Nepi Rockcastle N.v · JSE:NRP
Nepi Rockcastle — FY2018 Earnings Presentation
57 slides from Nepi Rockcastle's earnings presentation, December 2018
Slide 1: Results Presentation December 2018
RESULTS PRESENTATION DECEMBER 2018
Slide 2: Table of contents
Table of contents 2018 Highlights 3 Company overview 6 CEE market prospects 16 Retail transformation 21 Completed pipeline 28 Pipeline 38 Corporate Governance update 48 Outlook 52 Paradise Center, Bulgaria 2 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 3: 2018 Highlights
1 2018 Highlights Shopping City Galati, Romania 3 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 4: Successful delivery on our commitments for 2018
Successful delivery on our commitments for 2018 Mega Mall, Romania 52.86 €cents €305m distributable earnings distribution per share 9.5% GROWTH COMPARED TO 2017 13.2% GROWTH COMPARED TO 2017 €5.9bn Investment property value 2.8% EPRA vacancy rate Paradise Center, Bulgaria 20% GROWTH COMPARED TO 2017
Slide 5: Executing the strategy
Executing the strategy Ozas Shopping and Entertainment Centre, Lithuania €594m €260m Acquisition pipeline completed Invested in land and developments €396m Decrease in listed securities 2 million m2 GLA Galeria Mlyny Shopping Centre, Slovakia Aura Centrum, Poland 33% Prudent loan-to-value 72% Unencu
Slide 6: Company overview
2 Company overview Galeria Warminska, Poland 6 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 7: The leading retail property investment and development group in CEE
Lithuania 2% THE LEADING RETAIL PROPERTY INVESTMENT AND DEVELOPMENT GROUP IN CEE* Poland 24% Retail 93% 51 income-producing properties 1,837,700m2 GLA €5,290m property value 931 D 6 + 93% Czech Republic 3% Slovakia 9% RETAIL Hungary PORTFOLIO 10% Croatia Romania 4% 36% Office 6.7% Serbia 6 income-pr
Slide 8: Strategic positioning oriented towards long-term growth
Strategic positioning oriented towards long-term growth OPERATIONAL EXCELLENCE • Strong corporate culture focused on planning, quality of execution, sustainability, ethics and early risk assessment • In-house expertise in all key functions • Outstanding knowledge and expertise in the CEE retail mark
Slide 9: Dominant portfolio by scale and geographical diversification
Dominant portfolio by scale and geographical diversification 93% of the properties are located in investment-grade countries No. of Country rating Rentable Property Country Segment assets* area value Moody's / S&P / Fitch m2 €m Romania Retail 24 Baa3 / BBB- / BBB- 736 600 1 699 Poland Retail 12 A2 /
Slide 10: Portfolio overview
Portfolio overview DIRECT PORTFOLIO AT 31 DECEMBER 2018^ Number Annualised EPRA of properties GLA Valuation Passing rent/ERV Occupancy* '000m2 €m €m % TOTAL PROPERTIES 73 2 311 5 923 410 INCOME PRODUCING 59 2 024 5 689 389 97.2% Retail 51 1 838 5 290 357 97.2% Office 6 159 383 30 97.7% Industrial 2
Slide 11: Top 10 retail tenants and contracted gross rent
Top 10 retail tenants and contracted gross rent SUSTAINABLE ANCHOR TENANT BASE by rent 3.6% ** 3.5% * 3.2% 2.9% 2.2% 1.7% 1.3% 1.3% 1.2% 1.1% * Bershka, Massimo Dutti, Oysho, Pull and Bear, Stradivarius and Zara ** Reserved, Cropp Town, House, Mohito, Sinsay LONG-TERM LEASE DURATION €m EXPIRY PROFIL
Slide 12: Sustained growth in retailer sales
Sustained growth in retailer sales Lithuania* Tenant sales increased by 7.5% (like-for-like) in 2018 Poland +5.7% Performance driven by: 16.1% Electronics 13.3% Services Czech Republic 13.0% Fashion complements +18.6% 12.6% Food Slovakia +2.2% Hungary Sales benefited from asset management initiative
Slide 13: Strong performance indicators
Strong performance indicators Operational performance indicators Financial performance indicators Net Rental and Related Income (NOI) €346m Loan-to-value* 33% NOI growth (like-for-like) 4.9% Unencumbered assets (% of total assets) 72% Weighted average remaining lease term 4 years Cost of debt 2.3% C
Slide 14: Strong performance indicators » continued
Strong performance indicators» continued 53.43* €CENTS 52.86*€CENTS EPRA EARNINGS PER SHARE DISTRIBUTABLE EARNINGS PER SHARE €7.09EPRA NAV/SHARE 6.74% EPRA 6.82%EPRA 'TOPPED-UP' NET INITIAL YIELD NET INITIAL YIELD * Reconciliation of profit for the period to EPRA earnings and distributable earnings
