Euronext today announced its results for the first quarter of 2015.
- Third party revenue increased by +9.6% on an adjusted basis1 to € 130 million (Q1 2014 adjusted: €118.7 million), or +22.4% on a reported basis (Q1 2014 reported: €106.2 million)Download the document now 623.6 kb (PDF File)
- Substantial reduction in operational expenses excluding depreciation and amortization: -8.8% compared to Q1 2014 adjusted1 (increase by +1.4% compared to Q1 2014 reported)
- EBITDA margin of 52.2%
- €43.6 million of cumulated efficiencies achieved - €38.3 million of associated restructuring expenses
”Today we are announcing results that reflect the hard work we have put in to execute on our strategy and which demonstrate that we are on the right track. We have been able to over deliver on our promises, thanks to tight cost controls, robust volumes in our cash trading, strong tailwinds and a buoyant IPO market. I am delighted to have been given the opportunity to act as interim CEO. It is an honour to accept this position on an interim basis. As a team we have all worked hard to reposition Euronext as a leading capital financing centre in Europe. Our mission will not change and I am committed to defending the interests of the company, creating value for our shareholders and our clients, and fulfilling my role as CEO of this outstanding company.” said Jos Dijsselhof, Interim CEO and COO of Euronext NV.
Third party quarterly revenue increased by +9.6% on an adjusted1 basis to €130.0 million (Q1 2014 adjusted: €118.7m) or by +22.4% on a reported basis (Q1 2014 reported: €106.2 million), driven by very strong performance in the cash trading business, underpinned by favorable economic conditions and ECB quantitative easing, as well as by good performance in the market data and listing businesses. This revenue includes €11.7 million from the derivatives clearing contract with LCH.Clearnet which came into force on 1 April 2014 (adjusted1 clearing revenue for Q1 2014: €12.5 million).
In Q1 2014 Group revenue included €7.3 million of ICE transitional revenue and other income which terminated 1 January 2015. These 2014 revenues reflected primarily the IT support services provided to LIFFE for the operation of its derivatives exchanges in the UK and in the US and the impact of the Cannon Bridge House sublease rent in London.
1 for the three month period ending 31 March 2014 the changes in third party revenue and operational expenses have also been included when adjusted for(i) the derivative clearing agreement with LCH.Clearnet. This was included based on our estimate of the amount of revenue we would have received and the amount of associated expenses we would have paid under the Derivatives Clearing Agreement, based on our actual trading volume for the period presented and assuming the Derivatives Clearing Agreement had been in effect from 1 January 2014, and (ii) the termination of ICE transitional services starting 1st January 2015. See also specific paragraph and reconciliation pages 5 and 6.
Operational expenses excluding Depreciation & Amortization decreased by -8.8% on an adjusted1 basis to €62.2 million (Q1 2014 adjusted: €68.3 million) and increased by +1.4% on a reported basis (Q1 2014 reported: €61.4 million), thanks to ongoing strong cost discipline.
These expenses include €6.7 million of costs related to the contract with LCH.Clearnet above mentioned (Q1 2014: €6.9 million if this contract had been in place at that time).
As a result of this strong activity combined with a reduced cost base, the EBITDA margin increased strongly in Q1 2015 to 52.2% compared to 42.5% in Q1 2014 adjusted1 and to 45.9% reported.
Depreciation and Amortization were broadly in line with Q1 2014 (€4.7 million), amounting to €4.6 million in Q1 2015.
Quarterly operating profit before exceptional items was €63.3 million; a 38.4% increase compared to last year on an adjusted1 basis (€45.7 million) and a 33.4% increase compared to Q1 2014 reported (€47.4 million).
€6.3 million of exceptional income was booked in Q1 2015. This income includes mainly restructuring costs for €7.4 million, offset by a reversal of provision of €14.7 million linked to the positive outcome of the negotiation with the landlord on the Cannon Bridge House premises.
Income tax for Q1 2015 amounted to €19.4 million, representing a tax rate of 28.7%. The tax rate was, amongst other discrete items, positively impacted by the release of the provision created in 2014 in connection with the Cannon Bridge House lease.
The net profit for the first quarter of 2015 amounted to €48.0 million, compared to €7.6 million in Q1 2014, representing an EPS of €0.69 (basic) and of €0.68 (diluted), compared to €0.11 in Q1 2014, both basic and diluted.
As of 31 March 2015 the Company had cash and cash equivalents excluding financial investments of €162 million, and total debt of €107.5 million, as a result of its €140 million debt repayment on 23 March 2015.
Listing revenues were €15.3 million in Q1 2015, an increase of 12.6% compared to the €13.6 million achieved in Q1 2014. This performance was driven both by ongoing healthy IPO activity and by strong secondary market activity. In total €40 billion in equity and debt were raised on our markets in Q1 2015, compared to €24.2 billion in Q1 2014. 14 new listings took place in Q1 2015, raising €2.6 billion compared to six listings for €2.1 billion during the same quarter in 2014. Among the largest deals GrandVision and Refresco in Amsterdam raised €1 billion and €580 million respectively while Elis raised €750 million in Paris. Finally Cnova’s dual listing with Euronext Paris added €3 billion in additional market capitalisation.
EnterNext had a very successful Q1 2015 with €2.4 billion raised across our primary and secondary offerings, more than twice Q1 2014 level. The continued resurgence in IPOs resulted in 10 SME listings compared to four in Q1 2014.
Our performance in the cash trading business has been exceptionally strong in Q1 2015 with revenues of €52.1 million, an increase of 19.6% compared to €43.6 million in Q1 2014.
This quarter was our best quarter for volumes since Q2 2010, with cash market average daily volumes of €8.6 billion, +28.8% compared to Q1 2014. 20 March 2015 was the highest transaction value since May 2010 at €17.2 billion on equities. Our national indices rose by an average of 18%, which is the best first quarter percentage gain since 2000.
