intu warns that it may go bust af­ter UK tum­ble

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

UK-BASED intu, which made a stag­ger­ing £2 bil­lion (R41.45bn) loss in 2019 af­ter its malls were val­ued down­wards in the af­ter­math of Brexit and changes to con­sumer shop­ping be­hav­iour, has warned it may go bust.

A “ma­te­rial un­cer­tainty in re­la­tion to intu’s abil­ity to con­tinue as a go­ing con­cern” was noted in the re­sults yes­ter­day. How­ever, the group, orig­i­nally founded by South African en­tre­pre­neur Don­ald Gordon, said it still had options, in­clud­ing sell­ing off more as­sets, re­fi­nanc­ing its £4.5bn debt and ne­go­ti­at­ing with lenders and bring­ing in new part­ners at its cen­tres.

The share price – al­ready un­der mas­sive pres­sure af­ter plung­ing from R20.53 a year ago and from al­most R50 a share three years ago – plunged 20.17 per­cent to close at 95 cents on the JSE yes­ter­day, in a mar­ket that was well down glob­ally.

Last week, intu opted to aban­don a cash raise, be­cause “ex­treme” mar­ket con­di­tions had left it likely to be un­able to raise its min­i­mum tar­get of £1.3bn from in­vestors.

One un­cer­tainty was the coro­n­avirus. South African shop­ping cen­tre chief ex­ec­u­tives have said they do not yet know what im­pact the virus will have on their op­er­a­tions.

intu di­rec­tors said yes­ter­day that they were “closely mon­i­tor­ing the im­pact of the coro­n­avirus pan­demic on our cen­tres. How­ever, the num­ber of vis­i­tors was broadly un­changed in the first 10 weeks of 2020.”

“We have said be­fore that we will con­sider bring­ing part­ners into our larger cen­tres – we own 100 per­cent of four of our big­gest as­sets, which gives us a great deal of flexibilit­y – as well as dis­pos­ing of some of our smaller cen­tres,” the group said. “We had some sig­nif­i­cant ex­pres­sions of in­ter­est at both the PLC and as­set level dur­ing the equity process and we will take time to con­tinue those con­ver­sa­tions,” it said.

Net ex­ter­nal debt of £4.5bn de­creased by £368.8 mil­lion in 2019. Within the next 12 months, about £190m of bor­row­ings were due to be re­paid or re­fi­nanced.

“We will also be seek­ing to take timely mit­i­gat­ing ac­tions to deal with any po­ten­tial covenant breaches at the next test­ing date in July 2020. In our fa­cil­i­ties we have the abil­ity to pre­pay debt to manage LTV against the rel­e­vant covenant ra­tio. Since year end, we have utilised £50m from avail­able re­sources to pay down debt in a small num­ber of our fa­cil­i­ties,” the group said.

Like-for-like rental in­come was down 9.1 per­cent in 2019, with more than half the change com­ing from re­tail­ers in fi­nan­cial dis­tress, the weak con­sumer en­vi­ron­ment and po­lit­i­cal and eco­nomic un­cer­tain­ties.

The prop­erty de­val­u­a­tion came to £1.98bn.

In 2019, intu was af­fected by ad­min­is­tra­tions and CVAs at 167 stores at its shop­ping cen­tres, which equated to about 9 per­cent of intu’s pass­ing rent. Some 51 per­cent of th­ese had no im­pact on rent re­ceived as the stores were kept open, while 40 per­cent were trad­ing on dis­counted rents, and 9 per­cent had closed.

“We an­tic­i­pate 2020 like-for-like net rental in­come to de­cline fur­ther, but at a slower rate than in 2019.”

The UK shop­ping cen­tre in­vest­ment mar­ket had the low­est level of trans­ac­tions in 2019 sine 1993, re­sult­ing from fac­tors in­clud­ing po­lit­i­cal and eco­nomic un­cer­tainty in the UK and the chal­lenges fac­ing re­tail­ers.

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