| Tue 18 Aug 2009, 12:39 | | 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 2009
JSE Limited
Registration number 2005/022939/06
Share code: JSE
ISIN No.: ZAE000079711
Reviewed condensed consolidated interim results for the six months ended 30
June 2009
Revenue from operations up 7%
Acquired BESA 22 June 2009
Basic earnings per share 6% rise
Launched Africa Board February 2009
Commentary
Introduction
Unless otherwise indicated, all comparatives refer to the six months ended 30
June 2008.
The uncertainty that prevailed on world markets during much of 2008 has been
felt also in H1 2009, though as the interim period progressed, sentiment about
the stability of world financial systems started to improve, drawing investors
back to exchanges. The JSE Limited`s (JSE) risk management and operational
systems have weathered the turbulence of the period.
JSE revenues are largely dependent on the volumes of equities trades on the
exchange. The volatile conditions in the first half of 2009, combined with
increased foreign investment in South African equities, boosted trading
volumes and therefore revenues. However, there was a significant fall in
volumes of derivatives contracts traded (off a high base). Group revenue
climbed 7% to R544,5m (June 2008: R508,8m) during the period. This increase in
revenue, combined with tightly controlled fixed costs, led to a 9% increase
in profit before net financing income to R206,1m (June 2008: R188,8m).
Review of operations
In the six months to end-June 2009, the JSE focused on product and target
market development (including the launch of new derivative products and the
conclusion of the acquisition of the Bond Exchange of South Africa Limited
(BESA)); client service delivery (information technology development and
upgrades; liaison with market participants and issuers); fine-tuning of strong
risk management systems; and maintaining control of costs. During the period,
the JSE:
- Grew the number of trades in spot equities by 31% to 9,96m (2008: 7,62m);
- Kept costs low despite the continuous increase in product numbers and
sophistication - see Financial review;
- Focused on growing the retail market through educational initiatives and the
development of services and instruments specifically for this market;
- In response to client demand for rand-denominated exposure to well-known
companies listed offshore, launched an innovative series of derivatives on
large foreign companies;
- Encouraged institutions to reduce risks by bringing exposure to derivatives
on-exchange, using Can-Do instruments;
- Launched the cash-settled Chicago Corn futures contract under licence from
the Chicago Board of Trade (CBOT) Group on 27 January 2009;
- Bedded down the new derivatives trading and clearing systems implemented
late last year;
- Almost doubled the number of currency derivatives contracts traded (on the
previous period);
- Launched the Africa Board and listed Trustco Ltd from the Namibian Stock
Exchange as its first counter, as part of the JSE`s strategy to promote the
growth of African capital markets;
- Met first half technology targets following the bolstering of the JSE`s
inhouse IT team during 2008.
Impact of BESA acquisition
The highlight of the period was the JSE`s acquisition of BESA through a Scheme
of Arrangement which was finalised in June 2009. As a consequence, on 22 June
2009 the JSE acquired 100% of the shares and voting interests in BESA.
BESA`s market operations have been merged with the JSE`s existing Yield-X
division to form a new interest rate division, which is focused on: running
the JSE`s now combined interest rate products and developing a fresh interest
rate strategy for the South African fixed-income market. The strategy will be
finalised in consultation with market participants in due course. BESA`s
operating activities and personnel have also been integrated into the JSE.
The JSE anticipates that the transaction - and the combined expertise of the
BESA and JSE staff - will yield real benefits for market participants. These
are expected to include economies of scale due to increased use of
infrastructure, an increased range of spot and derivative interest rate
products, enhanced liquidity and market volumes and improved, common risk
management processes.
Accounting treatment of BESA acquisition
For the period 1 January 2009 to 21 June 2009, BESA operated as an independent
entity and reported a loss of R3.3m.
For the period 22 to 30 June 2009, the BESA Group results were consolidated
into JSE Group results and contributed revenue and other income of R1,3m and a
net loss of R0,7m. The JSE incurred acquisition-related costs of R4,2m (2008:
R2,1m) relating to external legal and consultation fees. These costs have been
included in other expenses in the Group`s consolidated statement of
comprehensive income. The revenue attributable to the BESA Group for this
period is contained in the "interest rate market" line in the JSE Group`s
consolidated statement of comprehensive income.
