Instinet Q4 and 2003 Results
January 22 2004 - 8:17AM
UK Regulatory
RNS Number:5315U
Reuters Group PLC
22 January 2004
22 January 2004 04/04
REUTERS: INSTINET ANNOUNCES FOURTH QUARTER AND 2003 RESULTS
London - Instinet Group Incorporated, the electronic brokerage in which Reuters
has a 63% stake, published its full year 2003 and fourth quarter financial
results today. These results are published under US GAAP. The equivalent set of
revenue figures in sterling and under UK GAAP will be published in due course.
Instinet's statement is below and the full press release, including financial
tables, can be found in the earnings release section on Instinet Group's
Investor Relations site at: www.instinetgroup.com.
NEW YORK- Instinet Group Incorporated (Nasdaq: INGP), the electronic brokerage
in which Reuters Group has a 63% stake, today announced a net loss of $38
million or $(0.12) per share for the fourth quarter of 2003. This included a
pre-tax restructuring charge of $60 million, a $22 million impairment charge on
the write-down of intangible assets, a net investment gain of $10 million and an
insurance recovery of $2.5 million. Excluding these items and the related tax
effect, pro forma operating income was $5 million, or $0.01 per share, for the
fourth quarter of 2003.(1)
The 2003 fourth quarter results improved from a net loss of $112 million, or $
(0.34) per share, for the fourth quarter of 2002, which included a $62 million
restructuring charge and a net investment write-down of $20 million. Excluding
these items and the related tax effect, the pro forma operating loss was $10
million, or $(0.03) per share for the fourth quarter of 2002.(1)
For the year ended December 31, 2003, the net loss was $74 million or $(0.22)
per share, compared to a net loss of $735 million, or $(2.71) per share for the
year ended December 31, 2002.2 Excluding restructuring charges, intangible asset
impairment charges, investment gains or losses and insurance recoveries, pro
forma operating earnings per share for 2003 was $0.00 compared to a loss of $
(0.03) in 2002. (1)
Edward J. Nicoll, Chief Executive Officer of Instinet Group, commented: "During
the past quarter, we made steady progress in building our market share and
overall trading volume relative to the previous quarter, and improved our
financial performance from last year's fourth quarter. Perhaps most
significantly, we remain focused on reaping the benefits of the worldwide trend
towards greater efficiency and transparency in equities trading. More than ever,
our customers are counting on our unconflicted, low-cost products and services."
Business Trends
* Our clients traded 37.2 billion U.S. equity shares through Instinet
Group's subsidiaries in the fourth quarter of 2003, up 1% from 36.7 billion
shares executed in the fourth quarter of 2002, and up 9% from 34.2 billion
shares executed in the third quarter of 2003. The increase versus the third
quarter of 2003 was due to the combination of increased market share and
higher overall average daily market volumes in the fourth quarter.
* U.S. equity shares executed through Instinet Group's subsidiaries during
the fourth quarter of 2003 consisted of 32.0 billion NASDAQ-listed shares
and 5.2 billion U.S. exchange-listed shares.
* Our share of total U.S. equity volume was 15.9% in the fourth quarter of
2003, compared to 16.1% in the fourth quarter of 2002 and 14.7% in the third
quarter of 2003.
* Our share of NASDAQ-listed equity volume was 28.5% in the fourth
quarter, and our share of U.S. exchange-listed equity volume was 4.2%.
Financial Performance
Revenues
Instinet Group's total revenues for the fourth quarter of 2003 were $296
million, up 9% from the third quarter of 2003.
Transaction fee revenue for the fourth quarter of 2003 was $280 million, up 4%
from the third quarter of 2003. Our net equity transaction fee revenue was $162
million up 4% from the third quarter of 2003.(1)
During the fourth quarter, Instinet Group recorded an unrealized net investment
gain of $10 million due to an increase in the carrying value of the company's
strategic investments.
Expenses
Instinet Group's total expenses for the fourth quarter of 2003 were $353
million, up from $267 million from the third quarter of 2003.
Total pro forma operating expenses for the fourth quarter of 2003 were $274
million, up 2% from the third quarter of 2003.(1)
* Compensation and benefits expense was $51 million in the fourth quarter
of 2003, comparable to the previous quarter.
* Brokerage, clearing and exchange fees were $37 million, up 5% from the
previous quarter, primarily due to higher routed transaction volumes.
