Wrap Text
Audited Results for the year ended 31 December 2018
INTU PROPERTIES PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: ITU
20 February 2019
intu properties plc
John Strachan, intu Chairman, commented:
AUDITED RESULTS FOR THE
YEAR ENDED 31 DECEMBER
"intu has had a challenging year with a difficult retail and uncertain economic environment,
2018 together with responding to two abortive corporate offers for the company. However, our
management team has produced a robust operational performance with increased like-for-like
net rental income for the fourth consecutive year, 97 per cent occupancy and signed 248 new
long-term leases.
This outcome is testimony to our long-term strategy of investing in our centres and the intu
brand, making them different, attractive and exciting so retailers look to our centres as key
trading locations.
Our three core objectives for the year ahead are to continue to deliver strong underlying
individual centre performance, continue our strategy of adapting to the changing retail
environment and to make smart use of capital.
We propose to reduce our debt to assets ratio over time back below 50 per cent by further
disposals and part-disposals and retaining the cash generated by our activities rather than
distributing it as dividend, to enable us to invest in our winning destinations.
I would like to thank our strong management team for their dedication and commitment in a
difficult economic environment as we focus on making intu centres winning destinations for
brands and shoppers."
David Fischel, intu Chief Executive, commented:
"intu has again delivered a resilient operational performance which demonstrates how our
Enquiries centres differentiate themselves as winning destinations for retailers with their variety and
excitement. We own and manage many of the best shopping centres, in some of the strongest
intu properties plc locations, in the UK and Spain.
David Fischel
Chief Executive
+44 (0)20 7960 1207 In a difficult year for the whole UK retail real estate sector and with very limited comparable
transactional evidence, property valuations declined as sentiment weakened significantly. We
reported a further 3 per cent fall in valuations in the final quarter of 2018, additional to the 9 per
Matthew Roberts cent fall over the first nine months of the year. As a result, EPRA NNNAV at the end of year was
Chief Financial Officer 271p per share, down from 349p the year before.
+44 (0)20 7960 1353
Adrian Croft
Head of Investor Relations Although sentiment in the retail sector is at an all-time low, the reality is that around
+44 (0)20 7960 1212 400 million shoppers visit our centres each year and occupancy is at 97 per cent. As some 85 per
cent of all retail transactions still touch a physical store, demand from major retailers continues
Public relations to be positive for our centres.
UK: New tenants to our centres include Abercrombie & Fitch, Uniqlo, Bershka, and Monki, with
Justin Griffiths established retailers such as Next, Primark, Zara and River Island all upsizing.
Powerscourt Our tenants invested a record GBP144 million in their stores over the year, a clear indication that
+44 (0)20 7250 1446 these retailers see great physical space as a key part of a successful multichannel strategy."
SA:
Frederic 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 eight of the top-20, 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 around 400 million customer visits and 26 million website visits a year offering a multichannel approach that truly supports retail
strategies.
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 tenants flourish, driving occupancy and income growth.
We are committed to our local communities, with our centres supporting nearly 130,000 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 profit/loss 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.
Investor presentation
A presentation to analysts and investors will take place at UBS, 5 Broadgate, London EC2 at 09.30GMT on 20 February 2019. 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.
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 of 2018
2018 2017
Like-for-like net rental income growth +0.6% +0.5%
Occupancy 96.7% 97.0%
Leasing activity
— number, new rent 248, GBP39m 217, GBP38m
— new rent relative to previous passing rent +6% +7%
Rental uplift on rent reviews settled +7% +9%
Net rental income (1) GBP450.5m GBP460.0m
Underlying earnings GBP193.1m GBP201.0m
Property revaluation (deficit)/surplus (1) GBP(1,405.0m) GBP47.3m
IFRS (loss)/profit for the year GBP(1,173.7m) GBP203.3m
Underlying earnings per share (3) 14.4p 15.0p
31 December 2018 31 December 2017
Market value of investment and development property (1) (2) GBP9,167m GBP10,529m
Net external debt (1) GBP4,867m GBP4,835m
IFRS net assets attributable to owners of intu properties plc GBP3,812m GBP5,075m
NAV per share (diluted, adjusted) (3) 312p 411p
EPRA NNNAV per share (3) 271p 349p
Debt to assets ratio (1) (4) 53.1% 45.2%
1 Including Group's share of joint ventures. See other information section for reconciliations between presented figures and IFRS figures.
2 31 December 2017 including intu Chapelfield which was classified as an asset held for sale.
3 See notes 8 and 9 for reconciliations between presented figures and IFRS figures.
4 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 year show a resilient operating performance with a continued like-for-like net rental income growth. The uncertainty around
the UK economy and the challenging retail background are leading to weakening sentiment in the retail property investment market, impacting
property valuations:
— property values reduced in the year by 13.3 per cent with a total revaluation deficit of GBP1,405.0 million (see below)
— like-for-like net rental income growth of 0.6 per cent (GBP2.3 million) driven by increased rents from new lettings (+6 per cent
ahead of previous rent) and rent reviews (+7 per cent ahead of previous rent) partially offsets GBP11.8 million impact from
disposals and developments
— underlying earnings of GBP193.1 million, impacted by disposals and development activity in 2018
— loss for the year of GBP1,173.7 million, an increase of GBP1,377.0 million, primarily from the property revaluation deficit
— underlying earnings per share of 14.4 pence, 0.6 pence lower than 2017 reflecting the impact of disposals and developments
— NAV per share (diluted, adjusted) of 312 pence, down 99 pence, the decrease due to the property revaluation deficit.
NNNAV per share is 271 pence, reducing by 78 pence
— debt to assets ratio is 53.1 per cent. Net external debt largely unchanged at GBP4,867 million, with cash and available facilities of GBP548 million
Property valuations
In a challenging year for the whole retail real estate sector, intu reported a 6.2 per cent valuation fall in the period to 30 June 2018 and a further
3.0 per cent in the quarter to 30 September 2018 with the full year reduction in our assets amounting to 13.3 per cent (GBP1,405.0 million).
This is driven by weakening sentiment in the UK retail property investment market as illustrated by the low levels of transactions (see market
trends). The valuers' assumption is that investors will focus on and seek higher net initial yields. In the year, intu's average net initial yield
(topped-up) has increased by 62 basis points to 4.98 per cent.
Additionally, given the current challenges for certain department stores, the valuers have taken a more conservative view on ERVs for larger
space units. On a like-for-like basis, ERVs decreased by 3.9 per cent.
Operating highlights
Growing like-for-like net rental income
— like-for-like net rental income increased by 0.6 per cent in the year, driven by increased rents from new lettings and rent reviews and
impacted by some 1.9 per cent from tenant failures
— anticipate 2019 full year change in like-for-like net rental income, including the impact of House of Fraser, to be down by
1 to 2 per cent (subject to no new material tenant failures)
— signed 248 long-term leases (187 in the UK and 61 in Spain) delivering GBP39 million of annual rent at an average of 6 per cent above previous
passing rent (like-for-like units) and in line with valuers' assumptions (2017: 217 leases; GBP38 million of annual rent; 7 per cent above previous
passing rent)
— rent reviews settled in the year on average 7 per cent above previous passing rent (2017: 9 per cent)
— sustained high occupancy of 96.7 per cent (December 2017: 97.0 per cent)
Delivering operational excellence
— footfall decreased by 1.6 per cent (2017: up 0.1 per cent) outperforming the national ShopperTrak retail average which fell by
3.5 per cent in the year
— net promoter score, our measure of customer service, improved in the year averaging 75 (2017: 70)
— brand awareness increased to 28 per cent on an unprompted basis (December 2017: 26 per cent) and to 76 per cent on a prompted basis
(December 2017: 71 per cent)
Optimising our winning destinations
— capital investment by intu of GBP201 million in the year including GBP67 million on the 380,000 sq ft extension of intu Watford which opened in
September 2018 and GBP40 million on the leisure extension at intu Lakeside, anchored by Nickelodeon, Puttshack and Hollywood Bowl
— record tenant investment of GBP144 million on new shopfits in 2018, with 262 stores opened in the year (2017: GBP89 million;
259 stores)
— commenced the GBP75 million extension and enclosure of Barton Square at intu Trafford Centre which will be anchored by
Primark and is due to open in early 2020
— appointed the main contractor on the GBP89 million mixed-use regeneration of intu Broadmarsh which will be anchored by
The Light cinema and Hollywood Bowl
— near-term committed and pipeline of projects through to the end of 2021 of GBP428 million
— actively pursuing non-retail development opportunities, particularly around super-regional centres, including residential with,
for example, the potential for over 1,000 private-rented-sector residential units at intu Lakeside
Making smart use of capital
— 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. Other disposals of sundry assets amounted to GBP23 million, 6 per cent ahead of December 2017 valuations
— we have refinanced or entered new facilities of over GBP500 million, including development finance loans on intu Trafford Centre's Barton
Square and intu Broadmarsh
— cash and available facilities of GBP548 million (31 December 2017: GBP833 million). Weighted average debt maturity of 5.8 years, with minimal debt
maturities until 2021
— substantial headroom on our loan to value debt covenants. By way of example, a further 10 per cent fall in capital values would create a
covenant shortfall of only GBP1 million which could be cured from available facilities
Chief Executive's review
Introduction - a challenging year
2018 has been an eventful and challenging year for intu.
The UK economy has struggled through a third year of pre-Brexit political uncertainty. Specific to intu, we had to overcome the disruption from
two public company offers, neither of which, for reasons outside our control, ultimately concluded.
I would like to thank the executive team and all intu staff for their outstandingly resolute and determined performance through these events
which coincided with significant industry challenges.
In terms of UK economic data most relevant to intu, non-food retail sales were essentially static year-on-year, but online sales continued to grow
so physical sales shrank. In fact, in-store non-food retail sales in the UK have shown a year-on-year reduction every month for the last two years.
Retailer costs, by contrast have not declined, not least as a result of the significant burden of the UK's property tax known as business rates.
Retailer failures therefore picked up substantially, impacting our net rental income by an estimated 1.9 per cent. Increasingly negative investor
sentiment towards retail property fed through to a 13.3 per cent fall in the valuations of our UK assets.
In the face of this adversity, shareholders have seen the share price decline to a level representing for intu a virtually unprecedented discount to
NAV per share (diluted, adjusted) of over 60 per cent.
Plans to reduce debt to assets ratio
Our debt to assets ratio at 31 December 2018 was 53 per cent, exceeding the Board's target maximum of 50 per cent.
We propose to take the following steps to lower the Group's debt to assets ratio over time to back below 50 per cent and lower
the share price discount:
— retaining for the time being the cash generated by our activities rather than distributing it as dividend, commencing with no final dividend for
2018 (2017 final dividend: 9.4 pence). In 2018 we paid dividends of GBP188 million based on an annual dividend per share of 14.0 pence.
Retaining the dividend will enable us to continue to invest in our winning destinations
— through further disposals and part-disposals in due course in both the UK and Spain. Following GBP171 million of disposals in 2018, we will
continue to recycle capital from individual assets. We consider substantial sales in the UK as challenging until a political resolution on the
Brexit issue is achieved and not in shareholders' interest while market sentiment towards UK retail property is so negative. In Spain we have
received a number of unsolicited offers which we are evaluating
Resilient 2018 operating performance
Despite negative external factors, intu demonstrated considerable resilience in its operating performance through a challenging period, evidence
of the underlying quality of the intu business. This includes ownership of eight of the UK's top-20 centres, which amount to 69 per cent of our
property assets by value, and three of the top-10 centres in Spain.
intu has reported a 0.6 per cent increase in like-for-like net rental income despite the retailer failures referred to above, stable occupancy around
97 per cent, and 248 new leases signed (2017: 217) at 6 per cent above previous rents. Lettings included an attractive mix of new and established
names, significantly refreshing the centres, among them Abercrombie & Fitch, Uniqlo, Bershka and Monki, with the likes of Next, Primark, Zara
and River Island all upsizing.
As we operate in many of the top UK retail destinations where retailers want to maintain their best stores, like-for-like net rental income
performance was robust despite recent administrations and CVAs. The administrations and CVAs in the year relate to around 6 per cent of our
passing rent, but the majority of these (72 per cent) have had minimal impact with the retailer keeping
their stores open on the existing rent or with a small reduction.
Underlying earnings per share reduced from 15.0p to 14.4p mainly as a result of the income impact from disposals.
Fall in property valuations
After two years of essentially unchanged valuations for our UK centres, 2018 saw investor sentiment turn against retail property.
We reported a 6.2 per cent fall in property values in the six months to 30 June 2018 and a further 3.0 per cent in the quarter to
30 September 2018, with the full year reduction in our assets amounting to 13.3 per cent. Net initial yield (topped-up) climbed over the year from
4.36 per cent to 4.98 per cent and was the primary factor driving NAV per share (diluted, adjusted) down in the year from 411 pence to 312
pence.
By way of illustration of the impact on intu, a further 10 per cent fall in valuations, amounting to approximately a further
GBP920 million reduction and 22 per cent overall since the beginning of 2018, would reduce NAV per share (diluted, adjusted) to around 243 pence
from 312 pence and EPRA NNNAV per share to around 202 pence from 271 pence.
Focus on winning destinations
With the structural changes going on in our industry, we regard it as increasingly important that intu focuses on centres which rank as winning
destinations where customers love to come and retailers want to be.
Alongside best retail, food, beverage and leisure, we intend to add further mixed-use attractions to these centres in the form of improved public
space with more frequent experiences, residential space, hotels and other uses such as state-of-the-art office and co-working space.
Our retailers regularly confirm to us the importance of flagship physical stores in centres such as ours for their overall offer to consumers, with
around 85 per cent of all transactions estimated to still touch a store. Our target is that every store in our centres should rank in the retailer's top
quintile of UK stores - ideally as many as possible in their top-20 stores.
Continuing investment programme
We and our tenants have continued to invest in our centres in 2018. We invested GBP201 million which included completing the transformational
extension of intu Watford that promotes Watford to a top-20 UK retail destination and handing over units to be fitted out at our exciting leisure
extension at intu Lakeside which is 93 per cent pre-let and due to open in spring 2019. Our tenants invested around a further GBP161 million - GBP144
million introducing their latest shopfits and GBP17 million on maintenance expenditure.
Our pipeline over the next three years of GBP428 million includes GBP82 million on the regeneration of intu Broadmarsh which will be anchored by The
Light cinema, the transformation and expansion of Barton Square at intu Trafford Centre, introducing Primark to the centre, and the creation of
the new generation 255,000 sq m shopping resort intu Costa del Sol, near Málaga in Spain.
2019 objectives
We have set three strategic objectives for 2019:
— delivering strong underlying individual centre performance
— adapting fast to a changing retail environment
— making smart use of capital
The first two objectives are to be measured by a number of key performance indicators, similar to those currently reported.
In terms of the third objective, making smart use of capital, the events of 2018 have impacted our views on capital allocation, especially as a
result of the discount to NAV per share (diluted, adjusted) widening to an unprecedented 64 per cent between the reported NAV per share
(diluted, adjusted) of 312 pence and the share price of 113 pence as at 31 December 2018.
Expressed another way, the year-end share price reflects a 29 per cent discount to gross assets of GBP9.2 billion. The implied initial yield on our
assets to a shareholder at this share price is currently 7.03 per cent rather than the published net initial yield
(topped-up) according to the year-end property valuations of 4.98 per cent.
Financial strength
We have cash and available facilities of GBP548 million. Net external debt was largely unchanged at GBP4,867 million and we have refinanced or
entered new facilities of over GBP500 million in 2018 illustrating that debt markets continue to be supportive of our highest quality retail property.
We consider the structure of our borrowings, predominantly using flexible asset specific
non-recourse arrangements, to be appropriate for our concentrated portfolio.
These facilities have significant covenant headroom. For example, a further fall of 10 per cent in capital values would create a covenant shortfall
of only GBP1 million.
The table below shows the covenant shortfalls on our non-recourse debt that could be remedied from our available facilities for further falls in
capital values:
Reduction in capital values from Total reduction in capital values from
31 December 2018 31 December 2017 Covenant shortfall Implied Group debt to assets ratio
10 per cent 22 per cent GBP1 million 59 per cent
15 per cent 26 per cent GBP4 million 62 per cent
20 per cent 31 per cent GBP43 million 66 per cent
25 per cent 35 per cent GBP123 million 71 per cent
David Fischel
Chief Executive
2019 strategy
Winning destinations strategy
Our strategy is to focus on winning destinations delivering resilient income streams, investing where there is the greatest potential, and reducing
our debt to assets ratio to below 50 per cent through disposals, part-disposals and introducing partners to assets. In recent years we have
successfully recycled capital through this approach, disposing of over GBP1 billion of assets.
The retail environment remains challenging. Our response is to adapt our strategy, protecting shareholder value in the short term and maximising
growth in the medium term as we progress the repositioning process.
Our strategy will ensure that we focus on the centres with the greatest potential, with a capital structure that enables us to make the required
investment.
