NZX Half Year 2018 & Interim Report Published
NZX Limited
Level 1, NZX Centre
11 Cable Street
PO Box 2959
Wellington 6140
New Zealand
Tel +64 4 472 7599
www.nzx.com
www.nzx.com 1 of 3
15 August 2018
New Zealand’s exchange – delivering on plan to build a stronger core
NZX today announced its financial results for the six months ended 30 June 2018.
1
NZX CEO Mark Peterson commented: “Six months into the delivery of our five-year strategy we
have advanced the business materially. We have divested our non-core businesses, improved
the exchange’s customer service and business efficiency, increased liquidity in the secondary
market, and progressed plans to simplify the New Zealand market’s structure and rule set.”
“Today’s half year financial result reflects the delivery we have made against our strategy
outlined last November. We are pleased with progress being made across the key strategic
areas fundamental to our future growth, and remain on track to deliver within the earnings
guidance range provided in February 2018.”
Key financial results:
Total operating earnings of $13.9 million
2
and net profit after tax was $4.4 million
3
;
Operating revenue from continuing operations was $33.4 million, up 2.0% driven by
strong growth in trading and clearing fees and funds management revenues;
Operating expenses from continuing operations increased 7.3% due to targeted
investments in marketing, cyber security and the dairy derivatives market, one-off staff
related costs, and fund expenditure which was driven by the growth in funds under
management;
Successful divestment of non-core businesses, including Farmers Weekly, AgriHQ and
the Australian based Grain Information Unit; and
Interim ordinary dividend, fully imputed, of 3.0 cents per share. Plus, a special dividend,
fully imputed, of 1.5 cents per share, with the Board returning proceeds from disposals of
non-core businesses to shareholders.
Business highlights
Core Markets
Revenues in this business – which includes issuer, participant and data services; derivatives;
and markets operated for Fonterra Co-operative Group and the Electricity Authority – were
relatively flat at $25.62 million.
Over the first half, $4.4 billion of capital was raised across the four markets, the same as a year
earlier, and 10 debt issuers, including NZX, issued $1.7 billion of new debt. Auckland Council
listed the exchange’s inaugural green bond.
1
Comparisons are to the six months ended 30 June 2017
2
Includes operating earnings from continuing operations of $13.2 million and discontinued operations of $0.7 million
3
Includes net profit after tax from continuing operations of $6.9 million and discontinued operations of ($2.5) million
(including impairment of goodwill and intangibles of $2.9 million)
www.nzx.com 2 of 3
Two new entrants joined the equity and debt markets respectively, QEX Logistics and
Christchurch International Airport. WEL Networks joined the debt market post the balance date.
Total value traded increased 2.4%, while total trades grew to 1.6 million, contributing to an
increase in trading and clearing revenues of 8.6% and 12.9% respectively during the period.
Hobson Wealth Partners Limited was accredited as an NZX cash market trading and clearing
participant in June. The first New Zealand based participant to join NZX since the Clearing
House was established in 2010.
The revised trading and clearing pricing structure was announced last week and will be
introduced alongside targeted policy changes and improved trading system functionality in
October. These changes aim to further improve on-market liquidity and enhance price
transparency in the equity market, delivering on several strategic initiatives from November’s
strategy. They also lay the platform for long term future growth in the secondary markets.
These changes follow a successful trial of a new pricing structure in the secondary market over
the past 12 months, which has helped contribute to an additional 33% in on-market value traded
since August 2017. At the beginning of 2017 on-market activity was 39.8%, it is now 53.4%.
This compares to 23% on-market value traded ten years ago, and 28.8% five years ago.
The exchange’s global dairy derivatives market traded its millionth lot in May, a significant
milestone in this market’s journey towards maturity. Strategic actions promised in November
2017 were delivered, with additional trading functionality launched in March and extended
trading hours in July.
Post the 30 June balance date a new record volume day was reached at 6,415 lots, and a
record trading month in July. This followed record trading days for the NZ milk price futures and
the skim milk powder futures and options contracts in June.
Funds Management
Revenues in this business – which comprises Smartshares Exchange Traded Funds (ETFs)
and SuperLife corporate superannuation and KiwiSaver – increased 11.1% to $7.3 million.
Operating earnings were $2.5 million, up 11.8%.
Strong growth in these businesses support the development of New Zealand’s public capital
market and the exchange’s core markets business, while reinforcing NZX’s strategic decision to
provide local investors with a high quality and low cost passive product offering.
Total funds under management (FUM) was $2.9 billion, up 21.7%. Smartshares FUM (excluding
SuperLife) was $800 million, up 39.3%, and investor numbers continued to climb with
application numbers, up 30.6%. SuperLife FUM reached $2.1 billion, up 16.0%. Membership
numbers increased 6.3%, and two new corporate super clients were secured, adding 1,350
members.
Wealth Technologies
Core development of the platform which enables advisers and brokers to manage client
investments was completed in Q2 and a large customer is scheduled to go-live in October. This
will be a significant milestone for this business, the newest addition to NZX, as it moves into the
next growth phase, focused on extending its product offering and client base.
www.nzx.com 3 of 3
Costs
Total operating expenses from continuing operations were $20.2 million. These costs include
several targeted investments made in the first six months, with roles created in marketing, dairy
derivatives and cyber security. A project management office was also established to ensure
improved delivery following the strategy reset.
Several one-off costs were incurred in the first six months. These included the establishment of
a dividend reinvestment plan, catch up costs for two LTI schemes, the issue of company shares
to employees to encourage engagement and align interests with shareholders, and financial
consulting costs associated with the Australian GST audit and internal audit program. Growth in
funds under management increased the FUM driven costs.
Savings from projects delivered in 2017, which modernised and simplified the data centre and
network infrastructure, were partly offset by one-off implementation costs that will create a more
robust and flexible mechanism for participants to connect to NZX’s core markets and wealth
technologies platforms.
Capital structure
NZX board completed a capital structure review. Outcomes include, the issuance of
subordinated notes, the implementation of a mutualised default fund for the Clearing House,
and the establishment of a dividend reinvestment plan. These actions will help to ensure the
exchange has a balance sheet risk profile appropriate for a business, which is a critical
component of New Zealand’s capital markets infrastructure.
Dividend
The Board declared an interim ordinary dividend, fully imputed, of 3.0 cents per share which will
be paid on 14 September 2018. Following the divestment of non-core businesses, each
shareholder will also receive a special dividend, fully imputed, of 1.5 cents per share. As
communicated in February, a dividend reinvestment plan has been established and will be
available for the 2018 interim and special dividends, at a discount rate of 2.5%.
Guidance
When the 2017 full year results were released in February 2018, the Board advised it expected
full year 2018 operating earnings to be within a range of $28.0 million to $31.0 million. As per
normal, it is subject to market outcomes, particularly with respect to initial public offerings and
secondary capital raising and equity and derivatives trading volumes. It assumes no material
adverse events, significant one-off expenses or major accounting adjustments. It also assumes
no further acquisitions or divestments.
For further information, please contact:
Media
Hannah Lynch
Head of Communications
T: 09 308 3710
M: 021 252 8990
E: hannah.lynch@nzx.com
Investors
Graham Law
Chief Financial Officer
T: 04 498 2271
M: 029 494 2223
E: graham.law@nzx.com
---
NZX Limited
Results for announcement to the market
Reporting Period 6 months to 30 June 2018
Previous Reporting
Period
6 months to 30 June 2017
Amount (000s) Percentage change
Revenue from ordinary
activities
$NZ 33,423 2.0%
Profit (loss) from
ordinary activities after
tax attributable to
security holder
$NZ 6,933 (11.3%)
Net profit (loss)
attributable to security
holders
$NZ 4,409 (44.6%)
Interim/Final Dividend Amount per security Imputed amount per
security
Interim dividend $NZ 0.03 $NZ 0.011667
Special dividend $NZ 0.015 $NZ 0.005833
Record Date 31 August 2018
Dividend Payment Date 14 September 2018
Comments: A brief Revenue from ordinary activities does not include
revenue from discontinued operations.
Profit (loss) from ordinary activities after tax
attributable to security holder does not include
profit (loss) from discontinued operations.
For additional information please see financial
release attached.
---
APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
X
whether:
Interim
X
YearSpecialDRP Applies
X
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
OR explanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
NZSX Listing Rule 7.12.7
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
EMAIL: announce@nzx.com
Notice of event affecting securities
NZX Limited
Graham Law - CFODirectors' Resolution
04 498 227104 496 28931482018
Ordinary SharesNZNZXE0001S7
Ordinary SharesNZNZXE0001S7
In dollars and cents
$0.030
$0.000
Enter N/A if not
applicable
$$0.002083$0.011667
$
NZD$0.005294
$8,068,671
Date Payable
14 September, 2018
31 August, 201814 September, 2018
---
APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
X
whether:
InterimYearSpecial
X
DRP Applies
X
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
OR explanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
NZSX Listing Rule 7.12.7
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
31 August, 201814 September, 2018
$$0.001042$0.005833
$
NZD$0.002647
$4,034,335
Date Payable
14 September, 2018
$0.000
Enter N/A if not
applicable
NZNZXE0001S7
Ordinary SharesNZNZXE0001S7
In dollars and cents
Proceeds from disposals of non-core businesses
$0.015
04 498 227104 496 28931482018
Ordinary Shares
EMAIL: announce@nzx.com
Notice of event affecting securities
NZX Limited
Graham Law - CFODirectors' Resolution
---
Interim Report
2018
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Contents
03
Highlights
04
Word from the CEO
09
Spotlight on Dairy
Derivatives
11
Management
Commentary
20
Financial Statements
26
Notes to the Financial
Statements
38
Auditor's Report
40
Directory
Dividend
Dairy derivatives
$13.9
3.8%
Total operating earnings**
million
1.5
3.0
cents per share
Interim
Special
33%
MILLIONTH
8.8%
* financial results for the six months ended 30 June 2018, comparisons are to the six months ended 30 June 2017
** includes operating earnings from continuing operations of $13.2 million and discontinued operations of $0.7 million
$2.9
21.7%
Funds under management
billion
LOT TRADED IN MAY
$164.6$10.9
Total market capitalisation
(equity and debt)
On-market value traded
billionbillion
Highlights from the first half*
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NZX Interim Report 2018<Previous
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04
Word from the CEO
Six months into reshaping our business
Six months into the delivery of our five-year strategy we have advanced the business materially. We have
divested our non-core businesses, improved the exchange’s customer service and business efficiency,
increased liquidity in the secondary market, and progressed plans to simplify the New Zealand market’s
structure and rule set.
We are pleased with progress being made across the key strategic areas fundamental to our future growth,
and remain on track to deliver within the earnings guidance range provided in February 2018.
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05
Delivering on the plan to build a stronger
core market for New Zealand
Non-core businesses divested
Since 1 January we have sold rural newspaper
Farmers Weekly, the red meat and forestry
components of AgriHQ, and the remainder of our
Melbourne agribusiness – Australian Crop Forecasters
and Profarmer Australia. 41 staff transitioned with the
sale of these businesses and we now have just two
offices in Auckland and Wellington.
The divestment of these businesses takes us a step
closer towards our underlying strategic goal of
creating a leaner and more focused NZX. This
reinforces the commitment we made to shareholders
to pursue a strategy that refocuses back on our core
business – the operation of New Zealand’s equity,
debt, funds and derivatives markets.
Focusing on the core - customers come first
Focusing on our core markets business meant we
needed to immediately step up our service offering
and put our listed customers first.
We have created a dedicated team to better manage
the relationships with our current and prospective
issuers. This team was formed in December, and have
already engaged with all their customers and are using
this feedback to enhance NZX’s service offering.
Individual customer plans have been created and
opportunities are now being identified to cross sell
our data and other products. The team is also working
alongside market players to proactively seek out new
customers.
We have improved our service offering to provide an
increased range of opportunities for our listed issuers
to showcase their stories to investors in New Zealand
and overseas. We now sponsor investor roadshows,
host retail investor evenings, and work alongside our
existing customers to promote the benefits of listing
with masterclasses held across the country for
prospective customers.
Our issuer relationships team, in conjunction with the
dairy derivatives team, will host our first event in
Singapore this October to market New Zealand as an
investment destination, and showcase the stories of
several of our listed customers. Companies presenting
at this event include Synlait Milk, Pushpay Holdings,
Meridian Energy, Heartland Bank and Pacific Edge.
This event underpins our global alliance strategy
outlined to shareholders at April’s annual meeting.
Global connectivity is key to the success of NZX, and
we signed Memoranda of Understanding with the
Hong Kong and Singapore exchanges earlier this
year. We want to increase the value our customers
receive from being listed in New Zealand by making
it easier for them to have a presence on like-minded
international exchanges. This will support their access
to global capital and help to lift their profile in those
markets.
Our regulatory function also recognised the Hong
Kong, Singapore and Toronto Stock Exchanges in
April, complementing agreements already in place
with the Australian Securities Exchange and the
London Stock Exchange Group.
While the market for equity initial public offerings
(IPOs) remains challenging at present, $4.4 billion of
primary and secondary capital was raised in the first
half of 2018 across equity, debt and funds products.
Since 1 January we have welcomed three new listed
customers to the market. QEX Logistics joined the
equity market with a compliance listing, and
Christchurch International Airport and WEL Networks
joined the debt market. We recognise equity IPOs are
important, and as mentioned above, are working with
market players to widely promote the benefits of
being publicly listed to prospective companies.
Debt issuance remained strong in the first six months
with 10 new issuances raising $1.7 billion on listing.
Our listed fund customers raised $698 million on the
secondary market over the same period.
Auckland Council listed the exchange’s inaugural
green bond, endorsing the strategic commitment we
made last year to grow our country’s environmental
markets. Today we have four green bonds listed on
the exchange, reinforcing the growing appetite for
investments that have positive environmental outcomes.
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Finally, our policy function has been leading work to
simplify the market’s structure and rule set to reduce
complexity for investors and companies. This work has
been supported by the issuer relationships team who
have been engaging with our current and prospective
customers on the proposed rule changes.
We recognised we needed to be bold when
completing the first holistic review of the exchange’s
rule set in more than 15 years, and through this review
we have taken the rules from 450 pages to
approximately 95.
Changes will be finalised before November, and we
will be removing our current junior equity boards and
creating a single equity market structure – but we are
carefully considering the minimum listing
requirements to ensure we have a pathway for small
to medium size businesses to list. We are also
delivering updated settings to facilitate the listing of
funds and to continue the strong momentum in the
debt market.
These changes will make additional capital raising
across the equity, debt and funds markets simpler and
faster for issuers, while ensuring we maintain strong
investor protections and integrity in the New Zealand
market.
Actions underway to drive secondary market
development
There are several actions underway across this team
to develop the secondary market and drive liquidity
growth.
Customer engagement has again been a key focus
of the markets development team with more than 270
meetings with current and prospective participants,
brokers and investors in the first half of 2018. These
meetings are being used to market our market and
sell the story of New Zealand’s exchange to a wider
group of investors. As a wider range of investors gain
an understanding of our market it is important their
brokers have connectivity to NZX’s markets. The team
is focused on growing the number of participants
accessing the New Zealand market.
As a first step, we welcomed Hobson Wealth Partners
as an NZX cash market trading and clearing
participant in June. Hobson Wealth is the first New
Zealand based participant to join NZX since the
Clearing House started in 2010.
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Strong growth in on-market value traded over past 12 months
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A revised trading and clearing pricing structure was
also announced last week and will be introduced
alongside targeted policy changes and improved
trading system functionality in October. These
changes aim to further improve on-market liquidity
and enhance price transparency in the equity market,
delivering on several strategic initiatives from NZX’s
strategy, and lay the foundation for long term future
growth in the secondary markets.
These changes follow a successful trial of a new pricing
structure in the secondary market over the past 12
months, which has helped contribute to an additional
33% in on-market value traded since August 2017.
At the beginning of 2017, on-market activity was
39.8%, it is now 53.4%. This compares to 23% on-
market value traded ten years ago, and 28.8% five
years ago.
All of this work is underpinned by projects to enhance
and further modernise our IT infrastructure, improve
operational efficiencies and broaden the suite of
trading tools for our customers. The addition of new
trading functionality and extended trading hours in the
dairy derivatives market was delivered in March and
July respectively, in response to demand from
customers based in Asia and Europe. More
information on how our dairy derivatives market has
delivered on the actions set out in our strategy last
year is available on page nine.
