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NEPI ROCKCASTLE PLC - Business update

Release Date: 24/05/2019 09:05
Code(s): NRP     PDF:  
 
Wrap Text
Business update

NEPI Rockcastle plc
Incorporated and registered in the Isle of Man
Registered number 014178V
JSE and Euronext share code: NRP
ISIN: IM00BDD7WV31
("NEPI Rockcastle" or "the Company" or "the Group")


BUSINESS UPDATE


All information below excludes joint ventures, unless otherwise stated.

OPERATIONAL AND FINANCIAL HIGHLIGHTS

NEPI Rockcastle had a strong operational performance during the three months ended 31 March 2019.

-   Continued execution of the Group's strategy across nine Central and Eastern European ("CEE") countries;

-   Strengthened the portfolio positioning by extending successful retail concepts in the region, such as Monki
    (first store in Poland), Xiaomi (first MI store in Romania), GAP and Ted Baker (first in NEPI Rockcastle
    portfolio);

-   Increased quarterly EBITDA to €92.2 million, 21% higher than Q1 2018, with a strong EBITDA margin
    of 95.1% (Q1 2018: 94.7%);

-   Total assets of over €6.6 billion, of which the value of the direct property portfolio exceeds €5.9 billion;

-   Listed securities portfolio fair value of €227 million, representing 3% of total assets;

-   Loan to Value ratio ("LTV") of 32%, below the Group's strategic target of 35%;

-   72% of the property portfolio remains unencumbered;

-   EPRA NAV per share of €7.28 (IFRS NAV per share of €6.82) compared to €7.09 at 31 December 2018
    (IFRS NAV per share of €6.66);

-   Tenant turnover on like-for-like property portfolio up by 6.8% compared to Q1 2018, including joint-
    ventures;

-   Collection rate maintained at 99.9%; and

-   Occupancy rate across the portfolio was 96.3% at 31 March 2019, slightly decreased from 97.2% at
    31 December 2018 due to refurbishment and extension works. Further to the completion of part of these
    works in May 2019 (detailed below), the occupancy rate increased to 97.1%.

OTHER HIGHLIGHTS

In March 2019 the Financial Services Conduct Authority ("FSCA") in South Africa announced it had closed
its investigations into possible insider trading concerning NEPI Rockcastle and, in May 2019, it also
announced it had closed its investigation into possible false and misleading reporting concerning the
Company. In neither case was any fault found with the Company or its Directors. Following these
announcements, the FSCA's only pending investigation related to the Company concerns possible prohibited
trading practices. As stated by the FSCA, this investigation is not into the affairs of the Company but into
trading of its shares on stock exchanges by third parties.

In April 2019, Sustainalytics, a leading independent global provider of Environmental, Social and Governance
("ESG") research and ratings, rated NEPI Rockcastle's ESG Risk as Low (16.4/100). Sustainalytics concluded
that the Company is at low risk of experiencing material financial impacts from ESG factors, due to its low
exposure to and appropriate management of material ESG issues. The Company is commended by
Sustainalytics for its strong corporate governance performance, which is reducing its overall risk.

During April 2019, shareholders representing approximately 37% of the issued share capital of the Company
elected to receive the final dividend for the year ended 31 December 2018 as a return of capital by way of an
issue of new NEPI Rockcastle shares.

UPDATE ON THE DEVELOPMENTS AND STRATEGIC DISPOSALS PIPELINE

SOLARIS EXTENSION (OPOLE, POLAND, MAY 2019)

The Company finalised the construction of an approximately 8,900m2 extension, including the development
of a multi-level underground car park and a new town square in front of the main entrance. New tenants
include C&A, CCC, Deichmann, Guess, Just Gym, KFC, Mohito, Reserved, McDonald's and Smyk.

ARENA RETAIL PARK (ZAGREB, CROATIA, MAY 2019)

Arena Retail Park, an over 8,000m2 centre adjacent to the Group's 65,700m2 Arena Centar in Zagreb, was
inaugurated in May 2019, after 8 months of construction. The retail park is fully occupied, hosting tenants
such as CCC, Intersport, Jysk, Pepco and LC Waikiki.


