Deutsche Börse - 10 per cent net profit growth
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Achieved 10 per cent net profit growth in 2019 as planned
Net revenue up 6 per cent in the full year 2019, to €2.9 billion/Adjusted net profit up 10 per cent in 2019, to €1.1 billion/Adjusted earnings per share up 11 per cent, to €6.03 for the full year/Net revenue up 2 per cent in Q4/2019, to €757 million/Adjusted net profit in Q4/2019 up 5 per cent, to €242 million/Proposed dividend increase by 7 per cent, to €2.90 per share/Outlook for 2020: secular growth in net revenue of at least 5 per cent, with adjusted net profit expected to rise to around €1.20 billion
Deutsche Börse AG published its preliminary results for the fourth quarter and the full year 2019 on Monday. The Group generated net revenue of €2,936.0 million in 2019 – a 6 per cent increase, with around 5 per cent attributable to secular factors and 1 per cent to consolidation effects. The cyclical environment was largely neutral in 2019. At €1,129.5 million, operating costs were up 8 per cent year-on-year, after adjusting the previous year’s figures for the impact of IFRS 16. The increase was largely due to higher levels of investment (especially for growth initiatives), as well as consolidation effects. Excluding consolidation effects, adjusted operating costs were up by 5 per cent. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to €1,813.2 million. Adjusted net profit for the period attributable to Deutsche Börse shareholders (“net profit”) increased by 10 per cent – as planned – to €1,105.6 million. Basic earnings per share, adjusted for non-recurring effects, rose by 11 per cent to €6.03.
The Executive Board is proposing a 7 per cent dividend increase for 2019, to €2.90 per share (2018: €2.70 per share). The dividend proposal is equivalent to a distribution ratio of 48 per cent of net profit, and thus within the range set by Deutsche Börse Group's dividend policy. The dividend proposal still requires formal approval by the Supervisory Board of Deutsche Börse AG (which has already expressed its support), and by Deutsche Börse AG's shareholders at the Annual General Meeting on 19 May 2020.
Within the framework of implementing its “Roadmap 2020” growth strategy, Deutsche Börse Group plans a further increase in net revenue from secular growth opportunities of at least 5 per cent in 2020, with adjusted 2020 net profit expected to rise to around €1.20 billion.
Gregor Pottmeyer, Chief Financial Officer of Deutsche Börse AG, said: “During the financial year under review, we achieved our targets of 5 per cent secular net revenue growth and a 10 per cent increase in adjusted net profit, as planned. Our shareholders will participate in this performance through a 7 per cent dividend increase, to €2.90 per share.”
Theodor Weimer, Chief Executive Officer of Deutsche Börse AG, said: “Following a strong previous year, we succeeded in achieving further very solid growth in 2019. Furthermore, the focus on external growth has come to fruition during 2019 – with the acquisitions of Axioma and UBS Fondcenter. We will continue to consistently pursue our strategy during the current financial year, anticipating adjusted net profit growth to around €1.20 billion.”
Preliminary results for Q4/2019
Deutsche Börse Group generated net revenue of €756.6 million in the fourth quarter of 2019, up 2 per cent year-on-year (Q4/2018: €740.4 million). Secular net revenue growth (+4 per cent) and consolidation effects (+3 per cent) were partially offset by weaker cyclical development compared to the previous year (-5 per cent). The Eurex (financial derivatives) and IFS (investment fund services) segments were the primary contributors to structural growth. In addition to OTC clearing, structural growth of net revenue in the Eurex segment was mainly a result of new products and pricing models, whilst activities in the IFS segment also rose thanks to new client acquisition. The EEX (commodities), Qontigo (index and analytics business) and 360T (foreign exchange trading) segments also contributed to secular growth. Consolidation-driven net revenue growth was mainly attributable to the acquisition of Axioma in the third quarter of 2019. Analysis of the decrease in cyclical net revenue suggests that the lower equity market volatility (compared to the previous year) materially burdened revenues from financial derivatives in the Eurex segment.
The reclassification of expenses due to the first-time adoption of IFRS 16 in 2019 impacted on the recognition of the operating costs and EBITDA, as well as on depreciation, amortisation and impairment, and on the financial result.
Adjusted operating costs were up 9 per cent year-on-year, to €347.4 million (Q4/2018: €318.5 million). Higher investment (especially for growth initiatives) as well as consolidation effects more than offset the effects of the transition to IFRS 16, thus contributing to higher costs. Operating costs were adjusted for exceptional items of €32.8 million (Q4/2018: €140.4 million), mainly comprising costs for acquisitions and for measures to reduce structural costs launched within the scope of the "Roadmap 2020".
Overall, Deutsche Börse Group’s adjusted EBITDA declined by 2 per cent, to €410.5 million (Q4/2018: €419.9 million). Adjusted depreciation, amortisation and impairment losses totalled €61.7 million during the quarter (Q4/2018: €63.2 million).
The Group’s financial result in the year under review was €–8.4 million (Q4/2018: €–28.4 million); the year-on-year reduction was largely due to lower provisions for interest on potential tax back-payments. As expected, the adjusted tax rate was 26 per cent (Q4/2018: 27 per cent).
At €242.4 million, adjusted net profit for the period attributable to Deutsche Börse AG shareholders was up 5 per cent on the figure for the same quarter of the previous year (Q4/2018: €230.5 million). Basic earnings per share, adjusted for non-recurring effects, rose by 6 per cent to €1.32.