IGD SiiQ

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Strategy

On 7 May 2015 IGD approved the 2015 - 2018 Business Plan.

The update of the Plan, presented on 10 May 2016, maintains unchanged the horizon to 2018 and confirms the previously outlined strategic guidelines. The targets to 2018 have been revised in light of the new portfolio perimeter and of the different, more efficient capital structure that the Company reached in the meantime. The core business FFO target, in particular, has improved from 70 to 75 million euro, thanks to the incremental contribution to cash generation made possible by new acquisitions.

Over the next few years IGD intends to continue along the sustainable growth path which also characterized the last years, despite the difficult external context with the aim to confirm its positioning as leading owner and manager of shopping centers in Italy.

The strategy relies on a fully integrated approach between the different areas of commercial/marketing, asset management and finance. As mentioned in 2014 - 2016 Business Plan, sustainability has been fully integrated in the new planning.

 

Presentation BP 2016-2018 (PDF - 1,878kB)
 

 

eng_strategia_IGD_2016

 

 

Starting from the first quarter of 2015, there has been the first concrete signals of a trend reversal in the macro-economic scenario. For IGD, this has resulted in a significative increase in sales of the operators in our Italian portfolio shopping centers and an improvement of all the key indicators of the Group financial performance.

The new Plan, taking into account the changed environment, builds on the results achieved by the Group in recent years thanks to the strenghtening of the financial structure and the realisation of relevant investment plan, as well as an active policy of assets rotation.

 

2016-2018 main Business Plan objectives

CAGR Revenues from rental activities +7% approx.
CAGR LFL Revenues +2% approx.
EBITDA Margin Freehold Management in 2018 > 80%
CAGR core business FFO (Funds From Operations) +18% approx.
LTV (bp timespan) 45%- 50%
Investments (bp timespan), of which developments for approx € 145 mn € 185 mn approx.
 

  • The 2015-2018 Plan provided total investments for approximately € 260 million, of which € 185 million related to Extensions and Capex on the current portfolio, through restyling and extensions of some shopping centers. In light of what has already been achieved in the meantime, the new 2016-2018 Plan provides investments for 195 million euro, of which approximately 145 million euro for developments.

     

     

    2016 achievements

    The Group continued the investment activities planned in 2014 - 2016 Business Plan: in particular in 2015, there were, the opening of Clodì Retail Park in Chioggia on 14 May 2015 (which in 2015 resulted in work for € 5.8 million), the completion of the restyling of CentroSarca in Milan (work for € 5.2 million), the restyling of Centro Borgo in Bologna (for € 4.2 million), preliminary work for the extension of ESP shopping center in Ravenna (which accounted for € 2.9 million), in addition to investments made in Romania (for about € 3 million) and in Porta a Mare development project (for about € 3.4 million).

    As far as disposal plan is concerned, in 2015, exactly on 27 May, IGD sold to UBS Real Estate GmbH Group the real estate complex on Via Rizzoli in the historic heart of Bologna, for € 29.4 million. For more information you can download the press release.

    Furthermore, on 16 December 2015, the acquisition of the shopping mall Puntadiferro in Forlì by UnipolSai has been completed, for an amount of € 127.9 million. For more information you can download the press release.

    In the first half of 2016 the IGD Group continued the development of the Porta a Mare project, with construction work of the sub area Officine Storiche, of which about € 1.7 million dedicated to the residential part, while about € 3.0 million was allocated to the retail part, whose completion is scheduled for the second half of 2018.

    As for the extension of ESP shopping center in Ravenna, whose opening is expected by theend of the first half of 2017, in 2016 structural and building work for a total amount of about € 14 million has started.

    In December 2016 IGD acquired the mall inside the Maremà Shopping Center in Grosseto, opened on 27 October 2016, which involved a total investment of about € 46.6 million.

     
  • Commercial policies remain oriented to maintain future leasing revenues and to maintain high levels of occupancy,  through constant innovation and active management of the merchandising and tenant mix.

     

    2016 achievements

    IGD continued its strong activities in marketing and in improving the tenant/merchandising mix. These activities were also supported by layout modification works on shopping centres, such as the interventions in CentroSarca and Centro Borgo Shopping Centers. At 31 December 2016 the occupancy rate of the hypermarkets resulted equal to 100%. In the Italian malls the occupancy rate increased, equal to 97.3%. The Winmarkt chain of shopping centers in Romania, the occupancy rate showed an improvement even more important, rising from 93.9% recorded at 31 December 2015 to 96.1% at the end of 2016, thanks to the higher number of the located shops.

    In 2016 it was carried out an intensive marketing activity for the shopping mall opened in Grosseto in October.

    On 13 May an agreement was signed with Elettra Investimenti S.p.A. for the construction of three photovoltaic plants for a total of 1.4 MWp of power in the following shopping centers: Katanè in Catania, La Torre in Palermo and Le Maioliche in Faenza. These three plants, to be built by the end of 2017, will be granted in rent for 15 years to shopping centers. Self-produced energy will meet about one third of the annual requirement of the three shopping centers involved in the project.

