High activity and good results again in second quarter

Transcription

1 VPS Holding ASA Group Report for the 2nd quarter 2007 High activity and good results again in second quarter Operating income increased to NOK million (115.5m) Post-tax profit: NOK 53.1 million (49.6m) Clearing and settlement incomes down due to price reductions VPS new facility, Investor Services, gets enthusiastic market reception Merger of Oslo Børs and VPS formally approved High market volumes and good sales of products and services were seen in all market areas. Mutual fund transactions rose by 45% while the number of VPS accounts rose by 12% to reach 1.5 million for the first time. However, a slight decline in clearing and settlement transactions (3.3%) together with price reductions brought lower incomes in the clearing and settlement area. The number of investor holdings in mutual funds continues to rise and now stands at 1,220,000. The strong growth is due to increased interest in mutual funds, growth in the value of mutual funds, and to unit-linked OTP agreements. While the VPS Group posted good income growth in the second quarter, profit did not grow correspondingly compared with last year s second quarter due to higher costs. This was mainly attributable to intensified systems development and to the charging of preliminary merger costs. The inclusion of VPS Clearing ASA in the figures for the year impacts income and expenses alike. The operating margin remains at a high level. VPS Investor Services enthusiastic market reception continues. With this facility VPS infrastructure offers a new customer and account structure which will be further developed in the course of the year to provide additional web-based services. High market activity also impacted VPS Clearing in the second quarter. The number of active derivative accounts continued to rise and now stands at about 2,100. VPS Clearing has been actively engaged in product development and, together with Oslo Børs, expects to launch a number of new derivative products in the quarters ahead. An extraordinary general meeting of Verdipapirsentralen Holding ASA held on Monday 11 June approved the merger plan dated 3 May 2007 for the merger of Oslo Børs Holding ASA and Verdipapirsentralen Holding ASA. A similar resolution was adopted by an extraordinary general meeting of Oslo Børs Holding ASA. 150 Total income Profit/loss after tax st Qtr 2nd Qtr 3rd Qtr 4th Qtr 102,3 115,5 96,7 120, ,7 134,4 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 34,8 49,6 91,4 41, ,7 53,1

2 Profit and loss account Main figures in NOK '000s 2007 Q2 Q First half First half Operating income Operating expenses Ordinary depreciation EBITDA Operating profit/loss (EBIT) Net financial items Profit/loss before tax Taxes Profit/loss after tax Financial key figures EBITDA margin 60,6 % 65,6 % 55,7 % 59,7 % 56,9 % EBIT margin 54,0 % 59,8 % 48,9 % 53,6 % 50,1 % Post-tax earnings per share 10,62 9,93 19,35 16,89 43,20 Cash flow from operations per share 32,34 27,71 48,23 Equity ratio 1) 63,6 % 77,7 % 64,8 % Return on equity 47,5 % 54,3 % 53,5 % Current ratio 1) 2,30 2,60 3,24 EBITDA = Operating profit/loss before depreciation and amortisation EBITDA margin = EBITDA as a percentage of operating income EBIT margin (operating margin) = EBIT as a percentage of operating income Earnings per share = Profit/loss after tax divided by number of shares Cash flow from operations per share = Cash flow from operating activities divided by number of shares Equity ratio = Equity as percentage of total capital Return on equity = Profit/loss after tax as a percentage of average equity (estimated p.a.) Current ratio = Liquid assets + debtors + other liquid receivables divided by short-term liabilities 1) Market value of outstanding derivative positions is not included in these ratios Income and expenses Income in the second quarter 2007 amounted to NOK million, which is NOK 189 million (16.4%) higher than in the same period. NOK 12.2 million of the income growth comprises income from VPS Clearing, which joined the Group on 1 September. The remaining growth was a result of higher market volumes in mutual fund and investor products, while income from clearing and settlement products was 8.6% lower this quarter than in the same period last year, mainly due to a reduction in prices for clearing and settlement services as from 1 April The price reduction also meant that second quarter income was NOK 1.3 million lower than for the first quarter Income for the first half of 2007 was NOK 52.3 million higher than for the same period. NOK 25.7 million of the first-half income growth derived from VPS Clearing, NOK 26.6 million from VPS ASA and Manamind. Second quarter operating expenses totalled NOK 61.9 million compared with NOK 46.4 million in the second quarter, an increase of NOK 15.5 million (33.4%). NOK 8.4 million of the increase (after eliminations) relates to VPS Clearing, which was not part of the Group as of 30 June. The rest of the Group showed cost growth of NOK

