1Q 2013 result presentation Conference call and Q&A 9th May 2013 Event: 1Q 2013 result presentation Date: 9th May 2013 Speakers: Mr. Claudio Albertini, CEO Good afternoon, this is the Chorus Call operator. We’d like to welcome you all to the O PERATOR : IGD’s Q1 2013 Financial Results Presentations. After management’s presentation, there will be a Q&A session. Now, I would like to turn the call over to Claudio Albertini, CEO of IGD. Please, sir. Good afternoon everybody. As you’ve probably read in the press release that we have C LAUDIO A LBERTINI : just made public, this morning IGD’s Board approved Q1, 2013 financial results. I think you have all received the copies of the presentations and therefore, I will start with the first slide. But before doing so, I’d like to make a few short preliminary remarks. Clearly, the numbers I am about to comment on, have to be put into the macroeconomic context of Q1, 2013. Unlike other quarterly result presentations, we are not here to provide all the major macroeconomic indicators, but I think that it is clear to all of you that the scenario in the context we as well as other players are currently operating in is still critical. We have received data about retail sales that went down 4.8%, which is minus 4 by food, about the food sector and the rest instead is represented by the non-food. And in addition to this, we have also seen numbers, which are probably a little bit less pessimistic, sales are down 4.2%. The only positive number is the strong slowdown of inflation with approximately unexpected 1% as expected trend, but we have already reached April, so we are talking about 1.2%. The numbers were overall considered as showing the good resilience of the Group and therefore, they have been considered by our Board as satisfactory, so you have to put them into this perspective. Let’s now start on Page 3, on Slide 3 of the handout, as usual, you can find the key economic and financial ratios or indicators. So revenues from core business amounted to €30.4 million, down on Q1, 2012, or minus 1.1%. Our EBITDA closed at €21.3 million or minus 3.9% compared to the end of Q1, 2012. And then we will see the major drivers leading this drop. EBITDA margin from our core business is slightly above 70%, 70.1%, or down 2 percentage points compared to the same period last year. The Group net profit is basically flat compared to Q1, 2012, €8.2 million against €8.3 million last year, or minus 1.4%. Funds from operations stood at €9.5 million, basically flat against the first quarter in 2012. Our gearing ratio is down, compared to
1Q 2013 result presentation Conference call and Q&A 9th May 2013 the number of last year to 1.36 against 1.38. So this year, as we did at year-end last year, we are reporting our financial occupancy, which is 1 percentage point down, 96.6%, th at’s the average in Italy against 97% at year -end. The decline has been hitting more severely in malls, whilst it remained really flat in the hypermarket segments. Occupancy remained stable in Romania, slightly below 90%. This was the macroeconomic scenario, so just to speak or the big picture numbers. If we now go to Page 5, you can see the consolidated income statement, comparing Q1, 2013 with that of 2012, we go down from the top-line to the EBITDA, so you can see that after that we have the Livorno project, the Porta a Mare Project. As you can see, revenues were down from approximately 1% from core business, amounting to €30.440 million, while direct cost, as I mentioned earlier in the presentation are up, reaching €23.634 million or up 3.6% overall. EBITDA amounted to €21.216 million or down 4.4% as I mentioned earlier, while if we look at depreciation and devaluation, and incidentally devaluations will be made at the end of June, so when we will be presenting our media results, we will release the number. So in the current quarter, we are only to report CAPEX on our real estate portfolio, which leaves us to 3.8% decline in EBIT compared to Q1, 2012. The performance of our financial activities improved in the sense that we are here to report quite a drop, but we benefited from a drop in both the base rate as well as slow down so to speak of spreads within other ancillary effects all leading to €900,000 or 7.3% compared to the same period last year. Pre-tax i ncome is slightly €9 million, down 1.8% and the tax rate remained slightly below 8% against 8.1%, which was reported in Q1 last year. So we then get to the bottom line, which is our net profit. As I mentioned is down 1.4%, approximately, slightly less than €100,000 last time in Q1, 2012. On the right hand side in the box, you can see the breakdown of revenues from rental activities, with a split between shopping malls and an additional split between Italian and Winmarkt malls and then we have the other component from Hypermarkets. Then we have the numbers about the City Center Project, basically the V. Rizzoli building at €345,000. We are now on Page 6, and here too you can find the breakdown of margins by activity or business line. As it is customary in our conference calls, we make the split between quarterly and annual figures. Margins of freehold is slightly below compared to 86.3% in March 2012, whilst margins from leasehold properties remained pretty much stable compared to the same period last year, slightly below 23%. Now, on Page 7, we can find some additional numbers to supplement the key highlights, which I have already given to you. As you can see, on the left hand side in the ba r chart, revenues from core business went down 1.1%, so €29,190 thousand compared to €29, 442 thousand, whilst overall the decline was approximately 1%. As we will see later, service provisions and related income was slightly on the upward
1Q 2013 result presentation Conference call and Q&A 9th May 2013 trend. On the right hand side, you can see the split of revenues by type of assets. And again, you can see that over 60% of our overall revenues are generated by malls, therefore by third parties’ assets. So that’s followed by 29% accounted for the 19 Hypermarkets which we have rented, 17 have been rented to our shareholders and the other two have been rented to so-called mixed company. So we can see that slightly below 9%, 8.9% is the share of revenues generated by our leasehold or the leasing of malls in Romania. At the bottom of this page, you can see the growth driver of our rental activities. You can see that on a like-for-like basis, growth was in the negative, 0.4%. So you have to consider on the one hand, Hypermarkets, which were quite resilient and held well as you can see. They were up 4.17%, thanks to the positive impact of a few step rents that were outstanding envisaging gradual step ups of rentals especially for newly opened Hypermarkets. When it comes to malls instead, we have 3.2% in the negative due to higher average vacancy and also due to a decline in variable revenues. As you will see later, the overall decline in consumptions and sales as released had an impact on our malls. So this is the number which we are presenting to you, showing basically that we have been resilient and there has only been a slight decline on a like-for-like basis. €140,000 is the temporary decline reported in Romania. As you can see on the right hand side box, and that’s a comment which we have put on this slide, we had a largest strategic vacancy underlying this decline; we are in the process of revamping and refurbishing certain shops slightly more than 4,000 square meters. So we think that we will catch up this sort of delay in the next few quarters. We are now on Page 8, and here you can see the breakdown of G&A and direct cost, again we are talking about the core business. Direct cost; as I said at the beginning they are up 7.1%, and as you can see on the right hand side box with the highlights and comments and bullets, and we have approximately €300,000 or 24% is represented by the new property tax IMU. Last year if you remember, in Q1, the computation of IMU was based on the rates that were set by the government 7.6% per 1,000 only later during the year the various municipal authorities introduced and implemented the tax with increasing rates. And as far as we are concerned, the average was 1.3% per 1,000 , that’s the rate applicable to our portfolio. So we had used the latest or the newest rates that to say the once set at the local levels, and we have used that as the basis for Q1. As for other direct costs, there has been an almost negligible increase in costs for direct service charges; in particular these were concentrated in Mondovi and Millennium at these two shopping centers. Now, I’d like to comment on the bottom of the slide, general expenses of the core business, a slight increase 3.3%, but as you can see if you look again on the right hand side percentage wise the share of general expenses of the core business remained stable at 7.6% of the share of our revenues.
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