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JSE
JSE
JSE - JSE Limited - Audited abridged results for the financial year ended 31
December 2009, cash dividend declaration and feedback presentation
JSE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share Code: JSE
ISIN Code: ZAE000079711
("JSE" or "the company" or the "Group")
AUDITED ABRIDGED RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2009, CASH
DIVIDEND DECLARATION AND FEEDBACK PRESENTATION
COMMENTARY OF THE AUDITED ABRIDGED ANNUAL FINANCIAL STATEMENT OF THE JSE
LIMITED for the year ended 31 December 2009
Reporting entity
JSE Ltd is registered and incorporated in South Africa. The JSE is licensed as
an exchange in terms of the Securities Services Act, No 36 of 2004. The
consolidated financial statements of the company as at and for the year to 31
December 2009 comprise the company and its subsidiaries and controlled special
purpose vehicles (collectively referred to as the Group) and the Group`s
interest in associates.
Introduction
The JSE weathered a year of tough global market conditions well, thanks to
rising trade volumes in its cash equity markets. In tough market conditions
the JSE`s performance was resilient. Operating revenue for the JSE Group
climbed 8% to R1 156 million for the year (2008: R1 072 million). The equities
business contributed the bulk of this revenue (R647 million or 56% of revenue;
2008: R579 million or 54% of revenue) with issuer services (R79 million or 7%
of revenue; 2008: R69 million or 6% of revenue), equity derivatives (R107
million or 9% of revenue; 2008: R132 million or 12% of revenue) and
information sales (R109 million: 9%; 2008: R97 million: 9%) also making
significant contributions. Revenue in the form of interest on the JSE`s own
funds amounted to R66 million (2008: R91 million) and the management fee on
the Safcom funds amounted to R20 million.
Other income was similar to 2008. Revenue of R18 million was received by the
JSE from Strate dividends (2008: R7 million), shown in the Group figures as a
reduction in the investments in equity accounted investees.
JSE operating costs increased by 12% from R723 million in 2008 to R810 million
in 2009, primarily as a result of increasing the headcount in IT and following
the BESA acquisition which is discussed more fully below.
This resulted in a 2.4% decrease in Group net profit after tax from R374
million in 2008 to R366 million in 2009.
Review of operations
In addition to focusing on market requirements in the aftermath of this
crisis, the executive focused on positioning the Exchange for continued
growth. This included boosting the Exchange`s position as a horizontally and
vertically integrated market linking South Africa to the global financial
markets through strategic initiatives including the launch of the Africa Board
with its first listing TrustCo from Namibia and the acquisition of BESA.
In June 2009, the JSE purchased BESA and merged the interest rate operations
of the JSE (under Yield-X) with those of BESA. This transaction had the effect
of creating a single marketplace for cash bonds and listed interest rate
derivatives. BESA`s 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. The JSE is very happy at the manner
in which the integration was achieved and would like to thank particularly
Garth Greubel, BESA`s chief executive officer and Graeme Brookes BESA`s chief
financial officer, for their extensive work in this regard.
The new Interest Rate Division of the JSE, headed by Graham Smale, also
previously with BESA, is working with the National Treasury and the market
participants to implement new processes and products to best position the
market for a return to volume and revenue growth.
The challenges of 2009 were significant. Trade in equity derivatives fell
owing to the global market crisis fallout, although it showed signs of
recovery from November 2009. Innovative product diversification reduced the
revenue impact of the lower derivative volumes. Listings slowed in the
turbulent economy, as they did on exchanges worldwide. In response, the
business development teams intensified initiatives to strengthen relationships
with existing clients and to market the JSE to potential new issuers and
clients. The IT team was substantially strengthened to support our initiatives
to enhance our existing technology. The Exchange is positioned to take
advantage of an improvement in confidence when it occurs.
Systems replacement programme
The JSE`s IT systems are essential tools for the Exchange`s success. The focus
on the maintenance and upgrade of the Exchange`s IT will thus continue to take
priority in the period ahead.
Five years ago the JSE embarked on a strategy of replacing its core systems in
order to meet changing client demands in the fast-developing exchange
industry. The task was initially outsourced to an external service provider.
Following a decision to bring it inhouse in 2008, the IT team has been
significantly expanded from 92 permanent employees in December 2008 to 131 in
2009 to handle the maintenance and development required to ensure that the JSE
does in fact run a top IT environment.
Last year the JSE`s IT team focused on bringing the exchange`s current
operational systems under the direct management of the JSE, ensuring proper
project management processes were put in place and making good progress with
the Systems Replacement Programme (SRP). In 2010 the team will conclude the
insourcing of the market services solution and progress the SRP through
systems integration testing.
Gateway to Africa
The JSE plans to be positioned as a gateway to investors worldwide wishing to
access opportunities throughout the African continent.
Its strategies in this regard are:
- Creating an Africa Board to provide opportunities for top African issuers to
list on their home exchanges and dual list on the JSE. We expect more listings
this year, with Wilderness Safaris listing in April 2010;
- Creating indices reflecting issuers listed in countries across the continent
to enables investors to track the performance of top issuers across the
continent;
- Developing a hub and spoke model to route orders and data to and from
African exchanges; and
- Forging closer relationships with African exchanges to develop new
businesses and markets.
Unfortunately, the JSE has not been able to resolve the concerns of the
Mauritian financial services regulator and thus has not been able to progress
our planned acquisition of a strategic stake in the Stock Exchange of
Mauritius.
Divisional review
In last year`s turbulent markets, new listings numbers fell on most stock
exchanges around the world, including the JSE. However, the drop in new
listing fees was compensated for during the year by heightened corporate
activity among listed companies, resulting in a rise in documentation fees.
