News

GPW Group’s Stable Financial Results in 2022 In a Challenging Market Environment

PRESS RELEASE

• Revenue at PLN 389.3 mn, 4.5% lower than in record-high 2021
• Increase of operating expenses lower than the inflation rate
• Record-high share of profit of associates (KDPW)
• High financial income due to accumulated cash
• Net profit of PLN 145.0 mn, a net profit margin of 37.2%
• Dividend payment of PLN 115 mn (PLN 2.74 dividend per share)
• Finalisation of work on the GPW Group’s new strategy for 2023-2027

The Warsaw Stock Exchange Group (GPW Group) generated PLN 389.3 million in revenue in 2022, representing a low single-digit decrease (4.5%) from the record level in 2021. The Group recorded a record share of profit of associates in 2022, which reached PLN 28.3 million and was 15.9% higher year on year due to the very strong performance of KDPW. In addition, the high value of the GPW Group’s cash allowed it to generate high financial income in an environment of rising interest rates: the financial income rose to PLN 23.5 million compared to PLN 1 million in 2021. The GPW Group’s operating expenses increased by 11.1% year on year in 2022, less than the average annual inflation rate (14.4%), despite the implementation of a number of important strategic initiatives. The decrease in revenue, resulting from the challenging market environment, and the increase in expenses in a high inflation environment, brought the GPW Group’s EBITDA in 2022 to PLN 167.4 million, 22.2% lower year on year. The decrease was significantly smaller at the level of net profit, which shrank by 10.1% in 2022 and amounted to PLN 145.0 million.

In Q4 2022, the GPW Group generated sales revenue of PLN 91.5 million, EBITDA of PLN 40.8 million, and net profit of PLN 37.7 million.

“The presentation of the financial results for 2022 is a good time to summarise the implementation of the #GPW2022 Strategy and the results of the last five years. Between 2018 and 2022, average revenue from trading in financial instruments increased by 13 percent compared to 2013-2017. The commodity segment saw an even greater improvement, with revenue increasing by 26 percent. Information services generated average annual revenue of PLN 52 million compared to PLN 39 million in 2013-2017. The high growth rate of revenue drove our profits: the average annual profit in the last five years was the highest ever and 24 percent higher than in 2013-2017. This was possible despite significant capital and operating expenditure in the implementation of the strategy," said Marek Dietl, President of the GPW Management Board.

The financial strength of the GPW Group has been steadily corroborated by the dividend paid every year. A dividend of PLN 115 million was paid in August 2022, which implies a dividend of PLN 2.74 per share and represents 71.3% of the consolidated net profit for 2021. Last year’s dividend yield reached 7.5 per cent. The dividend paid in the last five years has increased by 31.5 percent compared to 2013-2017.

“Since its IPO in 2011, GPW has distributed a total of over PLN 1.1 billion in dividends to the shareholders; more than 60% of the total has been paid to the shareholders during my mandate as CEO,” said Marek Dietl, President of the GPW Management Board. 

In 2022, EOB equity turnover on the GPW Main Market amounted to PLN 285.6 billion, 8.9% lower than in the record year 2021. Investor activity was significantly higher for another consecutive year compared to the years preceding the pandemic. GPW continued to support liquidity through, among others, discounts to large liquidity providers (HVP/HVF) as well as the Analytical Coverage Support Programme and the Technology Development Support Programme. Turnover on NewConnect (NC) was 58.7% lower year on year (PLN 2.5 billion vs. PLN 6.1 billion in 2021) as a result of a high base from the pandemic years, triggered by above-average volatility and interest in some NC-listed stocks, especially those of medical companies. ETF turnover was record-high in 2022 at more than PLN 1 billion for the first time, up 55% on 2021. The most popular derivatives on the GPW, the WIG20 futures, generated the highest trading volume since 2011 (9.34 million contracts, up 73% year on year).

Declines in the valuations of listed companies resulted in reduced activity in the Initial Public Offering (IPO) market, evident not only on GPW but across Europe. According to the PwC IPO Watch Europe 2022 report, the total value of IPOs in Europe was as much as 80% lower than in 2021. There were eight IPOs on GPW’s Main Market (transfers from NewConnect), while 16 companies were newly listed on NC. On the other hand, Secondary Public Offerings (SPOs) on GPW attracted a lot of interest last year. The total value of SPOs on GPW’s stock markets was PLN 9.0 billion in 2022, the highest since 2017. The biggest transactions in 2022 took place in the following sectors: energy (PGE, Polenergia, Enea), e-commerce (Allegro), fuels (PKN Orlen).

