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GLOBE TRADE CENTRE S.A. - Q3 & 9M 2017 Results for the Three and Nine-Month period ended 30 September 2017

Release Date: 13/11/2017 08:00
Code(s): GTC     PDF:  
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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