Wrap Text
H1 2017 Results for the six-month period ended 30 June 2017
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")
H1 2017 RESULTS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2017
HIGHLIGHTS
EPRA NAV/SHARE FFO I/SHARE EARNINGS/SHARE
EUR2.03 EUR0.05 EUR0.13
+4% +0% +69%
H1 2017 HIGHLIGHTS
- Development profit of EUR51m driven by
projects under construction and revaluation of
income generating portfolio
- Profit before tax at EUR68m in H1 2017 (EUR46m
in H1 2016)
- Earnings per share up to EUR0.13 in H1 2017
(EUR0.08 in H1 2016)
- EPRA NAV increased 6.6% to EUR956m
(EUR897m as of 31 December 2016)
- EPRA NAV/share increased 4.2% to EUR2.03
as of 30 June 2017 from EUR1.95 as of 31
December 2016
- Gross margin from rental activity increased
to EUR43m in H1 2017 (EUR42m in H1 2016)
- FFO I stable at EUR21.5m (EUR21.9m in H1 2016)
despite disposal of the malls in Bulgaria
- FFO I/share at EUR0.05 (EUR0.05 in H1 2016)
- EUR68.5m newly issued Euro denominated
bonds to refinance existing expensive PLN
bonds
- Financing and refinancing activity on project
of approx. EUR326m in H1
PORTFOLIO UPDATE
- 5 projects under construction with over
174,000 sq. m GLA with 72,300 sq. m to be
completed in Q3 2017 (Galeria Pólnocna and
Artico office building, Warsaw)
- 239,000 sq. m of retail and office space is in
the planning stage in 8 projects (Warsaw,
Budapest, Bucharest, Sofia and Zagreb)
- Strong leasing performance with 61,500 sq. m
of office and retail space newly leased and
renewed extending current WALT
- Occupancy at 94% (93% as at 31 March 2017)
thanks to improvement in Galeria Jurajska and
tenants expansion mainly in FortyOne complex
OPERATING PERFORMANCE
1 2017 Reported Variance %
GMRA EUR43m +1%
EBITDA EUR36m +2%
Profit for the period EUR60m +69%
FFO I EUR21.5m -2%
Total property EUR1,710m +5%
Net debt EUR736m +5%
Net LTV 43% +0bps
EPRA NAV/share EUR2.03 +4%
Earnings per share EUR0.13 69%
CORPORATE OVERVIEW
NATURE OF BUSINESS
The GTC Group is a leading real estate investor and developer focusing on Poland and three capital cities in
Eastern and Southern Europe. The GTC Group is operating in Poland, Romania, Hungary, Croatia, Serbia and
Bulgaria. Additionally, it holds land in Ukraine through its subsidiary. 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 and (iv) residential projects and
landbank.
Since its establishment and as at 30 June 2017 the Group: (i) has developed 1.1 million sq. m of gross commercial
space and approximately 300 thousand sq. m of residential space; (ii) has sold almost 500 thousand sq. m of
gross commercial space in completed commercial properties and approximately 299 thousand sq. m of residential
space; and (iii) has acquired approximately 90 thousand sq. m of commercial space in completed commercial
properties.
As of 30 June 2017, the Group's property portfolio comprised the following properties:
- 33 completed commercial buildings, including 31 office buildings and two retail properties with a total
combined commercial space of approximately 526 thousand sq. m of GLA, of which the Group's proportional
interest amounts to approximately 516 thousand sq. m of GLA;
- five commercial projects under construction, including three office projects and two retail project with total
GLA of approximately 174 thousand sq. m, of which the Group's proportional interest amounts to 174
thousand sq. m of GLA;
- commercial landbank designated for future development;
- one residential project under construction; and
- residential landbank.
The Group also holds a land plot in Ukraine through its subsidiary.
As of 30 June 2017, the book value of the Group's portfolio amounts to EUR1,710,269 with: (i) the Group's completed
commercial properties account for 70% thereof; (ii) commercial properties under construction – 21%; (iii) a
commercial landbank intended for future development– 7%; (iv) residential projects and landbank account for 1%.
