NZX boosts FY profit 82% on one-off Link Market sale, revenue buoyed by funds management

Wednesday 24th February 2016

NZX lifted annual profit 82 percent in 2015 as the one-off gain from the sale of its Link Market Services division bolstered flat earnings, even as revenue got a boost from the stock market operator's expanded funds management business.

Net profit rose to $23.9 million in calendar 2015, from $13.1 million a year earlier, the Wellington-based exchange said. That included an $11.8 million gain from the sale of share registry NZ Link. Earnings before interest, tax, depreciation and amortisation were unchanged at $24.6 million, on a 12 percent rise in revenue to $73.2 million. Operating expenses increased 20 percent to $48.6 million.

The company expects annual ebitda to be in the range of $22.5 million to $26.5 million in 2016, subject to market conditions and assuming no acquisitions or divestments. The exchange said it sees a relatively wide range of possible revenue outcomes in 2016, with the year off to a volatile start.

“NZX’s full year financial result is in line with expectations," said chief executive Tim Bennett. "Performance is underpinned by the execution of NZX’s funds services strategy and positive progress in capital markets development, putting more ‘products on the shelves’ including the launch of 16 new Exchange Traded Funds.”

NZX has been diversifying from its capital markets core business by expanding into funds management, buying SuperLife in December 2014 as part of a plan to roll out new ETFs which it could then offer as a low-cost KiwiSaver option. Sales in NZX's funds management business more than tripled to $10 million, reflecting a boost in earnings from the acquisition.

SuperLife contributed $6.4 million in revenue and $1.7 million in net profit for the year, NZX said. Its funds under management grew 14 percent in the year, with 22 percent growth in its Kiwisaver funds.

Based on Australia's experience with compulsory superannuation, Bennett said the local market is "at the start of a 10 to 15 year growth journey."

NZX also bought investment platform Apteryx in August for an initial consideration of $1.5 million and will make an additional payment of up to $2.5 million depending on Apteryx's performance by September this year. Apteryx contributed revenue of $700,000 and a loss of $200,000 to the group's annual results.

Revenue in its capital markets division rose 5 percent business to $39.3 million, with a significant increase in secondary capital raising activity driven by dual-listed banks, NZX said. Initial public offerings dropped away in 2015, with just four new listings.

Listed debt issuances grew 374 percent to $8.1 billion, boosted by the Local Government Funding Agency listing its six series of bonds worth a cumulative $5.6 billion.

Bennett said the company's $8 million growth in operating expenses was driven by $5 million in acquisition costs for SuperLife and Apteryx and $2.1 million from fees associated with its Ralec litigation. It is set to go to the High Court in May this year, and the company anticipates a similar level of litigation costs this year.

The shares fell 1 percent to trade at $1 this morning and are down 7.5 percent this year.

BusinessDesk.co.nz

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