Carmila Sas

Welcome to the Carmilla H1 2025 results presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers. Mary Cheval, Chair and CEO, Sebastian Van Hove, Deputy CEO, and Pierre-Yves Thirion, CFO. Please go ahead.

Good evening, everyone. Welcome to Carmela's H1 2025 results presentation. Together with Sébastien Vanhoef, Deputy CEO, and Pierre-Yves Thirion, CFO, we are thrilled to present strong results for this semester. We are confirming once again our ability to deliver growth and value for shareholders. We have secured 467 new leases. This strong living activity contributes to our sustained growth in net rental income. What's striking is how this translates into even stronger recurring earnings growth. It has increased by 7.1% year-on-year. Indeed, we raise our 25 recurring appraised guidance to 1.79 euros representing a 7% increase compared to 24. We will also launch tomorrow a new share buyback program of 10 million euros. Alongside these strong results, favorable trends are creating a supportive environment. We are observing a normalization of inflation and interest rates. Furthermore, the omnichannel approach remains the optimal model for retailers with integrated online and in-store strategies. We are seeing robust demand in retail, with positive growth across France, Spain and Italy. Finally, on the supply side, limited new greenfield projects mean that scarcity underpins the value and attractiveness of our assets. As a result, retail real estate investment volumes are increasing, demonstrating renewed confidence in the sector. In this context, the strategy of Carmilla remains the same. It is built on three pillars. First, transforming our asset to create value. Second, we maintain a strong capacity to optimize capital. We achieve this through asset rotation and strategic acquisition, such as Gallimaux. Finally, we are committed to a long-term vision through mixed-use developments with Carrefour, carbon neutrality, and other strategic growth initiatives. By focusing on these three pillars, Carmilla is in a position of strength for continued value creation. As shown on slide 7, we are beating our strategic plan targets across the board with a successful beginning of the fourth year of our Building Sustainable Growth Plan. Let's now talk about Spain. Spain is not just a key geography for Camila. It's a significant growth in China. We are leveraging significant positive trends. First, Spain GDP growth is projected at 2.6% in 2025, significantly above the Eurozone average. Second, Spain is a leading tourist destination expected to attract 100 million tourists this year, which directly benefits our centers located in high density areas. Carmilla is well positioned to capitalize on this growth. We are the number one shopping center operator in Spain with 75 assets representing 21% of our gross asset value. And we have a very strong track record. Our gross asset value has grown four times in Spain over the past 10 years and we see potential growth for the future. The slide 9 provides colors on how we are actively unlocking value within our Spanish portfolio. As you can see, we have achieved net rental income growth above indexation. Furthermore, we maintain a healthy financial occupancy of 95.2% and a net initial yield of 7.3%. There is room for further value creation. On slide 10, you can see some of our flagship assets in Spain. In the Balearics, in Andalusia, or near Madrid, we are positioned in top tourism regions benefiting from strong footfall and consumer spending. Now, let's focus on the GALIMO integration. This seamless integration demonstrates the scalability of our platform. This has led to immediate synergies, 5 million euros in cost synergies, and the integration of IT systems and employees within just six months. With 51 new centers now under operation, Carmela expands its platform and accelerates value creation. we confirm the quality of the GALIMO portfolio. Now on slide 12, the integration of GALIMO is delivering significant value to our shareholders. This transaction is generating an internal rate of return exceeding 40% on our €300 million of equity investments. And there is room for creating additional value. For example, We have already increased the financial occupancy and collection rate on these assets. Let's talk about Carmina's approach to capital optimization. We have a very strong track record. We are now positioned as a net buyer targeting 100 million euros in acquisitions with a spread of 100 basis points above cap rate. At the same time, we plan to disvest 50 million euros per year in line with book value. Recent transactions this year include the sale of Ketini for 17 million euros and Villers-Sommers for 12 million euros. This approach between disposals and acquisitions allow us to target an accretive spread. On slide 14, we are generating growth on a diversified portfolio. We do not subscribe to the view that bigger is always better in retail real estate. Performance is not a matter of size, as I will demonstrate. First, we benefit from strong local leadership on prime locations. 85% of our sites are leading retail destinations, notably thanks to the footfall generated by Carrefour and court centers. Second, The scale of our operations drives operational excellence. Our intelligent IT and AI systems allow us to streamline processes and reduce costs. Third, our extensive network makes Carmilla the go-to partner for expanding retail brands. In fact, half of our top performing assets are small, proving that it's more profitable to have the right location than a bigger footprint in the wrong one. Beyond our core business, we are actively executing on high potential growth initiatives that are already delivering incremental recurring earnings. As you know, our three key initiatives are gaining traction, generating 8 million euros in recurring contributions this semester. We are also working on our retail media platform and we look forward to sharing further updates on this contribution in the coming months. The next slide, 16, is a reminder of our commitment to environmental sustainability. As part of our long-term vision, we are firmly on track to achieve net zero emissions by 2030. Since 2019, we have already reduced our greenhouse gas emissions by 54%. Six photovoltaic projects have been brought into operation in Spain since the beginning of the year, and additional projects are currently under review. As a conclusion to my part, Carmilla is delivering best-in-class performance. We are demonstrating strong net rental income creation, growing 22% since 2019, and the 2025 EPS we will be well above the 2019 level. We have generated a strong shareholder return and are determined to continue to do so. I will now hand over to Sébastien, our Deputy CEO. We will provide details on our activity.

