TIDMINTU
RNS Number : 5356Q
Intu Properties PLC
20 February 2019
20 February 2019 intu properties plc
AUDITED RESULTS FOR THE YEARED 31 DECEMBER 2018
Winning destinations drive a resilient operational performance in
a challenging market
John Strachan, intu Chairman, commented:
"intu has had a challenging year with a difficult retail and uncertain
economic environment, together with responding to two abortive corporate
offers for the company. However, our management team has produced
a robust operational performance with increased like-for-like net
rental income for the fourth consecutive year, 97 per cent occupancy
and signed 248 new long-term leases.
This outcome is testimony to our long-term strategy of investing
in our centres and the intu brand, making them different, attractive
and exciting so retailers look to our centres as key trading locations.
Our three core objectives for the year ahead are to continue to deliver
strong underlying individual centre performance, continue our strategy
of adapting to the changing retail environment and to make smart
use of capital.
We propose to reduce our debt to assets ratio over time back below
50 per cent by further disposals and part-disposals and retaining
the cash generated by our activities rather than distributing it
as dividend, to enable us to invest in our winning destinations.
I would like to thank our strong management team for their dedication
and commitment in a difficult economic environment as we focus on
making intu centres winning destinations for brands and shoppers."
David Fischel, intu Chief Executive, commented:
"intu has again delivered a resilient operational performance which
demonstrates how our centres differentiate themselves as winning
destinations for retailers with their variety and excitement. We
own and manage many of the best shopping centres, in some of the
strongest locations, in the UK and Spain.
In a difficult year for the whole UK retail real estate sector and
with very limited comparable transactional evidence, property valuations
declined as sentiment weakened significantly. We reported a further
3 per cent fall in valuations in the final quarter of 2018, additional
to the 9 per cent fall over the first nine months of the year. As
a result, EPRA NNNAV at the end of year was 271p per share, down
from 349p the year before.
Although sentiment in the retail sector is at an all-time low, the
reality is that around
400 million shoppers visit our centres each year and occupancy is
at 97 per cent. As some 85 per cent of all retail transactions still
touch a physical store, demand from major retailers continues to
be positive for our centres.
New tenants to our centres include Abercrombie & Fitch, Uniqlo, Bershka,
and Monki, with established retailers such as Next, Primark, Zara
and River Island all upsizing.
Our tenants invested a record GBP144 million in their stores over
the year, a clear indication that these retailers see great physical
space as a key part of a successful multichannel strategy."
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 of 2018 Financial information
Chief Executive's review Other information
2019 strategy Investment and development
property
Operating review Financial covenants
Market trends Financial information including
share of joint ventures
Our top properties Underlying profit statement
Financial review EPRA performance measures
Principal risks and uncertainties Glossary
Directors' responsibility statement
About intu
intu owns and manages some of the best shopping centres, in some
of the strongest locations, in the UK and Spain.
Our UK portfolio is made up of 17 centres, including eight of
the top-20, and in Spain we own three of the country's top-10
centres, with advanced plans to build a fourth.
We are passionate about creating compelling experiences, in
centre and online, that make our customers smile and help our
retailers flourish.
We attract around 400 million customer visits and 26 million
website visits a year offering a multichannel approach that truly
supports retail strategies.
Our strategic focus on prime, high-footfall flagship
destinations, combined with the strength and popularity of our
brand, means that intu offers enhanced footfall, dwell time and
loyalty. This helps our tenants flourish, driving occupancy and
income growth.
We are committed to our local communities, with our centres
supporting nearly 130,000 jobs (representing about 3 per cent of
the total UK retail workforce), and to operating with environmental
responsibility. We have already met or exceeded a significant
number of our 2020 environmental targets.
Presentation of information
We account for our interests in joint ventures using the equity
method as required by IFRS 11 Joint Arrangements. This means that
the income statement and the balance sheet include single lines for
the Group's total share of post-tax (loss)/profit and the net
investment in joint ventures respectively.
Management review and monitor performance as well as determine
the strategy of the business primarily on a proportionately
consolidated basis. This includes the Group's share of joint
ventures on an individual line-by-line basis rather than a post-tax
profit/loss or net investment basis. The figures and commentary
presented are consistent with our management approach as we believe
this provides a more meaningful analysis of the Group's
performance. The other information section provides reconciliations
of the income statement and balance sheet between the two
bases.
See financial review for more details on the presentation of
information and alternative performance measures used.
Investor presentation
A presentation to analysts and investors will take place at UBS,
5 Broadgate, London EC2 at 09.30GMT on 20 February 2019. The
presentation will also be available to international analysts and
investors through a live audio call and webcast. The presentation
and a copy of this announcement will be available on the Group's
website intugroup.co.uk.
This annoucement 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 announcement on the price at which shares or other securities
in intu properties plc have been bought or sold in the past, or on
the yield on such shares or other securities, should not be relied
upon as a guide to future performance.
Highlights of 2018
2018 2017
---------------------------------------------------------- ------------- -----------
Like-for-like net rental income growth +0.6% +0.5%
Occupancy 96.7% 97.0%
Leasing activity
* number, new rent 248, GBP39m 217, GBP38m
* new rent relative to previous passing rent +6% +7%
Rental uplift on rent reviews settled +7% +9%
Net rental income 1 GBP450.5m GBP460.0m
Underlying earnings GBP193.1m GBP201.0m
Property revaluation (deficit)/surplus 1 GBP(1,405.0m) GBP47.3m
IFRS (loss)/profit for the year GBP(1,173.7m) GBP203.3m
Underlying earnings per share 3 14.4p 15.0p
31 December 31 December
2018 2017
---------------------------------------------------------- ------------- -----------
Market value of investment and development property GBP9,167m GBP10,529m
1 2
Net external debt 1 GBP4,867m GBP4,835m
IFRS net assets attributable to owners of intu properties GBP3,812m GBP5,075m
plc
NAV per share (diluted, adjusted) 3 312p 411p
EPRA NNNAV per share 3 271p 349p
Debt to assets ratio 1 4 53.1% 45.2%
---------------------------------------------------------- ------------- -----------
1 Including Group's share of joint ventures. See other
information section for reconciliations between presented figures
and IFRS figures.
2 31 December 2017 including intu Chapelfield which was classified as an asset held for sale.
3 See notes 8 and 9 for reconciliations between presented figures and IFRS figures.
4 31 December 2017 figure pro forma for the net initial
consideration of GBP148 million on 50 per cent disposal of intu
Chapelfield which completed on 31 January 2018.
Our results for the year show a resilient operating performance
with a continued like-for-like net rental income growth. The
uncertainty around the UK economy and the challenging retail
background are leading to weakening sentiment in the retail
property investment market, impacting property valuations:
- property values reduced in the year by 13.3 per cent with a
total revaluation deficit of GBP1,405.0 million (see below)
- like-for-like net rental income growth of 0.6 per cent (GBP2.3
million) driven by increased rents from new lettings (+6 per cent
ahead of previous rent) and rent reviews (+7 per cent ahead of
previous rent) partially offsets GBP11.8 million impact from
disposals and developments
- underlying earnings of GBP193.1 million, impacted by disposals
and development activity in 2018
- loss for the year of GBP1,173.7 million, an increase of
GBP1,377.0 million, primarily from the property revaluation
deficit
- underlying earnings per share of 14.4 pence, 0.6 pence lower
than 2017 reflecting the impact of disposals and developments
- NAV per share (diluted, adjusted) of 312 pence, down 99 pence,
the decrease due to the property revaluation deficit. NNNAV per
share is 271 pence, reducing by 78 pence
- debt to assets ratio is 53.1 per cent. Net external debt
largely unchanged at GBP4,867 million, with cash and available
facilities of GBP548 million
Property valuations
In a challenging year for the whole retail real estate sector,
intu reported a 6.2 per cent valuation fall in the period to 30
June 2018 and a further 3.0 per cent in the quarter to 30 September
2018 with the full year reduction in our assets amounting to 13.3
per cent (GBP1,405.0 million).
This is driven by weakening sentiment in the UK retail property
investment market as illustrated by the low levels of transactions
(see market trends). The valuers' assumption is that investors will
focus on and seek higher net initial yields. In the year, intu's
average net initial yield (topped-up) has increased by 62 basis
points to 4.98 per cent.
Additionally, given the current challenges for certain
department stores, the valuers have taken a more conservative view
on ERVs for larger space units. On a like-for-like basis, ERVs
decreased by 3.9 per cent.
Operating highlights
Growing like-for-like net rental income
- like-for-like net rental income increased by 0.6 per cent in
the year, driven by increased rents from new lettings and rent
reviews and impacted by some 1.9 per cent from tenant failures
- anticipate 2019 full year change in like-for-like net rental
income, including the impact of House of Fraser, to be down by 1 to
2 per cent (subject to no new material tenant failures)
- signed 248 long-term leases (187 in the UK and 61 in Spain)
delivering GBP39 million of annual rent at an average of 6 per cent
above previous passing rent (like-for-like units) and in line with
valuers' assumptions (2017: 217 leases; GBP38 million of annual
rent; 7 per cent above previous passing rent)
- rent reviews settled in the year on average 7 per cent above
previous passing rent (2017: 9 per cent)
- sustained high occupancy of 96.7 per cent (December 2017: 97.0
per cent)
Delivering operational excellence
- footfall decreased by 1.6 per cent (2017: up 0.1 per cent)
outperforming the national ShopperTrak retail average which fell by
3.5 per cent in the year
- net promoter score, our measure of customer service, improved
in the year averaging 75 (2017: 70)
- brand awareness increased to 28 per cent on an unprompted
basis (December 2017: 26 per cent) and to 76 per cent on a prompted
basis (December 2017: 71 per cent)
Optimising our winning destinations
- capital investment by intu of GBP201 million in the year
including GBP67 million on the 380,000 sq ft extension of intu
Watford which opened in September 2018 and GBP40 million on the
leisure extension at intu Lakeside, anchored by Nickelodeon,
Puttshack and Hollywood Bowl
- record tenant investment of GBP144 million on new shopfits in
2018, with 262 stores opened in the year (2017: GBP89 million; 259
stores)
- commenced the GBP75 million extension and enclosure of Barton
Square at intu Trafford Centre which will be anchored by Primark
and is due to open in early 2020
- appointed the main contractor on the GBP89 million mixed-use
regeneration of intu Broadmarsh which will be anchored by The Light
cinema and Hollywood Bowl
- near-term committed and pipeline of projects through to the
end of 2021 of GBP428 million
- actively pursuing non-retail development opportunities,
particularly around super-regional centres, including residential
with, for example, the potential for over 1,000
private-rented-sector residential units at intu Lakeside
Making smart use of capital
- completed the disposal of 50 per cent of intu Chapelfield for
net initial consideration of GBP148 million, in line with the
December 2016 market value. Other disposals of sundry assets
amounted to GBP23 million, 6 per cent ahead of December 2017
valuations
- we have refinanced or entered new facilities of over GBP500
million, including development finance loans on intu Trafford
Centre's Barton Square and intu Broadmarsh
- cash and available facilities of GBP548 million (31 December
2017: GBP833 million). Weighted average debt maturity of 5.8 years,
with minimal debt maturities until 2021
- substantial headroom on our loan to value debt covenants. By
way of example, a further 10 per cent fall in capital values would
create a covenant shortfall of only GBP1 million which could be
cured from available facilities
Chief Executive's review
Introduction - a challenging year
2018 has been an eventful and challenging year for intu.
The UK economy has struggled through a third year of pre-Brexit
political uncertainty. Specific to intu, we had to overcome the
disruption from two public company offers, neither of which, for
reasons outside our control, ultimately concluded.
I would like to thank the executive team and all intu staff for
their outstandingly resolute and determined performance through
these events which coincided with significant industry
challenges.
In terms of UK economic data most relevant to intu, non-food
retail sales were essentially static year-on-year, but online sales
continued to grow so physical sales shrank. In fact, in-store
non-food retail sales in the UK have shown a year-on-year reduction
every month for the last two years. Retailer costs, by contrast
have not declined, not least as a result of the significant burden
of the UK's property tax known as business rates.
Retailer failures therefore picked up substantially, impacting
our net rental income by an estimated 1.9 per cent. Increasingly
negative investor sentiment towards retail property fed through to
a 13.3 per cent fall in the valuations of our UK assets.
In the face of this adversity, shareholders have seen the share
price decline to a level representing for intu a virtually
unprecedented discount to NAV per share (diluted, adjusted) of over
60 per cent.
Plans to reduce debt to assets ratio
Our debt to assets ratio at 31 December 2018 was 53 per cent,
exceeding the Board's target maximum of 50 per cent.
We propose to take the following steps to lower the Group's debt
to assets ratio over time to back below 50 per cent and lower the
share price discount:
- retaining for the time being the cash generated by our
activities rather than distributing it as dividend, commencing with
no final dividend for 2018 (2017 final dividend: 9.4 pence). In
2018 we paid dividends of GBP188 million based on an annual
dividend per share of 14.0 pence. Retaining the dividend will
enable us to continue to invest in our winning destinations
- through further disposals and part-disposals in due course in
both the UK and Spain. Following GBP171 million of disposals in
2018, we will continue to recycle capital from individual assets.
We consider substantial sales in the UK as challenging until a
political resolution on the Brexit issue is achieved and not in
shareholders' interest while market sentiment towards UK retail
property is so negative. In Spain we have received a number of
unsolicited offers which we are evaluating
Resilient 2018 operating performance
Despite negative external factors, intu demonstrated
considerable resilience in its operating performance through a
challenging period, evidence of the underlying quality of the intu
business. This includes ownership of eight of the UK's top-20
centres, which amount to 69 per cent of our property assets by
value, and three of the top-10 centres in Spain.
intu has reported a 0.6 per cent increase in like-for-like net
rental income despite the retailer failures referred to above,
stable occupancy around 97 per cent, and 248 new leases signed
(2017: 217) at 6 per cent above previous rents. Lettings included
an attractive mix of new and established names, significantly
refreshing the centres, among them Abercrombie & Fitch, Uniqlo,
Bershka and Monki, with the likes of Next, Primark, Zara and River
Island all upsizing.
As we operate in many of the top UK retail destinations where
retailers want to maintain their best stores, like-for-like net
rental income performance was robust despite recent administrations
and CVAs. The administrations and CVAs in the year relate to around
6 per cent of our passing rent, but the majority of these (72 per
cent) have had minimal impact with the retailer keeping their
stores open on the existing rent or with a small reduction.
Underlying earnings per share reduced from 15.0p to 14.4p mainly
as a result of the income impact from disposals.
Fall in property valuations
After two years of essentially unchanged valuations for our UK
centres, 2018 saw investor sentiment turn against retail
property.
We reported a 6.2 per cent fall in property values in the six
months to 30 June 2018 and a further 3.0 per cent in the quarter to
30 September 2018, with the full year reduction in our assets
amounting to 13.3 per cent. Net initial yield (topped-up) climbed
over the year from 4.36 per cent to 4.98 per cent and was the
primary factor driving NAV per share (diluted, adjusted) down in
the year from 411 pence to 312 pence.
