Wrap Text
Reviewed condensed consolidated financial results for the year ended 31 December 2017
NEPI Rockcastle plc is incorporated and registered in the Isle of Man with registered number 014178V
Registered office: 2nd Floor, 30 Athol Street Douglas, Isle of Man, IM1 1JB
JSE share code: NRP
Euronext share code: NRP
ISIN: IM00BDD7WV31
('NEPI Rockcastle', 'the Group' or 'the Company')
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017
All information below excludes joint ventures, unless otherwise stated
DIRECTORS' COMMENTARY
NEPI Rockcastle is the largest listed real-estate group focused on Central and Eastern Europe
("CEE"). The group was formed from the merger of New Europe Property Investments ("NEPI")
and Rockcastle Global Real Estate Company Limited ("Rockcastle") in July 2017.
FINANCIAL HIGHLIGHTS
- Total value of direct property portfolio owned and managed by NEPI Rockcastle of over EUR5
billion (including joint-ventures);
- Acquisitions and developments finalised during 2017 of EUR947 million, with 339,800m(2) added
to Gross Lettable Area ("GLA");
- Net Operating Income ("NOI") of EUR267 million in 2017 (including EUR35 million reported by
Rockcastle for the first half of the year), representing the income from properties acquired
and developments finalised in 2017 only from their effective date; annualised passing rent
amounts to EUR319 million;
- Collection of 99.91% of annual contractual rental income and expense recoveries;
- Service charge costs 98% recovered;
- Occupancy of 96.5%, slightly lower than 2016 due to new acquisitions and extensions;
- Net Listed securities portfolio represented 10% of total assets; as previously stated,
this will decrease in 2018, as the acquisitions and development programme is implemented;
- Adjusted NAV per share of EUR7.10, reflecting a growth of 19% compared to NEPI's adjusted NAV as at
31 December 2016, and a growth of 11% compared to the pro-forma combined adjusted NAV at 31 December 2016
published in the NEPI Rockcastle Prospectus;
- Distributable earnings per share for the second half of 2017 of 24.80 euro cents; together with
the first half distribution of 23.46 euro cents per share, the total pay-out for the year is 48.26
euro cents per share, 17.10% higher than the 2016 pro-forma distribution of 41.21 euro cents per share
published in the NEPI Rockcastle Prospectus;
- Loan to Value ratio ("LTV") of 26%, below the group's target of 35%;
- Investment grade credit rating by all three major rating agencies;
- Successful EUR500 million Eurobond issue in November 2017, further reducing weighted average
cost of debt to 2.2%, and increasing the remaining weighted average maturity to 4.4 years;
- Currently, all interest rate exposure related to long-term loans is 100% hedged, with a
remaining weighted average hedge term of 5.1 years.
OPERATIONAL HIGHLIGHTS
- Successful completion of the merger of NEPI and Rockcastle created CEE's leading retail
property investment and development group, with a portfolio of 56 income-producing
properties (including joint-ventures) and five properties under development;
- Market entry into Bulgaria and Hungary, with the acquisition of prime assets in Sofia and
Budapest, taking NEPI Rockcastle's presence to a total of eight CEE markets. NEPI Rockcastle
now controls the two leading shopping centres in the Bulgarian capital (Serdika Center and
Paradise Center);
- Consolidation of the Group's significant position on the Polish retail market, through the
acquisition of Alfa Bialystok and the secured acquisition of Serenada and Krokus Shopping
Centres, which is expected to be finalised in Q3 2018;
- Completion of five developments or extensions, primarily in Romania, with lettings to leading
international retailers including Carrefour, Cinema City, Douglas, Hervis, New Yorker, Orsay,
Sephora, Starbucks, and multiple Inditex brands;
- Five developments and 11 extensions or redevelopment projects ongoing in CEE, totalling
294,600m(2), across five different markets;
- Tenants' turnover increased by 8.3%, while turnover/ m(2) increased by 6.3% (like-for-like);
- Footfall increased by 3.5% (like-for-like).
COMPANY PROFILE
NEPI Rockcastle owns and manages a portfolio of dominant retail properties in the following
high-growth CEE countries: Romania, Poland, Slovakia, Hungary, Bulgaria, Croatia, Czech
Republic and Serbia. The Group benefits from a highly-skilled internal management team which
combines asset management, investment, development, leasing and financial expertise. The
Group is well positioned for growth, driven by its best-in-class operating platform, as well as its
historically proven capacity to deploy existing capital resources into attractive direct property
investments. Geographically diverse management skills allow NEPI Rockcastle to pursue CEE
property opportunities more efficiently, benefitting from a strategic advantage in the acquisition,
development and management of properties. NEPI Rockcastle continues the active investment
policy that supported the growth of NEPI and Rockcastle over recent periods, with a strong
pipeline of acquisitions and developments currently being pursued in its targeted region.
NEPI Rockcastle's direct property geographic profile as at 31 December 2017 by asset value was:
Romania 42%
Poland 25%
Bulgaria 10%
Slovakia 8%
Hungary 6%
Croatia 5%
Czech Republic 3%
Serbia 1%
NEPI Rockcastle also holds a portfolio of liquid, listed securities of large companies that operate
primarily in the US, UK, and Continental Europe. This portfolio provides easily-accessible
resources to fund suitable acquisitions. Management expects to convert the majority of this
portfolio to direct property investments during 2018.
The Group's financial profile includes maintaining high liquidity, low gearing, and a diverse debt
structure, which combines secured and unsecured bank debt with unsecured bonds listed on
the Irish Stock Exchange. NEPI Rockcastle is investment-grade rated by Moody's (Baa3, positive
outlook), Standard & Poor's (BBB, stable outlook) and Fitch (BBB, stable outlook).
