SIX posted strong revenue growth in the 2017 financial year. Operating income rose 5.8% to CHF 1,944.6 million. This was mainly attributable to revenues from stock exchange trading and securities custody, and rising turnover in payment transactions. Sales in the financial data business were slightly below the prior-year level due to delays in the introduction of important financial market regulations. A high level of cost discipline was once again exercised in the day-to-day business. The overall 7.3% increase in costs is due primarily to investments in new services and acquisitions. The favorable performance of capital markets resulted in a higher financial result totalling CHF 15.8 million (+52.7%). Earnings before interest and tax (EBIT) declined 8.1% to CHF 273.2 million. Adjusted for the non-recurring effect from the previous year, EBIT rose 0.8%.
Targeted investments in the future and strengthening of market position
SIX made targeted investments to strengthen its market position and for future growth during 2017. It increased its competitiveness in payment transactions through the acquisition of the Frankfurt-based girocard network from VÖB-ZVD Processing GmbH and the purchase of the acquiring and terminal business of Aduno Group. Another long-term investment is the participation in the mobile payment app TWINT, which was successfully launched in April 2017. SIX is very satisfied how the TWINT app has developed. The app already had 627,000 registered users at the end of 2017, enabling mobile payment at a rapidly increasing number of points of sale. Within the business area Securities Services, the only Swiss trade repository that meets reporting requirements on derivative transactions approved by FINMA came into operation, and the harmonization of Swiss payment transactions was continued. In the business areas Swiss Exchange and Financial Information, investments were made in services supporting banks to meet new regulatory requirements efficiently. SIX also launched trial operations at a new security operations center (SOC) to prevent cyber attacks in collaboration with IBM. As a first step the SOC will strengthen cyber security at SIX, and as a second step SIX wants to offer tailored and managed security services to other companies in the Swiss financial center.
Jos Dijsselhof, CEO of SIX, said: "We have laid the groundwork to actively shape development and remain a key provider of services in the area of financial market infrastructure for our clients and shareholders in the future. Based on our operational strengths and our healthy balance sheet, we were able to lay the foundations during 2017 for a continued, successful future through targeted projects and investments."
Performance of the business areas
The result of the Swiss Exchange business area was influenced by considerably higher trading activity. Trading turnover rose by 5.2% to CHF 1,346.0 billion. The market share for Swiss blue-chip trading rose to 68.3% (previous year: 64.6%). As a result of the strong growth, operating income increased by 5.2% to CHF 198.2 million. The implementation of new regulatory requirements defined by European rules (MiFID II/MiFIR) and the Swiss Financial Market Infrastructure Act resulted in higher costs, leading to a 4.4% decline in EBIT to CHF 66.2 million.
In the Securities Services business area, assets in the securities custody business rose by 8.0% to CHF 3,315 billion. Operating income was CHF 375.4 million, an increase of 6.8% year-on-year adjusted for the non-recurring effect from a property sold in 2016. Investments in new services (trade repository, advanced settlement and tax services) led to a 7.3% rise in operating expenses and a decline in EBIT to CHF 40.3 million (adjusted -9.6%, unadjusted -42.8%).
The Financial Information business area again increased its profitability, posting EBIT of CHF 64.8 million (+142.9%) in the year under review. This is primarily attributed to rigorous cost discipline, a reorganization in France and growth in financial income. Operating income declined slightly by 0.6% to CHF 400.1 million. Despite sharply rising demand for tax and risk data, the potential of further regulatory services will only be exploited in 2018 due to the delayed start of key market regulations (MiFID II and PRIIPs regulation).
In Payment Services, operating income rose by 12.3% to CHF 993.8 million due to greater transaction volumes, and despite continued high pressure on margins. In processing for banks, the number of card transactions was up 9.2% to 3,997.9 million and the acquiring turnover increased 17.6% to CHF 88.7 billion. Operating expenses were 14.6% higher due to two strategic purchases, which are paving the way for the successful further development of the card business. Together with the additional expenses for the SIX participation in Twint AG, this resulted in a decline of 37.1% in EBIT to CHF 57.7 million.
