Mercialys 2007 First Half Earnings

Regulatory News: Mercialys (Paris:MERY): Another period of strong growth Rental revenues: +22.2% Recurring operating cash flow1: +23.3% Operating income: +26.5% Development pipeline enhanced by seven tenders won Portfolio valued at Euro 1,613 million A semester of strong growth > Rental revenues: +22.2% to Euro 48.4 million > Recurring operating cash flow: +23.3% to Euro 42.1 million > Operating income: +26.5% to Euro 35,1 million A solid business performance > 117 leases renewed or relet > Growth in rents on an annualized basis of +32% in renewals and +111% in relets > Growth in retailers' sales still above the CNCC average Development pipeline enhanced by tenders won and the roll-out of the "Alcudia" program to improve the value of the existing portfolio > Seven tenders won to develop new shopping centers, enlarging Mercialys's pipeline, currently worth Euro 515 million > 80 strategic plans of action finalized concerning the existing portfolio - planned investment of Euro 425 million Acquisitions signed or under contract since January 1, 2007 representing Euro 89 million Portfolio valued at Euro 1,613 million, representing an average yield of 5.8% Interim dividend of Euro 0.36 per share to be paid on October 4, 2007 Jacques Ehrmann, Chairman and Chief Executive Officer of Mercialys, commented: "As expected, we achieved tangible growth in 2007, driven by our teams' work in terms of value creation and acquisitions. This is a promising year, marked by the major successes of our development teams. It is also the year of the roll-out of the ambitious program launched in 2006 to enhance the value of our portfolio, which will be a source of value creation at Mercialys over the coming years." ACTIVITY OF THE SEMESTER The first half of the year was dedicated to feed the four main sources of growth on which Mercialys's teams are focusing: > Realization of reversionary potential: solid performance in renewals and relets. > Improving the value of the existing portfolio: The Alcudia program reached a key stage with the finalization of analysis of all of the Group's sites. A formal value-creation plan has been drawn up for 80 sites. > Developing new surface area: Mercialys and Casino's development teams achieved major successes, fueling the development pipeline. > Acquisitions: Euro 89 million of acquisitions signed or under contract. Solid performance in renewals and relets In the first half of 2007, 117 leases were renewed or relet: > 55 relets signed on the basis of an increase in annual rental values of Euro 1.3 million, or +111%; > 62 leases renewed with an increase in rents of Euro 0.5 million on an annualized basis or +32%; > Short-term leases in malls also improved, generating a Euro +0.2 million increase in rents in the first half of the year versus 1H06. In total, additional rents of Euro +1.9 million were achieved on an annualized basis in the first half of the year. Rental revenues up ±22.2%: Aggregate rental revenues to end-June 2007 came to Euro 48,438 thousands, an increase of +22.2% compared with the same period in 2006. Euro thousands 1H06(a) 1H07(a) % change   Invoiced rents 38,874 47,557 +22.3% Lease rights 759 881         Rental revenues 39,633 48,438 +22.2% (a) A limited review has been performed by auditors on these results Invoiced rents increased by +22.3% in the first half of 2007 as a result of organic growth (+7.4 points) and 2006 and 2007 acquisitions (+15.0 points). On a like-for-like basis, invoiced rents increased by Euro +2,863 thousands or +7.4%. This organic growth relates to: > Renewals, relets and targeted efforts on short-term leases in malls: Euro +2,525 thousands (+6.5 points) > Indexation of rents representing Euro +1,429 thousands (+3.7 points). These effects were attenuated by a reduction in variable rents of Euro -1,092 thousands (-2.8 points): > 2006 benefited from a non-recurring effect: 106 leases for which variable rents were invoiced annually until 2005 were invoiced on a quarterly basis in 2006. 2006 therefore benefited from both the invoicing of 2005 variable rents and quarterly invoicing in 2006: impact on 1H07/1H06 change : Euro -720 thousands > Indexation had a marginal impact on variable rents for 2007: Euro -180 thousands > Renewals and relets for 2006 and 2007 increased the basic guaranteed minimum rent, bringing down variable rents: Euro -140 thousands The majority of acquisitions in 2006 and 2007 were carried out in the second half of 2006 (Clermont Ferrand, Poitiers, Ajaccio, Corte) and the first quarter of 2007 (Bastia Furiani, Bastia Port Toga, Porto Vecchio), resulting in a significant impact on growth in rents in the first half of 2007: Euro 5,820 thousands (+15.0 points), the effect of which in percentage terms should be