Wellington, July 24 NZPA - Exchange operator NZX Group lifted first half net profit 18 percent, despite a sharp decline in the market during the six months.

The importance of the company's market information business continued to grow as the company reported net profit of $4.97 million for the six months to the end of June compared with $4.21m in the corresponding period last year.

Operating revenue was up 6 percent to $15.93m, while operating expenses were flat at $7.93m. As in previous years the company will not pay an interim dividend.

Chief executive Mark Weldon said the result reflected the company's strategy of structuring the business so it could ride out times of market volatility with good profitability and cashflow.

"Given the very challenging market conditions, given the difficulty that the listings side of the business and that brokers and financial markets more broadly have had, we are very, very pleased (with the result)," he said.

For the NZX Markets business, total operating revenue grew 8 percent to $14.75m for the first half.

That included revenue for NZX Data up 20 percent to $5.77m. The key driver was continued growth in demand for NZX Market Information, with the number of real time terminals worldwide up 16 percent on 2007.

Total listings revenue was down 3 percent to $4.19 million, NZX said.

Trading, clearing and settlement revenue was down 7 percent to $2.26m reflecting average daily trades down 7 percent at 2347 compared with 2512 trades in 2007.

The total value traded in the first half was down 10 percent to $15.12 billion, with the daily average also down 10 percent, to $123m.

Mr Weldon said he expected the listings business to be largely flat in the second half, with participant fees to rise slightly.

For trading, clearing and settlement, the company expected the second half to be more positive than the first half.

"You can't guarantee that, of course, but the direction of travel and the numbers in July would give that indication," he said.

Continuing growth was expected in market information, with improvement also likely in market services, including supervision and increasingly network and IT services.

NZX retained a significant focus on investment. The new clearing and settlement platform being built would allow finally the effective development of a non-cash market in this country, for options, commodities and futures.

"We're looking to ... provide good risk management products for New Zealand corporates going forward," Mr Weldon said.

NZX subsidiary Smartshares, which manages five listed, exchange traded funds, had a 30 percent fall in first half earnings before interest, tax, depreciation and amortisation (ebitda) to $320,000. The result was a normalised 4 percent increase on the 2007 first half, which had included an accounting adjustment to revenue of $147,000, NZX said.

Smartshares finished the first half of 2008 with $685m in funds under management, compared with $592m a year earlier.

Link Market Services had a slightly higher first half ebitda at $509,000. It returned $300,000 capital to NZX, while net profit was up to $170,110 from $24,600.

NZX's joint venture trading operation in Australia, AXE ECN (electronic communications network), had "become bogged down in Canberra", Mr Weldon said.

Australian exchange operator ASX had done an effective lobbying job in Canberra. "Aussie Inc is coalescing, as you would expect, but we are still confident that all of the signals and speeches being made by the incoming Labour administration are such that we will get a licence to operate that business in the second half of 2008," he said.

If that licence was not obtained, alternative solutions could be explored, including operating outside Australia.

NZX shares last traded at $7 yesterday, having ranged between $6.55 and $11.70 in the past year.

NZPA WGT mjd gt