Based on the good result and excellent liquidity and capital situation, an ordinary dividend of CHF 7.00 per share (previous year: CHF 7.30) will be proposed to the Annual General Meeting. This represents a total of CHF 136.7 million. The lower dividend is due to the slight decline in Group net profit.
Strategic realignment for a successful future
In November 2017, almost ten years after SIX was founded, the Board of Directors decided to make strategic and organizational changes to ensure the business is well-positioned for the rapidly changing market in which it operates. This strategic realignment focuses on the needs of SIX clients, shareholders and the requirements of the Swiss financial center. SIX will focus consistently on infrastructure services for the securities business, payment transactions and financial information. SIX is retaining its successful ‘user owned, user governed’ model and existing shareholder structure. SIX also welcomed PostFinance as a new shareholder in January 2018.
The realignment has also seen SIX bundle its services in the securities business in order to be able to offer all services related to trading, settlement and safekeeping of securities from a single source. The services provided for the Swiss payment system – interbank payments, connecting to the SEPA region, processing card-based and mobile payments for banks, operating ATMs, and the e-bill area – are also being brought together. SIX will separate the card processing business, which includes merchant acquiring and international card processing, from the core organization and take it forward within the context of a strategic partnership.
SIX is aiming to globally expand its leading position in the data business – particularly reference data. A Group-wide innovation unit is being planned as part of the strategic realignment, with the aim of further strengthening the innovation capacity of SIX. This also helps to strengthen the innovation collaboration with the banks in the area of infrastructure. SIX will also be developing services with individual banking groups so that it can meet specific user requirements in a more targeted way. In order to promote innovations in the Swiss financial center and collaborate more closely with start-ups and fintechs, SIX is also establishing a CHF 50 million venture fund.
The organizational changes will come into effect in April.
|Key figures SIX||Actual||Prior year|
|in mCHF||Dec 2017||Dec 2016||Act / Py (%)|
|Total operatig income||Total operatig income1||1'944.6||1'838.6||5.8|
|Total operating expenses||Total operating expenses||1'664.0||1'551.5||7.3|
|Net financial result||15.8||10.4||52.7|
|EBIT margin (in %)||EBIT margin (in %)||14.0%||16.2%||-13.1|
|Group net profit||Group net profit1||207.2||221.1||-6.2|
|Cash flow statement|
|Cash flow from operating activities||-110.3||953.2||-111.6|
|Cash flow from investing activities||-254.2||-93.7||171.4|
|Cash flow from financing activities||-142.0||-157.3||-9.7|
|Balance sheet as at 31/12|
|Return on equity2 (in %, average)||7.9%||9.0%||-12.3|
|Equity ratio3 (in %, average)||80.0%||76.7%||4.3|
|Operating key figures|
|Workforce as at 31/12 (full-time equivalents)||3'755.0||3'807.1||-1.4|
|Workforce as at 31/12 (headcount)||3'963||4'020||-1.4|
|Stock exchange trading volume (in bnCHF)||1'346.0||1'279.3||5.2|
|Deposit volume (in mCHF)||3'315'113||3'070'889||8.0|
|Number of financial instruments (in m)||27.3||23.7||15.4|
|Acquiring turnover (in mCHF)||88'658.4||75'407.9||17.6|
|Shareholders' key figures|
|Dividend per share (in CHF)||7.00||7.30||-4.1|
|Payout ratio (in %)||66.2%||64.6%||2.4|
|Equity per share (in CHF)||141.48||135.05||4.8|
|Earnings per share (in CHF)||10.91||11.66||-6.4|
|Segment information||Actual||Prior year|
|in mCHF||Dec 2017||Dec 2016||Act / Py (%)|
|Corporate and elimination||-462.6||-420.3||10.1|
|Total operating income||1'944.6||1'838.6||5.8|
|Corporate and elimination||-480.2||-445.5||7.8|
|Total operating expenses||1'664.0||1'551.5||7.3|
|Earnings before interest and tax (EBIT)|
Further information can be found in the 2017 annual report of SIX.
If you have any questions, please do not hesitate to contact Jürg Schneider.