Wrap Text
Condensed consolidated financial statements for the period 4 January to 31 December 2016
Echo Polska Properties N.V.(Incorporated in the Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
("EPP" or "the Company" or "the Group")
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the period 4 January to 31 December 2016
Highlights
Distributable earnings EUR34 million
Dividend per share of 3,14 euro cents being 2,2% ahead of forecast
NAV EUR1,16 per share
Successfully executed or announced acquisitions of EUR418 million
GLA increased to 498 575m2 as of 2016 year-end
Portfolio value EUR1,4 billion as of 2016 year-end - up 17% since listing
Portfolio increased from 16 to 19 properties
Market cap EUR797 million
Commentary
"We are building a national champion that leverages its scale and relationships to
provide a leading cash generating Polish property group with a weighted focus
towards retail properties in key locations, supported by strategic office sites. Europe
as a whole is currently navigating a period of uncertainty. This may have a positive
impact on Poland as it highlights the country's attractiveness as an investment and
business destination," Hadley Dean, chief executive officer.
Introduction
EPP was listed on the JSE on 13 September 2016 and presents its maiden results
for the period from 4 January 2016 to 31 December 2016 ("the period"). Since listing
EPP has grown its portfolio from 16 to 19 properties through a number of acquisitions.
The positive portfolio performance since listing has been driven by our effective and
active asset management strategy.
EPP is a Dutch-based real estate company that follows the REIT formula, which as
at 31 December 2016 owned a EUR1,4 billion diversified portfolio of nine office, ten
retail projects and one retail development site in the centre of Warsaw, totalling
498 575m2. The portfolio is located throughout 14 major cities in Poland,
characterised by their economic strength, increasing purchasing power and
attractiveness as an investment destination. EPP aims to become a national
champion as Poland's leading cash-generating property group with a retail bias
providing sustainable growth in dividend per share.
EPP is dual-listed on both the Luxembourg Stock Exchange and the Main Board of
the JSE (Real Estate and Development Sector).
Financial results
Although distributable earnings of EUR34,0 million was marginally below the forecast
EUR34,3 million in the pre-listing statement ("PLS"), distribution per share for the
period until 31 August was 0,5% ahead of forecast at 2,44 euro cents per share (the
clean-out dividend referred to in the PLS) and the dividend for the four months to
31 December 2016 of 3,14 euro cents per share was 2,2% ahead of the forecast of
3,07 euro cents per share forecast in the PLS.
Net asset value ("NAV") for the period totalled EUR683 million with NAV per share
at EUR1,16.
Property portfolio
The segmental breakdown of the EPP portfolio at 31 December 2016 is set out
below:
Portfolio structure by fair value
Retail 71,7%
Office 28,3%
Portfolio structure by GLA (m2)
Retail 63,3%
Office 36,7%
Occupancy
Occupancy increased from 96,2% to 97,4% overall. Office occupancy increased
from 92,2% to 95,7% while retail occupancy remained stable at a high level of 98,3%.
Lease expiry profile
Rental income (EUR) Retail Office
2017 271 246 140 238
2018 288 838 221 679
2019 323 414 292 908
2020 553 924 410 923
2021 839 911 275 543
2022 600 210 196 283
2023 487 652 86 361
2024 236 496 50 000
2025 192 183 148 859
=<2026 579 547 64 110
Valuations
As at 31 December 2016
Office Retail Total
Number of projects 9 10 19
Number of buildings 17 10 27
Value/consideration (EUR) 387 million 977 million 1 364 million
Vacancy (%) 4,3 1,7
Market value (% split) 28% 72%
GLA (m2) 175 941 322 633 498 575
WAULT (rent) 3,7 years 5,9 years
Acquisitions
Post listing EPP acquired a 70% stake in Towarowa 22/Jupiter in Warsaw, the largest and
last available retail development site in the city centre (see Developments for further
information) for EUR78 million. In December it acquired a holding in the 27 463m2
Zakopianka retail park in Krakow for EUR54 million. It further acquired EUR113 million
of office buildings - O3 Business Campus in Krakow, Tryton Business House in
Gdansk and Symetris in Lodz.
Post year-end EPP acquired an additional four retail assets for EUR166,6 million:
Galeria Twierdza Shopping Centre in KLodzko (23 039m2), Galeria Twierdza Shopping
Centre in Zamosc (23 785m2), Galeria Tecza Shopping Centre in Kalisz (16 003m2)
and Wzorcownia Shopping Centre in WLocLawek (25 629m2).
