Deutsche Euroshop Uns/Adr

Hello and good morning from the team of Deutsche U-Shop in Hamburg. This is Olaf Borker speaking. With me in this call is our investor relations team. Thank you for attending the presentation of our results for the first half of 2002, including an update on the situation in our centers and on the development of Deutsche U-Shop Group. Let's start with our business activities. For an executive summary of 8.1, 2022, please see slides two and three. After two years overshadowed by the pandemic, we are confident that 2022 will be impacted to a much less extent. We expect this year to be a transition year on the way to a new normal, operationally, as well as in terms of how we deal with virtues. Reliable forecasts are hard to make, however, given the uncertainty caused by the war in the Ukraine. What happens in our centers? On slide 4, we have a look on our footfall. After a difficult start into the new year with various restrictions, the footfall numbers have improved sustainably since April. At the end of July, we were able to reach a level of 87%, of the comparable pre-pandemic period in 2019. This means people are enjoying the regained shopping freedom and a certain normality. They are returning to the city centres, shopping malls and shops. As is this so far despite a certain reluctance of consumers in view of rising prices and the war in Ukraine, which is also not favorable for consumption. Coming to the retail turnover on slide five. Looking at our portfolio as a whole, tenant turnover is back on the levels of 2019. In Germany, it's only slightly lower. It's 95.3%. Our overall tenant sales averaged approximately 89% of 2019 levels. These figures also make us optimistic. It is worth mentioning that people are more afraid for their own income perspective since the beginning of the war in the Ukraine than they were at the peak of the pandemic. In addition, the propensity to buy is at a new record low. And the rising prices, especially for energy, leave less room for consumption. On slide six, you can see our collection ratio since the beginning of the pandemic. which initially followed the pattern of the consumer footfall and is strongly correlating with the lockdown periods. The collection ratio represents the ratio of received to invoiced rents, service charges and marketing contributions. For 2021, the number was 95%. From the third quarter of 2021 onwards, the collection ratio improved further and is now close to normality. In H1 2022 the collection ratio was at 98% with only very limited rent concessions granted resulting from some cleanup for 2021. We assume that the value for June will also be corrected slightly upwards. As experience shows that incoming payments can still be expected here so that we would reach a level of almost 100% too. So far the update on the situation in our centers. I'll now come to the financial results of H1 2022 and we'll start with the evaluation of our shopping centers on slide 7. The valuations of our shopping centers were on average almost unchanged, including investment costs The valuation result before taxes was minus 8.2 million euros as of end of the first six months. This corresponds to an average decrease of only 0.2%. The stabilized net initial yield for our portfolio is slightly up and now stands at 5.54%. The sensitivity of the valuation results to changes of the main value drivers is provided in the table in the lower part of the slide. I now come to the revenues on slide 8. These came out nearly unchanged at 105.5 million after 104.9 million in H1 2022. In contrast to the previous year, which was significantly affected by shop closures due to the pandemic, all of our tenants were allowed to open their shops in the first six months of 2022. Looking at the bridge, you see that H121 was influenced by temporary legal rent suspensions in Poland, which was 2.4 million euros. The continuing effects of the corona pandemic, such as defaults of tenants in payment difficulties, lower turnover rents, as well as longer re-letting periods and higher vacancy rates mean that revenues are still below the pre-pandemic level. On page 9, we show you the development of our EBIT, which was increased to now 76.1 million euros, which is a plus of 7.8%. The major financial effect resulting from the pandemic last year was reflected in the allowances for rent receivables. These allowances were made in relation to the realized and or expected losses of rent in connection with tenant support measures, for example, rent concessions, or in relation to the factor respectively likely insolvencies. In H122, these allowances came down to 5.4 million euros compared to 18.1 million in the first half of 2021. I now turn to page 10 and to the financial result. It improved by 3.5 million or 23.4%. Interest savings of 2.4 million due to federal refinancing of our BuildShield Center Hamburg, our City Gallery Wolfsburg and our Altmarktgalerie Dresden and an increased ad equity operating profit of plus 3.3 million euros had a positive impact on the financial result. The minority profit share was 2.2 million higher than in the first half of 2021. On slide 11, you see that the EBT adjusted for the valuation increased from 55.7 million to 64.7 million euros. which is a plus of 16.1% due to the high operating result of plus 6.6 million euros. Another positive impact came from interest savings. These amounted to 2.4 million euros. Let us look at the operating profit, the EPRA earnings, on page 12. EPRA earnings improved by 6.5 million to now 60.8 million. an increase of 12%. On a