NEPI Rockcastle's shares are listed on the Johannesburg Stock Exchange ("JSE") and Euronext
Amsterdam ("Euronext"). The Group plans to distribute at least 90% of its distributable earnings
on a semi-annual basis.
ACQUISITIONS OF INVESTMENT PROPERTY
The Group completed the acquisition and development of a number of properties during
2017, discussed below. The country and effective or opening date are included in brackets.
Populations are estimates.
NEPI Rockcastle completed acquisitions of EUR827 million during 2017, adding a total of over
265,000m(2) GLA to its direct property portfolio. The Group entered the Bulgarian market
through the acquisition of Serdika Center, and a few months later consolidated its dominant
position in Bulgaria by acquiring Paradise Center, Sofia. The Group also entered its eighth CEE
market, Hungary, through the acquisition of Arena Plaza in the capital city Budapest.
Serdika Center and Office (Sofia, Bulgaria - 22 August 2017)
NEPI Rockcastle acquired Serdika Center, a 51,500m(2) GLA modern shopping centre with a strong
tenant mix, benefitting from an excellent location close to Sofia's city centre and Serdika Office,
a Class A office situated atop the shopping centre, with 28,500m(2) GLA. Sofia, the capital city of
Bulgaria, has a population of 1.32 million residents, with 327,000 inhabitants within a 15-minute
drive from Serdika Center. The centre has an annual footfall in excess of 6.5 million people.
Arena Plaza (Budapest, Hungary - 15 September 2017)
The Group acquired Arena Plaza, a shopping mall in Budapest with 66,000m(2) GLA, enjoying
a modern layout over two floors, convenient parking and an attractive tenant mix. In addition,
the Group acquired a plot of land of circa 21,800m(2) adjoining Arena Plaza that will be used for
further expansion. Budapest, the capital city of Hungary has a population of 1.75 million, and
716,000 inhabitants are within a 15-minute drive from the shopping centre. More than 10 million
people visit Arena Plaza on an annual basis.
Alfa Bialystok (Bialystok, Poland - 9 November 2017)
With a GLA of 37,000m(2), Alfa Bialystok is the largest, dominant fashion destination in
Bialystok, Poland. The city is inhabited by approximately 297,000 people and is the most
populous urban area within a radius of 200km in the north-east region of the country. It is a
modern three-level shopping mall with 150 retail units and footfall exceeding 5.5 million in the
last year.
Paradise Center (Sofia, Bulgaria - 1 December 2017)
The Group acquired Paradise Center, the largest modern shopping centre in Sofia with 82,000m(2)
GLA, and consolidated its position in the Bulgarian market with ownership of the two best
performing retail assets in the capital city. Paradise Center is the best performing shopping
centre in Sofia, a city-wide destination located in the wealthy southern part of the city, with an
annual footfall in excess of 10.4 million visitors. Over 286,000 inhabitants are located within a
15-minute drive from the shopping centre.
Serenada and Krokus Shopping Centres (Krakow, Poland)
NEPI Rockcastle entered into an agreement to acquire Serenada and Krokus Shopping Centres,
which will be effective subject to satisfaction or waiver of a number of conditions precedent,
which is expected to occur in Q3 2018. The shopping centres have a current GLA of 68,900m(2)
and the envisaged extension will result in a single integrated shopping centre with a GLA of over
100,000m(2) with a planned completion date in 2021. This acquisition consolidates the Group's
position as one of the largest retail owners in Poland. Krakow, Poland's second largest city, has
a population of 767,000 residents, and 336,000 inhabitants are within a 15-minute drive of the
two shopping centres.
DEVELOPMENTS AND EXTENSIONS
The Group invests strategically in developments that contribute significantly to growth in
distributable earnings per share. NEPI Rockcastle is pursuing a development pipeline which
exceeds EUR1,200 million (including redevelopments and extensions, estimated at cost), of which
EUR190 million were spent during 2017. Undertaking redevelopments and extensions to existing properties
is a driver for future growth, ensuring that the Group maintains its pre-eminent position in the market
and its superior retail relationships thus de-risking the business and delivering higher quality earnings.
COMPLETED DEVELOPMENTS AND EXTENSIONS
The Office Cluj-Napoca third phase (Romania, 30 June 2017)
The Group, together with its joint venture partner, completed the 20,200m(2) GLA third phase of
The Office, Cluj-Napoca. The total GLA of the office complex is now 63,600m(2). The building is
99% let. Tenants include renowned corporations such as 3 Pillar Global, 8x8, Betfair, Bombardier,
Magneti Marelli, Telenav, Thomsons and Wolters Kluwer.
Victoriei Office Bucharest (Romania, 30 June 2017)
Outstanding permits for internal fit-out of the 7,800m(2) GLA landmark office located in central
Bucharest were received and the development was completed during the year. The building is
fully let to renowned corporations such as Fitbit, General Electric and Philip Morris.
Galeria Wolomin (Poland, 31 August 2017)
The retail park with 6,600m(2) GLA adjoins the existing Galeria Wolomin shopping centre. It
opened for trading on 31 August 2017, and increased the total retail GLA to 30,700m(2).
Shopping City Galati extension (Romania, 26 November 2017)
The Group successfully completed construction of the 21,000m(2) GLA extension to Shopping
City Galati. Shopping City Galati is now a 49,100m(2) GLA regional mall, located in Galati, a city
of 305,000 residents. The centre is the prime shopping destination for the 559,000 inhabitants
that live within a 45-minute catchment area. The centre is 84.9% let. The extension was leased
to tenants such as: Bershka, Cinema City, Douglas, Hervis, Pandora, Pull&Bear, Sephora, Sport
Vision, Starbucks and Stradivarius.