If the acquisition had occurred on 1 January 2009, management estimates that
BESA would have contributed R30,3 million to the JSE`s consolidated revenue
and its contribution to profit for the period would have been a loss of R4
million. In determining these amounts, management has assumed that the fair
value adjustments, determined provisionally, that rose on the date of
acquisition would have been the same if the acquisition had occurred on 1
January 2009. With effect from 1 July 2009, the core BESA business (and the
exchange licence granted by the FSB) has been transferred out of BESA Limited
into the JSE. The assets and liabilities, and associated revenues and
expenditures, in respect of BESA Limited`s core business have been allocated
to the appropriate business units within the JSE.
The accounting treatment of the transaction is laid out more fully in note 4
to the interim financial statements.
Changes to the Board of directors
As a result of the JSE acquisition of BESA, BESA chairman
Nonkululeko Nyembezi-Heita joined the JSE Board with Jonathan Berman, also a
former non-executive BESA director, as her alternate with effect from 24 June
2009. We are delighted to have them as part of the JSE Board of directors. The
JSE wishes to thank all outgoing BESA Board members for their long standing
commitment to BESA and their engagement with the JSE during the transaction.
Financial review
Revenue increased by 7% to R544,5m during the six months to end-June (2008:
R508,8m), mainly as a consequence of volatile market conditions and renewed
foreign interest in our cash equities market, compensating for the decreases
in revenues of 20.9% and 18.7% from equities and commodities derivatives trade
respectively.
During H1 2009, personnel expenses rose by 28% mainly due to the IT function
being bought inhouse, resulting in a 27% increase in headcount. This process
has progressed satisfactorily.
Other expenses decreased by 6% due mainly to saving outsource expense
(previously reflected in computer costs) as well as the charges relating to
the broad-based BEE scheme having been finally expensed in H1 2008. By
combining the two expense items of Personnel and Other Expenses, it will be
seen that total expenses increased by only 5%.
The effective tax rate fell to 34% (2008: 36%) during the period to June 2009,
due to the conclusion of the charges relating to the broad-based BEE scheme in
the previous equivalent period.
The improved revenue and controlled spending raised profit by 6%.
In the period from 1 January 2009 to 30 June 2009, the JSE has invested R17,7m
in property and equipment and R155,7m in intangible assets.
Goodwill/intangible assets from the BESA acquisition, with a combined value of
R119,0m, have been provisionally analysed and allocated. This valuation is
underway and we are aiming to finalise it before year-end.
Trade and other receivables are well controlled, despite growth in revenue.
Net asset value is up 16% compared with the equivalent period last year.
Capital structure and dividend policy
After paying out R240,6m to the shareholders of BESA for their shares in the
business and the acquisition of the BESA Guarantee Fund Trust, as well as
payment of R163,5m in dividends to our shareholders, the JSE Group has long-
term borrowings of R10 million (arising from the consolidation of the BESA`s
pre acquisition obligations) and R841,8m in cash reserves (2008:
R836,6m). The Board is satisfied that we have sufficient cash reserves based
on our current strategy of setting aside sufficient cash to fund four months
of operations, guarantee all on-market equities trades and fund investment
requirements.
The JSE`s dividend policy is to maintain an earnings-based dividend cover of
between 1,5 and 2,5 times. The Board has not declared an interim dividend as
it is our policy to only declare one annual dividend at the end of the
financial year.
Prospects
As a significant portion of revenue is dependent on the level of trades on the
Exchange, the JSE is not able to predict future profits. There is no guarantee
that first half trading volumes will be sustained throughout 2009.
The JSE will continue to focus on increasing liquidity and improving market
competitiveness. In the equity derivatives market, the exchange will work with
clients who previously traded off-exchange but who now want to trade on-
exchange to manage risk. Moreover, new products planned for the second half in
cash and derivatives markets should provide trading volume in the medium term.
