Wrap Text
Q3 & 9M 2017 Results for the Three and Nine-Month period ended 30 September 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")
Q3 & 9M 2017 RESULTS
FOR THE THREE AND NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2017
HIGHLIGHTS
EPRA NAV/SHARE EUR2.17 +11%
FFO I/SHARE EUR0.07 +4%
EARNINGS/SHARE EUR0.24 +4%
NET LTV 42% -100bp
Q3 & 9M 2017 HIGHLIGHTS
- Revaluation gain on Galeria Pólnocna of
EUR57m in Q3 2017 and EUR155m to date
- Profit before tax at EUR66m in Q3 and EUR134m
in 9M 2017 (EUR71m in 9M 2016 )
- Earnings per share up to EUR0.13 in Q3 and
EUR0.24 in 9M 2017 (EUR0.23 in 9M 2016)
- EPRA NAV increased 7% in the Q3 and 14%
in 9M to EUR1,019m (EUR897m as of 31 December 2016)
- EPRA NAV / share increased 7% in the Q3
and 11% in 9M to EUR2.17 as of 30 September
2017 (EUR1.95 as of 31 December 2016)
- Gross margin from rental activity at EUR22m in
Q3 and EUR65m in 9M 2017 (EUR65m in 9M 2016)
- FFO I up to EUR12m in Q3 2017 and EUR34m in
9M (EUR32m in 9M 2016) before the impact of
Galeria Pólnocna
- FFO I / share at EUR0.03 in Q3 2017 and EUR0.07
in 9M 2017 (EUR0.07 in 9M 2016)
- EUR105m of construction loans under
negotiations & EUR240m of refinancing loans,
including EUR200m loan related to Galeria
Pólnocna, under negotiations to improve
conditions
PORTFOLIO UPDATE
- Completion of Galeria Pólnocna on budget and
on time
- Acquisition of Belgrade Business Center of
17,700 sq. m in Belgrade
- Acquisition of Cascade office building of 4,200
sq. m in Bucharest
- Strong leasing performance:84,000 sq. m of
office and retail space newly leased and
renewed in 9M 2017
- Occupancy at 93% (94% as at 30 June 2017)
- We obtained building permits for Advance
Business Centre I in Sofia (14,100 sq. m) and
Matrix in Zagreb (21,000 sq. m)
- 6 projects under construction with over 145,000
sq. m
- 6 projects in the planning stage with 143,000
sq. m of office space and 61,000 sq. m and 2
extensions of existing projects for 5,100 sq m
OPERATING PERFORMANCE
9M 2017 Reported Variance %
GMRA EUR65m +1%
EBITDA EUR54m +0%
Profit for the period EUR112m +5%
FFO I EUR34m +5%
Total property EUR1,872m +15%
Net debt EUR795m +13%
Net LTV 42% -100bps
EPRA NAV/share EUR2.17 +11%
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.
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 September 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 over 500 thousand
sq. m of gross commercial space in completed commercial properties and approximately 300 thousand sq. m of
residential space; and (iii) has acquired approximately 112 thousand sq. m of commercial space in completed
commercial properties. Additionally GTC Group developed and sold over 100 thousand sq. m of commercial space
and approximately 76 thousand sq. m of residential space through its associates in Czech Republic.
As of 30 September 2017, the Group`s property portfolio comprised the following properties:
- 36 completed commercial buildings, including 33 office buildings and three retail properties with a total
combined commercial space of approximately 614 sq. m of GLA, of which the Group's proportional
interest amounts to approximately 603 thousand sq. m of GLA;
- six commercial projects under construction, including five office projects and one retail project with total
GLA of approximately 145 thousand sq. m, of which the Group's proportional interest amounts to 145
thousand sq. m of GLA;
- commercial landbank designated for future development;
- one completed residential project; and
- residential landbank.
As of 30 September 2017, the book value of the Group's portfolio amounts to EUR1,871,563 with: (i) the Group's
completed commercial properties account for 85% thereof; (ii) commercial properties under construction – 7%;
(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 September 2017, the Group's completed properties in its three most significant markets, i.e. Poland,
Hungary and Romania, constitute 57%, 14% and 12% of the total book value of all completed properties.
Additionally, the Group manages third party assets in Warsaw, Katowice and 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 9 months ended
