Good afternoon. I'm very pleased to welcome you to the third quarter conference call with Warsaw Stock Exchange. Today, the company is represented by Marek Dietl, the CEO of the company, Izabela Olszewska, member of the Management Board, Piotr Borowski, also member of the Management Board, and Piotr Listwoń, Vice President of the Management Board of TGE. Gentlemen, the floor is yours.
Thank you very much, Paweł. So let me begin the presentation. So first of all, I'd like to welcome you to our presentation, and we are very glad that you are interested in our first quarter results. Hopefully, you have the presentation in front of you, and let us move quickly to page three, where we summarize the financial development milestones. So on the left-hand side, you have business results up to nine months of 2020. So we have healthy revenue and top line growth, 12%. EBITDA is also up by 5%. Net profit is slightly down due to some one-off, and this will be explained later in the call.
We had a business-wise, we had a very good nine months. We had IPOs altogether, you know, 13, with total IPOs in European Union of 33. So we maintain one third of the IPO market in Europe in terms of number of IPOs. Trading volumes are our venue one third up, 32% up. Also, revenues from market data are very good, up almost 6%. And we also introduced new products to our agriculture market or agriculture venue. So this strategic initiative is developing pretty nice. On the right-hand side, you have with, with the dark blue, you have other elements which create a shareholder value.
So let's say long term are our strategic initiatives, and in Q3 we continue to implement our strategy set up in 2018. In the primary market we were busy with two initiatives, the GPW Ventures. It's a corporate venture, it is a pre-IPO fund together with Agriculture Support Agency, which will be focused on agri tech and other agri businesses. It's quite agnostic when it comes to the stage of development, but ultimately the at least part of the company should be IPO. And GPW Growth is our education program, and we had a second edition of it. Again, maximum number of participants subscribed to this training.
So the initiative itself is cash flow positive, and we are very glad that people are so interested in education or having in mind the limitations it will be mainly done online, but still people register for that. In the spring, we'll start another edition, so we have two editions a year from 2021 . In trading, we introduced new products and new derivatives. It's also part of our strategy. This was a single stock futures. And we had the second phase of Private Market , our blockchain initiative, the first and crowdfunding platform. So we first created crowdfunding platform. Now we are partners in [Raiser market].
It's a platform for issuing tokens for revenue share, and we received financing from the National Center for Research and Development for building out the secondary market trading platform for tokens. Next year, in about ten months, this platform will be ready, and we will be hosting this blockchain-based token trading platform for smart contracts and tokens. In the data space, our first initiative, GPW Data, around XBRL. The phase one is closed, we move to the phase two, so everything goes as we initially planned.
And we also integrated our capital group, so GPW, so our financial instruments venue, our BMR, so index company, GPW Benchmark, BondSpot, our bond trading platform, and TGE, so our commodities exchange, and sales of data was integrated, and we expect, and the licensing strategy was unified, so we expect major synergies from this joint sales on the revenue, synergies on the revenue side, obviously. Technology, our trading, we develop our trading system, and phase two was closed on time, so we are glad that we progressed the architecture of the system smoothly well.
GPW Tech is our arm which supports the commercialization of IT product developed in our capital group, and we are happy to announce the first clients are testing our tools. GPW Tech will transfer to the GPW Tech three products altogether by the end of this year, and the company will be responsible for commercialization of them. We also engage in some brand building events, e.g., CSR type of events. We cooperate with Three Seas conference of CEOs of the Three Seas Exchanges so Central and Eastern Europe. It was Polish President spent with the participant over two hours.
So we're very glad that he supports us in this process of cooperation within the Three Seas region. And with the huge IPO recently and the profit from the first day of trading of Allegro, we decided to offer the charity for coping COVID-19 pandemia. And we received a very great feedback from different stakeholders. And we believe that was a really great investment in our brand and also as a beneficiary of the COVID-19 pandemia. We're really convinced that we should share the fruits of this success. So let me now leave the floor to Izabela Olszewska, who will guide you through our business performance.
