NZSE records loss, turnover drops

By NZPA

Tuesday 24th September 2002

Restructuring costs and the worldwide slump have given the Stock Exchange a $515,000 loss for the year to June 30, the New Zealand Herald reports.

The result -- which was after tax and abnormals -- was down 169 percent on the previous year's $747,000 profit.

The exchange's annual report said market turnover virtually dropped by a third to $19.3 billion from $30.3 billion the previous year.

The number of trades fell to 607,601 from 705,977.

"It's global, not a New Zealand issue," chairman Simon Allen said.

"Global economic performance combined with other major factors, including the September 11 terrorist attacks and governance issues, have led to poor performance in all major markets. "

As well, there were more retail trades this year, Mr Allen said.

These are usually lower in value than institutional trades, which is why turnover fell more than the number of trades.

The exchange had revenue of $10.3 million for the year, up from $9.3 million.

This was due mainly to more listing fee income and a greater recovery rate for market surveillance panel costs.

About 23 per cent of revenue came from listing fees, around 40 percent from transaction and membership revenues and around 24 percent from information revenue.

The year's $9.9 million expenditure bill was up from $8.1 million because more was spent on staff costs and related expenses, legal and advisory fees and market surveillance panel costs.

About 5 per cent of exchange costs were for computer and technology development, about 40 percent was for computer and technology operations and the remaining costs were "other operations", mainly related to staff and vendor costs.

These numbers left a profit before non-recurring expenses and tax of $339,999.

The $515,000 loss was reached after spending $778,000 on non-recurring expenditure -- mainly related to demutualisation -- and a tax bill of $76,000.

In the previous financial year, the exchange received a tax credit.

Mr Allen estimated that by the time the exchange demutualises -- if members approve the move -- the process will have cost around $3 million.

Some of this will be recouped through a $7500-a-member levy.

Members' funds fell from $7 million to $6.5 million after accounting for the $515,000 deficit.

Mr Allen said higher staff costs reflected an increase in staff numbers and redundancy payments.

He said the higher cost was not because new chief executive Mark Weldon came at a high price.

Mr Weldon had started work on June 4 so the accounts reflected only a couple of weeks of his salary.

Since Mr Weldon was appointed, the exchange has been moving rapidly to tighten its regulatory environment and attract new listings:

* The New Capital Market is to be abolished, the exchange is withdrawing support for the so-called unlisted market and a junior board is to be established.

* The exchange is working towards demutualisation.

* The internal structure is being changed to make it more focused on the customer.

* Listing rules are being toughened.

* The exchange is devising ways of attracting new listings and investors.

In the annual report, Mr Weldon said he was appointed to create and implement plans to enable the capital markets to lead the economy into and through a new growth phase.

"It's well known that New Zealand has among the lowest proportion of listed equity to GDP among the OECD countries," he said.

Some of the measures required to address this were a revamped market structure, development of a liquid derivatives and options market, upgrading the infrastructure and technology, a marketing, education and communications strategy, customer relations and market development, and a sound legal and regulatory framework.

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