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RNS
Intu Properties PLC  -  INTU   

Half-year Report

Released 07:00 26-Jul-2018

RNS Number : 7906V
Intu Properties PLC
26 July 2018
 

 

 

 

26 JULY 2018

 

LEI: 213800JSNTERD5CJZO95

 

INTU PROPERTIES PLC

 

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018

 

 

WINNING DESTINATIONS DRIVE A RESILIENT PERFORMANCE IN A CHALLENGING MARKET

 

David Fischel, intu Chief Executive, commented:

 

"During a period of weakening sentiment in the retail market which has impacted prime shopping centre valuations, intu has delivered a resilient operational performance in the first half of 2018. This reflects the high quality of our business which was able to perform in a challenging retail environment.

Our occupancy level remains high at 97 per cent with aggregate lettings 6 per cent ahead of previous rents.

Like-for-like net rental income grew for the fourth consecutive year, by 1.3 per cent in the period, driven by new lettings and rent reviews, despite a 0.9 per cent hit from tenant failures.

We agreed 116 long term leases amounting to £16 million of annual rent to a number of new international entrants, as well as established key fashion brands such as Zara, River Island, Abercrombie & Fitch, Jo Malone, Jack Wills and The White Company.

We look forward to the opening of the £180 million intu Watford extension in October, followed by the £72 million intu Lakeside leisure extension in the first half of next year.

The Spanish business again had a strong six months with high occupancy and strong letting activity.

intu is the UK's only national consumer facing shopping centre brand with a growing digital presence, attracting 400 million customer visits per annum, with over half the UK population visiting an intu centre each year.

intu centres are in prime locations with high footfall and offer plenty of opportunities to increase density through additional mixed use developments. They have remained prime because we have always adapted and responded vigorously to the ever changing retail environment with continued investment and creative asset management satisfying the needs of retailers."

 

Investor presentation

A presentation to analysts and investors will take place at UBS, 5 Broadgate, London EC2 at 09.45BST on 26 July 2018. The presentation will also be available to international analysts and investors through a live audio call and webcast. The presentation and a copy of this announcement will be available on the Group's website intugroup.co.uk.

 

 

Enquiries

 

 

intu properties plc

 

 

David Fischel

Chief Executive

+44 (0)20 7960 1207

Matthew Roberts

Chief Financial Officer

+44 (0)20 7960 1353

Adrian Croft

Head of Investor Relations

+44 (0)20 7960 1212

Public relations

 

 

UK:

Justin Griffiths, Powerscourt

+44 (0)20 7250 1446

SA:

Frédéric Cornet, Instinctif Partners

+27 (0)11 447 3030

 

CONTENTS

 

Highlights

Chief Executive's review

Operating review

Our centres

Financial review

Principal risks and uncertainties

Directors' responsibility statement

Independent review report

Financial information

Other information

Investment and development property

Financial covenants

Financial information including share of joint ventures

Underlying profit statement

EPRA performance measures

Glossary

Dividends

 

About intu

intu owns and manages some of the best shopping centres, in some of the strongest locations, in the UK and Spain.

Our UK portfolio is made up of 17 centres, including 10 of the top-25, and in Spain we own three of the country's top-10 centres, with advanced plans to build a fourth.

We are passionate about creating compelling experiences, in centre and online, that make our customers smile and help our retailers flourish.

We attract over 400 million customer visits and 26 million website visits a year offering a multichannel approach that truly supports retail strategies. In 2017, we launched the UK's first tailor-made promotional services model to help brands as they look to optimise their portfolio or expand their UK coverage.

Our strategic focus on prime, high-footfall flagship destinations, combined with the strength and popularity of our brand, means that intu offers enhanced footfall, dwell time and loyalty. This helps our retailers flourish, driving occupancy and income growth.

We are committed to our local communities, with our centres supporting over 120,000 jobs (representing about 3 per cent of the total UK retail workforce), and to operating with environmental responsibility. We have already met or exceeded a significant number of our 2020 environmental targets.

Presentation of information

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

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

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

 

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

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

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

 

HIGHLIGHTS FOR THE FIRST SIX MONTHS OF 2018

 

Financial highlights1

 

Six months ended
30 June 2018
£m

12 months ended
31 December 2017
£m

Six months ended
30 June 2017
£m

Net rental income (£m) 2/3

223.1

460.0

226.2

Underlying earnings (£m)

98.5

201.0

98.5

Property revaluation (deficit)/surplus (£m) 2/3

(650.4)

47.3

17.7

IFRS (loss)/profit for the period (£m)

(503.4)

203.3

122.7

Underlying earnings per share (pence)

7.3

15.0

7.3

Dividend per share (pence)

4.6

14.0

4.6

 

At 30 June
2018
£m

At 31 December
2017
£m

 

Market value of investment and development property (£m) 2/3/4

9,831

10,529

 

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

4,472

5,075

 

Net asset value per share (diluted, adjusted) (pence) 5

362

411

 

EPRA NNNAV per share (pence) 5

309

349

 

Debt to assets ratio (per cent) 2/3/6

48.7

45.2

 

1     Please refer to glossary for definition of terms.

2    Including Group's share of joint ventures.

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

4    31 December 2017 including intu Chapelfield which is classified as an asset held for sale.

5     See note 11 for reconciliation between presented figures and IFRS net asset value per share.

6    31 December 2017 figure pro forma for the net initial consideration of £148 million on 50 per cent disposal of intu Chapelfield which completed on 31 January 2018.

Our results for the period show a resilient operating performance with stable underlying earnings and continued like-for-like net rental income growth. Uncertainty around the UK economy is leading to weakening sentiment in the retail property investment market, impacting property valuations:

-   like-for-like property values reduced in the period with a total deficit of £650.4 million

-   net rental income reflects £4.0 million impact of disposals; like-for-like net rental income growth of 1.3 per cent

-   underlying earnings of £98.5 million, in line with the first half of 2017

-   loss for the period of £503.4 million against a profit of £122.7 million in 2017, primarily from the property revaluation deficit

-   underlying earnings per share (7.3 pence) and interim dividend (4.6 pence) unchanged

-   net asset value per share (diluted, adjusted) of 362 pence (31 December 2017: 411 pence), the decrease due to the property revaluation deficit. NNNAV per share is 309 pence (31 December 2017: 349 pence)

-   debt to assets ratio is 48.7 per cent, with substantial cash and available facilities of £739 million (31 December 2017: £833 million)

Property valuations

Property values fell in the period, resulting in a revaluation deficit of £650.4 million, a reduction of 5.6 per cent on a like-for-like basis. This is driven by weakening sentiment in the UK retail property investment market as illustrated by the low levels of transactions (see operating review). The valuers' assumption is that investors will focus on and seek higher net initial yields. In the period, intu's average net initial yield has increased by 33 basis points to 4.69 per cent.

 

Operating highlights

Growing like-for-like net rental income

Growing our net rental income drives earnings and ultimately dividend and total property return

-   like-for-like net rental income increased by 1.3 per cent in the period, driven by increased rents from new lettings and rent reviews, building on increases averaging 2.0 per cent per annum over the last three years

-   anticipated full year like-for-like net rental income growth to be at the lower end of the stated range of 1.5 per cent to 2.5 per cent, with new lettings mitigating the impact of administrations and company voluntary arrangements (CVAs) to date

-   targeting medium term like-for-like net rental income growth of 2 to 3 per cent per annum over the next three to five years

-   signed 116 long-term leases (85 in the UK and 31 in Spain) delivering £16 million of annual rent at an average of 6 per cent above previous passing rent and in line with valuers' assumptions (H1 2017: 103 leases; £18 million of annual rent; 6 per cent above previous passing rent)

-   rent reviews settled in the period on average 10 per cent above previous passing rent (H1 2017: 8 per cent)

-   sustained high EPRA occupancy of 96.6 per cent (December 2017: 97.0 per cent) with 79 stores opening in the period against 94 closing (excluding Christmas temporary lettings), reflecting the trend of retailer upsizing

Delivering operational excellence

Operational excellence measures the success of our business from the view of both our retailers and customers

-   footfall decreased by 1.3 per cent (H1 2017: down 0.5 per cent) outperforming the national ShopperTrak retail average which fell by 3.3 per cent in the period. Excluding the two weeks of severe snow, footfall in our centres was broadly unchanged

-   net promoter score, our measure of customer service, running consistently high averaging 73 in the period (H1 2017: 70)

-   brand awareness increased to 29 per cent on an unprompted basis (December 2017: 26 per cent) and to 75 per cent on a prompted basis (December 2017: 71 per cent)

-   intu.co.uk, our online shopping platform providing strong editorial content, has seen over 200 per cent year-on-year increase in visits to our 'Shop Insider' digital magazine pages, with sales for retailers increasing by 28 per cent

Optimising our winning destinations

Ensuring our regional destinations remain the winning locations by having a compelling mix of retail, catering, leisure, events and strong digital engagement

-   capital investment by intu of £102 million in the period including £44 million on the 380,000 sq ft extension of intu Watford which is on target to open in October 2018 and £19 million on the Nickelodeon anchored leisure extension at intu Lakeside

-   tenants have invested £31 million in the period on new shop fits, with 107 stores open or refitted

-   have appointed main contractor and intend to commence the £72 million extension and enclosure of Barton Square at intu Trafford Centre in the second half of 2018

-   final detailed design of intu Costa del Sol ongoing with the plan to commence construction in 2019

-   near-term committed and pipeline of projects through to the end of 2020 of £441 million

-   actively pursuing non-retail development opportunities, particularly around super-regional centres, including residential, distribution and leisure

Making smart use of capital

Our financial structure and high-quality assets allow us to access capital and introduce partners to increase the focus and achieve superior returns on our flagship locations

-   completed the disposal of 50 per cent of intu Chapelfield for net initial consideration of £148 million, in line with the December 2016 market value. Subsequently agreed a £74 million debt facility on our retained interest in intu Chapelfield

-   cash and available facilities of £739 million (31 December 2017: £833 million). Weighted average debt maturity of 6.3 years, with minimal refinancing until 2021

-   substantial headroom on our debt covenants. By way of example, a further 20 per cent fall in capital values and 10 per cent fall in income would create a covenant shortfall of only £18 million which could be cured from available facilities

 

CHIEF EXECUTIVE'S REVIEW

A resilient operating performance in a challenging UK economy

Reflecting the overall high quality of our business, intu has continued to deliver a resilient operating performance in a challenging economic environment. Reflecting the superior quality of our portfolio, our occupancy level is high at 97 per cent. Aggregate lettings of £16 million were 6 per cent ahead of previous rents and in line with valuers' assumptions. Net rental income grew on a like-for-like basis by 1.3 per cent despite a 0.9 per cent impact from tenant failures and we are guiding to a stronger second half year. Underlying earnings per share remained stable at 7.3 pence.

In the pre-Brexit period, the UK economy has remained sluggish. The sentiment towards retail and retail property has been extremely negative, fuelled by a number of retailers, in particular New Look and House of Fraser, and restaurant chains entering high profile CVAs or administrations. While the direct financial impact on intu from CVAs and administrations has been minimal, they have dampened the retail property investment market with our property valuations decreasing by 5.6 per cent on a like-for-like basis, principally as a result of increased investment yield.

Well positioned to prosper as a standalone business

As these results demonstrate, intu is strongly placed to prosper as a standalone business, given our exceptional market positioning as the leading operator in the UK regional shopping centre industry, with the only national consumer facing brand and over 400 million customer visits per annum from over half the UK's population.

Demand from high-quality tenants for our winning destinations

Both cyclical factors, such as the flat UK economy and pressure on disposable incomes, and structural factors, such as increased costs and the growth in online retail, have combined to put pressure on retail market participants. However, quality retailers will emerge relatively stronger and we have achieved strong lettings in the period with, for example River Island, Zara, Abercrombie & Fitch and The White Company. In addition, we continue to diversify the mix of tenants introducing the likes of car manufacturer Mitsubishi and climbing operator Rock Up.

These participants recognise the increasing importance of the UK's winning physical destinations, such as intu's, in the multichannel world. 86 per cent by value of our £9.0 billion UK assets rank in the UK's top-25 shopping centre destinations.

Financial flexibility

On the financing front, we continue to have considerable financial flexibility as a result of (a) our focus on asset specific, non-recourse finance, which constitutes 86 per cent of our aggregate debt, and (b) 100 per cent ownership of £6.5 billion of our £9.8 billion assets.

Continuing investment in our centres

We have continued to invest in our centres. We look forward to the opening of the £180 million intu Watford extension in October, upgrading the centre to a top-20 UK destination. We will follow with the opening of the £72 million intu Lakeside leisure extension in the first half of 2019, greatly enhancing the overall family destination status of this top-five UK asset. We have committed to the £72 million enclosure of Barton Square at intu Trafford Centre, anchored by Primark, and expect to commit to the £81 million redevelopment of intu Broadmarsh in the second half of 2018.

Spanish business performing strongly

The Spanish business has again performed strongly. Operationally, we have high occupancy and strong letting activity, with property values increasing. On the development front, we are now in the detailed design phase for intu Costa del Sol and resolving final planning requirements which will allow us to commence this project during 2019.

Adapting and responding to the changing retail environment

We continue to focus intently on ensuring we are adapting and responding vigorously to the changing retail environment in the UK, improving the visitor experience through customer service initiatives, increased digital and leisure activities, changing tenant mix and continued investment in our centres.

In addition, there is clear evidence of demand for private rented sector or student residential projects at both super-regional centres and prime city centre locations which benefit from strong and improving public transport infrastructure as well as other key lifestyle services. Accordingly, we are dedicating additional resources to bringing forward these opportunities.

We are also focusing on the issues and opportunities facing our sector, looking at how we should further adapt to the changing market dynamics, what further opportunities exist to enhance our existing assets, how we ensure we continue to deliver superior operational performance and optimising the allocation of capital.

Conclusion

In conclusion, my thanks go to the team at intu who continue to excel and the impact of their great efforts, despite the distraction of corporate events and negative external sentiment towards our business sector, is demonstrated by the resilient results we have delivered in the period.

OPERATING REVIEW

intu and the UK market

A sluggish pre-Brexit UK economy

We are seeing very little change in intu centre visitor numbers in the pre-Brexit period where the continued uncertainty about the eventual outcome, and its impact, means the UK economy remains sluggish with modest growth.

On the positive side, unemployment remains at record low levels and, after a year of inflation running ahead of wage growth, this reversed in February 2018. Looking forward, Bank of England forecasts suggest that earnings should continue to outpace inflation through their forecast period to the end of 2020.

Against this, consumer confidence, as measured by GfK, continues to be challenging as it has been since the 2016 EU referendum vote, with consumers in pre-Brexit UK less confident about the economy.

A challenging time for retailers

Sales for retailers in our centres are robust given the mixed messages from improving disposable income, but low consumer confidence. UK total non-food retail spending (British Retail Consortium) fell by 0.6 per cent over the first half of 2018, with a fall of 2.3 per cent in physical store sales partially offset by an increase of 1.7 per cent in online sales highlighting the issues facing any retailers who are less advanced in their multichannel approach.

Some retailers face multiple challenges from lower spending, an increased cost base and a structural shift to multichannel retailing. Whilst some respite may come through as disposable income grows, leading to improving retailers' top line sales, they still face pressures on their net profit from increased business rates and national living wage. On top of this, the fast-paced change of online retailing leaves some retailers catching up.

In 2018, we have seen an increase in the number of administrations and CVAs as the pressures of an increased cost base and multichannel transformation mount on certain retailers and food and beverage operators.

The two most high profile CVAs in 2018 have been New Look and House of Fraser, planning to close 60 of 593 stores and 31 of 59 stores respectively. In both instances, their closure lists have been focused on secondary locations. This illustrates the polarisation occurring in the market where the best retail and leisure experiential destinations, such as intu's, are performing well against a weaker national position.

Polarisation in the market

We operate in many of the top UK retail destinations where retailers want to maintain their best stores and as such we have been relatively unaffected by the problems faced by certain retailers. This is in contrast with the media's continual focus on the issues facing retail and its impact on the UK high street, in particular those towns with many stores closing.

The administrations and CVAs in the period related to around 5 per cent of our passing rent. The majority of these (around 80 per cent) have had minimal impact with the retailers keeping the stores open on the existing rent or with a small reduction. Of the remainder, 10 per cent are trading on discounted rents and 10 per cent have closed.

Taking House of Fraser as an example, they have four stores in intu centres representing 1 per cent of our rent roll. Through their CVA, they are closing 31 of their 59 stores, but all of the intu stores are remaining open with a small rent reduction on only one unit. This highlights the quality of our centres and catchments and their ability to deliver profitable sales for retailers as part of their multichannel offer.

Investment market

The headwinds in the consumer and occupier market mean that investors remain cautious regarding shopping centres with sentiment weakening in the period. According to CBRE, 2017 had the lowest level of transactions since 2008 and volumes in the first half of 2018 remain subdued. There is an expectation that this situation will remain until the Brexit outcome becomes clearer.

In this market, it is anticipated that investors will seek a higher net initial yield to protect returns if capital growth is harder to deliver. Therefore, the quality and longevity of income streams increase in importance, along with the potential to add value through asset management.

These are the characteristics of most intu centres, with 86 per cent of our portfolio concentrated in ten centres, all of which are top-25 centres in the UK, with the next three all major schemes at the heart of thriving city centres in Nottingham, Newcastle and Milton Keynes.

