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NZX 1H earnings fall as it rejigs business for growth; special dividend declared

Wednesday 15th August 2018

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NZX first-half earnings fell as it lifted spending as part of a plan to position itself for future growth. It will return cash from the sale of non-core assets to shareholders as a special dividend.

Operating earnings from continuing operations fell 5.1 percent to $13.2 million in the six months ended June 30, the Wellington-based company said in a statement. Operating revenue advanced 2 percent to $33.4 million while operating expenses increased 7.3 percent to $20.2 million.

For the stock market operator, 2018 sets the platform for future growth as it embarks on a five-year strategy to revive its capital markets with new listing rules, an updated fee structure, a broader suite of products, deeper links with global bourses, and a stronger focus on its dairy derivatives market. In the past six months it divested non-core businesses including Farmers Weekly, AgriHQ and the Australian-based Grain Information Unit, with proceeds to be paid out to shareholders as a special 1.5 cent per share dividend. 

"Six months into the delivery of our five-year strategy we have advanced the business materially," said chief executive Mark Peterson. "We have divested our non-core businesses, improved the exchange’s customer service and business efficiency, increased liquidity in the secondary market, and progressed plans to simplify the New Zealand market’s structure and rule set.

"We are pleased with progress being made across the key strategic areas fundamental to our future growth."

Peterson reiterated that the company expects full-year operating earnings of between $28 million and $31 million, largely flat from last year's $29 million.

He attributed the higher expenses in the first half to targeted investments in marketing, cyber security and the dairy derivatives market, one-off staff related costs, and expenditure which was driven by the growth in funds under management. 

Meanwhile, the revenue growth was driven by strong growth in trading and clearing fees and funds management revenues, he said.

The exchange’s global dairy derivatives market traded its millionth lot in May, which it noted as a significant milestone in the market’s journey towards maturity. The dairy market gained additional trading functionality in March, its trading hours were extended in July, and new records continue to be set for volumes traded. It plans to translate the website to Mandarin in the second half.

NZX said it has expanded its dividend policy to pay between 80 percent to 110 percent of adjusted net profit after tax over time, subject to maintaining a prudent level of capital to meet regulatory requirements. As well as the special dividend announced today, the NZX will pay a 3 cent interim dividend on Sept. 14, unchanged from the year earlier level, and will offer a dividend reinvestment plan for both dividends at a 2.5 percent discount.

The company's net profit after tax fell to $4.41 million in the first half, from $7.95 million in the year-earlier period, impacted by a $2.89 million write down in the value of agri businesses it sold. 

Its shares last traded at $1.09 and have fallen 9.2 percent over the past year.


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