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JSE
JSE
JSE - JSE Limited - Audited abridged annual financial statements for
the year ended 31 December 2007 and dividend declaration
JSE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share Code: JSE
ISIN Code: ZAE000079711
("JSE")
Income statements
for the year ended 31 December 2007
Group Exchange Investor
Protection
Funds*
2007 2006 2007 2006 2007 2006
R`000 R`000 R`000 R`000 R`000 R`000
Revenue 877 426 640 377 898 673 654 154 0 0
Other 111 993 65 370 88 776 23 627 29 247 41 743
income
Personnel (230 069) (162 986) (230 069) (162 986) 0 0
expenses
Other (483 168) (413 561) (460 762) (395 228) (12 614) (10 412)
expenses
Profit 276 182 129 200 296 618 119 567 16 633 31 331
before net
financing
income
Interest 1 430 072 676 190 71 929 35 483 4 384 3 249
received
Interest (1 332 943) (621 450) (11 142) (5 875) 0 0
paid
Net 97 129 54 740 60 787 29 608 4 384 3 249
financing
income
Share of 31 865 27 364 0 0 0 0
profit of
equity
accounted
investees
Profit 405 176 211 304 357 405 149 175 21 017 34 580
before tax
Income tax (131 938) (70 254) (131 866) (70 200) 0 0
Profit for 273 238 141 050 225 539 78 975 21 017 34 580
the year
Earnings
per share
Basic 321.3 168.0 265.2 94.1 24.7 41.2
earnings
per share
(cents)
Diluted 318.7 167.5 263.1 93.8 24.5 41.1
earnings
per share
(cents)
* The JSE maintains the JSE Guarantee Fund Trust and the JSE
Derivatives Fidelity Fund Trust for investor protection purposes as
required under the Securities Services Act 36 of 2004. The JSE is
required to consolidate these funds into the results of the Group in
terms of International Financial Reporting Standards ("IFRS").
However, as these Trusts are legally separate from the JSE, neither
the JSE nor its shareholders have any right to the net assets of such
Trusts.
For enhanced understanding, the investor protection funds have been
shown separately, although, for compliance with IFRS, these results
form part of the Group financial statements.
Balance sheets
as at 31 December 2007
Group Exchange Investor
Protection
Funds
2007 2006 2007 2006 2007 2006
R`000 R`000 R`000 R`000 R`000 R`000
Assets
Non-current 542 597 517 316 284 613 294 892 223 644 213 919
assets
Property 214 014 213 198 214 014 213 198 0 0
and
equipment
Investments 58 957 54 119 21 416 42 413 0 0
in equity
accounted
investees
Investments 0 0 3 201 3 201 0 0
in
subsidiaries
Other 223 648 213 923 4 4 223 644 213 919
investments
Deferred 45 978 36 076 45 978 36 076 0 0
taxation
Current 18 731 134 10 151 448 1 076 068 855 411 46 856 26 020
assets
Trade and 232 231 119 979 91 254 60 827 6 502 6 468
other
receivables
Due from 0 0 7 042 5 334 0 0
group
entities
Derivative 0 1 407 0 1 407 0 0
financial
instruments
Margin 17 548 094 9 502 504 104 132 308 588 0 0
deposits
Collateral 186 264 22 694 186 264 22 694 0 0
deposits
Cash and 764 545 504 864 687 376 456 561 40 354 19 552
cash
equivalents
Total 19 273 731 10 668 764 1 360 681 1 150 303 270 500 239 939
assets
Equity and
liabilities
Share 1 108 678 833 540 800 353 582 349 270 194 239 742
capital and
reserves
Non-current 101 283 68 268 101 283 68 268 0 0
liabilities
Employee 42 307 8 416 42 307 8 416 0 0
benefits
Deferred 10 448 11 749 10 448 11 749 0 0
taxation
Operating 47 685 47 333 47 685 47 333 0 0
lease
liability
Due to SAFEX 843 770 843 770 0 0
members
Current 18 063 770 9 766 956 459 045 499 686 306 197
liabilities
Trade and 249 381 148 872 88 218 75 695 306 197
other
payables
Employee 37 191 39 565 37 191 39 565 0 0
benefits
Income tax 12 076 25 606 12 076 25 428 0 0
payable
Operating 30 764 27 715 30 764 27 715 0 0
lease
liability
Due to group 0 0 400 1 0 0
entities
