Earnings Call: Q1 2021

May 24, 2021

Ladies and gentlemen, thank you for standing by. I am Jota Yekorus, call operator. Welcome and thank you for joining the Hellenic Exchange's Athens Stock Exchange Conference Call and Live Webcast to present and discuss the Q1 2021 Financial Results. Exchange. All participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer At this time, I would like to turn the conference over to Mr. Nick Coscolleto's CFO, Mr. Stegos Consadino, Head of Investor Relations. Gentlemen, you may now proceed. Exchange. Good afternoon, ladies and gentlemen, and good morning to those of you listening to us from the other side of the Atlantic. We would like to present the financial results of the group for the Q1 of 2021, which were published yesterday And are available in the IR section of our website. And then we'll take any questions that you might have. Nick? Thank you, Stavio, and my best to all participants. Moving on, some highlights about the performance asset stock. I think one stands out is the fact that the average daily at. Share the value dropped by 11.7 percent in the Q1 to €75,000,000 versus close to €85,000,000 in Q1 2020. The average market cap is slightly lower year on year over year, at 2%. We had an increase in derivatives in terms of contracts, increased by 42%, at 55,000 contracts compared to 38,700,000. If we examine the quarterly market performance over the past 5 quarters in terms of trading. We see a obviously strong quarter in Q1 2020, which is the best quarter of 2020 for that matter and by far before the onset of the pandemic. So we had a weak Q2, even weaker Q3 and then we had a turnaround in the 4th quarter When trading activity turned to Q1 levels. So far this year, we have As mentioned in Q1, euros 75,000,000 but average daily trading values have increased at And we currently stand at over €80,000,000 and helped by a very strong at the month of May. We are seeking on moving forward. Aside from the volumes and the trading activity, we are etching on moving forward with regard to the series of actions and initiatives lined up that feed into the strategic outline that we have mentioned in the past with regard to increasing the tradable assets of the business, expanding over the value chain at And then how do we enlarge our footprint geographically in servicing other market infrastructures. We also had the licensing of our subsidiary, FX CSP under CSDR, and that started at post April 12, that's when we that was the go live date and enabled us to tap into additional services offering to the capital market and the corporate ecosystem and those are things that we're working on. As said, I will go into more detail in presenting our results. But at this point, I wanted to highlight A few things on my side. On employee services, I wish to stress the strategic importance of the ForteCare line As things mature more and more and revenue potential is being captured. In the past, we have mentioned that Amex relationship, non mature will yield Close to €1,800,000 and this is the case post Q4 And to all existing items that we are working on, we are committed to adding more deliverables We're planning additional opportunities along the strategic accesses that I mentioned before. Just a few notes. We have our upcoming AGM at the end of the month. We have already made public With the announcement of our annual results, the recommendation for a €0.07 dividend per share and then an additional €0.07 as a capital return. And the other thing we wanted to mention is that we are So bringing to the AGM a share buyback program. And this buyback program will be for purchase is up to 10% of our share capital with a upper limit of at this point, €5 per share. At this point, I'd like to pass it on to Stavros to go through our Q1 performance in more detail. Thanks, Nick. So let's start our overview of our financial performance as always From the top, the consolidated turnover of the group in the Q1 of 2021 was €8,400,000 compared to $8,200,000 in the Q1 of last year, up 2.3%. If we break it down into the 3 revenue streams. We see that trading based revenue, I. E. From trading, clearing and settlement, the first three lines from our P and L, at that was down 12% as ADP dropped by 12% in the Q1 of 2021 compared to the same period last year. Market based revenue, I. E. Exchange, the product or interior in clearinghouse revenue and services, the second three lines in our P and L, was up 12.5%. And finally, revenue from ancillary services, which includes market data, Asset Stock. Services to the Energy Exchange, Cobourta, Kuwait and others was up a strong 33%. If we look at the 6 more most important revenue drivers, which together account for about 90% of total revenue. We see that revenue from clearing made up 30% of total turnover and amounted to €53,000,000 compared to €86,000,000 in the Q1 of last at the end of the year. That's down 12%, and the drop, as mentioned already, is due to lower trading activities in the cash market as revenue asset stock. Revenue from trading represents 16% of total consolidated turnover and in the 3rd quarter at as expected 15% to $1,360,000 compared to $1,61,000,000 again on the back of lower trading activity in the cash market. Now as far as revenue from the derivatives market is concerned, both trading and clearing. In the Q1 of 2021, trading activities, I. E, the number of contracts was up 42%, as mentioned already, while revenue was flat. And I can only mean that the average revenue per contract was down from it was actually down 41% to EUR 0 point at €1.72 per contract compared to €0.249 per contract in the Q1 of 2020. As you know, our pricing depends on the type of investor, the product being traded and the prices of the underlying securities spend. As a result, market volumes and our revenue do not always asset stock at the end of the year. Slashing of derivatives, trading and tiering revenue in 2021 was at 555,000,000, okay, the 558,000, corresponding to at 14.3% of all trading and clearing revenue and 6.6% of total turnover. Moving on, revenue from exchange services makes up 11% of total turnover and this line includes a quarterly subscription fees paid by listed companies, fees on the right season in IPO as well as fees paid by members and that came in at $885,000 up 12.5% compared to the Q1 Stockettol last year. Revenue from depository services is up 13%, coming in at $702,000 compared to at $120,000 in the Q1 of last year. Revenue from this line makes up 8.4% of total turnover and includes revenue from rights issues, Again, quarterly subscriptions paid by operators and revenue from inheritances. Now Asset Stock Exchange. Revenue from ancillary services makes up 15% of total turnover. And in the Q1 Of 2021, it was up a strong 83 percent to €1,220,000 compared to 6 ASN 68,000 in the Q1 of last year. This increase is mainly due to the increase in revenue from the support of other markets such as the energy exchange group and Borsa Kuwait mainly. The large increase and Ancillary Services. It's due to the 260% increase in revenue from the support of these markets at 570,000 in the Q1 of 2021 compared to only 158,000 in the Q1 of 2020. In particular, if you break that down further, revenue from the Energy Exchange was 390,000 at €309,000 compared to €118,000 in the Q1 of last year and revenue from Borsa Kuwait was $126,000 compared to 0 in the Q1 of last year. Revenue from colocation services, which was also included in ancillary services, was also at 24% to $255,000 compared to $205,000 last year. Lastly, asset stock. Revenue from market data makes up 7.6% of total turnover and includes a fee that we collect from that event as well as provision of Athens Exchange Market Data. These fees depend essentially on a number of data terminals in which these data vendor disseminate, APAC's market data tool and I'm monitoring 634,000 in the Q1 of this year at 618,000 in the corresponding period last year, and that's up 2.6%. Turning now to the expense side. Total operating expenses, including asset light services, dropped by 1.3% in the Q1 of this year, coming in at $4,680,000 compared to $474,000,000 last year. If we break down these expenses. We see that personnel costs were down 6.9 percent to $2,560,000 compared to $2,750,000 last year, While all other expenses were up 6.5%, coming in at $2,120,000 compared to 1 point at €99,000,000 in the Q1 of last year. Now the main drivers behind this increase are higher consultant fees, asset stock, admittedly from a low base in 2020 and higher maintenance costs due to the new service contracts to support our IT infrastructure, including some new systems that were procured and installed. On the other hand, personnel costs were lower because, a, We increased CapEx in 2021 to normal levels compared to a lower level in the same period last year And B, because we had lower Social Security contributions this year compared to last. Other operating expenses were also down 26%, and that's net due mainly because of the 100,000 donation that we gave last year to the Ministry of Health to combat the COVID-nineteen pandemic. Personnel remuneration and expenses accounts for 60% of total OpEx compared to 62% in the Q1 of last year. And it's by far the largest expense category as always. And headcount at the group at the end of March 2021 was €231 compared to €223,000,000 as of the end of March 2020. Turning now to the bottom line. Earnings before interest and taxes of the group increased by 14.5 percent to 3 point 2 €7,000,000 compared to €1,900,000 in Q1 2020. Interest income was at only 4,000 compared to 40,000 in 2020 due obviously to the significantly lower interest rates assets offered on deposits. And thus, net after tax earnings of the group Excluding the impact of the Q1 of last year, up 25%. Asset stock. The effective tax rate on consolidated earnings in the Q1 of this year was 14.1% compared to 21.5% in the Q1 of Exchange. We remind you that for 2020, last year, the nominal corporate income tax rate was 24%, asset stock. While for 2021, the nominal rate is 22%. Earning now The balance sheet, the cash and cash equivalents of the group at the end of March 2021 Exchange increased to $70,300,000 compared to $68,000,000 at the end of 2020. And at the parent company, asset stock. Cash and cash equivalents were $18,600,000 