10 November 2017 12:21

The Chief Executive Officer’s Point of View

Dear Shareholders,

in the first nine months of 2017 the FFO – the indicator which best measures the effectiveness of our management – reached €49 million. The increase of 22.8% on the first nine months of 2016 is significant and higher than the 17.8% year-on-year increase recorded at 30 June 2017.

The operating results indicate that we worked in a positive environment, as the sales of the retailers in our malls gradually improved in the year and rose 4.3% in the last quarter. Occupancy is still high, reaching 96.8% at the end of September. Leases with a few operators expired and we were able to leverage on the favorable moment; negotiations, in fact, resulted in an average upside of 5.7%.

This was the foundation for the €5.9 million increase in rental income driven, above all, by the €4.3 million in additional revenue generated by the new GLA added to the portfolio and, to not a small degree, the like-for-like increase of €1.3 million (+1.5%).

Thanks to careful control of operating costs, we succeeded in increasing the freehold EBITDA margin which went from the 79.5% recorded in the first half to 79.7% in the first nine months of the year. The increase reached an impressive 100 basis points with respect to September 2016.

Financial expense fell by €4.3 million compared to the first nine months of 2016: the liability management activities that we carried out recently allowed us to further reduce the cost of debt which, in fact, fell to 2.85%.

The bottom line of the income statement shows that the Group’s net profit reached €64.7 million, an increase of 74.1% compared to what we posted in the first nine months of 2016.

The path we have followed thus far in 2017 seems, therefore, to be the right one: we can, therefore, confirm the guidance for FFO in 2017 of +20% announced last August.

While we have continued to work on the market commitments we made some time ago, in the last few weeks IGD’s stock has rallied significantly. The acceleration of the upward trend that began at the end of June 2017 is driven by the expectation that the investment universe of the Piani Individuali di Risparmio or PIR might be expanded to include the real estate sector. Originally Law 232/2016, which instituted the PIR, excluded investments in stocks of listed real estate companies in an effort to replicate French legislation. The need to support the creation of new REITs and the significant inflows of savings into the PIR has made it reasonable to reconsider this exclusion. The “PIR compliant” funds gathered amounted to €5.3 billion at 30 June and the figure is expected to reach €10 billion by year-end: an amount that it was initially hoped to reach in five years. Through both Assoimmobiliare and EPRA, the Advisory Board of which I am a member, we have promoted the expansion of the PIR’s investment universe to include the real estate sector. The proposal to amend the regulations was added to the official text of the proposed budget act for 2018, namely the government’s next Stability Act which was presented to the Senate on 30 October: the approval process is now underway in both the house and in the commission. The expectation that the amendment will be allowed has already had a positive impact on our stock which, in the future, could also benefit from higher investments and greater liquidity.

We look, therefore, to the next months with confidence, while maintaining our focus on managing well which, in the past, has always proven to be challenging.