Jonathan Spicer and Daisy Ku
Aggressive cost cutting helped NYSE Euronext
Analysts applauded a surprising 6 percent drop in fixed expenses and word from management that the company could exceed 2009 cost savings targets set only three months ago.
There was a lot of fat to be cut there, said Chris Allan, analyst at broker-dealer Pali Capital. The old management team did not do a very good job of integrating things. This is a very pro-active management team -- these guys are clearing house.
Excluding one-time items, the New York Stock Exchange parent earned 51 cents per share in the second quarter, topping analysts' average forecast by 6 cents, according to Reuters Estimates. Revenue rose 9.5 percent to $1.13 billion.
One-time charges resulted in a net loss of $182 million, or 70 cents per share, for the transatlantic exchange operator.
It recorded a $355 million charge related to the termination of its European clearing contract with London-based LCH.Clearnet. It also absorbed a $87 million charge from about 290 job cuts in Europe and the United States, which were expected after the integration of several mergers.
A year earlier, it posted a net profit of 73 cents per share, and earnings of 75 cents a share before one-time items.
Excluding the impact of foreign exchange rates and investment in new business, the second quarter's underlying fixed expenses were down $50 million, or 12 percent, from a year earlier.
Shares of NYSE Euronext, the world's largest exchange operator by the market cap of its listings, fell 3 cents to $26.99 in early trading on the New York Stock Exchange.
The company said its Liffe Clearing platform launched in Europe on Thursday, a venture it expects to boost earnings this year and yield more than $100 million in annual revenue.
NYSE Euronext CEO Duncan Niederauer said the job cuts will translate into sources of future revenue growth and expense reductions. Headcount was 3,500 as of June 30, down 9 percent from a year ago.
The company said it expects to exceed -- or at least hit the low end of -- its 2009 cost savings target. It said in April it expected fixed operating expenses of $1.82 billion to $1.90 billion.
The company also runs bourses in Paris, Amsterdam, Brussels, and Lisbon, as well as the London-based derivatives exchange Liffe, following its 2007 acquisition of Euronext.
Average U.S. equity trading volume jumped 25 percent and European volume rose 6 percent from a year ago, boosting cash trading revenue 20 percent. Derivatives trading revenue, accounting for a quarter of overall revenue, slipped 10 percent.
Solid expense control and continued synergy realization drove this quarter's upside; revenues were a bit light of our expectations, Credit Suisse analyst Howard Chen said in a note to clients, noting a backdrop of potential declines in industrywide volumes and further competitive pressures.
NYSE Euronext has been under pressure from start-up stock trading venues in the United States and Europe.
(Reporting by Jonathan Spicer and Daisy Ku, editing by Will Waterman and John Wallace)