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 Full Year 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 today, Mr. Baloumis. Please go ahead, sir.

Thank you. Good evening to everybody. And I suggest I will start by saying a few words about the situation with COVID-19 in Greece. As you may know, at March 13, the Greek government decided to lockdown the shopping malls in Greece. And therefore, our shopping malls, Golden Hall Mall, Mediterranean Cosmos, plus the shops and the parking operation in Marina Flisvos. For the time being, due to the circumstances, we are not able to predict the time our shopping malls will open again. And it's also challenging to dig into the financial impact worldwide. And of course, in Greece, in the areas of GDP, consumption and spending power for the consumers and the ability of the shopkeepers to fulfill their tax obligation against LAMDA after the opening of the shopping centers. We would like to announce today the following data, assuming 100% loss rent per month, not taking into account, for example, the decision of the Greek government that tenants have to pay 60% of base rent for months -- March. [Audio Gap] So lost income per month, EUR 7 million before minorities from shopping centers plus Marina Flisvos, loss to EBITDA per month for the same period EUR 6.5 million, loss to EBITDA after minorities EUR 5.3 million. As far as is concerned, the NAV and -- the net asset value per share, the impact is EUR 4 million and EUR 0.023 per share, respectively. This is the part of potential damages for LAMDA current operations. But as you know, the second pillar of LAMDA operation is the Hellinikon Project. Our intention is to get advantage from the current situation and give more effort to Hellinikon Project. So we have already proceeded with the followings: LAMDA Development personnel with external consultants, engineers and other professionals have accelerated the effort to prepare the next steps of the project like infrastructure studies, preparation in order to be completed before this year's transaction. Also, we are making the necessary preparations in order to start the demolition works of the old buildings, hopefully in a month. So before start presenting the financial results, I would like to inform you about 2 pending cities about the Hellinikon Project for the completion of the transaction. The first one is the casino license, and the second one is the decision of the superior court regarding petitions made against the joint ministerial decisions. We will have the time after the presentation to discuss this if you want in the Q&A session. So I have 2 last things I would like to say. The first one is the extension of Golden Hall in December '19. Before the lockdown, the performance of that part, that I remind you is focused in family entertainment, was very successful and also contribute to improve significantly the footfall in Golden Hall. And last but not least, LAMDA's management first concerned in employment safety, and that's why all our employees are working from home. So we are announcing today the results for the year 2019. As we shall see below, the operating results continues to increase, respectively, in the fourth quarter of the year. So retail EBITDA increased by 8.6% to EUR 64.3 million. Like-for-like EBITDA, excluding the effect of IFRS 16, increased by 2.5% versus 2018. Total EBITDA before valuations and Hellinikon once-off expenses also increased by 7.9% to EUR 50.5 million. Again, like-for-like EBITDA, excluding the effect of IFRS 16, increased by 4.7% versus 2018. Total EBITDA reached EUR 116 million. And the net profit of the period stood at EUR 49.9 million. NAV at EUR 1.155 billion and NAV per share EUR 6.54. Tenant sales recorded an increase by 2.5% and customer visit -- but customer visit decreased by 0.2%. The average occupancy approached 99%, but in essence 100% from a commercial perspective. Collection rate approaching 100%. Finally, the important developments, which is the Golden Hall, as I have already mentioned, and of course, the recent capital increase. So next Slide #3 presents the charts for sales and visits for the last 6 years, again, the increase of 2.5% of sales and a slight decrease in visitors by 0.2%. Next slide, #4, presents the EBITDA for the retail sector. The growth of the retail sector EBITDA reached, as I have already said, 8.6%. Like-for-like, the increase is 2.5%. Next slide, #5. It presents the KPI's and the EBITDA breakdown of The Mall Athens. Shopkeeper sales increased by 1.4%, visitors up by 1.2%, occupancy 98%. Total revenue is up by 2.5% due to the indexation. And also, EBITDA increased by 2.9%. Next slide, #6, Mediterranean Cosmos. Here, shopkeeper sales increased by 3.6%, visitors decreased by 