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Edited Transcript of AZM.MI earnings conference call or presentation 1-Aug-19 10:59am GMT

Half Year 2019 Azimut Holding SpA Earnings Call

Milan Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Azimut Holding SpA earnings conference call or presentation Thursday, August 1, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alessandro Zambotti

Azimut Holding S.p.A. - CFO & Director

* Gabriele Blei

Azimut Holding S.p.A. - CEO & Director

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Conference Call Participants

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* Alberto Villa

Intermonte SIM S.p.A., Research Division - Head of Analysts Team

* Federico Braga

UBS Investment Bank, Research Division - Equity Research Analyst

* Filippo Prini

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Hubert Lam

BofA Merrill Lynch, Research Division - VP

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Azimut Holding First Half 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Gabriele Blei, CEO of Azimut Holding. Please go ahead, sir.

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [2]

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Thank you very much, and good afternoon to everyone, and welcome to this presentation. We will go very quickly through the slides, so you will have more time to ask questions.

If we move to Slide #4, we have summarized the highlights of the major trends we have seen in the first half of 2019. On the left-hand side, you can see the revenues component. Revenues are -- have been 4x increased year-on-year in terms of vis-a-vis the operating cost. 29% increase year-on-year with a strong boost in terms of recurring fees, up 14% year-on-year, mainly driven by AUM growth as well as the repricing component, which is the first full quarter impact that we have seen since the repricing was introduced back in February this year.

If we look at the variable fees, we see a very good contribution, mainly -- thanks to the excellent job that was done during the first half by our investment managers with EUR 87 million of variable fees in the first semester.

If we turn to the operating cost. On the right-hand side, distribution costs are up 10% or EUR 70 million more. This is mainly driven by the increase in assets and the recruitment activity that has been performed during the first half. We will see the details later. While we have managed to control, I would say, pretty well the SG&A and personnel costs in this first half of the year, with a total increase of the operating cost of 6%.

If we turn to Slide #5. Just a brief summary of the main trends at the bottom line. At a margin level, we are back at 82 basis points of net profit margin. This is done on managed assets -- average managed assets year-on-year. So up from 36 basis points up to 82 basis points.

In the quarter, we have achieved the famous EUR 50 million recurring contribution that we have discussed during the Investor Day presentation. And this is true even if we will be stripping out positive/negative one-off components. But we will see this later on in the presentation.

On the consolidated net profit level, we have achieved EUR 171 million of net profit or 136% increase year-on-year.

Turning to Slide #6. There has been a significant increase in assets. If you look at the last 4.5 years, we have almost increased the asset almost 2x. This has come through an increase in assets from our domestic business in Italy as well as the growing contribution of the foreign operations. Asset stands at almost EUR 56 billion. If we include the preview of the net new money that we have recorded in July, we should stand in excess of EUR 56.4 billion, and we will communicate shortly in the next couple of days the final data, including the foreign operations.

Net inflows in the first half have been predominantly organic. And again, if we take into consideration the July inflows, this stands at EUR 3.2 billion since the beginning of the year. In July, as we said, EUR 500 million, of which EUR 350 million coming from the Italian operations, of which EUR 325 million from managed assets. While we expect the foreign operations to have contributed in the region of EUR 150 million in terms of net new money in July.

International business. As I was mentioning, at EUR 16.2 billion at the end of June, stand at 29% of our total assets. While if we look at the performance of our assets and the clients' performance year-to-date, they stand at 6.9%, which is above the Italian industry average and fully recovering the negative performance that was delivered in 2018.

Looking at Slide #7, our international business update. We have provided here a quick snapshot of the 3 main regions. In the European and Middle East and African region, we stand at EUR 4.7 billion of total assets under management, with net new money of almost EUR 580 million. This includes the EUR 360 million acquisition we have concluded in Egypt, which was announced some months ago.

We are growing our presence and the activities picking up in the UAE. While we have enjoyed in the first half a solid performance in Switzerland and Monaco, with net new money flows in the first half as well as a good contribution coming from the performance of the funds.

Turkey, we have seen, again, quite a volatile environment down there. Although, despite this, we have recorded positive net new money year-to-date as well as the company continues to generate profits.

If we look at the Asia Pacific region, the total assets stand at EUR 5.5 billion, with EUR 312 million of net new money in the first half of this year. The main news are the JV we have entered into with Youmy Wealth Management in China. This is a group active in the family office business in private equity and asset management. We are launching some funds with them and they act as our main entry point in terms of distribution of these funds.