smoothed out over the coming quarters. However, as stated in 2006, these acquisitions should still have a significant impact in terms of absolute value on growth in rental revenues in 2007 compared with 2006, at around Euro +10.2 million. An eventful first half of the year in terms of enhancing the value of the existing portfolio and development of new programs During the first half of 2007, teams working on the asset management program called Alcudia finalized the systematic review of sites initiated in 2006, with the aim of devising an ambitious strategic plan to enhance the value of each site concerned. A total of 109 sites were analyzed, 80 of which resulted in a finalized value-creation development plan, with the remaining 29 set to undergo further studies in order to ensure their optimization. At the end of this stage, projected investment for the Alcudia program as a whole is currently valued at Euro 425 million2. The Alcudia program is therefore entering the phase of the rolling out of plans, which should be completed in 2012. Casino's new development pipeline(3) was enhanced in the first half of the year with seven tenders won in Millau (12 - Aveyron), Castelnaudary (11 - Aude), Muret "Porte des Pyrénées" (31 - Haute Garonne), Quimper "Ilot du Chapeau Rouge" (29 - Finistère), Aime La Plagne (73 - Savoie), Susville-La Mure (38 - Isère) and Vals près Le Puy (43 - Haute Loire). At June 30, 2007, Casino's total pipeline was valued at Euro 515 million2, compared with Euro 470 million at December 31, 2006. Acquisitions signed or under contract with a favorable average yield of 7.0% Acquisitions signed or under contract in 2007 totaled Euro 89 million(3), with an average yield of 7.0%. > Three shopping centers in Béziers4, Bordeaux Villenave d’Ornon5 and Morlaix(5) representing Euro 24.7 million > One retail park from the Casino pipeline in Canet en Roussillon(5), comprising five mid-size stores representing Euro 2.7 million > Various co-ownership lots (St Didier shopping center in Paris 16th, Agen Lacassagne(5)) representing Euro 6.3 million > Three shopping centers in Corsica (Bastia Furiani, Bastia Port Toga, Porto Vecchio) under contract at December 31, 2006, representing Euro 55.1 million6 These transactions concern acquisitions carried out or under contract in 2006 and 2007, representing a total of Euro 194 million3. As a result, Mercialys's investment outlook until 2012, including planned investments relating to the Alcudia program, the Casino pipeline and acquisitions already carried out, exceeds Euro 1 billion. FIRST-HALF RESULTS Euro thousands 1H06(a) 1H07(a)   % change   Invoiced rents 38,874 47,557 +22.3% Rental revenues 39,633 48,438 +22.2% Net rental income 37,125 45,654 +23.0%             Operating costs -9,353 -10,531 Recurring operating income 27,772 35,123 +26.5%   Net financial income 2,977 1,695   Tax -1,064 -622           Net income 29,685 36,196 +21.9% Net income, Group share 29,665 36,177 +22.0%             Per share7 Based on the number of outstanding shares, i.e. 72,918,918 shares Earnings per share (EPS) 0.41 0.50 Net asset value (replacement NAV) 17.93 23.04 (a) A limited review has been performed by auditors on these results Growth in net rental income was in line with the increase in rental revenues at 23.0%, representing a total of Euro 45,654 thousands Structural costs net of fees received slightly increased by +5.6% as a result of the combined effect of cost controls and expenses not recognized on a straight-line basis over time, which are likely to be more significant in the second half of the year. Amortization increased by 15.6%, in line with acquisitions. As a result, operating income rose by +26.5% to Euro 35,123 thousands. Net financial income fell by -43% due to the combined effect of the reduction in cash position (positive cash position of Euro 99.4 million, down Euro -29 million during the first half 2007), offset by the higher average rate of interest. This resulted in a lower tax charge. On the basis of these factors, cash flow8 increased by +20.1% to Euro 43,453 thousands Adjusted for interest on cash net of tax, recurring cash flow came to Euro 42,059 thousands, up +23.3%. Net income, Group share, increased by +22.0% to Euro 36,177 thousands, representing basic earnings per share of Euro 0.50. VALUE OF ASSETS AND BALANCE SHEET Appraised portfolio value: Euro 1,613 million, up 20% over the first half of the year The value of the portfolio including transfer taxes, as estimated by the independent appraisers Atis Real and Galtier at June 30, 2007, amounted to Euro 1,613 million, up +20% compared with December 31, 2006. The average yield on the portfolio was 5.8% compared with 6.3% at December 31, 2006. On a like-for-like basis, appraised values rose by +15% over