Swedish stock market operator OM has seen its share price boosted by smaller-than-expected third quarter losses and a successful cost-cutting programme, including the closure of failed cross-border equity trading platform Jiway.
OM posted a July-September loss of Skr47 million, significantly undercutting consensus estimates of Skr106 million, and down from a loss of Skr577 million from the same period a year ago. The figures were released as OM announced the closure of its pan-European retail share trading operation Jiway, initially launched in concert with Morgan Stanley in November 2000 and a consistent drain on company resources.
Says OM CEO Per Larsson (pictured): "When we launched Jiway, we were breaking new ground. I remain convinced that the concept of Jiway, a one-stop-shop for cross-border trading, represents the future. Although Jiway showed some positive signs over the last six months, we have decided that it is not financially favorable to continue operations."
The closure of Jiway comes one year after the company folded the loss-making joint venture into its own operations following Morgan Stanley's withdrawal from the initiative. The Jiway marketplace, which before the restructuring had 45 employees, continued to operate under the name Jiway. The former Jiway Broker Services, then with 132 employees, was integrated within OM's back-office-for-hire operations and has during the last 12 months become profitable, says Larsson. The operations of the former Jiway Broker Services will not be affected.
OM expects to record a charge of Skr95 million against the closure in its fourth quarter results, but will realise annual savings of Skr80 million for the action.
OM shares rose by 17.3% to Skr36 crowns on the news.
"We have continued to adapt our operations to address tough market conditions," says Larsson. "Since the launch of our first cost-efficiency programme in Spring 2001, we have increased operational efficiency significantly and reduced our total operating costs by around Skr1 billion on an annual basis. Compared to the same period last year, the company's revenue has decreased by 11 percent at the same time as we have reduced costs by 19 percent."
Third quarter sales totalled Skr580 million, down from Skr648 million in the year ago period. The revenue decrease has been attributed to falling turnover on the Stockhom Bourse and decisions by investment banks to defer spending on new trading technology.