Euronext publishes Q3 2019 results
EURONEXT PUBLISHES Q3 2019 RESULTS
Q3 2019 NET INCOME UP 25.8% TO €63.5M DRIVEN BY ORGANIC GROWTH, COST MANAGEMENT AND OSLO BØRS VPS CONSOLIDATION Amsterdam, Brussels, Dublin, Lisbon, London, Oslo and Paris – 7 November 2019 – Euronext, the leading pan-European exchange in the Eurozone with 1,500 listed issuers, today announces its results for the third quarter of 2019.Q3 2019 revenue growth (+20.4%1) to €181.7 million:Total revenue contribution of Oslo Børs VPS at €25.5 million2, consolidated for the full quarterListing revenue up (+25.1%) to €34.8 million driven by the strong performance of Euronext’s Corporate Services (+41.4%) at €5.7 million, and listing revenue from Oslo Børs VPS contributing €5.9 millionCash trading revenue up (+10.0%) to €53.4 million, with organic growth at +4.4% and Oslo Børs VPS contributing €2.7 million. Cash ADV up +9.6% at €7.9 billion combined with a strong market share at 69.4% in Q3 2019 and a Group yield at 0.51bps, including an organic yield at 0.53bpsAdvanced Data Services3 revenue increase (+13.9%) to €33.5 million, thanks to good performance of indices business and Oslo Børs VPS consolidation for €3.7 millionPost-trade revenue up (+56.5%) to €30.8 million, mainly due to the post-trade CSD revenue from Oslo Børs VPS contributing €12 million, partially offset by a less favourable product mix in derivatives clearingGroup non-volume related revenue4 accounted for 52% of Q3 2019 total revenue (vs. 46% in Q3 2018), and covered 129% of operating expenses excluding Depreciation & Amortisation (D&A) (vs. 110% in Q3 2018)Q3 2019 EBITDA up (+23.0%) to €108.0 million, with EBITDA margin increase (+1.2pts) to 59.4%:Group operating costs excluding D&A up €10.6 million as a result of the consolidation of Oslo Børs VPS costs for €13.2 million, partially offset by the positive impact of IFRS 16 (€2.7 million) and continued cost controlConfirmed 2019 cost guidance of a low single digit organic growth of operating expenses, excluding D&A€7.6 million run-rate cost synergies from Euronext Dublin achieved as of Q3 2019 (vs. €7.5 million as of end of Q2 2019)Q3 2019 net income, reported, share of the Group, up (+25.8%) to €63.5 million:First impact on D&A of the PPA related to Oslo Børs VPS acquisition, for €3.4 million in Q3 2019 (accounted for 3.5 months in Q3 2019 to catch up two weeks of consolidation in Q2 2019. PPA expected to account for €3 million quarterly)Income tax rate at 32.1% due to adjustments on deferred tax assets and liabilitiesQ3 2019 adjusted EPS5 increase (+15.1%) to €0.98Release of Euronext’s strategic plan, ‘Let’s grow together 2022’, with a strong focus on growth, innovation and sustainable finance:New set of 2022 guidance released on 10 October 2019Launch of a new green bond offering to enhance the visibility of Euronext’s value proposition in green financeStéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext, said:
“In the third quarter of 2019, Euronext grew its revenue by 20.4%, to €181.7m, its EBITDA by 23.0%, to €108m, and its reported net income by 25.8%, to €63.5m, driven by organic growth, continued cost control and the consolidation of Oslo Børs VPS.
The diversification strategy of the Group was further enhanced with non-volume related revenue amounting to more than 50% and covering 129% of total operating expenses. Euronext’s Group EBITDA margin reached 59.4%, thanks to continued cost discipline on a like-for-like basis and despite the slightly dilutive impact of Oslo Børs VPS on EBITDA margin. Adjusted EPS grew by 15.1% to €0.98 per share, thanks to the accretive impact of Oslo Børs VPS acquisition coupled with organic performance.