Optimal positioning in a fast-moving environment
We operate in a fast-moving retail and leisure environment and to ensure we are optimally positioned we will:
— refine the portfolio to concentrate on regional destinations, making high-impact investments to ensure they remain winning locations where
customers love to come often and are great locations for retailers where it is easy for them to do business
— leverage the brand, aided by the delivery of world class service, compelling experiences and innovative digital initiatives
— deliver a compelling value proposition for our tenants, ensuring their locations in our centres are among their top quintile
in the UK
— actively pursuing complementary non-retail development alternatives to maximise the potential from our significant land holdings around our
centres which offer many opportunities for alternative uses, including residential and hotels
A capital structure to meet our needs
To deliver this transformation, we will create a capital structure to meet our needs, refinancing debt both as required and where attractive for the
Group to do so, targeting a reduction in our debt to assets ratio to below 50 per cent over time. This will be delivered by:
— significantly reducing the dividend paid and disposing of sundry assets
— the disposal and part-disposal of centres which do not meet our winning destination criteria over the medium term. We have
the flexibility to introduce partners into some of our flagship centres, with around two-thirds, by value, of our total assets
100 per cent owned
Strategic objectives for 2019
Our three strategic objectives for 2019 are:
1. Delivering strong underlying individual centre performance
2. Adapting fast to a changing retail environment
3. Making smart use of capital
Operating review
Valuation
Property values fell in the year driven by adverse conditions in the UK retail market and weakening sentiment in the retail property investment
market as illustrated by the low levels of transactions. With valuers assuming that investors have increased their focus on the current income,
their valuations reflect a greater weighting in the overall opinion towards net initial yields.
Like-for-like
Market value revaluation (deficit)/surplus
2018 2017
GBPm GBPm GBPm %
UK super-regional centres 5,613.6 6,373.7 (824.7) (13.0)
UK major city centres 1,875.2 2,223.4 (363.1) (16.3)
Spanish centres 628.8 606.8 8.8 1.5
Total like-for-like 8,117.6 9,203.9 (1,179.0) (11.8)
Spanish developments 232.3 212.8 (7.2) (3.4)
UK other including developments 817.5 1,112.5 (218.8) (20.3)
Total 9,167.4 10,529.2 (1,405.0) (13.3)
The table above shows the main components of the GBP1,405.0 million property revaluation deficit:
— UK super-regional centres: performed stronger than other intu UK assets, recognising the continuing attraction of this asset class which
remains key to retailers' requirements. These centres have reduced in value by 13 per cent in aggregate, with intu Braehead an outlier, down
20 per cent, as it continues to be impacted by the relatively weaker economic and uncertain political situation in Scotland
— UK major city centres: on average values have fallen by 16 per cent reflecting weaker investor demand for some of these centres. Within this
category, those super-prime assets in the busiest city centres have performed better, with smaller reductions at the likes of Manchester
Arndale, intu Eldon Square, Newcastle and intu Milton Keynes
— 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 year on intu Costa del Sol
— UK other including developments: predominantly 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 opportunities. This category also includes intu Watford (non like-for-like) and intu Chapelfield (31 December
2017 included at 100 per cent and 31 December 2018 included at 50 per cent)
The weighted average net initial yield (topped-up) at 31 December 2018 increased by 62 basis points in the year to 4.98 per cent.
On a like-for-like basis, ERV decreased by 3.9 per cent as valuers have in general taken a more conservative view on rental values for larger space
units and on the overall rental values at intu Braehead, intu Victoria Centre and intu Potteries.
The MSCI UK monthly property index (retail) indicated a 5.7 per cent decrease in capital values and a 2.5 per cent decrease in market rentals. The
divergence from intu's performance is considered most likely to represent a timing difference with intu's valuations.
In our view, once the near-term yield correction has taken place, income performance rather than changing yields is then likely to be, for a time,
the main driver of valuations.
Growing like-for-like net rental income
Like-for-like net rental income growth is our key income measure. In the year, we grew like-for-like net rental income by 0.6 per cent, similar to
the increase of 0.5 per cent in 2017. The key components of the growth are shown in the table below:
Group like-for-like net rental income
2018 2017
% %
Rent reviews and improved lettings +1.3 +2.2
Capital investment +0.2 +0.4
Vacancy impact -0.1 -0.4
Administrations and CVAs (1) -1.9 -1.4
Other (eg: bad debt; surrender premiums; head lease adjustments) +1.1 -0.3
Increase in like-for-like net rental income +0.6 +0.5
1 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 1.3 per cent rental growth. Against previous passing rent, lettings were on average up 6 per cent
and rent reviews up 7 per cent.
Vacancy increased marginally in 2018, resulting in a 0.1 per cent impact on net rental income.
The effect of administrations and CVAs was 1.9 per cent. This movement has been minimal given 6 per cent of our rent roll could have been
impacted by administrations and CVAs in 2018 (see market trends) and illustrates the strength of our stores in the retailers' portfolios.
Other delivered 1.1 per cent growth from non-recurring items, including a higher level of premiums received in 2018 against
the prior year.
Like-for-like net rental income operating metrics
2018 2017
Occupancy 96.7% 97.0%
— of which, occupied by tenants trading in administration 2.0% 0.6%
Leasing activity
— number, new rent 248, GBP39m 217, GBP38m
— new rent relative to previous passing rent +6% +7%
Rental uplift on rent reviews settled +7% +9%
Occupancy is 96.7 per cent, in line with 31 December 2017, with new lettings offsetting the closures in the year.
We agreed 248 long-term leases in the year, amounting to GBP39 million annual rent, at an average of 6 per cent above previous passing rent (like-
for-like units) and in line with valuers' assumptions. On a net effective basis (net of rent free and incentives), rents were also 6 per cent ahead of
previous rents.
Retailers continue to focus on increasing their space in prime, high-footfall retail destinations. While the UK letting market is challenging, our
winning destinations continue to be in demand from quality retailers. Significant activity in 2018 included:
— new retail anchors, in the shape of key fashion brands, upsizing to optimise their offering and configuration. At intu Lakeside, River Island and
Zara are both upsizing, doubling and trebling their space respectively, and Next opened new flagship stores of around 80,000 sq ft each at intu
Metrocentre and intu Merry Hill
— key international fashion brands expanding their portfolio of brands with H&M opening two of its eight Monki stores in the UK at intu Eldon
Square and Manchester Arndale and Inditex, the parent company of Zara, followed openings of Stradivarius and Pull&Bear at intu Trafford
Centre last year with Bershka at St David's, Cardiff
— international brands' ongoing appreciation of the attraction of intu's destination shopping centres to gain nationwide exposure. Abercrombie
& Fitch opened only its second UK store at intu Trafford Centre, Uniqlo is planning to open two of its first stores outside London at intu
Watford and Manchester Arndale and Xiaomi, the Chinese mobile phone company, opened 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, including brands which historically would be
department store concessions such as Jo Malone. Mitsubishi and Silent Night have opened stores at intu Lakeside and The White Company at
Cribbs Causeway
We settled 137 rent reviews in the year for new rents totalling GBP47 million, an average uplift of 7 per cent on the previous rents.
The weighted average unexpired lease term is 7.2 years (31 December 2017: 7.5 years) illustrating the longevity of our
income streams.
The difference between our annual property income of GBP474 million and ERV of GBP566 million represents GBP25 million from units subject to a rent
free period, GBP41 million from vacant and development units and reversion of GBP26 million, 5 per cent, from rent reviews and lease expiry.
Delivering operational excellence
The objective of delivering 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
2018 2017
Footfall -1.6% +0.1%
Retailer sales (like-for-like centres) -2.3% -2.1%
Rent to estimated sales (excluding anchors and major space users) 12.4% 12.1%
Net promoter score 75 70
Unprompted brand awareness 28% 26%
Prompted brand awareness 76% 71%
Footfall in our centres has been robust considering the unusual weather events in 2018 with periods of severe snow followed by the high
temperatures through the summer. Overall, our footfall decreased by 1.6 per cent in 2018, but significantly outperformed the ShopperTrak
measure of UK national retail footfall which was down on average by 3.5 per cent, highlighting the continued attraction of our compelling
destinations against the wider market.
Estimated retailer sales in our centres were down 2.3 per cent impacted by some larger space users who had a difficult 2018 and other retailers
who operate successful multichannel models where 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 12.4 per cent.
Our net promoter score, a measure of customer service, improved in the year, averaging 75. It continues to demonstrate 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, 28 per cent mentioned intu when asked to name a shopping centre brand and
76 per cent knew of the brand when prompted, both increasing against 2017.
intu Experiences, our in-house team delivering immersive brand partnerships, mall commercialisation and advertising, generated gross income of
GBP23 million (2017: GBP22 million). The growth was driven by promotional activity which included Stylist Live's first consumer event outside London
at intu Trafford Centre and increased demand from global brands such as Christian Dior and
Calvin Klein using our high footfall centres to reach a wider audience.
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 four years, from 2015 to 2018, intu and our tenants have invested over GBP1 billion in our centres, with over GBP500 million
coming from intu and a similar level coming from our tenants, predominantly introducing their latest shopfits.
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 2018
In 2018 we have invested GBP201 million in our centres on projects enhancing the value and appeal of these destinations. This includes:
— GBP67 million on completing the 380,000 sq ft intu Watford extension which opened in September 2018. Around 80 per cent of the space is now
open or exchanged, with the latest signings including Uniqlo, Hollister and Hugo Boss. A further 15 per cent is in advanced negotiations and we
anticipate 95 per cent of the space will be open and trading by spring 2019
— GBP40 million on the leisure extension at intu Lakeside. This scheme is 93 per cent pre-let with Market Halls, a new communal dining hall
concept, the most recent signing. Nickelodeon, Puttshack, Hollywood Bowl and Flip Out are now fitting out ready to open in spring 2019
— GBP17 million on the transformation of Barton Square at intu Trafford Centre (see near-term pipeline)
— GBP77 million on many other active asset management initiatives, including the recently opened Atlantis aquarium and Nickelodeon at intu
Xanadú and the Halle Place restaurant quarter at Manchester Arndale
In addition, 262 units opened or shopfitted in our centres in 2018 (2017: 259 stores), around 8 per cent of our 3,300 units. Tenants have invested
around GBP144 million in these stores, a significant demonstration of their long-term commitment to our centres.
Annual maintenance expenditure in our centres is substantially recovered from tenants via the service charge. In 2018, a total of GBP17 million
across our assets was recovered.
Near-term pipeline
Looking ahead, we are progressing our near-term investment pipeline of GBP428 million through to the end of 2021.
Cost to completion (GBPm)
Total 2019 2020 2021
intu Broadmarsh, Nottingham 82 30 32 20
intu Trafford Centre 66 47 15 4
intu Lakeside 19 19 - -
Intu Watford 19 19 - -
intu Costa del Sol (design) 12 12 - -
Active asset management 40 33 6 1
Total committed 238 160 53 25
intu Costa del Sol (net of partner funding) 59 42 - 17
intu Milton Keynes (phase 1) 11 - 5 6
Active asset management 120 40 40 40
Total near-term pipeline 428 242 98 88
We are committed to investing GBP238 million:
— at intu Broadmarsh we appointed the main contractor for this mixed-use regeneration project which is anticipated to cost
GBP89 million in total and expected to deliver a stabilised initial yield of around 7 per cent. We have signed The Light cinema and Hollywood
Bowl, with 45 per cent of the project either exchanged or in advanced negotiations. The redevelopment is expected to complete in the second
half of 2021
— at intu Trafford Centre, we have commenced construction of the expansion and transformation of Barton Square with
62 per cent of the space pre-let and a further 11 per cent in advanced negotiations. The GBP75 million project, expected to deliver
a return of between 6 and 7 per cent, involves enclosing the courtyard, enhancing interiors, trading from an additional level and providing a
fashion offer for the first time at Barton Square with Primark anchoring the development, which is expected to open in early 2020
— at intu Lakeside and intu Watford, we have the remaining costs to complete these projects
— at intu Costa del Sol, we have committed GBP12 million to complete the final designs and resolve any outstanding planning matters. We have
started the tendering process for some of the key construction packages (see below for more details on the full project)
— active asset management projects total GBP40 million and include GBP12 million for enhancing the look and feel of intu Merry Hill
and GBP8 million for a mall refresh at intu Lakeside to tie in with the opening of the leisure extension. Other projects are across all centres and
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 GBP190 million:
— at intu Costa del Sol, we expect to clear the final planning matters in 2019. With work on the final design ongoing, we are also targeting our
required level of pre-lets in the next 12 months. This 255,000 sq m development is expected to cost around
GBP670 million. Our business plan provides for the introduction of a joint venture partner at the start of construction and limits our outlay on the
project to around GBP188 million which we expect to be mostly funded by borrowings specific to the project
— active asset management projects total GBP120 million and are for projects of varying sizes across all centres
Mixed-use opportunities
In addition to the pipeline above, we have significant opportunities within the portfolio for alternative uses of some of our
available land.
We have extensive available land. Our six major out-of-town centres comprise some 760 acres of land, of which less than
40 per cent has buildings, multistorey car parks or distribution roads upon it, leaving 470 acres of surface car parks and other potentially
developable land. The city centre locations also offer opportunities for intensification of uses.
Mixed-use opportunities being evaluated include residential, hotels and other uses. Initial work has highlighted the potential for around 5,000
residential units and nearly 600 hotel rooms.
Initially, private-rented-sector residential opportunities to create a total of circa 1,700 units have been identified which, if fully developed, could in
aggregate produce a yield of around 5 per cent on total development costs, excluding land, of around
GBP240 million. The most advanced of these projects is at intu Lakeside, where we could deliver around 1,000 residential units.
In addition to the residential and hotel opportunities, further mixed-use opportunities relating to office, flexible working spaces, business lounge
and service-oriented uses have been identified that could generate attractive incremental returns to our current rental income stream. Many of
these options have a relatively low capital outlay, are quick to implement and take advantage of the current configuration of the centres.
All these opportunities, which are under active consideration, would create value directly but moreover would increase the overall attractiveness
and catchment of the centres.
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.
Financial strength
We consider the structure of our borrowings, predominantly using flexible asset specific non-recourse arrangements (84 per cent
of overall debt), to be appropriate for our concentrated portfolio.
We have refinanced or entered new facilities of over GBP500 million in 2018 (see financial review) at competitive rates illustrating
that debt markets continue to be supportive of the highest quality retail property. We will continue to undertake debt refinancing activity on a
timely basis or where it is attractive for the Group to do so.
Cash and available facilities at 31 December 2018 were GBP548 million and our debt to assets ratio was 53.1 per cent. As stated in our strategy, we
are targeting to reduce this to below 50 per cent over time and ensure we maintain adequate financial headroom.
Our facilities have covenant headroom to deal with falls in valuations. By way of example, a 10 per cent fall in capital values, from the December
2018 valuations, would create a covenant shortfall of only GBP1 million which could be cured from available facilities.
We have minimal debt maturities before 2021, with a weighted average debt maturity of 5.8 years at 31 December 2018.
With more than GBP5 billion of debt refinanced over the last six 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 4.2 per cent. Our average cost of debt
includes legacy debt on intu Trafford Centre (GBP0.7 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
3.5 per cent.
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.
In line with our strategy, in late 2018 we disposed of GBP23 million of sundry assets at 6 per cent above their December 2017
book values.
Our disposals in the last four years are 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, by value, of our portfolio is 100 per cent owned.
Market trends
We closely monitor market trends to enable us to respond to new opportunities and challenges and to ensure our centres are
well-positioned both now and for the future.
Today's market
A cautious consumer
The continuing Brexit uncertainty is weighing heavily on consumer confidence. The GfK measure of consumer confidence has been subdued since
the EU referendum and reduced further in the last few months of 2018. In particular, the measure of how consumers feel about the general
economic situation over the next 12 months has slipped.
Against this, employment is at its highest level since 1971 and wage growth has outpaced inflation since February 2018. This has translated to
growth in disposable income in 2018, an increase of 6 per cent according to the Asda disposable income tracker, giving a more positive outlook
than in the last few years.
A challenging time for weaker retailers
Economic uncertainty and changes in what customers are spending their money on has impacted sales growth, with non-food retailer sales
marginally down (0.3 per cent) on average in 2018 according to the British Retail Consortium (BRC).
Shopping behaviours are also changing. The trend of growth in online sales (BRC 2018: +1.7 per cent), offset by falling in-store sales (BRC 2018: -
2.0 per cent) has continued, but it is clear the store still plays a vital role irrespective of how the product is bought.
Store profitability is under pressure from limited sales growth and increased costs from business rates, national living wage and distribution costs
of online sales. The weakness in Sterling has also raised the cost of retailers' goods sold.
2018 has seen a higher level of administrations and CVAs than in recent years with over 2,500 stores affected according to the Centre for Retail
Research. High profile closures and CVAs include Toys R Us, House of Fraser, New Look and HMV, adding to the negative retail sentiment.
A widening gap between the best and the rest
As we operate in many of the top UK retail destinations where retailers want to maintain their best stores, we have been relatively unaffected by
the problems faced by the recent administrations and CVAs.
The administrations and CVAs in the year relate to around 6 per cent of our passing rent. The majority of these (72 per cent) have had minimal
impact, with the retailer keeping their best performing stores in our portfolio open on the existing rent. Of the remainder, 9 per cent are trading
on discounted rents, 14 per cent have closed and 5 per cent have been re-let.
Reduced demand from investors in shopping centres
The uncertainty of Brexit, the structural change in retail and higher than normal level of administrations and CVAs has significantly reduced
demand for prime shopping centres in 2018. With this weakening sentiment, valuation yields have risen throughout the year.
For transactions completed in 2018, there has been a greater focus on the quality of income, with investors seeking a higher net initial yield to
protect returns where capital growth is seen as harder to deliver.
More certainty in the course of 2019 over what Brexit means, and retailers addressing the structural changes in their sector, will enable investors
to make better informed decisions.
