YoY Increase Of GPW Group’s Net Profit, Operating Profit And EBITDA

GPW Group’s revenue stood at PLN 90.6 million in Q3 2021 (+1.8% YoY) and PLN 300.1 million in 9M 2021 (+4.3% YoY)
Operating expenses stood at PLN 49.4 million in Q3 2021 (-1.3% YoY) and PLN 166.2 million in 9M 2021 (+10.6% YoY)
EBITDA stood at PLN 48.6 million in Q3 2021 (+3.3% YoY) and PLN 160.6 million in 9M 2021 (-0.1% YoY)
Operating profit stood at PLN 39.9 million in Q3 2021 (+4.2% YoY) and PLN 134.0 million in 9M 2021 (+0.9% YoY)
Net profit stood at PLN 36.0 million in Q3 2021 (+12.8% YoY) and PLN 119.9 million in 9M 2021 (+14.6% YoY)

The Warsaw Stock Exchange Group (GPW Group) generated sales revenue of PLN 300.1 million, EBITDA of PLN 160.0 million, an operating profit of PLN 134.0 million and a net profit of PLN 119.9 million in 9M 2021. Consolidated revenue in 9M 2021 increased by 4.3% year on year, driven by an increase of revenue on both the financial market and the commodity market. The increase of the net profit by 14.6% year on year was driven by the increase of revenue, negative net financial income and expenses, and a higher share of profit of entities measured by the entity method (improved financial results of KDPW).

The GPW Group generated sales revenue of PLN 90.6 million, EBITDA of PLN 48.6 million, an operating profit of PLN 39.9 million and a net profit of PLN 36.0 million in Q3 2021. Consolidated revenue increased by 1.8% year on year. The year-on-year increase of revenue was driven by an increase of revenue on the commodity market combined with a decrease of revenue on the financial market.

The year-on-year decrease of revenue on the financial market in Q3 2021 by PLN 3.9 million (-6.7% YoY) was mainly driven by a decrease of revenue from trading by PLN 5.3 million (-13.1% YoY). Note that October 2020 brought the huge IPO of Allegro as well as high volatility caused by the pandemic. The year-on-year decrease of revenue on the financial market was mainly due to a decrease in turnover in equities and equity-linked instruments by PLN 5.5 million (-16.3%).

The Group’s revenue on the commodity market in Q3 2021 increased by PLN 6.3 million (+21.5% YoY). Revenue from trade in electricity increased by PLN 1.2 million (+27.7% YoY), revenue from trade in gas increased by PLN 2.3 million (+79.5% YoY), and revenue from trade in property rights decreased by PLN 1.4 million (-24.3% YoY).

Members of the GPW Group continued to implement the strategic initiatives in Q3 2021.

“The development strategy of the Warsaw Stock Exchange Group (GPW Group), updated in 2018, provides for soft persification: entering new business areas based on our core competences, which include operating and developing trading platforms. Our latest strategic initiatives, the Telemetric Operator (TeO) and the Polish Digital Logistics Operator (PCOL), are specific transaction platforms which will provide important revenue streams in the coming years," said Marek Dietl, President of the GPW Management Board.

Operating expenses in Q3 2021 decreased by 1.3% year on year and decreased by 3.1% quarter on quarter to PLN 49.4 million. The cost/income ratio (C/I) was 54.5% vs. 56.3% in Q3 2020 and 51.9% in Q2 2021.

Presentation of the financial results of the GPW Group for Q3 2021

Net profit
The net profit of the GPW Group was PLN 36.0 million in Q3 2021, an increase of 12.8% year on year and a decrease of 20.4% quarter on quarter. The year-on-year increase of the net profit was driven by much lower negative net financial income and expenses at (PLN 2.4 million) vs. (PLN 3.7 million) in Q3 2021. The negative net financial income and expenses were impacted by lower financial expenses at PLN 2.4 million in Q3 2021 vs. PLN 4.2 million in Q3 2020. The Group’s net profit of Q3 2021 was supported by a higher share of profit of entities measured by the equity method at PLN 5.9 million vs. PLN 4.6 million in Q3 2020.

Revenue on the financial market
Sales revenue on the financial market stood at PLN 54.4 million in Q3 2021, representing a decrease of 6.7% year on year and a decrease of 11.2% quarter on quarter. Revenue on the financial market contributed 60.0% of the total sales revenue of the GPW Group. Revenue on the financial market includes trading revenue, listing revenue, and revenue from information services.

Trading revenue on the financial market
Trading revenue on the financial market was PLN 35.5 million in Q3 2021 vs. PLN 40.9 million in Q3 2020. The revenue decreased by 13.1% year on year and by 15.0% quarter in quarter. The year-on-year decrease of the revenue was driven mainly by a decrease of revenue from trading in equities and derivatives.
Listing revenue
The GPW Group’s listing revenue on the financial market was PLN 5.5 million in Q3 2021 vs. PLN 4.5 million in Q3 2020 and PLN 5.5 million in Q2 2021. Revenue from listing fees stood at PLN 4.2 million (+2.6% YoY and +1.8% QoQ). The key drivers of revenue from listing fees include the number of issuers listed on the GPW markets and their capitalisation at the end of previous year. Revenue from fees for introduction and other fees was PLN 1.3 million. The key drivers of this revenue line include the number of IPOs on the GPW markets and the value of shares and bonds introduced to trading. There were three IPOs on the Main Market and eight IPOs on NewConnect in Q3 2021 vs. one IPO and seven IPOs, respectively, in Q3 2020.
Information services
Revenue from information services on the financial market stood at PLN 13.4 million in Q3 2021, an increase of 3.7% year on year and a decrease of 4.2% quarter on quarter. The year-on-year increase was driven by the acquisition of new clients of GPW Group data (non-display users and data vendors).

