2015 Full Year Results Presentation 24 February 2016 Contents • Overview of 2015 results • 2015 financial and operational performance • Outlook for 2016 • Dividend • Investor information This full year results presentation should be read in conjunction with the management commentary on NZX’s 2015 results which provides further comments on many areas covered in the presentation. 2 © Copyright NZX Ltd. 2016 Overview of 2015 results 09 Copyright NZX Ltd. 2016 2015 Business Highlights Markets - Capital and Energy • Lower level of IPO activity offset in 2015 by: - Higher than expected levels of secondary capital raising – up 435.9% over 2014 - Strong growth in trading and clearing volumes – number of trades up 12.0% over 2014 • Good progress in broadening the market - Substantial growth in the debt market including the listing of $5.6B in LGFA debt in November 2015 - Dairy derivative market gathering significant momentum – lots traded up 111.5% over 2014 - First listing on the NXT market – focus on developing a small cap pipeline • Capital markets continued to operate in a fair, orderly and transparent manner - No required actions from the FMA’s annual General Obligations Review - 100% uptime for both trading and clearing systems • Retention of Electricity Authority contracts - Extended at least 8 years, protecting significant value - Reduction in margin on core contracts offset by contracted development for systems upgrade • Required reinvestment in the capital markets business complete - Direct expenses down by 0.8% over 2014 4 © Copyright NZX Ltd. 2016 2015 Business Highlights Funds Services • Executed against our strategy of increasing exposure to the high growth funds management sector - Acquisition of SuperLife, results of which have met expectations ▪ SuperLife FuM growth 14.1%1 ▪ KiwiSaver FuM growth 22.3%1 ▪ Member growth 1.5%1 - Enabled launch of 16 new ETFs in 2015 (18 in total since December 2014) across all major asset classes ▪ 23 ETFs now available to investors on NZX; FuM (excluding SuperLife) up 15.0%1 ▪ SuperLife KiwiSaver scheme now offers 46 different fund options - Acquisition of Apteryx, a next generation wrap platform for fund managers and advisors, which has significant growth potential ▪ Current funds under administration $1.3B ▪ Estimated target market size up to $100B • In addition to the acquisitions, significant investment in the funds services business in 2015 - $0.5m in establishment costs associated with the launch of new funds and fund manager licensing - Apteryx did not achieve breakeven in 2015 1. Excludes transfer of funds/members from smartkiwi to SuperLife KiwiSaver Scheme 5 © Copyright NZX Ltd. 2016 2015 Business Highlights Agri (NZ and Aus) and Other • Agri results disappointing, reflecting very difficult market conditions in New Zealand and shift in grain trading patterns in Australia - NZ publishing revenues down by 9.9% as a result of both a difficult rural environment and the structural decline in print publishing revenues - Data information and analysis revenues up 11.4% which includes the acquisition of iFarm in May 2015 - Grain trading revenues down by 29.9% due to lower volumes of grain being traded in the first part of the 2015/16 harvest • Cost base of the business reduced accordingly and remains under close review - Direct expenses down 5.0% - Closure of one publication, Young Country, in July 2015 • At a group level - Ralec costs, $3.1M in 2015, remain a drain on earnings, accounting for all of the increase in corporate (non-business unit) costs. Trial scheduled for May 2016 - Realisation of significant value from sale of Link NZ shareholding 6 © Copyright NZX Ltd. 2016 2015 reported results 2015 $m 2014 $m Change 73.2 65.2 12.2% (48.6) (40.6) 19.7% EBITDA 24.6 24.6 (0.1%) Depreciation and amortisation (7.0) (5.5) 27.3% 0.2 0.1 95.4% 11.8 - NM 0.4 0.7 (38.9%) Tax (6.1) (6.8) (10.7%) Net profit after tax 23.9 13.1 82.1% Total revenue Operating expenses Net finance income Gain on disposal of Link NZ Associate earnings 7 © Copyright NZX Ltd. 2016 Impact of Link disposal 8 2015 $m 2014 $m Change Reported net profit after tax 23.9 13.1 82.1% Less gain on disposal of Link NZ 11.8 - NM Net