DGAP-News: CPI PROPERTY GROUP publishes half-year financial results for 2019

Press Release

Luxembourg, 30 August 2019

CPI PROPERTY GROUP publishes half-year financial results for 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 unaudited financial results for the first half of the 2019 financial year.

"CPIPG's superb operational and financial performance during the first half of 2019 reflects the hard work of our teams, the strength of our markets and the quality of our assets. We maintained our long-term focus, improved our capital structure and strengthened our corporate governance." said Martin Němeček, CEO.

Key highlights for the first half of the 2019 financial year include:

- Property portfolio increased to EUR7.9 billion (up EUR300 million versus year end 2018), driven primarily by a combination of capex, acquisitions and positive revaluations.

- Total assets increased to EUR9.5 billion (up EUR1.2 billion versus year end 2018), driven by increases to the property portfolio as well as a EUR0.9 billion increase in cash and equivalents following significant capital markets activity in the first half.

- Net rental income of EUR145 million (up 7.7% versus the first half of 2018), reflecting the combined effects of 3.9% like-for-like growth in rental income, improvement in occupancy to 94.6% and also acquisitions since the prior period.

- Total revenues of EUR322 million (up 13% versus the first half of 2018).

- Net business income of EUR168 million and consolidated adjusted EBITDA of EUR143 million (up 8% and 9% respectively versus the first half of 2018).

- Funds from operations (FFO I) of EUR103 million (up 18% versus the first half of 2018).

- EPRA NAV rose by 4% from year end 2018 to EUR4.7 billion.

- Net Loan to Value (LTV) reached a record low of 30.4%.

- Record 69% of unencumbered assets, relative to 65% at the end of 2018.

- Significant improvement of Net ICR to 7.2x for the first half of 2019, relative to 4.2x for full year 2018, reflecting the combination of higher EBITDA generation as well as reduction of interest costs following significant refinancing activity in 2018.

- CPIPG signed a new EUR510 million 3-year revolving credit facility in March 2019, significantly enhancing the Group's financial flexibility and liquidity.

- The Group further expanded its presence on the international capital markets and diversified its sources of funding with more than EUR900 million equivalent of new issuance across multiple instruments and currencies. This included our inaugural $350 million US Dollar unsecured bond (which was subsequently increased by $100 million in July), issuance of additional subordinated perpetual hybrid bonds in Euros of EUR550 million, unsecured bonds in Hong Kong Dollars of EUR82 million equivalent, and placement of EUR170 million equivalent of schuldschein (assignable loans). All foreign currency denominated bonds were swapped into Euros using cross-currency swaps.

- Together with the new revolving credit facility, CPIPG's total available liquidity stood at EUR1.5 billion at the end of June 2019.

- In April we increased capacity under our EMTN programme to EUR5 billion.

- CPIPG took the positive decision to tighten our financial policies, in line with our aim to achieve high "BBB" ratings in future. CPIPG now targets a Net LTV below 40% and a Net ICR of 4x or above. We also clarified our future distribution policy: no dividends and the intention to retain and reinvest between 50% to 100% of annual FFO going forward.

"CPIPG has a positive outlook for the rest of 2019, and will continue investing in our portfolio and making acquisitions, " said David Greenbaum, CFO. "Our strong financial performance, conservative financial policy and high levels of liquidity give CPIPG the flexibility to pursue good opportunities."

FINANCIAL HIGHLIGHTS

STATEMENT OF COMPREHENSIVE INCOME

The income statement for the six-month period ended on 30 June 2019 and 30 June 2018 was as follows:

* In connection with the adoption of IFRS 15, the Group changed, in respect of service charges, revenue recognition from net to gross, before deduction of cost of services (refer to the annual management report for 2018 for further detail). The presentation of the statement of profit or loss for the six-month period of 2018 was adjusted due to the changes in the accounting policy as follows:

** To provide reliable and more relevant information, the Group reclassified 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 0.1 million and EUR 1.1 million as at 31 March 2018 was adjusted accordingly.

