Gielda Papierow Wartosciowych w Wrszw : Improved Profitability Ratios of GPW Group in Q2 2016

2016-07-29 14:45:35

Warsaw, 29 July 2016

PRESS RELEASE

• Improving profitability ratios of the GPW Group in Q2 2016:
  
  • Net profit margin: 45.6 percent
    
  • EBITDA margin: 57.8 percent
    
• GPW Group's revenue at PLN 74.5 million, net profit at PLN 33.9 million
  
• Decrease of operating expenses resulted in a cost/income ratio of 51.1 percent

In Q2 2016, the GPW Group generated revenue of PLN 74.5 million, a net profit of PLN 33.9 million, and EBITDA of PLN 43 million. The decrease in revenue was mainly due to a weaker quarter on the financial market, resulting from a lower turnover on the equities market, reflecting a decrease of the average capitalisation of Polish companies and less activity of 'portfolio' investors. In addition, revenue from equities trading was under pressure from the reduction of trading fees starting in January 2016. As a result, the revenue from the financial market was PLN 42.9 million in Q2 2016, representing a decrease of 12.7 percent year on year. Thanks to effective acquisition efforts of GPW, the activity of new clients improved, in particular proprietary traders, who generated PLN 18.3 billion of additional turnover on the equities market in H1 2016, compared to PLN 21 billion in all of 2015.

'Similar to other exchanges, Warsaw has in the past few months faced more uncertainty and less investor activity. The falling capitalisation of companies results in a falling value of trade in equities on the GPW; hence, we are focusing on areas under our control irrespective of market conditions. We are acquiring new clients who generate revenue and liquidity on the GPW; furthermore, with the diversification of our business, stable revenues from other business lines partly offset the more difficult conditions on the equities market,' said Paweł Dziekoński, Vice President of the GPW Management Board.

In Q2 2016, revenue from the commodity market was PLN 30.9 million, accounting for 41.5 percent of the GPW Group's revenue. All TGE revenue lines increased year on year except for revenue from transactions in electricity. The decrease of revenue in the segment (-21.1 percent YoY) was mainly driven by a decrease in the volume of trade on the forward market due to uncertainty about future electricity prices. While the Q2 2016 revenue from trade in electricity decreased year on year, the revenue from trade in gas increased significantly by 42.1 percent year on year. The same can be said for the increase in revenues from operation of the Register of Certificates of Origin and from clearing.

The Q2 2016 operating expenses were PLN 38 million, resulting in a cost/income ratio of 51.1 percent. The sharp decrease (by 17.6 percent QoQ and by 15.6 percent YoY) was mainly due to a change in the booking method of PFSA fees which were fully accounted for in Q1. The Q2 2016 expenses were impacted by a one-off increase of provisions against salaries due to reorganisation (by PLN 1.5 million). Less the one-off expenses, operating expenses decreased year on year (by 12.7 percent), and the cost/income ratio was 52.8 percent.

'The significant decrease in costs includes the change of the method of booking of the fees due to PFSA, but it is also a result of the cost discipline which we have maintained steadily for several quarters and which we are planning to continue. Under the difficult market conditions affecting the revenue of our Group, the cost discipline allows us to maintain solid financial results and consequently share the earnings with our shareholders. The dividend yield this year is a record-high 6.7 percent,' said Paweł Dziekoński, Vice President of the GPW Management Board.

Presentation of GPW Group's Q2 2016 Financial Results

Net profit
The Q2 2016 net profit reported by the GPW Group was PLN 33.9 million, representing an increase of 28.9 percent quarter on quarter and by 25.8 percent year on year. The significant difference was mainly due to the fact all annual PFSA fees were booked in Q1 2016 (at GPW Group level and in KDPW). In addition to the change in the booking method of the PFSA fee, which strongly impacted operating expenses, the increase in the year on year Q2 2016 net profit was also driven by an increase in the revenue from the commodity market (by 15 percent year on year), as well as an increase in GPW Group's financial income due to the revaluation of GPW's stake in Aquis Exchange.

Revenue from the financial market
The Q2 2016 sales revenue from the financial market was PLN 42.9 million, representing a decrease of 12.7 percent year on year and by 3.4 percent quarter on quarter. The revenue from the financial market contributed 57.7 percent of the total sales revenue of the GPW Group in Q2 2016, compared to 54.9 percent in Q1 2016 and 63.8 percent in Q2 2015. Revenue from the financial market includes trading revenue, listing revenue and revenue from information services.

Trading revenue from the financial market
The Q2 2016 trading revenue from the financial market was PLN 26.6 million, compared to PLN 33.1 million in Q2 2015 (-19.9 percent) and PLN 28.3 million in Q1 2016 (-6.2 percent). The decrease in revenue was mainly driven by less active investor trading on the equities market (decrease of trade on the Electronic Order book by 18.5 percent YoY and 8.3 percent QoQ); combined with a reduction of GPW transaction fees as of 1 January 2016 and a growing share of lower margin investors in total trading, this reduced the revenue from trading in equities to PLN 19.2 million (-26.3 percent YoY, -8.2 percent QoQ). The Q2 2016 revenue from trading in derivatives increased modestly to
PLN 3 million but increased by 14.9 percent year on year.

