Amid concerns over increased delistings from Africa’s biggest stock exchange, JSE – which reported rich cash pickings for the year to the end of December – is on a solid financial footing, with earnings picking up in an environment that is worrying investors over political risks and currency devaluation.
As many as 25 companies delisted from the JSE in 2021 while a further 22 firms left Africa’s largest bourse in 2022. This has raised concerns among the South African investor community, with others making a stronger case for offshore investments.
“Let's settle the offshore/onshore debate once and for all. R1 000 invested each into S&P500 and JSE ALSI (All Share Index) on 1 January 1980, I would today have R143 000 in the JSE and R740 000 in the S&P500. From 1900 to 1980 JSE was one of top 3 markets in the world,” Magnus Heystek, director for Brenthurst Wealth Management, wrote on Twitter yesterday.
Other analysts said the rand’s poor performance streak was making returns on the JSE poorly competitive when compared to offshore bourses.
JSE CEO Leila Fourie acknowledged the “challenging trading environment” manifest in South Africa’s economy for listed companies and investors. She, however, said the JSE’s earnings showcased the “quality of our earnings and the resilience of our operating” platforms.
As at the end of the reporting period, the JSE maintained a “robust balance sheet and cash of R2.2 billion”. Its ring-fenced and non-distributable cash, which falls under regulatory capital and investor protection, amounted to R1.2bn.
The JSE reported a 4% growth in year-on-year headline earnings per share as well as an 18% stronger return on equity for the full year period to the end of December. Net profit after tax was also 4% stronger for the period at R709 million, while Ebitda earnings were also 1% firmer at R1.07bn.
Operating revenue for the period quickened by 5% to R2.7bn with an 11% increase in revenue from information Services and a 28% increase in revenue from JSE Investor Services (JIS). The JSE further increased the proportion of its revenue derived from non-trading activity.
“Our strategy to diversify revenue continues to gain traction, with non-trading revenue up 13% year-on-year to 25% of total operating revenue. This performance is underpinned by robust operational processes and 99.9% uptime across our markets,” Fourie said.
Despite the headwinds afflicting the South African economy such as challenges with electricity, currency depreciation and the recent greylisting for illicit financial flows, the JSE as a company remained “strongly cash generative”.
This had enabled the board to declare an ordinary dividend of 769 cents per share for 2022, yielding a cash distribution to shareholders of some R668 million. This was despite operating expenses amounting to R1.9bn which paced up by 7.5% on a year-on-year comparative basis.
Other operating expenditure growth areas included “an increase in administration fees” and an “increase in electricity and building” utilities.
The JSE ploughed in R127m in capital expenditure for the period, focused on “operational resilience and growth” initiatives.
In December 2022, the JSE “invested in South African government bonds for an initial acquisition cost of approximately R136m” as part of an initiative to improve yields earned on highly liquid financial instruments held for regulatory capital purposes.
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