In September, rand-denominated contracts in platinum, gold and oil will be
launched under licence from CBOT.
The transaction with BESA having been concluded, the JSE will also focus on
making real progress with growing the combined interest rate markets and
delivering the intended benefits of the merger. We are also continually
striving to grow the exchange`s other markets and revenue streams.
The JSE remains committed to delivering value to issuers and investors. Our
focus is on consistent work to build a sustainable business model, with depth
and breadth. The Board is 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.
For and on behalf of the Board
HJ Borkum RM Loubser
Chairman Chief Executive Officer
18 August 2009
Sandton
Condensed consolidated interim statement of comprehensive income for the six
months ended 30 June 2009
JSE Group
Six months ended Year ended
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Revenue 544 515 508 812 1 071 570
Other income 8 583 10 811 39 805
Personnel expenses (129 272) (100 615) (238 565)
Other expenses (217 720) (230 227) (484 281)
Profit/(loss) before net
financing income 206 106 188 781 388 529
Interest received 736 322 1 087 791 2 202 351
Interest paid (677 789) (1 023 863) (2 067 408)
Net financing income 58 533 63 928 134 943
Share of profit of equity
accounted investees (net of
income tax) 13 223 16 615 31 017
Profit/(loss) before income
tax 277 862 269 324 554 489
Income tax expense (94 321) (96 690) (180 132)
Profit/(loss) for the period 183 541 172 634 374 357
Other comprehensive income
Net change in fair value of
available-for-sale financial
assets 1 474 (1 979) (33 721)
Net change in fair value of
available-for-sale financial
assets transferred to profit
or loss (1 221) (3 176) (3 388)
Other comprehensive
income/(loss) for the period,
net of income tax 253 (5 155) (37 109)
Total comprehensive
income/(loss) for the period 183 794 167 479 337 248
Profit/(loss) attributable
to:
Owners of the Company 183 539 172 634 374 357
Non-controlling interest 2 - -
Profit/(loss) for the period 183 541 172 634 374 357
Total comprehensive
income/(loss) attributable
to:
Owners of the Company 183 792 167 479 337 248
Non-controlling interest 2 - -
Total comprehensive
income/(loss) for the period 183 794 167 479 337 248
Earnings per share
Basic earnings/(loss) per
share (cents) 215,6 202,8 439,7
Diluted earnings/(loss) per
share (cents) 212,5 200,5 434,0
Investor Protection Funds*
Six months ended Year ended
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Revenue 55 - -
Other income 4 110 5 064 9 074
Personnel expenses - - -
Other expenses (6 453) (5 626) (20 588)
Profit/(loss) before net
financing income (2 288) (562) (11 514)
Interest received 2 400 2 890 5 926
Interest paid - - -
Net financing income 2 400 2 890 5 926
Share of profit of equity
accounted investees (net of
income tax) - - -
Profit/(loss) before income
tax 112 2 328 (5 588)
Income tax expense - - -
Profit/(loss) for the period 112 2 328 (5 588)
Other comprehensive income
Net change in fair value of
available-for-sale financial
assets 1 474 (1 979) (33 721)
Net change in fair value of
available-for-sale financial
assets transferred to profit
or loss (1 221) (3 176) (3 388)
Other comprehensive
income/(loss) for the period,
net of income tax 253 (5 155) (37 109)
Total comprehensive
income/(loss) for the period 365 (2 827) (42 697)
Profit/(loss) attributable
to:
Owners of the Company 112 2 328 (5 588)
Non-controlling interest - - -
Profit/(loss) for the period 112 2 328 (5 588)
Total comprehensive
income/(loss) attributable
to:
Owners of the Company 365 (2 827) (42 697)
Non-controlling interest - - -
Total comprehensive
income/(loss) for the period 365 (2 827) (42 697)
Earnings per share
Basic earnings/(loss) per
share (cents) 0,1 2,7 (6,6)
Diluted earnings/(loss) per
share (cents) 0,7 2,7 (6,5)
*Investor Protection Funds comprises the JSE Guarantee Fund Trust, JSE
Derivatives Fidelity Fund Trust and BESA Guarantee Fund Trust (the "Trusts").