the first half of the year, an increase of Euro +198 million, of which Euro +85 million came from growth in the rental base and Euro +113 million from a reduction in average yields. Net asset value: up +15% over the first half of the year Mercialys's replacement NAV came to Euro 1,680 million or Euro 23.04 per share, compared with Euro 1,464 million (Euro 20,08 per share) at December 31, 2006. Net cash totaled Euro 99 million at June 30, 2007, down Euro -29 million versus December 31, 2006, as a result of: > investments made over the first half of the year: -Euro 59 million > cash flow from operations: +Euro 43 million > payment of the 2006 dividend balance: -Euro 28 million > and the change in WCR, impacted primarily by a repayment of VAT credit on 2006 acquisitions: +Euro 15 million. INTERIM DIVIDEND These results confirmed the strength of Mercialys's business model and the Board of Directors has therefore envisaged ensuring the durability of the policy of half-yearly dividends by paying an interim dividend representing half the dividend of the previous financial year excluding any specific situations that may result in the interim dividend being increased or decreased. Thus, the Board of Directors has decided to pay an interim dividend of Euro 0.36 per share on October 4, 2007. Next publications: October 22, 2007 (evening) Revenues to September 30, 2007 January 23, 2008 (evening) Revenues to December 31, 2007 Analyst/investor relations: Press relations: Marie-Flore Bachelier Citigate: Nicolas Castex Tel: + 33(0)1 53 65 64 44 Tel. + 33(0)1 53 32 78 88 or + 33(0)6 62 08 83 12 About Mercialys Mercialys, one of France's leading real estate companies, is solely active in commercial property. Rental revenue in 2006 came to Euro 82.3 million and net income, Group share, to Euro 60.5 million. It owns 160 properties with an estimated value of Euro 1.6 billion at June 30, 2007. Mercialys has benefited from "SIIC" tax status (REIT) since November 1, 2005 and has been listed on Eurolist by Euronext Paris, symbol MERY, since its initial public offering on October 12, 2005. CAUTIONARY STATEMENT This press release contains forward-looking statements about future events, trends, projects or targets. These forward-looking statements are subject to identified and unidentified risks and uncertainties that could cause actual results to differ materially from the results anticipated in the forward-looking statements. Please refer to the Mercialys shelf registration document available at www.mercialys.com for the year to December 31, 2006 for more details regarding certain factors, risks and uncertainties that could affect Mercialys' business. Mercialys makes no undertaking in any form to publish updates or adjustments to these forward-looking statements, nor to report new information, new future events or any other circumstance that might cause these statements to be revised. Business report (Financial statements for the period ending June 30, 2007) Financial report – 2007 first half Accounting rules and methods In accordance with EU regulation 1606/2002 of July 19, 2002 on international accounting standards, consolidated financial statements for the period to June 30, 2007 have been prepared under IAS/IFRS as applicable at this date and as approved by the European Union at the time of the closure of accounts. The consolidated half-year financial statements have been prepared in accordance with IAS 34 ("Interim financial reporting"). The consolidated half-year financial statements, presented in summary form, do not contain all of the information and appendices provided in the full-year financial statements. They should therefore be read in parallel with the Group's consolidated financial statements to December 31, 2006. CONSOLIDATED INCOME STATEMENT For the period to June 30, 2007 (six months) and to June 30, 2006 (six months) Euro thousands 1H07(a) 1H06(a)   Rental revenues 48,438 39,633 Non recovered property taxes -56 -129 Non recovered rental costs -873 -705 Building expenses -1,855 -1,674 Net rental income 45,654 37,125 Revenue from management, administration and other activities 1,101 439 External costs -1,825 -1,597 Depreciation and amortization of assets -7,540 -6,522 Provisions for contingencies and charges -105 -190 Staff costs -2,162 -1,483 Other operating income and costs - - Operating income 35,123 27,772 Cost of debt / Revenues of treasury 1,719 2,998 Other financial income and costs -24 -21 Net financial income 1,695 2,977 Tax - 622 -1,064 Net income 36,196 29,685   Minority interests 20 20 Group share 36,177 29,665   Earnings per share (Euro per share) (1)       Net income, Group share 0.50 0.41 Diluted net income, Group share 0.50 0.41 (1) Based on the weighted average number of outstanding shares over the