POLNORD INVESTOR PRESENTATION. August 2018

Transcription

1 POLNORD INVESTOR PRESENTATION August 2018

2 INVESTMENTS THESIS Higher utilization of assets, strategic and organizational changes helped the Group improve its cash flow, business and financing stability Investments thesis 1 New management model and competences When the financial investors took over the control, major organizational changes were implemented to improve investment efficiency, purchasing competitiveness, operational effectiveness and risk management The above included also hiring new employees with experience gained with competitors to ensure even faster utilization of the land bank 2 Land bank covering most of the Group's land needs for upcoming years The Group owns one of the biggest land banks among all Polish property developers. In the upcoming years, over 300 k sqm. of saleable area can be sourced from the bank In total the land bank covers over 570 k sqm. saleable area, including properties in Dopiewiec, Powsin and Głosków for which a longer property development timeframe is expected 3 Cash flows significantly better than P&L financial results The Group's cash flow is significantly better than its financial result as recognized through P&L account. The lower profitability of the business results from e.g. high historical valuation of assets, property locations. The Management Board and the Supervisory Board decided to accelerate the property development process to free the capital frozen in properties debt repayment was initiated along with new land acquisitions for future projects 4 Finished Wilanów Office Park commercialization In 2017, Wilanów Office Park finished the commercialization stage: the complex is ready for sale, the loan can be repaid, and the project will provide additional financing for the residential development business At the end of 2017, the office buildings were valued at PLN million, with the total debt from loan facilities at mere PLN 64.6 million (LTV 47%) 5 Financing structure The Group used to raise financing mainly from bonds offered to retail investors. Improved cash flow and higher transparency of the business allow a stronger position towards banks and bondholders institutional investors The current project portfolio enables repayment of the entire debt. The Group seeks partial refinancing and new project finance for future investments 2

3 GROUP SUMMARY Polnord Group is one of the biggest nation-wide residential developers. In addition to its anchor markets in Warsaw and the Tri-City area, the Group seeks new projects also in Wrocław and Cracow Polnord Group has been operating since 1977 and focused on the general construction business in its initial period. The Group has been in the residential development since In 2007, Polnord sold its construction business to Pol-Aqua Since the start of its residential development business Polnord Group has been concentrating mainly on two locations: the Tri-City area and Warsaw where its position is the strongest and most recognizable In addition to Warsaw and the Tri-City area, Polnord Group proactively seeks new projects in Cracow and Wrocław, as well. In parallel, it continues to develop the properties already found in its land bank in other cities (Łódź, Olsztyn, Poznań, Szczecin) The Group owns one of the biggest land banks among all residential developers in Poland. The bank covers over 300 k sqm. of total saleable area (housing and small commercial units), or over 570 k sqm. together with the property near Poznań. Such land bank satisfies the Group's expected investment needs for the next 4 years or more Polnord Group is one of the biggest nation-wide residential developers listed on the Warsaw Stock Exchange/Catalyst. Compared to competitors, in 2017 it s ranked: - 5th for units handed over - 9th for units sold In its anchor locations (the Tri-City area and Warsaw), the Group has a strong and competitive position, especially in the Tri-City area where it is ranked 3rd according to all flats sold in 2017 The Company has been listed on the Warsaw Stock Exchange since 1999 and is the founding member of the Polish Association of Property Developers (PZFD) Business areas Tri-City Olsztyn Szczecin Poznań Warsaw Łódź Wrocław Cracow Key markets Other markets Revenues per market and business segments in % 3.4% Total revenues PLN million 22.8% 38.7% 38,6% 93.7% Trójmiasto Tri-City Warszawa Warsaw Pozostałe Other Residential development Office space rental Other Source: 2017 Financial Statements of the Group 3

4 GROUP SUMMARY For 3 years Polnord has been under the control of financial investors and the Board, which is focused on improving the Company's operational effectiveness Landmark events across 40+ years of Group's operations 1999 WSE IPO Ryszard Krauze joined the company 2007 General contractor business sold to Pol-Aqua and focus changed to residential development 90 hectares of land invested by Prokom Investments 2013 Joint Venture cooperation started with MS Waryński Development SA 2016 New Management Board Operational restructuring started New Group strategy for Admiralska street property acquired in Warsaw New financial strategy Ended cooperation with KB Dom, risks elimination 1977 General Contractor for Eksport Północ 1997 Residential development business started Construction/General Contractor business 2005 Joint Venture cooperation started with Martinsa Fadesa SA Further growth of residential development business Willanów Office Park project 2015 Prokom Investments lost control in favor of financial investors Property value audit started 2017 Record-breaking revenues (flat hand-overs) and sales (which will impact on future revenues) Property revaluation process finished Land search&buy process restarted and intensified for future projects Residential development business 4

