PRESS RELEASE | LEONTEQ PUBLISHES HALF-YEAR 2021 RESULTS
Zurich, 22 July 2021 | Ad hoc announcement pursuant to Art. 53 LR
Leonteq AG (SIX: LEON) achieved record revenues and profits in the first half of 2021, resulting from strong client activity, disciplined risk management and the focused execution of its strategy.
Financial highlights in H1 2021
- Group net profit of CHF 74.4 million (H1 2020: CHF 5.5 million); earnings per share of CHF 4.04 (H1 2020: CHF 0.29)
- Total operating income of CHF 205.8 million, up 99% year-on-year, driven by strong net fee income of CHF 170.0 million and positive net trading result of CHF 35.4 million
- Capital target reached six months ahead of guidance, with the capital base totalling CHF 800.2 million at the end of June 2021
Further improvement in business diversification and revenue quality in H1 2021
- Balance sheet light turnover increased by 67% to CHF 1.5 billion, corresponding to approximately 9% of total turnover (up 3 percentage points)
- Total turnover grew by 3% to CHF 15.9 billion, driven by 26% increase in turnover in Leonteq's own products to CHF 7.8 billion
- Asset management-like revenues increased by 56% to CHF 31.2 million
- Revenues from fund derivatives rose to CHF 20.6 million, a ten-fold increase year-on-year
- Revenues from products with crypto assets as underlyings grew to CHF 9.2 million, representing a fifteen-fold increase year-on-year
Continued focused execution of strategy
- LynQs developing into a one-stop-shop for investment solutions; click 'n' trade platform launched and more than 40 clients and partners onboarded on white-labelled platforms
- White-labelling set-up with Basler Kantonalbank and Banque Internationale à Luxembourg completed; turnover of more than CHF 350 million generated in Q2 2021
- Following record results in H1 2021, performance expected to normalise in H2 2021
- Group net profit of more than CHF 100 million targeted for the full-year 2021
vs H1 2020
vs H2 2020
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|of which net fee income
|of which net trading results
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STRONG PERFORMANCE IN THE FIRST HALF OF 2021
Following a strong start to the year, Leonteq continued to register high levels of client activity in a favourable market environment during the first six months of 2021. It saw strong client demand across its entire range of innovative investment solutions and further diversified its revenue streams across products, underlyings and issuers. In particular, Leonteq grew its asset management-like revenues and attracted significant inflows into products with fund derivatives and cryptocurrencies as underlyings. The company also saw volumes and revenues in own issued products reach record levels, and it generated a notable increase in large ticket transactions during the first half of 2021. This strong performance is also reflected by a 24% increase in client transactions to a total of 142,452 transactions and a 28% increase in issued products to 20,610 products in the first half of 2021.
As a result, Leonteq generated strong net fee income of CHF 170.0 million in the first half of 2021, following the exceptionally high figure of CHF 213.0 million in the prior-year period, which was characterised by Covid-19-related market developments. At the same time, Leonteq continued to focus on disciplined risk management and recorded a positive net trading result of CHF 35.4 million compared to
CHF -107.1 million in the prior-year period, which was primarily affected by a significant increase in hedging-related costs and one-off hedging-related losses. Leonteq's total operating income grew by 99% to CHF 205.8 million in the first half of 2021, driven by an exceptional first quarter of 2021 and a strong second quarter of 2021.
Total operating expenses rose to CHF 125.2 million in the first half of 2021, an increase of 27% year-on-year, reflecting planned investments in key strategic initiatives, a performance-driven increase in variable costs and additional provisions for legal cases.
In line with the guidance provided on 15 June 2021, Leonteq reported record Group net profit of CHF 74.4 million in the first half of 2021, compared to CHF 5.5 million in the prior-year period. Shareholders' equity amounted to CHF 721.4 million as of 30 June 2021, compared to CHF 647.5 million as of 31 December 2020. Together with deferred fee income of CHF 78.8 million, Leonteq's capital base totalled CHF 800.2 million as of 30 June 2021 and the company thus reached its capital base target (in the area of CHF 800 million) six months ahead of the guidance provided on 11 February 2021.
Lukas Ruflin, Chief Executive Officer of Leonteq, stated: "Our first-half 2021 results demonstrate the good financial and strategic progress that Leonteq has made across many fronts: We achieved strong fee income, generated record net profit for the period, reached our target capital base ahead of schedule and are strongly capitalised. We continued to diversify our business across products, issuers and underlyings and have improved the quality of our revenues. At the same time, we further innovated our digital offering for our partners and clients and expanded our ecosystem for investment solutions."
