Total operating expenses of the GPW Group amounted to PLN 174.4 million in 2015, representing a decrease of 4.0% (PLN 7.2 million) year on year. The cost/income ratio decreased from 57.2% in 2014 to 53.2% in 2015. The decrease of operating expenses was mainly driven by lower external service charges (a decrease of PLN 2.3 million), depreciation and amortisation (a decrease of PLN 1.9 million), other operating expenses (a decrease of PLN 2.2 million), salaries and other employee costs (a decrease of PLN 1.5 million), rent and other maintenance fees (a decrease of PLN 0.5 million). Fees and charges increased due to a VAT adjustment in GPW in 2014, which reduced the expenses by PLN 1.3 million in 2014.
Separate operating expenses of GPW stood at PLN 120.4 million in 2015, representing a decrease of 7.9% (PLN 10.3 million) year on year.
Operating expenses of the PolPX Group increased sharply and stood at PLN 42.1 million in 2015 compared to PLN 34.8 million in 2014, representing an increase of 20.9% (PLN 7.3 million). Operating expenses of BondSpot in the periods under review stood at PLN 9.5 million and PLN 8.8 million, respectively.
Consolidated operating expenses of GPW Group and structure of operating expenses in 2013 - 2015
| PLN'000. % | Year ended 31 December | Change (2015vs2014) | Change (%) (2015vs2014) | |||||
|---|---|---|---|---|---|---|---|---|
| 2015 | % | 2014 | % | 2013 | % | |||
| Depreciation and amortisation | 26 837 | 15% | 28 769 | 16% | 25 723 | 15% | (1 932) | -6.7% |
| Salaries | 56 662 | 32% | 56 501 | 31% | 51 915 | 31% | 161 | 0.3% |
| Other employee costs | 11 426 | 7% | 13 042 | 7% | 12 121 | 7% | (1 616) | -12.4% |
| Rent and other maintenance fees | 9 785 | 6% | 10 272 | 6% | 10 572 | 6% | (487) | -4.7% |
| Fees and charges | 23 627 | 14% | 22 387 | 12% | 20 770 | 12% | 1 240 | 5.5% |
| including PFSA fees | 22 047 | 13% | 22 039 | 12% | 18 916 | 11% | 8 | 0.0% |
| External service charges | 39 621 | 23% | 41 967 | 23% | 36 242 | 22% | (2 346) | -5.6% |
| Other operating expenses | 6 433 | 4% | 8 662 | 5% | 8 881 | 5% | (2 229) | -25.7% |
| Total | 174 391 | 100% | 181 600 | 100% | 166 224 | 100% | (7 209) | -4.0% |
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 26.8 million in 2015, representing a decrease of 6.7% (PLN 1.9 million) compared to PLN 28.8 million in 2014. The decrease in depreciation and amortisation charges year on year in 2015 was driven by a decrease of depreciation and amortisation charges in GPW by PLN 2.7 million following the completion of depreciation of some property, plant and equipment in Q4 2014 as well as a capital expenditure reduction policy. At the same time, depreciation and amortisation charges in PolPX increased by PLN 0.6 million following the commissioning of its primary and back-up sites, depreciation of expenditures incurred to refurbish the WCCH offices, implementation of tools for the Exchange Information Platform (GPI), and the completion of development projects.
Salaries and other employee costs
Salaries and other employee costs of the Group amounted to PLN 68.1 million in 2015, representing a decrease of 2.1% (PLN 1.5 million) compared to PLN 69.5 million in 2014.
