Wrap Text
Annual Results for the year ended 31 December 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")
ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2017
HIGHLIGHTS
EPRA NAV/SHARE FFO I/SHARE EARNINGS/SHARE NET LTV
EUR2.28 EUR0.10 EUR0.34 42%
+17% +11% +0% -100bps
2017 HIGHLIGHTS
- Profit before tax up by 51% to EUR189m (EUR125m in 2016), earnings
per share at EUR0.34, return on equity of 18%
- EPRA NAV increased 20% to EUR1,073m (EUR897m as of 31 December 2016)
- EPRA NAV / share increased 17% to EUR2.28 as of 31 December 2017 (EUR1.95 as of 31 December 2016)
- Gross margin from rental activity up by 5% to EUR91m (87m in 2016)
- In - place NOI up 20% to EUR110m FFO I increased 13% to EUR47m (EUR42m in 2016), FFO I / share at EUR0.10
- Recommended dividend of PLN 0.33/share, DPS up 22%
- Average interest rate down to 2.8% p.a. from 3.2% p.a. in 2016, interest cover at 3.5x
- Net LTV down to 42% from 43% in 2016
- EUR79m of bonds and corporate loan issued in 4 tranches,3 new construction loans for the total amount of EUR151m,
7 refinanced loans for a total amount of EUR333m; PLN 196m bonds repaid in two tranches (May and October)
PORTFOLIO UPDATE
- Completions boost GAV and rent income
- EUR105m development profit
- Acquisition of income generating properties boosting rent income
- Belgrade Business Center of 17,700 sq. m in Belgrade in September 2017
- Cascade office building of 4,200 sq. m in Bucharest in August 2017
- Total investment of EUR46m
- Strong asset management:
- EUR43m revaluation gain
- Occupancy at 94% (94% as at 31 December 2016)
- 132,000 sq. m of office and retail space newly leased and renewed in 2017
- Additional in place rent of EUR18m annually (+20% vs. 2016) net of asset sales
- Commencement of construction of 5 projects with over 128,000 sq. m GLA; out of which 49,000 sq. m to be completed in 2018
- GTC White House (Budapest)
- part of Green Heart (Belgrade)
- and 79,000 sq. m to be completed in 2019
- Ada Mall (Belgrade)
- part of Green Heart (Belgrade)
- Advance Business Centre I (Sofia)
- Matrix A (Zagreb )
- Construction for 5 projects to start in next 12 months, with 128,400 sq. m of office space
OPERATING PERFORMANCE 2017
Reported Variance %
Gross margin from rental activity EUR91m +5%
EBITDA EUR78m +16%
Profit for the period EUR189m +51%
FFO I EUR47m +13%
Total property EUR1,958m +21%
Net debt EUR829m +16%
Net LTV 42% -100bps
EPRA NAV/share EUR2.28 +17%
CORPORATE OVERVIEW
NATURE OF BUSINESS
The GTC Group is a leading real estate investor and developer focusing on Poland and four capital cities in
Eastern and Southern Europe - Belgrade, Budapest, Bucharest, Zagreb and Sofia. 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 project and landbank.
Since its establishment and as at 31 December 2017 the Group has: (i) developed 1.1 million sq. m of gross
commercial space and over 300 thousand sq. m of residential space; (ii) 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) 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 31 December 2017, the Group`s property portfolio comprised the following properties:
- 37 completed commercial buildings, including 34 office buildings and three retail properties with
a total combined commercial space of approximately 621 thousand sq. m of GLA, of which the
Group's proportional interest amounts to approximately 611 thousand sq. m of GLA;
- five commercial projects under construction, including four office projects and one retail project
with total GLA of approximately 128 thousand sq. m, of which the Group's proportional interest
amounts to 128 thousand sq. m of GLA;
- commercial landbank designated for future development;
- one completed residential project; and
- residential landbank.
As of 31 December 2017, the book value of the Group's portfolio amounts to EUR1,957,630 with: (i) the Group's
completed commercial properties account for 84% thereof; (ii) commercial properties under construction - 8%;
(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.
Additionally, the Group manages third party assets in Warsaw and Katowice.
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 40 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 2017, GTC plans to distribute (upon approval of Annual Shareholder
Meeting) PLN 0.33 / share from 2017 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.
COMMENTARY
The management board presents the audited condensed consolidated annual results for the 12 months ended
