NSE issues profit warning thanks to the bearish market

November 23, 2016
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NSE plans to diversify revenue through new product offerings such as Exchange Traded Funds, Derivatives Contracts/FILE
NSE plans to diversify revenue through new product offerings such as Exchange Traded Funds, Derivatives Contracts/FILE

, NAIROBI, Kenya, Nov 23 -Nairobi Securities Exchange has issued a profit warning with the bourse projecting a net profit decline of more than 25 per cent in the full year 2016 compared to 2015.

The management attributes the decline to a bearish market that has seen a drop in equity market prices, with trading revenues accounting for 53 per cent of the Company’s revenue stream.

Cumulatively year to date, equity turnover is down 28.4 per cent while volumes traded are down 14.1 per cent.

Bond trading continues to offer relief with transactions growing by 39 per cent in the first half of 2016.

In the first half of 2016 the company recorded a 54.1 per cent decline in Earnings per Share to 0.32 cents weighed down by a 16.7 per cent drop in total income as well as a 15.9 per cent  rise in administration expenses.

At the time income from equity transactions declined 31 per cent

“Over the course of 2016, the Kenyan economy and particularly the Capital Markets sector has remained resilient despite a challenging operating environment both locally and internationally. The market has recorded increased volume of traded units for the period ended 30 September 2016 as compared to the same period last year. There continues to be significant interest from foreigners in the market, with increased trading activity particularly from large institutional investors,” said NSE Chief Executive Geoffrey Odundo.

Going forward, NSE plans to diversify revenue through new product offerings such as Exchange Traded Funds, Derivatives Contracts and Global Depositary Receipts.

“We have set the necessary structures, going forward next year we plan to now sell hard our new products in the market through awareness,” Odundo added.

The company will also be leveraging on the enhanced legislative environment geared towards increasing liquidity, such as the Market Making framework, which is now in place as well as Securities Lending and Borrowing, for which regulations should be in place in due course.

According to Odundo, the economy is set to remain stable pre and post elections owing to political stability and improved security.

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