Interim RESULTS 2019 | INTERIM RESULTS 2019 Agenda Interim - - PowerPoint PPT Presentation

Interim RESULTS 2019

| INTERIM RESULTS 2019

Interim Results 2019

Agenda

INTERIM RESULTS 2019 | AGENDA (2)

Company and market

• verview

Financial overview Retail portfolio overview Outlook

HADLEY DEAN CEO

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW

Company and market overview

FOOTFALL

+2%

Retail operational highlights

NET OPERATING INCOME

€ 72 m

+9%

Financial highlights

Operational and financial objectives achieved

2019 H1 results

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (4)

DISTRIBUTABLE EARNINGS

€ 53 m

+9%

DPS PER SHARE

€ 5.80 c

flat

NET LTV

49.8%

• 2.1%

SALES

+6%

OCCUPANCY

99.1%

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (5)

6th largest economy in the EU

Europe – Poland

GERMANY CZECH REPUBLIC NETHERLANDS AUSTRIA FINLAND FRANCE HUNGARY IRELAND ITALY POLAND PORTUGAL ROMANIA SPAIN SWEDEN UNITED KINGDOM SLOVAKIA

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (6)

GDP growth forecast 2019 – 2021 (%)

European macro outlook

1.3 2.2 1.5 1.8 1.5 1.5 3.4 2.4 0.3 3.4 1.4 3.1 2.0 1.9 1.6 2.9 Source: Oxford Economics

Poland – one of the highest expected GDP growth rate at 3.4%

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (7)

Retail sales growth forecast 2019 – 2021 (%)

European retail sales outlook

1.8 3.6 1.4 1.7 2.2 3.7 4.3 0.8 4.5 1.1 4.2 1.5 2.2 2.8 2.2

Poland – one of the highest expected retail sales growth rate at 4.5%

Source: Oxford economics 1.5

WARSAW ZAMOSC PRZEMYSL CZELADZ KIELCE ZABRZE BELCHATOW LODZ POZNAN JELENIA GORA KLODZKO KRAKOW KALISZ

GERMANY CZECH REPUBLIC UKRAINE BELARUS LITHUANIA

Hamburg Berlin Dresden Prague Brno Lviv Munich Gdansk WROCLAW

Largest retail landlord in Poland by GLA

EPP retail portfolio 2019

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (8)

SZCZECIN INOWROCLAW WŁOCLAWEK LOMZA

DEVELOPMENT PROJECT

1

RETAIL ASSETS

24

POZNAN RADOM CZESTOCHOWA BYTOM WARSAW ZAMOSC PRZEMYSL CZELADZ KIELCE ZABRZE BELCHATOW LODZ POZNAN JELENIA GORA KLODZKO KRAKOW KALISZ

GERMANY REPUBLIC UKRAINE BELARUS LITHUANIA

Hamburg Berlin Dresden Prague Brno Lviv Munich Gdansk WROCLAW

Largest retail landlord in Poland by GLA

EPP portfolio 2019

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (

SZCZECIN INOWROCLAW WŁOCLAWEK LOMZA LODZ

DEVELOPMENT PROJECT RETAIL ASSETS

POZNAN POZNAN POZNAN POZNAN RADOM CZESTOCHOWA BYTOM

M2 GLA

900 000

WARSAW ZAMOSC PRZEMYSL CZELADZ ZABRZE BELCHATOW LODZ POZNAN JELENIA GORA KLODZKO KRAKOW KALISZ

GERMANY CZECH REPUBLIC UKRAINE BELARUS LITHUANIA

Hamburg Berlin Dresden Prague Brno Lviv Munich Gdansk WROCLAW RADOM CZESTOCHOWA BYTOM SZCZECIN INOWROCLAW WŁOCLAWEK LOMZA LODZ

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (9)

Attractive and diversified pipeline of assets

EPP retail portfolio 2020

DEVELOPMENT PROJECT

1

RETAIL ASSETS

28

M2 GLA

>1 000 000

FOOTFALL

>120 000 000

OF POPULATION WITHIN 30 MIN DRIVE

40%

KIELCE TYCHY OPOLE OLSZTYN

Fundamentals support Polish spending

Favourable macro environment

Expected salary growth 2019 - 2021 – 6.9% Unemployment expected to reach record low of 2.8% by 2021

