- Earnings per share of 48 cents unchanged from the second quarter, 2002
- Revenue decline of 5% offset by lower expenses and income taxes
- Quarterly dividend of $0.18 per common share declared
Revenues were $52.8 million for the second quarter of 2003, down 5% as compared with $55.6 million for the same period in 2002, primarily due to decreased listing and trading revenue, offset somewhat by increased market data revenue for the same period. The revenue decline was offset by lower expenses and income taxes resulting in net income that was unchanged from the second quarter of 2002 at $16.2 million, or 48 cents per common share.
"Despite continued market uncertainty as we entered the second quarter, we were able to deliver consistent financial results," said Barbara Stymiest, Chief Executive Officer of TSX Group Inc. "As we progressed through the second quarter, it was encouraging to see an upturn in the markets and related activity as evidenced by a month over month improvement in the value of securities traded on both of our exchanges," added Ms. Stymiest.
Commenting specifically on TSX Group's financial results, Michael Ptasznik, Chief Financial Officer, said "We were pleased to be able to deliver bottom line results that were consistent with the second quarter of 2002, which was a particularly strong quarter in terms of both revenue and net income. Our ability to adapt to changing conditions and contain our spending accordingly is well reflected in these results."
Revenue
>b>Listing revenue of $21.0 million in the second quarter of 2003 decreased by $2.4 million, or 10%, compared with $23.4 million in the second quarter of 2002. The second quarter of 2002 was an excellent quarter for financing with record revenue. Reduced financing activity in the second quarter of 2003 compared with the same period in 2002 was the primary reason for the decline in listing revenue. This decline was somewhat offset by an increase in listing fees during the first quarter of 2003 in conjunction with new services and enhancements.
Trading and related revenue of $16.1 million in the second quarter of 2003 decreased by $1.4 million, or 8%, compared with $17.5 million in the second quarter of 2002. The number of transactions increased by 3% from 7.2 million in the second quarter of 2002 to 7.4 million in the second quarter of 2003. However, the total value of securities traded on the Toronto Stock Exchange and TSX Venture Exchange was $151.6 billion in the second quarter of 2003, or 12% below the $171.6 billion in value traded for the second quarter of 2002.
Market data revenue of $13.0 million in the second quarter of 2003 increased by $1.1 million, or 10%, compared with $11.9 million in the second quarter of 2002. Real time data fees are primarily driven by the number of data subscriptions and therefore are directly related to industry employment. The one hundred thousand professional real-time subscriptions at the end of the second quarter of 2003 is lower by approximately 8%, when compared to the end of the second 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.
Business services revenue of $2.2 million in the second quarter of 2003 decreased by $0.1 million, or 6%, compared with $2.3 million in the second quarter of 2002. The decrease related to a change in the pricing structure for services provided to one customer, reflecting savings achieved by migrating that customer to a lower cost technology solution.
Expenses
Compensation and benefits costs of $16.9 million for the second quarter of 2003 increased by $2.6 million, or 18%, from $14.3 million in the second quarter of 2002. The change is attributable to salary increases, accrual of additional long term compensation expense related to share price appreciation and building in-house expertise in both the technology and business development areas. The number of employees at June 30, 2003 was 526 compared with 520 at June 30, 2002.
Information and trading systems costs of $4.0 million for the second quarter of 2003 decreased by $1.6 million, or 28%, from $5.6 million in the second quarter of 2002. The decrease was primarily due to the savings from operational efficiencies which continued to be realized.
General and administrative costs of $8.1 million decreased by $1.6 million, or 17%, from $9.7 million in the second 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 second quarter of 2003 decreased by $0.4 million, from $3.1 million in the second quarter of 2002 reflecting a lower asset base.
Loss from Investment in Affiliate of $0.3 million represents TSX Group's approximate 45% share of CanDeal.ca Inc.'s loss for the second quarter of 2003.
Investment Income of $4.9 million in the second quarter of 2003 increased by $0.6 million, or 13%, compared with $4.3 million in the second quarter of 2002. The increase was primarily attributable to an increase in the amount of cash, investments and marketable securities available to be invested.