period. (a) A limited review has been performed by auditors on these results CONSOLIDATED BALANCE SHEET ASSETS Euro thousands 06/2007(a) 12/2006   Intangible fixed assets 30 11 Tangible fixed assets 828 36 Investment property 1,047,170 989,260 Non-current financial assets 10,660 10,287       Total fixed assets 1,058,688 999,594   Trade receivables 2,433 1,389 Other receivables 5,086 27,351   Casino current account 99,159 126,814 Cash and cash equivalents 877 1,631       Current assets 107,555 157,185 Total assets 1,166,243 1,156,779 SHAREHOLDERS’ EQUITY AND LIABILITIES Euro thousands 06/2007(a) 12/2006   Share capital 72,919 72,919 Additional paid-in capital 987,679 987,679 Treasury shares and reserves 24,357 16,297 Net income, Group share 36,177 60,468 Interim dividend payments 0 -24,044       Shareholders' equity, Group share 1,121,132 1,113,319   Minority interests 622 644       Shareholders’ equity 1,121,754 1,113,963   Long-term provisions 45 40 Non-current financial liabilities 28,610 22,872 Non-current tax liabilities 419 961       Non-current liabilities 29,074 23,873   Trade payables 2,397 3,533 Current financial liabilities 3,066 1,710 Short-term provisions 48 44 Other current payables 9,210 12,266 Current tax liabilities 694 1,390       Current liabilities 15,415 18,943 Total shareholders' equity and liabilities 1,166,243 1,156,779 (a) A limited review has been performed by auditors on these results CONSOLIDATED CASH FLOW STATEMENT Euro thousands   06/2007(a) 06/2006(a)   Net income, Group share 36,177 29,665 Minority interests 20 20   Net income from consolidated companies 36,196 29,685   Depreciation, amortization and provisions 7,544 6,712 Calculated income and charges relating to stock options 114 70 Calculated income and charges including discount -401 -285       Depreciation, amortization, provisions and other non-cash items   7,257 6,497         Cash flow   43,453 36,182   Net cost of debt -1,719 -2,998 Tax charge 622 1,064         Cash flow before cost of debt and tax charge   42,356 34,248   Tax payments -1,869 -1,096 Change in working capital requirement relating to operations (1) 15,444 4,641         Net cash flow from operations   55,931 37,793   Cash payments on acquisition of investmentproperty and other fixed assets -59,200 -12,902 Cash payments on acquisition of financial assets -35 -33 Impact of changes in the scope of consolidation -6,786 Change in loans and advances given -48 Receipts relating to disposals of financial assets 7       Net cash flow from investment operations   -59,228 -19,769   Dividend payments to shareholders -27,678 -42,983 Interim dividends Dividend payments to minority interests -42 -24   Capital increase or decrease Repurchase/resale of own shares -814 -1,122 Increase in borrowing and debts 9,238 473 Reduction in borrowing and debts -7,995 -612 Net interest income 1,719 2,998       Net cash flow from financing operations   -25,572 -41,270         Change in cash position   -28,869 -23,243   Opening cash 128,290 237,893 Closing cash 99,421 214,650         Closing cash   99,421 214,650 Of which: Casino SA current account 99,159 211,820 Balance sheet cash 877 2,966 Bank facilities -615 - 136 (1) The change in working capital requirement to June 30, 2007 is as follows (in Euro thousands): Trade receivables -1,044, Trade payables -1,136 and Other payables and receivables 17,623 (a) A limited review has been performed by auditors on these results Rental revenues Rental revenue covers mainly rents billed by the Company plus a smaller element of lease rights received from new tenants. In the first half of 2007, invoiced rents represented Euro 47.6 million compared with Euro 38.9 million in the first half of 2006, an increase of +22.3%. (Euro million) 06/2007 06/2006 Invoiced rents 47,557 38,874 Lease rights 881 759 Rental revenues 48,438 39,633 Non recovered rental costs and -929 -834 real estate taxes Building costs -1 855 -1,674 Net rental income 45,654 37,125 Invoiced rents increased by +22.3% in the first half of 2007 as a result of organic growth (+7.4 points) and acquisitions in 2006 and 2007 (+15.0 points). On a like-for-like basis, invoiced rents increased by Euro +2.9 million or +7.4%. This organic growth relates to: Renewals, relets and targeted efforts concerning short-term leases in malls: Euro +2.5 million (+6.5 points); Indexation of rents representing Euro +1.4 million (+3.7 points). For the vast majority of leases, the indexation applied in 2007 was based on the change in the CC index9 between the second quarter of 2005 and second quarter of 2006. This change was particularly significant over the period, at +7.05%. These effects were offset by a reduction in variable rents of Euro -1.1 million (-2.8 points): 2006 benefited from a non-recurring effect: 106 leases for which variable rents were invoiced annually until 2005 were invoiced on a quarterly basis in 2006. 