Dear Sir or Madam
The year 2019 opened with many a challenge for participants of Poland’s capital market including the Warsaw Stock Exchange (GPW), aware as they were of the difficult market environment. The key objectives of GPW in the past year included the implementation of the leading strategic initiatives. The Exchange Supervisory Board, which I have the honour to chair, was focusing on active support and oversight of the efforts of the Management Board.
The milestones of 2019 included a review of the financial targets under the strategy #GPW2022 completed by the GPW Management Board in late March. According to the guidance, the GPW Group will generate revenue at PLN 470 million and EBITDA of PLN 250 million in 2022. The Exchange Supervisory Board issued a positive opinion regarding the payment of dividend from the 2018 profit at PLN 3.18 per share. The Management Board decided that the dividend from the profits of 2020-2022 should increase by no less than PLN 0.1 per share annually. The dividend payout ratio was confirmed above 60% of the consolidated net profit of the GPW Group for the financial year attributable to the shareholders of GPW adjusted for the share of profit of associates.
According to the numbers from the last three years (excluding dual-listed companies), although the number of issuers on the Main Market who pay dividends has decreased (184 in 2017, 176 in 2018, 153 in 2019), the total amount of dividends paid has risen (PLN 10,484.25 million, PLN 17,129.70 million, and 18,876.06 million, respectively). What drives the value of stock portfolios is not only the change in stock prices but also the benefits provided to shareholders, including in particular dividends. Over the past 15 years, WIG20 gained 10 percent and WIG20TR gained 100 percent (including dividend income). The ten-fold difference between these indices is owed to dividend payments. Dividends provide returns to investors, support strong shareholder relations, and underpin a culture of long-term investing, which is particularly relevant in the low rate environment. Dividends have generated returns over the years. I believe that dividend-paying issuers should be an asset of first choice for long-term investors.
GPW sets the example for other issuers as a stable, forward-looking company which regularly shares its earnings with the shareholders and follows a dividend policy which has been communicated to the shareholders and sets clear dividend targets in the horizon of the strategy #GPW2022. The most recent dividend paid was one of the highest ever in the Company’s history. The implementation cost of strategic initiatives should not be shouldered by GPW shareholders. The Company will continue to share its profits with the shareholders in accordance with the dividend policy. That profit-sharing approach seems to have been acknowledged by the shareholders, as demonstrated by GPW’s stock price, which gained 7.2% year on year; the Total Shareholder Return (TSR) was +15.9% and GPW’s capitalisation reached approximately PLN 1.6 billion at the year’s end. In line with its dividend policy, GPW expects to pay dividends exceeding the average dividend paid by global exchange operators (6.1-6.3% vs. average 3.2%).
From the perspective of shareholders, the company’s outlook is equally important. The GPW Management Board focuses on business diversification through strategic initiatives. One of the key goals is to turn the GPW Group into the region’s technology leader. That goal is materialising with the decision to develop a proprietary trading platform and the plans for GPW Tech, which will establish a stand-alone technology company specialising in IT solutions for the capital market. Trading venues in this day and age cannot expect to grow without technology. GPW not only wants to be a part of the technological revolution on the global capital markets; we want to set the trend and develop unique solutions which could be implemented in the countries of our region and beyond.
Technology is not only a key part of #GPW2022 but also a pillar of the government’s Capital Market Development Strategy. GPW took active part in consultations concerning the strategy, which is bound to provide tangible benefits for the entire capital market. GPW will actively participate in the implementation of the strategy, in particular by promoting corporate governance principles
In 2019, the Exchange Supervisory Board and the Audit Committee focused in large part on broadly understood safety measures, including the functioning of the Company’s internal control system. The Audit Committee is responsible for ensuring that the system operates as required. We share our recommendations and expectations regarding the system. Notwithstanding the many new initiatives, we never forget about GPW’s core business and make sure that it is fully professional in keeping with the highest standards.
The Exchange Supervisory Board remains active and looks beyond the minimum requirements set by law. The Exchange Supervisory Board held eight meetings in 2019. The Audit Committee held 12 meetings; the Regulation and Corporate Governance Committee held nine meetings; the Strategy Committee held seven meetings; the Remuneration and Nominations Committee held six meetings. The Exchange Supervisory Board issued many key decisions at meetings and additionally passed 30 resolutions by circular procedure in 2019.
We need to keep up to date with the current developments in the company, which is why we listen not only to the opinions of the Management Board but also those of all other managers. In 2019, we initiated a series of meetings with GPW managers to give the Exchange Supervisory Board a broader picture of the Company’s activities.
We are closely watching all of GPW’s initiatives, striving to mitigate inherent risks. It is our long-term objective to create value for shareholders through the Company’s growth, not least driven by new business segments.
Every few years, the global financial markets face a crisis. We are facing one right now. This time, the coronavirus pandemic has stirred panic, precipitating a sharp decline on the exchanges. History shows that the capital markets are usually capable of facing a crisis, including GPW, which is a robust institution with strong fundamentals. I am certain that we will come out of the crisis unscathed.
Last but not least, I wish to thank the GPW Management Board, Employees and the Members of the Exchange Supervisory Board for their committed efforts throughout the year. At the same time, I would like to wish the next Supervisory Board success in the next term. We all realise that we have had two difficult years and are now looking to pursue ambitious but realistic goals. I am positive that they will boost the development of the Warsaw Stock Exchange, which is what I wish the GPW Management Board, employees, and shareholders.
Yours sincerely,
Jakub Modrzejewski, Chairman of the Exchange Supervisory Board
