PolskiTotal operating expenses of the GPW Group amounted to PLN 150.2 million in 2016, representing a decrease of 13.9% (PLN 24.2 million) year on year. The cost/income ratio decreased to 48.3% in 2016 from 53.2% in 2015. The decrease of operating expenses was mainly driven by a reduction of fees paid to the Polish Financial Supervision Authority following the change of rules of financing of market supervision as of 1 January 2016. The fees paid by the Group to the Polish Financial Supervision Authority for 2016 stood at PLN 9.1 million, a decrease of 58.6% of PLN 12.9 million. Furthermore, the decrease of operating expenses was driven by a decrease of salaries and other employee costs (a decrease of PLN 6.9 million), other operating expenses (a decrease of PLN 1.3 million), external service charges (a decrease of PLN 1.0 million), depreciation and amortisation (a decrease of PLN 1.0 million), and rent and other maintenance fees (a decrease of PLN 0.3 million).
Separate operating expenses of GPW stood at PLN 100.1 million in 2016, representing a decrease of 16.9% (PLN 20.3 million) year on year.
Operating expenses of POLPX stood at PLN 28.7 million in 2016 compared to PLN 32.8 million in 2015, representing a decrease of 12.4% (PLN 4.1 million). Operating expenses of IRGiT stood at PLN 11.4 million in 2016. Operating expenses of BondSpot in the periods under review stood at PLN 9.7 million and PLN 9.5 million, respectively, representing an increase of 2.2%.
Consolidated operating expenses of GPW Group and structure of operating expenses in 2014 - 2016
| Year ended 31 December | Change (2016 vs 2015) | Change (%) (2016 vs 2015) | ||||||
|---|---|---|---|---|---|---|---|---|
| PLN'000, % | 2016 | % | 2015 | % | 2014 | % | ||
| Depreciation and amortisation | 25.793 | 17% | 26.837 | 15% | 28.769 | 16% | (1.044) | -3,9% |
| Salaries | 49.860 | 33% | 56.662 | 32% | 56.501 | 31% | (6.802) | -12,0% |
| Other employee costs | 11.300 | 8% | 11.426 | 7% | 13.042 | 7% | (126) | -1,1% |
| Rent and other maintenance fees | 9.444 | 6% | 9.785 | 6% | 10.272 | 6% | (341) | -3,5% |
| Fees and charges | 10.009 | 7% | 23.627 | 14% | 22.387 | 12% | (13.618) | -57,6% |
| including: PFSA fees | 9.121 | 6% | 22.047 | 13% | 22.040 | 12% | (12.926) | -58,6% |
| External service charges | 38.587 | 26% | 39.621 | 23% | 41.968 | 23% | (1.034) | -2,6% |
| Other operating expenses | 5.162 | 3% | 6.433 | 4% | 8.662 | 5% | (1.271) | -19,8% |
| Total | 150.155 | 100% | 174.391 | 100% | 181.600 | 100% | (24.237) | -13,9% |
Source: Consolidated Financial Statements, Company
The Group is not dependent on any single supplier or provider as no contractor (other than fees paid to the Polish Financial Supervision Authority) has a share exceeding 10% of the total expenses of the Group.
Depreciation and amortisation
Depreciation and amortisation charges stood at PLN 25.8 million in 2016, representing a decrease of 3.9% (PLN 1.0 million) compared to PLN 26.8 million in 2015. The decrease in depreciation and amortisation charges year on year in 2016 was driven by a decrease of depreciation and amortisation charges in GPW by PLN 2.1 million following the completion of depreciation of some property, plant and equipment as well as appreciation of some intangible assets. At the same time, depreciation and amortisation charges in the POLPX Group increased by PLN 0.9 million following the commissioning of its primary and back-up sites in mod-2015, the commissioning of the OTC RRM system, and the commissioning of the new system X-Stream in IRGiT. Depreciation and amortisation charges of BondSpot also increased by PLN 0.3 million in 2016 as the capital expenditures commissioned in late 2015 relating to the migration of server centres were amortised for the full year.
