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DGAP-News: CPI PROPERTY GROUP reports financial results for the third quarter of 2019

DGAP-News: CPI PROPERTY GROUP reports financial results for the third quarter of 2019

DGAP-News: CPI PROPERTY GROUP / Key word(s): Interim Report/Real Estate
CPI PROPERTY GROUP reports financial results for the third quarter of 2019
29.11.2019 / 19:18
The issuer is solely responsible for the content of this announcement.


Press Release

Luxembourg, 29 November 2019


CPI PROPERTY GROUP reports financial results for the third quarter of 2019

CPI PROPERTY GROUP (hereinafter "CPIPG" the "Company" or together with its subsidiaries the "Group"), the largest owner of income-generating real estate in the Czech Republic, Berlin and the CEE region, hereby publishes its unaudited financial results for the third quarter of the 2019 financial year.

"Thanks to the efforts of our teams, the strength of our markets and the scale and quality of our portfolio, all key business and financial indicators continued on a positive trajectory in the third quarter," said Martin Němeček, CEO of CPIPG. "The planned expansion of our footprint in the attractive Warsaw office market is a natural strategic step and will further establish our position as the leading income-generating real estate company in the region."

Key highlights for the third quarter of 2019 include:

- Property portfolio increased to EUR7.9 billion (up EUR335 million versus year-end 2018), driven primarily by a combination of capex, acquisitions and positive revaluations;

- Total assets increased to EUR9.5 billion (up EUR1.2 billion versus year-end 2018), driven by increases to the property portfolio as well as an increase in cash and cash equivalents;

- Gross rental income of EUR234 million in the first nine months of the year (up 5% versus the prior period), reflecting the combined effects of 3.3% like-for-like growth in rental income, improvement in occupancy to 94.6% and also acquisitions since the prior period;

- Total revenues of EUR491 million in the first nine months of the year (up 12% versus the prior period);

- Funds from operations (FFO) of EUR171 million in the first nine months of the year (up 33% versus the prior period);

- EPRA NAV increased to EUR4.6 billion (up 2% versus year-end 2018);

- Net Interest Coverage Ratio (Net ICR) improved to 7.9x for Q3 2019 (up 3.7x versus full year 2018), reflecting the combination of higher EBITDA generation as well as a reduction of interest costs following significant refinancing activity in 2018;

- Net Loan to Value (Net LTV) decreased to 32.9% (from 36.7% at year-end 2018);

- Unencumbered assets as a percentage of total assets reached a record of 70% (versus 65% at year-end 2018);

- Secured debt reduced to 30% of total debt, relative to 37% at the end of 2018;

- Acquisition of 362,152,327 of own shares for the price of EUR0.30 per share (in total EUR108.6 million) in July 2019;

- Tap issuance of US $100 million (approximately EUR90 million equivalent) of senior unsecured bonds under the Company's EMTN programme in July 2019;

- Acquisition of complex of seven homes in Notting Hill, London in September 2019;

- Total available liquidity (comprising cash and undrawn revolving credit facilities) at the end of the third quarter stood at approximately EUR1.4 billion.

"CPIPG is the first company in the CEE to issue a benchmark Euro-denominated green bond, a testament to our focus on ESG and further demonstration of our ongoing efforts to strengthen and diversify our capital structure," said David Greenbaum, CFO of CPIPG. "The Group now has significant firepower to execute the planned acquisition pipeline in Warsaw while still remaining fully committed to our financial policies and credit ratings."


