| Tue 12 Aug 2008, 12:35 | | JSE - JSE Limited - Reviewed Condensed Consolidated Interim Results For The |
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JSE
JSE
JSE - JSE Limited - Reviewed Condensed Consolidated Interim Results For The
Six Months Ended 30 June 2008
JSE Limited
(Registration number 2005/022939/06)
Incorporated in the Republic of South Africa
JSE Code: JSE
ISIN: ZAE000079711
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2008
One Exchange Square, Gwen Lane, Sandown, South Africa Private Bag X991174,
Sandton, 2146, South Africa
Telephone +27 11 520 7000
Facsimile +27 11 520 8584
HIGHLIGHTS
- Headline earnings per share up 414,2%
- Cash inflow from operating activities up 154,2%
- Total costs down 14,5%
COMMENTARY TO 2008 INTERIM RESULTS
Unless otherwise indicated, all comparatives refer to the six months ended 30
June 2007.
In the six months to the end of June 2008, average daily trade volumes on the
JSE`s spot equities market rose to 61 924 (2007: 39 565) as a result of
volatile market conditions. This volatility is evident in the FTSE/JSE
AllShare Index which dropped to 23 135 in January 2008 and then climbed
steeply again to reach a new high of 33 192 in May 2008 but fell again sharply
in June 2008.
The increased trade proved good for the JSE Limited (the JSE), the company
that operates the exchange. The JSE`s revenues are largely dependent on the
volumes of equities trades and derivatives contracts, and Group revenue
climbed 24% to R509 million (2007: R411 million) during the period. Costs have
been controlled notwithstanding the higher turnover, new products or increased
sophistication of the JSE. This, together with lower than expected share-based
costs led to a 397% increase in operating profit to R189 million (2007: R38
million).
The JSE continues to focus on innovation (new products; new target markets);
client service (technology upgrades; liaison with market participants and
issuers) and cost control. During the first half of 2008, the JSE:
- introduced new products. The number of currency futures was expanded, new
derivative instruments were launched (such as the Alsi Mini contract) and new
companies were listed. After National Treasury`s further relaxation of
exchange controls in March 2008, corporate and institutional investors were
able to start trading currency futures on Yield-X and this has resulted in a
greater contribution to the JSE`s revenue generated by Yield-X;
- won recognition for the innovative ability of its trading products team. In
April 2008 the JSE took top honours in the New Contract of the Year category
in the second annual Futures & Options Awards held in London. The exchange
received the award for the Can-Do Option Contracts which the JSE has
developed. The JSE operates the 12th largest equity derivatives exchange in
the world in terms of volumes. The bulk of this growth comes from trade in Can-
Do Options and Single Stock Futures, in which South Africa remains the largest
player in the world according to number of contracts traded;
- intensified a marketing drive to encourage new corporate listings. The JSE
is recognised as a financial hub on the African continent and a globally
competitive listing destination. Thirteen companies listed in the six months
to end June 2008, of which 10 were main board and three were AltX companies.
That compares with 15 in the same period in 2007. Eleven companies delisted, a
drop from the 31 in the first half of 2007. Most of last year`s delistings
were part of an initiative to delist companies not meeting listings criteria;
this initiative is almost complete. The listings pipeline appears good for the
second half of 2008, however, that does not guarantee that the listings will
take place;
- reduced the equities trading fee by 7,5% effective 1 July 2008. Increased
volumes on the equities market enabled this fee reduction in anticipation of a
holistic reassessment of the equities pricing model, which has taken longer
than anticipated. It is worth noting that subsequent to the reduction, an
increase in the trading volumes in the equities market has been seen.
- kept costs low despite the continuous increase in turnover, new products and
greater sophistication - See Financial Review;
- continued with the impressive lack of failed trades record which the JSE has
maintained for eight years, since the dematerialisation of share certificates;
- through its use of the sophisticated monitoring tools at its disposal, was
able to extract and analyse market information and member positions quickly
and effectively, regardless of the level of market activity. Higher market
activity is often associated with the potential for market abuse, but the
efforts of the surveillance division and the Financial Services Board have
materially reduced cases of market abuse relating to JSE listed securities
over the last five years; and
- intensified its discussions with African issuers interested in listing on
the JSE`s proposed Africa Board and its efforts to develop a Pan African Index
with FTSE. It is expected that both these initiatives will progress well
during the second half of 2008.
