EuroCommerial, Key highlights for the 18 months reporting period to 31

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Algemeen advies 26/03/2021 08:23
Performance and business highlights
? Sales turnover, affected by 2.4 months of closures in 2020, encouragingly reached pre-pandemic
levels during reopening periods
? Solid tenant demand resulted in 10.5% rent uplifts on renewals and relettings, with higher number
of deals signed in 2020 compared to 2019
? EPRA vacancy rate at year-end at 1.6%
? Resilient property values down -3.8% over the past twelve months
? Around €300 million disposals over the past eighteen months at or close to their latest valuations
? LTV (on the basis of proportional consolidation) reduced to 43.8% compared to 45.5% in June
? EPRA sBPR Gold Award for the seventh year in a row
? Green Star status for the 5th consecutive year upgraded to four GRESB stars
? Net earnings €3.40 (direct investment result) per depositary receipt for 18 months to 31 December
2020 and €2.21 for the calendar year 2020 compared to €2.43 for the calendar year 2019
? Cost savings of €8 million in 2020 compared to 2019 (17% of total costs)
? Proposed dividend of €0.50 cash per depositary receipt and one new depositary receipt for each
18 depositary receipts held
? Over €100 million reduction in deferred taxes due to fiscal step up in Italy
? EPRA Net Tangible Assets of €42.55 per depositary receipt.

Management board commentary
During this unprecedented year marked by the global COVID-19 pandemic, Eurocommercial has
demonstrated its resilience on many levels. Our teams’ professionalism and hard work enabled us to reach
high rent collection rates while keeping vacancies to minimal levels. In 2020, we signed a higher number of
leases than in 2019 and relettings and renewals showed solid uplifts in rents (10.5%), in-line with our longterm average. These strengths, together with our history of affordable rental levels have been recognised by
our valuers through a modest decline in our asset values.
Over the past 18 months, we have sold around €300 million of properties representing 8% of our portfolio at
or close to book value, demonstrating that there remains a market for good retail assets. We are progressing
with other sales with the aim of achieving a loan to value (LTV) ratio of under 40% in due course as part of
our commitment to maintain a solid and healthy financing structure. All our debt is in the form of
straightforward individual mortgage loans with a wide range of banks with whom we have established longterm relationships.
As a new management team, our priorities are clear. In a changing retail landscape, we want to accompany
retailers’ portfolio transformation by working closely with them to our mutual benefits. Change is an
opportunity to innovate and we constantly engage with our consumers to tailor our offer to their expectations.
Ensuring rent sustainability while monitoring costs will be pivotal to our success. Building a sustainable and
resilient business is the foundation of our long-term strategy and our new ESG strategy is fully aligned with
these objectives, from our roadmap to reduce our footprint to our proposed improvements to our governance.
In Italy, colour-coded trading restrictions have been in place since November 2020 and these are reviewed
by the government on a weekly basis. Hypermarkets, pharmacies and a few services are currently able to
open seven days a week in all our shopping centres. In red areas all non-essential retail is closed. Currently
our galleries at I Gigli and Collestrada are open during the week. In France, all shopping centres of more than
20,000m² have been closed since 1 February with only hypermarkets, pharmacies and a few other essential
stores open and allowed to trade. Since 6 March, this has also applied to shopping centres larger than
10,000m² and therefore only Etrembières, Les Grands Hommes and Chasse Sud are currently open. In
Sweden, all shopping centres remain fully open, although there are some restrictions on the use of
restaurants. As of midnight, Friday 26 March the Belgian government have confirmed the closure of all nonessential retail for a period of four weeks, although click & collect and shopping by appointment will be
permitted.
These restrictive measures are clearly affecting our business and retail sales in our shopping centres during
the first part of this year. Although there are various government rent support initiatives currently under consideration, we are still awaiting further details about how they will operate. In the meantime, we can report
that we have collected 75% of rent and service charges for the months of January and February 2021.
Notwithstanding the current restrictions on part of our portfolio, we see the reopening of the economy in sight
as vaccination continues to progress. Our fundamentals are still strong and we are confident that our business is well-prepared to re-emerge and continue to create long-term value for our stakeholders.

Financial & Operational Review
Introduction
The financial year of the Company was extended to 18 months ending 31 December 2020 by resolution of
the Extraordinary General Meeting held on 18 June 2020. This implies that all actual numbers in this press
release refer to an 18 months financial reporting period. In order to make the Company’s figures more
comparable with those published by our peers and also to compare the pre-COVID-19 year 2019 with the
COVID-19 year 2020, we added two more columns showing 12 months figures for the calendar year 2020
and 12 months figures for the previous calendar year 2019.
COVID-19 pandemic
In 2020, Eurocommercial’s activities were significantly impacted by the COVID-19 pandemic which resulted
in government restrictions imposed on shopping centres openings and gatherings.
The first lockdown occurred during spring 2020 when our shopping centres were closed for around two
months from mid-March in Belgium, France and Italy. During this period non-essential retail was closed while
everyday shops including hypermarkets and pharmacies remained open. The only country which was not
closed was Sweden where all shopping centres remained open throughout 2020, although footfall was initially
reduced in response to health authority guidelines on social distancing and public gatherings. Retail was fully
reopened in all our markets by mid-May with the exception of some food & beverage and entertainment.
After the summer a second round of closures started following the increase in cases of COVID-19 that spread
throughout Europe from September. In Belgium and France the closure of restaurants in late October was
followed by national lockdowns during November which were slightly more flexible than the first one with
more stores able to stay open and click & collect activities permitted. Re-openings occurred in time for the
busy Christmas trade. The Italian government put in place a colour restriction scheme which is reviewed
weekly. This put more restrictions on shopping centres and restaurants than on city centre retail, with
limitations on opening at weekends and around public holidays.
In 2020, our shopping centres were closed for 2.4 months on average.
Direct investment result: €167.6 million (€3.40 per depositary receipt)
The direct investment result for the eighteen months reporting period to 31 December 2020 was €167.6
million. For the calendar year 2020 the direct investment result was €109.1 million compared to €120.2 million
for the calendar year 2019. This lower result was mainly due to discounts granted to retailers related to the
COVID-19 pandemic and a higher provision for bad debts as a result of tenant insolvencies. Sales of
properties in France and Sweden also reduced the result. These negative impacts were partly offset by cost
savings, including reduced interest expenses, lower marketing, staff and travelling expenses as well as lower
local taxes.
Altogether we granted rent concessions related to the COVID-19 pandemic of €24.0 million, of which €16.1
million was included as a reduction of net property income in 2020 with the remaining amount to be amortized
in accordance with IFRS 16 over the remaining terms of the leases or until the first tenant break option. For
more details about rent concessions see page 6.
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 IFRS “profit after tax”, which must include unrealised capital gains and losses.

