Wrap Text
Condensed consolidated financial information for the quarter ended 31 March 2017
Echo Polska Properties N.V. (Incorporated in The Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
LEI code: 7245003P7O9N5BN8C098
("EPP" or "the company" or "the group")
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
for the quarter ended 31 March 2017
Consolidated statement of profit or loss
Period from
1 January 2017
to 31 March 2017
EUR'000
Rental income and recoveries 31 241
Property operating expenses (9 496)
Net property income 21 745
Other income 621
Other expenses (221)
Administrative expenses (1 880)
Net operating profit 20 265
Loss on investment properties (41)
Profit from operations 20 224
Finance income 141
Finance costs (4 371)
Foreign exchange losses (1 221)
Participation in profits of joint ventures 91
Profit before taxation 14 864
Taxation
Current income tax (688)
Deferred tax 9 770
Profit for the period 23 946
Earnings per share:
Basic and diluted earnings, on profit for
the period (EUR cents) 2,74
Consolidated statement of other comprehensive income
Period from
1 January 2017 to
31 March 2017
EUR'000
Profit for the period 23 946
Other comprehensive income to be reclassified
to profit or loss in subsequent periods
Foreign currency translation reserve (2 154)
Other comprehensive income, net of tax,
to be reclassified to profit or loss in subsequent periods (2 154)
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 21 792
Total comprehensive income attributable to the parent
for the period, net of tax 21 792
Consolidated statement of financial position
As at
31 March 2017
EUR'000
ASSETS
Non-current assets 1 432 560
Investment in joint ventures 55 892
Tangible assets 74
Investment property 1 367 360
Financial assets 9 234
Current assets 78 757
Inventory 378
Tax receivable 1 871
Trade and other receivables 15 047
Financial assets 10 174
Restricted cash 21 147
Cash and cash equivalents 30 140
Total assets 1 511 317
EQUITY AND LIABILITIES
Equity 627 101
Share capital 474 702
Share premium 95 012
Accumulated profit 59 975
Foreign currency translation reserve (2 588)
Non-current liabilities 825 548
Bank borrowings 762 843
Other liabilities 10 946
Deferred tax liability 51 759
Current liabilities 58 668
Bank borrowings 16 091
Related-party financial liabilities 4 518
Tax payables 6 699
Trade payables 31 274
Provisions 86
Total equity and liabilities 1 511 317
Consolidated statement of changes in equity
Share
premium/
Share capital
capital reserves
EUR'000 EUR'000
Balance as at 1 January 2017 474 702 95 095
Profit for the period - -
Other comprehensive income - -
Total comprehensive income - -
Issue of ordinary shares
Acquisition of subsidiary
and transaction costs - (83)
Dividend paid - -
Balance as at 31 March 2017 474 702 95 012
Foreign
currency
Accumulated translation Total
profit/(loss) reserve equity
EUR'000 EUR'000 EUR'000
Balance as at 1 January 2017 54 431 (434) 623 794
Profit for the period 23 946 - 23 946
Other comprehensive income - (2 154) (2 154)
Total comprehensive income 23 946 (2 154) 21 792
Issue of ordinary shares
Acquisition of subsidiary
and transaction costs - - (83)
Dividend paid (18 402) - (18 402)
Balance as at 31 March 2017 59 975 (2 588) 627 101
Condensed consolidated statement of cash flow
Period from
1 January 2017 to
31 March 2017
EUR'000
Cash generated from operations 46 688
Tax paid (501)
Net cash generated from operating activities 46 187
Net cash utilised in investing activities (10 477)
Net cash generated from financing activities (27 988)
Net increase in cash and cash equivalents 7 722
Cash and cash equivalents at the
beginning of the period 21 921
Effect of foreign exchange fluctuations 497
Cash and cash equivalents at the end of the period 30 140
Headline earnings and distributable income reconciliation
Period from
1 January 2017
to 31 March 2017
EUR'000
Profit for the period attributable
to EPP shareholders 23 946
Change in fair value of investment properties 41
Headline and diluted earnings attributable
to EPP shareholders 23 987
Amortised cost valuation of long-term financial
liabilities 152
Prepaid rental income (73)
Deferred tax (9 770)
Amortisation of debt fee 284
Foreign exchange losses 1 221
Amortisation of leasing fees 73
Participation of profits in joint ventures 158
Distributable income 16 032
Actual number of shares in issue 586 051 293
Weighted number of shares in issue 586 051 293
Basic and diluted earnings per share (EUR cents)* 4,1
Headline earnings and diluted headline earnings
per share (EUR cents)** 4,1
Distributable income per share (EUR cents) 2,74
* 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.
