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RNS
Intu Properties PLC  -  INTU   

INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2017

Released 07:00 27-Jul-2017

RNS Number : 1683M
Intu Properties PLC
27 July 2017
 

 

 

 

27 JULY 2017

 

 

INTU PROPERTIES PLC

 

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

 

David Fischel, intu Chief Executive, commented:

 

"intu has performed robustly over the six month period in a UK retail environment which continues to be challenging. Retail brands are being selective in their expansion, looking at established locations such as our 17 prime shopping centres which are attracting high footfall through their differentiated offering and compelling customer experience.

The resilience of the tenant market in our centres is shown by our 103 lettings in the period at 7 per cent above previous passing rents, including brands such as Next, River Island, Hugo Boss, Gant, Paul Smith, Victoria's Secret and Tesla. Also our tenants continue to invest in upsizing and upgrading their units which has resulted in maintained high occupancy.

Our £679 million UK development programme is progressing on schedule with the £180 million intu Watford extension on target to open in Autumn 2018. We expect to start shortly on the £71 million intu Lakeside leisure extension which is over 90 per cent let to tenants including Nickelodeon, Hollywood Bowl and multiple restaurants.

Our Spanish business continues to perform well and intu now owns three of the country's top ten shopping centres. During the period, we acquired Madrid Xanadú for €530 million, a centre which has strong leisure attractions including an indoor ski slope, with an aquarium and Nickelodeon theme park attraction under construction.

We have a clear strategy to deliver long-term value to shareholders and, with cash and available facilities amounting to £920 million, we have significant flexibility to pursue opportunities as they arise in the UK and Spain."

 

 

Investor presentation

 

A presentation to analysts and investors will take place at UBS, 5 Broadgate, London EC2 at 09.30BST on 27 July 2017. The presentation will also be available to international analysts and investors through a live audio call and webcast. The presentation and a copy of this announcement will be available on the Group's website intugroup.co.uk.

 

Enquiries

 

intu properties plc

David Fischel

Chief Executive

+44 (0)20 7960 1207

Matthew Roberts

Chief Financial Officer

+44 (0)20 7960 1353

Adrian Croft

Head of Investor Relations

+44 (0)20 7960 1212


Public relations

UK:

Justin Griffiths, Powerscourt

+44 (0)20 7250 1446

SA:

Frédéric Cornet, Instinctif Partners

+27 (0)11 447 3030

 



CONTENTS

 

Highlights


Operating review


Top properties


Financial review


Market review


Principal risks and uncertainties


Directors' responsibility statement


Independent review report


Unaudited financial information


Other information


Glossary


Dividends


 

 

About intu

intu is the UK's leading owner, manager and developer of prime regional shopping centres with a growing presence in Spain. We are passionate about creating uniquely compelling experiences, in centre and online, that attract customers, delivering enhanced footfall, dwell time and loyalty. This helps our retailers flourish, driving occupancy and income growth.

We own many of the UK's largest and most popular retail destinations, with super-regional centres such as intu Trafford Centre and intu Lakeside and vibrant city centre locations from Newcastle to Watford.

We are focused on four strategic objectives: optimising the performance of our assets to deliver attractive long-term total property returns, progressing our UK development pipeline to add value to our portfolio, leveraging the strength of our brand and seizing the opportunity in Spain to create a business of scale.

We are committed to our local communities, our centres support over 120,000 jobs representing about 4 per cent of the total UK retail workforce, and to operating with environmental responsibility.

Our success creates value for our retailers, investors and the communities we serve.

 

Presentation of information

We account for our interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements. This means that the income statement and the balance sheet include single lines for the Group's total share of post-tax profit and the net investment in joint ventures respectively.

Management review and monitor performance as well as determine the strategy of the business primarily on a proportionately consolidated basis. This includes the Group's share of joint ventures on an individual line-by-line basis rather than a post-tax profit or net investment basis. The figures and commentary presented are consistent with our management approach as we believe this provides a more meaningful analysis of the Group's performance. The other information section provides reconciliations of the income statement and balance sheet between the two bases.

See financial review for more details on the presentation of information and alternative performance measures used.

 

 

 

 

 

 

 

 

 

 

This press release contains "forward-looking statements" regarding the belief or current expectations of intu properties plc, its Directors and other members of its senior management about intu properties plc's businesses, financial performance and results of operations.

 

These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of intu properties plc and are difficult to predict, that may cause actual results, performance or developments to differ materially from any future results, performance or developments expressed or implied by the forward-looking statements. These forward-looking statements speak only as at the date of this press release. Except as required by applicable law, intu properties plc makes no representation or warranty in relation to them and expressly disclaims any obligation to update or revise any forward-looking statements contained herein to reflect any change in intu properties plc's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

Any information contained in this press release on the price at which shares or other securities in intu properties plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.



HIGHLIGHTS OF THE FIRST SIX MONTHS OF 2017

 

Operating highlights

 

Optimising asset performance

 

We aim to deliver attractive long-term total property returns from strong, stable income streams

·      after increases of 1.8 per cent in 2015 and 3.6 per cent in 2016, like-for-like net rental income decreased by 1.5 per cent in the period, against a strong comparative of 7.5 per cent increase for the first half of 2016; guidance of second half recovery to deliver unchanged outcome for 2017

·      signed 103 long-term leases (80 in the UK and 23 in Spain) delivering £18 million of annual rent at an average of
7 per cent above previous passing rent and in line with valuers' assumptions

·      occupancy stable at 95.9 per cent (December 2016: 96.0 per cent)

·      footfall decreased by 0.5 per cent (2016: +1.3 per cent) outperforming the national ShopperTrak retail average which fell by 2.7 per cent in the period

·      like-for-like property values improved slightly in the period, increasing by 0.2 per cent, broadly in line with the IPD monthly retail index of 0.6 per cent (2016: intu +0.0 per cent; IPD down 4.7 per cent)

 

Delivering UK developments

 

By extending and enhancing our existing locations we aim to deliver superior returns

·      capital expenditure of £99 million in the period including £40 million on the £180 million extension of intu Watford which is on target to open in Autumn 2018

·      intend to commence two further developments in 2017 - the £71 million Nickelodeon-anchored leisure scheme at intu Lakeside and the £74 million extension and enclosure of Barton Square at intu Trafford Centre

·      signed The Light cinema to anchor the intu Broadmarsh redevelopment and expect to commit to this £89 million project later in 2017

·      near-term committed and pipeline of projects through to the end of 2020 of £679 million

 

Making the brand count

 

We leverage the strength of our brand to create compelling experiences for our customers

·      net promoter score, our measure of customer service, running consistently high at around 70

·      intu Experiences, our dedicated promotions business, generated income of £8 million in the period, which is in line with the first half of 2016 (£21 million annually, equivalent to the rental income of our eighth largest centre)

·      intu.co.uk, our online shopping platform providing strong editorial content, has seen an 80 per cent year-on-year increase in visits to our shop pages offering products from 470 retailers

·      on target to deliver our 2020 environmental objectives ahead of time, including intensity reduction in carbon emissions of 47 per cent since 2010 against our 2020 target of 50 per cent

 

Seizing the growth opportunity in Spain

 

Our strategy is to create a business of scale through acquisitions and development projects

·      acquired Madrid Xanadú, one of Spain's top 10 shopping centres in March 2017, for an agreed price of €530 million, and announced formation of a joint venture with TH Real Estate for them to take ownership of 50 per cent

·      completed a €8 million project at intu Asturias developing a previously under-utilised space. The redevelopment opened successfully in July 2017

·      signed 23 leases, including nine for the recently completed development at intu Asturias. New lettings of existing units were 14 per cent above the previous passing rent

·      occupancy remained strong in our three centres at 98 per cent, with footfall and retailer sales both up by 1 per cent

·      increases in the market value of existing centres with intu Asturias up 4 per cent and Puerto Venecia, Zaragoza up
3 per cent

·      strong interest from prospective tenants for the intu Costa del Sol development and progressing discussions with lenders for development finance for the project

 



Financial strength

 

Robust capital structure provides capacity to deliver our objectives from a range of funding sources. Since the half year, we have refinanced a £488 million loan on intu Merry Hill, raised additional finance of £250 million on intu Trafford Centre and imminently expect to complete the disposal of 50 per cent of Madrid Xanadú. On a pro forma basis, taking into account the above transactions:

·      cash and available facilities of £920 million (31 December 2016: £922 million)

·      weighted average debt maturity of 7.1 years, with minimal refinancing until 2021

·      substantial headroom on our debt covenants. By way of example, a 25 per cent fall in capital values and 10 per cent fall in income would only require an equity cure of £10 million

 

With 100 per cent ownership of assets valued at £6.7 billion and high quality income streams, we intend to continue the process of recycling capital from existing assets to help finance our investment programme.

 

Guidance for full year

 

Our guidance for full year like-for-like net rental income is around 0 per cent, at the bottom end of the previously announced range of 0 to 2 per cent. As previously stated, the precise outcome will be dependent on the timing of letting some of the larger units. These units, predominantly the former BHS units, are now all in advanced legals but closure of these transactions is slightly behind our original targets with longer term growth prospects undiminished.

 

Financial highlights 1

 





Six months ended

Six months ended


30 June 2017

30 June 2016







Net rental income (£m) 2 3

 

226.2

 

219.4

 

Underlying earnings (£m)

 

98.5

 

99.5

 

Property revaluation surplus (£m) 2 3

 

17.7

 

5.2

 

IFRS profit for the period (£m)

122.7

48.1




Underlying earnings per share (pence)

7.3

7.5

Dividend per share (pence)

4.6

4.6





As at

As at


30 June 2017

31 December 2016




Market value of investment properties (£m) 2 3

 

10,121

 

9,985

 

Net external debt (£m) 2 3

 

4,750

 

4,364

 

IFRS net assets attributable to owners of intu properties plc (£m)

4,992

4,979




Net asset value per share (diluted, adjusted) (pence)

 

403

 

404

 

Debt to assets ratio (per cent) 2 3

 

46.9

 

43.7

 

Pro forma debt to assets ratio (per cent) 2 4

 

45.8

 

n/a

 




1 Please refer to glossary for definition of terms.

2 Including Group's share of joint ventures.

3 See other information section for reconciliations between presented figures and IFRS figures.

4 Pro forma for intu Merry Hill refinancing, additional £250 million loan on intu Trafford Centre and disposal of 50 per cent of Madrid Xanadú.

 

Our results for the period show stable underlying earnings and property valuation:

·      net rental income increased by £7 million from the impact of acquisitions, partially offset by like-for-like net rental income reducing by 1.5 per cent, in line with our previous guidance and against a strong comparative of +7.5 per cent, including non-recurring items, in the first half of 2016 

·      underlying earnings of £99 million, broadly unchanged from the first half of 2016

·      like-for-like property values remained stable in the period with a total surplus of £18 million

·      profit for the period of £123 million has increased by £75 million primarily from the change in value of derivative financial instruments offset by 2016 gains on the sale of Equity One and acquisition of remaining 50 per cent of intu Merry Hill

·      underlying earnings per share similar to 2016 at 7.3 pence (six months ended 30 June 2016: 7.5 pence) with interim dividend unchanged

·      net asset value per share (diluted, adjusted) of 403 pence (31 December 2016: 404 pence), delivering a total financial return of 2.1 per cent

·      on a pro forma basis, taking into account the transactions since the period end - the refinancing of intu Merry Hill, the additional £250 million loan on intu Trafford Centre and the imminent disposal of 50 per cent of Madrid Xanadú - the debt to assets ratio is 45.8 per cent and cash and available facilities are £920 million (31 December 2016: £922 million)

OPERATING REVIEW

 

Optimising asset performance

 

Group valuation
The like-for-like valuation surplus on our investment property, including the Group's share of joint ventures, was 0.2 per cent
(£20.3 million) in the period, closely following the IPD monthly retail index which reported a 0.6 per cent increase
(2016: intu +0.0 per cent; IPD down 4.7 per cent).

Our like-for-like valuation surplus reflects improvements in retail and leisure mix along with the tightening supply of vacant units driving increases in expected future rental values.

The total valuation surplus in the period was £17.7 million, including the impact of developments, as set out in the table below.