Maximising growth in businesses that
support the core market
New Zealand’s fund management sector has
significant growth potential, with a large unmet need
amongst kiwi investors to participate in the local
market beyond their involvement in KiwiSaver. For
this reason, maximising the growth of our
superannuation, KiwiSaver and exchange traded funds
(ETFs) products is a priority. Growth in these passive
products also supports the development of New
Zealand’s broader public capital market, and in turn
our core exchange business.
Under the new leadership of Hugh Stevens,
Smartshares is exploring collaborative and innovative
ways to extend its customer base to be more relevant
to a wider range of retail and institutional investors.
Kiwis attitudes towards investing
Smartsharesand NZX think it is important that
New Zealanders understand how the share
market works and that they are comfortable
participating in it.
So, we teamed up with Sharesies to commission
a retail investor research project through market
research company Colmar Brunton. They
surveyed 1,000 New Zealanders about their
attitudes towards shares, investing and money.
Many New Zealanders aren’t aware how simple
investing in shares can be and many assume it
is out of reach for them.
Only 18% of New Zealanders own shares. The
biggest reasons cited for not investing are:
• A lack of cash to spare (36%)
• Not knowing how to invest in the share
market (34%)
• A belief that investing in shares is risky (31%)
• A belief that the share market is only for
people with lots of money (35%)
Shares are the fifth most popular investment for
New Zealanders. Savings accounts are the most
popular (72% of New Zealanders have one),
followed by KiwiSaver (65%), property (59%) and
term deposits (30%). There are huge
opportunities for Smartsharesto shape our
offerings in ways which give New Zealanders a
helping hand into the share market. We think
we are in a great position as the leading
provider of exchange traded funds in New
Zealand. Not only is this a great opportunity for
our business but it adds liquidity to the market
overall and should create wealth for more New
Zealanders.
The wider NZX Group will benefit from these
findings too. We are committed to making the
market more accessible to retail investors.
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Total funds under management is up 21.7% on this
time last year, while SuperLife member numbers
increased 6.3%, and total unitholders and member
numbers (including the number of investors in each
ETF) grew 30.8%.
Our Wealth Technologies business finished its core
platform development in June, and its first large
customer is scheduled to go live in October. This will
be a significant milestone for the business as it seeks
to extend its client base and product offering.
Funding future growth
Capital review completed
The board completed a review of the company’s
capital structure in the first half.
The outcome was the issue and listing of $40 million
of subordinated notes, consultation on a mutualised
default fund for the Clearing House which will be
implemented later this year, and the establishment
of a dividend reinvestment plan.
The subordinated notes have several innovative
features which NZX believe will advance New
Zealand’s debt market. These include a 15-year
maturity with election dates after five and 10 years, a
retail liquidity support facility, and penalty rate in the
event interest is deferred. The offer was well
supported by the market, and all shareholders were
offered a preference facility, we thank those of you
who took up this offer.
These actions will help to ensure the exchange has a
balance sheet risk profile appropriate for a business,
which is a critical component of New Zealand’s capital
markets infrastructure.
Dividend
The Board has declared an interim ordinary dividend,
fully imputed, of 3.0 cents per share. Following the
divestment of our non-core agri businesses, each
shareholder will also receive a special dividend, fully
imputed, of 1.5 cents per share.
As outlined in our annual report, a dividend
reinvestment plan will be established and apply to the
2018 interim and special dividends. It will be paid on
14 September 2018 and a discount rate of 2.5% will
apply.
The next six months
This has so far been a year of transition for NZX. We
are pleased with progress being made across the key
strategic areas fundamental to our growth, and the
growth of New Zealand’s wider capital markets. Six
months into our five-year strategy the team at NZX
are optimistic about what the future holds.
On behalf of the whole team, we thank you for your
continued support, and hope you find our progress
encouraging.
Mark Peterson, Chief Executive
Spotlight on
NZX’s dairy
derivatives
markets:
going global
NZX Head of Derivatives Nick Morris presenting to delegates at the NZX/GDT Showcase held in Shanghai last month.
Accelerating the global presence of our dairy
derivatives market forms a key pillar of our strategy
to support New Zealand’s position as a global leader
in the dairy industry.
So far in 2018 the derivatives team has delivered on
the actions promised in our strategy last year which
we believe will drive this market to a global scale.
Last month we extended the market’s trading
hours to 20 from 14 hours in response to customer
demand in Asia and Europe.
Expanded global access has been supported by
additional trading functionality launched in March.
This has helped improve on screen liquidity, by
tightening the bid-ask spread in the order book.
For example, there has been a 43% decrease in
the spread for Whole Milk Powder (WMP) futures
compared to the prior period.
In December, NZX launched Skim Milk Powder (SMP)
options, again in response to customer demand
on the back of growing volumes of SMP futures
volumes, with participants needing more tools to
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help manage price volatility. SMP options reached a
new record in June with 1,300 lots changing hands.
Our team has also been on the road stepping up
our sales efforts as we aggressively market our
market – particular in Asia where customer demand
is high. We have been hosting education events with
stakeholders in China and South East Asia, and are
upping our presence at industry events in Europe
and the United States.
Alongside this, our website has been redesigned
and will soon include Mandarin translation, and
bespoke marketing materials to create a reference
point for our global customer base. Preparations
continue to progress for our Singapore office, which
will likely open in 2019.
We are also leveraging our annual dairy derivatives
seminar held in Singapore each October to promote
our broader public market. Five of our listed
companies will travel to the city for a sideline event
designed to promote more Asian investment into
New Zealand.
To support future market growth and ensure capital
is used efficiently, our Clearing House developed a
risk management model in the form of a mutualised
default fund which will be rolled out later this year.
The addition of this fund provides a platform for
future growth in trading volumes and participation
by international clearers.
Records on records
The market traded its millionth lot in May, a
significant milestone in its journey to maturity.
This record was supported by a rise in positions
being held further out, a key sign of improved
market liquidity as traders become more confident in
extending their positions into the dairy season.
In the second quarter record volume was traded at
86,386 lots. This is a solid result given volatility was
subdued over the first half of 2018 compared to
normal market conditions, and WMP prices being
bounced round by low price fluctuations over the
past 12 months, and low price movements at Global
Dairy Trade (GDT) events.
Wednesday 27 June was a record day for
New Zealand milk price futures volumes, with 310
lots traded in a single day, or 1.86 million kilograms
of milk solids. It was also a record breaking second
quarter for this product with higher prices driving
increased farmer interest in hedging. Volume traded
in milk price derivatives increase more than 54%
in the first six months on 2018 – and are on track
to trade more than 10,000 lots in 2018. This is an
equivalent of 60 million kilograms of milk solids or
3% of New Zealand’s total annual milk supply.
Dairy futureDairy optioNZ milk price futures & options
Jan-16100521600
0
Feb-1610501350
0
Mar-1610469625
0
Apr-166740250
0
May-161121050
11
Jun-1610235660
67
Jul-1612088380
862
Aug-16207731850
960
Sep-1626052530
568
Oct-16169012050
586
Nov-16227174100
706
Dec-16187285400
232
Jan-17232431640
294
Feb-17200562340
430
Mar-17206454470
433
Apr-17226762400
705
May-17195575870
797
Jun-17231695625
872
Jul-17201853300
796
Aug-17250984500
417
Sep-17200583010
600
Oct-17253831900
614
Nov-17203102950
1032
Dec-17243281800
172
Jan-18162623455
278
Feb-18166032850
829
Mar-18150834890
544
Apr-18218443400
1211
May-18189545920
1308
Jun-18253057170
1274
Jul-182627014900
481Note: graph above shows monthly volume data for NZX dairy derivatives contract suite from May 2016 when NZ Milk Price Futures was launched
0
5,000
1 0,00 0
1 5,00 0
2 0,00 0
2 5,00 0
3 0,00 0
3 5,00 0
4 0,00 0
4 5,00 0
May-16
Jun-16
Jul-16
Aug -16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18Mar-18
Apr-18
May-18
Jun-18
Jul-18
Monthly lots traded
Total dairy futures and options volumes traded by month
Dairy futuresDa i ry op ti o nsNZ milk price fu tures & options
Note: graph above shows monthly volume data for NZX dairy derivatives contract suite from May 2016 when NZ milk price futures was launched
Total dairy futures and options volumes traded by month
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Management
Commentary
Financial results for the half year ended 30
June 2018
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Overview
A breakdown of NZX’s financial results by business unit is summarised in the table below:
Six months
ended 30 June
2018
$000
Issuer
Relationships
Secondary
Markets
Data &
Insights
Funds
Wealth
Technologies
Corporate
Total
continuing
operations
Agri
Total
including
discontinued
operations
Revenue11,5008,5465,5747,320483-33,4233,80337,226
Expenses(2,544)(2,640)(850)(4,820)(1,091)(8,261)(20,206)(3,088)(23,294)
Operating
earnings8,9565,9064,7242,500(608)(8,261)13,21771513,932
Six months
ended 30 June
2017
$000
Issuer
Relationships
Secondary
Markets
Data &
Insights
Funds
Wealth
Technologies
Corporate
Total
continuing
operations
Agri
Total
including
discontinued
operations
Revenue12,0017,9275,5246,590721-32,7633,79936,562
Expenses(2,669)(2,478)(657)(4,354)(1,522)(7,148)(18,828)(3,249)(22,077)
Operating
earnings
9,3325,4494,8672,236(801)(7,148)13,93555014,485
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Issuer Relationships
This team was established in December 2017. It is tasked with creating a compelling and attractive proposition
for our current and prospective equity, debt and funds customers.
Operating results and strategic metrics for this division are below:
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
Annual listing fees5,0824,9961.7%
Initial listing fees434452(4.0%)
Secondary issuance fees1,1581,1015.2%
Other issuer services3132936.8%
Consulting and development revenue155728(78.7%)
Contractual revenue4,3584,431(1.6%)
Total revenue11,50012,001(4.2%)
Total expenses(2,544)(2,669)4.7%
Operating earnings8,9569,332(4.0%)
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
Number of unique issuers200209(4.3%)
Equity market capitalisation137.0 billion123.8 billion10.6%
Debt market capitalisation (including green bonds)27.6 billion27.4 billion0.6%
Number of new equity listings11-
Number of new debt listings1010-
Value of new equity listed0.02 billion0.48 billion(95.9%)
Value of new debt listed1.67 billion1.53 billion9.0%
Total secondary capital raised2.75 billion2.44 billion12.5%
Annual listing fees paid by NZX’s equity, debt and fund issuers is driven by the number of listed issuers and
equity and debt market capitalisations. Growth in annual listing fees came from:
• an increase in the number and market capitalisation of listed debt instruments; and
• the growth in equity market capitalisation.
While the number of equity issuers declined in the period as a result of takeovers and liquidations, the
number of debt issuers continued to increase.
Initial listing fees are paid by all issuers at the time of listing. The primary driver of this revenue is the number
of new listings and the value of capital listed. There has been one initial listing during the period with initial
listing fees being comparable to 2017.
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Secondary issuance fees are paid by existing issuers when a company raises additional capital through
placements, warrants, rights issues, the exercise of options, dividend reinvestment plans, or further debt
issues. The primary driver for this revenue is the number of secondary issuances and the value of secondary
capital raised. Total capital raised in the period was of a lower value, however capital activity was more
complex in nature resulting in increased fees.
Other issuer services revenue arises from time spent by NZX Regulation reviewing listing and secondary
capital raising documents, requests for listing rule waivers, and other significant issuer matters.
Contractual and consulting and development revenue arises from the operation of New Zealand’s electricity
market, under long-term contract from the Electricity Authority, and the Fonterra Shareholders' Market, under
a long term contract from Fonterra. Consulting and development revenue arises on a time and materials
basis; the focus on the energy market software upgrade resulted in lower consulting activity.
Secondary Markets
This team is tasked with driving secondary market development across our equity, debt, funds and derivatives
markets, and managing participant relationships.
Operating results and strategic metrics for this division are below.
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
Participant services revenue1,9351,8862.6%
Securities trading revenue2,9622,7288.6%
Securities clearing revenue3,1052,75112.9%
Dairy derivatives revenue544562(3.2%)
Total revenue8,5467,9277.8%
Total expenses(2,640)(2,478)(6.5%)
Operating earnings5,9065,4498.4%
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
Number of trades1.6 million0.9 million75.7%
Total value traded20.3 billion19.8 billion2.4%
% of value on market53.4%40.3%32.5%
Dairy lots traded147,180155,222(5.2%)
Number of participants36345.9%
Participant services revenue is charged to market participants (broking, clearing and advisory firms) that are
accredited for NZX’s equity, debt and derivatives markets. The number of market participants increased
during the period.
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Securities trading revenue comes from the execution of trades on the equity and debt markets operated by
NZX. Trading fees are currently a combination of a fixed fee per trade (approximately 70% of revenue) and a
variable fee based on the value of the trade.
Securities clearing revenue relates to clearing and settlement activities, and a range of securities related
services such as stock lending undertaken by NZX’s subsidiary New Zealand Clearing and Depository
Corporation. The largest component is clearing fees, which are based on the value of settled transactions. The
value traded by participants on the pricing trial was greater in the period resulting in additional clearing revenue.
Changes to the securities trading and clearing pricing structure will be implemented alongside participant
rule changes in October. These changes seek to encourage greater on-market liquidity and price
transparency, in line with NZX’s strategic commitment to develop the secondary market.
Dairy derivatives revenue relates to trading, clearing and settlement fees for trading NZX dairy futures and
options. Fees are largely charged in USD (reflecting the global nature of the market) per lot traded. Trading
on the dairy derivatives market has been relatively flat in the period. Post the 30 June balance date, extended
trading hours were implemented in the dairy derivatives market, and July was a record month for lots traded.
Data & Insights
This team is tasked with growing existing data revenues, and turning raw data into insights that drive
decisions, particularly those which will support the equity, debt, funds and derivatives markets operated by NZX.
Operating results and strategic metrics for this division are below:
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
Royalties from terminal3,3353,1755.0%
Subscriptions and licenses1,8021,922(6.2%)
Dairy data subscriptions3433410.6%
Other94869.3%
Total revenue5,5745,5240.9%
Total expenses(850)(657)(29.4%)
Operating earnings4,7244,867(2.9%)
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
Terminal numbers (12 month average)7,2957,426(1.8%)
Number of licences96942.1%
Number of proprietary security products subscriptions3953891.5%
Number of dairy data products subscriptions1,03180128.7%
Royalties from terminals relate to the provision of capital markets data to global data resellers who
incorporate NZX data into their own subscription products. Terminal numbers declined in the period which
has been offset by receipts from royalty audits.
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Subscription and licenses relate to the provision of capital markets data to market participants and
stakeholders. The mix between low and high value subscriptions has resulted in lower fees.
Dairy data subscriptions relate to the sale of dairy data and analytical products.
Funds Management
This business comprises SuperLife superannuation and KiwiSaver and Smartshares Exchange Traded Funds products.
Operating results and strategic metrics for this business are detailed below:
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
SuperLife revenue4,1893,9027.4%
Smartshares revenue3,1312,68816.5%
Total revenue7,3206,59011.1%
Total expenses(4,820)(4,354)(10.7%)
Operating earnings2,5002,23611.8%
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
SuperLife member numbers51,96348,8886.3%
SuperLife external FUM2.1 billion1.8 billion16.0%
Smartshares external FUM0.8 billion0.6 billion39.3%
Smartshares SuperLife FUM1.7 billion1.3 billion32.5%
Total Smartshares FUM2.5 billion1.9 billion34.6%
Total FUM (external)2.9 billion2.4 billion21.7%
Funds management revenue is generated from:
• the SuperLife superannuation and KiwiSaver business, being a mix of fixed membership fees and variable
Funds Under Management (FUM) fees (which are received net of fund costs); and
• the Smartshares Exchange Traded Funds (ETFs) business, being variable FUM fees.
Growth in SuperLife member numbers and total external FUM was a driver of the significant increase in funds
management revenue, with member numbers up 6.3% on the prior comparable period.
Smartshares unitholders (the number of investors in each ETF) increased 30.8% onthe comparable period.
