Interim RESULTS 2019 | INTERIM RESULTS 2019
Agenda Interim Results 2019 Company and market overview Financial overview Retail portfolio overview Outlook INTERIM RESULTS 2019 | AGENDA (2)
Company and market overview HADLEY DEAN CEO INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW
Operational and financial objectives 2019 H1 results achieved Retail operational highlights Financial highlights € 72 m € 53 m € 5.80 c 49.8% +2% +6% 99.1% DISTRIBUTABLE NET OPERATING DPS PER NET LTV EARNINGS INCOME SHARE FOOTFALL SALES OCCUPANCY +9% +9% flat -2.1% INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (4)
FINLAND Europe – Poland 6 th largest economy in the EU SWEDEN UNITED IRELAND NETHERLANDS KINGDOM POLAND GERMANY CZECH REPUBLIC SLOVAKIA AUSTRIA FRANCE HUNGARY ROMANIA ITALY SPAIN PORTUGAL INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (5)
1.5 European macro outlook GDP growth forecast 2019 – 2021 (%) 1.9 2.4 1.5 1.6 3.4 1.3 2.2 Poland – one of the highest expected GDP 2.9 growth rate at 3.4% 1.8 1.5 3.4 3.1 0.3 Source: 2.0 1.4 Oxford Economics INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (6)
1.7 European retail sales outlook Retail sales growth forecast 2019 – 2021 (%) 2.2 4.3 1.5 2.8 4.5 1.8 3.6 Poland – one of the highest expected retail sales 2.2 growth rate at 4.5% 1.4 2.2 3.7 4.2 0.8 Source: 1.5 1.1 Oxford economics INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (7)
LITHUANIA LITHUANIA EPP EPP retail portfolio 2019 portfolio 2019 Largest retail landlord in Poland by GLA Largest retail landlord in Poland by GLA Gdansk Gdansk Hamburg Hamburg SZCZECIN SZCZECIN BELARUS BELARUS LOMZA LOMZA INOWROCLAW INOWROCLAW 24 1 WŁOCLAWEK WŁOCLAWEK Berlin Berlin POZNAN POZNAN POZNAN POZNAN POZNAN POZNAN POZNAN WARSAW WARSAW DEVELOPMENT DEVELOPMENT RETAIL ASSETS RETAIL ASSETS LODZ LODZ LODZ GERMANY GERMANY PROJECT PROJECT KALISZ KALISZ RADOM RADOM BELCHATOW BELCHATOW 900 000 Dresden Dresden WROCLAW WROCLAW JELENIA JELENIA KIELCE KIELCE CZESTOCHOWA CZESTOCHOWA ZAMOSC ZAMOSC GORA GORA BYTOM BYTOM M 2 GLA KLODZKO KLODZKO ZABRZE ZABRZE CZELADZ CZELADZ KRAKOW KRAKOW Lviv Lviv Prague Prague PRZEMYSL PRZEMYSL UKRAINE UKRAINE CZECH REPUBLIC REPUBLIC Brno Brno INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW ( INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (8) Munich Munich
LITHUANIA EPP retail portfolio 2020 Attractive and diversified pipeline of assets Gdansk OLSZTYN Hamburg SZCZECIN BELARUS 28 1 LOMZA INOWROCLAW RETAIL ASSETS DEVELOPMENT WŁOCLAWEK Berlin PROJECT POZNAN WARSAW > 1 000 000 LODZ LODZ GERMANY KALISZ RADOM M 2 GLA BELCHATOW Dresden WROCLAW JELENIA KIELCE CZESTOCHOWA > 120 000 000 ZAMOSC GORA BYTOM CZELADZ OPOLE KLODZKO ZABRZE FOOTFALL TYCHY KRAKOW Lviv Prague PRZEMYSL 40% UKRAINE CZECH REPUBLIC OF POPULATION WITHIN 30 MIN DRIVE Brno INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (9) Munich
Favourable macro environment Fundamentals support Polish spending Expected salary growth Unemployment expected to reach 2019 - 2021 – 6.9% record low of 2.8% by 2021 Average monthly salary and unemployment rate 1 000 12,0% 6 000 5 596 Average monthly salary (PLN) 5 259 4 915 5 000 10,0% 4 585 Unemployment rate 4 284 4 052 3 908 3 777 8,0% 4 000 3 659 6,0% 3 000 4,0% 2 000 2,0% 1 000 0 0 0,0% 2013 2014 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f) Unemployment rate in Poland Unemployment rate in EU-28 Average monthly salary (PLN) Source: INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (10) GUS, NBP, Oxford Economics, Eurostat
Retail landscape in Poland Limited supply on the horizon Exposure to nearly Shopping centres More than 70% of retail spend Lack of high streets 40 million people are seen as destinations occurs in shopping centres Evolution of retail space (m 2 ) 700 000 600 000 500 000 New supply (m 2 ) 400 000 300 000 200 000 100 000 0 2013 2014 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f) Source: INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (11) Savills
Key strategic objectives achieved Strategic initiatives achieved in H1 Successful divestment of offices through the sale of portfolio to JV Partner Strong support from the market in an oversubscribed equity raise of EUR 90m Increased exposure to retail with the successful acquisition of 4 shopping centres and the opening of Galeria Mlociny Reduced gearing in the business to below 50% Delivered on DPS guidance INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (12)
