Results first half 2024
NET RENTAL INCOME GROWS ON A LIKE-FOR-LIKE BASIS
Net Rental Income: €59 million; +4.5% like-for-like
GOOD RESULTS FROM THE ‘SERVICES FOR THIRD PARTIES’ BUSINESS UNIT
Two medium-sized stores in Clodi Shopping Center remarketed for Prelios (Food Fund)
VALUATIONS LARGELY STABLE
Market Value of Freehold Assets: €1,697.2 mn; -0.5% versus 31 December 2023 like-for-like
FINANCIAL STRUCTURE CONSOLIDATED
Loan-to-value down to 44.9% (from 48.1% at year-end 2023)
2024 FFO GUIDANCE CONFIRMED
FFO expected to reach approximately €34 million
Bologna, 1 August 2024. Today, in a meeting chaired by Antonio Rizzi, the Board of Directors of IGD – Immobiliare Grande Distribuzione SIIQ S.p.A. (“IGD” or the “Company”) examined and approved the consolidated half-year financial report at 30 June 2024.
Message from the Chief Executive Officer, Roberto Zoia
We welcome the results achieved in the first six months of 2024. Firstly, net the one-off write-down of the Food Fund stake, the fair value of IGD’s portfolio finally came in largely stable. The slight decline recorded is mainly related to lower inflation growth than estimated in December 2023. More in detail, the valuations of Officine Storiche, our redevelopment project in Livorno, were positive, supported by both the latest and future openings, like Primark which will open on September 3rd. In the second quarter, we also recorded an increase in rents for both renewals and new lets, which offset the downside posted in the last three months of the year. The results we present today form the basis we will use to define the 2025-2027 Business Plan whose guidelines we have already provided and that will be disclosed in full by year end.
OPERATING PERFORMANCE – ITALY
In the first half of 2024, footfalls in malls were 0.4% higher than in H1 2023, while tenant sales fell slightly by 0.5% as a result, specifically, of the general trend witnessed in the last couple of months and the negative performance of Electronics following the strong increases recorded as of 2019.
Looking at sales by product category, Electronics recorded the biggest drop (-9.6%) vs the same period last year, while Personal Care and Wellbeing recorded the strongest growth (+10.3% vs 2023); a positive trend was also recorded in Clothing, Restaurants and Services.
LEASING ACTIVITIES
During the first half of the year, IGD continued its marketing activities achieving effective results: mall occupancy at June 30th stood at 94.38%, an increase of 22bps vs March 31st; average occupancy at malls + hypermarkets also rose by 20 bps to 94.96%. The ability of IGD’s shopping centers to attract international anchor tenants was also confirmed: in February, Rituals opened a boutique at Puntadiferro, while the first Sinsay store in an Italian IGD center was opened on July 28th at Officine Storiche where, in September, Primark will also inaugurate a 2,400 square meter medium-sized store. In the same month, the newly renovated Notorious Cinemas multiplex will open its doors at the Nuova Darsena Shopping Center in Ferrara.
The 103 contracts signed during the first half-year (51 renewals and 52 turnover) led to an overall downside of -0.6%. However, after a first quarter in which the downside reached -3.5%, upside on the leases signed in the second quarter reached +3.6%. The leases signed account for 4.3% of the Group’s rental income. Between the first and second quarters of 2024 the WALB or Weighted Average Lease Break was also extended going from 1.78 to 1.82 years for malls and from 11.77 to 12.22 years for hypermarkets.
Positive results were also achieved in total collections, which stood at 95% at 31 July 2024.
DIGITAL ACTIVITIES
Digital initiatives continued in the half with the launch of the first IGD App for shoppers and tenants in 7 shopping centers. This is an important customer engagement and loyalty tool which can be used by shoppers to, among other things, participate in prize winning competitions or other ad hoc initiatives while, at the same time, providing tenants with the opportunity to reach a select audience through customized offers available only to registered users.
SERVICES FOR THIRD PARTIES
The first positive results were also reported for the business unit ‘Services for Third Parties’: in addition to property and facility management activities – highly valued by clients – in the second quarter, two medium-sized stores were successfully re-let at the Clodì Retail Park in Chioggia, i.e. one of the assets sold in April and transferred to Food Fund which is still managed by IGD.
The client will pay a commission for this activity, in addition to the fixed compensation established in the contract.
OPERATING PERFORMANCES ROMANIA
Consistent with what was described above for Italy, the Winmarkt shopping malls also recorded a good operating performance: at 30 June 2024 occupancy landed at 95.52%, basically unchanged with respect to the high levels recorded at 31 March 2024; in the first half, 177 leases were signed between renewals (114) and turnover (63), with a net upside on renewals of around +4.94%., thus confirming Romania’s retail sector vitality. The soundness of our tenant portfolio is also confirmed by a rent collection rate at around 96% in the first six months of 2024.
ASSET MANAGEMENT
In the first half of 2024 IGD’s investments and capex were approximately €7 million.
The fit-out work at Officine Storiche in Livorno continued in preparation for the opening of the Sinsay and Primark stores, as did the restyling of Centro Leonardo in Imola.
The assets’ decarbonization path continued with the installation of a new solar energy system on the roof of the parking lot at La Favorita Shopping Center in Mantua, which will be operational as of September 2024. Energy efficiency work was also completed at the ESP and Maioliche Shopping Centers where the gas boilers were substituted with highly efficient components.
As to the Porta a Mare Project in Livorno, the sale of another residential unit at Officine Storiche – closed in July – will be added to the 30 apartments already sold; 4 more sales are expected to close in the coming months, leaving only 7 out of a total 42 residential units to be sold.
