Singapore Exchange ((SPXCY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for SGX Group was marked by a strong positive sentiment, reflecting the company’s robust financial performance and strategic growth initiatives. The company reported record revenue and net profit, driven by significant growth in its derivatives and FX segments. Despite facing some challenges, such as impairments and a decline in the interest coverage ratio, the overall outlook remains optimistic, with a commitment to enhancing shareholder returns through increased dividends.
Record Revenue and Net Profit
SGX Group reported its highest revenue and net profit since listing, with group net revenue increasing by 11.7% to $1,298 million. The adjusted net profit after tax (NPAT) rose by 15.9% to $610 million, showcasing the company’s strong financial health and successful execution of its strategic initiatives.
Strong Derivatives and FX Performance
The derivatives franchise of SGX achieved record volumes, particularly in FX, commodities, and the China A50 index futures. The FX business experienced a 25% growth in net revenue, with average daily volumes rising by 28% to USD 143 billion, underscoring the company’s strength in this segment.
Increased Dividend and Future Growth Prospects
The Board has proposed a 17% year-on-year increase in the final quarterly dividend to $0.105 per share. Additionally, SGX plans a steady dividend increase of $0.0025 every quarter from FY 2026 to FY 2028, reflecting confidence in its future growth prospects and commitment to shareholder returns.
Broad-Based Growth Across Segments
All operating segments of SGX showed growth, with cash equities revenue increasing by 19% and the securities daily average value (SDAV) rising by 26.5% to $1.34 billion. This broad-based growth highlights the company’s diversified revenue streams and resilience in various market conditions.
Innovative Product Launches
SGX continues to expand its product portfolio with the launch of Brazilian Real Futures and Micro FTSE Taiwan Index Futures. These additions demonstrate the company’s responsiveness to market needs and its commitment to innovation.
Impairment of Purchased Intangibles
An $8 million impairment was recorded on purchased intangibles and associated companies due to underperformance. While this presents a challenge, SGX remains focused on optimizing its asset portfolio.
Interest Coverage Ratio Decline
The interest coverage ratio decreased to 54x from 77x, primarily due to higher interest expenses upon refinancing. Despite this decline, SGX maintains a strong balance sheet, positioning it well for future growth.
Equity Derivatives Volume Taper
The growth in equity derivatives revenue slowed in the second half, with a noted decrease in 225 and SiMSCI volumes. This tapering highlights the need for strategic adjustments in this segment.
Forward-Looking Guidance
Looking ahead, SGX Group anticipates continued growth driven by its multi-asset strategy and broad-based expansion across all operating segments. The company projects further increases in group net revenue and adjusted NPAT, supported by strong performance in the derivatives and equities cash segments. The proposed dividend increases reflect SGX’s confidence in its financial stability and growth trajectory.
In summary, SGX Group’s earnings call paints a picture of a company on a positive trajectory, with record financial results and strategic initiatives aimed at sustaining growth and enhancing shareholder value. Despite some challenges, the overall sentiment remains optimistic, underscoring SGX’s resilience and commitment to innovation and shareholder returns.