The weighted average nominal equivalent yield at 30 June 2017 was 4.92 per cent, a reduction of 10 basis points in the period, reflecting our asset management initiatives, reducing vacancy and long average unexpired lease terms. Based on the gross portfolio value, the net initial yield "topped-up" for the expiry of rent free periods was 4.33 per cent, a reduction of 12 basis points in the period.

On a like-for-like basis, ERV increased by 0.4 per cent in the period, compared with the IPD index which indicated a 0.2 per cent increase in the period.


First half

Second half

First half


2017

2016

2016





Group1 revaluation surplus (like-for-like)

 

+0.2%

 

-0.6%

 

+0.6%

 

IPD2 capital growth

 

+0.6%

 

-3.5%

 

-1.1%

 





Group1 weighted average nominal equivalent yield

 

4.92%

 

5.02%

 

5.01%

 

Change in Group nominal equivalent yield

 

-10bp

 

+1bp

 

-13bp

 

IPD2 equivalent yield shift

 

-7bp

 

+25bp

 

+4bp

 





Group1 "topped-up" net initial yield (EPRA)

 

4.33%

 

4.45%

 

4.49%

 





Group1 change in like-for-like ERV

 

+0.4%

 

+0.1%

 

-0.1%

 

IPD2 change in rental value index

 

+0.2%

 

+0.3%

 

+0.5%

 





 

1 Including Group's share of joint ventures.

2 IPD monthly index, retail.

 



The table below shows the main components of the Group's £17.7 million overall valuation surplus:





Market value

Like-for-like


30 June

31 December

Surplus/

Surplus/


2017

2016

(deficit)

(deficit)


£m

£m

£m

%











intu Lakeside

1,395.0

1,375.0

10.4

1

Intu Chapelfield

305.1

296.3

9.5

3

intu Trafford Centre

2,324.0

2,312.0

9.4

-

intu Potteries

162.5

169.0

(8.0)

(5)

intu Braehead

533.1

546.2

(12.0)

(2)

Other UK like-for-like

4,845.7

4,802.0

0.5

-











Total UK like-for-like

9,565.4

9,500.5

9.8

-

Spain like-for-like

353.2

331.0

10.5

3

Redevelopments

202.2

153.2

(3.6)

n/a











Investment and development property





including Group's share of joint ventures

10,120.8

9,984.7

16.7

n/a

Acquisition: Madrid Xanadú (asset held for sale)

462.8

-

1.0

n/a











Total

10,583.6

9,984.7

17.7

n/a






 

·      intu Lakeside: completion of new leases and renewals on expiry adds certainty to the income streams going forward as well as providing evidence for growth in future rental levels

·      intu Chapelfield: strong investment demand for prime centres with limited vacant units and strong tenant mix

·      intu Trafford Centre: new lettings continue to drive forward rental tone

·      intu Potteries: pressure on long-term rental values has impacted the centre's value

·      intu Braehead: continuation of the less buoyant occupier and investment market in Scotland has resulted in a reduction in value of this centre

·      Spain: limited vacant space and strong operating metrics increase the rental value potential of intu Asturias and Puerto Venecia, Zaragoza (see below - seizing the growth opportunity in Spain - for further details)

 

Group like-for-like net rental income

Like-for-like net rental income was 1.5 per cent lower than the same period in 2016 due to non-recurring rental items in the first half of 2016 not repeating and the impact of the closure of BHS which was fully income producing in the first half of 2016, partially offset by rental growth from new lettings and rent reviews, analysed as follows:





First half

First half


2017

2016


%

%







Rent reviews, improved letting and turnover income

+2.5%

+2.3%

Capital investment

+0.5%

+0.9%

Vacancy impact

-0.2%

+1.9%

Units closed for redevelopment

-2.1%

-

Other letting activity (e.g. bad debt; surrender premiums)

-2.2%

+2.4%







Total like-for-like net rental income

-1.5%

+7.5%




 

Our guidance for full year like-for-like net rental income is around 0 per cent, at the bottom end of the previously announced range of 0 to 2 per cent. As previously stated, the precise outcome will be dependent on the timing of letting some of the larger units. These units, predominantly the former BHS units, are now in advanced legals but closure of these transactions is slightly behind our original targets with longer term growth prospects undiminished. We expect the reletting of the former BHS units to increase the rents on these units by around 15 per cent in aggregate.



UK operating metrics






First half

Full year

First half


2017

2016

2016









Occupancy

95.9%

96.0%

96.1%

-  of which, occupied by tenants trading in administration

0.3%

0.5%

1.3%





Leasing activity




-  number, new rent

80, £17m

187, £35m

82, £16m

-  new rent relative to previous passing

7% above

4% above

7% above





Footfall

-0.5%

+1.3%

+1.3%





Retailer sales (like-for-like centres)

-2.1%

+0.2%

+0.2%





Rent to estimated sales (exc. anchors and major space users)

12.4%

12.2%

12.5%





 

Occupancy is 95.9 per cent, in line with 31 December 2016 and 30 June 2016. Five UK centres now have occupancy of 98 per cent or above.

We agreed 80 new long-term leases in the period, amounting to £17 million new annual rent, at an average of 7 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. Retailers continue to focus on increasing their space in prime, high footfall retail destinations. Significant activity in the period includes:

·     key fashion retailers upsizing to optimise their offering and configuration, including Next and River Island at intu Merry Hill

·     aspirational and international brands continuing to recognise the attraction of destination shopping centres, with Hugo Boss and Guess joining the line up at intu Metrocentre, Tesla and Victoria's Secret at intu Milton Keynes, Tag Heuer opening its first store in the West Midlands at intu Merry Hill and Paul Smith opening its first Manchester store at Manchester Arndale

·     traditional retail park tenants introducing smaller format stores in our prime high footfall locations. This includes Decathlon at intu Uxbridge, taking part of the former BHS unit, and Sharps Bedrooms at intu Lakeside, intu Eldon Square and intu Broadmarsh

84 new shops opened or refitted in our UK centres in the first half of 2017, around 3 per cent of our 2,800 units. Tenants have invested around £41 million in these stores, a significant demonstration of their commitment to our centres.

We settled 117 rent reviews in the period for new rents totalling £27 million, an average uplift of 8 per cent on the previous rents.

Footfall was 0.5 per cent lower than the same period in 2016. The closure of the Sainsbury's unit for redevelopment at intu Merry Hill and the short-term impact on our Manchester centres following the terrorist attack in the city have impacted the period. Excluding these, other centres were 0.4 per cent ahead of 2016. This is ahead of the ShopperTrak measure of UK national retail footfall which is down by 2.7 per cent for the same period.

Estimated retailer sales in our centres were down 2.1 per cent in the period. The ratio of rents to estimated sales for standard units remained stable in the period at 12.4 per cent.

The difference between annual property income (see glossary) of £490 million and ERV of £569 million represents £38 million from vacant units and reversion of £41 million, 8 per cent, from rent reviews and lease expiry. Of the 8 per cent reversion, 1 per cent is only realisable on expiry of leases with over 10 years remaining (e.g. anchor units), leaving 7 per cent realisable from other lease expiries and rent reviews.

The weighted average unexpired lease term is 7.3 years (31 December 2016: 7.7 years). 89 per cent of our top 40 tenants, over 50 per cent of the rent roll, have a below average risk profile according to Experian Delphi bands, illustrating the quality and longevity of our income streams.



Delivering UK developments

 

In the period we spent £99 million on capital expenditure. This included £40 million on intu Watford, £32 million on the acquisition of additional properties (all currently income generating) as part of site assembly for future projects, £6 million on planning and enabling works for developments and £21 million on active asset management projects, including the new Travelodge hotel at intu Lakeside and the Next flagship store at intu Metrocentre.

Looking ahead, we are progressing our near-term pipeline of £679 million through to the end of 2020. This, along with a further
£1.3 billion of opportunities over the next 10 years provides a robust platform for organic growth delivering value-enhancing returns.  

Near-term pipeline
Our UK development pipeline through to the end of 2020 amounts to £679 million.








Cost to completion










£m

Total

2017

2018

2019

2020













Committed - intu Watford

116

39

77

-

-

Committed - intu Trafford Centre

74

6

44

24

-

Committed - intu Lakeside

64

10

50

4

-

Committed - active asset management

67

47

18

2

-













Total committed

321

102

189

30

-













Pipeline - acquisition/creation of additional space

96

-

12

32

52

Pipeline - active asset management

153

31

55

42

25













Total pipeline

249

31

67

74

77













Development - intu Broadmarsh

89

-

37

36

16

Development - intu Milton Keynes (phase 1)

20

-

-

10

10













Total development

109

--

37

46

26

























Total UK

679

133

293

150

103







 

We are committed to spending £321 million:

·     at intu Watford we remain on target with our £180 million extension expected to open in Autumn 2018. The development continues at pace with the steel structure nearing completion. The 380,000 sq ft project, anchored by Debenhams and Cineworld, is two-thirds let by space with Superdry and Hollywood Bowl exchanged in the period. The cost to completion of this project is £116 million, and as previously stated, the project is expected to deliver a return on cost of 6 to 7 per cent, including 1 to 2 per cent from the existing centre

·     at intu Trafford Centre we are planning to enclose the courtyard at Barton Square and enable trading from two levels. The project is expected to cost £74 million and will add 110,000 sq ft of additional retail space as well as moving the existing retail profile of Barton Square away from bulky goods. The construction is expected to start in early 2018, once the key anchor tenant is signed, and deliver a return of 6 to 7 per cent

·     at intu Lakeside we have committed to the £71 million leisure extension in the period. This 180,000 sq ft project is expected to deliver a return of 6.5 per cent and has over 90 per cent of the space either pre-let or in solicitors' hands, with Nickelodeon and Hollywood Bowl exchanged. We have commenced the enabling works, with £64 million of cost remaining to completion

·     other active asset management projects total £67 million and include the completion of ancillary property acquisitions at intu Merry Hill, the Halle Place restaurant redevelopment at Manchester Arndale and the creation of flagship stores for Next at intu Metrocentre and intu Merry Hill. These projects are expected to deliver returns of between 6 and 10 per cent

Our pipeline of planned projects amounts to £249 million:

·     extending the space of existing centres by developing non-income producing areas and acquiring certain adjacent properties is expected to cost £96 million. This includes the leisure extension at intu Merry Hill which forms part of our strategy for repositioning the centre. This project is expected to have similar returns to the leisure extension at intu Lakeside

·     other active asset management projects at the feasibility stage amount to £153 million and are across all centres. We have the flexibility to start these projects when we have the required level of pre-lets and expect them to deliver similar returns to those that we have committed to



Extensions and redevelopments to which we have not yet committed are expected to cost £109 million. The majority of this relates to the redevelopment of intu Broadmarsh which is expected to cost £89 million and deliver a stabilised initial yield of around 7 per cent. In the period, we have signed The Light cinema to anchor the scheme and we would expect to have the required level of pre-lets and completed detailed design to enable us to commit to this by the end of the year. The remaining £20 million is the commencement of phase one of the redevelopment of space at intu Milton Keynes, the planning approval of which has now been reinstated after the successful outcome of a public inquiry.

Future opportunities
Beyond 2020, we continue to work on securing the required planning approvals and tenant demand to start £1.3 billion of projects which we would expect to deliver stabilised initial yields of around 7 per cent. We have the required planning approvals for extensions to intu Lakeside, intu Victoria Centre, intu Braehead and intu Milton Keynes and are at earlier stages of the approval process for the extension at Cribbs Causeway.

Funding
We will fund our near-term pipeline from cash and available facilities and from recycling capital to deliver superior returns. Pro forma cash and available facilities at 30 June 2017 were £920 million. Further recycling potential lies in the introduction of partners into some of our centres, although this would have a short-term impact on earnings through the development phase.

In addition, we expect to raise finance on near-term projects, such as the intu Watford extension, as they complete to fund future opportunities.

 

Making the brand count

 

As the role of a shopping centre operator becomes ever more specialised, the steps we have taken following the rebranding have positioned us well to ensure our centres remain relevant for both customers and retailers. To ensure the highest quality and the ability to deliver initiatives quickly, it is important that we control and manage all our space directly.

