AU$498m profit for ASX in record trading period boosted by COVID-19
The Australian Securities Exchange (ASX) has thanked its investment in culture and underlying "foundations" for its ability to move through COVID-19 relatively unscathed.
"ASX was well-prepared for the impact of COVID-19 because of the work we've done in recent years to strengthen our culture, and our operational and technical foundations; diversify our product and service offerings; and evolve our rules and guidance to meet the market's changing needs," CEO and MD Dominic Stevens said.
For the 2020 financial year, net profit after tax was slightly up on last year to AU$498.6 million, while operating expenses rose by 9% year-on-year to AU$286.2 million. Operating revenue for the 12 months to 30 June 2020 was AU$938.4 million.
Earnings before interest and taxation (EBIT) increased over the prior period by 8.5%, with the ASX touting it as the 10th year of consecutive EBIT growth. It thanked heightened market activity due to impacts of COVID-19, accompanied by strategic initiatives, for the earnings boost this year.
"The strong performance of our core businesses generated solid underlying profit growth, while investment in the resilience of our systems helped ensure the availability of ASX's markets throughout the COVID-19 pandemic," Stevens added.
Capital expenditure was AU$80.4 million, which the exchange said reflected its ongoing investment to refresh ASX's technology capabilities.
"The record trading activity and volatility experienced during the period, and the pressure this caused across the market, underscores why implementing the next generation of technology to support the digitisation of Australia's financial markets is a priority," the ASX told shareholders on Thursday.
Each of ASX's four main businesses grew, with the overall performance supported by higher cash market trading and "growing appetite from customers for technical connections and information services".
See also: The Australian Securities Exchange is investing in more than just blockchain
While the number of new listings across the period was down, the total amount of capital raised increased "materially".
"Given the turmoil of the final quarter, the increase reflects the strength of the ASX listed capital markets, including the responsiveness of our rules. Price discovery and liquidity remained strong, and companies were able to raise capital promptly and efficiently," the exchange added.
Despite the challenges, achievements the ASX clocked in FY20 included the launch of the S&P/ASX All Technology Index, which was stood up as a result of the growth of technology listings.
"It quickly proved its value, with technology being the best performing sector during the pandemic," Stevens said.
The ASX also completed the migration to its secondary data centre, which the CEO said better aligned with the "technical sophistication of our primary data and liquidity centre, and strengthens the resilience of our markets overall".
The exchange has been building the world's first, actual industrial-scale blockchain use case -- a new post-trade solution to replace its legacy Clearing House Electronic Subregister System (CHESS) platform, which has been running for around 25 years.
When delivering the organisation's half-year results in February, Stevens said the system would be ready for industry-wide testing in July and that full-functionality should be expected come April 2021.
However, in March, ASX announced it would revise the implementation timetable for replacing CHESS and consult with CHESS users in June as a result of the COVID-19 pandemic.
To that end, the ASX has set a new target go-live of April 2022.
Read more: Here's what to expect from ASX's blockchain-based CHESS replacement
"While we haven't yet completed our assessment of the consultation feedback, it's pleasing that the majority of the market confirmed to ASX that they can meet the proposed implementation timetable," Stevens said on Thursday. "There is still much to do and we continue to make good progress on the project, with around 90% of the core clearing and settlement functionality available for testing in the customer development environment."
It told shareholders 7 million trades had been registered in CHESS at its peak on 13 March 2020, which was double the pre-coronavirus peak set in August last year.
The ASX had 95% of its workforce shift to remote work in response to the pandemic, and it said COVID-19 has accelerated the trend towards digitisation of processes.
It also boasted 100% up time of its key trading and post-trade systems.
"While markets have stabilised in the months since March 2020, it will be some time before we return to normal market conditions," Stevens said during the results presentation.
"ASX remains well-positioned to continue to execute our customer-focused, technology-driven strategy … this strategy has been in place for a number of years, and recognises the importance of governance, strong risk management, and operational foundations across the organisation."
He said it has also been driving a transformation of ASX's technology stack.
"We are building an exchange for the future. Those organisations at the forefront of technology innovation will succeed -- not those relying on ageing legacy systems," he said. "By being technology-driven, ASX can deliver more customer-focused products and services, collaborate better with its customers, and allow its customers to collaborate with each other."