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 1 000 2013 2014 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f)

Unemployment rate in Poland Unemployment rate in EU-28

3 659 3 777 3 908 4 052 4 284 4 585 4 915 5 259 5 596

1 000 2 000 3 000 4 000 5 000 6 000

Average monthly salary and unemployment rate

Average monthly salary (PLN)

Average monthly salary (PLN) Unemployment rate

Source: GUS, NBP, Oxford Economics, Eurostat

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (10)

Limited supply on the horizon

Retail landscape in Poland

Exposure to nearly 40 million people More than 70% of retail spend

• ccurs in shopping centres

Shopping centres are seen as destinations Lack of high streets

100 000 200 000 300 000 400 000 500 000 600 000 700 000 2013 2014 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f)

New supply (m2)

Evolution of retail space (m2)

Source: Savills

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (11)

Strategic initiatives achieved in H1

Key strategic objectives achieved

INTERIM RESULTS 2019 | COMPANY AND MARKET OVERVIEW (12)

Successful divestment of offices through the sale of portfolio to JV Partner Strong support from the market in an

• versubscribed equity raise of EUR 90m

Increased exposure to retail with the successful acquisition of 4 shopping centres and the opening

• f Galeria Mlociny

Reduced gearing in the business to below 50% Delivered on DPS guidance

INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY

Asset recycling strategy

Successful office sale and JV

Office sale

INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (14)

Successful disposal of office portfolio to strong JV partner Disposal in line with book values In-house asset and property management retained to enhance returns Remain focused on recycling assets

Asset highlights

M1 tranche 1

INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (15)

GLA 194 000 m2

Well-established properties with 20 year track record Strong anchors: Auchan, OBI and Media Markt Large sites and catchments with over 200 ha of land

• n sites

Ample parking

highlights

CZELADŹ ZABRZE ŁÓDŹ KRAKÓW

NOI € 25 million Occupancy 100%

z

Asset highlights

M1 tranche 2

Well-established properties with 20 year track record Strong anchors: Auchan, OBI and Media Markt Large sites and catchments with over 200 ha of land

• n sites

Ample parking

GLA 141 000 m2

highlights

INTERIM RESULTS 2019 | ASSET RECYCLING STRATEGY (16)

POZNAŃ RADOM BYTOM CZĘSTOCHOWA CZELADŹ ZABRZE ŁÓDŹ KRAKÓW

NOI €15 million Occupancy 100%

JACEK BAGIŃSKI CFO

INTERIM RESULTS 2019 | FINANCIAL OVERVIEW

Financial overview

Earnings targets achieved

Snapshot of income statement

INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (18)

EUR million H1 2019 H1 2018 Growth Growth (%)

Net operating income 71,8 66,2 5.6 +8.5% Administration costs (7,3) (6,7) (0,6) +9.0% % of NOI 10.2% 10.1%

• 0.1%

EBITDA 64,2 59,2 5,0 +8.4% % of NOI 89.4% 89.4% +0% Interest expense (1) (17,4) (14,7) (2,7) +18.1% Cost of interest 2.4% 2.4% +0% Current taxation (5,3) (4,9) (0,4) +8.2% Effective tax rate 11.3% 11.0% +0.3% Joint ventures (2) 2.2 2.2 Distributable earnings 52,7 48,3 4,4 +9.1%

• No. of shares (‘million)

908 830 78 +9.4% Distribution per share (€cents) 5.80 5.82

• 0.02

0%

(1) Finance expenses excluding IFRS amortised cost valuations and IFRS 9 remeasurements (2) Operating profit of joint-ventures, excluding fair value remeasurements, deferred taxes and other

Improved capital structure while increasing scale of operations

Snapshot of financial position

INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (19)

EUR million H1 2019 YE 2018 Movement Change (%)

Investment properties 2,294 2,202 92 +4.2% Investment in JVs 170 139 31 +22.3% Total assets 2,620 2,472 148 +6.0% Bank borrowings 1,325 1,304 21 +1.6% Net asset value excl. deferred tax 1,209 1,118 91 +8.1%

• No. of shares (‘million)

