NZX third quarter revenue shrinks 4.4% in lukewarm environment for new listings

NZX posted a 4.4 percent decline in third-quarter revenue as a tepid environment for new listings weighed on the stock market operator's income.

Revenue fell to $18.5 million in the three months ended Sept. 30 from $19.3 million a year earlier, as listing fees dropped 8.7 percent to $3.6 million, only just keeping its position as the Wellington-based company's biggest source of income. Market operations shrank 22 percent to $2.3 million, while the bright point for the market division was a 10 percent gain in securities information to $2.6 million on an increase in professional terminal numbers and high-value subscription products.

"Total revenues for the quarter were down 4.4 percent reflecting a quiet quarter for capital raising activity relative to Q3, 2016, which saw substantial new debt listed," NZX said in a statement. The drop in listing fees reflected "lower initial listing fees with no equity listings in the quarter and $1.1 billion of new debt listed compared to $2.2 billion in the prior year."

The stock market operator has struggled to attract new initial public offerings this year in an environment where global capital markets have become increasingly volatile on the prospect of major central banks drawing a close on their extraordinary stimulus packages, something that's pushed equity markets to record highs.

NZX's agri division posted a 17 percent fall in revenue to $2 million due to the sale of Clear Grain Exchange and certain rural publications in an effort to get on top of the underperforming unit. Of the remaining media assets, NZX's Farmers Weekly advertising page equivalents climbed 15 percent with "buoyant advertising sales" and an increase in agri data subscriptions to corporate customers, the company said.

The funds management division was the stand-out for NZX in the quarter with revenue up 12 percent to $3.7 million, led by a 12 percent gain in funds management fees to $3.3 million, the company's second-biggest source of income in the period. That was due to a 17 percent increase in SuperLife's funds under management and a 29 percent gain in Smartshares exchange-traded funds.

NZX is forecasting earnings before interest, tax, depreciation and amortisation of between $27 million and $30 million in calendar 2017, up from $22.5 million last year. The company this year appointed Mark Peterson as chief executive and tasked him with growing the business to compete more effectively on the domestic and international fronts.

The stock market operator has been undertaking a review of its various businesses and is expected to announce the outcome in November.

The shares last traded at $1.20 and have gained 14 percent so far this year, lagging behind the 18 percent gain on the benchmark S&P/NZX 50 index over the same period. The stock is rated an average 'hold' based on three analyst recommendations compiled by Reuters with a median price target of $1.18.

(BusinessDesk)