Assets and liabilities

The balance-sheet total of the Group was PLN 1.2 billion as at 31 December 2016, an increase of 7.9% compared to PLN 1.1 billion as at 31 December 2015.

ASSETS

The Group’s non-current assets stood at PLN 597.3 million representing 51% of total assets as at 31 December 2016 compared to PLN 580.6 million or 54% of total assets as at 31 December 2015. The increase of property, plant and equipment as well as intangible assets in the last year was driven by capital expenditures, in particular GPW’s investments related to the MiFID II project and the POLPX Group’s implementation of a new trading and clearing system.

The Group’s current assets stood at PLN 560.6 million representing 49% of total assets as at 31 December 2016 compared to PLN 492.5 million or 46% of total assets as at 31 December 2015. The increase in current assets in the last year was driven by a significant increase of cash flows from operating activities.

Consolidated statement of financial position of GPW Group at the year’s end in 2014 - 2016 (assets)

EQUITY AND LIABILITIES

The equity of the Group stood at PLN 745.3 million representing 64% of the Group’s total equity and liabilities as at 31 December 2016 compared to PLN 713.2 million or 66% of total equity and liabilities as at 31 December 2015.

Non-controlling interests stood at PLN 0.5 million as at 31 December 2016 and as at 31 December 2015.

Non-current liabilities of the Group stood at PLN 141.2 million representing 12% of the Group’s total equity and liabilities as at 31 December 2016 compared to PLN 258.9 million or 24% of total equity and liabilities as at 31 December 2015. The main item of the Group’s non-current liabilities as at 31 December 2016 were GPW’s liabilities under outstanding series C bonds due for redemption on 6 October 2022. In addition, the non-current liabilities as at 31 December 2016 included accruals and deferred income of PLN 6.2 million in relation to PLN 7.0 million of total revenue from POLPX’s cooperation with the Polish Power Grid Company (PSE) in the PCR project. The amount of PLN 0.5 million was recognised in other income in 2016. Szczegółowe informacje dotyczące rozliczeń refundacji kosztów od PSE dla TGE zostały przedstawione w Skonsolidowanym sprawozdaniu finansowym GK GPW za 2016 rok w Nocie nr 18.

Current liabilities of the Group stood at PLN 271.4 million representing 23% of the Group’s total equity and liabilities as at 31 December 2016 compared to PLN 101.0 million or 9% of total equity and liabilities as at 31 December 2015.

The increase of current liabilities of the Group was driven by:

• GPW’s reclassification of liabilities under issued series A and B bonds from non-current to current liabilities in view of their approaching redemption date of the bonds (2 January 2017);
• year-on-year increase of income tax payable as at 31 December 2016 due to GPW’s selection of the simplified method of payment of monthly income tax advances at 1/12 of the income tax due for 2014; in 2015, GPW did not use the simplified method but paid income tax advances based on the actual taxable income of the period; furthermore, GPW’s tax depreciation/amortisation was greater than accounting depreciation/amortisation in 2015;
• increase in other current liabilities due to an increase of POLPX liabilities following changes of the tax policy for certain services as of 1 January 2017 and the adjustment of the VAT for the period from December 2011 to December 2016. The decision requires the issuance of correction invoices to POLPX’s counterparties, requesting them to pay the VAT not previously charged for fees (for the period from December 2011 to December 2016, inclusive) for tax liabilities which are not overdue in the total amount of PLN 69.8 million. At the same time, POLPX will be required to pay to the account of the tax office an amount of the resulting tax debit under correction invoices to be issued to POLPX’s counterparties plus interest on the tax debit in the amount of PLN 9.9 million as at 31 December 2016.

Consolidated statement of financial position of GPW Group at the year’s end in 2014 - 2016 (equity and liabilities)

LIQUIDITY, FINANCIAL ASSETS AND FINANCIAL RISK MANAGEMENT OF THE GROUP

The activities of the Company and the Group are exposed to three types of financial risks: market risk, credit risk, and liquidity risk. Details of how financial risks are identified and managed have been described in the Consolidated Financial Statements.

