Published On: Mon, Aug 2nd, 2010

Singapore Exchange Reports Strong Results

– Net Profit: Up 5% to $320.1 million ($305.7 million)
– Revenue: Up 8% to $639.7 million ($594.8 million)
– Earnings per Share: 30.1 cents (28.7 cents)
– Return on Equity: 39.2% (39.3%)
– FY2011 Base Dividend per Share: 16.0 cents (15.0 cents)

2 August 2010 – Singapore Exchange (SGX) today announced a net profit of $320.1 million for its full financial year ended 30 June 2010, up 5% from FY2009. Excluding a goodwill impairment of $2.7 million and write-back of property impairment of $5.0 million, the FY2010 profit was $317.8 million, the second highest profit level achieved since SGX’s listing in November 2000.

Revenue grew 8% to $639.7 million in FY2010 on increased equity trading and a revival in primary market activities. Earnings per share for FY2010 was 30.1 cents, with return on equity at 39.2%. The SGX Board has proposed a final dividend of 15.75* cents per share. This will bring the total dividend for FY2010 to 27.0 cents per share. In addition, the Board is pleased to increase SGX’s base dividend commitment to 16.0 cents per share, payable on a quarterly basis, effective FY2011.

Mr Magnus Bocker, SGX CEO said, “Last year was the second best year for SGX. We will continue to expand our distribution network, products and services while maintaining Singapore’s high regulatory standards. This will further strengthen our position as the Asian Gateway. We are committed to becoming one of the leading exchanges in the world.”

Please refer to Financial Statements for the Year Ended 30 June 2010 for full details. The report is also available on our website at www.sgx.com. (SGX SP, SGXL.SI)

Financial Performance and Proposed Final Dividend

To enhance transparency, we have reclassified our revenues in 3Q FY2010 and expenses in 4Q FY2010. The new revenue classification now reflects SGX’s six key business lines while the expense presentation is based on five categories.

SGX achieved a net profit of $320.1 million, up 5% from the previous financial year ($305.7 million). Earnings before interest, tax, depreciation and amortization was $404.5 million ($386.2 million). Excluding a goodwill impairment of $2.7 million and write-back of property impairment of $5.0 million, the FY2010 net profit was $317.8 million, the second highest profit level achieved since SGX’s listing in November 2000.

Revenue grew 8% to $639.7 million in FY2010 ($594.8 million) on the back of increased trading in the securities market and the revival of primary market activities. This offsets the lacklustre derivatives performance in the early part of the year before a stronger 4Q FY2010, lifted by increased volatility.

Expenses increased 15% to $261.4 million ($227.5 million) mainly due to: staff costs up $10.6 million on CEO transition cost and variable bonus provision following improved profitability; processing and royalties costs up $3.6 million on increased market turnover; and technology expenses up $16.7 million on implementation of new systems[3]. The latter includes $1.5 million in accelerated depreciation of our securities and derivatives systems, in view of planned implementation of the Reach initiative announced on 3 June 2010. Staff cost, excluding variable bonus, remained unchanged at $55.8 million ($55.5 million), with the headcount at 602 (585) on 30 June 2010.

As at 30 June 2010, the total equity was $815.9 million ($778.1 million) and unrestricted cash reserve, including proposed final dividend of $167.9 million, was $536.6 million ($470.7 million). SGX generated $371.2 million ($278.5 million) in cash from operations and incurred $55.0 million ($37.1 million) in capital expenditure, in support of our ongoing technology investments: SGXClear; OTC Financial Derivatives project; and the new Reach initiative.

For FY2010, SGX’s return on equity was 39.2% (39.3%). On the back of earnings per share of 30.1 cents (28.7 cents), the Board has proposed a final dividend of 15.75 cents per share. Subject to shareholders’ approval at the annual general meeting on 7 October 2010, this will bring the total dividend for FY2010 to 27.0 cents per share, a 91% payout of FY2010’s net profit (26.0 cents per share and 91% payout). In addition, the Board is pleased to increase SGX’s base dividend commitment to 16.0 cents (15.0 cents) per share, payable on a quarterly basis, effective FY2011.

Performance Review for the Year Ended 30 June 2010

Securities (46% of SGX’s revenue)

Securities revenues are generated through trading and clearing of listed securities: 763 equity securities including Investment Trusts; 80 Company Warrants; and 73 Exchange Traded Funds/Notes

Securities revenue improved 24% to $296.0 million ($238.8 million) due to a 25% increase in daily average trading value to $1.5 billion from $1.2 billion a year ago. Turnover velocity for FY2010 was 59% (67%).

The proportion of trades below $1.5 million in contract value increased two percentage points to 63% in FY2010.