* Communications and equipment expense was $21 million, down 16% from the
previous quarter, primarily due to lower market data and client
communications costs.
* Depreciation and amortization expense was $19 million, down 17% from the
previous quarter, primarily due to lower depreciation of leasehold
improvements associated with reduced space needs, and lower amortization of
intangible assets.
* Professional fees were $9 million, up 50% from the previous quarter,
primarily due to increased consultant and other professional fees.
* Marketing and business development expense was $7 million, up $4 million
from the previous quarter, primarily from higher advertising costs.
* Other expenses were $5 million, down 20% from the third quarter of 2003,
due to lower bad debt expense.
Balance Sheet
At December 31, 2003, Instinet Group had net cash (cash and cash equivalents and
securities owned less short-term borrowings) of approximately $775 million,
tangible net assets of approximately $890 million, and shareholders' equity of
approximately $972 million. There were approximately 331 million shares of
common stock outstanding.
Instinet Group's Chief Financial Officer, John F. Fay, commented: "During the
quarter we increased both trading volume and market share and continued to
aggressively pursue cost and operating efficiencies. Our balance sheet remains
strong with net cash having increased 22% to $775 million during the quarter. We
are well-positioned financially to serve our customers in 2004."
Strategic Developments
During the quarter, Instinet Group continued to make progress on our plan to
separate Instinet, the Institutional Broker, and INET.
Instinet, the Institutional Broker ("Instinet"), is a value-added broker that
serves institutions around the world. Its products and services are designed to
improve both the trading efficacy and investment performance of our clients.
Instinet's value to its clients includes:
* Direct, efficient and unbiased access to U.S. and global equity markets,
as well as the opportunity to trade directly with other Instinet clients.
* Sophisticated trading expertise and advanced technological tools
designed to make it easier to manage increasingly complex global equity trading
strategies.
* Unconflicted trading based on a pure agency business model.
Instinet's trading platform is designed to make it easier for institutions to
trade large blocks of shares with low market impact. Two key features for U.S.
equity trading, currently being launched, include:
*CBX ("Continuous Block Crossing") is a block-matching system with minimum
order and trade-size parameters to better facilitate block trading.
Institutional clients can trade directly with each other, or use advanced
order functionality and routing technologies to intelligently trade orders
in other market venues.
*Proactive SmartRouter enables clients, in addition to routing marketable
orders to the best available execution option, to post orders and manage
order display in more than one venue at the same time. It reduces the
opportunity cost of posting an order in one liquidity pool at the risk of
missing the potential for price and size improvement in another liquidity
pool.
INET is an alternative trading system into which we are consolidating the order
flow of our two ECNs -- the Instinet ECN and Island ECN. We are in the process
of implementing this consolidation, and expect it to be substantially complete
by the end of the first quarter of 2004.
INET offers matching and routing services to its U.S.-registered broker-dealer
subscribers, and provides access to one of the largest liquidity pools in
NASDAQ-listed equities. It employs a stable and scalable technology
infrastructure that enables speed and reliability while allowing the system to
operate at low cost. INET provides its clients with access to other U.S. trading
venues utilizing Instinet's SmartRouter technology.
INET took a number of steps during the quarter to build market share and
strengthen its competitive position. As part of the ongoing effort to build
internal matched volume, it rolled out a routing initiative, including price
incentives, for orders routed in NASDAQ-listed securities to other trading
venues through Instinet's SmartRouter. INET also announced that it intended to
participate in NASDAQ's SuperMontage electronic trading platform, and to make
available Instinet's SmartRouter to SuperMontage participants.
For the fourth quarter, Instinet Group recorded a charge of $60 million related
to the reduction of workforce by approximately 185 employees (or approximately
15% of full-time employees), expected to be substantially completed by July
2004, and the consolidation of the company's office space, which accounts for a
significant portion of the charge. This cost-reduction is primarily due to the
strategic decisions related to the separation of Instinet and INET, and the
company's ongoing efforts to streamline its operations.
With these and other initiatives, Instinet Group is positioning its businesses
to thrive in the highly competitive environments in which it operates, and serve
the needs of investors with technologically advanced, low-cost products and
services.
Instinet Group also recorded a $22 million charge for the impairment of
intangible assets, related primarily to certain Island technology assets that
were capitalized in 2002 as part of the company's acquisition of Island ECN. The
impairment charge is based on the application of annual impairment tests
prescribed by current accounting standards.