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Wealth Technologies
This business is a platform that enables advisers and brokers to manage client investments. It is the newest
addition to NZX. Operating results and strategic metrics for this business are detailed below:
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
Administration fees393631(37.7%)
Development fees90900.0%
Total revenue483721(33.0%)
Total expenses(1,091)(1,522)28.3%
Operating earnings(608)(801)24.1%
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
FUA (external)1.1 billion1.2 billion(7.9%)
Revenue in this business is generated from administration services provided on the existing wealth
management platform, and development fees received for part of the new platform that is in production. The
administration fees are based on Funds Under Administration (FUA). Client numbers remain the same,
however there was a decrease in FUA which resulted in lower revenue in the period.
Core platform development was completed in the second quarter and a large customer is scheduled to go
live in October.
Operating Expenses
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Gross personnel costs(13,625)(12,402)(9.9%)
Less capitalised labour2,0651,43543.9%
Personnel costs(11,560)(10,967)(5.4%)
Information technology costs(3,712)(3,646)(1.8%)
Professional fees(936)(676)(38.5%)
Marketing(205)(144)(42.4%)
Funds expenditure(1,965)(1,573)(24.9%)
Other expenses(1,828)(1,822)(0.3%)
Total expenses(20,206)(18,828)(7.3%)
Strategic metricsJune 2018June 2017
Change
Fav/(unfav)
Staff numbers (FTEs) - continuing217203(6.9%)
Staff numbers (FTEs) - discontinuing28293.4%
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Personnel costs were made up of:
• Salary costs (including bonuses, commissions, ACC levies and KiwiSaver contributions); and
• Contractor and other personnel costs (including training, recruitment and staff benefits); and
• Less capitalised labour (where employees or contractors are engaged on capital projects).
Personnel costs have increased due to:
• additional development resources (on fixed term contracts) for the Wealth Technologies and energy market
capital software projects have increased gross personnel costs and capitalised labour;
• Targeted new rolesto assist with strategy execution in cyber security, dairy derivatives and marketing.
• Introduction of CEO LTI scheme back dated to 6 April 2017 and an LTI scheme for the Head of Funds
Management;
• No Head of Issuer Relationships role in June 2017 period; and
• Issue of NZX shares ($1,000 gross) to each employee.
Information Technology costs were made up of software licence fees, hardware support and maintenance
fees, telecommunications and data network costs, and IT services provided by third parties. Savings from the
2017 project to modernise and rationalise the data centre hosting, have been used in the current period to
support further business initiatives to deliver cost savings in future years. These included increased maturity
of cyber security, creating modernised and resilient Australian connectivity to the New Zealand market,
internet and market participant modernisation and Wealth Technologies network, power reticulation
modernisation and data hosting costs relating to new client projects.
Professional fees were made up of legal expenses and advisory and consultancy fees. Additional legal costs
were incurred from the issue of shares to employees and the set-up of the dividend reinvestment plan and LTI
schemes. Financial consulting costs were incurred in relation to an Australian GST audit and the internal audit
program. Royalty commission costs also increased in line with increased receipts from royalty audits.
Marketing costs relate to Smartshares and the NZX corporate centre. Smartshares have increased their
marketing campaigns to attract new investors/members. NZX increased its investor relations deliverables and
broader communications and marketing efforts to support core strategic initiatives to establish a concerted
sales effort and market the market internationally.
Fund expenditure primarily represents the cost of operating the Smartshares schemes. The majority of costs
fluctuate relative to FUM (eg. custodian fees, trustee fees, index fees, settlement costs and third party
manager fees) and some costs are fixed (outsourced fund accounting and administration costs and registry
fees). The increase in fund expenditure arises from the growth in Smartshares FUM.
Other expenses include general and administrative expenditure such as rent, travel, insurance, directors’ fees,
audit fees and general overheads.
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Other Income and Expenses
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Interest income391471(17.0%)
Interest expense(608)(566)(7.4%)
Net gain/(loss) on foreign exchange333010.0%
Net finance expense(184)(65)(183.1%)
Depreciation of PP&E(428)(557)23.1%
Amortisation of intangibles(2,686)(2,430)(10.5%)
Total depreciation and amortisation(3,114)(2,987)(4.3%)
Adjustment to provision for earnout15--
Tax expense(3,001)(3,071)2.3%
Total net finance expenses, tax, depreciation and amortisation and gain on sale(6,284)(6,123)(2.6%)
Profit/(loss) from discontinued operations (net of tax)(2,524)142(1877.5%)
Net finance expense comprises interest income (on cash balances, Clearing House risk capital and regulatory
working capital), interest expenses (on loans, overdrafts, the subordinated note and earn out) and foreign
exchange gains/(losses). The subordinated note listed on 20 June 2018 will increase interest expenses in the
second half of 2018.
The effective tax rate is higher than the statutory rate of 28% due to non-deductible items.
Discontinued activities relate to the non-dairy agri businesses (including Farmers Weekly, AgriHQ and the
Australian based Grain Information Unit Agreements). NZX has entered into agreements to sell each of these
businesses. The current period includes impairments of $2.9 million.
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Financial Statements
Income statement..................................................21
Statement of comprehensive income....................21
Statement of changes in equity.............................22
Statement of financial position..............................23
Statement of financial position (continued)...........24
Statement of cash flows.........................................25
Notes to the Financial Statements
1.Reporting entity and statutory base...............26
2.Segment reporting..........................................27
3.Discontinued operations.................................29
4.Assets held for sale.........................................30
5.Adjustment to provision for earnout...............31
6.Operating revenue..........................................32
7.Operating expenses........................................33
8.Net finance expense.......................................33
9.Bank facilities..................................................33
10.Interest bearing liabilities................................34
11.Dividends........................................................35
12.Share based payments....................................35
13.Related party transactions..............................36
14.Contingent liabilities.......................................36
15.Subsequent events.........................................37
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The accompanying notes form an integral part of these financial statements21
Income statement
For the six months ended 30 June 2018
Note
Unaudited
6 months
ended
30 June 2018
$000
Unaudited
6 months
ended
30 June 2017
$000
Audited
12 months
ended
31 Dec 2017
$000
Total operating revenue633,42332,76367,141
Total operating expenses7(20,206)(18,828)(39,895)
Earnings before net finance income, income tax, depreciation,
amortisation and impairment, adjustment to provision for earnout,
and gain/(loss) on disposal of businesses and property, plant and
equipment
13,21713,93527,246
Net finance expense8(184)(65)(261)
Gain/(loss) on disposal of businesses and property, plant and equipment--6
Depreciation and amortisation expense(3,114)(2,987)(6,531)
Adjustment to provision for earnout515-(390)
Profit before income tax9,93410,88320,070
Income tax expense(3,001)(3,071)(5,720)
Profit from continuing operation6,9337,81214,350
Profit/(loss) from discontinued operations (net of tax)3(2,524)142487
Profit for the Period4,4097,95414,837
Earnings per share
Basic (cents per share)2.83.05.5
Diluted (cents per share)2.82.95.5
Statement of comprehensive income
For the six months ended 30 June 2018
Unaudited
6 months
ended
30 June 2018
$000
Unaudited
6 months
ended
30 June 2017
$000
Audited
12 months
ended
31 Dec 2017
$000
Profit for the period4,4097,95414,837
Other comprehensive income recognised through equity
Foreign currency translation differences(125)-(53)
Total other comprehensive income(125)-(53)
Total comprehensive income for the period4,2847,95414,784
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22The accompanying notes form an integral part of these financial statements
Statement of changes in equity
For the six months ended 30 June 2018
Note
Share
Capital
$000
Retained
Earnings
$000
Translation
Reserve
$000
Total
Equity
$000
Balance at 1 January 201747,55621,94117869,675
Profit for the period-7,954-7,954
Total comprehensive income for the period-7,954-7,954
Transactions with owners recorded directly in equity:
Dividends paid11-(8,050)-(8,050)
Share based payments174--174
Cancellation of non-vesting shares(90)90--
Total transactions with owners recorded directly in equity84(7,960)-(7,876)
Unaudited closing balance at 30 June 201747,64021,93517869,753
Profit for the period-6,883-6,883
Foreign currency translation differences--(53)(53)
Total comprehensive income for the period-6,883(53)6,830
Transactions with owners recorded directly in equity:
Dividends paid11-(8,054)-(8,054)
Share based payments194--194
Cancellation of non-vesting shares(383)383--
Total transactions with owners recorded directly in equity(189)(7,671)-(7,860)
Audited closing balance at 31 December 201747,45121,14712568,723
Profit for the period-4,409-4,409
Foreign currency translation differences--(125)(125)
Total comprehensive income for the period-4,409(125)4,284
Transactions with owners recorded directly in equity:
Dividends paid11-(8,323)-(8,323)
Issue of shares283--283
Share based payments291--291
Cancellation of non-vesting shares(120)120--
Total transactions with owners recorded directly in equity454(8,203)-(7,749)
Unaudited closing balance at 30 June 201847,90517,353-65,258
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The accompanying notes form an integral part of these financial statements23
Statement of financial position
As at 30 June 2018
Note
Unaudited
30 June
2018
$000
Unaudited
30 June
2017
$000
Audited
31 Dec
2017
$000
Current assets
Cash and cash equivalents918,3077,24314,881
Cash and cash equivalents - restricted920,00020,00020,000
Funds held on behalf of third parties89,37389,00958,890
Receivables and prepayments21,84626,25610,940
Current tax asset-3-
Assets held for sale45,606-2,415
Total current assets155,132142,511107,126
Non-current assets
Property, plant & equipment2,1952,7802,444
Goodwill30,22235,76433,929
Other intangible assets34,33537,68436,290
Total non-current assets66,75276,22872,663
Total assets221,884218,739179,789
Current liabilities
Funds held on behalf of third parties89,37389,00958,890
Trade payables6,5087,1593,810
Other liabilities16,39928,57123,536
Current tax liability467-666
Liabilities held for sale41,055--
Total current liabilities113,802124,73986,902
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24The accompanying notes form an integral part of these financial statements
Statement of financial position (continued)
As at 30 June 2018
Note
Unaudited
30 June
2018
$000
Unaudited
30 June
2017
$000
Audited
31 Dec
2017
$000
Non-current liabilities
Non-current other liabilities1093044
Interest bearing liabilities1038,77020,00020,000
Deferred tax liability3,9454,2174,120
Total non-current liabilities42,82424,24724,164
Total liabilities156,626148,986111,066
Net assets65,25869,75368,723
Equity
Share capital47,90547,64047,451
Retained earnings17,35321,93521,147
Translation reserve-178125
Total equity attributable to shareholders65,25869,75368,723
Net tangible assets per share (cents per share)(1.68)(1.36)(1.50)
Approved on behalf of the Board of Directors on 14 August 2018.
J B Miller
Chair of the Board
Lindsay Wright
Chair of the Audit and
Risk Committee
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The accompanying notes form an integral part of these financial statements25
Statement of cash flows
For the six months ended 30 June 2018
Note
Unaudited
6 months
ended
30 June 2018
$000
Unaudited
6 months
ended
30 June 2017
$000
Audited
12 months
ended
31 Dec 2017
$000
Cash flows from operating activities
Receipts from customers30,49534,94778,942
Net interest paid(211)(41)(92)
Payments to suppliers and employees(20,957)(23,448)(48,394)
Income tax paid(3,671)(3,843)(6,072)
Net cash provided by operating activities5,6567,61524,384
Cash flows from investing activities
Cash (paid on acquisition)/received on disposal of businesses5(9,419)-7
Payments for property, plant and equipment(209)(112)(302)
Payments for intangible assets(3,049)(3,014)(5,782)
Net cash used in investing activities(12,677)(3,126)(6,077)
Cash flows from financing activities
Proceeds from former CEO share scheme settlement--1,874
Loan facility cancellation10(20,000)--
Issue of subordinated note1040,000--
Transaction costs relating to subordinated note10(1,230)--
Dividends paid11(8,323)(8,050)(16,104)
Net cash provided by/(used in) financing activities10,447(8,050)(14,230)
Net increase/(decrease) in cash and cash equivalents3,426(3,561)4,077
Cash and cash equivalents at the beginning of the year34,88130,80430,804
Cash and cash equivalents at the end of the year38,30727,24334,881
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Notes to the Financial Statements
For the six months ended 30 June 2018
1. Reporting entity and statutory base
Reporting entity
These consolidated interim financial statements are for NZX Limited (the Company) and its subsidiaries
(together referred to as the Group) as at and for the six months ended 30 June 2018.
The Group operates New Zealand securities, derivatives and energy markets, including building and
maintaining the infrastructure on which they operate. It provides funds management services including
superannuation and exchange traded funds (ETFs), as well as building and operating wealth management
platforms for other providers. It also provides a range of information and data to support market growth and
development in the securities and dairy sectors.
The Company is incorporated and domiciled in New Zealand, registered under the Companies Act 1993 and
is an FMC reporting entity under the Financial Markets Conduct Act 2013 (FMCA). The Company is listed and
its ordinary shares are quoted on the NZX main board. The Company also has listed debt which is quoted on
the NZX debt market.
Basis of preparation
The Group financial statements have been prepared in accordance with the New Zealand equivalent to
International Accounting Standard 34 Interim Financial Reporting (NZ IAS 34). Selected explanatory notes are
included to explain events and transactions that are significant to an understanding of the changes in the
financial position and performance of the Group since the last annual consolidated financial statements as at
and for the year ended 31 December 2017. These Group financial statements do not include all the
information required for full annual financial statements prepared in accordance with NZ IFRS.
Accounting estimates and judgements
The preparation of the financial statements in conformity with NZ IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
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In preparing these Group financial statements, significant judgements are made by management in applying
the Group's accounting policies. The key sources of estimation uncertainty were the same as those that
applied to the financial statements as at and for the year ended 31 December 2017.
Functional and presentation currency
These financial statements are presented in New Zealand dollars ($), which is the Company's functional
currency. All financial information presented in New Zealand dollars has been rounded to the nearest
thousand, except when otherwise indicated.
Accounting policies
Except as described below, these Group financial statements have been prepared using the same accounting
policies as, and should be read in conjunction with, the financial statements and related notes included in the
Group's Annual Report for the year ended 31 December 2017.
The Group has initially adopted NZ IFRS 15 Revenue from Contracts with Customers and NZ IFRS 9 Financial
Instruments from 1 January 2018. The effect of initially applying these new standards is not material on the
Group's financial statements. Refer note 6 and note 10for further detail.
Presentational changes
Certain amounts in the comparative information have been reclassified to ensure consistency with the current
period's presentation.
2. Segment reporting
The Group has five revenue generating segments, as described below, which are the Group‘s strategic
business areas, and a corporate segment which has no revenue but includes all costs that are shared across
the organisation. The reportable segments are:
• Issuer Relationships - provider of issuer services for current and prospective customers and market operator
for Fonterra Co-Operative Group and the Electricity Authority. For segmental reporting purposes
regulatory services is also included in this division;
• Secondary Markets - provider of trading and post-trade services for securities and derivatives markets
operated by NZX, as well as the provider of a central securities depository;
• Data & Insights - provider of data services for securities and derivatives markets and data and analysis for
New Zealand's dairy sector;
• Funds Management - provider of SuperLife superannuation and KiwiSaver and Smartshares exchange
traded funds; and
• Wealth Technologies - funds administration provider.
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The following segment is now presented as a discontinued operation (refer note 3):
• Agri - provider of information, news, data and analysis relating to the agriculture sectors (other than dairy)
in New Zealand and Australia through printed publications and online services.
In prior periods the Group had three reportable segments - Markets (comprising Issuer Relationships,
Secondary Markets and Data & Insights), Funds Services (comprising Funds Management and Wealth
Technologies) and Agri (now presented as a discontinued operation). The change in reportable segments is
a result of a strategy review completed in November 2017.
The Group’s CEO (the chief operating decision maker) reviews internal management reports for each of these
strategic areas on a regular basis. The Group’s revenue is analysed into each of the reportable segments.
Expenses incurred are allocated to the segments only if they are direct and specific expenses to one of the
segments. The remaining expenses that relate to activities shared across the group are reported in
theCorporate segment.
The Group's assets and liabilities are analysed into each of the revenue generating segments, apart from
those assets and liabilities that are utilised on a shared basis, which are allocated to theCorporate segment.
