My name is Kevin, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, later in the call, you will have the opportunity to ask questions. I would now like to hand over to your host, Stefan Buschner to begin today's conference. Thank you.
Good morning from Oslo, and thank you for joining us this morning for the Euronext Third Quarter 2019 results conference call and webcast. I'm Stephane Boussna, CEO and Chairman of the Managing Board of Euronext. And I will start with the highlights of this Q3 2019. Georgio Modica, Your Next CFO, will then further develop the main business and financial highlights of the quarter. We will then open for questions together with Antonia Atia, member of the Managing Board of Euronext.
In the Q3 of 2019, Euronext grew its revenue by 20.4 percent to 181,700,000 euros Euronext grew its EBITDA by 23 percent to €108,000,000 and Euronext grew its reported net income by 25.8 percent to €63,500,000 This performance was driven by a combination of organic growth, continued cost control and the consolidation of Ocebol's VPS. So first on the revenue side. Revenue increased in Q3 2019 by EUR 30,800,000 up plus 20.4 percent to €181,700,000 This performance reflects solid organic growth of our trading and services business and the consolidation of Oslo CBS. Our diversification strategy continued to pay off with the non volume related revenue accounting now for 52% of the group revenue, thanks to tripled custody and settlement revenue. And now these non volume related revenue covered 129 percent of the operating costs this quarter.
2nd, Corporate Services continued to report double digit growth and the Listing business saw the comeback of IPOs this quarter. 3rd, cash trading revenue grew, driven by increase in average daily volumes, a 69.4 percent market share and a 0.51 bps yield. The indices part of Advanced Data Services performed well, offsetting for sure a certain downside trend on market data. Only clearing revenue were slightly down due to a decrease in commodities volumes. And finally, OCFS VPS contributed €25,500,000 for Q3 2019.
Now moving on to the cost side. We continue to deliver a robust cost control and we can confirm today our 2019 cost guidance for the full year. This cost discipline translated into €1,100,000 of organic operating cost reduction in Q3 2019. In Ireland, we delivered €7,600,000 of run rate cost synergies at the end of the Q3 in Euronext Dublin, which is a significant step towards the €8,000,000 targeted run rate cost synergies. On the other hand, we consolidated $14,500,000 of additional costs related to the onboarding of acquisitions during that quarter.
Now moving on to the margin. Taking all the above into account, the group EBITDA grew faster than revenue by 23% in Q3 2019 to €108,000,000 This translated into a combined EBITDA margin of 50 9.4%, which is 1.2 points higher than last year and even an EBITDA margin that reached 61.6 percent organically, I. E. For the same perimeter as Q3 2018. So finally, on the net side, this strong operating performance over the quarter resulted in a 15.1% increase in adjusted EPS at €0.98 per share.
Q3 reported net income up 25.8 percent to €63,500,000 showing the highest sorry, so showing the high accretion since day 1 of the Oslo versus UPS acquisition. So to show, we recorded higher tax rate due to non cash adjustment in deferred tax assets and liabilities. And I'm sure Jojo will answer questions on this particular item. So the recent weeks, as you may have seen, we are marked by the disclosure or the release of our strategic plan, Let's Grow Together 2022, along with a full new set of guidance for 2022. Organic growth as well as innovation and the strong focus on sustainable finance are very important components of our strategy.
As just a first example, we have launched earlier this week the Green Bone Initiative in Dublin to further enhance the visibility of our Green Bone offering. So I now hand over to Giorgio Modica for the detailed presentation of our Q3.
Thank you, Stephane, and good morning, everyone. First of all, I would like you to remind you that for the Q3 of 2019, the organic growth of the group exclude Oslo BPS, Comsize, OPPCVM 360 and any project costs supported by Euronext for their integration. In the Q3 of 2019, Euronext consolidated revenue increased to EUR 100 and 81,700,000 with an increase of EUR 30,800,000 or 20.4%. These results were driven by a solid 2.5 percent organic revenue growth, driven by listing, cash trading and service businesses with combined contribution from Oslo BPS for €25,500,000 and Comsize for €1,500,000 Now looking at the different business lines. Listing revenues grew 25.1 percent to €34,800,000 driven by the double digit growth of corporate service, dynamic equity issuance activity over the quarter and the consolidation of Oslo VPS.
Trading business revenue was up 9% to EUR 70,800,000 with a strong combined cash trading market share at 69.4 percent and then organic cash trading yield at 0.53basispointand0.51, including Oslo. Advanced Data Services reported a good quarter, up 13.9 percent to 33.5 €1,000,000 primarily driven by the integration of Oslo BPS and the good performance of indices, especially ESG. Foisted activity strongly increased to EUR 30,800,000 resulting from the consolidation of volumes. As Stefano already mentioned, in the Q3 of 2019, non volume related revenue accounted for 52% of total group revenue, reflecting notably the increased proportion of services and custody and settlement in our revenue mix. Lastly, the non volume related revenues cover 129% of our operating costs excluding D and A compared to 110% last year.
Moving to Slide 7 for listing. The 25.1% growth this quarter was driven by Corporate Services and Oslo Borse. Corporate Service continues to grow with a strong organic growth of almost 50% from last year, thanks to the increased commercial activity. Combined with the activities of Oslo BPS, our corporate service franchise reported EUR 6,000,000 of revenues this quarter. With regards to the equity listing, we reported an EUR221,000,000 rate.