Thank you, Marek. So good afternoon to everyone. So based on the next few slides, I would like to extend the core business overview of the first quarter. And we are on the page number four, and this is the international comparison of exchange volume and turnover velocity indicator. So the percentage growth of EoD turnover has placed the Warsaw Stock Exchange in forefront of the European stock exchanges. And following the strong decrease of trading volumes in end of Q1 and Q2, which was related to the outbreak of the pandemic and the high volatility observed on the market. So currently, the volumes on many exchanges tend to decline, which is not the case of the Warsaw Stock Exchange.
What makes us different from other exchanges? I would like, first of all, to mention the very high activity of retail clients. The retail clients, they started their inflow in March and still continue. It is caused by a couple of reasons, but the most important is the record low interest rates in Poland. It means that keeping the savings on bank deposits, currently, this means the real loss, minus around 3% per year.
PLN 70 billion flows out of bank accounts, and some of this money they are on the exchange because the people discovered that there are very good companies, especially those COVID winners, and they can earn money and multiply their savings on the exchange. The other reason is the growing Employee Capital Schemes . This is the governmental program, which was implemented in two thousand and nineteen. The goal of this program is to build the long-term savings of Polish citizens. This program is mandatory for Polish companies, but voluntary for employees. However, we gathered PLN 2 billion in assets, and we estimated around 40% of these assets is invested on equity markets.
So increasing volumes also, they are also reflected in turnover velocity indicators. So, I already described the reasons of growing in trading volumes. But, in the numerator of this formula, we have the market capitalization. And, in Q3, the market cap decreased a little bit. So it means that the whole formula that has noticed the positive, very positive results. So turnover velocity increased from 33% up to 52.5%. So, now let's go to page number five, and this is about the equity market.
In Q2, we had lower volumes, but comparing to Q3, we had the lower volumes comparing to Q2. But year on year, it was growth on the securities market, almost 29%. Of course, we should realize that in Q2, we had two holiday months, so there are always the months with lower trading volumes. But what is expected on the equity market? We expect the further high activity of individual investors. These investors they are with us because they want to have the good products and good companies listed on our platform.
Here, we do believe in our IPO pipeline, because we know now that more than 20 corporates they are in the process of preparation for listing. So we expect very soon the new debut of CANAL+ company from media sector. And then there are a couple of other big companies, like one Huuuge Games with which is registered in the States from gaming sector, and also some others from gaming, e-commerce sectors and also new technologies, biotech sector. Also, we expect very active FPO market. So in 2020 we had already 61 offers, and the companies they collected around PLN 3 billion in FPO.
So the end of the year is normally also the time when there is the inflow to individual pension accounts, which is connected with the inbuilt tax incentive in this product. And also Allegro, which is the company currently in couple of international indices and benchmarks, so like FTSE, STOXX, MSCI. So I think that also just draw the attention of more foreign clients to Polish market. So on the NewConnect market, so our SME platform, and we also had a tremendous growth of volume. And this was connected with the interest of the clients in trading of COVID winners. So we had a couple of very good companies listed on NewConnect.
What it's worth mentioning that for the first time ever, one of our member, a global bank, asked to extend its membership to the NewConnect. So it means that this platform becomes more and more internationally recognized market. Structured products here, we continue with the expansion of the palette of the products. So currently, we have 1,700 products. But we observe the interest of our clients, especially of retail clients, because this is the possibility to trade through, of course, structured products, different commodities. And also, this is the access to foreign indices and stocks.
In the ETF segment, we are expecting two or three more ETFs by the end of the year. We started from the low basis, but every quarter we observed the increasing interest and turnover volumes. The exchange is very much focused on innovation and especially innovative companies. We organize every quarter or even more frequently the so-called GPW Innovation Day. We connect the companies with the investors, so the last time we had almost 1,000 participants. It means that the investors are looking for the innovative companies listed on our exchange. The liquidity is the key thing for us, so we continue our liquidity programs.
In Q3, we open the High Volume Provider program. This is the program for quantitative funds. Currently, we have one participant of this program. The share of High Volume Providers is in percentage a little bit lower than in Q2, but nominal, it was, we noted the nominal increase of the activity. Let's go to a derivatives slide, and this is slide number six. On derivatives side, we had the increase of overall volume in Q2. Year- on- year, it was almost 80% +, but comparing to Q2, it was - 15%.
