Hello, and welcome to Klépierre's first half 2024 earnings presentation, hosted by Jean-Marc Jestin, CEO, and Stéphane Tortajada, CFO. My name is George. I'll be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, your line is being listened to only. However, you'll have the opportunity to ask questions at the end of the presentation, and this can be done by pressing star one on your telephone keypad to answer your question. You can also submit questions through webcast. If you require assistance at any point, please press star zero, and you will be connected to an operator. I'd like to turn the call over to your host today, Mr. Jean-Marc Jestin, to begin today's conference. Please go ahead, sir. So good morning, everyone. I'm very happy to welcome you today from Milan, together with Stéphane, to present Klépierre's 2024 first half earnings. We are delivering another strong set of results, which evidence the continued growth and expansion for the company and its retail partners over recent years. First, let me highlight that, contrary to common belief, we are evolving in a supportive macroeconomic environment. Private consumption, a good proxy of shoppers' behavior, is increasing in Europe. Unemployment rate is historically low, and the labor market is very dynamic, as evidenced by current robust wage growth. All those KPIs show that our business underpinnings are healthy. To tackle retail transformation, Klépierre has developed a unique positioning with 70 irreplaceable premium malls throughout continental Europe. They attract more than 700 million visitors annually and generate more than EUR 12 billion retailer sales every year. We constantly adapt our retail mix and invest in our assets to match customer demand and offer leading national and international banners to profitable stores that seek in their highly selective expansion plans. In that context, Klépierre is geared toward growth. First, our unrivaled platform of prime malls, the positive macro backdrop I just mentioned, and our unique know-how in terms of asset and leasing management lead us to deliver solid organic growth year after year. Secondly, backed by our sector-leading balance sheet, we are able to size highly attractive acquisition opportunities while still enlarging our dominant assets to generate external growth. This is our DNA and our plan for the future. This being said, let's review our first half results in a bit more detail. Our venues have continued to gain market shares and attract more and more visitors, with footfall up 2% in H1 and even 11.5% since June 2022. Similarly, retailer sales strongly increased by 3.9% in H1, more than doubling national indices. This directly translated into lower OCR than 20 basis points at 12.6%, creating further rental uplift potential medium term. Our highly attractive destination malls crystallized high leasing tension over the period, supporting all our operating KPIs. We signed close to 900 leases, 11% more than in H1 2023, and generated 3% positive rental uplift on renewals and releasing. Meanwhile, we continue to curate our tenant mix to offer outperformance and profitability to banners and meet consumers' expectations. We welcome and upsize stores of leading omnichannel retailers like Zara, Calzedonia, Mango, and many others, and push up dynamic segments, including health and beauty or sports, with deals with Normal, Rituals, JD Sports, and Adidas, among others. More concretely, we support leading retailers' expansion through leasing and asset management initiatives to enable them opening their flagship in the right places, at the right format, and in due times. As such, at La Gavia, we welcome Lefties, the last born of the Inditex galaxy, an enlarged New Yorker after the right sizing of the electronic store. At Campania, we enlarge a Zara store to 6,000 square meters, ranking among the best-performing worldwide in terms of sales. At Nave de Vero, we open a brand-new Primark megastore. Finally, at Arcades and Val d'Europe, we brought the sports and leisure offer to the upper level with the openings and enlargement of JD Sports, Adidas or Foot Locker, and the remarkable unveiling of La Tête dans les Nuages, and more importantly, Otium Leisure in Val d'Europe over more than 13,000 sq m. Today, we are the preferred platform for expanding omnichannel retailers. All leading brands are significantly increasing their footprint in our malls. They are investing in Klépierre's destinations for a simple reason. They have access to 700 million visits at affordable cost with a high sales conversion rate, ensuring them profitability. Consequently, growing retailers continue to ask for more and larger stores. Let's take a few examples. JD and New Yorker have respectively increased by 55% and 73% the total area they occupy in our malls since 2019. Same goes for Rituals, 160% up, Normal 231% up, Primark 99% up, while Inditex increased its footprint by 12%. Now, let's review our top-line performance into more details. In a year of lower indexation, Klépierre has once again delivered a remarkable 320 basis points net rental income outperformance on top of indexation, resulting in a 6% like-for-like increase over the first half of 2024, and probably the most solid performance among its retail peers in Europe. This best-in-class achievement is a testimony to our ability to unlock embedded value through multiple performance drivers. Number one, the high leasing tension translated into an optimized occupancy at 96.2%, up 50 basis points over one year, while collection rate increased by 120 basis points at 97.7%. We also benefited from the full effect of 2023 positive rental uplift. Number two, our 700 