5 GROUP SUMMARY Vast historical issues were addressed in the recent years Before restructuring During restructuring Today Land bank value and consolidated results Accounting methods and non-operational activity have been impairing the Group's results for many years and making its current situation difficult to understand for banks and investors Excessive valuation of certain properties in the past had a negative impact on projects profitability in later years Independent valuation of properties In 2015 and 2017 financial statements, major adjustments were posted regarding property revaluation (most of the valuations were provided by 3 independent entities) Low utilization of assets By 2016, the land bank was utilized to a very limited extent (mainly due to building permit delays) The Group operated with high debt ratio and low asset utilization, which caused continuous need for land bank (re)financing that lead to high interest costs with low revenue Accelerated utilization of land bank properties The Group greatly accelerated the property development process while adding more land to the bank As the result, the Group has launched in 2017 many new projects, marking record-breaking turnover and generating strong cash flows Many disputes and poor risk management Recent years were full of disputes with local governments and business partners At the same time, the Group was failing to properly manage its projects and risks New management model Major organizational changes were implemented, such as: improvement of investment efficiency, purchasing competitiveness, operational effectiveness and risk management 5

6 GROUP SUMMARY In 2017, the Group noted record-breaking level in sales and quantity of new units put up for sale a good prognostic for revenues and cash flow in the coming years Compared to 2016, the Group achieved record-breaking turnover in 2017: New land expense in (PLN million) - ca. 36% more units sold (up to 1,389) - ca. 34% more units handed over (up to 1,131) - ca. 66% more new units put up for sale (up to 1,595) - ca. 28% increase in offer size (up to 1,401) 2017 marked the highest expense on new land: over PLN 35 million Units sold* (thousand) Units handed over* (thousand) % % Units on offer at end of year (thousand) New units put up for sale* (thousand) +28% +66% * Weighted on Polnord's share Source: Financial Statements of the Group

7 GROUP SUMMARY A number of one-time items and accounting events have impacted the Group's P&L results in the last 3 years. Despite unsatisfactory net income Polnord Group has been generating strong cash flows PLN million Q LTM Revenue from sales EBITDA EBITDA margin 2.4% 8.0% 7.8% -14.3% -49.2% EBIT EBIT margin 2.0% 7.7% 7.5% -14.9% -49.5% Net profit (loss) Net profit (loss) margin 3.9% 3.3% 1.1% -9.6% -56.1% Cash flow Cash flow from operating activity Cash flow from investment activity Cash flow from financial activity Cash and cash equivalents: including in escrow accounts Balance sheet data Investment properties Inventories Total assets , , ,398.7 Equity Debt Net debt Net debt ratio % 41.7% 42.1% 48.7% 52.6% (1) Net debt = interest-bearing financial debt (unrestricted cash + restricted cash up to PLN 50 million) (2) Net debt ratio = net debt/equity In 2017 Polnord Group has generated the highest revenues since Great results are the effect of 2016 strategy implementation - projects initiated in the last two years brought changes to P&L account Regardless of the performed property revaluation (leading to lowered value of certain investment properties) Polnord Group still posted a net profit for 2017 Even with its neutral results, Polnord Group has been generating strong cash flow from its operating activity, which allowed debt reductions in 2017 As at the the end of Q1 2018, the Group had PLN million of cash, including PLN 51.3 million of unrestricted cash 7

8 MARKET SUMMARY The rising demand and supply of housing units promote the growth of the Polish property market. Key drivers of Polish property market Demand-side factors Economic growth Rising flat rents Salary increases Supply-side factors Stable interest rates MdM state subsidies ended Higher catalogue and transaction prices More building permits issued for residential buildings Property developer activity continued high Mieszkanie Plus state subsidies Higher prices of construction services and materials The record-low unemployment rate, high rises of salaries, low inflation rate and continuous GDP growth have positive impact on the real property market in Poland Flat rent fees are rising as a response to the rising salaries. Higher rents help keep renting profitable even with the rising prices of flats The continuous increase of the statutory average/minimum salaries leads to better creditworthiness of buyers. It has positive influence on the Polish property market when coupled with the current affordable mortgage offers from banks Interest rates have been stable for around 3 years. The Monetary Policy Council (RPP) is rather precautionary when it comes to interest rate raises In January 2018, the last tranche was paid under MdM (Mieszkanie dla Młodych) government programme which provided young couples with partial financing of their first property 2017 was another year when both offer and transaction prices grew on average In January November 2017, there were 27% more building permits issued than in the same period in 2016 There were over 178 k flats commissioned for occupancy in 2017: 9% more than in 2016 This government programme aims at improving supply of affordable flats for renting. The final proposal is still in progress Insufficient staffing has led to higher prices of construction services in The rising prices of construction materials caused higher overall project costs. This trend does not appear to change at any time soon. A partial remedy for this issue could by fixed-price contracts and higher catalogue prices of flats to compensate for the increase 8

