Bursa de Valori Bucuresti SA (BVB) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Bucharest Stock Exchange's 2019 Preliminary Results Call. I am Stefan Lungu from Wood & Company, and I'm going to be introducing the speakers today, which are Adrian Tanase, CEO; Virgil Stroia, CFO; and Remus Danila, Investor Relations. I'm now going to hand over to the speakers for the results presentation. Thank you.

Yes. Thank you, Stefan, and welcome, everybody, to our full year 2019 preliminary results conference call. I'm Remus Danila, the PR Officer of Bucharest Stock Exchange. So before handing out to Mr. Stroia, our CFO, for the -- for a detailed analysis of our figures, I just want to maybe remind everybody about some very significant events that occurred in 2019 for Bucharest Stock Exchange. I will start with what everybody knows was a major project for our exchange throughout the last years, namely the emerging market status projects. Finally, in Q3 last year, FTSE upgraded us to the secondary emerging market status. And yes, I guess it's a major accomplishment in the sense that it recognizes all our efforts and the progress our markets have achieved for the past, let's say, 5, 10 years. The second major project undertaken by Bucharest Stock Exchange is the creation of the clearing counterparty. Again, this is something that the market has been lacking for a long time, and it's probably the main infrastructure link, which is missing to make Romania a complete capital market environment for all type of investors and partners. This being said, I'm going to hand it to Virgil to take you through our results for the full year 2019 and the fourth quarter of last year.

