Euronext NV

PAR:ENX

Earnings Call Transcript 2021-Q4

[Operator]

Hello, and welcome to the Euronext Fourth Quarter and Full Year 2021 Results Call. My name is Josh, and I will be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. Thank you.

[Stéphane Boujnah, Chairman of the Managing Board & Group CEO]

Good morning, everybody, and thank you for joining us this morning for Euronext fourth quarter and full year 2021 Results Conference Call and Webcast. I am Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext and I will start with the highlights of this fourth quarter before commenting on our full year performance. Giorgio Modica, Euronext CFO, will then further develop the main business and financial highlights of the fourth quarter. As you've seen, Euronext reported record revenue in the fourth quarter of 2021 at EUR 370.1 million. This is the highest quarterly revenue we ever disclosed. This strong performance translated into more than 50% growth in both revenues and EBITDA and an almost 20% increase of adjusted EPS. During the fourth quarter of 2021, our revenue grew by plus 59.5% or plus EUR 138.1 million from last year. And this significant growth resulted from several drivers. First, from very solid organic growth across almost all our businesses. Giorgio will provide you with more details on this performance in a few minutes. Second, from the consolidation of the Borsa Italiana Group activities that contributed for EUR 127 million of revenue this quarter. In the fourth quarter of 2021, non-volume-related revenue accounted for 55% of our total revenue and income, slightly up compared to last year, while at the same time, our trading business has been growing. So our non-volume-related revenue covered 126% of our operating expenses, excluding D&A. This is an increase compared to 118% last year. On the cost side, the increase is solely reflecting the consolidated cost of the Borsa Italiana Group as well as related integration costs. Because like-for-like, our cost base remained flat compared to Q4 last year. Overall, these numbers translated into a plus 64.1% rise in EBITDA to EUR 208.2 million and representing a 56.3% EBITDA margin, up 1.6 points from last year. But like-for-like, at constant currencies, we reported an EBITDA margin at 57%, up plus 1.8 points from last year. Bottom line, in the fourth quarter, we delivered a plus 19.7% increase in adjusted EPS at EUR 1.31 per share. On a reported basis, net income was up plus 68.7% to $112.7 million. This report fourth quarter marked the conclusion of a very strong year 2021 for Euronext. With more than 40% growth in revenue, EBITDA and double-digit increase of adjusted EPS, 2021 was a record year compared to 2020, which was a very good year as well. In 2021, Euronext recorded a plus 46.9% revenue growth to close to EUR 1.3 billion. We generated plus EUR 414.3 million additional revenue in 2021. Thanks, again, to the combination of both organic growth even compared as I said, to a very strong 2020 year and accounting only for 8 months of consolidation of the Borsa Italiana Group. So this combination of [indiscernible] growth and combination of the Borsa Italiana Group. This performance reflects first an organic solid performance of our non-volume-related activities. In that respect, I would highlight the strong year of our listing business, posting a plus 8% organic growth, thanks to a record year in primary listing and the development of our corporate services. For the -- or Advanced Data Services business also reporting robust organic growth at plus 4%, reflecting growth across all our data and indices products. Second, the Borsa Italiana Group contributed EUR 337.7 million in 2021 for 8 months of consolidation. As a result, non-volume-related grew from 50% in 2020 to 55% of our top line in 2021. And these non-volume-related revenues accounted for 131% of our operating costs excluding D&A. On the cost side, I'm pleased to announce that we overachieved our 2021 guidance on costs excluding the impact of the Borsa Italiana Group acquisition. As we consolidated cost from Borsa Italiana Group and Euronext Securities Copenhagen and as we incurred related integration costs in relation to these 2 acquisitions, our costs mechanically increased by plus 49.8% compared to last year. Overall, it translated into an EBITDA of $752.8 million, up plus 44.8% or plus EUR 232.8 million from 2020. EBITDA margin was slightly down at 58% reflecting the cost from acquisitions and integration I just mentioned. In that regard, I'm pleased to share with you that we delivered the first 10.1 million of synergies in 2021. Lastly, on a like-for-like basis EBITDA margin was up 0.2 points to 59.7%. Overall, this performance resulted in a plus 17.2% increase in adjusted EPS to EUR 5.35. On a reported basis, net income is up plus 31% and to $413.3 million. Consequently and in line with our dividend policy of distributing 50% of reported net income a dividend of EUR 1.93 per share will be proposed at our upcoming Annual General Meeting in May. '21 has been a strong year and '22 is a year of transformational projects for Euronext. As I just mentioned, we delivered EUR 10.1 million of run rate synergies at the end of 2021, for the 8 months after the completion of the acquisition. As a reminder, we are committed to deliver EUR 100 million of run rate synergies by 2024. Please note that the synergies we delivered over the past -- over the 8 months of 2021 after the completion of the transaction and are delivered before any contribution from the identified business development opportunities that we are pursuing in relation to the acquisition of the Borsa Italiana Group. To deliver these synergies, we incurred a total of EUR 27.6 million of the implementation costs combined between operating costs and exceptional costs. As you can see on this time line, our 3 major projects are underway. Yet, the delivery will be faced over the duration of the plan starting with the migration of our new core data center in Italy near Bergamo which will happen in June this year. We also confirmed the expected time line for the migration of the Italian cash equities and derivative market to uptick for 2023 as well as the expansion of Euronext Clearing Services to all Euronext markets by '23 and '24. Moving to the next slide, I would like to share with you the latest development on our ESG strategy. We believe that capital markets can and must empower sustainable growth. We see it as overall to promote the evolution of companies to more sustainable business model than -- to help them addressing the transformation of the investment community. As the leading index provider in Europe, we are continuously taking steps to accelerate the transition to a sustainable economy. This is why we announced yesterday the upcoming launch of the AEX ESG Index in Amsterdam. This new ESG index is a new milestone in our ambition to offer investors an ESG [indiscernible] of our national flagship indices. After the successful launch of the CAC 40 ESG in France and the MIB ESG in Italy in the past few months, we are now launching this new development in the Netherlands. All 3 indices allow investors to finance high-impact projects and companies in line with the UN Global Compact principles. All in all, we launched more than 20 new ESG indices in '21 and we are now offering a wider range of products to investors including climate benchmarks, biodiversity or water and social criteria-based indices. These developments are very concrete results of our Fit for 1.5-degree ESG strategy of which 2 other important milestones will occur in '22. The first one will be the completion of the migration of our core data centre to a fully green facility near Bergamo, I've just mentioned. The second one is the release or the detailed announcement of our science-based detailed targets in the coming months for carbon footprint reduction. In 2021, we confirmed our position as the leading European market infrastructure thanks to the Borsa Italiana Group joining Euronext in April 2021 and benefiting from post-Brexit conditions. Today, Euronext is the largest equity listing venue in Europe, combining the strength and dynamism of its 7 exchanges across Europe, united by its unique single liquidity pool and therefore we welcome 25% of European equity trading activities in 2021 on Euronext markets. Out of the 212 new equity listings this year, half of them were from tech companies. This reflects the booming environment for tech and innovation-driven companies in Europe. As the leading listing venue, it is the mission of Euronext to support their financing needs and to accompany these companies on their growth journey. This is why we recently announced the launch of our new comprehensive service offering for tech companies, including our new segment dedicated to tech, named Tech Leaders. Tech companies will have access to a wide range of services, including pre-IPO programs and post listing services as well as to this unique dedicated segment. With this segment, we further strengthen Euronext's leading position for the equity listing of European tech companies as we enhance visibility, attractivity and credibility of our value propositions to both issuers, tech issuers and investors, tech investors. I now hand over to Giorgio Modica for the review of our fourth quarter performance.