Margin 17 548 094 9 502 504 104 132 308 588 0 0
deposits
Collateral 186 264 22 694 186 264 22 694 0 0
deposits
Total equity 19 273 731 10 668 764 1 360 681 1 150 303 270 500 239 939
and
liabilities
Cash flow statements
for the year ended 31 December 2007
Group Exchange Investor
Protection
Funds
2007 2006 2007 2006 2007 2006
R`000 R`000 R`000 R`000 R`000 R`000
Cash 379 878 223 710 418 181 233 625 (12 539) 10 882
generated/
(utilised)
by
operations
Interest 1 344 550 652 361 72 023 33 394 4 384 3 249
received
Interest (1 244 428) (584 259) (10 362) (5 573) 0 0
paid
Dividends 5 712 4 402 0 0 5 712 4 402
received
Taxation (156 671) (64 016) (156 422) (63 975) 0 0
paid
Net cash 329 041 232 198 323 420 197 471 (2 443) 18 533
inflow/
(outflow)
from
operating
activities
Cash
flows
from
investing
activities
Proceeds 0 65 000 0 65 000 0 0
on
redemption
of
preference
shares
Investment (274) (623) (274) (623) 0 0
to maintain
operations
Replacement (274) (623) (274) (623) 0 0
of property
and
equipment
Investment 21 417 (79 087) (1 828) (21 307) 23 245 (57 780)
to expand
operations
Proceeds 74 424 45 168 0 0 74 424 45 168
on maturity
of
other
investments
Additions (51 179) (102 948) 0 0 (51 179) (102
to other 948)
investments
Cash 26 951 (12 413) 26 951 (12 413) 0 0
flows
from
equity
accounted
investees
Capital 33 410 0 33 410 0 0 0
reduction
in Strate
Ltd
Purchase of (12 413) (12 413) (12 413) (12 413) 0 0
shares in
Strate Ltd
Dividends 5 954 0 5 954 0 0 0
received
from
Strate Ltd
Proceeds 0 1 500 0 1 500 0 0
on
sale of
ITRIX
Holdings
(Pty) Ltd
Proceeds 1 576 0 1 576 0 0 0
on sale
of
Satrix
Holdings
(Pty) Ltd
Leasehold (48) (741) (48) (741) 0 0
improvement
s
Additions (30 307) (9 653) (30 307) (9 653) 0 0
to property
and
equipment
Net cash 21 143 (14 710) (2 102) 43 070 23 245 (57 780)
inflow/
(outflow)
from
investing
activities
Cash
flows
from
financing
activities
Proceeds 43 131 43 131 0 0
from issue
of share
capital
Dividends (90 546) (69 230) (90 546) (69 230) 0 0
paid
Net cash (90 503) (69 099) (90 503) (69 099) 0 0
outflow
from
financing
activities
Net 259 681 148 389 230 815 171 442 20 802 (39 247)
increase/
(decrease)
in cash
and cash
equivalents
Cash and 504 864 356 475 456 561 285 119 19 552 58 799
cash
equivalents
at
beginning
of year
Cash and 764 545 504 864 687 376 456 561 40 354 19 552
cash
equivalents
at end of
year
Statements of changes in equity
for the year ended 31 December 2007
Non- BBB
Share Share distributable EE
Capital Premium Reserve reserve
R`000 R`000 R`000 R`000
Group
Balance at 1 8 340 162 779 10 058 0
January 2006
Income and 131 0 0 50 317
expenses
recognised
directly
in equity
BBBEE reserve 0 0 0 50 317
New issue 131 0 0 0
of shares to
The JSE
Empowerment
Fund
Fair value 0 0 0 0
gain on
available-for-
sale instruments
Profit for the 0 0 0 0
year
Dividends paid 0 0 0 0
Balance at 31 8 471 162 779 10 058 50 317
December 2006
Income and 0 0 0 77 054
expenses
recognised
directly in
equity
BBBEE reserve 0 0 0 77 054
Shares issued 0 0 0 30 364
to
The JSE
Empowerment Fund
Options issued 0 0 0 41 542
Black
Shareholders
Options lapsed 0 0 0 (5 915)
- transfer to
retained
earnings
Replacement 0 0 0 11 063
options
issued to
The JSE
Empowerment
Fund
Fair value 0 0 0 0
gain on
available-for-
sale instruments
New issue of 43 0 0 0
shares to
The JSE
Empowerment
Fund
Profit for 0 0 0 0
the year
Dividends paid 0 0 0 0
Balance at 31 8 514 162 779 10 058 127 371
December 2007
Exchange
Balance at 1
January 2006
8 340 162 779 0 0
Income and 0 0 0 50 317
expenses
recognised
directly in
equity
BBBEE reserve 0 0 0 50 317
New issue of 131 0 0 0
shares to
The JSE
Empowerment
Fund
Profit for 0 0 0 0
the year
Dividends paid 0 0 0 0
Balance at 31 8 471 162 779 0 50 317
