Wrap Text
Interim results for the six months period ended 30 June 2016
GLOBE TRADE CENTRE SA
(Incorporated and registered in Poland with KRS No. 61500)
(Share code on the WSE: GTC)
(Share code on the JSE: GTC ISIN: PLGTC0000037)
("GTC" or "the Company")
INTERIM RESULTS
FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016
HIGHLIGHTS
TOTAL
NOI PROFIT BEFORE TAX FFO EPRA NAV PROPERTY
EUR41M EUR46M EUR22M EUR828M 1,455
+5% +310% +14% +6% +10%
H1 2016 HIGHLIGHTS
- NOI increased by 5% to EUR41m (EUR39m in H1 2015)
- Rental margin improved to 76% (75% in H1 2015)
- Revaluation gain of EUR24m in (loss of EUR2m in H12015) driven by projects under construction
- Profit before tax at EUR46m (EUR11m in H1 2015)
- Investments in assets under construction of EUR49m (EUR12m in H1 2015)
- Net LTV of 43% (39% as of 31 December 2015) driven by an increase in construction loans
and deployment of cash
- Interest cover at 3.4x as of 30 June 2016 (3.0x as of 31 December 2015)
- 14% FFO improvement to EUR22m (EUR19m in H1 2015)
PORTFOLIO UPDATE
- Income generating portfolio increased by 9% to EUR1,146m (EUR1,052m as of 31 December 2015)
- Total acquisition volume of EUR95m in 4 income generating properties and a land plot
- Post balance sheet acquisitions of EUR57m in two income generating properties
- Disposal of non-core assets includes land plots, shares in joint-ventures and standing properties
- 105,000 sq. m NLA under construction in four projects:
- 57,200 sq. m of office and retail space newly leased and renewed
- Occupancy kept at 91% level
- Total property at EUR1,455m as of 30 June 2016 (EUR1,324m as at 31 December 2015)
- EPRA NAV increased by 6% to EUR828m (EUR779m as of 31 December 2015)
corresponding to an EPRA NAV per share of EUR1.80 (EUR1.69 as of 31 December 2015)
OPERATING PERFORMANCE
H1 2015 Reported Variance %
NOI EUR41m +5%
Rental margin 76% +100bps
EBITDA EUR35m +3%
Profit before tax EUR46m +310%
FFO EUR22m +14%
Total property EUR1,455m +10%
Net debt EUR630m +21%
Net LTV 43% +390bps
EPRA NAV EUR828m +6%
CORPORATE OVERVIEW
NATURE OF BUSINESS
The GTC Group is a leading developer and commercial real estate manager in CEE and SEE, operating in Poland,
Romania, Hungary, Croatia, Serbia and Bulgaria. Additionally, it holds land in Ukraine and Russia and operates
in the Czech Republic through its associates and joint ventures. The Group was established in 1994 and has been
present in the real estate market since then.
The Group's portfolio comprises: (i) completed commercial properties; (ii) commercial properties under
construction; (iii) a commercial landbank intended for future development or for sale and (iv) residential projects
and landbank.
Since its establishment and as at 30 June 2016 the Group: (i) has developed approximately 970 thousand sq. m
of commercial space and approximately 300 thousand sq. m of residential space; (ii) has sold approximately 430
thousand sq. m of commercial space in completed commercial properties and approximately 299 thousand sq. m
of residential space; and (iii) has acquired approximately 61 thousand sq. m of commercial space in completed
commercial properties.
As of 30 June 2016, the Group`s property portfolio comprised the following properties:
- 28 completed commercial properties, including 24 office properties and 4 retail properties with a combined
commercial space of approximately 556 thousand sq. m, of which the Group's proportional interest
amounts to approximately 533 thousand sq. m of NRA;
- 3 commercial projects under construction, including 2 office projects and 1 retail project with total NRA of
approximately 105 thousand sq. m, of which the Group's proportional interest amounts to 105 thousand
sq. m of NRA;
- commercial landbank designated for future development, with approximately 893 thousand sq. m NRA;
- 1 residential project under construction with 4 thousand sq. m area designated for residential use;
- residential projects and landbank designated for residential use approximately 335 thousand sq. m area
designated for residential use; and
- 3 assets held for sale, 2 retail projects (Galleria Arad and Galleria Piatra Neamt in Romania) and land
plot in Poland.
