Active markets drive JSE profits and special dividend
JOHANNESBURG, 25 February 2016 - On the back of an excellent performance by the Johannesburg Stock Exchange (JSE), which saw group earnings after tax for 2015 increasing by 42% to R899 million (2014: R634 million), CEO Nicky Newton-King stressed the importance of greater collaboration between business, the government and other stakeholders to ensure sustained growth for the country as a whole.
“The recent State of the Nation Address and Finance Minister Pravin Gordhan’s Budget speech clearly point to the economic stresses in our country,” says Newton-King. “This is a moment for all stakeholders to accept the government’s invitation to partner in achieving inclusive growth. The JSE looks forward to playing its role in this collaboration.”
In 2015, the JSE’s earnings before interest and tax (EBIT) increased by 45% (2014: 22%) to R1 billion (2014: R704 million). Earnings per share (EPS) and headline earnings per share (HEPS), at 1 051.0 cents (up 42%) and 1 026.3 cents (up 40%) respectively, reflect the Group's well-established commercial momentum.
“The JSE’s solid performance is attributable to double-digit revenue growth across all operating divisions, driven by significantly higher market activity, which was well handled by the increasingly robust technology in which the exchange continues to invest,” says Newton-King.
With regard to operating revenue, which increased by 20% to R2.1 billion (2014: R1.8 billion), good contributions were made by:
- The Primary Market, where there was a 20% increase in revenue to R161 million (2014: R134 million) as a result of increased listings activity and annual equity listing fees being brought in line with global peers;
- The Equity Market, where billable value traded grew by 26%, resulting in a 25% increase in cash equities trading revenue to R501 million (2014: R402 million);
- BDA, where revenue grew by 16% to R311 million (2014: R268 million) as a result of a 33% growth in the number of Equity Market transactions. This was offset by rebates of R22 million paid in the first half of 2015 and enabled a price reduction of 20% from September 2015;
- The Equities Derivatives Market, where value traded increased by 11%, resulting in an 18% increase in revenue to R173 million (2014: R147 million);
- The Currency Derivatives Market, where revenue increased by 48% to R34 million (2014: R23 million);
- The Interest Rate Market, where bond nominal value traded increased by 21%, resulting in a 14% increase in revenue to R50 million (2014: R44 million);
- The Commodities Derivatives Market, where the increased number and value of contracts traded resulted in a 33% increase in revenue to R73 million (2014: R55 million)
- Post-Trade Services, where clearing and settlement revenue related to equity trading grew by 19% to R357 million (2014: R299 million). The billing model was moved to a value-based model in the second half of 2014; and
- Market Data, where revenue grew by 16% (R31 million) to R226 million (2014: R195 million) owing to new business. Revenue from colocation contributed R19 million, up from R9 million, completing the first year of this product offering. Colocation accounted for 26% of the total value traded during the period.
Continued cost containment
The Group’s total operating expenses increased by 11% (2014: 5.5%) to R1.26 billion (2014: R1.14 billion), including a deliberate increase in general expenses. Included in operating expenses is R37 million (2014: R17 million) of project-related operating expenditure to deliver key strategic technology initiatives. This leaves business-as-usual expense growth of 9% for 2015. Technology costs increased by 16% to R235 million (2014: R202 million), mainly owing to standard, scheduled maintenance on key technology assets. Personnel costs increased by 6% to R496 million (2014: R467 million). General expenses rose by 14% to R291 million (2014: R256 million), largely owing to deliberate marketing costs and placement costs for senior staff.
Robust balance sheet
We generated R888 million in net cash (2014: R768 million) and ended the year with a robust balance sheet, including R1.9 billion (2014: R1.6 billion) in cash.
Declaration of ordinary and special dividend
The Board has decided to declare both an ordinary and a special dividend for the year ended December 2015 at 520 cents and 105 cents per ordinary share respectively. This is reflective of the strong growth in earnings and is consistent with our dividend philosophy – in terms of which we aim for steady growth in the ordinary dividend over time, and to provide an additional return to shareholders via special dividends to the extent that the annual financial performance and the Group’s capital position so permits
The JSE and its clients will be operating in a difficult economic environment in 2016. Understanding this, these results have enabled us to announce further reductions in trading fees with effect from April as we continue to find ways to make it cheaper for our clients to trade.
“We are also clear about our 2016 priorities and hence the issues that we need to tackle in order to achieve our strategy. In this vein, we have today announced that, subject to market readiness, we will move to T+3 settlement on 11 July this year,” says Newton-King.
“In addition, we are in the course of a demanding number of years of investment and delivery. We are excited that, although this investment will impact our income statement in the short term, it will position us well to continue to enhance the service we provide to clients and build on our long-established capabilities in operating Africa’s leading exchange.”
Note to Editors: JSE sets T+3 go-live date
The JSE’S T+3 project, the financial market’s top priority project, will shorten the settlement cycle in the equities market from five days to three days and is on track for delivery on Monday, 11 July. The switch-over to a three-day settlement cycle will align South Africa’s capital markets with global best practice and will help in the mitigation of both systemic and settlement risk. The move to T+3 has numerous benefits to the market, including attracting foreign investors by harmonising settlement with international standards and boosting liquidity, as assets will be released from the settlement process more quickly. This multi-year project has been driven by the JSE and has involved extensive contributions from a host of market participants and support from the Financial Services Board.
About the JSE
The Johannesburg Stock Exchange is based in South Africa, where it has operated as a market place for the trading of financial products for 130 years. It connects buyers and sellers in the equity, derivative and debt markets. The JSE is one of the top 20 exchanges in the world in terms of market capitalisation and is a member of the World Federation of Exchanges (WFE). The JSE offers a fully electronic, efficient, secure market with world-class regulation, trading and clearing systems, settlement assurance and risk management. www.jse.co.za
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