Hello, welcome to the Euronext Q4 and full year 2019 results call. My name is Mahan, and I'll be your coordinator for today's event. Please note that for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions later on the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I'll now hand over to your host, Stéphane Boujnah, CEO, to begin today's conference. Thank you.
Good morning, everybody, and thank you for joining us this morning for the Euronext fourth quarter and full year 2019 results conference call and webcast. I'm Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext, and I will start with the highlights of 2019. Giorgio Modica, Euronext CFO, will then develop the main business and financial highlights for the fourth quarter. We will then open up for questions together with Anthony Attia, Member of the Managing Board of Euronext. 2019 was a major transformation year for Euronext, reaching major milestones, strategic milestones, financial milestones, and operating milestones. We released a new strategic plan, Let's Grow Together 2022. We completed our largest acquisition since the IPO in 2000. We achieved the deployment of Optiq to European markets. All in all, Euronext entered into its new strategic cycle in 2019.
We released this new strategic plan, Let's Grow Together 2022, to set the path for Euronext to achieve its key goal of building the leading pan-European market infrastructure, connecting local economies in Europe to global capital markets. Clearly, innovation and sustainable finance are at the heart of this strategy. Clearly, Euronext will pursue the development of innovation solutions, innovative services to enable the group to capture new opportunities and to proactively address the challenges of the industry. We will also support and accelerate, in a significant way, the transition towards the sustainable growth and sustainable finance. We are committing to pursue our growth strategy through high value-added acquisitions aimed at diversifying and strengthening the business profile of the company. Second, we continued in 2019 to diversify our revenue profile with clear success throughout the year.
We expanded our federal model and our post-trade franchise with the acquisition of Oslo Børs VPS, our largest acquisition since the IPO. We entered into a new asset class with power trading through the acquisition of Nord Pool, also further widening our Nordics footprint. We also invested in innovation solutions such as tokenization platforms with Tokeny and FundData with OPCVM360. Lastly, we completed the deployment of the Optiq trading platform, which is a real key milestone in our technology development. Euronext has become a technology leader in our industry. Euronext Dublin cash market smoothly migrated early 2019 to this platform. Derivatives markets migrated in late 2019, providing our derivative tradings members with 10-fold reduction in latency and unlimited overall capacity. The last milestone will be reached this year with the planned migration of Oslo Børs markets to Optiq. Moving now to slide five on the financial performance.
Euronext reported a very strong performance throughout 2019, with double-digit growth in revenue, double-digit growth in EBITDA, and double-digit growth in adjusted EPS. Revenues increased in 2019 by EUR 64.1 million, up +10.4% to EUR 679.1 million. This strong performance reflects solid core business dynamics and successful diversification. First, our diversification strategy continued to pay off with non-volume related revenue accounting now for 50% of group revenues, thanks to our strengthened custody and settlement business. Now this non-volume related revenue covers 122% of operating costs. A fundamental step towards further diversification of our top line has been reached in the course of 2019. Our core business proved also its resilience against declining volume that were partially offset by strong organic performance of our listing and advanced data services businesses.
Corporate services businesses reported double-digit growth and the listing business saw improving market conditions during the second half of the year. The indices part of advanced data services performed well, offsetting a downside trend on core market data. Finally, Oslo Børs VPS contributed EUR 57.1 million for 2019. At the same time, we continued to deliver on cost control as we outperformed on our 2019 cost guidance. We also deliver EUR 7.8 million of run rate cost synergies at the end of the year in Euronext Dublin. The financial targets for Dublin have been reached much ahead of initial targets. This overall cost discipline has translated into group EBITDA growing faster than revenue by 12.8% in 2019 to EUR 399.4 million, leading to a combined EBITDA margin of 58.8%, 2.8 points higher than last year. Even on a like-for-like basis, the EBITDA margin reached 60.4%.
Overall, the strong operating performance over the year resulted in a 10.9% increase in adjusted EPS at EUR 3.9 per share on a reported basis. 2019 net income was up 2.8% at EUR 222 million. This number was impacted by exceptional items like restructuring costs, the impairments of some revaluations, and incremental costs related to buy options and deferred payments related to the over-performance of some businesses affected by announced commitments. Lastly, in accordance with the Euronext dividend policy, a dividend of EUR 1.59 per share will be proposed to shareholders. That represents a EUR 0.05 increase from last year, despite various non-recurring costs this year. This dividend represents 50% of the reported net income, and as I said, will be proposed to the shareholders meeting on the May 14th.
