Interim report
First quarter of 2010
Main features of the first quarter:
- Market activity higher than in the first quarter of 2009
- Operating revenues: NOK 246.1 million (231.1)
- Operating profit before amortisations and write-downs: NOK 108.9 million (79.7)
- Operating profit: NOK 88.3 million (53.1)
- Post-tax profit: NOK 67.2 million (42.2)
- Earnings per share before amortisations and write-downs NOK 1.91 (1.43)
- Earnings per share NOK 1.56 (0.98)
Business activities in the first quarter of 2010 (same period in 2009 in brackets)
Key figures for the group / Oslo Børs VPS Holding reports a profit of NOK 67 million for the first quarter of 2010 (NOK 42 million). The year-on-year improvement reflects higher operating revenue and lower costs.Relative to the first quarter of 2009, revenues increased by NOK 15 million or 6.5%. Most areas of activity reported growth in revenue. Revenues from trading in shares and from financial market data showed a decline.
Costs before amortisations and write-downs of excess value for the first quarter were NOK 14 million or 9% lower than in the same period in 2009. The reduction reflects increased capitalisation of internal resources and less use of external resources. The discontinuation of the next generation funds projects by VPS incurred external costs in the first quarter of NOK 6.5 million.
Amortisation of excess value in the first quarter of 2010 was NOK 6 million lower than in the same period of 2009. Amortisation was lower because certain items of excess value were fully amortised during the course of 2009.
Net financial items for the first quarter totalled NOK 5 million, NOK 4 million lower than in the same period of 2009 as a result of lower interest rates and some reduction in the level of liquid assets.
Dividend for 2009 / The Board of Oslo Børs VPS Holding has proposed to the Annual General Meeting that a dividend of NOK 8.00 should be paid in respect of the 2009 financial year. The proposed dividend takes into account the requirements imposed by the authorities for the capital adequacy of the activities carried out by the group that are subject to official authorisation, as well as the level of capital that the Board considers to be a prudent buffer in relation to the official requirements and the expected level of liquid assets over the course of the year.
Reductions in trading fees for equities / Oslo Børs works continuously to remain competitive and to encourage greater trading and liquidity for the exchange's marketplaces. As part of this commitment, Oslo Børs has announced further changes to the fees for trading in shares listed on Oslo Børs and Oslo Axess with effect from April 2010. This is the third time that Oslo Børs has reduced trading fees for equities since September 2008. In addition, Oslo Børs is making some changes to its pricing model to offer bigger discounts and greater flexibility for our customers.
Based on trading activity for 2009 as a whole, these changes to the pricing model and trading fees would have caused a reduction in annual revenue for Oslo Børs VPS of approximately NOK 10 million in 2009.
Stock exchange listing of Oslo Børs VPS Holding ASA / The Board of Oslo Børs VPS has been asked by various shareholders to consider a stock exchange listing for the group. The Board therefore authorised the Chairman to seek the views of more of the major shareholders. The majority of shareholders consulted wish to see the group prioritise its resources in the near future on responding to the changing competitive situation, improving the group's efficiency etc. Based on the feedback from these consultations, the Board has concluded that there is a generally positive response to the company considering a stock exchange listing on a somewhat longer perspective, and the Board will therefore give the question serious consideration in 12-15 months' time.
Oslo Børs served with legal proceedings by DNO / Oslo Børs has been served with a writ by DNO International relating to the ruling of the Stock Exchange Appeals Committee on 17 September 2009 to impose a violation charge on DNO for a breach of the duty to provide information. The statement of claim in the writ seeks the cancellation of the ruling on the basis that it is invalid, and also claims NOK 452,550 for the plaintiff's legal fees. Including the claim for repayment of the violation charge of NOK 942,228, the writ represents a total claim approaching NOK 1.4 million.
Successful implementation of TradElect / Oslo Børs started to use the TradElect trading system for equities and fixed income securities together with the Infolect system for market data on 12 April. The new trading system will make trading on Oslo Børs even more efficient, and will help to strengthen the Norwegian securities market, improve the profile of listed companies and increase the exchange’s competitiveness.
Termination of the mutual funds project / Verdipapirsentralen ASA (VPS) has been involved since spring 2008 with the development of a new mutual funds system, with the objective of renewing the services it offers for fund management companies and their distributors. The Board of Directors of VPS decided in January 2010 to repudiate the contractual relationship with the supplier Capgemini and halt this project.