The first step of this was to bring all staff in-house and ensure we deliver the best customer service. In addition, we took control of all our commercialisation within the malls, through intu Experiences, to control the quality and quantity of our mall, promotional and media activity. Finally, we embraced the multichannel world of retail introducing a transactional website through intu Digital.

Overall, our scale, expertise and insight along with our in-house teams ensure we offer the best customer service and experience in an ever evolving multichannel world.

Customer service
Our focus on putting the customer first is embedded in our culture, with our net promoter score, a measure of customer service, running consistently high at around 70. Pleasingly, the range of scores across centres is narrowing as we are able to roll-out best practices across the portfolio.  

intu Experiences
Curation of the customer experience is a key element of our role in managing shopping centres. Having an in-house team delivering nationwide immersive brand partnerships, mall commercialisation and advertising is crucial in ensuring everything meets our quality standards and is complementary to the asset strategy for each centre.

An example of this end to end control is through the large format digital screens we are introducing to centres, providing new income streams. We own all these screens and in many instances produce the content in an area of growth for us.

Similarly, choosing the brands we work with promotionally is important in delivering the right messages. Through the Easter holidays we furthered our collaboration with Nick Jr., Nickelodeon's pre-school television channel, adding augmented reality functionality to our in-centre app to deliver a new family experience to our customers.

We can also focus on innovations and are working with Virgin StartUp on 'Foodpreneur', a competition to find aspiring food entrepreneurs, and we have launched intu Accelerate, looking for innovative ideas in the retail and leisure market through a 10 week incubation programme. 

intu Digital
The attraction of our digital offering through our premium content publisher and shopping platform, intu.co.uk, saw an increase of over 50 per cent in online sales for retailers in the first six months of 2017.

We recorded an increase in website visits in the period of 2 per cent on the previous year. Visits to centre specific pages showing the likes of opening times are reducing as search engines provide more of this basic information. However, we are seeing year-on-year growth of over 80 per cent in visits to our shopping platform which offers product comparison from 470 retailers. Key to this growth is our online marketing to the 2.5 million individuals on our active marketing database and over one million social media audience.

Commitment to the community
We are performing strongly against our 2020 environmental targets, set against a 2010 base line, with a 47 per cent intensity reduction in carbon emissions (target 50 per cent), 100 per cent of waste diverted from landfill of which 74 per cent is recycled (targets 99 per cent and 75 per cent respectively) and a 14 per cent water intensity reduction (target 10 per cent).

Our people are crucial to what we do and in 2017 we have achieved the internationally recognised accreditation Investors in People gold standard across all intu branded centres. This highly regarded achievement defines what it takes to lead, support and manage people well for sustainable results.

 

Seizing the growth opportunity in Spain

 

Our Spanish strategy is to create a business of scale through acquisitions and our pipeline of development projects. Concentrating on the top 10 key catchments, we aim to establish a market leading position in the country through ownership and management of prime shopping resorts. We own and manage three of Spain's top 10 shopping centres and have four development sites with the most advanced project being intu Costa del Sol, near Málaga.

Acquisition

In March 2017, we acquired Madrid Xanadú, one of Spain's top 10 shopping centres, for an agreed price of €530 million. The centre has many of the key retailers, including El Corte Ingles, all of the Inditex fascias, Primark and Apple, along with a strong leisure offering of Spain's only indoor ski slope, cinema, bowling and soon to open aquarium and Nickelodeon theme park. Footfall is 13 million, with a potential catchment of four million people living within a 30 minute drive time. There is good reversionary potential over the medium term, with further growth opportunity from key asset management initiatives which will enhance the centre's status as a truly regional retail and leisure resort, drawing visitors from a wider catchment.

Further, in May 2017, we announced the formation of a joint venture with TH Real Estate for them to take ownership of 50 per cent of Madrid Xanadú based on the original acquisition price. This is expected to complete imminently. 

Operational performance

The occupancy of our Spanish centres is 98 per cent, with Puerto Venecia and Madrid Xanadú both 98 per cent and intu Asturias 97 per cent.

We agreed 23 new long-term lettings in the period, amounting to over €1 million new annual rent, at an average of 14 per cent above previous passing rent (like-for-like units) and ahead of valuers' assumptions. New names to our centres included Quiz, Levis and Pandora.

In the period we have completed a redevelopment of a previously underutilised area at intu Asturias to introduce a supermarket and new retail units which has opened with one unit remaining to be let. The development has impacted footfall and sales for the centre in the first six months of the year as the work continued, but this has picked up strongly since opening. Excluding this impact, footfall and sales increased in aggregate by around 1 per cent at the other two centres.

We have increased the value of the centres owned throughout the period with our share of Puerto Venecia, Zaragoza, valued at €256 million, an increase of 3 per cent, and our share of intu Asturias increased by 4 per cent, to €146 million. The investment market in Spain remains strong with continued demand for quality shopping centres.

Near-term pipeline








Cost to completion



£m

Total

2017

2018

2019

2020













Committed

4

3

-

1

-

Pipeline

40

5

5

15

15

intu Costa del Sol

470

-

98

186

186













Total

514

8

103

202

201







 

We are committed to spend £4 million, mainly at intu Asturias, and have a pipeline of proposed projects of £40 million through to the end of 2020. These are across all three centres and focus on enhancing the resort content of each centre.

Our plan for intu Costa del Sol, near Málaga, is to develop a shopping resort of around 230,000 sq. m. to target the three million residents and 10 million annual tourists to the region. We have received the required planning approval from the local (Torremolinos) town hall and the final approval from the regional government could be received by the end of the year. We have strong interest from potential tenants and would anticipate being on site in the second half of 2018.

The total cost of the development is expected to be around €750 million, including the €82 million already incurred by intu, and deliver a stabilised initial yield of around 7 per cent. We have previously included this project on the basis of introducing a partner to the project at an early stage, however our current plan is to develop alone and fund through bank and other finance, introducing a partner at a later stage.

Future opportunities
We continue to develop plans at the three other sites in Valencia, Palma and Vigo, with intu Valencia being the most likely to follow intu Costa del Sol.



TOP PROPERTIES

 















Annual

Headline




Market

Size


Number

property

rent

ABC1



value

(sq. ft. 000)

Ownership

of stores

income

ITZA

customers

Key stores


Super-regional centres











intu Trafford Centre

£2,324m

1,973

100%

228

£94.6m

£435

66%

Debenhams, Topshop, Selfridges, John Lewis, Next, Apple, Ted Baker, Victoria's Secret, Odeon, Legoland Discovery Centre, H&M, Hamleys, Marks & Spencer, Zara, Sea Life

intu Lakeside

£1,395m

1,435

100%

249

£52.9m

£355

66%

House of Fraser, Debenhams, Marks & Spencer, Topshop, Zara, Primark, Vue, Hamleys, Victoria's Secret

intu Metrocentre

£945m

2,108

90%

317

£48.8m

£280

52%

House of Fraser, Marks & Spencer, Debenhams, Apple, H&M, Topshop, Zara, Primark, River Island, Odeon

intu Merry Hill

£917m

1,671

100%

212

£40.5m

£200

48%

Marks & Spencer, Debenhams, Primark, Next, Topshop, Asda, Boots, H&M, Odeon

intu Braehead

£533m

1,124

100%

123

£27.5m

£250*

57%

Marks & Spencer, Primark, Apple, Next, H&M, Topshop, Superdry, Sainsbury's, David's Bridal

Cribbs Causeway

£240m

1,075

33%

152

£12.5m

£305

77%

John Lewis, Marks & Spencer, Apple, Next, Topshop, Timberland, Jigsaw, Hobbs, Hugo Boss, H&M


In-town centres


intu Derby

£461m

1,300

100%

213

£29.3m

£110

47%

Marks & Spencer, Debenhams, Sainsbury's, Next, Boots, Topshop, Cinema de Lux, Zara, H&M

Manchester Arndale

£450m

1,960

48%

250

£21.2m

£285

61%

Harvey Nichols, Apple, Burberry, Paul Smith, Topshop, Next, Hugo Boss, Superdry, Zara

intu Victoria Centre

£361m

976

100%

114

£18.9m

£250

56%

House of Fraser, John Lewis, Next, Topshop, River Island, Boots, Urban Outfitters, Superdry

St David's, Cardiff

£351m

1,391

50%

203

£16.4m

£212

71%

John Lewis, Debenhams, Marks & Spencer, Apple, Victoria's Secret, Hugo Boss, H&M, River Island, Hamleys, Primark

intu Watford

£336m

726

93%

136

£17.2m

£220

83%

John Lewis, Marks & Spencer, Apple, Zara, Primark, Next, Lakeland, Lego, H&M, Topshop, New Look

intu Eldon Square

£324m

1,350

60%

140

£16.2m

£308

63%

John Lewis, Fenwick, Debenhams, Waitrose, Apple, Topshop, Boots, River Island, Next, Marks & Spencer















Annual





Market

Size


Number

property





Value

(sq. m. 000)

Ownership

of stores

income



Key stores











Spanish centres









Madrid Xanadú

€527m

118**

100%

210

€25.4m



El Corte Inglés, Zara, Primark, Apple, H&M, Mango, SnowZone, Cinesa, BriCor, Decathlon

Puerto Venecia, Zaragoza

€256m

119**

50%

202

€12.3m



El Corte Inglés, Primark, Ikea, Apple, Decathlon, Cinesa, H&M, Mediamarkt, Zara, Hollister, Toys R Us, Fnac

intu Asturias

€146m

75**

50%

146

€8.0m



Primark, Zara, H&M, Cinesa, Eroski, Mango, Springfield, Fnac, Mediamarkt, Desigual

 

*The amount presented is on the Scottish ITZA basis, the English equivalent is £335.

** Excludes owner occupied space.



FINANCIAL REVIEW

 

Presentation of information

We account for our interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements. This means that the income statement and the balance sheet include single lines for the Group's total share of post-tax profit and the net investment in joint ventures respectively.

Management review and monitor performance as well as determine the strategy of the business primarily on a proportionately consolidated basis. This includes the Group's share of joint ventures on an individual line-by-line basis rather than a post-tax profit or net investment basis. The figures and commentary presented are consistent with our management approach as we believe this provides a more meaningful analysis of the Group's performance. The other information section provides reconciliations of the income statement and balance sheet between the two bases.

Alternative performance measures are also used to assess the Group's performance. The significant measures are summarised as follows:



Alternative performance

Rationale

measure used






Like-for-like amounts

Like-for-like amounts are presented as they indicate operating performance as distinct from the impact of acquisitions or disposals. In respect of property, the like-for-like measure relates to property which has been owned throughout both periods without significant capital expenditure in either period, so that income can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also include assets owned at the previous reporting period end but not throughout the prior period. Further analysis is presented in the other information section and in the operating review.





Net asset value ('NAV') (diluted, adjusted)

NAV (diluted, adjusted) is presented as it is considered to be a key measure of the Group's performance. The key difference from EPRA NAV, an industry standard comparable measure, is the exclusion of interest rate swaps not currently used for economic hedges of debt as, in our view, this better allows management to review and monitor the Group's performance. A reconciliation of NAV (diluted, adjusted) to NAV attributable to owners of intu properties plc as well as EPRA NAV is provided in note 13(a).





Underlying earnings

Underlying earnings is presented as it is considered to be a key measure of the Group's recurring income performance and an indication of the extent to which dividend payments are supported by underlying operations. It excludes property and derivative valuation movements, exceptional items and related tax. The key difference from EPRA earnings, an industry standard comparable measure, relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments that can be made. A reconciliation of underlying earnings to profit for the period attributable to owners of intu properties plc as well as EPRA earnings is provided in note 12(c). The underlying profit statement is also presented in full in the other information section.



 

Overview

 

Underlying earnings of £98.5 million is marginally down from £99.5 million in the first half of 2016. This reflects the reduction in like-for-like net rental income in the period, partially offset by the net impact of recent acquisitions and disposals. Underlying earnings per share of 7.3 pence, a decrease of 3 per cent on the same period in 2016.

Profit for the period attributable to owners of intu properties plc of £127.1 million has increased by £75.6 million, impacted by the change in fair value of financial instruments, a surplus of £18.7 million (six months ended 30 June 2016: a charge of £130.6 million), as well as a surplus on property valuations of £17.7 million (six months ended 30 June 2016: surplus of £5.2 million), partially offset by 2016 gains of £74.1 million on the sale of Equity One and £34.8 million on the acquisition of the remaining 50 per cent of intu Merry Hill.

