NZX Investor Roadshow Presentation – March 2018

Investor
Roadshow 2018
Mark Peterson, CEO
Graham Law, CFO

Forward-Looking Statement
This presentation contains forward-looking statements, which often
include words such as expects, anticipates, believes, intends, plan,
continue or other similar words in discussion of future operating or
financial performance. These forward-looking statements are based
on the Board and managements’ present expectations, estimates
and assumptions regarding its business, performance and the
current state of the markets in which it operates. As with any
forecast or projection, forward-looking statements are inherently
subject to risks, uncertainties and changes in circumstances. NZX’s
actual results may vary materially from what is expressed or implied
in its forward-looking statements. Any forward looking statements
contained in this presentation are relevant as at the date of this
presentation. Except as required by law, NZX assumes no obligation
to update or revise the content to reflect any changes in
circumstances.

Benefits of Investing in New Zealand
•Trusted business environment – 1
st
of 190 economics for ease of doing business
•Sound macro base – low inflation, strong banking sector, flexible exchange rate
•Simple tax structure
•Priority investment sectors – primary, tourism, infrastructure, manufacturing
•Exchange connected across multiple asset classes
•1
st
exchange in the world to open
•2
nd
highest P/E ratio in Asia pacific
•22% S&P/NZX 50 return in 2017
3

üDairy Derivatives
üDebt
üEnvironmental & Energy
üSuperLife
üSmartshares
üWealth Technologies
üEfficiencies
üCAPEX
üDividend
New Zealand’s Exchange
Core
Market
Growth
Opportunities Maximise
Options
Get
Fit
More Investable Product
Deeper Liquidity Levels
Greater Participation Rates
Global Presence
Our Refreshed Strategy
üEquity, Debt & Funds listings
üEnergy Market
üFonterra Shareholders’ Market
Our Vision
4

Strategy Resulted
in Fundamental
Reset of NZX
•Rigorous reviewof business by board and
management, market consultation with more
than 200 stakeholders, global analysis of peers
•Refreshedleadership team to ensure right skill
set, team now in place
•Organisationalprinciples alignedto the
customer
•Resources reallocated to high value areas
•KPIs, remuneration, reward and recognition
programme aligned to delivery
•Culture shift evident in improved employee
engagementsurvey
5

Full Year 2017 Results Highlights
*Excluding impact of 2016 Agridisposals
**Operating earnings are before net finance expense, income tax, depreciation, amortisation and impairment, adjustment to
provision for earnout, gain and loss on disposal of business and property, plant and equipment
NPAT
$14.8
61.6%
million
Operating earnings**
$29.0
31.3%
*
million
Funds under management
$2.7
25.8 %
billion
Dairy derivatives
311,675
57.2%
Lots traded
Revenue
1.1%
*
Expenses
11.6%
*
Dividend
6.1
Cents per share
2018 Guidance
$28 –$31
m
illion
6

Results Overview
2016 result included Agri
businesses which were
disposed in late 2016.
On a like-for-like basis:
•Revenue, up 1.1%
•Expenses, down
11.6%
•Operating earnings,
up 31.3%
Result underpinned by significant permanent cost savings, establishment of clear and strategic delivery plan
2017
$000
2016
$000
Changes
2017 v 2016
Operating revenue$75,325$77,544(2.9%)
Operating expenses($46,322)($55,027)15.8%
Operating earnings$29,003$22,51728.8%
Net finance expenses, tax, depreciation and amoratisationand
gain on sale($14,166)($13,335)(6.2%)
Net Profit After Tax$14,837$9,18261.6%
7

8
2017 Revenue Overview
NZX has a diversified revenue base
Annual Listing Fees14%
Initial Listing Fees1%
Secondary and Issuer Services4%
Other Issuer Services1%
Contractual and Development13%
Participant Services5%
Securities Trading8%
Securities Clearing8%
Dairy Derivatives2%
Terminal Royalties8%
Subscriptions and Licences5%
Dairy Data Subscriptions and Other1%
SuperLife10%
Smartshares7%
Wealth Technologies2%
Publishing Revenue7%
Agri Data (Non-Dairy)4%
Issuer
R
elationships
3
3%
Secondary
M
arkets
23%
Data &
I
nsights
14%
Funds
S
ervices
19%
Agri
1
1%
8

Operating Earnings of $29.0 Million
Highlights include:
•Funds Management
(Exchange Traded Funds
and KiwiSaver) business;
•Dairy Derivatives market;
and
•Cost control
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
19981999200020012002200320042005200620072008200920102011201220132014201520162017
9

