Intu warns on net rental income amid “transformational” strategy launch

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Intu warning
// Intu uses half year results to issue a warning over net rental income amid a wave of CVAs
// It said it expected like-for-like net rental income to be moderately down in 2020
// The shopping centre giant also launches a 5-year “transformational” strategy to arrest tumbling rental income & asset values

Intu has reported a drop in half-year net rental income due to a wave of CVAs, and warned that its like-for-like net rental income is expected to be moderately down in 2020.

The shopping centre giant said it experienced a “challenging” first half, thanks to weakening investor sentiment and a high number of retailer tenants entering administrations or launching CVAs.

Intu said it expects like-for-like net rental income, which fell 7.7 per cent to £205.2 million in the six month period ending June 30, to be at a similar level for the rest of the year.

Meanwhile, its property revaluation deficit widened to £872.1 million, compared to the £650.4 million deficit recorded in the same period last year.

In addition, the value of Intu’s shopping centre portfolio fell 8.8 per cent year-on-year to £8.36 billion.

Footfall edged up a mere 0.4 per cent in its UK shopping centres – which includes Lakeside in Essex, Newcastle’s Metrocentre, Nottingham’s Victoria Centre and Manchester’s Trafford Centre – but its centres in Spain enjoyed 3.5 per cent growth

The half-year results prompted shares in Intu to fall by 21 per cent to 55p this morning.

The firm also used its trading update to launch a five-year “transformational” strategy with the aim of improving rental income and asset values.

The strategy features plans to drive efficiencies, improve customer service and experience, shore up balance sheets, refurbish its shopping centres, and place a focus on residential, hotel and flexible working spaces instead of just retail.

Intu said it would also look at “modernising the lease structure”, which could soon feature “store generated online sales” in rental agreements.

Intu has already been working on preserving cash and reducing its debt by selling assets.

It said it removed around 10 per cent of its management roles since the end of June, allowing it to save £5 million in cash annually.

Intu also scrapped its dividend earlier this year, with the money saved directed to investment in its shopping centres instead.

It added that it would not pay a dividend for the foreseeable future in order to continue retaining cash.

“The first half of 2019 has been challenging for Intu,” chief executive officer Matthew Roberts said.

“We have experienced further downward pressure on like-for-like net rental income and property values resulting from a higher level of administrations and CVAs as some retailers struggle to remain relevant in a multichannel world.

”These challenges, facing Intu and the whole sector, have been well-documented and, while there are no quick fixes, I am confident that we can address them head on.”

He added: “We know radical transformation is required and have developed a new, ambitious five year strategy to reshape our business and address the challenges we face, with a priority to fix our balance sheet.

“With the people changes we have made, we now have the right leadership team in place with the appropriate skill sets to deliver this plan and drive the business forward.

“Regardless of current sentiment, one thing is clear: the physical store is not dying, it is evolving.

“The right store in the right location still plays a vital role in retailers’ multichannel strategies and we are starting to work with them as partners sharing the risks and rewards.

“Our centres will also transform as we turn them into thriving communities – places where people want to live, work and have fun, as well as shop.

“Change will not happen overnight, but I am confident we have the right plan in place and an energised, dynamic team to deliver it.”

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2 COMMENTS

  1. A considered strategic response to changing times from Intu. But I wonder whether centres can be transformed into ‘thriving communities’ where “people want to live, work and have fun, as well as shop’.
    Such admirable aims are about changing behaviour. A more radical approach might be to consider the analysis and solutions presented by the ‘Jobs to be Done’ methodology which reflect the actual needs of people.

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