- Eurocastle Releases First Quarter 2018 Financial Results,
Announces First Quarter Distribution of €0.33 per share and Annual General Meeting on 20 June 2018
Guernsey, 17 May 2018 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has released its financial results for the first quarter ended 31 March 2018.
Net Asset Value ("NAV") of €505.1 million, or €9.58 per share.
Normalised FFOof €7.3 million, or €0.14 per share2, for the first quarter of 2018.
First Quarter 2018 Distribution of €0.33 per share2, consisting of the regular quarterly dividend of €0.15 per share and an additional €0.18 per share capital distribution representing an acceleration of capital that would have otherwise been distributed in August 2018 under the Company's distribution policy. The dividend and capital distribution were declared on 16 May 2018 and will be paid on 31 May 2018 to shareholders of record at close of business on 23 May 2018, with an ex-dividend date of 22 May 2018.
Q1 2018 Q4 2017
€ million € per share2 € million € per share2
NAV1 505.1 9.58 556.5 10.56
Normalised FFO3 7.3 0.14 7.8 0.14
Distributions2 17.4 0.33 14.2 0.27
Annual General Meeting The Company further announces that it will hold its Annual General Meeting on Wednesday, 20 June 2018, at the Company's registered office at 2:00 pm Guernsey time (3:00 pm CET).
FIRST QUARTER 2018 BUSINESS HIGHLIGHTS
Sale of Senior Notes of FINO 1 Securitisation
In January 2018, the Company received €48.6 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 that the Company acquired from UniCredit S.p.A. The senior notes are guaranteed by the Italian state under the "GACS" program and the sale of these notes is therefore seen as an extremely attractive form of financing.
Eurocastle's value of its investment in the FINO portfolio appreciated by 10% during the quarter net of these proceeds and other distributions received in the period.
Follow-on Investment in FINO NPL Portfolio
In January 2018, the Company 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.
doBank Financial Performance
For the first quarter of 2018, the doBank Group reported EBITDA of €11.0 million, up 12% over the same period last year (Q1 2017: €9.9 million) driven by increased revenues following the onboarding of €12 billion GBV of new mandates and more efficient cost controls increasing the EBITDA margin by 2%.
Net profit for the first quarter was €6.6 million, up 23% over the same period last year (Q1 2017: €5.3 million).
In April 2018, doBank declared a 2017 full year dividend of €31.5 million (of which Eurocastle's share is €7.9 million) payable on 23 May 2018.
Eurocastle's holding of 20 million shares, representing 25.6% of doBank's outstanding shares, was valued at €11.45 per doBank share as at 31 March 2018.
NPL portfolio financing
In March 2018, the Company, alongside other Fortress affiliate co-investors, completed on a financing of the €293 million GBV NPL portfolio acquired in November 2017. As a result, the Company received net proceeds of €7.6 million equating to 63% of the equity invested.
BUSINESS HIGHLIGHTS SUBSEQUENT TO 31 MARCH 2018
Investment in New Single Name Loan Transaction
In May 2018, the Company closed on a €7.7 million investment to acquire a shared interest, alongside other Fortress affiliates, in a portfolio of Italian distressed loans to a single borrower with a gross book value of ~€81 million. The loans are secured by 1st lien ship mortgages.
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.
Normalised FFO for the Three Months Ended 31 March 2018
Average Net Invested Capital
€ Thousands Yield € Thousands
doBank Group 81,151 18% 3,628
Italian NPLs 104,653 28% 7,412
Real Estate Fund Investments 32,443 4% 354
Italian Investments NFFO before expenses 218,247 21% 11,394
Legacy portfolios (30)
Manager base & incentive fees (2,884)
Other operating expenses (1,202)
Normalised FFO 7,278
Per Share 0.14
As announced in the 2017 annual report, the Board of Directors came to the conclusion, that as of 1 July 2017, the Company met the requirements to be classified as an investment entity as defined under IFRS 10. Following this change, the Company does not consolidate the entities it controls and therefore fair values all of its investments (whether through subsidiaries, joint ventures or associates).
Income Statement for the Three Months ended 31 March 2018 (Unaudited)
€ Thousands Portfolio Returns
doBank Group (42,028)
Romeo NPLs 2,228
FINO NPLs 4,875
Other NPL Pools 1,082
Real Estate Fund Investment I 22
Real Estate Fund Investment II 393
Real Estate Fund Investment IV (39)
Real Estate Fund Investment V 344
Fair value movement on Italian investments (33,123)
Fair value movements on residual Legacy entities (30)
Other income - Gains on foreign currency translation and other derivatives 2
Total income (33,151)
Interest expense 76
Manager base and incentive fees 2,884
Remaining operating expenses 1,066
Other Operating expenses 3,950
Total expenses 4,026
Net loss for the period (37,177)
€ per share (0.71)
For the quarter ended 31 March 2018, the total net loss reported was (€37.2) million, or (€0.71) per share. Excluding the €42.0 million loss which arose from the revaluation of the doBank investment which is marked-to-market based on doBank's closing share price, Eurocastle recognised a €4.8 million profit or €0.09 per share.
Balance Sheet and NAV Reconciliation as at 31 March 2018 (Unaudited)
Italian Investments € Thousands Corporate € Thousands Total € Thousands
Cash and cash equivalents - 174,443 174,443
Other assets - 74 74
doBank Group 229,814 - 229,814
Romeo NPLs 49,091 - 49,091
FINO NPLs 4,913 - 4,913
Other NPL Pools 37,605 - 37,605
Real Estate Fund Investment I 11,140 - 11,140
Real Estate Fund Investment II 13,340 - 13,340
Real Estate Fund Investment IV 186 - 186
Real Estate Fund Investment V 5,857 - 5,857
Other net assets of subsidiaries (residual legacy entities) - 248 248
Total assets 351,946 174,765 526,711
Trade and other payables - 18,717 18,717
Manager base and incentive fees - 2,884 2,884
Total liabilities - 21,601 21,601
Net Asset Value 351,946 153,164 505,110
FINO deferred purchase price commitment 64,680 (64,680) -
New distressed loan investment 7,722 (7,722) -
RE Fund Investment V remaining unfunded commitment 794 (794) -
NAV (segments adjusted for outstanding commitments) 425,142 79,968 505,110
NAV (€ per share) 8.06 1.52 9.58
Taking into account the Q1 2018 distribution of €17.4 million (€0.33 per share) declared after the quarter end, the net Corporate NAV (after adjusting for outstanding commitments) would be €62.6 million (€1.19 per share) and the net total Company NAV would be €487.7m (€9.25 per share). The dividend and capital distribution were declared on 16 May 2018 and will be paid on 31 May 2018 to shareholders of record at close of business on 23 May 2018, with an ex-dividend date of 22 May 2018.
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 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 2:00 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 First Quarter 2018 Earnings Call" or "conference ID number 1685298".