Operating Earnings Waterfall
19,000
21,000
23,000
25,000
27,000
29,000
31,000
FY2016 Operating Earnings
Annual Listing Fees
IPOs and Secondary Listings
Regulatory Services
EA (Development) Revenue
Participant Services
Trading and Clearing
Dairy Derivatives
Terminals Revenue
Data and Subscriptions (including Dairy Data)
Funds Management Growth
FMCA Compliance Cost Savings
Wealth Technologies FUA and deferred Go-Live
Agri
Cost Savings (including Ralec and CEO Transition Costs)
Cost Increases (including one off items)
FY2017 Operating Earnings
$000
Corporate
Issuer Relationships
Secondary MarketsData & Insights
Fund Services
10

Operating Earnings
– Divisional Results (from EBITDA)
Core Markets:
•Issuer Relationships operating earnings $17.7
million (2016: $19.8 million) reduced due to lower
initial listing and secondary issuance fees
•Secondary Markets operating earnings $12.3
million (2016: $11.4 million) increase driven by
dairy derivatives
•Data & Insights operating earnings $10.0 million
(2016: $9.9 million), increased subscription and
license revenue offset by increased personnel
costs which are no longer being shared with Agri
Funds Services:
•Funds Management operating earnings $4.4
million (2016: $1.1 million) reflects growth in FUM
and completion in 2016 of FMCA compliance
project
•NZX Wealth Technologies (NZX WT) operating
earnings $(1.7) million (2016: $(1.4) million). Core
platform development expected to complete Q2
2018. Large client to go-live Q3 2018
Agri:
•Operating earnings improved due to 2016
disposals and the improved performance of
Farmers Weekly
Year ended 31 December 2017
Core
Markets
$000
Agri
$000
Funds
S
ervices
$000
Corporate
$000
Total
$000
Operating revenue52,3508,18414,791-75,325
Operating expenses(12,317)(6,427)(12,066)(15,512)(46,322)
Operating earnings40,0331,7572,725(15,512)29,003
Year ended 31 December 2016
Core
Markets
$000
Agri
$000
Funds
S
ervices
$000
Corporate
$000
Total
$000
Operating revenue53,57410,93813,032-77,544
Operating expenses(12,442)(10,148)(13,348)(19,089)(55,027)
Operating earnings
41,132790(316)(19,089)22,517
11

Executing the Strategy
Reshaping our business
•Full strategy reset – focus back on
core markets business, divestment
of non-core components,
maximising value of options
businesses (SuperLife, Smartshares
and Wealth Technologies)
•Relentless focus on costs,
efficiency improvement
•Re-orientation of culture to the
customer, creation of sales and
growth focused team
Advancing the market structure
•New Zealand market structure and
rule set must promote integrity
assist in delivering more investable
product, deeper liquidity levels
and greater participation rates
•Imperative that NZX progress
initiatives to grow the market
Global exchange partnerships
•Step change for NZX
•Shift focus away from regional
stock exchange model to global
exchange partnerships
•Offering value to current and
prospective issuers, increased
access for investors
12

Executing the Strategy for Growth
Rebuilding a strong foundation in the Core Market
Core
M
arket
Issuer Relationships
Secondary Market
Data & Insights
Customer engagement
Relationship managers appointed, more than 170 customers meetings
completed, 100% issuer contact on target for end of Q1 2018
Framework
More than 70 listing review rules submissions received
Product suite
Engagement, consultation and marketing collateral in progress
Sales
Engagement underway, first new participant on target for Q2 2018
Increase on-market liquidity
Revised trading and clearing pricing structure will be implemented alongside
rule changes to be consulted on in Q2 2018. NZX remains commitment to
delivering a pricing and rule structure that promotes on-market liquidity
On-market average daily value traded 50.4% in January 2018
Additional electronic trading clients added
Functionality
Dairy derivatives functionality on track for March 2018
Consultation underway for 2019 system upgrade
Post trade
Default fund consultation complete
Internal
Internal data process in place, data being delivered
B2B
Account planning underway
End user
Scoping of PRA complete, moving into development phase
Capability
Scoping for capability requirements underway
13

