NZX first-half net soars on asset sales

Friday 7th August 2009

New Zealand's sharemarket operator, NZX, is strongly positioned for future acquisitions and growth thanks to the sale of its TZ1 carbon registry, delivering after-tax profit of $60.758 million for the six months to June, in line with broker expectations.

NZX shares were unchanged immediately after the announcement, although the stock has risen 57% for the year, making it one of the strongest performers on its own exchange in 2009.

The sale of the TZ1 carbon registry to the US and UK-based operator Markit tipped a one-off gain of $52.062 million into the first half result, with a further $10.2 million realised in June from the sale of its 22% share in the Bond Exchange of South Africa.

On the downside, impairment costs of $3.596 million were recorded against the parent and $1.822 million at group level for the NZX's stalled investment in the alternative Australian share trading platform, AXE ECN, which the Australian Government is proving reluctant to grant a licence for.

NZX took the opportunity also to account for $986,000 of the costs of its CEO share scheme in the first half, reflecting earnings per share growing at the required 15% rate last year to trigger payments to CEO Mark Weldon under the scheme.

Costs associated with NZX's recent capital-raising and exploration of initiatives was also recorded.

Underlying operating performance continues to improve as the exchange seeks to bolster lumpy revenue streams from its traditional businesses with new revenue from its data sales and agri-business publishing ventures. Once the one-off impact of asset sales is stripped out, EBITDAF at $9.08 million was up 3% on the same period last year.

On a notional basis, NZX now projects 24% of its annual revenues from market data, 23% from agri-business, 20% from debt and equity listings, 11% from post-trade systems and services, 10% from trading, 8% from energy markets following the acquisition in the half of energy markets company M-Co, and 4% from its Smartshares funds management business.

Smartshares had a tough half, with funds under management tumbling 58% as the New Zealand Superannuation Fund took its passive portfolio management back in-house. Smartshares will no longer be reported as a separate company. Debt listings went through the roof in the first half with a record $2.87 billion raised, and $1.69 billion of equity.

"Management expects second-half listing revenue to be slightly improved on the first half, reflecting expected continued equity issuance with potential equity IPO activity in the first quarter," the NZX said in a statement.

Share trading volumes remained limp, contributing to an 8% fall in trading revenue to $2.44 million.

A less uncertain global economy was expected to lead to a slight improvement in second half trading volumes. On the basis of 21 days' trading by M-Co during the half under NZX ownership, revenues from energy trading are expected to be predictably around $4 million.

While the NZX's new clearing and settlement platform is in a testing environment and a launch date in prospect, Weldon noted that the work of the Capital Market Development Taskforce will be looking deeply at the best clearing and settlement solution for New Zealand.

The first half asset sales and equity raisings have left NZX in "a very strong financial position", with total assets at June 2009 of $147 million, compared with $47 million at the start of the financial year.

"Net cash at the end of June of $15.917 million leave NZX extremely well positioned to continue to expand its business base," Weldon said.

Businesswire.co.nz

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