As far as the Australian business is concerned, the fallout of the Royal Commission guidelines in terms of investigating the conflict of interest in the financial industry has produced some shakeups in the industry, which we are trying to exploit in order to grow our distribution as well as our production business in Australia.

When it comes to Taiwan and Singapore, we are seeing a positive trend in terms of recruitment of high-profile bankers out of Singapore, dropping out of banks and willing to come to work for an independent and more and more consolidated brand domestically.

Looking at the Americas. The assets under management stands at EUR 6.1 billion as -- and EUR 560 million in terms of net new money year-to-date. Again, a very strong contribution from our Brazilian business in the first half. We have, just for as a side note, we had to close or soft-close some of the funds in the first half because of capacity constraints and a subdued market, which has reduced the liquidity in some of the asset classes.

We expect, however, to see a more benign environment in Brazil in terms of market performance, especially, following the approval of some of the major reforms that the current government has announced, starting from the Pension Fund -- the Pension Reform.

Out of Mexico, we are seeing some good trends in terms of financial adviser growth, in terms of recruitment as well as productivity. The company is heading towards more and more a breakeven situation.

So overall, assets stand at EUR 16.2 billion. We have more than 800 million people around the world, EUR 1.8 billion coming from net new money in the first half, of which shy of EUR 500 million is related to 2 M&A transactions, one is Egypt, and another one is down in Australia.

Turning to Slide #8, the Private Market business. We have discussed some of this aspect during the Investor Day. Here is just a remind of what can be the potential of the Private Market business. We have, in Italy, 150,000 small and medium enterprises. Italy is the #2 country after Germany, in terms of presence of SMEs. And if we were to align the investment into liquid products of Italy to those of, say, France or the U.K., we would reach the potential AUM targets that you see on the slide. So 150 -- EUR 100 billion, sorry, for the retail, whereas, EUR 150 billion in terms of institutional money come out of the permitted range that these -- the institutional investors have to invest in this kind of asset class.

Our aim is, as we have argued, to lower the threshold to invest in these products, and this comes through an ongoing dialogue we have with the regulators in terms of approval of product.

Approval products that you see on the following Slide #9, and you see how we are slowly moving into the direction of having a decent range of product in terms of private equity, venture capital or debt funds that we have already invested in or that have been recently approved, which is the case of [Demos I], which by the way, has a minimum threshold of EUR 5,000 to be invested by the retail public.

We have a decent pipeline of ongoing product that we will be launching soon. To this end, we will organize a very big event in Italy in October for the launch of this initiative as well as these funds.

Turning to Slide #11. Performance of the -- weighted average performance of -- net to clients is in the region of 6.9%, which is still above the industry and as the gap vis-a-vis the industry has been reduced simply because we have a different asset allocation when it comes to the exposure to the Italian Government bonds.

Turning to Slide 12. No major change here. We still are having an exposure to equity of 39%. It ranges very much during the quarter, simply because we manage mainly in flexible funds that can have a very active management of the exposure to any asset class.

Slide 13. The breakdown of equities and fixed income by geography, but we'll leave you to go through the numbers and ask questions, if you have any.

When it comes to our performance in terms of net inflows vis-a-vis the average Italian industry, you see how we are still above the industry, which unfortunately, has recorded year-to-date if you exclude a one-off transaction coming out of cost that range for EUR 53 billion, the industry, as I was saying, is still -- has recorded a negative net new money of EUR 6 million year-to-date. So unfortunately, we see how even in a very strong market environment, the industry is not behaving very well in terms of net new money collection. And therefore, the clients will unfortunately not benefit from the performance that the market has generated.

Turning to Slide 16. You see a focus on our Italian networks. There are some KPIs. We have added 90 financial advisers as a gross figure year-to-date. The recruitment comes mainly from other financial network and distribution systems, 56%; 33% of it comes -- of these people come from banks and 11% from other financial institutions. Consider that in these 90 people, we also have a good chunk of young colleagues that join us, and this is one of the projects that was illustrated also during the Investor Day. Linked to the Millennials, where we want to hire young colleagues to be able to follow some of the client base that we will have in the future.

I leave the floor now to Alessandro for the financials, and then we will go back to the outlook.

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Alessandro Zambotti, Azimut Holding S.p.A. - CFO & Director [3]

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Yes. Thank you, Gabriele. Good afternoon to everyone.

