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Q3&9M 2018 Results for the three and nine-month periods ended 30 September 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")
Q3&9M 2018 RESULTS
FOR THE THREE AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER 2018
HIGHLIGHTS
GROSS MARGIN FROM PROFIT BEFORE TAX
RENTAL ACITIVITY AND FAIR VALUE FFO I EPRA NAV/SHARE
ADJUSTMENTS
EUR83M EUR48M EUR46M EUR2.37
+27% +57% +37% +4%
9M 2018 FINANCIAL HIGHLIGHTS
- In-place rent went up 15% to EUR127m
- 11 quarters of continuous increase, cumulative
increase in excess of 60% since Q4 2015
- Gross margin from rental activity up by 27% to EUR83m
- Occupancy kept high at 93%
- 117,000 sq. m of newly leased space (32,000 sq. m in
Q3'18)
- FFO I increased 37% to EUR46m
- 11 quarters of continuous increase, cumulative
increase in excess of 60% (annualized)
since Q4 2015
- Operating profit: 57% increase in profit before tax and
fair value adjustments to EUR48m
- Profit after tax at EUR69m, earnings per share of EUR0.14
- EPRA NAV increased 7% to EUR1,145m as at 30
September 2018, EPRA NAV per share at EUR2.37m
- 11 quarters of continuous increase, cumulative
increase of 47% since Q4 2015
- Net LTV at 45%
- Securing investment loans in the amount of EUR316 m
Q3 2018 PORTFOLIO HIGHLIGHTS
- Acquisition in Budapest
designated for development
of 35,500 sq. m office
building Center Point 3
- Commencement of
construction of 17,900 sq. m
office building Advance
Business Center II in Sofia
- Gold LEED Certificate for
Galeria Polnocna
- Additional anchor tenants in
Galeria Poonocna: Mango and
Media Expert
- Galeria Jurajska 100% leased
OPERATING PERFORMANCE
9M 2018 Reported Variance %
Gross margin from rental activity EUR 83m +27%
Profit before tax EUR 82m -39%
Earnings per share EUR 0.14 -42%
FFO I EUR 46m +37%
Net debt EUR 979m +18%
Net LTV 45% +7%
EPRA NAV/share EUR 2.37 +4%
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 30 September 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 151 thousand sq. m of commercial space in completed commercial
properties. Additionally GTC Group developed and sold over 100 thousand sq. m of commercial space and
approximately 76 thousand sq. m of residential space through its associates in Czech Republic.
As of 30 September 2018, the Group`s property portfolio comprised the following properties:
- 43 completed commercial buildings, including 39 office buildings and four retail properties with a
total combined commercial space of approximately 703 thousand sq. m of GLA, of which the
Group's proportional interest amounts to approximately 693 thousand sq. m of GLA;
- seven commercial buildings under construction, including six office buildings and one shopping
mall with total GLA of approximately 103 thousand sq. m, of which the Group's proportional
interest amounts to 103 thousand sq. m of GLA;
- commercial landbank designated for future development; and
- residential landbank.
As of 30 September 2018, the book value of the Group's portfolio amounts to EUR2,164.3m 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 - 6%; (iv) residential projects and landbank account
for 1% and assets held for sale. 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.
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 was 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 was 14 June
2018. Shareholders were given a choice to elect dividend in cash or in shares. Some of the shareholders decided
to choose shares and as a result in June 2018, the Company issued 13,233,492 series M Shares to some of the
Company's shareholders. The dividend was paid in cash (EUR 9.7m) or in shares (EUR 26.5m) on all 470,303,504
GTC S.A. shares.
COMMENTARY
The management board presents unaudited interim condensed consolidated results for the 9 months ended 30
September 2018.
