Struggling shopping mall operator, Intu, has revealed record losses of £2 billion in its 2019 results, heightening concerns that the company may collapse if it cannot secure additional funds. Intu, which owns or part-owns popular malls such as Lakeside, Cribbs Causeway, Merry Hill, and Trafford Centre, has been grappling with the impact of retailer company voluntary arrangements and a heavy debt burden. To mitigate its financial difficulties, the company has already sold off some valuable properties in Spain.

In addition to the financial losses, Intu was forced to reduce the value of its shopping centers by £2 billion, resulting in a significant 22% decrease in their overall value, now standing at £6.6 billion. This financial turbulence has caused the company’s share price to plummet, with a drop of approximately 16% in early trading on Monday, down to 4.8p. Just five years ago, the shares were worth £3.67 each, and even a year ago, they were valued at £1.11 each. Consequently, the company’s current market value on the stock exchange stands at a mere £65 million.

While these challenges are substantial, Intu believes there are viable options to avoid insolvency. The company plans to sell more assets, enter negotiations with lenders, and refinance its debt, which currently exceeds £4.5 billion. Intu has expressed a willingness to explore alternative capital structures and further disposals to generate liquidity. Additionally, they plan to negotiate covenant waivers to address potential covenant remedies and imminent refinancing activities, with significant debt maturities scheduled for early 2021.

Reviewing Intu’s performance in 2019, revenue declined to £542.3 million from £581.1 million, with net rental income also dropping to £401.6 million from £450.5 million. Looking ahead, Intu expects its net rental income to continue declining this year, albeit at a slower pace than in 2019. Regarding the impact of the coronavirus, the company has stated that it has not experienced a significant impact thus far, but they are closely monitoring the situation.

Despite the current challenges that brick-and-mortar retailers face, Intu remains optimistic about the future of physical retail spaces. CEO Matthew Roberts emphasized that stores are not dying, but rather evolving. Citing research by CACI, he revealed that around 90% of all retail spending is still influenced by physical stores, and the presence of a physical store can double a retailer’s online sales in the local catchment area. Roberts further highlighted that while online sales are projected to increase from 20% to 30% by 2026, 77% of transactions will still involve a physical store, underscoring the ongoing demand for high-quality, high-footfall retail locations.

In conclusion, Intu faces substantial challenges and the looming possibility of collapse if it fails to secure additional funding. Nonetheless, the company remains determined to explore various options to alleviate its financial burden and firmly believes in the enduring value of physical retail spaces amidst the evolving retail landscape. The future stability of Intu in the market will only become evident as the company maneuvers through these uncertain times.

Useful links:

1. [Intu – Official Website]({target=”_blank”}
2. [British Property Federation – About Intu]({target=”_blank”}