Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ASX Ltd (ASX:ASX, Financial) delivered record operating revenue of $1.03 billion in FY24, showcasing the strength of its diversified business model.
- The company achieved a fully franked final dividend of $1.068 per share, bringing the FY24 total dividend to $2.08 per share.
- ASX Ltd (ASX:ASX) made significant progress in its technology modernization program, including updates to ASX Trade and infrastructure upgrades in its data center.
- The company generated annualized savings of approximately $5 million through reducing consultant usage and process improvements.
- ASX Ltd (ASX:ASX) saw strong growth in its markets business, with futures and OTC revenue up 12.3% driven by global interest rate volatility.
Negative Points
- Total expenses increased by 14.7% compared to FY23, driven by investments in regulatory commitments and technology modernization.
- Underlying net profit after tax (NPAT) decreased by 3.4% to $474.2 million.
- The company is facing civil proceedings filed by ASIC related to statements made in February 2022 regarding the CHESS Replacement project.
- Cash market trading revenue declined by 4.7% due to a reduction in the average daily on-market value traded.
- Equity post-trade services revenue fell by 4% compared to FY23, impacted by lower levels of equity market activity.
Q & A Highlights
Q: Can you talk about the material pricing changes implemented and their impact on FY25 numbers, particularly in listings and information services?
A: We regularly review pricing for most of our services. For listings, changes typically occur from the beginning of July, and for technology and data, from January 1. We are currently reviewing these areas but have no specific numbers to share yet. Factors considered include international benchmarks, value added through resilience and new services, and CPI.
Q: Can you clarify the $5 million savings identified and its impact on FY25 expenses? Also, any cost implications from the ASIC action?
A: The $5 million savings are part of our ongoing cost management, including reduced consultant spend and procurement improvements. These savings are included in our 6%-9% expense growth guidance. Regarding the ASIC case, it’s too early to speculate on costs, but we are comfortable with our current guidance.
Q: What are the drivers behind the pricing for futures and option contracts moving from 149 to 145 in FY24?
A: The decrease is generally due to increased volumes in interest rate futures, leading some customers to hit volume rebates, resulting in a slightly lower average fee per trade.
Q: What is ASX's view on central clearing of bond and repo markets and its potential revenue opportunity?
A: We are actively evaluating central clearing of bonds and repos and discussing it with customers. It’s too early to quantify the revenue opportunity at this point.
Q: What are your thoughts on introducing zero-day expiry options to Australia, given their uptake in the US?
A: We don’t have a specific view right now, but the derivatives team is likely contemplating it. More updates may come in the future.
Q: Can you discuss the increase in D&A beyond FY25 due to increased CapEx and project rollouts?
A: We expect a gradual step-up in depreciation and amortization over the coming years as major technology projects transition into production. The average depreciation period for these projects is 7 to 10 years.
Q: How can someone compete in settlements and clearing when the new CHESS hasn't been delivered yet?
A: The focus of proposed rules is to ensure services are provided transparently and fairly, even in the absence of competition. ASX is not a legislative monopoly, and the rules aim to create conditions conducive to competition.
Q: What are the criteria for continuing to fund Sympli, and how long will ASX wait before potentially pulling the plug?
A: We see e-conveyancing as an attractive market opportunity and believe Sympli can provide a strong customer-focused competitor. The Sympli team is working with New South Wales and Queensland governments to firm up interoperability timelines.
Q: Are any of the new IT programs expected to contribute materially to revenue in the near to medium term?
A: We see areas where technology changes will support growth, such as the removal of the opening auction stagger and post-close trading opportunities. However, no specific material numbers to highlight at this stage.
Q: What is the plan to get back to the target ROE range, considering cost growth and D&A increases?
A: We have achieved our ROE target range for FY24 and will continue to focus on both revenue growth and cost-conscious operations to maintain and improve ROE.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