Salaries and other employee costs in the period under review were mainly driven by the following:
- changes of the jubilee award system and the retirement and disability severance pay system in GPW and the resulting release of provisions for retirement and disability severance pay and provisions for jubilee awards, which reduced the costs by PLN 3.5 million in Q1 2015 and by PLN 4.9 million year on year in 2015. GPW discontinued its jubilee award system and reduced its retirement and disability severance pay system (the previous system paid a multiple of monthly remuneration depending on seniority; the current system pays an amount equal to single monthly remuneration); GPW discontinued its jubilee award system in February 2015 following amendments to the Remuneration Rules. GPW also reduced its retirement and disability severance pay system. Retirement and disability severance pay a benefit was paid out as a one-off amount equal to a multiple of monthly remuneration (from 100% to 500%, depending on seniority and the number of months before retirement age). Since March 2015, employees who retire are paid a one-off severance pay equal to one months’ remuneration;
- the Company Agreement with the Exchange Employees’ Trade Union (ZZPG) was amended in 2015, resulting in a reduction of GPW’s contributions to the Employee Pension Scheme as well as other employee benefits (by PLN 1.8 million in aggregate) while salaries and bonuses increased (by PLN 1.4 million);
- salaries of the PolPX Group increased by PLN 5.0 million due to changes in the remuneration system for the Management Boards of PolPX and WCCH and the bonus system as well as an increase of employment by 10 FTEs in 2015 compared to the end of 2014;
- salaries of InfoEngine decreased by PLN 1.3 million following workforce restructuring, which reduced the cost of Q4 2014 and all of 2015;
- salaries of Instytut Rynku Kapitałowego decreased by PLN 0.4 million following the sale of the company to a third party in Q3 2015;
- salaries of Instytut Analiz i Ratingu increased by PLN 0.3 million after its launch in mid-2014 – the cost was recognised in two quarters of 2014 and in all of 2015.
The headcount of the Group was 351 FTEs as at 31 December 2015. The decrease of the headcount of the Group year on year in 2015 resulted from workforce reductions in GPW, a workforce increase in the commodity market segment (PolPX, WCCH), and workforce reductions in the other subsidiaries of the GPW Group.
Employment in GPW Group
| As at | |||
|---|---|---|---|
| # FTEs | 31 December 2015 | 31 December 2014 | 31 December 2013 |
| GPW | 201 | 207 | 205 |
| Subsidiaries | 150 | 154 | 134 |
| Total | 351 | 361 | 339 |
Rent and other maintenance fees
Rent and other maintenance fees amounted to PLN 9.8 million in 2015 compared to PLN 10.3 million in 2014. Rental contracts for NewConnect and Catalyst rooms and an archive space in the Centrum Giełdowe building were terminated at the end of May 2015, reducing the cost of rent and maintenance fees by ca. PLN 100 thousand per month as of June 2015. In addition, renegotiation of rental of office space in the Centrum Giełdowe building and related maintenance fees in 2015 reduced the cost by PLN 0.4 million and will provide savings of ca. PLN 0.8 million in 2016.
Fees and charges
Fees and charges stood at PLN 23.6 million in 2015, an increase of 5.5% (PLN 1.2 million) year on year. The main component of fees and charges of the Group are fees paid to the Polish Financial Supervision Authority (PFSA), which stood at PLN 22.0 million in each of 2015 and 2014. The increase in fees and charges in 2015 was due to a VAT adjustment in GPW in 2014, which reduced the expenses by PLN 1.3 million in 2014.
The Act of 12 June 2015 amending the Capital Market Supervision Act and certain other Acts has 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 paid by the GPW Group may be reduced significantly in 2016 and beyond compared to PLN 22 million in 2015. 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 trading fees on transactions in shares, rights to shares and ETFs in the part of the order value up to PLN 100 thousand from 0.033% to 0.029% in order to share the savings from the change of the structure of PFSA fees with active market participants. The reduction of the PFSA fee (approximately by half for the GPW Group compared to 2015) combined with the reduction of trading fees offered by GPW will result in corresponding decrease in both revenues and operational fees of the Group in 2016.
External service charges
External service charges amounted to PLN 39.6 million in 2015 compared to PLN 42.0 million in 2014.
