JSE Earnings Call Highlights Record Profits And Momentum

JSE ((JSEJF)) has held its Q4 earnings call. Read on for the main highlights of the call.

JSE’s latest earnings call painted an upbeat picture of a market operator firing on multiple cylinders, with record profitability, strong cash generation and an increasingly diversified earnings base. Management acknowledged specific pressure points, from softer JSE Investor Services revenue to FX‑driven volatility and regulatory overhang, but stressed that structural momentum and a solid balance sheet leave the group well placed.

Record financial performance

JSE delivered its strongest financial year yet, with operating income rising 14.2% year‑on‑year and net profit after tax climbing 16.7% to just over ZAR 1.07bn, breaking the ZAR 1bn barrier for the first time. Headline earnings per share reached ZAR 13.29, up 17.7%, while return on equity improved to 22% from 20.2%, underlining enhanced capital efficiency.

Strong shareholder returns

Shareholders saw a meaningful uplift in cash returns as the total dividend increased 28.1% to ZAR 10.61 per share, including an ordinary dividend of ZAR 9.61 and a ZAR 1.00 special dividend. The ordinary payout ratio of about 78% and total payout ratio of roughly 86% signal management’s confidence in sustainable cash generation and limited immediate funding needs.

Market activity and trading momentum

Trading activity was exceptionally strong, with average daily value traded up 32% for the year, the best performance since 2006–07, and Q3 and Q4 advancing 41% and 30% respectively. Billable equity value traded rose 32% and overall equities value traded 28%, supported by sharp price gains in large caps such as Sibanye and AngloGold, reinforcing JSE’s volume‑linked revenue.

Improved earnings quality and diversification

Earnings quality continued to improve as non‑trading income grew to roughly 35% of operating income from about 29% previously, reflecting a more stable and diversified revenue mix. Over several years, non‑trading nominal income has grown around 92%, while operating leverage of 5.9% and an EBITDA margin of 38.7% show the benefits of scale and disciplined cost control.

Stronger market positioning and foreign flows

JSE’s global standing improved as net foreign inflows climbed to ZAR 122bn from ZAR 82bn and non‑resident ownership increased to 32% from 29.3%. The exchange’s weighting in the FTSE Emerging Market index rose to 4.29% from 3.16%, helping JSE move up to 18th globally by market capitalisation and enhancing its appeal to international investors.

Robust cash generation and balance sheet strength

Net cash generated from operations grew 12.3% to ZAR 1.23bn, with cash and bonds totalling ZAR 3.16bn, up 12.7% year‑on‑year, supporting a cash conversion ratio of 1.64. This robust liquidity limits reliance on external funding and gives JSE ample flexibility for dividends, capex and selective M&A or share repurchases without compromising resilience.

Operational resilience and reliability

Operationally, the exchange remained highly reliable, achieving market availability of 99.96% and recording only three Priority‑1 incidents despite elevated trading volumes. Crucially, there were no equity market outages, and management positioned this reliability as a core competitive advantage in attracting both local and foreign order flow.

Modernization progress and AI adoption

The core BDA system modernization advanced ahead of schedule, with a successful pilot and around 2.2m lines of code already modernized without critical defects, targeting full modernization and large‑scale testing in 2026. Production rollout is planned for 2027, while AI pilots in code translation, testing and listings automation aim to speed delivery and lower long‑term technology costs.

Segment‑level growth drivers

Capital markets revenues grew 18%, powered by strong trading and post‑trade activity, while post‑trade itself advanced 18% and clearing and settlement surged 34%. Information Services revenue rose 10%, supported by global demand and its 68% USD‑denominated base, and derivatives and bond trading also contributed with double‑digit gains in equity and financial derivatives.

JSE Investor Services weakness

JSE Investor Services was a notable weak spot, with revenue falling 7% year‑on‑year after a strong prior‑year base and the drag from lower interest rates. Slower corporate actions activity further weighed on performance, although efforts in customer and asset reunification provided some offset and a potential platform for future recovery.

Volatility in other income

Other income swung sharply lower, dropping around 80% year‑on‑year as foreign exchange losses replaced prior‑year gains and once‑off items such as issuer fines and VAT recoveries did not recur. Management highlighted this line as a source of unavoidable earnings volatility but stressed that underlying operating performance remained robust.

Regulatory and legal uncertainty

The Competition Tribunal referral arising from a competitor complaint remains unresolved, introducing legal and reputational uncertainty even though management assesses the risk of a negative outcome as low. No provision has been recognised and the potential downside is not quantified, but investors were reminded that regulators have historically referenced exposure of up to 10% in related contexts.

Fee and product revenue pressures

Revenue pressure emerged from fee changes and product dynamics, with the planned new BDA fee model deferred and a mid‑2025 cut reducing the per‑transaction fee from ZAR 0.73 to ZAR 0.69, yielding an average of about ZAR 0.71 for the year. While this supports participants, it trims per‑trade revenue in the near term, and commodity derivatives volumes slipped 7% despite strong physical market growth.

Cost and investment headwinds

Costs rose faster than inflation as operating expenses increased 8.3% year‑on‑year, or 6.5% excluding trade‑linked items, with personnel costs up 12.5% and technology expenses up 13%. Management tied this to performance‑linked pay, cloud and FX‑linked licence costs and the BDA program, noting that capex is set to rise in 2026 as modernization spending peaks.

Exposure to market cycles

Management was candid about the group’s ongoing exposure to market cycles and external shocks despite greater diversification, acknowledging that a sharp reversal in trading activity would affect earnings. Stress‑testing is underway to evaluate downside scenarios, but the team argued that growing annuity‑style revenues and a stronger balance sheet provide a larger buffer than in prior years.

Guidance and outlook

For FY2026, JSE guided operating expenses to increase 5–7%, with some variability tied to trading volumes, and capex to rise to ZAR 190–230m as BDA modernization enters a heavier spend phase. The per‑transaction BDA fee is set to remain at ZAR 0.71 for 2026, while the dividend policy stays unchanged at a 67–100% payout range, leaving room for continued high distributions and potential buybacks funded by strong cash balances.

JSE’s earnings call sketched the picture of an exchange combining cyclical volume tailwinds with structural improvements in earnings quality, diversification and technology. While regulatory noise, fee pressure and project‑driven costs remain watchpoints, management’s disciplined capital allocation and visible modernization roadmap suggest the current momentum could be sustained if market conditions hold.