3 7.1 million (15.3%), which was mainly due to salary increases at the start of the year, increased use of consultants, higher depreciation and lower activity in capitalisable development projects. First-half operating expenses rose by NOK 36.9 million, of which NOK million 17.5 million relates to VPS Clearing. Accumulated cost growth for the remainder of the Group came to NOK 19.4 million, and is due to the same factors as those underlying the cost growth in the second quarter. Balance sheet figures Intangible assets rose by NOK 185 million compared with the first half, of which NOK 181 million relates to the acquisition of NOS Finance Clearing ASA on 1 September. The latter figure breaks down to NOK 144 million on goodwill and NOK 37 million on systems development. Financial fixed assets were down NOK 101 million on the same period of, mainly due to the redemption of shares in NOS ASA in the year s third quarter. VPS Clearing is the formal counterparty in derivative transactions traded on the Oslo Stock Exchange and derivative or securities lending transactions notified for clearing. Counterparty risk is measured by models designed with a basis in international practice. Counterparty exposure is covered by collateral from each individual customer. Under IFRS 39 and IAS 32 a clearing entity is required to recognise the liabilities it incurs as a central counterparty to derivative contracts. The market value of VPS Clearing s positions is estimated at NOK 2.2 billion and is recorded in the balance sheet as a short-term liability, with a counter-item under short-term assets. Assets and liabilities that can be assigned to outstanding derivative positions are netted to the extent set-off is possible. Group equity totalled NOK million at quarter-end (NOK 377.2m) and the equity ratio was 63.6% (77.6%). Outstanding derivative positions are excluded from these figures to give a fairer picture of the Group s financial strength. This is in line with practice at other clearing houses. The change in the equity ratio is mainly due to loans raised in connection with the acquisition of NOS Finance Clearing, and to an increase in payable tax. Funds flow In the second quarter the Group recorded a net cash flow of NOK 78.4 million from operations, of which NOK 9.9 million was spent on investment activities, while NOK million went to loan repayments and disbursement of dividends. Liquid assets fell by NOK 82.8 million in the second quarter, and by NOK 4.8 million for the first and second quarters combined, bringing the liquidity position to NOK million at quarter-end.

4 VPS ASA Issuer products Activity levels were high in the issuer area in the second quarter 2007, as in the first quarter. 71 new limited companies and 1 savings bank registered with VPS in the second quarter, compared with 54 companies in the same period last year. A total of 1,377 limited companies (1,192) and 26 (25) primary No. of companies registered in VPS st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr nd Qtr 2007 capital certificates were registered with VPS at quarter-end. 2,086 bond issues (1,992) were registered at the same point and 296 (329) loan certificates. Income from issuer products in the second quarter totalled NOK 27.3 million, which was NOK 2.5 million higher than in last year second quarter. Issues and onward sales showed particularly high activity, with 64 assignments completed compared with 41 in the same period of, bringing NOK 1.2 million higher income than in the same period of. Use made of the general meeting service has continued at last year s level. The service was provided for 58 general meetings in the second quarter compared with 54 in the same period. A strong increase is also noted in companies using VPS to calculate, report and pay dividends. 179 companies holding their general meeting in the second quarter paid dividends through VPS compared with 152 in the same period last year. Income approximately matched the level recorded in the second quarter. We are well under way towards developing a new system for fixed income instruments (FIXIN). Work has also started on the next generation of the saving-in-shares programme. Mutual fund products The market value of VPS-registered mutual funds rose in the second quarter 2007 to NOK 308 billion, an increase of 50.2% over the same period last year. The number of VPS-registered securities funds remained stable from the first quarter at 849, of which 93 are nominee registered. The number of mutual fund transactions rose by 25.5% in the second quarter to just under 1.5 million No. of transactions in mutual funds 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr nd Qtr 2007 The number of investor holdings in mutual funds continues to increase steadily, having risen by 27.0% to reach 1,220,000 in the last 12 months. The strong growth is due to growing interest in mutual funds, a marked increase in their value, and to unit-linked OTP agreements. On the product side the main focus was on further developing multicurrency solutions, which have been expanded to include services targeting Swedish and Finnish mutual fund owners, and on further developing pension services.