Thank you, Marie. Hello, everyone. Let's now take a closer look at our operational performance, which has been particularly dynamic this semester. I would like to begin with three key achievements that demonstrate our strategic execution, building on what Marie shared. First, Spain proves to be a standout growth engine. Second, we are adapting to evolving consumer expectations to ensure our centers remain attractive. Third, our incremental initiatives and agile restructuring projects are complementing the strong core performance which sustains organic growth. This solid activity is directly benefiting our retailers, as shown by the indicators on slide 19. In the second quarter, retailer sales rose by 2.1% and foothold by 2.3%, showing better momentum than in Q1, which was impacted by the leap year in 2024. Spain posted the most dynamic performance with sales up 4.4% and footfall up 1.5%. This was supported by a favorable economic environment and strong tourism activity. At the end of June 25, the tenants average occupancy cost ratio stood at 10.8%, confirming the strength and balance of Carmela's leasing model. These strong fundamentals are attracting retailers' interest, as illustrated on slide 20. In the first half, we signed 467 new leases, confirming the continued appeal of our centers. This momentum is reinforced by the arrival of 55 new brands, such as Aromazon in Biarritz, an iconic experience-led retailer. As Marie mentioned, This trend extends beyond our largest assets. Retailers are also expanded into convenience centers where Carmilla's proximity and market leadership offer strong growth opportunities. This is reflected in ADOPT's expansion strategy and in McDonald's, now operating nearly 50 restaurants across our portfolio. This illustrates Carmilla's unique network effect. Our ability to support multi-site deployment is a decisive advantage. As we have consistently said, we are well positioned to capture retail trends and deliver organic growth. Let's now look at how this translates into our merchandising mix on the next slide. As part of our strategy to create value, Carmilla is continually pivoting its merchandising mix to stay aligned with evolving consumer trends. We are actively embracing new concepts with a deliberate repositioning that brings us closer to our vision for a typical Carmilla center. Notably, we are seeing solid growth in health and beauty, as well as in restaurants and sports categories, where we are increasingly concentrating our efforts. We are now on slide 22. Our shopping centers are evolving. And as true pioneers of retail trends, we excel in pop-up and temporary concepts, bringing innovation and experience, attracting footfall while testing new concepts. Beyond traditional leasing, we create animation that builds customer loyalty. Specialty leasing is turning our centers into social hubs while delivering strong revenue growth, 9.1 million euros in H1, up 15.1%. An example, our partnership with Julie creates memorable family experiences. We also leverage digital campaigns with brands like M&M's to boost visibility and engagement. And we capture emerging trends like key beauty corners set to expand in the second half. Now let's examine our capacity for asset transformation, directly responding to the consumer trends I mentioned. We continue to reshape our assets through agile and strategic restructuring. Our scale enables us to execute and seize opportunities more efficiently. The numbers speak for themselves. 50 projects per year, 50 million euros in capex, and a targeted yield on cost of 10%. On food parks, we have already secured 11 new concepts since 2021, from street food formats to more premium dining. We are also capitalizing on wellness and entertainment trends by introducing fitness centers and leisure parks, boosting dual time and creating new revenue streams. We are further expanding our health care offer with new pharmacies, downtown clinics, and medical practices, answering clear local needs while improving daily food forms. To illustrate Carmilla's unique expertise on the strong performance in Spain highlighted by Marie, let's take a closer look at Los Alfares, 80 kilometers from Madrid. The site had potential, but faced challenges. from competition from radrid and high vacancy rates we saw an opportunity our approach three precise phases phase one took place between 2015 and 2018. we signed 17 new leases adding fashion healthcare and expanded food and leisure options phase two between 2019 and 2024 was the consolidation phase. We optimized the tenant mix, welcoming brands like Sprinter and Pemko, and grew footfall by 12% versus 2014. Phase 3 is launching now. Primark becomes our new flagship tenant, and the Mongo team concept arrives. Along with new revenue streams from all media and digital advertising, we are transforming this asset in a true destination. The figures are striking, 100% occupancy achieved, plus 23% footfall growth, and strong value creation for shareholders. Now on the next slide, major projects. Limited supply further reinforces the strategic positioning of our centers. In France, for instance, the low on net zero artificialization creates scarcity value for existing retail locations. Continued urbanization transforms our catchment areas into increasingly dense urban zones. We are currently wrapping up the project phase for Tarassa, near Barcelona. Our goal is to create a flagship retail destination, just as we did with FAN Mallorca or Los Alfares. We look forward to updating you on this exciting project in the months ahead. I will now hand over to Pierre-Yves, our CFO, who will provide a detailed review of our financial performance.