The year 2022 was a period of continued relatively high individual investor activity. At the end of 2022, KDPW maintained 1.605 million securities and omnibus accounts, compared to 1.374 million at the end of 2021. This implies that 230,400 accounts were added during the year, an increase of 16.8% year on year and the highest figure in 12 years.

On the commodity market operated by the GPW Group subsidiary Towarowa Giełda Energii, electricity and gas trading volumes recorded year-on-year declines of 37.2% to 141.4 TWh and 21.7% to 141.6 TWh, respectively, in 2022.

The electricity forward market saw a 42.7% year-on-year decline in turnover to 108.3 TWh. This was related to record-high energy valuations, including the financial burden of maintaining margins, as well as increased financial risks for trading activity (high price volatility combined with high uncertainty about next year’s commodity prices).

Turnover on the gas forward market in 2022 declined mainly for the instruments with the longest delivery periods, primarily due to record-high commodity valuations, including the financial burden of maintaining margins. In addition, domestic gas consumption declined sharply in the second half of the year. Annual turnover in the gas forward market amounted to 118.9 TWh, declining by 21.9% from the record year 2021. A similar decline (20.6%) was recorded in the spot market, where turnover amounted to 22.7 TWh.

The turnover in certificates on the Property Rights Market amounted to approximately 24.8 TWh in 2022. The 4.2% decrease in volumes compared to 2021 was due to the termination of the certificate support scheme for some entities in the Register of Certificates of Origin and the migration of entities to the auction system, which is a responsibility of the Energy Regulatory Office (URE).

Implementation of the Strategy #GPW2022

In 2022, the Group continued to implement strategic initiatives under the Strategy #GPW2022. The milestones were consistently met and their monitoring took place monthly at Exchange Management Board meetings and quarterly at Exchange Supervisory Board meetings.

The biggest project under development in the GPW Group is the new trading system: Warsaw Automated Trading System (WATS). WATS is planned for implementation at GPW and its subsidiaries in order to replace the legacy trading systems. It will ensure independence from external providers and may be commercialised.

The subsidiary GPW Tech continued to work on four products in 2022:

– TCA Tool, which is used to analyse market macro and micro structure. The product can be sold to other exchanges as well as brokerage houses. The first TCA Tool service contract for the Kuwait Stock Exchange has been completed;

– GPW STORK, used to detect irregularities in trading on the exchange. It has been implemented on the Polish market. Potential customers include brokerage houses and supervisory institutions, also outside Poland. The product has been fully implemented at GPW;

– New Indexator, a tool to calculate indices, which has replaced GPW’s previous calculator that was less efficient. GPW Tech is in talks with foreign customers interested in purchasing the tool;

–GRC System, a tool to manage the risk of non-compliance with applicable regulations and internal procedures, ensuring continuous monitoring of regulatory and legal requirements, in particular for public companies. The product has been implemented in the GPW Group and the first fee-paying customer outside the Group has been acquired.

GPW Benchmark focused in 2022 on the development of the WIRON Index, which can be used by banks to offer loans based on the index as of the beginning of 2023. The company developed the WIRON Compound Indices Family (WIRON 1M Compound Rate, WIRON 3M Compound Rate, WIRON 6M Compound Rate, and WIRON Single-Base Index), which can be used as a benchmark by supervised entities in financial contracts, financial instruments and investment funds since December 2022. The TBSP.Index and five new government bond indices with bond portfolios of different maturities joined the Treasury Bond Index Family in 2022.

The research and development in the GPW Data project, based on machine learning and artificial intelligence, was completed in 2022. Commercialisation of the project in a freemium model began. In the first place, state-of-the-art innovative services to facilitate market data analysis and the investment process will be offered on a mobile application. Developments in the area of data and technology are currently driving the global capital markets.

GPW Logistics was established in 2022 to commercialise the technology developed in the Polish Digital Logistics Operator (PCOL) project. GPW Logistics has already signed the first contracts with customers.

In November 2022, GPW launched a market for shares of foreign companies, GlobalConnect. Trading on GlobalConnect takes place during trading session hours on GPW and in Polish zloty, giving investors certainty of the price at which they are buying shares. Investors can place orders through an account at a domestic brokerage firm connected to the new market. The first five companies to be listed on GlobalConnect include Europe’s largest insurer Allianz, three automotive companies: BMW, Mercedes Benz, Volkswagen, as well as the technology company Siemens. There are plans to increase the number of listed companies, eventually also including US stocks.

