OMX Group STOCK EXCHANGE RELEASE 01.02.2007 09:00:00
OMX FINANCIAL YEAR-END REPORT 2006
- earnings per share increased by 64 percent
2006
- Revenues amounted to SEK 3,610 m (3,136)
- Operating income rose to SEK 1,211 m (910)
- Income after financial items rose to SEK 1,151 m (846)
- Income after tax rose to SEK 911 m (543)
- Earnings per share rose to SEK 7.64 (4.66)
- Return on shareholders' equity rose to 20 percent (12)
- The Board proposes a dividend of SEK 6.50 (9.50) per share,
of which SEK 2.00 (3.50+3.00) is an extra dividend
FOURTH QUARTER 2006
- Revenues amounted to SEK 1,025 m (847)
- Operating income rose to SEK 355 m (263)
- Income after financial items rose to SEK 339 m (255)
- Income after tax rose to SEK 296 m (187)
- Earnings per share amounted to SEK 2.47 (1.62)
CEO COMMENTS: In many ways, 2006 was a record-breaking year for OMX, in which we
generated the highest revenues and the highest operating income in the company's
history. Earnings per share rose by 64 percent compared with the preceding year
and return on shareholders' equity amounted to 20 percent. After several years of
structural and change activities, OMX is now well positioned in the global
exchange industry, an industry characterized by strong structural growth.
We witnessed a substantial increase in activities in all of our business areas
during the year. The development of the Nordic Exchange was in focus for the
Nordic Marketplaces business area. The launch on October 2 was well received and
integration work continues with our customers. As part of the Nordic Exchange's
offering, First North was established during the year as one of Europe's leading
alternative market places. Trading volumes in 2006 broke several records and we
welcomed more than 100 new companies to the Nordic Exchange's main market and
First North. The number of equity transactions on our exchanges amounted to
123,000 per day, representing an increase of 47 percent compared with 2005.
The Information Services & New Markets business area launched a Nordic offering
for market data including all information from the Nordic Exchange. We are
developing new communications services for launch in early 2007 to further
facilitate communications for our listed companies and the media. In 2006, we
worked intensely on integrating the Baltic stock exchanges, and we saw an
increase in the rate of growth primarily toward the end of the year. Based on our
experience with integrating regional exchanges, we also initiated a focus in
Central and Eastern Europe, which partly has resulted in OMX submitting a bid on
the stock exchange in Slovenia at the end of the year.
The order intake for the Market Technology business area amounted to a total of
SEK 1.9 billion in 2006, compared with SEK 1.2 billion in 2005. In addition to
intensified activities in OMX, we also saw increased demand among existing
customers such as ISE, Nordpool and Borsa Italiana, and from new customers such
as Tadawul in Saudi Arabia and CASE in Egypt. We also saw how the rise in the
order intake resulted in increased revenues toward the end of the year, and the
highest priority is to ensure that this growth will also lead to increased
profitability. An operating margin of 10 percent is a minimum for this business
area.
With a highly successful 2006 behind us, I would like to emphasize that our work
continues to further develop our efficiency. We have accelerated our positioning
work for MiFID, the new EU Directive to be introduced in 2007. This Directive
will lead to increased competition for European exchanges and it is extremely
important that we ensure that we take advantage of the opportunities that will
arise as well as take the necessary measures to handle potential risks. An
important part of this is that we participate in the European Commission's work
toward creating effective securities administration.
2006 was a record year for OMX and operating in a growth industry creates many
opportunities. Accordingly, we are looking forward to 2007 with confidence and
excitement.
Magnus Böcker
President and CEO
GROUP INCOME DEVELOPMENT
INCOME DEVELOPMENT DURING 2006
For OMX, 2006 was characterized by high market activity and increased
profitability, focus on new products and services, and the integration of
completed acquisitions.
OMX's total revenues rose by 15 percent to SEK 3,610 m (3,136 in 2005) for 2006.
The largest sources of the increase in revenues are rising trading revenues,
information revenues and facility management services revenues in the technology
operations. Total revenues also include SEK 22 m in earnings for the sale of
shares in Norsk Oppgørssentral ASA (NOS) and SEK 83 m attributable to the sale of
shares in VPC AB. The fourth quarter of 2005 included SEK 30 m in extra,
nonrecurring, volume-based trading revenue from EDX London. The operations OMX
acquired from Computershare were integrated in the Group effective February 1,
2006 and the Iceland Stock Exchange that was acquired at the end of November was
included from December 1.The order intake in the technology business rose to SEK
1,913 m (1,215) during the year.
The Group's total expenses were SEK 2,445 m (2,241) during the year. Compared
with the year-earlier period, the Group's expenses rose by 9 percent and by 6
percent excluding discontinuing operations. The rise in expenses is a result of
increased market activity and new product and service drives during the year, in
addition to acquisitions.
Operating income rose to SEK 1,211 m (910) during 2006, up 33 percent. Financial
items amounted to an expense of SEK 60 m (expense: 64).
Participations in earnings of associated companies amounted to SEK 46 m (15).
This increase is due to improved earnings in VPC AB (included in OMX until
September), Orc Software and EDX London.
Income after financial items amounted to SEK 1,151 m (846), while income after
tax was SEK 911 m (543). Earnings per share rose 64 percent to SEK 7.64 (4.66).
OMX's return on shareholder's equity was 20 percent for 2006. The Group's net
debt/equity ratio amounted to 18 percent at year-end.
SUMMARY EARNINGS, GROUP
Current period Current period
Okt-Dec Jan-Dec
2006 2005 2006 2005
Total revenue 1,025 847 3,610 3,136
Expenses -674 -573 -2,445 -2,241
Participations in earnings of 4 -11 46 15
associated companies
Operating income 355 263 1,211 910
Financial items -16 -8 -60 -64
Income after financial items 339 255 1,151 846
Income after tax 296 187 911 543
Earnings per share, SEK 2.47 1.62 7.64 4.66
Return on shareholders' equity, % 1) 20 12 20 12
1) 12-month rolling income before interest expenses and tax as a percentage of
average shareholders' equity plus interest-bearing liabilities.
INCOME DEVELOPMENT DURING FOURTH QUARTER 2006
During the fourth quarter of the year, OMX's total revenues rose to SEK 1,025 m
(847), an increase of 21 percent compared with the year-earlier period. Total
revenues include earnings of SEK 83 m, attributable to the sale of shares in VPC
AB. The fourth quarter of 2005 included approximately SEK 30 m in extra,
nonrecurring, volume-based trading revenue from EDX London. The primary reasons
for the rise in total revenues were higher trading revenues, rising information
sales and increased revenues in the technology operations. The order intake in
the technology operations amounted to SEK 499 m (423) during the quarter.
The Group's total expenses were SEK 674 m (573) during the fourth quarter, an
increase of 18 percent compared with the year-earlier period and 13 percent
excluding discontinuing operations. The increase compared with the preceding year
is primarily due to the one-off costs associated with the launch of the Nordic
Exchange and increases in personnel and consultant costs related to the high
market activities.
The Group's operating income rose to SEK 355 m (263) during the fourth quarter,
an increase of 35 percent compared with the year-earlier period. Participations
in earnings of associated companies amounted to SEK 4 m (loss: 11), mainly due to
the improved earnings in Orc Software and EDX London, in which large impairment
losses were reported in the preceding year. VPC AB is no longer included in
associated companies during the fourth quarter 2006.
Operating income before depreciation amounted to SEK 411 m (318). Financial items
amounted to an expense of SEK 16 m (expense: 8), a negative change that was
primarily a result of the positive nonrecurring effects arising in the fourth
quarter of 2005.
