Strong GPW Group's Financial Results, Driven by Market Volatility in Q1 2020

Strong GPW Group's Financial Results, Driven by Market Volatility in Q1 2020

The FINANCIAL --The Warsaw Stock Exchange (GPW) Group generated revenues of PLN 90.7 million and a net profit of PLN 29.3 million in Q1 2020. EBITDA was 5.0 million in Q1 2020. Consolidated revenues increased by 15.3% year on year and by 20.9% quarter on quarter in Q1 2020. The year-on-year increase of revenues was mainly driven by an increase of the trading revenue from the financial market, by PLN 9.5 million or 29.7%, and an increase of the revenue from the commodity market by PLN 3.6 million or 10.4%.

The increase of the trading revenue from the financial market was mainly driven by an increase of the revenue from trading in equities and derivatives by PLN 7.8 million, GPW reported. Higher market volatility resulted in an increase of the revenue from derivatives by 68.1% year on year. The revenue from trading in electricity continued to increase and grew by PLN 1.6 million or 50.0% year on year. The revenue from trading in gas also continued to increase and grew by PLN 1.0 million or 41.3% year on year.

"The results prove that the GPW Group is resilient to the crisis. In the past months, we have managed the record-breaking activity of the financial and commodity markets participants, while reengineering our operational model from a centralised to a dispersed one. The credit for our success in both fields, goes to our excellent team and the digitisation, automation and robotization of our processes in the last two years", said Marek Dietl, President of the Management Board of GPW.

Operating expenses increased by 3.2% year on year and 18.3% quarter on quarter to PLN 56.1 million in Q1 2020. The cost/income ratio was 57.8% vs. 64.5% in Q1 2019 and 59.0% in Q4 2019. The operating expenses of Q1 2020 include provisions at PLN 10.0 million against the Group's annual fee due to PFSA, compared to PLN 12.9 million in Q1 2019. The year-on-year increase of operating expenses in Q1 2020 was driven mainly by an increase of salaries by PLN 2.9 million due to an additional headcount necessary to implement the GPW Group's strategy, and by external service charges, up by PLN 1.3 million.

"Social distancing requirements have stepped up the digitisation of everyday work. On the other hand, they have impeded sales of our newer business lines, which could delay revenue from the strategic initiatives," stressed Mr. Dietl.

The GPW Management Board recommends a dividend of PLN 100.7 million, i.e., PLN 2.40 per share, equal to 93.2% of the consolidated net profit of GPW for the financial year 2019 attributable to the shareholders of GPW adjusted for the share of profit of associates. The recommendation is consistent with GPW's dividend policy.

GPW Group's financial results in Q1 2020

Net profit

The net profit of the GPW Group was PLN 29.3 million in Q1 2020, an increase of 19.7% year on year and an increase of 161.3% quarter on quarter. The quarter-on-quarter increase of the net profit was driven by a higher revenue on both the financial market, up by PLN 15.1 million, and the commodity market, up by PLN 2.2 million.

Revenue from the financial market

The sales revenue on the financial market was PLN 58.7 million in Q1 2020, representing an increase of 18.7% year on year and an increase of 34.6% quarter on quarter. The revenue on the financial market contributed 60.5% of the total sales revenue of the GPW Group compared to 58.8% in Q1 2019 and 54.4% in Q4 2019. The revenue on the financial market includes trading revenue, listing revenue, and revenue from information services.

ü Trading revenue on the financial market

The trading revenue on the financial market was PLN 41.5 million in Q1 2020 compared to PLN 32.0 million in Q1 2019, representing an increase of 29.7% year on year and an increase of 53.1% quarter on quarter. The revenue was mainly driven by an increase in revenue from trading in shares and derivatives. Revenue from trading in equities increased by 32.4% year on year and by 56.5% quarter on quarter. Revenue from trading in derivatives increased by 68.1% year on year and by 74.4% quarter on quarter.

The increase of the revenue from trading in shares was driven by an increase of the value of trading on the Main Market. The total value of trading on the Main Market stood at PLN 62.1 billion in Q1 2020, representing an increase of 18.2% year on year.

The increase in the value of trading was mainly attributable to financial instruments prices volatility caused by the outbreak of the pandemic, as well as the activity of new investors, including individual investors (+56.6 thousand new broker's accounts in January-April 2020 year to date).

ü Listing revenue
The GPW Group's listing revenue on the financial market was PLN 5.3 million in Q1 2020 compared to PLN 5.3 million in Q1 2019 and PLN 4.3 million in Q4 2019. The revenue from listing fees was PLN 4.5 million in Q1 2020 (-1.2% year on year and +6.0% quarter on quarter). The total value of IPOs and SPOs on the Main Market and NewConnect stood at PLN 0.9 billion in Q1 2020 vs. PLN 0.2 billion in Q1 2019. The total of PLN 0.9 billion mainly includes SPOs on the Main Market.