Shopping City Ramnicu Valcea (Romania, 7 December 2017)
NEPI Rockcastle completed the 28,200m(2) GLA regional mall in Ramnicu Valcea, a city of 119,000
residents. The centre services 315,000 inhabitants within a 45-minute catchment area. 95.3% of
the centre is leased to tenants such as: Altex, Carrefour, Cinema City (not yet opened), Douglas,
Hervis, Jysk, NewYorker and Orsay.
DEVELOPMENTS AND EXTENSIONS PIPELINE
Shopping City Satu Mare (Romania)
NEPI Rockcastle has received the required permits for the development of a 28,700m(2) shopping
mall in Satu Mare. The city has a population of 123,000 residents and 288,000 inhabitants live
within a 45-minute drive thereof. Tenants include: Carrefour, with a 10,000m(2) hypermarket, and
key fashion retailers. Construction will start in the next month, and management targets opening
by the end of 2018.
Promenada Novi Sad (Serbia)
Construction has started on the first phase of a shopping mall of approximately 49,400m(2) GLA.
The city has a population of 319,000 residents and 607,000 inhabitants live within a 45-minute
drive of the site. Tenant demand is strong and various international brands are planning to join
the scheme. Numerous retailers such as: Adidas, Calvin Klein, Cineplexx, Converse, Diesel, Guess,
Lacoste, Levi's, Nike, Replay, Sport Vision, Superdry, Timberland, Under Armor and Univerexport
(with a 3,300m(2) supermarket) have already been signed. The project has a unique central
location and will include a large food-court and dining area (1,400m(2)), a fitness operator and a
cinema. The Group plans to open the centre in the fourth quarter of 2018.
Platan Shopping Centre (Poland)
Extension and refurbishment works, including the construction of a multi-level car park, food
court and entertainment level, started in June 2017.The extension is scheduled to open in
November 2018 and will increase the shopping centre's GLA to over 39,700m(2).
Solaris Shopping Centre (Poland)
The building permit has been received and construction has started to extend the shopping
centre by approximately 9,000m(2). The project includes the development of multi-level
basement parking and a new town square in front of the centre's main entrance. Tenant demand
is strong and the extension area is scheduled to be completed in the first quarter of 2019.
Promenada Mall extension (Bucharest, Romania)
There has been limited traction in obtaining the required approvals and permits for the retail
extension and integrated office building of Promenada Mall, a shopping centre located in
Bucharest's central business district. Progress has been made, however at a significantly
slower rate than expected due to reasons outside of the Group's control. The retail extension
will include new fashion brands, a 14-screen Cinema City, additional leisure and entertainment
facilities and 1,600 new parking spaces.
Shopping City Sibiu reconfiguration and extension (Romania)
The Group received zoning for refurbishing, reconfiguring and extending Shopping City Sibiu, a
78,200m(2) mall. The centre serves a catchment area of 286,000 inhabitants within a 45-minute
drive. The extension will add approximately 9,700m(2) GLA and will improve the centre's fashion
offering and will further strengthen its market positioning. Nepi Rockcastle expects to finalise
the extension in December 2019.
Shopping City Targu Mures (Romania)
The Group is pursuing zoning approvals and permitting to develop a 32,900m(2) (in phase I) mall
in Targu Mures, a city with a population of 150,000 residents. The centre will serve a catchment
area of 306,000 inhabitants within a 45-minute drive. A large number of tenants have already
expressed their interest regarding the development which will represent the first new generation
shopping centre in the city. The hypermarket (Carrefour) has signed a lease agreement for
10,000m(2) GLA.
Aurora Shopping Mall - extension (Buzau, Romania)
The Group intends to start the refurbishment, reconfiguration and extension of Aurora Shopping
Mall, a mall that currently has 18,000m(2) GLA and will be extend with an additional 5,900m(2)
GLA. The centre is located in Buzau, a city with a population of 136,000 residents and services
a catchment area of 430,000 inhabitants within a 45-minute drive. The following tenants are
already present: Altex, Animax, Benvenuti, Carrefour, CCC, Deichmann, Intersport, Kendra, KFC,
New Yorker, Noriel, Orsay, Pepco, Sensiblu and Top Shop. Cinema City (a 6-screen multiplex),
has been signed and will enter the centre following the extension. Subject to permitting and
receipt of required approvals, the Group will start the development in H1 2018 and targets
opening the extended centre by the end of 2018.
Korzo Shopping Center - extension (Slovakia, Prievidza)
The Group is planning a 9,300m(2) GLA extension of Korzo Prievidza (Slovakia) including a
refurbishment of the existing part. The city of Prievidza has a population of 48,000 residents
and the centre services a catchment area of 308,000 inhabitants within a 45-minute drive.
The extension is aimed at improving the retail mix with new fashion brands, extend the leisure
offering (larger food-court, additional cinema halls) and improving the overall shopping
experience with a 50% larger parking, improved amenities and easier client access. Currently the
project is in the design and permitting stage. The extension is planned to be opened in Q3 2019.
Festival Sibiu - development (Romania) - subsequent event
In February 2018, the Group acquired Festival project, a 3.4ha land in the centre of Sibiu which
is permitted for the development of a 43,000m(2) GLA shopping centre. Sibiu has a population of
170,000 residents and Festival is expected to service a catchment of 162,000 inhabitants within
a 15-min drive. Key international tenants are secured: Kaufland (with its first leased hypermarket
in Romania), Inditex (with several brands including Zara), H&M and a cinema operator.