A total of 10 equity issuers joined the boards in 2009 (2008: 23). The
listings were mostly substantial and included Vodacom Ltd. At the end of 2009,
there were 410 (2008: 425) companies listed on the Exchange. Of the 25
delistings, 13 occurred due to corporate actions, 3 due to liquidations and 8
due to failure to comply with JSE Listings Requirements.
The JSE continues its drive to attract foreign-domiciled companies to this
market. Apart from Trustco which joined the Africa Board, four foreign
companies listed on the Exchange. The Business Development team is continuing
this marketing activity and further results should be felt as global economic
conditions start to lift.
AltX, started in 2003 to list young, fast-growing companies, had a turbulent
year in the global financial crisis aftermath of 2009. This market remains an
ongoing focus area for the JSE as the board believes it has a valuable place
in providing equity funding to a significant segment of South African
business. During 2009, three companies graduated out of AltX to move their
listings to the main board.
In 2009, the Equities Market division contributed R310 million or 27% of total
JSE revenue (2008: R267 million or 25%). The JSE`s revenue breakdown is
expected to reflect greater percentage contributions from its derivatives and
interest rate businesses over time as the interest rate market grows and the
Exchange`s derivative divisions recover.
Foreign investors were net buyers of R75 billion of equities during 2009, a
swing of R130 billion on the previous year.
Algorithmic traders have taken part in the JSE`s equities market since about
2004, and by all accounts participation continues to rise.
In response to market need, the Equities team:
- Is delivering an anonymous block trading facility during 2010 in order to
encourage local investors who currently choose to transact block trades off-
order book, to use the central order book;
- Is investigating whether the JSE can offer remote membership for offshore
market participants. Several requests for the JSE to provide this facility
have been received. Once the JSE has completed its initial work in this regard
it will consult with market participants;
- Continues to work with market participants to bring innovative products to
the market to improve the overall JSE offering.
Relative to exchanges worldwide, the JSE`s cash equity transaction charges are
well below average for high value trades and slightly above average for low
value. In a bid to:
- incentivise increased trade;
- reduce the cost of trading to clients as far as possible;
- encourage retail investors to trade more; and
- improve liquidity on the JSE;
The JSE`s management has implemented a new billing model which will
incentivise high volume and value participants, while recognising high
frequency traders (high trade volume, often low value) and retail investors
(often lower trade and value) on 1 March 2010.
Clearing and settlement revenue grew by 4% to R164 million during 2009 (2008:
R158 million). Though the division`s revenues are linked to the number of
equity transactions that take place on the cash equities market, the increase
in clearing and settlement revenues did not track exactly that of Equities
Trading. The reason for this is the combination of two factors.
Firstly, fees are determined based on a sliding scale according to the value
of each central order book transaction with a floor and a ceiling on the
possible fee. This differs from equity transaction fees effective in 2009
which depended purely on the number of transactions and were unrelated to
value traded. Secondly, the average value per trade last year was 29% lower
than that of the previous period (2009: R133 459; 2008: R187 543). Though the
20% climb in the number of trades helped to grow revenue, this was diluted by
the fact that the lower value of each trade decreased the clearing and
settlement fee levied.
The next strategic focus areas for equities risk management, clearing and
settlement are the move to a T+3 settlement cycle and the development of a
centralised share ownership register both discussions that the JSE is leading.
The JSE generates revenue from the back office system that equity members are
mandated to use, called the Broker Deal Accounting (BDA) system. The BDA
system also provides the JSE with the foundation for world-class surveillance.
The Exchange`s extensive surveillance capability was one factor behind the
JSE`s decision not to introduce restrictions on short selling in September
2008, as occurred in several international markets. Most developed markets
have recently recognised the unintended negative consequences of the short
selling ban and have allowed it again, subject to increased regulatory
thresholds.
The replacement of the BDA system with next generation technology is the focus
of the JSE`s Systems Replacement Programme (SRP) referred to earlier.
Equity derivative contract volumes fell during 2009 by 68% to 164 million
(2008: 511 million) owing to:
- the fact that Lehman Brothers, previously a large player in the JSE`s equity
derivatives market, did not survive the crisis;
- the drop in confidence of retail investors during the period; and
- an increase in clearing margins on derivatives on many small cap stocks
instituted by clearing members. This reduced trade in the instruments.
Investor confidence showed signs of recovering from November 2009, with
contract volumes partially recovering.
The fall in contracts traded was limited partly by the rise of the FTSE/JSE
All Share index and by the mix of contracts traded during the year as trade in
Can Do derivative products grew rapidly. As a result the revenue from equity
derivatives fell by 19% to R107 million (2008: R132 million).
Trade in currency derivatives continued growing in 2009 off a low base, with
31,651 contracts trades (2008: 19,380). Currency futures are a small but
growing contributor to total revenue.
The agricultural futures markets held up as markets saw record exports of
white maize. However, options trade fell, with traders opting to buy futures
instead of having to pay the premium on the option. The JSE`s commodities
derivatives market reinvented itself in 2009; previously exclusively an
agricultural market, last year the division broadened its focus to include all
commodities and added metals and oil contracts, using its core technology to
expand its product range. This process was initiated by the launch of a
Chicago Board of Trade (CBOT) corn futures contract launched on the JSE in
January 2009 in collaboration with the CME Group.
