfolio – Consolidated Net Profit post-minorities increased 15% (€3.8 million in Q1’22 vs €3.3 million in Q1’21) and represented the best Q1 since IPO.

The first quarter 2022 results are in line with the strategic objectives announced on 17 March 2022 with the Equita 2024 business plan, including the shareholders’ remuneration targets: considering a payout of 100% on the annualised Net Profit of Q1’22 and the reserves set aside over the years, the expected dividend is in line with what was announced to the market (“[…] average dividend of at least €0.30 per share […]”).

Consolidated Shareholders’ Equity

Consolidated Shareholders’ Equity was €103.5 million as of 31 March 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 5.8x the minimum requirements, pursuant to the new EU 2033/19 Regulation (IFR).

Outlook on H1’22

It is worth noting that as today the performance of the Directional Trading has returned to be profitable, partially mitigating the gap between the current year results and the previous year results. After Q1’22, the Investment Banking team was involved in several transactions and the pipeline of the coming months is interesting, with all teams involved in several deals. On the Alternative Asset Management side, the Private Debt team is expected to reach the final close of its second fund Equita Private Debt Fund II by June 2022 with total commitments between €230 and €240 million, well above the target size of €200 million previously announced.

Expressions of interest from a group of families, entrepreneurs and institutions

During the Board meeting, some shareholders of Equita – who are also managers of the Group – informed the Board of Directors that they have received expressions of interest from a group of families, entrepreneurs and institutions close to Equita to purchase a minority stake of c.a. 12% in the share capital of the Company from the management.

Managers also informed the Board of Directors that this potential transaction is in line with the objectives stated in the Equita 2024 business plan presented early this year to accelerate the growth of the business and improve the independence of Equita that has always distinguished the Group on market. The transaction would also allow the entry of new investors in the share capital while maintaining the role of the management as key shareholder of the Group.