Management believes that this development will complement its other retail property in the city
(Shopping City Sibiu). The centre is expected to open by the end of 2019.
Other extensions
The group is also pursuing several other extensions to its existing assets which will be
announced in due course.
LISTED SECURITY PORTFOLIO
NEPI Rockcastle invests in listed securities primarily to provide liquidity for the execution of
attractive acquisitions and developments. There has been an increasing focus on diversifying the
portfolio to facilitate the efficient deployment of capital into direct property assets during 2018.
Various changes have been implemented in this respect:
- During 2017 the portfolio has been tilted more towards Continental Europe than other regions.
- Additionally, the portfolio has been diversified further and exposure increased to highly liquid
counters, while the exposure to the US dollar has been reduced since Q3 2016;
Following the merger of NEPI and Rockcastle and due to the above mentioned changes within
the portfolio, the functional currency of the entity owning the listed securities portfolio was
changed from US dollar to Euro.
As indicated, the Group's current pipeline of acquisitions and developments expected to be
completed this year is substantial and will be in part funded through the listed security portfolio.
A portion of the funds raised by the Group through equity and debt issues during 2017 was
temporarily invested in the listed portfolio, awaiting the gradual implementation of the current
acquisition pipeline.
NEPI Rockcastle uses physical shares and equity derivative positions to obtain exposure to
listed real estate companies. The principal counter parties in all listed securities transactions are
Morgan Stanley, Goldman Sachs and BoA Merrill Lynch.
CASH MANAGEMENT AND DEBT
Following the merger, Moody's have revised the outlook on the Baa3 rating from stable to
positive, and Standard and Poor's have upgraded NEPI Rockcastle from BBB- to BBB, with a
stable outlook. The Group also obtained a BBB rating with a stable outlook from Fitch. After a
roadshow with European fixed-income investors in November 2017, the Group issued
EUR500 million of unsecured, 7-year Eurobonds maturing on 23 November 2024, carrying a
1.75% fixed coupon, with an issue price of 99.051%. This is the second time the Group has
raised material amounts from European investors, enabling it to compete more effectively in
the Central and Eastern European real estate markets in the long term. The Group has a broad
bondholder base, ranging from large asset managers, banks, pension and insurance companies
to international financial institutions such as the International Finance Corporation (part of the
World Bank group) and the European Bank for Reconstruction and Development. The proceeds
have been partly used for the acquisition of Paradise Center (Sofia, Bulgaria), while the balance
of the proceeds will be used for funding the acquisitions and developments pipeline.
During the year, the Group contracted on a combined basis EUR250 million in unsecured revolving
facilities from ING, Societe Generale and Garanti Bank, and EUR196 million in secured debt from
Berlin Hyp, Erste Bank, ING, Helaba, PBB and Raiffeisen Bank (including joint ventures). NEPI
Rockcastle benefits from a diversified funding base, and was complying with all debt covenants
as at 31 December 2017. NEPI Rockcastle's Loan to Value (interest bearing debt less cash divided
by investment property and listed securities) was 26%, below the gearing ratio target of 35%.
The average interest rate, including hedging costs, was 2.2% during 2017, due to contracting new
debt at lower rates and decreasing the interest margin on the existing debt. As at 31 December
2017, fixed-coupon bonds represented 53% of NEPI Rockcastle's outstanding debt, and out of
the remaining debt exposed to Euribor, 38% was hedged with interest rate caps and 62% with
interest rate swaps (including joint ventures).
The Group raised EUR593 million during 2017 pre-and post-merger by issuing new ordinary
shares, comprising EUR397 million from accelerated book builds and EUR196 million from scrip
dividends (which represented approximately 73% of the total dividend declared for the
corresponding period).
As at 31 December 2017, the Group had a strong liquidity profile, with EUR196 million in cash, EUR380
million in available unsecured revolving facilities, and EUR593 million net available in the listed
security portfolio.
NEPI ROCKCASTLE BUSINESS COMBINATION
In accordance with IFRS 3 - Business Combinations, the merger between NEPI and Rockcastle
was classified as a purchase of Rockcastle by NEPI. The attached condensed financial
statements and notes include:
- A consolidated statement of financial position, which includes all assets of the resulting entity,
NEPI Rockcastle; the comparative is NEPI's statement of financial position at
31 December 2016;
- A statement of comprehensive income, which includes the financial results of NEPI until the
merger date (11 July 2017), and the results of the combined group afterwards; the comparative
is NEPI's statement of comprehensive income for the year ended 31 December 2016.
For the calculation of distributable earnings, an antecedent dividend equal to Rockcastle's
distribution for the first half of the year was added.
Goodwill of EUR886 million resulted from Rockcastle's premium to net asset value at the date of
the merger. All assets and liabilities were recognized at
fair value at the acquisition date, therefore the resulting goodwill was considered a mechanical
result of the merger accounting, and consequently unallocated and requiring an accounting impairment.
This impairment of goodwill does not impact any of the key indicators: recurring earnings per
share, adjusted net asset value per share, cash flow, distributable earnings, overall financial profile,
synergies from the merger or the forecasted earnings per share. Consequently, the Group's
balance sheet includes almost exclusively tangible assets, marked to market every six months, in
line with the industry practice (e.g. Unibail - Rodamco and Kleppiere - Corio mergers).
VALUATION
NEPI Rockcastle assesses the valuation of its property portfolio twice a year. Fair value is
determined by external, independent professional valuers, with appropriate and recognised
qualifications, and recent experience in the locations and category of properties being valued.
The valuations as at 31 December 2017 were performed by Cushman & Wakefield and Colliers.
