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DEUTSCHE EUROSHOP AG

(DEQ)
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Deutsche EuroShop : Half-Year Financial Reportá2021

08/12/2021 | 12:12pm EST

H1 2021 / Half-year Financial Report dated 30 June 2021

LETTER FROM THE

EXECUTIVE BOARD

Dear Shareholders,

Dear Readers,

People are returning to shopping centers. After the remaining store closures in Germany were lifted at the beginning of June, footfall has risen again significantly and by the end of July had reached around 77% of pre-coronavirus levels. The visitors to our centers continue to exhibit great discipline in observing the measures implemented to contain the pandemic so that the centers and stores can be operated safely. Together with our tenants and ECE, our partner for center management, we are able to ensure risk-free visits to our retail properties and shops even during times of coronavirus. Centers and stores are not and have never been coronavirus hot- spots. We continue to work in collaboration with the world of politics via the relevant associations to make sure that this fact is also taken into account should the pandemic situation deteriorate again - which unfortunately cannot be ruled out - so that the shops and shopping centers can remain open throughout. That is our assumption at present.

As footfall has improved, so has the revenue of our tenants. In June 2021, it averaged at 85% of pre-crisis levels. The key operating ­figures thus show a clearly positive trend, although they still have significant ground to make up in some areas, as they did after the first lock- down in 2020 and as they do now just after the full store openings. To ­mitigate the negative impact and after-effects of the lockdown phases on the bricks-and-mortar retail trade, it is therefore necessary to continue with the temporary support offered to many of our tenants in order to safeguard the properties' continued existence. For our main market of Germany, the recent significant improvement in government support programmes has also provided some relief for retail- ers. As it stands, our occupancy rate is 93.8%, compared with 95.4%

KEY CONSOLIDATED FIGURES

01.01. - 

01.01. - 

in € million

30.06.2021

30.06.2020

+/-

Revenue 5

104.9

112.3

-6.5%

Net operating income (NOI)

71.9

80.0

-10.2%

EBIT

70.5

78.5

-10.2%

EBT (excluding measurement

gains /losses1)

55.7

62.1

-10.2%

EPRA 2 earnings

54.3

59.8

-9.2%

FFO

54.3

59.9

-9.3%

Consolidated profit

36.8

-129.3

01.01. - 

01.01. - 

in €

30.06.2021

30.06.2020

+/-

EPRA 2 earnings per share

0.88

0.97

-9.3%

FFO per share

0.88

0.97

-9.3%

Earnings per share

0.60

-2.09

Weighted number of

no-par-value shares issued

61,783,594

61,783,594

0.0%

in € million

30.06.2021

31.12.2020

+/-

Equity 3

2,355.4

2,314.8

1.8%

Liabilities

1,893.1

1,922.6

-1.5%

Total assets

4,248.5

4,237.4

0.3%

EPRA 2 NTA

2,350.1

2,309.7

1.8%

EPRA 2 NTA per share in €

38.03

37.38

1.7%

Equity ratio in % 3

55.4

54.6

LTV ratio in % 4

31.9

32.9

Cash and cash equivalents

268.1

266.0

0.8%

  1. Including the share attributable to joint ventures and associates accounted for using the equity method
  2. European Public Real Estate Association
  3. Including third-party interests in equity
  4. Loan-to-valueratio (LTV ratio): ratio of net financial liabilities (financial liabilities less cash and cash equivalents) to non-current assets (investment properties and
    financial­ investments accounted for using the equity method)
  5. Figures shown within net operating income were changed as at 31 December 2020 and the previous year's quarterly figures have been adjusted for easier
    comparability­. Please refer to the comments in the notes to the 2020 consolidated financial statements under section "4. New accounting standards and changes in presentation".

at year-end 2020. One focus of our activities is to fill these vacancies resulting from the coronavirus with attractive concepts. A number of specific approaches and negotiations with tenants are already underway in this area, although we expect that it will take some time before the gaps that have emerged can be closed again.

