Marta, please go ahead.
Good afternoon or good morning to anyone in U.S. Welcome to Warsaw Stock Exchange second quarter results call. My name is Marta Jeżewska-Wasilewska, and I represent WOOD & Company, host of today's call. Now, with no further delay, let me pass the microphone to Izabela Olszewska, Member of the Management Board, Warsaw Stock Exchange. Izabela.
Hello to everyone. Thank you very much, Marta, for your kind introduction. It will be my pleasure to guide you through the first part of today's presentation, which is devoted to the business situation on the financial market. Let's start with the achievements and milestones of the second quarter of 2022. In the second quarter, we have reviewed the current strategy. Just to remind you, we announced our strategy in 2018, and current year is the last year of the implementation of this strategy. We have reviewed the strategy and all our strategic initiatives together with the external advisors. The external advisor is Boston Consulting Group.
The conclusions were presented during the event which took place in June in our premises. Also they were presented in a press release and in the form of video material. To summarize the conclusions. In 2018, we set ourselves ambitious goals both in financial dimension and also in the area of creating completely new business segments. The diversification was a keyword in our strategy. As far as the financial results are concerned, we can say we did well. In the recent years, the average profits were higher by about 40% than in the previous five-year period, before we took the helm in the company. We managed to create some new products, services.
Also the strategy was live, so we added some new important initiatives which were relevant to the situation in the market. For example, one of the added initiative was ESG implementation. A couple of initiatives will be delivered with some delay, due to demanding conditions during the strategy implementation, like pandemic of coronavirus, war. Sometimes in some initiatives we were too optimistic with our assumptions. Two important international parts. As the market, we were upgraded to developed market status by FTSE Russell. It happened in 2018. Also the full member admission to World Federation of Exchanges took place in June this year.
In the second quarter, we have concluded also a share purchase agreement and shareholders agreement, which are connected with our project of acquisition of a little bit more than 65% stake in the Armenia Securities Exchange. This is the conditional transaction. Now we are waiting for fulfillment of two conditions. One is the approval of the sale of the shares by the Central Bank of Armenia. The second condition is a relevant amendment to article of association, in which, as a new owner, will have some corporate rights.
The conditions must be met by the end of September, and it will activate the payment for the shares. We have the ready plan for development of Armenian market. We prepared the business plan, and it has been reviewed and approved by EBRD. In the second quarter, we also paid dividend for 2021, and it was PLN 2.74 per share. Just to remind you that we have active dividend policy now. According to this policy, it would be PLN 2.60 per share, so we paid more because of a very good business year, 2021.
The management board decided to propose to the shareholders meeting the higher dividend. It currently is giving 7.5% dividend yield, and it proves that our company is a solid dividend corporate. We had the new management board in July 27th. The new joint term of office started. The current situation is that three person have been already approved by Polish Financial Supervision Authority, and whereas two other are waiting for approval. The next slide, please. The next slide is about investor activity on the cash market, and the second quarter this year was marked by war in Ukraine. Mainly I just want to underline the wide economic consequences of the war.
I mean, here energy crisis, high prices of raw materials, which fuels the inflation, and finally a couple decisions of National Bank of Poland to grow the interest rate in our country. Also our currency became much weaker. The activity of investors in the second quarter was slightly limited. We noticed a decrease of trading value in relation to first quarter this year and also in relation to the relevant period last year.
We are the neighbor country of Ukraine, but we receive the opinion from our investors that because of different strategic position, we are the member of NATO and European Union, so they don't identify additional risk. Of course, they look at the micro situation, and I think the global investors currently may have a wait-and-see position. For retail clients, decreasing valuation of stocks and plus uncertainty in the second quarter just resulted. They were factors of some limitation in the trading activity. It's worth saying that the first quarter of this year , it was the quarter with the outbreak of war.
We had very high volatility and heavy trading because of also uncertainty. It composed a high basis, so it is why it is such a percentage decrease between two quarters. The second quarter the previous years was in turn a very good IPO time, and we had a couple of IPOs of a very good companies. For example, Pepco the debut was in May 2021, and it fueled the trading volumes. Again year-on-year, there is a drop in trading volume higher than 30%. Also the session average trading value decreased plus the average fee was relatively low 2.11 basis points. We think that it shows the less activity of retail clients.
It would be also my comment to the first bullet point, where in which we are touching our SME platform, NewConnect. Of course, there was a decrease of turnover on NewConnect as well. In this market, the retail clients are the dominant group of investors. As I mentioned earlier, they were less active, so it caused some drop in trading volumes on NewConnect. Among structured products and ETFs, in second quarter, the most popular were those which predicted rebound, like, certificate long WIG20 or ETF WIG20 Leverage. For ETFs, we noticed some drop quarter on quarter of trading volume turnover.
