JSE resilient amid delisting woes

The JSE released solid results for the 2023 financial year, with double-digit earnings and profit growth, as the company’s attempts to diversify its revenue streams bear fruit.

The JSE Limited – the company that runs the Johannesburg Stock Exchange – released its results for the year ended 31 December 2023.

The JSE produced strong results, with a growth of 12.2% in headline earnings per share and a return on equity of 19.4%. 

Revenue is up 6% to R2.81 billion, while net finance income grew 66% to R168.89 million, supported by high interest rates.

Operating income grew 6.9% to R2.9 billion, supported by a 15.6% increase in revenue from Information Services and a 20.2% increase in revenue from JSE Investor Services (JIS).

As part of its strategy to diversify revenue, the JSE increased the proportion of its revenue derived from non-trading activity and achieved non-trading income of R954 million.

This brought the company’s profit for the year to R830.98 million – up 11% from 2022.

Basic earnings per share increased by around 12% to 1,019 cents per share.

“We continue to invest in defending our core trading activity while building new services across asset classes and in private capital raising, Information Services and JIS, which enabled non-trading income to increase to 36.8% (2022: 34.6%) of operating income in line with our long-term strategy,” said CEO Leila Fourie.

“We delivered an excellent operating performance with system uptime of 99.89%.” 

“We launched new partnerships to enable us to rapidly innovate in data services, private markets, carbon trading and a modernisation of our broker-dealer accounting (BDA) system, which will ensure the JSE maintains its leading position among emerging market exchange operators.”

This strong performance enabled the JSE to declare a dividend of 784 cents per share for the full year. 

Shrinking stock exchange

These positive results come at a time when many are concerned about the future of the country’s main stock exchange.

Over the past two decades, the JSE has been shrinking as more companies delist from the exchange without enough new companies coming to take their place.

The JSE has seen the number of listings more than halving from 616 in 2000 to just 284 at the end of 2023. 

The past few years, in particular, have seen a spate of delistings, which many attribute to the country’s moribund economy and the lack of incentives for companies to remain listed.

A2X CEO Kevin Brady previously said he is very concerned about the number of delistings and lower trading volumes seen on the JSE over the past few years, as it could have a severe impact on South Africa’s investment industry. 

“A shrinking pot is not good for anyone, even if we’re fortunate enough to be growing within the existing pot,” Brady told Daily Investor last year.

“Delistings are a concern, and obviously, lower trading volumes are a concern.”

“It’s quite scary, actually, if you look at continuous trade for the months of August, September, and October versus the same period last year – it’s down by 20%.”

Brady said this can largely be attributed to the country’s macroeconomic outlook.

He also believes the country lacks innovation and a more forward-looking regulatory regime that would allow industry roleplayers to do more to grow and compete in the market.

Head of investments at Morningstar South Africa, Sean Neethling, has also said the delisting trend raises concerns about the future of investing in local equities. 

“The shortage of new listings, the relatively weak performance of local shares and depressed levels of business confidence have further exacerbated fears among market participants,” he said.