Aedifica Sicafi Bruxelle

Good morning, everybody. Welcome at the half-year result presentation of Edifica. We will, as usual, walk you through the results and add some color to the results that we published this morning. Starting from the highlights that we identified for the first half of the year, i think what you probably have read already this morning that we are presenting solid to strong results for the first half year portfolio value standing at 6.2 billion euros generating 181 million euro top line leading to 123 million euro result apra earnings that is which we will explain in further detail during this call I think that one of the main events during the first half year is the fact that we exited from the Swedish market leading to seven countries in which we are doing business today. Also important to flag is that we see that the positive trend in terms to like for like valuation of the investment properties continues in the first half of 2025. When looking at the investment programme, as announced, we are working on refuelling our pipelines. We will go into further detail also in that respect. And when looking at the balance sheet, I think that we are, as was already the case in previous quarters, presenting a quite sound and strong balance sheet with a 42% debt-to-asset ratio. Now this about the highlights before I pass on to Ingrid, who will dive into in more detail about results and balance sheet, maybe just bringing to your attention that as announced, we are working once again on growth in a sense that we're working on refueling our investment and development pipeline. We had given guideline for 2025 meaning that we are expecting to increase the pipeline and or the portfolio with 250 million euros of new investments and projects. As of today, we are standing at 121 million euros of new investments and projects added. As you can see on the map, focused on three countries, being Finland, where we have a combination of standing assets, and new developments that we are adding to the pipeline, but also in the UK and Ireland, where we have been active. Looking at the existing pipeline, seven projects have been delivered, which is roughly 65 million euros. If you compare that to the guidance that we have given, I think it's clear that we're well on our way on executing and delivering on the strategy that we announced for Edifica. So once again, you can see that we're more than halfway in terms of the 250 million euro guidance that we've given for new investments and projects. And we're quite confident that we will be able to deliver on the 250 million euros, go into that later. Project completions more than halfway and I'm fully expecting to deliver on the guidance and then asset rotation. I think there the main thing to be flagged is that the deals that we absolutely wanted to do in 2025 have been done and I'm mainly referring to the exit in Sweden. So that means that we're more than halfway. The remaining 70 million, to be quite honest, is becoming for us more a nice-to-have than really a must-have, but we are still working on some transactions as we speak. Now, this being said, so in terms of highlights, I think I flagged what we needed to flag, and I let Ingrid dive into the details of results and the balance sheet.

Okay, good morning. So my turn to guide you through our income statement and our financial strategy going forward. So first of all, let's have a look on the income statement. So what you can see here are the APRA earnings, as already noticed probably in our half year results. APRA earnings are up compared to previous year with 4% leading to 123 million, 2.59 euros per share. Now, this increase is mainly driven by the increase in rental income of more than 9%, combined with a good cost control, helping to increase the EBIT margin towards 86.6%. For the full year, I do expect that in the second year half, this EBIT margin might slightly decrease, but we do expect full year that we will still be above the 86%. Then let's have a look on the financial charges. So you see an increase in the financial charges compared to previous year, but still we can report a low average cost of debt of 2.2% supported by the hedging. Hedging currently stands at 87%. And also for the two years that are coming, hedging percentage remains high above 80%. And then gradually in 2028, we have some more refinancing to be done on fixed interest rate debt. And the main difference this year is coming from the corporate taxes. As you're all well aware, there came an end to the regime of the fiscal blankings installing in the Netherlands. So this has an impact in the accruals of the current taxes in the Netherlands. For the full year, we are expecting that it will be an amount around 5 million. And when you start comparing with 2024, I also need to bring a reminder that in 2024, we benefited from a one-off refund of 4.2 million, which of course is no longer the case in the numbers that you see on 2025. Then moving over to the next result by including the non-cash elements. So first of all, the changes in fair value of the investment properties. So the valuation itself was positive on the first year half, a like-for-like change of 0.5%. where we mainly see increases in the valuation of the assets