In Q1, we observed that the owners of ETFs based on S&P 500, they closed their long positions. It was just again heavy trading periods. The share of participants of our liquidity programs, HVP and HVF, that was slightly lower year-over-year, but we managed to onboard the two new entities. One is HVP, high volume provider, and one is high volume funds, and they join us in June this year. Next slide, please. Or maybe, sorry, could I ask about the previous slide? Because just want to also add some comment on primary market, especially from the point of view of ECM and DCM.
In second quarter, there were only four debuts, all on SME platform, NewConnect. Generally, since the beginning of the year, three companies made their debuts on the main market. They were all transfers from NewConnect to the main market, and 10 companies made debut on NewConnect. It's worth saying that the IPO market is very quiet now, and the total value on European exchanges in the first half of the year dropped by 90%, 90, compared to this relevant period in the previous year. There are 14 prospectuses in Polish Securities Commission having started suspended and five ongoing processes. There are five companies that are waiting for the approval to transfer from NewConnect to the main market.
I just want to also to underline the vibrant SPO market in the first half of this year. Secondary public offering. We had 47 SPOs on the main market and with the value of about PLN 7 billion and 39 SPOs on NewConnect with the value of PLN 150 million. On the DCM side, the second quarter was a time of uncertainty in the corporate market, and there was a clear reason for that. This was the lack of demand from the institutional side because our funds they were suffering from a wave of redemption of debt funds. Within recent 12 months, the assets of corporate loan funds have melted by 30%.
Some of planned sales of corporate bonds have been postponed to the second half of the year, provided that the situation with redemptions stabilize. The good news is that there were some issues of corporate bonds directed to retail clients and they were organized in the form of public offering, and they were very successful. Now, the next slide, please. This slide is about our derivatives market. We had an increase of trading volume year-on-year and drop quarter-on-quarter. Especially, we are glad that the WIG20 futures turnover increased because WIG20 futures they are the most profitable for us products among all derivatives.
In the first quarter, the first quarter was the time of the turnover volume quarter-on-quarter. We had a high volatility. In the last bullet point on the slide, you can see volatility in the second quarter and in the first quarter. It is why in the first quarter, we had very high turnover base on derivatives market. We have active HVP and HVS programs, liquidity programs on derivatives markets. The share of these participants of these programs, they were roughly similar in the same quarter of both 2022 and 2021. The next slide, please. The next slide is about ESG.
We always inform about ESG during our results presentation because we realize that it is absolutely important topic for our analysts and investors. In December last year, the Warsaw Stock Exchange Group announced the ESG strategy until 2025, and now we are busy with the implementation of the strategy. We have established the ESG committee, which is the body responsible for monitoring of implementation of the strategy. Also, each of the company from our group, so the mother company, GPW, and also daughter companies, they developed and approved an operational plans of activities for this year in order to achieve the goal of our strategy.
ESG topic is regularly discussed on the meeting of the management board of the parent company, as well as on the meetings of group council. Of course, we inform our employees why ESG is so important in our company. We have published an integrated report that shows how the value is built in our company. Of course, it included the topic of sustainable development. We feel the responsibility to educate the market about ESG, so we carried out some training, some workshops, educational activities with some partners. We promote ESG, we promote green bonds market. Also, we organize in the second quarter the conference ESG Warsaw.
We are the partner, one of the partners, of the second edition of ESG Leaders competition. That's all from my side as for now. Piotr Kajczuk, over to you.
Thank you very much. Good morning and good afternoon, wherever you are. When we are talking about the result of second quarter of 2022, it's worth to point that our revenue are stable year-on-year, but dropped 10% quarter-on-quarter. It was due to the war in Ukraine, also by rise of interest rates and uncertainty of on the market. Also, in second quarter, we changed the structure of the revenues because on financial market, revenues dropped down but increased on commodity markets. On the other hand, we have operating expenses, which
Increased by 22.6% year-over-year, but dropped 9.2% quarter-over-quarter. You have to keep in mind that in first quarter, we set up provision for the fees for Polish Financial Supervision Authority in amount PLN 14.6 million . I will elaborate about the cost and expenses later. Looking at the EBITDA, we see that it dropped down by 18.8% year-over-year, and 8% quarter-over-quarter. Net profit on the level of PLN 38.1 million , similar to the first quarter, but decreased by 15.5% year-over-year. It is because the rise of revenues from the interest from our deposits. In the next slide, we have the results on the quarterly basis. About the trends, I told previously.
