Intu shares hit historic low as landlord grapples with lower rental income
Its keeping all options open, says the UK mall owner, as it struggles with Brexit uncertainties and online shopping
Shares in Intu Properties plunged 32.1% to a record low on Wednesday as the UK mall owner said it may ask shareholders for more funding to help it cut debt after earnings fell.
Intu and other JSE-listed, UK-focused landlords, including Capital & Counties Properties, have seen their valuations decline since the country voted to leave the EU in 2016. That event sparked a prolonged period of uncertainty at a time when online retailing was gaining momentum.
Intu said on Wednesday that net rental income in the six months to end-June fell 17.9% and property values declined as more retailers slipped into administration or launched restructuring processes. Underlying earnings in the first half slid 32.1% to £66.4m (R1.1bn) as tax and finance costs rose. Net external debt edged up to £4.9bn.
The landlord, which halted dividend payments at the end of 2018, said it would not pay an interim dividend so that it could retain cash.
Its shares lost as much as 32.1% at one point on Wednesday to reach a historic low of R8.22.
“In the short term, fixing the balance sheet is our top priority,” Intu CEO Matthew Roberts said. “We are making good progress on the disposal of our Spanish assets, the proceeds of which we will use to reduce our debt ... We are looking to make material progress over the next six to 12 months and we will keep all options under review, from the self-help measures described through to raising equity.”
Like-for-like net rental income fell 7.7% in the interim period, and this rate of decline is expected to continue through the rest of 2019. “Looking into 2020, we would expect like-for-like net rental income to be moderately down,” Roberts said.
Meanwhile, after property valuations fell in the first half by about 10%, more downward pressure is expected in the UK until the retail market stabilises somewhat “and we have clarity on the outcome of Brexit”.
Intu hopes that by adapting its malls to suit changing consumer habits it will be able to weather the storm.
“Our view is that the best locations will deliver theatre and world-class service, maximising the footfall and dwell time for our customers,” Roberts said. “These will be the locations that our customers focus on as they rationalise their store portfolios. In addition to the retail and leisure mix, we also see further intensification of sites introducing residential, office and hotels, which will increase our centres’ importance at the heart of their communities.”
Meanwhile, other JSE-listed stocks with UK exposure also fell sharply on Wednesday as the pound declined to its worst level in more than two years amid growing fears that the country will leave the EU without a deal in place.
Brait’s shares fell as much as 17.7% to a record low of R11.49, while Hammerson slipped 6.9% to R38.45.