VPS has implemented alternative arrangements in order to ensure that customers continue to select VPS as their supplier. VPS will therefore continue to work on developing systems and services intended for fund management companies. Its future development in this area will take place in collaboration with its customers, with the objective of ensuring that fund management companies will continue in the future to recognize VPS as a supplier of reliable and efficient solutions with competitive pricing.
Future prospects
Future prospects, cont. / The group’s revenues vary in line with activity levels. The reductions in fees implemented in 2009 and 2010 will have an effect on operating revenues in 2010. Oslo Børs VPS is committed to offering a pricing structure that is competitive and that encourages active use of the group's services. Competition is expected to continue to increase. Oslo Børs VPS will again consider adjusting certain of its fees and prices in 2010 as well as further measures to improve the efficiency of its services for the benefit of its customers.
Operating expenses before amortisations and write-downs for 2010 are at present expected to be a little over NOK 500 million, of which depreciation is expected to account for around NOK 70 million. Capitalisation of internal costs will be in the
order of NOK 20 million, while amortisation of excess values is expected to be around NOK 80 million. Investment spending planned for 2010 is expected to approach NOK 100 million.
The main challenge facing the group over the next few years is the new competitive environment for the Norwegian securities chain, which must be expected to cause a reduction in the group's market share of trading and settlement of securities listed on Oslo Børs. Central counterparty clearing for the cash equities market is due to be implemented in May 2010. The introduction of mandatory CCP clearing will have a significant adverse effect on the revenue generated by the settlement activities carried out by VPS. On a longer perspective, developments such as the European Central Bank's T2S initiative to develop a Europe-wide settlement system may also have an effect on the settlements area at VPS.
Oslo Børs /
The level of market activity in the first quarter of 2010, as measured by the value of turnover in equities, was higher than in the same period of 2009.
The OBX Index closed the first quarter at 342.61, up by 1% since the start of the year.
Four companies were admitted to listing on the Oslo Børs and Oslo Axess marketplaces in the first quarter, while five companies were removed from listing. At the end of the first quarter, 236 companies were listed in total, of which 29 were listed on Oslo Axess. In total 1,078 fixed income issues were listed on Oslo Børs and on Oslo ABM (Alternative Bond Market) at the end of the first quarter, representing an increase of 45 from the same quarter of 2009 and an increase of 19 from the preceding quarter. Fixed fees from issuers are up 21% or NOK 3 million from the first quarter of 2009. Prospectus and admission fees are up 100% or NOK 3 million.
The value of shares and equity certificates traded in the first quarter was NOK 471 billion (NOK 329 billion), an increase of 43% from the first quarter of 2009. Relative to the preceding quarter, this represents an increase of some 7%.Statistics published by Thomson Reuters show that trading ortrade reporting through Oslo Børs accounted, in valueterms, for around 74% of total trading in OBX securities in March 2010 and 84% in March 2009. There were 54 (58) active member firms at the end of the first quarter, of which 21 (23) are local members and 33 (35) are remote members. This represents a reduction of three members from the preceding quarter. The overall level of activity in the derivatives market in the first quarter, as measured by the number of contracts traded, was 7% higher than in the same period in 2009 and 13% higher than in the preceding quarter. Fixed and variable revenues from trading aredown 8% or NOK 4 million in the first quarter of 2010 relative to the same period of 2009.Trading revenuesfrom derivativesare up NOK 3 million, whilerevenues from equitiesare down NOK 8 million.
The estimated number of end users of market data from Oslo Børs was approximately 2% lower at the end of the first quarter than at the end of the preceding quarter, and approximately 7% lower than at the end of the first quarter of 2009. Customer numbers for private individuals have increased, while the number of professional users has fallen. Revenues are down 4% or NOK 2 million.
Oslo Børs reports total revenue for the first quarter of NOK 114 million (NOK 112 million), representing an increase of NOK 2 million or 2% from the first quarter of 2009. The year-on-year increase related principally to listing fees and increased activity in the fixed income and derivatives markets. Revenue from equity trading was NOK 8 million lower than in the first quarter of 2009.