So let's start as usual from the net profit of Azimut, EUR 178 million. To the level of the group, it's EUR 1-7-1 million. I mean EUR 100 million more compared to the first last -- to the first half of 2018 and more than 2x compared to the 2018.

Going back, these results [target reached] thanks to a total revenue, that is today EUR 486 million, more than EUR 110 million compared to last year, and the operating cost increased by EUR 30 million. And the operating profit has now settled to EUR 191 million. So EUR 92 million more compared to the 2018 first half.

This result, it is again, it's representing a good result for the group, the second best. And to me, looking to the single line of the income statement, you can see how the recurring fees increased compared to the 2018 by EUR 44 million, thanks to the growth, but also the newer pricing that we put in place starting from mid of February 2019.

The variable fees increased by EUR 57 million and also to the level of the insurance revenue increased by EUR 60 million. I mean also here, again, thanks to our growth and the new -- the new repricing of the IDD.

Moving to the cost. Distribution costs increased by EUR 70 million. Here, it's linked -- directly linked to the growth of [traveling,] the assets under management but also affected by the new recruiting that we characterized that we have. To the level of the personnel and the administrative cost, we are almost in line. We have shown a way also to consider the effect of the IFRS 16. Here, we have asset class of EUR 4.7 million from this line of cost to the amortization cost and to the interest expenses. But anyway, as you know, we increased to outside Italy, from 30 June of 2018. So we have -- we need to consider both elements to explain the difference.

Going down, the interest income, really positive. As you remember here, we have the positive effect of the fair value of our portfolio but also the positive effect coming from the option that we have. At the level of the net nonoperating cost, we have an increase of EUR 3 million. Here, we have to consider a one-off of EUR 3.2 million that is directly linked to the new reorganization that we performed in the second quarter at the level of the -- let me say, the Italian field.

And which means nothing special to us. Maybe it makes sense also to focus on quarter-on-quarter. Here again, the valuations are not really significant to a different explanation compared to what I say before, but maybe it's easiest to understand how it's changing our P&L because here, you can see how the new repricing is going directly down on the bottom line of the group profit. And because -- as you can see, the difference in terms of variable fees is very, very low. Therefore, the effect of the increase is really related to the new approach in terms of income.

So here, we are more predictable compared to the previous year.

And also here, you can see, if I take out the effect of the variable fees, and I clearly able to compensate the positive effect coming from the fair value of our portfolio. So the normalized effect that we are recovering from last year is netted by this one-off cost that impacted the group to the first quarter -- in the first half, sorry.

Moving forward. So moving to the net financial position. We are more negative compared to the 31st of December 2018. We are more negative by EUR 33 million. Total debt increased by EUR 200 million. We have already discussed about that. It's represented by the new loan. And at the level of cash and cash equivalents, we moved from EUR 323 million to around EUR 474 million. So we increased our cash of EUR 123 million. The simple reconciliation of this difference, it's -- how you say, [easy], and we should consider the EUR 200 million coming from the loan, EUR 178 million coming from the result of the half, and then we have to take out the effect of the dividend, EUR 166 million, EUR 27 million from tariffs and duties and EUR 33 million of acquisition that we performed during the half. This should give you the result of the difference in terms of cash.

I'm going to give to Gabriele.

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [4]

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Thanks, Alessandro.

So just summing up some of the key actions that we have taken. First, performance fees. We have as -- and we have already had the chance to discuss with you, filed the new methodology of performance fees, the -- the dialogue with the [Surveillance du Secteur] in Luxembourg is ongoing, and we expect to introduce the new pricing as of January 1, 2020. We are not seeing major pushbacks. It's a very constructive dialogue that we continue to have, and we do not expect any further delay down there.

The structure of the new management team is fully ongoing. No major news down here, and we are working in a coordinated way, and we are very focused on delivering the results for this year as well as working on the next 5-year business plan.

As far as the volatility of the P&L is concerned, we have now fully implemented the new methodology of recurring fees. And you see how the P&L is -- has been transformed, and there has been more and more skewed towards a stable and recurring activity.

As far as the international business is concerned, the results are positive, both at a consolidated level as well as if we bring it down to the subsidiaries we have around the world, and they are increasing their brand as well as the results in their home markets.

Profitability is improving and growing faster than the assets. So we are confident that we will be able to deliver more results to the group P&L from international business.

Operating costs. We are putting a lot of efforts to study and analyze our cost base. We do see some potential to control this. We do want to continue the analysis for the rest of this year and then implement some actions from 2020 onwards to gain some efficiencies. Some of them will come also from the implementation of the new IT platform that is expected to be rolled out -- rolled down from the end of the summer towards the end of -- concluding in -- by the end of the year.

