Euronext publishes Q2 2020 Results

Solid Second Quarter 2020 briven by increased trading volumes in all asset classes and continued benefits from diversification.

Euronext, the leading pan-European market infrastructure, today announced its results for the second quarter of 2020.

• Revenue at €210.7 million (+32.5%):

  • Trading revenue increased to €89.4 million (+34.0%), with growth across all asset classes and €6.7 million contributed by Nord Pool power trading. Like-for-like1, trading revenue increased +19.0%. Recently launched single stock futures saw strong commercial traction and diluted derivatives overall trading yield
  • Post-trade revenue increased to €36.1 million (+64.5%), driven by the consolidation of revenue from VPS, the Norwegian CSD, and higher clearing revenue. Like-for-like, post-trade revenue increased +7.9%
  • Listing revenue increased to €36.1 million (+21.3%), driven by the consolidation of Oslo Børs VPS and the solid performance of Corporate Services at €7.9 million (+33.8% like-for-like). Like-for-like, listing revenue increased +6.0%
  • Advanced data services revenue increased to €35.8 million (+16.0%), as a result of the consolidation of Oslo Børs VPS and Nord Pool, and the good performance of the core business. Like-for-like, advanced data services revenue increased +6.1%
  • Nord Pool contributed €8.6 million2
  • Group non-volume related revenue3 accounted for 49% of Q2 2020 total revenue (vs. 48% in Q2 2019), and covered 122% of operating expenses excluding depreciation & amortisation (vs. 124% in Q2 2019)

• EBITDA at €125.4 million (+27.8%), with EBITDA margin at 59.5% (-2.2pts); like-for-like, EBITDA margin was 61.7%:

  • Group operating costs excluding D&A were up +€24.4 million to €85.3 million, primarily as a result of the consolidation of costs from acquired businesses currently undergoing integration
  • Euronext confirms its 2020 guidance for costs, excluding D&A, of mid-single digit4 growth in 2020, compared to the H2 2019 annualised cost base, to reflect expected costs in H2 2020 related to the integration of Oslo Børs VPS and implementation of the strategic plan projects

• Reported net income, share of the Group, at €82.1 million (+53.7%) and Adjusted EPS5 at €1.23 (+33.1%)

  • Increased financing costs related to the interest expenses on the second bond issued in June 2019
  • Income tax rate at 25.1%, positively impacted by tax one-offs

Acquisition of VP Securities

  • Danish Financial Supervisory Authority clearance was received on 15 July 2020 and closing is expected early August 2020
  • 90.68% of total shares were tendered to the Euronext offer as of 15 July 20206
  • Run-rate cash cost synergies7 in year 3 are expected to reach €7 million, through optimised operating model, IT footprint optimisation and rationalisation of support functions
  • Restructuring provisions are expected to be incurred in Q4 2020

Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext, said:
“In the second quarter of 2020, Euronext delivered a solid performance with double digit growth across most asset classes, which, combined with continued cost control, translated into a higher EBITDA of €125.4 million and a +33.1% increase in adjusted EPS to €1.23. Euronext confirms its 2020 cost guidance of mid-single digit growth in 2020 compared to the annualised second half 2019 cost base, as costs related to the Oslo Børs VPS integration and strategic plan projects are expected to ramp up in second half 2020.
This second quarter, we also launched a suite of ESG products and services to empower sustainable growth. This constitutes an important milestone in the ESG roadmap of our three-year strategic plan ‘Let’s Grow Together 2022’. In addition, we became the first stock exchange to endorse the UN Global Compact’s nine Ocean Principles, having been an Official Supporter of the United Nations’ Sustainable Stock Exchanges initiative since 2015.
The third quarter has gotten off to a positive start for our ongoing diversification strategy, with the Danish FSA’s approval for the acquisition of VP Securities in July. We expect to close the transaction early August 2020, and the acquisition to be EPS accretive in full year 1. We are anticipating €7 million run-rate cash cost synergies in year 3, through organisational and IT optimisation, delivering a return in line with our investment criteria. The integration process has already started and we will report VP Securities’ revenue contribution from the third quarter.”

