ASX Announces A Record First-Half Profit After Tax

• Record 1st half profit of $28.3 million
• Record 1st half revenue of $99.65 million
• Earnings of 29.2 cents per share (pre goodwill)
• Fully franked interim dividend of 19.5 cents per share
• Strategic initiatives implemented.

Australian Stock Exchange (ASX) today announced an operating profit after tax of $28.3 million, an increase of 4% on the $27.1 million recorded for the previous corresponding period.

The directors have declared a fully franked interim dividend of 19.5 cents per share. This compares with the dividend of 16.5 cents per share paid during the previous six months, which is the only previous dividend paid at 70% of profit after tax.

The profit for the period was achieved on record first-half revenues of $99.65 million, 4.3% higher than the $95.53 million recorded for the previous corresponding period and due primarily to the increase in market activity.

Commenting on the results, ASX Managing Director, Mr Richard Humphry, said: "The first half of 2001/02 has been an intensely challenging period for exchanges throughout the world. It is very satisfying to produce such strong performance in light of the difficult circumstances.

"During the period we have implemented many significant initiatives for the longer-term growth of our business. For the past 12-18 months we have been focused on implementing large project infrastructure with ASX World Link, the ASX Perpetual registry system, and most recently ASX futures. It is a great accomplishment to achieve the successful implementation of all of those efforts while sustaining such strong performance and containing costs in our core business," he said.

Operational performance

• Revenue from equities trading, clearing and settlement increased by 6.4% to $45.15 million, due to an increase in the average number of trades per day to 52,846 from 50,900.
• Revenue from listings was $16.90 million ($17.62 million for the previous corresponding period). While there were fewer new listings, fees from secondary capital raised by existing listed companies partially offset the fall in new listings. In total there were 43 new listings compared with 102 for the previous corresponding period, however the total number of listed companies rose to 1,489 at 31 December 2001, compared with 1,470 at 31 December 2000.
• Market Data revenue was $14.88 million, down 13.5% from $17.21 million in the previous corresponding period. A generally weaker business environment with lower demand for data and information services contributed to this fall in revenue.
• Revenue from derivatives trading, clearing and settlement was $18.28 million compared with $13.95 million for the previous corresponding period, an increase of 31%. Daily average option contracts traded were 53,383 compared with 37,800 for the previous corresponding period, an increase of 41%.

  The warrants market grew strongly with 901 new series listed compared with 396 for the previous corresponding period. This brought total numbers to 1,071 at 31 December 2001, compared with 646 at 31 December 2000. There has also been substantial increase in warrants trading activity. Daily average warrants trades were 1,950 compared with 865 in the previous corresponding period.

• Total operating expenses for the period increased by 8.1% to $63.26 million from $58.52 million. However, the previous corresponding period did not include any expenses associated with Orient Capital, which contributed $1.4 million of expenses (fully offset by revenue) during the six months to 31 December 2001. The increase in costs is 5.7% excluding this effect.

  The increased cost base reflects the staff expenses associated with project implementation, including efforts directed towards ASX futures, ETFS, ASX World Link, ASX Supervisory Review, and ensuring compliance with the Financial Services Reform Act and the Privacy Act. Costs for the six months to 31 December 2001 also include approximately $1 million for staff redundancy, including some executive positions. Discretionary expenditure has been severely curtailed and recruitment is subject to stringent control including approval by the Managing Director. In addition, capital expenditure has fallen from $16.3 million in the previous corresponding period, to $5.5 million, following an intensive period of project development aimed at diversifying future revenue streams. This significant reduction is expected to be sustained for the remainder of the financial year.

