Press Release
Luxembourg, 13 April 2018
ORCO PROPERTY GROUP
2017 Financial Results
Key recent events
Acquisition of land banks in Czechia
In December 2017, ORCO PROPERTY GROUP (the "Company" and together with its subsidiaries as the "Group") acquired a portfolio of lands located in the North & West Bohemia regions of Czechia, mostly along the D5 & D8 motorways, totalling approximately 3.8 million square meters. As part of the portfolio, the Company also acquired 50% stake on a historical building located in the historic centre of Prague.
INCREASE OF SHARE IN THE JOINT VENTURE
On 29 June 2017, the Company and Unibail-Rodamco entered into documentation modifying parameters of their joint venture. The agreed modifications include, inter alia, the increase of the Company's share in the joint venture from 20% to 35%, certain governance rights as well as modifications of timeframe and parameters of the joint venture.
DISPOSAL OF CAPELLEN OFFICE BUILDING
The Company disposed the office building in Capellen, Luxembourg. The building with a leasable area of approximately 7,700 square meters, located in the Capellen business park just outside of the City of Luxembourg, was sold to a private investor. The transaction, structured as a share deal, was completed on 25 January 2017.
Trading of shares in Luxembourg and Warsaw
The Company shares (ISIN: LU0122624777) resumed trading on the Luxembourg and Warsaw Stock Exchanges on 15 December 2017.
Subscription of shares in CPI PROPERTY GROUP
On 22 December 2017, the Company subscribed to 159,132,897 new shares in CPI PROPERTY GROUP. The new shares, having a par value and a subscription price of EUR 0.10 each, were issued in a reserved capital increase under the CPI PROPERTY GROUP's authorized share capital for cash contribution. The Company holds approximately 2.66% shares in CPI PROPERTY GROUP.
Financial highlights
| Performance | 31-Dec-17 | 31-Dec-16 | Change | ||
| Gross rental income | € thousands | 2,156 | 7,212 | (70.1%) | |
| Total revenues | € thousands | 5,618 | 15,097 | (62.8%) | |
| Operating result | € thousands | 116,140 | 21,211 | 447.6% | |
| Net profit for the period | € thousands | 137,279 | 164,244 | (16.4%) | |
| | |||||
| Assets | 31-Dec-17 | 31-Dec-16 | Change | ||
| Total assets | € thousands | 1,980,303 | 613,666 | 222.7% | |
| EPRA NAV | € thousands | 598,736 | 425,624 | 40.7% | |
| Property Portfolio | € thousands | 457,000 | 269,140 | 69.8% | |
| Gross leasable area | sqm | 28,000 | 36,000 | (22.2%) | |
| Occupancy in % | % | 82% | 81% | 1.0 pp | |
| Land bank area | sqm | 17,675,000 | 13,649,000 | 29.5% | |
| Total number of properties | No. | 6 | 6 | 0% | |
| | |||||
| Financing structure | 31-Dec-17 | 31-Dec-16 | Change | ||
| Total equity | € thousands | 628,371 | 413,273 | 52.0% | |
| Equity ratio | % | 32% | 67% | (35.0 pp) | |
| Net debt | € thousands | (10,901) | 32,712 | (133%) | |
| Project LTV | % | (2.4)% | 13.3% | (15.7 pp) | |
Income statement
The income statement for the 12 months period ended on 31 December 2017 and 31 December 2016 is as follows:
| € thousands | 31-Dec-17 | 31-Dec-16 | ||
| Gross rental income | 2,156 | 7,212 | ||
| Service revenues | 3,180 | 3,656 | ||
| Net service charge income/(expense) | (313) | 1,884 | ||