KEY OPERATING ACHIEVEMENTS IN 9M 2018
Completions, acquisitions and asset management boost in-place rent and profit:
- Acquisition of land plot in Budapest designated for Center Point 3 office building of 35,500 sq. m
GLA
- In-place rent of EUR127m annually (+15% vs. Dec. 2017)
- 11 quarters of continuous increase, cumulative increase in excess of 60% since Q4 2015
- Gross margin from rental activity up by 27% to EUR83m
- Occupancy kept high at 93%
- 117,000 sq. m of newly leased space (32,000 sq. m in Q3'18)
Expected NAV and FFO growth from development activity:
- Commencement of construction of 17,900 sq. m office building Advance Business Center II in Sofia
- 7 buildings under construction with 103,000 sq. m GLA that are scheduled for completion in 2019
will further increase the In-place rent by EUR23m:
- Ada Mall (Belgrade)
- Green Heart (3 buildings)(Belgrade)
- Advance Business Centre (2 buildings) (Sofia)
- Matrix A (Zagreb)
- 5 buildings with 112,000 sq. m are planned to be commenced in 2019:
- City Rose Park (2 buildings) (Bucharest)
- The Twist (Budapest)
- Matrix B (Zagreb)
- Pillar (Budapest)
- Another 7 projects in the planning stage with over 210,000 sq. m GLA
KEY FINANCIAL HIGHLIGHTS IN 9M 2018
Rental and service revenues
- Increased strongly to EUR111m from EUR88m in 9M 2017
Reflects improvement in rental revenue through completion and leasing of FortyOne III, Galeria Polnocna,
Artico, which were completed in the second half of 2017 as well as White House which was completed in
Q2 2018. These buildings contributed EUR17.5m to the recurring rental income. Additionally, the acquired in
Q3 2017, Cascade Office Building, Belgrade Business Centre and Mall of Sofia, which was acquired in Q2
2018, contributed EUR6.9m to the recurring rental income.
Gross margin from operations
- Increased EUR83m from EUR65m in 9M 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 EUR31m as compared to EUR105m in 9M 2017
Reflects mainly valuation gain on assets under construction: Ada Mall, White House, Green Heart
and Advance Business Center as well as Galeria Jurajska.
Financial expenses
- Almost unchanged at EUR22m as compared to EUR21m in 9M 2017
Cost of finance down to 2.6% due to decrease in average interest rate and change in hedging strategy
Taxation
- Amounted to EUR13m as compared to EUR22m tax benefit in 9M 2017
Taxation consist of EUR5m of current tax expenses and EUR8m of deferred tax expenses.
Net profit
- Amounted to EUR69m compared to EUR112m in 9M 2017. Profit before fair value adjustments improved
significantly by 57% to EUR48m.
- Reflects strong operating performance and operational excellence.
- Earnings per share at EUR 0.14 compare to EUR 0.24 in 9M 2017.
Funds From Operations (FFO I)
- At EUR46m compared to EUR34m in 9M 2017
Total property value
- At EUR2,166m as of 30 September 2018 (EUR1,955m as of 31 December 2017) due to acquisition of assets, an
investment in assets under construction and revaluation gain those assets
EPRA NAV / share
- Up by 4% to EUR2.37 from EUR2.28 on 31 December 2017
Corresponding to EPRA NAV of EUR1,145m compared to EUR1,073m as of 31 December 2017
Total bank debt and financial liabilities
- At EUR1,125m compared to EUR1,031m as of 31 December 2017
- Weighted average debt maturity of 4.4 years and average cost of debt of 2.6% p.a.
- LTV at 45% (42% on 31 December 2017)
- Interest coverage at 4.1x (3.5x on 31 December 2017
Cash and cash equivalents
- Cash position of EUR105m as of 30 September 2018 from EUR149m as of 31 December 2017
Basis of preparation
The Interim Condensed Consolidated Financial Statements for the nine-month period ended 30 September 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 30 September 2018
(in thousands of euro)
30 September 2018 31 December 2017
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 2,009,596 1,797,583
Investment property landbank 138,418 139,258
Residential landbank 12,698 12,698
Investment in joint ventures - 1,303
Property, plant and equipment 6,736 6,847
Other non-current assets 123 86
2,167,571 1,957,775
Loan granted to non-controlling interest partner 9,573 -
Total non-current assets 2,177,144 1,957,775
Assets held for sale 3,566 4,336
Current assets
Residential inventory - 3,755
Accounts receivables 7,440 4,367
Accrued income 1,543 1,093
VAT receivable 4,710 6,618
Income tax receivable 947 619
Prepayments and deferred expenses 2,462 1,767
Escrow account 322 777
Short-term deposits 40,992 52,756
Cash and cash equivalents 104,504 148,746
162,920 220,498
TOTAL ASSETS 2,343,630 2,182,609
30 September 2018 31 December 2017
(unaudited) (audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital 10,960 10,651
Share premium 546,711 520,504
Capital reserve (36,054) (36,054)
Hedge reserve (3,240) (2,365)
Foreign currency translation 1,112 2,323
Accumulated profit 474,169 441,977
993,658 937,036
Non-controlling interest 4,885 4,226