in the UK, the Netherlands, Ireland, driven by the indexation. Then we have the line gains and losses on disposals, where you see a loss of almost 12 million. As a reminder, this is a loss that is related to the disposal of the portfolio in Sweden, which we already reported at the end of Q1. The Swedish portfolio was sold with a slight loss, less than 4%, compared to the fair value. But there's also the impact of the currency translation, which in the past was booked under the equity, and following the disposal of the assets in Sweden, this amount is recycled in the P&L. In itself, it has no impact on the NTA, because in the past it was already included in the equity. And then you also see that the deferred taxes went up with 11 million. This is driven by the difference between the fair value and the fiscal value of the assets, mainly in the Netherlands and Finland. The increase of the rental income. So rental income went up from 165 million towards 180 million. First of all, we have the impact of the acquisitions and the deliveries, a bit more than 10 million, partly compensated by the disposals. And secondly, we also have what we can call the organic growth in the portfolio, driven by the indexation, plus 4.2 million, and the impact of the contingent rents. So contingent rents are mainly coming from the U.K., and supported by the strong performance of the UK operators. As we already announced in the guidance, this year we have a catch-up of historical contingent trends, which were invoiced in Q1. So you can consider that an amount of 4 million is non-recurring, is exceptional and has been booked in Q1. For the remaining of the year, we are expecting that on a full year basis, we will have what you could call normal contingent trends, but still based on the operational performance of the operators of around 1.5 to 2 million euros. On this slide, you can see the same increase of the rental income, but this time presented on a by-country basis. Like just explained, there's a strong increase in the UK following acquisitions and deliveries, but also supported by those contingent rents. In Finland, it's mainly coming from portfolio growth. Then in the life-for-life calculation itself, there's an increase of 3% that can be split between 2.5% coming from rent indexation, 0.2% rent reversion, and 0.3% coming from the currency exchanges. The historical catch-up is not included in the like-for-like, so we deducted that from the calculations. Finland is showing a somewhat lower like-for-like, 0.7. This is driven by the fact that the inflation in Finland currently is quite low, and most of the lease agreements were indexed at the beginning of January. All other countries, I would say, show a like-for-like that is very close to the inflation in each of the countries. Germany laying a little bit behind because in Germany you do not have the full impact of the inflation and it only is triggered when a certain threshold is reached. Moving over to our balance sheet, so the debt to asset ratio 42.4%. If we deduct the excess cash that we had on the bank accounts at the end of June, it's around 42%. More importantly is that when we do the forecasting that we are expecting that by year end our debt-to-asset ratio will be around 41%. Traditionally, the debt-to-asset ratio is at the highest point at the end of Q2, following the payment of the dividends. Then our funding, our financial resources. So first of all, we have a total financial debt of 2.5 billion, out of which the resources are 55% coming from bank facilities and 45% is coming out of debt capital markets. With the banks, we continue to work on the refinancing of all of the debts that are maturing. So as you can see on this slide, our debt maturity schedule is well spread over the time. Most of the maturities for 2025 are currently handled. We still have 50 million of draw and untraw facilities that probably will be refinanced in the coming weeks. It also means that we have headroom available on committed credit lines of approximately 600 million. And this is already after deducting the backup facilities for the commercial paper program. So we have enough financing in place to cover all needs until the end of 2026. Moving back to the previous slide. So what you can see on this slide are our main debt KPIs, I would say. First of all, the interest cover ratio, still very solid at six times. The covenant with the bank stands at two times. Also going forward, we do expect that although the interest cover ratio will slightly decrease in the coming years following an increase in financial charges, but we will expect that we will remain above the five times for the coming two to three years. Net debt to EBITDA also decreased compared to the previous reporting 8.2 times. We barely have any secured financing, so most of the financing is done on an unsecured basis, and only 4% of the assets are uncovered. We still benefit from a BBB credit rating from S&P. As you all might have picked up, following the announcement of the transaction on Cofinimo, there has been a positive credit watch, where S&P is stating that if the transaction completes following the announced terms, this could have a positive impact on the credit rating. So I can hand over back to Stéphane.

