TIDMINTU
RNS Number : 1053L
Intu Properties PLC
17 April 2018
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
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JURISDICTION
17 APRIL 2018
INTU PROPERTIES PLC ('INTU')
LEI: 213800JSNTERD5CJZO95
Regulated Information Classification: Additional regulated
information required to be disclosed under the laws of a Member
State of the EU.
TRADING UPDATE FOR THE PERIOD 1 JANUARY 2018 TO 17 APRIL
2018
RECORD RETAILER DEMAND AND STRONG OPERATING PERFORMANCE
David Fischel, intu Chief Executive, commented:
"Our prime shopping centres produced a strong first quarter with
lettings at increased rents, high occupancy and footfall exceeding
the comparable period* last year, with footfall significantly and
consistently outperforming the ShopperTrak national retail
benchmark over the last five years.
It was a record three months for retailer demand as we signed 60
new leases, with high quality names increasing their presence with
intu and great new brands coming to our shopping centres for the
first time. This includes flagship retailers Zara and River Island
trebling and doubling their space respectively at intu Lakeside and
Abercrombie & Fitch choosing intu Trafford Centre for its first
UK store outside London.
Our prime centres continue to outperform as retailers and
shoppers gravitate towards the best locations. We have a very
concentrated portfolio. Over 80% of our UK gross asset value is
comprised of 10 centres, all PMA ranked top-25 UK centres and some
of the largest and most popular retail and leisure destinations in
the country.
We continue to see growth opportunities for our GBP10 billion UK
portfolio. We have a substantial ongoing investment programme that
will see us open our GBP180 million extension at intu Watford later
this year and the GBP72 million leisure extension at intu Lakeside
next year, with lettings proceeding strongly in both cases. We are
also planning to invest over GBP560 million in our UK centres over
the next three years.
Our well-timed entry into the Spanish market continues to offer
significant upside as the country's economic recovery continues,
both from the three top-10 centres we currently own and from our
plan to begin construction in the next 12 months of a GBP600
million world class retail resort near Málaga.
All this development activity is underpinned by a robust
financial structure with cash and available facilities of GBP872
million and an active capital recycling programme.
As a result of this strong performance, we reiterate our
guidance for like-for-like net rental income growth both for the
current financial year, subject to no further material tenant
failures, and over the medium term."
* First quarter excluding the two weeks commencing 18 February
2018 impacted by severe snow
Highlights in the period:
-- Record level of retailer demand in the first quarter with 60
long term leases agreed (43 in the UK and 17 in Spain) for GBP10
million of annual rent, 5 per cent above previous passing rent
-- Sustained high occupancy of 96.1 per cent (March 2017: 95.8
per cent), unchanged from 31 December 2017
-- Increased footfall year-on-year to date, excluding the
periods of severe snow, by 1.5 per cent in the UK and continuing to
outperform the UK benchmark
-- Anticipated growth in like-for-like net rental income for the
year continues to be in the range of 1.5 per cent to 2.5 per cent,
with the outcome expected to be stronger in the second half than
the first half
-- GBP180 million intu Watford extension on target to open in
October 2018 and anchored by Debenhams and Cineworld. Further
letting in the period to Jack Wills and The Florist, taking
pre-lets to 70 per cent
-- Completed the disposal of 50 per cent of intu Chapelfield for
GBP148 million, in line with the December 2016 market value
-- Cash and available facilities of GBP872 million and debt to
asset ratio of 45.3 per cent at 31 March 2018 (based on 31 December
2017 investment property valuations)
-- Market movements in the fair value of debt and financial
instruments since the year end have positively impacted net assets
(and thereby NNNAV) by around GBP180 million
Delivering operational excellence
We had record letting activity in the quarter, with 60 long term
leases signed representing GBP10 million of annual rent (Q1 2017:
42 leases; GBP6 million of annual rent). In aggregate, these were 5
per cent above previous passing rent. Signings in the period
include:
-- key flagship fashion retailers ensuring they optimise their
store size in prime high footfall destinations. At intu Lakeside,
Zara and River Island are both upsizing, trebling and doubling
their space respectively
-- international brand Abercrombie & Fitch to open only its
second UK store at intu Trafford Centre
-- aspirational brands continuing to open stores in our regional
centres with Jo Malone opening at intu Lakeside and The White
Company at Cribbs Causeway
-- leisure operators recognising the attraction of regional
destinations with Rock Up, a climbing experience for all ages, set
to open at intu Watford
Tenants have opened or are shop fitting 61 stores year to date,
including the 78,000 square foot Next flagship store at intu
Metrocentre which opened in March, another example of a major
retailer recognising the importance of flagship stores in their
multichannel strategy.
We settled 24 rent reviews in the period for new rents totalling
GBP8 million, an average uplift of 8 per cent on the previous
rent.
Footfall in the period, excluding the periods of severe snow
when some centres were closed, increased by 1.5 per cent in the UK.
