Hellenic Exchanges Athens Stock Exchange SA

ATHEX:EXAE

Earnings Call Transcript 2022-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Popi, your Chorus Call operator. Welcome, and thank you for joining the Athens Exchange Group conference call to present and discuss the second quarter 2022 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Nick Koskoletos, CFO; and Mr. Stelios Konstantinou, Head of Investor Relations. Gentlemen, you may now proceed.

[Stelios Konstantinou, executive]

Good afternoon, ladies and gentlemen, and good morning to those of you listening to us from the other side of the Atlantic. I would like to present the financial results of the group for the first half of 2022, which were published yesterday and are available in the IR section of our website, and then take any questions that you might have. Nick?

[Nikos Koskoletos, executive]

Yes. Thank you, Stelios. And good afternoon and good morning to all. I just wanted to note a couple of drivers that have impacted our first half performance. Obviously on the one hand, we had the average daily traded value that increased by 12% to EUR 91 million in the first half of 2022 versus EUR 81.3 million the same period last year. We also had the average market cap that stood 12.5% higher than the respective period in 2021. And if we would break that down, we see that the listed banks market capital increased by almost 50%. The market cap of the rest of the market increased by 7%.

So in terms of how things are shaping up in 2022, obviously, market volumes seem to be holding up for the most part, again, with regards to the first and the second quarter. However, in Q3, we've hit that seasonally low period, and it's standing at lower levels. Operating expenses have been picking up and, as we've been through management changes and some other restructurings and there's wage inflation pressure as well, that will be more evident in the second half as there were adjustments to wages made in June.

Our utility bills as it pertains to electricity costs are also significantly higher. However, the impact on the group is limited overall as electricity represents circa 5% of OpEx. Nevertheless, every little bit is something that we are monitoring. And overall, on a reported basis, our bottom line for the first half of 2022 stood at EUR 5.4 million, as we've said in our press release and our financials, versus 5.1% last year. While on an adjusted basis, and this would be adjusting for the tax loss that we recognized last year from the sale of Piraeus shares and the one-off gain that we had this year from the judicial outcome, the increase to our bottom line stands at 10.6%.

At this point, I'd like to pass it on to Stelios to go through our first half 2022 performance in more detail. Stelios?

[Stelios Konstantinou, executive]

Yes. Thanks, Nick. So let's start with the overview of our first half 2022 financial performance from the top. The consolidated turnover of the group in the first half of this year was EUR 19.6 million compared to EUR 18.4 million in the first half of last year, up 6.4%. And if we dive a little deeper, we see that trading-based revenue, i.e., from trading and post-trading, was up 8.7% on the back of a 12% increase in ADTV in the cash market in the first half of this year compared to last year.

Market cap-based revenue, i.e., from listings and services to issuers, was up 12%, mainly due to a 12.5% increase in the average capitalization of the market. Even more corporate action activity, i.e., you guys issuing new share and bond listings were significantly lower in the first half of this year compared to the same period last year. And revenue from Services i.e., data services, IT, digital and ancillary services, was down 5%.

If we look at the revenue lines in more detail, as reported in the P&L statement, we see that revenue from trading represents 18% of total consolidated turnover. And in the first half of 2022, it was up 8.5% to EUR 3.5 million compared to EUR 3.2 million. Revenue from post trading made up 41% of total turnover and amounted to EUR 8 million compared to EUR 7.3 million in the first half of last year, up 9%. And this increase is due to the 12% increase in tiering revenue in the cash market, while derivatives market revenue was down 8%.

Now as far as revenue from the derivatives market, both trading and post-trading is concerned in the first half of this year, trading activity, i.e., average daily number of contracts, dropped by 43% to 39,800 contracts compared to 69,700 last year. Revenue, in turn, was only down 8% and the average revenue per contract increased by 60%, as you can imagine, to EUR 0.218 per contract compared to EUR 0.137 per contract last year. Our fees for derivatives contracts depend on the type of investor, the product being traded and the prices of the underlying securities. And as a result, market volumes and our revenue rarely go hand-in-hand.

Lastly, on derivatives, trading and post-trading revenue in the first half of this year was EUR 1 million compared to EUR 1.1 million last year, corresponding to 9% of total trading and post-trading revenue.

