[South Africa] JSE delivers resilient performance for the first half of 2019
The first half of 2019 has been challenging for the JSE although the exchange has delivered resilient performance.
The Company's performance should be seen against the context of:
(a) the high base effect in revenue for H1 2018 following R17bn net foreign investment in the first half of last year (H1 2019: 30bn net foreign sales) and high value traded in the Equity Market in Q1 2018;
(b) the impact of the income tax credit of R31 million reported in H1 2018 (which was not repeated in H1 2019);
(c) a deliberate management strategy to invest in the JSE’s extensive strategic initiatives; and
(d) the relatively low headcount in H1 2018.
Although activity in most of the JSE's asset classes was down, bond market activity (nominal value 21% up); currency derivatives activity (contracts 18% up); and commodity derivatives (contracts 7% up) showed good performance.
Total revenue decreased by 8% to R1.08 billion (H1 2018: R1.18 billion). Operating costs increased by 11% to R670 million (2018: R601 million) although management has achieved all of the R170 million in cost savings to which it committed six months ahead of time.
Group earnings before interest and tax (EBIT) decreased by 28% to R414 million (H1 2018: R582 million) and net profit after tax (NPAT) declined by 29% to R398 million (H1 2018: R561 million).
Similarly, both basic earnings per share (EPS for continuing operations) and headline earnings per share (HEPS) decreased by 29%, to 467.0 cents (H1 2018: 654.5 cents) and 466.1 cents (H1 2018: 654.6 cents) respectively.
"Notwithstanding the constrained operating environment, the JSE remains in a healthy position with regard to cash and capital. We are well positioned to continue our deliberate investment in those areas of our business we believe to be critical to our long-term sustainability, while maintaining our disciplined control of costs," says Nicky Newton-King.
The Group continues to be highly cash generative, with net cash from operations of R444 million (2018: R522 million). Cash and cash equivalents on hand at 30 June 2019 amounted to R2.2 billion (2018: R2.4 billion).
Capital expenditure decreased to R33 million (2018: R42 million) in the first half of this year, which is aligned to the JSE's approach to capital investments and reflects it coming to the end of its ITaC implementation. All currently planned investments and 2019 capital requirements can be funded from the Group's own resources.
"Although the first half has been financially difficult for the JSE, this first half performance is not a reflection of the fundamental strength of the business. Slowing global and local economic growth and a lack of local business confidence, which is chipping away at expectations of an economic recovery in South Africa in 2019, have kept our core business lines under pressure for the current period, but the JSE is well positioned to benefit from a positive change in sentiment. We are excited by our strategic agenda as our focus and investments along the value chain are aimed at ensuring the long-term growth and sustainability of the JSE. We look forward to reporting on these at year end," concludes Nicky Newton-King.