(Adds analyst, executive comment, stock action)
By Alastair Sharp
TORONTO May 9 TMX Group Ltd, the
operator of the Toronto Stock Exchange, reported a 23 percent
rise in first-quarter profit on Friday as a budding recovery in
trading activity picked up speed.
The company said higher trading and clearing volumes were
complemented by cost savings and lower financing costs after
restructuring its long-term debt last year.
"The reduction in operating expenses would be a positive,"
said RBC Capital Markets analyst Paul Holden, adding it was not
clear how much of the savings were one-time or could be factored
into future earnings estimates.
The company said revenue was boosted as total capital raised
increased from the prior quarter and year-ago period, although
capital raised from initial public offerings slipped, bucking a
On a conference call with analysts, executives said mining
sector financings since the end of the quarter were flat, but
the outlook for technology listings was strong.
"The technology pipeline, as you might guess just from
looking around with what's happening around the world, is very
positive," said TMX Group Chief Executive Officer Thomas Kloet.
Along with the Toronto bourse, the company also owns the
Montreal derivatives exchange and the small-cap TSX Venture
Exchange, where listings are heavily weighted toward the
The company said its energy market notched strong volume
growth due to higher natural gas prices and volatility that
reflected extreme winter weather.
Net profit attributable to equity holders rose to C$46.4
million ($42.7 million), or 86 Canadian cents a share, from
C$37.8 million, or 70 Canadian cents, a year earlier.
Revenue increased 6 percent to C$182.1 million.
On an adjusted basis, excluding acquisition and integration
costs, TMX Group earned C$1.05 a share.
Analysts, on average, expected C$1.02 a share on revenue of
C$189 million, according to Thomson Reuters I/B/E/S.
A group of Canadian financial institutions bought TMX Group
in September 2012 and combined it with the smaller Alpha stock
exchange and the trading clearinghouse Canadian Depository for
Kloet, who has announced plans to step down in August, said
the integration was now largely complete and that the company
would look to invest in money-making opportunities.
"They're steering the ship without a captain at this point
so you don't go into anything drastic," RBC's Holden said. He
said he would want to hear about a replacement for the retiring
Kloet by July.
TMX Group said it was keeping its dividend payout steady at
40 Canadian cents per share.
The company is bracing for the arrival of Aequitas
Innovations Inc, an upstart competitor seeking to win over
institutional investors with an aggressive stance against
high-frequency trading (HFT).
HFT, which uses powerful computers and mathematical formulas
for rapid-fire trades in which stocks can often be held for
fractions of a second, has come under scrutiny in the United
But Kloet said the situation is different up north and that
he doesn't expect regulatory pressure.
TMX has said high-frequency trading accounts for 15 percent
to 20 percent of all TMX trades and had narrowed spreads and
It recently announced plans to launch a secondary market for
private companies, while regulators also plan to allow
crowdfunding of early-stage companies.
Shares in TMX were up 4 Canadian cents at C$58.19 in early
trading on the TSX.
($1 = 1.0866 Canadian dollars)
(Reporting by Alastair Sharp and Ashutosh Pandey; Editing by
Savio D'Souza and Jeffrey Benkoe)