compared to $17,900,000 last year. Asset stock. And approximately 20% of that cash, I. E, dollars 13,600,000 at the end of the Q1 2021 is kept at at Central Bank, the Bank of Greece, where interest rates are negative currently at minus 0.5%. Lastly, also on the balance sheet, a further EUR 223 at $400,000 that we report as both an asset and a liability are actually third party cash assets asset and currency margins in the cash and derivatives markets. These are clearing fund assets. And these funds are also deposited asset bank of Greece. And with this, I would like to thank you for listening in. We would like now to open at the earnings call to any questions that you might have. Thank you. Ladies and gentlemen, At this time, we will begin the question and answer session. Athens Stock. The question comes from the line of Kalogiropoulos Janis with Pekka Securities. Please go ahead. Hello, good evening. I have two questions actually. During your presentation, you mentioned the figure of around 1,800,000 That's what we refer to the total expected sales from services rendered that you expect for full year 2021, which includes, let's say, the energy market and the Kuwait bush and And the other bushes that we provide services to. That's the first question. And if you could guide us for Q2, Providing that we have already completed the Piraeus Bank share capital increase and we have pending at GM and Alfa Bank and also 2 bonds that were issued. I think it's Costa Mare during Q2 and it was Motorola, I guess, in Q1. Could you give us a color On what level the impact will be on your profitability, let's say, on the EBITDA level from these corporate actions? Thank you. Hi. Thank you. I'll jump on my question. On the the $1,800,000 that was quoted, that is the guidance that we're giving on our relationship with Pemex alone, not the whole line with regards to Amex alone, not the whole line with regards to additional services. And that's the number that we're calling that MX for Aptics Group is a EUR 1,800,000 relationship in full maturity. That's on a 2 year basis, right? Exchange. Correct. So that's one thing. So it's not so that is the line Item and revenue estimated, if you will, for the full mature nature of the relationship that we have with that particular client. Will this 1 be a complete year of full exploitation of the energy market? I mean, When we reach the €1,800,000 for 2, we do expect that 2021 will be such a year. Now with regards to Piraeus Bank. So Piraeus Bank, Yes. It was a very significant issue. Revenues on a cash basis, it is close to €1,000,000 But if as you recall, these types of revenues no longer get recorded On our revenue line, a point in time, but it's rather point over time. So you will see it asset stock. On our liability as a service that we owe to those clients at For over a period of time. So we do collect the money on a cash basis, but we don't book it in our revenue depending on the issue. If it's a primary listing. If it's an initial listing, it's 5 years that we amortize the revenue over that period. If it's a secondary issue as is the case at PEO sits over a 3 year basis. So that's why you see that on the liability side that we have for Services Ode and in terms of our obligations, that particular line has increased from just over €1,000,000 to just under €2,000,000 was close to €1,100,000 at the short term and long term liability. And then if you put on the Piraeus one, it's close to €2,000,000 that it's gone to that point. So again, you see it on the cash basis, but you're not it's gradual with regard to how it impacts our revenue line. Now with regards to motor oil, there the discussion is a little bit more at Limited with regards to the listing fees that we get from those types of instruments in terms of bond. So like for example, motor oil for us is close to 13,000 revenue stream that gets amortized over a period. But with the bonds where we do collect the close to 90 from the electric book the electronic book building process and that is booked within a year. So from Motorola's bond, it's close to 90 1,000 as we get and another 13,000,000 amortized over a period of time. For Alfa Bank, well, then it's I think I don't have the numbers off hand, but I think it's fair to assume that it will be proportional to The number that I mentioned for PLAs With regard to the differentiation of size, but I think one of the 2 dominant driving factors with regard to the asset stock. 2nd quarter aside from the services that we're working on and as we grow and continue to increase into the percentage advantage of our OpEx base, I think we will have a significant, if nothing else changes, Kiowin from the trading volumes that are significantly higher in the Q2 vis a vis the Q1. Ladies and gentlemen, there are no further questions at this Time. I will now turn the conference over to management for any closing comments. Thank you. Okay. Hello, do you want to wrap it up? Sure. Thank you to everyone for taking the time to listen in. If you want to we are happy to discuss with you in private if you want to take any matter up. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant evening.