Investor Presentation - May 2021 - Gruppe Deutsche Börse

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Investor Presentation - May 2021 - Gruppe Deutsche Börse
Investor Presentation
May 2021
Diversified, scalable and resilient business portfolio serves
as the basis for growth
F Y / 2 0 2 0 | € 3 , 2 1 4 m n e t r e ve n u e

Pre-trading                                             Trading & clearing                                                          Post-trading
€248m                                                         €1,906m                                                                      €1,060m

      8%                                                          59%                                                                               33%

      8%                                          35%                            9%             3%             12%                        26%                         7%

Qontigo | €248m                     Eurex | €1,110m                     EEX | €302m                       Xetra | €392m         Clearstream | €827m               IFS | €233m
  index & analytics                 financial derivatives                commodities                       cash equities             post-trading                 investment fund
                                                                                       360T | €102m                                                                   services
                                                                                       foreign exchange

Geographically diversified                                      Multi-asset class offering                                 High recurring revenues

                       36%   Rest of Europe                                        50% Equity/index                                           52% Transactional
                       30%   UK                                                    25% Fixed income                                           48% Recurring
                       22%   Germany                                                9% Commodities
                       7%    Americas                                               7% Interest income
                       5%    Asia-Pacific                                           6% Funds
                                                                                    3% FX

Deutsche Börse Group                                                                     2                                                                           May 2021
We successfully achieved our Roadmap 2020 targets

Financial scorecard 2017 – 2020                                                  ROADMAP 2020
                                                                                 TARGET
                                                                                 ARCHIEVEMENT
           9%          NET                          12%         NET
           CAGR        REVENUE                      CAGR        PROFIT a d j .

Strategic scorecard

                  ▪ Delivery on secular growth target of >5% p.a.
                  ▪ Multiple M&A deals in focus areas closed
                  ▪ Investments in new technologies like cloud & DLT
                  ▪ Reduction of structural costs by ~€100 million
                  ▪ Execution discipline strengthened

Deutsche Börse Group                                                         3                  May 2021
With Compass 2023 we target continued secular growth
and an increased M&A contribution
Compass 2023           N e t r e ve n u e ( € b n )              EBITDA reported (€bn)

                                      ~4.3
CONTINUED
SECULAR GROWTH

                           2.9
                                               ~ 10%
                                               CAGR

                                                      Cyclical
                                               ~0%     growth
INCREASED                                                             1.7
M&A CONTRIBUTION                                         M&A
                                               +5%     growth                        10%
                                                                                     ~
                                                                                     CAGR
                                                      Secular
                                               +5%     growth

                          2019        2023E                           2019   2023E

Deutsche Börse Group                       4                                             May 2021
Our key growth drivers are favorable capital market trends

Major trends                                                                                   Our credentials

OTC TO                 ▪ Growing importance of futurization                                    Eurex, EEX and 360T very well
ON-EXCHANGE            ▪ Standardization of OTC derivatives opportunity for central clearing   positioned to win market share

                                                                                               Eurex OTC clearing is a winning
BREXIT                 ▪ Brexit creates momentum to shift margin and collateral pools
                                                                                               proposition

SELL-SIDE                                                                                      IFS with strong position to benefit
                       ▪ Sell-side has to adapt due to regulatory and cost pressure
UNDER PRESSURE                                                                                 from outsourcing trend

IMPORTANCE             ▪ Growing importance of buy-side and shift to passive products          Qontigo and ISS with strong
OF BUY-SIDE            ▪ Increasing demand for analytics and ESG                               starting point to support demand

                       ▪ Technology and digitization are transforming the way                  Leading technology is at
DIGITIZATION
                         the financial sector operates (e.g. cloud, DLT)                       the core of our business model

                       ▪ Severe implications for economy and markets                           Products and services across
COVID-19
                         (digitization, efficiency, ESG)                                       the Group to support clients

Deutsche Börse Group                                                5                                                        May 2021
Our secular growth ambition is based on a broad set of initiatives

Pre-trading                                Tr a d i n g & c l e a r i n g                 Post-trading

