Mercialys Sa · EURONEXT:MERY
Mercialys Sa — H1 2006 Earnings Presentation
45 slides from Mercialys Sa's earnings presentation, Sep 7, 2006
Slide 1: 2006 half year earnings
2006 half year earnings September 7, 2006 Introduction en Bourse de SOF 0
Slide 2: Speakers
Speakers Jacques Ehrmann, Chairman and Chief Executive Officer Géry Robert-Ambroix, Chief Operating Officer Catherine Oulé, Executive Vice President 2006 first-half earnings 1
Slide 3: Contents
Contents Page First-half highlights 3 2006 First-half activity 11 2006 First-half investments 20 2006 First-half earnings 29 Conclusion and outlook 34 2006 first-half earnings 2
Slide 4: First-half highlights
First-half highlights 2006 first-half earnings 3
Slide 5: Mercialys achieved strong growth in first half
Mercialys achieved strong growth in first half Strong growth momentum 9 Increase in annualized rents: Euro +14.3 million, up +20% over 2005 invoiced rents > 251 relets or lease renewals on existing portfolio generating euro 3.2 million in additional annualized rent * > Excellent level of letting on
Slide 6: Euro 500 million investment program well under way
Euro 500 million investment program well under way Strong organic and acquisition-led growth 9 Euro 159 million of investments made or under contract > including Euro 100 million of existing properties acquired or under contract with an average yield of 7.2% > including Euro 43 million of assets fro
Slide 7: Strong growth in first-half earnings
Strong growth in first-half earnings Mostly organic growth 9 First-half growth was chiefly due to realization of reversionary potential > Small increase in construction cost index > Acquisitions mostly towards year end Euro million 1H05 1H06** Change pro forma Invoiced rents 36.7 38.9 +5.8% Rental r
Slide 8: Enterprise value already boosted by strong growth
Enterprise value already boosted by strong growth Asset portfolio reveals value creation potential 9 Value of asset portfolio up +9.1% to Euro1,120 million versus Euro 1,027 million at end-2005 Ö Average yield of 6.6%, down 0.4 percentage points Ö Market value up 6.9% over six months at constant sco
Slide 9: First half also devoted to building up resources required to step up growth
First half also devoted to building up resources required to step up growth Building a stronger team 9 Build-up of teams in charge of realizing reversionary potential (letting, asset management, marketing and valuation) Ö Four people hired or being hired 9 Creation of a team dedicated to acceleratin
Slide 10: Growth in development project portfolio is substantially stepping up
Growth in development project portfolio is substantially stepping up Acquisition-led growth accelerating time after time 9 Development pipeline: +60% in Potential portfolio 12 months Euro million > Euro 320 million versus Euro +36% 194 million at June 30, 2005 1,579 > 33 projects including 4 totalin
Slide 11: The Board of Directors plans to pay an interim dividend of Euro 0.33 per share
The Board of Directors plans to pay an interim dividend of Euro 0.33 per share 9 First-Half results over passed our initial ambitions 9 Those results, the level of the growth momentum and the step up of the development pipeline confirm Mercialys business model combining growth and value 9 Building u
Slide 12: Activity
Activity 2006 first-half earnings 11
Slide 13: Activity in the shopping centers remains buoyant and ahead of the market
Activity in the shopping centers remains buoyant and ahead of the market Value enhancement measures beginning to pay off 9 Strong growth in sales made by retailers in our large shopping centers Ö +5.7% versus +2.6% for the market* 9 Strong improvement in consumer traffic in our redeveloped or recent
Slide 14: A record level of relets and lease renewals during first half
A record level of relets and lease renewals during first half Growth in annualized rent of Euro 3.2 million 9 251 relets or renewals during the first half > 50 relets generating additional annual rent of Euro 1.4 million, an increase of +125% > 92 renewals generating additional rent of €0.4 million,
Slide 15: Target: focusing on high growth retail sectors
Target: focusing on high growth retail sectors… 92% of first-half relets concentrated on 4 targeted sectors Fisrt-half lettings by business sector In number of signed relets Services Culture, Gifts and leisure Personal equipment Health and beauty Household equipment Food and catering 2006 first-half
Slide 16: … and round out and diversify our portfolio of retail banners…
