intu releases half-year results and says ‘it was a challenging first half’ as rental incomes slump more than 7%.
Intu says it is having a difficult year, reporting a like-for-like 7.7% reduction in net rental income from £223.1m to £205.2m for the six months ending 30 June 2019.
The business says it was a challenging first half, driven by weakening investor sentiment and a higher level of administrations and CVAs as some retailers face a difficult operating environment.
Consequently, intu saw further downward pressure on valuations (like-for-like reduction of 9.6%) and like-for-like net rental income (down 7.7%) in the period.
intu believes that the wave of large CVAs is believed to now be over: the majority of intu tenants are well capitalised global brands and it has collected Q3 rents without issue.
intu signed 109 leases during the period at an average of 1% above the previous passing rent and rent reviews saw an average increase of 7%.
Key new lettings during the period include Morphe, AliExpress, Uniqlo, Hollister, Mango, Puttshack, Clip ‘n Climb and The Hall.
Footfall and retail sales in intu centres continued to outperform the benchmark during the period.
intu says it has developed an ambitious, but realistic plan to transform its business based on four key areas:
– Fix the balance sheet, which is the number one priority
– Simplify the business and drive efficiency
– Sharpen its focus on customers
– Transform its centres
– intu has also identified c.6,000 residential units across eight sites, seven potential hotel suits identified for c.800 rooms and eight office opportunities.
Matthew Roberts, intu Chief Executive, said:
“The first half of 2019 has been challenging for intu. 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. Over the past nine months we have carried out the most comprehensive review of the business that intu has ever undertaken.
“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.”
The business also comments that “intu Broadmarsh we commenced construction of the £89 million regeneration of the centre in January 2019. This leisure led scheme will be anchored by The Light cinema and Hollywood Bowl, with two-thirds of the units either exchanged or in advanced negotiations.”