Information relating to fair value measurement using significant unobservable inputs (Level 3
according to IFRS 13 - Fair value measurement) for 2017 is presented in the table below:
Weighted average Weighted average
estimated rental values Weighted average capitalisation rate for
Segment Valuation technique (yearly amount in discount rate terminal value
'000 euro) (%) (%)
Retail Discounted cash flow 10,838 7.96% 6.94%
Office Discounted cash flow 5,916 9.00% 7.50%
Industrial Discounted cash flow 910 11.25% 9.75%
SHARE PRICE MOVEMENT
Considering the unusual share price movement that NEPI Rockcastle has experienced since the
start of 2018, the Board felt it appropriate to draw shareholders' attention to the following points:
- The Board of NEPI Rockcastle confirms there has been no change in the Group's operations or
financial position that would justify the recent movements in its share price;
- The Board and management of NEPI Rockcastle have always been, and remain, committed
to the highest standards of transparency and corporate governance. The Group maintains an
open dialogue with equity and credit investors;
- The Group does not hold any shares in Resilient, Fortress or Greenbay, nor does it have any
financing arrangements with any of these parties.
In terms of the Articles of Association of the Company and the approval granted by the Board of Directors,
the Company may implement a repurchase of NEPI Rockcastle shares.
DISTRIBUTABLE EARNINGS AND DECLARATION OF DISTRIBUTION
The Group achieved 24.80 euro cents in distributable earnings per share for the six months ended
31 December 2017. Aggregated with the combined distribution achieved by NEPI and Rockcastle
for the first half of 2017, and declared by NEPI Rockcastle, of 23.46 euro cents per share, it results
in 48.26 euro cents per share; this is 17.1% higher than the 2016 pro-forma distribution of 41.21 euro
cents per share for 2016, as published in the NEPI Rockcastle Prospectus. This growth is in line
with previously announced guidance, and is due to the strong performance of the Group's assets
and acquisitions and developments completed during the year.
The Board of Directors declares a distribution of 24.80 euro cents per share for the second
half of 2017, which will be paid in cash in March 2018. An announcement in this
respect will be issued on the Stock Exchange News Service (SENS) of the JSE and Euronext
Amsterdam in due course.
PROSPECTS AND EARNINGS GUIDANCE
Distributable earnings per share for the year 2018 are expected to be approximately 10% higher
than the 2017 combined distribution of 48.26 euro cents per share. This guidance is based on
the assumptions that a stable macroeconomic environment prevails, no major corporate failures
occur, and planned developments and acquisitions remain on schedule. This forecast has not
been audited or reviewed by NEPI Rockcastle's auditors and is the responsibility of the Board.
By order of the Board of Directors,
Alex Morar Spiro Noussis
Co-Chief Executive Officer Co-Chief Executive Officer
Mirela Covasa
Chief Financial Officer
20 February 2018
For further information please contact: NEPI Rockcastle Plc, Mirela Covasa: +40 21 232 1398
JSE sponsor: Java Capital: +27 11 722 3050
www.nepirockcastle.com
BASIS OF PREPARATION
All amounts in EUR'000 unless otherwise stated
In accordance with IFRS 3 - Business Combinations, the merger between NEPI and Rockcastle was classified as a purchase of Rockcastle by
NEPI, with NEPI Rockcastle being assessed in substance as a continuation of NEPI. Consequently, in these consolidated financial statements,
in accordance with IFRS, NEPI Rockcastle presents the results of former NEPI Group before the merger date (11 July 2017), and the results of
the combined Group from the merger date onwards. The comparatives are the audited consolidated financial results of NEPI for the year ended
31 December 2016. These reviewed condensed consolidated financial results for the year ended 31 December 2017 have been prepared in accordance
with the requirements of the JSE Limited Listings Requirements for preliminary reports. These require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council, and to
also, as a minimum, contain the information required by IAS 34: Interim Financial Reporting. The accounting policies which
have been applied are consistent with those used in the preparation of the NEPI financial statements for the year ended 31 December 2016,
xcept for accounting policies in relation with the listed securities portfolio, which are detailed within the related section below.
PricewaterhouseCoopers LLC have issued an unmodified review report on the condensed consolidated financial statements for the year ended
31 December 2017 which is available for inspection at the Company's registered office, and is expected to issue an unmodified audit report
on the full set of financial statements.
The listed securities investments are measured at fair value being the quoted closing price at the reporting date and are categorized as
Level 1 investments, according to IFRS 13 - Fair value measurement. Realised and unrealised gains and losses arising from changes in the
air value of these investments are recognised in profit or loss in the period in which they arise. Attributable transaction costs are
recognised in the statement of comprehensive income as incurred. The listed security portfolio includes physical shares with a fair value
of EUR326.6 million presented within the Financial investments at fair value through profit or loss within the Consolidated Statement of
Financial Position. The equity derivative collateral of EUR265.5 million represents the cash held at Prime Brokers and provides the Group
with gross exposure to equity derivative swaps. The Group's equity derivatives swaps have a net fair value of EUR998 thousand from Financial
assets at fair value through profit or loss of EUR11.9 million and Financial liabilities at fair value through profit or loss of EUR10.9 million.