In 2016, the Company’s liquidity risk, which means inability to timely meet its payment obligations, was minor in view of material financial assets held and positive cash flows from operating activities which exceeded the value of existing liabilities. The current liquidity ratio amounted to 2.1 as at 31 December 2016 and 4.9 as at 31 December 2015.

GPW manages financial liquidity in accordance with the “Current Assets Allocation Procedure” adopted by the Management Board. Pursuant to this document, the procedures for investing free cash should be handled in view of the due dates of liabilities so as to minimise the liquidity risk for the parent entity and, at the same time, to maximise its financial income. In practical terms, this means that the Company invests its current assets in bank deposits and the average duration of a financial asset portfolio was around 66 days as at 31 December 2016 and ca. 120 days as at 31 December 2015.

As at 31 December 2016, GPW no longer applied hedge accounting. As at 31 December 2015, hedging covered cash flows under the agreement concerning the acquisition of a licence and delivery of a new trading system (UTP-Derivatives). However, on 28 June 2016, GPW and NYSE Euronext signed an agreement under which GPW will continue to use the existing version of UTP at least until 2020. After that date, the decision will be made whether to acquire a new system. Consequently, in 2016, GPW discontinued the classification of the dedicated EUR amount as an instrument hedging the risk of cash flows of a future liability.

In the opinion of the Management Board, the Company’s financial assets and financial risk management process is effective and ensures timely meeting of payment obligations.

No threats have been identified to the Company’s liquidity.

The risks inherent in financial instruments held are described in Note 3 to the Separate Financial Statements.

CASH FLOWS

The Group generated positive cash flows from operating activities at PLN 205.8 million in 2016 compared to positive cash flows of PLN 93.1 million in 2015.

The cash flows from investing activities were negative at PLN 14.5 million in 2016, mainly driven by GPW’s investments in the harmonisation of the UTP system with MiFID II. The cash flows from investing activities were negative at PLN 14.6 million in 2015, mainly driven by investments in intangible assets in the POLPX Group.

The cash flows from financing activities were negative in 2016, mainly due to the payment of dividend by GPW at PLN 99.1 million and interest paid on bonds at PLN 5.8 million. The cash flows from financing activities were negative at PLN 107.2 million in 2015, mainly due to the payment of dividend to the shareholders of GPW at PLN 100.7 million and interest paid on bonds at PLN 6.7 million.

Consolidated cash flows of the Group

CAPITAL EXPENDITURE

The Group’s total capital expenditure in 2016 amounted to PLN 23.6 million including expenditure for property, plant and equipment at PLN 13.7 million and expenditure for intangible assets at PLN 9.9 million. The Group’s total capital expenditure in 2015 amounted to PLN 30.8 million including expenditure for property, plant and equipment at PLN 23.9 million and expenditure for intangible assets at PLN 6.9 million.

The capital expenditure for property, plant and equipment and intangible assets in 2016 included GPW’s capital expenditure for maintenance of IT infrastructure and IT equipment preparing GPW to comply with MiFID II and the POLPX Group’s intangible assets related to the implementation of a trading and clearing system.

The capital expenditure for property, plant and equipment and intangible assets in 2015 included the POLPX Group’s capital expenditure in the acquisition of infrastructure for a new trading and clearing system, participation in the Price Coupling or Regions (PCR) and launch of the LITPOL link.

The value of contracted future investment commitments for property, plant and equipment was PLN 811.0 thousand as at 31 December 2016, including reconstruction of rooms in the GPW building.

The value of contracted future investment commitments for intangible assets was PLN  527.0 thousand as at 31 December 2016, including mainly the implementation of the financial and accounting system’s controlling module and the implementation of a document flow system in GPW.

The value of contracted future investment commitments for property, plant and equipment was PLN 1,094 thousand as at 31 December 2015, including mainly reconstruction of rooms in the GPW building.

The value of contracted future investment commitments for intangible assets was PLN 13,884 thousand as at 31 December 2015, including mainly the UTP-Derivatives system, the Electronic Document Flow system, Microsoft product licences, the POLPX Group trading and clearing system, and the AX system in GPW CU.