FLOW TRADERS Q222 RESULTS
FLOW TRADERS Q222 RESULTS
Amsterdam, the Netherlands - Flow Traders N.V.
(Euronext: FLOW) announces its
unaudited Q222 results and
2022 Half Year
report.
Highlights
- Market ETP Value Traded decreased by
9% quarter-on-quarter and increased by 66% H122 vs H121
- Flow Traders ETP Value Traded
decreased by 14% quarter-on-quarter and increased by 46% H122 vs
H121
- Flow Traders recorded Normalized
total income of €86.2m in Q222 comprising Normalized NTI of €83.7m
reflecting a more stable market and trading environment compared to
Q122 and Normalized other income of €2.5m derived from the
strategic investments portfolio. H122 Normalized total income was
€234.5m vs €236.9m in H121
- Normalized operating expenses of
€49.7m incurred in Q222. Normalized employee expenses reflect full
quarter impact of additional hires, completion of the targeted base
compensation increase exercise and the adjustment of the variable
remuneration pool to 32.5% of operating result to account for the
shift in total compensation mix
- €8.5m of strategic advisory costs
incurred in Q222 relating to optimization of group legal entity and
regulatory structure and further balance sheet review efforts,
which are excluded from Normalized operating expenses
- 611 FTEs as at 30 June 2022 compared
to 624 FTEs as at 31 March 2022
- Normalized EBITDA in Q222 reached
€36.5m representing a margin of 42% contributing to H122 Normalized
EBITDA of €111.1m with a margin of 47%
- Q222 Normalized net profit amounted
to €26.1m with Normalized basic EPS of €0.60. H122 Net Profit
amounted to €82.1m with basic EPS of €1.88
- Regulatory Own Funds Requirement
(OFR) as at 30 June 2022 was €312m, resulting in excess capital of
€203m as at 30 June 2022. Trading capital stood at €611m at the end
of the second quarter
- Interim FY22 dividend set at €0.70
per share with an ex-dividend date on 16 August 2022
- Announces new share buyback program
of up to €25m
Financial Overview
|
€million |
Q222 |
Q122 |
Change |
H122 |
H121 |
Change |
|
Normalized total income |
86.2 |
148.3 |
(42%) |
234.5 |
236.9 |
(1%) |
|
Normalized net trading
income |
83.7 |
148.4 |
(44%) |
232.1 |
236.6 |
(2%) |
|
EMEA |
50.4 |
108.5 |
(54%) |
158.8 |
143.3 |
11% |
|
Americas |
18.6 |
21.6 |
(14%) |
40.2 |
56.3 |
(29%) |
|
APAC |
14.7 |
18.3 |
(20%) |
33.0 |
37.0 |
(11%) |
|
|
|
|
|
|
|
|
|
Normalized other income |
2.5 |
(0.1) |
- |
2.4 |
0.2 |
- |
|
Normalized employee expenses1 |
28.5 |
54.0 |
(47%) |
82.4 |
85.7 |
(4%) |
| Technology
expenses |
14.9 |
13.8 |
8% |
28.7 |
24.1 |
(20%) |
| Other
expenses2 |
6.3 |
5.9 |
7% |
12.2 |
8.7 |
41% |
|
Normalized operating
expenses |
49.7 |
73.7 |
(32%) |
123.4 |
118.5 |
4% |
|
Normalized EBITDA1 |
36.5 |
74.6 |
(51%) |
111.1 |
118.4 |
(6%) |
|
Depreciation / amortisation |
3.9 |
3.8 |
|
7.7 |
7.5 |
|
| Write off of (in)
tangible assets |
- |
0.2 |
|
0.2 |
- |
|
|
Normalized profit
before
tax |
32.6 |
70.7 |
(54%) |
103.2 |
110.8 |
(7%) |
|
Normalized tax |
6.4 |
14.7 |
|
21.3 |
21.3 |
|
|
Normalized net
profit |
26.1 |
56.0 |
(53%) |
82.1 |
89.5 |
(8%) |
|
Normalized basic EPS3 (€) |
0.60 |
1.29 |
|
1.88 |
2.03 |
|
| Normalized EBITDA
margin |
42% |
50% |
|
47% |
50% |
|
Value Traded Overview
|
€billion |
Q222 |
Q122 |
Change |
H122 |
H121 |
Change |
|
Flow Traders ETP Value Traded |
448.8 |
521.9 |
(14%) |
970.8 |
767.9 |
26% |
|
EMEA |
192.8 |
238.2 |
(19%) |
431.0 |
366.3 |
18% |
|
Americas |
230.3 |
255.2 |
(10%) |
485.5 |
356.2 |
36% |
|
APAC ex China |
25.7 |
28.5 |
(23%) |
54.3 |
45.4 |
20% |
|
|
|
|
|
|
|
|
|
Flow Traders’ non-ETP Value Traded |
1,165 |
1,434 |
(20%) |
2,599 |
1,868 |
39% |
|
Market ETP Value Traded5 |
13,676 |
15,085 |
(9%) |
28,760 |
17,316 |
66% |
|
EMEA |
567 |
767 |
(26%) |
1,334 |
1,061 |
26% |
|
Americas |
11,951 |
13,305 |
(10%) |
25,256 |
14,533 |
74% |
|
APAC |
1,158 |
1,013 |
14% |
2,170 |
1,722 |
26% |
|
APAC ex China |
400 |
392 |
2% |
792 |
703 |
13% |
Regional Highlights
