Solid half-year results and strong growth in NAV per share
Carmila to join the FTSE EPRA/NAREIT indices as of September 18, 2017
Regulatory News:
Carmila (Paris:CARM) delivered a solid performance for the first half of 2017, confirming the company's outlook and the relevance of its strategy.
- Net rental income increased by +10% to Euro 134.4m.
- Organic growth generated over the semester in Gross rental income was up +2.4%
- Recurring earnings up +14% to Euro 92.7M, benefiting in addition to growth in Net rental income from lower average cost of debt and a favourable seasonal effect together with the rollover to the second half of the year of the ramp-up in costs relating to digital activities.
- The value (including transfer taxes) of Carmila's shopping centres totalled Euro 5.6bn, an increase of +5.6% relative to December 31, 2016. Very active asset management by our staff, centred around improving the quality of our assets and value creation, resulted in an increase in the valuation of the portfolio on a like-for-like basis of +3.0% over the half-year period and a reduction in the average yield of -0.2 points to 5.7%
- EPRA NAV per share as at June 30, 2017 increased by +9.4% to Euro 28.28 per share compared to pro forma EPRA NAV as of December 31, 20161. Adjusted for the effects of the IPO2 in July 2017, NAV pro forma per share increased by +5.8% to Euro 27.34 per share over 6 months
- Progress in the development and completions of extension projects is on target. No acquisitions were made during the first half of the year
With the completion of the IPO closed in July, Carmila is in a position to finance the equity portion of the financing of its 2017-2020 Business Plan.
On September 1, 2017, FTSE Russell announced that Carmila is to join the FTSE EPRA/NAREIT Global Real Estate (EMEA Region) indices as of 18 September 2017.
"Carmila delivered a solid performance in the first half of 2017. All value creation drivers were in play: earnings growth is in line with our targets, renovation and development plans are on track and during the period we stepped up the roll-out of our innovative digital strategy with a number of successes," comments Jacques Ehrmann, Chairman and Chief Executive Officer of Carmila.
We are confident about our prospects for growth and our ability to achieve our earnings forecasts for 2017 and to continue to create value in line with the targets set out at the time of the IPO.
First-half rental activity
Gross rental income for the first half of 2017 totalled 146.8 Meuros, up +8.8% as a result of the combined effect of i/ organic growth, ii/ acquisitions and completions of extensions in the second half of 2016 and completion of phase 2 of the extension of BAB2 (Bayonne) in April 2017, and iii/ an unfavourable effect relating to an increase in the strategic vacancy rate between January 1, 2016 and June 30, 20173 in preparation for the implementation of future extension projects.
Letting activity was brisk: 400 leases were signed during the first half of the year as renewals or relets, in addition to the signing of 114 leases for extension projects.
Organic growth achieved in the first half of the year and recognised in growth in Gross rental income totalled +2.0%, in addition to organic growth of +0.4% created by Carmila's teams on negotiations finalised in July resulting in retroactive reversion in the first half of the year and properties owned by subsidiaries recognised under the equity method. Organic growth in Gross rental income generated during the first half of the year was therefore +2.4%
Reversion recognised in relation to lease renewals over the period averaged at +7.6%, located in France (+7.7%) and Spain (+10.6%), which continued to benefit from an upturn in economic growth.
The financial occupancy rate4 continued to improve, rising by +0.2 points over the half-year period to 96.2% at June 30, 2017. The rate increased by +1.3 points over the period in Spain (96.1%), remaining stable in France (96.0%) and Italy (99.1%).
Net rental income for the first half of the year was 134.0 Meuros, up +10,0%.
In addition to the increase in rental income, growth in net rental income benefited from improvement in the Net to Gross rental income conversion rate (91.3% compared with 90.2% in the first half of 2016) relating to the lower vacancy rate and active reletting (reduction in non-recoverable expenses).
First-half results
Overhead costs net of other operating income and expense5 for the first half of 2017 totalled 25.9 Meuros and include expenses relating to the merger between Carmila and Cardety, representing a non-recurring cost of 6.3 Meuros. Adjusted for this effect, overhead costs were 19.6 Meuros, an increase of +5.2% compared with Euro 18.6 million in the first half of 2016.
