NZX, which made its biggest-ever acquisition by buying funds manager SuperLife in 2014, posted annual profit growth of 8.3 per cent after raising prices for securities data and benefiting from increased listing fees and funds management revenue.
Profit rose to $13.1 million in calendar 2014, from $12.1 million a yearearlier, the Wellington-based company said in a statement. Sales rose 3.8 per cent to $65.2 million. Profit missed First NZ Capital's forecast of $15.2 million. NZX shares fell 1.7 per cent to $1.19 and have declined 5.6 per cent in the past year, lagging behind the NZX 50 Index's 18 per cent gain.
The stock market operator enjoyed an influx of listings in 2014, as 16 companies joined the bourse, adding $4.7 billion to the equity market capitalisation, which widened to the equivalent of 42 per cent of New Zealand's gross domestic product from 37.8 per cent in 2013. Costs rose 9.6 per cent in 2014 to $40.6 million, led by a 62 jump in professional fees to $3.4 million, including $1 million for ongoing litigation with the vendors of the Clear Grain Exchange and $350,000 for the SuperLife acquisition.
NZX completed the purchase of SuperLife in January last year for $20 million upfront in cash and NZX shares, and a further $15 million provided SuperLife meets targets for growth in funds under management. SuperLife had $1.27 billion funds under management as at January 31, giving NZX a total FUM (funds under management) of $1.7 billion once its existing Smartshares business is included.
NZX wants to use SuperLife as a platform to accelerate growth of its Smartshares exchange traded funds (ETFs) to benefit from growth in the New Zealand funds management sector seen at an annual 10 per cent to 15 per cent over the next 10 years, driven by KiwiSaver and increased household savings generally.
Chief executive Tim Bennett didn't give guidance for 2015. "While we will continue to make selective investments in 2015, our focus is on executing against the immediate opportunities we have in front of us."
That includes the launch of the new NXT market for start-ups and small-to-medium businesses, growth in its derivatives business and ETFs. Also on the cards for 2015 is the tender for the electricity market operator contracts that NZX holds for the Electricity Authority, which expire in 2016. NZX has held the contracts since 2008.
While we will continue to make selective investments in 2015, our focus is on executing against the immediate opportunities we have in front of us
The company said its dispute with Clear's former owners through their Ralec companies is unlikely to be heard before 2016. NZX sued Ralec in the High Court for breach of warranty and associated claims under the 2009 sale and purchase agreement. The vendors subsequently counter-claimed for loss of earn-out payments. While NZX says the quantum of the counter-claim hasn't be detailed, earn-outs of some A$14 million were made because Clear failed to meet targets for grain tonnage and trading via an 'Agri-Portal.'
NZX said it has made a provision of $1.2 million related to settlement of an Inland Revenue Department tax audit relating to 2008 through 2010.
Operating cash flow in 2014 dropped to $16.1 million from $26 million a year earlier, and was the lowest bin the past five years. NZX said the decline partly reflected unusually high cash flow in 2013, which reflected the timing of high-value contracted revenue and favourable working capital movements.
The company's capital markets business remained the biggest generator of revenue in 2014, rising 6.2 per cent to $37.2 million, on growth in securities information, listings and participant services. While trade volumes grew 9.8 per cent, the total value of trading fell 17 per cent, which it said was largely due to reduced portfolio rebalancing compared to 2013.
Total soft commodities revenue fell 3.2 per cent to $1.5 million, reflecting a 14 per cent from in commodities trading sales to $1.3 million, while dairy derivatives sales rose to $200,000 from $100,000.
Sales of agricultural information rose 2.1 per cent to $12.2 million, funds management revenue climbed 11 per cent to $2.7 million and market operations revenue fell 2 per cent to $11.6 million.
NZX will pay a final dividend of 3 cents a share on March 27 with a record date of March 13.
