ASX profit slips, Holliday-Smith retires

The exchange operator’s profit took a hit from low interest rates, while chairman Holliday-Smith will retire after nine years in the role.

Australian Securities Exchange managing director and CEO Dominic Stevens. Site: AAP/Bianca De Marchi.

Rick Holliday-Smith will retire as chairman of ASX Ltd in April, after nine years in the role, and will be replaced by board member and investment banker Damian Roche.

The exchange operator made the announcement as it unveiled its half-year results, posting a 3.4 per cent slide in net profit, to $241.8m, over the six months through December.

This was despite a 3.4 per cent jump in revenue to $470.5m over the same period.

The profit decline was due to “materially lower interest earnings due to the interest rate environment,” CEO Dominic Stevens said.

The interim dividend declined in line with the slide in net profit, with shareholders to receive 112.4c per share. This is consistent with ASX’s 90 per cent dividend payout policy.

“As expected, the challenges arising from COVID-19 were felt during the half and are likely to continue for at least the short-term.

“ASX remains well positioned to serve Australia’s financial markets and our shareholders, given our mix of businesses, product and operational expertise, and commitment to investing in the technology that supports our industry’s integrity and growth,” Mr Stevens said.

Revenue growth in ASX’s cash equities-related segments over the first half, in particular its listings and issuer services, and its trading services, offset the economic impact of the pandemic and the RBA’s yield curve control program on its derivatives and over-the-counter markets business, he added.

There were 85 new listings across the six-month period, up more than 50 per cent on the prior corresponding period, and the total amount of capital raised rose 24 per cent to $52bn. The bulk of the growth came from IPO capital.

The exchange operator also saw a 19 per cent lift in the on-market value traded on its cash market, rising across the period to $5.9bn, on average, each day. The more than 5 per cent revenue growth recorded in its information services business was supported by rising retail activity in equity markets, Mr Stevens said.

“The derivatives and OTC business continued to be impacted by the COVID-driven yield curve control measures at the short-end of Australia’s interest rate curve,” he noted.

While overall futures volumes were down more than 15 per cent, 10-year bond futures volumes were up almost 17 per cent over the period.

“We are also seeing strong growth in the electricity derivatives business, following a multi-year focus on liquidity, market-making schemes and broadening participation.”

ASX’s expenses rose 8.2 per cent, slightly above guidance. This was to support initiatives and variable market-related activity costs, it said.

Citing the day-long outage that hit the operator in November, Mr Stevens said it had overshadowed the improvements it had made to operational resilience in recent years.

“There will be learnings from the recent incident as we continue to improve and enhance our platforms and processes. While we are deeply sorry for the disruption, it is in the interests of our stakeholders that we continue to contemporise our technology,” he said.

The outage, which is currently being investigated by the securities regulator, was due to an upgrade of ASX’s trading technology developed by US exchange Nasdaq.

Commenting on the appointment of Mr Roche to the chairman role, the outgoing Mr Holliday-Smith praised his knowledge and experience.

“Damian’s deep knowledge of ASX, his background in global financial markets, his international regulatory experience, his knowledge of risk, and his experience managing large teams of people, make him an excellent choice as chairman to lead ASX,” Mr Holliday-Smith said.

Mr Roche was appointed a director of ASX in August 2014 and will take on the chairman role from April 21.

ASX shares closed down 1.8 per cent at $70.05.