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JSE LIMITED - JSE Limited unreviewed condensed consolidated interim financial statements for the six months ended 30 June 2017

Release Date: 03/08/2017 16:09
Code(s): JSE     PDF:  
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JSE Limited unreviewed condensed consolidated interim financial statements for the six months ended 30 June 2017

JSE Limited
(Incorporated in the Republic of South Africa)
Registration number: 2005/022939/06
ISIN: ZAE000079711
Share code: JSE

JSE LIMITED UNREVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

Responsibility for interim results

The condensed consolidated interim financial statements of the JSE Limited (the "JSE”, the "Company” or the "Group”) have been prepared in
accordance with all the applicable requirements of the Companies Act, 2008, under the supervision of the Chief Financial Officer, Aarti Takoordeen
CA(SA). No review has been performed by the Group's independent Auditors; instead they performed agreed-upon procedures on the long-term
incentive scheme and disclosures in these interim financial statements, since the Group Audit Committee regard this type of engagement as
more appropriate. There are no findings which the Group Audit Committee consider material, as a result of the agreed-upon procedures performed by the Group's independent Auditors.
The directors take full responsibility for the preparation of this report.

Commentary

Executive summary
The JSE's performance was resilient against the backdrop of a tough operating environment. In this context:
-  Revenue from most of our business units declined during the first half of 2017, as low volatility and declining investor sentiment translated into
   operating revenue decreasing by 8%;
-  The Group worked hard to limit cost growth to 1%;
-  Group earnings after tax were down by 18%;
-  The Group remains cash generative with a strong cash balance of R2 billion;
-  The Group is ready to meet the known draft regulatory capital requirements;
-  The Integrated Trading and Clearing (ITaC) project 1b and c is on track for delivery in Q1 2018;
-  The Group recently introduced improved margin methodologies in the Interest Rate Derivatives Market that resulted 
   in a nearly 30% reduction (approx R3.5 billion) in margin calls for clients of that market;  
-  The Group has prioritised immediate aspects of its long-term growth strategy; and
-  The Group is well positioned for the competitive exchange landscape ahead.

Operating environment
On a macroeconomic level, the country continues to be plagued by low economic growth, rating downgrades and a loss of business confidence.
This has negatively impacted financial market activity in 2017.

In addition, global securities exchanges and other players in the financial services industry are changing the way in which they operate in response
to regulatory and technological developments. The fast pace of this change requires us to adjust the way in which we operate so that we are as
nimble and as cost effective as possible. To do this, we have announced measures to significantly re-engineer our cost base, our operating model
and the way we are structured as a business.

Financial review
This context has resulted in the JSE's earnings after tax decreasing by 18% to R419 million (H1 2016: R513 million), with operating revenue declining
by 8% (H1 2016: up 17%) to R1.1 billion (H1 2016: R1.2 billion) and costs being contained at 1% (H1 2016: up 12%) with total expenses at R644 million
(H1 2016: R636 million).

Group earnings before interest and tax (EBIT) are down by 20% to R453 million (H1 2016: R567 million). Earnings per share (EPS) decreased by 18%
to 490.9c (H1 2016: 599.7c) and headline earnings per share (HEPS) decreased by 16% to 488.9c (H1 2016: 585.1c).

Operating revenue
Revenue from most of our business units declined during the first half of 2017:
-  Primary Market revenue increased by 8% to R82 million. There were eight new Equity Market listings in the first half (H1 2016: 6).
-  Capital Markets:
   - Cash Equities Market revenue declined by 19% to R235 million owing to the 13% decrease in billable value traded;
   - Equity Derivatives Market revenue declined by 7% to R84 million because of the 18% decrease in value traded;
   - Currency Derivatives Market revenue increased by 26% to R24 million owing to a 36% increase in the number of contracts traded;
   - Commodity Derivatives Market revenue declined by 9% to R32 million owing to a 20% decrease in the number of contracts traded. This
     is largely because of a global grain oversupply and a very good local crop, as a result of which local clients have stopped hedging until export
     parity is reached;
   - Interest Rate Market revenue remained flat at R24 million with a decline of 12% in bond nominal value traded. However, interest rate
     derivatives grew by 50% owing to an increase in the number of contracts traded (up 23%).
-  Post-Trade Services:
   - Equity clearing and settlement revenue declined by 12% to R186 million following the 14% decrease in billable value traded in the
     Equity Market;
   - BDA revenue declined by 1% to R150 million, with transactions up by 4%. We reduced the BDA price point by a further 8% in January 2017; and
-  Information Services revenue declined by 11% (R17 million) to R133 million. Of this, R9 million is attributable to a forex impact on USD receipts.