Slide 15: Robust balance sheet
Robust balance sheet • Versatile funding profile via a combination of equity and debt €m DEBT MATURITY PROFILE AS AT 31 DECEMBER 2018 (€m) 1000 • 72% of the portfolio is unencumbered 800 • Investment grade credit ratings: - Baa3, stable outlook - Moody’s (to be discontinued in 2019) 600 - BBB, stabl
Slide 16: CEE market prospects
Promenada Mall, Romania 3 CEE market prospects 16 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 17: Attractive CEE markets with good fundamentals
Attractive CEE markets with good fundamentals CEE countries where the Group operates Lithuania Population (m inhabitants) 104.5 Population (m inhabitants) 2.8 Visits to Group's properties (m) 306.6 Visits to Group's properties (m) 5.3 GDP (€m) 233 856 GDP (€m) 39 330 LITHUANIA GDP per capita (€/capi
Slide 18: Solid macroeconomic fundamentals and growth prospects in CEE
Solid macroeconomic fundamentals and growth prospects in CEE % Real GDP growth 7 6 5 4 3 2 1 0 Czech Romania Slovakia Serbia Croatia Poland Bulgaria Hungary Lithuania EU28 Republic The European economy is expected to grow for the seventh year in a row in 2019. Cee countries are expected to continue
Slide 19: Solid macroeconomic fundamentals and growth prospects in CEE (continued)
Solid macroeconomic fundamentals and growth prospects in CEE » continued % General gov. debt (% of GDP) 100 80 60 40 20 0 Czech Romania Slovakia Serbia Croatia Poland Bulgaria Hungary Lithuania EU28 Republic The general government debt ratio (% of GDP) is expected to decrease in almost all CEE count
Slide 20: CEE private consumption growth well above the EU average
Solid macroeconomic fundamentals and growth prospects in CEE » continued CEE private consumption growth well above the EU average 120% 120% 100% 100% 10-year cumulative forecasted growth Serbia €30bn Poland Latvia 80% €290bn €18bn Lithuania 80% Romania €28bn Estonia €126bn €13bn Slovakia 60% €49bn S
Slide 21: Retail transformation
Mega Mall, Romania 4 Retail transformation 21 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 22: Strengthening the portfolio positioning
Strengthening the portfolio positioning Extending the preferred retailers concepts missing from the region 1st 1st 1st 1st in NEPI in Romania in Bulgaria in Romania Rockcastle 1st 1st Extended in Romania in Croatia in Croatia Extending successful online retailers by introducing physical presence Ada
Slide 23: Strengthening the portfolio positioning: focus on leisure
Strengthening the portfolio positioning » continued Focus on leisure • Refurbishment and extension of food courts and leisure areas in: »» Kragujevac Plaza »» Shopping City Timisoara »» Ploiesti Shopping City »» Braila Mall »» City Park »» Mega Mall »» Shopping City Sibiu »» Aurora Mall Buzau »» Foc
Slide 24: Focus on leisure: ScreenX in Arena Mall Budapest
Strengthening the portfolio positioning » continued Focus on leisure NEW SCREENX™ in Arena Mall Budapest - DIVE INTO THE MOVIE • Introduced in September 2018 • Number of visitors in the hall increased from 6,600 to 8,300 per month • Expands the traditional cinema screen to the side auditorium walls
Slide 25: Eobuwie offline store of online retailer
Strengthening the portfolio positioning » continued Eobuwie offline store of online retailer • E-commerce giant • Cooperates with leading brands: Adidas, Armani Jeans, Calvin Klein, Clarks, Crocs, Ecco, Geox, Guess, New Balance, Nike, Pepe Jeans, Tommy Hilfiger • Eobuwie in five of our locations • C
Slide 26: Engaging customer experience through new digital technology
Engaging customer experience through new digital technology Romania - CRM automation tool • Increase the marketing efficiency • New automation tools using machine learning and Location Based Marketing Automation • 4 times higher efficiency in our digital communication Poland - Loyalty Application •
Slide 27: Physical retail and e-commerce
Physical retail and e-commerce ONLINE SHARE OF TOTAL RETAIL SALES (2017) ESTIMATED ONLINE SHARE OF TOTAL RETAIL SALES (2022) % by region % by region 100 100 89% 91% 92% 94% 96% 97% 98% 85% 88% 89% 90% 94% 94% 97% 80 80 60 60 40 40 20 20 15% 11% 12% 11% 10% 9% 8% 6% 4% 6% 6% 3% 2% 3% 0 0 North Wester
