Euronext Publishes Second Quarter 2016 Results

• Most profitable quarter since IPO
• Resilient revenue: 1.7% increase compared to Q2 2015, to €132.3 million (Q2 2015: €130.1 million)
• Substantial reduction in operational expenses excluding depreciation and amortization: -9% compared to Q2 2015, to €54.6 million (Q2 2015: €60 million)
• Significant increase in EBITDA margin: 58.7% (Q2 2015: 53.9%)
• Basic EPS of €0.71, up 73% compared to €0.41 in Q2 2015
• New strategic plan “Agility for growth” translating into a set of new financial targets for the 2015-2019 period released on 13 May
• Group EBITDA margin excluding clearing operations to reach 61% to 63% in 2019

 

Regulatory News:

Today Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX) announced its results for the second quarter and for the first six months of 2016.

“Euronext has delivered its most profitable quarter since the IPO despite market uncertainty causing lighter volumes until the outcome of the UK referendum on 23 June 2016. Revenue generated by non-volumes operations (listing, market data, market solutions) have more than offset the decrease in transaction-based businesses. It reinforces our confidence in our capability to deliver the company’s Agility for Growth plan, which is built on the resilience of our core business with ongoing cost discipline and growth in selected initiatives. In spite of the uncertainties for the second half of 2016, we are well positioned to capture opportunities arising from changes in the industry landscape,” said Stéphane Boujnah, Chairman and CEO of the Managing Board of Euronext NV.

Financial performance

Quarterly revenue increased by 1.7% to €132.3 million (Q2 2015: €130.1 million), driven by strong performance in the listing and market data businesses. This performance has more than offset slower trading conditions in our cash and derivatives businesses, which saw lighter volumes as investors reduced risk exposure ahead of the UK referendum on 23 June 2016.

Quarterly operational expenses excluding Depreciation & Amortization decreased by 9% to €54.6 million (Q2 2015: €60 million). These savings result from the strict execution of the cost reduction plan. Compensation costs fell by €3.9 million, or -13%, as part of the continuous efforts to improve efficiency across the organization.

As a result of this increase in revenue combined with a reduced cost base, EBITDA increased strongly in Q2 2016 to €77.7 million, representing a margin of 58.7% compared to 53.9% in Q2 2015.

Depreciation and Amortization decreased by 16.1% in Q2 2016, to €3.8 million mainly due to the accelerated depreciation of assets in Q2’2015 in anticipation of the relocation of our premises in Paris and Brussels.

Quarterly operating profit before exceptional items was €73.9 million, an increase of 12.6% compared to €65.6 million in Q2 2015.

€5.2 million of exceptional costs were booked in the second quarter of 2016. These costs include expenses for employee termination benefits in the various Euronext locations, and expenses related to the update on the French restructuring plans and the relocation of Belfast IT operations to Porto. Exceptional costs in Q2 2015 (€24.6 million) included the recognition of the provision for the French restructuring plans (€22.1 million) and some redundancy costs in Europe.

The tax rate for the quarter was 31.8%, slightly higher than the normalized tax rate of the Company due to some discrete items such as the impact of the French restructuring plans.

The net profit for Q2 2016 was €49.3 million, an increase of 72% compared to the same quarter last year (Q2 2015: €28.7 million), representing an EPS of €0.71 basic and €0.70 fully diluted, compared with €0.41 in Q2 2015 (both basic and fully diluted).

As of 30 June 2016, after the dividend payment of €86.2 million in May, the Company had cash and cash equivalents excluding financial investments of €152.8 million, and total debt of €108.6 million.

Business highlights

• Listing

Listing revenue were €23.3 million in Q2 2016, an increase of 21% compared to the €19.3 million achieved in Q2 2015. This performance was driven by an increase in both IPO and secondary market activity. In total €46.3 billion in equity and debt was raised by corporates on our markets in Q2 2016, compared to €21.7 billion in Q2 2015. An excellent performance given existing market conditions and volatility. 14 new listings took place in Q2 2016, raising €3 billion, compared to 14 listings and €2.3 billion during the same quarter in 2015. Among the largest deals in Q2 were the IPOs of ASR Nederland and Philips Lighting as well as the technical listing on Euronext London and Euronext Amsterdam of Coca Cola European Partners adding €16 billion in market capitalization.

