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

So we are here today, our CEO, Mr. Adrian Tanase, joining us; and our CFO, Mr. Virgil Stroia; and we have Cristina Radulescu, our Senior Financial Controller. We will be discussing our latest results release this morning for the third quarter and the first 9 months of 2022. So as usual, we are now looking a bit at the share price evolution, the multiples, ownership structure. We haven't seen any significant changes in terms of ownership in the last quarter. And the main shareholder are the Romanian institutions, their share is slightly increasing about 80% as of the end of September. In terms of share price, third quarter was very good for the BVB share. Actually, it has increased roughly 15% during the third quarter. And this is even what was -- considering that overall the market has had a very, very sure direction. Moving forward to the results. So the highlights of the third quarter. Here, what we can notice on the positive side, the group results were all in the green, with revenues, operating profit and net profit seeing significant increases. The main driver for this group performance was the earnings and profit growth, et cetera, the profit level, as well as the lower CCP costs. On the stand-alone basis, the trading activity, we have seen weaker results compared with the third quarter 2021. And this is driven by the lower trading volumes as well as the lack of public offers during the period. On the expense side, we have seen smaller increases in terms of operating increase -- operating expenses, with a 9% increase on a stand-alone basis and 1% increase on a consolidated level year-on-year, while the quarter-on-quarter numbers show actual decreases, both on a stand-alone and consolidated basis. Then we could mention the volumes. This is the typical chart. So we can see actually that in the third quarter, the volumes were, let's say, started the -- let's say, lowest level of the range, and they were significantly lower compared to the third quarter of 2021. Some general updates. In terms of the primary market, what we see now and what we hear not only from the investor side, but also from other potential companies interested in financing through the stock exchange. Everybody is repositioning for the Hidroelectrica IPO. The latest estimates we heard in terms of timing in the second quarter of 2023. So we rather believe that on the equity side, at least, significant IPOs are unlikely ahead of the Hidroelectrica leasing. On the CCP side, I'm sure Adrian will give more [ Virgil ] update. In December, we will start the initial test with the technical solutions with our partners. And in terms of timing or where the authorization is expecting in the first half and start of operation in the second half of next year. Some important projects during -- that took place during the second quarter, we had a significant event with the representatives of Moldova capital markets and also represented from the Moldova leadership, on the occasion of the announcement of the largest bank in Moldova about its intention to list on Bucharest Stock Exchange in 2023. We do see more potential there on the long term. But of course, this is a very, very, let's say, complicated or complex project, but we hope it will all bring rewards on the long term for the capital market as well as for the Moldovan economy. Also a very important development during the third quarter, the Ministry of Finance -- or at the end of the third quarter, the Ministry of Finance published the strategy for the development of the Romanian capital market. The strategy was designed based on a set of recommendation prepared by OECD, the consultancy projects. And we were very, very pleased to see that significant measures aiming at increasing liquidity, increasing investor access, improving financial liquidity were included in the plan of measures to be undertaken by the government as well as by the local regulator. Again, in terms of share price, as we said in the third quarter, there was a significant uptick in the interest on the buy side for the BVB shares. And year-to-date, already our performance is roughly 31%, being the top performers in the BT index. This can also be slightly correlated with the inclusion in the FTSE Global Micro Cap indices, which took place in September 2022, as well as on the -- with the prospects related to the Hidroelectrica IPO in the 2022. Yes, here, we are jumping towards the results side, and I think Cristina will take over.

Thank you. So regarding the financial performance on BVB standalone, the operating revenues have increased 33% year-on-year up to the value of RON 24.34 million, due to higher trading revenues, mainly from the public offers, which increased 4x compared with the previous period. While the revenues from regular transactions increased 16%, which is mainly due to higher volumes traded in the first 6 months of the year. Operating revenues are in amount of RON 15.71 million, an increase of 16%, generated by higher personnel expenses and other operating expenses mainly influenced by the inflation increase. Operating profit is up 80%, up to the value of RON 8.8 billion. Financial result is in the amount of RON 3.2 million, up 88%, influenced by the dividend received from the [indiscernible] in the amount of RON 1.53 million. Net profit exceeds RON 10 million, almost up compared to the previous period, with a net margin of 43%. Regarding the performance in the third quarter, already mentioned by Remus, operating revenues have a slight decrease of 8%, influenced by a low level of trading revenues while the operating expenses increased by 9%, generating operating profit growth by 49% up to RON 1 million. The financial result is 17% higher, mainly due to the increase in USD-RON exchange rate with a positive impact on the valuation of financial investments [indiscernible]. Net profit is RON 1.4 million, in line with the evolution of operating profit put in place by the improvement in financial results. Moving on to BVB Group figures. The operating revenues are in the amount of RON 42.7 million, up 31%, influenced by increase in all business segments. Operating expenses are in amount of RON 33.5 million, up 8%, influenced by higher personnel expenses and other operating expenses at group level, mainly a result of the impact of inflation increase. Operating profit of RON 9.14 million, a significant decrease of over 5x year-on-year, with direct impact -- on the net profit, which exceeds the value of RON 10 million, 180% increase compared to the previous period. A better third quarter of -- at group level compared to the previous period, the 4% increase in revenues and the cost of the level of operating expenses generated operating profit higher by 68%, almost RON 1 million, which together with a positive impact on the financial results led to a net profit of RON 1.95 million. Regarding the revenues of segments, the trading revenues -- the trading segment represents 57% of group's revenue and recorded the high increase of 34% year-on-year. Post trading segment revenues are in amount of RON 11.5 million, up 23%, and are based on higher revenues from participants and local settlement revenues. Registry segment is in amount of RON 6.93 million and are up 32% due to higher revenues from issuers operations. Looking in detail on operating expenses of BVB, the increase of around RON 2 million is generated by personnel expenses due to an increasing average number of employees and the annual indexation of salaries according to the remuneration policy, together with the operating expenses, which are influenced by inflation increase mainly on [indiscernible] side. At consolidated level, the operating expenses increase of 8% is generated also by personal expenses. Already mentioned, the higher number of employees and the annual salary indexation. But we also have the impact of one-off event related to the alignment to the group accounting policy of the [ Bursa de Valori ], with an impact of RON 0.3 million increase in personnel expenses. The increase is amplified by other operating expenses. Also, while third-party services expenses decreased result of lower consulting expenses in CCP. And regarding the financial position, there are no significant variations as of 30th of September. On BVB stand-alone, on the asset side, there is a slight increase in financial instruments and bank deposits, while in liabilities, there is a decrease in payables, generic payables of personal accrual -- accruals performed at the end. At group level, noncurrent assets, there is a slight increase generated by the issue of financial instruments, while on liabilities, there is some increase in trade payers following the accruals recorded to -- at the end of the third quarter, especially on the post-trading impact. So that's it for me. Virgil, you have something to add?

