nzx 2011 first half results presentation · 2017-05-23 · nzx 2011 first half results...

NZX 2011 First Half Results Presentation

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Contents

NZX Group Description

1H 2011 Summary

Outlook

Business Review

- Revenue

- Expenses

- Capital Structure and Investments

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NZX is an integrated, Information, Markets, and Infrastructure business. These

three business areas are operated on an increasingly integrated fixed cost base:

Information - Provides high quality securities market and soft commodity

market information

Markets - Operates cash equities, bonds, derivatives, and spot commodities

markets

Infrastructure - Operates clearing and settlement platforms in securities and

energy, and designs, builds, and operates other contracted technology

platforms

NZX Group

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1H 2011 Summary

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NZX 1H 2011 - Key Points

Overall

EBITDAF up 36% on pcp

Normalised NPAT up 42% on pcp

Revenue growth of 11% and cost contraction of 3% on pcp

Strong operating leverage evident in 1H11 result

Quarterly dividend of 2.75 cents per share fully imputed declared, to be paid on 9 September 2011

Revenue

Information - Overall growth of 2%; solid growth in direct products of 9% and agri information of 7%

countered by negative impact on data terminal revenue of appreciating NZD

Markets - Up 15% on pcp, with strong growth balanced across derivatives and cash markets. IPO’s

and Secondaries significantly softer in Q2 than Q1

Infrastructure - Up 21% on pcp driven by Clearing House and new technology contracts

Other

Link Market Services - Continued strong profit growth in 1H11, with EBITDA up 33% on 1H10

nzx.com internally designed, built and launched, providing improved market tools and functionality

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1H 2011 Result - The Numbers

1H11 ($M) 1H10 ($M) change ($M) change (%)

Operating Revenue $26.59 $23.93 $2.66 11%

Operating Expenditure $14.94 $15.38 ($0.44) (3%)

EBITDAF $11.65 $8.56 $3.09 36%

EBITDAF Margin 43.8% 35.5%

NPAT $4.51 $5.68 ($1.17) (21%)

Normalised NPAT $6.62 $4.67 $1.95 42%

Fully Diluted Normalised EPS 5.4c 3.7c 1.7c 45%

NPAT impacted by non-cash FX loss on Markit shares of $1.91M vs an FX gain on Markit shares of

$1.23M in 1H10

Excluding the non-cash FX variation (and associated tax) on the Markit shares, 1H11 NPAT was $6.62M

vs equivalent 1H10 NPAT of $4.67M, an increase of 42%

Ordinary shares on issue down by 3% on pcp to 121,346,054 as at 30 June 2011

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1H 2011 Revenue - The Numbers

1H11 ($M) 1H10 ($M) PCP %

Information

Agri Information $5.72 $5.33 7%

Securities Information $4.52 $4.67 (3%)

Total Information $10.24 $10.00 2%

Markets

Listings & Issuer Services $5.54 $4.80 15%

Securities Trading & Participant Services $2.92 $2.50 17%

Fund Services $1.14 $1.10 4%

Commodities Trading $0.72 $0.54 33%

Total Markets $10.32 $8.94 15%

Infrastructure

Energy* $3.35 $3.80 (12%)

Securities Clearing$1.70 $0.68 150%

Tech & Custom Services $0.98 $0.51 92%

Total Infrastructure $6.03 $4.99 21%

Total Revenue $26.59 $23.93 11%

*Includes amount that was previously under “Energy Trading”

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Outlook

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NZX 2011 General Seasonal Characteristics and 2011

Specific Factors

General Characteristics

NZX is a second half business, with both pricing and seasonality drivers resulting in a consistently

stronger 2H than 1H on a like to like basis (five-year average revenue split of circa 46% in 1H and

54% in 2H)

NZX re-prices circa 50% of revenue annually on July 1: In 2011 the July 1 price change is between

2% and 4% across circa 60% of revenue, resulting in both revenue and margin growth