The recent weeks were marked by the release of Euronext’s strategic plan, ‘Let’s grow together 2022’, with a strong focus on growth, innovation and sustainable finance. The Euronext Green bond initiative was created early November, showing the strong engagement of Euronext to accelerate sustainable growth.”
Euronext Q3 2019 financial performance
RevenueIn the third quarter of 2019, consolidated Euronext revenue increased to €181.7 million, up +20.4%, mainly driven by the consolidation of Oslo Børs VPS, the contribution of Investor Services, the strong performance from Corporate Services as well as solid performance by the cash trading and FX trading businesses. On a like-for-like basis (excluding the consolidation of Oslo Børs VPS, Commcise and OPCVM360 in Q3 2019), consolidated Euronext revenue increased by +2.5% in Q3 2019, to €154.6 million.Non-volume related revenue6 accounted for 52% of total Group revenue in Q3 2019, increasing from 46% of total Group revenue in Q3 2018. The operating cost coverage ratio7 was at 129% in Q3 2019, compared to 110% in Q3 2018.EBITDAOperational expenses excluding Depreciation & Amortisation increased to €73.8 million, up +16.8%, i.e. €10.6 million, as a result of the consolidation of Oslo Børs VPS, Commcise and OPCVM360 costs for €14.5 million, partially offset by the impact of IFRS 16 (€2.7 million) and a strong cost control marked by the decrease in professional services to €9.3 million. On a like-for-like basis, operational expenses excluding Depreciation & Amortisation decreased by -6.1% compared to Q3 2018.As a consequence, EBITDA for the quarter was €108.0 million, up +23.0%, representing a margin of 59.4%, up +1.2 points compared to Q3 2018. On a like-for-like basis, EBITDA for Q3 2019 was up +8.6%, to €95.3 million, and EBITDA margin was 61.6%, up +3.5 points, compared to the same perimeter in Q3 2018.Net profitDepreciation and Amortisation accounted for €13.1 million in Q3 2019, up +103.3%, resulting from the consolidation of Oslo Børs VPS PPA for €3.4 million (accounted for 3.5 months in Q3 2019 to catch up two weeks of consolidation in Q2 2019) and the adoption of IFRS 16 (see appendix). On a like-for-like basis, Depreciation & Amortisation was up +28.5% to €8.3 million, mainly due to IFRS 16 impact.Operating profit before exceptional items was €94.9 million, a +16.6% increase compared to Q3 2018. On a like-for-like basis, operating profit before exceptional items was up +7.0%, to €87.0 million.€0.3 million of exceptional costs was booked in Q3 2019, compared to €8.8 million in Q3 2018 that resulted from the agreement for the early termination of the trading services contract provided by Deutsche Börse AG to Euronext Dublin, as well as advisory costs and impairments.Net financing expense for Q3 2019 was €2.0 million compared to a net financing income of €0.1 million in Q3 2018, resulting mainly from interest expense.Results from equity investments amounted to €2.1 million in Q3 2019, mainly resulting from the contribution from LCH SA, of which Euronext owns an 11.1% stake. In Q3 2018, €0.9 million in results from equity investments was reported.Income tax for Q3 2019 was €30.4 million, impacted by adjustments on deferred tax assets and liabilities. This translated into an effective tax rate of 32.1% for the quarter (Q3 2018: €22.6 million and 30.7%).Shares of non-controlling interests mainly relating to Euronext FX (formerly FastMatch) (97% owned), Skope8 (60% owned), InsiderLog (80% owned), Commcise (78% owned), OPCVM360 (60% owned) and Company Webcast (51% owned) amounted to €0.8 million in Q3 2019.As a result, the reported net profit share of the Group for Q3 2019 increased by +25.8%, to €63.5 million. This represents a reported EPS of €0.91 basic and €0.91 fully diluted in Q3 2019, compared to €0.73 basic and €0.72 fully diluted in Q3 2018. The number of shares used for the basic calculation was 69,641,223 and for the fully diluted calculation was 69,879,574.Adjusted EPS9 is up +15.1% in Q3 2019, at €0.98, compared to €0.85 in Q3 2018.In