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06.03.2019 09:30

Moscow Exchange announces results for the full year 2018

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 December 2018. Strong performance across all trading markets, led by Equities and Derivatives and supported by the Money Market, helped achieve another year of record fees and commissions (F&C).

Unless stated otherwise, all figures below refer to performance in 2018 and all comparisons are with the previous year.

KEY FINANCIAL HIGHLIGHTS FOR 2018

  • Fee and commission income increased 11.5% to an all-time high of RUB 23.6 bln, driven by growth of fee income across all markets.
  • Net interest and finance income (excluding realized gains/losses from investment portfolio revaluation) was RUB 15.8 bln, down 2.9%.
  • Operating expenses[1] were kept under control, increasing by just 7.6%. Excluding D&A expenses, operating costs were up 6.1%.
  • Adjusted EBITDA for the year was RUB 28.7 bln, with a best-in-class margin of 71.9%.

KEY BUSINESS & CORPORATE HIGHLIGHTS FOR 2018

  • MOEX remains the center for capital raising by Russian corporates, which placed bonds with a total value of more than RUB 2.33 trln in 2018. There were 324 bond issues by 111 corporates during the period, including 38 newcomers to the market.
  • MOEX introduced new products across its markets. Seven new currency pairs started trading on the FX Market. Contracts on Light Sweet Crude Oil, the US500 index, four metal price benchmarks, a new currency pair and deliverable futures on gold became available on the Derivatives Market. Trading in soybean and sunflower seeds was launched in the Commodities Market. Five new ETFs under Russian legislation have started trading in the Equities Market to date.
  • MOEX completed the Unified Collateral Pool (UCP) project, introducing unified collateral requirements across all markets, as well as netting of settlements and cross-margining. 45 companies have joined the UCP to date.
  • Corporates have continued to join the FX and Money Markets. As of today, 113 corporates have opened deposits with the CCP, and 36 corporates can trade on the FX Market directly.
  • More than 600,000 retail investors opened brokerage accounts in 2018, bringing the total number of accounts to 1.96 mln by year-end 2018. The number of IIAs held by private investors reached 598,000 by year-end, compared to 302,000 a year earlier. As of today, the number of IIAs accounts reached 674,184.
  • MOEX continued to develop services that facilitate access to trading and open new opportunities for participants. The Exchange introduced an OTC platform for bonds, links to global OTC liquidity in EUR/USD and GBP/USD for FX Market participants, the Indicative Quotation System (IQS) for trading derivatives with less liquid underlying.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:

"In 2018, trading volumes rose significantly across nearly all markets, enabling the Exchange to set a new record for annual fee and commission income. An important growth driver was the surge of retail investor operations in the market and the growth of private investment in exchange-traded assets. We see that the efforts of MOEX and the entire financial community to grow domestic retail investing have begun to deliver results. Since the beginning of 2018, the number of individual brokerage accounts has increased by more than 800 thousand to 2.12 million today. I am confident this growth will continue.

"MOEX’s core mission is to promote economic growth in Russia by providing access to the capital markets for both large companies and medium-sized enterprises. In 2018, Russian issuers raised more than two trillion rubles on the exchange to develop their businesses, primarily through the placement of bonds.

"The growth of client trading activity also demonstrates strong demand for MOEX’s products and services, as well as innovative clearing and collateral management solutions. We are successfully further differentiating our product line and developing trading in new asset classes. For example, as the grain market builds momentum, it is making greater contributions to total revenue.

"These trends that reflect substantial and sustainable growth of our business make us optimistic about MOEX's performances in 2019."

Maxim Lapin, Chief Financial Officer of Moscow Exchange, said:

"2018 was a strong year for F&C income, which increased by 11.5%. F&C growth accelerated YoY and outpaced the rolling four-year CAGR of 11.0%. In Q4 2018, we had record-high F&C income, surpassing the RUB 6 bln mark for the first time in a single quarter to reach RUB 6.3 bln. Equities (+20.0%), Derivatives (+15.3%) and the Money Market (13.1%) were the outperformers that supported the overall annual growth rate. F&C income accounted for 59.3% of operating income in FY 2018 and 62.8% in Q4 2018.