Moving to slide six, 2020 will be a year of transformation as Euronext will actively work on achieving its transformation ambitions and progress on the integration of Oslo Børs VPS. You remember that last year, we expected and we guided the market to a low single-digit growth in operating expenses, excluding D&A. Thanks to our continued discipline cost, we clearly outperformed on this cost target release in October last year. As announced at our Investor Day, we now expect to incur non-recurring costs related to the integration of Oslo Børs VPS and related to some internal digitalization projects that are very important to build the Euronext of tomorrow. As a result, and before the delivery of the first synergies, in 2021, we expect operating costs, excluding D&A, to temporarily increase mid-single digit in 2020 compared to the annualized second half of 2019 cost base.
I hand over to Giorgio Modica for the detailed presentation of our fourth quarter.
Thank you, Stéphane, and good morning, everyone. First of all, I would like you to remind that for the fourth quarter of 2019, the organic performance of the group excludes Oslo Børs VPS, Commcise, and OPCVM360, and any costs incurred by Euronext for their integration. In the fourth quarter of 2019, Euronext consolidated revenues reached EUR 185.7 million with an increase of EUR 28.4 million or 18.1%. These results were driven by the resiliency of our core business, the continued traction of corporate services, and the contribution of Oslo Børs VPS for EUR 27.1 million and Commcise for EUR 1.3 million. Now, looking at the different business lines. Listing revenue grew 23.7% to EUR 36.5 million, driven by the double-digit growth of corporate service, continued dynamic environment in listing, and the consolidation of Oslo Børs VPS. Trading businesses this quarter were generally characterized by lower volume and stronger yields.
Revenue was slightly up 1.4% to EUR 70.8 million, reflecting a strong cash market share above 70%, a stronger yield across all asset classes, partially offsetting softer volumes and the consolidation of Oslo Børs. Advanced data services reported a good quarter up 12.5% to EUR 33.5 million, primarily driven by the integration of Oslo Børs VPS and the good performance of index activity, particularly on ESG product and structured products. Post Trade Activity revenue nearly doubled to EUR 33.4 million as a result of the consolidation of VPS, increased activity in both custody and settlement, and higher clearing revenues. As Stéphane already mentioned, in the fourth quarter of 2019, non-volume related revenue accounted for 52% of total group revenue, reflecting notably the increased proportion of services, custody, and settlement in our revenue mix. Lastly, these non-volume related revenue covered 119% of our operating costs, excluding D&A, compared to 101% last year.
Moving to slide nine for listings. The growth engine this quarter were corporate services and Oslo Børs. Revenue grew 23.7% to EUR 36.5 million. In particular, corporate services continued to report strong organic growth of more than 45% versus last year, thanks to increased commercial traction. Combined with the activities of Oslo Børs VPS, our corporate services franchise reported EUR 7.6 million of revenues this quarter. With regard to equity listings, we saw the continuation of a positive Q3 trend with 15 new listings and EUR 3.3 billion rate. Euronext welcomed three domestic large cap listings this quarter, notably Française des Jeux in Paris, the second largest lottery in Europe and the fourth largest worldwide, as well as Verallia and the Nordic company, Tietoevry. In addition, we had 12 SME listings this quarter.
Thanks to this dynamic quarter for listing, Euronext ranked as the first exchange for listing in Europe in 2019 in terms of number of operation. Activity on the secondary market decreased compared to the fourth quarter of 2018, despite improved market condition reflecting lighter M&A activity compared to the record high last year. Our debt franchise reported strong growth, demonstrating our global leadership position in this market. Moving now to our trading business on the next slide, starting with cash trading. Cash trading revenue increased 0.7% to a total of EUR 53.2 million. On an organic basis, revenue decreased 4.5%, despite volume down 7.5%, thanks to improved revenue capture. ADV increased to EUR 8.4 billion, up 3.6%, resulting from the consolidation of Oslo Børs volumes. Combined market share was 70.9%, including Oslo, 4.8% higher than last year, and reached 71.2% like for like. We continued our active yield management.