ASX had a number of significant projects to implement during the period. These include:

• On 1 July 2001, stamp duty on share transactions was abolished following extensive efforts by ASX with both the Federal and State Governments.
• During July, ASX listed four actively managed funds under its Listed Funds Exchange (LIFE) initiative. The four funds, listed by Access BNP, enhance the range of products available to investors through ASX markets.
• In August, ASX launched a framework for listing the internationally popular Exchange Traded Funds (ETFs). At 31 December 2001, funds under management in the two State Street Global Advisers' products (SFY, STW) were $370 million compared with $82 million at the time of listing. During the same period, total market turnover had exceeded $630 million, representing liquidity of more than 200% of average capitalisation.
• In September, ASX announced its intention to provide transaction processing services for unlisted managed funds. The ASX FundConnect concept was launched to the industry in December 2001, with the intention of developing detailed design specifications and seeking industry support for the service by the end of this financial year.
• In October, ASX received regulatory confirmation of its license to trade, clear and settle futures contracts. ASX's first contracts, the ASX Mini5O and the ASX Mini200 began trading on 30 January 2002.
• In December, ASX launched a world-first co-trading link with Singapore Exchange (SGX). This launch marked the first time exchanges had linked to allow two-way cross-border trading, and extends the ASX World Link service which was previously limited to one-way trading into US markets (NYSE, NASDAQ and AMEX).

  The ASX and SGX link enables direct access for Australian brokers and their clients to 50 of the top SGX-listed companies through ASX's new multi-market trader workstation (MTW). The platform utilises ASX's own private trading network and routes orders directly to the central electronic order book of the SGX market. ASX also acts as settlement agent for the transactions executed in Singapore and custodian for Singapore securities held by Australian investors.

• During November and December, ASX's joint venture with Perpetual Trustees, ASX Perpetual Registrars Limited, successfully migrated the registers of all its 180 customers to the new system 'oscar' (online shareholder communication and registry system).

  This achievement followed the system design and build that was undertaken by ASX for the joint venture. The migration process involved the transfer of approximately 7 million shareholder accounts to the new system and was achieved with full system availability and integrity. John McMurtrie was appointed Managing Director of the joint venture on 14 January 2002. In addition, the largest register in Australia, Telstra Corporation Limited, has extended its contract with ASX Perpetual for a further three years.

  Since the end of the period, Qantas Airways Limited (QAN) has appointed ASX Perpetual Registrars Limited to manage its share register and provide shareholder services. This will bring an additional 160,000 shareholder accounts to ASX Perpetual, including more than 28,000 Qantas employee shareholders. The Qantas share register was successfully transferred to ASX Perpetual with effect from 25 February 2002.

• Experienced strong trading activity across equities and derivatives markets. The January 2002 daily averages for equities trades and options contracts were 16.9% and 30.6% higher respectively than for the same month last year. The average daily trading activity for February 2002 to date has been 64,672 for equities, and 65,272 for options, which is 29.8% and 18.2% higher than for the same month last year. February 2002 has been a record month with turnover value in equities exceeding $48 billion so far.
• Commenced trading its equity index futures contracts, the ASX Mini50 and ASX Mini200.
• Addressed the final sitting of the Senate Economics Reference Committee inquiry into the market supervision of Australia's stock exchanges.

  The Committee report, released in February 2002 cited significant advantages in the current framework where ASX acts as both market operator and front-line regulator. The Committee also endorsed ASX's initiative in forming ASX Supervisory Review (ASXSR) in September 2000 to enhance the transparency and accountability of ASX's supervisory activities.

  ASXSR is chaired by Mr David Hoare, and will report annually on the suitability of ASX's supervisory arrangements, including an opinion on whether adequate funding and other resources have been provided for supervision. ASXSR will also review ASX's management of potential conflicts of interest, for example where ASX supervises other listed companies with which it potentially competes or has commercial alliances.

Commenting on the company's outlook, Mr Humphry said: "Although present revenue remains closely tied to the overall level of market activity, we have developed new product to assist with the recent and future growth of our business. While we can't be certain about future levels of market activity, it is encouraging to see the continued strong growth in activity across all market products, with January and February well above the levels of last year.

"The second half of the year will bring close attention to our implemented initiatives, and their ability to perform. On that front, the early indicators are good for all our new products, including ETFS, equity futures products, ASX World Link, ASX Perpetual registrars, and the work being done on ASX FundConnect."