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REVIEWED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
JSE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share Code: JSE
ISIN Code: ZAE000079711
("JSE" or "the Group")
1 Exchange Square, 2 Gwen Lane,
Sandown, South Africa.
Private Bag X991174, Sandton 2146,
South Africa, Sandown
Tel +27 11 520 7000
Fax +27 11 520 8584
REVIEWED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
COMMENTARY
INTRODUCTION
In a difficult first half, in which a decline in the growth rate of equity trading volumes limited operating revenue, the JSE
Limited ("JSE" or "Group") focused on progressing key elements of its five year growth strategy. The financial services industry locally
and globally is facing enormous upheaval coupled with slow economic growth. In light of this, we have taken strong steps in all our
business areas to position the JSE to grow sustainably in this changed reality and already in 2012 have achieved a number of strategic
successes which position us well.
FINANCIAL COMMENTARY
JSE LTD RESULTS H1'12 (R'm) H1'11 (R'm) % change
Operating revenue 682.8 667.9 2
Other income 11.7 20.8 (44)
Total income 694.5 688.7 1
Operating costs 503.6 375.8 34
Net interest 41.4 42.1 (2)
Net profit after tax 100.7 253.8 (60)
Basic earnings per share 117.0 cents per share 299.0 cents per share (61)
Headline earnings per share 245.5 cents per share 288.9 cents per share (15)
Included in operating costs above are, inter alia, the following:
Impairment 72.6 0 n/a
Personnel expenses 161.1 134.9 19
Early retirement payments 6.2 0 n/a
While operating revenue grew by 2%, other income reduced by 44%, mainly as a result of lower income from the investor protection funds
during the period. As a result, total income for H1 being slightly up, by 1%.
Operating costs increased by 34% primarily as a result of:
- the decision not to complete the Market Services Solution ("MSS") following the technical recommendation earlier this year that it
would need to be rewritten. This has resulted in an impairment to MSS and related Systems Replacement Project ("SRP")
components;
- personnel expenses, which increased 19%, mainly owing to the deployment of staff from capital projects to operations following the
review of MSS, resulting in these salary costs being expensed rather than capitalised;
- early retirement payments.
Earnings per share ("EPS") are 61% lower than H1 2011. Headline earnings per share ("HEPS") are 15% lower than H1 2011. EPS and
HEPS for the Group for the period have been impacted by a number of factors, including (before tax):
- the impact of impairing MSS, the resultant reduction of the value of personnel costs capitalised to projects as well as the early
retirement payments, all of which are referred to above;
- the writing back of R7.3 million bonuses withheld in 2011 pending a decision on the way forward on SRP and now forfeited as a
result of the decision not to implement MSS. As a result, executives during 2011, will receive no part of the retained bonus, while the
rest of the staff of the company will receive only a portion of the retained bonus, on a sliding scale.
The Group's consolidated effective tax rate for the six months to 30 June 2012 was 60% (H1 2011: 31%). The increase in the current
period is mainly due to the reversal of the deferred tax on the accumulated impairments to MSS, amounting to R40.5 million, the
non-deductibility of the impairment (R20.3 million) and STC (R2 million) on the higher dividend declared by the JSE earlier this year.
The tax treatment of the software development costs is currently being investigated and may impact the taxation charge going forward.
Net profit after tax for the period declined by 60%.
