Equita Group — Interim / Quarterly Report 2017

Dec 14, 2017

Informazione Regolamentata n. 20115-6-2017		Data/Ora Ricezione 14 Dicembre 2017 17:55:41	AIM -Italia/Mercato Alternativo del Capitale
Societa'	:	Equita Group S.p.A.
Identificativo Informazione Regolamentata	:	97060
Nome utilizzatore	:	EQUITAGROUPN04 - Riggi
Tipologia	:	REGEM
Data/Ora Ricezione	:	14 Dicembre 2017 17:55:41
Data/Ora Inizio Diffusione presunta	:	14 Dicembre 2017 17:55:42
Oggetto	:	Results 3Q17
Testo del comunicato

Vedi allegato.

Successful completion of the IPO, first step of delivery on strategic plan

Consolidated net profit at €6.9mln in 9M17, up by 27.1% thanks to diversified revenues

ROTE at 29.8% in 9M17, tangible equity of €54.3mln after the IPO

The BoD confirms the intention to propose to 2018 AGM a minimum dividend of €0.20 p/s

Milan, December 14th 2017

Successful completion of the IPO

The IPO was successfully completed in November 2017, with a book covered about 2.5 times thanks to a strong demand from over 80 Italian and international institutional investors

Consolidated net profit at €6.9mln in 9M17, supported by a diversified revenue base

Equita Group realized a consolidated net profit of €6.9mln in 9M17, up by a strong 27.1% vs. 9M16¹ . Thanks to the successful diversification of the business, the traditional activities of Sales & Trading and Proprietary Trading (representing in aggregate 61% to net revenues in 9M17) are coupled with the more recent businesses of Investment Banking and Alternative Asset Management (representing in aggregate 39% to net revenues)

Strong profitability in 9M17 with a RoTE of 29.8%, and tangible equity at €54.3mln after the IPO of November 2017

The Return on Tangible Equity (RoTE) stands at a 29.8% in 9M17. With the IPO, additional resources of €22.1mln, net of fees, have been collected. As a consequence, tangible equity increases from €32.2mln at the end of September 2017 to €54.3mln, paving the way to a further enhancement of the competitive positioning of Equita

The Board of Directors of Equita Group S.p.A approved 9M17 results. The CEO Andrea Vismara commented:

"The results of the first nine months of 2017 confirm a positive progression of earnings, supported by the effective diversification strategies implemented in the past and consistent with the future. This positive trend is continuing during the fourth quarter, with a net profit for the full year 2017 expected to show a good progress compared to 2016."

Equita is a reference partner for Italian companies and institutional investors, with over 40 years of experience. The business model is clear and focused: the activity Sales & Trading on equities and bonds for domestic and international institutional customers is combined with a high profile Investment Banking platform dedicated to advisory to companies and financial institutions. The Proprietary Trading – with market making activities and advice on valuation of financial instruments – and Alternative Asset Management – providing with traditional portfolio management with concentrated positions along with innovative private debt e private equity portfolio management, such as the recent SPAC, focusing also non listed companies – complete the range of specialized and synergic services offered by Equita. All business divisions are supported by an Equity Research team recognized for its excellence. Independent advice and deep knowledge of capital markets grant Equita credibility by domestic and international institutional investors, ensuring a unique positioning in the Italian market, with a focus on Mid & Small caps.

¹ Net profit 9M16 proforma, assuming Equita Group SpA already controlling 100% of Equita SIM SpA.

Equita Group S.p.A. Via Turati, 9 - 20121 Milano Tel. +39 02 6204.1 investor@equitagroup.it www.equitagroup.it

Steady progression of profitability supported by a diversified business model

In the first nine months 2017, Equita Group realized a net profit of €6.9mln, up by 27.1% compared to the same period of 2016² . This positive trend is the result of the successful diversification strategy of business divisions, with the traditional activities of Sales & Trading and Proprietary Trading coupled with the more recent businesses of Investment Banking and Alternative Asset Management.

