Good afternoon, ladies and gentlemen. My name is Paweł Wieczorski. On behalf of Wood & Company, I am very pleased to welcome you to the second quarter conference call with Warsaw Stock Exchange Management Board. Today, the company is represented by Mrs. Izabela Olszewska, Member of the Management Board, Piotr Borowski, Member of the Management Board, Adam Młodkowski, Vice President of the Management Board of the Polish Power Exchange, as well as Piotr Borowski, Financial Director at the Warsaw Stock Exchange. Gentlemen, please go ahead.
Hello. My name is Izabela Olszewska. Thank you very much, Paweł, for organizing this conference call on behalf of Wood & Company, and thank you very much for your kind introduction. Let's start today's presentation with slide number three. Generally, we'll be more to, thank you, the business part of the financial market presentation. Let me shortly comment on slide number three, where for the best visibility, I have placed some milestones on one page. They are presented, I would say, in three layers. The first layer is financials, then core business, the last one, the new business initiatives in the capital group of Warsaw Stock Exchange. As all these milestones will be discussed and developed in detail in Paweł's presentation. I would propose just to go to slide number four.
I think that already traditionally, I am starting with an overview of the equity turnover in Europe. 2020 was a year of very high activity on all European markets. In Q1 this year, trading in some markets slowed down. It was not the case of Warsaw Stock Exchange, so we had a very good Q1, but our trading volume slowed down only in Q2 2021. All in all, the electronic order book turnovers change. These parameters rank Warsaw Stock Exchange in the top among stock exchanges in Europe for the first half of this year. Even in the second quarter, it was a growth of trading volume by more than 3%. Q2 2020 was very active because it was COVID-19 time and the volatility was high. We are very happy that this year the Q2 was even better than the last year.
Let's go to slide number five, where we present the investor activity on the cash market. On the main market, we observed high session trading volumes, and they were the result of several factors. I would like to mention, first of all, the high activity of retail clients. I already informed during our last call that we have also a low interest rate in Poland, and currently keeping money on the bank deposits with the inflation on the level of 5% is a real loss. Our retail clients look for new investment opportunities, we observed the high activity of retail clients on the Warsaw Stock Exchange. 24%, it was the share in turnover of retail clients for the 1st half of this year. The second factor, it was the inflow of fresh new capital to mutual funds, including equity funds.
In the first half of the year, we had the debuts of very interesting companies. Only in Q2, there were five debuts of new companies and good macroeconomic parameters in Poland. I think that all factors are still valid. It is why we hope that the whole 2021 year, it will be really good for the business on the Warsaw Stock Exchange and the financial market. Just to comment also on the time between the end of the second quarter and today. July and August, it was the holiday period, so they were weaker in terms of turnover, but September is currently much better. Just also to comment on the future. Just want to underline that there are sorts of good companies in verification with the Polish Financial Supervision Authority.
We do expect a continuation of the good IPO period in the next months of the year. I think that, of course, as a consequence of this, we can expect also very good results in trading volumes. On our SME market, NewConnect, we observed a drop in turnover and it was a significant drop by more than 50%. Please remember that this is a much smaller market, and it means that even a small nominal change translated to a large percentage change. It's worth underlying that the most actively traded companies from NewConnect, they migrate from this market to the main market of the Warsaw Stock Exchange, which is a natural thing. In Q2, we had three companies that migrated from the SME platform to the main market.
In the previous year, we observed a relatively huge interest in NewConnect but especially in so-called COVID winners companies. It means the companies from gaming sector, technology, and biotech sector. Now this interest is much lower. If you look at the graph on the left-hand side in the bottom, you can see that Q2 2021 was much, much better than the whole year 2019. Systematically, we have been developing our structured products market, and currently there are around 2,500 structured product lists delivered by six issuers, and they are based on various commodities and various underlyings. This is the chance for our specialty clients to have the exposure to various underlyings. In the first half of 2021, we had debuts of three ETFs.
