Texaf S.A. — Interim / Quarterly Report 2021

Sep 3, 2021

INTERIM MANAGEMENT REPORT 3

rd September 2021

REGULATED INFORMATION

TEXAF LAUNCHES ITS LARGEST RESIDENTIAL PROJECT DESPITE A FALL IN ITS RECURRING OPERATING RESULT IN THE FIRST HALF OF THE YEAR

TEXAF's Board of Directors closed the company's consolidated accounts (in accordance with IFRS as adopted in the European Union) on 30 June 2021. These interim accounts have not been audited.

HIGHLIGHTS FOR THE FIRST HALF OF 2021

• The group has decided to implement its largest real estate project to date. Called Promenade des Artistes, it will include 94 apartments for an investment of EUR 18 M and will be delivered in the 2nd half of 2023. Once leased out, this project should generate approximately EUR 3 M/year in rental income, i.e. an increase in rental income of 15%.
• Results for the 1st half of the year were negatively impacted by a temporarily higher than usual vacancy rate, a consequence of restrictions related to the COVID-19 crisis, and by a production accident at the start of the year at CARRIGRES.
• Rents for the REAL ESTATE ACTIVITY and its recurring operating result fell by 2% to EUR 9,579 k and by 10% to EUR 4,369 k respectively.
• Despite a technical incident at the start of the year, sales for the QUARRYING ACTIVITY (CARRIGRES) rose by 8% to EUR 1,280 k, but the recurring operating result fell to EUR 68 k (vs. EUR 244 k over the same period in 2020).
• The DIGITAL ACTIVITY division, called SILIKIN VILLAGE, is ramping up and has launched an expansion into offices for players in the digital economy.
• These developments combined to generate a 15% decrease in the recurring operating result to EUR 3,869 k.
• The net result (Group's share) came to EUR 3,109 k (compared with EUR 3,154 k in the first half of 2020), i.e. a fall of 1%.
• An optional dividend was offered to each shareholder. Shareholders opted for reinvesting 65% of their net dividend in a capital increase.
• UTEXAFRICA, a Congolese subsidiary, obtained an investment loan from a Belgian bank with external political risk coverage.

In thousands of EUR	2017	2018	2019	2020	2021
Half-year recurring operating result	3,597	3,952	4,193	4,540	3,869
As% of turnover	36%	40%	37%	39%	33%

REAL ESTATE ACTIVITIES

REAL ESTATE (EUR 000)	30/06/2017	30/06/2018	30/06/2019	30/06/2020	30/06/2021
Revenue from ordinary activities	8,166	8,465	9,501	9,797	9,579
Recurring operating result	4,525	4,375	4,728	4,865	4,369
Operating result	4,525	5,754	4,728	4,865	4,324
Result before deferred taxes	3,229	3,946	3,518	3,607	3,219
Net result (Group's share)	3,070	8,601	4,327	3,047	3,112

Contribution of the real estate activity to the consolidated result:

The group is developing property leasing activities in Kinshasa: residential housing, industrial buildings and offices.

• Rents fell by 2% to EUR 9,579 k. This decrease was due to the following factors:
  • o Following the fire on 8 August 2020, buildings that generated EUR 325 k in rent per half-year could not be rented anymore. Half of them, offices attached to the warehouse that was completely destroyed, have been rebuilt and will be available again in the 2nd half of 2021.
  • o Petit-Pont, the new office building (3,000 m² net), was gradually leased over the course of the half-year. It will be 100% occupied from 15 September 2021. The three new apartment buildings in the Bois Nobles Phase II project (33 apartments) were successively delivered in May, June and August. Together, these two projects generated EUR 300 k in rents in the 1st half of 2021.
  • o Travel restrictions and general uncertainty linked to the COVID-19 crisis have slowed the arrival of new residential tenants and the occupancy rate, which averaged 98.2% over the first six months of 2020, fell to 92.8% in the 1st half of 2021. Nevertheless, this rate has gradually recovered since the beginning of the year and, with the new housing units, the total number of tenants continues to increase. To date, 320 out of 333 housing units have been rented.
• The recurring operating result declined by 10% to EUR 4,369 k. Maintenance and upkeep costs, which could not be incurred during the 2020 lockdown, were deferred until 2021. In addition, the legal costs of protecting assets have been particularly high against a backdrop of a deterioration in the business environment and the safety of property, which has already been mentioned in previous press releases.
• At EUR 4,324 k, the operating result was slightly lower than the recurring operating result due to additional costs related to the August 2020 fire.
• The result before deferred taxes was EUR 3,219 k (-11%).
• The net result amounted to EUR 3,112 k vs EUR 3,047 k (+2%), in the absence of any significant change in deferred taxes.