Derivatives (21% of SGX’s revenue)

Derivatives revenues are generated through trading, clearing & settlement of financial and commodities derivatives: 31 futures & options contracts; 233 structured warrants; and 31 Over-the-Counter contracts

Derivatives revenue slipped 16% to $131.2 million ($156.0 million) mainly due to: a change in customer mix which led to a decline in yields; lower income from collateral management as a result of lower interest rates; depreciation of the US dollar; and reduced trading of structured warrants.

In FY2010, the daily average futures and options trading volume was 3% lower at 231,938 contracts (238,446 contracts) with high frequency trading accounting for 27% (15%). The average trading value of structured warrants was halved, at $29 million per day ($58 million).

On the commodities front, SICOM and AsiaClearÒ registered record volumes of 597,937 lots and 124,829 contracts, respectively, in FY2010 (343,259 lots and 66,934 contracts).

Market Data (5% of SGX’s revenue)

Market data revenues are generated by sales and distribution of securities, derivatives and commodities market information

Market data revenue was 7% lower at $32.6 million ($35.0 million). The number of securities terminals increased 6% to 38,567 (36,509 terminals) while the number of derivatives terminals fell 11% to 23,957 (26,780 terminals).

Member Services and Connectivity (5% of SGX’s revenue)

Revenues in these business areas are generated through the provision of membership, connectivity and network services to facilitate members’ trading and clearing in SGX’s markets

Member Services and Connectivity revenue rose 11% to $29.5 million ($26.6 million) mainly due to increased sign-ups for derivatives connectivity. FY2010 saw expanded distribution in our markets through the addition of: two Securities Trading Members; two Securities Clearing Members; 366 Securities Trading Representatives; one Derivatives Clearing Member; 18 Derivatives Trading Members (Proprietary); 33 Derivatives Trading Members (Individual); and six SICOM members.

Depository Services (13% of SGX’s revenue)

Revenues in this business area are generated from depository and settlement services relating to listed and unlisted securities for depository agents and retail investors

Depository Services revenue rose 12% to $82.4 million ($73.7 million) due to higher securities settlement and contracts processing revenues following increased market activity.

SGX expanded its depository customer base to 1.50 million (1.44 million) accounts[4] as at 30 June 2010.

Issuer Services (10% of SGX’s revenue)

Revenues in this business area are generated through listing of equity, debt and structured securities and corporate action services

Issuer Services revenue increased 5% to $64.1 million ($61.2 million). Listings revenue rose 8% to $37.0 million ($34.3 million) as we saw the return of IPO and bond listings activities and an increase in market capitalisation. Our corporate action revenue remained steady at $27.1 million ($26.9 million).

In FY2010, there were 40 new primary listings on SGX Mainboard and Catalist, raising a total of $4.6 billion (19 issues and $442 million). This included: CapitaMalls Asia, one of the largest listed shopping mall owners, developers and managers in Asia; Cache Logistics REIT; K-Green Trust, a “green infrastructure” business trust; TigerAirways, a budget airline; China Minzhong Food; and Debao Property Development. We also saw an additional $29.0 billion in market capitalisation through the secondary listings of Prudential Plc and Golden Ocean Group, a dry bulk carrier.

As at 30 June 2010, there were 763 (752) equity issues of which 304 (299) issues were from over 20 different countries; 73 (35) ETFs/ETNs; 80 (75) company warrants; 233 (312) structured warrants; and 1,229 (1,099) bonds listed on SGX markets.

Market Development

In FY2010, we completed the migration of all formerly SESDAQ-listed issuers to the Sponsor-based Catalist regime; implemented the revised securities settlement processes and penalty framework to reduce settlement failure; rolled out the new Derivatives Clearing Fund structure as well as increased the Securities Clearing Fund size to augment the financial safeguards for our clearing houses.

We are committed to becoming one of the leading exchanges in the world. We will continue to expand our distribution network, product and service offering and maintain trust in our marketplace through high regulatory standards. At the same time, we aim to be as efficient as possible and in doing so, reduce the cost of operating in our markets. Marking this transformation is the Reach initiative[5] – developing one of the world’s fastest securities trading engines supported by a state-of-the-art data centre with co-location facilities and establishing point of presence in data centres in four global liquidity hubs. The planned launch of a Depository Receipt (DR) quotation programme will further broaden the suite of Asian-based products available for trading on our market, while the demand for block trading services will be met by the launch of our Chi-East joint venture, a pan-Asian crossing network for securities listed in Australia, Hong Kong, Japan and Singapore.

To anchor SGX as the Asian Gateway, we are committed to further investment in our infrastructure, including the Reach initiative. This will increase our capital expenditure to $60.0-$65.0 million in FY2011 while depreciation will be higher, with approximately $9.0 million being the full year impact of SGXClear and accelerated depreciation of current platforms.

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