30 September 2017.
KEY OPERATING ACHIEVEMENTS IN Q3 & 9M 2017
Value creation will fuel accelerated growth
- Completion of Galeria Pólnocna
- Galeria Pólnocna was completed on budget and opened on time on 14 September
- We attracted nearly 2 million visitors in the first two months
- Revaluation gain of EUR57m in Q3 2017and EUR155m to date
- Refinancing of up EUR200m in advanced negotiations(i.e. EUR84m top-up)
- Acquisition of income generating properties
- Belgrade Business Center of 17,700 sq. m in Belgrade in September 2017
- Cascade office building of 4,200 sq. m in Bucharest in July 2017
- Total investment of EUR46m
- Additional NOI of EUR4.1m annually
- Completion of Galeria Pólnocna an acquisition of BBC and Cascade increased annualized rent by
20% to EUR105m
Further boost to NAV will come from 6 projects under construction with total of 145,000 sq. m GLA and
6 projects in the planning stage with a total GLA of 204,000 sq. m. We obtained building permits for
Advance Business Centre I in Sofia (14,100 sq. m) and Matrix in Zagreb (21,000 sq. m)
- 6 projects under construction with over 145,000 sq. m GLA
- 7,800 sq. m to be completed in Q4 2017 (Artico office building, Warsaw)
- 73,400 sq. m to be completed in 2018 (GTC White House, Budapest, Ada Mall and Green Heart, Belgrade)
- 63,600 sq. m to be completed in 2019/2020 (Advance Business Centre I, Sofia, Green Heart,
Belgrade and Matrix, Zagreb )
- 6 projects in the planning stage with over 143, 000 sq. m of office space and 61,000 sq. m of retail space
(Warsaw, Budapest, Bucharest and Sofia)
- 2 extensions of existing projects for 5,100 sq m: Galeria Jurajska and Cascade in the preparation phase
Strong leasing performance
- 84,000 sq. m of office and retail space newly leased and renewed in 9M 2017 extending current WALT to 3.3 years
- Largest leases: 13,000 sq. m of Romtelecom lease prolongation in City Gate, 5,500 sq. m of IBM lease
prolongation in Duna Tower, 3,500 sq. m of Black Rock new lease in White House, 3,400 sq. m of GFT
lease prolongation in Sterlinga Business Center, 3,000 sq. m of Enterprise Service lease prolongation in
University Business Park
- Occupancy at 93% (94% as at 30 June 2017)
KEY FINANCIAL HIGHLIGHTS IN H1 2017
Rental and service revenues
- Increased to EUR30m in Q3 and EUR88m in 9M from EUR85m in 9M 2016
Reflects mainly completion of University Business Park B and FortyOne II in 2016, FortyOne III and
Galeria Pólnocna in 2017 (EUR3m) as well as acquisition of Premium Point and Premium Plaza in
Bucharest, Sterlinga Business Center in Lódz and Neptun Office Center in Gdansk. BBC in Belgrade
and Cascada in Bucharest, partially offset by disposal of Galeria Burgas and Galeria Stara Zagora
Net profit from development revaluation and impairment
- EUR54m in Q3 and EUR105m in 9M as compared to EUR39m in 9M 2016
Reflects mainly completion of Galeria Pólnocna and 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
- Increased to EUR8m in Q3 and EUR21m in 9M due to an increase in average level of debt
Cost of finance down 3.1% (from 3.2%) due to decrease in average interest rate and change in hedging
strategy
Taxation
- Tax amounted to EUR14m in Q3 and EUR22m in 9M as comparted to EUR36m tax benefit in 9M 2016
Reflects mainly increased provision related to revaluation gain
Net profit
- EUR52m in Q3 and EUR112m in 9M compared to EUR107m in 9M 2016 mostly on revaluation gain
Funds From Operations (FFO I)
- At EUR34m compared to EUR32m in 9M 2016 despite disposal of Galleria Stara Zagora and Galleria Burgas
Total property value
- At EUR1,872m as of 30 September 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 7% in Q3 11% in 9M to EUR2.17 from EUR1.95 on 31 December 2016
Corresponding to EPRA NAV of EUR1,019m compared to EUR897m as of 31 December 2016
Financial liabilities
- At EUR925m as of 30 September 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 42% on 30 September 2017 (43% on 31 December 2016)
- Interest coverage at 3.6x on 30 September 2017 (3.5x on 31 December 2016)
- EUR105m of construction loans under negotiations
- EUR240 of refinancing loans under negotiations to improve conditions, including EUR200 refinancing of
Galeria Pólnocna
Cash and cash equivalents
- Decreased to EUR102m as of 30 September 2017 from EUR150m as of 31 December 2016 due to finance
activity
BASIS OF PREPARATION
The Interim Condensed Consolidated Financial Statements for the nine-months period ended
30 September 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 applied by the Group 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, 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 September 2017
(in thousands of euro)
30 September 2017 31 December 2016
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 1,726,022 1,501,770
Investment property landbank 124,597 102,905
Residential landbank 13,230 13,761
Investment in associates and joint ventures 1,698 3,803
Property, plant and equipment 6,871 6,002
Deferred tax asset 59 1,075
Other non-current assets 192 353
1,872,669 1,629,669
Current assets
Residential inventory 7,714 5,355
Accounts receivables 4,730 5,363
Accrued income 431 767
VAT receivable 15,525 17,389
Income tax receivable 619 652
