13 May 2021 12:00

The Chief Executive Officer’s point of view on the first three months of 2021

Dear Shareholders,

during the first quarter of 2020 IGD operated in an environment that was still impacted heavily by the restrictions imposed to limit the spread of the Covid-19 pandemic.

The “non-essential” retailers in our malls that were closed 25% of the possible days of operation in the first three months of 2020, weren’t allowed to operate 48% of the time in the same period 2021. This resulted in a negative one-off Covid effect that we estimate reached €5.4 million in the quarter that just ended, versus basically zero in the same period of 2020.

On the one hand, the results for the period January-March 2021 reported in the income statement, which inevitably show a negative performance in the top line, in EBITDA and the bottom line, reflect the conditions in which our shopping centers were operating, but on the other, demonstrate that the actions taken by IGD to limit the negative impact of the pandemic helped to prevent even greater decreases.

Our ability to adapt was expressed by the actions that we took immediately. We introduced new brands with great appeal, which were instantly well received, in order to maintain a highly attractive offer consistent with the shoppers’ new needs. Even through food&beverage was one of the sectors hit the hardest by the anti-Covid measures, the opening of new brands and formats continued. During the week, from Monday to Friday, we succeeded in recovering part of the turnover lost due to the weekend closures: while the malls were closed 48% of the time, sales fell 38% which is much less (excluding hypermarkets).

We responded to the decrease in occupancy caused by the pandemic with intense remarketing of the spaces: the results are already visible in Romania, where an uptick of 80 basis points was recorded which made it possible for financial occupancy to reach 94.4% at 31 March 2021; in Italy, where occupancy fell 90 basis points to 93.6%, the impact of the remarketing initiatives will gradually become more apparent beginning in the second quarter of this year.

A few phenomenon and structural aspects already seen in 2020, which we were able to leverage on in the first quarter of 2021 in order to limit the negative impact of the difficult context, were also confirmed: firstly, the high percentage of rental income generated by the food anchors ( 26%) that were always open; secondly, the ability to manage the negotiations with tenants in such a way as to avoid making structural changes to the leases in place and having to revisit rents, granting solely temporary discounts in the most critical situations. We also saw that shopping continues to be more targeted than before the pandemic: while footfalls were down 19.5% with respect to the first quarter of 2020, mall sales fell 14.4% with the average ticket up 21.6%. Another important aspect is rent collection as a percentage of monthly turnover which was maintained at a solid level: around 75% in Italy and 88% in Romania.

The work done to manage operations allowed us to close the quarter with core business EBITDA of €23.8 million, a decrease of €6.6 million compared to the first quarter of 2021, of which €5.4 million attributable to the Covid effect.

We also maintained a careful and proactive approach to finance, as demonstrated by the recent liability management activities. In addition to the committed and uncommitted credit lines, if we also consider the €46 million in net cash on hand at the end of March 2021, we can cover our financial needs through the first few months of 2022. Recurring financial charges amounted to €8.2 million in the first quarter of 2021, €0.2 million lower than in the first half of 2020. Net financial debt, lastly, was €10 million lower than at year-end 2020: consequently the Loan-to-Value went from 49.9% to 49.5% and from 47.8% to 47.6% excluding the impact of IFRS16.

FFO amounted to €13.8 million in the quarter, showing a drop of €6.9 million against the first quarter of 2020: this change is attributable to the €0.4 million decrease in the core business EBITDA, the €1 million drop in adjusted financial charges, the neutral impact of taxes and the €5.4 million negative “Covid effect”. Almost 78% of the decrease in FFO is, therefore, attributable to the restrictions implemented to limit the spread of the pandemic.

As a result of the legislative decree issued on 21 April, it was possible to begin a series of reopenings, including restaurants and cinemas, albeit with a few limitations. The weekend closures for shopping centers remain, however, which will impact our second quarter performance.

The elimination of the restrictions will, however, continue over the next few weeks consistent with the infection rates and the success of the vaccine roll-outs.

In the meantime, in IGD we are looking ahead, even beyond the current year, in order to make the changes in our centers needed to capture the new consumer trends. For this reason we launched an innovation project, that we call “Next Steps” because we want to give the idea that this project is really going to guide our next steps. We want to find new solutions to meet the needs of a “new normal” which will certainly be different than the pre-pandemic needs. These initiatives will leverage on the potential of digitalization and the CRM plan that we will launch soon in order to provide even greater personalization and targeted offers.

The footfalls recorded over the last view days allow us to be confident that the pre-pandemic level will be fully recovered. IGD’s business is not just resilient, but it also has the characteristics that allow for a strong and quick recovery. Let’s hope then that soon we will be allowed to keep our shopping centers open during the weekends as well, in order to return to results which express the full potential of our assets and our commitment to managing them.


Claudio Albertini

IGD’s Chief Executive Officer