EURONEXT PUBLISHES Q3 2018 RESULTS

EURONEXT PUBLISHES Q3 2018 RESULTS
STRONG PERFORMANCE ACROSS ALL BUSINESSES AND FIRST ACHIEVEMENTS OF 2019 TARGETS

Amsterdam, Brussels, Dublin, Lisbon, London and Paris - 12 November 2018 - Euronext, the leading pan-European exchange in the Eurozone with 1,300 listed issuers, today announces its results for the third quarter of 2018.

Strong performance for the third quarter of 2018

• Increase in Q3 2018 revenue to EUR150.9 million (+17.2%^[1]):
  • Listing revenue of EUR27.8 million (+37.6%), driven by the consolidation of Euronext Dublin and incremental contribution from Corporate services
  • Cash trading revenue at EUR48.5 million (+9.2%), thanks to a resilient market share, at 65.7%, effective yield management, at 0.52bps, and improved volumes (Cash ADV at EUR7.2bn, (+4.8%))
  • Market data and indices revenue of EUR29.4 million (+16.7%)
  • Improved Group`s revenue diversification initiatives with Euronext Dublin contributing EUR8.1 million, FastMatch EUR5.4 million and selected growth initiatives EUR4.4 million
• Core business costs (excluding D&A) down (-8.2%) while Group costs up (+6.5%) mainly due to perimeter effect (Euronext Dublin and FastMatch)
• EBITDA increased to EUR87.8 million (+26.4%), with a 58.2% margin (+4.2pts)
• Growth in EPS (basic) to EUR0.73 (+31.6%). Adjusted EPS at EUR0.85^[2] (+31.0%)
  • Net income, share of the Group, at EUR50.5 million driven by strong operating performance, cost discipline and impacted by EUR8.8 million of exceptional items
• Performance on a comparable accounting basis: excluding IFRS 15 impact¹, Q3 2018 revenue would have been EUR146.7 million (+13.9%), listing revenue EUR23.5 million (+16.5%), EBITDA EUR83.5 million (+20.2%) and EPS EUR0.68 (+23.5%)

Agility for Growth strategic plan recent events

• Deliver value to shareholders: last twelve months` EBITDA margin for core business^[3] and selected growth initiatives, excluding clearing and new perimeter, reaching the 61% level for the first time, one year in advance, of the 61-63% 2019 EBITDA margin target
• Enhance agility: 2019 cost reduction target achieved one year in advance with EUR24.2 million of cumulated core business gross efficiencies achieved since Q2 2016 (vs. EUR22 million targeted) thanks to continued cost discipline, with less than half of expected restructuring costs incurred (EUR13.9 million vs. EUR33 million targeted)
• Strengthen resilience of the core business: increased market share on cash trading to 65% on average since 2017         (vs. >60% market share targeted)
• Grow in selected segments: Euronext Synapse MTF and Euronext family of Indices in partnership with Morningstar initiatives no longer expected to contribute for EUR20 million of incremental revenue by 2019
• Annual update on Agility for Growth strategic plan during Q4 2018 announcement

Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext, said:

"Euronext delivered in Q3 2018 strong results, driven by growth in all its business lines. Euronext has kept a strong market share on its cash trading business, at 65.7%, along with an effective yield management. Since the beginning of the year, Euronext has diversified, consistently strengthened its position across all asset class traded, as well in non-trading activities, and delivered key milestones of our 2019 objectives for the core business. Thanks to this good performance, Group EBITDA margin is above 58% for the first nine months of 2018.

We are proud to announce that, within the scope of our Agility for Growth strategic plan, Euronext EBITDA margin over the last twelve months reached for the first time, and one year in advance, the 61% level of our 61 to 63% 2019 EBITDA margin target. In addition, the continued focus on costs reduction allowed us to reach the 2019 target one year in advance, with EUR24 million of cost savings on the core business achieved vs. EUR22 million targeted, while incurring less than half of the expected restructuring costs."