Commentary
1. Introduction
EPP is a real estate company that indirectly owns a portfolio of prime retail and office assets
throughout Poland, a dynamic Central and Eastern European ("CEE") economy with a very
attractive real estate market.
EPP was incorporated as a private company with limited liability (besloten vennootschap met
beperkte aansprakelijkheid) under Dutch law on 4 January 2016 in accordance with the
applicable laws of The Netherlands and converted to a public company on 12 August 2016.
The company's official seat (statutaire zetel) is in Amsterdam, The Netherlands, and its registered
address is at Rapenburgerstraat 175 M, 1011VM Amsterdam, The Netherlands. The company
is registered with the Dutch trade register under number 64965945.
The consolidated financial statements for the period ended 31 March 2017 comprise the
financial statements of the company and its subsidiaries (the "group" or "EPP group").
On 30 August 2016, EPP listed on Euro MTF market of the Luxembourg Stock Exchange
("LuxSE") and on 13 September 2016 listed on the JSE Securities Exchange ("JSE") in the Real
Estate Holdings and Development Sector. The company has a dual primary listing on both
LuxSE and the Main Board of the JSE.
2. Financial results
The net profit for the period ended 31 March 2017 amounted to EUR23.946 million and
distributable income amounted to EUR16.032 million.
3. Portfolio profile
EPP is a real estate company that owns a portfolio of 11 retail (including development land) and
nine office assets located throughout Poland. The properties are high quality, modern assets
with solid property fundamentals. The majority of the buildings are less than five years old.
The property portfolio offers an attractive and secure yield ranging from 6% to 7% fully let, a
long lease expiration profile and a portfolio weighted average unexpired lease term of over five
years by gross lettable area ("GLA").
The investment portfolio has a diversified tenant base of leading retailers with international
brands in the retail portfolio, and a tenant base of primarily blue-chip companies in the office
portfolio.
An analysis of the property portfolio in respect of geographic, sectoral, tenant, vacancy and
lease expiry profiles is provided in the tables below.
3.1. Geographic profile
City by rental
City by GLA income
(%) (%)
Kielce 17.92 17.41
Szczecin 16.61 21.93
Wroclaw 13.53 18.46
Krakow 3.92 3.57
Kalisz 7.01 6.22
Warszawa 6.94 5.33
Belchatow 6.82 4.55
Jelenia Gora 6.32 4.83
Poznan 5.90 5.56
Gdansk 4.91 3.58
Lodz 2.02 1.84
Katowice 3.77 3.30
Lomza 3.14 2.87
Przemysl 1.20 0.55
Total 100.0 100.0
3.2. Sectoral profile
Sector
Sector by rental
by GLA income
(%) (%)
Retail 63.22 68.01
Office 36.78 31.99
Total 100.0 100.0
3.3. Vacancy profile
The vacancy profile indicated below reflects the vacancy percentage in terms of current GLA
by sector.
Vacancy based
on total GLA*
(%)
Office 7.94/2.96**
Retail 1.25
Total 3.71/1.88%**
* Based on existing leases at 31 March 2017. The vacancy profile reflects
a high vacancy rate in the office portfolio, in particular, as the Park
Rozwoju office (being the largest office property in the property portfolio
by GLA), as this building is not fully let and has a vacancy rate of 13%
in total (18% Phase II).
** Including three years 100% rental guarantee from Echo Investment S.A.
3.4. WAULT*
Sector
Sector by rental
by GLA income
Retail 6.13 5.42
Office 4.14 3.91
* Weighted average unexplored lease term in years.
4. Prospects
EPP has a high quality portfolio of Polish commercial properties with attractive and secure
yields, tenanted by a diverse range of primarily blue-chip global clients. With the predominantly
retail portfolio located in one of the most dynamic and fastest growing economies in Europe,
experienced management and well respected strategic partners, EPP represents a compelling
investment.
Already the largest listed yielding Polish property company, EPP's goal is to become the leading
retail landlord in Poland while targeting sustainable growth in dividends per share in the short
and medium term through a combination of organic and acquisitive growth.
Organic growth represents growth opportunities that are already built into the EPP portfolio and
include (i) filling of vacancies in newly developed properties; (ii) 18 000 m2 of retail extensions
to two of EPP's existing retail centres that are currently under way; (iii) the 25% stake in seven
"ROFO" assets acquired by EPP (which entitles EPP to a 25% share in development proceeds
as well as a first right of offer to acquire such assets); and (iv) EPP's 70% stake in two of the last
and best sites for retail development in Warsaw with a planned retail development of
approximately 192 000 m2.