Other income
Group revenue growth was negatively impacted by a R11 million forex loss (2016: R8 million forex gain) on foreign denominated assets. The JSE still
holds USD14 million on its balance sheet (2016: USD10 million).

Operating expenditure
In the difficult revenue environment described above, the Group has worked hard to contain costs in the short and medium term.

Of the R644 million in operating expenses, personnel expenses decreased by R1 million to R245 million (H1 2016: R246 million). This is largely made
up as follows:
-  Gross remuneration per employee, which increased by 4%, mostly due to annual salary increases. Average headcount decreased by 5%,
   resulting in a 1% or R2 million decline in the payroll bill. Our exit headcount on 30 June was 454 (H1 2016: 482); and
-  The accounting impact of the long-term incentive scheme (LTIS 2010) which increased by R1 million to R26 million (H1 2016: R25 million).

Technology costs declined by 3% to R129 million (H1 2016: R133 million) owing to a reduction in the number and cost of contractors (down by
R12 million from R29 million to R17 million) and lower external project related services, which offset new cost items such as T+3 processing
capacity and information security costs.

Depreciation increased by 23% to R58 million (H1 2016: R47 million), largely owing to the impact of projects that have been brought into production.
These projects include T+3 phase 3, ITaC project 1a as well spend on server refreshes and network equipment.

General expenses have been well contained and rose by 1% to R212 million (H1 2016: R210 million). This includes a one-off expense of R10 million
for the IT cost optimisation exercise.

Cost optimisation
The implementation of the cost optimisation initiatives referred to above will result in annualised technology cost savings of approximately
R70 million, to be fully realised from 2019 onwards. The IT cost optimisation study includes clear recommendations regarding best practice use
of technology.

We have already implemented significant cost savings to date against our variable spend (approximately R65 million in annualised savings in
the first half through a combination of removing vacancies and reducing discretionary expenditure) in advance of implementing the structural
reduction of our fixed cost base.

The consultation process in terms of section 189A of the Labour Relations Act, 66 of 1995 could result in the retrenchment of approximately
60 people (14% of headcount) from the JSE's current full-time staff complement during 2017. These savings of approximately R100 million will
reflect from the 2018 financial year.

Strong balance sheet
The Group cash balance is strong at R2 billion after paying a dividend of R486 million during the period (H1 2016: R543 million). Group capital
expenditure on our various strategic initiatives was R97 million. This includes improved functionality on the project to integrate the JSE's trading
and clearing systems. All currently planned investments and capital requirements for 2017 can be funded from the Group's own resources.

Strategic focus
Our focus for the second half of 2017 remains on projects that are designed to strengthen the delivery of the JSE's strategic vision and our
long-term growth strategy. In particular:
-  Being well positioned for the competitive exchange landscape;
-  Implementing our cost saving initiatives:
   - Section 189A of the Labour Relations Act: The implementation costs will be in the order of R40 million in the second half of 2017;
   - Technology cost optimisation;
-  Integrated Trading and Clearing (ITaC) project 1b and c: We have announced to the market that we expect to complete the programme activities
   late in the fourth quarter of 2017 and to go live in the first quarter of 2018;
-  The electronic trading platform for government bonds;
-  Navigating changes following the Twin Peaks regulatory implementation: We have adequate eligible capital to cover the known draft regulatory
   capital requirements;
-  Prioritising immediate aspects of our long-term growth strategy:
   - Post-Trade Services. Evidencing our commitment to make it more efficient for our clients, the JSE recently introduced improved margin 
     methodologies in the Interest Rate Derivatives Market that resulted in a nearly 30% reduction (approx R3.5 billion) in margin calls for clients of that market;
   - Information services; and
-  Being a constructive participant in the SA Inc. dialogue.

Prospects
Despite the difficult macroeconomic and operating environment, we are clear about our 2017 priorities and hence the issues that we need to tackle
to achieve our strategy and grow this business sustainably.

Our revenues are variable and largely driven by activity on the various markets that we operate. For this reason, the Board makes no projections regarding 
the Group's financial performance. Although we have experienced a tough start to the year we remain focused on our cost optimisation initiatives, whilst 
making the necessary capital investments in areas that will enhance the Group's sustainability.