For the third quarter of 2018, Euronext consolidated revenue increased to EUR150.9 million, up +17.2%, driven by the consolidation of Euronext Dublin and FastMatch, incremental revenue from selected growth initiatives, strong performance across trading activities and strengthened revenue capture. Excluding IFRS 15 impact, Q3 2018 revenue would have grown by +13.9% compared to Q3 2017, to EUR146.7 million.

Non-volume related revenue^[4] amounted to 46% of total Group revenue in Q3 2018, compared to 45% in Q3 2017. The operating cost coverage ratio^[5] was 110% in Q3 2018.

Operational expenses excluding Depreciation & Amortisation increased to EUR63.2 million, up +6.5%, mainly due to the continued roll-out of selected growth initiatives, the consolidation of FastMatch¹ and Euronext Dublin  (from Q2 2018), despite the decrease in core business costs by 8.2%.

At the end of Q3 2018, EUR24.2 million of cumulated cost savings had been achieved since 1 April 2016, up EUR5.4 million compared to the end of Q2 2018 (EUR18.8 million).

During Q3 2018, selected growth initiatives of Agility for Growth strategic plan generated EUR4.4 million of revenue, mainly driven by Corporate services, and EUR3.6 million of costs (excluding D&A).

EBITDA for the quarter was EUR87.8 million, up +26.4%, representing a margin of 58.2%, up +4.2 points compared to Q3 2017. Excluding IFRS 15 impact, EBITDA would have grown by 20.2% (56.9% margin) compared to Q3 2017, to EUR83.5 million.

EBITDA margin for core business and selected growth initiatives, excluding clearing and new perimeter, reached 62.0% in Q3 2018 and 61.3% over the last twelve months.

Excluding the impact of the consolidation of FastMatch and Euronext Dublin^[6], Euronext consolidated revenue would have amounted to EUR137.5 million in Q3 2018, up +9.2%, with an EBITDA margin of 60.7%, up +6.5pts compared to Q3 2017.

Depreciation and Amortisation increased to EUR6.4 million in Q3 2018, up +81.3%, due to new acquisitions and the impact of PPA^[7] for EUR2.1 million in Q3 2018.

Operating profit before exceptional items was EUR81.3 million, a +23.4% increase compared to Q3 2017.

EUR8.8 million of exceptional costs were booked in Q3 2018 compared to EUR9.7 million in Q3 2017, resulting mainly from the agreement for the early termination of the trading services contract provided by Deutsche Börse AG to the Irish Stock Exchange (now operating as Euronext Dublin) as well as advisory costs and impairments.

Net financing income for Q3 2018 was EUR0.1 million compared to net financing expenses of EUR0.4 million in Q3 2017.

Results from equity investment amounted to EUR0.9 million in Q3 2018, primarily contributed by LCH SA of which Euronext owns an 11.1% stake since 29 December 2017. In Q3 2017, EUR1.7 million related to a deferred capital gain were recorded.

Income tax for Q3 2018 was EUR22.6 million, representing an effective tax rate for the quarter of 30.7% (Q3 2017: EUR18.7 million and 32.4%).

Share of non-controlling interests mainly relating to FastMatch (97% owned), iBabs/Skope (60% owned), InsiderLog (80% owned) and Company Webcast (51% owned) amounted to EUR0.5 million in Q3 2018.

As a result, the net profit share of the Group for Q3 2018 increased by +31.6%, to EUR50.5 million. This represents a reported EPS of EUR0.73 basic and EUR0.72 fully diluted in Q3 2018, compared to EUR0.55 basic and  fully diluted in Q3 2017. The number of shares used for the basic calculation was 69,582,257 and for the fully diluted calculation was 69,833,628.

Adjusted^[8] EPS is up +31.0% in Q3 2018, at EUR0.85, compared to EUR0.65 in Q3 2017. Excluding IFRS 15 impact, adjusted EPS would be up 23.5%, compared to Q3 2017, to EUR0.81.

As of 30 September 2018, the Company had cash and cash equivalents of EUR408 million, and EUR503 million of financial debt. Euronext gross debt / LTM EBITDA ratio amounted to 1.47 at the end of September 2018. In Q3 2018 Euronext generated a net cash flow from operating activities of EUR70.8 million, compared to EUR57.9 million in Q3 2017.

