Interim report Third quarter of 2017
Main features of the third quarter: Continued high level of activity in both the primary and secondary markets Four companies admitted to listing on Oslo Børs, two new companies registered on the NOTC list, and 18 new equity issuers registered with VPS 125 new fixed income issues admitted to listing, 433 new fixed income issues registered with VPS Oslo Børs and the Stock Exchange of Thailand have signed a memorandum of understanding Share savings accounts available from 1 September 2017 circa 75,000 accounts set up with VPS in September New tax-efficient scheme for individual pension saving from 1 November 2017 Operating revenue NOK 233 million (205) EBITDA NOK 113 million (97) Earnings per share NOK 1.87 (1.53) Business activities in the quarter (same period last year in brackets) Oslo Børs VPS Holding reports a profit of NOK 80 million for the third quarter of 2017 (NOK 66 million) and a profit of NOK 281 million (NOK 196 million) for the first nine months of the year. Operating revenues 232 645 204 834 743 310 667 422 901 052 Operating expenses 127 735 119 308 394 717 412 663 551 881 EBITDA 113 098 96 792 374 726 322 590 430 177 Operating profit (EBIT) 104 911 85 526 348 593 254 759 349 171 Earnings for the period 80 207 65 986 280 803 195 766 269 421 Earnings per share (NOK) 1,87 1,53 6,53 4,55 6,27 Earnings per share (NOK) before amortisations and write-down 1,88 1,55 6,58 5,20 6,93 The third quarter was characterised by the benchmark index reaching new all-time highs and continuing high levels of activity in the primary and secondary equity and fixed income markets. Reported revenue for the third quarter of 2017 was NOK 233 million, which is NOK 28 million higher than in the third quarter of 2016. Revenue related to listing and registration was in total NOK 18 million higher than in the third quarter of 2016, NOK 2 million of which amount relates to the consolidation of NOTC with effect from the second quarter of 2017. Revenue related to the trading and settlement of equities and fixed income issues was NOK 5 million higher than in the third quarter of 2016, while revenue related to trading in derivatives was in line with the third quarter of 2016. Revenue from the mutual funds area was NOK 4 million higher than in the third quarter of 2016, while revenue related to market data was NOK 1 million higher. Reported revenue for the first nine months of 2017 was NOK 76 million higher than in the first nine months of 2016, with revenue related to listing and registration NOK 66 million higher in the first nine months of 2017 than in the same period last year. Operating expenses before capitalisation of internal costs, depreciation and amortisation of excess value amounted to NOK 120 million in the third quarter of 2017, an increase of NOK 12 million from the third quarter of 2016. Operating expenses before capitalisation of internal costs, depreciation and amortisation of excess value for the first nine months of 2017 were NOK 24 million higher than in the first nine months of 2016. The increase principally relates to the financial sector tax, projects at both Oslo Børs and VPS (including Mifid 2, CSDR, share savings account, modernisation), the appointment of a new CEO of VPS, the fact that some types of costs increase with higher levels of activity, and general increases in salaries and prices. Net financial income for the third quarter of 2017 totalled NOK 2 million, in line with the same period in 2016. Net financial income for the first nine months of 2017 was NOK 15 million 2
higher than in the first nine months of 2016. The group s acquisition of the remaining 50% of NOTC AS and its change to a wholly owned subsidiary company from a joint venture meant that under IFRS the group s previous equity stake in NOTC had to be re-measured. This led to income of NOK 14.6 million being recognised in the second quarter, and to net financial income in the first nine months of this year increasing by NOK 15 million. Oslo Børs and the Stock Exchange of Thailand sign memorandum of understanding Share savings accounts from 1 September New tax-efficient scheme for individual pension saving In September, the Stock Exchange of Thailand and Oslo Børs signed a memorandum of understanding regarding market and product development, which will include investigating the