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19.11.2014 09:30

Moscow Exchange announces 3Q 2014 results

Moscow Exchange (MOEX) today announces its financial results for the third quarter (3Q) 2014 according to International Financial Reporting Standards (IFRS). Strong earnings were driven by growth across our highly diversified business, particularly the FX Market, depository and settlement services, as well as strong interest income.

KEY 3Q14 OPERATING AND FINANCIAL HIGHLIGHTS

  • Total operating income rose 16.3% YoY to RUB 7.31 bln.
  • EBITDA grew 37.1% YoY to RUB 5.48 bln; the EBITDA margin was 74.9%, versus 63.6% in 3Q13.
  • Operating expenses declined 17.9% YoY to RUB 2.23 bln.
  • Net profit increased 42.4% YoY to RUB 4.06 bln; earnings per share (EPS) increased 41.1% YoY to RUB 1.82.

KEY CORPORATE HIGHLIGHTS

  • International Central Securities Depositories (Euroclear and Clearstream) launched services for Russian equities. Euroclear and Clearstream have been servicing Russian government debt (OFZs) since February 2013, and corporate and municipal bonds since January this year.
  • The Bank of Russia has designated the National Settlement Depository (NSD) and the National Clearing Centre (NCC) as systemically important financial markets infrastructure institutions.
  • Moscow Exchange changed the methodology for setting tick sizes, which are now determined not only by a stock's price, but also by its liquidity. The new procedure aims to narrow bid-ask spreads and to aggregate liquidity at the best price level.
  • Deliverable futures on Magnit ordinary shares and Moscow Exchange ordinary shares were launched on Moscow Exchange's Derivatives Market.
  • The National Settlement Depository has initiated a programme to make corporate actions by Russian companies electronic and eliminate cumbersome paperwork. A fully-automated e-proxy voting procedure is expected to be in place by next May.

EVENTS OCURRING AFTER THE REPORTING DATE

  • Moscow Exchange admitted to trading Russian Corporate Eurobonds. Today 21 issues are traded on the Exchange.
  • The EUR became eligible as collateral on Moscow Exchange's Derivatives market from 13 October. The list of assets eligible as collateral previously included the RUB and USD, as well as stocks and bonds.
  • Moscow Exchange held its annual MOEX Forum: London Session, which brought together more than 300 market participants and featured high-profile speakers from the Russian government and the Bank of Russia.
  • Moscow Exchange and Bank of China have signed a cooperation agreement aimed at expanding collaboration between the Russian and Chinese financial markets, particularly in CNY/RUB trading.
  • Ten Moscow Exchange Group managers took leading positions in the XV Annual Top 1,000 Russian Managers ranking compiled by the Russian Managers Association. Alexander Kamensky and Evgeny Fetisov led the Best Corporate Governance Director and Best CFO categories, respectively.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:

"We are happy to report a second consecutive quarter of record net profit and operating income, demonstrating both the resilience of our business model to the challenging economic and market conditions, as well as our effective cost management.

"Moscow Exchange Group remains committed to continuing to upgrade Russia's market infrastructure and to developing the Group's product offering. This should further establish our position as an attractive trading and post-trade centre for local and international investors. We see that investor interest in the Russian financial markets and in the Group's services remains high.

"We continue to benefit from our diversified and vertically-integrated business model. New products on our FX and money markets, as well as post-trade services, which were recently introduced, contributed to our impressive results in the third quarter. Our latest innovation was to establish a link to International Securities Depositories, aimed at bringing the Russian financial markets in line with best international practice."

Evgeny Fetisov, Chief Financial Officer of Moscow Exchange, added:

"MOEX delivered another set of strong results in the third quarter, with revenue increasing 16.3% YoY, supported by growth across nearly all our markets. Though the operating environment remained challenging, trading volumes across markets were strong, driven by market infrastructure reforms, new product launches, higher volatility and rising interest rates. The FX market and post-trade services remained key growth drivers, with each posting double-digit fee and commission income growth. This resulted in a third consecutive record quarter for fee and commission income.

"We have maintained a particular focus on controlling operating expenses, achieving a 17.9% YoY decline in the third quarter. The combination of robust top-line growth and strict cost control brought our EBITDA margin even higher, to 74.9%, while net profit rose 42.4% YoY to RUB 4.06 bln."

FINANCIAL HIGHLIGHTS

RUB, mln 3Q 2014 3Q 2013 YoY 2Q 2014 QoQ 9M 2014 9M 2013 YoY
Total Operating Income 7,306.89 6,280.85 16.3% 6,753.25 8.2% 20,570.58 18,101.57 13.6%
Fee and Commission Income 3,598.82 3,163.37 13.5% 3,521.95 1.9% 10,628.80 9,310.04 14.2%
Net Interest and Other Finance Income 3,611.12 3,102.75 16.4% 3,219.15 12.2% 9,436.62 8,736.18 8.0%
Other Income 105.95 14.73 619.3% 12.15 772.1% 502.16 55.36 812.6%
Operating Expenses 2,226.29 2,711.37 -17.9% 2,364.59 -5.8% 7,154.78 6944.64 3.0%
Operating Profit 5,080.60 3,569.49 42.3% 4,388.66 15.8% 13,415.80 11,156.93 20.2%
Net Profit 4,063.52 2,854.02 42.4% 3,473.64 17.0% 10,707.31 8,717.63 22.8%
Basic Earnings per Share, RUB 1.82 1.29 41.1% 1.58 15.2% 4.83 3.95 22.3%
                 
EBITDA¹ 5,475.93 3,993.08 37.1% 4,774.86 14.7% 14,608.70 12,401.22 17.8%
EBITDA margin 74.9% 63.6%   70.7%   71.0% 68.5%  

¹ EBITDA is calculated as operating profit (EBIT) adjusted for depreciation & amortization

 

ANALYSIS OF 3Q14 FINANCIALS

Total Operating Income. Operating income was up 16.3% YoY to RUB 7.31 bln. Revenue growth for the quarter was mainly driven by higher income from depository & settlement services, FX and money market, equities, as well as higher interest income on the back of a higher interest rates environment and investment portfolio growth.

