Hello, and welcome to the Euronext Second Quarter 2021 Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this event is being recorded. And for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions.
And I will now hand you over to your host, Stefan Buschner, CEO and Chairman of the Managing Board of Euronext to begin today's conference. Thank you.
Good morning, everybody, and thank you very much for joining us this morning for the Euronext Second Quarter 2021 Results Conference Call And webcast, I am Stephane Bouchner, CEO and Chairman of the Managing Board of Euronext. And I will start with the highlights of this Q2. Georgiou Modica, the Euronext CFO, will then further develop the main business and financial highlights. Euronext reported a strong quarter second quarter performance with growth in both revenue and adjusted EPS. But before I take you through the numbers, I would like to single out a few important points.
First, This is the first time we have consolidated the Bostar Italiana Group accounts. You will see in most of the existing revenue lines The contribution of the Bostale Designer Group. But you will see also in new revolulines such as fixed income, Our net treasury income from CCNG and clearing activity, the contribution of Boste Italia. 2nd, we recorded Good organic revenue growth despite the fact that the comparable Q2 figures from 2020 were exceptionally high Because of the volatile market conditions at that time that many of you remember. The growth of this quarter Was made possible, thanks to the diversification of our activities, and we'll focus on that in a few minutes, the resilience of our core business.
3rd, our performance in listing has been very strong. With 62 new equity listings in the Q2, we have confirmed again our position as the largest listing venue in Europe. We're close to 1900 listed companies, representing approximately $6,400,000,000,000 in aggregate market capitalization. And as the largest liquidity pool in Europe with $12,000,000,000 average value traded daily, We are becoming definitely the largest listing venue and the largest equity trading venue in Europe. We will come In Q2 2021, large listings such as old funds and HPAX.
In addition, in Q2 2021, dollars 7,100,000,000 was raised on Euronext primary markets. This amount doubled Compared to the €3,400,000,000 raised in Q2 2020. Technology and innovative driven projects accounted for more than half Of the total new listings since the beginning of the year. And besides, secondary markets reported a solid strong A solid Q2 of 2021 with €32,000,000,000 raised in secondary equity issues Compared to €16,400,000,000 in Q2 2020. I would like also to emphasize that Euronext was the leading exchange in Europe With regards to ESG, Euronext demonstrated again this quarter That it is more than ever the venue of choice for sustainable projects.
1 third of new listings we welcomed were clintech. We have now over 40 European ESG indices, and we announced the upcoming launch of the Italian MIB ESG Index, Following the launch of the CAC40 ESG, we also announced that Euronext was selected by the German government To launch an ESG index to be replicated by German pension funds. This development shows the strength of our index franchise Even outside of your next country's borders. Looking at the numbers themselves for Q2 2021, Revenue increased by €118,000,000 up plus 56 percent to $228,800,000 This solid performance was driven by organic growth of 3.5% in non trading activities, With record activity in listing and fast growing post trade activity in the Nordic region. It was also driven by the consolidation of the Borsett and I Group For 2 months 2 days in Q2 2021, contributing for €89,600,000 to revenue and income.
As you know, we monitor closely the share of non volume related revenue in our mix, Which rose this quarter to 56% of total revenue. And now non volume related revenue cover 137% of operating expenses excluding D and A. On the cost side, the reported increase this particular quarter is mainly related to the consolidation cost From the Borzeit Helena Group and also the VP Securities costs for 41,200,000 And also related these incremental costs are related to the integration of the Bostatin and Group as announced in the full year and Q1 results. Overall, these numbers translated into group EBITDA increase of +53.8 percent to €192,900,000 and an EBITDA margin of 58.7 percent in Q2 2021. On a like for like basis, our EBITDA margin in Q2 2021 was 59.2%.
And The solid group business performance resulted in a +28.6 percent increase in adjusted EPS at 1 point €43 per share. On a reported basis, net income was up plus 5.6 percent To €86,600,000 despite exceptional and financing items related to the Boste Italiana Group acquisition. I want to underline the fact that during this Q2 of 2021, we achieved the targeted synergies for BP Securities in Copenhagen Only 11 months after the closing of this transaction. With these two milestones, we have Completed the integration plan for recent Nordic acquisitions well ahead of schedule. We are also very pleased to see The fast growing pace of the VP Securities business since the acquisition in August last year.
Regarding the integration plans For the Bostatin and A group in Italy, all our teams across the core Euronext businesses and across the Bostatin and A group companies are now working together Very effectively and with enthusiasm to make this acquisition a success and to build together the leading and European market infrastructure. I now hand over to Giorgio Modica for the detailed review of our businesses.
Thank you very much, Stefan, and good morning, everyone. I'm now on Slide 6. In the Q2 of 2021, Euronext consolidated revenues reached EUR328,800,000 With an increase of EUR 118,000,000 or 56%. These results were driven by the organic growth in post trade, Listing activity and by the contribution of the Bors Itagiana Group consolidated this quarter for 2 months and today. It's important to highlight this.
On a like for like basis and at current currencies, excluding the impact of the Borussia Tyana Group, Northpool, ticker, 0.03 dollars NBP Securities, Euronext Consolidated Revenue was up 3.5% Versus the Q2 of 2020. This is an important message. Despite significantly softer trading volume, Euronext delivered organic growth, thanks to an improved revenue mix. Moving now to the different business lines. Postpaid revenue, including net treasury income, increased 167.4 percent to €93,000,000 The result of the excellent performance of BP Securities in Denmark and Euronext DPS in Norway and the consolidation of Monterrey and The strong listing revenue growth, up 33.6 percent to €48,200,000 results from a record quarter in listing and the continued strong performance of corporate services as well as the Consolidation of the Bors Italiana Group.