9 MARKET SUMMARY In 2017, the demand for housing units improved greatly and exceeded the level of new offers was a year of very positive situation on the property market 73 k flats were sold: 17% more than in the previous year. Also, it was the first year since 2013 when the number of sold flats exceeded the number of new flats on offer In most cities of Poland there were more flats commissioned for occupancy in 2017 than in In 2017, there were 178 k flats commissioned for occupancy: 9.1% more than in 2016 In January December of 2017, there were much more flats covered with new building permits over 250 k flats: 18.3% more than in 2016 According to REAS, in six major metropolitan areas in Poland property developers sold 18.4 k flats in Q1 2017: 2.5% less than in the record-breaking Q (18.9 k flats). In Q1 2017, the market trends were positive leading to high demand for flats. Although the turnover was very high, the supply was clearly lower. Property developers offered 14.9 k new flats compared to 16 k in 2016 Most new flats were handed over in Warsaw, Cracow, Wrocław and the Tri-City area. The same markets are the focus for the Group: either in current operations (Warsaw and Tri-City) or as prospect grounds (Cracow and Wrocław) Housing sector trends flat sales volume (thousand)* Q New flats available for sale Sold flats Flats on offer at end of year/quarter *aggregated for 6 markets (Warsaw, Cracow, Wrocław, Tri-City, Poznań, Łódź) Source: REAS Housing units handed over in major cities of Poland (thousand) Housing units covered with new building permits issued in major cities of Poland (thousand) Poznań Trójmiasto Tri-City Wrocław Kraków Cracow Warszawa Warsaw Poznań Trójmiasto Tri-City Wrocław Kraków Cracow Warszawa Warsaw Source: Main Statistical Office (GUS) Source: Main Statistical Office (GUS) 9

10 MARKET SUMMARY... leading to higher prices of housing units offered by residential developers In 2017, the average catalogue price of one square meter increased and reached PLN 7,309 in Q The average transaction price kept rising through the year and average transaction price of one square meter reached PLN 6,969 in Q As at the end of Q1 2018, the highest average prices were observed in Warsaw: PLN 7,965, followed by the Tri-City area: PLN 7,255 in Gdańsk and PLN 6,851 in Gdynia. Those markets are the business focus for Polnord The rising turnover, continuous growth of demand and the rich offer allow residential developers to keep rising their catalogue prices Average housing unit transaction price in selected cities of Poland (PLN) I 2014 III 2014 I 2015 III 2015 I 2016 III 2016 I 2017 III 2017 I Gdańsk Gdynia Łódź Olsztyn Szczecin Warszawa Warsaw Wrocław Source: National Bank of Poland (NBP) Average price for new housing unit per one square meter in 7 major cities of Poland* III 2006 I 2007 III 2007 I 2008 III 2008 I 2009 III 2009 I 2010 III 2010 I 2011 III 2011 I 2012 III 2012 I 2013 III 2013 I 2014 III 2014 I 2015 III 2015 I 2016 III 2016 I 2017 III 2017 I 2018 Ceny Catalogue ofertowe price Ceny Transaction transakcyjne price * Gdańsk, Gdynia, Łódź, Cracow, Poznań, Warsaw, Wrocław Source: National Bank of Poland (NBP) 10

11 MARKET SUMMARY Polnord Group is one of the biggest residential developers in Poland in terms of all units sold and handed over in 2017 Sales volume of major residential developers listed on Catalyst, (no. of units) Developres Marvipol Dev Victoria i2 Dev Ronson Vantage Lokum Polnord Echo Investment Source: Corporate publications Archicom JWC LC Corp Atal Robyg Murapol Dom Dev Handovers volume of major residential developers listed on Catalyst, (no. of units)* Developres i2 Dev Marvipol Dev Lokum Victoria Archicom ** Ronson Vantage Echo JWC Polnord LC Corp Robyg Atal Dom Dev Murapol Investment * without Murapol (no comparable data for 2017) ** As at 24 November 2017 Source: Corporate publications The biggest developers marked record-breaking turnovers in They sold over 27 k units based on new development/preliminary sale contracts. It was almost 25% more comparing to Most of the surveyed property developers achieved higher sales than in Such splendid results allow assuming that the coming years will bring major growth in revenues for the leading developers. Polnord was ranked the 9th developer on Catalyst market the Group sold 1,389 units in 2017: 36% more than in 2016 Polnord is the 5th company with the highest handovers growth: 34% more than in

12 MARKET SUMMARY In its anchor locations (Tri-City and Warsaw), the Group has a strong position, especially in the Tri-City area where it is ranked 3rd for the number of all units sold in 2017 TOP 10 developers in the Tri-City area: total number of units sold in TOP 10 developers in Warsaw: total number of units sold in Robyg Hossa Polnord Dekpol Inpro EURO STYL Invest Kom Przeds. Górski Ekolan Budimex 0 Dom Dev Robyg LC Corp JW. Cons Victoria Dom Radius Proj Marvipol Polnord Asbud Bouygues Since the start of its residential development business Polnord Group has been concentrating on two locations: the Tri-City area and Warsaw where its position is the strongest and most prominent. In 2017, the Group sold 1,071 units in those locations: 77% of all 1,389 flats sold by the Group in 2017 The Group is ranked 3rd in the Tri-City area (535 units sold) and 8th in Warsaw (536 units sold) Source: REAS, Group 12

