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Edited Transcript of CARD.PA earnings conference call or presentation 14-Feb-20 8:00am GMT

Full Year 2019 Carmila SA Earnings Call

Paris Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Carmila SA earnings conference call or presentation Friday, February 14, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alexandre De Palmas

Carmila S.A. - Chairman & CEO

* Géry Robert-Ambroix

Carmila S.A. - Deputy CEO

* Sébastien Vanhoove

Carmila S.A. - Deputy CEO

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Presentation

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [1]

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Good morning. I suggest we start-off with this overview of 2019 results out of respect for those who're with us remotely and over the telephone. Thank you very much for being with us this morning and for spending our -- your St. Valentine's Day with us. And this demonstrates how much you love retail and commercial retail and real estate. Now I'd like to review with you 2019 annual results with Gery Robert-Ambroix and Seb Vanhoove, and we'll report on the activities as well as the results and outlook of Carmila's operations. To start off, I wanted to insist to dwell upon a number of key aspects that make what Camila is. And this, first of all, refer to the notion of local presence, which is really the DNA of Carmila. 2019 was a year of growth, a year of significant development for Carmila and it's retailers. A successful year. First of all, retailers revenues at 2% on operation over the geographies, across the geographies, which really demonstrates sustained growth in terms of recurring earnings per share. As we -- as you saw last night, as we -- when we posted our results. The recurring earnings per share stands at a 6.6% beyond the guidance. We communicated between 5% and 6.5%. So we are above target. So this performance is growth in our revenues, services on our geographies and are key economic drivers, which reflects a number of major trends across the geographies and employment rates decreasing, growing GDP and increasing consumption indexes. So our culture exposures was a plus -- was a key asset in 2019, as it turned out. As really, this is about trust and growth combined. And the -- throughout the vagaries and the unrest that we've experienced, well that France experienced, and Carmila's growth at 2.1% despite a very poor month of December, minus 0.4%, as a result of unrests, minus 0.4% for -- in the footstep of 2018, which was December 2018 was also a challenging month. So despite that, this 2.1% growth has been the result for Carmila's retailers in France. And this in an environment, which has been at times, well, challenging, hopes to growth along the way, and the retail has offered very contrasted situations. Some of the business sectors, notably in services is, if it's flat plus overall, stands at over 5% over the Carmila's real estate. And the sector of health and beauty is growing in France or across Camilla's operations, over 3%. So this is a sustained growth, conversely. And this is -- there's nothing new there. Some of the other sectors are very -- way more challenging. Household equipment overall, nationwide. This is the CNCC [survey] cells. So we're talking minus 3.5%, 0.8% in clothing accessories. So other -- some of this -- while some sectors are doing very, very well indeed, others have been going through challenging times. So hence, the -- how important it is to nurture momentum in these industries and sectors of activities and trends. So we have here -- this is about the work of the team that has led to operational performance as reflected in Carmila's results.

So what's key is really being agile. We are about brick-and-mortar, but we are about the many women, the qualities of the teams that will make the difference in terms of the real estate performance of Carmila's today and tomorrow.

Sectors with competitive dynamics, momentum and positioning and that drive the growth, and we have the most challenging sectors. Here, you can see within the portfolio. Some of the sectors have shown remarkable performance. Let's take a look at the Mango across the portfolio Carmila with plus 14% in France and 12% in Spain. So Zara, H&M. So we're talking about personal products and accessories and key retail brands. So let's look at -- when it comes to retail, look at -- let's have a per sector analysis and see highly contrasted situation, reflecting the work of those brands that are agile and have been able to transform. So other categories of retail brands that we tend to miss or neglect is the regional and local retail brands. There's a number of such examples there on this slide. So regional, we are very strong in with local partners, the regional partners at Carmila's. And extremely with key banners, which has been shown here. So these performance are widely beyond the average results. With these partners, we have brands, we have preferred both special relationships as we are co-investors. So this is Indemodable, Cigusto and Barbe de Papa are examples of this. So we'll come back to that in more detail in a moment.

Carmila, since it was created some 5 years ago now, has built its business model around 4 pillars that make it unique: Firstly, it's a portfolio of strong presence embedded in territories, meeting customers' expectations; secondly, the diversity of this portfolio, offering a resilient and attractive business model; third pillar, as I mentioned, the and women that make up Carmila, they're experienced, seasoned, specialized and entrepreneurial and innovative; and fourthly, a strategic partnership with Carrefour, a long-standing partnership. I'd like to review these 4 pillars with you. A strong portfolio shopping centers embedded in territories and the core of customers' expectations. We ask the questions to our clients, what makes Carmila standout from any other real estate companies? What makes Carmila different to others? And we ask to serve -- on kind of national retail brands. 7 out of 10 came back with the following answers: It's local network, 215 centers of work, 3 geographies. A unique network in France exceptional as a result of its coverage and combinations and extremely attractive network in Spain, focusing on northern part of the country, had a unique retail network. And a second response, and a second finding. This is about our capacity to listen to advertise combined with a local presence. Obviously, we have a strong local presence. But we have a very human presence. This really results in our capacity to weave relationships, strong connections with the clients with retailers and customers, so as really to nurture these local presence. And this is our DNA. And this is our signature, both in terms of the brick-and-mortar aspects of our real estate. And also, as a result of our capacity to nurture these connections with our clients and retailers. So this is how it's in what we want to be. We want to be multifunctional center, we're not pure shopping centers. We're capable to open up to other functions and we also offer accessible retail centers, shopping centers that are accessible, practical and useful. And this is definitely the avenue we want to go down moving forward.

