LAMDA Development S.A. (LAMDA) Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to the LAMDA Development conference call on the 9 months 2019 financial results. We have with us Mr. Vassilios Baloumis, Finance Director; Mrs. Konstantina Karatopouzi, Financial and Administration Director; Mr. Alexandros Kokkidis, Treasurer and Investor Relations Director of the company. [Operator Instructions] I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers for today, Mr. Baloumis. Please go ahead, sir.

Good evening to everyone. Happy New Year. Thank you very much for participating in this presentation. We are announcing today the results of the 9-month period ended September 30 with a significant delay of more than 1 month. The reason for this delay is no other than the strict timetable that we have set for the share capital increase to be completed by the beginning of the Christmas holiday. The release of the results at the end of November as per our usual practice would significantly slow down the process of completing the share capital increase. As we shall see below, the operating results continues to increase, respectively, in the third quarter of the year as well as in the first half. The company proceeded exceptionally with the valuation of its property in Greece dated September 30, due to the fact that there was evidence for yield compression in Greece, which has also depicted a remarkable fall in the interest rates of the Greek bonds. This factor improved the results of the third quarter. However, I should point out 2 factors that have negatively affected the results of this quarter. The first factor is the formation of an EUR 11 million provision, which as we have previously announced, concerns the agreement between the company, the Municipality of Maroussi and the National Bank of Greece in order to settle a legal issue concerning the property of The Mall Athens. The amount of EUR 11 million was partially set off with the valuation gains of the asset of The Mall Athens. The second factor in the -- is the retrospective recognition of EUR 5.8 million expenses of the Hellinikon Project in the consolidated results. Until June 30, the company has recognized this amount as a receivable from Global Investment Group. As you are aware, the company has completely taken over the project, and thus, the preliminary cost related to it. So retail EBITDA increased by 7.9% to EUR 47.6 million. Like-for-like EBITDA, excluding the effect of IFRS 16, increased by 1.8% versus September year-to-date 2018. Total EBITDA before valuation and Hellinikon expenses also increased by 12.7% to EUR 41 million. Like-for-like EBITDA, excluding the effect of IFRS 16, increased by 7.4% versus September year-to-date 2018. Total EBITDA reached EUR 81.8 million, and net profit for the period stood at EUR 30.2 million. NAV at EUR 479.2 million, and NAV after the share capital increase, EUR 1,119,200,000. The retail performance. Tenant sales recorded an increase by 2.5%. Customer visits decreased by 0.6%. The average occupancy approached 99%, and the collection rate approaching 100%. Finally, the important developments. I remind you that the remaining CPs of Hellinikon Project are the casino license and the contribution of land to the Hellinikon S.A., which is a target company. There has been a significant progress concerning the 2 CPs, but they have not been fulfilled yet. Apart from these 2 CPs, which are fully dependent on the Greek state, there are also pending petitions against the joint ministerial decisions. And the last one, the western part of the Golden Hall opened early in December, I remind you, we're talking about an investment of EUR 25 million. Next, Slide #3 presents the charts for sales and visits for the last 6 years. Again, the increase of 2.5% of sales and then -- and the slight decrease of visitors by 0.6%. Just to point out that the annual number of customers visit is flat. Next, Slide #4 presents the EBITDA for the retail sector. The growth of the retail EBITDA reached 7.9%. But as we have already mentioned, like-for-like EBITDA increased -- the EBITDA increase is 1.8%. Next, Slide #5, we present the KPIs and the EBITDA breakdown of The Mall Athens. So September sales, our September year-to-date increased by 2.4%, but in November year-to-date, they increased by 2%. Number of visitors increased by 1.2%. In November, it increased -- in November year-to-date, increased by 1.4%. Occupancy exceeds 98%. Total revenue is up by 2.5% due to the indexation, and EBITDA increased by 1.9% because we had an increase in the operating expenses. Next, Slide #6, Mediterranean Cosmos. Shopkeeper sales increased by 2.9%, and 4.1% was the increase in November. Visitors decreased by 2.4%, but this figure recovered in October and November. And now November year-to-date decreased by 1%. Occupancy approach is 99%. Total revenue up by 3.7%, and EBITDA increased by 27.1% due to the fact that the fixed component of land lease according to the IFRS 16 is reallocated to the net interest. Next, Slide #7, Golden Hall. Shopkeeper sales increased by 2.2%. In November, they also increased by 2.3%. Visitors decreased by 2.4%. And in November, they also decreased by 1.3%. Again, we can see an improvement in the last 3 months of the year. Occupancy at 99%, total revenue increased by 2.1% and EBITDA increased by 1.6%. Next, Slide #8, total EBITDA before valuations and Hellinikon expenses increased by 12.7% to EUR 41 million versus EUR 36.3 million last year. Like-for-like increased by 7.4%. Next, Slide #9 presents the income statement. So the net profit of the period, EUR 30.2 million versus EUR 26.6 million, increased by 13.5%. Next, Slide #10 is the net asset value evolution. Starting from the amount of EUR 438.9 million, we have the addition of EUR 39.3 million valuation gains, excluding minorities, minus EUR 5.8 million Hellinikon expenses, plus EUR 7.6 million of net profit for the period and EUR 0.8 million other items has led to the amount of EUR 479.2 million net asset value. Next, Slide #11 analyzes the retail investment portfolio. The investment -- the retail investment portfolio increased by EUR 68.6 million, 8.7% increase. The average EBITDA yield is now 6.9% versus 7.5% in the last December. We had a drop by 0.6%. But the EBITDA yield is based on the net operating income of 2018 because, as you know, we can't use the estimation for -- of the net operating income of 2019. Next, Slide #12 is the land plots portfolio is EUR 83.9 million, exactly the same with the previous period. So next, Slide #13 is the total investment portfolio by sector and by country. As you know, 85% focused in the retail sector and 94% of this in Greece. The total investment portfolio is now EUR 1.011 billion versus EUR 937.8 million last December. Total office is EUR 47.9 million versus EUR 45.3 million last year, representing an increase by 5.7%. Slide -- the next slide, Slide 14, presents the course of EBITDA of all the 3 centers and the total for the period between 2006 and 2018. I would like to mention that the total EBITDA starting in 2006, at an amount of EUR 30 million. And at the end of 2018, it reached the level of EUR 59.2 million, which is a record EBITDA for the group. Next, Slide #15 presents the shopkeepers' turnover history for all the 3 centers for the period between 2006 to 2018. It can be highlighted that shopkeepers' turnover shows stability for Cosmos, and from EUR 331 million in 2006 to EUR 240 million in 2018 for The Mall Athens. And finally, Golden Hall's shopkeepers' turnover has increased from EUR 138 million in 2006 to EUR 156 million in 2018. The total shopkeepers' turnover in 2018 reached the amount of EUR 580 million. Next, Slide #16 presents the total retail valuation since 2008. For Golden Hall and Cosmos, valuations of September 2019 are the peak values. The historical record was at 2009 when the total valuation was EUR 840 million. In 2009, we had the peak value for The Mall Athens, which was EUR 545 million. Next, Slide #17 is the balance sheet. There are significant changes in the balance sheet. The company applied IFRS 16 using the modified retrospective approach from the beginning of 2019. The right-of-use assets of EUR 78.7 million is the equal amount of EUR 78.7 million lease liability recognized in the balance sheet mainly refreshed to Mediterranean Cosmos in Thessaloniki. Next, Slide #18 presents the indicators. Net debt, EUR 369.8 million; I would say stable investment portfolio; an increased book equity, including minorities, EUR 470.3 million; and the average interest rate at 4.3%, stable comparing with the last period. So next, Slide #19. As you know, we outperformed the market. The LAMDA's share increase was 113.8% from 2016 until now. The market at the same period was up by 45.7%, the large cap by 38%. And Slide #20, which is the shareholders composition. Consolidated Lamda Holdings, 51%; Greek private investors, 8.2%; Greek Institutional, 7%; Aegean Airlines, 1.7%; EBRD, a new shareholder, 1.8%; and Voxcove Holdings, 10%. Okay. This brings me to the end of the presentation. So we are ready to hear your questions. Thank you very much.