LEONTEQ PRODUCTS ACHIEVE NEW RECORD VOLUMES
In Leonteq's Investment Solutions business line, platform assets in Leonteq's own products totalled CHF 5.8 billion as of 30 June 2021, an increase of 18% compared to end-2020. Turnover in own issued products increased by 26% to CHF 7.8 billion in the first half of 2021 (up 44% from H2 2020) while margins remained at elevated levels of 111 basis points, compared to 127 basis points in the prior-year period (104 basis points in H2 2020).
In its business with platform partners, outstanding volumes in platform partners' products increased by 4% to CHF 9.6 billion as of end-June 2021, and turnover generated with platform partners decreased to CHF 8.1 billion in the first half of 2021 compared to the very strong performance of CHF 9.2 billion in the prior-year period (up 45% from H2 2020). Margins continued to normalise to 96 basis points compared to an exceptionally high level of 130 basis points in the first half of 2020 (104 basis points in H2 2020).
The Insurance & Wealth Planning Solutions business line saw the number of outstanding policies serviced on the platform increase by 2% to 52,417 policies as of 30 June 2021. Total operating income decreased to CHF 8.8 million in the first half of 2021 from CHF 24.7 million in the prior-year period (flat vs H2 2020), primarily reflecting the continued challenging long-term interest rate environment and pandemic-related effects impacting the in-person sales activities of third-party distribution channels.
STRONG HOME MARKET AND INCREASED FOOTPRINT IN EUROPE AND THE MIDDLE EAST
Leonteq maintained its strong position in its home market of Switzerland. Together with its platform partners, Leonteq is the leading issuer of SIX-listed yield enhancement products with a market share of 28%, and it ranks as the number three issuer of total SIX-listed structured products with a market share of 16%. Leonteq also expanded its range of digitally tradable investment products in Switzerland by listing products on BX Swiss. Net fee income in Switzerland was CHF 60.0 million in the first half of 2021, down 27% compared to the prior-year period (up 29% from H2 2020).
Operations in Europe generated net fee income of CHF 85.8 million, representing the second-strongest result in Leonteq's history. Compared to the very strong result for the prior-year period, net fee income decreased by 24% in the first half of 2021 (up 43% from H2 2020). Leonteq made particularly good progress in Italy, where it established a presence in the fourth quarter of 2020, and it strengthened its sales coverage for the Nordic region.
In Asia (including the Middle East), Leonteq implemented key initiatives by increasing the range of products issued by Standard Chartered and improving its offering of actively managed certificates (AMCs) for Asian clients. Leonteq also expanded its regional footprint by opening a new office in Dubai. As a result, the Asia region (including the Middle East) saw a 36% increase in net fee income year-on-year to CHF 24.2 million (up 58% from H2 2020).
Leonteq also made further progress in establishing a service centre in Portugal and currently has 36 employees working in Lisbon. The company expects to receive regulatory approvals and open its own office in the second half of 2021.
FOCUSED EXECUTION OF STRATEGY
In the first half of 2021, Leonteq continued to make significant strategic progress in implementing the priorities defined in mid-2018 to enhance scalability, growth and investment experience as the targeted measures taken in recent years have begun to bear fruit. Through the disciplined execution of its strategic initiatives, Leonteq has further strengthened its position as a leading service and technology provider and significantly broadened its ecosystem for investment solutions.
- LynQs: Leonteq further advanced the functionalities and features of its one-stop-shop for structured investment solutions and launched its new module, Quote, offering clients a unique click 'n' trade platform for more than 10 issuers. It also launched its innovative white-labelling function, allowing Leonteq's partners and clients to integrate LynQs into their wealth management activity in their own corporate identity. To date, Leonteq has onboarded more than 40 clients and partners under this new format.
- Balance sheet light: Leonteq continued to advance its Smart Hedging Issuance Platform (SHIP) by enabling AMCs on the platform. Leonteq is also offering products manufactured outside its platform by providing clients access to a total of 21 third-party issuers through its marketplace. In the first half of 2021, Leonteq's balance sheet light turnover increased by 67% to CHF 1.5 billion, corresponding to approximately 9% of total turnover, compared to CHF 0.9 billion, or approximately 6%, in the prior-year period.
- White-labelling partners: Leonteq successfully completed the onboarding of Basler Kantonalbank and Banque Internationale à Luxembourg onto its multi-issuer platform and recorded more than CHF 350 million in turnover from these two issuers in the second quarter of 2021 after the go-live.
