East Capital Explorer Q4 2014

Transcription

1 East Capital Explorer Q February

2 Today s Presenters Welcome to today s conference call Mia Jurke CEO, East Capital Explorer Kestutis Sasnauskas Partner and Head of Private Equity, East Capital Ulf Sigfridsson Acting Head of Real Estate, East Capital 2

3 Agenda Key highlights and NAV development Our portfolio and quarterly performance Update on Direct Investments and Real Estate Outlook and Focus going forward Q&A 3

4 Key highlights and NAV development Mia Jurke

5 Key highlights Q Strong development in Baltic holdings, but not enough to offset weak performance in Russian holdings affected by the rouble s sharp decline NAV per share on 31 December 2014: EUR 8.73 (SEK 83) Decrease of 12.2% compared to Q Decrease of 11.4% compared to Q Continued diverging development in portfolio holdings; Strong development in core Baltic holdings; Starman and Baltic Real Estate investments Russian holdings pressured by geopolitics, economic slowdown and rouble depreciation; MFG and EC Russia Domestic Growth Fund 5

6 Key highlights Q Fair value adjustments in all unlisted direct investments Additional investment in Starman to be financed through fund divestments (Frontier Markets and Russia Domestic Fund) Fair value adjustments in Q4 Starman: +16% (+ 67% FY 2014), based on strong performance 3 Burės (former Vilnius Business Harbour): + 6% (+9% FY 2014), including operational income as well as revaluation of property Trev-2: -10% (-10% FY 2014), due to continued challenging environment in Estonian infrastructure sector MFG: -38% (-50% FY 2014), mainly translation effect from the RUB depreciation, but also includes an impairment of the underlying valuation Key events in Q4 Announced capital injection of approx EUR 23m in Starman (expected in Q1 2015) through rights issue to finance Starman s acquisition of leading Lithuanian cable-tv provider Cgates. After concluded, ECEX s ownership in Starman around 62 percent East Capital New Markets Fund merged into East Capital Frontier Markets Fund. The new holding is classified as a short-term investment. EUR 5.1m was divested end of December 6

7 Highlights after end of the quarter Third redemption program to be proposed to the 2015 AGM. If approved, implied yield of 9% at current discount Continued uncertainties related to Russia and Ukraine Rouble continued to depriciate in January Nevertheless, positive development in fund investments in January Deep ; +3.7% Russia Domestic Growth; +1.4% Bering Ukraine R; +6.9% Frontier Markets; +4.4% Starman s acquisition of Cgates approved by competition authorities in February, closing expected within next few days The Board will propose a redemption program to the 2015 AGM, whereby 5 percent of outstanding shares can be redeemed at SEK 83 per share (NAV per 31 December) Further fund divestments; Frontier Markets Fund EUR 7.1m (in addition to EUR 5.1m sold in Q4) and Russia Domestic Growth EUR 3.0m 7

8 Portfolio development Q Mia Jurke

9 Portfolio 31 December Dec 2014, meur NAV/ Share EUR 30 Sep 2013 meur 31 Dec 2013 meur change Jan-Dec 2014, % change Oct-Dec 2014, % Annualised return on investment, % Portfolio 31 December 2014 % of NAV Direct Investments Starman 39,5 1,32 15,1 34,0 23,6 67,4 16,2 38,3 Melon Fashion Group 35,1 1,17 13,4 56,6 70,5-50,2-38,1 7,4 3 Burės (former Vilnius Business Harbour) 24,2 0,8 9,3 22,9-8,6 5,7 14,5 Trev-2 Group 8,5 0,28 3,2 9,8 9,8-5,0-5,0 10,6 Komercijalna Banka Skopje 7,3 0,24 2,8 7,8 6,6 10,9-5,7-10,3 Total Direct Investments 114,6 3,83 43,9 131,1 110,5-13,1-11,9 Fund Investments East Capital Deep Fund 47,0 1,57 18,0 51,9-1,9-9,4 1,9 East Capital Baltic Property Fund II 24,4 0,81 9,3 23,9 20,7 6,0 2,0 9,8 East Capital Russia Domestic Growth Fund 16,1 0,54 6,2 27,5 42,3-61,9-41,5-35,2 East Capital Bering Ukraine Fund Class R 2,0 0,07 0,8 2,0 2,5-20,4 1,8-21,9 Total Fund Investments 89,5 2,99 34,2 156,4 189,0-8,6-13,6 Short-term Investments Short-term Investments 52,2 1,74 20,0 - - Cash and cash equivalents 5,6 0,19 2,1 10,4 20,3 Total Short-term Investment 57,8 1,93 22,1 10,4 20,3 Total Portfolio 261,9 8,75 100,2 298,0 319,8 Other assets and liabilities net -0,6-0,02-0,2-0,5-10,4 Net Asset (NAV) 261,3 8,73 100,0 297,5 309,4-11,4-12,2 9

