NAIROBI SECURITIES EXCHANGE PLC NAIROBI SECURITIES EXCHANGE PLC
ANNOUNCEMENT OF AUDITED GROUP RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2022
SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
2022 | 2021 | |||||||||
Audited | Audited | |||||||||
Kshs '000 | Kshs '000 | |||||||||
Transactions levy - Equity | 225,838 | 329,777 | ||||||||
Transactions levy - Bond | 79,380 | 66,988 | ||||||||
Data vending income | 93,548 | 52,452 | ||||||||
Annual initial and additional listing fees | 71,175 | 72,041 | ||||||||
Interest income | 104,376 | 105,752 | ||||||||
Broker back office subscription | 29,656 | 23,377 | ||||||||
Capital gain on trading book | - | 28,451 | ||||||||
Unquoted securities platform fees | 6,463 | 5,958 | ||||||||
Dividend from equity investment | 6,047 | 6,500 | ||||||||
Other income | 26,281 | 22,971 | ||||||||
Total income | 642,764 | 714,267 | ||||||||
Staff costs | 177,359 | 171,841 | ||||||||
Systems maintenance costs | 56,001 | 54,636 | ||||||||
Depreciation and amortisation | 48,512 | 54,915 | ||||||||
Building and office costs | 43,193 | 43,818 | ||||||||
Directors' emoluments | 47,289 | 43,606 | ||||||||
Revaluation loss on property | 17,222 | - | ||||||||
Other operating expenses | 161,413 | 119,036 | ||||||||
Total expenses | 550,989 | 487,852 | ||||||||
Operating profit before ECL and fair value movements | 91,775 | 226,415 | ||||||||
Provision for expected credit losses and bond mark to market valuation | (7,432) | (12,158) | ||||||||
Share of loss of associate | (46,544) | (3,389) | ||||||||
Profit before taxation | 37,799 | 210,868 | ||||||||
Taxation charge | (24,075) | (78,334) | ||||||||
Profit for the year | 13,724 | 132,534 | ||||||||
Other comprehensive income for the year | 29,563 | 26,721 | ||||||||
Total comprehensive income for the year | 43,287 | 159,255 | ||||||||
Earnings Per Share* - Basic and diluted (Kshs) | ||||||||||
0.05 | 0.51 | |||||||||
*EPS based on no. of shares | 260,391,721 | 260,004,320 | ||||||||
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||||||
2022 | 2021 | |||||||||
Audited | Audited | |||||||||
Kshs '000 | Kshs '000 | |||||||||
Assets | ||||||||||
Property and equipment | 447,628 | 484,482 | ||||||||
Intangible assets | 108,360 | 126,217 | ||||||||
Investment in associate | 188,275 | 236,752 | ||||||||
Financial assets at fair value through other comprehensive income | ||||||||||
- Quoted equity instruments | 106,829 | 75,333 | ||||||||
Government securities at amortised cost | 202,615 | - | ||||||||
Financial assets at fair value through profit or loss - Government | 256,375 | 365,598 | ||||||||
securities | ||||||||||
Cash and bank balances and bank deposits | 382,231 | 656,861 | ||||||||
Other assets | 341,376 | 269,149 | ||||||||
Total assets | 2,033,689 | 2,214,392 | ||||||||
Equity and liabilities | ||||||||||
Share capital | 1,041,567 | 1,040,017 | ||||||||
Share premium | 279,459 | 278,579 | ||||||||
Revenue reserves | 526,654 | 746,246 | ||||||||
Non controlling interest | 17,366 | 17,518 | ||||||||
Other reserves | 31,996 | 2,969 | ||||||||
Non current liabilities | 13,965 | 15,103 | ||||||||
Current liabilities | 65,573 | 46,890 | ||||||||
Dividends payable | 57,109 | 67,070 | ||||||||
Total shareholders' funds and liabilities | 2,033,689 | 2,214,392 | ||||||||
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
2022 | 2021 | |||||||||
Audited | Audited | |||||||||
Kshs '000 | Kshs '000 | |||||||||
Cash flows from operating activities | ||||||||||
Cash generated from operations | 66,974 | 139,887 | ||||||||
Tax paid | (97,362) | (85,391) | ||||||||
Cash (used in)/generated from operating activities | (30,388) | 54,496 | ||||||||
Cash (used in)/generated from investing activities | (88,455) | 173,068 | ||||||||
Cash used in financing activites | (243,965) | (256,033) | ||||||||
Decrease in cash and cash equivalents | (362,808) | (28,469) | ||||||||
Cash and cash equivalents at the beginning of the year | 613,095 | 641,400 | ||||||||
Effect of foreign exchange rate changes | 1,387 | 164 | ||||||||
Cash and cash equivalents at the end of the year | 251,674 | 613,095 | ||||||||
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | ||||||||||