By way of illustration of the impact on intu, a further 10 per
cent fall in valuations, amounting to approximately a further
GBP920 million reduction and 22 per cent overall since the
beginning of 2018, would reduce NAV per share (diluted, adjusted)
to around 243 pence from 312 pence and EPRA NNNAV per share to
around 202 pence from 271 pence.
Focus on winning destinations
With the structural changes going on in our industry, we regard
it as increasingly important that intu focuses on centres which
rank as winning destinations where customers love to come and
retailers want to be.
Alongside best retail, food, beverage and leisure, we intend to
add further mixed-use attractions to these centres in the form of
improved public space with more frequent experiences, residential
space, hotels and other uses such as state-of-the-art office and
co-working space.
Our retailers regularly confirm to us the importance of flagship
physical stores in centres such as ours for their overall offer to
consumers, with around 85 per cent of all transactions estimated to
still touch a store. Our target is that every store in our centres
should rank in the retailer's top quintile of UK stores - ideally
as many as possible in their top-20 stores.
Continuing investment programme
We and our tenants have continued to invest in our centres in
2018. We invested GBP201 million which included completing the
transformational extension of intu Watford that promotes Watford to
a top-20 UK retail destination and handing over units to be fitted
out at our exciting leisure extension at intu Lakeside which is 93
per cent pre-let and due to open in spring 2019. Our tenants
invested around a further GBP161 million - GBP144 million
introducing their latest shopfits and GBP17 million on maintenance
expenditure.
Our pipeline over the next three years of GBP428 million
includes GBP82 million on the regeneration of intu Broadmarsh which
will be anchored by The Light cinema, the transformation and
expansion of Barton Square at intu Trafford Centre, introducing
Primark to the centre, and the creation of the new generation
255,000 sq m shopping resort intu Costa del Sol, near Málaga in
Spain.
2019 objectives
We have set three strategic objectives for 2019:
- delivering strong underlying individual centre performance
- adapting fast to a changing retail environment
- making smart use of capital
The first two objectives are to be measured by a number of key
performance indicators, similar to those currently reported.
In terms of the third objective, making smart use of capital,
the events of 2018 have impacted our views on capital allocation,
especially as a result of the discount to NAV per share (diluted,
adjusted) widening to an unprecedented 64 per cent between the
reported NAV per share (diluted, adjusted) of 312 pence and the
share price of 113 pence as at 31 December 2018.
Expressed another way, the year-end share price reflects a 29
per cent discount to gross assets of GBP9.2 billion. The implied
initial yield on our assets to a shareholder at this share price is
currently 7.03 per cent rather than the published net initial
yield
(topped-up) according to the year-end property valuations of
4.98 per cent.
Financial strength
We have cash and available facilities of GBP548 million. Net
external debt was largely unchanged at GBP4,867 million and we have
refinanced or entered new facilities of over GBP500 million in 2018
illustrating that debt markets continue to be supportive of our
highest quality retail property. We consider the structure of our
borrowings, predominantly using flexible asset specific
non-recourse arrangements, to be appropriate for our
concentrated portfolio.
These facilities have significant covenant headroom. For
example, a further fall of 10 per cent in capital values would
create a covenant shortfall of only GBP1 million.
The table below shows the covenant shortfalls on our
non-recourse debt that could be remedied from our available
facilities for further falls in capital values:
Total reduction
Reduction in capital in capital values
values from from Implied Group debt
31 December 2018 31 December 2017 Covenant shortfall to assets ratio
-------------------- ------------------ ------------------ ------------------
10 per cent 22 per cent GBP1 million 59 per cent
15 per cent 26 per cent GBP4 million 62 per cent
20 per cent 31 per cent GBP43 million 66 per cent
25 per cent 35 per cent GBP123 million 71 per cent
-------------------- ------------------ ------------------ ------------------
David Fischel
Chief Executive
2019 Strategy
Winning destinations strategy
Our strategy is to focus on winning destinations delivering
resilient income streams, investing where there is the greatest
potential, and reducing our debt to assets ratio to below 50 per
cent through disposals, part-disposals and introducing partners to
assets. In recent years we have successfully recycled capital
through this approach, disposing of over GBP1 billion of
assets.
The retail environment remains challenging. Our response is to
adapt our strategy, protecting shareholder value in the short term
and maximising growth in the medium term as we progress the
repositioning process.
Our strategy will ensure that we focus on the centres with the
greatest potential, with a capital structure that enables us to
make the required investment.
Optimal positioning in a fast-moving environment
We operate in a fast-moving retail and leisure environment and
to ensure we are optimally positioned we will:
- refine the portfolio to concentrate on regional destinations,
making high-impact investments to ensure they remain winning
locations where customers love to come often and are great
locations for retailers where it is easy for them to do
business
- leverage the brand, aided by the delivery of world class
service, compelling experiences and innovative digital
initiatives
- deliver a compelling value proposition for our tenants,
ensuring their locations in our centres are among their top
quintile
in the UK
- actively pursuing complementary non-retail development
alternatives to maximise the potential from our significant land
holdings around our centres which offer many opportunities for
alternative uses, including residential and hotels
A capital structure to meet our needs
To deliver this transformation, we will create a capital
structure to meet our needs, refinancing debt both as required and
where attractive for the Group to do so, targeting a reduction in
our debt to assets ratio to below 50 per cent over time. This will
be delivered by:
- significantly reducing the dividend paid and disposing of
sundry assets
- the disposal and part-disposal of centres which do not meet
our winning destination criteria over the medium term. We have
the flexibility to introduce partners into some of our flagship
centres, with around two-thirds, by value, of our total assets
100 per cent owned
Strategic objectives for 2019
Our three strategic objectives for 2019 are:
1. Delivering strong underlying individual centre
performance
2. Adapting fast to a changing retail environment
3. Making smart use of capital
Operating Review
Valuation
Property values fell in the year driven by adverse conditions in
the UK retail market and weakening sentiment in the retail property
investment market as illustrated by the low levels of transactions.
With valuers assuming that investors have increased their focus on
current income, their valuations reflect a greater weighting in the
overall opinion towards net initial yields.
Like-for-like
Market value revaluation (deficit)/surplus
----------------- --------------------------------
2018 2017
GBPm GBPm GBPm %
-------------------------------- ------- -------- ------------------ ------------
UK super-regional centres 5,613.6 6,373.7 (824.7) (13.0)
UK major city centres 1,875.2 2,223.4 (363.1) (16.3)
Spanish centres 628.8 606.8 8.8 1.5
-------------------------------- ------- -------- ------------------ ------------
Total like-for-like 8,117.6 9,203.9 (1,179.0) (11.8)
Spanish developments 232.3 212.8 (7.2) (3.4)
UK other including developments 817.5 1,112.5 (218.8) (20.3)
-------------------------------- ------- -------- ------------------ ------------
Total 9,167.4 10,529.2 (1,405.0) (13.3)
-------------------------------- ------- -------- ------------------ ------------
The table above shows the main components of the GBP1,405.0
million property revaluation deficit:
- UK super-regional centres: performed stronger than other intu
UK assets, recognising the continuing attraction of this asset
class which remains key to retailers' requirements. These centres
have reduced in value by 13 per cent in aggregate, with intu
Braehead an outlier, down 20 per cent, as it continues to be
impacted by the relatively weaker economic and uncertain political
situation in Scotland
- UK major city centres: on average values have fallen by 16 per
cent reflecting weaker investor demand for some of these centres.
Within this category, those super-prime assets in the busiest city
centres have performed better, with smaller reductions at the likes
of Manchester Arndale, intu Eldon Square, Newcastle and intu Milton
Keynes
- Spanish centres: valuations have increased marginally given
the continued demand for top-quality Spanish centres
- Spanish developments: small decrease due to pre-development
expenditure in the year on intu Costa del Sol
- UK other including developments: predominantly represents
valuation movements on developments and assets valued below GBP200
million each. These assets, which represent only a small proportion
of the portfolio, have seen higher revaluation deficits due to
lower levels of potential asset management opportunities. This
category also includes intu Watford (non like-for-like) and intu
Chapelfield (31 December 2017 included at 100 per cent and 31
December 2018 included at 50 per cent)
The weighted average net initial yield (topped-up) at 31
December 2018 increased by 62 basis points in the year to 4.98 per
cent.
On a like-for-like basis, ERV decreased by 3.9 per cent as
valuers have in general taken a more conservative view on rental
values for larger space units and on the overall rental values at
intu Braehead, intu Victoria Centre and intu Potteries.
The MSCI UK monthly property index (retail) indicated a 5.7 per
cent decrease in capital values and a 2.5 per cent decrease in
market rentals. The divergence from intu's performance is
considered most likely to represent a timing difference with intu's
valuations.
In our view, once the near-term yield correction has taken
place, income performance rather than changing yields is then
likely to be, for a time, the main driver of valuations.
Growing like-for-like net rental income
Like-for-like net rental income growth is our key income
measure. In the year, we grew like-for-like net rental income by
0.6 per cent, similar to the increase of 0.5 per cent in 2017. The
key components of the growth are shown in the table below:
Group like-for-like net rental income
2018 2017
% %
---------------------------------------------------- ---- ----
Rent reviews and improved lettings +1.3 +2.2
Capital investment +0.2 +0.4
Vacancy impact -0.1 -0.4
Administrations and CVAs 1 -1.9 -1.4
Other (eg: bad debt; surrender premiums; head lease
adjustments) +1.1 -0.3
---------------------------------------------------- ---- ----
Increase in like-for-like net rental income +0.6 +0.5
---------------------------------------------------- ---- ----
1 2017 was originally disclosed as units held for redevelopment.
Primarily related to units in administration, so disclosed on this
basis in 2018.
Rent from lettings and rent reviews delivered 1.3 per cent
rental growth. Against previous passing rent, lettings were on
average up 6 per cent and rent reviews up 7 per cent.
Vacancy increased marginally in 2018, resulting in a 0.1 per
cent impact on net rental income.
The effect of administrations and CVAs was 1.9 per cent. This
movement has been minimal given 6 per cent of our rent roll could
have been impacted by administrations and CVAs in 2018 (see market
trends) and illustrates the strength of our stores in the
retailers' portfolios.
Other delivered 1.1 per cent growth from non-recurring items,
including a higher level of premiums received in 2018 against the
prior year.
Like-for-like net rental income operating metrics
2018 2017
-------------------------------------------------- ----------- -----------
Occupancy 96.7% 97.0%
* of which, occupied by tenants trading in
administration 2.0% 0.6%
Leasing activity
* number, new rent 248, GBP39m 217, GBP38m
* new rent relative to previous passing rent +6% +7%
Rental uplift on rent reviews settled +7% +9%
-------------------------------------------------- ----------- -----------
Occupancy is 96.7 per cent, in line with 31 December 2017, with
new lettings offsetting the closures in the year.
We agreed 248 long-term leases in the year, amounting to GBP39
million annual rent, at an average of 6 per cent above previous
passing rent (like-for-like units) and in line with valuers'
assumptions. On a net effective basis (net of rent free and
incentives), rents were also 6 per cent ahead of previous
rents.
Retailers continue to focus on increasing their space in prime,
high-footfall retail destinations. While the UK letting market is
challenging, our winning destinations continue to be in demand from
quality retailers. Significant activity in 2018 included:
- new retail anchors, in the shape of key fashion brands,
upsizing to optimise their offering and configuration. At intu
Lakeside, River Island and Zara are both upsizing, doubling and
trebling their space respectively, and Next opened new flagship
stores of around 80,000 sq ft each at intu Metrocentre and intu
Merry Hill
- key international fashion brands expanding their portfolio of
brands with H&M opening two of its eight Monki stores in the UK
at intu Eldon Square and Manchester Arndale and Inditex, the parent
company of Zara, followed openings of Stradivarius and
Pull&Bear at intu Trafford Centre last year with Bershka at St
David's, Cardiff
- international brands' ongoing appreciation of the attraction
of intu's destination shopping centres to gain nationwide exposure.
Abercrombie & Fitch opened only its second UK store at intu
Trafford Centre, Uniqlo is planning to open two of its first stores
outside London at intu Watford and Manchester Arndale and Xiaomi,
the Chinese mobile phone company, opened its fifth store in Spain
(and second in our portfolio) at intu Puerto Venecia
- brands recognising the benefit of standalone stores as part of
their customer acquisition, including brands which historically
would be department store concessions such as Jo Malone. Mitsubishi
and Silent Night have opened stores at intu Lakeside and The White
Company at Cribbs Causeway
We settled 137 rent reviews in the year for new rents totalling
GBP47 million, an average uplift of 7 per cent on the previous
rents.
The weighted average unexpired lease term is 7.2 years (31
December 2017: 7.5 years) illustrating the longevity of our income
streams.
The difference between our annual property income of GBP474
million and ERV of GBP566 million represents GBP25 million from
units subject to a rent free period, GBP41 million from vacant and
development units and reversion of GBP26 million, 5 per cent, from
rent reviews and lease expiry.
Delivering operational excellence
The objective of delivering operational excellence underpins how
we operate our centres. Through a range of metrics, we monitor our
performance to ensure we are meeting both our customer and retailer
requirements.
Operational metrics
2018 2017
----------------------------------------------------- ----- -----
Footfall -1.6% +0.1%
Retailer sales (like-for-like centres) -2.3% -2.1%
Rent to estimated sales (excluding anchors and major
space users) 12.4% 12.1%
Net promoter score 75 70
Unprompted brand awareness 28% 26%
Prompted brand awareness 76% 71%
----------------------------------------------------- ----- -----
Footfall in our centres has been robust considering the unusual
weather events in 2018 with periods of severe snow followed by the
high temperatures through the summer. Overall, our footfall
decreased by 1.6 per cent in 2018, but significantly outperformed
the ShopperTrak measure of UK national retail footfall which was
down on average by 3.5 per cent, highlighting the continued
attraction of our compelling destinations against the wider
market.
Estimated retailer sales in our centres were down 2.3 per cent
impacted by some larger space users who had a difficult 2018 and
other retailers who operate successful multichannel models where
in-store sales figures take no account of the benefit of the store
to retailers' online sales and are further impacted by returns of
online sales.
The ratio of rents to estimated sales for standard units
remained stable in the year at 12.4 per cent.
Our net promoter score, a measure of customer service, improved
in the year, averaging 75. It continues to demonstrate our
in-centre operational excellence.
Putting customers first is embedded in our culture and the intu
brand. The brand has continued to gain momentum and positions
us well as the role of the shopping centre operator changes. Our
measure of the brand, through its recognition with the public,
continues to grow on both an unprompted and prompted basis. Of
those questioned, 28 per cent mentioned intu when asked to name a
shopping centre brand and 76 per cent knew of the brand when
prompted, both increasing against 2017.
intu Experiences, our in-house team delivering immersive brand
partnerships, mall commercialisation and advertising, generated
gross income of GBP23 million (2017: GBP22 million). The growth was
driven by promotional activity which included Stylist Live's first
consumer event outside London at intu Trafford Centre and increased
demand from global brands such as Christian Dior and Calvin Klein
using our high footfall centres to reach a wider audience.
Optimising our winning destinations
Our focus is to ensure our centres continue to be the winning
destinations, where customers and retailers want to be, both now
and in the future. Over the last four years, from 2015 to 2018,
intu and our tenants have invested over GBP1 billion in our
centres, with over GBP500 million coming from intu and a similar
level coming from our tenants, predominantly introducing their
latest shopfits.
