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Pre-close operational update
EPP N.V.
(Incorporated in The Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
LEI Code: 7245003P7O9N5BN8C098
(“EPP” or “the company”)
PRE-CLOSE OPERATIONAL UPDATE
EPP would like to provide the market with a pre-close operational update since the publications of its half year results on
29 September 2020.
COVID-19 UDPATE
In the last quarter of the year several European governments have responded to the increasing COVID-19 case numbers in
the region by introducing restrictions including trade limitations in shopping centres. The Polish government reacted
similarly by implementing limitations on the operations of all Polish shopping centres and retail locations measuring over
2,000 sqm of retail space for a period of three weeks between 7 and 29 November 2020, which was subsequently shortened
by two days due to lower rates of new infections and shopping centres were allowed to re-open on Saturday 28 November
2020. In comparison to the 7-week lockdown in March and April 2020, the trading restrictions applied to fewer stores.
Grocers, DIY stores, pharmacies, medical stores, cosmetics shops, pet stores, outlets selling books or newspapers,
telecommunication stores and services were all able to continue trading. Approximately 30% of EPP’s retail GLA was
operational during this period compared to 21% in the spring lockdown. The impact of the second lockdown, which was
materially shorter than the first one in spring 2020, is expected to be less severe both for the Polish economy and the
company’s operations. As from 28 November 2020, 89% of EPP’s retail portfolio could trade with only cinemas,
entertainment and fitness centres currently remaining closed. EPP is extremely pleased with the decision that shopping
centres are able to trade ahead of the festive trading period in December, which is crucial for the entire retail industry,
and with the average daily COVID-19 case numbers in Poland reduced in recent weeks.
Importantly, the Polish economy is expected to be one of the least impacted in Europe and the velocity of the recovery is
expected to be further amplified by the EU recovery fund which totals EUR 750 billion for the region. The Polish
government also announced several support packages aimed at industries impacted by the lockdowns which are expected
to further boost the businesses of affected tenants as well as economic recovery in general.
OPERATIONAL UPDATE
Since June 2020, footfall levels in EPP’s retail projects continued to show an improvement with July at 78%, August at
78% and September at 84% of the prior year’s footfall levels. In October footfall levels declined to around 70% of the prior
year as result of the rising COVID-19 case numbers and temporary restriction measures placed on fitness and food and
beverage. In November footfall levels declined to 41% as result of the second lockdown when only 30% of EPP’s GLA
was operational from 7 to 27 November. In December footfall rebounded immediately to 76% of the prior year footfall
levels despite 11% of GLA still not being able to trade.
Tenant turnover levels have remained robust with July at 93%, August at 97% and September at 89% of the prior year’s
levels. In October sales dropped to 79% as result of the limited trading operations however it remained above the 70%
footfall level implying that the higher conversion rates continued. Such materially higher conversion rates are expected to
continue during the entire festive season in December 2020.
The company remains in close dialogue with the government, health and sanitary authorities and industry associations to
ensure all health protocols are strictly followed, shopping continues to remain safe in the company’s retail locations and
all shoppers, staff and employees are safe during this period.
Tenants
The rent relief negotiations with tenants have now been completed by the company and rent collections rates on
discounted rental levels have been in excess of 95% pre-November lockdown. The company expects similar collection
rates in December.
New store openings
Despite the disruption caused by COVID-19 pandemic a number of retailers continued to open new stores which is
testament to retailers’ belief in the future performance of EPP’s shopping centres. Since the beginning of the year the
following brands opened their stores in EPP’s retail projects: Levis, Sephora, Martes Sport, CCC, PEPCO, Carrefour, KIWI,
Hebe, W.KRUK, Super-Pharm, 50 style, eobuwie.pl, Modivo and the first Primark in Poland at Galeria Mlociny .
The current WALT by GLA in the retail portfolio is 5.4 years (30 June 2020: 4.7 years) and the occupancy rate remains
stable at 96% level.
PROSPECTS AND OUTLOOK
The second half of the year has been challenging because the whole of Europe is dealing with rising COVID-19 case
numbers across the region, and although many countries were prepared for the autumn wave of the pandemic unfortunately
most of them were unable to avoid some form of lockdowns.
EPP has dealt with the pandemic related lockdowns in Poland well, keeping sufficient levels of liquidity and improving the
leases alongside providing necessary rental support to tenants in 2020. EPP has an unparalleled operational platform with
an excellent portfolio of well performing shopping centres across Poland, which are well leased, have a very attractive
offering to its customers and a long and stable lease profile. The strength of the portfolio was evidenced by the fast
recovery in its operations since the reopening of shopping centres in May, and an early indication of the December
operational figures points to a good recovery ahead.
In result, the board remains confident that EPP will deliver on its full year earnings guidance of €4.75 and €5.25 cents per
share for the year ended 31 December 2020. This is based on the assumption that no further lockdown occurs in Poland by
the end of 2020. This guidance has not been reviewed or reported on by EPP’s auditors and is the responsibility of the board
of directors.
Looking ahead to 2021, the board will focus on reducing the loan to value in the business. The primary way to achieve this
is by way of the disposal of a select group of assets through either outright sales or sales to new partners in joint
ventures. 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. Consequently, at this stage, the
company does not envisage the need for a capital raise. 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 a post-COVID-19 recovery. Accordingly,
the disposal programme is not expected to be concluded earlier than in the next 12 to 18 months.
2020 ANNUAL FINANCIAL YEAR END RESULTS
EPP will release its annual results for the twelve months ended 31 December 2020 in March 2021.
10 December 2020
JSE Sponsor
Java Capital
Luxembourg Stock Exchange Listing Agent
Harneys Luxembourg
For more information:
Curwin Rittles, Investor Relations, EPP
Mobile: +48 885 982 310
Curwin.rittles@epp-poland.com
Java Capital, JSE Sponsor
Phone: +27 11 722 3050
Harneys Luxembourg, Luxembourg Stock Exchange Listing Agent
Phone: +352 27 86 71 02
Singular Systems IR
Michele Mackey
+27 (0)10 003 0700/+27 (0)82 497 9827
michele@singular.co.za
Date: 10-12-2020 12:30:00
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