Secure Property Development & Invest : - – RNS Half Year Results 2017

Secure Property Development & Invest PLC/ Index: AIM / Epic: SPDI / Sector: Real Estate

Secure Property Development & Investment PLC ('SPDI' or 'the Company') Half-Year Report

Secure Property Development & Investment PLC, the AIM quoted South Eastern European focused property company, is pleased to announce its unaudited half-year report for the period ended 30 June 2017.

Financial Highlights

Continued success in maximising returns from portfolio of South Eastern European prime real estate, the majority of which is let to blue chip tenants on long leases

• 9% increase in operating income to ~€3 million (H1 2016: ~€2,8 million) thanks to active management of portfolio

• 18% increase in EBITDA from operations to ~€1,8 million (H1 2016: ~€1,5 million) due to ongoing strategy to reduce cost base by ~30% by 2017 vis a vis 2015:

  • 8% reduction in administrative expenses to ~€1,06 million (H1 2016: ~€1,15 million)

  • 7.3% reduction in asset operating expenses to ~€361k (H1 2016: ~€390k)

    Significant asset backing behind the Company:

• 2% increase in net equity to ~€40 million compared to ~€39 million as at 31 December 2016 (H1 2016: ~€41 million) despite sale of assets

• Sale of non-core properties during the period achieved at book value

• Shares issued to Non-Executive Directors in lieu of fees at £0.35 per share, a 100%

  premium to the previous closing share price on 12 May 2017

  Strengthened balance sheet:

• 8% reduction in operational gearing to 47% (H1 2016: 52%) - sale of Terminal Brovary

  resulted in repayment of ~€12 million EBRD debt

• 17% reduction in net finance costs to ~€1 million (H1 2016: ~€1,2 million)

  Operational Highlights

• Sale of Terminal Brovary completed at a Gross Asset Value of over €16 million generating a profit for SPDI of ~€2.7 million and a cash inflow of more than €3 million

• Lease agreement signed with large Romanian logistics operator Aquila srl for 5,740 sq m of space in the Innovations Logistics Park in Bucharest - annual rent of ~€300,000

• Over €100,000 received net of VAT for the provision of asset management services to a third party in Romania

  Post Period End Highlights

• Conditional sale of Kiyanovski land asset in Kiev, Ukraine for a price expected be in excess of US$3 million which is in line with 31 December 2016 valuation

• Disposal of 65% owned ~40,000 sq m plot of land in Romania (Delia Lebada) for ~ €2.5 million (net) and settlement of associated €6.5 million loan at a rate of 45 cents / Euro (totalling ~€3 million) using the disposal proceeds plus additional €550,000 payment

Lambros G. Anagnostopoulos, Chief Executive Officer, said, "Excellent progress has been made across all our key performance metrics over the half year period, as we continue with our strategy to transform SPDI into a leading London-traded property company focused on selected South Eastern European countries. The numbers speak for themselves: operating income up 9% to over €3 million; EBITDA up 18% to €1,8 million; corporate overheads and property expenses down over 7%; net finance costs down 17%; operational gearing down 8%; and net equity up 2% to just at ~ €40million. Standing at over twice our current market value, this last figure serves to demonstrate the strong asset backing behind SPDI.

"Trading at a discount to book value can reflect the risk of realised values not matching those reported in the accounts. We believe the existing 50%+ discount is excessive, particularly as the sales completed or conditionally agreed during the half year and post period have been in line with book value. This demonstrates the accuracy of the valuations we assign to our properties, and also the team's expertise in securing deals at attractive prices. In our view, SPDI represents a low cost opportunity to gain exposure to rapidly growing economies and the ongoing European yield compression play, one that was recognised during the period by members of the Board who accepted shares issued at a 100% premium to the then share price in lieu of fees accrued. As we continue to build and manage our portfolio of prime real estate, we are confident SPDI's shares will trade closer to the underlying value of the Company."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

* * ENDS * *

For further information please visit www.secure-property.eu or contact:

Lambros Anagnostopoulos	SPDI	Tel: [phone]
Rory Murphy Ritchie Balmer	Strand Hanson Limited	Tel: [phone]
Lottie Brocklehurst Frank Buhagiar	St Brides Partners Ltd	Tel: [phone]
Jon Belliss Elliot Hance	Beaufort Securities Limited	Tel: [phone]

