Intu Properties Plc Trading Update

 
TIDMINTU 
 
INTU PROPERTIES PLC 
 
LEI: 213800JSNTERD5CJZO95 
 
Regulated Information Classification: Additional regulated information required 
to be disclosed under the laws of a Member State of the EU. 
 
2 NOVEMBER 2017 
 
 
TRADING UPDATE FOR THE PERIOD FROM 1 JULY 2017 TO 2 NOVEMBER 2017 
 
David Fischel, intu Chief Executive, commented: 
 
"We have recorded another active quarter with strong tenant demand. 73 long 
term leases have been agreed which are ahead of a robust comparative period in 
2016. We anticipate achieving a third year of positive like-for-like net rental 
income as we continue to attract well-known international and national brands. 
 
intu's nationwide portfolio allows international retailers opportunities to 
expand their UK coverage with brands such as Victoria's Secret (US), Lovisa 
accessories (Australia) and Inglot cosmetics (Poland) having all taken further 
stores in the period. Other major flagship brands, such as Next, Primark, 
Decathlon, Footasylum and Nespresso, are optimising their store sizes in our 
must-have quality locations. 
 
Our Spanish centres continue to perform well with occupancy levels remaining 
high and 
10 long term leases have been signed in the quarter. Our recently acquired 
Madrid Xanadú shopping centre has benefited from our relationships with UK and 
Spanish retailers and since acquisition we have introduced Quiz, Vans, G-Star 
and TGB to the centre. 
 
Although retailers continue to be selective with their expansion plans in the 
challenging consumer environment, our 20 prime centres are the first port of 
call because of their strong catchment, reliable footfall and differentiated 
leisure content. This leaves us well positioned to take advantage of this 
demand and we are confident of delivering further growth in like-for-like net 
rental income in 2018 and at a level of 2 to 3 per cent over the medium term." 
 
Highlights for the period 
 
  * An active period with 73 long term leases agreed (63 in the UK and 10 in 
    Spain) for GBP13 million of annual rent, 5 per cent above previous passing 
    rent (year to date 6 per cent above) and in line with ERV and valuers' 
    assumptions 
  * We anticipate positive like-for-like net rental income for a third year in 
    2017, in line with earlier guidance, consolidating the growth achieved in 
    2015 and 2016 
  * Rent reviews in the period have been concluded at an average uplift of 15 
    per cent on the previous rents. Year to date, we have settled 164 rent 
    reviews for new rent totalling GBP36 million, 10 per cent above previous 
    rents 
  * Occupancy remains high at 96 per cent, unchanged from June 2017 
  * Footfall has shown encouraging strength in the second half year to date at 
    2 per cent ahead of the same period in 2016 bringing the overall figure for 
    2017 back in line with 2016 
  * We have commenced the GBP73 million leisure extension at intu Lakeside for 
    opening at the end of next year, with all four leisure anchors now let and 
    the overall project 85 per cent pre-let. Other extensions, including intu 
    Watford and Barton Square at intu Trafford Centre, are progressing to plan 
  * Unprompted awareness of the intu brand increased to 26 per cent, a 
    three-fold increase since 2015 when we started monitoring, and in-centre 
    net promoter score, our measure of customer service, remains consistently 
    high at 70 
  * Encouraging lettings and activity at the recently acquired Madrid Xanadú, 
    including the Nickelodeon and aquarium developments, and strong 
    year-on-year footfall growth of 8 per cent at intu Asturias following the 
    opening of the redeveloped lower level 
  * Exchanged contracts to introduce a 50 per cent joint venture partner to 
    intu Chapelfield for a net consideration of GBP148 million.  This is in line 
    with the 31 December 2016 valuation of GBP296 million (100 per cent) and a 
    small discount to the 30 June 2017 valuation of GBP305 million (100 per 
    cent). The transaction further advances our stated strategy of introducing 
    partners to our assets and recycling capital into our UK development 
    pipeline 
  * Cash and available facilities of GBP850 million at 30 September 2017 reduced 
    by the repurchase of GBP140 million of the GBP300 million 2018 convertible bond 
    at a price around par. Financial position further strengthened by the 
    disposal of 50 per cent interest in intu Chapelfield 
 