Consolidated external service charges of GPW Group and structure of external service charges in 2013 - 2015
| PLN'000. % | Year ended 31 December | Change (2015 vs 2014) | Change (%) (2015 vs 2014) | |||||
|---|---|---|---|---|---|---|---|---|
| 2015 | % | 2014 | % | 2013 | % | |||
| IT cost: | 20 209 | 51% | 19 378 | 46% | 18 754 | 52% | 830 | 4.3% |
| IT infrastructure maintenance | 12 524 | 32% | 11 755 | 28% | 10 908 | 30% | 768 | 6.5% |
| TBSP maintenance services | 1 185 | 3% | 1 139 | 3% | 834 | 2% | 46 | 4.0% |
| Data transmission lines | 5 704 | 14% | 5 827 | 14% | 5 851 | 16% | (123) | -2.1% |
| Software modification | 796 | 2% | 657 | 2% | 1 160 | 3% | 139 | 21.1% |
| Office and office equipment maintenance: | 2 749 | 7% | 3 695 | 9% | 3 408 | 9% | (946) | -25.6% |
| Repair and maintenance of installations | 938 | 2% | 1 425 | 3% | 1 163 | 3% | (487) | -34.2% |
| Security | 820 | 2% | 1 137 | 3% | 1 091 | 3% | (317) | -27.9% |
| Cleaning | 483 | 1% | 467 | 1% | 409 | 1% | 17 | 3.6% |
| Phone and mobile phone services | 508 | 1% | 667 | 2% | 745 | 2% | (159) | -23.8% |
| Leasing. rental and maintenance of vehicles | 437 | 1% | 503 | 1% | 454 | 1% | (66) | -13.2% |
| Transportation services | 195 | 0% | 193 | 0% | 344 | 1% | 2 | 1.1% |
| Promotion. education. market development | 6 155 | 16% | 6 637 | 16% | 3 760 | 10% | (482) | -7.3% |
| Market liquidity support | 930 | 2% | 779 | 2% | 1 010 | 3% | 151 | 19.4% |
| Advisory (including: audit. legal services. business consulting) | 5 474 | 14% | 6 656 | 16% | 4 831 | 13% | (1 182) | -17.8% |
| Information services | 823 | 2% | 540 | 1% | 532 | 1% | 284 | 52.6% |
| Training | 1 147 | 3% | 604 | 1% | 485 | 1% | 543 | 90.0% |
| Mail fees | 86 | 0% | 71 | 0% | 57 | 0% | 14 | 20.2% |
| Bank fees | 115 | 0% | 131 | 0% | 136 | 0% | (15) | -11.8% |
| Translation | 260 | 1% | 275 | 1% | 299 | 1% | (15) | -5.5% |
| Other | 1 041 | 3% | 2 505 | 6% | 2 171 | 6% | (1 464) | -58.4% |
| Total | 39 621 | 100% | 41 968 | 100% | 36 241 | 100% | (2 347) | -5.6% |
The decrease of external service charges year on year was mainly driven by GPW (a decrease of PLN 2.6 million) and InfoEngine (a decrease of PLN 0.7 million). At the same time, external service charges of the PolPX Group increased (an increase of PLN 1.7 million). External service charges in 2015 compared to 2014 were driven by the following factors:
- reduction of GPW’s costs including:
- reduction of IT costs by PLN 1.0 million, including data transmission lines (by PLN 0.5 million following renegotiation of contracts) and software modifications (by PLN 0.5 million);
- reduction of advisory service costs by PLN 1.1 million;
- reduction of promotion costs by PLN 0.6 million;
- reduction of administrative costs by PLN 0.4 million, including security (by PLN 0.3 million, a reduction by ca. PLN 25 thousand per month as of the beginning of 2015 following optimisation of security services in the Centrum Giełdowe building) and telephone services (by PLN 0.1 million);
- increase of the cost of training by PLN 0.5 million in relation to the GPW Group’s employee training programme covering managers, experts and other employees;
- reduction of the costs of InfoEngine (by PLN 0.7 million): as part of cost optimisation, some third-party contracts were terminated and fees for the trading system Trayport were reduced;
- increase of the PolPX Group’s costs (by PLN 1.7 million), including mainly higher costs of IT infrastructure maintenance (by PLN 1.8 million) following the opening of the PolPX financial market, and the cost of WCCH relating to a review of and preparation for potential status of CCP, combined with a reduction of the cost of office maintenance and office equipment (by PLN 0.5 million – the cost of refurbishment and modernisation of PolPX offices was paid in 2014) and a small increase in other categories of external service charges.
Other operating expenses
Other operating expenses amounted to PLN 6.4 million in 2015 including the cost of material and energy consumption at PLN 3.2 million, industry organisation membership fees at PLN 0.7 million, non-life insurance at PLN 0.4 million, perpetual usufruct write-downs at PLN 0.1 million, business travel at PLN 1.4 million, conference participation at PLN 0.3 million, and other costs at PLN 0.3 million.
Compared to PLN 8.7 million in 2014, the decrease of expenses in 2015 was mainly due to a reduction in other operating expenses by PLN 2.1 million (an impairment loss on the goodwill of InfoEngine S.A. at PLN 1,311 thousand and an impairment loss on the assets of Instytut Rynku Kapitałowego – WSE Research S.A. at PLN 366 thousand were recognised in 2014) and a reduction in costs of material and electricity consumption by PLN 0.4 million, combined with an increase of industry organisation membership fees by PLN 0.2 million.