Income after financial items increased to SEK 339 m (255), while income after tax
rose to SEK 296 m (187). Earnings per share increased by 52 percent to SEK 2.47
(1.62).
DEVELOPMENTS IN OMX'S BUSINESS AREAS
summary revenue and income by business area
SEK m Okt-Dec Jan-Dec
Revenue 2006 2005 2006 2005
Nordic Marketplaces 474 433 1,778 1,510
Information Services & New Markets 186 132 625 512
Market Technology 390 307 1,300 1,155
Operating income
Nordic Marketplaces 242 202 940 689
Information Services & New Markets 77 48 251 196
Market Technology 50 27 93 61
NORDIC MARKETPLACES
Within the business area, OMX operates the equity and derivatives exchanges in
Stockholm, Helsinki, Copenhagen and Iceland
In 2006, Nordic Marketplaces was characterized by record high activity with
regards to both trading and listings. The Nordic Exchange was launched on October
2, which involved the development of a new pan-Nordic presentation model for
shares, new indexes and harmonized listing requirements. The Iceland Stock
Exchange was acquired in November and was consolidated on December 1. As opposed
to revenues and earnings, the statistical information below is pro forma, the
Iceland Stock Exchange is therefore included in comparative figures.
The business area's revenues amounted to SEK 1,778 m (1,510) for 2006, an
increased of 18 percent compared with the year-earlier period. Revenues for the
fourth quarter increased by 9 percent to SEK 474 (433), an increase that is
primarily due to rises in trading and issuers' revenue. The business area's costs
were SEK 851 (831) m for the full-year and SEK 232 m (217) for the fourth
quarter. The reason for the increase is primarily marketing costs for the launch
of the Nordic Exchange. Operating income rose by 36 percent to SEK 940 m (689)
for 2006, and by 20 percent to SEK 242 m (202) for the fourth quarter.
The Nordic Marketplaces business area has three main sources of income (see page
13): trading revenue, issuers' revenue and other revenue. Trading revenue
amounted to SEK 1,286 m (1,106) for the full-year and SEK 328 m (329) for the
fourth quarter. The fourth quarter of 2005 included approximately SEK 30 m in
extra, nonrecurring, volume-based trading revenue from EDX London. During 2006,
65 percent of trading revenue came from trading in cash products, primarily
equities, and 35 percent from trading and clearing in derivatives products. The
corresponding figures for the fourth quarter were 70 percent and 30 percent,
respectively. In 2006, the number of equity transactions increased by 47 percent
to an average of 123,490 (83,764) per day. During the quarter, the number of
equity transactions increased to an average of 139,018 (94,746) per day, a rise
of 47 percent compared with the year-earlier period. Turnover in equities trading
measured in value rose by 38 percent to a daily average of SEK 38,664 m (28,115)
for 2006. During the fourth quarter, the increase was 23 percent to SEK 39,984 m
(32,591). The turnover velocity in equities trading rose to 129 percent (117) for
the full-year and to 127 percent (121) for the fourth quarter.
The total number of derivatives contracts traded per day for the full year
averaged 553,793 (475,885), up 16 percent compared with the year-earlier period.
For the fourth quarter, the increase was 2 percent to 544,856 (533,053)
contracts. Of the total number of contracts per day in 2006, Finnish options
contracts on Eurex accounted for 65,967 (63,358) and Nordic derivatives contracts
on EDX London for 98,060 (73,678) per day. For the fourth quarter, the number of
options contracts on the Eurex exchange was 61,464 (57,561) and the number of
Nordic derivatives contracts on EDX London was 98,289 (79,911) per day. On
January 1, 2006, OMX lowered its fees for certain customer segments mainly
regarding trading in Swedish stock options. This reduction was implemented to
offer more competitive fees, which will lead to an increase in trade and larger
market shares.
Issuers' revenue was SEK 344 m (310) for 2006, representing an increase of 11
percent compared with the year-earlier period. Issuers' revenue for the fourth
quarter amounted to SEK 89 m (82), an increase of 9 percent. The increase was
mainly attributable to the higher market capitalization of the listed companies
and a larger number of new list-ings. At year-end, the total number of companies
was 693 (638), of which 614 (600) in the main market and 79 (38) at First North.
In 2006, 97 (32) new companies joined the marketplace, including 45 on First
North. A total of 41 (44) companies left the exchange during the year, three from
First North. During the fourth quarter, 40 (eight) new companies joined the
marketplace, including 16 on First North, and eight (nine) companies left the
exchange, two from First North. The total market capitalization of all listed
companies in the main market rose to SEK 8,306 billion (7,048) at year-end, an
increase of 18 percent.
Other revenue amounted to SEK 148 m (94) for 2006 and SEK 57 m (22) for the
fourth quarter. Other revenue for the fourth quarter includes SEK 33 m from the
sale of shares in NCSD. Other revenue for the full-year also includes SEK 9 m
from the sale of shares in NOS.
INFORMATION SERVICES & NEW MARKETS
The business area combines all of OMX's information services within the Group's
Nordic exchange offering, OMX's securities administration services and OMX's
ownership and operation of exchanges and central securities depositories in
Tallinn, Riga and Vilnius.
For the business area, the year was characterized by high levels of market
activity. At the same time, a focus was directed toward the development of
products and services and, as part of the Nordic Exchange, a pan-Nordic offering
of real-time information was launched. Activity continued to increase during the
fourth quarter.
The business area's revenue increased by 22% to SEK 625 m (512) for 2006 and to
SEK 186 m (132) for the fourth quarter. Increased market activity and growing
revenue from information services were the primary drivers behind the positive
trends for both the full-year and the fourth quarter, compared to a year ago. An
audit of the number of declared terminals was also conducted during the quarter
resulting in a positive effect on revenues. Earnings from the sale of shares in
VPC AB are included for the fourth quarter.
The business area's expenses were SEK 381 m (316) for 2006 and SEK 109 m (84) for
the fourth quarter. For the full-year, this increase is mainly related to the
rise in market activity and costs for product development associated with the
Nordic Exchange. Costs for the fourth quarter were impacted by a major
privatization over the exchange in Riga, in addition to increased market
activity. Compared with the third quarter 2006, this is the single largest
reason for the increase in costs. The business area's operating income improved
to SEK 251 m (196) for 2006 and to SEK 77 m (48) for the fourth quarter.
In Information Services & New Markets, there are four main revenue sources (see
page 13): information revenue, revenue from Baltic Markets, revenue from Broker
Services and Other revenue. Information revenue amounted to SEK 441 m (365) for
2006, a rise of 21 percent compared with the year-earlier period. For the fourth
quarter, the amount was SEK 121 m (95), representing an increase of 27 percent.
This revenue is mainly based on the number of real-time terminals used and
reported by the end users. The increase in revenue during the fourth quarter was
partly due to the rise in the number of terminals ordered. In addition, an audit
of the number of declared terminals was conducted resulting in a positive effect
on revenue. At year-end, OMX had 92 (87) information vendors. Comparative figures
are pro forma due to a change made to the calculation of the number of terminals
Revenue from Baltic Markets amounted to SEK 68 m (63) for 2006 and SEK 23 (17) m
for the fourth quarter. This increase in revenue is primarily attributable to the
privatization that was done over the exchange in Riga. The number of members of
the Baltic exchanges was 32 (32). Of the total number, 15 are members of all
three Baltic exchanges. Total equity turnover on the Baltic exchanges was SEK 91
m (95) per day for 2006 and SEK 230 m (49) during the fourth quarter. The main
explanation to this growth was that a large trade was conducted on the exchange
in Vilnius in December. The number of equity transactions for the full-year
amounted to 996 (903) per day and to 1,401 (1,064) for the fourth quarter.