million annual footfall enabled us to generate sizable additional revenues that rose by 8% on a like-for-like basis, driven by mall income, media revenues, turnover rents, and car park revenues. Additionally, we run a very cost-efficient platform, which enabled us to deliver a 5.4% growth in EBITDA, which means a further improvement in EBITDA margin by 60 basis points. This increase is definitely an outperformance when we compare it to our 4% EBITDA growth announced in our initial plan in February. Our second and joyful expansion is our capital allocation policy, fueled by our sector-leading balance sheet and growing cash flow generation. It enabled us to invest in external growth opportunities and create shareholders' value. We have a very strong track record. Our latest acquisition of Plenilunio, Oslo City, and Nueva Condomina have delivered respectively a 37%, 34%, and 73% increase in valuation since acquisition. This year, we are happy to have been able to acquire RomaEst and O'Parinor, two prime malls of 100,000 sq m in capital cities, in our two largest core markets at very attractive terms. With more than 10 million footfall, they rank among the most visited shopping centers in their respective geography and showcase a complete and up-to-date retailer mix, which has high sales per square meters. Thanks to clearly identified asset management and leasing initiatives, we will generate a double-digit cash return on those two investments. We also continuously upgrade and enlarge our leading assets, which are crystallizing high leasing tension. At Klépierre, we do believe in a very disciplined approach to development. No greenfield, but only extensions, ensuring a controlled level of risk and high returns for our shareholders. In the development field, we also have a solid track record with four main extensions completed over the last five years for a total amount of EUR 500 million and a return on investment above 8%. All projects have been delivered on time, on budget, and I can tell you with no cost overruns. Those projects are all great successes with significant increases in footfall and retailer sales, and our market share is growing. This year, the highlight for development is the unveiling in July of the 5,200 square meter extension of Maremagnum in Barcelona to welcome some of the most dynamic international retail banners like JD, Bershka, Pull&Bear, or Stradivarius, along with a fantastic Time Out Market on the rooftop, marking the finalization of the reshaping of this leading mall in Barcelona. The yield on cost is 13.5%, and the total numbers of visitors in the mall already jumped by 10% since opening. In the same vein, we launched an 18,500 square meter extension at Odysseum in Montpellier. It's the leading mall in Montpellier, and we want to further strengthen its leadership in its catchment area. With already more than 12 million visitors per year, it will host 22 new banners, including a Primark megastore as well as a new restaurant offering. Delivery is planned for 2025 for a total investment of EUR 56 million and a yield on cost at 9%. As a direct result of our positioning and actions, we have been able to deliver a 3.3% growth in net current cash flow per share, standing at EUR 1.25 in H1 2024. Between H1 2022 and H1 2024, the net current cash flow CAGR is 5.2%. Based on these strong results, we are confident in our ability to deliver further growth and raise our 2024 guidance. We now expect to generate a 5% increase in EBITDA instead of 4% and net current cash flow to reach EUR 250-EUR 255 per share in 2024. Now, turning to balance sheet, our solid track record in cash flow growth has been driving property values up for the first time in five years. We are turning the corner with a 2% like-for-like increase over six months, encompassing a 2.5% positive cash flow effect, more than offsetting a slightly negative market effect. In the meantime, the average EPRA Net Initial Yield of the portfolio remained stable at 5.9%. As a result, our EPRA Net Tangible Assets per share grew 4.3% at EUR 31.4 per share. Going forward, incremental support in valuation should come from a positive market effect with recent interest rate cuts and others to come. Discount and exit rates currently reaching all-time high levels should normalize. Over the period, the robustness of our balance sheet has also been acknowledged by our rating agencies. Concurrently to RomaEst acquisition, S&P reaffirmed its BBB+ rating and upgraded Klépierre's outlook from stable to positive. Fitch also confirmed its A- senior unsecured rating with a stable outlook. We continue to operate with sector-leading credit metrics, and we further improve them over the first half. Our net debt to EBITDA reached a historic low at 7.3x, while our loan-to-value ratio decreased to reach 37.6%, down 40 basis points over six months. These key advantages provide the group with the flexibility to continue to invest in profitable external growth opportunities at right time points in the cycles. To wrap up this presentation, I would like to emphasize that we have the right positioning and strategy to deliver long-term growth and generate value. We create preferred destinations for shoppers and retailers with active leasing and asset management actions. We constantly enhance our portfolios through accretive acquisition and targeting developments. Our strict financial discipline to serve our shareholders with regularly growing cash dividends leaves us room for external projects. With a long-term view, we also continue to progress in CSR to build the most sustainable platform for commerce. So I will end my remark on this and open the floor to the