The Board of Directors of Equita Group approves the financial results for the first nine months ended 30 September 2020. Outlook on 2020 fiscal year. Independent Director leaves his office and enters the Group’s Advisory Board

• Consolidated Net Revenues at Euro 47.7 million and Consolidated Net Profit at Euro 8.8 million in the first nine months 2020, representing growth of 25% and 56% year-on-year respectively

• Return on Tangible Equity at 27% and Total Capital Ratio at 19% as of 30 September 2020, consistently above capital requirements

• Outlook 2020: Equita confirms its intention to propose the distribution of a dividend of between Euro 0.18 and Euro 0.20 per share in 2021 (compared to Euro 0.19 distributed in June 2020), equal to a dividend yield above 8% at today’s market price

• Massimo Ferrari enters the Group’s Advisory Board, leaving his role of Independent Director

Milan, 12 November 2020

In the third quarter 2020, the Investment Banking recorded a 135% year-on-year increase in Net Revenues, from Euro 4.6 million in 2019 to Euro 10.9 million in 2020. Growth was mainly driven by the outperformance of M&A advisory activities, which comprised some relevant transactions like the mandate with Intesa Sanpaolo to acquire UBI Banca, and the consolidation of Equita K Finance since 14 July 2020.

In the first nine months of 2020, the investment banking team of Equita (that following the acquisition of Equita K Finance became the largest independent team in Italy with more than 45 professionals) ranked – on a pro-forma basis – 5th by number of deals and 2nd by value in Mergermarket’s Italian M&A rankings (15 deals and Euro 16 billion respectively, on a pro-forma basis. Source: Mergermarket). Equita also ranked 1st among Italian advisors. [5]

The Alternative Asset Management division recorded Net Revenues of Euro 3.1 million in the first nine months of 2020, stable year-on-year. The net revenues linked to asset management (Portfolio Management and Private Debt) moved from Euro 3.2 million in the first nine months of 2019 to Euro 2.9 million in the first nine months of 2020 (-10%), impacted by the lower average value of assets under management resulting from  the negative performance of markets.

As of 30 September 2020, assets under management grew compared to the previous quarter (Euro 966 million as of 30 September 2020, Euro 896 million as of 30 June 2020, Euro 1.0 billion as of 31 December 2019), thanks to the first closing of Equita Private Debt Fund II, the second private debt fund of the Group that raised Euro 100 million of commitments during its first commercial phase.[6]

The private debt team continued its scouting activities to identify new investment opportunities to accelerate the investment phase of the second fund, as well as the marketing activities to close its second round of financing in the second half of 2021. The private equity team continued its preparatory activities to start the marketing of its first ELTIF (Equita Smart Capital – ELTIF), an alternative PIR mainly focused on private equity investments in Italian SMEs.

In the first nine months of 2020, the Investment Portfolio[7] contributed Euro 0.2 million (compared to Euro -0.2 million in the first nine months of 2019) after having been hit by markets’ downturn in the first quarter of 2020 (with impacts on P&L of Euro -1.1 million) and having recovered its starting value in the second quarter of 2020.

In the third quarter 2020, the Alternative Asset Management net revenues grew by 190%, from Euro 0.4 million in 2019 to Euro 1.1 million in 2020. This result was mainly driven by the comparison effect with 2019, the latter impacted by the impairment of some investments included in the Investment Portfolio.

Following its successful performance, the private debt team was awarded by AIFI and Deloitte as the best team in the category “Executed transactions - Leveraged buyout/Extraordinary transactions” in September 2020.

The Research Team supported all business areas of the Group and helped institutional investors make investment decisions on 119 Italian and 39 foreign listed companies. The team also added several debt instruments to the coverage and built a significant presence in the fixed income domain. In August 2020, the Research Team topped Institutional Investor’s rankings for the quality of its research and the focus on mid and small caps.

Consolidated Income Statement (Reclassified)

Other operating costs rose from Euro 12.5 million in the first nine months of 2019 to Euro 12.7 million in the first nine months of 2020 (+2%). Trading fees – directly linked to the Net Revenues of the Global Markets – decreased by 2% (Sales & Trading Net Revenues increased by 5%), benefitting from some ad-hoc initiatives aimed at optimising the execution of brokerage orders. Information Technologies expenses decreased by 9% in the first nine months, following further integration of the Retail Hub and the renegotiation of some contracts with suppliers.Personnel costs grew from Euro 17.4 million in the first nine months of 2019 to Euro 22.6 million in the first nine months of 2020 (+30%), following the growth in Net Revenues. The Compensation/Revenues ratio was 47% in the first nine months of 2020, compared with 46% in the same period last year.