Segmental information for the six months ended 30 June 2018
Unaudited
Issuer
Relationships
$000
Secondary
Markets
$000
Data &
Insights
$000
Funds
$000
Wealth
Technologies
$000
Corporate
$000
Total
continuing
operations
$000
Agri
$000
Total
including
discontinued
operations
$000
Operating revenue11,5008,5465,5747,320483-33,4233,80337,226
Operating expenses(2,544)(2,640)(850)(4,820)(1,091)(8,261)(20,206)(3,088)(23,294)
Total segment result8,9565,9064,7242,500(608)(8,261)13,21771513,932
Segment assets24,694119,2344,51740,3288,45219,488216,7135,171221,884
Segment liabilities(11,613)(88,405)(791)(5,668)825(49,919)(155,571)(1,055)(156,626)
Net assets13,08130,8293,72634,6609,277(30,431)61,1424,11665,258
Segmental information for the six months ended 30 June 2017
Unaudited
Issuer
Relationships
$000
Secondary
Markets
$000
Data &
Insights
$000
Funds
$000
Wealth
Technologies
$000
Corporate
$000
Total
continuing
operations
$000
Agri
$000
Total
including
discontinued
operations
$000
Operating revenue12,0017,9275,5246,590721-32,7633,79936,562
Operating expenses(2,669)(2,478)(657)(4,354)(1,522)(7,148)(18,828)(3,249)(22,077)
Total segment result9,3325,4494,8672,236(801)(7,148)13,93555014,485
Segment assets25,028122,5504,79542,8934,9307,412207,60811,131218,739
Segment liabilities(13,008)(89,011)(504)(16,126)(213)(27,830)(146,692)(2,294)(148,986)
Net assets12,02033,5394,29126,7674,717(20,418)60,9168,83769,753
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Segmental information for the twelve months ended 31 December 2017
Audited
Issuer
Relationships
$000
Secondary
Markets
$000
Data &
Insights
$000
Funds
$000
Wealth
Technologies
$000
Corporate
$000
Total
continuing
operations
$000
Agri
$000
Total
including
discontinued
operations
$000
Operating revenue24,25716,62911,46413,4481,343-67,1418,18475,325
Operating expenses(5,028)(5,360)(1,399)(9,040)(3,026)(16,042)(39,895)(6,427)(46,322)
Total segment result19,22911,26910,0654,408(1,683)(16,042)27,2461,75729,003
Segment assets13,82391,3665,35242,5616,56810,326169,9969,793179,789
Segment liabilities(6,665)(58,606)(876)(15,936)465(27,650)(109,268)(1,798)(111,066)
Net assets7,15832,7604,47626,6257,033(17,324)60,7287,99568,723
3. Discontinued operations
A discontinued operation is a component of the Group's business that represents a single major line of
business or geographical area of operations that has been disposed of or is held for sale. Classification as a
discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held
for sale, if earlier.
Management has committed to a plan to sell various parts of the business, detailed in note 4. The combined
operations of Farmers Weekly, AgriHQ and the Grain Information Unit represent the Agri reportable
segment, the assets of which are classified as held for sale.
The results for the period and comparatives have been re-presented to show the Agri results as a discontinued
operation, separately from the Group's continuing operations.
The results of the discontinued operation for the periods presented in the income statement are as follows:
Note
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Total operating revenue3,8033,7998,184
Total operating expenses(3,088)(3,249)(6,427)
Earnings before net finance income, income tax, depreciation,
amortisation and impairment, adjustment to provision for earnout,
and gain/(loss) on disposal of businesses and property, plant and
equipment
7155501,757
Net finance expense(14)(35)(67)
Depreciation and amortisation expense(189)(301)(511)
Impairment expense4(2,893)-(353)
Profit/(loss) before income tax(2,381)214826
Income tax expense(143)(72)(339)
Profit/(loss) from discontinued operation (net of tax)(2,524)142487
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The cash flows of the discontinued operations for the periods presented in the cash flow statement are as follows:
Unaudited 6
months
ended
30 June
2018
$000
Unaudited 6
months
ended
30 June
2017
$000
Audited 12
months
ended
31 Dec
2017
$000
Net cash used in operating activities4805051,388
Net cash from investing activities-(25)(28)
4804801,360
4. Assets held for sale
Management has committed to a plan to sell the following parts of the business:
• Farmers Weekly - an agreement to sell this business has been entered into, with an effective sale date of
1 July 2018;
• AgriHQ - subsequent to balance date, an agreement to sell this business has been entered into, with an
effective sale date of 31 August 2018. Refer to note 15;
• Australian based Grain Information Unit (GIU) - subsequent to balance date, an agreement to sell this
business has been entered into, with an effective sale date of 31 August 2018. Refer to note 15;
• FundSource - efforts to sell this business have started and a sale is expected before the end of 2018.
Accordingly, each of the assets and liabilities of the above disposal groups are presented as held for sale.
a.Impairment losses relating to disposal group
Each of the above disposal groups have been reviewed for impairment. Impairment losses of $18,000 for
Farmers Weekly, $823,000 for AgriHQ and $2,052,000 for GIU have been recognised to write-down each
disposal group to the lower of carrying amount and fair value less estimated costs to sell. The impairment
losses have been applied to reduce the carrying amount of goodwill and other intangible assets.
At December 2017 NZX recognised an impairment loss of $353,000 in relation to the Agri business.
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b. Assets and liabilities of disposal groups held for sale
As at 30 June 2018, each disposal group was stated at fair value less estimated costs to sell and comprised
the following assets:
Unaudited 30 June 2018
GIU
$000
AgriHQ
$000
Farmers
Weekly
$000
Data
Services
$000
Total
$000
Property, plant & equipment3-10-13
Goodwill891-1,4363232,650
Other intangible assets1,5794515831122,725
Receivables and prepayments112106--218
Assets held for sale2,5855572,0294355,606
Trade payables3618--54
Other liabilities56648999-1,154
Current tax liability(130)---(130)
Deferred tax liability(23)---(23)
Liabilties held for sale44950799-1,055
Net Assets held for sale2,136501,9304354,551
As at 31 December 2017 the following assets were held for sale:
Audited 31 December 2017
Farmers
Weekly
$000
Data
Services
$000
Total
$000
Goodwill1,4363231,759
Intangible assets544112656
Assets held for sale1,9804352,415
No assets were held for sale at 30 June 2017.
5. Adjustment to provision for earnout
During the period the Group satisfied the Retention Agreements entered into when NZX sold its 50% stake
in Link Market Services Limited (in 2015) through the issue of 124,540 NZX shares to key employees of Link
Market Services Limited. The value of shares issued was less than the provision held, resulting in a $15,000
adjustment to the provision for earnout.
At 31 December 2017, the Group increased the provision for the final earnout payment for the acquisition of
SuperLife to 100% of amounts payable (an increase of $390,000) to recognise that funds under management
were greater than the 100% earnout target. The earnout was paid (gross amount of $9,970,000) in February 2018.
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6. Operating revenue
The Group has initially adopted NZ IFRS 15 Revenue from Contracts with Customers from 1 January 2018.
This standard contains new requirements for the recognition of revenue and involves an assessment of
performance obligations within contracts, allocation of the contract price to those performance obligations
and recognition of revenue as the performance obligations are satisfied. The Group has undertaken a review
of contracts and determined that no changes are required to the way revenue is recognised.
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Listing fees6,6746,54913,907
Other issuer services313293586
Market operations4,5135,1599,764
Total Issuer Relationships revenue11,50012,00124,257
Participant services1,9351,8863,768
Securities trading2,9622,7285,817
Securities clearing3,1052,7515,911
Dairy derivatives5445621,133
Total Secondary Markets revenue8,5467,92716,629
Securities information5,2315,18310,771
Dairy data subscriptions343341693
Total Data & Insights revenue5,5745,52411,464
Funds Management revenue7,3206,59013,448
Wealth Technologies revenue4837211,343
Total operating revenue33,42332,76367,141
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7. Operating expenses
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Operating expenses
Personnel costs(11,560)(10,967)(22,482)
Information technology(3,712)(3,646)(7,474)
Professional fees(936)(676)(2,197)
Marketing(205)(144)(405)
Funds expenditure(1,965)(1,573)(3,489)
Other expenses(1,828)(1,822)(3,848)
Total operating expenses(20,206)(18,828)(39,895)
8. Net finance expense
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Interest income391471878
Interest expense(608)(566)(1,238)
Net gain on foreign exchange333099
Net finance income(184)(65)(261)
9. Bank facilities
a.Cash and cash equivalents
The restricted cash and cash equivalents balance relates to balances held for risk capital required by the
Clearing House and is not available for general cash management use by the Group.
b.Bank overdraft facility
The Group has access to an overdraft facility which was established in 2015 to allow the Group flexibility in its
working capital management. The facility limit is $5.0 million (30 June 2017: $10.0 million, 31 December
2017: $10.0 million) and has an expiry date of 15 January 2020 (extendable by mutual agreement). The bank
may require repayment by making written demand. The effective interest rate of the facility at 30 June 2018
was 4.43% (30 June 2017: 4.00%, 31 December 2017: 3.93%).
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c.Working capital facility
During the period a revolving credit facility was established to provide the Group with additional flexibility in
its working capital management. The facility limit is $5.0 million and has an expiry date of 15 January 2020
(extendable by mutual agreement). No amount was drawn down at 30 June 2018.
10. Interest bearing liabilities
On 20 June 2018 NZX raised $40 million through a subordinated note issue. The purpose of the offer was to
enable NZX to repay existing debt and provide funding for general corporate purposes.
The subordinated note has a 15 year term, maturing 20 June 2033, with election dates at 5 yearly intervals
from the issue date until maturity. The current interest rate (5.40%) is fixed until the first election date, at which
point it may be reset. Investors will also have the option to redeem their subordinated notes on each election
date.
NZX may defer the payment of interest at any time at its discretion, but will be subject to penalty interest of
an additional 4.00% per annum until the next interest payment date at which unpaid and deferred interest is paid.
The terms of the subordinated note offer include a financial covenant requiring that debt that ranks in priority
to the subordinated note, less unrestricted cash may not exceed 1.5 times operating earnings (being EBITDA
and non-cash items, and capital gains/losses). A breach of the financial covenant is not an event of default,
but may prevent NZX paying dividends to shareholders, if it has failed on two consecutive test dates.
The subordinated note has been recognised initially at fair value less directly attributable transaction costs,
and will be subsequently measured at amortised cost using the effective interest method, as required by NZ IFRS
9.
On 20 June 2018 NZX paid down and cancelled its $20 million term loans.
Unaudited
as at
30 June
2018
$000
Unaudited
as at
30 June
2017
$000
Audited
as at
31 Dec
2017
$000
Term loans-20,00020,000
Subordinated note40,000--
Total drawn debt40,00020,00020,000
Capitalised borrowing costs(1,230)--
Net interest bearing liabilities38,77020,00020,000
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11. Dividends
Unaudited
6 months ended
30 June 2018
Unaudited
6 months ended
30 June 2017
Audited
12 months ended
31 Dec 2017
For year
ended
Cents per
share
Total
$000
Cents per
share
Total
$000
Cents per
share
Total
$000
Dividends declared and
paid
March 201731 Dec 163.008,0503.008,050
September 201731 Dec 173.008,054
March 201831 Dec 173.108,323
Total dividends paid
during the year3.108,3233.008,0506.0016,104
Refer to note 15 for details of the 2018 interim dividend.
12. Share based payments
On 10 May 2018, the CEO was issued 1,177,894 performance rights under a long term incentive (LTI) plan
(backdated to commence on 6 April 2017, being the date of CEO appointment). Each of these performance
rights will give the CEO an option to acquire one ordinary share in NZX. The CEO may exercise the options
if the performance rights vest. Vesting of the performance rights is dependent on NZX meeting performance
hurdles in respect of total shareholder return (TSR) growth and earnings per share (EPS) growth, and on the
CEO remaining an employee of the NZX Group for the duration of the five year vesting period.
Vesting of half the performance rights is dependent on TSR growth over the vesting period of at least 9.29%
per annum resulting in 50% of the performance rights being vested (with 100% being vested at 11.29% TSR
growth and 50.1% to 99.9% being vested on a linear, pro-rata basis).
Vesting of the other half of the performance rights is dependent on EPS growth over the period from 1 January
2018 to 31 December 2021 of at least 8% per annum resulting in 50% of the performance rights being vested
(with 100% vesting at 16% EPS growth and 50.1% to 99.9% being vested on a linear, pro-rata basis).
The five year vesting period is from 6 April 2017 to 6 April 2022.
There is a $4,000,000 cap on the maximum value of performance rights that can vest.
The cost of the performance rights is measured based on the fair value at the date granted using an
appropriate pricing model. The cost is recognised over the five year term, with a corresponding increase in
equity. The cumulative expense at each reporting date reflects the extent to which the vesting period has
expired and is the best estimate of the number of performance rights that will vest. The expense or credit in
the reporting period is the movement in cumulative expense and is recognised in personnel costs.
Shares that were issued, transferred to NZX employees or redeemed during the period under the Team and
Results share plan were on terms consistent with the prior year.
During the period $1,000 worth of NZX ordinary shares (gross) were issued to current New Zealand
employees to encourage staff engagement and shareholder alignment.
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13. Related party transactions
a.Transactions with key management personnel
Key management personnel comprises the Group’s senior management team. Key management personnel
compensation comprised the following:
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Short-term employee benefits1,9901,6893,741
Share-based payments15876156
Resignation benefits--138
2,1481,7654,035
b. Transactions with directors and other entities NZX directors are associated with
The Company regularly enters into transactions under normal commercial terms and conditions with other
entities that some NZX directors may sit on the board of or are employed by.
Directors fees for the six month period to 30 June 2018 were $208,000 (30 June 2017: $194,000, 31 December
2017: $377,000) and have been included in other expenses. An additional director was appointed in April
2017 resulting in the increased amount paid in the current period.
c.Transactions with other related parties
Unaudited
6 months
ended
30 June
2018
$000
Unaudited
6 months
ended
30 June
2017
$000
Audited
12 months
ended
31 Dec
2017
$000
Transactions with related parties
Interest on receivable from former CEO-5366
Settlement for former CEO share scheme--1,874
Balances with related parties
Current receivable from former CEO-1,893-
d. Transactions with managed funds
Management fees are received from the funds managed by wholly owned subsidiary Smartshares Limited and
are shown in the Income Statement as funds management revenue.
14. Contingent liabilities
There are no contingent liabilities as at 30 June 2018 (nil at 30 June 2017 and 31 December 2017).
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15. Subsequent events
Dividend
Subsequent to balance date the Board declared the following fully imputed dividends, to be paid on
14 September 2018 (with a record date of 31 August 2018). This is in line with the NZX dividend policy
adopted on 19 February 2018.
Special dividend
Subsequent to balance date the Board declared a special dividend, to return the proceeds from disposals of
non-core businesses to shareholders, of 1.5 cents per share, to be paid on 14 September 2018 (with a record
date of 31 August 2018).
Divestments
Subsequent to balance date the Group entered into agreements to sell the following disposal groups:
• AgriHQ - the red meat and forestry components of AgriHQ have been sold to GlobalHQ Limited, effective
31 August 2018. The assets of this disposal group have been written down to fair value less estimated
costs to sell at 30 June 2018, resulting in an impairment of goodwill of $823,000. Refer note 4.
• GIU - the Australian based Australian Crop Forecasters and Profarmer Australia have been sold to Rural
Bank, effective 31 August 2018. The assets of this disposal group have been written down to fair value less
estimated costs to sell at 30 June 2018, resulting in an impairment of goodwill of $2,052,000. Refer note 4.
© 2018 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Independent Review Report
To the shareholders of NZX Limited
Report on the interim consolidated financial statements
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the interim
consolidated financial statements on pages 21 to 37
do not:
i. present fairly in all material respects the
Group’s financial position as at 30 June
2018 and its financial performance and
cash flows for the 6 month period ended
on that date; and
ii. comply with NZ IAS 34 Interim Financial
Reporting.
We have completed a review of the accompanying
interim consolidated financial statements which
comprise:
— the consolidated statement of financial position
as at 30 June 2018;
— the consolidated income statement,
statements of other comprehensive income,
changes in equity and cash flows for the 6
month period then ended; and
— notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for conclusion
A review of interim consolidated financial statements in accordance with NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance
engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of NZX Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to
the audit of the annual financial statements.
