Leonteq AG / Key word(s): Annual Results
PRESS RELEASE | LEONTEQ PUBLISHES SECOND HALF AND FULL-YEAR 2020 RESULTS
Zurich, 11 February 2021
Leonteq AG (SIX: LEON) achieved significant strategic progress in 2020, improved its profitability in the second half of the year, reflecting record revenues in the fourth quarter.
Financial highlights H2 2020 / FY 2020
Continued focused execution of strategy with significant progress in 2020
Changes to the Executive Committee
For the full year 2020, total operating income decreased by 8% year-on-year to CHF 234.5 million, primarily driven by hedging-related one-off losses of approximately CHF 58 million (resulting from unexpected cancellations of pre-announced dividend payments as well as the first oil price shock) in the first half of 2020. In line with previous guidance, total operating expenses totalled CHF 197.9 million in 2020 despite significant investments in hiring and growth initiatives. Profit before taxes amounted to CHF 36.6 million in 2020, compared to CHF 65.1 million in 2019. Taxes improved to CHF 3.3 million in 2020 compared to CHF -2.4 million in 2019, primarily reflecting deferred income tax benefits of CHF 4.8 million. Group net profit amounted to CHF 39.9 million in 2020 compared to CHF 62.7 million in the prior year.
Leonteq's shareholders' equity totalled CHF 647.5 million as of 31 December 2020 compared to CHF 662.5 million at end-2019. Under the new regulatory framework for securities firms, Leonteq significantly exceeded its regulatory capital requirement of CHF 20 million as of 31 December 2020. Together with deferred fee income of CHF 75.1 million, Leonteq maintained its strong capital base which amounted to CHF 723 million as of 31 December 2020.
SHAREHOLDER DISTRIBUTION TO INCREASE BY 50% TO CHF 0.75 PER SHARE FOR 2020
Following record revenues in the fourth quarter of 2020, Leonteq had a strong start into 2021, will continue to invest in its key initiatives and expects total operating expenses of approximately CHF 210 million for the full-year 2021. Leonteq is further targeting for its capital base to reach the CHF 800 million area1 by end-2021 (CHF 723 million at end-2020), after which Leonteq intends to transition to a progressive dividend policy. For the financial year 2021, Leonteq expects to propose a shareholder distribution of more than CHF 0.75 per share. From the financial year 2022 onwards, a payout ratio of more than 50% of net profits is foreseen.
Lukas Ruflin, Chief Executive Officer of Leonteq, stated: "In 2020, we have demonstrated our ability to withstand one of the most severe capital market shocks in this century and have returned to the performance and profitability path we have built over the past few years. We have set a clear target for our capital base for 2021 and are providing transparency about our ambition to transition towards a progressive dividend policy thus underlining our commitment to create sustainable value for our shareholders and all stakeholders."
The Insurance & Wealth Planning Solutions business line saw the number of outstanding policies serviced on the platform increase by 9% to 51,577 policies as of 31 December 2020. Total operating income decreased to CHF 33.5 million in 2020 from CHF 48.3 million in 2019, primarily reflecting the challenging market environment with long-term interest rates at extraordinary negative levels throughout 2020.
INCREASED FOOTPRINT IN EUROPE AND THE MIDDLE EAST
In its home market of Switzerland, Leonteq reported net fee income of CHF 128.5 million in 2020 (up 15% compared to 2019), while the business in Europe generated 38% growth in net fee income to CHF 173.0 million. The Asia region saw a 17% increase in net fee income year on year to CHF 33.1 million.
FOCUSED EXECUTION OF STRATEGY
Leonteq's Smart Hedging Issuance Platform (SHIP) became fully operational in July 2020. SHIP is designed to reduce hedging exposure for Leonteq whilst providing its clients and issuance partners the choice of additional external hedging counterparties. To date, seven leading investment banks are connected to the platform, six of which are actively quoting and executing trades. Leonteq also extended its capabilities to enter into back-to-back hedging transactions on a bespoke basis. In addition, it increased its offering of products manufactured outside of the Leonteq platform by providing access to a total of 20 third-party issuers through its marketplace. In this context, Leonteq also established direct connectivity to Barclays' electronic trading platform as well as SG Markets, the trading platform of Societe Generale. In the second half of 2020, total notional volume of CHF 1.0 billion, or approximately 9% of total turnover, was directly hedged by an external counterparty, compared to CHF 0.5 billion, or approximately 3%, in the prior year period.
