Mercialys Paris Ord

Ladies and gentlemen, welcome to the Merchalise presentation regarding its 2025 full year results. It will be structured in two parts. First, a presentation by Merchalise management team, represented by Mr. Vansan Rava, Group CEO. Afterwards, there will be a Q&A session during which you can ask oral questions through your computer or by joining the conference call. I will now hand over to Mr. Vansan Rava. Sir, please go ahead.

Good morning, everyone. Thank you for attending this presentation of our 2025 full year results. Our presentation today is built around four main messages. First of all, the momentum created by the repositioning of our portfolio. Secondly, the foundations we have put in place to gain the preference of retailers and consumers. Thirdly, the strength of our results and our financial structure. And finally, our distribution policy and our outlook for 2026. 2025 was special for us. In October, we celebrated Mercedes' 25th anniversary. 2025 also marked a change of momentum for the company. For several years now, we have been undergoing a profound transformation of our portfolio. 2025 showed that this strategic change is now well advanced and already bearing fruit. Slide five, we note that there is a general positive consensus about commercial real estate sector. This is especially the case for the companies with portfolio of assets in the right locations and in the right format. Three factors will support future performance for those companies. First, population is still growing in the suburban areas, while administrative constraints for new supply have increased. The second factor is a tighter consumer spending, which means that everyday low price policies are fundamental to create shoppers' preference. Thirdly, retail and commercial real estate are polarizing, so portfolio selectivity will be central to performance. In the past few years, we have shaped and we continue to shape our portfolio of assets around these conditions of success. This is why we believe we are among the companies that are well positioned for positive performance forward. Slide six, you can see a summary of the journey we have undertaken to do so. Where we come from, where we stand, and where we are aiming soon to be. Our starting point was a dispersed portfolio of hypermarket-dependent assets. Today, we are no longer exposed to any hypermarket dependence. We used to have a portfolio spread across France, often including in areas with low economic dynamism. we have actively refocused our portfolio on the most dynamic regions and metropolitan cities. At the same time, we have strengthened the local dominance of our assets. Today, more than 85% of our assets have more than 50 shops, and this percentage increases every year. In this respect, Today, 80% of our portfolio now exceeds 3 million visitors annually, and we have in sight a 95% soon. Finally, within three years, our assets will have more than 90% of the consumers' preferred brands in their merchandising mix. Our portfolio is now made up of mostly dominant assets in their local area, no longer just convenience centers. This strategic repositioning is directly reflected in the very positive momentum of our 2025 figures, summed up on slide seven. This is our best overall set of results since 2019. Our EBITDA margin is gaining 40 bps at 82.4%, Our rental revenues are on the rise despite perimeter effects related to disposals in 2024. Our recurring net income grew year on year by a solid plus 3.9% to 117.5 million euros. This is the second highest level of NRE since 2011. At the same time, on a like-for-like basis, the value of our portfolio increased by nearly 4%, in the second half of the year to exceed now 3 billion euros. Our LTV ratio is improving consequently by 260 bps in six months to 39.5%. And finally, our IPRA NTA is up 8.5% since end of June. Slide eight, we ought to highlight that these financial performances are not temporary nor cyclical. They are here to stay. They are the results of our constructed, coherent, and disciplined model. It is based on the eight strategic pillars of our shop-park roadmap. Let me recap them. A geographically refocused portfolio. Two, assets of the right size dominant in their catchment area. Three, selectivity in our assets and in their commercial offer. Four, accessibility in terms of price positioning. Five, industrial and rental diversification to limit rental risk. Six, seven, and eight, cost efficient asset operation, full commitment to environment. As shown here, These are the pillars that will continue to support both the growth in our retailer turnover and hence our net rental income growth. This strategy translates into very concrete terms for our shareholders. On slide 9. Provided that our board proposed one euro dividend per share is approved by our general meeting to be held on April 23rd, for 2025, Mercedes would have delivered double-digit return to its shareholders, a total shareholder return of 18.4% and a 10.2% return on equity. Our solid model offers investors a visible, recurring, and distributable cash flow generation. This value creation is accompanied by our commitment to sector-leading ISR ratings and demanding forward ESG trajectory as illustrated on slide 10. 