profit excluding Link gain 12.1 13.1 (8.0%) Cents per share Cents per share Reported earnings per share 9.1 5.1 78.4% Less gain on disposal of Link 4.5 - NM EPS excluding Link gain 4.6 5.1 (9.8%) © Copyright NZX Ltd. 2016 Impact of acquisitions 2015 $m Less Acquisitions 2015 excl acquisitions 2014 $m Change 73.2 7.1 66.1 65.2 1.4% (48.6) (5.0) (43.6) (40.6) 7.4% EBITDA 24.6 2.1 22.5 24.6 (8.5%) Depreciation & amortisation (7.0) (1.2) (5.8) (5.5) 5.5% 0.2 (0.4) 0.6 0.1 500.0% 11.8 - 11.8 - NM 0.4 - 0.4 0.7 (38.9%) Tax (6.1) (0.2) (5.9) (6.8) (13.2%) Net profit after tax 23.9 0.3 23.6 13.1 80.2% Total revenue Operating expenses Net finance income Gain on Link NZ Associate earnings 9 © Copyright NZX Ltd. 2016 2015 Financial and Operational Performance 10 Copyright NZX Ltd. 2016 2015 Revenue Summary 2015 $m 2014 $m Change Securities information 10.5 10.4 1.5% Listing fees 13.4 13.2 1.8% Other issuer services 0.8 1.0 (24.0%) Securities trading 5.0 4.4 12.5% Participant services 3.5 3.5 1.4% Securities clearing 5.4 4.7 15.3% Dairy derivatives 0.7 0.3 169.3% Market operations 10.6 11.6 (8.6%) Total Markets 49.9 49.1 1.8% Funds Services 10.7 2.7 293.4% 0.9 1.2 (29.9%) Agri information 11.7 12.2 (4.2%) Total Agri Information 12.6 13.4 (6.6%) Total revenue 73.2 65.2 12.2% Commodities trading 11 © Copyright NZX Ltd. 2016 Listing fees Shift from IPOs to new debt listings and secondary capital raisings New Capital Listed Secondary Capital Raised $11.0B $30.0B Equity $10.0B Equity Debt $9.0B $25.0B Debt $8.0B $20.0B $7.0B $6.0B $15.0B $5.0B $4.0B $10.0B $3.0B $2.0B $5.0B $1.0B $0.0B $0.0B '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 IPOs 6 9 3 6 7 1 1 1 2 2015 revenue $0.8m 2 10 16 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 5 2015 revenue $3.9m Source: NZX Data 12 © Copyright NZX Ltd. 2016 Trading and clearing Trading volumes continue to grow; rise in value traded Value Traded Number of Trades (000’s) $50B 1,600 1,400 $40B -17.2% 12.0% 9.8% 19.1% 1,200 39.6% 32.0% 1,000 5.9% $30B 21.8% 800 $20B 600 400 $10B 200 $0B 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Approximately 30% of 2015 securities trading revenue was value based fees Change over prior year 13 © Copyright NZX Ltd. 2016 Dairy Derivatives Strong growth trajectory continues Cumulative Dairy Derivatives traded (# lots) 250,000 • 2011 2012 200,000 • 2013 2014 2015 150,000 3 new clearing participants in 2015 Launch of fresh milk futures planned for 2016, subject to regulatory approvals 100,000 50,000 0 Jan 14 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec © Copyright NZX Ltd. 2016 Market Operations Energy consulting revenues declined, contractual revenues steady Energy Revenue $9.0M $8.0M Development Contract $2.4M • 2015 development work included Extended Reserves Manager project, completion of Settlements & Prudential Securities and various other minor projects • 2014 development work included Financial Transmission Rights, Settlements & Prudential Securities and Dispatchable Demand projects $2.6M $1.6M $7.0M $0.7M $1.4M $6.0M $6.0M $5.9M $5.7M $5.0M $5.3M $5.4M $4.0M $3.0M $2.0M $1.0M $.0M 2011 15 2012 2013 2014 2015 © Copyright NZX Ltd. 2016 Funds services Comprising Smartshares, SuperLife and Apteryx 2015 $m 2014 $m 2013 $m Change 2015 v 2014 SuperLife revenue 6.4 - - NM Smartshares revenue 3.6 2.7 2.5 31.1% 10.0 2.7 2.5 268.0% 43,713 - - NM 1,433 - - NM 4401 411 355 7.1% Smartshares total FUM 1,490 499 355 198.6% Apteryx FUA 1,317 - - NM Total funds management revenue SuperLife member numbers SuperLife FUM Smartshares external FUM 1Net 16 of $33m transfer of smartkiwi KiwiSaver funds to SuperLife © Copyright NZX Ltd. 2016 Funds Under Management SuperLife and Smartshares Asset Allocation $M FuM $M 1,600 1,600 1,400 1,400 KiwiSaver Other 1,200 1,200 1,000 1,000 ETFs 800 800 600 600 Other Super 400 400 200 200 0 0 SuperLife 17 Property / Other Equities - Global Equities - NZ Fixed Income Cash SuperLife SuperLife External SmartShares FuM © Copyright NZX Ltd. 2016 Agri information Advertising revenues impacted by cyclical factors 25.0% 1,500 20.0% 1,400 15.0% 1,300 10.0% 1,200 5.0% 1,100 0.0% 1,000 Q1 -5.0% Q2 2012 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 