Klépierre SA (LI) Earnings Call Transcript & Summary

Hello, and welcome to the Klépierre's First Half 2026 Financial Results Presentation hosted by Jean-Marc Jestin, Chairman of the Executive Board; and Stephane Tortajada, CFO. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jean-Marc Jestin, to begin today's conference. Please go ahead, sir.

Good evening, everyone, and thank you for joining us today to discuss our first half 2026 results. We started the year on a strong footing, carrying over our solid operational momentum from 2025 in a very volatile geopolitical and macroeconomic environment. The retail market has proven strong and demand for high-quality retail space in our malls continue to exceed supply, contributing to a robust leasing tension and boosting our rental uplift. Our unique retail platform and mix offering provide us with great confidence in our ability to pursue continued growth, sustainable value creation and further increase our shareholder returns. Over the first half of the year, the group delivered a 4.4% increase in net rental income to EUR 571.9 million. This performance was underpinned by a 3.3% like-for-like growth and generated a solid 4.8% EBITDA growth powered by disciplined cost management, which enabled a remarkable 60 basis points improvement in our EBITDA margin to 86.7%. Overall, we delivered a net current cash flow of EUR 1.36 per share. Bolstered by sustained demand for profitable, well-located space, combined with very limited new supply, rental uplift on renewals and relettings grew by 5%, while leasing volume was up 8%. Footfall monetization gathered pace with mall income solutions up 13.4% in H1. Our occupancy rate edged up to 97.1%. Our venues have gained further ground with retailer sales climbing 3.9%, comfortably outpacing national sales indices, and footfall edged up by 1.2%. This positive trajectory was broad-based across all our regions, notably in Southern Europe, which has remained very dynamic across all segments. With structural tailwinds, a supportive consumption backdrop and strong operating performance all in play, we continue to be compounding our NAV growth, up 5.3% over first half to EUR 37.8 per share. Overall, this marks a growth of more than 10% over the last 12 months and above 20% over the last 2 years. On top of this, adding the EUR 1.9 dividend paid, we serve our shareholders with a total accounting return of 10.6% year-to-date. We have another half year to go, and as I said, we remain highly confident in further capital appreciation. We are lifting our 2026 guidance to at least EUR 1.15 billion in EBITDA and to a net current cash flow per share at the high end of EUR 2.77 to EUR 2.8 range. Let me now highlight what makes our business model so special. We own the right malls in the right places for retailers, a unique portfolio, 70 assets, each a leader in its catchment area, and together, they welcome 720 million visitors a year. We are positioned in the most dynamic parts of Continental Europe where revenue per capita runs 20% above national averages. Throughout the past years, we have been nimble in allocating capital to capture growth in the most dynamic catchment areas. Spain, Italy and Portugal clearly stand out as we have invested heavily in growing our footprint, including through value-accretive acquisition and targeted extensions. The most recent Bari acquisition and full consolidation of Portimão perfectly illustrate this strategy, reinforcing our position in high-growth markets where our scale, retailer relationships and operational expertise provides significant incremental value. Today, our Southern European platform has grown to represent 45% of the group net rental income. Great locations are only half the story. We actively manage what is inside our venues. Our portfolio is a dynamic retail platform that we continuously shape to stay ahead of evolving consumer needs. Since 2019, we have grown health, wellness and entertainment-related sales from 30% to 36% of our retail mix. As visitors not only come to our malls to shop and purchase the latest fashionable pieces, but also to splurge on leisure experiences. While the fashion sector continued to evolve rapidly and remain a key traffic driver, we continue to promote the category's leading brands and fastest-growing concepts. These dynamics have greatly contributed to steadily increasing footfall and the destination bappeal of Klépierre malls. And with 78% of our malls covering the full range of category killers, we offer the complete retail experience. That breadth is precisely what drove the top brands and the footfall to our destination venues, Zara, Sephora, Mango, Uniqlo, Normal or JDSports to name a few. Our success comes down to active retenanting and speed of execution. Over the last 2 years, lettings to new tenants made up 48% of our total leasing volume. We are highly committed to delivering space and continuously refreshing our venues, opening and enlarging stores for established leaders and fast-growing emerging brands. Our success lies in speed of execution, a key competitive advantage, allowing swift retail expansion and market share gains by our leading omnichannel retailer with some banners growing their footprint with us by more than 400% since 2019. This active retenanting and fast execution translate directly into strong numbers on the ground. Just over the past 2 years, across our flagship assets, sales density grew between 15% and 32% from Field's in Copenhagen and Le Gru in Italy, to Nueva Condomina and La Gavia in Spain. This strategy pays off, fueling strong leasing tension and contributes to maintaining an elevated occupancy rate across the portfolio. Demand for space in our venues remain exceptionally strong. We are capturing the leasing tension in our portfolio and this translate into another leasing volume growth of 8% year-on-year over the first half of 2026. At the same time, occupancy edged higher than a year ago to 97.1%. Such leasing tension release further rental uplift on renewals and relettings, reaching a very strong plus 5% year-on-year and consistent with the prior 4 years middle single-digit growth. Allow me now to stress a significant incremental source of organic growth above and beyond our traditional rental activities. We strive to monetize our qualified 720 million annual visitors. Through targeted specialty leasing actions, retail media campaigns in our malls and car parking services, mall income has accelerated further to 13% growth over the first half. Today, it represents 10% of the group total net rental income, and we expect that weight to further increase as we anticipate growth to remain in the double digits in the foreseeable future. Our mall income strategy rests on several complementary growth levers. In specialty leasing, we are hiring mall dedicated managers and rolling out a full digital platform to accelerate execution. In retail media, we continue to be modernizing our screen inventory and moving to a more profitable hybrid model. Finally, in mobility, we are expanding paid smart dynamic parking pricing to capture the scarcity of city center space while rolling out EV charging spaces. Before we take your questions, let me highlight a few points that underscore the strength of our performance. Our top line growth consistently outpaces indexation. In the first half of 2026, like-for-like net rental income grew 2.5 points above indexation. It's not the market handing it to us through inflation, we are earning it. This is a clear and repeated demonstration of the real structural value we create. Looking ahead, our growth potential remains fully intact, supported by 3 pillars. Our unique portfolio generates EUR 13 billion in annual retailer sales. Best-in-class leasing and asset management platform, highly supportive market dynamics with no new supply and scarcity of physical alternatives, together, this provides us with a long and visible runway for further growth. To conclude, our like-for-like net rental income has grown on average 3% above indexation since December 2023, while our NAV was up 26% over the same period. Backed by a fortress balance sheet, the best credit ratings and a historically low net debt-to-EBITDA ratio of 6.6x, our platform continue to deliver sustainable, high organic growth. Thank you for your attention, and I will now open the floor to questions.

