Preliminary financial results as of December 31, 2018

PRELIMINARY FINANCIAL REPORT AS OF DECEMBER 31, 2018

Until mid-December 2018, the Bucharest Stock Exchange (BVB) was one of the best performing markets in the region, but closed 2018 with a 4.77% drop in the BET index, the main index of the local capital market, which includes the most traded 15 companies. The strong downward trend was triggered on December 19, 2018, when information on additional charges on the banking, energy and telecommunications sectors and on the modification of Pillar II appeared, followed by the BET benchmark decrease by 11.21 %, the entire growth recorded until then in 2018 by the local capital market being vanished in one single day. Between the values existing before that date, namely December 18, and the last trading session in 2018, namely December 31, the main stock market index recorded a decrease by 12%.

At the end of last year, only the two total return indices, which include also the dividends, managed to maintain in positive territory. The BET-TR index, which also includes dividends distributed by the BET member companies, recorded the largest advance by 4.3%.

The equity daily average trading value rose last year by 5% in the RON equivalent and exceeded RON 45 mn (around EUR 10 mn) during the year 2018, when the total traded value with all types of financial instruments increased by 2%, exceeding RON 14 bn (about EUR 3 bn).

The stock market capitalization of Romanian companies was EUR 18 bn at the end of last year, while the capitalization of all listed companies on BVB regulated market was EUR 30 bn in the last trading session of 2018.

In December, the private placement offer for approx. 33.77% of ALRO shares took place. As a result of closing the offer, the value of the company's free-float almost doubled.

Representatives of the capital market, companies and individuals launched in November the Romanian Investor Relations Association (ARIR) with the aim of implementing in Romania the best communication practices with investors among the listed companies.

During 2018, the BVB Group recorded consolidated operating revenues of over RON 39.82 mn (12 months 2017: RON 38.06 mn), an increase of 5% compared to the same period of the previous year, growth generated by the advance of the trading, post-trading and registry segments, as well as the decrease recorded by the FCI Services and other services segment.

The revenues generated by BVB, representing the Group's trading segment, amounted to RON 23.93 mn (excluding intra-group transactions) in 2018, up by 3% compared with 2017 (12 months 2017: RON 23.35 mn), amid the increase in traded values.

Central Depositary (DC) activity in 2018 increased mainly due to the increase in revenues from the registry, as a result of the services rendered to issuers as well as to the holders of financial instruments, but also due to the growth of the portfolio managed by the custodians. In 2018 DC's operating revenues reached RON 15.37 mn (excluding intra-group transactions), which corresponds to an increase by 12% compared to 2017. Post-trading segment revenues increased by 4% compared with the previous year, up to the value of RON 10.11 mn (12 months 2017: RON 9.70 mn), amid the increase in the trading activity of BVB. Also, the revenues from the admission and maintenance of the participants to the clearing-settlement system of the custodians increased by 3%, from RON 6.47 mn to RON 6.67 mn, due to the increase of the value of portfolio managed.

Revenues from the registry activity rose significantly in 2018, up by 32% compared with the same period of the previous year, due to the increase in services rendered to issuers as well as to holders of financial instruments.

During the same period, the Group's consolidated operating expenses increased by 7% from RON 28.82 mn to RON 30.95 mn, generating a combined decrease by 4% of the preliminary operating profit to RON 8.87 mn (12 months 2017: RON 9.24 mn), which corresponds to an operating margin of 22%. The increase in operating expenses was mostly determined by the increase of the expenses rendered by third parties by 45%, respectively RON 1.30 mn. Following the General Shareholders Meeting’s decision of April 16, 2018, to initiate the set-up of the Central Counterparty (CCP Project), the BVB has contracted and incurred consultancy and assistance expenses for the establishment of a new subsidiary to be authorized as Central Counterparty, one-off expenses, in amount of RON 0.98 mn.

BVB intends to reinvoice these expenses to the new subsidiary during the year 2019, the establishment of which was approved by the BVB General Shareholders Meeting on January 29, 2019, based on the CCP's Business Plan submitted by the BVB management, and implicitly record an income equal to the expense of RON 0.98 mn.

Excluding the impact of this one-off expense, the Group's consolidated operating expenses increased by 4% from RON 28.82 mn to RON 29.97 mn, the preliminary operating profit recording an increase by 7%, respectively up to RON 9.85 mn (12 months 2017: RON 9.24 mn), which corresponds to an operating margin of 25%.

Expenditures with the services rendered by third parties have also increased due to the implementation of legal requirements (The Central Securities Depositories Regulation - CSDR, GDPR, etc.) and the outsourcing of some services.

Personnel expenses increased by 3%, amid the update of the BVB Group's remuneration policies, estimated expenditures with benefits granted in shares to Board members, management and employees, but also due to the fact that in 2017 the BVB capitalized RON 0.4 mn as "in-house" intangible assets, thus reducing the expenditure recorded in the previous year.

The category of Other Operating Expenses advanced 3% in 2018 compared to the previous year mainly due to the increase in depreciation expense of intangible and tangible fixed assets due to technology investments in recent years and adjustments for losses on non-current receivables.

The net financial income of RON 3.61 mn in 2018 were mainly represented by the interests generated from the government bonds and bank deposits, in RON and foreign currency, marking a significant advance against the same period of the last year (12 M 2017: RON 2.50 mn), being also influenced by the unrealized exchange rate differences related to the foreign currency financial investments, which generated a gain of RON 0.68 mn compared to the same period of 2017 when it was registered a loss of RON 1.15 mn.

The preliminary consolidated net profit for the year 2018 reached the level of RON 10.20 mn (12 M 2017: RON 14.69 mn), a decrease by 31% compared to the previous year, 81% generated by the Group's trading segment. The preliminary profit attributable to the shareholders of the parent company was RON 9.74 mn (12 M 2017: RON 14.20 mn).

Without considering the impact of BVB-SIBEX merger in 2017 and the effect of the CPP project in 2018, the consolidated net profit of the Group in 2018, of RON 11.18 mn, increased by 8% compared to the value of RON 10.34 mn in 2017 (adjusted to eliminate the merger impact).

Financial and operating highlights

Consolidated financial performance – BVB Group (RON mn, unless otherwise stated)

Profitability ratios - BVB Group (%)

Individual financial performance – BVB only, (RON mn, unless otherwise stated), including intra-group transactions

Operating highlights, trading segment (RON mn, all markets)

*Value for the Regulated market

Operating indicators, post-trading and registry segments

Share statistics for BVB as parent company (RON, unless otherwise stated)

The Preliminary Financial Report as of December 31, 2018 is available for shareholders, investors and general public both in printed version, at BVB’s headquarters, located in Bucharest, 34-36 Carol I Blvd, 14th floor, district 2, and online version, on official website www.bvb.ro, in the “Investor relations/Financial figures/Financial statements” section, at http://www.bvb.ro/InvestorRelations/FinancialFigures/FinancialReports.

The conference call for presenting the preliminary financial results as of December 31, 2018 takes place on February 14, 2019, 16:00 local time. In order to participate at the conference call, please e-mail us at ir@bvb.ro for registration.