Breakdown of revenues net of fees expenses and net interest by division as of 9M17:

Investment Banking

Revenues amount to €12.1mln in 9M17, increasing by 17.5% vs 9M16. The results benefitted from of a solid performance of ECM and DCM, more than offsetting M&A and Advisory decrease after a buoyant performance in 9M16. The pipeline visible to date for 2017 confirms a further improving trend.

Alternative Asset Management

Revenues amount to €2.0mln in 9M17, up by 37.3% vs. the same period of the past year. Managed assets amount to €623.6mln at the end of September 2017, of which €373.6mln related to delegated portfolio management (+31.0% vs. 9M16), €100mln related to the Private Debt fund launched at the end of 2016 and €150mln related to the initiative of Private Equity launched in August 2017. The steady increase of managed assets is mainly related to the new initiatives of Private Debt and Private Equity, which are set to increase their contribution to future revenues with recurring streams.

² Net profit 9M16 proforma, assuming Equita Group SpA already controlling 100% of Equita SIM SpA.

(€ million) 3Q16 2Q17 3Q17 Y/Y % Q/Q % Delegated ptf mgmt 285.1 345.7 373.6 +31.0% +8.1% Private Debt - 75.0 100.0 n.m. +33.4% Private Equity - - 150.0 n.m. n.m. Tot. AuM 285.1 420.7 623.6 n.m. +48.2%

Breakdown of Assets under Management as of September 2017:

Sales & Trading

Revenues amount to €17.6mln in 9M17, down by 8.5% compared to the same period of 2016, affected by the first impacts of MIFID II, although better than assumed in the Strategic plan, thanks to a diversified range of products and markets: the traditional intermediation in equities is now coupled with bonds and derivatives, while over 60% of revenues are generated by international clients interested in Italian markets. As of September 2017, Equita has organized 75 roadshows, confirming a leading position in promoting Italian stocks to domestic and international institutional investors.

Divisional highlights: Proprietary Trading

Revenues amount to €8.4mln in 9M17 supported by positive market trends, compared to €3.7mln booked in 9M16 which was negatively affected by a position which afterwards positively reversed in October 2016. The focus on trading activities to serve customers continues, with over 40% of gross revenues generated by client driven activities, with positions closed almost entirely intraday and a very limited risk.

The consolidated Return on Tangible Equity (RoTE) in the 9M17 is equal to a sound 29.8%, compared to a RoTE of 22.4% in 9M16. With the IPO, additional net resources of €22.1mln have been collected. As a consequence, tangible equity increases from €32.2mln at the end of September 2017 to €54.3mln, paving the way to a further enhancement of the competitive positioning of Equita.

Personnel costs amount to €18.8mln, increasing by 17.1% vs. 9M16, consistently with a flexible remuneration policy tightly linked to results.

Other expenses are equal to €7.6mln in 9M17, down by 5.8 % vs 9M16. Non operating costs (mainly provisions and write-downs) improve vs. 9M16, whilst administrative expenses are flat.

The Compensation Ratio is equal to 50% in the 9M17, in line with the previous year.

The Cost income ratio is equal to 72.1% in the 9M17, down by 3.2p.p. vs. 9M16, with increasing revenues more than offsetting higher costs.

Capital and risk

Total capital ratio stands at 13.7% as of September 2017, up vs. 10.4% of the same month of the previous year, which was affected by minority interests in the capital structure.

The business model of Equita is simple and capital light as highlighted by the Basel 3 leverage ratio, higher than 10%, above regulatory requirements and best in class among most investment banks.

Balance sheet items

Assets held for trading and available for sale in September 2017 amount to €66.5mln, increasing by 48% Y/Y benefitting from positive market trends.

Loans and receivables are equal to €164.6mln at the end of September, while debts amount to €145.4mln, up respectively by 8.5% Y/Y and 7.4% Y/Y mirroring higher usage of credit lines to support trading activities.

The composition of Equity has changed compared to September 2017 following the acquisition by Equita Group of the minority stake of 49.5% in Equita SIM SpA.

