• USD exchange generated US$1.34 million of segment operating profit as its economics pulled sharply ahead of the larger ZSE platform
• VFEX generated 74.6% of group operating profit from 38% of external revenue.
• VFEX operating margin reached 68.6%, against 15.1% at the ZSE.
• ZEEX follows a US$106,085 commodities-platform impairment, sharpening the capital-allocation test.

Harare- Victoria Falls Stock Exchange (VFEX) has become the principal earnings engine inside Zimbabwe Stock Exchange Holdings, with the USD-denominated market generating almost three-quarters of group operating profit during the first half of 2026 despite accounting for less than 40% of external revenue.

ZSE Holdings reported revenue of US$4.85 million, up 39.6% from US$3.55 million, while operating profit rose from US$558,316 to US$1.80 million. Resultantly, profit after tax increased 275.8% to US$1.70 million, while operating expenses grew far more slowly than revenue, allowing EBITDA to almost triple from US$699,767 to US$2.08 million.

VFEX generated external revenue of US$1.86 million, up 116% from US$862,000 in H1 2025. Its segment operating profit increased from US$298,796 to US$1.34 million, a rise of about 350%. ZSE external revenue increased at a slower 11.5% to US$2.99 million, while operating profit rose 76% to US$456,628.

On total segment income, VFEX converted approximately 68.6 cents of every dollar into operating profit, compared with about 15.1 cents at the ZSE. Its contribution to group operating profit has consequently risen from roughly 54% in H1 2025 to 74.6% in H1 2026.

That is becoming the defining economic feature of ZSE Holdings. ZSE still has the larger market, while VFEX has the stronger economics. The result is particularly striking because the ZSE remains the larger trading venue by turnover.

ZSE turnover reached approximately US$293 million during H1, up 209% from the comparable period. VFEX turnover reached US$166.4 million, up 126%. The ZSE therefore processed almost US$127 million more trading value during the period.

Yet VFEX generated almost three times the operating profit. The comparison should not be reduced to a simple trading-fee calculation because exchange revenue also includes listing, issuer, market-data and other charges. What the segment accounts establish is that additional VFEX activity is currently converting into profit considerably faster than activity on the local-currency exchange.

That gap widened rapidly during H1. VFEX's operating margin was around 35% in the comparable period before rising towards 69%, while the ZSE moved from around 10% to 15%. The group is therefore developing two economically different exchange businesses. ZSE provides greater turnover and revenue scale. VFEX is providing substantially stronger margin conversion.

The USD board is becoming increasingly valuable to the holding company. Five additional listings contributed to VFEX activity during the period, while management expects at least three further listings before year-end. The VFEX All Share Index rose 43.5% year-to-date and 137% from June 2025.

The growing listing base creates several recurring revenue opportunities around trading, issuer services and market infrastructure. Once an exchange's underlying systems and regulatory platform are established, higher market activity can be absorbed without an equivalent increase in operating expenditure. ZSE Holdings' group numbers are already showing that operating leverage: revenue increased almost 40% while operating expenses rose only 5.6%.

VFEX carries an additional structural advantage. The subsidiary is exempt from corporate income tax under Zimbabwe's Income Tax Act. That exemption does not explain the large difference in segment operating margins because operating profit is measured before tax. It does improve the translation of VFEX operating earnings into value available to the holding company.

The result is an increasingly powerful earnings architecture: the local exchange provides scale and access to the domestic capital pool, while the USD exchange adds a rapidly expanding, high-margin earnings stream.

ZSE growth weakens the cannibalisation argument. The rise of VFEX could easily be read as evidence that Zimbabwe's USD exchange is simply taking business away from the ZSE. H1 does not support such a simple conclusion. ZSE turnover itself increased 209% year-on-year, while its All Share Index gained 50% during the first six months. External revenue increased and operating profit improved substantially.

Both exchanges therefore expanded simultaneously. For ZSE Holdings, that creates a stronger commercial position than dependence on either currency architecture individually. Issuers seeking domestic ZiG price discovery can remain on the ZSE, while businesses and investors seeking USD settlement can operate through VFEX.

The economic opportunity for the holding company lies in capturing activity whichever route issuers choose. The risk lies in earnings concentration. With VFEX already contributing about three-quarters of operating profit, any material reduction in USD-market turnover, listing activity or trading participation would now have a disproportionately larger effect on group profitability than its revenue share alone implies.

ZEEX now has to prove that platform expansion creates economic value

Management's next expansion is the Zimbabwe Entrepreneurship Exchange, launched in July to provide SMEs and high-growth businesses with a formal capital-raising platform. ZSE Holdings says it is building an issuer pipeline, adviser network and institutional-investor participation around ZEEX.

The financial statements provide a useful warning against judging new platforms by their launch alone. During H1, ZSE Holdings recognised a US$106,085 impairment on its internally developed Commodities Exchange platform after management concluded that the platform's carrying value exceeded its expected recoverable amount. Development expenditure on ZEEX is meanwhile being capitalised as work in progress within intangible assets.

That creates a clear capital-allocation test. ZEEX needs to progress from technological infrastructure into actual issuers, capital raised, secondary trading and recurring fee generation. The Commodities Exchange impairment shows the cost of building market infrastructure ahead of sufficient commercial adoption. VFEX provides the opposite case. Its existing platform is now producing substantial operating leverage as listings and turnover scale.

Management's execution benchmark for ZEEX should therefore be closer to VFEX's economics than to the number of new platforms launched. The earnings jump is backed by cash. The improvement is also visible beyond accounting profit.

ZSE Holdings generated US$1.92 million of operating cash flow during H1, compared with US$394,772 a year earlier. Cash and cash equivalents increased from US$391,000 at December to US$2.27 million by June. The board subsequently approved an interim dividend of US$339,922, equivalent to 0.33 US cents per share. The distribution represents roughly 20% of H1 profit after tax, leaving most of the earnings retained within the group.

That retention gives management room to fund market development, although subsequent investment should increasingly be measured against the commercial conversion achieved by VFEX.

VFEX has changed the H2 hurdle

ZSE Holdings enters H2 with a substantially different earnings structure from a year ago. The ZSE remains the larger market by turnover and external revenue. VFEX has become the dominant profit contributor. ZEEX adds a third growth platform, while the Commodities Exchange impairment provides a reminder that capital-market infrastructure produces value only when issuers and investors actually use it.

The most important H2 numbers will therefore extend beyond the headline indices. VFEX's share of operating profit, operating margin and new-listing contribution will show whether its H1 economics are sustainable. ZSE margins will show whether its much larger turnover can be converted more efficiently into earnings. ZEEX needs measurable issuer conversion and capital raising before its development expenditure can be judged commercially successful.

ZSE Holdings has already demonstrated that a second exchange can materially change the economics of the group. VFEX now generates almost three-quarters of operating profit. The next phase is whether management can preserve that high-margin franchise while turning its expanding portfolio of exchange platforms into similarly productive assets.

Equity Axis News