Wrap Text
Condensed consolidated financial statements for the three months ended 31 March 2018
EPP N.V.
(previously Echo Polska Properties 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")
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED 31 MARCH 2018
Highlights
Distributable earnings up 48% to EUR23.7 million
Total investment properties value exceeded EUR2 billion
Net asset value per share improved to EUR1.33 (December 2017 EUR1.32)
Retail WAULT by GLA increased to 5.45 years from 5.30 years in December 2017
Successful acquisition of tranche 1 of M1 portfolio adding 194 400 m2 of high-quality
retail space
Consolidated statement of profit or loss
Period from Period from
1 January 1 January
2018 until 2017 until
31 March 31 March
2018 2017
EUR'000 EUR'000
Rental income and recoveries 46 571 31 241
Property operating expenses (13 661) (9 496)
Net property income 32 910 21 745
Other income 293 621
Other expenses (356) (221)
Administrative expenses (3 175) (1 880)
Net operating profit 29 672 20 265
Gain on investment properties (980) (41)
Profit from operations 28 692 20 224
Finance income 1 100 141
Finance costs (8 557) (4 371)
Foreign exchange (losses)/gains 6 (1 221)
Participation in profits of joint ventures (48) 91
Profit before taxation 21 193 14 864
Taxation
Current income tax (2 333) (688)
Deferred tax 2 155 9 770
Profit for the period 21 015 23 946
Basic and diluted earnings per share (EUR cents) 2.65 4.1
Headline earnings and diluted headline earnings
per share (EUR cents) 2.77 4.1
Consolidated statement of other comprehensive income
Period from Period from
1 January 1 January
2018 until 2017 until
31 March 31 March
2018 2017
EUR'000 EUR'000
Profit for the period 21 015 23 946
Other comprehensive income to be reclassified
to profit or loss in subsequent periods
Foreign currency translation reserve (1 451) (2 154)
Total comprehensive income for the period, net of tax 19 564 21 792
Total comprehensive income attributable to the
parent for the period, net of tax 19 564 21 792
Consolidated statement of financial position
As at As at
31 March 31 December
2018 2017
EUR'000 EUR'000
ASSETS
Non-current assets 2 161 294 1 797 545
Investment in joint ventures 116 618 116 009
Tangible assets 40 47
Investment property 2 018 289 1 655 572
Financial assets 26 347 25 917
Current assets 138 016 154 569
Inventory 651 525
Tax receivable 497 209
Trade and other receivables 38 430 26 723
Financial assets 3 973 3 955
Restricted cash 25 087 23 613
Cash and cash equivalents 69 378 99 544
Total assets 2 299 310 1 952 114
EQUITY AND LIABILITIES
Equity 966 165 833 821
Share capital 642 778 571 026
Share premium 187 668 147 534
Treasury shares (783) (783)
Accumulated profit 132 434 111 419
Share-based payment reserve 5 802 4 909
Foreign currency translation reserve (1 734) (284)
Non-current liabilities 1 175 457 941 710
Bank borrowings 1 070 638 831 183
Related-party liabilities 1 750 1 741
Other liabilities 12 263 15 033
Deferred tax liability 90 806 93 753
Current liabilities 157 688 176 583
Bank borrowings 122 945 117 155
Related-party financial liabilities 26 18 019
Tax payables 1 773 879
Trade payables 32 766 40 353
Provisions 178 177
Total equity and liabilities 2 299 310 1 952 114
Condensed consolidated statement of changes in equity
Share
premium/ Accumu-
Share capital Treasury lated
capital reserves shares profit/(loss)
EUR'000 EUR'000 EUR'000 EUR'000
Balance as at
31 December 2016
after restatement 474 702 95 095 - 38 075
Profit for the year - - - 128 348
Other comprehensive income - - - -
Other comprehensive income
from joint ventures - - - -
Total comprehensive income - - - 128 348
Issue of ordinary shares 96 324 56 650 - -
Transaction cost related
to issuance of shares - (4 211) - -
Acquisition of own shares - - (1 810) -
Recognition of share-based
payments - - - -
Transfer of shares 1 027
Dividend paid - - - (55 004)
Balance as at
31 December 2017 571 026 147 534 (783) 111 419
Profit for the year - - - 21 015
Other comprehensive income - - - -
Total comprehensive income - - - -
Issue of ordinary shares 71 752 40 748 - -
Transaction cost related
to issuance of shares - (614) - -
