Wrap Text
Condensed consolidated financial information for the nine month period ended 30 September 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 NINE MONTH PERIOD ENDED 30 SEPTEMBER 2017
Highlights
Distributable earnings EUR59.2 million
Distribution per share 8.41 euro cents
Market cap up to EUR962 million
Vacancies 1.99%
Retail WALT by NOI 4.7 years
EUR55.4 million acquisition of Solna in Northern Poland
Opening of third phase of Outlet Park Szczecin (3 300m2)
Post period EUR692 million acquisition of M1 portfolio of 12 properties
Consolidated statement of profit or loss
Period from Period from
1 January 4 January
2017 until 2016 until
30 September 30 September
2017 2016
EUR'000 EUR'000
Rental income and recoveries 107 216 65 203
Property operating expenses (32 805) (20 340)
Net property income 74 411 44 863
Other income 1 889 1 435
Other expenses (952) (2 663)
Selling costs (575) (343)
Administrative expenses (5 679) (6 338)
Net operating profit 69 094 36 954
Gain on investment properties 12 281 12 507
Profit from operations 81 375 49 461
Finance income 2 444 3 304
Finance costs (16 772) (14 083)
Cost of refinancing - (5 881)
Foreign exchange (losses)/gains (734) (11 811)
Participation in profits of joint ventures (1 117) -
Profit before taxation 65 196 20 990
Taxation
Current income tax (2 497) (685)
Deferred tax (7 816) 41 009
Profit for the period 54 883 61 314
Earnings per share:
Basic and diluted earnings, on profit for
the period (EUR cents) 8.3 21.0
Consolidated statement of other comprehensive income
Period from Period from
1 January 4 January
2017 until 2016 until
30 September 30 September
2017 2016
EUR'000 EUR'000
Profit for the period 54 883 61 314
Other comprehensive income to be reclassified to
profit or loss in subsequent periods
Foreign currency translation reserve (4 312) 12 024
Other comprehensive income, net of tax, to be
reclassified to profit or loss in subsequent periods (4 312) 12 024
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 50 571 73 338
Total comprehensive income attributable to the parent
for the period, net of tax 50 571 73 338
Consolidated statement of financial position
As at As at
30 September 31 December
2017 2016
EUR'000 EUR'000
ASSETS
Non-current assets 1 815 623 1 423 834
Investment in joint ventures 94 750 54 285
Tangible assets 51 85
Investment property 1 692 694 1 359 432
Financial assets 28 128 10 032
Current assets 81 784 85 564
Inventory 482 74
Tax receivable 4 350 9
Trade and other receivables 12 739 32 658
Financial assets 7 874 9 057
Restricted cash 20 865 21 845
Cash and cash equivalents 35 474 21 921
Total assets 1 897 407 1 509 398
EQUITY AND LIABILITIES
Equity 766 579 623 794
Share capital 571 989 474 702
Share premium 146 554 95 095
Accumulated profit 52 782 54 431
Foreign currency translation reserve (4 746) (434)
Non-current liabilities 1 072 795 818 458
Bank borrowings 981 103 741 776
Related-party liabilities 1 733 5 885
Other liabilities 12 428 11 881
Deferred tax liability 77 531 58 916
Current liabilities 58 033 67 146
Bank borrowings 25 080 52 845
Related-party financial liabilities 2 958 221
Tax payables 8 062 175
Trade payables 21 847 13 819
Provisions 86 86
Total equity and liabilities 1 897 407 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 1 January 2017 474 702 95 095 54 431
Profit for the period - - 54 883
Other comprehensive income - - -
Total comprehensive income - - 54 883
Issue of ordinary shares 97 287 55 687 -
Acquisition of subsidiary and
transaction costs - (4 228) -
Special dividend due - - (1 528)
Dividend paid - - (55 004)
Balance as at 30 September 2017 571 989 146 554 52 782
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 1 January 2017 (434) 623 794
Profit for the period - 54 883
Other comprehensive income (4 312) (4 312)
Total comprehensive income (4 312) 50 571
Issue of ordinary shares - 152 974
Acquisition of subsidiary and transaction costs - (4 228)
Special dividend due - (1 528)
Dividend paid - (55 004)
Balance as at 30 September 2017 (4 746) 766 579
Condensed consolidated statement of cash flow
Period from Period from
1 January 4 January
2017 until 2016 until
30 September 30 September
2017 2016
EUR'000 EUR'000