The corn contract, which won the JSE and the CME Group a joint prize for "Best
innovation by an exchange in the field of product design" at the prestigious
Futures & Options (FOW) Awards held in London, was the launch pad for a
relationship with the US exchange that led to the October 2009 listing of rand-
denominated gold, platinum and sweet crude oil futures contracts for the first
time on the JSE`s commodities derivatives market.
The JSE`s spot and derivative bond market including the operations of newly
acquired BESA D generated 2% of the JSE`s total revenue in 2009.
Revenue generated by BESA is included only from the effective acquisition date
of 22 June 2009.
After bond market volumes in South Africa reached a historical peak in 2008,
volumes fell in 2009. Volumes traded by foreigners in 2009 were 49% below
those of 2008 and this impacted secondary market turnover in JSE-listed bonds.
Despite this, the turnover volumes in 2009 remained higher than previous
years. The lower secondary market volumes had a significant impact on revenues
generated by the division.
Owing to the decrease in secondary market volumes in spot transactions, 2009
market volumes were dominated by carries (the proportion of which increased
from 64% to 71%). Volumes traded in inflation-linked bonds rose by 181% in
2009 over 2008. The number of bonds in issue dropped from 1 145 in 2008 to 1
067 in 2009. However owing to increased issuance by the SA government and
state owned enterprises, the nominal amount in issue increased by 13% to
R946,4 billion in 2009 (2008: R841,1 billion).
The information products sales team generates revenue by providing market
information packages to clients in South Africa and offshore. The division`s
revenue fall was owing to tough circumstances faced by the financial industry
worldwide, partially countered by the division through targeting new markets
and information distributors outside South Africa and by broadening the market
data package offering.
Institutional users accessing live data, who are traditionally the main target
market for JSE data, fell in number last year (2009: 31,177; 2008:
34,848).This was mainly due to the economic slowdown, with the biggest
contributor being a 14% decrease in international users accessing live JSE
data (2009: 18,680; 2008: 21,806).
Financial review
The JSE added 82 people to its permanent employee complement following the
acquisition of BESA and the bolstering of the IT team, investments which the
board believes are necessary to ensure our long term sustainability. This
contributed to an increase of 33% in personnel expenses.
The impact of the "mark to market" of the outstanding participation interests
issued under the current Long Term Incentive Scheme has resulted in a net
charge to income of R34 million. In the comparative period this charge
amounted to R9 million. This was due largely to the downward shift in the
share-price from 2007 to 2008 of R46 per share, and the increase in share
price from 2008 to 2009 of R21 per share.
During January 2008 the JSE`s exposure to the second tranche of participatory
interests issued was hedged through cash-settled European call options with a
resultant impact to the income statement in that year of R27 million. The
charge in 2009 for these options amounted to R4 million.
Other expenses increased by 2%, mainly owing to impairments of R22 million to
software in BondClear, a wholly owned subsidiary acquired with the BESA Group.
A further R8 million was impaired in production software that the JSE is
developing. Other increases included a loss on foreign exchange of R8 million,
an increase in consulting fees of R6 million and R4 million amortised in
intangible assets acquired with the BESA transaction.
The cost of the JSE`s Broad-Based Black Economic Empowerment (Broad-Based BEE)
transaction was concluded during 2008, with the last tranche resulting in a
charge to income in that year of R38 million. No costs in this regard were
reflected in the 2009 financials. If the R38 million is excluded from the 2008
figures in order to aid comparison, the cost growth in 2009 would have been
10%.
The result is a reduction in Group headline earnings per share from 456.9
cents to 456.1 cents.
The effective tax rate fell to 29% (2008: 32%) during the year.
Capital structure and dividend policy
The JSE Group has no long-term borrowings and R921 million in cash reserves
(2008: R946 million). The Exchange analyses its capital requirements in three
categories. First, to ensure a smoothly operating stock exchange, the JSE sets
aside sufficient cash to fund four months of operations. Second, as the JSE
guarantees all on-market equities trades, it sets aside sufficient cash to
settle a certain portion of on-market equity trades assuming the failure of a
JSE equities member (broker). And third, the JSE must be in a position to
maintain infrastructure and meet capital needs for expansion, so a portion of
cash is set aside to fund these types of expenses. On the basis of this
assessment, the board has determined how much cash the JSE needs, although
this will be revisited regularly.
With the acquisition of BESA, the BESA Guarantee Fund was also acquired. This
added R96 million to the cash balance but, similar to the JSE Guarantee Fund,
it is as investor protection fund and is consolidated as a result of the JSE`s
control over this fund and is not available for distribution to shareholders.
The Board has made no change to the dividend policy during the year, which
remains an earnings-based dividend cover of between 1.5 and 2.5 times.