The direct investment result per depositary receipt for the eighteen months reporting period to 31 December
2020 was €3.40. The direct investment result per depositary receipt for the twelve months to 31 December
2020 declined to €2.21 from €2.43 for the twelve months to 30 December 2019 for the reasons set out above.
The EPRA earnings result for the eighteen months reporting period to 31 December 2020 was €161.0 million,
or €3.27 per depositary receipt. For the calendar year 2020 the EPRA earnings result was €102.0 million
compared to €120.2 million for the calendar year 2019.
IFRS profit: €115.4 million
The IFRS profit after taxation for the eighteen months reporting period to 31 December 2020 was €115.4
million (€2.34 per depositary receipt). For the calendar year 2020 the IFRS profit after taxation was €50.3
million (€1.02 per depositary receipt) compared to €115.0 (€2.32 per depositary receipt) for the calendar year
2019. This was largely due to a negative revaluation of the investment property portfolio for an amount of
€162.7 million (2019: €7.7 million positive) which was partly offset by a positive movement in deferred tax of
€100.7 million.
This positive movement is the result of a fiscal step up of the Company’s Italian entities’ assets, which implies
a realignment of the fiscal values of the tangible and intangible assets to their market values. The positive
difference with the previous deferred tax accrual is reflected in the deferred tax asset of €25 million. This step
up was made mostly at a 3% substitute tax rate (compared to the 24% or 27.9% standard Italian corporate
tax rates), resulting in a tax payable amount of €13.8 million to be paid in the financial year 2021 and €18.6
million to be paid in the next two years. It is expected to recover these amounts in a short period of time
through the tax savings the Company will incur in Italy thanks to the increased fiscally deductible depreciation.
Net property income: €252.9 million
Rental income, including joint ventures (based on proportional consolidation), for the eighteen months
reporting period to 31 December 2020, after deducting net service charges and direct and indirect property
expenses (branch overheads), was €252.9 million. For the calendar year 2020 the net property income (based
on proportional consolidation) was €164.6 million compared to €179.7 million for the calendar year 2019. The
decline was mainly due to discounts granted to retailers related to the COVID-19 pandemic and a higher
provision for bad debts as a result of tenant insolvencies. Furthermore, sales of properties in France and
Sweden also reduced the net property income. Property expenses increased as well due to an increase in
COVID-19 related bad debts (impairment due to rent concessions) and bad debt provisions for insolvent
tenants. This was partly offset by lower centre marketing expenses, staff and travelling expenses as well as
lower local taxes.
Adjusted net asset value: €42.84 per depositary receipt
The adjusted net asset value at 31 December 2020 was €42.84 per depositary receipt compared with €42.73
at 30 June 2020 and €43.89 at 31 December 2019. Adjusted net asset values do not consider contingent
capital gains tax liabilities nor do they consider the fair value of financial derivatives (interest rate swaps)
which are used to stabilise interest costs.
EPRA Net Tangible Assets (NTA) per depositary receipt at 31 December 2020 was €42.55 per depositary
receipt, compared to €41.84 at 31 December 2019, and €42.67 at 30 June 2019.
The IFRS net asset value at 31 December 2020, after allowing for contingent capital gains tax liabilities if all
properties were to be sold simultaneously and the fair value of the interest rate swap contracts, was €38.17 per depositary receipt compared with €35.41 at 30 June 2020 and €37.80 at 31 December 2019. The increase
in IFRS net asset value is mainly attributed to the fiscal step up in Italy.

Retail sales turnover
Retail sales and footfall suffered during both two lockdown periods when our shopping centres only remained
open for essential shopping, principally hypermarkets and pharmacies. The period in between the lockdowns
saw a rapid rebound in both footfall and sales supported by the summer staycations. During this period retail
sales reached pre-pandemic levels and while fashion, shoes and restaurants generally suffered, other sectors
recovered well including hypermarkets, health and beauty, household, consumer electronics and sport. Value
and discount retailers have also generally flourished during the whole period.
With a shopping centre portfolio heavily anchored on food outlets (31 units) and other everyday necessities
(combined 56% of GLA1
), the strong recovery in turnover was most pronounced in our suburban and
provincial shopping centres, where people were both living and working with easy access and free parking
being important factors. Public transport makes an important contribution to footfall at Passage du Havre (Paris) and Woluwe (Brussels), and these assets therefore took slightly longer to recover.
The Swedish portfolio performed more consistently throughout the whole of 2020 being fully open and trading
and their strong provision of daily goods, particularly hypermarkets and Systembolaget (the state liquor monopoly) helped keep footfall consistently high, dropping by only 10% year-on-year. Retail sales were also
strong, reaching comparable levels to 2019 between July and October.
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