And secondly, this is really -- our resilience resides in diversity, the diversity of our portfolios, 215 sites, 3 countries. And exceptional dense data, dense whilst diverse. And these centers are either leaders or co-leaders in their catchment areas. This is an essential point, essential aspect. It Is way more important to be leaders on -- in mid-sized area as opposed to being the fourth or fifth center on a very large area. The resilience of our model when retail brands must have to make choices. This is about the resilience and a local presence that are driving motivations. And this is about -- this is reflected in the growth of our results. And we have a varied and balanced portfolio, not only in terms of retail centers, but in terms of brands and banners. It is a way we've defined the mix of our centers. I was telling you about the growing sectors. That accounts for nearly 60% of the retail brands in our centers. That relates to services and rest of activities and the clothing accessories only account for 34% of retail revenues. So it's down 1 point against last year in terms of exposure to clothing and accessories within the Carmila's portfolios and across the new lease signed in 2019. So only 27% were related to clothing accessories. So third pillar, which is an -- a very important pillar. We have a fantastic team. We have seasoned and specialized teams that in real estate involves many, many aspects. And you've seen performances. We've -- the number of lease signed in 2019 is unprecedented. We've managed these -- our success is really owed to capacity of our teams to work as close as possible to our clients. Regional presence is an essential asset. The specialty leasing and pop-up stores, everything that contributes to renewing, refreshing the commercial offering across our retail real estate, specialty leasing can for plus 34% growth into '18, '19 exceptional growth of the team that led to renewing and developing with this creation of a brand. For this particular purpose, Carmila event, which is a significant contributor to growth and will continue to do so going forward. Carmila was designed for digital marketing, completely different to what's out there in the market. So that's -- but this is a strength of Carmila. This is a major growth factor and we are very proud to have this unique know-how on the digital market. Carmila retail development will come back to and what is our internal investment funds. We invest in innovative retails. We say retail, it's beyond retail. We are -- we invest -- we believe in the concept of retail, and we believe in the men and women that are the driving forces of this concept. And we do not hesitate to finance these people to drive the growth.

And this is really about capacity to innovate. And this is embedded within the culture of our teams. We create a 5G antennas deployment project. This is a new business leveraging the unique character exceptional coverage of our real estate so as to drive this 5G coverage activities. And obviously, all the digital innovations driven by our marketing teams that not only that we nurture with all of our partners. So many women at the service of Carmila and the service of its clients, which have never -- which have been growing and growing in 2019.

And I would like to apologize for these lengthy introductions. But we have it also -- and this is the fourth aspect, a strategic partnership with Carrefour. Carrefour is a strategic partner at 3 -- on 3 aspects, on 3 levels. This is a key shareholder. Co across the entirety of Carmila's center. We work day-in day-out with Carrefour. And it's shopping operations in its real estate, in its co-owner and co-operator aspects. So in the -- we have -- as a result of these fantastic harmony between all these partners who are very much aligned, you might have, beyond Carmila, a few counter examples where the alignments of all the stakeholders over a given site is not a given. So this is about a strategic alignment across our offerings. And Carrefour is going to access a development project pipeline of a great magnitude. So we're talking 7 hectares for a given projects. And you have these in more and more organized and urban projects. They've been around for 50 years. They've been eaten up by urban development. So we can do a lot of these service areas into retail, but not only we can do a variety of activities, housing, mixed-use, commercial retail. And this partnership with Carrefour allows us to really contemplate these in a very secured and exclusive manner. And Carrefour is at the heart of our story. And for Carmila, this is an exceptional asset. And I'd like to hand it over to Sebastian now, and he will take you through the functioning of our business -- strong core business in 2019.