Over the Easter period, footfall was up by 7 per cent against the
Easter period in 2017 demonstrating the attraction of day out
retail and leisure destinations.
Unprompted awareness of the intu brand increased to 29 per cent
(December 2017: 26 per cent), with prompted awareness increasing to
75 per cent (December 2017: 71 per cent).
intu.co.uk, our premium content publisher and shopping platform,
delivered a 31 per cent increase in sales for retailers against the
same period in 2017.
Growing like-for-like net rental income
Anticipated growth in like-for-like net rental income for 2018
continues to be in the range 1.5 per cent to 2.5 per cent, subject
to no further material tenant failures, with the outcome expected
to be stronger in the second half than the first half.
Since the end of 2017, a number of administrations and
restructurings have been initiated by tenants, including New Look,
Toys R Us and Prezzo. The majority of our units with these
operators are still trading as the tenants go through their
restructuring processes.
The estimated impact of these administrations and restructurings
is approximately GBP3.9 million in 2018, equivalent to 0.8 per cent
of our 2017 net rental income. This is before we take any
mitigating actions to find quality replacement tenants and reduce
property operating expenses to minimise the impact of any closures.
Our like-for-like net rental income guidance is inclusive of the
effect of these administrations and restructurings.
As previously stated, we expect to deliver medium term
like-for-like net rental income growth of 2 to 3 per cent per
annum, over the next three to five years.
Optimising our flagship destinations
We remain on target with two major development projects
on-site.
At intu Watford, the GBP180 million extension is scheduled to
open in October 2018 and we have exchanged on 70 per cent of the
space, with Jack Wills and The Florist signing in the period. A
further 7 per cent is in detailed negotiations.
The GBP72 million Nickelodeon anchored leisure development at
intu Lakeside, which is expected to substantially strengthen the
centre through increasing catchment and footfall, is due to open in
Spring 2019 and is progressing well, with 85 per cent of the space
exchanged.
In Spain, following last year's acquisition of Madrid Xanadú, we
are successfully delivering our shopping resort concept with
ongoing active asset management projects, introducing an aquarium
and Nickelodeon theme park. These will augment the attractions of
the centre, which already includes an indoor ski slope and a
compelling mix of retail and catering.
Making smart use of capital
In January 2018, we completed the disposal of 50 per cent of
intu Chapelfield for GBP148 million, in line with the December 2016
market value. Further, we have agreed a GBP74 million debt facility
on our remaining interest in intu Chapelfield.
Cash and available facilities at 31 March 2018 were GBP872
million.
In April 2018, we amended and extended our EUR225 million term
loan secured on Puerto Venecia, Zaragoza. The margin on this loan
was reduced by 120 basis points and the maturity date extended from
2019 to 2025.
Market movements in the fair value of debt and financial
instruments since the year end have positively impacted net assets
(and thereby NNNAV) by around GBP180 million.
intu's key strengths
-- intu is the UK's leading owner, manager and developer of prime regional shopping centres
intu has a portfolio that comprises some of the largest and most
popular retail and leisure destinations in the country, owning four
of the top-10 PMA ranked shopping centres and eight of the top-20,
with our assets set out in the chart below.
Chart 1 - intu UK Portfolio
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/1053L_-2018-4-17.pdf
Five years on from launch, the importance of the intu brand has
continued to grow with customer awareness increasing considerably.
The combination of our national presence, attractive digital
offering and in-house commercialisation team offers retailers and
brands promotional opportunities, which in turn gives us a
multidisciplinary opportunity to help retailers flourish within our
centres.
-- intu entered the Spanish market at an opportune time and we
have successfully implemented the strategy set out at the time of
our first acquisition, intu Asturias
Our GBP0.8 billion investment comprises three of Spain's top-10
shopping centres and the proposed 230,000 square metre, GBP600
million shopping resort development, intu Costa del Sol, near
Málaga. The value of intu Asturias has almost doubled to EUR317
million in our four years of ownership, and with the approval of
the General Plan of Torremolinos, we have seen a GBP75 million
uplift in the valuation of our development site for intu Costa del
Sol.
-- intu's assets have consistently shown they remain relevant to
both shoppers and retailers despite the backdrop of a challenging
retail environment
Our centres attract 400 million customer visits per annum and we
estimate that over half of the UK's population visits an intu
centre each year. Occupancy across the portfolio is structurally
high and has been at 96 per cent for the last three years
(equivalent to 97 per cent on the EPRA basis). Leasing activity has
been, and remains, strong and has contributed to generating
continued like-for-like growth in net rental income over the last
three years, averaging 2 per cent per annum over that period.
-- intu has consistently invested in its centres
In 2017, GBP287 million was invested across our UK portfolio
(2016: GBP204 million). Of this, GBP103 million was invested by
tenants predominantly in improved shop fit outs. intu itself
invested GBP184 million in extensions and enhancements to centres.