Developments
EPP holds a 70% interest in a planned 110 000m2 mixed-use development in
Warsaw (Towarowa 22/Jupiter) which is set for completion in 2021.
The extensions of Galaxy and Outlet Park in Szczecin are well under way with already
more than 70% let. Both developments will be completed in Q4 2017 and are set to
enhance the portfolio with a yield of 8,5%.
Borrowings
Sources of debt
%
BZ WBK SA (Santander group)/Erste Bank 38
Helaba 23
HSBC plc 21
Berlin HYP/ING 15
Other 3
At 31 December 2016 the loan-to-value ratio (net of cash) was 52,7% and the group is
targeting 50%. The aggregate length of borrowings is 5,1 years at an average cost
of debt of 1,85% and with 90% of debt fixed with the remaining portion to be fully
hedged by Q1 2017.
Debt maturity profile
EUR million
2017 11
2018 -
2019 159
2020 -
2021 132
<2021 475
Regulatory tax
On 1 January 2017 amendments to Polish corporate income tax were introduced
which changed the tax regime for broad categories of investment entities. As a
consequence, the group's subsidiaries have lost their tax-exempt status, and are
now subject to 19% tax rate on income from rental and disposal of real estate.
New legislation is however progressing through parliament which would effectively
reintroduce the tax exemption for entities investing in real estate that meet the
requirements of a Real Estate Investment Trust under proposed REIT regulations.
The group was already being restructured to meet the requirements of the anticipated
REIT regulations, hence EPP was able to quickly react to changes in the regulatory
environment. However, pending the formal adoption of REIT legislation, the additional
tax cost has had an impact on the 2016 financial results.
The internal group restructuring, together with various asset management initiatives
and the recently announced acquisitions (concluded post the September 2016 listing),
should have the result that EPP will achieve its forecast distributable earnings and
distribution per share of 10,8 euro cents per share for the financial period ending
31 December 2017 (as published in the PLS).
Outlook
We expect good growth in retail sales, which supports our continued focus on
assets in this sector. We have also recently seen a strong uptake on the office side
and expect this to continue unabated given Poland's highly educated workforce
together with a track record of low unemployment, as well as unprecedented growth
in the Business Process Outsourcing ("BPO") services market. We are expecting
solid rental growth particularly in regional cities. We also expect the recently
introduced state sponsored child allowance programme called Family 500+ (PLN
500 per month per every second and next child in a family), which has a
disproportionately higher impact on disposable income growth in regional cities, to
continue to benefit our retail portfolio.
Poland remains an attractive investment and business destination with particularly
outsourcing benefiting from uncertainty in other European markets. The majority of
outsourcing jobs are in regional cities, which not only supports our office portfolio,
but also increases general spending power driving demand for retail.
Basis of preparation
The audited condensed consolidated financial statements for the period from
4 January 2016 to 31 December 2016 have been prepared by the management of
the company on 8 March 2017 in accordance with the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"), the requirements of IAS 34:
Interim Financial Reporting, the JSE Listings Requirements and in accordance with
Dutch law and the LuxSE rules and regulations.
The group's financial statements have been prepared on a historical cost basis,
except for investment properties, derivative financial instruments and contingent
consideration that have been measured at fair value. The consolidated financial
statements are presented in EUR (EUR) and all values are rounded to the nearest
thousand (EUR000), except where otherwise indicated.
These condensed consolidated financial statements are extracted from consolidated
financial statements information, but is not itself audited. The directors take full
responsibility for the preparation of the audited condensed consolidated financial
statements and for ensuring that the financial information has been correctly extracted
from the underlying audited consolidated financial statements. The auditors,
Ernst & Young have issued their unmodified opinion on the audited consolidated
financial statements for the period from 4 January 2016 to 31 December 2016 and a
copy of the audit opinion, together with the underlying audited consolidated financial
statements are available for inspection at the company's registered office.
Dividend payment
EPP's dividend policy states that the company intends to declare 100% of its distributable
income to shareholders. The company intends declaring half-yearly dividends, which
are expected to be declared for the periods ended 30 June and 31 December of the
relevant year. No assurance can be made that dividends will be proposed or declared
in any given year.
The board has declared a maiden dividend of 3,14000 euro cents per share for the
four months to 31 December 2016.
