NZX confirms slump in 1H profit; Agri information stands out as bright spot

Monday 20th August 2012

NZX, New Zealand's stock market operator, posted a 28 percent drop in first-half profit as revenue growth stalled and expenses rose, squeezing its earnings margin.

Profit was $3.25 million in the six months ended June 30, from $4.5 million a year earlier, the Wellington-based company said in a statement. Operating revenue rose 1 percent to $26.5 million.

The first-half results confirm NZX's Agri information unit as the biggest source of revenue, growing 8 percent to $6.2 million in the latest period, driven by growth in subscriptions, while advertising revenue was little changed at $3.76 million. The company expects subscription growth to continue in the second half, when it typically enjoys the benefit of a seasonal pickup.

The results are the first for new chief executive Tim Bennett, who described them as "a solid performance in challenging global conditions." Overall, though, "tighter than expected trading conditions in the second quarter are expected to continue into the second half of the year," he said.

NZX first flagged the earnings slump on July 30, highlighting a jump in expenses including one-time CEO transition costs, the costs of the Ralec litigation related to the Grain Exchange and about $2 million in other one-time costs.

That drove a 17 percent gain in first-half expenses to $16.9 million and resulted in the earnings before interest, tax, depreciation and amortisation margin shrinking to 36.1 percent from 44.6 percent.

Total revenue from information sales rose 5 percent to $10.8 million, making that the largest part of the business. Revenue from markets, including listings and trading, fell 2 percent to $9.7 million. Infrastructure sales, which are made up of securities clearing and market operations, rose 1 percent to $6 million.

Listings sales tumbled 23 percent to $4.1 million, reflecting zero IPO activity in the second quarter and lower secondary listings. Securities trading sales rose 30 percent to $1.56 million and revenue from commodities trading jumped 101 percent to $1.17 million.

NZX said global uncertainties are likely to persist in the second half, with trading volumes flat or declining and capital raising "below historic averages. Securities information revenue would be flat, with agri information growing at a slower pace.

The company cited "some upside in listings" with the potential IPO of Mighty River Power and the Fonterra farmers' shareholder fund in the fourth quarter.

The company will pay a second-quarter dividend of 1.25 cents a share on Sept. 14 to shareholders on the register as at Aug. 31.

Shares of NZX were unchanged at $1.14 and have gained 16 percent this year. The stock is rated a 'hold' based on the consensus of 3 recommendations compiled by Reuters with a price target of $2.54

BusinessDesk.co.nz

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