Intu Properties plc Annual results 2013 · 2016-09-20 · Underlying earnings per share 15.0p (2012...

Intu Properties plc Annual results 2013 Delivering change Delivering great experiences

Annual results 2013, 28 February 2014

• Welcome – David Fischel

• Financial performance

– Matthew Roberts • Operational review

– Mike Butterworth • Strategy and outlook

– David Fischel

• Questions

• Appendices

Intu Properties plc

This presentation 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 presentation. 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.

Welcome David Fischel, Chief Executive

Welcome

• Robust asset management approach, focused on medium-term total property return

• Financial performance affected by repositioning

• Growth from acquisitions with substantial organic development pipeline

• Transformed debt structure

• Nationwide consumer-facing brand and digital proposition

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A long term business - 20 years of measured expansion

Brand launch

• Cultural change

• New signage, information desks and uniforms

• In-sourced facilities management - intu Retail Services

• World Class Service training

• Free Wi-Fi

• Launch of an online business

• Formation of intu Experiences for promotional activities and national marketing campaigns

• Continuing signs of economic recovery

– BRC non-food sales

• Momentum of development programme picking up

– foregoing some income in preparation for redevelopment

• Increasing importance to multi-channel retailers of prime retail destinations such as Intu’s

– key retailers continuing to upsize

– strong demand for catering units

Outlook for 2014

Financial performance Matthew Roberts, Finance Director

Key highlights

• Underlying earnings per share 15.0p (2012 16.1p) - impact of tenant failures and lease expiries

• Final dividend 10p; full year dividend 15p

• NAV per share 380p

• £1.8bn refinanced in 2013 via bond issuance and bank debt

• Robust financial position: debt to assets ratio 48.5 per cent, 8.0 years average debt maturity and £325m* of cash and committed facilities at year end

• £110m tap of intu Trafford Centre; targeting c 50% leverage on Parque Principado

* Includes intu Metrocentre CMBS (£69m)

Underlying earnings (£m)

2013

£m

2012

£m Net rental income 369.5 362.6 Administration expenses (27.7) (26.7) Net finance cost (underlying) (203.1) (204.0) Dividend from US investment 6.3 6.3 Other (4.8) (0.5) Underlying earnings 140.2 137.7 Interest cover 1.71x 1.69x EPRA cost ratio (1) 15.7% 16.4% Earnings per share (pence) 15.0 16.1 Average shares in issue (million) 935.3 853.8 Dividend per share (pence) 15.0 15.0

(1) The EPRA cost ratio presented excludes direct vacancy costs and is calculated in accordance with EPRA guidelines

Net rental income Rental increases offset by tenant failures and lease expiries

2013

£m 12 months to December 2012 362.6 Like-for-like (-1.9%) (6.9) Additions 13.8 369.5

• £7m like-for-like decrease: £5m letting activity growth offset by tenant administrations

• Tenants in administration 68 units (3 per cent of rent) of which 19 units (1 per cent of rent) are still trading

• Expecting further year of net rental income like-for-like reduction

Underlying earnings “bridge” (£m)

Items excluded from underlying profit

(1) 2013 includes costs associated with acquisition of Midsummer Place (£11m), Parque Principado (£2m) and rebranding costs (£7m)

2013

£m

2012

£m Underlying earnings Property revaluations

140.2

125.8

137.7

40.9 Change in fair value of financial instruments 273.8 30.5 Exceptional finance costs

(158.0)

(61.0)

Exceptional administration expenses(1) (21.2) (1.1) Others 3.4 11.6 Profit for the period 364.0 158.6

1% total financial return including dividend

Net assets per share 380 pence

Recurring operating cash flow

2013 Pence per share

Underlying operating cash generated 36.1 Net finance charges paid (19.3) Convertible bond interest (0.6) Net movement in working capital 0.1 Recurring operating cash flow 16.3 Dividend 15.0

£194 million increase in net debt

Change in net external debt (£m)

• Currently 92 per cent hedged (excluding forward starting swaps)