possibility of secondary listings for companies listed on the two exchanges own marketplaces. The share savings account scheme entered into force on 1 September, with VPS offering services and solutions for share savings accounts from this date. At the end of September approximately 75,000 accounts had been set up with VPS. The revenue earned by VPS in the third quarter in relation to share savings accounts was primarily non-recurring revenue related to setting up share savings account solutions for customers. The revenue earned in 2017 will largely relate to share savings account transactions at VPS and delivering tax information to the providers of this product. From the start of 2018, share savings scheme revenue will relate to operating accounts and other related ongoing services. VPS wishes to encourage private individuals to save more by making the new IPS accounts available in VPS systems. The accounts will be able to be used to hold all types of financial instrument at VPS and will be available through today s various different interfaces. These include a case manager solution for providers and portal solutions for investors. IPS accounts at VPS will be available to our customers from November 2017. Outlook Operating expenses for 2017 before capitalisation of internal costs, depreciation and amortisation are expected to be in excess of NOK 500 million (unchanged from last reporting). This includes expenses related to a MiFID II version of Oslo Børs trading system Millennium Exchange, adapting VPS systems to the EU s CSD Regulation (CSDR), the financial sector tax that was approved by the Norwegian Parliament in December 2016, and the change of CEO at VPS. The financial sector tax consists of an extra payroll tax of 5% on the salaries and other remuneration received by financial sector employees in addition to the corporation tax rate remaining at 25% for financial sector companies. Operating expenses for 2018 before capitalisation of internal costs, depreciation and amortisation are also expected to be in excess of NOK 500 million. Included in this figure is an increase in expenses at Centevo in relation to planned development activities at the company. The group s operating revenue varies in line with the level of activity in the securities market. Oslo Børs VPS is committed to offering a range of products and a pricing structure that are competitive and that encourage active use of the group s services. Oslo Børs VPS anticipates that its marketplace activities will continue to face intense competition, and it also expects increasing competition for the group s post-trade activities. 3
Oslo Børs Equitues - value of turnover 400 300 200 100 0 Oslo Børs Operating revenues 118 237 100 340 375 428 324 203 445 542 Salary and other operating expenses 53 396 48 671 158 552 147 160 205 218 EBITDA 64 842 51 669 216 877 177 043 240 324 Depreciations and write-downs 1 313 4 087 5 957 12 403 16 159 Amortisations 0 0 0 0 0 Operating profit (EBIT) 63 529 47 582 210 920 164 640 224 165 Reported revenue for Oslo Børs for the third quarter of 2017 was NOK 118 million (NOK 100 million), an increase of NOK 18 million from the same period in 2016. Revenue from the primary market was NOK 13 million higher, while revenue related to trading was NOK 4 million higher and revenue from the sale of market data was NOK 1 million higher. Reported revenue for Oslo Børs for the first nine months of 2017 was NOK 51 million higher than in the same period in 2016. Revenue from the primary market was NOK 49 million higher than in the first nine months of 2016, while revenue from the sale of market data was NOK 3 million higher. Revenue related to trading was NOK 1 million lower than in the first nine months of 2016. The OSEBX Index (the Benchmark Index) was 783.09 at the end of the third quarter of 2017, an increase of 12.1% in the quarter. On the Oslo Børs marketplace, four companies were admitted to listing in the third quarter (including two transfers from Oslo Axess and Merkur market), while four companies were removed from listing. At the end of the third quarter of 2017, a total of 210 companies were listed on Oslo Børs and Oslo Axess, while 12 companies were listed on Merkur Market. At the end of the third quarter there were 47 companies registered on the NOTC list, with two companies newly registered on the list