Our international offering for large caps was further enhanced by the listing of the South African company process with a market capitalization of EUR 120,000,000,000 on its first day of listing in the Greek company Titan. In addition, we had 10 SME listing this quarter with a strong contribution from our European Tech SME initiative. Secondary market activity was stable, reflecting light M and A activity over the quarter. Our debt franchise reported strong growth demonstrating our leading global position on this market. Lastly, as announced in October at our Investor Day, we launched this week our green bond offering across all Euronext markets with more than 50 initial participating issuers to this initiative to promote and support the green bonds.
Moving to our trading business on Slide 8, we start with cash trading. Cash trading reported strong growth with revenue up 10% to €53,400,000 This growth was driven by organic growth and Oslo VPS contribution. The quarter was marked by a peak in volatility in August, which drove ADV to a €7,900,000,000 average, up 9.6%. In this context, the combined market share was 69.4% including Oslo 3.7 points higher than last year and reached 69.7% like for like. We continued our active yield management.
Revenue capture was at 0.53 basis points on an organic basis despite the higher volatility. Combined yield with Oslo is slightly diluted because of the higher share of reported deals in Oslo at 0.51 basis points. Moving on trading derivatives now. Trading derivatives revenues was up 4% to EUR 11,500,000. Financial derivatives were supposed to, as I mentioned, by high volatility.
In addition, revenue capture improved for index derivatives. We experienced a weak physical market activity this quarter that impacted commodity volumes. These unfavorable product mix resulted in slightly lower revenue per lot at €0.30 per lot in the Q3 of 2019. Lastly, on FX trading, revenue were 10.8 percent up to €6,000,000 resulting from positive foreign exchange rate impact and revenue capture management, while volumes remained stable at $19,400,000,000 ADV over the quarter. Moving to Slide 9 for post trade business, revenue from our post trading activity increased 56.5 percent to €30,800,000 resulting from the consolidation of VPS custody and settlement activity for EUR 12,000,000.
Clearing revenue was down 6.5% to EUR 13,300,000 due as already commented to the unfavorable derivative products mix with lower commodity volumes. In addition, I would like to remind that we do not record any clearing revenue from Oslo Derivative Products. Moving to Slide 10, with Advanced Data Services, revenues was up 13.9 percent to €33,500,000 in the Q3 of 2019. Oslo BPS data business contributed for €3,700,000 The growth of our indices franchise and not only on ESG product offset a slight decrease in market data revenue. Proceeding now with Investor Services, revenue was €1,800,000 as the business continued to grow benefiting from Euronext reach and expertise.
We also reported a small contribution for Oslo Borse VPS for €300,000 Lastly, on Technology Solution, revenue was up 9.5% to $9,900,000 reflecting the good performance of hosted service business as well the continued work on OPTIC commercial project delivery. Moving to Slide 10 for the financial highlight of the quarter, we start with EBITDA. Euronext EBITDA grew faster than revenue, as Stephane mentioned, 23% to $108,000,000 this quarter driven by organic growth, continued cost discipline and the consolidation of our recent acquisitions. Overall, the EBITDA margin increased to 59.4% in the Q3 of 2019, up 1.2 points. On a like for like basis, EBITDA margin was at 61.6% this quarter, up 3.5 points.
From a revenue perspective, revenue at constant perimeter increased EUR 3,700,000, reflecting trading and listing revenue growth with Oslo BOSVPS, Com Size and other non organic elements contributing €27,100,000 Looking at costs, organic operating expenses excluding D and A increased decreased EUR 3,800,000. This reflects both the adoption of IFRS 16 for around EUR 2,700,000 and the continuous cost optimization for around EUR 1,100,000. With respect to the integration of Euronext Dublin, out of the targeted EUR 8,000,000 of expected run rate savings, EUR 7,600,000 have been already delivered as of September 2019. In this context, we confirm our 2019 cost guidance of a low single digit growth compared to 2018, including Euronext doubling, but excluding Oslo VPS. In addition, we consolidated EUR 14,500,000 of operating costs, excluding D and A from Oslo Borse VPS, OPC VM this quarter.
As a reminder, Oslo Borse VPS integration costs will gain traction in the 4th quarter through increased provision and additional operating costs and some new projects will be launched in the Q4. Moving to Slide 13, to the net income. The net income grew faster than EBITDA by 25.8% to EUR 63,500,000 resulting from the following elements. G and A mechanically increased due to the adoption of IFRS 16 and were also impacted by the first consolidation of Oslo Board's VPS D and A and the PPA accounts for $3,400,000 for 3.5 months of consolidation. This is important to highlight.
3.5 months means that we needed to catch up the 2 weeks of PPA from the last quarter as we closed the transaction in mid June. On a run rate basis, the PPA for Oslo will be of around €3,000,000 per quarter. Exceptional items were lower this quarter compared to the Q3 of 2019 that was marked by very exceptional items mainly related to the acquisition of Euronext Dublin. As I mentioned earlier, we might expect increased costs for Oslo BPS integration costs in both operating and exceptional expenses in Q4 2019. And going forward, I remind you that the target for integration cost for Oslo BPS was set at $18,000,000 And clearly, in the Q4, we will book provision for a part of that.