Our near-term pipeline consists of projects that improve the
position of our flagship centres to meet customer and retailer
needs as we evolve the retail environments, enhance the catering
mix and expand the leisure offer.
Investment in 2018
In 2018 we have invested GBP201 million in our centres on
projects enhancing the value and appeal of these destinations. This
includes:
- GBP67 million on completing the 380,000 sq ft intu Watford
extension which opened in September 2018. Around 80 per cent of the
space is now open or exchanged, with the latest signings including
Uniqlo, Hollister and Hugo Boss. A further 15 per cent is in
advanced negotiations and we anticipate 95 per cent of the space
will be open and trading by spring 2019
- GBP40 million on the leisure extension at intu Lakeside. This
scheme is 93 per cent pre-let with Market Halls, a new communal
dining hall concept, the most recent signing. Nickelodeon,
Puttshack, Hollywood Bowl and Flip Out are now fitting out ready to
open in spring 2019
- GBP17 million on the transformation of Barton Square at intu
Trafford Centre (see near-term pipeline)
- GBP77 million on many other active asset management
initiatives, including the recently opened Atlantis aquarium and
Nickelodeon at intu Xanadú and the Halle Place restaurant quarter
at Manchester Arndale
In addition, 262 units opened or shopfitted in our centres in
2018 (2017: 259 stores), around 8 per cent of our 3,300 units.
Tenants have invested around GBP144 million in these stores, a
significant demonstration of their long-term commitment to our
centres.
Annual maintenance expenditure in our centres is substantially
recovered from tenants via the service charge. In 2018, a total of
GBP17 million across our assets was recovered.
Near-term pipeline
Looking ahead, we are progressing our near-term investment
pipeline of GBP428 million through to the end of 2021.
Cost to completion
(GBPm)
----- ---- --------------------
Total 2019 2020 2021
----------------------------------- ----- ---- --------- ---------
intu Broadmarsh, Nottingham 82 30 32 20
intu Trafford Centre 66 47 15 4
intu Lakeside 19 19 - -
Intu Watford 19 19 - -
intu Costa del Sol (design) 12 12 - -
Active asset management 40 33 6 1
------------------------------------ ----- ---- --------- ---------
Total committed 238 160 53 25
intu Costa del Sol (net of partner
funding) 59 42 - 17
intu Milton Keynes (phase 1) 11 - 5 6
Active asset management 120 40 40 40
------------------------------------ ----- ---- --------- ---------
Total near-term pipeline 428 242 98 88
------------------------------------ ----- ---- --------- ---------
We are committed to investing GBP238 million:
- at intu Broadmarsh we appointed the main contractor for this
mixed-use regeneration project which is anticipated to cost
GBP89 million in total and expected to deliver a stabilised
initial yield of around 7 per cent. We have signed The Light cinema
and Hollywood Bowl, with 45 per cent of the project either
exchanged or in advanced negotiations. The redevelopment is
expected to complete in the second half of 2021
- at intu Trafford Centre, we have commenced construction of the
expansion and transformation of Barton Square with 62 per cent of
the space pre-let and a further 11 per cent in advanced
negotiations. The GBP75 million project, expected to deliver a
return of between 6 and 7 per cent, involves enclosing the
courtyard, enhancing interiors, trading from an additional level
and providing a fashion offer for the first time at Barton Square
with Primark anchoring the development, which is expected to open
in early 2020
- at intu Lakeside and intu Watford, we have the remaining costs
to complete these projects
- at intu Costa del Sol, we have committed GBP12 million to
complete the final designs and resolve any outstanding planning
matters. We have started the tendering process for some of the key
construction packages (see below for more details on the full
project)
- active asset management projects total GBP40 million and
include GBP12 million for enhancing the look and feel of intu Merry
Hill
and GBP8 million for a mall refresh at intu Lakeside to tie in
with the opening of the leisure extension. Other projects are
across all centres and are expected to deliver a range of returns
between 6 and 10 per cent dependent on the nature of the individual
project
Our pipeline of planned projects amounts to GBP190 million:
- at intu Costa del Sol, we expect to clear the final planning
matters in 2019. With work on the final design ongoing, we are also
targeting our required level of pre-lets in the next 12 months.
This 255,000 sq m development is expected to cost around GBP670
million. Our business plan provides for the introduction of a joint
venture partner at the start of construction and limits our outlay
on the project to around GBP188 million which we expect to be
mostly funded by borrowings specific to the project
- active asset management projects total GBP120 million and are
for projects of varying sizes across all centres
Mixed-use opportunities
In addition to the pipeline above, we have significant
opportunities within the portfolio for alternative uses of some of
our
available land.
We have extensive available land. Our six major out-of-town
centres comprise some 760 acres of land, of which less than 40 per
cent has buildings, multistorey car parks or distribution roads
upon it, leaving 470 acres of surface car parks and other
potentially developable land. The city centre locations also offer
opportunities for intensification of uses.
Mixed-use opportunities being evaluated include residential,
hotels and other uses. Initial work has highlighted the potential
for around 5,000 residential units and nearly 600 hotel rooms.
Initially, private-rented-sector residential opportunities to
create a total of circa 1,700 units have been identified which, if
fully developed, could in aggregate produce a yield of around 5 per
cent on total development costs, excluding land, of around GBP240
million. The most advanced of these projects is at intu Lakeside,
where we could deliver around 1,000 residential units.
In addition to the residential and hotel opportunities, further
mixed-use opportunities relating to office, flexible working
spaces, business lounge and service-oriented uses have been
identified that could generate attractive incremental returns to
our current rental income stream. Many of these options have a
relatively low capital outlay, are quick to implement and take
advantage of the current configuration of the centres.
All these opportunities, which are under active consideration,
would create value directly but moreover would increase the overall
attractiveness and catchment of the centres.
Making smart use of capital
In line with our strategy, we continue to recycle capital to
focus on our winning destinations where we have the opportunity to
deliver superior returns.
Financial strength
We consider the structure of our borrowings, predominantly using
flexible asset specific non-recourse arrangements (84 per cent
of overall debt), to be appropriate for our concentrated
portfolio.
We have refinanced or entered new facilities of over GBP500
million in 2018 (see financial review) at competitive rates
illustrating
that debt markets continue to be supportive of the highest
quality retail property. We will continue to undertake debt
refinancing activity on a timely basis or where it is attractive
for the Group to do so.
Cash and available facilities at 31 December 2018 were GBP548
million and our debt to assets ratio was 53.1 per cent. As stated
in our strategy, we are targeting to reduce this to below 50 per
cent over time and ensure we maintain adequate financial
headroom.
Our facilities have covenant headroom to deal with falls in
valuations. By way of example, a 10 per cent fall in capital
values, from the December 2018 valuations, would create a covenant
shortfall of only GBP1 million which could be cured from available
facilities.
We have minimal debt maturities before 2021, with a weighted
average debt maturity of 5.8 years at 31 December 2018.
With more than GBP5 billion of debt refinanced over the last six
years, we have proven we have very good access to both the public
and private capital markets and over this period reduced our
weighted average cost of debt from 5.2 per cent to 4.2 per cent.
Our average cost of debt includes legacy debt on intu Trafford
Centre (GBP0.7 billion; cost of debt 6.0 per cent), which pre-dates
the asset becoming part of the intu portfolio in 2011 and a first
mortgage debenture stock 2027 (GBP0.2 billion; cost of debt 9.9 per
cent) originally issued over 25 years ago. Excluding these two
facilities, the weighted average cost of debt of all other
facilities is 3.5 per cent.
Disposals
In January 2018, we completed the formation of a joint venture
with LaSalle Investment Management for them to take ownership of 50
per cent of intu Chapelfield, Norwich for an initial net
consideration of GBP148 million.
In line with our strategy, in late 2018 we disposed of GBP23
million of sundry assets at 6 per cent above their December 2017
book values.
Our disposals in the last four years are over GBP1 billion as we
have disposed of non-core assets and introduced partners on other
centres. We have flexibility for further disposals or
part-disposals, as around two-thirds, by value, of our portfolio is
100 per cent owned.
Market trends
We closely monitor market trends to enable us to respond to new
opportunities and challenges and to ensure our centres are
well-positioned both now and for the future.
Today's market
A cautious consumer
The continuing Brexit uncertainty is weighing heavily on
consumer confidence. The GfK measure of consumer confidence has
been subdued since the EU referendum and reduced further in the
last few months of 2018. In particular, the measure of how
consumers feel about the general economic situation over the next
12 months has slipped.
Against this, employment is at its highest level since 1971 and
wage growth has outpaced inflation since February 2018. This has
translated to growth in disposable income in 2018, an increase of 6
per cent according to the Asda disposable income tracker, giving a
more positive outlook than in the last few years.
A challenging time for weaker retailers
Economic uncertainty and changes in what customers are spending
their money on has impacted sales growth, with non-food retailer
sales marginally down (0.3 per cent) on average in 2018 according
to the British Retail Consortium (BRC).
Shopping behaviours are also changing. The trend of growth in
online sales (BRC 2018: +1.7 per cent), offset by falling in-store
sales (BRC 2018: -2.0 per cent) has continued, but it is clear the
store still plays a vital role irrespective of how the product is
bought.
Store profitability is under pressure from limited sales growth
and increased costs from business rates, national living wage and
distribution costs of online sales. The weakness in Sterling has
also raised the cost of retailers' goods sold.
2018 has seen a higher level of administrations and CVAs than in
recent years with over 2,500 stores affected according to the
Centre for Retail Research. High profile closures and CVAs include
Toys R Us, House of Fraser, New Look and HMV, adding to the
negative retail sentiment.
A widening gap between the best and the rest
As we operate in many of the top UK retail destinations where
retailers want to maintain their best stores, we have been
relatively unaffected by the problems faced by the recent
administrations and CVAs.
The administrations and CVAs in the year relate to around 6 per
cent of our passing rent. The majority of these (72 per cent) have
had minimal impact, with the retailer keeping their best performing
stores in our portfolio open on the existing rent. Of the
remainder, 9 per cent are trading on discounted rents, 14 per cent
have closed and 5 per cent have been re-let.
Reduced demand from investors in shopping centres
The uncertainty of Brexit, the structural change in retail and
higher than normal level of administrations and CVAs has
significantly reduced demand for prime shopping centres in 2018.
With this weakening sentiment, valuation yields have risen
throughout the year.
For transactions completed in 2018, there has been a greater
focus on the quality of income, with investors seeking a higher net
initial yield to protect returns where capital growth is seen as
harder to deliver.
More certainty in the course of 2019 over what Brexit means, and
retailers addressing the structural changes in their sector, will
enable investors to make better informed decisions.
The US is now emerging from similar issues
The US has also seen significant retailer failures, in
particular the well-publicised weaker department stores, over the
last 18 months with a clear differentiation between prime and
failing malls. This, coupled with a stabilising multichannel model
and online retailers such as Amazon taking more physical space, has
increased investor confidence in the best centres.
With the UK typically running some two years behind the US in
terms of market trends, we would expect to see similar patterns
emerge as the prime malls take market share from weaker locations,
which should reignite investor demand.
Tomorrow's demands
The shopping journey is changing, but stores are still
critical
In our dynamic multichannel world, how people shop and what they
want from a visit to a shopping centre is evolving rapidly.
There are now many routes for customers to take on their
shopping journeys. They may see a retailer's store as a showroom to
view and try a product or the retailer's online presence as a
medium to consume product information - but both have an important
part to play. A key driver for customers is convenience, whether
that is smartphone access to a retailer whenever it suits them or
physical access to a store's full range as part of a retail
experience incorporating leisure as part of a day out.
So, a visit to a shopping centre must offer all the things our
customer wants. While online sales continue to increase, GlobalData
estimate that around 85 per cent of all transactions still touch a
store. What is important to the customer is that their chosen
shopping location has all the best stores offering a full range of
their products.
Flexibility is key for changing customer visits
Additionally, as the proportion of consumer spend on leisure is
increasing, customers want places to offer a more experiential day
out, be it cafes, restaurants, cinemas or activities such as
bowling, mini-golf, climbing or skiing.
Finally, shoppers are not all the same: different age groups and
different demographics want different things, so ensuring the mix
caters for all their requirements is a further important step.
Tenants focus on brand, perception and customer service
As the demands of their customers increase, retailers are
looking to further integrate their online and in-store models, with
the best retailers moving to seamless propositions for shoppers.
Key to this is a detailed understanding of their customers and
faultless customer service whatever the channel.
Managing their brands and the perceptions of them is also
critical, whether it be the physical proposition or social media
where the position of influencers becomes more important.
Similarly, for leisure operators who are now taking a higher
proportion of a customer's disposable income, the challenges and
opportunities are the same.
We are responding with an adapted strategy
A tenant-centric approach
Making customers smile and helping retailers flourish is
key.
This is not a one-size-fits-all business. Different centres have
different customer bases and we use our unique insight, assembled
from extensive data, to help our retailers and deliver what our
customers want.
As owners and curators of shopping centre space and the main
landlord for many of the best retailers in the UK from Apple to
Zara, we can ensure that our tenants are in the right space to
maximise their ability to generate profits. We can guarantee them a
level of quality from clean, secure and safe space with high
footfall and long dwell times. By contrast, high streets have
suffered where they are owned by multiple landlords or managed by
budget-constrained local authorities.
Adapting fast in a changing retail environment
As the role of the store evolves, for example with the increase
in click and collect, we can offer our tenants a configuration that
works successfully for their business model, be it more back of
house space for storage and distribution or direct access to car
parks for delivery pick-ups.
We are seeing this in a new generation of upsized flagship
stores in our centres from Next at intu Metrocentre and intu Merry
Hill, Zara at intu Lakeside to Primark at intu Merry Hill and intu
Trafford Centre. All this helps to ensure that when customers visit
our centres they have access to all the brands they want offering
their full ranges.
On top of this, around 600 of our 3,300 units offer catering and
leisure and the demand continues to increase. For instance, at
intu Watford we are bringing an evening economy to its affluent
catchment and at the family-oriented intu Lakeside we are
introducing the likes of Nickelodeon, Hollywood Bowl and
Puttshack.
A focus on the best destinations
We remain focused on the best destinations, with a portfolio
concentrated on the top centres in the UK and Spain which offer
day-out destinations for customers and superior footfall for our
tenants.
We continue to invest in the centres offering the maximum
potential, including ongoing leisure projects at intu Lakeside
and
intu Xanadú. Additionally, we are progressing mixed-use
opportunities from our significant land holdings around
centres.
Ensuring our centres remain appealing to customers and retailers
will mean that they should become more attractive to investors once
the current negative sentiment abates.