OPERATING REVENUE STREAMS
REVENUE H1'12 (R'm) H1'11 (R'm) % change
Issuer Regulation 46.1 48.8 (5)
Equity Market 161.2 172.6 (7)
Back-Office Services (BDA) and Equities Risk
Management 204.6 198.9 3
Equity Derivatives 57.0 55.9 2
Interest Rate Products 20.5 19.0 8
Currency Derivatives 8.3 7.2 14
Commodity Derivatives 24.5 23.6 4
Data Sales 70.8 61.1 16
Funds Management Fees 29.4 22.6 30
- Issuer Regulation revenue declined by 5% year on year, owing to a fall in the number of new company listings in H1 2012 and a
decline in the volume of corporate actions;
- Equity Market revenue declined by 7% despite a small increase in number of trades;
- Back-office services ("BDA") and Equities risk management revenue rose by 3% and 3% respectively. Revenues are somewhat linked
to the number of equity transactions that take place on the cash equity market, though a different billing model means there is not
an exact correlation;
- Equity Derivatives revenue was slightly up owing to growth in index derivatives contracts traded and despite a fall in total trading
volumes;
- Interest Rate Products revenue grew by 8% prompted by nominal value growth (spot bond) and a rise in the number of contracts
traded (derivatives);
- Currency Derivatives revenue grew by 14% as the value and the number of contracts traded rose by 27% in H1 2012 compared with the
same period in 2011;
- Commodity Derivatives revenue rose by 4% following an increase in the number of physical deliveries processed and improved
activity in the cash settled commodities;
- Data Sales revenue grew by 16% owing to international growth in professional indices users as well as algo players and hedge funds
subscribing to JSE data; and
- Funds management fees were up 30% as a result of increased funds under management during the period.
UPDATE ON STRATEGIC INITIATIVES
We are pleased by the progress made towards our objectives in the first six months towards our strategic objectives. In particular
we have:
- relooked at the pricing of most of our products and changed (and in many cases reduced) the pricing mix in our interest rate and
currency markets to encourage increased market participation;
- completed our data centre (built to tier 3 specifications) and disaster recovery site;
- implemented the new equity trading system on time and on budget and moved it to Johannesburg from London and implemented a
Point of Presence in London for access by international clients to JSE data. We announced a number of fee waivers to thank equity
market participants for the enormous effort they put in to enabling us to go live with the new trading engine;
- upgraded the commodities and derivatives market technology to handle the increased volumes;
- in conjunction with National Treasury and market participants, found a way forward on securities transfer tax with which
participants are comfortable and which should enable increased activity on our market;
- made significant progress on ensuring that our clearing, settlement and risk management services will meet the CPSS-IOSCO
standards and that our clients obtain maximum Basel III relief in 2013.
PROSPECTS
The critical interdependencies between the exchange, the financial services community and its broader stakeholder group have become
ever more apparent. That is why the JSE is focused on resilience and sustainability.
We are not able to make revenue projections for the Group, given the dependence on trading volumes in all the markets. In stressed market
conditions, we are retaining our strong focus on controlling costs. Where we are investing, it is in ensuring that our current business is
sustainable and that the right level of resources are deployed in those areas of our business that we think are critical to our long term
revenue growth.
For and on behalf of the Board
HJ Borkum NF Newton-King
Chairman Chief Executive Officer
15 August 2012
REVIEW CONCLUSION
KPMG Inc., the Company's independent auditor, has reviewed the consolidated interim financial statements contained in this interim
report and has expressed an unmodified conclusion on the consolidated interim financial statements. The review report is available for
inspection at the Company's registered office.
The consolidated financial results include the consolidated statement of financial position at 30 June 2012, the consolidated statement
of comprehensive income and the consolidated statements of changes in equity and cash flows for the six months then ended and the
explanatory notes. The explanatory notes are marked with a #.
These interim financial statements has been prepared under supervision of the Chief Financial Officer, Ms Freda Evans CA(SA).