2015 Q4 900 -10.0% 800 -15.0% 700 -20.0% 600 Advertising revenue change v PCP (LHS) GDT Price Index (RHS) Period of drought 18 © Copyright NZX Ltd. 2016 CGX Volumes Slow start to 2015/16 harvest due to low grain prices Cumulative Tonnes Traded by Harvest 800,000 2008/09 700,000 2009/10 2010/11 600,000 2011/12 2012/13 500,000 2013/14 2014/15 400,000 2015/16 300,000 200,000 100,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Week 19 © Copyright NZX Ltd. 2016 2015 operating expenses summary 2015 $m 2014 $m Change 27.7 22.3 24.6% (1.6) (0.3) 552.6% 26.1 22.0 18.5% IT costs 6.2 5.8 7.1% Professional fees 5.6 3.4 62.9% Marketing, print and distribution 3.5 3.8 (7.3%) Fund expenditure 2.3 1.1 114.5% Other expenses 4.9 4.5 8.8% 48.6 40.6 19.7% Gross personnel costs Less staff capitalisation Net personnel costs Total operating expenditure 20 © Copyright NZX Ltd. 2016 Expense growth driven by acquisitions, Ralec fees Underlying cost growth 2.2% • Cost growth reflects the investment in the expansion of the funds services business and the ongoing costs associated with the Ralec litigation - Total growth in operating expenses of $8.0m ▪ $5.0m from the acquisition of SuperLife and Apteryx ▪ $2.1m from increased Ralec fees1 ▪ $1.2m due to the launch of 16 new ETFs during 2015 reflected in higher funds expenses • Underlying expense growth (excluding acquisitions and Ralec fees) of $0.9m equates to 2.2% growth on 2014 - Direct expenses were down 0.8% in Markets and 5.0% in the Agri businesses 1. Total Ralec related costs were $3.1m in 2015 compared to $1.0m in 2014. The trial is set down for May 2016. 21 © Copyright NZX Ltd. 2016 Results by business area 2015 Markets $m Funds $m Agri $m Corporate $m Group $m Revenue 49.9 10.7 12.6 - 73.2 Direct expenses 12.4 9.0 11.5 15.7 48.6 EBITDA 37.5 1.7 1.1 (15.7) 24.6 Markets $m Funds $m Agri $m Corporate $m Group $m Revenue 49.1 2.7 13.4 - 65.2 Direct expenses 12.5 2.0 12.1 14.0 40.6 EBITDA 36.6 0.7 1.3 (14.0) 24.6 Markets % Funds % Agri % Corporate % Group % 1.8% 293.4% (6.6%) - 12.2% (0.8%) 350.0% (5.0%) 12.1% 19.7% 2.5% 142.9% (15.4%) (12.1%) (0.1%) 2014 15/14 % change Revenue Direct expenses EBITDA 22 © Copyright NZX Ltd. 2016 2016 Outlook Copyright NZX Ltd. 2016 Outlook for 2016 Revenues Business Area Markets 24 Outlook • Capital raising • Trading and clearing Currently in a period of high volatility which has: • Increased trading volumes thus far in 2016, but it is unclear what the medium-term impact of the current global markets correction will have on the NZ market • Created some uncertainty around what is a positive IPO pipeline versus 2015 Secondary capital raisings likely to return to a more normal profile after an elevated year in 2015 due to dual-listed bank’s capital raising • Annual listing fees • Participant services • Stable outlook across these revenue lines, recent takeover activity will impact only at the margin • Listing fees reviewed at half year • Securities data • Lower growth than prior year which benefitted from one-off audit activity • Dairy derivatives • Growth expected to continue, though recent decline in dairy commodity price volatility has seen growth rate moderate from very high levels of 2015 • Launch of a fresh milk futures (subject to regulatory approvals) unlikely to have an impact in 2016 year • Market operations • New EA contract pricing becomes effective in 2016. Results in similar total revenue to 2015 levels, though with additional systems refresh work included within the contract • Current expectation is for similar levels of consulting activity to 2015 © Copyright NZX Ltd. 2016 Outlook for 2016 Revenues Business Area Funds Services Agri 25 Outlook • SuperLife • Smartshares • Growth potentially impacted by declining equity markets, as significant proportion of revenue based on % of FUM fees • Net funds inflow however is expected to maintain current trends • Full year of revenues from new ETFs launched in 2015. Targeting similar underlying growth in external FUM within these funds as last year • Apteryx • Full year of revenue from existing contracts • Data • Publications • Agri data growth trend from 2015 expected to continue • Volume of