Total operating expenses of the Group amounted to PLN 148.5 million in 2012, an increase of 10.8% (PLN 14.5 million) compared to PLN 134.0 million in 2012. The increase compared to 2011 was driven mainly by the consolidation of expenses of the PolPX Group from March to December 2012.

Operating expenses of the PolPX Group and BondSpot S.A. amounted to PLN 22.4 million and PLN 8.4 million, respectively, in 2012.

Consolidated operating expenses of WSE Group and structure of operating expenses in 2011-2012 and in selected quarters of 2011 - 2012

  For the three-month period ended Year ended December 31,
PLN'000, % December 31, 2012 % September 30, 2012 % December 31, 2011 % 2012 % 2011 %
Depreciation and amortisation 4,203 11% 4,096 12% 3,889 11% 16,564 11% 15,620 12%
Salaries 13,304 33% 11,985 35% 10,380 29% 47,814 32% 39,387 29%
Other employee costs 3,018 8% 2,918 8% 4,840 14% 12,088 8% 12,454 9%
Rent and other maintenance fees 3,022 8% 2,129 6% 1,767 5% 9,905 7% 6,877 5%
Fees and charges 3,963 10% 4,816 14% 1,791 5% 19,452 13% 15,675 12%
including: PFSA fees 2,585 7% 4,469 13% 1,331 4% 16,823 11% 14,361 11%
External services 9,327 23% 6,664 19% 10,466 30% 33,718 23% 36,235 27%
Other operating expenses 2,881 7% 1,830 5% 2,066 6% 8,950 6% 7,718 6%
Total 39,717 100% 34,438 100% 35,198 100% 148,490 100% 133,966 100%
Source: Consolidated Financial Statements, Company

The Company is not dependent on any single supplier or service provider as the expenses of the Company per contractor (other than fees to KNF) never exceed 10% of the Company’s total expenses.

Depreciation and amortization

Depreciation and amortization was PLN 16.6 million in 2012, an increase of 6.0% (PLN 0.9 million) compared to PLN 15.6 million in 2011. The increase in depreciation and amortization in 2012 compared to 2011 was driven mainly by the consolidation of the PolPX Group.

Depreciation and amortization was PLN 4.2 million in Q4 2012 compared to PLN 4.1 million in Q3 2012 and PLN 3.9 million in Q4 2011.

Salaries and other employee costs

 Salaries and other employee costs of the Group amounted to PLN 59.9 million in 2012, an increase of 15.5% compared to PLN 51.8 million 2011. The increase in salaries and other employees costs in 2012 compared to 2011 was driven mainly by the consolidation of costs of the PolPX Group, which contributed PLN 13.0 million of salaries and other employee costs in 2012.

Quarterly salaries and other employee costs increased by 9,5% (PLN 1.4 million) in Q4 2012 compared to Q3 2012. The increase from PLN 14.9 million in Q3 2012 to PLN 16.3 million in Q4 2012 was mainly driven by an increase in costs of the PolPX Group by PLN 2.0 million due to annual bonus costs recognized in December 2012.

A one-off increase in the employee cost of settlement of medical packages for WSE employees amounted to PLN 2.8 million in Q4 2012. According to the prevailing practice followed by companies, including WSE, previously applied and confirmed by a decision of the Regional Administrative Court in Warsaw of April 27, 2009, medical benefits of WSE employees were not employees’ taxable income. However, a decision of the Supreme Administrative Court of December 21, 2011 provides that medical benefits of WSE employees should be subject to personal income tax as they are “free-of-charge benefits” for employees.

The lower costs in respect of the settlement of medical packages in 2012 compared to the estimate of PLN 3.3 million published in Q3 2012 was mainly due to the postponed settlement of the cost of medical services for former WSE employees for 2013 (it was assumed that the final settlement will be fulfilled till the end 2012 in Q3 2012 report)

Salaries and other employee costs increased by 7,2% in Q4 2012 compared to Q4 2011 mainly as a result of the consolidation of costs of the PolPX Group as well as lower costs of provisions set up against annual bonuses for WSE employees, lower costs of additional actuarial provisions against WSE’s future liabilities to employees, higher costs of the settlement of medical services for WSE employees and effect of the capitalization of the costs related to UTP project.