2013 debt funding activities Transformed maturity profile

• Refinanced c 50% of Group’s debt in 2013;

significantly de-risked 2015-2017 maturities

• Highly successful bond issues;

Secured Group Structure and intu Metrocentre

• Diversified sources of funding; operational flexibility

• Blended 4.4% cost on new debt

• Weighted maturity extended from two to ten years on

these assets

• Also arranged bank loans secured on Midsummer

Place and Barton Square

Debt maturity

• Weighted average debt maturity of 8.0 years

• Largely fixed, weighted average cost 4.8 per cent • £325m of cash and committed facilities

• £110m tap of intu Trafford Centre; targeting c 50% leverage on Parque Principado

• 2014-2018 Capex: £86m committed; £215m uncommitted (excludes major extensions)

Net debt to assets 48.5%

Robust financial position

31 December

2013

31 December

2012 Total properties* £7,624m £7,073m Net external debt** £(3,698)m £(3,504)m Net debt to assets 48.5% 49.5% Cash and short term investments** £235m £188m Undrawn committed corporate facilities £90m £375m Net assets attributable to shareholders £3,519m £2,977m Adjusted net assets per share 380p 392p Weighted average cost of gross debt 4.8% 5.2% Weighted average maturity of gross debt 8.0 years 6.1 years * Market value of investment properties

** 2013 includes intu Metrocentre CMBS (£69m)

Operational review Mike Butterworth, Chief Operating Officer

2013 operating metrics

•201 new long-term leases £42m +4% passing rent

•Occupancy 95% Vacancy UK “big shopping centres” * 10%

•Valuation +1.8% (IPD** capital growth + 0.8%)

•Total property return 7.3% (IPD quarterly index 8.1%)

•Footfall -2% (Experian benchmark -4%)

•Retailer sales (est.) +0%***

* PMA estimate – top 70 locations plus regional shopping centres. ** IPD monthly index, retail *** Excluding impact of trading interruptions during major tenant relocations at intu Braehead and Cribbs Causeway.

Dealing with lease expiry concentrations

• 21% expiries in 2012 and 2013 – 4% remain

• 8% expiries in 2014 – 6% remain

• Significant refreshment to tenant mix:

– 22 new shops & refits at Cribbs Causeway

– 19 new shops & refits at intu Potteries

• 2014 – intu Braehead

201 new long term leases

0%

2%

4%

6%

8%

10%

12%

2012 2013 2014

% expiring each year f rom 31 Dec 2011

% expiring each year f rom 31 Dec 2013

Successful management of tenant failures

Robust asset management approach

• Tenant administrations “cost” £10m 2013

• Few insolvencies since June 2013

• Successful approach delivering sustainable income:

– right space for new business models

– long-term lettings to encourage investment

– legal challenge won

• Outcome - enhanced tenant mix

Delivering change, delivering great experiences

Valuation +£126 million, +1.8%

Market value

Like-for-like surplus (deficit)

£m £m % intu Trafford Centre 1,900 94 5.3

intu Lakeside 1,125 26 2.4

Manchester Arndale 399 15 3.7

St David’s, Cardiff 272 16 6.4

Cribbs Causeway 242 7 2.8

intu Eldon Square 250 -7 -2.9

intu Potteries 163 -6 -3.6

intu Bromley 159 -7 -4.1

Significant valuation movements:

Nationwide opportunities

Development pipeline

2.6 million sq ft, 1.8 million sq ft consented, with 30 planning approvals

* Indicative timings – actual timing of expenditure will be dependent on a number of factors including timing of planning permission and tenant demand.

2013 million sq. ft.

2018* million sq. ft.

2023* million sq. ft.

