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H1 2018 results for the six-month period ended 30 June 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")
H1 2018 RESULTS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2018
HIGHLIGHTS
GROSS MARGIN FROM
RENTAL ACITIVITY FFO I EPRA NAV/SHARE NET LTV
EUR 54M EUR 29M EUR 2.32 45%
+26% +35% +2% +3%
FINANCIAL HIGHLIGHTS PORTFOLIO HIGHLIGHTS
- Refurbishment of the two buildings
- Gross margin from rental activity up by 26% to in Green Heart project (formerly
EUR 54m (EUR 43m in H1 2017) GTC Square)
- Profit after tax at EUR 46m (EUR 60m in H1 2017) - Completion of White House
- Profit after tax without revaluation increased - Acquisition of Mall of Sofia and
49% to EUR 25m (EUR 17m in H1 2017) Sofia Tower
- Earnings per share at EUR 0.10 - 4 projects under construction with
- FFO I increased 35% to EUR 29m (EUR 21m in 85,000 sq. m GLA to be completed
H1 2017), FFO I/share up to EUR 0.06 in 2019
- In-place rent up 14% to EUR 125m - 3 projects with 90,000 sq. m to be
- EPRA NAV increased 4% to EUR 1,120m (EUR commenced still in 2018
1,073m as of 31 December 2017); EPRA NAV/ - Strong asset management
share up to EUR 2.32 - Occupancy at 93% (94% as
- Average interest rate down to 2.6% p.a. from at 31 December 2017)
2.8% p.a. as of 31 December 2017 - 85,000 sq. m of office and
- Interest cover at 4.0x retail space newly leased
- Net LTV at 45% and renewed in H1 2018
OPERATING PERFORMANCE
H1 2018 Reported Variance %
Gross margin from rental activity EUR 54m +26%
Profit before tax EUR 57m -17%
Earnings per share EUR 0.10 -23%
FFO I EUR 29m +35%
Net debt EUR 953m +15%
Net LTV 45% +3%
EPRA NAV/share EUR 2.32 +2%
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 June 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 145 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 June 2018, the Group`s property portfolio comprised the following properties:
- 42 completed commercial buildings, including 38 office buildings and four retail properties with a
total combined commercial space of approximately 697 thousand sq. m of GLA, of which the
Group's proportional interest amounts to approximately 676 thousand sq. m of GLA;
- four commercial projects under construction, including three office projects and one retail
project with total GLA of approximately 85 thousand sq. m, of which the Group's proportional
interest amounts to 85 thousand sq. m of GLA;
- commercial landbank designated for future development; and
- residential landbank.
As of 30 June 2018, the book value of the Group's portfolio amounts to EUR 2,114.3m with: (i) the Group's
completed commercial properties account for 88% thereof; (ii) commercial properties under construction - 5%;
(iii) a commercial landbank intended for future development - 6%; (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.
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 6 months ended
30 June 2018.
KEY OPERATING ACHIEVEMENTS IN 2017
Completions, acquisitions and asset management boost in place rent and profit:
- Completion of the two buildings in Green Heart project (formerly GTC Square)
- Refurbishment of 21,600 sq. m of office space
- 85% leased as of 30 June 2018
- EUR 3.2m of additional in-place rent p.a.
- Completion of White House
- 21,500 sq. m of newly developed office space
- 59% leased as of 30 June 2018 (the remaining space under negotiation)
- EUR 2.4m of additional in-place rent p.a.
- Acquisition of Mall of Sofia
- 22,900 sq. m retail and 10,300 sq. m of office space
- 96% leased
- 65% acquisition price financed by the bank's loan
- EUR 7.55m of in-place rent p.a.
- Yield on equity invested 19.5%
- In-place rent of EUR 125m annually (+14% vs. Dec. 2017)
Expected NAV and FFO growth from development activity:
- 4 projects under construction with 85,000 sq. m GLA to be completed in 2019:
- Ada Mall (Belgrade)
- part of Green Heart (Belgrade)
- Advance Business Centre I (Sofia)
- Matrix A (Zagreb)
- 3 projects with 90,000 sq. m to be commenced still in 2018:
- Advance Business Centre II (Sofia)
- City Rose Park 1&2 (Bucharest)
- The Twist (Budapest)
- 2 projects with over 39,000 sq. m of office space to start in next 12 months
- Matrix B (Zagreb)
- The Pillar (Budapest)
- Another 6 projects in the planning stage with over 175,000 sq. m GLA
KEY FINANCIAL HIGHLIGHTS IN H1 2018
Rental and service revenues
- Increased to EUR 73m from EUR 58m in H1 2017
Reflects improvement in the rental revenue through completion and leasing of FortyOne III, Galeria
P�lnocna, Artico, which were opened to the public during the year 2017 and contributed EUR 12m to the
recurring rental income. Additionally, the acquired Cascade Office Building, Belgrade Business Centre
and Mall of Sofia contributed EUR 4m to the recurring rental income. These increases were partially offset
by lost revenues of EUR 3m following disposal of Galleria Stara Zagora and Galleria Burgas.
