Wrap Text
Q1 2018 Results for the three-month period ended 31 March 2018
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")
Q1 2018 RESULTS FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2018
HIGHLIGHTS
GROSS MARGIN FROM RENTAL ACITIVITY EUR27M +23%
FFO I EUR15M +27%
EPRA NAV/SHARE EUR2.34 +3%
NET LTV 43% +100bps
FINANCIAL HIGHLIGHTS PORTFOLIO HIGHLIGHTS
- Gross margin from rental activity up by 23% to - Completion of the two buildings in
EUR27m (EUR22m in Q1 2017) Green Heart project (formerly GTC Square)
- FFO I increased 27% to EUR15m (EUR12m in Q1 2017), - Acquisition of Mall of Sofia and
FFO I / share at EUR0.03 Sofia Tower
- Profit before tax at EUR30m (EUR33m in Q1 2017), - Strong asset management
earnings per share at EUR0.05 - Occupancy at 93% (94%
- Earnings per share at EUR0.05 (EUR0.07 in Q1 2017), as at 31 December 2017)
In-place rent up 3% to EUR114m (EUR110m at - 34,000 sq. m of office and retail
31 December 2017) space newly leased and renewed
- EPRA NAV increased 3% to EUR1,101m (EUR1,073m as in Q1 2018
of 31 December 2017)
- EPRA NAV / share increased 3% to EUR2.34 (EUR2.28
as of 31 December 2017)
- Average interest rate down to 2.7% p.a. from
2.8% p.a. as at 31 December 2017
- Interest cover at 4.3x
- Net LTV at 43% vs. 42% as at 31 December 2017
OPERATING PERFORMANCE
Q1 2018 Reported Variance %
Gross margin from rental activity EUR27m +23%
Profit before the tax EUR30m -9%
FFO I EUR15m +27%
Net debt EUR847m +2%
Net LTV 43% +100bps
EPRA NAV/share EUR2.34 +3%
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 March 2018 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 March 2018, the Group`s property portfolio comprised the following properties:
- 39 completed commercial buildings, including 36 office buildings and three retail properties with
a total combined commercial space of approximately 643 thousand sq. m of GLA, of which the
Group's proportional interest amounts to approximately 632 thousand sq. m of GLA;
- five commercial projects under construction, including four office projects and one retail project
with total GLA of approximately 106 thousand sq. m, of which the Group's proportional interest
amounts to 106 thousand sq. m of GLA;
- commercial landbank designated for future development; and
- residential landbank.
As of 31 March 2018, the book value of the Group's portfolio amounts to EUR1,980,640 with: (i) the Group's
completed commercial properties account for 86% 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 98% of the portfolio is core and remaining 2% 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 mWIG 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.
On 17 May 2018, the Annual General Meeting of GTC S.A. passed Resolution no 5 on the division of profits for
the 2017 financial year and dividend payment. The Annual General Meeting resolved, after due consideration of
the Management Board's proposal concerning allocation of GTC S.A.'s net profit for 2017, to distribute the amount
of PLN 155,200,156.32 as dividends to the Company's shareholders. The General Meeting resolved to pay
dividends of PLN 0.33 per share. The dividends shall be distributed from the Company's net profit for 2017. Under
the Resolution, the dividend record date was set for 25 May 2018, and the dividend payment date will be 14 June
2018. The dividend is to be paid on all 470,303,504 GTC S.A. shares.
COMMENTARY
The management board presents unaudited interim condensed consolidated results for the 3 months ended
31 March 2018.
OPERATING ACHIEVEMENTS IN Q1 2018
Completions, acquisitions and asset management boost profit and in place rent:
- Completion of the two buildings in Green Heart project (formerly GTC Square)
- Completion of the refurbishment of 21,600 sq. m of office space
- 78% leased upon completion
- EUR3m of additional in-place rent p.a.
- Acquisition of Mall of Sofia and Sofia Tower
- 23,700 sq. m retail space 98% leased
- 10,300 sq. m of office space 100% leased
- Acquisition value of the asset of EUR94m
- 65% acquisition price financed by the banks
- Transaction to be finalized in June 2018
- EUR7.55m of in-place rent p.a.