Q3 2019 Euronext generated a net cash flow from operating activities of €75.9 million, compared to €70.8 million in Q3 2018.At 30 September 2019, Euronext had net debt of €739.0 million and €325.1 million of cash and cash equivalents, representing a net debt on last twelve months pro-forma EBITDA equal to 1.8x.Q3 2019 business highlights¨ListingListing revenue was €34.8 million in Q3 2019, an increase of +25.1% compared to Q3 2018, driven by the strong performance of Euronext’s Corporate Services (+€1.7 million) and Oslo Børs VPS contributing €5.9 million. On a like-for-like basis, listing revenue increased by +3.9%.Primary equity issuances reported an active quarter in Q3 2019 with a dynamic trend on IPOs, despite mixed market conditions marked by macro uncertainties in Europe, demonstrating Euronext’s strong value proposition for international companies willing to expand their shareholder base and access international capital markets. Euronext welcomed two international large cap listings with Prosus, the South-African international internet assets group of Naspers, and Titan, a leading Greek cement company. In addition, Euronext welcomed 10 SME listings on its markets. In Q3 2019, €221 million was raised on primary markets on Euronext, compared to €175 million last year.Activity on the secondary market remains stable compared to Q3 2018, reflecting uncertainty around economic growth and light M&A activity. In Q3 2019, €6.1 billion was raised in secondary equity issues, compared to €6.4 billion in Q3 2018.In total, €314.4 billion in equity and debt was raised on Euronext’s markets in Q3 2019, compared to €239.1 billion in Q3 2018.Corporate Services reported a strong performance, generating €6.0 million in revenue in Q3 2019, including €0.3 million of contribution from Oslo Børs VPS, compared to €4.0 million in Q3 2018, reflecting strong client traction across all the services offered.¨TradingCash tradingCash trading revenue increased by +10.0% in Q3 2019, to a total of €53.4 million, driven by the contribution from Oslo Børs VPS and an uptick in volatility in August. On a like-for-like basis, cash trading revenue increased by +4.4%. Average daily volume for cash trading increased to €7.9 billion in Q3 2019, up +9.6% compared to Q3 20181. The average yield over the quarter was 0.51bps, amounted to 0.53bps on a like-for-like basis10, compared to 0.52bps in Q3 2018. The cash trading market share throughout the third quarter of 2019 averaged 69.4% on a consolidated basis, and 69.7% on a like-for-like basis, an increase from 65.7% in Q3 2018.The average daily transaction value of ETFs on the electronic order book was €227 million over Q3 2019, up +13.3% compared to Q3 2018, driven by upticks in volatility. The total number of ETFs listed on Euronext was 1,226 at end of September 2019.Derivatives tradingDerivatives trading revenue increased +4.0% in Q3 2019, to €11.5 million, compared to €11.0 million in Q3 2018. On a like-for-like basis, derivatives trading revenue was stable. Average daily volume on individual equity derivatives was up +1.4% at 274,352 contracts, while the average daily volume on equity index derivatives was up +21.1% to 243,886 contracts.Commodity products recorded a decline in average daily volumes in Q3 2019, down -25.1% to 54,027 contracts compared to Q3 2018. Yield on derivatives averaged €0.30 in Q3 2019, down -3.6% compared to Q3 2018, resulting from a less favourable product mix over the quarter.Spot FX tradingSpot FX trading activity on Euronext FX spot foreign exchange market recorded average daily volumes of $19.4 billion, flat compared to Q3 2018. Thanks to positive foreign exchange impact and yield management, spot FX trading generated €6.0 million of revenue in Q3 2019, up +10.8% compared to Q3 2018.¨Investor ServicesInvestor Services, encompassing the activities of Commcise, a provider of award-winning research evaluation and commission management solutions for financial services firms, of which Euronext acquired 78% of the capital in December 2018, and Investor Services activities from Oslo Børs VPS, reported €1.8 million of revenue in Q3 2019. The business continued to grow, benefiting from Euronext’s financial standing, reach and expertise with asset managers and broker dealers.