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GLOBE TRADE CENTRE S.A. - Q1 2019 results for the three months ended 31 March 2019

Release Date: 15/05/2019 07:05
Code(s): GTC     PDF:  
 
Wrap Text
Q1 2019 results for the three months ended 31 March 2019

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 2019 RESULTS
FOR THE THREE MONTHS ENDED 31 MARCH 2019

HIGHLIGHTS

GROSS MARGIN FROM RENTAL ACITIVITY
EUR 30M +10%

PROFIT BEFORE TAX AND FAIR VALUE ADJUSTMENTS
EUR 18M +12%

FFO I
EUR 18M +16%

EPRA NAV
EUR 1,192M +2%

Q1 2019 FINANCIAL HIGHLIGHTS

-   In-place rent increased by 15% to EUR 131m (114m as of 31 March 2018)
-   Gross margin from rental activity up by 10% to EUR 30m (EUR 27 in Q1 2018)
-   FFO I increased 16% to EUR18m (EUR 15m in Q1 2018), FFO per share at EUR 0.04
-   Operating profit: 12% increase in profit before tax and fair value adjustments
    to EUR 18m (EUR 16m in Q1 2018)
-   Profit after tax of EUR 20m (EUR 24m in Q1 2018), earnings per share of EUR 0.04
-   EPRA NAV up by 2% to EUR 1,192m as of 31 March 2019 (EUR 1,170 as of 31 December 2018),
    EPRA NAV per share at EUR 2.47 (PLN 10.62)
-   Solid financial metrics
         -   LTV at 45% (45% as of 31 December 2018)
         -   WAIR at historic low of 2.6% (2.7% as of 31 December 2018)

Q1 2019 PORTFOLIO HIGHLIGHTS

-   Occupancy up to 95% (94% as of 31 December 2018, 93% as of 31 March 2018)
          -   The highest since end of 2009
          -   45,600 sq m of newly leased or released space
              (34% more than in Q1 2018)
-   Construction of 7 office and one retail properties (113,200 sq m) commenced in 2018 and
    will be completed in 2019-2020. One more project to commence in Q2 2019. Upon completion
    and stabilization they shall increase the in-place rent by almost EUR 31m
-   Another 6 properties may commence construction during 2019-2020

OPERATING PERFORMANCE
2018                                                         Reported
Gross margin from rental activity                            EUR 30m
Profit for the period                                        EUR 20
Earnings per share                                           EUR 0.04
FFO I                                                        EUR 18m
Total portfolio                                              EUR 2,244
Net debt                                                     EUR 1,004m
Net LTV                                                      45%
EPRA NAV/share                                               EUR 2.47


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.

Group's portfolio comprises: (i) completed commercial properties; (ii) commercial properties under construction;
(iii) a commercial landbank intended for future development or sale and (iv) residential landbank.

Since its establishment and as at 31 March 2019 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 31 March 2019, the Group`s property portfolio comprised the following properties:

           -   41 completed commercial buildings, including 37 office buildings and four retail properties with a
               total combined commercial space of approximately 666 thousand sq m of GLA, of which the
               Group's proportional interest amounts to approximately 656 thousand sq m of GLA;

           -   2 completed office buildings presented as asset held for sale, with a total combined commercial
               space of approximately 38 thousand sq m of GLA, of which the Group's proportional interest
               amounts to approximately 38 thousand sq m of GLA;

           -   eight commercial buildings under construction, including seven office buildings and one shopping
               mall with total GLA of approximately 113 thousand sq m, of which the Group's proportional interest
               amounts to 113 thousand sq m of GLA;

           -   commercial landbank designated for future development; and

           -   residential landbank designated for sale.

As of 31 March 2019, the book value of the Group's portfolio amounts to EUR2,284 million with: (i) the Group's
completed investment properties account for 77% thereof; (ii) investment properties under construction - 10%;
(iii) an investment landbank intended for future development - 6%; (iv) assets held for sale - 5%, (vi) right of use
of lands under perpetual usufruct - 2% and (v) residential 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 landplots
designated for sale and residential landbank.

The Company's shares are listed on the WSE and inward listed on the Johannesburg Stock Exchange. The
Company's shares are included in mWIG40.

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
optimizing 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.

Following the growth and results achieved in 2018, GTC will distribute PLN 0.37 / share from 2018 profits in the
form of dividend following Annual Shareholder Meeting decision made on 14 May 2019. The dividend is guided
by, among others things, the availability of cash, the funds from operations growth plans, the Company's capital
expenditure requirements and planned acquisitions as well as the share of external financing in the Company's
overall equity.

