3 August 2017 11:55

The Chief Executive Officer’s point of view

Dear Shareholders,

The results for the first half of 2017 show an increase in net profit of 84.6%, as well as a 17.8% rise in FFO. The results are the product of the financial and operating strategies we have developed and consistently implemented over time. The figures recorded at 30 June 2017, which bring us halfway through our Business Plan 2016-2018, show that we are in line with, and in some instances, have exceeded our targets. We decided, therefore, to raise the guidance for full year 2017 FFO from between 18% and 19% to 20%

In the first half of 2017 the Italian economy improved, with unemployment down and a discreet recovery in household spending. In IGD’s shopping centers this trend translated into a 1.3% increase in retailers’ sales, thanks also to the expansion of the leasable space which we benefitted from following the opening of the ESP extension in Ravenna. If we look at the Italian portfolio of IGD centers on a like-for-like basis, rather, retailers’ sales were up 0.5%.

How did IGD succeed in translating these operating performances in greater revenue? Like-for-like rental income, which was 1.5% higher in Italy, suggests that we did a good job, above all if we consider that the contribution of inflation (linked to the indexed leases) is still modest: around one fourth of a percentage point. On the other hand, our strategy to grow through acquisitions, expansion and restyling proved to be key to the increase in rental income: out a total increase of €3.4 million, a whopping 2.4 million was, in fact, attributable to the expanded perimeter.

In the half we maintained our rigorous control of operating costs which dropped further as a percentage of core business revenue. We added, therefore, almost an entire percentage point to the core business freehold EBITDA Margin which reached 79.5%.

Financial management is always at the center of our attention: the liability management activities that we carried out allowed us to reduce the cost of debt noticeably, from the 3.3% recorded at year-end 2016 to 2.9%: in this way we were able to lower financial expense by more than €2 million, despite the increase in net financial debt linked to investments, including the opening of the ESP extension in June, as well as the payment of higher dividends.

The noticeable increase in net profit also reflects the positive impact of the “Change in fair value” which came to €18.9 million, compared to a positive €0.4 million in the first half of 2016. The independent appraisers valued IGD’s real estate portfolio at 30 June 2017 at €2.21 billion, an increase of 1.5% compared to year-end 2016. If this increase was driven primarily by the inclusion in the portfolio of the ESP extension, it is also true that the improvement in FV like-for-like of the Italian malls and hypermarkets, 1.1% and 0.5% respectively, was not negligible .

The EPRA NNNAV per share, which rose 1.6% on the figure posted at year-end 2016 to €1.31, continues to provide a very concrete measure of the stock’s valuation: it shows that, at the current price of around €0.82, IGD’s stock is trading at a discount of 38% and that it still provides interesting upside.

In order to create the best conditions for the stock price to more fully express the value of its assets we will continue to work on the projects and policies outlined in the Business Plan which, we are sure, will translate into numbers that are even more solid and convincing.