Wednesday 20 February 2019 8:18 am

Shopping centre landlord Intu swings to a loss after swallowing £1.4bn hit to property values

Embattled shopping centre landlord Intu moved into the red last year, as more than £1.4bn was wiped off the value of its property following a swathe of retail challenges.

Shares in the group dived almost 10 per cent in early morning trading.

The figures

Losses at the FTSE 250 firm, which suffered two failed takeover bids last year, swung to £1.2bn last year, falling from a profit of £203m in the previous 12 months.

The group’s portfolio value plunged 13.3 per cent to £9.2bn, and the company said it would not pay a final dividend.

Underlying earnings per share slipped from 15p to 14.4p

However, like-for-like net rental income growth edged up from 0.5 per cent to 0.6 per cent, although net rental income dipped from £460m to £450.05m


Why it's interesting

Expectations were not exactly optimistic ahead of Intu’s results this morning. with short-sellers such as Crispin Odey hovering over the FTSE 250 giant in the run-up to its trading statement. Nonetheless, a 10 per cent drop in the group’s share price today suggests that losses are even worse than some had predicted.

One of the fears is that today’s sharp write-down in values is just the beginning. Real estate analyst Colm Lauder says that while Intu has acknowledged the challenges facing the retail sector, "we consider the 13 per cent declines evident in full-year 2018 are only the start of a further downward trend".

According to Retail Economics boss and industry expert Richard Lim, part of the problem for shopping centre owners such as Intu is that while "primary locations in large city centres and key regions continue to demand high and rising rental values, secondary markets with excess capacity and declining levels of footfall will remain weak, leading to a broad dispersion in market performance".

Intu will be hoping to put the last 12 months behind it, after a consortium of funds backed out of a takeover bid months after rival landlord Hammerson also pulled the plug on a £3.4bn purchase. Its shares have plunged from 213p to 118p. However, now the focus is on the future, and Intu must come to terms with an industry-wide problem of falling retail property values and more potential vacancies.


What the group said

Boss David Fischel said: "intu has again delivered a resilient operational performance which demonstrates how our centres differentiate themselves as winning destinations for retailers with their variety and excitement. We own and manage many of the best shopping centres, in some of the strongest locations, in the UK and Spain.

Although sentiment in the retail sector is at an all-time low, the reality is that around 400m shoppers visit our centres each year and occupancy is at 97 per cent. As some 85 per cent of all retail transactions still touch a physical store, demand from major retailers continues to be positive for our centres.

New tenants to our centres include Abercrombie & Fitch, Uniqlo, Bershka, and Monki, with established retailers such as Next, Primark, Zara and River Island all upsizing.

Our tenants invested a record £144m in their stores over the year, a clear indication that these retailers see great physical space as a key part of a successful multichannel strategy."