Slide 28: Completed pipeline
5 Completed pipeline Promenada Novi Sad, Serbia 28 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 29: Successful delivery of acquisition and development pipeline
Successful delivery of acquisition and development pipeline Ozas Shopping and Entertainment Centre Acquisition drivers Vilnius, Lithuania Aura Centrum Large and dominant shopping centres: Olsztyn, Poland • Large cities • Strong growth potential Significant acquisitions in 2018 Platan Shopping Centre
Slide 30: Hungary
Hungary PEST PROVINCE 3 000 000* INHABITANTS BUDAPEST CITY 1 753 000 * Pest Province together with Budapest City 30 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 31: Mammut Shopping Centre
Mammut Shopping Centre Mammut is one of the largest and most successful shopping and entertainment destinations in Budapest. It is prominently located at Kalman Square, the busiest interchange hub in the Buda side of the city, and benefits from a strong annual footfall of 15.6 million people. The ce
Slide 32: Poland
Poland SILESIAN VOIVODESHIP 4 559 000 INHABITANTS ZABRZE CITY 175 000 32 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 33: Platan Shopping Centre
Platan Shopping Centre After 15 months of works, the 14,000m2 extension of Platan Shopping Centre opened in October 2018. The city of Zabrze has a population of 175,000 residents and is part of the Silesian metropolitan area that has 4.6 million residents. The extension upgraded Platan to a fourth g
Slide 34: Serbia
Serbia VOJVODINA REGION 1 881 000 INHABITANTS NOVI SAD CITY 319 000 34 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 35: Promenada Novi Sad
Promenada Novi Sad After 16 months of works, NEPI Rockcastle opened its first greenfield development in Serbia. With a 49,200m2 GLA, it is the largest mall in Serbia, located in Novi Sad, the country’s second largest city. The property hosts a great number of international brands such as: Adidas, Ar
Slide 36: Romania
Romania SATU MARE COUNTY 337 000 INHABITANTS SATU MARE CITY 123 000 36 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 37: Shopping City Satu Mare
Shopping City Satu Mare The only modern shopping and entertainment destination in Satu Mare was open in December 2018. The centre is located in the heart of Satu Mare, a city of 123,000 residents. The city is located in the north-west of Romania near the border with Hungary. The centre has 29,200m2
Slide 38: Pipeline
6 Pipeline Festival Sibiu render, Romania 38 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 39: Strong pipeline: sustainable growth with limited risk
Strong pipeline: sustainable growth with limited risk Commitment to developments in a phased manner to limit risk, with high pre-leasing percentages for retail. LEASING COMMITTMENT Main anchors secured early in the process for all developments REINFORCING DOMINANCE Eight extension projects to reinfo
Slide 40: Diversified developments to create value
Diversified developments to create value CASH BASIS GLA of Target existing GLA of Cost Total Country Type Category opening date Ownership property development to date cost % m2 m2 €m €m Developments under construction 245 700 93 700 79 281 Festival Sibiu Romania Mall Development Q4 2019 100 - 42 200
Slide 41: Sibiu Festival
Sibiu Festival UNDER CONSTRUCTION The 42,200m2 GLA of Festival Sibiu development, will complement the other retail property of the Group in the city, Shopping City Sibiu. Festival has an excellent location, within walking distance to Sibiu’s historical centre and to the main train station. The land
Slide 42: Shopping City Sibiu - extension and refurbishment
Shopping City Sibiu - extension and refurbishment UNDER CONSTRUCTION Shopping City Sibiu was recently refurbished and extended, with several fashion brands added, such as Cropp, De Facto (first store in the country), House, LC Waikiki, Mohito, Reserved and Smyk. Some of the existing stores were refu
Slide 43: Focus Mall Zielona Gora - extension and refurbishment
Focus Mall Zielona Gora - extension and refurbishment UNDER CONSTRUCTION The Company has started the 15,000m2 GLA extension of Focus Mall. Zielona Gora, a vibrant city which is well known for its annual wine festival, is the largest municipality and the seat of Lubuskie Voivodeship; it is also well