Non con- | ||||||||||
Share | Share | Revaluation & | Retained | trolling | ||||||
capital | premium | Other reserves | earnings | interest | Total | |||||
Kshs '000 | Kshs '000 | Kshs '000 | Kshs '000 | Kshs '000 | Kshs '000 | |||||
At January 2021 | 1,038,003 | 277,185 | (23,752) | 883,258 | 15,509 | 2,190,203 | ||||
Profit for the year | - | - | - | 130,525 | 2,009 | 132,534 | ||||
Other comprehensive income | - | - | 26,721 | - | - | 26,721 | ||||
2020 dividend declared in | ||||||||||
the year | - | - | - | (137,535) | - | (137,535) | ||||
2021 first special dividend | ||||||||||
declared in the year | - | - | - | (130,002) | - | (130,002) | ||||
Issue of shares to employee | ||||||||||
share ownership plan | 2,014 | 1,394 | - | - | - | 3,408 | ||||
At 31 December 2021 | 1,040,017 | 278,579 | 2,969 | 746,246 | 17,518 | 2,085,329 | ||||
Profit for the year | - | - | - | 13,876 | (152) | 13,724 | ||||
Other comprehensive income | ||||||||||
for the year | - | - | 29,027 | 536 | - | 29,563 | ||||
2021 second special dividend | ||||||||||
declared in the year | - | - | - | (130,002) | - | (130,002) | ||||
2021 final dividend declared | ||||||||||
in the year | - | - | - | (104,002) | - | (104,002) | ||||
Issue of shares to employee | ||||||||||
share ownership plan | 1,550 | 880 | - | - | - | 2,430 | ||||
At 31 December 2022 | 1,041,567 | 279,459 | 31,996 | 526,654 | 17,366 | 1,897,042 | ||||
SUMMARY OF DIRECTORS' REMUNERATION REPORT
During the year, the Group paid Kshs. 47,288,851/- (2021: Kshs. 43,605,820/-) as Directors' remuneration.
INDEPENDENT AUDITOR'S REPORT ON THE SUMMARY FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF NAIROBI SECURITIES EXCHANGE PLC (NSE)
Opinion
The summary consolidated financial statements of Nairobi Securities Exchange Plc (NSE), which comprise
the summary consolidated statement of financial position at 31 December 2022 and the summary consolidated statement of profit or loss and other comprehensive income, the summary statement of changes in equity and the summary consolidated statement of cash flows for the year then ended, are derived from the audited financial statements of Nairobi Securities Exchange Plc and its subsidiaries and structured entities (together, the "Group") for the year ended 31st December 2022.
In our opinion, the accompanying summary consolidated financial statements are consistent, in all material respects, with the audited financial statements of the Group, in accordance with the requirements of the Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulation, 2002 (''the Regulations'') as applicable to summary consolidated financial statements.
Summary consolidated financial statements
The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards and in the manner required by the Kenyan Companies Act, 2015, as applicable to annual consolidated financial statements. Reading the summary consolidated financial statements and the auditor's report thereon, therefore, is not a substitute for reading the audited consolidated financial statements, and the auditor's report thereon. The summary consolidated financial statements and the audited consolidated financial statements do not reflect the effects of events that occurred subsequent to the date of our report on the audited consolidated financial statements.
The audited consolidated financial statements and our report thereon
We expressed an unmodified audit opinion on the audited consolidated financial statements in our audit report dated 30th March 2023.
Directors' responsibility for the summary consolidated financial statements
The directors are responsible for the preparation of the summary consolidated financial statements in accordance with the requirements of the Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulation, 2002 as applicable to summary consolidated financial statements.
Auditor's responsibility
Our responsibility is to express an opinion on whether the summary consolidated financial statements are consistent, in all material respects, with the consolidated audited financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810 (Revised), Engagements to report on summary financial statements.
