NZX looks ahead after costly year

NZX shares fell from a 21-month high after the stock market operator unveiled a slump in annual profit while saying the groundwork was laid for future earnings growth.

The shares closed down 3c at $1.11 ending a 15 per cent rally since early December as investors digested the Wellington-based company’s annual report showing a 62 per cent slide in profit to $9.2 million in calendar 2016.

The year-earlier figures were flattered by an $11.8 million gain on the sale of its half-share in Link Market Services, and earnings before interest, tax, depreciation and amortisation fell 8.4 per cent to $22.5 million, as operating expenses climbed 13 per cent to $55 million, outpacing a 6 per cent gain in revenue to $77.5 million.

“The share price improved a little bit in the last month or so ahead of the result,” said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. “The result itself again showed expenditure growth outpacing revenue growth, which has been one of the main concerns for investors.”

NZX blamed the jump in expenditure on several one-off factors, including the dispute with the former owners of the Clear Grain Exchange, which cost the stock market operator $3 million in calendar 2016 alone when the case hit the courts and resulted in what the judge described as a “nil-all draw”. On top of that was a $1.3 million payment to senior executives with the departure of chief executive Tim Bennett along with the cost of finding his replacement.

NZX was more optimistic about 2017, forecasting ebitda of between $27 million and $30 million, although that depends on a number of factors.