No, this time, so we don't have other elements to be added, so to say, so some extra interesting IFRS or other accounting things that could give you more clues on our financial statement of what will happen.

Adrian, do you have anything?

Yes. Probably for the Central Counterparty project [Technical Difficulty] you are starting as revenues recognition. We are starting the first stage of this in the system and discussing with the authorities. And yes, we have got a target to register the file, the official file by the end of this year. Hopefully, we'll manage this and to initiate the whole for operation customers. And this will create time line to [Technical Difficulty] -- to obtain the authorization to start the operation of CCP in the second half of next year. I know that, yes, we are presenting updates because there are a lot of developments happening in each quarter, and this is an unfortunately all those -- so all those -- all these events are creating delays rather than accelerating -- acceleration of the process. But I think we are constructive and technical stage. As I said, we want to initiate first testing the stage with the -- possible to the next -- possible event which will come and -- or have the profit income [indiscernible] members and we begin members with market operators. We'll have this first round of testing the system or the beginning of December.

So yes, if there are any questions from the participants.

I have just a couple of questions for you. The first one is, how do you see the market evolving next year? Are you expecting lower volumes, lower trading volumes? And are there any -- is there any space for fees to be flexed to compensate for these lower volumes and by how much? Second question would be regarding costs, if there are any cost-cutting measures that are being put into place to fight the inflationary pressures right now. And to finalize, how does that all reflect on your capacity to pay dividends in the future?

Yes. Maybe I can cover the volume question. So basically, for us, we feel that we are in an inflection moment in terms of development and size of the market. And this is all driven and this is all centered on the Hidroelectrica IPO because we have to speak about, let's say, RON 2 billion plus/minus some percentage points of -- yes, new units that will definitely drive the market higher on many levels. On 1 hand, we expect the number of retail investor to increase significantly because Hidroelectrica is extremely visible and well known and domestic champion. On the other hand, we expect also higher foreign participation, and what could be very, very beneficial on the foreign investor perspective. We might have decent chances to -- put at least on the watch list for MSCI Emerging Markets inclusion. Also, the -- I've alluded briefly in the presentation, we see that the current low volumes are also driven by this, let's say, position here at Hidroelectrica because large domestic investors are already starting to maybe to save money, or to accumulating or to increase their liquidity ahead of the IPO. But when the IPO is -- because of arriving, where we will be in process, reminds me a lot of portfolio adjustments and the changes in the portfolio of the large investors, perhaps. And we might have actually a very, very positive year liquidity wise. But again, it's all up to Hidroelectrica and now the best case scenario is -- I mean, the base case scenario is -- it will happen in the second quarter. So actually, we are quite positive in this respect. And this also explains probably the share price evolution. So our view is currently shared by the market. And on the cost side, I'm not sure, maybe...

On the cost side, yes, we are seeing and we are touching the subject, the costs are influenced and increased the general administration costs and also the current costs for running the system increased. Yes, we have some tools also limited regarding to cover. This inflation part of our revenues are adjusted with the -- yearly with inflation rates. So regarding the maintenance tax for our issuers and also regarding the sale of data dissemination. So generated by the stock exchange. But on the other hand, we have also pressures from the market on -- and we will have also in the future, especially on the personnel expenses here. As you know, the market and the situation in the personnel market, it's not so easy for the companies, for the employees -- employers, not employees. And probably this will have also an impact in the next year budget. But as Remus said, volatility -- the volatility that is expected from the Hidroelectrica listing could help us.

And maybe something that I haven't -- we haven't mentioned. Recently, we have [indiscernible] generation part that we did for the second half of December to approve the proposed change of headquarter, the management proposed. So prior to GSM, there will be also more and more information available regarding this change in headquarter.

Understood. And how does that reflect on your dividend paying capacity? Do you still...

Regarding the dividends, the same policy is in place. So we will be distributing 100% of our net profit on a stand-alone basis after the delivered reserves or the recent policies put in place.

So any other questions perhaps?

In this case, we thank you very much for your participation. And yes, speak to you in 3 months. And of course, any time you have any questions or you have some clarification from us. Thank you, and have a nice afternoon.

Thank you.

Thank you.

Have a good day. Thank you and bye-bye.