2023-11-07 17:04:43
Deutsche Börse remains one of the most profitable companies in the DAX and continues to grow strongly. With this message at the Investor Day, Theodor Weimer, CEO of Deutsche Börse since 2018, revived his company’s share price on Tuesday. After the “Horizon 2026” strategy was announced, the price jumped by 4 percent at midday from a slight loss at the start of trading and became the top winner in the Dax. A rare sight for the shareholders of the stock market who are used to success.
The share’s upward trend broke just on the day at the end of April when Weimer announced the most expensive takeover in the company’s history at almost 4 billion euros. The stock market is now still a long way from the 186 euros per share back then, with the current 165 euros. Chart technicians noted, however, that the price jump on Tuesday at least exceeded the 100-day average line again.
With his presentation, Weimer succeeded in reducing investors’ doubts about the expensive takeover of the stock exchange. Yes, it cost a lot of money, bonds had to be issued and debt increased and the rating, which is so important for the banking business, will be more difficult to maintain.
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However, Weimer outlined how much money the stock exchange continues to earn operationally each year and announced that he would not seek any further takeovers until the end of 2024 unless an opportunity presented itself that made strategic and financial sense. Weimer emphasized the “and”. That doesn’t mean that the takeover of Denmark’s Simcorp, which has just been fully completed, doesn’t make financial sense.
Leithner possible Weimer successor
But it made it clear that the focus was on strategic benefits. Stephan Leithner, board member of the Weimer Stock Exchange, explained this further. The 57-year-old Austrian, who has been with the stock exchange for five years and previously sat on the board of Deutsche Bank for several years, is considered a hot contender to succeed him at the top of the stock exchange. Weimer announced in the summer that he would no longer extend his contract, which expires next year, and would hand over the chairmanship of the board after seven years.
Before that, however, he did not miss the opportunity to look back on the success of his term in office, with 13 percent annual average growth to probably 5 billion euros in net sales this year and 2.9 billion euros in operating profit. The more important message than mere growth is the broader positioning of the stock exchange under Weimer. Targeted takeovers, particularly of the American data provider ISS and now of the leading Danish software specialist Simcorp in the financial sector, have made the stock market more independent of share prices and market sentiment. These business areas will now be combined under Leithner’s leadership in the “Investment Management Solutions” unit.
The share of sales from data, indices and (software) services rose from 5 percent at the start of Weimer’s term in office to 17 percent this year and with the goal of 25 percent in 2026. The share of sales from trading fluctuates with the stock market mood and trade processing, which is led by board member Thomas Book, is falling from 59 percent in 2017 to around 44 percent and the planned 43 percent in 2026. Book is the second internal successor candidate, who was only allowed to take the lectern as the fifth.
The stock business doesn’t matter
From the beginning, Weimer’s goal was to make the stock exchange more independent of market fluctuations. The business of stock trading and IPOs therefore plays no role in the growth strategy. Derivatives have long been the most important in trading; raw materials and currencies are also expected to contribute to growth, while the equity business is expected to continue to stagnate in the coming years.
On Monday evening, the stock exchange announced that it would only distribute 30 to 40 percent of its profits to shareholders in the future. The range was previously 40 to 60 percent. At the same time, a share buyback for 300 million euros was announced for the beginning of 2024 – most recently, almost 700 million euros in dividends were paid. Investors were still skeptical about this in early Tuesday trading, fearing that the expensive takeover would make money scarce for shareholders in the future.
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In the presentation, Weimer underlined the announcement that the dividend would increase in absolute terms. Sales are expected to increase to 6.4 billion euros by 2026 and operating profit is expected to increase by 11 percent per year. The stock exchange wants to further expand its high operating profit margin of 58 percent. This does not include possible revenue that the exchange could receive from business with digital securities, tokenization and the provision of corresponding infrastructure. “We cannot risk not investing in this area,” said Weimer: “We want to participate in it as a platform provider.”
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