Deutsche EuroShop

1

H1 2021 / Half-year Financial Report dated 30 June 2021

The negative impact of the pandemic is reflected in our key financials for the first half of 2021. Revenue and EBIT were significantly lower than in the first half of 2020, at €104.9 million (-6.5%) and €70.5 million (-10.2%) respectively, which had already been affected - albeit to a lesser extent - by the business closures during the first lock- down. Earnings before taxes and measurement gains/losses (EBT before measurement) also fell by 10.2% to €55.7 million. EPRA earnings and FFO adjusted for measurement and special effects were both €54.3 million lower, down 9.2% and 9.3% on the previous year. The collection ratio has continued to improve as the reopenings have pro- gressed, already reaching 94% for the month of July. Including the effects of repaying our credit line at the beginning of the year, Group liquidity improved further, bolstered by lower capital expenditure due to the closure periods.

We were able to successfully conclude all pending refinancing of our loans for the current financial year at attractive conditions. A total of four loans with a combined volume of €191 million have been extended or replaced with our banking partners. In this ongoing exceptional sit- uation, we are coordinating with our financial partners on an ongoing basis and in a spirit of trust.

The end of the lockdown represents a major milestone on the road to the normalisation of economic life, although the bricks-and-mortar retail trade continues to face particular challenges, resulting in increased uncertainties in terms of business performance. Based on the current situation, we expect funds from operations (FFO) of €1.70 to €1.90 per share for the 2021 financial year (2020: €2.00).

This assumes that the pandemic situation will be brought under lasting control without renewed store closures or significant restrictions on center operations, a continued uptick in private consumer spending over the course of the year and an associated further recovery in tenant revenues and the collection ratio. These forecasts are also based on the assumption that the government coronavirus support programmes promised in Germany will be granted to a significant proportion of our affected tenants and paid out promptly.

Since the pandemic broke out in March 2020 and until the bricks-and- mortar retail trade was reopened just recently, we have continued to take quick and decisive action to implement the necessary measures to safeguard the sustainable development of Deutsche EuroShop. We thank you for your trust in this exceptional situation.

Hamburg, August 2021

Wilhelm Wellner

Olaf Borkers

Deutsche EuroShop

2

H1 2021 / Half-year Financial Report dated 30 June 2021

BASIC INFORMATION ABOUT THE GROUP

Group business model

Deutsche EuroShop is an Aktiengesellschaft (public company) under German law. The Company's registered office is in Hamburg. Deutsche EuroShop is the only public company in Germany to invest solely in shopping centers in prime locations. A total of 21 shopping centers in Germany, Austria, Poland, Hungary and the Czech Republic are held in the real estate portfolio. The Group generates its reported revenue from rental income on the space it lets in the shopping centers.

The shopping centers are held by independent companies, with Deutsche EuroShop holding stakes of 100% in twelve of them and between 50% and 75% in the other nine. The operational management of the shopping centers is contracted out to external service providers under agency contracts.

The Group managing company is Deutsche EuroShop AG. It is responsible for corporate strategy, portfolio and risk management, financing and communication. The Deutsche EuroShop Group has a central structure and lean personnel organisation.

The share capital amounted to €61,783,594 on 30 June 2021 and was composed of 61,783,594 no-par-value registered shares. The notional value of each share in the share capital is €1.00.

Objectives and strategy

The management focuses on investments in high-quality shopping centers in city centers and established locations offering the potential for stable, long-term value growth. A key investment target is the generation of high surplus liquidity from leases in shopping centers, of which a significant part can be paid out to shareholders in the form of an annual dividend. To this end, the Company invests its capital in shopping centers in different European regions in accordance with the principle of risk diversification. Germany is the main focus of investment. Indexed and revenue-linked commercial rents ensure that high earnings targets are achieved.

The Company may invest up to 10% of equity in joint ventures in shopping center projects in the early stages of development.

New investments should be financed from a balanced mix of sources, and external financing may not account for more than 55% of financing across the Group over the long term. As a general rule, long-term interest rates are fixed when loans are taken out or renewed, with the goal of keeping the term (average fixed interest period) at over five years.

