Press Release
Luxembourg, 31 August 2018
ORCO PROPERTY GROUP
H1 2018 Financial Results
Key recent events
Annual General Meeting of Shareholders
The annual general meeting of the shareholders of ORCO PROPERTY GROUP (the "Company") was held on 31 May 2018 in Luxembourg (the "Annual Meeting"), with approximately 97.45% of the voting rights present or represented.
The Annual Meeting approved the statutory annual accounts and consolidated annual accounts for the financial year ending 31 December 2017, as well as the allocation of financial results for the financial year ending 31 December 2017. The Annual Meeting further granted a discharge to the members of the Company's Board of Directors as well as to the auditors for the performance of their duties during the financial year ending 31 December 2017.
The Annual Meeting also resolved to re-appoint the following persons as members of the Company's Board of Directors until the annual general meeting of 2019: Jiri Dedera, Edward Hughes, and Erik Morgenstern. Jiri Dedera was also elected Managing Director (administrateur délégué) of the Company. The Annual Meeting finally resolved to appoint KPMG Luxembourg as an auditor (réviseur d'entreprises agréé) of the Company until the annual general meeting of 2019.
Disposal of non-contorOlling interest
On 26 June 2018, the Company transferred 80% stake in Bubny Development, s.r.o., a vehicle holding the Bubny land plots in Prague, to GSG Europa Beteiligungs GmbH ("GSG Europa").
The Company will continue to consolidate and manage Bubny Development, s.r.o. pursuant to shareholders agreement, entered into between the Company and GSG Europa.
Both the Company and GSG Europa belong under the consolidation of CPI PG. The disposal price in this intragroup transaction price was based on the IFRS NAV value.
Reconstruction of office building Bubenská 1
The Bubenská 1 office building will undergo an extensive reconstruction, thanks to which the tenants will get a top-quality work environment while maintaining a unique architecture. The total investment exceeds CZK 1 billion (app. EUR 38.4 million).
The first and largest tenant of the administrative part of the building became the WPP group. The WPP group includes twelve world-renowned creative, media, digital, content and research agencies such as Ogilvy, GroupM, Kantar, Wunderman, Young & Rubicam and many others. Individual WPP companies, formerly operating in various Prague buildings, will find their new home under one common roof.
The office building Bubenská 1 has 25,500 m2 of lettable area. Twelve WPP agencies occupy a total of nearly two thirds of the area (16,316 m2). The long-term lease agreement is concluded from 2020 to 18 years.
Acquisition of CPI BYTY Bonds
At the beginning of August 2018, the Company successfully acquired approximately CZK 2 billion (app. EUR 76.9 million) of bonds issued by CPI BYTY, a.s. The acquired bonds, issued under the bond programme of CPI BYTY, a.s., were due (or callable) in May 2019.
On 28 August 2018, following the bondholders meeting, CPI BYTY, a.s. announced, that all tranches of CPI BYTY bonds programme will be early repaid on 12 September 2018.
