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- Net profit increased by 11.6% QoQ and EBITDA increased by 12.1% QoQ in Q3 2015 despite a challenging market environment
- Consistently pursued business strategy helped to grow revenue to PLN 78.7 million (+2.0% QoQ) and to maintain the cost discipline and reduce operating expenses by 3.8% QoQ
The GPW Group earned a record-high revenue, net profit and EBITDA in Q1-3 2015. The incremental sales revenue stood at PLN 244.1 million (+4.5% YoY), the net profit was PLN 95.5 million (+8.5% YoY) and EBITDA was PLN 134.4 million (+8.9% YoY) in the nine months of 2015. The sales revenue was PLN 78.7 million in Q3 2015 alone. The Group generated a net profit of PLN 30.1 million (+11.6% QoQ, +0.5% YoY) and EBITDA of PLN 42.3 million (+12.1% QoQ, -1.5% YoY) owing to the strict cost discipline which helped to reduce expenses QoQ to PLN 43.3 million.
The increase in revenue, both quarter on quarter (by 2.0%) and year on year (by 1.1%), was mainly driven by increased activity of the financial market participants. Following an increase in the value of trade in equities (+4.2% QoQ, +2.7% YoY) and an increase in volumes on the derivatives market (+4.1% QoQ, +10.7% YoY), the revenue from the financial market increased by 4.7% quarter on quarter and 4.5% year on year and was the highest since Q1 2014. As a result, it contributed 65.4% of the Group’s total revenue in Q3 2015. The revenue from the commodity market was PLN 26.7 million in Q3 2015 and contributed 33.9% of the GPW Group’s total revenue.
“We are glad to see the growth in the revenue from the financial market, which has become the driver of growth of our results in Q3 as the revenue from the commodity market was stable. This demonstrates that our strategy of diversification is effective in view of the dynamically changing market environment. I hope that the time of uncertainties for investors is coming to an end, and I believe that the investors will be increasingly active on the equity market in the coming months. Combined with our efforts to build liquidity, this should be reflected in the financial results of the GPW Group in the coming quarters,” said Paweł Tamborski, President of the Management Board of GPW.
“Q3 2015 brought the first results of our focused efforts to attract new investors, exchange members and market makers. We expect that this will soon help to improve liquidity and turnover. Leading European companies which trade on own account in the equity and derivatives markets have joined GPW clients,” said Grzegorz Zawada, Vice President of the Management Board of GPW.
Despite the trends prevailing on the European market, the Warsaw Stock Exchange continued to attract new issuers for another consecutive quarter. According to the PwC IPO Watch Europe report, GPW was #4 by the number of IPOs in the nine months of 2015 (24 IPOs) and one of the five markets to note an improvement in the number of IPOs year on year.
The Financial Instruments Market on the Polish Power Exchange will open on 4 November 2015. According to plan, the first instruments to be introduced to trading are electricity futures, to be followed later by gas futures.
“The Financial Instruments Market opens up opportunities to attract new market participants, to grow liquidity thanks to interactions with the spot market, and consequently to grow the revenue. We expect that the volume of trade in electricity futures will reach 60% of domestic electricity consumption in 2020. The volume of trade in gas futures should reach 15% of the liberalised market,” said Ireneusz Łazor President of the Management Board of the Polish Power Exchange.
The strict cost discipline has also been effective as it helped to step up the growth rate of profits. Operating expenses decreased by 1.4% YoY in the nine months of 2015 and the cost/income ratio was 52.6% (down by 3.2 p.p. YoY) in line with the strategic goal of bringing the C/I down to less than 50%.
“The high net profit and EBITDA in the nine months of the year, driven by the strict cost discipline, give us the comfort of working towards the annual results and the intended payment of the dividend from the 2015 profit to the shareholders at PLN 2.6 per share. The dividend yield would be close to 7 percent at today’s share price,” said Karol Półtorak, Vice President of the Management Board of GPW.
Summary of the financial results of the GPW Group in Q3 2015
Net profit
The net profit of the GPW Group was PLN 30.1 million in Q3 2015, an increase of 11.6% quarter on quarter and an increase of 0.5% year on year. The quarter-on-quarter increase was mainly driven by higher revenues from the financial market owing to the growing value of trade in the equity and derivatives markets and a strict cost discipline which helped to reduce operating expenses by 3.8% quarter on quarter to PLN 43.3 million.
