EPP swings to H1 probability

Dutch based property group EPP has experienced a positive turnaround, swinging back to profit in the first half of the year despite facing challenges from lockdowns. The company's malls in Poland saw an increase in footfall, which helped offset some of the impact of the restrictions. CEO Tomasz Trzoslo discussed the company's performance and strategies in a recent interview with CNBC Africa. Trzoslo highlighted the difficult period during the lockdowns in Poland, with two lockdowns affecting operations in the first half of the year. However, compared to the previous year, the company managed to navigate through these challenges and deliver encouraging results. One of the key factors contributing to EPP's resilience during the lockdowns was the implementation of cost-saving initiatives. Additionally, the company provided significant financial support to tenants, particularly those facing difficulties. Trzoslo emphasized the importance of complying with government legislation on rents while also scaling back additional support to those most in need, such as leisure tenants. Despite uncertainties about tenant health a year ago, the majority of tenants are now performing well, thanks to government support and a strong bounce back in foot traffic and turnover once the lockdowns ended. While the retail sector showed signs of recovery, Trzoslo also addressed concerns about the office portfolio. With the rise of remote work and hybrid models, questions have been raised about the future of office space. However, Trzoslo expressed optimism about the demand for office space in the long term, citing the importance of collaboration and teamwork in many industries. He predicted that while some flexibility in remote work may remain, most companies will encourage employees to return to the office, driving continued demand for office space. Despite positive operational performance, EPP has adopted a cautious approach by choosing not to pay an interim dividend at this stage. Trzoslo explained that the company had taken on significant debt for liquidity reasons during the pandemic and needed to address debt refinancing in the coming years. EPP is actively exploring options to recycle assets and engage strategic partners to improve its financial position. Trzoslo emphasized the need for caution and progress in asset refinancing and debt repayment before considering a return to dividend payments. In summary, EPP's recent performance demonstrates resilience and adaptability in the face of challenging market conditions. While the company remains focused on operational success and growth opportunities, it is also prioritizing financial stability and debt management to ensure a sustainable path forward.