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Sébastien Vanhoove, Carmila S.A. - Deputy CEO [2]

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Thank you, Alexandre. So first and for all, I would like to talk about our core business and explain why this year, again, it has resisted the weather. We here, of course, have heard the numbers of -- in the speech of the preceding speaker. And we have 2% higher in Italy, Spain and so on. These are performances we are quite satisfied with. And I will present this as concerns our digital marketing options. So signing as many leases as was our case in 2019. We, of course, need to work with regional national banners, and there are many contrary wins in a lot of these banners in France. But the numbers point to success for Carmila. So here, you can see that the retailers' revenues are, over the year 2019 versus 2018, have grown as well. Another point of our core business is our fleet. Alexandre mentioned this, I would like you to retain 2-digit numbers. The concept of leadership is one that we constantly discuss with our teams. And this helps us manage all of our events and actions. Secondly, as you can see, we have no super regional centers, but we have 81% of the value of our sites that are composed by major regional and local centers. And this, of course, aspect which is one of proximity, a local presence, is an important vehicle for growth. So here we can see the closeness and the red thread of our portfolio, whatever the size of the center we are discussing is. A major regional center at Thionville, which is an institution in that city, which is not even conceding anything to a new leader, a new center. Also, in Rennes, the [crescent] commercial space is also a local center, even though it is called a large center, because we have parking spaces that have been reorganized to make our clients' customers more comfortable in using the parking lot in question. And of course, our asset here is our local presence. And in Meylan Grenoble is a small center, a local center, with 14 parking spaces. We would like to extend the parking lot, but unfortunately, there is not enough space to do this. And it is still a local center. All of these centers are popular and sometimes these banners are seeking rooms that we cannot make available to them at this point. Unique form of expertise as regards our local digital marketing strategy throughout our portfolio via our teams in Paris. We here, innovate. We innovate tools. And also, we deploy these tools over our 215 centers and the knowledge, the specific knowledge of the behaviors and motivations of consumers in each area and also expertise in collecting and analyzing data and this is [persona], and it is a tool that allows us to gain better knowledge as concerns our clients over a very wide-ranging population. And we have 5 segments of client segments here, will come either alone for the hypermarket or as a family or just to come for a shopping trip. And all of this allows us to better target the campaigns that we are going to ask our retailers to conduct. Also, this local digital presence is illustrated by how strong it is as well. We are present in a center, you look on your cell phone to find shopping information that is close to this center. This year, there were more than 101 million searches on Google of My business, where our pages are posted. And this is plus 188% versus last year. And this, of course, brings out new results that we must maintain. And then how do we retain this center? How do we retain the customer base of these centers? And we have seen that our clients want, of course, here to be able to use the social media. And our database, thanks to all of its tools increased in 2019 by plus time -- 5. And also here, the roles of influencers and female ambassadors, a local presence of these people and of course, a young person, for example, will be very much enthused by the presence of the influencers, the local ambassadors to come and see what is happening in our boutiques. Now this is a very strong move because the young people are much more open to what the influencers have to say and the ambassadors as well. Why are we the only ones in the administration in our partnership with Google that we're very proud of. And we are the first better tester of Google in France. And you can see here an article that Google has brought to press and, of course, it works beautifully according to Google and knowing how this is important. We are satisfied with what we do. Now of course, this also has an impact on our retailers in a B2B situation. And we here have devised more services and more marketing operations to address the local presence of our retailers. We have had more than 10,000 events in 2019 for our retailers. And this is not something that we do onetime at a time. In fact, we helped them do these -- conduct these events and maintain their strong position, and this goes over a period of 6 weeks. And of course, we here have a business that involves the stone, but also human relationship. And to point to the efficacy. And this is also something that our retailers come back to us with this is their feedback, a banner that has profited from this long-term relationship. In fact, overperforms revenues at plus 8.1 points.

Another important point that is important and for which 2019 was a very strong year is here the enterprise social situation. And here, of course, you can see an objective of 61%, and an objective of 75%. So here, this is something that is very dear to our heart, Act for Food, and we have many campaigns as well that we can co-conduct with Carrefour. Many operations also are done with our different directors of centers or stores. Also, people here who are fighting against wasting food in any shape or form. And to go even further because this is something that as far as CSR is concerned, we need to continue working on. So we have set up here responsible initiatives. And it is called, here we act in the Cite, here we act in Rennes Cesson. And here, we act again on all of these aspects that you can see on screen. So this is how we are an actor as we guard the local community, the banners, our retailers, and this is also proof of our local presence. We're acting in a local manner. We're also acting to protect the planet. We, of course, are builders. So we must also, as this also is included in our G&A. We have here to be able to develop local attractiveness to work on green electricity and to con serve biodiversity, to protect it even further. Also, here we act for our teams. And this is fundamental. As we said earlier on, we have fundamental strong points in all of our teams. And we must work permanently with our different managers. And how do we train and establish a trust environment with our teams. These are the elements of our core business.

And now I would like to spend a few minutes on how and why we, in fact, grew our core business this year. Transformation of our assets, the pipelines, transformation and acquisitions. Let's start with growth. As you can see, these numbers were communicated last night. In 2019, we had plus 6 -- 2.2% in the number of leases signed, representing about EUR 10 million. Another very important figure here is the amount of the reversion on renewals. 4.2% in Spain and 1.5% in Italy. So strong numbers of growth for Carmila this year. And here, of course, the like-for-like that I mentioned, the numbers that we here showed in 2018 with Athis-Mons, for example, and also the extensions delivered in 2018. Another fundamental point and lever for growth and value transformation of our assets. We often said that Carmila was an asset transformer, and which we could change new banners, extend the services of the existing boutiques and also to cater to 7.5 million visitors a year. And here, you have the demonstration, thanks to the work conducted by the teams, all teams, the design departments as well as the civil works and the valuation department as well. And everything that here is, of course, an addition to the different sites have led to EUR 52 million between the acquisition itself and what it stands for today.