31 December 2017.
KEY OPERATING ACHIEVEMENTS IN 2017
Completions, acquisitions and asset management boost profit and NOI:
- Completions boost GAV and rent income
- EUR105m development profit
- Acquisition of income generating properties boosting rent income
- Belgrade Business Center of 17,700 sq. m in Belgrade in September 2017
- Cascade office building of 4,200 sq. m in Bucharest in August 2017
- Total investment of EUR46m
- Strong asset management:
- EUR43m revaluation gain
- Galeria Jurajska shows record high occupancy with strong growth momentum on
footfall and turnover triggering revaluation gain based on NOI improvement of EUR24m
- Duna Tower and CenterPoint appreciate NOI increase on lease renewals to boost
revaluation gain of EUR8m due to increase of NOI
- Occupancy at 94% (94% as at 31 December 2016)
- 132,000 sq. m of office and retail space newly leased and renewed in 2017
- Additional in place rent of EUR18m annually (+20% vs. 2016) net of asset sales
Expected NAV and FFO growth from development activity:
- Commencement of construction 5 projects with over 128,000 sq. m GLA out of which 49,000 sq. m to be
completed in 2018:
- GTC White House (Budapest)
- part of Green Heart (Belgrade)
- and 79,000 sq. m to be completed in 2019:
- Ada Mall (Belgrade)
- part of Green Heart (Belgrade)
- Advance Business Centre I (Sofia)
- Matrix A (Zagreb )
- Construction for 5 projects to start in next 12 months, with 128,400 sq. m of office space
- Additional 6 projects in the planning stage with over 114,000 sq. m of office space and 61,000 sq. m of
retail space (Warsaw, Budapest, Bucharest and Sofia)
Strong leasing performance:
- Occupancy at 94% (94% as at 31 December 2016)
- 132,000 sq. m of office and retail space newly leased and renewed in 2017
KEY FINANCIAL HIGHLIGHTS IN 2017
Rental and service revenues
- Increased to EUR123m from EUR114m in 2016
Reflects mainly leasing of University Business Park B, FortyOne II, as well as completion of FortyOne III and
Galeria Polnocna which were opened to the public during the year 2017. These buildings contributed EUR7.3m to
the recurring rental income in the period. Additionally, the acquired Cascade Office Building and Belgrade
Business Centre contributed EUR1.6m to the recurring rental income in the period.
Net profit from development revaluation and impairment
- Increased to EUR149m as compared to EUR85m in 2016
Reflects mainly revaluation gain on Galeria Polnocna, which was valued following its completion in September
2017 combined with value appreciation of income generating assets following an improvements in their
occupancy, WALT and / or NOI (mostly Galeria Jurajska, Center Point I&II, Duna Tower, FortyOne III).
Financial expenses
- Decreased slightly to EUR29m from EUR30m in 2016 despite significant increase in average level of debt
Cost of finance down to 2.8% (from 3.2%) due to decrease in average interest rate and change in hedging
strategy.
Taxation
- Tax amounted to EUR32m as compared to EUR35m tax benefit in 2016
Taxation consist of EUR6m of current tax expenses and EUR26m of deferred tax expense and reflects mainly
increased provision related to revaluation gain.
Net profit
- Net profit amounted to EUR157m compared to EUR160m in 2016
Reflects mostly revaluation gain and improvement in operating results while the comparable 2016 net profit
includes one-off tax benefit of EUR48m , following a merger of GTC S.A. with GTC Real Estate Investments
Ukraine B.V. and GTC RH B.V.
Funds From Operations (FFO I)
- At EUR47m compared to EUR42m in 2016 despite disposal of Galleria Stara Zagora and Galleria Burgas
Total property value
- At EUR1,958m as of 31 December 2017 (EUR1,624m as of 31 December 2016) due to an investment in assets
that were completed during the year as well as assets under construction, acquisition of land plots and
revaluation gain.
EPRA NAV / share
- Up by 17% to EUR2.28 from EUR1.95 on 31 December 2016
Corresponding to EPRA NAV of EUR1,073m compared to EUR897m as of 31 December 2016
Financial liabilities
- At EUR1,034m compared to EUR893m as of 31 December 2016
- Weighted average debt maturity of 4.3 years and average cost of debt of 2.8% p.a.
- LTV at 42% (43% on 31 December 2016)
- Interest coverage at 3.5x (3.5x on 31 December 2016)
- EUR79m of bonds and corporate loan issued in 4 tranches
- 3 new construction loans for the total amount of EUR151m
- 7 refinanced loans for a total amount of EUR333m
- PLN 196m bonds repaid in two tranches (May and October)
Cash and cash equivalents
- Stable at EUR149m as of 31 December 2017 from EUR150m as of 31 December 2016
Basis of preparation
The Company maintains its books of account in accordance with accounting principles and practices employed
by enterprises in Poland as required by Polish accounting regulations. The companies outside Poland maintain
their books of account in accordance with local GAAP. The consolidated financial statements include a number
of adjustments not included in the books of account of the Group entities, which were made in order to bring the
financial statements of those entities to conformity with IFRS.
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU ("EU IFRS"). At the date of authorisation of these consolidated financial
statements, taking into account the EU's ongoing process of IFRS endorsement and the nature of the Group's
activities, there is a difference between International Financial Reporting Standards and International Financial
Reporting Standards endorsed by the European Union.
Annex 1 Consolidated Statement of Financial Position as at 31 December 2017
(in thousands of euro)
31 December 31 December
2017 2016
ASSETS
Non-current assets
Investment property 1,797,583 1,501,770
Investment property landbank 139,258 102,905
Residential landbank 12,698 13,761
Investment in associates and joint ventures 1,303 3,803
Property, plant and equipment 6,847 6,002
Deferred tax asset - 1,075
Other non-current assets 86 353
1,957,775 1,629,669
Assets held for sale 4,336 -
Current assets
Residential inventory 3,755 5,355
Accounts receivables 4,367 5,363
Accrued income 1,093 767
VAT receivable 6,618 17,389
Income tax receivable 619 652
Prepayments and deferred expenses 1,767 2,558
Escrow account 777 -
Short-term deposits 52,756 27,925
Cash and cash equivalents 148,746 149,812
220,498 209,821
TOTAL ASSETS 2,182,609 1,839,490
Annex 1 Consolidated Statement of Financial Position as at 31 December 2017 (cont.)
