Euronext has announced its results for the second quarter of 2017 including a 3.8 per cent increase in revenues to EUR137.3 million (Q2 2016: EUR132.3 million) on the back of improved trading volumes on both the cash and derivatives markets, with derivatives also benefiting from the closure of TOM in the Netherlands.
Operational expenses excluding Depreciation & Amortisation increased by 6.3 per cent to EUR58.1 million (Q2 2016: EUR54.6 million) due to the deployment of the company’s Agility for Growth initiatives, ongoing IT projects (including the development of our new trading platform, Optiq), and new business.
During the quarter, Agility for Growth initiatives generated EUR1.6 million of revenues and EUR1.9 million of costs.
The EBITDA for the quarter was strong, at EUR79.2 million, representing a margin of 57.7 per cent (Q2 2016: EUR77.7 million at 58.7 per cent).
As of the end of Q2 2017, EUR15.3 million of cost savings have been achieved since 1 April 2016, slightly down compared to Q1 2017 due to costs related to the Optiq and MiFID II projects.
Depreciation and Amortisation decreased by 12.8 per cent in Q2 2017, to EUR3.3 million (Q2 2016: EUR3.8 million), resulting from certain assets now being fully amortised.
Operating profit before exceptional items was EUR75.9 million, a 2.7 per cent increase compared to Q2 2016 (EUR73.9 million).
EUR1.4 million of exceptional costs were booked in Q2 2017 compared to EUR5.2 million of exceptional costs in Q2 2016. These costs were mainly related to restructuring, while Q2 2016 exceptional items included expenses for employee termination benefits in the various Euronext locations, and expenses related to the updated French restructuring plans and the relocation of Belfast IT operations to Porto.
Net financing expenses for Q2 2017 were EUR0.4 million compared to net financing expenses of EUR0.8 million in Q2 2016.
The EUR4.0 million of results from equity investment relates to dividends received from Euroclear. In Q2 2016, a dividend income of EUR3.8 million was received from Euroclear, and a dividend income of EUR0.7 million was received from LCH Group.
Income tax for Q2 2017 was EUR24.0 million, representing an effective tax rate for the quarter of 30.8 per cent (Q2 2016: EUR23.0 million and 31.8 per cent). This is consistent with the normalised tax rate of the Company, while in Q2 2016, the tax rate was slightly higher due to discrete items including the impact of the French restructuring plans.
As a result, the net profit for Q2 2017 increased by 9.3 per cent, to EUR53.9 million (Q2 2016: EUR49.3 million). This represents an EPS of EUR0.78 basic and EUR0.77 fully diluted in Q2 2017, compared to EUR0.71 basic and EUR0.70 fully diluted in Q2 2016. The number of shares used for the basic calculation was 69,562,035 and for the fully diluted calculation was 69,951,659.
As of 30 June 2017, the Company had cash and cash equivalents of EUR81.2 million, and no debt.
Revenues were EUR23.6 million in Q2 2017, an increase of 1.1 per cent compared to Q2 2016, despite Q2 2016 being, at that time, the strongest quarter since IPO with EUR23.3 million of revenues. This solid performance was driven by material increases in follow-on activity during the quarter, confirming the growing use of equity financing on capital markets.
On the primary market, activity was satisfactory given market conditions and high volatility. The second quarter saw the continuation of the first quarter trend of large capitalisations returning to our markets. Euronext Paris recorded its first large capitalisation deal since November 2015 with the IPO of ALD. Furthermore, the EU Tech Hub initiative reached a new milestone with the listing on Euronext Paris of X-Fab, a German-based technology company.
In total, EUR106 billion in equity and debt were raised on our markets in Q2 2017, compared to EUR89 billion in Q2 2016. Nine new listings, including five SME deals, took place on our markets in Q2 2017 raising EUR2.6 billion, compared to fourteen listings during Q2 2016 which raised EUR3.2 billion.