Our top properties
Size Number Annual Headline
Market (sq of property rent ABC1
value ft 000) Ownership stores income ITZA customers Key tenants
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
UK super-regional centres
----------------------------------------------------------------------------------------------------------------------
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 Trafford Ambercrombie
Centre GBP2,098.0m 2,020 100% 228 GBP94.7m GBP450 60% & Fitch
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
House of Fraser,
Debenhams,
Marks & Spencer,
Topshop,
Zara, Primark, Vue,
Victoria's Secret,
H&M, Next, Apple,
intu Lakeside GBP1,250.0m 1,612 100% 259 GBP55.8m GBP344 55% Nickelodeon
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
House of Fraser,
Marks
& Spencer, Debenhams,
Next, Apple, H&M,
Odeon,
Topshop, Zara,
Primark,
intu Metrocentre GBP841.8m 2,076 90% 306 GBP46.4m GBP280 55% River Island
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Marks & Spencer,
Debenhams,
Primark, Next,
Topshop,
intu Merry Asda, Boots, H&M,
Hill GBP777.2m 1,671 100% 217 GBP41.3m GBP200 42% Odeon
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Marks & Spencer,
Primark,
Apple, Next, H&M,
Topshop,
Hollister, Superdry,
intu Braehead GBP429.9m 1,123 100% 123 GBP29.0m GBP190 57% Sainsbury's
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
John Lewis, Marks &
Spencer, Apple, Next,
Topshop, Hugo Boss,
H&M, Tesla, The White
Cribbs Causeway GBP216.7m 1,076 33% 154 GBP12.8m GBP305 80% Company
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
UK major city centres
----------------------------------------------------------------------------------------------------------------------
Harvey Nichols,
Apple,
Burberry, Topshop,
Next, Ugg, Hugo Boss,
Superdry, Zara,
Victoria's
Manchester Secret, Paul Smith,
Arndale GBP409.9m 1,811 48% 258 GBP22.2m GBP285 57% Monki
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
John Lewis, Marks &
Spencer, Next,
Debenhams,
Apple, Zara, Primark,
Lego, H&M, Topshop,
intu Watford GBP407.4m 1,089 93% 166 GBP18.7m GBP200 81% Hugo Boss, Cineworld
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Marks & Spencer,
Next,
Debenhams,
Sainsbury's,
Boots, Topshop,
Cinema
de Lux, Zara, H&M,
intu Derby GBP372.5m 1,302 100% 208 GBP27.9m GBP110 53% Hollywood Bowl
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
John Lewis,
Debenhams,
Marks & Spencer,
Apple,
Hugo Boss, H&M, River
Island, Hamleys,
St David's, Primark,
Cardiff GBP294.6m 1,391 50% 203 GBP16.7m GBP212 71% Victoria's Secret
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
John Lewis, Fenwick,
Debenhams, Waitrose,
Apple, Hollister,
Topshop,
intu Eldon Boots, River Island,
Square GBP280.7m 1,385 60% 142 GBP16.3m GBP295 57% Next
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
John Lewis, House of
Fraser, Next,
Topshop,
River Island, Boots,
intu Victoria Urban Outfitters,
Centre GBP261.0m 976 100% 118 GBP19.0m GBP225 57% Superdry
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Annual
Number
Size1 of property
Market (sq
value m 000) Ownership stores income Key tenants
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Spanish centres
----------------------------------------------------------------------------------------------------------------------
El Corte Inglés,
Zara, Primark, Apple,
H&M, Mango, SnowZone,
Cinesa, Bricor,
intu Xanadú EUR270.5m 120 50% 206 EUR13.4m Decathlon
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
El Corte Inglés,
Primark, Ikea, Apple,
Decathlon, Cinesa,
H&M, Mediamarkt,
intu Puerto Zara,
Venecia EUR268.2m 119 50% 201 EUR12.2m Hollister, Toys R Us
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
Primark, Zara, H&M,
Cinesa, Eroski,
Mango,
Fnac, Mediamarkt,
intu Asturias EUR160.9m 74 50% 146 EUR8.1m Sfera
----------------- ----------- -------- --------- -------- ---------- -------- ---------- ---------------------
1 Excludes owner occupied space.
Financial review
Presentation of information
We account for our interests in joint ventures using the equity
method as required by IFRS 11 Joint Arrangements. This means that
the income statement and the balance sheet as prepared in
accordance with IFRS include single lines for the Group's total
share of post-tax profit/loss and the net investment in joint
ventures respectively.
Management reviews and monitors performance as well as
determines the strategy of the business primarily on a
proportionately consolidated basis. This includes the Group's share
of joint ventures on an individual line-by-line basis rather than a
post-tax profit/loss or net investment basis. The figures and
commentary presented are consistent with our management approach as
we believe this provides a more relevant and reliable analysis of
the Group's performance to users. The other information section
provides reconciliations of the income statement and balance sheet
between the two bases.
Figures and commentary presented on a proportionately
consolidated basis are alternative performance measures (APMs) (see
glossary) as they are not defined in IFRS. In presenting APMs
within these results, we have applied the 'European Securities and
Markets Authority Guidelines on Alternative Performance
Measures'.
The most significant APMs used to measure the Group's
performance including the rationale for their use are summarised
below. EPRA performance measures, which are industry standard APMs,
are detailed in the EPRA section within other information.
APM Rationale
------------- ------------------------------------------------------------------
Like-for-like Like-for-like amounts are presented as they measure operating
amounts performance as distinct from the impact of acquisitions
or disposals. In respect of property, the like-for-like
measure relates to property which has been owned throughout
both periods without significant capital expenditure in
either period, so that income can be compared on a like-for-like
basis. For the purposes of comparison of capital values,
this will also include assets owned at the previous reporting
period end but not throughout the prior period. Further
analysis is presented in the other information section
and in the operating review.
------------- ------------------------------------------------------------------
NAV (diluted, NAV per share (diluted, adjusted) as presented is based
adjusted) on EPRA NAV per share, an industry standard APM considered
a key measure of the Group's performance, but adjusted
for certain items (listed below) which management believes
are necessary in order to better present the Group's performance.
The key differences to EPRA NAV per share relate to the
following adjustments:
* fair value movements on interest rate swaps not
currently used for economic hedges of debt (referred
to as unallocated swaps) are included in EPRA NAV but
excluded from the Group's measure of NAV (diluted,
adjusted). The Group does not hold unallocated swaps
for speculative purposes. Management currently
intends to hold these unallocated swaps until
maturity, therefore the volatility created by their
fair value movements will not crystallise
* fair value movements on convertible bonds which are
excluded from EPRA NAV but included in the Group's
measure of NAV (diluted, adjusted). Management
reviews and monitors the Group's debt to assets ratio
based on the book value of debt and therefore
management believes it is appropriate to include the
book value of debt within the Group's measure of NAV
(diluted, adjusted)
A reconciliation of NAV (diluted, adjusted) to NAV attributable
to owners of intu properties plc as well as EPRA NAV is
provided in note 9. The EPRA section within the other information
section provides additional details on EPRA and related
measures provided.
------------- ------------------------------------------------------------------
Underlying Underlying earnings per share as presented is based on
earnings EPRA earnings per share, an industry standard APM considered
a key measure of recurring performance, but adjusted for
certain items (listed below) which management believes
are necessary in order to better present the Group's recurring
performance and therefore provide an indication of the
extent to which dividend payments are supported by underlying
operations (see underlying profit statement in the other
information section). Underlying earnings per share excludes
property and derivative movements, exceptional items and
related tax. The key differences to EPRA earnings per share
relate to the following adjustments:
* with the exception of termination costs on allocated
interest rate swaps and costs related to acquisitions,
which are both excluded from EPRA earnings and
underlying earnings, exceptional finance costs (as
detailed in note 5) and exceptional administration
expenses (as detailed in note 4) are included in EPRA
earnings but are excluded from the Group's measure of
underlying earnings. In accordance with the Group's
definition for exceptional items (as detailed in the
glossary), the Group considers these costs to be
exceptional based on their nature and incidence,
which create volatility in earnings
* fair value movements on interest rate swaps not
currently used for economic hedges of debt (referred
to as unallocated swaps) are included in EPRA
earnings but are excluded from the Group's measure of
underlying earnings. The Group does not hold
unallocated swaps for speculative purposes.
Management currently intends to hold these
unallocated swaps until maturity, therefore the
volatility created by their fair value movements will
not crystallise
A reconciliation of underlying earnings to (loss)/profit
for the year attributable to owners of intu properties
plc as well as EPRA earnings is provided in note 8. The
EPRA section within the other information section provides
additional details on EPRA and related measures provided.
------------- ------------------------------------------------------------------
Overview
We have recorded underlying earnings of GBP193.1 million in
2018, down from the GBP201.0 million recorded in 2017. This
reflects the impact of disposals and developments in 2018 partially
offset by a 0.6 per cent growth in like-for-like net rental income.
Underlying earnings per share of 14.4 pence has reduced 0.6 pence
in the year.
The deficit on property revaluations of GBP1,405.0 million in
2018 is the primary driver of the loss for the year attributable to
owners of intu properties plc of GBP1,132.2 million, compared to a
surplus on property revaluations of GBP47.3 million and a profit of
GBP216.7 million in 2017. Further commentary on the deficit on
property revaluations is provided in the operating review.
Our measure of NAV per share (diluted, adjusted) of 312 pence
has decreased 99 pence during the year due to the deficit on
property revaluations, which impact the movement by 102 pence.
In January 2018 we continued our programme of recycling capital,
completing the 50 per cent sale of intu Chapelfield to a new joint
venture partner, LaSalle Investment Management (acting on behalf of
Greater Manchester Pension Fund and West Yorkshire Pension Fund),
for initial net consideration of GBP148.0 million. In accordance
with IFRS, following the completion date, intu Chapelfield is now
presented as a joint venture in our financial statements.
We have refinanced or entered new facilities of over GBP500
million in 2018. Our interest cover ratio of 1.91x is slightly
lower in the year (31 December 2017: 1.94x) with satisfactory
headroom above our target minimum level of 1.60x.
Income statement
2018 2017
--------- --------- ---------- ----------
Group Group
including including
Share of share of share of
joint joint joint
Group ventures ventures ventures
GBPm GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------- ----------
Underlying earnings 193.1 n/a 193.1 201.0
Adjusted for:
Revaluation of investment and development
property (1,332.8) (72.2) (1,405.0) 47.3
Loss on disposal of subsidiaries (8.5) - (8.5) (1.8)
Gain on sale of investment and development
property 1.4 - 1.4 -
Loss on sale of other investments - - - (0.3)
Administration expenses - exceptional (13.1) (0.1) (13.2) (6.6)
Exceptional finance costs (32.9) 4.5 (28.4) (33.0)
Change in fair value of financial instruments 87.3 (1.0) 86.3 23.0
Tax on the above 5.8 (2.2) 3.6 (22.7)
Share of joint ventures' adjusted items (71.3) 71.3 - -
Share of associates' adjusted items 1.1 - 1.1 0.4
Non-controlling interests in respect
of the above 37.7 (0.3) 37.4 9.4
---------------------------------------------- --------- --------- ---------- ----------
(Loss)/profit for the year attributable
to owners of intu properties plc (1,132.2) n/a (1,132.2) 216.7
---------------------------------------------- --------- --------- ---------- ----------
Underlying earnings per share (pence) 14.4p n/a 14.4p 15.0p
---------------------------------------------- --------- --------- ---------- ----------
Underlying earnings and underlying earnings per share of
GBP193.1 million and 14.4 pence respectively in 2018 have decreased
from GBP201.0 million and 15.0 pence respectively in 2017. The key
movements of underlying earnings are shown in the chart below.
Net rental income decreased GBP9.5 million in 2018 to GBP450.5
million primarily due to the part disposal of intu Chapelfield in
January 2018 and the acquisition and part disposal of intu Xanadú
in 2017, partially offset by growth in like-for-like net rental
income.
http://www.rns-pdf.londonstockexchange.com/rns/5356Q_1-2019-2-19.pdf
Like-for-like net rental income increased by GBP2.3 million, 0.6
per cent in the year, driven by rent reviews and new lettings
partially offset by administrations and CVAs (see operating
review).
Administration expenses increased by GBP2.4 million during the
year to GBP44.0 million, predominantly from increased corporate
overheads and depreciation on IT capital projects.
Net underlying finance costs have decreased by GBP2.1 million
during the year to GBP220.4 million, driven by our ongoing
refinancing programme and interest capitalised on developments
partially offset by new debt raised. We expect finance costs in
2019 to be approximately double the second half of 2018 figure.
As discussed in the overview, the 2018 loss attributable to
owners of intu properties plc is GBP1,132.2 million, a decrease
from the GBP216.7 million profit reported in 2017.
Our investment in joint ventures recorded a loss of GBP42.1
million in 2018, compared to a profit of GBP35.5 million in 2017,
which is primarily a result of a deficit on property valuations of
GBP72.4 million (2017: surplus of GBP15.9 million). This includes
underlying earnings of GBP29.2 million, an increase of GBP10.9
million during the year due to intu Chapelfield becoming a joint
venture in January 2018 and the full year impact in 2018 of intu
Xanadú as a joint venture.
As detailed in the table below, our net rental income margin is
stable at 87.7 per cent. Our ratio of total costs to income, as
calculated in accordance with EPRA guidelines, remains low at 15.3
per cent (see other information section).
2018 2017
GBPm GBPm
------------------------------------------------- ------ ------
Gross rental income 528.0 546.2
Head rent payable (14.6) (20.5)
------------------------------------------------- ------ ------
513.4 525.7
Net service charge expense and void costs (28.8) (29.1)
Bad debt and lease incentive write-offs (2.5) (3.2)
Property operating expenses (31.6) (33.4)
------------------------------------------------- ------ ------
Net rental income 450.5 460.0
------------------------------------------------- ------ ------
Net rental income margin 87.7% 87.5%
------------------------------------------------- ------ ------
EPRA cost ratio (excluding direct vacancy costs) 15.3% 15.1%
------------------------------------------------- ------ ------
Balance sheet
2018 2017
--------- --------- ---------- ----------
Group Group
including including
Share of share of share of
joint joint joint
Group ventures ventures ventures
GBPm GBPm GBPm GBPm
----------------------------------------------- --------- --------- ---------- ----------
Investment and development property 8,021.8 1,108.3 9,130.1 10,192.5
Investment in joint ventures 823.9 (823.9) - -
Assets and associated liabilities classified
as held for sale - - - 302.9
Investment in associates and other investments 76.1 - 76.1 81.6
Net external debt (4,606.3) (260.9) (4,867.2) (4,835.5)
Derivative financial instruments (280.5) (3.5) (284.0) (349.8)
Other assets and liabilities (210.6) (16.3) (226.9) (259.3)
----------------------------------------------- --------- --------- ---------- ----------
Net assets 3,824.4 3.7 3,828.1 5,132.4
Non-controlling interest (12.7) (3.7) (16.4) (57.4)
----------------------------------------------- --------- --------- ---------- ----------
Attributable to shareholders 3,811.7 n/a 3,811.7 5,075.0
Fair value of derivative financial instruments 280.5 3.5 284.0 349.8
Other adjustments 98.7 (3.5) 95.2 97.9
Net assets (diluted, adjusted) 4,190.9 n/a 4,190.9 5,522.7
----------------------------------------------- --------- --------- ---------- ----------
NAV per share (diluted, adjusted) (pence) 312p n/a 312p 411p
----------------------------------------------- --------- --------- ---------- ----------
The Group's net assets attributable to shareholders are
GBP3,811.7 million, a decrease from GBP5,075.0 million at 31
December 2017, while net assets (diluted, adjusted) are GBP4,190.9
million, a decrease from GBP5,522.7 million at 31 December
2017.
http://www.rns-pdf.londonstockexchange.com/rns/5356Q_1-2019-2-19.pdf
NAV per share (diluted, adjusted) at 31 December 2018 has
decreased 99 pence during the year to 312 pence; the key movements
are shown in the chart above. This was driven principally by the
deficit on property revaluations in the year of 102 pence. As noted
previously, our measure of NAV per share continues to include a
timing impact within retained earnings of 4 pence in relation to
our Spanish development partner Eurofund's expected future equity
interest in the intu Costa del Sol development. The positive impact
on retained earnings is expected to reverse, once these
arrangements are concluded. In this event NAV per share would be
308 pence.
