NZX shares fell from a 21-month high after the stock market operator unveiled a slump in annual profit while saying the groundwork was laid for future earnings growth.

The shares fell 3.5 per cent to $1.10 as at 12.15 pm ending a 15 per cent rally since early December as investors digested the Wellington-based company's annual report showing a 62 per cent slide in profit to $9.2 million, or 3.4 cents per share, in calendar 2016.

The year-earlier figures were flattered by an $11.8m gain on the sale of its half-share in Link Market Services, and earnings before interest, tax, depreciation and amortisation fell 8.4 per cent to $22.5m, as operating expenses climbed 13 per cent to $55m, outpacing a 6 percent gain in revenue to $77.5m.

"The share price improved a little bit in the last month or so ahead of the result," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "The result itself again showed expenditure growth outpacing revenue growth, which has been one of the main concerns for investors."

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NZX blamed the jump in expenditure on several one-off factors, including the long-running dispute with the former owners of the Clear Grain Exchange, which cost the stock market operator $3m in calendar 2016 alone when the case hit the courts and resulted in what the judge described a "nil-all draw".

At the same time, a downturn in the dairy sector prompted a review of the agri division and NZX sold the Clear exchange and the Country-Wide and Dairy Exporter magazines, while the final leg of the Financial Markets Conduct Act came into effect requiring increased resources.

On top of that was a $1.3m payment to senior executives with the departure of chief executive Tim Bennett along with the cost of finding his replacement.

NZX was more optimistic about 2017, forecasting ebitda of between $27m and $30m, although that depends on the level of initial public offerings, secondary capital raisings, and trading and clearing volumes across its various markets. However, that left some downside open relative to analysts, who were projecting ebitda of about $29.2m in 2017.

Williamson said most of last year's costs were one-offs and things were looking more positive for the stock market operator.

"It does look like NZX has built a pretty good platform as they go through some legacy issues," Williamson said. "From here investors are expecting some earnings growth."

NZX's market operations delivered a 9.5 per cent increase in earnings to $41.1m on a 6 per cent gain in revenue to $52.9m as an increased appetite for debt listings offset a weak IPO pipeline, while trading volumes were bolstered by New Zealand's attractive dividend stocks luring overseas investors.

The agri division earnings fell 18 per cent to $855,000 on a 7.9 per cent decline in revenue to $11.6m on lower publishing and agri information sales.

The funds management division posted a loss of $316,000, compared to a year-earlier profit of $1.7m, while revenue climbed 21 per cent to $13m as NZX invested more heavily in expanding the business. The stock market operator expects it will pay a bigger earn-out to the former owners of SuperLife, however it anticipates a smaller payment will be due to the vendors of Apteryx, now NZX Wealth Technologies.

Williamson said NZX was looking to diversify its earnings, with some success in its funds management business. While renewed vigour in the debt market was welcome, "we're really keen to see some chunky, quality equity issues coming to market" and recent takeover activity could see the reverse happening, he said.

The three analysts following NZX were split on the company's fortunes according to Reuters, with one rating it an 'outperform', one an 'underperform' and the last a 'hold', though none had updated their forecasts since the results were released this morning. The median target price for the stock is $1.10.