2006 therefore benefited from both the invoicing of 2005 variable rents and quarterly invoicing in 2006: impact on 2007: Euro -0.7 million Indexation had a marginal impact on variable rents for 2007: Euro -0.2 million Renewals and relets for 2006 and 2007 increased the basic guaranteed minimum rent, bringing down variable rents: Euro -0.1 million. The majority of acquisitions in 2006 and 2007 were carried out in the second half of 2006 (Clermont Ferrand, Poitiers, two sites in Corsica) and the first quarter of 2007 (three sites in Corsica), resulting in a significant impact on growth in rents in the first half of 2007: Euro +5.8 million (+15.0 points) During the first half of 2007, 117 leases were renewed or relet, generating a Euro +1.9 million increase in the annualized rental base.   Annualized growth in rental base Euro million Change 2007/2006 55 leases relet +1.3 +111% 62 leases renewed +0.5 +32% Specialty leasing +0.2 +41% Euro +1.9 million Over the next few years, Mercialys will enjoy considerable potential to increase rent levels. The cost of occupancy10 of our tenants came to 7.4% for the major shopping centers (rent + charges gross of taxes/sales gross of taxes). This constitutes a +0.1 point increase on December 31, 2006,at a fairly low level in comparison with Mercialys' peers one. This figure reflects both the reasonable level of real estate costs in retailers' operating accounts and the potential for increase in rent levels at the time of lease renewals or as part of redevelopment.       Guaranteed minimum rent Share of leases expiring/ Guaranteed minimum rent Lease expiry schedule 2007 434 leases 11,326 12.5% 2008 121 leases 4,789 5.3 % 2009 91 leases 3,699 4.1 % 2010 174 leases 4,278 4.7% 2011 246 leases 8,226 9.1% 2012 277 leases 15,128 16.7% 2013 141 leases 6,014 6.7% 2014 139 leases 4,997 5.5% 2015 200 leases 8,385 9.3% 2016 232 leases 10,575 11.7% 2017 34 leases 1,414 1.6% 2018 116 leases 10,113 11.2% Beyond 31 lease 1,478 1.6% Total 2,236 leases 90,421 100% Thus, Mercialys has a significant stock of expired leases. This is due to ongoing negotiations, disputes (some negotiations result in a hearing by a rents tribunal), renewal refusals for reasons of redevelopment with payment of eviction compensation, global negotiations for retail brands and tactical delays. Rents received by Mercialys come from a very wide range of retailers. With the exception of Cafétérias Casino (12%), Feu Vert (5%) and Casino (4% - Corsica), no tenant represents more than 2% of total revenue. The breakdown between national and local brands of annualized rents is as follows: Annual GMR+variable 06/30/07 Euro million % of total Number of leases   National brands 1,226 54.7 59% Local brands 773 18.6 20% Casino Cafétérias 101 11.6 12% Other Casino Group brands 136 8.6 9% Total 2,236 93.5 100% (a)GMR = Guaranteed minimum rent The structure of rental revenue as at June 30, 2007 confirmed the dominant share, in terms of rent, of leases with a variable component. Number of leases Euro million % of total   Leases with variable component 1,048 580.3 62% - of which Guaranteed Minimum Rent 55.2 59% - of which Variable Rent 3.0 3% Leases without variable element 1,188 35.2 38% Total 2,236 93.5 100% The financial occupancy rate11 came to 97.6%. Rental revenues also includes lease rights and despecialization indemnities made over and above rent payments by tenants on signing a new lease. Rental revenues in the first half of 2007 were 22.2% higher than in the first half of 2006. Lease rights and despecialization indemnities received totaled Euro 0.8 million. After lease rights spread over the committed duration of leases, these front-end payments booked as rental revenues in the first half of 2007 came to Euro 0.9 million, an increase of Euro +0.1 million compared with the same period in 2006. Net rental income Net rental income consists of rental revenue less costs directly allocated to real estate assets. These costs include real estate taxes and rental charges that are not re-billed to tenants, together with other costs, most notably fees paid to the property manager and not rebilled and various charges relating directly to the operation of sites. Costs included in the calculation of net rental income came to Euro 2.8 million in the first half of 2007 compared with Euro 2.5 million in 2006. Rental income net of costs relating directly to real estate assets rose by +23.0% to Euro 45.7 million in the first half of 2007, from Euro 37.1 million in 2006. Staff costs Staff costs include all costs relating to the executive and management team of 24 employees transferred to Mercialys in December 2005, together with those