Management system

The Executive Board of Deutsche EuroShop AG manages the Company in accordance with the provisions of German company law and with its rules of procedure. The Executive Board's duties, responsibilities and business procedures are laid down in its rules of procedure and in its schedule of responsibilities.

The management indicators (performance indicators) are based on the targets of having shopping centers with sustainable and stable value growth and generating a high liquidity surplus from their long- term leases. These indicators are revenue, EBIT (earnings before interest and taxes), EBT (earnings before taxes) excluding measurement gains/losses and FFO (funds from operations).

Due to the higher rent defaults and arrears as a result of the corona- virus, these management metrics currently have only limited information value in some cases, so the collection ratio will be used for management purposes as a supplement until further notice. The collection ratio measures the ratio of incoming payments to rent and ancillary cost receivables from tenants.

Deutsche EuroShop

3

H1 2021 / Half-year Financial Report dated 30 June 2021

ECONOMIC REVIEW

Macroeconomic and sector-specific conditions

The coronavirus pandemic led to a renewed decline in economic output in the first half of 2021. Private consumption was especially affected by this, primarily due to the lockdown measures, which lasted all the way into June with brief interruptions and regional differences. In Germany, Deutsche EuroShop's main market, gross domestic product (GDP) rose by 1.5% in real terms in the second quarter, following a 2.1% decline in the opening quarter of 2021. The unemployment rate at the end of June 2021 stood at 5.7% (end-June 2020: 6.2%). Despite prolonged lockdown phases, consumer sentiment in Germany has recovered since the beginning of the year. There has been a positive trend in both economic and income expectations and in the propensity to spend money

Bricks-and-mortarnon-food retailing benefited from the first ­reopenings, but some businesses are still lagging well behind pre- crisis levels. According to the Federal Statistical Office, German retail sales (including online spending) rose by 1.6% year on year in real terms in the first six months of 2021. Online and mail-­order were again the main growth drivers (+26.1%), whereas bricks and mortar retailers were affected by the restrictions and reported a decline in revenue (-2.5%). After the lockdown measures were lifted, significant increases (+8.7% in real terms) were observed on a monthly basis in June in the non-food retail sector. The textiles, apparel, footwear and leather goods industries, which were hit particularly hard by the store closures caused by the federal emergency brake, posted a 70.5% increase in revenue compared with May 2021, the first time it had climbed back above the pre-crisis level of February 2020 (+ 4.8%). In the retail trade involving goods of various types (including department stores), revenue was up 34.3% compared with the previous month and 7.6% higher than before the coronavirus.

RESULTS OF OPERATIONS

in € thousand

Revenue

Operating and administrative costs for property

Write-downs and derecognition of receivables

NOI

Other operating income

Other operating expenses

EBIT

At-equity profit / loss

Measurement gains / losses (at equity)

Deferred taxes (at equity)

At-equity (operating) profit /loss

Interest expense

Profit /loss attributable to limited partners Other financial gains or losses

Financial gains or losses

(excl. measurement gains /losses) EBT (excl. measurement gains /losses)

Measurement gains / losses

Measurement gains / losses (at equity)

Measurement gains /losses (including at-equity profit /loss)

Taxes on income and earnings

Deferred taxes

Deferred taxes (at equity) Deferred taxes (including at equity)

CONSOLIDATED PROFIT

01.01. - 30.06.2020

Change

01.01. - 30.06.2021

(adjusted) 1

+/-

in %

104,928

112,274

-7,346

-6.5

-14,962

-13,226

-1,736

-13.1

-18,103

-19,002

899

4.7

71,863

80,046

-8,183

-10.2

2,309

2,089

220

10.5

-3,650

-3,636

-14

-0.4

70,522

78,499

-7,977

-10.2

13,278

-37,300

-1,777

49,171

11

-146

11,512

11,725

-213

-1.8

-20,483

-21,979

1,496

6.8

-5,807

-6,198

391

6.3

4

6

-2

-33.3

-14,774

-16,446

1,672

10.2

55,748

62,053

-6,305

-10.2

-13,090

-168,702

1,777

-49,171

-11,313

-217,873

206,560

94.8

-1,479

-2,195

716

32.6

-6,138

28,564

-11

146

-6,149

28,710

-34,859

36,807

-129,305

166,112

1 Figures shown within net operating income were changed as at 31 December 2020 and the previous year's quarterly figures have been adjusted for easier comparability. Please refer to the comments in the notes to the 2020 consolidated financial statements under section "4. New accounting standards and changes in presentation".