[Giorgio Modica, Chief Financial Officer]

Thank you, Stéphane, and good morning, everyone. I'm now on Slide 10. In the fourth quarter of 2021, Euronext consolidated revenue income reached EUR 370.1 million, the highest revenue quarter ever for our company representing an increase of EUR 138.1 million or 59.5%. These results were primarily driven by the consolidation of the Borsa Italiana Group and a strong performance of non-volume-related business and clearing. On a like-for-like basis and constant currencies, Euronext consolidated revenue was up 4.3% versus the fourth quarter of 2020. Moving now to the different business lines. Trading revenues increased to EUR 132.3 million, up 50.4%, thanks to the consolidation of Borsa Italiana and MTS trading activity as well as the organic performance of the business with good volume and revenue capture in our trading activities. Post trade revenue including net treasury income increased 81.2% to EUR 103.8 million primarily as a result of the consolidation of Euronext Securities Milan and Euronext Clearing previously known as Monte Titoli and CC&G. Advanced Data Service revenue increased to EUR 50.7 million, up 50.1%, benefiting from the consolidation of Borsa Italiana, data activity and dynamic index activity and a solid performance of the core business. The listing revenue grew 35.8% to EUR 51.9 million, thanks to the consolidation of Borsa Italiana and the continued momentum in equity listing. In terms of revenue mix for quarter 2021 non-volume-related revenue accounted for 55% of total group revenue versus 54% in the fourth quarter of 2020, reflecting the increased diversification in our revenue mix. Lastly, non-volume-related revenues covered 126% of our operating costs, excluding D&A, compared to 118% last year. Moving to the next slide for listing among Slide 11. Listing revenue was $51.9 million in the fourth quarter of 2021 and again, an increase of 30.8% (sic) [ 35.8% ] compared to the fourth quarter of 2020. It was driven by the momentum in equity and debt listing. With regard to equity listing, the fourth quarter of 2021 saw the continuation of a strong primary listing activity with 57 new listing on Euronext including 5 large-cap notably autostore holdings OVH and Ariston Holdings, the 2021 largest clean tech listing and six SPACs. Euronext continues to demonstrate its strong value proposition for tech companies recording most capital, raising from deals on tech and innovation-driven companies. In the fourth quarter of 2021, EUR 6.5 billion was raised on Euronext primary market, which is more than double the amount raised in the fourth quarter of 2020. EUR 6.2 billion were raised on secondary equity issues. I would like to highlight that for the first -- fourth quarter in a row, we confirm our position as #1 the listing venue in Europe for equities, ETF as well as for debt worldwide. Our debt franchise reported strong results across Euronext market in the fourth quarter of 2021 driven by favorable market condition and continued momentum in ESG bond listing. In the fourth quarter of 2021 EUR 389.4 billion in debt was raised on Euronext market. Overall, this brings us to a total of EUR 402.1 million raised in equity and debt on Euronext market in the fourth quarter of 2021. Lastly, Corporate Services reported EUR 8.6 million in revenue in the fourth quarter of 2021. This performance is negatively impacted by approximately EUR 1.5 million of one-off revenue recognition adjustment and lower activity compared to a very intense fourth quarter of 2020. Let's move now to our trading business on Slide 12, and let's start with cash trading. ADV on a pro forma basis including Borsa Italiana increased 4.7% to EUR 12.2 billion, supported by uncertainty around economic policies and material index rebalancing during the fourth quarter. Average revenue capture over the quarter reached 0.49 basis points and the market share was 71.3%, both including Italian cash markets. The consolidation of the cash trading activities of Borsa Italiana coupled with good volumes resulted in cash trading revenue up 26.5% to EUR 79.3 million. Now moving to derivatives trading. Derivatives trading was up 21.4% to EUR 14.2 million in the fourth quarter of 2021. Pro forma average daily volumes on financial derivatives slightly increased by 0.4%, thanks to higher individual equity derivative volumes offsetting lower volumes for equity index derivatives. Commodity product reported a record quarter with average daily volumes up 14.8%, reflecting the successful commercial expansion undertaken in the past few quarters. The average revenue capture of the fourth quarter for derivative trading was EUR 0.30 per lot. Moving to fixed income. I remind you