2025 marks 10 consecutive years of recognition at the highest ISR level for Mercedes. Operationally, we have reduced our greenhouse gas emissions by 57% since 2017 and we are now embarked on a new certified net zero trajectory covering all scopes 1, 2 and 3. We have equipped almost 85% of our centers with charging points. We have brought 86% of our main assets to an excellent or outstanding Bremen News rating. Last year, we have also obtained the leading score among French SBF 120 companies in terms of gender equality at 96%. As I mentioned earlier, we are repositioned. We have a solid model, and we have momentum. All these elements allow us to set our sights on an attractive medium-term trajectory, detailed slide 11. Over the period 2026-2028, we expect a trajectory of growth of our rental revenues between plus 5 and plus 7% on a compound annual basis, of which we consider that between 0 and to 1% could come from indexation, of which we consider that 1.5 to 2% could come from our organic rental growth through more reversion, more variable rent, more casual leasing, and even further less vacancy. The rest of the growth would be contributed by new acquisitions and by our pipeline based on current planning of deliveries. This growth in top line should offset the expected increase of our financial costs. All in all, By 2028, this would support an average net recurrent earnings growth of between plus 2 and plus 4%, with a dividend policy targeting an annual payout around 80% of the NRE per share. In any circumstances, our capital allocation will continue to be extremely disciplined, with a goal of a net debt over EBITDA ratio below eight times and an ICR ratio above 3.5 times, both well above our bank covenants. We have seen how we have laid solid foundations to deliver a strong and steady financial performance. It is because These foundations drive retailer and consumer preferences locally that our assets can outperform. Let's see how we do it in details in the following slides. First of all, it is important to realize that there is a high level of polarization of regional sociodemographic trends across France. Consequently, retail performances have not been equal across all regions. In the past few years, we have followed this polarization to reshape our asset portfolio. As you can see on slide 13, we have focused our portfolio on regional capitals and the French Sun Belt. That is a focus on the areas that capture most of the demographic and economic growth in France. In a country marked by a strong polarization of territories, being positioned in the right geographic areas is a decisive advantage in securing turnover growth. Beyond localization, we have also profoundly changed our marketing and digital approach. Our shop parks have become true omnichannel platforms, capable of generating additional physical traffic from powerful digital levers. Our permanent active asset management is amplified by this industrialized marketing strategy. These are three drivers that we focus our attention on. Firstly, the retail brand's local visibility. We have reached 417 million views of our content in 2025. with a coverage of 100% of the population in our portfolio catchment areas. Second driver, enhancing click and collect and ship from store for our retailers. For five years now, we have been offering local logistics solution to our retailers. We will soon reach 1 million visits for packages, pickups, and drop-offs. which themselves drive 25% incremental on-site purchases. Thirdly, we develop exclusive events, either thematic, climatic or eco-responsible, that contribute directly to increased on-site traffic and conversion. Preference from consumers also comes from supply. Today, 80% of French consumer favorite brands are present in our shop box, as you can see on screen. It is an extremely strong marker of the quality and relevance of our current commercial mix. Our strategy is to further concentrate our portfolio offer on the top of mind brands, while equally integrating e-commerce players when it reinforces the attractiveness of our sites. Slide 16. This attractiveness is accompanied by a strong discipline on diversification of our exposure to avoid any concentration of operational risks. In 2025, we have retenanted 100,000 square meters of our portfolio. That is to say 14% of our total portfolio surface area. At the same time, we are steadily reducing the share of the top 10 tenants in our rent role from 32% five years ago to 25 percent today and then we will reduce it further our objective remains unchanged no individual rental exposure above three percent in the medium term no excessive industrial exposure to any retailer either slide 17 We present another element driving our positive momentum. In a context where purchasing power remains under pressure, our everyday low price proposition is a real economic shock absorber. and a strong footfall and sales driver it allows retailers to preserve their volumes and consumers to maintain their appetite and satisfy their appetite for acquisition of physical goods this positioning is clearly an edge on inflation which translate very concretely into our continuously improving collection rates, reaching 