Total Equity 998,543 941,262
Non-current liabilities
Long-term portion of long-term borrowing 1,039,052 907,704
Deposits from tenants 9,776 8,960
Long term payable 3,039 2,621
Provision for share based payment 3,508 5,744
Derivatives 2,116 1,360
Provision for deferred tax liability 139,686 125,827
1,197,177 1,052,216
Current liabilities
Current portion of long-term borrowing 88,186 126,381
Trade and other payables 49,152 50,505
VAT and other taxes payable 2,099 1,516
Income tax payable 937 1,843
Derivatives 1,956 2,035
Advances received 5,580 6,851
147,910 189,131
TOTAL EQUITY AND LIABILITIES 2,343,630 2,182,609
Annex 2 Consolidated Income Statement for the nine month period ended 30 September 2018
(in thousands of euro)
Nine-month Nine-month Three-month Three-month
period ended 30 period ended 30 period ended 30 period ended 30
September 2018 September 2017 September 2018 September 2017
(unaudited) (unaudited) (unaudited) (unaudited)
Rental revenue 81,735 65,613 28,375 22,148
Service revenue 28,988 22,016 9,786 7,500
Residential revenue 4,578 442 - -
Service costs (27,937) (22,592) (9,416) (7,540)
Residential costs (3,868) (379) - -
Gross margin from operations 83,496 65,100 28,745 22,108
Selling expenses (1,566) (1,558) (371) (594)
Administration expenses (5,753) (10,320) (1,654) (2,666)
Profit from revaluation/impairment of
assets 31,331 105,314 7,963 54,220
Other income 530 1,153 123 289
Other expenses (4,414) (2,501) (1,657) (1,150)
Profit (loss) from continuing
operations before tax and finance
income / (expense) 103,624 157,188 33,149 72,207
Foreign exchange differences gain/
(loss), net 93 (2,819) (201) 1,339
Finance income 238 121 80 29
Finance cost (22,126) (20,707) (7,815) (7,694)
Share of gain (loss) of associates and
joint ventures - 184 - -
Profit before tax 81,829 133,967 25,213 65,881
Taxation (12,795) (22,272) (2,251) (13,785)
Profit (loss) for the period 69,034 111,695 22,962 52,096
Attributable to:
Equity holders of the Company 68,375 111,510 22,784 51,876
Non-controlling interest 659 185 178 220
Basic earnings per share (in Euro) 0.14 0.24 0.05 0.13
Annex 3 Consolidated Statement of Cash Flow for the nine month period ended 30 September 2018
(in thousands of euro)
Nine-month period Nine-month period
ended ended
30 September 2018 30 September 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 81,829 133,967
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (31,331) (105,314)
Share of loss (profit) of associates and joint ventures - (184)
Profit on disposal of assets -
Foreign exchange differences loss/(gain), net (92) 2,819
Finance income (238) (121)
Finance cost 22,126 20,707
Share based payment (income) / expenses (2,236) 1,993
Depreciation and amortization 405 308
Operating cash before working capital changes 70,463 54,175
Decrease in accounts receivables, prepayments and other current assets (1,047) 388
(Increase)/Decrease in inventory and residential land bank 3,755 (2,359)
Increase/(decrease) in advances received (2,733) 5,274
Increase in deposits from tenants 125 1,495
Increase/(decrease) in trade and other payables (1,279) (506)
Cash generated from operations 69,284 58,467
Tax paid in the period (6,160) (2,751)
Net cash flows from operating activities 63,124 55,716
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (83,265) (106,354)
Decrease in short term deposits 15,645 -
Purchase of land and completed assets (16,450) (51,064)
Purchase of subsidiary (37,846) (15,896)
Increase in Escrow accounts for purchase of assets 455 (1,504)
Sale (including advances) of investment property 13,613 3,067
Sale of subsidiaries - 37,545
Purchase of NCI - (352)
Sale of shares in associate - 1,250
VAT on purchase/sale of investment property 1,749 2,046
Interest received 58 87
Loans repayments from associates 1,301 1,218
Net cash flows from/(used in) investing activities (104,740) (129,957)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 171,871 123,346
Repayment of long-term borrowings (130,373) (68,965)
Dividends paid (9,752) (8,061)
Interest paid (20,379) (18,173)
Loans origination cost (1,933) (1,537)
Loan granted to non-controlling interest (9,393) -
Decrease/(increase) in blocked deposits (1,859) 100
Net cash from/(used in) financing activities (1,818) 26,710
Effect of foreign currency translation (808) 172
Net increase / (decrease) in cash and cash equivalents (44,242) (47,359)
Cash and cash equivalents at the beginning of the period 148,746 149,812
Cash and cash equivalents at the end of the period 104,504 102,453
Management Board Supervisory Board
Thomas Kurzmann (Chief Executive Officer) Alexander Hesse (Chairman)
Erez Boniel (Chief Financial Officer) Olivier Brahin
Philippe Couturier
Jan-Christoph D�dden
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: 14 November 2018
Sponsor: Investec Bank Limited
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