Net financing income increased following the launch of our second bond. These line could be impacted in the 4th quarter as well by the revaluation of the earn out and the right to buy back the minority of some of our corporate service subsidiaries. Lastly, income tax rate increased resulting from non cash adjustment on the fair tax asset and liabilities. Excluding this impact, the tax rate was slightly above 30% and we expect this rate to continue in Q4 with the information we have at the moment. Going forward, we expect the combined tax rate will go below 30% in 2020 if the tax rate expected across the Euronext will materialize as expected.
And in this respect, I would like to give you some more details. So clearly, in France, the tax rate that today is at 32%, will reduce next year to a little bit lower than 29%. And clearly, these had a one off impact on the valuation of our tax assets. In the Netherlands, we experienced some change in expectation as well. The tax rate was supposed to go down to 20.5% and will go down with respect to 2019, but at a lower pace at 21.7% and these had as well a negative impact on the valuation of some of our tax liability.
So the general trend of taxes across the Euronext countries are reduction, but with the reduction, there are some non cash element impacting our P and L. Adjusted for the PPA and exceptional items, adjusted net income was up 15.1 percent to €68,300,000 translating into an adjusted EPS of €0.98 for the quarter. I remind you that our adjustment includes the all the PPAs, exceptional items and the tax impact of those adjustments. To conclude with financial on Slide 14, over the quarter, 70 0.3% of EBITDA was converted into net operating cash flow compared to 80.6% last year. These results from negative changes in working capital driven by an acceleration of payment process linked to the migration to a new ERP in Euronext and the payment of the success fee related to the acquisition of Ostberg BPS.
It is to be noted as well that last year, there was a positive change in working capital impacted by the accrued expenses related to the termination of the DB contract. As far as the leverage is concerned, following the launch of our second bond, our net debt is at EUR 739,000,000 representing an adjusted net leverage of 1.8 times pro form a. Looking at the bottom of the slide, as of the end of Q3 of 2019, our liquidity position remained strong close to EUR 680,000,000 including the undrawn SCF of EUR 355,000,000 This concludes my presentation. I'll now hand back the floor to Stephane Boussner.
Thank you, Georgios. Just three comments to summarize this quarter. We reported a very strong quarter with net income growing faster than all other metrics, faster than EBITDA, faster than revenues. And this is the result, as you have understood it, of for sure the consolidation of all our acquisitions and the results of robust organic growth and the results of continued cost management. As planned, we will deliver on our 2019 organic cost guidance of a low single digit growth of our operating cost versus 2018.
My final comment is that for during Q4, you will see the launch of uptick for derivatives markets at the end of November. This will be the last step of our Optic trading platform delivery. We are now available for your questions with Antonia Attia, member of the Managing Board and Giorgio Modica.
Thank you very much. Our first question comes from the line of Mike Verner from UBS. Please go ahead.
Thank you and good morning. Just two questions from me. I was just wondering if you could provide a little bit more color on the businesses. I know I think you charge on a per client basis right now, but going forward, how are you going to be looking to potentially harmonize the fee rates with Oslo bores? And then second, I just noticed a bit of a tick up in terms of the your cash targeted cash from operations to about $180,000,000 from $110,000,000 in the second quarter.
I assume this is related to Oslo bores. I was just wondering if you could provide a little color as to the breakdown between the exchange business versus the CSD business. Thank you.
Yes. Thank you for the question. So when it comes to
Cash from operations, it's about $180,000,000 from $110,000,000 in the second quarter. I assume this is related to Oslo bores. I was just wondering if you could provide a little color as to the breakdown between the exchange business versus the CST business. Thank you.
Yes. Thank you for the question. So when it comes to Oslo BPS, if we look at the rate is actually not too dissimilar for the one of Euronext. What does change, however, Oslo BPS, if we look at the rate is actually not too dissimilar for the one of Euronext. What does change, however, is the mix in between the volumes, which are only reported volumes and therefore bring very limited contribution and the volume.
Oslo BPS, If we look at the rate, it's actually not too dissimilar for the one of Euronext. What does change, however, is the mix in between the volumes, which are only reported volumes and therefore bring very limited contribution and the volume for which we charge. So in terms of delta, there is in terms of average fee, there is clearly not we're already in line, to put it this way. Then clearly, in terms of harmonization of fees, we will need to wait for we're already in line, to put it this way. Then clearly, in terms of harmonization of fees, we will need to wait for the OPTIC migration.
And this is clearly a process that needs to be designed and agreed with the members to make sure that we're already in line to put it this way. Then clearly, in terms of harmonization of fees, we will need to wait for the OPTIC migration. And this is clearly a process that needs to be designed and agreed with the members to make sure that we design the best scheme as clearly the local members are very important to our business. So what I can comment today is first that on the part of the volume on which we charge, there is not a significant delta between Oslo
BPS margin and our margin.
And once we were on the part of the volume of which we charge, there is not a significant delta between Oslo BPS VPS margin and our margin. And once we have concluded the work to define the migration project, we will be able to give more details on that. When it comes to the question of the 100 and on the part of the volume of which we charge, there is not a significant delta between Oslo BPS margin and our margin. And once we will have concluded the work to define the migration project, we will be able to give more details on that. When it comes to the question of the EUR 180,000,000, you are correct.
