South Africa: JSE Outshines the Companies on Its Boards

Source from:  Business Day (Johannesburg) 13 August 2008 08/14/2008

THE JSE yesterday released a healthy set of interim results, which showed attributable profit rising 326% to R173m, in a results season peppered with less than stellar figures. The means the local stock exchange is now in a position to use its more than R837m in cash for the acquisition of African exchanges, the purchase of central securities depositary Strate, and technology upgrades. "Nigeria is too big to ignore," Russell Loubser, CE of the JSE, said yesterday when asked which stock exchanges in Africa could be attractive to the JSE. "But you've got to be careful." Loubser, who has long been involved with the World Federation of Exchanges (WFE), said that having helped Cairo and Mauritius to join the federation, Nigeria was now in the process of joining. Once it was part of the WFE, Loubser said, investors would be less hesitant. The JSE has wanted to attract African companies to its boards and expand into the continent for more than two years now, but yesterday Loubser was hopeful that renewed efforts would mean deals would be finalised within the next six months. The company's share price, which reached record highs at R92 in January, at first gained the most in three weeks to R49,74 when results were released at lunch time yesterday. But later, when news hit the wires that the JSE was keen on African exchange acquisitions, the share dropped sharply to R46 which is where it closed the day. Ricco Friedrich, head of value managed shares at Sanlam Investment Management (SIM), which is a shareholder in the JSE, said he was not sure it made sense for the JSE to buy another exchange when it already had one of the best trading platforms in Africa. He said SIM would need to see the prices on any such deal, and inward listings might be more attractive. It was on turbulent markets and increased trading that the JSE managed to lift revenues 24% to R509m in the six months to June. Friedrich said the exchange's high volume growth was particularly pleasing, but this was not a result of management action. "But if you focus on revenues, management has done well with new products," Friedrich said, citing the growth in currency futures. According to the JSE, operating costs, excluding share-based costs mostly linked to empowerment transactions, rose 6,4%, but total costs dropped 15%. Friedrich said, however, that personnel costs had risen 41% to R82m thanks to IT staff being integrated back into the JSE this year. But there were more vacancies to be filled and this was of concern to SIM. The company said it would raise the issue with the JSE. Despite higher staff costs, the tax rate fell and the JSE reported basic earnings a share 322% higher at R2,02. The JSE said its dividend policy remained the same with a cover of between 1,5 and 2,5 times. Listings had slowed from last year with 13 companies taking to the boards in the first half of the year. Nonetheless Loubser said there were still listings in the pipeline, with British American Tobacco to be the highlight of the year. Enditem