Deutsche Boerse : Börse AG launches broad-based growth programme and publishes Q2 results

Deutsche Börse AG launches the Group-wide growth programme "Accelerate". Having conducted an in-depth review of its strategy, organisational structures and business processes, Deutsche Börse launched "Accelerate" with the objective of becoming agile, ambitious and effective to participate in the global competition of financial market infrastructure providers with a strong customer focus. The company will embark upon a broad range of specific initiatives in order to achieve this strategic goal.

Carsten Kengeter, Chief Executive Officer of Deutsche Börse AG, said: "We conducted a thorough review of the strategy and organisational structure of the entire Group and all its divisions. Deutsche Börse is on the right track. With "Accelerate", we will underpin our growth trajectory and gain momentum over the medium-term with a broad set of new initiatives. Our clear vision is to turn Deutsche Börse into the global market infrastructure provider of choice, being top-ranked in all its activities."

In terms of organisational improvements, Deutsche Börse is looking to implement a Group-wide approach to sales, innovation and operations - in order to better meet changing client needs, and to gradually exploit untapped sales potential. To expedite its realignment and to intensify collaboration, Deutsche Börse already established a cross-divisional Group Management Committee (GMC) on 1 July. Delayering and complexity reduction will considerably enhance the Group's decision-making speed and agility. Furthermore, Deutsche Börse plans to enhance performance measurement and remuneration systems by introducing improved incentives and increased direct P&L responsibilities, in order to intensify performance orientation across all levels. This step is designed to enable Deutsche Börse to attract top talent across the financial industry. As part of its review of the medium-term financial plan, the Group conducted an in-depth analysis of its organic growth initiatives over recent weeks and is in the process of re-prioritising some of them. Specifically, the Group is looking to accelerate its expansion into new markets and asset classes. Deutsche Börse will step up existing initiatives in high-growth geographies like Asia, through stronger focus and enhancing expertise. Overall, the revision of the financial plan identified additional potential for organic growth through 2018. Regarding external growth options, the current focus is on strengthening existing growth areas, and on exploring new asset classes and services. Examples are the announced acquisitions of STOXX, to increase the strategic flexibility in the fast growing index business, and 360T, which is opening the highly attractive asset class FX to the company. When selecting opportunities, the Group will pursue a disciplined approach with a clear view on enhancing value. On capital allocation, the Group will be reviewing its business portfolio and shareholdings on an ongoing basis, to concentrate on the most promising initiatives, whilst maintaining its very sound balance sheet structure and attractive distribution policy.

As part of the strategic review of existing business activities, the Group enhanced the transparency of its organic structural and cyclical growth targets and identified additional growth potential. Clearly defined earnings growth targets have been introduced, underpinning the scalability of the Group's business model. Accordingly, the Group anticipates net revenue increases of between 5 and 10 per cent annually, based on its current business portfolio and assuming a continued recovery of the world economy as well as medium-term interest rate rises. The Group is targeting 10 per cent to 15 per cent increases in earnings before interest and tax (EBIT) and net income. This implies a target range of between €2.8 billion and €3.2 billion in net revenue and EBIT of between €1.55 billion and €1.75 billion for 2018, including the recently announced acquisitions. To improve the management of its cost base, the Group defined three principles for cost management during the course of its strategic review. Firstly, the Group is looking to sustainably safeguard the scalability of its business model. This means managing costs in such a way that single-digit net revenue growth is achieved on stable operating costs, with double-digit net revenue growth leading to cost increase of approximately 5 per cent. At the same time, the Group is committed to further improve its operating efficiency on a continuous basis: as a primary measure, a focus on client needs is intended to improve the quality and efficiency of services. In addition, inflationary effects like salary increases will be offset internally. The Group also plans to unlock capacity for further investment as an additional growth-accelerating effect. Through delayering, the integration of functions into competence centres and further improvements in purchasing and procurement, the Group is looking to create approximately €50 million in additional investment capacity from 2016 onwards. This will require one-off restructuring costs of approximately €60 million in the year 2015. The company has already initiated discussions with employee representatives in this context.

"Our new medium-term plan focusses more strongly on the scalability of our business model - primarily through expected revenue growth of up to 10 per cent per annum until 2018. In addition, structural efficiency gains will take full effect by the end of 2016, in order to ensure that our earnings targets are achieved," Kengeter commented.

Results for Q2/ 2015
Deutsche Börse Group's net revenue went up 19 per cent compared with the same quarter of the previous year, to €583.1 million (Q2/2014: € 491.2 million). The increase was mainly driven by higher equity and interest rate volatility and the continued positive developments in securities custody and settlement as well as in the market data business (Clearstream, Market Data + Services). Net interest income from the banking business - which is included in net revenue - amounted to €14.1 million (Q2/2014: €13.2 million). Since the first quarter of 2015, net interest income has also included interest income and expenses from investing cash collateral deposited by clients with the Eurex clearing house. The previous year's figures were adjusted accordingly.

At €307.7 million, operating costs increased as planned year-on-year (Q2/2014: €254.4 million), mainly due to consolidation effects and higher investments in growth initiatives and infrastructure. Operating costs included special items in the amount of € 11.8 million (Q2/2014: €5.1 million), which largely comprised of costs of efficiency programmes and business combinations. Adjusted for these non-recurring factors, costs rose by 19 per cent, to €295.9 million (Q2/2014: €249.3 million), as expected.

Gregor Pottmeyer, Chief Financial Officer of Deutsche Börse AG, commented: "During the second quarter, we benefited considerably from a revitalisation of markets, and from higher volatility. The increases in net revenue - up 19 per cent - and adjusted EBIT - up 18 per cent - are impressive evidence in this respect. This means that results at the half-year point are at the upper end of the forecast range."

The result from equity investments amounted to €-4.0 million (Q2/2014: €1.8 million). Adjusted for a €3.9 million write-down of the stake in Bondcube Limited, the figure was €-0.1 million (Q2/2014: €1.5 million).

Deutsche Börse Group's earnings before interest and taxes (EBIT) rose to €271.4 million during the period under review (Q2/2014: €238.6 million). Excluding the special factors mentioned above, EBIT was €287.1 million, up 18 per cent year-on-year (Q2/2014: €243.4 million).

The Group's financial result was €-17.8 million (Q2/2014: €-13.2 million). The year-on-year decline reflects a negative exchange rate effect of €3.9 million, due to a higher US dollar position, following a €18.1 million gain in the first quarter of 2015.

The Group's adjusted effective tax rate for the second quarter of 2015 was 26.0 per cent (Q2/2014: 26.0 per cent) as planned. The Group's consolidated net income for the period thus amounted to €175.1 million (Q2/2014: €159.3 million). Excluding special items, consolidated net income for the period stood at €187.7 million (Q2/2014: €165.2 million).

Basic earnings per share, based on the weighted average of 184.2 million shares outstanding, amounted to €0.95 (Q2/2014: €0.87). Adjusted for the special items mentioned, basic earnings per share amounted to €1.02, up 13 per cent year-on-year (Q2/2014: €0.90).