Advanced Data Services revenue increased to EUR 46,500,000 up 29.7 percent benefiting from the resilient performance of market data And the consolidation of the Borsitagana Group. Trading revenue increased to EUR 112,800,000, Up 26.1 percent, thanks to the consolidation of BOSS Itliana and MTS Trading Activities, The good revenue capture and market share for cash trading activities despite softer volumes in the second quarter Softer volume in the Q2 of 2021. With regard to fixed income trading, I would like to highlight that MTS cash trading activities was a key growth engine for the quarter, posting over 50% Growth in revenue. In terms of revenue mix this quarter, non volume related revenue accounted for 56% of total group revenue Versus 49% in the Q2 of 2020, reflecting the increased diversification in our revenue mix And the good performance of non trading activities. Please note that these non volume related activities Now include net treasury income from CCNG.
Lastly, nonvolume related revenue covered 137% Of our operating costs, excluding D and A, compared to 122% last year. I'm moving now to Slide 7 For listing, listing revenue was EUR 48,200,000, an increase of 33.6% Compared to the Q2 of 2020, driven by record activity in equity and ETF listing and positive traction of ESG bond listing, The strong performance of Corporate Services, up 31.2% as well as the consolidation of the Pors Itliana listing activity again For 2 months 2 days. With regards to equity listing, the Q2 of 2021 saw the continuation The strong primary equity listing with 62 new listing on Euronext, including 3 large caps and 8 packs. As Stephane said, we have confirmed our leadership as the leading listing venue in Europe for equities and ETFs. Secondary market activity reported
a good
second quarter and net listing highlighted the growing momentum in ESG on listing. Let's move now to our trading business, Slide 8. I would like to highlight that the revenue you see on the slide are actual revenues, I include only 45 trading days for BOSS Italiana, while other KPIs except the market share are pro form a, I include Bors Itliana for the full quarter. Let's start with cash trading. ADV on a pro form a basis Decreased 9.2%, reflecting softer cash trading volume compared to an exceptional Q2 of 2020.
On a pro form a basis, the average revenue capture over the quarter reached 0.52 basis points. Excluding BOS Itliana, the revenue capture on Cash trading averaged 0.57 basis points this quarter, while the market share was 68.3% And close to 69% at the end of the quarter. The consolidation of the cash trading activity of Borsa Italiana and this robust revenue capture offset lower trading volume, resulting in cash trading revenue increasing 8.7 percent to EUR 70,100,000. Let's move now to derivative trading. Derivative trading revenue was up 18.3 percent to EUR 13,100,000 in the Q2 of 2021.
Pro form a average daily volumes on financial derivative were down 7.9%, reflecting lower Volatility and risk appetite visavishe2nd quarter of 2020. Commodity Products, on the other side, reported A very strong quarter with average daily volume up 41.3%, reflecting the successful geographical and client expansion. On a pro form a basis, the average revenue capture over the quarter for derivative trading was €0.28 per lot. On a standalone basis, Euronext reported average revenue capture of EUR 0.26 per lot. Moving to fixed income trading, that is one of the new reporting lines that you see in our P and L this quarter.
Fixed income Trading includes now the trading activities of MPS, both cash and repo and the fixed income Trading activity of Euronext and Borsitliana, such as MOTH and Eurow TLX. Fixed Income Trading reported revenue at EUR 17,300,000 in the Q2 of 2021 compared to EUR 600,000 in the Q2 of 2020 As a result from the consolidation of the Borscht Itliana Group, for 2 months and 2 days of consolidation the Q2 of 2021, MTS Cash generated EUR 12,500,000 of revenues, And MTS repo generated EUR 3,200,000 in revenue. For the full Q2 2021, on a like for like basis At constant currencies, MTS Cash reported revenue growth of 52.2%, While MTS repo reported revenue decrease of 1.6%, reflecting stronger client appetite The strong performance of MTS cash trading activity reflects the positive momentum In cash bond trading supported by the steady issuance and support from the ECB bond buying program, The EU Recovery Fund to support the European Economy and generally greater adoption of electronic trading solutions. Continuing with trading on Slide 9. Euronext reported average FX trading daily volumes of $18,600,000,000 in the Q2 of 2021, down 9.8% compared to the Q2 of 2020, resulting from less volatile trading environment.
As a result, SpotFX Trading revenue decreased 13.5 percent to EUR 5,700,000. Power Trading reported stable revenues at EUR 6,600,000, reflecting lower power trading activity offset by Positive foreign exchange impact. In the Q2 2021, average Daily day ahead power traded was 2.7 terawatt hour, and average daily The intraday power traded was 0.07 terawatt hour. Moving to Slide 10. Revenue from our posted activity, including treasury income, increased 157.4 percent 93,000,000.
Clearing revenue was up 70.6% in the Q2 of 2021 DKK226,600,000 as a result of higher clearing revenue and treasury income received from LCHSA And the consolidation of CCNG activity for 2 months 2 days. On a like for like basis, At current currencies, clearing revenue was up 20.6% compared to the Q2 of 2020. Net treasury income of CC and G was EUR 9,600,000 and is also another new line of our P and L. If we focus on CCNG for the full Q2 of 2021, on a like for like basis at constant currencies, CCNG reported Seable revenues compared to the same quarter last year. Custody, settlement and other post trade encompassing The activity of the 4 CSD we operate, namely Interborda, Euronext, VPS, BP Securities and now Monter Italy, reported Strong revenue growth to EUR 56,800,000 mainly reflecting the contribution of BP Security, A very strong organic performance of our Nordic CSDs and the consolidation of Monce Etude.