So the first element I would like to highlight, these EUR 180,000,000 that is an increase with respect to the previous EUR 110,000,000 are not only related to capital requirements. So this is the cash that's within sufficient to EUR 80,000,000, you are correct. So the first element I would like to highlight, these EUR 180,000,000 that is an increase with respect to the previous EUR 110,000,000 are not only related to capital requirements. So this is the cash that's within sufficient to operate our business of which capital requirement is an element. Now coming to your last question, we do not provide the breakdown of this number that includes several elements.
However, what I can tell you is provide the breakdown of this number that includes several elements. However, what I can tell you is that clearly, a significant part of the increase is related to the integration of Oslo BPS.
Thank you very much.
To provide the breakdown of this number that includes several elements. However, what I can tell you is that clearly, a significant part of the increase is related to the integration of Oslo BPS.
Thank you very much.
Thank you. Our next question comes from the line of Philip Middleton from Merrill Lynch. Please go ahead.
Yes, thank you and good morning. Maybe this is a couple for Anthony. Looking at your cash equity yield again, it seems like on the organic yield, you've done a very good job of triangulating Mark. Thank you and good morning. Maybe this is a couple for Anthony.
Looking at your cash equity yield again, it seems like on the organic yield, you've done a very good job of triangulating market share and yield, whereas I normally thought there was a bit of a the 2 works in opposite directions. Could you talk through how you've done that? And also just conceptually, could you talk through a little bit thank you and good morning. Maybe this is a couple for Anthony. Looking at your cash equity yield again, it seems like on the organic yield, you've done a very good job of triangulating market share and yield, whereas I normally thought there was a bit of the 2 works in opposite directions.
Could you talk through how you've done that? And also just conceptually, could you talk through a little bit how you would go about integrating an exchange with very different charge and structures where maybe some people paid less and some people paid a lot more? How would you think about that?
Yes. So let me take these two questions. So the first element is that
How you would go about integrating an exchange with very different charge and structures where maybe some people paid less and some people paid a lot more. How would you think about that?
Yes. So let me take these two questions. So the first element is that, as we explained during the Investor Day, the way we are improving market share and yield is providing better value proposition for client. And so far, the programs that we did put in place proved to be very successful and specifically the adding better value proposition for client. And so far, the programs that we did put in place proved to be very successful and specifically the best of book and the Omega pack, which is the access to our market for non members.
What is interesting is that these are being better value proposition for client. And so far, the programs that we did put in place proved to be very successful. And specifically the best of book and the Omega Pack, which is the access to our market for non members. What is interesting is that these very strong performance in market share was reached despite a level of closing auction that we consider normal and lower than the level we reached in previous quarter. Then and this is something that we will continue to do, which means level and lower than the level we reached in previous quarter.
Then and this is something that we will continue to do, which means leverage the unique diversity of the flows in our market to propose value added liquidity schemes to clients to be able to and lower than the level we reached in previous quarter. Then and this is something that we will continue to do, which means leverage the unique diversity of the flows in our markets to propose value added liquidity schemes to client to be able to maximize our market share. And the second element, which is important as well is clearly when the liquidity drops, having the natural flows of retail and institutional clients provides to be sustainable having the natural flows of retail and institutional clients provides to be a sustainable competitive advantage versus competition that suffer more than we do. Your second question was relates having the natural flows of retail and institutional clients provides to be a sustainable competitive advantage versus competition that suffer more than we do. Your second question was related to the integration of Orocobrece, And you're absolutely right.
This is the core of the migration process. Switching from one system to the other, we did it many times. It's an activity that is not too complex from a technical point of view. One system to the other, we did it many times. It's an activity that is not too complex from a technical point of view.
The part that really needs to be well defined is the synchronization with the local ecosystem, and this is a process that take months and this is the reason why we will finalize that one system to the other. We did it many times. It's an activity that is not too complex from a technical point of view. The part that really needs to be well defined is the synchronization with the local ecosystem. And this is a process that take months and this is the reason why we will finalize that throughout the course of 2020.
So there is not a single rule. It's really interacting and discussing with the local members to find the best balance in between the value added and the change of fees. But you are right, this is something that needs to be very carefully assessed throughout the course of 2020. So there is not a single rule. It's really interacting and discussing with the local members to find the best balance in between the value added and the change of fees.
But you are right, this is something that needs to be very carefully assessed.
Thank you. Thank you. Our next question comes from the line of Benjamin Goy from Deutsche Bank. Please go ahead.
Yes. Hi, good morning. And two questions, please, from my side. First, I think Stefan, you were quoted last night when saying you look at opportunities when they arise. Yes, hi, good morning.
And two questions, please, from my side. First, I think Stefan, you were quoted last night on saying you look at opportunities when they arise for M and A. So just wondering how this works on the integration side. Do you feel capable to handle 2 significant transactions at the same time? Just have Yes.
Hi, good morning. And two questions, please, from my side. First, I think Stefan, you were quoted last night on saying you look at opportunities when they arise for M and A. So just wondering how this works on the integration side. Do you feel capable to handle 2 significant transactions at the same time, just hypothetically speaking?