Trading was negatively affected by the delisting of HansaBank, the most traded
share on the Baltic exchanges, in June 2005.
During the year, Broker Services operations benefited from the growing trading
volumes on the Nordic Exchange, with revenue rising to SEK 78 m (69) for 2006 and
to SEK 19 m (16) for the fourth quarter.
Other revenue amounted to SEK 38 m (15) for 2006 and SEK 23 m (4) for the fourth
quarter. Other revenue for 2006 and the fourth quarter includes SEK 17 m from the
sale of shares in VPC AB. Other revenue for 2006 includes SEK 4 m from the sale
of shares in NOS.
MARKET TECHNOLOGY
Within the business area, OMX develops and delivers systems solutions, IT
services and advisory services for the global exchange industry.
During the year, the market for systems and services for the exchange industry
continued to be characterized by increased activity. Important driving forces are
growing trading volumes in global markets, new commercial initiatives from
existing and new players, and regulatory changes in Europe and the US. Interest
in OMX's services is also rising in line with the development of the financial
markets in emerging markets. Work towards increasing profitability is ongoing in
the business area.
The business area's revenue grew by 13 percent to SEK 1,300 m (1,155) for the
year and to SEK 390 m (307) for the fourth quarter. Costs rose at the same time
to SEK 1,233 m (1,098) for the full-year and to SEK 344 (282) for the fourth
quarter. This increase, in both revenue and expenses, was mainly due to the
higher market activity and the acquisition of Computershare's Market Technology
operations. The increase in the fourth quarter is due to a marked upswing in
customer activity and earnings from the sale of shares in VPC AB. Operating
income was SEK 93 m (61) for 2006 and SEK 50 m (27) for the fourth quarter.
Investments in R&D, including investments involving the next generation trading
system for marketplaces, amounted to SEK 174 m (229) for the year, of which SEK
46 m (63) pertained to the fourth quarter. This corresponds to 13 (20) percent of
the business area's revenue for the full-year and 11 (21) percent for the fourth
quarter. Of the total investments in R&D, SEK 161 m (173) was capitalized during
the year, of which SEK 44 m (53) was capitalized during the fourth quarter.
OMX's order intake for 2006 amounted to SEK 1,908 m (1,215), of which SEK 575 m
(153) pertained to internal orders. The order intake for the fourth quarter
amounted to SEK 499 m (423), of which 93 (34) was internal orders. The total
order value at the end of the quarter was SEK 3,293 m (2,702), of which SEK 1,185
m (843) is scheduled for delivery within a year. The total order value includes
internal orders of SEK 1,075 m (794), of which SEK 400 m (242) is scheduled for
delivery within a year. All order statistics include discontinuing operations.
Orders signed during the year included one to the Saudi Stock Market Tadawul for
the design, delivery and support of a complete trading and clearing system. An
order was also signed with Borsa Italiana for the infrastructure, operation,
systems monitoring and network services for Borsa Italiana's derivatives market
(IDEM). OMX also signed a long-term licensing agreement with International
Securities Exchange (ISE) to ensure that ISE is provided with reliable and
scalable architecture.
There are three main sources of revenue within the Market Technology business
area (see page 13): license, support and project revenue; revenue from Facility
Management Services; and Other revenue. License, support and project revenue
amounted to SEK 785 m (730) for the year and SEK 235 m (210) for the fourth
quarter. This increase is due to the increased activities among existing
customers and the acquisition of Computershare's Market Technology operations.
Revenue from Facility Management rose to SEK 432 m (375) for 2006 and SEK 113 m
(89) for the fourth quarter, due to increased internal sales and increased
activities among existing customers resulting in a rise in variable revenue.
Other revenue for 2006 totaled SEK 83 m (50) and SEK 42 m (8) for the fourth
quarter. Other revenue for 2006 and the fourth quarter includes SEK 33 m from the
sale of shares in VPC AB. Other revenue for 2006 includes SEK 9 m from the sale
of shares in NOS.
OMX 2006 - OTHER IMPORTANT INFORMATION
FINANCIAL POSITION
Total assets at the end of the reporting period amounted to SEK 12,528 m compared
with SEK 10,612 m at the same time in 2005. The equity/assets ratio, excluding
the market value of outstanding derivatives positions, was 57 percent (57).
OMX had an interest-bearing net debt of SEK 847 m (573) at period-end. During the
second quarter total dividends of SEK 765 m was paid out. During the fourth
quarter the net debt has also been affected by the SEK 575 m OMX received from
the sale of shares in VPC AB, the SEK 318 m that was paid out in conjunction with
the acquisition of Oslo Stock Exchange and the SEK 355 m that was paid to
shareholders. The net debt/equity ratio amounted to 18 percent (12) at period-
end.
At period-end, interest-bearing financial liabilities amounted to SEK 1,797 m
(1,907), of which SEK 1,361 m (1,409) was long term. The Group's total approved
credit facilities was SEK 3,741 m (3,033), of which SEK 30 m (0) was utilized.
Interest-bearing financial assets totaled SEK 950 m (1,334), of which SEK 21 m
(90) were financial fixed assets.
NEW ORGANIZATION
Effective January 1, 2006, OMX has a new organization. The two former divisions,
OMX Exchanges and OMX Technology, were replaced by three business areas: Nordic
Marketplaces, Information Services & New Markets and Market Technology. Nordic
Marketplaces comprises OMX's exchange operations in Denmark, Finland, Sweden and
Iceland. Information Services & New Markets comprises exchange-related operations
pertaining to information services, OMX's Baltic marketplaces in Estonia, Latvia
and Lithuania, and the unit for securities administration, Broker Services.
Market Technology is based on the recently reorganized OMX Technology division.
NUMBER OF EMPLOYEES AND CONTRACTED CONSULTANTS
The number of employees and consultants in the Group was 1,550 (1,344) at the end
of the reporting period. The increase in the number of employees and consultants
was primarily due to increased activity within Information Services & New Markets
and Market Technology. The number of employees was SEK 1,402 (1,288) at the close
of the reporting period, of which 321 (300) were employed within Nordic
Marketplaces, 218 (144) in Information Services & New Markets. Within Market
Technology the number of employees was 863 (844) of which 91 (144) are
attributable to operations being discontinued . Of the total number of employees,
80 (107) were on long-term leave, mainly parental leave.
LEGAL DISPUTES
On February 23, 2005, OMX announced that a court jury had rejected eSpeed's claim
regarding patent infringement and declared eSpeed's patent invalid. eSpeed's
claim was approximately USD 100 m on January 25, 2005. In December 2005, the
court rejected eSpeed's motion to overturn the jury's ruling regarding
invalidity. In April 2006, eSpeed appealed the court decision.
During the second quarter of 2004, OMX rejected a legal claim for additional
repayment of VAT amounting to approximately EUR 5 m, excluding interest. The
Helsinki City Court announced an interim ruling on the case on June 9, 2006, in
favor of OMX. The City Court also found that OMX was entitled to receive
compensation for its legal costs. The court's ruling has been appealed by the
plaintiffs.
A dispute regarding a system delivery is in progress in the Market Technology
business area. In May 2006, OMX requested an arbitration process, which is
expected to be concluded in the latter half of 2007.