Other matter
We have not audited operating environment, market performance and future financial expectations by management included in the accompanying summary consolidated financial statements and accordingly do not express any opinion thereon.
The engagement partner responsible for the audit resulting in this independent
auditor's report is CPA Freda Mitambo, Practising certificate No. 2174.
For and on behalf of Deloitte & Touche LLP Certified Public Accountants
Nairobi
30th March 2023
OPERATING ENVIRONMENT IN 2022
The global operating environment in the review period remained challenging as high inflation, tightening monetary policy conditions and slow demand for export products, negatively impacted global and regional economic growth. The International Monetary Fund estimates that international and regional growth declined by 2.6% and 1.1% to settle at 3.4% and 3.6% respectively.
Domestically, the Kenyan economy remained resilient with the National Treasury estimating that the country would record a Gross Domestic Product (GDP) growth of 5.5% in the year under review, compared to 7.5% recorded in the year 2021. This reduction is largely attributable to a sharp increase in energy and food prices stemming from geo-political tensions in Eastern Europe and the prevailing drought situation.
The country also posted heightened inflation which averaged 7.65% throughout the year, exceeding the upper limit set by the Central Bank of Kenya of 7.5%.
The Kenyan shilling depreciated against the US dollar closing the year at Kshs. 123.37 compared to Kshs. 113.14 at the beginning of the review period.
MARKET PERFORMANCE
During the year, the equity market was negatively impacted by rising international and domestic interest rates, which resulted in capital outflows and a reallocation of capital towards fixed income assets. The United States Federal Reserve Bank raised the Fed rate seven times in the year under review to settle at 4.50% at the close of the year up from 0.25% at the beginning of the year. The Central Bank of Kenya (CBK) raised the reserve rate (CBR) three times in the year to close at 8.75% up from 7% at the beginning of the year.
Equity market turnover declined by 31%, to close the year at Kshs. 94.2 Billion from Kshs. 137.4 Billion in 2021. Bond turnover also recorded a decline of 21% to settle at Kshs. 741 Billion from Kshs. 956 Billion.
The NSE 20 Share Index declined by 11.9% to settle at 1,676.10 points in 2022 down from 1,902.57 points in 2021.
The Exchange Traded Fund (ETF) market recorded a turnover of Kshs. 1.28 Billion compared to Kshs. 139 Million recorded in the previous year supported by favorable gold prices.
The NSE Unquoted Securities Platform (USP) recorded a total turnover of Kshs. 647 Million, an increase of 67.2% compared to Kshs. 387 Million recorded in 2021. The USP Is increasingly becoming an attractive fundraising platform for unlisted companies.
The Derivatives Market recorded a turnover of Kshs. 125 Million representing a 57% decrease compared to Kshs. 289 Million in 2021. The total number of outstanding positions held by investors stood at 429 contracts worth approximately Kshs. 13.5 Million in 2022, down from 939 contracts worth Kshs. 36 Million in 2021. This decrease replicates the performance of the equity market.
FINANCIAL HIGHLIGHTS
The Group reported a revenue decline from Kshs. 714 Million in 2021 to Kshs. 642 Million in 2022 largely as a result of the reduced turnover in the equity trading business line. Equity levies reduced to Kshs. 225.8 Million from Kshs. 329.8 Million reported in 2021. Bond levies however increased by 18% to settle at Kshs. 79.4 Million in 2022 compared to Kshs. 66.9 Million reported in 2021.
Data business recorded tremendous growth with revenue increasing to Kshs. 93.5 Million from Kshs. 52.5 Million recorded in 2021 owing to improved product uptake, introduction of new data sets and our partnership with an international data consultant.
Total expenses increased by 13% from Kshs. 487.8 Million in 2021 to Kshs. 551 Million in 2022 on account of increased marketing expenses, cost of business support activities and revaluation loss incurred on the property.
Share of loss of associate (Central Depository and Settlement Corporation) increased from a loss of Kshs. 3.4 Million in 2021 to a loss of Kshs. 46.5 Million in 2022 on account of reduced equity and bonds trading in 2022 and staff restructuring costs resulting from the voluntary early retirement program undertaken by the associate in 2022.
