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JSE
JSE
JSE Limited - Interim Results for the six months ended 30 June 2006
JSE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share Code: JSE
ISIN Code: ZAE000079711
("JSE")
COMMENTARY ON THE INTERIM RESULTS
Overview
The period under review saw robust trading and a strong upward trend in the
value traded. This resulted in the equities market growing by R555 billion
(up by 98%). The volume of contracts traded in equity derivatives (up by
103%) has shown similar growth. The volume of contracts traded in the
agricultural products market has reversed the downward trend of the previous
year and is 10% up on the equivalent period.
AltX has expanded well and now boasts 23 listings.
Yield-X, which was introduced in February 2005, is growing slowly but
steadily.
Listing
Following the General Meeting of Shareholders held on 9 May 2006, JSE Limited
listed on the Main Board of the Exchange on 5 June 2006 under the "General
Financial Investment Services" sector. In order to facilitate the listing,
the JSE shares were subdivided on a 10 for 1 basis. In total 84 271 275 JSE
shares were listed with a market capitalisation of R2,1 billion.
At the same meeting the Broad-based Black Economic Empowerment (Broad-based
BEE) Initiative was approved. The first aspect of the Broad-based BEE
Initiative resulted in the first of two tranches of 868 775 shares (1% of the
JSE"s issued share capital) being issued to the JSE Empowerment Fund (JEF)
for 10 cents per share. The balance of the market price (R18 million) was
charged to the income statement and placed in a Broad-based BEE reserve. JEF
has been established by the JSE with the objective of providing financial
assistance for educational initiatives targeted specifically at bringing
black people into the financial sector. As part of its listing, the JSE
committed to issuing 2% of its issued share capital to JEF within 12 months
of the listing. The balance of the 1% remains to be issued and the Board will
consider the timing of this issue in due course.
The second aspect of the Broad-based BEE Initiative is the Black Shareholder
Retention Scheme ("the Scheme"). The Scheme has been created to incentivise
Qualifying Black Shareholders under the Scheme to retain their JSE
shareholding by granting them Options to subscribe for, collectively, up to a
maximum of 1 737 550 JSE shares at 20% of the 30 calendar day VWAP
immediately prior to and including the date of the Option. The Options may be
exercised on any business day during June 2011. The first tranche of Options
was issued with effect from 5 June to acquire 579 183 shares at a strike
price of R4.81 per share. The cost to the JSE of the issue of this first
tranche was R12 million, and has also been allocated to the Broad-based BEE
reserve.
Finally, shareholder approval was received for the implementation of the
Employee Retention Scheme, designed to attract, retain and incentivise its
senior management over the long term. This is a non-dilutive cash bonus
scheme based on the growth shown in the share price and vests over three,
four and five years. This amounted to a charge to the income statement of R6
million for the period.
Strategic direction
There has been no change to the JSE"s ongoing strategy which is to provide
cost effective and world-class trading, clearing and settlement facilities to
its users, thereby enhancing the attractiveness of South African investment
products.
Operations
In 2004, the JSE launched a substantial IT transformation initiative named
"Project Orion". The primary goal of Project Orion is to introduce a new
generation IT architecture that enables the JSE to better service client
requirements and is operated and managed:
* efficiently with resources skilled in new technologies; and
* at a lower IT operating cost in the future.
Although Project Orion has been delayed, with the first of three releases
expected to be deployed in the last quarter of 2006, the cost is not expected
to escalate since this is a fixed price contract. The cost of Project Orion,
anticipated to be R210 million, will be funded from the JSE"s internal
reserves. Implementation will result in the reduction of the JSE"s IT costs
over the next 6 years.
Financials
Revenue of R313 million (2005: R188 million) for the first six months of the
year showed an increase of 67% over the corresponding period of last year.