Outlook. Slide 22, and this is the last slide. The P&L transformation is almost complete. We are, as I was mentioning, ready for the new 5-year business plan, which we'll be presenting in the -- within the first half of 2020. There are some encouraging results on which we are going to start. We're generating 2x the recurring fee net profit. In the first half of 2018, we saw it was [EUR 32 million]. We are now working with EUR 84 million in the first half of 2019. We do not see in terms of outflows or negative activity any impact coming from the MiFID regulation -- introduction of the MiFID regulation as well as the repricing. I probably anticipate 1 of the questions, we are already -- we have already sent out some of the statements MiFID compliance, and we will conclude the distribution by the end of the summer.

The on-boarding of new clients is improving. We are running with 8,000 new clients year-to-date. And the clients' net performance is still above the industry and has recovered the losses we generated in 2018.

Going forward, as I mentioned, the new business plan is going to be something important that will be released in the next 12 months. We have started the work in terms of the private market activity that we envisage for the future. As you have seen, the aim is to try to democratize this asset class in order to make sure that this is something the retail clients will have access to. We are always keen to study and analyze potential M&A transaction, whether in Italy or abroad. We see -- we do see and we have some -- a dossier at an international level, both in countries in which we are already present as well as in countries in which we would like to enter.

We are, more than ever, fully committed towards the EUR 250 million, EUR 300 million net profit going forward, of which 80% will be coming from the recurrency of the revenues following the repricing.

Last, but not least, we expect the international business to continue to grow, mostly organically as well as through selective M&A transaction that we can perform.

That's it. And I will leave you the floor for any Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Alberto Villa from Intermonte.

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Alberto Villa, Intermonte SIM S.p.A., Research Division - Head of Analysts Team [2]

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I wanted to ask a few questions. The first one is on the inflows you announced yesterday on July, which were very strong growth in Italy. I was wondering if you can give us the breakdown between the contribution from recruitment? And if you think this trend is a real turning point for the Italian operations, as you mentioned already in the meeting in London or we can have more volatility going forward? So expecting the Italian operations to stably contributing positively in the future to net inflows.

And also on net inflows, if you have a new target in mind for the full year 2019 in light of the recent good numbers?

The second one is, if you can give us an idea of the performance fees you cashed in, in July? And if it's fair to assume that if markets stay at current levels, August could be really a very strong month for your business?

And the third one is on management fees in percentage on the average assets. If we isolate the component coming from the repricing that started in mid-February, it seems that the average amount of management fees has gone down slightly. I was wondering which were the drivers there? And if you can comment on what we can expect on, let's say, normalized level of management fees going forward?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [3]

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So in terms of inflows breakdown for the month of July coming from recruitment and existing advisers, we have seen a positive activity coming from both channels, I have to say. So if you want, you can split this between a good 50-50 coming from the existing ones and the remaining linked to the recruitment activity that has been carried out.

I didn't catch the second part of that question, but I'll go through the others, and then please ask what I'm not answering.

Target in terms of net new money for 2019. When we started the year, we said we were looking to achieve at least the same level of net new money we achieved in 2018, which is EUR 4.4 billion. The year so far has been quite good, both in terms of market performance and, of course, activity coming from net new money.

We are now at EUR 3.2 billion. We could update this figure, assuming markets are going to be -- are going to remain as we have seen them benign so far, or we could just simply reconfirm the EUR 4.4 billion.

Honestly, given that markets could be volatile, I would prefer, just to say, we are confident that we can achieve the EUR 4.4 billion. If markets are not going to go upside down, we can even overcome this target, but it's something that we cannot control. So for the time being, EUR 4.4 billion seems the most reasonable figure as far as the full year is concerned.

Performance fees. In July, we have seen a single-digit number in terms of performance fee we have collected. As you have correctly pointed out, August could be a quite significant number in terms of performance fee generation. But I would say, let's wait and see how August will end. It seems that there is a bit of a volatility kicking in, following the announcement of the central banks. And as you know, August tends to be a volatile month.

Management fees. Al, you want to quickly?

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Alessandro Zambotti, Azimut Holding S.p.A. - CFO & Director [4]

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Well, in my opinion, we -- here, we should focus maybe considering also the issuance revenue because due to the IDD repricing. So there is an effect of, let me say, the class between recurring fees and issuance value. And therefore, the significant increase is -- you can see additional revenue should be share with the recurring fees. So there is, let me say, maybe a misunderstanding in terms of [over] representation that we cannot offset as we have to consider when we say the 2 revenue.