In the second quarter of 2020, Euronext consolidated revenue increased to €210.7 million, up +32.5%, primarily resulting from increased trading volumes in all asset classes and from the consolidation of Oslo Børs VPS and Nord Pool. On a like-for-like basis (excluding the consolidation of Oslo Børs VPS, Nord Pool, OPCVM360 and Ticker in Q2 2020), Euronext consolidated revenue was up +12.4% in Q2 2020, at €173.8 million.

Non-volume related revenue accounted for 49% of total Group revenue in Q2 2020, increasing from 48% of total Group revenue in Q2 2019. This reflects the double digit growth in trading revenue in Q2 2020. The operating cost coverage ratio was at 122% in Q2 2020, compared to 124% in Q2 2019.

Operational expenses excluding depreciation & amortisation increased to €85.3 million, up +40.1%, i.e. by €24.4 million, as a result of the consolidation of the costs from Oslo Børs VPS (consolidated for only 2 weeks in Q2 2019), Nord Pool, OPCVM360 and Ticker for €18.8 million, as well as higher clearing expenses reflecting higher cleared derivatives volumes. On a like-for-like basis, operational expenses excluding depreciation & amortisation increased by +12.4% compared to Q2 2019, as a result of higher staff costs and professional services.

Consequently, EBITDA for the quarter was €125.4 million, up +27.8%, representing a margin of 59.5%, down -2.2 points compared to Q2 2019, due to the ongoing integration of Oslo Børs VPS and other recently acquired companies. On a like-for-like basis, EBITDA for Q2 2020 was up +12.4%, to €107.3 million, and EBITDA margin was 61.7%, stable, compared to the same perimeter in Q2 2019.

Depreciation and amortisation accounted for €13.6 million in Q2 2020, up +52.8%, resulting mainly from the consolidation of recently acquired businesses and their respective PPA . On a like-for-like basis, depreciation & amortisation was down -0.6% to €8.7 million.
Operating profit before exceptional items was €111.8 million, a +25.3% increase compared to Q2 2019. On a like-for-like basis, operating profit before exceptional items was up +13.7%, to €98.5 million.

€0.3 million of exceptional costs was booked in Q2 2020, compared to €10.0 million in Q2 2019. In Q2 2019, exceptional costs resulted from the acquisition of Oslo Børs VPS.
Net financing expense for Q2 2020 was €2.5 million compared to a net financing expense of €2.0 million in Q2 2019, mainly reflecting interest expenses on the second bond issued in 2019.

Results from equity investments amounted to €2.3 million in Q2 2020, resulting from the contribution from LCH SA, in which Euronext owns an 11.1% stake. In Q2 2019, €1.4 million in results from equity investments was reported.

Income tax for Q2 2020 was €27.9 million, positively impacted by tax one-offs. This translated into an effective tax rate of 25.1% for the quarter (Q2 2019: €24.3 million and 31.0%).

Shares of non-controlling interests mainly relating to iBabs (60% owned), OPCVM360 (60% owned) and Nord Pool (66% owned) amounted to €1.2 million in Q2 2020.

As a result, the reported net profit share of the Group for Q2 2020 increased by +53.7%, to €82.1 million. This represents a reported EPS of €1.18 basic and €1.17 fully diluted in Q2 2020, compared to €0.77 basic and €0.76 fully diluted in Q2 2019. The number of shares used for the basic calculation was 69,673,237 and for the fully diluted calculation 69,852,672.

Adjusted EPS8 is up +33.1% in Q2 2020, at €1.23, compared to an adjusted EPS of €0.93 in Q2 2019.

In Q2 2020 Euronext generated a net cash flow from operating activities of €80.6 million, compared to €39.5 million in Q2 2019.

Article Published: 30/07/2020