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JSE
JSE
JSE - JSE Limited - Audited Abridged Financial Statements For The Year Ended
31 December 2008 and cash dividend declaration
JSE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share Code: JSE
ISIN: ZAE000079711
("JSE" or "the Company" or "the Group")
Income Statements
for the year ended 31 December 2008
Group Exchange Investor
Protection Funds*
2008 2007 2008 2007 2008 2007
R`000 R`000 R`000 R`000 R`000 R`000
Revenue 1 071 570 877 426 1 097 095 898 673 0 0
Other 39 805 111 993 38 058 88 776 9 074 29 247
income
Personnel (238 565) (230 069) (238 565) (230 069) 0 0
expenses
Other (484 281) (483 168) (458 013) (460 762) (20 588) (12 614)
expenses
Profit/ 388 529 276 182 438 575 296 618 (11 514) 16 633
(loss)
before
net
financing
income
Interest 2 202 351 1 430 072 123 383 71 929 5 926 4 384
received
Interest (2 067 (1 332 943) (26 395) (11 142) 0 0
paid 408)
Net 134 943 97 129 96 988 60 787 5 926 4 384
financing
income
Share of 31 017 31 865 0 0 0 0
profit of
equity
accounted
investees
(net of
income
tax)
Profit/ 554 489 405 176 535 563 357 405 (5 588) 21 017
(loss)
Before
tax
Income (180 132) (131 938) (179 766) (131 866) 0 0
tax
Profit/ 374 357 273 238 355 797 225 539 (5 588) 21 017
(loss)
for the
year
Earnings
per
share
Basic 439.7 321.3 417.9 265.2 (6.6) 24.7
earnings/
(loss)
per share
(cents)
Diluted 434.0 318.7 412.4 263.1 (6.5) 24.5
earnings/
(loss)
per share
(cents)
* Investor Protection Funds comprise the JSE Guarantee Fund Trust and the JSE
Derivatives Fidelity Fund Trust.
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. In terms of International Financial
Reporting Standards the JSE is required to consolidate these funds into the
results of the Group as they are special purpose vehicles whose financial and
operating policies are under the control of the JSE. Neither the JSE nor its
shareholders have any right to the net assets of these 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. The Group consists of JSE Limited, its
subsidiary companies (Safex Clearing Company (Pty) Ltd and JSE Trustees (Pty)
Ltd), special purpose entities (JSE Guarantee Fund Trust and JSE Derivatives
Fidelity Fund Trust) and its interests in associated companies (Strate Ltd
and Indexco Managers Ltd).
Balance Sheets
as at 31 December 2008
Group Exchange Investor Protection
Funds
2008 2007* 2008 2007 2008 2007
R`000 R`000 R`000 R`000 R`000 R`000
Assets
Non-current 656 823 542 597 404 772 284 613 194 021 223 644
assets
Property 84 115 44 292 84 115 44 292 0 0
and
equipment
Intangible 232 763 169 722 232 763 169 722 0 0
assets
Investments 82 647 58 957 21 416 21 416 0 0
in equity
accounted
investees
Investments 0 0 3 201 3 201 0 0
in
subsidiarie
s
Other 194 025 223 648 4 4 194 021 223 644
investments
Derivative 5 619 0 5 619 0 0 0
financial
instruments
Deferred 57 654 45 978 57 654 45 978 0 0
taxation
Current 15 993 18 731 134 1 143 1 076 068 34 109 46 856
assets 536 123
Trade and 204 104 232 231 99 821 91 254 3 443 6 502
other
receivables
Income tax 15 978 0 15 658 0 0 0
receivable
Due from 0 0 7 680 7 042 0 0
group
entities
Margin 14 752 17 548 094 91 222 104 132 0 0
deposits 793
Collateral 74 320 186 264 74 320 186 264 0 0
deposits
Cash and 946 341 764 545 854 422 687 376 30 666 40 354
cash
equivalents
Total 16 650 19 273 731 1 547 1 360 681 228 130 270 500
assets 359 895
Equity and
liabilities
Share 1 373 492 1 108 678 1 083 800 353 227 497 270 194
capital and 716
reserves
Non-current 188 619 173 314 188 619 173 314 0 0
liabilities
Finance 2 402 0 2 402 0 0 0
lease
Employee 51 336 45 280 51 336 45 280 0 0