that fixed income, I remind you that fixed income includes the trading activity of MTS both cash and Repo and the fixed income trading activity of Euronext and Borsa Italiana such as the [indiscernible]. Fixed Income Trading reported revenue at EUR 24.2 million in the fourth quarter of 2021. This is 45x the amount reported in the fourth quarter of 2020 as a result of the consolidation of the Borsa Italiana Group. In the fourth quarter of 2021, MTS Cash generated $17.2 million of revenue and MTS Repo generated EUR 4.8 million in revenue. The strong performance of MTS Cash trading activity, up 31.7% versus the fourth quarter of 2020, reflects the positive momentum in cash bond trading supported by the steady issuance and support from the ECB and EU recovery fund activity and a continued risk-on attitude from investors. The fourth quarter of 2021, furthermore so a renewed interest in Repo trading activity with adjusted ADV up 4.9% to EUR 292 billion. Continuing with trading on Slide 13. Euronext reported average spot FX trading daily volumes of $19.4 billion in the fourth quarter of 2021, down 3.1% and compared to the fourth quarter of 2020, resulting from a less volatile trading environment. Spot FX trading revenue increased 3.9% to EUR 6.1 million as lower trading volume were more than offset by positive impact of foreign exchange rate of the period. Power Trading reported EUR 8.5 million in revenue in the fourth quarter of 2021, a solid double-digit growth of 18.7% compared to the fourth quarter of 2020 as a result of increased power trading volumes driven by cold winter in the fourth quarter of 2021. In the fourth quarter of 2021, average daily day ahead power traded was 2.76 terawatt hour and the average daily intraday power traded was 0.08 terawatt hour, up 14.4% compared to the fourth quarter of 2020. Moving to Slide 14. Revenue from our post trading activity, including treasury income increased 81.2% and to EUR 103.8 million. Clearing revenue was up 73.1% to EUR 30.1 million. As a result of the consolidation of Euronext clearing activity again formerly known as CC&G and higher clearing revenue and treasury income received from LCH SA. On a like-for-like basis and at current currencies, clearing revenue was up 6.4% compared to the fourth quarter of 2020. Net treasury income from Euronext clearing was for the quarter EUR 12.9 million. Custody, settlement and other post-trade encompassing the activity of the 4 CSD, we operate under the Euronext Securities brand reported strong revenue growth, up 52.3% to EUR 60.7 million. The strong performance was mainly driven by the consolidation of Euronext Securities Milan, a record EUR 6.5 trillion of assets under custody and a higher number of retail accounts in our Nordic CSDs. Moving to Slide 15. Advanced Data Service revenue was up 50.1% and to EUR 50.7 million in the fourth quarter of 2021, driven by the consolidation of Borsa Italiana, data activity, a dynamic index activity and a solid performance of the Market Data business. Proceeding now with investor services, revenue was up [ 32.1% ] to EUR 2.3 million in the fourth quarter of 2021, reflecting the continued traction of the offering. Lastly, Technology Solutions, revenue more than doubled in the fourth quarter of 2021 to EUR 26.4 million as a result of the consolidation of Borsa Italiana technology business, increased contribution from Nord Pool technology activity as well as increased SFTI and Colocation fees. Moving now to Slide 17 for the financial highlights of the quarter starting with the EBITDA bridge. Euronext EBITDA for the quarter was up 64.1% and to EUR 208.2 million. EBITDA margin increased to 56.3% in the fourth quarter from 54.7% in the fourth quarter of 2020, despite the impact of integration costs. On a like-for-like basis, the EBITDA margin was at 57% this quarter, up 1.8 points and EBITDA increased 7.8%. From a revenue perspective, Q4 revenue at constant perimeter increased EUR 10.1 million compared to the last year reflecting a mid-single-digit organic growth. Change of scope contributed EUR 125 million of additional revenue, reflecting the Borsa Italiana Group revenue contribution of EUR 127 million to the top line, but also the disposal of small businesses in 2021 not contributing to the profitability of the group. Looking at cost, operating cost, excluding D&A, were up 54% at EUR 161.8 million as a result of EUR 54.8 million additional cost from change of scope as a result of the consolidation of the Borsa Italiana Group and from integration costs related to the acquisition. Stable cost base on a comparable perimeter, thanks to our continued cost control efforts offsetting inflationary trends. Moving to Slide 18 for the net income