Mercialys Sa · EURONEXT:MERY
Mercialys Sa — FY2005 Earnings Presentation
57 slides from Mercialys Sa's earnings presentation, Mar 2, 2006
Slide 1: 2005 Analysts Meeting
2005 Analysts Meeting March 2, 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 1 2005 pro forma Results
Slide 3: Agenda
Agenda Pages Introduction 3 2005 Pro forma Results 10 Mercialys Activity 19 Investment Strategy 38 Outlook and Objectives 46 2 2005 pro forma Results
Slide 4: Introduction
Introduction 3 2005 pro forma Results
Slide 5: After 4 ½ months of existence of Mercialys, what are the results?
After 4 ½ months of existence of Mercialys, what are the results ? Mercialys since the IPO 9 The market appreciated the innovative Mercialys IPO 9 Confidence is justified by the delivery of the promises made for 2005 9 Major positive moves in 2006, after only 2 months of the year, should maintain th
Slide 6: The concept and creation of Mercialys provide a strong vision for the Company
The concept and creation of Mercialys provide a strong vision for the Company A growth and yield real estate company 9 A simple and efficient business model Share of retail real estate in total 2005 assets > A pure play in the strong and dynamic shopping centre segment 100% 87% > A solid portfolio o
Slide 7: The IPO was a real success
The IPO was a real success The market was ready Others France 9 15 x oversubscribed 15% 45% Germany 9 Subscription of 4 out of 5 investors met during 3% Switzerland 5% the roadshows in the Netherlands, Switzerland, The Netherlands 3% 29% UK and France UK 9 IPO priced at the highest level (€18.13) >
Slide 8: Our commitments for 2005 have been met
Our commitments for 2005 have been met Key 2005 figures and events 9 2005 pro forma results in line with announced objectives > Growth in rents of 7.3% Versus an objective > Growth in cash-flow of 7.6% of + 6% to + 7% 9 Net income: + 8.7% at €51.0m, and a pro forma EPS of €0.70* 9 NAV (including sta
Slide 9: The Company, its board, its governance and its management are all well in place
The Company, its board, its governance and its management are all well in place at end 2005 The governance structure is already active 9 The audit committee has sat twice to approve the accounts to 30/10/05, to 31/12/05 and pro forma 2005 9 The remunerations committee has already activated a program
Slide 10: The positive moves are already significant for 2006
The positive moves are already significant for 2006 A promising year 9 An ambitious investment programme up and running > 68% of the €100m of investment programmed for 2006 is already committed and confirmed of which the Clermont-Ferrand and Poitiers shopping centres for €43m 9 Feu Vert rental renew
Slide 11: 2005 pro forma results
2005 pro forma results 10 2005 pro forma Results
Slide 12: The objectives have been achieved
The objectives have been achieved Breakdown of rental revenues* Cashflow* Rents : + 7.3%, Cashflow: + 7.6%, vs objective of + 6 to +7% vs objective of + 6 to + 7% 63.9 72.6 59.4 68.4 0.8 12.9 1.5 12.4 71.8 51.0 66.9 46.9 2004 2005 2004 2005 Rents Lease rights Net income Amortisation * €m 11 2005 pro
Slide 13: 2005 was a year of organic growth
2005 was a year of organic growth Favourable Construction cost index in 2005 Origin of the growth in invoiced rents 1.4 71.8 3.4 €m 66.9 0.1 1.6 Enhancing the 1.8 Index- value of existing Development and based rent 2.6 restructuring increases properties Enhancing the 60.9 Index- value of existing ba
Slide 14: Net income rose + 8.7%
Net income rose + 8.7% Simplified P&L M€ (pro forma –IFRS) 2004 2005 Change Invoiced rents 66.9 71.8 +7.3% Rental income 68.4 72.6 +6.2% Net rental income 63.5 67.9 +7.0% Operating costs 16.5 17.3 +5.0% Operating income 47.0 50.6 +7.7% Financial income -0.1 0.7 Tax 0.0 -0.3 Net income 46.9 51.0 +8.7
Slide 15: 2005 dividend proposed at €0.59 / share
2005 dividend proposed at €0.59 / share* Distribution of 85% of 2005 pro forma income 9 Proposal to pay a dividend of €0.59 per share at the Annual Shareholders Meeting on April 27, 2006 9 Amount corresponds to 85% of the 2005 pro forma operating income, in line with the commitment made at the IPO 9
Slide 16: The capital increase has strengthened the Mercialys balance sheet
The capital increase has strengthened the Mercialys balance sheet Simplified balance sheet Assets IFRS €m 31.12.2004 31.12.2005 Investment properties 895.2 893.3 Financial assets 9.9 9.7 Total non-current assets 905.1 903.0 Cash 10.1 237.9 Clients and other creditors 0 11.4 TOTAL ASSETS 915.2 1 152.
