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Ann: FLLYR: NZX: NZX Full Year 2014 results announcement

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    • Release Date: 17/02/15 08:33
    • Summary: FLLYR: NZX: NZX Full Year 2014 results announcement
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    17/02/2015 08:33
    REL: 0833 HRS NZX Limited
    FLLYR: NZX: NZX Full Year 2014 results announcement
    NZX today reported its full year results for the year ended 31 December 2014.
    Revenues for the year of $65.2 million were up 3.8% on 2013, driven by strong
    growth in NZX's capital markets and funds management businesses.
    NZX CEO Tim Bennett commented: "2014 was a good year across all of our
    businesses. Excluding the impact of the Government share offer programme in
    2013 and 2014, new capital listed was up 87.1%, agri advertising revenues
    were up 8.1% and fund management revenues were up 10.5%. We also completed
    the acquisition of SuperLife, which will accelerate the development of the
    exchange traded funds market in New Zealand."
    **Reported results are summarised in the table in the announcement
    Business Highlights
    Capital markets
    NZX's markets business experienced another very positive year in 2014 with
    continued growth in listings and market capitalisation. Revenue was up 6.2%
    to $37.2 million.
    There were 16 listings during the year contributing an additional $4.7
    billion to New Zealand's equity market capitalisation. There was also
    significant growth in debt listings with new debt issuances up 755% on 2013.
    Market capitalisation of NZX equity markets to New Zealand's gross domestic
    product increased from 37.8% in 2013 to 42.1% in 2014.
    While trade volumes grew by 9.8%, the total value traded compared to 2013
    decreased by 17.2%, largely due to reduced portfolio rebalancing in 2014
    compared to 2013, which included the Government share offer programme and
    sell downs by substantial shareholders.
    NZX securities data revenue was up 16.6% to $10.4 million as a result of
    pricing changes that were effective Q3 2013 and one off audit revenue.
    In September, the Financial Markets Authority (FMA) approved the registration
    and rules for NXT, an NZX market designed for small, high growth companies.
    Underpinning the market's design is the new regulatory regime in place in New
    Zealand, including the Financial Markets Conduct Act, which provides the
    flexibility to develop new markets for different types of companies and
    groups of investors.
    The timing of NXT's launch depends on companies being ready to list. NZX is
    continuing to work with a range of companies looking to list on NXT, some of
    which will be new listings and others that propose to move across from the
    NZX CEO Tim Bennett commented: "The vitality of our markets business
    continues to be very pleasing, with the busy 2014 IPO activity contributing
    not just to current year results but also generating long term revenue
    through recurring annual listing, trading and clearing revenues."
    "Coupled with New Zealand's favourable economic environment, the positive
    turnaround in our capital markets that continued into 2014 is thanks largely
    to the building blocks put in place over the five years following the
    recommendations made by the Capital Market Development Taskforce."
    "It has been extremely pleasing to see the 28 companies list since I joined
    NZX, but it's important to remember that we are only at the beginning of what
    will be a decade long journey to fully develop our capital markets.
    Broadening and deepening our capital markets supports business growth and
    provides better domestic investment options, ensuring New Zealanders have the
    opportunity to invest in home grown businesses. It provides capital for these
    businesses to grow and support a vibrant economy."
    "With KiwiSaver continuing to grow, we need to provide a much greater level
    of high-quality New Zealand investment opportunities, or risk our savings
    going offshore."
    "NZX is at the centre of New Zealand's capital markets, and therefore we are
    totally committed to supporting the growth and sustainability of our markets.
    In a small market like New Zealand, this requires both investment and
    innovation. The introduction of new initiatives such as the NXT market and
    the provision of a broad range of exchange traded funds - which provide a
    simple, transparent and cost effective product for investors, while at the
    same time contributing to market liquidity - are two examples of this."
    In June, NZX welcomed the FMA's third annual General Obligations Review,
    which concluded that during the 2013 review period NZX complied with all of
    its statutory obligations to ensure that each of our registered markets and
    the derivatives market were fair, orderly and transparent. As part of the
    annual review process, NZX and FMA also agreed a set of actions relating to
    NZX's communication of its regulatory function and processes, and
    arrangements for handling perceived or potential conflicts. These have now
    been put in place.
    Soft commodities
    NZX's Dairy Derivatives business continued its rapid growth trajectory in
    2014 with the number of lots traded up 175% to 101,010.
    In recognition of the continued efforts to grow market participation and
    confidence, in September 2014 NZX's Dairy Futures Market won Best New
    Agricultural Contract at the Futures & Options World (FOW) Awards for Asia.
    NZX CEO Tim Bennett commented: "Once they are established and liquid,
    derivatives markets are a very high revenue, low marginal cost businesses,
    generating significant upside over sustained periods. While development takes
    time, the long-term payback far exceeds the initial investment. We still have
    a long way to go. Mature derivatives contracts notionally trade a multiple of
    the related underlying commodity and NZX dairy derivatives only constitute
    notional trade of around 4% of the related physical market, highlighting the
    future potential."
