VGP NV 31. 08. 2015
- Profit for the period of € 32.2 million (compared to 30.0 million on a like for like basis[1] as at 30 June 2014)
- 46.5% increase of committed annualised rent income to € 33.1 million (+ € 10.5 million compared to 31 December 2014)
- 71.6% growth in gross rental income (+ € 2.9 million) to € 7.0 million
- The signed committed lease agreements at year end represent a total of 614,477 m² of lettable area with the weighted average term of the committed leases standing at 7.9 years at the end of June 2015 (7.8 years as at 31 December 2014)
- 8 projects delivered during the first half of 2015 representing 98,567 m² of lettable area
- 19 projects under construction representing 322,014 m² of future lettable area
- 954,000 m² of new development land plots committed to expand land bank and support development pipeline and which are expected to be acquired during the second half of 2015
- Net valuation gain on the investment portfolio reaches € 48.1 million (against € 40.9 million at the end of June 2014)
- The fair value of the investment property and the investment property under construction (the "property portfolio") as at 30 June 2015 increased with 21.0% (+ € 87.4 million) to a record level of € 503.5 million compared to € 416.1 million as at 31 December 2014
- Establishment of presence in Spain with the opening of a new office in Barcelona and with first offers on land initiated
[1] The net profit as at 30 June 2014 included the estimated € 13.4 million profit on the sale of the associates' portfolio (VGP CZ I & IV and II). The sale of these portfolios was completed in October 2014.
Summary
During the first half of 2015 VGP continued to perform strongly with development and leasing activities reaching record levels.
Germany confirmed its role as the leading growth market of the Group during the first half. More than 50% of the current developments under construction are located in Germany.
In other markets, such as Slovakia, Czech Republic, Estonia and Romania development and leasing activities were also buoyant with Czech Republic clearly remaining the second market for VGP with a share of 25% of the current developments under construction.
During the first half of 2015 VGP's activities can be summarised as follows:
- The operating activities resulted in a net profit of € 32.2 million (€ 1.73 per share) for the period ended 30 June 2015 compared to a net profit of € 43.4 million (€ 2.33 per share) and € 30.0 million (on a like for like basis[1]) respectively as at 30 June 2014.
- The increase in demand of lettable area resulted in the signing of new lease contracts in excess of € 11.3 million in total of which € 10.5 million related to new leases and € 0.9 million related to replacement leases.
- The Group's property portfolio reached an occupancy rate of 94.8% at the end of June 2015 compared to 94.0% as at 31 December 2014.
- The investment property portfolio has now already grown to 25 completed buildings representing 365,971 m² of lettable area with another 19 buildings under construction representing 322,014 m² of lettable area.
- At the end of June 2015 the land bank includes 954,000 m² of new committed development land expected to be acquired during the second half of 2015. New land plots are being trgeted and are due to be secured during the second half of 2015 in order to continue to support the development pipeline.
- The net valuation of the property portfolio as at 30 June 2015 showed a net valuation gain of € 48.1 million against a net valuation gain of € 40.9 million per 30 June 2014.
- During the first half of 2015 VGP established itself in Spain and it is expected that the first investments in this new market will occur during the second half of the year. Also in other markets than Germany and the Czech Republic, VGP was successful to expand further. During the month of August 2015 a new park close to Budapest was started with a first building which is fully pre-let to a Blue Chip company under a 12 year lease agreement. Finally a further 540,000 m² land plot close to Bratislava was secured to establish a second VGP Park in Slovakia.
- In order to mitigate its future interest rate risk the Group concluded 2 new interest rate swaps, each for a notional amount of € 75 million and 5 year term. These 2 interest rate swaps have a future start date of July 2017 and December 2018 and will run until July 2022 and December 2023 respectively. The average interest rate which has been fixed is 0.84% p.a.
- In order to strengthen its consolidated equity base and support its further growth, VGP NV issued subordinated perpetual securities in July 2015 for an aggregate amount of € 20 million which were fully underwritten by the reference shareholders of the company i.e. VM Invest NV and Little Rock SA.
Gross rental income up 71.6% to € 7.0 million
The gross rental income reflects the full impact of the income generating assets delivered during 2015. The gross rental income for the period ending 30 June 2015 increased by 71.6% to 7.0 million for the period ending 30 June 2015 compared to € 4.1 million for the period ending 30 June 2014.
