Under its strategic and operating realignment (SIX2020), SIX grouped together its securities services in the first half of 2018 to enable it to offer all services for trading, settlement and custody of securities from a single source. It also amalgamated services for the Swiss payment system – interbank payments, connecting to the SEPA region, processing card-based and mobile payments for banks, operating ATMs, and e-bills. SIX also strengthened its innovation capacity by building upon the independent Innovation & Digital business unit, which in future will drive all innovation.
Strategic Partnership with Worldline in Card Business
Under the realignment, SIX announced at the end of last year that it was carving out its merchant acceptance, acquiring and international card processing from the core organization. In May 2018, SIX announced that it was transferring its card business through a strategic partnership with the French company Worldline. SIX will own a 27% stake in Worldline following the expected completion of the transaction in the fourth quarter of 2018.
Financial Highlights
For the first time in the company’s history, operating income in the first six months exceeded the CHF billion mark, rising 8% year on year to CHF 1,000.7 million (including the discontinued Cards business unit). This rise in operating income partially compensated for the increase in operating costs incurred as a result of the strategic and organizational realignment (including M&A activities). At CHF 139.0 million, earnings before interest and tax (EBIT) therefore fell year on year by approximately 15% in the first half of 2018 which was in line with expectations.
Positive Performance in All Business Units
Apart from the newly created Payments business unit, which will complete its reorganization later this year by being renamed Banking Services, all other business units contributed to the growth in operating income in the first half of the year. All business units generated positive operational profit. The custody and trading business of Securities & Exchanges benefited amongst others from favourable market conditions in the first quarter, generating an operational profit of CHF 109.2 million. Seven IPOs were completed in the first half of 2018, more than in the whole of 2017. The Financial Information business unit posted increased turnover, mainly with reference and price data as well as with services in the regulatory area, reporting a CHF 58.9 million operational profit for the first six months. Organic growth in merchant business helped the card business to generate an operational profit of CHF 52.1 million in the first half of 2018.
Special Accounting Treatments
No year-on-year comparison is published in the interim report at business unit level, as the previous year's figures are not yet available according to the new organizational structure. SIX will report according to the new structure from financial year 2018, including the previous year's figures. As the card business is being carved out from the core Group, a special accounting treatment also appears in this interim report. Under International Financial Reporting Standards (IFRS), the business being transferred to the partnership with Worldline must be stated separately in both the balance sheet and income statement. Operating income for the remaining business units totalled CHF 572.5 million for the first half of 2018, while earnings before interest and tax (EBIT) stood at CHF 102.2 million. The business areas being discontinued accounted for CHF 36.8 million of the EBIT of CHF 139.0 million. Consolidated profit after interest and tax totalled CHF 100.7 million. SIX will continue to be a benefactor from the profits of the business areas transferred after conclusion of the transaction through its 27% strategic stake in the new combined business with Worldline.
Outlook
With the successfully concluded strategic realignment, SIX has focused more on the needs of its customers, shareholders and the requirements of the Swiss financial center and so has introduced new competitive pricing structures throughout the company. SIX will continue to concentrate on infrastructure services in securities business, payments and in the financial information area, enabling it to strengthen the competitiveness of the overall Swiss financial center as a provider of core infrastructure services.