DIGITAL ACTIVITY

Contribution of digital activity

DIGITAL (EUR 000)	30/06/2017	30/06/2018	30/06/2019	30/06/2020	30/06/2021
Revenue from ordinary activities				0	20
Recurring operating result				-97	-84
Operating result				-97	-84
Result before deferred taxes				-97	-84
Net result (Group's share)				-97	-84

• Digital activity consists of a EUR 1 M stake in the Partech Africa fund and the operation of the SILIKIN VILLAGE in Kinshasa.
• SILIKIN VILLAGE is developing the digital economy hub in Kinshasa which will bring together on a single site training, incubation and hosting of start-ups as well as international companies looking to develop in the DRC. It is centred around the SILIKIN CAMPUS, opened in January 2020, which is a venue for teaching, seminars and conferences focused on digital technology and entrepreneurship. It is home, among other things, to the KINSHASA DIGITAL ACADEMY, which offers intensive training in web and mobile development to 40 young Congolese per session.
• In the 1st half of the year, a partnership, supported by the King Baudouin Foundation, with OVATION, an incubator resource centre, helped to train coaches and facilitators for Kinshasa incubators. In addition, SILIKIN VILLAGE is working on digitisation projects in the fields of health and education.
• The popularity of the concept has led to the renovation of a first phase of 1,000 m² of office and meeting spaces to accommodate start-ups and small organisations that want to be part of SILIKIN VILLAGE. These spaces will be available in the second half of 2021.

QUARRYING ACTIVITY

CARRIGRES (EUR 000)	30/06/2017	30/06/2018	30/06/2019	30/06/2020	30/06/2021
Revenue from ordinary activities	960	826	1,003	1,186	1,280
Recurring operating result	-458	45	-109	244	68
Operating result	-3,875	45	-109	244	68
Result before deferred taxes	-3,712	202	36	362	164
Net result (Group's share)	-2,538	-124	67	373	218

Contribution of the quarrying activity to the consolidated result:

• CARRIGRES operates a crushed sandstone quarry located 10 km from the centre of Kinshasa.
• There was a big difference in activity between Q1 and Q2. Due to the difficulty in obtaining a spare part, business was almost at a standstill in Q1 with turnover of EUR 430 K while that for Q2 recovered to EUR 850 k. In total, it amounted to EUR 1,280 k over the half-year (+8%) and 117,000 tonnes (+17%). Due to the most sought-after products not being produced in the 1st quarter, the product mix and the average price deteriorated.
• The operating result fell to EUR 68 k (vs EUR 244 k in the 1st half of 2020), due to destocking, which led to a negative change in inventories being taken into account. This change in inventories was a non-cash item.

Given the significant cash position of CARRIGRES, the net result, which includes financial income, amounted to EUR 218 k (vs EUR 373 k).

HOLDING COMPANY

Contribution of the holding activity to the consolidated result:

HOLDING COMPANY (EUR 000)	30/06/2017	30/06/2018	30/06/2019	30/06/2020	30/06/2021
Revenue from ordinary activities	0	0	0	0	0
Recurring operating result	-470	-468	-426	-472	-484
Operating result	-470	-468	-357	-472	-484
Result before deferred taxes	-308	-186	-129	-249	-220
Net result (Group's share)	-206	-1,036	-240	-169	-137

• Expenses totalled EUR 484 k, up slightly compared with last year.
• The net result was EUR -137 k (compared with EUR -169 k). It includes income from interest.