The Stockholmsbörsen AB subsidiary received a ruling from the Swedish Tax Board
in 2004 pursuant to which the company will be subject to a value added tax
surcharge for the support and operation services it purchases from other
companies within the group. Stockholmsbörsen AB does not share the Swedish Tax
Board's assessment and will appeal against the ruling. Should the Swedish Tax
Board's opinion utlimately be upheld, this would give rise to a cost for the
Group of approximately SEK 90-110 m based on the situation as per December 31,
2006, and increase ongoing expenses by SEK 2 m per month.
OMX did not make any provisions for the disputes in progress or changes in
contingent liabilities during the period.
NOMINATING COMMITTEE
At the Annual General Meeting on April 6, 2006, it was decided that the company's
four largest shareholders in consultation with the Chairman of the Board were to
appoint a Nominating Committee. The composition of the Committee was announced in
October 2006. The Nominating Committee consists of the following individuals:
Malin Björkmo, (Director, Ministry of Industry, Employment and Communication),
representing the Swedish government; Arne Liljedahl, (Group CFO, Nordea),
representing Nordea; KG Lindvall (Board member, Robur Fonder), representing Robur
Fonder; Olof Stenhammar (Chairman of the Board, OMX); and Jacob Wallenberg
(Chairman of the Board, Investor AB), representing Investor AB.
GENERAL MEETINGS, SHARE ISSUE AND DIVIDENDS
OMX's Annual General Meeting on April 6, 2006 approved a dividend to shareholders
of SEK 6.50 per share, comprising an ordinary dividend of SEK 3.00 and an
extraordinary dividend of SEK 3.50. The dividend was distributed on April 18,
2006.
An Extraordinary General Meeting was held on October 23, 2006. The Meeting
decided in favor of a new share issue in conjunction with the acquisition of the
Iceland Stock Exchange, and approved an extra dividend to shareholders of SEK 3
per share, that was paid on October 31, 2006.
SHARE MATCH PROGRAM - DECISION BY AGM OF OMX
OMX's Annual General Meeting on April 6, 2006 resolved to approve the proposed
Share Match Program 2006 regarding approximately 30 senior executives and key
individuals in OMX. The program runs over a period of three years and is based on
the employee's long-term confidence in OMX and provides an incentive to continue
to work for a successful OMX. Participants in the program invest in OMX shares
and, given that OMX achieves performance targets related to earnings per share
and how the OMX share performs in comparison to its competitors, after three
years, participants may obtain a maximum of five matching shares per invested
share. The number of shares that the participant may buy in the program is
limited.
At period-end, the number of shares invested totaled 26,855. OMX AB has signed a
share-swap agreement amounting to 57,000 shares, as a result of the program that
is reported as a shareholders' equity instrument in accordance with IAS 32. The
cost of the program for the period amounted to SEK 3 m, including social security
expenses, and the cost of the program's entire term is estimated at SEK 12 m.
DISCONTINUING OPERATIONS
In August 2005, OMX announced the focusing of its technology operations through
the divestment of operations targeting banks and brokerages within the former
Banks & Brokers business area. The continuing operations not yet divested have
during 2006 been included among discontinuing operations. These primarily
comprise the Nordic portion of the operations targeting banks and brokerages,
which offer development and maintenance of systems for securities management, and
UK operations in securities administration services.
Revenue from discontinuing operations amounted to SEK 289 m (241) during the
year, while expenses amounted to SEK 362 m (278). The operating loss was SEK 73 m
(loss: 37). The weakening in earnings compared with the year-earlier period is
mainly attributable to building up of operations in the UK as well as
organizational changes.
After the end of the report period OMX has signed an agreement with HCL
Technologies, the global IT-services provider, regarding an extended partnership
which means that OMX no longer have any discontinued operations in the Nordic
region.
The partnership means that HCL Technologies will take on the responsibility for
development of systems for securities management targeting banks and brokers and
that the remaining part of the Nordic operations, will be moved to Business Area
Information Services & New Markets, and be included in the unit Broker Services.
A number of employees´ work tasks will be within Business Area Market Technology
to replace consultants and minimize new recruitments.
The business that is to be moved had sales of SEK 160 million and costs of SEK
195 million in 2006. It is expected to reach a profit during 2007. For the fourth
quarter 2006, the business' revenue was SEK 43 million while costs were SEK 49
million - levels expected to remain in the first quarter of 2007. The changes
will be implemented in OMX accounting as per January 1, 2007.
In March 2006, OMX and TietoEnator agreed to cooperate on IT operations related
to the former business area Banks & Brokers. As part of the cooperation,
TietoEnator acquired an IT operation unit with 21 employees. The unit was
divested on April 1, 2006.
OMX's aim is to identify a long-term solution with clear advantages for the
remaining parts of the discontinued operations. Discussions are currently in
progress with potential partners.
ACQUISITION OF OPERATIONS FROM COMPUTERSHARE
On January 31, OMX agreed to acquire Computershare Ltd's Market Technology
operations. The operations are consolidated within OMX effective February 1,
2006. OMX acquired the operations by paying around SEK 250 m to Computershare in
the form of purchase price and license payments, of which SEK 85 m was paid on
implementation of the transaction and the remainder evenly distributed over a
five-year period. Discounted to net present value, the acquisition price is SEK
244 m (see preliminary acquisition calculation on page 16). For the 12-month
period July 2004 through June 2005, the operations reported revenues of
approximately SEK 100 m. The operations provided a positive contribution to OMX's
operating income during the reporting period.
SALE OF SHARES IN NOS
In February, OMX sold its entire shareholding in Norsk Oppgørssentral ASA (NOS),
totaling 1,749,700 shares. The gain from the sale amounted to SEK 22 m, which has
been reported among other revenue for the first quarter of 2006.
ACQUISITION OF THE ICELAND STOCK EXCHANGE - ICEX
At the beginning of September, it was announced that a Letter of Intent had been
signed with Eignarhaldsfelagid Verdbrefathing hf (EV), the owner of the Iceland
Stock Exchange ICEX, and the Icelandic Securities Depository (ISD) regarding the
acquisition of EV. In November the acquisition was finalized and EV is
consolidated into OMX's accounts from December 1, 2006. See preliminary
acquisition calculation on page 16. The consideration to EV's shareholders
comprised an issue of approximately 2.07 million new OMX shares. OMX's shares
have been listed on the Iceland Stock Exchange since December 1, 2006.
SALE OF SHARES IN VPC AB
At the beginning of October, OMX announced that its entire holding of 443,700
shares in VPC AB (the Swedish Central Securities Depository) had been sold for a
total of SEK 575 m. Operating profit of SEK 83 m from this transaction was
reported as other revenue for the fourth quarter. In addition, a joint
development project concerning a shared Nordic platform for the custody of
securities was discontinued, which is expected to have only minor effects on
OMX's operating activities.
ACQUISITION OF 10% OF IN OSLO STOCK EXCHANGE
On October 6, it was announced that OMX had acquired 10 percent of the shares in
the Oslo Stock Exchange. The price for 500,000 shares was SEK 318 m.
BID ON LJUBLJANA STOCK EXCHANGE IN SLOVENIA
At the end of November, OMX announced an initiative to investigate expanded
commercial activities in Eastern Europe. On December 12, it was announced that
OMX had submitted a bid on all issued shares in the Ljubljana Stock Exchange in
Slovenia. The bid amounted to EUR 125.19 per share, corresponding to a total
value of approximately EUR 4.2 m. The bid expired on January 22, 2007 at which
no owners had yet taken up a final position.
REDUCTION OF FEES FOR EXCHANGE MEMBERS
With the aim to increase the attractivenes of the OMX exchange offering, OMX will
reduce fees related to reporting of cash equity trades at the Nordic Exchange in
Stockholm, Copenhagen and Helsinki from April 2, 2007. The fee reduction is a
first step in introducing products for trade reporting according to MiFID. Based
on trading revenues during the 12 months up to September 2006, the fee reduction
would have had a negative effect on OMX revenues of approximately SEK 50 million
on a annual basis.
