EuroCommercial GOOD FIRST QUARTER RESULTS 2019/2020.

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Algemeen advies 01/11/2019 08:18
Business highlights
? Sale of 50% of Passage du Havre completed.
? 100% control of shopping centre Woluwe Shopping achieved by the contribution of the Inno department store by AG in exchange for shares in Eurocommercial’s Belgian subsidiary.
? Loan to value ratio reduced to 42% following the repayment of debt using the proceeds of the
Passage du Havre sale.
? Hallarna voted Swedish Shopping Centre of the Year.
? Valerie Jacob appointed as Director Investor Relations and Corporate Development.

Performance highlights
? Vacancies continue to be less than 1% of rent (ERV).
? Uplift on relettings and renewals was 8.4% for the 12 months, based on 256 lease negotiations.
? Like-for-like rental growth was 2.3% for the 12 months, with strong performance in Sweden (2.9%)
and Italy (2.6%).
? Earnings (direct investment result) of €30.0 million for the quarter in line with expectations.
Eurocommercial’s CEO, Jeremy Lewis, said:
Despite generally anaemic GDP growth in Europe, Eurocommercial’s shop rents continue to rise and our vacancies continue to be almost non-existent (0.7%). Our hypermarkets are also performing well with average turnover growth exceeding 2%, particularly in Sweden reflecting their competitive prices and absence of online sales and home deliveries.
The sale of 50% of the Passage du Havre to AXA-IM at a yield of 3.7% emphasizes the solidity of prices for good assets, particularly in France where recent economic performance now exceeds that of Germany. Our like-for-like rental growth for the year to 30 September was strong at 2.3% overall and uplifts on renewals and relettings were particularly good in France and Italy at 10.4% and 10.7% respectively.
The fact that so few of our retail tenants (5 out of 1800) have suspended rent payments after going into administration is comforting, especially when compared with the nightmarish problems in the UK.
We do not expect the situation to change significantly in our markets over the coming year and as a result European property investment markets are generally in good health, particularly for prime assets with sustainable income as an attractive alternative for institutions to extremely low or negative government bond yields.

Direct Investment Result
The direct investment result (earnings) for the three-month period to 30 September 2019 was €30.0 million compared with €29.7 million for the three months to 30 September 2018. The direct investment result per depositary receipt at 30 September 2019 was €0.61 compared with €0.60 at 30 September 2018.
The direct investment result is defined as net property income less net interest expenses and company expenses after taxation. In the view of the Board, this more accurately represents the underlying profitability of the Company than the IFRS “profit after tax”, which includes unrealised capital gains and losses.

Net Property Income
Net property income, including joint ventures (on the basis of proportional consolidation), for the three months to 30 September 2019, increased to €45.1 million compared with €43.8 million for the previous corresponding
period. This was achieved by higher income in Belgium from the acquisition of the second phase in Woluwe Shopping in January 2019, the completion of the extension of Hallarna and the opening of C4 in Sweden.

IFRS Statement of profit or loss
The total profit after taxation decreased from €39.2 million for the first quarter last year, to €11.2 million for the same period in the current financial year. This is mainly due to the lower and flattening of the Euro and Swedish interest rate curves which has a negative impact on the fair value of the derivative financial instruments of €29.5 million.

Rental Growth
Like-for-like (same floor area) rental growth (including indexation, turnover rent and reletting and renewals) for the twelve months to September 2019 was 2.3% across our portfolio. This represents an improvement compared to the year to September 2018 when we recorded a growth of 1.1%.

Uplifts on relettings and renewals
Uplifts on relettings and renewals across the portfolio averaged 8.4% for the past twelve months, as a result of 256 lease negotiations.
Eurocommercial also introduced several new brands to its portfolio during the past 12 months, including Normal, Victoria Magdalena, La Chaise Longue, Unisa, Boligheter, Holberg & Nielsen, Lekia amongst many others. During the first quarter alone, Eurocommercial helped 59 retailers open new stores in its existing shopping centres (excluding new space).
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