Ladies and gentlemen, welcome to the Klepierre twenty eighteen Half Year Earnings Conference Call. I now hand over to Jean Marc Gestin and Jean Michel Gault. Sir, please go ahead.
Good morning, everyone. It's my pleasure to be here with Jean Michel to present Klepierre's first half twenty eighteen earnings. Good morning, I will first present the highlights of the first half, which was very strong and explain why we think we have the best of retail in our properties. Then Jean Michel will walk you through the operational and financial performance of the first half. And I will conclude with our development projects and the outlook.
So starting with the highlights on first slide. Four key figures summarize how strong our performance was in the first six months of the year, thanks to the efforts of all our teams all over Europe. Number one, net current cash flow per share was up by 7.8% to €1.31 This is mainly due to solid like for like growth in net rental income of 3.2%, 200 basis points over indexation. Our net asset value rose by 6.8% to 39 point euros 5 And those very strong results exceeded our plan and therefore we have decided to raise our full year cash flow guidance for 2018 to at least €2.62 per share, which compares to our initial objective of €2.57 to €2.62 Our leasing activity remains very dynamic. We have signed nine fifty eight leases in the first half.
This is the second best performance of our portfolio in its current size. We signed also deals with 11.1% re leasing spread and this is roughly in line with previous years. And the vacancy as you can see is done by 20 bps year on year to 3.2%. Our leasing activity is dynamic because retail as you know is dynamic. Whether we are talking about established players who are expanding in our or new commerce we are introducing in our malls, the deal flow has been very strong.
Here we see a few brands that have signed deals with us. They are quite diverse. And probably names that you do not recognize we show that retail as it has always been the case is constantly regenerating. Sports sportswear retailers are continuing to grow quite impressively through our also food and beverage brands. There are some of the players we are introducing or expanding as part of the destination food strategy that we are implementing all over Europe in our malls.
Turning to our development highlights of this past six months, I would like first to say a few words about Uchucchacrine, the number one mall in The Netherlands and we think it's a true success story. Last spring, we fully opened what we call the North Mile that is a new connection from the central station to the art of the shopping center with 14,000 new square meters of retail, consolidating the mall's leading position at fashion and food destination for the whole country. The figures speaks by themselves. We have increased footfall by €3,000,000 year on year to €27,000,000 and retailer sales are up by 10% so far this year. And there is more to come and I will come later in the presentation.
Prado in Marseille is our newest family member. We opened it in March. It was an immediate success and has been unwavering since then. The footfall is increasing as Zara opened its flagship store a few months ago and the rooftop terrace is truly unique and entirely dedicated to a sophisticated dining offering. Prado is a fantastic venue as some of you have visited and leading edge in terms of architecture and environmental performance.
It I think exemplifies Klepierre's style and know how. Another example of Klepierre know how is in the refurbishment category is Pele Lunio. You will remember that we bought this asset in Marin in 2015. It was already a great shopping center, but we thought it needed a bit of innovation to make it a world class mall. We dedicated a limited amount of CapEx I.
E. Euros 15,000,000 to create maximum impact and Klepierre share is being limited to €5,000,000 This type of property proves that physical retail is not only still relevant, but more attractive than ever. The full refurbishment was delivered in May and already footfall sales and valuation have significantly increased. On Slide 11, you can see the new interior of the mall with a digital animated display and I think it's quite stunning. To conclude on the highlights of the first half, let me comment on the retailer sales.
In our malls all over Europe, they increased by 1.4% in the first half, outperforming national indexes by 100 basis points. The overall performance was driven by Iberia, which is still brilliant and Germany as well as Central Europe and Turkey. Scandinavia is lagging a little bit behind because of Denmark and Italy was negative because it suffered probably for the most important bad weather condition in Europe and which has a significant impact on the fashion segment and also macroeconomic situation affected by political uncertainty. In the whole portfolio, Health and Beauty and Food and Beverage were the main contributors to the growth and our extensive retenanting actions also play a large part, which brings me to the next topic. Being able to constantly outperform the market and sustain growth in a challenging retail environment is the outcome of a very clear strategy.
