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Euronext Reports Q3 And YTD 2002 Results: Strong Revenue Growth Combined With Good Cost Controls Leads To Improved EBIT

Date 13/12/2002

YTD 2002:
  • Revenues amounted to € 744.57 million: up 8.5 % (1)
  • EBIT (before Goodwill) of €204.06 million: up 49.1 % (1)(2)
  • Net Profit of €151.82 million: up 36.7% (1)

Euronext NV reports today its third quarter 2002 results . Compared to Q3 2001, revenues increased by 11.9% from €226.47 to €253.47 million, while costs increased by 2.17% to €176.96 million due to specific effects proper to 3 rd Quarter 2001.The strong revenue growth leads to a strong improvement of EBIT from €53.26 to €76.51 million.

For the nine months ending 30 September, 2002 revenues increased by 8.5%, or €58.1 million, due to ongoing strong activity on cash and derivatives markets. The trend Q3 / H1 shows strong increase in volumes. Due to a different business mix, the 1 st half of 2002 was marked by high option volumes. Whereas the 3 rd quarter 2002 showed strong cash and Short Term Interest Rates trading volumes.

Total expenses decreased by 1.7% yoy, or €9 million:
The increase in Staff costs (from €185 million to €217.4) is explained by a provision for an early retirement plan in Amsterdam (€ 15.1 million) and GL Trade's headcount increase (impact €12 million for the first nine months). After restatement of these elements, staff costs increased by 2.8%. Analysed in terms of headcount, we have met our 5% target reduction.
Accommodation costs slightly increased to €41.6, mainly explained by GL Trade's expenditures related to its expansion.
Other expenses decreased by €40.3 million or 13.05% YoY to €276.1.
Of which, ICT, Office, Administrative and Advisory costs decreased by 11.7% to €186.8 million mainly due to synergies realised and strict control of consultancy costs. Marketing costs decreased to €10 million, as well as "Other expenses" which were reduced by 26% to €30.3 million, owing to one-off IPO costs in 2001. EBIT before goodwill amortisation totalled €204.06 million for the first nine months of the year, up 49.1% on the same period of 2001. Over the period, Euronext's EBIT margin reached 27.4%, compared to 19.9% for the first nine months of 2001.

Net profits after goodwill increased by 36.7% to €151.82 million. In 2002, two non-recurring items affected the net profits: the sale of 20% of shares of Clearnet and of Dutch and Belgian settlement activities to Euroclear resulting in a capital gain of €91.1 million . Secondly, during the third quarter 2002, the mark-to-market of our 0.74% stake in Atos-Origin led us to revalue our Atos-Origin's shares; resulting in a negative impact of €15.6 million (pre tax) of the net financing income. As a result and taking into account the 12.3% increase of average number of shares, our adjusted EPS (restated of capital gains) decreases slightly from 0.86 to 0.82 compared to proforma 2001 figures.

Breakdown by Business Lines

2002 is the 1 st year where we report EBIT by business lines on a quarterly basis; we have not restated Q3 2001 EBIT by business lines. In 2001 we did not report on a quarterly basis; as a result costs might not always have been apportioned on a proper quarterly basis, thus making comparisons inappropriate.

The EBIT margin at group level has increased by 37.5% YoY and 28.3% QoQ (Q32001/Q32002).

Cash trading. The business generated Revenue growth of 1.24 % compared to same period in 2001. The observed increase of activity (+12.3% yoy) induced a decrease of the average price per trade and the end of invoicing the messages and modules following the implementation of NSC in Amsterdam impacted negatively the revenues. As a result of the overall revenue growth and effects of synergies, the cash trading reaches a high EBIT margin of 47.8% increasing slightly versus the 47.7% on H1 2002.

Listing fees. The uncertain market conditions did not encourage companies to go public. Therefore, revenues decreased on the first nine months by 19.4% compared to the same period in 2001. The EBIT margin of this business line decreased from 51.4% to 42.5%.

Derivatives trading. Derivatives markets registered a strong growth in volumes up 20% year-to-date.. EBIT margin compared to H1 2002, is flat at 23.3%. Amsterdam derivatives products achieved successfully the floor to screen migration ahead of schedule, on December 6, 2002.

Clearing. The strong increase in volumes traded on cash and derivatives markets led to an increase of the clearing activity and in resulting increase in revenues. The migration to Clearing21® platform was successfully achieved on October 25 th for the Dutch cash markets. Since then, Belgian, Dutch and French cash markets are cleared on one single platform. Clearing's EBIT margin increased slightly from 32.5% to 32.7%.

Settlement and custody. Revenues increased by 5.6%, from €22.49 million to €23.75 million.

Information services. Revenues from information services are slightly down 3.89% yoy, to € 21.5 million due to the sale of related activity and the rationalisations which took place in the financial industry. The business line's EBIT margin increased slightly from 18.5% to 21.5%,due to the optimisation of our working processes.

Sales of developed software/solutions. GL Trade's good revenue performance and sales of software to external clients by Euronext.liffe helped in keeping the EBIT margin stable.

Outlook for the year 2002 and 2003

So far, the year 2002 has showed strong growth in our derivatives trading activities; our cash markets have been extremely resilient in this gloomy economic environment due to our combined single trading and now also clearing platform. We expect now our full year revenues to reach 1 billion Euros. As synergies pay in cash markets and our cost controls show their first results, we expect an EBIT before Goodwill and extraordinary items of roughly 240 million Euros. This includes a provision of €9 million for an early retirement plan we might implement before year end.

Our forecast for the year 2003 is based on the assumption of ongoing uncertain markets as long as the economy has not fully recovered. Despite only limited revenue growth resulting from this assumption, we expect that the ongoing decrease of our expenses will lead to a new improvement of our EBIT.

Jean-François Théodore, Chairman of the Managing Board said : 'These results prove that our business model works. We are still a young Company, created only two years ago, but have so far achieved on time the integration of our businesses. Our aim is to extract the maximum of synergies from the exchanges and franchises we run. We are delighted by the way LIFFE business is developing and adding value to the group. We are in a good position to further enhance shareholder value.'

Click here for full details.

Appendix: Consolidated income statement and Consolidated balance sheet.

The third quarter results are available on the Euronext website: www.euronext.com

Key dates

 

Q4 sales              

February 2003        

13/02/2003

Annual Results    

March 2003     

21/03/2003

Q1 2003 sales     

May 2003        

13/05/2003

AGM  

May 2003        

22/05/2003

Q1 2003 results   

May 2003        

23/05/2003

 

(1) compared to proforma 2001 figures
(2) before goodwill amortisation

Euronext was formed by the merger of the Amsterdam, Brussels and Paris cash and derivatives exchanges in September 2000. The Euronext Group has since grown further, adding BVLP (the Portuguese cash and derivatives exchange) and LIFFE (The London International Financial Futures and Options Exchange). The derivatives businesses of Euronext and LIFFE are being combined under the Euronext.liffe umbrella. As of 30 September 2002, 1506 companies were listed on Euronext regulated markets representing a market capitalisation of €1364 billion. Volumes traded on the central electronic order book amounted €1235 billion and 531 million contracts traded in 2002 making Euronext the largest exchange in Europe.