And then secondly, on Technology Solutions, a good organic growth rate. Maybe you can speak a bit more about the external pipeline for this business going into 2020? Thank you. Okay.
We have acquired over the past
Pipeline for this business going into 2020. Thank you. Okay.
We have acquired over the past 4 years a very strong track record in terms of managing operations. What we are in the process of executing
The plan for this business going into 2020. Thank you. Okay.
We have acquired over the past 4 years a very strong track record in terms of managing operations. What we are in the process of executing in Oslo is similar to what we have done in Ireland. And what we have done in Ireland is similar to what we have done to ourselves, to the core business of Euronext. So you have seen the number for the Euronext core business. You have seen them done to ourselves to the core business of Euronext.
So you have seen the number for the Euronext core business. You have seen the number for Ireland. We're almost a year ahead of schedule. We are close to delivering the targeted relevant to ourselves to the core business of Euronext. So you have seen the number for the Euronext core business.
You have seen the number for Ireland. We're almost a year ahead of schedule. We are close to delivering the targeted run rate cost synergies that were anticipated at the time of closing Ireland in of closing the acquisition of the Irish Stock Exchange, sorry, in March 2018. We are well advanced in the integration process of Oslo Bourse VPS. Obviously, in a we have to March 2018.
We are well advanced in the integration process of Oslo Perce VPS. Obviously, we have to respect all the applicable rules and regulations and employees' consultations and dialogue with the regulators. But as far as everything in March 2018, we are well advanced in the integration process of Oslo Perus VPS. Obviously, we have to respect all the applicable rules and regulations and employees consultations and dialogues with the regulators. But as far as everything that is related to Euronext is concerned, things are doing extremely well.
So the question of our capability to integrate other assets is obviously an operational issue, but we are confident on the basis of what we have done so far, we will do it. As far as that is related to Euronext is concerned, things are doing extremely well. So the question of our capability to integrate other assets is is obviously an operational issue, but we are confident that on the basis of what we have done so far, we will do it. As far as market solution, Orange Range Solutions is concerned, we have the marketing of our solutions is really focused on the OPTIC platform. It's live for cash trading since last year.
It's going to be live on derivatives in the coming weeks. Live for cash trading since last year. It's going to be live on derivatives in the coming weeks. And all our marketing offer efforts across the planet is driven by this marketing, this new offering. I don't want to comment the pipeline at this stage because life it's live for cash trading since last year.
It's going to be live on derivatives in the coming weeks. And all our marketing offer efforts across the planet is driven by this marketing digital offering. I don't want to comment the pipeline at this stage because this business is a very discrete number of opportunities in reality. So we are there are a few ongoing RFPs. Some of them are public, others are not.
You have to understand that when exchanges are talking to us, they are talking about switch some of them are public, others are not. You have to understand that when exchanges are talking to us, they are talking about switching from a solution with another provider to us. And therefore, many of them want that process to be really discrete because they use another provider. Some of them are public, others are not. You have to understand that when exchanges are talking to us, they are talking about switching from a solution with another provider to us.
And therefore, many of them want that process to be relatively discrete because they use another provider. So I don't want to comment on the pipeline because it's a finite number of opportunities.
Understood. Thank you.
Thank you. Our next question comes from the line of Our next question comes from the line of Gurjit Kambo from JPMorgan. Please go ahead.
Just two questions. Firstly, in terms of the non volume related revenue
Thank you. Our next question comes from the line of Gurjit Kambo from JPMorgan. Please go ahead.
Hello. Good morning, guys. Just two questions. Firstly, in terms of the non volume related revenues, they've increased to about 52 and I think it was 46% last year and around 44% in 2014. How important is it to keep that number going up?
And particularly, I guess, in the face of sort of looking at non organic growth, do you look at that progression in that sort of non volume related revenues? That's the best news. They've increased to about 52%. I think it was 46% last year and around 44% in 2014. How important is it to keep that number going up?
And particularly, I guess, in the face of sort of looking at non organic growth, do you look at that progression in that sort of non volume related revenues? That's the first question. And then secondly, I think you cited some good growth within the ESG products within the Advanced Data Services business. What are the sort of revenue sort of yields in that business? Are they similar to, I guess, non ESG products?
So, Giorgio will So, yields in that business, are they similar to, I guess, non ESG products? So,
Georgios will take your second question. I'll take the first one.
So yields in that business, are they similar to, I guess, non ESG products?
So, Giorgio will take your second question. I'll take the first one. So yes, so on the non volume. So the objective of Euronext is to become more relevant in Europe. And to in order to achieve that objective, we want to diversify our top line for sure, and we want to grow in fact spend in Europe.
And to in order to achieve that objective, we want to diversify our top line for sure and we want to grow in size. So clearly, the ultimate objective is to continue to diversify our revenues. And it's also to look for opportunities to grow the size of your rent in Europe. And to in order to achieve that objective, we want to diversify our top line for sure, and we want to grow in size. So clearly, the ultimate objective is to continue to diversify our revenues.
And it's also to look for opportunities to grow the size of Euronext. But the clear objective is definitely to continue growing this the non volume related revenues as demonstrated by the efforts we have done over the past 2 years. Georgios?
Yes. On your second question, the indices are performing well. Also thanks to the SG underlying to Efforts we have done over the past 2 years. Georgios? Yes.
