Demand for IPOs solid, says NZX chief

NZX chief executive Tim Bennett. Photo / Supplied

NZX chief executive Tim Bennett says demand is looking solid for small and medium-sized sharemarket listings, but a potential downturn in market conditions could affect the environment for initial public offerings in the year ahead.

The Wellington-based exchange operator yesterday posted a 3.8 per cent rise in annual revenue to $65.2 million, driven by strong growth in the company's capital markets business - including 16 sharemarket listings - and funds management division.

Net profit, which rose 8.3 per cent to $13.1 million in the 12 months to December 31, missed analysts' forecasts as employee and professional fee costs rose and the company booked a $1 million provision for a tax settlement with the Inland Revenue Department. NZX shares closed down 4.1 per cent to $1.16.

Bennett said demand for small and mid-sized IPOs was at a similar level to this time last year.

"But there's a lot of water to pass under the bridge," he said. "We're in a somewhat fragile global economic environment, with QE [quantitative easing] going in Europe and Japan and at the same time interest rates will likely rise in the US."

However, Bennett said earnings multiples remained attractive for prospective issuers, while the domestic economic outlook was robust.

Bennett said the launch of the NZX's new NXT market, aimed at small and medium-sized fast-growing firms, was dependent on companies being ready to list.

"We're talking to half a dozen companies about listing [on NXT]," he said.

The exchange operator last month completed its up to $35 million acquisition of Auckland-based fund manager SuperLife, which NZX plans to use to accelerate the growth of exchange traded funds (ETFs) offered by its Smartshares business.

NZX's personnel costs lifted 10 per cent to $22 million last year as 12 new staff were added to support investment in regulation, technology and operations. Professional fee expenses rose 62 per cent to $3.4 million, partly as a result of the SuperLife acquisition and new product launches.