and two removed in the quarter. A total of 1,999 fixed income issues were listed on Oslo Børs and Nordic ABM (Alternative Bond Market) at the end of the third quarter of 2017, representing an increase of 204 relative to the end of the third quarter of 2016. Listing fees paid by issuers in the third quarter of 2017 totalled NOK 32 million, an increase of NOK 5 million from the same period in 2016. Document inspection and admission to listing fees in the third quarter of 2017 totalled NOK 16 million, an increase of NOK 8 million from the same period in 2016. Revenue of NOK 2 million from NOTC AS is included in the figures for the third quarter. The value of shares, ETFs and equity certificates traded in the third quarter of 2017 totalled NOK 252 billion (NOK 216 billion), an increase of 17% from the third quarter of 2016. We estimate that in the third quarter of 2017 Oslo Børs had a market share of trading in OBX shares of just under 60%, which is somewhat higher than in the same period in 2016. Oslo Børs had 50 member firms at the end of the third quarter of 2017, of which 18 are local firms and 32 are remote members. The overall level of activity in the derivatives market in the third quarter of 2017, as measured by the number of contracts traded, was approximately 1% higher than in the same period in 2016. The level of activity when measured in value terms was approximately 9% higher than in the same period in 2016. Fish Pool reported total contract turnover of 19,049 tonnes for the third quarter of 2017, representing an increase of approximately 60% from the same period in 2016. Total revenue related to trading in the third quarter of 2017 was NOK 32 million, up from NOK 28 million in the same period in 2016. Revenue related to trading in shares and fixed income issues in the third quarter of 2017 was NOK 4 million higher than in the same period in 2016, while revenue related to trading in derivatives was in line with the same period last year. Revenue from Fish Pool, which is included in revenue related to trading in derivatives, was NOK 1 million higher than in the third quarter of 2016. The estimated number of end users of market data from Oslo Børs at the end of the third quarter of 2017 was approximately 9% higher than at the end of the third quarter of 2016. The number of professional users was lower, while the number of private users was higher. There was also an increase in non-display use of market data. Revenue related to market data for the third quarter of 2017 was NOK 33 million, an increase of NOK 1 million from the same period in 2016. Salary and other operating expenses for the third quarter of 2017 totalled NOK 53 million, an increase of NOK 5 million relative to the same period in 2016. Salary and other operating expenses for the first nine months of 2017 were NOK 11 million higher than in the same period in 2016. The increase largely relates to trading system projects at Oslo Børs, the financial sector tax and general salary and price increases. 262 283 297 264 216 267 302 257 252 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Financial market data - no of end users (professional and private) 60 000 40 000 20 000 0 4 40 272 40 785 41 901 43 874 44 225 45 950 52 555 48 300 48 085 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317
VPS VPS Operating revenues 113 348 103 604 366 624 340 172 451 878 Salary and other operating expenses 64 347 57 119 204 436 192 467 258 579 EBITDA 49 001 46 485 162 188 147 705 193 299 Depreciations and write-downs 5 911 6 199 17 281 52 492 60 937 Amortisations 940 940 2 819 2 819 3 759 Operating profit (EBIT) 42 150 39 346 142 087 92 394 128 604 Third-quarter operating revenue for VPS totalled NOK 113 million (NOK 104 million), an increase of NOK 9 million from the third quarter of 2016. In the issuer area, registered securities saw a reduction in the number of limited companies registered with VPS but an increase in the number of fixed income issues registered relative to the third quarter of 2016. At the end of the third quarter of 2017, 999 (1,003) limited companies and 3,114 (2,890) fixed income issues were registered with VPS. Revenue from the issuer area for the third quarter of 2017 totalled NOK 31 million, in line with the same period in 2016. Revenue from the issuer area for the first nine months of 2017 was NOK 7 million