Oslo Børs VPS Holding ASA - 4th Quarter 2016

Oslo Børs VPS Holding reports a profit of NOK 74 million for the fourth quarter of 2016 (NOK 73 million). The Board of Oslo Børs VPS Holding intends to propose to the Annual General Meeting that a dividend of NOK 3.85 per share should be paid in respect of the 2016 financial year.

A more detailed presentation by business areas is provided in the quarterly report (enclosed).

The fourth quarter was characterised by a somewhat higher level of activity in the primary market compared with the fourth quarter of 2015, while the level of activity in the secondary market was somewhat lower compared with the fourth quarter of 2015.

Reported revenue for the fourth quarter of 2016 was NOK 234 million, which is NOK 11 million higher than in the same period last year. Revenue related to listing and registration was in total NOK 12 million higher than in the fourth quarter of 2015. Revenue related to trading and settlement was NOK 4 million higher. Revenue from the mutual funds area was NOK 5 million lower, while revenue related to market data was NOK 1 million lower. 

Reported revenue for 2016 as a whole was NOK 6 million higher than in 2015. Revenue related to listing and registration was in total NOK 16 million higher. Revenue related to trading and settlement was NOK 1 million lower, while revenue from the mutual funds area was NOK 11 million lower. Revenue related to market data was NOK 1 million higher.

Operating expenses before capitalisation of internal costs, depreciation and amortisation of excess value amounted to NOK 126 million in the fourth quarter, which represents an increase of NOK 5 million from the same period in 2015. Operating expenses before capitalisation of internal costs, depreciation and amortisation of excess value for 2016 as a whole were NOK 17 million higher than in 2015. The increase relates to VPS ending its agreement with Percival
CSD Partners and continuing some activities in its modernisation program, trading system projects at Oslo Børs, and the financial sector tax.

Net financial income for the fourth quarter of 2016 totalled NOK 4 million, a decrease from NOK 5 million in the fourth quarter of 2015. Net financial income for 2016 as a whole was NOK 5 million lower than in 2015, principally due to lower holdings of cash and cash equivalents and lower interest rates. 

The Board of Oslo Børs VPS Holding intends to propose to the Annual General Meeting that a dividend of NOK 3.85 per share should be paid in respect of the 2016 financial year. This is in addition to the dividend of NOK 2.60 paid in December 2016. The dividends for 2016 will therefore together total NOK 6.45 per share, which is equivalent to 93% of earnings per share before amortisation and write-downs. The proposed dividend is conditional on proposed dividend payments by subsidiaries to Oslo Børs VPS Holding ASA being approved by the Financial Supervisory Authority. A write-down at VPS in 2016 affected its profit for the year and consequently the dividend payable by VPS for 2016 by around NOK 25 million (after tax). VPS is in discussions with the authorities regarding the possibility of it making a dividend payment in excess of its profit for the year, but addressing this matter will take time.

After ending its agreement with Percival, VPS announced that it would continue to modernise its existing solutions in order to address market needs as well as the requirements being set by new regulations. At the end of August 2016 VPS published a road map describing 28 specific deliveries it would provide to the market by the end of Q2 2018. Half of these relate to new regulations. This modernisation work is going according to plan, and as at Q4 2016 all the scheduled deliveries were in production. 

VPS continues to have a target of migrating applications from IBM mainframes to a modern, flexible and cost-effective Java/Linux platform. In Q4 VPS put a new Java/Linux operating platform into production. One target in the application modernisation and development work being undertaken at VPS is for VPS' applications to be delivered from this platform in order to gradually reduce VPS' dependency on IBM mainframes.

On 20 December 2016 the Norwegian Parliament voted to introduce a share savings account scheme for private individuals during 2017. Share savings accounts will enable private individuals to buy and sell stock exchange listed shares and equity funds without being taxed on any gains if the funds remain in the share savings account. The Ministry of Finance is currently working on regulations that will determine who can offer share savings accounts. The providers will most probably be banks, investment firms and asset management companies. Possible share savings account providers are following developments closely, and are busy making preparations so they are ready to launch products when the time comes. During Q1 VPS will complete the adaptations its core systems require in order to support the scheme's introduction. VPS will also introduce a set of additional services to meet the requirements of possible providers. A transfer scheme to enable existing shareholdings to be moved into the new share savings accounts without any tax consequences is expected to be introduced in 2017.

Operating expenses for 2017 before capitalisation of internal costs, depreciation and amortisation are expected to be in the order of NOK 480 million to NOK 490 million. This includes expenses in 2017 in relation to a MiFID II version of Millennium Exchange, adapting VPS' systems to the EU'S CSD regulation (CSDR) and the financial sector tax that was approved by Parliament in December 2016. The financial sector tax will consist of an extra 5% tax on the salaries and other remuneration received by financial sector employees in addition to corporation tax remaining at 25% for financial sector companies.

The group's operating revenue varies in line with the level of activity in the securities market. Oslo Børs VPS is committed to offering a range of products and a pricing structure that are competitive and that encourage active use of the group's services. Oslo Børs VPS anticipates that its marketplace activities will continue to face intense competition, and it also expects increasing competition for the group's post-trade activities. Oslo Børs VPS will also in the future consider adjusting certain of its fees and prices, as well as further measures to improve the efficiency of its organisation and services for the benefit of its customers.