Seasonality in Agri businesses sees revenue typically 5% - 8% higher than 1H

Secondary listings (programmatic issuance like DRP’s and stock plans) highest in Q4, off higher fee

base

2011 Specifics

Telecom split and other listings (subject to impact of recent market volatility), and contracted

energy development, to provide incremental revenue vs 1H11 of circa $1M

Expenses expected to be relatively stable across 2H absent unusual events

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Value Driver March Investor Day Comment

Information sales(Information)

Full Year revenue growth of $1M - $1.5M expected

1H11 Agri revenue up 7% or circa $400K

Additional 2H11 seasonality expected to add circa 5% - 8% to 1H Agri revenue

Unexpected rise in NZD:USD impacted Securities Information revenue

Listings outlook(Markets)

Two listings YTD; pipeline healthiest since 2004

Listing fees adjustment of 3.5% on July 1

Telecom split confirmed

Some expected 1H listings delayed, but 2H11 pipeline remains solid

Unknown impact of recent market volatility on listing plans

Securities trading(Markets)

No comment provided Cash market trading revenue outperformed: up 29% on pcp

Outperforming on volume and value traded e.g. 92 days when ADV exceeded $100M vs 32 in pcp

Derivatives(Markets)

Possible revenue upside from new participants while liquidity develops

Dairy Futures volumes have grown at over 35% per month since launch

OMFinancial signed up as first NZ based derivatives participant

Key Value Drivers - Financial

2H Updated Outlook

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Grain exchange(Markets)

$2.25M P&L turnaround Base case reduced to circa $1.5M - $1.8M P&L turnaround

Weak 2Q reported grain volumes

Clearing house(Infrastructure)

Expect annual revenue of circa $3M

1H11 revenue of $1.7M

Demand for value added services such as stock lending strong, improving liquidity, market quality and revenue

Infrastructure and technology(Infrastructure)

$1.4M - $1.7M additional revenue, with additional upside likely

$500K increase in tech and custom services on pcp

Additional tech and energy development revenue scheduled for 2H11 of circa $850K

Expense management P&L costs flat, net cash spent to be reduced by around $1.5M

1H11 expenses 3% lower than pcp

P&L expenses expected to be relatively stable around these levels absent unusual events

Capex Capital refresh only, estimate circa $2M down from $5.5m in 2010

Capex circa $1.8M during 1H11

Circa $1M invested in nzx.com and clearing house

2H11 capex expected circa $1M

TZ1 / Markit N/A Expect US$21M cash in 2012; shares at Markit’s option

Key Value Drivers - Financial (cont)

Value Driver March Investor Day Comment 2H Updated Outlook

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Business Review - Revenue

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Information: Agri

$0M

$2M

$4M

$6M$5.72M

$5.33M

Revenue 1H10 vs 1H11 ($M)

1H10 1H11

Commentary

1H11 revenue increase of $400K up 7% on pcp

Total paid subscriptions in 1H11 of 19,280 up 31% from 14,749

in 1H10, reflecting deliberate revenue quality strategy

Advertising revenue in 1H11 of $3.73M up 5% on 1H10,

reflecting greater agri sector spending

Weak Jan - Mar in CountryWide as transitioned to

subscription model

Outlook and Value Drivers

Agri seasonality has consistently resulted in 2H being 5% -

8% higher compared to 1H

Growth in subscription numbers across all products expected

to continue throughout 2H11

Rising farm gate returns and Rugby World Cup should also

deliver advertising spend bounce

Subscription Revenue Trend ($M)

$0.4M

$0.8M

$1.2M

$1.6M

$2.0M

2H09 1H10 2H10 1H11

$1.96M$1.94M$1.78M

$1.63M

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Information: Securities (Market Data and Direct Products)

$0M

$0.3M

$0.6M

$0.9M

$1.2M

$1.5M

USD NZD

$1.12M

$1.41M$1.22M

$1.40M

Royalty Revenue 1H10 vs 1H11 ($M)