908 830 78 +9.4% NAV per share 1.33 1.35 (0.01)

• 1.5%

Cost of debt 2.4% 2.4% 0% Hedging 84% 85%

• 1%

Loan to value (net) 49.8% 51.9%

• 2.1%

Well capitalized and significant access to liquidity

Strong liquidity position

Debt extended successfully until 2023> Headroom in credit facilities

• f EUR 95 m

Hedging at 84% and 3.8 years debt maturity LTV successfully reduced to below 50% and on track to achieve medium term target of 45%

INTERIM RESULTS 2019 | FINANCIAL OVERVIEW (20) 100 150 11 80 672 185 10 814 513 100 200 300 400 500 600 700 800 900 2018 2019 2020 2021 2022 2023>

Debt maturity profile (EUR’m)

30 June 2018 30 June 2019

WOJCIECH KNAWA Head of Property Management

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Retail portfolio

Operations remained robust: H1 2018 vs. H1 2019

Retail portfolio summary

FOOTFALL

+2%

SALES

+6%

OCCUPANCY

99.1%

WALT (YEARS) GLA

4.6

RTS

11%

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (22)

LFL NRI GROWTH

+2.4%

Consistently outperfoming the competition

EPP performance vs Polish SC council benchmark

Source: Polish Council of Shopping Centers, Company data

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (23)

Tenant turnover

2% 2%

• 1%

1% 3% 7% 1% 6%

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8%

2016 2017 2018 2019 H1 PRCH EPP

SUNDAY FOOTFALL TRANSFERRED TO OTHER SHOPPING DAYS

100%

Consumer habits have shifted

Sunday trading

SATURDAYS

+10%

THURSDAYS

+7%

TUESDAYS

+6%

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (24)

+ 5% + 6% + 1% + 7% + 3% + 10%

• 31%

50000 100000 150000 200000 250000 300000 350000

Mon Tue Wed Thu Fri Sat Sun

Jan - Jun 19 vs. Jan - Jun 18

Jan-Jun 2018 Jan-Jun 2019

Supporting F&B and entertainment sales

Sunday initiatives

Initiatives to attract customers

• n non-trading Sundays

Cultural, sport, social and educational events Building customer loyalty Footfall increased by 40-140%

• n the days events took place

compared to non-trading Sundays

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (25)

Sunday initiatives movie

click here

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Asset highlights

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

GLA 48 097 m2

Asset highlights

Pasaz Grunwaldzki

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (28)

Leading retail destination in Wrocław 11 new leases signed and 5 prolonged in H1 2019 Top performing categories: Household +21%, Health&Beauty +19%, F&B +10% Successful launch of new Food Court

WROCLAW

Rent to sales 13.4% Footfall change +6.5% Sales change +8.2% Occupancy 98.4%

Pasaz Grunwaldzki movie

click here

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Asset highlights

Galaxy

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (30)

Rent to sales

12.6%

Footfall change

+1.5%

Sales change

+8.4%

Occupancy

99.4%

GLA 56 665 m2

#1 shopping destination in north-western Poland Top performing categories: Electronics +24%, Household +21%, F&B +7% New Food Court to be launched in Q4

SZCZECIN

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (31)

Future F&B transformation, works completing in Q4 2019

Galaxy

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (32)

Galaxy

Future F&B transformation, works completing in Q4 2019

Asset highlights

Galeria Echo

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (33)

GLA 71 896 m2

Record high footfall

• f +8.4% in H1

Top performing categories: F&B +17%, Household +12%, Fashion +8% 7 leases prolonged, 5 new openings Cinema and Kids Play enlargement

KIELCE

Rent to sales

10.2%

Footfall change

+8.4%

Sales change

+6.7%

Occupancy

98.9%

Galeria Mlociny grand opening

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Galeria Mlociny movie

click here

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Asset highlights

Galeria Młociny

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (36)

Successful opening in May with nearly 100% leased space First Primark in Poland

GLA 84 400 m2

Major brands: Inditex, H&M, C&A, Media Markt, TKMaxx

WARSZAWA

Value

€423 m

Occupancy

97%

Developments

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

Unique multi-functional project in the heart of Warsaw World famous architects from BIG responsible for the urban concept 2 ha square and a lot of greenery in the project Undergoing zoning which is expected in 2020