FINANCIAL HIGHLIGHTS

Performance   30-Sep-19 30-Sep-18 Change
         
Gross rental income EUR million 234 223 5%
Total revenues EUR million 491 440 12%
Net business income EUR million 261 246 6%
         
Consolidated adjusted EBITDA EUR million 223 211 6%
Funds from operations (FFO) EUR million 171 129 33%
         
Profit before tax EUR million 249 218 14%
Interest expense EUR million (37) (66) (43%)
Net profit for the period EUR million 221 181 22%
         
         
Assets   30-Sep-19 31-Dec-18 Change
         
Total assets EUR million 9,485 8,259 15%
Property portfolio EUR million 7,890 7,555 4%
Gross leasable area sqm 3,337,000 3,318,000 1%
Occupancy % 94.6 94.5 0.1 p.p.
Like-for-like gross rental growth % 3.3 4.9 (1.6 p.p.)
         
Total number of properties* No. 381 375 2%
Total number of residential units No. 11,935 11,917 0%
Total number of hotel beds** No. 12,070 11,300 7%
         
* Excluding residential properties in the Czech Republic
** Including hotels operated, but not owned by the Group
 
         
Financing structure   30-Sep-19 31-Dec-18 Change
         
Total equity EUR million 5,004 4,362 15%
EPRA NAV EUR million 4,572 4,480 2%
         
Net debt EUR million 2,593 2,775 (7%)
Loan to value ratio (Net LTV) % 32.9 36.7 (3.8 p.p.)
Secured consolidated leverage ratio % 10.8 12.9 (2.1 p.p.)
Secured debt to total debt % 29.5 36.7 (7.2 p.p.)
Unencumbered assets to total assets % 69.5 65.1 4.4 p.p.
Net ICR   7.9x 4.2x 3.7x


STATEMENT OF COMPREHENSIVE INCOME*

The income statement for the nine-month period ended on 30 September 2019 and 30 September 2018 was as follows:
 
  INCOME STATEMENT (EUR million) 30-Sep-19 30-Sep-18  
   
Gross rental income 234 223  
Service charge and other income** 88 80  
Cost of service and other charges** (62) (59)  
Property operating expenses (42) (40)  
Net rental income 218 204  
Development sales 32 16  
Development operating expenses*** (30) (17)  
  Net development income 2 (1)  
Hotel revenue 102 93  
Hotel operating expenses (68) (58)  
Net hotel income
34 35  
Other business revenue 35 28  
Other business operating expenses*** (28) (21)  
  Net other business income 7 7  
  Total revenues** 491 440  
  Total direct business operating expenses** (230) (195)  
  Net business income 261 245  
Net valuation gain**** 123 125  
Amortization, depreciation and impairment (25) (28)  
Administrative expenses (37) (35)  
Other operating income 7 3  
Other operating expenses (4) (4)  
  Operating result 325 306  
Interest income 9 10  
Interest expense (37) (66)  
Other net financial result**** (47) (31)  
  Net finance costs (75) (87)  
  Share of profit of equity-accounted investees (net of tax) (1) (1)  
  Profit before income tax 249 218  
Income tax expense (28) (37)  
  Net profit from continuing operations 221 181  
 

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34.

** In connection with the adoption of IFRS 15, the Group changed, in respect of service charges, revenue recognition from net to gross, before deduction of cost of services (refer to the annual management report for 2018 for further detail). The presentation of the statement of profit or loss for the nine-month period of 2018 was adjusted due to the changes in the accounting policy.

*** To provide reliable and more relevant information, the Group reclassified the following items, which are no longer presented separately in the consolidated financial statements:

- Cost of goods sold related to Development sales and Other business were reclassified to Development operating expenses and Other business operating expenses. The comparative information for the period ended 30 September 2018 was adjusted accordingly.

- Net gain/(loss) on disposal of subsidiaries and investees was reclassified to Net gain/(loss) on the disposal of investment property and subsidiaries. The comparative information for the period ended 30 September 2018 was adjusted accordingly.

**** The Group reclassified the effect of changing foreign exchange rates on the revaluation of the investment properties from Other net financial result to Net valuation gain or loss. The comparative information for the period ended 30 September 2018 was adjusted accordingly.