97.8% at the end of 2025. The attractivity of our refocused portfolio is reflected in our business activity on slide 18. In 2025, we have signed nearly 200 leases, a lot of them with new brands on our portfolio. This is an increase of 10% compared to 2025, showing the strength of the demand for assets. These signings mainly concern segments of daily consumption, home equipment, sport, beauty, and accessible products. Primark, Aromasome, Mango, Adidas, Lidl, Leclerc, Grandfrey, Volfoni, Teddy, Maxiso, B&M, Biotech, Ornormal are all leading brands in their segment signed in our portfolio in the last 12 months. With a lot of them, being international leaders. All of these levers I have just described resulted in a very clear operational outperformance of our assets in 2025. Slide 19, we can see that over 12 months, our portfolio footfall increased by plus 3.9%. This is 300 basis points above the national index. Meanwhile, retailer sales also increased by 2.6% over the same period, 280 basis points above the national index. It is worth noting as well that our outperformance in terms of sales versus the French national panel increased by a further 40 bps to 340 basis points for the month of December alone. These indicators confirm the relevance of our commercial offer and positioning. Since the beginning of 2026, the first indications are for a continuation of these positive trends. This dynamic is reflected in our other operating indicators, page 20. Thanks to our strong letting efforts I just described in 2025, our current financial vacancy has dropped to an all-time low of 2% at year-end. At the same time, our retailers' occupancy cost ratio remains among the lowest in the sector at 10.9%, and even lower at 10% if we include the food stores OCR. This combination creates a healthy rental tension, which constitutes a natural lever for positive reversion. In 2025, renewals and relocation were done at a 2.2% reversion rate up 190 basis points from their 2024 level. You will note that we do not include relating of vacant units nor short-term contracts in the calculation of our reversion rate. Our future growth will be sustained via not only the organic drivers that we have just seen, but also by our project pipeline, which will further strengthen our dynamic. As illustrated on slide 21, we have a large portfolio of projects that can be adjusted, activated, or deferred according to the economic context. We will remain very disciplined in our capital allocation with a strict 10% IRR hurdle rate for deployment. Part of the short and medium-term projects have already been activated to drive our growth in the coming few years. And we are currently deploying three categories of projects, strengthening, extension, new creation, which I will illustrate now individually. The first category, page 22, are projects that reinforce existing assets to help them gain local leadership when they do not have it already. Two of these projects are underway in Brest and New York. In Brest, the opening of the first MSUs including Leclerc has already generated an increase of plus 50% in footfall. We also expect positive reversion on leases for the rest of the asset as well as a revaluation to come upon completion in September 2026. This asset is becoming the leading asset in Brest metropolis. In New York, we are following a similar logic. accelerated execution, commercial strengthening, all with very significant expected effect on traffic of at least plus 30%. This reinforcement should also lead to a revaluation of the asset. Secondly, in terms of the projects, beyond these reinforcement projects I just mentioned, we are also deploying extensions to create additional rent-on-sites that are already dominant, as shown on slide 23. Our approach is very simple. We capitalize on assets that are already leaders, and we add additional attractiveness features. Two illustrations here. In Grenoble, we will create a daily gourmet promenade and add MSUs by gaining on common areas. Our project is already 80% pre-let, work will start soon, and we expect plus 20% additional net rent for the asset. In Angers, we have acquired 1.6 hectares of land immediately adjacent to our leading local shop park. We will be filling administrative authorization in 2026 for 15,000 square meter potential retail development. Our target is to increase our total rent on this site by 15% upon completion. These sequenced CAPEX slide developments with quick returns are best illustrated by the transformation example over time of our Toulouse Shop Park on slide 24. This is a textbook commercialist business case, a consistent step-by-step transformation strategy that gradually increases the retail offer, overall quality, and attendance of the site. Around 10 years ago, we owned a convenience center with an hypermarket and 24 shops with 2 million footfall. It was already not bad at the time for this type of neighborhood asset. In 10 years, we have grown this asset retail offer to 130 shops and restaurants, with more than 6.6 million visitors in 2025. and footfall continued to grow by another 3% in January. Our additional ongoing new project initiatives have a clear ambition for this asset to exceed 7.5 million visits within