Within the Consolidated Statement of Comprehensive Income, the Income from financial investments at fair value through profit or loss of
EUR18.1 million includes the gross income from dividends that the Group earns on the gross exposure netted off with the interest expense on
the gross liability. The Fair value and net result on sale of financial investments shows the change in fair value of the financial
instruments as well as the net result on sales of such instruments.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 Dec 2017 31 Dec 2016
ASSETS
Non-current assets 5 127 197 2 674 176
Investment property 4 927 509 2 546 772
Investment property in use 4 725 093 2 370 760
Investment property under development 202 416 176 012
Goodwill 82 582 58 390
Deferred tax assets 12 490 -
Investments in joint ventures 40 856 22 023
Long-term loans granted to joint ventures 25 792 31 015
Other long-term assets 36 175 15 299
Interest rate derivatives financial assets at 1 793 677
fair value through profit or loss
Current assets 860 366 107 538
Trade and other receivables 60 793 40 539
Financial investments at fair value through profit or loss 326 565 18 979
Equity derivative collateral 265 541 -
Financial assets at fair value through profit or loss 11 923 -
Cash and cash equivalents 195 544 48 020
Investment property held for sale 10 238 15 525
Total assets 5 997 801 2 797 239
EQUITY AND LIABILITIES
Total equity attributable to equity holders 3 914 719 1 814 552
Share capital 5 778 3 215
Share premium 3 625 568 1 368 171
Share-based payment reserve - 4 797
Currency translation reserve - (1 229)
Accumulated profit 282 897 439 598
Non-controlling interest 476 -
Total liabilities 2 083 082 982 687
Non-current liabilities 1 937 282 831 995
Bank loans 734 493 260 593
Bonds 889 917 394 819
Deferred tax liabilities 271 105 158 864
Other long-term liabilities 37 089 17 403
Interest rate derivatives financial liabilities at 4 678 316
fair value through profit or loss
Current liabilities 145 800 150 692
Trade and other payables 113 553 71 536
Financial liabilities at fair value through profit or loss 10 934 -
Bank loans 10 568 17 999
Bonds 10 745 61 157
Total equity and liabilities 5 997 801 2 797 239
Share-based Currency Non-
CONSOLIDATED STATEMENT Share Share payment translation Accumulated controlling
OF CHANGES IN EQUITY capital premium reserve reserve profit interest Total
Balance at 1 January 2016 2 986 1 213 325 4 797 (1 229) 275 042 1 629 1 496 550
Transactions with owners 229 154 846 - - (70 412) 687 85 350
- Issue of shares 229 154 800 - - - - 155 029
- Sale of shares issued under
the Initial Share Scheme - 46 - - - - 46
- Earnings distribution - - - - (48 288) - (48 288)
- Acquisition of non-controlling interest - - - - (22 124) 687 (21 437)
- Profit for the year - - - - 234 968 (2 316) 232 652
Total comprehensive income - - - - 234 968 (2 316) 232 652
Balance at 31 December 2016 3 215 1 368 171 4 797 (1 229) 439 598 - 1 814 552
Balance at 1 January 2017 3 215 1 368 171 4 797 (1 229) 439 598 - 1 814 552
Transactions with owners 2 563 2 257 397 (4 797) 1 229 422 993 196 2 679 581
- Issue of shares 514 395 596 - - - - 396 110
- Sale of shares issued under
the Initial Share Scheme - 18 - - - - 18
- Issue of shares for the
acquisition of Rockcastle 2 049 2 747 950 (4 797) 1 229 (424 152) 196 2 322 475
- Transfer of goodwill impairment
on acquisition of Rockcastle - (886 167) - - 886 167 - -
Group to share premium
- Earnings distribution - - - - (39 022) - (39 022)
Total comprehensive income - - - - (579 694) 280 (579 414)
- Impairment of goodwill - - - - (886 167) - (886 167)
- Profit for the year excluding - - - - 306 473 280 306 753
impairment of goodwill
Balance at 31 December 2017 5 778 3 625 568 - - 282 897 476 3 914 719
RECONCILIATION OF PROFIT FOR THE YEAR TO DISTRIBUTABLE EARNINGS 31 Dec 2017 31 Dec 2016
(Loss)/Profit for the year attributable to equity holders (579 694) 234 968
Reverse indirect result 776 019 (108 683)
Foreign exchange loss 1 255 127
Acquisition fees 10 681 4 339
Fair value adjustments of investment property for controlled subsidiaries (162 022) (143 163)
(Profit)/Loss on disposal of investment property (9) 485
Fair value and net result on sale of financial investments
at fair value through profit or loss 24 112 724
Income from financial investments at fair value through profit or loss (18 084) (738)
Fair value adjustment of Interest rate derivatives financial (500) (228)
assets and liabilities for controlled subsidiaries
Deferred tax expense for controlled subsidiaries 46 199 34 808
Impairment of goodwill 886 167 -
Adjustments related to joint ventures
Fair value adjustments of investment property for joint ventures (14 344) (7 252)
Fair value adjustment of Interest rate derivatives financial (439) 227
assets and liabilities for joint ventures
Deferred tax expense for joint ventures 2 903 2 034
Foreign exchange gain for joint ventures 100 (46)
Company specific adjustments 17 004 (558)
Amortisation of financial assets (1 807) (3 730)
Realised foreign exchange loss for controlled subsidiaries (769) (101)
Realised foreign exchange gain for joint ventures 3 7
Accrued dividend for financial investments 19 803 1 202
Accrued interest on share-based payments - 2
Fair value adjustment of Investment property for
non-controlling interest (392) 2 514
Deferred tax expense for non-controlling interest 166 (452)
Antecedent dividend 6 861 3 974
Antecedent dividend - Rockcastle distribution Jun 2017 49 531 -
Distributable earnings 269 721 129 701
Less: Distribution declared (269 721) (126 688)
Antecedent dividend for the first half of 2016 - (3 013)
Interim distribution* (126 438) (59 566)
Final distribution (143 283) (70 135)
Earnings not distributed - -
Number of shares entitled to interim distribution* 538 953 794 302 714 153
Number of shares entitled to final distribution 577 800 734 321 486 204
Distributable earnings per share (euro cents) 48.26 40.50
Less: Distribution declared per share (euro cents) (48.26) (40.50)
Interim distribution per share (euro cents)* (23.46) (18.68)
Final distribution per share (euro cents) (24.80) (21.82)
Earnings not distributed (euro cents) - -
* Interim distribution, interim distribution per share and number of shares entitled to interim distribution computed on a combined
basis for H1 2017.