• Listing

Listing revenue was EUR27.8 million in Q3 2018, an increase of 37.6% compared to Q3 2017. Excluding the adjustment on deferred revenue due to IFRS 15^[9], listing revenue would have been EUR23.5 million in Q3 2018, up +16.5% compared to Q3 2017. This good performance was driven by the integration of Euronext Dublin (+EUR5.4 million) and incremental revenue from Corporate services (+EUR1.2 million).

Primary equity issues activity was modest in Q3 2018, impacted by mixed market conditions, partially offset by an enhanced environment for SME deals with notably the listing of Roche Bobois on Euronext Paris. During the third quarter of 2018, 7 new listings, exclusively SME deals, were completed, compared to 6 listings in the third quarter of 2017. This translated into EUR88 million raised in Q3 2018, a decrease from EUR276 million last year.

Activity on the secondary market remained moderate, with follow-on activity recording EUR6.0bn of secondary equity issues, compared to EUR16.6bn in Q3 2017, which was marked by record activity in secondary equity issues.

In total, EUR227.5 billion in equity and debt were raised on Euronext`s markets in Q3 2018, compared to EUR131.9 billion in Q3 2017.

Corporate services generated EUR4.0 million in revenue in Q3 2018, compared to EUR2.8 million in Q3 2017.

 

• Trading

 

Cash trading

Average daily volume for cash trading remained stable at EUR7.2 billion in Q3 2018, up +4.8% compared to Q3 2017. In an environment of persisting low volatility, cash trading revenue increased by +9.2% in Q3 2018, to a total of EUR48.5 million, thanks to an average yield over the quarter of 0.52bps, up +4.2% compared to Q3 2017.

Euronext maintained its strong cash trading market share throughout the quarter, averaging 65.7% in Q3 2018, an increase of +0.5pts compared to Q3 2017.

The average daily transaction value of ETFs on the electronic order book^[10] was EUR201 million over Q3 2018, down -4.9% compared to Q3 2017, impacted by the persisting low volatility. The total number of ETFs listed on Euronext was 1,125 at the end of September 2018.

Derivatives trading

Derivatives trading revenue increased in Q3 2018, to EUR11.0 million, compared to EUR9.9 million in Q3 2017. Individual equity derivatives reported a +17.8% increase on average daily volume to 270,649 contracts, while the average daily volume on equity index derivatives was down -6.3% to 201,224 contracts.

Commodity products recorded increasing average daily volumes in Q3 2018, up +27.1% to 71,868 contracts.

Yield on derivatives averaged 0.31bps in Q3 2018, an increase from 0.30bps in Q3 2017.

Spot FX trading

Spot FX trading activity on FastMatch`s spot foreign exchange market (of which Euronext owns 97% of the capital since August 2018) recorded average daily volumes of $19.4 billion, up +5.9% compared to Q3 2017, supported by emerging markets volatility. As a result, spot FX trading generated EUR5.4 million of revenue in Q3 2018. In Q3 2017, spot FX trading generated EUR2.9 million of revenue, for 1.6 months of consolidation.

• Market data & Indices

Market data & Indices reported strong growth, with revenue up +16.7% to EUR29.4 million in Q3 2018, as a result of new market data agreements and of the consolidation of Euronext Dublin activities.

• Post-trade

Clearing

Clearing revenue increased by +11.6%, to EUR14.2 million in Q3 2018, supported by higher treasury income and dynamic commodities activity.

Custody, Settlement and other post-trade

Revenue from Interbolsa in Portugal and other post trade activities increased by +7.4%, to EUR5.4 million in Q3 2018, driven by an increase in asset under custody and settlement activity compared to Q3 2017.

• Market solutions & Other revenue

Market solutions & Other revenue increased by +10.4% in Q3 2018, to EUR9.1 million as the activity continued to benefit from increased activity in SFTI/Colocation services and increased Optiq® project work on commercial releases for international clients.

