Vincent Ravat, Mercialys’ Chief Executive Officer: “In the first quarter of 2022, Mercialys continued to reduce its vacancy rate in line with standard levels. The stabilization of rental reversion, against a general backdrop of rising inflation, also illustrates the soundness of its model. Excluding base effects relating to the health crisis during the first quarter of 2021, Mercialys recorded organic rental income growth of +2.4% for the first three months of 2022. Thanks to this performance, Mercialys is able to confirm its full-year targets for 2022, with FFO per share growth of at least +2% and a dividend ranging from 85% to 95% of 2022 FFO”.
I. Organic rental revenue growth of +4.8%, with +2.4% excluding base effects linked to the health crisis
The operational results recorded by Mercialys at end-March 2022 appear to have largely normalized. Mercialys maintained its robust letting activity, enabling it to achieve sustained organic growth.
First-quarter organic growth came to +4.8%, including +1.9% for indexation, as well as a deferred impact of +2.4% for the relief measures relating to the first lockdown in 2020, granted and recorded in the accounts in 2021.
Invoiced rents climbed to Euro 43.4 million, up +3.5% compared with end-March 2021, after factoring in scope effects.
The change in invoiced rents reflects the following factors:
Lease rights and despecialization indemnities received over the period totaled Euro 0.2 million, compared with Euro 0.6 million at end-March 2021, after factoring in the deferrals applicable under IFRS. This reduction is linked primarily to the end of the staggered recognition of lease rights relating to the extension of Le Port on Reunion Island, carried out in 2018.
Rental revenues therefore came to Euro 43.6 million at March 31, 2022, up +2.4% from March 31, 2021.
II. Operational indicators resilient in an uncertain context
During the first quarter of 2022, business continued to be marked by various elements linked to the general health environment, the inflationary macroeconomic context and the outbreak of the crisis in Ukraine.
However, capitalizing on the strong positions of its retail sites, Mercialys has rolled out a robust letting policy, making it possible to further reduce the vacancy rate. At end-March 2022, the current financial vacancy rate was 2.9%, significantly lower than at end-December 2021 (3.2%). The total vacancy rate (including “strategic” vacancies following decisions to facilitate the deployment of extension or redevelopment plans) was 4.5% at end-March 2022, which is also significantly lower than at end-2021 (4.9%).
The robust letting performance is illustrated by the 61 leases signed for renewals or relettings during the first quarter of 2022 for around 12,000 sq.m. The reversion rate associated with these negotiations was +0.1%.
The stabilization of reversion appears to be satisfactory in a context marked by geopolitical risks, with their impacts on household consumption still uncertain, as well as rising inflation, reflected in the increase in the new rents negotiated.
Alongside this, Mercialys has continued moving forward with its efforts concerning its collection rate.This came to 93.0% at April 15, 2022 for 2021, highlighting the significant progress made compared with the 88.8% recorded at December 31, 2021. The collection rate for the first quarter of 2022 was 92.9% at April 15, 2022.
The support package put in place for rent and charges 1, with a view to preventing the spread of the Covid-19 epidemic, was subject to payments by the French State during the first quarter of 2022. However, a significant number of tenant applications are still being processed. The continued rollout of these government support measures is expected to help improve the collection rate for 2021 over the coming months.
Rising inflation is putting the issue of purchasing power back at the heart of households’ concerns. The positioning of Mercialys’ sites is aligned with these stakes; on the one hand, through a food offering that is affordable thanks to the hypermarkets anchoring its centers, which represent an attractive format in terms of pricing, and, on the other hand, through its range of affordable retailers across all consumption segments.
III. Dividend of Euro 0.92 per share proposed at the General Meeting on April 28, 2022
As announced on February 14, 2022, Mercialys’ Board of Directors will submit a proposal at the General Meeting on April 28, 2022 for a dividend of Euro 0.92 per share, compared with a limited dividend of Euro 0.43 per share for 2020. The payout corresponds to 85% of 2021 FFO and offers a yield of 5.2% on the NDV of Euro 17.60 per share at end-2021 and 10.7% on the year’s closing price.
This proposed dividend is based on the distribution requirement with the SIIC tax status concerning exempt profits from:
– property rental or sub-letting operations (including dividends paid by the subsidiaries subject to the SIIC system), i.e. Euro 0.39 per share;
– the distribution based on 70% of exempt profits for 2021 from the disposal of properties and investments in real estate companies, i.e. Euro 0.01 per share;
– the distribution based on 70% of exempt profits for 2020 from the disposal of properties and investments in real estate companies, i.e. Euro 0.38 per share;
– the distribution of exempt income recorded on the Company’s balance sheet for Euro 0.14 per share.
The ex-dividend date is May 3, 2022, with the dividend to be paid on May 5, 2022.
IV. Changes in the shareholding structure
Following on from the gradual scaling back of its interest in Mercialys’ capital that began in 2018, the Casino group announced, on April 4, 2022, that it had sold 10.3% of Mercialys’ capital through a total return swap. Following this operation, the Casino group no longer holds any Mercialys shares or voting rights.
This withdrawal by the Casino group has helped further strengthen the float within Mercialys’ shareholding structure, benefiting the share’s liquidity. The Generali group is the Company’s largest shareholder, with 7.85% of its capital. During its meeting on April 28, the Board of Directors will review the changes in the shareholder base and the corresponding governance structure. Information will be released to the market, if applicable.