Combined with the organic growth retail opportunities is the potential for increasing retail rentals
through a combination of the current high levels of retail sales growth in Poland (at 9.7% year
on year in March 2017) and the active asset management of EPP's portfolio of regional shopping
centres by a strongly incentivised, dedicated and proven executive management team who
intend on leveraging EPP's platform with retail tenants to achieve higher rentals. This strategy
will be further enhanced by the development of the Warsaw retail development sites.
EPP's acquisition strategy is focused on acquiring retail assets in strategic locations, allowing
the company to further leverage its portfolio and platform with retail tenants. In the office sector,
EPP may selectively acquire high quality, well located office assets in major Polish cities, let to
strong international and domestic tenants where the management team believes that there is
scope for further value uplift. EPP will trade office assets proactively to ensure that its portfolio
remains balanced and competitive in the long term, while aiming to maintain a weighted
average unexpired lease term in excess of four years. The details of the acquisition transactions
completed after 31 March 2017 are detailed in note 6.3 Acquisitions, below.
In addition to the opportunities for growth in distributions per share, the company believes that
there are opportunities for growth in the underlying net asset value per EPP share. The Warsaw
retail developments, the ROFO assets and the extensions to certain existing retail assets all
represent the potential for (in some cases substantial) enhancements in the underlying net asset
value of EPP, given the costs at which they are being acquired and/or developed, relative to the
anticipated valuation yields. Taking the strength and growth of the Polish economy into account,
the company also believes that there is a potential for further compression in Polish commercial
property yields, which would in turn result in an increase in the value of the EPP portfolio.
5. Basis of preparation
The condensed consolidated financial information for the quarter ended 31 March 2017 has
been prepared in compliance with International Financial Reporting Standards ("IFRS"), the
presentation and disclosure requirements of IAS 34, Interim Financial Reporting, the Dutch Civil
Code, the JSE Listings Requirements and the Rules and Regulations of the LuxSE.
Jacek Baginski, EPP's chief financial officer, was responsible for supervising the preparation of
these condensed consolidated interim financial statements, which have not been reviewed or
reported by EPP's independent external auditors.
The company has fully complied with IAS 34 except for the fact that no comparative information
has been presented as the company was incorporated on 4 January 2016 and converted into a
public company on 12 August 2016. Since it was listed on LuxSE and JSE on 30 August 2016
and 13 September 2016, respectively, no published comparative information for the first quarter
ending 31 March 2016 is available.
6. Subsequent events
6.1. Changes to the board of directors
As of 31 March 2017, the composition of the company's board of directors (the "board") was
as follows:
Hadley Dean (Chief executive officer)
Maciej Adam Drozd (Chief financial officer)
Robert Weisz (Independent non-executive chairman)
Marek Marian Belka (Independent non-executive director)
Marc Wainer (Non-executive director)
Andrew Konig (Non-executive director)
Maciej Dyjas (Non-executive director)
Nebil Senman (Non-executive director)
Dionne Hirschowitz (Independent non-executive director)
Andrea Philippa Steer (Independent non-executive director)
Peter Driessen (Independent non-executive director)
As announced on SENS on 19 May 2017, shareholders were advised that:
- Maciej Adam Drozd, having served as the chief financial officer, retired from the board with
immediate effect;
- Jacek Baginski was appointed to the board as the new chief financial officer effective 19 May
2017; and
- Przemyslaw Krych was appointed to the board as a non-executive director effective 19 May
2017.
The above mentioned changes were confirmed at the annual general meeting. The board is
pleased to welcome Jacek Baginski and Przemyslaw Krych and looks forward to benefiting
from their continued contribution to the growth of the company.
6.2. Share issue
On 13 April 2017, the company issued 118 918 918 new ordinary shares at a price of EUR1.27
per share (ZAR18.50 per share) following a successful equity raise. Immediately post the issue
of new shares the authorised ordinary share capital of the company comprises 704 970 210
ordinary shares of EUR0.81 each (all of which are listed on the LuxSE and the JSE) and 1
preference share of EUR0.81 (not listed on any stock exchange).