Income Taxes were $9.5 million for the second quarter of 2003, compared to $11.0 million in the second quarter of 2002. The effective tax rate decline from approximately 41% in the second quarter of 2002 to approximately 37% in the second quarter of 2003 was primarily due to a reduction in the statutory corporate tax rate for Ontario.
Six Months Ended June 30, 2003
For the six months ended June 30, 2003, revenues were $106.9 million, a decrease of $0.3 million from $107.2 million for the same period in 2002. The increase in both listing and market data revenue was offset by a decline in trading and related revenue during the same period. Net income was $30.6 million, or 91 cents per common share, compared to net income of $27.6 million, or 82 cents per common share for the same period in 2002, representing an increase of 11%. These results reflect an overall reduction in discretionary spending as well as a lower effective tax rate.
Liquidity and Capital Resources
Cash, investments and marketable securities were $254.8 million at June 30, 2003, an increase of $19.8 million, or 8%, over $235.0 million at the end of 2002. A dividend of $0.15 on each outstanding common share was paid on March 31, 2003 and a dividend of $0.18 on each outstanding common share of the company was paid on June 30, 2003, representing total payments of $11.1 million. There were $4.2 million of capital expenditures during the six months ended June 30, 2003, primarily related to the renovation of the TSX Broadcast & Conference Centre.
Cash Flow from Operating Activities was $35.2 million in the first six months of 2003. A significant contributor to cash flow in the first half of 2003 was $36.0 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 $19.7 million, resulted in an increase in cash. This deferred revenue will be recognized over the balance of 2003. Cash flow from operating activities was reduced due to the payment of income taxes, a decrease in accounts payable and accrued liabilities, which in part related to the payment of expenses accrued at year end, and an increase in other assets related to funding the company's defined benefit pension plan. The contribution to this plan of $2.0 million in the second quarter of 2003 combined with further payments of approximately $5 million over the balance of 2003 will result in the defined benefit plan being fully funded.
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 September 30, 2003 to shareholders of record at the close of business on August 29, 2003.
Outlook
Commenting on TSX Group's outlook, Ms. Stymiest said: "We continue to remain confident in our goal of long-term annual earnings per share growth in the 10 to 12 percent range although we expect to see variation in growth rates on both a quarterly and annual basis. We will continue to be prudent in managing our expenses as we did in the first half of 2003, but will not hesitate to invest in opportunities that meet our criteria as we move forward in implementing our growth strategies. We remain committed to pursuing the many opportunities that surround us for enhancing our core business, extending our pre-eminent domestic position and expanding geographically."
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, TSX Datalinx and TSX Technologies. 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 second quarter 2003.
Time: 5:00 p.m. - 6:00 p.m. ET on Tuesday, July 29, 2003.
To participants: Please call the following at least 15 minutes prior to the start of the event.
Teleconference Number: (416) 405-9328 or 1-800-387-6216
AudioWebcast: www.tsx.com, under Investor Relations
Audio Replay: 416-695-5800 or 1-800-408-3053.
The passcode for the replay is 1452714
Unaudited Consolidated Financial Statements
TSX Group expects to file its unaudited second quarter 2003 consolidated financial statements with Canadian securities regulators in August, 2003, after which time the statements may be accessed through www.sedar.com or on the TSX Group website at www.tsx.com. In addition, copies of the filed statements will be available upon request by contacting TSX Group Investor Relations by phone at (416) 947-4277 or by e-mail at shareholder@tsx.com.
Forward-Looking Statements
This news release, in particular the section under the heading "Outlook," includes forward-looking statements, which are not historical facts but are based on certain assumptions and reflect TSX Group's current expectations. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of the factors that could cause actual results to differ materially from current expectations are: levels of market activity that are outside of TSX Group's control; its cost structure being largely fixed; competition from other exchanges, ATSs, new technologies and other sources; adverse effect of new business activities; failure to implement its strategy; failure to develop and accept new products; dependence of the trading and market data operations on a small number of clients; dependence on the economy of Canada; dependence on information technology; dependence on third party suppliers for a number of important services; and changes in regulation. Additional factors are discussed in TSX Group's materials, including its Annual Information Form, filed with the securities regulatory authorities in Canada from time to time. TSX Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