Our firm has also provided other services to the group in relation to regulatory assurance and vendor due
diligence. Subject to certain restrictions, partners and employees of our firm may also deal with the group on
normal terms within the ordinary course of trading activities of the business of the group. These matters have
not impaired our independence as reviewer of the group. The firm has no other relationship with, or interest in,
the group.
Use of this Independent Review Report
This report is made solely to the shareholders as a body. Our review work has been undertaken so that we
might state to the shareholders those matters we are required to state to them in the Independent Review
Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the shareholders as a body for our review work, this report, or any of the
opinions we have formed.
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Responsibilities of the Directors for the interim consolidated financial
statements
The Directors, on behalf of the group, are responsible for:
— the preparation and fair presentation of the interim consolidated financial statements in accordance with NZ
IAS 34 Interim Financial Reporting;
— implementing necessary internal control to enable the preparation of interim consolidated financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the interim consolidated
financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. We
conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything
has come to our attention that causes us to believe that the interim financial statements are not prepared, in all
material respects, in accordance with NZ IAS 34 Interim Financial Reporting.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit
opinion on these interim consolidated financial statements.
This description forms part of our Independent Review Report.
KPMG
Wellington
14 August 2018
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Directory
Registered office
NZX Limited
Level 1, NZX Centre 11 Cable Street
PO Box 2959
Wellington
Tel: +64 4 472 7599
info@nzx.com
www.nzxgroup.com
Auditors
KPMG
10 Customhouse Quay
Wellington
Tel: +64 4 816 4500
Board of Directors
Frank Aldridge
Nigel Babbage
Richard Bodman
Jon Macdonald
James Miller (Chair)
Dr Patrick Strange
Lindsay Wright
Share registry
Link Market Services Limited
Level 8, 80 Queen Street
PO Box 91976
Auckland 1142
Investor Enquiries +64 9 375 5998
enquiries@linkmarketservices.co.nz
www.linkmarketservices.co.nz
NZX Limited
Level 1 / NZX Centre
11 Cable Street
PO Box 2959
Wellington
Tel: +64 4 472 7599
info@nzx.com
www.nzx.com
---
Delivering on the plan to build
a stronger core market –six
months into reshaping our
business
NZX Half Year 2018
Investor Presentation
15 August 2018
Executing on our strategy
Highlights from the first half
Divisional performance
Issuer Relationships
Secondary Markets
Data & Insights
Funds Management
Wealth Technologies
Agenda
2
Important notice
This 2018 half year
investor presentation
should be read in
conjunction with the
management
commentary and
financial statements in
NZX’s 2018 interim
report, which
provides additional
information on many
areas covered in this
presentation.
Financials
Operating expenses
Other income and expenses
Capex
Balance sheet
Cash flows
Dividend
Capital management
Guidance
17
18
19
20
21
22
23
24
16
15
13
12
11
Executing on our strategy
Six months into the delivery of our five year strategy we are making good progress to build an efficient growth platform
üDivested non-core Agri
businesses
üTransformedissuer service
offering
üIncreased on-market liquidity
üListing rules review in final stage
üGlobal alliance strategy underway
üDairy derivatives market –
extended trading hours, added
additional trading functionality
and sales resource
üDebt market –11 new issuances
in first half
üSuperLife/Smartshares –new
leadership in place, strategic
review of operating model
underway, continued FUM growth
of 21.7% since June 2017
üWealth Technologies–core
platform development complete,
new client go-live on track for
October
üContinued automation of
operational processes
üFurther progression on IT
infrastructure programme
üReset capital structure –
subordinated notes issued,
mutualiseddefault fund consultation
completed and dividend
reinvestment plan established
New Zealand’s Exchange
Refocus
Core
Growth
Opportunities Maximise
Options
Get
Fit
3
Executing on our strategy
Delivering on the plan to build a stronger core market for New Zealand
Core
market
Customer engagement
•100% issuers contacted in Q1,150 recontactedin Q2/Q3 as part of proactive engagement programme
•Cross sellingopportunities identified with Data & Insights and SuperLife teams
•Event programme developed, showcasing NZX listed companies to retail and intuitional investors locally and offshore
Framework
•Second phase of listing rulesreview completed. Final rules on track for Q4 release, implementation Q1/Q2 2019
Product suite
•First green bond listed in June, four now listed
Marketing the market
•100% engagement with market participants inHY18. New participant (HobsonWealth Partners)joined in July
•Increased presence at industry events in Asia, United States and Europe
Increase on-market liquidity
•Revised trading and clearing pricing structure to be implemented alongside targeted rule and technologychanges in
October
•
On-market value tradedaveraged above53% each month in HY18
Functionality
•Changes applied to trading and clearing systems in HY18 included calendar spread trading functionality added inMarch,
extended trading hours in July, four decimal place pricing on track for October
•Consultation underway for 2019 trading system upgrade.Vendor engagement and design study tooccur in 2H18
•Indices strategy review underway,new dedicatedresource added
Internal
•
Monthly shareholder metrics revisedto alignwith strategy
B2B
•Increased relationship activity withother customer segments
End user
•
Pathway to PRA initiated, focus on dairy insights products
Capability
•
Customer management components of dataplatform to be delivered by end of FY18
Issuer
Relationships
$4.4 billion capital
raised in HY18,same
as prior period
Data
& Insights
Dairy data product
subscriptions up 28.7%
on prior period
Secondary
Markets
On-market trading
reached record high
of 56.8% in May 2018
4
Executing on our strategy
Growing opportunities and maximisingoptions that support growth in our core market
Growth
opportunities
Spotlight on
Dairy Derivatives
Maximise
options
•2018 volume target range
300,000 -400,000 lots
•147,180lots traded in HY18
Smartshares&
SuperLife
Wealth
Te c h n o l o g i e s
•2018 target FUM growth
plus 7%
•FUM growth HY18 7.1%
Expand global
access
•Extended trading hours startedinJuly,now capturing US morning through to
European lunchtime
Boost sales and
marketing
•Additional New Zealand based FTE hiredto sell NZ milk price future and options
contracts. Volume growth more than 50% YTD
•Progress made on Singapore office licensing, targeting 2019 opening
•New website launched, Chinese translation go-liveH218
Extend product set
•Skim milk powder options launched December 2017
•New calendar spread functionality added March
•Optionssettlement consultation on track H218
Grow end users
•Continuing to support third party distributors
•SuperLife website launched February
•Two new corporate super clientssecured (1,350 members)
Cross-sell
•
SuperLife financial adviser fee channel opened in April
Go-live
•Core platform development completed Q2
•Large customer scheduled to go-live October
Get fit
Clarityand alignment
•Divested non-core businesses
Efficiency
improvements
•Continued automation of operational processes
•Further progression on IT infrastructure programme
Capital structure
•Subordinated notes issued, mutualised default fund consultation completed and
dividend reinvestment plan established
5
Highlights from the first half*
On-market value traded
$10.9
33%
billion
$164.6
Dairy derivatives
MILLIONTH
LOTTRADED INMAY
Dividend
3.0
cents per share
8.8%
To t a l m a r k e t capitalisation
(equity and debt)
billion
* financial results for the six months ended 30 June 2018, comparisons are to the six months ended 30 June 2017
** includes operating earnings from continuing operations of $13.2 million and discontinued operations of $0.7 million
Interim
Special
1.5
6
To t a l o p e r a t i n g e a r n i n g s * *
$13.9
3.8%
million
$2.9
21.7%
Funds undermanagement
billion
Results overview
Result underpinned by divestment of non-core businesses and delivery of projects fundamental
to growth of core exchange
•Revenue highlights include
trading and clearing fees and
growth in the funds
management business
•Operating expenses include
targeted investments in
marketing, cyber security and
the dairy derivatives market,
one-off staff related costs, and
fund expenditure which was
driven by the growth in funds
under management
•Discontinued operations relate
to operating results, plus other
income and expenses for agri
businesses, including
impairment of goodwill and
intangibles of $2.89 million
June 2018
$000
June 2017
$000
Changes
Fav/(unfav)
Operating revenue$33,423$32,7632.0%
Operating expenses($20,206)($18,828)(7.3%)
Operating earnings$13,217$13,935(5.1%)
Net finance expenses, tax, depreciation and amortisation and
gain on sale($6,284)($6,123)(2.6%)
Discontinued operations (includes impairments)($2,524)142(1877.5%)
Net profit after tax$4,409$7,954(44.6%)
7
Operating earnings of $13.9 million in first half 2018
Operating earnings from:
•Continuing operations $13.2
million; and
•Discontinued operations $0.7
million.*
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
20082009201020112012201320142015201620172018
*Discontinued operations relate to recently divested Agri businesses (Farmers Weekly, Australian Crop Forecasters and ProfarmerAustralia and AgriHQ)
8
Operating earnings waterfall
9
000$
Continuing operations
HY 2017 EBITDA
Discontinued operations
(
Agri
HY 2017 EBITDA)
Total HY
2017 EBITDA
Annual listing fees
EA (consulting) revenue
Trading & clearing
Funds management
revenue growth
Funds expenditure
Wealth technologies FUA
Personnel costs
IT savings in 2017
IT 2018 initiatives
Professional fees
Agri
Total HY 2018 EBITDA
Continuing operations
HY 2018 EBITDA
Discontinued operations
(
Agri
HY 2018 EBITDA)
0
2,500
5,000
7,500
10,000
12,500
15,000
EBITDA divisional results
Six months ended 30 June 2018
$000
Issuer
Relationships
Secondary
Markets
Data &
Insights
Funds
Management
Wealth
Technologies
Corporate
Services
Total
continuing
operationsAgri
Total (including
discontinued
operations)
Operating revenue
11,500 8,546 5,574 7,320 483 -
33,423
3,803
37,226
Operating expenses
(2,544)(2,640)(850)(4,820)(1,091)(8,261)
(20,206)
(3,088)
(23,294)
Operating earnings
8,9565,9064,7242,500(608)(8,261)
13,217
71513,932
Six months ended 30 June 2017
$000
Issuer
Relationships
Secondary
Markets
Data &
Insights
Funds
Management
Wealth
Technologies
Corporate
Services
Total
continuing
operationsAgri
Total (including
discontinued
operations)
Operating revenue
12,001 7,927 5,524 6,590 721 -
32,763
3,799
36,562
Operating expenses
(2,669)(2,478)(657)(4,354)(1,522)(7,148)
(18,828)
(3,249)
(22,077)
Operating earnings
9,3325,4494,8672,236(801)(7,148)
13,935
55014,485
10
Issuer Relationships
•Annual listing fee growth from increase in number and value of debt instruments and equity
market capitalisation. Comparable listing of new debt in 2018,equity IPOs weaker than
expected
•Secondary issuances totalled$2.8 billion (equity and funds $2.3 billion, debt $0.5 billion)
•Other issuer services revenue relates to NZX Regulation
•Contractual, consulting and development revenue relates to operation of electricity market
(under contract from Electricity Authority) and Fonterra Shareholders' Market (under contract
from Fonterra)
•Focus on the energy market software upgrade due for completion in September 2018
impacted consulting and development revenue
June
2018
$000
June
2017
$000
Change
Fav/(unfav)
Revenue
Annual listing fees
5,0824,9961.7%
Initial listing fees
434452(4.0%)
Secondary issuance fees
1,1581,1015.2%
Other issuer services
3132936.8%
Consulting and development revenue
155728(78.7%)
Contractual revenue
4,3584,431(1.6%)
Total revenue
11,50012,001(4.2%)
Total expenses
(2,544)(2,669)4.7%
Total operating earnings
8,9569,332(4.0%)
Strategic metrics
Number of unique issuers
200209(4.3%)
Equity market capitalisation
137.0 billion123.8 billion10.6%
Debt market capitalisation (including green
bonds)
27.6 billion27.4billion0.6%
Number of new equity listings
11-
Number of new debt listings
1010-
Value of new equity listed
0.02 billion0.48 billion(95.9%)
Value of new debt listed
1.67billion1.53 billion9.0%
Total secondary capital raised
2.75 billion2.44 billion12.5%
Issuer feesOperating earnings
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2008
H1
2009
H1
2010
H1
2011
H1
2012
H1
2013
H1
2014
H1
2015
H1
2016
H1
2017
H1
2018
H1
AnnualInitialSecondary
11
Secondary Markets
•New pricing structure commences 1 October 2018. Estimated impact includes reduction
of net securities trading and clearing revenues of $150,000 to $200,000
•Changes follow successful trial of new price structure over last 12 months, helping to
contribute an additional 33% in on-market value traded over the first six months of 2018
•New cash trading and clearing participant (Hobson Wealth Partners) joined in July
•Dairy derivatives lots traded relatively flat. Post 30 June balance date, record number of
lots traded in July (41,651 lots)
June
2018
$000
June
2017
$000
Change
Fav/(unfav)
Revenue
Participant services revenue1,9351,8862.6%
Securities trading revenue2,9622,7288.6%
Securities clearing revenue3,1052,75112.9%
Dairy derivatives revenue*544562(3.2%)
Total revenue8,5467,9277.8%
Total expense(2,640)(2,478)(6.5%)
Total operating earnings5,9065,4498.4%
Strategic metrics
Number of trades1.6 million0.9 million75.7%
Total value traded20.3 billion19.8 billion2.4%
Percentage of value on-market53.4%40.3%32.5%
Dairy derivatives lots traded147,180155,222(5.2%)
Number of participants36345.9%
Operating earningsValue and volume traded
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2010 H12010 H22011 H12011 H22012 H12012 H22013 H12013 H22014 H12014 H22015 H12015 H22016 H12016 H22017 H12017 H22018 H1
Value traded ($billion)
Number of trades on SX, AX, DX, NXT
* Excludes annual membership fees charged to derivatives participants
12
Number of trades on SX, AX, DX, NXT
Value traded ($ billion) SX, AX, DX, NXT
Data & Insights
•Te r m i n a l n u m b e r s d e c r e a s e d ( p r e d o m i n a n t l y p r o f e s s i o n a l t e r m i n a l s ) , t h i s
has been offset by receipts from royalty audits
•Subscriptions and licence mix of low and high value subscriptions and
licenses has resulted in lower fees
•Work underway to expand dairy data offering to support trading in dairy
derivatives market
June
2018
$000
June
2017
$000
Change
Fav/(unfav)
Revenue
Royalties from terminal3,3353,1755.0%
Subscriptions and licenses1,8021,922(6.2%)
Dairy data subscriptions3433410.6%
Other94869.3%
Total revenue5,5745,5240.9%
Total expense(850)(657)(29.4%)
Total operatingearnings4,7234,867(2.9%)
Strategic metrics
Terminal numbers (12 month average)7,2957,426(1.8%)
Number of licences96942.1%
Number of proprietary security products
subscription 3953891.5%
Number of dairy data products subscription1,03180128.7%
Operating earnings
Percentage of revenue
66%
64%
63%
56%
60%
32%
32%
31%
38%
34%
3%
4%
6%6%6%
20142015201620171H 2018
Royalties from TerminalsSubscriptions, Licences and OtherDairy Data Subscriptions
13
Dairy Derivatives Market
Delivered on the actions promised in November
strategy:
•Additional trading functionality added (March)
•Additional FTE added to sell NZ milk price future
and options contracts. Volume growth more than
50% YTD
•Website redesigned, Mandarin translation on track
for second half
•Extend trading hours launched (July)
Records on records:
•Post 30 June balance date record trading days
recorded. Lots traded flatin first half due to lack of
volatility (147,180 lots traded as at 30 June 2018)
•Millionth lot traded in May
•Active traders up 60% on comparable period (note
this excludes the additional users from the 15
omnibus accounts)
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
201020112012201320142015201620171H 2018
Revenue ($000)
Lots traded
14
Volume tradedFY revenue (RHS)HY revenue (RHS)
Funds Management
•Total external Funds Under Management (FUM) has grown to $2.9 billion from $2.7 billion at
31 December 2017, reflecting increased retail and adviser utilisation
•SuperLife member numbers up 6.3% on comparable period
•Smartshares total unitholders (the number of investors in each ETF) up 30.8%
•Fresh leadership in place, strategic review of operating model underway
June
2018
$000
June
2017
$000
Change
Fav/(unfav)
Revenue
SuperLiferevenue4,1893,9027.4%
Smartsharesrevenue3,1312,68816.5%
Total revenue7,3206,59011.1%
Total expense(4,820)(4,354)(10.7%)
Total operatingearnings2,5002,23611.8%
Strategic metrics
SuperLifemember numbers51,96348,8886.3%
SuperLifeexternal FUM2.1 billion1.8 billion 16.0%
Smartsharesexternal FUM0.8 billion 0.6 billion 39.3%
SmartsharesSuperLifeFUM1.7 billion 1.3 billion 32.5%
Total SmartsharesFUM2.5 billion 1.9 billion 34.6%
Total FUM (external)2.9 billion 2.4 billion 21.7%
Operating earnings
0
500
1,000
1,500
2,000
2,500
3,000
3,500
15
Funds under management growth
SuperLifeSmartsharesexternalKiwiSaverTotal
December
2014
June
2015
December
2015
June
2016
December
2016
June
2017
December
2017
June
2018
Wealth Technologies
•Core platform development completed in Q2, includes
trading, valuation, cash and asset reconciliation, corporate
actions and investor and management reporting
•Large customer scheduled to go-live this October. Data
migration reconciliation, UAT and migration dry runs under
way
•Business then moves to growth phase, focus shifts to sales
and product refinement, pipeline remains strong
16
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Revenue
Administration fees393631(37.7%)
Development fees90900.0%
Total revenue483721(33.0%)
Total expenses(1,091)(1,522)28.3%
Total operatingearnings(608)(801)24.1%
Strategic metrics
Total FUA (external)1.1 billion1.2 billion(7.9%)
Operating earnings
Operating expenses
Personnel costs:
•Additional fixed term staff employed to complete major capital
projects in Wealth Technologies and energy systems;
•Investment in staff through the issue of $1,000 (gross) of company
shares;
•CEO LTI scheme introduced and back dated to 1 April 2017, LTI
scheme also introduced for new Head of Funds Management;
•No Head of Issuer Relationships in prior period; and
•Targeted new roles in cyber security, derivatives and marketing.
