21 August 2023 14:00

The Chief Executive Officer’s Point of View on the first six months of 2023

IGD’s Chief Executive Officer, Claudio Albertini, takes a look at the results IGD achieved in the first six months of the year.

An analysis of the results achieved in the first half of 2023 shows that progress was made in several areas: the very encouraging operating results reveal an increase in the core business EBITDA of 3.8% which reflects an improvement of 3.4% in net rental income.

FFO came to €30.9 million, lower as a result of the foreseeable increase in adjusted financial charges as interest rates continued to rise. Based on the half-year results and the current environment, without taking into account any refinancing or disposals in the second half, management revised the FY 23 guidance upward from €53 million to €54-55 million.

Let’s hear what the Chief Executive Officer has to say about the work done to achieve these half-year performances and what the expectations are for the rest of the year.


Dear Shareholders,

the first half of 2023 provided several reassuring signals relative to the operating performance which, firstly, confirm the validity of the role played by the typical IGD shopping center: the indications we gathered from footfalls, which were 6.6% higher, and the sales of mall tenants, which rose 8,5% compared to the same period of 2022, confirm what we have always believed, namely that the format of our centers is able to meet the needs and expectations of shoppers effectively, including in this post-pandemic phase, as well as live and work with e-commerce. In Italy the penetration rate of e-commerce has, moreover, remained stable over the last three years at around 11%.

These operating results also confirm that the work done to continuously update our assets, based on a correct interpretation of the new consumer trends, has paid off. In the first part of the year we focused on putting together the most current and attractive offer in terms of both merchandise and tenant mix. Occupancy of the Italian portfolio was in line with the first quarter at 95.2%.

If the fact that all categories of merchandise recorded higher sales in the half is reassuring for the role of the shopping center in general, the 20% increase in sales of the food and beverage segment suggests that we have officially left the negative impact of the pandemic behind us. Hypermarkets posted growth of 4.6% which demonstrates that they continue to be an invaluable anchor.

Coming in at around 92% at 1 August, rent collected provided another positive result.

The situation in Romania at 30 June was also promising, with occupancy at 96.8% and IGD’s rent collection at 1 August at 95%.

The operating results recorded in the first six months of the year reflect the intense commitment to marketing and the closing of new leases in order to introduce the most appropriate retailers in each mall based on a precise, medium/long-term vision which, even though there was a slight, short-term drop in profitability, helped us secure our target retailers. In Italy 87 new leases were signed (27 turnover) with an average downside in rent of 4.4%, which takes into account the positive impact that inflation had in the half of +7.2%. We expect the figure for FY 2023 to decrease further, by around 2%, as a result of further negotiations.

In Romania, where there were more renewals (212) with an average upside on rents of 2.3%.

Despite the convincing operating performances, the fair value of IGD’s freehold portfolio was 3.6% lower than in the year-end appraisals, coming in at €2,005.12 million which reflects the impact that higher interest rates had on the valuation models used by the independent appraisers.

As a result of the positive operating performance, consolidated core business EBITDA amounted to €53.8 million, an increase of 3.8%. The core business EBITDA Margin for the freehold properties came to 72.8%, an increase of 1.5 percentage points against the first half of 2022.

The increase in EBITDA reflects net rental income, which rose 3.4% overall and 7.8% like-for-like to €59.1 million. In Italy the marketing and inflation indexing continued to have a positive impact and more than offset any temporary discounts granted. In Romania, where there was an increase of 5.7%, we benefitted from indexed revenues, as well as the contribution of new retailers and the decrease in temporary discounts.

Financial charges went from €14.3 million in the first half of 2022 to €19.2 million: the change reflects the higher costs of the most recent loans in a context of higher interest rates. Refinancing continued: last May we, in fact, closed a €250 million Green secured facility which brought the financing obtained in the last year to €486 million.

With the net financial position at €981.97 million in the first half of 2023, the Loan-to-Value came to 47.7%, higher than the 45.7% recorded at 31 December 2022.

In the first half of 2023 FFO reached €30.9 million, beating our expectations but €3.1 million lower than in the same period of 2022. This performance is attributable mainly to an increase of €4.7 million in adjusted financial charges, partially offset by an improvement of €1.6 million in the adjusted core business EBITDA.

Due to the impact of impairment and fair value adjustments, which had a negative impact of €80.3 million, the consolidated income statement closed the half with a net loss of in €47.0 million.

Based on the FFO of €30.9 million recorded in the first half of the year, we have raised our guidance for 2023 of €53 million, disclosed last 23 February, to €54-55 million. This estimate is based on the current scenario and does not take into account any further refinancing or disposals we might make in the second half of 2023.

When the 2022-2024 Business Plan was presented last December, the disposal of assets was viewed as a way to possibly reduce debt and lower debt servicing costs. In light of the current backdrop, however, disposals are no longer viewed as optional but have become a pillar of the financial strategy. Overall, we expect to obtain at least €180-200 million from this process.

Encouraged by the operating results achieved in the first six months of the year, which testify to the validity of our policies, with respect to the new consumer trends, and the tenacious execution of our operational team, in the next few months we will also be very focused on a financial strategy based on clear principles: rigorous financial discipline which ensures IGD’s investment grade profile, refinancing maturing debt well in advance, including through the use of green financial products which IGD’s investors have already shown interest in.

We would like to thank the shareholders who continue to trust us and believe in the strategy we are using to navigate this difficult period. We believe that in the short-term we have, at least partially, rewarded this trust by paying a dividend for 2022 of €0.30 per share on 10 May, as we wait for the stock price to fully express the value of the Company in the future: based on the valuations at 30 June 2023, IGD ‘s has an EPRA NVR €9.54 per share, well below the stock’s most recent price.