The next generation of agricultural products and equity derivatives trading
and clearing systems will be implemented in the second half of 2008;
On 14 July 2008, the JSE experienced a network related incident resulting in
the equities market not opening for trading until 15:10 on that day. A
software upgrade which addressed the issue was successfully implemented and
the JSE is confident that the problem of the 14th of July 2008 has been
resolved.
CHANGES TO THE BOARD OF DIRECTORS
During the period under review, Messrs S. Koseff and G. Rothschild resigned as
non-executive and executive directors respectively. The JSE wishes to thank
them both for their loyal and very valuable contribution to the JSE`s affairs.
Mr. Rothschild remains a member of the JSE executive committee. Ms. F. Evans
and Mr. D. Lawrence were appointed as executive and non-executive directors
respectively. The resignations and appointments were effective from 25 April
2008.
FINANCIAL REVIEW
Revenue climbed 24% to R509 million during the period (six months to June
2007: R411 million).
During the first half of 2008, personnel expenses fell 4% mainly due to the
impact of a fall in JSE`s share price. This was attributable to the valuation
of the cash-settled Long Term Incentive Scheme, which is designed to attract,
retain and incentivise the JSE`s senior management over the long term. The
impact of the "mark to market" of the participatory interests issued has
resulted in a total charge to income of R0,4 million. In the comparative
period this charge amounted to R47 million. During January 2008 the JSE`s
exposure to the second tranche of participation interests was hedged through
cash-settled European call options with a resultant fair value charge to the
income statement in the interim period of R18 million.
Other expenses decreased by 18% due mainly to a drop in the charge relating to
the JSE`s Broad-Based Black Economic Empowerment Initiative (Broad-Based BEE
Initiative). This is the final charge to the Income Statement of the Broad-
Based BEE Initiative, which has a very small impact on the Group`s cash flows.
The JSE`s Broad-Based BEE Initiative has two parts: the JSE Empowerment Fund,
designed to fund the education of black students working towards tertiary
level qualifications in the financial markets and the Black Shareholders`
Retention Scheme, aimed at incentivising the JSE`s black shareholders to
retain their JSE shareholding at least until 2011.
The effective tax rate fell to 36% (2007: 54%), due to the lower Income
Statement charge of the Broad-Based BEE Initiative in the period and a drop in
the corporate tax rate from 29% to 28%. The Broad-Based BEE Initiative
amounting to R38 million (2007: R83 million) is not deductible for tax
purposes.
Capital structure and dividend policy
The JSE has no long-term borrowings, and R837 million in cash reserves (2007:
R593 million). The Exchange analyses its capital requirements in three
categories. Firstly, to ensure a smoothly operating stock exchange, the JSE
sets aside sufficient cash to fund four months of operations. Secondly, as the
JSE guarantees all on-market equities trades, it sets aside sufficient cash to
settle a certain portion of on-market equity trades assuming the failure of a
JSE equities member. Lastly, the JSE must be in a position to maintain
infrastructure and meet capital needs for expansion, so a portion of cash is
set aside to fund these types of investments. On the basis of this assessment,
the Board has determined how much cash is needed although this is revisited on
an ongoing basis.
In 2007 the Board approved an amended dividend policy for the JSE of an
earnings-based dividend cover of between 1,5 and 2,5 times.
PROSPECTS
Due to a significant portion of revenue being dependent on the level of trades
on the Exchange, the JSE is not able to predict future profits. The JSE did
not feel a noticeable impact from the credit crunch affecting various other
markets and stock exchanges during the first half of 2008. Volumes have
continued to climb on the JSE while they have stagnated in certain world
markets. An element of this is attributable to the fact that the equities
market of the JSE has a large commodity component. It is important to note
that this does not guarantee that these volumes will be sustained in the
second half of 2008. It should also be noted that a large number of staff
vacancies existed during the first part of 2008 and it is anticipated that
many of these vacancies will be filled in the second half of the year.