Total size 18.2 19.3 20.8

Catering and leisure 1.9 2.8 3.4

intu Lakeside Creating more reasons to visit and stay longer

• Food court repositioning underway – to complete Spring 2014, expenditure £9m, incremental rent over £1m

• Over 600,000 sq ft leisure and retail extensions consented

• 225,000 sq ft leisure extension - expenditure £80m, anticipated start 2015 subject to pre-lets, completion 2018

• 325,000 sq ft retail extension – expenditure £180m, anticipated start 2016 subject to pre-lets

intu Bromley Queens Gardens restaurants, cinema to follow

• 14,000 sq ft cluster of five restaurants

• Expected construction from Autumn 2014

• Planning application submitted for five screen boutique cinema and further restaurants

intu Watford Creating a 1.4m sq ft shopping and leisure destination

• 380,000 sq ft leisure, catering & retail extension

consented, expenditure £100m

• Cinema in solicitors hands, strong interest from catering and leisure operators new to Watford

• Discussions underway with retailers including new anchor store

• Anticipated start Winter 2014/15, completion

2017

intu Victoria Centre and intu Broadmarsh, Nottingham Major agreement with council for complementary developments

Stage 1: • Major refurbishment of intu Victoria Centre and

cluster of 12 new restaurants • Urban Outfitters, Superdry signed, interest from

other retailers not currently represented in Nottingham

Stage 2: • Major refurbishment of intu Broadmarsh

Stage 3: • 500,000 sq ft retail and leisure extension of intu

Victoria Centre

intu Metrocentre Enhancing tenant mix, dining area extension

• Platinum Mall - aspirational tenant mix and complementary catering to raise rental tone

• Planning consent for 45,000 sq ft extension to dining adjacent to cinema

– 11 more catering outlets – several new names to the region

CGI

CGI

intu Eldon Square Major refurbishment in progress, restaurant quarter consented

• Refurbishment to enhance overall appearance and ambience, to complete Spring 2014

• Planning consent for 20 new restaurants, two distinct areas

• Construction from early 2014 with completion Spring 2015

• Total expenditure £20m (Intu share £12m)

intu Potteries Driving change - 6 new brands, 1 in 5 stores refitted, leisure extension imminent

Midsummer Place, Milton Keynes Rental income growth potential

• Acquired March 2013

• Occupancy increased to 98%

• New names – Timberland, Hugo Boss, Brother2Brother

• New flagship Topshop/Topman

• Enhanced catering – Ed’s Diner, Chopstix

intu Trafford Centre Continual enhancement

Parque Principado, Oviedo The prime regional destination for Asturias, Northern Spain

• Acquired October 2013 with CPPIB

• Occupancy increased to 98% from 97%

• Five new lettings since acquisition

• Footfall 9 million

Enhancing the tenant mix

Strategy and outlook David Fischel, Chief Executive

• Brand launch and culture change

• Major refinancings

• Asset management

– moving on from lease expiry concentrations and tenant failures

• Development pipeline

– planning approvals

• Acquisitions

– UK and Spain

• Financial results

– focus on total property return

Significant progress in 2013

Created nationwide consumer-facing brand, intu Significant benefits

• Reinforcing scale of intu and importance of intu centres with retailers

• Extending dwell time and spend

• Engagement with consumers – ancillary income from new services

• Operational efficiencies

• Nationwide marketing partnerships

• Media benefits of same company and centre name

• Data collection and analysis

• Driving footfall between online and physical

Digitally connected

• 9 centres free Wi-Fi - 2m registrations

• Ownership model – infrastructure and data

• 60% of Wi-Fi registrants “opted in” to marketing

• 9 million unique visitors to our websites

• intu.co.uk up and running

• Optimise performance of existing assets through active asset management

– focusing on customer experience, combining retail, catering and leisure

• Continue to improve financial flexibility

– including capital recycling and introducing partners

• Obtaining competitive advantage from intu brand and digital presence

– demonstrating the benefits of scale and national coverage

• Seizing opportunities for profitable expansion

– drive forward £1.2 billion development pipeline

– acquisition opportunities

Intu’s priorities – leading change

350 million customer visits a year

£1.2 billion development pipeline over next ten years – that’s over 2.5 million sq ft of new retail, restaurants and leisure of which 1.8 million sq ft has planning approval

