Annual and Q4 2018 results

Wednesday 13 February 2019

Financial Communication

On Wednesday, 13 February, Amundi is releasing its annual and fourth-quarter 2018 results: high annual net inflows, a sharp improvement in results and a successful integration of Pioneer that led to a higher amount of synergies. The dividend submitted to the General Meeting also saw an increase.

FY 2018

Amundi’s results rose once again in 2018, despite a market environment that grew unfavourable starting from the second quarter.

Sharp improvement in annual results

Adjusted net income¹, which measures the Group’s performance on a comparable basis, increased to €946m. This significant growth (up +9 %² vs. 2017³) can be attributed to strong growth momentum despite a more difficult economic environment, as well as to lower operating expenses stemming from the realisation of Pioneer synergies.

Net revenues⁴ stayed the course, reaching €2,582m (- 5.2% compared with 2017³).
Operating expenses⁵ fell significantly (-6.8%³), due to the rapid implementation of Pioneer-related cost synergies (€110m in 2018), and despite the additional external research expenses for MiFID II and the first reinvestments in growth.
This led to a cost/income ratio¹ of 51.5%, an improvement of 0.9 pt³.
In light of the lower tax rate, mainly due to the US tax reform, net income Group share was €946m, up +9% compared with 2017².

Strong net inflows, driven by Retail, MLT assets and International

Inflows remained high in 2018 (+€42bn), driven mainly by medium/long-term assets⁶ (+€36.3bn) and Retail (+€30.7bn⁷). Given the negative market effect (-€43bn) concentrated at the end of the year, assets under management reached €1,425bn at 31 December 2018, stable over 12 months.
Given that the 2018 market environment was unfavourable (European asset management market down sharply⁸: +€62bn in 2018 compared with +€836bn in 2017), the quarterly inflow pattern was particularly unusual, as most of the flows were generated at the beginning of the year: Q1: +€39.8bn, Q2: +€+2.6bn, Q3: +€6.1bn and Q4: -€6.5bn.

Thus, in financial year 2018:

Net inflows were strong once again in the Retail segment (+€30.7bn⁷) but slowed significantly at the end of the year against the backdrop of heightened risk aversion in Europe.
Annual inflows in the Institutionals and Corporates segment were strong (+€11bn) despite a more challenging year end. These inflows were driven mainly by MLT assets and Company Savings, confirming this business line’s growth potential (strengthened by the possibilities offered by the Pacte act in France).
The growth drivers put in place several years ago such as passive management, smart beta and real and alternative assets benefited from a particularly favourable trend.
Lastly, net inflows continued to be driven by the International segment, in particular by the JVs in Asia.

Successful integration of Pioneer

The acquisition of Pioneer strengthened Amundi’s business model and its European leadership position.
In addition, this acquisition, carried out in record time (18 months) generated value: total amount of synergies raised from €150m (originally anticipated) to €175m and adjusted net earnings per share¹ grew by +36% in 2018 vs. 2016.

An attractive dividend policy and a strengthened financial structure

The Board of Directors has decided to propose a dividend of €2.90 per share in cash at the General Meeting to be held on 16 May 2019, i.e. an increase of +16% vs. 2017.
This dividend offer represents a payout ratio of 65% of the Group's share of net income excluding integration costs (based on the number of shares at end 2018) and a yield of 5.7% based on the share price on 7th February 2019 (at the close). Shares shall be designated ex-dividend on 24 May 2019 and paid out as from 28 May 2019.

Finally, Amundi's financial structure was solid once again; tangible equity⁹ amounted to €2.3bn, an increase of €0.4m from end 2017.
This solidity was once again recognized by the Fitch rating agency, which, in June 2018, reiterated Amundi's A+ rating with a stable outlook , the best in the sector.

4rth quarter of 2018

Despite the negative effects of the market context that weighed on revenues, the quarterly adjusted net income remains high (€225m).
Net management revenues were down –11.2%. However, this decrease in revenues was offset by a sharp decline in operating expenses (-14.6%).
The sharp decline in expenses led to a cost/income ratio of 52.5%.

Yves Perrier, Chief Executive Officer, comments on the results:

Despite an unfavourable market environment, Amundi's results increased sharply once again in 2018. There are two factors behind this improvement. First, business momentum remained strong, despite the market context, and benefited from Amundi’s significant international presence, particularly in Asia. Second, the Pioneer integration has been a success, and the acquisition has significantly strengthened Amundi's business model. This integration was executed quickly and competently, leading us to reassess the total amount of synergies up to €175m.

These strong results demonstrate the soundness of Amundi's business model.

1. Excluding amortisation of distribution contracts and excluding costs associated with the integration of Pioneer
2. Growth rate calculated based on 2017 adjusted and combined net income excluding the exceptional level of financial income
3. Comparison with combined 2017 data: 12 months Amundi + 12 months Pioneer
4. Excluding amortisation of distribution contracts (UniCredit, SG, and Bawag)
5. Excluding costs associated with the integration of Pioneer
6. Excluding treasury products
7. Including the -€6.5bn in assets reinternalised by Fineco in Q3 2018
8. Source: Broadridge Financial Solutions - FundFile/Open funds (excluding discretionary mandates and special investor funds) at the end of December 2018
9. Equity excluding goodwill and intangible assets