Net asset value per share of 403 pence is broadly unchanged from 31 December 2016, which when taking account of the dividend paid in the period of 9.4 pence delivers a total financial return for the six months ended 30 June 2017 of 2.1 per cent.

In March we continued to increase our presence in Spain and strengthen our super prime portfolio, acquiring 100 per cent of Madrid Xanadú for £453.5 million (€516.8 million). As part of this we arranged a €265 million loan facility, with a 2022 maturity. In May we announced the formation of a joint venture with TH Real Estate for them to take ownership of 50 per cent of Madrid Xanadú based on the original acquisition price. This transaction is expected to complete imminently. As a result, in accordance with IFRS, the net assets of Madrid Xanadú have been classified as held for sale in the balance sheet.



Our financing metrics remain strong mainly due to our continued refinancing activity. In the period, we issued and refinanced £366 million of debt, including the refinancing of intu Milton Keynes in February and financing of the acquisition of Madrid Xanadú in March. Our debt to assets ratio of 46.9 per cent (31 December 2016: 43.7 per cent) remains below our target maximum level of 50 per cent. Our interest cover ratio of 1.93x has decreased slightly in the year (31 December 2016: 1.97x) with satisfactory headroom above our target minimum level of 1.60x. At 30 June 2017 we had cash and available facilities of £566.9 million which have reduced in the period due to the acquisition of Madrid Xanadú (31 December 2016: £922.3 million).

Since the period end we have completed the refinancing of intu Merry Hill with a £488 million loan, have secured an additional £250 million facility on intu Trafford Centre and imminently expect to complete the disposal of 50 per cent of Madrid Xanadú. On a pro forma basis, we have a debt to assets ratio of 45.8 per cent and cash and available facilities of £920 million.

 

Income statement

 





Six months ended 30 June


2017

2016










Group

Group



Share of

including

including



joint

share of joint

share of joint


Group

ventures

ventures

ventures


£m

£m

£m

£m











Underlying earnings

98.5

-

98.5

99.5

Adjusted for:





Revaluation of investment and development property

9.2

8.5

17.7

5.2

Gain on acquisition of businesses

-

-

-

34.8

Loss on disposal of subsidiaries

(0.9)

-

(0.9)

-

(Loss)/gain on sale of other investments

-

(0.3)

(0.3)

74.1

Administration expenses - exceptional

(1.7)

-

(1.7)

(1.3)

Exceptional finance costs

(12.2)

-

(12.2)

(12.4)

Change in fair value of financial instruments

18.1

0.6

18.7

(130.6)

Tax on the above

(0.3)

1.5

1.2

(16.7)

Share of joint ventures' items

9.9

(9.9)

-

-

Share of associates' items

4.0

-

4.0

(2.4)

Non-controlling interests in respect of the above

2.5

(0.4)

2.1

1.3











Profit for the period attributable to owners of





intu properties plc

127.1

-

127.1

51.5











Underlying earnings per share (pence)

7.3p

n/a

7.3p

7.5p






 

Underlying earnings of £98.5 million is broadly unchanged from £99.5 million in the first half of 2016, the key movements of which are shown in the chart below. Underlying earnings per share of 7.3 pence, a decrease of 3 per cent on the same period in 2016.



 

Underlying earnings (£m) - Chart 1

 

Click on, or paste the following link into your web browser, to view the associated PDF document.

 

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Net rental income increased £6.8 million primarily due to the acquisition of Madrid Xanadú in March 2017 and the acquisition of the remaining 50 per cent of intu Merry Hill in June 2016, partially offset by the impact of the disposal of intu Bromley in December 2016 and the slight reduction in like-for-like net rental income in the period.

Like-for-like net rental income decreased by £3.3 million, 1.5 per cent, driven by non-recurring rental items in the first half of 2016 and the impact of the closure of BHS which was fully income producing in the first half of 2016, partially offset by rental growth from new lettings and rent reviews (see operating review).

Net finance costs have increased by £5.7 million primarily due to debt relating to the acquisition of Madrid Xanadú in March 2017, the acquisition of the remaining 50 per cent of intu Merry Hill in June 2016 and the £375 million convertible bonds issued in November 2016.

The profit for the period attributable to owners of intu properties plc is £127.1 million, an increase on the £51.5 million reported for the six months ended 30 June 2016. This was primarily due to the change in fair value of financial instruments, a surplus of £18.7 million (six months ended 30 June 2016: a charge of £130.6 million), as well as a surplus on property valuations of £17.7 million (six months ended 30 June 2016: surplus of £5.2 million), partially offset by 2016 gains of £74.1 million on the sale of Equity One and £34.8 million on the acquisition of the remaining 50 per cent of intu Merry Hill.

Our investment in joint ventures contributed £18.4 million to the profit of the Group (six months ended 30 June 2016: £17.6 million) including £8.5 million to underlying earnings (six months ended 30 June 2016: £12.1 million) and a gain on property valuations of £8.5 million (six months ended 30 June 2016: £8.8 million).

As detailed in the table below, our net rental income margin has reduced to 88 per cent primarily due to higher void costs from the closure of the former BHS units. Property operating expenses largely comprise car park operating costs and the Group's contribution to shopping centre marketing programmes. Our ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 15.0 per cent (see other information section).


Six months

Six months


ended

ended


30 June

30 June


2017

2016


£m

£m







Gross rental income

268.5

258.8

Head rent payable

(10.2)

(13.0)








258.3

245.8

Net service charge expense and void rates

(14.5)

(11.0)

Bad debt and lease incentive write-offs

(1.4)

(1.0)

Property operating expense

(16.2)

(14.4)







Net rental income

226.2

219.4







Net rental income margin

87.6%

89.3%







EPRA cost ratio (excluding direct vacancy costs)

15.0%

14.1%




 



Balance sheet

 





30 June

31 December


2017

2016










Group

Group


Group

Share of

including

including


balance

joint

share of joint

share of joint


sheet

ventures

ventures

ventures


£m

£m

£m

£m











Investment and development property

9,322.5

746.2

10,068.7

9,944.5

Investment in joint ventures

603.1

(603.1)

-

-

Investment in associates and other investments

86.6

-

86.6

80.7

Net external debt

(4,605.7)

(144.4)

(4,750.1)

(4,364.1)

Derivative financial instruments

(351.8)

(1.9)

(353.7)

(380.0)

Assets and associated liabilities





classified as held for sale

230.7

-

230.7

-

Other assets and liabilities

(230.2)

6.1

(224.1)

(234.7)











Net assets

5,055.2

2.9

5,058.1

5,046.4

Non-controlling interest

(63.2)

(2.9)

(66.1)

(67.6)











Attributable to shareholders

4,992.0

-

4,992.0

4,978.8

Fair value of derivative financial instruments

351.8

1.9

353.7

380.0

Other adjustments

79.2

(1.9)

77.3

76.3

Effect of dilution

2.6

-

2.6

2.6











Net assets (diluted, adjusted)

5,425.6

-

5,425.6

5,437.7











NAV per share (diluted, adjusted) (pence)

403p

-

403p

404p






 

The Group's net assets attributable to shareholders are £4,992.0 million, an increase from £4,978.8 million at 31 December 2016, while net assets (diluted, adjusted) are £5,425.6 million, a decrease from £5,437.7 million at 31 December 2016.

 

 

Net asset value per share (pence) - Chart 2

 

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NAV per share (diluted, adjusted) at 30 June 2017 decreased from 31 December 2016 to 403 pence with the key movements shown in the chart above. This was driven principally by underlying earnings in the period of 7.3 pence, offset by the final dividend for 2016 of 9.4 pence paid in the period.

Investment and development property has increased by £124.2 million primarily due to capital expenditure of £108.6 million, and a surplus on revaluation of £17.7 million. The acquisition of Madrid Xanadú in March has been subsequently classified as an asset held for sale and therefore does not impact this movement.

Our net investment in joint ventures is £603.1 million at 30 June 2017 (31 December 2016: £587.6 million), which includes the Group's share of net assets, on an equity accounted basis, of £375.1 million (31 December 2016: £355.4 million) and loans to joint ventures of £228.0 million (31 December 2016: £232.2 million). The increase in net investment in joint ventures primarily reflects the Group's share of their profit in the period.

Investments in associates and other investments of £86.6 million primarily represent our interests in India, which comprises a 32 per cent interest in Prozone (£48.7 million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (£21.0 million), owner and operator of a shopping centre in Aurangabad. See notes 16 and 17 for further details.

Net external debt of £4,750.1 million has increased by £386.0 million primarily from funding our acquisition of Madrid Xanadú and capital expenditure in the period. Cash including the Group's share of joint ventures has reduced by £2.7 million to £288.9 million and gross debt has increased by £383.3 million to £5,039.0 million.

Derivative financial instruments comprise the fair value of the Group's interest rate swaps. The net liability at 30 June 2017 is £353.7 million, a decrease of £26.3 million in the period, with the UK 10-year bond yield increasing marginally from 1.24 per cent to 1.26 per cent. Cash payments in the year totalled £21 million, £12 million of which has been classified as an exceptional finance cost as it relates to payments in respect of unallocated interest rate swaps. The balance of the payments has been included as underlying finance costs as it relates to ongoing interest rate swaps used to hedge debt.

As previously detailed, we have a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders' practice. At 30 June 2017 these interest rate swaps have a market value liability of £239.6 million (31 December 2016: £253.2 million). It is estimated that we will be required to make cash payments on these interest rate swaps of £13 million in the second half of 2017, £28 million in 2018, reducing to below £18 million per annum in 2021.

Assets and associated liabilities classified as held for sale of £230.7 million relate to Madrid Xanadú. In May we announced the formation of a joint venture with TH Real Estate for them to take ownership of 50 per cent of Madrid Xanadú based on the original acquisition price. This transaction is expected to complete imminently. As a result, in accordance with IFRS, the net assets of Madrid Xanadú have been classified as held for sale in the balance sheet.

The non-controlling interest at 30 June 2017 relates primarily to our partner's 40 per cent stake in intu Metrocentre.

We are exposed to foreign exchange movements on our overseas investments and our policy is to ensure that the net exposure to foreign currency is less than 10 per cent of the Group's net assets attributable to shareholders. At 30 June 2017 the exposure, pro forma for the 50 per cent disposal of Madrid Xanadú, is 8 per cent, higher than the 7 per cent at 31 December 2016 due to our increased exposure in Spain from the acquisition of Madrid Xanadú.

 

Cash flow

 





Six months ended

Six months ended


30 June 2017

30 June 2016


£m

£m







Group cash flow as reported



Cash flows from operating activities

67.9

73.0

Cash flows from investing activities

(539.7)

(244.8)

Cash flows from financing activities

466.9

140.6

Foreign currency movements

0.1

1.1







Net decrease in Group cash and cash equivalents

(4.8)

(30.1)




 

During the six months ended 30 June 2017 cash and cash equivalents decreased by £4.8 million.

Cash flows from operating activities of £67.9 million are £5.1 million lower than 2016, primarily due to the timing of payments.

Cash flows from investing activities reflect cash outflows for our acquisition of Madrid Xanadú of £446.3 million and capital expenditure paid during the period of £91.3 million.

Cash flows from financing activities include net debt drawdowns of £586.4 million primarily to fund our acquisition of Madrid Xanadú, partially offset by dividends paid in cash during the period of £117.8 million.



Financing

 

Debt structure
We have carried out significant refinancing activity in recent years which has resulted in diversified sources of funding, including secured bonds plus syndicated bank debt secured on individual or pools of assets, with limited or no recourse from the borrowing entities to other Group companies outside of these arrangements. Our corporate-level debt remains limited to the Revolving Credit Facility ('RCF') as well as the £375 million and £300 million convertible bonds.

During the period we undertook the following financing activities:

·     agreed a new £140 million facility secured against intu Milton Keynes, replacing the previous £125 million loan, maturing in 2019

·        agreed a €265 million facility in connection with the acquisition of Madrid Xanadú, maturing in 2022

 

Since the period end, we have completed the refinancing of intu Merry Hill with a £488 million secured facility, now maturing in 2024, and have secured an additional £250 million loan on intu Trafford Centre, maturing in 2022. Based on the current share price, it is likely the £300 million convertible bonds, maturing in 2018, will be repaid in cash. The chart below illustrates that we have no major refinancing requirement due until 2021.

