This morning, Australia's dominant stock exchange ASX Ltd (ASX: ASX) reported a profit after tax of $434.1 million on revenues of $764.1m which have both risen by 1.9% and 2.4% respectively.
Although its expenses have risen to $180.9m — up 6% — this has previously been flagged by management so this shouldn't be a surprise. Investments in capital expenditure, however, came in at just over $50m which was flat on the prior corresponding period (pcp).
Revenues and profits at ASX are mainly determined by activity levels which have been mixed.
The total amount of capital that was raised in the last financial year was down almost 29% but this was offset by an increase in the number of companies that listed their shares on the Australian public markets for the first time — including many foreign and technology companies. Revenue from its Listings and Issuer Services, however, were flat for the year at $193m.
The value of on-market trade, cash market, futures and equity options have all risen due in part, management says, to ongoing global uncertainty and pockets of volatility in the markets.
Volatility is a good thing for ASX.
Investing in the future
The company's rise in expenses and capital expenditures relates to investment in staff to support growth initiatives, and the upgrading of its infrastructure.
In particular, there's work being done on a potential replacement for the CHESS platform later this year, and there's its new futures trading platform, investments in distributed ledger (blockchain) technology and development work associated with becoming the administrator for the BBSW benchmark rate (BBSW stands for the Bank Bill Swap rate).
Whilst expenses have risen faster than both revenues and net profits, it's not necessarily a bad thing to see increased spend on staff, on the proviso it can obtain a clear return on investment for doing so.
Outlook
Given trading levels are so important for ASX, it was pleasing to read that trading activity for the first six weeks of the 2017-18 financial year is up on the pcp.
Ongoing volatility around the world could be a positive too given how linked volatility is to the value of its derivatives and over-the-counter markets.
Beyond this though, details are scant. There'll be a continued focus on foreign and technology listings, and continued investment in technology to support the business and its growth initiatives.
The company is paying out 90% of its earnings and has declared a fully-franked final dividend of 99.8 cents which is an increase of 0.8%.
Total dividends for the year have risen to 201.8 cents per share which is a rise of 1.9% for the year.
All up, it's a solid result and, for dividend-seeking investors, the forward yield is a nice fully-franked 3.7% and it's therefore not surprising to see the share price up marginally this morning.
