2013 Financial Highlight
- Underlying profit before tax improved to €22m (€6m in 2012)
- On like-for-like basis, after eliminating the share based program provision, general and administrative expenses down 17% to €11m (€14m in 2012); overall savings of more than 50% over last two years
- Net loss on revaluation of investment properties and impairment of €190m, takes into account adjusted expectations for slower recovery mostly in the SEE region
- Financial expenses down by 32% to €49m (€72m in 2012) mainly due to a decrease in debt level following the repayment of bonds and project loans
- Debt down by 18%, maturity of debt extended to 5 years and average cost of debt down to 4.3% p.a. (from 5% in 2012)
- Loan to value at 55% (53% in 2012); pro forma for bonds issue and repayment and capital increase LTV down to 51%
- Cash flow from operations 72% up y-o-y despite sale of Platinium Business Park
- Cash and deposits of €162m, were supplemented by additional €100m post balance sheet date
“Despite strategic shifts in 2013, as the year progressed, GTC management team remained focused on executing company`s strategy. We took active measures to improve GTC`s balance sheet and operating results, while minimizing the cost of operations, which is clearly visible with the significant improvement in cash flow from operations. The Group was also focused on deleveraging, which was achieved by repayment of bonds and some of project loans following sale of assets, including 50% stake in Galeria Kazimierz with the property valuation 10% above the book value. The company also prepared funds for repayment of bonds maturing in April 2014. On the other hand, the Group accepted the asset devaluations and write-downs, coming from adjusted expectations for slower recovery mostly in SEE sector. Having achieved our turn around goals on liquidity, leverage and operational profits, we begin to roll out a new strategy that will include acquisitions and selective developments while funding ourselves further through non – core assets sales.” – said Alain Ickovics, GTC Chairman of the Management Board.
Financial overview
Rental and service revenues decreased to €118m in 2013 from €129m in 2012, as a result of disposal of the Platinium Business Park complex in Warsaw in 2012 and softening of rental rates, especially in the office segment in Poland and Hungary, partially offset by improved operating results of underperforming assets in Bulgaria and Romania. On like-for-line rental revenues increased by €2m in 2013. Margin on rental activities was at 72% in 2013 (70% in 2012). As of December 2013, GTC`s completed buildings were leased in 91% (87% in 2012), therefore further rental revenue growth is probable.
Revenues from sale of residential properties decreased to €13m in 2013, mostly due to a decrease in available inventory and softer demand in various markets.
Gross profit from operations was €84m in 2013 compared to €90m in 2012 mostly due to the disposal of Platinium Business Park.
Selling expenses decreased to €3m in 2013 mainly due to a decrease in sale and leasing activities.
Administrative expenses decreased by €10m to €9m in 2013, of which the decrease of €8m is coming from the decrease in mark-to-market of phantom shares program and €2m is due to cost cutting initiatives. On a like-for-like basis, after eliminating the stock based program provision, administrative expenses decreased by 17% to €11m from €14m.
Net loss on revaluations of investment property and impairments of residential projects was €190m in 2013. An amount of €168m is attributable to a loss on the revaluation and impairment of investment properties, which comes mainly from a decrease in expected rental rates in the retail sector in Romania, Bulgaria and Croatia, as well as a decrease in rental rates on new leases in the office segment in Poland and Hungary and a moderate shift in yields in Poland and Serbia as well as a change of designation of Galleria Bucharest land following a change of regulatory environment. The loss was partially offset by realized increase in value upon sale of Galeria Kazimierz and improvement of the performance in some of the assets.
Financial expenses decreased to €49m in 2013 due to a decrease in the debt level totalling €214m due to the repayment of bonds and project loans. Average duration of the debt was extended to 5 year (4 years in 2012) and average interest rate decreased from 5% in 2012 to 4.3% in 2013.
Underlying profit before tax[1] improved to €22m in 2013 from €6m in 2012, mainly due to a decrease in financial expenses, other cost savings and improvement in operating results of underperforming assets in Bulgaria, Romania and Croatia. Notably, the Piatra Neamt shopping center achieved a breakeven in 2013. Other underperforming assets, including Galleria Burgas, Avenue Mall Osijek, Galleria Arad, Galleria Stara Zagora, registered significant financial improvements in 2013.