Included in this is R26 million received by the JSE Guarantee Fund Trust as
performance bonus on an insurance product. Operating expenses were 47%
higher than the corresponding period last year at R261 million (2005: R178
million). Net financing income of R23 million (2005: R19 million) further
enhanced this performance. The market strength was echoed in the associated
company STRATE adding R19 million to the results (2005: R12 million). The net
result is a profit before tax of R135 million for the period (2005: R47
million).
As previously disclosed, the JSE became a taxpaying entity in July 2005. The
tax charge for this period amounted to R43 million.
At the Annual General Meeting of Shareholders held on 9 May 2006,
Shareholders approved a maiden dividend of 13.6 cents per share, based on the
performance for 2005. This amounted to R12 million, paid on 26 June 2006.
The resultant attributable profit for the period of R92 million was R45
million or 96% better than that for the equivalent period last year.
Although the JSE Guarantee Fund Trust and JSE Derivative Fidelity Fund Trust
are consolidated, this is as a result of the control the JSE is able to
exercise over the trusts requiring consolidation in terms of International
Financial Reporting Standards. These trusts are legally separate from the JSE
and neither the JSE nor its shareholders have any right to the net assets of
such trusts.
These results are prepared using the same accounting policies and methods of
computation as were used in the 2005 Group Annual Financial Statements and
are in accordance with International Financial Reporting Standards and IAS
34.
Future prospects
The revenue of the JSE is largely dependant on the level of turnover of the
Exchange, which is impossible to forecast. However, given the good results in
the first six months and our expectation that turnover will again be strong
in the last six months, revenue is expected to exceed that of the previous
financial year. Project Orion related expenditure is expected to be higher in
the second half leading to higher costs in that period. The overall positive
performance of the JSE is expected to continue.
These results have not been audited or reviewed by the auditors.
For and on behalf of the Board
HJ Borkum RM Loubser
Chairman Chief Executive Officer
JSE Limited
One Exchange Square
Gwen Lane
Sandton
15 August 2006
Sponsor
Rand Merchant Bank
(A Division of FirstRand Bank Limited)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
Income statements
for the six months ended 30 June 2006
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
Notes (unaudited) (reviewed)* (audited)
R"000 R"000 R"000
Revenue 1 313 025 187 460 407 999
Other operating income 2 41 745 6 987 25 307
Personnel expenses 3 (60 311) (51 725) (117 414)
Other operating expenses 4 (201 131) (126 073) (276 820)
Operating profit before 93 328 16 649 39 072
financing costs
Interest received 254 521 184 191 409 085
Interest paid (231 999) (165 579) (370 246)
Net financing income 22 522 18 612 38 839
Share of profit from 18 966 11 881 23 966
associated companies
Profit before taxation 134 816 47 142 101 877
Taxation 5 (42 591) 0 5 120
Profit for the period 92 225 47 142 106 997
Basic earnings per share 6.1 110.4 56.5 128.3
(cents)
Balance sheets
as at 30 June 2006
JSE GROUP as at as at
30 June 31 December
2006 2005 2005
Notes (unaudited) (reviewed)* (audited)
R"000 R"000 R"000
Assets
Non-current assets 466 886 380 283 448 457
Property and equipment 7 218 286 220 280 227 022
Other financial assets 160 107 92 747 116 654
Investments in associates 63 308 67 256 79 342
Deferred taxation 25 185 0 25 439
Current assets 9 059 015 5 669 290 6 478 006
Trade and other 145 049 75 096 82 888
receivables