£70 million Investment by retailers in our centres during 2013

Average dwell time

100 minutes

Q&A

Appendices

UK’s top ranked shopping centres

Source: PMA * Top shopping centres on basis of PMA Retail Score (Dec 2013). Intu shopping centres highlighted ~~ Adjoined by Midsummer Place, acquired by Intu in March 2013

Centre Location Centre Location 1 Westfield London London – Shepherds Bush 23 intu Bromley Bromley 2 Bluewater Greenhithe 24 intu Eldon Square Newcastle 3 Westfield Stratford City London - Stratford 25= intu Braehead Glasgow 4 Meadowhall Sheffield 25= Victoria Square Belfast 5 intu Trafford Centre Manchester 27 East Kilbride Shopping Centre Glasgow 6 St David's Cardiff 28 Victoria Quarter Leeds 7 intu Lakeside Thurrock 29 Silverburn Glasgow 8 intu Metrocentre Gateshead 30 White Rose Shopping Centre Leeds 9 Liverpool One Liverpool 31 The Oracle Reading 10 Bullring Birmingham 32 Buchanan Galleries Glasgow 11 Arndale Centre Manchester 33 Churchill Square Brighton 12 Brent Cross London 34 Golden Square Warrington 13 Westfield Merry Hill Brierley Hill 35 Trinity Leeds Leeds 14 The Mall at Cribbs Causeway Bristol 15 Cabot Circus Bristol 16 Cabot Place, One Canada Square London 17 Highcross Leicester Leicester 45 intu Victoria Centre Nottingham 18 Westfield Derby Derby 50 intu Potteries Stoke-on-Trent 19 thecentre: mk ~~ Milton Keynes 52 intu Chapelfield Norwich 20 intu Watford Watford 60 Midsummer Place Milton Keynes 21 Festival Place Basingstoke 71 intu Uxbridge Uxbridge 22 West Quay Southampton 187 intu Broadmarsh Nottingham

Change in like-for-like net rental income (%)

Active management projects – anticipated expenditure £86m committed, c£215m uncommitted excluding major extensions

• Proposed expenditure is based on current expectation. Actual timing of expenditure will be dependent on a number of factors including timing of planning permission and tenant demand.

Development pipeline

1 Represents net additional floor space of retail, catering and leisure 2 Timing subject to change due to a number of internal and external factors 3 Total project cost £9 million of which £2 million has already been spent 4 Total project cost £42 million of which £2 million has already been spent 5 Smaller committed and pipeline projects do not necessarily involve the creation of additional floor space 6 Size refers to catering element only 7 Size excludes arena and hotel 8 Intu share 33% of total project cost £90 million

Indicative Expected Intu Size1 construction investment

Committed ‘000 sq ft timing2 £m intu Lakeside food court refurbishment3 – 2013-14 7 intu Victoria Centre refurbishment4 – 2014-15 40 intu Potteries leisure extension 58 2014-15 19 Other committed5 41 2014-15 20 86

Active management pipeline intu Trafford Centre - Barton Square courtyard enclosure and second floor retail 112 2014-15 40 intu Bromley Queen’s Gardens restaurants 14 2014-15 4 intu Eldon Square “Sidgate” redevelopment and restaurants – 2014-15 12 “Qube II” restaurants – 2014-15 11 intu Lakeside hotel6 8 2014-15 7 Other active management5 89 2014-18 141 215

Major projects intu Watford – Charter Place 380 2014-17 100 intu Broadmarsh redevelopment 51 2015-16 78 intu Lakeside leisure extension6 225 2015-17 80 intu Lakeside Northern extension 438 2016-18 180 intu Braehead extension7 475 2016-18 200 Cribbs Causeway extension8 200 2018-20 30 intu Victoria Place extension 505 2018-20 240 2,274 908

2,596 1,209

UK retail construction pipeline PMA estimate (million sq. ft.)

