Tech backing costs the JSE

For each of the three years from 2013 to 2015, the JSE performed strongly enough to declare a special dividend. But its latest results show that, while the year ended December 31 2016 still delivered growth, it did not achieve the same heights.

Operating revenue for the exchange was 10% higher at R2.3 billion, but group earnings before interest and tax dropped 5% to R975 million. The JSE noted this was a result of price reductions, forex movements that negatively impacted assets denominated in hard currency, and an increase in costs.

But due to higher finance income and a greater contribution from Strate (Share Transactions Totally Electronic), the JSE posted a 2% growth in profit after tax, rising to R920 million.

“It’s not nearly more of the same, but we are pleased with the results if you consider that operating revenue is up 10%, which is not too dissimilar to previous years,” JSE’s CEO Nicky Newton-King said.

“The reason that earnings after tax is only up by 2% is a direct consequence of our heavy technology investments.”

She said 2015 had been an exceptionally good year.

The JSE grew headline earnings per share by 4% to 1 063.2c per share. It also announced an increase in its ordinary dividend of 8%, up to 560c per share from 520c per share last year. This puts the counter on a dividend yield of around 3.4%.

The CEO said the exchange was nearing the end of its tech investment into trading and clearing for derivatives. It was 20% higher yearon-year, at R283 million – 33.5% of operating expenditure.

New competitors in the market this year will put further downward pressure on pricing.