Average daily volumes increased by 18.5 per cent to EUR8.4 billion compared to Q2 2016. The recovery in volumes resulted from a more stable political outlook in France, favourable economic conditions and improved corporate earnings across the Eurozone. In this rising volume environment, revenues increased by +9.8 per cent to EUR50.3 million in Q2 2017, compared to EUR45.8 million in Q2 2016. Yield softened but remained resilient at an average of 0.48 bps in Q2 2017, a 4.0 per cent decrease compared to the 0.50 bps yield of Q2 2016.
Market share strengthened during the quarter, averaging 64.2 per cent and standing at 65.3 per cent at the end of June, a significant increase from 61.3 per cent in Q2 2016. This increase resulted from the implementation of our new non-member proprietary fee scheme and from adjustments within the SLP programme that attracted additional volumes. Furthermore, our Equity Best of Book service which attracts retail flows to our markets, continued to gain traction, with two new members on-boarded during the quarter.
The average daily transaction value of ETFs was EUR501 million, a -10 per cent decline from Q2 2016, impacted by lower volatility. However, new ETF listings continued positive momentum with 26 new products listed on our markets, bringing the total number of ETFs listed at the end of June to 809. Overall, the franchise continued to grow with the on-boarding of a new ETF issuer, Candriam.
Derivatives trading revenues increased by 2.2 per cent in Q2 2017, to EUR10.4 million compared to EUR10.2 million in Q2 2016. Individual equity derivatives reported a 50.0 per cent increase on average daily volume to 333,930 contracts (222,631 contracts in Q2 2016), while the average daily volume on equity index derivatives was up 13 per cent to 245,908 contracts (217,211 contracts in Q2 2016). These figures include a total of 5.6 million equity and index option contracts, resulting from the planned non-recurring migration of open interest from TOM, a competitor on the Dutch market, to Euronext. This migration took place in June at marginal rates, due to the exceptional circumstances of the TOM closure.
Commodity products recorded weaker average daily volumes in Q2 2017, down -8.5 per cent to 50,372 contracts (55,061 contracts in Q2 2016). The end of the quarter saw improved volume as the heatwave that hit France in late June, coupled with spring wheat problems in the U.S., increased uncertainties on the wheat harvest this year and translated into significant price and volatility increases.
In Q2 2017, market data and indices revenues were EUR26.0 million compared to EUR27.3 million in Q2 2016. This decrease of -4.6 per cent was primarily due to the higher than usual contractual audit findings that were recorded in Q2 2016.
Clearing revenues increased by 8.0 per cent, from EUR12.3 million in Q2 2016 to EUR13.3 million in Q2 2017, reflecting stronger derivatives trading activity as well as higher treasury and other clearing income.
Revenues from Interbolsa in Portugal increased by 5.4 per cent, from EUR5.0 million in Q2 2016 to EUR5.2 million this quarter, driven by an increase of settlement, public debt and equities under custody.
Revenues from Market Solutions increased by +1.7 per cent in Q2 2017, to EUR8.3 million (Q2 2016: EUR8.2 million). The business continued to benefit from MiFID II projects and related work for commercial technology clients.
In May 2017, Euronext agreed Head of Terms for Atos to become the sales and delivery partner for the Optiq platform. This arrangement enables Euronext to extend its sales reach and scale its delivery capabilities ahead of the commercial availability of Optiq in 2018.
“I am proud to report today the strongest quarter since our IPO,“ says Stéphane Boujnah (pictured), Chairman and CEO of the Managing Board of Euronext NV. “The second quarter of 2017 saw volumes return to 2015 levels, driven by increased investor appetite and an improved financial and political outlook for the European Union. Euronext capitalised on this favourable environment and continued to deploy strong cost discipline.
“We strengthened our core business and delivered significant milestones in our Agility for Growth strategy, shaping the Euronext of tomorrow. Our new Optiq® platform was launched for market data and our diversification of activities continued with the reinforcement of our corporate services offering and the entry into the spot FX market.”
