Wrap Text
Unaudited condensed consolidated financial statements for the six months ended 30 June 2020
EPP N.V. (Incorporated in The Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
LEI code: 7245003P7O9N5BN8C098
("EPP" or "the company" or "the group")
SHORT-FORM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
FINANCIAL HIGHLIGHTS
- Net loan-to-value increased marginally to 51.7%
- Cost of debt remained stable at 2.5%
- Interest costs were hedged at 84%
- Weighted average debt maturity increased to 3.8 years
- Administrative costs declined by 5.5% to EUR6.9 million
- Distributable earnings per share amounted to 2.38 cents which is in line with guidance
provided in June 2020.
OPERATIONAL HIGHLIGHTS
- Footfall was at 69% of 2019 footfall levels and has increased to 85% of 2019 levels as at
September 2020
- Tenant sales were at 82% of 2019 levels as of June 2020 and has increased to 93% as
of July 2020
- 93% of EPP's retail GLA was operational and has increased to nearly 100% since
July 2020
- Primark opened its first store in Poland at Galeria Mlociny in August 2020
- WALT in portfolio has increased to 4.7 years and expected to increase in the
coming months
- Occupancy in the portfolio remained stable at 97.3%
- Average rental collections for rentals invoiced months from March 2020 to June 2020
stood at 79%, since July rental collections are in excess of 90% on discounted rentals
This short-form announcement is the responsibility of the directors and is only a summary
of the information in the full announcement and does not contain full or complete details.
The full announcement is available on the JSE website at
https://senspdf.jse.co.za/documents/2020/jse/isse/EPPE/interims20.pdf and on the
company website at https://www.epp-poland.com/s,91,financial-statements.html. Copies
of the full announcement may also be requested at the company's registered office and at
the office of the sponsor, Java Capital, at no charge, during office hours from Tuesday,
29 September 2020 to Tuesday, 13 October 2020.
Any investment decision should be based on the full announcement published on the JSE
and company websites.
HY2020 HY2019
Rental income and recoveries EUR'000 63 673 76 352
Net operating profit EUR'000 42 806 64 248
Profit from operations EUR'000 (52 515) 73 007
Profit/(loss) for the period EUR'000 (24 311) 34 428
HEPS EUR cents per share 6.9 3.0
EPS EUR cents per share (2.7) 4.0
See dividend
Dividend EUR cents per share paragraph 5.80
30 June 31 December
2020 2019
Investment properties and joint ventures EUR billion 2.40 2.49
Net asset value per share EUR 1.21 1.32
Loan-to-value net % 51.7 50
EPP is a Dutch-based real estate company that follows the REIT formula and is one of the
leading owners of retail space in Poland. As at 30 June 2020 the company manages a
portfolio of 26 retail centres and six high-quality offices located in the majority of regional
cities in Poland. In addition to these income generating properties, EPP owns the
Towarowa 22 development in Warsaw. The 26 retail centres under management include
the flagship Warsaw development Galeria Mlociny, which successfully opened in May 2019.
By the end of 2020, EPP expects to own or co-own 29 shopping centres post the conclusion
of the final tranche of the M1 transaction.
PROSPECTS AND OUTLOOK
EPP's board of directors ("board") remains confident that EPP will deliver on its full year
earnings guidance of between EUR4 and EUR5 cents per share for the year ended
31 December 2020, as announced on SENS on 29 June 2020. Given the recovery in its
operations and the progress it has made in the last couple of months with renegotiated
leases, the board feels that it is in a position to revise its full year earnings guidance to
between EUR4.75 and EUR5.25 cents per share for the year ended 31 December 2020.
This is based on the following assumptions:
- the Polish economy continues its projected recovery in the second half of the year;
- no significant tenant failures occur;
- successful conclusion of remaining tenant discussions; and
- no second wave of COVID-19 occurs that will have a detrimental impact on shopping
centres such as closures in the second half of the year.
2020 has been a very challenging year for the global economy as well as real estate markets
globally. EPP's business in Poland has been impacted materially, especially as tenants were
released from paying rent to retail landlords for the period of the lockdown, and significant
rental discounts had to be provided to tenants thereafter in order to provide them with the
necessary support to survive. However, EPP believes the steps taken by the Polish
Government, particularly the decision to open shopping centres earlier than in most
European countries, have enabled the Polish economy to get on a path of smooth recovery
from the COVID-related shock, and this has allowed shopping centres to start their recovery
sooner than most other countries. It will undoubtedly still take time to fully recover, but EPP
sees encouraging and consistent growth in both monthly footfall and tenant turnover figures
since the reopening of the shopping centres at the beginning of May 2020 and expects this
trend to continue.
EPP has an unparalleled operational platform with an excellent portfolio of shopping centres
across Poland, which is complemented by office assets. However, although operations in
the portfolio are recovering well, it is also expected to take some time for retail turnovers to
consistently return to pre-pandemic levels. Although the speed at which operations are
recovering is encouraging, the necessity to provide significant financial support to tenants
in the second half of 2020 will result in a significant decline in revenues during this period.
Therefore, it is prudent for EPP to focus on initiatives to strengthen its balance sheet and
to retain maximum liquidity. This will ensure that the company is well positioned to navigate
through the recovery phase which is expected to take until 2021. Furthermore, throughout
the balance of 2020 and in 2021 the board will focus on reducing the loan-to-value in the
business. The primary way to achieve it is by way of the disposal of a selected group of assets
through either outright sales or sales to new partners in joint ventures. Consequently, at this
stage, the company does not envisage the need for a capital raise. Importantly, the
management team will follow a measured approach in executing its disposal strategy, and
any potential asset disposals will be considered only if the right pricing can be secured.
The management team believes that there is liquidity in the Polish market but it is prudent
to allow time for the disposals in order to benefit from increasing investor interest as the
overall investment environment improves in the Polish real estate market in line with
post-COVID-19 recovery. Accordingly, the disposal programme is expected to be concluded
not earlier than in the next 12 to 18 months.
As part of this process, shareholders are advised that the board has elected not to distribute
a dividend for the first half of the year to June 2020 and will assess the payment of a second
half dividend to December 2020 when finalising its full year results, which is expected in
March 2021.
The financial information contained in this announcement has not been reviewed or
reported on by EPP's auditors.
By order of the board
29 September 2020
Directors
Tomasz Trzoslo (chief executive officer)
Jacek Baginski (chief financial officer)
Robert Weisz* (Chairman)
Marek Belka*
Maciej Dyjas**
Dionne Ellerine*
Andrew Konig**
James Templeton*
Pieter Prinsloo**
Taco de Groot*
* Independent non-executive
** Non-executive
LuxSE listing agent
Harney Westwood & Riegels SARL
JSE sponsor
Java Capital
www.epp-poland.com
Date: 29-09-2020 07:05:00
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