Euronext Soothed Skeptics When CEO Quit by Sticking to Strategy

Dominique Cerutti
Dominique Cerutti, former chief executive officer of Euronext NV. Photographer: Balint Porneczi/Bloomberg

Euronext NV management and investors were surprised when Dominique Cerutti said he was leaving the European exchange operator. They appear to have gotten over it.

His resignation as chief executive officer was announced on April 22. The company’s stock retreated to 36.91 euros a week later, an 8 percent drop. By May 8, the shares had rebounded to

41.20 euros, the highest price since Euronext was spun off by Intercontinental Exchange Inc. in June.

In the 10 months that Cerutti ran the independent company, he focused on cutting costs and diversifying sources of income, addressing reduced profitability resulting from European regulatory changes that increased competition in stock trading. Finding new ways to make money will be the biggest challenge for the next CEO in a world dominated by titans such as London Stock Exchange Group Plc, Deutsche Boerse AG and ICE.

“The message for us is we are sticking to our strategy,” Euronext Chief Financial Officer Amaury Dauge said in an interview last week in the company’s Paris office. “We don’t want to lose any momentum.”

Cerutti became CEO in 2009 of Euronext -- which runs stock markets in France, the Netherlands, Belgium and Portugal. He managed the company during its separation from ICE, which bought the business as part of its 2013 purchase of NYSE Euronext. Now, Cerutti has joined consulting firm Altran Technologies SA.

Biggest Concern

“The biggest concern we had when they announced he was leaving was, ‘Would they change strategy?’ Because the current strategy was working,” said Peter Lenardos, an analyst at RBC Capital Markets in London.

To diversify, Euronext is trying to widen its offerings on derivatives, exchange-traded funds and indexes. Derivatives revenue fell 11 percent in first quarter from a year earlier. It cited competition in Dutch stock options, where it faces competition from Amsterdam-based The Order Machine. Index and market data sales rose 12 percent.

The company is also looking at expansion in small- and medium-size enterprises, said Jos Dijsselhof, Euronext’s chief operating officer and interim CEO.

“It’s a long list of different initiatives and different product launches,” Dijsselhof said, also speaking in an interview in Paris. “We want to make sure that we are pan-European, that we are linked to the real economy, either through the financing side or through the trading side.”

Euronext says it learned lessons about moving quickly and hitting its targets when it was part of ICE. Aggressive cost cutting that beats their own stated plans is an ICE hallmark, RBC’s Lenardos said.

Copying Rivals

“They’re looking at the two best-in-class global operators, ICE and LSE,” he said. “The quickness and aggressiveness is a page out of the ICE playbook. The diversification bit is a page out of the LSE playbook.”

London Stock Exchange Group became majority owner of clearinghouse LCH.Clearnet Ltd. in 2013 and made 39 percent of its 2014 revenue through post-trade services, compared with 16 percent in 2009, according to a company presentation. It bought Frank Russell Co. last year for its index business.

Investors appear to agree with the approach. Euronext’s initial public offering was priced at 20 euros in June. The shares have since doubled in price. During that span, the 27-company Bloomberg World Exchanges Index has risen about 23 percent, led by Euronext’s rally.

Euronext said during its IPO that it would cut costs by 60 million euros ($68 million) by the end of 2016. The market operator says it has racked up 43.6 million euros already and has since increased the cost-cutting target to 80 million euros.

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