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
Date: 15/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.