Next: Board of Directors

Management Commentary

Financial results for the year ended 31 December 2016

Overview

NZX’s reported earnings are summarised in the table below.

2016
$000

2015
$000

2014
$000

Change 2016 v 2015

Total revenue

77,544

73,151

65,189

6.0%

Operating expenses

(55,027)

(48,572)

(40,588)

13.3%

Earnings before net finance expense, tax, depreciation and amortisation and gain on sale (Operating Earnings)

22,517

24,579

24,601

(8.4%)

Net finance income

(373)

170

87

(319.4%)

Depreciation and amortisation

(7,936)

(6,990)

(5,490)

13.5%

(Loss)/gain on disposal of businesses and property, plant and equipment

(467)

(29)

42

1510.3%

Gain on sale of associate

-

11,807

-

(100.0%)

Share of profit of associate

-

411

673

(100.0%)

Impairment expense

(793)

-

-

NM

Adjustment to provision for earnout

731

-

-

NM

Tax expense

(4,497)

(6,076)

(6,802)

(26.0%)

Net profit after tax – reported

9,182

23,872

13,111

(61.5%)

Earnings excluding Link gain

9,182

12,065

13,111

(23.9%)

Total revenues increased 6.0% as a result of an increase in activity levels in the capital markets (particularly debt listing and securities trading), growth in funds management activities and a full year of wealth platform fees, partly offset by a drop in advertising revenue in agri publications as a result of weak market conditions in the dairy sector.

This revenue growth was more than offset by growth in operating expenses of 13.3%. A portion of the $6.5 million growth in costs resulted from factors that related solely to 2016, including costs associated with CEO transition and costs associated with the transition to the Financial Markets Conduct Act (FMCA) in the Funds Services business. The remainder of the increase was the result of a full year of costs of operating new Exchange Traded Funds (ETFs) launched in 2015, a full year of NZX Wealth Technologies costs, and growth in IT and employee costs.

The combined impact of these factors was a decline in EBITDA of 8.4%. Depreciation and amortisation expense increased as a result of reclassifying some of the Group’s intangible assets as fixed life rather than indefinite life assets, together with a full year of amortisation on software in NZX Wealth Technologies.

Reported net earnings declined by 61.5%. However, reported 2015 results included a gain of $11.8 million realised on the sale of the Group’s 50% stake in Link Market Services (NZ). Excluding this gain, the decline in net earnings was 23.9%.

Segment earnings

The breakdown of Operating Earnings by business segment is set out in the table below.

($000)

2016

2015

2014

Change 2016 v 2015

Segment earnings:

Markets

41,067

37,512

36,180

9.5%

Funds Services

(316)

1,726

752

(118.3%)

Agri

855

1,040

1,303

(17.8%)

Corporate

(19,089)

(15,699)

(13,634)

21.6%

Group Operating Earnings

22,517

24,579

24,601

(8.4%)

The Markets division saw earnings grow by 9.5% due to increased listings and transaction volumes, while costs declined. Listings growth came from the debt market which saw a nearly 30% increase in market capitalisation during the year, while the number of securities traded was up nearly 20%.

Funds Services earnings dropped by $2.0 million due to costs incurred during 2016 in order to achieve compliance with the requirements of the FMCA, a full year of costs associated with NZX Wealth Technologies and the new ETFs launched in 2015. Both NZX Wealth Technologies and a number of the new ETFs are currently loss-making as they grow their customer base in order to achieve the necessary scale to reach profitability.

NZX’s Agri business was impacted by a downturn in the New Zealand agricultural sector. This flowed through into a notable reduction in advertising volumes.

Corporate costs increased due to costs associated with the CEO transition, a $0.4 million short-term increase in rent expense as the company reorganised its office accommodation, higher IT costs and increased employee costs.

Revenue

Markets

Securities information revenue

Securities information revenue is derived from the sale of capital markets data to global data resellers, as well as a broad range of subscription products to other participants in the capital markets. Sales to resellers represents the largest source of revenue within this category. These resellers incorporate this data into their own subscription products delivered via data terminals. The reseller pays NZX based on the number of terminal licences they have with their end customers that include NZX data. Thus the number of data terminals is the most significant revenue driver for this category.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Securities information revenue

10,406

10,558

10,406

(1.4%)

Terminal numbers (12 month average)

7,407

7,222

7,291

2.6%

While terminal numbers increased 2.6%, a change in the mix of terminals towards lower value products resulted in a small decline in data from securities terminals. A reduction in revenue from other data products added to the decrease in securities information revenue.

