The Johannesburg Stock Exchange (JSE), which is migrating to Amazon World Service (AWS) is to spend between R145 million and R165m in capital expenditure this year, after raising operating income for the 2023 full year by 6.9% to R2.9 billion in a South African market dogged by lower liquidity in equities markets.
The JSE was planning a minimum capex of R145m to fund its information services growth strategy, it said yesterday. The capital spend would include “rejuvenation of infrastructure, regulatory enhancements and automation of key” processes.
It would focus on “a pragmatic and systematic approach to modernisation by converting to modern software technology” by moving from mainframe to cloud computing and hosting, after “partnering with AWS” in an effort to “facilitate and de-risk” migration processes.
In 2023, the JSE operated against the backdrop of a tough economic environment in South Africa in which equities companies faced operating pressures. These ranged from infrastructure and energy supply bottlenecks, high interest rates and a flight by investors from local markets.
“Macroeconomic uncertainty and less liquidity for SA equity markets” characterised the period under review. This had resulted in a “shift in capital flows as local investors sought foreign assets and global investors reduced their SA exposure,” the JSE said.
Delistings from the JSE have been mounting, where the number of listed entities has gone down from more than 600 in 2000 to about 284.
Revenue from equity market trading for the JSE resultantly fell by 5%, with the value of published equity also taking a 9.5% knock and the average daily value down at R21bn compared to R24bn the previous year.
However, capital markets grew 3% on the back of higher bonds and financial derivatives revenue, partly offset by lower equity market trading revenue.
With the JSE’s primary market trading up by 2.4% for the full year to R161m, equity trading trended down 4.6% to R486m, drawing respite from colocation revenue which went up by 30% to R43m. Equity derivatives trading went up 2.2% to R117m, while currency derivatives trading strengthened by 26.5% to R37m.
Headline earnings per share (Heps) for the JSE for 2023 resultantly increased by 12.2% year on year to R1 per share compared to R0.91 a year earlier. The South African bourse’s net profit after tax firmed up 11% to R831m.
“The group’s revenue growth was supported by the diversified business segments and asset classes across the business. Operating income grew 6.9%2 to R2.9bn, supported by a 15.6% increase in revenue from information Services and a 20.2% increase in revenue from JSE Investor Services (JIS),” it said.
Cash generated from operations of R1.1bn for the period under review was 13.6% stronger on a year-on-year basis. This helped the JSE to declare an ordinary dividend of 784 cents per share for 2023.
“The JSE has produced strong results, with return on equity (ROE) of 19.4% in line with long-term targets. We continue to invest in defending our core trading activity while building new services across asset classes and in private capital raising, Information Services and JSE Investor Services, which enabled non-trading income to increase to 36.8% (2022: 34.6%) of operating income in line with our long-term strategy,” said Leila Fourie, Group CEO for the JSE.
System uptime on the JSE was 99.89% in 2023 as the company launched new partnerships to enable rapid innovation in data services, private markets, carbon trading and modernisation of the broker-dealer accounting (BDA) system.
As at end of December, the JSE maintained a balance sheet and cash of R2.3bn excluding bond investments of R256m. Ring-fenced and non-distributable cash and bonds for the period amounted to R1.47bn against its regulatory capital, amounting to nearly R1bn.
Total operating expenditure for 2023 soared 6.7% to R2bn, as the group sought to deliver operating leverage.
Of this, personnel costs strengthened 13% to R784m, with annual salary increases and higher incentives owing to good leavers and retention costs. Technology costs picked up 11% to R384m.
BUSINESS REPORT