Guernsey, 21 March 2018 -
Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has
released its annual report for the year ended 31 December
2017.
-
Adjusted Net Asset Value
("Adjusted NAV") of €556.5 million[1], or €10.56
per share[2], an
increase of €0.07 per share over the quarter after paying the third
quarter dividend of €1.13 per share in December. Total increase for
the year of €1.40 per share. Including dividends declared and paid
in 2017 this represents a total return on NAV of 35% for the
year.
-
Normalised FFO[3]of €111.1
million, or €1.86 per share2, for the full
year, of which €7.8 million, or €0.14 per share, relates to the
fourth quarter.
-
Fourth Quarter 2017
Dividend of €0.27 per share2 declared on
20 March 2018 and to be paid on 5 April 2018 to shareholders of
record at close of business on 27 March 2018, with an ex-dividend
date of 26 March 2017. This follows €14.7 million of net NFFO
received in cash in the quarter, in line with the Company's
distribution policy.
|
|
FY 2017 |
|
FY 2016 |
|
Q4 2017 |
|
Q3 2017 |
|
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
Adjusted NAV1 |
|
556.5 |
10.56 |
|
550.6 |
9.16 |
|
556.5 |
10.56 |
|
641.0 |
10.49 |
Normalised FFO3 |
|
111.1 |
1.86 |
|
46.0 |
0.70 |
|
7.8 |
0.14 |
|
68.2 |
1.12 |
Dividends2 |
|
116.3 |
2.10 |
|
33.1 |
0.525 |
|
14.2 |
0.27 |
|
59.6 |
1.13 |
FULL YEAR 2017
BUSINESS HIGHLIGHTS
Successful doBank
IPO
In July 2017, doBank completed a €704 million IPO at €9.00 per
doBank share, (equivalent to approximately 2.5x Eurocastle's
original investment, net of distributions received up to the IPO).
doBank is the largest & highest rated third party NPL servicing
group in Italy.
-
Eurocastle's holding of 20 million shares,
representing 25.6% of doBank's outstanding shares, was valued at
€13.55 per doBank share as at 31 December 2017, up from €10.98 per
doBank share as at 30 September 2017. This followed the
announcement of over €9 billion GBV of new servicing contracts in
the fourth quarter. Subsequent to year-end, doBank announced a
further €2.4 billion GBV of new contracts.
doBank Financial Performance
-
The doBank Group reported EBITDA for the full
year of 2017 of €70.1 million, up 9% like-for-like[4] over the
same period last year (FY 2016: €64.3 million) driven by
collections of €1.8 billion, up 8% over last year[5].
-
Net profit for the same period was €45.0
million, up 11% like-for-like1 over the same
period last year (FY 2016: €40.4 million).
-
In March 2018, the board of doBank approved,
subject to shareholder approval, a dividend of €31.5 million
expected to be paid in May 2018 (of which Eurocastle's share is
approximately €8 million).
Strong Capital
Deployment
During 2017, invested or committed over €144 million of capital
including €117 million relating to FINO, one of the largest NPL
transactions in Italy since the financial crisis.
-
In the first half of the year deployed €1.3
million in RE Fund IV and €4.1 million of previously committed
equity in RE Fund V with an additional €0.6 million deployed in
November. Expect to fund remaining investment, estimated to be €0.8
million, during 2018.
-
In July, deployed €43.9 million to acquire an
interest in a €14.4 billion GBV NPL portfolio from UniCredit S.p.A
("FINO")[6]. The
portfolio was subsequently split into two securitisation vehicles.
A deferred purchase price of €64.7 million is payable over the next
few years. In the fourth quarter 2017, committed an additional €8.4
million investment in the mezzanine and junior notes of the two
securitisations.
-
In November, invested €12.2 million for a shared
interest in a new NPL pool with a GBV of €293 million.
-
In December, deployed €9.0 million to acquire a
share of a leveraged interest in a performing and sub-performing
("PL/SPL") loan portfolio of €234 million GBV.
Significant
Distributions to Shareholders
-
In 2017 established a new distribution policy
and declared total dividends related to the period of €116.3
million representing 100% of NFFO realised in cash. This includes a
€14.2 million, or €0.27 per share Q4 dividend declared by the Board
on 20 March 2018 and payable on 5 April 2018.
-
In November 2017, Eurocastle repurchased 8.4
million shares (representing 13.75% of the Company's voting shares
in issue) at a price of €10.00 per share, returning €84 million of
capital received following the Company's partial sale of its stake
in doBank through the IPO. The completed repurchase was NAV and
earnings accretive, increasing pro forma NFFO per share by
approximately 15% and Q3 NAV per share by approximately 1%.