Investment and development property has decreased by GBP1,062.4
million due to a deficit on revaluation of GBP1,405.0 million,
partially offset by capital expenditure of GBP201.0 million during
the year and the recognition of the retained 50 per cent interest
in intu Chapelfield, of which 100 per cent was classified as an
asset held for sale at 31 December 2017.
Our net investment in joint ventures is GBP823.9 million at 31
December 2018 (31 December 2017: GBP735.5 million), which
includes
the Group's share of net assets, on an equity accounted basis,
of GBP487.9 million (31 December 2017: GBP452.6 million) and loans
to joint ventures of GBP336.0 million (31 December 2017: GBP282.9
million). The 2018 movement broadly reflects the addition of intu
Chapelfield from 31 January 2018 following the 50 per cent part
disposal, which is now accounted for as a joint venture rather than
as a 100 per cent owned subsidiary partially offset by a deficit on
property valuations of GBP72.4 million.
Investments in associates of GBP65.6 million represent our
interests in India, which comprises a 32 per cent interest in
Prozone (GBP45.1 million), a shopping centre developer listed on
the Indian stock market, and a direct interest in Empire (GBP20.5
million). Prozone and Empire own and operate shopping centres in
Coimbatore and Aurangabad.
Net external debt of GBP4,867.2 million has increased by GBP31.7
million, the main movements due to capital expenditure in the year
partially offset by proceeds from the part disposal of intu
Chapelfield. Cash including the Group's share of joint ventures is
in line with 2017, reducing slightly by GBP3.9 million to GBP274.3
million and gross debt has increased by GBP27.8 million to
GBP5,141.5 million.
Derivative financial instruments comprise the fair value of the
Group's interest rate swaps (referred to as allocated and
unallocated swaps). The net liability at 31 December 2018 is
GBP284.0 million, a decrease of GBP65.8 million in the year, due to
cash payments in the year and increases in interest rates, with the
Sterling five-year and 10-year swap rates increasing by 24bps and
13bps respectively. Cash payments in 2018 totalled GBP44.9 million,
GBP28.1 million of which has been classified as an exceptional
finance cost as it relates to payments in respect of unallocated
swaps (see below). The balance of the payments has been included as
underlying finance costs as it relates to ongoing allocated swaps
used to hedge debt.
We hold a number of interest rate swaps, entered into some years
ago, which are unallocated due to a change in lenders' practice.
Lenders previously would allow the allocation of existing
long-dated swap cover to new debt; however, this practice changed
where lenders began to require lender specific swaps on new debt to
be put in place as a hedge when entering into new variable interest
rate debt. As a consequence of our significant refinancing activity
carried out in recent years (see financing section), this
historical long-dated swap cover is no longer acting as a hedge to
any debt interests and is therefore unallocated.
At 31 December 2018 these unallocated swaps have a market value
liability of GBP184.4 million (31 December 2017: GBP235.4 million).
It is estimated that we will be required to make cash payments on
these unallocated swaps of around GBP26.7 million in 2019, reducing
to below GBP20 million per annum in 2021. Cash payments on these
unallocated swaps will continue until their maturity dates, which
range between 2020 and 2037, but will cease in the event a swap is
closed early. Management currently intends to hold these until
maturity as there is currently no economic benefit to closing these
unallocated swap contracts early as this would require an upfront
cash settlement in full.
The non-controlling interest at 31 December 2018 relates
primarily to our partner's 40 per cent stake in intu
Metrocentre.
We are exposed to foreign exchange movements on our overseas
investments. At 31 December 2018 the exposure is 15.0 per cent of
net assets attributable to shareholders of the Group (31 December
2017: 10.6 per cent), with the increase from 31 December 2017 being
primarily due to the declines in our UK property valuations during
the year. Once the Eurofund expected future interest in the intu
Costa del Sol development concludes, we expect the exposure to
reduce to 13.9 per cent, after which the appropriate level of
exposure will be assessed.
Cash flow
2018 2017
Group cash flow as reported GBPm GBPm
----------------------------------------------------- ------ -------
Cash flows from operating activities 102.6 140.9
Cash flows from investing activities (0.4) (518.1)
Cash flows from financing activities (89.0) 350.2
Foreign exchange movements 0.1 0.4
----------------------------------------------------- ------ -------
Net increase/(decrease) in cash and cash equivalents 13.3 (26.6)
----------------------------------------------------- ------ -------
During 2018 cash and cash equivalents increased by GBP13.3
million.
Cash flows from operating activities of GBP102.6 million are
GBP38.3 million lower than the same period in 2017, primarily due
to the timing of payments.
Cash flows from investing activities reflects the cash outflows
related to capital expenditure in 2018 offset by the cash inflow
for the 50 per cent sale of intu Chapelfield in January and net
cash inflows from joint ventures during the year.
The main elements of cash flows from financing activities are
the cash dividends paid in 2018 of GBP187.6 million, partially
offset by net borrowings drawn in the year.
Financing
Debt structure
We have carried out significant refinancing activity in recent
years which has resulted in diversified sources of funding,
including secured bonds plus syndicated bank debt secured on
individual or pools of assets, with limited or no recourse from the
borrowing entities to other Group companies outside of these
arrangements. Our corporate-level debt remains limited to the
Revolving Credit Facility (RCF) as well as the GBP375 million 2.875
per cent convertible bonds due 2022. In October 2018 we settled in
cash the remaining GBP160.4 million outstanding in respect of the
2.5 per cent convertible bonds.
During the year we undertook the following financing
activities:
- agreed a new GBP74 million facility secured against our
remaining 50 per cent interest in intu Chapelfield, maturing in
2023
- refinanced the EUR225 million facility secured against intu
Puerto Venecia (our share: EUR112.5 million), now maturing in
2025
- extended the GBP140 million facility secured against intu
Milton Keynes by 18 months, now maturing in 2021
- agreed a new GBP46 million facility secured against our
development at intu Broadmarsh, maturing in 2022. At 31 December
2018, this development finance loan was undrawn
- agreed a new GBP50 million facility secured against our
development at intu Trafford Centre's Barton Square, maturing in
2021. This facility is split as a GBP25 million term loan, which
was fully drawn at 31 December 2018 and a GBP25 million development
finance loan, of which GBP3.3 million was drawn at 31 December
2018
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Debt measures
2018 2017
------------------------------------------------------- --------- ----------
Debt to assets ratio 53.1% 45.2%1
Interest cover 1.91x 1.94x
Weighted average debt maturity 5.8 years 6.6 years
Weighted average cost of gross debt 4.2% 4.2%
Proportion of gross debt with interest rate protection 84% 95%
Cash and available facilities GBP548.5m GBP833.1m1
------------------------------------------------------- --------- ----------
1 Pro forma for the net initial consideration of GBP148 million
on 50 per cent disposal of intu Chapelfield.
Our debt to assets ratio has increased to 53.1 per cent since 31
December 2017 due to the deficit on property revaluation in the
year. As part of our revised strategy, we will be looking to reduce
this to below 50 per cent. Our weighted average debt maturity has
reduced to 5.8 years and the weighted average cost of gross debt is
stable at 4.2 per cent (excluding the RCF).
Interest cover of 1.91x has remained stable and above our target
minimum level of 1.60x.
We use interest rate swaps to fix interest obligations, reducing
any cash flow volatility caused by changes in interest rates. The
proportion of debt with interest rate protection has decreased in
the year to 84 per cent within our policy range of between
75 per cent and 100 per cent.
Covenants
Further details of the debt financial covenants are included in
the other information section of this report. We are in compliance
with all of our covenants and regularly stress test them for
changes in capital values and income. By way of example, a 10 per
cent fall in capital values would create a covenant shortfall of
only GBP1 million.
Capital commitments
We have an aggregate Board-approved commitment to capital
projects of GBP238.0 million at 31 December 2018 (31 December 2017:
GBP267.6 million). Of this, GBP191.2 million (31 December 2017:
GBP158.6 million) is contractually committed.
In addition to the committed expenditure, we have an identified
uncommitted pipeline of active asset management projects, major
extensions and developments that may become committed over the
coming years (see operating review).
Other
Tax policy position
The Group has tax exempt status in the UK (REIT) and for two of
our joint ventures in Spain (SOCIMI) which provide exemption from
corporation tax on rental income and gains arising on property
sales, with tax instead being paid at shareholder level. See
glossary for further information on REITs.
The Group looks to minimise the level of tax risk and at all
times seeks to comply fully with our regulatory and other tax
obligations and to act in a way which upholds intu's reputation as
a responsible corporate citizen. This is achieved through regularly
carrying out risk reviews, seeking pre-clearance from taxing
authorities in complex areas and actively engaging in discussions
regarding proposed changes in the taxation system that might affect
the Group.
We have updated 'intu's Approach to Tax' for 2018 which is
published on the Group's website intugroup.co.uk and provides
further information about the Group's tax strategy.
Despite being a REIT, we pay tax directly on non-SOCIMI overseas
earnings, any UK non-property income, business rates and
transaction taxes such as stamp duty land tax. In 2018 the total of
such payments to tax authorities was GBP28.2 million
(2017: GBP28.5 million), of which GBP25.4 million (2017: GBP26.0
million) was in the UK and GBP2.8 million (2017: GBP2.5 million) in
Spain. We also collect VAT, employment taxes and withholding tax on
dividends for HMRC and the Spanish tax authorities.
Dividends
The Directors are not recommending a final dividend for 2018.
The total paid in respect of 2018 is 4.6 pence, a reduction of the
14.0 pence paid in respect of 2017.
A UK REIT is expected to pay dividends (PIDs) of at least 90 per
cent of its taxable profits from its UK property rental business by
the first anniversary of each accounting date. In view of the
announced short term reduction of dividends it is expected that
there will be an underpayment of the minimum PID, and so for the
Group to incur UK corporation tax payable at 19 per cent. Any
corporation tax payable would form part of underlying earnings and
in 2019 we would expect this to be in the range of GBP15 million to
GBP20 million. The Group intends to remain a UK REIT for the
foreseeable future.
At 31 December 2018, the Company has distributable reserves of
GBP604 million.
Principal risks and uncertainties
intu's Board has responsibility for establishing the Group's
appetite for risk on the balance of potential risks and returns,
and has overall responsibility for identifying and managing risks.
The Board has undertaken a robust assessment of the principal risks
and uncertainties facing the Group, including those that would
impact the business model, future performance, solvency or
liquidity.
We have identified principal risks and uncertainties under five
key headings: property market; operations; financing; developments;
and brand. These are discussed in detail on the following pages. A
principal risk is one which has the potential to significantly
affect our strategic objectives, financial position or future
performance and includes both internal and external factors. We
monitor movements in likelihood and severity such that the risks
are appropriately managed in line with the Group's risk
appetite.
There was an increased risk profile in 2018, with increases in
both property market sub-risks. Additionally, there have been some
changes to existing principal risks. Acquisitions has been removed
as the business has not engaged in acquisitions in the year and
people has been added as sub-category within the operations
risk.
The main impact from the UK's decision to exit the EU on the
risks that the Group faces continues to be the potential negative
impact on the macroeconomic environment, as a result of the
continuing uncertainty around transitional and post-Brexit
arrangements. Specifically, the risks we face are affected by any
changes in sentiment in the investment and occupier markets in
which we operate, in our ability to execute our recycling and
investment plans and in broader consumer confidence and
expenditure. intu's Brexit risk review, initially conducted in
2016, has been reviewed and updated during the year.
Key to strategic objectives: Change in level of risk:
1) Growing like-for-like net
rental income Increased (+)
2) Delivering operational excellence Remained the same (=)
3) Optimising our winning destinations
4) Making smart use of capital
Risk and 2018 commentary
impact Mitigation Change
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Property Strategic objectives affected:
market 1,2,3,4
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Macroeconomic + Likelihood and impact of macroeconomic
Weakness in * focus on high-quality shopping centres together with weakness continues to be a
the their upgrading risk with continued political
macroeconomic uncertainty in the UK and
environment Brexit arrangements not yet
could * covenant headroom monitored and stress-tested detailed, which has increased
undermine investor caution resulting
rental income in a reduction in property
levels and * make representation on key policies, for example values and lower transaction
property business rates volumes in the year
values, * reduction in like-for-like property values, and
reducing continued pressure at the lower end of the market
return on * portfolio-wide marketing events to attract footfall
investment
and covenant * substantial covenant headroom
headroom * use our respected brand to attract and retain
aspirational retailers
* no significant debt maturities until 2021 and average
unexpired term of 5.8 years
* geographic diversification across the UK and Spain
* long-term lease structures with average unexpired
* review and update of Brexit risk review term of 7.2 years
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Retail + Due to continued macroeconomic
environment * active management of tenant mix uncertainty, the likelihood
Failure to and impact of changes to the
react to retail environment resulting
changes * regular monitoring of tenant strength and diversity in potential tenant failures
in the retail continues to increase. intu
environment monitored this closely in
could * upgrading assets to meet market demand 2018 with intu's strategy
undermine continuing to deliver solid
intu's footfall numbers and occupancy
ability * Tell intu customer feedback programme helps identify * increased level of administrations and retailer CVAs
to attract changes in customer preferences
customers
and tenants * signi cant progress on planning and pre-letting of
* work closely with retailers, including increased near-term pipeline with a focus on leisure
focus on managing shared risks
* continuing digital investment to improve relevance as
* digital strategy that embraces technology and digital shopping habits change
customer engagement. This enables intu to engage in
and support multichannel retailing, and to take the
opportunities offered by ecommerce * occupancy remains strong at 97 per cent
* intu Accelerate programme to identify and implement * footfall growth continues to beat the benchmark
innovations in the retail environment
* completion of the intu Watford development
* contingency plans for potential future vacant units
* on site with the GBP72m intu Lakeside leisure
* future diversification of land use, for example extension and the GBP75m expansion and transformation
residential of intu Trafford Centre's Barton Square
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Risk and 2018 commentary
impact Mitigation Change
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Operations Strategic objectives affected:
1,2,3
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Health and = Likelihood and severity of
safety * strong business process and procedures, including potential impact has not changed
Accidents or compliance with OHSAS 18001, supported by regular signi cantly during 2018
system training and exercises * retained OHSAS 18001, demonstrating consistent health
failure and safety management process and procedures across
leading to the portfolio
financial * annual audits of operational standards carried out
and/or internally and by external consultants
reputational * gold award from RoSPA
loss
* culture of visitor, staff and contractor safety
* full review undertaken of each centre's fire strategy
and building specifications post-Grenfell and
* crisis management and business continuity plans in Liverpool Echo Arena has provided appropriate
place and tested assurance across the portfolio
* retailer liaison and briefings * Primary Authority audits for both health and safety
and fire safety are being conducted. These provide
assurances surrounding compliance
* appropriate levels of insurance
* staff succession planning and development in place to
ensure continued delivery of world class service
* health and safety managers or coordinators in all
centres
* implementation of new risk mitigators such as acid
attack response kits in our shopping centres
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Cybersecurity = Likelihood continues to rely
Loss of data * data and cybersecurity strategies on operational and third party
and systems and data. Severity
information of potential impact managed
or failure of * regular testing programme and cyber scenario exercise through continued development
key systems and benchmarking of tools and controls. Hacking
resulting in attempts have not resulted
financial in data loss or major operational
and/or * appropriate levels of insurance impacts
reputational * ongoing Group-wide cybersecurity project with
loss investment in tools, consultancy and staff to
* crisis management and business continuity plans in mitigate impact of threats from evolving
place and tested cybersecurity landscape
* data committee and data protection officer in place * implemented updated GDPR policies and procedures
* internal and external assessment of GDPR compliance
* monitoring of regulatory environment and best
practice
* cybersecurity assessment performed by external
consultancy and full action plan in place
* managing of supply chain and service providers who
hold intu data
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Terrorism = Overall likelihood and severity
Terrorist * strong business processes and procedures, supported of potential impact unchanged.