Moving on now on the P&L. Revenue from listing makes up 12% of total turnover and this line includes the quarterly subscription fees paid by listed companies, fees on rights issues, IPOs and other services to issuers, and amounted to EUR 2.4 million, up 29% compared to the first half of last year.

Revenue from Data Services makes up 9% of total turnover and includes the fees that we collect in data vendors for the provision of assets market data as well as revenue from InBroker. The fees that we collect from market data depend essentially on the number of data terminals to which these data vendors disseminate Athex market data, too, and that increased by 9%.

And as you know, as we mentioned before, we have been gradually increasing our data feed prices. Revenue from IT and digital services makes up 17% of total turnover and includes revenue from digital services, infrastructure and technological solutions to the Energy Exchange Group and Boursa Kuwait. This category also includes revenue from services such as electronic book building, AXIAline, AXIA e-Shareholders Meeting, colocation and some others. Revenue from IT and digital services was down 9% as last year's figures include a one-off item that is associated with the systems delivery.

Finally, revenue from ancillary services makes up 30% total turnover. And in the first half of this year, it was down 15% to EUR 550,000 compared to EUR 649,000 in the first half of last year. Ancillary services include revenue from support services to the Energy Exchange, rents and some others.

Moving now to the expense side. Total operating expenses increased by 5.1% in the first half of this year at EUR 10.8 million compared to EUR 10.2 million last year. If we break down OpEx, we see that personnel costs were up 3.1% in the first half of this year at EUR 5.62 million compared to EUR 5.49 million last year, while all other OpEx increased by about EUR 350,000, i.e., by about 7%, with the highlights being 11% decrease in third-party remuneration and expenses, a 29% increase in utilities due to the persisting high electricity prices in the first half of this year compared to the same period last year, resulting in a EUR 584,000 electricity bill compared to EUR 364,000 bill in the first half of 2021.

And lastly, we had a 32% increase in taxes, which is, in large part, due to property tax, NFIA being assessed in the first half of 2022 this year compared to the second half of 2021. Personnel and remuneration expenses account for 52% of total OpEx. And headcount of the group at the end of June 2022 was 225 compared to 233 million at the end of the second quarter of last year.

Turning then to the bottom line. The earnings before interest and taxes of the group increased by 50.4% to EUR 5.37 million compared to EUR 5.06 million in the first half of last year. In the first half of this year, we booked EUR 625,000 in revenue from tax returns resulting from a favorable core judgment concerning the return of facing penalties that were assessed following a tax audit for fiscal years 2008, 2009 and 2010. We have appealed to have a further the last part of 270,000 returns, and we'll see what the court judgment is pertaining to that. Thus, the net after-tax earnings of the group came in at EUR 5.4 million compared to EUR 5.1 million in the first half of last year, a 6% increase.

For both 2022 and 2021, the nominal corporate income tax rate is 22%, while the effective tax rate on consolidated earnings in the first half of this year was 21.8% compared to 9.5% in the first half of last year. On the balance sheet, the cash and cash equivalents of the group at the end of June 2022 dropped to EUR 64.8 million compared to EUR 71.9 million at the end of 2021. Approximately 18% of the cash, i.e. EUR 11.7 million at the end of the first half of 2022, is kept at the Central Bank, the Bank of Greece, where interest rates are negative, were actually negative up until a few days ago, currently at minus 0.5%.

Also on the balance sheet, a further EUR 242.1 million that we report as both an asset and a liability are, in fact, third-party cash assets concern, margins at our subsidiary AthexClear received from its members in the cash and derivatives markets. And these funds are also deposited at the Bank of Greece.

And with these comments, this concludes our remarks for the first half of 2022 financial results of the group. Before we open the call to any questions that you might have, we would like to remind you that since we've changed the reporting on our P&L starting with the fiscal year 2021 results, we have made available on our website yearly and quarterly P&L data from 2017 and to 2021 in the new format. And it's there for you to download, and it can certainly help you if you need to find that client.

So thank you for listening in. I'm happy to take any questions that you might have.

[Operator]

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

[Stelios Konstantinou, executive]

So thank you all for taking the time to listening in. We wish you a great summer, and we'll speak again at the end of November for our 9-month results. Thank you all, and have a great afternoon or morning if you're from the U.S.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.