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Retail Estates sa
Earnings Release • Nov 21, 2022
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Earnings Release
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PRESS RELEASE
Periodic statement – regulated information Ternat, 21 November 2022
ANNOUNCEMENT OF HALF-YEARLY RESULTS FOR THE 2022-2023 FINANCIAL YEAR (closed on 30.09.2022)
EPRA EARNINGS1 FOR THE FIRST QUARTER OF FINANCIAL YEAR 2022- 2023 AMOUNTS TO € 39.06 MILLION (€ 2.84 PER SHARE)
THE FAIR VALUE OF THE REAL ESTATE PORTFOLIO AMOUNTED TO € 1,817.16 MILLION ON 30 SEPTEMBER 2022, WHICH REPRESENTS AN INCREASE BY € 57.28 MILLION (3.25%) COMPARED TO THE FAIR VALUE ON 31 MARCH 2022 (€ 1,759.88 MILLION).
STABLE OCCUPANCY RATE (97.37%)
RENTAL INCOME FULLY INDEXED AND PAID
INTEREST RATE HEDGING INSTRUMENTS CONTROL INTEREST COSTS
HALF-YEAR REPORT 2022-2023 AVAILABLE
A. HALF-YEAR RESULTS
1. ACTIVITY REPORT FOR THE FIRST HALF-YEAR 2022-2023 ENDING ON 30 SEPTEMBER 2022
1.1 Rental income and occupancy rate2
The net rental income amounted to € 60.62 million in the first six months of the financial year, an increase by 5.64% with respect to the comparable six months in the 2021-2022 financial year. The net rental income in that period amounted to € 57.38 million. The occupancy rate on 30 September 2022 was 97.37%, compared to 97.83% on 31 March 2022.
1.2 Fair value3 of the real estate portfolio
The fair value of the real estate portfolio (including non-current assets under construction) on 30 September 2022 amounted to € 1,817.16 million, which represents an increase by € 57.28 million (3.25%) compared to the fair value on 31 March 2022 (€ 1,759.88 million). This effect is the result of the investments and divestments during the first half year (in particular the acquisition of a 90% interest in the retail park Tref Center in Venlo (see below) for an amount of € 35.71 million) and the variations in the fair value of investment properties.
The variation in the fair value of the real estate portfolio amounts to € 22.57 million and can mainly be explained by an increase in the value of the real estate portfolio amounting to € 27.67 million.
Based on the contractually owed rent, rent return (versus investment value) on the portfolio as determined by the real estate experts amounts to 6.77%.
As of 30 September 2022, the real estate portfolio consists of 1,002 properties with a lettable surface of 1,186,521 m².
1.3 Investments4 – retail parks
On 4 July 2022, Retail Estates invested € 35.71 million in the acquisition of a 90% interest in retail park Tref Center in Venlo (the Netherlands - province of Limburg). The investment took place in cooperation with the Dutch real estate investor Westpoort Vastgoed, which acquired a 10% interest in the same transaction. The share of Retail Estates in the transaction amounts to € 35.71 million and generates a rental income of € 2.52 million, representing an initial yield of approximately 7%. According to real estate expert Cushman & Wakefield, the investment value of Retail Estates' share is € 35.5 million and the fair value amounts to € 32.83 million.
The retail park Tref Center has been developed around Tref Box, a hypermarket that is not included in the transaction. It is a combination of food and non-food retailers that is seldom seen in the Netherlands but is quite common in the United Kingdom. The park comprises 19 retail properties with a total surface area of 31,295 m2 and a petrol station. The main tenants include Lidl, Pets Place, Basic Fit, KFC, Kwantum, Leen Bakker, Jysk, Bever Sport (AS Adventure) and Beter Bed. The retail park has been widely known in the Venlo region for some 50 years and has a customer zone extending from Venlo (100,000 inhabitants) to across the German border. Venlo is the second largest city of the province of Limburg, after Maastricht. Retail Estates already invested in this region in the past, in particular in in Maastricht and in Heerlen.