Deferred government grant 1 256 0 1 005
Derivative financial 3 712 1 424 0
instruments
Due from joint venture 135 0 426
Margin and collateral 8 433 709 5 222 440 6 037 212
deposits
Cash and cash equivalents 475 154 370 330 356 475
Total assets 9 525 901 6 049 573 6 926 463
Equity and liabilities
Share capital and 797 870 607 167 682 604
reserves
Share capital 8.2 8 427 0 8 340
Share premium 8.2 162 779 0 162 779
JSE rights 8.2 0 171 119 0
BBBEE reserve 9 29 727 0 0
Non-distributable reserve 10 058 10 058 10 058
Fair value reserve 50 270 30 173 45 581
Retained income 536 609 395 817 455 846
Non-current liabilities 87 889 81 140 77 421
Provisions 10 24 530 33 172 14 884
Deferred taxation 11 235 0 12 799
Operating lease liability 46 123 41 302 43 933
Due to SAFEX members 6 001 6 666 5 805
Current liabilities 8 640 142 5 361 266 6 166 438
Trade and other payables 151 758 97 380 95 017
Income tax payable 28 381 0 7 680
Operating lease liability 26 294 23 688 24 969
Derivative financial 0 679 1 560
instruments
Margin and collateral 8 433 709 5 222 440 6 037 212
deposits
Due to SAFEX members 0 17 079 0
Total equity and 9 525 901 6 049 573 6 926 463
liabilities
Statements of changes in equity
for the six months ended 30 June 2006
JSE GROUP JSE
JSE Derivatives
Guarantee Fidelity
Fund Fund JSE Share Share
Trust Trust Rights Capital Premium
Notes R"000 R"000 R"000 R"000 R"000
Balance at 31 103 668 50 000 171 119 0 0
December 2004
(audited)
Fair value gains on 1 099 0 0 0 0
available-for-sale
instruments
Profit for the 3 584 0 0 0 0
period
Total income for 4 683 0 0 0 0
the period
Balance at 30 June 108 351 50 000 171 119 0 0
2005 (reviewed)*
Balance at 31 103 668 50 000 171 119 0 0
December 2004
(audited)
Rights converted to 0 0 (171 119) 8 340 162 779
shares on
demutualisation
Shares acquired for 0 0 0 0 0
employees net of
IFRS 2 cost
Fair value gains on 16 234 272 0 0 0
available-for-sale
instruments
Profit for the year 6 320 0 0 0 0
Total income for 22 554 272 0 0 0
the period
Balance at 31 126 222 50 272 0 8 340 162 779
December 2005
(audited)
BBBEE reserve 9 0 0 0 0 0
New issue of shares 0 0 0 87 0
- JSE Empowerment
Fund
Fair value gains on 2 234 2 454 0 0 0
available-for-sale
instruments
Profit for the 31 927 1 049 0 0 0
period
Total income for 34 161 3 503 0 87 0
the period
Dividends paid 8.3 0 0 0 0 0
Balance at 30 June 160 383 53 775 0 8 427 162 779
2006 (unaudited)
Statements of changes in equity
for the six months ended 30 June 2006 (Continued)
JSE GROUP
Non-
BBBEE distributable Retained
Reserve Reserve income Total
Notes R"000 R"000 R"000 R"000
Balance at 31 0 10 058 224 082 558 927
December 2004
(audited)
Fair value gains on 0 0 0 1 099
available-for-sale
instruments
Profit for the 0 0 43 557 47 141
period
Total income for 0 0 43 557 48 240
the period
Balance at 30 June 0 10 058 267 639 607 167
2005 (reviewed)*
Balance at 31 0 10 058 224 082 558 927
December 2004
(audited)
Rights converted to 0 0 0 0
shares on
demutualisation
Shares acquired for 0 0 174 174
employees net of
IFRS 2 cost
Fair value gains on 0 0 0 16 506
available-for-sale
instruments
Profit for the year 0 0 100 677 106 997
Total income for 0 0 100 851 123 677
the period
Balance at 31 0 10 058 324 933 682 604
December 2005
(audited)
BBBEE reserve 9 29 727 0 0 29 727
New issue of shares 0 0 0 87
- JSE Empowerment
Fund
Fair value gains on 0 0 0 4 688
available-for-sale
instruments
Profit for the 0 0 59 249 92 225
period
Total income for 0 0 59 249 97 000
the period
Dividends paid 8.3 0 0 (11 461) (11 461)
Balance at 30 June 29 727 10 058 372 721 797 870
2006 (unaudited)
Cash flow statements
for the six months ended 30 June 2006
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
(unaudited) (reviewed)* (audited)