Revenue capture was up to 0.53 basis point on an organic basis. The combined average fee with Oslo was at 0.49 basis point, slightly diluted by the higher share of reported deals in Oslo. Moving now to derivative trading. Derivative revenue was up 3.8% to EUR 11.9 million. Financial derivative volumes declined impacted by low volatility. Commodities volume increased double digits reflecting an improved agricultural physical market environment. Average revenue per lot increased 6.1% to EUR 0.30 per lot, reflecting enhanced revenue capture, partially offset by less favorable mix due to the growth of our equity futures. Lastly, on FX trading, revenue was up 4% to EUR 5.8 million thanks to improved yield management, while average daily volume decreased to 16.5 billion, impacted by the low volatility throughout the quarter. Moving to the next slide for our post-trade businesses. Revenues from post-trade activities increased 76.1% to EUR 33.4 million.
Clearing revenue was up 8% to EUR 14.5 million, resulting from higher commodity volumes, higher treasury income offsetting lower overall derivative volumes. Custody and settlement revenues accounted for EUR 18.8 million, resulting from the consolidation of VPS activities for EUR 13.2 million and increased settlement activity at Interbolsa. Moving to slide 12, starting with advanced data services, revenue was up 12.5% to EUR 33.5 million in the fourth quarter of last year. Oslo Børs VPS data business contributed EUR 3.8 million. The growth of our indices franchise, notably on ESG product, offset a slight decrease in market data revenues. Proceeding now with investor services, revenue was EUR 1.6 million, supported by the development of the offering. We also reported a small contribution from Oslo Børs VPS activities for EUR 0.3 million.
Lastly, on technology solution, revenue was up 8.4% to EUR 9.9 million as a result of the good performance of security colocation services and hosted services and the consolidation of Oslo Børs VPS. Now, before commenting on EBITDA, net income, on slide 14, let me start with some consideration on the valuation one-off items of this quarter. Since IPO, we remain disciplined on the labeling of non-recurring items as exceptional. We book in the line exceptional only items that are clearly measurable income or expense that relate to clearly identifiable events, transaction, or specific project, which are non-recurring by their size or by their nature. This means that, as discussed several times, all other non-recurring items are booked above or below EBITDA, depending on where they belong to.
Now, moving to the non-recurring items this quarter, within OpEx, we booked EUR 3.2 million, related to the success fee for the acquisition of Nord Pool and to share-based payments. As mentioned in November, we start to incur integration costs for Oslo Børs VPS for EUR 1.2 million this quarter. In exceptional items, we usually include costs related to transformational deals. This quarter, we reported EUR 5.8 million related to the integration of Oslo Børs VPS, namely restructuring costs and early termination of contracts, and EUR 2.4 million of M&A and other restructuring costs. Moving to financing expense, this quarter we had EUR 13.3 million of revaluation of buy option and deferred payments for some of our corporate service businesses, reflecting a stronger than expected performance. As mentioned by Stéphane earlier, the integration of Oslo Børs VPS and internal digitalization project will generate no recurring costs throughout 2020, before delivering synergies in 2021.
Moving to the next slide for the highlight of the fourth quarter, starting with the EBITDA bridge. Euronext EBITDA grew faster than revenue, 19.8% to EUR 104.1 million this quarter, driven by the continued cost discipline and the consolidation of our recent acquisition. Overall, EBITDA margin increased to 56% in the fourth quarter of 2019, up 0.8 points. On a like-for-like basis, the EBITDA margin was 57.9% this quarter, up 2.7 points. From a revenue perspective, revenue at constant perimeter remained stable despite low trading volume compared to last year, while Oslo Børs VPS Commcise, another non-organic element, contributed EUR 28.4 million. Looking at cost, organic operating expenses, excluding D&A, decreased EUR 4.2 million. This reflects both the adoption of IFRS 16 from the beginning of 2019 for around EUR 2.7 million and the continued cost optimization for around EUR 1.5 million.