CONSOLIDATED INTERIM STATEMENT OF
COMPREHENSIVE INCOME
for the six months ended 30 June 2012
JSE Group Investor Protection Funds*
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2012 2011 2011 2012 2011 2011
Note (reviewed) (reviewed) (audited) (reviewed) (reviewed) (audited)
R'000 R'000 R'000 R'000 R'000 R'000
Revenue 9 682 797 667 948 1 369 810
Other income 10 11 682 20 785 46 980 3 995 10 603 26 866
Personnel expenses 11 (161 107) (134 864) (299 184)
Other expenses 12 (342 516) (240 923) (737 530) (1 033) (3 950) (7 780)
Profit before net finance income 190 856 312 946 380 076 2 962 6 653 19 086
Finance income 442 821 437 795 911 776 3 590 3 707 7 423
Finance costs (401 457) (395 741) (825 646)
Net finance income 41 364 42 054 86 130 3 590 3 707 7 423
Share of profit of equity accounted investees
(net of income tax) 17 142 15 053 31 905
Profit before income tax 249 362 370 053 498 111 6 552 10 360 26 509
Income tax expense 13 (148 686) (116 228) (156 316)
Profit for the period 100 676 253 825 341 795 6 552 10 360 26 509
Other comprehensive income/(loss)
Net change in fair value of
available-for-sale financial assets 14 518 (2 320) 1 057 14 518 (2 320) 1 057
Net change in fair value of
available-for-sale financial assets
reclassified to profit or loss (2 449) (8 612) (22 931) (2 449) (8 612) (22 931)
Income tax on other comprehensive
income/(loss) 13
Other comprehensive income/(loss) for
the period, net of income tax 12 069 (10 932) (21 874) 12 069 (10 932) (21 874)
Total comprehensive income/(loss) for
the period 112 745 242 893 319 921 18 621 (572) 4 635
Earnings per share
Basic earnings per share (cents) 14.1 117.0 299.0 400.8 7.6 12.2 31.1
Diluted earnings per share (cents) 14.2 116.5 294.4 396.1 7.6 12.0 30.7
*Investor Protection Funds comprises the JSE Guarantee Fund Trust, JSE Derivatives Fidelity Fund Trust and BESA Guarantee Fund Trust (the "Trusts").
The JSE maintains these Trusts for investor protection purposes as required under the Securities Services Act 36, of 2004.
The JSE is required to consolidate the Trusts into the results of the Group in terms of International Financial Reporting Standards ("IFRS").
However, as these Trusts are legally separate from the JSE, neither the JSE nor its shareholders have any right to the net assets of these
Trusts on winding up. In certain limited circumstances, the JSE is entitled to the income and surplus assets of the Trusts. For enhanced
understanding, the Trusts have been shown separately, (before intercompany adjustments), although, for compliance with IFRS, the results
form part of the Group financial statements.
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
as at 30 June 2012
JSE Group Investor Protection Funds
As at As at As at As at As at As at
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2012 2011 2011 2012 2011 2011
Note (reviewed) (reviewed) (audited) (reviewed) (reviewed) (audited)
R'000 R'000 R'000 R'000 R'000 R'000
Assets
Non-current assets 897 422 990 011 954 338 191 026 212 224 169 883
Property and equipment 15 178 726 130 113 189 318
Intangible assets 16 329 490 478 868 352 952
Investments in equity accounted
investees 17 101 989 83 946 100 798
Other investments 191 028 212 227 169 885 191 026 212 224 169 883
Derivative financial instruments 516 814 625
Loan to the JSE Empowerment Fund
Trust 13 582 14 294 13 228
Deferred taxation 82 091 69 749 127 532
Current assets 16 110 958 16 703 969 16 374 566 109 203 118 169 113 505
Trade and other receivables 202 199 213 977 191 794 425 603 3 329
Income tax receivable 78 680 76 875 56 907
Amounts due from related parties 5 333
Margin and collateral deposits 14 905 830 15 402 135 15 084 776
Cash and cash equivalents 924 249 1 005 649 1 041 089 108 778 117 566 110 176
Total assets 17 008 380 17 693 980 17 328 904 300 229 330 393 283 388
Equity and liabilities
Total equity 1 641 679 1 863 259 1 769 068 299 650 329 812 282 535
Share capital 8 571 8 491 8 605
Share premium 102 858 108 117 129 642
Capital contribution 121 873 121 873 121 873
Reserves 497 276 534 107 476 363 63 637 62 510 51 567
Retained income 1 032 974 1 212 544 1 154 458 114 140 145 429 109 095
Non-current liabilities 140 343 151 838 164 742
