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Home / Business / Markets

NZX posts 4% lift in operating earnings, plans $44m rights issue

NZ Herald
16 Feb, 2022 08:08 PM4 mins to read

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NZX has reported its annual result for 2021. Photo / File

NZX has reported its annual result for 2021. Photo / File

Exchange operator NZX said its operating earnings - excluding acquisition costs - increased by 4 per cent in 2021 to $35.8 million in 2021.

The company's net profit was $15m, down 14.6 per cent year-on-year, reflecting lower interest rates and higher depreciation and amortisation.

In conjunction with the release of its results, NZX said it would take a one-third stake in Fonterra's Global Dairy Trade platform, and that it planned to raise $44m through a rights issue to maintain strength in its balance sheet.

NZX said it would pay $12.5m for the stake - plus $3.2m as NZX's proportion of planned additional investment in the platform.

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In its result, NZX said there had been continued growth across its main business areas – Capital Markets, Smartshares and NZX Wealth Technologies.

The company's 2022 operating earnings guidance range was from $33.5m to $38m.

NZX said there had been "substantial progress" in its strategy to re-engineer the group for future growth.

Chairman James Miller said NZX's operating earnings reflected sustained momentum from the extraordinary Covid-fuelled activity levels of 2020, with growth across all major business areas.

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Miller said the company had been true to its growth strategy aimed at "building a more robust, integrated financial services business".

"In addition to strengthening New Zealand's exchange, our strategy is to grow an NZX Group that is stronger and better positioned to deliver long-term sustainable value to our shareholders," he said in a statement.

Alongside growth in 2021, there had been a step-change in investment to support additional capacity, capability, and to enhance the security of operating platforms.

The NZX declared a final dividend of 3.1 cents per share, contributing to a 2021 dividend of 6.1 cents per share, and unchanged from last year.

Chief executive Mark Peterson said the Covid pandemic "materially stimulated" and accelerated activity through 2020, and this had flowed through positively into the 2021 operating performance and financial results – with operating earnings holding up well.

"We have continued to deliver growth in 2021 across all major business areas and we have made a step-change in our investment to support additional capacity, capability, and to enhance the security of our operating platform," he said.

NZX's capital raise is in the form of a $44m fully underwritten pro-rata accelerated renounceable entitlement offer of NZX shares at $1.42 per new share.

The offer is being conducted in two parts - institutional and retail.

Shares in NZX closed on Wednesday at $1.73. The stock is in a trading halt while the capital raise gets under way.

Commenting on the decline in net profit, NZX said lower interest rates have impacted the level of interest income on operational cash balances, NZX clearing risk capital and regulatory working capital.

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Depreciation was higher due to the investment into additional IT infrastructure and the fit-out of NZX's new Auckland office.

Amortisation was also higher due to capitalised costs in late 2020, relating to the spend associated with the migration of new clients onto NZX Wealth Technologies' platform, and the implementation of a new trading system.

Peterson said it was another year of strong activity across equity, debt and fund markets with the total value of new capital listed and secondary capital raised up more than 12 per cent to $19.8b.

Nine new companies joined NZX's equity market, one new issuer listed securities on our debt market and 28 businesses took the opportunity to raise additional equity in the market.

NZX's partnership with Singapore Exchange - which enabled the listing of its dairy derivatives contracts on the SGX - highlighted the potential for NZX to build and drive growth from the strategic partnerships it has, Peterson said.

The same is true for carbon trading, he added.

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The launch of the NZX-SGX dairy derivatives strategic partnership last November was several years in the making – with the objective of unlocking and accelerating the growth potential of the dairy derivatives market.

Miller said the NZX sees a clear opportunity ahead to evolve GDT to be a truly global auction facility, with the potential to grow financial products to many multiples of the physical dairy market.

"These tools are crucial and in huge demand in an international dairy market dealing with volatility and its associated risks – with clear benefits for New Zealand producers and dairy customers around the world," he said.

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