13 MAIN DIRECTIONS FOR STRATEGIC GROWTH The recent strategic assumptions foresee a sustainable development of the Group based on robust cash flows Main strategic directions for growth Operational focus on big metropolitan areas: Mainly Warsaw and the Tri-City area Proactively search for new projects also in Cracow and Wrocław Utilisation of the properties already found in the portfolio in other cities (Łódź, Olsztyn, Poznań, Szczecin) Higher profitability of operations: Thanks to new investments made available for sale Not less than 18% net New projects adapted to the actual market needs New finance structure: Bonds intended for institutional investors Credit facilities as SPV project finance Moderate levels of debt ratio Maturity/timetable fully matched with expected cash flows Sustained development: Annual sales volume at the level of 1,500 units New land searches and in-depth analysis of each business case Precautious but regular expenditures for new land Over ten new projects/project stages made available for sale every year Objective Robust cash flow, improved profitability and higher market cap 13

14 PORTFOLIO SUMMARY The Group focuses on metropolitan areas, such as Warsaw and the Tri-City area. In other locations, Group is developing properties already found in land bank Map of open and planned projects 2023 horizon (as of 30 June 2018) Tri-City Projects # projects # flats UFA (sqm.) In progress ,251 Planned 9 1,167 50,404 Olsztyn Projects # projects # flats UFA (sqm.) In progress ,299 Planned ,566 Wrocław Projects # projects # flats UFA (sqm.) JV in progress ,578 JV planned ,823 Warsaw Projects # projects # flats UFA (sqm.) In progress ,094 Planned 17 1, ,298 JV in progress ,162 JV planned ,464 Łódź # projects # flats UFA (sqm.) Polnord 38 5, ,274 In progress 7 1,190 63,644 Planned 31 4, ,630 JV ,026 ii progress ,740 Planned ,287 Total (weighted for Polnord's share) 46 5, ,859 In progress 12 1,471 80,388 Planned 34 4, ,470 Projects # projects # flats UFA (sqm.) Planned ,363 Cities covered by Polnord Definitions: "In progress" are projects under construction or in sales, excluding projects with minor number of flats remaining "Expected" are projects for which the sales launch is scheduled for a future period but the land bank already contains the property 14

15 PORTFOLIO SUMMARY Summary of key projects realized solely by Polnord expected to generate significant cash flows in five-year horizon (1/4) Key projects completed, in progress and planned solely by Polnord Project Location Sales launch date Construction end date Flats # Usable floor area (sqm.) Sales progress* Construction progress** Building permit Brzozowy Zakątek Warsaw Q Q , % 100% YES Brzozowy Zakątek - A2 Warsaw Q Q , % 100% YES Brzozowy Zakątek - A3 Warsaw Q Q , % 100% YES Brzozowy Zakątek - A4 Warsaw Q Q ,803 90% 75% YES Studio Morena Gdańsk Q ,965 55% 10% YES Fotoplastykon - stage I Gdańsk Q Q ,833 90% 30% YES Fotoplastykon - stage II Gdańsk Q Q ,128 35% 0% YES Fotoplastykon - stage III Gdańsk Q Q ,325 10% 0% YES Neptun I - stage II Ząbki by Warsaw Q Q , % 100% YES Neptun II - stage IA Ząbki by Warsaw Q Q ,500 95% 100% YES Neptun II - stage IB Ząbki by Warsaw Q Q , % 100% YES Neptun II - stage II Ząbki by Warsaw Q Q ,094 40% 35% YES Chabrowe Wzgórze - stage I Gdańsk Q Q , % 100% YES Chabrowe Wzgórze - stage II Gdańsk Q Q , % 100% YES Definitions: "Completed" are projects for which the construction process was finalized (completion status is 100%) "In progress" are projects under construction (completion status less than 100%) "Expected" are projects for which the sales launch is scheduled for a future period but the land bank already contains the property * At the end of Q ** At the end of Q