benefits
Deferred 11 972 10 448 11 972 10 448 0 0
taxation
Operating 75 767 78 449 75 767 78 449 0 0
lease
liability
Investor 46 200 38 294 46 200 38 294
Protection
Levy
Due to 942 843 942 843 0 0
SAFEX
members
Current 15 088 17 991 739 275 560 387 014 633 306
liabilities 248
Trade and 208 031 208 114 56 914 46 951 633 306
other
payables
Employee 50 071 37 191 50 071 37 191 0 0
benefits
Income tax 0 12 076 0 12 076 0 0
payable
Operating 3 033 0 3 033 0 0 0
lease
liability
Due to 0 0 0 400 0 0
group
entities
Margin 14 752 17 548 094 91 222 104 132 0 0
deposits 793
Collateral 74 320 186 264 74 320 186 264 0 0
deposits
Total 16 650 19 273 731 1 547 1 360 681 228 130 270 500
equity and 359 895
liabilities
Reclassifications
- In the prior period a liability relating to employees was presented as
Trade and Other Payables instead of Employee Benefits. The comparative
figures have been reclassified and restated accordingly.
- The classification of the operating lease liability has been amended to
better reflect the reversing of the operating lease liability. The
comparative figures have been reclassified and restated accordingly.
- The classification of the investor protection levy has been amended to
better reflect the non-current nature of the liability. The comparative
figures have been reclassified and restated accordingly.
The reclassifications did not impact reserves or profit for the year.
Cash Flow Statements
for the year ended 31 December 2008
Group Exchange Investor
Protection Funds
2008 2007 2008 2007 2008 2007
R`000 R`000 R`000 R`000 R`000 R`000
Cash 540 006 379 878 576 498 418 181 (7 051) (12 539)
generated/
(utilised)
by
operations
Interest 2 237 455 1 344 550 124 211 72 023 6 182 4 384
received
Interest (2 074 (1 244 (22 469) (10 362) 0 0
paid 998) 428)
Dividends 5 089 5 712 0 0 5 089 5 712
received
Taxation (218 308) (156 671) (217 654) (156 0 0
paid 422)
Net cash 489 244 329 041 460 586 323 420 4 220 (2 443)
inflow/
(outflow)
from
operating
activities
Cash flows
from
investing
activities
Investment (274) (7 984) (274) 0 0
to maintain
operations (7 984)
Replacement (7 984) (274) (7 984) (274) 0 0
of property
and
equipment
Investment (155 799) 21 417 (141 891) (1 828) (13 908) 23 245
to expand
operations
Proceeds 54 622 74 424 0 0 54 622 74 424
on maturity
of other
investments
Purchase (68 530) (51 179) 0 0 (68 530) (51 179)
of other
investments
Cash flows 7 327 26 951 7 327 26 951 0 0
from equity
accounted
investees
Capital 0 33 410 0 33 410 0 0
reduction
in Strate
Ltd
Purchase of 0 (12 413) 0 (12 413) 0 0
shares in
Strate Ltd
Dividends 7 327 5 954 7 327 5 954 0 0
received
from Strate
Ltd
Proceeds on 0 1 576 0 1 576 0 0
sale of
Satrix
Holdings
(Pty) Ltd
Leasehold (1 438) (48) (1 438) (48) 0 0
improvement
s
Additions (147 780) (30 307) (147 780) (30 307) 0 0
to property
and
equipment
Net cash (163 783) 21 143 (149 875) (2 102) (13 908) 23 245
(outflow)/
inflow from
investing
activities
Cash flows
from
financing
activities
Proceeds 0 43 0 43 0 0
from issue
of share
capital
Long-term (32 983) 0 (32 983) 0 0
incentive
scheme
hedge
Dividends (110 682) (90 546) (110 682) (90 546) 0 0
paid
Net cash (143 665) (90 503) (143 665) (90 503) 0 0
outflow
from
financing
activities
Net 181 796 259 681 167 046 230 815 (9 688) 20 802
increase/
(decrease)
in cash and
cash
equivalents
Cash and 764 545 504 864 687 376 456 561 40 354 19 552
cash
equivalents
at
beginning
of year
Cash and 946 341 764 545 854 422 687 376 30 666 40 354
cash
equivalents
at end of
year
Statement of changes in equity
for the year ended 31 December 2008
Non-