Net rental income
Net rental income increased by 7% to EUR218 million in the nine-month period ended 30 September 2019 compared to EUR204 million in the nine-month period ended 30 September 2018, primarily due to the acquisitions of Atrium office complex in Poland (+EUR2 million) and Futurum Hradec Králové shopping centre (+EUR2 million), as well as the impact of increasing rents in the Berlin portfolio (+EUR5 million).

Net development income
Development sales in the nine-month period ended 30 September 2019 were represented by sales of apartments in Nice (EUR21 million) and sales of family houses in Březiněves (EUR3 million).

Net hotel income
Net hotel income increased in the nine-month period ended 30 September 2019 primarily due to the acquisitions of CPI Hotels Italy (EUR4 million) and Orchard Hotel (EUR1 million) compared to the nine-month period ended 30 September 2018.

Net valuation gain
Net valuation gain relates primarily to the Prague office portfolio (EUR39 million), Czech residential portfolio (EUR9 million) and Berlin office portfolio (EUR10 million) in the nine-month period ended 30 September 2019.

Amortization, depreciation and impairments
The increase in amortization, depreciation and impairments in the nine-month period ended 30 September 2019 was affected by the goodwill write-off (EUR7 million), which was recognized in 2014 in connection with the acquisition of the Group's agriculture business.

Interest expense
Interest expense decreased to EUR37 million in the nine-month period ended 30 September 2019 compared to EUR66 million in the nine-month period ended 30 September 2018. The decrease reflects substantial refinancing activity in 2018, resulting in a significant decrease in interest expense from bank loans (decrease of EUR13 million) and bonds (decrease of EUR15 million).

Other net financial result
The negative other net financial result is comprised mainly of foreign exchange losses of EUR38 million in the nine-month period ended 30 September 2019 relating to retranslation of intragroup loans in different currencies (compared to foreign exchange losses of EUR24 million in the nine-month period ended 30 September 2018).


BALANCE SHEET*

  BALANCE SHEET (EUR million) 30-Sep-19 31-Dec-18  
 
  NON-CURRENT ASSETS      
  Intangible assets and goodwill 105 110  
  Investment property 6,976 6,687  
  Property, plant and equipment 801 736  
  Deferred tax assets 195 195  
  Other non-current assets 214 91  
  Total non-current assets 8,291 7,819  
  CURRENT ASSETS      
  Inventories 54 72  
  Trade receivables 65 68  
  Cash and cash equivalents 846 99  
  Assets linked to assets held for sale 70 67  
  Other current assets 159 134  
  Total current assets 1,194 440  
  TOTAL ASSETS
 
9,485
 
8,259
 
 
  EQUITY      
  Equity attributable to owners of the Company 3,850 3,776  
  Perpetual notes 1,110 542  
  Non-controlling interests 44 44  
  Total equity 5,004 4,362  
  NON-CURRENT LIABILITIES      
  Bonds issued 2,157 1,648  
  Financial debts 1,221 1,062  
  Deferred tax liabilities 782 762  
  Other non-current liabilities 69 53  
  Total non-current liabilities 4,229 3,525  
  CURRENT LIABILITIES      
  Bonds issued 30 7  
  Financial debts 32 158  
  Trade payables 70 98  
  Other current liabilities 120 109  
  Total current liabilities 252 372  
  TOTAL EQUITY AND LIABILITIES 9,485 8,259  
 

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34.

Total assets
Total assets increased by EUR1,226 million to EUR9,485 million (+15%) as at 30 September 2019 compared to 31 December 2018.

The increase in total assets reflects primarily increases in investment property (EUR289 million), property, plant and equipment of (EUR65 million, primarily relating to CPI Hotels), cash and cash equivalents (EUR747 million) and other non-current assets (EUR123 million).

Total liabilities
Total liabilities increased by EUR584 million to EUR4,481 million (+15%) as at 30 September 2019 compared to 31 December 2018. The increase is primarily attributable to issuance of USD bonds (EUR421 million equivalent) and HKD bonds (EUR82 million equivalent), in addition to the drawing of new unsecured Schuldschein loans (EUR170 million). Partly offsetting this was the repayment of bank loans of EUR148 million.