Moving to Slide 11, advanced data service revenue Was up 29.7 percent to EUR 46,500,000 in the Q2 of 2021, driven By a resilient market database and the consolidation of the Bors Itliana Group, various data activities. Proceeding now with the Investor Services revenue was up 29.8 percent to EUR 2,200,000, reflecting continued commercial development. Lastly, on Technology Solution and Other, revenue almost doubled in the Q2 2021 to €22,900,000 as a result of a strong safety colocation revenue and the consolidation of the technology business Obors Itagana Group, including GateLab, a financial software company offering brokering and property trading platform and X2M That provides the low latency trading access to the international financial markets. Moving to Slide 13 for the financial highlights of the Q2. Let's start with the EBITDA bridge.
EBITDA For Euronext, this quarter was up 53.8 percent to EUR 192,900,000. The EBITDA margin slightly decreased, but remained strong at 58.7% this quarter despite The ongoing integration activity is impacting the quarter. On a like for like basis, EBITDA margin was at 59.2 percent this quarter, and EBITDA increased 2.4%. From a revenue perspective, at constant perimeter, those revenue increased EUR 7,500,000 compared to last reflecting the listing and post trade organic growth. The Bors Itliana Group contributed €89,600,000 to the top line and the other business acquired for €20,000,000 And this EUR 20,000,000 mainly reflect the consolidation of BP Securities.
Looking at costs, Group operating costs, excluding D and A, were up EUR 50,600,000 to EUR 135,900,000 as a result of EUR 4,500,000 of additional organic costs, mainly reflecting the staff costs And EUR 46,400,000 additional cost from change of scope as a result of the consolidation of the Bors Itlianna Group, BP Security and other smaller recent acquisition and also from the integration costs mainly related to the Bors Itlaliana Group. As a reminder, The figures related to the Bors Itadiana Group represent 2 months 2 days of consolidation in the Q2 of 2021. Moving to Slide 14 for the net income bridge. Net income increased this quarter by 5.6 percent to EUR 86,600,000 resulting from the following element: D and A mechanically increased, impacted by consolidation of recent acquisition D and A and BPA. Going forward, quarterly D and A for the Euronext group are expected to amount to around EUR 37,000,000 including PPA for around EUR 20,000,000.
Exceptional costs were EUR 26,000,000 mainly related to the transaction of the Bors Itliana Group. I remind you that the estimated cost Well, already disclosed in our 2020 universal registration document for approximately EUR 30,000,000. The small discrepancy between the actual and the estimate resulted from cost savings, Costs already booked in the Q1 of 2021 are being capitalized in the first half of this year. Net financing expense for the Q2 of 2021 was EUR 10,500,000 higher compared to last year, primarily resulting from the consolidation Of the cost related to the acquisition of Bors Itliana. On a normalized basis, the financing costs are expected to amount To around EUR 7,000,000, EUR 8,000,000 per quarter.
Lastly, income tax for the Q2 2020 was €37,200,000 This translates into an effective tax rate of 29.6% Impacted by nondeductible exceptional costs. Going forward, excluding the potential impact of nondeductible We expect our tax rate to normalize at around 28%. Adjusted for PPA and exceptionalizes, Adjusted net income was €134,700,000 translating into an adjusted EPS increase of 20 Moving to Slide 15 for the cash flow generation and leverage. The net operating cash flow was slightly negative this quarter EUR 1,300,000 net negative. I would like to highlight that this includes the negative North Pool and CCNG cleaning activities on the changes of working capital for EUR 63,000,000.
In addition, the cash flow generation this quarter was impacted by higher tax paid due to the higher taxable income in 2020 This is 2019 and the seasonality of tax cash out. Our net debt to EBITDA ratio It's at 3.1 times at the end of June 2021, following the bond we issued to finance the Borsa Italian acquisition. You can find our debt schedule in appendix. Lastly, on Slide 16, for the evolution of our liquidity position over the quarter. As you can see, the main impacts are related to the acquisition of the Bors Itliana Group and its refinancing.
In particular, the key items are EUR 5,500,000 mainly related to EUR 3,800,000,000 Of bridge facility and EUR 1,800,000,000 3 tranche bond issuance, EUR 4,100,000,000 of investment mainly from the Net of the cash acquired EUR 2,400,000,000 of capital increase And EUR 3,700,000,000 of bridge facility repayment. Our liquidity position was strong That's about EUR 1,200,000,000 including the undrawn SCF for EUR 600,000,000. Finally, Our targeted cash for operation increased from EUR 180,000,000 to EUR 400,000,000 following the acquisition I now hand over the floor back to Stephane Buschner.
Thank you, Georgio, and thank you again for your We were very pleased to share with you a strong Q2, twenty twenty one in terms of organic performance boosted by the first Contribution of the Bostatinib Group accounts. We are actively preparing the new Euronext strategic plan, Which will include 2024 Group guidance. And we will release this new Euronet strategic plan in November 2021. We are now available for your questions with Georgios Modica, our Group CFO and also Juan Tonniatia, The Group Head of Primary Markets and Post Trade.
Thank you. And our first question comes in from the line of Mike Werner calling from UBS. Please go ahead.
Thank you and congrats on the results guys. Two questions if you don't mind. First on fixed income trading, particularly the cash portion. You noted how there was quite a strong increase quarter on quarter. I was just wondering how this quarter compares to other quarters.