The US is now emerging from similar issues
The US has also seen significant retailer failures, in particular the well-publicised weaker department stores, over the last 18 months with a clear
differentiation between prime and failing malls. This, coupled with a stabilising multichannel model and online retailers such as Amazon taking
more physical space, has increased investor confidence in the best centres.
With the UK typically running some two years behind the US in terms of market trends, we would expect to see similar patterns emerge as the
prime malls take market share from weaker locations, which should reignite investor demand.
Tomorrow's demands
The shopping journey is changing, but stores are still critical
In our dynamic multichannel world, how people shop and what they want from a visit to a shopping centre is evolving rapidly.
There are now many routes for customers to take on their shopping journeys. They may see a retailer's store as a showroom to view and try a
product or the retailer's online presence as a medium to consume product information - but both have an important part to play. A key driver for
customers is convenience, whether that is smartphone access to a retailer whenever it suits them or physical access to a store's full range as part
of a retail experience incorporating leisure as part of a day out.
So, a visit to a shopping centre must offer all the things our customer wants. While online sales continue to increase, GlobalData estimate that
around 85 per cent of all transactions still touch a store. What is important to the customer is that their chosen shopping location has all the best
stores offering a full range of their products.
Flexibility is key for changing customer visits
Additionally, as the proportion of consumer spend on leisure is increasing, customers want places to offer a more experiential day out, be it cafes,
restaurants, cinemas or activities such as bowling, mini-golf, climbing or skiing.
Finally, shoppers are not all the same: different age groups and different demographics want different things, so ensuring the mix caters for all
their requirements is a further important step.
Tenants focus on brand, perception and customer service
As the demands of their customers increase, retailers are looking to further integrate their online and in-store models, with the best retailers
moving to seamless propositions for shoppers. Key to this is a detailed understanding of their customers and faultless customer service whatever
the channel.
Managing their brands and the perceptions of them is also critical, whether it be the physical proposition or social media where the position of
influencers becomes more important.
Similarly, for leisure operators who are now taking a higher proportion of a customer's disposable income, the challenges and opportunities are
the same.
We are responding with an adapted strategy
A tenant-centric approach
Making customers smile and helping retailers flourish is key.
This is not a one-size-fits-all business. Different centres have different customer bases and we use our unique insight, assembled from extensive
data, to help our retailers and deliver what our customers want.
As owners and curators of shopping centre space and the main landlord for many of the best retailers in the UK from Apple to Zara, we can
ensure that our tenants are in the right space to maximise their ability to generate profits. We can guarantee them a level of quality from clean,
secure and safe space with high footfall and long dwell times. By contrast, high streets have suffered where they are owned by multiple landlords
or managed by budget-constrained local authorities.
Adapting fast in a changing retail environment
As the role of the store evolves, for example with the increase in click and collect, we can offer our tenants a configuration that works successfully
for their business model, be it more back of house space for storage and distribution or direct access to car parks for delivery pick-ups.
We are seeing this in a new generation of upsized flagship stores in our centres from Next at intu Metrocentre and intu Merry Hill, Zara at intu
Lakeside to Primark at intu Merry Hill and intu Trafford Centre. All this helps to ensure that when customers visit our centres they have access to
all the brands they want offering their full ranges.
On top of this, around 600 of our 3,300 units offer catering and leisure and the demand continues to increase. For instance, at
intu Watford we are bringing an evening economy to its affluent catchment and at the family-oriented intu Lakeside we are introducing the likes
of Nickelodeon, Hollywood Bowl and Puttshack.
A focus on the best destinations
We remain focused on the best destinations, with a portfolio concentrated on the top centres in the UK and Spain which offer
day-out destinations for customers and superior footfall for our tenants.
We continue to invest in the centres offering the maximum potential, including ongoing leisure projects at intu Lakeside and
intu Xanadú. Additionally, we are progressing mixed-use opportunities from our significant land holdings around centres.
Ensuring our centres remain appealing to customers and retailers will mean that they should become more attractive to investors once the
current negative sentiment abates.
Our top properties
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 GBP2,098.0m 2,020 100% 228 GBP94.7m GBP450 60% Debenhams, Topshop, Selfridges, John Lewis,
Next, Apple, Ted Baker, Victoria's Secret,
Odeon, Legoland Discovery Centre, H&M,
Hamleys, Marks & Spencer, Zara, Sea Life,
Ambercrombie & Fitch
intu Lakeside GBP1,250.0m 1,612 100% 259 GBP55.8m GBP344 55% House of Fraser, Debenhams, Marks &
Spencer, Topshop, Zara, Primark, Vue,
Victoria's Secret, H&M, Next, Apple,
Nickelodeon
intu Metrocentre GBP841.8m 2,076 90% 306 GBP46.4m GBP280 55% House of Fraser, Marks & Spencer,
Debenhams, Next, Apple, H&M, Odeon,
Topshop, Zara, Primark, River Island
intu Merry Hill GBP777.2m 1,671 100% 217 GBP41.3m GBP200 42% Marks & Spencer, Debenhams, Primark, Next,
Topshop, Asda, Boots, H&M, Odeon
intu Braehead GBP429.9m 1,123 100% 123 GBP29.0m GBP190 57% Marks & Spencer, Primark, Apple, Next, H&M,
Topshop, Hollister, Superdry, Sainsbury's
Cribbs Causeway GBP216.7m 1,076 33% 154 GBP12.8m GBP305 80% John Lewis, Marks & Spencer, Apple, Next,
Topshop, Hugo Boss, H&M, Tesla, The White
Company
UK major city centres
Manchester Arndale GBP409.9m 1,811 48% 258 GBP22.2m GBP285 57% Harvey Nichols, Apple, Burberry, Topshop,
Next, Ugg, Hugo Boss, Superdry, Zara,
Victoria's Secret, Paul Smith, Monki
intu Watford GBP407.4m 1,089 93% 166 GBP18.7m GBP200 81% John Lewis, Marks & Spencer, Next,
Debenhams, Apple, Zara, Primark, Lego, H&M,
Topshop, Hugo Boss, Cineworld
intu Derby GBP372.5m 1,302 100% 208 GBP27.9m GBP110 53% Marks & Spencer, Next, Debenhams,
Sainsbury's, Boots, Topshop, Cinema de Lux,
Zara, H&M, Hollywood Bowl
St David's, Cardiff GBP294.6m 1,391 50% 203 GBP16.7m GBP212 71% John Lewis, Debenhams, Marks & Spencer,
Apple, Hugo Boss, H&M, River Island,
Hamleys, Primark, Victoria's Secret
intu Eldon Square GBP280.7m 1,385 60% 142 GBP16.3m GBP295 57% John Lewis, Fenwick, Debenhams, Waitrose,
Apple, Hollister, Topshop, Boots, River Island,
Next
intu Victoria Centre GBP261.0m 976 100% 118 GBP19.0m GBP225 57% John Lewis, House of Fraser, Next, Topshop,
River Island, Boots, Urban Outfitters, Superdry
Annual
Size* Number of property
Market value (sq m 000) Ownership stores income Key tenants
Spanish centres
intu Xanadú EUR270.5m 120 50% 206 EUR13.4m El Corte Inglés, Zara, Primark, Apple, H&M,
Mango, SnowZone, Cinesa, Bricor, Decathlon
intu Puerto Venecia EUR268.2m 119 50% 201 EUR12.2m El Corte Inglés, Primark, Ikea, Apple,
Decathlon, Cinesa, H&M, Mediamarkt, Zara,
Hollister, Toys R Us
intu Asturias EUR160.9m 74 50% 146 EUR8.1m Primark, Zara, H&M, Cinesa, Eroski, Mango,
Fnac, Mediamarkt, Sfera
* 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 as prepared in accordance with IFRS include single lines for the Group's total share of post-tax profit/loss and
the net investment in joint ventures respectively.
Management reviews and monitors performance as well as determines 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 profit/loss or net investment basis.
The figures and commentary presented are consistent with our management approach as we believe this provides a more relevant and reliable
analysis of the Group's performance to users. The other information section provides reconciliations of the income statement and balance sheet
between the two bases.
Figures and commentary presented on a proportionately consolidated basis are alternative performance measures (APMs)
(see glossary) as they are not defined in IFRS. In presenting APMs within these results, we have applied the 'European Securities and Markets
Authority Guidelines on Alternative Performance Measures'.
The most significant APMs used to measure the Group's performance including the rationale for their use are summarised below. EPRA
performance measures, which are industry standard APMs, are detailed in the EPRA section within other information.
APM Rationale
Like-for-like amounts Like-for-like amounts are presented as they measure 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.
NAV (diluted, adjusted) NAV per share (diluted, adjusted) as presented is based on EPRA NAV per share, an industry standard APM considered a key measure of
the Group's performance, but adjusted for certain items (listed below) which management believes are necessary in order to better
present the Group's performance. The key differences to EPRA NAV per share relate to the following adjustments:
— fair value movements on interest rate swaps not currently used for economic hedges of debt (referred to as unallocated swaps) are
included in EPRA NAV but excluded from the Group's measure of NAV (diluted, adjusted). The Group does not hold unallocated swaps
for speculative purposes. Management currently intends to hold these unallocated swaps until maturity, therefore the volatility
created by their fair value movements will not crystallise
— fair value movements on convertible bonds which are excluded from EPRA NAV but included in the Group's measure of NAV (diluted,
adjusted). Management reviews and monitors the Group's debt to assets ratio based on the book value of debt and therefore
management believes it is appropriate to include the book value of debt within the Group's measure of NAV (diluted, adjusted)
A reconciliation of NAV (diluted, adjusted) to NAV attributable to owners of intu properties plc as well as EPRA NAV is provided in note
9. The EPRA section within the other information section provides additional details on EPRA and related measures provided.
Underlying earnings Underlying earnings per share as presented is based on EPRA earnings per share, an industry standard APM considered a key measure
of recurring performance, but adjusted for certain items (listed below) which management believes are necessary in order to better
present the Group's recurring performance and therefore provide an indication of the extent to which dividend payments are
supported by underlying operations (see underlying profit statement in the other information section). Underlying earnings per share
excludes property and derivative movements, exceptional items and related tax. The key differences to EPRA earnings per share relate
to the following adjustments:
— with the exception of termination costs on allocated interest rate swaps and costs related to acquisitions, which are both excluded
from EPRA earnings and underlying earnings, exceptional finance costs (as detailed in note 5) and exceptional administration
expenses (as detailed in note 4) are included in EPRA earnings but are excluded from the Group's measure of underlying earnings. In
accordance with the Group's definition for exceptional items (as detailed in the glossary), the Group considers these costs to be
exceptional based on their nature and incidence, which create volatility in earnings
— fair value movements on interest rate swaps not currently used for economic hedges of debt (referred to as unallocated swaps) are
included in EPRA earnings but are excluded from the Group's measure of underlying earnings. The Group does not hold unallocated
swaps for speculative purposes. Management currently intends to hold these unallocated swaps until maturity, therefore the
volatility created by their fair value movements will not crystallise
A reconciliation of underlying earnings to (loss)/profit for the year attributable to owners of intu properties plc as well as EPRA earnings
is provided in note 8. The EPRA section within the other information section provides additional details on EPRA and related measures
provided.
Overview
We have recorded underlying earnings of GBP193.1 million in 2018, down from the GBP201.0 million recorded in 2017. This reflects the impact of
disposals and developments in 2018 partially offset by a 0.6 per cent growth in like-for-like net rental income. Underlying earnings per share of
14.4 pence has reduced 0.6 pence in the year.
The deficit on property revaluations of GBP1,405.0 million in 2018 is the primary driver of the loss for the year attributable to owners of intu
properties plc of GBP1,132.2 million, compared to a surplus on property revaluations of GBP47.3 million and a profit of GBP216.7 million in 2017. Further
commentary on the deficit on property revaluations is provided in the operating review.
Our measure of NAV per share (diluted, adjusted) of 312 pence has decreased 99 pence during the year due to the deficit on property
revaluations, which impact the movement by 102 pence.
In January 2018 we continued our programme of recycling capital, completing the 50 per cent sale of intu Chapelfield to a new joint venture
partner, LaSalle Investment Management (acting on behalf of Greater Manchester Pension Fund and West Yorkshire Pension Fund), for initial net
consideration of GBP148.0 million. In accordance with IFRS, following the completion date, intu Chapelfield is now presented as a joint venture in
our financial statements.
We have refinanced or entered new facilities of over GBP500 million in 2018. Our interest cover ratio of 1.91x is slightly lower in the year
(31 December 2017: 1.94x) with satisfactory headroom above our target minimum level of 1.60x.
Income statement
2018 2017
Group Group
Share of including share of including share of
Group joint ventures joint ventures joint ventures
GBPm GBPm GBPm GBPm
Underlying earnings 193.1 n/a 193.1 201.0
Adjusted for:
Revaluation of investment and development property (1,332.8) (72.2) (1,405.0) 47.3
Loss on disposal of subsidiaries (8.5) - (8.5) (1.8)
Gain on sale of investment and development property 1.4 - 1.4 -
Loss on sale of other investments - - - (0.3)
Administration expenses - exceptional (13.1) (0.1) (13.2) (6.6)
Exceptional finance costs (32.9) 4.5 (28.4) (33.0)
Change in fair value of financial instruments 87.3 (1.0) 86.3 23.0
Tax on the above 5.8 (2.2) 3.6 (22.7)
Share of joint ventures' adjusted items (71.3) 71.3 - -
Share of associates' adjusted items 1.1 - 1.1 0.4
Non-controlling interests in respect of the above 37.7 (0.3) 37.4 9.4
(Loss)/profit for the year attributable to owners of intu properties plc (1,132.2) n/a (1,132.2) 216.7
Underlying earnings per share (pence) 14.4p n/a 14.4p 15.0p
Underlying earnings and underlying earnings per share of GBP193.1 million and 14.4 pence respectively in 2018 have decreased from GBP201.0 million
and 15.0 pence respectively in 2017. The key movements of underlying earnings are shown in the chart below.
Net rental income decreased GBP9.5 million in 2018 to GBP450.5 million primarily due to the part disposal of intu Chapelfield in January 2018 and the
acquisition and part disposal of intu Xanadú in 2017, partially offset by growth in like-for-like net rental income.
Like-for-like net rental income increased by GBP2.3 million, 0.6 per cent in the year, driven by rent reviews and new lettings partially offset by
administrations and CVAs (see operating review).
Administration expenses increased by GBP2.4 million during the year to GBP44.0 million, predominantly from increased corporate overheads and
depreciation on IT capital projects.
Net underlying finance costs have decreased by GBP2.1 million during the year to GBP220.4 million, driven by our ongoing refinancing programme and
interest capitalised on developments partially offset by new debt raised. We expect finance costs in 2019 to be approximately double the second
half of 2018 figure.
As discussed in the overview, the 2018 loss attributable to owners of intu properties plc is GBP1,132.2 million, a decrease from the GBP216.7 million
profit reported in 2017.
Our investment in joint ventures recorded a loss of GBP42.1 million in 2018, compared to a profit of GBP35.5 million in 2017, which is primarily a result
of a deficit on property valuations of GBP72.4 million (2017: surplus of GBP15.9 million). This includes underlying earnings of GBP29.2 million, an increase
of GBP10.9 million during the year due to intu Chapelfield becoming a joint venture in January 2018 and the full year impact in 2018 of intu Xanadú
as a joint venture.
As detailed in the table below, our net rental income margin is stable at 87.7 per cent. Our ratio of total costs to income, as calculated in
accordance with EPRA guidelines, remains low at 15.3 per cent (see other information section).
2018 2017
GBPm GBPm
Gross rental income 528.0 546.2
Head rent payable (14.6) (20.5)
513.4 525.7
Net service charge expense and void costs (28.8) (29.1)
Bad debt and lease incentive write-offs (2.5) (3.2)
Property operating expenses (31.6) (33.4)
Net rental income 450.5 460.0
Net rental income margin 87.7% 87.5%
EPRA cost ratio (excluding direct vacancy costs) 15.3% 15.1%
Balance sheet
2018 2017
Group Group
Share of including share of including share of
Group joint ventures joint ventures joint ventures
GBPm GBPm GBPm GBPm
Investment and development property 8,021.8 1,108.3 9,130.1 10,192.5
Investment in joint ventures 823.9 (823.9) - -
Assets and associated liabilities classified as held for sale - - - 302.9
Investment in associates and other investments 76.1 - 76.1 81.6
Net external debt (4,606.3) (260.9) (4,867.2) (4,835.5)
Derivative financial instruments (280.5) (3.5) (284.0) (349.8)
Other assets and liabilities (210.6) (16.3) (226.9) (259.3)
Net assets 3,824.4 3.7 3,828.1 5,132.4
Non-controlling interest (12.7) (3.7) (16.4) (57.4)
Attributable to shareholders 3,811.7 n/a 3,811.7 5,075.0
Fair value of derivative financial instruments 280.5 3.5 284.0 349.8
Other adjustments 98.7 (3.5) 95.2 97.9
Net assets (diluted, adjusted) 4,190.9 n/a 4,190.9 5,522.7
NAV per share (diluted, adjusted) (pence) 312p n/a 312p 411p
The Group's net assets attributable to shareholders are GBP3,811.7 million, a decrease from GBP5,075.0 million at 31 December 2017, while net assets
(diluted, adjusted) are GBP4,190.9 million, a decrease from GBP5,522.7 million at 31 December 2017.
NAV per share (diluted, adjusted) at 31 December 2018 has decreased 99 pence during the year to 312 pence; the key movements are shown in
the chart above. This was driven principally by the deficit on property revaluations in the year of 102 pence. As noted previously, our measure of
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
be 308 pence.