relating to employees recruited in 2006 and the first half of 2007, which took the total number of staff at Mercialys to 41 at June 30, 2007. Over the course of the first half of 2007, these costs came to Euro 2.2 million, from Euro 1.5 million in the first half of 2006. Other costs Other costs related mainly to the costs of opening new centers, Mercialys's contribution to the costs of advertising and promoting centers and central structural costs. These structural costs included mainly investor relations costs, directors' remuneration, fees paid to the Casino Group for work covered by the Service Provision Agreement (accounting, financial management, human resources, management, IT) and asset valuation fees. Over the course of the first half of 2007, these costs came to Euro 1.8 million, from Euro 1.6 million in 2006. This increase in costs was primarily due to the expansion of the company (marketing campaigns, project studies etc.), as well as costs relating to various investment opportunities under review. Depreciation, amortization and provisions Depreciation and amortization totaled Euro 7.5 million in the first half of 2007, from Euro 6.5 million in 2006. The sharp increase in amortization relates to acquisitions carried out in 2006 and the first half of 2007, representing a gross amount of Euro 194 million. The majority of these acquisitions took place in the second half of 2006 and the start of 2007. Operating income Operating income for the first half of 2007 came to Euro 35.1 million, from Euro 27.8 million in 2006, an increase of +26.5% as a result of: - the increase in net rental income (+23.0%); - contained growth in structural costs. The first half of the year saw positive effects on operating income that are non-straight line and should smooth growth in operating income in the second half of the year Financial income Financial items includes financial expenses relating to lease contracts (Tours La Riche Soleil, La Chapelle sur Erdre, Ajaccio, Porto-Vecchio, Toga and Furiani) and interest income from cash generated in the course of operations, deposits from tenants and Mercialys's positive cash position. At June 30, 2007, Mercialys's net cash balance stood at Euro 99.4 million compared with Euro 128.3 million at December 31, 2006. In the first half of 2007, net financial income came to Euro 1.7 million compared with Euro 3.0 million in 2006, down as a result of the gradual use of cash to finance Mercialys's investments. Tax The tax regime for French 'SIIC' (REIT) companies exempts them from paying tax on the income from real estate activities provided that at least 85% of net income from rental activities and 50% of gains on the disposal of real estate assets are distributed to shareholders. The tax charge recorded in the income statement corresponds to tax payable on financial income on cash holdings less a share of the company's central costs allocated to its taxable income. The tax charge for the first half of 2007 was Euro 0.6 million compared with Euro 1.1 million in 2006. Net income Net income came to Euro 36.2 million in the first half of 2007, from Euro 29.7 million the previous year, an increase of +21.9%. Minority interests were not significant. Thus for the first half of 2007 financial, the Net income, Group share was Euro 36.2 million, from Euro 29.7 million in 2006, an increase of +22.0%. Cash flow Cash flow is calculated by adding net income and the charge for depreciation, amortization and provisions and by eliminating other non cash items. Cash flow rose +20.1%, from Euro 36.2 million in 2006 to Euro 43.4 million in the first half of 2007. Recurring operating cash flow, being cash flow excluding interest income from positive cash position net of tax and non recurring items (none in 1H06 and 1H07) was up +23,3% to Euro 42,1 million. Balance sheet structure At June 30, 2007, the Group had cash of Euro 99.4 million, compared with Euro 128.3 million at December 31, 2006. After deduction of financial debts, net cash was Euro 67.7 million at June 30, 2007, from Euro 103.9 million at December 31, 2006. Consolidated shareholders' equity was Euro 1,121.8 million at June 30, 2007, from Euro 1,114.0 million at December 31, 2006. The balance of the dividend for 2006 of Euro 27.7 million was paid in the first half of 2007, representing Euro 0.38 per share. The Board of Directors has envisaged ensuring the durability of the policy of half-yearly dividends by paying an interim dividend representing half the dividend of the previous financial year excluding any specific situations that may result in the interim dividend being increased or decreased. Thus, the Board of Directors has decided to pay an interim dividend of Euro 0.36 per share on October 4, 2007. Valuation of the asset portfolio