Wrap Text
Interim Report for the six months ended 30 June 2018
INTU PROPERTIES PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: ITU
26 JULY 2018
INTU PROPERTIES PLC
LEI: 213800JSNTERD5CJZO95
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018
WINNING DESTINATIONS DRIVE A RESILIENT PERFORMANCE IN A CHALLENGING MARKET
David Fischel, intu Chief Executive, commented:
"During a period of weakening sentiment in the retail market which has impacted prime shopping centre valuations, intu has delivered a resilient
operational performance in the first half of 2018. This reflects the high quality of our business which was able to perform in a challenging retail
environment.
Our occupancy level remains high at 97 per cent with aggregate lettings 6 per cent ahead of previous rents.
Like-for-like net rental income grew for the fourth consecutive year, by 1.3 per cent in the period, driven by new lettings and rent reviews,
despite a 0.9 per cent hit from tenant failures.
We agreed 116 long term leases amounting to GBP16 million of annual rent to a number of new international entrants, as well as established key
fashion brands such as Zara, River Island, Abercrombie & Fitch, Jo Malone, Jack Wills and The White Company.
We look forward to the opening of the GBP180 million intu Watford extension in October, followed by the GBP72 million intu Lakeside leisure
extension in the first half of next year.
The Spanish business again had a strong six months with high occupancy and strong letting activity.
intu is the UK's only national consumer facing shopping centre brand with a growing digital presence, attracting 400 million customer visits per
annum, with over half the UK population visiting an intu centre each year.
intu centres are in prime locations with high footfall and offer plenty of opportunities to increase density through additional mixed use
developments. They have remained prime because we have always adapted and responded vigorously to the ever changing retail environment
with continued investment and creative asset management satisfying the needs of retailers."
Investor presentation
A presentation to analysts and investors will take place at UBS, 5 Broadgate, London EC2 at 09.45BST on 26 July 2018. The presentation will also
be available to international analysts and investors through a live audio call and webcast. The presentation and a copy of this announcement will
be available on the Group's website intugroup.co.uk.
Enquiries
intu properties plc
David Fischel Chief Executive +44 (0)20 7960 1207
Matthew Roberts Chief Financial Officer +44 (0)20 7960 1353
Adrian Croft Head of Investor Relations +44 (0)20 7960 1212
Public relations
UK: Justin Griffiths, Powerscourt +44 (0)20 7250 1446
SA: Frédéric Cornet, Instinctif Partners +27 (0)11 447 3030
About intu
intu owns and manages some of the best shopping centres, in some of the strongest locations, in the UK and Spain.
Our UK portfolio is made up of 17 centres, including 10 of the top-25, and in Spain we own three of the country's top-10 centres, with advanced
plans to build a fourth.
We are passionate about creating compelling experiences, in centre and online, that make our customers smile and help our retailers flourish.
We attract over 400 million customer visits and 26 million website visits a year offering a multichannel approach that truly supports retail
strategies. In 2017, we launched the UK's first tailor-made promotional services model to help brands as they look to optimise their portfolio or
expand their UK coverage.
Our strategic focus on prime, high-footfall flagship destinations, combined with the strength and popularity of our brand, means that intu offers
enhanced footfall, dwell time and loyalty. This helps our retailers flourish, driving occupancy and income growth.
We are committed to our local communities, with our centres supporting over 120,000 jobs (representing about 3 per cent of the total UK retail
workforce), and to operating with environmental responsibility. We have already met or exceeded a significant number of our 2020
environmental targets.
Presentation of information
We account for our interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements. This means that the income
statement and the balance sheet include single lines for the Group's total share of post-tax (loss)/profit and the net investment in joint ventures
respectively.
Management review and monitor performance as well as determine the strategy of the business primarily on a proportionately consolidated
basis. This includes the Group's share of joint ventures on an individual line-by-line basis rather than a post-tax (loss)/profit or net
investment basis. The figures and commentary presented are consistent with our management approach as we believe this provides a more meaningful
analysis of the Group's performance. The other information section provides reconciliations of the income statement and balance sheet
between the two bases.
See financial review for more details on the presentation of information and alternative performance measures used.
This press release contains "forward-looking statements" regarding the belief or current expectations of intu properties plc, its Directors and other members of its senior management about
intu properties plc's businesses, financial performance and results of operations.
These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties
and other factors, many of which are outside the control of intu properties plc and are difficult to predict, that may cause actual results, performance or developments to differ materially
from any future results, performance or developments expressed or implied by the forward-looking statements. These forward-looking statements speak only as at the date of this press
release. Except as required by applicable law, intu properties plc makes no representation or warranty in relation to them and expressly disclaims any obligation to update or revise any
forward-looking statements contained herein to reflect any change in intu properties plc's expectations with regard thereto or any change in events, conditions or circumstances on which
any such statement is based.
Any information contained in this press release on the price at which shares or other securities in intu properties plc have been bought or sold in the past, or on the yield on such shares or
other securities, should not be relied upon as a guide to future performance.
Highlights for the first six months of 2018
Financial highlights1
Six months ended 12 months ended Six months ended
30 June 2018 31 December 2017 30 June 2017
GBPm GBPm GBPm
Net rental income (GBPm) 2/3 223.1 460.0 226.2
Underlying earnings (GBPm) 98.5 201.0 98.5
Property revaluation (deficit)/surplus (GBPm) 2/3 (650.4) 47.3 17.7
IFRS (loss)/profit for the period (GBPm) (503.4) 203.3 122.7
Underlying earnings per share (pence) 7.3 15.0 7.3
Dividend per share (pence) 4.6 14.0 4.6
At 30 June At 31 December
2018 2017
GBPm BPm
Market value of investment and development property (GBPm) 2/3/4 9,831 10,529
IFRS net assets attributable to owners of intu properties plc (GBPm) 4,472 5,075
Net asset value per share (diluted, adjusted) (pence) 5 362 411
EPRA NNNAV per share (pence) 5 309 349
Debt to assets ratio (per cent) 2/3/6 48.7 45.2
1 Please refer to glossary for definition of terms.
2 Including Group's share of joint ventures.
3 See other information section for reconciliations between presented figures and IFRS figures.
4 31 December 2017 including intu Chapelfield which is classified as an asset held for sale.
5 See note 11 for reconciliation between presented figures and IFRS net asset value per share.
6 31 December 2017 figure pro forma for the net initial consideration of GBP148 million on 50 per cent disposal of intu Chapelfield which completed on 31 January 2018.
Our results for the period show a resilient operating performance with stable underlying earnings and continued like-for-like net rental income
growth. Uncertainty around the UK economy is leading to weakening sentiment in the retail property investment market, impacting property
valuations:
- like-for-like property values reduced in the period with a total deficit of GBP650.4 million
- net rental income reflects GBP4.0 million impact of disposals; like-for-like net rental income growth of 1.3 per cent
- underlying earnings of GBP98.5 million, in line with the first half of 2017
- loss for the period of GBP503.4 million against a profit of GBP122.7 million in 2017, primarily from the property revaluation deficit
- underlying earnings per share (7.3 pence) and interim dividend (4.6 pence) unchanged
- net asset value per share (diluted, adjusted) of 362 pence (31 December 2017: 411 pence), the decrease due to the property revaluation
deficit. NNNAV per share is 309 pence (31 December 2017: 349 pence)
- debt to assets ratio is 48.7 per cent, with substantial cash and available facilities of GBP739 million (31 December 2017: GBP833 million)
Property valuations
Property values fell in the period, resulting in a revaluation deficit of GBP650.4 million, a reduction of 5.6 per cent on a like-for-like basis. This is
driven by weakening sentiment in the UK retail property investment market as illustrated by the low levels of transactions (see operating
review). The valuers' assumption is that investors will focus on and seek higher net initial yields. In the period, intu's average net initial yield has
increased by 33 basis points to 4.69 per cent.
Operating highlights
Growing like-for-like net rental income
Growing our net rental income drives earnings and ultimately dividend and total property return
- like-for-like net rental income increased by 1.3 per cent in the period, driven by increased rents from new lettings and rent reviews, building
on increases averaging 2.0 per cent per annum over the last three years
- anticipated full year like-for-like net rental income growth to be at the lower end of the stated range of 1.5 per cent to 2.5 per cent, with new
lettings mitigating the impact of administrations and company voluntary arrangements (CVAs) to date
- targeting medium term like-for-like net rental income growth of 2 to 3 per cent per annum over the next three to five years
- signed 116 long-term leases (85 in the UK and 31 in Spain) delivering GBP16 million of annual rent at an average of 6 per cent above previous
passing rent and in line with valuers' assumptions (H1 2017: 103 leases; GBP18 million of annual rent; 6 per cent above previous passing rent)
- rent reviews settled in the period on average 10 per cent above previous passing rent (H1 2017: 8 per cent)
- sustained high EPRA occupancy of 96.6 per cent (December 2017: 97.0 per cent) with 79 stores opening in the period against 94 closing
(excluding Christmas temporary lettings), reflecting the trend of retailer upsizing
Delivering operational excellence
Operational excellence measures the success of our business from the view of both our retailers and customers
- footfall decreased by 1.3 per cent (H1 2017: down 0.5 per cent) outperforming the national ShopperTrak retail average which fell by 3.3 per
cent in the period. Excluding the two weeks of severe snow, footfall in our centres was broadly unchanged
- net promoter score, our measure of customer service, running consistently high averaging 73 in the period (H1 2017: 70)
- brand awareness increased to 29 per cent on an unprompted basis (December 2017: 26 per cent) and to 75 per cent on a prompted basis
(December 2017: 71 per cent)
- intu.co.uk, our online shopping platform providing strong editorial content, has seen over 200 per cent year-on-year increase in visits to our
'Shop Insider' digital magazine pages, with sales for retailers increasing by 28 per cent
Optimising our winning destinations
Ensuring our regional destinations remain the winning locations by having a compelling mix of retail, catering, leisure, events and strong digital
engagement
- capital investment by intu of GBP102 million in the period including GBP44 million on the 380,000 sq ft extension of intu Watford which is on target
to open in October 2018 and GBP19 million on the Nickelodeon anchored leisure extension at intu Lakeside
- tenants have invested GBP31 million in the period on new shop fits, with 107 stores open or refitted
- have appointed main contractor and intend to commence the GBP72 million extension and enclosure of Barton Square at intu Trafford Centre in
the second half of 2018
- final detailed design of intu Costa del Sol ongoing with the plan to commence construction in 2019
- near-term committed and pipeline of projects through to the end of 2020 of GBP441 million
- actively pursuing non-retail development opportunities, particularly around super-regional centres, including residential, distribution and
leisure
Making smart use of capital
Our financial structure and high-quality assets allow us to access capital and introduce partners to increase the focus and achieve superior
returns on our flagship locations
- completed the disposal of 50 per cent of intu Chapelfield for net initial consideration of GBP148 million, in line with the December 2016 market
value. Subsequently agreed a GBP74 million debt facility on our retained interest in intu Chapelfield
- cash and available facilities of GBP739 million (31 December 2017: GBP833 million). Weighted average debt maturity of 6.3 years, with minimal
refinancing until 2021
- substantial headroom on our debt covenants. By way of example, a further 20 per cent fall in capital values and 10 per cent fall in income
would create a covenant shortfall of only GBP18 million which could be cured from available facilities
Chief Executive's review
A resilient operating performance in a challenging UK economy
Reflecting the overall high quality of our business, intu has continued to deliver a resilient operating performance in a challenging economic
environment. Reflecting the superior quality of our portfolio, our occupancy level is high at 97 per cent. Aggregate lettings of GBP16 million were 6
per cent ahead of previous rents and in line with valuers' assumptions. Net rental income grew on a like-for-like basis by 1.3 per cent despite a 0.9
per cent impact from tenant failures and we are guiding to a stronger second half year. Underlying earnings per share remained stable at 7.3
pence.
In the pre-Brexit period, the UK economy has remained sluggish. The sentiment towards retail and retail property has been extremely negative,
fuelled by a number of retailers, in particular New Look and House of Fraser, and restaurant chains entering high profile CVAs or administrations.
While the direct financial impact on intu from CVAs and administrations has been minimal, they have dampened the retail property investment
market with our property valuations decreasing by 5.6 per cent on a like-for-like basis, principally as a result of increased investment yield.
Well positioned to prosper as a standalone business
As these results demonstrate, intu is strongly placed to prosper as a standalone business, given our exceptional market positioning as the
leading operator in the UK regional shopping centre industry, with the only national consumer facing brand and over 400 million customer visits
per annum from over half the UK's population.
Demand from high-quality tenants for our winning destinations
Both cyclical factors, such as the flat UK economy and pressure on disposable incomes, and structural factors, such as increased costs and the
growth in online retail, have combined to put pressure on retail market participants. However, quality retailers will emerge relatively stronger
and we have achieved strong lettings in the period with, for example River Island, Zara, Abercrombie & Fitch and The White Company. In
addition, we continue to diversify the mix of tenants introducing the likes of car manufacturer Mitsubishi and climbing operator Rock Up.
These participants recognise the increasing importance of the UK's winning physical destinations, such as intu's, in the multichannel world. 86
per cent by value of our GBP9.0 billion UK assets rank in the UK's top-25 shopping centre destinations.
Financial flexibility
On the financing front, we continue to have considerable financial flexibility as a result of (a) our focus on asset specific, non-recourse finance,
which constitutes 86 per cent of our aggregate debt, and (b) 100 per cent ownership of GBP6.5 billion of our GBP9.8 billion assets.
Continuing investment in our centres
We have continued to invest in our centres. We look forward to the opening of the GBP180 million intu Watford extension in October, upgrading
the centre to a top-20 UK destination. We will follow with the opening of the GBP72 million intu Lakeside leisure extension in the first half of 2019,
greatly enhancing the overall family destination status of this top-five UK asset. We have committed to the GBP72 million enclosure of Barton
Square at intu Trafford Centre, anchored by Primark, and expect to commit to the GBP81 million redevelopment of intu Broadmarsh in the second
half of 2018.
Spanish business performing strongly
The Spanish business has again performed strongly. Operationally, we have high occupancy and strong letting activity, with property values
increasing. On the development front, we are now in the detailed design phase for intu Costa del Sol and resolving final planning requirements
which will allow us to commence this project during 2019.
Adapting and responding to the changing retail environment
We continue to focus intently on ensuring we are adapting and responding vigorously to the changing retail environment in the UK, improving
the visitor experience through customer service initiatives, increased digital and leisure activities, changing tenant mix and continued
investment in our centres.
In addition, there is clear evidence of demand for private rented sector or student residential projects at both super-regional centres and prime
city centre locations which benefit from strong and improving public transport infrastructure as well as other key lifestyle services. Accordingly,
we are dedicating additional resources to bringing forward these opportunities.
We are also focusing on the issues and opportunities facing our sector, looking at how we should further adapt to the changing market
dynamics, what further opportunities exist to enhance our existing assets, how we ensure we continue to deliver superior operational
performance and optimising the allocation of capital.
Conclusion
In conclusion, my thanks go to the team at intu who continue to excel and the impact of their great efforts, despite the distraction of corporate
events and negative external sentiment towards our business sector, is demonstrated by the resilient results we have delivered in the period.
Operating review
intu and the UK market
A sluggish pre-Brexit UK economy
We are seeing very little change in intu centre visitor numbers in the pre-Brexit period where the continued uncertainty about the eventual
outcome, and its impact, means the UK economy remains sluggish with modest growth.
On the positive side, unemployment remains at record low levels and, after a year of inflation running ahead of wage growth, this reversed in
February 2018. Looking forward, Bank of England forecasts suggest that earnings should continue to outpace inflation through their forecast
period to the end of 2020.
Against this, consumer confidence, as measured by GfK, continues to be challenging as it has been since the 2016 EU referendum vote, with
consumers in pre-Brexit UK less confident about the economy.
A challenging time for retailers
Sales for retailers in our centres are robust given the mixed messages from improving disposable income, but low consumer confidence. UK
total non-food retail spending (British Retail Consortium) fell by 0.6 per cent over the first half of 2018, with a fall of 2.3 per cent in physical store
sales partially offset by an increase of 1.7 per cent in online sales highlighting the issues facing any retailers who are less advanced in their
multichannel approach.
Some retailers face multiple challenges from lower spending, an increased cost base and a structural shift to multichannel retailing. Whilst some
respite may come through as disposable income grows, leading to improving retailers' top line sales, they still face pressures on their net profit
from increased business rates and national living wage. On top of this, the fast-paced change of online retailing leaves some retailers catching
up.
In 2018, we have seen an increase in the number of administrations and CVAs as the pressures of an increased cost base and multichannel
transformation mount on certain retailers and food and beverage operators.
The two most high profile CVAs in 2018 have been New Look and House of Fraser, planning to close 60 of 593 stores and 31 of 59 stores
respectively. In both instances, their closure lists have been focused on secondary locations. This illustrates the polarisation occurring in the
market where the best retail and leisure experiential destinations, such as intu's, are performing well against a weaker national position.
Polarisation in the market
We operate in many of the top UK retail destinations where retailers want to maintain their best stores and as such we have been relatively
unaffected by the problems faced by certain retailers. This is in contrast with the media's continual focus on the issues facing retail and its impact
on the UK high street, in particular those towns with many stores closing.
The administrations and CVAs in the period related to around 5 per cent of our passing rent. The majority of these (around 80 per cent) have had
minimal impact with the retailers keeping the stores open on the existing rent or with a small reduction. Of the remainder, 10 per cent are
trading on discounted rents and 10 per cent have closed.
Taking House of Fraser as an example, they have four stores in intu centres representing 1 per cent of our rent roll. Through their CVA, they are
closing 31 of their 59 stores, but all of the intu stores are remaining open with a small rent reduction on only one unit. This highlights the quality
of our centres and catchments and their ability to deliver profitable sales for retailers as part of their multichannel offer.
Investment market
The headwinds in the consumer and occupier market mean that investors remain cautious regarding shopping centres with sentiment
weakening in the period. According to CBRE, 2017 had the lowest level of transactions since 2008 and volumes in the first half of 2018 remain
subdued. There is an expectation that this situation will remain until the Brexit outcome becomes clearer.
In this market, it is anticipated that investors will seek a higher net initial yield to protect returns if capital growth is harder to deliver. Therefore,
the quality and longevity of income streams increase in importance, along with the potential to add value through asset management.
These are the characteristics of most intu centres, with 86 per cent of our portfolio concentrated in ten centres, all of which are top-25 centres in
the UK, with the next three all major schemes at the heart of thriving city centres in Nottingham, Newcastle and Milton Keynes.