Other Significant
Realisations
-
In addition to the €166 million of proceeds
received from the doBank IPO, the Company also received
approximately €26 million relating to doBank's 2016 dividend.
-
In February 2017, Eurocastle sold its remaining
interest in the units of Real Estate Fund Investment III. The sale
resulted in total proceeds of €20.9 million and a total lifetime
gross profit of €18.0 million, an IRR of 137% and a 2.7x multiple
on equity invested.
-
In May 2017, the Company announced the
successful completion on the financing of the secured portion of
its Romeo NPL portfolio. As a result, it received approximately €36
million or 50% of the net proceeds after costs and reserves.
-
In October 2017, the remaining properties held
in Real Estate Fund Investment IV were sold, realising gross
proceeds to Eurocastle of €33.6 million and €4.6 million ahead of
ECT's Q3 carrying value. Taking into account previous
distributions, the sale resulted in a total lifetime gross profit
of €21.6 million, an IRR of 95% and 2.6x multiple on equity
invested.
-
During 2017, the Company unwound its interest in
the last remaining Legacy portfolio[7] (CDO V) and
as such has now fully disposed of all Legacy investments.
BUSINESS HIGHLIGHTS SUBSEQUENT TO
31 DECEMBER 2017
Sale of Senior
Notes of FINO 1 Securitisation
-
Raised approximately €48 million of net proceeds
through the sale of its share of the senior notes of FINO 1
Securitisation S.r.l., one of the two securitisations that
collectively own the FINO NPL portfolio acquired from UniCredit
S.p.A. The senior notes are guaranteed by the Italian state under
the "GACS" program and are therefore seen as an extremely
attractive form of financing.
Follow on
Investment in FINO NPL Portfolio
-
Closed on a €8.4 million follow-on investment to
acquire, together with other Fortress affiliates, additional
interests in the mezzanine and junior notes of the two
securitisations that collectively own the FINO NPL portfolio.
NORMALISED FFO
Normalised FFO ("NFFO") is a
non-IFRS financial measure that, with respect to all of the
Company's Italian Investments other than the doBank Group,
recognises i) income on an expected yield basis updated
periodically, allowing Eurocastle to report the run rate earnings
from these investments in line with their expected annualised
returns and ii) any additional gains or losses not previously
recognised through NFFO at the point investments are realised. Cash
flow receipts are therefore allocated by the Company between income
and capital in accordance with this expected yield methodology.
With respect to the doBank Group, following the IPO, the Company
now recognises NFFO based on its share of doBank's reported annual
net income after tax together with any gains or losses arising from
the sale of its shares. The income cash flow profile of each of the
Company's investments may not exactly equal the NFFO recognised by
the Company each period but will do so over the life of each
investment.
Segmental
Normalised FFO for the Year Ended 31 December 2017 |
Average Net
Invested Capital[8] |
|
|
Italian Investments |
Legacy |
Total |
|
€ Thousands |
Yield |
|
€ Thousands |
€ Thousands |
€ Thousands |
doBank Group |
126,232 |
79% |
|
99,220 |
- |
99,220 |
Italian NPLs |
104,689 |
16% |
|
17,027 |
- |
17,027 |
Real Estate Fund Investments |
44,707 |
58% |
|
25,837 |
- |
25,837 |
Other[9] |
n/a |
n/a |
|
7,247 |
- |
7,247 |
Italian Investments NFFO before
expenses |
275,628 |
54% |
|
149,331 |
- |
149,331 |
Legacy Portfolios NFFO before expenses |
|
|
|
- |
3,258 |
3,258 |
Manager Base & Incentive Fees[10] |
|
|
|
(37,357) |
- |
(37,357) |
Other
operating expenses |
|
|
|
(3,744) |
(371) |
(4,115) |
Normalised FFO for the
year |
|
|
|
108,230 |
2,887 |
111,117 |
Per Share[11] |
|
|
|
1.82 |
0.04 |
1.86 |
Segmental Normalised FFO for the
Fourth Quarter 2017 |
Average Net
Invested Capital1 |
|
|
Italian Investments |
Legacy |
Total |
|
€ Thousands |
Yield |
|
€ Thousands |
€ Thousands |
€ Thousands |
doBank Group |
81,151 |
13% |
|
2,673 |
- |
2,673 |
Italian NPLs |
112,879 |
18% |
|
5,062 |
- |
5,062 |
Real Estate Fund Investments |
43,801 |
35% |
|
3,809 |
- |
3,809 |
Other2 |
n/a |
n/a |
|
- |
- |
- |
Italian Investments NFFO before expenses |
237,831 |
19% |
|
11,544 |
- |
11,544 |
Legacy Portfolios NFFO before expenses |
|
|
|
- |
434 |
434 |
Manager Base & Incentive Fees3 |
|
|
|
(3,012) |
- |
(3,012) |
Other
operating expenses |
|
|
|
(774) |
(371) |
(1,145) |
Normalised FFO |
|
|
|
7,758 |
63 |
7,821 |
Per Share4 |
|
|
|
0.14 |
0.00 |
0.14 |
Following the change in
classification to an investment entity[12] as defined
under IFRS 10, all investments are to be fair valued through profit
and loss prospectively from 1 July 2017 onwards. The Company's
income statement as reported under IFRS therefore presents six
months of consolidated results for the first half of 2017 and six
months of Company stand-alone results from 1 July 2017. To aid
understanding of performance, the table below also reflects the
profit and loss under the retrospective application, i.e. as if the
Company had always been classified as an investment entity, which
is consistent with how the information was presented in the
Company's Q3 2017 interim report.