 

UK asset valuation at 30 June 2018 - Chart 1

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

http://www.rns-pdf.londonstockexchange.com/rns/7906V_1-2018-7-25.pdf

 

Valuation

 

Market value

Like-for-like
revaluation (deficit)/surplus

 

At 30 June
 2018
£m

At 31 December
 2017
£m

£m

%

UK super-regional centres

6,028.2

6,373.7

(379.0)

(6.0)

UK major city centres

2,373.6

2,559.3

(198.2)

(7.7)

Spanish centres

621.3

606.8

6.6

1.2

Total like-for-like

9,023.1

9,539.8

(570.6)

(5.6)

Spanish developments

211.3

212.8

(8.4)

(4.1)

UK other including developments

596.2

776.6

(71.4)

(10.0)

Total

9,830.6

10,529.2

(650.4)

(6.2)

The table above shows the main components of the £650.4 million property revaluation deficit:

-   UK super-regional centres: performed stronger in comparison to other intu assets recognising the continuing attraction of this asset class which remains key to retailers' requirements. These centres have reduced in value by around 6 per cent, with the exception of intu Braehead, down 12 per cent, which continues to be impacted by the relatively weaker economic and political situation in Scotland

-   UK major city centres: on average values have fallen by 8 per cent reflecting the limited transactional evidence and weaker investor demand for these types of assets. Within these assets, those super-prime assets in the busiest city centres have performed better, with smaller reductions at the likes of Manchester Arndale and intu Eldon Square, Newcastle

-   Spanish centres: valuations have increased marginally given the continued demand for top quality Spanish centres

-   Spanish developments: small decrease due to pre-development expenditure in the period on intu Costa del Sol

-   UK other including developments: represents valuation movements on developments and assets valued below £200 million each. These assets, which represent only a small proportion of the portfolio, have seen higher revaluation deficits due to lower levels of potential asset management initiatives. The total for 31 December 2017 includes 100 per cent of intu Chapelfield, whereas 50 per cent is included at 30 June 2018

The weighted average net initial yield (topped-up) at 30 June 2018 increased by 33 basis points in the period to 4.69 per cent.

On a like-for-like basis, ERV decreased by 2.3 per cent as valuers have taken a more conservative view on rental values, in particular at certain centres such as intu Braehead and for larger space units. The IPD index indicated a 0.4 per cent decrease for the same period, with the divergence from intu's performance considered most likely to represent a timing difference with intu's valuations.

Growing like-for-like net rental income

Like-for-like net rental income growth is our key income measure. Given our relatively low cost base and stable finance costs, growing our net rental income drives earnings and ultimately dividend and total property return.

In the period, we grew like-for-like net rental income by 1.3 per cent, compared to a reduction of 1.5 per cent in the same period in 2017. The key components of the growth are shown in the table below.

Group like-for-like net rental income

 

Six months ended
30 June 2018
%

Six months ended
30 June 2017
%

Rent reviews and improved letting

+1.4

+2.5

Capital investment

+0.3

+0.5

Vacancy impact

-0.3

-0.2

Administrations and CVAs 1

-0.9

-2.1

Other (eg: bad debt; surrender premiums; headlease adjustments)

+0.8

-2.2

Increase in like-for-like net rental income

+1.3

-1.5

1     Six months ended 30 June 2017 was originally disclosed as units held for redevelopment. Primarily related to units in administration, so disclosed on this basis in 2018.

Rent from lettings and rent reviews delivered 1.4 per cent rental growth. Against previous passing rent, lettings were on average up 6 per cent and rent reviews up 10 per cent.

Vacancy increased marginally in the period, resulting in a 0.3 per cent impact on net rental income.

The effect of administrations and CVAs was 0.9 per cent. This movement has been minimal to date given 5 per cent of our rent roll could have been impacted and illustrates the strength of our stores in the retailers' portfolios.

We are targeting a full year outcome of growth in like-for-like net rental income at the lower end of the stated range of 1.5 to 2.5 per cent (subject to no further material tenant failures) as we continue to deliver rental uplifts from new lettings and rent reviews and relet units closed from administrations and CVAs. Over the medium term of the next three to five years, we continue to target growth of 2 to 3 per cent per annum.

Like-for-like net rental income operating metrics

 

Six months
 ended 30 June
 2018

Year ended
 31 December
 2017

Six months
 ended 30 June
 2017

Occupancy (EPRA basis)

96.6%

97.0%

96.8%

-  of which, occupied by tenants trading in administration

0.3%

0.6%

0.3%

Leasing activity

 

 

 

-  number, new rent

116, £16m

217, £38m

103, £18m

-  new rent relative to previous passing rent

+6%

+7%

+7%

Rental uplift on rent reviews settled

+10%

+9%

+8%

Occupancy is 96.6 per cent, in line with 30 June 2017 and 31 December 2017, with new lettings offsetting the closures in the period.

We agreed 116 long-term leases in the year, amounting to £16 million annual rent, at an average of 6 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. Retailers continue to focus on increasing their space in prime, high footfall retail destinations. Significant activity in the period includes:

-   new retail anchors, in the shape of key fashion brands, upsizing to optimise their offering and configuration. At intu Lakeside, Zara and River Island are both upsizing, trebling and doubling their space respectively

-   international brands' ongoing appreciation of the attraction of intu's destination shopping centres. Abercrombie & Fitch is opening only its second UK store at intu Trafford Centre, House, the Australian homewares store, opening one of its first UK stores at intu Chapelfield and Xiaomi, the Chinese mobile phone company, opening its fifth store in Spain (and second in our portfolio) at intu Puerto Venecia

-   brands recognising the benefit of standalone stores as part of their customer acquisition, with Jo Malone, Mitsubishi and Silent Night opening at intu Lakeside and The White Company at Cribbs Causeway

-   leisure operators bringing a differentiated offering to our regional destinations with Rock Up, a climbing experience for all ages, set to open at intu Watford complementing the Cineworld and Hollywood Bowl leisure anchors at the intu Watford extension

A greater proportion of our lettings are now with well-financed global businesses, such as Inditex who are rolling out other brands in addition to Zara.

We settled 62 rent reviews in the year for new rents totalling £19 million, an average uplift of 10 per cent on the previous rents.

The weighted average unexpired lease term is 7.4 years (31 December 2017: 7.5 years) illustrating the longevity of our income streams.

The difference between our net rent (topped-up) of £463 million and ERV of £540 million represents £37 million from vacant and development units and reversion of £40 million, 8 per cent, from rent reviews and lease expiry. Of the 8 per cent reversion, 1 per cent is only realisable on expiry of leases with over 10 years remaining (eg anchor units), leaving 7 per cent realisable from other lease expiries and rent reviews. Net rent (topped-up) represents annual property income (see glossary) of £474 million plus contracted rent subject to a rent free period of £20 million, net of non-recoverable costs of £31 million.

Delivering operational excellence

The delivery of operational excellence underpins how we operate our centres. Through a range of metrics, we monitor our performance to ensure we are meeting both our customer and retailer requirements.

Operational metrics

 

Six months
 ended 30 June
 2018

Year ended
 31 December
 2017

Six months
 ended 30 June
 2017

Footfall

-1.3%

+0.1%

-0.5%

Retailer sales (like-for-like centres)

-2.2%

-2.1%

-2.1%

Rent to estimated sales (excluding Anchors and major space users)

12.1%

12.1%

12.4%

Net promoter score

73

70

70

Unprompted brand awareness

29%

26%

24%

Prompted brand awareness

75%

71%

71%

Shop Insider visits

+222%

+196%

n/a

Online sales

£5m

£9m

£4m

Footfall in our centres has been robust considering the extreme weather events in the period with severe snow early in the year followed by the high temperatures for the last three months.  Excluding the period of severe snow when some centres were closed, footfall was broadly unchanged, down 0.1 per cent in the period. Overall, our footfall decreased by 1.3 per cent in the period, but significantly outperformed the ShopperTrak measure of UK national retail footfall which was down on average by 3.3 per cent, highlighting the continued attraction of our compelling destinations against the wider market.

Estimated retailer sales in our centres were down 2.2 per cent. The main contributors to this are some of the larger space users, many of which have successful multichannel businesses. In-store sales figures take no account of the benefit of the store to retailers' online sales and are further impacted by returns of online sales.

The ratio of rents to estimated sales for standard units remained stable in the year at 12.1 per cent.

Our net promoter score, a measure of customer service, ran consistently high throughout the period averaging 73, an increase over 2017, and demonstrating our in centre operational excellence.

Putting customers first is embedded in our culture and the intu brand. The brand has continued to gain momentum and positions us well as the role of the shopping centre operator changes. Our measure of the brand, through its recognition with the public, continues to grow on both an unprompted and prompted basis. Of those questioned, 29 per cent mentioned intu when asked to name a shopping centre brand and 75 per cent knew of the brand when prompted.

These measures of customer satisfaction and recognition are a result of our national presence, attractive digital offering and in-house experiences team which offer retailers and brands promotional opportunities that deliver enticing events and experiences for our customers. Recognition and customer satisfaction are paramount to a shopper's likelihood to visit, which in turn drives footfall and extended dwell time.

In the period, promotional activity included Porsche opening a pop-up store at intu Trafford Centre, working with Apple to promote Apple Pay through our centres and launching our nationwide touring event Big Bugs on Tour to help reconnect adults and children with the importance of nature in our lives.

In addition to what we provide in centre, our attractive digital offering through our premium content publisher and shopping platform, intu.co.uk, continues to grow strongly and support retailers' physical operations. Online sales for retailers grew by 28 per cent in the period, year-on-year. This is driven for the most part by 'Shop Insider', the premium content section of the site, which saw over one million visits in the period, an increase of 222 per cent. This highlights the power of quality content to drive both physical and digital sales, as shoppers continue to be ever more considered in their purchases, researching heavily online before planned visits.

The importance of identifying innovative ideas and services emerging in the UK retail market cannot be underestimated. intu Accelerate, a first for the shopping centre sector and now in its second year, is our incubator for innovative technologies and services. It identifies start-ups to pilot new concepts in centre and online and the 2018 cohorts include Rhythm, a company which creates multiplayer games for big screens where up to 200 players can take part using their mobile phones, with a recent event successfully held at intu Merry Hill.

Optimising our winning destinations

Our focus is to ensure our centres continue to be the winning destinations, where customers and retailers want to be, both now and in the future. Over the last three years, from 2015 to 2017, we have invested over £350 million in our centres, with a similar level of investment coming from our tenants.

Our near-term pipeline consists of projects that improve the position of our flagship centres to meet customer and retailer needs as we evolve the retail environments, enhance the catering mix and expand the leisure offer.

Investment in the period

In the first six months of 2018 we have invested £102 million in our centres on projects enhancing the value and appeal of these destinations. This includes £44 million on the intu Watford extension, £19 million on the leisure extension at intu Lakeside and £39 million on many other active asset management initiatives, including the aquarium at Madrid Xanadú and the restaurant quarter, Halle Place, at Manchester Arndale.

In addition, 107 units opened or refitted in our centres in the period (H1 2017: 84 stores), around 3 per cent of our 3,300 units. Tenants have invested around £31 million in these stores, a significant demonstration of their long-term commitment to our centres.

Near-term pipeline

Looking ahead, we are progressing our near-term investment pipeline of £441 million through to the end of 2020, reinforcing our existing assets and delivering value-enhancing returns.

 

 

 

 

Cost to completion (£m)

 

 

Total

H2 2018

2019

2020

intu Watford

 

37

34

3

-

intu Lakeside

 

38

33

5

-

intu Trafford Centre

 

71

24

46

1

intu Costa del Sol design

 

9

9

-

-

Active asset management

 

80

64

16

-

Total committed

 

235

164

70

1

intu Broadmarsh, Nottingham

 

70

4

36

30

intu Costa del Sol (net of partner funding)

 

36

11

5

20

Active asset management

 

100

20

40

40

Total near-term pipeline

 

441

199

151

91

We are committed to investing £235 million:

-   at intu Watford we remain on target with our £180 million extension expected to open in October 2018. The 380,000 sq ft project, anchored by Debenhams and Cineworld, is 70 per cent let by space, with a further 20 per cent in advanced negotiations. In the period, we have exchanged with The Florist and Jack Wills. The cost to completion of this project is £37 million, and as previously stated, the complete project, including the refurbishment of the existing centre, is expected to deliver a return on cost of 6 to 7 per cent

-   at intu Lakeside the construction of the £72 million leisure extension, a major attraction for the South East, has £38 million of cost remaining to completion. This 175,000 sq ft project is expected to deliver a return on cost of 6.5 per cent. We have pre-let 85 per cent of the space, including the four leisure attractions Nickelodeon, Flip Out, Puttshack and Hollywood Bowl

-   at intu Trafford Centre, we have pre-let 60 per cent of the expansion and transformation of Barton Square and now appointed the main contractor. The £72 million project, expected to deliver a return of between 6 and 7 per cent, will enclose the courtyard, enhance interiors, allow trading from two levels and provide a fashion offer for the first time at Barton Square with Primark anchoring this development

-   at intu Costa del Sol, we have committed £9 million to complete the final designs and resolve any outstanding planning matters so we will be in a position to place the building contracts in 2019 (see below for more details on the full project)

-   active asset management projects total £80 million and include £18 million creating flagship stores for key fashion brands in our super-regional centres, £15 million enhancing the look and feel of intu Merry Hill and £5 million delivering the new leisure uses at Madrid Xanadú. These projects are expected to deliver a range of returns between 6 and 10 per cent dependent on the nature of the individual project

Our pipeline of planned projects amounts to £206 million:

-   at intu Broadmarsh we have a planned redevelopment which is expected to cost £81 million (£70 million until the end of 2020) and expected to deliver a stabilised initial yield of around 7 per cent. We have signed The Light cinema and Hollywood Bowl to anchor this leisure led scheme and, with 50 per cent of the project either exchanged or in advanced negotiations, we would expect to commit to this in the second half of 2018

-   at intu Costa del Sol, we expect to clear the final planning matters in the next 12 months. With work on the final design on-going (see above), we are also targeting our required level of pre-lets in the next 12 months. This 230,000 sq m development is expected to cost around £580 million and open in 2022. Our business plan provides for the future introduction of a joint venture partner at the start of construction and limits our outlay on the project to around £130 million which we expect to be mostly funded by borrowings specific to the project

-   active asset management projects total £100 million and are for projects of varying sizes across all centres. These projects are generally similar in nature and size to those active management projects that are committed

Future opportunities

Beyond 2020 we have a pipeline of future opportunities that will be brought forward as and when the tenant demand reaches the required level and any outstanding planning consents are approved. These projects will continue the evolution of our centres, ensuring we meet the future requirements of customers and tenants in our regional locations. The most advanced projects in this pipeline are the leisure extension we are proposing for intu Merry Hill and at intu Milton Keynes where we have received planning approval for a further 100,000 sq ft of space.

Making smart use of capital

In line with our strategy, we continue to recycle capital to focus on our winning destinations where we have the opportunity to deliver superior returns.

Disposals

In January 2018, we completed the formation of a joint venture with LaSalle Investment Management for them to take ownership of 50 per cent of intu Chapelfield, Norwich for an initial net consideration of £148 million.

This takes our disposals in the last four years to over £1 billion as we have disposed of non-core assets and introduced partners on other centres.

We have flexibility for further disposals or part disposals, as around two-thirds of our portfolio is 100 per cent owned.

Debt activity

Following the disposal of 50 per cent of intu Chapelfield, we raised debt of £74 million on our remaining interest, and in April 2018, we amended and extended our €225 million term loan secured on intu Puerto Venecia, Zaragoza. The margin on this loan was reduced by 120 basis points and the maturity date extended from 2019 to 2025. In June 2018, we extended the loan on intu Milton Keynes from 2019 to 2021.

Robust financial structure

Our balance sheet is robust and we consider the structure of our borrowings, predominantly using flexible asset specific non-recourse arrangements (86 per cent of overall debt), to be appropriate for our concentrated portfolio.

Cash and available facilities at 30 June 2018 were £739 million and loan to value was 48.7 per cent, within our target range of 40 per cent to 50 per cent.

All facilities have substantial covenant headroom. By way of example, a 20 per cent fall in capital values, from the June 2018 valuations, and 10 per cent fall in income would create a covenant shortfall of only £18 million which could be cured from available facilities.

We have minimal debt maturities before 2021, with a weighted average debt maturity of 6.3 years at 30 June 2018.

With more than £5 billion of debt refinanced over the last five years, we have proven we have very good access to both the public and private capital markets and over this period reduced our weighted average cost of debt from 5.2 per cent to 4.1 per cent. Our average cost of debt includes legacy debt on intu Trafford Centre (£0.8 billion; cost of debt 6.0 per cent), which pre-dates the asset becoming part of the intu portfolio in 2011 and a first mortgage debenture stock 2027 (£0.2 billion; cost of debt 9.9 per cent) originally issued over 25 years ago. Excluding these two facilities, the weighted average cost of debt of all other facilities is 3.4 per cent.

