THIRD QUARTER RESULTS 2022
Key highlights for the quarter to September 2022
Performance and business highlights
Following the strong retail sales growth in Q2, sales turnover in Q3 2022 was 7.3% higher than Q3 2021 and 7.7% above the pre-pandemic Q3 2019.
Strong like-for-like rental growth of 4.1% supported by rental indexation and the lease renewal and reletting programme.
Continued strong tenant demand resulted in 5.4% rent uplifts on renewals and relettings from 261 lease transactions signed during the 12-month period ending 30 September 2022.
EPRA vacancy rate at 30 September 2022 remains around its long-term historically low level at 1.5%, the same as at 30 June 2022.
Occupancy cost ratio (OCR) was 9.2% at 30 September 2022.
Eurocommercial maintained its GRESB 4 Star Rating, achieving its highest score to date, and also received an EPRA Gold Award for sustainability reporting for the ninth consecutive year (sBPR).
Cash dividend of €1.50 and one for 75 scrip dividend per share paid on 1 July 2022.
Loan to value ratio (on the basis of proportional consolidation) at 40.2% after the July dividend distribution.
Net earnings €1.77 (direct investment result) per share for the nine months to 30 September 2022 (30 September 2021 €1.57).
In accordance with the Company’s dividend policy, an interim cash dividend of €0.60 per share is expected to be paid in January 2023.
Direct investment result guidance for the full year 2022 confirmed ranging between €2.20 and €2.30 per share.
Board of Management’s commentary
Retail operations in our 24 shopping centres saw a continuation of the strong growth in retail sales that we reported for Q2. Retail sales during Q3 2022 increased by 7.3% compared to Q3 2021 and by 7.7% compared to the pre-pandemic Q3 2019, with all our four markets showing strong positive growth over both periods. Meanwhile, robust tenant demand has supported our renewal and reletting programme with 261 lease transactions completed in the last 12 months, producing an overall uplift of 5.4%. This tenant activity has helped maintain our historically low vacancy rate at its current level of only 1.5%.
Like-for-like rental growth was 4.1%, with a significant contribution from rental indexation where we remain on track to collect around €7 million during 2022 as previously reported. More will be known shortly about rental indexation for 2023 which is based on a variety of 2022 inflation indices, the majority of which are still to be published. Although there will be considerable variance in these inflation indices across our markets, the resulting levels of rental indexation will be significantly higher next year, and so far only the French government have provided some limitation on indexation, with a cap of 3.5% to assist smaller retailers and which will apply to around 25% of our rental income in France.
Clearly the main driver behind high inflation has been the sudden and marked increase in energy costs since the commencement of the war in Ukraine and the general disruption to supply chains, resulting in higher living costs and interest rates which are dampening consumer confidence, despite the generous energy support packages for households and businesses being put in place by governments. However, our shopping centres remain in a good position from which to face any reduction in retail spending with their high representation of everyday and essential retail, and being almost fully let to tenants at affordable rental levels, with an overall OCR of only 9.2%.
Assuming no major COVID-19 or energy