Wrap Text
Business update
NEPI Rockcastle S.A. (Societe Anonyme)
Incorporated and registered in the Grand Duchy of Luxembourg
Registered number: B267528
Share code: NRP
ISIN: IM00BDD7WV31
("NEPI Rockcastle" or "the Company" or the "Group")
All information below excludes joint ventures, unless otherwise stated
BUSINESS UPDATE
"Operational results for the first few months of 2022 indicate an almost complete recovery from the effects of the
Covid-19 pandemic. Customers returned as soon as trading restrictions lifted, and we are impressed that most
tenants achieved turnovers similar to 2019. However, during this period, new challenges emerged, specifically a
devastating military conflict in neighbouring Ukraine and rising inflation. Fortunately, the business suffered no
direct negative impacts, but we will continue to monitor the situation closely.
We are committed to the highest Environmental, Social and Governance (ESG) standards, and are pleased to
announce a €37 million investment in photovoltaic plants at thirty of our shopping centres. This programme should
conclude by the end of 2023, minimising our carbon footprint and stabilising energy costs.
We are grateful for stakeholders' support during our parent company relocation from the Isle of Man to the
Netherlands, via Luxembourg. This strategic move better positions the Company to attract new investors, enhancing
the long-term sustainability of the business." Rudiger Dany, Chief Executive Officer (CEO)
OPERATIONAL HIGHLIGHTS
- During the first quarter ('Q1') of 2022, throughout Central and Eastern Europe ('CEE'), all remaining
Covid-19 restrictions were lifted and 100% of NEPI Rockcastle's (hereafter referred to as the Group
and the Company) Gross Lettable Area ('GLA') was operational. As of mid-May, no indications that
trading restrictions could be reintroduced in the foreseeable future exist.
- The military conflict in Ukraine, commencing in February 2022, did not directly impact Group
operations. No significant tenants are subject to sanctions, and the Company owns no assets in Ukraine
or Russia. While some international tenants have assets in these countries, there are no indications of
any serious financial difficulties. Management will monitor the situation rigorously and update
investors regarding material developments.
- Footfall in Q1 2022 was 35% higher than the previous year, due to the gradual lifting of restrictions.
Tenant sales (excluding hypermarkets) in Q1 2022 were 53% higher than Q1 2021, and in February
and March exceeded Q1 2019, indicating a return to pre-pandemic levels.
- No significant rent concessions were required during Q1 2022, as all remaining Covid-19 restrictions
were lifted. Since the start of 2022, NEPI Rockcastle has not negotiated any new concessions, except
for very limited, specific cases (€0.3 million).
- As of mid-May 2022, the collection rate was 99% of reported revenues for 2021 (adjusted for
concessions) and respectively 96% for Q1 2022.
- Net Operating Income ('NOI') for the three months ending 31 March 2022 was €95 million, 32%
higher compared to Q1 2021, mainly due to lower rent concessions (€0.3 million Q1 2022 versus €24.6
million Q1 2021) partly offset by the impact of disposal of two Serbian properties July 2021
(€1.2 million NOI Q1 2021).
- During Q1 2022, driven by high inflation and much greater energy costs, property operating expenses
increased over 47% compared to Q1 2021. This trend is expected to continue throughout 2022,
especially if the war between Russia and Ukraine is not resolved quickly. One Company's action to
mitigate rising energy prices is the photovoltaic plants programme that should produce green energy at
thirty Romanian shopping centres by the end of 2023.
- As of 31 March 2022, the European Public Real Estate Association ('EPRA') occupancy rate was 96%.
- The Group appealed against Arbitral Tribunal's decision in relation to the discontinued acquisition of
Serenada and Krokus Shopping Centres in Poland (referred to in note 27 of the 2021 Annual Report).
FINANCIAL HIGHLIGHTS
- As of 31 March 2022, liquidity was very strong: €1 billion (including €620 million in available committed
credit facilities).
- As of 31 March 2022, the loan-to-value ratio ('LTV') was 32.5%, below the 35% strategic threshold.
- Following the January 2022 issue of green bonds maturing 2030 and early redemption of bond notes
maturing May 2023, each worth €500 million, the Group has no significant debt due in 2022 or 2023.
Of the remaining total outstanding debt, 60% is labelled green.
- The Company is investment grade credit rated as BBB by S&P and Fitch, with Positive Outlook by
Fitch, and stable outlook by S&P Global Ratings.
- As of 31 March 2022, EPRA Net Reinstatement Value ('NRV') per share was €6.42, which is 1.4%
lower than at 31 December 2021 (€6.51) due to the second half ('H2') 2021 dividend paid during Q1
2022.
- The property portfolio's value of €5.9 billion is marginally higher (+0.5%) compared to December
2021, due to investments in developments made during Q1 2022. In line with Company policy, no
property valuations were undertaken during Q1 2022. Independent valuations are included in half-year
and year-end financial reports.
- Previous earnings guidance for the 2022 financial year is maintained.
OPERATING PERFORMANCE
Status of trading restrictions and government measures
Throughout Q1 2022, all GLA was operational, except for Slovakian leisure and entertainment, which remained
closed until 18 January 2022. Other restrictions on entry, such as green certification proving vaccination or
mandatory mask wearing, were gradually lifted from February 2022. By the end of March, there were no trading
restrictions in any countries where NEPI Rockcastle operates.
The relatively mild nature of Omicron, which swept through CEE Q1 2022, meant lighter restrictions were required
compared to previous waves. Throughout CEE, infections peaked during February, fell abruptly and remained at
very low levels. High immunity, either due to vaccination or previous infection, contributed to fewer medical
emergencies during this latest phase. Further details on the current Covid-19 infection rate and the vaccination
programme in the CEE can be found at https://ourworldindata.org/covid-cases.
