Moscow Exchange announces results for the full year 2017

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 December 2017. Higher trading volumes in the Bond Market and Money Market, supported by solid performance of Depository and Settlement Services, helped the Exchange achieve record fee and commission income.

KEY FINANCIAL HIGHLIGHTS FOR 2017

• Fee and commission (F&C) income up 7.1% YoY to a record RUB 21.21 bln on the back of higher volumes and the introduction of new products and services.
• Net interest and other finance income down 27.1% YoY to RUB 17.29 bln, due to declining interest rates in a low inflation environment.
• Operating costs excluding D&A expenses up 5.2% YoY to RUB 10.48 bln.
• EBITDA margin was 72.8% (vs 77.1% in 2016).
• Net income was RUB 20.26 bln, down 19.6% YoY; basic EPS was RUB 9.02.

KEY BUSINESS & CORPORATE HIGHLIGHTS FOR 2017

• MOEX remained the main platform for Russian issuers to raise capital via public markets, with 16 equity offerings (including three IPOs) and 260 bond issues.
• MOEX provided large Russian corporates with direct access to the FX and Money Markets, thereby expanding the number of market participants and stimulating additional liquidity. Today 22 non-financial companies trade directly on the FX Market and 47 trade directly on the Money Market.
• MOEX expanded its product offering by launching trading in new instruments across its markets: new contracts on sugar and grain, options on GBP/USD and USD/JPY, new maturities of RTS and USD/RUB options as well as FX fixing instruments.
• The first phase of the Unified Collateral Pool (UCP) was launched, allowing single-account functionality, unification of collateral management and netting of settlements.
• A new segment of the Equity and Bond Market, the Growth Sector, was established to attract SMEs to raise capital via the Exchange.
• Retail investors opened approximately 250,000 new brokerage accounts, bringing the total to 1.9 mln at year-end 2017. The number of Individual Investment Accounts held by private investors reached 302,000 at year-end, compared to 195,200 a year earlier.
• MOEX established MOEX Innovations, a subsidiary company focused on innovative technologies and collaboration with fintech start-ups. MOEX pioneered a first bond placement via blockchain-based technology.

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

"MOEX’s strong results for the year, particularly continued growth of fee and commission income, underscore the strengths of the Exchange’s multi-product business model. In 2017 trading volumes in many asset classes – bonds, repo with the CCP and repo with GCC, currency swaps and commodity derivatives – reached all time highs. We are breaking new ground with the inflow of savings from Russian individual investors: last year 250 thousand retail investors opened new brokerage accounts. These new investors, as one would expect, begin investing with less risky fixed income products, and as their financial acumen increases we see them becoming more active in equities and derivatives. We are rolling out a digital platform together with brokers to attract individual investors to the Exchange’s markets, and intend to pro-actively market it.

"Despite a challenging geopolitical backdrop, we are seeing increased trading volumes from international investors, meaning that the quality of our market infrastructure, our openness and the fundamental attractiveness of the assets traded on our platform are outweighing potential concerns. We continue to actively invest in developing innovative services, most notably in the areas of Big Data and blockchain technologies."

Maxim Lapin, Chief Financial Officer of Moscow Exchange, said:

"We delivered strong fee and commission (F&C) income performance in 2017, up 7.1% YoY on the back of higher trading volumes and the successful roll-out of new products and services. The biggest contributors to F&C income growth were the Bond Market (+33.7% YoY) and the Money Market (+16.8% YoY) as well as Depository and Settlement Services (+17.4% YoY). I am pleased that our business model is evolving as expected and that the share of F&C in total operating income was more than 60% in the last quarter of 2017. Interest income decreased by 27.1% YoY due to declining RUB interest rates and lower client balances compared to the previous year.

"We ended the year with cost growth below our expectations at the start of the year. Operating costs increased by 9.6% YoY, which is largely attributable to the increase in D&A expenses following large-scale capital expenditures in 2016 associated with migration to a new data centre and other measures to improve the reliability of our trading and clearing platforms. Excluding D&A expenses, our operating costs were up only 5.2% YoY. Going forward, operational efficiency and cost control will remain key priorities."

