The Chief Executive Officer’s point of view on the first three months of 2022
The Chief Executive Officer, Claudio Albertini, examines the progress IGD made in the first quarter of 2022, even though the Omicron variant and the war that broke out in Ukraine have kept footfalls and retailers’ sales under pressure: confirmation of the valid strategy implemented by the Company in response to the pandemic and a scenario of higher interest rates and prices.
IGD’s stock recorded decided progress in these first few months of 2022, with solid fundamentals making it possible to resume paying an attractive dividend for 2021 of € 0.35 per share.
Let’s look at the Chief Executive Officer’s interpretation of the quarterly performance and the steps taken to implement the 2022-2024 Business Plan.
in the first quarter of 2022 we worked in an even more challenging environment, with footfalls and retailers’ sales once again under pressure due to the wave of infections attributable to the Omicron variant of the virus and, as of 24 February, the economic repercussions of the Russian-Ukrainian conflict.
Overall, sales in our malls were 7.9% lower in the quarter compared to the same period of 2019 – the last year before the pandemic – while footfalls fell 20.5%.
There were also positive signals, like the increase in the average ticket which was 20.3% higher than in March 2019 which confirms the new consumer behavior, namely less frequent, but more targeted shopping.
Financial Occupancy also held well, if we consider the intense reletting activity carried out over the last few months. In Italy, specifically, the indicator came in at 94.8%, a drop of 35 basis points compared to FY 2021.
The presence of food anchors in all our shopping centers, which account for 20.9% of the total rental income, once again proved to be a strong point.
Rent collection, which came to 90% both in Italy and in Romania, also provided good news.
The combination of these results, therefore, confirms that our approach to managing this challenging operating environment is the right one. Recently we also moved quickly to take a series of actions aimed at supporting tenants. When useful we, in fact, granted new temporary discounts, delayed or sliding scale payments. In order to limit the impact of higher energy prices we quickly intervened with automatic switching off of lights and signs and a continuous monitoring of the temperature inside each shopping center in order to minimize consumption due to heating and avoid increases in the tenants’ costs.
In terms of our operating activities, we took important steps forward, implementing the strategy outlined in the 2022-2024 Business Plan. We, in fact, continued to change our merchandising mix, enhancing it with brands capable of providing innovative products and increasingly more focused on personal services.
In order to accelerate and make our digital marketing strategy as effective as possible, we signed 31 contracts with agencies which will support the individual shopping centers with omnichannel initiatives, based on an approach which takes the specific needs of the catchment area into account.
Toward the same end, namely maximizing the impact of the new Plan’s strategy, we signed a co-marketing agreement with Coop Alleanza 3.0, the main food anchor in our portfolio of shopping centers.
If we look at the results achieved in this first quarter of 2022, we can see that the main indicators show improvement with respect to the first quarter of 2021 which is even more noticeable if we compare the 2021 figures restated to take into account the change in the perimeter following the sale of assets made last November.
Net Rental Income, despite the temporary discounts granted, increased 9.5% – or 22.4% compared to the restated figure for first quarter 2021 – coming in at €28.7 million. The result reflects the positive impact of the reletting made in the last few months of 2021 and the structure of the rents which are indexed 100% to inflation.
Despite the slight increase in general expenses, core business EBITDA reported an increase of 10% – or 24.5% against the figure for first quarter 2021 restated – bringing the EBITDA Margin to 73.2%.
Financial charges adjusted were also 14.2% lower.
Driven by the improvement in the core business EBITDA and the lower financial charges adjusted, FFO reached €16.7 million, an increase of 20.7%, or 46% restated, compared to the first quarter of 2021.
IGD’s financial structure also improved, with the net financial position at €976.3 million in the first quarter of 2022, which brings the Loan-to-Value from the 44.8% posted at the end of 2021 to 44.3% at the end of the quarter.
On 21 April we also repaid the residual amount outstanding on the 7-year bond (coupon 2.65%) of €153,600,000 million. As we have no other significant maturities to refinance before the last quarter of 2023 we decided to wait for more favorable market conditions before issuing the senior green bond that we had contemplated prior to the recent uptick in bond yields and which, however, is still included in our plans in the event different conditions materialize.
On 11 May IGD’s shareholders will receive a dividend of €0.35 per share which provides a significant yield on the stock’s current price.
We believe that the stock market has a positive view of our new Business Plan – built to carry IGD beyond the period of the pandemic, responding to consumers’ new needs – and that it appreciated our ability to respond quickly and effectively to the challenges that arise. The stock reacted in a very positive way to the announcement of the 2021 annual results; results which, moreover, made it possible to propose an attractive dividend and confirm IGD’s equity story.
We hope, therefore, that the economic-financial performance of this first quarter supports this point of view and allows the stock to close the discount, despite the increase of around 20% posted since the beginning of the year, with which it trades against the year-end 2021 EPRA NRV NAV of €10.85.Share