Equita FY'24 presentation slides: Net profits fall 13% amid strategic acquisitions

Equita Group (EQUI) reported a 9% decrease in FY'24 net revenues to €79.4 million and a 13% drop in net profits to €14.0 million, despite favorable market conditions and increased volumes in some segments, including a surge in M&A activity. While Global Markets revenue remained stable, Investment Banking and Alternative Asset Management saw declines. In response, Equita is pursuing strategic acquisitions, including CAP ADVISORY, and launching new funds like the EQUITA Green Impact Fund, to diversify revenue streams amid early indicators in 2025 showing mixed market volume trends.

Analysis

Equita Group SpA (BIT:EQUI) reported a challenging fiscal year 2024, with net revenues declining 9% to €79.4 million and net profits falling 13% to €14.0 million, despite some favorable market conditions. Specifically, Q4 FY24 performance was weaker, with net revenues down 15% and net profits down 34% year-over-year. This occurred even as Euronext Milan volumes increased 11% and Fixed Income (MOT) volumes rose 9% in FY24, while Debt Capital Markets and M&A activity surged 44% and 91% respectively. However, Euronext Growth Milan volumes declined 12%. Equita's Global Markets segment revenue remained stable at €40.6 million, contributing 51% to total revenues, while Investment Banking revenue fell 17% to €30.1 million, and Alternative Asset Management revenue decreased 16% to €7.0 million. Despite these declines, management fees within Alternative Asset Management grew 2% YoY. The company managed to reduce total costs by 7% to €59.3 million, with personnel costs down 8%, yet the cost-to-income ratio deteriorated to 74.6% from 71.5% due to the sharper revenue fall. Strategically, Equita is seeking to diversify by consolidating EQUITA K Finance, agreeing to acquire 70% of CAP ADVISORY (expected to add €3 million in net revenues at a 9x P/E multiple), launching the EQUITA Green Impact Fund (EGIF), and achieving a first closing for its third private debt fund (EPD III), targeting €450 million in new AUM by end-2025. The dividend per share was maintained at €0.35, and the IFR Ratio remained stable at 3.7x, though ROTE decreased to 22%. Early 2025 indicators show Euronext Milan volumes up 22% YoY through February, but Euronext Growth Milan volumes continued their decline, down 39%.

Key Decisions for Investors

• Investors should closely monitor the integration and revenue contribution of the CAP ADVISORY acquisition and the asset-gathering progress of new funds like EGIF and EPD III, as these are key to Equita's revenue diversification strategy against declining core business performance.
• Careful attention should be paid to Equita's cost-to-income ratio in upcoming quarters to assess if cost management can effectively counteract revenue pressures and improve profitability, especially given the maintained dividend despite lower profits.
• Consider the mixed market volume signals, particularly the continued weakness in Euronext Growth Milan, and its potential impact on specific Equita business lines, weighing it against the positive momentum in broader market segments like Euronext Milan and M&A activity.