2007 ANNUAL GENERAL MEETING
OMX's Annual General Meeting will be held on Thursday, April 12, 2007, at 5:00
p.m. at OMX's headquarters in Stockholm.
The Annual Report will be distributed to shareholders requesting the report and
will be available to the general public on OMX's website at www.omxgroup.com from
March 28.
PROPOSAL FOR AUTHORIZATION ON REPURCHASE OF SHARES
The OMX Board has decided to propose to the 2007 Annual General Meeting to
authorize the Board to repurchase shares corresponding to a maximum of 10 percent
of the remaining number of shares. The repurchase could take place through
trading on the stock exchange or a directed offering to shareholders. OMX does
not currently own any treasury shares. This mandate shall apply until the 2008
Annual General Meeting. The purpose of the proposal is to be able to continuously
adapt the capital structure to the company's needs, and thereby increase value
for shareholders and repurchase shares that could be used for the execution of
OMX's Share Match Program. The details of the proposal will be communicated when
notice of the 2007 Annual General Meeting is made.
FINANCIAL TARGETS
OMX endeavors to generate profitable growth with a return exceeding the market's
return requirement. To achieve this target in a medium-term perspective, the
following financial targets have been established as a guide for OMX: return on
shareholders' equity shall amount to at least 15 percent annually, while the net
debt/equity ratio shall not exceed 30 percent over time.
OUTLOOK FOR THE FIRST QUARTER 2007
Revenues in OMX's exchange operations are largely dependent on trading
performance and trading volumes on the exchanges in Stockholm, Helsinki and
Copenhagen. Due to lower project activity in the beginning of the year, revenue
in the business area Market Technology is estimated to be slightly lower in the
first quarter of 2007 compared to the fourth quarter of 2006, excluding result
from selling shares in VPC AB. Group expenses during the first quarter of 2007
are expected to be in line with those of the fourth quarter 2006.
DIVIDEND POLICY & PROPOSED DISTRIBUTION OF EARNINGS
For the 2006 financial year, the Board intends to propose that a dividend
totaling SEK 6.50 per share be paid, comprising an ordinary dividend of SEK 4.50
per share and an extra dividend of SEK 2.00 per share. The Board's ambition is
that OMX's ordinary dividend shall, in the future, grow in pace with the
company's earnings per share, taking OMX's long-term capital requirements into
account.
The following earnings are at the disposal of the Annual General Meeting (SEK):
Income brought forward 1,934,968,916
Income for the year -76,007,786
TOTAL 1,858,961,130
The Board proposes that the earnings be distributed as follows:
To the shareholders, ordinary dividend 542,882,102
of SEK 4.50 per share
To the shareholders, extra dividend 241,280,934
of SEK 2.00 per share
To the shareholders, a total dividend 784,163,036
of SEK 6.50 per share
To be carried forward 1,074,798,094
TOTAL 1,858,961,130
The proposed distribution of earnings and proposed income statement and balance
sheet shall be approved at the Annual General Meeting.
INCOME STATEMENT OCTOBER-DECEMBER
Oktober-december
2006 2005
------------------------ --------------------
REVENUE Conti Opera Total Conti Opera Total
OMX OMX
nuing tions nuing tions
opera being opera being
dis- dis-
tions Conti tions Conti
nued nued
Net sales 856 84 940 772 46 818
Own work capitalized 2 - 2 28 1 29
Other revenue 1) 83 - 83 - - -
Total revenue 941 84 1 025 800 47 847
EXPENSES
External expenses
Premises -52 -4 -56 -43 -3 -46
Marketing expenses -31 - -31 -12 - -12
Consultancy expenses -72 -12 -84 -60 -4 -64
Operations and maintenance, -44 -18 -62 -38 -21 -59
IT
Other external expenses -51 -26 -77 -55 -1 -56
Personnel expenses -272 -36 -308 -248 -33 -281
Depreciation and impairment -54 -2 -56 -55 - -55
Total expenses -576 -98 -674 -511 -62 -573
Participation in earnings of 4 - 4 -11 - -11
associated companies
Operating income 369 -14 355 278 -15 263
Financial items -16 - -16 -8 - -8
Income/loss after finanicial 353 -14 339 270 -15 255
items
Tax -37 -6 -43 -72 4 -68
Net income/loss for the 316 -20 296 198 -11 187
period
of which attributable to 315 -20 295 197 -5 192
shareholders in OMX AB
of which attributable to 1 - 1 1 -6 -5
minority interests
Average number of shares, 119.262 118.474
millions
Number of shares at period 120.640 118.474
end, millions
Average number of shares 119.262 118.760
after full conversion,
millions
Number of shares after full 120.640 118.760
conversion at period end,
millions
Earnings per share, SEK 2) 2.64 2.47 1.66 1.62
Earnings per share, SEK after 2.64 2.47 1.66 1.62
full conversion 2)
1) Other revenue refers to earnings attributable to the sale of shares in VPC
AB during the periods October - December 2006.
2) Earnings per share are calculated on the basis of the weighted average
number of shares during the period. This is based on OMX AB shareholders'
share of earnings for the period.
INCOME STATEMENT 2006
2006 2005
------------------------ ---------------------
REVENUE Conti Opera Total Conti Opera Total
nuing OMX nuing OMX
opera tions opera tions
tions being tions being
dis- dis-
Conti Conti
nued nued
Net sales 3,148 289 3,437 2,803 208 3,011
Own work capitalized 68 - 68 92 33 125
Other revenue 1) 105 - 105 - - -
Total revenue 3,321 289 3,610 2,895 241 3,136
EXPENSES
External expenses
Premises -196 -14 -210 -178 -13 -191
Marketing expenses -63 - -63 -40 - -40
Consultancy expenses -276 -34 -310 -228 -25 -253
Operations and -177 -78 -255 -157 -75 -232
maintenance, IT
Other external expenses -156 -67 -223 -206 -24 -230
Personnel expenses -999 -161 -1 160 -931 -138 -1 069
Depreciation and -216 -8 -224 -223 -3 -226
impairment
Total expenses -2,083 -362 -2,445 -1,963 -278 -2,241
Participation in earnings 46 - 46 15 - 15
of associated companies
Operating income 1,284 -73 1,211 947 -37 910
Financial items -53 -7 -60 -64 - -64
Income/loss after 1,231 -80 1,151 883 -37 846
finanicial items
Tax -252 12 -240 -313 10 -303
Net income/loss for the 979 -68 911 570 -27 543
period
of which attributable to 975 -68 907 565 -15 550
shareholders in OMX AB
of which attributable to 4 - 4 5 -12 -7
minority interests
Average number of shares, 118.671 118.108
millions
Number of shares at 120.640 118.474
period end, millions
Average number of shares 118.886 118.394
after full conversion,
millions
Number of shares after 120.640 118.760
full conversion at period
end, millions
Earnings per share, SEK 8.22 7.64 4.78 4.66
2)
Earnings per share, SEK 8.22 7.64 4.78 4.66
after full conversion 2)
1) Other revenue refers to earnings attributable to the sale of shares in
NOS ASA during the period January - December 2006 and earnings
attributable to the sale of shares in VPC AB during the periods October -
December 2006 and January - December 2006.
2) Earnings per share are calculated on the basis of the weighted average
number of shares during the period. This is based on OMX AB shareholders'
share of earnings for the period.