Executing the Strategy for Growth
Growing opportunities and maximisingoptions that will continue to drive growth
Growth
o
pportunities
Spotlight on Dairy
Derivatives
Maximise
options
2018 volume target range
400,000 – 500,000 lots
Smartshares&
SuperLife
Wealth
Technologies
2018 target FUM
growth plus 7%
Expand global access
New calendar spread functionality March 2018, extended
trading hours July 2018, options enhancements on track for
second half of 2018
Boost sales and
m
arketing
Additional New Zealand based FTE almost finalised, Asia office
on target for second half of 2018, new website on target mid-
2018
Extend product set
Skim Milk Powder Options launched December 2017, US
Lactose consultation underway
Grow end users
Engaging with third party distributors, retail investor portal
launched December 2017, SuperLifewebsite launched February
2018
Smartsharesdirect applications up 84%, unitholders up 37.6%
Cross-sell
Ongoing discussion with third party distributors
Go-live
Core platform development expected to be completed Q2
2018.
Large customer to go-live Q3 2018
14

•Create scale via global exchanges alliance model
•Major step change for NZX, shift focus away from regional stock exchange model to create partnerships with global
exchanges who are committed to promoting confidence and co-operation in their respective markets
•Already executing on this vision:
•Memorandum of Understanding signed with Hong Kong Exchanges and Clearing Limited (HKEX) in January
•Memorandum of Understanding signed with Singapore Exchanges Limited (SGX) in March
•Further Memorandum of Understandings to follow
•Under the terms, NZX will promote market development initiatives across a range of areas, share relevant
information, and partner on green finance and sustainability initiatives
•Customers will benefit from the increased international presence of our exchange, including access into new
markets for issuers, better connection points and capital flows for participants, and a broader product offering for
investors
•Additionally, it provides NZX with opportunities to promote Smartshares exchange traded funds and the dairy
derivatives market
•Next steps are a Stock Connect Agreement to operationalisethe strategy
Global exchange partnerships
Breaking away from the regional exchange model
15

Core Market
16

Core Markets –Revenue Overview
Core Markets revenue
2017
$000
2016
$000
Change
FY17 v
F
Y16
Issuer Relationships revenue24,257 26,770 (9.4%)
Secondary Markets revenue16,629 15,726 5.7%
Data & Insights revenue11,464 11,078 3.5%
Total Core Markets revenue
52,350 53,574
(
2.3%)
Core Markets –Revenue Overview
Core Markets revenue
2017
$000
2016
$000
Change
FY17 v
FY16
Issuer Relationships revenue24,257 26,770 (9.4%)
Secondary Markets revenue16,629 15,726 5.7%
Data & Insights revenue11,464 11,078 3.5%
Total Core Markets revenue
52,350 53,574
(2.3%)
17

Issuer Relationships
Create a compelling and attractive proposition for our issuing customers
Revenue
2017
$000
2016
$000
Change
FY17 v FY16
Issuer Relationships
Annual listing fees10,280 9,226 11.4%
Initial listing fees931 2,330 (60.0%)
Secondary issuance fees2,696 3,341 (19.3%)
Other issuer services586 1,144 (48.8%)
Development revenue428 1,493 (71.3%)
Contractual revenue9,336 9,236
1.1%
Total Issuer Relationships revenue24,257 26,770 (9.4%)
Strategic metrics
Number of listed issuers223232(3.9%)
Equity market capitalisation135.2 billion115.5 billion
17.1%
Debt market capitalisation26.4 billion25.7 billion2.7%
Number of new equity listings17(85.7%)
Number of new debt listings2037(45.9%)
Value of new equity listed0.48 billion2.1 billion(77.1%)
Value of new debt listed3.2 billion6.4 billion(50.0%)
Total secondary capital raised4.4 billion4.6 billion(4.3%)
Issuer Fees
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
AnnualInitialSecondary
Notes
•Annual listing fee growth from increase in number and value of listed debt
instruments and equity market capitalisation
•Substantial listing of new debt in 2016 not fully replicated in 2017
•Other issuer services revenue relates to activities undertaken by NZX Regulation
•Contractual and development revenue relates to the operation of electricity market
(under contract from Electricity Authority) and Fonterra Shareholders' Market (under
contract from Fonterra)
18

Secondary Markets
Notes
•Impact of pricing trial (aimed at increasing electronic trading flow) is reflected in 2017,
number of trades out pace actual value traded
•Trial did not include a fixed per trade fee component, increase in number of trades
does not reflect revenue collected
*Please note Dairy Derivatives revenue and trading lots are included in Growth Opportunities on page 18
Revenue
2017
$000
2016
$000
Change
FY17 v FY16
Secondary Markets
Participant services revenue3,768 3,592 4.9%
Securities trading revenue5,817 5,765 0.9%
Securities clearing revenue5,911 5,663 4.4%
Dairy derivatives revenue1,133 706 60.5%
Total Secondary Markets revenue16,629 15,726 5.7%
Strategic metrics
Number of trades2.05 million1.75 million17.1%
Total value traded44.0 billion44.0 billion-
Dairy lots traded311,675198, 303
57.2%
Number of participants36352.9%
RevenueValue and Volume Traded
$-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2008200920102011201220132014201520162017
Value Traded ($billion)
Number of Trades on SX, AX, DX, NXT
Number of Trades on SX, AX, DX, NXTValue Traded ($billion) SX, AX, DX, NXT
19