And on your second question, the indices are performing well. Also thanks to the SG underlying to on both structured products and ETFs, we created 5 families of indices for our client. In terms of profitability, there is no
separate we have done over the past 2 years. Georgio?
Yes. And on your second question, the indices are performing well. Also thanks to the SG and A line to on both structured products and ETFs, we created 5 families of indices for our client. In terms of profitability, there is not anything specific to highlight with respect in terms of difference between ESG and non ESG products.
That's great. Thank you.
Thank you. Our next question comes from the line of Ron Heidenrich from ABM AMRO. Please go ahead.
Good morning, John.
Thank you. Our next question comes from the line of Ron Heidenrich from ABM AMRO. Please go ahead.
Good morning, gentlemen. A few questions from my side. Firstly, Q3 has a seasonality in the Oslo Board's reporting, both on the settlement revenues as
Thank you. Our next question comes from the line of Ron Heidenrich from ABM AMRO. Please go ahead.
Good morning, gentlemen. A few questions from my side. Firstly, Q3 has a seasonality in the Oslo port reporting, both on the settlement revenues as well on the cost. I was wondering, is that seasonality going to be there going forward? Or is that going to change when integration of Oslo has been done?
Secondly, you were mentioning on one off changes in working capital as well as on the cost. I was wondering, is that seasonality going to be there going forward? Or is that going to change when integration of Oslo has been done? Secondly, you were mentioning on one off changes in working capital. You were mentioning some acceleration in migration costs, but I didn't catch up completely.
So could you please repeat the changes, the one off changes in the Q3? And then thirdly, were there this quarter any one offs in the EBITDA as in the cost base or in the revenue space? And that's it for the Q3. And then thirdly, were there this quarter any one offs in the EBITDA, so in the cost base or in the revenue space? And that's it for now.
Thank you.
Yes. So with respect to the to your question around seasonality, with respect to the Q3.
And then thirdly, were there this quarter any one offs in the EBITDA, so in the cost base or in the revenue space? And that's it for now. Thank you.
Yes. So with respect to the to your question around seasonality, With respect to the top line, the seasonality you should expect is not a lot is similar to the seasonality of exchanges that usually have weak Q3s. And as well, the listing activity has the usual seasonality, but nothing specific to report there. Where Q3 is and as well the listing activity as the usual seasonality, but nothing specific to report there. Where to a certain extent, there is a seasonality is with respect to the costs.
So the margin was between brackets inflated in the second quarter by Q3s. And as well, the listing activity has the usual seasonality, but nothing specific to report there. Where to a certain extent, there is a seasonality is with respect to the costs. So the margin was between brackets inflated in the second quarter, but this is more of an accounting element. And therefore, as far as your projection are concerned, if you consider the margin of the 3rd quarter, this is something a margin that can be considered in line with the past.
And of the Q3, this is a margin that can be considered in line with the past and sustainable. With respect to the one off, it's what has happened is a very practical thing, which means that we migrated to a new version of the year of the Q3. This is a margin that can be considered in line with the past and sustainable. With respect to the one off, it's what has happened is a very practical thing, which means that we migrated to a new version of the ERP. And to have a smoother migration, we anticipated the payments.
So it's a very practical element. And then we will go back to the usual element, but these had an impact in terms of cash flow. And the other element that I wanted to mention is the payment fee. And to have a smoother migration, we anticipated the payments. So it's a very practical element.
And then we will go back to the usual element, but these had an impact in terms of cash flow. And the other elements that I wanted to mention is the payment of the fee, the success fee due to for the success of Oslo, whereas the other element that highlighted in the Q3 of 2018 was linked to the fact that there was a positive change in working capital in late quarter of 20 18 was linked to the fact that there was a positive change in working capital related to a non cash cost item related to the cost settlement of the DDB contract. As you remember quarter of 2018 was linked to the fact that there was a positive change in working capital related to a non cash cost item related to the cost settlement of the DB contract. As you remember, we provisioned that cost in the Q3, and we expensed the cost in the and we cash out the cost in the Q1 of 2019 as we migrated the system in February this year. Your last question was with respect to 1 Q1 of 2019 as we migrated the system in February this year.
Your last question was with respect to one off. There is nothing specific to highlight. When there is something we usually do, there is some small costs for Q1 of 2019 as we migrated the system in February this year. Your last question was with respect to one off. There is nothing specific to highlights.
When there is something we usually do, there is some small costs for Oslo, but it's not material. So I would not mention anything.
Thank you for that. That's very clear. If I may, one further question. You were mentioning that the Oslo integration costs would go up in the Q4 of the year. You mentioned the €18,000,000 integration costs, which would go through the exceptionals Oslo integration costs would go up in the Q4 of the year.
You mentioned the €18,000,000 integration costs, which would go through the exceptionals, So what I would say Oslo BOSS integration cost would go up in the 4th quarter.
So what I would say?
Oslo BOSS integration costs would go up in the Q4 of the year. You mentioned the €18,000,000 integration cost, which would go through the exceptionals, a portion of that. Can you maybe elaborate on how much you are planning to take off this EUR 18,000,000 in the 4th quarter?