With respect to the integration of Euronext Dublin, out of the targeted EUR 8 million of expected run rate synergies, EUR 7.8 million have been already delivered as of December 2019. We consolidated EUR 15.5 million of operating costs, excluding D&A, from Oslo Børs VPS, Commcise, and OPCVM360, another integration cost this quarter. Moving to the net income bridge. Net income decreased 1.2% to EUR 49 million this quarter, resulting from the following elements. D&A mechanically increased due to the adoption of IFRS 16, and were also impacted by Oslo Børs VPS PPA, accounting for EUR 2.8 million. Exceptional items were higher this quarter compared to the fourth quarter of 2018, resulting primarily from restructuring costs at Oslo Børs VPS and advisory costs. Net financing expense increased in this quarter due mainly to the revaluation of buy option and deferred payments related to corporate service entities.
Lastly, income tax rate increased, reflecting non-deductible expenses related to the recognition of the earn-out liabilities I just mentioned. Going forward, we anticipate that the combined tax rate of the group shall go below 30% in 2020. Adjusted for PPA and exceptional items, the adjusted net income this quarter was up 26.6% to EUR 77.3 million, translating into an adjusted EPS of EUR 1.11 this quarter. To conclude with financial, over the quarter, 75.7% of EBITDA was converted into net operating cash flow post-tax, compared to 63.7% last year. Our net debt stands slightly higher than EUR 1 billion, representing a net leverage of 1.5x pro forma. Looking at the bottom of the slide, as of the end of 2019, our liquidity position remains strong, close to EUR 770 million, including the undrawn RCF of EUR 400 million. I now hand back the floor to Stéphane Boujnah.
Thank you, Giorgio. As you have all noticed it, we reported a strong quarter and overall a strong year. This is the result, you have understood, of the consolidation of our last acquisitions. The result also of solid core business' dynamics and the result of continued cost management. We are now available for your questions with Anthony Attia, Managing Board Member, and Giorgio Modica.
Thank you. If you'd like to ask a question, please press star one on your telephone keypad. Ensure that your line remains unmuted locally. I'll then prompt you when to ask your question. That is star one. We already have a few questions, the first one being from the line of Kyle Voigt from KBW. Please go ahead.
Hi. Good morning. Three questions from me. First is just on the 2020 expense guidance. Can you frame how many non-recurring costs are embedded within that guidance? I'm just trying to get a sense of what the guide would be excluding those kind of non-recurring items. Second question, just on the Nord Pool business. I appreciate the revenue disclosure, is there anything you can share on the profitability or the margin profile of that business? The third question is just related to the ESMA consultation with respect to the transparency of equities and the double volume cap that was launched a couple of weeks ago. It seems like the regulators are trying to find a more effective way to push more of that volume onto lit venues. What is your level of confidence that ESMA will be eventually successful in doing that?
I guess, can you try to talk to how big of an opportunity you think that is for Euronext over the coming years? Thank you.
Okay. I will answer your third question on the ESMA consultation, and Giorgio will answer your first question on expense guidance and your second question on Nord Pool profitability. On the ESMA consultation, we have a very close dialogue and constructive discussions with all the regulatory authorities to make sure that we achieve the collective objective of delivering the initial intent of MiFID II. The MiFID II core objective was to make capital markets more transparent and to migrate more volumes from dark markets to lit markets. For all sorts of reasons, this core objective was not achieved, because several tools that were conceived and designed initially within the MiFID II architecture as pure buffers of flexibility arrangement became genuine alternative trading prices and de facto quasi price formation locations.
ESMA is looking at the impact of these trends, is looking at ways to bring back the market architecture within the framework intended within MiFID II. We have a very constructive, transparent dialogue with ESMA in this respect. Over to you, Giorgio, on expense guidance and Nord Pool.
Yeah, absolutely. Let me start from the cost target. Let me elaborate a little bit on that. The starting point is the annualized second half. This is a good starting point because, as you know, there is a seasonality effect on the cost. To a certain extent, the one-off in the fourth quarter and the slight seasonality benefit in the third quarter compensate, so this provides a solid base for projection. Answering directly your question, I would say that pretty much all the increase of the cost we're expecting for next year is non-recurring, and this ties very well with the guidance we provide during the investor day, saying that we would have invested around EUR 12 million in digitalization projects and EUR 18 million for the integration of Oslo Børs VPS. The + 5% is the translation into our P&L of that guideline.