EQUITY AND EPRA NAV

Total equity increased from EUR4,362 million as at 31 December 2018 to EUR5,004 million as at 30 September 2019. The main elements impacting total equity during the period were:

- Issuance of EUR550 million perpetual notes in April 2019, treated as equity under IFRS;

- Profit for the period attributable to the owners of the Company of EUR188 million;

- Share repurchases of EUR-109 million;

- Hedging, translation and revaluation reserve of EUR-5 million, and;

- Changes in the below adjustments to EPRA NAV of EUR18 million.

EPRA NAV was EUR4,572 million as at 30 September 2019, an increase of 2% relative to 31 December 2018. The main drivers of the increase were the factors affecting total equity as described above.

EPRA NAV (EUR million) 30-Sep-19 31-Dec-18
     
Equity attributable to owners of the company 3,850 3,776
Effect of exercise of options, convertibles and other equity interests 0 0
Diluted NAV, after the exercise of options, convertibles and other equity interests 3,850 3,776
Revaluation of trading property and property, plant and equipment 4 7
Fair value of financial instruments - (5)
Deferred tax on revaluations 762 745
Goodwill as a result of deferred tax (43) (43)
Total 4,572 4,480

 

U.S. Litigation Update
On 10 April 2019, a group of Kingstown companies, Investhold LTD and Verali Limited (together, the Kingstown Plaintiffs) filed a claim in the United States District Court of the Southern District of New York against, among others, CPIPG and Mr Radovan Vitek. The claims brought by the Kingstown Plaintiffs against CPIPG include alleged violations of RICO. CPIPG believes that the claims are without merit and were designed to create negative press attention for CPIPG and force an undue settlement.

On 10 September 2019, CPIPG filed a motion to dismiss the New York case based on a lack of jurisdiction and other pleading defects. Rather than replying to the motion to dismiss, on 22 November 2019 the Kingstown Plaintiffs filed an amended complaint in the Southern District of New York court. The amended complaint does nothing to cure the serious pleading defects and jurisdictional infirmities present in the original complaint, and CPIPG will be moving to dismiss the case on substantial grounds in due course.


Key events occurring after quarter-end include:

- Successful issuance of EUR750 million of Reg S senior unsecured 7.5-year green bonds under the Company's EMTN programme in October 2019 at a rate of 1.625%. Following this issuance, total available liquidity sources increased to over EUR2 billion;

- The Company intends to use a significant portion of this liquidity to acquire over EUR800 million of high-quality office properties in central Warsaw, Poland during Q4 2019 and 2020. The acquisitions of Equator IV and Eurocentrum have already closed in November 2019, while preliminary purchase agreements have been signed for Green Corner A and Equator II. Discussions on several other significant assets are also in advanced stages.

- CPIPG's subsidiary CPI FIM SA acquired an entity which owns three luxury residential properties in the south of France and 67 million shares of CPIPG (0.7% of shares outstanding). The Group expects to continue reducing its exposure to France through asset sales, and has a strong track record in this regard. CPIPG now directly owns 362,152,327 of its own shares (4% of its own share capital and voting rights). The voting rights associated with the shares held by the Company are temporarily suspended. In addition, CPI FIM SA now directly owns 252,302,248 of CPIPG shares (2.8% of shares and voting rights) and indirectly owns 67,000,000 of CPIPG shares (0.7% of shares and voting rights).