question. Thank you very much for your attention. Thank you, sir. Ladies and gentlemen, as a reminder, you can ask questions by pressing star one on the phone keypad, and you can also submit your questions by web. Thank you. We'll pause just a moment. Yeah, we have a first question on the webcast, so on the chat from Robert Stone. Can you give us more color on asset disposal this year, and are you planning to do more? Thank you very much for the question. We have done, just maybe to anticipate the next question, the investment market is still very quiet, but in that environment, we have still been able to dispose of some assets. We have, as we speak, sold a bit more than EUR 100 million at quite a good condition. It's 14% above book value, and it's at an average 5.5% net initial. For certain assets, as we said in the past, when they are good assets, small size, we do find quite an appetite for them at book value or even higher and decent net initial. We are still working on some disposals. You know that we have no disposal target. We do that to curate our portfolio and to prune it over time. So when we look into perspective, we have sold EUR 106 million and invested EUR 240, and the gap between the yield is just very accretive for us. Okay. Another question for Peter Knowles. You closed a couple of acquisitions year to date. How would you describe your investment pipeline going forward? And is there any geography you're interested in? Well, I will say that, first of all, our core market, we only look at potential opportunities in our core market. So basically, our core markets are France, Italy, Iberia, and Scandinavia, I would say. So we will always look only in geographies where our platform is strong, where we can really accompany the retailers to grow. So that's number one. So Eurozone mainly and in those core markets. Okay. Next one for Pierre-Emmanuel. What would be your incremental firepower to make additional acquisitions? I can take this one. So basically, we obviously are very much looking at our investment-grade rating, and I'm very careful about keeping a very high investment-grade rating. In the last note published by S&P in May, they do see EUR 700 million of investment capacity between 2024 and 2025. So we think it's a good assumption to look at our firepower for the next 18 months, I would say. Okay. Yeah, you can go to the phone now. We have some questions over the phone. Yes. Thank you very much, sir. Our very first question from the PowerPoint audience is from Pierre Clouard, colleague from Jefferies. Please go ahead. Your line is open. Thank you. Good morning. So I have two questions on my side. Maybe on the operational side, where do you see lettings, your rental approvals and occupancy in 2024? It will be my first one. And the second one in the guidance. Can you remind us what is the level of disposals and acquisitions that are accounted in the guidance today? And if you are doing more acquisitions, is it a chance to see another rise of the guidance? Okay. Thank you, Pierre. So you know we are against itemizing the guidance line by line, but as you have seen last year for 2024, we decided to provide a guidance at the EBITDA level. So I think you can easily derive from what we have done in H1 what could be the full year numbers. I think what is important is that due to disposal, we have 4.9% NRI growth on a non-like-for-like basis, and EBITDA has gone even further at 5.4%. So on a like-for-like basis, NRI was 6% up. So we are increasing our guidance based on the current performance of the company on H1. So regarding disposals, I think we always put a bit of disposal in our budget. We never put any acquisition. So we are fully in line with what we had incorporated in our guidance, very in line, but we do it sooner than expected. And we will probably do a bit more, but this will not be extremely material. And on the rental approved and the occupancy, any chance to see those metrics improving by the end of the year? Well, I think if we look at occupancy and we itemize a bit, I think we are at level in many countries, we are at levels which are very close or even equal to pre-COVID levels. There are some markets where we are still a bit suboptimal due mainly to bankruptcies that have occurred over the last 18 months. So I think that where we can probably still continue to improve occupancy, it's in France and a bit in Spain, I would say. Okay. Thank you very much. Thank you, Pierre Clouard. When I move to Florent Laroche-Joubert of ODDO BHF, please go ahead. Good morning, Jean-Marc, good morning, Stéphane. So thank you for this presentation. I would have two questions on my side. Maybe could you please give us more colors on the improvement of your from where comes the improvement of your EBITDA margin and is there any further room to improve it in the next 18 months? And maybe also another question. So on the one thing that you have improved your complementary revenues, including variable revenues by +8%, if I'm correct. So is there any further room also to improve these revenues? To the first one, I will jump on the number two, sorry. So for incremental, I was not connected? Yeah. Okay. So thank you, Florent, for your questions. I don't know if you hear that. So I will answer to the second question before Stéphane answers to the first one. So for the incremental revenues, I think over the last we have seen that over the last couple of years, this has been a way for us to grow revenues. So it's a combination of retail media, specialty leasing, mall income, car parks, also a ton of rents due to the high performance. We are negotiating leases, not pure variable leases, but we are