It’s been a busy year for Singapore Exchange Limited (SGX: S68), or SGX.
The bourse operator has been actively launching a slew of new products to bolster its offering to clients.
From the launching of new futures contracts for LNG vessels to the world’s first ESG REIT derivatives, the group is getting its fingers into multiple pies.
SGX also recently announced the acquisition of MaxxTrader for US$125 million to complement its acquisition of BidFX last year.
Amidst the flurry of news, the group announced its full-year earnings for the fiscal year ended 30 June 2021 (FY2021).
It was a surprisingly downbeat set of earnings with net profit falling by 6% year on year, but CEO Loh Boon Chye attributed the weaker performance to lower treasury income due to the persistently low interest rate environment.
Here are five other highlights from the bourse operator’s earnings report.
1. Lower second-half earnings
SGX’s fiscal 2021’s second half (2H2021) was responsible for the weak full-year showing.
Operating revenue dipped by 6.8% year on year to S$535.1 million, dragged down by a 16.3% year on year revenue fall in the equities division.
Operating expenses, however, rose by 6.9% year on year, leading to a 17.2% year on year decline in operating profit and a 20.5% year on year plunge in net profit.
For FY2021, revenue was comparable as contributions from the acquisitions of BidFX and Scientific Beta helped to buffer lower treasury income.
Total expenses rose by 8% year on year to S$525 million mainly due to the consolidation of the above acquisitions. Excluding them, expenses would have been 4% lower year on year.
The decline in net profit for FY2021 can thus be attributed to expense recognition from SGX’s new subsidiaries along with weaker yields for its treasury division.
2. A strong showing from bonds and derivatives
Despite the weaker group results, the Fixed Income, Currencies and Commodities (FICC) business did well, with revenue increasing by 24% year on year to S$211.8 million.
In particular, fixed income revenue increased by 17% year on year, led by higher listings revenue.
The better performance was chalked up despite a fall in the number of bond listings for FY2021, at 795 versus 1,032 a year ago.
Currency and commodity derivatives also performed well, with revenue jumping by 24% year on year to S$196.9 million.
Trading and clearing revenue surged by 41% year on year to S$152.6 million, principally due to the consolidation of BidFX.
This performance came about even though total currencies and commodities volume remained constant year on year at around 51.2 million contracts.
3. Higher equities volume, but lower revenue
SGX’s equities division is by far its largest revenue contributor, making up two-thirds of total group revenue.
For the cash equities market, total traded volume improved by 36% year on year to 500 billion, while total traded value inched up 2% year on year to S$340.1 billion.
As a result, revenue for this segment increased by 3% year on year to S$412.7 million.
Equity derivatives volumes saw a 6% year on year decline to 181.2 million while revenue for trading and clearing was down by 8% year on year.
SGX lowered its fees for this segment due to the introduction of its new FTSE Asia expansion suite of products.
Treasury income saw a big plunge to S$57.5 million, down 48% year on year, due to lower yields.
Overall, there was an 8% year on year decline in revenue for the equities division to S$701.1 million.
4. Scaling up its foreign exchange, fixed income and indices business
The group continues with business initiatives to boost various aspects of its business.
A foreign exchange (forex) electronic communication network (ECN) is targeted for launch by end-2021 and will help to scale up SGX’s forex franchise.
Through its newly acquired Scientific Beta, SGX launched new bespoke index solutions and ESG products such as climate indices.
For fixed income, SGX intends to develop a bonds marketplace with end-to-end capabilities covering the full lifecycle for enhanced workflow and better customer experience.
5. Introduction of a scrip dividend scheme
Despite the weaker net profit, SGX has declared a final dividend of S$0.08, unchanged from a year ago.
For FY2021, the total dividend comes up to S$0.32, 5% higher than the S$0.305 declared last year.
The group also intends to put in place a scrip dividend scheme to allow shareholders to reinvest their cash dividends and to participate in SGX’s medium-term growth.
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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.