Investment and development property has decreased by GBP1,062.4 million due to a deficit on revaluation of GBP1,405.0 million, partially offset by
capital expenditure of GBP201.0 million during the year 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 GBP823.9 million at 31 December 2018 (31 December 2017: GBP735.5 million), which includes
the Group's share of net assets, on an equity accounted basis, of GBP487.9 million (31 December 2017: GBP452.6 million) and loans to joint ventures of
GBP336.0 million (31 December 2017: GBP282.9 million). The 2018 movement broadly 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 partially offset by a deficit on property valuations of GBP72.4 million.
Investments in associates of GBP65.6 million represent our interests in India, which comprises a 32 per cent interest in Prozone
(GBP45.1 million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (GBP20.5 million). Prozone and Empire
own and operate shopping centres in Coimbatore and Aurangabad.
Net external debt of GBP4,867.2 million has increased by GBP31.7 million, the main movements due to capital expenditure in the year partially offset
by proceeds from the part disposal of intu Chapelfield. Cash including the Group's share of joint ventures is in line with 2017, reducing slightly by
GBP3.9 million to GBP274.3 million and gross debt has increased by GBP27.8 million to GBP5,141.5 million.
Derivative financial instruments comprise the fair value of the Group's interest rate swaps (referred to as allocated and unallocated swaps). The
net liability at 31 December 2018 is GBP284.0 million, a decrease of GBP65.8 million in the year, due to cash payments in the year and increases in
interest rates, with the Sterling five-year and 10-year swap rates increasing by 24bps and 13bps respectively. Cash payments in 2018 totalled
GBP44.9 million, GBP28.1 million of which has been classified as an exceptional finance cost as it relates to payments in respect of unallocated swaps
(see below). The balance of the payments has been included as underlying finance costs as it relates to ongoing allocated swaps used to hedge
debt.
We hold a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders' practice. Lenders
previously would allow the allocation of existing long-dated swap cover to new debt; however, this practice changed where lenders began to
require lender specific swaps on new debt to be put in place as a hedge when entering into new variable interest rate debt. As a consequence of
our significant refinancing activity carried out in recent years (see financing section), this historical long-dated swap cover is no longer acting as a
hedge to any debt interests and is therefore unallocated.
At 31 December 2018 these unallocated swaps have a market value liability of GBP184.4 million (31 December 2017: GBP235.4 million). It is estimated
that we will be required to make cash payments on these unallocated swaps of around GBP26.7 million in 2019, reducing to below GBP20 million per
annum in 2021. Cash payments on these unallocated swaps will continue until their maturity dates, which range between 2020 and 2037, but will
cease in the event a swap is closed early. Management currently intends to hold these until maturity as there is currently no economic benefit to
closing these unallocated swap contracts early as this would require an upfront cash settlement in full.
The non-controlling interest at 31 December 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 31 December 2018 the exposure is 15.0 per cent of net assets
attributable to shareholders of the Group (31 December 2017: 10.6 per cent), with the increase from 31 December 2017 being primarily due to the
declines in our UK property valuations during the year. Once the Eurofund expected future interest in the intu Costa del Sol development concludes,
we expect the exposure to reduce to 13.9 per cent, after which the appropriate level of exposure will be assessed.
Cash flow
2018 2017
Group cash flow as reported GBPm GBPm
Cash flows from operating activities 102.6 140.9
Cash flows from investing activities (0.4) (518.1)
Cash flows from financing activities (89.0) 350.2
Foreign exchange movements 0.1 0.4
Net increase/(decrease) in cash and cash equivalents 13.3 (26.6)
During 2018 cash and cash equivalents increased by GBP13.3 million.
Cash flows from operating activities of GBP102.6 million are GBP38.3 million lower than the same period in 2017, primarily due to the timing of
payments.
Cash flows from investing activities reflects the cash outflows related to capital expenditure in 2018 offset by the cash inflow for the 50 per cent
sale of intu Chapelfield in January and net cash inflows from joint ventures during the year.
The main elements of cash flows from financing activities are the cash dividends paid in 2018 of GBP187.6 million, partially offset by net borrowings
drawn in the year.
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. In October 2018 we settled in cash the remaining GBP160.4 million outstanding in respect of the
2.5 per cent convertible bonds.
During the year 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
— agreed a new GBP46 million facility secured against our development at intu Broadmarsh, maturing in 2022. At 31 December 2018, this
development finance loan was undrawn
— agreed a new GBP50 million facility secured against our development at intu Trafford Centre's Barton Square, maturing in 2021. This facility is
split as a GBP25 million term loan, which was fully drawn at 31 December 2018 and a GBP25 million development finance loan, of which GBP3.3 million
was drawn at 31 December 2018
The chart below illustrates that we have no major refinancing requirement due until 2021.
Debt measures
2018 2017
Debt to assets ratio 53.1% 45.2%1
Interest cover 1.91x 1.94x
Weighted average debt maturity 5.8 years 6.6 years
Weighted average cost of gross debt 4.2% 4.2%
Proportion of gross debt with interest rate protection 84% 95%
Cash and available facilities GBP548.5m GBP833.1m(1)
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 53.1 per cent since 31 December 2017 due to the deficit on property revaluation in the year. As part of
our revised strategy, we will be looking to reduce this to below 50 per cent. Our weighted average debt maturity
has reduced to 5.8 years and the weighted average cost of gross debt is stable at 4.2 per cent (excluding the RCF).
Interest cover of 1.91x 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 in the year to 84 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 10 per cent fall in capital values would
create a covenant shortfall of only GBP1 million.
Capital commitments
We have an aggregate Board-approved commitment to capital projects of GBP238.0 million at 31 December 2018 (31 December 2017: GBP267.6
million). Of this, GBP191.2 million (31 December 2017: GBP158.6 million) is contractually committed.
In addition to the committed expenditure, we have an identified uncommitted pipeline of active asset 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 two of our joint ventures 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.
The Group looks to minimise the level of tax risk and at all times seeks 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. This is achieved through regularly carrying out risk reviews, seeking pre-
clearance from taxing authorities in complex areas and actively engaging in discussions regarding proposed changes in the taxation system that
might affect the Group.
We have updated 'intu's Approach to Tax' for 2018 which is published on the Group's website intugroup.co.uk and provides further information
about the Group's tax strategy.
Despite being a REIT, we pay tax directly on non-SOCIMI overseas earnings, any UK non-property income, business rates and transaction taxes
such as stamp duty land tax. In 2018 the total of such payments to tax authorities was GBP28.2 million
(2017: GBP28.5 million), of which GBP25.4 million (2017: GBP26.0 million) was in the UK and GBP2.8 million (2017: GBP2.5 million) in Spain. We also collect VAT,
employment taxes and withholding tax on dividends for HMRC and the Spanish tax authorities.
Dividends
The Directors are not recommending a final dividend for 2018. The total paid in respect of 2018 is 4.6 pence, a reduction of the
14.0 pence paid in respect of 2017.
A UK REIT is expected to pay dividends (PIDs) of at least 90 per cent of its taxable profits from its UK property rental business by the first
anniversary of each accounting date. In view of the announced short term reduction of dividends it is expected that there will be an
underpayment of the minimum PID, and so for the Group to incur UK corporation tax payable at 19 per cent. Any corporation tax payable would
form part of underlying earnings and in 2019 we would expect this to be in the range of GBP15 million to GBP20 million. The Group intends to remain a
UK REIT for the foreseeable future.
At 31 December 2018, the Company has distributable reserves of GBP604 million.
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 undertaken a robust assessment of the principal risks and uncertainties 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 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.
There was an increased risk profile in 2018, with increases in both property market sub-risks. Additionally, there have been some changes to
existing principal risks. Acquisitions has been removed as the business has not engaged in acquisitions in the year and people has been added as
sub-category within the operations risk.
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
macroeconomic 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. intu's Brexit risk review, initially conducted in 2016, has
been reviewed and updated during the year.
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
4) Making smart use of capital
Risk and impact Mitigation Change 2018 commentary
Property market Strategic objectives affected: 1,2,3,4
Macroeconomic — focus on high-quality shopping centres together with Likelihood and impact of macroeconomic weakness continues
Weakness in the their upgrading to be a risk with continued political uncertainty in the UK and
macroeconomic — covenant headroom monitored and stress-tested + Brexit arrangements not yet detailed, which has increased
environment could — make representation on key policies, for example investor caution resulting in a reduction in property values and
undermine rental income business rates lower transaction volumes in the year
levels and property values, — reduction in like-for-like property values, and continued
reducing return on — portfolio-wide marketing events to attract footfall pressure at the lower end of the market
investment and covenant
headroom — use our respected brand to attract and retain
aspirational retailers — substantial covenant headroom
— geographic diversification across the UK and Spain — no significant debt maturities until 2021 and average
unexpired term of 5.8 years
— review and update of Brexit risk review
— long-term lease structures with average unexpired term of
7.2 years
Retail environment — active management of tenant mix Due to continued macroeconomic uncertainty, the likelihood
Failure to react to changes in — regular monitoring of tenant strength and diversity and impact of changes to the retail environment resulting in
the retail environment could — upgrading assets to meet market demand + potential tenant failures continues to increase. intu monitored
undermine intu's ability to this closely in 2018 with intu's strategy continuing to deliver
attract customers and — Tell intu customer feedback programme helps identify solid footfall numbers and occupancy
tenants changes in customer preferences
— increased level of administrations and retailer CVAs
— work closely with retailers, including increased focus on
managing shared risks — significant progress on planning and pre-letting of
near-term pipeline with a focus on leisure
— digital strategy that embraces technology and digital
customer engagement. This enables intu to engage in — continuing digital investment to improve relevance as
shopping habits change
and support multichannel retailing, and to take the
opportunities offered by ecommerce — occupancy remains strong at 97 per cent
— intu Accelerate programme to identify and implement — footfall growth continues to beat the benchmark
innovations in the retail environment — completion of the intu Watford development
— contingency plans for potential future vacant units — on site with the GBP72m intu Lakeside leisure extension and the
— future diversification of land use, for example residential GBP75m expansion and transformation of
intu Trafford Centre's Barton Square
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 2018
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 — gold award from RoSPA
— crisis management and business continuity plans in place — full review undertaken of each centre's fire strategy and
and tested building specifications post-Grenfell and Liverpool Echo Arena
— retailer liaison and briefings has provided appropriate assurance across the portfolio
— appropriate levels of insurance — Primary Authority audits for both health and safety and fire
— staff succession planning and development in place to safety are being conducted. These provide assurances
ensure continued delivery of world class service surrounding compliance
— health and safety managers or coordinators in all centres
— implementation of new risk mitigators such as acid
attack response kits in our shopping centres
Cybersecurity — data and cybersecurity strategies Likelihood continues to rely on operational and third party
Loss of data and information — regular testing programme and cyber scenario exercise systems and data. Severity of potential impact managed
or failure of key systems and benchmarking = through continued development of tools and controls. Hacking
resulting in financial and/or — appropriate levels of insurance attempts have not resulted in data loss or major operational
reputational loss impacts
— crisis management and business continuity plans in place
and tested — ongoing Group-wide cybersecurity project with investment in
tools, consultancy and staff to mitigate impact of threats from
evolving cybersecurity landscape
— data committee and data protection officer in place
— internal and external assessment of GDPR compliance — implemented updated GDPR policies and procedures
— monitoring of regulatory environment and best practice
— cybersecurity assessment performed by external
consultancy and full action plan in place
— managing of supply chain and service providers who
hold intu data
Terrorism — strong business processes 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 The NaCTSO and the intelligence community continue to be as
centre or another major respond to changes in risk levels busy as ever in protecting the UK from terror attacks and 2018
shopping centre resulting in — trained security staff who are alert and vigilant has seen a continuation of terror attacks in mainland Europe.
loss of consumer confidence — extraordinary pre-planned operational responses to = Our Group Head of Security is a member of the Crowded Places
with consequent impact on changes in national threat level Information Exchange. This group meets quarterly and ensures
lettings and rental growth that intu is abreast of all the current threats and work
— annual audits of operational standards carried out undertaken by the Counter Terrorism Policing teams in the UK
internally and by external agencies
— national threat level remains at Severe
— culture of visitor, staff and contractor safety
— major multiagency security exercises held at all five super-
— crisis management and business continuity plans in place regional intu shopping centres
and tested with involvement of multiple external
— operating procedures in place for the introduction of further
agencies
— retailer liaison and briefings
— appropriate levels of insurance
— strong relationships and frequent liaison with police,
NaCTSO, CPNI and other agencies
— NaCTSO approved to train staff in counter-terrorism
awareness programme
— trial of airport style screening technology at the Arena,
intu Braehead
Risk and impact Mitigation Change 2018 commentary
People — Nominations Committee with responsibility for selecting New People risks have increased during the year as the business has
Failure to attract, retain or an appropriate replacement Chief Executive been through two transaction processes, neither of which
develop an appropriate — strengthened appraisal process focuses on key targets completed. This led to uncertainty around job security. The
team with the key skills to linked to intu's strategic objectives business also announced the departure of the Chief Executive
deliver intu's objectives
— benchmarking of salaries and packages with a planned
review of all benefits
— support for employees including the Retail Trust
— talent management programme and broader learning
and development initiatives
— employee engagement surveys to assess strengths and
opportunities for improvement
— range of recruitment channels to attract new staff
Financing Strategic objectives affected: 4
Availability of funds — funding strategy regularly reported to the Board with Macroeconomic events during 2018, and the uncertainty
Reduced availability of funds current and projected funding position caused by them, mean the risk of reduced funding availability
could limit liquidity, leading — effective treasury management aimed at balancing the = remains. The severity of potential impact remains unchanged
to restriction of investing length of the debt maturity profile and diversification of from 2017. Regular re?nancing activity continues to evidence
and operating activities sources of finance the availability of funding
and/or increase in funding — consideration of financing plans including potential for — introduction of joint venture partner into intu Chapelfield and
cost GBP74m new financing on intu's 50 per cent interest
recycling of capital before commitment to transactions
and developments — EUR225m refinancing of intu Puerto Venecia
— strong relationships with lenders, shareholders and — GBP140m new financing for intu Milton Keynes
partners — GBP96m of new development financing for intu Trafford
— focus on high-quality shopping centres Centre's Barton Square and intu Broadmarsh
Developments Strategic objectives affected: 3,4
Developments — Capital Projects Committee reviews detailed appraisals Although the intu Watford development works are now
Developments fail to create before and monitors progress during significant projects complete, new projects are commencing and therefore
shareholder value — fixed price construction contracts for developments = exposure in terms of likelihood and impact remain the same
agreed with clear apportionment of risk — at intu Lakeside, the leisure development remains on
— significant levels of pre-lets exchanged prior to scheme schedule and is close to completion
development — detailed appraisal work and signi?cant pre-lets ahead of
starting major development projects
— at intu Trafford Centre secured key anchor letting to Primark
and construction underway to deliver transformation of
Barton Square
— intu Costa del Sol progressing towards final planning
permission
Brand Strategic objectives affected: 2,3
Integrity of the brand — intellectual property protection Likelihood and severity of potential impact increased in 2018
The integrity of the brand is — strong guidelines for use of brand + due to the increased recognition of the brand combined with
damaged leading to financial — strong underlying operational controls and processes the increased pace and breadth of social media. However, intu
and/or reputational loss and customer service framework has strong controls to identify and manage these
— continuing media interest in intu and our commentary and
— robust crisis management procedures opinions on the business and wider landscape
— ongoing training programme and reward and
recognition schemes designed to embed brand values — ongoing development of brand in Spain, with full brand roll-
and culture throughout the organisation out at intu Puerto Venecia and intu Xanadu
— traditional and digital media monitoring/analysis
— Tell intu and Shopper View customer feedback
programmes
— increasing staff training, including media training
— detection processes for media and social and online
media issues
Statement of Directors' responsibilities in respect of the financial
statements
The Group's annual report for the year ended 31 December 2018 contains the following statement of Directors' responsibilities. Certain parts of
the annual report are not included within this announcement.
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit or loss of the Group and Company for that period. In preparing the financial
statements, the Directors are required to:
(a) select suitable accounting policies and then apply them consistently
(b) state whether applicable IFRSs as adopted by the European Union have been followed for the Group and Company financial statements,
subject to any material departures disclosed and explained in the financial statements
(c) make judgements and accounting estimates that are reasonable and prudent
(d) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue
in business
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that
the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the governance section of the annual report confirm that, to the best of their
knowledge:
(a) the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and loss of the Company
(b) the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and loss of the Group
(c) the strategic report within the annual report includes a fair review of the development and performance of the business and the position of
the Group and Company, together with a description of the principal risks and uncertainties that it faces
Signed on behalf of the Board on 20 February 2019
David Fischel
Chief Executive
Matthew Roberts
Chief Financial Officer
Consolidated income statement
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
Revenue 2 581.1 616.0
Net rental income 2 398.5 423.4
Net other income 5.3 3.0
Revaluation of investment and development property 10 (1,332.8) 30.8
Loss on disposal of subsidiaries 3 (8.5) (1.8)
Gain on sale of investment and development property 1.4 -
Administration expenses - ongoing (42.9) (40.9)
Administration expenses - exceptional 4 (13.1) (5.9)
Operating (loss)/profit (992.1) 408.6
Finance costs 5 (210.8) (213.9)
Finance income 5 14.8 12.6
Other finance costs 5 (38.8) (38.9)
Change in fair value of financial instruments 5 87.3 22.0
Net finance costs 5 (147.5) (218.2)
(Loss)/profit before tax, joint ventures and associates (1,139.6) 190.4
Share of post-tax (loss)/profit of joint ventures 11 (42.1) 35.5
Share of post-tax profit of associates 12 2.3 1.3
(Loss)/profit before tax (1,179.4) 227.2
Current tax 6 (0.1) 0.1
Deferred tax 6 5.8 (24.0)
Taxation 6 5.7 (23.9)
(Loss)/profit for the year (1,173.7) 203.3
Attributable to:
Owners of intu properties plc (1,132.2) 216.7
Non-controlling interests (41.5) (13.4)
(1,173.7) 203.3
Basic (loss)/earnings per share 8 (84.3)p 16.1p
Diluted (loss)/earnings per share 8 (84.3)p 15.0p
Details of underlying earnings are presented in the underlying profit statement in the other information section. Underlying earnings per share is
shown in note 8(b).
