Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Klepierre (KLPEF, Financial) reported a 6% like-for-like increase in net rental income for the first half of 2024, outperforming its retail peers in Europe.
- The company achieved a 5.4% growth in EBITDA, with an improvement in EBITDA margin by 60 basis points.
- Footfall increased by 2% in H1 and 11.5% since June 2022, indicating strong visitor engagement.
- Klepierre (KLPEF) successfully executed 900 leases, generating a 3% positive rental uplift on renewals and re-leasing.
- The company has a sector-leading balance sheet, with a net debt to EBITDA ratio at a historic low of 7.3 times and a loan-to-value ratio decreased to 37.6%.
Negative Points
- Despite the positive performance, the investment market remains very quiet, limiting opportunities for asset disposals.
- Occupancy rates, while improved, are still suboptimal in certain markets like France and Spain due to past bankruptcies.
- The company faces challenges in further improving collection rates, which are currently slightly below pre-pandemic levels.
- Klepierre (KLPEF) has no specific acquisition targets for the remainder of the year, indicating potential limitations in growth opportunities.
- The valuation of assets remains conservative, with appraisers lagging behind in reflecting the company's leasing performance and market conditions.
Q & A Highlights
Q: Can you give us any color on asset disposals this year? And are you planning to do more?
A: We have disposed of assets worth over EUR100 million at favorable conditions, 14% above book value with an average 5.5% net initial yield. While the investment market remains quiet, we continue to curate our portfolio without a specific disposal target.
Q: Can you describe your investment pipeline going forward and is there any geography more interesting?
A: We focus on our core markets: France, Italy, Iberia, and Scandinavia. We only consider opportunities in these geographies where our platform is strong and can support retailer growth.
Q: What would be your incremental firepower to make additional acquisitions?
A: We maintain a high investment grade rating and have an investment capacity of EUR700 million between 2024 and 2025, as per S&P's latest notes.
Q: Where do you see lending yields, rental uplift, and occupancy in 2024?
A: We expect to see continued improvement in occupancy, particularly in France and Spain, where we are still slightly below pre-COVID levels due to recent bankruptcies.
Q: Can you remind us of the level of disposals and acquisitions accounted for in the guidance today?
A: Our guidance includes a small amount of disposals but no acquisitions. We are in line with our budget and may do slightly more disposals, but it will not be extremely material.
Q: Is there further room to improve EBITDA margin in the next 18 months?
A: Yes, we expect to maintain tight cost control and stable costs, which should allow for continued improvement in EBITDA margin.
Q: How does the collection rate compare to pre-pandemic levels and where could it go?
A: Pre-pandemic, our collection rate was between 98.6% and 98.9%. We aim to reach around 98%, with some markets already at 99.5%.
Q: What is your outlook on capital values given the current market conditions?
A: We expect a positive market effect as long-term rates normalize. Our valuations have already seen a 2.5% increase in cash flow, offsetting a slight negative market effect.
Q: How do vendors view the higher yielding assets you acquired compared to your portfolio valuation?
A: Valuations are based on transactions between willing buyers and sellers. Our recent acquisitions were done at attractive conditions, but they do not impact our overall portfolio valuation.
Q: Have you considered acquiring listed companies trading at a discount to NAV?
A: We have the capacity for external growth but will only pursue opportunities that add value to our portfolio and are accretive to shareholders. We remain selective and have no specific M&A targets at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