Deutsche EuroShop

4

H1 2021 / Half-year Financial Report dated 30 June 2021

Revenue affected by the coronavirus pandemic

Revenue for the reporting period came in at €104.9 million. On a like- for-like basis, this constituted a decrease of 6.5% compared with the same period last year (€112.3 million) due to the longer closure periods compared with the first half of 2020. In our foreign markets, statutory regulations, among other things, provided for the temporary suspension of payment obligations under rental agreements for tenants affected by the closures. Other factors responsible for the decline in revenue, mainly due to the pandemic, included losses from tenants who encountered payment difficulties, lower revenue-linked rents as well as longer re-letting periods and higher vacancy rates.

Center operating expenses up on previous year due to higher non-apportionable ancillary costs

Center operating costs of €15.0 million in the reporting period, mainly comprising center management fees, non-apportionable ancillary costs, land taxes, building insurance and maintenance, increased year on year by 13.1%. This was due to higher vacancy-­ related, non-apportionable ancillary costs, which could not be offset in full despite the timely implementation of appropriate cost reduction measures.

Coronavirus-relatedwrite-downs weigh on first half of the year

Write-downs and the derecognition of receivables weighed heavily on the first half of 2021 as well, at €18.1 million (previous year: €19.0 million). The extent of the write-downs is dependent on the current status of negotiations with tenants regarding lockdown-­ related rent reductions as well as on tenant payment patterns.

Write-downs and the derecognition of receivables in the first half of the year of €14.0 million took into account both the rental concessions already contractually agreed and the further rental concessions expected on receivables outstanding as at the reporting date. In addition, receivables had to be derecognised or written down individually (€4.1 million), in particular due to insolvency.

Other operating income and expenses

Other operating income, stemming primarily from the reversal of provisions, income from rental receivables for which impairment losses had been recognised in previous years and from arrears payments with respect to ancillary costs, amounted to €2.3 million, representing a slight increase on the previous year. Other operating expenses, which mainly comprised general administrative costs and personnel costs, were the same year on year at €3.7 million.

EBIT lower than last year

Earnings before interest and taxes (EBIT) were €70.5 million, down on the figure for the previous year (€78.5 million), to a significant extent due to the coronavirus-driven decline in revenue.

Improvement in financial gains or losses excluding measurement effects

At €-14.8 million, net financial gains or losses (excluding measurement gains/losses) improved year on year (€-16.4 million).

As in the same period of the previous year, at-equity (operat- ing) earnings in the first half of 2021 were negatively impacted by coronavirus-relatedwrite-downs on rent receivables and revenue arrears and, at €11.5 million, were practically on a par with the prior year (€11.7 million). The interest expenses of Group companies were reduced by a further €1.5 million. In addition to scheduled repay- ments, the more attractive follow-up financing for the City-Arkaden Wuppertal had a positive effect here. The share of earnings attributable to limited partners decreased by €0.4 million in line with the reduced EBIT.

Deutsche EuroShop

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Deutsche EuroShop AG published this content on 12 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 August 2021 16:11:12 UTC.


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Net income 2021 -106 M -120 M -120 M
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Yield 2021 4,28%
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EV / Sales 2021 11,1x
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Nbr of Employees -
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Wilhelm Wellner Chief Executive Officer
Olaf G. Borkers Chief Financial Officer
Reiner Strecker Chairman-Supervisory Board
Karin Dohm Deputy Chairman-Supervisory Board
Klaus Striebich Independent Member-Supervisory Board