Strong first half in 2008 for NZX - NPAT up 18%
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NZX Limited (NZX) | 8:32 am, Thursday 24 July 2008 | NZX | 5.500 |
 -0.100 |
(-1.79%) |
Reporting Period 6 months to 30 June 2008
Previous Reporting Period 6 months to 30 June 2007
Amounts (000s) Percentage change
Operating Revenue NZ$ 15,934, 6% increase
Net profit attributable to shareholders
NZ$ 4,970 18% increase
No interim dividend will be paid
Record Date Not applicable
Dividend Payment Date Not applicable
24 July 2008 - NZX Group has released a strong half year 2008 financial
result showing NPAT up 18%. While market conditions have been difficult for
the first half of 2008, this result demonstrates the underlying strength and
diversity of the NZX's businesses.
NZX CEO Mark Weldon said, "This result is a continuation of the consistently
strong results that NZX has achieved in the five years since listing. This
period's result reflects our strategy to structure NZX business lines in such
a way as to minimise the impact of negative cyclical market conditions."
%
Change PCP
Operating Revenue $15.934 million 6%
Operating Expenses $7.927 million 0%
EBITDA $8.007 million 12%
EBITDA Margin 50% 6%
NPAT $4.970 million 18%
NPAT Margin 31% 12%
Fully Diluted EPS 20.26 cents 14%
Continued revenue growth from the market information business
The NZX Market Information business has again delivered strong growth.
Despite the challenging global markets environment and the high New Zealand
dollar, we have still seen strong growth in the number of data distributor
partners, with a 16% increase in data terminal numbers on the same period
last year. NZX's acquired data businesses have also grown both revenues and
margins.
Cost management and productivity
Total NZX operating expenditure is flat compared with the previous
corresponding period. NZX has invested, and will continue to invest, in
productivity improvements across all operations.
Subsidiaries and investments largely on track
In June TZ1 announced that it had been appointed as a global registry for the
Voluntary Carbon Standard. TZ1 has now signed up its first registry
customers, and is tracking to plan. Similarly, Appello, a funds management
administration business of which NZX owns 30%, has successfully signed up
some significant customers. Link has generated another improved performance
in a challenging environment, while Smartshares has seen continued unit
growth over the first half in the passive funds area. While AXE ECN is still
going through the approvals process in Canberra, expectations remain strong
that a licence will be granted and that operations will commence in 2008.
Investment to continue
NZX retains a significant investment focus. As well as the acquisition of
Dairy Week, NZX has considerable resource engaged in the development of its
new Clearing and Settlement system. Expected to launch toward the end of Q1
2009, the new Clearing House will be a stand-alone business that will look to
compete with Austraclear for settlement and CSD business. The Clearing House
will also enable exchange-traded futures, options, and commodities to be
transacted. Several NZX Participants are making human capital investments to
enable products such as equity options and dairy-focused commodity contracts
to be successful.
Going forward NZX will continue to invest, with a particular focus on adding
scale to its traded product set, growing its Australasian data footprint, and
gaining exposure to new international markets in areas where NZX has
established skills and platforms.
II. NZX Markets Business
Financial performance first half 2008
-Total NZX Markets operating revenue grew to $14.75 million from $13.60
million in 2007, an increase of 8%.
-The NZX Data business generated $5.77 million in revenue, an increase of 20%
on 2007. The key driver was continued growth in demand for NZX Market
Information with the number of real time terminals worldwide up 16% on 2007.
-Total listings revenue was $4.19 million, a 3% decrease on 2007.
-Trading, clearing and settlement revenue was down 7% on 2007 at $2.26
million, reflecting average daily trades down 7% at 2,347 trades compared
with 2,512 trades in 2007.
Future outlook
Overall, market conditions are expected to continue to impact listings,
trading and clearing and settlement revenues. Annual listing fees, which are
based on market capitalisation and index inclusion, will be negatively
impacted in the second half of 2008. The global credit crunch, and its impact
on global bank employment numbers, may impact NZX data sales. However, were
the recent slight fall in the NZ dollar versus the US dollar to continue,
there would be a positive impact on revenues.