I don't have a really good look into To where these volumes have been quarterly. So maybe if you could just provide some context with regards to the Q2 volumes relative Maybe the full year 2020 run rate. And then also any indication as to how July volumes are panning out? And then second, Stefan, I think I saw you make some comments about internalizing the clearing opportunity. And I was just wondering, I mean, our numbers show that you account or Euronxt now with Borsa Italiana Group consolidated Account for more than 50% of the revenues for the Paris subsidiary of LCH.
So I was just wondering if Euronext would also be willing to consider a potential transaction or M and A Solution to clearing with regards to the power subsidiary of LCH? Thank you.
So I'll answer your question on clearing and Georgi will answer your question on CEC and Cement drilling. 3 or 4 comments on your question on clearing. First, I don't want to comment the financials of LCHSA, And I'm not totally convinced that the percentage you are referring to are accurate, but I'm not in a position to comment the LCHSA Numbers. 2nd, on the M and A front, it's a situation which is Pretty clear, we own 11.1 percent of LTHSA. We sit at the board of LTHSA.
We have Preemption right, in the event of a transaction where LTH Limited will sell LTHSA, but it's up to The controlling shareholder London Stock Exchange Group to decide whether they have an interest to consider such a transaction or not. As you know, the assets that are part of LTHSA, formerly known as ClearNet, used to be part of Euronext. They were sold to Non Nonstructions Group in 2004, if I'm not mistaken. And we tried to acquire Those assets in 2016, 2017 in the context of the remedies for the attempted Merger between Deutsche Borse and LSE. Actually, we acquired them on the condition precedent of the completion of this merger, which did not complete.
So it's not like the idea has never existed, but the reality Of Corporate Life is that it's London's Exchange decision to decide whether or not they would be interested in such transaction. On the what you referred to as the international internalization of Caring, the matter is has been Discussed several times and requires some level of granular analysis because it's not binary. And what I said yesterday to a gentleman from Reuters, I think, It was slightly more complex than what was necessarily expressed in the report. We are now the owner For the first time of 100 percent of a clearinghouse. And that changed completely the way we look at clearing Close from your next clients and your next operations.
And we have the duty to consider how, when, At what pace for what assets we could consider Offering to our clients the possibility to clear the flows they trade with us within CCNG. And we are exploring These options. And these options requires the completion of at least 4 or 5 work streams. The first work stream is a legal work stream, which is a proper negotiation With LCHSA, LCH Limited and LSEG, because we have an agreement with them that last until 2027. We have exit windows from this contract, but there are breakup fees associated To the exiting this conference, like any contract, the closer you get to the maturity, the smaller the breakup fee, etcetera.
So let's without answering to the details, There is an element which is in negotiations with the incumbent provider. The second element is to assess what would it mean in terms of CapEx To transform CCNG, which today is mainly a single country clearinghouse for the Italian market, Into a Pan European clearing platform. And that's an easy work stream to do, but that's also work in progress, How much technology CapEx are needed? The 3rd work stream is what does it mean in terms of capital requirements and in terms of risk model. So far, CCNG is probably one of the safest clearinghouse in Europe With very strong capital requirements or initial margin required by the Central Bank of Italy.
To what extent this Margin initial margin profile and risk model could be adjusted to make TCNG more competitive is another issue That requires a dialogue that has started on Credit Italia. The 4th work stream is what is the right solution for the various assets that are today cleared By, as the HSA, we're clear cash, equity, trading, But we don't have any revenue sharing agreement with the CHF, we did the CHF for those operations. And as you know, they are not very complicated in terms of margin, but it is a relatively commoditized business. So one type of solution could be explored for this type of assets. Then we have derivatives.
Derivatives acquire more margin. And we have a profit sharing arrangement with the FTHSA, which is valuable to us. And that probably triggers the different type of options and solutions. Then we have commodities clearing. Now for the commodities, some of them behave Almost like financial derivatives because they are cash settled, but others have a specific profile in terms of clearing because they are physically settled.
And then we have the repo business Mainly for the Italian GOVI's repo, which has particular features and particular interactions between LCHSA And MTS. So the solutions is not can be captured in one time feasible and require granular analysis. Then we need to have a dialogue with clients because with clients like cross margin collateral. Are we online? Yes, okay.
So we know someone is beeping. And my point is that we have also to go to the root What sort of incentives need to be created for clients to migrate. That being said, The big picture is that we own 100 percent of CNG and we own 11% of CHSA. So that's what What's behind my comment made yesterday, we are exploring the options. We are analyzing the pros and cons of all the situations.
We have a good constructive dialogue with LSE, but we have also extremely productive, innovative discussions within You're next with the CCNG teams. And we will share the conclusions at the Investor Day that we'll take best at the beginning of November. Apologies for this long answer, but there can be a simplified reply to your question.
Yes. Let me take your question of MTS. So the first element that is important to highlight is that starting from the end of last year, The market has perceived a very strong support to the debt issuance of European govies. This has increased the appetite of investor. Number 1, to invest in cash transaction Vis a vis using the repo channel of MTS, so this explain the mild dilution of the repo Volumes and revenues visavis what happened in cash.
And then as you correctly highlighted, we are witnessing An explosion of volumes, which depending on the quarter and the month are between 50 100% higher than the volumes that we witnessed last year. Now part of your question entails the outlook For the remainder of the year, what I can share with you is that the trend remains strong As we speak, even if we start receiving some fatigue from the market given these prolonged Period of extremely high trading volume, but I believe that the important element is that the underlying Factors and tailwinds are there to stay in our view. The first one is support of EU To the pandemic recovery, the NextGen program will help as well. And the general political stability Across Europe is another very important factor. So what we can see is clearly those volumes Are exceptionally high.