UK asset valuation at 30 June 2018 GBP9.0bn
intu Trafford Centre 24%
intu Lakeside 15%
intu Merry Hill 10%
intu Metrocentre 10%
intu Braehead, Glasgow 6%
intu Derby 5%
Manchester Arndale 5%
intu Watford 5%
St David's, Cardiff 3%
Cribb's Causeway, Bristol 3%
intu Victoria Centre, Nottingham 4%
intu Eldom Square, Newcastle 3%
intu Milton Keynes 3%
Other 4%
Valuation
Like-for-like
Market value revaluation (deficit)/surplus
At 30 June At 31 December
2018 2017
GBPm GBPm GBPm %
UK super-regional centres 6,028.2 6,373.7 (379.0) (6.0)
UK major city centres 2,373.6 2,559.3 (198.2) (7.7)
Spanish centres 621.3 606.8 6.6 1.2
Total like-for-like 9,023.1 9,539.8 (570.6) (5.6)
Spanish developments 211.3 212.8 (8.4) (4.1)
UK other including developments 596.2 776.6 (71.4) (10.0)
Total 9,830.6 10,529.2 (650.4) (6.2)
The table above shows the main components of the GBP650.4 million property revaluation deficit:
- UK super-regional centres: performed stronger in comparison to other intu assets recognising the continuing attraction of this asset class
which remains key to retailers' requirements. These centres have reduced in value by around 6 per cent, with the exception of intu Braehead,
down 12 per cent, which continues to be impacted by the relatively weaker economic and political situation in Scotland
- UK major city centres: on average values have fallen by 8 per cent reflecting the limited transactional evidence and weaker investor demand
for these types of assets. Within these assets, those super-prime assets in the busiest city centres have performed better, with smaller
reductions at the likes of Manchester Arndale and intu Eldon Square, Newcastle
- Spanish centres: valuations have increased marginally given the continued demand for top quality Spanish centres
- Spanish developments: small decrease due to pre-development expenditure in the period on intu Costa del Sol
- UK other including developments: represents valuation movements on developments and assets valued below GBP200 million each. These
assets, which represent only a small proportion of the portfolio, have seen higher revaluation deficits due to lower levels of potential asset
management initiatives. The total for 31 December 2017 includes 100 per cent of intu Chapelfield, whereas 50 per cent is included at 30 June
2018
The weighted average net initial yield (topped-up) at 30 June 2018 increased by 33 basis points in the period to 4.69 per cent.
On a like-for-like basis, ERV decreased by 2.3 per cent as valuers have taken a more conservative view on rental values, in particular at certain
centres such as intu Braehead and for larger space units. The IPD index indicated a 0.4 per cent decrease for the same period, with the
divergence from intu's performance considered most likely to represent a timing difference with intu's valuations.
Growing like-for-like net rental income
Like-for-like net rental income growth is our key income measure. Given our relatively low cost base and stable finance costs, growing our net
rental income drives earnings and ultimately dividend and total property return.
In the period, we grew like-for-like net rental income by 1.3 per cent, compared to a reduction of 1.5 per cent in the same period in 2017. The key
components of the growth are shown in the table below.
Group like-for-like net rental income
Six months ended Six months ended
30 June 2018 30 June 2017
% %
Rent reviews and improved letting +1.4 +2.5
Capital investment +0.3 +0.5
Vacancy impact -0.3 -0.2
Administrations and CVAs 1 -0.9 -2.1
Other (eg: bad debt; surrender premiums; headlease adjustments) +0.8 -2.2
Increase in like-for-like net rental income +1.3 -1.5
(1) Six months ended 30 June 2017 was originally disclosed as units held for redevelopment. Primarily related to units in administration, so disclosed on this basis in 2018.
Rent from lettings and rent reviews delivered 1.4 per cent rental growth. Against previous passing rent, lettings were on average up 6 per cent
and rent reviews up 10 per cent.
Vacancy increased marginally in the period, resulting in a 0.3 per cent impact on net rental income.
The effect of administrations and CVAs was 0.9 per cent. This movement has been minimal to date given 5 per cent of our rent roll could have
been impacted and illustrates the strength of our stores in the retailers' portfolios.
We are targeting a full year outcome of growth in like-for-like net rental income at the lower end of the stated range of 1.5 to 2.5 per cent
(subject to no further material tenant failures) as we continue to deliver rental uplifts from new lettings and rent reviews and relet units closed
from administrations and CVAs. Over the medium term of the next three to five years, we continue to target growth of 2 to 3 per cent per
annum.
Like-for-like net rental income operating metrics
Six months Year ended Six months
nded 30 June 31 December ended 30 June
2018 2017 2017
Occupancy (EPRA basis) 96.6% 97.0% 96.8%
- of which, occupied by tenants trading in administration 0.3% 0.6% 0.3%
Leasing activity
- number, new rent 116, GBP16m 217, GBP38m 103, GBP18m
- new rent relative to previous passing rent +6% +7% +7%
Rental uplift on rent reviews settled +10% +9% +8%
Occupancy is 96.6 per cent, in line with 30 June 2017 and 31 December 2017, with new lettings offsetting the closures in the period.
We agreed 116 long-term leases in the year, amounting to GBP16 million annual rent, at an average of 6 per cent above previous passing rent (like-
for-like units) and in line with valuers' assumptions. Retailers continue to focus on increasing their space in prime, high footfall retail destinations.
Significant activity in the period includes:
- new retail anchors, in the shape of key fashion brands, upsizing to optimise their offering and configuration. At intu Lakeside, Zara and River
Island are both upsizing, trebling and doubling their space respectively
- international brands' ongoing appreciation of the attraction of intu's destination shopping centres. Abercrombie & Fitch is opening only its
second UK store at intu Trafford Centre, House, the Australian homewares store, opening one of its first UK stores at intu Chapelfield and
Xiaomi, the Chinese mobile phone company, opening its fifth store in Spain (and second in our portfolio) at intu Puerto Venecia
- brands recognising the benefit of standalone stores as part of their customer acquisition, with Jo Malone, Mitsubishi and Silent Night opening
at intu Lakeside and The White Company at Cribbs Causeway
- leisure operators bringing a differentiated offering to our regional destinations with Rock Up, a climbing experience for all ages, set to open
at intu Watford complementing the Cineworld and Hollywood Bowl leisure anchors at the intu Watford extension
A greater proportion of our lettings are now with well-financed global businesses, such as Inditex who are rolling out other brands in addition to
Zara.
We settled 62 rent reviews in the year for new rents totalling GBP19 million, an average uplift of 10 per cent on the previous rents.
The weighted average unexpired lease term is 7.4 years (31 December 2017: 7.5 years) illustrating the longevity of our income streams.
The difference between our net rent (topped-up) of GBP463 million and ERV of GBP540 million represents GBP37 million from vacant and development
units and reversion of GBP40 million, 8 per cent, from rent reviews and lease expiry. Of the 8 per cent reversion, 1 per cent is only realisable on
expiry of leases with over 10 years remaining (eg anchor units), leaving 7 per cent realisable from other lease expiries and rent reviews. Net rent
(topped-up) represents annual property income (see glossary) of GBP474 million plus contracted rent subject to a rent free period of GBP20 million, net
of non-recoverable costs of GBP31 million.
Delivering operational excellence
The delivery of operational excellence underpins how we operate our centres. Through a range of metrics, we monitor our performance to
ensure we are meeting both our customer and retailer requirements.
Operational metrics
Six months Year ended Six months
ended 30 June 31 December ended 30 June
2018 2017 2017
Footfall -1.3% +0.1% -0.5%
Retailer sales (like-for-like centres) -2.2% -2.1% -2.1%
Rent to estimated sales (excluding Anchors and major space users) 12.1% 12.1% 12.4%
Net promoter score 73 70 70
Unprompted brand awareness 29% 26% 24%
Prompted brand awareness 75% 71% 71%
Shop Insider visits +222% +196% n/a
Online sales GBP5m GBP9m GBP4m
Footfall in our centres has been robust considering the extreme weather events in the period with severe snow early in the year followed by the
high temperatures for the last three months. Excluding the period of severe snow when some centres were closed, footfall was broadly
unchanged, down 0.1 per cent in the period. Overall, our footfall decreased by 1.3 per cent in the period, but significantly outperformed the
ShopperTrak measure of UK national retail footfall which was down on average by 3.3 per cent, highlighting the continued attraction of our
compelling destinations against the wider market.
Estimated retailer sales in our centres were down 2.2 per cent. The main contributors to this are some of the larger space users, many of which
have successful multichannel businesses. In-store sales figures take no account of the benefit of the store to retailers' online sales and are further
impacted by returns of online sales.
The ratio of rents to estimated sales for standard units remained stable in the year at 12.1 per cent.
Our net promoter score, a measure of customer service, ran consistently high throughout the period averaging 73, an increase over 2017, and
demonstrating our in centre operational excellence.
Putting customers first is embedded in our culture and the intu brand. The brand has continued to gain momentum and positions us well as the
role of the shopping centre operator changes. Our measure of the brand, through its recognition with the public, continues to grow on both an
unprompted and prompted basis. Of those questioned, 29 per cent mentioned intu when asked to name a shopping centre brand and 75 per
cent knew of the brand when prompted.
These measures of customer satisfaction and recognition are a result of our national presence, attractive digital offering and in-house
experiences team which offer retailers and brands promotional opportunities that deliver enticing events and experiences for our customers.
Recognition and customer satisfaction are paramount to a shopper's likelihood to visit, which in turn drives footfall and extended dwell time.
In the period, promotional activity included Porsche opening a pop-up store at intu Trafford Centre, working with Apple to promote Apple Pay
through our centres and launching our nationwide touring event Big Bugs on Tour to help reconnect adults and children with the importance of
nature in our lives.
In addition to what we provide in centre, our attractive digital offering through our premium content publisher and shopping platform,
intu.co.uk, continues to grow strongly and support retailers' physical operations. Online sales for retailers grew by 28 per cent in the period, year-
on-year. This is driven for the most part by 'Shop Insider', the premium content section of the site, which saw over one million visits in the period,
an increase of 222 per cent. This highlights the power of quality content to drive both physical and digital sales, as shoppers continue to be ever
more considered in their purchases, researching heavily online before planned visits.
The importance of identifying innovative ideas and services emerging in the UK retail market cannot be underestimated. intu Accelerate, a first
for the shopping centre sector and now in its second year, is our incubator for innovative technologies and services. It identifies start-ups to pilot
new concepts in centre and online and the 2018 cohorts include Rhythm, a company which creates multiplayer games for big screens where up
to 200 players can take part using their mobile phones, with a recent event successfully held at intu Merry Hill.
Optimising our winning destinations
Our focus is to ensure our centres continue to be the winning destinations, where customers and retailers want to be, both now and in the
future. Over the last three years, from 2015 to 2017, we have invested over GBP350 million in our centres, with a similar level of investment coming
from our tenants.
Our near-term pipeline consists of projects that improve the position of our flagship centres to meet customer and retailer needs as we evolve
the retail environments, enhance the catering mix and expand the leisure offer.
Investment in the period
In the first six months of 2018 we have invested GBP102 million in our centres on projects enhancing the value and appeal of these destinations.
This includes GBP44 million on the intu Watford extension, GBP19 million on the leisure extension at intu Lakeside and GBP39 million on many other
active asset management initiatives, including the aquarium at Madrid Xanadú and the restaurant quarter, Halle Place, at Manchester Arndale.
In addition, 107 units opened or refitted in our centres in the period (H1 2017: 84 stores), around 3 per cent of our 3,300 units. Tenants have
invested around GBP31 million in these stores, a significant demonstration of their long-term commitment to our centres.
Near-term pipeline
Looking ahead, we are progressing our near-term investment pipeline of GBP441 million through to the end of 2020, reinforcing our existing assets
and delivering value-enhancing returns.
Cost to completion (GBPm)
Total H2 2018 2019 2020
intu Watford 37 34 3 -
intu Lakeside 38 33 5 -
intu Trafford Centre 71 24 46 1
intu Costa del Sol design 9 9 - -
Active asset management 80 64 16 -
Total committed 235 164 70 1
intu Broadmarsh, Nottingham 70 4 36 30
intu Costa del Sol (net of partner funding) 36 11 5 20
Active asset management 100 20 40 40
Total near-term pipeline 441 199 151 91
We are committed to investing GBP235 million:
- at intu Watford we remain on target with our GBP180 million extension expected to open in October 2018. The 380,000 sq ft project, anchored
by Debenhams and Cineworld, is 70 per cent let by space, with a further 20 per cent in advanced negotiations. In the period, we have
exchanged with The Florist and Jack Wills. The cost to completion of this project is GBP37 million, and as previously stated, the complete project,
including the refurbishment of the existing centre, is expected to deliver a return on cost of 6 to 7 per cent
- at intu Lakeside the construction of the GBP72 million leisure extension, a major attraction for the South East, has GBP38 million of cost remaining
to completion. This 175,000 sq ft project is expected to deliver a return on cost of 6.5 per cent. We have pre-let 85 per cent of the space,
including the four leisure attractions Nickelodeon, Flip Out, Puttshack and Hollywood Bowl
- at intu Trafford Centre, we have pre-let 60 per cent of the expansion and transformation of Barton Square and now appointed the main
contractor. The GBP72 million project, expected to deliver a return of between 6 and 7 per cent, will enclose the courtyard, enhance interiors,
allow trading from two levels and provide a fashion offer for the first time at Barton Square with Primark anchoring this development
- at intu Costa del Sol, we have committed GBP9 million to complete the final designs and resolve any outstanding planning matters so we will be
in a position to place the building contracts in 2019 (see below for more details on the full project)
- active asset management projects total GBP80 million and include GBP18 million creating flagship stores for key fashion brands in our super-
regional centres, GBP15 million enhancing the look and feel of intu Merry Hill and GBP5 million delivering the new leisure uses at Madrid Xanadú.
These projects are expected to deliver a range of returns between 6 and 10 per cent dependent on the nature of the individual project
Our pipeline of planned projects amounts to GBP206 million:
- at intu Broadmarsh we have a planned redevelopment which is expected to cost GBP81 million (GBP70 million until the end of 2020) and expected
to deliver a stabilised initial yield of around 7 per cent. We have signed The Light cinema and Hollywood Bowl to anchor this leisure led
scheme and, with 50 per cent of the project either exchanged or in advanced negotiations, we would expect to commit to this in the second
half of 2018
- at intu Costa del Sol, we expect to clear the final planning matters in the next 12 months. With work on the final design on-going (see above),
we are also targeting our required level of pre-lets in the next 12 months. This 230,000 sq m development is expected to cost around GBP580
million and open in 2022. Our business plan provides for the future introduction of a joint venture partner at the start of construction and
limits our outlay on the project to around GBP130 million which we expect to be mostly funded by borrowings specific to the project
- active asset management projects total GBP100 million and are for projects of varying sizes across all centres. These projects are generally
similar in nature and size to those active management projects that are committed
Future opportunities
Beyond 2020 we have a pipeline of future opportunities that will be brought forward as and when the tenant demand reaches the required level
and any outstanding planning consents are approved. These projects will continue the evolution of our centres, ensuring we meet the future
requirements of customers and tenants in our regional locations. The most advanced projects in this pipeline are the leisure extension we are
proposing for intu Merry Hill and at intu Milton Keynes where we have received planning approval for a further 100,000 sq ft of space.
Making smart use of capital
In line with our strategy, we continue to recycle capital to focus on our winning destinations where we have the opportunity to deliver superior
returns.
Disposals
In January 2018, we completed the formation of a joint venture with LaSalle Investment Management for them to take ownership of 50 per cent
of intu Chapelfield, Norwich for an initial net consideration of GBP148 million.
This takes our disposals in the last four years to over GBP1 billion as we have disposed of non-core assets and introduced partners on other centres.
We have flexibility for further disposals or part disposals, as around two-thirds of our portfolio is 100 per cent owned.
Debt activity
Following the disposal of 50 per cent of intu Chapelfield, we raised debt of GBP74 million on our remaining interest, and in April 2018, we amended
and extended our EUR225 million term loan secured on intu Puerto Venecia, Zaragoza. The margin on this loan was reduced by 120 basis points
and the maturity date extended from 2019 to 2025. In June 2018, we extended the loan on intu Milton Keynes from 2019 to 2021.
Robust financial structure
Our balance sheet is robust and we consider the structure of our borrowings, predominantly using flexible asset specific non-recourse
arrangements (86 per cent of overall debt), to be appropriate for our concentrated portfolio.
Cash and available facilities at 30 June 2018 were GBP739 million and loan to value was 48.7 per cent, within our target range of 40 per cent to 50 per
cent.
All facilities have substantial covenant headroom. By way of example, a 20 per cent fall in capital values, from the June 2018 valuations, and 10
per cent fall in income would create a covenant shortfall of only GBP18 million which could be cured from available facilities.
We have minimal debt maturities before 2021, with a weighted average debt maturity of 6.3 years at 30 June 2018.
With more than GBP5 billion of debt refinanced over the last five years, we have proven we have very good access to both the public and private
capital markets and over this period reduced our weighted average cost of debt from 5.2 per cent to 4.1 per cent. Our average cost of debt
includes legacy debt on intu Trafford Centre (GBP0.8 billion; cost of debt 6.0 per cent), which pre-dates the asset becoming part of the intu portfolio
in 2011 and a first mortgage debenture stock 2027 (GBP0.2 billion; cost of debt 9.9 per cent) originally issued over 25 years ago. Excluding these two
facilities, the weighted average cost of debt of all other facilities is 3.4 per cent.