higher than in the same period in 2016. The market value of VPS-registered mutual funds at the end of the third quarter of 2017 was NOK 565 billion (NOK 467 billion), representing an increase of 21% relative to the end of the third quarter of 2016. The number of mutual funds transactions totalled 0.8 million in the third quarter, up 30% from the same period in 2016. Revenue from the mutual funds area for the third quarter of 2017 was NOK 22 million, an increase of NOK 4 million relative to the third quarter of 2016. Centevo is included in the VPS Fund Services reporting unit and reported revenue of NOK 5 million in the third quarter of 2017, in line with the same period in 2016. Revenue from the mutual funds area for the first nine months of 2017 was NOK 4 million higher than in the same period in 2016. The number of transactions in the settlement area in the third quarter of 2017 was 7% higher than in the same period in 2016. The number of investor transactions was approximately 20% higher in the third quarter of 2017 than in the same period in 2016 due to a higher level of activity among private individuals. Revenue from the settlement area for the third quarter of 2017 totalled NOK 25 million, an increase of NOK 1 million from the same period in 2016. Revenue from the settlement area for the first nine months of 2017 was NOK 5 million higher than in the same period in 2016. In the investor area, the market value of holdings at the end of the third quarter of 2017 was 15% higher than at the end of the third quarter of 2016. 1.3 million VPS accounts were registered at the end of the third quarter of 2017, of which 1.15 million are income-earning for the investor area (the other accounts are share savings accounts which will not generate revenue in 2017 or accounts that affect income in the funds area). The total number of income-earning accounts at the end of the third quarter of 2017 was 4% higher than at the end of the third quarter of 2016. Revenue from the investor area for the third quarter of 2017 was NOK 34 million, an increase of NOK 5 million relative to the same period in 2016. Revenue from the investor area for the first nine months of 2017 was NOK 10 million higher than in the first nine months of 2016. Salary and other operating expenses for the third quarter of 2017 were NOK 7 million higher than in the same period in 2016. Salary and other operating expenses for the first nine months of 2017 were NOK 12 million higher than in the same period in 2016. The increase to a large extent relates to the financial sector tax, work on projects, the appointment of a new CEO, the fact that some types of expense increase as levels of activity increase, and general salary and price increases. Number of trade transactions (1000) Investor accounts and value of holdings 5 000 4 000 3 000 2 000 1 000 0 2 966 3 155 2 978 3 024 2 820 3 429 3 851 2 824 3 022 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 1 160 1 140 1 120 1 100 1 080 1 060 1 040 5409 4997 5075 5106 4575 4659 4524 4700 4607 1102 1094 1114 1121 1131 1082 1108 1 124 1154 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 5 600 5 400 5 200 5 000 4 800 4 600 4 400 4 200 4 000 # income-earning accounts (1000) Holdings (NOK bill) 5
Oslo Market Solutions Oslo Market Solutions Operating revenues 6 288 5 118 17 327 15 895 21 694 Salary and other operating expenses 5 105 4 791 15 800 14 617 20 120 EBITDA 1 183 327 1 527 1 278 1 574 Depreciations and write-downs 24 40 76 117 152 Amortisations 0 0 0 0 0 Operating profit (EBIT) 1 159 288 1 451 1 161 1 422 Operating revenue for the third quarter of 2017 was NOK 1.2 million higher than in the same period in 2016, while operating expenses were NOK 0.3 million higher. Operating revenue for the first nine months of 2017 was NOK 1.4 million higher than in the same period in 2016, while operating expenses were NOK 1.2 million higher. Oslo Market Solutions operating revenue fluctuates with the timing of the implementation of customer projects and the delivery of routine services. Please see www.osloborsvps.no for further operational key figures. All figures are in thousands of Norwegian kroner and apply to the Oslo Børs VPS group unless otherwise stated. The group comprises the parent company Oslo Børs VPS Holding ASA and the subsidiaries Oslo Børs ASA, Verdipapirsentralen ASA (VPS) and Oslo Market Solutions AS. The accounting information in this report has not been audited. 6