As of 30 June 2016, the book value of the Group's portfolio amounts to EUR1.454.413 with: (i) the Group's completed
commercial properties accounting for 79% thereof; (ii) commercial properties under construction – 10%; (iii) a
commercial landbank intended for future development or for sale - 8%; (iv) residential projects and landbank
accounting for 2% and (v) assets held for sale accounting for 1%. Based on the Group's assessment
approximately 95% of the portfolio is core and remaining 5% is non-core assets, including assets held for sale
and residential projects.
As of 30 June 2016, the Group's completed properties in its three most significant markets, i.e. Poland, Hungary
and Romania, constitute 41%, 18% and 16% of the total book value of all completed properties.
Additionally, the Group conducts operations in the Czech Republic, through its associates. The Group's
proportional interest in assets in Czech Republic amounts to approximately 4,000 sq. m of NRA in one office
building. The Group also holds a land plot located in Russia, and a land plot designated for Ana Tower located in
Romania.
Additionally, the Group manages third party assets, including: one office building in Budapest and three office
buildings in Warsaw and one office building in Katowice.
The Company's shares are listed on the WSE and included in the WIG30 index and on the JSE. The Company's
shares are also included in the Dow Jones STOXX Eastern Europe 300.
The Group's headquarters are located in Warsaw, at 17 Stycznia 45A Street.
STRATEGY
GTC's objective is to create value from active management of a growing commercial real estate portfolio in CEE
and SEE, supplemented by selected development activities; and enhancing deal flow, mitigating risks and
optimising performance through its regional platform, by investing its own funds, the proceeds from share capital
increases and reinvesting potential proceeds from the sale of real properties.
GTC will re-invest profit after tax in order to support the long-term growth of the business. The Group may
recommend a change in its dividend policy upon completion of certain material development projects.
COMMENTARY
The management board presents the unaudited condensed consolidated interim results for the six months ended
30 June 2016.
OPERATIONAL REVIEW
The first half of 2016 focused on the implementation of the company's growth strategy and the execution of its
mission focused on investing in value accretive assets in order to profit from active management of a growing
commercial real estate portfolio in the CEE and SEE regions. Due to numerous acquisitions and sales of shares
combined with successful sales of facilities, GTC has been able to continue its growth strategy and proceed with
the company's further development plans.
In the second half of 2016 GTC will remain focused on the development of its key commercial projects. In line
with the company's strategy, GTC also plans to further expand the core portfolio through selected opportunistic
acquisitions of value-accretive properties in its core markets.
Growth of the income generating portfolio through accelerated acquisitions and completions
In the first half of 2016 GTC increased its income by expanding the company's portfolio by 9% to EUR1,146m through
the investment of EUR95 million in value accretive office properties. The latest acquisitions have successfully
strengthened GTC's position in the CEE and SEE regions. The company acquired a modern A-class office
building, Pixel, an iconic and unique office building located in Poznan, and two modern A-class office buildings in
Bucharest – Premium Plaza and Premium Point.
In July GTC has acquired two A-class office buildings featuring modern design and a total of 30,000 sq. m of GLA
office space and 364 parking places. The Gdansk-based Neptun Office Center, is a high-rise office building,
offering 16,100 sq. m of leasable space. A second newly-acquired building is Sterlinga Business Center located
in the center of Lodz. It offers 13,900 sq. m of leasable office. The weighted average lease term of 3-5 years
combined with approximately 5,000 sq. m of leasable space available in both buildings, secure recurring income
and an upside potential in cash flow and property value.
Growth of the property portfolio through accelerated development
GTC's most important milestones include the completion of University Business Park B, a modern A-class office
building. In H1 2016 GTC also worked hard on developing investments, which are either under construction or in
an initial phase. The construction process of Galeria Polnocna moves at a fast pace with an official opening
scheduled for the summer of 2017. Moreover, the shopping mall has already finalized 70% of its leasing, taking
into account all signed agreements and letters of intent.
