Profit growth sees JSE up dividend (2024)

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JIMMY MOYAHA: From JSE-listed companies to the JSE itself. The JSE has reported its full-year results, and as it stands, the JSE has a value of R7.6 billion. I’m joined on the line by Dr Leila Fourie, who is the chief executive of the Johannesburg Stock Exchange, to reflect on those numbers and some of the developments that we know [of] from the JSE stable.

Good evening, DrFourie. Thanks so much for taking the time. Let’s start with the numbers. They were positive in many respects, earnings up and dividends up as well. How do you reflect on that?

LEILA FOURIE: Good evening, Jimmy. Yes, indeed we did have a very strong performance against a very challenging macroeconomic backdrop. Our headline earnings per share were up 12.2%, and our net profit was up 11%. That really culminated in a return on equity way above our cost of capital at 19.4%. Last year that was 17.8%.

The element that really supported the strong results was a resilient and diversified operating revenue profile, which was up 6.9%; and that was particularly pleasing despite the equity trading volumes, our largest trading market, being down by 9.5%.

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These results were far ahead of analyst forecasts, and the results were supported by diversification across both asset classes, so equity, bond, derivative, commodity-type markets, and then also between trading and non-trading. We are now deriving more than 37% of our revenue from non-trading businesses.

These results supported a healthy cash generation. Our operating cash was up 13.6%.

And all of this was achieved through a very conscious implementation of our strategy through modernisation, partnerships with global leaders, and delivering innovation much faster through partnerships rather than building grassroots from the ground up.

JIMMY MOYAHA: Dr Fourie, speaking of partnerships and the strategy that the business has, there’s capex of R155 million and a bunch of new partnerships that you’ve alluded to and improvements to the offerings. Can you just shed some light on the decisions around allocations – what the focus areas might be from that perspective? We know that the JSE had very little downtime in this last year, but even the downtime that you had, I would imagine you are working on improving. But what other areas are you also allocating this capex to?

LEILA FOURIE: Jimmy, we constantly focus on our core. After all, we are a trading infrastructure, and so a large part of our capex goes to cyber, to resilience, to building the core. This culminated in a 99.8% uptime, almost 100% – and that is above our long-run average of 99.3%.

In addition to that, we are also diverting a large part of our capex towards growing the business.

We are growing the Information Services business, which is really the transferring of master data into a cloud data lake that we’ve built, and that will enable a data marketplace and a self-service business intelligence. We are building a Bond Central Counterparty, or CCP, which is really the settlement and underwriting environment.

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We are looking at some digital asset opportunities and then, excitingly, we also announced today [Monday] that we have launched a collaboration with Amazon Web Services.

We will be using Amazon Web Services, machine learning, artificial intelligence and generative AI technologies to translate our mainframe system from a Cobol-type code into a Java code, and then we are planning to put that into the cloud.

And this is for a critical application which is used by the JSE to manage our systemic risk and to make sure that investors are protected when they trade on the JSE.

The collaboration with AAWS [Admission Applications Web Services] really marks a new area in our financial services. We are planning to leverage and use technology and innovation to drive progress. So we are not only modernising the infrastructure, but we’re aiming to set new standards for the industry and make sure that our standards are fit for purpose and that they enable a cost-effective ability for investors to invest on the JSE.

JIMMY MOYAHA: Dr Fourie, those developments are certainly some that we need to keep an eye on and are excited to hear about, particularly given that the Amazon Web Services [AWS] partnership is similar to the one announced by AWS and the Nasdaq. So clearly the JSE is pushing ahead with world-class developments in that respect.

Can we take a look at the private-placements platform that’s obviously been gaining a lot of momentum since its launch; and I remember attending one or two private-placement invitationals with your teams. That’s a new area that is needed in the ecosystem that is financial services and deal-making in South Africa. But the momentum that that’s picking up on – how is that filtering through into what the JSE intends to do going forward?

LEILA FOURIE: Indeed, our private placements market is a solution designed to address the small- and mid-cap markets, which are often raising capital in the private equity space. So the infrastructure is really a hybrid between private raising of capital and publicly listed entities.

The solution has been in place for a bit over a year now, and it has had a highly successful first year of operation.

We have 41 deals announced on the platform, and the capital to deploy has increased from R12 billion to R20billion. This really highlights significant progress that has been made in scaling this entity. It’s a long-term play.

We are using a global company called Globacap to power that technology – again, a partnership with world-class skilled specialists in the area – to help us rapidly roll out these solutions. And it really meets the need of market participants who are not looking to a more structured, centralised, standardised environment like we have in the listings environment. And it caters to both debt and equity.

So we’ve seen very pleasing progress. We are very happy with the number of deals and the growth in the interest from investors, and we are working with market participants to try and make sure that those deals close and some of them are funded.

JIMMY MOYAHA: Dr Fourie, as we look at the client-centric focus that the JSE is on, do we expect to see things like bitcoin listings or bitcoin ETF [exchange-traded fund] listings any time soon? We’ve seen that ever since the US SEC [Securities Exchange Commission] has passed that – and we’re still going through our own CASP [Crypto-Asset Service Providers] licensing – there is a demand for it, at least at an institutional level. Is that something we expect to see come through in the near future?

But also, are there other plans that the JSE may have in the pipeline? We’ve seen that there were a number of delistings last year, but I imagine it’s always nice to see that the likes of Cilo Cybin kicked off an IPO this year, and we expect that this year will be a lot better.

LEILA FOURIE: Indeed. Jimmy, you may have seen that last year we collaborated with financial institutions and the SAReserve Bank in a project called ‘Project Khokha’ to deliver a tokenised debt and equity solution.

And this year we have devoted capex to look at a digitisation project in the financial markets, partnering with our financial services producers. This may involve tokenised assets.

Now we’ll only be able to launch ETFs with a digital or bitcoin-type underlying once legislation has been passed for those instruments.

We’re not actually able to list – to enable listed entities with a crypto or a digital underlying – in the absence of regulation. So we are pleased that there are papers out and there’s progress being made and we note the SEC’s developments. But ultimately we would look to the regulators once the regulation is finalised. We would certainly look to enable ETF products with bitcoin or such like underlyings.

JIMMY MOYAHA: Well, the future certainly is looking bright, and I look forward to the tokenisation of real-world assets on the JSE. We are certainly heading in that direction.

We’ll leave it at that. Thanks so much, Dr Fourie. That was DrLeila Fourie, chief executive of the Johannesburg Stock Exchange, on its performance throughout the year as well as some new strategic partnerships that they’re bringing to the table.