The reporting period’s main event was the divestment transaction completed by IGD on 23 April 2024 with Sixth Street and Starwood Capital. The disposal involved a real estate portfolio including 8 hypermarkets, 3 supermarkets and 2 shopping malls for a total of €258 million. The transaction was carried out by contributing the entire real estate portfolio ‘Food Fund’ – a closed-end real estate investment fund (an Italian REIF), of which IGD maintained 40% ownership, while the remaining 60% was sold to a Luxembourg vehicle (50% Sixth Street and 50% Starwood Capital) for €155 million.[1]
The positive outcomes seen in Italy and Romania are the first operating results achieved as a result of IGD’s renewed strategy which, among other things, aims to fully exploit the potential of the Group’s shopping centers and to provide tenants with a true ‘IGD Shopping Center Ecosystem’, making not only sales areas available to tenants, but also providing high value-added property services, digital and communication tools, partnerships and collaborative marketing initiatives, all with a long-term and ESG-compliant vision.
PORTFOLIO: VALUATIONS STABILIZED
The market value of Gruppo IGD’s freehold real estate portfolio reached €1,697.2 million, down -0.5% like-for-like compared to December 2023. After two years characterized by strong writedowns, valuations have largely stabilized; the slight drop recorded is explained, above all, by an increase in inflation which was below the December 2023 estimates.
More in detail, the main asset classes comprising the Group’s real estate portfolio recorded the following changes:
- Shopping malls and retail parks were down -0.31% (-€4.2 million) compared to 31 December 2023 (net exit yield 7.2%);
- Hyper and Super posted a decrease of -0.83% (-€1.6 million) against 31 December 2023 (net exit yield 6.2%);
- Romania, 1.87% lower (-€2.3 million) compared to 31 December 2023 (net exit yield 7.2%).
The Net Initial Yield, calculated using the criteria defined by EPRA, was 6.1% for the Italian portfolio (6.3% topped up) and 7.0% for the Romanian portfolio (7.3% topped up).
Including the leasehold properties and the stakes in Juice Fund and Food Fund, the market value of IGD Group’s portfolio reaches €1,816.6 million, a drop of -0.65% compared to 31 December 2023. It should be noted that the impairment of EUR 3.5 million related to the leasehold properties will go to 0 when the lease contracts expire for the two different malls in 2026 and 2027, respectively. The Food stake had a negative one-off impact of €29 million due to the application of IFRS10 which will be offset upon expiration of the Fund[2].
EPRA NAV and EPRA NRV amounted to €983.9 thousand or €8.92 per share, which is 3.2% lower than at 31 December 2023 due mainly to the changes in net equity and the fair value of financial instruments.
EPRA NTA is €8.85 per share, 3.2% lower compared to 31 December 2023.
EPRA NDV is €8.76 per share, 2.7% lower compared to 31 December 2023.
ECONOMIC-FINANCIAL RESULTS:
In the first half of 2024, rental income stood at €69.1 million, with a decrease of 1.4% compared to the same period of the prior year: for a more consistent comparison, following the asset disposal completed in April 2024, the 2023 rental income was restated to reflect the change in consolidation scope (and landed at €66.9 million restated).
The increase over the 2023 restated amount is therefore +3.3%, attributable to:
- for approx. +€1.3 million, higher like-for-like revenues in Italy; both malls (+2.1%) and hypermarkets (+3.8%) showed growth.
- for approx. +0.9 million, to revenues – not like-for-like – mainly driven by the opening of Officine Storiche in September 2023.
The contribution of Romania’s like-for-like revenues was unchanged (€0.0 million).
Net rental income was €59.0 million, down 0.1% compared to the same period of last year, while on a like-for-like basis, a +4.5% increase was recorded.
Core business Ebitda amounted to €53.9 million, (+0.1%; +5.3% against the restated figure) with a growing EBITDA margin of 73.6%. The freehold EBITDA margin (relative to freehold properties) also rose, coming in at 75.8%.
Total financial charges amounted to €36.9 million (+92.0%); net of the accounting impact of IFRS 16 and non-recurring expenses, financial charges landed at €30.5 million or 70.1% higher than at 30 June 2023 due to the higher average cost of most recent loans.
Funds from Operations (FFO) reached €18.3 million, 40.7% lower than at 30 June 2023 due solely to higher financial charges. The delta versus the restated figure was -36.6%.
The Group closes the first half of the year with a net loss of -€32.5 million, 30.8% lower than the loss reported in June 2023 (- €47.1 million).
FINANCIAL STRUCTURE
The above described disposal had a positive impact on the Group’s financial structure with a Loan- to-Value ratio at 30 June 2024, landing at 44.9% compared to 48.1% at year-end 2023; this indicator also reflects a stabilization of freehold property valuations.
With regard to other financial indicators, at 30 June 2024 the average cost of debt was 6.05%, higher than the 3.86% reported at year-end 2023 due to the cost of the most recent loans; the interest cover ratio or ICR, was 1.7x, while the interest cover ratio for covenants was 2.1X.
During the second quarter of 2024, the Company also began consulting with banks and investors about the early refinancing of next maturities, so as to better spread repayments over time, with lower concentration and higher consistency with cash flow forecasts.
OUTLOOK 2024
In view of the operating and financial results achieved in the first half of 2024, and assuming no significant adverse changes will affect the global macroeconomic scenario, the Company confirms the FFO guidance disclosed to the market on 27 February 2024 (2024 Funds from Operations expected to reach approx. €34 million).[3]
OTHER RESOLUTIONS
INVESTOR RELATOR CONFIRMED
The Company, with a view to maintaining the requirements needed to be listed on Borsa Italiana’s STAR segment, announces that today the Board of Directors renewed the appointment of Investor Relator granted to Claudia Contarini, through the approval of the Company’s financial statements as at 31 December 2026, who will be responsible for managing the relationships with investors and the market.