So we've gone from 727 million to many, many more millions at 8,713 million. But we must also hear note that it is a work that is collected and this is what has brought us a very satisfactory result.

Another development pipeline, for example. Another example, this is important to mention the delivery in November 2019 of the extension in Rennes Cesson, which is a local center, matched with the other large centers of the conglomeration and also here with banners that are all leaders in their areas and business areas, and here, of course, we have 70 boutiques and medium surfaces of over 13,000 square meters. And also, we were talking about our partnership with Carrefour. We here, of course, are showing promising rentals and basic value. So I was talking about pipeline. Historically, we have been selective in this area and value creators also. And we have delivered 19 extensions since 2016, which is quite substantial. When we know the number of topics involved in new extensions, EUR 400 million and so on and so forth. And the pipeline this summer on June 30, 2019, we have delivered more. And we have also put some by the way side as we are very seriously examining their capacity to become successful centers in the future. So over these '19 sites, there are 9 that we consider to be very significant. And Nice Lingostiere is also a development that will be delivered at the end of this year. Antibes, Aix en Provence, all of this with different -- Aix en Provence and so on and even in Spain and in Italy. So as a function of the way in which the banners will continue to innovate in their business.

Now -- and final lever driving the value is really about acquisitions, concentrating on assets with potentials. So we've cut down this figure for 2019 because we consider that there was not enough strategic or sufficiently attractive projects for us, a few key figures related to acquisitions. So 29 acquisitions have been made since 2014 for EUR 2 billion -- valued at EUR 2.4 billion for an occupied unit, I think, at EUR 129 million for an average NIY at 5.45%. So we're selective, and we only want to focus on attractive and value-driving opportunities. Thank you. I shall now hand it over to our next speaker.

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Géry Robert-Ambroix, Carmila S.A. - Deputy CEO [3]

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Thank you very much, Sebastian. So [Gery] now. A robust activity, robust business in 2019. Sebastian has described these growth drivers enabling for us to deliver. And I'd like to review with you, EBITDA up a 6.9%; lease income at EUR 359.5 million; gross rental income in 2019, EBITDA from EUR 263.3 million to EUR 282.6 million. I'd like to draw your attention on productivity improving in 2019. So the EBITDA rental income, conversion rate improved by 90 basis points in 2019. So an improvement of productivity improvement. And so strong growth in recurring earnings to EUR 222.5 million, up 7.2% in recurring earnings following on to 2018 with a growth of 13.5%. So Carmila is undeniably a growing company going up and up. And with a loan-to-value with a debt ratio quite and remaining low, we'll come back to that, and contained in 2019. So recurring earnings per share will be at EUR 1.63 per share, so up 6.6%. So something that makes some of the puzzles for some of the observers, the experts has looked into our portfolio, and establish a stable value in the second quarter in the second half of 2019. Plus 0.7% in H2 2019. Remember, that was minus 0.4% in H1. So for the full year, we're talking plus 0.3% in 2019. So on a like-for-like change basis, so minus 0.9%. So we owe these characteristics. And as we agree on that with the experts, the portfolio of Carmila is -- so we're still talking about as sort of local presence, convenience shoppers, experience and as Sébastien demostrated and described, the team on board have demonstrated that these lease values are realistic, and we and (inaudible) the teams such that and agree with these. This is a portfolio that has been fully renovated, fully reviewed between 2014 and end of 2017. So little CapEx and robust portfolio. The occupancy rates remains stable and the asset rate remains stable at 10.5% at Carmila. And a key figure that definitely shows these experts views have been well founded, as our average cap rates and our portfolio is 5.9%. And this is the highest net potential yield amongst our peers. Again, with an extremely robust portfolio in its operations.

Now from these -- out of these experts views. We have the EPRA NAV per share. Showing a moderate drop of EUR 0.6 over 12 months. And after payment -- and this is the effect of the first quarter plus the following and after payment of a EUR 1.5 dividend. So now that stands at EUR 27.79 per share, so dropping by 2.1% against the previous year. So EUR 27.79 per share. So we have here a robust, cautious and long-term based strategy as reflected on our financial policies, and we try to meet the 3 following objectives. So first of all, reducing the financial cost, the financing costs, whilst working the extension of debt maturity and whilst optimizing the hedging structure. So the average cost of the debt that Carmila's amounts to 2.1% and an average remaining maturity at 5 years, an LTV ratio at the end of 2019 is amongst lowest in the industry at 34.9%. So this dynamic drop in 2019 has allowed us to up for a EUR 1.50 dividend per share and allowing us to move towards a target payout ratio of 90%, so at the end of 2019, at 92%.

