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 it set only three months ago.
Excluding one-time items, the world's largest exchange operator by the market cap of its listings reported a 33.7 percent profit drop, or 51 cents per share compared to 75 cents in the same period a year earlier. On average, analysts polled by Reuters Estimates expected earnings of 45 cents per share.
Revenue was up 9.5 percent at $1.13 billion.
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.
Still, NYSE Euronext recorded a hefty $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.
Including the charges, NYSE Euronext reported a loss of $182 million in the quarter ended June 30, or a loss of 70 cents per share, compared to earnings of 73 cents per share.
NYSE Euronext shares fell 1.9 percent to $18.75 in Paris.
The company said on Thursday its Liffe Clearing platform launched in Europe on Thursday, a venture it expects to be accretive this year and yield more than $100 million in annual revenues.
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 added it expects to exceed -- or at least hit the low end of -- this year's cost savings target. It said in April it expects between $1.82 billion and $1.90 billion in fixed operating expenses.
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.
Excluding the impact of foreign exchange rates and investment in new business, the quarter's underlying fixed expenses were down $50 million or 12 percent from last year.
Meanwhile, average U.S. equity trading volume jumped 25 percent and European volume jumped 6 percent from a year ago, boosting cash trading revenues 20 percent. Derivatives trading revenues, 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 the backdrop of potential declines in industry-wide volumes and further competitive pressures.
The company has been under pressure from start-up stock trading venues in the United States and Europe. Its matched U.S. market share has fallen to 30.2 percent of trading.
(Reporting by Jonathan Spicer and Daisy Ku, editing by Will Waterman)