December 2006
Income and
expenses
recognised
directly in
equity
BBBEE reserve 0 0 0 77 054
Shares issued 0 0 0 30 364
to The JSE
Empowerment Fund
Options issued 0 0 0 41 542
Black
Shareholders
Options lapsed 0 0 0 (5 915)
transfer to
retained
earnings
Replacement 0 0 0 11 063
options
issued to
The JSE
Empowerment
Fund
New issue of 43 0 0 0
shares to
The JSE
Empowerment
Fund
Profit for 0 0 0 0
the year
Dividends paid 0 0 0 0
Balance at 31 8 514 162 779 0 127 371
December 2007
Statements of changes in equity
for the year ended 31 December 2007
continues
Total
Exchange Investor
Retained and Protection Total
earnings subsidiaries Funds Group
R`000 R`000 R`000 R`000
Group
Balance at 1 324 933 506 110 176 494 682 604
January 2006
Income and 0 50 448 28 668 79 116
expenses
recognised
directly in
equity
BBBEE reserve 0 50 317 0 50 317
New issue of 0 131 0 131
shares to
The JSE
Empowerment
Fund
Fair value 0 0 28 668 28 668
gain on
available-for-
sale
instruments
Profit for the 106 470 106 470 34 580 141 050
year
Dividends paid (69 230) (69 230) 0 (69 230)
Balance at 31 362 173 593 798 239 742 833 540
December 2006
Income and 5 915 82 969 9 435 92 404
expenses
recognised
directly in
equity
BBBEE reserve 5 915 82 969 0 82 969
Shares issued 0 30 364 0 30 364
The JSE
Empowerment
Fund
Options 0 41 542 0 41 542
issued
Black
Shareholders
Options 5 915 0 0 0
lapsed
transfer to
retained
earnings
Replacement 0 11 063 0 11 063
options
issued to
The JSE
Empowerment
Fund
Fair value 0 0 9 435 9 435
gain on
available-for-
sale
instruments
New issue of 0 43 0 43
shares to The
JSE
Empowerment
Fund
Profit for the 252 221 252 221 21 017 273 238
year
Dividends paid (90 547) (90 547) 0 (90 547)
Balance at 31 529 762 838 484 270 194 1 108 678
December 2007
Exchange
Balance at 1 351 037 522 156
January 2006
Income and 0 50 317
expenses
recognised
directly in
equity
BBBEE reserve 0 50 317
New issue of 0 131
shares to
The JSE
Empowerment
Fund
Profit for 78 975 78 975
the year
Dividends paid (69 230) (69 230)
Balance at 31 360 782 582 349
December 2006
Income and
expenses
recognised
directly
in equity
BBBEE reserve 5 915 82 969
Shares issued 0 30 364
The JSE
Empowerment
Fund
Options 0 41 542
issued
Black
Shareholders
Options 5 915 0
lapsed
transfer to
retained
earnings
Replacement 0 11 063
options issued
to The JSE
Empowerment
Fund
New issue of 0 43
shares -
The JSE
Empowerment
Fund
Profit for the 225 539 225 539
year
Dividends paid (90 547) (90 547)
Balance at 31 501 689 800 353
December 2007
Headline earnings per share
The calculation of headline earnings per share at 31 December 2007 of
292.1 (2006:164.8) cents per share was based on Group headline
earnings of R248.4m (2006:R138.3m) and Exchange headline earnings of
R224.2m (2006:R81.5m) and a weighted average number of ordinary shares
of 85 038 891 (2006:83 934 476)
Reconciliation of headline earnings:
Profit for
the year 273 238 141 050 225 539 78 975
Adjustments are made to
the following
(Profit/loss on sale of property
an equipment * 4 * 4
Impairment loss on property
and equipment 0 3 803 0 3 803
Profit on sale of joint venture 0 (1 283) 0 (1
283)
Profit on sale of associated
Company (1 283) 0 (1 347) 0
Associated company-impairment
Loss 0 5 422 0 0
Profit on realisation of
Available for sale instruments (23 535) (10 707) 0 0
Headline earnings 248 420 138 289 224 192 81 499
Headline earnings
per share (cents) 292.1 164.8 263.6
97.1
*less than R1 000
Headline earnings per share has been calculated in terms of Circular
08/2007 "Headline earnings", effective for all financial years ending
on or after 31 August 2007. The comparative figure for 2006 has been
recalculated and restated accordingly.