- Strong asset management
- Occupancy at 93% (94% as at 31 December 2017)
- 34,000 sq. m of office and retail space newly leased and renewed in Q1 2018
Expected NAV and FFO growth from development activity:
- 5 projects under construction with over 106,300 sq. m GLA commenced in 2017:
- 27,400 sq. m to be completed in 2018
- GTC White House (Budapest)
- part of Green Heart (Belgrade)
- 78,900 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 2018/2019, with 128,400 sq. m of office space
- Additional 6 projects in the planning stage with over 114,100 sq. m of office space and 61,000 sq. m of
retail space
FINANCIALS IN Q1 2018
Rental and service revenues
- Increased to EUR36m from EUR30m in Q1 2017
Reflects mainly completion and leasing of FortyOne III and Galeria Pólnocna which were opened to the public
during the year 2017. These buildings contributed EUR6m to the recurring rental income. Additionally, the acquired
Cascade Office Building and Belgrade Business Centre contributed EUR1m to the recurring rental income. These
increases were partially offset by lost revenues of EUR2m following disposal of Galleria Stara Zagora and Galleria Burgas.
Gross margin from operations
- Increased EUR27m from EUR22m in Q1 2017
Reflects mostly newly completed and acquired properties partially offset by sale of non-core assets.
Net profit from development revaluation and impairment
- Amounted to EUR13m as compared to EUR24m in Q1 2017
Reflects mainly valuation gain on assets under construction: Ada Mall, White House and Green Heart.
Financial expenses
- Almost unchanged at EUR7m as compared to EUR7m in Q1 2017
Cost of finance down to 2.7% (from 3.2%) due to decrease in average interest rate and change in hedging strategy
Taxation
- Amounted to EUR6m as compared to EUR1m tax benefit in Q1 2017
Taxation consist of EUR2m of current tax expenses and EUR4m of deferred tax expense and reflects mainly increased
provision related to revaluation gain.
Net profit
- Amounted to EUR24m compared to EUR32m in Q1 2017
Reflects mostly revaluation gain and improvement in operating results.
Funds From Operations (FFO I)
- At EUR15m compared to EUR12m in Q1 2017
EPRA NAV / share
- Up by 3% to EUR2.34 from EUR2.28 on 31 December 2017
Corresponding to EPRA NAV of EUR1,101m compared to EUR1,073m as of 31 December 2017
Total bank debt and financial liabilities
- At EUR1,075m compared to EUR1,031m as of 31 December 2017
- Weighted average debt maturity of 4.2 years and average cost of debt of 2.7% p.a.
- LTV at 43% (42% on 31 December 2017)
- Interest coverage at 4.3x (3.5x on 31 December 2017)
- EUR20.5m of bonds and corporate loan issued
- PLN 16m bonds repaid in March
Cash and cash equivalents
- Strong cash position of EUR183m as of 31 March 2018 from EUR149m as of 31 December 2017
Basis of preparation
The Interim Condensed Consolidated Financial Statements for the three-month period ended
31 March 2018 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 and International Financial Reporting Standards endorsed by the European Union.