2 The occupancy rate is calculated as the area actually let in relation to the lettable area, expressed in m².
3 Fair value: investment value as determined by an independent real estate expert, with hypothetical transfer taxed deducted. The fair value is the book value under the IFRS (see also note 21 of the 2021-2022 annual report).
4 The purchase and sales values of the investments and divestments are in line with the fair value estimated by the real estate experts.
1.4 Non-current assets under construction
On 30 September 2022 the total amount of the non-current assets under construction is € 16.92 million. We distinguish five types of non-current assets under construction: speculative land positions (the socalled "land bank", i.e. residual lands of existing portfolios that are intended for possible development or will be sold at a later stage if no redevelopment is possible); prospective projects, projects under predevelopment, projects under development and projects specifically linked to sustainability.
On 30 September 2022, the speculative land positions represented € 1.57 million, the prospective projects represented € 9.21 million, the projects under predevelopment represented € 3.63 million, the projects under development represented € 2.31 million and the projects specifically linked to sustainability represented € 0.2 million.
A. Non-current assets under construction – prospection - overview of the main prospective projects
In 2014, Retail Estates acquired the retail park at Wetteren with 14 retail units and a gross retail area of 10,423 m². The retail park, which opened in 2008, is known as Frunpark Wetteren. It is very successful and attracts consumers from far and wide. In 2016, Retail Estates acquired, by way of speculation, an adjacent plot of land with two SME properties (investment of approx. € 9 million), which are currently let. According to the Spatial Implementation Plan, a permit can in principle be obtained for retail properties destined for large-scale retail as well as for SME properties.
The permit is expected in the course of 2023, the completion of the mixed-use project with retail units and SME properties is expected in the course of 2024. The costs of the procedures already completed and the preparation of the request for an environmental permit currently amount to € 0.44 million. The investment in this extension is estimated at € 3.6 million.
B. Non-current assets under construction – predevelopment – overview of the main own developments
B.1. Belgium
- In Houthalen, a permit was obtained and an agreement was entered into with a building promotor for the demolition and redevelopment of a site into flats with a retail property on the ground floor, enabling Retail Estates to still have the same retail area. The expected investment amounts to € 0.70 million.
B.2. The Netherlands
- For the retail park in Heerlen consultations with the tenants are ongoing with regard to the permit that was obtained for the modernisation of the entire façade. The additional investment is expected to amount to approximately € 5 million. Completion is expected at the latest one year after the consent of the tenants has been obtained.
C. Non-current assets under construction – development – overview of the main own developments
- In Halle (Belgium) a new retail area will be constructed. The investment is estimated at € 1.75 million. The permits required for this development have been obtained. This project requires the construction of a number of apartments. As this is a matter outside the scope of Retail Estates, a cooperation with a property developer was negotiated, who will develop this part of the project. Completion is expected by mid-2023.
D. Completion of non-current assets under construction
Within the context of the ESG strategy, Retail Estates invests in the installation of photovoltaic panels on the roofs of several retail parks, both in Belgium and in the Netherlands. Over the past six months, photovoltaic panels were installed in Heerlen and Rosendaal with a total capacity of 1,604 kWp, which are expected to generate more than 1,338 MWh of green power each year. The investment value amounts to € 1.12 million. Retail Estates will charge an annual fee.
1.5 Divestments
In the past half year 3 retail properties were sold. The net sales revenue amounted to € 4 million. The fair value of these properties was € 3.72 million. The rental income of these properties on the date of the sale amounted to € 0.6 million. These sales generated € 0.29 million in net added value.
2. INVESTMENTS WITH A VIEW TO FUTURE GROWTH
2.1 New IT platform
Retail Estates invested in a new IT platform for its administrative back-office. On 1 April 2022 the migration to a SAP S/4 Hana platform was completed successfully, in cooperation with Deloitte Consulting.