|
IFRS |
Adjustments |
Non-IFRS |
Income Statement for the Year
Ended 31 December 2017 |
Prospective |
Reallocation |
Timing |
Retrospective |
|
|
€ Thousands |
€ Thousands |
€ Thousands |
€ Thousands |
|
Portfolio
Returns |
|
|
|
|
|
doBank Group |
193,526 |
- |
- |
193,526 |
|
Romeo NPLs |
6,882 |
- |
- |
6,882 |
|
FINO NPLs |
2,988 |
- |
- |
2,988 |
|
Other NPL Pools |
3,436 |
1,335 |
- |
4,771 |
|
Real Estate Fund Investment I |
1,611 |
- |
- |
1,611 |
|
Real Estate Fund Investment II |
(2,528) |
626 |
- |
(1,902) |
|
Real Estate Fund Investment III |
1,445 |
- |
- |
1,445 |
|
Real Estate Fund Investment IV |
9,190 |
- |
- |
9,190 |
|
Real Estate
Fund Investment V |
552 |
- |
- |
552 |
|
Fair value movement on Italian
investments |
217,102 |
1,961 |
- |
219,063 |
|
Real Estate Fund Investment
II |
626 |
(626) |
- |
- |
|
Other NPL
Pools (Pools 6,7-18) |
1,335 |
(1,335) |
- |
- |
|
Share of post tax profits from
Italian investments |
1,961 |
(1,961) |
- |
- |
|
Fair value movements on operating
subsidiaries - New investments |
(1,967) |
- |
- |
(1,967) |
|
Fair value
movements on operating subsidiaries - Legacy investments |
879 |
- |
- |
879 |
|
Fair value
movements on other investments |
(1,088) |
- |
- |
(1,088) |
|
Gain on
classification to an investment entity - Real Estate Fund
Investment II |
6,393 |
- |
(6,393) |
- |
|
Other
Income |
|
|
|
|
|
Other income - Legacy
investments |
2,379 |
- |
- |
2,379 |
|
Gains on foreign currency,
translation and other derivatives |
7,381 |
- |
- |
7,381 |
|
Total income |
234,128 |
- |
(6,393) |
227,735 |
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
Interest expense |
286 |
- |
- |
286 |
|
Transaction costs |
287 |
- |
- |
287 |
|
Manager Base and Incentive Fees |
37,357 |
- |
- |
37,357 |
|
Remaining operating expenses |
3,171 |
371 |
- |
3,542 |
|
Other Operating expenses |
40,815 |
371 |
- |
41,186 |
|
Total expenses |
41,101 |
371 |
- |
41,472 |
|
|
|
|
|
|
|
Net operating profit before taxation |
193,027 |
371 |
(6,393) |
186,263 |
|
|
|
|
|
|
|
Total tax expense |
16 |
(16) |
- |
- |
|
Net profit after taxation from continuing
operations |
193,011 |
(355) |
(6,393) |
186,263 |
|
|
|
|
|
|
|
Net profit after taxation from discontinued operations -
Legacy investments |
40,492 |
355 |
(40,847) |
- |
|
Net profit for the year |
233,503 |
- |
(47,240) |
186,263 |
|
€ per share |
3.92 |
- |
(0.79) |
3.13 |
|
Attributed to: |
|
|
|
|
|
Italian Investments |
189,753 |
16 |
(6,393) |
183,376 |
|
Legacy Investments |
43,750 |
(16) |
(40,847) |
2,887 |
|
The impact of the change to
accounting method on the 2017 income statement as reported under
IFRS is €6.4 million and relates to Real Estate Fund Investment II
which was previously accounted for under the equity method at cost.