Consolidated statement of comprehensive income
For the year ended 31 December 2009
Group Exchange
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue 1 155 756 1 071 570 1 177 181 1 097 095
Other income 40 547 39 805 43 449 38 058
Personnel expenses (318 632) (238 565) (318 632) (238 565)
Other expenses (491 774) (484 281) (448 001) (458 013)
Profit/(loss) before net 385 897 388 529 453 997 438 575
finance income
Finance income 1 325 473 2 202 351 77 236 123 383
Finance costs (1 221 (2 067 (11 835) (26 395)
347) 408)
Net finance income 104 126 134 943 65 401 96 988
Share of profit of equity 27 937 31 017 0 0
accounted investees (net
of income tax)
Profit/(loss) before tax 517 960 554 489 519 398 535 563
Income tax expense (152 359) (180 132) (152 053) (179 766)
Profit/(loss) for the year 365 601 374 357 367 345 355 797
Other comprehensive income
Net change in fair value 38 187 (33 721) 0 0
of available-for-sale
financial assets
Net change in fair value (9 087) (3 388) 0 0
of available-for-sale
financial assets
transferred to profit or
loss
Income tax on other 0 0 0 0
comprehensive income
Other comprehensive 29 100 (37 109) 0 0
income/(loss) for the
year, net of income tax
Total comprehensive 394 701 337 248 367 345 355 797
income/(loss) for the year
Profit attributable to:
Owners of the Company 367 244 374 357 367 345 355 797
Non-controlling (1 643) 0 0 0
interest
Profit/(loss) for the year 365 601 374 357 367 345 355 797
Total comprehensive income
attributable to:
Owners of the Company 396 344 337 248 367 345 355 797
Non-controlling (1 643) 0 0 0
interest
Total comprehensive 394 701 337 248 367 345 355 797
income/(loss) for the year
Earnings per share
Basic earnings/(loss) per 431,3 439,7 431,5 417,9
share (cents)
Diluted earnings/(loss) 425,2 434,0 425,3 412,4
per share (cents)
Consolidated statement of comprehensive income continued
For the year ended 31 December 2009
Investor Protection
Funds*
2009 2008
R`000 R`000
Revenue 0 0
Other income 13 165 9 074
Personnel expenses 0 0
Other expenses (13 142) (20 588)
Profit/(loss) before net 23 (11 514)
finance income
Finance income 7 518 5 926
Finance costs 0 0
Net finance income 7 518 5 926
Share of profit of equity 0 0
accounted investees (net
of income tax)
Profit/(loss) before tax 7 541 (5 588)
Income tax expense 0 0
Profit/(loss) for the year 7 541 (5 588)
Other comprehensive income
Net change in fair value 38 187 (33 721)
of available-for-sale
financial assets
Net change in fair value (9 087) (3 388)
of available-for-sale
financial assets
transferred to profit or
loss
Income tax on other 0 0
comprehensive income
Other comprehensive 29 100 (37 109)
income/(loss) for the
year, net of income tax
Total comprehensive 36 641 (42 697)
income/(loss) for the year
Profit attributable to:
Owners of the Company 7 541 (5 588)
Non-controlling 0 0
interest
Profit/(loss) for the year 7 541 (5 588)
Total comprehensive income
attributable to:
Owners of the Company 36 641 (42 697)
Non-controlling 0 0
interest
Total comprehensive 36 641 (42 697)
income/(loss) for the year
Earnings per share
Basic earnings/(loss) per 8,9 (6,6)
share (cents)
Diluted earnings/(loss) 8,7 (6,5)
per share (cents)
* Investor Protection Funds comprises the JSE Guarantee
Fund Trust, JSE Derivatives Fidelity Fund Trust and BESA
Guarantee Fund Trust (the "Trusts").
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2009
Group Exchange Investor
Protection Funds
2009 2008 2009 2008 2009 2008
R`000 R`000 R`000 R`000 R`000 R`000
Assets
Non- 874 301 656 823 806 741 404 772 239 536 194 021
current
assets
Property 87 301 84 115 87 301 84 115 0 0
and
equipment
Intangible 382 749 232 763 382 400 232 768 0 0
assets
Invest 92 874 82 647 21 416 21 416 0 0
ments in
equity
accounted
investees
Invest 0 0 243 783 3 201 0 0
ments in
subsi
diaries
Other 239 538 194 025 2 4 239 536 194 021
invest
ments
Derivative 1 451 5 619 1 451 5 619 0 0
financial
instru
ments
Deferred 70 388 57 654 70 388 57 654 0 0
taxation
Current 15 702 376 15 993 536 969 317 1 143 123 122 584 34 109
assets
Trade and 210 918 204 104 118 863 99 821 4 274 3 443
other
receiva
bles
Income tax 29 640 15 978 28 992 15 658 0 0
receivable
Due from 0 0 8 184 7 680 2 200 0
group
entities
Margin 14 540 905 14 752 793 23 685 91 222 0 0
deposits
Collateral 116 74 320 116 74 320 0 0
deposits
Cash and 920 797 946 341 789 477 854 422 116 110 30 666
cash
equiva
lents
Total 16 576 678 16 650 359 1 776 058 1 547 895 362 120 228 130
assets
Equity and
liabili
ties
Total 1 604 724 1 373 492 1 287 592 1 083 716 357 888 227 497
equity
Non- 195 258 188 619 195 149 188 619 0 0
current
liabili
ties
Finance 3 333 2 402 3 333 2 402 0 0
lease
Employee 64 625 51 336 64 625 51 336 0 0
benefits
Deferred 5 587 11 972 5 478 11 972 0 0
taxation
Operating 70 529 75 767 70 529 75 767 0 0
lease
liability
Investor 50 165 46 200 50 165 46 200 0 0
Protection
Levy
Due to 1 019 942 1 019 942 0 0
SAFEX
members
Current 14 776 696 15 088 248 293 317 275 560 4 232 633
liabili
ties
Trade and 159 762 208 031 65 964 56 914 3 061 633
other
payables
Employee 70 571 50 071 70 571 50 071 0 0
benefits
Operating 5 342 3 033 5 342 3 033 0 0
lease
liability
Due to 0 0 127 639 0 1 171 0
group
entities
Margin 14 540 905 14 752 793 23 685 91 222 0 0
deposits
Collateral 116 74 320 116 74 320 0 0
deposits
Total 16 576 678 16 650 359 1 776 058 1 547 895 362 120 228 130
equity and
liabili
ties
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009
Attributable to equity holders of the Company
Non-
distribu-
Share Share table BBBEE Retained
capital premium reserve reserve earnings
Group R`000 R`000 R`000 R`000 R`000
Balance at 31 8 514 162 779 10 058 127 371 529 762
December 2007
Total comprehensive
income for the year
Profit/(loss) 0 0 0 0 379 945
Other comprehensive
income
Net change in fair 0 0 0 0 0
value of available-
for-sale financial
assets
Net change in fair 0 0 0 0 0
value of available-
for-sale financial
assets transferred
to profit or loss
Total other 0 0 0 0 0
comprehensive
income