10 Portfolio 31 December Dec 2014, meur NAV/ Share EUR 30 Sep 2013 meur 31 Dec 2013 meur change Jan-Dec 2014, % change Oct-Dec 2014, % Annualised return on investment, % Portfolio 31 December 2014 % of NAV Direct Investments Starman 39,5 1,32 15,1 34,0 23,6 67,4 16,2 38,3 Melon Fashion Group 35,1 1,17 13,4 56,6 70,5-50,2-38,1 7,4 3 Burės (former Vilnius Business Harbour) 24,2 0,8 9,3 22,9-8,6 5,7 14,5 Trev-2 Group 8,5 0,28 3,2 9,8 9,8-5,0-5,0 10,6 Komercijalna Banka Skopje 7,3 0,24 2,8 7,8 6,6 10,9-5,7-10,3 Total Direct Investments 114,6 3,83 43,9 131,1 110,5-13,1-11,9 Fund Investments East Capital Deep Fund 47,0 1,57 18,0 51,9-1,9-9,4 1,9 East Capital Baltic Property Fund II 24,4 0,81 9,3 23,9 20,7 6,0 2,0 9,8 East Capital Russia Domestic Growth Fund 16,1 0,54 6,2 27,5 42,3-61,9-41,5-35,2 East Capital Bering Ukraine Fund Class R 2,0 0,07 0,8 2,0 2,5-20,4 1,8-21,9 Total Fund Investments 89,5 2,99 34,2 156,4 189,0-8,6-13,6 Short-term Investments Short-term Investments 52,2 1,74 20,0 - - Cash and cash equivalents 5,6 0,19 2,1 10,4 20,3 Total Short-term Investment 57,8 1,93 22,1 10,4 20,3 Total Portfolio 261,9 8,75 100,2 298,0 319,8 Other assets and liabilities net -0,6-0,02-0,2-0,5-10,4 Net Asset (NAV) 261,3 8,73 100,0 297,5 309,4-11,4-12,2 10

11 Portfolio 31 December Dec 2014, meur NAV/ Share EUR 30 Sep 2013 meur 31 Dec 2013 meur change Jan-Dec 2014, % change Oct-Dec 2014, % Annualised return on investment, % Portfolio 31 December 2014 % of NAV Direct Investments Starman 39,5 1,32 15,1 34,0 23,6 67,4 16,2 38,3 Melon Fashion Group 35,1 1,17 13,4 56,6 70,5-50,2-38,1 7,4 3 Burės (former Vilnius Business Harbour) 24,2 0,8 9,3 22,9-8,6 5,7 14,5 Trev-2 Group 8,5 0,28 3,2 9,8 9,8-5,0-5,0 10,6 Komercijalna Banka Skopje 7,3 0,24 2,8 7,8 6,6 10,9-5,7-10,3 Total Direct Investments 114,6 3,83 43,9 131,1 110,5-13,1-11,9 Fund Investments East Capital Deep Fund 47,0 1,57 18,0 51,9-1,9-9,4 1,9 East Capital Baltic Property Fund II 24,4 0,81 9,3 23,9 20,7 6,0 2,0 9,8 East Capital Russia Domestic Growth Fund 16,1 0,54 6,2 27,5 42,3-61,9-41,5-35,2 East Capital Bering Ukraine Fund Class R 2,0 0,07 0,8 2,0 2,5-20,4 1,8-21,9 Total Fund Investments 89,5 2,99 34,2 156,4 189,0-8,6-13,6 Short-term Investments Short-term Investments 52,2 1,74 20,0 - - Cash and cash equivalents 5,6 0,19 2,1 10,4 20,3 Total Short-term Investment 57,8 1,93 22,1 10,4 20,3 Total Portfolio 261,9 8,75 100,2 298,0 319,8 Other assets and liabilities net -0,6-0,02-0,2-0,5-10,4 Net Asset (NAV) 261,3 8,73 100,0 297,5 309,4-11,4-12,2 11