Salaries and other employee costs
Salaries and other employee costs of the Group amounted to PLN 61.2 million in 2016, representing a decrease of 10.2% (PLN 6.9 million) compared to PLN 68.1 million in 2015.
The decrease of salaries in the GPW Group year on year in 2016 was driven by a decrease of costs by PLN 4.0 million in the POLPX Group, by PLN 1.6 million in GPW, by PLN 0.3 million in BondSpot, by PLN 0.4 million in IAiR, and by PLN 0.1 million in GPW CU; in addition, the salaries in 2015 included the costs of InfoStrefa S.A. (formerly Instytut Rynku Kapitałowego WSE Research S.A.) at PLN 0.6 million.
The decrease of costs in the POLPX Group was mainly driven by a release of provisions for bonuses for 2015 as well as an adjustment of provisions for 2016 totalling PLN 2.8 million and a decrease of gross salaries by PLN 1.3 million year on year on 2016.
The decrease of salaries in BondSpot was driven by a release of provisions for bonuses for 2015. The decrease o salaries in GPW was driven by a decrease of salaries in 2015 by PLN 3.3 million following the release of provisions due to changes of the jubilee award and pension benefit system combined with a decrease of salaries in 2016 due to a release of provisions for bonuses for the Management Board for 2015 at PLN 2.6 million as well as a decrease of gross salaries by PLN 1.5 million.
The headcount of the Group was 331 FTEs as at 31 December 2016. The decrease of the headcount of the Group year on year in 2016 resulted from workforce reductions in GPW and workforce reductions in the other subsidiaries of the GPW Group. The decrease of the headcount of GPW in 2016 was a result of staff restructuring.
Employment in GPW Group
| As at | |||
|---|---|---|---|
| # FTEs | 31 December 2016 | 31 December 2015 | 31 December 2014 |
| GPW | 185 | 201 | 207 |
| Subsidiaries | 146 | 150 | 154 |
| Total | 331 | 351 | 361 |
Source: Company
Rent and other maintenance fees
Rent and other maintenance fees of the GPW Group amounted to PLN 9.4 million in 2016 compared to PLN 9.8 million in 2015. The decrease of rent was mainly driven by savings following GPW’s termination of rental contracts for NewConnect and Catalyst rooms and an archive space in the Centrum Giełdowe building as at the end of May 2015, reducing the cost of rent and maintenance fees.
Fees and charges
Fees and charges stood at PLN 10.0 million in 2016, a decrease of 57.6% (PLN 13.6 million) year on year. The main component of fees and charges of the Group are fees paid to the Polish Financial Supervision Authority, which were largely reduced and stood at PLN 9.1 million for the Group in 2016 as compared to PLN 22.0 million paid for supervision in 2015.
The Act of 12 June 2015 amending the Capital Market Supervision Act and certain other Acts largely extended the list of entities required to finance supervision (by adding, among others, banks, insurers, investment funds, public companies, brokerage houses and foreign investment firms) and changed the amount of contributions of entities. As a result, the cost of fees paid by the GPW Group was reduced significantly in 2016. The Act was signed into law by the President of Poland on 31 July 2015 and promulgated in the Journal of Laws on 31 August 2015. A Regulation of the Minister of Finance effective as of 1 January 2016 determines among others the calculation method as well as the terms and conditions of the payment of fees by relevant entities.
As of 1 January 2016, GPW reduced the transaction fees on trade in shares, rights to shares and ETF units in the part charged on the value of an order up to PLN 100 thousand from 0.033% to 0.029% in order to share savings resulting from changes of fees paid to the Polish Financial Supervision Authority with active market participants. As of 1 November 2016, GPW reduced the fixed fee on an order from PLN 0.20 to PLN 0.15. The reduction of the PFSA fee (by more than one-half year on year in 2016 for the GPW Group) combined with the reduction of trading fees offered by GPW resulted in a proportionate decrease of both revenue and operating expenses of the GPW Group in 2016.
External service charges
External service charges amounted to PLN 38.6 million in 2016 compared to PLN 39.6 million in 2015.
