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- Turnover: 69.0 million euro, +2.7%
- Operating profit: 20.7 million euro, -9.8%
- Profit before extraordinary items and taxes: 21.3 million euro, -12.0%
- Net profit for the period: 15.0 million euro, -12.0%
- HEX acquired a majority holding in the Riga Stock Exchange Group comprising the Riga Stock Exchange and the Latvian Central Depository.
- The new Group IT Services organisation started its operations.The objective of the IT organisation reform is to improve cost efficiency and maintain quality and reliability.
THREE-QUARTER RESULT
Consolidated turnover increased by 2.7 per cent to 69.0 million euro (1 January - 30 September 2001: 67.2 million euro). The turnover of the outsourcing providers Securities Services and eHEX was up 60.8 per cent.
Costs rose to 48.4 million euro (44.3 million euro). The biggest increase came from personnel costs, which rose to 19.7 million euro (17.7 million euro) following an increase in the number of employees.
Operating profit decreased by 9.8 per cent to 20.7 million euro (22.9 million euro), corresponding to 29.9% of turnover (34.1%). Financial income decreased from the comparable period due to a decrease in the value of share-based mutual funds. Financial income in the comparable period 2001 was increased by an exchange rate gain from a mature bond. Profit before extraordinary items and taxes amounted to 21.3 million euro (24.2 million euro), 12.0 per cent lower than in the corresponding period of the previous year. The profit for the period under review, 15.0 million euro, was 12.0 per cent lower in comparison to the corresponding period in 2001 (17.0 million euro).
Capital expenditure totalling 12.2 million euro (13.1 million euro) were focused mainly on information systems and computer hardware. The capital expenditure also included the purchase of shares in the Riga Stock Exchange.
The figures for the period under review are unaudited.
VAT refunds in court of arbitration
The arbitration process between HEX and 19
companies operating as brokers and clearing parties
continues. The process will determine whether HEX is
liable to compensate the brokers for the value added
tax concerning the years 1995 to 2000 that has been
refunded to HEX.
PURCHASE OF THE RIGA STOCK EXCHANGE
The ownership arrangements between HEX and the shareholders of the Riga Stock Exchange were finalised in August, and the ownership arrangements between the Riga Stock Exchange and the Latvian Central Depository shareholders were finalised in October.
As a result of the arrangements HEX holds 92.98 per cent of the Riga Stock Exchange, which in turn holds the entire stock of the Latvian Central Depository. The Riga Stock Exchange was made part of HEX's Baltic operations.
INCREASING THE EFFICIENCY OF OPERATIONS
The market situation has changed HEX's operating environment. The market value of shares has decreased, and business has not developed as expected. At the same time, pricing has been adjusted in order to maintain competitiveness.
The new Group IT Services organisation was launched on 1 August. The new organisation includes the application development units of different business areas. The change aims to ensure quality and reliability, to boost and facilitate development work and to improve cost-efficiency - especially that of system development and acquisitions.
Due to the changes in the operating environment, HEX has also taken measures to reduce its costs and make its operations more efficient.
HEX has investigated alternatives for acquiring a single, common, modern and more cost effective office for the group's operations in Helsinki. A land area was reserved for the purpose in Hakaniemenranta.
PERFORMANCE BY BUSINESS AREA
Trading
The turnover of Trading decreased slightly from the
corresponding period last year to 35.5 million euro
(35.8 million euro), and profitability decreased. In
addition to the decreased trading volume, the turnover
was affected by reductions in market-making fees
collected from Eurex brokers since the beginning of
January 2002, as well as a decrease in charges levied
on brokers involved in cash transactions in force since
the beginning of April 2002.
The period-end market value of the shares listed on the Helsinki Exchanges fell by 15.6 per cent from the corresponding period last year. The HEX All-Share index fell by 15.5 per cent to 5,191.83 points while the Portfolio index dropped 6.5 per cent ending at 2,269.22 points.
The sliding share prices and slowdown on the markets were still visible in share trading, which decreased from the corresponding period last year. Trading volumes amounted to 139.4 billion euro, resulting in an 8.8 per cent decrease from the corresponding period in 2001. Average daily trading volume in the period was 741.5 million euro (812.7 million euro). Trading volume in terms of the number of shares increased by more than 36 per cent. From January to September, a total of 10.8 billion shares changed hands, compared to 7.9 billion in the corresponding period last year.
Trading in covered warrants continued to increase during the period under review. The euro-denominated trading reached 310 million euro, up from 43 million euro in the corresponding period in 2001.
Trading in derivatives also continued favourably. Nokia held the first or second place on the list of most traded share options on Eurex for the entire period.
The demand for market data (HEXFeed) continued at a good level and at the end of the reporting period there were a total of 107 (102) vendors. In addition, 73 vendors used the webhosting service introduced in 2001. 34 per cent of the vendors distribute real-time market data to their customers.
The number of active members at the end of September was 43, 26 of whom were remote members operating from locations outside Finland. The remote members' share of trading volumes remained above 40 per cent for the entire period and was 47 per cent at the end of September.
Settlement and Depository
The turnover of HEX's Settlement and Depository
services amounted to 13.0 million euro (14.6 million
euro), and operations continued in the red. The
turnover was decreased by the transfer of the Finnish
Central Securities Depository's account operator
business to the Securities Services business unit.
