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

Press Release

Luxembourg, 22 May 2019
 

CPI PROPERTY GROUP reports financial results for the first 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 financial results for the first quarter of 2019.

"In the first quarter of 2019, CPIPG continued our strong trajectory," said Martin Nemecek, CEO of CPIPG. "Income and profitability are rising, and our capital structure is extremely strong."

Key highlights for the first quarter of 2019, plus recent events, include:

• Total assets of EUR8.7 billion at the end of Q1, an increase of EUR0.5 billion from the end of 2018, primarily driven by an increase in cash and cash equivalents.
• Total revenues in Q1 of EUR163 million (up 12% versus Q1 2018), reflecting the combined effects of acquisitions in 2018 and 2019 and 3.2% like-for-like growth in rental income.
• Group occupancy increased to 94.7% in Q1, versus 94.5% at year-end.
• Funds from operations increased to EUR50 million for the quarter (up 8% versus Q1 2018).
• EPRA NAV remained unchanged at EUR4.5 billion.
• Net Interest Coverage Ratio increased to 7.7x for Q1 2019 (compared to 4.2x for 2018), reflecting the Group's successful refinancing activities during 2017 and 2018.
• Net Loan to Value (LTV) increased slightly from 36.7% at year-end to 37.4%.
• Unencumbered assets as a percentage of total assets rose to 67%, versus 65% at the end of 2018.
• Secured debt was reduced to 32% of total debt, relative to 37% at the end of 2018.
• Issuance of HKD 450 million (approximately EUR50 million) of senior bonds under the Group's EMTN programme in February 2019.
• Issuance of USD 350 million (approximately EUR312 million) of senior bonds under the Group's EMTN programme in March 2019.
• Issuance of senior unsecured Schuldschein (assignable loans) totaling EUR170 million in March 2019.
• New 3-year unsecured revolving credit facility of EUR510 million signed in March 2019 with 11 regional and international banks.
• Total available liquidity at the end of Q1 of about EUR1 billion, currently exceeds EUR1.5 billion following the issuance of hybrid bonds in April 2019.
• The Group's EMTN programme was increased to EUR5 billion in April 2019.

"Once again, our teams delivered excellent results for the Group," said David Greenbaum, CFO of CPIPG. "We remain focused on creating long-term sustainable value for all our stakeholders, and will continue investing in our portfolio throughout 2019."
 

U.S. Litigation

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. CPIPG intends to vigorously contest the claims and has retained an international law firm, Hogan Lovells, with an experienced team of litigators and significant experience in RICO cases. At this time, CPIPG has no further comments on developments in the case, aside from the Group's previously published statements.
 

FINANCIAL HIGHLIGHTS

STATEMENT OF COMPREHENSIVE INCOME

The income statement for the 3 months period ended on 31 March 2019 and 31 March 2018 was as follows:

** To provide reliable and more relevant information, the Group reclassified (firstly as at 31-Dec-2018) 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. Comparative information of EUR 7 million and EUR 1 million as at 31 March 2018 was adjusted accordingly.

*** The Group reclassified effect of changing foreign exchange rates on the revaluation of the investment properties from the Other net financial result to the Net valuation gain or loss. Management finds the adjusted presentation reliable and more relevant, because the effect is already included in determination of the fair value of the relevant investment properties by the Group's subsidiaries.

Comparative information as of 31 March 2018 was adjusted accordingly. The change in the accounting policy had no impact on the statement of financial position, the impact on the statement of comprehensive income is presented in the table below:
 

Net rental income

Net rental income increased by 10% to EUR73 million compared to EUR67 million in Q1 2018, driven primarily by an increase in gross rental income reflecting 2018's acquisitions of Futurum Hradec Králové shopping centre (net increase of EUR2 million) and Atrium office complex in Poland (net increase of EUR1.6 million). The better performance of our Berlin portfolio (net increase of EUR2.2 million) contributed to the overall increase in net rental income.
 

Net development income

Development sales in Q1 2019 were represented by sales of apartments in Nice (revenue of EUR11.6 million) and sales of family houses in Březiněves (revenue of EUR3.3 million).
 

Net valuation gain / (loss)

Valuation gain in Q1 2019 relates mainly to an FX gain on our property portfolio.
 

Amortization, depreciation and impairments

The increase in amortization, depreciation and impairments in Q1 2019 was affected by the write-off of goodwill (EUR7 million), which was recognized in 2014 in connection with the acquisition of the Group's agriculture business.
 

Interest expense

Interest expense was EUR12 million in Q1 2019 compared to EUR23 million in Q1 2018. Interest expense dropped due to the substantial change in the Group's financing structure, resulting into a significant decrease in interest expense from bank loans (net decrease of EUR4.7 million) and bonds (net decrease of EUR5.4 million).
 

Other net financial result

Other net financial result in Q1 2019 was adversly affected by foreign exchange losses of EUR14 million.

BALANCE SHEET
 

Total assets

Total assets increased by EUR460 million (6%) to EUR8,719 million as at 31 March 2019. The predominant driver of this growth was the increase in cash and cash equivalents by EUR365 million.

Increase in investment property by EUR29 million reflects primarily capex and development costs incurred in Q1 2019. Due to the acquisition of Orchard hotel in Ostrava the Group's property portfolio rose by of EUR11 million.
 

Total liabilities

Non-current and current liabilities totalled EUR4,335 million as at 31 March 2019, an increase of EUR438 million (11.2%) compared to 31 December 2018. During the first quarter, the Group raised USD bonds (EUR312 million), HKD bonds (EUR50 million), and Schuldschein (EUR170 million). The Group also signed a new secured bank loan of EUR170 million from Unicredit Bank AG and repaid loans totaling EUR102 million.
 

NAV AND EPRA NAV

Total equity increased from EUR4,362 million as at 31 December 2018 to EUR4,384 million as at 31 March 2019. The main elements impacting equity were:

• an increase in equity due to profit for three months of 2019 in the amount of EUR29 million;
• a decrease by EUR12 million due to a shift in hedging and translation reserves;
• an increase by EUR5 million due to the change in revaluation reserve.

EPRA NAV was EUR4,494 million as at 31 March 2019, an increase of 0.3% relative to 31 March 2018. The main positive effect was the positive equity elements described above.
 

Investor Contact:

David Greenbaum
Chief Financial Officer
CPI Property Group
d.greenbaum@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.fridemann@kirchhoff.de

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