External loans(1) at 30 June 2018 GBP4.9bn
intu Trafford Centre (cost of debt 6.0%) GBP0.8bn
First mortage debenture stock 2027 (cost of debt 9.9%) GBP0.2bn
Other (average cost of debt 3.4%) GBP3.9bn
(1) Excludes RCF
Our centres
Annual Headline
Size Number of property rent ABC1
Market value (sq ft 000) Ownership stores income ITZA customers Key tenants
UK super-regional centres
intu Trafford Centre GBP2,231.5m 2,018 100% 228 GBP95.0m GBP450 67% Debenhams, Topshop, Selfridges, John Lewis,
Next, Apple, Ted Baker, Victoria's Secret,
Odeon, Legoland Discovery Centre, H&M,
Hamleys, Marks & Spencer, Zara, Sea Life
intu Lakeside GBP1,340.0m 1,435 100% 244 GBP57.4m GBP360 69% House of Fraser, Debenhams, Marks &
Spencer, Topshop, Zara, Primark, Vue,
Victoria's Secret, H&M, Next, Apple
intu Metrocentre GBP894.5m 2,079 90% 302 GBP47.9m GBP280 55% House of Fraser, Marks & Spencer,
Debenhams, Apple, H&M, Topshop, Zara,
Primark, River Island, Odeon
intu Merry Hill GBP864.0m 1,671 100% 217 GBP42.9m GBP200 48% Marks & Spencer, Debenhams, Primark, Next,
Topshop, Asda, Boots, H&M, Odeon
intu Braehead GBP469.8m 1,123 100% 123 GBP28.9m GBP213 64% Marks & Spencer, Primark, Apple, Next, H&M,
Topshop, Hollister, Superdry, Sainsbury's
Cribbs Causeway GBP228.4m 1,076 33% 154 GBP12.9m GBP305 80% John Lewis, Marks & Spencer, Apple, Next,
Topshop, Hobbs, Hugo Boss, H&M, Tesla, The
White Company
UK major city centres
Manchester Arndale GBP438.2m 1,790 48% 254 GBP21.7m GBP285 57% Harvey Nichols, Apple, Burberry, Topshop,
Next, Ugg, Hugo Boss, Superdry, Zara,
Victoria's Secret, Paul Smith, Monki
intu Derby GBP410.8m 1,357 100% 210 GBP27.9m GBP110 46% Marks & Spencer, Debenhams, Sainsbury's,
Next, Boots, Topshop, Cinema de Lux, Zara,
H&M
intu Victoria Centre GBP320.5m 976 100% 115 GBP18.8m GBP250 57% John Lewis, House of Fraser, Next, Topshop,
River Island, Boots, Urban Outfitters,
Superdry, Timberland
St David's, Cardiff GBP319.9m 1,391 50% 203 GBP16.8m GBP212 71% John Lewis, Debenhams, Marks & Spencer,
Apple, Hugo Boss, H&M, River Island,
Hamleys, Primark, Victoria's Secret
intu Eldon Square GBP305.2m 1,385 60% 142 GBP16.3m GBP308 60% John Lewis, Fenwick, Debenhams, Waitrose,
Apple, Hollister, Topshop, Boots, River Island,
Next
intu Watford GBP303.0m 728 93% 140 GBP14.8m GBP200 81% John Lewis, Marks & Spencer, Apple, Zara,
Primark, Next, Lakeland, Lego, H&M,
Topshop, New Look
Annual
Size Number of property
Market value (sq m 000) Ownership stores income Key tenants
Spanish centres
Madrid Xanadú EUR267.7m 120* 50% 208 EUR12.3m El Corte Inglés, Zara, Primark, Apple, H&M,
Mango, SnowZone, Cinesa, Bricor, Decathlon
intu Puerto Venecia EUR266.7m 120* 50% 206 EUR12.4m El Corte Inglés, Primark, Ikea, Apple,
Decathlon, Cinesa, H&M, Mediamarkt, Zara,
Hollister, Toys R Us
intu Asturias EUR158.9m 74* 50% 145 EUR8.3m Primark, Zara, H&M, Cinesa, Eroski, Mango,
Springfield, Fnac, Mediamarkt, Desigual
* Excludes owner occupied space.
Financial review
Presentation of information
We account for our interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements. This means that the income
statement and the balance sheet include single lines for the Group's total share of post-tax profit and the net investment in joint ventures
respectively.
Management review and monitor performance as well as determine the strategy of the business primarily on a proportionately consolidated
basis. This includes the Group's share of joint ventures on an individual line-by-line basis rather than a post-tax (loss)/profit or net investment
basis. The figures and commentary presented are consistent with our management approach as we believe this provides a more meaningful
analysis of the Group's performance. The other information section provides reconciliations of the income statement and balance sheet
between the two bases.
Alternative performance measures are also used to assess the Group's performance. The significant measures are summarised as follows:
Alternative performance measure used Rationale
Like-for-like amounts Like-for-like amounts are presented as they indicate operating performance as distinct from the impact of acquisitions
or disposals. In respect of property, the like-for-like measure relates to property which has been owned throughout
both periods without significant capital expenditure in either period, so that income can be compared on a like-for-like
basis. For the purposes of comparison of capital values, this will also include assets owned at the previous reporting
period end but not throughout the prior period. Further analysis is presented in the other information section and in
the operating review.
Net asset value ('NAV') (diluted, NAV (diluted, adjusted) is presented as it is considered to be a key measure of the Group's performance. The key
adjusted) difference from EPRA NAV, an industry standard comparable measure which seeks to assist comparison between
European property companies, is the exclusion of interest rate swaps not currently used for economic hedges of debt
as, in our view, this better allows management to review and monitor the Group's performance. A reconciliation of
NAV (diluted, adjusted) to NAV attributable to owners of intu properties plc as well as EPRA NAV is provided in note 11.
Underlying earnings Underlying earnings is presented as it is considered to be a key measure of the Group's recurring income performance
and an indication of the extent to which dividend payments are supported by underlying operations. It excludes
property and derivative valuation movements, exceptional items and related tax. The key difference from EPRA
earnings, an industry standard comparable measure which seeks to assist comparison between European property
companies, relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments
that can be made. A reconciliation of underlying earnings to (loss)/profit for the period attributable to owners of intu
properties plc as well as EPRA earnings is provided in note 10. The underlying profit statement is also presented in full
in the other information section.
Overview
We have recorded underlying earnings of GBP98.5 million for the six months ended 30 June 2018, in line with the same period in 2017. This reflects a
1.3 per cent growth in like-for-like net rental income as well as the impact of 2018 and 2017 acquisitions and disposals. Underlying earnings per
share of 7.3 pence is unchanged from the same period in 2017.
The loss for the period attributable to owners of intu properties plc of GBP486.2 million, compared to a profit of GBP127.1 million for the same period
in 2017 is driven primarily by the deficit on property revaluations of GBP650.4 million (same period in 2017: surplus of GBP17.7 million), partially offset
by the change in fair value of financial instruments, a surplus of GBP75.1 million (same period in 2017: surplus of GBP18.7 million).
NAV per share of 362 pence has decreased 49 pence from 31 December 2017 largely due to the deficit on property revaluations. NAV per share
continues to include a timing impact within retained earnings of 4 pence in relation to our Spanish development partner Eurofund's expected
future equity interest in the intu Costa del Sol development. The positive impact on retained earnings is expected to reverse, once these
arrangements are concluded. Following this event, NAV per share would be 4 pence lower.
In January we continued making smart use of capital, completing the 50 per cent joint venture sale of intu Chapelfield to LaSalle Investment
Management (acting on behalf of Greater Manchester Pension Fund and West Yorkshire Pension Fund) for initial net consideration of GBP148.0
million. Subsequently, we arranged a GBP74.0 million loan facility, maturing in 2023 secured on our 50 per cent remaining interest. In accordance
with IFRS, following the completion date, intu Chapelfield is now presented as a joint venture in our financial statements.
Our financing metrics continue to remain strong. During the period we refinanced our facility on intu Puerto Venecia, extended our facility on
intu Milton Keynes and have secured financing on the remaining 50 per cent interest in intu Chapelfield. Our interest cover ratio of 1.95x is
slightly higher in the period (31 December 2017: 1.94x) with satisfactory headroom above our target minimum level of 1.60x.
Income statement
Six months ended Six months ended 30
30 June 2018 June 2017
Group Group
Group underlying Share of including share of including share of
profit joint ventures joint ventures joint ventures
GBPm GBPm GBPm GBPm
Underlying earnings 98.5 n/a 98.5 98.5
Adjusted for:
Revaluation of investment and development property (617.4) (33.0) (650.4) 17.7
Loss on disposal of subsidiaries (8.3) - (8.3) (0.9)
Loss on sale of other investments - - - (0.3)
Administration expenses - exceptional (6.3) - (6.3) (1.7)
Exceptional finance costs (14.9) 5.1 (9.8) (12.2)
Change in fair value of financial instruments 75.3 (0.2) 75.1 18.7
Tax on the above 3.3 (2.0) 1.3 1.2
Share of joint ventures' items (30.4) 30.4 - -
Share of associates' items (0.9) - (0.9) 4.0
Non-controlling interests in respect of the above 14.9 (0.3) 14.6 2.1
(Loss)/profit for the period attributable to owners of intu properties plc (486.2) n/a (486.2) 127.1
Underlying earnings per share (pence) 7.3p n/a 7.3p 7.3p
Underlying earnings and underlying earnings per share of £98.5 million and 7.3 pence respectively are in line with the same period in 2017. The
key movements of underlying earnings are shown in the chart below.
H1 2017 GBP98.5m
Net retail income: like-for-like +GBP2.7m
Net rental income: disposals/developments -GBP5.8m
Net finance costs +GBP2.0m
Administration expenses -GBP1.1m
Other +GBP2.2m
H1 2018 GBP98.5m
Net rental income decreased GBP3.1 million in the six months ended 30 June 2018 to GBP223.1 million primarily due to the part disposal of intu
Chapelfield in January 2018, the acquisition and part disposal of Madrid Xanadú in 2017, partially offset by growth in like-for-like net rental
income.
Like-for-like net rental income increased by GBP2.7 million, 1.3 per cent, primarily driven by rental growth from new lettings and rent reviews (see
operating review).
Administration expenses increased by GBP1.1 million in the six months ended 30 June 2018 to GBP21.7 million, broadly in line with the run rate in the
second half of 2017.
Net finance costs have decreased by GBP2.0 million in the six months ended 30 June 2018 to GBP107.3 million primarily as a result of our ongoing
refinancing programme. The net finance costs will increase in the second half and be similar to the second half of 2017 as capital projects come on stream.
As discussed in the overview, the loss attributable to owners of intu properties plc is GBP486.2 million, a decrease from the GBP127.1 million profit
reported for the same period in 2017.
Our investment in joint ventures recorded a loss of GBP16.2 million, compared to a profit of GBP18.4 million for the same period in 2017. This includes
underlying earnings of GBP14.2 million, an increase of GBP5.7 million from the same period in 2017 due to intu Chapelfield and Madrid Xanadú now
included within investment in joint ventures, and a deficit on property revaluation of GBP33.0 million (same period in 2017: surplus of GBP8.5 million).
As detailed in the table below, our net rental income margin has improved slightly to 88.0 per cent due to marginally lower costs related to
vacant units. Our ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 15.0 per cent (see other
information section).
Six months ended Six months ended
30 June 2018 30 June 2017
GBPm GBPm
Gross rental income 260.6 268.5
Head rent payable (7.2) (10.2)
253.4 258.3
Net service charge expense and void costs (14.3) (14.5)
Bad debt and lease incentive write offs (0.9) (1.4)
Property operating expense (15.1) (16.2)
Net rental income 223.1 226.2
Net rental income margin 88.0% 87.6%
EPRA cost ratio (excluding direct vacancy costs) 15.0% 15.0%
Balance sheet
30 June 2018 31 December 2017
Group Group
Group balance Share of including share of including share of
sheet joint ventures joint ventures joint ventures
GBPm GBPm GBPm GBPm
Investment and development property 8,660.0 1,133.9 9,793.9 10,192.5
Investment in joint ventures 851.5 (851.5) - -
Assets and associated liabilities classified as held for sale - - - 302.9
Investment in associates and other investments 77.2 - 77.2 81.6
Net external debt (4,542.9) (249.1) (4,792.0) (4,835.5)
Derivative financial instruments (304.0) (2.6) (306.6) (349.8)
Other assets and liabilities (232.7) (27.1) (259.8) (259.3)
Net assets 4,509.1 3.6 4,512.7 5,132.4
Non-controlling interest (37.0) (3.6) (40.6) (57.4)
Attributable to shareholders 4,472.1 - 4,472.1 5,075.0
Fair value of derivative financial instruments 304.0 2.6 306.6 349.8
Other adjustments 99.0 (2.6) 96.4 97.9
Net assets (diluted, adjusted) 4,875.1 n/a 4,875.1 5,522.7
NAV per share (diluted, adjusted) (pence) 362p n/a 362p 411p
The Group's net assets attributable to shareholders are GBP4,472.1 million, a decrease from GBP5,075.0 million at 31 December 2017, while net assets
(diluted, adjusted) are GBP4,875.1 million, a decrease from GBP5,522.7 million at 31 December 2017.
31 Dec 2017 411pence
Underlying earnings +7pence
Dividend paid -9pence
Value deficit -48pence
Other +1pence
30 Jun 2018 362pence
NAV per share (diluted, adjusted) at 30 June 2018 has decreased 49 pence from the prior year to 362 pence, the key movements are shown in
the chart above. This was driven principally by the deficit on property revaluations in the period of 48 pence. As noted in the overview, NAV per
share continues to include a timing impact within retained earnings of 4 pence in relation to our Spanish development partner Eurofund's
expected future equity interest in the intu Costa del Sol development. The positive impact on retained earnings is expected to reverse, once
these arrangements are concluded. In this event NAV per share would reduce by 4 pence.
Investment and development property has decreased by GBP398.6 million primarily due to a deficit on revaluation of GBP650.4 million, partially offset
by capital expenditure of GBP101.9 million and the recognition of the retained 50 per cent interest in intu Chapelfield, of which 100 per cent was
classified as an asset held for sale at 31 December 2017.
Our net investment in joint ventures is GBP851.5 million at 30 June 2018 (31 December 2017: GBP735.5 million), which includes the Group's share of net
assets, on an equity accounted basis, of GBP511.1 million (31 December 2017: GBP452.6 million) and loans to joint ventures of GBP340.4 million (31
December 2017: GBP282.9 million). The movement in the period primarily reflects the addition of intu Chapelfield from 31 January 2018 following
the 50 per cent part disposal, which is now accounted for as a joint venture rather than as a 100 per cent owned subsidiary.
Investments in associates of GBP61.7 million primarily represent our interests in India, which comprises a 32 per cent interest in Prozone (GBP42.5
million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (GBP19.2 million). Prozone and Empire own
and operate shopping centres in Coimbatore and Aurangabad.
Net external debt of GBP4,792.0 million has decreased by GBP43.5 million primarily from proceeds from the part disposal of intu Chapelfield partially
offset by capital expenditure in the period. Cash including the Group's share of joint ventures has reduced by GBP26.6 million to GBP251.6 million and
gross debt has decreased by GBP70.1 million to GBP5,043.6 million.
Derivative financial instruments comprise the fair value of the Group's interest rate swaps. The net liability at 30 June 2018 is GBP306.6 million, a
decrease of GBP43.2 million in the period, primarily due to cash payments in the year and the increases in sterling swap rates, with the five-year and
10-year rates increasing by 27bps and 25bps respectively. Cash payments in the year totalled GBP23.6 million, GBP14.1 million of which has been
classified as an exceptional finance cost as it relates to payments in respect of unallocated interest rate swaps. The balance of the payments has
been included as underlying finance costs as it relates to ongoing interest rate swaps used to hedge debt.
As previously detailed, we have a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders'
practice. At 30 June 2018 these interest rate swaps have a market value liability of GBP209.1 million (31 December 2017: GBP235.4 million). It is
estimated that we will be required to make cash payments on these interest rate swaps of GBP14 million in the second half of 2018, reducing to
below GBP24 million per annum in 2020.
The non-controlling interest at 30 June 2018 relates primarily to our partner's 40 per cent stake in intu Metrocentre.
We are exposed to foreign exchange movements on our overseas investments. At 30 June 2018 the exposure is 12.5 per cent of net assets
attributable to shareholders, the increase from 31 December 2017 being primarily due to the deficit on property revaluations in the UK. Once the
Eurofund expected future equity interest in the intu Costa del Sol development concludes, we expect this rate to reduce to closer to the Group's
policy of a maximum of 10 percent, after which the appropriate level of exposure will be assessed.
Cash flow
Six months ended Six months ended
30 June 2018 30 June 2017
Group cash flow as reported GBPm GBPm
Cash flows from operating activities 48.1 67.9
Cash flows from investing activities 75.1 (539.7)
Cash flows from financing activities (139.9) 466.9
Foreign exchange movements - 0.1
Net decrease in Group cash and cash equivalents (16.7) (4.8)
During the period cash and cash equivalents decreased by GBP16.7 million.
Cash flows from operating activities of GBP48.1 million are GBP19.8 million lower than the same period in 2017, primarily due to the timing of
payments.
Cash flows from investing activities reflects the cash inflow for the 50 per cent sale of intu Chapelfield in January and cash outflows related to
capital expenditure during the period.
Cash flows from financing activities primarily reflect the cash dividends paid during the period of GBP120.9 million.
Financing
Debt structure
We have carried out significant refinancing activity in recent years which has resulted in diversified sources of funding, including secured bonds
plus syndicated bank debt secured on individual or pools of assets, with limited or no recourse from the borrowing entities to other Group
companies outside of these arrangements. Our corporate-level debt remains limited to the Revolving Credit Facility (RCF) as well as the GBP375
million 2.875 per cent convertible bonds due 2022 and GBP160.4 million outstanding in respect of the 2.5 per cent convertible bonds due in the
second half of 2018.
During the period we undertook the following financing activities:
- agreed a new GBP74 million facility secured against our remaining 50 per cent interest in intu Chapelfield, maturing in 2023
- refinanced the EUR225 million facility secured against intu Puerto Venecia (our share EUR112.5 million), now maturing in 2025
- extended the GBP140 million facility secured against intu Milton Keynes by 18 months, now maturing in 2021
It is likely the GBP160.4 million outstanding in respect of the 2.5 per cent convertible bonds due in the second half of 2018 will be cash settled. The
chart below illustrates that we have no major refinancing requirement due until 2021.
2018* GBP173m
2019 GBP47m
2020 GBP88m
2021 GBP853m
2022 GBP774m
2023 GBP1,032m
2024 GBP603m
2025 GBP126m
2026 GBP28m
2027 GBP262m
2028-2032 GBP843m
2033+ GBP231m
Debt measures
30 June 2018 31 December 2017
Debt to assets 48.7% 45.2%1
Interest cover 1.95x 1.94x
Weighted average debt maturity 6.3 years 6.6 years
Weighted average cost of gross debt 4.1% 4.2%
Proportion of gross debt with interest rate protection 90% 95%
Cash and available facilities GBP738.8m GBP833.1m1
(1) Pro forma for the net initial consideration of GBP148 million on 50 per cent disposal of intu Chapelfield.
Our debt to assets ratio has increased to 48.7 per cent since 31 December 2017 due to the deficit on property revaluation and remains within our
target range of 40 per cent to 50 per cent. Our weighted average debt maturity has reduced marginally to 6.3 years and the weighted average
cost of gross debt has reduced to 4.1 per cent (excluding the RCF).
