Euronext Publishes Second Quarter 2015 Results

Regulatory News:

Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX) today announced its results for the second quarter and for the first six months of 2015.

• Third party revenue increased by +11.9% to €130.1 million (Q2 2014: €116.3 million)
• Substantial reduction in operational expenses excluding depreciation and amortization: -11.0% compared to Q2 2014
• EBITDA margin of 53.9%
• €51 million of cumulated efficiencies achieved on an accrued basis - €64 million on a run-rate basis
• €63 million of associated restructuring expenses
• Objective of approx. €500 million of revenues (5% CAGR over 2013-2016) and 53% of EBITDA margin to be reached by year-end

"Today we are announcing good results with solid revenue growth for the fifth consecutive quarter resulting from strong performance across most of our businesses. This achievement reflects the focus of our management team in executing on our sound strategy. We are proud to confirm that we have delivered, as previously announced, more than €60 million of efficiencies on a run rate basis at the half-way point of our strategic plan, thanks to a strong focus on costs. We are committed to achieving the efficiencies still to be made by the end of 2016 to reach €80 million on a run-rate basis.” said Jos Dijsselhof, Interim CEO and COO of Euronext NV.

Financial performance

Third party quarterly revenue increased by +11.9% to €130.1 million (Q2 2014: €116.3 million), driven by very strong performance in the cash trading business, underpinned by robust economic trading conditions. The market data and listing businesses recorded a good performance and commodity trading benefited from higher volatility for grains.

In Q2 2014 Group revenue included €9.2 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; as well as the impact of the Cannon Bridge House sublease rent in London.

Quarterly operational expenses excluding Depreciation & Amortization decreased by -11.0% to €60.0 million (Q2 2014: €67.4 million), thanks to ongoing strong cost discipline.

As a result of this strong activity combined with a reduced cost base, the EBITDA increased strongly in Q2 2015 to €70.1 million, representing a margin of 53.9% compared to 46.3% in Q2 2014.

Depreciation and Amortization increased by 10.2% in Q2 2015, to €4.5 million due to the accelerated depreciation of assets in Brussels and Paris as a result of the relocations.

Quarterly operating profit before exceptional items was €65.6 million, an increase of 21.5% compared to Q2 2014.

€24.6 million of exceptional costs were booked in the second quarter of 2015. These costs include mostly restructuring costs, including this quarter the recognition of a provision for the restructuring in Paris (€22.1m) and some redundancy costs in Europe.

The tax rate for the quarter was 33.6%, slightly higher than the expected normalized tax rate for the year. As a result of the strong activity, relatively more income was recognized in France, taxed at 38%.

The net profit for Q2 2015 was €28.7 million, stable compared to Q2 2014, representing an EPS of €0.41 (both basic and fully diluted).

As of 30 June 2015 the Company had cash and cash equivalents excluding financial investments of €128.4 million, and total debt of €107.7 million.

Business highlights

• Listing

Listing revenues were €19.3 million in Q2 2015, an increase of 1.9% compared to the €18.9 million achieved in Q2 2014. This performance was driven both by an increase in fixed revenues and by strong secondary market activity. In total €21.7 billion in equity and debt was raised on our markets in Q2 2015, compared to €33.8 billion in Q2 2014. 14 new listings took place in Q2 2015, raising €2.3 billion compared to 24 listings for €4.5 billion during the same quarter in 2014. Among the largest deals in Q2 were the IPOs of Spie and Europcar as well as an international transaction with the technical listing of NYSE-listed International Flavors & Fragrances (IFF), adding €11.5 billion in market capitalization.

Several benchmark transactions among our listed issuers took place during Q2 2015 on our Debt Capital markets, including the Unilever €1.2 billion bond issuance and Klepierre’s €750 million transaction. In addition, several benchmarking Green Bonds transactions were launched on our markets over the last couple of months: €500 million Ile-de-France bond (second Ile de France transaction), €1 billion Tennet bond issuance (first Dutch non-financial issuer Euro zone Green bond), €500 million ABN Amro listing (First Euro zone green bond certified under the new Climate Bonds Standard).