¨Advanced Data ServicesAdvanced Data Services reported revenue up +13.9% to €33.5 million in Q3 2019 due the good performance of index activities, particularly on ESG products and the consolidation of Oslo Børs VPS. On a like-for-like basis, Advanced Data Services revenues were up +1.1% compared to Q3 2018, thanks to the good performance of the ESG indices business, partially offset by the decrease of market data revenue.¨Post-TradeClearingClearing revenue was down in Q3 2019, at €13.3 million, -6.5% compared to Q3 2018, resulting from a less favourable derivatives product mix (see above).Custody, Settlement and other post-tradeRevenue from Custody, Settlement and other post-trade activities, notably encompassing Interbolsa and VPS activities, increased by +221.4% to €17.5 million in Q3 2019, resulting mainly from the consolidation of Oslo Børs VPS. Both VPS and Interbolsa reported a good performance driven by an increased settlement activity.On a like-for-like basis, revenue from Custody, Settlement and other post-trade was slightly up +1.0%.¨Euronext Technology Solutions & Other revenueEuronext Technology Solutions & Other revenue increased by +9.5% in Q3 2019, to €9.9 million, as a result of good performance by hosted services and the consolidation of Oslo Børs VPS. On a like-for-like basis, revenue was up +3.9% compared to last year.Corporate highlights of Q3 2019, since publication of Q2 2019 results on 31 July 2019¨Volumes in Q3 2019For the third quarter of 2019, the average daily transaction value on the Euronext cash order book stood at €7,928 million, up +9.6%11 compared to the same period last year.The average daily transaction value of ETFs on the electronic order book was €227 million over Q3 2019, up +13.3% compared to Q3 2018. The total number of ETFs listed on Euronext was 1,226 at end of June 2019.The overall average daily volume on Euronext derivatives stood at 577,448 contracts (+6.2% compared to Q3 2018) and the open interest was 18,431,726 contracts at the end of September 2019 (-0.2% compared to the end of September 2018).The average daily volume on Euronext FX’s spot foreign exchange market stood at $19,375 million in Q3 2019, stable compared to the same period last year.
Corporate highlights since 30 September 2019¨8 October 2019 EGM resultsIn Euronext’s Extraordinary General Meeting (EGM) that took place on 8 October 2019, all the items on the agenda were approved.These items were as follows:1. Appointment of Nathalie Rachou as an independent member of the Supervisory Board (97.42% votes in favour)2. Appointment of Morten Thorsrud as an independent member of the Supervisory Board (97.70% votes in favour)3. Re-appointment of Stéphane Boujnah as a member of the Managing Board and CEO (99.99% votes in favour)4. Appointment of Håvard Abrahamsen as a member of the Managing Board (99.99% votes in favour)5. Appointment of Simone Huis in ‘t Veld as a member of the Managing Board (100% votes in favour)6. Amendment of the remuneration policy (71.91% votes in favour)All the documentation is available at www.euronext.com/investor-relations/financial-calendar/egm-8102019¨Announcement of Euronext’s strategic plan, ‘Let’s grow together 2022’Euronext, the leading pan-European exchange, announced on 10 October 2019 its new three-year strategic plan, ‘Let’s Grow Together 2022’.Since its 2014 carve-out, Euronext has expanded substantially, maintaining its trademark operating excellence as it grew organically. Over the last five years, the Group has diversified profitably into new asset classes and services, and extended its federal model to welcome Ireland and Norway’s market operators.Today Euronext is geared to continue this growth journey. With innovation and sustainability at the heart of the plan, ‘Let’s Grow Together 2022’ sets the path for Euronext