SGX profit in Q4 dips as operating expenses rise

Dividend policy to change to an absolute amount from 2019

The Singapore Exchange (SGX) has posted a 1.8 per cent drop in net profit for the fourth quarter to $83.67 million from a year ago. This comes on the back of a 6 per cent jump in operating expenses, largely owing to legal fees incurred as a result of the interim injunction filed by the National Stock Exchange of India (NSE) to bar the bourse operator from rolling out new India derivatives products.

SGX also said it will switch its dividend policy from one based on percentage (80 per cent of net profit) to an absolute amount of 7.5 cents per quarter from next year which marks an increase of 2.5 cents per quarter. The current policy involves a base dividend of five cents per share every quarter.

"The new policy will provide flexibility for SGX to balance its dividend payments with the need to retain earnings to support growth," said SGX chief financial officer Chng Lay Chew at a results briefing on Friday.

He added that the new policy does not mean dividends cannot grow as the board will consider higher dividends in good years.

Conversely, when times are bad, he said the board intends to maintain the dividend policy, given that its earnings are "pretty well diversified" and have been consistent over the years. SGX has proposed a final dividend of 15 cents per share versus 13 cents previously. This brings the total dividend for the year to 30 cents per share compared with 28 cents in FY17. If approved, this will be the highest annual dividend in 10 years.

"We recognise the need to reward shareholders and we also want to retain some earnings to grow further in our next phase," said SGX chief executive Loh Boon Chye, referring specifically to the group's plan to cement its position as a multi-asset exchange which includes developing a digital marketplace in the global freight industry.

Revenue for the three months ended June came in 2.5 per cent higher at $212.95 million up from $207.72 million a year ago. Earnings per share stood at 7.8 cents for the period under review versus eight cents for the corresponding quarter in 2017.

  • AT A GLANCE (Q4)

  • REVENUE: $212.95 million (+2.5%)

  • NET PROFIT: $83.67 million (-1.8%)

Revenue from equities and fixed income slipped 0.6 per cent to $23 million while it improved 4.1 per cent for the derivatives segment to $85 million and nearly 12 per cent to $56 million for securities trading and clearing.

For the full year, the bourse operator chalked up a five-year high net profit of $363.2 million, up 6.9 per cent. This was on the back of a 5.5 per cent increase in revenue to $844.68 million, a record revenue since its listing in 2000.

"All three core businesses registered higher revenues. Our securities daily average traded value (SDAV) hit a five-year high, with the number of bond listings and derivatives trading volumes reaching record highs," said Mr Loh.

A version of this article appeared in the print edition of The Straits Times on July 28, 2018, with the headline 'SGX profit in Q4 dips as operating expenses rise'. Print Edition | Subscribe