EnterNext, our subsidiary dedicated to the promotion and growth of small and medium-size companies, maintained a strong capital raising dynamic during Q2, with €2.1 billion raised across our primary and secondary offerings and a continued resurgence in IPOs resulted in 10 SME listings compared to 17 in Q2 2014). During the first half year, we have seen 20 IPOs and €797m raised, compared to 31 IPOs and €740m raised in the full year 2014. July confirmed this positive trend with five new SME listings and an additional €96m raised.

• Trading

Cash trading

Our performance in the cash trading business has been exceptionally strong in Q2 2015 with revenues of €49.0 million, an increase of 24.0% compared to €39.6 million in Q2 2014.

This quarter was our best quarter for volumes since Q2 2010, with cash market average daily volumes of €8.8 billion, +41% compared to Q2 2014. Renewed commercial focus, deeper client engagement, product development and pricing optimisation are fuelling this growth as well as buoyant economic conditions strongly bolstering equitisation.

We continue to focus on nurturing our domestic market share, which returned to 64.8% for the month of June in a highly competitive environment.

We continue to grow our ETF franchise, with 18 new listings during Q2 2015 including the first money market ETF denominated in RMB in partnership with China Construction Bank (CCB), the world’s 2^nd largest bank by Tier 1 Capital. Volumes were up +101% vs Q2 2014 and AUM reached a new record at €279.4 billion (+74% compared to the end of last year).

Derivatives trading

Derivatives trading revenue increased by +5.9% in Q2 2015 compared to the same quarter last year, amounting to €11.0 million.

Commodities trading saw a strong increase in volume of +45% versus Q2 2014 which was largely due to adverse weather conditions in both Western Europe and in the Midwest Plains resulting in higher volatility for grains. Index futures and options grew by 14% compared to Q2-2014 due to increased volatility generated by the situation in Greece. Trading activity on individual equity derivatives continue to underperform with volume down 10% compared to Q2 2014.

We continue to pan-Europeanise our equity derivatives franchise as a core strategic theme, with the Exchange-for-physical service on AEX and CAC Indices live in early May and our OTC trade capture and clearing service currently in test.

• Market data & indices

Market data & indices revenue in Q2 2015 was up 3.8% compared to the same quarter in 2014, to €24.5 million (Q2 2014: €23.5 million) benefiting from the impact of the price increase for Level 2 data effective 1 January 2015, the good performance of the index license revenue for products linked to blue chip indices and the compliance audits.

• Post-trade

Clearing

For Q2 2015 Euronext recorded clearing revenues of €13.3 million, up 26.1% compared to Q2 2014 (€10.6 million), positively impacted by the product mix in the derivatives trading business.

Settlement & Custody

Revenues for Interbolsa in Portugal decreased by 8.3% in Q2 2015, to €5.1 million, compared to €5.5 million in Q2 2014 due to the 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 2.6% in Q2 2015 compared to the same quarter in 2014 (from €7.8 million to €8.0 million), primarily driven by ongoing service fees, reflecting our intention to reduce sensitivity to one-off project revenues.

Corporate Highlights

• CEO replacement

Following the resignation of Dominique Cerutti on 22 April, and the appointment of Jos Dijsselhof as interim Chief Executive Officer of Euronext N.V. on 5 May, the Supervisory Board has tasked the Nomination and Governance committee to launch a search for the new CEO on a permanent basis. The process is set to be concluded over the summer. The successor’s name should then be announced pending regulatory approvals and shareholders’ approval, an Extraordinary General Meeting being then scheduled for late October.

• Relocation

As part of its efficiencies plan Euronext has relocated its Brussels and Paris premises in Q2 2015 following the relocation of its London office in 2014. The new premises better suit the company's needs, and also better fit with Euronext’s new culture of efficiency, growth and innovation.

