GPW Group’s Record-High Earnings: Dynamic Growth In A Volatile Market Environment

• Historically high net profit at PLN 156.1 million in 2017
• Record-high EBITDA of PLN 212.2 million
• Record-high revenue of PLN 352.0 million, up by 13.2% year on year
• Operating expenses up by 10.4% in 2017 due to alignment with MiFID2/MiFIR
• Cost/income ratio at 47.1% in 2017

The GPW Group generated record-high revenues at PLN 352.0 million and a historically high net profit of PLN 156.1 million in 2017. EBITDA was record-high at PLN 212.2 million. Operating expenses increased by PLN 15.6 million year on year to PLN 165.8 million in 2017. However, the cost/income ratio was 47.1%, one of the lowest figures in the last few years.

“After a very good last year for the entire capital market, 2018 will be a time of development of a capital market strategy and changes which have already been outlined. It seems that the growth rate of the Polish economy will remain strong in the coming year. We want to support it even more by assisting companies in the spirit of well understood economic patriotism,” said Marek Dietl, President of the Management Board of the Warsaw Stock Exchange.

In 2017, the activity of the Group was impacted by the changing regulatory environment both on the financial market and the commodity market. Group companies took steps to align with MiFID2/MiFIR, which was the main driver of the increase in operating expenses by 10.4% year on year. 2017 was a time of the Group’s technological development. The TGE Group rolled out new systems including the trading system X-Stream Trading and the IT system SAPRI provided by Nasdaq. With these solutions, TGE is one of few European commodity exchanges capable of effective operation and competition on the international market of exchange services.

The Group continued its development initiatives to support liquidity, attract new investors, further diversify its business and participate in international projects. In 2017, the value of EOB trade in shares on GPW increased by 27.8%, the second-best result among all European exchanges. The Warsaw Stock Exchange kept up the strong pace of issuer acquisition. There were 34 IPOs on both equity markets operated by GPW, including 7 transfers from NewConnect to the Main Market. With newly listed companies, GPW continued to extend its product offer for investors.

In June 2017, GPW Benchmark took over as organiser and calculation agent of the WIBID/WIBOR reference rate fixing. GPW Benchmark will continue those development initiatives in 2018. As a result of those efforts, the GPW Group generated record-high revenues of PLN 352.0 million in 2017, representing an increase of 13.2% year on year.

December 2017 was the fifth anniversary of the TGE gas market. Last year was the best year in history for gas trade on TGE. The Property Rights Market also broke new records as the volume of trade in property rights of energy efficiency increased by 27% year on year. As a consequence, the revenue from the commodity market increased by 13.4% year on year to PLN 142.1 million in 2017.

The Group’s key strategic goals include regular growth of shareholder value, which is why a dividend of PLN 2.15 per share was paid in August 2017. The dividend yield as at the record date was 4.4%. The total shareholder return on GPW’s shares was 20.3% during the year.

“The Warsaw Stock Exchange will evolve based on state-of-the-art technology to protect the interests of all clients, shareholders and employees in advanced new ways. We will strive to improve continuously through an innovative business approach and diversification of our revenue,” said GPW President Marek Dietl.

Presentation of the GPW Group’s financial results for Q4 2017 and 2017

Net profit

The net profit of the GPW Group was PLN 39.4 million in Q4 2017, an increase of 19.5% year on year. The Group’s annual net profit was PLN 156.1 million in 2017, an increase of 19.0% year on year. It was the highest net profit of the Group in history. The year-on-year increase in Q4 2017 was mainly driven by higher revenues from the commodity market (+28.4%) and the financial market (+4.3%). The annual revenues from the financial market increased by 13.7% and revenues from the commodity market by 13.4% year on year in 2017. The net profit was also driven by the share of profit of associates which increased by 185.9% or PLN 6.5 million year on year.

Revenue from the financial market

The sales revenue from the financial market was PLN 51.9 million in Q4 2017, an increase of 4.3% year on year and 6.2% quarter on quarter. The revenue from the financial market contributed 56.3% of the total sales revenue of the GPW Group compared to 60.2% in Q3 2017 and 60.9% in Q4 2016. The annual sales revenue from the financial market was PLN 208.9 million, an increase of 13.7% year on year. The sales revenue from the financial market contributed 59.3% of the total sales revenue of the GPW Group in 2017 compared to 59.1% in 2016. The revenue from the financial market includes trading revenue, listing revenue, and revenue from information services.

Trading revenue on the financial market

The trading revenue on the financial market was PLN 34.6 million in Q4 2017 compared to PLN 33.2 million in Q4 2016 and up by 8.5% quarter on quarter. The annual trading revenue on the financial market was PLN 141.3 million in 2017, an increase of 18.7% year on year. The increase in the annual revenue on the financial market was mainly driven by the increase of the revenue from trade in shares (+22.4%). The increase in the revenue from trade in equities and other equity-related instruments was mainly driven by an increase in the value of trade on the Main Market by 28.9% year on year, including an increase of 24.7% for EOB trade and by 91.1% for block trades. The revenue from trade in debt instruments increased by 18.3% year on year in 2017, mainly owing to higher revenues from TBSP. The value of trade increased mainly for conditional transactions. A new TBSP price list is in effect as of 1 January 2017, which helped to grow the value of trade.