Interest cover of 1.95x has remained stable and above our target minimum level of 1.60x.
We use interest rate swaps to fix interest obligations, reducing any cash flow volatility caused by changes in interest rates. The proportion of
debt with interest rate protection has decreased slightly in the period to 90 per cent within our policy range of between 75 per cent and 100 per
cent.
Covenants
Further details of the debt financial covenants are included in the other information section of this report. We are in compliance with all of our
covenants and regularly stress test them for changes in capital values and income. By way of example, a 20 per cent fall in capital values and 10
per cent fall in income would create a covenant shortfall of only GBP18 million.
Capital commitments
We have an aggregate commitment to capital projects of GBP234.8 million at 30 June 2018 (31 December 2017: GBP267.6 million).
In addition to the committed expenditure, we have an identified uncommitted pipeline of active management projects, major extensions and
developments that may become committed over the coming years (see operating review).
Other
Tax policy position
The Group has tax exempt status in the UK (REIT) and for certain investments in Spain (SOCIMI) which provide exemption from corporation tax
on rental income and gains arising on property sales, with tax instead being paid at shareholder level. See glossary for further information on
REITs and SOCIMIs.
The Group's principle of good governance extends to our responsible approach to tax. We look to minimise the level of tax risk and at all times
seek to comply fully with our regulatory and other tax obligations and to act in a way which upholds intu's reputation as a responsible corporate
citizen by regularly carrying out risk reviews, seeking pre-clearance from HMRC in complex areas and actively engaging in discussions regarding
proposed changes in the taxation system that might affect the Group. It remains important to our stakeholders that our approach to tax is
aligned to the long-term values and strategy of the Group.
We published 'intu's Approach to Tax' in respect of the year ended 31 December 2017 on the Group's website intugroup.co.uk which provides
further information about the Group's tax strategy.
We pay tax directly on overseas earnings, any UK non-property income under the REIT rules, business rates and transaction taxes such as stamp
duty land tax. In the six months ended 30 June 2018 the total of such payments to tax authorities was GBP15.1 million (same period in 2017: GBP13.1
million), of which GBP13.4 million (same period in 2017: GBP11.6 million) was in the UK and GBP1.7 million (same period in 2017: GBP1.5 million) in Spain.
In addition, we also collect VAT, employment taxes and withholding tax on dividends for HMRC and the Spanish tax authorities.
Dividends
The Directors are recommending an interim dividend of 4.6 pence per share in line with the 2017 interim dividend. A scrip dividend alternative
may be offered. Details of the apportionment between the PID and non-PID elements per share will be confirmed in due course.
Principal risks and uncertainties
intu's Board has responsibility for establishing the Group's appetite for risk on the balance of potential risks and returns, and has overall
responsibility for identifying and managing risks. The Board has updated its assessment of the principal risks facing the Group, including those
that would impact the business model, future performance, solvency or liquidity.
We have identified principal risks and uncertainties under five key headings: property market; operations; financing; developments and
acquisitions; and brand. These are discussed in detail on the following pages. A principal risk is one which has the potential to significantly affect
our strategic objectives, financial position or future performance and includes both internal and external factors. We monitor movements in
likelihood and severity such that the risks are appropriately managed in line with the Group's risk appetite.
The risk profile for the six months ended 30 June 2018 has remained broadly in line with the year ended 31 December 2017 with no significant
new risk categories identified, although it is recognised that risks within the categories continue to evolve. Where risks have evolved additional
risk mitigation strategies have been put in place.
The main impact from the UK's decision to exit the EU on the risks that the Group faces continues to be the potential negative impact on the
macro-economic environment as a result of the continuing uncertainty around transitional and post-Brexit arrangements. Specifically, the risks
we face are affected by any changes in sentiment in the investment and occupier markets in which we operate, in our ability to execute our
recycling and investment plans and in broader consumer confidence and expenditure.
Key to strategic objectives: Change in level of risk:
1) Growing like-for-like net rental income Increased (+)
2) Delivering operational excellence Remained the same (=)
3) Optimising our winning destinations Decreased (-)
4) Making smart use of capital
Risk and impact Mitigation Change 2018 commentary
Property market Strategic objectives affected: 1,2,3,4
Macro-economic - focus on high-quality shopping centres together with + Likelihood of macro-economic weakness has increased and
Weakness in the macro- their upgrading continues to be a risk with political uncertainty in the UK and
economic environment - covenant headroom monitored and stress-tested Brexit arrangements not yet detailed, which has increased
could undermine rental - make representation on key policies, for example investor caution with lower transaction volumes in the period
income levels and property - reduction in like-for-like property values, and continued
business rates
values, reducing return on pressure at the lower end of the market
- company-wide marketing events across centres to
investment and covenant - substantial covenant headroom
headroom attract footfall
- use our respected brand to attract and retain - no significant near-term debt maturities and average
aspirational retailers unexpired term of 6.3 years
- continue geographic diversification by increasing - long-term lease structures with average unexpired term of
Spanish presence 7.4 years
- completion of 50 per cent disposal of intu Chapelfield in
January 2018 for initial consideration of GBP148m, in line with
the December 2016 valuation
Retail environment - active management of tenant mix + Likelihood has increased and severity of potential impact was
Failure to react to changes in - regular monitoring of tenant strength and diversity monitored and managed closely in the period with intu's
the retail environment could - upgrading assets to meet market demand strategy continuing to deliver solid footfall numbers and
undermine intu's ability to occupancy
- Tell intu customer feedback programme helps identify
attract customers and - modest impact from administrations and retailer CVAs
changes in customer preferences
tenants - signi?cant progress on planning and pre-letting of near-term
- work closely with retailers to ensure that intu's centres
pipeline with a focus on leisure
continue to evolve with their strategic objectives
- digital strategy that embraces technology and digital - continuing digital investment to improve relevance as
customer engagement. This enables intu to engage in shopping habits change
and support multichannel retailing, and to take the - occupancy remains strong at 97 per cent
opportunities offered by ecommerce - footfall reduced marginally but continues to outperform the
benchmark
- on site with the GBP72m intu Lakeside leisure extension
Risk and impact Mitigation Change 2018 commentary
Operations Strategic objectives affected: 1,2,3
Health and safety - strong business process and procedures, including = Likelihood and severity of potential impact has not changed
Accidents or system failure compliance with OHSAS 18001, supported by regular significantly during the period
leading to financial and/or training and exercises - retained OHSAS 18001, demonstrating consistent health and
reputational loss - annual audits of operational standards carried out safety management process and procedures across the
internally and by external consultants portfolio
- culture of visitor, staff and contractor safety - work continuing towards achieving additional accreditations
- crisis management and business continuity plans in with focus on ISO 14001
place and tested - gold award from RoSPA
- retailer liaison and briefings - full review undertaken of each centre's fire strategy and
- appropriate levels of liability insurance building specifications following Grenfell and Liverpool Arena
- continued investment of insurers' risk mitigation car park fire has provided appropriate assurance across the
portfolio
bursaries
- increased resources to counter anti-social behaviour - Primarily Authority audits for both health and safety and fire
safety are being conducted in accordance with programme.
- staff succession planning and development in place to
These provide assurances surrounding compliance
ensure continued delivery of world class service
- health and safety managers or coordinators in all
centres
Cybersecurity - data and cybersecurity strategies = Likelihood is unchanged and continues to rely on operational
Loss of data and information - regular testing programme and cyber scenario exercise and third party systems and data. Severity of potential impact
or failure of key systems and benchmarking managed through continued development of tools and
resulting in financial and/or - appropriate levels of insurance controls. Hacking attempts have not resulted in data loss or
reputational loss major operational impacts
- crisis management and business continuity plans in
- ongoing Group-wide cybersecurity project with investment
place and tested
in tools, consultancy and staff to mitigate impact of threats
- data committee and data protection officer in place
from evolving cybersecurity landscape
- monitoring of regulatory environment
- implemented updated GDPR policies and procedures
- cybersecurity testing performed by external consultancy
and full action plan in place (programme of works)
- managing of supply chain and service providers who
hold intu data
Terrorism - strong business process and procedures, supported by = Overall likelihood and severity of potential impact unchanged
Terrorist incident at an intu regular training and exercises, designed to adapt and but recognition of changing terrorist methods
centre or another major respond to changes in risk levels - national threat level remains at Severe
shopping centre resulting in - extraordinary pre-planned operational responses to - major multi-agency security exercises held at all five super-
loss of consumer confidence changes in national threat level regional intu managed shopping centres
with consequent impact on - annual audits of operational standards carried out
- operating procedures in place for the introduction of further
lettings and rental growth internally and by external agencies security measures if required
- culture of visitor, staff and contractor safety
- crisis management and business continuity plans in
place and tested with involvement of multiple external
agencies
- retailer liaison and briefings
- appropriate levels of insurance
- strong relationships and frequent liaison with police,
NaCTSO and other agencies
- NaCTSO approved to train staff in counter-terrorism
awareness programme
- NaCTSO counter terrorism assessments completed for
all centres
- internal head of security in place supported by security
strategy group
Risk and impact Mitigation Change 2018 commentary
Financing Strategic objectives affected: 3,4
Availability of funds - funding strategy regularly reported to the Board with = Macro-economic events during the period, and the uncertainty
Reduced availability of funds current and projected funding position caused by them, mean the increased risk of reduced availability
could limit liquidity, leading - effective treasury management aimed at balancing the remains. However, severity of potential impact unchanged
to restriction of investing length of the debt maturity profile and diversification of from 2017. Regular refinancing activity continuing to evidence
and operating activities sources of finance the availability of funding
and/or increase in funding - consideration of financing plans including potential for - GBP74m facility agreed on retained joint venture interest in intu
cost recycling of capital before commitment to transactions Chapelfield
and developments - EUR225m refinancing of intu Puerto Venecia
- strong relationships with lenders, shareholders and - extension of the GBP140m facility on intu Milton Keynes
partners - no major refinancing requirements due until 2021
- focus on high-quality shopping centres
Developments and acquisitions Strategic objectives affected: 3,4
Developments - Capital Projects Committee reviews detailed appraisals = Likelihood and severity of potential impact have remained
Developments fail to create before and monitors progress during significant projects unchanged in the period as the Group has progressed work on
shareholder value - fixed price construction contracts for developments its development pipeline
agreed with clear apportionment of risk - at intu Watford works are on schedule to open in October
- significant levels of pre-lets exchanged prior to scheme 2018
development - at intu Lakeside leisure development on schedule
- detailed appraisal work and significant pre-lets ahead of
starting major development projects
- at Barton Square key anchor letting to Primark secured and
main contractor appointed for intu Trafford Centre
transformation
Acquisitions - research and third party due diligence undertaken for = Likelihood and severity of potential impact have remained
Acquisitions fail to create transactions unchanged in the period
shareholder value - local partner, advisors and experienced staff in Spain
with specialist market knowledge
- where appropriate, investment risk reduced through
financing and joint venture investments
Brand Strategic objectives affected: 1,2,3,4
Integrity of the brand - intellectual property protection = Likelihood and severity of potential impact unchanged in the
The integrity of the brand is - strong guidelines for use of brand period
damaged leading to - strong underlying operational controls and crisis - continuing media interest in intu and our commentary and
financial and/or reputational management procedures opinions on the business and wider landscape
loss - ongoing development of brand in Spain, with full brand roll-
- ongoing training programme and reward and
recognition schemes designed to embed brand values out at intu Puerto Venecia
and culture throughout the organisation - net promoter score consistently high, averaging 73 in the
- traditional and digital media monitoring and analysis period
- Tell intu and Shopper View customer feedback
programmes
Directors' responsibility statement
The Directors are responsible for preparing the interim report and condensed consolidated set of interim financial statements (interim financial
statements), in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:
- the interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European
Union and gives a true and fair view of the assets, liabilities, financial position, and profit and loss of the Group; and
- the interim report includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Services Authority.
The operating and financial reviews refer to important events which have taken place in the period.
The principal risks and uncertainties facing the business are referred to in the operating and financial reviews.
Related party transactions are set out in note 23 of the interim financial statements.
Details, including biographies, of all current Directors are maintained on the intu properties plc website: intugroup.co.uk.
On behalf of the Board
David Fischel
Chief Executive
Matthew Roberts
Chief Financial Officer
26 July 2018
Independent review report to intu properties plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed intu properties plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim
report of intu properties plc for the 6 month period ended 30 June 2018. Based on our review, nothing has come to our attention that causes us
to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
- the consolidated balance sheet as at 30 June 2018;
- the consolidated income statement and consolidated statement of comprehensive income for the period then ended;
- the consolidated statement of changes in equity for the period then ended;
- the consolidated statement of cash flows for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the Directors
The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including
the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently,
does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2018
Consolidated income statement (unaudited)
for the six months ended 30 June 2018
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
Notes GBPm GBPm GBPm
Revenue 4 286.1 307.3 616.0
Net rental income 4 197.5 210.5 423.4
Net other income 3.2 0.6 3.0
Revaluation of investment and development property 12 (617.4) 9.2 30.8
Loss on disposal of subsidiaries 5 (8.3) (0.9) (1.8)
Administration expenses - ongoing (21.2) (20.1) (40.9)
Administration expenses - exceptional 6 (6.3) (1.7) (5.9)
Operating (loss)/profit (452.5) 197.6 408.6
Finance costs 7 (102.5) (105.1) (213.9)
Finance income 7 7.5 4.9 12.6
Other finance costs 7 (17.8) (15.1) (38.9)
Change in fair value of financial instruments 7 75.3 18.1 22.0
Net finance costs 7 (37.5) (97.2) (218.2)
(Loss)/profit before tax, joint ventures and associates (490.0) 100.4 190.4
Share of post-tax (loss)/profit of joint ventures 13 (16.2) 18.4 35.5
Share of post-tax (loss)/profit of associates 14 (0.3) 4.4 1.3
(Loss)/profit before tax (506.5) 123.2 227.2
Current tax 8 (0.2) (0.2) 0.1
Deferred tax 8 3.3 (0.3) (24.0)
Taxation 8 3.1 (0.5) (23.9)
(Loss)/profit for the period (503.4) 122.7 203.3
Attributable to:
Owners of intu properties plc (486.2) 127.1 216.7
Non-controlling interests (17.2) (4.4) (13.4)
(503.4) 122.7 203.3
Basic (loss)/earnings per share 10 (36.2)p 9.5p 16.1p
Diluted (loss)/earnings per share 10 (36.1)p 8.9p 15.0p
Details of underlying earnings are presented in the underlying profit statement in the other information section. Underlying earnings per share
are shown in note 10.