Finance lease 56 340 167
Borrowings 25 461 26 770
Employee benefits 16 643 34 559 28 972
Deferred taxation 5 173 3 935 4 535
Operating lease liability 45 604 60 366 52 571
Deferred income 46 242 51 530 50 592
Due to SAFEX members 1 164 1 108 1 135
Current liabilities 15 226 358 15 678 883 15 395 094 579 581 853
Trade and other payables 237 876 189 540 219 580 301 301 594
Employee benefits 68 935 75 203 78 145
Operating lease liability 13 717 12 006 12 593
Due to Group entities 279 280 259
Margin and collateral deposits 14 905 830 15 402 134 15 084 776
Total equity and liabilities 17 008 380 17 693 980 17 328 904 300 229 330 393 283 388
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
for the six months ended 30 June 2012
JSE Group Investor Protection Funds
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2012 2011 2011 2012 2011 2011
(reviewed) (reviewed) (audited) (reviewed) (reviewed) (audited)
R'000 R'000 R'000 R'000 R'000 R'000
Cash flows from operating activities
Cash generated by/(used in) operations 280 538 314 952 664 575 1 628 (2 402) (8 866)
Interest received 447 845 442 765 912 360 3 576 3 930 7 838
Interest paid (404 882) (401 883) (826 264)
Dividends received 1 530 1 974 3 905 1 530 1 974 3 905
Taxation paid (123 438) (125 168) (202 471)
Net cash generated by operating activities 201 593 232 640 552 105 6 733 3 502 2 877
Cash flows from investing activities
Proceeds on sale of other investments 11 958 27 684 82 306 11 958 27 684 82 306
Acquisition of other investments (18 582) (24 197) (33 100) (18 582) (24 197) (33 100)
Dividends from equity accounted investees 15 950 26 124 26 124
Proceeds from disposal of property and
equipment 76 8 83
Leasehold improvements (187) (47 406)
Acquisition of intangible assets (59 572) (70 505) (179 126)
Acquisition of property and equipment (15 811) (29 107) (62 083)
Net cash (used in)/from investing activities (66 168) (69 993) (213 202) (6 624) 3 487 49 206
Cash flows from financing activities
Distribution by Investor Protection Funds (1 507) (1 463) (53 947)
Proceeds from issue of new shares 5 485 22 092
Acquisition of treasury shares (26 736) (29 055) (29 068)
Proceeds from sale of treasury shares 2 423 1 053 6 099
Loan raised 26 770
Loan repaid (1 309)
Dividends paid (217 115) (178 767) (361 158)
Net cash used in financing activities (242 737) (201 284) (335 265) (1 507) (1 463) (53 947)
Net (decrease)/increase in cash and cash
equivalents (107 312) (38 637) 3 638 (1 398) 5 526 (1 864)
Cash and cash equivalents at 1 January 1 041 089 1 046 330 1 046 330 110 176 112 040 112 040
Effect of exchange rate fluctuations on cash
held (9 528) (2 044) (8 879)
Cash and cash equivalents at end of period 924 249 1 005 649 1 041 089 108 778 117 566 110 176
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2012
Non-distributable Shares pending JSE LTIS 2010 Retained Total Exchange Investor
Note Share capital Share premium reserve BBBEE reserve allotment reserve earnings and subsidiaries Protection Funds Total equity
Group R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 December 2010 8 466 130 658 10 058 159 881 6 244 1 143 950 1 459 257 331 847 1 791 104
Total comprehensive income for the period
Profit for the period 243 465 243 465 10 360 253 825
Other comprehensive income
Net change in fair value of available-for-sale financial assets (2 320) (2 320)
Net change in fair value of available-for-sale financial assets
reclassified to profit or loss (8 612) (8 612)
Total other comprehensive income (10 932) (10 932)
Total comprehensive income for the period 243 465 243 465 (572) 242 893
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Share options lapsed reclassified to retained earnings (2 433) 2 433
Share options granted 7 888 7 888 7 888
Dividends paid to owners 18 (178 767) (178 767) (178 767)
Distribution from the BESA Guarantee Fund Trust 1 463 1 463 (1 463)
Treasury shares (43) (28 946) (28 989) (28 989)
Treasury shares share issue costs (67) (67) (67)
Sale of treasury shares 2 1 054 1 056 1 056
Ordinary shares issued 66 5 418 5 484 5 484
Ordinary shares allotted during July 2011 16 607 16 607 16 607
Equity settled share-based payment 6 050 6 050 6 050