bridge. Net income increased this quarter, 67.8% to EUR 112.7 million, resulting from the following elements: D&A mechanically increased mainly impacted by the consolidation of Borsa Italiana D&A and the impact of PPA for around EUR 16 million. Exceptional costs were EUR 3.9 million higher vis-a-vis last year mainly related to the integration cost of Borsa Italiana Group and a brand impairment linked to the implementation of our new CSD branding strategy. Net financing expense for the fourth quarter of 2021 was EUR 1.8 million higher compared to last year reflecting the cost of recently issued debt. Results from equity investment increased EUR 3 million, reflecting higher dividend received from Sicovam and a stronger contribution of our 11.1% stake in LCH SA versus the fourth quarter of 2020. Lastly, income tax for the fourth quarter of 2021 was EUR 35.7 million. This translated into an effective tax rate for the quarter of 23.6%, benefiting from higher-than-expected deductible costs from the PPA. In 2021, the average effective tax rate was 27.4%. For next year, for 2022, we expect the tax rate in line with the one of 2021. Adjusted for PPA and exceptional items reported net income was EUR 140.2 million translating into an adjusted EPS increase of 19.7% to EUR 1.31 per share for the quarter. Moving to Slide 19 for cash flow generation and leverage. Net operating cash flow amounted to EUR 145.6 million. This would translate into a cash flow conversion of around 70%, but excluding the impact of CCP activities, the impact of Nord Pool and Euronext Clearing on change in working capital, 65% of the EBITDA was converted into post tax operating cash flow. Our net debt-to-EBITDA ratio was 2.6x at the end of the quarter versus 2.8x at the end of the third quarter of 2021. As a reminder, the net debt-to-EBITDA ratio at the end of 2020 was 3.2x pro forma for the Borsa Italiana Group acquisition. I would like to highlight that those ratios do not take into account the EUR 160 million Euronext [ all-in ] short-term securities. Moving to Slide 20. We now give a look at the evolution of our liquidity position over the quarter. Our liquidity position remains strong, above EUR 1.4 billion including the undrawn [ RCF ] of EUR 160 million. Finally, and I'm now on Slide 21, let's spend some time together on our 2022 cost guidance. Following the Investor Day and during the interaction with you and analysts and investors, we registered an increased demand for adjusted financial metrics to better capture the underlying performance of the business in a time of significant transformation like the one we are living. I have discussed that with Stéphane and with our Supervisory Board. And together, we have decided for an evolution of our reporting towards that direction. Starting from the first quarter of 2022, Euronext will provide information about its adjusted cost for nonrecurring items and publish an adjusted EBITDA. We will not do that -- we will do that for the aim of provide the market with a better sense of Euronext's underlying business performance. In practical terms, what will happen starting from the first quarter of 2022 is the following: we will remove the exceptional items line from our financial statement. As you might remember that line only included a portion of nonrecurring costs. This means that from the first quarter of this year, all costs recurring or not will be classified by nature into their respective line in our P&L. Then we will provide a detail of all nonrecurring costs by nature and we will publish an adjusted EBITDA, excluding those items. Now looking at 2022, we expect the underlying costs, excluding D&A, to be EUR 622 million for the full year 2022. This compares to an annualized fourth quarter 2021 underlying cost of EUR 627 million. In other terms, we expect in a year of transformation and before the impact of the migration of Borsa Italiana to uptick to generate savings able to more than offset the inflation for 2022. In addition, Euronext expects to incur around EUR 50 million of nonrecurring OpEx and exceptional items in 2022. I would like to highlight that those EUR 50 million are part of the announced EUR 160 million on nonrecurring and implementation costs to deliver the growth for Impact 2024 strategic plan. These implementation costs reflect the ongoing work of the Euronext team to deliver the key strategic priorities announced in November 2021 including the migration of our core data center to Bergamo in Italy, the migration of the Italian cash and derivative market to Optiq trading platform and the European expansion of Euronext clearing activity. Now with this, I conclude my presentation and I hand over the floor back to Stéphane Boujnah.