The development of the Settlement and Depository
business was hindered by a decrease in the value of
deposited assets. The total value of the assets in
depository - that is, the money market base and the
companies in the book-entry system - amounted to
192.2 billion euro (210.1 billion euro) at the end of the
review period.
The degree of settlement in stock trading was 99.23 per cent (97.47) in the period under review, and a record-breaking 99.51 per cent in September.
Issuer Services
The turnover of Issuer Services from January to
September amounted to 12.3 million euro (12.3
million euro), and profitability remained at the
previous year's level.
The strong interest in listing option rights and covered warrants continued. At the end of the review period, trading covered a total of 169 series of shares from 150 companies (176 series from 156 companies), one index share, 44 option rights (31) and 168 covered warrants (80). At the end of September, the book-entry system included 199 companies (197) and 901,040 shareholders (892,676).
By the end of September, services related to capital arrangements were used in a total of 224 (156) arrangements, through which the companies collected a total of 772.5 million euro (239.2 million euro) of capital.
Amendments to the regulations of the Helsinki Exchanges entered force in the beginning of September, specifying the prerequisites for listing and the rules of company disclosure in more detail. At the same time, the decisions on admitting shares for listing were transferred to a new Listing Committee. At the beginning of September, HEX opened a new ML Market offering a transparent and efficient marketplace for unlisted securities.
Securities Services
The Securities Services business area increased its
turnover by 48 per cent to 8.5 million euro (5.1 million
euro). The increase in turnover was affected by the
integration of HEX Back Office and Custody Services
Ltd (HBO) in the autumn of 2001, as well as the
transfer of the Central Securities Depository's account
operator service production from the Settlement and
Depository business unit to Securities Services.
The business unit decreased its profitability from the
corresponding period in 2001.
Investments in system development during the review period continued to be active in the Book-entry services, HBO, Derivatives and collateral management units. Development of new services, such as the HEX Risk Management and Back Office Service and HBO services, also continues.
eHEX
The eHEX business unit comprising the Information
Services unit increased its turnover from the
comparable period to 0.9 million euro (0.7 million
euro). Heavy investments pushed eHEX results into
the red for the review period. The difficult market
situation was evident in the acquisition of new
customers for the eHEX outsourcing services, the IR
service, the GMIS market information service and the
Performance Measurement analysis services.
Baltic operations
The turnover of HEX's Baltic operations was 1.3 million
euro (0.5 million euro) for the period from January to
September. The business unit grew on 1 September
with the integration of the Riga Stock Exchange Group
comprising the Riga Stock Exchange and the Latvian
Central Depository.
HEX's Baltic operations now comprise HEX Tallinn (Tallinn Stock Exchange and Estonian Central Securities Depository), the Riga Stock Exchange Group and the Baltic liaison unit.
The trading volume on HEX Tallinn from January to September amounted to 214.4 million euro, a 7.7 per cent increase from the corresponding period last year (199.1 million euro). On the Riga Stock Exchange, the trading volume in shares from January to September was 163.6 million euro and the trading volume in bonds was 301.0 million euro.
At the end of the period the market value of companies listed on HEX Tallinn was 711 million euro and the market value of companies listed in the Riga Stock Exchange was 1.9 billion euro.
A total of 101,152 people had joined the funded pension system maintained by HEX Tallinn by the end of September. The system is based on the Pension Fund Act and it was launched on 4 May, 2002. It offers additional pension security through obligatory as well as optional payments.
SHARES AND SHAREHOLDERS
The number of HEX Plc shares at the end of the period amounted to 13,471,728, and the company had 200 registered shareholders. A total of 15.7 per cent of shares were nominee registered.
In accordance with the subscription rules of the stock-based incentive scheme for HEX Plc employees, the original subscription price of 12.50 euro has been reduced to 10.70 euro on the basis of dividends paid. The redemption period for A options in the incentive scheme started on 1 November 2002.
If the company is not listed on the stock exchange, the holder of option rights is entitled to compensation in terms of salary or wages equalling the value of the increase in shareholders' equity. For this purpose, an entry of 1.7 million euro, affecting the company's result, has been made in accruals. This increases the total amount of reserves to 4.3 million euro.
Through the stock-option incentive scheme, employee shareholding in the company may not exceed 9.4 per cent of shares and voting rights. The figure includes the holdings of the Executive Board of the HEX Group and its Secretary, which may rise to a maximum of 1.5 per cent in total as a result of the incentive scheme.
During the period under review, the Board of Directors had no current authorisations to issue any stock, convertible bonds or option rights, or any authorisations to purchase or hand over any of the company's own stock.
HUMAN RESOURCES
At the end of the period under review, the HEX Group employed 457 people. The corresponding figure for the same period last year was 378. There were 397 employees at the end of 2001. HBO accounted for 28 persons and Riga Stock Exchanges for 47 persons at the end of September.
EVENTS AFTER THE PERIOD
October marked the 90th anniversary of the Helsinki Exchanges. A seminar to celebrate the 90th anniversary was held in the Finlandia Hall. In October, the Riga Stock Exchange purchased the final 18.92 per cent of the shares in the Latvian Central Depository from the Latvian government. As a result of the acquisition, the Riga Stock Exchange holds the entire stock of the Latvian Central Depository.
A total of 207,200 people had joined the funded pension system maintained by HEX Tallinn by the end of October.
YEAR-END OUTLOOK
International market insecurity has continued. The general market situation will affect Group turnover and profitability.