incident by regular training and exercises, designed to adapt The NaCTSO and the intelligence
at an intu and respond to changes in risk levels community continue to be as
centre busy as ever in protecting
or another the UK from terror attacks
major * trained security staff who are alert and vigilant and 2018 has seen a continuation
shopping of terror attacks in mainland
centre Europe. Our Group Head of
resulting in * extraordinary pre-planned operational responses to Security is a member of the
loss of changes in national threat level Crowded Places Information
consumer Exchange. This group meets
confidence quarterly and ensures that
with * annual audits of operational standards carried out intu is abreast of all the
consequent internally and by external agencies current threats and work undertaken
impact by the Counter Terrorism Policing
on lettings teams in the UK
and rental * culture of visitor, staff and contractor safety * national threat level remains at Severe
growth
* crisis management and business continuity plans in * major multiagency security exercises held at all five
place and tested with involvement of multiple super-regional intu shopping centres
external agencies
* operating procedures in place for the introduction of
* retailer liaison and briefings further security measures if required
* appropriate levels of insurance
* strong relationships and frequent liaison with police,
NaCTSO, CPNI and other agencies
* NaCTSO approved to train staff in counter-terrorism
awareness programme
* trial of airport style screening technology at the
Arena, intu Braehead
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Risk and 2018 commentary
impact Mitigation Change
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
People New People risks have increased
Failure to * Nominations Committee with responsibility for during the year as the business
attract, selecting an appropriate replacement Chief Executive has been through two transaction
retain processes, neither of which
or develop an completed. This led to uncertainty
appropriate * strengthened appraisal process focuses on key targets around job security. The business
team with the linked to intu's strategic objectives also announced the departure
key skills to of the Chief Executive
deliver
intu's * benchmarking of salaries and packages with a planned
objectives review of all benefits
* support for employees including the Retail Trust
* talent management programme and broader learning and
development initiatives
* employee engagement surveys to assess strengths and
opportunities for improvement
* range of recruitment channels to attract new staff
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Financing Strategic objectives affected:
4
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Availability = Macroeconomic events during
of funds * funding strategy regularly reported to the Board with 2018, and the uncertainty
Reduced current and projected funding position caused by them, mean the risk
availability of reduced funding availability
of funds remains. The severity of potential
could * effective treasury management aimed at balancing the impact remains unchanged from
limit length of the debt maturity profile and 2017. Regular re nancing activity
liquidity, diversification of sources of finance continues to evidence the
leading to availability of funding
restriction * introduction of joint venture partner into intu
of investing * consideration of financing plans including potential Chapelfield and GBP74m new financing on intu's 50 per
and operating for recycling of capital before commitment to cent interest
activities transactions and developments
and/or
increase in * EUR225m refinancing of intu Puerto Venecia
funding cost * strong relationships with lenders, shareholders and
partners
* GBP140m new financing for intu Milton Keynes
* focus on high-quality shopping centres
* GBP96m of new development financing for intu Trafford
Centre's Barton Square and intu Broadmarsh
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Developments Strategic objectives affected:
3,4
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Developments = Although the intu Watford
Developments * Capital Projects Committee reviews detailed development works are now
fail to appraisals before and monitors progress during complete, new projects are
create significant projects commencing and therefore exposure
shareholder in terms of likelihood and
value impact remain the same
* fixed price construction contracts for developments * at intu Lakeside, the leisure development remains on
agreed with clear apportionment of risk schedule and is close to completion
* significant levels of pre-lets exchanged prior to * detailed appraisal work and signi cant pre-lets ahead
scheme development of starting major development projects
* at intu Trafford Centre secured key anchor letting to
Primark and construction underway to deliver
transformation of Barton Square
* intu Costa del Sol progressing towards final planning
permission
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Brand Strategic objectives affected:
2,3
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Integrity of + Likelihood and severity of
the brand * intellectual property protection potential impact increased
The integrity in 2018 due to the increased
of the brand recognition of the brand combined
is damaged * strong guidelines for use of brand with the increased pace and
leading breadth of social media. However,
to financial intu has strong controls to
and/or * strong underlying operational controls and processes identify and manage these
reputational and customer service framework * continuing media interest in intu and our commentary
loss and opinions on the business and wider landscape
* robust crisis management procedures
* ongoing development of brand in Spain, with full
brand roll-out at intu Puerto Venecia and intu
* ongoing training programme and reward and recognition Xanadú
schemes designed to embed brand values and culture
throughout the organisation
* traditional and digital media monitoring/analysis
* Tell intu and Shopper View customer feedback
programmes
* increasing staff training, including media training
* detection processes for media and social and online
media issues
------------- ------------------------------------------------------------ ------ --------------------------------------------------------------
Statement of Directors' responsibilities in respect of the
financial statements
The Group's annual report for the year ended 31 December 2018
contains the following statement of Directors' responsibilities.
Certain parts of the annual report are not included within this
announcement.
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and Company financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit or loss of the Group and
Company for that period. In preparing the financial statements, the
Directors are required to:
(a) select suitable accounting policies and then apply them
consistently
(b) state whether applicable IFRSs as adopted by the European
Union have been followed for the Group and Company financial
statements, subject to any material departures disclosed and
explained in the financial statements
(c) make judgements and accounting estimates that are reasonable
and prudent
(d) prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group and Company's position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed in
the governance section of the annual report confirm that, to the
best of their knowledge:
(a) the Company financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position
and loss of the Company
(b) the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group
(c) the strategic report within the annual report includes a
fair review of the development and performance of the business and
the position of the Group and Company, together with a description
of the principal risks and uncertainties that it faces
Signed on behalf of the Board on 20 February 2019
David Fischel
Chief Executive
Matthew Roberts
Chief Financial Officer
Consolidated income statement
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
---------------------------------------------------- ----- --------- -------
Revenue 2 581.1 616.0
---------------------------------------------------- ----- --------- -------
Net rental income 2 398.5 423.4
Net other income 5.3 3.0
Revaluation of investment and development property 10 (1,332.8) 30.8
Loss on disposal of subsidiaries 3 (8.5) (1.8)
Gain on sale of investment and development property 1.4 -
Administration expenses - ongoing (42.9) (40.9)
Administration expenses - exceptional 4 (13.1) (5.9)
---------------------------------------------------- ----- --------- -------
Operating (loss)/profit (992.1) 408.6
---------------------------------------------------- ----- --------- -------
Finance costs 5 (210.8) (213.9)
Finance income 5 14.8 12.6
Other finance costs 5 (38.8) (38.9)
Change in fair value of financial instruments 5 87.3 22.0
---------------------------------------------------- ----- --------- -------
Net finance costs 5 (147.5) (218.2)
---------------------------------------------------- ----- --------- -------
(Loss)/profit before tax, joint ventures and
associates (1,139.6) 190.4
Share of post-tax (loss)/profit of joint ventures 11 (42.1) 35.5
Share of post-tax profit of associates 12 2.3 1.3
---------------------------------------------------- ----- --------- -------
(Loss)/profit before tax (1,179.4) 227.2
---------------------------------------------------- ----- --------- -------
Current tax 6 (0.1) 0.1
Deferred tax 6 5.8 (24.0)
---------------------------------------------------- ----- --------- -------
Taxation 6 5.7 (23.9)
---------------------------------------------------- ----- --------- -------
(Loss)/profit for the year (1,173.7) 203.3
---------------------------------------------------- ----- --------- -------
Attributable to:
Owners of intu properties plc (1,132.2) 216.7
Non-controlling interests (41.5) (13.4)
---------------------------------------------------- ----- --------- -------
(1,173.7) 203.3
---------------------------------------------------- ----- --------- -------
Basic (loss)/earnings per share 8 (84.3)p 16.1p
Diluted (loss)/earnings per share 8 (84.3)p 15.0p
---------------------------------------------------- ----- --------- -------
Details of underlying earnings are presented in the underlying
profit statement in the other information section. Underlying
earnings per share is shown in note 8(b).
Consolidated statement of comprehensive income
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
------------------------------------------------------- ------ --------- ------
(Loss)/profit for the year (1,173.7) 203.3
------------------------------------------------------- ------ --------- ------
Other comprehensive income
Items that may be reclassified subsequently to
the income statement:
Exchange differences 4.1 16.9
------------------------------------------------------- ------ --------- ------
Total items that may be reclassified subsequently
to the income statement 4.1 16.9
------------------------------------------------------- ------ --------- ------
Items that will not be reclassified subsequently
to the income statement:
Revaluation of other investments (6.4) (0.2)
Change in fair value of financial instruments 17 43.4 -
Tax relating to components of other comprehensive
income 6 - 0.1
------------------------------------------------------- ------ --------- ------
Total items that will not be reclassified subsequently
to the income statement 37.0 (0.1)
------------------------------------------------------- ------ --------- ------
Other comprehensive income for the year 41.1 16.8
------------------------------------------------------- ------ --------- ------
Total comprehensive (loss)/income for the year (1,132.6) 220.1
------------------------------------------------------- ------ --------- ------
Attributable to:
Owners of intu properties plc (1,091.1) 233.5
Non-controlling interests (41.5) (13.4)
------------------------------------------------------- ------ --------- ------
(1,132.6) 220.1
------------------------------------------------------- ------ --------- ------
Consolidated balance sheet
2018 2017
Notes GBPm GBPm
---------------------------------------------- ----- --------- ---------
Non-current assets
Investment and development property 10 8,021.8 9,179.4
Plant and equipment 11.8 12.2
Investment in joint ventures 11 823.9 735.5
Investment in associates 12 65.6 64.8
Other investments 10.5 16.8
Goodwill 4.0 4.0
Derivative financial instruments 4.3 0.3
Trade and other receivables 13 105.5 102.5
---------------------------------------------- ----- --------- ---------
9,047.4 10,115.5
---------------------------------------------- ----- --------- ---------
Current assets
Assets classified as held for sale - 309.1
Derivative financial instruments 0.4 -
Trade and other receivables 13 155.2 141.9
Cash and cash equivalents 14 239.5 228.0
---------------------------------------------- ----- --------- ---------
395.1 679.0
---------------------------------------------- ----- --------- ---------
Total assets 9,442.5 10,794.5
---------------------------------------------- ----- --------- ---------
Current liabilities
Liabilities associated with assets classified
as held for sale - (6.2)
Trade and other payables 15 (278.4) (288.5)
Current tax liabilities - (0.1)
Borrowings 16 (51.1) (186.7)
Derivative financial instruments (39.0) (8.0)
---------------------------------------------- ----- --------- ---------
(368.5) (489.5)
---------------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings 16 (4,984.2) (4,811.1)
Derivative financial instruments (246.2) (339.8)
Deferred tax liabilities 18 (18.0) (23.7)
Other payables (1.2) (1.2)
---------------------------------------------- ----- --------- ---------
(5,249.6) (5,175.8)
---------------------------------------------- ----- --------- ---------
Total liabilities (5,618.1) (5,665.3)
---------------------------------------------- ----- --------- ---------
Net assets 3,824.4 5,129.2
---------------------------------------------- ----- --------- ---------
Equity
---------------------------------------------- ----- --------- ---------
Share capital 19 677.5 677.5
Share premium 19 1,327.4 1,327.4
ESOP shares 20 (37.0) (39.1)
Other reserves 402.2 361.1
Retained earnings 1,441.6 2,748.1
---------------------------------------------- ----- --------- ---------
Attributable to owners of intu properties plc 3,811.7 5,075.0
Non-controlling interests 12.7 54.2
---------------------------------------------- ----- --------- ---------
Total equity 3,824.4 5,129.2
---------------------------------------------- ----- --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2018
Attributable to owners of intu properties
plc
------------------------------------------------------------
Non-
Share Share ESOP Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
At 1 January 2018 677.5 1,327.4 (39.1) 361.1 2,748.1 5,075.0 54.2 5,129.2
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
Adjustment on adoption
of new accounting standard
(note 1) - - - - 14.0 14.0 - 14.0
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
Adjusted 1 January 2018 677.5 1,327.4 (39.1) 361.1 2,762.1 5,089.0 54.2 5,143.2
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
Loss for the year - - - - (1,132.2) (1,132.2) (41.5) (1,173.7)
Other comprehensive income:
Revaluation of other
investments - - - (6.4) - (6.4) - (6.4)
Change in fair value
of financial instruments
(note 17) - - - 43.4 - 43.4 - 43.4
Exchange differences - - - 4.1 - 4.1 - 4.1
Total comprehensive loss
for the year - - - 41.1 (1,132.2) (1,091.1) (41.5) (1,132.6)
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
Dividends (note 7) - - - - (188.1) (188.1) - (188.1)
Share-based payments - - - - 2.8 2.8 - 2.8
Acquisition of ESOP shares - - (0.9) - - (0.9) - (0.9)
Disposal of ESOP shares - - 3.0 - (3.0) - - -
- - 2.1 - (188.3) (186.2) - (186.2)
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
At 31 December 2018 677.5 1,327.4 (37.0) 402.2 1,441.6 3,811.7 12.7 3,824.4
----------------------------- -------- -------- ------- --------- --------- --------- ------------ ---------
Attributable to owners of intu properties
plc
----------------------------------------------------------
Non-
Share Share ESOP Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
At 1 January 2017 677.5 1,327.4 (40.8) 344.3 2,670.4 4,978.8 67.6 5,046.4
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
Profit/(loss) for the
year - - - - 216.7 216.7 (13.4) 203.3
Other comprehensive income:
Revaluation of other
investments - - - (0.2) - (0.2) - (0.2)
Exchange differences - - - 16.9 - 16.9 - 16.9
Tax relating to components
of other comprehensive
income (note 6) - - - 0.1 - 0.1 - 0.1
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
Total comprehensive income
for the year - - - 16.8 216.7 233.5 (13.4) 220.1
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
Dividends (note 7) - - - - (187.9) (187.9) - (187.9)
Share-based payments - - - - 2.3 2.3 - 2.3
Other share related transaction - - - - 49.4 49.4 - 49.4
Acquisition of ESOP shares - - (1.3) - - (1.3) - (1.3)
Disposal of ESOP shares - - 3.0 - (2.8) 0.2 - 0.2
- - 1.7 - (139.0) (137.3) - (137.3)
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
At 31 December 2017 677.5 1,327.4 (39.1) 361.1 2,748.1 5,075.0 54.2 5,129.2
-------------------------------- -------- -------- ------- --------- --------- ------- ------------ -------
Consolidated statement of cash flows
for the year ended 31 December 2018
2018 2017
Notes GBPm GBPm
----------------------------------------------------- ----- ------- -------
Cash generated from operations 23 319.7 365.6
Interest paid (236.1) (232.4)
Interest received 19.3 7.6
Taxation (0.3) 0.1
----------------------------------------------------- ----- ------- -------
Cash flows from operating activities 102.6 140.9
----------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Purchase and development of property, plant
and equipment (193.5) (189.5)
Sale of investment and development property 24.4 3.7
Acquisition of businesses net of cash acquired - (446.7)
Cash transferred to assets classified as held
for sale - (0.5)
Additions to other investments (0.1) (1.5)
Disposal of subsidiaries net of cash sold 21 143.2 104.1
Investment of capital in joint ventures 11 (7.7) (0.7)
Repayment of capital in joint ventures 11 7.1 -
Loan advances to joint ventures 11 (2.0) (3.0)
Loan repayments by joint ventures 11 25.3 14.8
Distributions from joint ventures 11 2.9 1.2
----------------------------------------------------- ----- ------- -------
Cash flows from investing activities (0.4) (518.1)
----------------------------------------------------- ----- ------- -------
Cash flows from financing activities
Acquisition of ESOP shares (0.9) (1.3)
Sale of ESOP shares - 0.2
Cash transferred from restricted accounts 1.8 0.1
Borrowings drawn 302.0 1,199.2
Borrowings repaid (204.3) (660.0)
Equity dividends paid (187.6) (188.0)
----------------------------------------------------- ----- ------- -------
Cash flows from financing activities (89.0) 350.2
----------------------------------------------------- ----- ------- -------
Effects of exchange rate changes on cash and
cash equivalents 0.1 0.4
----------------------------------------------------- ----- ------- -------
Net increase/(decrease) in cash and cash equivalents 13.3 (26.6)
----------------------------------------------------- ----- ------- -------
Cash and cash equivalents at 1 January 14 225.1 251.7
----------------------------------------------------- ----- ------- -------
Cash and cash equivalents at 31 December 14 238.4 225.1
----------------------------------------------------- ----- ------- -------
Notes
1 Accounting convention and basis of preparation
The financial information presented does not constitute the
Group's annual report and financial statements for either the year
ended 31 December 2018 or the year ended 31 December 2017, but is
derived from those financial statements. The Group's statutory
financial statements for 2017 have been delivered to the Registrar
of Companies and those for 2018 will be delivered following the
Company's annual general meeting. The auditors' reports on both the
2017 and 2018 financial statements were not qualified or modified;
did not draw attention to any matters by way of an emphasis of
matter; and did not contain any statement under Section 498 of the
Companies Act 2006.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS), interpretations issued by the
International Financial Reporting Standards Interpretations
Committee and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
These consolidated financial statements have been prepared under
the historical cost convention as modified by investment and
development property, derivative financial instruments and certain
other assets and liabilities that have been measured at fair value.