Based on the Group's assessment approximately 97% of the portfolio is core and remaining 3% is non-core
assets, including non-core landplots and residential projects.
As of 30 June 2017, the Group's completed properties in its three most significant markets, i.e. Poland, Hungary
and Romania, constitute 47%, 18% and 15% of the total book value of all completed properties.
Additionally, the Group manages third party assets in Warsaw, in Katowice and in Prague.
The Company's shares are listed on the WSE and inward listed on the Johannesburg Stock Exchange. The
Company's shares are included in WIG 30 and the Dow Jones STOXX Eastern Europe 300.
The Group's headquarters are located in Warsaw, at 17 Stycznia 45A.
STRATEGY AND DIVIDEND POLICY
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. This leads to accretive funds from
operations and provides for growing dividend potential.
Following the growth and results achieved in 2016, GTC distributed PLN 0.27/share from 2016 profits in the form
of dividend. The dividend is guided by, among others things, the availability of cash, the funds from operations
growth plans, the Company's capital expenditure requirements and planned acquisitions as well as the share of
external financing in the Company's overall equity. GTC believes that the further realization of its growth strategy
will provide for a double-digit dividend growth in the future, starting from 2017 onward.
COMMENTARY
The management board presents unaudited interim condensed consolidated results for the 6 months ended 30
June 2017.
KEY OPERATING ACHIEVEMENTS IN H1 2017
Further boost to NAV will come from 5 projects under construction with total of 174,000 sq. m GLA and
8 projects in the planning stage with a total GLA of 239,000 sq. m
- 300 sq. m to be completed in Q3 2017 (Galeria Pólnocna and Artico office building, Warsaw)
- 21,500 sq. m to be completed in Q1 2018 (GTC White House, Budapest)
- 34,400 sq. m to be completed in Q4 2018 (Ada Mall, Belgrade)
- Refurbishment of the existing buildings in Green Heart, Belgrade is expected to be completed in Q1 2018
and new buildings in 2018/2019 (46,000 sq m)
- Another 239,000 sq. m GLA of retail and office space is in the planning stage in 8 projects (Warsaw,
Budapest, Bucharest, Sofia and Zagreb)
Strong leasing performance
- 61,500 sq. m of office and retail space newly leased and renewed extending current WALT
- Occupancy at 94% (93% as at 31 March 2017) thanks to improvement in Galeria Jurajska and tenants
expansion mainly in FortyOne complex
KEY FINANCIAL HIGHLIGHTS IN H1 2017
Rental and service revenues
- Increased to EUR58m in from EUR55m in H1 2016
Reflects mainly completion of University Business Park B and FortyOne II in 2016 as well as FortyOne
III in 2017 as well as acquisition of Premium Point and Premium Plaza in Bucharest, Sterlinga Business
Center in Lódz and Neptun Office Center in Gdansk.Net profit from development revaluation and
impairment
Net profit from development revaluation and impairment
- EUR51m as compared to EUR24m in H1 2016
Reflects mainly progress in the construction of Galeria Pólnocna and completion of FortyOne III as well
as revaluation gain on Galleria Stara Zagora combined with value appreciation of income generating
assets following an improvement in their operating results (mostly Galeria Jurajska, FortyOne III and
University Business Park B).
Financial expenses
- Decreased to EUR13m despite an increase in average level of debt
Cost of finance at 3.1% due to decrease in average interest rate and change in hedging strategy
Taxation
- Tax amounted to EUR8m as comparted to EUR11m in H1 2016
Net profit
- EUR58m 2016 compared to EUR55m in H1 2016 mostly on revaluation gain
Funds From Operations (FFO I)
- At EUR21.5m compared to EUR21.9m in H1 2016 despite disposal of Galleria Stara Zagora and Galleria Burgas
Total property value
- At EUR1,710m as of 30 June 2017 (EUR1,624m as of 31 December 2016) due to an investment in assets under
construction, acquisition of land plots and revaluation gain
EPRA NAV/share
- Up by 4% to EUR2.03 from EUR1.95 in Q1 2016
Corresponding to EPRA NAV of EUR956m compared to EUR897m as of 31 December 2016
Financial liabilities
- At EUR894m as of 30 June 2017 compared to EUR881m as of 31 December 2016
- Weighted average debt maturity of 4 years and average cost of debt of 3.1% p.a.