Profit and loss account This interim report has been prepared in accordance with IAS 34. The same accounting principles and methods of calculation are used in the interim report as in the annual accounts. Earnings per share is calculated on the basis of earnings for the period in question. Operating revenues 232 645 204 834 743 310 667 422 901 052 Operating expenses Salary and other personnel expenses 70 126 65 136 218 646 201 803 278 304 Other operating expenses 49 421 42 906 149 938 143 029 192 571 Depreciations and write-downs 7 248 10 326 23 314 65 012 77 248 Amortisations 940 940 2 819 2 819 3 759 Write-downs 0 0 0 0 0 Operating expenses before capitalisation of internal resources, depreciations and amortisations 119 547 108 042 368 584 344 832 470 875 Total operating expenses 127 735 119 308 394 717 412 663 551 881 EBITDA 113 098 96 792 374 726 322 590 430 177 Operating profit (EBIT) 104 911 85 526 348 593 254 759 349 171 Net financial items 1 980 2 199 20 783 6 009 9 507 Ordinary pre-tax profit 106 891 87 725 369 376 260 768 358 678 Tax 26 684 21 739 88 573 65 002 89 257 Earnings for the period 80 207 65 986 280 803 195 766 269 421 Actuarial gains/losses defined benefit pension plans 0 0 0 0-7 665 Tax-effect 0 0 0 0 1 916 Total comprehensive income 80 207 65 986 280 803 195 766 263 672 Profit/loss attributable to non-controlling interests 9 8 21 96 122 Profit/loss attributable to owners of the parent 80 198 65 978 280 782 195 670 263 550 Earnings per share (NOK) 1,87 1,53 6,53 4,55 6,27 Diluted earnings per share (NOK) 1,87 1,53 6,53 4,55 6,27 Earnings per share (NOK) before amortisations and write-down 1,88 1,55 6,58 5,20 6,93 EBITDA= Driftsinntekter fratrukket lønns- og personalkostnader og andre driftskostnader 7
Segment information The Oslo Børs VPS Holding group has three segments: Oslo Børs, VPS, and Oslo Market Solutions. The segments are equivalent to the subsidiaries of the same name. Transactions between companies in the same segment are not eliminated within the segment. The segment information reported has been prepared in accordance with IFRS 8. Oslo Børs Operating revenues 118 237 100 340 375 428 324 203 445 542 Salary and other operating expenses 53 396 48 671 158 552 147 160 205 218 EBITDA 64 842 51 669 216 877 177 043 240 324 Depreciations and write-downs 1 313 4 087 5 957 12 403 16 159 Amortisations 0 0 0 0 0 Operating profit (EBIT) 63 529 47 582 210 920 164 640 224 165 VPS Operating revenues 113 348 103 604 366 624 340 172 451 878 Salary and other operating expenses 64 347 57 119 204 436 192 467 258 579 EBITDA 49 001 46 485 162 188 147 705 193 299 Depreciations and write-downs 5 911 6 199 17 281 52 492 60 937 Amortisations 940 940 2 819 2 819 3 759 Operating profit (EBIT) 42 150 39 346 142 087 92 394 128 604 Oslo Market Solutions Operating revenues 6 288 5 118 17 327 15 895 21 694 Salary and other operating expenses 5 105 4 791 15 800 14 617 20 120 EBITDA 1 183 327 1 527 1 278 1 574 Depreciations and write-downs 24 40 76 117 152 Amortisations 0 0 0 0 0 Operating profit (EBIT) 1 159 288 1 451 1 161 1 422 Other/eliminations Operating revenues -5 228-4 227-16 069-12 848-18 062 Salary and other operating expenses -3 301-2 538-10 204-9 412-13 042 EBITDA -1 927-1 689-5 865-3 436-5 020 Depreciations and write-downs 0 0 0 0 0 Amortisations 0 0 0 0 0 Operating profit (EBIT) -1 927-1 689-5 865-3 436-5 020 Total operating revenues 232 645 204 834 743 310 667 422 901 052 Total salary and other operating expenses 119 547 108 042 368 584 344 832 470 875 Total EBITDA 113 098 96 792 374 726 322 590 430 177 Total capitalisation of internal resources 0 0 0 0 0 Total depreciations and write-downs 7 248 10 326 23 314 65 012 77 248 Total amortisations 940 940 2 819 2 819 3 759 Total operating profit (EBIT) 104 910 85 526 348 593 254 759 349 171 8