Net loss amounted to €177m in 2013. This is attributable mainly to a loss on revaluation of investment properties and impairment of residential projects.
Total debt decreased significantly to €992m as of 31 December 2013 from €1,205m as at 31 December 2012. The average debt maturity was extended to 5 years and the average cost of debt was down to 4.3% p.a. (5% p.a. in 2012). Loan to value ratio was at the level of 55% as at 31 December 2013. Interest coverage improved do 1.44 in 2013 from 1.08 in 2012.
NAV per share stood at €1.8 as at 31 December 2013 compared to €2.3 as at 31 December 2012. EPRA NAV per share was also €1.8 while EPRA NNNAV/per share was €2.2.
Cash flow from operations was up 72% to €28m in 2013 (€16m in 2012) despite sale of Platinium Business Park. The improvement in cash flow from operations was achieved mainly due to lower financial expenses coupled with cost cutting on the administrative expenses level and improvement of like-for-like net operating income.
Key achievements
Sale of Platinium Business Park in Warsaw
GTC finalized the sale of the Platinium V office building in February 2013, effectively completing the sale of whole Platinium Business Park in Warsaw. The final transaction price was €173m, reflecting the investment yield of 6,7%. The transaction generated approximately €60m of cash, with €16m from the Platinium V building alone.
Sale of 50% stake in Kraków`s Galeria Kazimierz
The transaction generated approximately €50m of net cash for GTC. The sale of the project was completed in December 2013, with transaction price 10% above the book value of that asset.
Commencement of construction of Pascal
GTC has re-launched the construction of Pascal, the last phase of valued and esteemed Korona Office Complex in Kraków, Poland. The 5,500 sq m office building is scheduled to be opened in April 2014. In October 2013, GTC signed an office space lease agreement with IBM, which leased over 1,700 sq m of the building. On the top of that, GTC has refinanced its project loan on Korona Office Complex and has signed a loan agreement for €45m with Bank Zachodni WBK, member of Santander Group, out of which €6m will cover further Pascal construction costs.
Development of two shopping malls in Warsaw in progress
Administrative proceedings for both shopping mall projects in Warsaw reached its final stages. Land purchase process in Białołęka is nearly finished, with only remaining small portions of land awaiting a final sale approval from Warsaw authorities. Both Galeria Wilanów and Galeria Północna are in process of gaining final environmental opinions, planned for 2014. Tender for construction of Galeria Północna was launched in 2013 and nearly completed. GTC signed term sheets with first tenants: Cinema City will open 12 cinema halls in Galeria Wilanów and 11 in Galeria Północna. LPP, the clothing company, will rent over 4,600 sq m of retail space in Galeria Wilanów and 4,700 sq m in Galeria Północna. GTC plans to commence construction of both projects in 2014.
164,000 of new leases and lease renewal
GTC continues to benefit from outstanding reputation among renowned buyers and reputable tenants who value GTC quality, despite growing pressure on rental rates. Year 2013 was marked by numerous significant new leases and renewals, totalling 164,000 sq m in Central and Eastern as well as South East Europe, an impressive 31 percent increase compared to 2012.
Significant new leases:
- Askent in Galleria Stara Zagora – 3,600 sq m
- IBM in Francuska Office Centre, Katowice – 3,200 sq m
- Canon in Prague Marina Office Center – 3,100 sq m
- Accenture in University Business Park in Łódź – 1,700 sq m
- DFDS in Globis Poznań – 1,600 sq m
Significant renewals and extensions:
- IBM in Korona Office Complex, Kraków – 3,000 sq m
- Arvato, GPC and UW Inwestycje in Globis Poznań – combined 3,000 sq m
- Genpact in Korona Office Complex, Kraków – 3,000 sq m
- E.ON Romania in City Gate, Bucharest – 2,400 sq m
- Novo Nordisk in Aeropark in Warsaw – 2,120 sq m
- Australian Embassy in 19 Avenue, Belgrade – 1,600 sq m
Preparation for repayments of Bonds in April 2014
- Post balance sheet date the Company raised €100m in equity and bonds
- Liquidity situation has been stabilized and bonds repayment has been secured
[1] Profit before tax defined as IFRS profit before tax adjusted for net valuation movement, loss from associates, deferred and current tax of joint ventures, amortisation of tangible assets and change in fair value of hedges.