2.2 Investment opportunities in another EU Member State
Market research was conducted with a view to identifying investment opportunities in retail parks in another EU Member State still to be identified. Within the scope of this research and support for a possible first investment, Mr Koen Nevens will support the management team. Koen Nevens has distinct experience in retail property investments and has built an international network in his 27-year career with Cushman & Wakefield. Since the start of this career, he has shared a distinct interest in out-of-town retail real estate with the management of Retail Estates.
2.3 ESG investments, target 10 million (2022-2023 financial year)
Over the past year, € 1.2 million was invested on photovoltaic panels in the clusters at Heerlen (NL) and Roosendaal (NL). In addition, a total of € 0.46 million was spent on sustainable maintenance and € 2.90 million on various other sustainability-related investments. The company's purpose is to invest € 10 million in ESG initiatives this year.
3. ANALYSIS OF THE RESULTS
Half-year results on 30 September 2022: EPRA earnings of the Group5 increase by 4.36% compared to 30 September 2021- fair value of the real estate portfolio increases to € 1,817.16 million.
On 30 September 2022 the EPRA result (i.e. the profit less the result on portfolio and the variations in the fair value of financial assets and liabilities) amounts to € 39.06 million, an increase by 4.36% compared to the same period last year.
The net rental income increased from € 57.38 million to € 60.62 million. This is mainly attributable to the investment in the Tref Center retail park in Venlo. Compared to 30 September 2021, the real estate portfolio grew by € 92 million. Compared to 31 March 2022, the portfolio grew by € 57.28 million.
After deduction of property costs, this results in an operating property result of € 54.02 million compared to € 51.66 million last year.
The property costs amount to € 5.62 million compared to € 4.69 million in the previous year, an increase by € 0.93 million which can mainly be explained by the increase in management costs and technical costs by € 0.40 million and € 0.25 million respectively. The increase in the technical costs can be explained by the expenditure within the scope of the sustainability strategy (making buildings more energy efficient). The increase in the management costs can partially be explained by the investment in a new integrated technology system (S/4HANNA), resulting in additional IT costs. The corporate operating costs amount to € 3.79 million, an increase by € 0.69 million compared to last year. After deduction of the corporate operating costs, Retail Estates achieves an operating result before the result on portfolio of € 50.23 million. The operating margin is 82.86%.
The result from the disposals of investment properties is € 0.29 million on total sales of € 4 million. We refer to the paragraph "Divestments" of the half year report.
The variations in the fair value of investment properties amount to € 22.57 million and are mainly explained by an increase in the value of the real estate portfolio by € 27.67 million and by the depreciation of the transaction costs for the determination of the fair value of the investment properties (€ -5.10 million). The "other" result on portfolio amounts to € -0.17 million.
The financial result (excluding variations in the fair value of financial assets and liabilities) amounts to € -9.34 million. The net interest costs amount to € -9.40 million, a decrease by € 0.06 million compared to last year. The average interest rate has remained stable at 2.02% compared to 2.02% on 30 September 2021. The increase of the financial result, including the variations in the fair value of financial assets and liabilities from € -58.8 million to € 34.91 million, is also the result of the change in the fair value of the swaps that are not defined as cash flow (variations in the fair value of financial assets and liabilities). However, this result is an unrealised and non-cash item.
On 30 September 2022 the EPRA earnings amount to € 39.06 million compared to € 37.43 million in the comparable period in the 2021-2022 financial year. This represents an EPRA profit of € 2.84 per share for the first half of the year (based on the weighted average number of shares), compared to € 2.95 on 30 September 2021 (based on the weighted average number of shares).
The net result (Group share) for the first half of the year amounts to € 106.01 million, consisting of the EPRA earnings of € 39.06 million, the result on portfolio of € 22.70 million and variations in the fair value of financial assets and liabilities of € 44.26 million.