1%, occupancy 99%. Total revenue up by 3.6%. And EBITDA increased by almost 30% due to the fact that the fixed component of land lease, I'm talking about IFRS 16, is allocated to the net interest. Like-for-like, the EBITDA increase is 4.2%. Next slide, #7, Golden Hall. Shopkeeper sales increased by 2.9%, visitors decreased by 0.5%, occupancy at 99% (sic) [ 98% ]. Total revenue increased by 4.6%, and EBITDA also increased by 0.6%. We can see an increase in operating expenses by EUR 0.7 million due to leasing fees, common charges contribution and marketing contribution because the extension of the Golden Hall opened at the year-end and having additional expenses before the respective income. So next slide, #8. Total EBITDA before valuations and Hellinikon expenses increased by 7.9% to EUR 50.5 million versus EUR 46.8 million last year, but excluding IFRS 16, EUR 3.6 million, and the Hellinikon expenses increase would be 4.7%. Overheads are also increased, mainly due to new hirings for Hellinikon Project. Next slide, #9, presents the income statement. So EUR 49.9 million versus EUR 42.3 million, increased by 18%. We can see a significant increase in valuations. Then, we have the Hellinikon expenses cannot be capitalized. The last thing to point out about this is that taxes in 2019 -- in 2018, sorry, were affected by an once-off positive impact EUR 14 million due to reversal of deferred tax liability due to the reduction in the income tax rate from 28% to 24%. Next slide, #10, is the net asset value evolution, starting from the amount of EUR 439 million. The addition of EUR 62.7 million valuation gains, excluding the minority rights minus Hellinikon expenses, EUR 6.3 million, plus the net profit of the year in the period. And then we have -- plus the treasury shares sales, EUR 13.1 million and the share capital increase, EUR 640 million, net reaching to EUR 1.155 billion. Next slide, #11, analyzes retail investment portfolio. The investment portfolio increased by EUR 104.6 million or 13.2%. The average EBITDA yield is now 6.8% versus 7.5% in 2018. Next slide, #12, is the land plot portfolio. It's the same, I think. And the next slide, #13, is the total investment portfolio by sector and by country. 85% focused in the retail sector in Greece -- and 94% in Greece. The total investment portfolio is now EUR 1.055 billion versus EUR 938 million last year due to valuation profits. Total offices at EUR 49.3 million versus EUR 45.3 million last year, representing an increase by 8.8%. Slide 14 presents the course of the EBITDA for all the 3 centers and in total for the period between 2006 and 2019. I would like to mention that the total EBITDA started in 2006 at an amount of EUR 30 million. And 2019, it reached the level of EUR 64.3 million, which is a record EBITDA for the group, as it happened at the last 6 years. Next slide, #15, presents the shopkeepers' turnover history for all the 3 shopping centers for the same period. It can be highlighted that shopkeepers' turnover shows stability for Cosmos and -- from EUR 331 million in 2006 to EUR 243 million in 2019 for The Mall Athens and -- but Golden Hall's shopkeepers' turnover has increased from EUR 138 million in 2006 to EUR 191 million (sic) [ EUR 161 million ] in 2019. The total shopkeepers' turnover in 2019 reached EUR 595 million. Next slide, #16, presents the total retail valuations since 2008. For Golden Hall and Cosmos valuation of 2019 are the peak values. We had a new record value in 2019 when the total valuation was EUR 892 million versus EUR 840 million back in 2009, when was the previous one record. So next slide is the balance sheet summary. There are significant sales in the balance sheet. Investment property value increased due to the valuations. The company applied IFRS 16 using the modified retrospective approach from the beginning of the year. So we have the right-of-use assets of EUR 78.80 million and the equal amount EUR 78.80 million lease liability recognized in the balance sheet. This amount mainly refers to Med. Cosmos. So cash and equity increased in 2019 due to the share capital increase. And next slide presents the indicators. Net debt to investment portfolio is 37.1%, net debt to book equity 74.8% versus 87.1% last year. Net debt to NAV 64.7% versus 71% last year. The average interest rate is 4.2% versus 4.2% at the end of the year -- at the end of the last year. Here, just to point out that for comparability purposes, cash and book equity excludes the funds raised through capital increase in 2019. Next slide, #19, is the share performance from 2016 until now. And the last slide, #20, which is the shareholders composition. So this brings me to the end of the presentation. So we are ready to hear your questions. Thank you very much.

