- Turnover: 48.0 million euro, +3.7 per cent
- Operating profit: 14.7 million euro, -13.1 per cent
- Profit before extraordinary items, appropriations and taxes: 15.6 million euro, -15.8 per cent
- Net profit for the period: 11.0 million euro, -16.0 per cent
- HEX agreed to purchase 92.98 per cent of the group consisting of the Riga Stock Exchange and the Latvian Central Depository.
- A link was built between HEX and the Swedish Central Securities Depository, VPC, to enable reliable and efficient cross-border transactions of foreign and domestic securities.
HALF-YEAR RESULT
Consolidated turnover increased by 3.7 per cent to 48.0 million euro (1 January - 30 June, 2001: 46.2 million euro). The turnover of outsourcing providers eHEX and Securities Services was up 45.9 per cent.
Costs rose to 33.2 million euro (29.3 million euro). The biggest increase came from personnel costs, which rose to 13.8 million euro (11.5 million euro) following an increase in the number of employees.
Operating profit decreased by 13.1 per cent to 14.7 million euro (17.0 million euro), corresponding to 30.7 per cent of turnover (36.7%). Financial income decreased from the previous year when an exchange rate gain resulted from a mature bond. Profit before extraordinary items and taxes amounted to 15.6 million euro (18.5 million euro), 15.8 per cent lower than in the corresponding period of the previous year. The profit for the period under review, 11.0 million euro, was lower in comparison to the corresponding period in 2001 (13.1 million euro).
Capital expenditure totalling 7.6 million euro (5.4 mil-lion euro) focused mainly on information systems and computer hardware.
All figures for the period are unaudited.
VAT Refunds in Court of Arbitration
The arbitration process between HEX and 19 companies
operating as brokers and clearing parties continues.
The purpose of the proceeding is to determine
whether HEX is liable to reimburse the brokers for the
value added tax that HEX has been refunded from the
years 1995-2000.
PURCHASE OF THE RIGA STOCK EXCHANGE
The majority of the Riga Stock Exchange (RSE) share-holders accepted the purchase offer made by HEX in March and signed the agreement to sell shares in late June. The shareholders represent 92.98 per cent of the RSE shares.
The Riga Stock Exchange has agreed to purchase 81.08 per cent of the shares of the Latvian Central Depository (LCD). The remaining 18.92 per cent of LCD shares are owned by the Latvian Privatisation Agency, which has announced its intention to sell the shares during the course of this year.
The transactions concerning RSE and LCD will be closed after a due diligence process conducted by HEX. The Riga Stock Exchange will be made part of HEX's Baltic operations. The Group's structure will correspond to that of the marketplaces of Finland and Estonia.
CHANGES IN THE ORGANISATION
In early June, Lasse Musakka was appointed Executive Vice President in charge of business development. He will report to Group President and CEO Jukka Ruuska. Lasse Musakka was previously in charge of the eHEX Business unit, which will hereafter consist of the In-formation Services unit.
The Group's IT services were restructured at the end of June and came to include the application development units of different business units. The organisation has operated in its new form as of 1 August 2002. The change aims to ensure quality and reliability, boost and facilitate development work and improve cost-efficiency - especially that of system development and acquisitions. IT services are headed by Heikki Sirve, who is also responsible for the Settlement and Depository business unit. He reports to Jukka Ruuska.
PERFORMANCE BY BUSINESS UNIT
Trading
Trading increased its turnover by 2.3 per cent from the
corresponding period last year to 25.1 million euro
(24.6 million euro), but profitability decreased. The
slowdown in turnover growth resulted from reductions
in early January concerning market-making fees
collected from Eurex brokers, as well as a decrease in
charges levied on cash market members in force since
the beginning of April 2002. The investments made in
the quality and reliability of information systems had
an impact on the profitability of Trading.
