Jse Limited · JSE:JSE
Jse — FY2017 Earnings Presentation
31 slides from Jse's earnings presentation, Feb 21, 2018
Slide 1: 2017 Year-End Results
2017 YEAR-END RESULTS 21 February 2018 JSE Limited 1
Slide 2: Operating environment for 2017
Operating environment for 2017 GLOBAL IN SA US has provided a welcome fiscal lead – Further downgrades still some labour market slack Conditions improved in Europe – rising Declining business confidence for business and consumer confidence most of the year, improving slightly since December China’s
Slide 3: What 2017 meant for our stakeholders
What 2017 meant for our stakeholders Particularly noisy local socio-economic environment Declining value and volume traded in key markets for most of 2017, with uptick in Q4 Reduced planned headcount by 17% In closing stages of ITaC and government bond ETP Focused on restoring stability following op
Slide 4: 2017 financial drivers
2017 financial drivers 5% 4% 21 11% Equity Billable equity Number of IPOs Equity derivatives transactions value traded* (2016: 18) value traded (2016: 15%) (2016: 18%) (2016: 4%) 30% 12% 45% Flat Interest rate Commodity Currency Bond nominal value derivatives contracts derivatives contracts derivati
Slide 5: How this translated in our business
How this translated in our business 5% 1% 9% 9% R2.2bn R1.40bn R884m R836m Operating Operating EBIT NPAT revenue expenses (2016: R975m) (2016: R920m) (2016: R2.3bn) (2016: R1.41bn) Flat 9% 6% R187m R977m 977.4 cents 996.6 cents Total capital Net cash flow EPS HEPS investment from operations (2016: 1
Slide 6: Quality of earnings
Quality of earnings 1 001 976 977 942 912 888 818 740 686 633 R’m 2013 2014 2015 2016 2017 Adjusted earnings* Cash generated from operations *Earnings adjusted for non-cash items: depreciation, amortisation, forex profit/loss, impairments, goodwill write-down 6
Slide 7: Financial performance
Financial performance (Rm) 2017 2016 Revenue 2 229 2 339 Other income 52 46 Total revenue 2 281 2 385 Personnel expenses (549) (565) Other expenses (848) (845) Total expenses (1 397) (1 410) EBIT 884 975 EBIT % 39% 41% Net finance income 233 214 Share of profit of equity-accounted investee 35 59 Pro
Slide 8: Trends
Trends Total revenue 2017 revenue as a % total -4% 12 11.9 11.8 11.7 11.6 11.5 11.4 11.3 Primary Markets: 9% (2016: 7%) 11.2 11.1 11 10.9 10.8 10.7 10.6 10.5 10.4 10.3 10.2 10.1 10 9.9 9.8 9.7 9.6 9.5 Equity Market: 25% (2016: 26%) 9.4 9.3 9.2 9 .1 8.9 8.8 8.7 8.6 8.5 8.4 8.3 8.2 8 .1 7.9 7.8 7.7 7.
Slide 9: External and internal capital expenditure
External and internal capital expenditure R205m R179m R187m Grow the business • Integrated Trading and Clearing project 1 – 2014, 2015, 2016, 2017 • ETP for government bonds – 2016, 2017 R130m 124 103 115 61 Maintain the business • Business as usual – 2014, 2015, 2016, 2017 • HR system – 2017 • Cust
Slide 10: Operating expenditure
Operating expenditure Total operating expenses down 1% to R1.40bn (2016: R1.41bn) R1.41bn R1.40bn Personnel costs 3% or R16m to R549m (2016: R565m) • Headcount at year-end 24% to 364 (2016: 476*). Average headcount 10%. Gross 565 549 remuneration per employee 7%. Contributed -3 percentage po
Slide 11: Operating expenditure (continued)
Operating expenditure (continued) Total operating expenses down 1% to R1.40bn (2016: R1.41bn) R1.41bn R1.40bn Depreciation 10% or R10m to R109m (2016: R99m), largely owing to the annualised impact of projects implemented (T+3 phase 3, ITaC project 1a) and hardware refreshes. This 565 549 is offset
Slide 12: Technology cost composition and growth
Technology cost composition and growth Technology costs 9% Cost saving resulted from significant reduction in contractor spend and the benefit of a stronger rand on foreign denominated spend 2016 115 70 63 22 13 R283m 2017 118 70 34 23 12 R257m Software maintenance and licences External services C
Slide 13: Cashflow view
Cashflow view Good cash flow and no debt 977 157 51 486 Cash (Rm) 2 377 2 095 Cash December 2016 Cash generated from Investing activities Financing activities Dividends paid Cash December 2017 operations 13
Slide 14: Return to shareholders
Return to shareholders 6.25 6.05* 5.60 1.05 4.80 4.00 0.80 0.50 6.05 5.60 5.20 4.00 3.50 2013 2014 2015 2016 2017 R346m R417m R543m R487m R526m Ordinary dividend Special dividend * Ordinary dividend – growth of 8% (2016: 8%). Dividend cover 1.56 times (2016: 1.9 times) 14
Slide 15: Capex external spend
