Intu shares in telling de­cline on the JSE

Group lost 70% of its value in the year to date

Pretoria News - - BUSINESS REPORT - ED­WARD WEST ed­[email protected]

UK SHOP­PING cen­tre gi­ant intu Prop­er­ties’ share price fell more than 30 per­cent on the JSE yes­ter­day after it flagged that it might not be able to pay its debt in June and after in­vestors re­fused to buy into a cap­i­tal raise of be­tween £1 bil­lion (R19.75bn) and £1.5bn.

The group, which has been re­view­ing op­tions to re­duce the debt for some time, said in a note to share­hold­ers that the un­cer­tain­ties in the eq­uity mar­ket and the UK re­tail in­vest­ment mar­ket made it dif­fi­cult to pur­sue the cap­i­tal raise.

The news sent the share price plum­met­ing to an all-time low of 33.81 per­cent to R1.39 by the close of trade – a far cry from the R50 at which the stock changed hands three years ago.

“While it is dis­ap­point­ing that the ex­treme mar­ket con­di­tions have pre­vented us from mov­ing for­ward with our planned eq­uity raise, I am pleased that a num­ber of al­ter­na­tive op­tions have pre­sented them­selves which we will ex­plore fur­ther,” chief ex­ec­u­tive Matthew Roberts said.

The group has al­ready faced a mas­sive de­cline of its stock, los­ing more than 70 per­cent of its value in the year to date.

An­a­lysts said the de­vel­op­ments put fur­ther pres­sure on the busi­ness.

“This casts doubt on the fu­ture of the busi­ness… No one wants a piece of shop­ping malls – no real sur­prise, the cur­rent fi­nan­cial mar­ket con­di­tions are hardly help­ful, ei­ther. Wrong busi­ness, wrong time,” Mar­kets.com chief mar­ket an­a­lyst Neil Wilson wrote.

Reit­way Global chief in­vest­ment of­fi­cer Gar­reth Elston said intu was caught in a storm that in­cluded deal­ing with the un­cer­tain­ties of Brexit, the growth of on­line shop­ping and chang­ing UK re­tail con­sumer pat­terns.

Elston said the high debt and bal­ance sheet that needed to be re­struc­tured and the po­ten­tial im­pact of the Covid-19 virus at its malls also con­trib­uted to the de­cline.

He said the spread of the virus had the po­ten­tial to im­pact shop­ping malls all over the world by keep­ing peo­ple away from the two ar­eas that were still at­tract­ing con­sumers: food ser­vices and en­ter­tain­ment at­trac­tions.

“Make no mis­take, intu’s busi­ness is not that bad. It is just that the man­age­ment struc­tured the busi­ness badly after fail­ing to deal with chang­ing cir­cum­stances,” Elston said.

intu said yes­ter­day that a val­u­a­tion of its port­fo­lio had re­vealed a 22 per­cent deficit of £2bn for 2019 and about 33 per­cent from its peak in De­cem­ber 2017. Its debt-to-as­set ra­tio was high at 68 per­cent.

The sale of intu As­turias in Spain, which was com­pleted in Jan­uary, and intu Puerto Vene­cia, also in Spain, which was ex­pected to com­pleted in early April 2020, was ex­pected to re­duce the ra­tio to 65 per­cent in April.

How­ever, in the next 12 months, £189.7 mil­lion of bor­row­ings was due to be re­paid or re­fi­nanced.

Since Jan­uary 1 this year, intu had used about £50m from its avail­able re­sources to re­duce lever­age in a small num­ber of its fa­cil­i­ties.

Over the past year, intu sold nearly £600m of as­sets, re­duced cap­i­tal ex­pen­di­ture by £60m and paused the div­i­dend, to im­prove liq­uid­ity. Last month, intu had £168.3m of cash and £129.2m of avail­able fa­cil­i­ties.

“intu is in com­pli­ance with debt covenants and is ser­vic­ing debt. How­ever, there is a risk that, de­pend­ing on the per­for­mance of intu’s busi­ness and move­ments in val­u­a­tions, it could be in breach of cer­tain covenants at their sched­uled test­ing date in July 2020,” di­rec­tors said in a state­ment.

“Op­er­a­tionally, our busi­ness is strong, de­liv­er­ing a re­silient rental per­for­mance de­spite on­go­ing pres­sure from CVAs and ad­min­is­tra­tions, with sta­ble oc­cu­pancy rates and foot­fall that con­sis­tently out­per­forms the bench­mark,” said Roberts.

Full-year like-for-like net rental in­come was in line with the guid­ance given in the Novem­ber 2019 trad­ing up­date, down by 9.1 per­cent.

“Guid­ance for 2020 re­mains un­changed, be­ing a fur­ther de­cline but at a slower rate than 2019.”

Foot­fall in intu’s cen­tres in­creased 0.3 per­cent and foot­fall in intu UK cen­tres was flat.

The group plans to pub­lish an­nual re­sults next Thurs­day. its

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