Gross margin from operations
- Increased EUR 55m from EUR 43m in H1 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 EUR 23m as compared to EUR 51m in H1 2017
Reflects mainly valuation gain on assets under construction: Ada Mall, White House and Green
Heart.
Financial expenses
- Almost unchanged at EUR 14m as compared to EUR 13m in H1 2017
Cost of finance down to 2.6% (from 3.1%) due to decrease in average interest rate and change in hedging
strategy
Taxation
- Amounted to EUR 11m as compared to EUR 8m tax benefit in Q1 2017
Taxation consist of EUR 4m of current tax expenses and EUR 7m of deferred tax expenses.
Net profit
- Amounted to EUR 46m compared to EUR 60m in H1 2017. The profit without revaluation increased 49%
to EUR 25m.
Reflects strong operating performance and operational excellence.
- Earnings per share at EUR 0.10 compare to EUR 0.13 in H1 2017.
Funds From Operations (FFO I)
- At EUR 29m compared to EUR 21m in H1 2017
Total property value
- At EUR 2,117m as of 30 June 2018 (EUR 1,955m as of 31 December 2017) due to an investment in
assets under construction and revaluation gain those assets
EPRA NAV / share
- Up by 2% to EUR 2.32 from EUR 2.28 on 31 December 2017
Corresponding to EPRA NAV of EUR 1,120m compared to EUR 1,073m as of 31 December 2017
Total bank debt and financial liabilities
- At EUR 1,135m compared to EUR 1,031m as of 31 December 2017
- Weighted average debt maturity of 4.25 years and average cost of debt of 2.6% p.a.
- LTV at 45% (42% on 31 December 2017)
- Interest coverage at 4.0x (3.5x on 31 December 2017)
- EUR 20.5m of bonds and corporate loan issued
- EUR 39m bonds repaid
Cash and cash equivalents
- Cash position of EUR 140m as of 30 June 2018 from EUR 149m as of 31 December 2017
Basis of preparation
The Interim Condensed Consolidated Financial Statements for the six-month period ended
30 June 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 June 2018
(in thousands of euro)
30 June 2018 31 December 2017
(unaudited) (audited)
ASSETS
Non-current assets
Investment property 1,964,653 1,797,583
Investment property landbank 133,383 139,258
Residential landbank 12,698 12,698
Investment in joint ventures 407 1,303
Property, plant and equipment 6,657 6,847
Other non-current assets 101 86
2,117,899 1,957,775
Loan granted to non-controlling interest partner 9,511 -
Total non-current assets 2,127,410 1,957,775
Assets held for sale 3,566 4,336
Current assets
Residential inventory - 3,755
Accounts receivables 6,743 4,367
Accrued income 1,466 1,093
VAT receivable 5,253 6,618
Income tax receivable 782 619
Prepayments and deferred expenses 2,718 1,767
Escrow account 316 777
Short-term deposits 41,148 52,756
Cash and cash equivalents 140,280 148,746
198,706 220,498
TOTAL ASSETS 2,329,682 2,182,609
Annex 1 Consolidated Statement of Financial Position as at 30 June 2018 (cont.)