However, the positive trends are still there even though some first Signs of fatigue are starting to appear.
Thank you both for those answers. Very helpful. Thanks.
The next question comes in from the line of Kyle Voigt calling from KBW. Please go ahead.
Hi, good morning. So first question is on just cash equities revenue capture excluding Borsa Italiana. Once again came in very strong. I think you noted before that you expected that capture rate excluding Borrza Itliana to settle in a lower range than it was And it had been at for the last several quarters. I guess now that this trend has persisted, do you expect Those cash equity capture rates to still move directionally lower or do you think we're in a more sustainable Type of revenue capture yield environment.
So that's the first question. 2nd question It's just with the strong EBITDA growth, the pro form a leverage has come down faster than we expected. Can you just give us some updated thoughts about this kind of new Diversified pro form a business and what type of leverage profile you think this business can sustain on an ongoing basis
And were
you willing to flex that to the high end for further M and A? And then lastly, should we think about M and A as really off the table for the next 12 months or so as you focus on integrating Borr Sataliana because of the size of that integration Are you still comfortable executing on M and A opportunities?
I'll provide you with a General qualitative answer to your strategic question on M and A. And Georgiou We'll answer your question on cash equity capture or yield and on the pro form a leverage profile evolution. Clearly, the key priority of Euronext for the coming 18 months It's to make the acquisition of Borsa Italiana a success, leveraging on the very good quality of the teams, the very good Features of the local markets and trust we have in the possibility to grow the business in Italy. So Our priority for the next, let's say, 18 months is to integrate Port Saint Helena to grow the combined Top line of the group to grow the EBITDA, to grow the free cash flow generation, to deleverage the company as quickly as possible. And we will probably not have proactive M and A move until we significantly deleverage.
That being said, the reality of corporate life and M and A is that situations come when they come, And you don't select the timing of sellers. So we are monitoring very closely opportunities to further expand the European footprint of Euronext and the European federal model of Euronext. And we'll see Whether some opportunities come or not after 18 months or before 18 months. Also, we continue to monitor very closely opportunities to diversify our top line To be less dependent than we are, even if we have massively diversified over the past 5 years, less dependent on volumes volatility. And this monitoring exercise and exploration continue.
So to the extent we have control of timing, we're trying to push them Down the road for the next 18 months, to the extent we do not, we will not have control of timing. We will explore ways To offer to our shareholders the possibility to capture those deals when they offer great EBITDA expansion potential. So it's a sort of generic reply because unfortunately, we can't be specific only on But at least you have the mindset in terms of priorities.
So let me take your first two questions. So Revenue capture, yes, you're absolutely right. We are at the highest point ever. And in this respect, we what I would like to share with you is similar to the message I shared in previous quarter. This is a result of a specific market condition, which are linked as well to the size of the order that remains low.
So what we have seen are a number of elements. The first one is that volumes and volatility has normalized. But on the other side, other elements of the market remain specific like retail participation, which remains relatively high. And the average trade side remains low, and this trigger a level of revenue capture that we still do not deem Sustainable in the long term. So now we have as well the revenue coming from Borsa Italiana, which are Diluting the yield, you have seen the EUR 0.52 billion as pro form a revenue capture for the whole group.
So what I can share with you Is that on a pro form a basis, we believe that what would be sustainable for us Is the revenue capture below 0.50 basis points at around 47, 48. This is more or less what we anticipate would be sustainable in the long term. That doesn't mean that the next quarter, We might not have a similar situation as the one we are witnessing this quarter, but this is our view for the long term. When it comes to leverage, again, you are very right. When we closed We were in a better situation than the one we were expected to be in September.
And today, we are in a better situation than the one we were expecting when we closed the transaction. This gives us a room of maneuver within our current rating band Of several 100 of €1,000,000 in terms of theoretical firepower, however, as Stephane commented, Our priority is to integrate BOS Itliana, and then we would be Extremely tough in the assessment of any potential opportunities in the short term.
Very helpful. Thank you.
The next question comes in from the line of Arnaud Ghibla calling from Exane. Please go ahead.
Yes. Good morning. Three questions, please. Firstly, could I ask you to comment perhaps on a specific deal situation? I think the Euroclear Stake has come up for sale from ICE.
I think in the past, you've also mentioned wanting to become the Euronext of clearing and settlement Across Europe. So could you perhaps comment on whether or not you've got any interest there? Secondly, I was wanting to get some of your views on net net treasury income. I mean historically, Under Elesys ownership, there's been a significant amount of optimization, if we can call it that way, Of net net interest income yield at Bosto Italiana, maybe going up the risk curve. How do you see the situation there?
Do you think the yields are optimal? Or can you shift them one or are you expecting them to shift one or another? And my final question is, could you perhaps quantify the integration costs that have happened over the quarter? Thank you.
Okay. I will answer your first question and Giorgio will answer your second question and your third question. The first question on the reported in the media interest for I still disclosed a 9.8% stake in Euroclear. I don't have any comments to make as far as your next Approach of the situation is. On the other two issues, Georgiou?
Absolutely. So when it
comes to the net Treasury income, what I can comment is that the investment policies of CCNG has been has remained table for a number of years. And if we look at the revenue capture out of the invested portfolio, Which I want to highlight remains a very small portion of the overall initial margin and default fund It's been fairly stable in the last years, and we feel that level It's in line with the risk appetite of our group. Having said that, it is clear that clearing These are new to Euronext, and we will be extremely cautious, and we will monitor the investment policies in the quarters and years to come. When it comes to the integration costs this quarter, we did spend above EBITDA Around €5,000,000
Thank you very much.
