Stéphane Boujnah, chief executive and chairman of Euronext, said the exchange could add other countries to its pan-European model and acquire non-volume related businesses to further diversify its revenues.
Boujnah said on the results call yesterday that the exchange group is committed to deploying its capital and to analyzing further acquisitions to expand its decentralized model in Europe and diversifying revenues.
“We could expand across Europe and add more single countries to our federal model,” he added. “We could also look to possible acquisitions in data, post-trade or other businesses with non-volume related revenues.”
In 2018 Euronext completed the acquisition of the Irish Stock Exchange to form Euronext Dublin. The Irish markets migrated to the group’s Optiq trading platform this month, seven months after its transition for the group’s cash markets.
In another exchange acquisition, Euronext launched an offer for Oslo Børs with the support of shareholders. However, the board of Oslo Børs supported a rival bid from Nasdaq and Euronext was forced to increase its offer.
Boujnah admitted that it was unusual for the board and shareholders to support competing bids.
“We are supported by the majority of shareholders who initiated the process,” he added. “The situation is not optimal, but it is what it is. We are where we are.”
He continued that Euronext is extremely eager and willing to discuss the way forward with the Oslo Børs board and the pan-European exchange is willing to take a minority stake.
“The Oslo Børs board also has an invitation to open dialogue with the Group’s reference shareholders,” Boujnah added. “We are very confident that our offer has superior prospects.”
Boujnah added that Euronext delivered a strong financial performance last year with double digit growth in revenue, earnings and adjusted earnings per share. In addition the firm has met the three-year targets it set in 2016 one year early.
“Euronext Group has transformed itself in the past three years, with a top line growing by around €100m ($113m) thanks to combined organic and external growth,” he said.
As well as buying Euronext Dublin, other acquisitions since 2016 including FastMatch for spot foreign exchange and Commcise, which manages research commission.
“We will launch a new strategic plan later this year,” said Boujnah.
Deutsche Börse results
Germany’s Deutsche Börse also published its preliminary results for the fourth quarter and full-year 2018 this week.
Gregor Pottmeyer, chief financial officer of Deutsche Börse, said in a statement: “In 2018, we managed to secularly increase our net revenue by approximately 6%, slightly ahead of our plan. In addition, cyclical net revenue increased significantly. In total, adjusted net profit grew by 17% – clearly exceeding our mid-term targets."
The exchange said that following strong growth last year , expectations for 2019 are slightly more subdued due to the general economic slowdown, increased economic risk and political uncertainty. However, the firm expects secular growth opportunities in 2019 to yield net revenue growth of at least 5% and for adjusted net profit to grow by around 10 %.
Theodor Weimer, chief executive of Deutsche Börse, said in a statement: “Deutsche Börse Group is looking back on a really good year. Cyclical risks are increasing and political risks are difficult to predict. Still, we are confident that we will maintain our ability to grow by our own efforts. In addition, we will focus on value-enhancing external growth and the consistent application of new technologies.”
Analysts at German bank Berenberg said in a report that Deutsche Börse’s results revealed a sharp slowdown in secular revenue growth. Berenberg continued that bottom-up analysis suggests that the exchange group will struggle to reach management’s 5% target for secular growth this year.
“The breadth of this slowdown was also notable, with most of the group’s structural growth in the fourth quarter driven by a single division, Eurex,” said the report.
The analysts continued that they expect management to respond to a more subdued outlook by accelerating M&A efforts.
“We estimate this could boost earning per share by 8% should management deploy its cash and debt capacity of roughly €1.5bn in full,” added Berenberg. “Given the group’s inflexible capital structure, any deal larger than this would likely require an equity raise.”