Guidance for full year 2017

The positive trend of earnings is continuing during the fourth quarter, with net profit for the full year 2017 expected in good progress compared to 2016. Thus, the Board of Directors of Equita Group has confirmed the intention to propose, to the Annual General Meeting to approve 2017 results, a minimum dividend of €0.20 per share, in line with the historically proven ability to remunerate shareholders and ensuring a significant yield on current share prices.

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This press release is available on the website https://www.equitagroup.it, section Investor Relations.

Contacts: Equita Group S.p.A., Investor Relations Via Turati, 9 – 20121 Milan Tel. +39 02 6204363 investor@equitagroup.it

Consolidated reclassified Profit & Loss figures as of 30 September 2017

(€ million)	9M16	9M17	9M/9M
Sales & Trading	19.3	17.6	-8.5%
Proprietary Trading	3.7	8.4	n.m.
Investmentment Banking	10.3	12.1	+17.5%
Alternative Asset Management	1.5	2.1	+44.8%
Total gross revenues	34.7	40.2	+15.9%
Fee expenses	(2.0)	(2.3)	+14.4%
Net interest	(0.6)	(1.2)	n.m.
Total net revenues	32.1	36.7	+14.4%
Personnel expenses	(16.1)	(18.8)	+17.1%
Other expenses	(8.1)	(7.6)	-5.8%
Income tax	(2.6)	(3.4)	+32.4%
Net profit for the group(1)	5.4	6.9	+27.7%
Key KPI	9M16	9M17	9M/9M
Cost / income	75.2%	72.0%	-3.2p.p.
Compensation / revenues(2)	50%	50%	+0.0p.p.
RoTE(3)	22.4%	29.9%	+7.6p.p.

(2) Personnel expenses (excluding cmpensations paid to embers of board of directors and board of statutory auditors / net revenues of Equita SIM). (1) Net profit 9M16 proforma, assuming Equita Group SpA already controlling 100% of Equita SIM SpA. Net profit for Group shareholders at €2.72mln in 9M16. Minorities equal to €2.67mln in 9M16, entirely acquired by the controlling legal entity after the set up of Equita Group.

(3) Net profit of the period (including minorities) annualized / Tangible equity (excluding net profit of the period) average compared to the beginning of the year.

Consolidated reclassified Balance Sheet figures as of 30 September 2017

(€ million)	3Q16	2Q17	3Q17	Y/Y %	Q/Q %
ASSETS
Cash and cash equivalents	0.0	0.0	0.0	n.m.	-39.8%
Assets held for trading	44.9	45.4	65.1	+45.1%	+43.3%
Assets held for sale	0.1	0.5	1.4	n.m.	n.m.
Loans and receivables	151.8	151.5	164.6	+8.4%	+8.6%
Financial holdings	(0.0)	0.0	1.3	n.m.	n.m.
Intangible assets	13.5	13.6	13.6	+1.4%	+0.0%
Property & equipm., tax and other assets	15.6	15.3	16.8	+16.4%	+16.1%
Total assets	225.8	226.4	262.8	+16.4%	+16.1%
LIABILITIES AND SHAREHOLDERS' EQUITY
Debts	135.5	141.4	144.8	+6.9%	+2.4%
Liabilities held for trading	20.8	15.3	43.2	n.m.	n.m.
Tax, post-empl., provisions and other liabilities	21.6	19.3	22.1	+2.4%	+14.6%
Equity	47.9	50.4	52.7	+10.0%	+4.6%
o.w. Share capital	19.2	10.0	10.0	-48.0%	-0.0%
o.w. Treasury shares	-	(8.2)	(8.2)	n.m.	+0.0%
o.w. Reserves	(0.1)	44.0	44.0	n.m.	-0.0%
o.w. Interim net profit	5.4	4.5	6.9	+27.1%	+51.5%
o.w. Minorities	23.4	-	-	n.m.	-
Total liabilities and Shareholders' Equity	225.8	226.4	262.9	+16.4%	+16.1%