three years and become the number one asset in terms of footfall in the Toulouse metropolis area. Finally, Our third category of projects on page 25 consists of new creation on selected geographies and secured land plots. In Saint-André, in the Orinian Islands, we are developing a mixed-use business park on a land reserve we already own. In an area with low commercial density and favorable consumption dynamics, Our project is fully authorized, already pre-let on more than 80% of its total retail GLA of 11,000 square meters. There is little complexity in the development scheme, and our approach is capex frugal with an expected yield on cost above 8.5%. In Fernet-Voltaire, on a plot of land bordering Geneva, we are targeting a 17,000 square meter mixed-use development in partnership. The yield on cost is expected above 8%. Given the attractiveness and wealthiness of this cross-border area, we have already received retailers' marks of interest for over 80% of the total GLA. Together with our developments, our acquisitions are part of a very disciplined investment logic, improving quality, strengthening leadership, and creating value quickly. Slide 26, we see that we invested 176 million in 2025 for an average return of around 9%, with value creation already visible. NAV is up by more than 20% in the scope concerned. We intend to pursue our investment campaign in 2026, which could reach up to 100 million euros depending on our level of disposals. we already have specific acquisition targets in sight. We are giving here, on page 26, the example of a retail park adjacent to our Toulouse asset that we are targeting in order to consolidate the local market share of this short park as explained earlier. Our post-acquisition model is also industrialized. We act on four levels, improving merchandising, vacancy, expenses, and ancillary revenues. As you can see on slide 27 with the case of Saint-Genis Shop Park acquired last year. We have already signed one new lease with Maxizoo and we have active leads with new retailers like Mango, Decathlon, or Aromazone. Our goals in 2026 are to one, reduce vacancy by 50%, two, increase rent by 5%, three, reduce charges by at least 10%, and four, develop specialty leasing income by plus 10%. Overall, in the medium term, our ambition is to create additional appraisal value of plus 30% to plus 40% of the acquisition price. Beyond our organic growth and project pipelines, we now fully hone another growth engine, the Imocom Partners Asset Management Platform. As at the beginning of 2026, the platform has 33 retail parks under management, approximately 400,000 square meters of GLA for $40 million in annual net rental income. Imocom Partners provides us with a platform of expertise and asset-like growth with recurring revenues that could be comforted by operational synergies. In the medium term, there is a strong potential of value creation with the launch of new funds and the ramp-up of asset under management, which would contribute positively to our EBITDA growth. Slide 30, I will now move on to financial results and funding metrics. Let's start with rental revenues. Our rental revenues reached 180.6 million euros at end 2025. On a pro forma basis, taking into account the temporary IFRS accounting impacts related to already related spaces of breast and urine detailed on the bottom right of this slide, our rental revenues grew by plus 1.7% compared to 2024. This growth includes the total negative scope effects of 2024, offset by 2025 acquisitions. This highlights our organic performance. Indeed, on a like-for-like basis, our gross rental revenues increased by plus 2.8%. It is important to note that we are talking here about gross rental revenues from indexation and leasing activity only. Our figure of plus 2.8% does not include doubtful debtors' effect nor JV marketing or other type of fees. Beyond the growth of the top line, we have embarked on a structured approach to optimize our cost base. Slide 31. In 2025, we launched the first operational deployments of artificial intelligence in our back office with three very concrete objectives. Automating recurring functions with low added value, optimizing commercial and rental management processes, and using our data to accelerate decision-making and pro-rata temporary effects. Over time, we expect associated productivity gains could contribute to plus 0.25 to plus 0.05 points of additional EBITDA margin. If we move on to the analysis of the evolution of our net recurrent earnings on slide 32, We see here that our EBITDA increased by 1.7 million euros. This brings the EBITDA margin to 82.4%. Our financial expenses grew by 6 million euros in the meantime. This change is mainly due to the increase in debt marginal cost and to our refinancing operations. The change of our other operating items Amounting to, as I mentioned earlier, to plus 5.1 million is mainly due to indemnities received for early lease termination. IFRS standards imposed accounting treatment outside rental income. It is worth noting that more than 90% of the GLA concerned by these indemnities I've just mentioned has already been re-let. The new RANs will take effect in 2026 and 2027 after store setup period, hence our pro forma