* To focus on integration of Alpha and CDS, paying down debt
* Still looking at possible acquisitions
* Alpha to continue to operate as marketplace, but not
* TMX to cut 100 jobs over next 12 months
* Posts adjusted Q3 EPS of C$0.67 per share
By Solarina Ho
TORONTO, Nov 9 Canada's TMX Group Ltd
will focus on paying down C$1.5 billion ($1.50 billion) in
loans, even as it looks for chances to expand its business
through acquisitions, the operator of the Toronto Stock Exchange
(TSX) said on Friday.
TMX reported a third-quarter profit in its first quarterly
statement since it was taken over by a consortium of major
Canadian financial institutions, but said earnings were hurt by
a slowdown in capital markets activity and uncertain
"It's been generally a tough summer across the exchange
landscape," said Ed Ditmire, an analyst with Macquarie Research.
Chief Executive Tom Kloet, who has continued to lead the
company since its acquisition, told analysts on a conference
call that TMX is focused on paying down its large debt load
related to the takeover and integrating former rival Alpha, as
well as clearinghouse Canadian Depository for Securities Ltd
Alpha will continue to operate as a marketplace, but not as
a listing venue, Kloet said, adding that 100 jobs will be cut
over the next 12 months as part of the integration process. TMX
has 1,344 employees overall.
Despite the company's post-takeover focus on bringing Alpha
and CDS into its fold, company executives said they will
continue to look for new avenues of growth.
"The marketplace is moving and there will be opportunities
out there that will be very interesting to us ... whether it's
domestically or internationally," Kloet said.
"We are very focused on integration but we're still watching
these opportunities come forward. Our pencil is very sharp."
TMX, which celebrated its 160th anniversary last month, was
in talks earlier this year to buy U.S. stock market operator
Direct Edge Holdings LLC, a top-four player in the United States
as measured in trading activity.
"I don't think M&A is on the wish list of the TMX
shareholders right now," said Ditmire, noting that investors
will be happier to see the company lower debt and return more
capital instead of making acquisitions.
TMX's dividend this quarter was unchanged at C$0.40, and
company executives said there were no plans to increase it at
The exchange operator, which controls more than 80 percent
of Canadian stock trading by volume and value following the
C$3.8 billion ($3.81 billion) takeover by Maple Group, has made
no secret of wanting to expand globally. It currently has around
350 global listings, roughly half of which are U.S.-based.
In addition to the Toronto Stock Exchange, TMX operates the
TSX Venture Exchange for small capitalization stocks, the
Montreal Exchange for derivatives, and other options and energy
COMPLEX QUARTERLY RESULTS
The third quarter report included results of TMX Group Inc
from Aug. 1 to Sept. 13, reflecting TMX Group Ltd's 80 percent
ownership of TMX Group Inc at that time. For the rest of
September, results were included as a subsidiary of TMX Group
TMX reported net earnings of C$15.3 million, or 53 Canadian
cents per share. A year earlier, when it took an
acquisition-related charge, it posted a loss of C$13.3 million,
or C$109.79 per share. TMX said the year-over-year comparisons
were of little use for evaluating operating performance.
On an adjusted basis, the company earned 67 Canadian cents
per share in the latest quarter.
Revenue was C$162.3 million, below analysts' expectations.
TMX Group Inc had revenue of C$167.8 million in the same period
Revenue in the most recent quarter was hit by lower listing
fees from initial public offerings (IPOs), secondary offerings
and ongoing listing fees.
"It appears that the global economic recovery remains
fragile, moving at what some would call a glacial pace," said
Kloet, who declined to provide quarterly guidance.
"It is also evident that this situation is having pronounced
impact both on companies that are looking to go public and on
equity investor confidence."
Global equity markets have been hit by a slow trading
environment amid worries about global economic growth.
On Tuesday, NYSE Euronext, parent company of the New
York Stock Exchange, reported its weakest equity trading levels
in years, and analysts expect lower profit from other global
exchanges including the London Stock Exchange.
Combined total trading volume for the TSX, TSX Venture
Exchange and TMX Select slumped 24 percent in the third quarter
compared with a year ago, and are down 26 percent year-to-date,
TMX said during the call.
Total volume on Alpha tumbled 35 percent for the quarter,
down 38 percent year-to-date. CDS, whose operations are
dependent on trading activity in Canadian equity marketplaces,
also saw the total number of trades processed fall dramatically.
BOX trading volume in the U.S. options market also fell
during the quarter, but decreased less than the overall industry
volume, indicating some market share gains.
Financing for IPOs has plunged 68 percent so far this year.
"Trying to find new avenues of growth in this environment
remains pretty difficult," Ditmire said.
TMX shares, which have fallen about 2.8 percent since the
takeover was finalized in mid-September, were up 24 cents at
C$48.90 on Friday afternoon on the Toronto Stock Exchange.