12 Portfolio 31 December Dec 2014, meur NAV/ Share EUR 30 Sep 2013 meur 31 Dec 2013 meur change Jan-Dec 2014, % change Oct-Dec 2014, % Annualised return on investment, % Portfolio 31 December 2014 % of NAV Direct Investments Starman 39,5 1,32 15,1 34,0 23,6 67,4 16,2 38,3 Melon Fashion Group 35,1 1,17 13,4 56,6 70,5-50,2-38,1 7,4 3 Burės (former Vilnius Business Harbour) 24,2 0,8 9,3 22,9-8,6 5,7 14,5 Trev-2 Group 8,5 0,28 3,2 9,8 9,8-5,0-5,0 10,6 Komercijalna Banka Skopje 7,3 0,24 2,8 7,8 6,6 10,9-5,7-10,3 Total Direct Investments 114,6 3,83 43,9 131,1 110,5-13,1-11,9 Fund Investments East Capital Deep Fund 47,0 1,57 18,0 51,9-1,9-9,4 1,9 East Capital Baltic Property Fund II 24,4 0,81 9,3 23,9 20,7 6,0 2,0 9,8 East Capital Russia Domestic Growth Fund 16,1 0,54 6,2 27,5 42,3-61,9-41,5-35,2 East Capital Bering Ukraine Fund Class R 2,0 0,07 0,8 2,0 2,5-20,4 1,8-21,9 Total Fund Investments 89,5 2,99 34,2 156,4 189,0-8,6-13,6 Short-term Investments Short-term Investments 52,2 1,74 20,0 - - Cash and cash equivalents 5,6 0,19 2,1 10,4 20,3 Total Short-term Investment 57,8 1,93 22,1 10,4 20,3 Total Portfolio 261,9 8,75 100,2 298,0 319,8 Other assets and liabilities net -0,6-0,02-0,2-0,5-10,4 Net Asset (NAV) 261,3 8,73 100,0 297,5 309,4-11,4-12,2 12

13 Company % of NAV 10 largest holdings on a see-through basis in portfolio, 31 December 2014 EURm Country Sector East Capital Explorer's investment vehicles Starman Estonia Telecom Direct Investment Melon Fashion Group Russia Cons. Discr. Direct Investment 3 Burės Lithuania Real Estate Direct Investment Komercijalna Banka Skopje Macedonia Financials Direct Investment East Capital Deep Fund Trev-2 Group Estonia Industrials Direct Investment GO Lithuania Real Estate East Capital Baltic Property Fund II Tänassilma Logistics Estonia Real Estate East Capital Baltic Property Fund II Metro Plaza Estonia Real Estate East Capital Baltic Property Fund II Integra Russia Energy East Capital Deep Fund Evraz Russia Materials East Capital Deep Fund Total