At the same time, Core NII stabilized at RUB 15.8 bln, which is nearly flat YoY. The easing cycle in Russia came to a pause, while monetary tightening in the US propped up the USD-denominated part of NII. On the cost side, we had a minor OPEX acceleration in Q4 2018, in line with our usual seasonality. For FY2018, OPEX ended up comfortably within the original guidance range of 7-9%, and closer towards the lower end of this range. The legal provision made in Q2 2018 was 75% reversed in Q4 2018 following our win in the cassation court. Overall, reported FY2018 net income declined by a mere 2.6% and would have increased by 2.5% on an adjusted basis."

FINANCIAL HIGHLIGHTS

RUB mln FY 2018 FY 2017 Change Q4 2018 Q4 2017 Change
Operating income 39,901.4 38,538.9 3.5% 10,028.0 9,591.4 4.6%
  • Fee and commission income
23,647.1 21,207.6 11.5% 6,296.6 5,790.8 8.7%
  • Net interest and other finance income (NII)[2]
16,061.0 17,285.3 (7.1%) 3,723.5 3,785.4 (1.6%)
NII less realized gains or losses on investment portfolio revaluation[3] 15,799.0 16,269.5 (2.9%) 3,782.5 3,435.0 10.1%
  • Other operating income
193.3 46.0 320.2% 7.9 15.2 (48.0%)
Operating expenses 14,453.7 13,431.8 7.6% 3,914.4 3,630.1 7.8%
  • Personnel expenses
6,512.3 6,152.9 5.8% 1,723.6 1,597.3 7.9%
  • D&A and IT maintenance
4,545.0 4,072.6 11.6% 1,185.7 1,075.8 10.2%
  • Professional services
572.6 426.3 34.3% 164.9 102.0 61.7%
  • Other general and administrative expenses
2,823.8 2,780.0 1.6% 840.2 855.0 (1.7%)
Profit before other operating expenses and tax 25,447.7 25,107.1 1.4% 6,113.6 5,961.3 2.6%
Other operating gains/(expenses) (1,075.2) - nm 654.7 - nm
Net profit 19,720.3 20,255.2 (2.6%) 5,463.4 4,814.5 13.5%
Basic earnings per share, RUB 8.76 9.02 (2.8%) 2.43 2.15 13.0%
 
Reconciliation of adjusted metrics
Net profit 19,720.3 20,255.2 (2.6%) 5,463.4 4,814.5 13.5%
  • Other operating (gains)/expenses
1,075.2 - nm (654.7) - nm
  • Deferred taxes related to one-off provisions
(215.0) - nm 131.0 - nm
  • Adjustment for the new D&A schedule and changes to IFRS 9
173.0 - nm 83.9 - nm
Adjusted net profit 20,753.4 20,255.2 2.5% 5,023.6 4,814.5 4.3%
 
EBITDA 27,712.0 28,059.6 -1.2% 7,609.3 6,729.0 13.1%
  • Other operating (gains)/expenses
1,075.2 - nm (654.7) - nm
  • IFRS 9 allowance reversal
(117.5) - nm 22.7 - nm
Adjusted EBITDA 28,669.7 28,059.6 2.2% 6,977.3 6,729.0 3.7%
Adjusted EBITDA margin 71.9% 72.8% (0.9 pp) 69.6% 70.2% (0.6 pp)
 
Operating expenses net of non-cash changes in amortization schedules of 2018 14,120.0 13,431.8 5.1% 3,832.2 3,630.1 5.6%