EMEA:
- Robust trading performance as Flow
Traders once again maintained its position as the leading liquidity
provider in ETPs, both on- and off-exchange - #1 position in fixed
income, equity, crypto and commodity ETFs
- Undertook a seamless transfer to
Euronext’s new data center in Bergamo, Italy from Basildon, UK once
again highlighting the strength of Flow Traders’ technology and
connectivity capabilities
- Further built out the corporate
credit trading business with improving hit rates, quote rates and
response times in the universe of ISINs covered with a focus on
automated trading. Retained Top 5 Bloomberg dealer rankings for
executed tickets and volume in Flow Traders’ Euro IG universe. From
a platform perspective, also successfully connected to Bloomberg
Bridge, an anonymous credit trading pool
- Continued to provide liquidity
across the crypto markets amidst the broader market backdrop.
Maintained support for new crypto ETP listings in EMEA such as
acting as a market maker for Jacobi Asset Management’s first
Bitcoin ETF. Moreover, sought to globally drive and accelerate the
development of the broader digital asset and decentralized finance
ecosystem via Flow Traders Capital’s latest strategic
investments
AMERICAS:
- Improved trading performance across
fixed income ETPs benefiting from increased volatility in rates and
inflation
- Continued expansion of Flow Traders’
Lead Market Maker (LMM) presence to support ETP industry-wide
growth. Recently, surpassed 150 LMMs as Flow Traders remains an
integral liquidity provider to ETF issuer partners
- Made further strategic progress in
the fixed income business as Flow Traders commenced trading as a
disclosed dealer on Trumid, the third most active institutional
bond trading platform in the US behind MarketAxess and
Tradeweb
APAC:
- Application submitted to open a
representative office in Shanghai ahead of imminent expected
receipt of regulatory approvals as part of the overall strategy to
enter the mainland China ETP market
- Reappointed as lead market maker in
the HKEX MSCI suite, continuing and deepening the already
successful partnership
- Expanded institutional relationship
effort during the quarter as part of an ongoing initiative to
broaden and deepen Flow Traders’ counterparty base across the
region - sponsored the first post-COVID S&P Japan event as well
as targeting the Taiwanese market with a dedicated institutional
trader
Flow Traders Capital
- Flow Traders Capital is Flow
Traders’ newly established corporate venture capital unit with an
initial commitment of €50 million to actively invest and capture
more value through a dedicated team in the development of financial
markets infrastructure and the digital asset space. The pace of
investments continued to accelerate during the second quarter with
seven investments in total amounting to €7.6m. Flow Traders has
completed 19 investments to date for a total value of €14.3m
- As part of its investment strategy,
Flow Traders Capital most recently formed part of the consortium to
drive the expansion of RFQ-Hub to create the leading global
institutional multi-asset RFQ platform
- In addition, Flow Traders Capital
further built its global presence in the digital asset and
decentralized finance space by having completed strategic minority
investments in Thalex, Tonic, Elwood, Ondo, BloXroute and Astaria
which are all highly innovative ventures that accelerate growth,
create greater transparency in financial markets and enable
financial ecosystem scalability
Outlook
- During the first quarter, a
systematic exercise was undertaken to shift the total compensation
mix of certain employee groups towards a greater fixed component
which meant that targeted base compensation increases have been
implemented. To account for the shift in total compensation mix,
the profit sharing percentage for employees has been adjusted to
32.5% of operating result, from 35% previously. This ensures that