| Property operating expenses | (1,272) | (2,751) | ||
| Net rental income | 3,751 | 10,001 | ||
| Development sales | 595 | 2,345 | ||
| Cost of goods sold | (505) | (1,955) | ||
| Net development income | 90 | 390 | ||
| Total revenues | 5,618 | 15,097 | ||
| Total direct business operating expenses | (1,777) | (4,706) | ||
| Net business income | 3,841 | 10,391 | ||
| Net valuation gain on inv. property | 113,013 | 7,065 | ||
| Net gain or loss on disposal of inv. property | (15) | 481 | ||
| Net gain on disposal of subsidiaries | 50 | 5,370 | ||
| Amortization, depreciation and impairments | 2,138 | 417 | ||
| Other operating income | 241 | 1,990 | ||
| Administrative expenses | (2,028) | (4,316) | ||
| Other operating expenses | (1,100) | (187) | ||
| Operating result | 116,140 | 21,211 | ||
| Interest income | 56,572 | 2,201 | ||
| Interest expense | (28,297) | (11,585) | ||
| Other net financial result | (3,806) | 40,411 | ||
| Net finance income | 24,469 | 31,027 | ||
| Share of profit of equity-accounted investees (net of tax) | 6,217 | (886) | ||
| Profit / (Loss) before income tax | 146,826 | 51,352 | ||
| Income tax expense | (9,547) | 112,892 | ||
| Net Profit for the period | 137,279 | 164,244 |
Net rental income
Net rental income decreased by 62.5% to EUR 3.8 million in 2017 (EUR 10.0 million in 2016). The negative impact of the decrease in gross rental income of 70.1%, reflecting the disposal of non-core properties in 2016 and 2017.
Net valuation gain
The net valuation gain amounts to EUR 113.0 million (EUR 7.1 million in 2016) which comprises gain from valuation of Czech properties Bubny, Rezidence Pragovka, Bubenská and CD Property. Its gain was driven primarily by the general market conditions as well as by improved assumptions (mainly on ERV and yields) retained by the external valuation experts.
Administrative expenses
Administrative expenses decreased by 53.0% to EUR 2.0 million in 2017 compared to EUR 4.3 million in 2016. During 2016 there was a significant cost reduction and this trend continued in 2017. Other determinants causing the reduction of costs were the disposals of entities in 2016 and 2017.
Net finance income
Total net finance income dropped from EUR 31.0 million in 2016 to EUR 24.5 million in 2017. The interest income increased from EUR 2.2 million in 2016 to EUR 56.6 million in 2017. The increase in interest income reflects the providing of new loans by the Company to the third parties. These loans bear interest rate between 6% - 12%.
Other net financial result
The other net financial result worsened from a gain of EUR 40.4 million to a loss of EUR 3.8 million as at 31 December 2017. The main cause of this deterioration is change in fair value of derivative instrument amounts to EUR 11.3 million (EUR 38.9 million in 2016) and in the exchange rate loss (EUR 14.2 million) resulting from the transactions between the Company and CPI PROPERTY GROUP companies (mainly CPI a.s., whose functional currency is Czech koruna). The Czech koruna has been steadily appreciating since April 2017, when the Czech National Bank ended its Czech koruna floor commitment.
The loss from the exchange rate is partly compensated by the fair value gain on the derivative assets (EUR 11.3 million).