But together, I think that you answered to -- I will answer to your question. Therefore, the 2 amounts would be considered together, maybe today more than yesterday due to this effect.

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Alberto Villa, Intermonte SIM S.p.A., Research Division - Head of Analysts Team [5]

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Which means that the average, let's say, recurrent fees on assets isolating the repricing is pretty much in line with the previous quarter?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [6]

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That's correct.

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Alessandro Zambotti, Azimut Holding S.p.A. - CFO & Director [7]

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Yes.

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Alberto Villa, Intermonte SIM S.p.A., Research Division - Head of Analysts Team [8]

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Gabriele, the part of the question was related to the fact that we have seen improvements in Italy. I was wondering what has happened to justify these improvements? Because it was a weak spot of the Italian inflows in the past. If this is mainly driven by -- you already answered it in part, but if there is a real change in the, let's say, organic contribution by the Italian network to the net inflows? And if we can expect this trend to continue?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [9]

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We have rolled out a number of projects to make sure that the network goes back to the usual trend, especially, given the positive market trends. So we -- as we have mentioned also this in London, we have reorganized the product range, we have made sure that the distribution is properly supported by our professionals in the investment team, and we have taken specific actions with the financial network to address the productivity issue that we have seen in 2018.

This has produced some results, starting, I would say, from April, May. It was not immediate, simply because the hit coming from the Q4 negative market performance has been strong and severe. I guess we are seeing exactly what we were mentioning a couple of months ago. It takes some time. It's not immediate that the network and the existing advisers, especially, resume their activity vis-a-vis their clients, and especially, their existing ones as well as going out and making new clients.

We are, however, seeing this trend slowly recovering, and we expect this to continue. Also in August, we have started the month really with some positive signs vis-a-vis the net new money collection coming out of our Italian distribution system.

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Operator [10]

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The next question is from Hubert Lam of Bank of America.

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Hubert Lam, BofA Merrill Lynch, Research Division - VP [11]

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I've got a few questions, but I think you may have answered one of them already. Just to clarify on the insurance revenues, are you saying now that because of the repricing, the insurance revenue should at least be -- at least is now a step higher than what it was in the past? And that the number should -- as AUM grows, that the number of the insurance revenue should also grow in line with that as it's post-April pricing? That's the first question.

The second question is on the other income. I noticed that's also higher than what it was at EUR 3.8 million compared to the prior quarters. Is there a one-off there? Or is that also part of the -- or is that line also benefiting from the pricing? Just a little clarity on that number.

And lastly, on tax rate. What tax rate should we assume for the recurring earnings of EUR 50 million? I noticed the tax rate was a little bit lower at 9% this quarter, and I assume that going forward, it's going to be higher just because you have less performance fees. So what's the tax rate we should think about in the 2020 for the recurring earnings?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [12]

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Hubert, so starting from the last one, the tax rate.

We do not change our long-term guidance of 15%. You know that on a quarterly basis, this can range up or down. But long-term sustainable tax rate, we have announced, I would say, now more than 10, 15 years ago, it's still the 15% that we have always stated.

At the other income level, this is mainly just linked to client activity. There is nothing specific. There are no one-offs in there. It's just driven by the activity generated by the clients.

As far as the first question on the insurance revenue, what we mean is, following the repricing in the IDD, the flows are split among different companies. And therefore, from our perspective, when we look at the numbers we have internally, we do not -- if we reconcile the flow and the different distribution among the 2 companies, we do not see the swings that you may perceive from outside in terms of margin levels. We do see stable Q-on-Q margins. And honestly, we see this trend quite stable, even now.

So unless market will turn very negative and therefore, clients may decide to take a more conservative approach towards their investment, and therefore, switch more to less-risky products, then we may see some reduction in the margins.

However, I just want to share with you that we have launched 1 product, specifically, that basically -- that works to slowly and gradually accumulate exposure to risky assets, which is exactly what client needs, eventually, these days after the strong performance for generating the next 2 to 3 to 5 years' performance, simply because you cannot just enter now the equity component directly. So you need some kind of products that builds up the positions over time.

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Operator [13]

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The next question is from Federico Braga with UBS.