Slide 17: Our portfolio is exclusively commercial property
Our portfolio is exclusively commercial property Summary of assets 9 A large portfolio: > 148 sites, of which 87 shopping centres > Gross leasable area: 549 000 m2 > Valuation (including stamp duty) of €1 026m at December 31, 2005, up + 7.2% relative to 30/06/05 9 Of commercial property: > Concentra
Slide 18: Total assets valued at €1,026m, including stamp duty
Total assets valued at €1 026 m, including stamp duty Implicit capitalisation of rents of 7% Type of Number of Valuation at GLA at 2005 invoiced property properties at 31/12/05 31/12/05 rents 31/12/05 m€ (%) (m²) (%) m€ (%) Large shopping centres 27 634 62 264 000 48 42.3 59 Neighbourhood 60 292 28
Slide 19: Mercialys NAV rose to €1,245m
Mercialys NAV rose to €1 245 m NAV per share up +9.3% relative to 30/06/05 €m At 31/12/05 Consolidated equity (IFRS) 1 121.0 Unrealised capital gain on assets 124.0 NAV including stamp duty 1 245.0 €17.07 / share*, + 9.3% Unrealised capital gain on assets - 61.6 NAV excluding stamp duty 1 183.4 * Ba
Slide 20: Mercialys Activity
19 Mercialys Activity J mercialys
Slide 21: Management indicators reflect the efficiency of the asset management
Management indicators reflect the efficiency of the asset management A dynamic portfolio with potential 9 Dynamic > Increase in turnover achieved by retailers » in the Mercialys large shopping centres on constant basis + 2.6% vs an average for large French shopping centres of + 1.5% (source: CNCC*)
Slide 22: The lease structure has improved
The lease structure has improved Increase in variable rent confirms the good health of the retail clients Rent structure at 31/12/05 Variable rent €4.0m Guaranteed minimum rent €40.8m Indexed rent €26.8m 6% +1pt 37% 57% - 1 pt = 869 leases with variable clause 1 082 leases without variable clause 21
Slide 23: Mercialys has renewed or recommercialised 87 leases in 2005
Mercialys has renewed or recommercialised 87 leases in 2005 Increase in new leases + 27% 9 Increase in the total rental roll in 2005 of €1.4m 9 Amongst the 87 leases > 56 have gone from 9 to 10 years » Unlimited » Variable rents > A majority of national retail brands 22 2005 pro forma Results
Slide 24: Feu Vert represents 5% of rental revenue
Feu Vert represents 5% of rental revenue An important portfolio coming up for renewal on December 31, 2005 9 Situation : > A leading brand in car maintenance, established on the Mercialys shopping centre car-parks > 27 Feu Vert with 9-year leases up for renewal, representing €2.464m of 2005 rent > R
Slide 25: Casino self-service restaurants represent 15% of rental revenue
Casino self-service restaurants represent 15% of rental revenue An important portfolio terminating December 31, 2006 9 Situation: > 84 Casino self-service restaurants with 9-year leases for renewal, representing €8.4 m of 2005 rent > Rent with two components: » A minimum rent guaranteed, €127 / m² »
Slide 26: Innovation is a winning strategy
Innovation is a winning strategy 9 Merchandising plan > Increasing the presence of personal equipment and services stores on our sites > Actions essentially oriented to national banners 9 Enhancing the value of the neighbourhood shopping centres 9 Interior atmosphere > Revival of the Valence 2 centr
Slide 27: Enhancement of neighbourhood shopping centres
Enhancement of neighbourhood shopping centres Albi Gassin Rodez Annemasse Brive 26 2005 pro forma Results
Slide 28: Valence 2
Valence 2 Before After 9 Repositionning of the site > Relets / renewals > Improvement of the facades and the entrances > Creation of an interior atmosphere 27 2005 pro forma Results
Slide 29: Dijon Chenôve
Dijon Chenôve Before After 9 Dressing of the facades of the centre: > Deployment of the new visuel identity > Increase in the impact of the facades and entrances > Improvement of the visibility from the main roads junctions 28 2005 pro forma Results