Bois Nobles courtyard

CONSOLIDATED RESULTS FOR TEXAF GROUP (in EUR thousands)

(not audited)

EUR 000	30/06/2019	30/06/2020	30/06/2021
Revenue from ordinary activities	10,504	10,959	10,854
Other recurring operating income	758	646	932
Recurring operating expenses	-5,422	-5,325	-6,153
Recurring EBITDA (1)	5,839	6,280	5,633
y-1	10%	8%	-10%
Amortisation and depreciation	-1,646	-1,740	-1,765
Recurring operating result (EBIT) (1)	4,193	4,540	3,869
y-1	6%	8%	-15%
Non-recurring operating items	68	0	-45
Operating result (EBIT) (1)	4,261	4,540	3,823
y-1	-20%	7%	-16%
Financial income and expenses	-196	-25	-20
Result before tax (for continuing operations)	4,065	4,515	3,803
y-1	-21%	11%	-16%
Current taxes	-640	-892	-724
Result before deferred taxes	3,425	3,622	3,079
Deferred taxes	738	-462	37
Net result after tax	4,163	3,160	3,115
Consolidated net result (Group's share)	4,154	3,154	3,109
y-1	-44%	-24%	-1%
Per share
Recurring operating result (in EUR)	1.183	1.260	1.055
Operating result in EUR	1.202	1.260	1.043
Consolidated net result (Group's share) in EUR	1.172	0.875	0.848
Number of shares in circulation	3,543,700	3,603,539	3,666,556

(1) EBITDA: EBIT to which depreciation is added but not variations in provisions and write-downs and reversals of write-downs on current assets. EBIT: Net result to which are added current and deferred taxes on the result and financial expenses and income, including changes in exchange rates. Non-recurring items: income or expenses that are not expected to be repeated in each accounting year, such as gain or loss on disposals of non-current assets, write-down or reversal of write-down on non-current assets, costs relating to major restructuring, purchase or disposal of a business (e.g. redundancy or plant closure costs, commissions paid to third parties to acquire or dispose of an activity, etc.).

STATEMENT OF COMPREHENSIVE CONSOLIDATED INCOME (in EUR thousands)

(not audited)

	30/06/2019	30/06/2020	30/06/2021
Result for the financial year	4,163	3,160	3,115
Spread variations in foreign currencies	-	6
Actuarial income and expenses related to post-employment obligations (net of taxes)	-2	-76	34
Variations (after tax) in revaluation reserves	-28	-	-
Comprehensive income	4,133	3,090	3,149
Allocated to:
TEXAF shareholders	4,124	3,084	3,142
To minority interests	9	6	7

CONSOLIDATED BALANCE SHEET (in EUR thousands)

(not audited)

EUR 000	30/06/2019	30/06/2020	30/06/2021
NON-CURRENT ASSETS	112,341	116,459	117,579
Property, plant and equipment	9,974	9,588	8,505
Right of use	159	109	59
Investment properties	102,027	106,377	108,320
Intangibles	13	5	13
Other financial assets	168	380	681
CURRENT ASSETS	13,128	14,662	14,848
Inventories	4,913	4,951	4,458
Receivables	1,015	1,230	1,174
Tax assets	434	689	676
Cash and cash equivalents	6,567	7,585	8,352
Other current assets	200	208	187
TOTAL ASSETS	125,469	131,120	132,427
EQUITY	90,904	98,395	100,452
Capital	21,508	23,398	25,497
Group's reserves	69,043	74,617	74,565
Minority interests	353	380	390
NON-CURRENT LIABILITIES	21,410	19,585	20,574
Deferred tax liabilities	13,250	13,234	12,784
Other non-current liabilities	8,160	6,351	7,789
CURRENT LIABILITIES	13,155	13,140	11,401
Current liabilities	13,155	13,140	11,401
TOTAL LIABILITIES	125,469	131,120	132,427

CONDENSED CASH FLOW STATEMENT (in EUR thousands)

(not audited)