[Operator Instructions] The next question comes from Pierre-Emmanuel Clouard from Jefferies.

So the first one actually is on, I guess you have the question every quarter, but on potential acquisitions. It would be nice if you can guide us through what you are seeing in the market? And if you are foreseeing any large acquisition in the foreseeable future?

Thank you, Pierre-Emmanuel, for your question, which is not the first time we have it. So as you know, we have a fortress balance sheet, and we are still committed to use it to make accretive acquisition. But -- and we are looking at different opportunities all over Europe. But we stay very disciplined both in quality and pricing and acquisition will come when it comes.

Okay. Then my second question is on your EBITDA guidance. If I'm correct, your EBITDA guidance implies a plus 3.2% year-on-year growth, while you already delivered plus 5% in H1. Should we expect any material deceleration in H2? Or should we be aware of anything happening in H2?

No, you should not expect any kind of deceleration in H2. It's just that you have kind of seasonality in the business. And we think this guidance is the right one at this time. We think we are more or less in line with market expectations also. So it's the right place to be, I think, at this time.

Okay. Understood. And my last one is more specific about your retail sales and footfall figures. Can you give us the Q2 numbers for footfall, and retail sales, it seems to decelerate a bit in Q2?

Stephane is looking at it. I think we should look at it over the last 6 months. It has been, as you have seen, a very, very strong Southern Europe, but also Northwest and Central Europe and even Scandinavia. The only region where we see more lukewarm environment is France, where it's only growing by 1.4% and the situation is not really improving or deteriorating. But I would say the pattern that we have seen in Q1 is -- in Q2 is quite similar across the regions. And I think when we look at the segments, the good news is that all the segments are positive. It's not for the first time, it's now for 2 or 3 years. And even fashion has also delivered a very strong performance with plus 4%. So I would say before looking at the Q1 and Q2 differences, but Stephane, maybe you can add.

Yes. Basically, our Q2 retailer sale is 3.5%. And the footfall in Q2 is plus 1.4%. So basically, it's quite consistent with the trend in Q1. That's why we think the trend of H1 is quite consistent. There is no big difference between Q1 and Q2.

But January was very strong, February a bit lukewarm, March, positive -- very positive, sorry, April a little bit shy of March, May was super strong, June was very strong. So it fluctuates from one month to another. So -- but on -- and I think it has been a good news to see sales developing so well all over the regions and all over the segments.

And I will add that the first view we have for July footfall, we do not have the retail side, it's still early, but it's around 1.5%. So again, very consistent with the trend we have seen in H1 and in Q2.

Okay. That's Clear. And maybe 1 quick follow-up question on potential acquisition. Given your current share price that is now trading above NAV, would you consider any contribution in kind with potential sellers? Or is it something that you are not considering today?