    Building on its success in milk powders, NZX launched a butter futures
    contract in December 2014, a global risk management tool that trades off the
    underlying price for unsalted butter on the GlobalDairyTrade auction
    NZX's Australian business Clear Grain Exchange traded 594,619 tonnes during
    2014, down 3.6% on 2013 due to a smaller harvest (down 10% year on year) in
    Clear's key east coast market. Clear diversified its product offering during
    the year with the launch of a forward grain contract, and a revised model for
    entry into South and Western Australia. These products will help increase
    Clear's participation in the spot and forward markets at a national level.
    However, the smaller 2014 harvest in Clear's key markets, together with rapid
    selling early in the season when prices were high, means that only a very
    limited pool of grain remains from the 2014/15 harvest, and NZX will look to
    the 2015/16 harvest for a return to volume growth.
    NZX Agri
    NZX's Agri business recovered from the impact of the drought that stagnated
    growth in 2013. Advertising revenues were up 8.1% in 2014, the volume of
    advertising in print publications was up 1.6%, and subscriptions were up
    In October, NZX Agri launched a step-change in dairy forecasting, with two
    online forecasting tools developed in conjunction with Massey University,
    designed to provide better insights into New Zealand milk production and
    farmgate milk prices.
    NZX CEO Tim Bennett commented: "Continued growth in the farming sector means
    the NZX Agri team are committed to expanding the range of information and
    data NZX provides to the sector to help support business decision-making."
    Funds management
    During 2014 Smartshares funds under management (FUM) grew by 40.4% while
    units on issue were up 45.9%. Excluding the two new ETFs launched in
    December, FUM and units on issue were up 15.7% and 11.1% respectively.
    In January, NZX completed its largest acquisition to date, purchasing leading
    passive superannuation funds manager SuperLife. SuperLife and Smartshares
    together have nearly $1.7 billion of FUM and of this total, more than $400
    million is in KiwiSaver funds.
    The acquisition will enable NZX to accelerate the growth of exchange traded
    funds in New Zealand by enabling Smartshares to launch a broad range of ETFs.
    This will include funds based on domestic and offshore equities and fixed
    ETFs provide simple, transparent and low cost investment options for
    investors. A broader range of traded products in New Zealand will also
    increase liquidity in the market.
    NZX CEO Tim Bennett commented: "Post acquisition, NZX is focussed on creating
    a vibrant exchange traded funds business within the NZX Group that will
    ultimately increase market liquidity, stock lending opportunities and provide
    greater choice and cost effective diversification for investors."
    "Our success here will be driven by the introduction of a broader product
    offering, lower costs, and effective distribution and marketing efforts which
    are now underway."
    Market Operations
    Market operations revenue for 2014 was down by 2.0% to $11.6 million.
    In NZX's Energy business there was a continued high level of service and
    system development activity however this was offset by the loss of the GIC
    gas allocation contract in December 2013.
    NZX expects the electricity market operator contracts, which expire in 2016,
    to come up for tender in 2015. As an independent service provider, NZX (and
    M-co before it) have performed these roles on behalf of the Electricity
    Authority efficiently and effectively since 2008. NZX has developed
    considerable expertise in the sector to deliver the systems and processes
    that enable reliable operation of the market. Going forward, NZX is committed
    to supporting the Electricity Authority in its work to promote a competitive
    electricity sector.
    At 31 December 2014 NZX had 188 Full Time Equivalent staff, an increase of 12
    compared to 31 December 2013, as a result of additional investment in
    regulation, technology and operations to support the growth of the capital
    markets. The rate of employee cost growth slowed in the latter part of 2014.
    Payroll costs were also higher due to a significant increase in contractor
    costs necessary to provide resources to complete major Energy consulting
    projects. These costs will reduce as projects come to completion in Q1 2015.
    Professional fees were significantly higher in 2014 due to costs associated
    with the SuperLife acquisition and the launch of new products, work related
    to energy consulting projects and costs related to the ongoing Ralec
    Other expenses were mainly stable compared to 2013.
    NZX's businesses operate in three high growth sectors of the New Zealand and
    Australian economies: capital markets, funds management and agriculture. Over
    the past two years we have built the foundation required to exploit this
    growth; a great team, robust systems and processes, and appropriate oversight
    and governance.
    NZX CEO Tim Bennett commented: "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. In the capital markets this includes
    the launch of the NXT market, growth in derivatives and the potential
    formation of a single securities settlement system for New Zealand. The
    acquisition of SuperLife provides the catalyst to accelerate the growth of
    ETFs in New Zealand by providing a much broader range of simple, transparent
    and low cost listed products for investors."
    The NZX Board has declared a final dividend for the full year of 3.0 cents
    per share, fully imputed, in accordance with its previously communicated
    intention. NZX's dividend policy targets distribution of 80% of free cash
    flow, subject to the commitments of NZX and the usual constraints of working
    capital and solvency requirements.
    The dividend record date for the dividend will be 13 March 2015 with a
    payment date of 27 March 2015.
    Media contact:
    Kate McLaughlin
    Head of Communications
    T: 09 309 3654
    M: 027 533 4529
    E: [email protected]
    Investor contact:
    Bevan Miller
    Chief Financial Officer
    M: 021 276 7359
    E: [email protected]
    End CA:00260695 For:NZX    Type:FLLYR      Time:2015-02-17 08:33:16
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