Thank you, Sébastien. Hello, everyone. Turning to the financial impacts of our operational strengths. Occupancy reached 96%, up 70 basis points versus 2024, driven by progress at Gallimaux and aligned with group standards. Rent collection is solid at 96.5%, on track for our 97% full-year target. Reversion stands at 3.3%, confirming momentum as inflation normalizes. Turning to net rental income on slide 28. As you can see, the net rental income growth is strong this semester. Gallimaux contributes to 11.8% of the overall growth. Organic growth is strong at plus 3.6%, driven by solid operating results and the positive impact of our agile restructuring initiatives. It is 110 basis points above indexation. Once again, we have demonstrated our capacity to extract value on top of indexation. Now on slide 29, Carmilla's EBDA hits a record level of 177 million euros, reflecting a robust 3.9% annual growth rate since 2019, and plus 14% versus 2024. So you may ask yourself why Carmilla is delivering stronger growth than Peels. Like others, we benefit from rent indexation which is a good edge against inflation. But more importantly, we consistently outperform indexation by actively transforming our assets to drive higher rents. On top of this, Our growth initiatives, such as Nextower and the Incubator, further enhance profitability. Beyond these operational levels, we also create value at corporate level. As Marie mentioned, we are currently in net buyer mode, targeting an equity spread between acquisition and disposals. This is what takes us apart. a multi-layered approach to value creation. On slide 30, we are also focused on improving margins to unlock value from scaling our ecosystem. Our target for N25 is an EBITDA margin over GRI of 79%, up 130 basis points versus 24. First, operational excellence. With over 6,000 retailers, we know exactly how to run a highly efficient platform, streamlining processes and maximizing productivity. Second, smart use of technology. We have deployed best-in-class SaaS solutions across all strategic functions, enabled by a modern IT architecture built around a centralized data lake. And finally, agile cost control. We manage overhead costs while maintaining flexibility to invest where it creates the most value. On slide 31, our strong top line growth trickles down to our recurring earnings. Our recurring earnings per share is up 7.1% to zero The financial performance is very strong this first semester. Turning to slide 32, at the risk of repeating what Marie said, we are pleased to announce an upward revision of our 25 recurring EPS guidance to 1.79 euros, a 7% increase compared with 2024. and significantly above our initial guidance of 1.75 euro per share. This upward revision reflects several key value drivers. First, our Spanish portfolio continues to strengthen. Second, GALIMO integration is delivering value ahead of schedule. And third, margin improvements is proving sustainable and scalable. Now on slide 33, our portfolio value reached 6.7 billion euros, up 1.1% on a like-for-like basis. As we have said in the last semester, net initial yields have stabilized at an all-time high and rental growth is supporting valuation. The three geographies are showing a line trend reflecting a coherent performance across our portfolio. On slide 34, the net initial yield. Beyond validating our asset quality, current market conditions present in our view a compelling investment opportunity. Repricing has been done. Our net initial yield reached 6.60% in H125, stabilizing for the third consecutive semester. We believe that we have reached peak rates in the current cycle, creating an attractive entry point. Our valuation approach relies on reasonable assumptions. The spread between discount rates and risk-free rates offers an interesting value proposition. We are now on slide 35. Carmina's strong balance sheets provide the financial flexibility to seize opportunities while maintaining a disciplined risk profile. Our fundamentals are solid, with an LTV of 39.7% and net debt to EBITDA ratio of 7.6 times. Liquidity is high. One point to insist, the cost of debt is stable at 3%. This level remains attractive in the current environment, as it shields Carmilla from steep step-up effects in interest rates, with new financing conditions around 3.8% compared to our current 3%. On the next slide, you can see the debt maturity profile of Carmilla. It has been significantly reinforced and is now well-balanced. with no annual maturity concentrations that could not be addressed through a single refinancing operation. We have no refinancing needs before 27, providing stability and predictability. Now on slide 37, Carmina's credit profile has been further reinforced with Fitch assigning a BBB plus rating to our senior unsecured bonds, while our BBB corporate rating with stable outlook from S&P remains unchanged. We view this dual rating as a strong endorsement of our financial discipline and asset quality. It further reinforces Carmina's credit profile and broadens our access to financing opportunities under favorable conditions. To conclude on slide 38, all these actions are reflected in the growth of our EPRA net asset value per share metrics. As you can see, our EPRA NTA provides a substantial increase of 10% to 25.89 euro per share on an annual basis. It illustrates our ability to create value through effective management, strategic investment, and a focus on sustainable growth. I will now leave the floor to Marie, who will conclude this presentation.

