Globe Trade Centre S.A. (“GTC”) released its 2014 financial results today. The results have been prepared in accordance with the International Financial Reporting Standards (IFRS) and are presented in euro.
2014 Financial Highlights
- Rental and service revenues maintained at €110m in 2014 (€110m in 2013)
- Rental margin improved to 74% (71% 2013)
- Underlying profit before tax up to €29m in 2014 (€19m in 2013) due to improvement in operations combined with cost savings
- Interest cover up to 2.1x (1.7x in 2013)
- Loan to Value (LTV) at 54% (53% as of 31 December 2013)
- Average interest cost down to 4.2% (4.3% in 2013)
- Cash flow from operations increased to €40m (€26m in 2013) mostly due to decline in the interest expenses coupled with improvement in cash from rental activity
- Cash and deposits of €113m at year end
- Revaluation loss of €194 in 2014 (€185 in 2013)
- Preliminary agreement for settling the Felicity loan with an asset at the recent valuation is agreed with the lenders
Throughout 2014, the company’s management has been focusing its efforts on further streamlining the company and cost reductions. This has resulted in steady and continuous improvement of key operational ratios.
Thomas Kurzmann, GTC Chief Executive Officer, comments: “I believe that GTC’s operations have significantly improved, with strong and stable rental and service revenues. Following reassessment of performance of our portfolio in secondary cities and B-class locations in Romania, Croatia, Bulgaria and Hungary we decided to stop supporting some of the non-performing assets and to intensify our efforts to sell them. As a result, we recognised significant decline in valuations of some of the properties and land bank in those locations. However, we managed to find potential buyers for some of those properties. Moreover, we with our lenders, which will allow us to sell those assets and shift the loans to GTC’s level. We consider this as a great step forward, as it will allow the team to focus purely on the future development and acquisition program.”
“We have passed significant milestones in leasing and administrative proceedings on our developments Galeria Północna and Galeria Wilanów in Warsaw. We expect that building permit for Galeria Północna will be issued by mid-2015, this will be followed by immediate commencement of construction.”
“GTC’s team in Serbia managed to expedite construction of FortyOne office project in Belgrade. The building is scheduled for completion in the third quarter of 2015. We also continue analysing potential acquisition of income producing assets with upside potential. We are prepared to realize that part of our strategy as soon as funds from the capital rise is available”– concluded Thomas Kurzmann.
Rental and service revenues kept unchanged at €110m in 2014 compared to €110m in 2013. Margin on rental activities was improved to 74% in 2014 (71% in 2013).
Revenues from sale of residential properties increased to €15m in 2014, mostly due to improved sale of residential units in Romania and Poland. Margin on sale of residential properties was 1%.
Gross profit from operations increased to €81m in 2014 compared to €78m in 2013, mostly due to cuts in the operating expenses of non-performing properties.
Selling expenses remained virtually unchanged at the level of €3m in 2014 compared to €3m in 2013.
Administrative expenses, excluding provision for stock based program, remained unchanged at €11m in 2014 compared to €11m in 2013.
Underlying profit before tax up to €29m in 2014 compared to €19m in 2013 due to improvement in gross margin from operations coupled with cost savings.
Net loss on revaluations of investment property and residential projects was €194m in 2014. The decline is attributed mainly to a decline in fair value of assets located in secondary cities in Romania, Croatia and Bulgaria, as well as land bank in Budapest. In previous years GTC supported the operations of certain projects with an intent to improve their operating performance. However, those efforts have not brought expected improvement. Following the reassessment of performance of Group`s portfolio in secondary cities and B-class locations in Romania, Croatia, Bulgaria and Hungary during fourth quarter of 2014, we decided to no longer support certain of these assets and to sell the Company`s non-performing assets. As a result, the valuations were based on less favourable assumptions with respect to future performance of certain shopping malls, which resulted in changes of estimated rental value of the projects, their required additional investments and their risk-adjusted yields.
Interest expenses net were at the level of €37m in 2014 compared to €43m in 2013.
Net loss of €207m in 2014 is attributable mainly to loss on revaluation of investment properties and residential projects.
Total debt of €811m as of 31 December 2014 (down from €888m as of 31 December 2013). The average debt maturity was 5.1 years and the average cost of debt was 4.2% p.a. (down from 4.3% in 2013).
