David Fischel, intu Chief Executive, commented:
“The underlying strengths of the intu business were much in evidence in 2017 as we recorded a robust overall performance, confounding the external gloom and negativity in pre-Brexit UK about retail and retail property.
We recorded a strong year of leasing activity, signing 217 long-term leases in the UK and Spain, at rents in aggregate 7 per cent ahead of previous rents, as retailers continue to focus on increasing their space in prime, high footfall retail and leisure destinations such as our shopping centres.
During the year, major flagship brands upsized and optimised their presence, with the likes of Primark, Next and River Island taking additional space in our centres, and Inditex and H&M expanding their brand portfolios with us. Major international brands have also continued to recognisthe attraction of our centres, including Victoria’s Secret (US), Lovisa (Australia), Colette (Australia) and Inglot (Poland) adding new stores.
This successful leasing performance has driven our third successive year of like for like net rental income growth, a key strategic priority for us. Following increases of 1.8 per cent in 2015 and 3.6 per cent in 2016, we have delivered a 0.5 per cent increase for the year overall, with a strong second half recovery with growth of 2.4%. Consequently, we reiterate our medium-term guidance, over the next three to five years, of 2 to 3 per cent like-for-like net rental income growth per annum and expect to be in the range of 1.5 to 2.5 per cent like-for-like net rental income growth in 2018.
Our asset performance was resilient in the UK and buoyant in Spain, resulting in a revaluation surplus of £47 million, which in turn drove an increased profit for the year of £203 million (2016: £172 million) and took net asset value per share from 404 pence to 411 pence. Other key performance indicators, such as 96 per cent occupancy and increased footfall for the year, also demonstrated that intu is in good shape.
We moved on at pace with our investment plans, with significant projects underway at intu Watford, intu Lakeside and a number of other centres. In the UK, we spent £184 million during the year and have plans to invest a further £562 million over the next three years, with plenty of opportunity beyond that period, at returns we anticipate to deliver significant enhancement to shareholder value.
Our successful asset recycling initiatives have continued as we concluded terms for the £148 million disposal of 50 per cent interest in intu Chapelfield, following our disposals of intu Bromley and part of intu Uxbridge in previous years, all on terms confirming the market values of these assets.
We continued to seize the substantial growth opportunity we see in Spain and acquired Madrid Xanadú in the year, a centre full of potential and an ideal fit for our shopping resort model in Spain. With three top 10 shopping centres in the country, our Spanish business, which we embarked upon in 2013 at an opportune moment in the cycle, delivered a tremendous performance during the year with continued high occupancy, increased footfall and valuations of intu Asturias and Puerto Venecia, Zaragoza increasing 11 per cent and 4 per cent respectively. We also welcomed new names to our centres, including Quiz, Levis, Pandora, Alcott and Xiaomi, signing 38 new leases at an average 25% ahead of previous passing rent.
Five years on from launch, the importance of the intu brand has continued to grow with customer awareness increasing considerably. The transaction between Hammerson and intu is expected to complete later this year and, as announced in December, the enlarged group will be using the intu name within its shopping centre business.
These results are an endorsement of the underlying strength of the intu business. Our active asset management, repositioning of the portfolio, investment in our centres and brand in recent years have put intu in a strong position to mitigate the continuing challenging business environment. Because of this, we remain confident in our future prospects and our ability to deliver further like-for-like rental growth in the year ahead.”