Slide 30: Dijon Chenôve
Dijon Chenôve 9 Improving the visual identity 9 Stronger event and communication programme September October November December New school year Harry Potter Fashion shows Safari Zoo Christmas 29 2005 pro forma Results
Slide 31: Clermont Ferrand – Le Brézet
Clermont Ferrand – Le Brézet From shopping centre to mall 9 Extension of the site to 30 000 m²: > From 27 to 47 stores > + 2 restaurants > + 2 large speciality stores 9 Notification of option by Mercialys in December 2005 9 70% of the spaces are already let 9 Average rent more than 450€ / m², above
Slide 32: Clermont Ferrand – Le Brézet
Clermont Ferrand – Le Brézet Concept de l’extension Integration The history, the culture, a sense of pride … Puy de Dôme, Vulcania, Fire Spas, springs, Water All the elements in harmony, perfectly balanced 31 2005 pro forma Results
Slide 33: Clermont Ferrand – Le Brézet
Clermont Ferrand – Le Brézet 32 2005 pro forma Results
Slide 34: Poitiers – BeauLieu…belle promenade
Poitiers – BeauLieu…belle promenade From shopping centre to mall 9 Extension of the shopping centre of 6 000 m²: > from 44 to 65 stores > + 2 speciality stores 9 Notification of option by Mercialys in December 2005 9 65% of the spaces are already reserved 9 Average rent more than 400€ / m², above ob
Slide 35: Poitiers – BeauLieu…belle promenade
Poitiers – BeauLieu…belle promenade An open invitation to wander The central island, glass awning, a city atmosphere Stolling about: through the salle des Pas Perdus, along the boulevards Glass, metal, cobblestones 34 2005 pro forma Results
Slide 36: Poitiers – BeauLieu…belle promenade
Poitiers – BeauLieu…belle promenade 35 2005 pro forma Results
Slide 37: Poitiers – BeauLieu…belle promenade
Poitiers – BeauLieu…belle promenade 36 2005 pro forma Results
Slide 38: The IPO has improved visibility of Mercialys and helped attract major retail banners
The IPO has improved visibility of Mercialys and helped to attract major retail banners New partnerships expected 9 Positive effects of the IPO on banners with renewed interest of certain partners and contacts with new ones 9 Negotiations to develop the Inditex / Mercialys partnership on a large num
Slide 39: An ambitious development strategy
An ambitious development strategy 38 2005 pro forma Results
Slide 40: The current portfolio conceals strong potential
The current portfolio conceals strong potential Strong reversionary potential 9 Significant stock of leases currently being renewed (400 leases / €11.6m rent): negotiations underway, legal proceedings underway, national banner negotiations, tactical stalling… Expiring leases 14 12 10 8 6 4 2 0 Stock
Slide 41: Renovation and restructuring will optimise the current portfolio
Renovation and restructuring will optimise the current portfolio Enhance attraction of assets over the next 5 years 9 Value creation renovation and restructuring operations 9 Capex to maintain high quality of sites 9 €100m of investment over the 5 years, of which €38m in 2006 and 2007 9 10 projects
Slide 42: Exclusive access to Casino development pipe-line provides a growth accelerator
Exclusive access to Casino development pipe-line provides a growth accelerator Pipe-line increased + 30% 9 Casino’s 5-year pipe-line of development projects has increased from €200m to €260m in the last six months (+ 30%): > Years 2006-2007: 12 operations for €76m » Clermont-Ferrand / Poitiers: €43m
Slide 43: Mercialys intends to be a significant player in commercial real estate acquisitions market
Mercialys intends to be a significant player in commercial real estate acquisitions market New assets or minority assets within existing shopping centres 9 An acquisition budget of an average €45m pa 9 An exceptional network through the Casino group providing access to sellers at the outset of a dis