Two are based on foreign indices, NASDAQ 100 and S&P 500, and one is based on our, I would say, local index, WIGtech. This is the index that consists of the companies from technology sectors. Two prospectuses of the new ETF is in the Polish FSA, including one ETF related to fixed income markets. We hope that if the decision of the approval of the Polish Financial Supervision Authority is by the end of the year, so we will have two new ETFs even this year. We run constantly marketing and sales activities. There were a couple of interesting conferences, especially with some of the most innovative companies from subsets like green tech, biotech, med tech, life science, gaming sectors, but also other companies as well. Started the first edition of our, I would say, flagship program, which is supporting research coverage for the smaller companies.
Currently, this program covers 65 companies and reports which are distributed free of charge to investors because the costs are covered by Warsaw Stock Exchange, and these reports are delivered by 10 investment firms from Poland. The liquidity on the equity market is supported by, of course, market makers, but also the participants of our High Volume Provider and High Volume Fund. They increase their activity on the market. Also we are very happy to inform that there is a constant growth of the new investment accounts, however, much smaller than in the previous year. Now, we are on the slide number six, which is dedicated to derivatives market. I have two comments on derivatives. First of all, due to the dropping volatility in the second quarter of this year, the trading volume was lower quarter-on-quarter.
It was similar to quarter two previous year. However, this is the second comment, we observed the change of the structure of the trading. Now, WIG20 index contract and single stock contracts, they were less traded, and we observed the growth of trading in FX future, especially the futures based on the currency pair US dollar to Polish zloty. Also, in derivatives space, we had active programs supporting the liquidity, and this is High Volume Provider and High Volume Fund program. Also, we had very active market makers on derivatives market. Now, I just want to comment on ESG, which is a very hot topic on capital markets and also it's very important topic for the Warsaw Stock Exchange. We are on the slide number seven. The management board of the Warsaw Stock Exchange is just preparing the whole capital group to advance ESG reporting.
We are working on our own ESG strategy, plus we are just in the process of implementation of relevant policies. We also help our listed companies to prepare to ESG reporting requirements. We treat it as a business-oriented issue because we realize that if the companies are not prepared for reporting, so they'll be out of the investment radar of global investors. We would like to have global capital here rather than somewhere else. It is why, together with EBRD, we prepared the ESG reporting guidelines, which is the manual for our listed companies. We also prepared the new set of best practice for listed companies, which cover ESG factors. The companies, they should report how they follow the best practice. We are involved in training for our, especially institutional investors.
On the product side, currently we have mutual funds based on our ESG index and also the structured products based on this WIG-ESG. Our daughter company, GPW Benchmark, is working on the new set of ESG indices. Currently, they also are working on bringing our WIG index family. That's all from my side. Piotr Borowski, over to you.
Thank you, Izabela. Ladies and gentlemen, we are on slide number nine, financial results. We can say that we have a good second quarter of the last year. Our sales revenue is slightly down by 3%, but it was a mixed bag because the revenue on the financial market increased year-on-year, while revenue on the commodity market was slightly down. Operating expenses increased by 15.5% year-on-year. If we deduct the one-off fee for the market regulator that was accounted in our books in the first quarter, in the second quarter, we observed a decrease of expenses quarter-on-quarter from PLN 51.7 million to PLN 51 million. We can say that operating expenses were stable quarter-on-quarter. EBITDA decreased by 8.5% year-on-year and by 7.8% quarter-on-quarter, while the net profit rose healthy by 4.1% year-on-year and by 17% quarter-on-quarter.