5 The number of OTP agreements registered through VPS continued to rise, to 8,700 in the second quarter, and they now cover about 44,000 employees with paid-in contributions. This is a moderate development compared with the previous quarter. Income from mutual fund products in the second quarter totalled NOK 18.4 million, which is NOK 7.2 million (63.4%) higher than in the same quarter and 13.3% higher than in the first quarter. This is mainly due to record-high market values and high transaction volumes, as well as to new sales and further development of the services offered. VPS is seeing increased interest in mutual fund services from new customer groups in the pensions field and from independent distributors. Investor products The number of VPS accounts increased in the second quarter 2007, albeit at a slower rate than in the first quarter. However, a 12% increase is noted since last year s second quarter, and the number of accounts has now passed 1.5 million for the first time. The market value of securities registered with VPS rose this quarter to reach NOK 3,691 million. No. of investor holdings (inclusive mutual funds) registered in VPS st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr nd Qtr 2007 The number of online users of VPS services for investors was 7% up on the previous quarter, and is now at 514,000. More than 50% of investors with a VPS account are hooked up to this service. Income from investor products in the second quarter totalled NOK 22.6 million, which is 22% higher than in last year s second quarter. The main contributors are high market values, general growth in the volume of accounts and sales of VPS Investor Services (a new facility to simplify account operators customer management). VPS Investor Services has enjoyed a good reception in the market and we will continue to market this facility in the third quarter. Work also continues on developing and launching other services to meet customers needs. Clearing and settlement products The high market activity continued into the second quarter. Completed trade transactions totalled NOK 6.6 million, a decrease of 3.3% on the same quarter last year No. of trade transactions processed in VPS Income from clearing and settlement products totalled NOK 50.7 million in the second quarter, NOK 4.8 million (8.6%) lower than in the same quarter. The income reduction is essentially due to VPS price reductions in the clearing and settlement area with effect from 1 April and to somewhat lower volumes. However, volume has risen on other services including deferred settlement, extended checks on presence of securities in sellers accounts and new services in the securities borrowing and lending scheme st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr nd Qtr 2007

6 The completion rate is falling slightly. In the second quarter 2007 it was 97.13% compared with 97.52% in the same quarter. The completion rate signifies the proportion of trades settled on the agreed settlement date and is an indicator of market efficiency. VPS acquired three new clearing and settlement participants in the second quarter, all remote members. Two participate through an agent, while one is a direct member. Seven new participants joined in 2007, bringing VPS s total number of participants to 96. These comprise 69 investment firms and 27 clearing and settlement agents. Thirtytwo of the investment firms are local members, 37 are remote members. Of the latter, 30 are indirect members through an agent while seven are direct members. VPS Clearing ASA VPS Clearing s second quarter income totalled NOK 12.2 million, down NOK 1.3 million on the previous quarter. Operating expenses fell NOK 0.6 million from the previous quarter to NOK 10.1 million for the second quarter. Operating profit came to NOK 2.0 million, giving an operating margin of 17.1%. Accumulated operating profit for the first half-year was NOK 4.8 million, giving an operating margin of 18.7%. Market activity in VPS Clearing remained relatively high in the second quarter Somewhat reduced activity was seen in derivative clearing although market activity in the securities borrowing and lending programme remains high. The number of active derivatives accounts continued to rise and is now at about 2,100, having increased by 200 since the last period. The cost reduction is mainly attributable to higher activity in capitalisable development projects and to accrual of wage costs as a result of holiday pay disbursement. VPS Clearing was actively engaged in product development in the second quarter and, together with Oslo Børs, expects to launch a number of new derivative products in the course of the year. Manamind AS Manamind saw a steady increase in income in the second quarter, particularly from some major contracts signed in the quarter. Second quarter income came to NOK 5.3 million, an increase of 19% over the same period last year. Operating profit was NOK 2.7 million, yielding an operating margin of in excess of 50%. VPS Holding ASA An Extraordinary General Meeting of Verdipapirsentralen Holding ASA held on Monday 11 June approved the merger plan dated 3 May 2007 for the merger of Oslo Børs Holding ASA and Verdipapirsentralen Holding ASA. A similar resolution was passed by an Extraordinary General Meeting of Oslo Børs Holding ASA. Oslo Børs and VPS were warned by the Competition Authority on 13 July 2007 of possible intervention against the merger.

7 Outlook for the future The Board of Directors expects the high activity levels to continue. As experience shows, however, activity on the stock market tends to fluctuate. Transaction volumes ahead are therefore uncertain. We expect income and expenses to increase somewhat as a result of investment in new products. 20 largest shareholders in VPS Holding ASA Name Number % DnB NOR Bank ASA* KLP Forsikring Arendals Fossekompani ASA Oslo Børs ASA Pareto AS Norsk Hydros Pensjonskasse Sundt AS Orkla ASA Storebrand ASA UBS Securities LLC (NOM) Sparebanken Vest Snefonn AS Fondsavanse AS Telenor Pensjonskasse Sigval Bergesen DY s Stiftelse Statoil Pensjonskasse Violina AS Cat Invest 1 AS Tonsenhagen Forretningssenter AS Skips AS Tudor Total Foreign share 2.64 * On 2 July 2004 the Ministry of Finance authorised DnB NOR ASA to own 16.58% of the shares of VPS Holding ASA for a period of three years. On 29 June 2007 this authorisation was extended to 31 December The Ministry makes it a condition that, at general meetings of VPS Holding ASA, DnB NOR ASA cannot vote for more than 10% of the votes of the company or for more than 20% of the votes represented at the general meeting.