Changes to the Board of directors and executive committee
-  Leanne Parsons, alternate executive director responsible for JSE Information Services, has indicated that she will step down from the JSE
   Executive Committee and from the Board effective 31 December 2017. Ms Parsons, who has spent her entire working career of 32 years at the
   JSE, will remain at the JSE for 2018 and will continue to drive the delivery of the ITaC project. The JSE will utilise this considerable lead time to
   enable a smooth succession for Ms Parsons' executive responsibilities and to ensure that our strategic ITaC project remains on track.
-  As part of our efforts to streamline the business, Riaan van Wamelen offered to step down from his role as CIO to facilitate the combination
   of the JSE's IT and Trading & Market Services Divisions. Tshwantsho Matsena has assumed the CIO role effective 1 July 2017 and heads the
   combined Division.
-  Graeme Brookes, the Group Company Secretary, has stepped off the Executive Committee but remains responsible as Group Company
   Secretary for all Group governance, compliance and internal audit functions.

Regulation
The Financial Sector Regulation (FSR) Bill (also known as Twin Peaks) and consequential amendments to the Financial Markets Act will impact how
the JSE is regulated and the cost of operating in a regulated environment. The JSE is ready to meet the known draft regulatory capital requirements
and is exploring opportunities to provide products and services to enable capital relief to its clients.

The National Assembly passed the FSR Bill on 22 June 2017.

Directors' responsibility statement
The directors are responsible for the preparation and presentation of these interim financial statements in accordance with International Financial
Reporting Standard IAS 34 Interim Financial Reporting; the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee;
the Financial Pronouncements as issued by the Financial Reporting Standards Council; and the requirements of the Companies Act of South Africa.
The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of interim financial
statements that are free from material misstatement, whether owing to fraud or error.

Approval of financial statements
The unreviewed condensed consolidated interim financial statements were approved by the Board of directors on 3 August 2017 and are signed
on its behalf by:


N Nyembezi
Chairman


N Newton-King
Chief Executive Officer


Consolidated statement of comprehensive income
For the six months ended 30 June 2017

                                                                                                                 Group
                                                                                                      Six months ended             Year ended
                                                                                             30 June 2017     30 June 2016   31 December 2016
                                                                                                                                    (audited)
                                                                                    Notes           R'000            R'000              R'000
Revenue                                                                                 8       1 079 332        1 176 410          2 338 796
Other income                                                                                       17 911           26 624             46 402
Personnel expenses                                                                      9       (244 668)        (245 727)          (564 996)
Other expenses                                                                         10       (399 714)        (389 899)          (845 144)
Profit from operating activities                                                                  452 861          567 408            975 058
Finance income                                                                                  1 653 119        1 533 488          3 249 286
Finance costs                                                                                 (1 541 781)      (1 436 146)        (3 035 497)
Net finance income                                                                                111 338           97 342            213 789
Share of profit of equity-accounted investee (net of income tax)                                   20 500           24 817             59 066
Profit before income tax                                                                          584 699          689 567          1 247 913
Income tax expense                                                                     11       (165 265)        (176 917)          (328 211)
Profit for the period                                                                             419 434          512 650            919 702
Other comprehensive income                 
Items that are or may be reclassified to profit or loss                 
Net change in fair value of available-for-sale financial assets                                     8 298          (4 422)           (22 331)
Net change in fair value of available-for-sale financial assets                 
reclassified to profit or loss                                                                    (1 722)         (12 432)           (16 328)
Other comprehensive income for the year, net of income tax                                          6 576         (16 854)           (38 659)
Total comprehensive income for the period                                                         426 010          495 796            881 043
Earnings per share                 
Basic earnings per share (cents)                                                     12.1           490.9            599.7            1 074.8
Diluted earnings per share (cents)                                                   12.2           487.7            594.9            1 062.1
Other earnings                 
Headline earnings per share (cents)                                                  12.3           488.9            585.1            1 063.2
Diluted headline earnings per share (cents)                                          12.4           485.7            580.4            1 050.7
                 
Consolidated statement of financial position                 
as at 30 June 2017                 
                                
                                                                                                                      Group
                                                                                                         As at                          As at
                                                                                             30 June 2017     30 June 2016   31 December 2016
                                                                                                                                    (audited)
                                                                                    Notes           R'000            R'000              R'000
Assets                         
Non-current assets                                                                              1 274 786        1 136 382          1 244 388
Property and equipment                                                                            194 858          156 021            173 047
Intangible assets                                                                      13         464 388          408 877            452 039
Investment in equity-accounted investee                                                           218 678          188 902            223 151
Other investments                                                                      18         295 864          302 792            293 470
Loan to the JSE Empowerment Fund Trust                                                             25 924           25 794             25 098
Deferred taxation                                                                                  75 074           53 996             77 583
Current assets                                                                                 44 451 229       43 592 342         44 713 700
Trade and other receivables                                                                       541 920          564 623            555 091
Income tax receivable                                                                                 852              529              1 064
JSE Clear Derivatives Default Fund collateral deposit                                             500 000          500 000            500 000
Margin deposits                                                                                41 423 502       40 771 648         41 538 835
Collateral deposits                                                                                   920               85             23 926
Cash and cash equivalents                                                                       1 984 035        1 755 457          2 094 784
                         