R"000 R"000 R"000
Cash generated by operations 94 681 49 802 39 237
Interest received 245 399 185 348 404 553
Interest paid (219 186) (166 781) (361 886)
Net cash inflow from operating 120 894 68 369 81 904
activities
Cash flows from investing
activities
Proceeds on redemption of 35 000 0 0
preference shares in STRATE
Investment to maintain (204) (1 859) (829)
operations
Replacement of property and (204) (1 869) (857)
equipment
Proceeds on disposal of property 0 10 28
and equipment
Investment to expand operations (37 098) (41 600) (70 020)
Proceeds on maturity of other 21 364 32 958 57 898
financial assets
Additions to other financial (54 794) (31 486) (63 528)
assets
Leasehold improvements (162) (370) (2 841)
Additions to property and (3 506) (42 702) (61 549)
equipment
Net cash outflow from investing (2 302) (43 459) (70 849)
activities
Cash flows from financing
activities
Proceeds on issue of shares to 87 0 0
JSE Empowerment Fund
Net cash inflow from financing 87 0 0
activities
Net increase in cash and cash 118 679 24 910 11 055
equivalents
Cash and cash equivalents at 356 475 345 420 345 420
beginning of year
Cash and cash equivalents at end 475 154 370 330 356 475
of period
NOTES TO THE INTERIM FINANCIAL STATEMENTS
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
for the six months ended (unaudited) (reviewed)* (audited)
30 June 2006 R"000 R"000 R"000
1 Revenue
Derivatives trading and clearing 56 346 34 223 81 299
Equities trading fees 68 714 38 888 87 174
Equities risk management, 65 267 22 919 50 993
clearing and settlement
Information product sales 28 282 22 008 46 144
Listings 34 574 29 078 54 950
Technology and related services 42 457 30 689 64 817
Funds management and other 17 385 9 655 22 622
313 025 187 460 407 999
2 Other operating income 41 745 6 987 25 307
Other operating income has increased mainly as a result of a
performance bonus of R26 million received by the JSE Guarantee Fund
Trust from its insurance underwriters.
3 Personnel expenses (60 311) (51 725) (117 414)
Personnel expenses have increased as a result of the implementation of
the Employee Scheme (R6,0 million). In addition the investigation into
the potential shortfall in the pension fund annuities was concluded by
a contribution by the JSE to the pension fund of R2,9 million matched
by an equal contribution by the erstwhile pension fund administrators.
Employee Scheme
The Board considered it imperative to incentivise, attract and retain
employees over the long-term. Consequently, a long-term incentive and
retention scheme was introduced, effective 1 January 2006. The Employee
Scheme is a cash bonus scheme which pays participants a certain amount
in cash based on the extent of the employees participation in the
Employee Scheme and calculated by reference to the growth in the JSE"s
Share price from the base price (determined in accordance with the
Employee Scheme Rules) to the share price on the date on which an
employee"s Participation Interest vests unconditionally.
In the event that the vesting price is below the base price,
participants will not receive a cash bonus from the Employee Scheme,
and will not be required to make any payment to the Scheme. The
Participation Interests awarded under the Employee Scheme vests over a
five year period: 50% on 31 December 2008, 25% on 31 December 2009 and
25% on 31 December 2010. The strike price of each Participation
Interest will be the 30 calendar day VWAP for the JSE shares
immediately prior to and including 22 November 2005, being the date on
which the JSE Board ratified the HR Committee"s decision to make an
award.
Based on Black-Scholes valuation methodology, the following assumptions
were used to calculate the income statement impact.
