NZX Q3 financial result 2009

NZX Q3 Financial Result 2009

30/10/09

The NZX Group financial results for the nine months to September 2009 were released today, showing EBITDAF of $14.68 million, up 8% on the same period in 2008.

EBITDAF increased from $4.3 million in Q2 2009 to $5.6 million in Q3. For the nine-month period EBITDAF is up 8%, compared with an EBITDAF increase of 3% at the Half Year 2009 -showing a strong Q3 performance.

NZX CEO Mark Weldon said, "This result shows solid performance across all NZX business lines, with significant revenue contribution from agri-business and energy market operations that were not represented in 2008.

NZX now owns an integrated set of businesses with expertise in information, infrastructure and markets across the securities, energy and agri-business sectors.

NZX's established core markets and market information businesses remain resilient, performing strongly over the quarter and exhibiting operating leverage in some areas. Acquired businesses have met financial expectations while operational integration has been completed on plan.

"The established securities markets and market information businesses have been complemented by the acquisition of related businesses operating in adjacent areas. Each of these provides a strong set of interrelated opportunities," said Weldon.

I. NZX Group Q3 2009 Financial Result - Summary

 

 

 

 

Year to Date 2009

 

Change (pcp)

 

 

Operating Revenue

 

 

$31.12 million

 

 

29%

 

 

Operating Expenditure

 

 

$16.45 million

 

 

58%

 

 

EBITDAF

 

 

$14.68 million

 

 

8%

 

 

EBITDA

 

 

$63.99 million

 

 

398%

 

 

NPAT

 

 

$58.39 million

 

 

649%

 

 

II. NZX Group Q3 2009 Financial Result - Commentary

Operating Revenue

The listings revenue category is up strongly year on year, reflecting an increase in both initial debt listing revenues and secondary equity listing revenues. Initial listing fee revenue was up 80% to $256,000 in the first three quarters of 2009 compared with the same period in 2008. Secondary listing fee revenue was up over 140% to $3.33 million in the first three quarters of 2009. Annual listing fee revenue was slightly down at $4.29 million compared with $4.59 million in the same period in 2008.

The $3.02 billion of debt raised in the first three quarters of this year is an all time NZDX Market record, surpassing the previous record of $2.7 billion debt raised in the full 2007 year. Listed Issuers have raised $2.32 billion in new equity year to date.

In the market data business, decreases in NZX real-time data terminal numbers reflect a lagged flow through from firm failures, mergers and cost-cutting globally. The split of USD/NZD remains at around 70/30, meaning strong US dollar currency exposure, which has also impacted royalties revenues.

While the agricultural information businesses have not been immune from adverse market conditions, flagship title Farmers Weekly has grown its market share by total page numbers over the September quarter. Q3 revenues for the agri-business increased over Q2 2009.

Operating Expenses

The increase in operating expenditure in staff and information technology are both a consequence of an increase in the number of employees via acquired businesses.

Increased costs in the professional fees line are largely attributed to costs associated with acquisitions.

Subsidiaries and Principal Investments

Equity accounted earnings represent NZX's proportional share of the associates' earnings for Link Market Services and Appello Services Limited.

Link has had a strong quarter with EBITDA for the nine-month period of $895,000 representing a 10% increase on the prior period.  Link has already redeemed $400,000 of Redeemable Preference Shares to NZX in 2009. Total Redeemable Preference Shares redeemed to NZX in 2008 were $550,000. Link has won the majority of debt and equity IPOs offered in 2009. Link is now a fully mature business and continues to win new business and market share.

Appello Services continues to execute its strategy and contributed a small equity accounted loss for NZX's 30% shareholding.

It has now been three months since the sale of TZ1 Registry to Markit. Focus in the third quarter was on integration, which Markit has now successfully concluded. TZ1 Registry is now known as the Markit Environmental Registry.  The Markit Environmental Registry team are currently developing a strategy for large customer acquisition.  Markit Environmental Registry continues to acquire customers, and has a strong market share globally.

III. NZX Group - Outlook and Strategic Priorities

The outlook for Q4 2009 listings revenue is stronger than in Q3 as equity IPOs return and secondary equity raising continues. On the trading side, trade numbers are beginning to show year on year increases which management expects to continue. Improved liquidity and trade numbers in the NZDX market are now of material importance. It is expected that real-time data terminal declines have stabilised.  Direct data products which have delivered steady revenues, such as i-search and Deep Archive, provide NZX with platforms from which to further develop new products and attract new customers. NZX Data is also developing new sets of debt and equity indices following niche customer demand.

NZX management expects the benefits of integration synergies with newly acquired businesses will develop further over the next 12 months.

The Minister of Energy commissioned a report into the operation of New Zealand's electricity market earlier this year. NZX is positive on the outcomes of the Ministerial Review of Electricity Market Performance 2009.

October is expected to be the highest revenue month, both historically and for 2009, for NZX's agri-business and 2010 is expected to show an improved EBITDA contribution as against a pro-rata 2009.

Progress on fulfilling the conditions of the conditional sale and purchase agreement for the businesses of the Clear Group is continuing, and NZX expects to settle this transaction within the next two weeks. The CLEAR transaction will bring together two key components of NZX's strategy: trading of agricultural commodities and acquiring technology development expertise to build and grow markets. NZX is monitoring acquisition opportunities in the agricultural sector on an ongoing basis.

Following a three-month consultation period with dairy participants and financial market players in New Zealand and globally, NZX has confirmed that there is a high level of demand for the development of cash settled dairy futures contracts. Customer feedback has been integral in designing a contract specification for the first product launch in what will be a suite of dairy derivatives - a cash settled Whole Milk Powder (WMP) futures contract. The contract specification, launch date and other details for WMP futures will be finalised and released prior to year end.

Appendix - Layout of NZX Statements of Financial Performance

A. Operating Revenue

Listings

Listings, across annual, initial and secondary are consolidated into one category which also includes any other revenue related to listings activity.

Trading

This revenue line captures all revenue associated with trading, and includes trading fees from cash equities (previously disclosed within trading, clearing and settlement fees), and all Participant related fees and

Post Trade Systems and Services

Post Trade Systems and Services is a new revenue category. It is comprised of Securities, Clearing and Settlement fees as well as revenue from the post trade systems in energy, in particular the Lines and Reconciliation systems. Also included in this category are any services revenues NZX receives from owned businesses.

Market Data

The Market Data line includes only data revenue that is relevant to all markets NZX operates as distinct from NZX's agri-businesses.

Smartshares

Smartshares is now reported as its own revenue line and will no longer be reported as a separate company. Smartshares revenues reflect management fees that are based on Funds Under Management (FUM).

Agri-business

The NZX Agri-business now warrants separate disclosure as a stand-alone revenue line. This includes subscription businesses such as NZX Agrifax, NZX Profarmer, Dairy Week, Newsroom, NZ Dairy Exporter, Deer Farmer and Young Country, and advertising driven titles such as New Zealand Farmer's Weekly, Country-wide North and Country-wide South.

B. Operating Expenditure

Information Technology

Professional Fees

This line includes expenditure for professional services around strategic initiatives for the business.

Marketing, Printing and Distribution

Marketing, printing, and distribution costs include the costs associated with the hard copy publications that will be produced by Country-wide Publications, and as such now form a new category.

Fund Expenditure

This line includes direct fund related expenses for Smartshares (i.e., excluding staff).

General Administration

This line includes rent costs, insurance, travel, office supplies and other sundry administration costs.