In general, these projects are expected to deliver stabilised
initial yields on cost in a range between 6 and 10 per cent
depending on the individual project. We are planning to invest over
GBP560 million in our UK centres over the next three years. At intu
Merry Hill in the West Midlands, a centre we took full ownership of
in 2016, we have a great opportunity to generate value with a
leisure extension, similar to that at intu Lakeside, to ensure the
centre has a compelling mix of retail, catering and leisure on a
par with our flagship asset outside Manchester, intu Trafford
Centre.
-- intu has delivered strongly against its strategic objectives
since the demerger of Capital and Counties in 2010, when it
recreated the company as a specialist regional shopping centre
business
Over the period to 31 December 2017, we have:
- delivered a total financial return (dividend plus growth in
net asset value per share) of 7.5 per cent per annum (compound
annual growth rate) increasing net asset value per share to 411
pence as at 31 December 2017
- improved the quality and breadth, across the UK and Spain, of
the investment and development portfolio. This has increased from
GBP5 billion in 2010 to over GBP10 billion today, through organic
growth, active management, developments and acquisitions net of the
GBP1 billion of disposals referred to below
- successfully launched the intu brand in 2013, the UK's only
national consumer facing shopping centre brand, the strength of
which is widely recognised today
- made a timely and strategic entry into the Spanish market in
2013, building a business of scale to take advantage of the strong
growth opportunity in that market, while profitably completing our
exit from the US in January 2016
intu's robust financial structure
Our balance sheet is robust and we consider the structure of our
borrowings, predominantly using flexible asset specific
non-recourse arrangements, to be appropriate for our concentrated
portfolio. The weighted average debt maturity at 31 December 2017
was 6.6 years with minimal maturities before 2021. We have a
diversified, flexible capital structure with substantial covenant
headroom.
With more than GBP5 billion of debt refinanced over the last
five years, we have proven that we have very good access to both
the public and private capital markets with our core secured group
financing structure, comprising GBP1.5 billion of bank loans and
investment grade bonds, A grade rated by S&P. Over this period,
we have taken out borrowings at an average all-in cost of around
3.5 per cent and reduced our weighted average cost of debt from 5.2
per cent to 4.2 per cent. The average cost of debt includes legacy
debt on intu Trafford Centre, which pre-dates this asset becoming
part of the intu portfolio in 2011, and a first mortgage debenture
stock 2027 originally issued over 25 years ago. Both these
facilities would be expensive to break, and we have therefore
chosen to keep them in place rather than incur the cost of
refinancing.
Chart 2 - intu Net External Debt
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/1053L_-2018-4-17.pdf
Over the last three and half years, we have disposed of over
GBP1 billion of assets to recycle capital into our investment
programme, and we have flexibility for further disposals or part
disposals as around two-thirds of our portfolio (GBP6.8 billion) is
100 per cent owned.
CONFERENCE CALL
A conference call for analysts and investors will be held today
at 08:30 BST.
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 +44 (0)20 7960 1207
Matthew Roberts Chief Financial Officer +44 (0)20 7960 1353
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
FORWARD LOOKING STATEMENTS
This press release contains "forward-looking statements"
regarding the belief or current expectations of intu properties
plc, its Directors and other members of its senior management about
intu properties plc's businesses, financial performance and results
of operations. These forward-looking statements are not guarantees
of future performance. Rather, they are based on current views and
assumptions and involve known and unknown risks, uncertainties and
other factors, many of which are outside the control of intu
properties plc and are difficult to predict, that may cause actual
results, performance or developments to differ materially from any
future results, performance or developments expressed or implied by
the forward-looking statements. These forward-looking statements
speak only as at the date of this press release. Except as required
by applicable law, intu properties plc makes no representation or
warranty in relation to them and expressly disclaims any obligation
to update or revise any forward-looking statements contained herein
to reflect any change in intu properties plc's expectations with
regard thereto or any change in events, conditions or circumstances
on which any such statement is based. No statement is intended to
be a profit forecast or profit estimate for any period.
Any information contained in this press release on the price at
which shares or other securities in intu properties plc have been
bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future
performance.
NOTES FOR EDITORS
intu owns and manages some of the best shopping centres, in some
of the strongest locations, in the UK and Spain.
Our UK portfolio is made up of 17 centres, including eight of
the top 20, and in Spain we own three of the country's top 10
centres, with advanced plans to build a fourth.
We are passionate about creating compelling experiences, in
centre and online, that make our customers smile and help our
retailers flourish.
We attract over 400 million customer visits and 26 million
website visits a year offering a multichannel approach that truly
supports retail strategies.
Our strategic focus on prime, high-footfall flagship
destinations, combined with the strength and popularity of our
brand, means that intu offers enhanced footfall, dwell time and
loyalty. This helps our retailers flourish, driving occupancy and
income growth.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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