Total operating expenses for the first quarter of 2010 were NOK 7 million lower than in the same period of 2009. The reduction was principally the result of higher capitalisation of internal resources in connection with projects currently underway, together with a reduction in the use of external resources. Oslo Børs implemented measures in 2009 to reduce normal operating expenses. By the close of the second quarter of 2010, the effective headcount of Oslo Børs will be 20% lower than at the start of 2009.
VPS /
Market activity in the settlements area, as measured by the number of transactions, was significantly higher than in the first quarter of 2009. The quarter saw 12.7 million trade transactions (9.9 million). Revenues were 7.9% or NOK 4 million higher than in the same quarter of 2009 for the settlement area.
The issuer area saw a net reduction in the number of units registered relative to the first quarter of 2009. At the end of the first quarter, 1,380 (1,434) limited companies, 29 (29) equity certificates and 2,108 (2,108) fixed income issues were registered with VPS. Revenue generated by the issuer area was 10% or NOK 2 million higher in the first quarter of 2010 than in the same quarter of 2009 as a result of higher numbers of new issues, corporate acquisitions and dividend payments.
The market value of VPS-registered mutual funds was 68.3% higher than at the end of the first quarter of 2009. The number of mutual fund transactions totalled 1.5 million in the first quarter, up by 8.8% from the same quarter of 2009. The number of investor holdings in mutual funds increased by 6% to 1.4 million. Revenue generated by the mutual funds area was 13% or NOK 2 million higher than in the first quarter of 2009. This increase was principally the result of higher market values and growth in the number of transactions.
In the investor area, the market value of holdings was 41% higher at the end of the first quarter of 2010 relative to the same period of 2009. There were 1.66 million VPS accounts at the end of the first quarter, an increase of 1% from the same time in 2009. The number of internet users increased by approximately 7% between the first quarter of 2009 and the first quarter of 2010. Revenue was 15% or NOK 3 million higher at the end of the first quarter of 2010 relative to the same period of 2009.
First quarter 2010 operating revenues for VPS totalled NOK 126 million (NOK 112 million), representing an increase of NOK 14 million or 13% from the same quarter in 2009..
Operating expenses before amortisations and write-downs for the first quarter of 2010 were NOK 6 million, or 8%, lower than in the same period of 2009. The reduction was principally the result of lower depreciation, and some reduction in the use of external resources. Other operating expenses reported for the first quarter of 2010 include NOK 6.5 million of costs related to the funds system project. The Oslo Børs VPS group implemented measures in 2009 to reduce normal operating expenses. Further measures will be implemented in 2010. VPS will implement measures over the course of the second half of the year.
Certain items of excess value were fully amortised during the course of 2009. As a result, amortisation of excess value was NOK 6 million lower in the first quarter of 2010 than in the same period of 2009.
Oslo Clearing /
Operating revenues for the first quarter of 2010 were NOK 1 million higher than in the same period of 2009. The increase reflects a higher level of activity in the derivatives market, and the fact that fees charged for certain products are affected by changes in the market value of underlying securities.
First quarter operating costs, before amortisation of excess value and write-downs, were NOK 2.0 million higher than in the first quarter of 2009. This reflects the implementation of central counterparty clearing for equities and other current projects involving Oslo Clearing. Planed launch date for central counterparty for equities is in May 2010.
The number of active derivatives accounts remained stable, with 1,783 accounts at the end of the fourth quarter of 2009 and 1,809 accounts at the end of the first quarter of 2010.
Oslo Market Solutions /
Operating revenues for the first quarter of 2010 were NOK 1.3 million, or 25%, higher than in the same period of 2009. Oslo Market Solutions’ operating revenue fluctuates with the timing of the implementation of customer projects and annual system licences. The revenue reported for the first quarter relates in part to services delivered within the group in connection with the development of a new trading terminal for the fixed income market.
Operating expenses before amortisation and write-downs of excess value were slightly higher than in the first quarter of 2009. Amortisation of excess value in the first quarter of 2010 was at the same level as in the same quarter last year.
Please see further operational key figures. All figures are in thousands of Norwegian kroner and apply to the Oslo Børs VPS group unless otherwise stated. The group comprises the parent company Oslo Børs VPS Holding ASA and the subsidiaries Oslo Børs ASA, Verdipapirsentralen ASA (VPS), Oslo Clearing ASA and Oslo Market Solutions AS. The accounting information in this report has not been audited.
