TIDMINTU
RNS Number : 3730S
Intu Properties PLC
06 November 2019
LEI: 213800JSNTERD5CJZO95
6 NOVEMBER 2019
INTU PROPERTIES PLC
TRADING UPDATE FOR THE PERIOD FROM 1 JULY 2019 TO 5 NOVEMBER
2019
PROGRESSING OUR FIVE YEAR STRATEGY
Matthew Roberts, intu Chief Executive, commented:
"At our interim results, we set out our strategy to reshape our
business and address the challenges we face. In the last three
months, we have made progress on all four of our strategic
objectives, with a particular focus on creating liquidity.
In the last quarter, we have continued to face challenging
market conditions along with the rest of the sector. In particular,
CVAs were slightly worse than expected. In the face of these
challenges, there is much that gives me confidence about intu. Many
of our top customers are global, well capitalised businesses and
having visited 17 intu centres in recent weeks, there is a very
different feeling on the ground to the one we read about regularly.
Our centres are busy with footfall and occupancy significantly
above the industry benchmarks. We know we have the best centre in
each city and region that we operate.
While letting activity has been slower in the third quarter as
some customers delay decisions due to continued political and
economic uncertainty, we are still signing a good number of new
deals with great brands. We have also seen a pick-up in letting
activity in recent weeks which has seen Harrods take 23,000 sq ft
at intu Lakeside to launch its first standalone beauty store, H
Beauty, and Zara sign for a new flagship store at St David's,
Cardiff. In Spain, AliExpress opened their first European store at
intu Xanadú, with footfall at the centre up 20 per cent following
the opening.
Our number one priority is to fix the balance sheet. We have a
clear plan to do this and are working to make material progress
over the next six months. We continue to consider all options to
put us in the best position to deal with both our short and medium
term liquidity requirements as we approach our next material debt
maturity in early 2021. These options include disposing of assets,
where we are in the advanced stages of selling two of our Spanish
assets, through to raising equity, which is also likely to form
part of the solution.
Although early days, we are also making good progress in the
delivery of the other strategic objectives we outlined in July,
namely sharpening our customer relationships, transforming our
centres and simplifying the business structure, and I look forward
to updating on these further at the full year."
Conference call
A conference call for analysts and investors will be held today
at 08:00 GMT.
A copy of this announcement is available on our website
intugroup.co.uk.
Enquiries
intu properties plc
Matthew Roberts Chief Executive +44 (0)20 7960 1353
Robert Allen Chief Financial Officer
+44 (0)20 7960 1360
Adrian Croft Head of Investor Relations
+44 (0)20 7960 1212
Public relations
UK Justin Griffiths, Powerscourt +44 (0)20 7250 1446
South Africa Frédéric Cornet, Instinctif Partners
+27 (0)11 447 3030
Operational performance
Operating metrics
Three months Nine months Nine months
ended 30 Sept ended 30 Sept ended 30 Sept
2019 2019 2018
-------------------------------------------------- -------------- -------------- --------------
Footfall +1.2% +0.9% -1.3%
Rental uplift on rent reviews settled +4% +6% +8%
Leasing activity
* number 47 156 200
* new rent GBP5m GBP19m GBP32m
* new rent relative to previous passing rent -3% +0% +7%
Investment by customers GBP38m GBP86m GBP64m
As at As at
30 Sept 2019 30 Sept 2018
-------------------------------------------------- -------------- -------------- --------------
Occupancy (EPRA basis) 95.1% 97.0%
Unexpired lease term 6.5 years 7.4 years
-------------------------------------------------- -------------- -------------- --------------
- year to date footfall in our centres is 0.9 per cent ahead of
the same period in 2018. In the UK, footfall was up 0.4 per cent,
significantly outperforming Springboard footfall monitor for
shopping centres which was down on average by 2.4 per cent. The
footfall growth in Spain has benefitted from AliExpress at intu
Xanadú, where footfall was up by 20 per cent in the first six weeks
of opening. The UK growth has benefitted from our management
initiatives:
- since the start of the year, footfall at intu Watford has
increased by 19 per following the opening of the extension which
has extended the centres catchment from the introduction of an IMAX
cinema, additional restaurants and new retail brands
- following the opening of the leisure extension at intu
Lakeside in the summer, footfall has increased in the centre by 7
per cent
- excluding these two centres, UK year to date footfall is broadly unchanged
- we settled 34 rent reviews in the period with an average
uplift of 4 per cent. Year to date, we have settled 135 rent
reviews for new rents totalling GBP40 million, an average uplift of
6 per cent on the previous rents
- year to date, we have signed 156 long-term leases producing
GBP19 million of annual rent, in line with previous passing rent.