per share basis, the EPRO earnings increased from 0.88 to 0.98 euros. I now come to the consolidated result of the group on slide 13. The consolidated profit increased from 36.8 million to 46.2 million. The main impact for the change came from a higher result from the standing assets, a plus of 6.6 million euros. Correspondingly, the EPS increased by 25% from 0.60 to 0.75 euros in H1 2022. Please follow me now to page 14 and to the development of the FFO, which excludes the valuation result. The FFO increased strongly from 45.3 million to now 66.7 million or on a per share basis from 0.88 euros to 1.08 euros. In the FFO calculation, we excluded the one of expenses in connection with the takeover offer, an amount of 5.9 million euros. I'm now coming to the balance sheet on page 15. where you will only see small changes compared to the figures of December 2021. Our total assets amounted to 4.3 billion euros. This is just a change of 42.5 million compared with the reporting date end of 2021. Our consolidated liquidity as of the 30th June of 2022 stands at 377.8 million That is a plus of 48.9 million euros in six months. The build-up of cash was influenced by the normalization of the payment behavior of the tenants. Total equity, including minorities, increased by 45.9 million. At the end of the first half year of 2022, current and non-current financial liabilities stood at 1.5 billion euros, which was 6.2 million lower than at the end of 2021, influenced by scheduled exemptions. Non-current deferred tax liabilities increased by 8.8 million to 341.8 million euros. Our equity ratio increased slightly and now stands as a solid 56.3% and the consolidated loan-to-value now stands at a low 29%. On a look-through basis, that is the LTV calculated fully proportionally according to the group share in all assets, the LTV now stands at 31.7%, also a continued very reasonable and low level. While earnings and profits are still below pre-corona levels, our balance sheet today is stronger than before corona. On the pages 16 and 17, we give you some information on our debt. Approximately 17.8 million or only 4.2% of our consolidated bank loans is left to expire this year and will be repaid to the banks. currently our consolidated debt bears an average interest rate of 2.23%. The weighted maturity of our loan portfolio now stands at 5.9 years. Including our non-consolidated loans, the weighted maturity of the portfolio now stands at 6.2 years with an average interest rate of 2.19%. On the right side of page 17, you will see that we have fixed this year three loans with a total of €216 million with an average interest rate of 2.98% compared to former 3.26%. News from the portfolio are shown on slides 18 and 19. We recently published new investment plans for the Maitaunus Zentrum, one of the largest and strongest turnover shopping centers in Germany and a jewel in our portfolio. A new highlight is to be added to the Main-Taunus-Zentrum, giving it a new lively and urban center with the high quality, the right restaurant and food offering. Five new freestanding restaurant buildings are to be built until 2024, some with roofed terraces, some with outdoor terraces, attractive landscaped exterior areas and sophisticated architecture. The new food garden will be built on an area of around 7,000 square meters in the heart of the shopping center in place of a former department store building. The investment volume amounts to approximately 25 million euros. In the meantime, numerous food trucks around the construction site provide a variety offer. The offer is very well welcomed by the visitors. As of now, Another highlight in the My Townish Centrum is the TEO concept. Please see slides 20 and 21. Thanks to digital sales technology, consumers can shop right here around the clock, seven days a week. With the help of installed self-scanning checkouts and a specially developed app, customers can access a well-assorted range of 950 products on a space of only 50 square meters. Finally, I would like to come to slide 22 and a look to the transaction market and financing activities. Financing first. As already mentioned in our last call, we have agreed with banks on a 107.4 million loan with 10 years maturity, the fixed interest rate on 2.5%, to refinance a loan for our Altmarktgalerie Dresden that became due end of March 2022. Meanwhile, we have concluded all our upcoming refinancings for this year. This includes a group-level loan of 52 million, as well as financing for the City Point Castle, which is 55 million euros. a credit charge of 10 million euros for the Allee Center HAM will be repaid at the end of September. The signed contracts mean that in the future we will profit from interest savings of approximately half a million euros per year. The interest expenses for 2002 will be approximately 3.2 million euros less than in the previous year. This is essentially with light of refinance undertakings in 2021 and 2022 totaling around 400 million euros. As mentioned, we do not face any further loan maturities this year. For the only refinancing due in 2023 at 209 million euros for the mine town at Zentrum, the company has already agreed on a term sheet for 221 million loan with a banking consortium. That's for refinancing 209 million and 12 million to finance the food garden investment. The interest rate for the current loan is 2.99%. After this, there is no further refinancing due until September 2025. The latest interest rate increases come as no surprise to us. although we did not expect them quite to this extent. For 2022, we are anticipating