Annual Press Conference 2018 21 March 2018
Agenda Highlights Financial performance Business performance Key Points 2018 CEO CFO CFO CEO Q&A
Strong operating income growth of 5.8% and a solid EBIT of CHF 273m was achieved in a year with significant forward-looking investments (0.8% EBIT growth, adjusted for gain from sale of real estate in 2016) The IPO transaction volume of CHF 4.5 bn at SIX Swiss Exchange puts SIX on third position among Europe s exchanges The new innovative Regulatory Hub already hosts more than 15 million regulatory documents and is accessed by over 100 clients Launch of the first Swiss next-generation Security Operations Center (SOC) to strengthen cyber security Successful launch of TWINT in April with over 627 000 registered users, and more than 4 million transactions in 2017 Highlights 2017 Successful acquisitions of girocard network operations of VÖB-ZVD Processing GmbH and Aduno SA and sale of commercial issuing business in Austria Strategic realignment SIX increases focus on requirements of shareholders and the Swiss financial centre. The card business of SIX Payment Services will be further developed in a strategic partnership
Financial Performance
Financial key figures (CHF m) 2017 2016 Change (%) Operating income ¹ 1'944.6 1'838.6 5.8 Operating expenses -1'664.0-1'551.5-7.3 Operating profit 280.5 287.1-2.3 Net financial income 15.8 10.4 52.7 Income from associates -23.2-0.3 n/a EBIT ¹ 273.2 297.1-8.1 Net profit ¹ 207.2 221.1-6.2 Equity 2'675.9 2'554.4 4.8 EBIT margin (in %) 14.0 16.2-13.1 Cost/income ratio (in %) 85.6 84.4 1.4 Return on equity (in %, average) 7.9 9.0-12.3 Equity ratio (in %, average) 80.0 76.7 4.3 CAPEX 101.3 99.4 1.9 FTEs 3'755.0 3'807.1-1.4 SIX proposes an ordinary dividend of CHF 7.00 per share (total CHF 136.7m) in the Annual General Meeting; payout ratio 66.2% ¹ 2016 includes CHF 26.0m from sale of real estate. Adjusted operating income growth is +7.3%, adjusted EBIT growth +0.8%, and adjusted net profit growth +6.2%.
Operating Income +5.2% Swiss Exchange +6.8% Securities Services* -0.6% Financial Information +12.3% Payment Services (CHF m) 1,944.6-8.1 1,812.6 9.7 24.0-2.4 108.8 Operating income 2016* Swiss Exchange Securities Services Financial Information Payment Services Global IT, corporate, elimination Operating income 2017 Strong growth in total operating income of 7.3%*, supported by financial market activity and increased acquiring volumes Swiss Exchange benefited from increased trading volumes (+5.2%) and Securities Services was driven by higher custody deposit volumes (+8.0%) Financial Information remained largely flat due to delays in key market regulations Payment Services was driven by a strong growth in acquiring turnover (+17.6%) and positively impacted by two acquisitions * Gain from sale of real estate (CHF +26m) has been eliminated in 2016 for comparison reasons. Non-adjusted numbers: Securities Services -0.5% and SIX total +5.8%
Operating Expenses +11.0% Swiss Exchange +7.3% Securities Services -9.1% Financial Information +14.6% Payment Services (CHF m) 1,664.0-4.5 1,551.5 13.1 22.9-34.3 115.3 Operating expenses 2016 Swiss Exchange Securities Services Financial Information Payment Services Global IT, corporate, elimination Operating expenses 2017 Cost increase of 3% from current business; forward-looking investments leading to an overall increase of 7.3% Swiss Exchange incurred increased cost from new regulatory requirements and Securities Services made, more than ordinary, forward-looking investments in new services Financial Information again increased its profitability, with a rigorous cost discipline and a consistent implementation of its global operating model Cost increase in Payment Services was primarily due to sales-related costs and M&A activity
