Euronext Publishes Full Year 2015 Results

Regulatory News:

Today Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX) announced its results for the full year of 2015.

• Successful achievement of the IPO objectives undertaken for 2016 a year in advance:
  • Third party revenue of €518.5 million, while IPO objective was to reach €500 million by the end of 2016
  • Cumulated efficiencies of €83 million net (run-rate), while IPO objective was €60 million then revised up to €80 million net by the end of 2016
  • Full-year EBITDA margin of 54.7%, while IPO objective was 45%, then revised up to 53% by the end of 2016
• Consistent dividend policy, with a €1.24 per share dividend proposed for approval at the AGM on 12 May 2016, which represents an increase of 48% compared with €0.84 per share paid last year

"Our strong results in 2015 were underpinned by a supportive Eurozone economic environment; macro uncertainty has been a solid driver of volumes on Euronext’s markets. Our revenue performance, combined with a rigorous approach to cost control, allowed Euronext to achieve, a year ahead of schedule, the objectives set out at its IPO. We are pleased to be in a position to improve the value we deliver to our shareholders, proposing for approval at our AGM in May the payment of €1.24 dividend per share, an increase of nearly 50% compared to last year. Trading activity in 2016 has been resilient so far; Euronext is well positioned to benefit from volatility emerging from the current environment. I look forward to presenting, in the course of the second quarter of 2016, our new strategic plan. This plan will be structured on two key pillars: revenue growth and cost discipline,” said Stephane Boujnah, CEO and Chairman of the Managing Board of Euronext NV.

Financial performance

Third party revenue increased by +10.1% on an adjusted basis to €518.5 million (FY 2014 adjusted: €470.9 million), and by +13.1% on a reported basis (FY 2014 reported: €458.5 million). 2015 has been a strong year for the listing business, as well as for cash trading. Buoyant market conditions, resulting from the ECB Monetary Policy and from some economic uncertainties (Greece in the first half of the year and China in the third quarter), resulted in strong trading volumes.

In 2014, Group revenue included €34 million of transitional revenue and other income from ICE, reflecting primarily (i) the IT support services provided to LIFFE for the operation of its derivatives exchanges in the UK and in the US, and (ii) the impact of the Cannon Bridge House sublease rent in London. These services and related revenues terminated on 1 January 2015.

The transformation of our cost structure resulted in a -14.3% decrease in operational expenses excluding Depreciation & Amortization (FY 2014 adjusted: €274 million), to €234.7 million, and in a -12.1% decrease on a reported basis (FY 2014 reported: €267.1 million).

As a result of these strong improvements, both on the revenue and on the cost sides, EBITDA increased strongly in 2015 to €283.8 million, representing a margin of 54.7% compared to 41.8% on an adjusted basis (FY 2014: €197 million) and to 45.8% on a reported basis (FY 2014 reported: €225.4 million).

Depreciation and Amortization increased by +2.6% in 2015, to €17.1 million. This was mainly due to some accelerated depreciation of assets in conjunction with our relocations in France and Belgium.

Operating profit before exceptional items for the year was €266.8 million, an increase of +47.9% compared to 2014 on an adjusted basis, and of +27.8% on a reported basis.

€28.7 million of exceptional costs were booked in 2015 compared to €44.6 million in 2014. These costs include restructuring costs for €22.6 million. Exceptional costs not linked to restructuring include €5 million of provision for AMF litigation. Cumulated restructuring expenses for the period 2014-2015 stand at €67.2 million.

The effective tax rate for the full year has been limited to 27.6% due to the release of a €13.9 million provision for uncertain tax in the last quarter of the year. Income tax recognized in 2015 thus amounted to €65.9 million, compared to €44.1 million in 2014.

As a result, the net profit for the year 2015 was €172.7 million, increasing by +46.1% compared to 2014. This represents an EPS of €2.47 basic and €2.46 fully diluted, compared to €1.69 both basic and fully diluted in 2014.The number of shares used for the (basic) calculation was 69,851,603 for 2015 compared to 69,998,908 in 2014.

The Supervisory Board, upon the recommendation of the Managing Board, has decided to propose for approval at the Annual General Meeting on 12 May 2016, the payment of a dividend of €1.24 per share. This represents a pay-out ratio of 50% of the net profit and is based of the number of outstanding shares at the end of the period. This is a +48% increase compared to the €0.84 dividend per share that was paid to shareholders last year.

As of 31 December 2015, the Group had cash and cash equivalents of €158.6 million, and total debt of €108.3 million. As anticipated in the release our Q3’2015 results, a cash tax payment of €58 million took place in the last quarter of the year.