So here, I have a picture of our Carmila Retail Development partner, has a thing -- salon, a flagship salon, the Barbe de Papa brand.

It's all very, very, very well done, highly professional, driven. And Carmila has been deploying beyond what we traditionally do, as the real estate manager, really high-quality in 2019. We've developed a unique strategy to create short-term, medium-term value beyond organic growth, and pipe -- promotion pipeline as well as acquisition operations. So this focusing on 3 -- focuses on 3 strategic axis.

And as Alexandre mentioned by -- within introductions, that we invest in retail, it means in lease, and with talented and dynamic entrepreneurs. And this lies at the heart of what we do day in, day out. We invest in good retailers. We sign the leases reflecting on our retailers' DNA, allowing us to be relevant in the way we do our job. I think Carmila is the only real estate company that really reflects this, and embodies, this strategy.

Third, the partner must be really, really good professionals. And they have to be early stage companies, businesses. No start-up, other. And the third part is marketing that needs to be consistent between the retail brand and at Carmila shopping centers. And also, we want people who want rapid development and whilst not necessarily having the financial resources to do so.

So have [playing field accounts too for companies]. Comprised of 215 sites across 3 countries. So -- and beyond that, we invest by their side, to finance the development of their new stores. So development works. And we want to finance in HR, finance. And we provide support to them across all of the complicated operational aspects of [AR] companies in development phase, in its development phase. And so we -- by developing these retail brands, we gain -- we collect leases. And as for any other -- for these partners, as for any other retailers.

And secondly, we want to -- and move side by side. And gradually, we want to -- and -- sell off and exit between 2 to 5 years. And we expect to generate benefit as a result of selling off our stakes in these businesses.

So promising starts, yes. And this has been confirmed. Indeed, if we review figures in 2019. So also with Barbe de Papa, Cigusto, indmodable, Centros Ideal in Spain. We opened 71 stores. And with these partners that -- we're talking EUR 2.1 million worth of annualized rents. That means EUR 7.5 million committed investments to date, meaning EUR 6.5 million gains to date.

And if we take these 4 partners, and only those 4 partners, and if we look at the forecast over 5 -- 4 years, Barbe de Papa, we're talking 2 years down the line and -- still to go; and 4 years, the other 3. So that means 160 stores at Carmila. EUR 6 million annualized rent, so EUR 15 million of net commitment. And if we were to sell off these stakes, and tomorrow, that means that EUR 12 million of Carmila share gains. That creates tremendous values whilst engaging very little -- very limited capital.

So our [commitment] is much wider than that. We want to attain a 15 to 20 retail brands portfolio in partnership, setting up 2 to 4 stakes each year, accounting for EUR 25 million in annualized rents, EUR 20 million worth of net commitments and EUR 50 million of Carmila's shares of gains. So these figures are significant, and they really are taking forward the Carmila business model.

And this really stems from what I've just explained: Health. Everybody agrees that health is a growing sector. Secondly, this is a very natural related activities as a result of the shopping center. And the local presence, the easy access, free car parks, facilities and day-to-day offers of amenities there. So this is really part of our DNA and close to what we are.

So all the Carmila Health, these projects, aims at developing a full, a comprehensive and a high-quality health care, health services offerings, being financial partners as in Carmila Retail Development. And so being a partner with these operators and enhancing value of these partnerships with -- and what -- fostering -- bolstering development of the health offering in our shopping centers.

So dental, our practices, they're really booming. They're restructuring. And this is a sector of great interest for us, as ophthalmologists, as labs, as primary care health points. And they are going to become more and more relevant. And this is what we want to foster [now] at Carmila.

And so convenient shopping centers, and also very close, very local, embedding operations with -- whilst nurturing the entrepreneur and entrepreneurial partnerships.

To somebody we've been -- Pharmalley, we've been working with them for a year now. So as either transfer of pharmacies -- or existing transfer of pharmacies to a drug store, or existing pharmacies in our shopping centers. And we want to join efforts with professionals. We're not professionals in health care, however, we are professionals in shopping center operations.

So our stake of 45% in Pharmalley, and we have -- and Laon and St. Jean de Luz, La Roche-sur-Yon. So that opened in 2019. Investment-wise, we're talking EUR 0.5 million to EUR 1.5 million per pharmacy. And a 4-year gain, as expected, from 0.5% -- from EUR 0.5 million to EUR 1.5 million. So this is highly profitable, and we want to really move into that direction.

Dentalley. So dental practices. We work with great professional partners to develop a complete offering. So we have a 37.5% stake, and we want to open 50 such units in 5 years. And great activity for our clients, highly profitable in our business plan. We do think that this company could be expected to generate a EUR 15 million EBITDA as after 6 years of 50 -- on a basis of 50 units.

So less profitable with regards to medical and for paramedical practices. And again, we'll keep an eye on that.