Investor Contacts:

David Greenbaum
Chief Financial Officer
CPI Property Group
d.greenbaum@cpipg.com

Joe Weaver
Director of Capital Markets
CPI Property Group
j.weaver@cpipg.com

Media / PR Contact:

Kirchhoff Consult AG
Andreas Friedemann
Borselstraße 20
22765 Hamburg
T +49 40 60 91 86 50
F +49 40 60 91 86 16
E andreas.friedemann@kirchhoff.de


GLOSSARY

Alternative Performance Measures (APM) Definition Rationale
EPRA NAV Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model. Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy.
Loan-to-Value or Net LTV It is calculated as Net debt divided by fair value of Property Portfolio. Loan-to-value provides a general assessment of financing risk undertaken.
Net ICR It is calculated as Consolidated adjusted EBITDA divided by a sum of interest income as reported and interest expense as reported. This measure is an important indicator of a firm's ability to pay interest and other fixed charges from its operating performance, measured by EBITDA.
Secured debt to total debt It is calculated as a sum of secured bonds and secured financial debts as reported divided by a sum of bonds issued and financial debts as reported. This measure is an important indicator of a firm's financial flexibility and liquidity. Lower levels of secured debt typically also means lower levels of mortgage debt - properties that are free and clear of mortgages are sources of alternative liquidity via the issuance of property-specific mortgage debt, or even sales.
Unencumbered assets to total assets It is calculated as total assets as reported less a sum of encumbered assets as reported divided by total assets as reported. This measure is an important indicator of a commercial real estate firm's liquidity and flexibility. Properties that are free and clear of mortgages are sources of alternative liquidity via the issuance of property-specific mortgage debt, or even sales. The larger the ratio of unencumbered assets to total assets, the more flexibility a company generally has in repaying its unsecured debt at maturity, and the more likely that a higher recovery can be realized in the event of default.
Consolidated adjusted EBITDA Net business income as reported deducting administrative expenses as reported. This is an important economic indicator showing a business's operating efficiency comparable to other companies, as it is unrelated to the Group's depreciation and amortization policy and capital structure or tax treatment. It is one of the fundamental indicators used by companies to set their key financial and strategic objectives.
Funds from operations or FFO It is calculated as net profit for the period adjusted by non-cash revenues/expenses (e.g. deferred tax, net valuation gain/loss, impairment, amortization/depreciation, goodwill etc.) and non-recurring (both cash and non-cash) items (e.g. net gain/loss on disposals etc.). The calculation also excludes accounting adjustments for unconsolidated partnerships and joint ventures. Funds from operations provide an indication of core recurring earnings.
Secured consolidated leverage ratio Secured consolidated leverage ratio is a ratio of a sum of secured financial debts and secured bonds to Consolidated adjusted total assets. This measure is an important indicator of a firm's financial flexibility and liquidity. Lower levels of secured debt typically also means lower levels of mortgage debt - properties that are free and clear of mortgages are sources of alternative liquidity via the issuance of property-specific mortgage debt, or even sales.
Consolidated adjusted total assets Consolidated adjusted total assets is total assets as reported deducting intangible assets and goodwill as reported.  
 
Non-financial definitions Definition
Company CPI Property Group S.A.
Property Portfolio value or PP value The sum of value of Property Portfolio owned by the Group
Gross Leasable Area or GLA Gross leasable area is the amount of floor space available to be rented. Gross leasable area is the area for which tenants pay rent, and thus the area that produces income for the property owner.
Group CPI Property Group S.A. together with its subsidiaries
Net debt Net debt is borrowings plus bank overdraft less cash and cash equivalents.
Occupancy Occupancy is a ratio of estimated rental revenue regarding occupied GLA and total estimated rental revenue, unless stated otherwise.
Property Portfolio Property Portfolio covers all properties held by the Group, independent of the balance sheet classification, from which the Group incurs rental or other operating income.


