ambition - Strategic perspectives

Accelerate



“Accelerate” is the name of Deutsche Börse’s growth programme, which we launched in July 2015. Accelerate is the result of a detailed analysis of our strategic focus, as well as our organisational structures and business processes. The purpose of Accelerate is to secure our growth momentum through numerous initiatives, to boost this momentum over the medium term and to strengthen and ensure the Group’s economic and social value in accordance with our sustainability strategy.

Five steps to reach the number one spot

Accelerate pursues a clearly defined vision: to turn Deutsche Börse into the global market infrastructure provider of choice, being top-ranked in all its activities along the entire value chain. The growth programme will help us to focus more strongly on our clients’ needs, and to enhance the efficiency of our processes.

Accelerate comprises five elements:

1. to better fulfil client needs, through a more rigorous organisation
2. to improve performance measurement and performance-oriented remuneration
3. to review the medium-term financial planning
4. to exploit opportunities for external growth
5. to review and examine the portfolio of businesses and investments

Our key approaches – which are aligned with these five strategy elements – are summarised as follows:

Structural change within the company sharpens focus on clients

Going forward, we will apply a joint approach to marketing, innovation and operations within Deutsche Börse Group. This organisational change will enable us to better serve new client needs, and to tap sales potential which we have not been able to explore to date. In order to expedite structural change within the company, and to intensify Group-wide cooperation, we have established a Group Management Committee, as a first step. This committee brings together executives from all parts of the Group – its composition will be variable, in line with the Group’s strategic needs. Moreover, our new Managing Directors for Group Sales (Robert Jolliffe) and Group Business & Product Development (Ashwin Kumar), both based in London, will improve coverage of our top customers, and will enhance our client-oriented offers. In addition, we have restructured the entire Executive Board (for details, please refer to the combined management report of the financial report 2015.

New staff incentives

We will gradually introduce new systems for measuring staff performance, and for determining remuneration. Besides enhancing incentive structures, this will establish a more direct responsibility for profit and loss. The objective is to increase performance orientation on all levels – at the same time, we want to raise the Group’s attractiveness for the top talents in our sector.

Faster growth – with clearly defined targets up to 2018

Our competitors use their strong results to expand their business lines – some of them on a massive scale: ICE, the Intercontinental Exchange, has acquired Interactive Data Holdings Corp. for US$5.2 billion, thus boosting its presence in the data business. In other words: the market for financial infrastructures is undergoing massive changes – to stand still in such a situation simply means falling behind.

This is why we want to invest into new markets and asset classes at a faster pace than in the past. In fact, during the course of revising our financial planning until 2018, we already identified opportunities for organic growth. We set clearly defined targets for profit growth – also with a view to safeguarding the scalability of our business model by making sure our technical systems are prepared to support the expansion of our product and service offers – at minimal cost.

The targets of our revised financial planning are as follows:

  • We strive for net revenue growth of between 5 and 10 per cent per annum until 2018, based on the Group's current business portfolio and assuming a continued recovery of the world economy as well as medium-term interest rate rises.
  • Earnings before interest and tax (EBIT) and consolidated net profit for the period attributable to the shareholders of the parent company are targeted to grow by between 10 and 15 per cent per annum.
  • This implies a target range of between €2.8 billion and €3.2 billion in 2018 net revenue (up from the previous target range of €2.3 billion to €2.7 billion), and EBIT of between €1.55 billion and €1.75 billion for 2018.

To achieve these growth targets, three fundamental cost management principles will apply:

  • Our business model must be scalable – not just as a “snapshot”, but on a sustained basis. Hence, single-digit net revenue growth requires stable operating costs; costs will be permitted to rise by around 5 per cent if revenues grow by a double-digit percentage.
  • We will continuously enhance our operational efficiency, with a focus on our clients’ needs. We will offset inflationary effects and salary increases through internal cost savings.
  • We will create additional scope for further investments by removing hierarchies, consolidating functions in competence centres, and through further improvements in procurement and purchasing.

Successful takeovers and cooperations show the way to the future

We will also continue to pursue external growth options – not only in order to strengthen existing growth areas, but also to explore new asset classes and services. What is essential in this context is to remain disciplined, to act with an eye to the future and to grow only where we can create sustainable value. The acquisitions of STOXX and 360T are cases in point.

In July 2015, we acquired the remaining 50 per cent stake in index provider STOXX that we did not already own from SIX Swiss Exchange, thereby achieving full control. This will significantly increase our strategic flexibility, allowing us to benefit from the fast-growing index business to an even larger extent.

With the acquisition of 360T, a fintech, we have gained exposure to foreign exchange – an asset class that is quite new to us – and hence, access to new clients. Based in Frankfurt/Main, 360T is a global foreign-exchange trading platform with a broad customer base that includes corporates, buy-side clients as well as banks. Since its foundation in 2000, 360T has been posting double-digit annual growth rates. Our acquisition of 360T will provide the company with a further boost to its organic growth momentum; moreover, the combination provides the option of realising revenue synergies in a high double-digit million euro amount over the medium term. We will be leveraging our international distribution network and our expertise for this purpose.

In Asia, cooperations offer particularly strong potential. We are already successfully cooperating with Korea Exchange (KRX) and the Taiwan Futures Exchange (TAIFEX), jointly offering products based on their respective blue-chip indices. At the end of October 2015, we made a great leap forward in our strategy for Asia. In cooperation with the Shanghai Stock Exchange (SSE) and the China Financial Futures Exchange (CFFEX), we founded the China Europe International Exchange (CEINEX), a trading venue for offshore renminbi products. Immediately after the joint-venture agreement, CEINEX entered into a cooperation agreement with China Construction Bank (CCB). We are therefore making progress with the implementation of our Asia strategy, strengthening Deutsche Börse Group.

Reviewing capital allocation, remaining true to our fundamental values

We will continue to examine our portfolio of businesses and investments, whilst maintaining our very sound balance sheet structure and attractive dividend policy.

To achieve our growth targets, we will not compromise on high standards of security and compliance. In an increasingly regulated capital markets environment, we will always comply with applicable rules. Nobody within this company will assume risks which will make us susceptible to attack – a fundamental stance which we will clearly communicate to all our business partners.

Likewise, for a market infrastructure provider such as ourselves, the reliability of our trading and clearing systems remains crucially important. Our core business segments and our IT will continue to join forces in focusing upon solutions.

With Accelerate, we have set ourselves ambitious targets – to meet the high standards of Deutsche Börse Group. Yet there is no change in our intention to secure a stable future, and this is why we regularly review the speed at which we are moving. To prevent falling behind our competitors, we must act neither too hastily, nor too slowly. It is the programme’s name that sets the pace: Accelerate.