Prepayments and deferred expenses 2,031 2,558
Escrow account 11 1,504 -
Short-term deposits 14 27,825 27,925
Cash and cash equivalents 102,453 149,812
162,832 209,821
TOTAL ASSETS 2,035,501 1,839,490
30 September 31 December 2016
2017 (audited)
(unaudited)
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 (2,796) (3,631)
Foreign currency translation 2,048 1,872
Accumulated profit 397,187 315,195
891,540 787,432
Non-controlling interest 4,113 2,891
Total Equity 895,653 790,323
Non-current liabilities
Long-term portion of long-term borrowing 813,961 739,031
Deposits from tenants 8,969 8,043
Long term payable 2,625 2,730
Provision for share based payment 4,039 2,046
Derivatives 2,122 2,778
Provision for deferred tax liability 119,215 98,237
950,931 852,865
Current liabilities
Investment, trade payables and provisions 61,623 36,739
Current portion of long-term borrowing 116,006 153,902
VAT and other taxes payable 1,463 1,122
Income tax payable 172 530
Derivatives 1,583 2,553
Advances received 8,070 1,456
188,917 196,302
TOTAL EQUITY AND LIABILITIES 2,035,501 1,839,490
Annex 2 Consolidated Income Statement for 9-month period ended 30 September 2017
(in thousands of euro)
Nine-month Three-month Nine-month Three-month
period ended period ended period ended period ended
30 September 30 September 30 September 30 September
2017 2017 2016 2016
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues from rental activity 87,629 29,648 85,159 30,109
Residential revenue 442 - 5,306 1,530
Cost of rental activity (22,592) (7,540) (20,533) (7,260)
Residential costs (379) - (4,383) (1,430)
Gross margin from operations 65,100 22,108 65,549 22,949
Selling expenses (1,558) (594) (2,304) (907)
Administration expenses (10,320) (2,666) (8,682) (3,685)
Profit from revaluation 105,314 54,220 39,385 15,318
Other income 1,153 289 1,126 357
Other expenses (2,501) (1,150) (2,456) (868)
Profit (loss) from continuing
operations before tax and finance
income / (expense) 157,188 72,207 92,618 33,164
Foreign exchange differences gain/
(loss), net (2,819) 1,339 2,589 (547)
Finance income 121 29 1,242 81
Finance cost (20,707) (7,694) (21,690) (7,803)
Share of profit (loss) of associates
and joint ventures 184 - (4,178) (375)
Profit before tax 133,967 65,881 70,581 24,520
Taxation (22,272) (13,785) 36,031 46,885
Profit (loss) for the period 111,695 52,096 106,612 71,405
Attributable to:
Equity holders of the Company 111,510 51,876 106,670 71,406
Non-controlling interest 185 220 (58) (1)
Basic earnings per share (in Euro) 0.24 0.13 0.23 0.16
Annex 3 Consolidated Statement of Cash Flow for the 9-month period ended 30 September 2017
(in thousands of euro)
Nine-month period Nine-month period
ended ended
30 September 2017 30 September 2016
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 133,967 70,581
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (105,314) (39,385)
Share of loss (profit) of associates and joint ventures (184) 4,178
Profit on disposal of assets - (5)
Foreign exchange differences loss/(gain), net 2,819 (2,589)
Finance income (121) (1,242)
Finance cost 20,707 21,690
Share based payment (income) / expenses 1,993 839
Depreciation and amortization 308 325
Operating cash before working capital changes 54,175 54,392
Decrease in accounts receivables, prepayments and other current assets 388 723
(Increase)/Decrease in inventory and residential land bank (2,359) 2,768
Increase/(decrease) in advances received 5,274 942
Increase in deposits from tenants 1,495 1,951
Increase/(decrease) in trade and other payables (506) (1,492)
Cash generated from operations 58,467 59,284
Tax paid in the period (2,751) (3,183)
Net cash flows from operating activities 55,716 56,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (106,354) (63,823)
Purchase of land and completed assets and land (51,064) (133,551)
Purchase of subsidiary (15,896) (5,601)
Increase in Escrow accounts for purchase of assets (1,504) -
Sale (including advances) of investment property 3,067 9,614
Sale of subsidiaries 37,545 4,800
Purchase of minority (352) (18,108)
Sale of shares in associate 1,250 3,334
VAT on purchase/sale of investment property 2,046 (10,145)
Interest received 87 319
Loans granted to associates - (123)
Loans repayments from associates 1,218 11,347
Net cash flows from/(used in) investing activities (129,957) (201,937)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 123,346 174,116
Repayment of long-term borrowings (68,965) (67,572)
Dividends paid (8,061) -
Interest paid (18,173) (18,377)
Loans origination cost (1,537) (959)
Decrease/(increase) in blocked deposits 100 (4,408)
Net cash from/(used in) financing activities 26,710 82,800
Effect of foreign currency translation 172 867
Net increase/(decrease) in cash and cash equivalents (47,359) (62,169)
Cash and cash equivalents at the beginning of the period 149,812 169,472
Cash and cash equivalents at the end of the period 102,453 107,303
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
Ryszard Wawryniewicz
Registered office of the Company
17 Stycznia 45A,
02-146 Warsaw
Poland
Warsaw, Poland
Date: 13 November 2017
Sponsor: Investec Bank Limited
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