Share Share Distributable BBBEE
capital premium Reserve reserve
R`000 R`000 R`000 R`000
Group
Balance at 8 471 162 779 10 058 50 317
31 December
2006
Total 0 0 0 0
recognised
income*
Profit 0 0 0 0
for the
year
Total 0 0 0 0
income
recognised
directly in
equity
Fair 0 0 0 0
value gains
on
available-
for-sale
instruments
BBBEE 0 0 0 77 054
reserve
Transferred 0 0 0 (5 915)
to retained
earnings -
lapsed
options
Options 0 0 0 41 542
issued to
black
shareholder
s
Replacement 0 0 0 11 063
options
issued to
the JSE
Empowerment
Fund
Shares 0 0 0 30 364
issued to
the JSE
Empowerment
Fund
Issue of 43 0 0 0
shares
Dividends 0 0 0 0
paid
Balance at 8 514 162 779 10 058 127 371
31 December
2007
Total 0 0 0 0
recognised
income and
expense
Profit/(los 0 0 0 0
s) for the
year
Total 0 0 0 0
expense
recognised
directly in
equity
Fair value 0 0 0 0
loss on
available-
for-sale
instruments
BBBEE 0 0 0 38 132
reserve
Transferred 0 0 0 (116)
to retained
earnings -
lapsed
options
Options 0 0 0 33 539
issued to
black
shareholder
s
Replacement 0 0 0 4 709
options
issued to
the JSE
Empowerment
Fund
Dividends 0 0 0 0
paid
Balance at 8 514 162 779 10 058 165 503
31 December
2008
Total
exchange Investor
and Protection Total
Note subsidiaries Funds Group
R`000 R`000 R`000
Group
Balance at 593 798 239 742 833 540
31 December
2006
Total 252 221 30 452 282 673
recognised
income*
Profit for 252 221 21 017 273 238
the year
Total income 0 9 435 9 435
recognised
directly in
equity
Fair value 0 9 435 9 435
gains on
available-
for-sale
instruments
BBBEE 82 969 0 82 969
reserve
Transferred 0 0 0
to retained
earnings -
lapsed
options
Options 41 542 0 41 542
issued to
black
shareholders
Replacement 11 063 0 11 063
options
issued to
the JSE
Empowerment
Fund
Shares 30 364 0 30 364
issued to
the JSE
Empowerment
Fund
Issue of 43 0 43
shares
Dividends (90 547) 0 (90 547)
paid
Balance at 838 484 270 194 1 108 678
31 December
2007
Total 379 945 (42 697) 337 248
recognised
income and
expense
379 945 (5 588) 374 357
Profit/(loss
) for the
year
Total 0 (37 109) (37 109)
expense
recognised
directly in
equity
Fair value 0 (37 109) (37 109)
loss on
available-
for-sale
instruments
BBBEE 38 248 0 38 248
reserve
Transferred 0 0 0
to retained
earnings -
lapsed
options
Options 33 539 0 33 539
issued to
black
shareholders
Replacement 4 709 0 4 709
options
issued to
the JSE
Empowerment
Fund
Dividends (110 682) 0 (110 682)
paid
Balance at 1 145 995 227 497 1 373 492
31 December
2008
Share Share BBBEE Retained Total
capit premium reserve earnings exchange
al
R`000 R`000 R`000 R`000 R`000
Exchange
Balance at 8 471 162 779 50 317 360 782 582 349
31 December
2006
Total 0 0 0 225 539 225 539
recognised
income*
Profit for 0 0 0 225 539 225 539
the year
BBBEE 0 0 77 054 5 915 82 969
reserve
Transferred 0 0 (5 915) 5 915 0
to retained
earnings -
lapsed
options
Options 0 0 41 542 0 41 542
issued to
black
shareholder
s
Replacement 0 0 11 063 0 11 063
options
issued to
the JSE
Empowerment
Fund
Shares 0 0 30 364 0 30 364
issued to
the JSE
empowerment
Fund
Issue of 43 0 0 0 43
shares
Dividends 0 0 0 (90 547) (90 547)
paid
Balance at 8 514 162 127 501 689 800 353
31 December 779 371
2007
Total 0 0 0 355 797 355 797
recognised
income
Profit for 0 0 0 355 797 355 797
the year
BBBEE 0 0 38 132 116 38 248
reserve
Transferred 0 0 (116) 116 0
to retained
earnings -
lapsed
options
Options 0 0 33 539 0 33 539
issued to
black
shareholder
s
Replacement 0 0 4 709 0 4 709
options
issued to
the JSE
Empowerment
Fund
Dividends 0 0 0 (110 (110 682)
paid 682)
Balance at 8 514 162 165 746 920 1 083 716
31 December 779 503
2008
