Chairman's Report

Dear fellow shareholder,

I am pleased to present NZX’s annual report for 2015 on behalf of the NZX board, my first time doing so as Chairman.

New Zealand market activity remained strong in 2015 – our markets are performing well and are considered to be “open for business”. This is evident in the increase in the S&P/NZX 50 index which was up 13.6% for the year to 31 December 2015. The five year return of that index to the end of 2015 was 13.8%; while the 10 year return (including the Global Financial Crisis of 2007-2008) was 8.1%. It is worth noting, as happens in markets, we have given up some of these gains post the December balance date, with the S&P/NZX 50 index down 0.7% to 1 March.

Index 2015 return 5 year return (pa) 10 year return (pa)
S&P/NZX 50 G +13.6% +13.8% +8.1%
Australian S&P/ASX 200 Accumulation +2.6% +7.0% +5.6%
US S&P 500 Total Return +1.4% +12.6% +7.3%

Source: Forsyth Barr. Table in local currency.

Growth of the New Zealand market in 2015 is also demonstrated by the increase in the ratio of equity market capitalisation to Gross Domestic Product during the year to 45.2% at 31 December 2015, up from 42.1% at 31 December 2014.

The listed debt market experienced a resurgence in 2015 with market capitalisation growing during the year from $13.2 billion to $19.8 billion. This was driven by the New Zealand Local Government Funding Agency’s (LGFA) listing of all of its $5.6 billion of existing bonds on the debt market, and further large listings of corporate debt.

The LGFA listings provide retail investors with greater access to highly rated and liquid fixed income investments. We thank the LGFA team for their support in bringing these products to market – this was another key milestone in the development of our markets following the recommendations by the 2009 Capital Market Development Taskforce.

2015 has again demonstrated the benefits that a public listing can provide to companies in contributing to the creation of significant shareholder value. The table that follows highlights the companies with the highest 10 year return on the market.

10 year rank Code Company 10 year annualised return (G w/ICs) Dec 2015 price/earnings 5 year average price/earnings 10 year average price/earnings
1 ATM A2 Corporation +34.0% 44.7x 82.0x 82.0x
2 RYM Ryman +26.3 11.9x 13.7x 19.1x
3 RBD Restaurant Brands +24.1% 11.7x 9.8x 10.7x
4 POT Port of Tauranga +22.0% 15.7x 16.5x 21.0x
5 EBO Ebos +20.5% 18.6x 10.6x 12.8x
6 MFT Mainfreight +20.5% 17.2x 10.6x 13.1x
7 NZX NZX +19.6% 29.9x 18.1x 17.7x
8 AIR Air New Zealand +18.5% 16.5x 10.9x 8.9x
9 AIA Auckland Airport +17.4% 34.7x 21.2x 24.6x
10 FPH F&P Healthcare +14.7% 6.5x 29.1x 22.8x

Source: Forsyth Barr

The above tables show impressive statistics and notwithstanding recent turbulence will provide you with confidence that the New Zealand market has gained significant momentum over recent years. We hope to continue this growth story in 2016 and further strengthen NZX’s position globally.

2015 performance

NZX’s own financial performance in 2015 was stable at an operational level, with EBITDA (earnings before interest, tax, depreciation and amortisation) unchanged from the prior year at $24.6 million. Reported Net Profit After Tax (NPAT) reflected the significant value realised from the sale of NZX’s stake in Link Market Services NZ. Reported NPAT was up 82.1% to $23.9 million. Excluding the $11.8 million gain on the sale of Link NZ, NPAT was down 8.0% to $12.1 million.

The board declared a fully imputed dividend return of 6.0 cents per share in respect of the 2015 year. Total shareholder return for NZX in the year to 31 December 2015 was -1.0% – an improvement of shareholder returns continues to have the full focus of NZX’s board and management team.

More information about NZX’s 2015 financial and operational performance is provided in Tim’s CEO report and the management commentary.


More information about NZX’s 2015 financial and operational performance is provided in Tim’s CEO report and the management commentary.

The Financial Markets Authority’s (FMA) fourth annual General Obligations Review endorsed the recent work and investment by NZX in its regulatory role, and the effectiveness of our role as frontline regulator. The May report concluded that during the 2014 review period NZX complied with all of its statutory obligations, and NZX was not required to take any specific actions in response to the FMA’s review.