In our last earnings presentation, I touched on the refocus of our portfolio, which were completed in recent years and on our capital allocation strategy. This morning, I would like to zoom in to the leasing level to show you how we have transformed our retail mix over the past few years. Working on the mix takes time. It's not always visible, but it is essential, which is the very core of our activity as I sit, looking for the right retailers at the right place, detecting the new trend, the new retail heroes, deploying them fast. This is our job, balancing the various segments within the mix.
And of course, there is no cookie cutter approach. We have to adapt to each local situation. But there are some fundamentals to observe. And we have been doing this in-depth across our portfolio and it is bearing fruits. Which is what I want to show you now.
So starting with fashion, we have significantly outperformed the European market on the fashion segment in terms of retailer sales by two fifty basis points since 2013 on average. The market where we are have grown by 1.7% annually on average while our retailer sales have grown by 4.2%. And there is a reason for that. Because we have clearly over weighted the big international retailers in all our malls and more importantly, we have implemented their latest store formats. That's what we have called for years now the rightsizing.
Thanks to our ability to accommodate them, we have today 39% of our retail sales in the fashion segment in our malls are from top international retailers including names among others such as Zara, Primark, Unico and Caledonia. And this number compares to 29% in 2013 at constant scope. And this illustrates a massive qualitative transformation of the fashion segment in our malls. And as we have been implemented the latest stock formats of those retailers, the average store size has increased by 18% and sales per square meter have also increased accordingly by 19%. And we will continue to work on this transformation and I'm confident that it will allow us to keep outperforming in this polarizing retail environment.
Turning to Health and Beauty now. Again, our outperformance versus the market in terms of retail sales is very clear. We have grown by 4.5% annually, while the market has grown by 2%. And in this case, we believe it reflects our ability to size the momentum the momentum sorry of trendy and fast growing brands. We can highlight retailers such as Sephora, MAC, Rituals, Lush among others.
And since 2013, we have opened 101 stores with these brands, which accounted for half of our growth since 2013. They help explain our outperformance on this segment. The last segment is Food and Beverage and this market is very dynamic and we have benefited from that. We are amplifying the trend by rolling out our destination food strategy in all our malls in Europe. And in this segment, have been capitalizing on the must have brands that we have largely deployed in our malls with 156 stores and 27 openings since 2013.
These brands include Burger King, McDonald's or more recently Starbucks and Nespresso. And today these retailers represent 20% of our retail sales in the Food and Beverage segment. In addition, through the ongoing deployment of our destination food concept, we have been expanding new concepts on local heroes such as La Piano, Big Fernault or Five Guys. And we are committed to extend the Food and Beverage segment in our malls. To illustrate what I have just said about the three segments, I would like to showcase on the ground the exceptional retail mix transformation of Val D'Orop.
The extension and refurbishment of this mall gave Klepierre the opportunity to modernize the retail offering. And we as you know, we have added 14,000 square meters of new anchors such as Primark, Zara, H and M, Uniqlo, Nike in their latest formats. And this has benefited not only to the fashion segment, it has also benefited to the entire mall. Sales per square meter for the Health and Beauty segment have increased by 20%. This segment also benefited from the implementation of new brands such as NYX, MAC and the brand new Sephora Concept Store.
The same goes for Food and Beverage where sales per square meter in Valdera are up by 24%. I would like to conclude this section by saying that Klepierre has a unique business profile in Europe for four reasons. Number one, thanks to our leading Pan European platform, which is positioned in urban areas, which are all growing faster than others in economic and demographic terms. Number two, thanks to the unmatched retail mix I just presented. Number three, in a polarizing retail environment, these two elements allow us to generate high and growing sales per square meter.