It was due to mainly decrease of financial expenses in the second quarter and the sharp increase of the share of profit of entities measured by the equity method, and I will elaborate this topic later on. On Slide 10, you can see that we generated very healthy EBITDA margin at the level of 58.9% and a high net profit margin at the level of 46.1%, and these metrics were record high during the last couple of quarters. Slide 11. Trading revenue was lower by 5.1% year-on-year and 21.5% quarter-on-quarter. It was due to lower market activity, mainly on the equity market in the second quarter and on our main market and NewConnect, while there was a sharp increase in the bond trading, especially the treasury bond trading on our TBSP platform. Slide number 12.
Year-on-year, we had an increase of our listings revenue that was PLN 5.5 million in the second quarter. Still, we see new issuers coming to our market. On the stock market, we had a few new listings on the main market and eight on NewConnect, and also a couple of new issuers on the bond market. Also, on the secondary issues market is very active, so we are very positive and very optimistic about this business line. Slide number 14. We noted the steady increase of the revenue from the market data, and all is important for us. We are still finding the new clients, not only for our stock exchange, Warsaw Stock Exchange data, but also for the TGE and the GPW Benchmark, which is our index factory, and also for our bond market, TBSP.
Still there is capacity to slightly increase this business line, revenues from this. This is all at the time being. Now I'm handing over to Adam Młodkowski, Vice-President of our Commodity Exchange. Adam, please.
Thank you, Piotr. Hello, everyone. Adam Młodkowski from Towarowa Giełda Energii speaking. We are on slide 14. The best result we achieved on the gas market, which continues to grow steadily. The lower turnover on the spot market compared to the previous quarter of 2021 was due to the seasonality. The turnover on the energy market was worse than in Q2 2020. We should remember that the results from Q2 last year was the highest in our history, caused by market uncertainty of volumes related to the development of the COVID-19.
I think is the message that operating expenses were flat quarter-on-quarter because if we deduct the one-off fee accounted in the first quarter of this year for our market regulator, we have a similar picture in the second quarter. Depreciation was down by 1.3% quarter-on-quarter. Employee costs were down by 1.5% quarter-on-quarter. External services was slightly higher. It was due to IT costs, promotion, and advisory costs connected with our new projects. On slide number 20, you can see the share of profit of entities managed by the equity method. It was a record high in the second quarter. The best result mainly due to the very good financial results of KDPW Group, which is a national securities depository and CCP.
They had very good quarter in all business lines like clearing, settlement, depository services, and services for issuers, like corporate actions. They are very active, and we can say that is a very valuable asset in our portfolio. Slide number 21, consolidated statement. We still have very liquid position. Our assets increased when compared with the end of the last year, and it was mainly driven by an increase in the net liquid financial assets, which grew by PLN 59 million. We had very comfortable position and situation, and we paid in August dividend of PLN 104.9 million which was PLN 2.5 per share, and the dividend yield was around 5.2%. We think it was a good information for our shareholders.
Even though that we paid the dividend, we still have very liquid position in our balance sheet. Thank you. It was the last slide in our presentation.
Gentlemen, thank you so much for the insightful presentation. I have a couple of questions, if I may start. First of all, could you please elaborate a bit more on the IT product you sold to Kuwait Stock Exchange? How does this contract work? Do you receive a monthly payment for it, or it's just you have a single upfront payment? Could you please elaborate a bit more on the details of this deal? That's my first question. Hello, hello. Can you hear me?
Yes, we can hear you. Piotr, would you like to comment on it?
Okay, perfect. Thank you.
Piotr Borowski?
Yes. It's our new project, but very prospective. We are testing now with the Kuwait Stock Exchange, but then we'll be delivering it to other smaller exchanges. There are two possible ways of treating our clients, so it can be a part of our consulting services, helping other exchange to work on the liquidity, which is not very common, and it can be a limited in time process, or we can sell it as a service and charge on a monthly basis, or we can donate this to entities or clients. Now we are testing it with Kuwait, but it's very promising because we know that smaller exchanges don't have such tools to measure the liquidity.