Hello. Thank you, Remus. So as you noticed, during the 2019 year, we recovered during the year from the very sharp decrease at the end of 2018, and the value of the shares increased during the year. And mainly during the first 3 quarters, the last quarter 2018 was not as expected. So the value of the trading was lower, especially in the case of the shares and with low values in offers, but with higher values in the trading of the -- as we are noticing the fixed income. So the bonds, mainly the corporate bonds, where we saw during the first -- the last quarter 2019 a very nice evolution. It is true that mainly our revenues are generated by the trading of shares and less from the trading of bonds. As you know, the bonds are commissioned with a low value in order to be comparable to the other markets, but we are very happy to see the interest for the bonds in our market. Due to this evolution, the fourth quarter was not -- didn't brought us a very significant or significant revenues in the -- as year-end and compared to 2018 where we had very high volatility, especially in December 2018, the -- we have a 22% decrease in revenues. Mainly the volatility in December, of course, brought us significant revenues that time. This event didn't happen in 2019. We are happy that it didn't happen. It -- we didn't have the same experience, but of course, we are expecting more revenues in the future. Regarding 2019, the whole year, and mainly the consolidated financial statement and the consolidated figures were influenced, as you know, by the trading activities. So our trading revenues, the post-trading revenues are linked to the trading activity. Even if we saw that, that index increasing during the year and very close to 10,000 points and with 35.12% growth in the year. Even the BET total return also index increased during the year, 46.9%. Even the market value of the -- of all company listed on the main market reached over RON 180 billion, an equivalent of EUR 37.8 billion. And the new listing of bonds in Q4, the total trading of the -- total trading value on the regulated shared market, excluding offers, decreased with 3%, from RON 9.6 billion to RON 9.3 billion. All these events, this marks our -- an increase in our revenues, in the trading revenues given that we are still meeting, and we -- it was a high lake of offers of IPOs and FPOs in our market. So this lake of offers, let's say, decreased our revenues with almost RON 3.8 million. We did generated in 2019 revenues of almost RON 20 million on the individual level, but with almost RON 4.5 million less than in 2018. And as I said, the main reason is the lake of revenues from public offers. Maybe you noticed that in the first 3 quarters, we try to show the evolution in the regulated market. So -- and that we had this increase, which we consider that it was a good time at that time. And still, we are -- we hope also in 2020 to have a good evolution in this segment. Yes. Other figures regarding 2019, so preliminary operating revenues of the BVB Group in 2019. Remember that in the -- we are consolidating here the Bucharest Stock Exchange. So the trading segment, the central depository with the post-trading segment and registry segments and the compensation fund and together with the new set-up company, the CCP.RO BUCHAREST S.A., that was set up in November 2019. So the revenues, the operating revenues were almost RON 35 million, 12% less compared to 2018. Preliminary consolidated operating expenses are almost 1% higher from -- approximately to RON 31 million and with an operating profit of RON 3.7 million. It is true, it's a much lower operating profit than in 2018. And it's also true that we noticed in the past years, let's say, so 6, 7 years in the past that in the years when we had a decrease in the trading activity compared to the past year, we noticed also an increase in our financial income. So operating profit, RON 3.7 million and then a financial income of RON 4.4 million. The financial income is -- if you are checking a breakdown of this income is comparable to the previous year. So unrealized and realized exchange rates from our investments in foreign currency, the we had also a plus -- a gain from the sales of government bonds of RON 0.5 million and, as you know, mainly the interest revenues from the investments in deposits and bonds. So altogether, generated a consolidated net profit of RON 6.8 million, 33% down from 10.2% last year. 78% being generated by the trading segment. These are preliminary figures. Of course, we are still auditing the figures, but we are not expecting significant differences to these figures. In our presentation, we have also additional information regarding the breakdown of our revenues, from trading segments, from the post-trading segments, the evolution of this. As I explained previously, the decrease in the trading revenue is due to a decrease of the trading from public offers, values, a decrease in the deals traded value, which is also important for us because the deals are commissioned higher than the normal trading. Yes. The post-trading segment had a result similar to the trading segment, if you are seeing the evolution in this part. The registry segment had also decreased as a base effect considering the one-off revenues registered in the first half of 2018. Regarding the operating expenses, we try to keep our expenses to a normal level. So we had an increase of almost 1% in this -- in the operating expenses at the group level. Yes. At the operating expenses level, we can speak about the personnel expenses, which are constantly under, to say so, influenced by the increase in the salary cost due to pressure of rising labor costs in the labor market and increase in the staff turnover in 2019 compared to the previous years, but we are trying to keep them at a reasonable level. Services provided by third parties. So we're down with 90% as a base effect considering the expenses with consultancy services related to the CCP project. And other operating expenses. We have here an increase influenced by the increase of the expenses with rent and utilities. And I can speak here also about the increase in the RON-euro exchange rate, which is also influencing this cost, and also the increase in the expenses with amortization, appreciation of our fixed assets, tangible and intangible assets. We are constantly trying to keep the technology at the, to say so, state-of-art level, if we can say so, and advance of the marketing and promoting expenses. And I can say here that the upgrade to the FTSE Russell -- by FTSE Russell that the emergence market was also sustained by several events and expenses in order to get this promotion, to say so. Regarding our financial position, if comparable, the total asset levels compared to -- comparable to 2018, we have here some movements, and we can explain them. So the investments in the new subsidiary, the new entity, CCP.RO BUCHAREST S.A., generated a movement from -- of cash from our deposits and bonds to the -- into the accounts of the company. So it -- we are speaking here of EUR 10 million, equivalent of EUR 10 million, and also an increase of the cash position due to the investment from the minority shareholders in CCP.RO of EUR 6 million. So noncurrent assets, a decrease of 80% compared to the beginning of the year mainly due to the maturity and the sale of financial assets. So we had to sell some of our bonds and to liquidate some of the deposits in order to get to the liquidities for the EUR 10 million investment in CCP. Of course, the CCP will invest also the money in bonds and deposits in 2017. And the current assets increased with 9% compared to the beginning of the year mainly, as I said, as a result of the increasing cash influenced by the consolidation of the new subsidiary. Total payables of the group are only short term, RON 62.62 million. And the highest amount from this amount is related to the dividend payments held by BCE for the listed companies. Shareholders equity is up with 25% compared to the beginning of the year influenced by the increase of the noncontrolling interest by almost RON 32 million. Regarding our dividend policy, we are keeping the same dividend policy for 2019, and we hope to propose our shareholders the -- a payout ratio of 100% after legal -- after retaining the legal results. So this was the main figures for 2019. Thank you. If you have questions, please let us know.

[Operator Instructions] We have no questions registered, so I'll hand back.

Since there are no question, this means that everything is clear. So please, if you have any questions, please let us know.

We have just had a question registered [ Khayas Rafino ] of BCR.