Total comprehensive 0 0 0 0 379 945
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
BBBEE reserve 0 0 0 38 132 116
Options issued to 0 0 0 33 539 0
Black shareholders
Options lapsed 0 0 0 ( 116) 116
transferred to
retained earnings
Replacement options 0 0 0 4 709 0
issued to The JSE
Empowerment Fund
Dividends to equity 0 0 0 0 (110 682)
holders
Total contributions 0 0 0 38 132 (110 566)
by and
distributions to
owners
Total changes in 0 0 0 0 0
ownership interests
in subsidiaries
Total transactions 0 0 0 38 132 (110 566)
with owners
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total ex-
Non- change Investor
control- and Pro- Total
ling* subsi- tection Group
interest diaries Funds equity
Group R`000 R`000 R`000 R`000
Balance at 31 December 2007 0 838 484 270 194 1 108 678
Total comprehensive income
for the year
Profit/(loss) for the year 0 379 945 (5 588) 374 357
Other comprehensive income
Net change in fair value of 0 0 (33 721) (33 721)
available-for-sale
financial assets
Net change in fair value of 0 0 (3 388) (3 388)
available-for-sale
financial assets
transferred to profit or
loss
Total other comprehensive 0 0 (37 109) (37 109)
income
Total comprehensive income 0 379 945 (42 697) 337 248
for the year
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
BBBEE reserve 0 38 248 0 38 248
Options issued to Black 0 33 539 0 33 539
shareholders
Options lapsed transferred 0 0 0 0
to retained earnings
Replacement options issued 0 4 709 0 4 709
to The JSE Empowerment Fund
Dividends to equity holders 0 (110 682) 0 (110 682)
Total contributions by and 0 (72 434) 0 (72 434)
distributions to owners
Total changes in ownership 0 0 0 0
interests in subsidiaries
Total transactions with 0 (72 434) 0 (72 434)
owners
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009 (continued)
Attributable to equity holders of the Company
Non-
distribu-
Share Share table BBBEE Retained
capital premium reserve reserve earnings
Group R`000 R`000 R`000 R`000 R`000
Balance at
31 December 2008 8 514 162 779 10 058 165 503 799 141
Total comprehensive
income for the year
Profit/(loss) for the 0 0 0 0 359 703
year
Other comprehensive
income
Net change in fair 0 0 0 0 0
value of available-
for-sale financial
assets
Net change in fair 0 0 0 0 0
value of available-
for-sale financial
assets transferred to
profit or loss
Total other 0 0 0 0 0
comprehensive income
Total comprehensive 0 0 0 0 358 060
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
BBBEE reserve 0 0 0 (5 311) 5 311
Options issued to 0 0 0 0 0
Black shareholders
Options lapsed 0 0 0 (5 311) 5 311
transferred to
retained earnings
Replacement options 0 0 0 0 0
issued to The JSE
Empowerment Fund
Dividends to equity 0 0 0 0 (163 469)
holders
Total contributions 0 0 0 (5 311) (158 158)
by and distributions
to owners
Total transactions 0 0 0 (5 311) (158 158)
with owners
Non-controlling 0 0 0 0 0
interest in BESA
Group
Minority share of
losses
Transfer to the BESA 0 0 0 0 (95 676)
Guarantee Fund Trust*
Balance at
31 December 2009 8 514 162 779 10 058 160 192 903 367
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009 (continued)
Total ex-
Non- change Investor
control- and Pro- Total
ling* subsi- tection Group
interest diaries Funds equity
Group R`000 R`000 R`000 R`000
Balance at
31 December 2008 0 1 145 995 227 497 1 373 492
Total comprehensive income
for the year
Profit/(loss) for the year (1 643) 358 060 7 541 365 601
Other comprehensive income
Net change in fair value of 0 0 38 187 38 187
available-for-sale financial
assets
Net change in fair value of 0 0 (9 087) (9 087)
available-for-sale financial
assets transferred to profit
or loss
Total other comprehensive 0 0 29 100 29 100
income
Total comprehensive income 0 358 060 36 641 394 701
for the year
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
BBBEE reserve 0 0 0 0
Options issued to Black 0 0 0 0
shareholders
Options lapsed transferred to 0 0 0 0
retained earnings
Replacement options issued to 0 0 0 0
The JSE Empowerment Fund
Dividends to equity holders 0 (163 469) 0 (163 469)
Total contributions by and 0 (163 469) 0 (163 469)
distributions to owners
Total transactions with 0 (163 469) 0 (163 469)
owners
Non-controlling interest in 1 643 1 643 0 1 643
BESA Group
Transfer to the BESA 0 (95 676) 95 676 0
Guarantee Fund Trust*
Balance at
31 December 2009 0 1 244 910 359 814 1 604 724
Share Share BBBEE Retained Total
capital premium reserve earnings exchange
Exchange R`000 R`000 R`000 R`000 R`000
Balance at 31 8 514 162 779 127 371 501 689 800 353
December 2007
Total comprehensive
income for the year
Profit/(loss) for 0 0 0 355 797 355 797
the year
Other comprehensive
income
Total other 0 0 0 0 0
comprehensive income
Total comprehensive 0 0 0 355 797 355 797
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
BBBEE reserve 0 0 38 132 116 38 248
Options issued to 0 0 33 539 0 33 539
Black shareholders
Options lapsed 0 0 ( 116) 116 0
transferred to
retained earnings
Replacement options 0 0 4 709 0 4 709
issued to The JSE
Empowerment Fund
Dividends to equity 0 0 0 (110 682) (110 682)
holders
Total contributions 0 0 38 132 (110 566) (72 434)
by and distributions
to owners
Total transactions 0 0 38 132 245 231 283 363
with owners
Balance at 31 8 514 162 779 165 503 746 920 1 083 716
December 2008
Total comprehensive
income for the year
Profit/(loss) for 0 0 0 367 345 367 345
the year
Other comprehensive
income
Total other 0 0 0 0 0
comprehensive income
Total comprehensive 0 0 0 367 345 367 345
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
BBBEE reserve 0 0 (5 311) 5 311 0
Options lapsed 0 0 (5 311) 5 311 0
transferred to
retained earnings
Dividends to equity 0 0 0 (163 469) (163 469)
holders
Total contributions 0 0 (5 311) (158 158) (163 469)
by and distributions
to owners
Total transactions 0 0 (5 311) 209 187 203 876
with owners
Balance at 31 8 514 162 779 160 192 956 107 1 287 592
December 2009
*The transfer represents the isolation in the BESA Guarantee Fund Trust of the
value on acquisition by the JSE of that fund.
CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 31 December 2009
Group Group Exchange Exchange
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Cash from/(used in) operations 467 318 540 006 527 936 576 498
Interest received 1 353 964 2 237 456 77 806 124 212
Interest paid (1 284 943) (2 074 (16 440) (22 469)
998)
Dividends received 3 922 5 089 0 0
Taxation paid (185 701) (218 309) (185 (217
126) 655)
Net cash from operating 354 561 489 244 404 176 460 586
activities
Cash flows from investing
activities
Investment to maintain 0 (7 984) 0 (7 984)
operations
Replacement of property and 0 (7 984) 0 (7 984)
equipment
Investment to expand operations (209 621) (155 799) (305 (141
652) 891)
Proceeds from maturity of other (91 329) 54 622 0 0
investments
Acquisition of other 81 888 (68 530) 0 0
investments
Acquisition of shares in Bond
Exchange of South Africa,
net of cash acquired (98 346) 0 (240 0
582)
Cash acquired from BESA Ltd 0 0 36 764 0
Cash acquired from BESA 0 0 0 0
Guarantee Fund Trust
Cash flows from equity 17 710 7 327 17 710 7 327
accounted investees
Proceeds from disposal of 447 0 447 0
property and equipmemt
Acquisitions from business 0 0 0
combinations
Leasehold improvements (3 181) (1 438) (3 181) (1 438)
Acquisition of intangible (89 730) (89 802) (89 730) (89 802)
assets
Acquisition of property and (27 080) (57 978) (27 080) (57 978)
equipment
Net cash (used in)/from (209 621) (163 783) (305 (149
investing activities 652) 875)
Cash flows from financing
activities
Transfer to group (2 015) 0 0 0
Repayment of loan to OMX (5 000) 0 0 0
Technology AB
Purchase of European call 0 (32 983) 0 (32 983)
options
Dividends paid (163 469) (110 682) (163 (110
469) 682)
Net cash used in financing (170 484) (143 665) (163 (143
activities 469) 665)
Net (decrease)/increase in cash (25 544) 181 796 (64 945) 167 046
and cash equivalents
Cash and cash equivalents at 946 341 764 545 854 422 687 376
beginning of year
Cash and cash equivalents at 920 797 946 341 789 477 854 422
end of year
CONSOLIDATED STATEMENT OF CASH FLOW CONTINUED
for the year ended 31 December 2009
Investor Investor
protection Protection
Funds Funds
2009 2008
R`000 R`000
Cash from/(used in) (10 632) (7 051)
operations
Interest received 7 268 6 182
Interest paid 0 0
Dividends received 3 922 5 089
Taxation paid 0 0
Net cash from operating 558 4 220
activities
Cash flows from
investing activities
Investment to maintain 0 0
operations
Replacement of property 0 0
and equipment
Investment to expand 86 901 (13 908)
operations
Proceeds from maturity (91 329) 54 622
of other investments
Acquisition of other 81 888 (68 530)
investments
Acquisition of shares
in Bond Exchange of
South Africa,
net of cash acquired 0 0
Cash acquired from BESA 0 0
Ltd
Cash acquired from BESA 96 342 0
Guarantee Fund Trust
Cash flows from equity 0 0
accounted investees
Proceeds from disposal 0 0
of property and
equipmemt
Acquisitions from 0 0
business combinations
Leasehold improvements 0 0
Acquisition of 0 0
intangible assets
Acquisition of property 0 0
and equipment
Net cash (used in)/from 86 901 (13 908)
investing activities
Cash flows from
financing activities
transfer to group (2 015) 0
Repayment of loan to 0
OMX
Purchase of European 0
call options
Dividends paid 0 0
Net cash used in (2 015) 0
financing activities
Net (decrease)/increase 85 444 (9 688)
in cash and cash
equivalents
Cash and cash 30 666 40 354
equivalents at
beginning of year
Cash and cash 116 110 30 666
equivalents at end of
year
Basis of preparation
Basis of preparation and accounting policies
JSE Limited (the "Company") is a company domiciled in the Republic of South
Africa. The consolidated abridged annual financial statements of the Company
as at and for the year ended 31 December 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
consolidated abridged annual financial statements for the year ended 31
December 2009 are the same as those applied by the Group in its consolidated
annual financial statements as at and for the year ended 31 December 2008.
