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JSE turnover declines, CEO to retire

Profitability down by 30%.

NOMPU SIZIBA: Today [Tuesday] the Johannesburg Stock Exchange announced its interim numbers. The JSE is regarded as one of the most efficient stock markets in the world. Group turnover however declined by 7% to just over R1 billion, after-tax profit was down 30% at R400 million, and headline earnings were also down 30% at R4.66/share.

RYK VAN NIEKERK: On the line is Nicky Newton-King, CEO of the JSE. She also surprised the market today by announcing her resignation. Nicky, welcome to the show. You’ve been the CEO for eight years, and you’ve been at the JSE for more than 20. You are part of the DNA of the JSE. Why did you decide to retire?

Read: JSE CEO Nicky Newton-King to retire 

NICKY NEWTON-KING: Hi, Ryk. I think after 23 years at an institution, and eight years as chief executive, and before that eight years as deputy CEO, with many different other executive roles in the 23 years, after that amount of time at an institution, when you really have touched almost all of the DNA, as you say, it’s time to step back.

We are extremely well platformed as the JSE. We’ve made significant investments and we know exactly where we are going in the future, and I think it’s right for this very special institution to be taken forward by someone else.

RYK VAN NIEKERK: The institution of course is dependent on trading volumes. You are the place where buyers and sellers of equities meet and people want to raise equities. Your profitability did decline significantly by 30%. What were the main reasons for that?

NICKY NEWTON-KING: Yes, 29% off. A couple of reasons – most notably because last year we had significant net foreign investment. This year we had significant net foreign disinvestment, and that was a very big driver of what’s actually happening on the markets, and we can see that impact now in the value traded in the equities market. You talk about this every might on the show, how negative people’s sentiment is at the moment. That impacts appetite to trade on the market.

These things turn over time; these things will turn when the country gets growth going, when we make the investments as a country that we need to. But, for the moment, if you compare the first half of this year relative to the first half last year, it has been tougher for us. This will clear out as the year progresses and specifically if we can get growth going as a nation. But this has been a tough first half.

RYK VAN NIEKERK: There also haven’t been many new listings. I can remember MultiChoice was a big one this year. Were there fewer than the normal companies coming to the market, or looking for capital?

NICKY NEWTON-KING: Yes, it’s definitely quieter than normal. This is not just a South African trend; it’s an international trend. All of our peers internationally are expressing a couple of trends – firstly, companies coming to market and then companies going private once they are in the market. But this is significantly lower, and this is a historic low. In the lower-growth economy people are very sensitive about valuations, they are sensitive about the wisdom of coming to the market, and so they hang back on those decisions.

That too turns, and our job is to make sure that our platforms are ready and waiting when they come back to the market.

RYK VAN NIEKERK: Are you planning any job cuts for the rest of this financial year?

NICKY NEWTON-KING: The JSE is extremely focused on its cost resilience. So we have the right number of people, we are making the right investments. We make investments for the long term, notwithstanding that sometimes, as I think you are alluding to, in a difficult economic environment some of those investments feel a little rich. But we have to make investments for the long run, and that’s exactly what we are doing. We know we had to go through a restructuring a couple of years ago, but that well positioned the JSE for the future and so I fully expect that we will continue to invest now.

RYK VAN NIEKERK: Thank you, Nicky, for your time.

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Net foreign disinvestment and local disinvestment.

It is so easy to access foreign markets now that the risk of investing or trading the local market is not worth it. It’s like a bad soap opera. One shock after the next.

When last did the JSE reward you for the risk you take investing in this small emerging market?

End of comments.

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