Total contributions by and distributions to owners 25 (22 541) 5 455 16 607 6 050 (174 871) (169 275) (1 463) (170 738)
Changes in ownership interests in subsidiaries that do not result
in a loss of control
Total transactions with owners 25 (22 541) 5 455 16 607 6 050 (174 871) (169 275) (1 463) (170 738)
Balance at 30 June 2011 8 491 108 117 10 058 165 336 16 607 12 294 1 212 544 1 533 447 329 812 1 863 259
Balance at 31 December 2010 8 466 130 658 10 058 159 881 6 244 1 143 950 1 459 257 331 847 1 791 104
Total comprehensive income for the year
Profit for the year 315 286 315 286 26 509 341 795
Other comprehensive income
Net change in fair value of available-for-sale financial assets 1 057 1 057
Net change in fair value of available-for-sale financial assets
reclassified to profit or loss (22 931) (22 931)
Total other comprehensive income (21 874) (21 874)
Total comprehensive income for the year 315 286 315 286 4 635 319 921
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Share options lapsed reclassified to retained earnings (2 433) 2 433
Share options granted 7 888 7 888 7 888
Dividends paid to owners 18 (361 158) (361 158) (361 158)
Distribution from the BESA Guarantee Fund Trust1 2 947 2 947 (2 947)
Distribution from the JSE Guarantee Fund Trust2 51 000 51 000 (51 000)
Treasury shares (43) (28 946) (28 989) (28 989)
Treasury shares share issue costs (79) (79) (79)
Sale of treasury shares 8 6 091 6 099 6 099
Ordinary shares issued 174 21 918 22 092 22 092
Equity settled share-based payment 12 190 12 190 12 190
Total contributions by and distributions to owners 139 (1 016) 5 455 12 190 (304 778) (288 010) (53 947) (341 957)
Changes in ownership interests in subsidiaries that do not result
in a loss of control
Total transactions with owners 139 (1 016) 5 455 12 190 (304 778) (288 010) (53 947) (341 957)
Balance at 31 December 2011 8 605 129 642 10 058 165 336 18 434 1 154 458 1 486 533 282 535 1 769 068
Total comprehensive income for the period
Profit for the period 94 124 94 124 6 552 100 676
Other comprehensive income
Net change in fair value of available-for-sale financial assets 14 518 14 518
Net change in fair value of available-for-sale financial assets
reclassified to profit or loss (2 449) (2 449)
Total other comprehensive income 12 069 12 069
Total comprehensive income for the period 94 124 94 124 18 621 112 745
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Dividends paid to owners 18 (217 114) (217 114) (217 114)
Distribution from the BESA Guarantee Fund Trust1 1 506 1 506 (1 506)
Treasury shares (37) (28 808) (28 845) (28 845)
Treasury shares share issue costs (70) (70) (70)
Sale of treasury shares 3 2 094 2 097 2 097
Equity settled share-based payment 3 798 3 798 3 798
Total contributions by and distributions to owners (34) (26 784) 3 798 (215 608) (238 628) (1 506) (240 134)
Changes in ownership interests in subsidiaries that do not result
in a loss of control
Total transactions with owners (34) (26 784) 3 798 (215 608) (238 628) (1 506) (240 134)
Balance at 30 June 2012 8 571 102 858 10 058 165 336 22 232 1 032 974 1 342 029 299 650 1 641 679
1 The BESA Guarantee Fund Trust Deed makes specific provision for the utilisation of excess funds for the purpose of reducing the risk of claims being made against the Trust. To this effect, R1.5 million (June 2011: R1.5 million) (December 2011: R2.9 million) before intercompany adjustments was
transferred to the JSE Limited for the defrayment of market regulatory expenditure.
2 This represents the monies distributed by the JSE Guarantee Fund Trust for the specific purpose of funding the establishment of the JSE's data centre.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2012
1.# Reporting entity
JSE Limited (the "Company", the "JSE" or the "Exchange") is a company domiciled in the
Republic of South Africa. The condensed consolidated interim financial statements of the
Company as at and for the six months ended 30 June 2012 comprise the Company and its
subsidiaries (together referred to as the "Group") and the Group's interests in associates. The JSE
is licensed as an exchange in terms of the Securities Services Act, No 36 of 2004.
