Letter from the President of the Management Board
President of GPW
Dear Sir or Madam, Dear Shareholder, Dear Investor,
I am proud to present you the integrated annual report of the GPW Group prepared according to the International Integrated Reporting Framework standards developed by the International Integrated Reporting Council – IIRC.
Focusing on key issues related to the GPW Group's activity including resources, business model, strategy and achievements, viewed from the perspective of the external environment and anticipated macroeconomic trends, this report aims to reveal how the value for our stakeholders has been created.
I believe that our report will meet your expectations in terms of reliable, useful and user friendly information, and the experience gained while developing the report will allow us, as the largest stock exchange in the region and the strong player in Europe, to shape our own approach to integrated reporting.
Last year we all witnessed extreme volatility on the global financial markets. Investors’ expectations went from catastrophic to optimistic. The sentiment was reflected in record-breaking EOB turnover which exceeded PLN 297 billion on GPW and was historically high. NewConnect performed even better as annual turnover was greater than the aggregate turnover in the last three years.
Expansive monetary policy encouraged a return of individual investors who generated 25% of equity turnover on the Main Market vs. 12% in 2019. They invested through the exchange almost as much in a single year as they had in 2017-2019 in aggregate. New investors joined the market, and the number of brokerage accounts increased by nearly 85,000.
That record-breaking performance was corroborated by excellent financial results in 2020. Our consolidated net profit was PLN 151.4 million in 2020 vs. PLN 119.3 million in 2019 while total revenue stood at PLN 403.8 million (20.1% YoY). The annual operating profit was PLN 188.3 million in 2020 vs. PLN 156.3 million in 2019 while EBITDA stood at PLN 224.6 million, an increase of 16.3% year on year. Revenue from information services grew steadily (7.8% YoY) and accounted for 13.0% of total revenue.
Importantly, we paid out a PLN 100.7 million dividend from the consolidated net profit of 2019 (adjusted for the share of profit of associates). In accordance with the dividend policy, the dividend will increase by no less than PLN 0.1 per share every year up to 2022.
Towarowa Giełda Energii performed very well and delivered historically high turnover in electricity in 2020. The total volume reached 243.2 TWh, an increase of 6.2% year on year. The gas market also broke new records as the total turnover volume stood at 151.1 TWh (up by 3.4% YoY).
We opened the Food and Agricultural Commodity Market in March 2020. It was one of the GPW Group’s key strategic initiatives and a breakthrough project for Polish agriculture. We offer trading in three products: wheat, rye, and maize. We are planning to open a forward market in food and agricultural commodities. The subsidiary GPW Ventures and KOWR signed a memorandum of understanding in 2020 to establish the KOWR Ventures Fund. It is a development project for agriculture, the food and agricultural industry and rural areas in Poland based on innovative solutions.
We continued to develop the technological arm of the Warsaw Stock Exchange, GPW Tech. The company opened preparations in 2020 for the commercialisation of two IT projects under development at GPW. One is the GRC system (Governance, Risk, Compliance) for secure automated management of compliance with internal and external requirements, compliance risk, and processes. The other one is our TCA Tool, an application analysing the micro and macro market structure, and quality of order execution.
As a major milestone, GPW Benchmark was authorised in late 2020 by the Polish Financial Supervision Authority as an interest-rate benchmark administrator, including the Reference Rates WIBID and WIBOR. It is a key pillar of stability of the financial system. We realise that the success comes with great responsibility for ensuring credibility and adequacy of benchmarks in the future. As a next step, GPW Benchmark will expand its offer, including the harmonisation of the exchange index methods with the requirements of sustainable financing, as well as the development of state-of-the-art alternative interest-rate benchmarks.
We carried out the GDP Data project in partnership with the National Centre for Research and Development. The project will develop an innovative AI-based system for the collection and sharing of market data to support investment decisions of capital market participants. The project published an XBRL taxonomy model in 2020. We are now focusing on the development of a repository of exchange data including listing quotes and (periodic, current and non-financial) reports of issuers.
We launched the second phase of the strategic initiative GPW Private Market. We developed a platform for the issuance of tokens in return for a stream of economic benefits. We will establish a token trading system this year. Tokenisation of financial and non-financial assets follows EU regulatory trends.
We continued to develop the Analytical Coverage Pilot Programme which improves the availability of research covering SMEs. The number of participating companies increased to 51 in 2020.
We are aware of the growing importance of ESG factors in investment decisions and we continue the implementation of our ESG strategy. As a key milestone, we joined the United Nations Global Compact, the major global initiative of the UN Secretary General in support of sustainable business. As a part of the partnership, we signed an agreement to develop tools to support the financing of sustainable development.
We were named the co-ordinator of a new project in 2020. Polski Cyfrowy Operator Logistyczny (Polish Digital Logistics Operator) aims to improve and facilitate TSL processes and protect the security of the Polish transport industry which is estimated to be worth PLN 140 billion. It is the first initiative and a reference project of the Synergia team at the Ministry of State Assets. We are preparing a business plan and discussing the terms of co-operation with potential partners.
We developed new derivatives as one of GPW’s strategic initiatives. We continued to develop the segment of single-stock futures, introducing four new futures in October 2020. Single-stock futures turnover increased by 71% in 2020. The biggest percentage increase across all derivatives was reported for currency futures, up by 83% year on year.
The structured product segment also picked up. We now list more than 21,000 structured products. Turnover reached nearly PLN 3.7 billion in 2020, up by 148% year on year. The WIG20lev Beta ETF was newly listed on the GPW Main Market, the seventh Exchange Traded Fund to be listed on GPW and the fourth Beta ETF. Structured products enjoy growing interest: turnover grew 338% in 2020. Just like investors around the world, Polish investors do appreciate ETFs.
As for new listings last year, seven companies went public on the Main Market (including two transfers from NewConnect), including Allegro.eu, the biggest IPO in GPW history worth PLN 10.6 billion (the second biggest in Europe and the ninth biggest globally). Fourteen companies were newly listed on NewConnect, including mainly high-tech, biotech and gamedev stocks. GPW was #1 globally by the number of listed gamedev stocks, outpacing the former leaders, namely Tokyo Stock Exchange and South Korea’s KRX.
We are active on the international forum. We established relations with Sovereign Wealth Management funds in Saudi Arabia and Singapore. GPW opened talks with Asian exchanges to initiate joint marketing activities in 2021. We are still interested in acquiring a majority stake in the Armenia Stock Exchange; political conditions permitting, we will soon open its due diligence. We consolidated our position in the Three Seas Region. The Three Seas Exchanges Conference was held in September 2020 under the patronage of the President of Poland Andrzej Duda.
The year 2020 brought major challenges arising from the COVID-19 pandemic. To protect the health and safety of our employees, we decided that more than 90% of staff would work from home. We initiated a range of supporting measures: we financed SARS-CoV-2 antibody tests for all interested employees and we offered grants for home office equipment. Guided by social responsibility, we made two donations, totalling PLN 1,680,000, for the acquisition of equipment by a dozen health care centres across Poland.
I wish to thank all GPW shareholders, investors, issuers, the Exchange Management Board, the Exchange Supervisory Board, and all employees of the GPW Group for their efforts in this challenging year. I wish you every success in 2021.
With best regards,
Marek Dietl, President of GPW