3) The income statement for discontinuing operations has been adjusted as
compared with the Annual Report as a result of organizational changes
where certain parts of the business area have been retained.
NOTES TO THE INCOME STATEMENT FOR THE FOURTH QUARTER 2006
Total revenue amounted to SEK 1,025 m (847), including SEK 83 m from the sale of
shares in VPC AB. Consolidated net sales amounted to SEK 940 m (818). Own work
capitalized amounted to SEK 2 m (29) during the period, primarily referring to
systems development. The calculation of own work capitalized was corrected in the
amount of SEK 19 m for the full-year, which is the reason for the low amount in
the fourth quarter. Refer to pages 3-4 for revenue per business area.
The Group's total expenses amounted to SEK 674 m (573) for the reporting period.
The increase in costs is primarily due to increased marketing costs related to
the launch of the Nordic Exchange and rises in personnel and consultant costs as
a result of increased market activity.
The Group's share in the earnings of associated companies amounted to SEK 4 m
(loss: 11) and is attributable to EDX London, Orc Software and the Lithuanian
securities depository CSDL. The main reason for this increase was improved
earnings for Orc Software and EDX London.
Net financial items for the Group amounted to an expense of SEK 16 (expense: 8),
a negative change primarily due to the positive nonrecurring effects arising in
the fourth quarter of 2005. Tax expenses for the reporting period amounted to SEK
43 m (68), corresponding to a tax rate of 13 (27) percent. One main reason for
the low tax rate was the tax free result from the divestment of the shares in VPC
AB.
NOTES TO THE INCOME STATEMENT FOR 2006
Total revenue amounted to SEK 3,610 m (3,136), including SEK 22 m from the sale
of shares in NOS during the first quarter and SEK 83 m from the sale of shares in
VPC AB during the fourth quarter. Consolidated net sales amounted to SEK 3,437 m
(3,011). Own work capitalized amounted to SEK 68 m (125) during the period,
primarily referring to systems development. Refer to pages 3-4 for revenue per
business area.
The Group's total expenses amounted to SEK 2,445 m (2,241) for the reporting
period. The increase in costs is primarily due to rises in personnel and
consultant costs as a result of increased market activity.
The Group's share in the earnings of associated companies amounted to SEK 46 m
(15) and is attributable to VPC AB (NCSD), EDX London, Orc Software and the
Lithuanian securities depository CSDL. The main reason for this increase was
improved earnings for Orc Software and EDX London.
Net financial items for the Group amounted to an expense of SEK 60 m (expense:
64). Tax expenses for the reporting period amounted to SEK 240 m (303),
corresponding to a tax rate of 21 (36) percent. An extra tax cost of SEK 67 m
pertaining to NLK was included in the second quarter of 2005.
BALANCE SHEET
SEK m Dec Dec
2006 2005
Goodwill 3,124 2,924
Other intangible fixed assets 1,145 853
Tangible fixed assets 321 354
Financial fixed assets, non-interest-bearing 699 1,004
Financial fixed assets, interest-bearing 21 90
Total fixed assets 5,310 5,225
Market value outstanding derivative positions 4,401 2,312
Current receivables 1) 1,738 1,714
Financial assets available for sale 519 328
Liquid assets 409 915
Assets held for sale 151 118
Total current assets 7,218 5,387
Total assets 12,528 10,612
Shareholders' equity 4,614 4,749
Long-term liabilities, non-interest-bearing 282 199
Long-term liabilities, interest-bearing 1,361 1,409
Total long-term liabilities 1,643 1,608
Market value outstanding derivative positions 4,401 2,312
Current liabilities, non-interest-bearing 1,434 1,445
Current liabilities, interest-bearing 436 498
Total current liabilities 6,271 4,255
Total liabilities and shareholders' equity 12,528 10,612
In addition to assets and liabilities reported in the balance sheet, OMX has
deposits on a client funds account that totaled SEK 2,604 m at December 31, 2006
and SEK 0 m at December 31, 2005.
1) Of which interest-bearing receivables accounted for SEK 1 m as at December
31, 2006 and SEK 1 m as at December 31, 2005.
NOTES TO THE BALANCE SHEET
Consolidated goodwill amounted to SEK 3,170 m (2,955) at period-end, including
assets held for sale of SEK 46 m (31). Consolidated goodwill pertains primarily
to the Nordic Marketplace business area, and refers to strategic acquisitions of
operations with a long history and stable and strong cash flow. During the
period, investments in goodwill amounted to SEK 326 m, of which SEK 180 m was
attributable to the acquisition of the operations from Computershare and SEK 130
m was attributable to the acquisition of Eignarhaldsvelagid Verdbrefathing (EV).
The value of goodwill pertaining to EV was negatively impacted by exchange-rate
fluctuations in the amount of SEK 5 m since the acquisition date.
Other intangible assets of SEK 1,241 m (932), including assets held for sale,
consist mainly of capitalized development costs for system products that are
amortized over a period of 3-10 years and valued on a current basis against
prevailing market conditions, as well as intangible assets attributable to the
acquisition of Copenhagen Stock Exhange and the acquisition of EV. Assessment to
ascertain possible impairment of intangible fixed assets is conducted on an
ongoing basis. At period-end, the Group's deferred tax assets amounted to SEK 125
m (237). Provisions were utilized in an amount of SEK 49 m (133) during the
period.
The Group's investments in other intangible assets during the period were SEK 229
m (312) plus assets of SEK 75 m identified on the acquisition of operations from
Computershare and SEK 135 m identified on the acquisition of EV. The other
intangible assets identified on the acquisition of EV were negatively impacted by
exchange-rate fluctuations in the amount of SEK 5 m since the acquisition date.
Investments in tangible fixed assets amounted to SEK 77 m (85). The market value
of OMX's holding in the associated company Orc Software (4.5 million shares) at
period-end was SEK 524 m (398), while the carrying amount was SEK 76 m (62).
CHANGE IN SHAREHOLDERS' EQUITY
SEK m Jan-dec Jan-dec
2006 2005
Shareholders' equity - opening balance 4,749 3,859
Minority interests -1 -16
New issue 269 232
Dividend to shareholders -1,120 -
Share swap for share-investment program -8 -
Share-investment program 2 -
Cash-flow hedging -18 -
Translation differences -173 125
Reassessments reported against shareholders' -12 12
equity
Changes in shareholders' equity of associated 15 -6
company
Net income in reporting period 1) 911 543
Shareholders' equity - closing balance 4,614 4,749
1) Of which, the minority share was SEK 4 m for January-December 2006,
a negative amount of SEK 7 m for January-December 2005.
CASH-FLOW STATEMENT
Current period Current period
Okt-dec Jan-dec
SEK m 2006 2005 2006 2005
Cash flow from current operations
before changes in working capital 242 341 1,002 808
Change in working capital 42 50 30 -328
Cash flow from current operations 284 391 1,032 480
Cash flow from investing activities 427 -17 -284 -1,139
Dividend to shareholders -355 - -1,120 -
Cash flow from financing activities -176 -460 -133 741
Change in liquid assets 180 -86 -505 82
Liquid assets - opening balance 1) 2) 230 1,001 915 833
Liquid assets - closing balance 1) 2) 410 915 410 915
1) Cash and cash equivalents comprise cash and bank balances, as well as
financial investments with a term of less than three months. Short-term
investments with a term of more than three months are reported as cash flow
from investing activities.
2) Cash and cash equivalents not available to the Group amounted to SEK 21 m at
period-end. Funds earmarked for operations under supervision amounted to
SEK 750 m.
