Prelios: the Board of Directors Approves the Results as at 30 September 2016

RESULTS FROM ORDINARY OPERATIONS POSITIVE AND IMPROVING; REVENUES AND MARGINS INCREASE

• REVENUES DURING THE FIRST NINE MONTHS OF THE YEAR INCREASED BY 23% TO €51.3 MILLION (€41.8 MILLION AT 30 SEPTEMBER 2015[1])
• EBIT FROM THE MANAGEMENT AND SERVICES PLATFORM[2] TOTALLED €5.1 MILLION EURO (€2.4 MILLION EURO AT 30 SEPTEMBER 2015)
• GROUP EBIT[3] IS POSITIVE (€+0.1 MILLION) AND IMPROVED COMPARED TO 2015 (€-3.3 MILLION AT 30 SEPTEMBER 2015)
• NET LOSS OF €-24.1 MILLION COMPARED TO €-16.6 MILLION AT 30 SEPTEMBER 2015, MAINLY DUE TO NON-RECURRING CHARGES

2016 FORECAST AND ESTIMATES

• TARGETS FOR EBIT FROM THE MANAGEMENT AND SERVICES PLATFORM (AT €10-12 MILLION) AND SAVINGS IN CENTRAL COSTS THAT WERE PREVIOUSLY ANNOUNCED TO THE MARKET ARE CONFIRMED
• REVENUES ARE EXPECTED TO INCREASE COMPARED TO 2015, ALBEIT LOWER THAN PREVIOUSLY ANNUOUNCED
• THE COMPANY HAS STARTED THE PROCESS FOR DEFINING THE NEW GUIDELINES FOR THE THREE-YEAR PERIOD 2017-2019 WHICH WILL BE PRESENTED TO THE MARKET IN EARLY 2017

Milan, 10 November 2016 – the Board of Directors of Prelios S.p.A. (“Prelios” or the “Company”) examined and approved the results as at 30 September 2016.

The results highlight organic growth in all the Group’s business lines, with an overall improvement in margins. The results reflect the effects of the company’s ongoing relaunch and repositioning process following the positive conclusion of the extraordinary spin-off transaction[4].

On the other hand, determination of the Group’s net result was, along with other entries, significantly impacted by the result of the interest in the investment platform transferred to Focus Investments S.p.A.

Group Performance at 30 September 2016

In the first nine months of 2016, the Group recorded an increase in consolidated revenues of 23% compared to the same period last year. Revenues were equal to Euro 51.3 million compared to Euro 41.8 million at 30 September 2015, with the same scope of consolidation and considering the abovementioned extraordinary transaction. The increased revenues reflect improved performance in both Alternative Asset Management and Real Estate Services, thus highlighting the Group’s organic growth.

EBIT improved over the same period last year and is positive at Euro 0.1 million (Euro -3.3 million at 30 September 2015).  The improvement is the result of both growth in volumes and increased concentration of high value added business, as well as from improved margins from the operating companies and from the centralised cost containment process.

The net result was a loss of Euro 24.1 million (Euro -16.6 million at 30 September 2015).  This performance is mainly the result of the valuation of the investment in Focus Investments S.p.A.[5] which had an impact of -13.3 million Euro.  The decrease compared to the same period in 2015, which contrasts with the improvement in operating activities, is mainly attributable to the real estate write-downs of Focus Investments S.p.A. along with restructuring costs. 

The Net Financial Position[6] is a net debt of Euro 3 million and is significantly improved on the Euro 184.9 million reported at 31 December 2015 as a result of the extraordinary transaction.

Equity at 30 September 2016 was Euro 99.4 million compared to Euro 66.0 million at 31 December 2015. The increase is mainly due to the capital increase concluded in the first quarter of 2016 and the result for the period.