The JSE maintains these Trusts for investor protection purposes as required
under the Securities Services Act 36, of 2004. The JSE is required to
consolidate the Trusts 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 these Trusts. For enhanced understanding, the Trusts have
been shown separately (before intercompany adjustments), although, for
compliance with IFRS, the results form part of the Group financial statements.
Condensed consolidated interim statement of financial position
as at 30 June 2009
JSE Group
As at As at
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Assets
Non-current assets 802 548 641 280 656 823
Property and equipment 90 672 77 476 84 115
Intangible assets 378 138 210 796 232 763
Investments in equity
accounted investees 78 163 68 244 82 647
Other investments 191 677 217 555 194 025
Derivative financial
instruments 3 069 14 625 5 619
Deferred taxation 60 829 52 584 57 654
Current assets 14 987 542 20 459 456 15 993 536
Trade and other receivables 162 377 232 950 204 104
Income tax receivable 27 972 - 15 978
Margin and collateral
deposits 13 955 414 19 389 881 14 827 113
Cash and cash equivalents 841 779 836 625 946 341
Total assets 15 790 090 21 100 736 16 650 359
Equity and liabilities
Total equity 1 395 436 1 203 723 1 373 492
Total equity attributable to
equity holders of the Company 1 393 815 1 203 723 1 373 492
Non-controlling interest 1 621 - -
Non-current liabilities 216 008 177 133 188 619
Finance lease 1 459 801 2 402
Employee benefits 57 046 45 156 51 336
Deferred taxation 25 252 10 650 11 972
Operating lease liability 73 455 77 887 75 767
Investor Protection Levy 47 811 41 750 46 200
Loans and borrowings 10 000 - -
Due to SAFEX members 985 889 942
Current liabilities 14 178 646 19 719 880 15 088 248
Trade and other payables 178 312 286 572 208 031
Employee benefits 40 076 38 762 50 071
Income tax payable - 3 384 -
Operating lease liability 4 844 1 281 3 033
Margin and collateral
deposits 13 955 414 19 389 881 14 827 113
Total equity and liabilities 15 790 090 21 100 736 16 650 359
Investor Protection Funds
As at As at
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Assets
Non-current assets 191 674 217 551 194 021
Property and equipment - - -
Intangible assets - - -
Investments in equity
accounted investees - - -
Other investments 191 674 217 551 194 021
Derivative financial
instruments - - -
Deferred taxation - - -
Current assets 132 909 50 141 34 109
Trade and other receivables 449 402 3 443
Income tax receivable - - -
Margin and collateral
deposits - - -
Cash and cash equivalents 132 460 49 739 30 666
Total assets 324 583 267 692 228 130
Equity and liabilities
Total equity 323 367 267 367 227 497
Total equity attributable to
equity holders of the Company 323 367 267 367 227 497
Non-controlling interest - - -
Non-current liabilities - - -
Finance lease - - -
Employee benefits - - -
Deferred taxation - - -
Operating lease liability - - -
Investor Protection Levy - - -
Loans and borrowings - - -
Due to SAFEX members - - -
Current liabilities 1 216 325 633
Trade and other payables 1 216 325 633
Employee benefits - - -
Income tax payable - - -
Operating lease liability - - -
Margin and collateral
deposits - - -
Total equity and liabilities 324 583 267 692 228 130
Condensed consolidated interim statement of cash flows
for the six months ended 30 June 2009
JSE Group
Six months ended Year ended
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Net cash inflow from operating
activities 185 965 300 213 489 244
Net cash (outflow)/inflow from
investing activities (127 041) (84 465) (163 783)
Net cash outflow from financing
activities (163 486) (143 668) (143 665)
Net (decrease)/increase in cash
and cash equivalents (104 562) 72 080 181 796
Cash and cash equivalents at
beginning of period 946 341 764 545 764 545
Cash and cash equivalents at end
of period 841 779 836 625 946 341
Investor Protection Funds
Six months ended Year ended
