NZX Announces Preliminary 2004 Results

Summary

Operating EBITDA (excluding non-recurring expenditure): $6.0 million, versus $3.6 million in 2003, an increase of 69%.
Total revenue: $18.1 million, versus $13.7 million in 2003, an increase of 32.1%.
Operating expenses (excluding non-recurring): $10.5 million, versus $9.1 million in 2003, an increase of 15.3%.
NPAT: $3.7 million, versus $2.9 million in 2003, an increase of 24.9%.
New investments: $4.1 million, in Smartshares and Link Market Services.
Included in the total revenue is $1.7 million of interest revenue.
A special, fully imputed dividend of $.40 per share will be paid in April.

Performance

New Zealand Exchange Limited (NZX) today announced a full year operating EBITDA result of $6.0 million. This represents a 69% increase on the $3.6 million EBITDA result recorded the previous year.

This result was achieved on operating revenue of $16.5 million, excluding interest revenue of $1.7 million, representing an increase of 30.4% on the previous full year result.

“NZX's core market operations business benefited from strong market conditions. This was reflected in increased listings, IPOs, transactions and consumption of market data. NZX had the second highest percentage increase in new listings for any exchange in the world.

“Total market capitalisation of listed companies increased by $11 billion, whilst the value traded increased to $28 billion, compared with $22 billion the previous year,” said NZX CEO Mark Weldon.

“In 2005 we expect to see our investments in Smartshares and the joint venture registry business Link Market Services contributing to further revenue growth. These, and other investments in NZX's portfolio, mean NZX is well positioned to deliver diversified shareholder value and growth in the future,” said Weldon.

“NZX has delivered a strong performance in a healthy market. Even more significant from a shareholder viewpoint is the level of sound, strategic investment NZX has made in order to grow revenue from new businesses. This will place NZX in a strong position to grow independently of core market performance indicators going forward,” said NZX Chairman Simon Allen.

Financial Details

Revenue: Total group revenue was $18.1 million, an increase of 32.1% versus $13.7 million in 2003.

Listing revenue was $5.8 million, a 31.1% increase over the 2003 result. The increase was driven by the addition of new listings (40 compared with 25 in 2003) and a pricing change implemented in July 2004.
Trading, Clearing and Settlement revenue was $4.3 million, a 31% increase on 2003. Total transactions increased 6.8% versus 2003.
Market Information revenue was $2.8 million, a 22.1% increase on 2003.

Expenditure: Group operating expenses reached $10.5 million, an increase of 15.3% driven primarily by an increase in staff.

Group staff costs, including salaries and training, was $5.7 million, an increase of $1.3 million on 2003. Total staff numbers reached 59 at year end, up from 45 at year end 2003.
Operating expenditure - excluding subsidiaries, staff costs and non-recurring expenditure - was $4.3 million in 2004, a decrease of $300,000 versus 2003.

Investments and non-recurring expenditure:

Non-recurring expenditure across the group was $1.5 million. This figure includes expenditure related to the Access Brokerage failure ($486,000) and Smartshares expenditure ($1.1 million).
NZX invested $3.26 million in Link Market Services, a 50/50 JV with ASX Perpetual Registrars Limited of Australia , to compete in the New Zealand registry business.

“NZX staff numbers are now at the right size to manage the existing core market operations business. We will continue to manage ongoing operational expenses closely,” said Mark Weldon.

Smartshares

Total funds under management was $192 million spread across four funds, versus $88 million in one fund at the year end 2003.
Smartshares has 10,386 investors direct on register at year end 2004.
Operating revenue was $556,000 for the year.
Three funds were added during the final quarter.
Operating expenditure, excluding staff costs, was $540,000.
Expenditure relating to the launch of the Smartshares brand and IPO related fees totalled $1.1 million.

“NZX is happy with the level of new funds under management in Smartshares, especially during a period when wider funds management withdrawals reached $630 million. The popularity of Smartshares, amongst a wide range of investors, demonstrates to us that Smartshares are viewed as a sound means of growing and diversifying assets, with strong yield and good tax efficiency. We expect to see significant growth in this area in the future,” said Mark Weldon.

Key achievements across the NZX Group in 2004

Core business:

Introduced Direct Market Access (DMA), an open interface to the NZX trading system. Eight trading participants were accredited for use.
Implemented new participant rules allowing more flexibility to suit specific business models of existing and potential market participants.
Implemented new regulatory framework, bringing compliance and issuer ruling functions in-house.

NZX subsidiaries and investments:

Launched the Smartshares brand, added three new funds and raised $50.5 million in Initial Public Offerings.
Formed Link Market Services, a 50/50 JV to provide a superior registry service to all issuers with New Zealand based shareholders. Link Market Services subsequently purchased BK Registries, located in Ashburton.

2005 Outlook

The key drivers of NZX's core business performance, including listings, transactions, and demand for NZX market data, are expected to remain strong in 2005.

“In 2004 NZX continued to invest in its core market operations business, while successfully expanding into two new key segments, registry and funds management. In 2005 we will focus on delivering results in these segments. Beyond these segments, NZX will continue to invest in exploring and evaluating further growth opportunities,” said Mark Weldon.

NZX today announced it will pay a special, fully imputed dividend of $.40 per share. Payment date for the dividend will be 11 May, 2005; record and ex dates will be Friday 29 April and Monday 2 May respectively. NZX intends to review its dividend policy on an annual basis.

“This tax efficient dividend reflects NZX's strong performance since listing. Our balance sheet continues to provide opportunities for growth and investment, as demonstrated in 2004. We will continue to identify, explore and execute against growth opportunities,” said Chairman Simon Allen.

“We would like to thank shareholders for demonstrating their ongoing confidence in NZX's strategy and performance,” said Mark Weldon.