PolskiFinancial income of the Group stood at PLN 12.9 million in 2016 compared to PLN 9.9 million in 2015.
Financial income includes mainly interest on bank deposits, financial income on investment in Treasury bonds, as well as positive FX differences. Income from interest on bank deposits was PLN 6.4 million in 2016 and PLN 6.2 million in 2015. The Group held no Treasury bonds in its portfolio in 2016; financial income on investment in Treasury bonds was PLN 0.6 million in 2015. FX differences were negative in 2016 and 2015, shown under financial expenses at PLN 0.2 million and PLN 0.3 million, respectively.
GPW’s associate Aquis Exchange Limited completed several new issue shares in 2016 without the participation of GPW. As a result of the transactions, GPW’s share in economic and voting rights decreased from 26.33% to 20.31%. As a result of the issue, the net asset value of Aquis increased and GPW recognised gains at PLN 5.8 million shown under financial income.
Financial expenses of the Group stood at PLN 12.1 million in 2016 compared to PLN 12.1 million in 2015. The comparable level of the Group’s financial expenses in 2016 was mainly driven by additional recognition of the cost of interest on POLPX’s overdue tax debt. The tax debt results from changes of the taxation policy for certain services, effective as of 1 January 2017, and the correction of the related VAT for the period from December 2011 to December 2016. The -largest item of financial expenses is the interest cost under GPW’s outstanding bonds at PLN 8.0 million in 2016 compared to PLN 8.4 million in 2015.
In December 2011 and February 2012, GPW issued bonds with a total nominal value of PLN 245.0 million. The bonds are due for redemption on 2 January 2017. The bonds bear interest at a floating rate equal to WIBOR 6M + 1.17%, interest was paid semi-annually.
The cost of the bond offering was PLN 2.2 million, recognised as prepayments and charged to the Company’s financial expenses on a straight-line basis from the issue date of the series A bonds (23 December 2011) to the redemption date of the series A and B bonds (2 January 2017). The prepayments reduce the Company’s liabilities in respect of the bond issue. The cost of the offering added PLN 0.5 million to the Group’s financial expenses in 2016 and PLN 0.8 million in 2015.
The series A and B bonds were partly redeemed in 2015.
On 18 September 2015, GPW announced its intention to buy back series A and B bonds issued by GPW from bond holders for cancellation. On 29 September 2015, the GPW Management Board passed a resolution on the issue of series C unsecured bearer bonds. The bonds were issued on 6 October 2015.
On 6 October 2015, GPW issued 1,250,000 series C bearer bonds in a total nominal amount of PLN 125,000,000. The nominal amount and the issue price was PLN 100 per bond. The series C bonds bear interest at a fixed rate of 3.19% p.a. Interest on the bonds is paid semi-annually. The bonds are due for redemption on 6 October 2022 against the payment of the nominal value to the bond holders. The bonds have been introduced into the alternative trading system on Catalyst.
On 12 October 2015, GPW completed the purchase of its series A and B bonds from bond holders at a price of PLN 101.20 per bond. On 6-12 October 2015, GPW bought back 1,245,163 bonds for a total price of PLN 126,010,495.60. The early redemption of the series A and B bonds was paid for with cash raised by GPW through the issue of series C bonds.
Interest on the bonds is the main contributor to the financial expenses of the Company. The interest rate on the series A and B bonds is 2.94% p.a. in H1 2016 compared to 2.96% in H2 2015. The series C bonds bear interest at a fixed rate of 3.19% p.a.
Following the partial redemption of the series A and B bonds, GPW’s outstanding debt under the series A and B bonds was PLN 120,483,799.
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). The Company classified the EUR amount maintained for this purpose as a hedging instrument. The FX differences on the carrying value of the amount were recognised, as of 1 January 2012, in equity rather than in financial income and expenses. In 2015, the FX differences in equity were positive at PLN 0.1 million.
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.