presentation two slides ago. Change in equity associates and non-controlling trusts have been mostly impacted by the change in the consolidation method of the Imocom Partners fund management company. and the impacts of change of other minority interests due to acquisitions and disposals. On the basis of these elements, our net recurring earnings stood at 117.5 million euros for 2025. Its increase is plus 3.9% over 12 months. This represents 1.26 euros per share, also up plus 3.9%. This performance is at the top end of the range of the guidance we revised last year. Slide 33. Our operating performance, rent growth and net acquisitions are also reflected in the positive evolution of the valuation of our portfolio. In 2025, The value of our portfolio exceeded the 3 billion marks, up 10.1% over 12 months. This increase was driven by a positive rent effect for plus 2% and a scope effect for plus 8%. Meanwhile, capitalization rates stayed stable. Our appraisal yield remained flat at 6.65%, maintaining a premium of more than 300 basis points over the risk-free rate. This leaves potential for further revaluation given the current operational strength of our asset base and the associated level of our key performance indicators. Slide 34, this portfolio revaluation is reflected in our NAV. IPRA net tangible assets came to 16.96 euros per share, up plus 8.5% over six months and plus 4.1% over 12 months. The positive change over 12 months takes into account the following impacts. The payment of one euro of dividends, the net recurrent earnings growth for plus 1.26 euros, The positive change in unrealized capital gains for 1.41 euro, including a negative effect linked to the change in valuation rates and positive effect linked to rents. And fourth, other items in relation to the accounting for minus 99 cents, mainly in relation to amortization and depreciation. I remind you that our accounting is on the historical cost method. Regarding our IPRA NDV, it is up plus 9.5% over six months and plus 5.1% over a year to reach 17.29 euros per share. Slide 35, we highlight that our current performance and our future growth remain supported by a robust financial structure. At the end of 2025, our banking covenant LTV excluding duties to that 40.4%. Note that the LTV on screen is not taking into account the financial lease associated with our Lyon acquisition. Including this financial lease, our LTV stood at 39.5% including rights at end of December. It is down 260 basis points over six months. These levels are all much lower than the 55% banking covenant that applies to all our confirmed bank lines. Our ICR ratios stood at 4.9 times as of December 31st, well above the minimum level set by our covenants. Both our ICR ratio and net debt over EBITDA ratio were partially impacted at the end of December by the pro-rata temporis effect of the acquisition of Saint-Genis in Lyon, which occurred in June. We had more debt, but halved the EBITDA contribution. Note also that on October 17, Standard & Poor's reiterated Mercialis BBB stable outlook rating. Slide 36. As you know, in June 2025, Mercialis issued a 300 million bond oversubscribed five times with a maturity of seven years. This emission illustrated investors' confidence in the credit quality of the company. It is intended to allow the redemption of the 300 million bonds maturing this month and carrying a coupon of 1.8%. At the end of December 2025, the average maturity of our drone debt was 3.5 years. We also maintain a high level of coverage of our fixed rate debt at 89%. Additionally, Mercialis also has 390 million euros of undrawn financial resources, all of our angel bank resources include esg criteria i hope that with these results and through this presentation we have shown that mercialis combines portfolio strength high recurrent profitability balance sheet discipline and a high growth potential Building on these strengths, we expect a solid 2026 performance. We are targeting an earnings per share of at least €1.29 with a dividend of at least €1 per share. Our underlying growth of earnings shall be supported by continued strong retail operating performance with continued football and retail sales growth it will be supported by the positive impacts of our dynamic leasing by the ramp up of some of our projects and by positive impacts of 2025 and new 2026 acquisition and as well a continued focus with a continued focus on cost discipline Our guidance also incorporates and reflects the increased and mentioned of our cost of debt and the effect of disposals associated with our permanent ISAT rotation policy. Well, that is all for me for today. Thank you for listening and we can now follow up with the Q&A session.

If you wish to ask a question, you may do so in one of the two ways. Through your computer, by clicking on the green hand button on the audio player to enter the queue. Once your line is activated, you will see a message to unmute your microphone. Please make sure to do so. You can also ask your question by joining the conference call and dialing hashtag 5 on your telephone keypad. If you wish to withdraw your question, please dial hashtag 6. The next question comes from Florent Laroche-Hubert from Otto BHF. Please go ahead.