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NZX more than doubles 1H profit as it focusses on cutting costs, business review

Tuesday 15th August 2017

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NZX more than doubled first-half profit though revenue dipped slightly, with operating expenses falling as it streamlined operations as it seeks to focus its business.

Net profit rose to $7.95 million in the six months ended June 30 from $3.58 million a year earlier, the market operator said in a statement. NZX sold out of its unprofitable Clear Grain Exchange and agri magazines businesses in the fourth quarter of 2016, resulting in a 3.6 percent revenue drop to $36.6 million. With that stripped out, revenue rose 1.1 percent in the first half.

Chief executive Mark Peterson, who took over the role officially in April this year having been acting chief executive since January, said it was a very encouraging result and the business had been focussed on its five-year strategic plan over the first half.

"Highlights from the first half included our SuperLife and Smartshares businesses, which experienced substantial revenue growth, while our global dairy derivatives market has become a true point of difference for NZX, and is now making a meaningful contribution to our revenue line," Peterson said. "Operating costs also reduced significantly due to the restructuring of the agri business and the absence of one-off costs. Disciplined cost control has ensured that our core cost base has been well contained."

The results of its business review are due in November, with NZX currently mulling class waivers for stocks listed on its NZAX and NXT small-cap markets as part of a likely consolidation into the main board.

Peterson said NZX was focussing on its core service, markets, as operating earnings from that division rose just 1.6 percent to $19.5 million in the first half. Results from a new dedicated listings team and from tailored trade pricing structure in its secondary market have been encouraging, he said. 

In the first half, NZX saw a 13 percent growth in fund management revenue and "very rapid growth" in dairy derivatives, resulting in revenues rising 154 percent, while reduced trading activity meant listing and trading fees dropped and agri information revenues dipped 4.1 percent.

The revenue dip was counteracted by lower operating costs, which fell 19 percent to $22 million. In the first half of 2016, NZX paid out $2.9 million in legal fees for its legal battle with the former owners of the Clear Grain Exchange. The court case ultimately resulted in what the judge described a "nil-all draw", with neither side awarded any costs.

Without that expense, the cost of the businesses it sold in 2016, and with the benefit of reduced operating costs in its fund management business, earnings before finance expenses, tax, depreciation, amortisation and gain on sale rose 34 percent to $14.5 million.

The company said it remains comfortable with its previous guidance range of ebitda of between $27 million and $30 million for the full year. It declared a 3 cent per share interim dividend, unchanged from a year earlier, payable on Sept. 15 with a Sept. 1 balance date.

The shares last traded at $1.19, and have gained 13 percent this year.


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