                                           Introduce new derivatives products
                                           and build the leading OTC clearinghouse
                                           in the Eurozone                                Strengthen the European proposition
Combine index and analytics to increase
                                                                                          to continuously onboard new portfolios/
buy-side penetration and become a leader
                                                                                          clients and grow custody services on
in the field of investment intelligence    Expand on the leading position in              a global scale
                                           European energy markets and win a
                                           significant position in the US energy market
Become a global ESG leader through the                                                    Leverage the partnership model and add
highly complementary combination of ISS                                                   new clients/services to strengthen the
and Deutsche Börse                         Further develop the FX one-stop-shop           leadership position for the funds service
                                           exchange and OTC solutions with a              business platform
                                           leading technology platform

Deutsche Börse Group                                             6                                                             May 2021
We will continue to pursue our successful M&A agenda

M&A focus areas               Strategic guidelines                        Financial guidelines

                              ▪ Strong fit with strategic growth areas    ▪ Cash earnings accretive in year 1,
P r e - t r a di ng                                                         latest in year 3
                              ▪ Value creation for shareholders
▪ Index and analytics
▪ ESG                                                                     ▪ ROI in year 3 should be higher than
                              ▪ Successful integration and synergy          WACC (~6%) across M&A portfolio
                                potential
                                                                          ▪ Margin dilution acceptable for
Tr a di n g & c l e ar i ng   ▪ Public M&A only with high closing           transactions with strong strategic fit
▪ Commodities                   certainty
▪ Foreign exchange
▪ Fixed income                ▪ Avoidance of auctions if possible

                              ▪ Partnerships and majority stakes
                                preferred
P o s t - t r a di ng
▪ Investment fund services    ▪ Larger deals (€1 – 5bn++) explicitly
                                targeted, but only if there is a strong
                                strategic fit and clear post merger
                                integration plan

Deutsche Börse Group                                 7                                                               May 2021
Our growth ambition is based on a multitude of strategic initiatives

M i d - t e r m n e t r e ve n u e g r o w t h o p p o r t u n i t i e s ( € m )
                                                                                                                                                             ~0.6bn          ~4.3bn
                                                                                  ~0.2bn                       ~0.1bn                    ~0
                                              ~0.4bn
           2,936

                                                                           5% sCeAcGuRl a r                                     0% cCyAcGl iRc a l        5% MC A&GA R
           2019                                                                                                                                                              2023E
                                    Trading & clearing                  Post-trading                   Pre-trading

                                    New ETD1                  ~110      IFS                     ~100   Indices          ~60   NII              ~−130   Closed M&A     ~100
                                    EEX                        ~90      Custody                  ~90   Analytics        ~40   Trading &                ISS            ~300
                                    360T/FX                    ~70      GSF3 and others          ~30                          clearing,        ~+170   Future M&A     ~200
                                                                                                                              Post-trading
                                    Pricing                    ~40
                                    OTC IRS                    ~35
                                    GFF2                       ~30
                                    Buy-in agent               ~25

                                                            BREAKDOWN BY PRODUCT FOR INDICATIVE PURPOSE
1| Exchange traded derivatives; 2| Global Funding & Financing; 3| Global Securities Financing

Deutsche Börse Group                                                                                               8                                                             May 2021
Mid-term secular net revenue growth opportunities fully intact

                                                                    Net revenue                      Growth
 Segment                                                              2019 (€m)                  CAGR 2023E      t/o secular   t/o M&A
 Tr a di n g &                            Eurex                                        1,009          7 – 10%           >5%        ~1% Quantitative Brokers
 c l e a r i ng
                                          EEX                                             289         7 – 10%           >5%           –

                                          360T                                              92            >10%         ~10%           –

                                          Xetra                                           329          0 – 3%            0%           –
 P o s t - t r a di ng                    Clearstream                                     843          0 – 3%         3 – 5%          –

                                          IFS                                             183             >15%         ~10%        ~6% Ausmaq, UBS Fondcenter
 P r e - t r a di ng                      Qontigo                                         190             >15%         ~10%        ~5% Axioma
                                                                                                                                          >5% secular growth
                                          ISS                                                                                      ~2% expected for ISS