The growth in distributable earning per share of 17.10% was computed by comparison to the combined pro-forma distribution of 41.21
euro cents per share as published in the NEPI Rockcastle Prospectus.
BUSINESS COMBINATIONS Paradise Serdika Center Arena Rockcastle
Center and Office Plaza merger Total
Investment property 254 700 206 978 285 794 1 205 521 1 952 993
Investment property under development - - - 10 819 10 819
Current assets 3 614 2 920 10 909 430 389 447 832
Current liabilities (2 824) (3 044) (8 212) (23 217) (37 297)
Non current assets - - - 340 358 340 358
Non current liabilities - - (1 247) (501 398) (502 645)
Deferred tax liabilities (10 659) (2 465) (17 472) (26 359) (56 955)
Total identifiable net assets at fair value 244 831 204 389 269 772 1 436 113 2 155 105
Goodwill arising on acquisition 9 311 - 7 905 886 167 903 383
Total consideration payable 254 142 204 389 277 677 2 322 280 3 058 488
Receivable from sellers (1 508) - - - (1 508)
Total consideration paid* 252 634 204 389 277 677 2 322 280 3 056 980
* Consideration paid in cash for Paradise Center, Serdika Center and Office and Arena Plaza. Consideration paid through issue of
shares for Rockcastle merger. From the effective date of their acquisitions, the above retail business combinations have contributed
to the Group's profit after tax and recoveries and contractual rental income with the amounts below. In respect of the Rockcastle
merger it is impracticable to disclose the equivalent information as the combined group has been strategically integrated and
all operational, financing and investment decisions have been optimised, producing different results than if the two entities
had not been merged.
Profit after tax 2 724 13 042 16 231
Recoveries and contractual rental income 1 755 8 207 7 899
DEBT REPAYMENT PROFILE Lender Type Secured/Unsecured Ownership Outstanding amount*
Aupark Kosice Mall & Tower Tatra Banka Term loan Secured 100% 93 947
Aupark Zilina VUB Term loan Secured 100% 62 702
Aupark Piestany Komercni Banka Term loan Secured 100% 19 107
Ploiesti Shopping City (joint venture) BRD - Societe Generale Term loan Secured 50% 14 144
The Office, Cluj-Napoca (joint venture) Raiffeisen Bank Term loan Secured 50% 31 399
Karolinka Shopping Centre PBB/Helaba/ING Term loan Secured 100% 87 200
Pogoria Shopping Centre PBB/Helaba/ING Term loan Secured 100% 44 900
Platan Shopping Centre PBB/Helaba/ING Term loan Secured 100% 31 500
Focus Park Zielona Gora PBB/Helaba/ING Term loan Secured 100% 67 145
Solaris Shopping Centre ING Term loan Secured 100% 34 800
Bonarka City Center ING/BerlinHyp/NN Term loan Secured 100% 188 899
Forum Liberec Shopping Centre Erste Bank Term loan Secured 100% 41 000
Galeria Warminska Berlin Hyp Term loan Secured 100% 76 000
NE Property Cooperatief Public Fixed coupon bonds Unsecured 100% 900 000
NE Property Cooperatief Raiffeisen Bank Revolving facility Unsecured 100% -
NE Property Cooperatief ING Revolving facility Unsecured 100% -
NE Property Cooperatief Societe Generale/Garanti Revolving facility Unsecured 100% -
Total 1 692 743
DEBT REPAYMENT PROFILE Available for drawdown 2018 2019 2020 2021 2022 2023 2024
Aupark Kosice Mall & Tower - 5 526 5 526 82 895 - - - -
Aupark Zilina - 2 379 2 462 2 548 2 636 52 677 - -
Aupark Piestany - 396 396 396 17 919 - - -
Ploiesti Shopping City (joint venture) - 1 095 1 095 1 095 1 095 1 095 1 095 7 574
The Office, Cluj-Napoca (joint venture) - 1 950 1 950 1 950 1 950 23 599 - -
Karolinka Shopping Centre - 436 872 872 85 020 - - -
Pogoria Shopping Centre - 225 449 449 43 777 - - -
Platan Shopping Centre - 158 315 315 30 712 - - -
Focus Park Zielona Gora - 336 671 671 65 467 - - -
Solaris Shopping Centre - - - 34 800 - - - -
Bonarka City Center - 965 965 186 969 - - - -
Forum Liberec Shopping Centre - - 308 410 410 564 615 38 693
Galeria Warminska - - - - - 380 1 520 74 100
NE Property Cooperatief - - - - 400 000 - - 500 000
NE Property Cooperatief 130 000 - - - - - - -
NE Property Cooperatief 100 000 - - - - - - -
NE Property Cooperatief 150 000 - - - - - - -
Total 380 000 13 466 15 009 313 370 648 986 78 315 3 230 620 367
* The outstanding amounts represent the principal payable on bank loans and bonds, and does not include accrued interest or
capitalised finance raising costs.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 31 Dec 2017 31 Dec 2016
Net rental and related income 232 085 145 532
Revenues from rent and expense recoveries 336 977 209 890
Property operating expenses (104 892) (64 358)
Administrative expenses (15 191) (8 186)
EBITDA 216 894 137 346
Net result from financial investments (6 028) 14
Income from financial investments at fair value through profit or loss 18 084 738
Fair value and net result on sale of financial investments
at fair value through profit or loss (24 112) (724)
Acquisition fees (10 681) (4 339)
Fair value adjustments of investment property 162 022 143 163
Foreign exchange loss (1 255) (127)
Gain/(Loss) on disposal of investment property 9 (485)
