NZX boss: We're over the slump

The sharemarket is past the worst of a slump that contributed to an 11 per cent decline in third-quarter net profit for operator NZX, chief executive Mark Weldon said yesterday.

A sluggish economy, regulatory uncertainty for market leader Telecom and lines company Vector, and a souring of investor sentiment after the Feltex debacle resulted in a fall-off in business for the sharemarket in recent months.

That, with lower interest income and expenditure on a bid to win a "sliver" of the ASX's Australian equity market business, led to NZX's bottom line falling to $1.53 million in the three months to September.

Flat earnings in NZX's core trading, clearing and settlement business "reflect the slowed activity seen in the markets over the last quarter", said Weldon.

But he believed the worst was now over.

Activity had increased slightly this month, several share issues were likely in the fourth quarter and would generate new shareholders and trading activity, and there was "a little more certainty and calm" among investors after the Commerce Commission backed off from harsh regulation of Vector.

The third-quarter's 11 per cent net profit decline on the same quarter last year was exaggerated by the large Vector and Goodman Fielder floats last year which had boosted core trading clearing and settlement revenue.

Despite the decline for the quarter, NZX's $3.7 million net profit for the three quarters was 14 per cent more than the same period a year ago and operating earnings were up 30 per cent.

Group revenue was up 8 per cent, and expenditure rose 15 per cent.

Much of that increase was related to hiring costs and regulatory spadework for the Australian market platform or electronic communications network plan announced last month.

Weldon expects "significant services revenue" from the joint venture with five investment banks.

The low-cost share trading and market information platform is scheduled to open early next year. Weldon hopes it will capture at least a "sliver" of the ASX's business.

NZX was encouraged by the positive response to the plan from media and market participants in Australia, he said.

NZX's interest income fell by a third as the company returned $16 million to shareholders in August.

Revenue from the company's SmartShares funds management business was up 55 per cent and expenditure was down 30 per cent, delivering a 457 per cent rise in operating earnings.

Operating earnings from the Link market services business, in which NZX has a 50 per cent share, were up 25 per cent to $261,000.