Construction works are being simultaneously conducted at the second and third phase of FortyOne in Belgrade
as well as the last stage of prestigious Osiedle Konstancja residential project in Warsaw. Furthermore, the
company has started preparations for the construction of White House in Budapest, as well as the design process
of V-RK Tower in Budapest. The design concept for Ada Mall in Belgarde has also been completed.
57,200 sq. m of office and retail space newly leased and renewed to keep occupancy at 91%
In H1 2016, GTC intensively worked on developing its portfolio in order to further improve the overall occupancy
currently exceeding 90%. During the first six months of 2016 the company leased 57,200 sq. m of office and retail
space, which was either newly leased or renewed, including 13,000 sq. m of the prolonged Romtelecom lease in
City Gate.
Disposal of non-core assets
GTC sold part of the Konstancja commercial land in Poland in the H1 2016 and Gallerie Piatra Neamt, located in
Romania in August 2016. In addition, the Company sold shares in Galleria Harfa, Harfa Office and Prague Marina
in July 2016.
Listing on Johannesburg stock exchange
On 18 August 2016, GTC became the first Polish inward listed company when it listed on the main board of the
Johannesburg Stock Exchange ("JSE"). The company successfully listed in the "Real Estate Holding and
Development" sector. GTC's primary listing will remain on the main market of the Warsaw Stock Exchange.
FINANCIAL REVIEW
Total revenues were EUR59m in H1 2016 compared to EUR60m in H1 2015. Rental and service revenues increased
by EUR2m to EUR55m due to the acquisition of Duna Tower, Pixel, Premium Plaza and Premium Point, partially offset
by the sale of Kazimierz Office Centre, Galleria Buzau, Jarosova and Avenue Mall Osijek in 2015. The increase
in rental revenues was offset by a decrease in residential revenues as we completed the sale of ready-made
apartments. Rental margin was 76% in H1 2016 compared to 75% in H1 2015.
NOI was EUR41m in H1 2016 compared to EUR39m in H1 2015 mostly due to the newly acquired properties combined
with the disposal of non-core assets with negative NOI.
Administrative expenses, excluding provision for the stock based program, decreased to EUR5m in H1 2016. Mark-
to-market of the phantom shares program resulted in recognition of income of EUR0.1m in H1 2016 compared to a
recognized cost of EUR0.1m in H1 2015.
Net profit from revaluation of investment properties and impairment of residential projects amounted to
EUR24m in H1 2016 as compared to a loss of EUR2m in H1 2015. This reflects mainly progress in the construction of
Galeria Polnocna, University Business Park B and Fortyone II as well as profit from the revaluation of Galeria
Jurajska and Galleria Burgas following an improvement in their operating results.
Net financial expenses decreased sharply to EUR13m in H1 2016 from EUR16m in H1 2015 mainly due to refinancing
and deleveraging activity, loan restructuring and the repayment of loans related to disposed assets. The decrease
was also supported by a change in hedging strategy allowing us to benefit from a low EURIBOR environment and
therefore resulted in a decrease in average borrowing cost to 3.2% in H1 2016 from 3.4% H1 2015.
Profit before tax was at EUR46m in H1 2016 compared to EUR11m in H1 2015 mostly due to the recognition of profit
from the revaluation of the investment properties and impairment of residential projects of EUR24m combined with a
significant decrease in net financial expenses.
Tax provision was EUR11m in H1 2016 comprising EUR2m of current tax expenses and EUR9m of deferred tax expenses.
Net profit totalled EUR35m in H1 2016 compared to EUR6m in H1 2015.
FFO increased to EUR22m in H1 2016 from EUR19m in H1 2015 mostly due to a significant decrease in interest and
hedging expenses.
The value of the properties was up to EUR1,455m as of 30 June 2016 compared to EUR1,324m as of 31 December
2015 mainly as a result of an investment in acquisition of Pixel (an office building in Poznan), Premium Plaza and
Premium Point (office buildings in Bucharest), a landplot in Budapest as well as an investment into assets under
construction mainly in Galeria Polnocna shopping centre in Warsaw, University Business Park B in Lodz and
Fortyone office building in Belgrade and the revaluation gain attributed to these projects.