30 June 30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Net cash inflow from operating
activities 3 727 5 271 4 220
Net cash (outflow)/inflow from
investing activities 98 067 4 114 (13 908)
Net cash outflow from financing
activities - - -
Net (decrease)/increase in cash
and cash equivalents 101 794 9 385 (9 688)
Cash and cash equivalents at
beginning of period 30 666 40 354 40 354
Cash and cash equivalents at end
of period 132 460 49 739 30 666
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2009
Attributable to equity holders
of the Company
Non-
Share Share distributable
capital premium reserve
Group R`000 R`000 R`000
Balance at 31 December 2007
(audited) 8 514 162 779 10 058
Total comprehensive income for
the period - - -
Transactions with owners,
recorded directly in equity - - -
Balance at 30 June 2008
(reviewed) 8 514 162 779 10 058
Balance at 31 December 2007
(audited) 8 514 162 779 10 058
Total comprehensive income for
the period - - -
Transactions with owners,
recorded directly in equity - - -
Balance at 31 December 2008
(audited) 8 514 162 779 10 058
Total comprehensive income for
the period - - -
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners - - -
Non-controlling interest in BESA
Group - - -
Transfer to the BESA Guarantee
Fund Trust* - - -
Total transactions with owners - - -
Balance at 30 June 2009
(reviewed) 8 514 162 779 10 058
Attributable to equity holders of the
Company
Non-
BBBEE Retained controlling
reserve earnings interest
Group R`000 R`000 R`000
Balance at 31 December 2007
(audited) 127 371 529 762 -
Total comprehensive income for
the period - 170 306 -
Transactions with owners,
recorded directly in equity 38 132 110 566 -
Balance at 30 June 2008
(reviewed) 165 503 589 502 -
Balance at 31 December 2007
(audited) 127 371 529 762 -
Total comprehensive income for
the period - 379 945 -
Transactions with owners,
recorded directly in equity 38 132 (110 566) -
Balance at 31 December 2008
(audited) 165 503 799 141 -
Total comprehensive income for
the period - 183 427 2
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners (4 469) (159 000) -
Non-controlling interest in BESA - -
Group 1 619
Transfer to the BESA Guarantee - (95 505)
Fund Trust* -
Total transactions with owners (4 469) (254 505) 1 619
Balance at 30 June 2009
(reviewed) 161 034 728 063 1 621
Attributable to equity holders of the
Company
Total Investor
Exchange and Protection Total Group
subsidiaries Funds equity
R`000 R`000 R`000
Group
Balance at 31 December 2007
(audited) 838 484 270 194 1 108 678
Total comprehensive income for
the period 170 306 (2 827) 167 479
Transactions with owners,
recorded directly in equity (72 434) - (72 434)
Balance at 30 June 2008
(reviewed) 936 356 267 367 1 203 723
Balance at 31 December 2007
(audited) 838 484 270 194 1 108 678
Total comprehensive income for
the period 379 945 (42 697) 337 248
Transactions with owners,
recorded directly in equity (72 434) - (72 434)
Balance at 31 December 2008
(audited) 1 145 995 227 497 1 373 492
Total comprehensive income for
the period 183 429 365 183 794
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners (163 469) - (163 469)
Non-controlling interest in
BESA Group 1 619 - 1 619
Transfer to the BESA Guarantee
Fund Trust* (95 505) 95 505 -
Total transactions with owners (257 355) 95 505 (161 850)
Balance at 30 June 2009
(reviewed) 1 072 069 323 367 1 395 436
*The transfer represents the isolation in the BESA Guarantee Fund Trust of the
value on acquisition by the JSE of that fund.
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2009
1. Basis of preparation and accounting policies#
JSE Limited (the "Company") is a company domiciled in the Republic of South
Africa. The consolidated interim financial statements of the Company as at and
for the six months ended 30 June 2009 comprise the Company and its
subsidiaries (together referred to as "the Group") and the Group`s interests
in associates and jointly controlled entities.
