Does the JSE’s SENS still make sense?

There was once a time when the JSE’s listing requirements prescribed that every corporate activity that had an impact on an issuer’s share price should be published in a major English and Afrikaans newspaper on the day.

It served a significant blow to the publishing industry’s profits when the bourse pulled the plug on this dual-medium requirement. More than a decade ago, market participants of the exchange came together online, in one place and for the first time. An evolutionary step, and a consequence of the exchange going electronic.

But it was their only step, as SENS remained fixed in its single text file format forever since. It was the executive John Burke – now the former director of issuer regulation – that looked after the dinosaur during the dark ages. Burke was there forever and a day, but I was told he left in November 2019. Strangely, I didn’t see an announcement of his departure anywhere, but he apparently got a generous severance package when he left the building.

With him gone the JSE recently issued a paid-for announcement, that they are looking into ways to reinvent the SENS structural design. But as it stands, data providers like Profile Media, Sharenet and Bloomberg receive the JSE feed in this flat file format, which initially they had to manually input into their systems, which is more compatible with dot matrix printers than digital integration. They have managed to develop a capability to streamline the upload of SENS data feeds and at their own cost.

The PDF format of the SENS announcement is published in the cloud and can then be accessed by the SENS subscribers and their customers, but it is not a preferred format, data providers say. The JSE charges a flat distribution per month of around R5,600 for the privilege of live access distributors need to pay between R2,900 and R3,500 to extract either end-of-the-day or 15-minute delayed updates. Other user costs may also apply.

The JSE gets this information from the listed companies free, and have to upload it to the website themselves. Sens is a service provided to issuers as part of their listing fees, which is around 2% of their market cap.

And leaving companies to their own devices means the information reflected is disorganised, there’s a diversity of definitions and a total lack of standardisation. But what is unique to South Africa is what is referred to as headline earnings per share (HEPS). It’s something you won’t necessarily see in international listed financial statements.

The JSE subscribes to the International Accounting Standards Board (IASB) view that there is no single number that encapsulates the performance of an entity. Investors and analysts worldwide have expressed this view for some time. The market takes note of a wider information set.

Nevertheless, there is still the call from users for a single earnings number that can be used as an unambiguous reference point. The headline earnings survey carried out by SAICA in 2006 and subsequent interviews with various user groups, including fund managers, analysts and financial institutions, showed a large demand from users in general for a clearly defined reference number (other than the earnings per share number in terms of IAS 33 – Earnings per Share), which can be used for reporting and comparative purposes.

The JSE has said on many occasions that headline earnings should not be seen as divergence or a departure from the recognition criteria for revenue, expenses, gains and losses in IFRS. Instead, it is a way of dividing the IFRS reported profit between re-measurements that are more closely aligned to the operating/trading activities of the entity, and the platform used to create those results. Headline earnings, based on these principles, have been used in South Africa since 1995.

Back to the delay in crossing the digital divide. 

The last time they tried, the JSE almost drowned. It was 15 years ago in its attempt to integrate its 30-year-old back-end platform, which included SENS, broker data and other information with a hyper-modern front-end it just bought from the London Stock Exchange. That was in the years when we referred to local indices with the FTSE/JSE prefix.

When the project cost hit half a billion rand and showed no significant progress, then CEO Russell Loubser decided to cut their losses and shut it down.

Current CEO, Leila Fourie, who worked for Accenture then, was the consultant brought in to officiate the installation of the front-end solution together with the members of the FTSE Team in London with great success. It was prior to the merger attempt, which was also an Accenture project.

After a stint at Standard Bank, She later joined the JSE as Executive Director of Post Trade and Settlement Services to head up the settlement cycle project to reduce it from T+5 to T+3 – settlement three or five days after the trade takes place. This was completed in mid-2016.

She moved to Australia shortly after but returned to her roots when she took over as group CEO from Nicky Newton-King late last year.

BM/DM

• Story corrected to indicate some fees are paid monthly not yearly and to correct Fourie's involvement in the JSE prior to becoming its CEO.