So what I was saying, clearly, we do not expect the full EUR 18,000,000 to be next quarter. What is going to happen is that the costs that are well identified to be paid and would not be recurring will need to be a provision. And in this cost, you might identify it to be paid and would not be recurring, would need to be provisioned. And in this cost, you might include the cost like early termination of contract as well as redundancies. So next quarter, clearly, the comp identified to be paid and would not be recurring, will need to be a provision.
And in this cost, you might include the cost like early termination of contracts as well as redundancies. So next quarter, clearly, the computation will need to be finalized depending on final elements. But you would expect a provision within the same scheme of what happened in Dublin last year. So clearly, we are looking at an amount, which is clearly situation will need to be finalized depending on final elements. But you would expect a provision within the same scheme of what happened in Dublin last year.
Clearly, we are looking at an amount, which is clearly significantly lower than 50% of the total envelope.
Our next question comes from the line of Johannes Thormann from HSBC. Please go ahead.
Good morning, everybody. Johannes Thormann, HSBC. Two questions on my
Next question comes from the line of Johannes Thormann from HSBC. Please go ahead.
Good morning, everybody. Johannes Thormann, HSBC. Two questions on my end.
Significantly lower than 50% of the total envelope.
Perfect. Thank you very much.
Thank you. Our next question comes from the line of Johannes Thormann from HSBC. Please go ahead.
Good morning, everybody. Anders Thormann, HSBC. Two questions from my side, please. You nicely provided the breakdown of Oslo's contribution to the revenues. Could you provide us also to the personnel costs and the other costs, how much in the quarter have come from that source?
And secondly, looking at the tax rate, I know it's difficult to give a precise guidance. But could you give us a feeling, a range how low you think the tax rate can go in the long term? Yes, guidance. But could you give us a feeling, a range, how low you think the tax rate can go in the long term?
The question is on the cost or on the revenues?
On the next guidance. But could you give us a feeling, a range, how low you think the tax rate can go in the long term?
The question is on the cost or on the revenues?
On the cost now. Because I didn't find it
in the presentation. You gave the breakdown for every revenue line,
how much contribution of Oslo was, but I didn't find it for the
Yes, yes, yes, I understand it. The breakdown we can give is that the staff cost
Contribution of Oslo was, but I didn't find it for the
Yes, yes, yes. I understand it. The breakdown we can give is that the staff cost is around €8,500,000 out of the total of €13,200,000 which are the cost of Oslo.
Solution of Oslo was, but I didn't find it for the
Yes, yes, I understand it. The breakdown we can give is that the staff cost is around €8,500,000 out of the total of €13,200,000 which are the cost of Oslo.
Okay. Thank you.
Thank you. The question
on tax rate. And the question on tax rate in Norway, the tax rate, the corporate tax rate is the nominal for financial institutions. The question on tax rate in Norway, the tax rate, the corporate tax rate is the nominal for financial institution is 24. And clearly, the actual one with light margin is between 24 25. The question on tax rate in Norway, the tax rate the corporate tax rate is the nominal for financial institution is 24%.
And clearly, the actual one with light margin is between 24% 25%.
Okay. Thank you.
Thank you. Our next question is from Andrew Coombs from Citi. Please go ahead.
Good morning. 2 please. The first on clearing, you talk about an unfavorable derivatives product mix with lower commodities. Okay.
Thank you.
Thank you. Our next question is from Andrew Coombs from Citi. Please go ahead.
Good morning. 2, please. The first on clearing. You talk about an unfavorable derivatives product mix with lower commodities. Can you just elaborate there exactly what was driving the weakness?
And secondly, an accounting question. In depreciation and amortization charge, you're now including a purchase price adjustment. Boslow bought, I think, dollars 3,500,000 this quarter. You're guiding for $3,000,000 going forward. What are the drivers of charge you're now including a purchase price adjustment for those they bought?
I think $3,500,000 this quarter. You're guiding for $3,000,000 going forward. What are the drivers that could flex that? I know it's a noncash item, but just wondering how long we can expect it to last for? And what are the key drivers for that number?
Thank you. Charge you're now including a purchase price adjustment for the board, I think, dollars 3,500,000 this quarter. You're buying for $3,000,000 going forward. What are the drivers that could flex that? I know it's a non cash item, but just wondering how long we can expect it to last for?
And what are the key drivers for that number? Thank you. Yes.
So your I start with your second question. So on that one, just to be completely clear on that item. So when you look at the increase of the second question, when you look at the increase of D and As, let's first start from a pure comparable standpoint. So what has happened between last year this year comparing quarter to quarter? The second question, so on that one, just to be completely clear on that item.
So when you look at the increase of D and As, let's first start from a pure comparable standpoint. So what has happened between last year this year comparing quarter to quarter, 2 things have happened. On the one side, the normal DNA of tangible and tangible assets have reduced in size. On the other side, there is the impact of IFRS 16 that has increased the D and A of EUR 2 point $7,000,000 The net of these EUR 12,000,000 on the other side, there is the impact of IFRS 16 there has increased the D and A of EUR 2,700,000. The net of these two elements is an increase of D and As of around EUR 2,000,000.
So from a let's say, if we exclude the accounting principles, on the other side, the impact of IFRS 16 that has increased the D and A of EUR 2,700,000. The net of these two elements is an increase of D and As of around EUR 2,000,000. So from a let's say, if we exclude the accounting principles change between the 2 quarters, D and A have reduced. Now the other part is the change in scope. The change the impact of the change in scope is around EUR 5,000,000.
