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Financial|Power|Rental
Financial|Power|Rental
financial|power|rental

EPP meets guidance for fourth consecutive year

Outgoing EPP CEO Dean Hadley

Photo by Creamer Media's Simone Liedtke

Tomasz Trzósło will take over as EPP CEO

Photo by Creamer Media's Simone Liedtke

12th March 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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JSE-listed retail landlord EPP on Thursday reported that it had met its earnings guidance for a fourth consecutive year, with distributable income earnings for the year ended December 31 having increased by 9.6%.

Distributions were €11.62 a share.

The company’s property income for the financial year was up by 3.8% year-on-year to €148-million, with a distributable income of €105.5-million.

The company, which has assets in Poland, also advanced its key deleveraging strategy, and reduced its loan-to-value ratio by 1.9% to 50%, with a low average cost of debt of 2.5%.

Outgoing CEO Hadley Dean said the strong Polish economy supported the positive performance of EPP’s “quality portfolio of dominant shopping centres in prospering cities” with the highest consumer demand and growth potential.

Dean is due to complete his tenure at the company’s helm in May, with the reins to be handed over to Tomasz Trzósło.

During the 12 months under review, retail sales in the EPP portfolio grew 4.8% despite Poland’s Sunday trading ban. The Polish government implemented legislation in about 2017, resulting in the country transitioning into a period where no trading will be allowed on Sundays.

The 2019 financial year was influenced by 15 Sundays of no trading, an additional three days compared with 2018. From 2020, trading on Sundays will no longer be allowed at all.

The company has, however, been able to retain 100% of its Sunday footfall, which has spread across the other days of the week.

Like-for-like net rental income increased by 3.3%, signalling a well-managed portfolio.

Dean attributed the robust set of results to significant strategic progress made during the year, and highlighted the execution of EPP’s asset recycling strategy, which saw the successful opening of the company’s first retail development in Warsaw, Poland; while simultaneously upgrading its assets and raising about R1.4-billion of capital, and broadening its shareholder base.

This, together, served to grow and enhance the quality of EPP’s retail asset base, bolstered its balance sheet and cemented its leading market position, Dean said during a presentation on Thursday at the JSE, in Sandton.

With the addition of 200 000 m2 of quality retail gross lettable area (GLA) to the EPP portfolio during the year, including four second-tranche M1 portfolio assets with a transaction value of €224-million, EPP now owns a portfolio of 25 shopping centres complemented by six high-quality office properties and the iconic mixed-use Towarowa 22 development site in Warsaw.

The EPP portfolio spans one-million square metres of lettable commercial space in Poland, and its vacancy rate remains below 1%, which underscores the dominance of the portfolio, Dean enthused.

Additionally, aligned with its capital allocation strategy of recycling out of office assets into retail opportunities, EPP disposed of a 70% interest in three office properties with a gross asset value of €188.3-million to Henderson Park private equity fund, with which it formed a joint venture.

During the year, the company successfully made its first move into the Warsaw retail market with the opening of the flagship Galeria Młociny shopping centre, 70% owned by EPP, in May 2019. Considered to be “the most modern shopping centre in Poland”, the centre has 75 000 m2 of retail space, includes more than 220 shops, 40 restaurants, and is home to Poland’s first Primark store.

Looking ahead, Dean said that EPP’s growth in 2020 will come from the third tranche of its M1 portfolio acquisition, which includes four retail power parks of a combined 111 100 m2 of GLA with a gross asset value of €111.5-million.

Rental income will also be boosted by Galeria Młociny’s first full-year of trading.

When commenting on the company’s plans for the year ahead, Dean told attending delegates on Thursday that “EPP is primed to integrate its recent acquisitions into the portfolio smoothly, continue to add value through asset management, and move forward with its asset recycling strategy”.

According to Dean, EPP is “well positioned to deliver the best possible rates of return to shareholders by giving consumers unique shopping experiences and tenants attractive space, supported by the compelling Polish macro-economy and favourable property fundamentals”.

EPP’s board and management, however, found it to be “irresponsible” to deliver guidance on the year ahead until the impact of the Coronavirus, or Covid-19, has been properly assessed and the threat stabilised.

According to Dean, Poland has announced that as of Monday next week, all schools will be closed for two weeks, with cinemas and gatherings of more than 1 000 people banned for the same duration.

Poland currently has about 50 confirmed Covid-19 cases.

Italy, where over 12 400 cases have been confirmed, on Wednesday evening announced that all shopping centres in the country will be closed for the next two weeks as well.

Only pharmacies and supermarkets are exempt from this trading ban, and there is talk of financial aid being provided by retailers affected by the Covid-19 virus. Details on the financial aid, however, are still unclear.

Dean on Thursday said EPP is “fully supportive” of the “significant government support” during this time.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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