The fair value of the real estate portfolio, including non-current assets under construction, amounts to € 1,817.16 million on 30 September 2022, compared to € 1,759.88 million on 31 March 2022. The EPRA net tangible asset value (NTA) per share was € 67.97 on 30 September 2022. On 31 March 2022, the EPRA NTA was € 68.46.
The debt ratio on 30 September 2022 was 47.54% compared to 49.15% on 31 March 2022.
4. OUTLOOK
Macroeconomic uncertainties do not allow predictions about the evolution of the fair value of real estate nor about the variations in the fair value of interest rate hedging instruments. The evolution of the intrinsic value of the shares, which is sensitive to this, is therefore uncertain.
The high inflation leads to a general increase in the rental prices. The contractual indexation is applied in full. Upon the three-yearly (Belgium) or five-yearly (Netherlands) expiry date of the current tenancy agreements, an assessment will have to be made in consultation with the tenants concerned in order to verify whether the rental prices will still be in line with the market after the indexation and/or whether they risk to significantly affect the tenant's profitability.
The interest hedging agreements concluded make it possible to pass on the increase of the interest charges for a period of approximately 4 years for the current credit portfolio. It's not possible to predict the future evolution due to the current volatility on the financial markets.
The dividend forecast of € 4.70 gross per share (€ 3.29 net per share) is maintained. Compared to the 2021-2022 financial year, this represents a 2.17% dividend increase. This expectation was made under the hypothesis of stable consumer spending and a positive evolution of rents.
5. FORWARD-LOOKING STATEMENTS
This half-year report contains a number of forward-looking statements. Such statements are subject to risks and uncertainties which may lead to actual results being materially different from the results which might be assumed in this interim statement on the basis of such forward-looking statements. Major factors that may influence these results include changes in the economic situation, commercial, taxrelated and environmental factors.
6. SUBSEQUENT EVENTS
No material events have occurred after the end of the half year.
MISCELLANEOUS
1. FINANCIAL CALENDAR
| Announcement of the results of the third quarter of the 2022-2023 financial year | 20 February 2023 |
|---|---|
| Announcement of the annual results of the 2022-2023 financial year | 29 May 2023 |
| General meeting | 24 July 2023 |
| Ex-coupon date dividend | 28 July 2023 |
| Dividend made available for payment | 1 August 2023 |
2. HALF-YEAR REPORT 2022-2023 AVAILABLE
The half-year report 2022-2023 is available via the website of Retail Estates nv (www.retailestates.com).
ATTACHMENTS
1. CONDENSED CONSOLIDATED INCOME STATEMENT
| INCOME STATEMENT (in € 000) | 30.09.22 | 30.09.21 |
|---|---|---|
| Rental income | 60 831 | 57 333 |
| Rental related expenses | -209 | 52 |
| Net rental income | 60 622 | 57 385 |
| Recovery of property expenses | - | - |
| Recovery of rental charges and taxes normally payable by tenants on let properties |
6 215 | 5 960 |
| Rental charges and taxes normally payable by tenants on let properties |
-7 194 | -6 924 |
| Other rental related income and expenses | 4 | -67 |
| Property result | 59 646 | 56 354 |
| Technical costs | -2 381 | -2 136 |
| Commercial costs | -534 | -390 |
| Charges and taxes on unlet properties | -388 | -247 |
| Property management costs | -2 315 | -1 919 |
| Other property costs | -4 | -1 |
| Property costs | -5 622 | -4 694 |
| Operating property result | 54 024 | 51 660 |
| Operating corporate costs | -3 792 | -3 103 |