Debt maturity (£m) - Chart 3

 

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Debt measures





30 June

31 December


2017

2016







Debt to assets

45.8%1

43.7%

Interest cover

1.93x

1.97x

Weighted average debt maturity

7.1 years1

7.1 years2

Weighted average cost of gross debt

4.3%1

4.3%

Proportion of gross debt with interest rate protection

99%1

88%

Cash and available facilities

£919.6m1

£922.3m




1 Pro forma for intu Merry Hill refinancing, additional £250 million loan on intu Trafford Centre  and disposal of 50 per cent of Madrid Xanadú.

2 Pro forma for intu Milton Keynes refinancing, completed February 2017.

 

On a pro forma basis, our debt to assets ratio has increased to 45.8 per cent since 31 December 2016 due to the acquisition of Madrid Xanadú and remains below our target maximum level of 50 per cent. Our weighted average debt maturity is unchanged at 7.1 years and the weighted average cost of gross debt is unchanged at 4.3 per cent (excluding the RCF).

Interest cover of 1.93x has decreased slightly during the period and remains 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 on a pro forma basis has increased in the period to 99 per cent within our policy range of between 75 per cent and 100 per cent.



Covenants
Full 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. A 25 per cent fall in property values and a 10 per cent reduction in income would only require a £10 million equity cure.

 

Capital commitments
We have an aggregate commitment to capital projects of £325.0 million at 30 June 2017 (31 December 2016: £257.0 million).

In addition to the committed expenditure, we have an identified uncommitted pipeline of active management projects, major extensions and developments that may become committed over the next three years (see operating review).

 

Other information

 

Tax policy position
Like all Real Estate Investment Trusts ('REIT's), tax on property operating profits is paid at shareholder level to the UK Government rather than by the Group. REIT status brings with it the requirement to operate within the rules of the REIT regime (see glossary for further information).

The Group's principle of good governance extends to our responsible approach to tax.  We look to minimise the level of tax risk and at all times seek to comply fully with our regulatory and other tax obligations and to act in a way which upholds intu's reputation as a responsible corporate citizen by regularly carrying out risk reviews, seeking pre-clearance from HMRC in complex areas and actively engaging in discussions regarding proposed changes in the taxation system that might affect the Group. It remains important to our stakeholders that our approach to tax is aligned to the long-term values and strategy of the Group. The Chief Financial Officer is the Executive Committee member with executive responsibility for tax matters, with close involvement of executive and senior management.

We pay tax directly on overseas earnings, any UK non-property income under the REIT rules, business rates and transaction taxes such as stamp duty land tax. In the six months ended 30 June 2017 the total of such payments to tax authorities was £13.1 million, of which £11.6 million was in the UK and £1.5 million in Spain. In addition, we also collect VAT, employment taxes and withholding tax on dividends for HMRC and the Spanish tax authorities.

 

Dividends
The Directors are recommending an interim dividend of 4.6 pence per share in line with the 2016 interim dividend. A scrip dividend alternative may be offered.  Details of the apportionment between the PID and non-PID elements per share will be confirmed in due course.

 



 

MARKET REVIEW

 

UK investment market

 

Low interest rates and a weakened value of sterling mean that prime shopping centres continue to attract interest from international investors. Whilst activity was limited in the first half of 2017 as the UK general election took centre stage, good levels of demand remain for quality assets in the UK's liquid and transparent market for large shopping centres.

However, a flight to quality has ensured prime yields remain stable as investors look at the quality and longevity of income streams coupled with rental growth potential in a market where new supply, by way of development, remains low. Against this, yields on secondary assets are drifting outwards due to investors perceiving a relatively poor outlook for such assets.

 

UK consumer market

 

Uncertainty from the early stages of discussions of the UK's exit from the EU is creating a mixed picture on the state of the UK consumer. Unemployment continues at record low levels which should in turn drive earnings growth. However, the increase in inflation from the weakening of sterling after the EU referendum vote is causing prices to rise faster than wages at the moment which impacts consumers' disposable income. This is reflected in the Asda benchmark index of household income which has shown a reduction of 2 per cent since December 2016.

Looking further ahead, the Bank of England's forecasts suggest that wage growth will overtake inflation as we go into 2018.

Consumer confidence, as measured by GfK, had remained broadly stable over the majority of the first half of 2017, but has dropped following the UK general election in June 2017, reflecting negative sentiment about consumers' personal finances and expectations for the wider economy.

These mixed messages have not had a material effect on non-food retail spending, which remains unchanged against 2016 (British Retail Consortium like-for-like non-food retail index).

 

Occupier market

 

Retail is one of the UK's most dynamic and flexible industries which has always been able to adapt quickly in fast-changing environments. Retailers are facing both economic and structural challenges and the winners will be those with the right stores in the right places, who align their online and instore strategies and who give customers an experience they cannot get elsewhere.

Economic pressures include the impact on retailers' cost bases from the weakness of sterling, business rates revaluations and increases in the national living wage. The current squeeze on disposable income from higher inflation may add more pressure.

Structurally, retailers are still evolving in relation to the opportunities and costs of online shopping with those possessing a strong store network benefitting from click and collect. This enables them to use their existing efficient distribution networks to reduce delivery costs and convert additional sales when the customer is instore.

Considering the challenges that face them, many retailers are looking at fewer stores, but in the best locations offering high footfall from a compelling mix of retail, catering and leisure. This demand is spread across all unit sizes with the powerhouse fashion brands taking larger flagships and introducing their sub-brands, traditional big box retailers refining their offer to smaller shopping centre size stores, new international and aspirational lifestyle brands successfully entering the shopping centre market and the continued growth in new leisure concepts. Whilst the rapid expansion of food and beverage operators in the last few years is slowing, leisure operators are increasingly looking at shopping centres for their expansion plans.

With our prime portfolio of shopping centres, offering compelling customer experiences and a sophisticated online offer, we are well positioned to meet the demands of this changing world, including the trend of online retailers taking physical stores, although this is still at an early stage.

Retailer administrations in the period remained at relatively low levels. Jones the Bootmaker (three units), 99p Stores (one unit) and Handmade Burger Co. (four units) entered administration in the period and amount in total to 0.4 per cent of intu's rent roll.

 

Spanish market

 

In recent years, the Spanish economy has had significant growth making it one of Europe's fastest growing economies. Forecasts suggest that this is expected to continue in 2017 with its GDP growth expected to be one of the highest of the major European economies. For the consumer, unemployment is at its lowest level for several years and consumer confidence at its highest. This in turn benefits retail sales which are further enhanced by record levels of tourists.

The investment market remains strong with continuing investor confidence in Spanish real estate supported by an economy that is growing. With the return of bank financing, the weight of money in the market looking to invest in quality assets has continued to strengthen the market. Due to lack of development in recent years, prime regional shopping centres are a scarce asset class which is reflected in good demand.



PRINCIPAL RISKS AND UNCERTAINTIES

 

intu's Board has responsibility for establishing the Group's appetite for risk on the balance of potential risks and returns, and has overall responsibility for identifying and managing risks. The Board has updated its assessment of the principal risks facing the Group, including those that would impact the business model, future performance, solvency or liquidity.

Principal risks and uncertainties are identified under five key headings: property market; operations; financing; developments and acquisitions; and brand. These are discussed in detail below. A principal risk is one which has the potential to significantly affect the Group's 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 mitigated in line with the Group's risk appetite.

The risk profile for the six months ended 30 June 2017 has remained broadly in line with the year ended 31 December 2016 with no significant new risks identified nor substantial changes in existing risks. Uncertainty in the UK economy and real estate markets following the EU referendum vote last year ('Brexit') has not resulted in any material adverse impacts, although recent UK general election results may create some further uncertainty. Following recent events we remain focused on our approach to terrorism and cybersecurity.

 

Key to strategic objectives:                                                                                           Change in level of risk:

 

1)

Optimising asset performance

=

Remained the same

2)

Delivering UK developments

3)

Making the brand count



4)

Seizing the growth opportunity in Spain

 

 





Risk and impact

Mitigation


2017 commentary





Property market

Strategic objectives affected: 1,2,3,4







 


Macro-economic

Weakness in the macro-economic environment could undermine rental income levels and property values, reducing return on investment and covenant headroom

 

·   focus on prime and super prime assets together with their upgrading

·   covenant headroom monitored and stress-tested

·   make representation on key policies, for example business rates

·   large-scale national marketing events across centres to attract footfall

·   leveraging the strength of the intu brand to attract and retain aspirational retailers

·   continued geographic diversification by increasing Spanish presence

=

Likelihood of macro-economic weakness continues to be a risk with political uncertainty in the UK and Brexit arrangements not yet detailed

·   like-for-like property values remaining stable in the period

·   substantial covenant headroom

·   no significant near-term debt maturities and average unexpired term unchanged at 7.1 years

·   long-term lease structures with average unexpired term of 7.3 years

·   Purchase of Madrid Xanadú for €516.8m



 




 


Retail environment

Failure to react to changes in the retail environment could undermine intu's ability to attract customers and tenants

·   active management of tenant mix including letting of former BHS units

·   regular monitoring of tenant strength and diversity

·   upgrading assets to meet demand, for example, increased leisure offering

·   Tell intu customer feedback programme helps identify changes in customer preferences

·   work closely with retailers

·   digital strategy that embraces technology and digital customer engagement. This enables intu to engage in and support multichannel retailing, and to take the opportunities offered by ecommerce

=

Likelihood and severity of potential impact was monitored closely in the first half of 2017 with intu's strategy continuing to deliver solid footfall numbers and occupancy

·   significant progress on planning and pre-letting of near-term pipeline with a focus on leisure

·   continuing digital investment to improve relevance as shopping habits change

·   occupancy unchanged at 95.9 per cent

·   footfall continues to be ahead of benchmark

·   committed to the £71m intu Lakeside leisure extension

 

 

 




 



PRINCIPAL RISKS AND UNCERTAINTIES (continued)

 





Risk and impact

Mitigation


2017 commentary





Operations

Strategic objectives affected: 1,3







 


Health and safety

Accidents or system failure leading to financial and/or reputational loss

 

 

·   strong business process and procedures, including compliance with OHSAS 18001, supported by regular training and exercises

·   annual audits of operational standards and equipment carried out internally and by external consultants

·   culture of visitor, staff and contractor safety

·   crisis management and business continuity plans in place and tested

·   retailer liaison and briefings

·   appropriate levels of insurance

·   staff succession planning and development in place to ensure continued delivery of world class service

·   health and safety managers or coordinators in all centres

=

Likelihood of potential impact has not changed significantly during the first half of 2017, however severity impacted by new enforcement structure

·   maintenance of OHSAS 18001 certification, demonstrating consistent health and safety management process and procedures across the portfolio

·   work continuing towards achieving additional accreditations with focus on ISO 14001

·   award of the golden status from the Royal Society for the Prevention of Accidents


· 

 



· 

 


Cybersecurity

Loss of data and information or failure of key systems resulting in financial and/or reputational loss

·   data and cybersecurity strategies

·   regular testing programme and cyber scenario exercise and benchmarking

·   appropriate levels of insurance

·   crisis management and business continuity plans in place and tested

·   data committee and data protection officer in place

·   monitoring of regulatory environment and best practice

·   cybersecurity assessment performed by external consultancy and full action plan in place (programme of works)

·   managing of supply chain and service providers who hold intu data

=

Likelihood has increased with increased reliance on operational and third party systems and data, and with the number of recent high profile hacks. Severity of potential impact has reduced by significant development of tools and controls. We have experienced attempted cybersecurity hacks which have not resulted in any data loss or major operational impacts. We continue to prioritise on the cybersecurity programme of works 

·   ongoing Group-wide cybersecurity project with investment in tools, consultancy and staff to mitigate impact of threats from evolving cybersecurity landscape


· 

 



· 

 


Terrorism

Terrorist incident at an intu centre or another major shopping centre resulting in loss of consumer confidence with consequent impact on lettings and rental growth