- Product offering: Leonteq significantly expanded its fund derivative business and recorded a ten-fold increase in revenues to CHF 20.6 million compared to the prior-year period. Revenues from products with crypto assets as underlyings grew to CHF 9.2 million in the first half of 2021, a fifteen-fold increase compared to the prior-year period. In addition, Leonteq launched its new AMC Gateway with improved functionalities aimed at enhancing user and investment experience for AMCs. Leonteq's revenues in its asset management-like business (including AMCs and tracker certificates that are generally open-end certificates with an annual fee on total outstanding volumes) increased by 56% to CHF 31.2 million, corresponding to 18% of the Group's fee income, in the first half of 2021.
- ESG: As part of its sustainability initiative, Leonteq began offering investors the opportunity to invest in structured products that incorporate responsible investment approaches and is now screening its own product universe according to ESG criteria. When selecting structured products or underlyings, Leonteq thus assesses the underlying's ESG score and includes it in each structured product termsheet so that the product's sustainability credentials are visible at a glance. Leonteq is also applying an ESG label to all termsheets whose underlyings achieve a certain minimum score. In addition, Leonteq has launched the world's first donation certificate which offers investors the opportunity to invest in a charitable certificate that provides an automatic donation. With this innovative offering, Leonteq is demonstrating its commitment to sustainability and is playing a pioneering role in shaping the future of sustainably conscientious tracker certificates.
By investing in its talent and technology platform, Leonteq has created a sound basis for the continued profitable growth of its business and solid foundations for the company to build on. The pandemic-related trends affecting end-investor behaviour, digitalisation and online connectivity have accelerated the growth opportunities for Leonteq in terms of product distribution and white-labelling offerings. Against this background, Leonteq will increase its annual investments in existing and new growth initiatives while continuing to safeguard its profitability.
At the same time, Leonteq remains mindful of potential challenges in a market environment characterised by record prices in equity markets, a potential increase in inflationary pressures and pandemic-related measures that are still in place. In this context, Leonteq expects its performance to normalise in the second half of 2021, which is usually characterised by a slower summer period followed by a pickup in client demand from September onwards. It is targeting Group net profit of more than CHF 100 million for the full-year 2021.
Leonteq is reaffirming the dividend policy it communicated on 11 February 2021: 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, Leonteq intends to move to a progressive dividend policy with a payout ratio of more than 50% of net profits.
Lukas Ruflin stated: "We have demonstrated that the diligent and focused execution of our strategy over the past three years is starting to yield attractive investment returns. We will continue expanding our product offering and issuer universe, and we will further accelerate our digital solutions. With the ambition to become a leading ESG provider for structured investment products, we are committed to offering our clients and partners innovative solutions in the area of responsible investing. We are acting from a position of strength and are investing in our business to seize the opportunities emerging in the changed operating environment, and we are well positioned to deliver future growth."
LEONTEQ HALF-YEAR 2021 RESULTS PRESS AND ANALYST CONFERENCE CALL
A press and analyst conference call with Lukas Ruflin, CEO of Leonteq, and Marco Amato, Deputy CEO and CFO of Leonteq, will be held today, 22 July 2021, at 10.00 a.m. CEST.
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 half-year 2021 results'.
This press release, the half-year 2021 results presentation and the half-year 2021 report are available at: http://www.leonteq.com/halfyearresults
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/halfyearresults
10 February 2022: Full-year 2021 results
31 March 2022: Annual General Meeting 2022
21 July 2022: Half-year 2022 results
ALTERNATIVE PERFORMANCE MEASURES USED IN THIS PRESS RELEASE
The definitions of Alternative Performance Measures used in this press release are provided in the half-year report 2021 on page 7.
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Leonteq is a Swiss fintech company with a leading marketplace for structured investment solutions. Based on proprietary modern technology, the company offers derivative investment products and services and predominantly covers the capital protection, yield enhancement and participation product classes. Leonteq acts as both a direct issuer of its own products and as a partner to other financial institutions. Leonteq further enables life insurance companies and banks to produce capital-efficient, unit-linked pension products with guarantees. The company has offices and subsidiaries in 12 countries, through which it serves over 50 markets. Leonteq AG is listed on the SIX Swiss Exchange (SIX: LEON). www.leonteq.com
This press release issued by Leonteq AG (the "Company") serves for information purposes only and does not constitute research. This press release and all materials, documents and information used therein or distributed in the context of this press release do not constitute or form part of and should not be construed as, an offer (public or private) to sell or a solicitation of offers (public or private) to purchase or subscribe for shares or other securities of the Company or any of its affiliates or subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction, and may not be used for such purposes. Copies of this press release may not be made available (directly or indirectly) to any person in relation to whom the making available of the press release is restricted or prohibited by law or sent to countries, or distributed in or from countries, to, in or from which this is restricted or prohibited by law.
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.