APM RECONCILIATION
EPRA NAV reconciliation (EUR million) 30-Sep-19 31-Dec-18
Equity attributable to owners of the company 3,850 3,776
Effect of exercise of options, convertibles and other equity interests 0 0
Diluted NAV, after the exercise of options, convertibles and other equity interests 3,850 3,776
Revaluation of trading property and property, plant and equipment 3 7
Fair value of financial instruments 0 (5)
Deferred tax on revaluation 761 745
Goodwill as a result of deferred tax (43) (43)
EPRA NAV 4,572 4,480
 
Net LTV reconciliation (EUR million) 30-Sep-19 31-Dec-18
Financial debts 1,253 1,219
Bonds issued 2,187 1,655
Net debt linked to assets held for sale (1) 0
Cash and cash equivalents (846) (99)
Net debt 2,593 2,775
Total property portfolio 7,890 7,555
Net LTV 32.9% 36.7%
 
Net Interest coverage ratio reconciliation (EUR million) 30-Sep-19 31-Dec-18
Interest income 9 14
Interest expense (37) (78)
Net business income 261 320
Administrative expenses (37) (49)
Net Interest coverage ratio 7.9x 4.2x
 
Secured debt as of Total debt reconciliation (EUR million) 30-Sep-19 31-Dec-18
Secured bonds 0 0
Secured financial debts 1,015 1,055
Total debts 3,440 2,874
Secured debt as of Total debt 29.5% 36.7%
 
Unencumbered assets reconciliation (EUR million) 30-Sep-19 31-Dec-18
Bonds collateral 0 0
Bank loans collateral 2,890 2,883
Total assets 9,485 8,259
Unencumbered assets ratio 69.5% 65.1%
 
Consolidated adjusted EBITDA reconciliation (EUR million) 30-Sep-19 30-Sep-18
Net business income 261 246
Administrative expenses (37) (35)
Consolidated adjusted EBITDA 223 211
 
Funds from operations reconciliation (EUR million) 30-Sep-19 30-Sep-18
Net profit for the period 221 180
Deferred income tax 19 17
Net valuation gain or loss on investment property (123) (125)
Net valuation gain or loss on revaluation of derivatives (0) (2)
Net gain or loss on disposal of investment property (0) 0
Net gain or loss on disposal of inventory (3) 1
Net gain or loss on disposal of assets (1) 1
Amortization, depreciation and impairments 25 29
Other non-recurring / non-cash items 34 27
Funds from operations 171 129
 
Secured consolidated leverage ratio reconciliation (EUR million) 30-Sep-19 31-Dec-18
Secured bonds 0 0
Secured financial debts 1,015 1,055
Consolidated adjusted total assets 9,380 8,149
Secured consolidated leverage ratio 10.8% 12.9%
 
Property portfolio reconciliation (EUR million) 30-Sep-19 31-Dec-2018
Investment property - Office 3,287 3,165
Investment property - Retail 2,120 2,097
Property, plant and equipment - Retail 1 1
Property, plant and equipment - Hospitality 688 630
Investment property - Residential 671 640
Property, plant and equipment - Residential 9 9
Investment property - Land bank 546 540
Property, plant and equipment - Mountain resorts 75 74
Investment property - Agriculture 94 90
Investment property - Industry and logistics 108 80
Inventories - Development 36 48
Inventories - Land bank 10 20
Assets held for sale 68 66
Investment property - Development 146 71
Property, plant and equipment - Office 9 7
Property, plant and equipment - Agriculture 12 9
Share of profit of equity - accounted investees 3 4
Others 6 5
Total 7,890 7,555


29.11.2019 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases.
Archive at www.dgap.de


Language: English
Company: CPI PROPERTY GROUP
40, rue de la Vallée
L-2661 Luxembourg
Luxemburg
Phone: +352 264 767 1
Fax: +352 264 767 67
E-mail: contact@cpipg.com
Internet: www.cpipg.com
ISIN: LU0251710041
WKN: A0JL4D
Listed: Regulated Market in Frankfurt (General Standard); Regulated Unofficial Market in Dusseldorf, Stuttgart
EQS News ID: 925323

 
End of News DGAP News Service

925323  29.11.2019 

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