Assumed strike price for 30 days R8.31
prior to 22 November 2005
30 Day VWAP at 30 June 2006 R24.07
Total number of Participation 2 500 000
Interests in issue
Vesting date:
50% of Participation Interests 1 250 000
vest on 31 December 2008
25% of Participation Interests 625 000
vest on 31 December 2009
25% of Participation Interests 625 000
vest on 31 December 2010
Volatility 30%
Dividend yield 0.52%
Risk-free rate Between
8.77% and
8.93%
4 Other operating expenses (201 131) (126 073) (276 820)
Other operating expenses
increased mainly as a result of
the following:
4.1 - Implementation of a Broad-based Black Empowerment Initiative:
4.1.1 - JSE Empowerment Fund (JEF) (R18,1 million) was established to
provide financial assistance for education initiatives
targeted at bringing black people into the financial sector
and at demystifying investment in the stock market. 1 737 550
JSE shares will be issued to JEF at par value for cash. The
first tranche of 868 775 JSE shares was issued immediately
after the listing. The remainder of the JSE shares will be
issued in one or more tranches within twelve months of the
listing.
4.1.2 - Black Shareholder Retention Scheme (R11,7 million):
The Scheme was established to encourage Qualifying Black
Shareholders to retain their Qualifying Black Shareholding
until 1 June 2011. The granting of Options will be tranched
in amounts determined by the Board over a period of three
years - at 5 June 2006, 1 June 2007, and 1 June 2008
respectively, to qualifying Black Shareholders
proportionately to their Qualifying Black Shareholding at
those dates. The strike price of the Options for each
tranche will be 20% of the 30 calendar day VWAP immediately
prior to and including the effective date of the tranche of
Options in question. The Options will be exercisable during
June 2011. The Options are not transferable. The Black-
Scholes model valuation methodology was used to calculate the
impact to the income statement:
30 Day VWAP at 30 R24.07
June 2006
Share price growth 8.00%
per annum
Exercise date 1 June 2011
Dividend yield 0.52%
Volatility 30.00%
Risk free rate 8.96% -
9.07%
This cost will be recognised at the granting of each tranche since the
grant vests immediately. As this transaction is equity settled, the
cost has been credited to the BBBEE reserve.
4.2 - Costs relating to the additional trades conducted through JSE
SETS, as well as the costs of the STRATE Ad Valorum charge
(R24,5 million) contributed to the increased operating costs.
The latter is set off by the recovery of the equivalent value
from the users, resulting in a zero impact on the profit of
the Ad Valorum settlement fees.
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
for the six months ended (unaudited) (reviewed)* (audited)
30 June 2006 R"000 R"000 R"000
5 Tax status
With effect from 1 July 2005, the tax status of the JSE changed from
tax-exempt to being subject to the provisions of the Income Tax Act,
No. 58 of 1962.
6 Basic earnings, diluted earnings
and headline earnings per share
Basic, diluted and headline earnings per share for the period ended 30
June 2005 have been calculated assuming that shares were in issue in
place of rights, to offer enhanced comparability.
6.1 Basic earnings per share
The calculation of basic earnings per share at 30 June 2006 of
110.4 cents per share was based on the profit attributable to
ordinary shareholders of R92,2 million and a weighted average
number of ordinary shares of 83 521 510 during the period as
calculated in Note 6.3.
Profit after taxation 92 225 47 142 106 997
Basic earnings per share (cents) 110.4 56.5 128.3
6.2 Headline earnings per share
The calculation of headline earnings per share at 30 June 2006 of
104.0 cents per share was based on headline earnings of
R86,9 million and a weighted average number of 83 521 510 ordinary
shares in issue during the period calculated as reflected in note
6.3.
Reconciliation of headline
earnings:
Profit after taxation 92 225 47 142 106 997
Adjustments are made to the
following:
Loss on sale of property and 0 3 3
equipment
Profit on realisation of (5 336) (3 384) (5 213)
available-for-sale instruments
Headline earnings 86 889 43 761 101 787
Headline earnings per share 104.0 52.5 122.0
(cents)
6.3 Weighted average number of
ordinary shares:
Number of shares issued in 0 8 340 250 8 340 250
exchange for proprietary rights
on 1 July 2005
Issued ordinary shares at 1 8 340 250 0 0
January
Subdivision of shares on 5 June 83 402 500 83 402 500 83 402 500
2006: 10 for 1
Issue of 868 775 shares to JSE 59 505 0 0
Empowerment Fund on 5 June 2006
868 775 shares to be issued to 59 505 0 0
JSE Empowerment Fund within 12
months
Weighted average number of 83 521 510 83 402 500 83 402 500
ordinary shares
6.4 Shareholders interest in
Investor Protection Funds
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. In view of the
control that the JSE exercises over these Trusts, the JSE is
required to consolidate them into the results of the Group in terms
of International Financial Reporting Standards. 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.