Listing revenue
GPW Group's Q2 2016 listing revenue from the financial market was PLN 6.1 million, representing a decrease of 6.2 percent year on year and an increase of 4.4 percent quarter on quarter. The listing revenue represented 8.2 percent of the GPW Group's total Q2 2016 revenue. Despite a strong decrease in the capitalisation of companies at the end of 2015, which was the basis of the listing fees, the listing revenue increased by 1.7 percent year on year but decreased by 2.4 percent quarter on quarter. The decrease in capitalisation mainly affected large and mid-sized issuers whose fees are capped.
Information services
The Q2 2016 revenue from information services was PLN 10.3 million, compared to PLN 9.5 million in Q2 2015 (+7.8 percent) and PLN 10.3 million in Q1 2016 (-0.1 percent). The contribution of the information services revenue to the GPW Group's total revenues increased to 13.8 percent. The increase in the revenue from information services was driven mainly by further development of non-display data sales as well as a record-high revenue from sales of index licences and historical and statistical data at PLN 720 thousand (9.9 percent QoQ and 21.3% YoY).

Revenue from the commodity market
The Q2 2016 sales revenue from the commodity market was PLN 30.9 million, representing an increase of 15 percent year on year and a decrease of 14.4 percent quarter on quarter. The revenue share of the commodity market was 41.5 percent of the GPW Group's total Q2 2016 revenue. The revenue from the commodity market includes trading revenue, revenue from operation of the certificates of origin register and revenue from clearing.

Trading revenue from the commodity market
The Q2 2016 trading revenue from the commodity market decreased to PLN 14.1 million, i.e., by 15.1 percent year on year and increased by 3.6 percent quarter on quarter. The GPW Group's revenue from trade in electricity stood at PLN 2.7 million in Q2 2016, compared to PLN 2.7 million in Q1 2016 (+1.2 percent QoQ) and PLN 3.4 million in Q2 2015 (-21.1 percent YoY). The decrease in the revenue from trade in electricity quarter on quarter was driven by a lower volume of forward transactions, as opposed to a modest increase quarter on quarter (+2.7 percent QoQ and -29.9 percent YoY). The revenue from trade in gas stood at PLN 2.3 million in Q2 2016, representing a decrease of 7.8 percent quarter on quarter and an increase of 42.1 percent year on year. The biggest part of GPW Group's trading revenue from the commodity market is generated by trade in property rights; it stood at PLN 7.1 million in Q2 2016, which represented a decrease of 1.8 percent year on year and a decrease of 25.8 percent quarter on quarter.
Operation of the Certificates of Origin Register
The revenue from the operation of the Certificates of Origin Register was PLN 7.8 million in Q2 2016, representing an increase of 42.0 percent year on year and a decrease of 2 percent quarter on quarter. The total volume of issued certificates of origin was 9.6 TWh in Q2 2016 (-11.3 percent YoY and -42.5 percent QoQ); the volume of cancelled certificates of origin was 32.6 TWh (+327 percent YoY and +236.3 percent QoQ). The increase in the revenue from the operation of the Register of Certificates of Origin was driven mainly by the extension of the obligation to cancel certificates of origin until the end of June.

Clearing
The Q2 2016revenue from clearing was PLN 9 million, representing a decrease of 21.9 percent year on year and an increase of 15.8 percent quarter on quarter. The quarter-on-quarter increase in the revenue was driven mainly by the expiration of the promotion for clearing on the gas market.

Operating expenses
The Q2 2016 operating expenses were PLN 38 million, representing a decrease of PLN 7 million year on year (-15.6 percent) and a decrease of PLN 8.1 million quarter on quarter (-17.6 percent). The nominal decrease in operating expenses was mainly driven by GPW Group's PFSA fees, which were fully booked in Q1 2016 both for GPW and its associate KDPW. Furthermore, additional provisions against reorganisation severance allowances at PLN 1.5 million were booked in Q2 2016.

Profit share of associates
The GPW Group's profit share of associates was PLN 1.4 million in Q2 2016, compared to a negative PLN 0.3 million in Q2 2015 and a negative PLN 1.4 million in Q1 2016. The profit share of associates was mainly driven by the earnings of the KDPW Group and Aquis Exchange. KDPW's profit attributable to GPW was PLN 2.7 million in Q2 2016, compared to a profit of PLN 1.3 million in Q2 2015. The multilateral trading facility Aquis Exchange generated a loss in Q2 2016, including a loss attributable to the GPW Group at PLN 1.3 million (compared to a loss of PLN 1.2 million in Q1 2016 and PLN 1.8 million in Q2 2015).

GPW Group Financial Results Q2 2016

Ratios based on the reported financial results; net of one-offs including the one-off booking of the fees due to PFSA in Q1 2016, the additional provisions against reorganisation under salaries in Q2 2016, and a positive revaluation of the stake in Aquis Exchange, the net profit margin was 39.1 percent, the EBITDA margin was 56 percent, and the cost/income ratio was 52.8 percent.
Dividend yield based on GPW share price at the closing on the dividend record date.

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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.pl/.