Total assets                                                                                   45 726 015       44 728 724         45 958 088
Equity and liabilities                         
Total equity                                                                                    3 184 658        2 862 463          3 269 531
Stated capital                                                                                   (23 896)           21 540             26 693
Reserves                                                                               15         511 473          473 094            475 700
Retained earnings                                                                               2 697 081        2 367 829          2 767 138
Non-current liabilities                                                                           136 454          127 962            137 391
Employee benefits                                                                                   9 149            8 883              8 796
Due to Safex members                                                                                1 347            1 347              1 347
Deferred taxation                                                                                  15 210           11 371             17 771
Operating lease liability                                                                         100 994           92 949             97 287
Deferred income                                                                                     9 754           13 412             12 190
Current liabilities                                                                            42 404 903       41 738 299         42 551 166
Trade and other payables                                                                          478 447          494 704            434 442
Income tax payable                                                                                 38 240            4 718                  -
Employee benefits                                                                                  63 794           67 144            153 963
JSE Clear Derivatives Default Fund collateral contribution                                        400 000          400 000            400 000
Margin deposits                                                                                41 423 502       40 771 648         41 538 835
Collateral deposits                                                                                   920               85             23 926
                         
Total equity and liabilities                                                                   45 726 015       44 728 724         45 958 088
        
Consolidated statement of changes in equity
For the six months ended 30 June 2017

                                                                                        Share-
                                                                                         based
                                                              Stated                  payments          Total         Retained          Total
                                                             capital         NDR       reserve       reserves         earnings         equity
Group                                                          R'000       R'000         R'000          R'000            R'000          R'000
Balance at 1 January 2016                                     66 507     433 392        44 968        478 360        2 411 285      2 956 152
Profit for the period                                              -           -             -              -          512 650        512 650
Other comprehensive income                                         -    (16 854)             -       (16 854)                -       (16 854)
Total comprehensive income for the period                          -    (16 854)             -       (16 854)          512 650        495 796
LTIS Allocation 3 - shares vested                             10 288           -                            -                -         10 288
LTIS Allocation 4 - shares vested                             16 268           -                            -                -         16 268
Distribution from the BESA Guarantee Fund Trust(1)                 -     (2 154)             -        (2 154)            2 154              -
Dividends paid to owners                                           -           -             -              -        (542 658)      (542 658)
Equity-settled share-based payments                                -           -       (1 860)        (1 860)                -        (1 860)
Transfer of profit from investor protection funds                  -      15 602             -         15 602         (15 602)              -
Treasury shares                                             (71 066)           -             -              -                -       (71 066)
Treasury shares - share issue costs                            (457)           -             -              -                -          (457)
Total contributions by and distributions to owners    
of the Company recognised directly in equity                (44 967)      13 448       (1 860)         11 588        (556 106)      (589 485)
Balance at 30 June 2016                                       21 540     429 986        43 108        473 094        2 367 829      2 862 463
Profit for the period                                              -           -             -              -          407 052        407 052
Other comprehensive income                                         -    (21 805)             -       (21 805)                -       (21 805)
Total comprehensive income for the period                          -    (21 805)             -       (21 805)          407 052        385 247
LTIS Allocation 3 - shares vested                                  -           -      (10 288)       (10 288)                -       (10 288)
LTIS Allocation 4 - shares vested                              (632)           -      (15 636)       (15 636)                -       (16 268)
Distribution from the BESA Guarantee Fund Trust(1)                 -     (2 268)             -        (2 268)            2 268              -
Equity-settled share-based payments                                -           -        42 592         42 592                -         42 592
Transfer of profit from investor protection funds                  -      10 011             -         10 011         (10 011)              -
Treasury shares                                                5 785           -             -              -                -          5 785
Total contributions by and distributions to owners    
of the Company recognised directly in equity                   5 153       7 743        16 668         24 411          (7 743)         21 821
Balance at 31 December 2016                                   26 693     415 924        59 776        475 700        2 767 138      3 269 531
Profit for the period                                              -           -             -              -          419 434        419 434
Other comprehensive income                                         -       6 576             -          6 576                -          6 576
Total comprehensive income for the period                          -       6 576             -          6 576          419 434        426 010
     
