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Deutsche Börse Group presented its results for the second quarter of 2010 on Tuesday. Following a stable first quarter, the Company recorded significant growth in sales revenue and earnings in Q2. Sales revenue rose by 9 percent year-on-year to €564.4 million. Total costs in the second quarter of 2010 amounted to €356.0 million. Adjusted for restructuring expenses of €82.0 million for the measures to increase operating efficiency, costs amounted to €274.0 million and were down significantly on the level recorded in 2009. Earnings before interest and tax (EBIT) totaled €257.4 million. Adjusted for restructuring expenses, EBIT was €338.4 million, a substantial increase as against previous quarters.
Gregor Pottmeyer, Chief Financial Officer of Deutsche Börse AG: “The business environment for Deutsche Börse Group further improved in the second quarter of 2010. Added to this was the increased volatility on financial markets, particularly in May. The measures to increase operating efficiency have also already had a positive effect on the Group’s results. We therefore expect to come in below our costs guidance for full-year 2010.”
Q2/2010 results
In the course of the recovery of the global economy and increased volatility on financial markets, Deutsche Börse Group recorded significant growth in sales revenue in Q2/2010 as against both the prior-year quarter and the previous quarter. At €564.4 million in Q2/2010, sales revenue was up 9 percent as against Q2/2009 (€515.6 million) and also 9 percent higher than in Q1/2010 (€519.2 million).
In addition to sales revenue, the Group’s net interest income from banking business amounted to €15.7 million, down 39 percent on the prior-year quarter (Q2/2009: €25.9 million) and up 43 percent on the previous quarter (Q1/2010: €11.0 million). The year-on-year decline is due to low short-term interest rates, expired interest rate hedging transactions and longer-term investments reaching maturity. The slight increase as against the previous quarter is the result of higher average customer cash balances, which rose to €7.0 billion in the second quarter (Q1/2010: €5.9 billion), and an increase in short-term market interest rates. Other operating income amounted to €24.6 million in the second quarter of 2010 (Q2/2009: €12.1 million). This increase was mainly due to an adjustment to the maturities of the investment portfolio for Clearstream’s own funds.
At €356.0 million, total costs were higher than in the second quarter of 2009 (Q2/2009: €311.7 million). However, this includes restructuring expenses of €82.0 million as part of the measures to increase operating efficiency announced in Q1/2010. Adjusted for this effect, costs amounted to €274.0 million, down significantly year-on-year and on a level with the previous quarter (Q1/2010: €271.0 million adjusted for restructuring expenses). Since the first quarter of 2010, the Company has distinguished between volume-related and operating costs. In the period under review, volume-related costs amounted to €51.4 million (Q2/2009: €62.6 million), while operating costs of €304.6 million were incurred (Q2/2009: €249.1 million). Excluding restructuring expenses, operating costs amounted to €222.6 million. The year-on-year decline in volume-related costs is mainly attributable to the consolidation of STOXX Ltd. and the deconsolidation of Scoach Holding S.A. The reduction of fee and commission expenses from banking business as part of the ongoing efficiency measures also led to lower volume-related costs. The fall in operating costs as against the previous year is primarily the result of provisions recognized in the previous year for the relocation to Eschborn that could be partially reversed in the second quarter of 2010. This was due to the fact that the relocation can be implemented more cost efficient than originally assumed. Furthermore, the elimination of own expenses capitalized as of 1 January 2010, the decline in regular amortization of intangible assets in connection with the International Securities Exchange (ISE) and the positive effects of the ongoing efficiency measures led to a reduction in operating costs. Due to the positive cost performance in the first half of 2010, the Company now expects to come in below its original cost guidance of €1,210 million for full-year 2010 before restructuring expenses. Furthermore, with project progress the expenses for restructuring measures have become more concrete. They will amount to less than €200 million, some €40 million below the original assumption.
The result from equity investments was up year-on-year at €8.7 million (Q2/2009: €6.9 million). This is mainly due to Scoach Holding S.A., Direct Edge Holdings LLC and European Energy Exchange AG. All companies also performed well in the second quarter of 2010, resulting in a rise in the contribution to the Group’s result from equity investments.
Overall, Deutsche Börse Group therefore generated EBIT of €257.4 million, up 3 percent on the second quarter of 2009 (Q2/2009: €248.8 million). Adjusted for restructuring expenses, the increase was even greater, by 36 percent to €338.4 million.
The financial result in Q2/2010 amounted to €–29.8 million. In addition to interest payments in connection with the financing of ISE agreed in 2008, the financial result for Q2/2010 includes expenses from the redemption of non-current financial instruments. The interest coverage ratio, adjusted for restructuring expenses, amounted to 20.2 following 16.6 in Q1/2010. At 27.0 percent, the effective Group tax rate in the second quarter of 2010 was similar to that recorded in 2009. The improvement in the Group tax rate since the second half of 2008 reflects the relocation of employees to Eschborn. The proportion of net income for the year attributable to non-controlling interests, which is used to share the profits and losses of subsidiaries with minority shareholders, was on a level with Q2/2009 at €5.3 million.
Net income for the second quarter of 2010 amounted to €160.8 million as against €164.9 million in Q2/2009. Adjusted for restructuring expenses, net income for the period amounted to €219.9 million, up 33 percent. Basic earnings per share, based on a weighted average of 185.9 million shares outstanding, amounted to €0.87 in the second quarter of 2010 (Q2/2009: €0.89 with an average of 185.8 million shares outstanding). Adjusted for restructuring expenses, basic earnings per share were up 34 percent year-on-year at €1.19.
H1/2010 results
Total sales revenue in the first half of 2010 amounted to €1,083.6 million (H1/2009: €1,055.4 million, up 3 percent). Total costs were €654.8 million (H1/2009: €600.2 million, up 9 percent). Adjusted for restructuring expenses, total costs were down 9 percent year-on-year at €545.0 million. EBIT in the first half of the year amounted to €503.0 million (H1/2009: €560.4 million, down 10 percent). Adjusted for restructuring expenses, EBIT was up 9 percent on the first half of 2009 at €611.8 million. Net income for the period amounted to €317.7 million in the first half of the year as against €370.8 million in the prior-year period. Adjusted for restructuring expenses, net income for the period rose by 7 percent to €397.1 million. Basis earnings per share amounted to €1.71 (H1/2009: €2.00, down 15 percent). Excluding restructuring costs, basic earnings per share were up 7 percent year-on-year at €2.14. The Group’s basic operating cash flow amounted to €2.43 per share in the first half of 2010, an indication of its strong earnings power.
