Deutsche Boerse AG (DB1), the operator of the Frankfurt stock exchange, trimmed its dividend and unveiled plans to cut about 250 jobs as part of a cost-reduction plan to shore up profit in the face of declining trading volumes.
The company proposed a 2012 dividend of 2.10 euros a share, down from 2.30 euros in the previous period, Deutsche Boerse said in a statement today. The company will identify savings of as much as 70 million euros ($95 million) annually and start negotiations immediately with labor representatives. The cuts will be completed by 2016 and the exchange will spend 90 million euros to 120 million euros implementing the program.
“The cost of implementing the efficiency improvements in 2013 will likely outweigh the benefits,” Peter Lenardos, an analyst at RBC Capital Markets in London, wrote in a report today. “Cost savings of around 7 percent of forecasted 2013 operating expenses that will not be realized for years and will cost almost twice as much to implement should not be applauded by the market.”
Deutsche Boerse and its rivals, including NYSE Euronext and London Stock Exchange Group Plc, have seen volumes drop following the global financial crisis of 2008. Traditional exchanges have also lost market share to trading venues such as Bats Chi-X Europe.
Deutsche Boerse shares rose 28 cents, or 0.6 percent, to close at 48.25 euros in Frankfurt trading today.
The company reported 2012 adjusted preliminary net income of about 660 million euros, without giving comparable figures for the previous period. Net revenue was 1.93 billion euros, preliminary operating costs adjusted for special items were about 920 million euros and adjusted preliminary earnings before interest and tax were about 1 billion euros, the Frankfurt-based bourse said in the statement.
“We intend to reduce staff costs by 30 million euros by giving approximately 200 employees and about 50 executives the opportunity to participate in a voluntary redundancy scheme,” Frank Herkenhoff, a spokesman for Deutsche Boerse, said today.
European regulators blocked Deutsche Boerse’s acquisition of New York-based NYSE Euronext last year, citing concerns over competition in derivatives and clearing. The German exchange spent about 82 million euros in 2011 on legal, consulting, banking and other expenses related to the failed merger. Deutsche Boerse is moving its Eurex derivatives exchange to a new trading system as it develops a standalone strategy.
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