In the first half of 2007, Mercialys signed five acquisitions representing a total of Euro 60.2 million gross of financing: - 60% of three shopping centers and their food retail store in Corsica (Bastoia Furiani, Porto Vecchio and Bastia Port Toga) – Sale effective January 1, 2007 - two co-ownership lots in the rue St Didier shopping center in Paris At June 30, 2007, Atis Real and Galtier updated their valuation of Mercialys's portfolio. Atis Real (for hypermarket sites) and Galtier (for other sites) valued the assets of 63 sites and updated their appraisal valuations of the second half of 2006 (97 sites). Sites acquired during the first half of 2007 were valued as follows: at the acquisition price for the two Paris St Didier sites; at Atis Real's appraisal value for the three sites in Corsica. On the basis of these valuations, the portfolio was valued at Euro 1,613.3 including transfer taxes at June 30, 2007, compared with Euro 1,346.9 million at December 31, 2006. Thus, the value of the portfolio increased by 19.8% over six months (or 14.7% on a like-for-like basis). The average yield on the appraised value was 5.8% compared with 6.3% at December 31, 2006. The increase in the appraised value of the portfolio on a like-for-like basis was due to a number of factors: - Impact of the change in the average yield applied to the portfolio at December 31, 2006: 57.1% adding Euro 113 million to the valuation. - Impact of the increase in the rental value of assets at December 31, 2006: 42.9% adding Euro 85 million to the valuation. Averageyield06/30/2007 Averageyield12/31/2006 Averageyield06/30/2006         Large shopping centers 5.5% 5.8% 6.2% Neighborhood shopping centers 6.3% 6.9% 7.2% Total portfolio(a) 5.8% 6.3% 6.6% (a) including other assets (large food stores, large specialty stores, independent cafeterias and other individual sites) The following table shows the breakdown of Mercialys's real estate portfolio in terms of market value and gross leasable area by type of site as at June 30, 2007, as well as rents generated over the periods indicated: Number of assets at 06/30/07 Appraisal value at 06/30/07 inc. TT Gross leasable area at 06/30/07 Appraised net rental income   Type of property (Euro million) (%) (m2) (%) (Euro million) (%) Large shopping centers 29 1,028 64 313,100 51 56.2 60 Neighborhood shopping centers 64 434 27 199,100 32 27.5 29 Large food stores 12 21 1 31,000 5 1.4 1 Large specialty stores 7 21 1 15,200 2 1.4 1 Independent cafeterias 23 49 3 30,200 5 3.2 3 Other (1) 25 59 4 26,700 4 4.0 4 Total 160 1,613 100 615,300 100 93.7 100 (1) Primarily service outlets and convenience stores NB: Large food stores: gross leasable area of over 750 m2 Large specialty stores: gross leasable area of over 750 m2 Net asset value calculation The calculation of net asset value (NAV) consists of adding to consolidated shareholders' equity the unrealized capital gains or losses on the asset portfolio and charges and revenues to be recorded over several years. NAV is calculated in two ways: excluding transfer taxes (liquidation NAV) or including transfer taxes (replacement NAV). NAV at June 30, 2007 (Euro million) NAV at 12/31/06 Consolidated shareholders' equity 1,121.8 1 114.0 Add back income and costs to be recorded over several years 3.0 2.8 Unrealized gains on assets 555.5 347.4 Updated market value 1,613.3 1 346.9 Consolidated net book value -1,057.8 -999.5 Replacement NAV 1,680.2 1 464.1 Per share (Euro) 23,04 20,08   Transfer taxes and disposal costs -94.2 -78.3 Liquidation NAV 1,586.0 1 385.8 Investment outlook Acquisitions signed or under contract since January 1st 2006 Acquisitions signed or under contract in 2007 totaled Euro 89 million, with an average yield of 7.0%. > Three shopping centers in Béziers12, Bordeaux Villenave d’Ornon13 and Morlaix13 representing Euro 24.7 million > One retail park from the Casino pipeline in Canet en Roussillon13, comprising five mid-size stores representing Euro 2.7 million > Various co-ownership lots (St Didier shopping center in Paris 16th, Agen Lacassagne13) representing Euro 6.3 million > Three shopping centers in Corsica (Bastia Furiani, Bastia Port Toga, Porto Vecchio) under contract at December 31, 2006, representing Euro 55.1 million14 These transactions concern acquisitions carried out or under contract in 2006 and 2007, representing a total of Euro 194 million. Alcudia, an ambitious, exhaustive and intensive asset management program During the first half of 2007, teams working on the asset management program called Alcudia finalized the systematic review of sites initiated in 2006, with the aim of devising an ambitious strategic plan to enhance the value of each site concerned. A total of 109 sites were analyzed, 80 of which resulted in a finalized