NZX will pursue sales growth this year, after wearing the cost of reshaping its business in 2018 as part of a five-year strategy to revive the capital markets.
Net profit fell to $11.6 million in calendar 2018 from $14.8 million. That was largely due to $3 million of impairment charges NZX booked in selling its Farmers Weekly, AgriHQ and grain information businesses, which no longer sat comfortably within the stock market operator’s plans to refocus on its core market business.
Operating earnings from continuing operations were flat at $27.3 million.
NZX unveiled its long-term strategy in late 2017. At that time it flagged that 2018 would set the platform for future growth, with a key focus on its traditional markets business. Since then it has introduced new listing rules and an updated fee structure to encourage more trading through the formal market.
Chief executive Mark Peterson said the stock market operator made a lot of progress in 2018 setting the foundation for the long-term plan, and will ramp up sales and marketing this year as a result.
“The orientation of the business is now going to really swing to sales and growth and marketing,” he told BusinessDesk.
NZX forecast operating earnings of $28 million-31 million for calendar 2019, which Peterson said will see a full year of the stock exchange’s new pricing schedule.
The company’s shares fell 2 cents to $1, down 8.7 percent from a year earlier.
The board declared a final dividend of 3.1 cents per share, unchanged from a year earlier, to be paid on March 22. That was in line with expectations, and takes the annual return to 7.6 cents, including a special dividend paid from the proceeds of the asset sales.
NZX’s revenue edged up 0.5 percent to $67.5 million, underpinned by a good result from its funds management business, which saw a 7.6 percent revenue gain to $14.5 million.
Issuer relationships revenue fell 2.8 percent to $23.6 million, as issuers delisted and the initial public offering pipeline remained subdued. Secondary markets revenue increased 0.1 percent to $16.7 million, reflecting three months of the new pricing schedule, while data & insights revenue gained 7.6 percent to $11.7 million.
While the lack of IPOs has been a source of criticism for the NZX, secondary market capital raisings, debt market listings, and the growing value of on-market trades all improved in 2018.
Peterson said the NZX’s initiative with the Financial Markets Authority for an industry-led Capital Markets 2029 review will build on the stock market operator’s own efforts to renew wider interest in the capital markets.
That sentiment is shared by Chapman Tripp’s latest trends and insights paper on equity capital markets, also released today.
Partner Rachel Dunne is on the same page as Peterson in viewing the NZX’s long-term strategy as a work in progress, but one which should ultimately lead to a healthier capital market and set the stage for more IPOs this year.
Among those is the planned float of Napier Port by the Hawke’s Bay Regional Council. Dunne said that differs from other rumoured IPOs in that the council has gone out and secured a mandate for the partial privatisation.
NZX also outlined how it plans to measure its success in achieving the long-term plan. For 2019, it wants the core markets to see $9.1 billion of primary and secondary capital raised, with $41 billion traded on the secondary market. Over the five-year horizon, NZX wants to see that rise to $11-12 billion raised by 2023 and $42.5-45 billion traded in the secondary market.
For its funds management business, NZX’s “aspirational” goal is to have $5-5.75 billion of funds under management by 2023 from the $2.9 billion at the end of 2018.
It also aims to lift funds under administration in its wealth technologies to $35-50 billion from $2 billion.
If NZX can achieve those high-level goals, it estimates operating earnings of $42-54 million in five years.