Technology:
•Savings from projects delivered in 2017, which modernised and
simplified data centre and network infrastructure, partly offset by
one-off implementation costs to create a more flexible and robust
mechanism for participants to connect to NZX’s core markets and
wealth technologies platforms
Professional fees
•Legal costs from issue of shares to employees, set-up of dividend
reinvestment plan and LTI schemes:
•Costs associated with Australian GST audit and timing of internal
audit; and
•Royalty commission costs increased in line with royalty audit
receipts.
Funds expenditure:
•Funds costs increased in relation to FUM growth
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Gross personnel costs
(13,625)(12,402)(9.9%)
Less capitalised labour
2,0651,43543.9%
Personnel costs
(11,560)(10,967)(5.4%)
Information technology costs
(3,712)(3,646)(1.8%)
Professional fees
(936)(676)(38.5%)
Marketing
(205)(144)(42.4%)
Funds expenditure
(1,965)(1,573)(24.9%)
Other expenses
(1,828)(1,822)(0.3%)
Total expenses
(20,206)(18,828)(7.3%)
Strategic metrics
Staff numbers (FTEs) –continuing
217203(6.9%)
Staff numbers (FTEs) –discontinuing
28293.4%
17
Other income and expenses
•Net finance expense relates to:
-Interest income on cash balances,
Clearing House risk capital and
regulatory working capital;
-Interest expenses on loans, overdrafts
and earn out; and
-Foreign exchange gains/losses.
•Subordinated notes issued on 20 June
2018, will increase net finance costs in the
second half of 2018
•Discontinued operations relate to
operating results, plus other income and
expenses for Agribusinesses, including
impairment of goodwill and intangibles of
$2.9 million
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Interest income
391471(17.0%)
Interest expense
(608)(566)(7.4%)
Net gain/(loss) on foreign exchange
333010.0%
Net finance income / (expense)
(184)(65)(183.1%)
Depreciation of PP&E
(428)(557)23.1%
Amortisation of intangibles
(2,686)(2,430)(10.5%)
Total depreciation and amortisation
(3,114)(2,987)(4.3%)
Adjustment to provision for earnout
15--
Tax expense
(3,001)(3,071)3.3%
Total net finance expenses, tax, depreciation and amortisation, adjustment to
provision for earnout, and gain on sale
(6,284)(6,123)(2.6%)
Profit/(loss) from discontinued operations (net of tax)
(2,524)142(1877.5%)
18
Capex activity
•Capex driven by specific system life
cycles which result in large multi-year
projects
•Wealth Technologies core system
development completed Q2.
Customisation for a large client continues
ahead of scheduled October go-live.
Stage two development on track for 2019
completion. Future clients may require
degree of customisation
•Energy systems software upgrade on
track for September completion
•Scoping underway for system changes
following publication of final revised
listing rules
•Tr a d i n g s y s t e m u p g r a d e re q u i re d i n
2019, scoping underway
19
Wealth TechnologiesSuperLifeEnergyClearing HouseTrading systemOther softwarePP&E
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2006200720082009201020112012201320142015201620171H 2018
$
Balance sheet
•Cash includes $20 million Clearing House risk
capital. Not available for general use
•Clearing House also complies with
International Organisationof Securities
Commissions principles requiring retention of
sufficient working capital (including cash of
approximately $4.2 million)
•Funds Management maintains sufficient net
tangible assets (including cash of
approximately $1.7 million)
•Focused on receivables collection and working
capital management
•Other current liabilities included SuperLife
earn out $9.97 million paid 1 February 2018
•Subordinated notes (net of issue costs)
replaced term loans
•Funds held on behalf of third parties (assets
and liabilities) offset. These relate to issuer
bond deposits, participants’ collateral
deposits and deposited funds. Amounts are
repayable to issuers and participants
June 2018
$000
June 2017
$000
Change
Fav/(unfav)
Current assets
Cash and cash equivalents38,30727,24340.6%
Receivables and prepayments21,84626,259(16.8%)
Funds held on behalf of third parties89,37389,0090.4%
Assets held for sale5,606--
Total current assets
155,132142,5118.9%
Total non-current assets
66,75276,228(12.4%)
Current liabilities
Trade payables6,5087,159(9.1%)
Other current liabilities16,86628,571(41.0%)
Funds held on behalf of third parties89,37389,009(0.4%)
Liabilities held for sale1,055--
Total current liabilities113,802124,7398.8%
Non-current liabilities
Interest bearing liabilities
38,77020,000(93.9%)
Other non-current liabilities
4,0544,2474.5%
Total non-current liabilities
42,82424,247(76.6%)
Net assets/equity
65,25869,753(6.4%)
20
Cash flows
•Cash flow from operating
activities reflects decreased
profit and working capital
movements
•Investing activities relates to
software development –
Clearing House, Wealth
Te c h n o l o g i e s a n d e n e r g y
systems and payment of
SuperLife earnoutin first
half of 2018
•Financing activities include
subordinated note receipts
net of debt repayment and
dividends paid
June 2018
$000
June 2017
$000
Change
Fav/
(unfav)
Continued
operations
Discontinued
operations
To t a l
Continued
operations
Discontinued
operations
To t a l
Continued
operations
Operating activities5,176480$5,6567,110505$7,615(27.2%)
Investing activities(12,677)-($12,677)(3,101)(25)($3,126)(308.8%)
Financing activities10,447-$10,447(8,050)-($8,050)229.8%
Net increase /
(decrease) in cash and
cash equivalents
2,946480$3,426(4,041)480($3,561)172.9%
21
Dividends –interim and special
•NZX’s Dividend Policy has been expanded to pay between
80% to 110% of adjusted Net Profit After Tax overtime,
subject to maintaining a prudent level of capital to meet
regulatory requirements.
•Interim dividend, fully imputed, of 3.0 cents per share (2017:
3.0 cents per share)
•Special dividend, fully imputed, of 1.5 cents per share.
Returning proceeds from disposals of non-core businesses
to shareholders
•Dividend to be paid on 14 September 2018 to shareholders
registered as at 31 August 2018
•Dividend reinvestment plan available for interim and special
dividend. Shares will be issued at 2.5% discount
22
Capital management
•Capital review completed
•Subordinated notes listed on 20 June 2018. Ensures NZX has a
more robust balance sheet to protect business in unlikely case of
a major market event. Offer extremely well supported by the
market
•Mutualised default fund consultation completed, implementation
October. Will advance Clearing House’s risk model to global
standards. Important in ensuring appropriate Clearing House risk
structure to meet anticipated dairy derivatives market growth
•These actions will help to ensure the exchange has a balance
sheet risk profile appropriate for a business, which is a critical
component of New Zealand’s capital markets infrastructure
23
2018 earnings guidance
•2018 sets the platform for NZX’s future growth. The
divestment of non core assets (including Farmers Weekly) and
changes to the clearing and trading pricing structure
(effective October 2018) will rebase operating earnings
•As the board communicated in the 2017 full year results,
2018 operating earnings are expected 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 assumes no material adverse events, significant one-off
expenses or major accounting adjustments. It also assumes
no further acquisitions or divestments
24
Mark Peterson
Chief Executive Officer
mark.peterson@nzx.com
+64 21 390 636
Graham Law
Chief Financial Officer
graham.law@nzx.com
+64 29 494 2223
Hannah Lynch
Head of Communications
hannah.lynch@nzx.com
+64 21 252 8990
Contacts
25
---
Dividend Reinvestment Plan
Dividend
Reinvestment Plan
This is an important document. If you have any questions
in relation to the Dividend Reinvestment Plan, or are in
any doubt as to how to act, please contact your financial
adviser. This document is dated 15 August 2018.
Dividend Reinvestment Plan
Contents
Letter from the Chair .................................................2
Terms & Conditions ....................................................4
1. INTRODUCTION .......................................................4
2. THE OFFER ...............................................................5
3. METHOD OF PARTICIPATION ..................................8
4. ADDITIONAL SHARE ENTITLEMENT .....................10
5. OPERATION OF THE PLAN ....................................13
6. SOURCE OF ADDITIONAL SHARES .......................13
7. STATEMENT TO PARTICIPATING
SHAREHOLDERS .....................................................14
8. TERMINATION, SUSPENSION
AND MODIFICATION .............................................15
9. REDUCTION OR TERMINATION OF
PARTICIPATION WHERE NO NOTICE GIVEN ........18
10. TAXATION ...............................................................19
11. COSTS .....................................................................22
12. STOCK EXCHANGE QUOTATION .........................22
13. NZMDT SPECIAL DIVISION ....................................23
14. GOVERNING LAW ..................................................23
15. ANNUAL REPORT AND
FINANCIAL STATEMENTS ......................................23
Q&A .........................................................................24
Glossary ....................................................................28
Directory ..................................................................30
NZX Limited Dividend Reinvestment Plan
Participation Form ...................................................32
1
Dividend Reinvestment PlanDividend Reinvestment Plan
Letter from the Chair
Dear Shareholder,
Dividend Reinvestment Plan
We are pleased to announce that as indicated in
NZX’s 2017 annual report, a dividend reinvestment
plan has been established. NZX has received strong
interest over the years from retail investors for
introduction of a dividend reinvestment plan.
This is an opportunity for you to reinvest all or part of
your dividends into additional NZX shares instead of
being paid cash.
There is a brief summary of the process below and
this booklet explains how the full process works.
How to participate
Participating is optional, and it is also flexible. You can
elect to participate with all or part of your dividends,
and you can start or stop your participation at any
time.
If you would like to participate in the dividend
reinvestment plan, please follow the link below or
complete and return the enclosed participation form
included in the booklet to Link Market Services by
5.00pm on the Record Date 2018.
https://investorcentre.linkmarketservices.co.nz - you
will your CSN/Holder Number and Authorisation
Code (FIN) to complete the investor validation
process
If you decide not to participate, you don’t need to do
anything and you will continue to receive all future
dividends in cash, unless and until you decide at a
later date to participate.
What will the share price be?
The price of the shares will be based on the volume
weighted average sale price of NZX shares sold on
the NZX Main Board over five business days, starting
on the Business Day before the Record Date (Ex
Date).
From time to time the share price may be subject to a
discount set by the Board. Any such discount will be
announced when the dividend is announced.
It is also important to note that the dividend
reinvestment plan may not apply to all future
dividends. This will be advised by the Board when
each dividend is announced.
Please read the information in the booklet carefully,
and if you have any questions, please speak to your
financial adviser.
Yours sincerely,
James Miller
Chair
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Dividend Reinvestment PlanDividend Reinvestment Plan
Terms & Conditions
1. INTRODUCTION
Pursuant to the Constitution of NZX Limited
(“NZX”), the board of directors (the “Board”)
has approved the adoption of the NZX Dividend
Reinvestment Plan (the “Plan”). Under the Plan:
• in respect of each cash dividend or
distribution declared by NZX, the Board will
determine whether the Plan applies to that
dividend or distribution; and
• where the Board has determined that the
Plan applies to a dividend or distribution,
eligible holders of Shares in NZX may elect
to reinvest the net proceeds of that dividend
or distribution paid on all or any of their
Shares in NZX by acquiring further fully paid
ordinary shares in NZX instead (“Additional
Shares”).
This Offer Document sets out the terms
and conditions of the Plan and is issued in
compliance with the exclusion for dividend
reinvestment plans contained in Schedule 1 to
the Financial Markets Conduct Act 2013 and
Schedule 8 of the Financial Markets Conduct
Regulations 2014. Accordingly, no product
disclosure statement is required in respect of the
Plan.
This Offer Document has been prepared as at
15 August 2018. Capitalised terms used in these
terms and conditions have the meanings set out
in the Glossary to this Offer Document.
2. THE OFFER
2.1 Offer to Shareholders
Subject to clauses 2.5 to 2.7, NZX offers to all
Shareholders the right to elect to participate in
the Plan.
2.2 Application of the Plan
The Board may, in its absolute discretion, in
respect of each cash dividend or distribution,
determine whether the Plan will apply to that
dividend or distribution.
Where the Plan does not apply to a dividend
or distribution, NZX will announce this on the
NZX Main Board through the NZX market
announcement platform at the same time the
dividend or distribution is announced.
2.3 Available options
Shareholders may elect to participate in the Plan
by exercising one of the following options:
(a). Full participation: If you elect full
participation, participation in the Plan will
apply to all of your Shares registered in your
name on the Record Date.
(b). Partial participation: If you elect partial
participation, only the proportion of Shares
nominated by you will participate in the
Plan. If the percentage of Shares nominated
by you does not result in a whole number
of Shares, the number of Shares will be
rounded down to the nearest whole
number.
(c). Non-Participation: If you do not wish to
participate in the Plan, you are not required
to do anything. You will continue to
automatically receive in cash any dividends
or distributions paid on all of your Shares.
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Dividend Reinvestment PlanDividend Reinvestment Plan
2.4 Information for Australian Shareholders
The offer of securities under the Plan does not
need disclosure for the purposes of section 708
of the Corporations Act 2001 (Cth). Accordingly,
this Offer Document will not be lodged with
ASIC.
Australian resident Shareholders should note
that NZX is not licensed to provide financial
product advice in relation to the securities
offered under the Plan. There is no cooling-
off regime that applies in respect of your
acquisition of securities offered under the Plan.
This Offer Document does not take into account
your personal objectives, financial situation
or needs. You should consider obtaining your
own financial product advice in relation to the
proposed offer from an independent person
who is licensed by ASIC to give such advice.
2.5 Ability to exclude overseas Shareholders
from the Plan
The Board has elected not to offer participation
under the Plan to Shareholders whose registered
address is outside New Zealand and Australia.
The Board has adopted this policy on the basis
that to do so would risk breaching the laws of
places outside of New Zealand and Australia
and it would be unduly onerous to ensure that
the laws of those place are complied with.
The Board may, in its absolute discretion, elect
to amend this policy.
Representations and warranties from overseas
Shareholders
Shareholders who apply to participate in the
Plan who are not resident in New Zealand or
Australia represent and warrant to NZX that
the offer of the Plan and their participation in
it would not breach any laws in their country of
residence.
Any person residing outside New Zealand
or Australia who holds Shares through a
New Zealand or Australian resident nominee
should not allow their nominee to participate in
the Plan if participation in respect of their Shares
would be contrary to the laws of their country of
residence.
Any person residing outside of New Zealand or
Australia who participates in the Plan through
a New Zealand or Australian resident nominee
will be deemed to represent and warrant to
NZX that they can lawfully participate in the Plan
through their nominee.
NZX accepts no responsibility for determining
whether a Shareholder is able to participate
in the Plan under laws applicable outside of
New Zealand or Australia.
