SIX Benefits From BME Acquistion03.17.2021
In a globally challenging environment defined by the COVID-19 pandemic and global market turmoil, SIX demonstrated operational stability and, with the inclusion of the contribution from the newly acquired Bolsas y Mercados Españoles (BME), achieved an overall operating income of CHF 1.4 billion (+21.8%) and EBITDA of CHF 368.9 million (+72.8%). EBIT and profit received an additional boost from the strong net financial result. The successful acquisition of BME will further enhance the profitability and competitiveness of SIX.
- Operating Income amounted to CHF 1,375.9 million (+21.8%)
- Earnings before interest, tax, depreciation and amortization (EBITDA) totaled CHF 368.9 million (+72.8%)
- Earnings before interest and tax (EBIT) increased to CHF 516.6 million due to the high net financial results
- Group net profit totaled CHF 439.6 million
- Successful acquisition of BME will further enhance the profitability and competitiveness of SIX
- Investments in infrastructure for stability, security, reliability and efficiency
Overview of Key Figures
The substantial increase in operating income compared to the previous year (+21.8%) to CHF 1,375.9 million is attributable to two main drivers.
Following the successful completion of the acquisition of BME, SIX benefited from the additional financial contribution from the Spanish financial market infrastructure once the transaction had closed in June (CHF 196.6 million). The high level of trading activity on the exchanges boosted the contribution from the Securities & Exchanges business unit (+11.7%), supported by the fact that SIX enjoyed a market share of almost 100% in the trading of Swiss equities, with EU equivalence remaining suspended.
In addition to the strong operating performance, the non-operating net financial result of SIX was also significantly up on the previous year at CHF 273,8 million. This was brought about by two main factors. Firstly through realized valuation gains from the sale of 10.1 million Worldline shares (5.5% of Worldline’s share capital), which SIX disposed of in April during an accelerated book building procedure. Secondly, Worldline acquired payment services provider Ingenico in October, which was partly settled with newly issued shares and likewise had a positive effect on the SIX net financial result because of the higher valuation of the Worldline shares remaining in the possession of SIX.
Worldline remains the largest equity interest held by SIX. However, due to the transactions effected on both sides, the equity share of SIX in Worldline was reduced to 10.7%, from 21.8% in 2019. In the SIX income statement, this is reflected in the item “Share of profit and loss of associates and joint ventures” (–77.5% compared to the previous year). With an equity interest of around 10.7% and a proportion of the voting rights of 21.1%, SIX nevertheless remains Worldline’s largest shareholder and, through this interest, also shares in the growth of digital payments. Worldline shares rose from EUR 63.15 to EUR 79.10 (+25.3%) in the year under review.
In terms of overall profitability, the high net financial result increased Earnings before interest and tax (EBIT) and the Group net profit of SIX in the year under review. The result was a significant increase in net income compared to the previous year: EBIT amounted to CHF 516.6 million, while Group net profit totaled CHF 439.6 million.
In a globally challenging environment SIX demonstrated operational stability and, with the contribution from the newly acquired BME, achieved an overall operating income of CHF 1.4 billion (+21.8%) and EBITDA of CHF 368.9 million (+72.8%). #sixnews https://t.co/zcRrwKaz3M
— SIX (@sixgroup) March 17, 2021
Operating Contribution of the Business Units
At CHF 565.6 million, the Securities & Exchanges business unit accounted for the largest share of operating income at SIX in 2020. Due to the high level of market volatility in the year under review, the Swiss Stock Exchange registered an increase in trading turnover of 18.6%. The number of transactions rose by 55.3% year on year. The suspension of EU equivalence since July 2019 continued to drive consolidation of trading in Swiss equities at SIX.
High levels of volatility also affected post-trade activities. Clearing transactions rose by 19.4%. The settlement business benefited, too, with settlement transactions up 29.8% and average deposit volume up 3.2% compared to the previous year.