[Stéphane Boujnah, Chairman of the Managing Board & Group CEO]

Thank you all. The team here were Giorgio Modica and Anthony Attia the Head of Primary Markets and Post Trade and myself are available to answer your questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Kyle Voigt from KBW.

[Unknown Analyst]

This is actually [ Matt Moon ] on for Kyle Voigt. I was just wondering if you could potentially walk us through the rate sensitivity of the legacy CC&G and NTI line? I know it's a smaller line item, but I was just curious on that front, particularly given that there's been some more increased expectations [indiscernible] in the region near term. Is still clearly off a low negative base, so I was just curious at what level of rates, so we should maybe expect a benefit in this line item. And maybe if there's been any change to any investment policy at Euronext in comparison to the legacy ownership with LSE?

[Giorgio Modica, Chief Financial Officer]

So let me take that one. So the revenues of CC&G within the clearing line is pretty stable and is not directly impacted by changes in interest rates. I would like to highlight as well, so the way you should look at that is more like a spread in basis point on the basis, on the margins, which are actually contributed to the clearing house. And this spread in basis points tend to be pretty stable across periods and in the last several years. On the other side, when looking at the net treasury income of Euronext Clearing, this is the result of the investment of the cash margin invested in short-term securities. And in this respect, this is a short-term fixed income portfolio and which is impacted by 2 elements. The element, the first element is again the return of the portfolio. And the second one is clearly potential capital gains on that portfolio. Now going forward, we anticipate that the result is going to be mainly linked to the performance of the portfolio itself and we see more limited possibility to cash in capital gain given the trend of interest rates in the -- expected for the next quarters.

[Operator]

Our next question comes from the line of Andrew Coombs from Citi.

[Andrew Philip Coombs, Director]

A couple of questions, please. First, if we could just come back to the costs. Thank you for the new disclosure. I do think it makes it easier, but perhaps you could just talk a bit more about underlying cost inflation pressures that you're seeing and any investment projects that you have ongoing outside of the Borsa Italiana integration. That would be the first question. Second question is just can you remind us on any rate sensitivity that you might have within your post-trade business both to dollar and also to euro rates?

[Giorgio Modica, Chief Financial Officer]