Recognition of share-based
payments - - - -
Balance as at 31 March 2018 642 778 187 668 (783) 132 434
Foreign Share-
currency based
translation payment Total
reserve reserve equity
EUR'000 EUR'000 EUR'000
Balance as at
31 December 2016
after restatement (434) - 607 438
Profit for the year - - 128 348
Other comprehensive income (3 403) - (3 403)
Other comprehensive income
from joint ventures 3 553 - 3 553
Total comprehensive income 150 - 128 498
Issue of ordinary shares - - 152 974
Transaction cost related
to issuance of shares - - (4 211)
Acquisition of own shares - - (1 810)
Recognition of share-based
payments - 5 936 5 936
Transfer of shares (1 027) -
Dividend paid - - (55 004)
Balance as at
31 December 2017 (284) 4 909 833 821
Profit for the year - - 21 015
Other comprehensive income (1 450) - (1 450)
Total comprehensive income (1 450) - (1 450)
Issue of ordinary shares - 112 500
Transaction cost related
to issuance of shares - - (614)
Recognition of share-based
payments - 893 893
Balance as at 31 March 2018 (1 734) 5 802 966 165
Condensed consolidated statement of cash flow
Period from Period from
1 January 1 January
2018 until 2017 until
31 March 31 March
2018 2017
EUR'000 EUR'000
Cash generated from operations 2 916 46 699
Tax paid (1 561) (501)
Dividends paid/due to shareholders - -
Net cash generated from operating activities 1 355 46 187
Net cash utilised in/generated from investing activities (365 184) (10 477)
Net cash generated from/(utilised in) financing activities 335 314 (27 988)
Net increase in cash and cash equivalents (28 515) 7 722
Cash and cash equivalents at the beginning of the period 99 544 21 921
Effect of foreign exchange fluctuations (1 651) 497
Cash and cash equivalents at the end of the period 69 378 30 140
Headline earnings reconciliation
Period from Period from
1 January 1 January
2018 until 2017 until
31 March 31 March
2018 2017
EUR'000 EUR'000
Profit for the period attributable to EPP shareholders 21 015 23 946
Change in fair value of investment properties 980 41
Headline and diluted earnings attributable to EPP shareholders 21 996 232 987
Actual number of shares in issue 793 552 888 586 051 293
Weighted number of shares in issue 793 552 888 586 051 293
Basic and diluted earnings per share (EUR cents)* 2.65 4.1
Headline earnings and diluted headline earnings
per share (EUR cents)** 2.77 4.1
* There are no dilutionary instruments in issue and therefore basic and diluted earnings
are the same.
** There are no dilutionary instruments in issue and therefore headline earnings and
diluted headline earnings are the same.
Commentary
Introduction
During the first quarter of the year, we successfully purchased the first tranche of the M1
portfolio consisting of four properties located in sought after regions in Poland for a
consideration of EUR358 million. The total retail gross lettable area ("GLA") added was over
194 000 m2 with an average property size of over 48 000 m2.
EPP is continuing the integration of the assets purchased in 2017 and exploring asset
management opportunities within the portfolio.
Profile
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. Its portfolio is complemented by high-quality
offices located in regional cities across Poland. The company currently operates a portfolio
of 18 retail centres and six offices located across the majority of regional cities across
Poland. In addition to the income generating properties, EPP also has two developments
in the capital city in Poland, Warsaw, which has the highest purchasing power in Poland,
namely Towarowa 22 and Mlociny, which is set to open in April 2019. By the end of 2020,
EPP expects to own 27 shopping centres post the conclusion of the M1 transaction.
EPP owns and operates 635 000 m2 retail GLA and 137 000 m2 office GLA, excluding
joint ventures. The investment portfolio has a diversified tenant base of leading retailers
with international brands in the case of retail properties, and primarily blue-chip companies
in the case of office properties.
The company's operations are fully internalised and all asset management and property
management is done in-house.
