Leveraging off an improvement in financial market sentiment and activity and tight cost control, the JSE delivered strong financial results for the year ended December 31, 2013, lifting net profit after tax by 68% to a record high of R507-million, despite the presence of a political environment described by the bourse as “vibrant and noisy”.

JSE CEO Nicky Newton-King said on Wednesday that “standout” revenue performances were achieved by the equity market, post-trade services and market data divisions, all of which posted increased margins.

“I’m particularly pleased with the progress we made towards achieving our five-year plan of providing integrated trading and clearing across all of our five markets by 2017,” she said at the JSE’s results presentation on Wednesday.

A 14% increase in operating revenue growth to R1.58-billion offset a moderate 5% increase in operating costs to R1.08-billion, while group earnings before interest and tax increased by 42% to R578-million.

Earnings a share of 592c and headline earnings a share of 645c were up 68% and 36%, respectively.

Newton-King noted that the “pleasing” business performance translated into strong cash flow, with a net increase in cash of R250-million, while the strong showing left the group with cash and cash equivalents of R1.38-billion at the end of the 12 months.

“As we run the exchange, we continue to be very mindful of equitably balancing the interests of all stakeholders. In recognition of the group’s performance, the JSE was able to return an amount of R84-million, or 5% of group revenue, to equity market clients by way of a rebate in 2013.

“[We also] declared an ordinary dividend for the year ended of 350c an ordinary share and a special dividend of 50c a share,” she said.

DIVISIONAL REVENUE LIFT

Looking to the exchange’s operational divisions, revenue for the issuer regulation segment rose by 14% to R110-million, with 12 new companies listed on the JSE over the period.

Listings activity in other JSE-listed equity instruments included three new exchange-traded funds, while the total nominal listed bond value by year-end increased from R1.6-trillion in the 2012 fiscal period to R1.8-trillion.

Revenue from the equity market division rose by 17% to R385-million as the
number of transactions year-on-year rose 45% and value traded by 16%.

Revenue from the back-office services system, or BDA, increased 16% over the period to R238-million, with the JSE likely to retain the BDA system until at least 2018.

“In addition, the post-trade services segment lifted revenue by 18% to R249-million, while Phase 1 of the move to T+3 processing was successfully implemented during 2013, with Phase 2 due in the second half of 2014 and Phase 3 in 2015,” said Newton-King.

Meanwhile, divisional revenue for bonds and financial derivatives rose by 15% in 2013 to R202-million, with earnings from equity derivatives increasing 17% to R132-million and income from currency derivatives rising 37% to R24-million.

The interest rate market revenue rose by 1% to R46-million.

Bucking the upward trend, revenue for the commodity derivatives market
declined by 13% to R49-million, largely owing to lower price volatility in the agricultural grains market.

In addition, international growth in professional indices users, as well as algorithmic players and hedge funds subscribing to JSE data, drove revenue for the market-data division up 20% to R177-million.

TECHNOLOGY SHIFT

Commenting on the bourse’s priorities for the coming year, Newton-King said the group would continue to focus on technological upgrades over the period, launching Phase 1 of the colocation facility to host client-trading systems over the period while progressing towards an integrated trading and clearing system.

“This will result in both the move of all trading onto the technology currently used for the equity market and the introduction of a new clearing technology for all markets.

“Moreover, we are progressing the development of an electronic-trading platform for the government bond market with National Treasury and other market participants,” she noted.