 

External loans at 30 June 2018 - Chart 2

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OUR CENTRES

 

Market value

Size
(sq ft 000)

Ownership

Number of
 stores

Annual
 property
 income

Headline
 rent
 ITZA

ABC1
 customers

Key tenants

UK super-regional centres

intu Trafford Centre

£2,231.5m

2,018

100%

228

£95.0m

£450

67%

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

intu Lakeside

£1,340.0m

1,435

100%

244

£57.4m

£360

69%

House of Fraser, Debenhams, Marks & Spencer, Topshop, Zara, Primark, Vue, Victoria's Secret, H&M, Next, Apple

intu Metrocentre

£894.5m

2,079

90%

302

£47.9m

£280

55%

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

intu Merry Hill

£864.0m

1,671

100%

217

£42.9m

£200

48%

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

intu Braehead

£469.8m

1,123

100%

123

£28.9m

£213

64%

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

Cribbs Causeway

£228.4m

1,076

33%

154

£12.9m

£305

80%

John Lewis, Marks & Spencer, Apple, Next, Topshop, Hobbs, Hugo Boss, H&M, Tesla, The White Company

UK major city centres

Manchester Arndale

£438.2m

1,790

48%

254

£21.7m

£285

57%

Harvey Nichols, Apple, Burberry, Topshop, Next, Ugg, Hugo Boss, Superdry, Zara, Victoria's Secret, Paul Smith, Monki

intu Derby

£410.8m

1,357

100%

210

£27.9m

£110

46%

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

intu Victoria Centre

£320.5m

976

100%

115

£18.8m

£250

57%

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

St David's, Cardiff

£319.9m

1,391

50%

203

£16.8m

£212

71%

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

intu Eldon Square

£305.2m

1,385

60%

142

£16.3m

£308

60%

John Lewis, Fenwick, Debenhams, Waitrose, Apple, Hollister, Topshop, Boots, River Island, Next

intu Watford

£303.0m

728

93%

140

£14.8m

£200

81%

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

 

Market value

Size
(sq m 000)

Ownership

Number of
 stores

Annual
 property
 income

 

 

Key tenants

Spanish centres

Madrid Xanadú

€267.7m

120*

50%

208

€12.3m

 

 

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

intu Puerto Venecia

€266.7m

120*

50%

206

€12.4m

 

 

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

intu Asturias

€158.9m

74*

50%

145

€8.3m

 

 

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

* Excludes owner occupied space.

 

 

FINANCIAL REVIEW

 

Presentation of information

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

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

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

Alternative performance measure used

 

Rationale

Like-for-like amounts

 

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

Net asset value ('NAV') (diluted, 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 which seeks to assist comparison between European property companies, is the exclusion of interest rate swaps not currently used for economic hedges of debt as, in our view, this better allows management to review and monitor the Group's performance. A reconciliation of NAV (diluted, adjusted) to NAV attributable to owners of intu properties plc as well as EPRA NAV is provided in note 11.

Underlying earnings

 

Underlying earnings is presented as it is considered to be a key measure of the Group's recurring income performance and an indication of the extent to which dividend payments are supported by underlying operations. It excludes property and derivative valuation movements, exceptional items and related tax. The key difference from EPRA earnings, an industry standard comparable measure which seeks to assist comparison between European property companies, relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments that can be made. A reconciliation of underlying earnings to (loss)/profit for the period attributable to owners of intu properties plc as well as EPRA earnings is provided in note 10. The underlying profit statement is also presented in full in the other information section.

Overview

We have recorded underlying earnings of £98.5 million for the six months ended 30 June 2018, in line with the same period in 2017. This reflects a 1.3 per cent growth in like-for-like net rental income as well as the impact of 2018 and 2017 acquisitions and disposals. Underlying earnings per share of 7.3 pence is unchanged from the same period in 2017.

The loss for the period attributable to owners of intu properties plc of £486.2 million, compared to a profit of £127.1 million for the same period in 2017 is driven primarily by the deficit on property revaluations of £650.4 million (same period in 2017: surplus of £17.7 million), partially offset by the change in fair value of financial instruments, a surplus of £75.1 million (same period in 2017: surplus of £18.7 million).

NAV per share of 362 pence has decreased 49 pence from 31 December 2017 largely due to the deficit on property revaluations. NAV per share continues to include a timing impact within retained earnings of 4 pence in relation to our Spanish development partner Eurofund's expected future equity interest in the intu Costa del Sol development. The positive impact on retained earnings is expected to reverse, once these arrangements are concluded. Following this event, NAV per share would be 4 pence lower.

In January we continued making smart use of capital, completing the 50 per cent joint venture sale of intu Chapelfield to LaSalle Investment Management (acting on behalf of Greater Manchester Pension Fund and West Yorkshire Pension Fund) for initial net consideration of £148.0 million. Subsequently, we arranged a £74.0 million loan facility, maturing in 2023 secured on our 50 per cent remaining interest. In accordance with IFRS, following the completion date, intu Chapelfield is now presented as a joint venture in our financial statements.

Our financing metrics continue to remain strong. During the period we refinanced our facility on intu Puerto Venecia, extended our facility on intu Milton Keynes and have secured financing on the remaining 50 per cent interest in intu Chapelfield. Our interest cover ratio of 1.95x is slightly higher in the period (31 December 2017: 1.94x) with satisfactory headroom above our target minimum level of 1.60x.

Income statement

 

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

 

Group underlying
 profit
£m

Share of
 joint ventures
£m

Group
 including share of
joint ventures
£m

Group
 including share of
joint ventures
£m

Underlying earnings

98.5

n/a

98.5

98.5

Adjusted for:

 

 

 

 

Revaluation of investment and development property

(617.4)

(33.0)

(650.4)

17.7

Loss on disposal of subsidiaries

(8.3)

-

(8.3)

(0.9)

Loss on sale of other investments

-

-

-

(0.3)

Administration expenses - exceptional

(6.3)

-

(6.3)

(1.7)

Exceptional finance costs

(14.9)

5.1

(9.8)

(12.2)

Change in fair value of financial instruments

75.3

(0.2)

75.1

18.7

Tax on the above

3.3

(2.0)

1.3

1.2

Share of joint ventures' items

(30.4)

30.4

-

-

Share of associates' items

(0.9)

-

(0.9)

4.0

Non-controlling interests in respect of the above

14.9

(0.3)

14.6

2.1

(Loss)/profit for the period attributable to owners of intu properties plc

(486.2)

n/a

(486.2)

127.1

Underlying earnings per share (pence)

7.3p

n/a

7.3p

7.3p

Underlying earnings and underlying earnings per share of £98.5 million and 7.3 pence respectively are in line with the same period in 2017. The key movements of underlying earnings are shown in the chart below.

 

Key movements in underlying earnings - Chart 3

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Net rental income decreased £3.1 million in the six months ended 30 June 2018 to £223.1 million primarily due to the part disposal of intu Chapelfield in January 2018, the acquisition and part disposal of Madrid Xanadú in 2017, partially offset by growth in like-for-like net rental income.

Like-for-like net rental income increased by £2.7 million, 1.3 per cent, primarily driven by rental growth from new lettings and rent reviews (see operating review).

Administration expenses increased by £1.1 million in the six months ended 30 June 2018 to £21.7 million, broadly in line with the run rate in the second half of 2017.

Net finance costs have decreased by £2.0 million in the six months ended 30 June 2018 to £107.3 million primarily as a result of our ongoing refinancing programme. The net finance costs will increase in the second half and be similar to the second half of 2017 as capital projects come on stream.

As discussed in the overview, the loss attributable to owners of intu properties plc is £486.2 million, a decrease from the £127.1 million profit reported for the same period in 2017.

Our investment in joint ventures recorded a loss of £16.2 million, compared to a profit of £18.4 million for the same period in 2017. This includes underlying earnings of £14.2 million, an increase of £5.7 million from the same period in 2017 due to intu Chapelfield and Madrid Xanadú now included within investment in joint ventures, and a deficit on property revaluation of £33.0 million (same period in 2017: surplus of £8.5 million).

As detailed in the table below, our net rental income margin has improved slightly to 88.0 per cent due to marginally lower costs related to vacant units. Our ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 15.0 per cent (see other information section).

 

Six months ended
30 June 2018
£m

Six months ended
30 June 2017
£m

Gross rental income

260.6

268.5

Head rent payable

(7.2)

(10.2)

 

253.4

258.3

Net service charge expense and void costs

(14.3)

(14.5)

Bad debt and lease incentive write offs

(0.9)

(1.4)

Property operating expense

(15.1)

(16.2)

Net rental income

223.1

226.2

Net rental income margin

88.0%

87.6%

EPRA cost ratio (excluding direct vacancy costs)

15.0%

15.0%

Balance sheet

 

 

 

30 June 2018

31 December 2017

 

Group balance
 sheet
£m

Share of
 joint ventures
£m

Group
 including share of
joint ventures
£m

Group
 including share of
joint ventures
£m

Investment and development property

8,660.0

1,133.9

9,793.9

10,192.5

Investment in joint ventures

851.5

(851.5)

-

-

Assets and associated liabilities classified as held for sale

-

-

-

302.9

Investment in associates and other investments

77.2

-

77.2

81.6

Net external debt

(4,542.9)

(249.1)

(4,792.0)

(4,835.5)

Derivative financial instruments

(304.0)

(2.6)

(306.6)

(349.8)

Other assets and liabilities

(232.7)

(27.1)

(259.8)

(259.3)

Net assets

4,509.1

3.6

4,512.7

5,132.4

Non-controlling interest

(37.0)

(3.6)

(40.6)

(57.4)

Attributable to shareholders

4,472.1

-

4,472.1

5,075.0

Fair value of derivative financial instruments

304.0

2.6

306.6

349.8

Other adjustments

99.0

(2.6)

96.4

97.9

Net assets (diluted, adjusted)

4,875.1

n/a

4,875.1

5,522.7

NAV per share (diluted, adjusted) (pence)

362p

n/a

362p

411p

The Group's net assets attributable to shareholders are £4,472.1 million, a decrease from £5,075.0 million at 31 December 2017, while net assets (diluted, adjusted) are £4,875.1 million, a decrease from £5,522.7 million at 31 December 2017.

 

Key movements in NAV per share (diluted, adjusted) - Chart 4

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NAV per share (diluted, adjusted) at 30 June 2018 has decreased 49 pence from the prior year to 362 pence, the key movements are shown in the chart above. This was driven principally by the deficit on property revaluations in the period of 48 pence. As noted in the overview, NAV per share continues to include a timing impact within retained earnings of 4 pence in relation to our Spanish development partner Eurofund's expected future equity interest in the intu Costa del Sol development. The positive impact on retained earnings is expected to reverse, once these arrangements are concluded. In this event NAV per share would reduce by 4 pence.

Investment and development property has decreased by £398.6 million primarily due to a deficit on revaluation of £650.4 million, partially offset by capital expenditure of £101.9 million and the recognition of the retained 50 per cent interest in intu Chapelfield, of which 100 per cent was classified as an asset held for sale at 31 December 2017.

Our net investment in joint ventures is £851.5 million at 30 June 2018 (31 December 2017: £735.5 million), which includes the Group's share of net assets, on an equity accounted basis, of £511.1 million (31 December 2017: £452.6 million) and loans to joint ventures of £340.4 million (31 December 2017: £282.9 million). The movement in the period primarily reflects the addition of intu Chapelfield from 31 January 2018 following the 50 per cent part disposal, which is now accounted for as a joint venture rather than as a 100 per cent owned subsidiary.

Investments in associates of £61.7 million primarily represent our interests in India, which comprises a 32 per cent interest in Prozone (£42.5 million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (£19.2 million). Prozone and Empire own and operate shopping centres in Coimbatore and Aurangabad.

Net external debt of £4,792.0 million has decreased by £43.5 million primarily from proceeds from the part disposal of intu Chapelfield partially offset by capital expenditure in the period. Cash including the Group's share of joint ventures has reduced by £26.6 million to £251.6 million and gross debt has decreased by £70.1 million to £5,043.6 million.

Derivative financial instruments comprise the fair value of the Group's interest rate swaps. The net liability at 30 June 2018 is £306.6 million, a decrease of £43.2 million in the period, primarily due to cash payments in the year and the increases in sterling swap rates, with the five-year and 10-year rates increasing by 27bps and 25bps respectively. Cash payments in the year totalled £23.6 million, £14.1 million of which has been classified as an exceptional finance cost as it relates to payments in respect of unallocated interest rate swaps. The balance of the payments has been included as underlying finance costs as it relates to ongoing interest rate swaps used to hedge debt.

As previously detailed, we have a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders' practice. At 30 June 2018 these interest rate swaps have a market value liability of £209.1 million (31 December 2017: £235.4 million). It is estimated that we will be required to make cash payments on these interest rate swaps of £14 million in the second half of 2018, reducing to below £24 million per annum in 2020.

The non-controlling interest at 30 June 2018 relates primarily to our partner's 40 per cent stake in intu Metrocentre.

We are exposed to foreign exchange movements on our overseas investments. At 30 June 2018 the exposure is 12.5 per cent of net assets attributable to shareholders, the increase from 31 December 2017 being primarily due to the deficit on property revaluations in the UK. Once the Eurofund expected future equity interest in the intu Costa del Sol development concludes, we expect this rate to reduce to closer to the Group's policy of a maximum of 10 percent, after which the appropriate level of exposure will be assessed.

Cash flow

Group cash flow as reported

Six months ended
30 June 2018
£m

Six months ended
30 June 2017
£m

Cash flows from operating activities

48.1

67.9

Cash flows from investing activities

75.1

(539.7)

Cash flows from financing activities

(139.9)

466.9

Foreign exchange movements

-

0.1

Net decrease in Group cash and cash equivalents

(16.7)

(4.8)

During the period cash and cash equivalents decreased by £16.7 million.

Cash flows from operating activities of £48.1 million are £19.8 million lower than the same period in 2017, primarily due to the timing of payments.

Cash flows from investing activities reflects the cash inflow for the 50 per cent sale of intu Chapelfield in January and cash outflows related to capital expenditure during the period.

Cash flows from financing activities primarily reflect the cash dividends paid during the period of £120.9 million.

Financing

Debt structure

We have carried out significant refinancing activity in recent years which has resulted in diversified sources of funding, including secured bonds plus syndicated bank debt secured on individual or pools of assets, with limited or no recourse from the borrowing entities to other Group companies outside of these arrangements. Our corporate-level debt remains limited to the Revolving Credit Facility (RCF) as well as the £375 million 2.875 per cent convertible bonds due 2022 and £160.4 million outstanding in respect of the 2.5 per cent convertible bonds due in the second half of 2018.

During the period we undertook the following financing activities:

-   agreed a new £74 million facility secured against our remaining 50 per cent interest in intu Chapelfield, maturing in 2023

-   refinanced the €225 million facility secured against intu Puerto Venecia (our share €112.5 million), now maturing in 2025

-   extended the £140 million facility secured against intu Milton Keynes by 18 months, now maturing in 2021

It is likely the £160.4 million outstanding in respect of the 2.5 per cent convertible bonds due in the second half of 2018 will be cash settled. The chart below illustrates that we have no major refinancing requirement due until 2021.

 

Debt maturity - Chart 5

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

http://www.rns-pdf.londonstockexchange.com/rns/7906V_1-2018-7-25.pdf

 

 

Debt measures

 

30 June 2018

31 December 2017

Debt to assets

48.7%

45.2%1

Interest cover

1.95x

1.94x

Weighted average debt maturity

6.3 years

6.6 years

Weighted average cost of gross debt

4.1%

4.2%

Proportion of gross debt with interest rate protection

90%

95%

Cash and available facilities

£738.8m

£833.1m1

1     Pro forma for the net initial consideration of £148 million on 50 per cent disposal of intu Chapelfield.

Our debt to assets ratio has increased to 48.7 per cent since 31 December 2017 due to the deficit on property revaluation and remains within our target range of 40 per cent to 50 per cent. Our weighted average debt maturity has reduced marginally to 6.3 years and the weighted average cost of gross debt has reduced to 4.1 per cent (excluding the RCF).

Interest cover of 1.95x has remained stable and above our target minimum level of 1.60x.

We use interest rate swaps to fix interest obligations, reducing any cash flow volatility caused by changes in interest rates. The proportion of debt with interest rate protection has decreased slightly in the period to 90 per cent within our policy range of between 75 per cent and 100 per cent.

Covenants

Further details of the debt financial covenants are included in the other information section of this report. We are in compliance with all of our covenants and regularly stress test them for changes in capital values and income. By way of example, a 20 per cent fall in capital values and 10 per cent fall in income would create a covenant shortfall of only £18 million.

Capital commitments

We have an aggregate commitment to capital projects of £234.8 million at 30 June 2018 (31 December 2017: £267.6 million).

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

Other

Tax policy position

The Group has tax exempt status in the UK (REIT) and for certain investments in Spain (SOCIMI) which provide exemption from corporation tax on rental income and gains arising on property sales, with tax instead being paid at shareholder level. See glossary for further information on REITs and SOCIMIs.

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

We published 'intu's Approach to Tax' in respect of the year ended 31 December 2017 on the Group's website intugroup.co.uk which provides further information about the Group's tax strategy.

We pay tax directly on overseas earnings, any UK non-property income under the REIT rules, business rates and transaction taxes such as stamp duty land tax. In the six months ended 30 June 2018 the total of such payments to tax authorities was £15.1 million (same period in 2017: £13.1 million), of which £13.4 million (same period in 2017: £11.6 million) was in the UK and £1.7 million (same period in 2017: £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 2017 interim dividend. A scrip dividend alternative may be offered. Details of the apportionment between the PID and non-PID elements per share will be confirmed in due course.

 

PRINCIPAL RISKS AND UNCERTAINTIES

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

We have identified principal risks and uncertainties under five key headings: property market; operations; financing; developments and acquisitions; and brand. These are discussed in detail on the following pages. A principal risk is one which has the potential to significantly affect our strategic objectives, financial position or future performance and includes both internal and external factors. We monitor movements in likelihood and severity such that the risks are appropriately managed in line with the Group's risk appetite.