14 Direct Investments Kestutis Sasnauskas, Partner and Head of Private Equity

15 Melon Fashion Group One of the fastest growing Russian fashion retail Operating performance, 12M14 36% holding in MFG (13.4% of NAV) Q4 sales amounted to RUB 3.3bn (EUR 55.1m), +23% compared to Q4 2013; +5.5% compared to Q Despite unfavorable market conditions, Q4 like-for-like sales increased by +1.3% (+0.2% FY 2014) Profitability affected by weak rouble through higher purchasing costs denominated in foreign currency Gross margins down to 54% (60% Q4 2013) Positive impact from currency hedging Gains of currency hedging resulted in an EBITDA margin of 20%; underlying EBITDAmargin excl. hedging effects was 7% (10% Q4 2013) Quarterly sales, RUBm Quarterly sales Sp+WS+Co&B 12 months average Key financials, 2014 RUBm FY FY Q4 Q4 Sales 11,192 8,966 3,268 2,665 Gross profit 5,972 5,275 1,757 1,602 EBITDA Sales growth (%) Gross margin (%) EBITDA margin (%) Like-for-like growth (%) Number of stores, end of period

16 Melon Fashion Group One of the fastest growing Russian fashion retail companies Clear focus on cost savings measures and strengthening future competitiveness Operating environment remains difficult Sharp decline in rouble and deteriorated consumer sentiment affected MFG through increased costs which could not fully be passed on to customers and declining footfall Management focus on cost saving measures and reducing currency dependency Successful renegotiations of fixed USD and EUR rental contracts into turnover RUB rental contracts Introduction of flexible work schedules MFG active to assure future competitiveness Seizes opportunities to strengthen market position through improved locations of rental contracts and marketing initiatives 16

17 Starman Estonia s leading cable TV and broadband provider 51% holding in Starman (15.1% of NAV) Operational outperformance during 2014 continues to enjoy good momentum owing to superior product offering and successful product launches such as Estonia s fastest broadband speeds and TV Everywhere Reversed RGU trend during 2014 with steady, positive customer intake Increasing penetration of internet and advanced TV-products enabled Starman to increase ARPU by 9% compared to previous year Key financials, 2014 EURm FY FY Q4 Q4 Sales EBITDA Net profit Sales growth (%) EBITDA margin (%) Number of RGU's ('000) ARPU ( /month)

18 Starman Estonia s leading cable TV and broadband provider Aquisition of Cgates initial step in creating the first truly pan-baltic player Announced 100% acquisition of Lithuania s leading cabletv and broadband provider Cgates Transaction value EUR 56.3m East Capital Explorer will increase its ownership stake in Starman to around 62% through a rights issue of EUR 23m in connection to the transaction Synergies include Joint purchases of equipment and content Product development System and platform utilization Cgates in short cable-tv and broadband customers 2014 net sales: EUR 16m; 2014 EBITDA: EUR 7m 18

19 Trev-2 Group A leading infrastructure construction and maintenance company in Estonia 38.3% holding in Trev-2 (3.2% of NAV) As expected, 2014 revenues declined to EUR 66.3m (EUR 103.1m) mainly due to Exits from the general construction segment and businesses in Latvia and Russia in 2013 Increased competition du to lower EUfunding The Company acquired a minority stake in its subsidy Taskar, now all subsidies are fully owned. East Capital Explorer sold a part of its holding to former minority shareholders Dividend of EUR 0.2m received during the quarter Key financials, Q1-Q EURm FY FY Q4 Q4 Sales EBITDA EBIT Net profit Sales growth (%) EBITDA margin (%) EBIT margin (%)

20 Real Estate Ulf Sigfridsson Acting Head of Real Estate

21 Strong cash flow and solid performance Real Estate portfolio s key characteristics Yields Yield levels 7-9% Gearing 55-70% Interest rates Around 2-3% NAV BPF II +28.5% since launch May ,0 120,0 110,0 100,0 90,0 Return on Equity ROE target 15-20% (currently 16.5%) 3 Burės +8.6% since acquisition in May

22 High quality commercial properties in the Baltic capitals ESTONIA Tallinn Tänassilma Logistics (BPFII) Rimi Logistics (BPFII) Metro Plaza (BPFII) LATVIA Riga Deglava Prisma (BPFII) LITHUANIA Vilnius 3Bures (DI) GO9 Shopping Center (BPFII) BPFII = East Capital Baltic Property Fund II, DI = Direct Investment 22