In December 2022, GPW formally acquired a 65.03% stake in the Armenia Securities Exchange (AMX) for approximately PLN 9.6 million. GPW indirectly took control of the Central Depository of Armenia (Central Securities Depository of Armenia, CDA), in which AMX holds a 100% stake. The acquisition of AMX will allow GPW to further expand its services and accelerate the implementation of its strategy. On the other hand, it will allow the Armenia Securities Exchange to benefit from the know-how of the GPW Group: the detailed development plan of AMX and of the Armenian capital market are part of AMX’s long-term development strategy, which was developed in cooperation with GPW and the European Bank for Reconstruction and Development (EBRD).

In March 2023, GPW announced that together with Emitel, it will conduct a pilot implementation of an ad broadcasting system in the dynamic ad insertion model, which the subsidiary GPW DAI is developing. The tests are to cover all types of digital TV platforms in Poland. The objective of the GPW DAI project is to develop a multi-modular auction platform for comprehensive media market transactions.

Work is currently underway to develop the GPW Group’s strategy for 2023-2027. The publication of the new strategy is scheduled for the second quarter of 2023.

Presentation of the financial results of the GPW Group for Q4 2022 and for 2022

Net profit

The net profit of the GPW Group was PLN 37.7 million in Q4 2022 vs. PLN 41.4 million in Q4 2021 and PLN 31.1 million in Q3 2022. The Group’s annual net profit was PLN 145.0 million in 2022 vs. PLN 161.3 million in 2021. The year-on-year decrease of the net profit was due to lower revenue on the commodity market (-7.9% YoY) and on the financial market (-2.7%) combined with an increase of operating expenses (+11.1% YoY). The net profit was supported by the positive net finanxial income at PLN 16 million compared to a net financial loss of PLN 10.6 million in 2021. The GPW Group’s share of profit of entities measured by the equity method was record-high, up by 15.9% to PLN 28.3 million.

RYNEK FINANSOWY FINANCIAL MARKET

Revenue from the financial market

The sales revenue from the financial market stood at PLN 57.4 million in Q4 2022 vs. PLN 66.3 million in Q4 2021 and PLN 58.0 million in Q3 2022. The revenue from the financial market contributed 62.7% of the total sales revenue of the GPW Group vs. 61.7% in Q4 2021 and 65.5% in Q3 2022.

The annual sales revenue from the financial market was PLN 247.7 million in 2022 vs. PLN 254.7 million in 2021. The sales revenue from the financial market contributed 63.6% of the total sales revenue of the GPW Group in 2022 vs. 62.5% in 2021.

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 37.2 million in Q4 2022 vs. PLN 47.4 million in Q4 2021 and PLN 38.2 million in Q3 2022.

The annual trading revenue on the financial market was PLN 167.5 million in 2022 vs. PLN 177.9 million in 2021. The year-on-year decrease in the annual revenue on the financial market was driven by a decrease of revenue from equity trading (-14.0% YoY) combined with an increase of revenue from derivatives trading (+55.2% YoY).

• Listing revenue

The GPW Group’s listing revenue on the financial market was PLN 5.6 million in Q4 2022 vs. PLN 4.3 million in Q4 2021 and PLN 5.5 million in Q3 2022. The annual listing revenue represented 5.9% of the GPW Group’s total revenue and stood at PLN 23.0 million in 2022 vs. PLN 21.6 million in 2021. Listing revenue includes annual listing fees, fees for introduction, and other fees. As such, the revenue is mainly a function of IPO/SPO activity, the number of issuers, and company capitalisation.

There were 24 new listings on GPW’s markets in 2022 (including 8 transfers from NewConnect to the Main Market) vs. 48 new listings in 2021. The total IPO value on both equity markets was PLN 127 million in 2022 (vs. PLN 9.4 billion in 2021). The value of SPOs was PLN 9.0 billion (vs. PLN 1.9 billion in 2021). The total capitalisation of domestic and foreign companies on GPW’s two equity markets stood at PLN 1,128.9 billion as at 31 December 2022 vs. PLN 1,331.5 billion as at 31 December 2021.

• Information services

The revenue from information services stood at PLN 14.6 million in Q4 2022 vs. PLN 14.6 million in Q4 2021 and PLN 14.3 million in Q3 2022. The annual revenue from information services in 2022 was record-high for another consecutive year and stood at PLN 57.3 million vs. PLN 55.2 million in 2021 (up by 3.6%), accounting for 14.7% of the GPW Group’s consolidated sales revenues.

2022, the number of the GPW Group’s data vendors continued to increase: 6 companies were licensed as GPW data vendors and one as a GPW Benchmark data vendor. The number of subscribers for GPW Group data was record-high at over 533,000.

COMMODITY MARKET

Revenue from the commodity market

The sales revenue on the commodity market was PLN 32.9 million in Q4 2022, a decrease of 17.8% year on year and an increase of 10.3% quarter on quarter. It contributed 36.0% of the Group’s total revenues in Q4 2022. The annual revenue from the commodity market was PLN 138.1 million in 2022, representing a decrease of 7.9% year on year and contributing 35.5% 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, revenue from clearing, and revenue from information services.