Other costs increased from Euro 5.4 million in the first nine months of 2019 to Euro 6.1 million in the first nine months of 2020 (+12%) due to some additional costs coming from the newly established subsidiary Equita Capital SGR that started its operations on October 1, 2019 (mainly governance expenses), some one-off initiatives occurred in the second quarter 2020 (like the structuring of the medium-long term financing, the acquisition of Equita K Finance and the charity initiative “Equita Trading for the Recovery”) and the consolidation of Equita K Finance acquired on July 14, 2020. Excluding such expenses (approximately Euro 0.7 million in total), other costs declined by 2% compared to the previous year.

The Cost/Income ratio[8] improved to 74% in the first nine months of 2020, from 79% in the previous year. This was possible thanks to the growth of the Investment Banking division that benefits from higher operating leverage.

Consolidated Net Profit, adjusted for minorities, grew 56% year-on-year, from Euro 5.6 million in the first nine months of 2019 to Euro 8.8 million in the first nine months of 2020, thanks to the growth of the Investment Banking and the contribution of Equita K Finance (since 14 July 2020). The post-tax margin came in at 19% and the tax rate was 26%, lower than the previous year (31%) due to the tax benefit deriving from the consolidation of Equita K Finance starting from 14 July 2020.

Consolidated Shareholders’ Equity

Consolidated Shareholders’ Equity was Euro 81.4 million as of September 30, 2020, up compared to 2019 year-end (Euro 80.1 million), despite the distribution of dividend of Euro 8.6 million paid out in June 2020. The Consolidated Return on Tangible Equity (ROTE)[9] was 27% and the Consolidated Total Capital Ratio (TCR) was 19%, consistently above capital requirements.

Outlook 2020

For the fourth quarter of 2020, the Equita management expects positive results – despite the challenging situation that highlights low levels of activities on markets and weak performance of share prices due to the prolonged pandemic – thanks to the consolidation of Equita K Finance and the asset management fees of the new fund Equita Private Debt Fund II.

In light of the results of the first nine months of 2020, the expectations for the fourth quarter of 2020 and the retained earnings of the last three years (approximately Euro 3.9 million), the Board of Directors confirms – absent significant market changes – the proposal , to be submitted to the next Shareholders’ Meeting, to distribute a dividend of between Euro 0.18 and Euro 0.20 per share, in line with the announcement made in September 2020. This dividend proposal represents a dividend yield above 8% at today’s market price.2

Massimo Ferrari enters the Group’s Advisory Board, leaving his role of independent director

The Board of Directors of the Company took notice that, following the recent intensification of his professional roles and duties, Massimo Ferrari has decided to resign from his office as Independent Director of the Company, effective 15 November 2020. From this date, Massimo Ferrari will also leave his role as member of the Risk and Control Committee of the Company.

Mr. Ferrari will remain close to Equita by entering the Group’s Advisory Board and will continue to support the management team with his strong expertise, helping the Company to achieve the financial targets set in the strategic plan 2020-2022. As of today, Massimo Ferrari owns 69.000 Company shares.

The Board of Directors of the Company will appoint the new Independent Director during the next Board meeting, scheduled in December 2020. Marzio Perrelli, first name in one of the slates of candidates submitted by some minority shareholders in the last Shareholders’ Meeting, has been identified by the Board of Directors as the primary candidate to co-opt Mr. Ferrari. The slate of candidates where Mr. Perrelli was included resulted the third most voted slate in the last Shareholders’ Meeting on 7 May 2020[10].

The decision of the Board of Directors to consider Marzio Perrelli as candidate follows the will of the Company to maintain four Independent Directors and meet the expression of all the minority shareholders that submitted a slate of candidates during the last Shareholders’ Meeting. By appointing the Independent Director belonging to the third most voted slate of candidates (or the second most voted slate of candidates submitted by minority shareholders), Equita confirms its market-friendly approach that has always distinguished the Group.

Marzio Perrelli, currently Executive Vice President at Sky Italia, held the role of CEO at HSBC Italia from 2008 to 2018. When at HSBC, he also served as Head of the Global Banking and Global Markets divisions since 2004 – supervising areas such as Fixed Income, Derivatives, Equity and Equity Capital Markets, M&A and Advisory. Previously, from 1993 until 2004, Marzio Perrelli held managing roles at Goldman Sachs in the United Kingdom and in 2001 he was appointed CEO of the Italian branch.

Andrea Vismara then concluded: “On behalf of the entire Board of Directors, we express our sincere thanks to Massimo Ferrari for the professionality and commitment with which he has always supported the Group since the IPO. We are glad that Mr. Ferrari will remain close to Equita with a role in the Advisory Board. We are also pleased to have identified Marzio Perrelli, direct expression of our minority shareholders during the last Shareholders’ Meeting, as a candidate to be appointed Independent Director. Mr. Perrelli has long-standing experience in investment banking, and his strategic competences would be an important addition to Equita’s Board of Directors”.