- WSE Group’s consolidated net profit was PLN 30.0 million in Q3 2014, an increase of 15.5% YoY and 46.9% QoQ
- Total revenue increased to PLN 77.9 million, i.e., by 12.9% YoY and by 12.4% QoQ
- Revenue from the financial market was PLN 49.3 million and was stable compared to previous quarters
- The volume of trade in natural gas increased to 58.9 TWh, growing the Group’s revenue from the commodity market to PLN 28.3 million (increase of 51.3% YoY and 39.2% QoQ)
- The Group’s operating expenses decreased by 5.6% QoQ to PLN 41.9 million
- In August 2014, WSE paid PLN 1.2 of dividend per share with a dividend yield of 3.3%1
In Q3 3014, the WSE Group generated a net profit of PLN 30 million. Total revenue stood at PLN 77.9 million, one of the highest levels in the history of WSE. Revenue from the financial market stabilised at PLN 49.3 million (a decrease of 0.4% YoY and an increase of 2.2% QoQ). Revenue on the commodity market increased by 51.3% YoY to PLN 28.3 million, driven mainly by record-high turnover on the gas market and increase of turnover on the property rights market. Operating expenses decreased by 5.6% quarter on quarter to PLN 41.9 million (and increased by 4.2% YoY). As a result, the operating profit was PLN 36.1 million, representing an increase of 26.5% YoY and 48.5% QoQ.
“From the very beginning, we have imposed a strict cost discipline; if we want to be competitive on the market in the long term, we need to keep costs under control. The outcome of this approach shows in the results of Q3 2014. The Exchange offers an attractive market for investors and issuers while building shareholder value as an interesting company in its own right. One of our strategic goals is to ensure high operating effectiveness of the Group as reflected in the cost/income ratio (C/I). We want C/I to fall below 0.5,” said PaweÅ‚ Tamborski, President of the Management Board of WSE.
In September 2014, the WSE Management Board decided to keep the trading session hours unchanged until the end of 2015 and to restore WIG20 as the main index underlying derivatives. In October 2014, WSE decided to continue the listing of WIG20 futures contracts with a multiplier of PLN 20.
Presentation of the financial results of the WSE Group in Q3 2014
The net profit of the WSE Group in Q3 3014 stood at PLN 30.0 million, which represents an increase of 46.9% QoQ and 15.5% YoY. The year-on-year increase was mainly driven by higher revenue from the commodity market. The high quarter-on-quarter increase of net profit was driven among others by a significant decrease of operating expenses (-5.6% QoQ).The operating profit of the WSE Group increased to PLN 36.1 million in Q3 2014, i.e., by 48.5% QoQ and 26.5% YoY.
Revenue from the financial market
Revenue from the financial market stood at PLN 49.3 million in Q3 2014, representing an increase of 2.2% QoQ and a decrease of 0.4% YoY. Revenue from the financial market accounted for 63.3% of the WSE Group’s total revenue in Q3 2014 (69.6% in Q2 2014 and 71.7% in Q3 2013). Revenue from the financial market includes trading revenue, listing revenue, and revenue from information services.
Trading on the financial market
Trading revenue on the financial market stood at PLN 34.3 million in Q3 2014 v. PLN 32.5 million in Q2 2014 (an increase of 5.5%) and PLN 35.7 million in Q3 2013 (a decrease of 3.9%). The QoQ change was driven among others by an increase of trading revenue on the equity market (by 10.2% to PLN 27.0 million) resulting from an increase of turnover in shares on the Main Market (increase of 16.1% to PLN 63.6 billion).
Revenue on the derivatives market in Q3 2014 decreased by 24.8% QoQ and 48.7% YoY and stood at PLN 2.8 million. The lower revenue was due to a decrease of the volume of trade in index futures driven among others by the low volatility of the underlying, relatively low turnover of WIG20 shares, and change of the WIG20 contract multiplier from PLN 10 to PLN 20. In Q3 2014, the volume of trade in index futures was 1.2 million contracts, representing a decrease of 18.9% QoQ and 42.4% YoY. An analysis of the WIG20 futures market suggests that the transaction costs for investors in relation to the value of the contract decreased by half following the change of the multiplier while the order book became much deeper, which allows investors to open large positions.