Loan to value ratio was at the level of 54% as at 31 December 2014 compared to 53% as at 31 December 2013.
Interest coverage improved to 2.1x as at 31 December 2014 from 1.7x as at 31 December 2013.
NAV per share stood at €1.4 as at 31 December 2014 compared to €1.9 as at 31 December 2013.
Cash flow from operations went up to €40m in 2014 (€26m in 2013) mostly due to improvements in occupancy and rental income in the Group’s projects in Kraków, Łódź and Katowice, as well as cost cuts combined with decline in interest paid.
In January 2014, GTC has executed a successful issue of 32 million series J ordinary bearer shares. The issue was 250% oversubscribed, proving strong interest in the company from both Polish and international investors.
In March 2014, GTC has successfully issued 20,000 new bonds in total nominal value of PLN 200 million maturing in 2018/2019. The bonds were issued to Polish financial institutions and are listed on Catalyst Alternative Trading Systems.
Early in 2014, GTC has repaid €102m of bonds maturing in April 2014, as well as hedges related to bonds, consequently decreasing balance of liabilities from the proceeds from the bonds issue and partially from the share issue.
Commencement of FortyOne office project in Belgrade
In October 2014, GTC conducted an official ground breaking ceremony for its newest project in Serbia, the class-A FortyOne office complex. FortyOne will offer 10,300 sq m of leasable space, which today is 60% pre-leased. Phase one of the project is scheduled for completion and opening in Q3 2015, as construction works progress ahead of plan.
Completion and opening of Pascal in Kraków
Following the re-launch of construction of Pascal, the last phase of valued and esteemed Korona Office Complex in Kraków, Poland, in the first half of 2014. GTC has finalized construction works in regard to this 5,600 sq m office building. Currently, Pascal is fully operational and leased.
Progress in two key shopping mall projects in Warsaw
As of 31 December 2014, both projects reached a respectable number of pre-lease agreements. With regard to Galeria Północna, 10 agreements for total 19,921 sq m of space were signed, which brought the project’s pre-lease level to 31%. There is a significant number of pre-lease agreements that is under advanced negotiations.
Galeria Wilanów saw 11 pre-lease agreements for a total of 15.627 sq m of space signed by the end of 2014. This amounts to a pre-lease level of 25%, with additional pre-lease contracts in the pipeline.
Applications for building permits for both projects are currently being processed. In regard to Galeria Północna, the process has reached its final stage and as for Galeria Wilanów, the application process is progressing.
New leases and lease renewals
Despite continuous market pressure on rental rates, GTC benefits from outstanding reputation among renowned tenants, who value company’s experience and quality. Year 2014 was marked by numerous significant new leases and renewals, as well as pre-lease agreements for GTC’s new projects, totalling 147,500 sq m in Central and Eastern as well as South East Europe.
Significant renewals and extensions:
- Hungarian Gov., Budapest, Hungary – 28,787 sq m
- ExxonMobil in Center Point, Budapest, Hungary – 19,000 sq m
- IBM in Korona Office Complex, Kraków, Poland – 7,154 sq m
- Microsoft in City Gate complex, Bucharest, Romania – 6,845 sq m
- Roche in City Gate complex, Bucharest, Romania – 2,881 sq m
Significant pre-lease agreements:
- Carrefour in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 16,100 sq m (combined)
- LPP Group in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 9,350 sq m (combined)
- Cinema City in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 7,300 sq m (combined)
- H&M in Galeria Północna, Warsaw, Poland – 2,100 sq m
1 Profit before taxes, movement in valuation of investment assets, depreciation and change in fair value of hedges
2 Profit before taxes, movement in valuation of investment assets, depreciation and change in fair value of hedges
GTC Group is at the forefront of the commercial real estate sector in Central, Eastern and Southern Europe. Its shares are listed on the Warsaw Stock Exchange and featured in the WIG30 index as well as many other international indices.
The Group was founded in 1994. Ever since we have been active on the real estate markets in Poland, Romania, Serbia, Croatia, Bulgaria, Hungary and Slovakia and we have developed 60 commercial buildings, offering over 1,000,000 sq m of lease area and nine residential projects offering over 400,000 sq m of floor space. Today GTC owns and manage 35 commercial buildings, office buildings and shopping centers, which combined space accounts for 665,000 sq m.