JSE delivers good performance in tough economy
JOHANNESBURG, 28 February 2017 - Against a background of tough market conditions, JSE Group earnings after tax grew by 2% to R920 million (2015: R899 million) in the year to end-December 2016.
"2016 was a challenging year for both the JSE and its clients and we are pleased that, in this environment, we were able to grow the ordinary dividend to shareholders and continue to make significant year-on-year trading fee reductions to find ways to make it more affordable for our clients to do business with us," says JSE CEO Nicky Newton-King.
The result was achieved against the following backdrop:
- The JSE listed ABInBev SA/NV (the world's largest brewer), Hammerson plc (one of the UK's leading real estate investment trusts (REITs) and 7 ALTX listings, among 18 new listings;
- The JSE moved to a T+3 equity settlement with zero failed trades to date (something for which we know of no international precedent). The JSE is now in line with best practice globally for developed markets, with the US and Canada trading on T+3 and the EU predominantly on T+2;
- Upgraded the equity market functionality to allow clients to execute large orders with lower market impact;
- Reduced certain BDA and equity trading fees considerably;
- Liquidity on the local register grew to nearly 80%;
- Real traction has been gained in implementing the electronic trading platform for government bonds;
- Value traded grew in almost all the derivative markets;
- Launched new initiatives to support the development of our black brokers;
- Invested R205 million in capex to enable us to deliver faster, more reliable systems to our clients; and
- New exchange licences have been granted in South Africa.
The JSE's operating revenue rose by 10% to R2.3 billion (2015: R2.1 billion), despite year-on-year fee reductions of R34 million (2015: R18 million) in Back-Office Services and the impact of the R30 million (2015: R0) elimination of charges for certain report-only trades. Earnings before interest and tax (EBIT) decreased by 5% (2015: increased by 45%) to R975 million (2015: R1 billion), with higher finance income and a higher contribution from Strate (the Group's equity accounted investee) supporting net profit after tax (NPAT) growth for 2016.
Earnings per share (EPS) and headline earnings per share (HEPS) were at 1 074.8 cents (up 2%) and 1 063.2 cents (up 4%) respectively.
The following contributions to operating revenue are worth noting:
- Information Services, which includes Market Data, grew revenue by 22% to R298 million (2015: R245 million) because of new business, new clients, new products, colocation sales and the impact of forex gains;
- The Interest Rate Market bond nominal value traded increased by 22%, resulting in a 20% increase in revenue to R60 million (2015: R50 million). This was on the back of two SARB Monetary Policy Committee repo rate hikes in 2016 and continued expectations that the US Federal Reserve would hike interest rates;
- Post-Trade Services grew by 16% to R413 million (2015: R357 million) following the increase in equity billable value traded;
- The Currency Derivatives Market revenue increased by 12% to R38 million (2015: R34 million) owing to the increase in the number of contracts traded (up 7%);
- The Equity Market where billable value traded grew by 18%, contributing to an 11% increase in cash equities trading revenue to R555 million (2015: R501million). The revenue reflected is net of the fees eliminated for certain report-only trades (R30 million);
- The Equity Derivatives Market value traded increased by 4%, resulting in a 2% increase in revenue to R177 million (2015: R173 million);
- The BDA revenue grew by 2% to R316 million (2015: R311 million) owing to increased traded volumes. The revenue reflected is net of fee reductions of R34 million;
- The Primary Market recorded a 2% increase in revenue to R164 million (2015: R161 million) following muted listings;
- Commodity Derivatives revenue declined by 4% to R70 million (2015: R73 million) owing to a 2% drop in commodity derivatives contracts. 2016 was a tough year for the grains sector, as the drought significantly reduced the available deliverable supply of grains, negatively impacting trading volumes.
The Group's total operating expenses increased by 12% to R1.4 billion (2015: R1.3 billion) following higher technology investment to ensure robust product and service delivery to clients, staff costs and expenses to support the JSE's ecosystem.
Robust balance sheet
The JSE generated R976 million (2015: R888 million) and ended the year with a robust balance sheet, including R2 billion (2015: R1.9 billion) in cash. It invested R205 million in capex in a continued investment in technology.
Declaration of ordinary dividend
The Board has decided to declare an ordinary dividend for the year ended December 2016 at 560 cents per ordinary share (2015: 520 cents ordinary; 105 cents special) which is an increase of 8%.
"Notwithstanding the difficult economic environment both globally and locally, we are clear about our 2017 priorities and hence the issues that we need to tackle to achieve our strategy and grow the JSE business sustainably. We are focussed on pursuing our objective of running a world class, fully integrated multi-product exchange which gives our clients the opportunity to fund their growth, while we continue to play a broader role in the South African ecosystem" concludes Newton-King.
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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