Total bank debt and financial liabilities increased to EUR799m as of 30 June 2015 from EUR717m as of 31 December
2015. The weighted average debt maturity was 3.4 years and the average cost of debt is down to 3.2% p.a.
Cash and cash equivalents decreased to EUR74m as of 30 June 2016 from EUR169m as of 31 December 2015,
mainly as a result of the investment activities mentioned above.
The loan to value ratio was at 43% on 30 June 2016 compared to 39% on 31 December 2015.
EPRA NAV was up to EUR828m in H1 2016 from EUR779m in 2015, corresponding to an EPRA NAV per share of
EUR1.80
Interest coverage was at 3.4x on 30 June 2015 compared to 3.0x on 31 December 2015.
Basis of preparation
The Interim Condensed Consolidated Financial Statements for the three months ended 31 March 2016 have been
prepared in accordance with IAS 34 Interim Financial Reporting. These interim condensed consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards ("IFRS" ) as
adopted by the EU ("EU IFRS"). At the date of authorisation of these Interim Condensed Consolidated Financial
Statements, taking into account the EU's ongoing process of IFRS endorsement and the nature of the Group's
activities, there is a difference between International Financial Reporting Standards and International Financial
Reporting Standards endorsed by the European Union. The Group applied the possibility existing for the
companies applying International Financial Reporting Standards endorsed by the EU, to apply IFRIC 21 for
reporting periods beginning on or after 1 January 2015 and to apply amendments to IFRS 2 and amendments to
IFRS 3, being part of Improvements to IFRSs resulting from the review of IFRS 2010-2012, for reporting periods
beginning on or after 1 January 2016.
The Interim Condensed Consolidated Financial Statements do not include all the information and disclosures
required in the annual financial statements, and should be read in conjunction with the Group's consolidated
financial statements and the notes thereto for the Year ended 31 December 2015. The interim financial results
are not necessarily indicative of the full year results.
Annex 1 Consolidated Statement of Financial Position as at 30 June 2016
30 June 2016 31 December 2015
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 1,415,475 1,288,529
Residential landbank 24,284 26,773
Investment in associates and joint ventures 17,772 23,067
Property, plant and equipment 3,768 1,070
Deferred tax asset 1,072 647
Other non-current assets 176 386
1,462,547 1,340,472
Assets held for sale 11,709 5,950
Current assets
Residential inventory 3,235 3,161
Accounts receivables 5,577 5,505
Accrued income 278 1,655
VAT and other tax receivable 7,463 4,985
Income tax receivable 372 316
Prepayments and deferred expenses 2,860 1,323
Escrow accounts for purchase of assets 70,107 -
Short-term deposits 24,998 26,711
Cash and cash equivalents 73,892 169,472
188,782 213,128
TOTAL ASSETS 1,663,038 1,559,550
30 June 2016 31 December 2015
(unaudited) (audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital 10,410 10,410
Share premium 499,288 499,288
Capital reserve (20,624) (20,646)
Hedge reserve (5,312) (4,563)
Foreign currency translation reserve 1,138 1,405
Accumulated profit 191,911 156,647
676,811 642,541
Non-controlling interest (15,204) (21,339)
Total Equity 661,607 621,202
Non-current liabilities
Long-term portion of long-term loans and bonds 698,734 658,744
Deposits from tenants 6,950 6,242
Long term payable 2,631 4,621
Provision for share based payment 1,034 1,152
Derivatives 3,741 2,755
Provision for deferred tax liability 143,079 133,455
856,169 806,969
Current liabilities
Trade and other payables and provisions 22,066 28,774
Payables related to purchase of non-controlling interest - 18,108
Current portion of long-term loans and bonds 115,333 80,368
VAT and other taxes payable 1,097 1,572
Income tax payable 300 363
Derivatives 2,536 2,194
Advances received from buyers 3,930 -
145,262 131,379
TOTAL EQUITY AND LIABILITIES 1,663,038 1,559,550
Annex 2 Consolidated Income Statement for 3 and 6-month periods ended 30 June 2016
Six-month period Six-month period Three-month Three-month
