INTU.L Share News (INTU)

(Sharecast News) - Intu Properties warned over its rental income on Friday as it said the rest of the year was expected to be "challenging" due to a higher-than-expected level of CVAs and a slowdown in new lettings as tenants delay their decisions, partly due to Brexit-related uncertainty.In an update on trading from 1 January to 2 May, the shopping centre owner said it now expects like-for-like net rental income for this year to drop between 4% and 6%. The outcome is expected to be down more in the first half of 2019, given the stronger comparative, and less so in the second half of the year. Intu had previously said net rental income would decline by 1% to 2%.Still, the company said its operational performance in the quarter has been "stable".Chief executive Matthew Roberts said: "We have continued to see good letting activity with 53 long-term leases signed amounting to £6 million of annual rent at an average of 1% above previous passing rent."These include new types of tenants such as Metro Bank at Manchester Arndale, exciting new catering concepts with Market Halls at intu Lakeside and an expanding leisure attraction at intu Metrocentre with Namco's mini golf and a climbing attraction."The company said occupancy at 31 March was 95.6%, down a touch from 96.1% in March 2018 on the back of CVAs and administrations, including the closure of some New Look Men and HMV stores, along with the seasonal reduction in the quarter as Christmas 2018 pop-ups closed.Roberts said: "Despite the current operating environment, I believe we have a very good business and am confident we can meet the challenges we are facing head on. I look forward to updating the market on strategy alongside our interim results in July."At 0905 BST, the shares were down 6.7% at 93.52p.Russ Mould, investment director at AJ Bell, said: "Analysts will have to slash their earnings forecasts for the shopping centre landlord which explains why its share price is particularly weak following this news."The amount of retailers undergoing CVAs (company voluntary agreements) is really hurting Intu, so too a slowdown in new lettings as companies remain cautious about the political and retail landscape."Intu's pains are far from over as many retail companies are still struggling to stay afloat. The company expects CVAs to run at a higher level than in 2018."It is also worth bearing in mind that Debenhams accounts for 3% of Intu's rent roll. That retailer announced a CVA last week and is closing 22 of its 166 stores. While none of this batch are located in Intu's centres, the risk that further stores will close will hang over the landlord and its share price."Numis said: "We believe the challenges facing the business remain substantial, not least of which is the £3.7bn of debt that requires refinancing by 2024 and that we would expect will require some degree of equity injection in order to keep the cost of debt at an acceptable level."With ongoing CVA activity putting downward pressure on occupancy (-110bp in Q1 to 95.6%) and a slowdown in new lettings as tenants delay decision making due to uncertainties in the political and retail environment, we believe the current discount (-66%) is justified given the likely magnitude of further capital value writedowns we expect."