… and round out and diversify our portfolio of retail banners… Targeting 'flagship' banners in their sector 9 Gifts and leisure > Bouygues > SFR 9 Personal >Zara equipment >H&M >Camaieu >Promod >Christine Laure >Mexx >Exprit >Sergent Major 9 Hygiene, health, >Marionnaud fitness >Nocibe >Franck Provo
Slide 17: Letting of Clermont-Ferrand and Poitiers extensions completed on excellent terms
Letting of Clermont-Ferrand and Poitiers extensions completed on excellent terms An example of value creation 9 Lettings at higher than expected rents > Annualized rents: Euro 3.9 million > Average rent per m²: Euro 434 per sqm for the shops Euro 226 per sqm for the Medium-sized stores > Immediate y
Slide 18: Strong growth in first half invoiced rents…
Strong growth in first half invoiced rents… …driven by reversionary potential realization and an historically low indexation Source of growth in Invoiced rents Euro million +1.5 38.9 Value creation on +0.4 +0.2 the portfolio 36.7 Organic growth +4.1%* Indexation Development and acquisitions +1,1 pt
Slide 19: … and an improvement in quality of leases
… and an improvement in quality of leases A further positive shift in the lease mix Structure of rents at June 30, 2006 9 Rise in proportion of derestricted Change versus December 31, 2005 leases Variable rent €3.3 m > Number of 10-year plus commercial leases: +5% Fixed Fixed Index-linked minimum >
Slide 20: Portfolio still has strong potential
Portfolio still has strong potential Strong reversionary potential 9 Substantial stock of leases in course of 9 Indicators point to further substantial renewal or expiring by end 2006 (413 leeway for value enhancement leases / Euro 9.8m in rent) > Occupancy cost ratio*: 7.3% > Gross average rental v
Slide 21: First-half investments
First-half investments 2006 first-half earnings 20
Slide 22: Investment plan well underway with Euro 159 million of assets acquired or under contract
Investment plan well underway with Euro 159 million of assets acquired or under contract A plan of over Euro 500 million TOTAL Already Original Original plan committed plan Controlled Original Committed as of transactions plan + Euro million 2006-2007 Beyond 06/30/06 controlled 2007 Total 06/30/06 A
Slide 23: Market acquisitions represent an investment of Euro 100 million
Market acquisitions represent an investment of Euro 100 million Assets with value creation potential Euro million 9 60% of 5 Corsican shopping centers and their hyper/supermarkets • Bastia Port Toga • Bastia Furiani 80 • Ajaccio Mezzavia • Corte • Porto Vecchio 9 1 Conforama MSS – Antibes (06) 9 Sho
Slide 24: Five of Corsica's prime shopping malls
Five of Corsica's prime shopping malls Ajaccio - Mezzavia Bastia - Port Toga Corte Bastia - Furiani Porto Vecchio 2006 first-half earnings 23
Slide 25: Five of Corsica's prime shopping malls
Five of Corsica's prime shopping malls Setting a partnership 9 Contractual commitment for 60% of the centers and partnership agreement with the developer and owner for pooling resources to develop the centers over the longer-term Space Price in Euro million Location Description sqm (Mercialys share
Slide 26: A shopping mall with a leading hypermarket anchor
A shopping mall with a leading hypermarket anchor 14 shops – Aurillac (15) 9 Shopping mall with 14 shops, cafeteria and auto center 9 Anchor store: Géant hypermarket, leader on its market 9 Space: 2,000 sqm GLA 9 Center completely redeveloped and renovated in 2005 with construction of a parking silo
Slide 27: Shopping mall in a dynamic area of Nantes suburb
Shopping mall in a dynamic area of Nantes suburb 17 shops – La Chapelle sur Erdre (44) 9 Shopping mall with 17 shops + 1 cafeteria 9 Anchor store: Géant hypermarket 9 Space: 2,200 m² GLA 9 Fully renovated in 2003 2006 first-half earnings 26
Slide 28: A Euro 320 million development pipeline, up +23% over 6 months
A Euro 320 million development pipeline, up +23% over 6 months +60% since the IPO 9 Growth sustained by building up and structuring our teams 9 4 major advanced-stage development programs of over 20,000 m² totaling 119,500 m² of space 9 Projects that all have at least land control Number of Space In
Slide 29: New 2007 projects
New 2007 projects Examples of projects that have received administrative authorization Completion Project Description Creation of MSS on the existing site (2,900 T2 2007 Canet en Roussillon sqm) T3 2007 Sables d’Olonne Creation de 2,000 sqm of MSS T4 2007 Arles 1,450 sqm to existing mall T4 2007 Val
Slide 30: First-half results
First-half results 2006 first-half earnings 29