Worth to mention is that looking at the margin, EBITDA margin, we can find that it stabilized on the level of 46%-47% last quarters. Slightly increased margin on net profit to 38.4%, thanks to revenues from interest from deposits. Also, it was mentioned that we paid 5th August dividend PLN 2.74 per share. It is more of PLN 0.14 zlotys than dividend policy because of the good year of 2021. In the next slide, we are talking about the trading revenue on the financial market. It is at the level of PLN 38.4 million. In second quarter, it dropped down 8.1% year-over-year and 28.5% quarter-over-quarter.
As I said, it was due to the uncertainty on the market caused by the Ukrainian war, inflation, rise of interest rates, and exchange in assets. Volumes dropped down on shares 35%, on derivatives 11%, and on the debt market more than 50%. In the next slide, we are talking about the listing revenues. Yes, that's right. They were at the level of PLN 5.6 million, and it is increased by 6.3% year-over-year and dropped quarter-over-quarter by 11.9%. As for trading, it was due to the uncertainty regarding economic situation and on Main Market we had 0 IPOs, only four IPOs on NewConnect, and we had SPOs. In the next slide, we have information services.
We recorded PLN 15 million in the second quarter 2022. It is rise of 5.5% year-on-year and 6.9% quarter-to-quarter. Mainly, it's thanks to new clients which we acquired. It is one company distributing GPW data, real-time data, six non-display users, three for GPW data, two for Viber data, and one for BondSpot data. It's worth to mention that subscriber base rose by 18% year on year. Now we'll talk about the commodity market and Piotr Listwoń, Vice President of the Polish Power Exchange, the floor is yours.
Thank you, Piotr. Regarding the commodity market, trading volumes in both the electricity and gas markets decreased by 13 and 27% quarter-on-quarter and 31 and 16% year-on-year, respectively. The reason for this situation is the uncertainty which is commonly used in this presentation accompanying trading companies and electricity producers. Uncertainty about the coal prices, emission allowances prices, also taking into account the ongoing talks on the reform of the emission trading system, and the prices of energy commodities in foreign markets. All this results in record high valuations of electricity and gas in Poland and lower turnover on the Polish Power Exchange.
Good news, however, results from the summary of the trading in property rights, which recorded a significant increase of almost 59% quarter-on-quarter and over 25% year-on-year, reaching the level of 9 TWh in the second quarter of this year. White certificates are pretty stable. Trading volumes total 36.8 kt equivalent in second quarter of this year, which is a decrease by 1.8% year-on-year. Comparing to the first quarter, it's growth by over 112%. Next slide, please. On the revenue side of the commodity market, the results directly comes from the turnover of the volumes that we achieved in the second quarter of this year.
While the revenues from the electricity and gas markets decreased by almost half and almost PLN 1 million respectively, the revenues from the trading of the property rights achieved a very good results at the level of PLN 9 million, which is increasing by PLN 3.7 million. Next slide, please. The revenues from the settlement of the transactions is similarly to turnover to our turnover. Our provisions are coming directly from the volumes that are traded on the exchange and cleared by our clearing house. We see decreased by 2% year-on-year and almost 12% quarter-on-quarter, reaching the level of PLN 11 million.
Revenues from the guarantee of origin register increased over 30% year-on-year and over 36% quarter-on-quarter, reaching the level of PLN 8.5 million. That's what we have from the commodity side. May I ask Piotr to take over the voice again?
Thank you very much. Let's spotlight on the expenses now in the second quarter of 2022. As I mentioned, it was increased by 22.6% year on year to the level of PLN 62.5 million. It was dropped by 9.2% quarter to quarter. As I mentioned, in first quarter, we set up provision for fine from Polish Financial Supervision Authority in the amount PLN 14.6 million. In the graph below, you have analytical view on this increase year on year on this cost in second quarter of 2022. The main factors which caused this increase start from the depreciation. We shortened the useful life of our trading system by one year from first quarter 2025 to first quarter 2024.
It means that the cost, depreciation, amortization cost, rose PLN 0.3 million monthly. In terms of the year, it is PLN 3.5 million yearly. The second factor is employee personnel costs. We have the mixture of the two trends. First one is the increase of the FTEs, especially in GPW, because of the running projects and in our subsidiaries, especially new subsidiaries. On the other hand, we have the release of provision against social security contributions, regarding employees in projects. In the first quarter of 2021, we set up provision for the security contributions. We changed classification of these employees from the individuals to the individuals which run business. It means that they will not be charged by the social security contributions, but by VAT.
