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MAS P.L.C.
Registered in Malta
Registration number C 99355
JSE share code: MSP
ISIN: VGG5884M1041
LEI code: 213800T1TZPGQ7HS4Q13
('MAS', 'the Group' or 'the Company')
VOLUNTARY TRADING UPDATE AND CHANGE TO THE BOARD OF DIRECTORS
Introduction
This trading announcement is a pre-close update prior to the release of MAS' financial results for the six months ending 31 December 2023. Information
regarding the Group's markets, strategy and operations is detailed within. Unless otherwise stated, figures are presented on a proportionate
consolidated basis.
MAS is a green property owner and operator focused on Central and Eastern Europe ('CEE'), with investments in retail assets in Romania, Bulgaria,
and Poland. The Group also benefits from exposure to high-quality commercial and residential developments via the Development Joint Venture
('DJV')1 with developer and general contractor Prime Kapital. MAS aims to maximise total long-term returns from property investments, on a per share
basis, by focusing on capital allocation, operational excellence, sensible leverage and cost efficiency, sustainably growing distributable earnings per
share.
Operations
Consumption remained strong in all Central and Eastern European countries where the Group operates during the first four months of the 2024 financial
year, with all the Group's properties benefiting from robust trading.
Overall like-for-like ('LFL') footfall for the four months to 31 October 2023 was 8% above the same period in 2022, and tenants' sales per m2 exceeded
prior year's levels by 7%, both in enclosed malls (8% increase) and in open-air malls (6% increase).
Detailed information regarding MAS' Central and Eastern European LFL footfall and tenants' sales (compared to the same period of the previous
financial year), and collection rates for the four months to 31 October 2023, is presented in Table 1. The collection rates include collections up to
8 December 2023.
Table 1:
Jul 23 Aug 23 Sep 23 Oct 23 Total
Footfall (2023 compared to 2022) % 110 107 109 106 108
Open-air malls % 110 107 111 107 109
Enclosed malls % 109 106 105 105 106
Tenants' sales per m2 (2023 compared to 2022) % 110 104 106 107 107
Open-air malls % 108 103 106 106 106
Enclosed malls % 112 106 106 108 108
Collection rate % 99.3 99.6 99.5 99.3 99.4
1 DJV is an abbreviation for a separate corporate entity named PKM Development Ltd ('PKM Development'), an associate of MAS since 2016, with independent
governance. MAS owns 40% of PKM Development's ordinary equity ('20million), an investment conditional on it irrevocably undertaking to provide
preferred equity to PKM Development on notice of drawdown. By 30 November 2023, MAS had invested '315.7million in preferred equity and had an obligation
of '154.3million outstanding. In addition, MAS has committed to provide PKM Development a revolving credit facility of '30million at a 7.5% fixed rate,
which was fully drawn on 30 November 2023 (figures not proportionally consolidated). The balance of the ordinary equity in PKM Development ('30million)
was taken up by Prime Kapital in 2016 in cash. In terms of applicable contractual undertakings and restrictions, Prime Kapital:
(i) is not permitted to undertake real estate development in CEE outside of PKM Development until the earlier of the DJV's capital commitments
being fully drawn and invested, or 2030;
(ii) contributes secured development pipeline to PKM Development at cost;
(iii) takes responsibility for sourcing further developments, and
(iv) provides PKM Development with all necessary construction and development services via an integrated in-house platform.
Collection rates were excellent for the four-month period at 99.4%. Occupancy of Central and Eastern European assets improved marginally to 97.4%2
on 31 October 2023 (97.3% on 30 June 2023). Occupancy cost ratios (excluding certain tenant categories: supermarkets, DIYs, entertainment and
services) to 31 October 2023 remain exceptionally healthy at 10.8% (10.7% on 30 June 2023).
Carolina Mall opened on 31 August 2023 with 92% of the 29,000m2 gross leasable area ('GLA') occupied. Opening month produced record results
and subsequent trading was strong, similar to the Group's other enclosed malls.