• Acquisition of additional interest in FastMatch

On 14 August 2018, Euronext announced the acquisition of approximately 8% of additional interest in FastMatch, a global FX spot market operator, operating as a Euronext company since August 2017. In combination with the stake in the Company that Euronext acquired in August 2017, Euronext owns, since 14 August 2018, an approximate 97.3% interest in FastMatch.

The additional interest was acquired by purchasing the remaining shares owned by Dmitri Galinov, co-founding CEO of FastMatch, for $.001 per share, following his termination for cause by FastMatch. The shares were purchased pursuant to the agreement signed at the time of the acquisition of the Company.

Kevin Wolf, US Head of FICC for Euronext and member of the FastMatch Board of Directors since September 2017, was appointed CEO of FastMatch in June 2018 by the Board of Directors of FastMatch Inc., following Galinov`s termination.

• Volumes in Q3 2018

For the third quarter of 2018, the average daily transaction value on the Euronext cash order book stood at EUR7,232 million, up +2.2% compared to the same period last year.

The average daily transaction value of ETFs on the electronic order book^[11] was EUR201 million over Q3 2018, down -4.9% compared to Q3 2017. The total number of ETFs listed on Euronext was 1,125 at end of September 2018.

The overall average daily volume on Euronext derivatives stood at 543,740 contracts (+8.5% compared to the second quarter of 2017) and the open interest was 18,468,073 contracts at the end of September 2018 (+9.3% compared to the end of September 2017).

The average daily volume on FastMatch`s spot foreign exchange market stood at $19,397 million, up +5.9% compared to the same period last year.

• Update on the integration of Euronext Dublin

On 2 October 2018, Euronext announced an update on the integration of Euronext Dublin, of which Euronext completed the acquisition on 27 March 2018.

Migration to Optiq® for Euronext Dublin in February 2019

The migration of Euronext Dublin`s Cash Market to Euronext`s trading platform Optiq® is planned in February 2019, subject to regulatory approval.

The migration to Optiq®, Euronext`s proprietary trading platform, will allow Euronext Dublin trading members and investors to benefit from access to trading across all cash equity asset classes available on Euronext`s pan-European exchanges. Euronext and Deutsche Börse will work together actively to ensure a smooth transition.

Upgraded cost synergies targets

As a result of the first successful integration steps, Euronext has identified additional cost-saving opportunities, and now expects to deliver EUR8 million (vs EUR6 million announced at the time of acquisition) in pre-tax run-rate cost synergies. As part of the integration, total costs of EUR14 million (vs EUR9 million announced at the time of acquisition) will be incurred in the first years of integration.

Signing of a termination agreement with Deutsche Börse for the migration of Euronext Dublin to Optiq®

Euronext has signed an agreement for the early termination of the trading services contract provided by Deutsche Börse AG to the Irish Stock Exchange (now operating as Euronext Dublin), initially due on December 2021. This agreement will contribute to approximately 50% of the announced EUR8 million in cost synergies. Furthermore, Euronext has recognised a EUR4 million impact from this settlement as an exceptional P&L expense in Q3 2018.

• Euronext Extraordinary General Meeting results

On 4 October 2018, Euronext announced that during the Extraordinary General Meeting that took place this day, the appointment of Daryl Byrne and Chris Topple as members of the Managing Board of Euronext N.V. was approved by its shareholders.

• Volumes for October 2018

Cash trading

In October 2018, the average daily transaction value on the Euronext cash order book stood at EUR8,865.9 million, up +20.2% compared to October 2017 and up +6.2% from the previous month.
The average daily transaction value on ETFs order book^[12] was EUR302 million, up +45% compared to October 2017 and up +40.2% from the previous month. At the end of October 2018, 1,133 ETFS were listed on Euronext compared to 1,048 at the end of December 2017.