Balance sheet
| € thousands | ||||||
| 30-Dec-17 | 31-Dec-16 | |||||
| NON-CURRENT ASSETS | ||||||
| Intangible assets | -- | -- | ||||
| Investment property | 450,373 | 239,790 | ||||
| Property, plant and equipment | 35 | 26 | ||||
| Equity-accounted investees | 4,571 | 4 | ||||
| Available-for-sale financial assets | 104,613 | 33,042 | ||||
| Loans provided | 1,196,932 | 149,850 | ||||
| Trade and other receivables | 12 | 85 | ||||
| Deferred tax assets | 123,565 | 114,025 | ||||
| Total non-current assets | 1,880,101 | 536,822 | ||||
| CURRENT ASSETS | ||||||
| Inventories | 6,348 | 6,524 | ||||
| Current income tax receivables | 279 | -- | ||||
| Derivative instruments | -- | 38,732 | ||||
| Trade receivables | 4,540 | 3,833 | ||||
| Loans provided | 68,490 | 993 | ||||
| Cash and cash equivalents | 11,230 | 2,215 | ||||
| Other current assets | 8,918 | 1,338 | ||||
| Assets held for sale | 397 | 23,209 | ||||
| Total current assets | 100,202 | 76,844 | ||||
| TOTAL ASSETS | 1,980,303 | 613,666 | ||||
| EQUITY | ||||||
| Equity attributable to owners of the Company | 565,688 | 412,798 | ||||
| Non-controlling interests | 62,683 | 475 | ||||
| Total equity | 628,371 | 413,273 | ||||
| NON-CURRENT LIABILITIES | ||||||
| Bonds issued | -- | 12,482 | ||||
| Financial debts | 1,113,884 | 128,348 | ||||
| Deferred tax liabilities | 33,048 | 12,911 | ||||
| Provisions | 1,559 | 1,712 | ||||
| Other non-current liabilities | 1,991 | 3,524 | ||||
| Total non-current liabilities | 1,150,482 | 158,977 | ||||
| CURRENT LIABILITIES | ||||||
| Bonds issued | -- | 142 | ||||
| Financial debts | 54,581 | 20,718 | ||||
| Trade payables | 2,723 | 1,657 | ||||
| Advance payments | 84,505 | 395 | ||||
| Derivative instruments | -- | 7 | ||||
| Other current liabilities | 59,641 | 3,629 | ||||
| Liabilities linked to assets held for sale | -- | 14,868 | ||||
| Total current liabilities | 201,450 | 41,416 | ||||
| TOTAL EQUITY AND LIABILITIES | 1,980,303 | 613,666 | ||||
Total assets and total liabilities
Total assets increased by EUR 1,367 million or 222.7% to EUR 1,980 million as at 31 December 2017. The increase is a result of valuation of Investment property and providing new long-term loans to the CPI PROPERTY GROUP.
Non-current and current liabilities total EUR 1,351.9 million as at 31 December 2017 which represents an increase by EUR 1,151.5 million or 574.6% compared to 31 December 2016. Main driver of this increase was an additional drawdown of loan provided by Czech Property Investments, a.s. and a new loan provided to the Company by CPI PROPERTY GROUP.
EPRA Net assets value
The EPRA Net Asset Value per share as of 31 December 2017 is EUR 0.46 compared to EUR 0.32 as at December 2016.
The Triple NAV amounts to EUR 0.43 per share compared to EUR 0.31 at the end of last year. The calculation is compliant with the EPRA (European Public Real Estate Associations) "Triple Net Asset Value per share.
| December 2017 | December 2016 | |
| Consolidated equity | 565,688 | 412,798 |
| Fair Value adjustment on asset held for sales | -- | -- |
| Fair value adjustments on inventories | -- | -- |
| Deferred taxes on revaluations | 33,048 | 12,826 |
| Goodwill | -- | -- |
| Own equity instruments | -- | -- |
| EPRA Net asset value | 598,736 | 425,624 |
| Existing shares (in thousands) | 1,314,508 | 1,314,508 |
| Net asset value in EUR per share | 0.46 | 0.32 |
| EPRA Net asset value | 598,736 | 425,624 |
| Deferred taxes on revaluations | (33,048) | (12,826) |
| Fair value adjustment of bonds issued by the Group | -- | -- |
| EPRA Triple Net asset value (*) | 565,688 | 412,798 |
| Fully diluted shares | 1,314,508 | 1,314,508 |
| Triple net asset value in EUR per share | 0.43 | 0.31 |
Over the year 2017 the consolidated equity increased by EUR 152.9 million. The main driver of this increase is the profit of the period amounting to EUR 137.3 million.
For disclosures regarding Alternative Performance Measures used in this press release please refer to our 2017 Financial Information, chapter GLOSSARY & DEFINITIONS; accessible at http://www.orcogroup.com/investors/financial-documentation/full-year-documents.php.
For more information please refer to our website at www.orcogroup.com or contact us at investors@orcogroup.com.