Business highlights

• Listing

The Listing business has delivered a strong performance in 2015, with €12.4 billion raised in primary activity. Companies from a large diversity of sectors and segments joined Euronext markets in 2015, from SMEs to large-capitalizations (such as ABN Amro, Amundi, Grandvision, Intertrust) and large cross border deals took place (Altice, LafargeHolcim,etc.). As a result, revenues were €70.5 million in 2015, an increase of +14.2% compared to the €61.7 million achieved in 2014.

EnterNext, our subsidiary dedicated to the promotion and growth of small and medium-size companies, sustained its development, with a growing number of SMEs listings for the fourth consecutive year. There were 34 new listings and €1.2 billion raised in equity during the year (FY 2014: 29 new listings and €740 million raised).

In total, €111.7 billion in equity and debt was raised on our markets in 2015, compared to €104.4 billion in 2014. 52 new listings took place in 2015, raising €12.4 billion compared to 45 listings for €11.2 billion in 2014.

• Trading

Cash trading

Cash trading delivered solid annual revenues of €197.2 million, up +19.1% compared to the €165.6 million achieved in 2014. Average daily volumes for the year reached €8.3 billion (+27.8% compared to €6.5 billion in 2014).

This robust performance was largely driven by buoyant market volumes due to the ECB Monetary Policy, and to successive rounds of market volatility during the year, resulting from uncertainties on some economies. Market share for the year was over 63% for 2015 despite intense competition for high volume yet mobile, low yield flow. The balance of market share and yield has been nurtured throughout the year, with carefully planned evolution of our liquidity schemes.

Activity on ETFs was particularly dynamic in 2015 with an average daily transaction value at €613 million, up 74% compared to 2014. Warrants listings grew to a record level in excess of 50k. Fixed income activity was subdued due to the low rate environment.

Derivatives trading

Derivatives trading revenue decreased by -4.3% in 2015 compared to 2014, to €44.5 million.

Commodities benefited from higher volumes (+8.6%) due to the situation in Ukraine in the first quarter of the year, and to adverse weather conditions in both Western Europe and in the Midwest Plains causing uncertainty on the harvest campaign. Volumes, however, slowed down in Q4, as expected, given the volume upload in Q3. During the year, 14.3 million lots were exchanged in Euronext commodities markets, an absolute record since their start in 1994.

Financial derivatives suffered from lower volumes in 2015 (-4.8% on index products , -9.9% on individual equity products), in line with volatility and competition in The Netherlands. As a result of the fee cut in The Netherlands to address competition, market share was brought back to 60% on average. Our single stock futures complex is showing signs of traction with open interest at 75,000 lots at the end of January 2016, exceeding the combined open interest of AEX, BEL and PSI Index Futures for the first time.

• Market data & indices

Revenue from market data and indices in 2015 were up +6.9%, to €99.8 million (FY 2014: €93.3 million), benefiting both from sustained market data activity, and from the promising start of our new global index server, which debuted at the end of September. Our new index processor has already delivered six new index families, and 50 new indices in total. A new online corporate action data portal and associated pricing was launched on 1^st October. 80 clients for Cash and Index notices have been signed so far.

As of 31 December 2015, there were over 7,000 ETPs (Exchange Traded Products) linked to Euronext indices listed on our markets, an increase of 25.3% on 2014. ETFs linked to Euronext indices had a net inflow of assets under management (AUM) of €1.15bn, on a total AUM growth of €1.4bn, leading to an all-time high of AUM of €6.5bn.

• Post-trade

Clearing

Clearing revenues were positively impacted by the favourable product mix in our derivatives trading franchise, and specifically by the good performance of our commodity franchise. Revenues for the year were €51.9 million, up +7.2% compared to €48.5 million adjusted in 2014 (FY 2014 reported: €36 million).

Settlement & Custody

Revenues for Interbolsa in Portugal in 2015 were €19.7 million, down -7.3% compared to the €21.3 million in 2014 due to a reduction in settlement instructions, corporate actions and private debt assets under custody in Portugal during the year. Interbolsa remains on track to go live in Wave 2 of T2S at the end of March 2016.

• Market solutions & other

Revenues from market solutions increased by +2.1% in 2015 compared to 2014 (from €33.4 million to €34.1 million). This increase was mainly driven by the recognition of €1.5 million non-recurring revenue, offsetting the reduction in solution revenue.

Corporate Highlights

• Capital requirements

On 17 December 2015, the District Court of Rotterdam rendered its decision in the appeal procedure, and decided that the new capital requirements imposed in the June 2014 license were not applicable any longer. The court ruled that the June 2014 License granted by the Dutch Minister was cancelled and replaced by the precedent one of March 2014, pending a revision of that license into a new and final license. Under the March 2014 license, Euronext NV has to confirm and demonstrate annually to the AFM that it has sufficient financial means to run its business during the coming 12 months and that it will be possible to meet its financial obligations during this period. The court also ruled that in view of the revision of the March 2014 license, Euronext has to demonstrate to the Dutch Ministry of Finance that it has at its disposal sufficient financial means to promote the orderly operations of the market. On 17 December 2015, Euronext issued a press release stating that pursuant to this decision, it will maintain its dialogue with the Minister of Finance with a view to continue complying with all applicable requirements in the most transparent manner in order to best serve its clients.

