NZX first half profit up 42%

Stock market operator NZX Ltd boosted first half profit by 42% to $6.62 million before unusual items, with revenue up 11% to $26.59 million.

Operating profit climbed by 36% to $11.65 million for the six months to June 30 with revenue growth in markets and infrastructure the standout contributors.

Chief executive Mark Weldon noted that NZX was traditionally a second-half business, with an average of 54% of annual revenues earned in the six months to December.

“NZX expects a strong second-half trend to occur again this year, reflecting some seasonal factors, price adjustments across a large percentage of the revenue base.”

Operating spending declined by 3% to $14.94 million.

Net profit fell 21% to $4.5 million, affected by a non-cash foreign exchange loss on Markit shares of $1.9 million, compared to a foreign exchange gain of $1.2 million a year earlier

Directors declared a quarterly dividend of 2.75 cents per share, fully imputed, payable on October 29.

NZX’s markets business recorded revenue of $10.3 million, up 15%, with listing and issuer fees contributing $5.54 million compared to $4.8 million in the previous corresponding period.

The infrastructure business - which operates clearing and settlement platforms in securities and energy - had a 21% rise in revenue to $6 million.

Revenue in the information business for the six months to June 30 was 2% higher at $10.2million.

Revenue from agri-information activities rose 7% to $5.7 million, but securities information revenue fell 3% to $4.5 million due to flat market data volumes and an appreciating US dollar. 

Clear Grain exchange

NZX said the value of its Australian Clear grain exchange (CGX) remained unchanged at $7.45 million after a recent valuation review audit.

That followed media reports highlighting comments by Mr Weldon in a Melbourne court suggesting the business was not performing as expected.

NZX said today that to sustain CGX’s carrying value on the NZX Group balance sheet, the CGX business is expected to need to achieve market share in relevant market segments at or around 7% by 2015, which is not materially above current market share levels estimated at around 4% of the relevant market.

NZX bought Clear in October 2009 for $A6.4 million, but last month filed court action against the founders of Clear alleging breach of warranty and other claims.

The original sale and purchase agreement provides for NZX to make an additional payment of $A7m ($9 million) subject to certain targets being met, including grain tonnage traded.

NZX said today that no provision for this payment has been made at 30 June 2011, as based on grain volumes, NZX Clear traded less than 13% of the required metric tonnes at 30 June 2011.

“Given its track record NZX Clear is a 'transitional' business that is evolving with the market, rather than a 'breakthrough' business which transforms the market.”NZX added that it did not expect the required threshold at 30 June 2012 will be met.

The sale and purchase agreement also provides for a further additional payment of $A7m ($9 million) on the development of an “Agri-Portal software platform.

NZX has not made a provision for this payment either.

“The grain trading volumes on Clear to date have not reached close to the level where it is the key marketplace for spot trading of grain as required under the SPA [sale and purchase agreement].

“Neither is the Clear platform the key marketplace for the spot trading of any other soft commodities, nor - and closely related to this - is there sufficient proprietary content for the Agri-Portal to be put into operation to the satisfaction of NZX at this time.”