The next question comes in from the line of Bruce Hamilton calling from Morgan Stanley. Please go ahead.
Thanks. Good morning guys. Just a question on SGX, it was very good. And in terms of your sort of plans to extend The offering outside of Italy, obviously, you gave quite a detailed answer about the steps you need to go through for CC and G to Think about or bring clearing back from LCH, but what are the sort of steps to go through on the MTS side to maybe extend that? And then secondly, I guess, often in large exchange deals, there is discussion with users around some sharing of the benefits of the deal in terms of Pricing give up or other.
How should we think about that? So I assume it's already embedded in the sort of revenue synergy numbers that would be net sort of give back to users. But is there any sort of are there any areas where there could be some price adjustments to benefit users? Thank you.
Yes. So I will take your question. So if I understand correctly, the line was a little breaking up. What we will be doing in order to extend the potential of certain Euronext Borsitaglala CDL is outside of Italy, and I believe you were mentioning MTS. This is something that we are already doing, And the work is around different lines.
One line is clearly to export For the value proposition that MTS has built on sovereign debt To other geographies outside of Italy, MTS has a very specific electronic solution That might greatly help DMOs around Europe, and we are actively marketing for that. And the other element, we believe that the full value chain of Bors Itliana and Euronext would deserve A greater share of the EU program For the refinancing and development of European economy. We believe that Euronext Dublin could contribute. We believe that our CSD would be able to contribute, and we believe that the electronic platform of MTS We'll play could play a very significant role in this respect. When it comes to your second question, I can only confirm That any retrocession or any giveback, as you called it, Would be or is embedded in the target that we have already shared and is going to be included in the target that we will share To the market at the Investor Day later this year.
Great. Thank you.
The next question comes in from the line of Enrico Bolzoni calling from Credit Suisse. Please go ahead.
Hi, good morning, and thanks for taking my questions. Just a couple, one on costs. They were pretty much under control over the Quarter despite the Borsa acquisition.
Can you
just give an update on how we should think about that in terms of future quarters in terms of evolution in the near term, I'm not talking about operating, so excluding clearly the exceptionals. And then I have another question on Again, the custody and settlement, it clearly was very, very strong. So again, can you just confirm how comfortable you are that This trend can continue for this part of the business over the coming quarters. And then finally, just a bit of a general question. There are numbers of Retail players that are coming in Europe and quite a few of them offer basically internalization of trades between clients.
So Is this something that down the line concerns you, the fact that there's going to be more and more of these players that actually internalize the trading orders, So skipping the actual infrastructure. Thank you very much.
So starting with your first question on costs. The way I can help you is twofold. I can confirm the target that we have set for the perimeter, excluding Bors Itliana In February, with the results of 2020, so our ambition To decrease cost with respect to the full 2020 by a mid single digit, then to be more granular than that, We will need to go to the Investor Day. This is more, if you want, of a technical quarter between and we're going to have some say it's very difficult to give you A specific target for Q3. So I cannot do more than that.
The other element that I can highlight Is that clearly, we are in the process of onboarding costs for the integration and to get prepared to the migration The data center that will impact our cost in the quarters to come. When For the then I will take your question on retail, and I will give the floor to Antonya, who is the Global Head of Post Trade to answer your last question. So when it comes to retail, I want to highlight a few elements. Number 1 is that Euronext has a very strong retail participation, And it is one of the key assets of the group, and we are willing to leverage that even more going forward. The second element is that in this respect, Bors Itagliano provides a great contribution because also the Italian ecosystem, Retail ecosystem is intimately linked to the stock exchange, and we are willing to use and leverage The task that even more, we are always vigilant for the new threats That might emerge around retail.
At the moment, what I can say is that we believe that we have the right element And the strategic flexibility to cope with those elements. And one of the most important element is making sure that we are able To display the value added of our solution with respect to other solution Because many times internalization comes at a very significant cost for retail, Even if this cost is not explicit in a fee, but is implicit with the lower quality of execution. Anthony?
Yes. Good morning. Thank you, Giorgio. So concerning our TSD businesses, so we have Four drivers for the growth of the earnings of the CSG. The first one is the valuation of assets, which, as you know, has been growing in the past few months.
So now we are reaching a level of 6.3 €1,000,000,000,000 in our 4th CFTs. It's obviously difficult to predict the trend, But it's a macro trend that you can follow. The second driver is the number of settlement instruction, which is the result Of the trading on the different markets that are captured by the CFTs. And we had in Q2, We have managed a €33,100,000 settlement instructions. And again, this is a consequence of the volumes of the market.
We've observed Some stabilization in the past few weeks. The 3rd driver is specific to our Nordic TSDs, We manage resell accounts directly in opposition to the continent of CSCs such as Monte Italy or Interbolsa who manage Jumbo account. And the revenues are directly linked with a number of new accounts being opened for the retail clients and as well as the retail activity. So same thing, this has been growing in the past few quarters. Although we observed some trends to stabilization.
The last driver is very important for us because it's the growth part of the CSD, which is a diversification to post This is something that we would comment in the future, but it's still modest at that stage. Thank you.
Thank you.
The next question comes in from the line of Philip Middleton calling from Bank of America. Please go ahead.
Yes, thank you. I wonder if
you could say a little bit, obviously, you've been talking a lot about BOSU Italiana, which is I think a fantastic deal. But could you say a little bit about your Ambitions in the Nordic region. Now you've completed your integrations there. I'm sure there's plenty you can do there organically. And secondly, you give this very compelling figure about Non volume based revenues.
