NZX's Half Year 2012 Operating Metrics, accompanying this release, highlight the impact of a decline in capital markets activity during the second quarter. This trend is similar to the decline witnessed in offshore markets.
As is apparent from the NZX Operating Metrics released monthly, whilst equities trading volumes continue to be higher than the previous year, value traded has declined by 12.4% in the second quarter over the same period last year consistent with trends seen in offshore markets. Derivatives and commodities trading continue
to show strong growth.
Listings and secondary capital raisings are down significantly on the same period last year.
Whilst revenues in NZX's Information businesses have grown relative to 2011, the strong uplift in Q1 2012 has pegged back in Q2. This is both a consequence of
lower seasonal activity and a more cautious setting in the rural economy.
Preliminary unaudited estimates indicate low single digit growth in total NZX revenues for 1H 2012 over 1H 2011.
Preliminary unaudited estimates indicate an increase in total NZX expenses of approximately $2 to 3 million in 1H 2012 versus the corresponding period last year. Approximately two-thirds of this increase is associated with the CEO transition, the Clear Grain litigation and a number of non-recurring items. The remainder reflects a reduction in the level of capitalisation of project costs in 1H 2012 versus the prior corresponding period, due to a reduction in the size of projects under development.
Based on preliminary unaudited estimates, EBITDAF for the 1H 2012 is estimated to be between $9 and $10 million. Including the negative foreign exchange impact resulting from settlement of the Markit transaction of approximately $1.6 million, the preliminary unaudited estimated NPAT for 1H 2012 is between $3 to $4 million.
The outlook for 2H 2012 combines a traditionally stronger second half for NZX's businesses with some significant market developments against the backdrop of a challenging global economic environment.
Secondary issuance has picked up in July, and the anticipated start of the MOM programme and the launch of Trading Amongst Farmers should underpin increased listing and trading revenues.
The medium-term outlook for the business remains strong. The launch of equity derivatives is planned for the first half of next year. NZX also plans to launch a series of growth initiatives over the coming months to further strengthen our global position in dairy derivatives and improve liquidity in the equity market. Resources will also be invested in initiatives designed to increase the attractiveness of listing for small and medium-size companies seeking capital for growth.
To support these growth opportunities, expenses are expected to increase by a moderate amount in the second half of 2012 on a year on year basis (excluding costs associated with the trading system upgrade, Clear Grain litigation and the launch of TAF).
A more detailed outlook will be provided with the first half results that are scheduled for release on 20 August.