28 November 2023 15:30

The Chief Executive Officer’s point of view on the first nine months of 2023

The Chief Executive Officer, Claudio Albertini, gives us his interpretation of IGD’s results at 30 September 2023 and comments on the FFO guidance for FY 2023.

The signals pointing to gradual improvement in the operating performances were confirmed, once again, in the third quarter of the year. The core business EBITDA, which was 3.8% higher in the first half compared to the first half of 2022, accelerated in the third quarter: there was, in fact, an increase of 6.7% in the first nine months of 2023 compared to the same period of 2022. This improvement in EBITDA was also reflected in a similar acceleration in Net Rental Income which rose 5.7% in the nine-month period versus +3.4% in the first half.

In an environment of increasingly higher interest rates, the increase in adjusted financial charges impacted FFO which amounted to €44.4 million (-11.9%).

In light of the exchange and consent solicitation transaction to refinance the bond due in 2024, which closed successfully on 14 November, the FFO guidance for FY 2023 is €53 million.    

Let’s hear what the Chief Executive Officer has to say about the dynamics underlying the performances recorded at 30 September and the expectations for the next reporting period.


Dear Shareholders,

The first nine months of 2023 showed a consistent strengthening in the operating performances, confirmation not only of the underlying validity of our shopping center format, but also of the effectiveness of the management choices made by IGD.

The 5.4% rise in footfalls recorded by the Italian portfolio, was accompanied by an increase in mall retailers’ sales of 6.2% when compared to the same period of 2022.

The increase in retailers’ sales was recorded across all categories of merchandise with one exception, electronics which, after the strong uptick in revenues seen over the last few years, reported a slight drop of around 1.4%. Clothing, which accounts for 48.5% of IGD’s rental income, posted above average growth of 6.4%. Positive signals were also provided by home care and food and beverage which were up 18.0% and 16.5%, respectively. Hypermarkets also provided reassuring results in the nine-month period, posting an increase in turnover of 4.9%.

Despite the ongoing efforts to make the shopping centers’ retail offering even more appealing – which typically causes a certain level of strategic vacancies – occupancy was 10 basis points higher than at the end of June 2023, coming in at 95.3%.

In the first nine months of 2023 we also received an encouraging signal from rent collection which at the beginning of November exceeded 94%.

In the period January – September 2023 we also finalized leases representing around 6.5% of the total rent in Italy, with a small downside of around 1.4%: a significant result if you consider that the rents on renewals and turnover had been adjusted for inflation (+7%) in the previous period.

Romania provided us with signals that were just as encouraging, with occupancy at 97.1% and rent collection at around 96%. The 404 new leases, both renewals and turnover, were signed with retailers at an average upside of 2.28% and the qualitative profile of the tenant mix was also improved thanks to the presence of new, international brands.

A lot of work was done on marketing in the period which produced concrete results, including the successful inauguration, in mid-September, of Officine Storiche in Livorno, a key Porta a Mare. Project asset. In a space of more than 16 thousand square meters, IGD introduced excellent brands which attracted almost half a million people in the first month and a half of operation. This interest is destined to increase with the opening of the fitness center, which took place at the beginning of November, and the arrival of the very appealing clothing anchor, Primark, which will be opening its doors in the second half of 2024.

Thanks to the significant improvement in the operating metrics, we recorded a consolidated core business EBITDA of €81.0 million, an increase of 6.7% compared to the first nine months of 2022. The core business EBITDA Margin for freehold properties was, therefore, 220 basis points higher than in the same period of 2022, coming in at 72.9%.

The increase in EBITDA of €5 million compared to the first nine months of 2022 reflects the €4.8 million rise in Net Rental Income, which rose 5.7% overall and 8.1% like-for-like to €88.4 million. In Italy we benefitted from indexed leases and new pre-lets which offset the temporary discounts granted in the malls. In Romania there was an increase of 6.1%, fueled by rent indexing and the arrival of new retailers, as well as lower temporary discounts.

The average cost of debt came to 3.48% in the period, as a result of the recent loan agreements: the financial charges were €9 million higher, going from €22.1 million in the first nine months of 2022 to €31.1 million.

In the first nine month of 2023 we recorded FFO of €44.4 million, €6.0 million lower than in the same period of 2022. This change reflects the net effect of the €4.4 million increase in adjusted core business EBITDA and the €10.4 million increase in adjusted financial charges.

While net financial debt improved slightly with respect to the €976.94 million recorded at year-end 2022, coming in at €970.86 million at 30 September 2023, the Loan- to-Value of 47.2% was higher than the 45.7% recorded at year-end 2022 due to the penalizing valuations of the real estate portfolio recorded at 30 June. The LTV recorded at the end of September 2023 was actually slightly better than the 47.7% reported at 30 June 2023.

The exchange and consent solicitation transaction on the bond due November 2024, which closed successfully with a high take-up rate of more than 85%, also confirms the trust that investors continue to have in IGD and testifies to the Company’s ability to refinance maturities well in advance.

In light of the residual debt maturities and the lack of further significant maturities over the next three years, the priority for the future will be to optimize the structure of our debt and minimize the cost.

At the moment, therefore, we are extremely focused on containing the LTV by disposing of assets in our portfolio, at a time when we have already completed a large part of the investments in our pipeline. The total residual committed capex is, in fact, limited to €12 million in the fourth quarter of 2023 and €9 million in FY 2024.

The goal to realize at least €180-200 million through the disposal of assets, already envisaged in our 2022-2024 Business Plan, remains unchanged and we are working intensely in this regard but, at the moment, we cannot make any disclosures about the status of ongoing discussions with third parties.

Taking into account the impact of the exchange, repurchase and consent solicitation transaction which was just completed and in light of IGD’s solid operating results, we are updating the FY 2023 FFO guidance to €53 million. This is around the level of FFO we forecast last spring which did not, however, include the costs associated with the latest refinancing.