 Future M&A                                                                                                                        ~2%

 TOTAL                                                                                 2,936              ~10%          ~5%        ~5%

1| Exchange traded derivatives; 2| Global Funding & Financing; 3| Global Securities Financing

Deutsche Börse Group                                                                                  9                                                    May 2021
Eurex – Trading and clearing of financial derivatives

K e y s e c u l a r g r o w t h d r i ve r s                                    N e t r e ve n u e g r o w t h

EQUITY INDEX BUSINESS – PRODUCT INNOVATION
▪ Leading global position with STOXX index family; unique innovation pipeline
  to capture growth trends in index, futurization, ESG and ETF derivatives
                                                                                                         NET REVENUE
                                                                                                         GROWTH
                                                                                  7 – 10%                CAGR 2019-23E
FIXED INCOME BUSINESS – OTC CLEARING
▪ Partnership program driving volume growth by factor 6;
  Euro Interest Rate Derivatives (IRD) with ~20% market share
                                                                                t/o secular
                                                                                                                 >5%
                                                                                                                 CAGR

SERVICE AND BUSINESS EXPANSION – ORGANIC AND M&A
                                                                                t/o M&A
▪ Quantitative Brokers – quant-tech algorithmic execution
                                                                                (Quantitative Brokers)
                                                                                                                 ~1%
▪ Buy-in Agent – service for failed securities settlement                                                        CAGR

Deutsche Börse Group                                              10                                                May 2021
EEX – Trading and clearing of commodity spot and
derivatives markets
K e y s e c u l a r g r o w t h d r i ve r s                     N e t r e ve n u e g r o w t h

▪ Further market share wins in European power and natural
  gas markets vs. the uncleared OTC market

▪ Leveraging the unique physical-delivery capability of
  our clearing house European Commodities Clearing                                   NET REVENUE
                                                                                     GROWTH
▪ Developing our US energy exchange Nodal, regionally             7 – 10%            CAGR 2019-23E
  expanding business, strengthening Asian footprint

                                                                 t/o secular
                                                                                                  >5%
                                                                                                  CAGR

Deutsche Börse Group                                        11                                      May 2021
360T – Foreign exchange markets

K e y s e c u l a r g r o w t h d r i ve r s                                    N e t r e ve n u e g r o w t h

▪ FX market: Global, large and growing

▪ Shift to electronic execution and multi-dealer platforms;
  reputation, regulatory status key
                                                                                                    NET REVENUE
▪ Changing market structure: Rise of non-bank liquidity providers,                                  GROWTH
  largest bank liquidity providers getting bigger, market fragmentation          > 10%              CAGR 2019-23E

▪ Reduced credit capacity: PB capacity linked to higher costs,
  de-selecting clients based on credit availability, alternatives needed
                                                                                t/o secular
                                                                                                             ~10%
▪ Technological progress:
                                                                                                                 CAGR
  Digitization, electronification, low latency, data

Deutsche Börse Group                                                       12                                      May 2021
IFS – Leading provider of investment fund distribution services

K e y s e c u l a r g r o w t h d r i ve r s                                 R e ve n u e g r o w t h

▪ Positioning in sweet spot of global fund sector growth, third party
  distribution acceleration and outsourcing pressures

▪ Expanding #1 position as leading European fund processing
  service provider with ~€3.1tr assets under custody                                                    NET REVENUE
                                                                                                        GROWTH
▪ Strengthening fund distribution services (via Fund Centre) as                > 15%                    CAGR 2019-23E
  foundation for growth and onboarding of new portfolios

▪ Cross-selling synergy effects from business combinations,
                                                                             t/o secular
  e.g. Ausmaq, Fund Centre, Clearstream (I)CSD                                                                ~10%
                                                                                                                CAGR
▪ Expanding in alternative fund shares issuance via digital
  enablers and DLT (FundsDLT)
                                                                             t/o M&A
▪ Strengthening funds data and analytics solutions                           (Ausmaq, UBS Fondcenter)
                                                                                                                ~6%
                                                                                                                CAGR

