NZX revenue buoyed by funds management

[NZX] lifted its annual profit 82% after the sale of its Link Market Services division bolstered flat earnings.

Revenue also got a boost from the stock market operator's expanded funds management business.

Net profit rose to $23.9 million in 2015, from $13.1 million a year earlier. This included $11.8 million from the sale of share registry NZ Link.

Earnings before interest, tax, depreciation and amortisation were unchanged at $24.6 million, on a 12% rise in revenue to $73.2 million. Operating expenses increased 20% to $48.6 million.

The company expects annual ebitda to be in the range of $22.5-26.5 million this year, subject to market conditions and assuming no acquisitions or divestments. The exchange sees a relatively wide range of possible revenue outcomes, with the year off to a volatile start.

"NZX's full year financial result is in line with expectations," says chief executive Tim Bennett.

"Performance is underpinned by the execution of NZX's funds services strategy and positive progress in capital markets development, putting more 'products on the shelves' including the launch of 16 new Exchange Traded Funds."

NZX has been diversifying from its capital markets core business by expanding into funds management, buying SuperLife in December 2014 as part of a plan to roll out new ETFs which it could then offer as a low-cost KiwiSaver option. Sales in NZX's funds management business more than tripled to $10 million, reflecting a boost in earnings from the acquisition.

SuperLife contributed $6.4 million in revenue and $1.7 million in net profit for the year. Its funds under management grew 14%, with 22% growth in its KiwiSaver funds.

Based on Australia's experience with compulsory superannuation, Mr Bennett says the local market is "at the start of a 10 to 15 year growth journey."

NZX also bought investment platform Apteryx in August for an initial sum of $1.5 million and will make an additional payment of up to $2.5 million in September depending on Apteryx's performance. Apteryx contributed revenue of $700,000 and a loss of $200,000 to the group's annual results.

Revenue in its capital markets division rose 5% to $39.3 million, with a significant increase in secondary capital raising activity driven by dual-listed banks, NZX says. Initial public offerings dropped away in 2015, with just four new listings.

Listed debt issuances grew 374% to $8.1 billion, boosted by the Local Government Funding Agency listing its six series of bonds worth a cumulative $5.6 billion.

Mr Bennett says the company's $8 million growth in operating expenses was driven by $5 million in acquisition costs for SuperLife and Apteryx and $2.1 million from fees associated with its Ralec litigation. It is set to go to the High Court in May this year, and the company anticipates a similar level of litigation costs this year.

The shares fell 1% to trade at $1 this morning and are down 7.5% this year.

(BusinessDesk)