The equivalent impact under the retrospective method would have
been recognised in the previous year. In addition, the
retrospective approach does not recognise €40.5 million of income
arising from the deconsolidation of the CDO V portfolio, as the
equivalent impact would have been recognised in the prior year
given the investment would have been carried at a fair value of nil
by virtue of its negative NAV and non-recourse liabilities. Outside
of these timing related effects, all other differences reflect the
reallocation of profit and loss items.
For the year ended 31 December
2017, the total net profit as reported under IFRS was €233.5
million, or €3.92 per share. Applying the accounting change on a
retrospective basis results in net profit of €186.3 million, or
€3.13 per share, of which €58.2 million, or €1.01 per share relates
to the fourth quarter.
Balance Sheet and Adjusted NAV Reconciliation as
at 31 December 2017 |
|
Italian Investments € Thousands |
Corporate € Thousands |
Total € Thousands |
Assets |
|
|
|
|
Cash and cash equivalents |
|
- |
121,481 |
121,481 |
Other assets |
|
- |
55 |
55 |
Investments: |
|
|
|
|
doBank Group |
|
271,842 |
- |
271,842 |
Romeo NPLs |
|
48,712 |
- |
48,712 |
FINO NPLs |
|
43,451 |
- |
43,451 |
Other NPL Pools |
|
47,938 |
- |
47,938 |
Real Estate Fund Investment I |
|
11,119 |
- |
11,119 |
Real Estate Fund Investment II |
|
13,131 |
- |
13,131 |
Real Estate Fund Investment IV |
|
198 |
- |
198 |
Real Estate Fund Investment V |
|
5,514 |
- |
5,514 |
Other net assets of subsidiaries (residual
legacy entities) |
|
- |
148 |
148 |
Total assets |
|
441,905 |
121,684 |
563,589 |
|
|
|
|
|
Liabilities |
|
|
|
|
Trade and other payables |
|
- |
3,852 |
3,852 |
Manager Base and Incentive Fees |
|
- |
3,218 |
3,218 |
Total liabilities |
|
- |
7,070 |
7,070 |
|
|
|
|
|
Net Asset Value |
|
441,905 |
114,614 |
556,519 |
|
|
|
|
|
FINO Deferred Purchase Price Commitment |
|
64,680 |
(64,680) |
- |
FINO follow-on Commitment |
|
8,440 |
(8,440) |
- |
RE Fund Investment V remaining unfunded
Commitment |
|
795 |
(795) |
- |
|
|
|
|
|
Adjusted NAV |
|
515,820 |
40,699 |
556,519 |
Adjusted NAV (€ per Share) |
|
9.79 |
0.77 |
10.56 |
ADDITIONAL
INFORMATION
For additional information that
management believes to be useful for investors, please refer to the
latest presentation posted on the Investor Relations section of the
Company's website, www.eurocastleinv.com. For consolidated
investment portfolio information, please refer to the Company's
most recent Financial Report, which is available on the Company's
website (www.eurocastleinv.com).
EARNINGS CALL
INFORMATION
Eurocastle's management will host
an earnings conference call at 1:00 P.M. London time (9:00 A.M. New
York time) later today. All interested parties are welcome to
participate on the live call. You can access the conference call by
dialling first +1-800-215-5243 (from within the U.S.) or
+1-330-863-8154 (from outside of the U.S.) ten minutes prior to the
scheduled start of the call; please reference "Eurocastle Fourth
Quarter 2017 Earnings Call" or "conference ID number 6277238".
A webcast of the conference call
will be available to the public on a listen-only basis at
www.eurocastleinv.com. Please allow extra time prior to the call to
visit the site and download the necessary software required to
listen to the internet broadcast. A replay of the webcast will be
available for three months following the call.
For those who are not available to
listen to the live call, a replay will be available until 11:59
P.M. New York time on Saturday, 21 April 2018 by dialing
+1-855-859-2056 (from within the U.S.) or +1-404- 537-3406 (from
outside of the U.S.); please reference access code "6277238"
ABOUT
EUROCASTLE
Eurocastle Investment Limited is a
publicly traded closed-ended investment company that focuses on
investing in performing and non-performing loans and other real
estate related assets primarily in Italy. The Company is Euro
denominated and is listed on Euronext Amsterdam under the symbol
"ECT". Eurocastle is managed by an affiliate of Fortress Investment
Group LLC, a leading global investment manager. For more
information regarding Eurocastle Investment Limited and to be added
to our email distribution list, please visit
www.eurocastleinv.com.
