2015-04-30 16:47:00

Results of WSE Group in Q1 2015

Warsaw, 30 April 2015

GPW Group in Q1 2015: Growth of Income, Reduction of Operating Expenses, Historically High Quarterly EBITDA

PRESS RELEASE

  • The net profit of the GPW Group was PLN 38.4 million, an increase of 2.1% year on year and an increase of 58% quarter on quarter
  • EBITDA was PLN 54.3 million, the highest in history
  • Revenue stood at PLN 88.2 million (an increase of 1.09% YoY and 5% QoQ), the highest in history
  • The Group's operating expenses were reduced to PLN 40.1 million (a decrease of 8.8% YoY and 21.9% QoQ)
  • GPW Management Board recommends the payment of dividend at PLN 2.40 per share in line with the previously announced dividend policy

In Q1 2015, the GPW Group reported historically highest quarterly revenue (PLN 88.2 million); combined with the strict cost disciine, it allowed the Group to generate a net profit of PLN 38.4 million and EBITDA of PLN 54.3 million. The increase in revenue by 5% quarter on quarter was driven by an improvement on the financial market and a very good quarter on the commodity market. The average value of trading in shares per session in Q1 2015 was PLN 839 million, which was 2% more than the 2014 average. The commodity market benefited from very active trading by participants, both in electricity and gas instruments and in property rights. As a result, the share of the segment in the total revenue of the GPW Group increased to 42.4%.

"In the last months, we have been working on the operational deoyment of the strategy which was updated in Q4 2014. We are focusing on growth of business as well as improvement of the cost and organisational efficiency of the Group. The key areas of our efforts include supporting liquidity on the equity and derivatives markets, the acquisition of new issuers, and enhanced diversification of the commodity market business. This is supported by initiatives including the High Volume Provider programme, which is geared to activation of investors trading on own account, where we acquired another two participants in Q1 2015. We promote the Polish capital market and GPW-listed issuers abroad, among others by holding conferences and road-shows and co-organising such events with brokers. We were present in Hong Kong and London in Q1. This May we are bringing listed companies, and not just the biggest caps, to New York. We will also visit Paris and Singapore later this year. We expect to see the results of these activities in the course of the year," said Paweł Tamborski, President of the GPW Management Board.

The highlight of Q1 2015 on the commodity market was the approval of the Ministry of Finance for the start of trade in derivatives on commodities settled in cash (without delivery).

"The launch of this business segment is already well advanced. We promote it among investors and see demand for the product. We expect to spark the interest of industry participants - members of the Polish Power Exchange, as well as financial institutions from Poland and beyond," said Ireneusz Łazor, President of the PolPX Management Board.

In Q1, PolPX signed a trading system acquisition contract with Nasdaq. The new technology will help to handle the steadily growing volume of trade and to add new commodity and derivative instruments to the business in the future. The vast majority of the GPW Group's capital expenditure anned in 2015 at PLN 40 - 60 million is allocated for the new trading system for the commodity market.

"The overarching objective is to grow the business and consequently to grow the shareholder value. These are the goals of the on-going savings programme. Initiatives including reduction of used office space, relocating the entire Group to a single business location, optimising salaries, and reducing some of the administrative and IT expenses, are expected to generate total savings of PLN 19 million by 2017, leading among others to a gradual reduction of the cost/income ratio in line with our strategy. These measures will make us a more efficient and closely integrated organisation, capable of responding in a flexible way to the fast changing environment and the resulting challenges and opportunities," said Karol Półtorak, Vice President of the GPW Management Board.

The GPW Management Board recommends the payment of dividend at PLN 2.40 per share1. The dividend payout ratio for 2014 is 89.7% of the consolidated net profit and is consistent with the dividend policy published in October 2014 which provides for a dividend payout ratio above 60% of the consolidated net profit of the GPW Group. The dividend yield is 4.9% at the share price of 31 March 2015.
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1 The Exchange Management Board dividend recommendation is subject to approval by the General Meeting

Summary of GPW Group Financials in Q1 2015

Net profit
The net profit of the GPW Group in Q1 2015 was PLN 38.4 million, representing an increase of 58.0% quarter on quarter and an increase of 2.1% year on year. The year-on-year increase was driven mainly by higher revenue from the commodity market, which reported the best quarter in history, as well as a significant reduction of operating expenses (by 8.8% YoY). The quarter-on-quarter increase of the net profit was mainly driven by higher revenue from the financial market segment, principally the revenue from trading in shares, as well as a reduction of operating expenses by 21.9% QoQ. As a result, the operating profit of PLN 48.1 million in Q1 2015 was the highest in history (an increase of 45.2% QoQ and by 14.9% YoY).

Revenue from the financial market
In Q1 2015, revenue from the financial market was PLN 50.2 million, representing an increase of 8.1% QoQ and a decrease of 10.2% YoY. The revenue from the financial market represented 57.0% of the total revenue of the GPW Group, compared to 64.7% in Q1 2014 and 55.4% in Q4 2014. The revenue from the financial market includes trading revenue, listing revenue, and revenue from information services.