Distribution from the BESA Guarantee Fund Trust(1)                 -     (2 250)             -        (2 250)            2 250              -
Dividends paid to owners                                           -           -             -              -        (486 456)      (486 456)
Equity-settled share-based payment                                 -           -        26 162         26 162                -         26 162
Transfer of profit from investor protection funds                  -       5 285             -          5 285          (5 285)              -
Treasury shares                                             (50 482)           -             -              -                -       (50 482)
Treasury shares - share issue costs                            (107)           -             -              -                -          (107)
Total contributions by and distributions to owners    
of the Company recognised directly in equity                (50 589)       3 035        26 162         29 197        (489 491)      (510 883)
Balance at 30 June 2017(2)    
                                                            (23 896)     425 535        85 938        511 473        2 697 081      3 184 658
Note                                                                          15            15
(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, R2.3 million (December 2016: R4.4 million) (June 2016: R2.1 million) before intercompany 
    adjustments was transferred to the JSE Limited for the defrayment of market regulatory expenditure.
(2) This balance is in debit as at 30 June 2017 as a result of a change in date of vesting of LTIS Treasury shares pertaining to Allocation 
    4 Tranche 2 and Allocation 5 Tranche 1. Please refer to note 16 for details.

Consolidated statement of cash flows
For the six months ended 30 June 2017

                                                                                                                   Group
                                                                                                       Six months ended            Year ended
                                                                                             30 June 2017     30 June 2016   31 December 2016
                                                                                                                                    (audited)
                                                                                                    R'000            R'000              R'000
Cash flows from operating activities                                      
Cash generated by operations                                                                      480 538          587 104          1 136 998
Interest received                                                                               1 688 130        1 498 165          3 151 306
Interest paid                                                                                 (1 555 445)      (1 370 776)        (2 948 179)
Dividends received                                                                                  1 601            1 634              3 546
Taxation paid                                                                                   (126 865)        (193 835)          (367 569)
Net cash generated by operating activities                                                        487 959          522 292            976 102
Cash flows from investing activities                                      
Proceeds on sale of other investments                                                              19 249           48 885             77 408
Acquisition of other investments                                                                 (13 344)         (43 535)           (80 648)
Dividends from equity-accounted investee                                                           24 972           22 945             22 945
Proceeds from disposal of property and equipment                                                        -              265                310
Leasehold improvements                                                                            (1 064)          (1 615)            (5 076)
Acquisition of intangible assets                                                                 (44 928)         (73 080)          (145 600)
Acquisition of property and equipment                                                            (46 547)         (14 147)           (49 890)
Net cash used in investing activities                                                            (61 662)         (60 282)          (180 551)
Cash flows from financing activities                                      
Proceeds from sale of treasury shares                                                                   -           41 229                  -
Acquisition of treasury shares                                                                   (50 590)        (112 753)           (65 738)
Dividends paid                                                                                  (486 456)        (542 658)          (542 658)
Net cash used in financing activities                                                           (537 046)        (614 182)          (608 396)
Net (decrease)/increase in cash and cash equivalents                                            (110 749)        (152 172)            187 155
Cash and cash equivalents at 1 January                                                          2 094 784        1 907 629          1 907 629
Cash and cash equivalents at end of period                                                      1 984 035        1 755 457          2 094 784

Notes to the condensed consolidated interim financial statements
For the six months ended 30 June 2017

1.  Reporting entity
    JSE Limited (the "JSE” or the "Company”) is a company domiciled in South Africa. The registration number is 2005/022939/06. The JSE is
    licensed as an exchange in terms of the Financial Markets Act, 19 of 2012. The JSE has the following main lines of business: primary market
    services, trading, clearing and settlement services and market data sales. The address of the Company's registered office is One Exchange
    Square, 2 Gwen Lane, Sandown. The condensed consolidated interim financial statements of the Company as at and for the six months
    ended 30 June 2017 comprise the Company and its subsidiaries and controlled Structured Entities (collectively referred to as the "Group”
    and individually as "Group entities”) and reflect the Group's interest in associates.
 
2.  Statement of compliance
    The condensed consolidated interim financial statements of the Company have been prepared in accordance with International Financial
    Reporting Standards (IFRSs) IAS 34 interim financial reporting, the SAICA financial reporting guides as issued by the Accounting Practice
    Committee, the Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the
    requirements of the Companies Act, 2008.
 
3.  Changes in accounting policies
    The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial
    statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2016. The accounting
    policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the
    preparation of the Group's annual consolidated financial statements for the year ended 31 December 2016, except for the adoption of new
    standards effective as of 1 January 2017. The Group has not early adopted any other standard, interpretation or amendment that has been
    issued but is not yet effective.
 
