Net revenue of €458 million/Operating costs of €236 million excluding exceptional items/ Option to settle with OFAC results in a provision/ Adjusted EPS of €0.83/ Interest burden significantly reduced due to refinancing
Deutsche Börse AG published its figures for the third quarter of 2013 on Tuesday. The Group generated net revenue of €457.9 million (Q3/2012: €471.0 million), a slight decrease year-on-year. The Group’s operating costs amounted to €359.1 million (Q3/2012: €227.4 million) and included exceptional items totalling €123.0 million. Of this amount €8.2 million were mainly attributable to efficiency programmes and €114.8 million are related to the investigation of the US Treasury Department’s Office of Foreign Asset Control (OFAC) regarding suspected violations of US law by Clearstream. Resulting from higher investments in growth initiatives and infrastructure adjusted operating costs increased as planned and amounted to €236.1 million (Q3/2012: €225.6 million).
In the third quarter of 2013, earnings before interest and taxes (EBIT) amounted to €101.0 million (Q3/2012: €245.4 million). EBIT, excluding the above-mentioned exceptional items was €224.0 million (Q3/2012: €247.2 million).
Basic earnings per share amounted to €0.33 (Q3/2012: €0.86). Adjusted for special factors, this figure was €0.83 (Q3/2012: €0.86).
In the first nine months of 2013, the Group generated net revenue of €1,439.3 million. (Q1–3/2012: €1,484.6 million). Adjusted for exceptional items, the Group’s operating costs amounted to €699.7 million (Q1–3/2012: €675.3 million).
Adjusted for exceptional items, EBIT amounted to €747.8 million (Q1–3/2012: €813.8 million). Cash flows from operating activities excluding CCP positions amounted to €613.4 million and thus increased slightly year-on-year (Q1–3/2012: €601.6 million).
Gregor Pottmeyer, Deutsche Börse AG’s CFO and Executive Board member for human resources, said: “In the third quarter of 2013, net revenue was negatively impacted by the low cash market volatility as well as by the continuing extremely low interest rate level. Nevertheless, on the basis of the first three quarters we are confirming our net revenue forecast for full-year 2013.”
“With the significant progress made in the Peterson case and the now available option to settle with OFAC, legal risks for the Group have been reduced significantly.”
“Supported by the efficiency measures, which we are implementing as planned, and by the high profitability of our business model, we are systematically driving forward expansion into new growth areas, like acquiring new partners for our global collateral management services and expanding our business in Asia.”
Results for Q1–3/2013
Except for the equity index derivatives business which continues to be adversely affected by low volatility, Deutsche Börse Group’s net revenue in the first nine months of 2013 has remained stable. Overall net revenue decreased only slightly to €1,439.3 million (Q1–3/2012: €1,484.6 million). Net interest income from banking business, a component of net revenue, decreased to €27.5 million (Q1–3/2012: €43.6 million) due to continuing low key interest rates.
Operating costs totalled €898.2 million in the reporting period, up on the previous year (Q1–3/2012: €704.9 million), however, included €198.5 million exceptional items (Q1–3/2012: €29.6 million). These consist of €79.7 million mainly relating to efficiency programmes and €118.8 million in the context of the investigation of OFAC into Clearstream. OFAC had looked into certain securities transfers within the Clearstream settlement system in 2008 undertaken to close Iranian customers’ accounts, and the maintenance of an omnibus account in the Unites States during the same period. OFAC informed Clearstream on 28 October 2013 that if it were to issue a formal pre-penalty notice at this time, such notice would include a penalty of US$168.8 million.
Clearstream now has the option to settle the matter with OFAC before the issuance of a pre-penalty notice, in which case a 10 per cent discount would apply, for a total settlement payment of US$151.9 million. OFAC’s determination followed discussions with Clearstream since January 2013, when Clearstream first learned of OFAC’s indicative penalty of approximately US$340 million.
The competent boards within Deutsche Börse Group will analyse the information received and will decide whether to settle with OFAC. Deutsche Börse Group has included a provision of €112.5 million in the third quarter and additionally booked an amount of €6.3 million for expenditures like legal costs in connection with the investigation of OFAC in the first three quarters 2013.
Adjusted for these effects, costs increased by 4 per cent to €699.7 million (Q1–3/2012: €675.3 million) as a result of higher investments, and were thus in line with the company’s planning.
EBIT declined to €549.3 million (Q1–3/2012: €784.2 million) as a result of lower net revenue in combination with higher costs. Excluding the exceptional items mentioned above, the Group’s EBIT was €747.8 million, a decrease of 8 per cent year-on-year (Q1–3/2012: €813.8 million).
The Group’s financial result for the first nine months of 2013 was €–56.2 million (Q1–3/2012: €–92.8 million). The improvement is primarily due to Deutsche Börse AG’s agreement with SIX Group AG to acquire all the shares in Eurex Zürich AG in the first quarter of 2012, and to the successful completion of the refinancing of long-term financial liabilities in the second quarter of 2013.
The adjusted effective Group tax rate stood unchanged at 26.0 per cent in the first nine months of 2013 (Q1–3/2012: 26.0 per cent).
Consolidated net income for the period amounted to €353.8 million in the first nine months of 2013 (Q1–3/2012: €492.3 million). The result of the investigation of OFAC into Clearstream, taking into account the tax deductibility of a potential settlement payment, affected the net income negatively by €87.9 million. Excluding the special factors mentioned above, consolidated net income for the period decreased by 8 per cent to €500.6 million (Q1–3/2012: €541.6 million). Basic earnings per share, based on a weighted average of 184.1 million shares outstanding, were €1.92 in the same period (Q1–3/2012: €2.62 based on 188.0 million shares outstanding) and adjusted earnings per share were €2.72 (Q1–3/2012: €2.89).