Trading revenue from the financial market
In Q1 2015, revenue from trading on the financial market was PLN 34.4 million, compared to PLN 39.8 million in Q1 2014 and PLN 31.1 million in Q4 2014. The change compared to the previous quarters was driven mainly by revenue from trading in shares, which stood at PLN 26.9 million in Q1 2015. A decrease of the revenue in this business line by 9.6% YoY and an increase of 11.9% QoQ was due to a 13.7% YoY decrease and a 9.6% QoQ increase in the Electronic Order Book in shares on the Main Market. Another key driver of the YoY decrease in trading revenue was a decrease in revenue from trading in derivatives.

Listing revenue
In Q1 2015, the Group's listing revenue on the financial market stood at PLN 6.2 million, representing an increase of 7.2% QoQ and a decrease of 1.6% YoY. The increase in revenue from annual listing fees was a result of a higher number of issuers listed on the GPW markets and a higher capitalisation of companies at the end of 2014, which is the basis for the calculation of fees in 2015.

Information services
Revenue from information services stood at PLN 9.6 million in Q1 2015, compared to PLN 9.8 million in Q1 2014 and PLN 9.5 million in Q4 2014.

Revenue from the commodity market
Revenue from the commodity market was record-high at PLN 37.4 million, representing an increase of 24.3% YoY and 4.5% QoQ. At the end of March 2015, the revenue represented 42.4% of the total revenue of the GPW Group, compared to 34.8% in Q1 2014 and 42.6% in Q4 2014. Revenue from the commodity market includes trading revenue, revenue from the operation of the register of certificates of origin, and revenue from clearing.

Trading revenue from the commodity market
In Q1 2015, trading revenue from the commodity market increased by 14.8% YoY and decreased by 0.7% QoQ to PLN 18.5 million. This resulted from a decrease in the volume of trade in gas and electricity in Q1 2015 quarter on quarter and an increase in trade in property rights driven by a high volume of issued green certificates and a recovery of the cogeneration certificates market (following the reinstatement of statutory support in 2014).

Operation of the register of certificates of origin
Revenue from the operation of the register of certificates of origin stood at PLN 7.6 million in Q1 2015, representing an increase of 7.4% YoY and 29.2% QoQ. The revenue in Q1 2015 was driven by a significant increase in the volume of issued and cancelled green certificates of origin of energy. The total volume of issued and cancelled certificates of origin of energy was 21.8 TWh in Q1 2015, representing an increase of 17.9% YoY and 45.8% QoQ.

Clearing
Revenue from clearing stood at PLN 11.2 million in Q1 2015, compared to PLN 6.8 million in Q1 2014 and PLN 11.2 million in Q4 2014. The year-on-year change was mainly driven by higher volumes on all PolPX markets, in particular the gas market where the volume of trade increased from 1.0 TWh in Q1 2014 to 35.5 TWh in Q1 2015.

Operating expenses
In Q1 2015, the operating expenses were reduced significantly (by 8.8% YoY and by 21.9% QoQ) to PLN 40.1 million in line with the efficiency enhancement programme approved together with the GPW Group strategy updated in Q4 2014. The programme provides for PLN 19 million of savings in 2015-2017 (net of the cost of optimisation), including PLN 10 million in 2015.

The expenses in Q1 2015 were mainly driven by a significant decrease of external service charges to PLN 8.9 million (by 8.8% YoY and 32.3% QoQ), a decrease of salaries to PLN 14.7 million (by 15.0% YoY and 26.8% QoQ) due to optimisation of emoyment and changes in the jubilee award and retirement and disability benefit system (resulting among others in a one-off reduction of expenses by PLN 3.3 million in Q1 2015), a decrease of depreciation and amortisation to PLN 6.2 million (by 13.8% YoY and 17.7% QoQ). The operating expenses in Q1 2015 were also influenced by an increase of the advance fee paid by GPW to the Polish Financial Supervision Authority (KNF) for capital market supervision up to PLN 5.5 million.

Share of profit of associates
In Q1 2015, the GPW Group's share of profit of associates was PLN 0.2 million, compared to a loss of PLN 2.2 million in Q4 2014 and a profit of PLN 4.0 million in Q1 2014. The share of profit of associates was mainly driven by the profits of the KDPW Group and Aquis Exchange. In Q1 2015, the KDPW profit attributable to GPW was PLN 1.6 million (PLN 10.2 million in all of 2014).

The trading atform Aquis Exchange is at an early stage of growth and has not yet reached the break-even despite dynamic increase of its market share in European equities. In Q1 2015, PLN 1.5 million of Aquis loss was attributable to GPW (compared to PLN 2.1 million in Q4 2014).

WSE Group Financial Results Q1 2015

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Warsaw Stock Exchange (GPW) is the biggest securities exchange in Central and Eastern Europe. GPW operates a regulated market of shares and derivative instruments and the alternative stock market NewConnect for growing companies. GPW is developing Catalyst, a market for issuers of corporate and municipal bonds, as well as commodity markets. Since 9 November 2010, GPW is a public company listed on Warsaw Stock Exchange. For more information visit http://www.gpw.

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