Answering to your second question, when it comes to Nord Pool, the EBITDA margin that you should take into consideration for your assessment is around 25%.
Great. Thank you.
The next question in the queue comes from the line of Philip Middleton from Bank of America. Please go ahead.
Yes. Good morning. Thank you for taking the question. Following on from Giorgio's comments on 2020 guidance, where you're saying basically almost all of the uptick apart from consolidation in Nord Pool will be one-off. Does that mean that we should effectively start 2021, assuming a similar level as H2 run rate for 2019? Should we assume all that, what you've now called to be 5%, you previously called mid-single digits, just drops away, and we should just assume a little bit of inflation from then? In other words, we should assume 2021 costs look significantly lower than 2020.
In this respect, we felt that giving a guidance for 2020 was really important, having in mind that the target for the plan are 2022. Providing another intermediate point of 2021 cost base is something that we're not ready to do at the moment. What I can say, a bit repeating myself, is that the increase of cost is temporary, is related to projects that will be closed by the end of next year. There is going to be, in 2021, another part of integration cost and project cost, but we will start having the benefits of the synergies. I believe that this is what we can say at the moment.
Okay. Thank you.
The next question in the queue comes from the line of Arnaud Giblat from Exane. Please go ahead.
Yeah. Good morning. I've got two questions, please. Could you perhaps provide us an update on BME? We're hearing everything and its opposite in the press. I'm wondering what your stance is there. What is an acceptable level of return on invested capital? Maybe what is your view on WACC? I'm just wondering if that may have changed. Secondly, on Nord Pool, as I understand, it only does spot. Is there an opportunity for you to introduce futures on that exchange? Secondly, what sort of profitability could you be aiming for in the long term as opposed to synergies? Thank you.
I'll take your question on BME, and Giorgio will take your questions on Nord Pool. BME, the situation is very simple. We are monitoring all the developments around the current BME situation. We are analyzing all the relevant parameters that are driving a possible decision on this asset. These monitoring efforts and these analyses are going to lead, in due course, to a decision to make an offer or not to make an offer on BME. Over to you on Nord Pool.
Yeah. When it comes to Nord Pool, a few elements. Clearly, the activity today combines of two element. One is spot trading, and the other one is the market coupling. You are correct. Today, the main activity is the spot trading, and we see a possibility to further develop the activity into the derivatives, which will be part of our plan together with the expansion in Europe of that activity. When it comes to longer term EBITDA target objective, so far, in terms of target for you to make your analysis, we believe that 25% is a good percentage.
Can I just follow up quickly on BME? When you are talking about parameters, will you consider revenue synergies as a potential parameter in your financial analysis before making a bid?
We are analyzing all the relevant parameters to make a large investment decision that includes definitely cost synergies, revenue synergies, cost of capital, and all the other circumstances that any investor would analyze, including all the moving pieces that have evolved since the SIX offer was announced and all the developments that are relevant in this type of situations, including all sorts of strategic analysis that a company like Euronext has to do, one of them being the best allocation of the capital of our shareholders.
Thank you.
Our next question comes from the line of Ian White from Autonomous. Please go ahead.
Hi. Morning. Thanks for the call, and thanks for taking my questions. I just wanted to follow up actually on Arnaud's question around return targets. Previously, I think you've said, in terms of your return on capital employed being in excess of WACC, that the relevant figures for WACC are sort of 8%-9%. Is that still the correct hurdle for M&A today? I'm conscious that the group's own cost of debt and cost of equity have likely fallen over the last year or so, and since you sort of gave that 8%-9% range, I think sort of early last year. That's question one, please.
On question two, we've seen some commentary from at least one large sell-side dealer suggesting that they are looking to reduce the number of multi-dealer FX platforms that they are prepared to connect to and just focus on the larger players in the sector. If that were to become a more widespread trend, do you see that as a threat or an opportunity for your own FX business, please? Thank you.
Answer the Forex business question. Giorgio will answer the question on possible adjustments to the return on capital employed self-imposed discipline. On the Forex front, after the acquisition of FastMatch, now Euronext FX, we have developed an expertise within the Euronext Group on the Forex front. We have very close dialogues with all the players of the value chain in the Forex trading world. We do know that some of them are considering reorganizing the way they process their electronic flows. We believe that the solution for growth is in an intimate dialogue in a niche positioning of our offering. We believe that there are opportunities to grow for a player like Euronext in the Forex market. We are confident that the initiatives we have taken in other geographies, including the launch of our services in Singapore, is going to diversify our revenue mix over there.