And again, holiday month plus when you look at the slide in the bottom on the left-hand side, so you can see the lower volatility in Q3. And the lower volatility has always had an impact on the volume. So what we observe is increasing interest in single stock futures. So in October, as Marek already mentioned, we implemented four new contracts, three on quoted companies and one on Allegro. And I think that it's worth underlining that we are really able to very quickly implement the new products, the new single stock futures.
So our time to market is very short if we observe the high volumes and interest of investors, plus we can sign the agreement with market makers. So we are really very quickly ready to implement the new product. Also in derivative segment, we have active High Volume Provider and programs, and the new participant joined in Q3. Also we managed to find the new market maker for our blue chip or our flagship, I would say, future contract based on WIG20 index. So the slide number seven, this is my favorite, because I think that this is a very nice slide summarizing the overall business in 2020, in nine months.
So I'm very happy to record the percentage increase in each product line. So even the niche instruments so far gain interest of investors. And we are, we hope, that this will be continued. On the slide number eight, so there is the message about our ESG development, and as our CEO, Marek Dietl already mentioned, so ESG is very important. It's very important topic for us. And I would like just to kindly touch this issue from a very business angle.
When you look at the figures and, for example, the JP Morgan report, in which we found the estimation of the assets under management of ESG funds, it is like 45 trillion dollars. It means that it is a huge market. Also when you look at the level of global assets in ESG ETFs, plus taking into consideration the results of our roadshow with the global clients, and they inform us that in 2021, they want to be very focused on ESG criteria, even with 100% integration. This is, for us, a very important message that we need to prepare our company and our market for this important trend.
So currently, our actions are, I would say, twofold. So, preparation of our company to ESG reporting, and then the support for market participants, like, our issuers, and also local institutional and retail clients. Plus, some analysis on which are conducted by our daughter company, GPW Benchmark. And, this analysis, they are connected with the new benchmarks, low carbon benchmarks. So, in the framework of preparation of our company to ESG, we continue to develop the ESG policy and also the way how we would like to report ESG factors to investors.
To be honest, we are not beginners in this area, because currently we publish so this year with already the integrated report. The report that covers financial and non-financial results. We are in touch Sustainalytics because we are also the participants of this ESG index. And currently Sustainalytics assesses as a low-risk company. And last but not least, the company has dedicated the member of the Management Board who is responsible for further ESG development. This is from my side, and I would like to ask Piotr to continue.
Okay, Izabela. Izabela mentioned very active financial market resulted in high financial result, results of our group. The sales revenue were up in Q3 by 7.2% year-on-year. It was mainly due to the activity of the financial market, the Warsaw Stock Exchange. In Q3, we had also higher operating expenses. It was mainly due to the higher personnel costs. We are working on a new development projects and hiring new people. Also, the increase of external services, and there was also a higher fee for the market supervision. It was a real surprise. The whole market was surprised because the fees by the Polish KNF was higher by 100% when compared with the last year.
It resulted in a lower EBITDA at the level of PLN 47 million, and lower net profit at the level of PLN 32 million. Slide 11. The result of this higher cost base of the lower EBITDA margin, which was at the end of this quarter, 53.2%, and lower net profit margin at the level of 66.2%. Slide 12. Results of the Warsaw Stock Exchange, the financial markets were very good with this, the activity of the market, the volatility and high volumes. We still had a very high above market average electronic order book volume daily, and also very good trend in fees, because we have bigger number of small transactions. And the small transactions are much more profitable for us.
The average fee per trade was at the level of 2.31 basis points, and it was a record high. It was a result of small orders posted to the exchange by the retail investors, because we observed in this year big shift from bank deposits to the capital markets, and increase of the retail investors in trading on the Warsaw Stock Exchange. In the past, it was around 10%-12%, now it's over 20%. Slide number 14. Listing revenue, it was stable. Year-on-year, we had good activity. We had 7 small IPOs in the NewConnect market, our MTF, and one new listing on the main market.
But still, very low, I mean, the small cap, so it doesn't have much impact on our revenues. Nevertheless, we are happy that this market is still alive and active, and what is worth mentioning is that in the Q3, we had a quite active FPO market. We had new listings, secondary listings of new shares, and slide number 14. Market data. Market data is growing steadily. It's very stable business line, and also you see developing. This year we are very glad with the increasing number of individual subscribers. Since, again, it's connected with the activity of the retail investors, but also we have new data vendors and non-display professional data users, so at the moment, I ask Piotr Listwoń to present commodity.