[Next, to the actions] beyond the traditional business model of shopping center operations and resting upon the number of shopping centers in our shopping center network at Carmila. This is LOU5G. This is a mobile telephony, antenna subsidiary. This is growing, definitely going up and up. And we have signed 150 leases. And we signed, at the end of 2019, for EUR 1.5 million of rents with a very limited CapEx. So we're talking 20%, and we will continue growing this in 2020. Our ambition is, between now and by the next 5 years, is for this subsidiary to account for EUR 100 million in value within the next 5 years. So this is 5-year ambition, a key aspect of our business model.

I'd like to hand it over to Alexandre for our closing remarks now.

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [4]

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Right. So you must have understood that 2019 was an exceptional year for Carmila. and may I remind you that we are a young enterprise. We are only 5 years old. And over a 5-year period, we have done a lot. We have improved, we have built. And all of this, because it is based on a very simple DNA that we have described.

First of all, our 215 local centers in the geographic sense of the word, in an urban environment. Also, due to our local presence and by our teams, once again. And we're not just stone people, this is also something that you need to remember, we work with human beings. And also the support and partnership of Carrefour that helped us to project our ambitions in the project pipeline that Carrefour makes available to us. Of course, we have a resilient business model. We also are working towards sustaining our cash flow, better rentals and a stabilized value of our portfolio.

And this is what we have done. It is true for today, but it is also something that we will continue to apply in the future over and above our traditional business and management commercialization, our partnerships with central managers as well on site. And our site businesses are developed thanks to our centers and thanks to the partnership that Carrefour makes available to us all around.

So we are not just blindingly going -- traveling down the same road. We are -- also here know that commerce is changing. We are therefore modifying our retailer mix in our centers to be able to satisfy our clients' expectations. And the more we listen, the more we will be able to give them what they expect.

And also something else that we here, of course, are players in thanks to the digital networks that we are setting up. But remember that we first and foremost talk about logistics. And when we have 215 centers in the external areas around the cities where we have our major centers, obviously, here as well, local presence, many parking lot developments in partnership with Carrefour.

And finally, our social and environmental policy isn't just something that we have to do. It is something that we truly and deeply believe in. The choices of the French consumers of tomorrow will be more and more based on our building environmentally friendly centers where all of the stakeholders, including our employees, are members of a community that lives together and that is very deeply involved in how we manage our business.

So the local presence I mentioned is of course at the core of our business center. We have started working within the framework of the PACS law. It will be presented next May in our general assembly. And of course, this is where -- we know that this is at the core of the way we do our business, of how we mix and match financial results and empathy.

And here, we listen to our customers, and local presence with the banners and with local retailers in our centers, we listen to what the feedback is, regards information. And we establish strong relationships with our banners. And here, our local communities, our territories with whom we have major history behind us, 50 years in some cases.

So these are the results we wanted to share with you, the strategy we also wanted to describe for the future. All of these elements and the confidence we place in our core business, this allows us to propose a growth in our earnings per share, dividends, between plus 2% and 4%.

so thank you very much for your attention. We are now available to answer your questions and those who would have questions to ask by telephone. Thank you very much.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Unidentified Analyst, [2]

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I would have 3 questions for you. Could you tell us a little bit more about how you're funding the pipeline? And also, are you able to fund your pipeline on a constant basis?

And also, could you specify the development margin for Carmila?

And do you also include in your guidance a conservative aspect as concerns the developments in China? Which of course can be impacted by the supply chain in 2020.

And also as regards to your new businesses, what is the degree of risk that you may be apprehending in these areas?

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [3]

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Right. So I'm going to start answering, and Géry and Sebastien will.

As regards how we finance the pipeline. As we have said, we are a little bit more selective as concerns the projects brought in by the pipeline. Because we are initially basing our business model on major projects.

So our funding approach has not changed in this pipeline and we are at 34.9%. And this of course gives us an open boulevard here to move ahead in the hypothesis of the evaluation of our portfolio. And this leads us with the possible time we need to make decisions that are different from those that we have in hand as we speak.

As concerns the coronavirus in the health hypothesis. We haven't really taken that into account. We know today that this could have a global impact at that would stand at 0.1%. So it's not really a significant issue. And we don't, for the moment, know exactly how we could deal with this approach.

So Géry.

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Géry Robert-Ambroix, Carmila S.A. - Deputy CEO [4]

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Sure. So on Carmila development, the beauty of the strategy is that we are facing extremely limited risks. I told you that we were working with super professionals. And the second response is that as concerns our WCR, this isn't a very high investment. As we've said, we are investing EUR 100,000 per banner. And we're not telling our partner, "We'll invest in million with you and so on." That's not how we're doing it.

And we're training these retailers as partners. And after 5 openings, we saw, perhaps in some cases, that of course there was an objective that was not reached by the retailer. So the risk we take is extremely well apprehended, and we understand that. We limit here our capital investments.

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Unidentified Analyst, [5]

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[Alain]. The correspondence of the banner, and since last -- as you said last year, you're very happy with what you've done. But is the signing of many rentals, of course here, are people moved out or not?