(in thousands of euro)
31 December 31 December
2017 2016
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 (2,365) (3,631)
Foreign currency translation 2,323 1,872
Accumulated profit 441,977 315,195
937,036 787,432
Non-controlling interest 4,226 2,891
Total Equity 941,262 790,323
Non-current liabilities
Long-term portion of long-term borrowing 907,704 739,031
Deposits from tenants 8,960 8,043
Long term payable 2,621 2,730
Provision for share based payment 5,744 2,046
Derivatives 1,360 2,778
Provision for deferred tax liability 125,827 98,237
1,052,216 852,865
Current liabilities
Investment and trade payables and provisions 50,505 36,739
Current portion of long-term borrowing 126,381 153,902
VAT and other taxes payable 1,516 1,122
Income tax payable 1,843 530
Derivatives 2,035 2,553
Advances received 6,851 1,456
189,131 196,302
TOTAL EQUITY AND LIABILITIES 2,182,609 1,839,490
Annex 2 Consolidated Income Statement for the year ended 31 December 2017
(in thousands of euro)
2017 2016
Revenue from rental activity 122,609 114,341
Residential revenue 6,128 5,960
Cost of rental activity (32,081) (27,890)
Residential costs (4,515) (5,065)
Gross margin from operations 92,141 87,346
Selling expenses (2,111) (3,236)
Administration expenses (15,242) (12,234)
Profit from revaluation/ impairment of assets 148,562 84,551
Other income 1,484 1,354
Other expenses (2,806) (2,996)
Profit/(Loss) from continuing operations
before tax and finance income / expense 222,028 154,785
Foreign exchange differences gain/(loss), net (4,906) 2,435
Finance income 234 1,324
Finance cost (28,848) (29,500)
Share of profit/(loss) of associates and joint
ventures 184 (4,474)
Profit/(loss) before tax 188,692 124,570
Taxation (32,094) 35,005
Profit/(Loss) for the year 156,598 159,575
Attributable to:
Equity holders of the Company 156,300 158,548
Non-controlling interest 298 1,027
Basic earnings per share (in Euro) 0.34 0.34
Annex 3 Consolidated Statement of Cash Flow for the year ended 31 December 2017
(in thousands of euro)
Year ended Year ended
31 December 31 December
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 188,692 124,570
Adjustments for:
Loss/(profit) from revaluation/impairment of assets and residential projects (148,562) (84,551)
Share of loss / (profit) of associates and joint ventures (184) 4,474
Loss / (profit) on disposal of asset - 65
Foreign exchange differences loss/(gain), net 4,906 (2,434)
Finance income (234) (1,324)
Finance cost 28,848 29,500
Provision for share based payment loss/(profit) 3,698 894
Depreciation 529 468
Operating cash before working capital changes 77,693 71,662
Decrease in accounts receivables and prepayments and other current 594 374
assets
Decrease in residential inventory 1,737 2,303
Increase in advances received 2,578 1,456
Increase in deposits from tenants 1,486 1,801
Increase (decrease) in trade payables 505 (202)
Cash generated from operations 84,592 77,394
Tax paid in the period (3,915) (4,113)
Net cash from operating activities 80,678 73,281
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (155,204) (93,259)
Purchase of completed assets and land (62,108) (139,646)
Increase in escrow accounts for purchase of assets (777) -
Sale (including advances) of investment property 4,499 12,640
VAT/tax on purchase/sale of investment property 10,953 (8,900)
Sale of subsidiary 37,545 10,179
Purchase of subsidiary (15,896) (9,844)
Purchase of non-controlling interest (352) (18,558)
Sale of shares in associates 1,250 3,947
Interest received 161 425
Loans granted to associates - (123)
Loans repayments from associates 1,625 11,349
Net cash used in investing activities (178,304) (231,790)
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution of dividend (8,061) -
Proceeds from long-term borrowings 258,268 273,517
Repayment of long-term borrowings (100,343) (103,193)
Interest paid (26,242) (25,075)
Loans origination payment (3,573) (2,229)
Decrease/(Increase) in short term deposits (24,831) (2,214)
Net cash from /(used) in financing activities 95,219 140,806
Net foreign exchange difference 1,341 (1,957)
Net increase/ (Decrease) in cash and cash equivalents (1,066) (19,660)
Cash and cash equivalents at the beginning of the period 149,812 169,472
Cash and cash equivalents at the end of the period 148,746 149,812
Management Board Supervisory Board
Thomas Kurzmann (Chief Executive Officer) Alexander Hesse (Chairman)
Erez Boniel (Chief Financial Officer) Olivier Brahin
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: 21 March 2018
Sponsor: Investec Bank Limited
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