4.  Comparative figures
    Unless otherwise indicated, comparative figures refer to the six months ended 30 June 2016 and the year ended 31 December 2016.
 
5.  Use of estimates and judgements
    Judgements and estimates are consistent with those in the consolidated financial statements as at and for the year ended 31 December 2016.
 
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 2016.
 
7.  New standards and interpretations not yet adopted
    There are a number of forthcoming new standards and interpretations or amendments to standards and interpretations, which have been
    issued by the International Accounting Standards Board (IASB) prior to the publication of these financial statements, but are effective only in
    future accounting periods, as listed below:
 
    IFRS 9: Financial Instruments - effective date: 1 January 2018
    The amendments affect the classification, measurement and derecognition of financial assets and financial liabilities. The amendment will
    be adopted by the Group for its financial reporting period ending after the date the statement comes into effect. The Group does not expect
    a significant impact from the adoption of this statement.
 
    IFRS 15: Revenue from Contracts with Customers - effective date: 1 January 2018
    The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time
    or over time. The model features a contract based five-step analysis of transactions to determine whether, how much and when revenue
    is recognised. The Group and Company are assessing the potential impact on the financial statements resulting from the application of
    IFRS 15.
 
    IFRS 16: Leases - effective date: 1 January 2019
    IFRS 16 was published in January 2016. It sets out the principles for the recognition, measurement, presentation and disclosure of leases
    for both parties to a contract, i.e. the customer ("lessee”) and the supplier ("lessor”). IFRS 16 replaces the previous leases Standard,
    IAS 17 Leases, and related interpretations. IFRS 16 has one model for lessees which will result in almost all leases being included on the
    Statement of Financial position. No significant changes have been included for lessors.
    Early adoption is permitted only if the entity also adopts IFRS 15. The transitional requirements are different for lessees and lessors.
    The Group and Company are assessing the potential impact on the financial statements resulting from the application of IFRS 16.

                                                                                               Six months ended                  Year ended
                                                                                      30 June 2017        30 June 2016     31 December 2016
                                                                                                                                  (audited)
                                                                                             R'000               R'000                R'000

8.  Revenue and operating segments
    Revenue comprises:
    Capital markets
      Commodity derivatives fees                                                            31 666              34 518              69 725
      Currency derivatives fees                                                             23 710              18 836              37 573
      Equity derivatives fees                                                               84 083              90 464             177 335
      Equity market fees                                                                   234 711             289 465             555 439
      Interest rate market fees                                                             30 222              31 620              60 318
      Primary market fees                                                                   81 854              76 030             164 368
    Post-trade services
      Back-office Services (BDA)                                                           148 824             151 092             315 981
      Clearing and settlement fees                                                         186 319             212 171             412 741
      Funds under management                                                                46 281              46 281              94 940
    Information services 
      Colocation fees                                                                        9 998              10 167              19 938
      Indices net of FTSE                                                                   15 318              20 839              42 150
      Other market data fees                                                               107 376             118 506             235 956
    Trading and market services
      Trading services                                                                      16 371              12 046              23 401
    Total revenue excluding Strate ad valorem fees                                       1 016 733           1 112 035           2 209 865
    Strate ad valorem fees - cash equities                                                  62 599              64 375             128 931
                                                                                         1 079 332           1 176 410           2 338 796
 
9.  Personnel expenses
    Remuneration paid                                                                      218 762             220 592             522 233
    Gross amount paid                                                                      226 487             231 122             541 576
    Less: Capitalised to intangible assets                                                 (7 725)            (10 530)            (19 343)
    Long-term incentive schemes                                                             25 906              25 135              42 763
                                                                                           244 668             245 727             564 996

10. Other expenses
    Other expenses                                                                       (270 971)           (256 746)           (562 486)
    Technology costs                                                                     (128 743)           (133 153)           (282 658)
                                                                                         (399 714)           (389 899)           (845 144)

11. Income tax expense
    The Group's consolidated effective tax rate for the six months ended 30 June 2017 was 28% (for the six months ended 30 June 2016: 26%;
    for the year ended 31 December 2016: 26%).