Perfect. Thank you. My second question is about the very solid profit from associates that you recorded in the second quarter. I believe that was all-time high profit from associates you've ever reported. I know that this stems from the very strong KDPW contribution, roughly PLN 7 million, as far as I remember. Do you think that this level of profit contribution from this entity is a sustainable one? Shall we expect similar level of profits from this entity to be contributed in the next few quarters?
It was extremely active quarter for them, for KDPW, because it was a period of corporate action, like payment of dividends and re-registering new issues of shares because the regulations change in Poland and all the share issuers, they have to register shares with the central depository. I'm not sure the next quarters will be such good ones, but I think that the perspectives for the KDPW services are very good. They also started to clear transactions for our TBSP treasury bond market, which was not okay in the last year. They have a new promising business line, and they will generate profits in the next quarters.
Mm-hmm. Perfect. Looking at the second quarter, EBITDA margin was an extremely high level, close to 60%. What shall we expect going forward? This very solid EBITDA margin stemmed from the lower than market, and we expected OpEx. Could you please share with us your considerations over the possible OpEx growth in the upcoming quarters?
Yes. I think that OpEx can grow, especially the last quarter, the fourth quarter of this year, because it's a kind of a seasonality in our business. Every year in the last quarter, we have higher promotion costs and IT costs. I think that it will be difficult to keep such a high EBITDA margin in the next quarters, which is extremely high this quarter. We can expect some increase of OpEx, also connected with our new projects, new business initiatives that we will develop, and then it will generate some advisory costs and human costs.
Mm-hmm. Perfect. I know that during the last conference call, you started thinking about introducing foreign stocks to your product offering, and you are aiming at introducing trading of these foreign equities at the Warsaw Stock Exchange in the fourth quarter. What's the long-term target in terms of the number of stocks, I mean the foreign stocks, that you want to be traded at the Warsaw Stock Exchange?
Okay. Maybe I will take this question. You're right. We are just working to prepare the launch of new markets. It's named Global Connect. It will be organized in the form of MTF, Multilateral Trading Facility. We would like to offer to investors the trading in the large names amongst West European and American companies. I think that we will start from our European companies, and then we'll add American companies. This market, of course, is for all categories of investors, but mainly will be dedicated to retail clients. I think that we'll have some competitive advantages. Currently, the retail clients, if they want to buy the foreign stocks, they need to go to the brokers. They, of course, have to cover the currency risk, and it's very expensive.
We'll offer the trading in Polish złoty, and we offer also a quotation of the market makers. The access to this market will be easy because the Global Connect will be operated on the same trading platform as our other equity markets. The access to the brokers will be as currently. No additional effort is expected for exchange members. We assume that we'll achieve the internal readiness by the end of this year. However, there are two important factors when the market will really start, because now we're waiting for the green light from the Polish Financial Supervision Authority. There is no mandatory approval of the regulation from the FSA side.
We want to be sure that the supervisor has no objections to the structure of the market. This is the one thing, the second thing that the companies will be allowed to trading by so-called Introducing Market Maker. It is the investment term based in Poland. Of course, we can say that the market is open when the first company is available to trading. Let's hope that we will manage to open it by the end of this year. There are some markets already similar to our idea, one is in Austria, organized by Vienna Stock Exchange, also the Moscow Exchange opened such a market, Deutsche Börse has such a market. When we look at the similar market in Vienna, they opened it in 2017, and now they have around 700 companies offered to their investors.
Our goal is during the, I would say, the first period of running of this market. I think that one year, one and a half years, that to reach around 100 companies listed there, but not listed, sorry, traded. It will depend on the interest of our investors. What to think about the trading volumes when we look at the Wiener Börse, so the trading volumes are similar to our NewConnect trading volumes, but in the best periods of the NewConnect. It's around PLN 1 million per month. We think that maybe this is something that can be our benchmark at the beginning of Global Connect operations.
