EPP presents strong first quarter operational performance

Hadley Dean, Echo Polska
Hadley Dean, CEO of EPP.

EPP has announced the group’s first quarter results for the three months ended on the 31st of March 2018.

The results showed distributable earnings having increased 48% to 23.7 million Euros and increased 9% on a per share basis to 2.98 Euros, compared to the first quarter in 2017. EPP successfully purchased the first tranche of the M1 portfolio which comprises of four properties in sought-after regions, adding 194 000 square meters of Gross Lettable Area and taking the group’s total income producing assets to over two billion Euros.

The net profit for the first quarter totaled 20.9 million Euros and the net asset value amounted to 966 million Euros, equating to NAV per share of 1.33 Euros. The net loan-to-value ratio at the 31st of March was 51% with an average cost of debt of 2.28%.

This growth is due to solid operations driven by active asset management and strong macroeconomic conditions in Poland. Our LTV remains a key focus area in the business and we are working to reduce it to our target levels” says EPP CEO, Hadley Dean.

Tenant sales remained steady with footfall across our portfolio up 2.2%. “These footfall increases were achieved despite the March introduction of the Sunday trading ban for two Sundays a month. We have seen footfall increase on Fridays, Saturdays and Mondays to compensate and to date the ban has not had a significant impact on performance,” says Dean.

The new M1 properties – M1 Czeladź, M1 Kraków, M1 Łódź and M1 Zabrze – performed solidly and KPIs remain strong with further improvement expected following the opening of leading DIY retailer OBI in Kraków, Łódź and Zabrze in the next few months:“We are progressing well on the potential extension and development of these properties,” says Dean. A head lease agreement with Metro AG is in place securing revenue streams.

In line with strategy to maximise existing assets through extensions and refurbishments, EPP advanced a number of refurbishment projects during the quarter. These include architectural designs for the upgrade of the food court area in Pasaż Grunwaldzki as well as exploring extension possibilities at Twierdza Zamość.

Dean says: “With food as the new fashion we are focused on further enhancing our food court areas across the portfolio to create engaging, ambient food hall concepts.”

Construction of Galeria Młociny, EPP’s flagship Warsaw development, is ahead of schedule and on budget with pre-letting at 75%. In addition, the development is currently ahead of its budgeted rental income by more than €0.5 million per year.

We are particularly pleased with the interest from a number of new international entrants to the Polish market,” says Dean. Galeria Młociny is scheduled to open in Spring 2019.

Looking ahead EPP will focus on integrating the recent acquisitions into the portfolio, exploring asset management opportunities in the portfolio and continue recycling office assets. The Polish economy is expected to continue performing strongly with current property fundamentals remaining favourable. Full year guidance remains at €11.6-11.8 cents per share.

The share closed trade Friday at R17.50.