Ann: FLLYR: NZX: NZX Full Year 2013 results annou

• Release Date: 21/02/14 11:14
• Summary: FLLYR: NZX: NZX Full Year 2013 results announcement
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					NZX
21/02/2014 09:14
FLLYR

REL: 0914 HRS NZX Limited

FLLYR: NZX: NZX Full Year 2013 results announcement

NZX today reported its full year financial results for the year ended 31
December 2013, which was a record year for Initial Public Offerings and
equity trading activity.

Revenues for the year of $62.8 million were up 12.2% on the previous year. As
well as the very strong performance of NZX's capital markets businesses,
additional revenue from market operations activities, including NZX's
operation of the Energy markets and the Fonterra Shareholders' Market,
contributed to the revenue growth.

This positive performance was partly offset by the impact of the worst
drought in 70 years on NZX Agri's performance, and the timing of grain
trading through the harvest in Australia.

NZX CEO Tim Bennett commented: "Activity in New Zealand's capital markets in
2013 was at its highest in a more than a decade which clearly has a direct
and positive impact on NZX's financial performance. Driving this activity is
what we consider are structural changes in the market, including the growth
of KiwiSaver, and a more positive New Zealand and global economic
environment."

"To support these changes, NZX is continuing to invest in building a strong
foundation from which to grow the business, and to support the growth of New
Zealand's capital markets in the long term."

** Reported results are summarised in the table in the announcement attached.

Included in 2013 reported Net Profit After Tax was an impairment expense of
$2.6 million ($2.0 million net of tax). Of this, $2.4 million was to reduce
the carrying value of the Group's investment in the Clear Grain Exchange and
$0.2 million to write down the NewsRoom brand asset.

Included in 2012 reported Net Profit After Tax was a foreign exchange loss of
$1.5 million on the realisation of the Group's former investment in Markit.

Business Highlights

Capital markets

NZX's capital markets businesses performed strongly in 2013. Revenue was up
18.2% to $35.0 million. Initial Public Offering activity in 2013 was at a 10
year high, resulting in new capital listed of $7.5 billion. The 10 new
listings comprised a broad range of company sizes and industry sectors,
comprising Airwork Group, GeoOp, Meridian Energy, Mighty River Power, SLI
Systems, Synlait Milk, Snakk Media, Wynyard Group, Z Energy and the reverse
listing of Mad Butcher via Veritas.

The listing fees associated with this IPO activity have contributed to NZX's
current year results, and will also provide recurring annual listing, trading
and clearing revenues.

NZX CEO Tim Bennett commented: "The level of IPO activity in 2013 is of
long-term benefit to New Zealand's capital markets. It adds greater depth to
the market, a broader range of investment opportunities for New Zealanders
and, particularly in the case of the Government share offers, brings new
investors into the market."

NZX's securities data revenues were down 0.9% to $8.9 million. This was due
to primary data distributors declining 7.7% during the year to 24.  However,
real time data terminals increased by 6.0% to 7,291, further demonstrating
the renewed interest in New Zealand's capital markets.

Securities trading revenue increased 34.4% as the number of trades increased
32.0% and total value traded increased 39.6% compared to the prior year.
This buoyant capital markets activity drove growth in NZX's Clearing House
and Depository business with gross value of cleared trades over the period up
40.0% to $42.4 billion. Stock lending activity also grew strongly, up 28.3%
to $2.8 billion.

The market performed strongly during the year, with the NZX 50 Index up 16.5%
to 4,737.

Soft commodities

NZX's Dairy Derivatives business continued its growth trend in 2013, with the
number of lots traded up 52.0% to 36,748, and open interest at 31 December
2013 up 316.4% to 9,070. While this business is still in the early stage of
its lifecycle, it has considerable long term potential.

In early 2014, the US regulatory agency the Commodity Futures Trading
Commission (CFTC) registered NZX as a Foreign Board of Trade under the US
Commodity Exchange Act. The registration allows NZX to permit direct access
to participants in the US to trade NZX Dairy Derivatives on NZX's trading
platform, significantly increasing the available market. Whole Milk Powder,
Skim Milk Powder and Anhydrous Milk Fat Futures, and Whole Milk Powder
Options can be traded on NZX.

Tonnes traded on the Clear Grain Exchange were down 24.5% to 616,828 due to a
significant amount of grain being sold earlier in the 2012/13 harvest cycle.

Agri information

2013 was a tough year for New Zealand's agricultural sector with severe
drought conditions across the country in the early part of 2013 and into Q2.
This negatively impacted NZX's Agri information business with revenue down
2.9% to $12.0 million. This comprised a decline in revenue on the prior
comparable period of 7.6% in the first half of 2013 partly offset by a 1.8%
increase in the second half as the sector recovered. Total paid advertising
page equivalents were down 5.9% for the full year and dairy information
subscriptions were down 2.0%.

However, there were a number of operational milestones achieved in the Agri
business including a steady increase in visitors to Farmers Weekly Online and
the launch of the Dairy Trader website dairytrader.co.nz.

Funds management

In NZX's funds management business, Smartshares, funds under management was
up 11.2% and units on issue up 4.5%.