And number four, and thanks to our low level of OCR, we have clear potential to sustain the rental income growth going forward, especially keeping in mind the accretive impact of both acquisition and the development pipeline. With this, I'm handing the floor over to Jean Michel now to present the operating and financial performance of the first half.
Okay. Thank you, Jean Marc, and good morning, everyone. Let me walk through the operating and financial performance for the 2018. As Jean Marc told you, the first half has been once again very strong. Net current cash flow increased by 7.8% after a 7.4% increase last year.
Looking at the main growth drivers, net rental income rose by 2.4% mainly driven by a sound 3.2% like for like growth for shopping centers. Operating cash flow increased by 2.6%. This is slightly higher than the net rental income growth as we managed to further reduce our operating expenses as illustrated by the 50 bps reduction in our imprA cost ratio. The net cost of debt has continued to decline to 1.6%, a 30 bps reduction compared to the same period last year. The result is a €5,500,000 drop in our cost of debt.
Lastly, the reduction in the average number of shares following our share buyback program boosted the net current cash flow per share. Looking at the NRI like for like growth, we benefited over the 2018 from a higher indexation at 1.2% compared to 0.7% last year. In addition, our outperformance of our indexation remained at a very high level of 200 bps. This is explained by solid leasing spread, further increase in specialty leasing revenues and vacancy reduction. Lastly, bad debt remains at a very low 1.6%, demonstrating KKR's leasing policy to focus on healthy international retailers.
By geographical area, NRI like for like growth by country was quite comparable with last year with all the geographies posting a positive performance except for Germany, which was flat. Moving to the next slide, the leasing momentum remains buoyant. We have let renewed or re let 6% of our rent roll during the first half, translating into additional annualized minimum guarantee rents of €19,100,000 slightly above last year record, which was 18,900,000.0 For renewed and relet leases, the reversion reached 11.1% with strong contribution from France, plus 13.8% benefiting from the renewal campaign at Salazar and Spain, plus 24.1%. Reversion in Central Eastern Europe and Turkey was also maintained at a high level, plus 10.4%, sustained by The Czech Republic, notably in Novichmirov with the ongoing Tesco operation and Hungary. In Germany, the mark to market of our leases is still an ongoing process, mostly at the shopping center of Drisberg and Drisberg Koenigsgallery.
Through the dynamic leasing activity, vacancy rate kept declining at 3.2%, down 20 bps year on year. This improvement comes mostly from The Netherlands, Germany, Central Europe and Turkey. On this next slide, regarding cost, we continue to streamline our cost base. Looking first at our operating cost, G and A have declined by 2%, which combined with the net rental income increase has triggered a 60 to 70 bps reduction in our EPRA pass ratio over the past six months or a 300 bps drop since 2015. Meanwhile, we also reduced our net cost of debt to 1.6% at the end of the first half.
The 30 bps reduction in compa with the level one year earlier was driven by recent refinancing initiatives since net debt remained stable year on year. Looking now at the capital allocation for the first half. In terms of CapEx, we invested €177,000,000 over the first six months of the year. It can be split between development for €115,000,000 mostly related to Prado, Francatharine and Creteil Soleil and the like for like portfolio for €50,000,000 On the like for like portfolio, that is to say assuming no additional square meter, the spendings includes leasing CapEx for approximately 50%, refurbishment for 20% and technical maintenance for another 25%. These figures are before invoicing to tenants, which represent about one third of the overall amount.
On the disposal side, we sold assets for a total amount of €310,000,000 As a reminder, euros $2.00 3,000,000 are related to the two malls in Marseille and in Madrid that we sold to Carmela in February. Other assets sold include notably a development plot in Germany. Lastly, we continue our share buyback program in the first half. Since the inception of this program last year, we have repurchased shares for roughly $440,000,000 including $67,000,000 over the first half. I would like to illustrate now how we allocate our resources.