Thank you Pierre-Yves. Carmilla is delivering strong shareholder returns. This performance stems from our clear shareholder return policy, a 75% payout ratio, and regular share buybacks. A new 10 million euros program will be launched tomorrow. With our upgraded 2025 recurring EPS guidance, we are confident on our ability to continue this growth story. Thank you for your attention. We are now open for Q&A session.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Next question comes from Florent Laroche-Hubert from AutoBHF. Please go ahead.

Good evening.

Thank you for this presentation. I would have two questions, if I may. So my first question is that you have been able to increase your occupancy in Ashwaunna. What do you expect or what do you see for H2? Do you think that you are still able to increase again your occupancy in H2? So that would be my first question. My second question would be on your new share buyback program. So with which bid do you want maybe to execute this share buyback program and how do you We consider this share-buy-buy program with the fact that your LTV ratio is now close to 40%, so are you ready maybe to go more close to 40% or to remain below 40%? Thank you very much.

Yes, thank you, Florent, for your two questions. I will take the first one. Occupancy ratio is at a very high level. As you see, our leasing activity is still very dynamic and will continue to be so. So we hope to maintain and to increase a little this occupancy ratio. You know, retail is always a history of new trends or new brands, so we are very active to capture these new trends.

And on the second one about the share buyback program. So the share buyback is very interesting for Carmilla. EPS outlook for 25 is at 1.79%. So when you compare it versus the share price, it makes an attractive investment for Carmilla. We have done several programs of 10 million euros, one per semester over the last semester. and it performs well. Regarding the LTV, the LTV stands at 39.7%. It's cyclical. We have just cashed out the dividend in May, so it has the full impact of the cash out of the dividend. If we make some projections at the end of the year, At the constant valuation, it will be reduced significantly. And as you have seen, we are positive on valuations. So we don't expect the LTV level to be an issue and it will decrease by the end of the next semester. So we have room to invest at that level.

Okay, thank you very much.

Next question comes from Valerie Jacob from Bernstein. Please go ahead.

Hi, good evening. Thank you for the presentation. So I've got three questions and maybe a follow-up on the one that has been asked. So my first question is on your relationship with CAR4, if you can tell us if the recent placing has changed anything in the relationship, if you feel it will in the future. That's my first question. My second one is on Gallimaux, so you've improved I think the KPI and you want to continue to do that. I was wondering how much capex are you planning, you already spend in the asset and you're planning to spend on Gallimaux. That's my second question. My third question is on your valuation. I think though, if I'm correct me if I'm wrong, but I think the 1.1% is including CAPEX and I was wondering if you could give us the number excluding CAPEX. And my last question is just to follow up on the question on DLTV. You said you have room to invest and I was wondering if you had an internal target of LTV range or how much you think you have to invest and why you feel comfortable. Thank you.

