The Board of Directors approves the interim management statement at 31 March 2016 and the update of the business plan 2016-2018
In the quarter: solid operating results confirmed
- Group’s net profit: €12.7 million, up 37.4%
- Funds from Operations (FFO): €14.1 million, + 33.7%
- Core business revenue: €33.8 million, + 8.7% (LFL Italy + 1.6%, Romania +2.3%)
- Sales of retailers in Italian malls up + 6%; footfalls +2.4%; occupancy on the rise in Italy and Romania
- Cost of debt down significantly at 3.26%
Update of the Business Plan 2016-2018: further progres
- CAGR for rental income around + 7% (total growth of > 20%)
- Freehold EBITDA margin at the end of the plan period: around 80%
- Improved financial management (cost of debt < 3%, interest cover ratio >3x by end of the plan period)
- Yearly FFO of around €75 million by 2018; CAGR above 18%
- Investments expected to reach some €195 million, approximately €145 million of which in development projects
- Balanced financial structure to be maintained over the life of the plan with a loan to value of between 45% and 50% (trend at 2018 pointing to the lower end of the range)
Today the Board of Directors of IGD – Immobiliare Grande Distribuzione SIIQ S.p.A. (“IGD”or the “Company”), one of the main players in Italy’s retail real estate market and listed on the STAR segment of the Italian Stock Exchange examined and approved the Interim Management Statement at 31 March 2016 and the update of the business plan 2016-2018 during a meeting chaired by Gilberto Coffari.
“The results posted in 2015 and in first quarter 2016 demonstrate the solidity of the Group’s fundamentals and the validity of the strategic choices made; furthermore, the opportunities that we took advantage of in 2015 (like the acquisition of the Punta di Ferro mall in Forlì) and the initiatives that we will be implementing over the next few months allow us to raise the targets for 2018, particularly with regard to FFO and financial management”, Claudio Albertini, IGD – Immobiliare Grande Distribuzione SIIQ S.p.A.’s Chief Executive Officer stated. “With this plan, which we believe has limited execution risk, IGD is confirming the ability to continually increase FFO and provide greater visibility of dividend payouts; all this will be achieved while maintaining a balanced, solid financial structure and solely through organic growth. We will also evaluate any opportunities for external growth that might materialize which would create value for all our shareholders”.
Principal consolidated results at 31 March 2016
Excellent operating results continued in first quarter 2016: sales of retailers in Italina malls rose 6% and footfalls were up by 2.4%; in Romania footfalls increased (+1%).
The average occupancy also rose further reaching 97.2% in Italy and 94.2% in Romania.
Core business revenue reached €33.8 million, an increase of 8.7% against the same period of the prior year.
Rental income rose 9.1% against the same period 2015 to €32.6 million; the change is explained primarily by:
- the1.6% increase in like-for-like revenue in Italy (upside on renewals and turnover was around +2%);
- for €2.4 million, the new openings and acquisitions made in 2015;
- the +2.3% increase in revenue posted in Romania (average upside of +1.4%).
Operating costs dropped significantly in the quarter, boosting the core business Ebitda Margin which amounted to 69.9%, while the freehold Ebitda margin came to 79.2%.
Financial expense also fell noticeably (dropping – 9.3% against 1q 2015 to €9.4 million), with the average cost of debt falling to 3.26%.
The Group’s portion of net profit amounted to €12.7 million, an increase of 37.4% against the same period 2015.
Funds from Operations (FFO) came to €14.1 million, up considerably compared to first quarter 2015 (+33.7%).
The IGD Group’s net debt at 31 March 2016 was largely in line with 31 March 2015 at €984.2 million, as was the Loan to Value which came to 47.3%.
Update of the Business Plan 2016-2018
The Business Plan 2016-2018 was updated in order to reflect both the changing global market conditions, as well as, in particular, the acquisition and capital increase completed year-end 2015 which were not taken into account in the prior version.
Even though market instability persists and growth in Italy is still moderate, the overall environmentremains positive. The signals gathered by the Group also point in this direction and appear particularly convincing (and were confirmed by the results posted year-end 2015 and in 1Q 2016, as well as the operating performances recorded in both Italy and Romania).
The targets for the main financial and economic indicators are confirmed or raised with respect to the prior version of the Plan.
From an economic standpoint, CAGR1 for rental income is expected to reach around 7%, while like-for-like revenue is projected to grow at a CAGR of around 2%. Overall, rental income is expectedto increase by more than 20% by the end of the plan period.
Thenew openings, which also account for the majority of the investments in development, will have a significant impact. These include:
- the mall in the Grosseto shopping center which is expected to open in November 2016. Pre-letting is underway with a view to achieving full occupancy by the opening (pre-letting more than 80%);
- the extension of the ESP shopping center in Ravenna which is expected to open first-half 2017. Pre-letting is going well (goal of 100% occupancy by the opening);
- the shopping mall at Officine Storiche in Livorno which is expected to open second-half 2018. The first inquiries have been received.
With regard to profitability, the Group expects the freehold EBITDA margin to reach 80% by year-end: revenue will increase more than proportionately with respect to the increased operating costs (linked to the expanded perimeter).
Noticeable improvement in financial management will be recorded thanks to a further reduction in the cost of debt2(estimated to reach3% by the end of the plan period with the interest cover ratio above 3x). The goal to obtain a rating from a premiere rating agency in order to access the bond market at even more favorable conditions is confirmed.
Over the period 2016-2018, the Group intends to complete the committed pipeline with investments of around €195 million, approximately €145 million of which relating to expansions and development projects with a focus on the quality, as well as the efficiency, of the shopping centers and enhancement of the “spaces to be lived in “ concept. New GLA of more than 70 thousand square meters will be added with yields on cost above7%.
Rigorous financial discipline will be maintained when making the investments, along with a balanced capital structure: the Loan to Value is expected to remain between 45% and 50%, reaching the low end of the range by 2018.
Funds from Operations (FFO) are also expected to rise significantly at a CAGR of more than 18% (target FFO by 2018 of €75 million); toward this end, of note is the positive result recorded between 2014 and 2015 (FFO rose +28.5% to €45.1 million).
These performances will also directly benefit shareholders: the Group intends, in fact, to distribute approximately 2/3 of the FFO as a dividend, reserving the right to propose a Dividend Reinvestment Option as it has in the past, market conditions permitting.
1 Calculated based on figures at 31/12/2015
2 Net of loan fees (both recurring and non)