Deutsche Börse Group                                                    13                                         May 2021
Qontigo – Building state-of-the-art investment products of the future

K e y s e c u l a r g r o w t h d r i ve r s                               R e ve n u e g r o w t h

▪ Investment intelligence market will grow by 5-10%
  p.a. with deep growth pockets of >15%

▪ Active-to-passive migration will continue – Qontigo
  serves both and can leverage scale in index/passive                                         NET REVENUE
                                                                                              GROWTH
▪ Demand for seamless customer experience and margin pressure                > 15%            CAGR 2019-23E
  will accelerate growth of E2E platforms and interoperable ecosystems

▪ Disruption by ESG and fast lateral entrants will lead to only few
                                                                           t/o secular
  mega-platforms and offer opportunities for superior analytics                                       ~10%
                                                                                                      CAGR
▪ Qontigo aggregates scale with its open architecture platform
  connecting its own as well as 3rd party content
                                                                           t/o M&A
                                                                           (Axioma)
                                                                                                      ~5%
                                                                                                      CAGR

Deutsche Börse Group                                                  14                                 May 2021
ISS – Innovative global leader in data, research and ESG

K e y s e c u l a r g r o w t h d r i ve r s                                              R e ve n u e g r o w t h

▪ The global leader in corporate governance for more than three decades with a
  rapidly growing position in broader ESG and distribution services

▪ ISS has strong and deep experience in operating emerging market data and
  processing centers, which can be leveraged by Deutsche Börse                                               NET REVENUE
                                                                                                             GROWTH
▪ Well established global business with excellent organic and inorganic growth             > 5%              CAGR 2019-23E
  track record

▪ ISS’ business will transform Deutsche Börse Group into a global ESG leader;
                                                                                          t/o secular
  Deutsche Börse’s significant financial resources will accelerate ISS’ product roadmap                              > 5%
                                                                                                                     CAGR
▪ ISS with very strong US franchise and brand; leverage Deutsche Börse’s strong
  European brand/network to expand in EMEA

▪ Highly complementary product offering already within ISS; strong linkages to
  Deutsche Börse that offer concrete revenue synergies in/from pre- and post-trading

Deutsche Börse Group                                                   15                                               May 2021
We refined our financial steering logic to support our
growth ambition

                       SUSTAINABLE
                                       ▪ Funding of growth initiatives is linked to sustainable secular net revenue growth
                       GROWTH

                                       ▪ In order to support our secular revenue growth ambition, we expect the operating
                       OVERALL COST      costs to increase
                       DEVELOPMENT
                                       ▪ Reported operating costs will be the new cost metric
Financial
steering
                       CONTINUOUS      ▪ Continuous improvement (~2% productivity increase p.a. or ~€100m by 2023) will
                       IMPROVEMENT       be a key measure to capture efficiencies and ensure scalability of core businesses

                                       ▪ We are planning with a broadly stable EBITDA margin until 2023
                       PROFITABILITY
                                       ▪ Additional cyclical support would result in an increase of the EBITDA margin

Deutsche Börse Group                                 16                                                                 May 2021
Long standing capital management policy is confirmed

  Rating                         Dividend policy                    Use of excess cash                 Capital allocation

▪ AA rating mainly because of   ▪ Payout between 40% to 60%        ▪ Preferably reinvested into the   ▪ Permanent review and
  post-trading business           of net profit (reported)           business to support M&A            monitoring of business portfolio
▪ Net debt/EBITDA below 1.75x   ▪ With increased earnings,           strategy; otherwise buy-backs    ▪ Maintain sound balance sheet
                                  payout ratio expected to           would be considered                structure
▪ FFO/net debt above 50%
                                  decrease

Deutsche Börse Group                                          17                                                                May 2021
Group financials
Q1/2021
Net revenue | €m           EBITDA | €m          Cash EPS1 | €          Note
 −7%                       −12%                −12%
 −10%         (organic)    −14%   (organic)    −13%     (organic)   Net interest                              €35m
                                                                       income                                    −49%