Okay, I will take the first one and let Pierre-Yves answer the other one. So on Carrefour, as you know Carrefour made a recent placement of 7% of the capital of Carmilla. Clearly it didn't change anything in our relationship with Carrefour. and it was clearly stated in their press release. Carrefour reiterates its confidence in Carmela's management and strategy, and confirms its intention to remain Carmela's reference holders, and it will not result in any change to existing partnership mandates and service agreements between Carmela and Carrefour, and we are very happy with all this relationship with Carrefour.

And the next question, so on the CAPEX and GELIMO, So last year we had a plan to invest 40 million euros of CAPEX at the Carmilla perimeter. Now with Gallimaux, we have increased the envelope of CAPEX from 10 million euros. So we are now at 50 million euros per year. So we haven't disclosed the specific part of Gallimaux, but it's approximately 10 million euros per year. And the idea is to continue to create value with those CAPEX with a 10% yield on cost target. The next question was about the valuation. So it is plus 1.1% on a like-for-like basis. So if you take 1% of 6.7 billion, it's approximately 70 million euros. We invest per year 50 million euros, so it's approximately 25, so there is value creation above the CAPEX investment. And about the LTV and the target, the target is clear. The target is 40%. It's a target at the end of the year. About the capacity of investment, as you have seen we have made progress on the asset disposal with 29 million euros of asset disposal and we plan to reinvest those funds plus to be in a net buyer mode. So the idea is to invest 50 million euros net per year And we have the room to do that with .

Thank you very much.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

Okay, there is, I think, one question on the chat.

So it's a question about the next hour. So just to give you some info about next hour, we have now approximately 2.9 million euros of rents coming from next hour. It is representing 37 million euros in our asset valuation. We are scaling that activity as it creates value. The target is 10 million euros of rent by 2028. So we have made some progress this year and we are continuously working on it.

Just waiting a few seconds to see if there is any other question.

Another question about the occupancy of the GALIMO assets. We are now at 93.5% on the GALIMO assets. We have significantly improved the financial occupancy rates on the GALIMO portfolio. At the acquisition, it was at the level of 92% approximately. And 93%, so we are now at 93.5%. And the target is to improve that rate semester after semester and to align it with the Carmilla perimeter. So the target is 96%. Yes, we are on track with our expectations and the leasing activity is also very dynamic on the Gallimaux portfolio. And a question about the Italian portfolio and the size of the Italian portfolio within Carmela. Marie, do you want to take the point?

Yes, so in Italy we have eight assets located in the northern part of Italy. It's a strong asset with a very high occupancy ratio. No problem. We are very happy with those assets in Italy and the team continues to transform them and to develop growth also in Italy.

Next question comes from Alexander Zeri from All Invest. Please go ahead.

Hi, thank you for taking my question. I will have two questions on my side. The first one is linked to the very likely departure of Carrefour from Italy. Could you tell us please how many of the eight Carrefour stores located in Carmilla Galleries in Italy are in a difficult situation? compared to a normal situation. And my second question on Italy will be, what was your personal performances in terms of retailer sales and also in terms of footfall and the occupancy cost ratio in Italy this semester? And my second question will concern the assets acquired from Ganimaux. How many shopping malls have the potential you know, to reduce the surface area of the retailer, if it's possible to have some details on the plan for Gallium.

Okay, so concerning Italy, so we do not comment on on the rumor on the Carrefour decision on Italy. So we have eight centers, as I mentioned, seven of which are anchored by Carrefour hypermarket. One is anchored with Tozano, and there is no issue with hypermarkets in Italy for the Carmilla shopping centers. Concerning the business in Italy, occupancy cost ratio is at 12.2%. footfall is plus 1.2% this semester, so performance are very similar to the one in France, in fact.

And sorry, can you repeat your question about Ganimaux?

Yes, I don't know if my line is open. My second question was on the the potential of reducing the space, the surface area of the food retailer if there is some discussion with the food... I think it would be a decision of Carrefour, so we don't want to comment on this kind of discussion.

Okay, thanks. Okay, so there is no more questions.

So we thank you for your attention and wish you a very good evening.