Owner of Trafford Centre and Lakeside ‘could go bust’: Shopping centre giant Intu sees share price wiped out after slumping to a £2bn loss
- Annual loss rose from £1.17bn to over £2bn in the last year, dismal results show
- Group admits numbers show ‘material uncertainty’ to carry on as a business
- But, company insisting it still has ‘options’ to raise cash fast
- City expert tells This is Money that shareholders could have stakes wiped out
Struggling shopping centre group Intu Properties has warned that it is at risk of going bust if it cannot find fresh funds to prop up its finances.
The ailing group, which owns the Trafford Centre in Manchester and Lakeside in Essex, slumped to a loss of over £2billion last year, up from £1.17billion the year before.
In its dismal results, the group admitted its balance sheet unmasked a ‘material uncertainty in relation to Intu’s ability to continue as a going concern.’
Deep trouble: Intu Properties has warned that it is at risk of going bust if it cannot find fresh funds to prop up its finances
As it looks to get itself out of a major financial black hole, Intu insisted it still had ‘options’, including selling off further assets, negotiating with its lenders and refinancing its £4.5billion debt. The group said it will also keep trying to engage with its investors.
Neil Wilson, chief market analyst at Markets.com, told This is Money that Intu’s results had been a ‘shocker.’
Worse still, he thinks shareholders could end up having their stakes wiped out.
Wilson added: ‘No one wants a piece of shopping malls – no real surprise, the current financial market conditions are hardly helpful either. Wrong business, wrong time.
‘This is all about the collapse on the high street and the massive reduction in the value of its assets.
‘The only way to survive will be to wipe out existing shareholders with a debt-for-equity swap.
‘The fact they couldn’t raise the equity before suggests that investors who looked at the balance sheet realised this £2bn loss was coming and ran a mile.’
Struggling: Intu owns the well-known Traffford Centre in the centre of Manchester
Desperate for cash: Lakeside shopping centre Intu needs cash fast to prop up its finances
Last week, Intu was forced to halt plans for an emergency cash call, as ‘extreme’ market conditions left it unable to raise the minimum £1.3billion it required from investors.
The group needs cash quickly to be able to stay afloat and is operating within a retail market saturated with endless tales of profit warnings and dwindling sales.
With an ever increasing number of retailers going bust, Intu was forced to write down the value of its shopping centre sites by around £2billion in the last year.
The value of the group’s shopping centres fell by 22 per cent to £6.6billion over the period, as the group struggles to fill up spaces left by vacated retailers.
Intu said it expects its net rental income to fall further this year on a like-for-like basis, but by less than in the last 12 months.
Keen to allay the fears of its shareholders, Intu said: ‘We are focusing all our energies on moving the business forward.
‘We own many of the best shopping centre locations in the UK, with dedicated staff looking after our visitors who are coming to our centres in the same numbers and like intu more than ever.
‘In a world where it is harder for retailers to increase profits, our centres offer them the best opportunity and many, such as Next, Primark and JD Sports, are thriving.
‘But we cannot stand still, and as we have always done, we will focus on placemaking, curating our space to ensure it remains the place visitors love to be.’
According to findings published by the British Retail Consortium earlier this year, 2019 was the ‘worst’ for retail sales in 25 years.
Well-known brands like New Look, Debenhams and House of Fraser have all been battling with their landlords to get their rents cut.
The full impact of the coronavirus outbreak on Britain’s shopping centres remains uncertain, but shopper fears and increasingly stringent Government interventions mean it is unlikely to do the likes of Intu any favours on the financial front.
The sopping centre group said it was closely monitoring the impact of the coronavirus pandemic on its centres, but said the number of visitors was broadly unchanged in the first 10 weeks of this year.
Intu’s share price is currently down 15.79 per cent to 4.8p. A year ago, the company’s share price stood at around the 111.45p mark and at the start of this year were trading close to 34p.