And you have 7 hectares of parking lot space on average. So how many times do you multiply this 7-hectare surface in Italy, Spain or France?

And are you already have identified targeted operations?

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [6]

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As concerns the leases and the mid-city issues that are mentioned in my introduction, we have never signed as many leases as possible. And also, we must say that leases have been renewed in greater number than before. So to increase new leases, all of the leases, of course, that are linked to our new centers, Bourg-en-Bresse and so on. And these are of course retailers who have decided to renew the lease. And this of course is something we owe to our teams. And we signed more rather than -- the number of people departing remains stable.

As far as mid-city is a concerned, it's an average number. It's more relative to France because the size of assets on a supermarket center, for example, is a little bit smaller in Italy and Spain. And of course, we're talking about 2,000 -- 215 and 100 Carmila sites. And so obviously, the Carrefour group is the owner of the parking lots. This is what we're talking about here.

Secondly as regards mid-city per se, the local presence of how we approach this. And of course, the local presence can mean bringing new activities or health care options. This can also involve logistics and different types of activities. And then we can have projects that are more or less significant, and can involve office space and so on. So of course, there are many activities that make the centers quite attractive. It's a little too early yet to give you more information, but we're working hard with Carrefour on the topic.

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Unidentified Analyst, [7]

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[Daniel Picard]. What about 5G? One question there. Haven't quite understood the -- what the business model is about. What kind of partnership is this? Is this a kind of a lease, a rental service with the 5G services?

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Géry Robert-Ambroix, Carmila S.A. - Deputy CEO [8]

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So this is a 5G LOU -- this is an antenna rental operations. But that's for -- LOU5G is a project that start today about 18 months ago. Out of a simple division, that we have 215 centers, 7 hectares. And this is about of 7 hectares. This is really adding value to this assets. And 5G is now being rolled out everwhere and the operators need to densify their network in a significant way.

So that we're talking 2019 as that needs to be deployed in France. So this is a real conundrum for our operators. And as you can see, this is just very difficult to achieve. And so we told them, "Well, we have a real estate, here's the list of real estate. And there we are. What are the sites that are of interest to you." Now are -- and as a located close to urban centers.

There's 2 configuration there, 2 case scenarios there. Dive into the details now. Either we invest, we let them build the antenna itself, the tower, and then they pay rent for this. And that's extremely simple. And in most cases, we have a second source of rental revenues. Because when they builds a tower, we will stick it to an antenna on the tower, and then we get sublet rental income from this. And this is a way that allows us to save the number -- and that allows operators to save, to optimize the number of antennas. And so using one antenna for several operators and solutions.

So we try to look to install them and optimizing the divisional impact. And so we try to do things in the nice and right manner. And France has to avail us of -- with these antennas as a result of 5G rollout. So we are in an excellent position, side-by-side with Carrefour.

Obviously has -- all this has to be signed off by Carrefour. And it's kind of being the third-party co-owners. And this really reflects the might of, when people get along well on a given side, then the sky's the limit. And we can do, we can roll out such projects.

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Unidentified Analyst, [9]

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[David France] So I'd like to come back to the parking lots. Can you give us the typical setup? So Carrefour is the sole owner, and this gets into a 50-50 partnership pipeline? Is that right?

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [10]

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Well as you know, relationship between Carrefour and Carmila are set out by a covenant, an agreement setting out the key terms and conditions of these operations. So these parking lots operations would be in a schematic where we would be in the same way as the extension of a shopping center, it just has status in (foreign language). And so we take -- we install the gallery on the shopping center extension on a parking lot of Carrefour, and we share the margin to market and to sell off to Carmila the -- by the end of the year, projects. So this is a site-by-site analysis, so allowing us visibility on these terms and conditions in the year as well as visibility on scheduling.

So let's imagine you get municipal elections, looming in the first -- in the next few months. And we don't know what's going to be happening. We know that this is not the optimal configurations to develop such shopping center projects. No problem, the owner is Carrefour. Carrefour is the owner. We manage the operations. We can just postpone it till after the elections.

So we're not tied to these schedules. So 2 advantages, visibilities on the setup, visibilities on financial conditions and visibility of the time frame so as now to optimize our opportunities.

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Unidentified Analyst, [11]

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Question. I will -- wanted to come back to the market conditions. So is this including the list of '19? Or is it kind of on a more ad hoc basis?

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [12]

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So I'll start and Sébastien will complement. We're all going to answer. So this is a Carrefour-driven decision. So they decide how -- to what extent it'll be cutting down the number of shopping centers. And this is also part of a capital property decision.

And so first, Carmila, where we're slightly outside of these, but not quite. Because if Carrefour decides to cut down the surface area, and 2 options. Well, Carrefour can reuse the surface area for their own purposes. And second option, they can offer us to recover the surface area. And this is only an option. Carmila has the choice to do or not to do depending on the surface areas and revenues and physical layout that is proposed. And so this is a -- and then we get into the framework of the agreement with very clearly defined terms and conditions that do not give rise to any renegotiation.