The JSE Limited`s abridged consolidated annual financial statements or the
year ended 31 December 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.
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 consolidated abridged annual financial
statements as at and for the year ended on 31 December 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.
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.
Audit Opinion
KPMG Inc, the company`s independent auditors, has audited the consolidated
annual financial statements of JSE Limited from which the abridged
consolidated results contained in this report have been derived, and has
expressed an unmodified audit opinion on the consolidated annual financial
statements.
The abridged consolidated financial results comprise the statements of
financial position at 31 December 2009, and the statements of comprehensive
income, changes in equity and cash flows for the year then ended, and selected
explanatory notes. The selected explanatory notes have been marked with a #.
Their audit report is available inspection at the company`s registered office.
Cash dividend declaration
The directors of JSE are proposing to declare ordinary dividend number 6 of
192 cents per share to be approved at the Annual General Meeting of
shareholders to be held on Thursday, 22 April 2010. This equates to 2.1 times
cover and is consistent with the stated dividend policy to pay between 1.5 and
2.5 cover.
The salient dates for the payment of the dividend are as follows:
Finalisation announcement confirming
Shareholder approval of dividend to be released
On SENS on Thursday, 22 April 2010
Last date to trade JSE shares cum
dividend Friday, 7 May 2010
JSE shares trade ex dividend Monday, 10 May 2010
Record date for purposes of
determining the registered holders
of JSE shares to participate in the
dividend at close of business on Friday, 14 May 2010
Date of payment of dividend Monday, 17 May 2010
Share certificates may not be dematerialised or rematerialised from Monday, 10
May 2010 to Friday 14 May 2010, both days inclusive.
Prospects
The JSE remains committed to delivering value to issuers and investors. Our
focus is on continual improvement and consistent work to sustain our 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 the JSE`s service.
Since a significant portion of revenue is dependent on the level of trades on
the Exchange, the JSE is not able to predict future profits.
The exchange industry is changing fast to anticipate and satisfy client
demands. Demutualised exchanges serve not only members as used to be the case
but all market participants. Apart from its day to day operational focus in
the areas mentioned above, the JSE is focused on retaining its competitive
edge and delivering growth to shareholders in JSE Limited.
Operating segments
The Group has 5 reportable segments, as stated below. The business units offer
different products and services, and are managed separately because they
require different technology and marketing strategies. Management has
determined the operating segments based on the monthly reports reviewed by the
Executive Committee, "Exco". 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 ABOUT REPORTABLE SEGMENTS#
Com-
Equity modity Interest
Equity* Deriva Deriva- Rate
Division tives tives Market
R`000 R`000 R`000 R`000
For the year ended
31 December 2009
External revenues 725 674 116 175 41 241 18 123
For the year ended
31 December 2008
External revenues 648 040 141 216 46 893 0
INFORMATION ABOUT REPORTABLE SEGMENTS
Infor- Group
mation and
Sales other Total
R`000 R`000 R`000
For the year ended
31 December 2009
External revenues 108 773 145 770 1 155 756
For the year ended
31 December 2008
External revenues 96 563 138 858 1 071 570
*Comprises equities trading fees, membership fees, issuer services, broker
deal accounting services and risk management, and clearing and settlement fees
ACQUISITION OF SUBSIDIARY AND NON-CONTROLLING INTERESTS#
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 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 employees. 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.
Although the business was acquired on 22 June 2009 the activity for the 8 days
to 30 June 2009 was not significant in light of the Group results and has thus
been ignored when determining the final take-on values.
For the period 1 July 2009 to 31 December 2009 BESA Ltd generated revenue of
Rnil and a profit of R60,7m. This is as a consequence of the sale of its
business to the JSE. As a result of the sale of business, revenue and
expenditure from the BESA operations amounting to R22,6m and R24,5m
respectively for the same period have been incorporated within the JSE. If the
acquisition had occurred on 1 January 2009, management estimates that the BESA
Group`s consolidated revenue would have been R30,1m, and the BESA Group`s
consolidated loss for the year would have been R23,8m. These figures exclude
the revenue and expenditure now incorporated within the JSE from 01 July 2009.
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
Provisional take-
on
values as
disclosed
Final take-on in the 2009
interim
values report
R`000 R`000
Identifiable assets acquired and
liabilities assumed
Property and equipment 1 496 5 585
Intangible assets 27 904 72 347
Trade and other receivables 10 598 13 064
Cash and cash equivalents 142 236 145 494
Employee benefits (1 502) (1 502)
Deferred lease liability (578) (534)
Deferred taxation (621) (14 137)
Loan from OMX Technology AB (10 000) (10 000)
Trade and other payables (10 453) (14 776)
Total net identifiable assets 159 080 195 541
The fair values of the net identifiable assets at 30 June 2009 per the 2009
interim report were determined provisionally pending completion of an
independent valuation. This valuation has since been completed. Intangible
assets comprise BESA`s trade name, customer relationships, computer software
and regulatory and operational relationships. The most significant changes
between the provisional and final values relate to the values provisionally
attributable to the customer relationships and the computer software. In using
the Multi-period Excess Earnings method and applying the Contribution Asset
Costs to that, both values together estimated at R45 million in the interim
report are worth negligible amounts in the valuation. Deferred taxation on
this amounting to R14 million, has also been removed from the take-on values.
