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Trump-led trading spike benefits ASX 1H17 result

Glenn Freeman  |  17 Feb 2017Text size  Decrease  Increase  |  

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ASX Limited (ASX: ASX) has reported a $219-million net profit after tax for the first half of fiscal 2017, 3 per cent higher than the corresponding period last year.

Group revenue for the market operator grew 2.8 per cent to $386 million in the six months to 31 December 2016, from $376 million a year earlier.

Shareholders will receive a dividend of $1.02 per share, fully franked.

Dominic Stevens, who replaced Elmer Funke Kupper as CEO in August 2016, said the result was "underpinned by healthy levels of cash market and derivatives trading activity, stimulated in part by market reaction to the US presidential election".

"The dip in revenue from our listings business reflects the comparison with last year's strong level of secondary capital raisings. While the total amount of capital raised was down for the half year, the number of new listings was up from 77 to 86."

The positive result of the wide-moat company was only slightly below expectations, with Morningstar senior equity analyst Gareth James having anticipated mid-single-digit growth in earnings per share (EPS). ASX's EPS of 113 cents for the half was 2.9 per cent higher than the previous corresponding period.

"We don't explicitly forecast interim results, but ASX's earnings are usually split reasonably equally between the first and second halves. At just under 3 per cent, it's a bit below what we had expected, but we anticipate the second half will be slightly better," said James, while also indicating the result sees no meaningful change to Morningstar's longer-term earnings forecast.

ASX management highlighted the success of several ongoing strategic initiatives in the half year. These include stakeholder engagement ahead of its planned replacement of the CHESS clearing house system, development of distributed ledger technology, and a new futures trading platform due to launch next month.

Its derivatives clearing business, which contributes the highest proportion (30 per cent) of group revenue, saw an almost 5 per cent uplift to $133 million, with higher volumes from futures and over-the-counter trading.

The company's listings division--it's second-largest business (25 per cent of group revenue)--declined by 2 per cent to $103 million. Management attributed this to lower secondary listing fees during the half relative to the same period in fiscal 2016, during which the four major Australian banks undertook record levels of capital raisings.

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Glenn Freeman is Morningstar's senior editor.

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