FINANCIAL HIGHLIGHTS

ANALYSIS OF FULL YEAR 2017 FINANCIALS

Fee and Commission Income

Securities (Equities & Bond) Market. Trading volumes on the Equities Market were down by 1.0% YoY and amounted to RUB 9.19 trln. Equities Market fee and commission income increased by 1.3% YoY to RUB 1.61 bln. The combined market capitalisation of companies listed on MOEX was RUB 35.9 trln (USD 623.2 bln) at year-end 2017.

Bond Market turnover exclusive of overnight bonds was up 25.3% YoY to RUB 16.56 trln; inclusive of overnight bonds, turnover was up 79.4% to RUB 26.23 trln. Bond Market fee and commission income increased 33.7% YoY to RUB 1.98 bln. In 2017, there were 260 new bond offerings (excluding overnight bonds), of which 36 were placed by newcomers to the market.

Listing and other service fees were RUB 392.3 mln, down 5.5% YoY mostly due to a lower number of bond offerings (while the average size per bond issue increased).

FX Market. Total trading volumes on the FX Market increased by 5.4% YoY and reached RUB 347.67 trln. Spot trading volumes declined by 26.9% YoY, impacted by lower volatility of the Rouble. Trading volumes in the swap and forward segment increased by 20.9% YoY. Swaps accounted for 77.5% of total FX Market trading volumes. Fee and commission income from the FX Market amounted to RUB 3.83 bln, down by 11.9% YoY as the effective commission for swaps is lower than for spot trades.

Money Market. Total Money Market trading volumes were up 13.0% YoY to RUB 377.14 trln. The most heavily traded Money Market product was repo with the CCP, which accounted for 59.8% of total turnover. Fees and commissions from the Money Market increased by 16.8% YoY and reached an all-time high of RUB 5.65 bln.

Derivatives Market. Total trading volumes on the Derivatives Market declined by 26.7% YoY to RUB 84.50 trln, due to lower volatility in FX and the RTS Index, the underlying assets of the market’s most heavily traded products. To note, commodity futures trading volumes continued to grow for the third consecutive year and were up 6.9% YoY to RUB 16.28 trln; options trading volumes also grew, rising 18.9% to RUB 6.87 trln. The product mix shifted to favour higher-fee products (commodity futures and options), supporting overall fees from the Derivatives Market (RUB 2.01 bln, down 2.0% YoY).

Depository and Settlement Services contributed RUB 4.18 bln to operating income (+17.4% YoY) driven mainly by increased assets under custody (average assets were up 11.1% YoY to RUB 36.8 trln).

Other fee and commission income increased by 2.4% YoY to RUB 1.55 bln. Sales of data and information services brought in RUB 769.7 mln, up 2.4% YoY. Income from sales of software and technical services accounted for RUB 630.7 mln (down 0.9% YoY). Other fee and commission income was RUB 149.3 mln, up 19.4% YoY.

Interest & other finance income

Net interest and other finance income[1] declined 27.1% YoY to RUB 17.29 bln due to lower RUB interest rates and a decline in funds available for investment. The average investment portfolio during the year was RUB 748.59 bln (2016: RUB 904.86 bln).

Expenses

Operating costs were RUB 13.43 bln, up 9.6% YoY. Administrative and other operating expenses were up 15.3% YoY to RUB 7.28 bln, primarily due to higher depreciation and amortisation costs (RUB 2.95 bln, up 28.7% YoY) that were impacted by large-scale capital spending in 2016. Personnel expenses rose by 3.5% YoY to RUB 6.15 bln.

Cash and cash equivalents

The cash position[2] at year-end 2017 amounted to RUB 82.65 bln. The company had no debt as of 31 December 2017.

Capital expenditures

CAPEX amounted to RUB 1.94 bln, all of which was spent on purchases of equipment and software as well as software development.

Moscow Exchange’s consolidated IFRS financial statements for FY 2017 are available on the Investor Relations section of the company's web site.

The FY 2017 and 4Q 2017 IFRS Financial Results webcast is scheduled for 2 March 2018 at 5 pm (Moscow time).

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Contacts:                                                  

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 securities 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 offer its clients the full spectrum of trading and post-trading services.

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 named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

Disclaimers

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.