We are absolutely aware that the world of Forex is changing. We believe that being a cutting-edge technology operator is a key differentiator. It's not the only solution, but it's really a necessary condition to be relevant and to be a strong partner to the relevant players in this industry. We feel that there are opportunities because, exactly as you say, the sector is moving.
Coming to your question on WACC, I believe you are spot on in the sense that clearly we are started an internal thinking to assess whether what seems to be a new normal in terms of cost of debts will translate into a reduction of our threshold. This internal thinking is not over, and it involves ourselves, the managing board, and the supervisory board. What I can tell you at the moment is that the threshold is going to be lower than the 8%-9%. I am not in a position today to update the target, but clearly, we will need to reflect the reality where this quarter we paid for EUR 1 billion of debt, EUR 1.7 million pre-tax of interest.
In a short sentence, we will remain disciplined, so you should not expecting the threshold to reduce dramatically, but clearly, a reduction of the target to 8% to 9% is something that we are considering.
Okay. That's very helpful. Thank you.
The next question in the queue comes from the line of Michael Werner from UBS. Please go ahead.
Thank you. Three questions, please. First, on the listing fees that we saw in the fourth quarter, we saw quite an uptick in terms of the other listing fees, about EUR 4.3 million. I was just wondering what was reflected there. Second, with regards to the cost guidance for 2020, you indicate that some of the spend in 2020 will lead to cost savings as we look out to 2021. Is this the case where we can actually think potentially, again, excluding other project costs and other integration costs in 2021, that the run rate, the operating cost base will actually decline in 2021 from 2020, even excluding the non-recurring expenses in 2020? Finally, I read an interview yesterday from you, Stéphane, indicating that you were interested in Borsa Italiana, should it be put up for sale.
I just wanted to confirm that that was the case and get any thoughts you might have on that. Thank you.
Take your question on Borsa Italiana, and Giorgio will take your question on listing fees and your other question on run rate cost savings. On Borsa Italiana, I want to be super clear because there are two components in my answer. Sorry for repeating what was not addressed properly, probably in some media. Borsa Italiana is owned by London Stock Exchange Group and is not for sale. Borsa Italiana is owned by London Stock Exchange Group, is not for sale. Borsa Italiana is owned by London Stock Exchange Group and is not for sale, and there is no intent whatsoever indicated by the management of London Stock Exchange Group that they are contemplating any sale. There is no Borsa Italiana situation for the moment.
Number 2, if you ask me that in the event, which is not foreseeable for the moment, that this assumption was to change, if there were to be a sale process, an intent to enter into a dialogue for disposal, whatever that would change this assumption, then for sure, Euronext will analyze carefully the Borsa Italiana situation as such, assuming that it exists, because again, for the moment, it does not exist in any way whatsoever. Assuming that it exists, we will look at it, because the purpose, the mandate, the DNA of Euronext is to power Pan-European capital markets to finance the real economy, is to build the leading Pan-European market infrastructure. Borsa Italiana is a great company with great teams, with great diversified businesses.
If there is one decision, for sure, we believe that we would be one of the options that could make sense for the relevant stakeholders, including the shareholders, because we would have significant synergies, and we would know how to accommodate within the Euronext family, within our united in diversity model, such a great asset. For the moment, and sorry for repeating myself because it seems to be unheard, there is no situation around Borsa Italiana, and there is no indication that London Stock Exchange Group has any intention whatsoever to dispose of or to sell this asset. There is no situation to be commented beyond theoretical, speculative comments.
Yeah. I will take your question on cost and give the floor to Anthony on your listing question. When it comes to cost, I can say a few things. First, cost will go down. This is a fact. This is a part of the target that we did put out in the market at the investor day. It is clear as well that the increased costs in 2020 are going to be a one-off. Unfortunately, today, I'm not in a position to provide an intermediate guideline in between the landing point of cost for 2020 and the objective of having a margin in excess of 60% in 2022. However, the message is clear: costs are set to go down and profitability will improve.