Several benchmark transactions among our listed issuers took place during Q2 2016 on our Debt Capital markets, including the Total €1.5 billion bond issuance and JC Decaux €750 million transaction.

Despite difficult market conditions, small and medium-size companies maintained a capital raising dynamic during Q2, with €2.7 billion raised across our primary and secondary offerings and 11 new international and domestic SME listings compared to €2.1 billion and 12 new listings in Q2 2015.

• Trading

Cash trading

As a result of lighter trading volumes during the quarter, revenue from cash trading decreased by 6.6%, to €45.8 million, (Q2 2015: €49.0 million) despite cash market average daily volumes in Q2 2016 being down 19.4%, to €7.1 billion compared to €8.8 billion in Q2 2015, thanks to an increase of 11% in the revenue capture.

€21.3 billion was traded on 24 June 2016, making this day the most active one since the financial crisis.

Our domestic market share established at 61.3% for the quarter, steadily increasing since the beginning of the year, from 60.4% in January to 62.2% in June.

Activity on ETFs remained resilient in Q2 2016 with an average daily transaction value of €560 million, down 5% compared to Q2 2015. We also continue to grow our ETF franchise, with 40 new listings during Q2 2016. Therefore, we have achieved a record number of new listings in excess of 100 during the first six months of 2016.

Derivatives trading

Derivatives trading revenue decreased by -7.6% in Q2 2016 compared to the same quarter last year, amounting to €10.2 million (Q2 2015: €11 million) impacted by lower trading volumes.

Quarterly Average Daily Volumes on individual equity derivatives decreased by -4%, at 222,631 contracts during the second quarter of 2016, while volumes on equity index derivatives decreased by -16% at 217,211 contracts.

Volumes on commodity products were nearly stable (-1%, with quarterly average daily volumes of 55,061 contracts).

Our total open interest increased to 14.7 million contracts at the end of June 2016 (+8% compared to the end of June 2015).

• Market data & indices

Market data & indices revenue in Q2 2016 was up 11.5% compared to the same quarter in 2015, to €27.3million (Q2 2015: €24.5 million) still benefiting from the positive impact of the new products and services launched during the course of 2015 as well as from some fee adjustments starting 1 January 2016.

• Post-trade

Clearing

For Q2 2016 Euronext recorded clearing revenue of €12.3 million, down 8.0% compared to Q2 2015 (€13.3 million), in line with the contraction in the derivatives trading activity mentioned above.

Settlement & Custody

Revenue for Interbolsa in Portugal remained stable at €5.0 million in Q2 2016 (Q2 2015: €5.1 million), slightly recovering from Q1 2016 thanks to an increase in public debt assets under custody and higher settlement activity.

• Market solutions & other

Revenue from market solutions increased by 2.9% in Q2 2016 compared to the same quarter in 2015 (from €8.0 million to €8.2million), positively impacted by revenue from SLE connections as a result of change in fees structure and an increase in the number of connections. The impact is slightly lessened by a reduced level of project activity pending Optiq sales.

Corporate Highlights

• Release of Agility for Growth strategic plan

On 13 May 2016 Euronext presented to the market its strategic plan, Agility for Growth, designed to strengthen the resilience of its core business, capture strategic opportunities and grow in selected segments. The driver of this plan is to fulfil Euronext’s core mission: power pan-European capital markets to finance the real economy, while delivering value to shareholders.

Euronext’s strategy Agility for Growth translates into a set of new financial objectives. Euronext’s core business revenue will grow by a 2% CAGR over the 2015 – 2019 period¹. On top of this, the six new growth initiatives will bring about €70 million of additional revenue. As a result, Group revenue will grow by a CAGR of 5% over the period, up to about €575 million, vs. €467 million in 2015, excluding clearing revenue.

Cost management will remain a key pillar of Euronext’s strategy to 2019. A target of €22 million of gross efficiencies has been identified, representing about €15 million net, taking into account an annual inflation rate of 1% over the period. The restructuring costs requested to deliver the additional cost efficiencies are estimated at 1.5 times the gross efficiencies, or €33 million.

The completion of the strategic plan and the growth initiatives will induce about €35 million of additional operational expenses. On a net basis, the Company’s cost base will then increase by about 1% CAGR over the period. Euronext’s EBITDA margin is expected to range between 61% and 63% by 2019.

Some significant milestones in the implementation of the plan have already been achieved. The business plans related to the six growth initiatives are being fine-tuned and the relevant teams will be hired in the second half of 2016.