16 PORTFOLIO SUMMARY Summary of key projects realized solely by Polnord expected to generate significant cash flows in five-year horizon (2/4) Key projects completed, in progress and planned solely by Polnord Project Location Sales launch date Construction end date Flats # Usable floor area (sqm.) Sales progress* Construction progress** Osiedle Tęczowy Las - b. 7 Bartąg by Olsztyn Q Q ,039 50% 5% YES Osiedle Tęczowy Las - b. 8 Bartąg by Olsztyn Q Q ,251 90% 70% YES Osiedle Tęczowy Las - b Bartąg by Olsztyn Q Q ,260 0% 5% YES Osiedle Tęczowy Las - b. 13 Bartąg by Olsztyn Q ,566 0% 0% NO Haffnera - hotel Sopot Q ,139 0% 0% NO Haffnera - mieszkania Sopot Q ,941 0% 0% NO Stogi Duże Gdańsk Q ,714 0% 0% NO Stogi Małe Gdańsk Q ,438 0% 0% NO Zgierska - stage I Łódź Q ,233 0% 0% NO Zgierska - stage II Łódź Q ,085 0% 0% NO Zgierska - stage III Łódź ,369 0% 0% NO Teren B - stage I (Wilania) Warsaw Q ,207 0% 0% YES Teren B - stage II (Wiktoria) Warsaw Q ,164 0% 0% YES Teren B - stage III (Wioletta) Warsaw Q ,172 0% 0% YES SMART Aparthotel - stage I Warsaw Q Q , % 100% YES SMART Aparthotel - stage II Warsaw Q ,108 0% 0% NO Building permit * At the end of Q ** At the end of Q

17 PORTFOLIO SUMMARY Summary of key projects realized solely by Polnord expected to generate significant cash flows in five-year horizon (3/4) Key projects completed, in progress and planned solely by Polnord Project Location Sales launch date Construction end date Flats # Usable floor area (sqm.) Sales progress* Construction progress** Miasteczko Wilanów 2 - stage I Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage II Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage III Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage IV Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage V Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage VI Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage VII Warsaw ,842 0% 0% NO Miasteczko Wilanów 2 - stage I (houses) Warsaw ,000 0% 0% NO Miasteczko Wilanów 2 - stage II (houses) Warsaw ,000 0% 0% NO Miasteczko Wilanów 2 - stage I (offices) Warsaw Q ,450 0% 0% NO Miasteczko Wilanów 2 - stage II (offices) Warsaw ,450 0% 0% NO Building permit * At the end of Q ** At the end of Q

18 PORTFOLIO SUMMARY Summary of key projects realized solely by Polnord expected to generate significant cash flows in five-year horizon (4/4) Key projects completed, in progress and planned solely by Polnord Project Location Sales launch date Construction end date Flats # Usable floor area (sqm.) Sales progress* Construction progress** Apartamenty Innova - b. C (6.2) Wrocław Q Q ,635 65% 60% YES Apartamenty Innova - b. D (6.1) Wrocław Q Q ,943 70% 55% YES Stacja Kazimierz - stage I Warsaw Q Q , % 100% YES Stacja Kazimierz - stage II Warsaw Q Q , % 100% YES Stacja Kazimierz - stage III Warsaw Q Q ,550 85% 60% YES Stacja Kazimierz - stage IV Warsaw Q Q ,481 85% 60% YES Stacja Kazimierz - stage V Warsaw Q ,131 75% 0% YES Villa Botanica I Warsaw Q ,628 0% 0% NO Villa Botanica II Warsaw Q ,836 0% 0% NO Nyska Wrocław Q ,823 0% 0% NO Building permit * At the end of Q ** At the end of Q

19 PORTFOLIO SUMMARY The Group has a robust pool of projects in progress and planned for implementation (1/2) Timetable of key projects in progress and planned in realized solely by Polnord Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Brzozowy Zakątek - A Brzozowy Zakątek - A Brzozowy Zakątek - A Studio Morena Fotoplastykon - stage I Fotoplastykon - stage II Fotoplastykon - stage III Neptun II - stage IA Neptun II - stage IB Neptun II - stage II Chabrowe Wzgórze - stage I Chabrowe Wzgórze - stage II Osiedle Tęczowy Las - b Osiedle Tęczowy Las - b Osiedle Tęczowy Las - b Osiedle Tęczowy Las - b Haffnera - hotel Haffnera - mieszkania Stogi Duże Stogi Małe Zgierska - stage I Zgierska - stage II Zgierska - stage III Teren B - stage I (Wilania) Teren B - stage II (Wiktoria) Teren B - stage III (Wioletta) Construction period Sales period 19

20 PORTFOLIO SUMMARY The Group has a robust pool of projects in progress and planned for implementation (2/2) Timetable of key projects in progress and planned in realized solely by Polnord Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q SMART Aparthotel - stage II Miasteczko Wilanów 2 - stage I Miasteczko Wilanów 2 - stage II Miasteczko Wilanów 2 - stage III Miasteczko Wilanów 2 - stage IV Miasteczko Wilanów 2 - stage V Miasteczko Wilanów 2 - stage VI Miasteczko Wilanów 2 - stage VII Miasteczko Wilanów 2 - stage I (houses) Miasteczko Wilanów 2 - stage II (houses) Miasteczko Wilanów 2 - stage I (offices) Miasteczko Wilanów 2 - stage II (offices) Apartamenty Innova - b. C (6.2) Apartamenty Innova - b. D (6.1) Stacja Kazimierz - stage III Stacja Kazimierz - stage IV Stacja Kazimierz - stage V Villa Botanica I Villa Botanica II Nyska Construction period Sales period 20