The risk profile for the six months ended 30 June 2018 has remained broadly in line with the year ended 31 December 2017 with no significant new risk categories identified, although it is recognised that risks within the categories continue to evolve. Where risks have evolved additional risk mitigation strategies have been put in place.

The main impact from the UK's decision to exit the EU on the risks that the Group faces continues to be the potential negative impact on the macro-economic environment as a result of the continuing uncertainty around transitional and post-Brexit arrangements. Specifically, the risks we face are affected by any changes in sentiment in the investment and occupier markets in which we operate, in our ability to execute our recycling and investment plans and in broader consumer confidence and expenditure.

Key to strategic objectives:

 

 

 

Change in level of risk:

 

1) Growing like-for-like net rental income

 

 

 

Increased (+)

 

2) Delivering operational excellence

 

 

 

Remained the same (=)

 

3) Optimising our winning destinations

 

 

 

Decreased (-)

 

4) Making smart use of capital

 

 

 

 

 

 

Risk and impact

Mitigation

Change

2018 commentary

Property market

 

 

Strategic objectives affected: 1,2,3,4

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

-  focus on high-quality shopping centres together with their upgrading

-  covenant headroom monitored and stress-tested

-  make representation on key policies, for example business rates

-  company-wide marketing events across centres to attract footfall

-  use our respected brand to attract and retain aspirational retailers

-  continue geographic diversification by increasing Spanish presence

+

Likelihood of macro-economic weakness has increased and continues to be a risk with political uncertainty in the UK and Brexit arrangements not yet detailed, which has increased investor caution with lower transaction volumes in the period

-  reduction in like-for-like property values, and continued pressure at the lower end of the market

-  substantial covenant headroom

-  no significant near-term debt maturities and average unexpired term of 6.3 years

-  long-term lease structures with average unexpired term of 7.4 years

-  completion of 50 per cent disposal of intu Chapelfield in January 2018 for initial consideration of £148m, in line with the December 2016 valuation

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

-  regular monitoring of tenant strength and diversity

-  upgrading assets to meet market demand

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

-  work closely with retailers to ensure that intu's centres continue to evolve with their strategic objectives

-  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 has increased and severity of potential impact was monitored and managed closely in the period with intu's strategy continuing to deliver solid footfall numbers and occupancy

-  modest impact from administrations and retailer CVAs

-  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 remains strong at 97 per cent

-  footfall reduced marginally but continues to outperform the benchmark

-  on site with the £72m intu Lakeside leisure extension

Operations

 

 

Strategic objectives affected: 1,2,3

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 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 liability insurance

-  continued investment of insurers' risk mitigation bursaries

-  increased resources to counter anti-social behaviour

-  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 and severity of potential impact has not changed significantly during the period

-  retained OHSAS 18001, demonstrating consistent health and safety management process and procedures across the portfolio

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

-  gold award from RoSPA

-  full review undertaken of each centre's fire strategy and building specifications following Grenfell and Liverpool Arena car park fire has provided appropriate assurance across the portfolio

-  Primarily Authority audits for both health and safety and fire safety are being conducted in accordance with programme. These provide assurances surrounding compliance

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

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

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

=

Likelihood is unchanged and continues to rely on operational and third party systems and data. Severity of potential impact managed through continued development of tools and controls. Hacking attempts have not resulted in data loss or major operational impacts

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

-  implemented updated GDPR policies and procedures

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 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

-  NaCTSO counter terrorism assessments completed for all centres

-  internal head of security in place supported by security strategy group

=

Overall likelihood and severity of potential impact unchanged but recognition of changing terrorist methods

-  national threat level remains at Severe

-  major multi-agency security exercises held at all five super-regional intu managed shopping centres

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

Financing

 

 

Strategic objectives affected: 3,4

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 the length of the 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 high-quality shopping centres

=

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

-  £74m facility agreed on retained joint venture interest in intu Chapelfield

-  €225m refinancing of intu Puerto Venecia

-  extension of the £140m facility on intu Milton Keynes

-  no major refinancing requirements due until 2021

Developments and acquisitions

 

 

Strategic objectives affected: 3,4

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 the period as the Group has progressed work on its development pipeline

-  at intu Watford works are on schedule to open in October 2018

-  at intu Lakeside leisure development on schedule

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

-  at Barton Square key anchor letting to Primark secured and main contractor appointed for intu Trafford Centre transformation

Acquisitions
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 in the period

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 period

-  continuing media interest in intu and our commentary and opinions on the business and wider landscape

-  ongoing development of brand in Spain, with full brand roll-out at intu Puerto Venecia

-  net promoter score consistently high, averaging 73 in 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 gives a true and fair view of the assets, liabilities, financial position, and profit and loss of the Group; and

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

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

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

Related party transactions are set out in note 23 of the interim financial statements.

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

On behalf of the Board

 

 

David Fischel
Chief Executive

 

 

Matthew Roberts
Chief Financial Officer
26 July 2018

 

INDEPENDENT REVIEW REPORT TO INTU PROPERTIES PLC

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed intu properties plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report of intu properties plc for the 6 month period ended 30 June 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

-   the consolidated balance sheet as at 30 June 2018;

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

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

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

-   the explanatory notes to the interim financial statements.

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

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

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

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

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

What a review of interim financial statements involves

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

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

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

 

 

PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2018

 

CONSOLIDATED INCOME STATEMENT (unaudited)

for the six months ended 30 June 2018

 

 

 

Notes

Six months
ended 30 June
2018
£m

Six months
ended 30 June
2017
£m

Year ended
31 December
2017
£m

Revenue

4

286.1

307.3

616.0

Net rental income

4

197.5

210.5

423.4

Net other income

 

3.2

0.6

3.0

Revaluation of investment and development property

12

(617.4)

9.2

30.8

Loss on disposal of subsidiaries

5

(8.3)

(0.9)

(1.8)

Administration expenses - ongoing

 

(21.2)

(20.1)

(40.9)

Administration expenses - exceptional

6

(6.3)

(1.7)

(5.9)

Operating (loss)/profit

 

(452.5)

197.6

408.6

Finance costs

7

(102.5)

(105.1)

(213.9)

Finance income

7

7.5

4.9

12.6

Other finance costs

7

(17.8)

(15.1)

(38.9)

Change in fair value of financial instruments

7

75.3

18.1

22.0

Net finance costs

7

(37.5)

(97.2)

(218.2)

(Loss)/profit before tax, joint ventures and associates

 

(490.0)

100.4

190.4

Share of post-tax (loss)/profit of joint ventures

13

(16.2)

18.4

35.5

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

14

(0.3)

4.4

1.3

(Loss)/profit before tax

 

(506.5)

123.2

227.2

Current tax

8

(0.2)

(0.2)

0.1

Deferred tax

8

3.3

(0.3)

(24.0)

Taxation

8

3.1

(0.5)

(23.9)

(Loss)/profit for the period

 

(503.4)

122.7

203.3

 

 

 

 

 

Attributable to:

 

 

 

 

Owners of intu properties plc

 

(486.2)

127.1

216.7

Non-controlling interests

 

(17.2)

(4.4)

(13.4)

 

 

(503.4)

122.7

203.3

 

 

 

 

 

Basic (loss)/earnings per share

10

(36.2)p

9.5p

16.1p

Diluted (loss)/earnings per share

10

(36.1)p

8.9p

15.0p

Details of underlying earnings are presented in the underlying profit statement in the other information section. Underlying earnings per share are shown in note 10.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

for the six months ended 30 June 2018

 

 

 

Six months
ended 30 June
2018
£m

Six months
ended 30 June
2017
£m

Year ended
31 December
2017
£m

(Loss)/profit for the period

 

(503.4)

122.7

203.3

Other comprehensive income

 

 

 

 

Items that may be reclassified subsequently to the income statement:

 

 

 

 

Revaluation of other investments

 

(1.2)

(0.1)

(0.2)

Exchange differences

 

(4.6)

11.4

16.9

Tax relating to components of other comprehensive income

 

-

-

0.1

Total items that may be reclassified subsequently to the income statement

 

(5.8)

11.3

16.8

Other comprehensive (loss)/income for the period

 

(5.8)

11.3

16.8

Total comprehensive (loss)/income for the period

 

(509.2)

134.0

220.1

 

 

 

 

 

Attributable to:

 

 

 

 

Owners of intu properties plc

 

(492.0)

138.4

233.5

Non-controlling interests

 

(17.2)

(4.4)

(13.4)

 

 

(509.2)

134.0

220.1

 

 

CONSOLIDATED BALANCE SHEET (unaudited)

at 30 June 2018

 

 

 

Notes

At 30 June
2018
£m

At 31 December
2017
£m

At 30 June
2017
£m

Non-current assets

 

 

 

 

Investment and development property

12

8,660.0

9,179.4

9,322.5

Plant and equipment

 

12.5

12.2

8.6

Investment in joint ventures

13

851.5

735.5

603.1

Investment in associates

14

61.7

64.8

69.7

Other investments

 

15.5

16.8

16.9

Goodwill

 

4.0

4.0

4.0

Derivative financial instruments

 

6.3

0.3

0.2

Trade and other receivables

 

103.6

102.5

102.3

 

 

9,715.1

10,115.5

10,127.3

Current assets

 

 

 

 

Assets classified as held for sale

 

-

309.1

559.5

Trade and other receivables

 

153.5

141.9

145.2

Cash and cash equivalents

15

210.2

228.0

250.4

 

 

363.7

679.0

955.1

Total assets

 

10,078.8

10,794.5

11,082.4

Current liabilities

 

 

 

 

Liabilities associated with assets classified as held for sale

 

-

(6.2)

(328.8)

Trade and other payables

 

(298.0)

(288.5)

(307.9)

Current tax liabilities

 

(0.3)

(0.1)

(0.5)

Borrowings

16

(210.3)

(186.7)

(17.4)

Derivative financial instruments

 

(38.9)

(8.0)

(51.5)

 

 

(547.5)

(489.5)

(706.1)

Non-current liabilities

 

 

 

 

Borrowings

16

(4,729.4)

(4,811.1)

(5,019.4)

Derivative financial instruments

 

(271.4)

(339.8)

(300.5)

Deferred tax liabilities

8

(20.2)

(23.7)

-

Other payables

 

(1.2)

(1.2)

(1.2)

 

 

(5,022.2)

(5,175.8)

(5,321.1)

Total liabilities

 

(5,569.7)

(5,665.3)

(6,027.2)

Net assets

 

4,509.1

5,129.2

5,055.2

Equity

 

 

 

 

Share capital

18

677.5

677.5

677.5

Share premium

18

1,327.4

1,327.4

1,327.4

Treasury shares

 

(39.6)

(39.1)

(39.2)

Other reserves

 

355.3

361.1

355.6

Retained earnings

 

2,151.5

2,748.1

2,670.7

Attributable to owners of intu properties plc

 

4,472.1

5,075.0

4,992.0

Non-controlling interests

 

37.0

54.2

63.2

Total equity

 

4,509.1

5,129.2

5,055.2

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the six months ended 30 June 2018

 

 

 

Attributable to owners of intu properties plc

 

 

 

Share
capital
£m

Share
premium
£m

Treasury
shares
£m

Other
reserves
£m

Retained
earnings
£m

Total
£m

Non-
controlling
interests
£m

Total
equity
£m

At 1 January 2018

677.5

1,327.4

(39.1)

361.1

2,748.1

5,075.0

54.2

5,129.2

Adjustment on adoption of new accounting standard (note 2)

-

-

-

-

14.0

14.0

-

14.0

Adjusted 1 January 2018

677.5

1,327.4

(39.1)

361.1

2,762.1

5,089.0

54.2

5,143.2

Loss for the period

-

-

-

-

(486.2)

(486.2)

(17.2)

(503.4)

Other comprehensive income:

 

 

 

 

 

 

 

Revaluation of other investments

-

-

-

-

(1.2)

-

(1.2)

Exchange differences

-

-

-

-

(4.6)

-

(4.6)

Total comprehensive loss for the period

-

-

-

(5.8)

(486.2)

(492.0)

(17.2)

(509.2)

Dividends (note 9)

-

-

-

(126.3)

(126.3)

-

(126.3)

Share-based payments

-

-

-

1.9

1.9

-

1.9

Acquisition of treasury shares

-

-

(0.5)

-

(0.5)

-

(0.5)

 

-

-

(0.5)

-

(124.4)

(124.9)

-

(124.9)

At 30 June 2018

677.5

1,327.4

(39.6)

355.3

2,151.5

4,472.1

37.0

4,509.1

 

 

 

Attributable to owners of intu properties plc

 

 

 

Share
capital
£m

Share
premium
£m

Treasury
shares
£m

Other
reserves
£m

Retained
earnings
£m

Total
£m

Non-
controlling
interests
£m

Total
equity
£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 year

-

-

-

-

216.7

216.7

(13.4)

203.3

Other comprehensive income:

 

 

 

 

 

 

 

Revaluation of other investments

-

-

-

-

(0.2)

-

(0.2)

Exchange differences

-

-

-

-

16.9

-

16.9

Tax relating to components
of other comprehensive income

-

-

-

0.1

-

0.1

-

0.1

Total comprehensive income for the year

-

-

-

16.8

216.7

233.5

(13.4)

220.1

Dividends (note 9)

-

-

-

(187.9)

(187.9)

-

(187.9)

Share-based payments

-

-

-

2.3

2.3

-

2.3

Other share related transaction

-

-

-

49.4

49.4

-

49.4

Acquisition of treasury shares

-

-

(1.3)

-

(1.3)

-

(1.3)

Disposal of treasury shares

-

-

3.0

(2.8)

0.2

-

0.2

 

-

-

1.7

-

(139.0)

(137.3)

-

(137.3)

At 31 December 2017

677.5

1,327.4

(39.1)

361.1

2,748.1

5,075.0

54.2

5,129.2

 

 

 

Attributable to owners of intu properties plc

 

 

 

Share
capital
£m

Share
premium
£m

Treasury
shares
£m

Other
reserves
£m

Retained
earnings
£m

Total
£m

Non-
controlling
interests
£m

Total
equity
£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

-

-

-

-

(0.1)

-

(0.1)

Exchange differences

-

-

-

-

11.4

-

11.4

Total comprehensive income for the period

-

-

-

11.3

127.1

138.4

(4.4)

134.0

Dividends (note 9)

-

-

-

(126.2)

(126.2)

-

(126.2)

Share-based payments

-

-

-

2.2

2.2

-

2.2

Acquisition of treasury shares

-

-

(1.2)

-

(1.2)

-

(1.2)

Disposal of treasury shares

-

-

2.8

(2.8)

-

-

-

 

-

-

1.6

-

(126.8)

(125.2)

-

(125.2)

At 30 June 2017

677.5

1,327.4

(39.2)

355.6

2,670.7

4,992.0

63.2

5,055.2

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

for the six months ended 30 June 2018

 

 

 

Notes

Six months
ended 30 June
2018
£m

Six months
ended 30 June
2017
£m

Year ended
31 December
2017
£m

Cash generated from operations

20

156.6

180.3

365.6

Interest paid

 

(110.9)

(113.0)

(232.4)

Interest received

 

2.5

1.1

7.6

Taxation

 

(0.1)

(0.5)

0.1

Cash flows from operating activities

 

48.1

67.9

140.9

Cash flows from investing activities

 

 

 

 

Purchase and development of property, plant and equipment

 

(88.3)

(91.3)

(189.5)

Sale of property

 

1.5

3.4

3.7

Acquisition of businesses net of cash acquired

 

-

(446.3)

(446.7)

Cash transferred to assets classified as held for sale

 

-

(12.7)

(0.5)

Additions to other investments

 

-

(1.5)

(1.5)

Disposal of subsidiaries net of cash sold

22

143.4

-

104.1

Investment of capital in joint ventures

13

(2.8)

-

(0.7)

Repayments of capital by joint ventures

13

5.3

-

-

Loan advances to joint ventures

13

(0.6)

(2.3)

(3.0)

Loan repayments by joint ventures

13

16.2

10.1

14.8

Distributions from joint ventures

13

0.4

0.9

1.2

Cash flows from investing activities

 

75.1

(539.7)

(518.1)

Cash flows from financing activities

 

 

 

 

Acquisition of treasury shares

 

(0.5)

(1.2)

(1.3)

Sale of treasury shares

 

-

-

0.2

Cash transferred from/(to) restricted accounts

 

1.1

(0.5)

0.1

Borrowings drawn

 

74.0

596.6

1,199.2

Borrowings repaid

 

(93.6)

(10.2)

(660.0)

Equity dividends paid

 

(120.9)

(117.8)

(188.0)

Cash flows from financing activities

 

(139.9)

466.9

350.2

Effects of exchange rate changes on cash and cash equivalents

 

-

0.1

0.4

Net decrease in cash and cash equivalents

 

(16.7)

(4.8)

(26.6)

Cash and cash equivalents at beginning of period

15

225.1

251.7

251.7

Cash and cash equivalents at end of period

15

208.4

246.9

225.1

 

 

NOTES (unaudited)

 

1 Basis of preparation

The condensed consolidated set of interim financial statements (interim financial statements) for the six months ended 30 June 2018 are unaudited and do not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006. The interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with IAS 34 as adopted by the European Union.

The comparative information presented for the year ended 31 December 2017 is not the Group's financial statements for that year. Those financial statements have been reported on by the Group's auditors and delivered to the registrar of companies. The auditors' opinion on those financial statements was unqualified and did not contain an emphasis of matter paragraph or a statement made under Section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements should be read in conjunction with the Group's Annual Report and financial statements for the year ended 31 December 2017 which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

Significant estimates and judgements

The preparation of interim financial statements in conformity with the Group's accounting policies requires management to make judgements and use estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these judgements and estimates are based on management's best knowledge of the amount, event or action, the actual result ultimately may differ from those judgements and estimates.