EBIT -4.4% Swiss Exchange -9.6% Securities Services* +142.9% Financial Information -37.1% Payment Services (CHF m) 271.1 273.2-3.1-4.3 38.1-34.1 5.4 EBIT 2016* Swiss Exchange Securities Services Financial Information Payment Services Group EBIT was maintained on a high level (+0.8%*), despite large strategic investments Swiss Exchange and Securities Services both showed a decline in EBIT, due to the increase in operating expenses The strong growth in Financial Information is primarily explained by lower operating expenses Global IT, corporate, elimination Long-term investments in Payment Services, paving the way for a successful development of the cards business, can be recognized in the lower EBIT EBIT 2017 * Gain from sale of real estate (CHF +26m) has been eliminated in 2016 for comparison reasons. Non-adjusted numbers: Securities Services -42.8% and SIX total -8.1%
Business Performance
Market share of 68.3% in Swiss Blue Chips 8% transactions increase and 5.2% increased trading turnover 6 IPOs and third largest IPO transaction volume in Europe (Landis+Gyr was the third largest IPO in Europe) New products and services for its users and owners remains a central priority (e.g. SwissAtMid) Swiss Exchange EU Equivalence: Temporary status as an equivalent thirdcountry trading venue
Positive impact from high custody deposit volumes (+8%) driven by new international mandates and appreciation of the financial markets Investments in new applications and services: Trade Repository launched in October Advanced Settlement & Advanced Tax Services - Reclaim Artificial Intelligence based client support interface Clearing expanded to Denmark, Finland and Sweden Securities Services FINMA recognizes SIX SIS Ltd as an Financial Market Infrastructure and CO:RE as multilateral trading facility.
Increased operating efficiency once again in 2017 Innovative products and services: Regulatory Hub SIX Flex Premium Fund Data Financial Information CNN Money Switzerland extended the existing portfolio of SIX data partnerships with media companies
SIX communicated its intention to expand its cards-business together with a strategic partner Acquisition of Frankfurt-based girocard network operations of VÖB-ZVD Processing GmbH and Aduno SA and sale of commercial issuing business in Austria Acquiring volume increased by 17.6% Payment Services Successful launch of TWINT in April 2017 with 627 000 registered users by December 2017
Key Points 2018
SIX2020 as of 1 April 2018 (I) Consistent focus on shareholder requirements and market developments Clear focus on core business: run the Swiss financial infrastructure, drive for international growth Securities transactions from a single source Bundling and harmonization of payment services Expansion of leading position in reference data
SIX2020 as of 1 April 2018 (II) Flexibility to develop certain services with a selective group of customers Creation of a new Innovation & Digital business unit SIX with a uniform market presence Expansion of acquiring business and international card processing with a strong strategic partner
New Organization as of 1 April 2018 Securities & Exchanges Payments Financial Information Bundling Swiss Value Chain: Trading & Post-Trading Operations, development and innovation in Swiss payment services Data business Switzerland & International Innovation & Digital Central innovation unit IT Cards* Central area providing IT services for SIX Further development of national and international acquiring Card processing Europe *Involvement of a strategic partner