Listing fees

There are three components to listing fees:

  • Annual listing fees paid by equity and debt issuers on NZX’s securities markets. The primary drivers of this revenue are the number of listed issuers and any changes in the fee schedule;
  • Initial listing fees, which are paid by equity and debt issuers upon their initial listing on NZX’s securities markets. The primary driver of this revenue is the number of new listings and the value of new capital listed (as fees are based on the opening market capital of the newly listed entity); and
  • Secondary issuance fees, which are paid by existing issuers when they raise additional capital through placements, rights issues, the exercise of options, dividend reinvestment plans, further debt issues, etc. The primary driver for this revenue is the value of secondary capital raised.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Annual listing fees

9,226

8,584

7,936

7.5%

Initial listing fees

2,330

764

2,800

205.0%

Secondary issuance fees

3,341

4,042

2,419

(17.3%)

Total listing fees

14,897

13,390

13,155

11.3%

Number of listed issuers

232

231

215

0.4%

Equity market capitalisation

$115.5b

$110.2b

$96.5b

4.9%

Debt market capitalisation

$25.7b

$19.8b

$13.2b

29.7%

Number of new equity listings

7

6

19

16.7%

Value of new equity listed

$2.1b

$1.7b

$4.7b

24.5%

Value of new debt listed

$6.4b

$8.1b

$1.7b

(20.8%)

Total secondary capital raised

$4.6b

$12.9b

$2.4b

(64.2%)

Annual listing fees were up $0.6 million. More than half of this increase came from the debt market, where there has been a substantial increase in the number and value of listed debt instruments over the past 18 months. The remainder of the increase resulted from growth in equity market capitalisation and changes to the fee schedule increasing fees for existing issuers. While there were seven new equity listings in 2016 (three NZX Main Board IPOs, two NXT market IPOs and two new entities split out of existing issuers), several delistings meant that the number of listed issuers was almost unchanged.

Initial listing fees increased $1.6 million. Although there was little increase in equity raising activity compared to 2015, there was substantial listing of new debt products in 2016, which was the primary driver of the tripling of initial listing fees. The $8.1 billion of debt raised in 2015 was mostly the result of the compliance listing of $5.6 billion of existing debt by the Local Government Funding Authority, while in the current year new debt listed reflected higher-value new debt issues.

Despite a 64.2% decrease in the value of secondary capital raised, secondary issuance fees only declined 17.3% ($0.7 million). The issuance fee as a percentage of capital raised decreases the larger a capital raising is and 2015 secondary capital raising was dominated by a small number of very large capital raisings by dual-listed Australian banks. By contrast, in 2016 secondary capital raising was spread over a number of smaller to medium sized transactions which resulted in a higher yield as a percentage of capital raised.

Other issuer services

This revenue represents fees billed for time spent by NZX’s market supervision team reviewing listing and secondary capital raising documents, requests for waivers from NZX Listing Rules and other significant issuer matters.

($000)

2016

2015

2014

Change 2016 v 2015

Other issuer services revenue

1,144

770

1,013

48.6%

The increase in revenue resulted from more complex transactions occurring in 2016 coupled with the increase in listing activity in the debt market.

Securities trading revenue

This represents fees billed for the execution of trades on NZX’s equity and debt markets. Trading fees are a combination of a fixed fee per trade and a variable fee based on the value of the trade. The fixed fee component accounts for approximately 70% of NZX’s trading revenues, hence the number of trades is the most significant revenue driver.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Securities trading revenue

5,765

4,976

4,424

15.9%

Number of trades

1.75m

1.46m

1.31m

19.8%

The number of securities traded increased just under 20% in 2016, which resulted in a corresponding increase in fixed per-trade fees. Approximately 30% of securities trading revenue is derived from variable fees based on the value traded which only increased only 5.5%, meaning the increase in total securities trading revenue was lower than the growth in the number of trades.

Participant services revenue

This represents fees billed to broking and advisory firms who are accredited participants in NZX’s equity and debt markets.