23 3 Burės One of Vilnius most modern and well located office buildings Renamed to 3 Burės in December (previously Vilnius Business Harbour) 100% holding in 3 Burės valued at EUR 24.2m (9.3% of NAV, + 5.7% from Q3) 3 Burės and neighboring land plot acquired in May as direct investment Current yield level 7% and vacancy rate 4% Strong pipeline of new tenants and expansion needs of existing implies further reduced vacancy going forward Development of a third building initiated, expected to be ready for construction by Q Key financials, Q1-Q EURm H Q4 Rental income Operating profit * Net profit Operating margin (%) * Vacancy rate (%) ** Average rent ( /month) *Owing to a property revaluation of EUR 0.7m ** Historical figures have been restated to reflect the increase in leasable area. Compares to 2.6 percent according to previous definition 23

24 East Capital Baltic Property Fund II Property portfolio Tänassilma Logistics is a modern logistics centre outside Tallinn with stable rent revenues. In combination with low interest on its debt this has resulted in earnings of more than 20% on invested equity and a strong positive cash flow. GO9 a well-known high street shopping centre in the heart of Vilnius with an excellent location on the best stretch of Gedimino avenue. Grand opening of redeveloped shopping centre took place in March 2014, with H&M and anchor tenant. Prisma Deglava, a newly constructed big box retail property in Riga fully let to the Finnish retail chain Prisma (SOK group). Strong cash flow generating investment in the fund with a ten-year plus lease agreement with a stable and reliable tenant. Rimi Logistics, warehouse and office complex outside Tallinn purchased in a sale-and-leaseback deal. The property is fully let with a 10+ years unbreakable lease to a leading grocery chain Rimi Eesti Food, a company part of ICA group. Metro Plaza, A class office in Tallinn CBD with excellent location and visibility. Solid cash flow from strong tenants, office areas fully let. Revenue enhancement potential by redeveloping and enlarging retail areas in the ground and first floor. Mustamäe Keskus, shopping centre developed in Mustamäe residential district in Tallinn. GLA 13,500 sqm. Anchor tenant Rimi grocery, key tenants multiplex cinema, fitness club, restaurants. Expected closing after completion December Weight% Country Property type Tänassilma Logistics 24% Estonia Logistics GO9 shopping centre 27% Lithuania Retail 31/12/14 Q% 1Y Since inc. East Capital Baltic Property Fund II % 6.12% % Deglava Prisma 15% Latvia Retail Rimi Logistics 13% Estonia Logistics Metro Plaza 21% Estonia Office 24

25 Outlook & Focus 25

26 Market outlook Baltics and Balkans by year end 41% (excl. add-on investment in Starman) and 14 % respectively Russian exposure in portfolio now only 27%, due to divestments as well as value declines Stable outlook for Baltic and Balkan countries with; Growth stabilizing around 3%, expectations on continued low interest rates and inflation ECB stimulus and low oil price positive effect Weak growth in Eurozone and Russia largest downside risk Russia expected to contract in 2015 Oil price to stay volatile and has strong impact on RUB, floating RUB however a shock absorber for balancing the budget Ukrainian conflict still unsolved, and sanctions having effect, but our base case scenario is that EU sanction will not be renewed in July Structural problems not yet dealt with Upside risk if oil price rebounds and if Ukrainian conflict deescalates 26

27 ECEX Focus Re-modelling of portfolio to a PE and RE portfolio to continue Baltic PE and RE still in focus, to be financed by further fund divestments 1. Clear strategic direction towards creating a Private Equity and Real Estate portfolio PE and RE today 60% of portfolio, aim % in 2017/2018 Around EUR 100m invested during the last years (1/3 of total NAV) in Baltic PE and RE 2. Continued focus on Baltic Private Equity and Real Estate Baltic Real Estate still an attractive case Focus on further consolidation in Baltic cable TV and broadband sector 3. Fund holdings including listed holdings available to finance new strategic investments 27

28 Thank you! Our Q report will be published on 13 May 2015 Mia Jurke, CEO Phone: mia.jurke@eastcapitalexplorer.com Lena Krauss, CFO and Head of Investor Relations Phone: lena.krauss@eastcapitalexplorer.com 28