| Operating result before result on portfolio | 50 232 | 48 558 |
| Result on disposals of investment properties | 294 | 473 |
| Result on sales of other non-financial assets | - | - |
| Changes in fair value of investment properties | 22 569 | 3 391 |
| Other result on portfolio | -166 | -699 |
| Operating result | 72 929 | 51 723 |
| Financial income | 83 | 72 |
| Net interest charges | -9 399 | -9 459 |
| Changes in fair value of financial assets and liabilities | 44 256 | 3 626 |
| Other financial charges | -29 | -39 |
| INCOME STATEMENT (in € 000) | 30.09.22 | 30.09.21 |
|---|---|---|
| Financial result | 34 911 | -5 800 |
| Share in the result of associated companies and joint ventures | -8 | - |
| Result before taxes | 107 832 | 45 922 |
| Taxes | -1 819 | -1 705 |
| Net result | 106 013 | 44 218 |
| Attributable to: | ||
| Shareholders of the Group | 106 013 | 44 218 |
| Minority interests | ||
| Note: | ||
| EPRA earnings (share Group)6 | 39 060 | 37 426 |
| Result on portfolio | 22 697 | 3 165 |
| Changes in fair value of financial assets and liabilities | 44 256 | 3 626 |
| RESULT PER SHARE | 30.09.22 | 30.09.21 |
| Number of ordinary shares in circulation | 14 085 827 | 12 665 763 |
| Weighted average number of shares | 13 733 624 | 12 665 763 |
| Net profit per ordinary share (in €)7 | 7.72 | 3.49 |
Diluted net profit per share (in €) 7.72 3.49
2. CONDENSED CONSOLIDATED BALANCE SHEET
| ASSETS (in € 000) | Notes | 30.09.22 | 31.03.22 |
|---|---|---|---|
| Non-current assets | 1 897 011 | 1 792 078 | |
| Goodwill | |||
| Intangible non-current assets | 5 181 | 4 030 | |
| Investment properties8 | 2 | 1 817 160 | 1 759 879 |
| Other tangible non-current assets | 6 233 | 6 440 | |
| Financial non-current assets | 63 900 | 17 860 | |
| Financial instruments | 57 169 | 11 120 | |
| Participations accounted for using the equity method | 1 732 | 1 740 | |
| Receivables towards participations accounted for using the equity method |
5 000 | 5 000 | |
| Finance lease receivables | 1 030 | 1 030 | |
| Trade receivables and other non-current assets | 3 507 | 2 839 | |
| Deferred taxes | 3 504 | 1 402 | |
| Other | 3 | 1 437 | |
| Current assets | 32 378 | 20 151 | |
| Assets or groups of assets held for sale | 2 | 12 351 | 11 807 |
| Trade receivables | 12 272 | 2 067 | |
| Tax receivables and other current assets | 2 818 | 2 132 | |
| Cash and cash equivalents | 2 121 | 1 483 | |
| Deferred charges and accrued income | 2 815 | 2 663 | |
| TOTAL ASSETS | 1 929 389 | 1 812 228 |
| SHAREHOLDERS' EQUITY AND LIABILITIES (in € 000) | Notes | 30.09.22 | 31.03.22 |
|---|---|---|---|
| Shareholders' equity | 1.022.157 | 920.980 | |
| Shareholders' equity attributable to the | |||
| shareholders of the parent company | 1.022.157 | 920.980 | |
| Capital | 308.515 | 289.179 | |
| Issue premiums | 374.617 | 339.798 | |
| Reserves | 233.013 | 160.166 | |
| Net result of the financial year | 106.013 | 131.837 | |
| Minority interests |
| SHAREHOLDERS' EQUITY AND LIABILITIES (in € 000) | Notes | 30.09.22 | 31.03.22 |
|---|---|---|---|
| Liabilities | 907.232 | 891.248 | |
| Non-current liabilities | 822.948 | 764.789 | |
| Provisions | - | - | |
| Non-current financial debts | 3/5 | 822.026 | 763.982 |
| Credit institutions | 642.670 | 584.594 | |
| Long-term financial lease | 3/5 | 4.041 | 4.159 |
| Other | - | - | |
| Bonds | 3/5 | 175.315 | 175.229 |
| Other non-current financial liabilities | 5 | - | - |
| Deferred taxes | 922 | 807 | |
| Current liabilities | 84.284 | 126.459 | |
| Current financial debts | 3/5 | 43.599 | 101.730 |
| Credit institutions | 43.599 | 101.730 | |
| Short-term financial lease | - | - | |
| Other | - | - | |