Where necessary, comparative figures have been reclassified to conform to
changes in presentation in the current period
Headline earnings per share
The calculation of headline earnings per share at 31 December 2008 of 456.9
(2007: 292.1) cents per share was based on headline earnings of R389.0m
(2007: R248.4m) and a weighted average number of ordinary shares of 85 140
050 (2007: 85 038 891) during the year.
Reconciliation of
headline earnings:
Profit for the year 374 357 273 355 225 539
238 797
Adjustments, net of
tax, are made for the
following:
Loss on sale of 2 * 0 *
property and equipment
Impairment loss on 8 700 0 8 700 0
intangible assets
Impairment of available- 9 811 0 0 0
for-sale investment
securities
Profit on sale of 0 (1 283) 0 (1 347)
associated company
Profit on realisation (3 883) (23 0 0
of available-for-sale 535)
instruments
Headline earnings 388 987 248 420 364 224 192
497
Headline earnings per 456.9 292.1 428.1 263.6
share (cents)
* less than R1 000
COMMENTARY ON THE ABRIDGED ANNUAL FINANCIAL STATEMENTS OF THE JSE LIMITED FOR
THE YEAR ENDED 31 DECEMBER 2008
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 2008 comprise the Company and its subsidiaries and controlled
special purpose vehicles (collectively referred to as the Group) and the
Group`s interest in associates.
Clarification
As a consequence of the timing of the amendment to tax legislation
overturning a binding ruling from SARS and the timing of the decision of the
Directors to change the manner in which to retain and motivate staff, the
earnings are different from those indicated in our Trading Statement of 23
February 2009.
Further consideration was also given to the impairment of the financial
assets held for sale as a result of poor market conditions and the Board felt
that it was appropriate to impair the equity portfolios held in the two
Investor Protection Funds by R10 million.
The resulting differences are that Earnings per Share (EPS) were expected to
be between 43% and 53% better than 2007`s 321.3 cents per share, and the
actual results are that EPS are 37% better than 2007, at 439.7 cents per
share. Headline Earnings Per Share (HEPS) were indicated to be between 60%
and 70% better than the previous year`s 292.1 cents per share. The actual
results show HEPS at 456.9 cents per share, 56% better than last year.
Highlights
Stock markets globally faced unprecedented tests in 2008: increased
volatility, declining investor sentiment, increased systemic pressures from
diverse and often foreign sources, increased volumes and significant pressure
on pricing. It is an indication of the resilience and prudence of exchange
business and risk models that worldwide, exchanges passed these tests well.
At the JSE, too, market rules and systems functioned as designed and not a
single client lost money through the inability to transact, settle or clear
trades. The volatility had a positive impact on the JSE and hence its
financial results. As will be covered in more detail below, revenues rose by
22% to R1 072 million (2007: R877 million). Net cash flow from operating
activities climbed by 49% to R489 million (2007: R329 million). The JSE is a
fixed cost business; keeping a firm hand on these expenses led to pre-tax
profit increasing by 37% to R554 million (R405 million).
Review of Operations
As is to be expected in turbulent markets, the number of listings on the JSE
declined in 2008 over the previous year; 23 companies joined the boards
(2007: 63). Many are substantial with one, British American Tobacco (BAT),
now the largest JSE-listed company in terms of market capitalization.