·   strong business process and procedures, supported by regular training and exercises, designed to adapt and respond to changes in risk levels

·   extraordinary pre-planned operational responses to changes in national threat level

·   annual audits of operational standards and physical protection measures carried out internally and by external agencies

·   culture of visitor, staff and contractor safety

·   crisis management and business continuity plans in place and tested with involvement of multiple external agencies

·   retailer liaison and briefings

·   appropriate levels of insurance

·   strong relationships and frequent liaison with police, NaCTSO and other agencies

·   NaCTSO approved to train staff in counter-terrorism awareness programme

·   internal head of security appointed 

=

Overall likelihood and severity of potential impact unchanged. In May 2017 we enacted our operational plan for the period of increased threat level. The threat level was subsequently reduced to the prior threat level

·   national threat level remains at Severe

·   major scenario exercises now completed at all five intu managed super regional shopping centres with involvement of multiple external agencies

·   operating procedures in place for the introduction of further security measures if required

 



 

 

 



PRINCIPAL RISKS AND UNCERTAINTIES (continued)

 





Risk and impact

Mitigation


2017 commentary





Financing

Strategic objectives affected: 2,4







 


Availability of funds
Reduced availability of funds could limit liquidity, leading to restriction of investing and operating activities and/or increase in funding cost

 

·   funding strategy regularly reported to the Board with current and projected funding position

·   effective treasury management aimed at balancing long debt maturity profile and diversification of sources of finance

·   consideration of financing plans including potential for recycling of capital before commitment to transactions and developments

·   strong relationships with lenders, shareholders and partners

·   focus on prime and super prime assets

 

=

Macro-economic events during 2017, and the uncertainty caused by them, mean the increased risk of reduced availability remains. However, severity of potential impact unchanged from 2016. Regular refinancing activity continuing to evidence the availability of funding

·   new €265m loan facility secured on Madrid Xanadú

·   introduction of joint venture partner into Madrid Xanadú to complete in the second half of 2017

·   £140m refinancing of intu Milton Keynes

·   £488m refinancing of intu Merry Hill

·   £250m additional financing on intu Trafford Centre





Developments and acquisitions

Strategic objectives affected: 2,4









Developments

Developments fail to create shareholder value

·   Capital Projects Committee reviews detailed appraisals before and monitors progress during significant projects

·   fixed price construction contracts for developments agreed with clear apportionment of risk

·   significant levels of pre-lets exchanged prior to scheme development

=

Likelihood and severity of potential impact have remained unchanged in 2017 as the Group has progressed work on its development pipeline

·   at intu Watford works are on schedule to hit all key milestones 

·   intu Lakeside leisure development committed

·   detailed appraisal work and significant pre-lets ahead of starting major development projects



 




 


Acquisitions

Acquisitions fail to create shareholder value

 

 

·   research and third party due diligence undertaken for transactions

·   local partner, advisors and experienced staff in Spain with specialist market knowledge

·   where appropriate, investment risk reduced through financing and joint venture investments

=

Likelihood and severity of potential impact have remained unchanged

·   substantial due diligence process undertaken before acquisition of Madrid Xanadú

 



 




 


Brand

Strategic objectives affected: 1,2,3,4



 




 


Integrity of the brand

The integrity of the brand is damaged leading to financial and/or reputational loss

·   intellectual property protection

·   strong guidelines for use of brand

·   strong underlying operational controls and crisis management procedures

·   ongoing training programme and reward and recognition schemes designed to embed brand values and culture throughout the organisation

·   traditional and digital media monitoring and analysis

·   Tell intu and shopper view customer feedback programmes

=

Likelihood and severity of potential impact unchanged in the first half of 2017

·   continuing media interest in intu and our commentaries and opinions on the business and wider landscape

·   ongoing development of brand in Spain

·   net promoter score consistently high at around 70 for the period


 

 


 



DIRECTORS' RESPONSIBILITY STATEMENT

 

The Directors are responsible for preparing the interim report and condensed consolidated set of interim financial statements ('interim financial statements'), in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:

·      the interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union; and

·      the interim report includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Services Authority.

The operating and financial reviews refer to important events which have taken place in the period.

The principal risks and uncertainties facing the business are referred to in the operating and financial reviews.

Related party transactions are set out in note 27 of the interim financial statements.

Details, including biographies, of all current Directors are maintained on the intu properties plc website: intugroup.co.uk.

On behalf of the Board

 

 

 

 

 

David Fischel

Chief Executive

 

 

 

 

 

Matthew Roberts

Chief Financial Officer

27 July 2017



Independent review report to intu properties plc

 

Report on the condensed consolidated interim financial statements

 

Our conclusion

We have reviewed intu properties plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report of intu properties plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed

The interim financial statements comprise:

·      the consolidated balance sheet as at 30 June 2017;

·      the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

·      the consolidated statement of changes in equity for the period then ended;

·      the consolidated statement of cash flows for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the Directors

The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

 

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

27 July 2017

 

 

a)   The maintenance and integrity of the intu properties plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.



CONSOLIDATED INCOME STATEMENT (unaudited)

For the six months ended 30 June 2017

 



Six months

Six months

Year



ended

ended

ended



30 June

30 June

31 December



2017

2016

2016


Notes

£m

£m

£m











Revenue

4

307.3

285.5

594.3











Net rental income

4

210.5

193.6

406.1

Net other income

5

0.6

0.4

0.6

Revaluation of investment and development property

14

9.2

(3.6)

(78.0)

Gain on acquisition of businesses


-

34.8

34.6

Loss on disposal of subsidiaries


(0.9)

-

(0.3)

Gain on sale of other investments


-

74.1

74.1

Administration expenses - ongoing


(20.1)

(18.1)

(37.8)

Administration expenses - exceptional

6

(1.7)

(0.9)

(2.5)











Operating profit


197.6

280.3

396.8











Finance costs

7

(105.1)

(98.6)

(202.9)

Finance income

8

4.9

10.6

14.9

Other finance costs

9

(15.1)

(15.4)

(37.9)

Change in fair value of financial instruments


18.1

(127.6)

(16.3)











Net finance costs


(97.2)

(231.0)

(242.2)











Profit before tax, joint ventures and associates


100.4

49.3

154.6

Share of post-tax profit of joint ventures

15

18.4

17.6

32.1

Share of post-tax profit/(loss) of associates

16

4.4

(2.1)

1.6











Profit before tax


123.2

64.8

188.3











Current tax

10

(0.2)

-

-

Deferred tax

10

(0.3)

(16.7)

(16.5)











Taxation


(0.5)

(16.7)

(16.5)











Profit for the period


122.7

48.1

171.8











Attributable to:





Owners of intu properties plc


127.1

51.5

182.7

Non-controlling interests


(4.4)

(3.4)

(10.9)













122.7

48.1

171.8











Basic earnings per share

12

9.5p

3.9p

13.7p

Diluted earnings per share

12

8.9p

3.3p

11.2p






 

Details of underlying earnings are presented in the underlying profit statement in the other information section. Underlying earnings per share are shown in note 12(c).



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the six months ended 30 June 2017

 


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m









Profit for the period

122.7

48.1

171.8









Other comprehensive income




Items that may be reclassified subsequently to the income statement:




Revaluation of other investments (note 17)

(0.1)

(0.3)

0.4

Exchange differences

11.4

21.3

31.6

Tax relating to components of other comprehensive income

-

-

(0.2)









Total items that may be reclassified subsequently to the income statement

11.3

21.0

31.8





Transferred to the income statement:




On sale of other investments

-

(77.0)

(77.0)

Tax on sale of other investments

-

16.7

16.7









Total transferred to the income statement

-

(60.3)

(60.3)









Other comprehensive income/(loss) for the period

11.3

(39.3)

(28.5)









Total comprehensive income for the period

134.0

8.8

143.3









Attributable to:




Owners of intu properties plc

138.4

12.2

154.2

Non-controlling interests

(4.4)

(3.4)

(10.9)










134.0

8.8

143.3





 



CONSOLIDATED BALANCE SHEET (unaudited)

As at 30 June 2017

 



As at

As at

As at



30 June

31 December

30 June



2017

2016

2016


Notes

£m

£m

£m











Non-current assets





Investment and development property

14

9,322.5

9,212.1

9,403.0

Plant and equipment         


8.6

7.6

6.7

Investment in joint ventures

15

603.1

587.6

574.3

Investment in associates

16

69.7

65.2

56.8

Other investments

17

16.9

15.5

0.6

Goodwill


4.0

4.0

4.0

Derivative financial instruments


0.2

-

-

Trade and other receivables


102.3

99.1

91.4













10,127.3

9,991.1

10,136.8











Current assets





Assets classified as held for sale

26

559.5

-

-

Trade and other receivables


145.2

123.4

116.2

Cash and cash equivalents

18

250.4

254.7

245.5













955.1

378.1

361.7











Total assets


11,082.4

10,369.2

10,498.5
















Current liabilities





Liabilities associated with assets classified as held for sale

26

(328.8)

-

-

Trade and other payables


(307.9)

(281.0)

(292.0)

Current tax liabilities


(0.5)

(0.3)

(0.4)

Borrowings          

19

(17.4)

(142.4)

(16.7)

Derivative financial instruments


(51.5)

(37.0)

(34.2)













(706.1)

(460.7)

(343.3)











Non-current liabilities





Borrowings

19

(5,019.4)

(4,520.2)

(4,775.3)

Derivative financial instruments


(300.5)

(340.7)

(432.5)

Other payables


(1.2)

(1.2)

(3.0)













(5,321.1)

(4,862.1)

(5,210.8)











Total liabilities


(6,027.2)

(5,322.8)

(5,554.1)











Net assets


5,055.2

5,046.4

4,944.4
















Equity





Share capital

21

677.5

677.5

672.3

Share premium

21

1,327.4

1,327.4

1,303.1

Treasury shares


(39.2)

(40.8)

(43.1)

Other reserves


355.6

344.3

333.5

Retained earnings


2,670.7

2,670.4

2,603.5











Attributable to owners of intu properties plc


4,992.0

4,978.8

4,869.3

Non-controlling interests


63.2

67.6

75.1











Total equity


5,055.2

5,046.4

4,944.4






.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the six months ended 30 June 2017

 


Attributable to owners of intu properties plc









Non-


 


Share

Share

Treasury

Other

Retained


controlling

Total

 


capital

premium

shares

reserves

earnings

Total

interests

equity

 


£m

£m

£m

£m

£m

£m

£m

£m

 










 










 

At 1 January 2017

677.5

1,327.4

(40.8)

344.3

2,670.4

4,978.8

67.6

5,046.4

 










 










 

Profit/(loss) for the period

-

-

-

-

127.1

127.1

(4.4)

122.7

 

Other comprehensive income:









 

  Revaluation of other investments









 

  (note 17)

-

-

-

(0.1)

-

(0.1)

-

(0.1)

 

  Exchange differences

-

-

-

11.4

-

11.4

-

11.4

 










 










 

Total comprehensive income









 

for the period

-

-

-

11.3

127.1

138.4

(4.4)

134.0

 










 










 

Dividends (note 11)

-

-

-

-

(126.2)

(126.2)

-

(126.2)

 

Share-based payments

-

-

-

-

2.2

2.2

-

2.2

 

Acquisition of treasury shares

-

-

(1.2)

-

-

(1.2)

-

(1.2)

 

Disposal of treasury shares

-

-

2.8

-

(2.8)

-

-

-

 










 










 


-

-

1.6

-

(126.8)

(125.2)

-

(125.2)

 










 










 

At 30 June 2017

677.5

1,327.4

(39.2)

355.6

2,670.7

4,992.0

63.2

5,055.2

 










 

 



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (continued)

For the year ended 31 December 2016

 


Attributable to owners of intu properties plc









Non-



Share

Share

Treasury

Other

Retained


controlling

Total


capital

premium

shares

reserves

earnings

Total

interests

equity


£m

£m

£m

£m

£m

£m

£m

£m



















At 1 January 2016

672.3

1,303.1

(43.3)

372.8

2,671.5

4,976.4

78.5

5,054.9



















Profit/(loss) for the year

-

-

-

-

182.7

182.7

(10.9)

171.8

Other comprehensive income:









Revaluation of other









investments

-

-

-

0.4

-

0.4

-

0.4

Exchange differences

-

-

-

31.6

-

31.6

-

31.6

Tax relating to components









of other comprehensive









income (note 10)

-

-

-

16.5

-

16.5

-

16.5

Transferred to income









statement on sale of other









investments

-

-

-

(77.0)

-

(77.0)

-

(77.0)



















Total comprehensive









income for the year

-

-

-

(28.5)

182.7

154.2

(10.9)

143.3



















Ordinary shares issued

5.2

24.3

-

-

-

29.5

-

29.5

Dividends (note 11)

-

-

-

-

(182.5)

(182.5)

-

(182.5)

Share-based payments

-

-

-

-

1.9

1.9

-

1.9

Acquisition of treasury shares

-

-

(0.7)

-

-

(0.7)

-

(0.7)

Disposal of treasury shares

-

-

3.2

-

(3.2)

-

-

-




















5.2

24.3

2.5

-

(183.8)

(151.8)

-

(151.8)



















At 31 December 2016

677.5

1,327.4

(40.8)

344.3

2,670.4

4,978.8

67.6

5,046.4










 



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (continued)

For the six months ended 30 June 2016

 


Attributable to owners of intu properties plc









Non-


 


Share

Share

Treasury

Other

Retained


controlling

Total

 


capital

premium

shares

reserves

earnings

Total

interests

equity

 


£m

£m

£m

£m

£m

£m

£m

£m

 










 










 

At 1 January 2016

672.3

1,303.1

(43.3)

372.8

2,671.5

4,976.4

78.5

5,054.9

 










 










 

Profit/(loss) for the period

-

-

-

-

51.5

51.5

(3.4)

48.1

 

Other comprehensive income:









 

  Revaluation of other









 

  investments

-

-

-

(0.3)

-

(0.3)

-

(0.3)

 

  Exchange differences

-

-

-

21.3

-

21.3

-

21.3

 

  Tax relating to components of









 

  other comprehensive income









 

  (note 10)

-

-

-

16.7

-

16.7

-

16.7

 

  Transferred to income









 

  statement on sale of other









 

  investments

-

-

-

(77.0)

-

(77.0)

-

(77.0)

 










 










 

Total comprehensive income









 

for the period

-

-

-

(39.3)

51.5

12.2

(3.4)

8.8

 










 










 

Ordinary shares issued

-

-

-

-

-

-

-

-

 

Dividends (note 11)

-

-

-

-

(121.1)

(121.1)

-

(121.1)

 

Share-based payments

-

-

-

-

2.4

2.4

-

2.4

 

Acquisition of treasury shares

-

-

(0.6)

-

-

(0.6)

-

(0.6)

 

Disposal of treasury shares

-

-

0.8

-

(0.8)

-

-

-

 










 










 


-

-

0.2

-

(119.5)

(119.3)

-

(119.3)

 










 










 

At 30 June 2016

672.3

1,303.1

(43.1)

333.5

2,603.5

4,869.3

75.1

4,944.4

 










 

 



CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

For the six months ended 30 June 2017

 



Six months

Six months

Year



ended

ended

ended



30 June

30 June

31 December



2017

2016

2016


Notes

£m

£m

£m






Cash generated from operations

23

180.3

163.0

355.9

Interest paid


(113.0)

(97.6)

(233.0)

Interest received


1.1

7.4

8.5

Taxation


(0.5)

0.2

-











Cash flows from operating activities


67.9

73.0

131.4











Cash flows from investing activities





Purchase and development of property, plant and equipment


(91.3)

(57.0)

(120.9)

Sale of property


3.4

-

-

Acquisition of businesses net of cash acquired

25

(446.3)

(398.8)

(405.5)

Cash transferred to assets classified as held for sale


(12.7)

-

-

Sale of other investments


-

201.9

201.9

Additions of other investments


(1.5)

-

(14.1)

Disposal of subsidiaries net of cash sold with business


-

-

80.5

Loan advances to joint ventures

15

(2.3)

(0.7)

(1.2)

Loan repayments by joint ventures

15

10.1

7.5

12.7

Distributions from joint ventures

15

0.9

2.3

3.2











Cash flows from investing activities


(539.7)

(244.8)

(243.4)











Cash flows from financing activities





Issue of ordinary shares


-

0.1

0.3

Acquisition of treasury shares


(1.2)

(0.6)

(0.7)

Cash transferred (to)/from restricted accounts


(0.5)

0.2

(0.8)

Borrowings drawn


596.6

588.2

962.9

Borrowings repaid


(10.2)

(333.8)

(720.4)

Equity dividends paid


(117.8)

(113.5)

(152.6)











Cash flows from financing activities


466.9

140.6

88.7

Effects of exchange rate changes on cash and cash equivalents


0.1

1.1

                    1.4











Net decrease in cash and cash equivalents


(4.8)

(30.1)

(21.9)

Cash and cash equivalents at beginning of period

18

251.7

273.6

273.6











Cash and cash equivalents at end of period

18

246.9

243.5

251.7






 



NOTES (unaudited)

 

 

1 Basis of preparation

The condensed consolidated set of interim financial statements ('interim financial statements') for the six months ended
30 June 2017 are unaudited and do not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006. The interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with IAS 34 as adopted by the European Union.

The comparative information presented for the year ended 31 December 2016 is not the Group's financial statements for that year. Those financial statements have been reported on by the Group's auditors and delivered to the registrar of companies. The auditors' opinion on those financial statements was unqualified and did not contain an emphasis of matter paragraph or a statement made under Section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements should be read in conjunction with the Group's financial statements for the year ended
31 December 2016 which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.

 

Use of estimates and assumptions
The preparation of interim financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the interim financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. In preparing the interim financial statements, the areas of significant judgement made by management in applying the Group accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2016. In particular, significant judgement is required in the use of estimates and assumptions in the valuation and accounting for investment and development property and derivative financial instruments.

 

Going concern
The Group prepares regular forecasts and projections which include sensitivity analysis taking into account a number of downside risks to the forecast including reasonably possible changes in trading performance and asset values and assesses the potential impact of these on the Group's liquidity position and available resources.

In preparing the most recent projections, factors taken into account include £288.9 million of cash (including the Group's share of cash in joint ventures of £38.5 million) and £278.0 million of undrawn facilities at 30 June 2017. The Group's weighted average debt maturity of 7.1 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 interim financial statements.

 

 

2 Accounting policies

The accounting policies applied are consistent with those of the Group's statutory financial statements for the year ended
31 December 2016 as set out on pages 114 to 117 of the Annual report, as amended when relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the period. These amendments have not had an impact on the financial statements.

Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.

 

 

3 Seasonality and cyclicality

There is no material seasonality or cyclicality impacting interim financial reporting.



NOTES (unaudited) (continued)

 

 

4 Segmental reporting

Operating segments are determined based on the strategic and operational management of the Group. The Group is primarily a shopping centre-focused business and has two reportable operating segments being the United Kingdom and Spain. Although management review and monitor the performance of the business principally on a centre-by-centre basis, the operating segments are consistent with the strategic and operational management of the Group.

As mentioned in the financial review, management review and monitor the business primarily on a proportionately consolidated basis. As such, the segmental analysis has been prepared on a proportionately consolidated basis.

The key driver of underlying earnings which is used to measure performance is net rental income. An analysis of net rental income is provided below:




Six months ended 30 June 2017










Group including




share of joint ventures

Less share of

Group






UK

Spain

Total

joint ventures

total


£m

£m

£m

£m

£m







Rent receivable

252.7

15.8

268.5

(18.5)

250.0

Service charge income

55.7

3.8

59.5

(3.7)

55.8

Facilities management income from joint ventures

1.2

-

1.2

0.3

1.5













Revenue

309.6

19.6

329.2

(21.9)

307.3

Rent payable

(10.2)

-

(10.2)

0.5

(9.7)

Service charge costs

(64.5)

(2.9)

(67.4)

4.1

(63.3)

Facilities management costs recharged to joint ventures

(1.2)

-

(1.2)

(0.3)

(1.5)

Other non-recoverable costs

(21.8)

(2.4)

(24.2)

1.9

(22.3)













Net rental income

211.9

14.3

226.2

(15.7)

210.5







 




Six months ended 30 June 2016










Group including




share of joint ventures

Less share of

Group






UK

Spain

Total

joint ventures

total


£m

£m

£m

£m

£m







Rent receivable

251.2

7.6

258.8

(29.5)

229.3

Service charge income

54.2

1.6

55.8

(5.8)

50.0

Facilities management income from joint ventures

3.5

-

3.5

2.7

6.2













Revenue

308.9

9.2

318.1

(32.6)

285.5

Rent payable

(13.0)

-

(13.0)

0.6

(12.4)

Service charge costs

(61.4)

(1.6)

(63.0)

6.5

(56.5)

Facilities management costs recharged to joint ventures

(3.5)

-

(3.5)

(2.7)

(6.2)

Other non-recoverable costs

(18.5)

(0.7)

(19.2)

2.4

(16.8)













Net rental income

212.5

6.9

219.4

(25.8)

193.6







 



NOTES (unaudited) (continued)

 

 

4 Segmental reporting (continued)


Year ended 31 December 2016










Group including




share of joint ventures

Less share of

Group






UK

Spain

Total

joint ventures

total


£m

£m

£m

£m

£m







Rent receivable

516.7

15.9

532.6

(48.1)

484.5

Service charge income

107.6

3.5

111.1

(9.5)

101.6

Facilities management income from joint ventures

5.1

-

5.1

3.1

8.2













Revenue

629.4

19.4

648.8

(54.5)

594.3

Rent payable

(25.4)

-

(25.4)

1.1

(24.3)

Service charge costs

(123.5)

(3.7)

(127.2)

10.6

(116.6)

Facilities management costs recharged to joint ventures

(5.1)

-

(5.1)

(3.1)

(8.2)

Other non-recoverable costs

(42.3)

(1.8)

(44.1)

5.0

(39.1)













Net rental income

433.1

13.9

447.0

(40.9)

406.1







 

There were no significant transactions within net rental income between operating segments.

Profit for the period of £122.7 million (six months ended 30 June 2016: £48.1 million, year ended 31 December 2016: £171.8 million) includes £112.7 million in respect of the UK (six months ended 30 June 2016: £41.5 million, year ended 31 December 2016: £150.7 million) and £10.0 million in respect of Spain (six months ended 30 June 2016: £6.6 million, year ended 31 December 2016: £21.1 million).

An analysis of investment and development property, capital expenditure and revaluation surplus/(deficit) is provided below:


Investment and



Revaluation


development property

Capital expenditure

 surplus/(deficit)


30 June

31 December

Six months ended 30 June


2017

2016

2017

2016

2017

2016


£m

£m

£m

£m

£m

£m








United Kingdom

9,648.9

9,537.5

99.4

38.3

6.2

(8.5)

Spain

437.8

407.0

9.2

13.1

11.5

13.7















Group including share of joint ventures

10,086.7

9,944.5

108.6

51.4

17.7

5.2

Less share of joint ventures

(764.2)

(732.4)

(4.8)

(0.8)

(8.5)

(8.8)















Group

9,322.5

9,212.1

103.8

50.6

9.2

(3.6)








 

The Group's geographical analysis of non-current assets is set out below. This represents where the Group's assets reside and, where relevant, where revenues are generated. In the case of investments this reflects where the investee is located.  


As at

As at

As at


30 June

31 December

30 June


2017

2016

2016


£m

£m

£m





United Kingdom

9,752.4

9,648.6

9,839.3

Spain

304.7

276.7

240.1

India

70.2

65.8

57.4










10,127.3

9,991.1

10,136.8





 

 



NOTES (unaudited) (continued)

 

 

5 Net other income

 

Six months

Six months

Year

 

ended

ended

ended

 

30 June

30 June

31 December

 

2017

2016

2016

 

£m

£m

£m





Dividend income

0.4

-

-

Management fees

1.8

1.7

3.3

intu Digital

(1.6)

(1.3)

(2.7)









Net other income

0.6

0.4

0.6





 

 

6 Administration expenses - exceptional

Exceptional administration expenses in the period totalled £1.7 million and relate to corporate transactions, principally the acquisition of Madrid Xanadú (see note 25). These have been classified as exceptional based on their incidence (see definition in the glossary).