A summary of the significant accounting policies applied is set out
in note 2 of the Group's annual report and financial
statements.
These accounting policies are consistent with those applied in
the last annual financial statements, as amended when relevant to
reflect the adoption of new standards, amendments and
interpretations which became effective in the year. Except as
described below, these changes have not had an impact on the
financial statements.
This is the Group's first set of annual financial statements
where IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers have been applied. The impacts on the
financial statements on adoption of these standards are set out
below. Significant accounting policies in respect of these
standards are provided in note 2 of the Group's annual report and
financial statements.
IFRS 9 Financial Instruments - the standard applies to
classification and measurement of financial assets and financial
liabilities, impairment provisioning and hedge accounting. The most
significant presentation changes to the Group on adoption are as
follows:
- financial instruments designated as at fair value through
profit or loss (e.g. convertible bonds) - changes in fair value
related to own credit risk will now be recognised in other
comprehensive income, as opposed to the income statement under the
previous standard
- modifications to financial liabilities (e.g. borrowings) - a
one off gain or loss will now be recognised in the income statement
at the date of modification, as opposed to recognising the gain or
loss over the modified term of the financial liability
- other investments - an irrevocable election has been made to
recognise movements in other investments through other
comprehensive income, consistent with the accounting treatment
under the previous standard
On adoption, the Group has made an opening adjustment to
retained earnings of GBP14.0 million, with the 2017 comparative
period not restated. The adoption of the standard has not had any
other material impact on the financial statements.
IFRS 15 Revenue from Contracts with Customers - the standard is
applicable to service charge income and facilities management
income but excludes lease rental income arising from contracts with
the Group's tenants. The adoption of this standard has not had a
material impact on the financial statements.
A number of standards and amendments to standards have been
issued but are not yet effective for the current year. See note 1
of the Group's annual report and financial statements for further
details.
Significant estimates and judgements
The preparation of financial statements in conformity with the
Group's accounting policies requires management to make judgements
and use estimates that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. Although these judgements and estimates are based on
management's best knowledge of the amount, event or action, the
actual result ultimately may differ from those judgements and
estimates. See note 1 of the Group's annual report and financial
statements for details on significant judgements and estimates.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the strategic report of the Group's annual report
and financial statements. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are
described in the financial review. In addition, note 28 of the
Group's annual report and financial statements includes the Group's
risk management objectives, details of its financial instruments
and hedging activities, its exposure to liquidity risk and details
of its capital structure.
The Group prepares regular forecasts and projections which
include sensitivity analysis taking into account a number of
downside risks to the forecast including reasonably possible
changes in trading performance and asset values and assesses the
potential impact of these on the Group's liquidity position and
available resources.
1 Accounting convention and basis of preparation
Going concern (continued)
In preparing the most recent projections, factors taken into
account include GBP274.3 million of cash (including the Group's
share of cash in joint ventures of GBP34.8 million) and GBP274.2
million of undrawn facilities at 31 December 2018. The Group's
weighted average debt maturity of 5.8 years and the relatively
long-term and stable nature of the cash flows receivable under
tenant leases were also factored into the forecasts.
After reviewing the most recent projections and the sensitivity
analysis, the Directors consider it appropriate to continue to
adopt the going concern basis of accounting in preparing the
Group's financial statements.
2 Segmental reporting
Operating segments are determined based on the strategic and
operational management of the Group. The Group is primarily a
shopping centre-focused business and has two reportable operating
segments being the UK and Spain. Although certain areas of business
performance are reviewed and monitored on a centre-by-centre basis,
the operating segments are consistent with the strategic and
operational management of the Group by the Executive Committee (the
chief operating decision makers of the Group).
As mentioned in the financial review, management review and
monitor the business primarily on a proportionately consolidated
basis. As such, the segmental analysis has been prepared on a
proportionately consolidated basis.
The key driver of underlying earnings which is used to measure
performance is net rental income. An analysis of net rental income
is provided below:
2018
---------------------------------------
Group including share
of joint ventures
--------------------------- ----------
Less share
of
joint
UK Spain Total ventures Group total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- ----- --------- ---------- -----------
Rent receivable 494.6 33.4 528.0 (60.7) 467.3
Service charge income 113.2 7.3 120.5 (13.5) 107.0
Facilities management income
from joint ventures 4.5 - 4.5 2.3 6.8
-------------------------------------- --------- ----- --------- ---------- -----------
Revenue 612.3 40.7 653.0 (71.9) 581.1
Rent payable (14.6) - (14.6) 1.1 (13.5)
Service charge costs (131.0) (8.0) (139.0) 15.0 (124.0)
Facilities management costs recharged
to joint ventures (4.5) - (4.5) (2.3) (6.8)
Other non-recoverable costs (40.0) (4.4) (44.4) 6.1 (38.3)
-------------------------------------- --------- ----- --------- ---------- -----------
Net rental income 422.2 28.3 450.5 (52.0) 398.5
-------------------------------------- --------- ----- --------- ---------- -----------
(Loss)/profit for the year (1,175.1) 1.9 (1,173.2) (0.5)1 (1,173.7)
-------------------------------------- --------- ----- --------- ---------- -----------
2017
------------------------------------------
Group including share
of joint ventures
------------------------- ---------------
Less share
of
UK Spain Total joint ventures Group total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- ------ ------- --------------- -----------
Rent receivable 513.5 32.7 546.2 (42.8) 503.4
Service charge income 109.7 8.1 117.8 (8.7) 109.1
Facilities management income
from joint ventures 2.8 - 2.8 0.7 3.5
-------------------------------------- -------- ------ ------- --------------- -----------
Revenue 626.0 40.8 666.8 (50.8) 616.0
Rent payable (20.5) - (20.5) 1.0 (19.5)
Service charge costs (128.1) (8.8) (136.9) 9.6 (127.3)
Facilities management costs recharged
to joint ventures (2.8) - (2.8) (0.7) (3.5)
Other non-recoverable costs (43.4) (3.2) (46.6) 4.3 (42.3)
-------------------------------------- -------- ------ ------- --------------- -----------
Net rental income 431.2 28.8 460.0 (36.6) 423.4
-------------------------------------- -------- ------ ------- --------------- -----------
Profit for the year 140.4 63.5 203.9 (0.6)1 203.3
-------------------------------------- -------- ------ ------- --------------- -----------
1 Relates to the profit attributable to non-controlling
interests within the Group's investment in joint ventures.
There were no significant transactions within net rental income
between operating segments.
An analysis of investment and development property, capital
expenditure and revaluation (deficit)/surplus are presented
below:
Investment and
development property Capital expenditure Revaluation (deficit)/surplus
----------------------- --------------------- -------------------------------
2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----------- ---------- ---------- --------- ------------------ -----------
UK 8,270.5 9,373.8 171.8 184.1 (1,406.6) (51.2)
Spain 859.6 818.7 29.2 62.6 1.6 98.5
----------------------------- ----------- ---------- ---------- --------- ------------------ -----------
Group including share
of joint ventures 9,130.1 10,192.5 201.0 246.7 (1,405.0) 47.3
Less share of joint ventures (1,108.3) (1,013.1) (5.8) (7.3) 72.2 (16.5)
----------------------------- ----------- ---------- ---------- --------- ------------------ -----------
Group 8,021.8 9,179.4 195.2 239.4 (1,332.8) 30.8
----------------------------- ----------- ---------- ---------- --------- ------------------ -----------
The Group's geographical analysis of non-current assets is
presented below on a statutory basis. This represents where the
Group's assets reside and, where relevant, where revenues are
generated. In the case of investments this reflects where the
investee is located.
2018 2017
GBPm GBPm
------ ------- --------
UK 8,381.8 9,484.1
Spain 599.6 565.5
India 66.0 65.9
------ ------- --------
9,047.4 10,115.5
------ ------- --------
3 Loss on disposal of subsidiaries
The loss on disposal of subsidiaries of GBP8.5 million includes
a loss in respect of the part disposal of intu Chapelfield to a
joint venture of GBP9.0 million (see note 21) offset by an
adjustment in respect of the part disposal of intu Xanadú in 2017
of GBP0.5 million. The 2017 loss of GBP1.8 million includes a loss
in respect of the final net asset value adjustment of intu Bromley
of GBP0.8 million as well as a loss in respect of the disposal of
intu Xanadú to a joint venture of GBP1.0 million.
4 Administration expenses - exceptional
Exceptional administration expenses (see glossary for definition
of exceptional items) in the year totalled GBP13.1 million (2017:
GBP5.9 million) and relate principally to costs associated with the
aborted offers for the Group made by Hammerson plc and the
Consortium (comprised of the Peel Group, the Olayan Group and
Brookfield Property Group). The 2017 costs related to the
acquisition of intu Xanadú as well as costs associated with the
aborted offer for the Group made by Hammerson plc. These costs have
been classified as exceptional based on their incidence.
5 Net finance costs
2018 2017
GBPm GBPm
---------------------------------------------------------- ------ ------
On bank loans, overdrafts and allocated interest rate
swaps 192.6 192.0
On convertible bonds (note 17) 13.8 17.5
On obligations under finance leases 4.4 4.4
---------------------------------------------------------- ------ ------
Finance costs1 210.8 213.9
---------------------------------------------------------- ------ ------
Finance income (14.8) (12.6)
---------------------------------------------------------- ------ ------
Amortisation of Metrocentre compound financial instrument 5.9 5.9
Payments on unallocated interest rate swaps and other
costs2 31.8 34.6
Foreign currency movements2 1.1 (1.6)
---------------------------------------------------------- ------ ------
Other finance costs 38.8 38.9
---------------------------------------------------------- ------ ------
Gain on derivative financial instruments3 (67.5) (28.3)
(Gain)/loss on convertible bonds designated as at fair
value through profit or loss (note 17) (19.8) 6.3
---------------------------------------------------------- ------ ------
Change in fair value of financial instruments (87.3) (22.0)
---------------------------------------------------------- ------ ------
Net finance costs 147.5 218.2
---------------------------------------------------------- ------ ------
1 Finance costs of GBP10.5 million were capitalised in the year
ended 31 December 2018 (2017: GBP4.9 million).
2 Amounts totalling GBP32.9 million in the year ended 31
December 2018 (2017: GBP33.0 million) are treated as exceptional
items, as defined in the glossary, due to their nature and are
therefore excluded from underlying earnings (see note 8(b)). These
finance costs include payments on unallocated interest rate swaps,
payments on termination of interest rate swaps, amounts associated
with modifications and extinguishments of borrowings, foreign
currency movements and other fees.
3 Included within the gain on derivative financial instruments
are gains totalling GBP44.9 million (2017: GBP47.1 million)
resulting from the payment of obligations under derivative
financial instruments during the year. Of these GBP28.1 million
related to unallocated swaps (2017: GBP26.1 million).
6 Taxation
Taxation for the year:
2018 2017
GBPm GBPm
------------------------------------------------------------ ----- -----
Current tax:
Overseas taxation 0.1 0.2
Overseas taxation - adjustment in respect of prior years - (0.1)
UK taxation - adjustment in respect of prior years - (0.2)
------------------------------------------------------------ ----- -----
Current tax 0.1 (0.1)
------------------------------------------------------------ ----- -----
Deferred tax:
On investment and development property (5.5) 24.8
On other temporary differences (0.3) (0.8)
------------------------------------------------------------ ----- -----
Deferred tax (5.8) 24.0
------------------------------------------------------------ ----- -----
Total tax (credit)/charge (5.7) 23.9
------------------------------------------------------------ ----- -----
Tax relating to components of other comprehensive income of nil
(2017: credit of GBP0.1 million) relates entirely to deferred tax
in respect of other investments.