[Operator Instructions] We'll now take our first question.

This is Jakub Caithaml from Wood & Company. I wanted to ask essentially 2 questions. First, regarding the shopping centers. If you could just clarify if you are collecting rents during the shopping centers being shut? Or if you reached an agreement with the tenants? Or if there is some government-imposed restrictions, which is saying that the rents are not due currently?

Konstantina Karatopouzi. Yes, we are collecting rents at the moment. The rents have been invoiced to March and April. So at the moment, we're collecting, let's say, as usual, of course, for the amounts that have been invoiced. So in the future, remains what is going to happen.

Sure. Excellent. I was confused because of the earlier comments in the presentation. I didn't understood that correctly. And in that place, could you please share, firstly, how much of the rents have you collected? And if there have been any significant payments kind of missing for perhaps the March rent? And secondly, if you are in some kind of talks with the tenants about some measures where you would help them kind of bear this burden so that they can go through this period and not default? Or no talks are currently in there?

First of all, let me start from the second part. Of course, there are many talks underway with the tenants because this is the way we always manage any kind of, let's say, difficult situation, just like we did back in the crisis that we had in Greece a few years ago, which is not so long ago, actually. So yes, at the moment, we already have discussions with them. It is relatively new. So there are no conclusions at the moment or different agreements from what the contractor is saying. However for the months of March and April, we have invoiced a lower amount than the usual one. We've invoiced the 60% of the rent, which is in accordance with the directions that the government has given for the cases like ours that have been affected by the coronavirus situation. So -- and in terms of your first question, how much of this has been collected? Up to now, the whole amount has been collected, but we have to note that it's a lower amount, it's 60%. So at the moment that -- a specific amount is being collected. Again, bear in mind that the collections every month refer to the current month with potentially to a month that hasn't been paid before. So this is always, let's say, a collective or accumulated basis. So there's no collection issue at the moment. But again, we're very conservative in establishing or determining anything about the cash flow collections going forward. We will see how things go, and we will address them as such.

Excellent. That's super helpful. And then the second part -- or the second question that I wanted to ask is, if you could kindly elaborate a little bit more on the kind of key administrative hurdles that are kind of precluding the start of construction of Hellinikon? And also, I just wanted to clarify because, of course, in the current uncertain environment, number of bigger investments and pipeline projects are being put on hold. So if all these administrative obstacles would be cleared, would you kind of launch the project immediately? Or would you prefer to kind of wait to see how the situation is going to evolve within the next couple of months?

The same cities apply the same administrative processes are in place. Nothing -- there's nothing really that has changed. The only thing that has changed is that the courts are slower in deciding matters because of the coronavirus. So we don't -- we cannot really project the timing as we could do before, how long it would take for a rent case to be discussed in the courts that -- each appeal that has taken place. They've been already discussed at first place, but the final decision -- for the final decision to be taken, the judges need to convene and decide and all that. And that because of the coronavirus, it doesn't happen as it normally does. So we cannot project when the court cases will be resolved by the high court. Now in terms of the casino, the situation, again, is affected by delays by the court -- the High Court because of the appeal that has been -- that has taken place by the other casino company that has made a petition to the High Court, Hard Rock, as you know. So that, again, cannot be projected from a time perspective. However, we believe that as soon as courts will start actually commencing, that will be, I guess -- we guess, sometime in May from what we understand based on how the coronavirus situation evolves. Then the things will get moving much faster than before because of this big break, because of the coronavirus. But we don't see any substantial -- any real change other than the delay from the coronavirus situation. One good thing is that the permits are only that -- we believe our permits will be obtained for demolitions. This hasn't happened, but we know that there is a will there from the government side. And soon as this happens, then demolitions can start. I don't know if we have answered your question.

[Operator Instructions] We'll now take our next question.

Just a clarification from -- a clarification of what you said, Alexandros, regarding the demolition works. So it's just now a decision by the government. There are no other obstacles. So once these decisions are taken, then you could go ahead and start doing work on the case?

Yes. Yes. Yes. Yes. When the permits are issued?

When the permits are issued? And this work is just demolition? Or it's going to be other initial works that can be done in the real estate?

Yes. Apart from a few demolition works, there'll be landscaping activities, studies, et cetera. This part has to be done anyway. They can start earlier.

Just to clarify, we're talking about the early demolition works, whatever can be done before the transfer of the shares, yes, before the transaction. This is -- these are the words that we're referring to. Now the actual construction that will start after the transaction takes place. Is that clear?

Is that -- have we answered your question? I'm not sure.

Yes, this is clear. This is clear. There is another question, it's just on the impact Vassilios mentioned on -- from closing down the mall for 1 month, the 100%. Could you repeat the numbers, please, Vassilios, because I couldn't hear exactly what were the numbers? I mean, my line was breaking.

So the lost income in a 100% basis, not according to the decision of the Greek government, it's the worst-case scenario. So I repeat lost income per month EUR 7 million, lost EBITDA per month EUR 6.5 million, lost EBITDA after minorities, I'm referring to Värde, EUR 5.3 million. And NAV means EBITDA after minorities, minus the income tax 24%. So the NAV affected by EUR 4 million per month. And the per share, the total loss per month is EUR 0.223 (sic) [ EUR 0.023 ] per share. Is it clear?

We'll now take our next question.

I'm [ Vangelis from Bank of Finance ]. Just wanted to clarify the impact that you have just mentioned is based on what? On the government's plan for the tenants to pay 60% of the rent?

No, no. It's a worst-case scenario, assuming 0 income.

0 income for 2 months?

Per month.

Per month.

Per month 0?

Yes.

0 income per month?

Okay.

Okay. This is the worst-case scenario. So if the tenants are obliged to pay 60% of the rent. This will be like 40% of that, as you mentioned?

I can give you the numbers. At this case -- at this case, the lost income is EUR 3.6 million, lost EBITDA EUR 3.1 million, EBITDA after minorities EUR 2.6 million and NAV minus EUR 2 million.

Okay. Okay. And this is in the case that tenants are paying 60% of your rent? Am I correct?

Exactly. Exactly.

[Operator Instructions] There are no other questions at this time. So I'll hand back to the speakers.

Okay. Thank you very much for your time. We're glad to answer any other questions. Thank you.

Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect.