NZX has delivered a strong 2011 profit result, with NPAT growing by 56%, despite the obvious challenges in the global environment. This growth has been generated off installed platforms and infrastructure and is, accordingly, characterised by low capital intensity and strong free cash flow.
“The key to the 2011 result was broad based revenue growth, expanded operating margins achieved by adding new product to scalable infrastructure, and the integrated nature of NZX’s business model,” said NZX CEO Mark Weldon.
2011 operating result
The Preliminary Full Year Result shows a significant increase in Operating Profit (EBITDAF) of 21% and Net Profit After Tax (NPAT) of 56%. Earnings Per Share grew a corresponding 57%.
“These results were delivered by a combination of strong execution against plan, balanced revenue growth and an ongoing focus on cost discipline. These core factors enabled NZX to meet its objective to deliver non capital intensive, high quality growth, as illustrated by a growing gap between the growth rates of the revenue and cost lines,” said Weldon.
Operating revenue grew 11% to $55.6 million, compared with $50.2 million in the previous year. By comparison, operating expenditure grew by just under 4% to $30.4 million. EBITDAF growth kept pace with revenue, reaching $25.2 million, compared with $20.9 million in the previous year. There has been a concurrent expansion in operating profit margins from 41.6% in 2010 to 45.3% in 2011.
This growth demonstrates that NZX has truly bedded in the integrated Information, Markets and Infrastructure (IMI) system and processes across the company.
IMI enabled NZX to leverage cross-firm expertise and, where practical, centralise skills in one location. This in turn enabled our team to drive both organic revenue growth - including revenues derived from new products - and cost efficiencies.
Particular highlights include:
Information
NZX Agri gathered momentum at the topline and improved the cost line.
Markets
NZX Markets saw both a number of significant IPOs, and a marked increase in trading activity.
NZX Dairy Futures experienced significant growth and is now firmly established as a viable market, retaining its position as the most liquid dairy futures contract globally.
NZX Clear met its second half forecast for tonnes traded on the grain exchange platform.
Infrastructure
Clearing House revenues continued to climb.
Operational performance in all Technology and Market Supervision areas was strong.
Capital return to shareholders
2011 Full Year dividend
The NZX Board has declared a 2011 dividend of 11 cents per share, in line with the existing dividend policy. The fourth instalment of the 2011 dividend is 2.75 cents per share, and will be paid on 23 March, 2012 with a record date of 9 March, 2012.
Capital return
NZX intends to return circa $32.5 to $35 million to shareholders, representing 10% of the company’s market capitalisation.
To execute this return, NZX has announced:
A 10% pro-rata compulsory share cancellation, subject to shareholder, court and IRD approval.
The return is expected to utilise NZX’s existing ASC balance, with the remainder of cancelled shares accompanied by imputation credits.
The entire return will be tax effective to shareholders.
The return is expected to take place before the end of May 2012.
More detail on the mechanics of the capital return via share cancellation is contained in the appendix to this release.
Stock split
A stock split of seven for three will be effected with the capital return.
2012 dividend
Guidance on the 2012 dividend will be announced by the Board at the 30 April, 2012 NZX Annual Meeting.
Outlook
The second half of 2011 in particular saw strong momentum across the business, which is flowing through into the first quarter of 2012. The key focus in 2012 will remain free cash flow growth.
EBITDAF margin growth rate is expected to continue at a similar rate to 2011, due to the addition of new products operated on scalable infrastructure.
On the revenue side, liquidity in the cash equities, derivatives and commodities markets is expected to continue to grow. Market data revenues are expected to improve. In addition there is further scope for revenue growth through the Fonterra Shareholders’ Market and listed Fund.
The focus on cost management will continue, with cost growth expected to be maintained at similar levels to those held in 2011.
Summary
Since becoming a public company, NZX has delivered consistent topline growth with an expanded footprint across sectors and across geographies, and has developed new markets and platforms.
“This model has shown strength across a full variety of economic, regulatory and political conditions,” said Mark Weldon.
The business model has, over time, delivered increasing yield to accompany the growth. Therefore, NZX as a stock spans the spectrum of growth and yield. It has proved to be a healthy combination for markets and shareholders alike.
ENDS