NZX Annual Meeting 2015
Inform. Exchange. Grow Presentation to Annual Shareholders Meeting 21 May 2015
Agenda Overview of the business Our markets Growth opportunities Progress to date Priorities going forward 3
Business Overview - Performance 2014 Business Capital markets Soft commodities Agricultural information Funds Management Market Operations Capital raising Trading and clearing Listing fees Participant services Securities data 2014 ($M) 2013 ($M) Change (%) 2010-2014 CAGR (%) % of 2014 Revenues 14.4 14.7 (3.6%) 15.8% 21.9% 22.8 20.2 12.6% 4.6% 35.0% Dairy futures Grain (Clear) 1.5 1.5 (3.2%) 15.9% 2.3% Publications Agri data (NZ and Aus) 12.2 12.0 2.1% 2.4% 18.7% Smartshares 2.7 2.5 10.5% 4.5% 4.2% Energy Fonterra 11.6 11.9 (2.0%) 7.2% 17.9% 4
Our Markets Overview 5
We are a markets business At our core, NZX is a markets business. We build and operate markets that are a critical part of the economies in which we operate Markets are more than exchanges they are networks that include the underlying infrastructure, the products that trade, the intermediaries and investors that trade them, and the data and information that drives trading activity Our current focus is on building and operating capital, agricultural commodity and energy markets in New Zealand and Australia 6
Our markets are different We must be different Our chosen markets are different - They all have high growth potential - They are and will remain relatively small by global standards - They are underdeveloped We have tremendous opportunities to grow the business but - We need to do things differently from other exchanges - We need to operate and invest in parts of the market that are underdeveloped, including industry utilities - We need to invest in long-term growth where the opportunities are most attractive 7
Growth Opportunities 8
Capital Markets The Twenty Year Journey Index 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 18% 8% 17% -2% Market Cap CAGR 0 2 4 6 8 10 12 14 16 18 20 Years Au Super Assets Au Market Capitalisation NZ KiwiSaver & Super Assets NZ Market Capitalisation Source: NZX Data, WFE, AVA, RBA 9
Capital markets The beginning of a different market environment New Capital Listed Secondary Capital Raised $8.0B $30.0B Equity Equity $7.0B Debt $25.0B Debt $6.0B $5.0B $20.0B $4.0B $15.0B $3.0B $10.0B $2.0B $1.0B $5.0B $0.0B 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $0.0B 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 IPOs 6 9 3 6 7 1 1 1 2 2 10 16 Source: NZX Data 10 2014 revenue $2.8m 2014 revenue $2.2m
Capital Markets Capitalisation drives trading and clearing revenues YoY Growth 50% 40% 30% 20% 10% 0% -10% -20% -30% 13 % 21 % 9 % CAGR 2010-14 11 12 13 14 Q1'15 Market Cap Nbr of Trades Trade Value Source: NZX Data 11
Capturing the opportunities Capital markets IPO pipeline Futures, options ETFs Products NXT KiwiSaver registry Infrastructure Funds infrastructure NZClear NZX.com Retail Advice Relationships Regulation Franchise Advocacy 12
Funds management SuperLife acquisition The SuperLife acquisition provides the platform to accelerate the growth of Smartshares ETFs in the rapidly growing NZ funds management sector Globally, exchange traded funds (and passive managed funds more generally) have grown faster than other segments of the fund management market The development of our ETF business is consistent with NZX s strategy of investing in the growth of the breadth and depth of the capital markets 13
Funds Management ASX ETF Growth FuM (Index) 1,800 1,600 1,400 FuM (Au Sources) ETF Market Capitalisation # ETF's ASX Listed ETF s (#) 1,200 1,000 800 600 400 200 0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 120 100 80 60 40 20 0 35 % ETF FuM 7 % All FuM CAGR 2010-14 Source: ASX, ABD, RBA 14
Funds Management Net Funds Flow Relative to Funds Under Management Net Funds Flow / Total Funds Under Management 140% 120% 100% 80% 60% 40% 20% 0% SLSS SLKS Kiwisaver TOTAL YE Mar 09 YE Mar 10 YE Mar 11 YE Mar 12 YE Mar 13 YE Mar 14 17 % SLKS 3 % SLSS % Growth 2014 Note: Total FuM each year calculated as average of opening and closing FuM balance Source: FundSource, SuperLife 15
Funds Management Capturing the opportunities 10 Funds ETFs Target 20+ Low-cost 30+ investment options KiwiSaver Merge Reinvigorate $856m current FuM 140+ employers Group Superannuation Two schemes won YTD 16
Agricultural informational and commodities Agricultural production growth NZ Dairy and Au Wheat Production Index 300 250 200 150 100 50 Dairy (NZ) KgMS Wheat (Au)1,000 MT 6 0 1992/93 1997/98 2002/03 2007/08 2012/13 % Dairy 2 % Grain CAGR 2010-14 Source: NZX Data 17
Agricultural informational and commodities Price volatility NZ Dairy and CBOT Wheat Price Volatility (% monthly change) 50% 40% 30% 20% 10% 0% -10% -20% -30% Dairy Price Index CBOT Spot Wheat 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Last 5 Years Range Dairy (21)% 27% Wheat (23)% 20% Source: NZX Data 18
Agricultural informational and commodities Comparison of ASX Wheat and NZX Dairy contracts Trade Volume (Index) 1400 1200 1000 800 600 400 200 Futures / Physical (%) 14% 12% 10% 8% 6% 4% 2% 0 1 2 3 4 5 6 7 8 9 10 Years since launch 0% 1 2 3 4 5 6 7 8 9 10 Years since launch ASX NSW Wheat NZX WMP Futures ASX WA Wheat NZX Dairy Derivatives ASX NSW Wheat GDT Products Source: NZX Data, ASX 19
Agricultural informational and commodities Clear trade volumes Volume by Harvest Thousands 1,000 800 600 400 200-40 42 44 46 48 50 52 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 Weeks 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Source: NZX Data 20
Agricultural informational and commodities Content Subs (#) (#) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Magazine Subscriptions (LHS) Data Revenues (RHS) Ad Pages Page Views ('000's) Source: NZX Data 500 400 300 200 100 21 600 0
Agricultural informational and commodities Capturing the opportunities CFTC Butter contract Dairy Milk exposure Clearers Entry in WA, SA Forwards Grain Operating model Dairy tools ifarm Data Shift to corporate Academy AgriHQ Busienss Information Print to online Monetisation 22
Investment made People Highly capable and stable senior management team Reduced attrition, market competitive compensation Growth in numbers in Markets, Market Supervision and Surveillance Infrastructure Systems (trading and clearing) Presence: Auckland office Compliance 23
Focus areas for 2015 Business Agri data and Clear Electricity Authority tender NZClear Market Advisor regulation Industry economics Competitive landscape Portfolio 24
Inform. Exchange.Grow NZX builds and operates capital, risk and commodity markets and the infrastructure required to support them. We provide high quality information, data and tools to support business decision making. We aim to make a meaningful difference to wealth creation for our shareholders and the individuals, businesses and economies in which we operate. 25
NZX Annual Meeting 2015