The dividend is payable to EPP shareholders in accordance with the timetable set
out below:
2017
Announcement of Euro to Rand conversion rate on Monday, 20 March
Last day to trade in EPP shares on the JSE and LuxSE
in order to receive the dividend Tuesday, 28 March
EPP shares trade ex dividend Wednesday, 29 March
Record date for the receipt of the dividend Friday, 31 March
Dividend paid to EPP shareholders Monday, 3 April
Share certificates may not be dematerialised or rematerialised between Wednesday,
29 March 2017 and Friday, 31 March 2017, both days included. Transfers between
the European and South African share registers may not take place between Monday,
20 March 2017 and Friday, 31 March 2017, both days included.
Tax considerations
The dividend shall be paid net of Dutch dividend withholding tax ("DWHT") of 15%,
unless to the extent the company has, prior to the dividend record date, been
provided with proof, to its satisfaction, that the relevant shareholder qualifies for
(partial) relief from DWHT with respect to the dividends. The company shall remit the
DWHT withheld to the Dutch tax authorities.
For South African resident shareholders, the dividend may be regarded as a foreign
dividend as the dividend will be paid out of The Netherlands and may be subject to
South African dividends tax at a rate of 20%, unless an exemption as set out in the
South African Income Tax legislation applies,
For shareholders residing outside of South Africa, the dividend may have legal or tax
implications and such shareholders are advised to obtain appropriate advice from
their professional advisers in this regard.
As at the date of declaration of this dividend, the company has 586 051 292 shares
in issue.
On behalf of the board
Hadley Dean
Chief executive officer
Maciej Drozd
Outgoing chief financial officer
9 March 2017
Consolidated statement of profit or loss
Group
Period from
4 January 2016 to
31 December 2016
EUR'000
Rental income and recoveries 95 278
Straight-line rental income 1 233
Property operating expenses (29 209)
Net property income 67 302
Other income 2 109
Other expenses (2 610)
Administrative expenses (12 532)
Net operating profit 54 269
Profit from investment properties 44 325
Profit from operations 98 594
Finance income 7 339
Finance costs (18 582)
Foreign exchange gains 2 192
Cost of refinancing (5 881)
Participation in profits of joint ventures 12 526
Profit before taxation 96 188
Taxation
Current income tax (878)
Deferred tax (18 546)
Profit for the period 76 764
Attributable to EPP shareholders 76 764
Earnings per share:
Basic and diluted earnings, on profit for the period (EUR cents) 20,9
Consolidated statement of other comprehensive income
Group
Period from
4 January 2016 to
31 December 2016
EUR'000
Profit for the period 76 764
Other comprehensive income to be reclassified
to profit or loss in subsequent periods
Foreign currency translation reserve (434)
Other comprehensive income, net of tax, to be
reclassified to profit or loss in subsequent periods (434)
Other comprehensive income, net of tax, not to be
reclassified to profit or loss in subsequent periods -
Total comprehensive income for the period, net of tax 76 330
Total comprehensive income attributable to the
parent for the period, net of tax 76 330
Consolidated statement of financial position
Group
As at
31 December
2016
EUR'000
ASSETS
Non-current assets 1 423 834
Investment in joint ventures 54 285
Tangible assets 85
Investment property 1 359 432
Financial assets 10 032
Current assets 85 564
Inventory 74
Tax receivable 9
Trade and other receivables 32 658
Financial assets 9 057
Restricted cash 21 845
Cash and cash equivalents 21 921
Total assets 1 509 398
EQUITY AND LIABILITIES
Equity 623 794
Share capital 474 702
Share premium 95 095
Accumulated profit 54 431
Foreign currency translation reserve (434)
Non-current liabilities 818 458
Bank borrowings 741 776
Related-party financial liabilities 5 885
Other liabilities 11 881
Deferred tax liability 58 916
Current liabilities 67 146
Bank borrowings 52 845
Related-party financial liabilities 221
Tax payables 175
Trade payables 13 819
Provisions 86
Total equity and liabilities 1 509 398
Consolidated statement of changes in equity
Share
premium/
Share capital Accumulated
capital reserves profit/(loss)
EUR'000 EUR'000 EUR'000
Balance as at 4 January 2016 20 - -
Profit for the period - - 76 764
Other comprehensive income - - -
Total comprehensive income - - 76 764
Issue of ordinary shares 474 682 110 157 -
Acquisition of subsidiary and
transaction costs - (15 062) -
Dividend paid - - (22 333)
Balance as at 31 December 2016 474 702 95 095 54 431
Foreign
currency
translation Total
reserve equity
EUR'000 EUR'000
Balance as at 4 January 2016 - 20
Profit for the period - 76 764
Other comprehensive income (434) (434)
Total comprehensive income (434) 76 330