Webcast
Instinet will webcast a conference call to discuss its fourth quarter results at
11:00 a.m. New York time today at http://www.investor.instinet.com. A replay
will be available at the same address following the call.
About Instinet Group
Instinet Group, through affiliates, is the largest global electronic agency
securities broker and has been providing investors with electronic trading
solutions for more than 30 years. Our services enable buyers and sellers
worldwide to trade securities directly and anonymously with each other, have the
opportunity to gain price improvement for their trades and lower their overall
trading costs. Instinet Group is part of the Reuters family of companies.
Through our electronic platforms, our customers can access other U.S. trading
venues as well as securities markets throughout the world, including stock
exchanges in Frankfurt, Hong Kong, London, Paris, Sydney, Tokyo, Toronto and
Zurich. We also provide our customers with access to research generated by us
and by third parties, as well as various informational and decision-making
tools. We act solely as an agent for our customers and do not trade securities
for our own account or maintain inventories of securities for sale.
# # #
This press release is for information purposes only and is not intended as an
offer or solicitation with respect to the purchase or sale of any security.
(c) 2004 Instinet Group Incorporated and its affiliated companies. All rights
reserved. INSTINET and INET are service marks in the United States. Instinet is
part of the Reuters family of companies.
Instinet, LLC (formerly Instinet Corporation and now branded Instinet, the
Institutional Broker, member NASD/SIPC), INET ATS, Inc. (formerly The Island
ECN, Inc. and now branded INET, member NASD/CSE/SIPC) and Instinet Clearing
Services, Inc. (member NASD/SIPC) and the Inet Holding Company, Inc. are
subsidiaries of Instinet Group Incorporated.
System response times may vary for a number of reasons including market
conditions, trading volumes and system performance.
This news release may be deemed to include forward-looking statements relating
to Instinet Group. Certain important factors that could cause actual results to
differ materially from those disclosed in such forward-looking statements are
included in Instinet Group's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002, and other documents filed with the SEC and available on
the Company's website. Certain information regarding trading volumes is also
included in Instinet Group's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 and on the Company's website at www.instinetgroup.com.
These statements speak only as of the date of this news release, and the Company
does not undertake any obligation to update them.
Investor Contact
John Pitt
Instinet Group Incorporated
212 310 7481
john.pitt@instinet.com
Media Contact
Stephen Austin
Instinet Group Incorporated
212 310 4037
stephen.austin@instinet.com
About Reuters
Reuters (www.about.reuters.com), the global information company, provides
indispensable information tailored for professionals in the financial services,
media and corporate markets. Our information is trusted and drives decision
making across the globe based on our reputation for speed, accuracy and
independence. We have 16,000 staff in 94 countries, including some 2,400
editorial staff in 197 bureaux serving approximately 130 countries, making
Reuters the world's largest international multimedia news agency. In 2002, the
Reuters Group had revenues of #3.6 billion.
Reuters and the sphere logo are the trademarks of the Reuters group of
companies.
Forward-looking Statements
This statement may be deemed to include forward-looking statements relating to
Reuters within the meaning of Section 27A of the US Securities Act of 1933 and
Section 21E of the US Securities Exchange Act of 1934. Certain important factors
that could cause actual results to differ materially from those disclosed in
such forward-looking statements are described in Reuters Annual Report and Form
20-F 2002 under the heading 'Risk Factors'. Copies of the Annual Report and Form
20-F are available on request from Reuters Group PLC, 85 Fleet Street, London
EC4P 4AJ.
Reuters Contacts:
Press - US Tel: +646 223 5222
Kyle Arteaga
kyle.arteaga@reuters.com
Press - UK Tel: +44 (0) 20 7542 0496
Yasmeen Khan
yasmeen.khan@reuters.com
Investors Tel: +44 (0) 20 7542 7057
Miriam McKay
miriam.mckay@reuters.com
--------------------------
(1) See tables titled "Reconciliation of Pro Forma Operating Results for 4Q03".
2 Unless otherwise specified, financial results and statistical information
referred to in this release include data for Inet Holding Company, Inc.
(formerly Island Holding Company, Inc.) following the closing of our acquisition
of Island on September 20, 2002
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR XLLFLZFBBBBQ