Profit before net finance expense 360 961 275 572
Net finance expense (22 906) (13 059)
Finance income 2 567 4 784
Finance expense (25 473) (17 843)
Fair value adjustment of Interest rate derivatives financial assets and liabilities 500 228
Share of profit of joint ventures 16 068 6 383
Impairment of goodwill* (886 167) -
(Loss)/Profit before tax (531 554) 269 124
Income tax (47 870) (36 472)
Current tax expense (1 671) (1 664)
Deferred tax expense (46 199) (34 808)
(Loss)/Profit after tax (579 414) 232 652
Total comprehensive (loss)/profit for the year (579 414) 232 652
Non-controlling interest (280) 2 316
(Loss)/Profit for the year attributable to equity holders (579 694) 234 968
Profit for the year attributable to equity holders excluding impairment of goodwill 306 473 234 968
Weighted average number of shares in issue 436 806 684 309 760 628
Diluted weighted average number of shares in issue 436 809 203 309 778 913
Basic (loss)/earnings per share (euro cents) (132.71) 75.85
Diluted (loss)/earnings per share (euro cents) (132.71) 75.85
Basic earnings per share (euro cents) excluding impairment of goodwill 70.16 75.85
Diluted earnings per share (euro cents) excluding impairment of goodwill 70.16 75.85
* Impairment of goodwill arising from the merger with Rockcastle, computed as the difference between Rockcastle's market capitalisation and its
net asset value at merger date. Further information is provided in the above Directors' Commentary.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 31 Dec 2017 31 Dec 2016
(Loss)/Profit after tax (579 414) 232 652
Adjustments 801 695 (93 262)
Interest and coupon paid (24 034) (10 164)
Changes in working capital 14 829 15 230
Cash flows from operating activities 213 076 144 456
Proceeds from issue of shares 396 128 155 075
Earnings distribution (39 022) (48 288)
Net movements in bank loans and bonds 422 048 134 890
Other proceeds / payments 196 (24 500)
Cash flows used in financing activities 779 350 217 177
Investments in acquisitions and developments (947 245) (627 385)
Net cash flow from/(used in) investments in financial assets 102 712 (18 961)
Other investments (369) 6 123
Cash flows used in investing activities (844 902) (640 223)
Net increase / (decrease) in cash and cash equivalents 147 524 (278 590)
Cash and cash equivalents brought forward 48 020 326 610
Cash and cash equivalents carried forward 195 544 48 020
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS 31 Dec 2017 31 Dec 2016
(Loss)/Profit for the year attributable to equity holders (579 694) 234 968
Fair value adjustments of investment property for controlled subsidiaries (162 022) (143 163)
(Gain)/Loss on sale of investment property held for sale (9) 485
Impairment of goodwill 886 167 -
Tax effects of adjustments for controlled subsidiaries 27 089 24 446
Fair value adjustments of investment property for joint ventures (20 928) (7 252)
Tax effects of adjustments for joint ventures 2 295 1 160
Headline earnings 152 898 110 644
Weighted average number of shares in issue 436 806 684 309 760 628
Diluted weighted average number of shares in issue 436 809 203 309 778 913
Headline earnings per share (euro cents) 35.00 35.72
Diluted headline earnings per share (euro cents) 35.00 35.72
RECONCILIATION OF NET ASSET VALUE TO ADJUSTED NET ASSET VALUE 31 Dec 2017 31 Dec 2016
Net Asset Value per the Statement of financial position 3 914 719 1 814 552
Loans in respect of the Initial Share Scheme - 18
Deferred tax liabilities for controlled subsidiaries 271 105 158 864
Deferred tax assets for controlled subsidiaries (12 490) -
Goodwill (82 582) (58 390)
Deferred tax liabilities for joint ventures 8 856 5 952
Adjusted Net Asset Value 4 099 608 1 920 996
Net Asset Value per share (euro) 6.78 5.64
Adjusted Net Asset Value per share (euro) 7.10 5.98
Number of shares for Net Asset Value per share 577 800 734 321 479 204
Number of shares for adjusted Net Asset Value per share 577 800 734 321 486 204
SEGMENTAL ANALYSIS
Year ended 31 December 2017 Retail Office Industrial Corporate Total
Revenues from rent and expense recoveries 299 862 35 089 2 026 - 336 977
Profit before Net finance expense 340 489 37 584 2 205 (19 317) 360 961
Total Assets 4 113 095 361 999 12 344 1 510 363 5 997 801
Total Liabilities 1 103 046 53 076 2 567 924 392 2 083 082
Year ended 31 December 2016
Revenues from rent and expense recoveries 177 614 30 263 2 013 - 209 890
Profit before Net finance expense 249 753 27 167 1 023 (2 371) 275 572
Total Assets 2 338 444 388 883 16 243 53 669 2 797 239
Total Liabilities 369 027 49 105 2 519 562 036 982 687
LEASE EXPIRY PROFILE 2018 2019 2020 2021 2022 2023 2024 2025 2026 >=2027 Total
Total based on rental income 6.4% 17.2% 18.9% 14.5% 12.2% 11.8% 4.7% 2.3% 2.1% 9.9% 100%
Total based on rented area 4.1% 13.5% 16.9% 13.7% 11.8% 12.7% 5.0% 3.7% 3.7% 14.9% 100%
www.nepirockcastle.com
Date: 20/02/2018 09:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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