Thank you, Piotr. Slide number sixteen. Let me present to you turnover in the third quarter of 2020 . It's divided into three main commodity in business lines run by TGE, which is electricity, natural gas, and property rights market. Starting from electricity. On the electricity market, the main event of 2020 is still intraday market development. Intraday volumes rise continuously, quarter by quarter. So after third quarter, they amounted to 1. 5 TW , compared with 3/10 of terawatts in the first three quarters of 2019 . So you can see dynamic change in the volumes in the intraday market.
Mainly caused by European intraday energy market that we started offering to our clients in November last year. Thanks to intraday market, we achieved year-on-year growth on the whole electricity spot market by 5.1%. However, despite of the good results of the spot market, we have noted a decrease in the overall trading volume of electricity due to lower volumes on our main market, which is electricity forward market. Decrease is about 18% quarter on quarter, and 21.8% year- on- year. Which means, it was the worst quarter on the electricity forward market since second quarter of 2019.
We have noted growth on this market in July, but after the announcements of the potential removal of the exchange obligation of electricity producers, volumes started to drop. In August and in September, there was a decrease by one third on year on year on this market. And lower volumes of this market are explicable by a very large volumes of annual contracts concluded in the first half of 2020, mainly in time between February and April. Nevertheless, it's also clear that there is a significant impact of the possible removal of the exchange obligations, since it concerns delivery years starting with 2021, and hence also affect trading on annual instruments on the electricity forward market.
There was also year-on-year decrease in the volumes of natural gas forward contracts, but unlike to the electricity forward market, there was a slight increase quarter on quarter, which is 31.7 versus 31 terawatt hours. It's on the level near three previous quarters, the decline of overall gas volume comparing to the previous quarters is the result of low spot market volumes. This is usually in the summer time. On our natural gas spot market, there was even a 4.7 year-on-year growth, so 3.6 TWh .
But the decline in the gas forward market can be put down to the limited volumes of annual contracts that could have been expected after the record-breaking first half of 2020 , and growth by 658% year-on-year. On the different business lines, on the green certificates market, we have noted a significant drop of volumes quarter on quarter by 25%. But it should be explained by seasonal changes caused by the certification redemption deadline, which is the end of June. Therefore, the year-on-year comparison is much better for the third quarter on the property rights market, and it comes to the green certificates we have had 6% growth.
Unfortunately, there is also a drop in liquidity of the energy efficiency certificates market, so-called white certificates. It has even dipped in the previous quarter. We have got no new white certificates issued in the previous months, and the newer types of white certificates are being issued in relatively slow pace by Polish authority. At the end of September, we've got this a decline in the overall volumes of white certificates issued by URE that amounts to 60% year-on-year from 189 kiloton to 75 kiloton of oil equivalent.
As a result, we have got also an 86% decline in the third quarter trading volume, but it's also due to the comparison with the second best quarter of the market, which was in the third quarter of 2019 last year, when the price of auctions of white certificates soared after the validity was prolonged. When we move to the next slide 17 to the revenues from the commodity market. At the beginning, I'd like to just to let you know that and keep in mind that the revenues from commodity markets are strongly correlated to the total volume traded on the market in a given period.
That's why in the third quarter, we have noted a decline of revenues from electricity and gas markets. This is a result of trading volume decline that I have described earlier. A large decline of energy efficiency certificates trading volume is caused a revenue decline of the whole property rights market. This revenues declined amounted to 27% year-on-year, that occurred due to huge 86% decline on the white certificates market, even having 6.9% growth on the green certificates. On the next 18 slides, we have information about the revenues from clearing and also revenue from operation of the register.
On this slide, you may observe drops of the revenues from the clearing from Guarantees of Origin. Revenues from clearing amounted to PLN 9.6 million . That means the drop of 11.1%, year-on-year, is the result of trading volumes drops that occurred on electricity natural and energy efficiency certificates market. This drop is lower than an analogous one of trading volumes trading revenues. The reason of that is the revenues from clearing of the electricity forward markets, trading on organized trading facility, comes also from clearing and treatment of open positions traded on in the past for delivery in particular quarter. This is the reason that the revenues from clearing are little bit better than on the exchange.