Listing revenue

The GPW Group’s listing revenue on the financial market was PLN 6.3 million in Q4 2017 compared to PLN 6.1 million in Q4 2016 and PLN 6.3 million in Q3 2017. The annual listing revenue represented 7.1% of the GPW Group’s total revenue and stood at PLN 25.0 million in 2017 compared to PLN 23.9 million in 2016. The increase in the listing revenue was mainly driven by an increase in the value of shares introduced into trading in 2017. The total IPO value on both equity markets was PLN 7.7 billion in 2017 compared to PLN 1.1 billion in 2016. The value of SPOs was PLN 90.8 billion in 2017 compared to PLN 4.0 billion in 2016. The revenue from fees for introduction increased to PLN 5.0 million in 2017 compared to PLN 4.0 million in 2016. The revenue from listing fees stood at PLN 20.0 million and was stable year on year (PLN 19.9 million in 2016).

Information services

The revenue from information services was record-high at PLN 11.0 million in Q4 2017, representing an increase of 6.2% year on year and an increase of 2.9% quarter on quarter. The annual revenue from information services was PLN 42.5 million in 2017, which represents an increase of 4.6% year on year and a share of 12.1% in the GPW Group’s total sales revenues. The main driver of the increase in the revenue in 2017 was the sale of non-display licences.

Revenue from the commodity market

The sales revenue on the commodity market was PLN 40.2 million in Q4 2017, an increase of 28.4% year on year and an increase of 25.7% quarter on quarter. It contributed 43.6% to the Group’s total revenues in Q4 2017. The annual revenue from the commodity market was PLN 142.1 million in 2017, representing an increase of 13.4% and a share of 40.4% of the Group’s total sales revenues. The revenue from the commodity market includes trading revenue, revenue from operation of the register of certificates of origin, and revenue from clearing.

Trading revenue on the commodity market

The trading revenue on the commodity market increased by 22.3% quarter on quarter to PLN 20.2 million in Q4 2017. The annual trading revenue on the commodity market was PLN 70.1 million in 2017, representing an increase of 15.2%. The revenue from trade in electricity was PLN 2.9 million in Q4 2017, an increase of 13.0% quarter on quarter and 34.8% year on year. The annual revenue from trade in electricity was PLN 8.8 million, a decrease of 13.5% year on year. The revenue from trade in gas was record-high at PLN 10.8 million in 2017, representing an increase of 17.4%. The revenue from trade in gas decreased by 0.9% year on year and 11.9% quarter on quarter and stood at PLN 3.0 million in Q4 2017. The revenue from trade in property rights of certificates of origin increased by 23.8% year on year to PLN 39.6 million in 2017. The revenue of that line stood at PLN 11.4 million in Q4 2017, representing an increase of 43.0% year on year and 36.3% quarter on quarter. The volume of trade in all property rights to certificates of origin of electricity (RES, cogeneration, energy efficiency) increased year on year in 2017. The Group’s revenue from other fees paid by commodity market participants stood at PLN 10.8 million in 2017 compared to PLN 9.4 million in 2016, i.e., it increased by 14.7%. The amount of other fees paid by commodity market participants depends largely on the activity of IRGiT Members, in particular the number of transactions.

Operation of the Register of Certificates of Origin

The revenue from the operation of the Register of Certificates of Origin was PLN 8.0 million in Q4 2017, representing an increase of 117.3% year on year. The annual revenue from the operation of the Register of Certificates of Origin was PLN 30.6 million in 2017, an increase of 23.0% year on year. The large increase in the revenue from the operation of the Register of Certificates of Origin was driven by an increase in the volume of cancelled property rights (by 21.6%) and of the volume of issued property rights (by 2.7%) which have the strongest impact on the revenue level.

Clearing

The revenue from clearing was PLN 12.0 million in Q4 2017, representing an increase of 8.2% year on year and 27.1% quarter on quarter. The Group’s annual revenue from clearing was PLN 41.0 million in 2017, an increase of 4.7% year on year. The year-on-year increase was driven by rising volumes of trade on all markets operated by TGE.

Operating expenses

Operating expenses were PLN 49.0 million in Q4 2017, an increase of PLN 11.2 million year on year. The annual operating expenses were PLN 165.8 million in 2017, an increase of 10.4% year on year. Despite that increase in expenses, the cost/income ratio dropped to 47.1% in 2017 compared to 48.3% in 2016. The increase of operating expenses was mainly driven by an increase in external service charges by PLN 14.6 million (+37.9%) year on year due to the alignment of the GPW Group companies with the MiFID2/MiFIR requirements. The Group’s depreciation and amortisation charges increased by 9.8% year on year to PLN 28.3 million and its salaries and other employee costs increased by PLN 1.7 million (+2.8%) year on year in 2017. The year-on-year increase of depreciation and amortisation charges in 2017 was related to new trading systems in TGE and IRGiT.

Share of profit of associates

The GPW Group’s share of profit of associates was PLN 1.9 million in Q4 2017 compared to PLN 1.2 million in Q4 2016 and PLN 3.6 million in Q3 2016. The GPW Group’s annual share of profit of associates was PLN 10.1 million in 2017 compared to PLN 3.5 million in 2016. The share of profit of associates was mainly driven by the earnings of the KDPW Group and Aquis Exchange. KDPW’s profit attributable to GPW was PLN 12.6 million in 2017 compared to PLN 7.7 million in 2016. The multilateral trading facility Aquis Exchange generated a loss in 2017, including a loss attributable to the GPW Group at PLN 3.2 million, compared to a loss of PLN 4.5 million in 2016.

GPW Group’s Financial Results in 2017