SGX posts 8.8% drop in first-half profit on higher operating expenses

Net profits fell in the half-year due to an 8.2 per cent increase in operating expenses to S$215.6 million. PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - Bourse operator Singapore Exchange (SGX) posted a 8.8 per cent decline in net profit to $218.7 million for the first half of its financial year 2022 ended Dec 31, 2021, down from $239.8 million it reported a year ago.

After adjusting for net gains from long-term investments, amortisation of purchased intangible assets and other non-cash and non-recurring items that have less bearing on the company's operating performance, it reported a 2.7 per cent decline in adjusted net profit to $221.8 million, down from $228 million in the same period last year.

Net profits fell in the half-year due to an 8.2 per cent increase in operating expenses to $215.6 million. These included staff expenses, which rose 8.2 per cent to $119.1 million, technology expenses, which rose 7.2 per cent to $36.5 million and professional fees, which climbed 24.8 per cent to $7.9 million.

Earnings per share on a fully diluted basis for the half-year declined 10.8 per cent to 19.9 cents, from 22.3 cents a year earlier.

SGX's board of directors also declared an interim quarterly dividend of eight cents per share payable on Feb 21, which brings the total dividends for the half-year to 16 cents per share, the same amount as a year earlier.

Operating revenue in the first half of FY2022 was up 0.2 per cent to $521.6 million from the $520.8 million it reported a year earlier.

The company also noted that its underlying core businesses excluding treasury income rose by 6 per cent to $501 million from S$472.6 million a year ago.

The growth in operating revenue was led by its fixed income, currencies and commodities segment, which saw revenue rise 14.9 per cent to $114 million, and the data, connectivity and indexes segment, which rose 3.4 per cent to $73.1 million.

However, the equities segment saw revenue decline 4.7 per cent to $334.5 million.

Still, SGX remained optimistic and noted that it saw positive momentum in its equity listings and products.

"There is clear interest from potential issuers on the back of our new special purpose acquisition companies framework and joint inter-agency funding for high-growth companies," it said.

The company also noted that it anticipates inflationary pressures and interest rates to rise as Asian economies recover and noted that it could lead to higher demand for portfolio risk management solutions and access to growing Asian markets.

Chief executive officer Mr Loh Boon Chye said in a media briefing that even as net profit fell SGX's underlying core revenue, which excludes non-core incomes and non-recurring expenses, grew by 6 per cent in the reported period.

"In the last two years, we have made $1 billion (Sing dollar) worth of acquisitions and investments to leapfrog our multi-asset strategy and capture the growth opportunities across asset classes and platforms."

He noted the currencies business can be scaled further as SGX integrates its
newly-acquired subsidiary MaxxTrader and ramp up its FX Electronic Communication Network in the coming months.

Looking ahead, Mr Loh said: "As Asian economies recover, demand for Asia-centric portfolio investment and risk management solutions will rise, while China will remain high on investors’ radar as its economy will bounce back."

  • Additional reporting by Ovais Subhani

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