EPP on solid growth path with strong Q1 operational performance
JSE-listed EPP - the retail-focused Polish property play – announced first quarter results for the three months ended 31 March 2018 (“Q1”), showing distributable earnings increased 48% to €23.7 million and were up 9 percent on a per share basis to €2.98 compared to Q1 2017. During the quarter EPP successfully purchased the first tranche of the M1 portfolio comprised of four properties in sought-after regions, adding 194,000 sqm in GLA and taking total income producing assets to over €2 billion.
Net profit for Q1 totalled €21 million. Net asset value amounted to €966 million equating to NAV per share of €1.33. The net loan-to-value ratio at 31 March was 51 percent with an average cost of debt of 2.28 percent.
CEO Hadley Dean says: “This growth is due to solid operations driven by active asset management and strong macroeconomic conditions in Poland. Our LTV remains a key focus area in the business and we are working to reduce it to our target levels.”
Tenant sales remained steady with footfall across our portfolio up 2.2 percent. “These footfall increases were achieved despite the March introduction of the Sunday trading ban for two Sundays a month. We have seen footfall increase on Fridays, Saturdays and Mondays to compensate and to date the ban has not had a significant impact on performance,” says Dean.
The new M1 properties - M1 Czeladź, M1 Kraków, M1 Łódź and M1 Zabrze – performed well and KPIs remain strong with further improvement expected following the opening of leading DIY retailer OBI in Kraków, Łódź and Zabrze in the next few months. “We are progressing well on the potential extension and development of these properties,” says Dean.
In line with its strategy to maximise existing assets through extensions and refurbishments, EPP advanced several refurbishment projects during the quarter. These include architectural designs for the upgrade of the food court area in Pasaż Grunwaldzki as well as exploring extension possibilities at Twierdza Zamość. Dean says “With food as the new fashion, we are focused on further enhancing our food court areas across the portfolio to create engaging, ambient food hall concepts.”
Construction of Galeria Młociny, EPP’s flagship Warsaw development, is ahead of schedule and on budget with pre-letting at 75 percent. In addition, the development is currently ahead of its budgeted rental income by more than €0.5 million per year. “We are particularly pleased with the interest from a number of new international entrants to the Polish market,” says Dean. Galeria Młociny is scheduled to open in Spring 2019.
Looking ahead EPP will focus on integrating the recent acquisitions, exploring asset management opportunities in the portfolio and continue recycling office assets. The Polish economy is expected to continue performing strongly with current property fundamentals remaining favourable. Full year guidance remains at €11.6-11.8 cents per share.