PERFORMANCE OF KEY BUSINESS LINES

RUB mln FY 2018 FY 2017 Change Q4 2018 Q4 2017 Change
Equities Market 
Fee and commission income, RUB mln 1,932.2 1,610.2 20.0% 480.1 419.8 14.4%
Trading volumes, RUB bln 10,829.6 9,185.5 17.9% 2,730.8 2,309.4 18.2%
Bond Market
Fee and commission income, RUB mln 2,173.5 1,982.5 9.6% 493.1 668.7 (26.3%)
Trading volumes (ex. overnight bonds), RUB bln 21,216.0 16,563.1 28.1% 5,109.1 5,299.7 (3.6%)
FX Market
Fee and commission income, RUB mln 3,990.0 3,827.0 4.3% 989.3 945.4 4.6%
Trading volumes, RUB bln 348,368.4 347,670.8 0.2% 83,694.0 84,347.4 (0.8%)
Money Market
Fee and commission income, RUB mln 6,389.8 5,650.0 13.1% 1,750.3 1,555.1 12.6%
Trading volumes, RUB bln 364,215.8 377,140.6 (3.4%) 96,173.7 88,761.9 8.4%
Derivatives Market
Fee and commission income, RUB mln 2,318.9 2,012.0 15.3% 646.5 539.4 19.9%
Trading volumes, RUB bln 89,263.1 84,496.7 5.6% 24,784.4 20,029.0 23.7%
Depository and Settlement Services
Fee and commission income, RUB mln 4,530.7 4,183.9 8.3% 1,265.2 1,108.6 14.1%
Average assets under custody, RUB bln 42,797.8 36,766.4 16.4% 43,807.4 39,037.3 12.2%
Other fee and commission income (IT Services, Listing and other)
Information services, RUB mln 792.4 769.7 2.9% 227.4 222.6 2.2%
Sale of software and tech. services, RUB mln 695.9 630.7 10.3% 183.0 150.9 21.3%
Listing and other services, RUB mln 338.3 392.3 (13.8%) 101.9 110.1 (7.4%)
Other fee income, RUB mln 485.4 149.3 225.1% 159.8 70.2 127.6%
Net interest and other finance income
Net interest and other finance income, RUB mln 16,061.0 17,285.3 (7.1%) 3,723.5 3,785.4 (1.6%)
Investment portfolio, RUB bln 670.1 748.6 (10.5%) 664.8 592.9 12.1%
  • Fee and commission income from the Equities Market grew by 20.0% on the back of strong growth in trading volumes. The total market capitalisation of companies listed on MOEX was RUB 40.0 trln (USD 576.1 bln) as of 31 December 2018. 
  • Fee income from the Bond Market increased 9.6% due to high activity in the primary market (placement volumes up 2.0x excluding overnight bonds). The effective fee in the Bond Market declined due to the shorter average maturity of bonds placed in the corporate segment and a higher proportion of CBR bonds in the primary market.
  • Fees and commissions from the Money Market grew 13.1%. Trading volumes declined 3.4% YoY due to lower volumes of repo with the CBR (-97.7%) and interdealer repo (-31.4%). The decrease was partially offset by GCC repo, where volumes were up 7.6x. The shift towards value-added GCC repo along with extension of repo terms supported the effective fee on the Money Market.
  • The Derivatives Market saw 15.3% growth of fees and commissions. This was due to a combination of trading volumes growth and mix improvement thanks to the shift towards commodity and single-stock contracts.
  • Average assets under custody at NSD grew 16.4%. This supported fee income, which continued to grow (+8.3%). At the same time, lower trading volumes of repo with CMS through the NSD
    (-58.8%) had a negative effect on the income line.
  • Other fee income grew 3.3x due to explosive growth of fees from the Commodities Market.
  • The cash position[4] at the end of 2018 was RUB 89.73 bln. The company had no debt as of the end of the quarter.
  • Capex for the year was RUB 2.01 bln, all of which was spent on purchases of equipment and software as well as software development.

Moscow Exchange’s consolidated IFRS financial statements for FY and Q4 2018 are available on the Investor Relations section of the company's web site.

The FY and Q4 2018 IFRS Financial Results webcast is scheduled for 6 March 2019 at 5:00 pm (Moscow time).

Contacts:

Investor Relations:   Public Relations:

Anton Terentiev

+7 495 363 3232

ir@moex.com

Lev Bystrov

+7 495 363 3232

pr@moex.com

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group operates Russia’s main trading platform for equities, bonds, derivative instruments, currencies, money market instruments and commodities. The Group includes the central securities depository (National Settlement Depository), and a clearing center (National Clearing Centre), performing the functions of central counterparty on the markets, which allows Moscow Exchange to offer its clients the full spectrum of trading and post-trading services.

Moscow Exchange was formed in December 2011 as a result of a merger between Russia's two main exchange groups – MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia; and RTS Group, at the time the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

Disclaimers

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

[1] Net of Other operating expenses (one-off provisions)

[2] Calculated as the sum of interest and other finance income, gains/losses on FVTOCI, gains/losses on AFS and foreign exchange gains less losses less interest expense.

[3] Calculated as the sum of iInterest and other finance income and fForeign exchange gains less losses less interest expense (compared to net interest and other finance income, excludes gains/losses on FVTOCI and gains/losses on AFS).

[4] Cash position is calculated as the sum of Cash and cash equivalents, Financial assets at fair value through profit and loss, Due from financial institutions, Financial assets at fair value though other comprehensive income less Balances of market participants, Overnight bank loans,  and Distributions payable to holders of securities and Margin Account..

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