Revenue on the commodity market
Sales revenue on the commodity market was PLN 35.8 million in Q3 2021, an increase of 21.5% year on year and a decrease of 0.6% quarter on quarter. It contributed 39.6% of the Group’s total revenue in Q3 2021. 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
Trading revenue on the commodity market in Q3 2021 increased by 15.6% year on year and increased by 1.7% quarter on quarter to PLN 18.4 million. Revenue from trade in electricity in Q3 2021 increased by 27.7% year on year due to a higher turnover volume on the electricity forward market. Revenue from trade in property rights decreased by 24.3% year on year due to a decrease of turnover in RES certificates to 4.5 TWh vs. 6.0 TWh in Q3 2020 and a decrease of turnover volume in certificates of energy efficiency. Revenue from trade in gas increased by 79.5% year on year in Q3 2021 driven by a strong increase of spot turnover as well as forward turnover. The Group’s revenue from other fees paid by commodity market participants increased by 11.5% year on year to PLN 3.7 million in Q3 2021. Other fees paid by commodity market participants depend mainly on the number and activity of IRGiT Members, in particular the number of transactions.
Operation of the Register of Certificates of Origin
Revenue from the operation of the Register of Certificates of Origin was PLN 4.9 million in Q3 2021, representing an increase of 26.6% year on year and a decrease of 25.4% quarter on quarter. The decrease of revenue from the operation of the Register of Certificates of Origin was driven mainly by a decrease in the number of issued RES property rights.
Clearing
The Group earns revenue from clearing services provided by IRGiT, which is TGE’s subsidiary. Revenue from clearing stood at PLN 12.3 million in Q3 2021, an increase of 28.0% year on year and an increase of 10.1% quarter on quarter. The revenue depends on the turnover volume on TGE’s markets.
Information services
Revenue from information services on the commodity market in Q3 2021 stood at PLN 245 thousand vs. PLN 115 thousand in Q3 2020 and PLN 238 thousand in Q2 2021.

Operating expenses
Operating expenses in Q3 2021 stood at PLN 49.4 million, a decrease of 1.3% year on year and a decrease of 3.1% quarter on quarter.
The decrease of operating expenses was driven mainly by lower fees due to PFSA which stood at PLN 0.3 million in Q3 2021, representing a decrease of 92.3% year on year.
Employee costs stood at PLN 24.0 million vs. PLN 22.3 million in Q3 2020. The increase of employee costs was due to a higher headcount required to implement the development strategy #GPW2022. In view of GPW’s development projects, a part of employee costs is capitalised and will be charged to expenses following project roll-out. External service charges stood at PLN 13.5 million, an increase of 4.0% year on year and an increase of 2.1% quarter on quarter, driven among others by higher advisory service costs paid by GPW in connection with active projects. Depreciation charges decreased by 0.5% year on year to PLN 8.7 million in Q3 2021 while maintenance fees stood at PLN 1.2 million, an increase of 8.3% year on year.

Share of profit of entities measured by the equity method
The GPW Group’s share of profit of entities measured by the equity method was PLN 5.9 million in Q3 2021, representing an increase of 30.3% year on year and a decrease of 24.5% quarter on quarter. The year-on-year increase of the share of profit was driven by higher earnings of the KDPW Group. KDPW’s improved financial results were owed to a higher revenue from:

settlement and safe-keeping of securities for which KDPW is the home depository in view of their higher capitalisation and new issues;
services for issuers: increase of revenue from recording of securities following the entry into force of the obligation to record shares of non-public companies; increase of revenue from handling of cash payments from securities; and
clearing: increase of turnover and the number of transactions on GPW’s cash and derivative markets; clearing of TBSP transactions.

***

History of the WSE
On 12 April 1991, the then Ministers of Ownership Transformation and Finance signed the Deed of Incorporation of the joint stock company "Giełda Papierów Wartościowych w Warszawie S.A." Four days later, on the day of the WSE's inaugural session, shares of five companies were traded and the turnover amounted to PLN 1990. Since 2018, the WSE has been classified as one of the 25 developed markets by the FTSE Russell agency. The history of the capital market on Polish soil dates back to the early 19th century. The first in Poland and one of the few in Europe, the Merchant Exchange, was established in Warsaw on 2 May 1817, soon became the largest market in Tsarist Russia, responsible for 5-6% of global securities trading. A thriving stock exchange, accounting for 90% of the domestic turnover, also operated in Warsaw in the interwar period. After the period of the People's Republic of Poland and the planned economy, it was not until 1989, with the political and economic transformation, that the Polish capital market was able to develop again.

Stock exchange today
The average EoB equity daily trading volume on the WSE was PLN 1,502.8 million in October 2021. The Main Market listed 425 companies (378 domestic and 47 foreign) and the NewConnect market listed 373 companies (369 domestic and 4 foreign) at the end of October 2021. Last year, the WSE Group generated record sales of PLN 403.8 million and one of the highest ever net profits of over PLN 151 million. According to the Federation of European Securities Exchanges, in 2020 the WSE ranked first in Europe in terms of percentage increase in equity turnover and third in terms of the value of initial offerings. At the end of 2020, the WSE was also the second market in Europe in terms of liquidity and achieved the status of world leader in terms of the number of listed companies in the gamedev sector.

WSE position in the region
The WSE is the leader among stock exchanges in Central and Eastern Europe by the number of listed companies and the total capitalisation of domestic companies. The WSE's share in trading on stock exchanges in the region is 81%. The WSE leads the initiative of the Three Seas Stock Exchanges and aspires to the role of a regional hub for young technological companies with huge potential, the so-called unicorns. Negotiations are currently underway for the WSE to acquire a majority stake in the Armenian Exchange.