The period-end market value of the shares listed on the Helsinki Exchanges fell by 27.6 per cent from the corresponding period last year. HEX All-Share index fell by 27.8 per cent to 6,063.27 points while the Portfolio index dropped 9.0 per cent ending at 2,765.64 points. Compared to the beginning of the year, the All-Share index dropped by 31.1 per cent and the Portfolio index by 7.4 per cent.
The sliding share prices and slowdown on the markets left their mark on share trading, which decreased from the corresponding period last year. Trading volumes amounted to 100.4 billion euro, resulting in an 11.7 per cent decrease. The average daily trading volume was 823 million euro (924 million euro).
Despite the decline in share prices, the number of shares traded continued to grow. From January to June, a total of 6.8 billion shares changed hands, compared to 5.1 billion in the corresponding period last year.
Trading in covered warrants also continued to grow during the period under review. The euro-denominated trading reached 188 million euro, up from 17 million euro in the corresponding period in 2001.
Trading in derivatives also continued favourable. In June, Nokia reclaimed its place as the most traded stock option on the Eurex with 1,783,000 contracts. The Nokia stock option rose for the first time from second to first place on the Eurex in March and held this position also in April. In May, Nokia was the second most traded stock option on the Eurex.
The demand for market information (HEXFeed) remained good. At the end of the reporting period, there were 106 vendors of market data (106). In addition, 66 vendors used the webhosting service introduced in 2001. Thirty-four per cent of the vendors distribute real-time market information to their customers.
The number of active cash market members at the end of June was 45, 27 of which were remote members operating from locations outside Finland. The remote members' share of trading volumes continued to rise during the period, accounting for 44.3 per cent in the period from January to June. The share for the corresponding period last year was 26.8 per cent.
Settlement and depository
The turnover of the HEX Settlement and Depository
business unit declined by 7.7 per cent to 9.7 million
euro (10.5 million euro) and resulted in negative
profit. This was a result of a reduction in the value of
assets in depository, as well as a decrease in the
number of settlement and depository transactions.
The total value of the assets in depository, that is, the
money market base and the companies in the book-entry
system, decreased by 21.6 per cent to 207.7
billion euro. The number of share settlement transactions
dropped by four per cent compared to the corresponding
period in 2001.
The rate of equities clearing remained good. From January to June, 99.1 per cent of the stock exchange trades were settled within the settlement period defined in the marketplace rules, compared to a 97.9 per cent degree of settlement in 2001.
During the period under review, a link was built between HEX and the Swedish Central Securities Depository, VPC, to enable reliable and efficient cross-border transactions of foreign and domestic securities. HEX has corresponding links with the central securities depositories in Germany, France and the Netherlands. The links aim to facilitate investments across geo-graphical borders and offer investors new options for the settlement and depository of securities.
Issuer Services
Issuer Services increased its turnover by 1.3 per cent
to 8.5 million euro (8.4 million euro) in the period from
January to June. The business unit increased profitability.
The demand for services related to the public listing of new companies and inclusion in the book-entry securities system remained low. In the case of option rights and warrants, listing and inclusion services continued to develop favourably.
At the end of the review period, trading covered a total of 170 series of shares from 151 companies (179 series from 158 companies), one index share, 45 option rights (29) and 181 covered warrants (45). The book-entry system included 197 companies at year-end (199). Owners totalled 901,074 (888,766) at the end of June.
During the period under review, services related to capital arrangements were used in a total of 172 (114) arrangements carried out in the book-entry system. The funds collected in this way totalled 507 million euro (180 million euro).
Services related to shareholders' meetings have established a firm position among listed companies and the demand for related expert services continued strong. In the review period, HEX shareholder meeting services were used at a total of 121 shareholders' meetings.