ü Information services
The revenue from information services stood at PLN 11.8 million in Q1 2020, representing a decrease of 3.0% year on year and 3.3% quarter on quarter. The revenue from information services contributed 12.2% of the GPW Group's total sales revenues.

Revenue from the commodity market

The sales revenue on the commodity market was PLN 38.1 million in Q1 2020, an increase of 10.4% year on year and an increase of 6.1% quarter on quarter. It contributed 39.3% to the GPW Group's total revenues in Q1 2020. The revenue on the commodity market includes trading revenue, revenue from operation of the certificates of origin register, and revenue from clearing.

ü Trading revenue on the commodity market
The trading revenue on the commodity market increased by 18.9% year on year and by 3.1% quarter on quarter to PLN 18.9 million in Q1 2020. The revenue from trading in electricity was PLN 4.8 million in Q1 2020, an increase of 50.0% year on year and a decrease of 0.9% quarter on quarter. The revenue from trading in gas increased by 41.3% year on year and decreased by 1.8% quarter on quarter to PLN 3.4 million in Q1 2020. The revenue from trading in property rights of certificates of origin decreased by 0.9% year on year and increased by 7.9% quarter on quarter to PLN 7.3 million in Q1 2020 (a very good result considering that trade in cogeneration certificates ended at the end of June 2019). The Group's revenue from other fees paid by commodity market participants stood at PLN 3.5 million in Q1 2020 compared to PLN 3.0 million in Q1 2019 and PLN 3.3 million in Q4 2019. The amount of other fees paid by commodity market participants depends largely on the number and activity of IRGiT Members, particularly in terms of the number of transactions.

ü Operation of the Certificates of Origin Register
The revenue from the operation of the Certificates of Origin Register was PLN 5.9 million in Q1 2020, representing a decrease of 22.9% year on year and an increase of 15.6% quarter on quarter. The year-on-year decrease in the revenue was due to a decrease in the volumes of cancelled property rights (by 66.5%) and issued property rights (by 39.3%). The decrease in the revenue was driven by a decrease of the revenue from the RES register from PLN 5.4 million to PLN 5.2 million, no revenue from cogeneration in Q1 2020 vs. PLN 1.6 million in Q1 2019, and stable revenue from energy efficiency and guarantees of origin year on year.

ü Clearing
The revenue from clearing was PLN 13.1 million in Q1 2020, representing an increase of 20.3% year on year and an increase of 5.9% quarter on quarter. The change of the revenue was driven by volumes of trade on all markets operated by TGE.

ü Information services
The revenue from information services on the commodity market stood at PLN 291 thousand in Q1 2020 compared to PLN 169 thousand in Q1 2019 and PLN 176 thousand in Q4 2019.

Operating expenses

Operating expenses were PLN 56.1 million in Q1 2020, an increase of 3.2% year on year and an increase of 18.3% quarter on quarter.

In Q1 2020, the GPW Group booked lower provisions against capital market supervision fees at PLN 10.0 million vs. PLN 12.9 million in Q1 2019. The GPW Group reported an increase of salaries and other employee costs at PLN 22.3 million in Q1 2020 vs. PLN 19.4 million in Q1 2019 and PLN 19.9 million in Q4 2019, as well as an increase of external service charges at PLN 11.4 million in Q1 2020 vs. PLN 10.1 million in Q1 2019 and PLN 15.3 million in Q4 2019. The increase of salaries was driven by a gradual increase of the headcount required by an additional workload in the implementation of the Group's strategy including the implementation of a pension plan in TGE. Depreciation charges increased by 6.2% year on year and by 3.6% quarter on quarter to PLN 9.8 million in Q1 2020. External service charges increased by 12.5% year on year and decreased by 25.5% quarter on quarter. The year-on-year increase in external service charges was driven among others by an increase in advisory costs by PLN 0.7 million. The quarter-on-quarter decrease was driven by a decrease of IT costs and promotion costs.

Share of profit of entities measured by the equity method

The GPW Group's share of profit of entities measured by the entity method was PLN 2.0 million in Q1 2020 compared to PLN 1.0 million in Q1 2019 and PLN 1.9 million in Q4 2019. The increase was driven by a higher profit of the KDPW Group.

The Group's share of the profit of the KDPW Group was PLN 1.8 million in Q1 2020 compared to PLN 1.1 million in Q1 2019.

The share of the profit of Centrum Giełdowe increased by 43.5% or PLN 40 thousand year on year to PLN 0.1 million in Q1 2020.

The share of the loss of PAR (joint venture) was not recognised as the investment had been fully impaired in 2019.

Author: The FINANCIAL