Alternative Asset Management Performance

Thanks to the combination of the results achieved by Prelios SGR and Prelios Credit Servicing, the Alternative Asset Management activities earned a total of Euro 18.9 million in revenue, up from Euro 16 million reported at 30 September 2015. The operating profit at 30 September 2016 was Euro 3.7 million compared to a loss of Euro 0.3 million in the first nine months of 2015. In particular:

• PRELIOS SGR recorded revenue, mainly coming from fixed management fees, of Euro 12.5 million, up 12% compared to the amount reported at 30 September 2015.  The operating profit was Euro 3.8 million compared to Euro 2.1 million reported in the same period in 2015 thanks to the increase in revenue and the continued efforts in containing structural and occasional costs. With regard to the development of new initiatives, during the period under review, Prelios SGR established four new AIFs: Fondo Bernina Social Housing, Fondo Madison Imperiale; Fondo Logita; Fondo IASO, which brought assets under management to about Euro 3.8 million. The establishment of three new AIFs is still ongoing.
• PRELIOS Credit Servicing reported increased operating profit in the first nine months of 2016, which was essentially at breakeven compared to the operating loss of Euro 2.4 million reported at 30 September 2015.  The amounts collected in the first nine months of 2016 on behalf of clients totalled about Euro 60.9 million, compared with about Euro 39.6 million in the corresponding period of 2015 on a like-for-like basis. PRELIOS Credit Servicing reported increased revenues of Euro 6.4 million at 30 September 2016 over the same period of 2015 (+ Euro 1.6 million) as a result of (i) the involvement in new securitisation transactions with major Italian banks in which the company took on the role of Special, Master and Corporate Servicer; (ii) the new Special Servicer mandates entered into with leading national banks and; (iii) the fees from Advisory/Due Diligence activities that the company provided during the period. The Gross Book Value (GBV) of the portfolios under management is about Euro 9.7 billion, while the number of doubtful loans managed during the period (more than 42,000 units) is down on the same period last year following agreed termination of the management mandate for an unsecured portfolio containing a high number of small/medium sized positions. The gross book value was more than offset by the acquisition of new secured asset management mandates involving medium-sized and large loans.

Real Estate Services Performance

Real Estate Services (both Italian and foreign) recorded total revenues of Euro 32.1 million, an improvement compared with the figures at 30 September 2015 (Euro 26.7 million). The operating profit was Euro 1.4 million compared with the 2.7 million reported in the first nine months of 2015, which was impacted by a few positive one-off items related to services in Germany.  In particular:

• PRELIOS Integra reported revenues of Euro 14.2 million at 30 September 2016 compared with Euro 12.8 million in the first nine months of 2015. Operating profit was Euro 1.4 million compared with Euro 1.6 million reported at 30 September 2015. During the first nine months of 2016 the company continued its transformation, which was started in the previous period, from a Business Unit with mainly captive customers to a service provider capable of competing on the market independently from the Group, acquiring and developing non-captive clients with strategic external growth objectives. In order to strengthen the building management commercial services offering, Prelios Integra has decided to revolutionise the way services are provided by launching ISM 1.0 (Integra Smart Management), a software platform that allows for the monitoring of maintenance activities of any building within the company’s portfolio through an application and an app.
• PRELIOS Agency reported revenues of Euro 1.6 million, in line with the result achieved during the first nine months of 2015. Despite reporting an operating loss of Euro 0.9 million, the result is an improvement over the Euro 1.7 million loss reported at 30 September 2015. The improvement is mainly the result of a different revenue mix (with higher margins) and activities aimed at containing overhead costs.  During the period under review, the process of transforming the company from one focused on captive customers to a Broker & Advisor aimed at third party customers continued.  In particular, during the first nine months of 2016, the Company was awarded new contracts and renewed a number of marketing agreements worth approximately Euro 500 million. Furthermore, it was assigned new important mandates to lease approximately 68,000 square metres and rents amounting to roughly Euro 15.4 million, in addition to a mandate to find 9,000 square metres of leased office space.
• PRELIOS Valuations reported revenues of Euro 6.9 million at 30 September 2016 compared to Euro 4.3 million reported in the same period of 2015. The positive change is mainly related to the increase in revenues deriving from the "loan services" appraisal activity. The operating profit was Euro 0.9 million, with increased margins compared to 30 September 2015 (+ Euro 0.5 million) thanks to the renegotiation of contracts with some major suppliers.
• GERMANY: revenues at 30 September 2016 in Germany totalled Euro 9 million, up Euro 1.3 million on the Euro 7.7 million recorded during the same period of 2015.  The operating result is breakeven compared with the Euro 2.7 million operating profit reported in the same period of 2015, which had benefited from positive one-off items, while the first nine months of 2016 were impacted by the opening costs of the Frankfurt operation in preparation for start-up of the new “Prelios German Retail Property Fund” that will also allow the German business to focus on Alternative Asset Management.  During the first nine months of 2016, Prelios Immobilien Management, which is developing and marketing a shopping centre in the heart of Husum and will manage it once it is completed, has confirmed three high profile tenants.
• POLAND: the operating result is breakeven, but improved over the first nine months of 2015 (operating loss of Euro 0.2 million). The Group is active in Poland mainly with Prelios Real Estate Advisory Sp. z o.o., a company incorporated in 2015 with the aim of providing asset management, advisory and brokerage services to investors and real estate operators active on the Polish market.