In preparing the interim financial statements, the areas of significant judgement made by management and the key sources of estimation uncertainty in applying the Group's accounting policies were the same as those applied to the Group's financial statements as at and for the year ended 31 December 2017. See page 112 of the Group's 2017 Annual Report and financial statements for details on significant use of estimates and assumptions as well as significant areas of judgement. During the period, management applied significant judgement assessing the control over joint arrangements following the part disposal of intu Chapelfield. See note 22 for further details.

Going concern

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

In preparing the most recent projections, factors taken into account include £251.6 million of cash (including the Group's share of cash in joint ventures of £41.4 million) and £487.2 million of undrawn facilities at 30 June 2018. The Group's weighted-average debt maturity of 6.3 years and the relatively long-term and stable nature of the cash flows receivable under tenant leases were also factored into the forecasts.

After reviewing the most recent projections and the sensitivity analysis, the Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing the interim financial statements.

 

2 Accounting policies

The accounting policies and methods of computation applied are consistent with those of the Group's financial statements for the year ended 31 December 2017 as set out on pages 113 to 116 of the Group's 2017 Annual Report and financial statements, as amended when relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the period. Except as described below, these amendments have not had an impact on the interim financial statements.

This is the Group's first set of financial statements where IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been applied. The impacts on the interim financial statements on adoption of these standards are set out below:

IFRS 9 Financial Instruments - The standard applies to classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge accounting. On adoption, the Group has made an opening adjustment to retained earnings of £14.0 million. An irrevocable election has also been made to recognise movements in other investments through other comprehensive income, consistent with the accounting treatment under the previous standard. No other changes have impacted the interim financial statements on adoption of the standard.

IFRS 15 Revenue from Contracts with Customers - The standard is applicable to service charge income and facilities management income, but excludes lease rental income arising from contracts with the Group's tenants. The adoption of this standard has not had a material impact on the interim financial statements.

A number of standards and amendments to standards have been issued but are not yet effective for the current period. The most significant of these is set out below:

IFRS 16 Leases (effective 1 January 2019) - This standard requires lessees to recognise a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. Depreciation on the right-of-use asset and finance costs on the lease liability will be recognised in the income statement. This standard does not affect the current accounting for rental income earned. The Group has completed its impact assessment of the standard in the period, where the most significant operating leases identified are the Group's London and Madrid office leases. On adoption, the Group expects to apply the modified retrospective approach and will elect to not re-assess existing leases under the new standard. The Group expects to recognise a right-of-use asset and corresponding lease liability on its balance sheet of less than £5 million on adoption.

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

 

3 Seasonality and cyclicality

There is no material seasonality or cyclicality impacting the interim financial statements.

 

4 Segmental reporting

Operating segments are determined based on the strategic and operational management of the Group. The Group is primarily a shopping centre-focused business and has two reportable operating segments being the UK and Spain. Although certain areas of business performance are reviewed and monitored on a centre-by-centre basis, the operating segments are consistent with the strategic and operational management of the Group by the Executive Committee (the chief operating decision makers of the Group).

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

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

 

Six months ended 30 June 2018

 

 

Group including share of joint ventures

Less share of

joint ventures
£m

 

 

UK
£m

Spain
£m

Total
£m

Group total
£m

Rent receivable

243.9

16.7

260.6

(29.8)

230.8

Service charge income

56.3

3.6

59.9

(7.0)

52.9

Facilities management income from joint ventures

1.6

-

1.6

0.8

2.4

Revenue

301.8

20.3

322.1

(36.0)

286.1

Rent payable

(7.2)

-

(7.2)

0.5

(6.7)

Service charge costs

(65.1)

(4.1)

(69.2)

8.0

(61.2)

Facilities management costs recharged to joint ventures

(1.6)

-

(1.6)

(0.8)

(2.4)

Other non-recoverable costs

(18.9)

(2.1)

(21.0)

2.7

(18.3)

Net rental income

209.0

14.1

223.1

(25.6)

197.5

(Loss)/profit for the period

(505.3)

2.3

(503.0)

(0.4)1

(503.4)

             

 

 

 

Six months ended 30 June 2017

 

 

Group including share of joint ventures

Less share of

joint ventures
£m

 

 

UK
£m

Spain
£m

Total
£m

Group total
£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

Profit for the period

112.7

10.4

123.1

(0.4)1

122.7

             

 

 

Year ended 31 December 2017

 

 

Group including share of joint ventures

Less share of

joint ventures
£m

 

 

UK
£m

Spain
£m

Total
£m

Group total
£m

Rent receivable

513.5

32.7

546.2

(42.8)

503.4

Service charge income

109.7

8.1

117.8

(8.7)

109.1

Facilities management income from joint ventures

2.8

-

2.8

0.7

3.5

Revenue

626.0

40.8

666.8

(50.8)

616.0

Rent payable

(20.5)

-

(20.5)

1.0

(19.5)

Service charge costs

(128.1)

(8.8)

(136.9)

9.6

(127.3)

Facilities management costs recharged to joint ventures

(2.8)

-

(2.8)

(0.7)

(3.5)

Other non-recoverable costs

(43.4)

(3.2)

(46.6)

4.3

(42.3)

Net rental income

431.2

28.8

460.0

(36.6)

423.4

Profit for the year

140.4

63.5

203.9

(0.6)1

203.3

             

1     Relates to the profit attributable to non-controlling interests within the Group's investment in joint ventures.

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

Revenue, in respect of the above categories, is recognised over time in line with the performance obligations being satisfied.

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

 

Investment and development property

Capital expenditure

Revaluation (deficit)/surplus

 

At 30 June
 2018
£m

At 31 December
 2017
£m

Six months ended
 30 June 2018
£m

Six months ended
 30 June 2017
£m

Six months ended
 30 June 2018
£m

Six months ended
 30 June 2017
£m

UK

8,962.2

9,373.8

83.7

99.4

(648.4)

6.2

Spain

831.7

818.7

18.2

9.2

(2.0)

11.5

Group including share of joint ventures

9,793.9

10,192.5

101.9

108.6

(650.4)

17.7

Less share of joint ventures

(1,133.9)

(1,013.1)

(1.8)

(4.8)

33.0

(8.5)

Group

8,660.0

9,179.4

100.1

103.8

(617.4)

9.2

 

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

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

UK

9,076.2

9,484.1

9,752.4

Spain

576.7

565.5

304.7

India

62.2

65.9

70.2

 

9,715.1

10,115.5

10,127.3

 

5 Loss on disposal of subsidiaries

The loss on disposal of subsidiaries of £8.3 million includes a loss in respect of the part disposal of intu Chapelfield to a joint venture of £8.8 million (see note 22) offset by an adjustment in respect of the part disposal of Madrid Xanadú in 2017 of £0.5 million.

 

6 Administration expenses - exceptional

Exceptional administration expenses in the period totalled £6.3 million and relate principally to costs incurred in respect of the all-share offer made by Hammerson plc in 2017. These costs have been classified as exceptional based on their nature and incidence (see definition in the glossary).

 

7 Net finance costs

 

Six months
 ended 30 June
 2018
£m

Six months
 ended 30 June
 2017
£m

Year ended
 31 December
 2017
£m

On bank loans and overdrafts

93.0

93.8

192.0

On convertible bonds (note 17)

7.3

9.1

17.5

On obligations under finance leases

2.2

2.2

4.4

Finance costs1

102.5

105.1

213.9

Finance income

(7.5)

(4.9)

(12.6)

Amortisation of Metrocentre compound financial instrument

2.9

2.9

5.9

Payments on unallocated interest rate swaps and other costs2

15.2

14.6

34.6

Foreign currency movements2

(0.3)

(2.4)

(1.6)

Other finance costs

17.8

15.1

38.9

Gain on derivative financial instruments3

(42.7)

(26.8)

(28.3)

(Gain)/loss on convertible bonds designated as at fair value through profit or loss (note 17)

(32.6)

8.7

6.3

Change in fair value of financial instruments

(75.3)

(18.1)

(22.0)

Net finance costs

37.5

97.2

218.2

1     Finance costs of £7.2 million were capitalised in the six months ended 30 June 2018 (six months ended 30 June 2017: £2.0 million, year ended 31 December 2017: £4.9 million).

2    Amounts totalling £14.9 million in the six months ended 30 June 2018 (six months ended 30 June 2017: £12.2 million, year ended 31 December 2017: £33.0 million) are treated as exceptional items, as defined in the glossary, due to their nature and are therefore excluded from underlying earnings (see note 10). These finance costs include payments on unallocated interest rate swaps, payments on termination of interest rate swaps, amounts associated with modifications and extinguishments of borrowings, foreign currency movements and other fees.

3     Included within the change in fair value of derivative financial instruments are gains totalling £23.6 million (six months ended 30 June 2017: £22.8 million, year ended 31 December 2017: £47.1 million) resulting from the payment of obligations under derivative financial instruments during the period. Of these £14.1 million relate to unallocated swaps (six months ended 30 June 2017: £14.3 million, year ended 31 December 2017: £26.1 million).

 

8 Taxation

Taxation for the period:

 

Six months
 ended 30 June
 2018
£m

Six months
 ended 30 June
 2017
£m

Year ended
 31 December
 2017
£m

Overseas taxation

0.2

0.1

0.2

Overseas taxation - adjustment in respect of prior years

-

-

(0.1)

UK taxation - current year

-

0.1

-

UK taxation - adjustment in respect of prior years

-

-

(0.2)

Current tax

0.2

0.2

(0.1)

Deferred tax:

 

 

 

On investment and development property

(3.2)

0.3

24.8

On other temporary differences

(0.1)

-

(0.8)

Deferred tax

(3.3)

0.3

24.0

Total tax (credit)/charge

(3.1)

0.5

23.9

Movements in the provision for deferred tax:

 

 

 

Investment and development property
£m

Other
temporary
differences
£m

Total
£m

Provided deferred tax provision/(asset):

 

 

 

 

 

At 1 January 2018

 

 

24.6

(0.9)

23.7

Recognised in the income statement

 

 

(3.2)

(0.1)

(3.3)

Foreign exchange movements

 

 

(0.2)

-

(0.2)

At 30 June 2018

 

 

21.2

(1.0)

20.2

The net deferred tax provision of £20.2 million predominantly arises in respect of the revaluation of development property at intu Costa del Sol, partially offset by associated tax losses.

At 30 June 2018, the Group had unrecognised deferred tax assets calculated at a tax rate of 17 per cent (31 December 2017: 17 per cent, 30 June 2017: 17 per cent) of £47.8 million (31 December 2017: £43.1 million, 30 June 2017: £43.6 million) for surplus UK revenue tax losses carried forward, £36.8 million (31 December 2017: £45.6 million, 30 June 2017: £43.9 million) for temporary differences on derivative financial instruments, £0.5 million (31 December 2017: £0.5 million, 30 June 2017: £0.6 million) for temporary differences on capital allowances, £0.2 million (31 December 2017 and 30 June 2017: nil) for other investments and £5.7 million (31 December 2017: £5.8 million, 30 June 2017: £5.8 million) for capital losses.

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

 

9 Dividends

 

Six months
 ended 30 June
 2018
£m

Six months
ended 30 June
 2017
£m

Year ended
 31 December
 2017
£m

Ordinary shares:

 

 

 

2017 final dividend paid of 9.4 pence per share (2016 final dividend paid of 9.4 pence per share)

126.3

126.2

126.2

2017 interim dividend paid of 4.6 pence per share

-

-

61.7

Dividends paid

126.3

126.2

187.9

Proposed 2018 interim dividend of 4.6 pence per share

62.3

 

 

 

10 Earnings per share

(a) Number of shares

 

Six months
 ended 30 June
 2018
million shares

Six months
 ended 30 June
 2017
million shares

Year ended
 31 December
2017
 million shares

Basic1/2

1,343.6

1,343.1

1,343.2

Diluted3

1,345.9

1,437.8

1,427.6

1     The weighted average number of shares used has been adjusted to remove shares held in the Employee Share Ownership Plan (ESOP).

2    Basic shares is used to calculate EPRA earnings per share and underlying earnings per share.

3     Diluted shares includes the impact of dilutive convertible bonds, share options and share awards.

(b) Earnings per share

Basic and diluted earnings per share is calculated in accordance with IAS 33 Earnings Per Share.

Underlying earnings per share is a non-GAAP measure but has been presented as it is considered to be a key measure of the Group's recurring performance and an indication of the extent to which dividend payments are supported by underlying operations (see underlying profit statement in other information). It excludes property and derivative movements, exceptional items and related tax. The key difference from EPRA earnings per share, an industry standard comparable measure which seeks to assist comparison between European property companies, relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments that can be made. Underlying earnings is defined as an alternative performance measure in the financial review. A reconciliation from EPRA earnings per share to the Group's measure of underlying earnings per share is provided below:

 

Six months ended
 30 June 2018

Six months ended
 30 June 2017

Year ended
 31 December 2017

 

(Loss)/
earnings
£m

Pence per
share

Earnings
£m

Pence per
share

Earnings
£m

Pence per
share

Basic (loss)/earnings per share

(486.2)

(36.2)p

127.1

9.5p

216.7

16.1p

Dilutive convertible bonds, share options and share awards

-

 

1.2

 

(1.9)

 

Diluted (loss)/earnings per share

(486.2)

(36.1)p

128.3

8.9p

214.8

15.0p

 

 

 

 

 

 

 

Basic (loss)/earnings per share

(486.2)

(36.2)p

127.1

9.5p

216.7

16.1p

Adjusted for:

 

 

 

 

 

 

Revaluation of investment and development property (note 12)

617.4

46.0p

(9.2)

(0.7)p

(30.8)

(2.3)p

Loss on disposal of subsidiaries (note 5)

8.3

0.6p

0.9

0.1p

1.8

0.1p

Administration expenses - exceptional (acquisition and disposal related)

6.1

0.5p

1.3

0.1p

4.9

0.4p

Exceptional finance costs (termination of derivative financial instruments)

14.1

1.0p

10.6

0.8p

26.1

1.9p

Change in fair value of financial instruments (note 7)

(75.3)

(5.6)p

(18.1)

(1.4)p

(22.0)

(1.6)p

Tax on the above

(3.2)

(0.3)p

0.3

-

23.9

1.8p

Share of joint ventures' items1

36.7

2.7p

(9.9)

(0.7)p

(17.2)

(1.3)p

Share of associates' items

0.9

0.1p

(4.0)

(0.3)p

(1.1)

(0.1)p

Non-controlling interests in respect of the above

(14.9)

(1.1)p

(2.5)

(0.2)p

(10.0)

(0.7)p

EPRA earnings per share

103.9

7.7p

96.5

7.2p

192.3

14.3p

Adjusted for:

 

 

 

 

 

 

Other exceptional items

1.0

0.1p

2.0

0.1p

7.9

0.6p

Other exceptional tax

(0.1)

-

-

-

0.1

-

Share of associates' items

-

-

-

-

0.7

0.1p

Share of joint ventures' items1

(6.3)

(0.5)p

-

-

-

-

Underlying earnings per share

98.5

7.3p

98.5

7.3p

201.0

15.0p

1     Included within share of joint ventures' items are other finance costs consisting of payments on termination of interest rate swaps and amounts associated with modifications of borrowings as described in note 7. These are excluded from underlying earnings per share and also, where permitted, from EPRA earnings per share.

 

(c) Headline earnings per share

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

 

Six months ended
30 June 2018

Six months ended
30 June 2017

Year ended
31 December 2017

 

Gross
£m

Net1
£m

Gross
£m

Net1
£m

Gross
£m

Net1
£m

Basic (loss)/earnings

 

(486.2)

 

127.1

 

216.7

Adjusted for:

 

 

 

 

 

 

Revaluation of investment and development property (note 12)

617.4

599.3

(9.2)

(12.0)

(30.8)

(16.1)

Loss on disposal of subsidiaries (note 5)

8.3

8.3

0.9

0.9

1.8

1.8

Share of joint ventures' items

33.0

35.0

(8.2)

(8.2)

(15.9)

(17.2)

Share of associates' items

0.9

0.9

(4.0)

(4.0)

(1.1)

(1.1)

Headline earnings

 

157.3

 

103.8

 

184.1

Dilution2

 

-

 

1.2

 

(1.9)

Diluted headline earnings

 

157.3

 

105.0

 

182.2

Weighted average number of shares (million)

 

1,343.6

 

1,343.1

 

1,343.2

Dilution2

 

2.3

 

94.7

 

84.4

Diluted weighted average number of shares (million)

 

1,345.9

 

1,437.8

 

1,427.6

Headline earnings per share (pence)

 

11.7p

 

7.7p

 

13.7p

Diluted headline earnings per share (pence)

 

11.7p

 

7.3p

 

12.8p

1     Net of tax and non-controlling interests.

2    The dilution impact is required to be included as calculated in note 10(a/b) even where this is not dilutive for headline earnings per share.