[Operator Instructions] Our first question is from the line of Jakub Caithaml from Wood & Company.

This is Jakub Caithaml from Wood. I wanted to ask a couple of questions about the Hellinikon Project, if possible. In general, I mean I'm trying to break it down to smaller components to be able to understand the project better. So first off, in the presentation, which you have on the website, there is this very helpful division of the projects that you want to build over the first 5 years. I was wondering if you could give us some sort of more detailed idea about the pecking order, what comes first, what comes second? I appreciate that a lot of the projects will be kind of started and running at the same time, but just to have a general idea. Perhaps also, what are the milestones that you expect to hit in 2020 and 2021?

Well, I think what you're asking is in our presentation, what we're going to build in the first 5-year period and what the targets are in the first 5 years. Now we expect to start building at the end of this year, beginning of next year, hopefully. But -- and before that, we'll have to -- we have to embark on infrastructure, et cetera, but obviously, in order to proceed with actual building. By that time, we will have progressed very significantly on the commercialization side of the project for each component of the project that is presented in our company presentation that is on our site, but we don't have specific dates. There's nothing really substantial to add on our presentation at this point in time. Nothing -- there's no additional information compared to a few weeks ago that we can provide at this point. Of course, if Jakub, whenever you are around, we can have a discussion and discuss potential developments and details. But I don't think for this particular conference call, we can expand any further.

Okay. Fair enough. I mean in that case, let's leave it like that. I would keep you posted. I hope to be in Athens in the next couple of months, so we can speak offline.

[Operator Instructions] Sir, there are no further questions that are coming -- oh, apologies. We just have one come through from Katerina from Eurobank Equities.

I have a couple of quick questions, if I may. The first one is that there appears to be a small revaluation loss booked in Q3. Could you shed some color on that, what this relates to? And if you could give us some color on performance of the shopping centers during the holiday season in the fourth quarter, in general.

As we have already mentioned, we recognized a provision of EUR 11 million concerning the legal issue of The Mall Athens. So the increase between the first half and the third quarter of the total portfolio was EUR 8 million, but minus EUR 11 million, which is the provision. This is the reason for this decline.

Okay. That's clear.

What was the other part of your question, Katerina?

If you have any indication on trends in the shopping centers for the holiday season and the fourth quarter?

The -- as mentioned before by Mr. Baloumis, the -- in the last 3 months, we have experienced a growth in sales revenue in our shopping malls. And we expect this to continue. So we cannot really say how much exactly we're going to end up with as of 31st of December. But the trend is positive as it has been in the last 3 months. And it has been very, very, very busy, actually. And to our great satisfaction, the expansion of Golden Hall has attracted a lot of people and has been very -- so far, it really looks very successful.

There are no further questions awaiting, sir.

No other questions. Okay, okay, thank you. So Vassilios, do you want to...

Well, thank you. Thank you very much for your participation.

Thank you very much.

Thank you. Good afternoon.

Okay. Bye-bye.

Bye-bye.

Ladies and gentlemen, that does conclude the call for today. Thank you all for your participation. You may now disconnect.