Our commitment to maintaining positive and robust relationships with New Zealand’s regulators was further cemented in 2015 when NZX signed Memoranda of Understanding (MoUs) with both the FMA and the Takeovers Panel. These MoUs set out frameworks for engagement and cooperation between regulators, taking into account our respective statutory roles.

My thanks go to our fellow regulators, the FMA, the Takeovers Panel, and the New Zealand Markets Disciplinary Tribunal (NZMDT), for their work in 2015. I would also like to acknowledge the work of the Special Division of the NZMDT which exercises the powers and functions of NZX Regulation as they apply to NZX and our Smartshares business.

In November 2015, NZX sought feedback on updating NZX’s corporate governance guidelines for Main Board listed issuers. The board recognises good corporate governance standards are important for listed issuers as it further promotes investor confidence and provides mechanisms by which companies, and those in control, are held to account. NZX has received excellent engagement in the first stage of this review with more than 40 submissions received. The board is grateful to all of those who took the time to make a submission, and the NZX team leading this project is looking forward to further engagement with the market as this review progresses.

NZX notes the formation of the New Zealand Corporate Governance Forum in July last year. We hope that our corporate governance initiative will lead to the development of a single set of corporate governance guidelines for listed issuers in New Zealand and we will continue to work with the forum, the FMA, and other stakeholders, to achieve this objective.

In October we welcomed David Flacks who was appointed as an independent non-director member of the NZX Conflicts Committee, a sub-committee of the NZX board chaired by director Dame Therese Walsh. The committee is responsible for the oversight of NZX’s conflicts management policies and procedures. David is also chair of the NZMDT and a member of the Takeovers Panel. We thank David for his service and valuable work within our markets.

I would also like to thank Derek Johnston for his work as an independent non-director member and chair of the Regulatory Governance Committee of the board. The committee was established in August 2013, and assists the board in fulfilling its governance responsibilities relating to NZX’s regulatory function for its registered markets.

In November, Guy Elliffe and John Williams were appointed independent directors to our Smartshares board. Both bring extensive funds management experience and join CEO Tim Bennett and CFO Bevan Miller on that board.

Board update

I was honoured to take the reins as NZX’s Chairman from Andrew Harmos following our annual meeting in May 2015.

Andrew joined the board in 2002 and was appointed Chairman in 2008. In his 13 year tenure, Andrew worked tirelessly on behalf of shareholders and other market stakeholders to ensure our markets are well operated and regulated, and to ensure our organisation is appropriately resourced both to meet current demands and to respond effectively to new developments and opportunities.

Under Andrew’s guidance, NZX took a significant leadership role in the development of capital, agricultural commodity and energy markets in New Zealand and Australia. In his seven years as Chairman, Andrew played a vital role in laying the foundations for what is a new chapter in our capital markets, kick-started by KiwiSaver, and now supported by a new regulatory environment under the Financial Markets Conduct Act.

My sincere thanks on behalf of my fellow directors and our shareholders go to Andrew for his constant service to the board, our shareholders, NZX management, and ultimately to New Zealand’s capital markets; and for his true professionalism and integrity at every turn.

I would also like to acknowledge and thank the Hon. Simon Power, who also stepped off the board at our annual meeting, for the contribution he made to our board during his two and a half years as a director. Our departing directors join a group of enthusiastic NZX alumni who are champions for NZX and who continue to work tirelessly for the development of our capital markets.

We welcomed Dr Patrick Strange as a director at our annual meeting. Patrick has spent 30 years working as a senior executive and director in both private and listed companies, including more than six years as Chief Executive of Transpower, where he oversaw Transpower’s $3.8 billion of essential investment in the National Grid.

Patrick is also Chair of Chorus, a director of Mighty River Power, Auckland International Airport and of the joint board of Ausgrid, Endeavour Energy and Essential Energy, Australia. Patrick has quickly made a valuable contribution to our board, bringing relevant experience from a variety of governance and management roles.

The NZX board continues to work well together, and my thanks go to my fellow directors for their continued hard work and dedication.


Markets are network businesses and NZX is at the heart of that network in New Zealand. NZX takes this leadership role seriously and is committed to developing our capital markets on behalf of all New Zealanders.

The board is extremely grateful for the efforts of Tim Bennett and the NZX management team who delivered a number of important initiatives in 2015.

I would particularly like to thank all of the NZX staff – in Wellington, Auckland, Melbourne, Feilding and across New Zealand – and their families, on behalf of the NZX board.

I would also like to thank our customers, particularly our listed issuers and market participants.

Finally thanks to you, our shareholders, for your continued support of NZX.

James Miller