0

17

34

51

68

85

2H10 1H11

85

73

Data Licenses*

1H10 1H11

Commentary

Total revenue in 1H11 of $4.52M, down 3% on 1H10

Market data terminal revenue fell $341K or 9% as circa 62%

of market data royalty revenue was derived in USD

Market data terminals (royalties), were 7,358 at end of 1H11,

versus 7,335 at end of 1H10 and 7,536 at 2H10

Direct products (i.e i-Search, CRC, etc) up 9% on pcp


NZD:USD cross rate a key driver

Pricing review scheduled for all products

Terminal sales driven by additional derivatives customers,

volatility and other cash market catalysts (e.g. Telecom split

and potential SOE listings)

*Real time (primary) and delayed (other) data licenses

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Markets: Listings

$0M

$1.108M

$2.216M

$3.324M

$4.432M

$5.540M

1H10 1H11

$0.98M$1.14M$3.29M

$2.88M

Revenue Breakdown 1H10 vs 1H11 ($M)

Annual SecondaryInitial Other Issuer Services

$0.28M

$0.99M$0.50M$0.28M

Commentary

Total listings revenue up 15% vs 1H10

Q2 significantly softer than 1Q on capital raised in both IPO’s

and secondaries

Credit market uncertainty may see continuation of trend to

equity


Telecom split into two separate listed entities announced for

4Q11

Healthy pipeline for 2H11 with reasonably diverse companies

ranging from $20M tech growth company through to $200M

established services company

Unknown impact of recent market volatility on listing plans

Listing fees adjusted upwards by 3.5% as of July 1

Election in November will provide clarity in terms of partial

floats of SOEs

Total Capital Raised 1H10 vs 1H11 ($B)

$0B

$0.5B

$1.0B

$1.5B

$2.0B

1H10 1H11

$0.5B$1.2B

$1.2B

$0.6B

Equity Debt

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Markets: Secondary Listing Fees Calculation

Example Illustrating Revenue Differences at Different Secondary Issuance Levels*

Commentary

The absolute level of issuance is not the only driver of NZX's

revenue; the composition of the issuance is also important

Lots of small issuance events generate significantly more

revenue than one large one on a relative basis. For example:

- One secondary capital raising of $15M, generates revenue

of $16,765

- One hundred secondary capital raisings of $150K each (i.e.

$15M raised), generates revenue of $131,300 (or 8x the

revenue if done in one chunk)

NZX’s first half (e.g. FBU $612M issuance) was comprised of

an unusually high proportion of large chunks

Relatively higher value issuance occurs on a seasonal basis

heavily in Q4, comprised of multiple programatic issuance

under DRPs, stock plans, etc

NZX’s Issuer Fee Schedule which outlines all fees charged, in

detail available at https://www.nzx.com/services/listing_fees

$10M spread equally over 10 transactions results in

revenue of $38,420

$10M spread equally over 100 transactions results in revenue of $111,800

$100M over 1 transaction results in revenue of

$35,645

$100M spread equally over 100 transactions results in revenue of

$384,200

10 Transactions 100 Transactions

$1

0M

Ra

ise

d$

10

0M

Ra

ise

d

*Calculated based on section II.2.2 Subsequent Issues in the NZX Issuer Fee Schedule

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Average Daily Value 1H10 vs 1H11

$60M

$80M

$100M

$120M

$140M

Jan Feb Mar Apr May Jun

Markets: Trading (Cash Markets and Derivatives)

Commentary

Trading revenue across cash market up 29% vs 1H10 on

stronger equity trading volumes

Cash market ADV traded up 30% at $115.7M for 1H11 vs 1H10

$89.0M;

Average daily trades at June 30 2,777 up 28% on pcp (now

circa 2,930)

Value traded exceeded $100M on 92 days vs 32 in pcp

Derivatives volumes growth monthly CAGR of above 35%

between launch in October 2010 and July 2011


NZX cash market volumes not following international trends

in declining volumes (U.S. cash equity volumes dropped circa

20% vs previous June year)

New participant (OMFinancial) in derivatives

Participant fees adjusted upwards by circa 2% as of July 1

Expect to launch options on WMP Futures

1H10 1H11 5 Year Avg

0

300

600

900

1200

1500

Jan Feb Mar Apr May Jun Jul

1408

953

698

523

392270250

455

255175131112

2040

Dairy Futures Lots Traded*

* As at 31/07/2011

Month Cumulative

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Markets: Spot Commodities

Commentary

Sensitivity of Clear Grain Exchange trading volumes to price

levels now apparent off current customer base (minimal

trading at low prices as growers hold grain)