Developments

Towarowa 22

INTERIM RESULTS 2019 | RETAIL PORTFOLIO (38)

GLA 230 000 m2

mixed use*

*estimate

Towarowa 22 movie

click here

INTERIM RESULTS 2019 | RETAIL PORTFOLIO

HADLEY DEAN CEO

INTERIM RESULTS 2019 | OUTLOOK

Outlook

Outlook

2019 focus

INTERIM RESULTS 2019 | OUTLOOK (41)

Asset recycling Asset management Portfolio integration Capital structure

Disclaimer

This document has been prepared and issued by and is the sole responsibility of the management of EPP N.V. (the “Company” or “EPP”) and its subsidiaries. No information made available in connection with this presentation may be passed on, copied, reproduced, in whole or in part,

• r otherwise disseminated, directly or indirectly, to any other person.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract commitment or investment decision in relation thereto nor does it constitute a recommendation regarding the securities of the Company. Investors and prospective investors in securities of the Company are required to make their own independent investigation and appraisal of the business and financial condition of the Company and the nature of the securities. This presentation and any materials distributed in connection with this presentation may include certain forward-looking statements, beliefs or

• pinions, including statements with respect to the Company’s business, financial condition and results of operations. These statements, which

contain the words “anticipate”, “believe”, “intend”, “estimate”, “expect”, “forecast” and words of similar meaning, reflect the management beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the

• future. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved.

There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these statements and forecasts. Past performance of the Company cannot be relied on as a guide to future performance. Forward-looking statements speak only as at the date of this presentation and the Company expressly disclaims any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation. No statement in this presentation is intended to be a profit

• forecast. As a result, you are cautioned not to place any undue reliance on such forward-looking statements. The information on which these

statements has been based has not been reviewed or reported by EPP’s auditors. This document speaks as of the date hereof. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness, accuracy or fairness. The Company, its advisers and each of their respective members, directors, officers and employees are under no obligation to update or keep current the information contained in this presentation, to correct any inaccuracies which may become apparent, or to publicly announce the result of any revision to the statements made herein except where they would be required to do so under applicable law, and any opinions expressed in them are subject to change without notice. No representation or warranty, express or implied, is given by the Company, or any of its subsidiary undertakings or affiliates or directors, officers, any of its directors or employees or any other person as to the fairness, accuracy or completeness of the information or opinions contained in this presentation and no liability whatsoever for any loss howsoever arising from any use of this presentation or its contents otherwise arising in connection therewith is accepted by any such person in relation to such information.

INTERIM RESULTS 2019 | DISCLAIMER (42)

INTERIM RESULTS 2019 | APPENDICES

Appendices

€21.7bn €30.3bn €13.8bn €2.9bn €1.8bn €5.0bn €1.0bn €6.7bn €3.1bn €8.4bn €1.6bn €4.0bn €0.4bn €0.3bn €0.4bn €2.4bn €2.6bn

Investment volumes in Europe, H1 2019

Poland 51% Czech Republic 29% Hungary 7% Romania 6% Slovakia 7%

Investment volume in CEE, H1 2019

• In H1 2019 the CEE region recorded investment volumes of €5.5 billion
• Poland’s transactional volume share amounts to 51%, followed

by the Czech Republic (29%), whilst Hungary and Slovakia accounted for 7% of the total CEE volume each.

Investment market

Appendices

€2.81bn INTERIM RESULTS 2019 | APPENDICES (44)

Source: Savills

• One of the growing investment spots in Europe, a financial

hub for the region;

• Integration with the EU associated with large FDI inflows;
• Investment significantly boosted by EU investment funds;
• GDP per capita rose from 51% of the EU-28 average to

71% by 2018, the fastest pace of convergence among the CEE economies;

• High consumer confidence and continued increases in

average household income has spurred robust growth in private consumption which is expected to reach 3.8% in 2019;

• Healthy and well-capitalised, resilient banking sector;
• PLN 500+ government programme (PLN 500/month for

second and each next child) introduced in April 2016 has led to a considerable growth of retail sales;

• Since July 2019 the PLN 500+ programme is granted also

for the first child;

• Sustainable consumer-led growth, underpinned by major

productivity gains and capital accumulation.