Committed annualised rent income increases to € 33.1 million
Supported by the continued increase in demand for lettable space in almost all of its markets VGP signed 25 new leases during the first half year. These contracts represent in total more than € 11.3 million annualised rental income of which € 10.5 million relate to new leases and € 0.9 million relate to replacement leases.
The annualised committed leases therefore increased to € 33.1 million as at the end of June 2015 (compared to € 22.6 million as at 31 December 2014).
The committed annualised rent income represents the annualised rent income generated or to be generated by executed lease - and future lease agreements.
Germany was the main driver of the increases in committed leases with € 5.0 million of new leases signed during the first half year. The other countries also performed very well with new leases being signed in the Czech Republic + € 2.2 million, Slovakia + € 1.9 million, Hungary + € 1.5 million, Romania + € 0.6 million and finally € 0.1 million in Estonia.
The signed committed lease agreements represent a total of 614,477 m² of lettable area with the weighted average term of the committed leases standing at 7.9 years at the end of June 2015 compared to 7.8 years as at 31 December 2014.
Property and facility management income reaches € 1.3 million
The property and facility management income reached € 1.3 million for the period compared to € 1.4 million for the period ending June 2014.
The property and facility management is expected to start growing again in the near future as more and more buildings are being completed and delivered to tenants.
Net valuation gain on the property portfolio reaches € 48.1 million
As at 30 June 2015 the net valuation gain on the property portfolio reaches € 48.1 million against a net valuation gain of € 40.9 million per 30 June 2014.
The trend of improving yields continued during the first half of 2015. As a result the total property portfolio, excluding development land, is being valued by the valuation expert at 30 June 2015 based on an average market rate of 7.42% (compared to 7.81% as at 31 December 2014) applied to the contractual rents increased by the estimated rental value on unlet space.
The (re)valuation of the portfolio was based on the appraisal report of Jones Lang LaSalle.
Net financial expenses reach € 2.5 million
For the period ending 30 June 2015, the financial income included € 2.7 million of unrealised gains on interest rate derivatives. This unrealised gain was mainly driven by 2 interest rate transactions concluded during the first half year i.e. in order to mitigate its future interest rate risk the Group concluded 2 new interest rate swaps, each for a notional amount of € 75 million. These 2 interest rate swaps will start in July 2017 and December 2018 and will run until July 2022 and December 2023 respectively. The average interest rate which has been fixed is 0.84% p.a.
As at 30 June 2015 no interest income from loans to associates was recorded (compared to € 1.8 million as at 30 June 2014) due to the repayment of all shareholder loans to the associates in October 2014.
As a result the net financial expenses reached € 2.5 million as at 30 June 2015 compared to € 3.2 million as at 30 June 2014.
The financial debt increased from € 198.8 million as at 31 December 2014 to € 234.0 million as at 30 June 2015. The increase was mainly driven by an increase in bank debt which increased to € 80.1 million compared to € 49.1 million as at 31 December 2014.
The gearing ratio[2] of the Group remains conservative and stood at 37.4% at the end of June 2015 compared to a gearing level of 33.2% as at 31 December 2014.
[1] The net profit as at 30 June 2014 included the estimated € 13.4 million profit on the sale of the associates' portfolio (VGP CZ I & IV and II). The sale of these portfolios was completed in October 2014.
[2] Gearing calculated as "net debt / total equity and liabilities"
Evolution of the property portfolio
The fair value of the investment property and the investment property under construction (the "property portfolio") as at 30 June 2015 increased with 21.0% to a record level of € 503.5 million compared to € 416.1 million as at 31 December 2014.
Completed projects
During 2015, 8 building were completed totalling 98,567 m².
These buildings were delivered in following locations. In Germany: 3 buildings totalling 30,558 m² in VGP Park Hamburg, 1 building of 19,805 in VGP Park Rodgau and 1 building of 15,140 m² in VGP Park Höchstadt. In the other countries: 1 building of 15,270 m² in VGP Park Malacky (Slovakia), 1 building of 10,384 m² in VGP Park Timisoara (Romania) and finally 1 building of 7,410 m² in VGP Park Nehatu (Estonia).
Projects under construction
At the end of June 2015 VGP has the following 19 new buildings under construction: In Germany: 2 buildings in VGP Park Hamburg, 4 buildings in VGP Park Rodgau, 1 building in VGP Park Borna and 1 building in VGP Park Berlin. In the Czech Republic: 1 building in VGP Park Tuchomerice, 1 building in VGP Park BRNO, 2 buildings in VGP Park Plzen, 1 building in VGP Park Usti nad Labem and 2 buildings in VGP Park Olomouc which will be merged into one building on completion. In the other countries: 1 building in VGP Park Nehatu (Estonia), 2 buildings in VGP Park Malacky (Slovakia) and finally 1 building in VGP Park Timisoara (Romania). The new buildings under construction on which several pre-leases have already been signed, represent a total future lettable area of 322,014 m².