Issue of ordinary shares - 584 839
Acquisition of subsidiary
and transaction costs - (15 062)
Dividend paid - (22 333)
Balance as at 31 December 2016 (434) 623 794
Consolidated statement of cash flow
Group
Period from
4 January 2016 to
31 December 2016
EUR'000
Operating activities
Cash generated from operations 26 363
Tax paid (707)
Net cash generated from operating activities 25 656
Investing activities
Acquisition of business net of cash acquired (164 154)
Investments in joint ventures (41 609)
Purchase of investment property (118 747)
Capital expenditure on completed investment property (14 768)
Loans granted (23 412)
Interest received (131)
Purchase of fixed and intangible assets (85)
Net cash utilised in investing activities (362 906)
Financing activities
Proceeds from borrowings 832 687
Repayment of borrowings (791 284)
Proceeds from issue of share capital 372 888
Transaction costs on issue of shares (14 967)
Dividends paid (22 333)
Interest paid (17 386)
Net cash generated from financing activities 359 605
Net increase in cash and cash equivalents 22 355
Cash and cash equivalents at the beginning of the period -
Effect of foreign exchange fluctuations (434)
Cash and cash equivalents at the end of the period 21 921
Headline earnings and distributable income reconciliation
Period from
4 January 2016 to
31 December 2016
EUR'000
Profit for the period attributable
to EPP shareholders 76 764
Change in fair value of investment properties (44 719)
Headline and diluted earnings attributable
to EPP shareholders 32 045
Amortised cost valuation of long-term
financial liabilities (1 502)
Straight-line rental income accrual (net of taxation) (1 233)
Prepaid rental income (251)
Deferred tax charge 18 546
Accelerated amortisation of debt fee 5 881
Foreign exchange gains (2 192)
Consolidation adjustment on acquisition
(goodwill impairment) 494
Participation of profits in joint ventures (12 526)
Capital gains (5 255)
Distributable income 34 007
Actual number of shares in issue 586 051 293
Weighted number of shares in issue 366 544 911
Basic and diluted earnings per share (EUR cents)* 20,9
Headline earnings and diluted headline earnings
per share (EUR cents)** 8,7
Distributable income per share (EUR cents) 5,8
* There are no dilutionary instruments in issue and
therefore basic and diluted earnings are the same.
** There are no dilutionary instruments in issue and therefore
headline earnings and diluted headline earnings are the same.
Segment information
The group is considered to have two reportable segments, as follows:
- Retail: acquires, develops and leases shopping malls; and
- Office: acquires, develops and leases offices.
The group's administrative costs, finance revenue, finance costs and income taxes
are not reported to the members of the executive management team on a segment
basis. The operations between segments are eliminated for consolidation purposes.
Segment assets represent investment property and the investment in the joint ventures.
Segment liabilities represent loans and borrowing, as these are the only liabilities
reported to the Board on a segmental basis.
Retail Office Total
EUR'000 EUR'000 EUR'000
Period ended 31 December 2016
Segment profit
Rent and recoveries income 71 638 23 640 95 278
Straight line rental income 196 1 037 1 233
Property operating expenses (22 643) (6 566) (29 209)
Year ended 31 December 2016
Segment assets
Investment in joint ventures 54 285 - 54 285
Investment property 972 392 387 040 1 359 432
Total segment assets 1 026 677 387 040 1 413 717
Bank borrowings 564 241 230 380 794 621
Total segment liabilities 564 241 230 380 794 621
All revenues were generated from external customers based in Poland.
All investment properties are located in Poland.
Company information
Directors
Hadley Dean (chief executive officer)
Maciej Drozd (chief financial officer)***
Robert Weisz* (chairman)
Marek Belka*
Peter Driessen*
Maciej Dyjas**
Dionne Hirschowitz*
Andrew König**
Nebil Senman**
Andrea Steer*
Marc Wainer**
* Independent non-executive.
** Non-executive.
*** Post year-end effective 9 March 2017 Maciej Drozd stepped down as chief
financial officer but continues as non-executive director. Jacek Baginski was
appointed as chief financial officer in his stead effective 9 March 2017.
Registered office
Rapenburgerstraat 175 M
1011VM Amsterdam
The Netherlands
Company secretary
Rafal Kwiatkowski (Master of Laws)
a.l Solidarnosci 36
25-323 Kielce
Poland
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue
Rosebank
2195
PO Box 61051
Marshalltown
2107
LUXSE listing agent
M Partners
56 rue Charles Martel L-2134
Luxembourg
JSE sponsor
Java Capital Trustees and Sponsors Proprietary Limited
6A Sandown Valley Crescent
Sandton
2196
www.echo-pp.com
Date: 09/03/2017 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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