The Board of Directors approves the half-year financial statement at 30 June 2016
Another half of solid results
- Group’s net profit: €26.5 million (+30% against 30 June 2015)
- Core business funds from operations (FFO): €27.1 million (€0.033 per share), +26.6%. Estimate for year-end FFO revised upward (+15/16%)
- Excellent operating results: sales of retailers in Italian malls continue to rise: +4.6%, occupancy improved (97.3% Italy; 95.1% Romania); significant upside on renewed contracts
- Market value of freehold properties: €2,093.6 million (+0.6% vs FY2015)
- EPRA NNNAV per share: €1.22 (-1.8%)
- Significant financial results: Baa3 rating obtained, bond issued at lowest cost ever for the Group, average maturity of debt extended (5.5 years)
Today, in a meeting chaired by Gilberto Coffari, the Board of Directors of IGD – Immobiliare Grande Distribuzione SIIQ S.p.A. (“IGD” or the “Company”), a major player in Italy’s retail property market and listed on the STAR segment of the Italian Stock Exchange, examined and approved the Half-Year Financial Report at 30 June 2016.
“We are closing the half with great satisfaction, not only because of the excellent operating and financial results, but also because we delivered on the first key targets of our business plan”, stated Claudio Albertini, IGD – Immobiliare Grande Distribuzione SIIQ S.p.A.’s Chief Executive Officer “The Group, in fact, obtained an investment grade rating of Baa3 from Moody’s and completed its first public bond issue at the lowest cost ever recorded in its history while also extending the average debt maturity.
As for operations, the positive trend in terms of footfalls and retailers’ sales continued in our shopping centers and the Group benefitted from higher revenue and FFO. We are confident that we will close 2016 with satisfying results for our shareholders, with the FFO rising by +15/16%”
Please note that in addition to the standard financial indicators provided for as per the IFRS, IGD uses alternative performance indicators in order to allow for a better evaluation of the operating performance and the financial position. The meaning and content of these indicators are described below, in line with the ESMA/2015/1415 recommendation published on 5 October 2015 and CONSOB Bulletin n. 0092543 published on 3 December 2015.
EXCELLENT OPERATING AND COMMERCIAL PERFORMANCES …
The positive performance of the Group’s properties was reinforced. Sales of retailers in Italian malls rose further (+4.6% in the half, marking tenth straight quarter of uninterrupted growth), with all categories of merchandise posting growth.
Footfalls were also positive: +1.3% in Italy, +4% in Romania (where the completion of the most important fit outs and the introduction of new brands helped to increase appeal).
In Italy 134 new contracts were signed (95 renewals and 39 turnover) with an average upside of +2.1%; in Romania 125 contracts were renewed with an average upside of +1.7%.
Occupancy rate was higher, reaching 97.3% in Italy (average hyper/malls) and 95.1% in Romania.
….RESULT IN POSITIVE ECONOMIC AND FINANCIAL RESULTS (FFO +26.6%)
Consolidated revenue amounted to €68.1 million, an increase of 7.6% against the same period of the prior year.
Rental income rose 8.5% to €65.0 million; the change is explained primarily by:
- for around €1.2 million, like-for-like growth (+2.2%) in Italy. Malls were up (+3.4%) and hypermarkets were in line with the prior year
- for around €4.4 million, higher revenue not like-for-like
- for around €0.1 million, higher revenue like-for-like in Romania (+2%)
- a decrease in revenue (-€0.7 million) linked to the sale of the City Center property on via Rizzoli at the end of May 2015 and other minor changes
Revenue from services was basically stable (+0.3%): the drop in pilotage revenue, linked primarily to the presence in 2015 of the activities related to the opening of Clodì in Chioggia, was offset by the increase in revenue for Facility Management (which came to €2.4 million, an increase of +2.5% due also to a new mandate).
The Porta a Mare project generated revenue from trading of €0.6 million as a result of the sale of 2 residential units and appurtenances.
Core business Ebitda amounted to €46.7 million, up 12.4% against 1H 2015. Operating costs fell further as a percentage of core business revenue, causing the core business Ebitda Margin to rise by 260 basis points at 69.2%against the prior year. Consolidated Ebit came to €46.1 million, an increase of 14.9% due, in addition to the positive performance in EBITDA, to the positive impact of writedowns and fair value adjustments (+€0.4 million).
Financial expense dropped (–3.2%) to €19.6 million despite the increase in debt linked to the investments made in the period and the payment of dividends.
The Group’s portion of net profit amounted to €26.5 million, an increase of around 30% against the €20.4 millionposted in 1H 2015.
Lastly, core business Funds from Operations (FFO) rose 26.6% against first half 2015 to €27.1 million (€0.033 per share).
INVESTMENT GRADE RATING AND FINANCING
On 17 May the rating agency Moody’s assigned IGD a provisional first-time long-term issuer rating of (P)Baa3 with a stable outlook including in light of the solidity of IGD’s portfolio focused on retail properties where a food anchor is present, the maturity of the lease agreements, as well as the moderate and sustainable financial leverage. The rating became definitive upon completion, on 25 May, of the issue of a €300 million senior unsecured bond.
The bond, which generated demand two times higher than the offer, has a maturity of 5 years and a coupon of 2.5%, the lowest ever paid by the Group on this type of security.
These activities, in line with the business plan targets, were carried out during a positive window of opportunity presented by the market and were far enough ahead of the referendum in Great Britain. IGD was able to lengthen its debt maturity (average maturity is now 5.5 years) and further lower the cost of debt to 3.23%.
The Interest Cover Ratio rose to 2.37x versus 2.15x at year-end 2015.
The EPRA NNNAV reached €994.3 million (€1,012.5 at year-end 2015) or €1.22 per share. The decrease is explained by the payment of around €32.5 million in dividends, higher than the profit of €26.5 million recorded in the period, in addition to the changes in IRS which had a negative impact on the cash flow hedge reserve and net equity of around €2 million. The fair value of debt was also down by around €10 million.
The market value of the IGD Group’s real estate portfolio reached €2,093.6 million, an increase of 0.6% with respect to 31 December 2015.
In Italy like-for-like hypermarkets rose +0.7% (+€4.7 million) and malls were up by +0.4% (+€4.3 million); the market value of the Romanian portfolio at 30 June 2016 was €166 million, down with respect to the €170.6 million recorded at 31/12/2015.
Financial ratios confirm the solidity of the Group’s financial structure: the Loan to Value reached 48.2% and the gearing ratio 0.96x. Net debt reached -€1,009.5 million, higher than the -€984.8 million recorded at 31 December 2015 due to investments and the payment of dividends of more than €32.5 million.
PROJECTS AND NEW OPENINGS
After having opened the shopping center in Chioggia and purchased the mall of the Puntadiferro center in Forlì in 2015, the investment pipeline is moving forward as planned.
Work on the extension of the ESP center in Ravenna (an additional 19,000 m2) was started in the half and is expected to be completed in 1H2017 (retailers have shown great interest and full occupancy is expected by the opening); work continued on the Officine Storiche area of Porta a Mare in Livorno, the commercial portion of which is expected to open in second half 2018.
The shopping center in Grosseto is expected to be inaugurated end of October/beginning of November 2016. IGD will purchase a portion of the mall: pre-letting was completed at 90%; premiere national and international brands expressed great interest in the project.
OUTLOOK 2016 UPDATE
Based on the positive results posted in the first half, the Company estimates that in 2016 FFO will rise about 15/16% against 2015, which is higher than the previous increase forecast of between +13% and +15%.
This outlook assumes that there will be no substantial changes in the market conditions in the countries where the Group operates.