The Group currently consists of the Company, its subsidiary companies (Safex Clearing Company
(Pty) Limited, JSE Trustees (Pty) Limited, BESA Limited, BESA Investments (Pty) Limited,
BondClear Limited, Nautilus MAP Holdings (Pty) Limited and Nautilus MAP Operations (Pty)
Limited), special purpose entities (JSE Guarantee Fund Trust, JSE Derivatives Fidelity Fund Trust
and BESA Guarantee Fund Trust) and its interests in associated companies (Strate Limited and
Indexco Managers Limited).
The consolidated financial statements of the Group as at and for the year ended 31 December
2011 are available upon request from the Company's registered office at One Exchange Square,
Gwen Lane, Sandown, or at www.jse.co.za.
2.# Statement of compliance
These consolidated interim financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS 34, Interim Financial Reporting and the
AC 500 series pronouncements issued by the Accounting Practices Board of SAICA as well as
section 29(e) of the Companies Act (No 71 of 2008). They do not include all of the information
required for full annual financial statements and should be read in conjunction with the
consolidated financial statements of the Group as at and for the year ended 31 December 2011.
These condensed consolidated interim financial statements were approved by the Board of
Directors on 15 August 2012.
3.# Accounting policies
Change in accounting policies
The Group has elected to early adopt Circular 3/2012: Headline Earnings. All other accounting
policies applied by the Group in these condensed consolidated interim financial statements are the
same as those applied by the Group in its consolidated financial statements as at and for the year
ended 31 December 2011.
4.# Comparative figures
Unless otherwise indicated, comparative figures refer to the six months ended 30 June 2011.
5.# Estimates
The preparation of interim financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated financial statements
as at and for the year ended 31 December 2011.
6.# Financial risk management
The Group's financial risk management objectives and policies are consistent with those disclosed
in the consolidated financial statements as at and for the year ended 31 December 2011.
7.# Operating segments
Information about reportable segments
Equity and Com- Interest
Equity Currency modity Rate Data
Market1 Derivatives Derivatives Products2 Sales Other3 Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
For the period ended
30 June 2012
External revenues 409 534 65 227 24 547 28 175 70 780 84 533 682 797
For the period ended
30 June 2011
External revenues 418 665 63 127 23 578 25 761 61 141 75 676 667 948
For the period ended
31 December 2011
External revenues 846 055 133 305 53 142 52 040 125 547 159 721 1 369 810
1 Comprises equities trading fees, risk management, clearing and settlement fees, membership fees,
issuer services and back-office services ("BDA").
2 Includes R7.6 million (2011: R6.7 million) of issuer regulation listing fees relating to the bond market.
3 Comprises funds management and Strate ad valorem fees.
8.# Long-term incentive scheme 2010 ("LTIS 2010")
LTIS 2010 is a long-term incentive scheme, designed to incentivise and retain selected senior
employees of the JSE over rolling three- and four-year time horizons. All shares awarded under
LTIS 2010 are held in trust and are restricted until the applicable vesting conditions are fulfilled.
Where a participant leaves the employ of the JSE prior to the vesting dates or where the relevant
personal or corporate performance metrics are not achieved, the share awards may be forfeited.
During June 2012 shareholders approved a special resolution authorising financial assistance to
the JSE LTIS 2010 Trust, for the purpose of acquiring JSE ordinary shares in the open market for
allocation to selected employees in accordance with the rules of LTIS 2010. The specific allocations
to selected employees for the 2012 year ("Allocation 3") were approved by the Board, and these
individual allocations were accepted by scheme participants prior to 30 June 2012. The requisite
number of JSE ordinary shares were also acquired in the open market prior to 30 June 2012.
Notwithstanding the fair value grant date of 22 June 2012, a charge to profit and loss in respect
of Allocation 3 will only be brought to account as from 1 July 2012 as the services relating to
Allocation 3 commences from 1 July 2012. No fair value charge to profit and loss has therefore
been included for the period under review. Information on Allocation 3 is as follows:
Personal Corporate
performance performance
shares shares
Base price (Rand per share) 78.68 78.68
Total number of shares granted 263 600 103 000
Vesting dates:
50% of the shares awarded vest after three years 131 800 51 500
50% of the shares awarded vest after four years 131 800 51 500
Members of the JSE's executive committee, which includes the executive directors and Company
Secretary, have been granted a total of 80 200 personal performance (previously "retention")
shares and 103 000 corporate performance shares under Allocation 3.