NOTES TO CHANGES IN SHAREHOLDERS' EQUITY
Shareholders' equity amounted to SEK 4,614 m (4,749), of which the minority share
was 17 (14) at period-end. This change in shareholders' equity compared with the
year-earlier period is mainly due to the positive earnings for the period and the
dividends to shareholders paid in April and October 2006.
NOTES TO THE CASH-FLOW STATEMENT
Cash flow from operating activities before changes in working capital comprises
operating income with depreciation and capital gains (other revenue) reversed,
plus adjustments for financial items and paid tax. During the report period
January - December, investments in intangible assets affecting the cash flow
amounted to SEK 390 m (312), of which the acquisition of operations from
Computershare represented SEK 113 m. The change in liquid funds previously
included in the cash flow from operating activities is now included in cash flow
from financing activities. Comparative figures have been adjusted
correspondingly.
During thefourth quarter, the cash flow from investing activities was impacted by
the sale of the associated company VPC AB in the amount of SEK 575 m and the
investment in the Oslo Stock Exchange in the amount of SEK 318 m.
Investments in tangible assets amounted to SEK 77 m (85) for the reporting
period. Cash flow from investing activities also includes changes in financial
investments with a term of more than three months in the amount of SEK 190 m
which have been transferred from cash and cash equivalents.
REVENUES, EXPENSES AND OPERATING INCOME BY BUSINESS AREA
Oct-Dec Jan-Dec
Nordic Marketplaces 2006 2005 2006 2005
Trading revenue 328 329 1,286 1,106
Issuers' revenue 89 82 344 310
Other revenue 57 22 148 94
Total revenues 474 433 1,778 1,510
Total expenses -232 -217 -851 -831
Participation in earnings
of associated
companies 0 -14 13 10
Operating income 242 202 940 689
Operating margin, % 51 47 53 46
410 915 410 915
Information Services & New Markets
Information sales 121 95 441 365
Revenues from Baltic Markets 1) 23 17 68 63
Revenue from Broker Services 19 16 78 69
Other revenue 23 4 38 15
Total revenue 186 132 625 512
Total expenses -109 -84 -381 -316
Participation in earnings of associated
companies 0 0 7 0
Operating income 77 48 251 196
Operating margin, % 41 36 40 38
Market Technology
License-, support- and project revenue 235 210 785 730
Facility Management Services 113 89 432 375
Other revenue 42 8 83 50
Total revenue 390 307 1,300 1,155
Total expenses -344 -282 -1,233 -1,098
Participation in earnings of associated
companies 4 2 26 4
Operating income 50 27 93 61
Operating margin, % 13 9 7 5
Operations being discontinued
Total revenue 84 47 289 241
Total expenses -98 -62 -362 -278
Operating income -14 -15 -73 -37
Group eliminations 109 72 382 282
Total Group
Revenue 1,025 847 3,610 3,136
Expenses -674 -573 -2,445 -2,241
Participation in earnings of associated 4 -11 46 15
companies
Operating income 355 263 1,211 910
Earlier periods are reported pro forma in accordance with the new organization
that came into operation on January 1, 2006.
1) Comprises trading revenues, issuers' revenue and revenues from the central
securities depositories in Tallinn and Riga.
SOURCES OF REVENUE IN OMX
NORDIC MARKETPLACES
TRADING REVENUE
Trading revenues comprise trading and clearing revenues from the spot and
derivatives products traded on the exchanges included in Nordic Marketplaces. Of
the trading revenues during the fourth quarter, 70 percent was from spot trading
(mainly equities) and 30 percent was from trading and clearing related to
derivatives products.
With respect to trading revenues from share trading, the two most important
parameters are the value of the share turnover and the number of share
transactions. A change in value of the average trading volume of 1 percent on an
annual basis (assuming an unchanged number of transactions) will affect trading
revenues by +/- SEK 9.2 m, calculated on the basis of trading during the fourth
quarter of 2006.
With respect to revenue from trading and clearing related to derivatives
products, the two most important parameters are the number of derivatives
contracts and the size of the options premiums. A change of the average daily
derivatives turnover of 1,000 contracts on an annual basis (assuming unchanged
options premiums and product mix) will affect trading revenue by +/- SEK 0.8 m,
calculated on the basis of trading during the fourth quarter of 2006.
ISSUERS' REVENUE
Issuers' revenues derive from the fees that listed companies pay and are directly
related to the listed companies' market capitalization. A 10 percent change in
the total market capitalization of Nordic Marketplaces will affect issuers'
revenue by +/- SEK 6.3 m, calculated on an annual basis from 2006 levels and
based on the business conducted during the year.
OTHER REVENUE
Other revenues consist primarily of line connection fees for members and
operation reimbursement fees regarding the derivatives clearing link with the
Oslo Stock Exchange. Other revenues also include possible capital gains from the
sale of operations.
INFORMATION SERVICES & NEW MARKETS
INFORMATION REVENUE
Information revenues are generated through the sale and distribution of trading
information based on the data generated through trading on OMX's exchanges.
Customers comprise information vendors, exchange members and private individuals.
Trading information, which is the largest source of revenue, is sold to nearly
one hundred companies that distribute the information to a large number of end
users. These information vendors are invoiced in arrears. The size of the fee
depends on the number of end users.
REVENUE FROM BALTIC MARKETS
Revenues from the Baltic Markets comprise trading revenues and issuers' revenue
from the exchanges owned by OMX in Tallinn, Riga and Vilnius. The revenue model
is similar to that within Nordic Marketplaces. Also included are revenues from
the central securities depositories in Tallinn and Riga - the number of register
accounts as well as cleared and settled accounts are the most important
parameters.
REVENUE FROM BROKER SERVICES
Revenues from Broker Services derive from securities administration, mainly back-
office services related to share trading in the Nordic region. Revenue is based
on fixed revenue per customer and variable revenue governed by the number of
transactions carried out.
OTHER REVENUE
Other revenues consist primarily of training revenues, sales of information
materials and line connection fees for members. Other revenues also include
possible capital gains from the sale of operations.
MARKET TECHNOLOGY
LICENSE, SUPPORT AND PROJECT REVENUE
License, support and project revenue derive from the system solutions developed
and sold by OMX. After Market Technology has developed and sold a system
solution, the customer licenses the right to use the software. Each project
involves individual adaptations to the specific requirements of the customer, for
instance, relating to functionality and capacity. This development, testing and
installation work generates project revenue that is invoiced continually
according to degree of completion. When Market Technology provides a system
solution, it undertakes to continually upgrade, develop and maintain the system
and receives regular support revenues for this work.
With regard to major system solutions for customers such as exchanges and
clearing organizations, license and project revenue is mostly fixed and
recognized in relation to the degree of completion. Support revenue is mainly
fixed and contracts usually extend for five years. A certain portion of license
revenue can also be recurring, and contracts can extend for a longer period.
FACILITY MANAGEMENT SERVICES REVENUE
Facility Management Services involve OMX assuming responsibility for the
continuous operation of a system platform for a customer, for which OMX receives
recurring facility management revenue. Revenue from Facility Management Services
can be both fixed and volume-based. Contract periods vary between one and seven
years.
OTHER REVENUE
Other revenues comprise mainly revenue from consulting services and exchange-rate
differences. Other revenues also include possible capital gains from the sale of
operations.
DEPRECIATION AND IMPAIRMENT BY BUSINESS AREA
Oct-Dec Jan-Dec
SEK m 2006 2005 2006 2005
Nordic Marketplaces 17 22 70 83
Information Services & New 6 5 22 21
Markets
Market Technology 1) 33 28 132 122
Total 56 55 224 226
1) The period January - December 2006 includes writedowns in discontinuing
operations in the amount of 8. The period January - December 2005 includes
writedowns of discontinuing operations in the amount of 3.
