Euronext, the leading European capital market infrastructure, released its new three-year strategic plan, “Innovate for Growth 2027”.

“Innovate for Growth 2027” sets out the Group’s ambition to leverage Euronext’s presence on the entire capital markets value chain in Europe to accelerate growth through innovation and efficiency. Euronext announces an updated capital allocation policy with a focus on shareholders’ returns and strategic flexibility. In line with this new capital allocation policy, Euronext will launch a €300 million maximum share repurchase programme on 11 November 2024.

Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext, said:

”Euronext today is fundamentally different from Euronext in 2020. And, for the past four years, Euronext has profoundly transformed capital markets in Europe. We have achieved our “Growth for Impact 2024” targets a full quarter in advance, thanks to strong integration capabilities, solid organic growth and continuous cost discipline. Euronext now covers the entire capital markets value chain in Europe, with a global outreach. We are fully equipped to take advantage of tailwinds and capture opportunities on both volume and non-volume businesses.

“Innovate for Growth 2027” frames Euronext’s potential for the acceleration of our growth.

Our strategy relies on three priorities: (i) accelerate growth in non-volume business, (ii) expand the FICC1 trading and clearing franchise and (iii) build upon our leadership in trading. Our strategy will provide a stronger value proposition for investors, issuers and market participants globally.

ESG will continue to be embedded in all our businesses, and we will scale up our ESG ambition, with a Net Zero commitment to be set by 2027.

We have consolidated and offered best-in-class technology across European capital markets. Now, we will enhance our operational excellence and innovation capabilities through AI.

This plan is an inflection point for Euronext towards faster organic growth. Our financial guidance reflects our ambition to accelerate our growth and invest to seize future opportunities. Euronext’s organic revenue growth is expected to be above 5% on average per year between 2023 and 2027. Adjusted EBITDA growth is expected to be above 5% on average per year between 2023 and 2027. We will keep a strong focus on costs and will continue to invest for future growth.

The Group will continue to execute external growth opportunities, in line with its investment criteria of ROCE above WACC in years 3 to 5. We are announcing today an updated capital allocation policy with attractive returns for shareholders and strategic flexibility.

By 2027, Euronext will be larger, stronger and more diversified. Our leadership will be extended to new activities and asset classes in Europe. The Group will be positioned as the unique and most efficient gateway to European capital markets for listing, trading, clearing, settlement and custody. By 2027, Euronext will be the undisputed backbone of the European Savings and Investments Union.”

• 2027 financial targets:

– Revenue and income is expected to grow above 5% CAGR2023-2027E;

– Adjusted EBITDA is expected to grow above 5% CAGR2023-2027E;

– CAPEX is expected to be between 4% to 6% of total revenue over the period.

• Updated capital allocation principles:

– Euronext will invest to enhance growth and strengthen its market position, and to sustain a strong cash flow generation profile;

– Euronext will maintain a strong balance sheet and targets a medium-term leverage ratio of 1.0x-2.0x net debt to adjusted EBITDA, with flexibility to pursue value-accretive M&A. Euronext will preserve an investment grade rating by S&P of at least BBB;

– Euronext will maintain a dividend pay-out at 50% of reported net income;

– Euronext will continue to pursue value-accretive M&A with ROIC>WACC in years 3 to 5, to reinforce and diversify its profile;

– Euronext will introduce a flexible approach to special returns, including share buybacks. Special returns will be periodically assessed considering Euronext’s leverage, market developments and strategic opportunities;

– In line with its updated capital allocation policy, Euronext today announces the launch of a share buyback programme of a maximum of €300 million (representing around 3.0% of Euronext’s outstanding shares), starting on 11 November 2024 for a maximum duration of 12 months. This programme is enabled by Euronext’s strong cash generation capabilities and demonstrates Euronext’s rigorous capital allocation strategy. This programme is not expected to change Euronext’s credit rating.

•  “Innovate for Growth 2027” strategic priorities:

– Accelerate growth in non-volume business;

– Expand the fixed income, currencies and commodities (FICC) trading and clearing franchise;

– Build upon our leadership in trading.

• Transversal enablers of Euronext’s superior growth:

– Empower sustainable finance through ambitious ESG commitments;

– Enhance operational excellence, enabled by artificial intelligence and the scalability of Euronext’s model;

– Deliver value-creative M&A through external growth opportunities, in line with Euronext’s disciplined investment criteria.

• New reporting framework

In order to align with the evolved business structure and to facilitate the analysis of performance, Euronext will introduce a new, simplified revenue presentation. From Q1 2025, consolidated revenue will be broken down into the following categories, to distinguish non-volume and volume-related revenue:

• Non-volume related revenue and income

– Capital markets and data solutions;

– Securities services;

– Net treasury income;

• Volume-related revenue

– Equity markets;

– Fixed income, currencies and commodities (FICC) markets.

Source: Euronext

Euronext publishes Q3 2024 results

In Q3 2024, Euronext delivered a strong performance, driven by a diversified business model, the successful expansion of Euronext Clearing and continued cost discipline. Euronext reached its “Growth for Impact 2024” strategic plan targets one full quarter in advance.

Euronext, the leading pan-European market infrastructure, publishes its results for the third quarter 2024.