the shift in compensation mix is income statement neutral going
forward. This change was implemented in the second quarter which
has led to a catch-up effect in the Q222 results. This adjusted
profit sharing percentage will be used going forward
- Growth in fixed operating expenses
(excluding one-off expenses) in 2022 is now expected to be
approximately 25% given the shift in total compensation mix towards
higher levels of base compensation as well as the impact across all
categories of the strengthening US dollar. The impact of the base
compensation increases will be offset by the adjustment of the
profit sharing percentage to 32.5% of operating result. The
expectation is that the maximum annual growth in fixed operating
expenses will revert to the c. 10-15% level
- The second quarter saw further
one-off strategy related costs being incurred, which are again
expected to deliver meaningful benefits going forward. These relate
specifically to optimization of group legal entity and regulatory
structure and further balance sheet review efforts. The expectation
is that the vast majority of these costs have now been absorbed
during the second quarter. Flow Traders remains focused on
underlying cost efficiency and discipline while executing the
overall strategic growth agenda
- Flow Traders announces a share
buyback program for a total aggregate consideration of up to €25m
over a period of 12 months from the start of the forthcoming open
period. The purpose of the buyback is to return excess capital to
shareholders. The intention is that shares repurchased as part of
this program will initially be held in treasury until
cancellation
Management Board Comments
Dennis Dijkstra, CEO,
stated:“The strengths of our business remained
very much evident during the second quarter. A robust risk
management approach along with pricing and hedging expertise
enabled the successful navigation of the recent volatility in the
crypto markets. Our institutional counterparty base continues to
grow quarter on quarter as Flow Traders’ trading proposition across
multiple asset classes is increasingly utilized by the buyside. It
is also highly satisfying that we will soon be able to open an
office in Shanghai in line with our plans to enter the mainland
China market. We have also worked hard to build on our strong
offering to current and prospective employees both from a culture
as well as a compensation mix perspective. We have expanded our
offices in every region and all colleagues are now all back in the
office. We have long held the firm belief that we are an employer
of choice, and it is pleasing to note that this has also been
recognized externally by MT 500 where we ranked in the top 10% of
companies with the best reputation in The Netherlands. Lastly,
within the context of our capital allocation framework, we have
elected to pay a €0.70 interim dividend to shareholders as well as
launching a share buyback program. This buyback in combination with
the proposed final dividend will further enhance capital returns to
shareholders.”
Folkert Joling, Chief
Trading Officer,
added:“The second quarter saw more normalised
market conditions with lower levels of activity compared to Q1.
Nonetheless, we delivered a resilient trading performance in Q2.
Our trading footprint continues to grow with more counterparties
onboarded as well additional connectivity to trading platforms.
With this in mind, we remain active in enhancing our coverage of
fixed income, commodity, and FX markets. The recent volatility in
the crypto markets has not altered our conviction around the long
term potential of crypto and decentralised finance both from a
trading as well as a technological and financial markets innovation
standpoint. With our generally market neutral approach, we
continuously provided liquidity across these markets in Q2 which
once again highlights our trading capabilities, strong risk
framework and consistently improving technology stack.