• Trading revenue on the commodity market

The trading revenue on the commodity market stood at PLN 16.8 million in Q4 2022, representing a decrease of 16.6% year on year and an increase of 6.3% quarter on quarter. The annual trading revenue on the commodity market stood at PLN 69.2 million in 2022, down by 7.3% year on year.

The revenue from trade in electricity was PLN 2.8 million in Q4 2022 vs. PLN 5.4 million in Q4 2021 and PLN 3.4 million in Q3 2022. The annual revenue from trade in electricity was PLN 13.4 million in 2022, a decrease of 29.9% year on year.

The revenue from trade in gas remained stable (-0.4%) year on year and increased by 75.3% quarter on quarter and stood at PLN 3.6 million in Q4 2022. The annual revenue from trade in gas was PLN 11.5 million in 2022, a decrease of 23.0% year on year.

The revenue from trade in property rights stood at PLN 4.9 million in Q4 2022, representing a decrease of 27.1% year on year and remaining stable (-0.4%) quarter on quarter. The annual revenue of the segment decreased modestly by 3.2% year on year and stood at PLN 24.3 million in 2022.

The Group’s revenue from other fees paid by commodity market participants stood at PLN 5.5 million in Q4 2022, an increase of 24.7% year on year and an increase of 1.6% quarter on quarter. The Group’s annual revenue from other fees paid by commodity market participants stood at PLN 20.0 million in 2022 vs. PLN 15.6 million in 2021, an increase of 28.7% year on year. The amount of other fees paid by commodity market participants depends mainly 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 4.8 million in Q4 2022, representing a decrease of 14.1% year on year and a decrease of 10.6% quarter on quarter. The annual revenue from the operation of the Register of Certificates of Origin was PLN 25.0 million in 2022, an increase of 4.9% year on year.

• Clearing

The revenue from clearing was PLN 10.9 million in Q4 2022, representing a decrease of 21.5% year on year and an increase of 31.7% quarter on quarter. The Group’s annual revenue from clearing was PLN 42.6 million in 2022, a decrease of 15.5% year on year. The revenue depends on turnover volumes on the markets operated by TGE.

• TGE Group information services

Revenue from information services stood at PLN 337 thousand in Q4 2022, an increase of 2.1% year on year and an increase of 4.7% quarter on quarter. Annual revenue from TGE Group information services stood at PLN 1.3 million in 2022, an increase of 20.5% year on year.

Operating expenses

Operating expenses of the GPW Group stood at PLN 64.2 million in Q4 2022 vs. PLN 63.2 million in Q4 2021, representing an increase of 1.6% year on year and an increase of 8.2% quarter on quarter. The annual operating expenses were PLN 254.9 million in 2022 vs. PLN 229.4 million in 2021, an increase of 11.1% year on year. The C/I ratio increased to 65.5% in 2022 vs. 56.3% in 2021.

• Total employee costs in Q4 2022 stood at PLN 27.7 million vs. PLN 32.3 million in Q4 2021, a decrease of PLN 4.6 million (-14.2%). The annual expenses in 2022 were stable (increase of 1.8% year on year, i.e., by PLN 2 million) and stood at PLN 111.6 million.
• External service charges stood at PLN 23.4 million in Q4 2022 vs. PLN 17.6 million in Q4 2021, an increase of PLN 5.8 million year on year (+33.3%). Annual charges in 2022 increased by 32.7% year on year, i.e., by PLN 18.7 million to PLN 76.0 million.
• The PFSA fee in 2022 stood at PLN 14.8 million, an increase of PLN 0.3 million or 1.8% 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 7.6 million in Q4 2022 vs. PLN 5.2 million in Q4 2021. The GPW Group’s annual share of profit was PLN 28.3 million in 2022 vs. PLN 24.4 million in 2021, an increase of 15.9% year on year and the highest figure ever reported. The share of profit of entities measured by the equity method is mainly driven by the earnings of the KDPW Group. The KDPW Group’s profit attributable to GPW was PLN 27.8 million in 2022 vs. PLN 24.1 million in 2021.

***

The Warsaw Stock Exchange Group (GPW Group) operates trading platforms for shares, Treasury and corporate bonds, derivatives, electricity and gas, and provides indices and benchmarks including WIBOR and WIBID. The index agent FTSE Russell classifies the Polish capital market as a Developed Market since 2018. The markets operated by the GPW Group are the biggest in Central and Eastern Europe. For more information, visit www.gpw.pl.