Consolidated statement
of comprehensive income (unaudited)
for the six months ended 30 June 2018
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
(Loss)/profit for the period (503.4) 122.7 203.3
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Revaluation of other investments (1.2) (0.1) (0.2)
Exchange differences (4.6) 11.4 16.9
Tax relating to components of other comprehensive income - - 0.1
Total items that may be reclassified subsequently to the income statement (5.8) 11.3 16.8
Other comprehensive (loss)/income for the period (5.8) 11.3 16.8
Total comprehensive (loss)/income for the period (509.2) 134.0 220.1
Attributable to:
Owners of intu properties plc (492.0) 138.4 233.5
Non-controlling interests (17.2) (4.4) (13.4)
(509.2) 134.0 220.1
Consolidated balance sheet (unaudited)
at 30 June 2018
At 30 June At 31 December At 30 June
2018 2017 2017
Notes GBPm GBPm GBPm
Non-current assets
Investment and development property 12 8,660.0 9,179.4 9,322.5
Plant and equipment 12.5 12.2 8.6
Investment in joint ventures 13 851.5 735.5 603.1
Investment in associates 14 61.7 64.8 69.7
Other investments 15.5 16.8 16.9
Goodwill 4.0 4.0 4.0
Derivative financial instruments 6.3 0.3 0.2
Trade and other receivables 103.6 102.5 102.3
9,715.1 10,115.5 10,127.3
Current assets
Assets classified as held for sale - 309.1 559.5
Trade and other receivables 153.5 141.9 145.2
Cash and cash equivalents 15 210.2 228.0 250.4
363.7 679.0 955.1
Total assets 10,078.8 10,794.5 11,082.4
Current liabilities
Liabilities associated with assets classified as held for sale - (6.2) (328.8)
Trade and other payables (298.0) (288.5) (307.9)
Current tax liabilities (0.3) (0.1) (0.5)
Borrowings 16 (210.3) (186.7) (17.4)
Derivative financial instruments (38.9) (8.0) (51.5)
(547.5) (489.5) (706.1)
Non-current liabilities
Borrowings 16 (4,729.4) (4,811.1) (5,019.4)
Derivative financial instruments (271.4) (339.8) (300.5)
Deferred tax liabilities 8 (20.2) (23.7) -
Other payables (1.2) (1.2) (1.2)
(5,022.2) (5,175.8) (5,321.1)
Total liabilities (5,569.7) (5,665.3) (6,027.2)
Net assets 4,509.1 5,129.2 5,055.2
Equity
Share capital 18 677.5 677.5 677.5
Share premium 18 1,327.4 1,327.4 1,327.4
Treasury shares (39.6) (39.1) (39.2)
Other reserves 355.3 361.1 355.6
Retained earnings 2,151.5 2,748.1 2,670.7
Attributable to owners of intu properties plc 4,472.1 5,075.0 4,992.0
Non-controlling interests 37.0 54.2 63.2
Total equity 4,509.1 5,129.2 5,055.2
Consolidated statement of changes in equity (unaudited)
for the six months ended 30 June 2018
Attributable to owners of intu properties plc
Non-
Share Share Treasury Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2018 677.5 1,327.4 (39.1) 361.1 2,748.1 5,075.0 54.2 5,129.2
Adjustment on adoption of new accounting
standard (note 2) - - - - 14.0 14.0 - 14.0
Adjusted 1 January 2018 677.5 1,327.4 (39.1) 361.1 2,762.1 5,089.0 54.2 5,143.2
Loss for the period - - - - (486.2) (486.2) (17.2) (503.4)
Other comprehensive income:
Revaluation of other investments - - - (1.2) - (1.2) - (1.2)
Exchange differences - - - (4.6) - (4.6) - (4.6)
Total comprehensive loss for the period - - - (5.8) (486.2) (492.0) (17.2) (509.2)
Dividends (note 9) - - - - (126.3) (126.3) - (126.3)
Share-based payments - - - - 1.9 1.9 - 1.9
Acquisition of treasury shares - - (0.5) - - (0.5) - (0.5)
- - (0.5) - (124.4) (124.9) - (124.9)
At 30 June 2018 677.5 1,327.4 (39.6) 355.3 2,151.5 4,472.1 37.0 4,509.1
Attributable to owners of intu properties plc
Non-
Share Share Treasury Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2017 677.5 1,327.4 (40.8) 344.3 2,670.4 4,978.8 67.6 5,046.4
Profit/(loss) for the year - - - - 216.7 216.7 (13.4) 203.3
Other comprehensive income:
Revaluation of other investments - - - (0.2) - (0.2) - (0.2)
Exchange differences - - - 16.9 - 16.9 - 16.9
Tax relating to components
of other comprehensive income - - - 0.1 - 0.1 - 0.1
Total comprehensive income for the year - - - 16.8 216.7 233.5 (13.4) 220.1
Dividends (note 9) - - - - (187.9) (187.9) - (187.9)
Share-based payments - - - - 2.3 2.3 - 2.3
Other share related transaction - - - - 49.4 49.4 - 49.4
Acquisition of treasury shares - - (1.3) - - (1.3) - (1.3)
Disposal of treasury shares - - 3.0 - (2.8) 0.2 - 0.2
- - 1.7 - (139.0) (137.3) - (137.3)
At 31 December 2017 677.5 1,327.4 (39.1) 361.1 2,748.1 5,075.0 54.2 5,129.2
Attributable to owners of intu properties plc
Share Share Treasury Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2017 677.5 1,327.4 (40.8) 344.3 2,670.4 4,978.8 67.6 5,046.4
Profit/(loss) for the period - - - - 127.1 127.1 (4.4) 122.7
Other comprehensive income:
Revaluation of other investments - - - (0.1) - (0.1) - (0.1)
Exchange differences - - - 11.4 - 11.4 - 11.4
Total comprehensive income for the period - - - 11.3 127.1 138.4 (4.4) 134.0
Dividends (note 9) - - - - (126.2) (126.2) - (126.2)
Share-based payments - - - - 2.2 2.2 - 2.2
Acquisition of treasury shares - - (1.2) - - (1.2) - (1.2)
Disposal of treasury shares - - 2.8 - (2.8) - - -
- - 1.6 - (126.8) (125.2) - (125.2)
At 30 June 2017 677.5 1,327.4 (39.2) 355.6 2,670.7 4,992.0 63.2 5,055.2
Consolidated statement of cash flows (unaudited)
for the six months ended 30 June 2018
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
Notes GBPm GBPm GBPm
Cash generated from operations 20 156.6 180.3 365.6
Interest paid (110.9) (113.0) (232.4)
Interest received 2.5 1.1 7.6
Taxation (0.1) (0.5) 0.1
Cash flows from operating activities 48.1 67.9 140.9
Cash flows from investing activities
Purchase and development of property, plant and equipment (88.3) (91.3) (189.5)
Sale of property 1.5 3.4 3.7
Acquisition of businesses net of cash acquired - (446.3) (446.7)
Cash transferred to assets classified as held for sale - (12.7) (0.5)
Additions to other investments - (1.5) (1.5)
Disposal of subsidiaries net of cash sold 22 143.4 - 104.1
Investment of capital in joint ventures 13 (2.8) - (0.7)
Repayments of capital by joint ventures 13 5.3 - -
Loan advances to joint ventures 13 (0.6) (2.3) (3.0)
Loan repayments by joint ventures 13 16.2 10.1 14.8
Distributions from joint ventures 13 0.4 0.9 1.2
Cash flows from investing activities 75.1 (539.7) (518.1)
Cash flows from financing activities
Acquisition of treasury shares (0.5) (1.2) (1.3)
Sale of treasury shares - - 0.2
Cash transferred from/(to) restricted accounts 1.1 (0.5) 0.1
Borrowings drawn 74.0 596.6 1,199.2
Borrowings repaid (93.6) (10.2) (660.0)
Equity dividends paid (120.9) (117.8) (188.0)
Cash flows from financing activities (139.9) 466.9 350.2
Effects of exchange rate changes on cash and cash equivalents - 0.1 0.4
Net decrease in cash and cash equivalents (16.7) (4.8) (26.6)
Cash and cash equivalents at beginning of period 15 225.1 251.7 251.7
Cash and cash equivalents at end of period 15 208.4 246.9 225.1
Notes (unaudited)
1 Basis of preparation
The condensed consolidated set of interim financial statements (interim financial statements) for the six months ended 30 June 2018 are
unaudited and do not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006. The interim financial
statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct
Authority and with IAS 34 as adopted by the European Union.
The comparative information presented for the year ended 31 December 2017 is not the Group's financial statements for that year. Those
financial statements have been reported on by the Group's auditors and delivered to the registrar of companies. The auditors' opinion on those
financial statements was unqualified and did not contain an emphasis of matter paragraph or a statement made under Section 498 (2) or (3) of
the Companies Act 2006.
The interim financial statements should be read in conjunction with the Group's Annual Report and financial statements for the year ended 31
December 2017 which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union.
Significant estimates and judgements
The preparation of interim financial statements in conformity with the Group's accounting policies requires management to make judgements
and use estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Although these judgements and estimates are based on management's best knowledge of
the amount, event or action, the actual result ultimately may differ from those judgements and estimates.
In preparing the interim financial statements, the areas of significant judgement made by management and the key sources of estimation
uncertainty in applying the Group's accounting policies were the same as those applied to the Group's financial statements as at and for the year
ended 31 December 2017. See page 112 of the Group's 2017 Annual Report and financial statements for details on significant use of estimates
and assumptions as well as significant areas of judgement. During the period, management applied significant judgement assessing the control
over joint arrangements following the part disposal of intu Chapelfield. See note 22 for further details.
Going concern
The Group prepares regular forecasts and projections which include sensitivity analysis taking into account a number of downside risks to the
forecast including reasonably possible changes in trading performance and asset values and assesses the potential impact of these on the
Group's liquidity position and available resources.
In preparing the most recent projections, factors taken into account include GBP251.6 million of cash (including the Group's share of cash in joint
ventures of GBP41.4 million) and GBP487.2 million of undrawn facilities at 30 June 2018. The Group's weighted-average debt maturity of 6.3 years and
the relatively long-term and stable nature of the cash flows receivable under tenant leases were also factored into the forecasts.
After reviewing the most recent projections and the sensitivity analysis, the Directors consider it appropriate to continue to adopt the going
concern basis of accounting in preparing the interim financial statements.
2 Accounting policies
The accounting policies and methods of computation applied are consistent with those of the Group's financial statements for the year ended 31
December 2017 as set out on pages 113 to 116 of the Group's 2017 Annual Report and financial statements, as amended when relevant to reflect
the adoption of new standards, amendments and interpretations which became effective in the period. Except as described below, these
amendments have not had an impact on the interim financial statements.
This is the Group's first set of financial statements where IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have
been applied. The impacts on the interim financial statements on adoption of these standards are set out below:
IFRS 9 Financial Instruments - The standard applies to classification and measurement of financial assets and financial liabilities, impairment
provisioning and hedge accounting. On adoption, the Group has made an opening adjustment to retained earnings of GBP14.0 million. An
irrevocable election has also been made to recognise movements in other investments through other comprehensive income, consistent with
the accounting treatment under the previous standard. No other changes have impacted the interim financial statements on adoption of the
standard.
IFRS 15 Revenue from Contracts with Customers - The standard is applicable to service charge income and facilities management income, but
excludes lease rental income arising from contracts with the Group's tenants. The adoption of this standard has not had a material impact on the
interim financial statements.
A number of standards and amendments to standards have been issued but are not yet effective for the current period. The most significant of
these is set out below:
IFRS 16 Leases (effective 1 January 2019) - This standard requires lessees to recognise a right-of-use asset representing its right to use the
underlying asset and a lease liability representing its obligation to make lease payments. Depreciation on the right-of-use asset and finance
costs on the lease liability will be recognised in the income statement. This standard does not affect the current accounting for rental income
earned. The Group has completed its impact assessment of the standard in the period, where the most significant operating leases identified are
the Group's London and Madrid office leases. On adoption, the Group expects to apply the modified retrospective approach and will elect to not
re-assess existing leases under the new standard. The Group expects to recognise a right-of-use asset and corresponding lease liability on its
balance sheet of less than GBP5 million on adoption.
Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.
3 Seasonality and cyclicality
There is no material seasonality or cyclicality impacting the interim financial statements.
4 Segmental reporting
Operating segments are determined based on the strategic and operational management of the Group. The Group is primarily a shopping
centre-focused business and has two reportable operating segments being the UK and Spain. Although certain areas of business performance
are reviewed and monitored on a centre-by-centre basis, the operating segments are consistent with the strategic and operational
management of the Group by the Executive Committee (the chief operating decision makers of the Group).
As mentioned in the financial review, management review and monitor the business primarily on a proportionately consolidated basis. As such,
the segmental analysis has been prepared on a proportionately consolidated basis.
The key driver of underlying earnings which is used to measure performance is net rental income. An analysis of net rental income is provided
below:
Six months ended 30 June 2018
Group including share of joint ventures Less share of
UK Spain Total joint ventures Group total
GBPm GBPm GBPm GBPm GBPm
Rent receivable 243.9 16.7 260.6 (29.8) 230.8
Service charge income 56.3 3.6 59.9 (7.0) 52.9
Facilities management income from joint ventures 1.6 - 1.6 0.8 2.4
Revenue 301.8 20.3 322.1 (36.0) 286.1
Rent payable (7.2) - (7.2) 0.5 (6.7)
Service charge costs (65.1) (4.1) (69.2) 8.0 (61.2)
Facilities management costs recharged to joint ventures (1.6) - (1.6) (0.8) (2.4)
Other non-recoverable costs (18.9) (2.1) (21.0) 2.7 (18.3)
Net rental income 209.0 14.1 223.1 (25.6) 197.5
(Loss)/profit for the period (505.3) 2.3 (503.0) (0.4)1 (503.4)
Six months ended 30 June 2017
Group including share of joint ventures Less share of
UK Spain Total joint ventures Group total
GBPm GBPm GBPm GBPm GBPm
Rent receivable 252.7 15.8 268.5 (18.5) 250.0
Service charge income 55.7 3.8 59.5 (3.7) 55.8
Facilities management income from joint ventures 1.2 - 1.2 0.3 1.5
Revenue 309.6 19.6 329.2 (21.9) 307.3
Rent payable (10.2) - (10.2) 0.5 (9.7)
Service charge costs (64.5) (2.9) (67.4) 4.1 (63.3)
Facilities management costs recharged to joint ventures (1.2) - (1.2) (0.3) (1.5)
Other non-recoverable costs (21.8) (2.4) (24.2) 1.9 (22.3)
Net rental income 211.9 14.3 226.2 (15.7) 210.5
Profit for the period 112.7 10.4 123.1 (0.4)1 122.7
Year ended 31 December 2017
Group including share of joint ventures Less share of
UK Spain Total joint ventures Group total
GBPm GBPm GBPm GBPm GBPm
Rent receivable 513.5 32.7 546.2 (42.8) 503.4
Service charge income 109.7 8.1 117.8 (8.7) 109.1
Facilities management income from joint ventures 2.8 - 2.8 0.7 3.5
Revenue 626.0 40.8 666.8 (50.8) 616.0
Rent payable (20.5) - (20.5) 1.0 (19.5)
Service charge costs (128.1) (8.8) (136.9) 9.6 (127.3)
Facilities management costs recharged to joint ventures (2.8) - (2.8) (0.7) (3.5)
Other non-recoverable costs (43.4) (3.2) (46.6) 4.3 (42.3)
Net rental income 431.2 28.8 460.0 (36.6) 423.4
Profit for the year 140.4 63.5 203.9 (0.6)1 203.3
(1) Relates to the profit attributable to non-controlling interests within the Group's investment in joint ventures.
There were no significant transactions within net rental income between operating segments.
Revenue, in respect of the above categories, is recognised over time in line with the performance obligations being satisfied.
An analysis of investment and development property, capital expenditure and revaluation (deficit)/surplus is presented below:
Investment and development property Capital expenditure Revaluation (deficit)/surplus
At 30 June At 31 December Six months ended Six months ended Six months ended Six months ended
2018 2017 30 June 2018 30 June 2017 30 June 2018 30 June 2017
GBPm GBPm GBPm GBPm GBPm GBPm
UK 8,962.2 9,373.8 83.7 99.4 (648.4) 6.2
Spain 831.7 818.7 18.2 9.2 (2.0) 11.5
Group including share of joint ventures 9,793.9 10,192.5 101.9 108.6 (650.4) 17.7
Less share of joint ventures (1,133.9) (1,013.1) (1.8) (4.8) 33.0 (8.5)
Group 8,660.0 9,179.4 100.1 103.8 (617.4) 9.2
The Group's geographical analysis of non-current assets is presented below. This represents where the Group's assets reside and, where
relevant, where revenues are generated. In the case of investments this reflects where the investee is located.
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
UK 9,076.2 9,484.1 9,752.4
Spain 576.7 565.5 304.7
India 62.2 65.9 70.2
9,715.1 10,115.5 10,127.3
5 Loss on disposal of subsidiaries
The loss on disposal of subsidiaries of GBP8.3 million includes a loss in respect of the part disposal of intu Chapelfield to a joint venture of GBP8.8
million (see note 22) offset by an adjustment in respect of the part disposal of Madrid Xanadú in 2017 of GBP0.5 million.
6 Administration expenses - exceptional
Exceptional administration expenses in the period totalled GBP6.3 million and relate principally to costs incurred in respect of the all-share offer
made by Hammerson plc in 2017. These costs have been classified as exceptional based on their nature and incidence (see definition in the
glossary).
7 Net finance costs
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
On bank loans and overdrafts 93.0 93.8 192.0
On convertible bonds (note 17) 7.3 9.1 17.5
On obligations under finance leases 2.2 2.2 4.4
Finance costs1 102.5 105.1 213.9
Finance income (7.5) (4.9) (12.6)
Amortisation of Metrocentre compound financial instrument 2.9 2.9 5.9
Payments on unallocated interest rate swaps and other costs2 15.2 14.6 34.6
Foreign currency movements2 (0.3) (2.4) (1.6)
Other finance costs 17.8 15.1 38.9
Gain on derivative financial instruments3 (42.7) (26.8) (28.3)
(Gain)/loss on convertible bonds designated as at fair value through profit or loss (note 17) (32.6) 8.7 6.3
Change in fair value of financial instruments (75.3) (18.1) (22.0)
Net finance costs 37.5 97.2 218.2
1 Finance costs of GBP7.2 million were capitalised in the six months ended 30 June 2018 (six months ended 30 June 2017: GBP2.0 million, year ended 31 December 2017: GBP4.9 million).
2 Amounts totalling GBP14.9 million in the six months ended 30 June 2018 (six months ended 30 June 2017: GBP12.2 million, year ended 31 December 2017: GBP33.0 million) are treated as
exceptional items, as defined in the glossary, due to their nature and are therefore excluded from underlying earnings (see note 10). These finance costs include payments on unallocated
interest rate swaps, payments on termination of interest rate swaps, amounts associated with modifications and extinguishments of borrowings, foreign currency movements and other fees.
3 Included within the change in fair value of derivative financial instruments are gains totalling GBP23.6 million (six months ended 30 June 2017: GBP22.8 million, year ended 31 December 2017: GBP47.1
million) resulting from the payment of obligations under derivative financial instruments during the period. Of these GBP14.1 million relate to unallocated swaps (six months ended 30 June 2017: GBP14.3
million, year ended 31 December 2017: GBP26.1 million).
8 Taxation
Taxation for the period:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Overseas taxation 0.2 0.1 0.2
Overseas taxation - adjustment in respect of prior years - - (0.1)
UK taxation - current year - 0.1 -
UK taxation - adjustment in respect of prior years - - (0.2)
Current tax 0.2 0.2 (0.1)
Deferred tax:
On investment and development property (3.2) 0.3 24.8
On other temporary differences (0.1) - (0.8)
Deferred tax (3.3) 0.3 24.0
Total tax (credit)/charge (3.1) 0.5 23.9
Movements in the provision for deferred tax:
Investment and Other
development temporary
property differences Total
GBPm GBPm GBPm
Provided deferred tax provision/(asset):
At 1 January 2018 24.6 (0.9) 23.7
Recognised in the income statement (3.2) (0.1) (3.3)
Foreign exchange movements (0.2) - (0.2)
At 30 June 2018 21.2 (1.0) 20.2
The net deferred tax provision of GBP20.2 million predominantly arises in respect of the revaluation of development property at intu Costa del Sol,
partially offset by associated tax losses.
At 30 June 2018, the Group had unrecognised deferred tax assets calculated at a tax rate of 17 per cent (31 December 2017: 17 per cent, 30 June
2017: 17 per cent) of GBP47.8 million (31 December 2017: GBP43.1 million, 30 June 2017: GBP43.6 million) for surplus UK revenue tax losses carried
forward, GBP36.8 million (31 December 2017: GBP45.6 million, 30 June 2017: GBP43.9 million) for temporary differences on derivative financial
instruments, GBP0.5 million (31 December 2017: GBP0.5 million, 30 June 2017: GBP0.6 million) for temporary differences on capital allowances, GBP0.2
million (31 December 2017 and 30 June 2017: nil) for other investments and GBP5.7 million (31 December 2017: GBP5.8 million, 30 June 2017: GBP5.8
million) for capital losses.
In accordance with the requirements of IAS 12 Income Taxes, the deferred tax asset has not been recognised on the Group's balance sheet due
to uncertainty over the level of profits that will be available in the non-REIT elements of the Group in future periods.
9 Dividends
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Ordinary shares:
2017 final dividend paid of 9.4 pence per share (2016 final dividend paid of 9.4 pence per share) 126.3 126.2 126.2
2017 interim dividend paid of 4.6 pence per share - - 61.7
Dividends paid 126.3 126.2 187.9
Proposed 2018 interim dividend of 4.6 pence per share 62.3
10 Earnings per share
(a) Number of shares
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
million shares million shares million shares
Basic(1/2) 1,343.6 1,343.1 1,343.2
Diluted(3) 1,345.9 1,437.8 1,427.6
1 The weighted average number of shares used has been adjusted to remove shares held in the Employee Share Ownership Plan (ESOP).
2 Basic shares is used to calculate EPRA earnings per share and underlying earnings per share.
3 Diluted shares includes the impact of dilutive convertible bonds, share options and share awards.
(b) Earnings per share
Basic and diluted earnings per share is calculated in accordance with IAS 33 Earnings Per Share.