The contribution these funds make to the earnings of the Group are as
follows:
Basic earnings per 39.5
share (cents)
Headline earnings per 33.1
share (cents)
Computer
JSE GROUP Computer software Furniture
Computer software under and
for the six months hardware other development equipment
ended
30 June 2006 R"000 R"000 R"000 R"000
7 Property and
equipment
Cost
Balance at 31 50 943 102 665 98 026 20 141
December 2004
Acquisitions 2 219 4 936 35 560 1 766
Disposals (13) 0 0 0
Balance at 30 June 53 149 107 601 133 586 21 907
2005
Balance at 31 50 943 102 665 98 026 20 141
December 2004
Acquisitions 2 546 11 700 46 881 3 517
Disposals (24 530) (15 981) 0 (11)
Balance at 31 28 959 98 384 144 907 23 647
December 2005
Acquisitions 109 153 3 258 218
Balance at 30 June 29 068 98 537 148 165 23 865
2006
Depreciation and
Impairment losses
Balance at 31 47 392 64 272 0 8 765
December 2004
Depreciation charge 1 253 8 650 0 1 086
for the period
Impairment losses 0 736 0 0
Balance at 30 June 48 645 73 658 0 9 851
2005
Balance at 31 47 392 64 272 0 8 765
December 2004
Depreciation charge 2 397 18 199 0 2 216
for the year
Disposals (24 505) (15 981) 0 0
Impairment losses 0 736 0 0
Balance at 31 25 284 67 226 0 10 981
December 2005
Depreciation charge 629 9 243 0 1 003
for the period
Balance at 30 June 25 913 76 469 0 11 984
2006
Carrying amounts
Balance at 30 June 4 504 33 943 133 586 12 056
2005
Balance at 31 3 675 31 158 144 907 12 666
December 2005
Balance at 30 June 3 155 22 068 148 165 11 881
2006
JSE GROUP
Leased Leasehold
for the six months assets improvements Vehicles Total
ended
30 June 2006 R"000 R"000 R"000 R"000
7 Property and
equipment
Cost
Balance at 31 1 732 51 750 101 325 358
December 2004
Acquisitions 0 458 0 44 939
Disposals 0 0 0 (13)
Balance at 30 June 1 732 52 208 101 370 284
2005
Balance at 31 1 732 51 750 101 325 358
December 2004
Acquisitions 0 605 0 65 249
Disposals 0 0 0 (40 522)
Balance at 31 1 732 52 355 101 350 085
December 2005
Acquisitions 0 133 0 3 871
Balance at 30 June 1 732 52 488 101 353 956
2006
Depreciation and
Impairment losses
Balance at 31 1 443 14 372 67 136 311
December 2004
Depreciation charge 241 1 714 13 12 957
for the period
Impairment losses 0 0 0 736
Balance at 30 June 1 684 16 086 80 150 004
2005
Balance at 31 1 443 14 372 67 136 311
December 2004
Depreciation charge 241 3 436 13 26 502
for the year
Disposals 0 0 0 (40 486)
Impairment losses 0 0 0 736
Balance at 31 1 684 17 808 80 123 063
December 2005
Depreciation charge 0 1 726 6 12 607
for the period
Balance at 30 June 1 684 19 534 86 135 670
2006
Carrying amounts
Balance at 30 June 48 36 122 21 220 280
2005
Balance at 31 48 34 547 21 227 022
December 2005
Balance at 30 June 48 32 954 15 218 286
2006
JSE GROUP Six months ended year ended
30 June 31 December
for the six months ended 2006 2005 2005
30 June 2006 (unaudited) (reviewed)* (audited)
8 Share capital
8.1 Rights/shares in issue
On demutualisation, the JSE Rights were converted to JSE shares
on the basis of 1 000 shares for every JSE Right. The JSE shares
have the same rights, conditions and privileges attaching to
them, as set out in the articles of association of JSE Limited.