Cash generated from operations 96 700 81 963
Tax paid (2 397) -
Dividends paid/due to shareholders (56 532) (22 333)
Net cash generated from operating activities 37 771 59 630
Net cash utilised in/generated from investing activities (364 884) (236 798)
Net cash generated from/(utilised in) financing activities 346 094 272 214
Net increase in cash and cash equivalents 18 981 95 046
Cash and cash equivalents at the beginning of the period 21 921 -
Effect of foreign exchange fluctuations (5 428) 12 482
Cash and cash equivalents at the end of the period 35 474 107 528
Headline earnings reconciliation
Period from Period from
1 January 4 January
2017 until 2016 until
30 September 30 September
2017 2016
EUR'000 EUR'000
Profit for the period attributable to EPP shareholders 54 883 61 314
Change in fair value of investment properties (12 281) (12 507)
Headline and diluted earnings attributable to
EPP shareholders 42 602 48 807
Actual number of shares in issue 704 970 211 414 901 280
Weighted number of shares in issue 660 103 366 291 750 144
Basic and diluted earnings per share (EUR cents)* 8.3 21.0
Headline earnings and diluted headline earnings
per share (EUR cents)** 6.5 16.7
* 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
Introduction
During the past quarter EPP continued implementing its strategy of building the group into
one of the leading retail landlords in Poland with the EUR55.4 million acquisition of
Solna shopping centre in Northern Poland and continued enhancements in the existing
portfolio with the opening of the third phase of Outlet Park Szczecin, adding
EUR0.7 million in annual net operating income ("NOI"). EUR28.5 million was invested
in capital improvements throughout the portfolio with the extension to Galaxy opening
post period end in November.
EPP's asset management and leasing team has been bolstered during the period and the
experienced team is well positioned to handle all portfolio and asset management functions,
including the commercialisation and re-commercialisation of available space.
Post period end EPP announced its acquisition of the M1 portfolio comprising 12 retail
properties located across Poland (see Acquisitions below). In line with EPP's strategy
three offices were disposed of post period end (see Disposals below).
"Our Q3 results reflect our commitment to delivering sustainable growth in ROE and NAV
while building the company into one of the leading retail landlords in Poland. Our
strategic acquisitions as well as existing portfolio enhancements and extensions
during the period as well as post the quarter end are a further step in achieving
this aim," commented Hadley Dean CEO.
Profile
EPP is a real estate company that indirectly owns a portfolio of 14 prime retail and nine
prime office assets located throughout Poland, a dynamic Central and Eastern European ("CEE")
economy with a very attractive real estate market, and two retail developments in Warsaw.
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
5.4 years in the retail sector and 3.8 years in the office sector by gross lettable area ("GLA").
The investment portfolio has a diversified tenant base of leading retailers with international
brands in the case of retail properties, and primarily blue chip companies in the case of
office properties.
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.
On 30 August 2016 EPP listed on Euro MTF market of the Luxembourg Stock Exchange
("LuxSE") and on 13 September 2016 listed on the Johannesburg Stock Exchange ("JSE")
in the Real Estate Holdings and Development Sector. The company has primary listings
on both the LuxSE and the Main Board of the JSE.
The condensed consolidated financial statements for the nine months ended 30 September
2017 comprise the financial statements of the company and its subsidiaries (the "group" or
"EPP Group").
Financial results
The net profit for the nine month period ended 30 September 2017 amounted to
EUR54.883 million and distributable income amounted to EUR59 276 million. Total net
asset value amounted to EUR844 million equating to an NAV per share of EUR1.20. The
loan-to-value ratio remained static at 52.7% with an average cost of debt of 2.09%.