2.6 Exclusion where liens or charges over Shares
Any Shares over which NZX has a lien or charge
in accordance with the Constitution or other
requirements of law will not be eligible to
participate in the Plan.
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Dividend Reinvestment PlanDividend Reinvestment Plan
3. METHOD OF PARTICIPATION
3.1 Participation Form
To participate in the Plan a Shareholder must
make a participation election in one of the
following ways:
(a). Online Election – by visiting the website
of the Registrar at https://investorcentre.
linkmarketservices.co.nz. You will
require your CSN/Holder Number and
Authorisation Code (FIN) to complete the
investor validation process.
(b). Participation Form – complete the
Participation Form in accordance with the
instructions on that form, and return the
completed Participation Form by:
Email:
operations@linkmarketservices.co.nz
Mail:
NZX Limited Registrar
C/- Link Market Services Limited
PO Box 91976
Auckland 1142
Shareholders who subsequently decide that
they would like to participate in the Plan can
download the Participation Form and Offer
Document from the NZX website or request a
Participation Form and Offer Document from the
Registrar at the address set out above.
If the Participation Form does not indicate the
level of participation or indicates a level of
participation in excess of the number of Shares
then held by that Shareholder, it will be deemed
to be an application for full participation if
the Participation Form is otherwise correctly
completed and signed.
A Participation Form will not attach to the
Shares in respect of which it has been given but
will be personal to the Shareholder giving it.
This means that Participating Shares will cease
to participate upon transfer and a transferee of
those Shares will need to make a fresh election
in respect of those Shares if the transferee
wishes those Shares to participate in the Plan.
3.2 Holder number and common shareholder
number (“CSN”)
A separate participation election must be given
by a Shareholder in respect of each holding of
Shares identified by a separate holder number
or CSN.
3.3 When participation becomes effective
Participation will be effective as to dividends
or distributions payable from the first Record
Date after receipt by the Registrar of a properly
completed Participation Form, unless the Board
notifies Shareholders that Participation Forms
will be effective if they are received by some
later date.
Subject to the above, any notice received by the
Registrar after 5.00pm (New Zealand time) on a
Record Date for a dividend or distribution will be
effective only from the next dividend to which
the Plan applies.
Participation will continue for all future dividends
or distributions to which the Plan applies in
accordance with these terms and conditions
(unless a Shareholder varies their participation
in the Plan in accordance with these terms and
conditions).
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Dividend Reinvestment PlanDividend Reinvestment Plan
4. ADDITIONAL SHARE ENTITLEMENT
4.1 General
Subject to clause 6, the number of Additional
Shares to be acquired by a Shareholder who has
elected to participate in the Plan will be:
(a). based on the net cash proceeds of the
dividend or distribution the Shareholder
would otherwise have received; and
(b). calculated on the basis that the price of the
Additional Shares will be the market price of
Shares less a discount (if any),
as determined in accordance with the formula
set out in clause 4.2.
4.2 Formula for calculation of Additional Shares
Subject to clause 6, the number of Additional
Shares to be acquired by a Participating
Shareholder will be calculated in accordance
with the following formula:
Where:
AS is the number of Additional Shares which the
Participating Shareholder will receive.
S is the number of Participating Shares.
D is the net proceeds per Share from NZX
(expressed in cents and fractions of cents,
including any supplementary dividends in
respect of Participating Shares payable to
non-resident Shareholders but excluding any
imputation credits and after deduction of any
resident and non-resident withholding (or other)
taxes, if any) of cash dividends payable or
credited on that Share which would otherwise
have been payable to a Shareholder in cash if
the Shareholder had not elected to participate
in the Plan.
Price is the volume weighted average sale price
in New Zealand dollars (expressed in cents and
fractions of cents) for a Share calculated on all
price setting trades of Shares which took place
through the NZX Main Board over a period
of five Business Days starting on the Ex Date,
less a discount (if any) as determined by the
Board from time to time. If no sales of Shares
occur during those five Business Days, then
the volume weighted average sale price will
be deemed to be the sale price for a Share on
the last price setting trade of Shares which took
place after such Business Days as determined by
NZX.
Any volume weighted average sale price so
determined may be reasonably adjusted by NZX
to allow for any bonus issue or dividend or other
distribution expectation. If, in the opinion of the
Board in its sole discretion, any exceptional or
unusual circumstances have artificially affected
the volume weighted average sale price so
determined, NZX may make such adjustment to
that sale price as it considers reasonable.
The determination of the price of the Additional
Shares by the Board, or by some other person
nominated by the Board, will be binding on all
Shareholders with Participating Shares.
The discount, if any, determined by the
Board will be announced by NZX on the NZX
Main Board at the same time the dividend
or distribution is announced for the relevant
period.
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Dividend Reinvestment PlanDividend Reinvestment Plan
4.3 Fractional Shares
Where the number of Additional Shares to
be acquired by a Participating Shareholder
calculated in accordance with clause 4.2 includes
a fraction, the number of Additional Shares to
be issued or transferred will be rounded down
to the nearest whole number.
Any net proceeds per Share (as described as
D in clause 4.2 above) which are not applied
to acquire an Additional Share because of this
clause 4.3 will be retained by NZX for its sole
benefit and will not be refunded or paid to
a Participating Shareholder nor held by NZX
or the Registrar on behalf of a Participating
Shareholder.
4.4 Share price information publicly available
NZX will ensure that, at the time the price for the
Additional Shares is set under clause 4.2, it will
have no information that is not publicly available
that would, or would be likely to, have a material
adverse effect on the realisable price of the
Shares if the information was publicly available.
4.5 Compliance with laws, NZX Listing Rules
and Constitution
The Plan will not operate in relation to a
dividend or distribution to the extent that the
allotment, issue or transfer of Additional Shares
under the Plan would breach any applicable law,
the NZX Listing Rules, or any provision of the
Constitution.
If and to the extent that the Plan does not
operate for such reason in respect of a
Participating Shareholder’s Participating
Shares, the relevant dividend or distribution
on Participating Shares will, until such time as
the issue is resolved, be paid or distributed
in the same manner as to Shareholders not
participating in the Plan.
5. OPERATION OF THE PLAN
5.1 Additional Shares
Where the Board has determined that the Plan
applies in respect of a dividend or distribution,
NZX will, on the Dividend Payment Date, either
issue or arrange the transfer of the Additional
Shares to that Participating Shareholder in
accordance with clause 4.
5.2 Terms of issue and ranking of Additional
Shares
Additional Shares acquired by Participating
Shareholders under the Plan will be issued or
transferred on the terms set out in this Plan,
subject to the rights of termination, suspension
and modification set out in clause 8. The
Additional Shares acquired by Participating
Shareholders under the Plan will, from the date
of issue or transfer, be subject to the same rights
and rank equally in all respects with each other
and with all other Shares on issue as at that
date.
6. SOURCE OF ADDITIONAL SHARES
Additional Shares to be acquired by
Participating Shareholders under the Plan may,
at the Board’s discretion, be:
(a). new Shares issued by NZX;
(b). existing Shares acquired by NZX or a
nominee or agent of NZX; or
(c). any combination of new Shares and existing
Shares.
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Dividend Reinvestment PlanDividend Reinvestment Plan
7. STATEMENT TO PARTICIPATING
SHAREHOLDERS
Subject to clause 2, and where the Board
determines the Plan applies to a dividend or
distribution, NZX or its Registrar will send to
each Participating Shareholder on the Dividend
Payment Date, a statement detailing in respect
of that Participating Shareholder:
(a). the number of Shares of the Participating
Shareholder as at 5.00pm (NZ time) on the
relevant Record Date;
(b). the number of Participating Shares of the
Participating Shareholder as at 5.00pm (NZ
time) on the relevant Record Date;
(c). the amount of:
(i). cash dividend or distribution reinvested
in respect of Shares nominated by
the Participating Shareholder for
participation in the Plan; and
(ii). dividend or distribution paid in cash
on the Shares not nominated for
participation in the Plan (if applicable);
(d). the amount of any tax deduction or
withholding made;
(e). the number of Additional Shares acquired
by the Participating Shareholder under the
Plan on the relevant Dividend Payment Date
and the price of those Additional Shares,
including any discount (if any), determined
by the Board under clause 4.2;
(f). advice as to the amount of any imputation
or other taxation credits; and
(g). such other matters as are required by law
with respect to dividends or distributions
and/or their reinvestment.
8. TERMINATION, SUSPENSION AND
MODIFICATION
8.1 Board’s discretion
The NZX Board may at any time in its sole
discretion:
(a). terminate the Plan; or
(b). suspend the operation of the Plan for a
temporary period so that it will not apply
in whole or part to any dividends or
distributions; or
(c). modify the Plan; or
(d). resolve that participation will not apply in
whole or part to any dividend or distribution
and that the balance of the dividend or
distribution (as the case may be) will be paid
in cash; or
(e). resolve, in the event of the subdivision,
consolidation or reclassification of the
Shares into one or more new classes of
Shares, that a Participation Form will
be deemed to be a Participation Form
in respect of the Shares as subdivided,
consolidated or reclassified unless such
Participation Form is subsequently varied or
withdrawn by the Participating Shareholder
in accordance with clause 8.5; or
(f). resolve that a Participation Form will cease
to be of any effect; or
(g). resolve that Additional Shares may be
acquired at a discount to the market price
of Shares in accordance with clause 4.2, that
the level of any discount will be adjusted, or
that no such discount will apply; or
(h). determine that the Plan may be
underwritten on such terms as agreed
between NZX and an underwriter.
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Dividend Reinvestment PlanDividend Reinvestment Plan
8.2 Prior notice
Notice of any termination, suspension or
modification of the Plan by NZX under clause
8.1 will be given to all Participating Shareholders
by providing notification to Shareholders
by way of announcement to the NZX Main
Board through the NZX market announcement
platform, except for notice of any determination
under clause 8.1(f) which shall be given to the
Shareholder who gave the Participation Form in
question.
8.3 Termination, suspension or modification by
NZX
If the Plan is modified, then a Participation
Form shall be deemed to be a Participation
Form under the Plan as modified unless such
Participation Form is subsequently changed or
withdrawn by the Shareholder.
If the Plan is suspended then elections under
the Plan will cease to have effect and the Shares
will revert to their previous character in relation
to any dividends or distributions until the Board
lifts the suspension, at which time a Participation
Form will have effect from the next Record Date
following the suspension of the Plan being
lifted, unless the Board resolves otherwise
and gives notice of such resolution at the time
of the suspension being lifted by way of an
announcement to the NZX Main Board.
If the Plan is terminated then elections under the
Plan will cease to have effect and the Shares will
revert to their previous character in relation to
any dividends or distributions.
8.4 When no notice required
Notwithstanding clauses 8.1, 8.2 and 8.3, NZX
may at any time, without the need of any notice:
(a). modify the Plan to comply with the
Constitution, the NZX Listing Rules or any
law; and
(b). make minor amendments to the Plan where
such amendments are of an administrative
or procedural nature.
8.5 Variation or termination by a Participating
Shareholder
A Shareholder may, at any time:
(c). increase or decrease the proportion of
Participating Shares, by amending their
participation election online at https://
investorcentre.linkmarketservices.co.nz or
by completing and sending a Participation
Form to the Registrar; or
(d). terminate their participation in the Plan
by written notice to that effect to the
Registrar online at https://investorcentre.
linkmarketservices.co.nz or by completing
a Cancellation Form (available from the
Registrar upon request).
Such variation or termination will take effect
from the first Record Date after the Participation
Form or Cancellation Form is received by
the Registrar or the Participation Form or
Cancellation Form has been completed online.
A properly completed Participation Form or
Cancellation Form will need to be received
by the Registrar prior to 5.00pm (NZ time)
on the Record Date in order for that variation
or termination to be effective in respect of
dividends or distributions payable in relation to
that Record Date.
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Dividend Reinvestment PlanDividend Reinvestment Plan
8.6 Death of Participating Shareholder
If a Participating Shareholder is an individual
and that Shareholder dies, participation by that
Shareholder will cease upon receipt by NZX of
a notice of death in a form acceptable to NZX.
Death of one of two or more joint Participating
Shareholders will not automatically terminate
participation.
9. REDUCTION OR TERMINATION
OF PARTICIPATION WHERE NO
NOTICE GIVEN
9.1 Dispositions where partial participation
Where a Shareholder participating in the
Plan in respect of some but not all its Shares
disposes of some of its Shares then, unless the
Participating Shareholder notifies the Registrar
otherwise in writing, the number of Participating
Shares held by that Participant will be reduced
proportionately.
9.2 Partial dispositions where full participation
If a Shareholder with full participation disposes
of part of its holding of Shares without giving
the Registrar written notice terminating the
Participating Shareholder’s participation in
the Plan in accordance with clause 8.5(b), the
Participating Shareholder will be deemed to
have terminated its participation in the Plan with
respect to the Shares disposed of by it from the
date NZX registers a transfer of those Shares.
9.3 Dispositions of all Shares
If a Participating Shareholder disposes of all of
its holding of Shares without giving the Registrar
written notice terminating the Participating
Shareholder’s participation in the Plan in
accordance with clause 8.5(b), the Participating
Shareholder will be deemed to have terminated
participation in the Plan from the date NZX
registers a transfer of those Shares.
10. TAXATION
The statements below in relation to taxation
reflect the relevant New Zealand and Australian
tax law as at the date this Offer Document
was prepared, and, as such, are subject to
any change in New Zealand or Australian
taxation laws. It is intended as a general guide
only and is not an authoritative or complete
statement of all potential tax implications for
each Shareholder. Taxation is a complex area
of law and the taxation consequences for each
Shareholder may differ depending upon their
particular circumstances. Accordingly, each
Shareholder should consult their own tax adviser
as to the taxation implications of the Plan.
NZX does not accept any responsibility for the
financial or taxation effects of a Shareholder’s
participation or non-participation in the Plan.
10.4 New Zealand Shareholders
For New Zealand tax purposes, a Participating
Shareholder should be treated in the same way
as if they had not participated. This means that
the Shareholder will derive a dividend of the
same amount that they would have derived if
they had not participated (ie, they will be treated
as receiving a dividend from NZX which is then
applied to purchase or subscribe for Additional
Shares).
Accordingly, where the dividend (including
any attached imputation credits) is paid to a
New Zealand Shareholder, it will generally be
subject to resident withholding tax (“RWT”)
which is deducted at source by NZX (and
therefore reduces the amount applied to
purchase or subscribe for Additional Shares).
RWT will be deducted at the rate of 33% with
an allowance for any attached imputation
credits. For example, RWT will be deducted
at the rate of 5% where a dividend is fully
imputed (reflecting company tax paid at the
28% rate). RWT will not need to be deducted
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Dividend Reinvestment PlanDividend Reinvestment Plan
where the New Zealand Shareholder notifies
NZX that they hold a RWT exemption certificate
or, if NZX chooses to not apply RWT in such
circumstances, where the New Zealand
Shareholder is a company and the dividend is
fully imputed.
The New Zealand Shareholder will need to
return the dividend (including any attached
imputation credits) as assessable income, which
will be taxable to the New Zealand Shareholder
at their personal marginal tax rate. Any attached
imputation credits or RWT deducted will be
creditable against New Zealand taxes payable.
10.5 Australian Shareholders
For Australian tax purposes, an Australian
resident Participating Shareholder should be
treated as having received the dividend which
has been applied to purchase or subscribe for
Additional Shares. The gross dividend (including
any withholding tax deducted in New Zealand)
should be assessable to the Australian resident
Participating Shareholder at its respective
marginal tax rate. The Australian resident
Participating Shareholder may be entitled to a
foreign income tax offset for any withholding tax
deducted in New Zealand.
The Australian tax implications of the future
sale of Additional Shares acquired by an
Australian resident Participating Shareholder will
depend on the particular circumstances of that
Shareholder. For capital gains tax purposes:
(a). the cost base of the Additional Shares
includes the amount of the dividend applied
to acquire the Additional Shares; and
(b). the Additional Shares should be treated as
being acquired by the Australian resident
Participating Shareholder on the date that
they are issued or otherwise transferred to
that Shareholder by NZX.
For New Zealand tax purposes, an Australian
resident Participating Shareholder should be
treated in the same way as if they had not
participated. This means that the Australian
resident Participating Shareholder will derive a
dividend of the same amount that they would
have derived if they had not participated (ie, the
Australian resident Participating Shareholder
will be treated as receiving a dividend from NZX
which is then applied to purchase or subscribe
for Additional Shares).