 

11 NAV per share

(a) Number of shares

 

Six months
 ended 30 June
 2018
shares million

Year ended
 31 December
2017
 shares million

Six months
ended 30 June
2017
 shares million

Basic1

1,343.8

1,343.4

1,343.4

Diluted2/3

1,346.0

1,345.2

1,346.5

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

2    Diluted shares is used to calculate EPRA NAV per share and NAV per share (diluted, adjusted).

3     Diluted shares includes the impact of dilutive convertible bonds, share options and share awards.

(b) NAV per share

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

 

Six months ended
 30 June 2018

Year ended
 31 December 2017

Six months ended
 30 June 2017

 

Net assets
£m

Pence per
share

Net assets
£m

Pence per
share

Net assets
£m

Pence per
share

NAV per share attributable to owners of intu properties plc

4,472.1

333p

5,075.0

378p

4,992.0

372p

Dilutive convertible bonds, share options and share awards

-

 

-

 

2.6

 

Diluted NAV per share

4,472.1

332p

5,075.0

377p

4,994.6

371p

Adjusted for:

 

 

 

 

 

 

Fair value of derivative financial instruments

94.9

7p

112.1

8p

112.2

8p

Deferred tax on investment and development property and other investments

20.2

2p

23.7

2p

0.1

-

Share of joint ventures' items

7.5

1p

5.2

1p

7.8

1p

Non-controlling interest recoverable balance not recognised

71.3

5p

71.3

5p

71.3

5p

EPRA NAV per share

4,666.0

347p

5,287.3

393p

5,186.0

385p

Adjusted for:

 

 

 

 

 

 

Swaps not currently used as economic hedges of debt

209.1

15p

235.4

18p

239.6

18p

NAV per share (diluted, adjusted)

4,875.1

362p

5,522.7

411p

5,425.6

403p

 

(c) EPRA NNNAV per share

EPRA NNNAV per share is a non-GAAP measure but has been included as it is considered to be an industry standard comparable measure which seeks to assist comparison between European property companies.

 

Six months ended
 30 June 2018

Year ended
 31 December 2017

Six months ended
 30 June 2017

 

Net assets
£m

Pence per
share

Net assets
£m

Pence per
share

Net assets
£m

Pence per
share

NAV per share (diluted, adjusted)

4,875.1

362p

5,522.7

411p

5,425.6

403p

Adjusted for:

 

 

 

 

 

 

Fair value of derivative financial instruments

(304.0)

(22)p

(347.5)

(26)p

(351.8)

(26)p

Excess of fair value of debt over book value

(356.5)

(26)p

(430.8)

(32)p

(389.9)

(29)p

Deferred tax on investment and development property and other investments

(20.2)

(2)p

(23.7)

(2)p

(0.1)

-

Share of joint ventures' items

(50.2)

(4)p

(47.8)

(4)p

(10.0)

(1)p

Non-controlling interest recoverable balance not recognised

18.2

1p

22.9

2p

23.6

2p

EPRA NNNAV per share

4,162.4

309p

4,695.8

349p

4,697.4

349p

 

 

12 Investment and development property

 

Investment property
£m

Development property
£m

Total
£m

At 1 January 2018

8,747.0

432.4

9,179.4

Additions

22.0

78.1

100.1

Disposals

(0.3)

(1.2)

(1.5)

Deficit on revaluation

(596.1)

(21.3)

(617.4)

Foreign exchange movements

-

(0.6)

(0.6)

At 30 June 2018

8,172.6

487.4

8,660.0

A reconciliation to market value is given in the table below:

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Balance sheet carrying value of investment and development property

8,660.0

9,179.4

9,322.5

Tenant incentives included within trade and other receivables

115.8

109.2

112.8

Head leases included within finance leases in borrowings

(80.2)

(80.2)

(80.1)

Market value of investment and development property

8,695.6

9,208.4

9,355.2

The market value of investment and development property at 30 June 2018 includes £8,263.9 million (31 December 2017: £8,831.9 million, 30 June 2017: £9,155.6 million) in respect of investment property and £431.7 million (31 December 2017: £376.5 million, 30 June 2017: £199.6 million) in respect of development property.

The fair value of the Group's investment and development property at 30 June 2018 was determined by independent external valuers at that date other than certain development land. The valuations are in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation - Global Standards 2017 and were arrived at by reference to market transactions for similar properties and rent profiles. Fair values for investment properties are calculated using the present value income approach.

In respect of development valuations, deductions are made for anticipated costs, including an allowance for developer's profit and any other assumptions before arriving at a valuation.

The valuation methodology is unchanged from the prior year and is set out in further detail on pages 124 and 125 of the Group's 2017 Annual Report and financial statements. The table in the other information section sets out the market value, yield and occupancy of the significant investment and development property.

In respect of the intu Costa del Sol development site near Málaga, Spain, as the General Plan of Torremolinos was approved in December 2017, with the remaining consents expected in 2018, the Group obtained an independent external valuation at 31 December 2017 as cost is no longer an appropriate approximation of fair value. At 30 June 2018 the remaining consents are yet to be finalised; therefore, consistent with the 31 December 2017 valuation, the 30 June 2018 valuation is based on the assumption that planning approval is in place at the valuation date.

 

13 Investment in joint ventures

The Group's principal joint ventures own and manage investment and development property.

 

St David's,
Cardiff
£m

intu
 Chapelfield
£m

intu Puerto
Venecia
£m

Madrid
Xanadú
£m

intu
Asturias
£m

Other
£m

Total
£m

Group's interest

50%

50%

50%

50%

50%

 

 

Principal place of business

Wales

England

Spain

Spain

Spain

 

 

At 1 January 2018

347.0

-

133.9

119.4

95.6

39.6

735.5

Acquisition of joint venture interest (note 22)

-

151.9

-

-

-

-

151.9

Group's share of underlying profit

6.7

2.4

0.7

2.8

1.4

0.2

14.2

Group's share of other net (loss)/profit

(25.2)

(8.1)

9.9

(0.5)

(0.6)

(5.9)

(30.4)

Group's share of (loss)/profit

(18.5)

(5.7)

10.6

2.3

0.8

(5.7)

(16.2)

Investment of capital

-

-

-

2.8

-

-

2.8

Repayments of capital

-

-

-

(5.3)

-

-

(5.3)

Distributions

-

-

-

-

-

(0.4)

(0.4)

Loan advances

-

-

-

-

-

0.6

0.6

Loan repayments

(10.5)

-

-

-

(5.7)

-

(16.2)

Foreign exchange movements

-

-

(0.3)

(0.3)

(0.6)

-

(1.2)

At 30 June 2018

318.0

146.2

144.2

118.9

90.1

34.1

851.5

Represented by:

 

 

 

 

 

 

 

Loans to joint ventures

73.1

74.0

98.8

57.5

28.9

8.1

340.4

Group's share of net assets

244.9

72.2

45.4

61.4

61.2

26.0

511.1

 

 

St David's,
Cardiff
£m

intu Puerto
Venecia
£m

Madrid
Xanadú
£m

intu
Asturias
£m

Other
£m

Total
£m

Group's interest

50%

50%

50%

50%

 

 

Principal place of business

Wales

Spain

Spain

Spain

 

 

At 1 January 2017

355.2

119.4

-

76.0

37.0

587.6

Acquisition of joint venture interest

-

-

117.1

-

-

117.1

Group's share of underlying profit

13.4

0.6

1.4

2.0

0.9

18.3

Group's share of other net profit/(loss)

(6.8)

8.9

0.4

14.7

-

17.2

Group's share of profit

6.6

9.5

1.8

16.7

0.9

35.5

Investment of capital

-

-

0.7

-

-

0.7

Distributions

-

-

-

-

(1.2)

(1.2)

Loan advances

-

-

-

-

3.0

3.0

Loan repayments

(14.8)

-

-

-

-

(14.8)

Foreign exchange movements

-

5.0

(0.2)

2.9

(0.1)

7.6

At 31 December 2017

347.0

133.9

119.4

95.6

39.6

735.5

Represented by:

 

 

 

 

 

 

Loans to joint ventures

83.6

99.1

57.7

35.0

7.5

282.9

Group's share of net assets

263.4

34.8

61.7

60.6

32.1

452.6

 

 

 

St David's,
Cardiff
£m

intu Puerto
Venecia
£m

intu
Asturias
£m

Other
£m

Total
£m

Group's interest

50%

50%

50%

 

 

Principal place of business

Wales

Spain

Spain

 

 

At 1 January 2017

355.2

119.4

76.0

37.0

587.6

Group's share of underlying profit

6.5

0.4

1.0

0.6

8.5

Group's share of other net profit/(loss)

(1.9)

6.0

6.0

(0.2)

9.9

Group's share of profit

4.6

6.4

7.0

0.4

18.4

Distributions

-

-

-

(0.9)

(0.9)

Loan advances

-

-

-

2.3

2.3

Loan repayments

(10.1)

-

-

-

(10.1)

Foreign exchange movements

-

3.5

2.3

-

5.8

At 30 June 2017

349.7

129.3

85.3

38.8

603.1

Represented by:

 

 

 

 

 

Loans to joint ventures

88.3

98.0

34.9

6.8

228.0

Group's share of net assets

261.4

31.3

50.4

32.0

375.1

 

14 Investment in associates

 

£m

At 1 January 2018

64.8

Share of loss of associates

(0.3)

Foreign exchange movements

(2.8)

At 30 June 2018

61.7

Investment in associates comprises a 32.4 per cent holding in the ordinary shares of Prozone Intu Properties Limited (Prozone), a listed Indian shopping centre developer, and a 26.8 per cent holding in the ordinary shares of Empire Mall Private Limited (Empire). Both companies are incorporated in India.

As required by IAS 28 Investments in Associates and Joint Ventures, the equity method of accounting is applied in accounting for the Group's investments in Prozone and Empire. The results for the year to 31 March have been used as 30 June information is not available in time for these financial statements. Those results are adjusted to be in line with the Group's accounting policies and include the most recent property valuations, determined at 31 March 2018, by independent professionally qualified external valuers in line with the valuation methodology described in note 12.

The market price per share of Prozone at 30 June 2018 was INR38 (31 December 2017: INR72, 30 June 2017: INR40), valuing the Group's interest at £20.7 million (31 December 2017: £41.1 million, 30 June 2017: £23.8 million) compared to the carrying value of £42.5 million (31 December 2017: £45.1 million, 30 June 2017: £48.7 million). As the share price of Prozone is lower than its carrying value, a review of the carrying value has been undertaken. The net assets of Prozone principally comprise investment property which is held at fair value within the investment in associates line. As with other Group investment property, it is subject to independent valuation to fair value and that valuation reflects the future cash flows expected to be generated from those assets. As such the net asset carrying value recorded in the Group's financial statements is deemed to be a reasonable approximation of the value in use of the business and so no adjustment to that carrying value is considered necessary.

 

15 Cash and cash equivalents

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Unrestricted cash

208.4

225.1

246.9

Restricted cash

1.8

2.9

3.5

Cash and cash equivalents

210.2

228.0

250.4

 

16 Borrowings

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Current

 

 

 

Commercial mortgage backed securities (CMBS) notes

45.7

23.3

15.1

2.5% convertible bonds (note 17)

160.2

161.0

-

Current borrowings, excluding finance leases

205.9

184.3

15.1

Finance lease obligations

4.4

2.4

2.3

 

210.3

186.7

17.4

Non-current

 

 

 

Revolving credit facility 2021 (including £88.5 million drawn in euros (31 December 2017: £88.8 million, 30 June 2017: £88.7 million)

153.5

233.8

362.7

CMBS notes 2019

-

19.9

19.8

CMBS notes 2022

38.3

43.0

50.3

CMBS notes 2024

88.2

88.0

87.9

CMBS notes 2029

70.4

73.2

76.2

CMBS notes 2033

303.8

311.2

318.8

CMBS notes 2035

193.9

192.8

191.8

Bank loan 2018

-

-

495.8

Bank loan 2019

-

139.7

139.6

Bank loan 2020

33.0

32.9

32.8

Bank loans 2021

597.4

470.2

469.6

Bank loan 2022

247.1

246.8

-

Bank loan 2023

73.0

-

-

Bank loan 2024

483.1

482.7

-

3.875% bonds 2023

444.0

443.5

442.9

4.125% bonds 2023

479.0

478.5

478.0

4.625% bonds 2028

342.6

342.3

342.0

4.250% bonds 2030

345.2

345.0

344.9

Debenture 2027

229.0

228.8

228.6

2.5% convertible bonds 2018 (note 17)

-

-

305.6

2.875% convertible bonds 2022 (note 17)

345.5

377.3

373.6

Non-current borrowings, excluding finance leases and Metrocentre compound financial instrument

4,467.0

4,549.6

4,760.9

Metrocentre compound financial instrument

186.6

183.7

180.7

Finance lease obligations

75.8

77.8

77.8

 

4,729.4

4,811.1

5,019.4

Total borrowings

4,939.7

4,997.8

5,036.8

Cash and cash equivalents (note 15)

(210.2)

(228.0)

(250.4)

Net debt

4,729.5

4,769.8

4,786.4

The fair value of total borrowings at 30 June 2018 was £5,296.2 million (31 December 2017: £5,428.6 million, 30 June 2017: £5,426.7 million)

Analysis of the Group's net external debt is provided in the other information section.

 

17 Convertible bonds

2.875 per cent convertible bonds ('the 2.875 per cent bonds')

In 2016 the Group issued £375.0 million 2.875 per cent Guaranteed Convertible Bonds due 2022 at par, all of which remain outstanding at 30 June 2018. Under the terms of the 2.875 per cent bonds, the exchange price is adjusted upon certain events including the payment of dividends by the Company over a certain threshold. At 30 June 2018 the exchange price was £3.7506 per ordinary share (31 December 2017 and 30 June 2017: £3.7506). These bonds are designated at fair value through profit or loss and so are presented on the balance sheet at fair value with all gains and losses taken to the income statement through the change in fair value of financial instruments line.

At 30 June 2018, the fair value of the 2.875 per cent bonds was £345.5 million (31 December 2017: £377.3, 30 June 2017: £373.6 million). During the six months ended 30 June 2018, interest of £5.4 million has been recognised on these bonds within finance costs (six months ended 30 June 2017: £5.4 million, year ended 31 December 2017: £10.8 million).

2.5 per cent convertible bonds ('the 2.5 per cent bonds')

In 2012 the Group issued £300.0 million 2.5 per cent Guaranteed Convertible Bonds due 2018 at par, £160.4 million of which remains outstanding at 30 June 2018. Under the terms of the bonds, the exchange price is adjusted upon certain events including the rights issue on 22 April 2014 and the payment of dividends by the Company. At 30 June 2018 the exchange price was £2.9761 per ordinary share (31 December 2017: £3.1164, 30 June 2017: £3.1797). These bonds are designated at fair value through profit or loss and so are presented on the balance sheet at fair value with all gains and losses taken to the income statement through the change in fair value of financial instruments line.

At 30 June 2018, the fair value of the 2.5 per cent bonds was £160.2 million (31 December 2017: £161.0 million, 30 June 2017: £305.6 million). During the six months ended 30 June 2018, interest of £1.9 million has been recognised on these bonds within finance costs (six months ended 30 June 2017: £3.7 million, year ended 31 December 2017: £6.7 million).

 

18 Share capital and share premium

 

Share
capital
£m

Share
premium
£m

Issued and fully paid:

 

 

At 1 January 2018 and 30 June 2018: 1,355,040,243 ordinary shares of 50 pence each

677.5

1,327.4

 

19 Financial risk management

The table below presents the Group's financial assets and liabilities recognised at fair value.

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Assets

 

 

 

Level 1                                 Other investments at fair value through other comprehensive income

14.0

15.3

15.4

Level 2                                Derivative financial instruments - fair value through profit or loss

6.3

0.3

0.2

Level 3                                 Other investments at fair value through other comprehensive income

1.5

1.5

1.5

Total assets

21.8

17.1

17.1

 

 

 

 

Liabilities

 

 

 

Level 1                                 Convertible bonds - designated at fair value through profit or loss

(505.7)

(538.3)

(679.2)

Level 2                                Derivative financial instruments - fair value through profit or loss

(310.3)

(347.8)

(352.0)

Total liabilities

(816.0)

(886.1)

(1,031.2)

 

Fair value hierarchy

Level 1: Valuation based on quoted market prices traded in active markets.

Level 2: Valuation techniques are used, maximising the use of observable market data, either directly from market prices or derived from market prices.

Level 3: Where one or more significant inputs to valuation are unobservable. Valuations at this level are more subjective and therefore more closely managed, including sensitivity analysis of inputs to valuation models. Such testing has not indicated that any material difference would arise due to a change in input variables.

Transfers into and transfers out of the fair value hierarchy levels are recognised on the date of the event or change in circumstances that caused the transfer. There were no transfers between Levels 1, 2 and 3 during the period.

Derivative financial instruments are initially recognised on the trade date at fair value and subsequently re-measured at fair value. In assessing fair value the Group uses its judgement to select suitable valuation techniques and make assumptions which are mainly based on market conditions existing at the balance sheet date. The fair value of interest rate swaps is calculated by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for similar instruments at the measurement date. These values are tested for reasonableness based upon broker or counterparty quotes.

Other investments at fair value through other comprehensive income, being investments intended to be held for an indefinite period, are initially and subsequently measured at fair value. For listed investments, fair value is the current bid market value at the reporting date. For unlisted investments where there is no active market, fair value is assessed using an appropriate methodology.