Underlying earnings per share is a non-GAAP measure but has been presented as it is considered to be a key measure of the Group's recurring
performance and an indication of the extent to which dividend payments are supported by underlying operations (see underlying profit
statement in other information). It excludes property and derivative movements, exceptional items and related tax. The key difference from
EPRA earnings per share, an industry standard comparable measure which seeks to assist comparison between European property companies,
relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments that can be made. Underlying earnings
is defined as an alternative performance measure in the financial review. A reconciliation from EPRA earnings per share to the Group's measure
of underlying earnings per share is provided below:
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(Loss)/
earnings Pence per Earnings Pence per Earnings Pence per
GBPm share GBPm share GBPm share
Basic (loss)/earnings per share (486.2) (36.2)p 127.1 9.5p 216.7 16.1p
Dilutive convertible bonds, share options and share awards - 1.2 (1.9)
Diluted (loss)/earnings per share (486.2) (36.1)p 128.3 8.9p 214.8 15.0p
Basic (loss)/earnings per share (486.2) (36.2)p 127.1 9.5p 216.7 16.1p
Adjusted for:
Revaluation of investment and development property (note 12) 617.4 46.0p (9.2) (0.7)p (30.8) (2.3)p
Loss on disposal of subsidiaries (note 5) 8.3 0.6p 0.9 0.1p 1.8 0.1p
Administration expenses - exceptional (acquisition and disposal related) 6.1 0.5p 1.3 0.1p 4.9 0.4p
Exceptional finance costs (termination of derivative financial instruments) 14.1 1.0p 10.6 0.8p 26.1 1.9p
Change in fair value of financial instruments (note 7) (75.3) (5.6)p (18.1) (1.4)p (22.0) (1.6)p
Tax on the above (3.2) (0.3)p 0.3 - 23.9 1.8p
Share of joint ventures' items1 36.7 2.7p (9.9) (0.7)p (17.2) (1.3)p
Share of associates' items 0.9 0.1p (4.0) (0.3)p (1.1) (0.1)p
Non-controlling interests in respect of the above (14.9) (1.1)p (2.5) (0.2)p (10.0) (0.7)p
EPRA earnings per share 103.9 7.7p 96.5 7.2p 192.3 14.3p
Adjusted for:
Other exceptional items 1.0 0.1p 2.0 0.1p 7.9 0.6p
Other exceptional tax (0.1) - - - 0.1 -
Share of associates' items - - - - 0.7 0.1p
Share of joint ventures' items1 (6.3) (0.5)p - - - -
Underlying earnings per share 98.5 7.3p 98.5 7.3p 201.0 15.0p
1 Included within share of joint ventures' items are other finance costs consisting of payments on termination of interest rate swaps and amounts associated with
modifications of borrowings as described in note 7. These are excluded from underlying earnings per share and also, where permitted, from EPRA earnings per share.
(c) Headline earnings per share
Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing requirements.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
Gross Net1 Gross Net1 Gross Net1
GBPm GBPm GBPm GBPm GBPm GBPm
Basic (loss)/earnings (486.2) 127.1 216.7
Adjusted for:
Revaluation of investment and development property (note 12) 617.4 599.3 (9.2) (12.0) (30.8) (16.1)
Loss on disposal of subsidiaries (note 5) 8.3 8.3 0.9 0.9 1.8 1.8
Share of joint ventures' items 33.0 35.0 (8.2) (8.2) (15.9) (17.2)
Share of associates' items 0.9 0.9 (4.0) (4.0) (1.1) (1.1)
Headline earnings 157.3 103.8 184.1
Dilution2 - 1.2 (1.9)
Diluted headline earnings 157.3 105.0 182.2
Weighted average number of shares (million) 1,343.6 1,343.1 1,343.2
Dilution2 2.3 94.7 84.4
Diluted weighted average number of shares (million) 1,345.9 1,437.8 1,427.6
Headline earnings per share (pence) 11.7p 7.7p 13.7p
Diluted headline earnings per share (pence) 11.7p 7.3p 12.8p
1 Net of tax and non-controlling interests.
2 The dilution impact is required to be included as calculated in note 10(a/b) even where this is not dilutive for headline earnings per share.
11 NAV per share
(a) Number of shares
Six months Year ended Six months
ended 30 June 31 December ended 30 June
2018 2017 2017
shares million shares million shares million
Basic1 1,343.8 1,343.4 1,343.4
Diluted2/3 1,346.0 1,345.2 1,346.5
1 The number of shares used has been adjusted to remove shares held in the ESOP.
2 Diluted shares is used to calculate EPRA NAV per share and NAV per share (diluted, adjusted).
3 Diluted shares includes the impact of dilutive convertible bonds, share options and share awards.
(b) NAV per share
NAV per share (diluted, adjusted) is a non-GAAP measure but has been presented as it is considered to be a key measure of the Group's
performance. The key difference from EPRA NAV per share, an industry standard comparable measure which seeks to assist comparison
between European property companies, is the exclusion of interest rate swaps not currently used for economic hedges of debt as, in our view,
this better allows management to review and monitor the Group's performance. NAV (diluted, adjusted) is defined as an alternative
performance measure in the financial review. A reconciliation from EPRA NAV per share to the Group's measure of NAV per share (diluted,
adjusted) is provided below:
Six months ended Year ended Six months ended
30 June 2018 31 December 2017 30 June 2017
Net assets Pence per Net assets Pence per Net assets Pence per
GBPm share GBPm share GBPm share
NAV per share attributable to owners of intu properties plc 4,472.1 333p 5,075.0 378p 4,992.0 372p
Dilutive convertible bonds, share options and share awards - - 2.6
Diluted NAV per share 4,472.1 332p 5,075.0 377p 4,994.6 371p
Adjusted for:
Fair value of derivative financial instruments 94.9 7p 112.1 8p 112.2 8p
Deferred tax on investment and development property and other investments 20.2 2p 23.7 2p 0.1 -
Share of joint ventures' items 7.5 1p 5.2 1p 7.8 1p
Non-controlling interest recoverable balance not recognised 71.3 5p 71.3 5p 71.3 5p
EPRA NAV per share 4,666.0 347p 5,287.3 393p 5,186.0 385p
Adjusted for:
Swaps not currently used as economic hedges of debt 209.1 15p 235.4 18p 239.6 18p
NAV per share (diluted, adjusted) 4,875.1 362p 5,522.7 411p 5,425.6 403p
(c) EPRA NNNAV per share
EPRA NNNAV per share is a non-GAAP measure but has been included as it is considered to be an industry standard comparable measure which
seeks to assist comparison between European property companies.
Six months ended Year ended Six months ended
30 June 2018 31 December 2017 30 June 2017
Net assets Pence per Net assets Pence per Net assets Pence per
GBPm share GBPm share GBPm share
NAV per share (diluted, adjusted) 4,875.1 362p 5,522.7 411p 5,425.6 403p
Adjusted for:
Fair value of derivative financial instruments (304.0) (22)p (347.5) (26)p (351.8) (26)p
Excess of fair value of debt over book value (356.5) (26)p (430.8) (32)p (389.9) (29)p
Deferred tax on investment and development property and other investments (20.2) (2)p (23.7) (2)p (0.1) -
Share of joint ventures' items (50.2) (4)p (47.8) (4)p (10.0) (1)p
Non-controlling interest recoverable balance not recognised 18.2 1p 22.9 2p 23.6 2p
EPRA NNNAV per share 4,162.4 309p 4,695.8 349p 4,697.4 349p
12 Investment and development property
Investment Development
property property Total
GBPm GBPm GBPm
At 1 January 2018 8,747.0 432.4 9,179.4
Additions 22.0 78.1 100.1
Disposals (0.3) (1.2) (1.5)
Deficit on revaluation (596.1) (21.3) (617.4)
Foreign exchange movements - (0.6) (0.6)
At 30 June 2018 8,172.6 487.4 8,660.0
A reconciliation to market value is given in the table below:
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Balance sheet carrying value of investment and development property 8,660.0 9,179.4 9,322.5
Tenant incentives included within trade and other receivables 115.8 109.2 112.8
Head leases included within finance leases in borrowings (80.2) (80.2) (80.1)
Market value of investment and development property 8,695.6 9,208.4 9,355.2
The market value of investment and development property at 30 June 2018 includes GBP8,263.9 million (31 December 2017: GBP8,831.9 million, 30
June 2017: GBP9,155.6 million) in respect of investment property and GBP431.7 million (31 December 2017: GBP376.5 million, 30 June 2017: GBP199.6 million)
in respect of development property.
The fair value of the Group's investment and development property at 30 June 2018 was determined by independent external valuers at that
date other than certain development land. The valuations are in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation -
Global Standards 2017 and were arrived at by reference to market transactions for similar properties and rent profiles. Fair values for investment
properties are calculated using the present value income approach.
In respect of development valuations, deductions are made for anticipated costs, including an allowance for developer's profit and any other
assumptions before arriving at a valuation.
The valuation methodology is unchanged from the prior year and is set out in further detail on pages 124 and 125 of the Group's 2017 Annual
Report and financial statements. The table in the other information section sets out the market value, yield and occupancy of the significant
investment and development property.
In respect of the intu Costa del Sol development site near Málaga, Spain, as the General Plan of Torremolinos was approved in December 2017,
with the remaining consents expected in 2018, the Group obtained an independent external valuation at 31 December 2017 as cost is no longer
an appropriate approximation of fair value. At 30 June 2018 the remaining consents are yet to be finalised; therefore, consistent with the 31
December 2017 valuation, the 30 June 2018 valuation is based on the assumption that planning approval is in place at the valuation date.
13 Investment in joint ventures
The Group's principal joint ventures own and manage investment and development property.
St David's, intu intu Puerto Madrid intu
Cardiff Chapelfield Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group's interest 50% 50% 50% 50% 50%
Principal place of business Wales England Spain Spain Spain
At 1 January 2018 347.0 - 133.9 119.4 95.6 39.6 735.5
Acquisition of joint venture interest (note 22) - 151.9 - - - - 151.9
Group's share of underlying profit 6.7 2.4 0.7 2.8 1.4 0.2 14.2
Group's share of other net (loss)/profit (25.2) (8.1) 9.9 (0.5) (0.6) (5.9) (30.4)
Group's share of (loss)/profit (18.5) (5.7) 10.6 2.3 0.8 (5.7) (16.2)
Investment of capital - - - 2.8 - - 2.8
Repayments of capital - - - (5.3) - - (5.3)
Distributions - - - - - (0.4) (0.4)
Loan advances - - - - - 0.6 0.6
Loan repayments (10.5) - - - (5.7) - (16.2)
Foreign exchange movements - - (0.3) (0.3) (0.6) - (1.2)
At 30 June 2018 318.0 146.2 144.2 118.9 90.1 34.1 851.5
Represented by:
Loans to joint ventures 73.1 74.0 98.8 57.5 28.9 8.1 340.4
Group's share of net assets 244.9 72.2 45.4 61.4 61.2 26.0 511.1
St David's, intu Puerto Madrid intu
Cardiff Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Group's interest 50% 50% 50% 50%
Principal place of business Wales Spain Spain Spain
At 1 January 2017 355.2 119.4 - 76.0 37.0 587.6
Acquisition of joint venture interest - - 117.1 - - 117.1
Group's share of underlying profit 13.4 0.6 1.4 2.0 0.9 18.3
Group's share of other net profit/(loss) (6.8) 8.9 0.4 14.7 - 17.2
Group's share of profit 6.6 9.5 1.8 16.7 0.9 35.5
Investment of capital - - 0.7 - - 0.7
Distributions - - - - (1.2) (1.2)
Loan advances - - - - 3.0 3.0
Loan repayments (14.8) - - - - (14.8)
Foreign exchange movements - 5.0 (0.2) 2.9 (0.1) 7.6
At 31 December 2017 347.0 133.9 119.4 95.6 39.6 735.5
Represented by:
Loans to joint ventures 83.6 99.1 57.7 35.0 7.5 282.9
Group's share of net assets 263.4 34.8 61.7 60.6 32.1 452.6
St David's, intu Puerto intu
Cardiff Venecia Asturias Other Total
GBPm GBPm GBPm GBPm GBPm
Group's interest 50% 50% 50%
Principal place of business Wales Spain Spain
At 1 January 2017 355.2 119.4 76.0 37.0 587.6
Group's share of underlying profit 6.5 0.4 1.0 0.6 8.5
Group's share of other net profit/(loss) (1.9) 6.0 6.0 (0.2) 9.9
Group's share of profit 4.6 6.4 7.0 0.4 18.4
Distributions - - - (0.9) (0.9)
Loan advances - - - 2.3 2.3
Loan repayments (10.1) - - - (10.1)
Foreign exchange movements - 3.5 2.3 - 5.8
At 30 June 2017 349.7 129.3 85.3 38.8 603.1
Represented by:
Loans to joint ventures 88.3 98.0 34.9 6.8 228.0
Group's share of net assets 261.4 31.3 50.4 32.0 375.1
14 Investment in associates
GBPm
At 1 January 2018 64.8
Share of loss of associates (0.3)
Foreign exchange movements (2.8)
At 30 June 2018 61.7
Investment in associates comprises a 32.4 per cent holding in the ordinary shares of Prozone Intu Properties Limited (Prozone), a listed Indian
shopping centre developer, and a 26.8 per cent holding in the ordinary shares of Empire Mall Private Limited (Empire). Both companies are
incorporated in India.
As required by IAS 28 Investments in Associates and Joint Ventures, the equity method of accounting is applied in accounting for the Group's
investments in Prozone and Empire. The results for the year to 31 March have been used as 30 June information is not available in time for these
financial statements. Those results are adjusted to be in line with the Group's accounting policies and include the most recent property
valuations, determined at 31 March 2018, by independent professionally qualified external valuers in line with the valuation methodology
described in note 12.
The market price per share of Prozone at 30 June 2018 was INR38 (31 December 2017: INR72, 30 June 2017: INR40), valuing the Group's interest
at GBP20.7 million (31 December 2017: GBP41.1 million, 30 June 2017: GBP23.8 million) compared to the carrying value of GBP42.5 million (31
December 2017: GBP45.1 million, 30 June 2017: GBP48.7 million). As the share price of Prozone is lower than its carrying value, a review of the
carrying value has been undertaken. The net assets of Prozone principally comprise investment property which is held at fair value within the
investment in associates line. As with other Group investment property, it is subject to independent valuation to fair value and that valuation
reflects the future cash flows expected to be generated from those assets. As such the net asset carrying value recorded in the Group's financial
statements is deemed to be a reasonable approximation of the value in use of the business and so no adjustment to that carrying value is
considered necessary.
15 Cash and cash equivalents
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Unrestricted cash 208.4 225.1 246.9
Restricted cash 1.8 2.9 3.5
Cash and cash equivalents 210.2 228.0 250.4
16 Borrowings
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Current
Commercial mortgage backed securities (CMBS) notes 45.7 23.3 15.1
2.5% convertible bonds (note 17) 160.2 161.0 -
Current borrowings, excluding finance leases 205.9 184.3 15.1
Finance lease obligations 4.4 2.4 2.3
210.3 186.7 17.4
Non-current
Revolving credit facility 2021 (including GBP88.5 million drawn in euros
(31 December 2017: GBP88.8 million, 30 June 2017: GBP88.7 million) 153.5 233.8 362.7
CMBS notes 2019 - 19.9 19.8
CMBS notes 2022 38.3 43.0 50.3
CMBS notes 2024 88.2 88.0 87.9
CMBS notes 2029 70.4 73.2 76.2
CMBS notes 2033 303.8 311.2 318.8
CMBS notes 2035 193.9 192.8 191.8
Bank loan 2018 - - 495.8
Bank loan 2019 - 139.7 139.6
Bank loan 2020 33.0 32.9 32.8
Bank loans 2021 597.4 470.2 469.6
Bank loan 2022 247.1 246.8 -
Bank loan 2023 73.0 - -
Bank loan 2024 483.1 482.7 -
3.875% bonds 2023 444.0 443.5 442.9
4.125% bonds 2023 479.0 478.5 478.0
4.625% bonds 2028 342.6 342.3 342.0
4.250% bonds 2030 345.2 345.0 344.9
Debenture 2027 229.0 228.8 228.6
2.5% convertible bonds 2018 (note 17) - - 305.6
2.875% convertible bonds 2022 (note 17) 345.5 377.3 373.6
Non-current borrowings, excluding finance leases and Metrocentre compound
financial instrument 4,467.0 4,549.6 4,760.9
Metrocentre compound financial instrument 186.6 183.7 180.7
Finance lease obligations 75.8 77.8 77.8
4,729.4 4,811.1 5,019.4
Total borrowings 4,939.7 4,997.8 5,036.8
Cash and cash equivalents (note 15) (210.2) (228.0) (250.4)
Net debt 4,729.5 4,769.8 4,786.4
The fair value of total borrowings at 30 June 2018 was GBP5,296.2 million (31 December 2017: GBP5,428.6 million, 30 June 2017: GBP5,426.7
million)
Analysis of the Group's net external debt is provided in the other information section.
17 Convertible bonds
2.875 per cent convertible bonds ('the 2.875 per cent bonds')
In 2016 the Group issued GBP375.0 million 2.875 per cent Guaranteed Convertible Bonds due 2022 at par, all of which remain outstanding at 30
June 2018. Under the terms of the 2.875 per cent bonds, the exchange price is adjusted upon certain events including the payment of dividends
by the Company over a certain threshold. At 30 June 2018 the exchange price was GBP3.7506 per ordinary share (31 December 2017 and 30 June
2017: GBP3.7506). These bonds are designated at fair value through profit or loss and so are presented on the balance sheet at fair value with all
gains and losses taken to the income statement through the change in fair value of financial instruments line.
At 30 June 2018, the fair value of the 2.875 per cent bonds was GBP345.5 million (31 December 2017: GBP377.3, 30 June 2017: GBP373.6 million).
During the six months ended 30 June 2018, interest of GBP5.4 million has been recognised on these bonds within finance costs (six months
ended 30 June 2017: GBP5.4 million, year ended 31 December 2017: GBP10.8 million).
2.5 per cent convertible bonds ('the 2.5 per cent bonds')
In 2012 the Group issued GBP300.0 million 2.5 per cent Guaranteed Convertible Bonds due 2018 at par, GBP160.4 million of which remains
outstanding at 30 June 2018. Under the terms of the bonds, the exchange price is adjusted upon certain events including the rights issue on 22
April 2014 and the payment of dividends by the Company. At 30 June 2018 the exchange price was GBP2.9761 per ordinary share (31 December
2017: GBP3.1164, 30 June 2017: GBP3.1797). These bonds are designated at fair value through profit or loss and so are presented on the balance
sheet at fair value with all gains and losses taken to the income statement through the change in fair value of financial instruments line.