Over the past twelve months, sources and uses of cash have been quite comparable leading to stable net debt over the period. It is worth to highlight that our net current cash flow more than covers the dividend payment, the CapEx of the existing portfolio and most of our annual cash out dedicated to the development pipeline. This is another way to say that we don't rely on disposals to finance our current business. In the meantime, the cash proceeds from the disposals are invested in selective acquisition and the share buyback. Overall, through a disciplined financial policy, we are able to improve the quality of both our asset portfolio and our balance sheet.
Now let's look at the portfolio evolution. On a like for like basis, the value of our portfolio of shopping malls has increased by 3% over the past twelve months and by 1.4% over the past six months. In a context where yield contraction has been nil, our EPRA net initial yield remained flat at 4.8%. By geographic area, France, Belgium, Italy, Iberia and The Netherlands have been the most important growth contributors. Central Europe and Turkey decreased by 10% over six months, mostly due to rent adjustments in Turkey related to the depreciation, sorry, of the Turkish lira.
As Jean Marc mentioned earlier, we are accelerating the evolution of the tunnel mix in our malls. This has also boosted the valuation of some of our assets. For instance, Nueva Condominium, plus 11.4% over six months sales, plus five percent L'Ovish Miraof plus 4.5%, but also Parquenac and Tin Portugal plus 5.4% and Porta di Roma plus 5.3%. All these malls are benefiting from these recent refinancing initiatives. Moving now to the debt position.
Debt position remained very stable. Over the past twelve months, LTV declined by 100 bps to 37.2% at June, reflecting the flat net debt and the increase in our portfolio valuation. Over the last six months, LTV increased by 40 bps due to the dividend seasonality. Restated from that impact, our LTV would have reached 36% or 80 bps contraction. As a reminder, next year, we will pay our dividend in two installments instead of one.
Overall, the 30.2% loan to value remain right in the middle of our mid term target. Other debt ratios also point to a very healthy financial situation, namely broadly stable net debt to EBITDA ratio at 8.7 times and pretty high interest cover ratio at 6.8 times. Debt duration was maintained at six point two years. After the refinancing last December with 500,000,000 fifteen year bond issue at 1.6% coupon, KKR has repaid in January a €290,000,000 bond having a 4.625% coupon. Additionally, to continue to optimize its debt structure, Klepierre has renegotiated or contracted new credit revolving facilities as illustrated by these two charts.
Overall, this transaction will generate savings for 2018 and 2019 of respectively €700,000 and €1,200,000 while extending the maturity by one point eight years, three point four years if extension options are exercised because most of these lines are, as you probably know, five plus one plus one year credit facility. The group liquidity position is at €2,000,000,000 which cover two point six years of debt repayment with an average maturity of five point one years versus four point seven years at end December twenty seventeen. And now after portfolio valuation and debt evolution, let's turn to the EPRA NAV. IPRA NAV per share stood at €39.5 at the June 2018. This represents a 6.8% increase compared to June 2017.
The main drivers were the strong cash flow generation for €2.6 and the asset revaluation for €1.8 partly offset by 2017 dividend payment for €1.96 Over six months, the NAV is broadly flat explained by the full impact sorry, by the impact of the full dividend payment. After optimized deferred taxes and the change in fair market value of debt and financial instrument, the IPRA triple net NAV is at €37.8 per share, up 7.1% year on year. And now as a conclusion, I would like to share with you the evolution of our net current cash flow per share in connection with our leverage. Over the past three years, we have been able to grow our cash flow per share by 6.6% annually. All in all, that is to say including acquisition, disposal, etcetera.
Meanwhile, net debt has been stable, leading to a declining LTV, a unique performance in the sector. And now I hand over to Jean Marc for the update on our development projects.
So thank you very much for this Jean Michel. So on the development, we will just remind you that we have our development pipeline is about €2,900,000,000 As you know, it's also very focused on extension as we see the reductions from the retailers to go for larger greenfield project. And we have and we also consider that this is a better risk reward strategy for our shareholders to focus on extension. So moving to Utkaltrain, a very quick update. We will finish the project at the 2019.