For and on behalf of the Board
HJ Borkum RM Loubser
Chairman Chief Executive Officer 12 August 2008
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
for the six months ended 30 June 2008
JSE Group
Six months ended 30 June Year ended
31 December
2008 2007* 2007
Note (reviewed) (reviewed) (audited)
R`000 R`000 R`000
Revenue 6 508 812 411 457 877 426
Other income 7 10 811 13 219 111 993
Personnel expenses 8 (100 615) (104 978) (230 069)
Other expenses 9 (230 227) (282 032) (483 168)
Profit before net 188 781 37 666 276 182
financing income
Interest received 1 087 791 536 676 1 430 072
Interest paid (1 023 863) (498 917) (1 332 943)
Net financing income 63 928 37 759 97 129
Share of profit of 16 615 12 069 31 865
equity accounted
investees
Profit before taxation 269 324 87 494 405 176
Income taxation 10 (96 690) (46 961) (131 938)
Profit for the period 172 634 40 533 273 238
Earnings per share
Basic earnings per 11.1 202,8 47,7 321,3
share (cents)
Diluted earnings per 11.2 200,5 47,5 318,7
share (cents)
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT(CONTINUED)
for the six months ended 30 June 2008
Investor Protection Funds*
Six months ended 30 June Year ended
31 December
2008 2007* 2007
Note (reviewed) (reviewed) (audited)
R`000 R`000 R`000
Revenue 6 - - -
Other income 7 5 064 10 236 29 247
Personnel expenses 8 - - -
Other expenses 9 (5 626) (6 762) (12 614)
Profit before net (562) 3 474 16 633
financing income
Interest received 2 890 2 086 4 384
Interest paid - - -
Net financing income 2 890 2 086 4 384
Share of profit of - -
equity accounted -
investees
Profit before taxation 2 328 5 560 21 017
Income taxation 10 - - -
Profit for the period 2 328 5 560 21 017
Earnings per share
Basic earnings per share 11.1 2,7 6,5 24,7
(cents)
Diluted earnings per 11.2 2,7 6,5 24,5
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.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
as at 30 June 2008
JSE Group
As at 30 June As at
31 December
2008 2007* 2007
(reviewed) (reviewed) (audited)
Note R`000 R`000 R`000
Assets
Non-current assets 641 280 575 869 542 597
Property and equipment 12 288 272 206 949 214 014
Investments in equity 68 244 72 646 58 957
accounted investees
Other investments 217 555 244 481 223 648
Derivative financial 14 625 - -
instruments
Deferred tax assets 52 584 51 793 45 978
Current assets 20 459 456 14 090 319 18 731 134
Trade and other 232 950 188 139 232 231
receivables
Derivative financial - 502 -
instruments
Margin and collateral 19 389 881 13 309 016 17 734 358
deposits
Cash and cash 836 625 592 662 764 545
equivalents
Total assets 21 100 736 14 666 188 19 273 731
Equity and liabilities
Share capital and 1 203 723 964 565 1 108 678
reserves
Non-current 104 268 138 437 101 283
liabilities
Finance lease 14.2 801 - -
Employee benefits 45 156 78 293 42 307
Deferred tax 10 650 11 288 10 448
liabilities
Operating lease 46 772 48 053 47 685
liability
Due to SAFEX members 889 803 843
Current liabilities 19 792 745 13 563 186 18 063 770
Trade and other 328 322 205 266 249 381
payables
Employee benefits 38 762 18 676 37 191
Income tax payable 3 384 1 042 12 076
Operating lease 32 396 29 186 30 764
liability
Margin and collateral 19 389 881 13 309 016 17 734 358
deposits
Total equity and 21 100 736 14 666 188 19 273 731
liabilities
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET(CONTINUED)
as at 30 June 2008
Investor Protection Funds
As at 30 June As at
31 December 2007
(reviewed) (reviewed) (audited)
2008 2007 2007
Note R`000 R`000 R`000
Assets
Non-current assets 217 551 244 477 223 644
Property and equipment 12 - - -
Investments in equity - - -
accounted investees
Other investments 217 551 244 477 223 644
Derivative financial - - -
instruments
Deferred tax assets - - -
Current assets 50 141 21 769 46 856
Trade and other 402 722 6 502
receivables
Derivative financial - - -
instruments
Margin and collateral - - -
deposits
Cash and cash 49 739 21 047 40 354
equivalents
Total assets 267 692 266 246 270 500
Equity and liabilities
Share capital and 267 367 266 065 270 194
reserves
Non-current - - -
liabilities
Finance lease 14.2 - - -
Employee benefits - - -
Deferred tax - - -
liabilities
Operating lease - - -
liability
Due to SAFEX members - - -
Current liabilities 325 181 306
Trade and other 325 181 306
payables
Employee benefits - - -
Income tax payable - - -
Operating lease - - -
liability
Margin and collateral - - -
deposits
Total equity and 267 692 266 246 270 500
liabilities
*In the prior period, employee benefits were presented as provisions. In line