8 VPS Holding ASA Group PROFIT AND LOSS ACCOUNT 2007 Q2 Q First half First half OPERATING INCOME Production income Other income Total operating income OPERATING EXPENSES Capitalisation of systems development ( ) ( ) ( ) ( ) ( ) Salaries and other personnel expenses Depreciation Security and production expenses Other admin. and operating expenses Total operating expenses Operating profit/loss FINANCIAL EXPENSES AND INCOME Income on investment in associated companies (56 286) 0 (56 286) Financial income Gain on disposal of shares Other financial items Total financial items Ordinary profit/loss before tax Tax charge Profit/loss after tax

9 Segmentrapportering (I NOK hele tusen) 2007 Q2 Q Acumulated Acumulated Register activity Operating income Operating expenses Operating profit Operating margin 56,3 % 60,5 % 51,1 % 54,1 % 51,6 % Clearing activity Operating income Operating expenses Operating profit Operating margin 17,1 % 0 18,7 % 0 29,6 % Financial information Operating income Operating expenses Operating profit Operating margin 50,4 % 42,4 % 32,7 % 39,6 % 25,9 % Other, and eliminations Operating income (2 775) 0 (4 104) (34) (2 876) Operating expenses (3 162) (18) (5 901) (18) (2 674) Operating profit (202) Group Operating income Operating expenses Operating profit Operating margin 54,0 % 59,8 % 48,9 % 53,6 % 50,1 % Income by product area Investor products Issuer products Clearing and settlement Mutual fund products Financial information Derivatives and borrowing/lending Total operating income Other income Total income

10 VPS Holding ASA Group BALANCE SHEET FIXED ASSETS Systems development Deferred tax asset Goodwill Total intangible assets Vehicles/movables Computer hardware/software Structural installations Property, plant and equipment Investment in joint ventures Loans to affiliates and joint ventures Investment in shares Total financial fixed assets Total assets CURRENT ASSETS Receivables, customers Other receivables Market value, outstanding derivative positions Total receivables Bank deposits, cash, etc Total current assets Total assets EQUITY CAPITAL Share capital Share premium account Total contributed capital Other equity capital Total equity capital LIABILITIES Pension commitments Debt to credit institutions Total long-term liabilities Accounts payable, suppliers Tax payable Unpaid government charges Market value, outstanding derivative positions Other short-term liabilities Total short-term liabilities Total liabilities Total equity capital and liabilities

11 VPS Holding ASA Group FUNDS FLOW STATEMENT Liquid assets generated by/used for operations Profit/loss before tax (Gain)/loss on sale of shares 0 ( ) (Gain)/loss on sale of operating assets (37 000) Tax paid in period ( ) ( ) Ordinary depreciation Change in receivables, customers ( ) ( ) Change in accounts payable, suppliers Change in other short-term liabilities Change in other time-limited items ( ) ( ) Net cash flow from operations In-payments property, plant and equipment Out-payments property, plant and equipment ( ) ( ) Out-payments, systems development ( ) ( ) Out-payments, purchase of shares in Nac AS ( ) 0 Loan disbursed to associated company 0 ( ) Profit share, associated company ( Out-payment, purchase of shares in NOS ASA 0 ( ) Out-payment, purchase of NOS Finance Clearing 0 ( ) Settlement, disposal of shares in NOS ASA Monies received, purchase of NOS Finance Clearing Net cash flow from investment activities ( ) ( ) Change in long-term liabilities ( ) Payment of dividend ( ) ( ) Net cash flow from financing activities ( ) Net change in cash assets ( ) Liquid assets at start of period Liquid assets at end of period Of which tied-up funds amounting to

12 VPS Holding ASA Group EQUITY CAPITAL STATEMENTS Equity capital at Dividend paid ( ) Value adjustment, shares Profit at Equity capital at Value adjustment, shares ( ) Dividend paid ( ) Profit at Equity capital at Dividend paid ( ) Profit for the period Equity capital at The Board of Directors of VPS Holding ASA, 8 August 2007