Financial highlights
| Performance | 30-Jun-18 | 30-Jun-17 | Change | ||
| Gross rental income | € thousands | 800 | 1,189 | (32.7%) | |
| Total revenues | € thousands | 9,822 | 1,332 | 637.4% | |
| Operating result | € thousands | 2,409 | 78,213 | (96.9%) | |
| Net profit for the period | € thousands | 18,477 | 62,612 | (70.5%) | |
| | |||||
| Assets | 30-Jun-18 | 31-Dec-17 | Change | ||
| Total assets | € thousands | 2,638,975 | 1,980,303 | 33.3% | |
| EPRA NAV | € thousands | 609,838 | 598,736 | 1.9% | |
| Property Portfolio | € thousands | 459,000 | 457,000 | 0.4% | |
| Gross leasable area | sqm | 28,000 | 28,000 | 0% | |
| Occupancy in % | % | 48% | 82% | (34.0 pp) | |
| Land bank area | sqm | 17,655,500 | 17,675,000 | (-0.1%) | |
| Total number of properties | No. | 6 | 6 | 0% | |
| | |||||
| Financing structure | 30-Jun-18 | 31-Dec-17 | Change | ||
| Total equity | € thousands | 748,217 | 628,371 | 19.1% | |
| Equity ratio | % | 28% | 32% | (4.0 pp) | |
| Net debt | € thousands | (98,625) | (10,901) | 804.7% | |
| Project LTV | % | (21.5)% | (2.4)% | (19.1 pp) | |
Income statement
Income statement for the six month period ended on 30 June 2018 is as follows:
| TEUR | 30-Jun-18 | 30-Jun-17 | ||
| Gross rental income | 800 | 1,189 | ||
| Service revenues | 9,136 | -- | ||
| Net service charge expense | (119) | (55) | ||
| Property operating expenses | (608) | (837) | ||
| Net rental income | 9,209 | 297 | ||
| Development sales | 5 | 198 | ||
| Cost of goods sold | (7) | (61) | ||
| Net development income | (2) | 137 | ||
| Total revenues | 9,822 | 1,332 | ||
| Total direct business operating expenses | (615) | (898) | ||
| Net business income | 9,207 | 434 | ||
| Net valuation gain on inv. property | -- | 74,499 | ||
| Net gain or loss on disposal of inv. property | 471 | (21) | ||
| Net gain on disposal of subsidiaries | -- | 1,056 | ||
| Gain related to changes in purchase price | 2,532 | -- | ||
| Amortization, depreciation and impairments | (2,567) | 3,098 | ||
| Other operating income | 23 | 163 | ||
| Administrative expenses | (7,182) | (913) | ||
| Other operating expenses | (75) | (103) | ||
| Operating result | 2,409 | 78,213 | ||
| Interest income | 49,275 | 19,212 | ||
| Interest expense | (24,184) | (10,708) | ||
| Other net financial result | (4,794) | (8,410) | ||
| Net finance income | 20,297 | 94 | ||
| Share of profit of equity-accounted investees (net of tax) | (362) | (1,009) | ||
| Profit / (Loss) before income tax | 22,344 | 77,298 | ||
| Income tax expense | (3,867) | (14,686) | ||
| Net Profit for the period | 18,477 | 62,612 |
Service revenue
Service revenue increased to EUR 9.1 million in H1 2018 (H1 2017: EUR 0 million). The increase is due to providing of advisory services to entities controlled by the ultimate shareholder of the Group.
Net valuation gain
The fair value of the property portfolio as of 30 June 2018 was determined based on the management's analysis and it does not differ from the fair value as of 31 December 2017.
Administrative expenses
Administrative expenses increased by 686.6% to EUR 7.2 million in H1 2018 compared to EUR 0.9 million in H1 2017. During 2018 there was a significant increase in management fees relating to the related parties.
Net finance income
Total net finance income has risen from EUR 0.1 million in H1 2017 to EUR 20.3 million in H1 2018. The interest income increased from EUR 19.2 million in H1 2017 to EUR 49.1 million in H1 2018. The increase in interest income reflects the providing of loans by the Company to the related parties. These loans bear interest rate between 6% - 14%.
Other net financial result
The other net financial result has improved from a loss of EUR 8.4 million in H1 2017 to a loss of EUR 4.8 million in H1 2018. The main cause of this improvement is decrease of the exchange rate loss (EUR 4.7 million) resulting from the transactions between the Company and CPI PG Group (mainly CPI a.s., whose functional currency is Czech koruna).