- LTV at 43% on 30 June 2017 (43% on 31 December 2016)
- Interest coverage at 3.5x on 30 June 2017 (3.5x on 31 December 2016)
- Refinancing of existing income generating assets and construction loans of EUR394 including EUR68.5m euro
denominated bonds issued in H1 2017 to refinance existing PLN bonds at much lower interest cost
Cash and cash equivalents
- Increased to EUR162m as of 30 June 2017 from EUR150m as of 31 December 2016 due to finance activity
BASIS OF PREPARATION
The Interim Condensed Consolidated Financial Statements for the six-months period ended 30 June 2017 have
been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by EU.
At the date of authorisation of these 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 is aware of the fact that IFRS 15 and IFRS 9, which are effective for financial years beginning
on or after 1 January 2018, have been already endorsed by the European Union. The Group is currently in the
process of analysis of quantitative and qualitative impact of those two standards, as well as of IFRS 16, which is
not yet endorsed, on the Group's consolidated financial statements.
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 2016, which were authorized for
issue on 17 March 2017. The interim financial results are not necessarily indicative of the full year results.
The Group's Interim Condensed Consolidated Financial Statements are presented in Euro, which is also GTC's
functional currency. For each entity, the Group determines the functional currency and items included in the
financial statements of each entity are measured using the functional currency.
The financial statements of those entities prepared in their functional currencies (other than Euro) are included
in the Interim Condensed Consolidated Financial Statements by translation into Euro using appropriate
exchange rates outlined in IAS 21. Assets and liabilities are translated at the period end exchange rate, while
income and expenses are translated at average exchange rates for the period. All resulting exchange differences
are classified in equity as "Foreign currency translation" without affecting earnings for the period.
These Interim Condensed Consolidated Financial statements have been prepared on the assumption that the
Group will continue as a going concern in the foreseeable future. As at the date of approval of these financial
statements, no circumstances were identified which would indicate any threat to the Group' continuing as a going
concern.
Annex 1 Consolidated Statement of Financial Position as at 30 June 2017
(in thousands of euro)
30 June 2017 31 December 2016
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 1,563,131 1,501,770
Investment property landbank 126,752 102,905
Residential landbank 13,230 13,761
Investment in associates and joint ventures 2,091 3,803
Property, plant and equipment 6,975 6,002
Deferred tax asset 59 1,075
Other non-current assets 201 353
1,712,439 1,629,669
Current assets
Residential inventory 7,156 5,355
Accounts receivables 3,928 5,363
Accrued income 494 767
VAT receivable 21,588 17,389
Income tax receivable 500 652
Prepayments and deferred expenses 3,210 2,558
Derivatives 477 -
Escrow account 7,444 -
Short-term deposits 27,131 27,925
Cash and cash equivalents 162,306 149,812
234,234 209,821
TOTAL ASSETS 1,946,673 1,839,490
Annex 1 Consolidated Statement of Financial Position as at 30 June 2017 (cont.)