Out of this EUR 5,000,000, again, the part that is related to change the impact of the change in scope is around EUR 5,000,000. Out of this EUR 5,000,000, again, the part that is related to PPAs in general because there is no only Oslo that we commented, but there is as well a big portion of comp size. The impact of the change in scope is around EUR 5,000,000. Out of this EUR 5,000,000, again, the part that is related to PPAs in general because there is no only Oslo that we commented, but there is as well a big portion of comp size. That contribution is 3 €500,000 out of the 5, and the rest is the usual DNA of the companies that we have acquired.
Then when it comes more specifically to the DPA element, what happens is that when we complete an acquisition, then when it comes more specifically to the DPA element, what happens is that when we complete an acquisition, the asset and liability needs to be revalued at fair value and then amortized during the remaining useful life. Then when it comes more specifically to the DPA element, what happens is that when we complete an acquisition, the asset and liability needs to be revalued at fair value and then amortized during the remaining useful life of those assets. Usually, there are 2 key categories. There is client relationship and software, which have a useful life, which is very different. And therefore, you should expect that charge to remain in the P and L for the life of those assets.
Usually, there are 2 key categories. There is client relationship and software, which have useful life, which is very different. And therefore, you should expect that charge to remain in the P and L for a significant long time.
Thank you. And on the clear?
And on the clearing, I can not comment exactly on the different charge. But different charge. But on the clearing, I can not comment exactly on the different physical settlement. So the base fee is higher. The cost of clearing commodity is significantly higher because there is a component of physical settlement.
So the base fee is higher. And therefore, the drop in the commodity volumes has limited impact on the trading, but significantly higher on the cost of clearing commodity is significantly higher because there is a component of physical settlement. So the base fee is higher. And therefore, the drop the commodity volumes has limited impact on the trading, but significantly higher on the clearing. If you want your simulation, you can assume that pretty much all the drop is related to the change in mix.
Okay. Thank you.
Thank you. Our final question comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead.
In the clearing, if you want your simulation, you can assume that pretty much all the drop is related to the change in mix.
Okay. Thank you.
Thank you. Our final question comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead.
Thank you. Yes, just a couple of follow ups. On the clearing point, so I get the commodities obviously is much higher margin. But within the rest of the clearing, is there any other sort of margin differentials between sort of index and single stock options? Or should we not really worry too much about it and just focus on commodities and non commodities Is there any other sort of margin differentials between sort of index and single stock options?
Or should we not really worry too much about it and just focus on commodities and non commodities? Secondly, in terms of the sort of clearing fees and rebates, how often do you sort of renegotiate with LCH? Just a reminder on the sort of contract clearing. Is there any other sort of margin differentials between sort of index and single stock options? Or should we not really worry too much about it and just focus on commodities and non commodities?
Secondly, in terms of the sort of clearing fees and rebates, how often do you sort of renegotiate with LCH? Just a reminder on the sort of contract terms there. And then finally, if we're just thinking about depreciation and amortization and there's also sort of moving parts going on here. But is the way to think about it in terms of cash cost, I think you guide sort of 3% to 5% of revenues in terms of CapEx. So it's kind of €9,000,000 the upper end of what we should think about in terms of the sort of the P and Ls.
I think you guide sort of 3% to 5% of revenues in terms of CapEx. So it's kind of €9,000,000 the upper end of what we should think about in terms of the sort of the P and L cost of CapEx on a quarterly basis?
Yes. So let me start with the CapEx.
I think you guide sort of 3% to 5% of revenues in terms of CapEx. So it's kind of €9,000,000 the upper end of what we should think about in terms of the sort of the P and L cost of CapEx on a quarterly basis?
Yes. So let me start with the CapEx, yes. So what you should consider is 3% to 5% of our top line. This is what you should think in terms of cash costs. With respect to the differentiating element between the different classes of derivatives, yes, there are differences.
But as you said, if you yes, so what you should consider is 3% to 5% of our top line. This is what you should think in terms of cash costs. With respect to the differentiating element between the different classes of derivatives, yes, there are differences. But as you said, if you consider it as 1, would be good enough in terms of expectations. And your second question was?
Negotiation. Negotiation is defined, agreed for the next 10 years. So it's there is no additional negotiation to be made. Our negotiation is defined, agreed for the next 10 years. So it's there is no additional negotiation to be made.
The condition are defined for the next 10 years.
Got it. Thank you.
Thank you for your questions. I would now like
Our negotiation is defined, agreed for the next 10 years. So it's there is no additional negotiation to be made. The conditions are defined for the next 10 years.
Got it. Thank you.
Thank you for your questions. I would now like to hand back to your host, Stefan Buschner, for any further remarks.
Well, thank you very much for your time this morning and have a good day from Oslo where it is starting snowing. Have a good day.
Thank you for joining this morning's conference call. You may now disconnect your lines. Host, please stay connected.
Have a good day.
Thank you for joining this morning's conference call. You may now disconnect your lines. Hosts, please stay connected. Thank you for joining this morning's conference call. You may now disconnect your lines.
Host, please stay connected.