- Net gain/(loss) on disposal of subsidiaries and investees was reclassified to Net gain/(loss) on the disposal of investment property and subsidiaries. Comparative information of EUR 0.1 million as at 30 June 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 for the six-month period ended 30 June 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 8% to EUR145 million compared to EUR135 million in Q2 2018, driven primarily by an increase in gross rental income reflecting 2018's acquisitions of Futurum Hradec Králové shopping centre (increase of EUR2.8 million) and Atrium office complex in Poland (increase of EUR2.8 million). The better performance of our Berlin portfolio (increase of EUR4.8 million) contributed to the overall increase in net rental income.

Net development income

Development sales in Q2 2019 were represented by sales of apartments in Nice (revenue of EUR15.2 million) and sales of family houses in Březiněves (revenue of EUR2.5 million).

Net hotel income

Net hotel income in Q2 2019 increased primarily due to the Orchard Hotel acquisition (EUR1 million).

Net valuation gain / (loss)

Valuation gain in Q2 2019 relates mainly to the Prague office portfolio (EUR39 million), Czech residential portfolio (EUR9 million) and Berlin office portfolio (EUR9.8 million).

Amortization, depreciation and impairments

The increase in amortization, depreciation and impairments in Q2 2019 was affected by the write-off of goodwill (EUR6 million), which was recognized in 2014 in connection with the acquisition of the Group's agriculture business.

Interest expense

Interest expense was EUR25.5 million in Q2 2019 compared to EUR45 million in Q2 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 EUR9.7 million) and bonds (decrease of EUR8.8 million).

Other net financial result

Improvement of other net financial result Q2 2019 due to overall FX gain of EUR6.5 million (compared to FX loss of EUR43 million in Q2 2018).
BALANCE SHEET

Total assets

Total assets increased by EUR1,239 million (15%) to EUR9,498 million as at 30 June 2019. The predominant driver of this growth was the increase in cash and cash equivalents by EUR860 million.

Increase in investment property by EUR255 million reflects primarily capex and development costs (EUR 85.1 million) incurred in Q2 2019. Due to the acquisition of 7St James's Square the Group's property portfolio rose by of EUR54.3 million. Valuation gain in Q2 2019 was EUR79.4 million.

Total liabilities

Non-current and current liabilities totalled EUR4,407 million as at 30 June 2019, an increase of EUR510 million (13.1%) compared to 31 December 2018. The increase is attributable to the emission of USD bonds (EUR312 million), HKD bonds (EUR82 million). The Group also signed a new unsecured loan Schuldschein of EUR170 million from Unicredit Bank AG and repaid bridge loan of EUR68 million and RCF of EUR34 million.

NAV AND EPRA NAV

Total equity increased from EUR4,362 million as at 31 December 2018 to EUR5,091 million as at 30 June 2019. The main elements impacting equity were:

- an increase in equity due to profit for the six-month period of 2019 in the amount of EUR165.6 million;

- an increase by EUR23.5 million due to a shift in hedging and translation reserves;

- an increase by EUR5.5 million due to the change in revaluation reserve.

EPRA NAV was EUR4,668 million as at 30 June 2019, an increase of 4.2% relative to 31 December 2018. The main positive effect was the positive equity elements described above.

For disclosures regarding Alternative Performance Measures used in this press release please refer to our Half-year Management Report 2019, chapters Glossary and EPRA Performance; accessible at http://cpipg.com/reports-presentations-en.

Unaudited documents will be available tonight on:
http://www.cpipg.com/reports-presentations-en

Half-year 2019 unaudited financial report
Half-year 2019 unaudited management report

CPIPG will host a webcast in relation to its financial results for the first half of 2019. The webcast will be held on Friday 6 September 2019 at 11:00am CET / 10:00am UK.

Please register for the webcast via the link below:

https://globalmeet.webcasts.com/starthere.jsp?ei=1259937&tp_key=d0056de7de

Investor Contacts:

David Greenbaum
Chief Financial Officer
CPI Property Group
d.greenbaum@cpipg.com

Joe Weaver
Director of Capital Markets
CPI Property Group
j.weaver@cpipg.com

Media / PR Contact:

Kirchhoff Consult AG
Andreas Friedemann
Borselstr. 20
22765 Hamburg
T +49 40 60 91 86 50
F +49 40 60 91 86 60
E andreas.friedemann@kirchhoff.de