Volatile markets were good for the JSE`s equity business in 2008; the average
daily number of equity market trades increased by approximately 50% from 2007
to just over 69 000. The JSE`s equity trading revenues are primarily a
function of volumes traded. The exchange cut equity market trading fees by
7,5% as of 30 June 2008. A focus on client service prompted an upgrade of the
JSE trading engine to the latest version used by the London Stock Exchange
(LSE) which offers more functionality; stabilising downstream JSE systems;
and increasing the minimum bandwidth allocated to the publication of real-
time information to the market.
In 2008, the JSE introduced new rules to permit the rolling of settlement
under exceptional circumstances. The JSE continued to work towards moving
settlement from T+5 to T+3.
Equity derivative contract volumes climbed by 45% in 2008 (off a high base;
volumes shot up by 219% in 2007). The JSE remains the biggest global player
in Single Stock Futures (SSFs), by volumes traded. The JSE`s new equity
derivatives trading and clearing platform was launched, allowing more product
innovation. New product development continued apace. International
derivatives - that is, JSE-listed derivative instruments written on stocks
listed offshore - were launched.
In 2008 the Currency Futures Market was opened up to corporate entities
including trusts, close corporations, private companies and partnerships. A
fourth currency futures product was added. In September 2008 the JSE
introduced a sliding scale fee system for currency futures, in a bid to lure
larger currency future trades to the exchange.
Volumes of commodity derivative contracts traded climbed 10% (2008: 2,63
million contracts; 2007: 2,40 million contracts). A new derivatives trading
and clearing platform, allowing for greater functionality, was implemented.
In January 2009, the JSE started trading foreign-referenced corn futures
under licence from the CBOT Group, the world`s largest and most diverse
derivatives exchange.
A corporate bond was listed on the JSE`s fixed income securities market,
Yield-X, during 2008. Still, the JSE has not made the progress it aimed for
in this area and Yield-X has a small percentage of the total South African
debt market.
In 2008, the number of terminals receiving JSE information packages grew by
15% from 2007 (2008: 49 225; 2007: 42 923). Over 20 000 live terminals are
offshore. The retail client pricing strategy is proving successful. The team
also launched products around five new indices in 2008.
Equities market members use the JSE`s Broker Deal Accounting (BDA) system to
conduct their back-office operations. Technology revenue trends in the same
direction as does Equities trading revenue. The BDA system also provides the
JSE with world-class surveillance. The exchange`s surveillance capability was
one factor behind the JSE`s decision not to introduce restrictions on short
selling in September 2008, as occurred in several markets. This is a decision
that we look back on with some pride.
Other strategic initiatives
The JSE has embarked on the following strategic initiatives:
Africa strategy
This is a long-term strategy to promote the growth of capital markets on the
African continent. It aims to attract foreign capital to the African market,
by allowing investors access to the opportunities that exist in Africa. The
JSE`s Africa strategy entails
- Creating an Africa Board, providing opportunities for primary and
secondary listing;
- Creating indices reflecting issuers listed in countries across the
continent;
- Offering a hub and spoke interconnectivity model to connect SADC stock
exchanges
- Closer relationships with exchanges to help develop new business and
markets.
The JSE`s Africa Board is a listing venue for companies domiciled in Africa
or with assets on the continent. Companies listed on the Africa Board may
well be listed elsewhere in Africa also and will have a listing on the JSE.
Infrastructure for the new board, which is not extensive and uses existing
equity trading systems, was completed by end-2008. The Africa Board was
launched in early 2009, welcoming Trustco of Namibia as its first listing.
In October 2008, the JSE launched an index series in collaboration with the
FTSE, aimed at reflecting issuers listed in countries across the African
continent.
Proposed transaction with BESA
For a decade, the JSE has worked towards developing a closer relationship
with the Bond Exchange of South Africa (BESA), with the aim of integrating
BESA and Yield-X. In December 2008 the directors of the JSE and BESA together
proposed implementing the deal as a scheme of arrangement in terms of section
311 of the Companies Act, 1973, should regulatory approval be received. BESA
shareholders have approved the scheme. We are awaiting the decision of the
Financial Services Board, the South African Reserve Bank and the Competition
Commission. If all regulatory approvals are obtained, then a purchase
consideration of R240 million will be due to BESA shareholders. The Boards of
both exchanges are excited by the opportunities presented by integration.