• Reinforcement of the Group multipolar exposure

Euronext has signed a Memorandum of Understanding (MOU) with Shenzhen Stock Exchange to enhance the development of Exchange Traded Products (ETPs) in the People’s Republic of China and the Euronext markets. The MOU is the starting point for collaboration on joint development, research, marketing and specialized trading technology, as well as co-branding of indices and Exchange Traded Products.

In addition, Euronext signed two Memorandums of Understanding with ICBC and CCB in order to further strengthen ties between the Exchange and these leading Chinese banks with the goal to position Euronext as a key hub for off-shore RMB and Chinese investors in the context of the internationalisation of the RMB.

• Expansion of the product offering

During the second quarter, Euronext has continued to expand its product offering, launching some promising new financial derivatives products:

- Additional spotlight options

- Country indices for Germany, Italy and Spain

In the field of commodities Euronext has also taken new decisions:

- Move into the renewable energy space with the launch of the wood pellet contract

- Suspension of the malting barley product with the view to potentially redevelop it as part of a feed barley contract.

EnterNext has also extended its product offering for the financing of the SMEs, launching a commercial solution specifically designed to simplify Dutch small companies access to capital and providing a broader investor base for Belgian and Dutch family businesses and entrepreneurs.

• Staff restructuring

Euronext is aiming to right size the company for its new positioning while allowing for a reduction of its cost base. In France this decrease will materialize through social plan process which is framed by the relevant legal and administrative processes and currently ongoing. A provision of €22.1 million was thus recognised as at 30 June 2015.

• Appeal on capital requirements

The appeal lodged against the Dutch Ministry of Finance at the District Court of Rotterdam on 31 March 2015 related to the consolidated capital requirements is still pending. The appeal hearing scheduled by the Court is due to take place in September or October 2015.

• Update on cost efficiencies

The Management Team is pleased to confirm that it has delivered, as previously announced, €64 million of efficiencies on a run rate basis by the end of June 2015 - the half-way point of our strategic plan - and 18 months ahead of schedule. The Management Team remains strongly focused on execution, so as to achieve the efficiencies still to be delivered. By the end of 2016 we will have achieved on a run-rate basis €80 million of efficiencies, or 25% of our comparable cost base for 2013.

• EBITDA margin

We are in a position to confirm that the objectives of €500 million of revenues resulting from the 5% CAGR we had anticipated over the period 2013-2016 and the approximative 53% EBITDA margin will be achieved by year-end, given (i) where we currently stand, (ii) the continued focus on the execution of our cost reduction plan, and assuming the continuity of the current trading conditions.

• Court case vs TOM and BinckBank

The District Court in the Hague, the Netherlands upheld Euronext’s claim that TOM had breached its various intellectual property rights by trademark infringement, database infringement, breach of contract and publishing misleading information and activities for investors. Furthermore, the Court ordered TOM and BinckBank to place an announcement regarding misleading advertisement of their Smart Order Router on the websites of Alex, BinckBank and TOM.

• Refresh of core trading infrastructure

Euronext is initiating a multi-year programme in its core technology to deliver improved performance to our customers, underpin our product growth strategy, reduce our cost footprint, and improve efficiency thus maintaining our status as a leader in the industry. This is part of Euronext’s constant commitment to business performance. The related cost of the project is factored in our existing Capex guidance.

• Purchase of own shares

In order to hedge price risk arising from the employee share plans for 2014 and 2015, Euronext will begin a programme to purchase its own shares in the coming days for a total value of €20 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.

[Financial tables omitted]

Financial calendar

About Euronext

Euronext is the primary exchange in the Euro zone with more than 1 300 issuers worth €3.1 trillion in market capitalisation, an unmatched blue-chip franchise consisting of 24 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.

© 2015, Euronext N.V. - All rights reserved.

This press release is available in English, French, Dutch and Portuguese; nevertheless the English version prevails.

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