increasing the level of sale-based rent percentage in our leases. So we see this as a way to continue increasing over the next probably two, three, five years. So I think we are not at the maximum of where we should be. So I'm very positive about this source of revenues, and I think we will deliver a great performance going forward. Yeah. On the second part, which is the improvement in the EBITDA margin. So basically, our NRI is growing at 4.985%, and we have a very tight cost control. And it does mean that our costs are quite stable over the period, and we expect more or less the same for the rest of the year. So the improvement in the margin you see in H1 should be more or less the same for the full year because we expect to be in the same zip code in terms of EBITDA increase because we have given a guidance at five. So you should take this assumption for H1 for the full year. I think it's a reasonable assumption. I think it's quite a remarkable achievement that we can grow revenues and our costs, salaries, mainly salaries, and they are not increasing in the context where you have inflation and wage growth. So that's a very cost-efficient organization, I may say. Okay. Thank you very much. I have a question on the chat from Pranava from Barclays. Thanks for the presentation. I understand you have refunded your November 2024 bond with a bond earlier this year. We look at the bond issue opportunities in H2 for CapEx need or 25 debt. So we have issued EUR 600 million in February 2024. We have a bond redemption of EUR 560 million in November 2024. And in 2025, we have very low redemption level around EUR 250 million. So basically, we don't have urgent financing need. Nevertheless, as mentioned by Jean-Marc, we are looking at potential other opportunities. And if we find attractive targets, of course, we'll be happy to come back to the bond market to finance, but it's a bit early to take this decision, obviously. Okay. Yeah. Yes? We still have a couple of calls in the queue. Would you like to take the next question, the gentleman? Yes, sure. Okay. Thank you very much. We will now move to Rob Jones of BNP Paribas. Please go ahead. Your line is open. Great. Thank you very much. So just following on from Pierre Emmanuel's questions regarding some of those components of your like-for-like growth, obviously touched on the rental update and the occupancy. But I just wanted to touch on the third one, which is the collection rates improved up 120 bps, almost 98%. I wonder how that compares to pre-pandemic levels and where you could push that collection rate to. Can we get to north of 99 and thus that drive further like-for-like upside in the reporting periods to come? And then my second and final question was around asset values. You've got a slide in your presentation on slide 23 where you talk about the next incremental tailwinds coming from market effects and basically highlighting that discount rates are all-time highs, ECB rates are coming down, and ultimately, it looks to me like pointing to an expectation that discount rates come down and ultimately we see a bit of inward yield shift, albeit not necessarily in H2. I wonder if you could just touch on that kind of capital value outlook point as well. Thanks. Okay, Rob, and thank you for the two questions. This time, I'll take the first one. Stéphane will take the second one. On the collection rate, that's a good question. I think what has been driving us is that post-COVID, we had quite a not important, but quite a non-negligible number of bankruptcies. We have spent a lot of time to curate our tenant mix and to change difficult tenants by a new tenant. So this has a direct impact on occupancy, but also on rent collection, which is improving due to, I would say, the credit of the new tenants. So when we look, we are still a bit suboptimal compared to the good old times, I would say. We were ranging between 98.6%-98.9%. Okay. So I think the reasonable rent collection should be the target should be around 98 point something. So marginally, we can improve it. So I think the two suboptimal levels where we are, even though it has improved dramatically, it's a bit of occupancy in the geography I mentioned and a bit of rent collection. And it's, as you can imagine, a bit in the same geographies. In some of the countries, we are already at 99.5% rent collection. So it's on specific markets where curating the mix takes a bit of time, but it's improving. Yeah. On the second part, basically, if you look at our valuation H1, it's +2.5 on cash flow, -0.5 in market effect because the discount rate slightly increased. But basically, the expert made the job based on 10-year swap rate taken in April, May, which were quite high, to be honest. It was 2.8, 2.85. Our views, obviously, and I don't have a crystal ball, is that this long-term and short-term rate in Europe should normalize. And it may happen in H2, it may happen next year, but we do not see any reason is a normalization of long-term rates that we do not have a positive market effect coming. So obviously, we do not give any kind of guidance because it's the expert job, but we think this is a direction of travel. Yeah. And maybe if I may add, I think, as we said, we are turning the corner. And I think there is still some room for improvement in terms of valuation, as Stéphane said, on the discount rate, definitely. And also on the ERV assumption for our properties because we are still doing better in terms of leasing than what the appraisers are taking as ERVs. So if I take Italy, I think the CAGR for the appraiser is 2.3% over the next 10 years where the like-for-like net rental income is exceeding 7%. So I think