DGAP-News: Deutsche EuroShop returned to profit in 2021 financial year

Deutsche EuroShop returned to profit in 2021 financial year

• Operating earnings at prior-year level despite stricter coronavirus restrictions
• Real estate valuations largely stable (-1.5%)
• Positive consolidated profit of €59.9 million following loss in 2020
• Forecast for 2022 above previous year
• Collection ratio currently at 99% - intention to resume dividend payments
• Successful re-leasing of premises left vacant due to the coronavirus
• Refinancing of €107.4 million secured over the long-term, as scheduled

Hamburg, 22 March 2022 - Deutsche EuroShop this evening announced its preliminary and as yet unaudited results for the 2021 financial year. Despite significantly longer lockdown phases than in the previous year and the resulting impact on operating earnings, as well as a slight measurement loss, the shopping center investor was again able to generate a consolidated profit. The balance sheet remains solid and liquidity was increased further. The Executive Board aims to return to a sustainable dividend policy and will submit a dividend proposal to this effect when it publishes the Annual Report for 2021.

Revenue: €211.8 million (-5.5%)

Consolidated revenue was down 5.5% for the financial year, from €224.1 million to €211.8 million. This was due in particular to the rent concessions agreed with tenants owing to the coronavirus. The company had offered affected tenants a rent waiver of 50% during the closure phases in 2021 to help mitigate the major negative impact on their business and also in view of legal aspects.

EBIT: €152.5 million (-5.4%)

The expense from write-downs and the derecognition of receivables decreased year on year to €25.0 million (2020: €29.2 million); of this, the share of receivables affected by insolvency or impaired amounted to €7.2 million. Earnings before interest and taxes (EBIT) were €152.5 million, down on the figure for the previous year (€161.2 million), to a significant extent due to the aforementioned coronavirus-driven decline in revenue and write-downs.

EBT excluding measurement: €125.6 million (-1.6%)

At €-26.9 million, net finance costs (excluding measurement gains/losses) improved further versus 2020 (-€-33.6 million). At-equity (operating) earnings were less adversely affected by coronavirus-related write-downs on rental receivables and revenue arrears than in the previous year. More attractive follow-up financing also had a positive effect. In addition, the interest expense of the Group companies was reduced by a further €4.5 million - also as a result of more attractive follow-up financing. Overall, however, the improved financial result (excluding measurement gains/losses) did not fully compensate for the coronavirus-related decline in EBIT. Consequently, EBT (excluding measurement gains/losses) fell slightly by -1.6% from €127.6 million to €125.6 million.

Measurement: EPRA NTA up 2.8% to €38.43 per share

The measurement loss of €-54.7 million (2020: €-427.6 million) was due to the valuation of the Group's real estate assets. Of this, €-58.8 million (2020: €-353.8 million) resulted from the measurement of the real estate assets reported by the Group and €4.1 million (2020: €-73.8 million) from the measurement of the real estate assets of the joint ventures recorded on the balance sheet according to the at-equity method. The average value of Group properties, after ongoing investments, fell slightly by 1.5% (2020: -10.7%).

With market yields largely unchanged during the financial year due to a lack of market transactions, adjusted market rents and longer post-leasing periods were the major influencing factors on the valuation.

"Our vacancy rate stabilised at 94.3% at the end of the year," explains CEO Wilhelm Wellner. "What's important for us at this stage is the success we are having in re-leasing vacant premises. For example, shortly after Galeria Karstadt Kaufhof moved out, we were quickly able to attract new attractive anchor tenants for our Rathaus-Center Dessau. They will make the shopping center even more attractive from 2023. Now more than ever, it is and remains the main draw for tenants and customers in Dessau-Roßlau. In addition, we are pleased to announce a new gastronomy concept for our Rhein-Neckar-Zentrum: Starting in 2024, L'Osteria will join the shopping center's growing range of attractive and interregional offerings with a modern and free-standing restaurant."

At €38.43 per share, EPRA NTA (net tangible assets) as at 31 December 2021 was up 2.8% on the prior-year level (€37.38), due in particular to the additional increase in liquidity.