($000)

2016

2015

2014

Change 2016 v 2015

Participant services revenue

3,592

3,526

3,479

1.9%

Participant services revenues were stable, with no significant changes to fee structures or number of market participants to whom these fees were charged.

Securities clearing revenue

This revenue represents fees for clearing and settlement activities and a range of related services such as custody and stock lending undertaken by NZX’s subsidiary New Zealand Clearing and Depository Corporation. The largest component is clearing fees, which are billed based on the value of the transactions settled. Hence total value traded is the most significant revenue driver for this category.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Securities clearing revenue

5,663

5,365

4,653

5.6%

Total value traded

$44.0b

$41.7b

$35.0b

5.5%

The increase in securities clearing revenue almost exactly reflected the growth in total value traded during the year. The 5.5% growth in value traded was noticeably lower than the 19.8% increase in the number of trades as much of the volume growth came from “algorithmic” trading, which is characterised by a large number of low value trades.

Dairy derivatives revenue

This is trading, clearing and settlement fees for trading in NZX dairy futures and options. Fees are calculated per lot traded, hence the total number of lots traded is the most significant revenue driver. These fees are largely billed in USD reflecting the global nature of the market, hence changes in the NZD:USD exchange rate also have an impact on reported revenues.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Dairy derivatives revenue

706

684

254

3.2%

Lots traded

198k

214k

101k

(7.2%)

The number of lots traded declined 7.2% in 2016 due to low volatility through the first half of the year reducing the incentive for buyers of dairy products to hedge their price exposure. This particularly manifested in a significant reduction in the volume of milk powder options traded, which had been a significant driver of volumes in 2015. Increased volatility in the latter part of 2016 saw trading momentum return somewhat.

Despite the fall in the number of lots traded, revenue increased 3.2% as a result of the weakening of the NZD relative to the USD over the period.

Market operations revenue

NZX operates a number of aspects of the New Zealand electricity market under long term contracts from the Electricity Authority and operates the Fonterra Shareholders' Market on behalf of Fonterra. Market operations revenue has two components:

  • Fixed annual fees for market operator contracts; and
  • Fees for development projects related to the market operator contracts, which are generally billed on a time and materials basis.

($000)

2016

2015

2014

Change 2016 v 2015

Development revenue

1,493

1,375

2,560

8.6%

Contractual revenue

9,236

9,256

9,074

(0.2%)

Total market operations revenue

10,729

10,631

11,634

0.9%

NZX successfully retendered in 2015 for the four market operator contracts that it has with the Electricity Authority and the new contracts commenced in 2016. While the fees for the basic service operation decreased in the new contracts, this was offset by additional annual contracted revenue for the enhancement of the systems used to provide these services. Accordingly, the total contractual revenue was almost unchanged in 2016.

Development revenues also remained at similar levels to 2015, with a similar portfolio of development and consulting activities undertaken in 2016.

Funds Services

Funds management revenue

NZX has two sources of funds management income:

  • Funds management fees derived by SuperLife's superannuation and KiwiSaver activities. NZX acquired SuperLife Limited effective 1 January 2015, which was amalgamated with Smartshares Limited in November 2016. These fees are a mix of membership fees (a flat fee charged on a per member basis) and Funds Under Management (FUM) fees (calculated based on a percentage of funds under management). Thus the key revenue drivers are number of members and FUM.
  • Funds management fees derived by Smartshares, a provider of ETFs. These fees are calculated as a percentage of FUM, therefore FUM is the key revenue driver for Smartshares.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

SuperLife revenue

7,038

6,433

-

9.4%

Smartshares revenue

4,589

3,562

2,716

28.8%

Total funds management revenue

11,627

9,995

2,716

16.3%

SuperLife member numbers

48,015

43,713

-

9.8%

SuperLife FUM

$1,660m

$1,433m

-

15.8%

Smartshares external FUM

$487m

$440m

$411m

10.7%

Smartshares SuperLife FUM

$1,218m

$1,050m

$88m

16.0%

Total Smartshares FUM

$1,705m

$1,490m

$499m

14.4%

A combination of 15.8% growth in FUM and 9.8% growth in member numbers resulted in a 9.4% increase in SuperLife revenue. SuperLife added 4,302 new members during the year. Three quarters of these were added in November 2016 with the migration of new superannuation mandates to SuperLife. As they came on late in the year, their impact on 2016 revenues was small, hence the growth in revenues is not as large as the growth in year-end member numbers would suggest.