Business Outlook

From a management standpoint, 2016, following the completion of the well-known Extraordinary Transaction, will be dedicated to relaunching Prelios as a key player in the real estate and financial services sector as outlined in the Industrial Plan. The repositioning and relaunch process of the Company has entered the second phase of strategic development through which the Company will increase its focus on alternative asset management by virtue of its high level of expertise in this area.

Considering the results at 30 September 2016 and the positive trend from ordinary operations, the Directors of Prelios consider it reasonable to confirm the targets estimated for 2016 with regard to the Central Cost (G&A) reduction trend and EBIT for the Management and Services Platform[7] (between Euro 10 and 12 million) that were communicated to the market.  Revenues from the Management and Services Platform at the end of 2016 are expected to be below the announced target (between Euro 100 and 105 million), but nonetheless improved over 2015.   

The Company has started the process for defining the new guidelines for the three-year period 2017-2019 which should be presented to the market in early 2017. In this context and as part of the continuous process of strengthening the business in a market that shows progressive signs of consolidation and the need to focus on the activities and resources that are available, the Board of Directors of Prelios has decided to launch an assessment process, along with an advisor, to identify and evaluate possible partnerships within the context of the Group’s business sectors.

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Calendar of 2017 corporate events

The following is a calendar of Board and Shareholder events for 2017:

• 23/03/2017 – 27/04/2017: Board of Directors’ meeting to review the draft Financial Statements and Consolidated Financial Statements as at 31 December 2016.
• 26/04/2017 – 31/05/2017: Shareholders’ Meeting to approve the 2016 Financial Statements (single call)
• 11/05/2017: Board of Directors’ meeting to review the Interim Financial Report at 31 March 2017
• 27/07/2017: Board of Directors’ meeting to review the Half-Yearly Financial Report at 30 June 2017
• 09/11/2017: Board of Directors’ meeting to review the Interim Financial Report at 30 September 2017

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This press release, and in particular the section entitled “Business Outlook” contains forward looking statements. These statements are based on the Group’s current estimates and forecasts about future events and, by their nature, are subject to inherent risks and uncertainties.  Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including continued volatility and further deterioration of capital and financial markets, changes in general economic conditions and economic growth, as well as other changes in business conditions and many other factors, most of which are outside of the Group’s control. 

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The Interim Report on Operations will be made available to the public on 14 November 2016 at the Company's registered office, Viale Piero e Alberto Pirelli 27, Milan, Italy, and published on the Company's website www.prelios.com (Investor Relations section). The same documentation will also be available at Borsa Italiana S.p.A. and through the authorised storage system eMarket Storage (www.emarketstorage.com).

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The Manager responsible for preparing the corporate accounting documents of Prelios S.p.A.,
Mr Sergio Cavallino, certifies - pursuant to art. 154-bis, paragraph 2, of the Consolidated Law on Finance (Legislative Decree 58/1998) – that the accounting information contained in this press release corresponds to the documents, books and accounting records of the Company.