The profit or loss fair value charge for the period in respect of Allocation 1 (granted in May 2010)
and Allocation 2 (granted in May 2011) amounts to R3.5 million (2011: R6.1 million).
Six months ended Year ended
30 June 30 June 31 Dec
2012 2011 2011
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
9.# Revenue
Equity Market 161 157 172 637 352 188
Risk Management, Clearing and Settlement Fees 104 928 102 305 208 962
Back-Office Services ("BDA") 99 700 96 590 196 816
Issuer Regulation 46 145 48 798 91 622
Membership Fees 5 239 5 055 9 689
Equity Derivatives Fees 56 950 55 880 116 753
Currency Derivatives Fees 8 277 7 247 16 552
Commodity Derivatives Fees 24 547 23 578 53 142
Interest Rate Products 20 541 19 041 38 818
Data Sales 70 780 61 141 125 547
Funds Management 29 398 22 627 50 088
Total revenue before Strate ad valorem fees 627 662 614 899 1 260 177
Strate ad valorem fees 55 135 53 049 109 633
Total revenue 682 797 667 948 1 369 810
10.# Other income 11 682 20 785 46 980
Other income decreased by 44%. Income from the
Investor Protection Funds was lower than the prior
period.
11.# Personnel expenses (161 107) (134 864) (299 184)
There was an increase of 19% in personnel
expenses. This is mainly as a result of:
the deployment of staff from capital projects to
operations resulting in the relating salary costs
being expensed; and
the remuneration benefits contractually payable to
senior employees on early retirement.
These expenses have been offset by the write-back
of R7.3 million relating to the special bonus that
was withheld during F2011 pending resolution of
the Systems Replacement Programme ("SRP"), and
now largely forfeited.
12.# Other expenses
Other operating expenses (214 809) (187 874) (404 555)
Impairment to SRP (72 572) (223 342)
Strate ad valorem fees (55 135) (53 049) (109 633)
(342 516) (240 923) (737 530)
The increase in other operating expenses is mainly due to computer costs increasing by
R11.8 million, and consulting fees by R10.2 million.
The impairment to SRP of R72.6 million (June 2011: Rnil; December 2011: R223.3 million)
relates to the carrying value of the Market Services Solution ("MSS") and associated components
of SRP, which have been identified as not being able to deliver value. The decision to impair SRP
was taken following a technical analysis that indicated that it is technically desirable to completely
rewrite the MSS component, which is one of the five components of SRP.
13.# Income tax expense
13.1 The Group's consolidated effective tax rate for the six months ended 30 June 2012 was 60%
(for the six months ended 30 June 2011: 31%; for the year ended 31 December 2011: 31%).
The increase in the effective tax rate for the current period is mainly due to the unwinding
of deferred tax amounting to R40.5 million (2011: Rnil) in respect of the impairments to
SRP. In addition, the SRP impairment of R72.6 million referred to in note 12 above was
not deducted for tax purposes. We are currently investigating the tax treatment of software
developments costs which may impact the taxation charge going forward.
13.2 The JSE Derivatives Fidelity Fund Trust and JSE Guarantee Fund Trust are exempt from
Income Tax in terms of Section 10(1)(d)(iii) of the South African Income Tax Act, (No 58 of
1962). Application for the BESA Guarantee Fund Trust exemption is in progress.