Slide 44: Solaris Shopping Centre - extension
Solaris Shopping Centre - extension UNDER CONSTRUCTION The construction works have started in 2018 and are on- going. The project includes the development of multi-level basement parking and a new town square in front of the centre’s main entrance. 100% Extension area is scheduled to be completed in
Slide 45: Aurora Shopping Mall
Aurora Shopping Mall UNDER CONSTRUCTION The Group started the development works of the extension and reconfiguration of Aurora Mall. The refurbishment will include a Cinema City, a food-court and several fashion anchors and is expected to be completed by the end of 2019 (except for 100% Cinema City
Slide 46: Arena Centar Retail Park
Arena Centar Retail Park UNDER CONSTRUCTION The 8,300m2 GLA retail park is adjacent to the shopping mall and is almost completed and is expected to open in May 2019. The retail park will bring additional large-format tenants such 100% as Extra Sport, Intersport, Jysk, LC Waikiki (market entry in Cro
Slide 47: Developments under permitting and pre-leasing
Developments under permitting and pre-leasing Shopping City Targu Mures Targu Mures, Romania Promenada Plovdiv Plovdiv, Bulgaria RENDER 100% 100% The Group is in progress of obtaining a building permit for the development of a 41,300m2 GLA shopping mall in the south- Ownership The Group owns over 6.
Slide 48: Corporate Governance update
7 Corporate Governance update Floreasca Business Park, Romania 48 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 49: Investor relations
Investor relations • Public company with a broad range of regulators and oversight bodies in Europe and South Africa ○○ Stock exchanges and financial services authorities in Europe and South Africa ○○ Big 4 auditors ○○ Local tax authorities and other regulators ○○ Valuators ○○ Rating agencies • Quar
Slide 50: Remuneration policy
Remuneration policy Our Objectives Our Process Our Way Forward Remuneration related priorities All Staff Disclosure • To ensure our remuneration motivates • Job analysis and pay benchmark with • Increase transparency of our people for performance while driving international and local markets (Mercer
Slide 51: Remuneration policy » continued
Remuneration policy» continued Current Amendments Future direction Fixed Pay At or below market median Adjust to 3rd quartile At market median/above, 50-75% percentile Short – term incentive plan (cash) - STI Role specific measures / weights Only Financial and Operational performance criteria Measur
Slide 52: Outlook
Shopping City Satu Mare, Romania 8 Outlook 52 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
Slide 53: Conclusions
Conclusions • Achievements: »» Earnings growth above peers »» Solid NOI and Turnover growth, with low Occupancy Cost Ratios and high collection rate »» Additional growth through acquisitions and development »» Strong balance sheet and investment grade rating • Focus on: »» Asset management »» Select
Slide 54: Appendix: Reconciliation of profit to EPRA Earnings and distributable earnings
Appendix: Reconciliation of profit for the period to EPRA Earnings and distributable earnings amounts in €'000 EPRA Earnings Dec 2018 Dec 2017 Earnings in IFRS Consolidated Statement of Comprehensive Income 221 855 (579 694) Fair value adjustments of investment property (108 411) (162 022) Fair valu
Slide 55: From distributable earnings to cash flow from operating activities
From distributable earnings to cash flow from operating activities +2,542 +2,291 305,413 +3,352 281,905 +3,428 -28,122* -6,079 -920 Distributable Non-cash items Amortisation of Accrued Acquisition fee Accrued net Non-cash Working capital Cash flow from earnings relating to JVs financial assets divid
Slide 56: Disclaimer
Disclaimer NEPI Rockcastle plc is a commercial property investor and developer, listed on the Main Board of the Johannesburg Stock Exchange Limited (JSE) and Euronext Amsterdam (AEX). The information in this presentation has been included in good faith but is for general informational purposes only.
Slide 57: 57 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018
57 NEPI ROCKCASTLE RESULTS PRESENTATION DECEMBER 2018