Innovation@SIX Objective Innovating to retain SIX and the Swiss financial market s competitive edge in the long term Fields of innovation Innovation at SIX: Exploration and validation of new ideas to improve financial market infrastructure Cooperation with banks: Collaboration with Swiss banks to develop customer-focused services and drive digital transformation Fintech ecosystem: Boost international start-ups through accelerator programs and investments Thought leadership: Establish fintech thought leadership by expanding competence in technological and methodical fields
Innovation & Digital Central innovation unit Bundle SIX innovation activities Focus on new technologies, new infrastructure services and Fintech-driven innovations Establish a Company Builder to support the scaling-up of validated concepts F10 Accelerator to support external and internal start-ups Cooperation with banks Set up Venture Fund Establish cognitive Security Operations Centre (SOC) for banks and insurances
Key undertakings for 2018 Successful transformation of SIX SIX2020 Industrialization of business model Strengthen competitiveness of the Swiss Financial Centre Establishment of a cognitive Security Operations Center (SOC) Standardization and enrichment of SIX Data Services Increase clients efficiency Further develop regulatory services (e.g. MiFID II, PRIIPs regulation) Establish Advanced Tax Services Reclaim for Swiss banks and investors New infrastructure services Launch of Corporate Bonds Further extend SIX RegHub into a regulatory data and documents market place Cooperate with Swiss banks to develop new services and drive digital transformation
Summary SIX continues its success of the last 10 years with a strong operating income growth and a solid EBIT in 2017 SIX invests in the future and strengthens its market position Clear commitment by all banks to a common, strong financial market infrastructure in Switzerland Focus on infrastructure services in securities, payments and financial information Strengthened focus on innovation and new services Strong foundation for a continued successful future
Q&A
Key figures SIX Key figures SIX Actual Prior year in mchf Dec 2017 Dec 2016 Act / Py (%) Income statement Total operatig income 1 1'944.6 1'838.6 5.8 Total operating expenses 1'664.0 1'551.5 7.3 Net financial result 15.8 10.4 52.7 EBIT 1 273.2 297.1-8.1 EBIT margin (in %) 14.0% 16.2% -13.1 Group net profit 1 207.2 221.1-6.2 1) 2016 includes CHF 26.0m from sale of real estate. Adjusted operating income growth is +7.3%, adjusted EBIT growth +0.8%, and adjusted net profit growth +6.2%. 2) Return on equity = Profit previous 12 months / average equity previous 12 months 3) Equity ratio = Average equity previous 12 months / (average adjusted liabilities previous 12 months + average equity previous 12 months). The adjustments of the liabilities include the positions "payables from clearing & settlement" and "negative replacement values from clearing & settlement". 23 Cash flow statement Cash flow from operating activities -110.3 953.2-111.6 Cash flow from investing activities -254.2-93.7 171.4 Cash flow from financing activities -142.0-157.3-9.7 Balance sheet as at 31/12 Total assets 10'301.5 10'279.5 0.2 Total liabilities 7'625.6 7'725.1-1.3 Total equity 2'675.9 2'554.4 4.8 Return on equity 2 (in %, average) 7.9% 9.0% -12.3 Equity ratio 3 (in %, average) 80.0% 76.7% 4.3 Operating key figures Workforce as at 31/12 (full-time equivalents) 3'755.0 3'807.1-1.4 Workforce as at 31/12 (headcount) 3'963 4'020-1.4 Stock exchange trading volume (in bnchf) 1'346.0 1'279.3 5.2 Deposit volume (in mchf) 3'315'113 3'070'889 8.0 Number of financial instruments (in m) 27.3 23.7 15.4 Acquiring turnover (in mchf) 88'658.4 75'407.9 17.6 Shareholders' key figures Shares outstanding 18'914'041 18'914'041 - Dividend per share (in CHF) 7.00 7.30-4.1 Payout ratio (in %) 66.2% 64.6% 2.4 Equity per share (in CHF) 141.48 135.05 4.8 Earnings per share (in CHF) 10.91 11.66-6.4