Trading revenue from debt instruments stood at PLN 3.0 million in Q3 2014, representing an increase of 5.3% QoQ and an increase of 9.3% YoY. The revenue was largely driven by an increase of turnover on the wholesale Treasury bond market TBPS Poland to PLN 216.8 billion (total cash and conditional transactions increased by 5.4% QoQ and 38.2% YoY).
Listing
Listing revenue stood at PLN 5.7 million in Q3 2014, representing a decrease of 7.2% QoQ and an increase of 8.3% YoY. It was driven by revenue from listing fees and fees for introduction to trading. The former increased by 9.9% YoY due to a higher capitalisation of companies listed on WSE at the end of 2013 used as the basis for the listing fees charged in 2014 (the capitalisation of all companies listed on the Main Market stood at PLN 840.8 billion at the end of 2013 compared to PLN 734.0 billion at the end of 2013). Revenue from fees for introduction to trading in Q3 2014 decreased by 27% QoQ but increased by 1.3% YoY. In addition, the revenue is driven by the number of IPOs on the WSE markets, as well as the value of shares introduced to trading. There were 5 IPOs while the value of IPOs and SPOs was PLN 0.8 billion in Q3 2014, as compared to 8 IPOS and PLN 1.4 billion in Q2 2014.
Information services
Revenue from information services stood at PLN 9.3 million in Q3 2014, a decrease of 3.1% QoQ and an increase of 8.7% YoY.
Revenue from the commodity market
Revenue from the commodity market stood at PLN 28.3 million, representing an increase of nearly 40% QoQ and 51.3% YoY. It accounted for 36.4% of the total revenue of the WSE Group at the end of September 2014, compared to 29.4% in Q2 2014 and 27.1% in Q3 2013. Revenue from the commodity market includes trading revenue, revenue from the operation of the register of certificates of origin, and revenue from clearing.
Trading on the commodity market
Trading revenue on the commodity market increased by 48.6% QoQ and by 40.9% YoY to PLN 15.1 million in Q3 2014. It was driven by a significant increase of the volume of trade in natural gas (record-high volume of 58.9 TWh).
Register of Certificates of Origin
Revenue from the operation of the Register of Certificates of Origin stood at PLN 4.7 million in Q3 2014, representing a decrease of 1.5% QoQ and an increase of 72.1% YoY. The YoY change was driven by a change of the volume of issued and cancelled certificates of origin of energy from renewable sources at 12.4 TWh (a decrease of 27.4% QoQ and an increase of 70.3% YoY).
Clearing
Revenue from clearing increased by 57.6% QoQ and 61.9% YoY to PLN 8.5 million in Q3 2014. It was driven by an increase of the volume of trade on the gas market and the property rights market in Q3 2014.
Operating expenses
Operating expenses stood at PLN 41.9 million in Q3 2014, representing a decrease of 5.6% QoQ and an increase of 4.2% YoY. They were driven by a decrease of external service charges to PLN 8.7 million (from PLN 10.5 million, i.e., -16.5% QoQ) and a decrease of employee costs and other costs (by PLN 0.4 million QoQ). Other operating expenses also decreased (by 27.9% QoQ) to nearly PLN 1.5 million. The WSE Group’s operating expenses increased by 4.2% YoY due to higher salaries.
Other income and costs
Other income and costs decreased significantly in Q3 2014. Other income decreased by 60% QoQ to PLN 0.2 million due to partial release of provisions in Q2 2014. Other costs decreased to PLN 85 thousand (by 91.9% QoQ) due to write-offs of doubtful debt in Q2 2014.
Share of profit of associates
The WSE Group’s share of profit of associates stood at PLN 1.1 million in Q3 2014 v. PLN 0.9 million in Q2 2014 and PLN 3.4 million in Q3 2013. The main driver was the net profit of the KDPW Group where the share of WSE was PLN 2.7 million in Q3 2014 (a decrease of 11.5% YoY and a decrease of 1.6% QoQ), as well as the loss generated by Aquis Exchange. Aquis Exchange became an associate in February 2014. The loss of Aquis Exchange was PLN 1.6 million in Q3 2014 v. a loss of PLN 2.0 million in Q2 2014.
[1] dividend yield as the dividend per share to the closing price of WSE shares at 4 August 2014