Integration will commence with a fixed income growth strategy, involving
consultation with all interest rate market participants, to offer the best
products at the best cost.
Technological initiatives
A leading exchange must offer the best technology available. To that end, the
JSE consistently works on improving its IT infrastructure and services. In
the last five years this has involved a major systems upgrade and, in 2008,
the creation of a new Chief Information Officer position to lead the JSE`s IT
team, after IT operations were insourced from a service provider the previous
year. In 2008 the IT team was bolstered and restructured to handle sharply
increased trading volumes, various other client needs and the systems
upgrade.
IT targets for 2009
- To enhance procurement and vendor/supplier management;
- To continue to replace systems so that the technology platform can meet
new business requirements;
- To enhance the production stability of our systems through more robust IT
management processes.
Financial review #
Revenue climbed 22% to R1 072 million for the year (2007: R877 million).
In 2008, personnel expenses increased by 4%, due to the dissolution of the IT
outsource arrangement (which resulted in expenses previously attributed to IT
being shifted to personnel expenses) as well as further staff needs,
particularly in the IT division. These costs were mitigated to some extent by
the reduction in the expense of the Employee Retention Scheme off the lower
share price. The impact of the "mark to market" of the participation
interests issued has resulted in a net reduction to expenses of R20 million.
In the comparative period this was a charge amounting to R29,3 million.
During January 2008 the JSE`s exposure to the second tranche of participatory
interests was economically hedged through cash-settled European call options,
which had an impact on the income statement of R27 million. In December 2007,
a portion of the Long Term Incentive Scheme was accelerated by one year in
return for the participants agreeing to cap the vesting price of the first
tranche in order to limit the impact to the JSE`s profit and loss. This cost
R53 million in that year, which was not repeated in 2008.
Other expenses were on a par with 2007, due to the reduction in the computer
costs relating to the outsource arrangement. In addition, there was a drop in
the cost of the JSE`s Broad-Based Black Economic Empowerment (Broad-Based
BEE) charge as a result of the lower price of the final tranche of options
granted through the Black Shareholder Retention Scheme and in the comparative
year, the final tranche of shares were issued to the JSE Empowerment fund.
This concludes the cost to the income statement of the Broad-Based BEE costs,
which have an almost zero cash impact on the group`s cash flows. The JSE`s
Broad-Based BEE initiative has two parts: the JSE Empowerment Fund is
designed to fund the education of black students working towards tertiary
level qualifications in the financial markets; and the Black Shareholders`
Retention Scheme encourages the JSE`s black shareholders to retain their JSE
shareholding at least until 2011.
The effective tax rate reduced to 32% (2007: 33%) during the current year,
owing to the lower income statement charge of the Broad-Based BEE scheme in
the latter period and a drop in the corporate tax rate from 29% to 28%. The
Broad-Based BEE initiative amounting to R38,2 million (2007: R82,9 million)
is not deductible for tax purposes.
Impairments
After careful consideration of the Systems Replacement Project, it was
decided that a portion of the Surveillance system would require rework to the
design and development to achieve optimal results. It was felt that this
element should be impaired to reflect this and consequently, an amount of
R8.7 million has been impaired through the income statement.
Similarly, the available-for-sale financial assets held in the JSE Guarantee
Fund Trust and the JSE Derivatives Fidelity Fund Trust have been impaired in
the light of the extent of the reduction in value and the period for which
these reductions below cost had been experienced. The values involved were
R7m and 3m respectively.
Long Term Incentive Scheme
At the Board meeting in November 2008 it was agreed that an amount not
exceeding 10% of the estimated net profit after tax of the Exchange be set
aside for a long term incentive scheme to replace the current scheme. In 2008
this amounted to R34m. Due to a change in the tax legislation one of the
elements of the Board`s preferred retention scheme was rendered ineffective.