On 28 January 2016, the Ministry of Finance lodged an appeal against the decision taken by the District Court of Rotterdam, which appeal has no suspensive effect. Therefore, the applicable license for capital requirements remains the one of March 2014, with no particular capital requirements at the holding level, pending a revision of this license into the new and final license.

• AMF litigation

In connection with an investigation by the AMF into the trading pattern of a member firm using algorithmic trading strategies, the AMF notified Euronext Paris on 25 July 2013 that the exemption from certain fees granted in a non-public way to the trading firm under investigation may have been a violation of the General Regulations of the AMF by Euronext Paris in its capacity as a market operator. Euronext Paris contested the position of the AMF.

On 8 December 2015, the Enforcement Committee of AMF sentenced Euronext Paris to pay a fine of €5.0 million for alleged wrong-doing in the HFT pilot program launched by NYSE Euronext in 2009 and discontinued in 2010. After reviewing the ruling of AMF’s Enforcement Committee, Euronext announced that it would appeal against the decision, and has effectively lodged an appeal in front of Conseil d'Etat on 8 February 2016. As per IFRS rules, however, Management has recorded a provision of €5.0 million in its financial statements.

• Mid-term objectives

Euronext has achieved its IPO mid-term objectives as an independent Company a year in advance. At IPO Euronext announced that it anticipated:

• Revenues to grow by a CAGR of 5% over the period 2013-2016 – it has delivered 9.5% CAGR over the period 2013-2015;
• Costs to be reduced by €60 million net on a run-rate basis by the end of 2016 (upgraded to €80 million in February 2015) – it has delivered €83 million net on a run-rate basis at the end of 2015;
• EBITDA margin to stand at 45% at the end of 2016 (upgraded to 53% in November 2014) – it has delivered a margin close to 55%.

Euronext will provide the market with a full set of mid-term objectives in the course of Q2’2016, upon the completion of the strategic review initiated by the CEO following his arrival on 16 November 2015.

Within this framework, it is expected that in 2016 Euronext will incur selected expenditures to continue to reposition the Company, that might offset part of the additional cost saving measures undertaken in 2015.

Therefore, we expect our cost base for the year to be stable compared to 2015, re-iterating our €80 million of net cost reduction by the end of 2016.

As of year-end 2015, out of the €90 million of restructuring costs announced at IPO time €67.2 million have been spent. Several potential development options are currently being assessed by the Company as part of its strategic review. As a result of this process, part of these unspent restructuring costs could be used in 2016 for the implementation of these options.

• Governance

On 16 November 2015, Stephane Boujnah joined Euronext as CEO and Chairman of the Managing Board.

On 28 January 2016, Euronext announced that Luis Laginha, Chairman and CEO of Euronext Lisbon and Interbolsa and member of the Managing Board of Euronext NV, had resigned and would step down from his role as CEO. This departure was agreed mutually based on Luis Laginha’s desire to pursue other professional interests. He will continue to fulfil his responsibilities until the shareholders’ meetings of both entities have taken place on 22 February 2016.

A replacement for Luis Laginha will be recruited in the coming months. Until such time as this recruitment process is finalised, Isabel Ucha, currently member of the Board of Euronext Lisbon and Director of Local Market Development, will be appointed interim CEO of Euronext Lisbon. Rui Matos, currently Board Member of Interbolsa, will be appointed interim CEO of Interbolsa. In addition, Hugo Rocha will be appointed to the Board of Euronext Lisbon. All these appointments are subject to prior non-objections from relevant market authorities.

• Refreshment of trading system

As mentioned in earlier results communications, Euronext is investing in its core technology, under the programme Optiq. We are investing to enhance the performance of our systems, the time to market of new products and services, and the stability and security of our core markets for our members and issuers. This programme will ensure we will stay at the forefront of our industry and is part of the continuous improvement Euronext is making to its business and its infrastructure.

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 2014 for Clearing revenues and expenses and ICE transitional revenues

For comparative purpose, for the twelve month period ending 31 December 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 assuming the Derivatives Clearing Agreement had been in effect starting on 1 January 2014.

Financial calendar

About Euronext

Euronext is the primary exchange in the Euro zone with more than 1 300 listed issuers worth more than €3.0 trillion in market capitalization as of end December 2015, 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 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 may 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.

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

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