- In the first six months of 2019 SIX generated CHF 551.7 million in operating income and CHF 99.9 million in earnings before interest, taxes, depreciation and amortization (EBITDA)
- Reflecting substantial investments following last year’s strategic realignment, M&A activities and price reductions, EBITDA was lower than in the first half of the previous year
- The non-operating financial result was influenced by the stake in Worldline whereby a negative accounting effect outweighed profit participation. Subsequently, SIX reports a Group net profit of CHF 32.4 million for the first half of 2019
- The fair value of SIX’ 27% stake in Worldline has increased since the signing of the transaction from CHF 2.5 billion to CHF 3.5 billion
Financial Highlights
SIX recorded a solid operational performance for the period January – June 2019. The slight year-on-year decrease in operating income (CHF 551.7 million, -4% YoY) was due to price reductions granted mid-2018 in accordance with the new mandate.
In the first six months of 2019 SIX generated CHF 99.9 million in EBITDA. Apart from the price reductions, EBITDA was lower compared to the previous year’s period (-30% YoY) mainly due to increased strategic investments in the Innovation & Digital unit and the newly formed Banking Services unit. Strategic investments also included SIX Digital Exchange ‘SDX’, the fully integrated issuance, trading, settlement and custody infrastructure for digital assets and regulatory costs. These investments led, as anticipated, to an increase of operating expenses.
The non-operating financial result was influenced by the participation in Worldline. In line with the strategic realignment SIX entered into a strategic partnership with Worldline in 2018, bringing its existing card business into the partnership.
As a consequence of the strategic partnership with Worldline SIX's revenues have practically halved. Instead SIX has participated in Worldline’s profit via its 27% stake in the French company appearing as a positive contribution to share of profit or loss of associates. In addition, the transaction with Worldline has also had a negative accounting effect on the net financial result as a result of the revaluation of a contingent cash consideration that was part of the original Worldline transaction. A value increase of the strategic liquidity partly offset that effect.
The fair value of the 27% stake in Worldline has increased since the signing of the transaction on 14 May 2018 from CHF 2.5 to 3.5 billion (as of 28 June 2019). As the participation is accounted for using the equity method, this had, however, no effect on the income statement or balance sheet.
Excluding the total impact of the Worldline participation, Group net profit almost equalled previous year’s figure (CHF 81.3 million, -1% YoY).
Business Unit Performances
The trading and post-trading business of Securities & Exchanges reported a profit contribution of CHF 81.4 million (-25% YoY). The year-on-year profit decline is mainly due to the granted price reductions as well as higher expenses due to large investments such as in SIX Digital Exchange ‘SDX’. SIX recorded three IPOs (Medacta, Stadler Rail, Aluflex) and one direct listing (Alcon) in the first half of 2019. Proceeds raised from these listings were CHF 2.3 billion, ranking SIX second in Europe (after LSE Group and no. 8 in the world).
Banking Services, the business unit founded last year from the Swiss captive payment business, performed well and basically held its year-on-year profit contribution of CHF 20.3 million (-1% YoY). Higher expenses as a result of ramping up the business were compensated by higher income for eBill and Direct Debit as well as the acquisition of Swiss Euro Clearing Bank (SECB) GmbH. A second transaction was completed in acquiring PostFinance’s 25% minority stake in SIX Interbank Clearing (SIC) AG (SIX now holds 100% of the shares).
Financial Information is below year-on-year comparison with a profit contribution of CHF 46.2 million (-21% YoY) due to price reductions granted to Swiss banks and FX effects. However, revenues of new services have shown strong growth, such as the Sanctioned Securities Monitoring Service due to the ongoing changing geopolitical sanctions landscape.
EU equivalence
From 1 July 2019 the ordinance adopted by the Swiss Federal Council to safeguard and strengthen a strong Swiss Capital Market became operational. The transition of EU trading volumes of Swiss equities onto SIX after EU-equivalence was no longer granted, has been conducted without disruption. Effective open markets and legal certainty continue to be the highest priority for and of the utmost importance to SIX in order to be able to serve best the interests of banks, issuers and investors.
Outlook
Following the strategic realignment of the business in 2018, the foundations for targeted growth were laid in the first half of 2019. SIX continues to put its focus even more on delivering services for the banks and to drive forward innovative business ideas that strengthens the competitiveness of the Swiss financial center. Various investments in innovation and new products are now in a late stage of development and will be made available to the clients in the second half of the year.
There are certain indications that the non-equivalence potentially has a positive effect on operating income as well as profit in the second half of the year due to the associated contingent measures by the Federal Council.
SIX continues to provide the Swiss financial sector with reliable and stable services and contributes significantly to the competitiveness of the financial sector in Switzerland.
Further information
SIX Interim Report 2019
SIX Half Year 2019 Presentation