Our continued focus on nurturing domestic market share meant it returned to 64% for the month of March in a highly competitive environment. Market share for the full quarter was 62.2%. In our ETF franchise, volumes were up +79% vs Q1 2014. On 23 March we had the tenth most active day since 2010 in terms of transaction value on ETFs with €1 billion traded.
Derivatives trading revenue decreased by -11.3% in Q1 2015 compared to the same quarter last year, amounting to €11.2 million. This business was impacted by the dampening effects of low volatility in February and March and competition in the Dutch segment of the individual equity options business.
Commodity products are broadly flat compared to Q1 2014 which was an exceptional quarter due to the situation in Ukraine.
- Market data & indices
Market data & indices revenue in Q1 2015 was up 12.3% compared to the same quarter in 2014, to €24.6 million (Q1 2014: €21.9 million) benefiting from the price increase for Level 2 data effective 1 January 2015.
The financial benefits of the derivatives clearing agreement with LCH.Clearnet came into force on 1 April 2014. To facilitate the comparison, Euronext has decided to provide adjusted figures for Q1 2014, estimating the impact this contract would have had, had it been in place from January 2014 onwards.
For Q1 2015 Euronext recorded clearing revenues of €11.7 million, (Q1 2014 adjusted1: €12.5 million, or Q1 2014 reported: €0.0 million).
Settlement & Custody
Revenues for Interbolsa in Portugal decreased by 9.3% in Q1 2015, to €5.0 million, compared to €5.6 million in Q1 2014 due to a 6% decrease in the average value of assets under custody, still resulting from the overall reduction of securities market value.
- Market solutions & other
Revenues from market solutions increased by 4.3% in Q1 2015 compared to the same quarter in 2014 (from €8.9 million to €9.3 million) thanks to ongoing service fees, reflecting our intention to reduce sensitivity to one-off project revenues.
- Successful completion of Euronext Separation Programme (ESP) As part of establishing an independent Euronext, the Euronext Separation Programme (ESP) was designed to decouple our Derivatives business from LIFFE’s infrastructure and to optimise the Euronext Derivatives IT systems. ESP delivered eight major operational tools from July 2014 to completion in March 2015. Such alignment has resulted in substantial cost savings in terms of the IT footprint and the resources required to operate & monitor the systems. Successful negotiation with the landlord on CBH During the separation from ICE, Euronext inherited the lease of the Cannon Bridge House building (CBH), which ran until 2017. In 2014, Euronext decided to vacate completely the office space by end of December 2014 and to transfer the DR by year-end 2015. Following the vacation of the office space in 2014, a provision for onerous contract was booked to cover the costs of the unused space (£25.5m). In parallel, Euronext management engaged with the landlord of Cannon Bridge House to agree on an early surrender of the lease. On 15 April deed of lease surrender was signed with the CBH landlord. The Euronext disaster recovery site will remain in CBH until the end of the year.
- Appeal on capital requirements As mentioned publicly in its Registration document, Euronext has considered all courses of action against the administrative decision of the Dutch Ministry of Finance in February not to modify the capital requirements. The Company considers that this decision could negatively impact Euronext’s strategic plan and create an unlevel playing field, concluding that an administrative appeal procedure should be launched in order to obtain an independent judgment. Euronext has thus lodged an appeal against the Dutch Ministry of Finance at the District Court of Rotterdam on 31 March 2015. In parallel we have an ongoing constructive dialogue with the Dutch Ministry of Finance.
- Loan repayment On 6 May 2014, the Group entered into a syndicated bank loan facilities agreement with 12 institutions (“the Bank Facilities”), with BNP Paribas and ING Bank N.V. as Lead Arrangers, providing for (i) a €250 million term loan facility and (ii) a €250 million revolving loan facility. On 20 February 2015, Euronext NV entered into an amended and extended facility agreement, where the undrawn revolving credit facility has been increased by €140 million to €390 million and €140 million has been repaid as an early redemption of the €250 million term loan facility.
Appointment of Jos Dijsselhof as interim CEO
Euronext N.V. announced on 5 May that it has decided to accelerate its transition plan following the announcement by Dominique Cerutti of his resignation on 22 April, and that it will be appointing Jos Dijsselhof as interim Chief Executive Officer of Euronext N.V. with immediate effect, pending relevant regulatory approvals. As a result of this decision, the Board and Dominique Cerutti have jointly decided for Dominique to leave the company immediately.
- Update on mid-term objectives
The Management Team is fully committed to deliver the 5% CAGR top line growth (over the period 2013 - 2016) and the efficiencies2 announced (€60 million by the end of H1 2015 on a run-rate basis - €80 million by the end of 2016 on a run-rate basis), resulting in an EBITDA margin close to 53% by the end of 2016. During the quarter, we have pursued our effort to reduce our cost structure by undertaking a number of actions, including the commencement of negotiations for a restructuring of our organisation in France.
2 pre tax operating optimisation and efficiencies. Net amount, on a run-rate basis, ie taking into account the full year impact of any cost saving measure to be undertaken before the end of the period mentioned.
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.
Adjusted first quarter 2014 for Clearing revenues and expenses and ICE transitional revenues
For comparative purpose, for the three month period ending 31 March 2014 the revenue, expenses and the subsequent impact on revenues, operational expenses excluding depreciation and amortization have also been included when adjusted for (i) the new derivative clearing agreement with LCH.Clearnet, and (ii) the termination of ICE transitional services starting 1 January 2015. Clearing revenues and expenses were included based on our estimate of the amount of revenue we would have received and the amount of associated expenses we would have paid under the Derivatives Clearing Agreement, based on our actual trading volume for the periods presented and