to achieve its goal of building the leading pan-European market infrastructure, connecting local economies to global capital markets.Euronext’s growth ambition is reflected in the 2022 financial targets12 and a rigorous capital allocation strategy.Revenue is expected to grow by 2% to 3% CAGR2018PF-2022E, excluding potential acquisitions, driven by (i) organic growth, (ii) cross-cycle trading growth in line with European GDP and (iii) continued focus on revenue diversification and services.EBITDA margin is expected to be above 60%, excluding potential acquisitions, driven by (i) continued best-in-class cost discipline, (ii) investments in operational excellence and (iii) uplift profitability of already-acquired companies to Euronext’s level.To realise these ambitions, Euronext expects to record one-off costs of €12m relating to internal project costs over the period.Euronext expects to achieve €12m of run-rate cost synergies by 2022 at Oslo Børs VPS, to incur €18m of restructuring costs, and to achieve a ROCE13 on this transaction above the WACC by Year 3.Capex is expected to remain between 3% and 5% of revenue.Dividend policy set with a 50% pay-out of reported net income.Euronext will continue to seek external diversification opportunities, in line with its strict investment criteria and its commitment to a strong investment grade rating.On 11 October 2019, Euronext hosted an Investor Day in Paris. The full press release, the replay of the webcast and the presentations are available here: www.euronext.com/investor-relations/financial-calendar/2019-euronext-investor-day¨Launch of Green Bond SegmentEuronext announced on 5 November 2019 the creation of a new Euronext Green Bonds offering across its six regulated markets. The initiative, which was launched at Climate Finance Week in Dublin, is operated out of Euronext Dublin, the group centre of excellence for Debt, Funds and ETFs, and is designed to encourage and promote more sustainable investment in Europe. The Green Bonds offering went live on 5 November with more than 50 participating issuers, and marked the first product launch of Euronext’s new three-year strategic plan, ‘Let’s Grow Together 2022’, illustrating Euronext’s commitment to accelerating the transition towards sustainable finance, by developing sustainable products and services for the financial community.With more than 44,000 bonds, Euronext is the world’s number one venue for bond listing and has become a global leader in sustainable finance, with approximately €118bn worth of Green Bonds listed on Euronext markets, €40bn of which was raised in the last 12 months.The new initiative builds on the recent Green Bonds leadership across the Euronext markets, in particular in Amsterdam, Brussels, Dublin, Lisbon, Oslo, and Paris, and is designed to encourage more sustainable investment by offering issuers a range of opportunities to list bonds to finance their environmental and sustainability projects. By promoting Green Bonds from all of Euronext’s markets in one dedicated area on the Euronext website, it will be easier for investors to discover and participate in sustainable investment opportunities. In order to be eligible for inclusion, Green Bonds must be listed on a Euronext market, be aligned with recognizable industry standards such as ICMA Green Bond Principles or the Climate Bond Initiative Taxonomy, and be accompanied by an appropriate external review performed by an independent third party.
Agenda
A conference call and a webcast will be held tomorrow Friday 8 November 2019, at 9.00am CET (Paris time) / 8.00am UK time:Website: www.euronext.com/en/investorsTo connect to the conference call, please dial:UK Number: +44 203 003 2666FR Number: +33 1 7037 7166NL Number: +31 20 794 8426 US Number: +1 212 999 6659BE Number: +32 2 792 0434PT Number: +351 3 0880 2081 IR Number: +353 1 436 0959NO Number: +47 2 156 3318Password: EuronextLive Webcast:
A live audio webcast and replay after the call will be available via this link and on Euronext’s Investor Relations website.