Capex external spend Capital intensity policy applied from 2018 2016 2017 2018 Integrated Trading and Clearing project 1 105 100 30 ETP for government bonds 2 1 1 T+3 phase 3 10 - - Customer relationship management system 9 - - HR system - 4 1 Project capex 126 105 33 Business as usual 59 67 49 New
Slide 16: 16
16
Slide 17: Capital Markets: Primary Market
Capital Markets: Primary Market Revenue 9% of total revenue Revenue 10 % to R181m (2016: R164m) 21 new company listings, 15 new ETFs, 2 ETNs, 253 warrants and structured products (2016: 18 listings; 2 ETFs; 1 ETN; 215 warrants and structured products). There were 32 delistings (2016: 25) New: 2 RE
Slide 18: Capital Markets: Equity Market
Capital Markets: Equity Market Billable value traded 25% of total revenue 600 16 R6.8tr 500 14 Revenue 11% to R507m (2016: R569m*) 12 400 10 300 8 Billable value traded 4% 200 6 4 100 2 Trades 5% to 68m (2016: 71m) - - 2014 2015 2016 2017 Colocation 31% of overall value traded (2016: 31%) Trad
Slide 19: Capital Markets: Bonds and Financial Derivatives
Capital Markets: Bonds and Financial Derivatives Equity derivatives value traded 13% of total revenue 300 R6.2trn 8 Revenue 2% to R281m (2016: R275m) 250 7 6 200 5 Equity derivatives revenue 4% to R170m (2016: R177m) 150 4 • Contracts traded 27% to 312m (2016: 427m) 100 3 • Value traded 11%
Slide 20: Capital Markets: Commodity Derivatives
Capital Markets: Commodity Derivatives 3% of total revenue 80 Contracts traded 4.0 Revenue 2% to R68m (2016: R70m) 3m 70 3.5 Value traded 41% to R569bn (2016: R958bn) 60 3.0 Contracts traded 12% to 3.0m (2016: 3.4m) 50 2.5 40 2.0 Q1 of the year saw one of the tightest stock levels on record in
Slide 21: Post-Trade Services: Back-Office Services (BDA)
Post-Trade Services: Back-Office Services (BDA) 14% of total revenue Effective rate 320 0.3 Revenue 7% to R293m (2016: R316m) 310 0.25 Follows Equity Market transaction volumes 300 0.21 bps 0.2 290 R14m in price reductions (2015: R18m; 2016: R56m) accounts for the majority of the revenue decline 2
Slide 22: Post-Trade Services: Equity Clearing and Settlement
Post-Trade Services: Equity Clearing and Settlement Effective rate 18% of total revenue 450 0.35 Revenue 7% to R384m (2016: R413m) 400 0.3 350 0.25 Follows Equity Market value traded 0.25bps 300 0.2 Reflects only Equity Market clearing and settlement fees 250 200 0.15 150 0.1 100 0.05 50 0 0 2014
Slide 23: Information Services: Includes Market Data
Information Services: Includes Market Data Revenue breakdown 13% of total revenue Revenue 6% to R272m (2016: R288m*) • 27 new clients have signed up for Market Data products (11 local clients and 16 international clients) • Passive tracking products 15 • Continued growth in products tracking JSE
Slide 24: 24
24
Slide 25: 2018 strategic priorities
2018 strategic priorities To be the best global platform in emerging markets Complete our large technology investments to deliver growth Drive operational resilience to better serve our clients Maintain our strong cost controls Embed an agile, client-led culture Drive transformation Drive new produc
Slide 26: 26
26
Slide 27: JSE liquidity
JSE liquidity Monthly liquidity: 2011 to 2017 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov 2011 2012 2013 2014 2015 2016 2017 WF
Slide 28: Equity Market: JSE effective pricing trend
Equity Market: JSE effective pricing trend 3-year price trend 0.41 0.39 0.36 0.30 0.29 0.26 0.25 Fees (in bps) 0.22 0.21 2015 2016 2017 Trading fee: Equity Market Equity Market Clearing and Settlement BDA fees 2015: BDA fee reduced by 20% 2016: Option delta (OD) fee reduced to zero 2017: BDA fee red
Slide 29: Technology development drives trade
Technology development drives trade 2001 2002 2003 2005 2007 2010 2012 2016 JV with GL • JSE SETS DMA LMIL to Infolect JSE TradElect Hidden order JSE trading • T+3 Trade: Talk • Strate (InfoWiz) functionality engine upgrade • EME upgrades electronic settlement environment 20 000 1 800 18 000 1 600 1
Slide 30: Financial metrics
Financial metrics Ratios 2017 2016 2015 2014 2013 Operating margin 39% 41% 45% 38% 35% EPS 977.4 1 074.8 1 051.0 742.4 592.1 HEPS 996.6 1 063.2 1 026.3 735.0 644.6 PE 15.8 15.3 12.2 16.3 15.2 Dividend yield (ordinary) 4.0% 3.4% 4.1% 3.3% 3.9% Dividend yield (total) 4.0% 3.4% 4.9% 4.0% 4.5% EBITDA 99
Slide 31: Thank You
ts ai rebraary 201 THIS IITI & ‘ 1 a meme, 5 BRE wy, Tee Tit Stee ay “Me * | r ” pw