UPDATE: NZX boost first-half profit on listings surge, sees similar gain for full-year
(Updates with chief executive comment, full-year guidance)
By Suze Metherell
Aug. 11 (BusinessDesk) - NZX increased profit 8.3 percent in the first-half and sees a similar gain in full-year earnings, as a flurry of listings boosts the stock market operator's income.
Profit rose to $6.97 million, or 2.7 cents a share, in the six months ended June 30, from $6.4 million, or 2.5 cents a year earlier, the Wellington-based company said in a statement. Sales rose to $31.2 million from $30 million. Profit was just below Forsyth Barr's estimate of $7.1 million.
Chief executive Tim Bennett told a teleconference he was comfortable with analyst forecasts for the full year, suggesting a 1.2 percent gain in revenue to $63.54 million and an 8.9 percent increase in net profit to $15.35 million.
NZX is experiencing a flurry of listings, with Intueri Education Group, the private tertiary education company, Genesis Energy, the last of the government's power companies to be partially privatised, Serko, a travel booking firm and Gentrack, an airport and utilities software developer, all listing in the first half. Since its June balance date three more companies have joined the bourse, while Vista International Group debuts today and ERoad launches on Friday.
“There are two structural things that are happening in New Zealand's markets which gives us confidence that this IPO activity will continue, even if there is a blip in the next 12 months,” Bennett said. “We've got a strong desire for KiwiSaver mangers to invest in New Zealand, and secondly we're having very good dialogue with a large number of private companies about using the listed market as a way to raise capital, and I think both of those factors will continue for some time.”
The biggest revenue contribution came from listings in the first half, which rose to $6.2 million from $5.7 million in the comparable period a year earlier. In the year ended Dec. 31, 2013, listings rose to be the biggest revenue earner for the stock market operator, as it generated $12.98 million in fees from that year's 10 initial public offers.
Bennett did flag that growing geopolitical uncertainty, such as the escalating violence in Iraq and the US’s subsequent involvement, as well as tensions between Russia and the West over Ukraine was weighing on investors and would be listed companies. While in New Zealand, political uncertainty because of the general election in September also could affect companies coming to market.
Sales from commodities trading fell to $671,000 from $770,000 and dairy derivatives generated $88,000 from $25,000. Agri information revenue climbed 5.4 percent to $6 million and fund services revenue was little changed at $1.2 million. Bennett said weakening commodity prices may impact on its agri businesses in 2015, as falling GlobalDairyTrade auction results and a lower Fonterra Cooperative Group payout likely to hit farmers.
Securities information generated $4.9 million of sales, up from $4.4 million a year earlier, while securities trading revenue rose 8.3 percent to $2.2 million, participant services rose to about $1.7 million from $1.5 million, and Securities clearing rose to 2.7 percent to $2.2 million.
The markets division, which includes the energy market and Fonterra Shareholders' Market, posted a 15 percent decline to $5.4 million, which the company attributed to reduced energy consultancy work and the loss of a gas market contract in late 2013.
Total expenses rose to about $19 million from $18.2 million, driven by a 31 percent increase in professional fees, which NZX said "were high due to Ralec litigation costs, tax audit related work and legal costs associated with the launch of the new NZ Core Equity fund." Employee costs rose to about $10.5 million from $9.8 million.
NZX has also replaced outgoing chairman Andrew Harmos, after 12-years on the board, half of which was as its head. James Miller, who is currently the Harmos’s deputy will take over at the company’s 2015 annual general meeting.
The company will pay a first-half dividend of 3 cents and said it was on track to make payments for the full year of 6 cents a share.
NZX shares were unchanged at $1.27, and have gained 2.4 percent this year. The stock is rated an average of ‘sell’ according to three analysts surveyed by Reuters, with a median price target of $1.27.