On the primary market, the Swiss Stock Exchange recorded two listings, Ina Invest Holding and V-ZUG Holding. A further CHF 88.1 billion in capital (+13.2% compared to the previous year) was raised through bond issues. In addition, the estimated value of capital increases undertaken by companies already listed amounted to just under CHF 6 billion. These figures demonstrate the solid financing ability and the importance of the Swiss Stock Exchange in times of market uncertainty.
BME (Bolsas y Mercados Españoles) contributed CHF 196.6 million to the operating income of SIX from the closing of the transaction in June, up until the end of December. Of BME’s total annual revenue in 2020, 40% was attributable to its Equity business, 24% to Market Data and Value Added Services, and a further 21% to Settlement and Registration. The number of stock market transactions rose by 50% year on year. As a result of heightened activity in the equity trading business, clearing and settlement transactions in this segment rose as well: Equity clearing transactions were up by 48.4% and the number of instructions from stock market operations settled rose by 5.84%.
In the year under review BME registered one new listing and nine new companies in the BME Growth market.
In its Financial Information business unit SIX generated income of CHF 365.7 million in the year under review. This represents 26.6% of its total operating income and is slightly below the previous year’s figure owing to negative translation effects (–0.7%). Factoring out currency impact, the business unit surpassed the previous year’s results.
Reference data and corporate actions continue to account for the largest share of revenue in the Financial Information business. However, because of the further increase in compliance stipulations placed on business and the financial sector, it is mainly regulatory data that is generating additional growth. SIX introduced data sets for adjustments that became necessary as a result of Brexit and the regulatory changes brought about by MiFID II. The highest growth rates were once again recorded by the Sanctioned Securities Monitoring Service.
In its index business SIX grew its customer base. There is an increased adoption of SARON – calculated by SIX – as a reference interest rate to replace LIBOR. In Switzerland several banks have started using SARON as a reference interest rate for the calculation of mortgages in the year under review.
The operating income of the Banking Services business unit was also slightly lower than it was in 2019, at CHF 185.9 million (–0.9%). Consumers’ payment behaviour changed significantly in 2020: As a result of the pandemic, cash withdrawals and payments by debit card fell for a short time during the Swiss lockdown in April by around 50% and 30% respectively. While card payments rose again as the year progressed, cash use remained low. As a consequence of falling cash withdrawals ATM transactions were 23% below the previous year’s level at the end of the reporting period.
In contrast, electronic and digital payment solutions grew rapidly, boosted by COVID-19. SIX recorded its strongest growth in digital bills, with eBill transactions up by 60%. The migration of bank customers from PostFinance to the eBill platform played a significant role in this development. At the beginning of the year SIX introduced new functions on the eBill platform. Furthermore, digitally readable QR-bills were introduced across Switzerland on schedule on 30 June, with a view to progressively replacing the traditional payment slip.
A further milestone in 2020 was the successful installation of a uniform multi-vendor software on a total of almost 6,000 ATMs in Switzerland and Liechtenstein. SIX thereby brought a major project extending over several years to a successful conclusion.
For 2020 a proposal will be made at the Annual General Meeting to distribute an ordinary dividend of CHF 4.30 per share (prior year: CHF 3.90).
Outlook: Forward-looking Growth Initiatives
In order to continue to hold its own in a competitive market environment, SIX will be looking at organic growth opportunities as well as potential acquisitions in all areas of business.
While organic growth is the focus for SIX, partnerships and acquisitions offer the opportunity to accelerate or complement the growth strategy. Financial market infrastructures entail high fixed costs. Additional volumes enable significant economies of scale to be achieved quickly, which increases profitability and thus enhances the capacity for innovation. This means that the competitiveness of the infrastructure is augmented.
In parallel to the focus on growth, SIX will drive forward with the integration of BME in 2021 in order to benefit from the expected economies of scale and synergy effects as swiftly as possible.
It remains the mandate and core mission of SIX to provide its owners and customers with highly reliable and efficient infrastructure services, to ensure optimal access to capital markets and to support banks in their digital transformation.
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