Revenues from operations were $ 54.1 million for the first quarter of 2003 compared with $ 51.6 million for the same period in 2002, primarily due to increased listing and market data revenue, which was somewhat offset by a decline in trading and related fees for the same period. Net income was $ 14.4 million, or 43 cents per common share, compared with $ 11.4 million, or 34 cents per common share, in the first quarter of 2002.
"We were pleased with the positive financial results in the first quarter of 2003 despite difficult market conditions," said Barbara Stymiest, CEO of TSX Group Inc. "We continue to focus on the fundamentals of our core business by developing new products and solutions for our customers and the marketplace. Our performance demonstrates the benefits of having complementary yet diversified revenue streams, a strategy which we will continue to pursue," added Ms. Stymiest.
Commenting on TSX Group's financial performance, Michael Ptasznik, CFO of TSX Group Inc. said, "Our results for the quarter reflect our ability to adapt to changing market dynamics. While we have a largely fixed cost structure, a portion of our spending is discretionary with respect to timing and amount." Mr. Ptasznik noted, "We monitor market conditions and continue to pursue operational efficiencies and other initiatives, as appropriate."
Revenue
Listing fees of $ 21.4 million in the first quarter of 2003 increased by $ 3.9 million, or 22%, compared with $ 17.5 million in the first quarter of 2002. In conjunction with new services and enhancements that increased the value of listing on both of the company's exchanges, listing fees were increased in the first quarter of 2003 and contributed to the improvement in revenue.
Trading and related fees of $ 16.3 million in the first quarter of 2003 decreased by $1.2 million, or 7%, compared with $ 17.5 million in the first quarter of 2002. The number of transactions decreased from 7.4 million in the first quarter of 2002, or approximately 4%, to 7.1 million in the first quarter of 2003. Despite an increase of almost 13% in the volume of shares traded on the Toronto Stock Exchange and TSX Venture Exchange, the total value of securities traded on these exchanges was $ 148.7 billion in the first quarter of 2003, or approximately 16% below that for the comparable period in 2002.
Market data fees of $ 13.3 million in the first quarter of 2003 increased by $ 0.8 million, or 6%, compared with $ 12.5 million in the first quarter of 2002. Real time data fees are primarily driven by the number of data subscriptions and therefore directly related to industry employment. The number of professional real-time subscriptions is lower by approximately 9%, when compared to the end of the first quarter of 2002, primarily due to employment reductions in the U.S. financial services sector. The impact of these reductions was more than offset by a price increase implemented in the third quarter of 2002.
Market regulation fees were zero in the first quarter of 2003, compared with $ 2.3 million in the first quarter of 2002. TSX Group no longer directly performs this function, since March 1, 2002 when Market Regulation Services Inc. ("RS Inc.") was retained to provide it on TSX Group's behalf.
Business services revenue was $2.4 million in the first quarter of 2003, compared with $ 0.8 million in the first quarter of 2002, representing revenue earned for the technology support services provided by TSX Group to RS Inc., commencing March 1, 2002, and to CanDeal.ca Inc. ("CanDeal"), commencing in the fourth quarter of 2002.
Expenses
Compensation and benefits of $ 18.2 million for the first quarter of 2003 increased by $ 0.8 million, or 5%, from $ 17.4 million in the first quarter of 2002. The increase was attributable to both costs associated with organizational changes and salary increases, which were effective at the beginning of 2003. The number of employees at March 31, 2003 was 532 compared with 529 at March 31, 2002.
Information and trading systems costs of $ 4.7 million for the first quarter of 2003 decreased by $ 0.4 million, or 8%, from $ 5.1 million in the first quarter of 2002. The decrease was primarily due to the savings resulting from the integration of TSX Venture Exchange and Toronto Stock Exchange trading systems completed in the first quarter of 2002.
General and administrative costs of $ 6.6 million decreased by $ 2.3 million, or 26%, from $ 8.9 million in the first quarter of 2002. The decrease is attributable to a contraction in office space in Vancouver, Calgary and Toronto, decreased reliance on external contractors, and a reduction in discretionary spending.