Consolidated statement of comprehensive income
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
(Loss)/profit for the year (1,173.7) 203.3
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Exchange differences 4.1 16.9
Total items that may be reclassified subsequently to the income statement 4.1 16.9
Items that will not be reclassified subsequently to the income statement:
Revaluation of other investments (6.4) (0.2)
Change in fair value of financial instruments 17 43.4 -
Tax relating to components of other comprehensive income 6 - 0.1
Total items that will not be reclassified subsequently to the income statement 37.0 (0.1)
Other comprehensive income for the year 41.1 16.8
Total comprehensive (loss)/income for the year (1,132.6) 220.1
Attributable to:
Owners of intu properties plc (1,091.1) 233.5
Non-controlling interests (41.5) (13.4)
(1,132.6) 220.1
Consolidated balance sheet
at 31 December 2018
2018 2017
Notes GBPm GBPm
Non-current assets
Investment and development property 10 8,021.8 9,179.4
Plant and equipment 11.8 12.2
Investment in joint ventures 11 823.9 735.5
Investment in associates 12 65.6 64.8
Other investments 10.5 16.8
Goodwill 4.0 4.0
Derivative financial instruments 4.3 0.3
Trade and other receivables 13 105.5 102.5
9,047.4 10,115.5
Current assets
Assets classified as held for sale - 309.1
Derivative financial instruments 0.4 -
Trade and other receivables 13 155.2 141.9
Cash and cash equivalents 14 239.5 228.0
395.1 679.0
Total assets 9,442.5 10,794.5
Current liabilities
Liabilities associated with assets classified as held for sale - (6.2)
Trade and other payables 15 (278.4) (288.5)
Current tax liabilities - (0.1)
Borrowings 16 (51.1) (186.7)
Derivative financial instruments (39.0) (8.0)
(368.5) (489.5)
Non-current liabilities
Borrowings 16 (4,984.2) (4,811.1)
Derivative financial instruments (246.2) (339.8)
Deferred tax liabilities 18 (18.0) (23.7)
Other payables (1.2) (1.2)
(5,249.6) (5,175.8)
Total liabilities (5,618.1) (5,665.3)
Net assets 3,824.4 5,129.2
Equity
Share capital 19 677.5 677.5
Share premium 19 1,327.4 1,327.4
ESOP shares 20 (37.0) (39.1)
Other reserves 402.2 361.1
Retained earnings 1,441.6 2,748.1
Attributable to owners of intu properties plc 3,811.7 5,075.0
Non-controlling interests 12.7 54.2
Total equity 3,824.4 5,129.2
Consolidated statement of changes in equity
for the year ended 31 December 2018
Attributable to owners of intu properties plc
Non-
Share Share ESOP 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 1) - - - - 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 year - - - - (1,132.2) (1,132.2) (41.5) (1,173.7)
Other comprehensive income:
Revaluation of other investments - - - (6.4) - (6.4) - (6.4)
Change in fair value of financial instruments
(note 17) - - - 43.4 - 43.4 - 43.4
Exchange differences - - - 4.1 - 4.1 - 4.1
Total comprehensive loss for the year - - - 41.1 (1,132.2) (1,091.1) (41.5) (1,132.6)
Dividends (note 7) - - - - (188.1) (188.1) - (188.1)
Share-based payments - - - - 2.8 2.8 - 2.8
Acquisition of ESOP shares - - (0.9) - - (0.9) - (0.9)
Disposal of ESOP shares - - 3.0 - (3.0) - - -
- - 2.1 - (188.3) (186.2) - (186.2)
At 31 December 2018 677.5 1,327.4 (37.0) 402.2 1,441.6 3,811.7 12.7 3,824.4
Attributable to owners of intu properties plc
Non-
Share Share ESOP 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 (note 6) - - - 0.1 - 0.1 - 0.1
Total comprehensive income for the year - - - 16.8 216.7 233.5 (13.4) 220.1
Dividends (note 7) - - - - (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 ESOP shares - - (1.3) - - (1.3) - (1.3)
Disposal of ESOP 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
Consolidated statement of cash flows
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
Cash generated from operations 23 319.7 365.6
Interest paid (236.1) (232.4)
Interest received 19.3 7.6
Taxation (0.3) 0.1
Cash flows from operating activities 102.6 140.9
Cash flows from investing activities
Purchase and development of property, plant and equipment (193.5) (189.5)
Sale of investment and development property 24.4 3.7
Acquisition of businesses net of cash acquired - (446.7)
Cash transferred to assets classified as held for sale - (0.5)
Additions to other investments (0.1) (1.5)
Disposal of subsidiaries net of cash sold 21 143.2 104.1
Investment of capital in joint ventures 11 (7.7) (0.7)
Repayment of capital in joint ventures 11 7.1 -
Loan advances to joint ventures 11 (2.0) (3.0)
Loan repayments by joint ventures 11 25.3 14.8
Distributions from joint ventures 11 2.9 1.2
Cash flows from investing activities (0.4) (518.1)
Cash flows from financing activities
Acquisition of ESOP shares (0.9) (1.3)
Sale of ESOP shares - 0.2
Cash transferred from restricted accounts 1.8 0.1
Borrowings drawn 302.0 1,199.2
Borrowings repaid (204.3) (660.0)
Equity dividends paid (187.6) (188.0)
Cash flows from financing activities (89.0) 350.2
Effects of exchange rate changes on cash and cash equivalents 0.1 0.4
Net increase/(decrease) in cash and cash equivalents 13.3 (26.6)
Cash and cash equivalents at 1 January 14 225.1 251.7
Cash and cash equivalents at 31 December 14 238.4 225.1
Notes
1 Accounting convention and basis of preparation
The financial information presented does not constitute the Group's annual report and financial statements for either the year ended
31 December 2018 or the year ended 31 December 2017, but is derived from those financial statements. The Group's statutory financial statements
for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's annual general
meeting. The auditors' reports on both the 2017 and 2018 financial statements were not qualified or modified; did not draw attention to any
matters by way of an emphasis of matter; and did not contain any statement under Section 498 of the Companies Act 2006.
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (IFRS), interpretations issued by the International Financial Reporting Standards Interpretations Committee and with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS.
These consolidated financial statements have been prepared under the historical cost convention as modified by investment and development
property, derivative financial instruments and certain other assets and liabilities that have been measured at fair value. A summary of the
significant accounting policies applied is set out in note 2 of the Group's annual report and financial statements.
These accounting policies are consistent with those applied in the last annual financial statements, as amended when relevant to reflect the
adoption of new standards, amendments and interpretations which became effective in the year. Except as described below, these changes have
not had an impact on the financial statements.
This is the Group's first set of annual financial statements where IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with
Customers have been applied. The impacts on the financial statements on adoption of these standards are set out below. Significant accounting
policies in respect of these standards are provided in note 2 of the Group's annual report and financial statements.
IFRS 9 Financial Instruments - the standard applies to classification and measurement of financial assets and financial liabilities, impairment
provisioning and hedge accounting. The most significant presentation changes to the Group on adoption are as follows:
— financial instruments designated as at fair value through profit or loss (e.g. convertible bonds) - changes in fair value related to own credit risk
will now be recognised in other comprehensive income, as opposed to the income statement under the previous standard
— modifications to financial liabilities (e.g. borrowings) - a one off gain or loss will now be recognised in the income statement at the date of
modification, as opposed to recognising the gain or loss over the modified term of the financial liability
— other investments - an irrevocable election has been made to recognise movements in other investments through other comprehensive
income, consistent with the accounting treatment under the previous standard
On adoption, the Group has made an opening adjustment to retained earnings of GBP14.0 million, with the 2017 comparative period not restated.
The adoption of the standard has not had any other material impact on the financial statements.
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
financial statements.
A number of standards and amendments to standards have been issued but are not yet effective for the current year. See note 1 of the Group's
annual report and financial statements for further details.
Significant estimates and judgements
The preparation of 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. See note 1 of the Group's annual report
and financial statements for details on significant judgements and estimates.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the
strategic report of the Group's annual report and financial statements. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the financial review. In addition, note 28 of the Group's annual report and financial statements includes the
Group's risk management objectives, details of its financial instruments and hedging activities, its exposure to liquidity risk and details of its
capital structure.
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.
1 Accounting convention and basis of preparation
Going concern (continued)
In preparing the most recent projections, factors taken into account include GBP274.3 million of cash (including the Group's share of cash in joint
ventures of GBP34.8 million) and GBP274.2 million of undrawn facilities at 31 December 2018. The Group's weighted average debt maturity of 5.8
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 Group's financial statements.
2 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:
2018
Group including share of joint ventures
Less share of
UK Spain Total joint ventures Group total
GBPm GBPm GBPm GBPm GBPm
Rent receivable 494.6 33.4 528.0 (60.7) 467.3
Service charge income 113.2 7.3 120.5 (13.5) 107.0
Facilities management income from joint ventures 4.5 - 4.5 2.3 6.8
Revenue 612.3 40.7 653.0 (71.9) 581.1
Rent payable (14.6) - (14.6) 1.1 (13.5)
Service charge costs (131.0) (8.0) (139.0) 15.0 (124.0)
Facilities management costs recharged to joint ventures (4.5) - (4.5) (2.3) (6.8)
Other non-recoverable costs (40.0) (4.4) (44.4) 6.1 (38.3)
Net rental income 422.2 28.3 450.5 (52.0) 398.5
(Loss)/profit for the year (1,175.1) 1.9 (1,173.2) (0.5)1 (1,173.7)
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.
An analysis of investment and development property, capital expenditure and revaluation (deficit)/surplus are presented below:
Investment and development property Capital expenditure Revaluation (deficit)/surplus
2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm
UK 8,270.5 9,373.8 171.8 184.1 (1,406.6) (51.2)
Spain 859.6 818.7 29.2 62.6 1.6 98.5
Group including share of joint ventures 9,130.1 10,192.5 201.0 246.7 (1,405.0) 47.3
Less share of joint ventures (1,108.3) (1,013.1) (5.8) (7.3) 72.2 (16.5)
Group 8,021.8 9,179.4 195.2 239.4 (1,332.8) 30.8
The Group's geographical analysis of non-current assets is presented below on a statutory basis. 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.
2018 2017
GBPm GBPm
UK 8,381.8 9,484.1
Spain 599.6 565.5
India 66.0 65.9
9,047.4 10,115.5
3 Loss on disposal of subsidiaries
The loss on disposal of subsidiaries of GBP8.5 million includes a loss in respect of the part disposal of intu Chapelfield to a joint venture of GBP9.0
million (see note 21) offset by an adjustment in respect of the part disposal of intu Xanadú in 2017 of GBP0.5 million. The 2017 loss of GBP1.8 million
includes a loss in respect of the final net asset value adjustment of intu Bromley of GBP0.8 million as well as a loss in respect of the disposal of intu
Xanadú to a joint venture of GBP1.0 million.
4 Administration expenses - exceptional
Exceptional administration expenses (see glossary for definition of exceptional items) in the year totalled GBP13.1 million
(2017: GBP5.9 million) and relate principally to costs associated with the aborted offers for the Group made by Hammerson plc and the Consortium
(comprised of the Peel Group, the Olayan Group and Brookfield Property Group). The 2017 costs related to the acquisition of intu Xanadú as well
as costs associated with the aborted offer for the Group made by Hammerson plc. These costs have been classified as exceptional based on their
incidence.
5 Net finance costs
2018 2017
GBPm GBPm
On bank loans, overdrafts and allocated interest rate swaps 192.6 192.0
On convertible bonds (note 17) 13.8 17.5
On obligations under finance leases 4.4 4.4
Finance costs1 210.8 213.9
Finance income (14.8) (12.6)
Amortisation of Metrocentre compound financial instrument 5.9 5.9
Payments on unallocated interest rate swaps and other costs2 31.8 34.6
Foreign currency movements2 1.1 (1.6)
Other finance costs 38.8 38.9
Gain on derivative financial instruments3 (67.5) (28.3)
(Gain)/loss on convertible bonds designated as at fair value through profit or loss (note 17) (19.8) 6.3
Change in fair value of financial instruments (87.3) (22.0)
Net finance costs 147.5 218.2
1 Finance costs of GBP10.5 million were capitalised in the year ended 31 December 2018 (2017: GBP4.9 million).
2 Amounts totalling GBP32.9 million in the year ended 31 December 2018 (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 8(b)). 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 gain on derivative financial instruments are gains totalling GBP44.9 million (2017: GBP47.1 million) resulting from the payment of obligations under derivative financial instruments
during the year. Of these GBP28.1 million related to unallocated swaps (2017: GBP26.1 million).
6 Taxation
Taxation for the year:
2018 2017
GBPm GBPm
Current tax:
Overseas taxation 0.1 0.2
Overseas taxation - adjustment in respect of prior years - (0.1)
UK taxation - adjustment in respect of prior years - (0.2)
Current tax 0.1 (0.1)
Deferred tax:
On investment and development property (5.5) 24.8
On other temporary differences (0.3) (0.8)
Deferred tax (5.8) 24.0
Total tax (credit)/charge (5.7) 23.9
Tax relating to components of other comprehensive income of nil (2017: credit of GBP0.1 million) relates entirely to deferred tax in respect of other
investments.
The tax (credit)/charge for 2018 and 2017 is lower than the standard rate of corporation tax in the UK. The differences are explained below:
2018 2017
GBPm GBPm
(Loss)/profit before tax, joint ventures and associates (1,139.6) 190.4
(Loss)/profit before tax multiplied by the standard rate of tax in the UK of 19% (2017: 19.25%) (216.6) 36.7
Exempt property rental profits and revaluations 214.9 (32.8)
(1.7) 3.9
Additions and disposals of property and investments 0.3 6.2
Prior year corporation tax items - (0.3)
Non-deductible and other items 3.4 2.8
Overseas taxation (0.4) 4.3
Unprovided deferred tax (7.3) 7.0
Total tax (credit)/charge (5.7) 23.9
Details of deferred tax balances are given in note 18.
Factors that may affect future current and total tax charges
The Group continued to operate as a UK REIT throughout the year, under which any profits and gains from the UK property investment business
are exempt from corporation tax, provided certain conditions continue to be met. The Group fulfilled these UK REIT conditions throughout the
year. In view of the announced short-term reduction of dividends it is expected that there will be an underpayment of the minimum PID, and so
for the Group to incur UK corporation tax payable at 19 per cent.
Certain of the Group's Spanish joint ventures have elected into the SOCIMI regime, and these continued to operate as and fulfil the relevant
conditions of the SOCIMI regime throughout the year.
7 Dividends
2018 2017
GBPm GBPm
Ordinary shares:
Prior year final dividend paid of 9.4 pence per share (2017: 9.4 pence per share) 126.3 126.2
Interim dividend paid of 4.6 pence per share (2017: 4.6 pence per share) 61.8 61.7
Dividends paid 188.1 187.9
The Directors are not recommending a final dividend for 2018. See financial review and note 6 for further information.
Details of the shares in issue and dividends waived are given in notes 19 and 20 respectively.
As a REIT, dividends are declared and paid in accordance with REIT legislation. See glossary for further information as well as the financial review
for information on distributable reserves.
8 Earnings per share
(a) Number of shares
2018 2017
million shares million shares
Basic1/2 1,343.7 1,343.2
Diluted3 1,343.7 1,427.6
1 The weighted average number of shares used has been adjusted to remove shares held in the 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 as presented is based on EPRA earnings per share, an industry standard APM considered a key measure of
recurring performance, but adjusted for certain items (listed below) which management believes are necessary in order to better present the
Group's recurring performance and therefore provide an indication of the extent to which dividend payments are supported by underlying
operations (see underlying profit statement in the other information section). Underlying earnings per share excludes property and derivative
movements, exceptional items and related tax. The key differences to EPRA earnings per share relate to the following adjustments:
— with the exception of termination costs on allocated interest rate swaps and costs related to acquisitions, which are both excluded from EPRA
earnings and underlying earnings, exceptional finance costs (as detailed in note 5) and exceptional administration expenses (as detailed in
note 4) are included in EPRA earnings but are excluded from the Group's measure of underlying earnings. In accordance with the Group's
definition for exceptional items (as detailed in the glossary), the Group considers these costs to be exceptional based on their nature and
incidence, which create volatility in earnings
— fair value movements on interest rate swaps not currently used for economic hedges of debt (referred to as unallocated swaps) are included
in EPRA earnings but are excluded from the Group's measure of underlying earnings. The Group does not hold unallocated swaps for
speculative purposes. Management currently intends to hold these unallocated swaps until maturity, therefore the volatility created by their
fair value movements will not crystallise
A reconciliation of underlying earnings to (loss)/profit for the year attributable to owners of intu properties plc as well as EPRA earnings is
provided below. The EPRA section within the other information section provides additional details on EPRA and related measures provided.
