Intu shares in telling decline on the JSE
Group lost 70% of its value in the year to date
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