納斯達克交易所 (NDAQ) 2006 Q1 法說會逐字稿

We have most of the visitors on board here in Stockholm. So, good morning and most welcome for all of you here in OMX, here in Stockholm, and for all of you also visiting us on the web and via phone, most welcome. We will take this presentation on this first quarter report as we used do it. I will go through some of the operational highlights of the first quarter. Kristina will then present the financial highlights of the quarter. We will then open up for some q-and-a and we will, following that for you here in Stockholm, we'd like to invite you to a light lunch just outside.

So, we have now started the year, 2006 for OMX. We have had a very, very strong first quarter and I am very happy to announce the results. We have seen record high exchange activities and I’m coming back to that. We have seen increased profitability as an effect of that. We’ve also seen a stable cost level and we have seen the new organization now in place. An organization that is more geared towards growth. An organization that will have its main focus on offering the Nordic exchange and technology for the exchange industry. And in order to serve those two offerings, we have had -- we are now working within three business areas. Nordic marketplaces, information services and new markets and market technology.

For many of you trying to exactly transfer the old organization to the new one, I can already now say that it’s not necessarily totally possible to get all the granularity of the details. We will support you with as much facts as we can. But the new organization is there very much to support growth. To simplify, flatter what the way we do, more synchronization of service functions and get our costs down.

So the highlights for the first quarter. Well, we had revenues of over 900 million, it's over 20% growth quarter on quarter. We are having an operating profit of 334 million, it’s up 61%. We have an earnings per share growth of 80% for the first quarter, and we have seen improvement in all business areas.

To start looking into the different business areas, we start with the Nordic marketplaces, and of course I need to repeat, and I will do that a few times, the record high exchange activity we saw for the first quarter. We’ve also seen that we have taken a few steps further on the Nordic integration and to create one Nordic financial market.

This slide demonstrates the increased positive momentum we see in the exchange industry. Not only is this specific for the Nordic part but this is something we see also for other parts in the world when it comes to exchanges. We have seen new listings, nine so far this year compared to two last year. We also, today here in Stockholm, we had the opportunity to welcome KappAhl as a new listed company. KappAhl, which owns, manage and develop commercial real estate, was successfully launched at the market today.

This graph, and this is really what you have seen during the first quarter, shows also the development we have seen over the last ten years. The graph shows the exchange industry and the growth we have seen in the industry. We see that it’s really a very strong growth. We have seen the 20% accumulative growth over the last ten years. And by that I would like to say two things. You see that there is a structural growth and there is a cyclical growth. And I think what is supporting the structural growth is the development you have seen over the last few years. When it comes to decrease of trade barriers, it’s easier to trade between countries, easier to trade products in different market settings. We see new trading patterns pushing for how to be efficient in the market. We see algorithmic trading; we are experts in the algorithmic trading sphere. We see that more and more retail is coming back into the market. We see cross border also for institutional investors. We see that lower cost of trading, which we have shown in what we do, in lowering the fees for the trading members is also increasing the overall growth of trading.

We also know, and as you all know, there is a demographic saving of our society and these focus on our future pensions etc. is also pushing for the structural growth. So there is a structural growth in this industry and there is a cyclical. If we look into the first quarter, equity trading amounted to nearly 40 billion kronor per day. It’s up 57% from last year.

We have seen that the share -- number of share trading is up 52% to an average of 117 transactions per day. We see derivatives up 638,000 in average first quarter, it’s up 34%. And it’s up 20% since the fourth quarter. And we have done some changes in the fee structure focusing on certain customer segments on the stock option side. An affect of that, changes of the fee structure, lowering certain fees, have increased the trading and the volume of trading.

And going back to the structural and cyclical discussion, we see that all the aim we do, creating a Nordic exchange, will support the structural growth, make it easier to trade other products in other countries, is strengthening the overall trading activity.

The next business area, there are just a few highlights from, is information service and new markets. The purpose of our new business area is very much to explore and develop new opportunities when it comes to market data. This is still also a growth area which we think could benefit from a more explicit, more specific focus on it. That’s what we see. We also see a lot of opportunities in the Baltic market and some of the new European markets that we are focusing from this business area.

Some highlights of a specific kind. You see that the number of vendors for our information is increasing to 172. The number of terminals, information terminals, using our information is growing by more than 10% and is now over 125,000 terminals.

We have announced during the first quarter that there will be a new real-time market data feed for the Nordic -- supporting the Nordic exchange launched in October this year. We have seen, on the Baltic side, that we now -- there is increased interest of listed funds, so we have started a Baltic fund center where you could trade all the different kinds of funds in the Baltic market. Offering that to more market participants also outside the Baltic.

Then over to the business area market technology, and as you all know we have during this quarter strengthened our networks. We now have over 60 exchanges in 50 countries as the network for what we do within technology. Our technology business, during the first quarter, was down maybe to three topics. The business from Computershare, our co-operation with Deutsche Borse and that we see some improvements in the market.