Mike Kuehnel, Chief
Financial
Officer,
added:“The whole team is looking forward to
sharing our strategic ambition at today’s capital markets update,
which reflects the strong conviction we have in the future of Flow
Traders. One aspect of this strategic roadmap has been the creation
of Flow Traders Capital, our dedicated corporate venture capital
unit, which formalises our accelerating strategic ecosystem
approach. This approach has led to seven minority investments since
the start of the second quarter. From an operating cost
perspective, we have adjusted the profit-sharing percentage to
better reflect the shift in compensation mix following the
systematic increase in base compensation for certain employee
groups. This ensures that the base compensation increases are
income statement neutral. There were also one-off expenses incurred
this quarter relating to optimization of group legal entity and
regulatory structure as well as further balance sheet review
efforts, which are all expected to deliver meaningful benefits
going forward. Our strong focus on underlying cost efficiency
remains.”
Preliminary Financial Calendar
16 August
2022 Proposed
FY22 interim dividend ex-dividend date17 August
2022 Proposed
FY22 interim dividend record date19 August
2022 Proposed
FY22 interim dividend payment date30 September
2022 Start silent
period ahead of Q322 trading update27 October
2022 Release
Q322 trading update (no analyst conference call)
Analyst Conference Call and Webcast
The Q222 results analyst conference call will be held at 10:00
am CEST on Friday 22 July 2022. The presentation can be downloaded
at www.flowtraders.com/investors/results-centre and the conference
call can be followed via a listen-only audio webcast. A replay of
the conference call will be available on the company website for at
least 90 days.
Contact Details
Flow Traders N.V.
InvestorsJonathan BergerPhone:
+31 20
7996799Email: investor.relations@flowtraders.com
MediaLaura PeijsPhone:
+31 20
7996799Email: press@flowtraders.com
About Flow Traders
Flow Traders is a leading global financial technology-enabled
liquidity provider in financial products, historically specialized
in Exchange Traded Products (ETPs), now expanding into other asset
classes. Flow Traders ensures the provision of liquidity to support
the uninterrupted functioning of financial markets. This allows
investors to continue to buy or sell ETPs or other financial
instruments under all market circumstances. We continuously grow
our organization, ensuring that our trading desks in Europe, the
Americas and Asia can provide liquidity across all major exchanges,
globally, 24 hours a day. Founded in 2004, we continue to cultivate
the entrepreneurial, innovative and team-oriented culture that has
been with us since the beginning. Please visit www.flowtraders.com
for more information.
IFRS Financial Overview
|
€million |
Q222 |
Q122 |
Change |
H122 |
H121 |
Change |
|
Total income |
83.5 |
148.0 |
(44%) |
231.4 |
236.6 |
(2%) |
|
Net trading income |
84.0 |
148.7 |
(44%) |
232.7 |
236.6 |
(2%) |
|
EMEA |
50.1 |
108.2 |
(54%) |
158.3 |
143.3 |
10% |
|
Americas |
19.1 |
22.3 |
(14%) |
41.4 |
56.3 |
(26%) |
|
APAC |
14.7 |
18.3 |
(20%) |
33.0 |
37.0 |
(11%) |
|
|
|
|
|
|
|
|
|
Other income |
(0.5) |
(0.8) |
- |
(1.3) |
|
- |
|
Employee expenses1 |
35.4 |
54.9 |
(36%) |
90.3 |
84.2 |
7% |
| Technology
expenses |
14.9 |
13.8 |
8% |
28.7 |
24.1 |
19% |
| Other
expenses |
6.3 |
5.9 |
7% |
12.2 |
7.4 |
66% |
|
One off expenses |
8.5 |
3.3 |
159% |
11.8 |
1.3 |
779% |
|
Total operating
expenses |
65.1 |
77.9 |
(16%) |
143.0 |
117.1 |
22% |
|
EBITDA |
18.3 |
70.1 |
(74%) |
88.4 |
119.6 |
(26%) |
|
Depreciation / amortisation |
3.9 |
3.8 |
|
7.7 |
7.5 |
|
| Write off of (in)
tangible assets |
- |
0.2 |
|
0.2 |
- |
|
|
Results of equity-accounted investments |
(0.1) |
(0.1) |
|
(0.2) |
(0.1) |
|
|
Profit before
tax |
14.3 |
66.1 |
(78%) |
80.3 |
112.1 |
(28%) |
|
Tax |
3.1 |
13.7 |
|
16.8 |
21.8 |
|
|
Net profit |
11.2 |
52.3 |
(79%) |
63.5 |
90.2 |
(30%) |
|
Basic EPS3 (€) |