Balance sheet
| TEUR | ||||||
| 30-Jun-18 | 31-Dec-17 | |||||
| NON-CURRENT ASSETS | ||||||
| Intangible assets | -- | -- | ||||
| Investment property | 452,085 | 450,373 | ||||
| Property, plant and equipment | 370 | 35 | ||||
| Equity-accounted investees | 4,209 | 4,571 | ||||
| Other investments | 110,913 | 104,613 | ||||
| Loans provided | 1,697,777 | 1,196,932 | ||||
| Trade and other receivables | 12 | 12 | ||||
| Deferred tax assets | 123,565 | 123,565 | ||||
| Total non-current assets | 2,388,931 | 1,880,101 | ||||
| CURRENT ASSETS | ||||||
| Inventories | 6,224 | 6,348 | ||||
| Current income tax receivables | 326 | 279 | ||||
| Trade receivables | 11,355 | 4,540 | ||||
| Loans provided | 100,745 | 68,490 | ||||
| Cash and cash equivalents | 98,914 | 11,230 | ||||
| Other current assets | 32,101 | 8,918 | ||||
| Assets held for sale | 379 | 397 | ||||
| Total current assets | 250,044 | 100,202 | ||||
| TOTAL ASSETS | 2,638,975 | 1,980,303 | ||||
| EQUITY | ||||||
| Equity attributable to owners of the Company | 578,205 | 565,688 | ||||
| Non-controlling interests | 170,012 | 62,683 | ||||
| Total equity | 748,217 | 628,371 | ||||
| NON-CURRENT LIABILITIES | ||||||
| Financial debts | 1,392,977 | 1,113,884 | ||||
| Deferred tax liabilities | 34,583 | 33,048 | ||||
| Provisions | 1,557 | 1,559 | ||||
| Other non-current liabilities | 1,874 | 1,991 | ||||
| Total non-current liabilities | 1,430,991 | 1,150,482 | ||||
| CURRENT LIABILITIES | ||||||
| Financial debts | 393,902 | 54,581 | ||||
| Trade payables | 8,965 | 2,723 | ||||
| Advance payments | 251 | 84,505 | ||||
| Other current liabilities | 56,649 | 59,641 | ||||
| Total current liabilities | 459,767 | 201,450 | ||||
| TOTAL EQUITY AND LIABILITIES | 2,638,975 | 1,980,303 | ||||
Total assets and total liabilities
Total assets increased by EUR 658.7 million (33.3%) to EUR 2,639.0 million as at 30 June 2018. The main reason is the increase of long-term loans provided to CPI PG.
Non-current and current liabilities total EUR 1,890.8 million as at 30 June 2018 which represents an increase by EUR 538.8 million (39.9%) compared to 31 December 2017. Main driver of this increase was an additional drawdown of loan provided to the Group by CPI Property Group.
EPRA Net assets value
The EPRA Net Asset Value per share as of 30 June 2018 and 31 December 2017 is EUR 0.46.
The Triple NAV amounts to EUR 0.44 per share compared to EUR 0.43 at the end of last year. The calculation is compliant with the EPRA (European Public Real Estate Associations) "Triple Net Asset Value per share".
| June 2018 | December 2017 | |
| Consolidated equity | 578,205 | 565,688 |
| Fair Value adjustment on asset held for sales | -- | -- |
| Fair value adjustments on inventories | -- | -- |
| Deferred taxes on revaluations | 31,633 | 33,048 |
| Goodwill | -- | -- |
| Own equity instruments | -- | -- |
| EPRA Net asset value | 609,838 | 598,736 |
| Existing shares (in thousands) | 1,314,508 | 1,314,508 |
| Net asset value in EUR per share | 0.46 | 0.46 |
| EPRA Net asset value | 609,838 | 598,736 |
| Deferred taxes on revaluations | (31,633) | (33,048) |
| Fair value adjustment of bonds issued by the Group | -- | -- |
| EPRA Triple Net asset value (*) | 578,205 | 565,688 |
| Fully diluted shares | 1,314,508 | 1,314,508 |
| Triple net asset value in EUR per share | 0.44 | 0.43 |
Over the first half of 2018 the consolidated equity increased by EUR 12.5 million. The main driver of this increase is the profit of the period amounting to EUR 18.5 million, which is partially offset by foreign exchange loss of EUR 7.5 million.
For disclosures regarding Alternative Performance Measures used in this press release please refer to our 2018 Interim Financial Information, chapter GLOSSARY & DEFINITIONS; accessible at
http://www.orcogroup.com/investors/financial-documentation/half-year-documents.php.
For full Interim Management Report as of 30 June 2018, including Condensed Consolidated Interim Financial Statements as at 30 June 2018 please refer to our website at www.orcogroup.com.