Consolidated external service charges of GPW Group and structure of external service charges in 2014 - 2016
| Year ended 31 December | Change (2016 vs 2015) | Change (%) (2016 vs 2015) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| PLN'000, % | 2016 | % | 2015 | % | 2014 | % | |||
| IT cost: | 22.161 | 57% | 20.209 | 51% | 19.378 | 46% | 1.952 | 9,7% | |
| IT infrastructure maintenance | 12.395 | 32% | 12.524 | 32% | 11.755 | 28% | (129) | -1,0% | |
| TBSP maintenance service | 1.453 | 4% | 1.185 | 3% | 1.139 | 3% | 268 | 22,6% | |
| Data transmission lines | 5.924 | 15% | 5.704 | 14% | 5.827 | 14% | 220 | 3,9% | |
| Software modification | 2.389 | 6% | 796 | 2% | 657 | 2% | 1.593 | 200,2% | |
| Office and office equipment maintenance: | 2.860 | 7% | 2.749 | 7% | 3.695 | 9% | 111 | 4,0% | |
| Repair and maintenance of installations | 1.038 | 3% | 938 | 2% | 1.425 | 3% | 100 | 10,7% | |
| Security | 904 | 2% | 820 | 2% | 1.137 | 3% | 84 | 10,3% | |
| Cleaning | 495 | 1% | 483 | 1% | 467 | 1% | 12 | 2,4% | |
| Phone and mobile phone services | 423 | 1% | 508 | 1% | 667 | 2% | (85) | -16,7% | |
| International electricity market's services | 399 | 1% | - | 0% | - | - | 399 | - | |
| Leasing, rental and maintenance of vehicles | 527 | 1% | 437 | 1% | 503 | 1% | 90 | 20,7% | |
| Transportation services | 125 | 0% | 195 | 0% | 193 | 0% | (70) | -35,9% | |
| Promotion, education, market development | 5.392 | 14% | 6.155 | 16% | 6.637 | 16% | (763) | -12,4% | |
| Market liquidity support | 583 | 2% | 930 | 2% | 779 | 2% | (347) | -37,3% | |
| Advisory (including: audit, legal services, business consulting) | 3.716 | 10% | 5.474 | 14% | 6.656 | 16% | (1.758) | -32,1% | |
| Information services | 892 | 2% | 823 | 2% | 540 | 1% | 69 | 8,3% | |
| Training | 700 | 2% | 1.147 | 3% | 604 | 1% | (447) | -39,0% | |
| Mail fees | 78 | 0% | 86 | 0% | 71 | 0% | (8) | -9,0% | |
| Bank fees | 135 | 0% | 115 | 0% | 131 | 0% | 20 | 17,1% | |
| Translation | 224 | 1% | 260 | 1% | 275 | 1% | (36) | -13,9% | |
| Other | 795 | 2% | 1.041 | 3% | 2.505 | 6% | (246) | -23,7% | |
| Total | 38.587 | 99% | 39.621 | 100% | 41.968 | 100% | (1.034) | -2,6% | |
Source: Consolidated Financial Statements, Company
The decrease of external service charges year on year was mainly driven by a decrease of the cost of advisory by PLN 1.8 million (by 32.1%), in particular in POLPX, a decrease of the cost of promotion, education and market development by PLN 0.8 million, the cost of employee training by PLN 0.4 million, and the cost of market liquidity support by PLN 0.3 million. At the same time, the cost of software modifications increased by PLN 1.6 million as a result of a one-off recognition of the UTP-D transaction system module contract with Euronext. GPW decided not to implement the module. 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.
Other operating expenses
Other operating expenses amounted to PLN 5.2 million in 2016, including the cost of material and energy consumption at PLN 3.1 million, industry organisation membership fees at PLN 0.6 million, non-life insurance at PLN 0.3 million, perpetual usufruct write-downs at PLN 0.1 million, business travel at PLN 0.8 million, conference participation at PLN 0.1 million, and other costs at PLN 0.1 million.
Other operating expenses amounted to PLN 6.4 million in 2015, including the cost of material and energy consumption at PLN 3.2 million, business travel at PLN 1.4 million, conference participation at PLN 0.3 million.