SIX reports solid financial results
SIX performed well operationally in the 2019 financial year and generated operating income totalling CHF1,129.7 million.
While reported operating income is around 50 per cent less than in the previous year due to the carve-out of the card business in 2018, SIX achieved a year-on-year increase in the operating income of 1.2 per cent.
Operating costs rose slightly compared with the previous year (+0.5 per cent) due to expenses relating to regulatory projects as well as the substantial investment associated to the realignment of the company, launched in 2018. These investments include the continued expansion of the business units Innovation & Digital and Banking Services. The business also forged ahead with the build-up of the infrastructure for the SIX Digital Exchange (SDX), which is based on distributed-ledger technology (DLT).
Earnings before interest, tax depreciation and amortisation (EBITDA) of CHF213.5 million increased slightly compared with the previous year (+4.4 per cent), despite substantial investments in technology and infrastructure. These high investment expenses will enable further efficiency improvements and stronger growth in the coming years.
SIX recorded a 24.4 per cent increase in earnings before interest and tax (EBIT) to CHF 168.0 million and a 26.9 per cent increase in profit from continuing operations to CHF 120.5 million. Group net profit of 2018 was affected by the one-off effect resulting from the sale of the card business and is therefore not directly comparable.
At CHF506.3 million, the Securities & Exchanges business unit in 2019 again contributed the largest portion of the SIX operating income. Despite considerable price reductions in securities trading and post-trade services, the operating income decreased only slightly compared with the previous year (-1.4 per cent). SIX had seven initial public offerings on the primary market in the reporting period. The corresponding transaction volume totalled CHF 3.1 billion, the fourth largest on a European exchange in 2019.
The trading turnover at SIX rose year-on-year by 8.5 per cent. This increase was also due to the almost complete consolidation of trading in Swiss shares at SIX that was caused by the loss of EU equivalence which commenced in July, in connection with the Swiss Federal Council’s measure to strengthen the Swiss capital market.
The trading turnover also had a positive impact on post-trading. Deposit volume averaged CHF3.414 billion during the year, which is 5.3 per cent higher than in the previous year. In addition, the number of settlement transactions rose by 5.6 per cent.
The Banking Services business unit of SIX, which generated an operating income of CHF 187.5 million, realised the strongest growth by a business unit in the reporting period (+19.9 per cent). SIX fully acquired SIX Interbank Clearing AG and the European correspondent bank Swiss Euro Clearing Bank (SECB) in the first quarter of 2019. The number of transactions in Swiss Interbank Clearing (SIC) increased year-on-year by 7.8 per cent, the number of transactions in Euro Swiss Interbank Clearing (EuroSIC) by 9.3 per cent.
The volume of card transactions processed by SIX rose by 7.4 per cent. SIX will support the banks to launch the new generation of debit cards in Switzerland in the second half of 2020. These cards offer improved functionality and security, and can also be used in e-commerce. In addition, SIX has migrated more than 4,000 of the targeted 6,000 ATMs in Switzerland to a common software standard. This migration increases the transaction volumes on SIX systems and creates the conditions for additional services, such as monitoring and control of ATMs.
Financial information and data are a strategic success factor and an important field of innovation for SIX. Reduced prices for reference data and corporate actions, as well as currency effects on the global sales proceeds from market data and displays, trimmed the operating income of the Financial Information business unit in 2019. At CHF 368.2 million, it was 7.3 per cent lower on the previous year.
Reference and market data together account for more than 80 per cent of the business unit’s total sales, which is why declines in sales have a material impact on this business unit’s operating income. The quality of the SIX reference data is consistently high and in 2019, was awarded the Inside Reference Data Award “Best Corporate Actions” for the tenth consecutive year.
Regulatory data and services, as well as the index business, continued to perform well in 2019 and realised significant growth. The growth in the demand for compliance and tax data was particularly strong. SIX also continued to benefit from global demand for its data services for detecting corruption and money laundering, with particularly high demand for their Sanctions Securities Monitoring Service.
The Innovation & Digital business unit coordinates innovation processes within SIX and focuses on different fields of innovation with significant potential for the financial industry.
A highly scalable, web-based platform for bond ratings and bond research reports resulted from these fields of innovation in 2019: SIX Rating. The ratings are based on a wide variety of data which are analysed using artificial intelligence. This enables valuations almost in real-time, faster time-to-market and regular updates at lower costs.
The F10 Incubator & Accelerator founded by SIX in 2015 is operated by SIX and supported as an association member. In 2019, F10 exported its successful Prototype-to-Product program, with a Swiss team, to Singapore. F10 also opened a co-working space in Zurich with 60 workplaces for fintech start-ups. As in previous years, with the support of SIX it additionally organised hackathons in Zurich and Singapore.
SIX uses its SIX FinTech Ventures corporate venture fund to support start-ups during the early stage of their development. In 2019 it invested in further candidates. The current portfolio includes PXL Vision AG, Vestr, Shift Cryptosecurity, Tradeplus24, Value3 and Archilyse.
The non-operating result was influenced in the 2019 financial year by several accounting effects and transactions in connection with the investment of SIX in Worldline. In accordance with its strategic realignment, in 2018 SIX moved its existing card business into a strategic partnership with Worldline, and in exchange received a 27 per cent interest in Worldline and a cash payment totalling CHF 338 million.
The Worldline investment accounted for a significant portion of the positive contribution from the interest in associates in the 2019 financial year.
A proposal will be made to the Annual General Meeting to distribute an ordinary dividend of CHF3.90 (prior year: CHF4.10) per share.
Thomas Wellauer (64) was elected to the Board of Directors as of 16 March 2020 at an Extraordinary General Meeting on 11 December 2019. At the same time, the Board of Directors elected him to become the new Chairman of the Board of Directors. He replaces Romeo Lacher , who announced his resignation as of 15 March 2020.
Infrastructure, expertise and networking in the fields of digital assets, as well as blockchain and distributed-ledger technologies, are an important component of the SIX mission. SIX aims to achieve a balance between investments in the stability, efficiency and security of its infrastructure, and investments in the development of innovative financial technology.
SIX also relies on inorganic growth to implement its growth strategy. SIX has a strong capital base, an A+ rating from Standard & Poor’s and adequate financial means to undertake acquisitions.
If the Spanish regulator approves the voluntary cash offer for BME, the Spanish exchange and financial market infrastructure group, this would provide SIX with economies of scale and efficiency benefits in respect of technology and securities services. Both would sustainably strengthen the international competitive position of SIX as a financial market infrastructure and provide new impetus to its growth strategy.
The mandate and core task of SIX remains unchanged, namely, to provide its owners and customers with highly reliable and efficient infrastructure services, guarantee optimal access to capital markets and support the banks with digital transformation.