(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 global trend.
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 resource sector.
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 Securities Ltd.
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 States recently.
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 added liquidity.
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)