Integration update
2001 has seen significant progress in Euronext's integration and business development culminating in the IPO which was completed early July. The main milestones achieved include:
- January, Clearing 21®, the state-of-the-art Clearing software, launched for Euronext Paris
- Launch of the NextTrack segment for Exchange Traded Funds (ETFs)
- February, Euronext Amsterdam and Brussels clearing activities merged with Clearnet
- April, New Euronext version of NSC equities trading system launched at Euronext Paris
- May, New Euronext version of NSC equities trading system launched at Euronext Brussels
- May , Major chapters of Euronext single trading Rule Book agreed by regulators
- June, Signed memorandum of understanding for merger with BVLP Portugal
- First half, Transfer of IT activities in Euronext Brussels and Amsterdam to Atos-Euronext
- July, IPO completed
- July, Reached agreement with Euroclear for the merger of Dutch and Belgian settlement organisations and Euroclear/Clearnet agreement: Euroclear taking a 20% stake in Clearnet.
Revenues increased slightly to Euro 354.4 million and EBIT (before goodwill amortization) adjusted for non-recurring items, including mainly merger costs and integration costs, reached Euro 107.9 million, down 6.8% from the same period last year. Profit before tax adjusted for non-recurring items reached Euro 119.1 million.
Net Profit is up 6.3% to Euro 109.4 million.
Cash trading: Compared with the record performance in the first six months of 2000, the value of trades executed increased by 4% to Euro 893 billion while the number of trades declined 13.9% to 59 million. Revenues declined by a smaller amount of 6.7% to Euro 87.8 million, principally due to Euronext's degressive tariff structure.
Listing: During the first six months of 2001 there were 24 IPOs raising Euro 8.9 billion, the main one being Orange. This compares with 58 IPOs in the equivalent period in 2000. Revenues in respect of listing declined 7% to Euro 26.2 million. Going forward revenues will be supported by annual fees paid by listed companies which in the first half of 2001 represented Euro 11.2 million.
Derivatives: Revenues increased by 4% to Euro 44.1 million. During the first six months the total number of futures and options traded was flat at 180 million contracts compared with the same period in 2000 but the number of options traded increased by 28.9% to 149 million contracts as market participants took advantage of the higher market volatility.
Clearing: The value of trades cleared increased by 4% to Euro 893 billion and clearing revenues were broadly unchanged at Euro 87.7 million notwithstanding the decline in the number of trades. These results confirm Clearing as one of Euronext's core businesses. Clearnet is the first and only pan-European central counterparty able to offer users the benefits of real time netting for cash equities and derivatives including reduced settlement costs, greater administrative efficiency and lower capital consumption.
Settlement and custody: Revenues were stable at Euro 16.1 million. Agreement was reached with Euroclear regarding the contribution of CIK and Necigef, respectively the Brussels and Amsterdam settlement organisations to Euroclear, in exchange for a 3% shareholding in Euroclear. This transaction was an important milestone in the development of Euronext's business model and Euroclear's taking of a 20% interest in Clearnet will lead to a significant capital gain in the second half of 2001.
Information services: Revenues declined by 3% to Euro 30.0 million. The principal reason for the decline was a reduction in the price of a new package for the three data feeds sold to data vendors from our exchanges. The price reduction resulted from the merger of the three exchanges. We expect demand for the consolidated data from Euronext to increase, providing a healthy basis for growth in the medium term.
Sales of developed software/solutions: Revenues grew strongly by 20% to Euro 45.8 million. Adjusting the revenues of the first half of 2000, which included Euro 7.1 million revenues from a business that has been transferred to Atos-Euronext, revenues on a comparable basis grew by 48%. The strong growth reflects the success GL Trade has had in expanding its global coverage and its range of products to include back and middle office products in addition to its already successful trading and information products.
Through Atos-Euronext, our 50/50 joint venture with Atos-Origin, Euronext continues to build on its leadership in developing technology solutions for exchanges and other financial institutions. Euronext's NSC system is used by 17 exchanges around the world and we expect strong demand for its market leading Clearing 21® technology.
Cost structure
Costs and expenses increased by 8.6% to Euro 266.3 million. This change is linked to GL Trade's development, the launch of Clearing 21® and amortization of its development costs (Euro 32 million in total) which will be fully completed in two years and represent Euro 8 million in the first half of 2001.
Outlook for the second half of 2001
Jean-François Théodore, CEO, declared: "In a difficult environment we have demonstrated the resilience and financial strength of our business and have successfully achieved further milestones in our integration. Given the state of the world financial markets and the traditionally slower summer months, we expect revenues in the second half to be slightly lower than in the first half. The progress that we are making with our integration, the resulting synergies therefrom and the completion of our IPO enhance Euronext's competitive and strategic position and make us confident about our medium and long term growth prospects."
