NZX doubles first half profit despite derth of new listings

NZX chief executive Mark Peterson. Picture/NZ Herald.

A stranglehold on costs combined with substantial growth in its exchange traded funds business helped stock exchange operator NZX more than double its net profit to $7.95 million in the first half to June 30, despite a subdued period for new sharemarket listings.

NZX's earnings before interest, tax, depreciation and amortisation (ebitda) rose by 34.4 per cent to $14.5m, mostly reflecting an 18.7 per cent fall in operating expenses, it said.

The company sold out of its unprofitable Clear Grain Exchange and agri magazines businesses in the fourth quarter of 2016, resulting in a 3.6 per cent drop in revenue to $36.6m. However, with that stripped out, revenue rose 1.1 per cent in the first half.

NZX reaffirmed that it expects full year 2017 ebitda to be within a range of $27m to $30m, which would be a 20 to 33 per cent improvement on last year's ebitda of $22.5m.

The company declared a 3c per share interim dividend, unchanged from a year earlier.

"This result was achieved despite a relatively subdued capital raising environment, with funds management the standout performer," NZX chief executive Mark Peterson said.

"Over the past six months we have been focused on improving business performance, market development, and creating a refreshed five-year strategic plan, which will strengthen our commercial position as we tighten our focus on capital and cost effectiveness."

Salt Funds managing director Matthew Goodson said NZX had made inroads into its expenses, which had in the past been a problem, and that the result reflected the exit of some non-core businesses.

"It's a cleaner vehicle now as an exchange operator," he said.

NZX said there had been substantial growth in its SuperLife superannuation business, and in its exchange traded funds (ETF) business, Smartshares.

Smartshares had enjoyed record growth, with application numbers in the first half up 100 per cent against the previous corresponding period.

The company's global dairy derivatives business was also making a meaningful contribution to its revenue line.

Operating expenses fell due to the absence of costs associated with the Ralec litigation, and the sale of some businesses. In the first half of 2016, NZX paid $2.9m in legal fees for its legal battle with Ralec - former owners of the Clear Grain Exchange.

The court case ultimately resulted in what the judge described as a "nil-all draw", with neither side awarded any costs.

NZX hit the headlines at the company's annual meeting in June, when Auckland businessman and vocal NZX-critic Tony Falkenstein failed to make it onto the NZX board.

Earlier that month, NZX said it was looking at shutting down the NXT and NZAX junior exchanges with a view to folding them into its main equity exchange. Falkenstein had long argued that NXT had stifled the flow of new floats by small businesses onto the public market.

Results of NZX's business review are due in November.

NZX shares closed up 1c at $1.20 yesterday, and have gained 16.5 per cent over the last 12 months.

- additional reporting BusinessDesk