                                                                                             Six months ended                   Year ended
                                                                                      30 June 2017        30 June 2016    31 December 2016
                                                                                                                                 (audited)
                                                                                             R'000               R'000               R'000

12. Earnings and headline earnings per share
    12.1   Basic earnings per share
           Profit for the year attributable to ordinary shareholders                       419 434             512 650             919 702
           Weighted average number of ordinary shares:
           Issued ordinary shares at 1 January                                          86 877 600          86 877 600          86 877 600
           Effect of own shares held (JSE LTIS 2010)                                   (1 440 033)         (1 394 319)         (1 305 370)
           Weighted average number of ordinary shares at
           30 June/31 December                                                          85 437 567          85 483 281          85 572 230
           Basic earnings per share (cents)                                                  490.9               599.7             1 074.8
    12.2   Diluted earnings per share
           Profit for the year attributable to ordinary shareholders                       419 434             512 650             919 702
           Weighted average number of ordinary shares (diluted):
           Weighted average number of ordinary shares at
           30 June/31 December (basic)                                                  85 437 567          85 483 281          85 572 230
           Effect of LTIS Share Scheme                                                     562 911             696 265           1 016 489
           Weighted average number of ordinary shares (diluted)                         86 000 478          86 179 546          86 588 719
           Diluted earnings per share (cents)                                                487.7               594.9             1 062.1
           The average market value of the Company's shares for purposes of
           calculating the dilutive effect of share options was based on
           quoted market prices using a volume-weighted average price for
           the period
    12.3   Headline earnings per share
           Reconciliation of headline earnings:
           Profit for the year attributable to ordinary shareholders                       419 434             512 650            919 702
           Adjustments are made to the following:
           Profit or loss on disposal of property and equipment                               (11)                (43)               (66)
           - Gross amount                                                                     (15)                (60)               (92)
           - Taxation effect                                                                     4                  17                 26
           The SA SME Fund Limited - write-down of investment                                    -                   -              5 000
           - Gross amount                                                                        -                   -              5 000
           - Taxation effect                                                                     -                   -                  -
           Net realised gain on disposal of available-for-sale financial assets
           (no taxation effect)                                                            (1 722)            (12 433)           (14 820)
           Headline earnings                                                               417 701             500 174            909 816
           Headline earnings per share (cents)                                               488.9               585.1            1 063.2
    12.4   Diluted headline earnings per share
           Diluted headline earnings per share (cents)                                       485.7               580.4            1 050.7

13. Intangible assets
    Included in the intangible asset of R464 million (June 2016: R409 million) (December 2016: R452 million) is work in progress of
    R212.6 million (June 2016: R201 million) (December 2016: R171 million), mainly in respect of integrated trading and clearing.

14. Financial instruments
    The carrying amount of all significant financial instruments approximates the fair value.

                                                                                               Six months ended                Year ended
                                                                                      30 June 2017        30 June 2016   31 December 2016
                                                                                                                                (audited)
                                                                                             R'000               R'000              R'000
                                           
15. Reserves                                           
    Investor protection funds1                                                             425 535             429 986            415 924
    - BESA Guarantee Fund Trust                                                            110 918             108 382            109 448
    - JSE Derivatives Fidelity Fund Trust                                                  163 049             167 707            157 971
    - JSE Guarantee Fund Trust                                                             151 568             153 897            148 505
                                           
    Non-distributable reserves                                                             425 535             429 986            415 924
    JSE LTIS 2010 reserve2                                                                  85 938              43 108             59 776
                                                                                           511 473             473 094            475 700
     
    (1) These funds were established for the purpose of investor protection in the event of a member defaulting in the Equity, Equity Derivatives and Bond Markets.
    (2) This reserve relates to the portion of the LTIS 2010 Long-Term Incentive Scheme that has been expensed to date.


16. Share-based payments
    (i)     Vesting of Allocation 4 Tranche 2 shares during the period under review
            The fourth award ("Allocation 4”) under LTIS 2010 was granted in May 2013 with the following vesting profile:
            Tranche 1: 50% of the total award, which vested on 1 June 2016.
            Tranche 2: 50% of the total award, vesting on 4 August 2017 (previously disclosed as 1 June 2017). All LTIS 2010 participants in the
            employ of the Company as at 1 June 2017 will be eligible to participate in the vesting of this Tranche in accordance with the terms
            and conditions of the Scheme rules.

    (ii)    Vesting of Allocation 5 Tranche 1 shares during the period under review
            The fifth award ("Allocation 5”) under LTIS 2010 was granted in May 2014 with the following vesting profile:
            Tranche 1: 50% of the total award, vesting on 4 August 2017 (previously disclosed as 1 June 2017). All participants in the employ of the
            Company as at 1 June 2017 will be eligible to participate in the vesting of this Tranche in accordance with the terms and conditions
            of the Scheme rules.
            Tranche 2: 50% of the total award, vesting on 1 June 2018.