So yes, when it comes to the first question around underlying cost, I would like to highlight a few elements. So the first one is that if you look at our cost for the fourth quarter year-on-year those are stable as we have seen. But I would like to spend like a few minutes in walking you through the changing cost between the third quarter and the fourth quarter because this is an important step in my view. So the first element that I would like to highlight is that the cost of the third quarter are seasonally lower. We have an impact of salary costs of around EUR 4 million and this is linked to the holiday season. And you can see this has always been the case since the moment we have published results after the IPO of the company was the same last year. So if you look at the increase in cost between the third quarter and the fourth quarter, this explains alone 1/3 of the increase. Another 1/3 of the increase is explained by the increase of consultants that we have hired to execute the project related to the different migration and integration projects that we have. The last element that I wanted to highlight because that might not be obvious is that in the fourth quarter of 2021, what you see as well are a couple of million of increased cost related to the type of post-COVID environment. As you might remember in October and November, everyone started traveling and having marketing events. And this is new compared to the previous quarter, and this accounts for around EUR 2 million. So I believe it's important because you might have an impression of an increase of cost of -- in the fourth quarter, but the reality is that things are progressing exactly as expected. Then the other element that you were highlighting is whether there are initiatives across the group to deliver savings. And the answer for that is yes. We always look at cost on a holistic basis. And thanks to that, we were able to achieve the EUR 10 million of synergies that we have announced -- and I take the opportunity to walk you through the different components of those EUR 10 million. In there, what you have is one first element, which is related to Euronext providing to Borsa Italiana cheaper services with respect to what LSE used to do. Another element is related exactly to what you mentioned, optimization of Euronext organization, leveraging on Borsa Italiana and therefore, saving from an organizational perspective. And finally, the last element is that we started, reassessed every expense in Borsa Italiana, which is aimed at a perimeter, which is not our interest outside of Europe and that does not generate a sufficient return on the investment. And thanks to these elements, which do not touch the biggest part of the value upside, which is coming from the integration, we were able to deliver a significant part of the originally announced EUR 45 million of cost synergies. Then moving to your second question around the sensitivities. Again, our P&L, in general is not that sensitive to interest rates. If we look at our liabilities, we have EUR [ 3.50 billion ] in debt issued. This is all fixed rate. The only portion that we swapped into variable is only EUR 500 million. That was a very good idea when we started in 2018 and it's already paid off. This is -- you can see that in our balance sheet, we have a positive value of the derivative for around EUR 10 million. When it comes to your more specific question linked to CC&G, again as I said, this is not a business which is positively or negatively impacted by interest rate directly. The portion on which there is a sensitivity is related, again, as I said to the fixed income portfolio on which CC&G or Euronext Clearing invests. And what I can say is that given the upward trend of interest rates, we see going forward the fewer possibility to cash in and book capital gains out of that portfolio. But apart from that, no major impact from interest rates.

[Operator]

Our next question comes from the line of Arnaud Giblat from BNP.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

Yes. Three questions, please. Firstly, can I ask on the tax rate? Can you confirm that the PPA is deductible and therefore, that's why you're getting a [indiscernible] guidance for 2022. Should we think about [ 27% ] as the long-term guidance given that you're going to have PPA going on for a while? And also, I'm curious as to why you don't strip out the tax benefit of PPAs and exceptionals when calculating adjusted EPS to get to a more homogeneous calculation since you are taking a PPA in the first page when we comparing adjusted EPS.And secondly, I was wondering if you could talk a bit about the cash yield, 0.49 basis points, I think, on a like-for-like comparable basis, it was at 0.52 in Q2. So a 0.03 reduction. Is that down to reduced retail activity? And finally, I was wondering if perhaps you could give us a bit of an update in terms of potential acquisitions, which areas you're currently looking at?

[Stéphane Boujnah, Chairman of the Managing Board & Group CEO]

Absolutely. So Arnaud, I will answer your last question, and Giorgio will answer your question on the yield and on the PPA. As you have observed, Euronext is deleveraging faster than expected with the level of debt-to-EBITDA of 2.6x compared to 3.2x at the time of the completion of the acquisitions. So we are, over time regaining capital deployment flexibility. What we do is that we monitor very closely any situation, which could contribute to diversifying the revenue mix and the growth profile of Euronext and/or expanding the European federal footprint of Euronext. And this process is ongoing as we speak. Now there is no process, no dialogue, but there are various situations that we are monitoring very closely. And the purpose of our M&A strategy organization is to be ready to act decisively when a situation becomes actionable within the framework of our capital deployment. But it's clear that we keep a strong interest in any segment which could help us diversifying our revenue mix.

[Giorgio Modica, Chief Financial Officer]

Yes. With respect to your first question, let me clarify. So what is relevant is that between the third and the fourth quarter. So in the third quarter, we have booked a preliminary PPA assessment, which has been now finalized in the fourth quarter. As a result of this process of assessment, we have now on our books a slightly lower goodwill and higher intangible assets. So this is what creates a deductible cost. It's not the -- if you want the goodwill itself, but it's the intangible assets which are amortized over time that have an impact on our P&L and on our tax rate.On your second question, yes, in the adjustment, we take into consideration as well as the impact of tax. Your third question around the cash basis points, this is something that we have discussed many times and I've shared we with you the fact that the yield has been exceptionally high for a very long time. We have guided for a blended tax rate, blended revenue capture at or slightly below the mark of 0.50 basis points. Now the key driver of that, there are many and is very difficult to single out the impact of each one of those, but what we have seen in general terms is an increase of the average size of the orders. That was one of the factors contributing to the increase of the revenue capture. It's true as well, as you said, that we have seen as well a reduction of the retail activity, although the retail activity remained at a level which is higher with respect to what we had before the pandemic.