Consolidated profit: €59.9 million, €0.97 per share

On the back of the significantly improved measurement gains/losses compared with 2020, the consolidated loss of €251.7 million was transformed into a consolidated profit of €59.9 million for 2021. Earnings per share was €0.97 (2020: €-4.07). EPRA earnings, which exclude measurement gains/losses, fell to €122.0 million or €1.97 per share, due mainly to the coronavirus-driven decline in revenue as well as write-downs (2020: €2.02).

FFO: €122.3 million (-0.9%), €1.98 per share

Funds from operations (FFO) declined slightly from €123.3 million to €122.3 million or by €0.02 per share to €1.98. As an income-based figure, FFO do not reflect the current increase in rent receivables, so the analysis of tenants' payment behaviour expressed in the collection ratio is also necessary. However, the collection ratio after rent reductions continued to improve significantly in 2021, averaging 94.8% (2020: 89.6%). At the beginning of 2022, the collection ratio was around 99%.

Further boost to financial ratios and liquidity position

As at year-end, the loan-to-value (LTV) ratio stood at 30.5% (2020: 32.9%). Based on the Group's pro-rata share in joint ventures and subsidiaries, this resulted in an absolute LTV ratio of 33.3%, which is still conservative in a sector comparison (2020: 35.8%).

The financing terms for consolidated borrowing as at 31 December 2021 were fixed at 2.09% p.a. with an average residual maturity of another 4.7 years. The loans to Deutsche EuroShop are maintained as credit facilities with 22 banks and savings banks. All loans maturing in the 2021 financial year were extended or refinanced at lower interest rates. Four loans totalling €225.9 million are due for refinancing in the 2022 financial year, whereby a loan of €107.4 million has already been extended at a lower interest rate for ten years. In 2023, a loan of €209.1 million is scheduled for extension; in 2024 there are no loan maturities, and in 2025 follow-up financing is due for a loan of €58.7 million.

At €2,377.8 million as at the end of the reporting year, equity (including third-party shareholders) was up €63.0 million on the previous year (€2,314.8 million), mainly attributable to the consolidated profit. The already solid equity ratio improved further to 55.6% (2020: 54.6%).

Cash and cash equivalents increased by €62.8 million to €328.8 million as at the reporting date.

Forecast resumed

Deutsche EuroShop has seen a noticeable improvement in its key operating figures in recent months, even though these are currently still significantly below pre-crisis levels in some cases, and in spite of the fact that the bricks-and-mortar retail trade continues to face particular challenges in light of the ongoing pandemic and the outbreak of the war in Ukraine, which remain a source of heightened uncertainty for future business development.

Assuming that the pandemic shows signs of continued and sustainable stabilisation, the Executive Board expects funds from operations (FFO) of €1.95 to €2.05 per share (2021: €1.98) for the 2022 financial year, which as a transitional year is still affected by the after-effects of the pandemic. Possible adverse repercussions of the Ukraine war on consumer behaviour and tenant revenue cannot be assessed at present and therefore are not included in the forecast.

Aim to return to a sustainable dividend policy

In the 2021 financial year, as in the previous year, Deutsche EuroShop was able to bolster its liquidity by largely waiving dividends, despite the significant impact of the imposed lockdowns and the impact of store closures on rental income. In the aim of returning to a sustainable dividend policy while maintaining a clear focus on securing the company's long-term liquidity, the Executive Board will develop a dividend proposal together with the Supervisory Board, which will be communicated along with the publication of the Annual Report.

The 2021 Annual Report with the final audited figures will be published on 26 April 2022.

Webcast of teleconference

Deutsche EuroShop will hold a conference call for analysts in English at 10 a.m. on 23 March 2022, which will be transmitted as a live webcast at www.deutsche-euroshop.com/ir

Deutsche EuroShop - The shopping center company

Deutsche EuroShop is the only public company in Germany to invest solely in shopping centers in prime locations. The SDAX-listed company currently has investments in 21 shopping centers in Germany, Austria, Poland, the Czech Republic and Hungary. The portfolio includes the Main-Taunus-Zentrum near Frankfurt, the Altmarkt-Galerie in Dresden and the Galeria Baltycka in Gdansk, among many others.

Key consolidated figures