NZX confirms first-half profit slump, Agri info is bright spot

BUSINESSDESK: NZX, New Zealand’s stock market operator, posted a 28% drop in first-half profit as revenue growth stalled and expenses rose, squeezing its earnings margin.

Profit was $3.25 million in the six months ended June 30, from $4.5 million a year earlier, the Wellington-based company said in a statement. Operating revenue rose 1% to $26.5 million.

The first-half results confirm NZX’s Agri information unit as the biggest source of revenue, growing 8% to $6.2 million in the latest period, driven by growth in subscriptions, while advertising revenue was little changed at $3.76 million.

The company expects subscription growth to continue in the second half, when it typically enjoys the benefit of a seasonal pickup.

The results are the first for new chief executive Tim Bennett, who described them as “a solid performance in challenging global conditions”. 

Overall, though, “tighter than expected trading conditions in the second quarter are expected to continue into the second half of the year”, he says.

NZX first flagged the earnings slump on July 30, highlighting a jump in expenses including one-time CEO transition costs, the costs of the Ralec litigation related to the Grain Exchange and about $2 million in other one-time costs.

That drove a 17% gain in first-half expenses to $16.9 million and resulted in the earnings before interest, tax, depreciation and amortisation margin shrinking to 36.1% from 44.6%.

Total revenue from information sales rose 5% to $10.8 million, making that the largest part of the business. Revenue from markets, including listings and trading, fell 2% to $9.7 million.

Infrastructure sales, which are made up of securities clearing and market operations, rose 1% to $6 million.

Listings sales tumbled 23% to $4.1 million, reflecting zero IPO activity in the second quarter and lower secondary listings. Securities trading sales rose 30% to $1.56 million and revenue from commodities trading jumped 101% to $1.17 million.

NZX says global uncertainties are likely to persist in the second half, with trading volumes flat or declining and capital raising “below historic averages". Securities information revenue would be flat, with agri information growing at a slower pace.

The company cites “some upside in listings” with the potential IPO of Mighty River Power and the Fonterra farmers’ shareholder fund in the fourth quarter.

The company will pay a second-quarter dividend of 1.25 cents a share on September 14 to shareholders on the register as at August 31.

Shares of NZX were unchanged at $1.14 and have gained 16% this year. The stock is rated a "hold" based on the consensus of three recommendations compiled by Reuters with a price target of $2.54