FY 2012 result presentation Conference call and Q&A 28th February 2013 Event: FY 2012 result presentation Date: 28th February 2013 Speakers: Mr. Claudio Albertini, CEO O PERATOR : Good afternoon, this is the Chorus Call Operator. Welcome to Full Year 2012 Financial Results Presentation of IGD. After management’s presentation, you will ask your questions. Now, I would like to turn the call over to Claudio Alber tini, IGD’s CEO. Please, sir. Good afternoon everybody. As you’ve probably seen in the press release that was C LAUDIO A LBERTINI : issued half an hour ago, IGD’s Board of Directors approved the Financial Statements full year 2012. And I will therefore, illustrate the financial. Let’s start from Page 3 in the handout where you can find the key financial highlights. First of all, revenues amounted to €123.3 million, up 1.7% compared to 2011. Revenues from the core business account for almost the majority of our overall revenues. EBITDA, again core business EBITDA is slightly down 2.7%, compared to the previous year, equal to €85.8 million. And I will tell you which are the major drivers. EBITDA margin of the core business is slightly below 70% or down 3 percentage points compared to the same period last year. Group net profit amounted to €11.3 million, down 63% approximately compared to 2011. And funds from operations amounted to approximately €36 million, down 15.7%, compared to the same period last year. Di vidend per share that will be proposed to the AGM amounts to €0.07, which compares to €0.08 and with €0.75 in 2010. Market value is slightly down, €18 million less than in 2011. While for the financial occupancy, a piece of information which was generally included in other presentations, but which instead we want to include today, amounted to 97.5% in Italy and slightly less than 90% in Romania. That’s the snapshot at the end of December 2011. So we will use this as the financial occupancy date, as the opening date for 2013. The average occupancy rate in 2012 was approximately 1 percentage point lower, given the adverse backdrop. And the Italian economic context, as I said, was negative and you can see for trade and its main characteristics on Page 5 for Italy and on Page 6 for Romania. I will not dwell on details, you know better, than I can explain to you what happened in Italy. And as far as the retail sector is concerned, which is where we operate, retail sales
FY 2012 result presentation Conference call and Q&A 28th February 2013 were deeply affected. Non-food sales were down 2.8 percentage points, that’s the round number and consumptions was down 4%. We will then see our modern hypermarkets performed vis-à-vis the more general decline in consumptions. They slightly performed better. As far as investments or CapEx is concerned, which you can see on the right upper box, in 2012 with the exception of the first quarter, which was positive, we saw almost the zeroing down of the investments in Q4, for approximately €1 billion. However, I’d like to stress that international reta ilers expressed and are still expressing some degrees of interest, looking for high street locations and prime locations. If you look at Romania, the economic context was better than in Italy. GDP, first of all, was in the positive, posting a growth, which is between 0.2%, 0.8% compared to the 1.5% or 2% decline recorded in Italy. And non-food retail sales were up 1.6 percentage points. Now, clearly we are talking about Romania, which is a very smaller economy than Italy. Its GDP amounts to one-eighth or one-tenth of Italy, which is therefore, more sensitive to either positive or negative movements. What’s interesting is that, some watch institutes or some sources point towards a growth in Romania for 2013 and 2014 as you know, it should join euro land . Here too, in this country major retailers have expressed or are still expressing some good interest. They are basically concentrated on Bucharest, but we too have been subjected to quite strong interest. There have been some factors such as the fact that H&M over the next three years will join our shopping centers. So this was I have to say about Italy and Romania. If you now move to Page 8, you can find our consolidated income statement. As it is customary, we have divided it into core business, which as I said and I want to repeat, represents the bulk and the majority of our revenues. And then we have separate columns for the numbers of the PORTA A MARE project, which is more operated in real developing logical or direction. As far as revenues, we can say that core business are up to 1.7%, direct cost are up and a year later why they grew, they are mainly attributable or the bulk of them is attributable to the IMU tax. EBITDA amounted to €85.8 million from core business, and down 3 percentage point decline, a decline in EBITDA margin, which as you will see later, is attributable to increased direct costs and to the higher average vacancy posted throughout 2012 and a higher maintenance cost. In the second half we had a stronger impact of write downs. And we had negatives value assessments, minus €11 million; they went up to €30 million, €30.5 million in the second half of the year. They are the combination of €29.4 million in the fair value and the number for write down. Please note that we have a number, which is equal to 1.55 for the Italian portfolio in the negative, with minus 0.06 for the Romanian portfolio. There has been also an increase of slightly more than €4 million as a consequence of a combination of causes which I will go through, 9.7% that’s the
FY 2012 result presentation Conference call and Q&A 28th February 2013 growth that was posted. And then we have a net profit which due to deferred tax assets applicable to write downs, give us a minus 62.9% performance or €11 million. In the next page, you can see the difference between Italian location, city center projects and many others. If you go to the next page, then I will briefly mention this, we have margins by rental activities, 85.7% is freehold or down 3 percentage point compared to 2011, and again that was driven by increased direct costs. And then we have margins from leasehold, let’s say €22.6 is last year, that’s down 4 percentage points and again that was driven down by higher provisioning. Let’s now get into detail in the various P&L items on Page 10. You can see the breakdown. On the upper left hand chart, you can see a breakdown of our revenues. As I said earlier, they are mainly accounted for by our core business, up 1.7%, whilst the other revenues performed differently, because we had €1.7 million from the Project PORTA A MARE, which was positive, which is no longer seen in 2012. We only had €7000 of rental income for office space whose construction was completed. A positive impact of the sales that delivered us Project PORTA A MARE because in September we will record the pre-contracts and we will therefore have over 30 executed contracts at year-end. On the right hand side, you can see the breakdown of our overall assets. You can see that Hypermarkets account for 28%, Malls 61% whilst revenues from Winmarkt are 9.1%. The main income or revenue growth drivers in 2012 are at the bottom of the slide 0.5% on a like-for-like basis, €2.4 million which is increased revenues as a consequence of purchases made in 2011, generating revenues for full- year in 2012, and then the contribution of Romania which was down approximately €620,000 as you can see the right hand box, because the insolv ency or default so to speak of a major Romanian tenant, which led to rescheduling and to reorganization and reduction of rented areas leading ultimately to an overall growth, which amounted to 1.1% or €2.2 million. Now, let’s now come to the negative not es that are represented by direct costs on Page 11. As I’ve mentioned earlier, they were up approximately €4.2 million or up 18% and as you can see in the box on the right hand side, you can see the major negative i.e. first of all the IMU tax, which negatively affected our P&L for a total equivalent of €2.8 million, up 63.4% replacing ICI. So €2.8 million tax plus €700,000 for the Romanian tax give us an increase compared to the pre-existing ICI tax, whilst the Romanian property tax remained unchanged. We had a slight increase in provisioning; therefore we kept quite strong control on working capital. Our net receivables are pretty stable, whilst we recorded €1.3 million in increase in so -called other direct cost that are slightly up 8 percentage points mainly driven by the higher average vacancy,
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