(in thousands of euro)
30 June 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 (3,492) (2,365)
Foreign currency translation 738 2,323
Accumulated profit 451,385 441,977
970,248 937,036
Non-controlling interest 4,707 4,226
Total Equity 974,955 941,262
Non-current liabilities
Long-term portion of long-term borrowing 1,021,623 907,704
Deposits from tenants 9,558 8,960
Long term payable 2,654 2,621
Provision for share based payment 4,371 5,744
Derivatives 2,071 1,360
Provision for deferred tax liability 138,788 125,827
1,179,065 1,052,216
Current liabilities
Trade and other payables 48,031 50,505
Current portion of long-term borrowing 116,164 126,381
VAT and other taxes payable 1,626 1,516
Income tax payable 816 1,843
Derivatives 2,279 2,035
Advances received 6,746 6,851
175,662 189,131
TOTAL EQUITY AND LIABILITIES 2,329,682 2,182,609
Annex 2 Consolidated Income Statement for the six month period ended 30 June 2018
(in thousands of euro)
Six-month period Six-month period Three-month Three-month
ended 30 June ended 30 June period ended 30 period ended 30
2018 2017 June 2018 June 2017
(unaudited) (unaudited) (unaudited) (unaudited)
Rental revenue 53,360 43,465 27,380 21,393
Service revenue 19,202 14,516 9,327 6,800
Residential revenue 4,578 442 963 -
Service costs (18,521) (15,052) (9,514) (7,106)
Residential costs (3,868) (379) (889) -
Gross margin from operations 54,751 42,992 27,267 21,087
Selling expenses (1,195) (964) (720) (511)
Administration expenses (4,099) (7,654) (2,701) (5,012)
Profit from revaluation/impairment of
assets 23,368 51,094 10,834 26,670
Other income 407 864 244 518
Other expenses (2,757) (1,351) (1,377) (899)
Profit (loss) from continuing operations
before tax and finance income/(expense) 70,475 84,981 33,547 41,853
Foreign exchange differences gain/
(loss), net 294 (4,158) 188 (406)
Finance income 158 92 85 40
Finance cost (14,311) (13,013) (7,150) (6,471)
Share of gain (loss) of associates and
joint ventures - 184 - -
Profit before tax 56,616 68,086 26,670 35,016
Taxation (10,544) (8,487) (4,907) (7,512)
Profit (loss) for the period 46,072 59,599 21,763 27,504
Attributable to:
Equity holders of the Company 45,591 59,634 21,533 27,454
Non-controlling interest 481 (35) 230 50
Basic earnings per share (in Euro) 0.10 0.13 0.05 0.06
Annex 3 Consolidated Statement of Cash Flow for the six month period ended 30 June 2018
(in thousands of euro)
Six-month period Six-month period
ended ended
30 June 2018 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax 56,616 68,086
Adjustments for:
Loss/(profit) from revaluation/impairment of assets (23,368) (51,094)
Share of loss (profit) of associates and joint ventures - (184)
Profit on disposal of assets -
Foreign exchange differences loss/(gain), net (294) 4,158
Finance income (158) (92)
Finance cost 14,311 13,013
Share based payment (income)/expenses (1,373) 2,215
Depreciation and amortization 266 216
Operating cash before working capital changes 46,000 36,318
Increase in trade receivables, prepayments and other current assets (1,158) (85)
Decrease/(increase) in inventory and residential land bank 3,755 (1,801)
Increase/(decrease) in advances received (1,567) 2,947
Increase in deposits from tenants (92) 1,439
Increase/(decrease) in trade and other payables (693) (477)
Cash generated from operations 46,245 38,341
Tax paid in the period (4,623) (2,101)
Net cash flows from operating activities 41,622 36,240
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property (59,337) (69,199)
Decrease in short term deposits 15,515 -
Purchase of subsidiary (37,846) (12,500)
Purchase of completed assets and land - (10,525)
Decrease/(Increase) in Escrow accounts for purchase of assets 461 (7,444)
Sale of investment property 13,613 1,731
Sale of subsidiaries - 37,545
Sale of shares in associate - 1,250
VAT on purchase/sale of investment property 1,067 (3,498)
Interest received 40 71
Loans repayments 813 812
Net cash flows from/(used in) investing activities (65,674) (61,757)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 135,967 106,035
Repayment of long-term borrowings (82,752) (48,075)
Dividends paid (9,752) (8,061)
Interest paid (13,525) (12,440)
Loans origination cost (1,180) (1,474)
Loan granted to non-controlling interest (9,393) -
Decrease/(increase) in blocked deposits (1,967) 794
Net cash from/(used in) financing activities 17,398 36,779
Effect of foreign currency translation (1,812) 1,232
Net increase/(decrease) in cash and cash equivalents (8,466) 12,494
Cash and cash equivalents at the beginning of the period 148,746 149,812
Cash and cash equivalents at the end of the period 140,280 162,306
Management Board Supervisory Board
Thomas Kurzmann (Chief Executive Officer) Alexander Hesse (Chairman)
Erez Boniel (Chief Financial Officer) Olivier Brahin
Jan-Christoph Dudden
Mariusz Grendowicz
Ryszard Koper
Marcin Murawski
Katharina Schade
Registered office of the Company
17 Stycznia 45A,
02-146
Warsaw
Poland
Warsaw, Poland
Date: 23 August 2018
Sponsor: Investec Bank Limited
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