Employment in WSE Group
  As at
  December 31,2012
September 30,2012
December 31,2011
# FTEs
     
WSE
209 207 209
Subsidiaries
115 122 45
Total
324 329 255
Source: Company

Rent and other maintenance fees

Rent and other maintenance fees of the Group amounted to PLN 9.9 million in 2012, an increase of 44.0% compared to 2011. The significant increase in costs in 2012 was driven mainly by the consolidation of costs of the PolPX Group (PLN 1.4 million) as well as business expansion of WSE and the lease of additional space for the IT infrastructure.

Quarterly rent and other maintenance fees amounted to PLN 3.0 million in Q4 2012, an increase of PLN 0.9 million compared to Q3 2012. The increase in Q4 2012 was mainly driven by the settlement of the cost of the project of leasing additional space for the IT infrastructure.

Fees and charges

Fees and charges stood at PLN 19.5 million in 2012, an increase of 24.1% compared to 2011. The main component of the Group’s fees and charges are fees paid by WSE to the Financial Supervision Authority (KNF), which stood at PLN 16.8 million in 2012 and PLN 14.4 million in 2011.

Quarterly fees and charges amounted to PLN 4.0 million in Q4 2012, a decrease of 17.7% compared to Q3 2012. The decrease in fees and charges was driven mainly by lower fees paid to KNF (down by PLN 1.9 million), and simultaneously WSE incurred costs of ca. PLN 0.6 million in Q4 2012 due to a VAT adjustment for 2011-2012.

Fees and charged amounted to PLN 1.8 million in Q4 2011. The lower fees and charges in the last quarter of the year are due to the procedure of payment of fees to KNF. The monthly advances paid by WSE in 2012 and 2011 were, respectively, PLN 1.6 million and PLN 3.4 million higher than the actual fee due from WSE to KNF. The surplus was deducted from the fees and charges in Q4 2012 and Q4 2011.

The KNF fees in the first and second quarter 2013 will be PLN 4.5 million quarterly calculated on the basis of advances which will be paid during first months of 2013.

External service charges

External service charges of the Group amounted to PLN 33.7 million in 2012, a decrease of 6.9% compared to 2011. The decrease of external service charges in 2012 was driven mainly by reduced promotion spending of WSE (down by PLN 3.6 million), lower costs of data transmission services (down by PLN 1.9 million), as well as lower costs of advisory and legal services (down by PLN 1.0 million). The PolPX Group contributed PLN 2.9 million of external service charges in 2012.

Quarterly external service charges increased by 40.0% (PLN 2.7 million) in Q4 2012 compared to Q3 2012, mainly due to higher promotion costs and costs of advisory. External service charges decreased by 10.9% compared to Q4 2011 among others due to higher costs of advisory and promotion costs incurred by WSE in 2011.

Other operating expenses

Other operating expenses of the Group amounted to PLN 9.0 million in 2012, an increase of 16.0% compared to PLN 7.7 million in 2011. The decrease in other operating expenses in 2012 compared to 2011 was driven mainly by the consolidation of other operating expenses of the PolPX Group, which contributed PLN 2.1 million to the costs of the Group.

Quarterly other operating expenses amounted to PLN 2.9 million in Q4 2012 compared to PLN 1.8 million in Q3 2012 and PLN 2.1 million in Q4 2011. The increase of PLN 1.1 million compared to Q3 2012 was driven mainly by higher costs of electricity and materials, business travel costs and costs of conferences and promotion.

Other operating expenses primarily included costs of materials and electricity, business travel, professional organization fees, property insurance and conferences.

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