Segment information Segment information Actual Prior year in CHF m Dec 2017 Dec 2016 Act / Py (%) Operating income Swiss Exchange 198.2 188.5 5.2 Securities Services 375.4 377.4-0.5 Financial Information 400.1 402.6-0.6 Payment Services 993.8 885.0 12.3 Global IT 439.5 405.3 8.4 Corporate and elimination -462.6-420.3 10.1 Total operating income 1'944.6 1'838.6 5.8 Operating expenses Swiss Exchange 132.5 119.3 11.0 Securities Services 335.4 312.5 7.3 Financial Information 342.5 376.9-9.1 Payment Services 907.5 792.2 14.6 Global IT 426.3 396.1 7.6 Corporate and elimination -480.2-445.5 7.8 Total operating expenses 1'664.0 1'551.5 7.3 Earnings before interest and tax (EBIT) Swiss Exchange 66.2 69.3-4.4 Securities Services 40.3 70.6-42.8 Financial Information 64.8 26.7 142.9 Payment Services 57.7 91.8-37.1 Global IT 13.3 9.2 43.6 Corporate 30.9 29.6 4.5 24 Total EBIT 273.2 297.1-8.1
Contribution by division 25%, 58m 29%, 66m 51%, 994m EBIT Swiss Exchange Securities Services Financial Information 10%, 198m Operating income Payment Services 20%, 400m 19%, 375m 18%, 40m 28%, 65m
Swiss Exchange financials in CHF m 2017 2016 Change % Operating income 198.2 188.5 5.2 Trading 147.3 144.9 1.7 Data & Indices 44.5 37.3 19.2 Other 6.5 6.4 2.6 Operating expenses -132.5-119.3-11.0 Operating profit 65.8 69.2-4.9 EBIT 66.2 69.3-4.4 EBIT margin (in %) 33.4 36.7-9.1 Cost/income ratio (in %) 66.8 63.3 5.6 FTEs 171 163 4.7 Trading volume (in CHF bn) 1'346.0 1'279.3 5.2 Number of transactions (in m) 51.4 47.6 8.0 Number of tradable products 34'639 32'188 7.6 SPI market capitalization (in m) 1'352'691 1'221'256 10.8 26
Securities Services financials in CHF m 2017 2016 Change % Operating income 375.4 377.4-0.5 CCP Clearing 27.9 28.4-1.7 Domestic Custody 117.5 111.9 5.0 International Custody 99.1 80.1 23.7 Financial Center Services 60.2 56.3 6.9 Other 70.7 100.7-29.8 Operating expenses -335.4-312.5-7.3 Operating profit 39.9 64.9-38.4 EBIT 40.3 70.6-42.8 EBIT margin (in %) 10.7 18.7-42.5 Cost/income ratio (in %) 89.4 82.8 7.9 FTEs 500 510-1.9 Clearing transactions (in m) 324.2 423.9-23.5 Number of settlement transactions (in m) 38.1 37.6 1.4 Deposit volume (CHF bn YTD avg) 3'315 3'071 8.0 Number of payment transactions (in m) 589.0 511.7 15.1 27
Financial Information financials in CHF m 2017 2016 Change % Operating income 400.1 402.6-0.6 Financial Information 352.6 354.2-0.4 Value Added Services 36.4 36.3 0.4 Other 11.1 12.1-8.3 Operating expenses -342.5-376.9 9.1 Operating profit 57.6 25.7 123.9 EBIT 64.8 26.7 142.9 EBIT margin (in %) 16.2 6.6 n/a Cost/income ratio (in %) 85.6 93.6-8.6 FTEs 770 891-13.6 Number of financial instruments (in m) 27.3 23.7 15.4 Number of price updates per year (in bn) 1'884.6 1'886.3-0.1 28
Payment Services financials in CHF m 2017 2016 Change % Operating income 993.8 885.0 12.3./. Interchange -321.8-274.4 17.3 Net Operating income 672.0 610.6 10.1 Merchant Services 421.1 350.2 20.3 Financial Institutions Services 245.6 255.9-4.0 Other 5.2 4.5 16.7 Net Operating expenses -585.7-517.7-13.1 Operating profit 86.4 92.9-7.0 EBIT 57.7 91.8-37.1 EBIT margin (in %) 5.8 10.4-44.0 Cost/income ratio (in %) 87.1 84.8 2.8 FTEs 949 905 4.8 Acquiring turnover (in CHF m) 88'658.4 75'407.9 17.6 Number of card transactions processed (in m) 3'997.9 3'661.2 9.2 Number of payment cards (in m) 24.6 27.2-9.6
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