AUSTRALIAN stock market operator ASX said annual underlying profit slipped below market expectations due to higher expenses stemming in part from a troubled software upgrade that sparked a regulator lawsuit.
ASX, responsible for one of the world’s top 20 stock exchanges by turnover, was hit this week with a lawsuit accusing it of telling the public an upgrade of its clearing and settlement platform was on track when it was beset with delays.
Since shelving the upgrade in November 2022, six years after it was announced, the company has been required to give a series of governance reports to the Australian Securities and Investments Commission (Asic) and the Reserve Bank of Australia, which oversee the exchange operator.
Asic’s lawsuit against ASX alleges it misled the public, undermined confidence in Australian financial markets, and breached its own governance guidelines. The regulator is seeking an unspecified fine.
ASX said on Friday (Aug 16) that higher staffing costs to support regulatory commitments helped push up its expenses by nearly 15 per cent, culminating in a 3.4 per cent decline in profit to A$474.2 million (S$415 million) for the year to end-June. That compared to Visible Alpha consensus estimates of A$478.5 million.
The exchange operator did not directly comment on the Asic lawsuit except to repeat an earlier statement that it took the proceedings seriously and was reviewing the allegations. CEO Helen Lofthouse said on an analyst call that she was limited in what she could say about the case since it was before the court.
The company’s shares fell as much as 3.3 per cent in early trading, making ASX among the worst losers in the benchmark index, before recovering to be flat by mid-session, against a 1.4 per cent gain on the broader market.
JPMorgan analysts said the result was unlikely to be viewed as a catalyst for the stock, despite the prospect for better trading volumes in the current financial year as interest rates stabilise and conditions for initial public offerings possibly improve.
Analysts at both JPMorgan and Citi also flagged that Asic’s investigation into its handling of the troubled software upgrade remained an overhang on the stock. REUTERS