• Q3 2024 revenue and income was up +10.0% at €396.3 million:
  • Strong performance of non-volume related revenue representing 58% of total revenueand income (compared to 60% in Q3 2023) and covering 153% of underlying operating expenses, excluding D&A^[1] (vs. 148% in Q3 2023):
    • Custody and Settlement revenue grew to €63.1 million (+7.1%), driven by higher assets under custody, dynamic settlement activity and continued double digit growth of value-added services;
    • Advanced Data Services revenue grew to €61.2 million (+10.4%), driven by continued demand for fixed-income and power trading data, dynamic non-professional usage and audit fees. It also represents a full quarter contribution of GRSS;
    • Listing revenue grew to €56.4 million (+3.2%), reflecting continued strong performance of corporate services and debt listing. Euronext recorded 13 new equity listings and remained the leading venue for equity listings in Europe;
    • Technology Solutions reported €25.7 million of revenue (-6.5%), due to the termination of Borsa Italiana legacy services in March 2024 following the migration to Optiq;
  • Trading revenue grew to €136.9 million (+15.7%), driven by record results in fixed income and FX trading and solid growth in cash and power trading;
  • Clearing revenue grew to €35.2 million (+19.3%), powered by the expansion of Euronext Clearing to Euronext’s cash markets, and dynamic fixed income and commodities clearing. Net treasury income for Euronext Clearing was at €13.5 million (-1.7%). Increase in collateral following the financial derivatives clearing migration on 9 September and higher return on cash held was offset by client portfolio rebalancing on repo clearing and by the introduction of the VaR-based margin methodology in Q4 2023;
• Underlying operating expenses excluding D&A¹ were €150.5 million (+2.7%). Continued cost discipline and the positive impact of seasonality on recurring expenses offset the cost of growth investments. Euronext upgrades its underlying operating cost guidance for full year 2024 to €620 million.
• Adjusted EBITDA¹ was €245.8 million (+15.1%) and adjusted EBITDA margin was 62.0% (+2.7pts).
• Adjusted net income¹ was €180.8 million (+23.4%) and adjusted EPS was €1.74 (+26.1%), positively impacted by high results from equity investments.
• Reported net income was €159.5 million (-4.2%), reflecting the negative comparison base related to the €41.6 million capital gain received in Q3 2023 for the disposal of Euronext’s 11.1% stake in LCH SA.
• Net debt to EBITDA^[2] was at 1.5x at the end of September 2024.

• Completion of the Borsa Italiana Group integration and more delivered synergies than planned
  • €121 million of cumulated run-rate annual EBITDA synergies were achieved at end of September 2024, above the €115 million guidance, and twice the amount targeted at the moment of the Borsa Italiana Group acquisition in April 2021. €37 million run-rate annual EBITDA synergies were delivered in Q3 2024, mainly related to the termination of the LCH SA clearing contract and the successful migration of its derivatives markets to Euronext Clearing in September 2024.
  • €110.8 million cumulated implementation costs have been incurred since the acquisition of the Borsa Italiana Group, of which €1.7 million were incurred during Q3 2024. This is €48.2 million lower than the €160 million guidance announced in November 2021.
• “Growth for Impact 2024” financial targets achieved 

Euronext achieved its “Growth for Impact 2024” financial guidance one full quarter in advance. Euronext revenue reached +4.1% CAGR_{2020PF-2024LTM}, compared to +3% to +4% CAGR_2020PF-2024e targeted. Despite inflation, Euronext continued its trademark cost discipline. Euronext reached adjusted EBITDA growth of +5.3% CAGR_{2020PF-2024LTM}, compared to +5% to +6% CAGR_2020PF-2024e targeted.

• Continued bolt-on acquisitions to diversify Euronext’s business model
  • In September 2024, Euronext acquired Substantive Research, an industry-leading pioneer providing in-depth transparency on product and pricing comparison for investment research spend, market data and investment research content.
  • In October 2024, Euronext acquired substantially all the business of the Acupay Group, a global leader in financial reporting, corporate actions, cross-border tax relief, and securities processing. The acquisition further expands Euronext Securities services offering to investors and issuers and also strengthens Euronext’s non-volume related revenue streams.

Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext, said:

“Our Q3 2024 results demonstrate our ability to generate strong organic growth. We delivered double-digit topline growth thanks to the excellent performance of our diversified trading business, our successful clearing expansion in Europe and solid performance of non-volume related activities. We maintained strong cost discipline on recurring expenses and we continued to invest in growth. Consequently, we grew our adjusted EBITDA by +15.1% compared to last year, to €245.8 million. Supported by strong results from equity investments, we grew our adjusted net income to a  record level of €180.8 million. Our adjusted EPS grew by +26.1% to €1.74.

Once again, we have demonstrated exceptional execution capabilities. We have finalized the migration of our derivatives markets to Euronext Clearing, the final step of the Borsa Italiana Group integration. We have over performed the €115 million guidance for the total run-rate EBITDA synergies related to the Borsa Italiana Group acquisition to reach €121 million. This is twice the amount targeted at the closing of the transaction in April 2021. We achieved more synergies than targeted, and spent less costs for the integration than anticipated.

Thanks to our strong performance, we reached our “Growth for Impact 2024” financial targets a full quarter in advance. Euronext is now present on the entire trading value chain, from pre-listing to post trade and solutions. We are perfectly positioned to accelerate growth, through innovation and efficiency. Our integrated clearing capabilities enable us to bring a set of innovative products to the market, some of which are already live. Alongside these organic initiatives, we continued to strengthen our non-volume related business with strategic bolt-on acquisitions.

I am looking forward to share how we will innovate for growth over the next three years at our investor day on 8 November 2024.”

The full results can be read here

Source: Euronext