In terms of overhead costs, the first half of the year benefited from a favourable seasonal effect relative to the second half of the year. In addition, the full impact of the expected increase in costs relating to the ramp-up of Carmila's organisational structure and in particular costs relating to the company's digital strategy will be seen in the second half of 2017.
EBITDA for the first half of the year was 108.6 Meuros. Adjusted for merger-related expenses, EBITDA was 114.9 Meuros compared with 104.8 Meuros in the first half of 2016, an increase of +10.1 Meuros or +9.6%
Financial result in the first half of 2017 was -18.8 Meuros. This includes interest income relating to negative goodwill recognised at the time of the merger with Cardety of 6.5 Meuros. Adjusted for this non-recurring item, Financial result for the first half of 2017 was -25.3 Meuros compared with -26.5 Meuros during the same period in 2016. This improvement is the result of an average reduction in cost of debt of 26 bp to 1.89% thanks to the implementation of a commercial paper programme and the fall in interest rates between the two periods.
In 2017, Foncière Géric the subsidiary that owns our property in Thionville opted for SIIC status. As a result, tax expense decreased by 2.1 Meuros between the two half-year periods.
Recurring EPRA earnings adjusted in particular for items relating to the merger (negative goodwill and costs) and expenses recognised within the framework of refinancing arranged at the same time as the merger, as described below (borrowing costs and amortisation of residual costs relating to repaid loans and swap breakage results), amounted to 92.7 Meuros, an increase of +11.7 Meuros or +14.4% relative to the first half of 2016.
Portfolio valuation and NAV6
The valuation of the portfolio, including transfer taxes, was 5,616 Meuros as at June 30, 2017, an increase of +295 Meuros (+5.6%) relative to 5,321 Meuros as at December 31, 2016.
On a like-for-like basis, the value of the portfolio increased by +3.0% (+162 Meuros), broken down as follows:
- Impact of growth in potential net rental income according to expert appraisals: +34 Meuros
- Valuation of the improved intrinsic quality of some large assets in France and Spain: +68 Meuros
- Compression of market cap rates: +60 Meuros.
The average potential yield for the portfolio was 5.7% compared with 5.9% as at December 31, 2016. This decline in the average capitalization rate is primarily due to expert appraisers taking account of improvement in the quality of properties relating to a few major properties in Spain and France as a result of our active asset management policy, including renovation works, improvement in the merchandising mix, structural reduction in vacancy rates, reversion and potential for site extensions.
Other changes include taking account of the completion of phase 2 of the BAB2 extension in Bayonne and improvement in margins (IPUC) and works recognised in relation to extensions under development.
EPRA NAV as at June 30, 2017 was 3,083 Meuros, up +9.4%7 over the period. This represents an increase of +265 Meuros, broken down as follows:
- Increase relating to recurring earnings for the first half of the year: +98 Meuros
- Change in fair value of assets net of effects of deferred taxes: +147 Meuros
- Other changes: +21 Meuros
EPRA NAV per share as at June 30, 2017 was therefore Euro 28.28 per share compared with Euro 25.85 per share as at December 31, 2017, an increase of +9.4%
Taking account of the placement of 26.2 million new shares by Carmila in July 2017 in the gross amount of Euro 628 million or a net amount of 614 Meuros after deducting IPO costs to be accounted for in H2 2017, EPRA NAV per share as at June 30, 2017 on a pro forma basis was Euro 27.34 per share, an increase of +5.8% over six months.
Debt and balance sheet structure
Prior to the merger between Carmila and Cardety on June 12, 2017, the company made repayments of existing debts and renegotiated all of its borrowings with its banking partners, resulting in particular in the signing of an amendment to the syndicated loan agreement to extend its maturity. The company has also taken out two new confirmed revolving credit facilities (RCF) of Euro 250 million and Euro 759 million, maturing in 2020 and 2022 respectively. For more details about these transactions, refer to the appendices to this press release.
In addition, in order to diversify its sources of financing and maturity dates, Carmila has put in place a programme of commercial papers for a maximum of Euro 600 million (290 Meuros was issued as of June 30, 2017).