EPP's shares are listed on the official list and admitted to trading on the Euro MTF market
of the Luxembourg Stock Exchange ("LuxSE") and on the Main Board of the JSE Limited
("JSE") in the Real Estate Holdings and Development Sector. The company has primary
listings on both the LuxSE and the JSE.
The company's strategy is to own large dominant shopping centres, located in strong
catchment areas and which have asset management opportunities in terms of extensions
across Poland. EPP intends continuing to divest from offices and recycle the proceeds to
fund purchases of retail assets.
The condensed consolidated financial statements for the three months ended 31 March
2018 comprise the financial statements of the company and its subsidiaries.
Financial results
The net profit for the three months ended 31 March 2018 amounted to EUR21.02 million
and distributable income totalled EUR23.7 million. Total net asset value amounted to
EUR966 million equating to a NAV per share of EUR1.33. The loan-to-value ratio as of
31 March 2018 was 51% with an average cost of debt of 2.28%.
Segment information
Retail Office Total
EUR'000 EUR'000 EUR'000
Three month period ended 31 March 2018
Segment profit
Rent and recoveries income 38 311 6 949 45 260
Property operating expenses (12 400) (2 490) (14 890)
Net property income 25 911 4 459 30 370
As at 31 March 2018
Segment assets
Investment in joint ventures 116 618 - 116 618
Investment property 1 708 622 309 666 2 018 288
Total segment assets 1 825 240 309 666 2 134 906
Bank borrowings 932 278 161 197 1 093 475
Total segment liabilities 932 278 161 197 1 093 475
Headline earnings to distributable income reconciliation
Period from Period from
1 January 1 January
2018 until 2017 until
31 March 31 March
2018 2017
EUR'000 EUR'000
Headline and diluted earnings attributable to EPP shareholders 21 966 23 987
Amortised cost valuation of long-term financial liabilities 1 099 152
Change in deferred tax (2 155) (9 770)
Foreign exchange losses/(gains) 1 512 1 221
Fair value losses/(gains) in joint ventures 129 158
Other non-distributable items 177 284
Provision for Long-Term Incentive Plan 892 -
Distributable income 23 650 16 032
Actual number of shares in issue 793 552 888 586 051 293
Distributable income per share (EUR cents) 2.98 2.74
Portfolio performance
During the period, the company increased the number of retail properties from 14 to 18
retail assets with the successful acquisition of tranche 1 of the M1 portfolio. The average
GLA of the new acquisitions were in excess of 48 000 m2 GLA per asset which is in line
with the company strategy to acquire large dominant centres that are located in strong
catchment areas. The total retail GLA increased by 194 400 m2, to bring EPP's total retail
exposure to 635 000 m2. Post the acquisition of tranche 1, EPP now holds one of the
largest shopping centre portfolios by GLA in Poland.
Footfall was up 2.2% and tenant sales have remained fairly flat despite the introduction of
the Sunday trading ban in March of this year.
Construction at EPP's flagship Warsaw-based shopping centre Mlociny remains on track
and on schedule to open in April 2019. Mlociny is more than 75% pre-leased, with many
first time entrants to Poland looking to open in the shopping centre. Towarowa 22 is in the
process of zoning approval which is expected in 2018/2019.
Vacancy profile
The vacancy profile indicated below reflects the vacancy percentage in terms of current
GLA by sector, including the Metro Master Lease agreement.
Vacancy
based
on total
GLA (%)
Office 6.3
Retail 0.3
Total 1.39
Tenants
During the quarter retail tenants totalled 1 433 with 90 office tenants.
Geographic profile
By fully
By GLA let NOI
City Project % %
Kielce Galeria Echo, Astra Park 11.09 11.05
Szczecin Galaxy, Outlet, Oxygen 12.73 17.98
Wroclaw Pasaz Grunwaldzki, West Gate 6.24 10.45
Krakow Zakopianka, Opolska Business Park, M1 14.64 14.82
Kalisz Galeria Amber 4.32 4.06
Warszawa Park Rozwoju 4.31 4.34
Belchatow Galeria Olimpia, CH Belchatow 4.21 2.70
Jelenia Gora Galeria Sudecka 3.90 3.00
Czeladz M1 6.91 6.11
Poznan Malta Office Park 3.64 3.68
Wloclawek Wzorcownia Wloclawek 3.28 2.84
Zabrze M1 6.80 4.61
Zamosc Twierdza Zamosc 3.07 2.84
Inowroclaw Galeria Solna 3.03 3.05
Klodzko Twierdza Klodzko 2.97 2.41
Lomza CH Veneda 1.94 1.86
Lodz Symetris, M1 6.18 3.89
Total 100.00 100.00
Sectoral profile
By fully
By GLA let NOI
% %
Retail 82.30 82.45
Office 17.70 17.55
Total 100.00 100.00
WAULT
By rental
Sector By GLA income
Retail 5.45 4.98
Office 4.01 4.02
Weighted average unexpired lease term in years.