COMMENTARY
The management board presents annual condensed consolidated results for the 3 months ended 31 March 2019

KEY OPERATING ACHIEVEMENTS IN 2018

Offices: Strong leasing activity:
-     32,700 sq m of lettings and renewals
            -   17% more than in Q1 2018
           -   Occupancy up to 95% (from 93% as of 31 December 2018)
           -   Strong leasing activity in each country, with the strongest activity in Poland where occupancy
               rate increased to 93% (89% in December 2018)

-     Completion of 45,200 sq m of high quality space in 2019
            -   Green Heart (2 buildings), Belgrade
            -   Advance Business Centre I, Sofia
            -   Matrix A, Zagreb

-     Completion of 33,600 of high quality space in 2020
            -   Green Heart (1 building), Belgrade
            -   Advance Business Centre II, Sofia
            -   Matrix B, Zagreb

-     Sustainability as important value
            -   BREEAM excellent for Korona Office Complex
            -   BREEAM excellent for University Business Park
            -   77% offices with green certificates
            -   12% offices under certification

Retail: Operational outperformance:
-     Leasing activity of 12,900 sq m
            -   Driven by pre-lease of Ada Mall to 93% as of 31 March 2019 (current pre-lease at 97%)

-     Operational outperformance
            -   Galeria Jurajska: Q1 2019 footfall 2.7% higher than in Q1 2018 despite increased number of
                non trading days (Sunday trading ban introduced in March 2018)
            -   Galeria Polnocna: Q1 2019 turnover was 31% higher than in Q1 2018
            -   Mall of Sofia: increased rent income via renegotiations and change of tenant mix
            -   Avenue Mall Zagreb: stable well performing shopping mall

-     Well positioned in current markets
            -   Occupancy at 95%

-     Completion of 34,400 sq m of high quality space in 2019
            -   Ada Mall, Belgrade, opening on 24 May 2019


KEY FINANCIAL HIGHLIGHTS IN Q1 2019

Rental and service revenues
 -    Increased to EUR 39m from EUR 36m in Q1 2018
      Reflects improvement in rental revenue through completion and leasing of GTC White House, acquisition
      of Mall of Sofia and completion of modernization and leasing of the first two buildings of Green Heart
      project.

Gross margin from operations
 -    Increased to EUR 30m from EUR 27m in Q1 2018
      Reflects mostly newly completed and acquired properties.

Net profit from development revaluation and impairment
 -    Amounted to EUR 7m as compared to EUR 13m in Q1 2018
      Main contributors to the revaluation gain were assets under construction: Ada Mall, Green Heart, Advance
      Business Center I and II and Matrix A as well as Neptune Office Center.

Financial expenses
 -    Average interest rate down to 2.6% thanks to refinancing activity and hedging strategy.
 -    Financial expenses increased to EUR 8m following adoption of IFRS 16 and an increase in the average
      debt balance.

Tax
 -    Tax expenses amounted to EUR 4m as compared to EUR 6m in Q1 2018
      Taxation consist of EUR 1.2m of current tax expenses and EUR 2.3m of deferred tax expenses.
Net profit
 -    Profit before tax and fair value adjustments improved by 12% to EUR 18m reflecting strong operating
      performance and operational excellence The net profit amounted to EUR 20m.
      Earnings per share at EUR 0.04 compare to EUR 0.05 in Q1 2018.

Funds From Operations (FFO I)

At EUR 18m compared to EUR 15m in Q1 2018, FFO I per share at EUR 0.04

GAV*
 -     At EUR 2,244m as of 31 March 2019 (EUR 2,208m as of 31 December 2018) thanks to investment in
       assets under construction and revaluation gains

EPRA NAV / share
 -    Up by 2% to EUR 2.47 from EUR 2.42 on 31 December 2018
Corresponding to EPRA NAV of EUR 1,192m compared to EUR 1,170m as of 31 December 2018.

Total bank loans and bond**
 -     At EUR 1,165m compared to EUR 1,112m as of 31 December 2018
 -     Weighted average debt maturity of 4.0 years and average interest rate of 2.6% p.a.
 -     LTV at 45% (45% on 31 December 2018)
 -     Interest coverage ratio at 4.4x (4.0x on 31 December 2018)

Cash and cash equivalents
 - Cash balance of EUR 94m as of 31 March 2019

*  Including completed investment properties, investment properties under construction, landbank,
   assets held for sale and building for own use.
** Excluding loans from non-controlling interest and deferred issuance debt expenses.