INVESTMENTS
Oct-Dec Jan-Dec
SEK m 2006 2005 2006 2005
Goodwill 136 -5 326 924
Other intangible assets 53 125 229 312
Tangible assets 43 15 77 85
Assets acquired through 135 39 210 398
acquisitions1)
Totalt 367 174 842 1,719
1) Concerns other intangible assets.
INVESTMENTS IN R&D
Oct-Dec Jan-Dec
Nordic Marketplaces 6(4) 10(-) 17(8) 25(3)
Information Services & New 4(1) 4(-) 17(2) 9(4)
Markets
Market Technology1) 46(2) 63(10) 174(13) 229(56)
Totalt 56(7) 77(10) 208(23) 263(63)
1) The period January - December 2006 includes investments in discontinuing
operations in the amount of 5 (0). The period January - December 2005
includes impairment of discontinuing operations in the amount of 45 (5).
PRELIMINARY ACQUISITION CALCULATION REGARDING EIGNARHALDSVELAGID VERDBREFATHING
SEK m
Cash 41
Acquisition costs 17
New share issue 256
Acquisition price 314
Fair value of acquired net 179
assets
Goodwill 135
ACQUIRED ASSETS AND LIABILITIES
Fair value Carrying value
Fixed assets1) 149 9
Current assets 19 19
Cash and bank balance 33 33
Current liabilities -22 -22
Acquired net assets 179 39
1) The difference between fair value and carrying value is primarily
attributable to the valuation of acquired contracts.
Eignarhaldsvelagid Verdbrefathing (EV) is included in Nordic Marketplaces. EV was
consolidated in the Group's income statement and balance sheet on December 1,
2006. EV is included in the Group's revenues in the amount of SEK 11 m and in net
income in the amount of SEK 5 m. Goodwill is attributable to the company's
positive profitability and expected revenue synergies in conjunction with the
continued integration of the Nordic-Baltic securities market.
The cash-flow effect of the acquisition amounts to SEK 25 m, comprising a cash
payment of SEK 41 m, acquisition costs of SEK 17 m, minus received cash balances
of SEK 33 m. Of the total amount of acquisition costs of SEK 17 m, only SEK 11 m
had an effect on cash flow in 2006. The remaining SEK 6 m will impact cash flow
in 2007. The new shares issued are valued at market value on the acquisition
date.
PRELIMINARY ACQUISITION CALCULATION REGARDING COMPUTERSHARE
SEK m
Cash 1) 244
Acquisition costs 5
Acquisition price 249
Fair value of acquired net 69
assets2)
Goodwill 180
1) Payment will be made over a period of five years.
The acquisition price is discounted to net present value.
2) Acquired net assets comprise marketplace systems.
OTHER IMPORTANT INFORMATION
ACCOUNTING PRINCIPLES
This interim report was prepared in accordance with IAS 34 Interim Financial
Reporting, and recommendation RR 31 Interim Reporting for Groups issued by the
Swedish Financial Accounting Standards Council. The same accounting principles
and methods of calculation were applied as in the 2005 Annual Report, which was
prepared in accordance with IFRS as adopted by the EU, and RR32 for the Parent
Company. The new/revised IFRS that came into effect from January 1, 2006 affected
only the hedging of cash flows in the OMX Group's income statements, balance
sheet, cash-flow statements and shareholders' equity. Effective January 1, 2006,
OMX applies hedge accounting of hedging of internally forecast flows in foreign
currencies. Earnings from these cash-flow hedges are reported in shareholders'
equity.
Since a decision was made in August 2005 to discontinue operations within Banks &
Brokers, these operations are reported as discontinued although the
discontinuation has yet to be implemented. In the balance sheet, assets
attributable to Banks & Brokers are reported separately through December 31,
2005. The balance sheet for the comparison period is not affected in accordance
with IFRS 5.
In preparing this report in accordance with generally accepted accounting
principles, the Board and senior management make assessments and assumptions
affecting the company's income and position, as well as other information
disclosed. These assessments and assumptions are based on historic experience and
are reviewed at regular intervals.
OMX AB
The legal entity OMX AB, the Group's Parent Company, comprises the Group's
corporate functions and conducts holding company operations on behalf of Group
subsidiaries. Revenue totaled SEK 149 m (2,267) for the reporting period. The
loss before appropriations and tax was SEK 141 m (1,999). Cash and cash
equivalents totaled SEK 1 m (1). Investments amounted to SEK 17 m (59). The high
revenues and earnings during the preceding year pertain to the internal sale of
Stockholmsbörsen AB to OMX Exchanges Ltd.
OMX AB (publ)
Stockholm, February 1, 2007
Board of Directors
KEY RATIOS 1)
Jan-dec Jan-dec
2006 2005
Earnings per share, SEK 2) 7.64 4.66
Share price at period-end, SEK 126 110.5
Average number of OMX shares traded daily, 772 335
thousands
P/E ratio 3) 16 23
Shareholders' equity per share, SEK 38 40
Share price/Shareholders' equity per share, SEK 3.3 2.75
Return on equity, % 3) 20 12
Return on capital employed, % 4) 20 14
Net debt/equity,% 18 12
Equity/assets ratio, % 5) 57 57
Number of employees at period-end 1,402 1,288
Average number of employees during the period 1,324 1,370
Personnel expenses, SEK m 1,160 1,069
1) Definitions of key ratios are given in the OMX Annual Report 2005, page 93.
Net debt/equity ratio is calculated on the basis of interest-bearing net
debt divided by shareholders' equity.
2) Based on OMX AB shareholders' share of earnings for the period.
3) Based on 12-month rolling income.
4) 12-month rolling income before interest expenses and tax as a percentage of
average shareholders' equity plus interest-bearing liabilities.
5) Calculated excluding market value of outstanding derivative positions.
MAJOR SHAREHOLDERS AS OF DECEMBER 31 2006
Number of shares Share capital
and votes, %
Investor AB 12,950,507 10.7
The Swedish state 7,993,466 6.6
Nordea Bank 6,484,943 5.4
Swedbank Robur funds 4,362,719 3.6
Didner & Gerge aktiefond 4,000,000 3.3
Fidelity funds 3,906,500 3.2
Franklin-Templeton funds 3,584,270 3.0
Svenska Handelsbanken 3,099,888 2.6
SHB/SPP funds 2,458,714 2.0
SEB funds 2,396,723 2.0
Other Swedish owners 26,879,671 22.3
Other foreign owners 42,523,066 35.3
Total number of shares 120,640,467 100
Source: SIS Ägarservice
OMX - Financial reports during 2007
April 12 - Annual General Meeting
April 24 - Interim report for January-March 2007
July 18 - Interim report for January-June 2007
October 24 - Interim report for January-September 2007
OMX is a leading expert in the exchange industry. Through the Nordic Exchange,
OMX offers access to approximately 80 percent of the Nordic and Baltic securities
market. The Nordic Exchange is a term used for marketing purposes and is not a
legal entity. It describes the common offering from the Helsinki Stock Exchange,
Copenhagen Stock Exchange, Stockholm Stock Exchange, Iceland Stock Exchange,
Tallinn Stock Exchange, Riga Stock Exchange and Vilnius Stock Exchange. OMX
integrated technology solutions cross the transaction chain enabling efficient
securities transactions for over 60 exchange organizations in more than 50
countries. OMX is a Nordic Large Cap company in the Financials sector on the OMX
Nordic Exchange. For more information, please visit www.omxgroup.com.