Prospects
EPP has a quality portfolio of dominant retail assets complemented by high-quality office
assets. The company continues to focus on integrating its recent acquisitions into the
portfolio, exploring asset management opportunities in the portfolio and continuing on its
asset recycling strategy. The Polish economy continues to perform well and the current
property fundamentals remain favourable. The board remains confident that EPP will deliver
on its stated full year distribution per share guidance of between EUR11.6 and
EUR11.8 cents.
Basis of preparation
The condensed consolidated financial information for the period ended 31 March 2018 has
been prepared in compliance with International Financial Reporting Standards ("IFRS"), the
presentation and disclosure requirements of IAS 34: Interim Financial Reporting, the Dutch
Civil Code, the JSE Listings Requirements and the Rules and Regulations of the LuxSE.
Jacek Baginski, EPP's Chief Financial Officer, was responsible for supervising the
preparation of these condensed consolidated financial statements for the period ended
31 March 2018, which have not been reviewed or reported by EPP's independent external auditors.
Subsequent events
Kings Cross Marcelin
On 29 May 2018 EPP concluded a preliminary acquisition agreement (the "preliminary
acquisition agreement") with King Cross Group S.r.l. (the "seller") to acquire the King Cross
Marcelin Shopping Centre (the "property" or "King Cross Marcelin") for a net purchase
consideration of EUR91.1 million.
The 45 353 m2 King Cross Marcelin shopping centre presented a unique opportunity to
acquire a dominant retail asset in its catchment area, at a price with a material discount
compared to other regional markets. The initial acquisition yield is 7.3%, compared to the
current sub-7% yield in other regional cities. This is EPP's first retail acquisition in Poznan
and is in line with its strategy to expand its presence in Polish regional cities.
The property is c.99% let to 120 tenants with only a few small retail units remaining vacant.
Approximately 95% of King Cross Marcelin is let to popular international and national
retailers including Auchan, Media Markt, H&M, Intersport, Jysk, Reserved, New Yorker,
CCC, Smyk, Empik Pepco, Rossmann, Super-Pharm and McDonalds.
The transaction is unconditional. However, EPP and the seller have the right to withdraw
from the transaction if certain pre-closing covenants are not fulfilled. The transaction is
expected to close at the end of July 2018.
Bond announcement
On 18 June 2018 EPP announced a book building for an unsecure corporate bond issue of
EUR400 million, with an intention of extending the current debt average maturity of 3.8 years
with a five-years instrument, diversifying funding resources and reducing amortization.
Subsequently, EPP decided to postpone the bookbuild for the corporate bond issue due to
adverse market conditions and pricing levels. The postponement does not adversely affect
the liquidity situation of EPP, as the current debt profile is considered favourable from the
refinancing perspective.
EPP has sufficient cash resources to meet its ongoing obligations and the bond raise was
merely intended as a substitution of current funding. The postponement of the issue has no
impact on the operations of the business. EPP continues to have excellent relationships
with its debt providers and access to funding.
By order of the board
EPP N.V.
25 June 2018
For more information
Investor Relations
Curwin Rittles
EPP
Mobile: +48 885 982 310
Curwin.Rittles@echo-pp.com
Singular Systems IR
South Africa
Michele Mackey
+27 (0)10 003 0700
michele@singular.co.za
Jacques de Bie
+27 (0)82 497 9827
Jdebie@singular.co.za
JSE Sponsor
Java Capital
Phone: +27 11 722 3050
Luxembourg Stock Exchange Listing Agent
M Partners
Phone: +352 263 868 602
www.echo-pp.com
Date: 25/06/2018 03:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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