GDP GROWTH (Q2 2019)

4.5%

CORPORATE TAX RATE

19.0%

INFLATION (Q2 2019)

2.4%

UNEMPLOYMENT RATE (Q2 2019)

3.4%

FDI INFLOW (2018)

11 354

AVERAGE MONTHLY GROSS SALARY (Q2 2019)

1 172

USD billion EUR INTERIM RESULTS 2019 | APPENDICES (45)

Poland: Economic indicators

Appendices

0% 1% 2% 3% 4% 5% 6% 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f)

GDP growth

Poland Germany EU-28 46,9% 53,1% 50,4% 50,6% 48,4% 66,5% 81,0% 74,5% 63,9% 59,8% 59,8% 78,9% 87,8% 83,3% 81,6% 0% 30% 60% 90% 120% 2006 2010 2014 2017 2018

Government gross debt (%GDP)

Poland Germany EU-28 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Poland Czech Republic Romania Hungary France UK Germany CAGR Retail sales growth

Retail sales and CAGR

2019-2028 CAGR Source: Oxfrod Economics, Eurostat

INTERIM RESULTS 2019 | APPENDICES (46)

Economics

Appendices

2 000 4 000 6 000 8 000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019

EUR million

Investment volume by sector

Office Retail Industrial Other 4,00% 5,00% 6,00% 7,00% 8,00% 9,00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019

Prime yields by sector

Office (CBD Warsaw) Retail (Warsaw) Retail (regional cities)

INTERIM RESULTS 2019 | APPENDICES (47)

Investment market

Appendices

• In 2018 prime yields reached levels untested earlier on the Polish

market, in all major property sectors, having significantly broken the psychological barrier of 5% in the office and retail sectors and reached a low 5% in the logistics sector. This trend continued in the first half of 2019.

• Prime shopping centre yields are in the range of 4.75-5.25% but with

limited market evidence. The most recent transactions of prime retail properties are Galeria Katowicka sold at 5.25% (Q1 2019) and Wars Sawa Junior department store in Warsaw City Centre was sold at ca. 4.00%+ (Q4 2018), the record yield in the retail sector in Poland and the first to be considered as high street. In Q2 2019 Cinema City in Manufaktura in Łódź was sold at 5.5%.

Source: Savills

* All types of properties, based on RCA data

100 200 300 400 500 600 700 800 900 1 000 1 100 GLL Cromwell / Goldman Sachs Pradera LRC Group Blackstone Revetas / Goldman Sachs Atrium European Real Estate REICO (Ceska Sporitelna) Union Investment Savills IM Mapletree CIC (China Investment Corporation) Globalworth Chariot Top (PIMCO, Oaktree, Redefine) EPP

EUR million

Top 15 investors 2017-H1 2019

2 000 4 000 6 000 8 000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019

EUR million

Investment volume in Poland by investor’s region of origin

Domestic EU US AsiaPac Middle East South Africa Other

INTERIM RESULTS 2019 | APPENDICES (48)

Investment market cont’d

Appendices

• EUR 2.81 billion of total investment volume on the commercial real estate market in

Poland in H1 2019;

• Close to 57% of total investment volume in H1 2019 relates to office sector, whereas

the share of retail and industrial sector was almost equal at 16% and 15.2% respectively;

• Following dominance of retail transactions for three consecutive years (2015-2017), the
• ffice sector was the major focus for investors in 2018 and H1 2019.
• Total volume in the retail sector summed to slightly over EUR 450 million. In the first

few weeks of the third quarter another EUR 298 million was added to the volume as Atrium Koszalin and Atrium Felicity in Lublin were sold ECE.

2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 EUR million

Investment volume* in CEE

CE (excl. Poland) Poland Eastern Europe (excl. Russia) CE: Czechia, Hungary, Slovakia Source: Savills

EPP IR Contact details

INTERIM RESULTS 2019 | CONTACT (49)

Curwin Rittles Poland - Warsaw e-mail: Curwin.Rittles@epp-poland.com Michèle Mackey South Africa Singular Systems IR e-mail: Michele@singular.co.za

www.epp-poland.com