As at June 30, 2017, Carmila's gross debt stood at 2,264 Meuros and the amount of RCF and net available cash stood at 1,068 Meuros. Taking account of the capital increase in July 2017, available back up lines and net cash is in excess of 1.6 BnEuros. The average debt term was increased from 5.6 years to 6.7 years.
The net consolidated debt fair value of property assets ratio was 40.6% at June 30, 2017, not taking account of the capital increase in July, net of related costs, which reduces the ratio to 29.4%, all other things being equal.
The EBITDA net cost of debt ratio over 12 months rolling as at June 30, 2017 was 4.5x, well above the contractually agreed minimum threshold of 2.0x.
Renovations, extension pipeline and acquisitions
The programme of renovation works continued during the first half of 2017, with the aim of being completed by the end of the year. Six renovation projects were completed in France and five in Spain over the period. The plan is proceeding on schedule.
Phase 2 of the BAB2 shopping centre extension in Bayonne was opened in April 2017. At the end of two phases of extension projects completed over the last 12 months, BAB2 comprises over 120 stores over an area of around 26,000 m² and has established its long-term position as the leading regional shopping centre in the Basque Country region.
Two new CDAC approvals and three new construction permits were obtained during the first half of the year concerning the 1.5 bnEuros extension pipeline launched three years ago. Openings of extension projects scheduled for the second half of 2017 are on track, with an average pre-letting rate of 94%. Ten extensions will open in the second half of the year, representing 46,000 m² of additional space and additional rental income of Euro 12 million.
No new properties were acquired during the first half of year. However, a number of acquisition opportunities are currently being reviewed in an active market offering a wealth of opportunities.
Placement of new shares finalised in July 2017 (IPO)
On July 6, 2017, Carmila successfully finalised the placement of new shares initiated on 26 June 2017. This resulted in the creation of 26.2 million new shares, representing a capital increase of Euro 628 million or Euro 614 million net of all costs. This has allowed Carmila to strengthen its position as a major listed company in the shopping centre sector in Europe and to finance the equity share of its extension pipeline, its internal and external growth and its innovative and unique B-to-B-to-C digital strategy.
Outlook
The company delivered solid results for the first half of the year, which also benefited from a favourable seasonal cost effect, as well as a slower than anticipated ramp-up in overhead costs. These results and the progress made in the first half of the year in terms of developing the extension pipeline and digital strategy confirm the relevance of our strategy and our prospects for growth.
The company's growth and performance drivers for the second half of the year are already in place, with completions of 2017 extension projects in the process of being finalised with high levels of pre-letting, while macroeconomic indicators are improving for France and remain positive for Spain. A major extension delivery in Nichelino Turino will occur in Italy and have a positive impact on our activity in this country.
Against this backdrop, we are particularly confident about our ability to achieve our 2017 recurring earnings targets at the upper end of the range. This year consolidates further the prospect of achieving our 2018-2020 targets.
| Main results and financial indicators | ||||||
| In thousands of euros | June 30, 2017 | June 30, 2016 | % change 2017/2016 | |||
| Gross Rental income | 146,797 | 134,974 | +8.8% | |||
| Net rental income | 133,992 | 121,766 | +3.0% | |||
| Overhead costs and other operating income and expense8 | -25,911 | -18,625 | ||||
| Provisions | -227 | 93 | ||||
| Other operating income | 9749 | |||||
| Share of equity affiliates (recurring earnings | 706 | 601 | ||||
| EBITDA | 108,560 | 104,809 | +3.6% | |||
| Adjusted EBITDA(10) | 114,884 | 104,809 | +9.6% | |||
| Net financial income/(expense) | -18,798 | -26,481 | ||||
| Corporate income tax and other taxes11 | -171 | -2,291 | ||||
| Funds from operations (FFO) | 89,591 | 76,037 | +17.8% | |||
| Adjusted FFO(8) | 95,915 | 76,037 | +26.1% | |||
| Depreciation and amortisation | -413 | -385 | ||||
| Change in fair value of assets net of tax | 136,044 | 8,105 | ||||
| Change in fair value of assets owned by equity affiliates | 10,644 | 3,855 | ||||