Currently, there is no reason to anticipate the introduction of new Covid-19 restrictions in CEE.
Tenant support
All tenants now operate without restrictions, therefore rent concessions are unnecessary. Exceptions are limited to a
few specific cases that are expected to finish shortly. No government regulated concessions or subsidies affected Q1
2022 results.
Trading update
Total visits were 35% higher in Q1 2022 compared to Q1 2021 (32% like-for-like ('LFL')). Compared to Q1 2019,
footfall was 17% lower in Q1 2022 (21% LFL). The variance in visits compared to the corresponding period during
2019 improved from month-to-month during Q1 2022 (from -22% in January to -11% in March) reflecting the ongoing
relaxation of restrictions.
Tenant sales (LFL, excluding hypermarkets) in Q1 2022 were 53% higher than in Q1 2021 (1% lower than Q1 2019).
During February 2022, monthly sales slightly exceeded February 2019 (+0.4%), while in March 2022 these were
higher than March 2019 (+3%). All product categories recorded increased sales Q1 2022 compared to Q1 2019, except
for Fashion (-12%) and Entertainment (-25%). The best performing categories were Health and Beauty (+19%) and
Electronics (+20%).
The complete recovery in sales up to, and beyond, 2019 levels was driven by a strong increase in average basket size
(+26% Q1 2022 versus Q1 2019).
Leasing activity
During Q1 2022, the Group signed 297 leases for over 48,500m2 (2.4% GLA), of which 38% are new. International
tenants accounted for 40% of newly leased GLA.
New leases signed Q1 2022 include Douglas (Mammut Shopping Centre), Dr.Max (Shopping City Sibiu), HalfPrice
(Mammut Shopping Centre), Pull&Bear (Galeria Mlyny), RTV Euro AGD (Focus Mall Zielona Gora) and Sinsay
(Shopping City Piatra Neamt).
New units opened Q1 2022 include ACTION! by Apollo (Ozas Shopping and Entertainment Centre), Dr.Max (Mega
Mall), Foot Locker and HalfPrice (Arena Mall, Bonarka City Center) and JD Sports (Mega Mall).
DEVELOPMENT UPDATE
Construction commenced at Promenada Mall Craiova and Promenada Mall Bucharest extension, after respective
building permits were issued. Vulcan Residence, the Group's first housing project, remains on schedule.
NEPI Rockcastle's development pipeline under construction, or permitting, is worth €610 million, of which €32
million was spent Q1 2022.
The Group's latest project is the installation of photovoltaic plants at thirty Romanian shopping centers. This
programme should conclude by the end of 2023, and requires an investment of €37 million. Producing energy will
provide more flexibility and resilience, mitigate rising electricity prices and improve sustainability.
CASH MANAGEMENT AND DEBT
As of 31 March 2022, NEPI Rockcastle had a very strong liquidity profile, with €397 million in cash and €620
million in undrawn committed credit facilities.
The Group's gearing ratio* (interest bearing debt less cash, divided by investment property) was 32.5%,
comfortably below the 35% threshold.
As of 31 March 2022, ratios for unsecured loans and bonds showed ample headroom compared to covenants:
- Solvency Ratio: 39% actual versus maximum 60% requirement;
- Consolidated Coverage Ratio: 4.4 actual versus minimum 2 requirement;
- Unsecured consolidated total assets/unsecured consolidated total debt: 260% actual versus minimum
150% requirement.
The Q1 2022 average interest rate, including hedging, was 2.3%. Exposure to variable interest rates is 100% hedged.
The Group's debt average maturity was 4.9 years at the end of Q1 2022.
* As of 31 March 2022, the reported gearing ratio (LTV) excludes the €32.9 million right-of-use assets and
associated lease liabilities.
CORPORATE EVENTS
On 10 May 2022, NEPI Rockcastle celebrated an important corporate milestone, with shareholders voting
resoundingly in favour of its migration from the Isle of Man to the Netherlands, via Luxembourg. Both moves
received over 99% approval from voting shareholders. As a result, the Group has, with effect from 10 May 2022,
established its registered office and place of effective management and central administration in Luxembourg as a
public limited liability company (societe anonyme). The subsequent Netherlands migration remains subject to the
fulfilment of certain conditions precedent and should be completed by September 2022. Shareholders will be kept
updated.
The Company's audit rotation policy is to regularly schedule tenders from the top audit firms. In 2022, the Group
decided to appoint Ernst & Young as its new external auditor. The previous tender took place in 2018. Ernst &
Young's mandate will commence with the review of the Interim Financial Report for first half ('H1') of 2022.
OUTLOOK
The Company reaffirms the guidance released in February 2022 that distributable earnings per share for the year will
be at least 24% higher relative to the 2021 distributable earnings per share.
This guidance does not consider the impact of potential regional political instability or major disruptions (such as
comprehensive lockdowns, trading restrictions or other measures impacting purchasing) and assumes current trading
trends continue. This guidance can be modified, or withdrawn, in the future if material changes unfold.
By order of the Board of Directors
Rudiger Dany Eliza Predoiu
Chief Executive Officer (CEO) Chief Financial Officer (CFO)
17 May 2022
For further information please contact:
NEPI Rockcastle S.A
Rudiger Dany / Eliza Predoiu +44 1624 654 704
JSE sponsor
Java Capital +27 11 722 3050
Euronext Listing Agent
ING Bank +31 20 563 6685
Media Relations mediarelations@nepirockcastle.com
Date of publication
18 May 2022
Date: 18-05-2022 08:45:00
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