| Bonds | 3/5 | - | - |
| Trade debts and other current debts | 21.204 | 17.787 | |
| Exit tax | 391 | 391 | |
| Other | 20.813 | 17.396 | |
| Other current liabilities | 1.534 | 1.771 | |
| Accrued charges and deferred income | 17.948 | 5.171 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 1.929.389 | 1.812.228 | |
| DEBT RATIO | 30.09.22 | 31.03.22 | |
| Debt ratio9 | 4 | 47,54% | 49,15% |
KEY PERFORMANCE INDICATORS
| EPRA result per share (in €) | 30.09.22 | 30.09.21 |
|---|---|---|
| EPRA earnings (group share) | 39.059.846 | 37.426.355 |
| Number of ordinary shares in circulation | 14.085.827 | 12.665.763 |
| Weighted average number of shares | 13.733.624 | 12.665.763 |
| EPRA result per share (in €)10 | 2,84 | 2,95 |
| EPRA result per share (in €) - diluted | 2,84 | 2,95 |
| NET ASSET VALUE PER SHARE (in €) – GROUP SHARE | 30.09.22 | 30.09.21 |
| Net asset value per share IFRS11 | 72,57 | 69,63 |
| EPRA NTA per share12 | 67,97 | 68,46 |
| Net asset value per share (investment value) excluding dividend | ||
| excluding the fair value of authorised hedging instruments | 71,69 | 69,67 |
10 The EPRA earnings per share are calculated from the weighted average number of shares, counted from the time of issue (which does not necessarily coincide with the first dividend entitlement date). Calculated on the basis of the number of dividend-entitled shares, the EPRA earnings per share amount to € 2.84 per share on 30.09.2022 compared to € 2.95 per share on 30.09.2021.
11 The net asset value per share IFRS (fair value) is calculated as follows: shareholders' equity (attributable to the shareholders of the parent company) divided by the number of shares.
12 ERPA NAV is calculated as follows: shareholders' equity (excluding the fair value of the authorised hedging instruments, deferred taxes and intangible non-current assets) divided by the number of shares.
ABOUT RETAIL ESTATES NV
The Belgian public real estate investment trust Retail Estates nv is a niche player specialised in making in out-of-town retail properties located on the periphery of residential areas or along main access roads to urban centres available to users. Real Estates NV acquires these real properties from third parties or builds and commercialises retail buildings for its own account. The buildings have useful areas ranging between 500m² and 3,000m². A typical retail building has an average area of 1,000 m².
As of 30 September 2022, Retail Estates nv has 1,002 premises in its portfolio with a total retail area of 1,186,521 m², spread over Belgium and the Netherlands. The occupancy rate of the entire portfolio was 97.37% on 30 September 2022, compared to 97.64% on 30 June 2022.
Retail Estates NV is listed on Euronext Brussels and Euronext Amsterdam and is registered as a public regulated real estate company.
FORWARD-LOOKING STATEMENTS
This press release contains a number of forward-looking statements. Such statements are subject to risks and uncertainties which may lead to actual results being materially different from the results which might be assumed in this press release on the basis of such forward-looking statements. Major factors that may influence these results include changes in the economic situation, commercial, tax-related and environmental factors.
Ternat, 21 November 2022
Jan De Nys, CEO of Retail Estates nv
For more information, please contact:
Retail Estates nv, Jan De Nys – CEO, T: +32 2/568 10 20 – F:+32 475/27 84 12 Retail Estates nv, Kara De Smet – CFO, tel. +32 2/568 10 20
RETAIL ESTATES nv Openbare GVV naar Belgisch recht Industrielaan 6 B-1740 Ternat • RPR Brussel BTW BE 0434 797 847 • T : +32 2 568 10 20 [email protected] • www.retailestates.com
'IN RETAIL WE TRUST'