Presumably, that's only including 2 months of Borsa Italiana, and that would have been higher had you You count it for a full 3 months. Do you have any idea about what that number might have been?
I will answer your questions on our Nordic strategy and Georgiou will answer your question on the revenues. The Nordic region is a very important component of the O and M strategy. There is no European success without a Nordic dimension. Before the acquisition of the Bostatin Arie Group, the Nordic region was representing 25% of the top line of the group. And All the investments we have made in this part of the world are extremely successful, and we are very happy with The pace and of integrations over there, the flexibility offered by local market, And it's really a place where we want to grow, for sure.
We had several dialogues with Several players, mainly in the field of platforms to diversify our revenue mix. And we definitely will try to continue this dialogue and to capture any available Opportunity to grow in this part of the world, again, with a focus on acquiring Asset that could help us to diversify our revenue mix.
Philippe, with respect to your second question, my honest This quarter was so many gaps and changes to compute it. We did not compute that one. So I do not have a reliable number to share with you, but my guess is that the number will not be dramatically Different from the 56%.
Okay. Thank you very, very much. That's helpful.
The next question comes in from the line of Martin Price calling from Jefferies. Please go ahead.
Good morning. Thanks for taking my questions. I've got 2, hopefully, quick ones. The first was just on costs. I was just wondering if you could provide an update on the nonrecurring expenses you expect to be included in full year 2021 operating costs rather than exceptionals.
I think you said you booked $5,000,000 in the first half. Just be helpful to understand how significant those items are in the context of your guidance for this year. Second question, just a quick one on M and A. Clearly, you've done a lot of deals in the last 3 to 5 years. Have you seen you divest a couple of non core assets this year as you optimize the portfolio?
I I was just wondering if we should expect a bit more of this and potentially something more significant in terms of size? Or are you sort of essentially happy with the existing business perimeter? Thank you.
Look, I think I covered the acquisition part in the previous question, and you are opening A new question about the disposal of assets or the asset rotations, whatever you want to call the fact that you sell Asset, we have a clear view on that one. The bigger your net growth gets, The more important is to trim the perimeter and to dispose assets that can find A better owner elsewhere. And I'm referring here to small businesses that have a margin dilutive Impact on the group. The philosophy and since you asked an open ended question is the following. We don't like margin dilutive businesses.
We can live with margin dilutive businesses If such margin dilutive businesses produce growth at the higher level than the core business And or quality of earnings in terms of resilience of revenues, That is stronger and better than the core business. Now if the margin dilutive business doesn't grow And doesn't bring in any material way quality of earnings, then we sell We'll restructure, we do whatever is appropriate to make sure that it is not part of the Euronext perimeter. We have done that in the past Two quarters in Q1 with the San Tevo in Q2 with OMS. These were two good assets That we're part of the perimeter of Osterholm's EPS when we acquired it in 2019. We look for a year and a half To what to do with those assets and I reached the conclusion that we were not the best owner and that we will not be in a position to create any Convergence towards the blended margin contribution of the group, know that the growth profile, know The quality of the earnings would be material enough to justify that.
So we have done it. We will continue to have the same approach across the group, And it's a sort of continuous sanity check, a trimming effort that we have on every asset. And we will apply the same logic on some periphery assets within the Boste Italian Group if and when appropriate. But
this is
a sort of very important discipline to focus the group on areas where we do create value and not to use our shareholders' resources in areas where we don't create value. Yes.
On your question on cost, the short answer is that I cannot give you A target for the next quarter or the end of the year. The slightly longer version of the answer is that we put a lot of Important in the credibility of what we of the target we set out. So we are Still gathering the information needed to give you the plan as detailed as possible at the time of the Investor Day. What I can tell you as well is that out of the around EUR 5,000,000,000 that I was mentioning, not 100% is related to Borcitallana Because there is a small component around 10%, which is related to the completion of the integration of other acquisitions. And the other element I can share with you is that you should expect this number to grow in the next quarter as we are Getting equipped to deliver on very ambitious project such as the migration of the data center and the OPTIC migration.
Unfortunately, I cannot tell you more than that, more to come at the Investor Day. Thank you.
Understood. That's great. Thanks, Georgi. Thanks, Stefan.
The next question comes in from the line of Ian White calling from Autonomous Research. Please go ahead.
Hi, morning. Thanks for taking my questions. Just two follow ups from me, please. So first of all, just on Corporate Services. Could you provide a sense of the penetration rate for those services, please?
Essentially, what percentage of the group's listed issuers Purchases those services today. I'm just keen to understand the scale of the remaining opportunity there. Secondly, a follow-up on the clearing discussion. So I'd be keen to understand the extent of flexibility you think you might have there, particularly on the MiFID's non discriminatory access provisions. So basically, do you think it's possible to silo, the MTS business specifically, and actually severed the clearing link to LCHSA?
Or is it more likely that any clearing solution that you can pursue going forward would maintain a choice for end users between CC and G and LTHSA over the
long term, please. Thank you. I will answer your second question, and Anthony and Patria will answer your first question on corporate services is the head of listing, which includes our corporate services ambitions. No one is suggesting to create a false silo of any solution, which would be contradictory to the terms Of MiFID and EMEA. So what we are discussing and what I commented earlier on Is the possible development of a solution to be proposed to our clients And because we want to be CCP neutral vis a vis your clients, And we are just talking about offering them a solution that is a complement and that could be an alternative So what they do today with the CHS Day.
So nothing different or contradictory To the current regulatory framework, so no silo ambition, just an alternative proposal. Anthony on Corporate Services.