From 2009 onwards, the new Clearing and Settlement system will decrease
capital requirements for Market Participants and reduce the level of
financial risk in the Clearing and Settlement system. Importantly, it will
broaden the range of investment products available to investors and build the
liquidity of underlying equities. NZX announced this week it will use the
Swiftnet FIN network for clearing and settlement messaging. New Zealand will
become the first market in Asia Pacific to have all its domestic payment and
securities market infrastructures accessible via Swift's international
standards. Additionally, Swift will enable TZ1 to provide straight-through
processing (STP) services to financial institutions around the world and
interface with commercial banks for a variety of currencies to allow DvP
settlement of emissions contracts.
Increasing the liquidity of the NZX Markets has been front of mind for NZX in
developing the new market infrastructure. Market making, short selling and
stock lending are additional liquidity initiatives in progress.
In the second half of 2008 NZX will focus on productivity enhancements and
continue to pursue the strategic acquisition of bolt-on data businesses both
locally and in Australia.
III. NZX Subsidiaries and Strategic Investments
SUBSIDIARIES
Smartshares
Financial performance first half 2008
-EBITDA was $320,000, a 30% decrease on the first half of 2007 but a
normalised 4% increase over the first half 2007 EBITDA results. 2007 EBITDA
included an accounting adjustment to revenue of $147,000.
-Smartshares finished the first half of 2008 with $685 million in funds
under management, compared with $592 million in 2007.
Future outlook
Smartshares unit-holder numbers and funds under management (FUM) have
remained solid despite market conditions. Smartshares continues to look at
ways of promoting Smartkiwi to investors who are looking for a low cost,
transparent vehicle for their retirement savings. Smartshares is developing
the online functionality for Smartkiwi in the second half of 2008.
The investment market environment continues to challenge Smartshares and its
ability to grow FUM, however as a manager of passive index products
Smartshares is well placed to capture any upturn as conditions improve.
TZ1
First half 2008 and future outlook
The focus for TZ1 first half 2008 has been on the launch of the TZ1 Registry,
and executing an international customer engagement strategy. TZ1 was
appointed as one of four global Voluntary Carbon Standard (VCS) Registries in
early July. TZ1 has built a key registry asset, a business line that is not
contingent on New Zealand or a domestic Emissions Trading Scheme (ETS). For
participation in the worldwide voluntary carbon market to grow, true
financial market registry infrastructure is critical.
Registries play a critical role in carbon markets. The TZ1 registry
infrastructure is world-class and provides the technology and transparency
needed for the voluntary market to enter its next phase of development.
The voluntary carbon market is in a major growth phase, with both issuance of
carbon credits and trade numbers growing strongly year on year.
STRATEGIC INVESTMENTS
Link
Financial performance first half 2008
-Link had a steady first half despite market conditions and an absence of new
listings with an EBITDA result of $509,000 versus $505,000 in 2007.
-Link continues to return capital to NZX by way of redemption of preference
shares.
The capital return to NZX in the first half of 2008 was $300,000.
-NPAT was a strong $170,110 compared with $24,600 in the same period in 2007.
Future outlook
Client-focused technology features were released in the first half of 2008,
continuing Link's strong focus on innovative services in the registry space.
Link's focus over the next six months is NPAT growth through productivity
enhancement.
AXE
First half 2008 and future outlook
AXE ECN is in the final stages of acquiring an Australian Market Licence
(AML) with a decision from Canberra pending.
Appello
First half 2008 and future outlook
Appello Services Limited is a new company established in response to the
increasingly complex technology needs of fund managers, primarily as a result
of Portfolio Investment Entity (PIE) and KiwiSaver developments. Appello
provides fully electronic administrative, productivity and compliance
services for New Zealand fund managers and is able to support all managed
funds including KiwiSaver funds and PIEs.
The PIE-compliant platform was implemented in April and is now operational
and working efficiently. Within three months of initiation of operations, a
total of 11 fund managers are now using the platform with more than $1.5
billion in funds under management on the Appello platform. Revenues are well
ahead of business plan, with an accompanying increase in expenses associated
with increased activity.
NZX acquired a 30% shareholding in Appello in November 2007.
IV. Capital Expenditure and Management
As in previous years, NZX will not pay an interim dividend in 2008.
In this period NZX has capitalised personnel costs that directly relate to
the Clearing and Settlement system and TZ1 Registry capital projects.
ENDS
* - This announcement and accompanying Half Year Report meet the Appendix One
requirements for a Half Year result preliminary announcement under Listing
Rule 10.4.1.
For more information please contact:
Lucy McFadden
Media & Investor Relations
NZX Limited
lucy.mcfadden@nzx.com
Direct Line: +64 4 496 2890
Mobile: 027 512 7832