PARADISE CENTRE (SOFIA, BULGARIA, APRIL 2019)

Paradise Center's first retail level is under refurbishment, creating additional retail units and reconfiguring the
former hypermarket space. The first phase of the project, inaugurated in March 2019, added a large Billa
supermarket and additional local and international brands. The remaining phases of the refurbishment,
expected to further improve the tenant mix, are estimated to be finalised in Q1 2020.

PROMENADA SIBIU (ROMANIA, DECEMBER 2019)

NEPI Rockcastle is currently developing a 42,200m2 modern retail and entertainment destination in the centre
of Sibiu, a significantly developed and affluent city in Romania.

Located in the inner city, with a unique architectural design allowing it to seamlessly blend into the city's
medieval skyline, the development is within the reach of 267,000 people in a 45-minute drive catchment area.

The project is anchored by the first hypermarket in Romania leased by Kaufland and has over 1,700 parking
bays. The mall will have a diverse mix of tenants, including regional and international fashion and beauty
brands as well as a leisure and entertainment area. Tenants include: CineGold, H&M, Inditex (Bershka,
Massimo Dutti, Oysho, Pull&Bear, Stradivarius, Zara) and New Yorker. Promenada Sibiu is scheduled to
open in December 2019.

SALE OF THE OFFICE CLUJ-NAPOCA (CLUJ, ROMANIA, MAY 2019)

In April 2019, the Group signed a sale and purchase agreement for the sale of its 50% stake in The Office
Cluj-Napoca property. The transaction was closed in May 2019, following the fulfilment of several conditions
precedent. The selling price includes a 1.4% premium to book value.

POTENTIAL DIVESTMENT OF THE OFFICE PORTFOLIO IN ROMANIA

The Group focuses its investment strategy on core dominant retail properties, and thus has initiated an open
tender process for the sale of its Romanian office portfolio.

CASH MANAGEMENT AND DEBT

The Group has a strong liquidity profile, with €155 million in cash, €211 million in available unsecured
revolving facilities and €227 million listed securities as at 31 March 2019. NEPI Rockcastle's gearing ratio
(interest bearing debt less cash, divided by investment property and listed securities) was 32%, below the
gearing ratio target of 35%.As at 31 March 2019, the ratios calculated for unsecured loans and bonds showed
ample headroom compared to the covenants:

                                     31 March 2019                            Threshold
 Solvency ratio                      36%                                      <60%
 Consolidated coverage ratio         7.7                                      >2
 Unsecured Consolidated Total        322%                                     >180% / 150%
 Assets/ Unsecured Consolidated
 Total Indebtedness

In March 2019, the Company refinanced €140 million of unsecured financing expiring in 2019 with a loan
maturing in March 2022.

In May 2019, after a roadshow with European fixed-income investors, the Group issued €500 million of
unsecured, 4 year Eurobonds, carrying a 2.625% fixed coupon, with an issue price of 98.15%. This successful
transaction enables the Group to compete more effectively in the Central and Eastern European real estate
markets in the long-term. The Group has a broad bondholder base, which was further diversified through this
issue, ranging from large asset managers, banks, pension and insurance companies to international financial
institutions such as the European Bank for Reconstruction and Development. The proceeds will be used for
debt refinancing, developments, acquisitions and working capital.

OUTLOOK

The Company reaffirms its guidance released on 27 February 2019 that, based on strategic options currently
under management's control, distributable earnings per share for 2019 are expected to be approximately 6%
higher than the 2018 distribution. This guidance is based on the assumptions that a stable macroeconomic
environment prevails, no major corporate failures occur, and controlled developments remain on schedule.
This forecast has not been audited or reviewed by NEPI Rockcastle's auditors and is the responsibility of the
Board of Directors.

GLOSSARY

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) represents the Group's
Operating profit, defined as Net rental and related income less Administrative expenses.

EBITDA margin represents EBITDA divided by Net rental and related income.

EPRA Net Asset Value (EPRA NAV): Net assets per the statement of financial position, excluding goodwill,
deferred taxation net balance and mark-to-market of interest rate derivatives.
For further information please contact:

NEPI Rockcastle plc
Alex Morar                               +40 21 232 1398

JSE sponsor
Java Capital                             +27 11 722 3050

Euronext Listing Agent
ING Bank                                 +31 20 57 67 261

Media Relations
Brunswick Group LLP                      nepirockcastle@brunswickgroup.com
                                         +44 20 7404 5959

24 May 2019

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