Except for the adoption of new and revised accounting standards, the JSE
Limited`s principal accounting policies applied by the Group in its condensed
consolidated interim financial statements for the six months ended 30 June
2009 are the same as those applied by the Group in its consolidated financial
statements as at and for the year ended 31 December 2008.
The JSE Limited`s condensed consolidated interim financial statements as at
and for the six months ended 30 June 2009, have been prepared in terms of the
recognition and measurement requirements of International Financial Reporting
Standards and the presentation and disclosure requirements of IAS 34, Interim
Financial Reporting.
Accounting for business combinations
The Group has early adopted IFRS 3 Business Combinations (2008) and IAS 27
Consolidated and Separate Financial Statements (2008) for business
combinations occurring in the financial year starting
1 January 2009. All business combinations occurring on or after
1 January 2009 are accounted for by applying the acquisition method. The
change in accounting policy was applied prospectively.
The Group measures goodwill as the fair value of the consideration transferred
including the recognised amount of any non-controlling interest in the
acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed, all measured as of the
acquisition date.
Transaction costs that the Group incurs in connection with a business
combination, such as finder`s fees, legal fees, due diligence fees, and other
professional and consulting fees are expensed as incurred.
A contingent liability of the acquiree is assumed in a business combination
only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
Determination and presentation of operating segments
As of 1 January 2009 the Group determines and presents operating segments
based on the information that internally is provided to the Executive
Committee ("Exco"), which represents the Group`s chief operating decision
maker. This change in accounting policy is due to the adoption of IFRS 8
Operating Segments. In addition the Group has early adopted the 2009
improvement project. As the services provided by the JSE are not subject to
materially different operational risks, they were previously regarded as a
single business and geographical segment for annual financial statement
reporting purposes and therefore segment information was not disclosed. The
new accounting policy in respect of segment operating disclosures is presented
as follows.
Comparative segment information has been presented in conformity with the
transitional requirements of IFRS 8. Since the change in accounting policy
only impacts presentation and disclosure aspects, there is no impact on
earnings per share.
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group`s
other components. An operating segment`s operating results are reviewed
regularly by Exco to make decisions about resources to be allocated to the
segment and assess its performance, and discrete financial information is
available for an operating segment. Segment results that are reported to Exco
include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly information
technology expenses and corporate overheads.
Presentation of financial statements
The Group has applied the revised IAS 1 Presentation of Financial Statements
(2007), which became effective as of 1 January 2009. As a result, the Group
presents in the consolidated statement of changes in equity all owner changes
in equity, whereas all non-owner changes in equity are presented in the
consolidated statement of comprehensive income. This presentation has been
applied in these condensed consolidated interim financial statements as at and
for the six month period ended on 30 June 2009.
Comparative information has been re-presented so that it also is in conformity
with the revised standard. Since the change in accounting policy only impacts
presentation aspects, there is no impact on earnings per share.
2. Comparative figures#
Where necessary, comparative figures have been reclassified to conform to
changes in presentation as reported in the consolidated financial statements
as at and for the year ended 31 December 2008.
3. Operating segments#
The Group has 5 reportable segments, as reflected below. The business units
offer different products and services, and are managed seperately because they
require different technology and marketing strategies. Management has
determined the operating segments based on the monthly reports reviewed by the
Exco. Exco reviews the revenue streams as set out in note 5. Financial and
personnel resources are allocated according to the needs of the various
divisions in order to apply the strategy and operating plans agreed to during
the budgeting process. Costs in the JSE are managed holistically across the
Exchange and variances against budget are closely monitored. Information
technology and other corporate overheads are generally not allocated to a
particular segment and are reflected in "Group and Other" below.