[Operator]

Our next question comes from the line of Bruce Hamilton from Morgan Stanley.

[Bruce Allan Hamilton, Equity Analyst]

Maybe just a couple more on the cost, just to check. So on the EUR 622 million guidance, and thanks for that. This includes further synergy delivery to offset inflation. I don't know if you're able to give us what the sort of run rate synergies assumed in that number are versus the EUR 10 million already in 2021, but that would be helpful, plus any other guide on the phasing of the EUR 45 million, if that's possible. .Secondly, similarly on the integration costs, so EUR 50 million of the EUR 160 million comes through the 2022 cost base. Should we expect the majority of the rest comes through '23, so '24 is relatively clean? Or is it quite hard to tell? And then finally, I guess, for your current guidance for 2024, I think the implied cost base is around GBP 585 million. So obviously, a bit lower than we are today. So I just wanted to check that guidance still stands.

[Giorgio Modica, Chief Financial Officer]

So let me start from the last point. Yes, and I want to clarify the trajectory and the numbers that we have shared the ambition for 2022 is absolutely consistent with the delivery of our 2024 ambitions. So yes, I can confirm that the trajectory is exactly the one that we have described during the November Investor Day. Then with respect to your second question, we had EUR 27 million of one-off costs in 2021. We will have EUR 50 million next year. And it's a fair assumption that 2024 is going to be a rather clean year. So this gives you pretty much all the elements to assess a phasing of the exceptional costs. Then when it comes to the EUR 622 million what I can say is that is the following. I will not provide you a rate -- run rate target for 2022, unfortunately. What I can say, on the other side, is clearly that you have a base and you can have an idea of what type of inflation 2022 could mean. The inflation rate across the industry are well known and we will more than offset that. Even an inflation of 2%, 2.5% would imply an increase of our cost base, which is significant between EUR 15 million and EUR 20 million. And we will overcompensate that.

[Operator]

Our next question comes from Ian White from Autonomous Research.

[Ian White, Research Analyst]

Just a couple of follow-ups on costs as well from my side, please. And so to actually go back to a short follow-up to Bruce's question. The guidance that was set out in November, I think, gets us to a cost base at the midpoint, if we're saying 3.5% revenue growth, 5.5% EBITDA growth, cost base of about [indiscernible] in 2024. Can you just walk me through please, how we might get to a figure in that ballpark from the EUR 622 million in 2022, please? That's question one. And secondly, can I just clarify, do the integration costs, the total EUR 160 million for Borsa Italiana, does that include any onetime termination fee that might be payable to LCH to discontinue the clearing service, please?

[Giorgio Modica, Chief Financial Officer]

Yes. So let me take the 2 elements. So let me start from your first question. So what is important to understand and I appreciate that is not easy, is the concept that the target of EUR 100 million is not a mix between revenue increase and cost reduction but is an increase in EBITDA, which means that it could be a combination of the 2 elements. And this is specifically true for the activity that we have today with respect to the data center and the clearing activity. What I'm trying to say that if we look at -- just to give you a practical example, if we assess the increase of margin that we expect from clearing, which is the largest part of the increase of target from EUR 60 million to EUR 100 million. This is a combination of increased revenues and reduced costs. So in -- to a certain extent in the EUR 100 million, there is -- if you take it in absolute amount, more revenue savings to come as a part of the new setup that we will have for the data center and the clearing. Then you let me know whether this is clear enough or not. And I can expand. On your second question, the answer is yes. We are including all the costs related to the implementation of the plan, including the termination -- the potential termination fee for LCH SA.

[Ian White, Research Analyst]

Got it. That is helpful. And question one, I guess, just to clarify then, I think the EBITDA margin that was implied by your targets in November or somewhere between sort of 61% to 65%, maybe something in that ballpark. So we should still be expecting the margin to land in that range, presumably for 2024? It might just be a mix of perhaps higher cost, higher revenues and vice versa relative to sort of my strawman workings on the guidance. That's what I'm hearing there if I've got that correct.

[Giorgio Modica, Chief Financial Officer]

So what I can say is that during the Investor Day, we gave a trajectory for the EBITDA and the trajectory of the revenue. And if you deduct one from the other you would have implicitly the trajectory of cost and this is implied into the EUR 100 million target. Then if you're asking yourself, how is it possible to get to that level? What I can say is that part of the business opportunity in doing the business ourselves will translate into further savings that you don't see today.