Accordingly, the dividend declared in favour of
Australian resident Participating Shareholders
will be subject to New Zealand non-resident
withholding tax (“NRWT”) which is deducted
at source by NZX (and therefore reduces the
amount applied to purchase or subscribe
for Additional Shares). NRWT will generally
be deducted at the rate of 15%. However,
where the dividend is fully imputed, the
impact of NRWT may effectively be negated
by NZX paying the Australian Shareholder a
supplementary dividend in addition to the
dividend paid to all Shareholders
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10.6 Other non-resident Shareholders
Where the dividend is paid to non-New Zealand
resident shareholders, it will be subject to
NRWT which is deducted at source by NZX
(and therefore reduces the amount applied to
purchase or subscribe for Additional Shares).
The rate at which NRWT is imposed will depend
on the extent to which imputation credits
are attached to a dividend and whether the
Shareholder is tax resident in a country which
has entered into a tax treaty with New Zealand.
Generally, NRWT is deducted at the rate of:
(a). 15%, or 0% if the tax rate applicable after
applying any relevant tax treaty would be
less than 15%, to the extent that a dividend
is fully imputed; or
(b). 30%, or the tax rate applicable after
applying any relevant tax treaty, to the
extent that a dividend is not fully imputed.
Depending on the extent to which a dividend is
imputed, the impact of NRWT may effectively
be mitigated by NZX paying a supplementary
dividend in addition to the dividend paid to all
shareholders.
11. COSTS
There are no charges for participation or
withdrawal from the Plan or changing the
proportion of Shares nominated by you which
will participate in the Plan. No brokerage or
commission costs will be incurred in respect of
the acquisition of Additional Shares.
12. STOCK EXCHANGE QUOTATION
It is expected that Additional Shares will
be quoted on the NZX Main Board on the
completion of allotment procedures and will
rank equally with all existing Shares.
13. NZMDT Special Division
This Offer Document has been approved by the
NZMDT Special Division but the NZMDT Special
Division does not accept any responsibility for
any statement in this Offer Document.
14. GOVERNING LAW
This Offer Document, the Plan, and its
operation, will be governed by the laws of
New Zealand.
15. ANNUAL REPORT AND FINANCIAL
STATEMENTS
You may obtain free of charge NZX’s most recent
annual report and financial statements (including
an independent auditor’s report) complying
with the Companies Act 1993 and Financial
Reporting Act 2013 by contacting NZX at the
address set out in the directory to this Offer
Document, or you may download these reports
from NZX’s website https://www.nzx.com/about-
nzx/investor-centre/reports-and-disclosure.
22
23
Dividend Reinvestment PlanDividend Reinvestment Plan
Q&A
1. What is the NZX Dividend Reinvestment
Plan?
The Plan enables you to reinvest all or part of
a dividend or distribution paid on your Shares
in additional NZX Shares instead of receiving
that dividend or distribution in cash, where the
Board has determined that the Plan applies to
that dividend or distribution. NZX will announce
through the NZX market announcement
platform whether the Plan applies to a dividend
or distribution at the same time the dividend or
distribution is announced.
2. Am I eligible to participate?
As at the date of this Offer Document, the Plan
is only available to holders of Shares who have
a New Zealand or Australian address on the
NZX share registry. NZX has elected not to offer
participation under the Plan to Shareholders
who are resident outside of New Zealand or
Australia. This is to avoid the risk of breaking
overseas laws and because it would be unduly
onerous to ensure compliance with those laws.
However, the Board may amend this policy at
any time, in its sole discretion.
3. Is there a minimum number of Shares that I
need to own before I can participate?
No.
4. How do I participate in the Plan?
It is recommended that you read this Offer
Document carefully before deciding whether to
participate.
You can elect to participate at any time
by making an election online at https://
investorcentre.linkmarketservices.co.nz. You
will require your CSN/Holder Number and
Authorisation Code (FIN) to complete the
investor validation process.
Alternatively, you can elect to participate at any
time by returning a Participation Form to the
Registrar.
5. What options do I have regarding
participating in the Plan?
Participation in the Plan is optional. If you wish
to participate in the Plan, you may elect:
(a). Full participation: Where all of your Shares
(including all Shares held both now and
any Shares acquired in the future, including
where issued or transferred to you under the
Plan) will be treated as participating in the
Plan for all future dividends or distributions
to which the Plan applies (unless you vary
your participation in the Plan in accordance
with the terms and conditions of the Plan);
or
(b). Partial participation: Where only the
proportion of Shares nominated by you (and
the dividends or distributions paid on them)
will participate in the Plan for all future
dividends or distributions to which the Plan
applies (unless you vary your participation in
the Plan in accordance with the terms and
conditions of the Plan).
You will continue to receive cash dividends or
distributions on any of your Shares which do not
participate in the Plan.
If you do not wish to participate in the Plan,
you are not required to do anything. You
will continue to receive cash dividends or
distributions paid on all of your Shares.
24
25
Dividend Reinvestment PlanDividend Reinvestment Plan
6. What if I change my mind?
You can join the Plan or vary your participation
in the Plan at any time by amending your
participation election online or by forwarding a
completed Participation Form to the Registrar.
Participation Forms are available online or from
the Registrar upon request.
If you choose to participate in the Plan and then
change your mind, you can opt out online or by
completing a Cancellation Form (available from
the Registrar upon request).
Such variation, withdrawal or cancellation will
be effective from the first Record Date after
the properly completed Participation Form or
Cancellation Form is received by the Registrar or
the online process has been completed.
7. How much does it cost?
Participation in the Plan is free and provides
NZX Shareholders with the ability to acquire
Additional Shares in NZX free of any brokerage,
commission or other transaction costs.
8. What price will Shareholders pay?
The price of Shares is based upon the volume
weighted average sale price of NZX Shares sold
on the NZX Main Board over a period of five
Business Days starting on the “Ex Date” (which
is one Business Day before the Record Date).
The share price may be subject to a discount set
by the Board from time to time. The discount, if
any, will be announced by NZX through the NZX
market announcement platform at the same
time the dividend is announced for the relevant
period.
9. Can the Plan be changed in the future?
Yes. The NZX Board may change, suspend or
cancel the Plan at its sole discretion. If that
occurs, notice will be given through the NZX
market announcement platform.
10. How do the Shares rank and can I sell them?
Shares acquired under the Plan will rank equally
in all respects with existing Shares and can be
sold at any time.
11. Are there any tax implications?
For New Zealand and Australian income tax
purposes, dividends reinvested in Shares under
a dividend reinvestment plan are generally
treated in the same manner as a cash dividend.
NZX will provide details of the amount of the
dividend, taxes withheld and credits available
so Shareholders can complete their tax returns.
It is recommended that each Shareholder
contact their professional tax adviser for more
information about their specific circumstances.
Refer to clause 10 of the Terms and Conditions.
12. Where can I find information on the NZX
dividend policy?
The Board announced that there will be a new
dividend policy which will come into effect for
the 2018 financial year onward. You can see an
explanation of this policy on page 5 in NZX’s
2017 Annual Report available at https://www.
nzx.com/about-nzx/investor-centre/reports-and-
disclosure.
13. How do I find out how many shares I have
received?
On the Dividend Payment Date participants
will be sent a dividend remittance advice, and
following this a separate security transaction
statement.
26
27
Dividend Reinvestment PlanDividend Reinvestment Plan
Glossary
Additional Shares means the additional Shares to be
issued or transferred to Participating Shareholders
pursuant to the Plan.
Board means the board of directors of NZX.
Business Days means a time between 8.30am and
5.30pm on a day on which the NZX Main Board is
open for trading.
Cancellation Form means the cancellation form
available from the Registrar which notifies NZX that
a Participating Shareholder wishes to terminate their
participation in the Plan.
Constitution means the constitution of NZX.
Dividend Payment Date means the date on which
NZX pays a dividend in respect of its Shares.
Ex Date means the first Business Day before the
Record Date.
NZX means NZX Limited.
NZX Listing Rules means the NZX Main Board listing
rules.
NZX Main Board means the main board equity
security market operated by NZX.
NZMDT Special Division means the Special Division
of the NZ Markets Disciplinary Tribunal which
exercises the functions of NZX Regulation as they
apply to NZX.
Offer Document means this booklet which sets out
the terms and conditions of the Plan.
Participating Shareholder means a Shareholder who
has validly elected to participate in the Plan.
Participating Shares means the Shares in respect of
which an election to participate in the Plan has been
validly made (subject to any validly made variation
or termination) by a Participating Shareholder on the
Record Date.
Participation Form means the participation form
accompanying this Offer Document or available from
the Registrar.
Plan means NZX’s Dividend Reinvestment Plan
established by the Board on the terms and conditions
set out in this Offer Document, as amended from time
to time.
Record Date means, in relation to a dividend or
distribution, the date on which NZX’s register
of Shareholders is closed in order to determine
entitlement to the relevant dividend or distribution.
Registrar means Link Market Services Limited.
Shareholder means a holder of Shares from time to
time.
Shares means fully paid ordinary shares in NZX.
28
29
Dividend Reinvestment PlanDividend Reinvestment Plan
Directory
NZX
NZX Limited
Level 1 / NZX Centre
11 Cable Street
PO Box 2959
WELLINGTON
Tel: +64 4 472 7599
info@nzx.com
www.nzx.com
Registrar
Link Market Services Limited
PO Box 91976
Auckland 1142
Investor enquiries: +64 9 375 5998
enquiries@linkmarketservices.co.nz
www.linkmarketservices.co.nz
Solicitors for NZX
Russell McVeagh
Vero Centre
48 Shortland Street
PO Box 8
Auckland
New Zealand
Auditors
KPMG
10 Customhouse Quay
WELLINGTON
Tel: +64 4 816 4500
FOLD OUT
SECTION
30
31
NZX Limited Dividend Reinvestment Plan Participation Form
Do not complete this Participation Form if you wish to continue to receive in cash any dividends declared in respect
of all of your shares in NZX Limited (“NZX”).
A Dividend Reinvestment Plan (“Plan”) has been introduced in relation to your shares in NZX. Full details of the Plan are set out in the Offer
Document dated 15 August 2018 accompanying this Participation Form. If you wish to reinvest all or part of your NZX dividends, complete and
return this form in the enclosed reply paid envelope or email the completed form to enquiries@linkmarketservices.com. Alternatively, you may
make your participation election, or vary an existing participation election online by visiting https://investorcentre.linkmarketservices.co.nz.
Capitalised terms not defi ned in this Participation Form have the meaning given to those terms in the glossary of the Offer Document.
Name(s):
Address:
Address:
Address:
CSN/Holder number: Daytime phone:( )
In terms of the Plan, I/we wish to participate in the Plan and request: (Choose one option only)
a) Full participation in the Plan for all the Shares I/we may hold from time to time.
OR
b) Partial participation in the Plan, for the percentage of Shares stated. Please specify percentage of Shares:
Joint holders must each sign. Companies must execute by an authorised offi cer or attorney. If signed by an attorney, a non-revocation declaration
must accompany this form, and the relevant authority must either have been exhibited previously to the Registrar or accompany this form.
I/We acknowledge that I/we have received and read a copy of the Offer Document. I/We agree to be bound by the terms and conditions of
the Plan set out in the Offer Document dated 15 August 2018 and this Participation Form. I/We hereby direct that the net proceeds of all cash
dividends I am/we are entitled to be paid or credited in respect of my/our Participating Shares be applied towards the purchase of Additional
Shares in accordance with the Plan.
Signature of Shareholder(s):
Date: / /
Date: / /
Date: / /
Participation will commence on the fi rst Record Date after receipt by the Registrar of this Participation Form, correctly completed. Participation will
continue to apply until varied online at https://investorcentre.linkmarketservices.co.nz or submitting another Participation Form or terminated by
submitting a Cancellation Form (available from the Registrar upon request), in accordance with the terms and conditions of the Plan or until the
Plan is terminated or suspended by NZX.
This Participation Form may be returned at any time to the Registrar by one of the methods below:
By post (New Zealand):
NZX Limited Registrar
C/- Link Market Services Limited
PO Box 91976
Auckland 1142
Level 11, Deloitte Centre
80 Queen Street
Auckland 1010
New Zealand
Scan and email:
enquiries@linkmarketservices.com
(Please put NZX DRP in the subject line
for easy identifi cation)
NZX Limited Dividend Reinvestment Plan Participation Form
Dividend Reinvestment Plan
NZX Limited
Level 1 / NZX Centre
11 Cable Street
PO Box 2959
WELLINGTON
Tel: +64 4 472 7599
info@nzx.com
www.nzx.com
---
NZX Limited
Level 1, NZX Centre
11 Cable Street
PO Box 2959
Wellington 6140
New Zealand
Tel +64 4 472 7599
www.nzx.com
[TEMPLATE SHAREHOLDER EMAIL]
[Insert name and title of recipient]
[Insert company name]
[Insert address]
[Insert city] [Insert postcode]
15 August 2018
Dear [insert name],
NZX Half Year Results & Interim Report Published
NZX today reported its financial results for the six months ended 30 June 2018.
1
Today’s half year financial result reflects the delivery we have made against our strategy
outlined last November.
Six months into the delivery of our five-year strategy we have advanced the business materially.
We have divested our non-core businesses, improved the exchange’s customer service and
business efficiency, increased liquidity in the secondary market, and progressed plans to
simplify the New Zealand market’s structure and rule set.
We are pleased with progress being made across the key strategic areas fundamental to our
future growth, and remain on track to deliver within the earnings guidance range provided in
February 2018.
Summary of highlights from the first half are below:
Successful divestment of non-core businesses. Rural newspaper Farmers Weekly, red
meat and forestry components of AgriHQ, and the remainder of our Melbourne
agribusiness have been sold. 41 staff transitioned with the sale of these businesses and
we now have just two offices in Auckland and Wellington;
Total operating earnings were $13.9 million
2
and net profit after tax was $4.4 million;
3
Operating revenue from continuing operations increased 2.0%, with strong growth in
trading and clearing fees and funds management revenues;
Trial of a new pricing structure in secondary market over last 12 months has helped
contribute an additional 33% in on-market value traded, which now represents 53.4% of
1
Comparisons are to the six months ended 30 June 2017
2
Includes operating earnings from continuing operations of $13.2 million and discontinued operations of $0.7 million
3
Includes net profit after tax from continuing operations of $6.9 million and discontinued operations of ($2.5) million
(including impairment of goodwill and intangibles of $2.9 million)
the market. On-market trading reached a new record of 56.8% in May. A new trading
and clearing pricing structure was announced last week, alongside targeted policy
changes and technology improvements to be introduced in October;
While the market for initial public offerings remains challenging, $4.4 billion of primary
and secondary issuance was raised, the same as last year. Debt issuance remained
strong with 10 new issuances raising $1.7 billion on listing, and a further $454 million in
the secondary market;
Growth in funds under management continued, with revenues up 11.1% in this business.
SuperLife membership numbers increased 6.3% and Smartshares applications numbers
grew 30.6%;
Wealth technologies core platform development was completed, large client scheduled
to go-live in October; and
NZX board completed a capital structure review. Outcomes include, the issuance of
subordinated notes, the implementation of a mutualised default fund for the Clearing
House, and the establishment of a dividend reinvestment plan. These actions will help to
ensure the exchange has a balance sheet risk profile appropriate for a business, which
is a critical component of New Zealand’s capital markets infrastructure.
To view the full interim report please click here.
Dividend
The Board has declared an interim ordinary dividend, fully imputed, of 3.0 cents per share.
Following the divestment of our non-core businesses, each shareholder will also receive a
special dividend, fully imputed, of 1.5 cents per share.
There has been strong interest from retail shareholders to introduce a dividend reinvestment
plan. As promised in our annual report, this has now been established and will be available for
the 2018 interim and special dividends. It will be paid on 14 September 2018 and a discount
rate of 2.5% will apply.
The next six months
This has so far been a year of transition for NZX. We are pleased with progress being made
across the key strategic areas fundamental to our growth, and the growth of New Zealand’s
wider capital markets. Six months into our five-year strategy the team at NZX are optimistic
about what the future holds. We hope you find our progress encouraging.
Mark Peterson, Chief Executive
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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