(in thousands of euro)
30 June 2017 31 December 2016
(unaudited) (audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital 10,651 10,410
Share premium 520,504 499,288
Capital reserve (36,054) (35,702)
Hedge reserve (2,822) (3,631)
Foreign currency translation 2,394 1,872
Accumulated profit 345,311 315,195
839,984 787,432
Non-controlling interest 3,893 2,891
Total Equity 843,877 790,323
Non-current liabilities
Long-term portion of long-term borrowing 775,632 739,031
Deposits from tenants 8,874 8,043
Long term payable 2,687 2,730
Provision for share based payment 4,613 2,046
Derivatives 1,344 2,778
Provision for deferred tax liability 104,920 98,237
898,070 852,865
Current liabilities
Investment,trade payables and provisions 42,462 36,739
Current portion of long-term borrowing 154,213 153,902
VAT and other taxes payable 1,161 1,122
Income tax payable 187 530
Derivatives 2,300 2,553
Advances received 4,403 1,456
204,726 196,302
TOTAL EQUITY AND LIABILITIES 1,946,673 1,839,490
Annex 2 Consolidated Income Statement for 6-month period ended 30 June 2017
(in thousands of euro)
Six-month Three-month Six-month Three-month
period ended period ended period ended period ended
30 June 2017 30 June 2017 30 June 2016 30 June 2016
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues from rental activity 57,981 28,193 55,050 27,940
Residential revenue 442 - 3,776 76
Cost of rental activity (15,052) (7,106) (13,273) (6,742)
Residential costs (379) - (2,953) (75)
Gross margin from operations 42,992 21,087 42,600 21,199
Selling expenses (964) (511) (1,397) (770)
Administration expenses (7,654) (5,012) (4,997) (2,303)
Profit (Loss) from revaluation 51,094 26,670 24,067 16,631
Other income 864 518 769 353
Other expenses (1,351) (899) (1,588) (767)
Profit (loss) from continuing
operations before tax and finance 84,981 41,853 59,454 34,343
income/(expense)
Foreign exchange differences gain/
(loss), net (4,158) (406) 3,136 2,843
Finance income 92 40 1,161 591
Finance cost (13,013) (6,471) (13,887) (7,036)
Share of profit (loss) of associates
and joint ventures 184 - (3,803) (3,320)
Profit before tax 68,086 35,016 46,061 27,421
Taxation (8,487) (7,512) (10,854) (8,553)
Profit (loss) for the period 59,599 27,504 35,207 18,868
Attributable to:
Equity holders of the Company 59,634 27,454 35,264 18,824
Non-controlling interest (35) 50 (57) 44
Basic earnings per share (in Euro) 0.13 0.06 0.08 0.04
Annex 3 Consolidated Statement of Cash Flow for the 6-month period ended 30 June 2017
(in thousands of euro)
Six-month period Six-month period
ended ended
30 June 2017 30 June 2016
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 68,086 46,061
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (51,094) (24,067)
Share of loss (profit) of associates and joint ventures (184) 3,803
Profit on disposal of assets - (9)
Foreign exchange differences loss/(gain), net 4,158 (3,136)
Finance income (92) (1,161)
Finance cost 13,013 13,887
Share based payment (income)/expenses 2,215 (118)
Depreciation and amortization 216 216
Operating cash before working capital changes 36,318 35,476
Increase in accounts receivables, prepayments and other current
assets (85) (114)
Decrease in inventory and residential land bank (1,801) 2,424
Increase/(decrease) in advances received 2,947 -
Increase in deposits from tenants 1,439 942
Increase/(decrease) in trade and other payables (477) (879)
Cash generated from operations 38,341 37,849
Tax paid in the period (2,101) (1,437)
Net cash flows from operating activities 36,240 36,412
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (69,199) (49,432)
Purchase of subsidiary (12,500) -
Purchase of completed assets and land (10,525) (76,387)
Increase in Escrow accounts for purchase of assets (7,444) (70,107)
Sale of investment property 1,731 2,729
Sale of subsidiaries 37,545 3,930
Purchase of minority - (18,121)
Sale of shares in associate 1,250 2,009
VAT on purchase/sale of investment property (3,498) -
Interest received 71 275
Loans granted - (123)
Loans repayments 812 -
Net cash flows from/(used in) investing activities (61,757) (205,227)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 106,035 129,190
Repayment of long-term borrowings (48,075) (43,507)
Dividends paid (8,061) -
Interest paid (12,440) (12,386)
Loans origination cost (1,474) (317)
Decrease/(increase) in blocked deposits 794 1,611
Net cash from/(used in) financing activities 36,779 74,591
Effect of foreign currency translation 1,232 (1,356)
Net increase/(decrease) in cash and cash equivalents 12,494 (95,580)
Cash and cash equivalents at the beginning of the period 149,812 169,472
Cash classified as part of assets held for sale - -
Cash and cash equivalents at the end of the period 162,306 73,892
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: 21 August 2017
Sponsor: Investec Bank Limited
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