INTU SGS - (Slow) Progress

All,

Please find our analysis on INTU SGS here.

- With the reopening of UK retail outlets post-Covid restrictions, it is not surprising to see footfall return to UK shopping centres. At SGS, footfall is now 74% of 2019 levels with Lakeside continuing to be the strongest at 81%. This in turn is driving higher rent collections and just as important, SGS continues to make progress on rent arrears.

Rent Collections:

- As of 21st September 2021, SGS has collected 74% of billed Rent and Service charges. This compares very favourably to earlier in the year where collections were in the 50-65% range. Arrears collections are ahead of budget, with £1.5m collected in August (£3.5m in July).

- The Company continue to engage new and existing tenants on leases and management are in advanced negotiations on 70 units (15%) across the four centres.

Acquiring the equity:

- As previously advised, SGS management have set up a Jersey Charitable Trust Structure and have agreed on a consensual transfer of the equity from INTU into the Trust. As part of the transfer, SGS and INTU (administrators) have agreed to settle all intercompany liabilities between the various entities.

- This involves SGS paying INTU (administrators) £400k covering subordinated and un-subordinated balances (the nature of which are commercially sensitive and have not been disclosed).

- Additionally, there is a counter transfer of £469k from INTU (administrators) to SGS which is a return of amounts received by INTU as part of earlier payments made by SGS in 2020.

- For clarity, the settlement excludes the payments due to or from INTU (administrators) in relation to the TSA. Also excluded is the treatment of tax losses and whether INTU (administrators) require SGS approval to withdraw the sharing of group tax losses - HMRC has been asked for clarification on the matter and both parties await a response.

Positioning:

- We maintain our 5% long position in SGS debt. The process of acquiring the equity is in line with previous updates from the Company and does not change our view. The increase in footfall and rent collections supports our view on a recovery in UK retail.

Happy to discuss.

Tomás

E: tmannion@sarria.co.uk

T: +44 20 3744 7009

M:+44 7786 705 806

www.sarria.co.uk