Segment information
Retail Office Total
EUR'000 EUR'000 EUR'000
Nine month period ended
30 September 2017
Segment profit
Rent and recoveries income 75 031 32 185 107 216
Property operating expenses (24 066) (8 739) (32 805)
Net property income 50 965 23 446 74 411
As at 30 September 2017
Segment assets
Investment in joint ventures 94 750 - 94 750
Investment property 1 270 782 421 912 1 692 694
Total segment assets 1 365 532 421 912 1 787 444
Bank borrowings 685 772 234 541 920 313
Total segment liabilities 685 772 234 541 920 313
Headline earnings to distributable income reconciliation
Period from Period from
1 January 4 January
2017 until 2016 until
30 September 30 September
2017 2016
EUR'000 EUR'000
Headline and diluted earnings attributable to
EPP shareholders 42 602 48 807
Amortised cost valuation of financial liabilities 2 310 (2 682)
Change in deferred tax 7 816 (41 009)
Foreign exchange losses/(gains) 734 11 810
Cost of refinancing - 5 881
Fair value losses/(gains) in joint ventures 1 714 -
Other non-distributable items 1 778 314
Non-distributable capital gains (1 356) -
Antecedent dividend 3 678 -
Distributable income 59 276 23 121
Actual number of shares in issue 704 970 211 414 901 280
Distributable income per share (EUR cents) 8.41 5.6
Portfolio performance
During the period we increased the portfolio from 10 to 15 retail properties. Retail GLA
increased from 402 638m2 to 426 845m2 with footfall up 5.1% and sales increasing 9.6%.
The office portfolio comprises 188 795m2 of GLA.
Construction at Galeria Mlociny in Warsaw is progressing well, on schedule and on budget.
The development is 57% pre-let with anchor tenants including MediaMarkt, Zara,
Intermarche, Van Graaf, H&M, C&A, Go Sport, Rossman, Smyk. Towarowa in Warsaw is on
schedule and is awaiting town planning approvals.
Vacancy profile
Vacancies across the portfolio reduced during the quarter from 2.26% to 1.99% for the
total portfolio with vacancies in retail at 2.7% and in offices at 1.66%.
The vacancy profile indicated below reflects the vacancy percentage in terms of current
GLA by sector.
Vacancy based
on total GLA*
(%)
Office 2.7**
Retail 1.66
Total 1.99**
* Based on existing leases at 30 September 2017.
** Including three years 100% rental guarantee from Echo Investment S.A.
Tenants
During the quarter retail tenants totalled 1 402 with 123 office tenants.
Geographic profile
The portfolio is located in high catchment, rapidly growing cities across Poland as outlined
below:
By fully
By GLA let NOI
City Project % %
Kielce Galeria Echo, Astra Park 13.95 14.16
Szczecin Galaxy, Outlet, Oxygen 12.99 13.12
Wroclaw Pasaz Grunwaldzki, West Gate 10.53 15.38
Krakow Zakopianka, Opolska Business Park 7.52 8.14
Kalisz Galeria Amber 5.46 4.88
Warszawa Park Rozwoju 5.44 4.92
Belchatów Galeria Olimpia, CH Belchatow 5.31 3.62
Jelenia Góra Galeria Sudecka 4.95 3.66
Katowice A4 Business Park etap I-III 4.87 4.74
Poznan Malta Office Park 4.59 4.83
Wloclawek Wzorcownia Wloclawek 4.13 4.07
Gdansk Tryton 3.88 3.76
Zamosc Twierdza Zamosc 3.87 3.74
Inowroclaw Galeria Solna 3.84 3.66
Klodzko Twierdza Klodzko 3.74 3.11
Lomza CH Veneda 2.44 2.32
Lodz Symetris 1.56 1.48
Przemysl CH Przemysl 0.94 0.43
Total 100.00 100.00
Sectoral profile
By fully
By GLA let NOI
% %
Retail 69.33 70.66
Office 31.88 30.58
Total 100.00 100.00
WAULT
By rental
Sector By GLA income
Retail 5.3 4.7
Office 3.7 3.8
Weighted average unexpired lease term in years.
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. The predominantly
retail focused portfolio is located in one of the most dynamic and fastest growing economies
in Europe. The company continues to expand its team of property and financial professionals
to adequately support the growth of its portfolio. The Polish economy continues to perform
well and property fundamentals currently remain favourable.
EPP continues to be well positioned to operate and benefit from favourable market conditions.
The board is confident that the company will meet its 2017 full year dividend guidance of
EUR10.8 cents per share.
EPP’s dividend for the 12 month period to 31 December 2018 is forecast to increase by between
7.5% and 8.5%. This dividend growth is based on the following assumptions:
- That a stable global and Polish macro-economic environment will prevail;
- No major tenant failures;
- That the acquisition of the Metro tranche 1 acquisition is implemented in accordance with
its terms and the planned sale of certain office assets is implemented in accordance with
EPP’s policy framework;
- That no new acquisitions or disposals (beyond those already publicly announced) are
implemented during the reporting period.