Thank you. Walking you quickly through the main portfolio features, as at the 30th of June of this year, I guess not a lot of surprises here. The focus of the company still is, to a large extent, on elderly care and senior housing. The 88% that you see on this slide is basically 1% higher than the number that you saw at the end of the first quarter, but that increase is mainly due to the exit in Sweden, where we did not have any exposure to elderly care homes and senior housing. So in itself, no surprises. When looking at the geographical footprint of the portfolio, once again, I think you will find something very similar to what you have seen in the recent past. So the main four countries, each around 20%, still are the UK in first instance, followed by Belgium, Finland, and Germany. We do see Ireland over the past couple of years growing a lot, now standing at 7%, with the Netherlands standing at a quite stable 11%. Maybe also flagging that we delivered our first project in Spain a couple of weeks ago. So the minus 1% now is basically representing one asset in Spain. Looking then at the tenants, and I think that as usual, this is probably the more interesting topic. Now, first of all, what you do see here is the tenant diversification, which in itself has not really changed. Our main client remains Clariane, standing at 10%. So what you see here is, I think, a quite well-spread tenant pool, more than 140 different groups. You will find the bigger European players. You will find national heroes, local heroes, but also some not-for-profit players. Also drawing your attention here to the Finnish municipalities, which are good for 4% of the total outstanding contractual rents of the whole of the portfolio. But it means that when looking at the Finnish portfolio, municipalities, so public operators, are a very, very important part. of our Finnish activities, and we do expect that to remain the case also in the future. It might be even growing, though we do see private operators becoming more and more active in the Finnish market. Again, we'll talk about that later. Talking about occupancy, there's a couple of remarks I think we can add to this slide. Now, first of all, When looking at the coverage, what you see is that for five of the seven countries that we're doing business in, we have a very strong coverage, up to 100% in two of the countries, but well above 90% in two others, and in the Netherlands now at 82%. Now, this coverage is increasing. Okay, Spain, we only have one asset which has recently been delivered, so it's not really relevant. The Finnish market remains the one where we are putting a lot of effort into place to try and convince operators to be more transparent and communicate about occupancy and financial KPI. It is work in progress, but we did make some progress as we reached an agreement with the first operator and working on an agreement with a second operator. this being said not expecting to see a high coverage in finland uh in the next one or two quarters but at least it seems like the trend is changing also there for the better and as usual you know that we refer to attend publications where you can get some flavor about what is really happening in the operating market in finland now this being said when looking at the occupancy numbers uh themselves uh first message clearly is that the average occupancy in the care homes in the five countries where we do have sufficient information remains around 90%, so it's a high number. Looking at the different countries, you will see that, as was the case in the previous quarter, some of the countries are at 90% or above 90%. What we do see in those countries is that a certain seasonality is starting to kick in, meaning somewhat higher numbers or slightly higher numbers after the summer, slightly lower numbers after the winter. But that is the type of seasonality that we also noticed before COVID. So that basically means that we're getting really back to a normal pre-COVID situation in these countries. I think what to us is more striking and more important is what is happening in Germany now. We now see Germany in our portfolio coming in at 87%. But if you look at the like-for-like growth, which is basically comparing mature assets at March 2024 and at March 2025, we do see almost 400 bps like-for-like growth in occupancy. So which is a clear indication that also in Germany, the trend has changed and occupancy is absolutely picking up. Now, what does this mean in terms of rent covers and operating margins of the operators? Well, as was the case in previous quarters, we can show you the rent cover for the whole of the UK portfolio of ATIFICA, which remains at a very, very high level above 2. Very strong rent cover on the back of very strong operating margins well above 25%, flirting with 30% in the UK portfolio. We are working and collecting more info in some of the other countries like Finland and Belgium. So I've promised this already before, but it is evolving in the right direction. So hopefully in the near future, we will be able to also show you rent covers for the Belgian and the Irish portfolio. Now, this is being said to add some flavor to what we see happening in countries. I think that first of all, we can confirm that UK and Ireland remain very, very strong performers in terms of operator performance. We do see a lot of positive indicators and trends in countries like Finland. Well, once again, referring to Attendo, which recently, and I think it was two weeks ago, flagged slight improvement of their margins, but more importantly, for the first time, if I'm not mistaken, not just referred to increased fees they're getting from the well-being countries, but they're basically also referred