Smartshares revenue increased 28.8% as a result of a full year of revenue from the new ETFs launched during 2015 compared to only a part year in the prior period, as well as growth in FUM during 2016 of 14.4%.

Wealth platform fees

Wealth platform fees are earned by NZX Wealth Technologies (formerly Apteryx), a business that NZX acquired effective 1 July 2015. Fees are calculated based on the amount of Funds Under Administration (FUA), therefore this is the key revenue driver for this business.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Administration fees

1,365

689

-

98.1%

Development fees

40

-

-

NM

Total wealth platform fees

1,405

689

-

103.9%

FUA

$1,292m

$1,317m

-

(1.9%)

Growth in administration fees reflects 12 months of revenue in 2016 compared to only six months in the prior year. FUA remained stable throughout 2016.

Development fees represent amounts payable by new customers for work to customise the NZX Wealth Technologies platform for their requirements. This work is on track to be completed in the first half of 2017, enabling the transfer of substantial additional FUA onto the platform.

Agri

Agri information revenue

This revenue falls into two categories:

  • Publishing revenues – advertising and subscription revenues from the publication of rural newspapers and magazines. Advertising is the most significant contributor to revenue and hence the volume of advertising, measured by advertising page equivalents, is the most important revenue driver.
  • Data revenues – revenue from the sale of subscription data and analytical products in the New Zealand agri sector and Australian grain industry.

($000)

2016

2015

2014

Change 2016 v 2015

Publishing revenue

6,451

8,069

8,953

(20.1%)

Agri data revenue

4,038

3,621

3,251

11.5%

Total agri information revenue

10,489

11,690

12,204

(10.3%)

Total paid advertising page equivalents

1,679

2,120

2,483

(20.8%)

The adverse conditions that began impacting the New Zealand rural sector in 2015 persisted in 2016 with low commodity prices for dairy products impacting farm returns causing advertisers to cut back their spending. This was evident in the 20.8% reduction in paid advertising page equivalents which directly correlated with the 20.1% reduction in publishing revenues. Another factor in the reduction in paid advertising page equivalents was the sale of the Group’s two remaining magazine titles, effective 1 October 2016.

While publishing revenues declined, data revenues were up 11.5% as a result of strong growth in the New Zealand business. New Zealand data revenues were up 36% due to growth in sales of existing products, the development of AgriHQ Pulse (an online news service) and a full year of revenue from the iFarm business that was acquired in 2015. Conversely, Australian data revenues declined 0.9% in reported NZD terms as a result of a reduction in farmer subscribers and changes in the NZD:AUD exchange rate adversely impacting reported NZD revenue.

Commodities trading revenue

This revenue came from trade fees on NZX’s Australian online grain trading market, the Clear Grain Exchange. A fixed fee was billed per tonne traded on the exchange, hence the number of tonnes traded was the primary driver of revenue.

NZX sold the Clear Grain Exchange effective 1 December 2016, so no grain trading revenue will be reported in future periods.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Commodities trading revenue

1,121

877

1,251

27.8%

Total tonnes traded

543k

452k

595k

19.9%

Higher tonnes were traded in 2016 relative to 2015 due to the 2015/16 harvest seeing a greater proportion of grain sold later in the harvest (which fell into NZX’s 2016 financial year) than was the case in the previous harvest. This resulted in a 27.8% increase in commodities trading revenue.

Operating Expenses

Personnel costs

Gross personnel costs are made up of:

  • Wages and salaries, comprising base remuneration of permanent and fixed term employees, leave expense, short-term incentive costs (bonuses and commissions), long-term incentive costs (employee share schemes), ACC and KiwiSaver contributions;
  • Contractor costs, comprising the cost of all individuals on short term contracts (including freelance contributors to agricultural publications); and
  • Other personnel costs, including training and development, recruitment and staff benefits.

Where employees or contractors are engaged on capital projects, a proportion of their time is capitalised to capital work in progress, resulting in a credit to personnel costs.