 

 

7 Finance costs


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m





On bank loans and overdrafts

93.8

93.2

189.2

On convertible bonds

9.1

3.7

9.3

On obligations under finance leases

2.2

1.7

4.4









Finance costs

105.1

98.6

202.9





 

Finance costs of £2.0 million were capitalised in the six months ended 30 June 2017 (six months ended 30 June 2016: £0.6 million, year ended 31 December 2016: £2.1 million).

 

 

8 Finance income


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m





Interest receivable on loans to joint ventures

3.8

10.0

13.4

Other finance income

1.1

0.6

1.5









Finance income

4.9

10.6

14.9





 

 



NOTES (unaudited) (continued)

 

 

9 Other finance costs


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m





Amortisation of Metrocentre compound financial instrument

2.9

2.9

5.9

Cost of termination of derivative financial instruments and other costs1

14.6

13.8

34.7

Foreign currency movements1

(2.4)

(1.3)

(2.7)









Other finance costs

15.1

15.4

37.9





1 Amounts totalling £12.2 million in the six months ended 30 June 2017 (six months ended 30 June 2016: £12.5 million, year ended 31 December 2016: £32.0 million) are treated as exceptional items, as defined in the glossary, due to their nature and therefore excluded from underlying earnings (see note 12(c)). These finance costs include termination of interest rate swaps on repayment of debt, payments on unallocated interest rate swaps, foreign currency movements and other fees.

 

 

10 Taxation

Taxation for the period:


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m





UK taxation - current year

0.1

-

-

UK taxation - adjustment in respect of prior years

---

-

(0.1)

Overseas taxation

0.1

-

0.1









Current tax

0.2

-

-









Deferred tax:




On investment and development property

0.3

-

-

On other investments

-

16.4

(2.3)

On derivative financial instruments

-

(2.2)

16.4

On other temporary differences

-

2.5

2.4









Deferred tax

0.3

16.7

16.5









Total tax charge

0.5

16.7

16.5





 



NOTES (unaudited) (continued)

 

 

10 Taxation (continued)

Movements in the provision for deferred tax:



Investment and


Other




development

Other

temporary




property

investments

differences

Total



£m

£m

£m

£m







Deferred tax provision:






At 1 January 2017


-

0.1

(0.1)

-

Acquisition of Madrid Xanadú (note 25)


84.5

-

(6.8)

77.7

Recognised in the income statement


0.3

-

-

0.3

Transferred to held for sale (note 26)


(84.8)

-

6.8

(78.0)













At 30 June 2017


-

0.1

(0.1)

-







 

At 30 June 2017, the Group had unrecognised deferred tax assets calculated at a tax rate of 17 per cent (31 December 2016: 17 per cent, 30 June 2016: 18 per cent) of £43.6 million (31 December 2016: £39.7 million, 30 June 2016: £43.5 million) for surplus UK revenue tax losses carried forward, £43.9 million (31 December 2016: £45.5 million, 30 June 2016: £61.0 million) for temporary differences on derivative financial instruments, £0.6 million (31 December 2016: £0.6 million, 30 June 2016: £0.6 million) for temporary differences on capital allowances and £5.8 million (31 December 2016: £3.4 million, 30 June 2016: £nil) for capital losses.

In accordance with the requirements of IAS 12 Income Taxes, the deferred tax asset has not been recognised in the Group financial statements due to uncertainty over the level of profits that will be available in the non-REIT elements of the Group in future periods.

 

 

11 Dividends


Six months

Six months

Year


ended

ended

ended


30 June

30 June

31 December


2017

2016

2016


£m

£m

£m





Ordinary shares:




Final dividend paid of 9.4 pence per share




(2015: final dividend: 9.1 pence per share)

126.2

121.1

121.1

2016 interim dividend paid of 4.6 pence per share

-

-

61.4









Dividends paid

126.2

121.1

182.5









Proposed 2017 interim dividend of 4.6 pence per share

62.3







 



NOTES (unaudited) (continued)

 

 

12 Earnings per share

(a) Earnings per share

Basic and diluted earnings per share as calculated in accordance with IAS 33 Earnings per Share. All earnings arise from continuing operations.


Six months ended

Six months ended

Year ended


30 June 2017

30 June 2016

31 December 2016




Pence



Pence



Pence


Earnings

Shares

per

Earnings

Shares

per

Earnings

Shares

per


£m

million

share

£m

million

share

£m

million

share

Profit for the period










attributable to owners of










intu properties plc

127.1



51.5



182.7























Basic earnings per share1

127.1

1,343.1

9.5p

51.5

1,332.0

3.9p

182.7

1,333.5

13.7p

Dilutive convertible bonds,










share options and share awards

1.2

94.7


(4.1)

91.4


(21.6)

107.9






















Diluted earnings per share

128.3

1,437.8

8.9p

47.4

1,423.4

3.3p

161.1

1,441.4

11.2p











1 The weighted average number of shares used for the calculation of basic earnings per share has been adjusted to remove shares held in the Employee Share Ownership Plan ('ESOP'). 

 

(b) Headline earnings per share

Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing requirements.


Six months ended

Six months ended

Year ended


30 June 2017

30 June 2016

31 December 2016


Gross

Net1

Gross

Net1

Gross

Net1


£m

£m

£m

£m

£m

£m








Basic earnings


127.1


51.5


182.7

Adjusted for:







Revaluation of investment and development property







(note 14)

(9.2)

(12.0)

3.6

2.3

78.0

71.8

Gain on acquisition of businesses

-

-

(34.8)

(34.8)

(34.6)

(34.6)

Loss on disposal of subsidiaries

0.9

0.9

-

-

0.3

0.3

Gain on sale of other investments

-

-

(74.1)

(74.1)

(74.1)

(74.1)

Share of joint ventures' items

(8.2)

(8.2)

(8.8)

(8.8)

(14.2)

(14.2)

Share of associates' items

(4.0)

(4.0)

2.4

2.4

(1.1)

(1.1)















Headline earnings/(loss)


103.8


(61.5)


130.8

Dilution2


1.2


(4.1)


(21.6)















Diluted headline earnings/(loss)


105.0


(65.6)


109.2















Weighted average number of shares


1,343.1


1,332.0


1,333.5

Dilution2


94.7


91.4


107.9















Diluted weighted average number of shares


1,437.8


1,423.4


1,441.4















Headline earnings/(loss) per share (pence)


7.7p


(4.6)p


9.8p















Diluted headline earnings/(loss) per share (pence)


7.3p


(4.6)p


7.6p








1 Net of tax and non-controlling interests.

2 The dilution impact is required to be included as calculated in note 12(a) even where this is not dilutive for headline earnings per share.



NOTES (unaudited) (continued)

 

 

12 Earnings per share (continued)

(c) Underlying earnings per share

Underlying earnings per share is a non-GAAP measure but has been included as it is considered to be a key measure of the Group's recurring performance and an indication of the extent to which dividend payments are supported by underlying operations (see underlying profit statement in the other information section). Underlying earnings is defined as an alternative performance measure in the financial review.


Six months ended

Six months ended

Year ended


30 June 2017

30 June 2016

31 December 2016




Pence



Pence



Pence


Earnings

Shares

per

Earnings

Shares

per

Earnings

Shares

per


£m

million

share

£m

million

share

£m

million

share











Basic earnings per share (note 12a)

127.1

1,343.1

9.5p

51.5

1,332.0

3.9p

182.7

1,333.5

13.7p

Adjusted for:










Revaluation of investment and










development property (note 14)

(9.2)


(0.7)p

3.6


0.3p

78.0


5.9p

Gain on acquisition of businesses

-


-

(34.8)


(2.6)p

(34.6)


(2.6)p

Loss on disposal of subsidiaries

0.9


0.1p

-


-

0.3


-

Gain on sale of other investments

-


-

(74.1)


(5.6)p

(74.1)


(5.6)p

Administration expenses










- exceptional (note 6)

1.7


0.1p

0.9


0.1p

2.5


0.2p

Exceptional finance costs (note 9)

12.2


0.9p

12.5


0.9p

32.0


2.4p

Change in fair value of










financial instruments

(18.1)


(1.4)p

127.6


9.5p

16.3


1.2p

Tax on the above

0.3


-

16.7


1.3p

16.5


1.3p

Share of joint ventures' items

(9.9)


(0.7)p

(5.5)


(0.4)p

(12.3)


(0.9)p

Share of associates' items

(4.0)


(0.3)p

2.4


0.2p

(1.1)


(0.1)p

Non-controlling interests










in respect of the above

(2.5)


(0.2)p

(1.3)


(0.1)p

(6.2)


(0.5)p





















Underlying earnings per share

98.5

1,343.1

7.3p

99.5

1,332.0

7.5p

200.0

1,333.5

15.0p

Dilutive convertible bonds,










share options and share awards

1.2

94.7


3.7

91.4


9.3

107.9






















Underlying, diluted earnings










per share

99.7

1,437.8

6.9p

103.2

1,423.4

7.3p

209.3

1,441.4

14.5p











 

A reconciliation from underlying earnings per share to EPRA earnings per share is provided below:


Six months ended

Six months ended

Year ended


30 June 2017

30 June 2016

31 December 2016




Pence



Pence



Pence


Earnings

Shares

per

Earnings

Shares

per

Earnings

Shares

per


£m

million

share

£m

million

share

£m

million

share











Underlying earnings per share

98.5

1,343.1

7.3p

99.5

1,332.0

7.5p

200.0

1,333.5

15.0p

Adjusted for:










Other exceptional items

(2.0)


(0.1)p

-


-

(6.5)


(0.5)p

Other exceptional tax

-


-

(0.3)


-

(0.2)


-

Share of joint ventures' items

-


-

(0.4)


-

(0.4)


-





















EPRA earnings per share

96.5

1,343.1

7.2p

98.8

1,332.0

7.5p

192.9

1,333.5

14.5p











 



NOTES (unaudited) (continued)

 

 

13 Net assets per share

(a) NAV per share (diluted, adjusted)

NAV per share (diluted, adjusted) is a non-GAAP measure but has been included as it is considered to be a key measure of the Group's performance. The key difference from EPRA NAV, an industry standard comparable measure, is the exclusion of interest rate swaps not currently used for economic hedges of debt as, in our view, this better allows management to review and monitor the Group's performance. NAV (diluted, adjusted) is defined as an alternative performance measure in the financial review.


As at 30 June 2017

As at 31 December 2016

As at 30 June 2016


Net


NAV per

Net


NAV per

Net


NAV per


assets

Shares

share

assets

Shares

share

assets

Shares

share


£m

million

(pence)

£m

million

(pence)

£m

million

(pence)











NAV per share attributable to










owners of intu properties plc1

4,992.0

1,343.4

372p

4,978.8

1,343.0

371p

4,869.3

1,332.1

366p

Dilutive convertible bonds,










share options and awards

2.6

3.1


2.6

3.5


10.9

6.9






















Diluted NAV per share

4,994.6

1,346.5

371p

4,981.4

1,346.5

370p

4,880.2

1,339.0

364p

Adjusted for:










Fair value of derivative










financial instruments

351.8


26p

377.7


28p

466.7


35p

Deferred tax on investment










and development property










and other investments

0.1


-

0.1


-

-


-

Share of joint ventures'










items

7.8


1p

7.2


1p

10.3


1p

Non-controlling interest










recoverable balance not










recognised

71.3


5p

71.3


5p

71.3


5p





















NAV per share (diluted, adjusted)

5,425.6

1,346.5

403p

5,437.7

1,346.5

404p

5,428.5

1,339.0

405p











1 The number of shares used has been adjusted to remove shares held in the ESOP.

 

A reconciliation from NAV per share (diluted, adjusted) to EPRA NAV per share is provided below:


As at 30 June 2017

As at 31 December 2016

As at 30 June 2016


Net


NAV per

Net


NAV per

Net


NAV per


assets

Shares

share

assets

Shares

share

assets

Shares

share


£m

million

(pence)

£m

million

(pence)

£m

million

(pence)











NAV per share (diluted, adjusted)

5,425.6

1,346.5

403p

5,437.7

1,346.5

404p

5,428.5

1,339.0

405p

Adjusted for:










Swaps not currently used for