for the first time to the positive impact of the somewhat lower staffing requirements that apply in Finland since the 1st of January. So they do start to see the first positive impact of that on their margins. What we also see in Finland is clearly that our development pool is growing And that some of the bigger operators, private operators, like for instance Attendo, but also Mechelenen, are absolutely turning back into growth models. So quite a lot of positive trends in Finland. Looking at the Dutch market, we do see a very stable market, which recently a new study published by BDO, indicating that in the, I think it was mostly talking about intramural part of the market, but this being said, they flagged that they now see fee increases outpacing cost increases, which once again, on the back of growing occupancy, seeing also revenue per resident growing is what we want to see, and it's clearly what is also happening in the Netherlands now. Maybe also about the German market, where we have seen some issues over the past couple of years. Once again, I think that we can confirm that the positive trend that we saw is still continuing. We mentioned already in the past that high-cost insert ingredients are increasing to levels, which seems to be very promising. We keep hearing from the German team that also the idea of allowing more flexibility in staffing requirements is also starting to kick in in more regions, which should be helpful for the German operators. And as we just flagged, we did see this quarter really the occupancy in our portfolio improving. So that makes us also quite positive about what will be happening in the German market in the near future. This being said, we do see a positive trend and we confirm the positive trend that we have been talking about regarding operators over the past couple of quarters. Now, as I keep repeating myself, does not mean that there is not still a risk of certain incidents. And then talking about incidents, we reflect in the press release that when looking at Colisée, we only can confirm what we said at the end of the first quarter. Rents are paid at June 30, and occupancy of the Colisée, but in the case of Edifica, this is basically the Armonia Belgian portfolio, occupancy in that portfolio is absolutely in line, actually above the average of the Belgian market. So there's nothing new that we can tell you at this point in time about Colisée. About Argentum, which is a German operator that at least for part of its portfolio went into insolvency. There's only two assets involved in the IDifica portfolio. One of these assets is an absolutely top performer and is, by the way, in a self-managed insolvency of Argentum, so we do not expect any impact. on that asset coming out of this insolvency procedure. The other asset is one that we were redeveloping, and that will be, if everything goes well, but will be transferred out of the insolvency to a new operator in two days from now, on August the 1st. So that is an issue that we are, well, if things go well, has been solved by now. I think that that concludes a bit on what we have to tell about what we see happening with operators. So we do see a positive trend that continues and we do see gradually improvement of operating performance in Europe on average. Walking you through some other features. Now, first, the lease maturity still stands or the wall at least still stands at 18 years. We have a 100% occupancy rate within the portfolio. And I think that what is important to flag also is that when looking at the maturity of the leases, only 1% of leases will expire in the next five years. I think that in itself is also a quite strong feature. Looking then at the portfolio valuation, as I mentioned at the beginning of this session, But maybe the trend continues or the positive trend continues. Looking at the fair value yield as at June 30, we do see an average fair value yield, gross fair value yield of 6% for the whole of the portfolio. But when looking at what happened like for like, I think that now 18 months on the row, we do see stable to slightly increasing valuation. which meant for Q2 2025 an increase of 0.21%. If you look at the whole of the first half years, it's 0.5%. But also important is to notice that it is now slightly positive for all of the countries in the portfolio. So the trend is more and more confirmed. And then one slide that we particularly find interesting this time, because it is an indication of the fact that we gradually do see a more dynamic healthcare real estate investment market in Europe. Our pipeline, year to date, this is not the exact June 30 number, because we took into account some of the deals that landed just after June 30, but year to date, our pipeline is standing at 178 million euros. I think that interesting is to have a look at the geographical split where historically we used to have a huge pipeline in Germany. We do still have a pipeline in Germany, but it's basically or it's to a large extent one bigger project that is being executed right now. historically a legacy project, but that has been renegotiated. But I think it's more important to look at the other countries that are becoming more important. And I guess without surprise, we're talking about the UK, Ireland and Finland. I can confirm that our Finnish in-house development team is building up once again a pipeline at the yield targets that we're looking for, and that we're also building up a pool of potential future projects that might become committed and that we expect to become committed in the next quarters. Whereas both in the UK, but certainly also in Ireland, we do see still a lot of potential. I think that this is reflecting the reality of operating performance in