The Board subsequently decided not to pursue the preferred retention scheme
but as an interim step decided to award a cash bonus to staff vesting in
three tranches in the form of deferred compensation - 50% at 31 December
2011, 25% at 31 December 2012 and 25% at 31 December 2013. This resulted in a
net present value effect to profits in 2008 of R27,2m.
Capital structure and dividend policy
The JSE has no long-term borrowings and R946 million in cash reserves (2007:
R765 million). The exchange analyses its capital requirements in three
categories. First, to ensure a smoothly operating stock exchange, the JSE
sets aside sufficient cash to fund four months of operations. Second, 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 (broker). And third, the JSE must be in a position
to maintain infrastructure and meet capital needs for expansion, so we set
aside a portion of cash to fund these types of expenses.
In 2009, R240 million is earmarked to fund the BESA transaction, should it
receive regulatory approval. On the basis of this assessment, the Board has
determined how much cash we need, although this will be revisited regularly.
Basis of preparation
Accounting policies
JSE Limited`s principal accounting policies have been consistently applied.
The consolidated financial results have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards and the presentation and disclosure requirements of IAS 34, Interim
Financial Reporting.
Auditor`s opinion on the annual financial statements
KPMG Inc., the Company`s independent auditor, has audited the Group and
Company financial statements of the JSE Limited, from which the accompanying
abridged consolidated financial results were derived, and has expressed an
unmodified opinion on the Group and Company financial statements. Their audit
opinion is available inspection at the Company`s registered office. The
abridged consolidated financial results comprise the consolidated balance
sheet at 31 December 2008, the consolidated income statement, consolidated
statement of changes in equity and consolidated cash flow statement for the
year then ended and selected explanatory notes. Selected explanatory notes
are marked with "#".
Cash dividend declaration
The directors of JSE are proposing to declare ordinary dividend number 5 of
192 cents per share (2007:130 cents per share) to be approved at the Annual
General Meeting of shareholders to be held on 23 April 2009. This equates to
2.5 times cover and is consistent with the stated dividend policy to pay
between 1.5 and 2.5 times cover measured against net profit after tax after
deducting non-recurring items and excluding the investor protection funds.
The salient dates for the payment of the dividend are as follows:
Last date to trade JSE shares cum dividend Friday, 8 May 2009
JSE shares trade ex dividend Monday, 11 May 2009
Record date for purposes of determining
the registered holders of JSE shares to
participate in the dividend at close
of business on Friday, 15 May 2009
Date of payment of dividend Monday, 18 May 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 11 May 2009 and Friday, 15 May 2009, both days inclusive.
Prospects
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 cash
equities market started 2009 slightly up on the same period in 2008. The
impact of the global economic circumstances will be mitigated at least
partially by new products and improved access to trading services.
In early 2009, equity derivatives volumes eased, affected by factors
including reluctance to trade in derivatives in small cap companies by
certain clients and the reduced circumstances of other clients. However, the
exchange has seen a rise in business from clients who previously traded off-
exchange but who now want to trade on-exchange to manage risk. The JSE will
try to provide services that attract business that was previously done over
the counter.
Moreover, new products planned for 2009, including a broader range of
derivative products on foreign equities, should provide trading volume in the
medium term. Should the combination of the JSE and BESA receive regulatory
approval, we will also want to make real progress with growing the combined
interest rate markets and delivering the intended benefits of the merger.
We will also continue to investigate the possibility of other strategic
acquisitions in our industry and in this regard are in discussions regarding
the acquisition of a strategic stake in the Stock Exchange of Mauritius.
These discussions have not been finalised. Should they be, the impact on the
JSE`s financial results will not be material.
We are also growing the exchange`s other markets and revenue streams.
It is important to note that there is no guarantee that 2008 trading volumes
will be sustained throughout 2009.
The JSE remains committed to delivering value to issuers and investors. Our
focus is on continual improvement and consistent work to build a sustainable
business model, with depth and breadth. We are optimistic that this should be
achieved through the strategic objectives discussed above, combined with the
strength of JSE regulation and the quality of our service.
Company Secretary
Gary Clarke
9 March 2009
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 09/03/2009 13:33:19 Produced by the JSE SENS Department.
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