Market Operations

Market Operations revenue was up 19.0% on the prior year to $11.9 million,
benefiting from a full year of the operation of the Fonterra Shareholders'
Market. In addition, NZX's energy business earned additional revenue through
development contract work for the Electricity Authority.  As previously
signalled, the high level of development work performed by NZX's energy
business during the first half of 2013 returned to more normal levels in the
second half.

Registry business Link Market Services, which is 50% owned by NZX, had
revenue growth of 10.8%, which was offset in part by relocation costs.

Other developments

As well as focusing on delivering value in its existing businesses, NZX also
progressed a number of growth initiatives during the period.

Initiatives underway include development of a new market aimed at small to
medium sized businesses that wish to raise new capital and/or provide
liquidity to shareholders. Recent structural changes in the capital markets,
such as the introduction of the Financial Markets Conduct Act and increased
savings from a broad range of investors, have provided an opportunity to
develop and launch a new, unique market targeted at these businesses.

The market will address a gap in New Zealand's capital markets infrastructure
between smaller private markets, such as angel and venture capital, and the
NZX Main Board, which is targeted at larger, more established businesses.

Other initiatives include development of Equity Derivatives, and new Exchange
Traded Funds in NZX's Smartshares business.

Costs

The growth in expenses was largely driven by the following factors:

o The full year impact of staff hires made at the end of 2012
o A reduction in staff capitalisation
o Additional IT costs resulting from the refresh of non-core systems and the
full year impact of the NASDAQ X-stream trading platform launched in 2012

Staff numbers at 31 December 2013 were up 4% compared to a year earlier.

Legal costs during the period in relation to the ongoing dispute with Ralec
were $0.8 million.

Write-down of investments

NZX reduced the carrying value of its Australian business Clear Grain
Exchange by $2.4 million to the assessed fair value of $4.7 million. 2013 was
a disappointing trading year for the Clear Grain Exchange which saw revenues
fall 22.4% compared to the prior year.

In addition, as the market has evolved, it has become evident that growth in
volumes outside Australia's East Coast will require different operating
models which will take longer to implement. A number of management changes
were made to the business at the end of last year to better capture these
opportunities.

The consequence of the above factors resulted in forecast cash flows that
were no longer able to support the carrying value of the asset, necessitating
the recognition of the impairment charge.

Outlook for 2014

In NZX's capital markets business, 2014 IPO activity is expected to be
focused on smaller to medium size listings compared to 2013. Securities
trading/clearing volumes are expected to remain robust and will benefit from
the flow on effect of listings and sell-downs of strategic holdings during
2013.

For soft commodities, the profile of 2013/14 grain harvest has followed a
similar pattern to 2012/13, with large volume of sales early in season and
limited grain now remaining in silo, suppressing the potential trading
volumes in Q1 to Q3 2014.

Dairy derivative volumes are expected to continue their strong growth, but
from a very low base.  Equity derivatives are planned for launch in late
March 2014, subject to final systems testing.

Improvement is expected in the Agri information business as the impact of the
2013 drought is now behind the sector. Forward bookings for advertising in
rural publications are currently ahead of where they were at the same time in
2013.

In NZX's funds management business, the launch of two new funds management
products in 2014 is anticipated to drive growth in funds management beyond
2013 levels.

Finally, in market operations, the gas contract ($670k of revenue) ceased at
31 December 2013.  Energy consulting revenues are expected to be at similar
levels to 2013 if a major settlement project goes ahead in 2014.

NZX CEO Tim Bennett commented: "The medium term growth opportunities are
significant across most of the businesses that NZX is involved in. In the
capital markets, the impact of KiwiSaver and an increased savings rate is
underpinning a structural shift in the supply of capital."

"Coupled with this, the Financial Markets Conduct Act provides the
flexibility to introduce different types of marketplaces. In addition, the
opportunity to develop a meaningful derivatives business remains a key area
of focus for NZX."

"The growth in KiwiSaver is also anticipated to result in double-digit growth
in funds under management in New Zealand - NZX is currently the sole provider
of exchange traded funds in New Zealand, which are significantly
underrepresented in the investment environment here relative to overseas."

"Long term, agricultural exports are expected to increase at around twice the
rate of gross domestic product-NZX is well positioned to participate in this
growth through our soft commodities and agricultural information businesses."

Dividend

The NZX Board has declared a final dividend for the full year of 1.6 cents
per share, fully imputed, in accordance with the existing dividend policy.

The dividend record date will be 7 March 2014 with a payment date of 21 March
2014.

A new dividend policy will be effective from the beginning of the 2014
financial year, which is to target a distribution of 80% of free cash flow,
subject to the commitments of NZX and the usual constraints of working
capital and solvency requirements. In transitioning to this policy, the Board
has indicated that it intends to pay total dividends of 6.0 cents per share
in respect of the 2014 financial year (subject to no material adverse changes
in circumstances).  It is expected that dividends will be fully imputed. NZX
will also revert to the more conventional approach of paying half-yearly
dividends.

Media contact:
Kate McLaughlin
Corporate Communications
M: 027 533 4529
E: [email protected]

Investor contact:
Bevan Miller
Chief Financial Officer
M: 021 276 7359
E: [email protected]
End CA:00247316 For:NZX    Type:FLLYR      Time:2014-02-21 09:14:31