these countries, which allows us to find an interesting balance between the cost of construction, our own cost of capital, and the rent payment capacity of operators. And that clearly reflects into this geographical split. In terms of expected delivery dates, you will see that we still expect 43 million euros of projects to be delivered this year, and then roughly 65 and 70 million in 26 and 27. Maybe reminding you that all of these projects are 100% pre-led, so there is no speculative development going on within IDifica. But I think the main feature here is now that we finally reached the 6.5 initial yield on cost, average initial yield on cost for the whole of this pipeline. You heard us talking in the past about the targets that we're setting, I think now The legacy deals are behind us. The past is behind us. We're now building a new pipeline, which is clearly reflecting the yield on cost that we want to see around 6.5%. And then perhaps underlining and stressing that we do expect to be able to continue refueling this pipeline. When talking to the country teams and our investment team, I can confirm that on average we do see a much larger, bigger pool of potential deals that we are analyzing continuously. So that is the first indication of a more dynamic investment market. We also have More important, what we call pre-approved deals or pool of deals, meaning deals that we have analyzed that have green light within the company, but that still need to become committed. So we really do see a more active investment market in Europe, which gradually keeps improving. Then maybe just as a quick reminder, IDifica was founded in October 2005. So we have our 20th anniversary this year that we already celebrated with the team. And this is a position to thank the team for the efforts that have been made over the past 20 years and over the past a couple of years and that is basically a big part of the success of Edifica over this period in time. With some more in detail on where these people are working, but you see that we have a very international team with a relatively small mean and lean HQ in Brussels. And then most of the other people dedicated to one of the countries in which we are doing business with the somewhat bigger number in Finland, clearly reflecting the fact that we have a full development in-house team in Finland. And that then brings us to the outlook, which I will let Ingrid explain.

Okay. So at the beginning of the year, we have given guidance that for 2025, for the full year results, we are expecting an APRA EPS of 5.01 per share, and we announced a proposed dividend of four euros per share. Now, after this six months, the results that we have just shown to the market this morning, they are ahead of budget. But at the same point in time, we also take into consideration that we have the exchange offer on Copinimo that is outstanding, and where certain elements are currently unknown, like the exact timing and also the number of shares that will be tendered, and that will have an influence on the APRA earnings for the full year 2025. So for that reason, management decided to keep the guidance on a standalone basis, as it was announced at the beginning of the year, and at the 5.01 euro per share. So, depending on the rollout of this transaction with Cofinimo, later onwards, we can provide more specific guidance on this. Okay.

And so, we made the bridge towards the Cofinimo transaction. So, quick update on where we are standing in the Cofinimo transaction. So, a lot has happened since May 1st, of course. Main milestones up till now. First of all, the fact that we were able to reach an agreement with the board of Cofinimo regarding this transaction, which then led to an exchange ratio of 1.185 new Edifica shares for each Cofinimo share. So a deal that is recommended now. Second main milestone is the EGM of Edifica on July the 11th, during which we got approval of our shareholders for the capital increase that we need to be able to execute the exchange offer. And we got approval with an overwhelming 99.9% approval rates, for which we like to thank our shareholders. Right now, we are in the more, if I am allowed to call it like this, administrative phase. So basically, teams are working now on prospectus approval with the FSMA in Belgium. And we're working also our way through the merger approvals that we need to be able to execute the deal. Now, as you all know, the Netherlands and Germany already approved. We are in Belgium right now in an ongoing procedure with the Belgian market authority. Today, we are in the pre-notification phase of this procedure, meaning that it is the Investigation and Prosecution Service, so the IPS of the BMA, which is conducting its investigation. Now, this is a phase which is, first of all, totally confidential, and secondly, it is a phase without any strict deadlines. So basically what the IPS is doing is they're talking to the market, they're sending out questions to whoever they deem interesting enough to ask questions to, including, of course, Edifica and Cofinimo. That phase is ongoing, as I said, confidential, without strict deadlines, and that has led them to the press release that we've sent out, I think, 10 days ago, flagging to the market that we expect that the indicative timeline that we had forward previously is probably not the one that really, in the end, will be the final timeline. So it's an ongoing process. At this point in time, there's absolutely nothing more that we can tell you about this, expecting that you probably will have a lot of questions, but I'm afraid that there are not a lot of answers that we can give at this point in time. I think that This concludes the presentation that we prepared for you.