CAPE TOWN – UK-based shopping centre group intu’s share price plunged 20 percent to R6.29 on the JSE yesterday after a trading statement said they have a plan to “fix the balance sheet,” which included a capital raising.
“We continue to consider all options to put us in the best position to deal with our short and medium term liquidity requirements, as we approach our next material debt maturity in early 2021,” CEO Matthew Roberts said.
These options included selling assets - the sale of two Spanish assets was underway - through to also selling assets in the UK, and raising equity.
Intu’s net debt reduced by £210 million in the third quarter due to the part disposal of intu Derby, with loan to value at 57.7 percent, based on June 2019 property valuations.
Numis analyst Robert Duncan said intu’s third quarter performance showed a “continuation of Intu’s eroding income base” with rental income seen lower and the weakness likely to persist in the 2020 financial year, Bloomberg reported.
Analyst Kieran Lee estimated the company would need another 1.8 billion pounds to bring its loan-to-value down to 40 percent, more than three times its market capitalisation.
Kempen analyst Max Nimmo (sell) said the question for Intu as it moved closer to refinancing deadlines, would be how much equity it would need to raise, which he estimated to be between 1-2 billion pounds, which would be “highly dilutive,” Bloomberg reported.
Mathews said “good” progress was also being made in sharpening customer relationships, transforming the shopping centres and simplifying the business structure.
“We have continued to face challenging market conditions along with the rest of the sector. CVAs were slightly worse than expected,” he said.
Like-for-like net rental income for 2019 would be down by about 9 percent, with more than half the reduction due to CVAs such as Arcadia and Monsoon.
The CVAs announced in mid-2019 would continue to impact the first half of next year, so like-for-like net rental income for 2020 was expected to continue to decline, but at a slower rate than in 2019.
“In the face of these challenges...there is a very different feeling on the ground to the one we read about regularly. Our centres are busy with footfall and occupancy significantly above industry benchmarks. We know we have the best centre in each city and region we operate,” said Roberts.
Letting activity had been slower in the third quarter due to political and economic uncertainty, but a “good number” of new deals were being signed with “great brands”.
There had also been a pick-up in letting activity in recent weeks which had seen Harrods take 23 000 square feet at intu Lakeside to launch its first standalone beauty store, H Beauty; and Zara sign for a new flagship store at St David’s, Cardiff.
In Spain, AliExpress opened their first European store at intu Xanadú, with footfall at the centre up 20 percent following the opening.