Grain price collapse mid H1 resulted in fall in all

transactions, including NZX Clear

Season to date tonnes traded of 333K, up 63% vs prior season

Currently 6,840 “activated” grower accounts on NZX Clear at

end of this harvest vs 3,961 at end of last harvest


Big grain carry-forward from 2010 harvest (unsold grain due

to low prices) so greater total market volume expected to be

traded next harvest

Business initiatives being undertaken in the off-harvest (Jul-

Sep) to reduce reliance on market price to drive volumes

Tonnes Traded Per Month (09/10 harvest v 10/11 harvest) and Wheat Price (10/11 harvest)

20000

40000

60000

80000

100000

Oct Nov Dec Jan Feb Mar Apr May Jun

09/10 10/11

Harvest commences 1 October. Wheat price based on average of the daily CBOT SRW Settlement Price converted to AUD$!

$0M

$0.2M

$0.4M

$0.6M

$0.8M

$0.72M

$0.54M


1H10 1H11

$200

$225

$250

$275

$300

Wheat Px

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Markets: Smartshares

Commentary

Revenue at $1.14M up 4% on pcp

Upward trend in ETF units on issue continues and 1H11 units

on issue up 10% on pcp

FUM of $341M in 1H11 vs $306M in 1H10, an increase of 11%

Positive benefits of stock lending starting to flow through in

terms of revenue and liquidity benefits for overall market


Continuation of upward trend in stock lending income

Incremental growth through continued cost management

Continued growth in FUM and units on issue driven by

strength in SmartTENZ volumes

2H dividends from underlying holdings typically higher

providing stronger revenue stream vs 1H$0M

$87.5M

$175.0M

$262.5M

$350.0M

1H10 2H10 1H11

$341M$337M$306M

Funds Under Management

Units on Issue - ETFs

40M

80M

120M

160M

200M

1H10 2H10 1H11

191M183M174M

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Infrastructure: Securities Clearing

Annual Fees16%

Depository27%

Clearing45%

Settlement9%

Stock Lending3%

$0M

$0.3M

$0.6M

$0.9M

$1.2M

$1.5M

$1.8M

$1.70M

$0.68M


1H10 1H11

Clearing House Revenue Split

Commentary

Securities clearing revenue strong at $1.70M, a 9% increase

from Q410 run rate (clearing house launched in Sep 2010)

$14.1B cleared in 1H11, with fails reduced by 53%, evidence

of positive impact on market integrity

Stock lending exceeding expectations and being undertaken

for both settlement and liquidity purposes

Recent one day index falls of > 3% handled easily by risk

management and collateral systems


Focus on sales to acquire new depository participants

Working with trustee organisations to increase the amount of

stock available for lending

Improving equity and derivative market volumes

NZCC fees adjusted upwards as of July 1

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Infrastructure: Energy and Other Technology

$0M

$1M

$2M

$3M

$4M

1H10 1H11

$0.65M$3.35M

$3.15M

Energy Revenue 1H10 vs 1H11 ($M) Commentary

Energy pass-through third party contract (noted at Q1

Investor Day) expired in November 2010 which has resulted in

revenue decline of $950K and cost removal of $750K

Ex this pass-through third party contract, revenue was

$3.35M in 1H11 vs $3.15M in 1H10, an increase of 5%

Other technology contracts revenue increased by $500K vs

1H10


Major contracted energy revenue to grow by between 3% and

3.5% in 2H11 due to contractually agreed price adjustments

Additional technology development revenue across energy

and other infrastructure of circa $850K scheduled for 2H

$0M

$0.25M

$0.50M

$0.75M

$1.00M

$0.81M

$0.30M

Other Technology Contracts Revenue 1H10 vs 1H11 ($M)