Rights in issue at 1 8 340.25 8 340.25
January 2005
Rights converted into
shares at 1 000 shares
per right held at 1 July 0 8 340 250
2005
Shares in issue 31 0 8 340 250
December 2005 - fully
paid, before subdivision
On 9 May 2006, the shareholders in the general meeting approved
the subdivision of each ordinary share of R1.00 into ten ordinary
shares of 10 cents each resulting in an authorised share capital
of 400 000 000 shares, effective 5 June 2006.
Shares in issue at 1 8 340 250 0 0
January 2006
10 for 1 share 83 402 500 0 0
subdivision
New shares - JSE 868 775 0 0
Empowerment Fund first
tranche
Shares in issue 30 June 84 271 275 0 0
2006 - fully paid, after
subdivision
8.2 Share Capital R"000 R"000 R"000
Rights in issue 1 January 0 171 119 0
2005 : 8 340.25
Shares in issue - fully 8 427 0 8 340
paid
Share premium 162 779 0 162 779
8.3 Dividends
A dividend of 13.6 cents per share was approved by the
Shareholders at the Annual General Meeting held on 9 May 2006,
which dividend was paid on 26 June 2006.
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
for the six months ended (unaudited) (reviewed)* (audited)
30 June 2006 R"000 R"000 R"000
9 BBBEE reserve
The reserve comprises:
- JSE Empowerment Fund 18 071 0 0
- Black Shareholder Retention 11 656 0 0
Scheme
29 727 0 0
Refer to Note 4.1 for details.
10 Provisions
Provisions comprise:
- Personnel related 24 280 28 678 14 617
provisions 1,2
- Other provisions 250 4 494 267
24 530 33 172 14 884
1 The policy relating to deferred compensation was amended during 2005
from being spread over 2 years to being deferred for 6 months dependant
on satisfactory personal and company performance. 50% of the amount is
payable on or before December of the year in which it is earned and the
payment of the remainder is deferred for 6 months provided that the
employee is still employed by the JSE when the deferred tranche is due
to be paid.
2 Includes R6,0 million of the Employee Scheme. Refer to Note 3.
11 Contingent liabilities and
Commitments
11.1 Contingent
liabilities
11.1.1 The JSE has a contingent liability as a result of the
JSE guaranteeing the settlement of central order book
equity market trades in the event that one member fails
to settle. This risk is mitigated through various
mechanisms, being the member firms" deposits and bank
guarantees and the JSE"s own trade monitoring system.
The JSE retains reserves to meet these contingent
liabilities.
11.1.2 The JSE is currently engaged in arbitration with a
former supplier for alleged breach of contract by the
JSE. The case was split between merits and quantum.
The JSE lost on merits and the quantum has not yet been
established. The JSE expects the quantum to fall in the
range R2,0 million to R25,0 million.
11.1.3 The Joint Municipal Pension Fund has served summons on
25 defendants, including the JSE, for a sum of R1,4
billion for losses realised in the trading of
derivatives. This issue is in the early stages of the
legal process and an exception has been filed by the
JSE. Senior Counsel opinion on this matter is that the
claim is unfounded. The JSE is defending the claim.
11.2 Commitments
11.2.1 The JSE leases a building and accounts for the lease as
an operating lease. The lease commenced on 1 September
2000 for a period of 15 years. On termination of the
lease, should the landlord wish to sell the building,
the JSE has an option to buy the building at a price yet
to be determined. The operating lease payments escalate
at 11% per annum.