         915                                                                                                     €347m
                 855                                                   Operating cost
                                                                                                                 +9%

                                                                       Depreciation2                             €62m
                                593
                                       521
                                                                       Financial result                          €−14m

                                                       2.05
                                                              1.81                                               €317m
                                                                       Net profit
                                                                                                                 −14%

                                                                       EPS                                       €1.73

       Q1/20 Q1/21             Q1/20 Q1/21             Q1/20 Q1/21
                                                                       Note: Organic growth incl. UBS Fondcenter (IFS),
                                                                       Quantitative Brokers (Eurex) and ISS like-for-like.
Deutsche Börse Group                              18                   1) EPS before purchase price allocation.                 May   2021
                                                                       2) Includes €19 million purchase price allocation effects.
Progress on Compass 2023 targets

Net revenue | €m                           EBITDA | €m                         Note

                    +9%                                    +8%                 ▪ Compass 2023 mid-term plan
                   CAGR                                   CAGR                   targets 10% net revenue growth
              (Q1/21 vs. Q1/19)                      (Q1/21 vs. Q1/19)           CAGR (5% secular + 5% M&A) and
                                                                                 10% EBITDA growth CAGR.

                                                                               ▪ Results in Q1/20 driven by
         Ø 734               Ø 803                Ø 420          Ø 467           exceptional COVID-19 situation.

                                                                               ▪ Q1/21 net revenue and EBITDA
                       915
                                     855                                         compared to 2019 (Compass 2023
  721                                                                            base year) fully in-line with expected
                                                                                 growth trajectory.
                                                           593
                                                                         521
                                            451

   Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1               Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
   2019        2020        2021             2019        2020        2021
Deutsche Börse Group                                        19                                                   May 2021
Outlook FY/2021

N e t r e ve n u e | € m                EBITDA | €m                          Guidance 2019 – 23   (CAGR)

              +10% CAGR                            +10% CAGR
         Compass 2023 target                   Compass 2023 target

                                                                             NET
                                                                                                  ~10%
                               ~4.3bn
                                                                             REVENUE
               2021 target:
                 ~3.5bn                                                      EBITDA
 2,936
           3,214                                                                                  ~10%
                                                    2021 target:
                                                1,869 ~2.0bn                 EPS
                                        1,678                                                     ~10%

 2019      2020 2021E          2023E    2019     2020 2021E          2023E

Deutsche Börse Group                                          20                                     May 2021
Disclaimer

Cautionary note with regard to forward-looking statements: This document contains forward-looking statements and
statements of future expectations that reflect management's current views and assumptions with respect to future events. Such
statements are subject to known and unknown risks and uncertainties that could cause actual results, performance or events to
differ materially from those expressed or implied and that are beyond Deutsche Börse AG's ability to control or estimate precisely.
In addition to statements which are forward-looking by reason of context, the words 'may, will, should, expects, plans, intends,
anticipates, believes, estimates, predicts, potential, or continue' and similar expressions identify forward-looking statements.
Actual results, performance or events may differ materially from those statements due to, without limitation, (i) general economic
conditions, (ii) future performance of financial markets, (iii) interest rate levels (iv) currency exchange rates (v) the behaviour of
other market participants (vi) general competitive factors (vii) changes in laws and regulations (viii) changes in the policies of
central banks, governmental regulators and/or (foreign) governments (ix) the ability to successfully integrate acquired and merged
businesses and achieve anticipated synergies (x) reorganization measures, in each case on a local, national, regional and/or
global basis. Deutsche Börse AG does not assume any obligation and does not intend to update any forward-looking statements
to reflect events or circumstances after the date of these materials.
No obligation to update information: Deutsche Börse AG does not assume any obligation and does not intend to update any
information contained herein.
No investment advice: This presentation is for information only and shall not constitute investment advice. It is not intended for
solicitation purposes but only for use as general information.
All descriptions, examples and calculations contained in this presentation are for illustrative purposes only.
© Deutsche Börse AG 2021. All rights reserved.
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