Johannesburg, 5 August 2021: Today the JSE released its results for the six months ended 30 June 2021. The results reflect the impact of external factors on business operations and a high revenue base. Despite this, the Group reported strong cash generation in its core business, and recorded progress in its strategic projects. Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 19% to R520 million (2020: R644 million). Net profit after tax (NPAT) decreased by 28%. Earnings per share (EPS) and headline earnings per share (HEPS) decreased by 26%, to 420.2 cents and 420.1 cents, respectively.
The JSE’s financial performance for the six months ended 30 June 2021 reflects:
- lower revenue in the Equity and Bond markets compared with a high revenue base in the comparative period, which stemmed from elevated volatility and trading activity driven by the COVID-19 outbreak;
- a stronger rand relative to the US dollar during the period, impacting Information Services revenue and other income from foreign exchange cash holdings year-on-year;
- significantly lower interest rates in South Africa and lower collateral deposit balances compared with high levels in the comparative period, which resulted in a material reduction in net finance income;
- JSE Investor Services (JIS) was consolidated during the period following the successful conclusion of the acquisition in November 2020, and as from 17 June 2021 is wholly-owned;
- and control in the JSE’s normalised cost base (up 0.2% year-on-year) with operating expenses up by 6%, reflecting the annualised effect of the acquisition of Link Market Services, now consolidated as JSE Investor Services.
The Group reported net cash from operations of R472 million (2020: R525 million), implying 105% of NPAT adjusted cash conversion (+11 basis points year-on-year). Total Capital expenditure (CAPEX) was R46 million (2020: R46 million) and focused mainly on optimising new ways of work and expanding client services.
During this period, the JSE focused efforts on a number of priorities, leading to the following key achievements:
- Maintained operational resilience and robustness
- Strong cash generation, a key component of the business model
- Met operational priorities and progressed on inorganic growth objectives
- Announced two new inorganic transactions (minority buy-out of JSE Investor Services (JIS) and acquisition of Investec Share Plan Services (ISPS))
- Listed first social bond and self-labelled sustainability-linked bond on the JSE's Sustainability Segment
- Maintained a healthy balance sheet, allowing the JSE to remain well positioned for sustainable growth
“Notwithstanding the constrained operating environment, the JSE remains in a healthy cash position. The highly cash generative nature of our business models coupled with our strong balance sheet positions us well to continue investing in those areas of our business we believe to be critical to our long-term sustainability,” says JSE Group CEO Leila Fourie.
Primary Market: Revenue was broadly stable at R74 million (2020: R75 million) supported by six initial public offerings during the period (2020: four). In the coming months, the JSE looks forward to welcoming further new listings. There were 15 de-listings (2020: 13), which largely resulted from corporate actions and schemes of arrangement in mostly small to mid-sized, illiquid counters. However, the aggregate market capitalisation of all listed equity instruments on the JSE increased by 5% from last year's close to 30 June 2021 (from R17.9 trillion to R18.8 trillion). In addition, 4 new Exchange-Traded Funds (ETFs) were listed (2020: 1), three of which were environmental, social and governance (ESG) focused, while the JSE has also listed debt products on its Sustainability Segment.
Revenue decreased by 8% to R240 million (2020: R260 million), reflecting lower market volumes in the period compared with a high base the year before, which was driven by COVID-19-related volatility. Colocation activity contributed 53% (2020: 48%) to overall value traded, with 46 racks (2020: 31). Foreigners remained net sellers of equities in the period.
Equity Derivatives Market:
Revenue increased by 3% to R74 million (2020: R71 million), owing to higher activity in index future contracts. Overall, value traded increased by 10% (R287 million) due to the increase in the value of the JSE Top 40 Index, which was up 11% on 30 June 2021 year to date. There continues to be a strong contribution from international and exotic derivatives, which rose by 27% and 32% respectively in value traded year-on-year.
Currency Derivatives Market:
Revenue decreased by 36% to R18 million (2020: R27 million), largely owing to a 29% decline in the number of contracts traded. The currency market has seen subdued activity owing to a stronger rand and a reduced appetite for hedging.
Bond and Interest Rate Market:
Revenue decreased by 5% to R36 million (2020: R37 million), owing to a 6% decline in nominal bond value traded and lower volumes. The decline was largely due to the high base effect in the comparative period, as well as lower liquidity and wider bid-offer spreads. Lower volumes affected the Interest Rate Derivatives Market, as the number of contracts traded was down 10%. Net foreign inflows for bonds were R35 billion during the period.
Commodity Derivatives Market:
Revenue increased by 13% to R46 million (2020: R41 million) following a rise in the number of contracts traded (up 4%) as well as a substantial increase in physical deliveries through the JSE (up 35% to 1.3 million tonnes). The number of contracts traded increased, largely owing to more volatile global commodity prices, dry weather conditions in Brazil and the USA, and strong demand for corn and soybeans from Asia. Value traded increased by 28%, largely as a result of greater yields and commodity prices. Physical deliveries also saw an increase in tonnages owing to a bumper crop this year.
Clearing and settlement revenue decreased by 14% to R207 million (2020: R240 million), driven by lower billable value traded in the Equity Market. Our Broker Dealing Accounting system (BDA), known as our Back Office Services, revenue decreased by 13% to R173 million (2020: R198 million), following a 19% decrease in the number of transactions. Funds under management declined by 1% owing to a decrease in JSE Trustees cash balances due to lower market activity.
Reported revenue decreased by 6% to R174 million (2020: R184 million), mainly driven by foreign exchange losses on US dollar-denominated revenue, linked to a stronger rand. Excluding this, underlying growth was 9% due to new business and an increase in market data clients.
“Our long-term strategic objectives are to grow and diversify revenue streams as well as invest in a robust and resilient marketplace. We remain committed to our strategic agenda of ensuring the depth and sustainability of the JSE franchise by growing the business while prudently managing costs,” concludes Fourie.
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 131 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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