This guidance and the forecast underlying such statement are reported on by the board and
have not been reviewed by EPP’s auditors.
Basis of preparation
The condensed consolidated financial information for the period ended 30 September 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 financial statements for the period ended
30 September 2017, which have not been reviewed or reported on by EPP's independent
external auditors.
Subsequent events
Acquisitions
M1 portfolio
On 10 October 2017, EPP concluded a preliminary agreement relating to the acquisition of
a portfolio comprising eight M1 superregional shopping centres (with GLAs ranging from
30 000m2 to 55 000m2) and four PP power retail parks (with GLAs ranging from 20 000m2
to 35 000m2) with over 620 stores situated in strong regional cities across Poland. The M1
portfolio has an aggregate gross lettable area of 446 500m2.
The transaction will occur in three separate tranches of:
- firstly, the First Tranche Portfolio comprising four properties with an aggregate GLA of
194 400m2, an aggregate value of EUR358.7 million and an aggregate purchase
consideration of EUR135.0 million (the "First Tranche Acquisition");
- secondly, the Second Tranche Portfolio comprising a further six properties with an
aggregate GLA of 184 000m2, an aggregate value of EUR222.5 million and an aggregate
purchase consideration of EUR75.2 million (the "Second Tranche Acquisition"); and
- thirdly, the Third Tranche Portfolio comprising a further two properties with an aggregate
GLA of 68 100m2, an aggregate value of EUR110.9 million and an aggregate purchase
consideration of EUR44.1 million (the "Third Tranche Acquisition").
The expected completion date of the:
- First Tranche Acquisition is late December 2017 or January 2018;
- Second Tranche Acquisition by either 27 June 2019 or 10 July 2019; and
- Third Tranche Acquisition by either 29 June 2020 or 9 July 2020.
The delay in completing the Second and Third Tranche Acquisitions is to enable the seller
to implement various contracted asset management initiatives (including certain lease
renewals or renegotiations) to align those acquisitions with EPP's investment requirements
and strategy. Further details regarding the acquisition of the M1 portfolio can be found
in the announcements published on 11 October 2017 and 4 December 2017.
In management meetings with investors in South Africa last week a few queries regarding
the transaction were raised. These have been addressed in a document available on the
EPP website www.echo-pp.com.
Disposals
On 3 October 2017, EPP and Echo Polska Properties (Cyprus) PLC (EPP's wholly owned
subsidiary) concluded a preliminary agreement with Griffin Premium RE N.V. (the "Purchaser")
for the disposal of a portfolio of office properties, being Tryton Business House in Gdansk,
A4 Business Park in Katowice and West Gate in Wroclaw (the "Office Portfolio"). The agreed
estimated transaction price for the shares in the companies controlling the Office Portfolio
shall amount to EUR160 million (the "Price"), (jointly the "Transaction"). The company
intends utilising the sale proceeds from the disposal to finance further retail acquisitions.
Subject to the satisfaction of certain conditions by 31 January 2018 (with a mechanism for
prolonging the long stop date in case the condition listed under item 3 below is not satisfied
on time), EPP and the Purchaser shall be obliged to enter into a final share purchase
agreement in respect of the shares, and consequently the Purchaser shall pay the Price
and the Seller shall transfer the shares.
The conditions include:
1. the acquisition of at least 50% plus one share in the share capital of the Purchaser by
Globalworth Asset Managers SRL and/or Globalworth Real Estate Investments Ltd.
("GREIL") in the tender offer announced by GREIL pursuant to an investment agreement
relating to the shares in the Purchaser executed on or about the date of the agreement
for the disposal of the Office Portfolio;
2. the receipt by the Seller of the originals, and by the Purchaser of copies, from the
relevant financing banks of a payoff letter(s) specifying the amount to be paid to the
financing banks upon the completion of the Transaction to discharge the in-place
financing; and
3. the approval of the acquisition of shares by the general meeting of shareholders of
the Purchaser.
Further details on the disposal of the Office Portfolio can be found in the announcement
published on 4 October 2017.
By order of the board
Echo Polska Properties N.V.
14 December 2017
For more information
Java Capital
JSE Sponsor
Phone: +27 11 722 3050
M Partners
Luxembourg Listing Agent
Phone: +352 263 868 602
Date: 14/12/2017 02:45:00 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.
Sharenet Sites 