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Wages and salaries

(29,198)

(24,424)

(18,320)

19.5%

Contractor costs

(2,325)

(2,138)

(2,872)

8.7%

Other personnel costs

(1,185)

(1,127)

(1,034)

5.1%

Gross personnel costs

(32,708)

(27,689)

(22,226)

18.1%

Less capitalised labour

2,855

1,638

251

74.3%

Reported personnel costs

(29,853)

(26,051)

(21,975)

14.6%

Staff numbers (FTEs)

237

237

188

0.0%

Wages and salaries costs increased by $4.8 million. Of this amount, $1.7 million related to NZX Wealth Technologies with a full 12 months of expense in 2016 compared to six months in 2015, as well as additional staff recruited to service major new clients won during 2016. The remainder of the increase was due to costs associated with the CEO transition, additional staff recruited on a fixed term basis to support major projects (the clearing system upgrade, the energy systems upgrade and the FMCA compliance project) and additional leave accruals. This was offset by an increase in capitalised labour reflecting capitalisation of staff time on the clearing system and energy projects as well as development work undertaken by NZX Wealth Technologies.

Contractor costs increased 8.7% due to additional contract resource engaged on energy projects and increased use of contractors for covering short term vacancies.

Information technology costs

This includes software licence fees, software and hardware support and maintenance fees, telecommunications and data network costs and the cost of IT services provided by third parties.

($000)

2016

2015

2014

Change 2016 v 2015

Information technology costs

(7,303)

(6,242)

(5,828)

17.0%

IT costs increased by $1.1 million. This increase resulted from increased costs of data feeds used in the securities and agri data businesses, increased NZD cost of annual software maintenance fees billed in USD as a result of changes in the exchange rate, additional software licence costs in the energy business that were previously borne directly by the Electricity Authority, and miscellaneous price increases and additional services acquired from external suppliers.

Professional fees

This includes legal expenses and advisory and consultancy fees.

($000)

2016

2015

2014

Change 2016 v 2015

Ralec litigation expenditure

(2,984)

(3,094)

(956)

(3.6%)

Other professional fees

(2,609)

(2,505)

(2,481)

4.2%

Total professional fees

(5,593)

(5,599)

(3,437)

(0.1%)

Ralec litigation costs were in line with the previous year. The trial was completed in 2016 with neither party successful in its claim for damages. No further costs will be incurred in respect of this matter in future with an agreement being reached that neither party would appeal the judgement.

Other professional fees increased slightly by 4.2%. While 2015 costs included costs associated with the launch of 16 new ETFs and the acquisition of Apteryx (now NZX Wealth Technologies) which were not repeated in 2016, this was offset by additional legal fees and other expenditure incurred in the FMCA compliance project within the funds management business.

Marketing, print and distribution

This includes marketing and promotional expenditure and print and distribution costs for the Group’s agricultural publications.

($000)

2016

2015

2014

Change 2016 v 2015

Marketing, print and distribution

(3,064)

(3,549)

(3,827)

(13.7%)

Print and distribution costs declined in line with the reduction in agri publications revenue, as reduced advertising volumes meant the production of smaller publications. The Group also sold its two remaining magazine titles, effective 1 November 2016, and as a result there are only 10 months of print and distribution costs for these publications in the current year compared to a full year in 2015.

Fund expenditure

This represents the cost of operating the Smartshares ETFs. They are a mixture of costs that are effectively fixed in the short term (principally outsourced fund accounting and administration costs and registry fees) and costs that vary in proportion to FUM (principally custodian fees, trustee fees, index fees, settlement costs and third party manager fees).

($000)

2016

2015

2014

Change 2016 v 2015

Fund expenditure

(3,660)

(2,280)

(1,063)

60.5%

There were 16 new ETFs launched during the course of 2015 and the increase in costs was largely driven by having a full year of the cost of operating these funds in 2016 as opposed to a part year in 2015. There was also a further increase in variable costs due to 14.4% growth in total FUM between 31 December 2015 and 31 December 2016.

Other expenses

This comprises general and administrative expenditure, including rent, travel, insurance, directors fees, audit fees and general overheads.

($000)

2016

2015

2014

Change 2016 v 2015

Other expenses

(5,554)

(4,851)

(4,458)

14.5%

The increase in other expenses was principally the result of a $0.4 million increase in rent and associated premises costs. NZX had previously sublet approximately half its Auckland office to Link Market Services, which moved to larger premises in 2016 to support business growth. NZX moved its SuperLife business into this space however there was a period of approximately six months where NZX effectively incurred lease costs on two premises. NZX also has surplus space in its Wellington offices that it subleases. This was vacant for approximately half of 2016 during which time NZX was bearing the full rental cost.