On the order intake and order value, we have seen a slight improvement in the total order value. The total order value is up 7% from its low at the end of the third quarter and it’s up 2% since year end. We have an order intake, during the first quarter, of 348 million, of which 150 million is internal. That means at 348 million we are approximately 10% above the sales for the quarter when we relate it to order intake.

And we have now a much stronger market position within technology. And I’d like to immediately state that we are still not satisfied with the profitability. We are still not satisfied with the growth of the area but we have had, during the first quarter, cost related to the increased interest, all the sales effort, and it’s our sincere hope that we will see some increased order intake out of the investments or the costs we have spent during the first quarter.

We have integrated -- started to integrate Computershare. We have made an agreement with Deutsche Borse on a global standard for exchanges, for connectivity using FastFix as the model for that. We have extended co-operations with existing and new clients. We have, to be mentioned could be worthwhile, Singapore, Australia, Nord Pool the energy exchange, ICAP, the inter-dealer broker based -- the global inter-dealer broker based in London and the Cairo -- the Egyptian financial market. So all in all that focus on our market technology has strengthened the position.

The third part of our business, which is business being discontinued. And I think you’re all aware that since 2005 we made a decision to further focus on technology for the exchange industry. We made a decision to find partnerships for our banks and broker business. And there are still two units yet to be finding the long-term partnerships for. And we have ongoing discussions, we have ongoing discussions with a few partners on that and I would like to say that the main focus, however, of practical reasons is of course, also to grow that business, support that business.

You saw during the first quarter that, especially the UK business here, which we took on a lot of new clients last year, is starting up with new clients and we took some extra costs for that. And they are now up and running with those new clients during the second quarter. And, that was the first quarter, but the volumes and the different records have continued to be there.

Last Friday, on April 21, we made a few new records. We have an all time high in share turnover in Stockholm with 49 billion -- more than 49 billion in turnover compared to 45 and that goes back to October of 2000. We also saw that the number of traded derivatives was up -- was 1.8 million compared to 1.4 the previous record. And yesterday, Tuesday, we made another record. The number of share transactions was 152,000. The previous record was 149,000. So we continue to do records in our business.

And by that I’d like to hand over to Kristina to take you through some of the financials. Please, Kristina.

Thank you Magnus. Yes, I would like to start with just repeating the key points of the report that Magnus just has gone through. First of all it is the high market activity that we have seen on all our business areas but especially the record high trading on our Nordic marketplaces. At the same time, we have had continued stable costs so as a result of this we have seen a strong improvement in our profitability.

I will now go through the financials in more details and let’s start with the income statement. As you can see here, revenue has increased from 742 million a year ago to 903 million, and that’s an increase of 22% compared to the first quarter in 2005. The increase is mainly due to the record high trading activity on our marketplaces. Total revenue also includes other revenue, from sale of shares in NOS, the Norwegian futures and options clearing operation with 22 million. And as of February 1, revenue from the technology business that we acquired from Computershare is also included.

Despite high market activity we have had continued stable costs at 580 million for the quarter compared to 541 a year ago.

Included in the expenses, we have 10 million of integration costs related to Copenhagen Stock Exchange merger, compared to 7 in the first quarter last year. And this is the last of the expected integration costs, resulting in a total of 54 million since the merger. This is 6 million lower than we initially expected. Initially we mentioned 60 million.

Operating income has also improved with 61% compared to a year ago and 27% compared to the last quarter last year. And net income has improved even more to 244 million and this is more than 80% higher than the same period last year.

This slide here, on the graph, it really confirms what I've just said. The clear positive trend in revenue, with a growth of 22% and an even stronger growth in operating income with 61% since the first quarter last year.

Let’s now take a closer look at the sources of revenue growth. Here you can see the sources of revenue growth per business area since the first quarter in 2005. As you can see, the major part of revenue growth relates to strong trading revenue in the Nordic marketplaces business area. There has also been revenue growth in information sales -- information services and new markets business area, and that mainly relates to the information sales.

For market technology, the revenue growth compared to the first quarter in 2005 is mainly a result of increased license, support and project revenue. But also that we have now included the acquisition of the technology business from Computershare since February 1. Other revenue includes, among things, a decrease in revenue from discontinuing operations.

Let’s take a closer look at the cost development. And here I would like to highlight the continued stable costs. The costs are slightly up compared to the first quarter last year but in line with the fourth quarter. As already mentioned, we have had the last integration costs, related to Copenhagen Stock Exchange merger during the quarter amounted to 10 million.

In relation to the merger, we also announced annual cost synergies of 30 million. And at the end of the first quarter, we have now started to realize these synergies and we are at an annual rate of 20 million. The remainder is expected during the latter part of this year. Tight cost control is a continued high priority for us and we will closely manage our costs also going forward.

