JSE results satisfactory in challenging year - Headline EPS up 29% on 9% operating revenue increase

JSE results satisfactory in challenging year - Headline EPS up 29% on 9% operating revenue increase

13/03/2012

The JSE recorded a satisfactory operating year in 2011. Strong revenue performance and cash flows, and tight operating cost control for the year resulted in headline earnings per share of 562.4 cents, 29% higher than 2010’s 436.1 cents per share.

“The JSE is focused on resilience and sustainability. To us, in the complex ecosystem that is the financial market, this means that our own growth is dependent on the continued growth of issuers, investors and broader stakeholders,” say CEO Nicky Newton-King.

Financial performance

The strong operational performance of each of our markets and business lines has enabled the JSE to grow operating revenue by 9% to R1.4 billion (2010: R1.3 billion). Other income reduced by 7% to

R47.0 million (2010: R50.3 million). Normalised operating costs increased by 5% to R952 million in 2011 (2010: R909 million). The strong operating performance resulted in a substantial increase in headline earnings per share. During 2011, the JSE recognised an impairment of R223.1 million (2010: R33.2 million) to software under development which resulted in earnings per share slipping by 10% to 400.8 cents (2010: 445.5 cents). The exchange declared a dividend of 250 cents a share, having paid a special dividend in September 2011.

Issuer Regulation

  • Number of new company listings on the JSE rose to 16
  • Additional listings activity in other JSE-listed equity instruments included 14 new ETFs and ETNs and 334 warrants
  • Revenue rose 7.0% to R91.6 million (2010: R85.6 million)
  • 7.0% revenue increase year on year

Equity market

  • In August 2011, the JSE set a new trading record of 230 797 transactions in one day, a 12% increase on our previous record of 205 784 transactions
  • 11.6% increase in the number of transactions year on year (2011: 26.5 million; 2010: 23.8 million)
  • Total value traded increased 9.9%
  • Revenue rose 8.5% to R352.2 million (2010: R324.6 million)

Back-office services (BDA)

  • Risk management, clearing and settlement business performed well in 2011, driven by transaction growth on the cash equity market
  • Revenue rose 10.9% to R196.8 million (2010: R177.5 million)

Equity risk management, clearing and settlement

  • The risk management, clearing and settlement business performed well in 2011, driven by transaction growth on the cash equity market
  • Revenue rose by 10.6% to R209.0 million (2010: R188.9 million)

Bonds and financial derivatives

  • Strong growth in index derivatives and bespoke products
  • Currency derivatives market performed well – number of contracts, growth in value traded and open interest all doubled
  • Bond market volumes increased by 23.6% to a nominal value of R29.9 trillion in 2011
  • Value of bond derivatives traded rose from R160 billion in 2010 to R206 billion in 2011
  • Financial derivatives revenue rose to R133.3 million (2010: R116.1 million)
  • Interest rate market revenue rose to R38.8 million (2010: R35.1 million)
  • Total divisional revenue rose 13.9% to R172.1 million (2010: R151.2 million)

Commodity derivatives market

  • Options trade in crude oil and platinum contracts for the first time
  • In late 2011, the market expanded its licensing agreements with other exchanges to include the Kansas City Board of Trade to offer local investors access to their benchmark Hard Red Winter Wheat contract
  • Revenue rose 11.1% to R53.1 million (2010: R47.8 million)

Data Sales

  • Number of terminals displaying JSE data started rising again after a dip in 2010, despite continued global contraction in the industry
  • Terminals accessed by professional users rose by 16%
  • Nearly 45% of terminals are foreign
  • Financial derivatives revenue in IPS division rose 12% to R4 million
  • Total revenue rose 7.6% to R125.5 million (2010: R116.7 million)

Way forward

Nicky Newton-King says: “Over the past 15 years, under former JSE CEO Russell Loubser’s leadership, the JSE has achieved significant growth and has been recognised for the second year in a row by the World Economic Forum as the world’s best regulated financial market. As investors know, revenue projections are not feasible, given the JSE’s dependence on trading volumes in all the markets. Our industry is changing rapidly and this represents a good opportunity to position the JSE for future growth. We are excited about this journey.”