0.26 |
1.20 |
|
1.46 |
2.05 |
|
| Fully diluted
EPS5 (€) |
0.25 |
1.17 |
|
1.41 |
1.99 |
|
| EBITDA
margin |
22% |
47% |
|
38% |
51% |
|
Normalized performance
- Flow Traders makes certain
adjustments to various IFRS expense and profit measures in order to
derive Alternative Performance Measures (APM). The policy is to
exclude or adjust items that are considered to be significant in
both nature or size and where the treatment as an adjusted item
provides stakeholders with useful information to assess the
year-on-year or quarter-on-quarter underlying performance. On this
basis, the following items were adjusted or excluded for the Q222
results reporting:
- Removal of IFRS 2 treatment of
share-based payments which include the deferral of a portion of the
current year share plans as well as recognition of prior years’
share plans. This adjustment provides insights into the
relationship between the current year variable employee expenses
and current year trading performance
- Other income line includes all the
realized and unrealized results on Flow Traders’ long-term equity
investments whether accounted for as Fair Value Other Comprehensive
Income (FV OCI), Fair Value Profit and Loss (FVPL) or Results of
Equity Accounted Investments
- Exclusion of strategic advisory
costs which relate specifically to optimization of group legal
entity and regulatory structure and further balance sheet review
efforts. These are not considered to be part of the underlying
operating expenses of the business
- Tax expenses are adjusted based upon
the pre-tax adjustments and/or excluded items above
Normalized to IFRS reconciliation
- Normalized EBITDA and margin are
based on the relevant profit share percentage of operating result
for the relevant financial period without any IFRS 2 adjustments
for share-based payments. The profit share percentage was adjusted
to 32.5% in Q222 from 35%. One-off expenses in the form of
strategic advisory expenses are also excluded
- Tax based on estimated expected
effective tax rate for the relevant financial period: Q222 - 19.7%;
Q122 - 20.8%; H122 - 20.5%; H121 - 19.4%
- A summary reconciliation of
Normalized to IFRS is presented below:
|
€million |
Q222 |
Q122 |
H122 |
H121 |
|
Normalized EBITDA |
36.5 |
74.6 |
111.1 |
118.4 |
|
FV OCI adjustment |
(2.9) |
(0.3) |
(3.2) |
(0.2) |
|
Results of equity-accounted investments |
0.1 |
0.1 |
0.2 |
(0.1) |
|
One off expenses |
(8.5) |
(3.3) |
(11.8) |
- |
|
Prior year share plans |
(6.2) |
(7.9) |
(14.1) |
(10.8) |
|
Current year share plan deferral |
0.4 |
5.8 |
6.2 |
12.2 |
|
Other variable remuneration adjustment |
(1.1) |
1.1 |
- |
- |
|
|
|
|
|
|
|
IFRS EBITDA |
18.3 |
70.1 |
88.4 |
119.6 |
|
Normalized Net profit |
26.1 |
56.0 |
82.1 |
89.5 |
|
Profit before tax IFRS adjustments |
(18.3) |
(4.6) |
(22.9) |
1.2 |
|
Tax difference |
3.3 |
1.0 |
4.3 |
(0.5) |
|
|
|
|
|
|
|
IFRS Net profit |
11.2 |
52.3 |
63.5 |
90.2 |
Notes
- Fixed employee
expenses: Q222 - €18.2m; Q122 - €16.1m; H122 - €34.3m; H121 -
€26.1m
- H121 other expenses includes €1.3m
of business continuity plan-related expenses previously classified
as one-off expenses
- Weighted average shares outstanding:
Q222 - 43,731,905; Q122 - 43,514,470; H122 - 43,623,788; H121 -
44,030,063. 43,731,905 shares outstanding as at 30 June 2022
- Source - Flow Traders analysis
- Determined by adjusting the basic
EPS for the effects of all dilutive share-based payments to
employees
Important Legal Information
This press release is prepared by Flow Traders N.V. and is for
information purposes only. It is not a recommendation to engage in
investment activities and you must not rely on the content of this
document when making any investment decisions. The information in
this document does not constitute legal, tax, or investment advice
and is not to be regarded as investor marketing or marketing of any
security or financial instrument, or as an offer to buy or sell, or
as a solicitation of any offer to buy or sell, securities or
financial instruments. The information and materials contained in