Yield comparisons

• Prime UK shopping centres - attractive asset class for major international investors

• Wide spread relative to corporate bonds

Yield by retail sub class (%)

Net rental income margin

Year ended 31 Dec 2013 Year ended

31 Dec 2012 Partners' Total share Intu share Intu share £m £m £m £m Gross rental income 448 (27) 421 412 Head rent payable (24) 24 - - 424 (3) 421 412 Net service charge expense and void rates (16) 2 (14) (12) Bad debt and lease incentive write off (9) - (9) (9) Property operating expenses (see below) (29) 1 (28) (28) (54) 3 (51) (49) Net rental income 370 - 370 363 Net rental income margin 88% 88%

• Property operating expenses include £10m of car park operating costs and £8m contribution to shopping centre marketing

Weighted average expiry 7.5 years

Lease expiry profile (%) ~

* Excludes four per cent in respect of leases which have expired of which around three quarters are in negotiation or solicitors hands

~Expressed as a % of rent roll

Chart to be updated

Marginal reduction in occupancy cost ratio

Retailer affordability

Estimated occupancy cost trends(2)(5) Current rent per square foot(3)(4)

• Compares rent to retailer turnover(2)

(1) MSU: Major space user > 10,000 sq ft (2) Based on actual sales data for 62 per cent of sales, estimates for 38 per cent of sales, extent of data varies between centres. Excluding retail parks (3) Based on net internal area – generally 10 per cent to 40 per cent higher than retail area (4) Anchors and MSUs are generally let on a rent per square foot basis, standard shop unit rents are generally determined on a zoned basis. (5) Not comparable with continental Europe and US shopping centre statistics, differences include measurement of retail area (see (3) above), treatment of property taxes

12 months ended

31 Dec 2013

31 Dec 2012

31 Dec 2011

Excluding anchor stores 12.4% 12.4% 13.2%

Excluding anchors and MSUs(1) 13.5% 13.9% 14.6%

As at

31 Dec 2013

31 Dec 2012

Anchors £11 £11

MSUs £31 £30

Standard units(4) £52 £51

Aggregate ERV

* Comprising passing rent £368m, plus other net income £29m (net car park income, turnover rent, commercialisation income) and contracted rent subject to rent free periods £17m, less non-recoverable costs and running void £20m

Top 20 tenants

(1) Includes BHS, Topshop, Topman, Burtons, Dorothy Perkins, Miss Selfridge, Wallis and Evans

(2) Includes Bank, Blacks, Cecil Gee and Scotts

(3) Includes USC

(4) Includes H Samuel and Ernest Jones

(5) Includes Superdrug and The Perfume Shop

Rank Tenant Group Number of units Secured rent %

1 Arcadia (1) 49 5% 2 Next 17 4% 3 Boots 23 3% 4 Debenhams 9 2% 5 H&M 15 2% 6 JD Sports (2) 25 2% 7 New Look 14 2% 8 Sports Direct (3) 23 2% 9 River Island 15 2% 10 Signet Group (4) 32 2% 11 Primark 8 1% 12 A S Watson (5) 33 1% 13 Dixons Retail 11 1% 14 Monsoon 22 1% 15 House of Fraser 4 1% 16 W H Smith 13 1% 17 Marks and Spencer 13 1% 18 Superdry 12 1% 19 Gap 13 1% 20 Clintons 15 1% Top 20 tenants total 366 36%

Corporate responsibility highlights

18% CO2 reduction 96% of waste diverted from landfill 22 Community projects

• Reduced our carbon emissions by 18% (like-for-like portfolio) compared with 2011 – saving enough CO2 in 2013 to cover the emissions of a medium car driving over 28 million miles

• Diverted 96% of waste from landfill, of which 71% was recycled – that’s over 23,000 tonnes of

waste, or the equivalent of over 3,800 male African elephants, diverted from landfill

• One of only 40 UK companies to hold BitC CommunityMark

• 22 community projects working with 12 charity partners • Included in FTSE4Good, Dow Jones Sustainability Global Index and JSE SRI