COMMENTARY ON THE AUDITED ABRIDGED ANNUAL FINANCIAL STATEMENTS OF THE
JSE LIMITED FOR THE YEAR ENDED 31 DECEMBER 2007
Reporting entity
JSE Ltd is registered and incorporated in South Africa. The JSE is
licensed as an exchange in terms of the Securities Services Act, No 36
of 2004. The consolidated financial statements of the company as at
and for the year to 31 December 2007 comprise the company and its
subsidiaries and controlled special purpose vehicles (collectively
referred to as the Group) and the Group`s interest in associates.
Highlights
JSE Ltd had its best year yet in 2007.
With the All Share Index breaking all records to reach 31,531 in
October (but easing to 28,958 by year-end), volumes and value traded
on the equities market reached unprecedented levels. Because trading
volumes drive much of the Group`s revenue, this was one of the main
factors behind 2007`s impressive results.
But there were other reasons too. There were 25 new main board
listings and 37 new entries onto the AltX market. Second-half
volatility further boosted the Group`s revenues as investors pushed up
trading volumes, seeking to hedge portfolios and profit from global
market turbulence. The average monthly number of single stock futures
(SSF) contracts traded in 2007 was up 216% on 2006 and elevated JSE to
the largest Single Stocks Futures exchange in the world in terms of
the number of contracts traded. This contributed to a 217% rise in the
average monthly number of equity derivative contracts traded. All
these factors have driven revenues upward.
Foreign interest in Africa as an investment destination rose. The
number of new listings jumped. Sales of JSE market data to offshore
investors, some of them trading on the exchange for the first time,
climbed significantly. And importantly, our trading platforms, which
handled huge increases in trading volumes during 2007, demonstrated
the capacity to process even more trades in the future.
Overview of results
The JSE Group recorded another strong performance for the year under
review, attributable mainly to strong world markets and controlled
costs. Group revenue from operations increased by 37% to R877.4
million while the increase in operating costs (which exclude share-
based costs) was contained below inflation, at 6%.
Included for the first full year in the JSE`s revenue, is an amount of
R83 million (2006:R57 million) relating to the Strate Ad Valorem fees.
In the previous year this figure was only included for 10 months. This
arose as a result of the revision of the service level agreement
between the JSE and Strate Limited ("Strate") in terms of which Strate
provides settlement services to the equities market. Equities members
were previously charged directly by Strate for these services, whereas
since March 2006, the JSE is billed by Strate and in turn passes these
same charges on to members.
With effect from 1 May 2007, the fees charged for managing the funds
on behalf of JSE Trustees (Pty) Ltd and SAFCOM were reduced by 20%.
The total revenue received by the JSE, however, increased as result of
the growth in these funds.
Other income increased by 71% to R112 million. Of this, R75 million
related to a once-off payment from a contractor, releasing the
contractor from its further obligations with regard to its agreements
with JSE. In 2006, there was a non-recurring performance bonus
received on an insurance product by the JSE Guarantee Fund Trust
amounting to R26 million.
Personnel costs increased by R67 million, of which R53 million was a
consequence of the acceleration of 25% of the first tranche of the
Employee Scheme due to be paid in December 2008 but brought forward to
December 2007, in recognition of Participants` agreement to cap the
group`s liability under the first tranche. More detail on this is set
out in note 19.5 to the Annual Financial Statements, which will be
posted to shareholders in due course.
Other expenses include the cost of the JSE`s Broad-Based Black
Economic Empowerment (Broad-Based BEE) initiative, amounting to R30
million (2006:R39 million) for the issue of the final tranche of
shares at par value to the JSE Empowerment Fund (JEF). The second
element of the Broad Based-BEE initiative, the Black Shareholder
Retention Scheme, (the BSR Scheme) cost R53 million in the year under
review (2006:R12 million). The final tranche of options due in terms
of this scheme will be issued to Qualifying Black Shareholders in June
2008
Net financing income has improved considerably on the back of
increased values invested and the general increase in interest rates.
Strate too has benefited from the strong market conditions, delivering
a return of R32 million to JSE for its equity accounted investment, an
improvement of 16% on the previous year. During the year, Strate also
distributed a dividend, the Group`s share of which amounted to R6
million and a capital reduction of which the Group`s share amounted to
R33 million.
The tax impact of R132 million in the current year is exacerbated by
the fact that the cost of the Broad-Based BEE initiative amounting to
R83 million (2006: R51 million) is not deductible for tax purposes.
Also included in this tax figure, is Capital Gains Tax amounting to
R11 million on the receipt from a contractor of R75 million.
Despite the cost of the Broad-Based BEE initiative and the Long Term
Incentive Scheme, the Group has achieved after tax profits for the
year of R273 million, an increase over the previous year of 94%.
