August 5, 2011 / 10:15 AM / 6 years ago

UPDATE 4-TMX profit tops expectations as Maple talks go on

* Q2 adj EPS C$0.94 vs expectations of C$0.90

* Q2 net income C$0.73/shr vs C$0.79/shr a year ago

* Maple talks ongoing, CEO eyes “growth opportunities”

* TMX down 0.67 percent at C$42.83 on the TSX (Adds details, background, CFO comment, share price)

By John McCrank

TORONTO, Aug 5 (Reuters) - Toronto Stock Exchange operator TMX Group (X.TO), target of a C$3.8 billion ($3.9 billion) hostile takeover bid, reported higher-than-expected quarterly earnings on lower costs and higher revenue from new listings and derivatives trading.

However, second-quarter net income was down from year-ago levels because of charges tied to a failed merger with the London Stock Exchange (LSE.L) and a takeover bid from Maple Group, a consortium of Canadian financial firms and pension funds, TMX said.

Excluding one-time items, TMX earned 94 Canadian cents a share. Analysts on average had forecast 90 cents, according to Thomson Reuters I/B/E/S.

“Good results,” said analyst Ed Ditmire of Macquarie Research in New York. “And probably importantly, under the notion that if TMX can make a lot more money than people thought it could as a stand-alone company, it’ll help management if they wanted to present alternatives to the Maple offer.”

Maple this week extended the deadline for TMX stakeholders to tender their shares to its offer to Sept. 30, as it seeks regulatory approvals. [ID:nN1E77207J]

MAPLE EXPLORING ALL GROWTH OPPORTUNITIES

That extension came not long after TMX said it was talking with Maple, opening the door to a friendly deal. The company said on Friday those talks were ongoing. [ID:nN1E76K29L]

“Management will also continue to explore all of our growth opportunities,” TMX Chief Executive Officer Thomas Kloet said on a call with analysts.

TMX said this week it bought network solutions company Atrium Network for an undisclosed amount. [ID:nN1E772071] It said on Friday that similar acquisitions are its number one priority with respect to how to deploy its excess cash.

“We are currently actively looking at a number of different investment opportunities across the different aspects of the business,” Michael Ptasznik, TMX’s chief financial officer, said on the call.

Beyond that, he said the company would look to increase its dividend over time as net income and cash flow grow.

In the latest quarter, cash flow from operations was up 25 at C$179.3 million. TMX was sitting on C$101.4 million at June 30, compared to C$56.6 million a year earlier.

TMX said combined new listings on the Toronto Stock Exchange and TSX Venture Exchange were up 33 percent from a year earlier. The value of new equity financings on TSX Venture Exchange increased 84 percent.

Operating costs fell 3 percent to C$71.5 million as the decommissioning of legacy hardware and lower expenses for bad debt helped offset a 3 percent rise in compensation and benefits to staff.

Net income fell to C$54.7 million, or 73 Canadian cents a share, from C$58.4 million, or 79 Canadian cents. Costs from the LSE and Maple offers came to C$20.8 million.

TMX shares were down 0.67 percent at C$42.83 shortly after the market opened on Friday. ($1=$0.98 Canadian) (Additional reporting by Euan Rocha and Aftab Ahmed; editing by Janet Guttsman)

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