Asset recycling strategy INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY
Office sale Successful office sale and JV Successful disposal of office portfolio to strong JV partner Disposal in line with book values In-house asset and property management retained to enhance returns Remain focused on recycling assets INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (14)
M1 tranche 1 Asset highlights highlights Well-established properties ŁÓDŹ with 20 year track record CZELADŹ ZABRZE Strong anchors: Auchan, KRAKÓW OBI and Media Markt GLA 194 000 m 2 Large sites and catchments with over 200 ha of land on sites NOI € 25 million Occupancy 100% Ample parking INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (15)
M1 tranche 2 Asset highlights highlights POZNAŃ Well-established properties ŁÓDŹ with 20 year track record RADOM CZĘSTOCHOWA BYTOM CZELADŹ ZABRZE z Strong anchors: Auchan, KRAKÓW OBI and Media Markt GLA Large sites and catchments with over 200 ha of land 141 000 m 2 on sites NOI €15 million Ample parking Occupancy 100% INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (16)
Financial overview JACEK BAGIŃSKI CFO INTERIM RESULTS 2019 | FINANCIAL OVERVIEW
Snapshot of income statement Earnings targets achieved EUR million H1 2019 H1 2018 Growth Growth (%) Net operating income 71,8 66,2 5.6 +8.5% Administration costs (7,3) (6,7) (0,6) +9.0% % of NOI 10.2% 10.1% - 0.1% EBITDA 64,2 59,2 5,0 +8.4% % of NOI 89.4% 89.4% +0% Interest expense (1) (17,4) (14,7) (2,7) +18.1% Cost of interest 2.4% 2.4% +0% Current taxation (5,3) (4,9) (0,4) +8.2% Effective tax rate 11.3% 11.0% +0.3% Joint ventures (2) 2.2 0 2.2 Distributable earnings 52,7 48,3 4,4 +9.1% No. of shares (‘million) 908 830 78 +9.4% Distribution per share (€cents) 5.80 5.82 -0.02 0% (1) Finance expenses excluding IFRS amortised cost valuations and IFRS 9 remeasurements (2) Operating profit of joint-ventures, excluding fair value remeasurements, deferred taxes and other INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (18)
Snapshot of financial position Improved capital structure while increasing scale of operations EUR million H1 2019 YE 2018 Movement Change (%) Investment properties 2,294 2,202 92 +4.2% Investment in JVs 170 139 31 +22.3% Total assets 2,620 2,472 148 +6.0% Bank borrowings 1,325 1,304 21 +1.6% Net asset value excl. deferred tax 1,209 1,118 91 +8.1% No. of shares (‘million) 908 830 78 +9.4% NAV per share 1.33 1.35 (0.01) -1.5% Cost of debt 2.4% 2.4% 0% Hedging 84% 85% -1% Loan to value (net) 49.8% 51.9% -2.1% INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (19)
Strong liquidity position Well capitalized and significant access to liquidity Debt extended successfully Debt maturity profile (EUR’m) until 2023> 900 814 800 Headroom in credit facilities 672 of EUR 95 m 700 600 513 Hedging at 84% and 500 3.8 years debt maturity 400 300 LTV successfully reduced 185 to below 50% and on track 200 150 100 to achieve medium term 80 100 target of 45% 11 10 0 0 0 0 2018 2019 2020 2021 2022 2023> 30 June 2018 30 June 2019 INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (20)
Retail portfolio WOJCIECH KNAWA Head of Property Management INTERIM RESULTS 2019 | RETAIL PORTFOLIO
Retail portfolio Operations remained robust: summary H1 2018 vs. H1 2019 +2% +6% 99.1% 4.6 11% +2.4% FOOTFALL SALES OCCUPANCY WALT (YEARS) GLA RTS LFL NRI GROWTH INTERIM RESULTS 2019 | RETAIL PORTFOLIO (22)
EPP performance vs Polish SC council benchmark Consistently outperfoming the competition Tenant turnover 8% 7% 7% 6% 6% 5% 4% 3% 3% 2% 2% 2% 1% 1% 1% 0% -1% -1% -2% 2016 2017 2018 2019 H1 PRCH EPP Source: INTERIM RESULTS 2019 | RETAIL PORTFOLIO (23) Polish Council of Shopping Centers, Company data
Sunday trading Consumer habits have shifted 100% SUNDAY FOOTFALL TRANSFERRED TO OTHER SHOPPING DAYS Jan - Jun 19 vs. Jan - Jun 18 +10% 350000 + 10% 300000 SATURDAYS + 3% + 7% + 1% + 5% + 6% 250000 +7% - 31% 200000 150000 THURSDAYS 100000 +6% 50000 0 TUESDAYS Mon Tue Wed Thu Fri Sat Sun Jan-Jun 2018 Jan-Jun 2019 INTERIM RESULTS 2019 | RETAIL PORTFOLIO (24)
Sunday initiatives Supporting F&B and entertainment sales Initiatives to attract customers on non-trading Sundays Cultural, sport, social and educational events Building customer loyalty Footfall increased by 40-140% on the days events took place compared to non-trading Sundays INTERIM RESULTS 2019 | RETAIL PORTFOLIO (25)
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