Strong 2007 First Half Result For NZX

I. NZX Group Performance Summary

EBITDA: 102% increase to $7.15 million versus $3.53 million in the first half of 2006.
Operating revenue: $15.05 million, versus $10.44 million in the first half of 2006, an increase of 44%.
Operating Expenses: $7.89 million, versus $6.61 million in the first half of 2006, an increase of 19%.
Earnings after tax: 95% increase to $4.21 million versus $2.16 million in the first half of 2006.

NZX today announced a first half 2007 EBITDA result of $7.15 million. This represents a 102% increase on the $3.53 million result recorded for the same half of 2006. Net profit after tax reached $4.21 million, an increase of 95% over the same period in 2006.

NZX CEO Mark Weldon said, “This strong result was achieved on the basis of strong revenue growth with carefully controlled expense management. The result reflects revenue growing more than twice as fast as cost.”

“In addition, NZX is maintaining an appropriate investment balance between growing core business and creating future value. Acquisitions and infrastructure investments adding scope and potential have been integrated within the core business. This improves leverage on the overall cost base and is a model that is working very well for NZX and our shareholders,” said Weldon.

II. Markets Business Highlights

Robust performance across the core Markets business is reflected in a 98% year-on-year EBITDA improvement.
Operating revenue grew to $13.60 million from $9.58 million in the first half of 2006, an increase of 42%.
Total Listings revenues grew to $4.30 million – a 34% improvement on the first half of 2006, driven in the main by new debt and hybrid listings and secondary capital raising activity across NZX Markets.
The NZX market information business generated $4.79 million revenue in the first half, an increase of 104% over the same period in 2006.
Trading volumes relatively flat against 2006, with revenue similarly flat at $2.42 million in revenue against $2.40 million for the corresponding period in 2006.
Seamless launch of the fast, flexible Trayport trading system in to the market on 3 July.

III. Subsidiary and Associate Businesses

Smartshares

Operating revenue reached $1.58 million in the first half of 2007, a 76% increase on the same period last year.
Operating EBITDA was $456,000 compared with $115,000, a 297% increase on same period in 2006.
Smartshares finished the first half of 2007 with $592 million in funds under management.

LINK Market Services

LINK Market Services, a joint venture, produced a much improved first half EBITDA result of $505,000 compared with a $214,000 loss for the same period in 2006.
During the first half of this year LINK returned $400,000 to its shareholders through the redemption of preference shares. LINK's performance continues to improve. Link is equity accounted.

IV. Capital Management

NZX instituted a Dividend Reinvestment Plan (DRP). There was a 79% take up of NZX shares under the plan.

NZX CEO Mark Weldon said, “This high level of uptake was a very pleasing result for NZX, providing financial flexibility and improved cash flow management across the annual revenue cycle.”

V. Future Outlook

Second half 2007 and 2008 outlook

KiwiSaver and related tax changes kick in on October 1. NZX predicts a positive impact on trading volumes on the NZX Markets. This will be felt initially in Q4 and grow over time.
ASIC earlier this week released a very positive paper on the basis for competition in the Australian market for exchange services going forward. AXE ECN in Australia is expected to commence trading before the end of Q3.
NZX is planning to move to a substantially upgraded Clearing and Settlement System, including a Central Counterparty function. In Q2, 2008 in combination with the Trayport trading system this will allow NZX to launch a range of options, derivatives, and commodities contracts. NZX will be working with its customers to determine the demand for particular products, and define sequence of release.
This upgraded infrastructure, combined with the upcoming July 27 move to anonymity for trading, will both assist in growing liquidity, and position the Markets business for growth into new product areas.
TZ1 is expected to launch carbon trading in May, 2008. Further details on TZ1 will be made public as appropriate.

Longer term growth

NZX will continue to pursue a sound acquisition strategy based on a set of key criteria that will drive additional value to the business. A key selection criterion is that any acquisition must be manageable on a reduced overall cost base within NZX, due to greater scale and an ability to drive technological improvements.

AXE ECN shows that NZX has the ability to take our technological, market supervision, and strategic skills into new markets outside our domestic market. This will continue to be a focus of management, with NZX looking to carve out a footprint distinctive amongst exchanges.

VI. Other - IFRS

NZX has transitioned to NZIFRS with effect from 1 January 2007. All actual and prior year references are based on adjusted financial statements.

Statements of Financial Performance and NZX Operating Metrics can be found on the NZX website at www.nzx.com/aboutus/investor/financial.