6.3. Acquisitions
Zakopianka Shopping Centre
EPP concluded an agreement relating to the acquisition of 100% of the equity in EPISO 3
Zakopianka sp. z o.o ("EPISO 3") for an acquisition consideration of EUR53.3 million. EPISO 3
is the holder of leasehold rights that entitle it to all rental income derived from leases concluded
with tenants occupying premises within the Zakopianka Retail Park other than those portions
of the Zakopianka Shopping Centre leased to owner occupied Carrefour and Castorama stores
(the "transaction").
EPP has fulfilled all outstanding conditions precedent and accordingly the transaction was
completed on 25 April 2017 for an amount of EUR53.3 million. The property is currently 98%
leased.
A4 Business Park Phase III
A subsidiary of EPP concluded agreements for the acquisition of, inter alia, the A4 Business
Park Phase III during October 2015. All outstanding conditions precedent relating to A4
Business Park Phase III were fulfilled on 28 April 2017 and the acquisition was accordingly
successfully completed. The property is currently 86% leased, with the outstanding 14% of
income covered by a three-year master lease provided by Echo Investment S.A.
Galeria Mlociny
On 31 May 2017, EPP concluded an acquisition agreement to acquire 70% of the Galeria
Mlociny Shopping Centre ("Galeria Mlociny"). The investment was effected via EPP's
acquisition of 70% of the equity in Rosehill Investments sp. z o. o. ("Rosehill") from Powell Real
Estate International B.V., Elsoria Trading Limited, Terbanacle Limited and Terbanacle
Investments Limited for an aggregate consideration of EUR29 million. Rosehill indirectly owns
the land on which Galeria Mlociny is being developed (the "development"). Echo Investment
S.A. has been appointed as the developer of Galeria Mlociny and acquired the remaining 30%
of the equity in Rosehill for an aggregate consideration of EUR12.4 million. The transaction is in
line with EPP's stated strategy of acquiring quality retail assets and developments in strategic
locations.
Galeria Mlociny is a mixed-use development of approximately 81 900 m2 (of which
approximately 71 050 m2 will be retail space) situated in North Warsaw, Poland. Construction
of the first phase of Galeria Mlociny commenced in October 2016 and is on track for completion
in the second quarter of 2019. The development is c. 55% preleased to strong anchor tenants
including Inditex brands, C&A, Van Graaf, H&M and CCC (shoe retailer). Contracts have also
been signed with RTV Euro AGD, Jysk, Intermarche and Go Sport. Galeria Mlociny is situated
next to the Mlociny transport hub, the main public transport hub for residents of North Warsaw
and surrounds, which is used daily by c. 40 000 people.
The total cost of the land on which Galeria Mlociny is being developed is approximately
EUR104.5 million. The balance of cost of the land on which Galeria Mlociny is being developed
is financed through mezzanine loans granted by reputable private equity funds to the value of
EUR63.1 million. Galeria Mlociny will be developed at an estimated development yield on cost
of c. 7.1% and on completion is expected to be accretive to EPP.
Blackstone retail property portfolio
On 14 June 2017, EPP completed, on an unconditional basis, the acquisition of 100% of the
equity of Klodzko Retail LLC, Zamosc Retail LLC and Wloclawek Retail LLC, which own Galeria
Twierdza in Klodzo, Galeria Twierdza in Zamosc and Galeria Wzorcownia in Wloclawek,
respectively, as announced on 1 February 2017. The aggregate purchase consideration for
these three properties is EUR141.60 million.
By agreement with the sellers, the acquisition of the equity in Kalisz Retail LLC, which owns
Galeria Tecza in Kalisz, has been omitted from the transaction due to anti-monopoly concerns
raised by the Polish Office of Competition and Consumer Protection arising from EPP's
ownership of the Galeria Amber Kalisz shopping centre also located in Kalisz.
By order of the board
Echo Polska Properties N.V.
28 June 2017
Company information
Directors
Hadley Dean (chief executive officer)
Jacek Baginski (chief financial officer)
Robert Weisz* (chairman)
Marek Belka*
Peter Driessen*
Maciej Dyjas**
Dionne Hirschowitz*
Andrew Konig**
Przemyslaw Krych**
Nebil Senman**
Andrea Steer*
Marc Wainer**
* Independent non-executive
** Non-executive
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
Phone: +352 263 868 602
JSE sponsor
Java Capital Trustees and Sponsors Proprietary Limited
6A Sandown Valley Crescent
Sandton
2196
Phone: +27 11 722 3050
Investor relations
Singular Systems IR
28 Fort Street
Birnam
2196
Phone: +27 (0)10 003 0661
www.echo-pp.com
29 June 2017
Date: 29/06/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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