Rise in demand for tech and data contributes to uplift in ASX FY22 first half results
The Australian Securities Exchange (ASX) has reported that partly due to a rise in demand for its information and technical services during the first half of the 2022 financial year, revenue grew by AU$31 million to AU$501 million during the period.
On Thursday, ASX detailed that a rise in technology and data products secured a 10% increase to AU$108.6 million on the prior half and contributed to 22% of total revenue. Information services and technical services made up 13% and 9%, respectively, in the company's technology and data business.
"Our technology and data business achieved a pleasing increase in revenue," CEO Dominic Stevens said.
"On the data side there was consistent growth across almost all parts of the business leading to a more than 12.9% increase on the pcp. Growth was also strong in technical services, with demand from new participants establishing their operations and increased demand from existing players.
"Over the last six months, we have expanded our ALC (Australian Liquidity Centre) floor space and the number of cabinets available to customers. About 30% of this new space was snapped up immediately and we have a pipeline we are working with to fill the remaining space."
"Bringing in new customers and expanding existing footprints have a leveraged effect within the technical services business. There are 139 customers in the ALC, this expands out into the use of 369 cabinets, accessing over 1,200 service connections (both ASX and non-ASX services hosted by ASX). We also have 104 customers connected through ASX Net communications infrastructure, where they access 466 service feeds," Stevens added.
The latest financial report also showed that net profit after tax increased by 3.5% to just over AU$250 million, while half-year earnings before interest and tax came in at AU$338 million, 6% higher on last year's result.
Total expenses for the six month period was AU$11.6 million higher than the corresponding period of the previous year totalling AU$163 million for the half.
ASX explained the increased costs were partly due to the company's ongoing technology upgrade, including cybersecurity and digital initiatives. As a result, equipment costs contributed just shy of AU$24 million to total expenses.
The other aspect that contributed to higher expenses was the inclusion of restructuring costs from the company's new operating model that kicked off at the start of the 2022 financial year where the company is made up of four core businesses: technology and data, securities and payments, listings, and markets.
"These changes better align the businesses and improve accountability, and bring operations and technology closer," Steven said. "Two further changes, which reflect some of what I have said today, are the dedicated focus on our customers and the standalone technology and data business line.
"We have a customer centre of excellence tasked with enhancing the end-to-end service across all our lines of business to our individual customers. This is an area where we feel we can add more value by gaining a better cross-product view of how customers use our services.
"Moreover, the technology and data area is now its own discreet business, separated from the equity trading business. With an expanding data centre footprint, a DLT platform and a big data platform in place, we are exploring the growth opportunities in this area."
ASX also invested AU$54 million in capital expenditure during the period, slightly lower than the previous corresponding period of AU$54.5 million. This was inclusive of the company's replacement of its legacy Clearing House Electronic Subregister System (CHESS) platform
On its digital transformation program, Stevens outlined how since kicking off the program in FY16, technology debt has been "significantly" reduced, and that the program is nearing completion.
"The transformation of our technology has been a multi-year, multi-project undertaking, with much achieved already. The age of some of our core equity technologies is set to drop from over 20 years to an average of less than five years," he said.
"We have also improved ASX's operating resilience, with incidents falling by 85% over the last five years. There was only one severity 1 incident in the three years to December 2021, compared to five in the three years prior, and 12 in the three years before that."
He pointed out that at the end of last year ASX launched its electronic CHESS statements capability to enable investors to download the statements via a web portal, as well as Synfini, the company's distributed ledger technology as-a-service platform.
At the same time, Stevens highlighted that the company is on track to delivering its equity data warehouse this year, as it enters the final testing phase ahead of the customer transition period, which will begin in March, and the CHESS replacement is still set to go-live on April 2023.
"We achieved a significant milestone with our CHESS replacement project by opening the industry test environment (ITE) in November, giving CHESS software vendors access to our fully integrated external solution. The environment provides a valuable opportunity to develop and stress test systems, and enhance the overall resilience of the new infrastructure. We look forward to opening ITE to all CHESS users in coming months," Stevens said.
In presenting the company results, Stevens also announced that he will be retiring this year, after six years as CEO and nine years working at the ASX.
Stevens will remain on board until his successor commences. A global search for Steven's replacement is expected to commence shortly, the company said.
Looking ahead, Stevens commented the second half of FY22 is already "off to a strong start", offering an expense guidance to be in the range of 7-8%, an increase of 1% from prior guidance, and capital expenditure to remain in the range of AU$105-115 million for FY22.