Land bank
During the first half of 2015 VGP continued to target a significant amount of land plots in order to ensure that the land bank remains sufficiently large to support the development pipeline for future growth.
VGP has currently a land bank in full ownership of 2,950,204 m². The land bank allows VGP to develop besides the current completed projects and projects under construction a further 626,000 m² of lettable area of which 440,000 m² in Germany, 51,000 m² in the Czech Republic, and 135,000 in the other countries.
Besides this VGP has another 954,000 m² of new land plots under option. These land plots have a development potential of approx. 389,000 m² of new projects. These remaining land plots are expected to be acquired during the second half of 2015.
During the month of August 2015, VGP was able to secure a land plot of 540,000 in Bratislava (Slovakia). This land plot will be acquired in 2 phases i.e. phase 1 (200,000 m²) and phase 2 (340,000 m²) and will allow VGP to develop in total circa 240,000 m².
Geographic Expansion
New territories
During the first half year VGP established itself in Spain by opening an office in Barcelona. VGP has in the meantime targeted a number of land plots and it is anticipated that first acquisitions of land will occur during the second half of 2015.
VGP is also looking at expanding into the Nordic countries and is actively looking to secure land plots to start up its development activities there.
Existing territories
A 85,000 m² secured land plot located next to the ring road of Budapest (Hungary) was acquired during the month of August 2015. The development of a pre-let building of 22,892 m² was immediately started up and should be completed early 2016. The building is fully pre-let to a blue chip company under a 12 year lease contract.
As mentioned before in Slovakia VGP was able to secure an additional 540,000 m² land plot close to Bratislava during August 2015.
Hybrid securities
In order to strengthen its consolidated equity base and support its further growth, VGP NV issued subordinated perpetual securities in July 2015 for an aggregate amount of € 20 million. The securities were fully underwritten by the reference shareholders of the company, VM Invest NV and Little Rock SA after complying with the conflict of interest procedure in accordance with article 523 of the Belgian Companies Code and article 16 of the articles of association of the Company. The securities are not convertible into VGP shares and, hence, do not entail dilution for the shareholders.
Additional comments on the 30 June 2015 condensed interim financial accounts
Deferred taxes
As at the end of June 2015 the deferred tax liabilities increased from € 27.3 million at the end of December 2014 to € 42.3 million at the end of June 2015. The increase is due to the deferred tax recorded on the fair value adjustment of the property portfolio and has therefore no effect on the liquidity position of the Group.
Risk Factors
The overview of the most significant risks to which the VGP Group is exposed to can be found on page 36 to 37 of the Annual Report 2014. These risks remain actual and valid and will continue to apply for the remainder of the financial year.
Outlook 2015
Based on the positive trend in the demands for lettable area recorded by VGP during 2015 and the continuing trend seen after the first half year, and provided there are no unforeseen events of economic and financial markets nature, VGP should be able to continue to substantially expand its rent income and property portfolio through the completion and start-up of additional new buildings.
During the second half of 2015 VGP will continue to review its sources of funding and funding strategy in order to enable the Group to continue to invest in the expansion of the land bank to support its development activities as well as to maximise shareholder value.
Declaration in accordance with Art. 13 of the Belgian Royal Decree of 14 November 2007
The Board of Directors of VGP NV represented by Mr Marek Šebest'ák, Chairman, VM Invest NV represented by Mr Bart Van Malderen, Jan Van Geet s.r.o. represented by Mr Jan van Geet, CEO, Mr Alexander Saverys and Rijo Advies BVBA, represented by Mr Jos Thys, jointly certify that, to the best of their knowledge,
(i) the interim condensed financial statements are prepared in accordance with applicable accounting standards and give, in all material respect, a true and fair view of the consolidated assets and liabilities, financial position and consolidated results of the company and of its subsidiaries included in the consolidation for the six month period
(ii) the interim financial management report, in all material respect, gives a true and fair view of all important events and significant transactions with related parties that have occurred in the first six month period and their effects on the interim financial statements, as well as an overview of the most significant risks and uncertainties we are confronted with for the remaining six months of the financial year.
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