Basic Earnings per share increased to 321.3 cents per share (2006:
168.0 cents per share) and Diluted Earnings per share increased to
318.7 cents per share (2006: 167.5 cents per share).
The JSE Guarantee Fund Trust and JSE Derivative Fidelity Fund Trust
are consolidated in terms of International Financial Reporting
Standards (IFRS). The trusts are legally separate from the JSE and
shareholders do not have any right to the net assets of such trusts.
Trade and other receivables increased by R112 million as a result of
interest receivable on margins amounting to R135 million, an increase
of R86 million over 2006 and trade receivables on higher revenues
being R27 million higher than the previous year.
Trade and other payables increased by R101 million, of which R89
million relates to the interest payable on margins.
Net Asset Value per share has increased by 32% to 1302.2 cents per
share (2006: 984.0 cents per share).
Basis of preparation
The consolidated financial statements and the separate financial
statements of JSE have been prepared in accordance with international
financial reporting standards, including IAS 34 and the
interpretations adopted by the International Accounting Standards
Board. The accounting policies are consistent with those applied in
all periods presented in these abridged consolidated statements.
Accounting policies
The abridged annual financial statements incorporate accounting
policies which are consistent with those adopted in the previous
financial year.
Auditor`s report
KPMG Inc., the company`s independent auditor, has audited the group
and company financial statements for the JSE Limited, from which the
accompanying abridged consolidated financial statements were derived,
and has expressed an unmodified opinion on the Group and Company
financial statements. Their audit opinion is available for inspection
at the company`s registered office.
Cash dividend declaration
After careful consideration, the Board has decided to amend the
dividend policy of the group from distributing a maximum of 2.5% of
Net Asset Value, after excluding the Investor Protection Funds, to a
policy of distributing between 40% and 67% of earnings, after
deducting non-recurring items. This equates to a dividend cover of
between 2.5 and 1.5 times.
In terms of the new policy the directors of JSE are proposing to
declare ordinary dividend number 3 of 130 cents per share to be
approved at the Annual General Meeting of shareholders to be held on
24 April 2008.
The salient dates for the payment of the dividend are as follows:
Last date to trade JSE shares cum dividend Friday, 9 May 2008
JSE shares trade ex dividend Monday, 12 May 2008
Record date for purposes of determining
the registered holders of JSE shares to
participate in the dividend at close
of business on Friday, 16 May 2008
Date of payment of dividend Monday, 19 May 2008
Share certificates may not be dematerialised or rematerialised between
Monday, 12 May 2008 and Friday, 16 May 2008, both days inclusive.
Prospects
The start of 2008 has been volatile in many markets worldwide. South
Africa, an emerging market, hasn`t escaped this.
Despite this, the early months of the year have been good for the JSE.
High volumes have been traded during the period. We have had promising
indications for the listings pipeline. Plans to launch new products
and to improve service levels for investors and issuers have continued
apace.
Moreover, significant regulatory changes announced during the national
budget speech of March 2008 enable corporates to trade currency
futures on the exchange. The currency future market was previously
limited to retail investors. This creates an opportunity for the
exchange. The budget also improves prospects for foreign companies
listed on the JSE boards by allowing institutions to invest in these
companies, thereby increasing the attractions of a dual listing on
this market by companies worldwide.
During 2008, a significant focus will be on the ease and flexibility
of our trading services. This focus includes ensuring that the
exchange is able to fulfill the evolving requirements of algorithmic
traders and investors` more sophisticated requirements. However a
thorough review of the requirements of these stakeholders, now
underway, may prompt changes including a revised pricing structure for
equity trades on the exchange. Clearly, the objective of this exercise
would be to increase the JSE`s liquidity (or velocity).
The focus on ease and flexibility of trading also includes a
continuation of our investigation into all obstacles hampering the
reduction in the equity settlement period from T+5 to T+3. We will not
move to T+3 before we are convinced that our clearing and settlement
of trades will be as flawless as is our current record. However we are
intent on removing all obstacles and shifting to T+3 is within our
sights.
Shareholders are reminded that the JSE`s earnings are impacted,
amongst other things, by the volumes of transactions executed on the
JSE markets. The JSE does not control these volumes and has a largely
fixed cost base. At the same time, the JSE will start to depreciate
the capital expenditure on elements of its IT transformation as they
are implemented and will need to expense the costs of the remaining
tranche of the Broad-based BEE initiative as well as the Employee Long
Term Incentive Scheme during 2008. All these expenses will impact the
group`s profit in 2008.
Sandton
10 March 2008
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 10/03/2008 14:20:44 Produced by the JSE SENS Department.
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