There is still 28,000 square meters of additional retail to be opened by that time. 82% of it is already leased and we expect the footfall to increase from €27,000,000 to €34,000,000 Moving to Crete, we have started the extension and the renovation of Crete. This is a €134,000,000 investment with a 5.7% yield on cost, which includes the renovation cost. We will add 11,000 square meters making a straight connection to the subway and we will add 3,000 square meters of restaurants. And as we speak today, 57% is already pre let or in advanced negotiation.
I would like just to we have not started the next two projects I'm going to go through very quickly, but just to give you a sense of what extensions means for Capierre. Going to Odisha and this is in Montpellier. Montpellier, this scheme retail destination is more than 100,000 square meters. What we own is what you can see is in blue, we are going to do a future extension on an existing plot with large fashion retailers and more boutiques and restaurants. And this is probably to be launched sooner with an opening targeted for 2021.
And in addition, this is a €400,000,000 property in Klepierre. Grenoble Grand Place, same strategy. This is a large scheme, more than 80,000 square meters, a very large retail destination in France. And we are going to extend also by 16000 square meters. The total value of the asset is €370,000,000 And we will have a large fashion anchored, which is already leased.
And the food area will be increased by 3,000 square meters. And we will also refurbish the sensor. So now moving to the outlook. As we started with, we have decided to increase our guidance to at least €2.62 cash flow per share. So now maybe we can leave time for questions.
And Jean Michel and myself are pleased to answer
We have the first question from Jonathan Kolt Natta from Goldman Sachs. Sir, please go ahead. Good morning. Thanks for the presentation. I have three questions please, if I may.
The first one on vacancy. Do you expect that from 3%, 3.2% that you have at this stage, do you expect this rate to go down still? Or is that rate to the level at which you feel that this is the structural vacancy at least the remainder of the vacancy? First question. Second, interest costs, I've seen it's gone down again.
Have we reached the bottom at this stage? Or do you still expect some opportunities to reduce that further? And the third question please on valuations, the rates marginally come down at this stage. I mean, the investments in shopping centers in France and in Europe, some extent, have come down quite a bit. How are your conversations going with the values about the yields at this stage?
The growth will remain flat, But do you expect that to continue in the near future? Or do you see a bit more pressure from the valuers and more heated questions coming on that point? Thank
Thank you. You, Jonathan, for your situation. So I will start by the first one. So the vacancy level, it's always a target for us to reduce it a little bit more. I always had a target to be a little bit below 3%.
But vacancy, the way we see it is this is there is two type of vacancy. There is vacancy, some of it is structural and it's difficult to reduce. And some is also they allow us to do the relevant free-ten 19. So to a certain extent, we need to have a certain buffer of vacant services in our best malls to accelerate free-ten 19. So in a nutshell, think being around 3%, that's our target.
For the interest cost, Well, for interest cost,
for the end of the year, we clearly expect the the cost of debt to go to 1.5%. Then after, we don't know because we don't have major refinancing to come next year as you have seen in our maturity schedule. So that makes that it will depend of course from interest rates in the next two years, which is not easy to predict. So for the time being, it's also that we will go at least to 1.5 at year end.
Okay. Valuations?
Well, on valuation, the discussion with we haven't been challenged too much, I have to say, by valuers regarding yields and so on. They still view the shopping center market for the quality of assets we have in our portfolio as benefiting from it's difficult to say a strong demand because we have seen quite few transaction during the first half. But they remain quite confident on the fact that the yields are stable at least for the best asset. And even if we have improved yields in for the second year in all, I have to say, in Italy, and we have corrected some yield on more secondary assets in France. But all in all, as you have seen, our net initial yield is flat at 4.8%.
No pressure there.
Sure. I mean, obviously, I mean, as you're saying, you decreased the yield on you increased the yield on a few properties. Does the lack of liquidity indicates that there's a mismatch between supply and demand at this stage and investors are no longer ready to bid for these yields. And obviously, in The U. K, it's a different context, but we are seeing adjustments in yields at this stage, the repricing for U.