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Federico Braga, UBS Investment Bank, Research Division - Equity Research Analyst [14]

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I have 3 questions, if you don't mind. The first one is on the average size of the financial advisers hired year-to-date. If you could please give us this information?

And related to these, actually, what is the contribution of the recruited advisers to flows year-to-date? So not only in July, we can assume 50-50, as you said, also year-to-date, or the breakdown is different?

The second question is on the IFRS 15 impact. The distribution costs in your Capital Markets Day, you mentioned about the EUR 15 million positive impact this year. So I was trying to understand, what was the contribution -- the positive impact of IFRS 15 in the second quarter of this year? The distribution cost?

And if -- what could be a more normalized rate for distribution costs, excluding the positive impact of IFRS 15?

And the third question is, if you could please share with us the contribution to recurring revenues of the EUR 500 million or so of AUM that you have in private assets?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [15]

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So the first question was concern that the average size of the recruited advisers. You have to consider that on average, advisers employ 18 to 24, those that are really strong and good to move their -- existing portfolio from their previous employer to Azimut. And then from then on, they start to work on the mix as well as to grow their existing base of assets.

We could say that once they have terminated to transfer this asset, the pool of asset transferred is in the region of EUR 25 million, EUR 30 million. Clearly, this depends from the profile of the advisers and the division they enter into. So whether they are a wealth management person or more a traditional financial advisory network person.

Can you remind me your second question? What was it about?

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Federico Braga, UBS Investment Bank, Research Division - Equity Research Analyst [16]

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Yes. If you can give us the contribution to flows from new advisers and organic contribution also year-to-date? You mentioned before that in July, it was 50-50, according to your numbers. Just wanted to understand if you can give comparison also year-to-date?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [17]

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Well, as you remember, probably the -- we had a similar question in the first quarter presentation, and this was the indication we gave also back then. So I would say that the 50-50 assumption is still true and valid year-to-date.

Distribution cost, Al, you want to answer the question?

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Alessandro Zambotti, Azimut Holding S.p.A. - CFO & Director [18]

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At the level of the IFRS 15, I should double-check. But if I remember, we are around EUR 2 million, EUR 2.5 million per quarter. But I mean it's something that we already take in consideration in 2018 because it's something that is already working from last year. So even if you consider, let's say, the compare, I mean we already consider the effect also last year.

By the way, we are talking about this [2] number per quarter.

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [19]

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Okay. You had a last question, right?

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Federico Braga, UBS Investment Bank, Research Division - Equity Research Analyst [20]

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Yes. If you could share with us the contribution to the recurring revenues of the private assets that you have at the moment?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [21]

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Yes. I would say, it's a negligible figure these days.

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Operator [22]

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The next question is from Filippo Prini from Kepler.

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Filippo Prini, Kepler Cheuvreux, Research Division - Equity Research Analyst [23]

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Three quick question. Do the variable fees of this last quarter include any contribution from performance of asset in, a broader meaning, America, also Asia Pacific?

And second question, how come the minorities result in the second quarter declined compared to the second quarter '18?

And finally, back to distribution cost, if you can give us an indication of what you [spent] in terms of payout for '19?

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [24]

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The performance fee generated from the foreign operations in the first half, you could assume a number in the region of EUR 2 million. So if you compare this with the previous year, it's considerably lower year-on-year. But we are in a position if markets do not turn too much too negative to expect some more contribution in the second half.

Al?

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Alessandro Zambotti, Azimut Holding S.p.A. - CFO & Director [25]

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As for the minorities, the difference is just explained by the agreement that we have in place in the past and it is now finished. So let me say, the profit, I mean the rule how we determined the minority effect was impacted by this rule of [the agreement]. So now it's finished. So you can see we changed the effect comparing last year.

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [26]

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The payout on the distribution cost so far is pretty stable. We do pay the 40% of the fixed management fee. I would remind you that the repricing of the 50 basis points on average is not included in the repricing -- sorry, in the rebate that the adviser receives.

And as far as the recruitment cost, this is clearly discounting the strong recruitment year-to-date, but we do not see any major swings. And there's always -- it's better to see this distribution cost line rather than on a quarterly basis, on a yearly basis. And we see that the trend is always pretty stable. There is just a few bps up and down year-on-year, depending on the recruitment activity.

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Operator [27]

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Gentlemen, there are no more questions registered at this time.

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Gabriele Blei, Azimut Holding S.p.A. - CEO & Director [28]

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Thank you very much. Happy summer for those that go a bit on holidays. And we remain available for any follow-up questions. Bye-bye.