with the consolidated financial statements as at and for the year ended 31
December 2007, the comparative figures have been reclassified and restated
accordingly.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2008
Non-
Share Share distributable BBBEE
capital premium reserve reserve
R`000 R`000 R`000 R`000
Group
Balance at 31 December 8 471 162 779 10 058 50 317
2006 (audited)
Total recognised income* - - - -
Profit for the period - - - -
Total income recognised - - - -
directly in equity
Fair value gains on - - - -
available-for-sale
instruments
BBBEE reserve - - - 79 864
Shares issued to the JSE - - - 30 364
Empowerment Fund
Options issued to black - - - 41 542
shareholders
Transferred to retained - - - (3 105)
earnings-lapsed options
Replacement options - - - 11 063
issued to the JSE
Empowerment Fund
Issue of shares 43 - - -
Dividends paid - - - -
Balance at 30 June 2007 8 514 162 779 10 058 130 181
(reviewed)
Balance at 31 December 8 471 162 779 10 058 50 317
2006 (audited)
Total recognised income* - - - -
Profit for the period - - - -
Total income recognised - - - -
directly in equity
Fair value gains on - - - -
available-for-sale
instruments
BBBEE reserve - - - 77 054
Shares issued to the JSE - - - 30 364
Empowerment Fund
Options issued to black - - - 41 542
shareholders
Transferred to retained - - - (5 915)
earnings-lapsed options
Replacement options - - - 11 063
issued to the JSE
Empowerment Fund
Issue of shares 43 - - -
Dividends paid - - - -
Balance at 31 December 8 514 162 779 10 058 127 371
2007 (audited)
Total recognised income - - - -
and expense
Profit for the period - - - -
Total expenses recognised - - - -
directly in equity
Fair value loss on - - - -
available-for-sale
instruments
BBBEE reserve - - - 38 132
Options issued to black - - - 33 539
shareholders
Transferred to retained - - - (116)
earnings-lapsed options
Replacement options - - - 4 709
issued to the JSE
Empowerment Fund
Dividends paid - - - -
Balance at 30 June 2008 8 514 162 779 10 058 165 503
(reviewed)
*Where necessary, comparative figures have been reclassified to conform to
changes in presentation in the current period.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY(CONTINUED)
for the six months ended 30 June 2008
Total
exchange Investor
Retained and Protection Total
earnings subsidiaries Funds Group
R`000 R`000 R`000 R`000
Group
Balance at 31 December 362 173 593 798 239 742 833 540
2006 (audited)
Total recognised income* 34 973 34 973 26 323 61 296
Profit for the period 34 973 34 973 5 560 40 533
Total income recognised - - 20 763 20 763
directly in equity
Fair value gains on - - 20 763 20 763
available-for-sale
instruments
BBBEE reserve 3 105 82 969 - 82 969
Shares issued to the JSE - 30 364 - 30 364
Empowerment Fund
Options issued to black - 41 542 - 41 542
shareholders
Transferred to retained 3 105 - - -
earnings-lapsed options
Replacement options - 11 063 - 11 063
issued to the JSE
Empowerment Fund
Issue of shares - 43 - 43
Dividends paid (13 283) (13 283) - (13 283)
Balance at 30 June 2007 386 968 698 500 266 065 964 565
(reviewed)
Balance at 31 December 362 173 593 798 239 742 833 540
2006 (audited)
Total recognised income* 252 221 252 221 30 452 282 673
Profit for the period 252 221 252 221 21 017 273 238
Total income recognised - - 9 435 9 435
directly in equity
Fair value gains on - - 9 435 9 435
available-for-sale
instruments
BBBEE reserve 5 915 82 969 - 82 969
Shares issued to the JSE - 30 364 - 30 364
Empowerment Fund
Options issued to black - 41 542 - 41 542
shareholders
Transferred to retained 5 915 - - -
earnings-lapsed options
Replacement options - 11 063 - 11 063
issued to the JSE
Empowerment Fund
Issue of shares - 43 - 43
Dividends paid (90 547) (90 547) - (90 547)
Balance at 31 December 529 762 838 484 270 194 1 108 678
2007 (audited)
Total recognised income 170 306 170 306 (2 827) 167 479
and expense
Profit for the period 170 306 170 306 2 328 172 634
Total expenses - - (5 155) (5 155)
recognised directly in
equity
Fair value loss on - - (5 155) (5 155)
available-for-sale
instruments
BBBEE reserve 116 38 248 - 38 248
Options issued to black - 33 539 - 33 539
shareholders
Transferred to retained 116 - - -
earnings-lapsed options
Replacement options 0 4 709 - 4 709
issued to the JSE
Empowerment Fund
Dividends paid (110 682) (110 682) - (110 682)
Balance at 30 June 2008 589 502 936 356 267 367 1 203 723
(reviewed)
*Where necessary, comparative figures have been reclassified to conform to
changes in presentation in the current period.
CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT
for the six months ended 30 June 2008
JSE Group
Six months ended 30 June Year ended
31 December
2008 2007 2007
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Cash generated/(utilised) from 323 469 157 759 379 878
operations
Interest received 1 095 089 514 916 1 344 550
Interest paid (1 002 733) (474 322) (1 244 428)
Dividends received 2 270 2 563 5 712
Taxation paid (111 980) (80 483) (156 671)
Net cash inflow/(outflow) from 306 115 120 433 329 041
operating activities
Cash flows from investing
activities
Investment to maintain operations (268) (211) (274)
Replacement of property and (268) (211) (274)
equipment
Investment to expand operations (84 197) (19 184) 21 417
Proceeds on maturity of other 22 600 31 857 74 424
investments
Purchase of other investments (18 486) (33 936) (51 179)
Cash flows from equity accounted 7 327 (6 459) 26 951
investees
Capital reduction in Strate - - 33 410
Limited
Purchase of shares in Strate 0 (12 413) (12 413)
Limited
Dividends received from Strate 7 327 5 954 5 954
Limited
Proceeds on sale of Satrix - - 1 576
Holdings (Pty) Ltd
Leasehold improvements (83) (363) (48)
Additions to property and (95 555) (10 283) (30 307)
equipment
Net cash (outflow)/inflow from (84 465) (19 395) 21 143
investing activities
Cash flows from financing
activities
Proceeds from issue of share - 43 43
capital
Long-term incentive scheme hedge (32 986) - -
Payment of finance lease (5 902) - -
liabilities
Dividends paid (110 682) (13 283) (90 546)
Net cash outflow from financing (149 570) (13 240) (90 503)
activities
Net increase in cash and cash 72 080 87 798 259 681
equivalents
Cash and cash equivalents at 764 545 504 864 504 864
beginning of period
Cash and cash equivalents at end 836 625 592 662 764 545
of period
CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT(CONTINUED)
for the six months ended 30 June 2008
Investor Protection Funds
Six months ended 30 June Year ended
31 December
2008 2007 2007
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Cash generated/(utilised) from (17) (1 075) (12 539)
operations
Interest received 3 018 2 086 4 384
Interest paid - - -
Dividends received 2 270 2 563 5 712
Taxation paid - - -
Net cash inflow/(outflow) from 5 271 3 574 (2 443)
operating activities
Cash flows from investing
activities
Investment to maintain operations - - -
Replacement of property and - - -
equipment
Investment to expand operations 4 114 (2 079) 23 245
Proceeds on maturity of other 22 600 31 857 74 424
investments
Purchase of other investments (18 486) (33 936) (51 179)
Cash flows from equity accounted - - -
investees
Capital reduction in Strate - - -
Limited
Purchase of shares in Strate - - -
Limited
Dividends received from Strate - - -
Limited
Proceeds on sale of Satrix
Holdings (Pty) Ltd
Leasehold improvements - - -
Additions to property and - - -
equipment
Net cash (outflow)/inflow from 4 114 (2 079) 23 245
investing activities
Cash flows from financing
activities
Proceeds from issue of share - - -
capital
Long-term incentive scheme hedge - - -
Payment of finance lease - - -
liabilities
Dividends paid - - -
Net cash outflow from financing - - -
activities
Net increase in cash and cash 9 385 1 495 20 802
equivalents
Cash and cash equivalents at 40 354 19 552 19 552
beginning of period
Cash and cash equivalents at end 49 739 21 047 40 354
of period
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2008
1. Reporting entity
JSE Limited is a company domiciled in the Republic of South Africa. The
condensed consolidated interim financial statements of the Company as at and
for the six months ended 30 June 2008 comprise the Company and its
subsidiaries (together referred to as the "Group") and the Group`s interest in
associates.