Good morning. This is Anthony. Your question was about the EUR 4.3 million of revenues qualified as others for the listing. It's mainly due to the centralization fees, which is a retail order centralization service that we offered for the French privatization of La Française des Jeux, which was one of our major operations in Q4.
Thank you.
The next question comes from the line of Haley Tam from Credit Suisse. Please go ahead.
Morning, gentlemen. Just two quick questions for me, please. On the corporate services adjustment, the EUR 13.3 million, I just wonder, can you remind us of the details of those buy options and deferred payments? I just wonder whether that is purely a backward-looking calculation or whether it's based on any future expectations for growth, and within that, whether there's any scope for further one-off charges here in the future. Second question. Given the Oslo Børs integration is now a little bit further underway, and I think last year you were very clear in terms of the cost synergies you were targeting. I just wondered whether there's any update on revenue synergy opportunities, perhaps bearing in mind the Nord Pool acquisition as well. Thank you.
Giorgio is going to answer your two questions on Nordic synergies and on the cost related to corporate services earn-out.
These EUR 13.3 million are specifically related to two companies. One is a company, iBabs, and the second one is InsiderLog. We are in the process of acquiring the 100% control of this company as we speak, and we are finalizing the computation of the purchase price. This is in the form of two elements. There is one element of earn-out, and there is one element of buyout. What you see in the fourth quarter of 2019 is nothing else than the adjustment based on the provision of the acquisition agreement based on the actual performance. To a certain extent, the 45% growth translates into a higher price that is booked through P&L, given the fact that it is related to a liability that we will need to book.
In short, no, this will not get any higher because the process is now complete and is based on actual results. The second element is that, clearly, this is related to actual performance and overperformance with respect to the business plan, and this is the reason why you have this impact in the fourth quarter of 2019.
Thank you.
Unfortunately, when it comes to giving further update with respect to revenues and cost targets, we are not in a position to provide an update.
Thank you.
The next question in the queue comes from the line of Ron Heydenrijk from ABN AMRO. Please go ahead.
Hi, good morning. A few questions left from my side. Giorgio, you just said on the EUR 13.3 million that this is a finalized process. Can we assume that the buyout of these minorities will be announced somewhere in the first quarter? Secondly, with regards to your cost guidance, and then specifically the internal digitization project, obviously you already gave some guidance on the total integration cost for Oslo Børs, can you also give the total cost for the internal digitization project, so beyond 2020? I think you said EUR 12 million for 2020, can you give some guidance beyond that? Secondly, on that point, should we assume similar kind of projects going forward beyond 2021, i.e., should we factor in some normalized number for off projects in our estimates?
Finally, I think you gave some tax guidance for this year that the 31% in the fourth quarter was driven by non-deductible items, but I missed your exact comment, so could you please repeat that? Thank you.
On the EUR 13.3 million, yes, it's a final number. We are getting the latest details. I believe we will communicate as long as this is finalized. The second comment is just to make sure, the EUR 12 million is not for 2020. The EUR 12 million is what we will spend in projects throughout the Let's Grow Together plan for improving process and digitalization. A part of the EUR 12 million are going to be in 2020.
Okay.
Did it answer your second question? When it comes to your third question, clearly, as you have seen, there are a number of costs this year which are not tax deductible, starting from the buy option and some exceptional items, which mean that while it reads 31%, in reality, the real underlying rate is in between 28% and 29%. Clearly below 30%, and next year should remain in that range or potentially be even lower. Clearly, this depends on how many non-deductible costs we will have next year, but if you are looking at the underlying rates, we are already below 30%, closer to 28%, 29% than 30%.
Thank you. That's very clear. If I may, one further question on the net financing cost. You reported EUR 14.2 million, of which EUR 13.3 million is one-off. This implies that normal net financing cost would only be EUR 0.9 million, versus expectations of EUR 2.8 million. I think that earlier you said that the interest cost in this quarter was EUR 1.7 million. Can you run us through the dynamics there? What is normal?
Yeah.
Where are we wrong as analysts? We all put forward EUR 2.8 million.