     
  • In terms of financial strategy, IGD aims to keep the gearing ratio to a level below 1x and the Loan-to-Value between 45% and 50% during the period 2016 - 2018.

    IGD aims also to reduce the average cost of debt, which is expected to be at about 3% in 2018, net of charges on loan (both recurrent and not), while the Interest Cover Ratio shuold be above 3x.

    In the BP timespan, IGD aimed also to receive a rating from a primary rating agency, assuming that this will reduce the costs (lower spread compared to the those of beginning of 2015) of future issues.

    2016 achievements

    Financial management in 2016 grasped the opportunities presented by the market to get some important results:

    • lower the average cost of debt;
    • extend the maturity of its medium/long term debt;
    • increase the portion of debt raised on capital markets with respect to bank debt

    The average cost of debt decreased from 3.67% in 2015 to 3.30% in 2016.

    The Interest Cover Ratio increased from 2.15x at the end of 2015 to 2.24x at the end of 2016.

    At 31 December 2016 IGD also had a balanced ratio between bank debt (34.3% of total debt) and market (for the remaining 65.7%).

    On 17 May 2016 Moody's assigned a rating of Baa3 to IGD's the long-term debt, with stable outlook. By obtaining a rating in the "investment grade" area IGD could therefore place with qualified investors, a 5-year bond for a total amount of € 300 million with a rate of 2.5%, concluding the operation with success the next 25 May. Moreover in December there was a secon bond issue through a private placement of a € 100 million 7-year bond with a gross annual coupon of 2.25%, completed on the US market. This transaction settled in January 2017.

     
  • Aware of its SIIQ status, IGD remain finally committed to ensure an attractive return to its shareholders even through the distribution of profits related to the FFO level.

    During the period 2016 - 2018 IGD is committed to distributing dividends approximately equal to 2/3 of the gross FFO.

    2016 Achievements

    The proposed dividend for 2016, equal to € 0.045, imply a dividend yield of 6.2% based on the price at year-end.

    The dividend amount, equal to € 36.6 million, is equal to 67.9% of the FFO for the year.

     
  • Since the previous Plan, IGD has made sustainability part of its business planning process.

    In 2015 - 2018 Business Plan, IGD plans to invest € 10 million in functional projects to achieve its sustainability goals.

    The targets that IGD will be working to achieve fall into the areas identified as most important by the 'material' analysis carried out in 2014.

    1. Business and managerial integrity
    2. Quality and efficiency of the shopping centers
    3. A changing context
    4. the "Space to be lived in" concept
    5. The people

    In order to further improve the efficiency and quality of the shopping centers, IGD will work on limiting the environmental impact of the centers particularly with regard to energy consumption; IGD will also continue to work on making the centers more accessible, including for the physically challenged.

    Stakeholders will be increasingly involved through greater contact and the use of more communication channels.

    IGD will continue to reinforce the concept of the shopping center as a "space to be lived in" and seek to further enhance its social role as a place to meet others, offering activities dedicated to leisure time and the arts, in close collaboration with local partners: toward this end, local events will make up 30% of the events organized.

    Lastly, a corporate welfare project focused on increasing the wellbeing of IGD's employees will also be developed over the life of the Plan.

     

    2016 achievements

    In 2016 it is possible to highlight four areas in which significant results have been achieved.

    Innovation

    Innovation, for IGD, means to offer our Shopping Centre visitors the best environment possible so that their shopping experience is in line with their needs and expectations. With this in mind, IGD continuously work on three areas:

    • the adaptation of our structures,
    • a tenant and merchandising mix that is continuously evolving
    • strong focus on innovative solutions offered in the Malls and on a multichannel approach.

    Social relations

    Social relations for us, is also focus being placed on our employees’ wellbeing: for this reason, in 2016, we approved IGD’s first corporate Welfare Plan, which will systematise the features already in existence in the company and integrate them with the new opportunities offered by the last two years’ altered legislative framework.  The aim is to also have a positive impact on the internal atmosphere and on the ability of the employees to work in the best way possible.   

    Environment

    Because IGD is well aware that its structures produce numerous environmental impacts, over the last 5 years, we have implemented an energy consumption reduction process which is achieving good results. Since 2011 till now we have reduced overall electricity consumption by 13%, The roll out plan that we set ourselves in 2013, continues and by the end of  2018 90% of our Shopping Centres in our Italian portfolio will obtain UNI EN ISO14001 environmental certification. Furthermore, in 2016 Sarca Shopping Center obtained BREEAM certification, following the restyling work carried out.

    Legality

    IGD also achieved an important result regarding legality in 2016, by obtaining the Legality Rating from the Antitrust Authority with three stars, the maximum score possible. This recognition rewards IGD’s commitment to abide by the highest ethical/social and governance standards, not only by complying with the laws and regulations in its everyday operations, but also by promoting compliance with the law among its stakeholders.  


     
 
 
 
 
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