Other comprehensive income in 2022 includes fair value gain of Kshs. 31.5 Million on share price appreciation in our equity investment in the Dar-es-salaam Stock Exchange.
Total assets decreased marginally by 8% from Kshs. 2.2 Billion in 2021 to Kshs. 2 Billion in 2022 on reduced profitability, a revaluation loss on our property asset and reduced cash reserves on 2021 special dividends paid in 2022.
Return on assets and return on equity reduced from 5.89% and 6.31% respectively in 2021 to 0.68% and 0.74% in 2022.
Cash flow from investing activities in the year decereased on the purchase of additional Government bonds and investment in fixed deposits with maturities of more than three months. Cash and cash equivalents reduced to Kshs. 251.7 Million in 2022 from Kshs. 613.1 Million in 2021 on account of additional investments made in Government securities of Kshs. 93.4 Million, fixed deposits of Kshs. 86.8 Million and dividend payment of Kshs. 243 Million. Total investable assets stood at Kshs. 841.2 Million, inclusive of the regulatory restricted funds amounting to Kshs. 296.5 Million.
OUTLOOK - 2023
The global economic outlook remains fragile on account of increasing interest rates, heightened inflation and reduced economic activity. The resultant impact is a reduction in trading activity in global equity markets and increased capital allocation to fixed income and alternative assets.
In line with this, the Exchange has positioned itself to mitigate the impact of these economic challenges through broadening of its product offering to include Derivatives, REITs, ETFs and the USP.
Capital markets financing still remains a core business offering by the Exchange and we are able to support medium to long term financial requirements through our debt and equity market solutions. We are now partnering with the Kenya Government to actualize the listing of State Owned Enterprises (SOEs) through its privatization program on the back of their commitment to bring on board six to ten SOEs in the ensuing period. Equally, we have revitalized our listing program targeting corporates and SMEs through partnerships with other capital market stakeholders.
The Exchange continues to play a leading role in providing a venue for capital raising financing. Through our diversified product offering, we are now able to support capital requirements for the national Government, Corporate and SMEs businesses, real estate practitioners and portfolio managers seeking to de-risk their investments. Our Ibuka Program and the Unquoted Securities Platform (USP) aim to promote capital raising by small and medium sized enterprises. The two offer enterprises flexible admission requirements for companies seeking access to affordable and competitive capital to fund their growth and expansion.
The Board has initiated strategic revenue diversification initiatives to ensure the business continues to grow shareholder value especially in a tough operating environment. Core to these initiatives is to increase revenue from alternative income lines such as data, ETFs and REITs which recorded an exceptional performance in 2022. The company targets to increase the attributions from these income lines.
To increase trading activity in the market, we will build on our day trading infrastructure which contributed to 2% of total turnover in 2022 with a target of 5% this year. The NSE in partnership with other stakeholders have launched a retail mobile application, named Dosikaa, which will support retail investors participation in our market.
Sustainability remains a central focus for the Exchange. To this end, the NSE has established a green bond market and supported compliance to Environmental, Social and governance (ESG) through the NSE ESG Guidance and Disclosure Manual that is currently in use by companies seeking to comply with ESG standards. We are also working towards the development of a carbon credits trading market. We have to date listed the first green bond in the region. We will soon be providing ratings and assessment services for ESG for listed companies.
The market is currently undervalued hence providing a very good entry point for investors. This is in line with the Government's focus of enhancing savings among Kenyans. The capital markets remain an attractive investment opportunity for the attainment of this objective.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Nairobi Securities Exchange Plc will be held on 30th May 2023. Further information will be sent to shareholders ahead of the Meeting.
DIVIDENDS
The Board of Directors recommends to the members at the forthcoming Annual General Meeting the payment of a first and final dividend of Kshs. 0.20 per share (2021: Kshs. 1.40 per share representing a special dividend of Kshs 1.00 per share and a final dividend of Kshs 0.40 per share) to be paid by 31st July 2023 to members on the register at the close of business on 31st May 2023.
The financial statements were approved and authorised for issue by the Board of Directors on 30TH March 2023 and were signed on its behalf by:
Mr. Kiprono Kittony, EBS | Mr. John Niepold | Geoffrey O. Odundo |
Chairman | Director | Chief Executive |
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NSE - Nairobi Securities Exchange Ltd. published this content on 30 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 April 2023 11:54:07 UTC.