    (iii)  Grant of Allocation 8 under LTIS 2010 during the period under review
            In accordance with shareholder approval, previously granted, for the provision of financial assistance to the JSE LTIS 2010 Trust, the
            Board approved a fresh annual allocation of shares ("Allocation 8”) to selected employees for the 2017 year, and these individual
            allocations were all accepted by scheme participants by 3 March 2017. Allocation 8 comprised a total of 290 530 JSE ordinary shares
            and these shares were acquired in the open market by 3 March 2017, at a volume-weighted average price (including all execution
            costs) of R147.92 per ordinary share. These shares are held in trust and are restricted until all vesting conditions are fulfilled
            whereupon the shares vest.
            Included in the total number of shares granted of 290 530, a total of 153 630 corporate performance shares has been granted to
            members of the JSE's Executive Committee. No personal performance shares were allocated under Allocation 8.

            Information on Allocation 8 is as follows:
                                                                                                                                     Corporate
                                                                                                                                   performance
                                                                                                                                        shares
            Share price at grant date (rands per share)                                                                                 147,92
            Total number of shares granted                                                                                             290 530
            Dividend yield                                                                                                                  3%
            Grant date                                                                                                            3 March 2017
            Vesting profile:
             50% of the shares awarded vest on 1 March 2020                                                                            145 265
             50% of the shares awarded vest on 1 March 2021                                                                            145 265
     
            Fair value charge to profit and loss.
            The profit or loss charge for the period, calculated using the Black-Scholes valuation methodology, in respect of allocations granted
            under LTIS 2010 is as follows:
                                                                                                                      Six months ended 30 June
                                                                                                                       2017               2016
                                                                                                                      R'000              R'000
            Allocation 3 (granted in June 2012)                                                                           -              1 071
            Allocation 4 (granted in May 2013)                                                                        2 575              5 012
            Allocation 5 (granted in May 2014)                                                                        8 849              3 980
            Allocation 6 (granted in June 2015)                                                                       2 181              4 513
            Allocation 7 (granted in October 2016)                                                                    6 154                  -
            Allocation 8 (granted in March 2017)                                                                      2 492                  -
                                                                                                                     22 251             14 576

17. Contingent liabilities and commitments
    17.1  Contingent liabilities
          There were no material changes to the contingent liabilities as disclosed in the annual financial statements for 31 December 2016.

    17.2  Commitments
          There were no material changes to the commitments as disclosed in the annual financial statements for 31 December 2016.

18. Fair value estimation
    Financial instruments measured in the statement of financial position at fair value require disclosure. The following is the fair value
    measurement hierarchy:
    - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
    - Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, as prices) or
      indirectly (that is, derived from prices) (level 2).
    - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

                                                                          Level 1              Level 2             Level 3       Total balance
                                                                            R'000                R'000               R'000               R'000
    30 June 2017
    Available-for-sale financial assets                                   149 404              146 460                   -            295 864
    30 June 2016
    Available-for-sale financial assets                                   163 170              139 622                   -            302 792
    31 December 2016
    Available-for-sale financial assets                                   153 354              140 116                   -            293 470

    The fair value of financial instruments traded in active markets is based on quoted market prices, which represent actual and regularly
    occurring market transactions between market participants at the reporting date. A market is regarded as active if quoted prices are
    readily and regularly available from an exchange, dealer, broker or industry group pricing market transactions on an arm's length basis and
    transactions occur regularly. The quoted market price used for financial assets held by the Group is the current bid price. These instruments
    are included in level 1. Instruments included in level 1 comprise primarily FTSE 100 equity investments classified as available-for-sale.
    
    The fair value of available-for-sale financial assets is determined by reference to the quoted bid price for equity instruments and the clean
    price from a quoted exchange for interest-bearing instruments, at the reporting date. In respect of unit trusts, valuations are carried out
    in accordance with the agreed principle that units in collective investment schemes shall be valued by reference to their middle market
    price where the units have a bid/offer spread, or to their most recently published net asset value (NAV). In the absence of final bid/offer
    prices or final net asset values, estimated figures may be relied upon. The value of any underlying fund is provided by the manager or the
    administrator of that fund. Should the manager be in any doubt as to the valuations, the manager will request an independent third party
    to review the valuations in order to confirm their fairness. The NAV per share is calculated and rounded down to four decimal places, any
    rounding to be retained for the benefit of the fund.
   
    If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. For all other financial
    assets and liabilities, the carrying value approximates the fair value.
    
    Sandton
    3 August 2017
   
    Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)

www.jse.co.za



Date: 03/08/2017 04:09:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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