• Increased our CDP climate change survey score by 25% over past 4 years

Refreshing intu Eldon Square With intu Eldon Square’s £22 million refurbishment we are refreshing 65,000 ft sq of malls, replacing 13,000 ft sq of roof and lights and constructing a new feature entrance onto Northumberland Street. We are carrying out the majority of the work overnight to minimise disruption to our shoppers and retailers. Each evening the centre is transformed into a hive of construction activity with up to 120 operatives, scissor lifts, cherry pickers and cranes operating within the malls. 27,000 ft sq of structural crash decks, a temporary roof and 16,000 ft sq of shop front hoardings have been put in place for the works. Full life safety system checks are conducted each morning to ensure that the malls can be safely re-opened for the tens of thousands of people who visit every day.

EPRA non-GAAP measures Net asset value (diluted, adjusted)

Site location

• EPRA NNNAV is arrived at by adjusting NAV by the fair value of financial instruments (-20p), deferred tax (-2p), the difference between the fair value and book value of debt (-6p) and the non-controlling interest in respect of financial instruments (+1p)

• EPRA vacancy rate: The vacancy rate at 31 Dec 2013 was 3% (31 December 2012: 2%) • EPRA cost ratio:

EPRA costs include all operating costs of the business included in underlying earnings. Gross rental income is stated after deducting head rent and service charge costs recorded directly through rents.

Net assets

£m NAV per share

(pence)

Reported net assets, basic net assets per share 3,519 366 Dilutive convertible bonds and share options/awards 4 (15)

Diluted NAV 3,523 351

Adjustments:

Financial instrument-related valuation adjustments 198 20 Deferred tax 16 2

Non-controlling interest 67 7

NAV (diluted, adjusted) 3,804 380 EPRA NNNAV (diluted, adjusted) 3,535 353

EPRA costs - including direct vacancy costs £79.8m EPRA costs - excluding direct vacancy costs £66.3m Gross rental income £421.6m EPRA cost ratio (including direct vacancy costs) 18.9% EPRA cost ratio (excluding direct vacancy costs) 15.7%

Proportionally consolidated income statement and balance sheet

Summarised income statement Attributable to partner

Group as reported Metro Centre

Partnership Parque

Principado Group

proportionally 100% 40% 49% consolidated

£m £m £m £m

Net rental income 370 (19) (1) 350

Other income 4 - - 4

Administration expenses (28) - - (28)

Underlying net finance costs (203) 23 - (180)

Valuation and exceptional items 220 (8) 1 213

Taxation 1 - - 1 Profit for the year 364 (4) - 360

Attributable to partner

Group as reported

Metro Centre Partnership

Parque Principado

Group proportionally

100% 40% 49% consolidated

£m £m £m £m

Investment property 7,551 (347) (70) 7,134

Net external debt (3,698) 190 - (3,508)

Derivative financial instruments (206) - - (206)

Other net assets (26) 124 1 99 Net assets 3,621 (33) (69) 3,519

Summarised balance sheet

Accounting impact

Joint venture reporting change

Balance sheet As at 31 December 2013 £m

Current

Reclass IFRS 11

Investment property 7,551 (273) 7,278 Net external borrowings (3,698) 70 (3,628) Other net liabilities (232) (6) (238) Investment in joint ventures - 209 209 Net assets 3,621 - 3,621

Income statement Year ended 31 December 2013 £m

Current

Reclass IFRS 11

Net rental income 370 (13) 357 Revaluation of investment property 126 (16) 110 Net finance costs (87) 3 (84) Other (45) - (45) Share of profit of joint ventures - 26 26 Profit for the year 364 - 364

Included within the above reclassification are the Group's investments in St David's, Cardiff and the Centaurus retail park. The Group’s interests in Manchester Arndale and Cribbs Causeway are joint operations (not joint ventures) and will continue to be proportionally consolidated.

Super-regional centres

Top in-town centres

Intu Properties plc Annual results 2013 · 2016-09-20 · Underlying earnings per share 15.0p (2012...

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