We have continued to make good progress with our four strategic priorities for 
2017: 
 
  * optimising asset performance 
 
  * delivering UK developments 
 
  * making the brand count 
 
  * seizing the growth opportunity in Spain 
 
Optimising asset performance 
 
We have had an active third quarter with 73 long term leases signed in the 
period, representing GBP13 million of annual rent (Q3 2016: 67 leases; GBP13 
million of new passing rent). In aggregate, these were 5 per cent above 
previous passing rent and in line with valuers' assumptions. This brings the 
total for the year to date to 176 new leases (2016: 165) producing GBP31 million 
of new annual rent, 6 per cent above previous passing rent. 
 
Signings in the period include: 
 
  * international retailers continuing to use intu's nationwide portfolio to 
    expand their UK coverage. Victoria's Secret exchanged on its fourth lease 
    with intu at Manchester Arndale, Australian accessories brand Lovisa signed 
    three more leases and has around one-third of its UK stores with intu and 
    Polish cosmetics retailer Inglot chose intu Eldon Square for its first 
    stand-alone store outside London 
  * key flagship brands ensuring they optimise their store size in our 
    must-have locations including Nespresso and Footasylum at Manchester 
    Arndale and Primark agreeing to take the former BHS unit and additional 
    space in Barton Square, at intu Trafford Centre, to create an 88,000 sq ft 
    flagship store 
 
We expect to deliver modest growth in like-for-like net rental income for the 
full year driven by new lettings at improved rents and successful rent reviews, 
subject to no material tenant failures. 
 
Our unrelenting focus on operational excellence, both in the UK and Spain, 
combined with the quality of our centres has continued to deliver a robust set 
of key performance indicators. 
 
We settled 47 rent reviews in the period for new rents totalling GBP9 million per 
annum, an average uplift of 15 per cent on the previous rents. Year to date, we 
have settled 164 rent reviews with rent totalling GBP36 million per annum, an 
average uplift of 10 per cent on the previous rents. 
 
Occupancy remains high at 96 per cent (June 2016: 96 per cent). intu Lakeside 
and intu Merry Hill remain slightly lower as we hold units for remodelling of 
significant space for key fashion tenant flagship stores. These are in advanced 
negotiations and should exchange shortly for openings in 2018. 
 
We are continuing to capitalise on re-letting the former BHS stores. Of the 10 
stores that closed in 2016, we have new leases signed on five units, improving 
the tenant mix with lettings to the likes of Next, Primark and Decathlon. One 
store is held for redevelopment and detailed discussions are on-going with the 
remaining four stores. We expect the overall new rental levels to be 15 per 
cent ahead of previous passing rent and the resultant retail offer to be more 
attractive to our shoppers. 
 
There were no tenant administrations at our centres in the period. 
 
Delivering UK developments 
 
We continue to focus our capital expenditure programme on our prime centres to 
ensure they evolve with consumer and retailer trends. Key milestones in the 
period include: 
 
  * at intu Lakeside, we have signed the construction contract and are on site 
    with the 175,000 sq ft Nickelodeon anchored leisure extension. The scheme 
    has over 90 per cent of the space exchanged or in solicitors' hands. 
    Including the recent lettings in the period for the remaining two leisure 
    anchors and TGI Friday's, 85 per cent is now exchanged. The project is 
    expected to cost GBP73 million and is due to open in late 2018 
  * at intu Trafford Centre, we have signed Primark to anchor the expansion and 
    transformation of Barton Square. The GBP74 million project will enclose the 
    courtyard, enhance the interiors, allow trading from two levels and provide 
    a fashion offer for the first time at Barton Square. We are progressing the 
    procurement of the construction works and expect the project to be 
    completed by mid-2019 
  * at intu Watford, the GBP180 million retail and leisure extension continues on 
    budget and on target for opening in autumn 2018. The scheme is two-thirds 
    pre-let, including Debenhams and Odeon as anchors, and we are making good 
    progress on the remaining units 
  * at intu Merry Hill, we have contracted on key site assembly transactions to 
    enable us to pursue a leisure extension in the next few years which will 
    have a transformational effect on the entire centre 
 
