Chief executive's review

Our performance in 2017

The underlying strengths of the intu business were much in evidence in 2017 as we have recorded a robust overall performance, confounding the external gloom and negativity in pre-Brexit UK about retail and retail property, and showing the success of our asset management initiatives and strategic positioning.

Our underlying earnings per share were steady at 15.0 pence; we grew like-for-like net rental income by 0.5 per cent, within our original guidance 12 months ago; and net asset value per share, helped by a tremendous performance from the Spanish business, increased from 404 pence to 411 pence. We delivered on each of our four core objectives for 2017:

  • Asset performance was resilient in the UK and buoyant in Spain, with the clear message from key performance indicators, such as lettings, occupancy, footfall and dwell time, that intu is in fine shape 
  • The investment programme in the UK moved on at pace with expenditure in the year of £184 million. The pipeline for the next three years amounts to £562 million, with plenty of opportunity beyond that date. In addition to the £180 million intu Watford extension, opening in 2018, significant projects are underway at major centres, such as intu Lakeside, intu Trafford Centre and intu Merry Hill 
  • The awareness and importance of the intu brand has continued to grow. Five years on from launch, we can clearly see the advantages of a strong brand for a shopping centre business such as ours. Among these advantages we would include superior customer service, refreshing changes to the centres’ physical and digital environments and new and innovative sources of revenue 
  • We continued to seize the growth opportunity in Spain. We acquired Madrid Xanadú in the year, a centre full of growth opportunities and an ideal fit for our shopping resort model in Spain, with a Nickelodeon theme park attraction and aquarium under construction, to add to the existing indoor ski slope

Outlook and 2018 strategic objectives

The environment for the business is likely to remain challenging as the UK continues through the Brexit negotiations. Our shopping centres have not been immune to the UK’s relatively sluggish economic performance. Decision-making about investing in the UK has inevitably been impacted in the pre-Brexit period and domestic consumers have been adapting to fluctuations in their discretionary spending capacity.

The 2017 results are, however, a considerable endorsement of the underlying strength of the intu business and our strategic objectives for 2018 build on those we have pursued in the last few years. They are: 

  • growing like-for-like net rental income 
  • optimising our flagship destinations 
  • delivering operational excellence 
  • making smart use of capital

Front of mind for investors is the changing mix of online and in-store sales and how that might affect demand for physical space, hence our particular focus on the basic measure of growing like-for-like net rental income. At intu, we are still seeing key retailers taking more space, and investing for the long term in our centres, as they recognise the footfall we deliver and our ability to create more reasons for customers to visit and stay longer.

Our energies are also concentrated on ensuring all our centres evolve with consumer and retailer needs, so that they deliver sustainable growth. Keeping our centres at the forefront of people’s minds requires continual focus on bringing in new attractions, be it a key retailer or restaurant or a compelling leisure attraction. In addition to delivering our target return hurdles, our projects innovate what we offer our customers and keep us at the leading edge of the shopping centre industry.

Nowhere will this be more obvious than at our ground-up scheme in Spain, intu Costa del Sol, where we have the opportunity to create a world-class centre, delivering our signature shopping resort product and showcasing our expertise.

Operational excellence is a clear differentiator in both the UK and Spain. Our knowledge and insight are important, as is our culture and living our values – bold, creative and genuine – which underpin everything that we do. Our culture is embodied by our brand which has become recognised throughout the shopping centre industry, with intu a byword for fantastic customer service, motivated and enthusiastic staff, expert mall operations and good corporate citizenship.

Our skill in this area is recognised by the partners we have brought into the business in the last few years, including CPPIB, LaSalle Investment Management and TH Real Estate. The ability to partner on assets allows us to astutely recycle and allocate capital to deliver superior returns. With over £800 million of cash and committed facilities, our financial position is very sound.