interest costs of around 37 million euros in the group. This is comparable with our interest costs in 2006, which were around 39 million euros. However, our sales in 2006 were only around 93 million euros. Whereas for 2022, we are anticipating a revenue of over 200 million euros. The transaction market has been, not surprisingly, in the given situation, rather dry. However, there are signs that the transaction market is slowly coming back, even though it is currently again affected by the terrible Ukrainian war. The shopping center Boulevard Berlin was sold end of 2021 and Gera Arcaden in Gera, Germany in the first quarter 2022 at, as we have heard, fair prices. If the impact of the Ukrainian war on investors and their financing banks stays limited, one may expect to see some further transactions. As we hear from the market, some transactions are currently being prepared. For example, one in Munich. The yield differential between shopping center assets and the other real estate asset classes, for example, office, residential, and logistics, seems to be just too big to be ignored. The spike in interest rates may support the shift of demand among real estate classes. Let's come to the financial outlook outlook on slide 23. We confirm our forecast and expect an FFO of €1.95 to €2.05 per share for the full year. 2022 will be, in our expectation, a transitional year on the way to normality after Corona. Accordingly, we have applied a bit more cautious assumptions on rent write-downs in comparison to pre-corona times. This forecast again assumes that the pandemic situation can be brought under lasting control without further store closures or significant restrictions on center operations. A continued uptick in private consumer spending and an associated further recovery of the tenant turnovers, as well as the preservation of recovered high collection ratios. We are therefore pleased with the German government's recent decisions not to impose lockdowns in the future. The war in Ukraine and its consequences could have a negative impact on consumer behavior, supply chains and ultimately our business. This has not yet been reflected in our forecast as the potential impact cannot be estimated at present. Indexation of our rents is lagging behind inflation. Though indexation at full inflation is agreed, we are in a lot of discussions with our tenants. Ladies and gentlemen, we remain optimistic as before, even though there is still some way ahead of us to come. Our company is very well prepared. Finally, I would like to say a few personal words. In July, Wilhelm Wellner and I reached an agreement with the supervisory board that following the takeover by Oak Tree and Kura, which has now been fully completed, we would no longer be available to Deutsche Euroshop for a long-term continuation of our cooperation as executive board members. After 17 exciting and great years in the service of Deutsche Euroshop, with a small and effective team, I will say goodbye on September the 13th and thank you for your trust. I wish the future executive board every success and you all the best and lots of fun with shopping. So far my presentation. Thank you for listening. I'm happy to take your questions now. I hope you will understand that I cannot respond to questions but to the company's future strategy in connection with the takeover more than we have published in our 60 pages official statement. The new management will be available to you in the near future. Thank you.

Yeah, good morning, Dr. Schott's team and Mr. Bokos. First, I would like to thank you for the work over the last couple of years. I couldn't believe for the 17 years. I really would say I personally very much enjoyed the collaboration with you and I wish you really all the best for any new adventures you maybe step into. Again, thank you. Thank you very much. Welcome. And, uh, nonetheless, some questions, um, maybe on the, on the current situation, not on the futures plan as you described, uh, you are not able to, to answer that, uh, for, uh, good reasons. Well, the first question is, you mentioned in your outlook that 2022 will be a transition year to a new normality. What personally do you see as a new normality, maybe in terms of rent levels or the portfolio vacancy? And finally, probably not given a precise outlook on that, but finally on the FFO1 rate. on the existing portfolio. Any views from your side would be very helpful. That's the first question, please.

Again, thank you very much for your warm words, Mr. Remke. I also enjoyed the long cooperation with you as an analyst, having a very close look on our company. Coming to the normal that is reflected in rent levels, we expect that rents in total can be stabilized, which means we still have lower rent levels in new lease agreements. On the other hand, we have this indexation of our lease agreements, from which we see that indexation is lagging behind inflation, so it's not possible to increase rents by 5% according to CPI. 1.5%, 2% for the individual lease agreements. So the combination of all will mean a stable rent income for the next years. This is also supported by a higher occupancy ratio. Occupancy ratio is roughly at 95%, 96%. And we expect it to increase in the next two years to roughly 98%. That is the main impact on turnover. Financing is, as we have shown, a sign for us for the next three years. We have this financing of Main Taunus Zentrum. The actual indication is slightly lower than 2.99%. We believe that we can keep costs stable after we have seen higher costs for us in the last two years.