 

20 Cash generated from operations

 

Notes

Six months
 ended 30 June
 2018
£m

Six months
 ended 30 June
 2017
£m

Year ended
 31 December
2017
£m

(Loss)/profit before tax, joint ventures and associates

 

(490.0)

100.4

190.4

Adjusted for:

 

 

 

 

Revaluation of investment and development property

12

617.4

(9.2)

(30.8)

Loss on disposal of subsidiaries

5

8.3

0.9

1.8

Depreciation

 

1.7

1.3

2.9

Share-based payments

 

1.9

2.2

2.3

Lease incentives and letting costs

 

(7.0)

(2.9)

(4.1)

Net finance costs

7

37.5

97.2

218.2

Changes in working capital:

 

 

 

 

Change in trade and other receivables

 

8.4

(10.1)

(0.6)

Change in trade and other payables

 

(21.6)

0.5

(14.5)

Cash generated from operations

 

156.6

180.3

365.6

 

21 Capital commitments

At 30 June 2018 the Board had approved £216.4 million of future expenditure for the purchase, construction, development and enhancement of investment property. Of this, £96.8 million is contractually committed. The majority of this is expected to be spent during the remainder of 2018 and 2019.

 

22 Disposal of intu Chapelfield

On 31 January 2018 the Group sold 50 per cent of its interest in intu Chapelfield, a wholly owned subsidiary, to LaSalle Investment Management for final cash consideration of £145.1 million before expenses of £1.4 million. Following this transaction intu Chapelfield has ceased to be accounted for as a subsidiary and is now a joint venture. Therefore the assets and liabilities of intu Chapelfield are no longer recorded at 100 per cent in the Group's balance sheet but the remaining 50 per cent interest is included in investment in joint ventures at an initial value of £151.9 million. As a result of this transaction the Group has recorded a loss on disposal of £8.8 million in the income statement. The cash flow statement records a net inflow of £143.4 million comprising the net consideration received of £143.7 million less cash in the business of £0.8 million reclassified to investment in joint venture, net of cash classified as held for sale at 31 December 2017 of £0.5 million.

Assessing control over joint arrangements is a significant judgement. Based on the terms set out in the joint venture agreement, the Group has classified its retained 50 per cent interest as a joint venture as key decisions require consent of both partners.

The assets and liabilities of the subsidiaries disposed of, at 100 per cent, are set out below:

 

 

 

£m

Assets

 

 

 

Investment and development property

 

 

302.0

Cash and cash equivalents

 

 

0.8

Trade and other receivables

 

 

6.6

Total assets

 

 

309.4

Liabilities

 

 

 

Trade and other payables

 

 

(5.0)

Total liabilities

 

 

(5.0)

Net assets

 

 

304.4

Net assets (at 50 per cent)

 

 

152.2

Fair value of consideration received (including fair value adjustments of £0.3 million)

 

 

143.4

Loss on disposal of subsidiaries

 

 

8.8

 

23 Related party transactions

There have been no related party transactions during the period that require disclosure under Section DTR 4.2.8 R of the Disclosure Guidance and Transparency Rules sourcebook or under IAS 34 Interim Financial Reporting except those disclosed elsewhere in this condensed set of financial statements.

 

INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)

 

1 Property data

 

Market value
£m

Revaluation
deficit/surplus

Net initial
yield (EPRA)

'Topped-up' NIY
(EPRA)

Nominal
equivalent yield

Occupancy
 (EPRA)

At 30 June 2018

 

 

 

 

 

 

Subsidiaries

 

 

 

 

 

 

intu Trafford Centre

2,231.5

-4%

4.0%

4.1%

4.5%

99%

intu Lakeside

1,340.0

-7%

3.7%

4.2%

4.8%

97%

intu Metrocentre

894.5

-4%

4.8%

5.1%

5.5%

94%

intu Merry Hill

864.0

-8%

4.4%

4.7%

5.3%

93%

intu Braehead

469.8

-12%

5.7%

5.7%

6.2%

97%

Manchester Arndale

438.2

-5%

4.1%

4.4%

5.4%

99%

intu Derby

410.8

-11%

5.8%

6.2%

6.8%

95%

intu Victoria Centre

320.5

-11%

5.1%

5.3%

5.9%

98%

intu Eldon Square

305.2

-6%

4.9%

4.9%

5.3%

97%

intu Watford

303.0

-11%

4.0%

4.0%

5.3%

96%

intu Milton Keynes

276.0

-3%

4.7%

4.7%

5.0%

98%

Cribbs Causeway

228.4

-5%

5.1%

5.2%

5.4%

97%

OtherB

613.7

 

 

 

 

 

Investment and development property excluding Group's share of joint ventures

8,695.6

 

 

 

 

 

 

 

 

 

 

 

 

Joint ventures

 

 

 

 

 

 

St David's, Cardiff

319.9

-7%

4.4%

4.6%

5.0%

93%

Madrid Xanadú

236.8

+1%A

4.3%

4.6%

5.4%

97%

intu Puerto Venecia

235.9

+2%A

4.5%

4.8%

5.7%

99%

intu Chapelfield

145.3

-5%

5.2%

5.3%

5.4%

100%

intu Asturias

140.6

-A

4.7%

4.9%

5.3%

97%

OtherC

56.5

 

 

 

 

 

Investment and development property including Group's share of joint ventures

9,830.6

 

4.49%D

4.69%D

5.22%D

97%

At 31 December 2017
including Group's share of joint ventures

10,222.7

 

4.20%D

4.36% D

5.03% D

97%

Notes

A    Calculated in local currency.

B    Includes the Group's interests in intu Potteries, intu Broadmarsh, Soar at intu Braehead, development land in Spain, Charter Place, Watford and Sprucefield, Northern Ireland.

C    Includes the Group's interest in intu Uxbridge.

D    Weighted average yields exclude developments.

 

 

At 30 June
 2018
£m

At 31 December
 2017
£m

Passing rent

432.7

426.9

Annual property income

473.8

462.2

ERV

540.2

544.4

Weighted average unexpired lease term

7.4 years

7.5 years

Please refer to the glossary for definitions of terms.

 

2 Analysis of capital return in the year - including Group's share of joint ventures

 

Market value

Revaluation deficit

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2018
£m

At 30 June
 2018
%

Like-for-like property

9,023.1

9,539.8

(570.6)

(5.6)

intu Chapelfield (classified as held for sale at 31 December 2017)

145.3

-

(8.3)

(5.4)

Spain developments

211.3

212.8

(8.4)

(4.1)

Other

450.9

470.1

(63.1)

(15.0)

Total investment and development property

9,830.6

10,222.7

(650.4)

(6.2)

3 Analysis of net rental income in the year - including Group's share of joint ventures

 

Six months ended 30 June

 

 

2018
£m

2017
£m


£m

Movement
%

Like-for-like property

208.2

205.5

2.7

1.3

Acquisition and part disposal: Madrid Xanadú

5.8

6.7

(0.9)

n/a

Disposal: intu Chapelfield

-

3.1

(3.1)

n/a

Developments

9.1

10.9

(1.8)

n/a

Net rental income

223.1

226.2

(3.1)

(1.4)

 

 

FINANCIAL COVENANTS (unaudited)

 

Intu (SGS) Finance plc and Intu (SGS) Finco Limited (Secured Group Structure)

 

Loan
£m

Maturity

LTV
covenant

LTV
actual

Interest
cover
covenant

Interest
cover
actual

Term loan

351.8

2021

  

 

  

 

3.875 per cent bonds

450.0

2023

  

 

  

 

4.625 per cent bonds

350.0

2028

  

 

  

 

4.250 per cent bonds

350.0

2030

  

 

  

 

 

1,501.8

 

80%

52%

125%

231%

Covenants are tested on the Security Group, the principal assets of which are intu Lakeside, intu Braehead, intu Watford, intu Victoria Centre and intu Derby.

The structure has a tiered operating covenant regime giving the Group a significant degree of flexibility when the covenants are below certain levels. In higher tiers the level of flexibility is reduced. The Group retains operating control at loan to value below 72.5 per cent and interest cover above 1.4x. No financial covenant default occurs unless the loan to value exceeds 80 per cent or the interest cover falls below 1.25x.

The Trafford Centre Finance Limited

There are no financial covenants on the intu Trafford Centre debt of £756.9 million at 30 June 2018. However, a debt service cover ratio is assessed quarterly and where this falls below specified levels restrictions come into force. The loan to 30 June 2018 market value ratio is 35 per cent. No restrictions are in place at present.

Intu Metrocentre Finance plc

 

Loan
£m

Maturity

LTV
covenant

LTV
actual

Interest
cover
covenant

Interest
cover
actual

4.125 per cent bonds

485.0

2023

100%

54%

125%

217%

The structure's covenant regime gives the Group a significant degree of flexibility when the covenants are below certain levels. The Group retains operating control below loan to value of 70 per cent and interest cover above 1.4x. No financial covenant default occurs unless loan to value exceeds 100 per cent or interest cover falls below 1.25x.

Other asset-specific debt

 

Loan outstanding
at 30 June 20181
£m

Maturity

LTV
covenant

Loan to  
30 June 2018  
market value2

Interest
cover
covenant

Interest
cover
actual3

Sprucefield

33.2

2020

65%

60%

150%

252%

intu Uxbridge4

26.0

2020

70%

60%

125%

261%

St David's, Cardiff

122.5

2021

65%

38%

150%

310%

intu Milton Keynes

140.5

2021

65%

51%

150%

362%

intu Trafford Centre

250.0

2022

65%

46%

103%5

120%

intu Merry Hill

487.8

2024

75%

57%

150%

262%

intu Asturias4 (€)

60.5

2021

65%

38%

150%

604%

Madrid Xanadú4 (€)

131.5

2022

65%

50%

150%

413%

intu Chapelfield4

74.0

2023

65%

51%

150%

315%

intu Puerto Venecia4 (€)

112.5

2025

65%

42%

150%

443%

1     The loan values are the actual principal balances outstanding at 30 June 2018, which take into account any principal repayments made up to 30 June 2018. The balance sheet value of the loans includes unamortised fees.

2    The loan to 30 June 2018 market value provides an indication of the impact the 30 June 2018 property valuations could have on the LTV covenants. The actual timing and manner of testing LTV covenants varies and is loan specific.

3     Based on latest certified figures, calculated in accordance with loan agreements, which have been or will be submitted between 30 June 2018 and 31 July 2018. The calculations are loan specific and include a variety of historical, forecast and in certain instances a combined historical and forecast basis.

4    Debt shown is consistent with the Group's economic interest.

5     Covenant is a debt service cover ratio (includes interest and scheduled debt repayments).

 

Intu Debenture plc

 

Loan
£m

Maturity

Capital cover
 covenant

Capital cover
actual

Interest cover
covenant

Interest cover
actual

 

231.4

2027

150%

223%

100%

119%

The debenture is currently secured on a number of the Group's properties including intu Potteries, intu Eldon Square, intu Broadmarsh and Soar at intu Braehead.

Should the capital cover or interest cover test be breached, Intu Debenture plc (the 'Issuer') has three months from the date of delivery of the valuation or the latest certificate to the Trustees to make good any deficiencies. The Issuer may withdraw property secured on the debenture by paying a sum of money or through the substitution of alternative property provided that the capital cover and interest cover tests are satisfied immediately following the substitution.

Financial covenants on corporate facilities

 

Net worth
covenant

Net worth
actual

Interest cover
covenant

Interest cover
actual

Borrowings/net
worth covenant

Borrowings/net worth actual

£600m facility, maturing in 2021*

£1,200m

£2,397m

120%

203%

125%

61%

£375m due in 2022 2.875 per cent
convertible bonds (note 17)**

 

n/a

 

n/a

 

n/a

 

n/a

 

175%

 

12%

£160m due in 2018 2.5 per cent
convertible bonds (note 17)**

 

n/a

 

n/a

 

n/a

 

n/a

 

175%

 

12%

*    Tested on the Borrower Group which excludes, at the Group's election, certain subsidiaries with asset-specific finance. The facility is secured on the Group's investments in Manchester Arndale and Cribbs Causeway.

**  Tested on the Group excluding, at the Group's election, the borrowings on certain subsidiaries with asset-specific finance.

Interest rate swaps

The table below sets out the nominal amount and average rate of hedging, excluding lenders' margins, in place under current and forward-starting swap contracts.

 

Nominal amount
£m

Average rate
%

In effect on or after:

 

 

1 year

2,331.0

2.44

2 years

2,190.5

2.75

5 years

1,365.3

2.99

10 years

669.0

5.10

15 years

456.4

4.73

 

 

FINANCIAL INFORMATION INCLUDING SHARE OF JOINT VENTURES (unaudited)

for the six months ended 30 June 2018

 

The information in this section is presented to show the Group including share of joint ventures. A reconciliation from the amounts shown in the Group's income statement and balance sheet is provided on the following page.

Underlying earnings

 

 

Six months ended 30 June 2018

 

Group underlying
 profit
£m

Share of
 joint ventures
£m

Group
 including share of
joint ventures
£m

Rent receivable

230.8

29.8

260.6

Service charge income

52.9

7.0

59.9

Facilities management income from joint ventures

2.4

(0.8)

1.6

Revenue

286.1

36.0

322.1

Net rental income

197.5

25.6

223.1

Net other income/(expenses)

3.2

(1.2)

2.0

Administration expenses

(21.2)

(0.5)

(21.7)

Underlying operating profit

179.5

23.9

203.4

Finance costs

(102.5)

(3.2)

(105.7)

Finance income

7.5

(6.2)

1.3

Other finance costs

(2.9)

-

(2.9)

Underlying net finance costs

(97.9)

(9.4)

(107.3)

Underlying profit before tax, joint ventures and associates

81.6

14.5

96.1

Tax on underlying profit

(0.2)

(0.2)

(0.4)

Share of underlying profit of joint ventures

14.2

(14.2)

-

Share of underlying profit of associates

0.6

-

0.6

Remove amounts attributable to non-controlling interests

2.3

(0.1)

2.2

Underlying earnings

98.5

-

98.5

A reconciliation from the Group's profit to underlying earnings is provided in note 10.

 

 

Consolidated income statement

 

 

Six months ended 30 June 2018

 

Group income
 statement
£m

Share of
 joint ventures
£m

Group
 including share of
 joint ventures
£m

Revenue

286.1

36.0

322.1

Net rental income

197.5

25.6

223.1

Net other income/(expenses)

3.2

(1.2)

2.0

Revaluation of investment and development property

(617.4)

(33.0)

(650.4)

Loss on disposal of subsidiaries

(8.3)

-

(8.3)

Administration expenses - ongoing

(21.2)

(0.5)

(21.7)

Administration expenses - exceptional

(6.3)

-

(6.3)

Operating loss

(452.5)

(9.1)

(461.6)

Finance costs

(102.5)

(3.2)

(105.7)

Finance income

7.5

(6.2)

1.3

Other finance costs

(17.8)

5.1

(12.7)

Change in fair value of financial instruments

75.3

(0.2)

75.1

Net finance costs

(37.5)

(4.5)

(42.0)

Loss before tax, joint ventures and associates

(490.0)

(13.6)

(503.6)

Share of post-tax (loss)/profit of joint ventures

(16.2)

16.2

-

Share of post-tax loss of associates

(0.3)

-

(0.3)

(Loss)/profit before tax

(506.5)

2.6

(503.9)

Current tax

(0.2)

(0.2)

(0.4)

Deferred tax

3.3

(2.0)

1.3

Taxation

3.1

(2.2)

0.9

(Loss)/profit for the period

(503.4)

0.4

(503.0)

Non-controlling interests

17.2

(0.4)

16.8

Loss for the period attributable to owners of intu properties plc

(486.2)

-

(486.2)

Consolidated balance sheet

 

 

At 30 June 2018

 

Group
 balance sheet
£m

Share of
 joint ventures
£m

Group
 including share of
 joint ventures
£m

Assets

 

 

 

Investment and development property

8,660.0

1,133.9

9,793.9

Investment in joint ventures

851.5

(851.5)

-

Derivative financial instruments

6.3

-

6.3

Cash and cash equivalents

210.2

41.4

251.6

Other assets

350.8

57.0

407.8

Total assets

10,078.8

380.8

10,459.6

Liabilities

 

 

 

Borrowings

(4,939.7)

(290.5)

(5,230.2)

Derivative financial instruments

(310.3)

(2.6)

(312.9)

Other liabilities

(319.7)

(84.1)

(403.8)

Total liabilities

(5,569.7)

(377.2)

(5,946.9)

Net assets

4,509.1

3.6

4,512.7

Non-controlling interests

(37.0)

(3.6)

(40.6)

Net assets attributable to owners of intu properties plc

4,472.1

-

4,472.1

 

Investment and development property

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Balance sheet carrying value of investment and development property

9,793.9

10,192.5

10,086.7

Tenant incentives included within trade and other receivables

125.0

118.5

122.4

Head leases included within finance leases in borrowings

(88.3)

(88.3)

(88.3)

Market value of investment and development property

9,830.6

10,222.7

10,120.8

Net external debt

The table below provides a reconciliation between the components of net debt included on the Group's balance sheet and net external debt including the Group's share of joint ventures' debt and cash.