1H10 1H11

3rd party

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Business Review - Expenses

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Costs

Employee, Contractor & Related

$7.39 Decrease from 1H11 expected

Marketing, Printing & Distribution

$2.16 Reduction of circa 15% expected from 1H11 as consequence of move to subscription over free, at reduced printing levels

Information Technology $1.98 Expected to remain stable at current levels

General & Administration $1.62 Expected to remain stable at current levels

Professional Fees $0.96 Expected to reduce, subject to any significant litigation

Rebates & Incentives $0.45 Slight reduction expected (seasonal)

Fund Expenditure $0.38 Expected to remain stable at current levels

Cost 1H Actual ($M) 2H Outlook

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Business Review - Capital Structure and Investments

25

Link Market Services

Link NZ 1H11 1H10 % change

Operating Revenue

$2.8 m $2.5 m 12%

Operating Expenditure $2.0 m $1.9 m 5%

EBITDA $0.8 m $0.6 m 33%

EBITDA Margin 29.5% 24.8%

NPAT $0.3 m $0.1 m 200%

EBITDA ($M)

0.2M

0.4M

0.6M

0.8M

1.0M

1H09 1H10 1H11

0.8M

0.6M0.5M

Commentary

Net cash paid to NZX in 1H11 of $550K

Continued strong profit growth in 1H11, with EBITDA up 33%

on 1H10

Strong expense management

EBITDA approximately corresponds with free cash flow

Significant amortisation of the technology assets

Currently held on NZX Balance Sheet at $3.53M (reducing as

preferred shares redeemed)


Revenue growth expected to continue

Continued success in winning IPO mandates

Diverse debt and equity pipeline in 2H

Potential impact of SOE listings in 2012

Link Australia IPO? Or exit event?

26

Balance Sheet and Capital

30 June 2011 ($M)

30 June 2010($M)

Assets

Cash and equivalents $26.7 $16.9

Investment in Markit $25.9 $30.9

Goodwill $13.2 $13.2

Other intangible assets $36.1 $37.6

Other assets $11.9 $18.0

Total Assets $113.8 $116.6

Liabilities and Equity

Trade and other payables $20.0 $9.8

Bank loan $7.5 $10.0

Other liabilities $1.6 -

Total Liabilities $29.1 $19.8

Equity $84.7 $96.8

Total Liabilities and Equity $113.8 $116.6

Commentary

Increase in cash of $9.8M

Increased cash paid in dividends, with $11M paid year to date

to shareholders

Depreciation of $2.55M

NZD:USD reduced carrying value of Markit shares by $1.91M

vs 2H10

At June 30 121,346,054 ordinary shares on issue;

122,613,915 fully diluted shares on issue including restricted

shares reduced by $3.48M, down 3% on pcp


Depreciation and amortisation unchanged at circa $2.5M

FY2011 capitalisation likely circa $2.5M to $3M reflecting

unanticipated capital maintenance and nzx.com

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Share Capital

30 June 2011 30 June 2010 Change (%)

Fully paid ordinary shares

General 120,438,972 122,686,913 -1.83%

CEO share scheme 907,082 1,803,351 -49.70%

Total fully paid ordinary shares 121,346,054 124,490,264 -2.53%

Restricted & Employee

Employees (Team & Results) 997,694 1,333,125 -25.16%

Country-Wide Publishing 270,167 270,167 0.00%

Total restricted shares 1,267,861 1,603,292 -20.92%

Total Issued Capital 122,613,915 126,093,556 -2.76%

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Investor Information

Quarterly dividend of 2.75 cents per share fully imputed declared

- Record date 2 September 2011 and Payment date 9 September 2011

NZX Full Financial Reports available for download from:

http://www.nzxgroup.com/documents

For more information please contact:

Rowan Macrae

Direct Line: +64 4 4962874

Mobile: +64 27 4727599

www.nzx.com

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similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance,

anticipated growth and trends in businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are

based on current expectations and could be affected by uncertainties, changes in market conditions, regulatory settings, technology, or other factors. NZX's actual

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nzx 2011 first half results presentation · 2017-05-23 · nzx 2011 first half results...

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