Moscow Exchange Announces Results For First Quarter Of 2013

 31/05/2013

Moscow Exchange (MOEX) today announces its financial results¹ for the quarter ended March 31, 2013. The Exchange's diversified business platform continues to provide for strong year-on-year growth and margin expansion.

KEY OPERATIONAL AND FINANCIAL HIGHLIGHTS FOR Q1 2013

  • Total trading volume across all markets was up 16% YoY and totaled RUB 83.8 trn.
  • Assets in custody increased to RUB 14.2 trn as of March 31, 2013 from RUB 11.9 trn as of December 31, 2012.
  • Total operating income was up 8.6% YoY to RUB 5.52 bln.
  • EBITDA was up 12.3% YoY to RUB 3.86 bln; EBITDA margin increased to 70.0% from 67.7% in Q1 2012.
  • Net profit increased by 21.1% YoY to RUB 2.56 bln.

KEY CORPORATE HIGHLIGHTS FOR Q1 2013

  • Moscow Exchange successfully completed an IPO on its own trading platform raising RUB 15 bln.
  • Corporate dividend policy was adopted, providing for payouts of not less than 30% of net profit for 2012, not less than 40% for 2013 and not less than 50% for 2014.
  • Introduced T+2 settlement, bringing procedures in line with international best practices.
  • Euroclear and Clearstream opened nominee accounts with the National Securities Depository, a Moscow Exchange subsidiary, and began providing settlement services for government bond (OFZ) transactions. This generated a significant increase in trading volumes in these instruments.
  • REPO trading with the Central Counterparty (CCP) was introduced.
  • Presence in London was expanded and the Exchange grew its international sales team.

Mr. Alexander Afanasiev, Chief Executive Officer of the Moscow Exchange, said, "2013 got off to a strong start. Our own successful IPO in Moscow underscored that international investors are willing to participate in sizable offerings executed entirely in local shares in Russia. Before the IPO we announced a dividend policy aimed at returning a large proportion of profits to shareholders. We are following through on our commitment and recently recommended to the upcoming AGM dividend payments for 2012 of 35.4% of net profit."

"The first quarter of 2013 has again underscored the strength of our strategy. The merger of MICEX and RTS diversified our business and helped us to grow in a volatile environment. And we are well placed to continue developing financial market infrastructure to benefit market participants and investors."

"We remain on track to completely migrate to T+2 settlement, which we introduced in the first quarter. This is one of many initiatives designed to make Moscow a more attractive financial center and meet the expectations of global investors."
"We continue to work on new instruments and attracting new issuers. We recently launched new interest rate futures contract, upgraded our CHY/RUB offering, introduced Russia's first exchange-traded fund (ETF), the first mortgage-backed securities, and the first single-stock futures contract on an international security. These are important steps in the development of Russia's financial infrastructure as we deepen our product offerings and grow our customer base."

Mr. Evgeny Fetisov, Chief Financial Officer of the Moscow Exchange, added, "We are very pleased with the Exchange's results for the period, notwithstanding the fact that the first quarter is typically a slower quarter for the Exchange. We continue to benefit from the diversification of our business. The strong growth in our operating income on a year-on-year basis was driven by higher trading volumes on the FX & Money Markets as well as in derivatives and bonds. This offset some negative dynamics that we saw in equities. In addition, effective cost management resulted in a further increase in our EBITDA margin."

FINANCIAL HIGHLIGHTS

RUB, mln Q1 2013 Q1 2012 YoY
Total Operating Income 5 517.49 5 079.90 8.6%
Fee and Commission Income 2 858.75 2 568.06 11.3%
Net Interest and Other Finance Income 2 638.90 2 483.09 6.3%
Other Income 19.84 28.75 -31.0%
Operating Expenses 2 065.74 2 053.41 0.6%
Operating Profit 3 451.76 3 026.49 14.1%
Net Profit 2 562.40 2 115.63 21.1%
Basic Earnings per Share, RUB 1.17 1.01 15.7%
       
EBITDA 3 864.73 3 401.99 12.3%
EBITDA margin 70.0% 67.7%  

ANALYSIS OF Q1 2013 FINANCIALS

Total Operating Income. Operating income was up 9% YoY to RUB 5.52 bln. Revenue growth for the year was driven by an increase in derivatives fees and commissions, higher volumes on the FX and Money Markets and increased interest income.

Securities Market. Fee & commission income from the securities market decreased 22.8% YoY to RUB 724.6 mln. Total trading volume in Q1 2013 was RUB 5.9 trn, down 7.3% YoY. The 48% decline in equity volumes was partially offset by trading in bonds that was up 53% YoY. Total capitalization of the Exchange's equity market amounted to RUB 24.1 trn (US$ 774.0 bln) as of March 31, 2013.

Foreign Exchange Market. Fee & commission income from the FX market increased by 9.1% YoY to RUB 487.0 mln. Trading volumes on the FX market totaled RUB 27.5 trn, up 10% YoY. Notably, a decrease in spot trading volumes due to relatively low exchange rate volatility was offset by an increase in swap trading volumes.

Money Market. Fee & commission income from the money market increased by 100.6% YoY to RUB 498.0 mln. Total trading volume on the money market including repo transactions and lending market amounted to RUB 38.8 trn, an increase of 31% YoY. Rising interest rates (MosPrime rate was up from 5.1% in Q1 2012 to 5.9% in Q1 2013) as well as ruble liquidity tightening, which led market participants to use REPOs more, were the main reasons for the increase in volumes. The launch of REPO with the Central Counterparty (CCP) in February 2013 for government bonds (OFZs) was another driver for this segment.

Derivatives Market. Fee & commission income from the derivatives market increased by 31.7% YoY to RUB 359.4 mln. The trading volume amounted to 263 mln contracts (up 22% YoY), representing RUB 11.5 trn. Open interest reached RUB 346.0 trn at the end of Q1 2013, up 28% from YE 2012. The main growth came from FX futures and options on the RTS index.

Depositary and Settlement Services. Fees & commission income from depositary and settlement services increased 12.6% to RUB 526.4 mln. The volume of assets in deposits at the NSD increased to RUB 14.2 trln as of March 31, 2013 compared to RUB 11.9 trln as of December 31, 3012, primarily due to the NSD functioning as the Central Securities Depository.

Interest & Other Finance Income. Interest & other finance income increased by 6.3% YoY to RUB 2.64 bln. This was primarily due to an increase in funds available for investments (average for Q1 2013 of RUB 300.0 bln) and increased interest rates. Interest & Other Finance Income accounts for 48% of the Exchange Operating Income, unchanged YoY.

Cash Position. The Exchange cash position² as of March 31, 2013 totaled RUB 39.2 bln. The Exchange had no debt as of the end of Q1 2012.

Expenses. Operating expenses in Q1 2013 were up 0.6% YoY to RUB 2.07 bln. The major expense item was personnel expenses which were up 23% for the period. Other operating expenses decreased by 15% for the period. Significant savings came from lower spending on rent and office maintenance (RUB 88.39 mln, a decrease of 49% YoY) and market makers fees (RUB 67.50 mln, a decrease of 52% YoY).

Capital expenditures for Q1 2013 totaled RUB 154.5 mln. Total capex planned for 2013 amounts to around RUB 1.1bln.

The complete version of the Moscow Exchange consolidated IFRS financial statements for the quarter ended March 31, 2013 is available on the website in the Investor Relations section.

 


[1] In accordance with International Financial Reporting Standards (IFRS).

[2] Cash position is calculated as cash and cash equivalents plus financial assets minus the balance of market participants and distributions payable to holders of securities.