Derivatives trading

In October 2018, the overall average daily volume on derivatives reached 602,169 contracts, up +21.0% compared to October 2017 and up +4.7% compared to the previous month. In detail:

• the average daily volume on equity index derivatives reached 266,380 contracts, up +38.9% compared to October 2017 and up +22.1% from the previous month,
• the average daily volume on individual equity derivatives reached 292,697 contracts, up +10.4% compared to October 2017 and down -4.9% from the previous month,
• the average daily volume on commodities derivatives reached 43,092 contracts, up +5.3% compared to October 2017 and down -12.0% from the previous month.

At the end of October 2018, the overall average daily volume on Euronext derivatives stood at 582,033 contracts (+7.1% compared to the end of October 2017) and the open interest was up at 20,117,189 contracts (+9.9% compared to the end of October 2017).

FX spot trading    

In October 2018, the average daily volume on the spot foreign exchange market of FastMatch, operating as a Euronext company since August 2017, stood at $19,174 million, up +6.3% compared to October 2017 and up +2.8% from the previous month.

Listings

In October 2018, Euronext had three new listings from Shurgard Self Storage SA and Neoen SA on Euronext main market and Medincell SA on Euronext Growth that raised EUR1.23 billion. In addition, EUR96.4 billion were raised on Euronext in bonds of which EUR1.8 billion in green bonds and EUR20.7 billion in follow-on equity of which EUR18 billion from the share capital increase of Essilor-Luxottica.

 

 

 

 

A conference call and a webcast will be held today at 9.00am CET (Paris time) / 8.00am UK time:

Website : www.euronext.com/en/investors

To connect to the conference call, please dial:

• UK Number: +44 2071943759
• FR Number: +33 172727403
• IR Number: +353 14311252
• NL Number: +31 207095119
• BE Number: +32 24035816
• US Number: +1 6467224916  
• PT Number: +351 210609110

PIN CODE: 74096647# 

Live Webcast:
A live audio webcast and replay after the call will be available via this link and on Euronext`s Investor Relations website.

Investor Relations:
Aurélie Cohen                                      +33 1 70 48 24 27; ir@euronext.com

Media:
Pauline Bucaille                                    +33 1 70 48 24 41; mediateam@euronext.com
                                                                                                                                                                             

Euronext is the leading pan-European exchange in the Eurozone, covering Belgium, France, Ireland, The Netherlands, Portugal and the UK. With 1,300 listed issuers worth EUR3.9 trillion in market capitalisation as of end September 2018, Euronext is an unmatched blue chip franchise that has 24 issuers in the Morningstar® Eurozone 50 IndexSM 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, 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).

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.
© 2018, Euronext N.V. - All rights reserved.

The Euronext Group processes your personal data in order to provide you with information about Euronext (the "Purpose"). With regard to the processing of these personal data, Euronext will comply with its obligations under the Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation, "GDPR"), and any applicable national laws, rules and regulations implementing the GDPR. In accordance with the applicable legislation you have a right to access your personal data and a right to the rectification, erasure, restriction of processing, data portability or to object to the processing of your personal data. You may also submit a complaint to the competent data privacy authority. For any request regarding the processing of your data, please use our data subject request form or email our Data Protection Officer at dpo@euronext.com. Your personal data will be retained as long as necessary for the Purpose and will be accessible only to the extent necessary for this specific Purpose.
APPENDIX

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

• Operational expenses excluding depreciation and amortisation
• EBITDA, 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 expenses
-          EBITDA as the operating profit before exceptional items and depreciation and amortisation
-          EBITDA 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 15 has increased Q3 2018 Listing revenue by EUR4.3m, compared to the previous treatment of revenues.

Euronext has chosen to adopt the modified retrospective approach and is therefore not required to restate financial statement issued prior to 1 January 2018 incorporating the impact of IFRS 15:

However for information purposes the P&L impact of IFRS 15 for the year ended 31 December 2017 would have been:

IFRS 15 deferral adjustments impact on balance sheet:

 

 

 

 

 

 

 

 

The figures in this document have not been audited or reviewed by our external auditor.

 

 

The figures in this document have not been audited or reviewed by our external auditor.

The figures in this document have not been audited or reviewed by our external auditor.

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.

 

Derivatives markets activity

 

 

 

 

Spot FX Trading

 

*END*