We relieve this provision, PLN 3 million, from employee costs, and we set up provision PLN 1.3 million in taxes for the VAT. It was the next factor. Next is our internal, external services, and we have a few points. First one, our IT costs, which increased PLN 2.9 million. Second is international energy market, which rose PLN 1.4 million. Third, our advisory services, which increased PLN 1.9 million. And promotion, which rose PLN 0.6 million. Coming back to IT. First point is Nasdaq. Nasdaq is the provider of the trading and clearing system for commodity market. This rise is thanks to the rise of exchange rate by 19% and valorization of this cost by 4.3%.
Another factor included in this rise is that the Nasdaq, we received this invoice from Nasdaq in second quarter, but the invoice is for all year. This rise in the second quarter, we have to distribute between first and second quarter. It means that in second quarter, this rise could be lower by PLN 0.5 million-PLN 0.6 million. Another point, IT costs are licenses and services in GPW regarding network and transaction system. Also they raised. International energy market. Also, here we have two trends because this is netting of costs and revenues. Costs are the cost of support and development of the common system used by commodity exchanges in Europe, including TGE, our commodity exchange. On the other hand, we have revenues which recover part of the costs. There are two sources of this revenues.
First one is Polish Grid Operator, which recovers part of the costs. Second are the other participants of this market, because some of the participants has direct contract with the vendor of the system and they are charged directly by this vendor. The costs are distributed to other participants, which do not have a direct contract with the vendor. Those revenues dropped down in the second quarter, but we are in negotiation with Polish Grid Operator to recover some of these costs. Third point are advisory services. Mainly rise comes from verification of the current strategy, which is first stage to develop new strategy and some costs we allocated to the second quarter. Also, this rise is coming from projects like for example, in private markets, logistic PCOL or marketing or advertisement TIO. Also increases from audit of new trading system projects.
Promotion rise, as I mentioned, PLN 0.6 million. In 2021, our activities were limited by pandemic. In this year, we had many events like for example, Kongres 590, Impact 2022 or WallStreet Conference or Brokerage Houses Conference. At the end, we can mention that this PLN 0.8 million on other expenses are mainly due to the rise of energy prices and business trips. Also, we move more this year than year before because of the pandemic when it was limited. In the next slide, we have the share of profits of our affiliates. Main impact is made by the Polish depository, KDPW. The share is at the level of PLN 7.8 million.
It's more or less stable year on year, but it rose by 71.3% quarter to quarter. This is because of seasonality. Polish depository has additional revenues in second quarter from general meeting services and dividend payments. Also, they had more revenues from the guarantee funds because they manage guarantee funds and Polish depository has income from the interest from the deposits. Last slide in our presentation regarding statement of financial position, balance sheet. Comparing second quarter to the first quarter, it's worth to mention that we moved one position coming from the dividend payment in amount of PLN 150 million from equity to the other current liabilities at the bottom.
Because at the moment of 30 June 2022, we recommended to pay the dividend, and dividend was paid, as I mentioned, in 5th August. Thank you very much and I expect now questions.
Thank you very much for the presentation. We'll now be moving to the Q and A part of the call. If you're dialed in via the web, please press star two on your keypad. That's star two on your keypad to ask a question. You may also ask a voice or a text question if you are dialed in via the web. We'll now give a minute or so for the questions to come in. Thank you. Our first question comes from Mr. Miguel Dias from WOOD & Company. Please go ahead, sir. Your line is open.
Hello. My first question would be regarding the cost-to-income guidance. We understand that you're making significant investments, and that's why your cost-to-income is in an upward trend. My question would be, would you expect this trend to be reversed? Also, what is your long-term guidance for cost-to-income? That's on the cost-to-income guidance. Also, I'd like to ask you something regarding your dividend. Taking into consideration everything that is going on in the economy, and given future expectations, I would like to ask you if you still see dividend expansion in the next years as guided in your fourth quarter call, 2021.
Regarding volumes, I would like to ask you where do you see the risk of lower volumes and how do you see this impacting your revenue in the future years? In an inflationary and recessionary scenario, how much would you be able to adjust your trading fees to compensate for these lower volumes? Thank you.
Yeah. Mm-hmm.
Okay. I will take this first question about the cost-to-income guidance for the next quarter of this year. We can expect, because we reached the level of 33% cost-to-income. This is in line with our strategy because of running of our strategic project. We can expect in the next quarters that it will be more or less on this level. We'll try to push it down in the next year, but we have to keep in mind that we'll have new strategy and new financial goals will come from this strategy.