| Profit on sales of investment property | -191 | 118 | ||||
| Attributable net income | 235,675 | 87,730 | +168.6% | |||
| EPRA earnings | 90,935 | 77,610 | +17.2% | |||
| Recurring EPRA earnings | 92,749 | 81,059 | +14.4% | |||
| Fully diluted earnings per share (in euros) | ||||||
| EPS | 2.24 | 0.86 | +160.6% | |||
| Adjusted FFO | 0.91 | 0.75 | +22.4% | |||
| Recurring EPRA earnings | 0.88 | 0.79 | +11.0% | |||
| In millions of euros | 30 June 2017 | 31 December | % change 2017/2016 | |||
| Portfolio valuation (including transfer taxes) | 5,616 | 5,321 | +5.6% | |||
| EPRA NAV (Euro per share) | 28.28 | 25.85 | +9.4% | |||
| EPRA NNNAV (Euro per share) | 27.45 | 24.90 | +10.2% | |||
Financial calendar
5 September 2017 (10.30 am, Paris): 2017 first-half results presentation by conference call.
Telephone number to dial: + 44 (0) 2071 928000 ID: 78759309
Slides for the presentation will be available on http://www.carmila.com/en/finance/
About Carmila
Carmila was founded by Carrefour and large institutional investors in order to develop the value of shopping centers anchored by Carrefour stores in France, Spain and Italy. Its portfolio pro forma for the merger with Cardety effective as of June 12 consisted, as at March 31, 2017, of 205 shopping centers in France, Spain and Italy, mostly leaders in their catchment areas, and valued at Euro 5.4 bn as at March 31, 2017. Inspired by a genuine retail culture, Carmila's teams include all of the expertise dedicated to retail attractiveness: leasing, digital marketing, specialty leasing, shopping centre management and portfolio management.
IMPORTANT LEGAL INFORMATION AND CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein may be forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans, expectations or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause Carmila's actual results to differ materially from those expressed or implied in the forward looking statements.
Carmila draws the public's attention to the risk factors in paragraph 5 of the management report of Cardety's board of Directors in chapter 9.2 of Cardety's Registration Document, in Chapter 4 of Appendix II of the Document E. Please refer to these documents for a description of certain important factors, risks and uncertainties that may affect the Company's business and/or results of operations.
Carmila undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise, except as part of applicable regulatory or legal obligations.
In addition, this report refers to certain financial measures, or alternative performance measures, used by management in analyzing Carmila's operating trends, financial performance and financial position and providing investors with additional information that management believes is useful and relevant regarding Carmila's results. These alternative performance measures generally have no standardized meaning and therefore may not be comparable to similarly labelled measures used by other companies. As a result, none of these financial measures should be considered in isolation from, or as a substitute for, the Group's consolidated financial statements and related notes prepared in accordance with IFRS.
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1 ANR as of December 31, 2016, proforma reflecting the merger between Carmila and Cardety and deducting the remaining 2016 dividends to be paid
2 Taking into account a 628 Meuros gross 614 Meuros net of costs capital increase and 26.2 million shares newly issued
3 Strategic vacancy was 0.8% as of January 1, 2016, 1.7% as of June 30, 2017 and at a pick on December 31, 2016 at 2.0%
4 Excluding 1.7% strategic vacancy rate
5 Excluding development margin in H1 2016 and depreciation and amortization
6 The values as at 31 December 2016 stated in this paragraph are pro forma for the Carmila-Cardety merger
7 Growth in EPRA NAV as at June 30, 2017 and pro forma EPRA NAV as at December 31, 2016, minus 2016 dividends still to be paid (Euro 70 million)
8In 2016, this included costs of Euro 6.324 million relating to the Carmila/Cardety merger
9 Development margin
10Adjusted for costs of Euro 6.324 million relating to the Carmila/Cardety merger
11 Excluding deferred taxes on change in fair value of properties
View source version on businesswire.com: http://www.businesswire.com/news/home/20170904005388/en/
Contacts:
Carmila
Investors and analysts contact:
Marie-Flore Bachelier, +33 6 20 91 67 79
marie_flore_bachelier@carmila.com
or
Press contacts:
Morgan Lavielle, +33 6 20 91 63 29
morgan_lavielle@carmila.com