The point is, unfortunately, there are small elements into that line. There is something that is very difficult to predict for me and for you, which is the FX impact. This quarter, we're at EUR 14.2 million of financing cost. EUR 13.3 million is the revaluation of buy option. EUR 1.7 million is the overall cost of all the bonds, including the positive impact of the swap with it from fixed to floating on the first bond. The other elements are tiny elements that make the difference, and the biggest portion of those are FX adjustments.
Okay, that's clear. Thank you very much.
The next question comes from the line of Gurjit Kambo from JP Morgan. Please go ahead.
Hi. Good morning. Just a few questions. Firstly, on the market data revenue decrease, can you just explain what drove that decrease? Is it a drop-off in the regulatory data that's been acquired, or is there something else going on there? That's the first question. Secondly, on the foreign exchange side, are you still seeing the transition away from direct platforms to ECN? Is that shift still happening in the FX business? Finally, just on the yield management, I think you seem to have done a relatively good job in improving that. Just thinking about the cash side, is there more you can do at Oslo Børs in terms of enhancing the yield there? Thank you.
I will answer your Forex question, and Giorgio will answer your market data question and your cash trading question. On the Forex side, we do see opportunities. We do see upside, as I said a few minutes ago, where in the close dialogues we are having for the past two years with all the participants in this value chain. We do see an appetite for cutting-edge, over-performing electronic platforms. We are also seeing players revisiting the way they organize their full trading chain on Forex. We believe that there are opportunities for niches. We believe that you have to be super competitive on technology, that you have to be super close to your clients. We believe that there is a space for players like Euronext FX, provided that we further increase the relevance of our offers and the proximity with the clients.
Forex platforms are not commoditized and will find, and can find, a space to grow and develop, when you have the right pricing and the right offering, as we do with Euronext FX.
Moving to your question on market data. Here, there are two dynamics which are very clear. There is, on the one side, the pricing on the traditional part of the business, which is CPI-like, and attrition in terms of numbers of terminal, which is something common in the industry. On the other side, there is a new part of the business which is getting traction and getting stronger, which is related to the indices, and especially structured product and ESG indices. One, pretty much at the moment, offset the other. Clearly, what we're willing to do is strengthen the more growing part of the activity. Moving to your second question, clearly segmentation of client and pricing, and making sure that we can provide the best quality market is one of our top priorities.
Clearly, looking into further way to segment and extract more value and more market share from our market is something that we will continue to do. When it comes specifically to Oslo, those are a discussion that we will start having at the moment of migration, and we will consult with the Oslo clients to see how we can integrate those market into our own market in terms of pricing. It's a little bit too early to comment on that one. Clearly, this is something that is going to be related to the migration, and it's something that is going to be part of the consultation with the local and global clients operating on the Oslo markets.
Okay. Just to clarify, on the market data, on the traditional business, is this a drop-off in terminals, or is it like a drop-off post-MiFID II? You had a bounce, I guess, when MiFID II was introduced. Now, are you seeing some of that going away? Is that on the traditional side?
No. It's terminals.
Okay. Thank you.
The next question comes from the line of Martin Price from Jefferies. Please go ahead.
Good morning. Just two quick questions, please. The first is a follow-up on expenses. I was just wondering what level of exceptional costs you'd expect to incur this year, given the inclusion of most of the one-off items you talked about within OpEx. Secondly, on M&A, I was just wondering if you could remind me what you think is a prudent ceiling for group leverage on a short-term basis for the right acquisition opportunity. Thank you.
When it comes to target of cost, I believe that, honestly, you have sufficient element for your projection based on what we already discussed. We cannot provide you further comments. When it comes to leverage, the principle are quite clearly stated from S&P. When it comes to an A- rating, the maximum leverage we can get is 2.25x net debt to EBITDA, and clearly this needs to be considered with a grace period of 12, 18 months. Clearly, it's a different story if we need to push the rating to BBB+, but as far as we are concerned at the moment with the A-, 2.25 is the ceiling.
Understood. That's great. Thanks, Giorgio.
Okay, the next and last question comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead.
Hi. Morning. Thanks. Actually, my question was on WACC, which Giorgio has very eloquently already answered. I'll leave it there. Thank you.
We have no further questions in the queue. I'll hand back over to your host now.
Okay. Well, thank you very much for your time, and I wish you a good day.
Thank you.
Thank you for joining today's call. You may now disconnect your handsets.