The trade and other receivables include gross contractual amounts due of R10,6
million 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.
GOODWILL
Goodwill on the acquisition has been recognised as follows:
R`000
Total consideration transferred 240 582
Add: non-controlling interests 1 643
242 225
Less: value of net identifiable assets 159 080
Goodwill 83 145
The goodwill is attributable mainly to the skills and technical talent of
BESA`s work force, and the synergies expected to be achieved from integrating
BESA into the Group`s existing business. The goodwill recognised is not
deductible for income tax purposes.
Transactions recognised separately from the acquisition
The JSE incurred acquisition-related costs of R4,2 million (2008: R2,1
million) relating to external legal and consulting fees. These costs have
been included in other expenses in the Group`s consolidated statement of
comprehensive income.
REVENUE AND OTHER INCOME#
for the year ended 31 December 2009
Group Exchange
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue comprises: 106 700 131 591 106 700 131 591
Equity derivatives fees
Commodity derivatives fees 41 241 46 893 41 241 46 893
Equities trading fees 309 980 266 739 309 980 266 739
Yield-X trading fees 9 475 9 625 9 475 9 625
Interest rate market 16 433 0 18 123 0
Risk management, clearing 163 663 157 744 163 663 157 744
and settlement fees
Information sales 108 773 96 563 108 773 96 563
Membership fees 8 360 6 895 8 360 6 895
Issuer services 78 853 69 134 78 853 69 134
Broker deal accounting 164 818 147 528 164 818 147 528
services
Funds management 49 630 47 491 69 365 73 016
Strate ad valorem fees 97 830 91 367 97 830 91 367
1 155 756 1 071 570 1 177 181 1 097 095
EARNINGS AND HEADLINE EARNINGS PER SHARE#
for the year ended 31 December 2009
Group Exchange
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Basic earnings per share
The calculation of basic
earnings per share at 31
December 2009 of 431,3
(2008: 439,7) cents per
share was based on profit
for the year of R367,2
million (2008: R374,4
million) and a weighted
average number of ordinary
shares of 85 140 050
(2008: 85 140 050)
calculated as follows:
Profit for the year 367 244 374 357 367 345 355 797
Weighted average number of
ordinary shares:
Issued ordinary shares at 85 140 050 85 140 050 85 140 050 85 140 050
1 January
Weighted average number of 85 140 050 85 140 050 85 140 050 85 140 050
ordinary shares at 31
December
Basic earnings per share 431,3 439,7 431,5 417,9
(cents)
Diluted earnings per share
The calculation of diluted
earnings per share at 31
December 2009 of 425,2
(2008: 434,0) cents per
share was based on the
profit for the year of
R367,2 million (2008:
R374,4 million) and a
weighted average number of
ordinary shares
outstanding after
adjustment for the effects
of all dilutive potential
ordinary shares of 86 369
696 (2008: 86 266 616)
calculated as follows:
Profit for the year 367 244 374 357 367 345 355 797
Weighted average number of
ordinary shares (diluted):
Weighted average number of 85 140 050 85 140 050 85 140 050 85 140 050
ordinary shares at 31
December (basic)
Effect of share options on 1 229 646 1 126 566 1 229 646 1 126 566
issue
Weighted average number of 86 369 696 86 266 616 86 369 696 86 266 616
ordinary shares (diluted)
Diluted earnings per share 425,2 434,0 425,3 412,4
(cents)
The average market value
of the Exchange`s shares
for purposes of
calculating the dilutive
effect of share options
was based on quoted market
prices for the period that
the options were
outstanding.
Headline earnings per
share
The calculation of
headline earnings per
share at 31 December 2009
of 456,1 (2008: 456,9)
cents per share was based
on headline earnings of
R388,4 million (2008:
R389,0 million) and a
weighted average number of
ordinary shares of 85 140
050 (2008: 85 140 050)
during the year.
Reconciliation of headline
earnings:
Profit for the year 367 244 374 357 367 345 355 797
Adjustments, net of tax1,
are made to the following:
Loss on sale of property 107 2 107 0
and equipment
Impairment of goodwill 158 0 0 0
Impairment of monies due 329 0 1 844 0
from related entities
Impairment loss on 27 286 8 700 5 773 8 700
intangible assets
Impairment of available- 2 113 9 811 0 0
for-sale equity securities
Share of associate 200 0 0 0
company`s impairment
Profit on realisation of ( 9 087) ( 3 883) 0 0
available-for-sale
instruments
Headline earnings 388 351 388 987 375 069 364 497
Headline earnings per 456,1 456,9 440,5 428,1
share (cents)
*Less than R1 000
1 Taxation effect of headline adjustments was R2.3 million (2008: Rnil).
Diluted headline earnings
per share
The calculation of diluted
headline earnings per
share at 31 December 2009
of 449.6 (2008: 450.9)
cents per share was based
on headline earnings for
the year of R388,4m (2008:
R389.0m) and
a weighted average number
of ordinary shares
outstanding after
adjustment for the effects
of all dilutive potential
ordinary shares of 86 369
696 (2008: 86 266 616).
Diluted Headline earnings 446.8 450.9 432.1 422.5
per share (cents)
JSE Limited (Registration number 2005/022939/06)
Incorporated in the Republic of South Africa 1 Exchange Square
2 Gwen Lane, Sandown, South Africa
Private Bag X9991174, Sandton 2146, South Africa
Tel +27 11 520 7000 Fax +27 11 520 8584
Sandown
8 March 2010
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 08/03/2010 14:50:01 Produced by the JSE SENS Department. |
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