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Total borrowings

4,939.7

4,997.8

5,036.8

Cash and cash equivalents

(210.2)

(228.0)

(250.4)

Net debt

4,729.5

4,769.8

4,786.4

Less Metrocentre compound financial instrument

(186.6)

(183.7)

(180.7)

Add borrowings within assets classified as held for sale

-

-

226.3

Less cash and cash equivalents within assets classified as held for sale

-

(0.5)

(15.8)

Net external debt - before Group's share of joint ventures

4,542.9

4,585.6

4,816.2

Add share of borrowings of joint ventures

290.5

300.1

182.9

Less share of cash of joint ventures

(41.4)

(50.2)

(38.5)

Net external debt - including Group's share of joint ventures

4,792.0

4,835.5

4,960.6

Analysed as:

 

 

 

Debt including Group's share of joint ventures

5,043.6

5,113.7

5,249.5

Cash including Group's share of joint ventures

(251.6)

(278.2)

(288.9)

Net external debt - including Group's share of joint ventures

4,792.0

4,835.5

4,960.6

Debt to assets ratio

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Market value of investment and development property

9,830.6

10,222.7

10,120.8

Add market value of investment and development property classified as assets held for sale

-

306.5

462.8

 

9,830.6

10,529.2

10,583.6

Net external debt

(4,792.0)

(4,835.5)

(4,960.6)

Debt to assets ratio

48.7%

45.9%

46.9%

Interest cover

 

Six months
 ended 30 June
 2018
£m

Six months
 ended 30 June
 2017
£m

Year ended
 31 December
 2017
£m

Finance costs

(105.7)

(107.5)

(219.9)

Finance income

1.3

1.1

3.3

 

(104.4)

(106.4)

(216.6)

Underlying operating profit

203.4

205.7

419.3

Interest cover

1.95x

1.93x

1.94x

 

 

UNDERLYING PROFIT STATEMENT (unaudited)

for the six months ended 30 June 2018

 

 

The underlying profit information in the table below shows the Group including share of joint ventures on a line-by-line basis.

 

Six months
ended 30 June
2018
£m

Six months
ended 30 June
2017
£m

Six months ended
31 December
2017
£m

Year ended
31 December
2017
£m

Net rental income

223.1

226.2

233.8

460.0

Net other income

2.0

0.1

0.8

0.9

Administration expenses

(21.7)

(20.6)

(21.0)

(41.6)

Underlying operating profit

203.4

205.7

213.6

419.3

Finance costs

(105.7)

(107.5)

(112.4)

(219.9)

Finance income

1.3

1.1

2.2

3.3

Other finance costs

(2.9)

(2.9)

(3.0)

(5.9)

Underlying net finance costs

(107.3)

(109.3)

(113.2)

(222.5)

Underlying profit before tax and associates

96.1

96.4

100.4

196.8

Tax on underlying profit

(0.4)

(0.2)

0.1

(0.1)

Share of underlying profit of associates

0.6

0.4

0.5

0.9

Remove amounts attributable to non-controlling interests

2.2

1.9

1.5

3.4

Underlying earnings

98.5

98.5

102.5

201.0

Underlying earnings per share (pence)

7.3p

7.3p

7.6p

15.0p

Weighted average number of shares (million)

1,343.6

1,343.1

1,343.4

1,343.2

For the reconciliation from basic earnings per share see note 10.

 

EPRA PERFORMANCE MEASURES (unaudited)

 

1 Summary

The EPRA Best Practice Recommendations identify six key performance measures, including the EPRA cost ratios. The measures are deemed to be of importance for investors in European property companies and aim to encourage more consistent and widespread disclosure. The Group is supportive of this initiative but continues to disclose additional measures throughout this report which it believes are more appropriate to the Group's current circumstances.

In 2017, the Group retained its EPRA Gold Award for exceptional compliance with the EPRA Best Practice Recommendations.

The EPRA measures are summarised below and detailed in the tables following:

 

Table/note

At 30 June
2018

At 30 June
2017

At 31 December
2017

EPRA cost ratio (including direct vacancy costs)

table 2

19.6%

19.4%

19.4%

EPRA cost ratio (excluding direct vacancy costs)

table 2

15.0%

15.0%

15.1%

EPRA earnings

note 10

£103.9m

£96.5m

£192.3m

-  per share

note 10

7.7p

7.2p

14.3p

EPRA NAV

note 11

£4,666.0m

£5,186.0m

£5,287.3m

-  per share

note 11

347p

385p

393p

EPRA NNNAV

note 11

£4,162.4m

£4,697.4m

£4,695.8m

-  per share

note 11

309p

349p

349p

EPRA net initial yield

table 3

4.5%

4.2%

4.2%

EPRA 'topped-up' NIY

table 3

4.7%

4.4%

4.4%

EPRA vacancy rate

table 4

3.4%

3.2%

3.0%

Details of the Group's performance against the EPRA Best Practice Recommendations on Sustainability Reporting can be found in full in the 2017 corporate responsibility report. In 2017, the Group retained its Gold EPRA Sustainability Best Practice Recommendations award.

2 EPRA cost ratios

 

Six months
 ended 30 June
 2018
£m

Six months
 ended 30 June
 2017
£m

Year ended
 31 December
 2017
£m

Administration expenses - ongoing

21.7

20.6

41.6

Net service charge costs

9.3

7.9

19.1

Other non-recoverable costs

21.0

24.2

46.6

Remove:

 

 

 

Service charge costs recovered through rents

(2.9)

(3.2)

(6.5)

EPRA costs - including direct vacancy costs

49.1

49.5

100.8

Direct vacancy costs

(11.5)

(11.3)

(22.6)

EPRA costs - excluding direct vacancy costs

37.6

38.2

78.2

 

 

 

 

Rent receivable

260.6

268.5

546.2

Rent payable

(7.2)

(10.2)

(20.5)

Gross rental income less ground rent payable

253.4

258.3

525.7

Remove:

 

 

 

Service charge costs recovered through rents

(2.9)

(3.2)

(6.5)

Gross rental income

250.5

255.1

519.2

 

 

 

 

EPRA cost ratio (including direct vacancy costs)

19.6%

19.4%

19.4%

EPRA cost ratio (excluding direct vacancy costs)

15.0%

15.0%

15.1%

 

3 EPRA net initial yield and 'topped-up' NIY

 

At 30 June
 2018
£m

At 31 December
 2017
£m

At 30 June
 2017
£m

Investment and development property

9,831

10,223

10,121

Less developments

(434)

(379)

(202)

Completed property portfolio

9,397

9,844

9,919

Allowance for estimated purchasers' costs

544

673

594

Gross up completed property portfolio valuation

9,941

10,517

10,513

 

 

 

 

Annualised cash passing rental income

474

462

468

Property outgoings

(31)

(25)

(22)

Annualised net rents

443

437

446

Notional rent on expiration of rent free periods or other lease incentives

20

23

23

Topped-up net annualised rent

463

460

469

 

 

 

 

EPRA net initial yield

4.5%

4.2%

4.2%

EPRA 'topped-up' NIY

4.7%

4.4%

4.4%

EPRA net initial yield and 'topped-up' NIY by property is given in the investment and development property section.

4 EPRA vacancy rate

 

At 30 June
 2018
%

At 31 December
 2017
%

At 30 June
 2017
%

intu Trafford Centre

0.9

1.6

3.3

intu Lakeside

3.1

5.8

6.2

intu Metrocentre

6.1

5.5

4.8

intu Merry Hill

6.6

1.8

3.3

intu Braehead

2.9

2.5

2.5

Manchester Arndale

1.4

1.8

0.3

intu Derby

5.1

2.1

1.7

intu Victoria Centre

1.9

1.5

3.0

intu Eldon Square

3.4

1.2

0.9

intu Watford

4.5

2.8

2.5

intu Milton Keynes

2.4

0.4

-

Cribbs Causeway

2.7

1.7

3.0

St David's, Cardiff

7.2

6.0

4.6

Madrid Xanadú

3.2

4.5

1.6

intu Puerto Venecia

1.3

1.9

1.8

intu Chapelfield

-

-

-

intu Asturias

2.7

3.6

2.5

 

3.4

3.0

3.2

EPRA vacancy rate is the ERV of vacant space divided by total ERV.

 

GLOSSARY

 

ABC1 customers - Proportion of customers within UK social groups A, B and C1, defined as members of households whose chief earner's occupation is professional, higher or intermediate management, or supervisory.

Annual property income - The Group's share of passing rent plus the independent external valuers' estimate of annual excess turnover rent and sundry income such as that from car parks and mall commercialisation.

CACI - Provide market research on intu's customers and UK-wide location analysis.

Debt to assets ratio - Net external debt divided by the market value of investment and development property including investment and development property classified as held for sale.

Diluted figures - Reported amounts adjusted to include the effects of dilutive potential shares issuable under convertible bonds and employee incentive arrangements.

Earnings per share - Profit for the period attributable to owners of intu properties plc divided by the weighted average number of shares in issue during the period.

EPRA - European Public Real Estate Association, the publisher of Best Practice Recommendations intended to make financial statements of public real estate companies in Europe clearer, more transparent and comparable.

EPRA cost ratios - The ratio of administration and operating costs (including and excluding direct vacancy costs) divided by gross rental income, as calculated in accordance with EPRA Best Practice Recommendations.

EPRA earnings per share - Earnings per share adjusted to exclude valuation movements, exceptional items and related tax, as calculated in accordance with EPRA Best Practice Recommendations. The key difference from underlying earnings per share relates to adjustments in respect of exceptional items where EPRA is prescriptive about the adjustments that can be made.

EPRA NAV per share - NAV per share calculated on a diluted basis adjusted to remove the fair value of derivatives (net of tax), goodwill resulting from the recognition of deferred tax liabilities, and deferred tax on investment and development property and other investments, as calculated in accordance with EPRA Best Practice Recommendations. The key difference from NAV per share (diluted, adjusted) is EPRA NAV per share's exclusion of interest rate swaps not currently used for economic hedges of debt.

EPRA net initial yield (NIY) - Annualised net rent on investment property (after deduction of revenue costs such as head rent, running void, service charge after shortfalls, empty rates and merchant association contribution) expressed as a percentage of the gross market value before deduction of theoretical acquisition costs, as calculated in accordance with EPRA Best Practice Recommendations and as provided by the Group's independent external valuers.

EPRA NNNAV -  EPRA NAV adjusted to reflect the fair value of borrowings, derivatives financial instruments and deferred taxation on revaluation of investment and development property.

EPRA topped-up NIY - NIY adjusted for the expiration of rent-free periods and other unexpired lease incentives.

EPRA vacancy rate - The ERV of vacant space divided by total ERV.

ERV (estimated rental value) - The independent external valuers' estimate of the Group's share of the current annual market rent of all lettable space after expiry of concessionary periods net of any non-recoverable charges but before bad debt provisions.

Exceptional items - Items that in the Directors' view are required to be separately disclosed by virtue of their size, nature or incidence. Underlying earnings is considered to be a key measure in understanding the Group's financial performance, and excludes exceptional items.

Headline rent ITZA - Annual contracted rent per square foot after expiry of concessionary periods in terms of Zone A.

Interest cover - Underlying operating profit divided by the net finance costs excluding the change in fair value of financial instruments, exceptional finance costs and amortisation of the Metrocentre compound financial instrument.

Interest rate swap - A derivative financial instrument enabling parties to exchange interest rate obligations for a predetermined period. These are used by the Group to convert floating rate debt to fixed rates.

IPD - Investment Property Databank Limited, producer of an independent benchmark of property returns.

Like-for-like property - Investment property which has been owned throughout both periods without significant capital expenditure in either period, so that income can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also include assets owned at the previous reporting period end but not throughout the prior period.

Long-term lease - A lease with a term certain of at least five years.

LTV (loan to value) - The ratio of attributable debt to the market value of an investment property.

NAV per share (diluted, adjusted) - NAV per share calculated on a diluted basis and adjusted to remove the fair value of derivatives (net of tax), goodwill resulting from the recognition of deferred tax liabilities, and deferred tax on investment and development property and other investments.

Net asset value (NAV) per share - Net assets attributable to owners of intu properties plc divided by the number of ordinary shares in issue at the period end.

Net external debt - Net debt after removing the Metrocentre compound financial instrument and including net debt within liabilities associated with assets classified as held for sale.

Net rental income - The Group's share of net rents receivable as shown in the income statement, having taken due account of non-recoverable costs, bad debt provisions and adjustments to comply with IFRS including those regarding tenant lease incentives.

Nominal equivalent yield - Effective annual yield to a purchaser from an asset at market value before taking account of notional acquisition costs assuming rent is receivable annually in arrears, reflecting ERV but disregarding potential changes in market rents, as determined by the Group's independent external valuers.

Occupancy - The ERV of let and under-offer units expressed as a percentage of the passing rent of the total ERV, excluding development and recently completed properties. Units let to tenants in administration and still trading are treated as let and those no longer trading are treated as un-let.

Passing rent - The Group's share of contracted annual rents receivable at the balance sheet date. This takes no account of accounting adjustments made in respect of rent free periods or tenant incentives, the reclassification of certain lease payments as finance charges or any irrecoverable costs and expenses, and does not include excess turnover rent, additional rent in respect of unsettled rent reviews or sundry income such as from car parks etc. Contracted annual rents in respect of tenants in administration are excluded.

PMA - Property Market Analysis LLP, a producer of property market research and forecasting.

Property Income Distribution (PID) - A dividend, generally subject to UK withholding tax at the basic rate of income tax, that a UK REIT is required to pay to its shareholders from its qualifying rental profits. Certain classes of shareholder may qualify to receive a PID gross, shareholders should refer to intugroup.co.uk for further information. The Group can also pay non-PID dividends which are not subject to UK withholding tax.

Real Estate Investment Trust (REIT) - REITs are internationally recognised property investment vehicles which have now been introduced in many countries around the world. Each country has its own rules, but the broad intention of REITs is to encourage investment in domestic property by removing tax distortions for investors.

In the UK, REITs must meet certain ongoing rules and regulations, including the requirement to distribute at least 90 per cent of qualifying rental profits to shareholders. Withholding tax of 20 per cent is deducted from these Property Income Distributions. Profits from a REIT's non-property business remain subject to normal corporation tax. The Group elected for REIT status in the UK with effect from 1 January 2007.

Scrip Dividend Scheme - The Group may offer shareholders the opportunity to participate in the Scrip Dividend Scheme. This enables participating shareholders to receive shares instead of cash when a Scrip Alternative is offered for a particular dividend.

Short-term lease - A lease with a term certain of less than five years.

SOCIMI - The Spanish equivalent of a Real Estate Investment Trust.

Tenant (or lease) incentives - Any incentives offered to occupiers to enter into a lease. Typically, incentives are in the form of an initial rent-free period and/or a cash contribution to fit out the premises. Under IFRS the value of incentives granted to tenants is amortised through the income statement on a straight-line basis over the lease term.

Total financial return - The change in NAV per share (diluted, adjusted) plus dividends per share paid in the period expressed as a percentage of opening NAV per share (diluted, adjusted).

Total property return - The change in capital value, less any capital expenditure incurred, plus net income in the period expressed as a percentage of the capital employed (opening capital value plus capital expenditure incurred) in the period as calculated by IPD.

Underlying earnings per share - Earnings per share adjusted to exclude valuation movements, exceptional items and related tax.

Underlying figures - Amounts described as underlying exclude valuation movements, exceptional items and related tax.

 

DIVIDENDS

 

The Directors of intu properties plc have announced an interim dividend per ordinary share (ISIN GB0006834344) of 4.6 pence (2017: 4.6 pence) payable on 20 November 2018 (see salient dates below). An announcement confirming whether a scrip dividend alternative will be offered will be made on 9 October 2018.

The dividend may be partly paid as a Property Income Distribution (PID) and partly paid as a non-PID. The PID element will be subject to deduction of a 20 per cent withholding tax unless exemptions apply (please refer to the PID special note below). Any non-PID element will be treated as an ordinary UK company dividend. For South African shareholders, non-PID cash dividends may be subject to deduction of South African Dividends Tax at 20 per cent.

The following are the salient dates for the payment of the proposed final dividend.

Monday 8 October 2018

Sterling/Rand exchange rate struck

Tuesday 9 October 2018

Sterling/Rand exchange rate and dividend amount in South African currency announced

Wednesday 17 October 2018

Ordinary shares listed ex-dividend on the Johannesburg Stock Exchange

Thursday 18 October 2018

Ordinary shares listed ex-dividend on the London Stock Exchange

Friday 19 October 2018

Record date for interim dividend in London and Johannesburg

Tuesday 20 November 2018

Dividend payment date for shareholders

South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be Tuesday 16 October 2018 and that no dematerialisation or rematerialisation of shares will be possible from Wednesday 17 October 2018 to Friday 19 October 2018 inclusive. No transfers between the UK and South African registers may take place from Tuesday 9 October 2018 to Friday 19 October 2018 inclusive.

PID Special Note:

UK shareholders

For those who are eligible for exemption from the 20 per cent withholding tax and have not previously registered for exemption, an HM Revenue & Customs (HMRC) Tax Exemption Declaration is available for download from the 'Investors' section of the intu properties plc website (intugroup.co.uk), or on request to our UK registrars, Link Asset Services. Validly completed forms must be received by Link Asset Services no later than the dividend Record Date, as advised; otherwise the dividend will be paid after deduction of tax.

South African and other non-UK shareholders

South African shareholders may apply to HMRC after payment of the dividend for a refund of the difference between the 20 per cent withholding tax and the UK/South African double taxation treaty rate of 15 per cent. Other non-UK shareholders may be able to make similar claims for a refund of UK withholding tax deducted. Refund application forms for all non-UK shareholders are available for download from the 'Investors' section of the intu properties plc website (intugroup.co.uk), or on request to our South African registrars, Terbium, or HMRC. UK withholding tax refunds are not claimable from intu properties plc, the South African Revenue Service (SARS) or other national authorities, only from the UK's HMRC.

Additional information on PIDs can be found at intugroup.co.uk/en/investors/shareholder-information/real-estate-investment-trust/.

The above does not constitute advice and shareholders should seek their own professional guidance. intu properties plc does not accept liability for any loss suffered arising from reliance on the above.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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