The guidelines on the acquisition of the listed companies' own shares were complemented with insider regulations concerning the acquisition of own shares, which entered into force on 2 April 2002. The review period also saw the approval of amendments made to the Rules of the Helsinki Exchanges, which further de-fine disclosure requirements as well as the conditions and procedures for the listing of securities. Decisions regarding the admission of companies to listing will be transferred from the Helsinki Exchanges' Board of Directors to a new Listing Committee. The amended guidelines will enter into force on 1 September 2002.
A new contest called Company disclosure and financial reports 2002 was opened in May. The contest is organised by HEX and newspaper Helsingin Sanomat and is open to all listed companies and companies applying for listing. The contest aims to promote open and consistent company disclosure and stimulate general interest for the content and quality of disclosure.
Securities Services
The Securities Services business unit increased its
turnover by 38.1 per cent to 5.0 million euro (3.6
million euro). The acquisition of HEX Back Office and
Custody Services Ltd (HBO) in autumn 2001 has led to
a strong increase in turnover. The business unit's
operating result was negative.
An electronic lending pool, ePool, was introduced for stock lending purposes in April. The new ePool auto-mates lending from the lending pool of HEX.
The development version of HBO's portfolio system reached production phase in April and a service appropriate for remote brokers was introduced in May. The first customers were two Swedish brokers.
Investments in system development during the review period continued active in the Book-entry services, HBO and Derivatives and collateral management units. Development of new services, such as the HEX Risk Management and Back Office Service and HBO ser-vices, also continues.
eHEX
The turnover of eHEX for January-June amounted to
0.6 million euro (0.3 million euro), translating into a
growth of 119.6 per cent. Heavy investments pushed
eHEX results into the red for the review period.
The number of funds on the mutual fund list continued to increase notably during the period: in April, 60 new funds joined the list. In April-June, the number of new funds totalled 117. The first Estonian mutual fund company was also added to the mutual fund list maintained by HEX, with Trigon Capital listing two of its mutual funds.
The demand for investor relations services offered to listed companies remained good during the period. A total of eight listed companies have now adopted the service.
In the future, eHEX business operations will consist of the Information Services unit.
Baltic Operations
The turnover of HEX's Baltic operations amounted to
0.8 million euro (0.2 million euro) in the review period.
The business unit was established in the second
quarter of 2001.
Stock trading on HEX Tallinn in January-June amount-ed to 177 million euro, showing an increase of 21.0 per cent over the corresponding period of the previous year.
A funded pension system, maintained by Estonian CSD, part of HEX Tallinn, was introduced on 4 May 2002. By the end of the period, 43,592 people had joined the system.
SHARES AND SHAREHOLDERS
The number of shares of HEX Plc at the end of the reporting period was 13,471,728 and the number of registered shareholders amounted to 192. A total of 15.7 per cent of the shares were nominee registered.
In accordance with the subscription rules of the stock-based incentive scheme for HEX employees, the original subscription price of 12.50 euro has been reduced to 10.70 euro on the basis of dividends paid. If the company is not listed on the stock exchange, the option holder 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 1.3 million euro, affecting the company´s result, has been made in accruals. This increases the total amount of reserves to 3.9 million euro.
Through the stock-option incentive scheme, employee shareholding in the company may rise to a maximum 9.4 per cent of shares and voting rights. The figure includes the holdings of the Executive Group and its Secretary, which may rise to a maximum of 1.5 per cent 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
HEX Group employed 427 people at the end of the period under review. At the end of the corresponding period in 2001, the number of personnel was 364. At the end of the year 2001, the Group employed 397 persons.
YEAR-END OUTLOOK
International market insecurity has increased and share prices have taken a considerable dip.
In addition to the general market situation, turnover development in the latter part of the year will also be affected by the demand for outsourcing services. Relative profitability is expected to decrease due to the accumulated effect of investments in outsourcing ser-vices and reductions in trading fees.
The estimates presented in the interim report are based on the view formed by the management, made on the basis of current facts. It is possible that the final results will differ from the estimates made in the report.
The next interim report of HEX Plc will be published on 4 November 2002.