2018 2017(1)
(Loss)/
earnings Pence per Earnings Pence per
GBPm share GBPm share
Basic (loss)/earnings per share (1,132.2) (84.3)p 216.7 16.1p
Dilutive convertible bonds, share options and share awards - (1.9)
Diluted (loss)/earnings per share (1,132.2) (84.3)p 214.8 15.0p
Basic (loss)/earnings per share (1,132.2) (84.3)p 216.7 16.1p
Adjusted for:
Revaluation of investment and development property (note 10) 1,332.8 99.2p (30.8) (2.3)p
Loss on disposal of subsidiaries (note 3) 8.5 0.6p 1.8 0.1p
Gain on sale of investment and development property (1.4) (0.1)p - -
Administration expenses - exceptional (acquisition and disposal related) 8.0 0.6p 4.9 0.4p
Change in fair value of financial instruments (36.6) (2.7)p (3.7) (0.3)p
Tax on the above (5.8) (0.4)p 23.9 1.8p
Share of joint ventures' adjusted items 77.1 5.7p (17.2) (1.3)p
Share of associates' adjusted items (2.2) (0.2)p (1.1) (0.1)p
Non-controlling interests in respect of the above (37.7) (2.7)p (10.0) (0.7)p
EPRA earnings per share(3) 210.5 15.7p 184.5 13.7p
Adjusted for:
Other exceptional items(2) 38.0 2.8p 34.0 2.5p
Other change in fair value of financial instruments(2) (50.7) (3.8)p (18.3) (1.3)p
Other exceptional tax - - 0.1 -
Share of joint ventures' adjusted items (5.8) (0.4)p - -
Share of associates' adjusted items 1.1 0.1p 0.7 0.1p
Underlying earnings per share 193.1 14.4p 201.0 15.0p
1 2017 EPRA earnings per share has been adjusted to remove the fair value movements of unallocated interest rate swaps not related to cash payments on the respective swaps.
2 Includes the impact of payments on unallocated interest rate swaps and changes in fair value of unallocated interest rate swaps as detailed in note 5.
3 Diluted EPRA earnings for the year ended 31 December 2018 is 15.7p (2017: 12.8p).
(c) Headline earnings per share
Headline earnings per share is an APM and has been calculated and presented as required by the Johannesburg Stock Exchange listing
requirements.
2018 2017
Gross Net(1) Gross Net(1)
GBPm GBPm GBPm GBPm
Basic (loss)/earnings (1,132.2) 216.7
Adjusted for:
Revaluation of investment and development property (note 10) 1,332.8 1,289.3 (30.8) (16.1)
Loss on disposal of subsidiaries (note 3) 8.5 8.5 1.8 1.8
Gain on sale of investment and development property (1.4) (1.4) - -
Share of joint ventures' adjusted items 72.4 74.6 (15.9) (17.2)
Share of associates' adjusted items (2.2) (2.2) (1.1) (1.1)
Headline earnings 236.6 184.1
Dilution(2) - (1.9)
Diluted headline earnings 236.6 182.2
Weighted average number of shares (million) 1,343.7 1,343.2
Dilution(2) 1.8 84.4
Diluted weighted average number of shares (million) 1,345.5 1,427.6
Headline earnings per share (pence) 17.6p 13.7p
Diluted headline earnings per share (pence) 17.6p 12.8p
1 Net of tax and non-controlling interests.
2 The dilution impact is required to be included as calculated in note 8(a/b) even where this is not dilutive for headline earnings per share.
9 NAV per share
(a) Number of shares
2018 2017
shares million shares million
Basic(1) 1,343.8 1,343.4
Diluted(2)/(3) 1,345.6 1,345.2
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) as presented is based on EPRA NAV per share, an industry standard APM considered a key measure of the
Group's performance, but adjusted for certain items (listed below) which management believes are necessary in order to better present the
Group's performance. The key differences to EPRA NAV per share relate to the following adjustments:
— fair value movements on interest rate swaps not currently used for economic hedges of debt (referred to as unallocated swaps) are included
in EPRA NAV but excluded from the Group's measure of NAV (diluted, adjusted). The Group does not hold unallocated swaps for speculative
purposes. Management currently intends to hold these unallocated swaps until maturity, therefore the volatility created by their fair value
movements will not crystallise
— fair value movements on convertible bonds which are excluded from EPRA NAV but included in the Group's measure of NAV (diluted,
adjusted). Management reviews and monitors the Group's debt to assets ratio based on the book value of debt and therefore management
believes it is appropriate to include the book value of debt within the Group's measure of NAV (diluted, adjusted)
A reconciliation of NAV (diluted, adjusted) to NAV attributable to owners of intu properties plc as well as EPRA NAV is provided below. The EPRA
section within the other information section provides additional details on EPRA and related measures provided.
2018 2017
Net assets Pence per Net assets Pence per
GBPm share GBPm share
NAV per share attributable to owners of intu properties plc 3,811.7 284p 5,075.0 378p
Dilutive convertible bonds, share options and share awards - -
Diluted NAV per share 3,811.7 283p 5,075.0 377p
Adjusted for:
Fair value of derivative financial instruments - allocated swaps (net of tax) 96.8 7p 112.1 8p
Fair value of convertible bonds (60.1) (5)p - -
Deferred tax on investment and development property 18.0 2p 23.7 2p
Share of joint ventures' adjusted items 9.4 1p 5.2 1p
Non-controlling interest recoverable balance not recognised 71.3 5p 71.3 5p
EPRA NAV per share 3,947.1 293p 5,287.3 393p
Adjusted for:
Swaps not currently used as economic hedges of debt - unallocated swaps (net of tax) 183.7 14p 235.4 18p
Fair value of convertible bonds 60.1 5p - -
NAV per share (diluted, adjusted) 4,190.9 312p 5,522.7 411p
(c) EPRA NNNAV per share
EPRA NNNAV per share has been included as it is considered to be an industry standard APM which seeks to assist comparison between
European property companies.
2018 2017
Net assets Pence per Net assets Pence per
GBPm share GBPm share
EPRA NAV per share 3,947.1 293p 5,287.3 393p
Adjusted for:
Fair value of derivative financial instruments - allocated swaps (net of tax) (96.8) (7)p (112.1) (8)p
Fair value of convertible bonds 60.1 5p - -
Excess of fair value of debt over book value (206.7) (15)p (430.8) (32)p
Deferred tax on investment and development property (18.0) (2)p (23.7) (2)p
Share of joint ventures' adjusted items (52.0) (4)p (47.8) (4)p
Non-controlling interest recoverable balance not recognised 7.0 1p 22.9 2p
EPRA NNNAV per share 3,640.7 271p 4,695.8 349p
10 Investment and development property
Development
Investment property property Total
GBPm GBPm GBPm
At 1 January 2017 9,003.0 209.1 9,212.1
Acquisition of intu Xanadú 461.4 - 461.4
Additions 109.6 129.8 239.4
Disposals (3.1) (0.3) (3.4)
Disposal of intu Xanadú to joint venture (472.3) - (472.3)
Transfer of intu Chapelfield to assets held for sale (302.0) - (302.0)
(Deficit)/surplus on revaluation (59.0) 89.8 30.8
Foreign exchange movements 9.4 4.0 13.4
At 31 December 2017 8,747.0 432.4 9,179.4
Additions 64.3 130.9 195.2
Disposals (21.7) - (21.7)
Disposal of development property to joint venture - (1.2) (1.2)
Transfer 165.5 (165.5) -
Deficit on revaluation (1,268.8) (64.0) (1,332.8)
Foreign exchange movements - 2.9 2.9
At 31 December 2018 7,686.3 335.5 8,021.8
A reconciliation to market value is given in the table below:
2018 2017
GBPm GBPm
Balance sheet carrying value of investment and development property 8,021.8 9,179.4
Tenant incentives included within trade and other receivables (note 13) 116.5 109.2
Head leases included within finance leases in borrowings (note 16) (80.2) (80.2)
Market value of investment and development property 8,058.1 9,208.4
The market value of investment and development property at 31 December 2018 includes GBP7,718.7 million (31 December 2017: GBP8,831.9 million) in
respect of investment property and GBP339.4 million (31 December 2017: GBP376.5 million) in respect of development property.
The fair value of the Group's investment and development property at 31 December 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 in note 14 of the Group's 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 the coming months, the Group obtained an independent external valuation at 31 December 2017 as
cost was no longer an appropriate approximation of fair value. At 31 December 2018 the remaining consents are yet to be finalised; however, we
continue to expect these to be received. Therefore, consistent with the
31 December 2017 valuation, the 31 December 2018 valuation is based on the assumption that planning approval is in place at the valuation
date.
11 Investment in joint ventures
The Group's principal joint ventures own and manage investment and development property.
2018
St David's, intu intu Puerto intu intu
Cardiff Chapelfield Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2018 347.0 - 133.9 119.4 95.6 39.6 735.5
Acquisition of joint venture interest (note 21) - 151.9 - - - - 151.9
Group's share of underlying profit 13.2 5.3 2.0 5.1 3.2 0.4 29.2
Group's share of other net (loss)/profit (49.8) (20.3) 9.8 (0.8) 0.5 (10.7) (71.3)
Group's share of (loss)/profit (36.6) (15.0) 11.8 4.3 3.7 (10.3) (42.1)
Investment of capital - - - 7.7 - - 7.7
Repayment of capital - - - (7.1) - - (7.1)
Distributions - (2.2) - - - (0.7) (2.9)
Loan advances - - - - - 2.0 2.0
Loan repayments (14.0) - (2.0) - (9.3) - (25.3)
Foreign exchange movements - - 2.0 1.0 1.2 - 4.2
At 31 December 2018 296.4 134.7 145.7 125.3 91.2 30.6 823.9
Represented by:
Loans to joint ventures 69.6 74.0 98.3 58.5 26.0 9.6 336.0
Group's share of net assets 226.8 60.7 47.4 66.8 65.2 21.0 487.9
2017
St David's, intu Puerto intu intu
Cardiff Venecia Xanadu Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
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
At 31 December 2018, the boards of joint ventures had approved GBP5.0 million (2017: GBP13.8 million) of future expenditure for the purchase,
construction, development and enhancement of investment property. Of this, GBP2.7 million (2017: GBP12.7 million) is contractually committed.
These amounts represent the Group's share.
Set out below is the summarised information of the Group's joint ventures with financial information presented at 100 per cent. The 2018
summary information and the summarised income statement of intu Chapelfield is presented for the period from 1 February 2018, the date at
which it ceased being a 100 per cent owned subsidiary of the Group.
2018
St David's, intu intu Puerto intu intu
Cardiff Chapelfield Venecia Xanadu Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Summary information
Group's interest 50% 50% 50% 50% 50%
Principal place of business Wales England Spain Spain Spain
Summarised income statement
Revenue 41.0 22.2 26.6 32.6 18.0 17.9 158.3
Net rental income 26.6 15.1 20.3 23.0 13.5 11.4 109.9
Revaluation of investment and development property (99.6) (40.7) 11.4 4.3 1.7 (50.0) (172.9)
Administration expenses - underlying (0.1) (0.1) (2.0) (2.0) (1.3) (2.6) (8.1)
Administration expenses - exceptional - - - (0.1) - - (0.1)
Finance costs - (4.4) (14.2) (9.7) (5.7) (5.9) (39.9)
Other finance income - exceptional - - 9.4 - - - 9.4
Change in fair value of financial instruments - - (0.5) (1.2) (0.8) 1.3 (1.2)
Taxation - - - (5.7) 0.1 - (5.6)
(Loss)/profit (73.1) (30.1) 24.4 8.6 7.5 (45.8) (108.5)
Attributable to non-controlling interests - - (0.8) - (0.2) - (1.0)
(Loss)/profit attributable to owners (73.1) (30.1) 23.6 8.6 7.3 (45.8) (109.5)
Group's share of (loss)/profit (36.6) (15.0) 11.8 4.3 3.7 (10.3) (42.1)
Summarised balance sheet
Investment and development property 592.1 266.6 480.7 485.5 288.3 221.4 2,334.6
Other non-current assets 0.2 0.4 1.1 82.0 5.1 2.5 91.3
Total non-current assets 592.3 267.0 481.8 567.5 293.4 223.9 2,425.9
Cash and cash equivalents 9.7 7.0 13.4 19.8 16.7 5.9 72.5
Other current assets 19.4 2.6 2.1 1.1 0.9 13.6 39.7
Total current assets 29.1 9.6 15.5 20.9 17.6 19.5 112.2
Current financial liabilities (0.1) (0.9) (10.4) (9.5) (4.7) (1.8) (27.4)
Other current liabilities (12.4) (6.4) (5.4) (7.0) (1.7) (7.7) (40.6)
Total current liabilities (12.5) (7.3) (15.8) (16.5) (6.4) (9.5) (68.0)
Partners' loans (139.1) (148.0) (196.6) (116.9) (52.2) (19.4) (672.2)
Non-current financial liabilities - - (186.1) (236.1) (107.5) (130.5) (660.2)
Other non-current liabilities (16.2) - - (85.3) (11.4) - (112.9)
Total non-current liabilities (155.3) (148.0) (382.7) (438.3) (171.1) (149.9) (1,445.3)
Net assets 453.6 121.3 98.8 133.6 133.5 84.0 1,024.8
Non-controlling interests - - (4.1) - (3.2) - (7.3)
Net assets attributable to owners 453.6 121.3 94.7 133.6 130.3 84.0 1,017.5
Group's share of net assets 226.8 60.7 47.4 66.8 65.2 21.0 487.9
The 2017 summary information and the summarised income statement of intu Xanadú is presented for the period from
31 July 2017, the date at which it ceased being a 100 per cent owned subsidiary of the Group.
2017
St David's, intu Puerto intu intu
Cardiff Venecia Xanadu Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Summary information
Group's interest 50% 50% 50% 50%
Principal place of business Wales Spain Spain Spain
Summarised income statement
Revenue 39.6 25.1 13.0 17.0 18.8 113.5
Net rental income 26.7 19.2 8.6 12.5 12.9 79.9
Revaluation of investment and development property (13.6) 18.1 2.0 26.6 - 33.1
Loss on sale of other investments - (0.4) - (0.3) - (0.7)
Administration expenses - underlying - (1.9) (1.1) (1.0) (2.3) (6.3)
Administration expenses - exceptional - - (1.0) - - (1.0)
Finance costs - (15.9) (4.4) (7.5) (5.0) (32.8)
Change in fair value of financial instruments - 0.6 0.4 0.6 0.7 2.3
Taxation - (0.1) (0.9) 3.2 - 2.2
Profit 13.1 19.6 3.6 34.1 6.3 76.7
Attributable to non-controlling interests - (0.6) - (0.7) - (1.3)
Profit attributable to owners 13.1 19.0 3.6 33.4 6.3 75.4
Group's share of profit 6.6 9.5 1.8 16.7 0.9 35.5
Summarised balance sheet
Investment and development property 692.0 460.4 470.5 281.0 265.3 2,169.2
Other non-current assets 14.0 0.8 81.2 5.3 3.7 105.0
Total non-current assets 706.0 461.2 551.7 286.3 269.0 2,274.2
Cash and cash equivalents 8.9 38.2 18.9 31.2 6.0 103.2
Other current assets 7.7 2.5 - 1.5 9.4 21.1
Total current assets 16.6 40.7 18.9 32.7 15.4 124.3
Current financial liabilities - (17.0) (6.1) (6.2) (0.5) (29.8)
Other current liabilities (12.6) (13.9) (15.2) (1.9) (5.8) (49.4)
Total current liabilities (12.6) (30.9) (21.3) (8.1) (6.3) (79.2)
Partners' loans (167.2) (198.3) (115.4) (70.0) (15.0) (565.9)
Non-current financial liabilities - (199.6) (230.9) (105.2) (131.6) (667.3)
Other non-current liabilities (16.1) - (79.7) (11.4) - (107.2)
Total non-current liabilities (183.3) (397.9) (426.0) (186.6) (146.6) (1,340.4)
Net assets 526.7 73.1 123.3 124.3 131.5 978.9
Non-controlling interests - (3.4) - (3.1) - (6.5)
Net assets attributable to owners 526.7 69.7 123.3 121.2 131.5 972.4
Group's share of net assets 263.4 34.8 61.7 60.6 32.1 452.6
12 Investment in associates
2018 2017
GBPm GBPm
At 1 January 64.8 65.2
Share of post-tax profit of associates 2.3 1.3
Foreign exchange movements (1.5) (1.7)
At 31 December 65.6 64.8
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.
The equity method of accounting is applied to the Group's investments in Prozone and Empire in line with the requirements of
IAS 28 Investments in Associates and Joint Ventures. The results for the year to 30 September have been used as 31 December 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 30 September 2018, by independent professionally qualified external valuers in line with the valuation
methodology described in note 10.
The market price per share of Prozone at 31 December 2018 was INR29 (31 December 2017: INR72), valuing the Group's interest at GBP16.4 million
(31 December 2017: GBP41.1 million) compared to the carrying value of GBP45.1 million (31 December 2017:
GBP45.1 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 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.