The full consolidated financial statements for the three month period ended 31 March 2019 are posted on the
Company's website www.ir.gtc.com.pl

Basis of preparation
The Interim Condensed Consolidated Financial Statements for the three-month period ended 31 March 2019
have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by EU.

At the date of authorisation of consolidated financial statements, taking into account the EU's ongoing process of
IFRS endorsement and the nature of the Group's activities, there is no difference between International Financial
Reporting Standards applying to these consolidated financial statements and International Financial Reporting
Standards endorsed by the European Union.

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 2018, which were authorized for issue
on 20 March 2019. The interim financial results are not   necessarily indicative of the full year results.

The functional currency of GTC S.A. and most of its subsidiaries is Euro. The functional currency of some of
GTC's subsidiaries is other than Euro.

The financial statements of those companies prepared in their functional currencies are included in the
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 effecting earnings for the period.

As of 31 March 2019, the Group's net working capital (defined as current assets less current liabilities) was
negative and amounted to EUR 93.1 million as some loans that are expected to be refinanced were temporary
classified as current liabilities. The Group signed preliminary sale agreements and consider offers it received for
the sale of few assets (see note 11 consolidated financial statements ). Those assets are presented within Assets
held for sale, in the amount of EUR112.9 million.

The management has analysed the timing, nature and scale of potential financing needs of particular subsidiaries
and believes that cash on hand, as well as, expected operating cash-flows will be sufficient to fund the Group's
anticipated cash requirements for working capital purposes, for at least the next twelve months from the balance
sheet date. Consequently, the consolidated financial statements have been prepared on the assumption that the
Group companies will continue as a going concern in the foreseeable future, for at least 12 months from the
balance sheet date.

Annex 1   Consolidated Statement of Financial Position as at 31 March 2019 (in thousands of euro)

                                                                                      31 March 2019      31 December 2018
                                                                                        (unaudited)             (Audited)
ASSETS
Non-current assets
Investment property                                                                       2,156,787                2,113,068
Residential landbank                                                                         13,907                   12,698
Property, plant and equipment                                                                 7,745                    6,712
Deferred tax asset                                                                               77                       52
Other non-current assets                                                                        125                      129
                                                                                          2,178,641                2,132,659
Loan granted to non-controlling interest partner                                             10,348                   10,282
Total non-current assets                                                                  2,188,989                2,142,941
Assets held for sale                                                                        112,862                   76,196
Current assets
Accounts receivables                                                                          5,802                    4,449
Receivables related to expropriation of land                                                      -                    4,917
Accrued income                                                                                  754                    1,066
VAT receivable                                                                                5,016                    5,156
Income tax receivable                                                                         1,148                    1,233
Prepayments and deferred expenses                                                             3,223                    1,401
Short-term deposits                                                                          66,907                   39,109
Cash and cash equivalents                                                                    94,216                   80,456
                                                                                            177,066                  137,787
TOTAL ASSETS                                                                              2,478,917                2,356,924

                                                                                      31 March 2019      31 December 2018
                                                                                        (unaudited)             (Audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital                                                                                10,960                   10,960
Share premium                                                                               546,711                  546,711
Capital reserve                                                                            (36,054)                 (36,054)
Hedge reserve                                                                               (5,516)                  (4,542)
Foreign currency translation                                                                  1,791                    1,680
Accumulated profit                                                                          516,579                  496,996
                                                                                          1,034,471                1,015,751
Non-controlling interest                                                                      4,782                    5,044
Total Equity                                                                              1,039,253                1,020,795
Non-current liabilities
Long-term portion of long-term borrowing                                                    957,885                  993,453
Lease liability                                                                              45,038                        -
Deposits from tenants                                                                        11,427                   10,375
Long term payable                                                                             3,034                    3,045
Provision for share based payment                                                             5,923                    4,533
Derivatives                                                                                   4,979                    3,736
Provision for deferred tax liability                                                        141,183                  139,120
                                                                                          1,169,469                1,154,262
Current liabilities
Investment and trade payables and provisions                                                 52,782                   50,499
Current portion of long-term borrowing                                                      210,753                  121,894
Current portion of lease liability                                                              165                        -
VAT and other taxes payable                                                                   1,580                    1,636
Income tax payable                                                                              718                    1,114
Derivatives                                                                                   1,756                    1,887
Advances received                                                                             2,441                    4,837
                                                                                            270,195                  181,867
TOTAL EQUITY AND LIABILITIES                                                              2,478,917                2,356,924
Annex 2   Consolidated Income Statement for the year ended 31 March 2019 (in thousands of euro)