ended 30 June ended 30 June period ended 30 period ended 30
2016 2015 June 2016 June 2015
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues from rental activity 55,050 52,816 27,940 26,209
Residential revenue 3,776 7,215 76 4,226
Cost of rental activity (13,273) (13,078) (6,742) (6,086)
Residential costs (2,953) (6,799) (75) (4,205)
Gross margin from operations 42,600 40,154 21,199 20,144
Selling expenses (1,397) (1,230) (770) (706)
Administration expenses (4,997) (4,939) (2,303) (2,529)
Profit (Loss) from revaluation/
impairment of assets 24,067 (446) 16,631 (64)
Impairment of residential projects - (1,380) - (1,380)
Other income 769 1,400 353 138
Other expenses (1,588) (1,128) (767) (288)
Profit (loss) from continuing
operations before tax and finance 59,454 32,431 34,343 15,315
income/(expense)
Foreign exchange differences gain/
(loss), net 3,136 (1,634) 2,843 1,819
Finance income 1,161 1,917 591 940
Finance cost (13,887) (17,892) (7,036) (8,656)
Share of profit (loss) of associates and
joint ventures (3,803) (3,581) (3,320) (1,975)
Profit before tax 46,061 11,241 27,421 7,443
Taxation (10,854) (5,177) (8,553) (9,246)
Profit (loss) for the period 35,207 6,064 18,868 (1,803)
Attributable to:
Equity holders of the Company 35,264 6,385 18,824 (1,868)
Non-controlling interest (57) (321) 44 65
Basic/headline earnings per share 0.08 0.02 0.04 (0.01)
(in Euro)
Annex 3 Consolidated Statement of Cash Flow for the 6-month periods ended 30 June 2016
Six-month period Six-month period
ended ended
30 June 2016 30 June 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 46,061 11,241
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (24,067) 1,826
Share of loss (profit) of associates and joint ventures 3,803 3,581
Profit on disposal of assets (9) (1,039)
Foreign exchange differences loss/(gain), net (3,136) 1,634
Finance income (1,161) (1,917)
Finance cost 13,887 17,892
Share based payment (income)/expenses (118) 105
Depreciation and amortization 216 252
Operating cash before working capital changes 35,476 33,575
Increase in accounts receivables, prepayments and other current assets (114) (2,595)
Decrease in inventory and residential land bank 2,424 6,135
Increase/(decrease) in advances received - (208)
Increase in deposits from tenants 942 -
Increase/(decrease) in trade and other payables (879) (304)
Cash generated from operations 37,849 36,603
Tax paid in the period (1,437) (1,442)
Net cash flows from operating activities 36,412 35,161
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (49,432) (11,683)
Purchase of completed assets and land (76,387) -
Increase in Escrow accounts for purchase of assets (70,107) -
Sale of investment property 2,729 51,279
Advances received for sale of subsidiaries/assets 3,930 -
Liquidation of joint venture - 3,890
Purchase of minority (18,121) (800)
Sale of shares in associate 2,009 -
VAT/tax on purchase/sale of investment property - 5,001
Interest received 275 419
Loans granted (123) -
Loans repayments - 23
Net cash flows from/(used in) investing activities (205,227) 48,129
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 129,190 17,658
Repayment of long-term borrowings (43,507) (88,599)
Repayment of hedge - (1,489)
Interest paid (12,386) (14,335)
Loans origination cost (317) -
Decrease/(increase) in blocked deposits 1,611 2,936
Net cash from/(used in) financing activities 74,591 (83,829)
Effect of foreign currency translation (1,356) 665
Net increase/(decrease) in cash and cash equivalents (95,580) 126
Cash and cash equivalents at the beginning of the period 169,472 81,063
Cash classified as part of assets held for sale - (377)
Cash and cash equivalents at the end of the period 73,892 80,812
Management Board Supervisory Board
Thomas Kurzmann (Chief Executive Officer) Alexander Hesse (Chairman)
Erez Boniel (Chief Financial Officer) Philippe Couturier
Jan Düdden
Mariusz Grendowicz
Ryszard Koper
Marcin Murawski
Katharina Schade
Tomasz Styczynski
Registered office of the Company
17 Stycznia 45A,
02-146
Warsaw
Poland
Warsaw, Poland
Date: 24 August 2016
Sponsor: Investec Bank Limited
Date: 24/08/2016 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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