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Ralec court case weighs on NZX profit

NZN 16/08/2016 Sophie Boot

Stock market operator NZX's first-half profit has dropped 80 per cent as costs related to the ongoing Ralec litigation offset gains in operating revenue.

Net profit fell to $3.58 million in the six months ended June 30 from $17.9m a year earlier, which was bolstered by a one-off gain on an asset sale, the market operator said on Wednesday.

Stripping out that gain and other one-off adjustments, underlying profit fell to $4m from $6.2m.

Operating costs climbed 19.7 per cent to $27m in the first half, outpacing a 10 per cent increase in revenue to $37.9m, with costs related to the protracted litigation with the sellers of the Clear Grain Exchange increasing by $1.6m.

NZX spent $2.9m on the trial in the first half of 2016, more than twice what it spent in the same period a year earlier, and said the increased cost reflected the flurry of activity leading up to and during the trial which began in May and lasted until July.

NZX said it doesn't expect to incur any more significant costs on the Ralec case after July, and anticipates a judgment before the end of the year.

"We are pleased the Ralec trial and associated costs, which weighed on our result, are behind us now," chief executive Tim Bennett said.

NZX would continue to deliver its strategic objectives to grow the business and the markets, he said.

"We are continuing to see a good pipeline of small to medium sized listing candidates, while debt-raising activity is expected to continue at levels above historical averages."

NZX reiterated its expectation for annual earnings before interest, tax, depreciation and amortisation to be in the range of $22.5m to $26.5m, a forecast it gave in February, subject to market outcomes.

The shares last traded at $1.04, having declined 2.8 per cent so far this year.

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