At 30 June 2018, the fair value of the 2.5 per cent bonds was GBP160.2 million (31 December 2017: GBP161.0 million, 30 June 2017: GBP305.6
million). During the six months ended 30 June 2018, interest of GBP1.9 million has been recognised on these bonds within finance costs (six
months ended 30 June 2017: GBP3.7 million, year ended 31 December 2017: GBP6.7 million).
18 Share capital and share premium
Share Share
capital premium
GBPm GBPm
Issued and fully paid:
At 1 January 2018 and 30 June 2018: 1,355,040,243 ordinary shares of 50 pence each 677.5 1,327.4
19 Financial risk management
The table below presents the Group's financial assets and liabilities recognised at fair value.
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Assets
Level 1 Other investments at fair value through other comprehensive income 14.0 15.3 15.4
Level 2 Derivative financial instruments - fair value through profit or loss 6.3 0.3 0.2
Level 3 Other investments at fair value through other comprehensive income 1.5 1.5 1.5
Total assets 21.8 17.1 17.1
Liabilities
Level 1 Convertible bonds - designated at fair value through profit or loss (505.7) (538.3) (679.2)
Level 2 Derivative financial instruments - fair value through profit or loss (310.3) (347.8) (352.0)
Total liabilities (816.0) (886.1) (1,031.2)
Fair value hierarchy
Level 1: Valuation based on quoted market prices traded in active markets.
Level 2: Valuation techniques are used, maximising the use of observable market data, either directly from market prices or derived from market
prices.
Level 3: Where one or more significant inputs to valuation are unobservable. Valuations at this level are more subjective and therefore more
closely managed, including sensitivity analysis of inputs to valuation models. Such testing has not indicated that any material difference would
arise due to a change in input variables.
Transfers into and transfers out of the fair value hierarchy levels are recognised on the date of the event or change in circumstances that caused
the transfer. There were no transfers between Levels 1, 2 and 3 during the period.
Derivative financial instruments are initially recognised on the trade date at fair value and subsequently re-measured at fair value. In assessing
fair value the Group uses its judgement to select suitable valuation techniques and make assumptions which are mainly based on market
conditions existing at the balance sheet date. The fair value of interest rate swaps is calculated by discounting estimated future cash flows based
on the terms and maturity of each contract and using market interest rates for similar instruments at the measurement date. These values are
tested for reasonableness based upon broker or counterparty quotes.
Other investments at fair value through other comprehensive income, being investments intended to be held for an indefinite period, are
initially and subsequently measured at fair value. For listed investments, fair value is the current bid market value at the reporting date. For
unlisted investments where there is no active market, fair value is assessed using an appropriate methodology.
20 Cash generated from operations
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
Notes GBPm GBPm GBPm
(Loss)/profit before tax, joint ventures and associates (490.0) 100.4 190.4
Adjusted for:
Revaluation of investment and development property 12 617.4 (9.2) (30.8)
Loss on disposal of subsidiaries 5 8.3 0.9 1.8
Depreciation 1.7 1.3 2.9
Share-based payments 1.9 2.2 2.3
Lease incentives and letting costs (7.0) (2.9) (4.1)
Net finance costs 7 37.5 97.2 218.2
Changes in working capital:
Change in trade and other receivables 8.4 (10.1) (0.6)
Change in trade and other payables (21.6) 0.5 (14.5)
Cash generated from operations 156.6 180.3 365.6
21 Capital commitments
At 30 June 2018 the Board had approved GBP216.4 million of future expenditure for the purchase, construction, development and enhancement
of investment property. Of this, GBP96.8 million is contractually committed. The majority of this is expected to be spent during the remainder of
2018 and 2019.
22 Disposal of intu Chapelfield
On 31 January 2018 the Group sold 50 per cent of its interest in intu Chapelfield, a wholly owned subsidiary, to LaSalle Investment Management
for final cash consideration of GBP145.1 million before expenses of GBP1.4 million. Following this transaction intu Chapelfield has ceased to be
accounted for as a subsidiary and is now a joint venture. Therefore the assets and liabilities of intu Chapelfield are no longer recorded at 100 per
cent in the Group's balance sheet but the remaining 50 per cent interest is included in investment in joint ventures at an initial value of
GBP151.9 million. As a result of this transaction the Group has recorded a loss on disposal of GBP8.8 million in the income statement. The cash flow
statement records a net inflow of GBP143.4 million comprising the net consideration received of GBP143.7 million less cash in the business of
GBP0.8 million reclassified to investment in joint venture, net of cash classified as held for sale at 31 December 2017 of GBP0.5 million.
Assessing control over joint arrangements is a significant judgement. Based on the terms set out in the joint venture agreement, the Group has
classified its retained 50 per cent interest as a joint venture as key decisions require consent of both partners.
The assets and liabilities of the subsidiaries disposed of, at 100 per cent, are set out below:
GBPm
Assets
Investment and development property 302.0
Cash and cash equivalents 0.8
Trade and other receivables 6.6
Total assets 309.4
Liabilities
Trade and other payables (5.0)
Total liabilities (5.0)
Net assets 304.4
Net assets (at 50 per cent) 152.2
Fair value of consideration received (including fair value adjustments of GBP0.3 million) 143.4
Loss on disposal of subsidiaries 8.8
23 Related party transactions
There have been no related party transactions during the period that require disclosure under Section DTR 4.2.8 R of the Disclosure Guidance
and Transparency Rules sourcebook or under IAS 34 Interim Financial Reporting except those disclosed elsewhere in this condensed set of
financial statements.
Investment and development property (unaudited)
1 Property data
Market value Revaluation Net initial 'Topped-up' NIY Nominal Occupancy
GBPm deficit/surplus yield (EPRA) (EPRA) equivalent yield (EPRA)
At 30 June 2018
Subsidiaries
intu Trafford Centre 2,231.5 -4% 4.0% 4.1% 4.5% 99%
intu Lakeside 1,340.0 -7% 3.7% 4.2% 4.8% 97%
intu Metrocentre 894.5 -4% 4.8% 5.1% 5.5% 94%
intu Merry Hill 864.0 -8% 4.4% 4.7% 5.3% 93%
intu Braehead 469.8 -12% 5.7% 5.7% 6.2% 97%
Manchester Arndale 438.2 -5% 4.1% 4.4% 5.4% 99%
intu Derby 410.8 -11% 5.8% 6.2% 6.8% 95%
intu Victoria Centre 320.5 -11% 5.1% 5.3% 5.9% 98%
intu Eldon Square 305.2 -6% 4.9% 4.9% 5.3% 97%
intu Watford 303.0 -11% 4.0% 4.0% 5.3% 96%
intu Milton Keynes 276.0 -3% 4.7% 4.7% 5.0% 98%
Cribbs Causeway 228.4 -5% 5.1% 5.2% 5.4% 97%
OtherB 613.7
Investment and development property excluding
Group's share of joint ventures 8,695.6
Joint ventures
St David's, Cardiff 319.9 -7% 4.4% 4.6% 5.0% 93%
Madrid Xanadú 236.8 +1%(A) 4.3% 4.6% 5.4% 97%
intu Puerto Venecia 235.9 +2%(A) 4.5% 4.8% 5.7% 99%
intu Chapelfield 145.3 -5% 5.2% 5.3% 5.4% 100%
intu Asturias 140.6 -(A) 4.7% 4.9% 5.3% 97%
Other(C) 56.5
Investment and development property including
Group's share of joint ventures 9,830.6 4.49%(D) 4.69%(D) 5.22%(D) 97%
At 31 December 2017
including Group's share of joint ventures 10,222.7 4.20%(D) 4.36%(D) 5.03%(D) 97%
Notes
(A) Calculated in local currency.
(B) Includes the Group's interests in intu Potteries, intu Broadmarsh, Soar at intu Braehead, development land in Spain, Charter Place,
Watford and Sprucefield, Northern Ireland.
(C) Includes the Group's interest in intu Uxbridge.
(D) Weighted average yields exclude developments.
At 30 June At 31 December
2018 2017
GBPm GBPm
Passing rent 432.7 426.9
Annual property income 473.8 462.2
ERV 540.2 544.4
Weighted average unexpired lease term 7.4 years 7.5 years
Please refer to the glossary for definitions of terms.
2 Analysis of capital return in the year - including Group's share of joint ventures
Market value Revaluation deficit
At 30 June At 31 December At 30 June At 30 June
2018 2017 2018 2018
GBPm GBPm GBPm %
Like-for-like property 9,023.1 9,539.8 (570.6) (5.6)
intu Chapelfield (classified as held for sale at 31 December 2017) 145.3 - (8.3) (5.4)
Spain developments 211.3 212.8 (8.4) (4.1)
Other 450.9 470.1 (63.1) (15.0)
Total investment and development property 9,830.6 10,222.7 (650.4) (6.2)
3 Analysis of net rental income in the year - including Group's share of joint ventures
Six months ended 30 June
2018 2017 Movement
GBPm GBPm GBPm %
Like-for-like property 208.2 205.5 2.7 1.3
Acquisition and part disposal: Madrid Xanadú 5.8 6.7 (0.9) n/a
Disposal: intu Chapelfield - 3.1 (3.1) n/a
Developments 9.1 10.9 (1.8) n/a
Net rental income 223.1 226.2 (3.1) (1.4)
Financial covenants (unaudited)
Intu (SGS) Finance plc and Intu (SGS) Finco Limited (Secured Group Structure)
Interest Interest
Loan LTV LTV cover cover
GBPm Maturity covenant actual covenant actual
Term loan 351.8 2021
3.875 per cent bonds 450.0 2023
4.625 per cent bonds 350.0 2028
4.250 per cent bonds 350.0 2030
1,501.8 80% 52% 125% 231%
Covenants are tested on the Security Group, the principal assets of which are intu Lakeside, intu Braehead, intu Watford, intu Victoria Centre
and intu Derby.
The structure has a tiered operating covenant regime giving the Group a significant degree of flexibility when the covenants are below certain
levels. In higher tiers the level of flexibility is reduced. The Group retains operating control at loan to value below 72.5 per cent and interest
cover above 1.4x. No financial covenant default occurs unless the loan to value exceeds 80 per cent or the interest cover falls below 1.25x.
The Trafford Centre Finance Limited
There are no financial covenants on the intu Trafford Centre debt of GBP756.9 million at 30 June 2018. However, a debt service cover ratio is
assessed quarterly and where this falls below specified levels restrictions come into force. The loan to 30 June 2018 market value ratio is 35 per
cent. No restrictions are in place at present.
Intu Metrocentre Finance plc
Interest Interest
Loan LTV LTV cover cover
GBPm Maturity covenant actual covenant actual
4.125 per cent bonds 485.0 2023 100% 54% 125% 217%
The structure's covenant regime gives the Group a significant degree of flexibility when the covenants are below certain levels. The Group
retains operating control below loan to value of 70 per cent and interest cover above 1.4x. No financial covenant default occurs unless loan to
value exceeds 100 per cent or interest cover falls below 1.25x.
Other asset-specific debt
Loan outstanding Loan to Interest Interest
at 30 June 2018(1) LTV 30 June 2018 cover cover
GBPm Maturity covenant market value(2) covenant actual(3)
Sprucefield 33.2 2020 65% 60% 150% 252%
intu Uxbridge(4) 26.0 2020 70% 60% 125% 261%
St David's, Cardiff 122.5 2021 65% 38% 150% 310%
intu Milton Keynes 140.5 2021 65% 51% 150% 362%
intu Trafford Centre 250.0 2022 65% 46% 103%5 120%
intu Merry Hill 487.8 2024 75% 57% 150% 262%
intu Asturias(4)(EUR) 60.5 2021 65% 38% 150% 604%
Madrid Xanadú(4)(EUR) 131.5 2022 65% 50% 150% 413%
intu Chapelfield(4) 74.0 2023 65% 51% 150% 315%
intu Puerto Venecia(4)(EUR) 112.5 2025 65% 42% 150% 443%
(1) The loan values are the actual principal balances outstanding at 30 June 2018, which take into account any principal repayments made up
to 30 June 2018. The balance sheet value of the loans includes unamortised fees.
(2) The loan to 30 June 2018 market value provides an indication of the impact the 30 June 2018 property valuations could have on the
LTV covenants. The actual timing and manner of testing LTV covenants varies and is loan specific.
(3) Based on latest certified figures, calculated in accordance with loan agreements, which have been or will be submitted between
30 June 2018 and 31 July 2018. The calculations are loan specific and include a variety of historical, forecast and in certain instances
a combined historical and forecast basis.
(4) Debt shown is consistent with the Group's economic interest.
(5) Covenant is a debt service cover ratio (includes interest and scheduled debt repayments).
Intu Debenture plc
Loan Capital cover Capital cover Interest cover Interest cover
GBPm Maturity covenant actual covenant actual
231.4 2027 150% 223% 100% 119%
The debenture is currently secured on a number of the Group's properties including intu Potteries, intu Eldon Square, intu Broadmarsh and Soar
at intu Braehead.
Should the capital cover or interest cover test be breached, Intu Debenture plc (the 'Issuer') has three months from the date of delivery of the
valuation or the latest certificate to the Trustees to make good any deficiencies. The Issuer may withdraw property secured on the debenture by
paying a sum of money or through the substitution of alternative property provided that the capital cover and interest cover tests are satisfied
immediately following the substitution.
Financial covenants on corporate facilities
Net worth Net worth Interest cover Interest cover Borrowings/net Borrowings/net
covenant actual covenant actual worth covenant worth actual
GBP600m facility, maturing in 2021* GBP1,200m GBP2,397m 120% 203% 125% 61%
GBP375m due in 2022 2.875 per cent
convertible bonds (note 17)** n/a n/a n/a n/a 175% 12%
GBP160m due in 2018 2.5 per cent
convertible bonds (note 17)** n/a n/a n/a n/a 175% 12%
* Tested on the Borrower Group which excludes, at the Group's election, certain subsidiaries with asset-specific finance. The facility is
secured on the Group's investments in Manchester Arndale and Cribbs Causeway.
** Tested on the Group excluding, at the Group's election, the borrowings on certain subsidiaries with asset-specific finance.
Interest rate swaps
The table below sets out the nominal amount and average rate of hedging, excluding lenders' margins, in place under current and forward-
starting swap contracts.
Nominal amount Average rate
GBPm %
In effect on or after:
1 year 2,331.0 2.44
2 years 2,190.5 2.75
5 years 1,365.3 2.99
10 years 669.0 5.10
15 years 456.4 4.73
Financial information including
share of joint ventures (unaudited)
for the six months ended 30 June 2018
The information in this section is presented to show the Group including share of joint ventures. A reconciliation from the amounts shown
in the Group's income statement and balance sheet is provided on the following page.
Underlying earnings
Six months ended 30 June 2018
Group
Group underlying Share of including share of
profit joint ventures joint ventures
GBPm GBPm GBPm
Rent receivable 230.8 29.8 260.6
Service charge income 52.9 7.0 59.9
Facilities management income from joint ventures 2.4 (0.8) 1.6
Revenue 286.1 36.0 322.1
Net rental income 197.5 25.6 223.1
Net other income/(expenses) 3.2 (1.2) 2.0
Administration expenses (21.2) (0.5) (21.7)
Underlying operating profit 179.5 23.9 203.4
Finance costs (102.5) (3.2) (105.7)
Finance income 7.5 (6.2) 1.3
Other finance costs (2.9) - (2.9)
Underlying net finance costs (97.9) (9.4) (107.3)
Underlying profit before tax, joint ventures and associates 81.6 14.5 96.1
Tax on underlying profit (0.2) (0.2) (0.4)
Share of underlying profit of joint ventures 14.2 (14.2) -
Share of underlying profit of associates 0.6 - 0.6
Remove amounts attributable to non-controlling interests 2.3 (0.1) 2.2
Underlying earnings 98.5 - 98.5
A reconciliation from the Group's profit to underlying earnings is provided in note 10.
Consolidated income statement
Six months ended 30 June 2018
Group
Group income Share of including share of
statement joint ventures joint ventures
GBPm GBPm GBPm
Revenue 286.1 36.0 322.1
Net rental income 197.5 25.6 223.1
Net other income/(expenses) 3.2 (1.2) 2.0
Revaluation of investment and development property (617.4) (33.0) (650.4)
Loss on disposal of subsidiaries (8.3) - (8.3)
Administration expenses - ongoing (21.2) (0.5) (21.7)
Administration expenses - exceptional (6.3) - (6.3)
Operating loss (452.5) (9.1) (461.6)
Finance costs (102.5) (3.2) (105.7)
Finance income 7.5 (6.2) 1.3
Other finance costs (17.8) 5.1 (12.7)
Change in fair value of financial instruments 75.3 (0.2) 75.1
Net finance costs (37.5) (4.5) (42.0)
Loss before tax, joint ventures and associates (490.0) (13.6) (503.6)
Share of post-tax (loss)/profit of joint ventures (16.2) 16.2 -
Share of post-tax loss of associates (0.3) - (0.3)
(Loss)/profit before tax (506.5) 2.6 (503.9)
Current tax (0.2) (0.2) (0.4)
Deferred tax 3.3 (2.0) 1.3
Taxation 3.1 (2.2) 0.9
(Loss)/profit for the period (503.4) 0.4 (503.0)
Non-controlling interests 17.2 (0.4) 16.8
Loss for the period attributable to owners of intu properties plc (486.2) - (486.2)
Consolidated balance sheet
At 30 June 2018
Group
Group Share of including share of
balance sheet joint ventures joint ventures
GBPm GBPm GBPm
Assets
Investment and development property 8,660.0 1,133.9 9,793.9
Investment in joint ventures 851.5 (851.5) -
Derivative financial instruments 6.3 - 6.3
Cash and cash equivalents 210.2 41.4 251.6
Other assets 350.8 57.0 407.8
Total assets 10,078.8 380.8 10,459.6
Liabilities
Borrowings (4,939.7) (290.5) (5,230.2)
Derivative financial instruments (310.3) (2.6) (312.9)
Other liabilities (319.7) (84.1) (403.8)
Total liabilities (5,569.7) (377.2) (5,946.9)
Net assets 4,509.1 3.6 4,512.7
Non-controlling interests (37.0) (3.6) (40.6)
Net assets attributable to owners of intu properties plc 4,472.1 - 4,472.1
Investment and development property
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Balance sheet carrying value of investment and development property 9,793.9 10,192.5 10,086.7
Tenant incentives included within trade and other receivables 125.0 118.5 122.4
Head leases included within finance leases in borrowings (88.3) (88.3) (88.3)
Market value of investment and development property 9,830.6 10,222.7 10,120.8
Net external debt
The table below provides a reconciliation between the components of net debt included on the Group's balance sheet and net external debt
including the Group's share of joint ventures' debt and cash.