Okay. Yeah. Maybe I will take some other questions. Just about the dividend policy. The dividend policy just again, as Kai is somehow connected with the strategy in the sense that when we announce in 2018 the strategy, we also announce the dividend policy. I think that the same will be this time. We are going to announce the new strategy and also our dividend policy. What I can offer now, and the answer that we would like to stay the high dividend company. This is our goal to be seen by our shareholders, by investors, and analysts as a good dividend company.
We don't have the complete answer as for now because it will be elaborated together with the working on the strategy. Now the question about volumes. That's true that this is a demanding time for us. We presented the results also the comparison year-on-year. 2021 was a very extremely good business year for us with vibrant IPO market and also high valuation that brought the retail clients to the market. Now the macroeconomic conditions that are weaker but is not and also uncertainty. I think that there are conditions in which we see the limited activity of especially retail clients because the valuations are now low.
Also the global investors, some of them, as I mentioned earlier, they have wait-and-see position. Of course, we don't want to sit and just look at the situation, we want to be more active and offer to investors some new products. I think that we are very close to offer ETC and ETN products, which are absent on our market now. We are in the final stage of approval of some of our rules and regulations in order to have the possibility to offer this to investors.
I think that this is the last stage of our preparation to open the GlobalConnect market, which will offer the trading in foreign caps, mainly from the blue chips from Western Europe and the States, maybe in the mix there, also the international or foreign ETFs. We are expecting some revenues from our strategic initiatives from our projects. Like, the projects connected with the advertisement market or flight market or some others. Of course, in this year, probably it will be just the beginning with the revenues in this project.
There are also you know the stream of the potential new revenues for the next years. I think that this is the answer. There was also the question about the fees. There are no discussion now about any adjustment or increase of the fees. We are not considering such movement now.
Thank you very much. Just to touch again on the GlobalConnect. Would you be able to provide any sort of guidance to the sort of volumes that you would be expecting in the coming years, and how would that translate into your bottom line? Thank you.
Yeah. As we just informed a little bit earlier. From our side, we are ready to start the market. We received also the green light from Polish FSA. Now, this is the last stage because we are waiting for the readiness of our external partners. I mean, here the market maker, which will introduce also the foreign stocks to trading, and plus the readiness of our brokerage houses. Some of them they declared to be on the market on the day one. As soon as they receive the readiness, we will be ready to start the market. The plan is to organize some kind of pilot.
With just a couple of stocks, the European stocks, and check if everything operates in a proper way and then add the next caps. Now, answering your second part of the question. What kind of volumes we can expect. We can look at the Vienna global market because they organized this before us in 2017. Now they have around 600 ISINs. The monthly average turnover is on the level of PLN 1 billion. This is something that we can consider. Of course, we are not going to start with 600 ISINs just from the beginning.
You know, we can look at situation on the Vienna Stock Exchange, and we think that here we can expect the similar figures.
Okay. Thank you. Just to finalize, I'd like to touch on the acquisition of the Armenia Securities Exchange. I'd like to ask you what's the impact that you see coming from there? Is there any future plans to take the company public? Thank you.
We are going to fully consolidate Armenia Securities Exchange and, of course, this is a very small business, but very healthy. The EBITDA margin is 30% and net profit margin is 23%, but they are really small, so their revenue are around PLN 6 million. Just, we had some estimation and calculation about the impact on our revenues and profits. It will be + 2.5% on the revenue side and + 1.5% on the profit side. It's worth saying that the company has no debt and it has PLN 12 million of cash.
We elaborated the plan how to develop this market and what kind of initiative we can implement to develop the market. I think that the majority of the costs to implement these initiatives can be covered from their own financial resources. We're not going just to take the dividends at the beginning. As for now, we cannot inform about any floating plans. It is not on the table now.
Okay. Thank you.
Okay. Thank you very much. Before I pass the call back to Marta, I would like to do a small reminder. If there are any additional questions, please press star two on your keypad. That's star two. If you have a voice or text question, you may also ask it if you are dialed in via the web. We'll now give another moment or so for any additional questions. Okay. It looks like the presentation was fairly exhaustive. I'll pass the line back to our host, Marta, for any additional questions or concluding remarks. Please go ahead.
Thank you very much for joining the call. Thank you, Izabela Olszewska, for hosting the call. I hope to see all of you and many more at the following conference, due in November, I guess. Thank you.
Thank you very much.
Thank you very much. Goodbye.
Goodbye. See you.
Thank you. Thank you. Goodbye.
Thank you. Goodbye. This concludes today's conference call. We'll now be closing all the lines. Goodbye, and have a nice weekend.
Thank you. Goodbye.