Reportable segments
Equities Equity Commodity
division* derivatives derivatives
R`000 R`000 R`000
For the six months ended
30 June 2009
External revenues 342 805 53 732 17 756
Reportable segment profit
before income tax 298 782 45 254 13 787
For the six months ended
30 June 2008
External revenues 303 519 67 845 21 806
Reportable segment profit
before income tax 280 066 61 915 18 728
For the year ended
31 December 2008
External revenues 648 040 131 591 46 893
Reportable segment profit
before income tax 569 143 115 362 39 383
Interest
rate Information Group and
division sales other Total
R`000 R`000 R`000 R`000
For the period ended
30 June 2009
External revenues 6 154 55 133 68 935 544 515
Reportable segment
profit before income tax 2 447 53 979 (136 387) 277 862
For the period ended
30 June 2008
External revenues 2 678 46 192 66 772 508 812
Reportable segment
profit before income tax 936 43 300 (135 621) 269 324
For the period ended
31 December 2008
External revenues 9 625 96 563 138 858 1 071 570
Reportable segment
profit before income tax 4 106 89 617 (263 122) 554 489
* Comprises equities trading fees, membership fees, listing fees, broker deal
accounting services and risk management, clearing and settlement fees
4. Acquisition of BESA#
Business combination
The Scheme of Arrangement, proposed by BESA and the JSE in December 2008 in
respect of the proposed acquisition of BESA, was successfully finalised in
June 2009, with all necessary regulatory and competition authority approvals
having been received. As a consequence, on
22 June 2009 the Group acquired 100 percent of the shares and voting interests
in BESA, a licensed exchange responsible for operating and regulating the
fixed-income and interest-rate derivatives markets in South Africa.
As a consequence of this acquisition, the Group anticipates being able to
increase utilisation of infrastructure to achieve economies of scale and to
leverage the combined expertise of the BESA and JSE staff. This is expected to
translate into real benefits for market participants, particularly with
respect to an increased range of spot and derivative products, enhanced
liquidity and market volumes, and improved, common risk-management processes.
In the period 22 June 2009 to 30 June 2009, BESA Group contributed revenue and
other income of R1,3m and a loss of R0,7m. If the acquisition had occurred on
1 January 2009, management estimates that the BESA Group`s consolidated
revenue would have been R30,3m, and the BESA Group`s consolidated loss for the
period would have been R4,0m. In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally, that arose
on the date of acquisition would have been the same if the acquisition had
occurred on 1 January 2009.
The following summarises the major classes of consideration transferred, and
the recognised amounts of assets acquired and liabilities assumed at the
acquisition date:
Consideration transferred
R`000
Cash consideration paid 240 582
Identifiable assets acquired and liabilities assumed
Property and equipment 5 585
Intangible assets 72 347
Trade and other receivables 13 064
Cash and cash equivalents 145 494
Employee benefits (1 502)
Deferred lease liability (534)
Deferred taxation (14 137)
Loan from OMX Technology AB (10 000)
Trade and other payables (14 776)
Total net identifiable assets 195 541
The fair values of the net identifiable assets (excluding trade and other
receivables and cash and cash equivalents) have been determined provisionally
pending completion of an independent valuation. Intangible assets comprise
BESA`s trade name, customer relationships, computer software and regulatory
and operational relationships.
The trade and other receivables include gross contractual amounts due of
R13,1m of which Rnil was expected to be uncollectible at the acquisition date.
The non-controlling interest was based on the proportionate share of fair
value of identifiable net assets.
The loan from OMX Technology AB has been advanced to BondClear Limited, a
subsidiary of the Group, in accordance with the shareholders` agreement
between BondClear Limited ("BondClear"), BESA Investments (Pty) Limited and
OMX AB (PUBL) concluded during September 2008. This is an interest-free,
subordinated loan with no fixed terms of repayment.
Goodwill
Goodwill on the acquisition has been provisionally recognised as follows:
R`000
Total consideration transferred 240 582
Add: non-controlling interests 1 619
242 201
Less: value of net identifiable assets 195 541
Goodwill 46 660
The goodwill recognised is not expected to be deductible for income tax
purposes.
Transactions recognised separately from the acquisition
The JSE incurred acquisition-related costs of R4,2m (2008: R2,1m) relating to
external legal and consulting fees. These costs have been included in other
expenses in the Group`s consolidated statement of comprehensive income for the
six months ended 30 June 2009.