this press release are provided ‘as is’ and Flow Traders N.V. or
any of its affiliates (“Flow Traders”) do not warrant the accuracy,
adequacy or completeness of the information and materials and
expressly disclaim liability for any errors or omissions. This
press release is not intended to be, and shall not constitute in
any way a binding or legal agreement, or impose any legal
obligation on Flow Traders. All intellectual property rights,
including trademarks, are those of their respective owners. All
rights reserved. All proprietary rights and interest in or
connected with this publication shall vest in Flow Traders. No part
of it may be redistributed or reproduced without the prior written
permission of Flow Traders. This press release may include
forward-looking statements, which are based on Flow Traders’
current expectations and projections about future events, and are
not guarantees of future performance. Forward looking statements
are statements that are not historical facts, including statements
about our beliefs and expectations. Words such as “may”, “will”,
“would”, “should”, “expect”, “intend”, “estimate”, “anticipate”,
“project”, “believe”, “could”, “hope”, “seek”, “plan”, “foresee”,
“aim”, “objective”, “potential”, “goal” “strategy”, “target”,
“continue” and similar expressions or their negatives are used to
identify these forward-looking statements. By their nature,
forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors because they relate to
events and depend on circumstances that will occur in the future
whether or not outside the control of Flow Traders. Such factors
may cause actual results, performance or developments to differ
materially from those expressed or implied by such forward-looking
statements. Accordingly, no undue reliance should be placed on any
forward-looking statements. Forward-looking statements speak only
as at the date at which they are made. Flow Traders expressly
disclaims any obligation or undertaking to update, review or revise
any forward-looking statements contained in this press release to
reflect any change in its expectations or any change in events,
conditions or circumstances on which such statements are based
unless required to do so by applicable law. Financial objectives
are internal objectives of Flow Traders to measure its operational
performance and should not be read as indicating that Flow Traders
is targeting such metrics for any particular fiscal year. Flow
Traders’ ability to achieve these financial objectives is
inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are
beyond Flow Traders’ control, and upon assumptions with respect to
future business decisions that are subject to change. As a result,
Flow Traders’ actual results may vary from these financial
objectives, and those variations may be material. Efficiencies are
net, before tax and on a run-rate basis, i.e. taking into account
the full-year impact of any measure to be undertaken before the end
of the period mentioned. The expected operating efficiencies and
cost savings were prepared on the basis of a number of assumptions,
projections and estimates, many of which depend on factors that are
beyond Flow Traders’ control. These assumptions, projections and
estimates are inherently subject to significant uncertainties and
actual results may differ, perhaps materially, from those
projected. Flow Traders cannot provide any assurance that these
assumptions are correct and that these projections and estimates
will reflect Flow Traders’ actual results of operations.
By accepting this document you agree to the terms set out above.
If you do not agree with the terms set out above please notify
legal.amsterdam@nl.flowtraders.com immediately and delete or
destroy this document.
Market Abuse Regulation
This press release contains information within the meaning of
Article 7(1) of the EU Market Abuse Regulation and is an
announcement pursuant to Article 5(1) of the EU Market Abuse
Regulation.
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