Leonteq continued to enhance its digital marketplace, LynQs, which features an intuitive and responsive design and navigation system as well as several new functionalities, enabling Leonteq's clients to manage their portfolio of structured products more efficiently across the entire value chain. Leonteq also further enhanced the visibility and transparency of clients' structured products portfolios for real-time monitoring by launching a new mobile app which is available in 25 countries. Furthermore, Leonteq introduced new portfolio allocation features, which provide clients complete autonomy in creating and managing their portfolios. As of the end of 2020, 1,530 LynQs users were onboarded, up from 1,056 at end-2019 (+44%).
Leonteq launched new collaborations and partnerships with Rand Merchant Bank (a division of FirstRand Bank), Basler Kantonalbank, Banque Internationale à Luxembourg and PostFinance in 2020. Furthermore, Leonteq has entered into a collaboration with Google Cloud to support its platform scalability, thus meeting expected higher computation, pricing and trading demand from clients and white-labelling partners.
Good progress was also made in broadening Leonteq's product offering in 2020 through the addition of products on systematic indices and the extension of the underlying universe for actively managed certificates (AMCs), and Leonteq continued to improve the operational efficiency of its AMC gateway with a redesigned client portal. Leonteq also significantly expanded its efforts in offering tracker certificates on a large range of crypto currencies resulting in an increase in outstanding volumes by 482% to CHF 155 million at end-2020. In addition, Leonteq launched a number of thematic certificates through its collaborations with Morningstar and Finanz und Wirtschaft, and, most recently, The Market.
Similar to features of asset management products, AMCs and tracker certificates are generally open-end certificates with an annual fee on total outstanding volumes. Leonteq's revenues in this asset management-like business increased by 43% to CHF 33 million, or 10% of the Group's fee income in 2020.
SUSTAINABILITY INITIATIVE LAUNCHED
CHANGES TO THE EXECUTIVE COMMITTEE
Lukas Ruflin stated: "We are very grateful to Jochen for his contributions in building out Leonteq's IWPS business over the last four years, and we wish him all the best in the future. Together with the IWPS team, I look forward to bringing Leonteq's savings and retirement solution business to the next stage of its development."
1Area is defined as a range of +/- 3% of the target indicated.
If you wish to participate, please use the following numbers:
- Dial-in number Switzerland: +41 (0)58 310 50 00
- Dial-in number UK: +44 (0) 207 107 06 13
- Dial-in number USA: +1 (1) 631 570 56 13
Please dial in 10-15 minutes before the start of the presentation and ask for 'Leonteq full-year 2020 results'.
This press release, the full-year 2020 results presentation and the annual report 2020 are available at: http://www.leonteq.com/fullyearresults
A digital playback of the telephone conference will be available approximately one hour after the conference call and can be accessed for one month at: http://www.leonteq.com/fullyearresults
This press release may contain specific forward-looking statements, e.g. statements including terms like "believe", "assume", "expect", "target" "forecast", "project", "may", "could", "might", "will" or similar expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may result in a substantial divergence between the actual results, financial situation, development or performance of the Company or any of its affiliates or subsidiaries and those explicitly or implicitly presumed in these statements. These factors include, but are not limited to: (1) general market, macroeconomic, governmental and regulatory trends, (2) movements in securities markets, exchange rates and interest rates and (3) other risks and uncertainties inherent in our business. In addition, currently, it is very difficult to provide a meaningful prediction on how the governmental actions in response to the ongoing outbreak of a novel coronavirus disease (COVID-19) and other COVID-19 related factors will affect Leonteq's operations and how long such measures will remain in place. The COVID-19 outbreak has caused, and may continue to cause, uncertainty, economic instability and a significant decrease of total economic output in the affected areas and globally. The impact of the COVID-19 outbreak on the general economic environment in the markets in which Leonteq operates remain uncertain and could be significant. Against the background of these uncertainties, you should not rely on forward-looking statements. Neither the Company nor any of its affiliates or subsidiaries or their respective bodies, executives, employees and advisers assume any responsibility to prepare or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this press release or to adapt them to any change in events, conditions or circumstances, except as required by applicable law or regulation.
End of ad hoc announcement