Well, what I like in your question is the world potential. So as long as everything is potential, we can elaborate and speculate. So I think we have been successful over the past years to do some very accretive acquisition. Just maybe to -- that I don't frustrate you too much, I think the investment market has recovered in many places. We have seen more capital being deployed in Spain and even in Portugal, a bit in Central Europe and a bit in Italy. So the investment market is stronger even though it has not completely recovered from pre-COVID times. And so we see a bit more competition, I would say, in the -- on the market. But once more, we are very -- we want to be very disciplined and the Board of the company is also very disciplined on quality and pricing. And yes, it takes a bit more time than what we would have expected, but we are still confident that we will have opportunities. The way we are going to finance it in the future will always be in the best way for our shareholders return. And yes, and we'll have to be accretive NAV and cash flow. So it will depend at that time where our share price stands.

The next question comes from Frederic Renard from Kepler.

I was waiting to come back on the Pierre-Emmanuel's question on acquisition and I am sorry for that. But you just mentioned that you are very disciplined in terms of pricing. But the way market might see it is that you have the lowest cost of equity at the moment of the retail companies and probably the lowest cost of debt as well. So on top of that, your leverage is quite low. So aren't you afraid of missing opportunities that might be accretive at some point just because you are probably too selective? That's the first question.

Well, selective, so we can turn around the issue as long as we want. But I think the -- when we say we are disciplined, I think we have strategy we want to focus on the large cities and for assets where we can bring value. So in fact, in many circumstances, there are some assets of great quality, but we can't really add value and then pricing is challenging for us. So I think our shareholders will always favor discipline and if it comes with timing, it's okay. So we have seen many transactions of assets yielding quite high, which do not fit to our strategy. So I think, yes, our shareholders favor discipline and even if it comes with timing. So we have a very strong balance sheet. We are among the few, okay, being able to deliver such growth, okay, with the net debt, which is -- net debt to EBITDA, which is declining and the net debt, which is stable. So we are also pruning the portfolio. We have been selling a couple of assets. So we are long-term committed. So we don't look at our -- at the portfolio size or quality short term, we really look at long term. So we may have some time a bit more disposal and less acquisition, but we are still committed to use our balance sheet the best we can for our shareholders. So -- and I think that's -- and maybe I hope we will not have the same question coming.

No, that's fair. Maybe a second question is, what is explaining the acceleration of -- or at least the acceleration rhythm, I mean, the inflection point? So you had a 13% increase in the mall income in H1 2026 versus full year 2025. Is it a specific lever that is increasing faster than what you may have thought initially? Or how should we read into that?

No, I think what we -- even if you know we are not -- we don't really like to itemize too much the business, okay? But we think we -- there is a lot of question about ancillary income. I think the value of our footfall is much higher than what we sought 5 or 6 years ago. So we clearly have identified 3 levers. We don't talk too much about data and AI, And, okay, we are very on the ground, okay? And there our 3 levers that are contributing each to a good monetization of the footfall, so it's specialty leasing, it's also retail media we are improving quite fast, and also mobility as we explained in the presentation. So we really think it's -- we are not really at the beginning of the journey, but we still have a long road to go, and we see it as -- yes, as a new source of revenue going forward.

And also maybe to add a bit of color for you, Fred. We have better occupancy in specialty leasing. We have stronger rental uplift in specialty leasing. So obviously, that's why the specialty leasing is increasing and accelerating. And because we have put in place a strategy relying on on-the-ground people making the jobs. That's what we have explained in the presentation. We have hired dedicated managers in the shopping malls to boost the brand activations, the events and to boost the specialty leasing that's why specialty leasing is increasing and accelerating on the retail media because we expand and modernize all our screen inventory. So basically, it's a very specific strategy and with very dedicated action and it pays.

Okay. It's fair. And maybe if I may, a last one. I see capital appreciation still at 2.6%, so it's a very good level. I see that the yield is going down. How can you justify lower yield in a higher interest rate environment just purely on rental growth?

No. Basically, we have 2 points. The first point is the cash flow growth. So basically, if you split the 2.6% increase -- like-for-like increase in the portfolio value, 2% come from cash flow growth because the cash flow growing above appraisal expectation. So that's the first point. Because of mall income, because of rental uplift, all what we have explained in the presentation about the growth of the cash flow in H1. Second point, we have 0.6% coming from a better market metrics. And it's just because the discount rate has slightly decreased. The exit rate is the same, but the discount rate has slightly decreased because the investment market, as explained by Jean-Marc, has been much more active in retail in the last 12 months than it has been in the last 4 years. So basically, there is an acceleration of the direct investment market. And the appraisal translated in a lower discount rate because it's less risky.

The next question comes from Kai Klose from Berenberg.

I've got just one question, if I may. This is on the CapEx or the capital expenditure, which, in the first half '26 were a little lower compared to H1 last year. I think that might be seasonal. But could you maybe give an indication what you're planning to spend in the second half as a rough number?

I think for the second half, the CapEx will be probably around EUR 50 million.