Six months ended Year ended
30 June 30 June 31 Dec
2012 2011 2011
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
14.# Earnings and headline earnings per share
14.1 Basic earnings per share
Profit for the period attributable to ordinary
shareholders 100 676 253 825 341 795
Weighted average number of ordinary shares:
Issued ordinary shares at 1 January 86 877 600 85 140 050 85 140 050
Shares issued during the period 287 992 864 338
Effect of own shares held (JSE LTIS 2010) (837 663) (547 375) (724 979)
Weighted average number of ordinary shares
at 30 June/31 December 86 039 937 84 880 667 85 279 409
Basic earnings per share (cents) 117.0 299.0 400.8
14.2 Diluted earnings per share
Profit for the period attributable to ordinary
shareholders 100 676 253 825 341 795
Weighted average number of ordinary shares
(diluted):
Weighted average number of ordinary shares
at 30 June/31 December (basic) 86 039 937 84 880 667 85 279 409
Effect of share options in issue1 385 220 1 342 878 1 001 178
Weighted average number of ordinary shares
(diluted) 86 425 157 86 223 545 86 280 587
Diluted earnings per share (cents) 116.5 294.4 396.1
1 Consists of: June 2012 - LTIS 2010 treasury
shares; June 2011 LTIS 2010 treasury shares
and BBBEE options; December 2011 LTIS 2010
treasury shares.
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.
14.3 Headline earnings per share
Reconciliation of headline earnings:
Profit for the period attributable to ordinary
shareholders 100 676 253 825 341 795
Adjustments are made to the following:
Profit on disposal of property and equipment (54) (8) (60)
Gross amount (76) (11) (83)
Taxation 22 3 23
Impairment of intangible assets 113 023 160 806
Gross amount 72 572 223 342
Taxation 40 451 (62 536)
Net realised gains on disposal of available-for-
sale financial assets (2 449) (8 612) (22 932)
Gross amount (2 449) (8 612) (22 932)
Taxation
Headline earnings 211 196 245 205 479 609
Headline earnings per share (cents) 245.5 288.9 562.4
14.4 Diluted headline earnings per share
Diluted headline earnings per share (cents) 244.4 284.4 555.9
14.5 Effect on earnings and net asset value per
share of Investor Protection Funds
The contribution these funds make to the
Group is as follows:
Basic earnings per share (cents) 7.6 12.2 31.1
Diluted earnings per share (cents) 7.6 12.0 30.7
Headline earnings per share (cents) 4.8 2.1 4.2
Diluted headline earnings per share (cents) 4.7 2.0 4.1
Net asset value per share (cents) 348.3 388.6 331.3
15.# Property and equipment
During the six months ended 30 June 2012, the
Group acquired assets with a cost of R15.9 million
(2011: R29.1 million). The assets purchased
were mainly in respect of the new equities trading
platform (R9.6 million) and computer equipment
(R5.2 million). There were disposals of R0.7 million
(2011: R4.2 million).
16.# Intangible assets
During the six months ended 30 June 2012, the
Group acquired intangible assets with a cost
of R59.6 million (2011: R67.0 million), mainly
in respect of the new equities trading platform.
The Systems Replacement Project ("SRP"), had
an opening balance at the beginning of the year
of R158 million. In H1 2012, we impaired all of
the Market Services Solution and its associated
software, amounting to R72.6 million. The
remaining software components of SRP, have been
reallocated to their relevant projects and will remain
in Intangible Assets Software under Development
until they are implemented.
17.# Investments in equity accounted investees
During the period under review, a dividend of
R15.9 million (2011: R26.1 million) was received
from Strate Limited.
18.# Dividends declared and paid by the Group
Ordinary dividend of 250.0 cents
(2011: 210.0 cents) per share 217 193 178 794 178 794
Ordinary dividend of 250.0 cents
(2011: 210.0 cents) per share on
unallocated treasury shares (79) (27) (27)
Special dividend of nil cents
(2011: 210.0 cents) per share 182 443
Special dividend of nil cents
(2011: 210.0 cents) per share on
unallocated treasury shares (52)
217 114 178 767 361 158
19.# Contingent liabilities and commitments
A contingent liability of R2.2 million exists, relating to possible penalties payable to the London
Stock Exchange for the timing of the move away from the TradElect system. This may be mitigated
by set-off against future expenses incurred with Millenium IT, a London Stock Exchange Group
company. There were no other changes to the contingent liabilities and commitments reported in
the consolidated financial statements as at and for the year ended 31 December 2011.
Sponsor:
RAND MERCHANT BANK
(a division of FirstRand Bank Limited)
Date: 15/08/2012 02:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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