EUR 000	30/06/2019	30/06/2020	30/06/2021
Cash and cash equivalents at the beginning of the year	5,564	8,767	6,979
Operating cash flow after tax	5,076	5,350	4,970
Changes in net working capital	2,336	-54	1,077
Cash flows from operating activities	7,412	5,296	6,047
Investments	-1,786	-2,948	-3,408
Divestments	279	2	26
Cash flows from investment activities	-1,507	-2,946	-3,382
Increase in capital		1,890	2,099
Dividends	-3,442	-4,101	-4,633
Change in debt	-1,460	-1,321	1,242
Cash flows from financing activities	-4,902	-3,532	-1,292
Net increase (decrease) of cash and cash equivalents	1,003	-1,182	1,373
Cash and cash equivalents at year's end	6,567	7,585	8,352
of which Texaf s.a.	997	1,563	858

Comments on consolidated accounts

The full half-yearly report drawn up in accordance with IAS 34 is available at www.texaf.be

• Group turnover fell by 1%, mainly due to the increase in rental vacancies. Recurring operating expenses increased by EUR 828 k, nearly half of which stemmed from a non-cash change in inventories at CARRIGRES, and the rest mainly from real estate maintenance and legal costs for asset protection. Consequently, the recurring operating result fell by 15% to EUR 3,869 k. Non-recurring items were the balance of costs related to the August 2020 fire.
• Net financial expenses remained low at EUR 20 k (vs EUR 25 k). Consequently, the operating result before tax fell by 16% to EUR 4,803 k.
• The tax charge for the 1st half of 2020 included a negative re-valuation of deferred taxes of EUR -462 k. However, in 2021, the re-valuation was slightly positive.
• In total, the net result (Group's share) was EUR 3,109 k, compared with EUR 3,154 k one year before (-1%).
• TEXAF gave its shareholders the option of taking their 2020 dividend in cash or of contributing it as a capital increase ("optional dividend"). 65% of the net dividends were contributed in the amount of EUR 2,099 k, bringing the capital to EUR 25,497 k and the number of shares to 3,666,566 (+1.7%).
• UTEXAFRICA, a Congolese subsidiary of TEXAF, has finalised a loan of EUR 2 M over 5 years with BELFIUS BANK to finance its investments. This loan, which is covered by political risks insurance issued by CREDENDO, is enabling UTEXAFRICA to significantly reduce its borrowing costs. TEXAF is particularly pleased to have secured a new source of financing for its future projects.

EVENTS TAKING PLACE AFTER 30 JUNE 2021 AND OUTLOOK FOR 2021

The Board of Directors is of the view that the increase in the rental vacancy rate that impacted the accounts for the 1st half of the year is due to the consequences of the COVID-19 crisis, is temporary and is gradually being resolved. The increase in the total number of tenants, particularly residential, during this period has convinced it that the concept of a secure site in a green setting with a wide range of services is particularly suited to the high-end demand in Kinshasa. It has therefore just approved implementation of the largest project that TEXAF has ever carried out. This project, called Promenade des Artistes, will include 94 apartments of 1-4 bedrooms in a pedestrian setting with underground garages. Its budget has been fixed at EUR 18 M (excluding land) and it has rental potential of EUR 3 M. It will be delivered in the 2nd half of 2023.

Promenade des Artistes project

CARRIGRES' activity in July and August offers hope that the result for the second half-year will be better than that for the first, which had been impacted by production problems at the beginning of the year. The result for the real estate activity should also be higher given the full leasing of Petit-Pont and delivery of the last Bois Nobles II building.

FINANCIAL CALENDAR

• Friday 12 November 2021: Quarterly press release
• Thursday 25 February 2022: Publication of 2021 annual results
• Friday 8 April 2022: Publication of 2021 annual report
• Friday 10 May 2022: General Meeting

TEXAF, established in 1925, is the only listed company with all its activities in the Democratic Republic of Congo. Currently, these are concentrated on property, quarries and the digital domain. This listing on the stock exchange and the resulting obligations in terms of good governance and transparency constitute a major asset of the Group for its development and for the promotion of the formal sector in the Democratic Republic of Congo.

Contact: Jean-Philippe Waterschoot, CEO: +32 476 25 26 26 - +243 81 891 0525 Christophe Evers, CFO: +32 495 24 32 60 Philippe Croonenberghs, Chairman: +32 495 24 32 64