5. Revenue#
Six months ended Year ended
30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Equity derivatives fees 53 732 67 845 131 591
Commodity derivatives fees 17 756 21 806 46 893
Equities trading fees 145 267 121 234 266 739
Interest rate market 6 154 2 678 9 625
Risk management, clearing and
settlement fees 76 187 72 811 157 744
Information sales 55 133 46 192 96 563
Membership fees 4 151 3 433 6 895
Listing fees 39 011 38 034 69 134
Broker deal accounting
services 78 189 68 007 147 528
Funds management 25 568 23 534 47 491
Total revenue before Strate
ad valorem fees 501 147 465 574 980 203
Strate ad valorem fees 43 368 43 238 91 367
Total revenue 544 515 508 812 1 071 570
6. Headline earnings per share#
Six months ended Year ended
30 June 31 December
2009 2008 2008
(reviewed) (reviewed) (audited)
R`000 R`000 R`000
Reconciliation of headline
earnings:
Profit for the period 183 541 172 634 374 357
Adjustments are made to the
following:
Loss on sale of property and
equipment - - 2
Impairment of intangible
assets - - 8 700
Impairment of available-for-
sale securities 2 113 - 9 811
Profit on realisation of
available-for-sale
instruments (1 655) (3 176) (3 883)
Headline earnings 183 999 169 458 388 987
Headline earnings per share
(cents) 216,1 199,0 456,9
Diluted headline earnings per
share (cents) 213,0 196,8 450,9
7. Contingent liabilities and commitments#
Except as noted below, there were no changes to the contingent liabilities and
commitments reported in the consolidated financial statements as at and for
the year ended 31 December 2008.
7.1 Contingent liabilities
(i) A subsidiary company of the Group, BondClear Limited, entered into a
clearing services agreement with OMX Technology AB ("OMX"). This agreement
includes a contractual commitment for BondClear to pay fixed operating costs
of R33,3m to OMX over the initial five year operating period of the contract.
The effective date of the contract and the incurrence of this commitment is
contingent upon the condition precedent that BondClear obtains a clearing
licence from the Financial Services Board, for which BondClear has applied.
Should the condition precedent be satisfied, the entire commitment would
become payable immediately in the event of an early termination of the
contract.
(ii) BESA Investments, a subsidiary company of the Group, has undertaken to
provide funding to MarketTech as may be required from time to time on the
terms and conditions contemplated in the Shareholders Agreement to enable
MarketTech to pay any claims and all its operating expenses to the extent that
this is necessary so as to place MarketTech in the financial position where
its liabilities (excluding subordinated loans and all other loans advanced by
shareholder) do not exceed its assets, and it will be able to pay its debts or
settle its liabilities (excluding subordinated loans and all other loans
advanced by MarketTech`s shareholders if any) as they arise in the ordinary
course of the business.
7.2 Commitments
The BESA Group leases a building at Melrose Arch and accounts for the lease as
an operating lease. The lease was renewed for a further five year period
during 2007 and terminates on 30 June 2012. The lease payments escalate at 10%
per annum.
As at
30 June
2009
(reviewed)
R`000
Total future minimum payments:
Not later than one year 1 998
Between one and five years 4 615
6 613
Review conclusion
KPMG Inc., the Company`s independent auditor, has reviewed the condensed
consolidated interim financial statements contained in this interim report and
has expressed an unmodified conclusion on the condensed consolidated interim
financial statements. Their review report is available for inspection at the
company`s registered office.
The condensed consolidated financial results include the consolidated
statement of financial position at 30 June 2009, and the consolidated
statement of comprehensive income, consolidated statement of changes in equity
and the consolidated statement of changes in cash flows for the six months
then ended and selected explanatory notes. Selected explanatory notes are
marked with a #.
A full version of these results can be found on our website:
www.jse.co.za
Registered office One Exchange Square, 2 Gwen Lane, Sandown,
Sandton, 2196
Postal address Private Bag X991174, Sandton, 2146
Telephone
011 520 7000
Web www.jse.co.za
Email ir@jse.co.za
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 18/08/2009 12:39:01 Produced by the JSE SENS Department.