Securities (Equities & Bond) Market. Fee & commission income from the Equities Market climbed 21.7% YoY to RUB 396.82 mln. Equities trading volume grew by 5.8% YoY to RUB 2.26 trn. The equity market's total capitalisation was RUB 22.96 trn (US$ 580.38 bln) as of 30 September 2014. Fee & commission income from the Bond Market decreased 28.5% YoY to RUB 213.93 mln. Bond trading volume declined 33.6% YoY to RUB 2.27 trn. Listing and other services fees increased 36.8% YoY to RUB 67.81 mln.

Foreign Exchange Market. Fee & commission income from the FX Market increased 26.2% YoY to RUB 816.84 mln, while trading volumes rose 26.4% YoY to RUB 55.86 trn. Spot trading volumes grew 13.9% YoY, while swap trading volumes outperformed, rising 32.9% YoY driven by continued strong demand for liquidity-management products by market participants.

Money Market. Fee & commission income from the Money Market increased 8.8% YoY to RUB 766.73 mln. Total trading volume, including repo transactions and the credit & deposit market, declined 17.1% YoY to RUB 51.98 trn, largely due to a move to 1-week REPO auctions with the CBR instead of 1-day REPO, which led to a lower number of REPO trades, though with longer maturity. REPO trading volumes with the Central Counterparty continued to grow rapidly, up 6.29-fold YoY.

Derivatives Market. Fee & commission income from the Derivatives Market declined 3.2% YoY to RUB 363.94 mln. While trading volumes grew 16.1% YoY to RUB 13.28 trn (from 269.1 to 324.2 mln contracts), open interest rose 25.1% YoY to 12.47 mln contracts at the end of 3Q14. Futures on FX-instruments comprised 49.8% of total futures trading volumes versus 34.4% in the same period last year due to higher FX-rate volatility. The share of futures on equity indexes declined from 53.1% to 41.9% of total futures trading volumes. The share of options in Derivatives Market trading volumes accounted for 6.5% in 3Q14.

Depository and Settlement Services. Fee & commission income from depository and settlement services increased 40.8% YoY to RUB 766.05 mln. The volume of assets on deposit at the National Securities Depository (NSD) declined to RUB 22.76 trn as of the end of 3Q14 from RUB 23.44 trn as of the end of 2Q14 due to assets market value contraction, and averaged RUB 22.70 trn for 3Q14.

Net Interest & Other Finance Income. Net Interest & other finance income increased by 16.4% YoY and totalled RUB 3.61 bln. Average amount of funds available for investment was RUB 743.4 bln in 3Q14. Net Interest & other finance income accounted for 49.4% of the Exchange's operating income.

Cash Position. The Exchange's own cash position totalled RUB 49.90 bln as of 30 September 2014. The Exchange had no outstanding debt as of the end of 3Q14.

Expenses. Operating expenses declined by 17.9% YoY in 3Q14 to RUB 2.23 bln. Personnel costs contracted by 18.0% YoY to RUB 1.20 bln and remained the major cost item, comprising 54.0% of total costs. Administrative and other operating expenses remained under strict control, with lower spending on taxes other than income tax (-24.6%) and market maker fees (-48.4%), coupled with a base effect due to impairment of investments in associates recognized in 3Q13, which helped to decrease administrative expenses by 17.7% YoY.

Capital expenditures were RUB 208.89 mln in 3Q14 and totalled RUB 403.00 mln for the first nine month of 2014, largely spent on software development and improvements.

The complete version of Moscow Exchange's consolidated condensed interim financial statements for the nine month period ended 30 September 2014 is available at the Investor Relations section on our website.

***

INVESTOR ENQUIRIES MEDIA ENQUIRIES
Sergey Klinkov
+7 495 363 3232
ir@moex.com
Lev Bystrov
+7 495 363 3232
pr@micex.com

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages the sole multifunctional exchange platform in Russia for equities, bonds, derivative instruments, currencies, money market instruments and commodities. The Group includes the central depository (National Settlement Depository), and a clearing centre (National Clearing Centre), performing the functions of central counterparty on the markets, which allows Moscow Exchange to render the full spectrum of trading and post-trading services to its clients.

Moscow Exchange ranks among the world's top 25 exchanges by total capitalization of securities traded, and also among the 10 largest exchange platforms by bonds and derivatives trading. Securities of 701 issuers are admitted to trading on the securities market of Moscow Exchange, including securities of the largest Russian companies by market capitalization.

Moscow Exchange was formed in December 2011 as a result of a merger between Russia's two main exchange groups — MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia; and RTS Group, at the time the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes, which was reorganized into an open joint stock company (OJSC) and was named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

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