EPP remains cautious despite recovery


EPP remains cautious despite recovery

Published Date: 2020-09-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

EPP remains cautious despite recovery

The Polish property group has held back on an interim dividend and may dispose of assets to strengthen its balance sheet.

EPP has reported a decline in net property income for the first six months of its financial year after it wasn't able to legally enforce payments by its tenants during the seven-week lockdown in Poland. However, the property group has raised its earnings guidance for the year after the retail sector recovered from Covid-19.

EPP, previously called Echo Polska Properties, says Poland is expected to be one of the least impacted economies by Covid-19 in the next 18 months with growth of 1.1% forecast for 2020-2021. The country's rapid economic response to the pandemic lockdown included nearly €50 billion of support to protect jobs and business liquidity and promote economic activity. This was followed by another stimulus package primarily aimed at providing liquidity for companies. With the country's shopping centres allowed to open sooner than many other countries, footfall at its malls improved to 85% of last year's levels by September, up from 69% at the end of June.

While earnings were impacted by pandemic regulations, EPP said its balance sheet remained stable. Still, despite cash on hand of €177 million it's remaining cautious in order to preserve capital and liquidity. After holding back on a final dividend for its 2019 financial year, it's not paying an interim dividend either as it waits for the recovery to gain more traction. It said it would reassess the payment of the second-half dividend when finalising its full-year results next March.

For the six months to end-June, net property income fell 27% to €52.7 million. It reported a €24.3 million loss, down from earnings of €34.4 million previously. Although its net loan-to-value ratio increased to 51.7% from 50%, it said it remained well within covenant levels of 68%. It would also accelerate its deleveraging strategy over the next 12 to 18 months, possibly selling some assets or releasing them into joint venture partnership while remaining the active asset manager. Potential asset disposals would only be concluded with suitable partners at the right price, it said.

EPP's total investment in properties and joint ventures declined to €2.4 billion as a result of valuations declining by 3.9%.

EPP has raised its full-year earnings guidance upwards to 4.75-5.25 euro cents per share from 4-5c previously.

Its shares rose 2.1% to R4.90 yesterday.

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