value-creation development plan, with the remaining 29 set to undergo further studies in order to ensure their optimization. At the end of this stage, projected investment for the Alcudia program as a whole is currently valued at Euro 425 million15. Including Euro 125 million of renovation and restructuring of existing sites and Euro 300 million of extensions of existing sites bought through the Partnership Agreement with Casino16 The Alcudia program is therefore entering the phase of the rolling out of plans, which should be completed in 2012. The development pipeline of Casino Casino's new development pipeline16 was enhanced in the first half of the year with seven tenders won in Millau (12 - Aveyron), Castelnaudary (11 - Aude), Muret "Porte des Pyrénées" (31 - Haute Garonne), Quimper "Ilot du Chapeau Rouge" (29 - Finistère), Aime La Plagne (73 - Savoie), Susville-La Mure (38 - Isère) and Vals près Le Puy (43 - Haute Loire). At June 30, 2007, Casino's total pipeline was valued at Euro 515 million15, compared with Euro 470 million at December 31, 2006. Mercialys Investment outlook for the period 2006-2012 are thus at least worth 1 billion In Euro million Vision october 2005 (IPO) Vision june 2007 Renovation and restructuring of existing centers 100 125 Acquisition of new developments or of extensions on existing sites (Alcudia) 200 815 Acquisitions 200 Already signed 194 Total investment outlook 2006 - 2012 500 More than 1 000 Events arising since the end of period No significant events occurred after the closing of the period. Notes to the parent company accounts for Mercialys SA Euro million 06/2007(a) 06/2006(a)   Rental revenues 46.9 38.4 Net income 36.3 28.6 (a) A limited review has been performed by auditors on these results Company operations Mercialys SA, the parent company of the Mercialys group, is a real estate company that has opted for the Sociétés d’Investissements Immobiliers Cotées (S.I.I.C -- Real Estate Investment Trust) tax regime. It owns 155 of the 160 commercial assets owned by the Mercialys group and holdings in six companies, of which four are real estate companies (owning the remaining five assets) and two are management companies: Mercialys Gestion and Corin Asset Management. Revenues at Mercialys SA consist primarily of real estate revenues and returns earned on the company's cash under its current account agreement with Casino. Notes to the accounts In the first half of 2007, Mercialys SA recorded rental revenue of Euro 46.9 million and net income of Euro 36.3 million. As the Company owns 155 of the 160 sites owned by the Mercialys Group as a whole, information regarding the main events affecting 2007 performance for the Company is available in the notes on operations forming part of the consolidated financial statements for the Mercialys Group. Total assets at June 30, 2007 were Euro 1,149.6 million, including: net fixed assets of Euro 1,029.5 million and net cash of Euro 101.0 million, including a current account balance with Casino Guichard-Perrachon of Euro 99.2 million. In order to optimize the management of Mercialys's cash, a current account agreement has been entered into with Casino Guichard-Perrachon. The interest is set at Eonia plus 0.10%, and total interest received in the first half of 2007 was Euro 2.1 million. The company's shareholders' equity was Euro 1,121.0 million. The main changes to this item over the course of the year were: - Payment of the balance of the dividend in respect of the 2006 financial year: Euro -27.7 million - Income for the first half of 2007: Euro +36.3 million 1 Operating cashflows excluding interest on cah position net of tax and non recurring items (none in 1H07 and 1H06) 2 Valuation of each investment program weighted by the probability of completion 3 Mercialys holds a right of first refusal to participate in these projects under the terms of the partnership agreement with Casino 4 Contract subject to conditions precedent - Signature expected in December 2007 or early 2008 5 Signed in July 2007 6 Gross of remaining property lease rights – Acquisition of 60% of each site 7 8 Cash flow = net income before depreciation and non-cash items 9 Construction Cost Index 10 The ratio of the rent and charges paid by a retailer to his sales 11 1- [Rental value of vacant units /(Rental value of vacant units + annualized guaranteed minimum rent on occupied units)] 12 Contract subject to conditions precedent - Signature expected in December 2007 or early 2008 13 Signed in July 2007 14 Gross of remaining financing – Acquisition of 60% of each site 15 Valuation of each investment program weighted by the probability of completion 16 Mercialys holds a right of first refusal to participate in these projects under the terms of the partnership agreement with Casino