Notes
•Terminal numbers remained relatively flat in 2017
•For subscriptions and licencefees we have implemented a new pricing policy around Non-Display Applications
•Opportunity to expand dairy data offering to support the Dairy Derivatives market
Revenue
2017
$000
2016
$000
Change
FY17 v FY16
Data & Insights
Royalties from terminal6,367 6,965 (8.6%)
Subscriptions and licenses4,099
3,288 24.7%
Dairy data subscriptions693
672 3.1%
Other305
153 99.3%
Total Data & Insights revenue11,464 11,078 3.5%
S
trategic metrics
Terminal numbers (12 month
average)
7,379
7,407 (0.4%)
Number of licences97925.4%
Number of proprietary security
products subscription 4043952.3%
Number of dairy data products
subscription
77458432.5%
RevenuePercentage of Revenue
66%
64%
63%
56%
32%
32%
31%
38%
3%
4%
6%6%
2014201520162017
Terminal RoyaltiesSubscriptions, Licences, OtherDairy Data Subscriptions
Data & Insights
Grow existing data revenues, turn data into insights that drive decisions and sales
20

Grow opportunities
aligned to New Zealand
21

Dairy Derivatives
•Record volume traded up 57.2% on
2016, directly translated into revenue
growth of 60.5% to $1.13 million
•Number of active traders up 60% on
prior year (note this excludes the
additional users from the 15 omnibus
accounts)
•Executing on our final initiatives will
accurate market to scale
•Expand global access
•Bolster sales and marketing
•Extend product set
•Capital efficiency
•Already delivering – product suite
extended, announced trading hours
extension and further trading
functionality
NZX Dairy Derivatives Yearly Volumes Traded and Revenue
$-
$200
$400
$600
$800
$1,000
$1,200
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
20102011201220132014201520162017
Revenue $000
Lots Traded
Volume traded Revenue
Accelerate our dairy derivatives market to scale, support New Zealand’s position as a global leader
22

0.2 million
0.3 million
0.45 million
0.67 million
1.01 million
1.5 million
2.25 million*
~14 million
~28 million
~43 million
FY2016FY2017FY2018FY2019FY2020FY2021FY2022
Rapid growth towards significant end game
Source: Euronext; Bursa Malaysia; NZX Data; AgirHQ
* Excluding cheese and whey
50% CAGR
1x
New Zealand
p
hysical trade
Lots traded
p
er annum
Hypothetical growth scenario:
growth in the next five years
continues at 50% rate which is a
mid-point between Bursa Malaysia
and Euronext peak five year
growth CAGR
5x
New Zealand
p
hysical trade
5x
New Zealand
a
nd European
p
hysical trade
5x
t
he world’s
p
hysical trade
23

24
Maximising options

Funds Management & NZX WT
– Revenue Overview
•Funds Management operating
earnings $4.4 million (2016: $1.1
million) reflects growth in FUM and
completion of FMCA compliance
project
•SuperLiferevenue is derived from
79% variable FUM fees and 21%
fixed membership fees
•NZX WT operating earnings $(1.7)
million (2016: $(1.4) million)
Revenue
2017
$000
2016
$000
Change
FY17 v FY16
Funds Management
SuperLiferevenue7,846 7,038 11.5%
Smartsharesrevenue5,602 4,589 22.1%
Total Funds Management revenue13,448 11,62715.7%
Wealth Technologies
Administration fees1,163 1,365 (14.8%)
Development fees
180 40 350.0%
Total Wealth Technologies revenue1,343 1,405 (4.4%)
Total Funds revenue14,791 13,032 13.5%
Strategic metrics
SuperLifemember numbers50,304 48,015 4.8%
SuperLifeexternal FUM1,999m1,660m 20.4%
Smartsharesexternal FUM701m 487m43.9%
SmartsharesSuperLifeFUM1,430m 1,218m 17.4%
Total SmartsharesFUM2,131m 1,705m 25.0%
Total Fund Management FUM (external)2,700m 2,147m 25.8%
Total Wealth Platform FUA (external)1,167m1,292m(9.7%)
25