Amortization of $ 2.7 million for the first quarter of 2003 decreased by $ 0.4 million, from $ 3.1 million in the first quarter of 2002 reflecting a decrease in amortization expense due to a lower asset base.
Loss from investment in affiliate of $ 0.2 million represents TSX Group's approximate 40% share of CanDeal's loss for the first quarter of 2003.
Investment income of $ 0.8 million in the first quarter of 2003 decreased by $ 1.6 million, from $ 2.4 million in the first quarter of 2002. The decline was largely attributable to less favourable returns on short term bond investments given recent increases in interest rates.
Income taxes were $ 8.0 million for the first quarter of 2003, compared to $ 8.1 million in the first quarter of 2002. The effective tax rate declined from approximately 41% in the first quarter of 2002 to approximately 36% in the first quarter of 2003 primarily due to both a reduction in the statutory corporate tax rate for Ontario to approximately 37%, and an adjustment in the valuation of the future tax asset.
Cash, investments and marketable securities were $ 250.5 million at March 31, 2003, an increase of $ 15.5 million, or 7%, over $ 235.0 million at the end of 2002. A dividend of $0.15 on each outstanding common share of the company was paid on March 31, 2003 representing a total payment of $ 5.1 million.
Cash Flow from Operations was $ 21.5 million in the first quarter of 2003. A significant contributor to cash flow in the period was $ 17.1 million of net income excluding amortization. In addition, the billing of listed issuer sustaining fees, which is reflected in the increase in deferred revenue of $29.8 million, resulted in an increase in both cash and accounts receivable. This deferred revenue will be recognized over the balance of 2003. Cash flow was reduced due to the payment of income taxes and a decrease in accounts payable and accrued liabilities, which in part related to the payment of expenses accrued at year end. The aggregate impact of an increase in accounts receivable and prepaid expenses and decrease in accounts payable and accrued liabilities as well as income taxes payable was a reduction in cash flow of $26.5 million.
Dividends
The Board of Directors of TSX Group Inc. declared a quarterly dividend of $0.18 on each outstanding common share of the company, payable on June 30, 2003 to shareholders of record at the close of business on May 30, 2003. The increase in the quarterly dividend from $0.15 to $0.18 per share reflects the company's previously stated intention of providing shareholders with regular and growing dividends that take into account the yields of comparable publicly traded stock exchanges and other Canadian financial institutions.
Commenting on TSX Group's outlook Ms. Stymiest said, "We expect to see variation in growth rates on both a quarterly and annual basis, but we remain confident in our previously stated goal of long-term annual earnings per share growth in the 10 to 12 percent range. We will continue to be prudent in managing our expenses, especially in these difficult market conditions, and will not hesitate to invest in opportunities to grow our core business, diversify geographically and expand into other markets."
Financial Statements Governance Practice
The Finance & Audit Committee of the Board of Directors of TSX Group Inc. reviewed the financial statements referred to in this press release and recommended they be approved by the Board of Directors. Following review by the full Board, the financial statements and the contents of this press release were approved.
About TSX Group Inc.
TSX are the initials attached to the company's core operations: Toronto Stock Exchange, TSX Venture Exchange, TSX Markets and TSX Datalinx. The company operates Canada's two national exchanges serving the senior equity and public venture equity markets. TSX Group Inc. is headquartered in Toronto and maintains offices in Montreal, Winnipeg, Calgary and Vancouver.
Teleconference / Audio Webcast
TSX Group will host a teleconference / audio webcast to discuss the financial results for first quarter 2003.
Time: 5:00 p.m. - 6:00 p.m. EDT on Tuesday, April 29, 2003.
To interested participants: Please call the following numbers at least 15 minutes prior to the start of the event. +1 416 405-9328 or 1-800-387-6216
AudioWebcast: www.tsx.com, under Investor Relations
Audio Replay: +1 416-695-5800 or 1-800-408-3053..The passcode for the replay is 1404649
Both the audio webcast and the audio replay will be archived for a period of three months.
Please click here to view the TSX Group consolidated balance sheets.
Please click here to view TSX Group market statistics.