21 PORTFOLIO SUMMARY Total value of acquired land, erected but unsold properties, and projects in progress was PLN 919 million as at the end of Q Key financial data as at 31 march 2018 (thousand PLN) 1 Inventories 1 Projects completed 86,709 2 Projects in progress 183, Ku Słońcu (I-III) 43, Brzozowy Zakątek (A2-A4) 70, Gdynia Brama Sopocka (I, II, III) 13, Neptun II stage 2 26, City Park IV (buildings EA 3 and 5) 9, Fotoplastykon (stages I-III) 23, Neptun (I stage 2, II stages 1a and 1b) 7, Chabrowe Wzgórze stage II 21, Chabrowe Wzgórze stage I 6, Osiedle Tęczowy Las (building 7-12) 21, City Park (others) 2, Studio Morena - Rakoczego 19, Ostoja Myśliwska (I-II) 2, SMART Aparthotel I 1, Brzozowy Zakątek (A1) Inventories The consolidated value of inventories of the Polnord Group at the end of Q amounted to approx. PLN 536 million 3 Projects planned 197,397 4 Others 59, Haffnera (hotel and flats) 53, Karuzela treatment plant 26, Teren B (stages I-III) 45, Wilanów in Warsaw (beach and plot for sale) 11, Zgierska (stages I-III) 35, Miasteczko Wilanów infrastructure 7, Stogi Duże i Małe 20, Wilanów Office Park internal streets 7, SMART Aparthotel II 19, Śródmieście Wilanów 3, W Dolinie 9, Kowale 2, Admiralska 8, Senatorska 5,120 5 Other inventories 9,722 Total 536,404 2 Investment properties 1 Projects planned 145,650 2 Land not planned for development anytime soon 98, Miasteczko Wilanów 2 flats and offices 94, Dopiewiec 52, Miasteczko Wilanów 2 family houses 40, Powsin 42, Others 10, Głosków 3,230 3 Offices for sale 138, Wilanów Office Park 1 61, Wilanów Office Park 3 76,366 Total 382, Investment properties Consolidated value of investment properties at the end of Q amounted to approx. PLN 383 million 21

22 HISTORICAL FINANCIAL DATA FOR 2015 Q Polnord Group has been greatly improving sales volume and turnover for a few years. The Group's P&L results are still lower than its cash flows because of e.g. asset revaluations and the land value recognized in projects Profit and Loss Account (PLN million) Q LTM Revenue from sales , Gross profit (loss) on sales , Gross margin 14.5% 14.5% 15.0% 25.1% -10.5% Investment property revaluations - -71, Costs of sale , Overhead costs , Result from other operating activity , Operating profit (loss) EBIT , EBIT margin 2.0% 7.7% 7.5% -14.9% -49.4% Normalised EBIT normalised EBIT margin % -4.6% 10.3% Finance income , Finance cost , Interest in related unit profits , Net profit (loss) , net margin 3.9% 3.3% 1.1% -9.6% -56.1% Normalised net profit (loss) normalised net margin % 1.0% 4.2% 2017 was the year of the highest revenues since The level increased by 66% compared to It resulted from the advantageous market situation and the record-breaking number units handed over in 2017: 34% more than in 2016 The other operating revenues amounted to PLN 95.1 million and included a dispute won in courts (damages for 10 hectares of land under public roads) Regardless of the performed property revaluation (leading to lowered value of certain investment properties) Polnord Group demonstrated a net profit (reported and normalized) for 2017 "Share in profit /loss of the unit priced using equity method" was a loss resulting from the share in KB Dom written off for the amount of PLN (-) 28.5 million after recovery and insolvency proceedings. This item also includes the higher valuation of Fadesa Group shares Source: 2015-Q Financial Statements of the Group 22

23 HISTORICAL FINANCIAL DATA FOR 2015 Q Normalization adjustments have a significant impact on the Company's P&L results, especially the property revaluations resulting from the asset value audit Reported EBIT Reported net profit Normalisation adjustments EBIT NSA court judgment 90.8 Investment property revaluations Provision for state property titles (ANR perpetual usufruct) -5.9 Provision for VAT -9.9 Russia revaluations -8.3 Investment project revaluations Adjustments to receivables Provision for liabilities Normalised EBIT Normalisation adjustments net profit NSA court judgment 90.8 Investment property revaluations KB Dom shares written off Fadesa share revaluation Provision for state property titles (ANR perpetual usufruct) Income tax adjustment -4.0 Provision for VAT and taxes Russia revaluations -8.3 CIT case won 2.5 Adjustments to receivables Investment project revaluations Provision for liabilities Normalised net profit In 2017, the Company was awarded PLN 90.8 million of damages for 10 hectares of land which was used under public roads In 2015 and 2017, the Company revaluated investment properties after obtaining new valuations from 3 independent sources. In 2016, construction expenses for certain projects dropped causing better profitability of the Company KB Dom shares written off in 2016 resulted in the Russian adjustments for PLN 2.3 million, and PLN 31.1 million adjustments for the recovery and insolvency proceedings in 2017 In 2017 and 2016, Polnord recognized the higher value of Fadesa shares: up by PLN 5 million and 4.9 million In 2016, the Company created a provision for 2011 VAT in the amount of PLN 15.5 million In 2015, another provision of PLN (-) 29.8 million was established for liabilities owed to mainly the State Agricultural Agency (ANR): PLN 27 million, and the previous Board The Company regularly reviews the project profitability ratios and, as a consequence, revaluated its assets for PLN 60.1 million in 2015 based on uncertainty of prices, limited credit readiness of banks and other market circumstances Source: executive information 23