On a net effective basis (net of rent-free periods and incentives),
rents were also in line with previous rents
- in the quarter, we agreed 47 long-term leases amounting to
GBP5 million annual rent (Q3 2018: 84 leases; GBP15 million of
annual rent). In aggregate, these were 3 per cent below the
previous passing rent (like-for-like units) and in line with
valuers' assumptions. On a net effective basis (net of rent-free
periods and incentives), rents were 4 per cent lower than previous
rents. Key lettings include:
- Harrods taking their first shopping centre store at intu
Lakeside, launching a new beauty concept, H Beauty
- a new flagship store for Zara at St David's, Cardiff. This
follows their recent upsizing of stores at intu Trafford Centre and
intu Lakeside
- further leisure expansion at intu Lakeside with climbing
operator Rock Up exchanging to open in a two-level mall unit
- digital native brand Morphe agreeing to open its third store
in the intu portfolio, and sixth in the UK, at Manchester
Arndale
- new JD Sport brand Kids Cavern, offering luxury branded
childrensware, opening its second UK store at intu Trafford
Centre
- year to date, customers have invested around GBP86 million on
181 new store fit-outs, which following a record year of investment
in 2018 demonstrates their long-term commitment to our centres and
providing a fresh and ever-changing experience for our visitors
- occupancy at 30 September 2019 was 95.1 per cent (September
2018: 97.0 per cent), unchanged from June 2019. This compares
favourably against the latest BRC-Springboard town centre vacancy
rate of 10.3 per cent
Like-for-like net rental income
- although new lettings and rent reviews are still positive
overall, CVAs in the period were slightly worse than expected and
the political and economic uncertainty is causing customers to
delay new lettings, with letting activity in the third quarter
slower than forecast and at a lower level than 2018. We anticipate
that like-for-like net rental income for 2019 will be down by
around 9 per cent, with more than half the reduction coming from
the impact of CVAs such as Arcadia and Monsoon
- with the majority of rent now collected for the year, the only
further impact would relate to incentive write-offs from any
further failures through to the end of the year. Outside those
retailers who have been through a CVA, the majority of our top-20
customers are well capitalised, global businesses
- as the CVAs announced in mid-2019 will continue to impact the
first half of next year, we expect 2020 like-for-like net rental
income to continue to decline, but at a slower rate than 2019
Strategy update
Fix the balance sheet
- as highlighted in the 2019 interim results, we are working to
make material progress over the next six months in fixing the
balance sheet. We have no material debt maturities until intu
Milton Keynes and the SGS term loan in early 2021, but our focus is
to create liquidity to deal with these upcoming refinancing
activities and address any actions which may be required to manage
credit exposures with banks that arise prior to that, including
from further falls in asset values. Our self-help measures to do
this are:
- retaining cash generated from operations within the business
- disposals and part-disposals of assets both in the UK and Spain
- reduction in capital expenditure pipeline
- in the period, we have:
- entered advanced stages of negotiations on the disposals of
intu Asturias and intu Puerto Venecia, and at intu Xanadú, where
our lock in period expires in summer 2020, we are continuing
discussions with our partner
- initiated a review of options for disposal or part-disposal of certain UK assets
- disposed of a further GBP21 million of sundry assets, 13 per
cent ahead of their December 2018 valuation. Year to date, proceeds
amount to GBP33 million from sundry asset disposals
- we will continue to keep all options under review from the
self-help measures described above through to raising equity, which
is also likely to form part of the solution
- net external debt reduced by GBP210 million in the quarter as
a result of the part disposal of intu Derby, with loan to value of
57.7 per cent, based on June 2019 property valuations
Sharpen customer focus
- changing the way we work, and improving our relationships,
with those who pay us to take space is important in maximising the
returns for both parties
- in the period, we have:
- continued CEO to CEO meetings with our top 30 customers,
including Next, Primark and Sports Direct. Key themes from the
meetings include positive feedback around their trading in intu
centres, looking at sharing data and working better in partnership
in the future
- commenced a data hub project to further consolidate all data
sources within the business, which will allow us to maximise the
potential from the insight we have on centres, customers and
visitors
Transform our centres
- we are transforming our centres to deliver what the future
visitors and customers want. This is illustrated by:
- at intu Trafford Centre's Barton Square development we have
handed over the 85,000 sq ft anchor unit to Primark for fitting
out. The GBP75 million project is on target to open in spring
2020
- the GBP72 million leisure extension at intu Lakeside opened in
the period, and with only one unit remaining unlet, is already
delivering a 7 per cent increase in footfall
- commenced the process to introduce an investment partner for
intu Lakeside's 1,200 unit build to rent residential
development
Simplify, enhance and drive efficiency
- to deliver our strategy and reshape intu, we plan to operate a
more dynamic organisation, with the right skill sets and teams to
deliver the vision
- since the half year, our focus on efficiencies and cost
savings relating to the centres has allowed us to deliver a benefit
to our customers, with the 2020 service charge budget lower than
2019
About intu
intu creates thriving, vibrant destinations where brands
flourish.
Our portfolio of 20 centres in the UK and Spain consistently
beats the industry standard for visitor numbers. In fact, we are
the only group in Europe to attract more than ten million visitors
a year to each and every centre.
With ten of the most popular out-of-town and city centre
flagship destinations in the UK, our centres welcome half the
population every year and provide employment for more than three
per cent of the country's retail workforce.
We have worked hard to create winning destinations that are the
beating heart of regions, with an irresistible blend of shopping,
dining, events and leisure. intu centres are rated number one for
being modern, stylish and fun; there is always something new to
discover and everything we do is designed to make people smile.
We are recognised by retail and leisure brands for our
unrivalled national coverage, high footfall and compelling mix, all
under one roof and one brand.
We bring economic prosperity wherever we operate and we take our
responsibilities as a good neighbour just as seriously with green
transport plans and energy efficiency strategies for each
centre.
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END
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