K. Shopping centers. So are we just one year behind in France? Or do you feel that investment market, for instance, will resume and will continue to see transactions at the current yield levels?
I mean, for instance, can
you perhaps if you could comment on your disposal program and do you see appetite in the market if you want to sell any asset?
Okay. So there is a lot of questions in one. So I think the it's clear that the investment market is not that great. We have seen a lot of transaction, but the level of we don't have the Q2 numbers, but we expect the investment numbers to be lower than the previous years. So I think the fact that we are Pan European actor and that we can play on a different investment market.
So I would say today to characterize the French market is almost quiet. We don't see a lot of transaction, but we have been able to do two transaction above book value at the beginning of the year. All our transactions are made above sale. Disposals are made above or around book value. So we are still confident that our disposal strategy will meet the book value.
And we are selling assets a little bit everywhere. So we are much more able than some other players to dispose because we are not exposed to only one or two investment market that can close for six months or for a year and reopen after. So I'm still confident that when we put assets on for sale at Klepierre, we have appetite and we don't see a risk for the values to go down.
Thank you.
Okay. Thank you. Next question from Charles Boisier from UBS. Sir, please go ahead.
Yes. Good morning. I have two questions, if I may. So the first one is you compete with Unibail in quite a few catchments like Paris, Madrid. And I just was wondering, as they change scale with the Westfield acquisition, do you see the lot potentially affecting your bargaining position to attract international retailers in your malls going forward?
Or do you think that's totally irrelevant and neutral to your own bargaining position? And then secondly, on the negative revaluation in Turkey and Poland, how much of that is FX related? Thank you.
Okay. So your question about some of our peers, we don't comment publicly on what they are doing. So I think if I may say, yes, this is irrelevant. For Turkey, have seen a decrease in values. So maybe Jean
Yes, Pierre will I think we have to look for the figure. We will come back to you Charles on this, if you don't mind. Give us a few minutes.
Okay, sure. Thank you.
So we will answer to that question specifically.
We'll come back on it, yes.
We have less than €500,000,000 invested in Turkey. So even if it is 10%, that's still a very moderate number.
Yes, yes. And in Poland as well, was asking.
And Poland, have also we'll give you the number in a few minutes. So maybe we can move to the next question until we find the right answer.
We have a question from Florent Lacher. Gilbert, it's over to you, sir. Good morning, Florent Lacher. Gilbert, I had two questions. The first on Germany, we can see growth on a like for like basis of 0% and a reversion, a negative reversion of 4.6%.
I just wanted to know what we can expect. We understood that you're working on this. My second question is about the cost of debt. We've understood that it should be at one in the region of 1.5% at the end of the year. Have you implemented a hedging policy for rising interest rates?
Okay. So moving to Germany. Germany, we acquired Germany through the merger with Corio back in 2015. The narrative about Germany has not changed. The properties were those properties were a little bit over rented.
So we are re tenanting to better tenants. So the reversion is negative, but this is compensated by higher occupancy, saving in cost. So I think we are quite fortunate to see the NII flat with a moderate negative reversion. We have three big assets in Germany, Duisburg, most of the releasing campaign after ten years has been achieved and the next challenges would be for Dresden and Berlin, but we are well on track. So I think the narrative has not changed.
This is a property we are really taking care of. We are releasing. We opened two flagship stores with Zara, which is a good sign that the international retailers have appetite for those assets. So we will probably continue to see negative reversion, but more or less stable NII.
So on hedging, I think, good one. Actually, the general policy of Klepierre is to be 70 in fixed rate, but it is fair that we can adapt this general policy also in consideration of the interest rate timing. And for now one year, we have managed to raise this hedging ratio to 95% at least for the next three years. That is to say that we have taken three years mostly caps in order to manage that if interest rates were going up, we can enter into the atmosphere gradually. So I need to say that for the next three years, are almost immune from an interest rate increase at debt stable, obviously.