The Group is aware of the fact that IFRS 16 which is effective for financial years beginning on or after 1 January
2019, has been already endorsed by the European Union. The Group is currently in the process of analysis of
quantitative and qualitative impact of these standard 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 2017, which were authorized for issue
on 21 March 2018. 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 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 31 March 2018
(in thousands of euro)
31 March 2018 31 December 2017
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 1,828,902 1,797,583
Investment property landbank 132,286 139,258
Residential landbank 12,698 12,698
Investment in joint ventures 905 1,303
Property, plant and equipment 6,809 6,847
Other non-current assets 89 86
1,981,689 1,957,775
Loan granted to non-controlling interest partner 9,449 -
Total non-current assets 1,991,138 1,957,775
Assets held for sale 5,884 4,336
Current assets
Residential inventory 870 3,755
Accounts receivables 6,139 4,367
Accrued income 720 1,093
VAT receivable 6,026 6,618
Income tax receivable 726 619
Prepayments and deferred expenses 3,111 1,767
Escrow account 1,355 777
Short-term deposits 43,637 52,756
Cash and cash equivalents 183,135 148,746
245,719 220,498
TOTAL ASSETS 2,242,741 2,182,609
31 March 2018 31 December 2017
(unaudited) (audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital 10,651 10,651
Share premium 520,504 520,504
Capital reserve (36,054) (36,054)
Hedge reserve (3,541) (2,365)
Foreign currency translation 2,117 2,323
Accumulated profit 466,035 441,977
959,712 937,036
Non-controlling interest 4,477 4,226
Total Equity 964,189 941,262
Non-current liabilities
Long-term portion of long-term borrowing 939,388 907,704
Deposits from tenants 8,994 8,960
Long term payable 2,601 2,621
Provision for share based payment 4,384 5,744
Derivatives 2,503 1,360
Provision for deferred tax liability 129,271 125,827
1,087,141 1,052,216
Current liabilities
Trade and other payables 40,829 50,505
Current portion of long-term borrowing 138,035 126,381
VAT and other taxes payable 3,177 1,516
Income tax payable 2,140 1,843
Derivatives 2,305 2,035
Advances received 4,925 6,851
191,411 189,131
TOTAL EQUITY AND LIABILITIES 2,242,741 2,182,609
Annex 2 Consolidated Income Statement for the three month period ended 31 March 2018
(in thousands of euro)
Three-month Three-month
period ended period ended
31 March 2018 31 March 2017
(unaudited) (unaudited)
Rental revenue 25,980 22,072
Service revenue 9,875 7,716
Residential revenue 3,615 442
Service costs (9,007) (7,946)
Residential costs (2,979) (379)
Gross margin from operations 27,484 21,905
Selling expenses (475) (453)
Administrative expenses (1,398) (2,642)
Profit from revaluation/ impairment of assets 12,534 24,424
Other income 163 346
Other expenses (1,380) (452)
Profit from continuing operations before tax and finance 36,928 43,128
income / (expense)
Foreign exchange differences gain/(loss), net 106 (3,752)
Finance income 73 52
Finance cost (7,161) (6,542)
Share of gain / (loss) of associates and joint ventures - 184
Profit before tax 29,946 33,070
Taxation (5,637) (975)
Profit for the period 24,309 32,095
Attributable to:
Equity holders of the Company 24,058 32,180
Non-controlling interest 251 (85)
Basic earnings per share (Euro) 0.05 0.07
Annex 3 Consolidated Statement of Cash Flow for the three month period ended 31 March 2018
(in thousands of euro)
Three-month Three-month
period ended period ended
31 March 2018 31 March 2017
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 29,946 33,070
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (12,534) (24,424)
Share of loss (profit) of associates and joint ventures - (184)
Profit on disposal of assets - -
Foreign exchange differences loss/(gain), net (106) 3,752
Finance income (73) (52)
Finance cost 7,161 6,542
Share based payment expenses (1,360) 151
Depreciation and amortization 140 167
Operating cash before working capital changes 23,174 19,022
Increase in debtors and prepayments and other current assets (2,746) (2,947)
(Increase)/Decrease in inventory 2,885 (416)
Increase/(decrease) in advances received (1,926) 2,868
Increase in deposits from tenants 34 808
Increase in trade and other payables 1,599 1,623
Cash generated from operations 23,020 20,958
Tax paid in the period (1,814) (985)
Net cash from operating activities 21,206 19,973
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property under construction (32,717) (33,818)
Decrease in short term deposits 11 10,368 -
Increase in escrow account (578) -
Sale of investment property 9,266 1,738
Sale of shares in associates and joint ventures - 1,250
VAT/tax on purchase/sale of investment property 592 (3,614)
Interest received 17 31
Loans repayments from associates and joint ventures 406 406
Net cash from/(used in) investing activities (12,646) (34,007)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 81,371 42,728
Repayment of long-term borrowings (37,485) (16,978)
Interest paid (6,385) (5,631)
Loans origination cost (892) (437)
Loan granted to non-controlling interest 10 (9,393) -
Decrease/(increase) in short term deposits (1,250) 274
Net cash from/(used in) financing activities 25,966 19,956
Effect of foreign currency translation (137) 1,526
Net increase/(decrease) in cash and cash equivalents 34,389 7,448
Cash and cash equivalents at the beginning of the period 148,746 149,812
Cash and cash equivalents at the end of the period 183,135 157,260
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 May 2018
Sponsor: Investec Bank Limited
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