Contacts
Investor Relations:
Aurélie Cohen, Head of Investor Relations +33 1 70 48 24 17; ir@euronext.com Media:
Pauline Bucaille, Chief Communication Officer +33 1 70 48 24 41; mediateam@euronext.com
About EuronextEuronext is the leading pan-European exchange in the Eurozone, covering Belgium, France, Ireland, The Netherlands, Portugal and the UK. The Norwegian stock exchange and its clearing & settlement subsidiary, together operating as Oslo Børs VPS, joined Euronext on 14 June 2019. With 1,476 listed issuers worth €4.0 trillion in market capitalisation as of end September 2019, Euronext is an unmatched blue chip franchise that has 26 issuers in the Morningstar® Eurozone 50 Index℠ and a strong diverse domestic and international client base. Euronext operates regulated and transparent equity and derivatives markets and is the largest centre for debt and funds listings in the world. Its total product offering includes Equities, FX, 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. In addition to its main regulated market, Euronext also operates Euronext GrowthTM and Euronext AccessTM, simplifying access to listing for SMEs. For the latest news, find us on Twitter (twitter.com/euronext) and LinkedIn (linkedin.com/euronext).Disclaimer
This press release is for information purposes only and is not a recommendation to engage in investment activities. This press release is provided “as is” without representation or warranty of any kind. While all reasonable care has been taken to ensure the accuracy of the content, Euronext does not guarantee its accuracy or completeness. Euronext will not be held liable for any loss or damages of any nature ensuing from using, trusting or acting on information provided. No information set out or referred to in this publication July be regarded as creating any right or obligation. The creation of rights and obligations in respect of financial products that are traded on the exchanges operated by Euronext`s subsidiaries shall depend solely on the applicable rules of the market operator. All proprietary rights and interest in or connected with this publication shall vest in Euronext.
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.
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APPENDIX
Non-IFRS financial measuresFor comparative purposes, the company provides unaudited non-IFRS measures including:Operational expenses excluding depreciation and amortisationEBITDA, EBITDA margin.Non-IFRS measures are defined as follows:Operational expenses excluding depreciation and amortisation as the total of salary and employee benefits, and other operational expensesEBITDA as the operating profit before exceptional items and depreciation and amortisationEBITDA margin as the operating profit before exceptional items and depreciation and amortisation, 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.Adoption of IFRS 16 from Q1 2019
Until the 2018 financial year, payments made under operating leases were charged to profit or loss on a straight line basis over the period of the lease. On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets for which associated payments are recognised on a straight-line basis as an expense in profit or loss.
The adoption of IFRS 16 from 1 January 2019 led to the recognition of €2.7 million of operating expenses in Depreciation and Amortisation in Q2 2019.
Adjusted EPS definition
Consolidated income statementThe figures in this document have not been audited or reviewed by our external auditor.
Consolidated comprehensive income statementThe figures in this document have not been audited or reviewed by our external auditor.
Consolidated balance sheet
The figures in this document have not been audited or reviewed by our external auditor.
Consolidated statement of cash flows
The figures in this document have not been audited or reviewed by our external auditor.
Cash markets activity* included New Listings incl over allotment, Follow-ons on Equities, Corporate Bonds on Euronext Listed Issuers.
**(Euronext, Euronext Growth and Euronext Access)
Q3 2018 restated to include Oslo Børs VPS
Derivatives markets activityQ3 2018 restated to include Oslo Børs VPSQ3 2018 restated to include Oslo Børs VPSSpot FX Trading*END*1Unless stated otherwise, percentages compare Q3 2019 to Q3 2018 data including IFRS 15, and are not restated for IFRS 16. For further details, please refer to the appendix2Euro/NOK rate for Q3 2019 is 9.8524343Formerly ‘Market data and indices’4Volume-related businesses include Cash, Derivatives, Spot FX trading, Clearing, and IPOs5Definition in appendix6Volume-related businesses include Cash, Derivatives, Spot FX trading, Clearing, and IPOs7Non-volume related businesses revenue divided by operating costs (excluding D&A)8Formerly known commercially as iBabs9Definition in Appendix10Excluding Oslo Børs VPS11Compared to Q3 2018 volumes excluding Oslo Børs VPS12Based on 2018 pro forma revenue of €734 million.13Return on Capital EmployedAttachment20191107_Euronext Q3 2019_PR