13 Trade and other receivables
2018 2017
GBPm GBPm
Current
Trade receivables 35.8 26.4
Amounts owed by joint ventures 8.5 13.6
Other receivables 16.3 17.2
Net investment in finance leases 0.4 0.4
Prepayments and accrued income 94.2 84.3
Trade and other receivables - current 155.2 141.9
Non-current
Amounts owed by associates 5.0 4.7
Other receivables 0.4 -
Net investment in finance leases 0.8 1.2
Prepayments and accrued income 99.3 96.6
Trade and other receivables - non-current 105.5 102.5
Included within prepayments and accrued income for the Group of GBP193.5 million (2017: GBP180.9 million) are tenant lease incentives of GBP116.5
million (2017: GBP109.2 million), of which GBP17.2 million are classified as current (2017: GBP12.6 million) and GBP99.3 million as non-current
(2017: GBP96.6 million).
14 Cash and cash equivalents
2018 2017
GBPm GBPm
Unrestricted cash 238.4 225.1
Restricted cash 1.1 2.9
Cash and cash equivalents 239.5 228.0
A number of the Group's borrowing arrangements place certain restrictions on the rent received each quarter. These do not prevent access to or
use of this funding within the borrowing entities, however they do place certain restrictions on moving those funds around the wider group,
typically requiring debt servicing costs to be paid before restrictions are lifted.
15 Trade and other payables
2018 2017
GBPm GBPm
Current
Rents received in advance 103.4 102.1
Trade payables 3.2 6.1
Amounts owed to joint ventures 0.4 0.3
Accruals and deferred income 141.2 137.9
Other payables 2.5 10.9
Other taxes and social security 27.7 31.2
Trade and other payables 278.4 288.5
16 Borrowings
2018
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Commercial mortgage backed securities (CMBS) notes 46.7 46.7 - 46.7 - 51.1
Current borrowings, excluding finance leases 46.7 46.7 - 46.7 - 51.1
Finance lease obligations 4.4 4.4 - 4.4 - 4.4
51.1 51.1 - 51.1 - 55.5
Non-current
Revolving credit facility 2021 (including GBP89.9 million drawn in euros) 393.9 393.9 - - 393.9 393.9
CMBS notes 2022 33.4 33.4 - 33.4 - 37.1
CMBS notes 2024 88.3 88.3 - 88.3 - 96.8
CMBS notes 2029 67.5 67.5 - 67.5 - 77.0
CMBS notes 2033 296.3 296.3 - 296.3 - 364.7
CMBS notes 2035 195.1 195.1 - - 195.1 201.9
Bank loan 2020 25.0 25.0 - - 25.0 25.0
Bank loans 2021 668.7 668.7 - - 668.7 668.7
Bank loan 2022 247.5 247.5 - 247.5 - 282.8
Bank loan 2023 73.1 73.1 - - 73.1 73.1
Bank loan 2024 473.8 473.8 - - 473.8 473.8
3.875% bonds 2023 444.6 444.6 - 444.6 - 454.7
4.125% bonds 2023 479.5 479.5 - 479.5 - 496.9
4.625% bonds 2028 342.9 342.9 - 342.9 - 363.0
4.250% bonds 2030 345.3 345.3 - 345.3 - 349.7
Debenture 2027 229.1 229.1 - 229.1 - 247.2
2.875% convertible bonds 2022 (note 17) 314.9 - 314.9 314.9 - 314.9
Non-current borrowings, excluding finance leases and Metrocentre
compound financial instrument 4,718.9 4,404.0 314.9 2,889.3 1,829.6 4,921.2
Metrocentre compound financial instrument 189.5 - 189.5 189.5 - 189.5
Finance lease obligations 75.8 75.8 - 75.8 - 75.8
4,984.2 4,479.8 504.4 3,154.6 1,829.6 5,186.5
Total borrowings 5,035.3 4,530.9 504.4 3,205.7 1,829.6 5,242.0
Cash and cash equivalents (note 14) (239.5)
Net debt 4,795.8
Analysis of the Group's net external debt is provided in the other information section.
The fair values of fixed rate borrowings and CMBS are assessed based on quoted market prices, and as such are categorised as
Level 1 in the fair value hierarchy (see note 28 of the Group's annual report and financial statements for definition). The fair values of unlisted
floating rate borrowings are equal to their carrying values.
2017
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Commercial mortgage backed securities (CMBS) notes 23.3 23.3 - 23.3 - 28.1
2.5% convertible bonds 2018 (note 17) 161.0 - 161.0 161.0 - 161.0
Current borrowings, excluding finance leases 184.3 23.3 161.0 184.3 - 189.1
Finance lease obligations 2.4 2.4 - 2.4 - 2.4
186.7 25.7 161.0 186.7 - 191.5
Non-current
Revolving credit facility 2021 (including GBP88.8 million drawn in euros) 233.8 233.8 - - 233.8 233.8
CMBS notes 2019 19.9 19.9 - 19.9 - 20.4
CMBS notes 2022 43.0 43.0 - 43.0 - 49.5
CMBS notes 2024 88.0 88.0 - 88.0 - 98.6
CMBS notes 2029 73.2 73.2 - 73.2 - 85.9
CMBS notes 2033 311.2 311.2 - 311.2 - 393.1
CMBS notes 2035 192.8 192.8 - - 192.8 212.1
Bank loan 2019 139.7 139.7 - - 139.7 139.7
Bank loan 2020 32.9 32.9 - - 32.9 32.9
Bank loans 2021 470.2 470.2 - - 470.2 470.2
Bank loan 2022 246.8 246.8 - 246.8 - 277.3
Bank loan 2024 482.7 482.7 - - 482.7 482.7
3.875% bonds 2023 443.5 443.5 - 443.5 - 486.2
4.125% bonds 2023 478.5 478.5 - 478.5 - 535.7
4.625% bonds 2028 342.3 342.3 - 342.3 - 410.0
4.250% bonds 2030 345.0 345.0 - 345.0 - 402.3
Debenture 2027 228.8 228.8 - 228.8 - 267.9
2.875% convertible bonds 2022 (note 17) 377.3 - 377.3 377.3 - 377.3
Non-current borrowings, excluding finance leases and Metrocentre
compound financial instrument 4,549.6 4,172.3 377.3 2,997.5 1,552.1 4,975.6
Metrocentre compound financial instrument 183.7 - 183.7 183.7 - 183.7
Finance lease obligations 77.8 77.8 - 77.8 - 77.8
4,811.1 4,250.1 561.0 3,259.0 1,552.1 5,237.1
Total borrowings 4,997.8 4,275.8 722.0 3,445.7 1,552.1 5,428.6
Cash and cash equivalents (note 14) (228.0)
Net debt 4,769.8
The maturity profile of debt (excluding finance leases) is as follows:
2018 2017
GBPm GBPm
Repayable within one year 46.7 184.3
Repayable in more than one year but not more than two years 30.5 175.5
Repayable in more than two years but not more than five years 2,722.0 1,445.9
Repayable in more than five years 2,155.9 3,111.9
4,955.1 4,917.6
Certain borrowing agreements contain financial and other conditions that, if contravened, could alter the repayment profile. During the year
there were no breaches of these conditions (see financial covenants in the other information section).
16 Borrowings (continued)
At 31 December 2018 the Group had committed undrawn borrowing facilities of GBP274.2 million (2017: GBP406.9 million), maturing in 2021 and
2022.
Finance lease disclosures:
2018 2017
GBPm GBPm
Minimum lease payments under finance leases fall due:
Not later than one year 4.4 2.4
Later than one year and not later than five years 17.8 9.5
Later than five years 104.8 115.1
127.0 127.0
Future finance charges on finance leases (46.8) (46.8)
Present value of finance lease liabilities 80.2 80.2
Present value of finance lease liabilities:
Not later than one year 4.4 2.4
Later than one year and not later than five years 17.8 9.5
Later than five years 58.0 68.3
80.2 80.2
Finance lease liabilities are in respect of head leases on investment and development property. A number of these leases provide
for payment of contingent rent, usually a proportion of net rental income, in addition to the rents above.
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 31
December 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 31 December 2018 the exchange price was GBP3.7506 per ordinary share (2017: GBP3.7506).
The 2.875 per cent bonds are designated as at fair value through profit or loss and so are presented on the balance sheet at fair value. Gains and
losses in respect of own credit risk are recognised in other comprehensive income and all other gains and losses are recognised in the income
statement through the change in fair value of financial instruments line.
At 31 December 2018, the fair value of the 2.875 per cent bonds was GBP314.9 million (2017: GBP377.3 million). During the year interest of
GBP10.8 million (2017: GBP10.8 million) in respect of these bonds has been recognised within finance costs.
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 were outstanding at
31 December 2017. The outstanding 2.5 per cent bonds were settled in cash on 4 October 2018, the Final Maturity Date.
During the year interest of GBP3.0 million (2017: GBP6.7 million) in respect of these bonds has been recognised within finance costs.
18 Deferred tax
Under IAS 12 Income Taxes, provision is made for the deferred tax assets and liabilities associated with the revaluation of assets and liabilities at
the corporate tax rate expected to apply to the Group at the time the temporary differences are expected to reverse. For those UK assets and
liabilities benefitting from REIT exemption the relevant tax rate will be 0 per cent (2017: 0 per cent), and for other UK assets and liabilities the
relevant rate will be 19 per cent if the temporary difference is expected to be realised before
1 April 2020 and 17 per cent if it is expected to be realised on or after 1 April 2020 (2017: 19 per cent before 1 April 2020, 17 per cent thereafter).
For Spanish assets and liabilities the relevant tax rate will be 25 per cent (2017: 25 per cent).
Movements in the provision for deferred tax:
Investment and Other
development Other temporary
property investments differences Total
GBPm GBPm GBPm GBPm
Provided deferred tax provision/(asset):
At 1 January 2017 - 0.1 (0.1) -
Acquisition of intu Xanadú 84.5 - (6.8) 77.7
Recognised in the income statement 24.8 - (0.8) 24.0
Recognised in other comprehensive income - (0.1) - (0.1)
Foreign exchange movements 1.8 - (0.1) 1.7
Disposal of subsidiaries (86.5) - 6.9 (79.6)
At 31 December 2017 24.6 - (0.9) 23.7
Recognised in the income statement (5.5) - (0.3) (5.8)
Foreign exchange movements 0.1 - - 0.1
At 31 December 2018 19.2 - (1.2) 18.0
The net deferred tax provision of GBP18.0 million arises in respect of the revaluation of development property at intu Costa del Sol, partially offset
by tax losses in the same company.
At 31 December 2018, the Group had unrecognised deferred tax assets calculated at a tax rate of 17 per cent (2017: 17 per cent) of GBP51.1 million
(2017: GBP43.1 million) for surplus UK revenue tax losses carried forward, GBP31.4 million (2017: GBP45.6 million) for temporary differences on derivative
financial instruments, GBP0.5 million (2017: GBP0.5 million) for temporary differences on capital allowances, GBP1.2 million (2017: nil) for other
investments and GBP5.8 million (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.
19 Share capital and share premium
Share Share
capital premium
GBPm GBPm
Issued and fully paid:
At 31 December 2018 and 31 December 2017: 1,355,040,243 ordinary shares of 50 pence each 677.5 1,327.4
At 20 February 2019 the Company had an unexpired authority to repurchase shares up to a maximum of 135,504,024 shares with a nominal
value of GBP67.8 million, and the Directors have an unexpired authority to allot up to a maximum of 451,608,081 shares with a nominal value of
GBP225.8 million.
Included within the issued share capital at 31 December 2018 are 11,216,115 ordinary shares (2017: 11,633,680) held by the Trustee of the ESOP
which is operated by the Company (see note 20). The nominal value of these shares at 31 December 2018 is GBP5.6 million (2017: GBP5.8 million).
20 Employee Share Ownership Plan (ESOP)
The cost of shares in intu properties plc held by the Trustee of the Employee Share Ownership Plan operated by the Company is accounted for as
a deduction from equity.
The purpose of the ESOP is to acquire and hold shares which will be transferred to employees in the future under the Group's employee incentive
arrangements, including joint ownership of shares in its role as Trustee of the Joint Share Ownership Plan. Dividends of GBP1.6 million
(2017: GBP1.7 million) in respect of these shares have been waived by agreement.
2018 2017
Shares Shares
million GBPm million GBPm
At 1 January 11.6 39.1 12.1 40.8
Acquisitions 0.6 0.9 0.4 1.3
Disposals (1.0) (3.0) (0.9) (3.0)
At 31 December 11.2 37.0 11.6 39.1
21 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
(acting on behalf of Greater Manchester Pension Fund and West Yorkshire Pension Fund) for final cash consideration of GBP145.1 million before
expenses of GBP1.6 million. Following this transaction intu Chapelfield 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 GBP9.0 million in the income statement. The cash flow statement records a net inflow of GBP143.2 million comprising
the net consideration received of GBP143.5 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.
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) 143.2
Loss on disposal of subsidiaries 9.0
22 Capital commitments
At 31 December 2018 the Board had approved GBP233.0 million (2017: GBP253.8 million) of future expenditure for the purchase, construction,
development and enhancement of investment property. Of this, GBP188.5 million (2017: GBP145.9 million) is contractually committed. The majority of
this is expected to be spent during 2019 and 2020.
23 Cash generated from operations
2018 2017
Notes GBPm GBPm
(Loss)/profit before tax, joint ventures and associates (1,139.6) 190.4
Adjusted for:
Revaluation of investment and development property 10 1,332.8 (30.8)
Loss on disposal of subsidiaries 3 8.5 1.8
Gain on sale of investment and development property (1.4) -
Depreciation 4.3 2.9
Share-based payments 2.8 2.3
Lease incentives and letting costs (9.3) (4.1)
Net finance costs 5 147.5 218.2
Changes in working capital:
Change in trade and other receivables (5.3) (0.6)
Change in trade and other payables (20.6) (14.5)
Cash generated from operations 319.7 365.6
24 Related party transactions
Key management1 compensation is analysed below:
2018 2017
GBPm GBPm
Salaries and short-term employee benefits 4.9 5.4
Pensions and other post-employment benefits 0.8 0.7
Share-based payments 1.7 2.0
7.4 8.1
1 Key management comprises the Directors of intu properties plc and the Executive Committee who have been designated as persons discharging managerial responsibility (PDMR).
During 2017 the Group's joint ventures in intu Puerto Venecia and intu Asturias sold shares in subsidiaries, previously wholly owned by the respective
joint ventures, listed on the Spanish MaB to PDMR's of the Group. The total value of the shares at 31 December 2018 is EUR1.3 million for each joint
venture, representing 1 per cent of the respective outstanding share capital. The sale of shares in these entities was required to comply with Spanish
MaB free float listing requirements. The Group provided an interest-free loan to PDMR's to enable them to purchase the shares. The loans are treated
as a taxable benefit which accordingly is included in the above table.
As John Whittaker, Deputy Chairman and Non-Executive Director of intu properties plc, is the Chairman of the Peel Group (Peel), members of Peel are
considered to be related parties. Total transactions between the Group and members of Peel are shown below:
2018 2017
GBPm GBPm
Income 1.3 1.3
Expenditure (0.7) (0.6)
Income predominantly relates to leases of office space and contracts to provide advertising services. Expenditure predominantly relates to costs
incurred under a management services agreement, travel costs and the supply of utilities. All contracts are on an arm's length basis at commercial
rates.
Balances outstanding between the Group and members of Peel at 31 December 2018 and 31 December 2017 are shown below:
2018 2017
GBPm GBPm
Net investment in finance lease 1.2 1.6
Amounts owed by members of Peel 0.3 1.0
Amounts owed to members of Peel (0.1) -
Under the terms of the Group's acquisition of intu Trafford Centre from Peel in 2011, Peel have provided a guarantee in respect of Section 106
planning obligation liabilities at Barton Square which at 31 December 2018 totalled GBP12.4 million (2017: GBP12.4 million).
During 2016, the Group agreed terms on three advertising services agreements related to digital screens with Peel Advertising Limited (a member
of Peel) under which Peel will procure advertising on behalf of the Group. The minimum fixed payments in these agreements have been classified
as a finance lease (see net investment in finance lease above).
25 General information
The Company is a public limited company incorporated in England and Wales and domiciled in the UK. The address of its registered office is 40
Broadway, London SW1H 0BT.
The Company has its primary listing on the London Stock Exchange. The Company has a secondary listing on the Johannesburg Stock Exchange,
South Africa.
1 Property data
Market value Revaluation Net initial 'Topped-up' NIY Nominal Occupancy
GBPm (deficit)/surplus yield (EPRA) (EPRA) equivalent yield (EPRA)
At 31 December 2018
Subsidiaries
intu Trafford Centre 2,098.0 -10% 4.4% 4.4% 4.7% 98%
intu Lakeside 1,250.0 -15% 3.9% 4.5% 4.9% 97%
intu Metrocentre 841.8 -10% 4.8% 5.4% 5.7% 95%
intu Merry Hill 777.2 -16% 4.5% 4.8% 5.6% 93%
intu Braehead 429.9 -20% 6.1% 6.2% 6.3% 99%
Manchester Arndale 409.9 -12% 4.6% 4.9% 5.6% 98%
intu Watford 407.4 -11% 3.7% 3.8% 5.3% 96%
intu Derby 372.5 -19% 6.6% 6.7% 7.2% 95%
intu Eldon Square 280.7 -13% 5.4% 5.4% 5.5% 99%
intu Victoria Centre 261.0 -28% 6.1% 6.3% 6.5% 98%
intu Milton Keynes 256.5 -11% 5.0% 5.0% 5.3% 98%
Cribbs Causeway 216.7 -10% 5.3% 5.5% 5.6% 97%
OtherB 456.5
Investment and development property excluding
Group's share of joint ventures 8,058.1
Joint ventures
St David's, Cardiff 294.6 -14% 4.9% 5.2% 5.2% 92%
intu Xanadú 243.1 +1%(A) 4.4% 4.7% 5.4% 98%
intu Puerto Venecia 241.1 +3%(A) 4.5% 4.7% 5.7% 100%
intu Asturias 144.6 +1%(A) 4.6% 4.7% 5.3% 99%
intu Chapelfield 133.6 -13% 5.5% 5.5% 5.8% 99%
Other(C) 52.3
Investment and development property including
Group's share of joint ventures 9,167.4 4.75%(D) 4.98%(D) 5.44%(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%
A Calculated in local currency.