I will now take you through the earnings for each respective business area and let’s start with the Nordic marketplaces. Here you can see the sharp improvement in revenue over the past year. Compared to the same quarter last year there is an increase of 35% whereof the major part relates to trading revenue. The trading revenue has increased with 43%. While [issuer] fees have increased to 80%. The value equity trading is up with 57% and at the same time we have also seen a number of derivative contracts traded per day increase and it’s up 34%. Please also note, once again, that expenses have remained stable and operating income has improved with 74% to 275 million for the quarter.

Let’s take a closer look at information services and new markets. And here you can see that we have also had a growth in revenue of 16% compared to the same quarter last year. The growth is mainly related to increased information sales due to growth in number of terminals for market data but also growth in number of information vendors. Other revenue sources within this business area are the broker services and the Baltic markets and these parts have had flat revenue during the quarter, compared to the same quarter last year.

Expenses have been fairly stable and this has resulted in an improved operating income of 37%. Market technology has also had a growth in revenue and the growth is 21% since the same quarter last year. The main increase is, as I already mentioned, an increase in license, support and project revenue of around 35%, which is mainly due to somewhat stronger market activity. But it’s also a result of the acquisition of the technology business unit from Computershare.

Expenses have increased to around 12% compared to the first quarter in 2005, and this has resulted in an increase in operating income to 21 million compared to a loss a year ago of 6 million.

I will now leave the income statement and take a closer look at the balance sheet. And here I would like to highlight just a few things. First of all, we have seen an increase in goodwill and intangible assets and this increase is around 300 million compared to the first quarter last year, and around 200 million compared to the end of the year, last year. And the major part of this increase also relates to the acquisition of the technology business in Computershare.

Please also note the line assets held for sale, and that relates to our assets in discontinuing operations. We have also seen an increase in our shareholders’ equity since year end with around 200 million and since the same period last year with 600 million. And this is due to a strong profit generation.

We have also had a positive cash flow during the quarter. Cash flow from current operations amounts to 250 million compared to 146 for the same period last year.

If we take a closer look at the cash flow from investment operations, it includes the acquisition of the technology business, from Computershare, with 90 million. It also includes other investments intangible assets. And the major part relates to financial investments with a maturity exceeding three months. That’s about 400 of the total item.

These financial investments do however not affect the net debt. So, during the quarter, we have seen an improved net debt situation and the debt has decreased with 135 million since the year end to 438.

Finally, to conclude, I’m happy to present the development in our key financial ratios. First of all, as you can see, our net debt/equity has decreased since the year end, due to the positive cash flow generation. At the end of the first quarter the net debt equity was 9%, this is well below our set target of 30%.

After the end of the quarter we have paid out our dividend but, even taking that into account, we are well within our set target. Earnings per share for the quarter has also improved and it’s now at 2,05 per share and this is an increase of close to 80% compared to the same quarter a year ago, and 30% compared to year-end.

Looking at return on capital employed and return on equity, please note that these are calculated on 12 month rolling numbers. And, as you can see, we have had an improvement in our return on capital employed and it has now reached 17% in the first quarter. And our return on equity has improved 14%, which is now close to our target of 15%.

If we would annualize the first quarter numbers, return on equity would exceed 18%. And this, once again, marks the very strong performance in our first quarterly results. With that, I would like to hand over to Magnus for some final remarks.

Thank you, Kristina. Well I think it’s just very much to repeat what has already been said. I think this first quarter, the strong performance is really an emphasis of the position of OMX as the leader in the world of exchange industry.

I think we have had a focus on value creation that is now coming through. I think we, by many of the discussions you see globally of the potential of mergers or parternships or co-operations, I think we have proven to be leader when it comes to the experience of integration. Experience of cross-border, being experts in using technology is one of the most important tools when it comes to integrate and make market work.

I also think, by this report, we show a strong financial position for OMX. I think we have proven that many of the aims and efforts and projects that we have started over the years start to give effect. Also on what we do in the Nordic sector. So by that final statement, opening up for q-and-a. Please, asking your question, if you could state your name and who you represent. So please, who would like to get started?

I can start, Tomas Oqvist, Carnegie. Would you care to quantify the organic growth in the market technology business? And also when you think we will see a more significant impact on your order intake from these improved market conditions.

I think most of it, because we -- the only thing that isn’t organic during the first quarter is Computershare. That was part of it only two months. So the major part of this 53 million, as Kristina showed, is of course organically driven.

When it comes to the efforts and the costs we have taken now for supporting the interest in the market, I think lessons learned. We are a little bit cautious to give any specific outlook, but I think we need to be very clear that some of the costs we have taken during this first quarter is aiming to take care of that interest. Whether it’s one, two, three or four quarters I think it remains to be seen.

More questions? Surprisingly few questions today. Well I’m not intending to keep you here longer. Please -- thank you very much for attending. Both you on web, you on phone and you here in Stockholm. Thank you very much.