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¹ This growth has to be calculated based on 2015 revenue excluding clearing.

• Stake in EuroCCP

In May Euronext announced that it was in exclusive talks to acquire a 20% equity stake in EuroCCP for €14M (including contribution to regulatory capital), with the objective to offer choice in clearing within the Eurozone through the implementation of a preferred Central Counterparty (CCP) model for its equity markets. Shareholder agreement is expected to be signed in the third quarter and the close of the deal will be subject to regulatory approvals.

• Development of a Blockchain infrastructure for SME post trade

In June Euronext signed a Memorandum of Understanding with six other leading institutions to explore together the development of a post-trade Blockchain infrastructure for SMEs in Europe. Open to other international partners, this pilot agreement aims to improve SMEs' access to capital markets while facilitating secure and transparent post-trade operations. It is part of the development of a new regulatory environment in France that allows the issue and circulation of securities using Blockchain technology.

• Purchase of own shares

As part of the liquidity agreement, Euronext held 82,719 shares as of 30 June 2016. Early July, Euronext made an additional €1,000,000 contribution to the assets managed under the liquidity contract, bringing the total contribution to €4,000,000 since the start of it.

• Relocation of IT operations from Belfast to Porto

As announced at the Investor Day in May, Euronext has decided to close its Belfast Technology site and to set-up a new Technology centre in Porto (Portugal) (130 jobs). This centre will be co-located with our Euronext Interbolsa team and will provide Technology services to the whole of Euronext including Technology Operations, Development and Information Security. This reduction in our number of sites will translate into cost efficiencies and give additional impetus to our focus on innovation.

• Strenghtening the listing team

In addition to his current position as member of the Managing Board and CEO for France, Anthony Attia was appointed Global Head of Listing in May. His mission includes boosting our existing core listing business, executing Euronext development plan for international Tech SMEs and developing the right products and services offering for our issuers. Department organization is to be adjusted with new recruitments planned to strengthen the team in the coming months.

• Investment in Tredzone

As part of its innovation strategy, in July 2016 Euronext has acquired a 34% stake in Tredzone, a highly specialized low latency software developer, for an amount of €1.4 million.

Non-IFRS financial measures

For comparative purposes, the company provides unaudited non-IFRS measures including:

• Operational expenses excluding depreciation and amortization;
• EBITDA, EBITDA margin.

We define the non-IFRS measures as follows:

• Operational expenses excluding depreciation and amortization as the total of salary and employee benefits, and other operational expenses;
• EBITDA as the operating profit before exceptional items and depreciation and amortization;
• EBITDA margin as the operating profit before exceptional items and depreciation and amortization, divided by revenue.

Non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures and should be read only in conjunction with the consolidated financial statements.

Cash markets activity

Derivatives markets activity

About Euronext

Euronext is the primary exchange in the Euro zone with more than 1 300 listed issuers worth close to €3.0 trillion in market capitalization as of end March 2016, an unmatched blue chip franchise consisting of 25 issuers in the EURO STOXX 50® benchmark and a strong diverse domestic and international client base.Euronext operates regulated and transparent equity and derivatives markets. Its total product offering includes Equities, Exchange Traded Funds, Warrants & Certificates, Bonds, Derivatives, Commodities and Indices. Euronext also leverages its expertise in running markets by providing technology and managed services to third parties. Euronext operates regulated markets, Alternext and the Free Market; in addition it offers EnterNext, which facilitates SMEs’ access to capital markets.

Disclaimer

This presentation may include forward-looking statements, which are based on Euronext’s current expectations and projections about future events. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of Euronext. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no undue reliance should be placed on any forward-looking statements. Forward-looking statements speak only as at the date at which they are made. Euronext expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statements contained in this presentation to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law.

Financial objectives are internal objectives of the Company to measure its operational performance and should not be read as indicating that the Company is targeting such metrics for any particular fiscal year. The Company’s ability to achieve these financial objectives is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control, and upon assumptions with respect to future business decisions that are subject to change. As a result, the Company’s actual results may vary from these financial objectives, and those variations may be material.

This press release speaks only as of this date. Euronext refers to Euronext N.V. and its affiliates. Information regarding trademarks and intellectual property rights of Euronext is located at www.euronext.com/terms-use.

© 2016, Euronext N.V. - All rights reserved.

 

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