Certificate of Origin Register dropped year-on-year by 37.8% to PLN 3.8 million . Preliminarily, it's the effect of lower volumes of green and white certificates issued and redemptions. The last information, we have also a slight 1.8% year-on-year decline of Guarantees of Origin revenues. We expect higher volumes in November and December, as end of the year is a deadline which guarantees should be executed. So this is all for now from the commodity.
Thank you, Piotr. I will continue on other financials here on the slide number 20. Operating expenses, there was increase of operating expenses year-on-year by 37.9% and 10.6% quarter-on-quarter. The main contributors of this rise was, again, the high fee for the market regulator, which I mentioned before, and also the total employee cost is mainly connected with our new business development project. That was worth mentioning, I think, on the personnel cost, that there was an increase 15% year-on-year, but quarter-on-quarter, they were flat. We also create a provision against interest on potential tax payable at IRGiT. IRGiT is clearing house for the commodity market. Slide number 21. Profit of entities measured by equity method in Q3, it was more or less flat with the year-on-year and quarter-on-quarter.
The main contributor here is the net profit of the KDPW Group, which is a Polish national depository for securities and clearing house. Slide number 22, consolidated statement. We have a high level of liquid financial assets. I just want to mention that in the third quarter, in August, we paid dividend 100 million PLN. It was 2.4 zloty per share, and dividend yield was 5.5%. It was the last slide of our presentation. Thank you.
Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. If you are joining us online, please click the Request to Speak flag icon. If you do want to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. At this time, we have no telephone questions, so I'll hand back over to you, Paweł.
Okay. So I have two questions, in fact, if I may. First question is, what are the chances or risks, whatever you call it, of lifting this obligation of electricity trading? And what is your gut feeling in terms of what kind of, or what part of volumes that you have currently on the electricity market trading can be put here following this lifting of the obligation?
Piotr Listwoń, please, can you handle this question, please?
Yes, thank you, so the question about the chances, as we all are aware, currently we are waiting mainly on the public information about the... what's happened already, about the coal miner labor union agreement between, yeah, coal miner labor union and Polish government. One of the point is just saying that it's obligation to trade on the exchange should be removed from Polish regulations. Currently, we have no further information about that. What we know that some discussions will be between Polish government and European Commission concerning possibility of having some concerning the current situation about the coal miner companies and some help from Polish government to them.
So we don't know exactly what will be the final result of the discussion and between government and European Commission. And also, we currently are expecting of some project of the regulation that will be presented, showing what the Ministry of Climate would like to change in the provision concerning exchange obligation. So we are expecting that such project of resolution will be given to public consultation, and we will see what will be the final result of that. So currently, we have no further information about this project and what will be the final project resolution example.
So, we are still in the time of waiting for that. Concerning your question about what would be the impact of the changes in exchange obligation, I could say that, of course, we have some estimation concerning that. What I can say so that's, we have, we all have to know that obligation, current obligation, which is in the resolution, Polish resolution says that it's 100%, but effectively it's not like that. We count that it is around 55-60, because there are some exclusions from this obligation. So we see that it might be possible that if total removal of the obligation to trade on the exchange will be enforced, we might have the impact of around half of our trade volumes on the forward electricity market could be impacted of that.
My next question refers to the concerns, the acquisition of Armenian Stock Exchange, which has been in fact put on hold until the military unrest in the region eases. Do you see any further acquisition targets among smaller stock exchanges in the region?
I'll handle this question. This is Marek. Well, we look our M&A strategy as we continue our M&A strategy. So we look for tech companies and we look for trading venues, stock exchanges. And in both cases, it's quite difficult to foresee what will be the results of our M&A activities. So, in case of tech companies, we are more... We're working still on our CVC, corporate venture capital, just to outsource the selection of companies and growing them. We might consider to invest from our balance sheet, but we'd rather prefer to outsource that. And in case of stock exchanges or trading venues, it's a heavily political decisions.
For example, in case of Armenia, took us over one year of discussing with various stakeholders. You never know what will come out of this talk, but we are generally interested, and if someone approaches us, we always very seriously. We'll be very happy to integrate the region, but if there is a supply of companies, I don't know. There's definitely demand on our side, but we'll see if it's gonna work out. What I would like to assure you, not only this should be a strategic fit, but also very, a clear value added for our shareholders. It's a pure business decision for us to go for an M&A.