we have a double effect that they are more conservative, not everywhere, but more conservative on ERVs than what the leasing transaction shows. On discount rate, we are at a very high level, and this should probably normalize. I wanted just to also add that on the ERVs. Thank you very much. Thank you. Thank you very much, Ms. We have other very exciting jobs, yes, sir. We have other questions on the phone? Yes, sir. I'm just going to introduce the next caller. The next one that we have is going to be Céline Soo-Huynh of Barclays. Please go ahead, Celine. Hello. Good morning. I've got two questions, please. The first one is on valuation. How do you think the valuers are looking at the higher yielding assets you acquired year to date compared to the valuation of your own portfolio? That would be the first one. And the second one is on your acquisition strategy. Have you thought about acquiring listed companies since the trade-in loss discount rate and higher implied cap rate than yours? You have made a bid in the past for a listed U.K. REIT, so wondering if that could be something back on the table. Thank you. Okay. Thank you, Celine. So first of all, I would say as a caveat, we worked hard prior to COVID to have the right balance sheet to go through the cycles. And maybe we are the only one who has been able to go through the cycles without disappointing their shareholders. And so it's true. Also, it's fair to say that today we have more than capacity than anyone to look at external growth, but we will only do it if it is adding value to the portfolio and if it is accretive to our shareholders. So we will be extremely selective, and we are not a force buyer. So we will do or we won't do, but we just said that we have the flexibility to size opportunities, and we are happy to have done two very good deals at attractive conditions. So when it comes to valuation, okay, I think without making a debate on the methodology, I think the way the valuers are doing valuation, okay, is based on the standard that we can all read again. Okay. So valuation, it's the value between a willing buyer and a willing seller. And so if you go to the RICS definition of what a willing seller is, it's neither an over-eager nor a force seller prepared to sell at any price. Okay. And a willing buyer is someone who is motivated but not compelled to buy. I think when they look at the transactions we have done, we are probably in the exceptions to the rules. I don't know if they were a forced seller prepared to sell at any price or wanted to exit. I think it's like in any market. We can do good deals or we can do bad deals. Valuations are between a willing seller and a willing buyer under certain conditions. And so those transactions have simply no impact on valuation. On M&A, we never commented on that, and we have nothing on the radar, and we prefer to stay put. We will only look at opportunities on a single basis. Thank you. Can I follow up on that? How much do you think there is distress on the market in terms of millions of euros? I was tempted to say I have no clue, but you can imagine that we are monitoring the market. So I can't answer to that question. Okay. I think it's an interesting time. So the REIT, okay, they have to be prepared to go through the cycles. That's what our shareholders want. Okay. When the cycles are up, we don't buy. When they are done, okay, we have questions about valuation, but that's where you have opportunities. So we will size opportunities if they come. As I said, very selective. And we have no specific objective to do before the end of the year, but we are quite active in monitoring some specific situations which are interesting. Thank you. Thank you. Thank you so much. Sorry about that, sorry again. Celine, thank you very much for your questions. Mr. Jestin, as we have no further questions at this time, sir, I'd like to turn the call back over to you for any additional closing remarks. Thank you. We have also a question coming to the chat. So Thierry Ferrer from Natixis, could you give us more color in terms of ERV change in appraiser assumption? And is the rationale only based on improved OCR, or are there other factors? Well, I think it's a mix of different elements. I think the ERVs is always a judgment based on OCRs. It's difficult to predict ERVs when you are not really able to predict what could be the how you curate the mix, how you change the mix. So that's where probably the appraisers are a bit lagging behind because we have, I think, a better know-how of what type of brands we can bring in almost, what type of sales they can do. So how we can, with higher sales, getting higher rents. So I think the ERV discussion, it's sometimes a bit more static with appraisers based on current OCR, but they don't really, it's difficult for them to factor in the asset and leasing management initiatives we may have. But definitely, it's based on OCR. So what is, I think, noticeable is that we are delivering higher like-for-like growth than the CAGR that they are taking into account, not in all the countries, but in some countries. So it asks the question that are they a bit more conservative than reality? That's what I wanted to say, but they are independent, and they do the job as they think they should. Okay. Do we have other questions on the phone, maybe? We do not appear to have any further questions, sir. Okay. Okay. So thank you very much to all of you for attending this call. And once more, I wanted to reiterate, we are very happy with this strong operating performance, which drives to valuation increase and guidance of great. And see you soon. Have a good day. Thank you. Thank you very much.