FORWARD LOOKING
STATEMENTS
This release contains statements
that constitute forward-looking statements. Such forward-looking
statements may relate to, among other things, future commitments to
sell real estate and achievement of disposal targets, availability
of investment and divestment opportunities, timing or certainty of
completion of acquisitions and disposals, the operating performance
of our investments and financing needs. Forward-looking statements
are generally identifiable by use of forward-looking terminology
such as "may", "will", "should", "potential", "intend", "expect",
"endeavor", "seek", "anticipate", "estimate", "overestimate",
"underestimate", "believe", "could", "project", "predict",
"project", "continue", "plan", "forecast" or other similar words or
expressions. Forward-looking statements are based on certain
assumptions, discuss future expectations, describe future plans and
strategies, contain projections of results of operations or of
financial condition or state other forward-looking information. The
Company's ability to predict results or the actual effect of future
plans or strategies is limited. Although the Company believes that
the expectations reflected in such forward-looking statements are
based on reasonable assumptions, its actual results and performance
may differ materially from those set forth in the forward-looking
statements. These forward-looking statements are subject to risks,
uncertainties and other factors that may cause the Company's actual
results in future periods to differ materially from forecasted
results or stated expectations including the risks regarding
Eurocastle's ability to declare dividends, amortise the Company's
debts, renegotiate the Company's credit facilities, make new
investments, or achieve its targets regarding asset disposals or
asset performance.
[1]Adjusted NAV
for Q4 is before deducting the fourth quarter dividend of €0.27 per
share declared in March 2018.
[2]Amounts per
share are calculated on the following basis: Q4 2017 Adjusted Net
Asset Value ("Adjusted NAV") - 52.7 million voting shares in issue;
Q3 2017 Adjusted NAV - 61.1 million voting shares in issue; Q4 2017
NFFO - 57.5 million weighted average shares; Q3 2017 NFFO - 60.7
million weighted average shares and FY 2017 NFFO - 59.6 million
weighted average shares. Q4 2017 & Q3 2017 dividends paid on
52.7 million voting shares; FY 2017 dividend per share represents
the sum of the first, second, third quarter 2017 dividends (€1.83
per share) and €0.27 per share dividend for the fourth quarter 2017
declared in March 2018.
[3] Normalised
FFO ("NFFO") is a non-IFRS measure used to explain the financial
performance of the Company, as outlined on page 11 of the 2017
Annual Report.
[4] Financials
for 2016 are pro forma for the acquisition of 100% of the share
capital of Italfondiario S.p.A. and derecognition of the Romeo
portfolio, as if these had been put in place on 1 January 2016
[5] Increase in
collections assumes net collections for Italfondiario for the 12
months ended 31 December 2016. Alternatively, it would be an
increase of 3% if gross collections of Italfondiario for the same
period were applied.
[6]At
completion of the acquisition, and following interim collections
from the cut-off date the €17.7 billion GBV FINO NPL portfolio
reduced to €16.2 billion, with the sub-pool reducing to €13.2
billion GBV.
[7]The Legacy
business encompasses all investments owned by the Group prior to
April 2013, date at which the group re-strategised and started
focusing on investments in Italian performing and non-performing
loans and other credit receivables.
[8]Time
weighted average of invested capital (net of any capital returned)
over the relevant period.
[9] Fully
realised investments.
[10]Manager
base fees are equal to the sum of (i) 1.5% of the Company's Net
Asset Value excluding Net Corporate Cash and (ii) 0.75% of the
Company's Net Corporate Cash calculated and paid monthly in
arrears. Incentive fees are equal to 25% of the euro amount by
which the Company's NFFO derived from Italian Investments (net of
allocable fees and expenses) exceeds the net amount invested in
such investments multiplied by a simple interest rate of 8% per
annum (calculated on a cumulative but not compounding basis).
[11]Amounts per
share are calculated on the following basis: FY 2017 NFFO - 59.6
million weighted average shares; Q4 2017 NFFO - 57.5 million
weighted average shares.
[12]Refer to
page 10 and pages 28-30 of the 2017 Annual Report for further
details.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Eurocastle Investment Limited via
Globenewswire
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