The consolidated financial statements of the Group as at and for the year
ended 31 December 2007 are available for inspection at the Company`s
registered office at One Exchange Square, Gwen Lane, Sandown, or at
www.jse.co.za.
2. Statement of compliance
These condensed consolidated interim financial statements have been prepared
in accordance with International Financial Reporting Standard IAS 34, Interim
Financial Reporting. They do not include all the information required for full
annual financial statements and should be read in conjunction with the
consolidated financial statements of the Group as at and for the year ended 31
December 2007.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 12 August 2008.
3. Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those applied by the Group in its
annual financial statements as at and for the year ended 31 December 2007.
4. Key estimates and areas of judgement
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group`s accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements as at and for the year
ended 31 December 2007.
5. Segmental information
The JSE provides exchange and auxiliary services in South Africa. The revenue
streams derived from the services are described in note 6 to the interim
results. The services provided by the JSE are not subject to materially
different operational risks and are regarded as a single business and
geographical segment.
6. Revenue
Six months ended 30 June Year ended
31 December
2008 2007 2007
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Equity derivatives fees 67 845 53 698 116 674
Agricultural derivatives fees 21 806 21 832 43 432
Equities trading fees 121 234 84 298 185 605
Yield-X trading fees 2 678 150 637
Risk management, clearing and 72 811 53 675 122 247
settlement fees
Information sales 46 192 38 915 79 534
Membership fees 3 433 3 328 6 557
Listing fees 38 034 44 044 85 888
Broker deal accounting 68 007 51 926 112 932
services
Funds management and other 23 534 20 363 40 957
Total revenue before Strate ad 465 574 372 229 794 463
valorem fees
Strate ad valorem fees 43 238 39 228 82 963
Total revenue 508 812 411 457 877 426
10 811 13 219 111 993
7. Other income
Other income is down from the prior period largely due to lower income (R5,2
million) generated by the Investor Protection Funds. This decrease has been
off-set by income received from the Social Responsibility Index (R1,2 million)
and other sundry income (R1,6 million). Furthermore, during the year ended 31
December 2007, a once-off payment of R74,6 million was received from a
contractor, releasing the contractor from its further obligations with regards
to its agreements with the JSE.
8. Personnel expenses (100 615) (104 978) (230 069)
Long-term incentive scheme, (18 790) (46 559) (82 687)
including cost of hedge
Personnel related expenditure (80 328) (57 066) (144 506)
Other (1 497) (1 353) (2 876)
Personnel expenses decreased mainly as a result of the following:
8.1 Long-term incentive scheme, including cost of hedge
The terms and conditions of the Employee Scheme are disclosed in the
consolidated financial statements as at and for the year ended 31 December
2007. During the period under review, no additional participatory interests
were awarded. The total expense recognised in the income statement is R0,4
million (2007: R46,6 million) resulting in a total liability of R61,3 million
(2007: R77,0 million). The decrease from the prior period is primarily due to
the decline in the JSE share price, off-set by the continuing accrual of the
liability based on elapsed time.
The basis of measuring fair value is consistent with that disclosed in the
consolidated financial statements as at and for the year ended 31 December
2007.
During January 2008, the JSE`s exposure to the second tranche of participatory
interests was hedged through cash-settled European call options, with a view
to establishing an economic hedge over the life of the issue. The resultant
impact to the income statement for the period ended 30 June 2008 is a fair
value loss of R18,4 million. The following assumptions, using Black-Scholes
valuation methodology, were used to calculate the income statement impact:
Base price R84,54
30 Calendar day VWAP R63,62
Total number of options 1 050 350
Vesting date 31 December 2012
Volatility 32,10%
Dividend yield 2,39%
8.2 Personnel related expenditure
There has been an increase in personnel related expenditure of R23,3 million.