Making the brand count 
 
As the role of the shopping centre operator becomes ever more specialised, our 
scale, expertise and insight along with our in-house teams ensure we offer the 
best customer service and experience in an ever evolving multichannel world. In 
the period: 
 
  * our net promoter score, a measure of customer service, remained 
    consistently high at 70 
  * brand recognition increased to its highest level, with unprompted brand 
    awareness measuring 26 per cent in the period, a three-fold increase since 
    2015 when we started monitoring, and prompted awareness at 72 per cent 
  * sales on our online shopping platform are running around 50 per cent ahead 
    of last year, with visits to our 'Shop' pages increasing by a similar 
    amount 
  * intu Accelerate, our incubator for new technologies and services for the UK 
    retail market, has identified seven start-ups to pilot new concepts 
    in-centres and online, including Europe's first customer service robot in a 

    shopping centre 
 
Seizing the growth opportunity in Spain 
 
Our three top-10 centres are performing well, benefitting from our asset 
management initiatives and taking advantage of the strengthening economy in the 
regions we operate: 
 
  * footfall remains strong, running 1.5 per cent ahead for the year to date. 
    At intu Asturias, following the opening of the new lower level retail in 
    July, footfall has increased by 8 per cent 
  * new lettings in the period were driven by tenant demand at Madrid Xanadú 
    building on our relationships with retailers both in the UK and Spain, 
    introducing the likes of Quiz, Vans, G-Star and TGB 
  * we completed our 50:50 joint venture partnership of Madrid Xanadú with TH 
    Real Estate in July 2017, on terms in line with our original acquisition in 
    March 2017 
 
Corporate responsibility 
 
We worked with the National Autistic Society to create the first UK-wide Autism 
Hour at the start of October. Retailers, restaurants and leisure operators at 
all our centres reduced their lights, music and other background noise for an 
hour to create a better environment for autistic customers to visit our centres 
and raise awareness of this issue. 
 
With three years to go, we have met or almost met our 2020 environmental 
targets which were set against a 2010 base line. We have reduced the intensity 
of carbon emissions by 47 per cent (target 50 per cent), diverted 100 per cent 
of waste from landfill of which 74 per cent is recycled (targets 99 per cent 
and 75 per cent respectively) and reduced the water intensity by 14 per cent 
(target 10 per cent). 
 
Our people are at the heart of what we do and in 2017 we have achieved the 
internationally recognised accreditation Investors in People gold standard 
across all intu branded centres. This highly regarded achievement defines what 
it takes to lead, support and manage people well for sustainable results. 
 
Conference call 
 
A conference call for analysts and investors will be held today at 08:00 GMT. 
 
A copy of this press release is available for download from our website at 
intugroup.co.uk. 
 
ENQUIRIES 
 
intu properties plc 
 
David Fischel     Chief Executive                                  [phone] 
 
Matthew Roberts   Chief Financial Officer                          [phone] 
 
Adrian Croft      Head of Investor Relations                       [phone] 
 
Public relations 
 
UK:               Justin Griffiths, Powerscourt                    [phone] 
 
SA:               Frédéric Cornet, Instinctif Partners              [phone] 
 
NOTES FOR EDITORS 
 
intu is the UK's leading owner, manager and developer of prime regional 
shopping centres with a growing presence in Spain. 
 
We are passionate about creating uniquely compelling experiences, in centre and 
online, that attract customers, delivering enhanced footfall, dwell time and 
loyalty. This helps our retailers flourish, driving occupancy and income 
growth. 
 
We own many of the UK's largest and most popular retail destinations, with 
super-regional centres such as intu Trafford Centre and intu Lakeside and 
vibrant city centre locations from Newcastle to Watford. 
 
We are focused on four strategic objectives: optimising the performance of our 
assets to deliver attractive long-term total property returns, progressing our 
UK development pipeline to add value to our portfolio, leveraging the strength 
of our brand and seizing the opportunity in Spain to create a business of 
scale. 
 
We are committed to our local communities, our centres support over 120,000 
jobs representing about 4 per cent of the total UK retail workforce, and to 
operating with environmental responsibility. 
 
Our success creates value for our retailers, investors and the communities we 
serve. 
 
 
 
END 
 

(END) Dow Jones Newswires

November 02, 2017 03:00 ET (07:00 GMT)