Thank you, Stephane. So on our Corporate Services business, it's a diverse The business from a client segmentation point of view as well as the from a product offering Software as a Service offering point of view. So we do offer our services to listed issuers, Some of them being Euronexted issuers, others being non Euronexted issuers. It is wide and then broad across Europe. We do not disclose the proportion of issuers versus non issuers clients.
But what I can tell you is that we still have larger opportunities in Europe to deploy our advisory Post listing services as well as our webcast services, in particular, in this Increased accelerated digitalization period of time where we see a high demand. Some of our corporate services are targeting non issuers, and this place is called corporate services. And it's the same thing. We have a very deep, very broad Potential client base in Europe. From a geographical point of view, It's the same approach.
We of course, we leverage on the countries where Euronext is present, but we are also Expanding on non Euronext countries such as Spain, Sweden and Germany, for instance. Thank you.
Thanks very much. Very clear. Thank you.
The final question comes in the line of Andrew Coombs calling from Citi. Please go ahead.
Good morning, and thanks for squeezing me in. I have a broad based question and I appreciate that some of this we may have to wait until the investor update later in the year. I just wanted to ask your thoughts on investment spend more broadly. You obviously have a lot of initiatives coming up in terms of the optic migration, the data center Migration, potential shift in post trade from LCHSA to CCNG, you're still sizing up the clients and the time frame and all of these things. I guess my question would be when you think about investment spend, number 1 is, how do you think about how you book it Between exceptionals, OpEx, CapEx.
And secondly, what do you deem to be the necessary payback period for that investment?
So I can take the more accounting question And then Stephane can take the more strategic part of the question. So our rule, and this is very important, What you read in the line exceptional items does not mean one off. It's very, very specific category of one off. And those are the one offs which are related to transactions that are considered transformational in nature. And the shortcut for that, That usually fits 95% of the cases are the transaction where We need to seek for board approval.
Just to give you a very practical example, an M and A fee Paid to an investment banker to buy a company a small company would be in OpEx. So in the last quarter, for example, even in large transactions, we have booked those type of costs in OpEx. However, when it comes to transaction that require Board approval, such as Borsitaglana, Then the same line item in nature is recorded into the line exceptional items. So going forward, what you will see, but so this is one condition. The second condition is that in terms of amount, We need to be meaningful and therefore, several 100,000 ks.
For example, The travels for the Borst Italiana Group will not be booked clearly as exceptional. So in the EUR 26,000,000, What you will see are more the invoices from lawyers, banks, etcetera. And then so I believe that I answer Your questions or not fully?
Well, then let me ask
you a couple of follow ups.
I guess, Given that point, absent any further M and A, should we expect exceptional items to trend to 0? And then also on the CapEx versus OpEx And you think about the investment, is it case the technology investment goes in CapEx and the bulk of the rest is in OpEx?
Yes. Yes, absolutely, yes. Any so the first element to your question, In the range between being aggressive or conservative on capitalization, we are very conservative, Which means that if you compare ourselves to the other, most of our IT expenses flow Through OpEx, which does not mean that we do not invest enough. It means that we are conservative. However, the large projects That you are mentioning that will trigger a long term financial benefit from the group, of course, are going to be booked As CapEx.
On my side, to give you some intellectual framework To assess the way we look at this big technology project with strategic confidence, the situation is different from the 3 examples you have I mentioned for the OPTIC trading platform migration, this is part of the fundamental synergies of the acquisition of Port St. Helena. So the cost part, the revenue part and the Restructuring cost part of the OPTIC migrations are the component of what has been announced today. The cost part is part of the EUR 45,000,000 Cost synergies to be extracted from the transaction by Yotri. The revenue part is included in the €15,000,000 of revenue synergies to be generated by year 3.
And the restructuring costs are part of the €100,000,000 revenue restructuring cost that we have announced when the deal was made public. For the core data center, this is not part of the initial synergy story. So we will announce in November The contribution of the core data center migration to the expansion of the Euronext EBITDA and the restructuring costs will be separated From the €100,000,000 restructuring costs. For the clearing migration, if any, As I told you, it's work in progress, but that will be a separate project as well. So and as for any Of this project, there will be an element of if this migration of clearing A7 truly decided and completed, An element of cost synergies, of revenue synergies and on implementation costs with significant one offs.
So The solution is very different. Each time we measure the stand alone financial profile of the initiatives In terms of return on capital employed like any investment, in some cases, we look at the strategic value Because there are things that we have to do for strategic reasons that make sense. I mean, the migration of the quarter at Ascenta It was something we had to do for a sort of reason, including uncertainty post Brexit. And Although it's a deal that makes sense in any respect, it's a deal where the decision was somehow a must do decision And where we had to price the strategic benefit of having a core Teracentre in a facility that was built very recently in 2017 In the 110 percent renewable energy production facility in within Italy, which is now a very core market to Euronext And within a coordinated regulated environment of the European Union. So that's part of the decision as much as The standalone financial, the same for clearing.
For clearing, the decision is really And what you need for Euronext in terms of reduction of costs, incremental revenues and return on capital vis a vis The one off cost, but there is also an element of what does it mean to be fully independent in terms of clearing and not to be dependent on a contract that The maturity that ends in 2027. So for this type of very, very fundamental projects, we have to factor in. We have to price the strategic value of positioning the company differently and to make it less dependent on third parties Than before. So that's the way we are approaching those big projects.
That's really helpful. I appreciate the color. Thank you.
Thank you. That was the final question in the queue. So I shall turn the call back Thank you for joining today's call. You may now disconnect your handsets.