Slide 44: The investment plan is already well underway
The investment plan is already well underway A plan of more than €500m over 5 years 9 The investment objective to 2010 represents more than 50% of the current portfolio* 9 68% of 2006 €100 m investment programme is already committed on March 2nd of which To end To end already €m 2007 2010 committed
Slide 45: Investment criteria are well-defined
Investment criteria are well-defined Qualitative 9 100% retail (shopping centres with or without a hypermarket, retails parks, speciality stores and eventually town centres with a banner-partner) 9 Privileging acquisitions with reversionary or extension potential Quantitative 9 A model based on the
Slide 46: Required capital
The model provides rational reasoning Acceptable limits curve Theoretical 70% 15.1% 60% % required: EBITDA / Investment 50% 12.4% Required capital 40% 9.7% 30% 8.8% 7.9% 7.4% 20% 6.8% 6.1% 6.5% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Risk points 45 2005 pro forma Results
Slide 47: Outlook and objectives
46 Outlook and objectives P eS * mercialys
Slide 48: The outlook for retail real estate and Mercialys in 2006 is attractive
The outlook for retail real estate and Mercialys in 2006 is attractive 9 A healthy market > Sustained by the development of national and international banners in mid-sized shopping centres across France > Stimulated by the wave of primary or secondary LBOs on the retail brands leading to vigorous bu
Slide 49: Appendices
48 Appendices J mercialys
Slide 50: Mercialys asset portfolio
Mercialys asset portfolio 49
Slide 51: Established in the fastest-growing demographic regions
Established in the fastest-growing demographic regions Portfolio by region Asset locations Expected population flows National average: 4.9% 5,8% 5,8% Brest 3 St Brieuc Chartres Paris Quimper 5,1% Rennes 5,1% Lanester 7,0% 7,0% Angers Besançon 6,3% 6,3% St Nazaire Tours Dijon Cholet Forecast Poitiers
Slide 52: A presence in all formats
A presence in all formats Breakdown of rental revenue 27 sites 3% 4% 4% 60 sites 59% Large shopping centres > 20,000 sq.m. GLA Neighbourhood shopping centres > 5,000 sq.m. GLA 31% Independent self-service restaurants Other (service outlets, convenience stores) Food hypermarkets and large specialty s
Slide 53: A diversified tenant base
A diversified tenant base The 30 biggest tenants (excluding Groupe Casino) account for less than 27% of total rent roll 0.4% 0.5% 0.7% 1.0% 1.5% 5.0% 52 2005 pro forma Results
Slide 54: Balanced portfolio in terms of types of stores
Balanced portfolio in terms of types of stores Mercialys revenue by business segment Breakdown of rents by business segment Change in revenue by business segment Personal wear 1.2% 23% - 0.6% Food and 0.6% 22% restaurants 0.6% Homeware 2.6% 18% 0.1% Beauty, health, 5.2% 14% hygiene 3.2% Culture, gif
Slide 55: A liquidity contract to consolidate market volumes and avoid excess
A liquidity contract to consolidate market volumes and avoid excess Terms 9 Agent: Oddo Corporate Finance 9 Current budget: 800 000 euros 9 Effective since February 27, 2006 9 Objectives of the purchase programme: ensure liquidity and market activity 54 2005 pro forma Results
Slide 56: Shareholder and management interests have been aligned
Shareholder and management interests have been aligned 9 Aligning management interests with those of shareholders: > Stock option programme: » Beneficiaries: 7 people » Number of options: 38 550 » Life of programme: 5.5 years to 31/05/11 » Blocked period: to 30/11/08 » Exercise price: 20.21 euros (a
Slide 57: Mercialys shareholder base
Mercialys shareholder base Groupe Casino shareholding at 75.3% Share-ownership at 02/03/06 Public 17.4% Groupe Casino 75.3% AXA 7.3% 56 2005 pro forma Results