1. Management Report

In Summary

The first half of 2017 was a period of strong and steady value generation for SPDI following the consolidation period of the previous years. Specifically the Company sold two assets in Ukraine: one income producing fully let core asset that was sold in January; and one non-core asset that was conditionally sold in July. Both properties have been sold at around book value and in aggregate, generated more than €6 million in cash in net proceeds for the Company, demonstrating again the mismatch between the Company's Net Asset Valuation compared to its market capitalisation, which currently stands at more than a 50% discount to book value. In addition, the Company prepared the sale of other non-core assets (with one being effected in July 2017) while undertaking a cost cutting plan, as embarked upon last year.

In Romania, the fastest growing economy in the EU, we spent time and resources progressing the refinancing of various components and facilitating sales within our residential portfolio, actions we believe will ideally place SPDI to reap the benefits of this advancing market. In parallel with this, we rented all the unlet ambient space at Innovations Logistics Terminal to Aquila Srl, a large Romanian logistics operator and Coca Cola's distributor in Romania. This followed the signing of a new sale and leaseback agreement with Bank of Piraeus after Nestle's departure from the building, which had prompted prolonged negotiations with the lending bank.

In July 2017, the Company closed the disposal of the Delia Lebada 40k sqm lake front plot of land on Pantelimon lake, which generated a profit of more than €3 million as the plot was recorded in the Company's books at a discounted €4.5 million, while the related loan (which the Company managed to negotiate a 50% haircut) was kept at full value of more than €6 million. By retaining a small percentage of the now debt free plot and the right to increase it, the Company has the option of tapping into any further value-add, should this prove possible.

In Ukraine, an economy that has been hampered by both the war and continuing tensions with neighboring Russia as well as the resulting drop in its GDP, SPDI concluded in January the sale of Terminal Brovary Logistic Park in Kiev ('Brovary'), generating more than €3 million in cash. A few months later, the Company conditionally sold its Kiyanovski land plot in Podil, a 0.55Ha plot of land very well located in this traditional neighborhood of Kiev, for a price greater than US$3m million. Having received a non-refundable down payment of US$100k, SPDI is awaiting the issuance of the construction permit, which will signal the second payment of ~ US$1.4 million with the remainder of the cash following suit. As a result of these transactions, the Company is one of the few sellers in the country that managed to generate cash and not make a loss in the process.

The economic climate in South East Europe improved further in the first half of 2017.

Romania continues its fast growth after recording an annual rise of ~4% in GDP. Bucharest continues to boast almost no unemployment and its property market is continuing its uptrend with prices growing and cap rates dropping.

Greece managed to finalise the agreement with its international lenders (ECB, IMF and EU), which was signed within the period, removing most of the uncertainty surrounding its economic direction. With a primary surplus and indications pointing to possible GDP growth within 2017, the first non-recessionary year since 2012, Greece is poised to experience a positive economic reversal.

Following SPDI's profitable disposal of Delia Lebada in July as well as the cash generating sales in Ukraine, the Company's Gross Asset Value ("GAV") stood at €78 million as at September 2017, compared to €105 million the previous year. In addition, as the Brovary and Delia Lebada assets had higher than average leverage, the LTV for SPDI experienced a substantial drop and now stands at less than 50%, further reducing any risk associated with our assets in Ukraine (where we now have no debt whatsoever). As a result, and as shown in the table below our properties are now located mostly in Romania (55%) and Greece (21%), both economies with substantial near-term upside potential. In addition, the Company's debt is also centered around these economies and at much lower levels than in 2016, whereas our NAV picked up towards ~€40 million, 2% higher from the year end NAV. The results of our strategy to diversify out of our roots in Ukraine and invest in undervalued assets in countries with high growth potential, is paying off, with concrete results seen during the period.

GAV % allocation by Country*
2013	2014	2015	Sep 2016	Sep 2017
Ukraine	100%	42%	21%	12%	11%
Greece	0%	21%	14%	16%	21%
Bulgaria	0%	0%	16%	17%	12%
Romania	0%	37%	49%	55%	55%
GAV (€ million)*	40	78	117	105	78

*Sep 2016 excludes Terminal Brovary and Sep 2017 excludes Terminal Brovary, Kyanovski lane and Delia Lebada