If I may come back on the question of Charles, because I do have the answer and quite rapidly. On Turkey, most of the change actually on a like for like basis is related to ForEx and it makes about €38,000,000 due to the depreciation of the Turkish lira. And for Poland, it's about €10,000,000 So I think we can go to the next question.
Okay. So next question from Madam Ariane Kleber from Kinna. So please go ahead.
Good morning. It's Ariane Kleber, KIRI. We are an independent research firm, and I have three questions. First of all, what do you see in relevant demographic trends across Europe that you are using to optimize the portfolio?
So for this question, as you know, whole Europe has a declining demographic. So, but the big cities are getting bigger and more populated. So that's the reason why we have targeted our strategy to be in those cities, which are the vast majority of them are going quite fast. So we are very happy with that strategy because I assume the retail is always, we never have to forget that always a function of the number of people.
Okay. And my second question is about e commerce. And my question is how do you anticipate further increases? And do you see strong regional differences in the growth of e commerce? And maybe also a comment about the difference in e commerce, groceries and non groceries?
So yes, it's not a prediction. Think this is what everybody can see clearly. E commerce is growing in Europe at the pace of around 15% a year. Some of the countries are well equipped or well penetrated by Internet, some are less. So looking at The UK, this is probably the highest and then you have France.
And then at the very bottom, have Spain, Italy due to infrastructure and those countries are growing at a pace of where Internet is growing more than double digit starting with the two. When you look at The UK, for example, the growth from a year to another for e commerce is only 8%. So, there is a trend I cannot predict for sure, but there is a trend that the e commerce is going fast to 20% in terms of retail penetration and it has an impact on all the segments. And for our retailers, it clearly means that they need less stores, but they need more relevant stores, bigger stores where they can showcase their brands and they favor clearly the big shopping centers, dominance in the catchment area to the expense of high street, secondary high street. So we are to a certain extent benefiting from the increase of Internet when we see our occupancy.
That's what I can say on grocery, this is where the penetration rate is the lowest. There is a lot of debate about where it could go. Think there is a big issue about logistic and technology for fresh food and goods to be on Internet. But I expect this segment also to be impacted in the future quite significantly.
Okay. Thank you. And then my final question is about your French convenience centers. Do you expect further arbitrage or do you plan further arbitrage of that portfolio?
We have no I think there is on the newspaper yesterday, today and the day after, are so many people who are forced to sell. We are not in that situation. We have a portfolio which we think is relevant in the catchment area. The shopping centers you are referring to are doing extremely well. They have high sales.
They are growing in terms of retailer sales and NII. So we have a very strong portfolio and we are a little bit confused when it comes to making to narrow segment about it. So we are satisfied by it. But we are clearly over time financing our pipeline and continuing constantly to downsize our number of assets. And this we have started this year, the year before.
So we will continue obviously to sell assets a little bit everywhere.
Okay. Thank you very much.
Thank you. So next question from Celine Yoon from Barclays. Your line is now
morning. Thank you very much for taking my questions. I have three questions. The first one is can you comment on how why exactly you upgraded the cash flow guidance guidance for full year 2018? The second is a follow-up question on the disposal.
Are you planning to accelerate the disposal on the secondary small assets in the second half of the year? And what sort of discount or premium do you see out there for these assets? Third question, can you give us the latest on The UK? Have The UK company's recent result make you feel more or less enthusiastic about this market?
Maybe I take the first one on the guidance. I think, well, it's quite obvious that we have delivered €1.31 per share in the first half. So and we don't see it going lower in the second half. So that make that we are already at $2.62. I think this is the best and shortest answer I can give you.
So when it comes to the disposal, this is the question comes almost every time we meet. I think the last time we discussed officially presenting our annual results, we said that we have a target for 2018 between 400,000,000 and €600,000,000 of disposals. We are almost at the bottom of the target and we will probably be in the middle of the target or slightly higher by the end of the year. So we continue to do the job. I think it's important to refer to Jean Michel presentation about uses and sources.
We are our discipline, okay, allow us to dispose assets in very good conditions when the market investment market are open. And that's why we reach our book value. And this discipline, I will think will pay off short term, medium term and long term. When it comes to The UK, we have no comment.
Okay. Thank you.
Thank you. And our last question from Charles Kuhn from E and J. Sir, please go ahead.
Yes, hi, good morning. First question on basically the setup of shops. Two of your peers have commented on larger retail units And one of them said that they have problem leasing up larger units, and that's specific to Belgium. And then a UK peer has commented that larger units saw a higher decrease in appraisal ERVs. So could you maybe comment on what's happening to larger units in your portfolio and if you recognize these statements?
Thanks.
Don't have to be honest, I don't have the answer to the question. I think there is there are so many different landscape when it comes to retail in Continental Europe that's difficult for me to opine on Belgium and The UK. I think the main difference between The UK and Us, it's when it comes to department stores, the same happened to The U. S. All these big boxes, which are exceeding 20,000 square meters or even 30,000 square meters, they need to be released and sooner than later.
So that's a challenge we don't have. When it comes to medium sized unit, as we can see, we see the large operators in fashion with a trend to enlarge their stores. So we have a great demand from all of them to expand and to increase the size. And just as a sign, if you look at the most at the largest fashion retailers, the Primark are taking bigger space, the H and M are taking bigger space, the Zara taking bigger pace, the Ki Adi are taking bigger space, the OVS are taking the list can be very long. So I think there is clearly the polarization of retail to the best shopping center in their catchment area comes with an enlargement of some of the large retailers in their segment.
But in other segment, you can see downsizing, it comes to electronic, to culture. There are more downsizing than enlarging. So our job is to manage all of this. And I think we are doing quite pretty well.
Okay, thanks. And then maybe finally on the sources and uses slide in your presentation, you split out the CapEx and then €104,000,000 on like for likes. Could you just comment on the kind of the return you're expecting on that like for like CapEx, which is shown there?
I think the there is we have been we have received requests from analysts and shareholders to be more transparent about CapEx. That's what we are doing here. I think when we the like for like CapEx on the 104,000,000 I think we should dig into more details, which probably we will not do today, but in the next release that we have in that numbers, have three numbers. We have the some of the renovation cost. We have also maintenance CapEx and those costs renovation and maintenance CapEx are mainly invoiced to tenants.
Here we show the gross amount. And then we have leasing CapEx, which is a portion of it where in fact when the tenant income, there are two items into it, the cost that we have to spend as a landlord to sometimes reunify units or doing some works to prepare the premises and fitting out contribution we may have to grant to some of the junior anchor. And that's something which is explaining now in our on Page 35 of our Management report. Management report. So I invite you to go on that page and to see in more details the numbers.
Okay. Thank you. But we can That's a pretty
low number, in fact, 104, I think, for a company of our size. We have been very disciplined we are, we have been and we will stay very disciplined when it comes to CapEx. I think the core of the business is not to spend CapEx, is to do the right free tenanting, okay? And when you see for a company like us, the like for like is very strong, robust and the CapEx associated, which is only a portion of that amount on to releasing CapEx is very marginal. And I think that our the way we manage the company is to be very, very careful about the CapEx we spend.
Okay, great. So you would say that within that number and then obviously you will wait for further details, release in CapEx is definitely not the it's a smaller part of that number?
50% of the €50,000,000 we have in Tuesday.
Okay, great. Thank you. Okay. We don't have any questions for the moment.
So thank you very much for attending the call. We did it by phone. I hope the technology was okay. On our side, it was okay. So on the agenda for then we the agenda of the company is October 1516, we will organize Investor Day in Amsterdam slash Eutris to our Ucabrein redevelopment project.
And October 22, we will announce the third quarter of business review of 2018. So thank you very much for attending and we wish you an excellent day.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.