Revenue from the financial market
The sales revenue from the financial market was PLN 51.5 million in Q3 2015, an increase quarter on quarter (+4.7%) and year on year (+4.5%). The revenue from the financial market contributed 65.4% of the total sales revenue of the GPW Group, compared to 63.8% in Q2 2015 and 63.3% in Q3 2014. 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 36.2 million in Q3 2015, compared to PLN 33.1 million in Q2 2015 and PLN 34.3 million in Q3 2014. The increase of the revenue by 9.3% QoQ and by 5.4% YoY was driven by higher trading on the Electronic Order Book on the Main Market (+4.2% QoQ, +2.7% YoY) and an increase in the volume of trade in index futures (+26.5% QoQ, +3.9% YoY). The increase in the revenue on the financial market was also driven by the revenue from tender offers at PLN 2.3 million. The trading revenue on the financial market was affected by the decrease in the value of trade in derivatives, which fell by 24.3% year on year in Q3 2015 but increased by 2.9% QoQ.
Listing revenue
The Group’s listing revenue on the financial market was PLN 5.7 million in Q3 2015, a decrease of 13.1% QoQ and stable year on year. The decrease in the revenue from listing fees (-6.8% QoQ and -3.0% YoY) was due to less issuer activity on the IPO market. The revenue from fees for introduction and admission was PLN 1.1 million in Q3 2015, a decrease of 31.5% QoQ and an increase of 14.2% YoY as a result of the still weak issuer activity on the IPO market.
Information services
The revenue from information services was PLN 9.6 million in Q3 2015 compared to PLN 9.5 million in Q2 2015 (+0.7% QoQ) and PLN 9.3 million in Q3 2014 (+3.6% YoY).
Revenue from the commodity market
The sales revenue on the commodity market was PLN 26.7 million, a decrease of 0.7% quarter on quarter and a decrease of 5.7% year on year. The revenue from the commodity market contributed 33.9% of the GPW Group’s total sales revenue in Q3 2015, compared to 34.8% in Q2 2015 and 36.4% in Q3 2014. 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 decreased by 6.4% QoQ and 15.7% YoY to PLN 12.8 million in Q3 2015. This was driven by the decrease in the volume of trade in electricity and gas year on year and, for electricity, also quarter on quarter. The smaller quarter-on-quarter decrease in the trading revenue on the commodity market was owed to a high increase in the volume of trade in property rights (+75.9% QoQ).
Operation of the Register of Certificates of Origin
The revenue from the operation of the register was PLN 5.5 million in Q3 2015, an increase of 0.8% QoQ and 17.6% YoY. The total volume of issued and cancelled certificates of origin of energy was 23.5 TWh in Q3 2015, an increase of 27.3% QoQ and an increase of 89.9% YoY.
Clearing
The revenue from clearing was PLN 8.4 million in Q3 2015, compared to PLN 7.8 million in Q2 2015 (+8.1% QoQ) and PLN 8.5 million in Q3 2014 (-0.8% YoY). The year-on-year change was closely related to the volumes of trade in the electricity and gas markets. The quarter-on-quarter increase was mainly driven by the termination of promotion on clearing fees in the gas market in Q3 2015.
Operating expenses
Operating expenses were PLN 43.3 million in Q3 2015, a decrease of 3.8% QoQ and an increase of 3.4% YoY. The cost/income ratio was 52.6% after the nine months of 2015 (change of 3.2 p.p. YoY), which is in line with the aspiration to bring the ratio down to less than 50% in 2020. The consistent reduction of operating expenses and the C/I ratio is one of the strategic goals and a result of the strict cost discipline. The QoQ reduction of expenses in Q3 2015 was mainly driven by a decrease of salaries to PLN 17.3 million (-3.4% QoQ), a reduction of external service charges to PLN 9.3 million (-7.5% QoQ) and a reduction of rent and maintenance fees to PLN 2.3 million (-9.4% QoQ), which offset the increase of depreciation and amortisation charges (+5.9% QoQ).
Share of profit of associates
The GPW Group’s share of profit of associates was PLN 0.3 million in Q3 2015, compared to a loss of PLN 0.3 million in Q2 2015 and a profit of PLN 1.1 million in Q3 2014. 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 1.7 million in Q3 2015, compared to PLN 1.3 million in Q2 2015. The multilateral trading facility Aquis Exchange continues to grow its turnover dynamically, which however still does not translate into an increase of revenue. The loss of Aquis attributable to GPW was PLN 1.6 million in Q3 2015 (compared to a loss of PLN 1.8 million in Q2 2015).
