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NZX emphasises diversity of business

Monday 28th February 2011

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NZX is emphasising the diversity of its business, while saying the outlook for new listings on its traditional capital markets transaction business that now provides less than 5% of revenue looks the best since 2004.

"We are not losing focus on equities, but we have become a much more diverse business," Fiona Mackenzie, NZX head of markets, said.

Chief executive Mark Weldon said equities trading was "a deep part of our DNA", and a business with potential on the upside as private equity was a less viable channel for raising capital since the global financial crisis.

Mackenzie said there were two new listings in the first quarter of this year and six companies presenting at an investor day next month were potential new listings.

Companies presenting include Phil and Ted's, MasterPet, Imarda, Jucy, Martin Aircraft and Opus Printing Group.

"What is going on in listings is pretty interesting," she said.

NZX today reported a 17% rise in revenue to $50.2 million in 2010 from a year earlier, and a 19% rise in ebitdaf (earnings before interest, tax, depreciation, amortisation, and financial instruments) to $20.9 million.

Bottom line profit fell 76% to $9.3 million, with 2009 having included the proceeds of asset sales.

A final dividend of 6.25 cents per share will be paid on April 29, while an interim dividend of 3.73 cents per share was paid on October 29, 2010. From June 2011, NZX's dividend will be paid quarterly, providing more consistent cash flow to shareholders.

The company reiterated that its strong cashflows would see the dividend rise by at least a cent a share for the next three years.

Weldon said NZX was "situated quite differently" to other exchanges merging with each other because it had diversified its business.

Exchange mergers were "corporate deals that are driven by cost reductions". They were seeking to run larger footprints off a fixed cost base, he said.

NZX has developed a clearing house, a derivatives market, an agricultural data and markets business and other investments. It is signalling the development of equity derivatives products after developing a dairy product.

NZX was a "soft commodity story as well as a traditional capital markets story", Weldon said.

"This is a business with a little downside risk and a business that has invested a lot of capital and expects to harvest meaningful cashflow return from those businesses in the next two to three years," he said.

Transaction revenue from the equity market was now less than 5% of revenue, down from 35% to 45% around a decade ago.

The company is signalling 10 to 12% revenue growth in 2011, noting that the third and fourth quarters of 2010 were "strong and stronger again".

NZX said the result was delivered against a backdrop of difficult market conditions, with contributions to the result having come from across the entire business, but most notably in the areas of agricultural information, clearing house participation, technology contracts and new product development.



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