24 HISTORICAL FINANCIAL DATA FOR 2015 Q Through the last three years Polnord Group generated robust positive cash flow on both operating and investment activities Cash flow (PLN million) Operating activity Q LTM Inventory increase (decrease) Increase (decrease) in receivables Increase (decrease) in liabilities except for credits and loans Change in prepayments and accruals Change in provisions Net Cash from operating activity Net cash from investing activity Net cash from financing activity Net cash and equivalents increase (decrease) Cash in progress Cash at opening Cash at closing including in escrow accounts The intensified utilisation of its land bank and the record-breaking sales results helped Polnord Group generate PLN 55.0 million of cash flow on its operating activity in 2017 In addition, the dividends paid by companies controlled by it (mainly Fadesa) plus repaid loans allowed the Company to generate positive cash flow also on its investment activity The surplus cash from the operating and investment activities were used towards the Group's debts, thus leading to negative cash flow on financing activity By the end Q1 2018, the Group had PLN million of cash, including PLN 51.3 million of freely-disposable cash Source: 2015-Q Financial Statements of the Group 24

25 HISTORICAL FINANCIAL DATA FOR 2015 Q Robust cash flow on the operating and investment activities generated in 2017 allowed the Group to reduce its debt by 16% (compared to 2016) down to PLN 419 million and to PLN 401 million as at the end of Q Balance Sheet (PLN million) 31 Mar Dec Dec Dec Total assets 1, , , ,398.7 Fixed assets, including: Investment properties Investments in related, subsidiary and associated units Long-term receivables Other fixed assets Current assets, including: Inventories Trade and other receivables Cash and cash equivalents Assets held for sale Others Equity Total liabilities, including: Debt Net debt Trade liabilities Advances from customers Other liabilities In 2017, the value of investment properties was adjusted down by 15% (compared to 2016) after auditing their market value which is PLN 69.8 million A court dispute generated damages from the City of Warsaw in exchange for 10 hectares of land under public roads the payment increased the long- term liabilities by PLN 90.8 million Even with its neutral results, Polnord Group has been generating robust cash flow on its operating activity. In 2017, the resulting cash was used towards its debt and reduced it by over PLN 69 million compared to 2016 (1) Net debt = interest-bearing financial debt (freely-disposable cash + restricted cash up to PLN 50 million) Source: 2015-Q Financial Statements of the Group 25

26 HISTORICAL FINANCIAL DATA FOR 2015 Q Polnord is consequently reducing the level of financial debt, which consists of bonds and bank loans Group financial debt structure from 2012 to 31 March 2018 (PLN million) Sum ,0 Sum 150,0 100,0 50,0 0, Obligacje Bonds Kredyty Loans Leasing Finance finansowy leases Loans repayment and bond redemption schedules as at 31 March 2018 (PLN million) Jul VII-XII Dec Obligacje Bonds Kredyty Loans 36.8 Credits *Net debt = interest-bearing financial debt (freely-disposable cash + restricted cash up to PLN 50 million) net debt ratio = net debt/equity Source: 2012-Q Financial Statements of the Group Debt ratios in (PLN million)* % 48.7% % Net debt Net debt ratio 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% Through the recent years the Group lowered the financial debt from nearly PLN 619 million (end of 2012) to PLN million (end of March 2018) As at 31 March 2018, the Group's debt consisted mainly of bonds (72%) and loans from banks (28%) Currently, Polnord issued 12 bond series for a total value of PLN 286.8, including two series for PLN 70 million which are due in The remaining bonds will be redeemed in the next three years The Group is currently financed by 3 banks: Getin Bank, BOŚ, PKO BP. Out of PLN million loan facilities (31 March 2018) 67% should be repaid by the end of Other financing raised from PKO BP is amortized until 2025 and 2030 (its prepayment is assumed after the sale of two office buildings in 2019) 26