Perfect. Thank you. If I may ask a few more questions on these foreign stocks. Are you not concerned that these foreign stocks, once they are introduced into your product offering, could potentially cannibalize the volumes of the Polish stocks that are traded at the Warsaw Stock Exchange? Because since the local investors will have additional investment opportunities, they may switch from trading in Polish stocks to trading in foreign stocks. Are you not concerned with such a risk?
First of all, we have the same trading fee. If the investors decide to trade foreign stocks, we'll charge the similar trading fee. However, I think that currently, we have the situation on the Polish market that our investors, the local investors, may look for some diversification of their portfolio, so they look also for foreign stocks. We think that we can offer them trading in foreign stocks here in Poland rather than send them to the other platforms. We treat it as a kind of, not cannibalization, but as a complementary market to our current offer. We think that we'll have, as I mentioned earlier, the competitive advantages, and we hope that those clients that really want to trade in foreign stocks, they will trade here on our platform rather than go to other platforms and other exchanges.
Perfect. Do you have any kind of initial estimate what might be the volumes traded in foreign stocks once you reach your target of, let's say, 100 foreign stocks? Do you have any kind of long-term target or some figure you could recall now?
I have an impression that I already mentioned some kind of benchmark from Wiener Börse. Of course, it's very difficult to predict in which phase and how it will be developed here in Poland. They have around PLN 1 million per month, which is not a huge volume, but it's similar like, as I mentioned, on the NewConnect, but in the best time of the NewConnect. Last quarter, we had around PLN 3 million on the NewConnect. This is somehow similar. That's what we expect here. We'll see, of course.
Okay. Essentially, your rough estimate, once this 100 stocks target is reached, is that it can potentially add roughly PLN 1 billion of additional trading volumes to your equities line, correct?
Yes. Of course, it's just when we look at the Vienna Stock Exchange and we see similar figures. Of course, to be honest, I don't know how much time it will take to reach these volumes and this number of stocks. But we made the research among our investors, and there is the interest in foreign stocks. We do hope that it will be a good proposal for them.
Okay. Perfect. My last question would be on the pace of introduction of these stocks, because as far as I remember, you suggested at the initial stage you want to introduce 20, 30 foreign stocks in the fourth quarter, and then you want to reach 100 stocks. This 100 stocks is a target for which year or for which quarter?
Yeah. I think that it very much depends on the Introducing Market Maker, which is the external decision, to be honest. There is a special role of broker-dealer investment company from Poland. Just to, first of all, how to say, bring these stocks to the Polish market and then to provide the market-making services. It's not the internal decision of the Warsaw Stock Exchange, but rather, it depends on the decision of the broker-dealer. We have the cooperation with one broker-dealer, and others are interested in playing the similar role in the future. We discuss with this potential Introducing Market Maker around 100 possible names. It's very difficult to declare when they decide to launch these stocks to this Global Connect.
If they decide just to start from the, let's say one, two companies and check what will be the interest, or they start from 20 in one go. Probably, later on, it will be much easier to discuss the pace of the implementation of the new companies. As I mentioned, it's not the decision of the Warsaw Stock Exchange, but rather is very much dependent on the decision of the Introducing Market Maker. I mean the broker-dealer from Poland.
Okay.
This is the broker-dealer from Poland. Mm-hmm, sorry.
You went ahead.
Explanation. That this is the broker-dealer or investment firm from Poland, but this is the part of the international capital group. This is very important because it's much easier for such an entity to bring the companies here if they are the part of international group.
Okay. Perfect. Thank you. That's clear and very helpful. Operator, do we have any other questions?
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Okay, perfect. Ladies and gentlemen, thank you so much for attending this call and for the presentation. On behalf of Wood & Company, I wish you all a good afternoon and a great weekend. Let's speak following the third quarter results, dear Members of the Management Board. Please have a good luck with your development plans, and speak to you in November. Thank you.
Thank you very much, Paweł. Thank you. Bye. Bye.
Thank you very much. Bye.
Thank you very much.