There was also an increase in statutory fees and compliance costs associated with the FMCA compliance regime and an increase in doubtful debts expense, however these were largely offset by an increase in capitalised overheads in line with the increase in labour capitalisation.

Other Income and Expenses

Net finance income/(expense)

This comprises net interest and foreign exchange gains/losses.

($000)

2016

2015

2014

Change 2016 v 2015

Interest income

943

1,218

615

(22.6%)

Interest expense

(1,233)

(1,197)

(407)

3.0%

Net gain/(loss) on foreign exchange

(83)

149

(121)

(155.7%)

Net finance (expense)/income

(373)

170

87

(319.4%)

Interest income from cash and interest expense was relatively stable year on year. The $0.2 million decrease in interest income largely resulted from use of money interest credits in 2015.

The largest factor in the change from net finance income in 2015 to a net finance expense in 2016 was the foreign exchange loss recognised in 2016 compared to a gain recognised in 2015.

Gain/(loss) on disposal

($000)

2016

2015

2014

Change 2016 v 2015

Gain on disposal of associate

-

11,807

-

NM

Other (loss)/gain on disposal

(467)

(29)

42

1510.3%

Total (loss)/gain on disposal

(467)

11,778

42

NM

NZX sold its 50% stake in Link on 30 June 2015 with a gain of $11.8 million recognised in 2015 on this sale.

In 2016, the Group sold its two rural magazine titles in New Zealand and the Clear Grain Exchange business in Australia, realising a combined loss on disposal of these businesses of $469,000.

Depreciation and amortisation

($000)

2016

2015

2014

Change 2016 v 2015

Depreciation of PP&E

(1,294)

(1,189)

(1,073)

8.8%

Amortisation of intangibles

(6,642)

(5,801)

(4,417)

14.5%

Total depreciation and amortisation

(7,936)

(6,990)

(5,490)

13.5%

The increase in depreciation resulted from capital expenditure during the period.

Amortisation expense increased by $0.8 million. Of this amount $0.4 million results from a change in classification of certain intangible assets in 2016 from indefinite lived (which are not amortised) to finite lived (which are amortised). The remainder reflects amortisation of software development completed in 2015 and 2016 (principally by SuperLife and NZX Wealth Technologies).

Impairment

($000)

2016

2015

2014

Change 2016 v 2015

Impairment expense

(793)

-

-

NM

In its half year results to 30 June 2016 the Group wrote down the carrying value of certain of its brand assets, including those of the rural magazine publications that were subsequently sold. This resulted in an impairment charge of $0.8 million.

Adjustment to provision for earnout

($000)

2016

2015

2014

Change 2016 v 2015

Adjustment to provision for earnout

731

-

-

NM

NZX acquired Apteryx (which it subsequently renamed NZX Wealth Technologies) in 2015 for an initial payment of $1.5 million. A further $2.5 million was payable in the event that the business achieved Funds Under Administration of $3.0 billion and monthly revenues of $0.25 million by 31 March 2017. Based on a probability assessment NZX recognised a provision for 50% of the earnout (discounted to present value) at 31 December 2015.

The earnout targets will not be met and accordingly the earnout provision has been reversed in 2016 resulting in a credit to earnings of $1.3 million.

Offsetting this is an adjustment to increase to the provision for the SuperLife earnout, to record an increase in the likelihood of the full earnout being paid to 95% (previously accrued at 90%).

Share of profit of associate

($000)

2016

2015

2014

Change 2016 v 2015

Share of profit of associate

-

411

673

(100.0%)

The share of profit of associates came from NZX’s 50% interest in Link. This ceased upon the sale of the Link stake on 30 June 2015.

Tax expense

($000 unless otherwise stated)

2016

2015

2014

Change 2016 v 2015

Tax expense

(4,497)

(6,076)

(6,802)

(26.0%)

Effective tax rate (excluding non-assessable gain on disposal of Link)

32.9%

33.5%

35.4%

(1.9%)

The decrease in tax expense reflects lower earnings before tax. The effective tax rate is higher than the statutory rate of 28% due to the significant expenditure on the Ralec litigation which is not deductible for tax purposes.