27 HISTORICAL FINANCIAL DATA FOR 2015 Q The Group s financing is based mainly on bonds which contributed to 75% of its entire debt as at the end of June These were mainly retail bonds Polnord bond maturity as at 31 March 2018 (PLN million) Active bonds as at 31 March 2018 No. Bond type Value (PLN million) Issue date Due date Apr. Dec Nominal interest rate Tenor Collateral 1 MB2 straight bonds WIBOR 6M % 2 No 2 Series O straight bonds WIBOR 3M % 3 No 3 Series D straight bonds WIBOR 3M % 4 Yes 4 NS4 straight bonds WIBOR 3M % 3 Yes 5 NS5 straight bonds WIBOR 6M % 3 Yes 6 NS6 straight bonds WIBOR 3M % 3 No 7 NS7 straight bonds WIBOR 3M % 3 Yes 8 NS8 straight bonds WIBOR 3M % 3 Yes 9 NS9 straight bonds WIBOR 3M % 3 No 10 NS10 straight bonds WIBOR 3M % 3 Yes 11 Series P straight bonds WIBOR 3M % 3 No 12 MB3 straight bonds WIBOR 6M + 4,50% 3 No Sum Currently, Polnord issued 12 bond series for a total value of PLN million. All bonds were issued in PLN and, except for two private issues, all are quoted on WSE's Catalyst listing The two series of PLN 70 million are due in The remaining bonds will be redeemed in the next three years All Catalyst-listed issues are variable interest rate bonds based on WIBOR 3M/6M reference rates The median and average tenor is 3 years The mark-up is at the level of % Six series listed on WSE's Catalyst are secured by joint contract mortgage on real properties for PLN 146 million The bonds are subject to a number of covenants, including: - Dividend payment limitations - Maximum net financial debt and short-term financial debt ratios, LTV 27

28 HISTORICAL FINANCIAL DATA FOR 2015 Q Loans from banks make up for nearly 1/4 of the Group's debt Loans balance from 2014 to 31 March 2017 (PLN million) Sum PKO BP Getin Noble Bank BOŚ BPS The Group is currently financed by 3 banks: Getin Bank, BOŚ, PKO BP Out of PLN million loans (31 March 2018) 67% should be repaid by the end of 2018 Other financing raised from PKO BP is amortized until 2025 and 2030, however it will be prepaid after the expected sale of two office buildings in 2019 (Wilanów Office Park B1 and B3) Polnord's loans and fully-controlled subsidiaries as at 31 March 2018 No. Borrower Bank Type Balance (PLN million) Final due date 1 Polnord SA BOŚ SA Revolving Polnord SA Getin Noble Bank SA Overdraft Wilanów Office Park building B1 PKO BP Refinanced Wilanów Office Park building B3 PKO BP Project finance Sum Principal repayment schedule as at 31 March 2018 (PLN million) Sum Apr Dec Getin Noble Bank SA BOŚ SA PKO BP Source: 2014-Q Financial Statements of the Group 28

29 HISTORICAL FINANCIAL DATA FOR Q Profit and Loss Account (PLN million) Q Q Revenue from sales Gross profit (loss) on sales gross margin 14.7% 25.3% Investment property revaluations - - Costs of sale Overhead costs Result from other operating activity Operating profit (loss) EBIT EBIT margin 2.1% -33.9% Finance income Finance cost Interest in related unit profits Net profit (loss) net margin 3.9% -42.6% Net debt ratio* 41.8% 49.9% *Net debt ratio = net debt/equity Source: Q Financial Statements of the Group 29

30 HISTORICAL FINANCIAL DATA FOR Q Cash flow (PLN million) Operating activity Q Q Inventory increase (decrease) Increase (decrease) in receivables Liabilities increase (decrease) except for loans Change in prepayments and accruals Change in provisions Net Cash from operating activity Net cash from investing activity Net cash from financing activity Net cash and equivalents increase (decrease) Cash at opening Cash at closing Including in escrow accounts Source: Q Financial Statements of the Group 30

31 HISTORICAL FINANCIAL DATA FOR Q Balance Sheet (PLN million) Dec Total assets 1, ,468.5 Fixed assets, including: Investment properties Investments in related, subsidiary and associated units Long-term receivables Other fixed assets Current assets, including: Inventories Trade and other receivables Cash and cash equivalents Assets held for sale Others Equity Total liabilities, including: Debt Net debt Trade liabilities Advances from customers Other liabilities (1) Net debt = interest-bearing financial debt (freely-disposable cash + restricted cash up to PLN 50 million) Source: 2017 and Q Financial Statements of the Group 31

32 WAIVER This study is intended for information purposes only it is not aimed at soliciting any acquisition or disposal of financial instruments. This study is not an advertisement, an offer or a proposal to acquire any financial instruments. It is based on sources which Polnord S.A. recognised as reliable and accurate, however it cannot warrant that the data is exhaustive and fully reflects the actual status. This study may contain forward-looking statements that create investment risks or uncertainty and that could be materially different from actual results. Polnord S.A. is not liable for any consequences of decisions made based on this study. This study must not be used as a sufficient source of knowledge for any investment decision. The user of this study will be solely liable for usage of the information contained in this study. This study is protected under the Polish Act on the copyright and related rights. No copying, publication or distribution of this study is permitted, unless with the written consent of Polnord S.A. 32