NZX Group has today released a financial result showing NPAT up 20% to $7.80 million year to date.
NZX CEO, Mark Weldon said, "NZX has changed the shape of the business ahead of the need to do so. NZX has spent the last three years planning and seeding these options and as a result we are in good shape to meet the challenges market conditions are throwing at us.
"Both organically and via investment we have opened up business lines that, while highly scalable and utilising the same core asset base and skills, are not directly impacted by the market environment. NZX will continue to invest for growth.
"The result today reinforces both the strategy and the strength of NZX’s businesses," said Weldon.
I. NZX Group - Q3 2008 Financial Result Summary
Revenue Growth
- NZX has achieved revenue growth of 4% during an extended period of market volatility.
Cost Management
- NZX continues to focus intensely on cost management. Through disciplined cost management NZX has achieved a reduction in Group operating expenses of 3%, despite the addition of TZ1 costs (at 10% of total costs).
Profitability
- The scalability of the business is evidenced by EBITDA growth of 12% and NPAT growth of 20% versus the comparable prior period.
| 2008 | vs 2007 | |
|---|---|---|
| Operating Revenue | $24.04 million | 4% |
| Operating Expenses | $11.61 million | -3% |
| EBITDA | $12.43 million | 12% |
| NPAT | $7.80 million | 20% |
| Fully Diluted EPS | 31.69c | 17% |
II. NZX Markets Business - Q3 2008 Financial Result
- Total NZX Markets operating revenue grew to $22.26 million from $20.97 million in 2007, an increase of 6%.
- The Data business generated $8.81 million in revenue, an increase of 15% on 2007. Real-time data terminal numbers have not been significantly impacted to date by the global credit crisis environment, but are being monitored closely on an ongoing basis.
- Total listings revenue was $6.36 million, a 4% decrease on 2007.
- Trading, clearing and settlement revenue was 6% less than 2007 at $3.46 million.
Major work continues toward the development of a new Clearing and Settlement system to upgrade the capital market risk management infrastructure, and enable futures and commodities to be traded on market. In Q3, a beta test version of the TCS BaNCS system was released to existing NZX Market Participants. The derivatives team is working with customers and key stakeholders on product planning and development. These groups are focused on equity options, carbon, equity and milk powder derivatives. The launch of these new products to market will occur in a phased approach over 2009.
III. NZX Subsidiaries and Strategic Investments
A. SUBSIDIARIES
Smartshares
- EBITDA was $621,000, a 10% increase on the same period in 2007.
- Smartshares finished Q3 2008 with $655 million in funds under management, an 11% increase on the same period in 2007.
While Smartshares unitholder numbers have held up well over the year, the current market environment has affected Smartshares’ growth in funds under management and management fees. However, as a manager of passive index products, Smartshares is well placed to capture the upturn as conditions improve. Smartshares is continuing to examine ways of improving productivity and efficiency of the funds.
TZ1
During the third quarter 12 new customers signed on to the TZ1 Registry from around the world, including Australia, US, and the UK. TZ1 was also selected as the registry for the world's first commercial rainforest biodiversity conservation project. TZ1 expects to sign a similar number of customers in Q4 2008. Annualised revenue from the customers signed in Q3 this year is expected to be around $400,000.
With the passing of the New Zealand emissions trading scheme (ETS) legislation in September, there is now a strong impetus for the carbon market to develop in New Zealand. As the only domestic ETS outside Europe, and with units issued and surrendered under the NZETS being globally interchangeable under the Kyoto Protocol, TZ1 is well placed to generate a market in these units. There has been a great deal of interest from overseas companies in participating in the market operated by TZ1.
TZ1 is now focused on capital raising.
B. STRATEGIC INVESTMENTS
Link Market Services
- Link continued to have a steady performance, with a year-to-date EBITDA result of $819,000 versus $625,000 last year.
- To date this year Link has returned $800,000 to its shareholders through the redemption of preference shares.
NPAT to date is $246,000 versus $56,000 for the same time last year.
AXE ECN
Events in both the global and Australian financial landscape have led to widespread regulatory uncertainty. The Australian government may conduct a comprehensive review of the capital market regulatory framework in Australia. While such a review will unavoidably delay launch further, it should enable AXE to function in a robust and stable regulatory environment when the AML is granted and AXE is fully operational.
Appello Services
Appello has made progress in signing up New Zealand-based fund managers to its services in 2008. Revenue is ahead of 2008/09 projections. Planned investment in technology and infrastructure has been brought forward to meet higher than anticipated demand for services from fund managers.
Revenue in 2009 will be derived primarily from KiwiSaver funds and single class (including cash) PIEs, as well as extension of services to fund managers through the additional capabilities of the unit registry platform, especially web-enablement, customer relationship management, workflow automation and business intelligence reporting.
Bond Exchange of South Africa (BESA)
In early October, NZX made a $5.57 million investment in the Bond Exchange of South Africa (BESA), an independent, licensed exchange operating in the South African capital market.
NZX is now the largest BESA shareholder, with 22% of the total issued capital and two seats on the BESA board. The capital raised in the rights issue was sourced from existing shareholders, with Investec Bank and Standard Bank substantially increasing their stake and NZX, as an underwriter of the issue, coming on board as a cornerstone investor.
This is a strategic investment for NZX in an established business with existing cash flow that has just demutualised and is currently at break-even levels. NZX demutualised in 2002 and has successfully transformed from a mutual organisation into a profitable business with diversified, quality revenue streams and steadily growing margins. NZX has experience in many of the core competencies which will assist BESA to generate similar growth in returns.
A further detailed update on BESA, including opportunities for BESA as a business and for NZX as a shareholder, will be released to the market next week.
Download Statements of Financial Performance and NZX Operating Metrics Q3 2008 here.