Balance sheet Current receivables totalled approximately NOK 110 million at the end of the third quarter. Of this, trade receivables totalled NOK 78 million, and other current receivables, including prepaid expenses and income accrued but not yet invoiced, amounted to NOK 32 million. Cash and cash equivalents held at the end of the third quarter totalled NOK 714 million. Current liabilities, which consist of non-interesting bearing other debt, amounted to approximately NOK 237 million, of which prepayments from customers and tax payable accounted for NOK 60 million and NOK 79 million respectively. Fixed assets 30 Sept 30 Sept 31 Dec 2017 2016 2016 IT systems 28 819 50 573 41 235 Registrations 6 200 6 200 6 200 Goodwill 534 459 491 551 491 569 Deferred tax assets 51 934 52 813 53 413 Tangible assets 54 158 40 431 40 261 Financial fixed assets 8 217 16 989 18 913 Current assets Receivables 110 203 90 137 106 524 Cash and liquid assets 714 303 651 225 603 862 Assets 1 508 293 1 399 919 1 361 977 Equity Contributed equity 1 105 340 1 034 152 989 916 Non-controlling interests 481 433 459 Total equity 1 105 821 1 034 585 990 375 Liabilities Pension liabilities 163 248 157 885 164 348 Deferred tax liabilities 2 584 3 411 3 204 Current liabilities 236 640 204 038 204 050 Equity and liabilities 1 508 293 1 399 919 1 361 977 9
Cash flow Cash flow is reported in accordance with IAS 7. Oslo Børs VPS Holding recorded an increase in cash and cash equivalents of NOK 50 million in the third quarter. Cash and cash equivalents held at the end of the third quarter totalled NOK 714 million. Cash flow from - operational activities 46 911 69 652 307 735 256 837 323 844 - investment activities 2 280 666-30 953-5 383-6 819 - investments in systems and tangible assets 227-1 930-27 808-13 947-17 650 - investments in subsidiaries 0 0-13 706 0 0 - financial income 2 053 2 596 10 561 8 564 10 831 - financing activities 1 112 278-166 341-178 711-291 645 Cash and cash equivalents at period's start 664 001 580 629 603 862 578 482 578 482 Change in cash and cash equivalents 50 302 70 596 110 441 72 743 25 380 Cash and cash equivalents at period's end 714 303 651 225 714 303 651 225 603 862 Cash flow per share (NOK) 1,17 1,64 2,57 1,69 0,59 Equity Equity amounted to NOK 1,106 million at the end of the third quarter, and the equity ratio was 73%. 31 Dec Equity at period's start 1 024 589 968 466 990 375 1 018 111 1 018 111 Total comprehensive income 80 207 65 986 280 803 195 766 269 421 Dividends 0 0-165 535-178 395-290 170 Purchase of own shares 1 185 676 100 239-284 Acturial gains/losses in the period 0 0 0 0-5 749 Change in non-controlling interests etc -160-543 78-1 136-953 Equity at period's end 1 105 821 1 034 585 1 105 821 1 034 585 990 375 10
Shareholder information Oslo Børs VPS Holding ASA share price: The graph shows movements in the share price of Oslo Børs VPS Holding ASA over the last five years. The company has issued 43,004,000 shares. Approximately 0.9 million shares were traded in the third quarter, with prices from NOK 107.25 to NOK 116. The last registered trade in the third quarter of 2017 was at NOK 112. Dividends last five years 2 012 2 013 2 014 2 015 2 016 Dividend per share (NOK) 7,00 7,00 8,20 6,75 6,45 Payout ratio vs EPS adjusted for amortisations and write-downs 113 % 111 % 111 % 92 % 93 % In addition to dividends above, a special dividend of NOK 4,50 per share was paid out in August 2014. Oslo Børs VPS Holding ASA 20 largest shareholders at 24 October 2017 11
Key figures Financial Earnings per share (NOK) 1,87 1,53 6,53 4,55 6,27 Diluted earnings per share (NOK) 1,87 1,53 6,53 4,55 6,27 Earnings per share (NOK) before amortisations and write-down 1,88 1,55 6,58 5,20 6,93 Change in cash per share (NOK) 1,17 1,64 2,57 1,69 0,59 Return on equity 30,1 % 26,3 % 35,8 % 25,5 % 26,2 % Return on total capital 28,7 % 25,4 % 32,7 % 23,9 % 24,8 % Net operating margin 45,1 % 41,8 % 46,9 % 38,2 % 38,8 % Operational OSEBX index at period's end 783,09 622,69 783,09 622,69 683,87 Change in period 12,1 % 3,3 % 14,5 % 2,0 % 12,1 % Equities - no. of transactions (1000s) 6 254 4 861 18 679 17 483 23 322 Equities - value of turnover (NOKbn) 252 216 811 777 1 044 Equities - market value listed companies (NOKbn) 2 410 1 902 2 180 No. of companies listed 210 214 212 Change in period -2 1-1 Number of trade transactions processed in VPS (1000s) 3 022 2 820 9 697 8 822 12 251 Number of VPS-accounts (1000s) 1 230 1 131 1 082 Derivatives - no. of contracts traded (1000s) 1 722 1 698 5 686 6 559 8 855 Turnover derivatives (NOK million) 46 431 42 777 140 203 143 350 191 151 Financial market data - number of end-users 48 085 44 225 45 950 The Board of Directors of Oslo Børs VPS Holding ASA Oslo, 24 October 2017 12
OSLO BØRS VPS HOLDING ASA PO Box 460 Sentrum 0105 Oslo www.osloborsvps.no