Slide 31: Results in line with targets set for 2006
Results in line with targets set for 2006 Rental revenues Cash flow:** Invoiced rents : +5.8% Cash flow: +11.1% Euro Rental revenues: +6.5% million 36.2 39.6 32.6 37.2 0.8 6.5 5.8 0.5 EBITDA*/Invoiced 38.9 rents > 85% 29.7 36.7 26.8 H1 2005 H1 2006 H1 2005 H1 2006 Lease premiums Depreciation and oth
Slide 32: Net income, Group share up 10.7%
Net income, Group share up 10.7% Condensed income statement 9 Structural costs in 2006 due to development efforts (personnel costs, investment- related costs, etc.) and Mercialys' new status as listed company (financial reporting, corporate governance, etc.) 9 Strong growth in net financial income d
Slide 33: Asset portfolio valued at Euro 1,120 million, including transfer taxes
Asset portfolio valued at Euro 1,120 million, including transfer taxes Portfolio up +9.1% over 6 months and 17% since the IPO Real estate Number of Appraisal value inc. Gross leasable area at Appraised net rents asset class assets at transfer taxes 06/30/06 06/30/06 06/30/06 Euro mill. % sqm % Euro
Slide 34: Replacement NAV amounts to Euro 1,308 million, or Euro 17.93 per share
Replacement NAV amounts to Euro 1,308 million, or Euro 17.93 per share NAV per share up +15% since the IPO (October 2005) Euro million Dec. 31, 2005 June 30, 2006 Change Consolidated equity 1,121.0 1,106.7 -1.3% Net unrealized gains on assets 124.0 201.0 +62.1% Replacement NAV (including TT) 1,245.0
Slide 35: Conclusion and outlook
Conclusion and outlook 37 2006 first-half earnings 34
Slide 36: Almost one year after its creation, Mercialys has kept its promises
Almost one year after its creation, Mercialys has kept its promises… 9 Growth… 9 …and value > Excellent first half, driven > Average yields of the chiefly by organic growth as portfolio 6,6% will be the full year > 2005 dividend: Euro 0,59 > First half marked by an acceleration in all plans, > 2006
Slide 37: …and accelerate strongly as part of an unchanged strategy
…and accelerate strongly as part of an unchanged strategy Pursue a strategy that has already proved its worth 9 Remain a pure player… 9 Realize reversionary potential on assets 9 Innovate 9 Attract top retail 9 Step up 9 Redevelop banners organic 9 Improve consumer growth 9 Improve our shopping mall
Slide 38: Outlook for retail real estate in 2006/2007 still attractive (1/2)
Outlook for retail real estate in 2006/2007 still attractive (1/2) 9 An asset class that remains the most attractive in the real estate sector year after year > The latest IPD survey shows that retail real estate is the only sector that offers continued high reversionary potential with no fall betwe
Slide 39: Outlook for retail real estate in 2006/2007 still attractive (2/2)
Outlook for retail real estate in 2006/2007 still attractive (2/2) 9 Consumer spending remains high 9 Continued fall in unemployement 9 Strong banners accelerate their development and grow their space needs in a constraintfull environment 9 Shopping centers are targeting most dynamic sectors to adap
Slide 40: Mercialys outlook is very good (1/2)
Mercialys outlook is very good (1/2) 2006 will be better than expected 9 All indicators a pointing the direction of a very good outlook > The dynamic created in the first half of 2006 > Market conditions > The robustness of the business model 9 2006 targets revised up based on those elements… > Grow
Slide 41: Mercialys outlook is very good (2/2)
Mercialys outlook is very good (2/2) …while at the same time medium term outlook is confirmed 9 … 2007-2010 forecasts confirmed by 2006 first-half trends > Double-digit growth in major aggregates > Growth equally divided between organic growth and new developments or acquisitions 9 2007 will benefit
Slide 42: Questions/answers
Questions/answers 2006 first-half earnings 41
Slide 43: Appendices
Appendices 2006 first-half earnings 42
Slide 44: Condensed balance sheet
Condensed balance sheet Assets Euro million 12/31/05 06/30/06 Investment properties 893.3 909.0 Financial assets 9.7 10.0 Total non-current assets 903.0 919.0 Cash and cash equivalents (incl. Casino CA) 237.9 214.8 Trade and other receivables 11.5 3.6 Total assets 1,152.4 1,137.3 Equity and liabilit
Slide 45: Condensed P&L
Condensed P&L Euro million 1H05 1H06** Change Proforma Invoiced rents 36.7 38.9 +5.8% Lease rights 0.5 0.8 Rental revenues 37.2 39.6 +6.5% Non-recovered property tax -0.0 -0.1 Non-recovered rental expenses -0.6 -0.7 Building expenses -1.9 -1.7 Net rental income 34.7 37.1 +7.0% Management, administra