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Sébastien Vanhoove, Carmila S.A. - Deputy CEO [13]

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[Interpreted] Now in response to your questions. This is Sébastien. The answer is, well, no. These projects existed -- had existed for long -- for some time, as all these sites that have been indicated here is related to extensions independently from surface area extensions. Then we have [As], the projects were an extension of a medium-sized -- this is medium-sized extensions, will be complemented with a surface area reduction.

So this is our Carrefour operated setup. There's no overall rule. This really depends on the performance and on a number of criteria on a retail-by-retail basis. So this is -- we're obviously tied by a surface area reduction conversely, so a reduction of a surface area of our supermarkets, that are a part of this EUR 1.3 million? No, no.

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [14]

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Any additional questions?

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Operator [15]

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(Operator Instructions)

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Unidentified Analyst, [16]

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Carrefour outsourced it's logistics operations. And this -- then moving with this is -- I'm talking about logistic warehouses. Do you see -- do you have a plan b should they want to do likewise with these parking lots in terms of outsourcing parking lots?

And second question, what is the average cost of the debt as on the 31st of December 2019?

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Sébastien Vanhoove, Carmila S.A. - Deputy CEO [17]

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I would like to pick up on the second question, jumping in. So 2.1% is the debt at the end of the year with an average period of 5 years, as you rightly record and pointed out. This is a highly -- a very stable cost as we're always trying to strike the balance between long duration and the right cost level.

Now on the first point. Now we are here in a very highly theoretical scenario. And I must say we don't have a plan per se. This is an unlikely scenario because I think that is in -- for Carrefour, Carrefour would be actually best in answering this question. But then I would sound -- talking 7 hectares on average set in urban areas, in urban centers. Even -- and Carrefour was -- and so we are working very hard with Carrefour, how we can add value to this real estate in a smart way without stopping the shopping centers' activities. And with a view to selling off, which more or the -- which is not, as things stand, preferred option now.

And for Carmila, within the agreement that Alexandre mentioned, obviously, they are indeed obligations for the purpose of providing parking lots. And obviously, that secures Carmila's operations in this respect.

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Unidentified Analyst, [18]

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Once again, my congratulations for these innovative ideas you've come up with to enhance the value of your real estate value. And so experts seems to disagree because they've viewed downwards your [KPM rates]. What is your take on this?

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [19]

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I'll start and Gery will follow on. Now there were 2 kind of rough times in this March. The first half of 2019, while the hands of experts shook simply because there were very few transactions in France, in particular. So fewer points of reference and a bit more uncertainties. And we saw this, this was reflected in the expert views from H1 2019.

But the second half went much better. And there were a few transactions, AXA this year. Or on the commercial side, [H2] and the [Passage du Ave]. These were our sort of case in points. And so I think the market has slightly unlocked, has slightly opened up. And we'll be able to kind of hug the road. And it is good, that has reassured experts, and they've reviewed upwards their key assessments.

So slightly growing overall. Constant perimeter, we're talking down 0.9%, very limited movement there, while comparing what we do with the results as opposed to a few days ago, on our peers, is minus 0.9% is very, very good. It's a very good result and it pays tribute to the -- how resilient our real estate. It's local leadership, it's local presence. And this really reflect on our (foreign language). Still some hesitating going on as a result of limited volume of transactions, and transactions that tend to reflect our forecast. And we're very serene to the fact that we have good level of assessments. So we've been very realistic there, and that really makes us very comfortable as to the forecast and the evolution of our real estate.

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Géry Robert-Ambroix, Carmila S.A. - Deputy CEO [20]

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Yes. So over both of these. I think Carmila has been driving innovations. This is one of our -- this is part of our DNA. And in terms of the markets -- and you're perfectly right in terms of the market development.

Now why? Firstly on the growth drivers, the Carmila Retail Development, 5G, health, et cetera. Yes, all of these is complicated to indicating and working through financial models. And we always said that Carmila is not a real estate operations, it is not. We have said we are about retail, and this is compared to traditional players, I said, "Well, we [might sweep this under a rock] because this is too complicated for this reason. No.

However, we claim, we cherrypick shopping centers, real estate projects. Our real estate is robust. We have huge growth drivers that have great interest, very attractive, high potential. And the market could maybe appraise this specificity of Carmila. And in the year, reviews are read and papers, like it was last night and this morning, they've remained very traditional as to all the KPIs were real estate oriented, and hardly any comments as to the rest of what we've described. That's a pity.

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Alexandre De Palmas, Carmila S.A. - Chairman & CEO [21]

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Any additional questions?

No question over to the phone.

Well, enjoy Valentine's Day. This is a great day for shopping centers, Valentine's Day is definitely. So thank you very much for being here with us.

And really, we want to praise all the work of Camilla's team. My congratulations to Carmila, Marie-Flore Bachelier, the kingpins for today is our organization.

Thank you very much and have a lovely day and lovely morning. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]