Okay, and in case of acquisition of this technology company, you'll aim at later on developing them and incorporating them into your business group, or you'll just aim at developing them and sell them?
Yeah. I mean, this initially, we wanted to buy majority, so preferably 100% and integrate them with us indeed. But, we worked on several cases over the last two years, and we are never successful. And it's simply because the tech companies today have so great opportunities around that, it's very difficult to convince the founders that they should exit now. That's not the problem. Or it gets the valuations get to the skyrocket when they have to exit, and then it makes we not see that much synergies. So currently, we rather move for minority stake, that's why the CVC idea, and we would rather benefit a little bit from equity and also be a first client or important client to help them grow globally.
So, of course, if there's opportunity to take over the full means to take over 100% of an attractive tech company, we will not hesitate to do. But it's up to those two years of trials, and we would rather we focus ourselves on minority stake.
Mm-hmm. Okay, cool. My last question concerns the dividend potential dividend payment next year. It seems that this year will be record high in terms of your profit. Nine months EBITDA spend is over 160 million, that's the second highest EBITDA in your history. So I was wondering whether we can expect certain upside potential to the dividend in your strategy. You declare that you are going to pay at least PLN 2.5 from 2020 profit. I was wondering, given the fact that the acquisitions that you have on the table, I mean, there are many stock exchanges, PLN 6 million you spend on dividends, roughly 100 million. So the potential acquisitions are not game changer in the dividend story.
So I was wondering, given the very strong results this year, no material, M&A on horizon, can we expect something more than just this PLN 2.5 dividend per share next year?
Well, a long question and a pretty short answer. We have very good results. That's true. But our main focus is the end of 2022, when we promised the shareholders PLN 470 million in revenues and PLN 200 million in EBITDA, and this is our primary focus. Of course, we share the profits with the shareholders, but our top priority is not maximizing the dividend payout, but to get the strategy done in the way that the revenues will be around the numbers I already mentioned by the end of 2022. Having in mind those priorities, we still hope for both organic and inorganic growth.
We are not tempted to change a single word in our dividend policy. Of course, life is quite complex, and we might change our mind, but currently, I don't see any reason for changing our mind. We have to invest in order to get to the KPIs we promised to our shareholders.
Okay, but if there are no acquisitions, no material acquisitions next year on the table, and volumes options strongly cannot rule out that the dividend may be, in fact, slightly high or higher than this minimum level of two point five. Is that correct then?
Yeah, the issues with acquisition, that you never know when it comes to a situation and interesting. If there is something interesting in the market, we have to act quickly. So we rather keep cash at hand. If by the end of 2022 , we'll see that there's nothing to invest in, of course, we will not hesitate to pay out this money to investors. But still, we are hoping to get some investment done. And also, don't forget that we have some investments in pipeline, like trading system. We also might...
Of course, today it is going to be tricky to buy buildings, but we might also sign an intention letter to buy our business office building, so it might happen if the valuation is attractive enough. And of course, those valuations of office buildings are getting attractive, so we might also spend money on that. And so plenty of opportunities we see in the marketplace. So, the dividend yield of around 5% I think at the current interest rates levels is still attractive for our shareholders, and it will be increased in the next years. So, currently, we don't see any reason for changing our dividend policy.
Okay. Perfect. My literally last question is, on the securities lending platform, because that is one of your strategic initiatives that should be launched soon. Do you happen to know the date when we shall the initiative being launched?
But which initiative? Can you-
The securities lending platform.
The grain lending. Well, we hope that there will be a new law or amendment to the law passed this year to the parliament, and then we will be able to start this initiative. There is still uncertainty in the law, and this law should be clear. So this is not a very precise question. I think, not later than half a year after the amendment of the law.
Okay, perfect. Thank you so much for taking my questions and for the call. Thank you very much.
Any further questions?
There are no telephone questions, so I hand back over to you, Paweł, for your end remarks.
Okay. Ladies and gentlemen, thank you so much for attending the call. It's been a pleasure to host all of you. I hope you enjoyed it. Have a safe weekend, and let's stay in touch until the next conference call next year. Thank you so much. Have a great weekend.
Thank you.
Cheers. Bye. Great weekend and take care.