At Flensburg Galerie (Germany), by 31 October 2023 occupancy increased to 89.2% (86.0% on 30 June 2023). Footfall and tenants' sales have
outperformed those in the same four months to 31 October 2022.
Developments, extensions, and refurbishments
Construction of Arges Mall continues, and tenant demand remains strong with over 90% of GLA secured well in advance of the scheduled opening
which was brought forward to April 2024. Construction works in respect of Mall Moldova redevelopment started in September 2023. Leasing is
progressing very well, with more than 80% of the mall's GLA subject to leases that are in the process of finalisation. In addition, the DJV has agreed
to sell approximately 5.2ha of the site to IKEA for it to construct and operate its first store in the Moldova region.
The construction of the first phases of the Silk District Office and Silk District Residential project completed by 30 September 2023, and hand-over of
residential units to clients commenced in December.
Other ongoing developments continue broadly in accordance with expectations, and further details will be made available in due course.
Capital structure, debt management and dividend
The Group's investment approach remains to maximise risk-adjusted total long-term returns from investments on a per-share basis. With the release
of the Group's 30 June 2023 financial statements, the Group communicated changes to its self-imposed, long-term overall debt limitations, suspension
of dividend payments and implementation of a revised debt management plan to raise bank funding secured against its unencumbered properties in
CEE aimed at reducing refinancing risks associated with its bond maturity in May 2026. Conditions in the sub-investment grade real estate bond
markets remain challenging.
Management estimated that, with financial resources on 30 June 2023 and not making dividend payments over the period to the bond maturity, it is
necessary to raise an estimated minimum of '343million in new debt finance by May 2026 to repay the bond and fulfil other commitments.
Since 30 June 2023, management has achieved considerable progress with new debt finance, finalising and drawing '95million in secured loans for
Militari Shopping and Flensburg Galerie, and the Group has agreed term sheets for '101million of secured finance, subject to banks' credit committee
approvals and documentation being finalised. Processes in respect of an additional '64million in secured bank finance are ongoing.
The secured debt raised enabled management to improve the Group's debt maturity profile by launching and completing a public tender process to
repurchase bonds. The Group has repurchased '80.7million of notes at a 9.3% discount to par, reducing the outstanding notional to be repaid by May
2026 to '212.7million and reducing the estimated additional debt finance required to be raised by '7.5million.
Following the above, and assuming the successful implementation of ongoing secured bank finance processes, the Group needs to raise an additional
'76million in debt by May 2026, to achieve the '343million new debt finance objective. The Group is well positioned to raise the necessary finance in
good time, but if the current bond market conditions persist, the Board does not expect to be able to consider resuming dividend payments prior to
June 2026.
Changes to the Board of Directors and Board Committees
After serving on the Board for more than nine years, Pierre Goosen has stepped down as Independent Non-Executive Director. The Board is grateful
and thanks Pierre for his dedication during his long-tenured service to the Group.
Following this change, the Board is considering the most appropriate restructuring of its committees' memberships.
2 Occupancy rate was adjusted to reflect only operational units for Mall Moldova phase I, as construction works which commenced on phase II,
reconfiguring the property into a super-regional mall, affected certain operational units of phase I.
Earnings guidance
The Company expects to achieve its diluted adjusted distributable earnings guidance for the financial year to 30 June 2024, ranging from 9.81-
10.65eurocents per share.
The Board and management are confident that MAS' strategy to continue investing in CEE by concentrating on capital allocation, operational
excellence, sensible leveraging and cost efficiency will sustainably grow distributable earnings per share and maximise total long-term returns from
investments on a per share basis.
11 December 2023
For further information please contact:
Dan Petrisor, MAS P.L.C. +356 77 186 791
Java Capital, JSE Sponsor +27 11 722 3050
Date: 11-12-2023 05:30:00
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