Intu Properties PLC (LON:INTU) shares dropped on Wednesday as the real estate firm slumped to a £1.2bn loss last year after it was forced to slash the value of its shopping centres.
The FTSE 250 group, which owns the Trafford Centre in Manchester and Lakeside in Essex, saw the value of its portfolio of 20 malls in the UK and Spain fall by £1.41bn in 2018.
READ: Credit Suisse downgrades Intu as it sees headwinds continuing
It said the sharp drop-off reflected “adverse conditions” in the UK retail market as well as “weakening sentiment” among property investors ahead of Brexit.
As a result of the hefty write-down, Intu swung to a loss before tax of £1.18bn in the 12 months ended 31 December 2018. That compared with a profit of £203.3mln in 2017. Net asset value fell to 271p a share, down from 349p a year in earlier.
No final dividend
Given the huge loss it racked up during the year, Intu has decided not to pay a final dividend in order to keep some money for future investment in its sites.
Despite the troubles, Intu, which was the subject of two takeover bids in 2018, managed to grow like-for-like rental income by 0.6% (2017: +0.5%), while occupancy rates remained steady at just below 97%.
“Intu has had a challenging year with a difficult retail and uncertain economic environment, together with responding to two abortive corporate offers for the company,” said chairman John Strachan.
Long-time chief executive David Fischel, who is stepping down once a successor is found, agreed that it was a “difficult year”, with the sentiment in the retail sector at “an all-time low”.
Disposals needed
Intu said it would look to sell off some of its assets over the next year or so in order to reduce its debt-to-assets ratio below 50%.
City broker Liberum said the results were worse than feared and that disposals were now a necessity.
“FY18 results were below our forecasts as pressure on UK shopping centres accelerated in the second half,” read a note to clients.
“NAV -24% to 312p was 8% below our 339p forecast. While debt was stable, aided by the cancellation of the final dividend, a -13% decline in property values further increased the group’s LTV to a high 53%.
“Disposals are now increasingly required, hence approaches for the Spanish assets are being considered.”
In early morning trading, Intu shares were 8.9% lower at 107.85p.
Keep taking the headache tablets
Russ Mould, investment director at AJ Bell said: “What a right mess Intu has got in to. Being exposed to the retail sector is a poisoned chalice for property companies at the moment and Intu is in the thick of it with an estate of shopping centres across the UK and Spain.”
He added: “The company is trying to sell assets and has received some unsolicited offers for properties in Spain. Selling assets into a weak market shows how desperate it is. Any buyer would have the upper hand in pricing negotiations.
“In time Intu could emerge a leaner business but for now it will have to keep taking the headache tablets and do its best to survive the turmoil.”
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