Total future
minimum lease
payments under
non-cancellable
operating lease:
Not later than 26 294 23 688 24 969
one year
Between one and 134 106 123 836 129 192
five years
Later than five 197 242 233 806 215 525
years
357 642 381 330 369 686
Recognised in
the balance
sheet in terms
of IAS 17
Non-current (46 123) (41 302) (43 933)
liability
Current (26 294) (23 688) (24 969)
Liability
Recognised in (72 417) (64 990) (68 902)
Balance Sheet
Future balance 285 225 316 340 300 784
of operating
lease not yet
recognised
11.2.2 The JSE has entered into an agreement to outsource the
operation of its IT infrastructure with a total
commitment of R425 million.
Not later than 79 234 92 465 77 100
one year
Between one and 346 206 341 051 352 014
five years
Later than five 0 84 785 38 816
years
425 440 518 301 467 930
The JSE is party to agreements for the development of
software totalling approximately R210,6 million over the
next two years, of which R147,3 million has been settled.
The IT transformation project is currently running behind
schedule and the JSE is in discussions with the service
provider regarding payment of further amounts towards the
fixed fee for resolution of scope items. If the JSE
unduly delays the implementation of the project, the JSE
may have to pay further amounts but a delay by the JSE is
considered unlikely.
JSE GROUP six months ended year ended
30 June 31 December
2006 2005 2005
for the six months ended (unaudited) (reviewed)* (audited)
30 June 2006 R"000 R"000 R"000
12 Related parties
12.1 Identity of
related parties
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, to
member firms, trading and market data amounted to R204,6
million (2005: R114,5 million) for the period. These
transactions are conducted on an arm"s length basis.
The associated companies, subsidiaries and joint
ventures of the Group are identified as follows:
six months ended year ended
30 June 31 December
(unaudited) (reviewed)* (audited)
R"000 R"000 R"000
- Associated Loans due from/(due to)
companies:
STRATE 0 0 4
Limited1
Satrix 181 482 2 263
Managers (Pty)
Limited
- Subsidiaries:
SAFEX 1 695 1 549 31
Clearing Company
(Pty) Limited
JSE 0 4 012 2 308
Derivatives
Fidelity Fund
Trust
JSE 3 581 2 612 0
Trustees (Pty)
Limited
JSE (230) (1 273) (86)
Guarantee Fund
Trust
- Joint Venture
ITRIX 135 426 0
Holdings (Pty)
Limited
1 STRATE invoices the JSE for a service fee in respect
of settlement which the JSE recovers from the members.
The directors are listed in the JSE website.
Director"s and executive"s remuneration of R12,9 million
(2005: R10,7 million) was paid during the period.
12.2 Material related
party
transactions
The JSE provides secretarial services to
the Group entities for no consideration.
13 Segmental information
The JSE provides exchange and auxiliary services in South Africa. The
revenue streams derived from the services are described in note 1 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 segment.
14 * Restatement
JSE Trustees (Proprietary)
Limited
JSE Trustees (Proprietary) Limited ("JSE Trustees") acts as an agent
for all funds placed by members of the JSE on behalf of their clients
and other counterparties. JSE Trustees invests for the clients and
administers the funds on behalf of the members. JSE Trustees charges
an administration fee for this service.
The financial information relating to JSE Trustees was historically
attached as an annexure to the JSE Limited Group Annual Financial
Statements. It is more appropriate to consolidate this financial
information with that of the JSE Group Financial Statements.
The impact of consolidating JSE Trustees (Proprietary) Limited on the
results of the JSE Group as at 30 June 2005 is as follows:
Change Tax effect After tax
before tax
R"000 R"000 R"000
Increase in revenue 1 475 0 1 475
Increase in other operating (1 475) 0 (1 475)
expenses
0 0 0
Effect of this change on
earnings per share:
Basic earnings per share 0
Headline earnings per share 0
Date: 15/08/2006 03:11:02 PM Produced by the JSE SENS Department
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