Profit and loss account
With effect from 1 January 2005, all financial information is reported in accordance with the current International Financial Reporting Standards (IFRS). Further information on the transition to IFRS can be found in Note 17 (page 63) of the 2005 annual report. The interim report has been prepared in accordance with IAS 34. The same accounting principles and methods of calculation are used in the interim report as in the annual accounts. Earnings per share is calculated on the basis of earnings for the period in question.Segment information
The Oslo Børs VPS Holding group has four segments: Oslo Børs, VPS, Oslo Clearing, and Oslo Market Solutions. The segments are equivalent to the subsidiaries of the same name. The segment information reported has been prepared in accordance with IFRS 8.Balance sheet
The merger between Oslo Børs Holding and VPS Holding, which came into effect at the end of November 2007, is recognized in the accounts on the transaction basis with Oslo Børs Holding ASA as the acquiring company. An account of the business combination can be found in the interim report for the fourth quarter of 2007.Short-term receivables totalled approximately NOK 123 million at the end of the first quarter of 2010. Of this, trade receivables totalled NOK 89 million. Other current receivables, including prepaid expenses and income accrued but not yet invoiced, amounted to NOK 34 million.
The market value of outstanding derivative positions totalled NOK 680 million. Oslo Clearing is the formal counterparty in derivative transactions traded on Oslo Børs and in derivative or securities lending transactions notified for clearing. Counterparty risk is measured by models designed in accordance with international practice. Counterparty exposure is covered by individual collateral from each customer. IFRS 39 and IAS 32 stipulate that a clearing entity must recognise the liabilities it incurs as a central counterparty to derivative contracts. The market value of positions is recognized in the balance sheet as a current liability, with a balancing entry in current assets. Receivables and liabilities that can be assigned to outstanding derivative positions are netted to the extent that set-off can be applied.
Cash and cash equivalents totalled NOK 998 million at the end of the first quarter. In addition, NOK 25 million of liquid assets are classified as financial fixed assets. Current liabilities amounted to approximately NOK 304 million at the end of the first quarter, of which tax payable accounted for NOK 76 million and pre-payments by customers accounted for NOK 117 million.
Cash flow
Cash flow is reported in accordance with IAS 7. The group's financial income is included in investment activities, and its financial expenses are included in financing activities.Oslo Børs VPS Holding recorded an increase in cash and cash equivalents in the first quarter of NOK 93 million.
Cash and cash equivalents held at the end of the quarter totalled NOK 998 million. In addition, NOK 25 million of liquid assets are classified as financial fixed assets.
Equity
Equity amounted to NOK 1,765 million at the end of the first quarter and the equity ratio was approximately 58%.Shareholder information
Oslo Børs VPS Holding ASA share price:The graph shows movements in the share price of Oslo Børs VPS Holding ASA from May 2001 to 15 April 2010, not adjusted for disbursed dividends or reduction of capital. The share price is compared with the OSEBX price index also not adjusted for dividends. With effect from and including 9 May 2007, the company’s share was split 1:5. The merger with VPS Holding came into effect on 27 November 2007. The merger involved the issue of 18,004,000 new shares. The total number of shares outstanding after the merger is 43,004,000. The following text and chart refer to nominal value and the number of shares following the merger. Around 1 million shares were traded in the first quarter of 2010, with prices from NOK 60 to NOK 68. The last registered trade in the quarter was at NOK 68. The last registered trades for the three previous quarters were at NOK 60, NOK 55 and NOK 58 respectively. Since May 2001, dividends and payments to shareholders in respect of reductions in share capital have totalled NOK 36.40 per share, including a dividend payment for 2008 of NOK 5 per share distributed in June 2009. A dividend of NOK 8.00 per share is proposed for 2009.
Oslo Børs VPS Holding ASA – 20 largest shareholders at 16 April 2010
Key figures
The Board of Directors of Oslo Børs VPS Holding ASA
Oslo, 28 April 2010
Leiv Askvig
Chairman of the Board / Svein Støle
Member of the Board / Ottar Ertzeid
Member of the Board / Benedicte Schilbred Fasmer
Member of the Board
Giséle Marchand
Member of the Board / Benedikte Bettina Bjørn
Member of the Board / Harald Espedal
Member of the Board / Bente A. Landsnes
Group CEO
Oslo Børs VPS Holding ASA