Intu profits surge but rental income growth slows
UK and Spanish fashion retailers may be struggling but landlord Intu Properties managed to report higher profits for 2017. That said, its rental growth slowed in an undeniably tough market in which the migration to e-shopping means many store spaces are becoming less profitable for retailers.
The company said pre-tax profit rose 20% to £227 million as its property portfolio’s value rose, while underlying earnings edged up 0.5% to £201 million.
Comparable net retail income was up only 0.5% however, well down from the 3.6% growth of a year earlier. Total net rental income was up 3% to £460 million as Intu added new space, but the net rental income margin was slightly lower as it faced higher costs due to empty spaces after the BHS collapse.
While the company was upbeat, saying that it had risen above the gloom and negativity prevalent in a pre-Brexit UK, it estimated that sales for retailers renting its property fell by a little over 2% last year.
Clearly, it still faces challenges in convincing under-pressure retailers to commit to expensive stores. But while some retailers at Pure last week told Fashion Network that they’re being offered extremely attractive deals by major shopping mall landlords at present, the Intu results show that it’s largely one of the winners in the squeezed retail sector. Its occupancy rate at UK centres was broadly flat at 96% year-on-year and it even managed a 0.1% rise in footfall at a time when malls are among the biggest sufferers from footfall declines nationwide.
Intu said that last 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.” It added that “major international brands have also continued to recognise the attraction of our centres, including Victoria's Secret, Lovisa, Colette and Inglot adding new stores.”
Intu’s UK portfolio is made up of 17 centres, including 10 of the top 25, and in Spain it owns three of the country's top 10 centres, with advanced plans to build a fourth.
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