This is largely the result of the in-sourcing of IT operations during the
latter half of 2007.
9. Other expenses (230 777) (282 032) (483 168)
Other operating expenses decreased mainly as a result of the following:
- 434 387 shares were issued to the JSE Empowerment Fund (JEF) at a cost of
R30,4 million during June 2007. This represented the final issue of the 1 737
550 JSE shares that were set aside to be issued to JEF at par for cash.
- On 1 June 2008, 578 968 (2007: 579 132) options amounting to R33,5 million
(2007: R41,5 million) were issued to Qualifying Black Shareholders as per the
Black Shareholders` Retention Scheme ("the BBBEE Scheme"). In addition, 81 290
(2007: 154 263) lapsed options were re-issued to JEF at a cost of R4,7 million
(2007: R11,1 million). The terms and conditions of the BBBEE Scheme are
disclosed in the consolidated financial statements as at and for the year
ended 31 December 2007.
Based on Black-Scholes methodology, the following assumptions were used to
calculate the income statement impact:
Strike price R14,07
Exercise date 15 June 2011
Dividend yield 1,81%
Volatility 36,14%
Risk-free rate 12,24%
As this transaction is equity settled, the total cost of R38,1 million (2007:
R46,7 million) has been credited to the BBBEE reserve.
- Computer expenses have decreased by R14,3 million and depreciation has
increased by R4,5 million from the prior period. This is mainly due to the in-
sourcing of the IT operations and the assignment of contracts classified as
finance leases respectively.
10. Income tax expense
The Group`s consolidated effective tax rate for the six months ended 30 June
2008 was 36% (for the six months ended 30 June 2007: 54% and for the year
ended 31 December 2007: 33%). This change in effective tax rate was caused
mainly by two factors:
- a decrease in the income tax rate effective for the first time for financial
years ending between 1 April 2008 and 31 March 2009; and
- a reduction in BBBEE expenses, which expenses are non-deductible for tax
purposes.
11. Earnings and headline earnings per share
11.1 Basic earnings per share
The calculation of basic earnings per share at 30 June 2008 of 202,8 (2007:
47,7) cents per share was based on the profit for the period of R172,6 million
(2007: R40,5 million) and a weighted average number of ordinary shares of 85
140 050 (2007: 84 933 538) during the period as calculated below.
Profit for the period 172 634 40 533 273 238
Basic earnings per share (cents) 202,8 47,7 321,3
Weighted average number of
ordinary shares:
Issued ordinary shares at 85 140 050 84 705 663 84 705 663
beginning of period
Issue of 434 387 shares - the JSE - 227 875 333 228
Empowerment Fund - 27 March 2007
Weighted average number of 85 140 050 84 933 538 85 038 891
ordinary shares
11.2 Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2008 of 200,5 (2007:
47,5) cents per share was based on the profit for the period of R172,6 million
(2007: R40,5 million) and a weighted average number of diluted ordinary shares
of 86 115 620 (2007:
85 348 834) during the period as calculated below.
Profit for the period (basic and 172 634 40 533 273 238
diluted)
Diluted earnings per share (cents) 200,5 47,5 318,7
Weighted average number of
ordinary shares (diluted):
Weighted average number of 85 140 050 84 933 538 85 038 891
ordinary shares as at end of
period
Dilutive effect of share options 975 570 415 296 683 821
Weighted average number of 86 115 620 85 348 834 85 722 712
ordinary shares (diluted)
11.3 Headline earnings per share
The calculation of headline earnings per share at 30 June 2008 of 199,0 (2007:
38,7) cents per share was based on headline earnings of R169,5 million (2007:
R32,9 million) and a weighted average number of
85 140 050 (2007: 84 933 538) ordinary shares in issue during the period as
calculated in note 11.1.