B Includes the Group's interests in intu Potteries, intu Broadmarsh, Soar at intu Braehead, development land in Spain and Sprucefield, Northern Ireland.
C Includes the Group's interest in intu Uxbridge.
D Weighted average yields exclude developments.
31 December 31 December
2018 2017
GBPm GBPm
Passing rent 428.9 426.9
Annual property income 474.1 462.2
ERV(1) 566.3 572.6
Weighted average unexpired lease term 7.2 years 7.5 years
1 ERV is presented excluding the net impact of non-recoverable charges. The 31 December 2017 figure has been adjusted to the same basis.
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)/surplus
2018 2017 2018 2018
GBPm GBPm GBPm %
Like-for-like property 8,117.6 9,203.8 (1,178.9) (11.8)
50% retained interest in intu Chapelfield (classified as held for sale
at 31 December 2017) 133.6 - (20.6) (13.4)
Spain developments 232.3 212.8 (7.2) (3.4)
UK other including developments(1) 683.9 806.1 (198.3) (21.5)
Total investment and development property 9,167.4 10,222.7 (1,405.0) (13.3)
1 UK other including developments represents valuation movements on investment and development property valued below GBP200 million each. This category also includes intu Watford (non like-for-
like).
3 Analysis of net rental income in the year - including Group's share of joint ventures
Year ended 31 December Movement
2018 2017
GBPm GBPm GBPm %
Like-for-like property 420.1 417.8 2.3 0.6
Acquisition and part disposal: intu Xanadú 11.5 13.0 (1.5) n/a
Part disposal: intu Chapelfield (50%) - 7.0 (7.0) n/a
Developments 18.9 22.2 (3.3) n/a
Net rental income 450.5 460.0 (9.5) (2.1)
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% 57% 125% 228%
Covenants are tested on the Security Group, the principal assets of which are intu Lakeside, intu Braehead, intu Watford, intu Derby and intu
Victoria Centre.
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 GBP744.4 million at 31 December 2018. However, a debt service cover ratio is
assessed quarterly and where this falls below specified levels restrictions come into force. The loan to 31 December 2018 market value ratio is 37
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% 58% 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 at loan to value below 70 per cent and interest cover above 1.4x. No financial covenant default occurs unless loan to value
exceeds 100 per cent or the interest cover falls below 1.25x.
Other asset-specific debt
Loan outstanding Loan to Interest Interest
at 31 December 2018(1) LTV 31 December 2018 cover cover
GBPm Maturity covenant market value2 covenant actual(3)
Sprucefield 25.2 2020 65% 57% 150% 332%
intu Uxbridge(4) 26.0 2020 70% 65% 125% 244%
St David's, Cardiff 163.2 2021 65% 55% 150% 230%
intu Milton Keynes 140.5 2021 65% 55% 150% 280%
intu Trafford Centre, Barton Square(5) 25.0 2021 65% 38% 150% 432%
intu Trafford Centre 250.0 2022 65% 49% 103%(6) 119%(6)
intu Chapelfield 74.0 2023 65% 55% 150% 266%
intu Merry Hill 478.1 2024 75% 62% 150% 262%
intu Asturias(4) (EUR) 60.5 2021 65% 38% 150% 653%
intu Xanadu(4) (EUR) 131.5 2022 65% 49% 150% 433%
intu Puerto Venecia4 (EUR) 112.5 2025 65% 42% 150% 441%
1 The loan values are the actual principal balances outstanding at 31 December 2018, which take into account any principal repayments made up to 31 December 2018. The balance sheet value of the
loans includes unamortised fees.
2 The loan to 31 December 2018 market value provides an indication of the impact the 31 December 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 submitted between 31 December 2018 and 7 February 2019. 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 In addition to this term facility, we have a committed development funding facility of GBP25 million of which GBP3.3 million was drawn at 31 December 2018.
6 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% 186% 100% 111%
The debenture is currently secured on a number of the Group's properties including intu Eldon Square, intu Potteries and Soar at
intu Braehead. During the year, intu Broadmarsh was withdrawn from the debenture.
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 GBP2,174m 120% 194% 125% 84%
GBP375m 2.875 per cent convertible
bonds, due in 2022 (note 17)** n/a n/a n/a n/a 175% 15%
* 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 andCribbs 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 1,838.4 2.85
2 years 1,787.2 2.89
5 years 1,268.2 3.11
10 years 670.1 4.90
15 years 457.8 4.64
Financial information including
share of joint ventures (unaudited)
for the year ended 31 December 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 pages.
Underlying earnings
2018 2017
Group including Group including
Group underlying Share of joint share of joint Group underlying Share of joint share of joint
profit ventures ventures profit ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Rent receivable 467.3 60.7 528.0 503.4 42.8 546.2
Service charge income 107.0 13.5 120.5 109.1 8.7 117.8
Facilities management income from joint ventures 6.8 (2.3) 4.5 3.5 (0.7) 2.8
Revenue 581.1 71.9 653.0 616.0 50.8 666.8
Net rental income 398.5 52.0 450.5 423.4 36.6 460.0
Net other income 5.3 (2.4) 2.9 3.0 (2.1) 0.9
Administration expenses (42.9) (1.1) (44.0) (40.9) (0.7) (41.6)
Underlying operating profit 360.9 48.5 409.4 385.5 33.8 419.3
Finance costs (210.8) (6.3) (217.1) (213.9) (6.0) (219.9)
Finance income 14.8 (12.2) 2.6 12.6 (9.3) 3.3
Other finance costs (5.9) - (5.9) (5.9) - (5.9)
Underlying net finance costs (201.9) (18.5) (220.4) (207.2) (15.3) (222.5)
Underlying profit before tax, joint ventures
and associates 159.0 30.0 189.0 178.3 18.5 196.8
Tax on underlying profit (0.1) (0.6) (0.7) 0.1 (0.2) (0.1)
Share of underlying profit of joint ventures 29.2 (29.2) - 18.3 (18.3) -
Share of underlying profit of associates 1.2 - 1.2 0.9 - 0.9
Remove amounts attributable to non-controlling
interests 3.8 (0.2) 3.6 3.4 - 3.4
Underlying earnings 193.1 - 193.1 201.0 - 201.0
A reconciliation from the Group's (loss)/profit attributable to owners of intu properties plc to underlying earnings is provided in
note 8(b).
Consolidated income statement
2018 2017
Group including Group including
Group income Share of joint share of joint Group income Share of joint share of joint
statement ventures ventures statement ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 581.1 71.9 653.0 616.0 50.8 666.8
Net rental income 398.5 52.0 450.5 423.4 36.6 460.0
Net other income 5.3 (2.4) 2.9 3.0 (2.1) 0.9
Revaluation of investment and development
property (1,332.8) (72.2) (1,405.0) 30.8 16.5 47.3
Loss on disposal of subsidiaries (8.5) - (8.5) (1.8) - (1.8)
Gain on sale of investment and development
property 1.4 - 1.4 - - -
Loss on sale of other investments - - - - (0.3) (0.3)
Administration expenses - ongoing (42.9) (1.1) (44.0) (40.9) (0.7) (41.6)
Administration expenses - exceptional (13.1) (0.1) (13.2) (5.9) (0.7) (6.6)
Operating (loss)/profit (992.1) (23.8) (1,015.9) 408.6 49.3 457.9
Finance costs (210.8) (6.3) (217.1) (213.9) (6.0) (219.9)
Finance income 14.8 (12.2) 2.6 12.6 (9.3) 3.3
Other finance costs (38.8) 4.5 (34.3) (38.9) - (38.9)
Change in fair value of financial instruments 87.3 (1.0) 86.3 22.0 1.0 23.0
Net finance costs (147.5) (15.0) (162.5) (218.2) (14.3) (232.5)
(Loss)/profit before tax, joint ventures
and associates (1,139.6) (38.8) (1,178.4) 190.4 35.0 225.4
Share of post-tax (loss)/profit of joint ventures (42.1) 42.1 - 35.5 (35.5) -
Share of post-tax profit of associates 2.3 - 2.3 1.3 - 1.3
(Loss)/profit before tax (1,179.4) 3.3 (1,176.1) 227.2 (0.5) 226.7
Current tax (0.1) (0.6) (0.7) 0.1 (0.2) (0.1)
Deferred tax 5.8 (2.2) 3.6 (24.0) 1.3 (22.7)
Taxation 5.7 (2.8) 2.9 (23.9) 1.1 (22.8)
(Loss)/profit for the year (1,173.7) 0.5 (1,173.2) 203.3 0.6 203.9
Non-controlling interests 41.5 (0.5) 41.0 13.4 (0.6) 12.8
(Loss)/profit for the year attributable to owners of
intu properties plc (1,132.2) - (1,132.2) 216.7 - 216.7
Consolidated balance sheet
2018 2017
Group including Group including
Share of joint share of joint Share of joint share of joint
Group balance sheet ventures ventures Group balance sheet ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Investment and development property 8,021.8 1,108.3 9,130.1 9,179.4 1,013.1 10,192.5
Investment in joint ventures 823.9 (823.9) - 735.5 (735.5) -
Derivative financial instruments 4.7 - 4.7 0.3 0.2 0.5
Assets classified as held for sale - - - 309.1 - 309.1
Cash and cash equivalents 239.5 34.8 274.3 228.0 50.2 278.2
Other assets 352.6 59.9 412.5 342.2 54.3 396.5
Total assets 9,442.5 379.1 9,821.6 10,794.5 382.3 11,176.8
Liabilities
Borrowings (5,035.3) (295.7) (5,331.0) (4,997.8) (300.1) (5,297.9)
Derivative financial instruments (285.2) (3.5) (288.7) (347.8) (2.5) (350.3)
Liabilities associated with assets
classified as held for sale - - - (6.2) - (6.2)
Other liabilities (297.6) (76.2) (373.8) (313.5) (76.5) (390.0)
Total liabilities (5,618.1) (375.4) (5,993.5) (5,665.3) (379.1) (6,044.4)
Net assets 3,824.4 3.7 3,828.1 5,129.2 3.2 5,132.4
Non-controlling interests (12.7) (3.7) (16.4) (54.2) (3.2) (57.4)
Net assets attributable to owners of
intu properties plc 3,811.7 - 3,811.7 5,075.0 - 5,075.0
Investment and development property
2018 2017
GBPm GBPm
Balance sheet carrying value of investment and development property 9,130.1 10,192.5
Tenant incentives included within trade and other receivables 125.6 118.5
Head leases included within finance leases in borrowings (88.3) (88.3)
Market value of investment and development property 9,167.4 10,222.7
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.
2018 2017
GBPm GBPm
Total borrowings 5,035.3 4,997.8
Cash and cash equivalents (239.5) (228.0)
Net debt 4,795.8 4,769.8
Less Metrocentre compound financial instrument (189.5) (183.7)
Less cash and cash equivalents within assets classified as held for sale - (0.5)
Net external debt - before Group's share of joint ventures 4,606.3 4,585.6
Add share of borrowings of joint ventures 295.7 300.1
Less share of cash of joint ventures (34.8) (50.2)
Net external debt - including Group's share of joint ventures 4,867.2 4,835.5
Analysed as:
Debt including Group's share of joint ventures 5,141.5 5,113.7
Cash including Group's share of joint ventures (274.3) (278.2)
Net external debt - including Group's share of joint ventures 4,867.2 4,835.5
Debt to assets ratio
2018 2017
GBPm GBPm
Market value of investment and development property 9,167.4 10,222.7
Add market value of investment and development property classified as assets held for sale - 306.5
9,167.4 10,529.2
Net external debt (4,867.2) (4,835.5)
Debt to assets ratio 53.1% 45.9%
Interest cover
2018 2017
GBPm GBPm
Finance costs (217.1) (219.9)
Finance income 2.6 3.3
(214.5) (216.6)
Underlying operating profit 409.4 419.3
Interest cover 1.91x 1.94x
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 Six months
Year ended Year ended ended ended ended ended
31 December 31 December 31 December 31 December 30 June 30 June
2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm
Net rental income 450.5 460.0 227.4 233.8 223.1 226.2
Net other income 2.9 0.9 0.9 0.8 2.0 0.1
Administration expenses (44.0) (41.6) (22.3) (21.0) (21.7) (20.6)
Underlying operating profit 409.4 419.3 206.0 213.6 203.4 205.7
Finance costs (217.1) (219.9) (111.4) (112.4) (105.7) (107.5)
Finance income 2.6 3.3 1.3 2.2 1.3 1.1
Other finance costs (5.9) (5.9) (3.0) (3.0) (2.9) (2.9)
Underlying net finance costs (220.4) (222.5) (113.1) (113.2) (107.3) (109.3)
Underlying profit before tax and associates 189.0 196.8 92.9 100.4 96.1 96.4
Tax on underlying profit (0.7) (0.1) (0.3) 0.1 (0.4) (0.2)
Share of underlying profit of associates 1.2 0.9 0.6 0.5 0.6 0.4
Remove amounts attributable to
non-controlling interests 3.6 3.4 1.4 1.5 2.2 1.9
Underlying earnings 193.1 201.0 94.6 102.5 98.5 98.5
Underlying EPS (pence) 14.4p 15.0p 7.0p 7.6p 7.3p 7.3p
Weighted average number of shares (million) 1,343.7 1,343.2 1,343.8 1,343.4 1,343.6 1,343.1
For the reconciliation from basic EPS see note 8(b).
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 APMs throughout this report which it believes are more appropriate to the
Group's current circumstances. These EPRA measures are calculated in accordance with the EPRA Best Practices Recommendations Guidelines.
In 2018, 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 and notes referenced:
Table/note 2018 2017
EPRA cost ratio (including direct vacancy costs) table 2 20.1% 19.4%
EPRA cost ratio (excluding direct vacancy costs) table 2 15.3% 15.1%
EPRA earnings note 8(b) GBP210.5m GBP184.5m
— per share note 8(b) 15.7p 13.7p
EPRA NAV note 9(b) GBP3,947.1m GBP5,287.3m
— per share note 9(b) 293p 393p
EPRA NNNAV note 9(c) GBP3,640.7m GBP4,695.8m
— per share note 9(c) 271p 349p
EPRA NIY table 3 4.8% 4.2%
EPRA 'topped-up' NIY table 3 5.0% 4.4%
EPRA vacancy rate table 4 3.3% 3.0%
Details of the Group's performance against the EPRA Best Practice Recommendations on Sustainability Reporting can be found in full in the 2018
corporate responsibility report. In 2018, the Group retained its Gold EPRA Sustainability Best Practice Recommendations award.
2 EPRA cost ratios
2018 2017
GBPm GBPm
Administration expenses - ongoing 44.0 41.6
Net service charge costs 18.5 19.1
Other non-recoverable costs 44.4 46.6
Remove:
Service charge costs recovered through rents (4.6) (6.5)
EPRA costs - including direct vacancy costs 102.3 100.8
Direct vacancy costs (24.3) (22.6)
EPRA costs - excluding direct vacancy costs 78.0 78.2
Rent receivable 528.0 546.2
Rent payable (14.6) (20.5)
Gross rental income less ground rent payable 513.4 525.7
Remove:
Service charge costs recovered through rents (4.6) (6.5)
Gross rental income 508.8 519.2
EPRA cost ratio (including direct vacancy costs) 20.1% 19.4%
EPRA cost ratio (excluding direct vacancy costs) 15.3% 15.1%
3 EPRA NIY and 'topped-up' NIY
2018 2017
GBPm GBPm
Investment and development property 9,167 10,223
Less developments (342) (379)
Completed property portfolio 8,825 9,844
Allowance for estimated purchasers' costs 609 673
Gross up completed property portfolio valuation 9,434 10,517
Annualised cash passing rental income 474 462
Property outgoings (26) (25)
Annualised net rents 448 437
Notional rent on expiration of rent-free periods or other lease incentives 25 23
Topped-up net annualised rent 473 460
EPRA NIY 4.8% 4.2%
EPRA 'topped-up' NIY 5.0% 4.4%
EPRA NIY and 'topped-up' NIY by property is given in the investment and development property section.
4 EPRA vacancy rate
2018 2017
% %
intu Trafford Centre 2.1 1.6
intu Lakeside 2.9 5.8
intu Metrocentre 5.1 5.5
intu Merry Hill 6.6 1.8
intu Braehead 1.3 2.5
Manchester Arndale 1.7 1.8
intu Watford 3.9 2.8
intu Derby 4.8 2.1
intu Eldon Square 1.4 1.2
intu Victoria Centre 1.8 1.5
intu Milton Keynes 1.7 0.4
Cribbs Causeway 2.6 1.7
St David's, Cardiff 7.8 6.0
intu Xanadú 2.3 4.5
intu Puerto Venecia 0.5 1.9
intu Asturias 1.1 3.6
intu Chapelfield 0.7 -
3.3 3.0
EPRA vacancy rate is the ERV of vacant space divided by total ERV.
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 20/02/2019 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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