advertising in publications currently supressed by lack of sector confidence due to low dairy and other commodity prices. Expected to persist for the remainder of 2016 • Grain trading • After two harvests where most of the crop was sold early in the harvest, the 2015/16 harvest is being sold more slowly as a result of lower market prices. This suits Clear Grain’s offering and is expected to underpin growth in volume in 2016 relative to 2015 © Copyright NZX Ltd. 2016 Outlook for 2016 Expenses Area Outlook Personnel costs • Full year of Apteryx costs. Further investment in development and operational capability would be required if a new major client is secured • Additional energy development/testing resource to deliver EA system enhancements • Growth in salary rates at or below CPI • Increase in staff capitalisation expected, reflecting progression of BaNCS upgrade, EA development work and a full year of Apteryx IT costs • Moderate growth associated with Apteryx and other development and corporate activities Professional fees • Current estimate of Ralec fees through to the end of the trial is $2.5m to $3.0m • Other professional fees anticipated to be in line with 2015 levels as FMCA transition costs offset the absence of fund launch costs that were incurred in 2015 Marketing, print and distribution • Increase in marketing costs expected to promote funds management products Fund expenses • Full year of funds costs on the 16 new ETFs launched in 2015. These are largely fixed, hence incremental revenues result in margin expansion Other expenses • Full year of Apteryx costs • Other costs in line with 2015 26 © Copyright NZX Ltd. 2016 Outlook Summary • Based on the factors outlined on the previous three slides, NZX expects FY 2016 EBITDA to be in the range of $22.5m to $26.5m. This is subject to market outcomes, particularly with respect to IPOs, secondary capital raising, trading and clearing volumes for equities and derivatives and grain trading volumes • Guidance assumes no material adverse events, significant one-off expenses or major accounting adjustments • It also assumes no acquisitions or divestments 27 © Copyright NZX Ltd. 2016 Millions Capex Investment requirements driven by system lifecycles, addition of new funds businesses increases BAU capital expenditure 20 • “BAU” capital expenditure has averaged $2-3m p.a. over recent years, with peaks driven by system implementations/renewals 18 16 • This has increased as a result of the acquisition of SuperLife and Apteryx, which undertake development of their core systems in-house 14 12 10 • The Group is also in the middle of a major upgrade of its clearing and settlement system, which is anticipated to be largely completed in 2016, and has commenced work on a 2-3 year upgrade of the systems used to operate the NZ Electricity markets under contract from the EA 8 6 4 2 0 2006 2007 PP&E Clearing House SuperLife 28 2008 2009 2010 Other software Clear Grain Apteryx 2011 2012 2013 Trading system M-co software 2014 2015 • In 2016, the Group currently anticipates capital expenditure in the region of $6m to $8m, the majority of which represents the capitalisation of internal staff costs. This includes the clearing system upgrade, the EA systems upgrade and continuing development of the Apteryx and SuperLife platforms © Copyright NZX Ltd. 2016 Dividend 29 Copyright NZX Ltd. 2016 2H 2015 Dividend • Final 2015 dividend of 3.0 cents declared. Takes total distributions for 2015 to 6.0 cents, unchanged from 2014 • Dividend to be fully imputed • To be paid on 30 March 2016 for holdings as at 16 March 2016 30 © Copyright NZX Ltd. 2016 Investor information 31 Copyright NZX Ltd. 2016 Investor Information • Final dividend of 3.0 cents per share fully imputed declared • Record date 16 March 2016 and payment date 30 March 2016 • NZX full financial reports available to download at: http://nzxgroup.com/investor-centre/reports-information For more information please contact: Tim Bennett Bevan Miller Kate McLaughlin CEO CFO Head of Communications E-Mail tim.bennett@nzx.com bevan.miller@nzx.com kate.mclaughlin@nzx.com Mobile: +64 21 276 7359 +64 27 533 4529 +64 27 518 5526 www.nzx.com 32 © Copyright NZX Ltd. 2016