Reconciliation of headline earnings:
Profit for the period 172 634 40 533 273 238
Adjustments are made to the
following:
Profit on sale of associated - - (1 283)
company
Profit on realisation of (3 176) (7 673) (23 535)
available-for-sale instruments
Headline earnings 169 458 32 860 248 420
Headline earnings per share 199,0 38,7 292,1
(cents)
11.4 Net asset value per share 1 413,8 1 132,9 1 302,2
(cents)
11.5 Contribution of Investor Protection Funds
The contribution these funds make to the headline earnings, diluted earnings
and the net asset value of the Group is as follows:
Headline loss per share (cents) (1,0) (2,5) (3,0)
Diluted earnings per share (cents) 2,7 6,5 24,5
Net asset value per share (cents) 314,0 312,5 317,4
12. Property and equipment
12.1 During the six months ended 30 June 2008, the Group acquired assets with
a cost of R95,9 million (2007: R10,9 million). The assets purchased were
mainly in respect of the IT Systems Replacement Project (R47,3 million), the
SAN Storage Solution (R23,5 million) and hardware acquired under finance
leases (R12,3 million). There were no disposals during the period under review
(2007: Rnil). Refer to note 14.2 for the finance lease commitments.
12.2 Since taking over the project management of the Systems Replacement
Project late last year, intensive examination has been taking place to assess
the extent to which elements of the software, currently capitalised as
software under development at a value of R30 million, will deliver full value.
We have ascertained that the risk exists that some elements may not deliver
full value but the extent to which the assets may suffer impairment has not
yet been quantified. The process of assessing the quantum is expected to be
completed by the end of the year.
13. Dividends paid
Ordinary dividend of 15,6 cents - 13 282 13 282
per share
Special dividend of 90,75 cents - - 77 265
per share
Ordinary dividend of 130,0 cents 110 682 - -
per share
110 682 13 282 90 547
14. Contingent liabilities and commitments
14.1 Contingent liabilities
There were no changes to the contingent liabilities reported in the
consolidated financial statements as at and for the year ended 31 December
2007.
14.2 Commitments
There were no changes to the commitments reported in the consolidated
financial statements as at and for the year ended 31 December 2007. The
following new commitments were entered into during the six months ended 30
June 2008.
Finance leases
As part of the termination of the outsourced IT operations, certain contracts
were assigned to the JSE and have been classified as finance leases.
Future payments:
Not later than one year 5 360 - -
Between one and five years 801 - -
6 161 - -
15. Related parties
15.1 Related party transactions
The JSE is the main provider of risk management, clearing and settlement, and
accounting systems to equity member firms (many of whom are shareholders).
Revenue earned from this source, and from providing trading and market data to
member firms, amounted to R311,7 million (2007: R232,3 million) for the
period. These transactions are conducted on an arm`s length basis.
The associated companies and subsidiaries of the Group are identified as
follows:
Amounts due from/(due to)
- Associated companies:
Strate Limited1 (16 783) (8 590) (6 762)
- Subsidiaries:
SAFEX Clearing Company (Pty) 4 611 3 135 3 497
Limited
JSE Trustees (Pty) Limited 4 240 3 904 3 522
JSE Guarantee Fund Trust * - (400)
JSE Fidelity Fund Trust 100 - 23
1 Strate invoices the JSE for a service fee of R43,2 million (2007: R39,2
million) in respect of settlement, which the JSE thereafter recovers from the
members.
*Less than R1 000.
No allowance for impairment losses has been raised in respect of related
parties as at 30 June 2008 (2007: Rnil).
Normal trading terms apply to the amounts due to the JSE.
15.2 Transactions with key management personnel
Executive directors and other key executives remuneration of R5,8 million
(2007: R5,5 million) and R9,5 million (2007: R7,9 million) respectively, was
paid during the period.
Executive directors and other key executives have participatory interests in
the long-term incentive scheme of 1,3 million (2007: 0,9 million) and 1,
million (2007: 1,0 million) respectively.
KPMG Inc., the Company`s independent auditor, has reviewed the interim
financial statements contained in the interim report from which this interim
financial information is extracted and has expressed an unmodified conclusion
on the interim financial statements. Their review report is available for
inspection at the Company`s registered office.
EXECUTIVE DIRECTORS
RM Loubser (CEO), NF Newton-King, LV Parsons, JH Burke, FM Evans
NON-EXECUTIVE DIRECTORS
HJ Borkum (Chairman), AD Botha, MR Johnston, DM Lawrence, W Luhabe, A Mazwai,
SN Nematswerani, N Payne, GT Serobe
COMPANY SECRETARY
GC Clarke
Sandton
12 August 2008
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 12/08/2008 12:35:02 Produced by the JSE SENS Department.