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Total borrowings 4,939.7 4,997.8 5,036.8
Cash and cash equivalents (210.2) (228.0) (250.4)
Net debt 4,729.5 4,769.8 4,786.4
Less Metrocentre compound financial instrument (186.6) (183.7) (180.7)
Add borrowings within assets classified as held for sale - - 226.3
Less cash and cash equivalents within assets classified as held for sale - (0.5) (15.8)
Net external debt - before Group's share of joint ventures 4,542.9 4,585.6 4,816.2
Add share of borrowings of joint ventures 290.5 300.1 182.9
Less share of cash of joint ventures (41.4) (50.2) (38.5)
Net external debt - including Group's share of joint ventures 4,792.0 4,835.5 4,960.6
Analysed as:
Debt including Group's share of joint ventures 5,043.6 5,113.7 5,249.5
Cash including Group's share of joint ventures (251.6) (278.2) (288.9)
Net external debt - including Group's share of joint ventures 4,792.0 4,835.5 4,960.6
Debt to assets ratio
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Market value of investment and development property 9,830.6 10,222.7 10,120.8
Add market value of investment and development property
classified as assets held for sale - 306.5 462.8
9,830.6 10,529.2 10,583.6
Net external debt (4,792.0) (4,835.5) (4,960.6)
Debt to assets ratio 48.7% 45.9% 46.9%
Interest cover
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Finance costs (105.7) (107.5) (219.9)
Finance income 1.3 1.1 3.3
(104.4) (106.4) (216.6)
Underlying operating profit 203.4 205.7 419.3
Interest cover 1.95x 1.93x 1.94x
Underlying profit statement (unaudited)
for the six months ended 30 June 2018
The underlying profit information in the table below shows the Group including share of joint ventures on a line-by-line basis.
Six months Six months Six months ended Year ended
ended 30 June ended 30 June 31 December 31 December
2018 2017 2017 2017
GBPm GBPm GBPm GBPm
Net rental income 223.1 226.2 233.8 460.0
Net other income 2.0 0.1 0.8 0.9
Administration expenses (21.7) (20.6) (21.0) (41.6)
Underlying operating profit 203.4 205.7 213.6 419.3
Finance costs (105.7) (107.5) (112.4) (219.9)
Finance income 1.3 1.1 2.2 3.3
Other finance costs (2.9) (2.9) (3.0) (5.9)
Underlying net finance costs (107.3) (109.3) (113.2) (222.5)
Underlying profit before tax and associates 96.1 96.4 100.4 196.8
Tax on underlying profit (0.4) (0.2) 0.1 (0.1)
Share of underlying profit of associates 0.6 0.4 0.5 0.9
Remove amounts attributable to non-controlling interests 2.2 1.9 1.5 3.4
Underlying earnings 98.5 98.5 102.5 201.0
Underlying earnings per share (pence) 7.3p 7.3p 7.6p 15.0p
Weighted average number of shares (million) 1,343.6 1,343.1 1,343.4 1,343.2
For the reconciliation from basic earnings per share see note 10.
EPRA performance measures (unaudited)
1 Summary
The EPRA Best Practice Recommendations identify six key performance measures, including the EPRA cost ratios. The measures are deemed to
be of importance for investors in European property companies and aim to encourage more consistent and widespread disclosure. The Group is
supportive of this initiative but continues to disclose additional measures throughout this report which it believes are more appropriate to the
Group's current circumstances.
In 2017, the Group retained its EPRA Gold Award for exceptional compliance with the EPRA Best Practice Recommendations.
The EPRA measures are summarised below and detailed in the tables following:
At 30 June At 30 June At 31 December
Table/note 2018 2017 2017
EPRA cost ratio (including direct vacancy costs) table 2 19.6% 19.4% 19.4%
EPRA cost ratio (excluding direct vacancy costs) table 2 15.0% 15.0% 15.1%
EPRA earnings note 10 GBP103.9m GBP96.5m GBP192.3m
- per share note 10 7.7p 7.2p 14.3p
EPRA NAV note 11 GBP4,666.0m GBP5,186.0m GBP5,287.3m
- per share note 11 347p 385p 393p
EPRA NNNAV note 11 GBP4,162.4m GBP4,697.4m GBP4,695.8m
- per share note 11 309p 349p 349p
EPRA net initial yield table 3 4.5% 4.2% 4.2%
EPRA 'topped-up' NIY table 3 4.7% 4.4% 4.4%
EPRA vacancy rate table 4 3.4% 3.2% 3.0%
Details of the Group's performance against the EPRA Best Practice Recommendations on Sustainability Reporting can be found in full in the
2017 corporate responsibility report. In 2017, the Group retained its Gold EPRA Sustainability Best Practice Recommendations award.
2 EPRA cost ratios
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Administration expenses - ongoing 21.7 20.6 41.6
Net service charge costs 9.3 7.9 19.1
Other non-recoverable costs 21.0 24.2 46.6
Remove:
Service charge costs recovered through rents (2.9) (3.2) (6.5)
EPRA costs - including direct vacancy costs 49.1 49.5 100.8
Direct vacancy costs (11.5) (11.3) (22.6)
EPRA costs - excluding direct vacancy costs 37.6 38.2 78.2
Rent receivable 260.6 268.5 546.2
Rent payable (7.2) (10.2) (20.5)
Gross rental income less ground rent payable 253.4 258.3 525.7
Remove:
Service charge costs recovered through rents (2.9) (3.2) (6.5)
Gross rental income 250.5 255.1 519.2
EPRA cost ratio (including direct vacancy costs) 19.6% 19.4% 19.4%
EPRA cost ratio (excluding direct vacancy costs) 15.0% 15.0% 15.1%
3 EPRA net initial yield and 'topped-up' NIY
At 30 June At 31 December At 30 June
2018 2017 2017
GBPm GBPm GBPm
Investment and development property 9,831 10,223 10,121
Less developments (434) (379) (202)
Completed property portfolio 9,397 9,844 9,919
Allowance for estimated purchasers' costs 544 673 594
Gross up completed property portfolio valuation 9,941 10,517 10,513
Annualised cash passing rental income 474 462 468
Property outgoings (31) (25) (22)
Annualised net rents 443 437 446
Notional rent on expiration of rent free periods or other lease incentives 20 23 23
Topped-up net annualised rent 463 460 469
EPRA net initial yield 4.5% 4.2% 4.2%
EPRA 'topped-up' NIY 4.7% 4.4% 4.4%
EPRA net initial yield and 'topped-up' NIY by property is given in the investment and development property section.
4 EPRA vacancy rate
At 30 June At 31 December At 30 June
2018 2017 2017
% % %
intu Trafford Centre 0.9 1.6 3.3
intu Lakeside 3.1 5.8 6.2
intu Metrocentre 6.1 5.5 4.8
intu Merry Hill 6.6 1.8 3.3
intu Braehead 2.9 2.5 2.5
Manchester Arndale 1.4 1.8 0.3
intu Derby 5.1 2.1 1.7
intu Victoria Centre 1.9 1.5 3.0
intu Eldon Square 3.4 1.2 0.9
intu Watford 4.5 2.8 2.5
intu Milton Keynes 2.4 0.4 -
Cribbs Causeway 2.7 1.7 3.0
St David's, Cardiff 7.2 6.0 4.6
Madrid Xanadú 3.2 4.5 1.6
intu Puerto Venecia 1.3 1.9 1.8
intu Chapelfield - - -
intu Asturias 2.7 3.6 2.5
3.4 3.0 3.2
EPRA vacancy rate is the ERV of vacant space divided by total ERV.
Glossary
ABC1 customers - Proportion of customers within UK social groups
A, B and C1, defined as members of households whose chief earner's
occupation is professional, higher or intermediate management, or
supervisory.
Annual property income - The Group's share of passing rent plus the
independent external valuers' estimate of annual excess turnover rent
and sundry income such as that from car parks and mall
commercialisation.
CACI - Provide market research on intu's customers and UK-wide
location analysis.
Debt to assets ratio - Net external debt divided by the market value
of investment and development property including investment and
development property classified as held for sale.
Diluted figures - Reported amounts adjusted to include the effects of
dilutive potential shares issuable under convertible bonds and
employee incentive arrangements.
Earnings per share - Profit for the period attributable to owners of
intu properties plc divided by the weighted average number of shares
in issue during the period.
EPRA - European Public Real Estate Association, the publisher of Best
Practice Recommendations intended to make financial statements of
public real estate companies in Europe clearer, more transparent and
comparable.
EPRA cost ratios - The ratio of administration and operating costs
(including and excluding direct vacancy costs) divided by gross rental
income, as calculated in accordance with EPRA Best Practice
Recommendations.
EPRA earnings per share - Earnings per share adjusted to exclude
valuation movements, exceptional items and related tax, as calculated
in accordance with EPRA Best Practice Recommendations. The key
difference from underlying earnings per share relates to adjustments
in respect of exceptional items where EPRA is prescriptive about the
adjustments that can be made.
EPRA NAV per share - NAV per share calculated on a diluted basis
adjusted to remove the fair value of derivatives (net of tax), goodwill
resulting from the recognition of deferred tax liabilities, and deferred
tax on investment and development property and other investments,
as calculated in accordance with EPRA Best Practice
Recommendations. The key difference from NAV per share (diluted,
adjusted) is EPRA NAV per share's exclusion of interest rate swaps not
currently used for economic hedges of debt.
EPRA net initial yield (NIY) - Annualised net rent on investment
property (after deduction of revenue costs such as head rent, running
void, service charge after shortfalls, empty rates and merchant
association contribution) expressed as a percentage of the gross
market value before deduction of theoretical acquisition costs, as
calculated in accordance with EPRA Best Practice Recommendations
and as provided by the Group's independent external valuers.
EPRA NNNAV - EPRA NAV adjusted to reflect the fair value of
borrowings, derivatives financial instruments and deferred taxation on
revaluation of investment and development property.
EPRA topped-up NIY - NIY adjusted for the expiration of rent-free
periods and other unexpired lease incentives.
EPRA vacancy rate - The ERV of vacant space divided by total ERV.
ERV (estimated rental value) - The independent external valuers'
estimate of the Group's share of the current annual market rent of all
lettable space after expiry of concessionary periods net of any non-
recoverable charges but before bad debt provisions.
Exceptional items - Items that in the Directors' view are required to
be separately disclosed by virtue of their size, nature or incidence.
Underlying earnings is considered to be a key measure in
understanding the Group's financial performance, and excludes
exceptional items.
Headline rent ITZA - Annual contracted rent per square foot after
expiry of concessionary periods in terms of Zone A.
Interest cover - Underlying operating profit divided by the net finance
costs excluding the change in fair value of financial instruments,
exceptional finance costs and amortisation of the Metrocentre
compound financial instrument.
Interest rate swap - A derivative financial instrument enabling parties
to exchange interest rate obligations for a predetermined period.
These are used by the Group to convert floating rate debt to fixed
rates.
IPD - Investment Property Databank Limited, producer of an
independent benchmark of property returns.
Like-for-like property - Investment property which has been owned
throughout both periods without significant capital expenditure in
either period, so that income can be compared on a like-for-like basis.
For the purposes of comparison of capital values, this will also include
assets owned at the previous reporting period end but not throughout
the prior period.
Long-term lease - A lease with a term certain of at least five years.
LTV (loan to value) - The ratio of attributable debt to the market
value of an investment property.
NAV per share (diluted, adjusted) - NAV per share calculated on a
diluted basis and adjusted to remove the fair value of derivatives (net
of tax), goodwill resulting from the recognition of deferred tax
liabilities, and deferred tax on investment and development property
and other investments.
Net asset value (NAV) per share - Net assets attributable to owners
of intu properties plc divided by the number of ordinary shares in issue
at the period end.
Net external debt - Net debt after removing the Metrocentre
compound financial instrument and including net debt within liabilities
associated with assets classified as held for sale.
Net rental income - The Group's share of net rents receivable as
shown in the income statement, having taken due account of non-
recoverable costs, bad debt provisions and adjustments to comply
with IFRS including those regarding tenant lease incentives.
Nominal equivalent yield - Effective annual yield to a purchaser from
an asset at market value before taking account of notional acquisition
costs assuming rent is receivable annually in arrears, reflecting ERV
but disregarding potential changes in market rents, as determined by
the Group's independent external valuers.
Occupancy - The ERV of let and under-offer units expressed as a
percentage of the passing rent of the total ERV, excluding
development and recently completed properties. Units let to tenants
in administration and still trading are treated as let and those no
longer trading are treated as un-let.
Passing rent - The Group's share of contracted annual rents
receivable at the balance sheet date. This takes no account of
accounting adjustments made in respect of rent free periods or tenant
incentives, the reclassification of certain lease payments as finance
charges or any irrecoverable costs and expenses, and does not include
excess turnover rent, additional rent in respect of unsettled rent
reviews or sundry income such as from car parks etc. Contracted
annual rents in respect of tenants in administration are excluded.
PMA - Property Market Analysis LLP, a producer of property market
research and forecasting.
Property Income Distribution (PID) - A dividend, generally subject to
UK withholding tax at the basic rate of income tax, that a UK REIT is
required to pay to its shareholders from its qualifying rental profits.
Certain classes of shareholder may qualify to receive a PID gross,
shareholders should refer to intugroup.co.uk for further information.
The Group can also pay non-PID dividends which are not subject to UK
withholding tax.
Real Estate Investment Trust (REIT) - REITs are internationally
recognised property investment vehicles which have now been
introduced in many countries around the world. Each country has its
own rules, but the broad intention of REITs is to encourage investment
in domestic property by removing tax distortions for investors.
In the UK, REITs must meet certain ongoing rules and regulations,
including the requirement to distribute at least 90 per cent of
qualifying rental profits to shareholders. Withholding tax of 20 per
cent is deducted from these Property Income Distributions. Profits
from a REIT's non-property business remain subject to normal
corporation tax. The Group elected for REIT status in the UK with
effect from 1 January 2007.
Scrip Dividend Scheme - The Group may offer shareholders the
opportunity to participate in the Scrip Dividend Scheme. This enables
participating shareholders to receive shares instead of cash when a
Scrip Alternative is offered for a particular dividend.
Short-term lease - A lease with a term certain of less than five years.
SOCIMI - The Spanish equivalent of a Real Estate Investment Trust.
Tenant (or lease) incentives - Any incentives offered to occupiers to
enter into a lease. Typically, incentives are in the form of an initial rent-
free period and/or a cash contribution to fit out the premises. Under
IFRS the value of incentives granted to tenants is amortised through
the income statement on a straight-line basis over the lease term.
Total financial return - The change in NAV per share (diluted,
adjusted) plus dividends per share paid in the period expressed as a
percentage of opening NAV per share (diluted, adjusted).
Total property return - The change in capital value, less any capital
expenditure incurred, plus net income in the period expressed as a
percentage of the capital employed (opening capital value plus capital
expenditure incurred) in the period as calculated by IPD.
Underlying earnings per share - Earnings per share adjusted to
exclude valuation movements, exceptional items and related tax.
Underlying figures - Amounts described as underlying exclude
valuation movements, exceptional items and related tax.
Dividends
The Directors of intu properties plc have announced an interim
dividend per ordinary share (ISIN GB0006834344) of 4.6 pence (2017:
4.6 pence) payable on 20 November 2018 (see salient dates below).
An announcement confirming whether a scrip dividend alternative will
be offered will be made on 9 October 2018.
The dividend may be partly paid as a Property Income Distribution
(PID) and partly paid as a non-PID. The PID element will be subject to
deduction of a 20 per cent withholding tax unless exemptions apply
(please refer to the PID special note below). Any non-PID element will
be treated as an ordinary UK company dividend. For South African
shareholders, non-PID cash dividends may be subject to deduction of
South African Dividends Tax at 20 per cent.
The following are the salient dates for the payment of the proposed
final dividend.
Monday 8 October 2018
Sterling/Rand exchange rate struck
Tuesday 9 October 2018
Sterling/Rand exchange rate and dividend amount in South African
currency announced
Wednesday 17 October 2018
Ordinary shares listed ex-dividend on the Johannesburg Stock
Exchange
Thursday 18 October 2018
Ordinary shares listed ex-dividend on the London Stock Exchange
Friday 19 October 2018
Record date for interim dividend in London and Johannesburg
Tuesday 20 November 2018
Dividend payment date for shareholders
South African shareholders should note that, in accordance with the
requirements of Strate, the last day to trade cum-dividend will be
Tuesday 16 October 2018 and that no dematerialisation or
rematerialisation of shares will be possible from Wednesday 17
October 2018 to Friday 19 October 2018 inclusive. No transfers
between the UK and South African registers may take place from
Tuesday 9 October 2018 to Friday 19 October 2018 inclusive.
PID Special Note:
UK shareholders
For those who are eligible for exemption from the 20 per cent
withholding tax and have not previously registered for exemption, an
HM Revenue & Customs (HMRC) Tax Exemption Declaration is
available for download from the 'Investors' section of the intu
properties plc website (intugroup.co.uk), or on request to our UK
registrars, Link Asset Services. Validly completed forms must be
received by Link Asset Services no later than the dividend Record
Date, as advised; otherwise the dividend will be paid after deduction
of tax.
South African and other non-UK shareholders
South African shareholders may apply to HMRC after payment of the
dividend for a refund of the difference between the 20 per cent
withholding tax and the UK/South African double taxation treaty rate
of 15 per cent. Other non-UK shareholders may be able to make
similar claims for a refund of UK withholding tax deducted. Refund
application forms for all non-UK shareholders are available for
download from the 'Investors' section of the intu properties plc
website (intugroup.co.uk), or on request to our South African
registrars, Terbium, or HMRC. UK withholding tax refunds are not
claimable from intu properties plc, the South African Revenue Service
(SARS) or other national authorities, only from the UK's HMRC.
Additional information on PIDs can be found at
intugroup.co.uk/en/investors/shareholder-information/real-estate-
investment-trust/.
The above does not constitute advice and shareholders should seek
their own professional guidance. intu properties plc does not accept
liability for any loss suffered arising from reliance on the above.
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 26/07/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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