JSE increases earnings despite flat revenue growth

The JSE Limited was able to advance earnings and dividends despite a lacklustre year for the 131-year-old bourse.

Revenue for the year to December 2018 rose just 1% to R2.28bn, but with costs well controlled, headline earnings per share rose 6% to R10.56 and the ordinary dividend increased 8% to R6.55 per share.

“I think this is a resilient set of results, given that it was quite a tricky year which started well but then faded as the difficult economic environment hit home in the third quarter,” said JSE CEO Nicky Newton-King.

The primary markets division, which generates income from initial public offerings and secondary listings, saw revenue decline 15% to R155m on the back of fewer listings.

The Capital Markets division had some good performances from commodity derivatives and interest rate instruments, but the biggest component, equity market trading, saw revenues decline 2% to R499m on flat activity. This did incorporate a 12% reduction in equity trading platform fees. An interesting feature of equity market trading was the increase in the volume from “colocation” which sees the JSE charging a rental to high frequency trading platforms who place their servers in the JSE’s data centre.

According to the JSE 37% of all equity market volume in 2018 was generated from colocation, up from 31% in 2017.

“This is a significant development as these high-speed trading systems add volume to our market and that brings liquidity,” said Newton-King.

With respect to new initiatives, Newton-King said the government bond trading platform implemented with the primary dealers in 2018 continues to grow, while everything is on track for the launch of the new derivative trading and clearing platform equity called Itac in April.

“Clients should get a much more robust trading platform, with more sophisticated risk management tools and which will allow them to post noncash collateral like government bonds and shares,” said NewtonKing.