JSE steady financial performance - Dividend maintained at 250c/share

12/03/2013

The JSE has delivered a steady financial performance in 2012, with strong results in a number of business areas offsetting a tough year in equity trading and demonstrating the success of the Group’s strategy to offer a full range of products and services to clients.

“2012 has been a year of hard work in challenging conditions and the JSE has achieved a number of key successes,” says JSE Chairman Humphrey Borkum.

Financial review
Group revenue remained steady, increasing by 1.1% to R1.38 billion (2011: R1.37 billion). In common with most other cash equity exchanges around the world, equity market trade execution revenues fell. This was offset by growth in other revenue lines, with notable improvements in both interest rate products and market data.

Total operating expenses were slightly down at R1.03 billion (2011: R1.04 billion).

“Earnings have improved by 6.7% year-on-year to R405.6 million with EBIT margin ticking up 1% point to 29%,” says JSE CEO Nicky Newton-King. “This performance demonstrates the resilience of the JSE’s business and attests to the underlying strength of our strategy of continuing to diversify the revenue base.”

Net profit after tax has declined 12% to R302.1 million (2011: R341.8 million), largely the result of tax issues associated with the impairment of certain technology costs during 2011 and 2012.

Financial strength and cash-generating ability
The business continues to be cash generative with cash generated from operations totalling R470.4 million (2011: R664.6 million). At year-end Group cash and cash equivalents stood at R1.1 billion (2011: R1.0 billion).

Dividend maintained at 250c per share
As the Board and management are confident about the underlying strength of the JSE’s operations and its continued strong cash flows, the Board has declared a dividend for the year ended December 2012 of 250c per ordinary share. This is an improvement in dividend cover to 1.56x (2011: 2.19x).

“The leadership team is comfortable that the progress made in 2012, the internal efficiencies and “can do” culture that is now taking root, together with the Group’s financial strength, provide a solid launch pad for delivering on our 2013 strategic objectives”, says Newton-King.

Operations
Issuer Regulation
• Revenue rose 4.6% to R95.8 million (2011: R91.6 million).
• The number of new company listings on the JSE declined to 12 (2011: 16). Listings activity in other JSE-listed equity instruments rose, including 16 new ETFs, ETNs (2011: 14 ETFs, ETNs).
• The total nominal listed bond value by year-end December 2012 was R1.6 trillion (2011: R1.3 trillion), with 1 452 listings in total by year-end December 2012 (2011: 1 171).

Equity Market
• Revenue declined by 9.4% to R319.1 million (2011: R352.2 million).
• The number of transactions year on year was flat at 26.9 million (2011: 26.5 million).
• The new MillenniumIT trading system was implemented successfully, on time and within budget.

Post-Trade Services
• Revenue rose by 1.4% to R211.9 million (2011: R209.0 million).
• Post-Trade Services revenue was flat in 2012, owing to the flat volume of equities trades.
• CPSS-IOSCO compliance status was achieved by Safcom in December 2012, making it one of the world’s first clearing houses to be compliant.

Back-Office Services
• Revenue rose by 4.1% to R204.9 million (2011: R196.8 million).
• The risk management, clearing and settlement business was flat in 2012, owing largely to the flat volume of equities trades.

Bonds and Financial Derivatives
• Total divisional revenue rose 2.1% to R175.7 million (2011: R172.1 million).
• Financial Derivatives revenue declined 3.6% to R112.6 million (2011: R116.8 million). Currency derivatives revenue rose 5.5% to R17.5 million (2011: R16.6 million).
• Interest rate market revenue rose 17.7% to R45.7 million (2011: R38.8 million).

Commodity Derivatives Market
• Revenue rose by 5.3% to R55.9 million (2011: R53.1 million) following an increase in the number of physical deliveries processed and improved activity in the cash-settled commodities.
• The division enhanced the physical delivery process for grain products by introducing a platform to the market to trade basis premiums for grain stored in any of the 200 registered delivery points.
• “In December 2012, the JSE received approval from the regulators to introduce Zambian grain contracts to be traded in USD. This milestone allows the commodities market to extend its price risk management instruments into Zambia,” says CEO Nicky Newton-King.

Market Data
• Revenue rose by 17% to R146.8 million (2011: R125.5 million) owing to international growth in users.
• The overall number of terminals displaying JSE data increased by 7% as a result of a continued focus on diversifying the client base outside South Africa. The sales focus continues on foreign clients across all continents.

Information technology
The JSE’s drive to upgrade and replace its trading systems and back-office technology over the past decade has been accompanied by trade volume growth and is a factor in the Exchange’s global recognition as a strong market operator and regulator. The Exchange continues this drive in a bid to serve clients and maintain growth. With this in view, the JSE upgraded the commodities and derivatives market technology to handle the increased volumes and is planning to replace the Equity Derivatives trading engine completely in 2014/2015.

The new MillenniumIT trading system was implemented successfully for the equity market, on time and within budget. The system offers world-class trading technology, which along with its relocation to the JSE, significantly reduces latency and transaction execution times. This also reduces reliance on international links, which enhances the system’s operational stability.

The JSE is investigating offering co-location services in the JSE’s existing primary data centre, but will do so only if sufficient client demand exists to cover the cost of providing such services.