Funds Management
•Strong growth in funds management
continued on back of increased retail
and adviser investment
•SuperLifemember numbers up 4.8%
•Smartsharesunitholders (the number
of investors in each ETF) up 37.6%
•SmartsharesETF direct applications
up 84%
•Fresh leadership in place -Hugh
Stevens joined in February 2018
Funds under management growth
0
500
1,000
1,500
2,000
2,500
3,000
December 2014June 2015December 2015June 2016December 2016June 2017December 2017
KiwiSaverSuperLifeSmartshares externalTotal
26

Balance Sheet
•Cash includes $20 million Clearing
House risk capital which is not
available for general use
•Additionally the Clearing House
complies with International
Organisationof Securities
Commissions principles requiring
retention of sufficient working
capital (including cash of
approximately $3.9 million)
•Similarly Funds Management
maintains sufficient net tangible
assets (including cash of
approximately $1.6 million)
•Focused on receivables collection
•Other current liabilities includes
SuperLife$9.97 million paid 1
February 2018 (2016 classified as
non-current liability $9.09 million)
•Term loan expires January 2020,
ratios comfortably met
2017
$000
2016
$000
Change
FY17 v FY16
Current assets
Cash and cash equivalents34,88130,80413.2%
Receivables and prepayments10,94015,923(31.3%)
Funds held on behalf of third parties58,89070,847(16.9%)
Total current assets104,711117,574(10.9%)
Total non-current assets75,07876,390(1.7%)
Current liabilities
Trade payables3,8105,63232.4%
Other current liabilities24,24614,394(68.4%)
Funds held on behalf of third parties58,89070,84716.9%
Total current assets86,94690,8734.3%
Non-current liabilities
Term loan20,00020,000-
Other non-current liabilities4,12013,41669.3%
Total non-current liabilities24,12033,41627.8%
Net assets/equity 68,72369,675(1.4%)
27

Capital Structure
•Board completed capital structure review
•Consultation on a mutualiseddefault fund underway to
advance Clearing House’s risk model to meet global
standards. This is important to ensure we have an
appropriate Clearing House risk structure to meet
anticipated dairy derivatives market growth
•The board will explore use of a capital note to ensure NZX
has a more robust balance sheet to protect the business in
the unlikely case of a major market event
28

Dividend
Dividend
•Final fully imputed dividend of 3.1 cents per share for the 2017 financial year
(2016: 3.0 cents per share). Total fully imputed dividends for the 2017
financial year are 6.1 cents per share (2016: 6.0 cents per share)
Reinvestment plan
•Board to implement reinvestment plan for 2018 interim dividend in response
to shareholder feedback. Further details, including the offer document to
follow
Policy
•Previous dividend policy was based on a target payoutratio of 80% of free
cash flow (defined as operating cash flow less purchase of property, plant and
equipment and intangible assets)
•New policy will come into effect for the 2018 financial year onwards and pay
between 80% to 110% of adjusted Net Profit After Tax, subject to maintaining
a prudent level of capital to meet regulatory requirements
•Board considers that a policy based on Net Profit After Tax is comparable
with peers, and provides sufficient headroom to manage the ongoing capital
structure requirements of the exchange, and pursue future relevant
opportunities should they arise
29

2018 Earnings Guidance
•Refreshed strategy marked fundamental reset of NZX –
completion of final reset initiatives in 2018 will set
business up to deliver long term returns
•Divestment of non core assets in 2018 (including rural
newspaper Farmers Weekly) and changes to the clearing
and trading pricing structure (effective in the second half
of 2018) will rebase the operating result
•NZX expects full year 2018 operating result to be in the
range of $28.0 million to $31.0 million
•This is subject to market outcomes, particularly with
respect to initial public offerings, secondary capital raising,
equity trading and derivatives trading volumes. This
guidance assumes no material adverse events, significant
one-off expenses or major accounting adjustments. It also
assumes no further acquisitions or divestments
30

Summary
2017 operating earnings of $29.0 million, up 31.3%
Result underpinned by performance of Funds
Management and DairyDerivatives businesses,
disciplined cost control and efficiency improvements
Refreshed strategy marked fundamental reset of NZX
– completion of final reset initiatives in 2018 will set
business up to deliver long term returns
Core market must deliver more investable
product, deeper liquidity levels, greater participation
rates, and achieve a global presence. Strong focuson
these elements
2018 operating earnings expected to be in the range
of $28.0 million to $31.0 million
31

Mark Peterson
Chief Executive Officer
mark.peterson@nzx.com
+64 21 390 636
Graham Law
Chief Financial Officer
graham.law@nzx.com
+64 21 276 7359
Contacts