                                                                                        Three-month           Three-month
                                                                                    period ended 31       period ended 31
                                                                                         March 2019            March 2018
                                                                                        (unaudited)           (unaudited)
Rental revenue                                                                               29,274                25,980
Service revenue                                                                              10,186                 9,875
Residential revenue                                                                               -                 3,615
Service costs                                                                               (9,909)               (9,007)
Residential costs                                                                                 -               (2,979)
Gross margin from operations                                                                 29,551                27,484
Selling expenses                                                                              (368)                 (475)
Administrative expenses                                                                     (4,523)               (1,398)
Profit from revaluation/ impairment of assets                                                 6,719                12,534
Other income                                                                                    283                   163
Other expenses                                                                                (391)               (1,380)
Profit from continuing operations before tax and finance
income / (expense)                                                                           31,271                36,928
Foreign exchange differences gain/(loss), net                                                  (79)                   106
Finance income                                                                                   82                    73
Finance costs                                                                               (7,986)               (7,161)
Profit before tax                                                                            23,288                29,946
Taxation                                                                                    (3,539)               (5,637)
Profit for the period                                                                        19,749                24,309
Attributable to:
Equity holders of the Company                                                                19,583                24,058
Non-controlling interest                                                                        166                   251
Basic earnings per share (Euro)                                                                0.04                  0.05


Annex 3   Consolidated Statement of Cash Flow for the year ended 31 March 2019 (in thousands of euro)

                                                                                 Three-month period     Three-month period
                                                                                              ended                  ended
                                                                                      31 March 2019          31 March 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax                                                                            23,288                29,946
Adjustments for:
Loss/(profit) from revaluation/impairment of assets                                         (6,719)              (12,534)
Foreign exchange differences loss/(gain), net                                                    79                 (106)
Finance income                                                                                 (82)                  (73)
Finance cost                                                                                  7,986                 7,161
Share based payment expenses                                                                  1,390               (1,360)
Depreciation and amortization                                                                   131                   140
Operating cash before working capital changes                                                26,073                23,174
Increase in in account receivables and prepayments and other current
assets                                                                                      (2,141)               (2,746)
(Increase)/Decrease in inventory                                                                  -                 2,885
Increase/(decrease) in advances received                                                      1,170               (1,926)
Increase in deposits from tenants                                                             1,052                    34
Increase in trade and other payables                                                            100                 1,599
Cash generated from operations                                                               26,254                23,020
Tax paid in the period                                                                      (1,646)               (1,814)
Net cash from operating activities                                                           24,608                21,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property under construction                                      (31,456)              (32,717)
Decrease in short term deposits                                                                   -                10,368
Increase in escrow account                                                                        -                 (578)
Sale of investment property                                                                       -                 9,266
Proceeds related to expropriation of land                                                     4,917                     -
VAT/tax on purchase/sale of investment property                                                 140                   592
Interest received                                              16         17
Loans repayments from associates and joint ventures             -        406
Net cash from/(used in) investing activities             (26,383)   (12,646)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings                        103,970     81,371
Repayment of long-term borrowings                        (51,360)   (37,485)
Repayment of lease liability                              (1,730)          -
Interest paid                                             (6,740)    (6,385)
Loans origination cost                                      (611)      (892)
Dividend paid to non-controlling interest                   (428)          -
Loan granted to non-controlling interest                        -    (9,393)
Increase in short term deposits                          (27,798)    (1,250)
Net cash from/(used in) financing activities               15,303     25,966
Net foreign currency translation differences                  232      (137)
Net increase / (decrease) in cash and cash equivalents     13,760     34,389
Cash and cash equivalents at the beginning of the year     80,456    148,746
Cash and cash equivalents at the end of the period         94,216    183,135


Management Board
Thomas Kurzmann (Chief Executive Officer)
Erez Boniel (Chief Financial Officer)

Supervisory Board
Alexander Hesse (Chairman)
Olivier Brahin
Jan-Christoph Dudden
Mariusz Grendowicz
Patrick Haerle
Ryszard Koper
Marcin Murawski
Katharina Schade
Ryszard Wawryniewicz

Registered office of the Company
17 Stycznia 45A,
02-146
Warsaw
Poland

Warsaw, Poland
Date: 15 May 2019

Sponsor: Investec Bank Limited

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