[Operator]

Our next question comes from the line of Johannes Thormann from HSBC.

[Johannes Thormann, Global Head of Exchanges and Analyst]

So 3 questions, please. First of all, a follow-up, could you provide us a breakdown of the collateral for the net treasury income by currency or also by the different volumes? Secondly, on the cost -- on the Green Data Centre in migration in June. How long have you hedged your energy cost for that one? Or do you [indiscernible] your energy on your own in this data center? And last but not least, if you could provide probably some clarity on the dividends from Sicovam and Euroclear you're expecting for 2022 and the contribution from LCH, if you can elaborate a bit on the seasonality from this.

[Giorgio Modica, Chief Financial Officer]

So a few elements on my side. Let me start with the data center. So this data center is green, not because it buys green electricity, but because it produced itself green energy with a combination of fully owned hydro power plant and photovoltaic panels which are built on the roof of the data center itself. So this is for the first question. We are not hedging -- we are out to producing. The second is related to the dividend for next year. I mean we will need to have the results of Euroclear. So once those companies will announce -- so for LCH SA this is going to be an 11.1% share of their net income when this will become available. And for Sicovam and Euroclear, once is going to be announced, it's going to be publicly available. We cannot anticipate those elements. Then when it comes to your question around the collateral, we provide a breakdown of the element that we collect from our clients in terms of margin. This is I believe one of the last pages of the press release. And at the moment, this is largely euros and we don't anticipate to provide breakdowns because -- not because we don't want, but we don't feel that this gives really more insight into the revenue potential from that activity.

[Operator]

Our next question comes from the line of Martin Price from Jefferies.

[Martin Gerald Price, Equity Analyst]

Just 2 questions, if I may. First on post trade, you reported a strong sequential increase in revenue in Q4. I just wanted to confirm that, that was just a function of stronger settlement activity and higher custody assets rather than any one-offs or seasonality in revenue? And secondly, I just wanted to come back to the EU consolidated tape proposal. I appreciate it's still very early days in the process, but at the Investor Day last year, I think you said that you thought the impact was manageable. I just wonder if you could help us understand in a little bit more detail the revenue you think potentially could be at risk?

[Stéphane Boujnah, Chairman of the Managing Board & Group CEO]

So I will answer briefly your question on consolidated tape and Anthony Attia, the Head of Primary Markets and Post-trade will answer your first question on the revenue mix within the CSD business.The debate on the consolidated debt is ongoing. We are spending a lot of time with the various constituencies that will have to form their final views on this matter at the European Parliament and we did the relevant number states of the council of the European Union. We are confident that a pragmatic, manageable solution will be found. There are still open issues on the scope to pace the timing, the framework to operate such consolidated tape. So for the moment, it's more a concept and an ambition more than something frame precisely. So there are a lot of moving pieces in finalizing what this consolidated tape, if any, will be in due course. So it's very difficult for us to form a view on what will be the final regulatory framework that will apply to the [indiscernible] time data produced by Euronext. That being said, we don't change the comments made at the Investor Day. On the basis of the various scenarios we are analyzing internally. We believe that the consequences of this new piece of regulation will be manageable. But again, we are spending a lot of time and effort to make sure that these changes are minimizing -- minimal in terms of impact on our top line. On the CSD?

[Anthony Attia, Global Head of Primary Markets & Post Trade]

Thank you, Stéphane, and good morning, everyone. So I understand your question was about the drivers of the growth in our CSD businesses. So as we explained in the press release, we have -- we enjoy a growth compared to the previous year and the previous quarter, but it's not only due to the the addition of the Euronext Securities Milan, formally Monte Titoli [indiscernible]. It's also because we have an increased settlement activity and also a very strong retail account activity in the Nordics. And as you can remember from the previous calls, this segregated account business in our 2 Nordic CSDs in Copenhagen and in Oslo is one of the drivers of that growth.

[Giorgio Modica, Chief Financial Officer]

And I can confirm that there is no one-off component in the fourth quarter revenue. This is fully organic and recurring.

[Operator]

[Operator Instructions] We don't seem to have any further questions in the queue at this moment. So we'll hold just a second to see if any more questions come through.Okay. We have no further questions on the line, so I'll hand you back over to the speakers.

[Stéphane Boujnah, Chairman of the Managing Board & Group CEO]

Thank you very much for your time. Happy to follow up with the team here and have a good day.

[Operator]

Thank you very much for joining today's call. You may now disconnect your handsets. Host, please stay on the line. Thank you.