The tax (credit)/charge for 2018 and 2017 is lower than the
standard rate of corporation tax in the UK. The differences are
explained below:
2018 2017
GBPm GBPm
-------------------------------------------------------- --------- ------
(Loss)/profit before tax, joint ventures and associates (1,139.6) 190.4
-------------------------------------------------------- --------- ------
(Loss)/profit before tax multiplied by the standard
rate of tax in the UK of 19% (2017: 19.25%) (216.6) 36.7
Exempt property rental profits and revaluations 214.9 (32.8)
-------------------------------------------------------- --------- ------
(1.7) 3.9
Additions and disposals of property and investments 0.3 6.2
Prior year corporation tax items - (0.3)
Non-deductible and other items 3.4 2.8
Overseas taxation (0.4) 4.3
Unprovided deferred tax (7.3) 7.0
-------------------------------------------------------- --------- ------
Total tax (credit)/charge (5.7) 23.9
-------------------------------------------------------- --------- ------
Details of deferred tax balances are given in note 18.
Factors that may affect future current and total tax charges
The Group continued to operate as a UK REIT throughout the year,
under which any profits and gains from the UK property investment
business are exempt from corporation tax, provided certain
conditions continue to be met. The Group fulfilled these
UK REIT conditions throughout the year. In view of the announced
short-term reduction of dividends it is expected that there will be
an underpayment of the minimum PID, and so for the Group to incur
UK corporation tax payable at 19 per cent.
Certain of the Group's Spanish joint ventures have elected into
the SOCIMI regime, and these continued to operate as and fulfil the
relevant conditions of the SOCIMI regime throughout the year.
7 Dividends
2018 2017
GBPm GBPm
------------------------------------------------------ ----- -----
Ordinary shares:
Prior year final dividend paid of 9.4 pence per share
(2017: 9.4 pence per share) 126.3 126.2
Interim dividend paid of 4.6 pence per share (2017:
4.6 pence per share) 61.8 61.7
------------------------------------------------------ ----- -----
Dividends paid 188.1 187.9
------------------------------------------------------ ----- -----
The Directors are not recommending a final dividend for 2018.
See financial review and note 6 for further information.
Details of the shares in issue and dividends waived are given in
notes 19 and 20 respectively.
As a REIT, dividends are declared and paid in accordance with
REIT legislation. See glossary for further information as well as
the financial review for information on distributable reserves.
8 Earnings per share
(a) Number of shares
2018 2017
million million
shares shares
--------- -------- --------
Basic1/2 1,343.7 1,343.2
Diluted3 1,343.7 1,427.6
--------- -------- --------
1 The weighted average number of shares used has been adjusted
to remove shares held in the ESOP.
2 Basic shares is used to calculate EPRA earnings per share and underlying earnings per share.
3 Diluted shares includes the impact of dilutive convertible
bonds, share options and share awards.
(b) Earnings per share
Basic and diluted earnings per share is calculated in accordance
with IAS 33 Earnings Per Share.
Underlying earnings per share as presented is based on EPRA
earnings per share, an industry standard APM considered a key
measure of recurring performance, but adjusted for certain items
(listed below) which management believes are necessary in order to
better present the Group's recurring performance and therefore
provide an indication of the extent to which dividend payments are
supported by underlying operations (see underlying profit statement
in the other information section). Underlying earnings per share
excludes property and derivative movements, exceptional items and
related tax. The key differences to EPRA earnings per share relate
to the following adjustments:
- with the exception of termination costs on allocated interest
rate swaps and costs related to acquisitions, which are both
excluded from EPRA earnings and underlying earnings, exceptional
finance costs (as detailed in note 5) and exceptional
administration expenses (as detailed in note 4) are included in
EPRA earnings but are excluded from the Group's measure of
underlying earnings. In accordance with the Group's definition for
exceptional items (as detailed in the glossary), the Group
considers these costs to be exceptional based on their nature and
incidence, which create volatility in earnings
- fair value movements on interest rate swaps not currently used
for economic hedges of debt (referred to as unallocated swaps) are
included in EPRA earnings but are excluded from the Group's measure
of underlying earnings. The Group does not hold unallocated swaps
for speculative purposes. Management currently intends to hold
these unallocated swaps until maturity, therefore the volatility
created by their fair value movements will not crystallise
A reconciliation of underlying earnings to (loss)/profit for the
year attributable to owners of intu properties plc as well as EPRA
earnings is provided below. The EPRA section within the other
information section provides additional details on EPRA and related
measures provided.
2018 20171
-------------------- --------------------
(Loss)/
earnings Pence per Earnings Pence per
GBPm share GBPm share
---------------------------------------------- --------- --------- --------- ---------
Basic (loss)/earnings per share (1,132.2) (84.3)p 216.7 16.1p
Dilutive convertible bonds, share options
and share awards - (1.9)
---------------------------------------------- --------- --------- --------- ---------
Diluted (loss)/earnings per share (1,132.2) (84.3)p 214.8 15.0p
---------------------------------------------- --------- --------- --------- ---------
Basic (loss)/earnings per share (1,132.2) (84.3)p 216.7 16.1p
Adjusted for:
Revaluation of investment and development
property (note 10) 1,332.8 99.2p (30.8) (2.3)p
Loss on disposal of subsidiaries (note
3) 8.5 0.6p 1.8 0.1p
Gain on sale of investment and development
property (1.4) (0.1)p - -
Administration expenses - exceptional
(acquisition and disposal related) 8.0 0.6p 4.9 0.4p
Change in fair value of financial instruments (36.6) (2.7)p (3.7) (0.3)p
Tax on the above (5.8) (0.4)p 23.9 1.8p
Share of joint ventures' adjusted items 77.1 5.7p (17.2) (1.3)p
Share of associates' adjusted items (2.2) (0.2)p (1.1) (0.1)p
Non-controlling interests in respect
of the above (37.7) (2.7)p (10.0) (0.7)p
---------------------------------------------- --------- --------- --------- ---------
EPRA earnings per share3 210.5 15.7p 184.5 13.7p
Adjusted for:
Other exceptional items2 38.0 2.8p 34.0 2.5p
Other change in fair value of financial
instruments2 (50.7) (3.8)p (18.3) (1.3)p
Other exceptional tax - - 0.1 -
Share of joint ventures' adjusted items (5.8) (0.4)p - -
Share of associates' adjusted items 1.1 0.1p 0.7 0.1p
Underlying earnings per share 193.1 14.4p 201.0 15.0p
---------------------------------------------- --------- --------- --------- ---------
1 2017 EPRA earnings per share has been adjusted to remove the
fair value movements of unallocated interest rate swaps not related
to cash payments on the respective swaps.
2 Includes the impact of payments on unallocated interest rate
swaps and changes in fair value of unallocated interest rate swaps
as detailed in note 5.
3 Diluted EPRA earnings for the year ended 31 December 2018 is 15.7p (2017: 12.8p).
(c) Headline earnings per share
Headline earnings per share is an APM and has been calculated
and presented as required by the Johannesburg Stock Exchange
listing requirements.
2018 2017
------------------ ---------------
Gross Net1 Gross Net1
GBPm GBPm GBPm GBPm
-------------------------------------------- ------- --------- ------ -------
Basic (loss)/earnings (1,132.2) 216.7
Adjusted for:
Revaluation of investment and development
property (note 10) 1,332.8 1,289.3 (30.8) (16.1)
Loss on disposal of subsidiaries (note
3) 8.5 8.5 1.8 1.8
Gain on sale of investment and development
property (1.4) (1.4) - -
Share of joint ventures' adjusted items 72.4 74.6 (15.9) (17.2)
Share of associates' adjusted items (2.2) (2.2) (1.1) (1.1)
-------------------------------------------- ------- --------- ------ -------
Headline earnings 236.6 184.1
Dilution2 - (1.9)
-------------------------------------------- ------- --------- ------ -------
Diluted headline earnings 236.6 182.2
-------------------------------------------- ------- --------- ------ -------
Weighted average number of shares (million) 1,343.7 1,343.2
Dilution2 1.8 84.4
-------------------------------------------- ------- --------- ------ -------
Diluted weighted average number of shares
(million) 1,345.5 1,427.6
-------------------------------------------- ------- --------- ------ -------
Headline earnings per share (pence) 17.6p 13.7p
-------------------------------------------- ------- --------- ------ -------
Diluted headline earnings per share (pence) 17.6p 12.8p
-------------------------------------------- ------- --------- ------ -------
1 Net of tax and non-controlling interests.
2 The dilution impact is required to be included as calculated
in note 8(a/b) even where this is not dilutive for headline
earnings per share.
9 NAV per share
(a) Number of shares
2018 2017
shares shares
million million
----------- -------- --------
Basic1 1,343.8 1,343.4
Diluted2/3 1,345.6 1,345.2
----------- -------- --------
1 The number of shares used has been adjusted to remove shares held in the ESOP.
2 Diluted shares is used to calculate EPRA NAV per share and NAV per share (diluted, adjusted).
3 Diluted shares includes the impact of dilutive convertible
bonds, share options and share awards.
(b) NAV per share
NAV per share (diluted, adjusted) as presented is based on EPRA
NAV per share, an industry standard APM considered a key measure of
the Group's performance, but adjusted for certain items (listed
below) which management believes are necessary in order to better
present the Group's performance. The key differences to EPRA NAV
per share relate to the following adjustments:
- fair value movements on interest rate swaps not currently used
for economic hedges of debt (referred to as unallocated swaps) are
included in EPRA NAV but excluded from the Group's measure of NAV
(diluted, adjusted). The Group does not hold unallocated swaps for
speculative purposes. Management currently intends to hold these
unallocated swaps until maturity, therefore the volatility created
by their fair value movements will not crystallise
- fair value movements on convertible bonds which are excluded
from EPRA NAV but included in the Group's measure of NAV (diluted,
adjusted). Management reviews and monitors the Group's debt to
assets ratio based on the book value of debt and therefore
management believes it is appropriate to include the book value of
debt within the Group's measure of NAV (diluted, adjusted)
A reconciliation of NAV (diluted, adjusted) to NAV attributable
to owners of intu properties plc as well as EPRA NAV is provided
below. The EPRA section within the other information section
provides additional details on EPRA and related measures
provided.
2018 2017
--------------------- ---------------------
Net assets Pence per Net assets Pence per
GBPm share GBPm share
----------------------------------------------- ---------- --------- ---------- ---------
NAV per share attributable to owners
of intu properties plc 3,811.7 284p 5,075.0 378p
Dilutive convertible bonds, share options
and share awards - -
----------------------------------------------- ---------- --------- ---------- ---------
Diluted NAV per share 3,811.7 283p 5,075.0 377p
Adjusted for:
Fair value of derivative financial instruments
- allocated swaps (net of tax) 96.8 7p 112.1 8p
Fair value of convertible bonds (60.1) (5)p - -
Deferred tax on investment and development
property 18.0 2p 23.7 2p
Share of joint ventures' adjusted items 9.4 1p 5.2 1p
Non-controlling interest recoverable
balance not recognised 71.3 5p 71.3 5p
----------------------------------------------- ---------- --------- ---------- ---------
EPRA NAV per share 3,947.1 293p 5,287.3 393p
Adjusted for:
Swaps not currently used as economic
hedges of debt - unallocated swaps (net
of tax) 183.7 14p 235.4 18p
Fair value of convertible bonds 60.1 5p - -
----------------------------------------------- ---------- --------- ---------- ---------
NAV per share (diluted, adjusted) 4,190.9 312p 5,522.7 411p
----------------------------------------------- ---------- --------- ---------- ---------
(c) EPRA NNNAV per share
EPRA NNNAV per share has been included as it is considered to be
an industry standard APM which seeks to assist comparison between
European property companies.
2018 2017
--------------------- ---------------------
Net assets Pence per Net assets Pence per
GBPm share GBPm share
----------------------------------------------- ---------- --------- ---------- ---------
EPRA NAV per share 3,947.1 293p 5,287.3 393p
Adjusted for:
Fair value of derivative financial instruments
- allocated swaps (net of tax) (96.8) (7)p (112.1) (8)p
Fair value of convertible bonds 60.1 5p - -
Excess of fair value of debt over book
value (206.7) (15)p (430.8) (32)p
Deferred tax on investment and development
property (18.0) (2)p (23.7) (2)p
Share of joint ventures' adjusted items (52.0) (4)p (47.8) (4)p
Non-controlling interest recoverable
balance not recognised 7.0 1p 22.9 2p
----------------------------------------------- ---------- --------- ---------- ---------
EPRA NNNAV per share 3,640.7 271p 4,695.8 349p
----------------------------------------------- ---------- --------- ---------- ---------
10 Investment and development property
Investment Development
property property Total
GBPm GBPm GBPm
-------------------------------------------------- ---------- ----------- ---------
At 1 January 2017 9,003.0 209.1 9,212.1
Acquisition of intu Xanadú 461.4 - 461.4
Additions 109.6 129.8 239.4
Disposals (3.1) (0.3) (3.4)
Disposal of intu Xanadú to joint venture (472.3) - (472.3)
Transfer of intu Chapelfield to assets held
for sale (302.0) - (302.0)
(Deficit)/surplus on revaluation (59.0) 89.8 30.8
Foreign exchange movements 9.4 4.0 13.4
-------------------------------------------------- ---------- ----------- ---------
At 31 December 2017 8,747.0 432.4 9,179.4
Additions 64.3 130.9 195.2
Disposals (21.7) - (21.7)
Disposal of development property to joint venture - (1.2) (1.2)
Transfer 165.5 (165.5) -
Deficit on revaluation (1,268.8) (64.0) (1,332.8)
Foreign exchange movements - 2.9 2.9
-------------------------------------------------- ---------- ----------- ---------
At 31 December 2018 7,686.3 335.5 8,021.8
-------------------------------------------------- ---------- ----------- ---------
A reconciliation to market value is given in the table
below:
2018 2017
GBPm GBPm
-------------------------------------------------------------- ------- -------
Balance sheet carrying value of investment and development
property 8,021.8 9,179.4
Tenant incentives included within trade and other receivables
(note 13) 116.5 109.2
Head leases included within finance leases in borrowings
(note 16) (80.2) (80.2)
-------------------------------------------------------------- ------- -------
Market value of investment and development property 8,058.1 9,208.4
-------------------------------------------------------------- ------- -------
The market value of investment and development property at 31
December 2018 includes GBP7,718.7 million (31 December 2017:
GBP8,831.9 million) in respect of investment property and GBP339.4
million (31 December 2017: GBP376.5 million) in respect of
development property.
The fair value of the Group's investment and development
property at 31 December 2018 was determined by independent external
valuers at that date other than certain development land. The
valuations are in accordance with the Royal Institution of
Chartered Surveyors (RICS) Valuation - Global Standards 2017 and
were arrived at by reference to market transactions for similar
properties and rent profiles. Fair values for investment properties
are calculated using the present value income approach.
In respect of development valuations, deductions are made for
anticipated costs, including an allowance for developer's profit
and any other assumptions before arriving at a valuation.
The valuation methodology is unchanged from the prior year and
is set out in further detail in note 14 of the Group's annual
report and financial statements. The table in the other information
section sets out the market value, yield and occupancy of the
significant investment and development property.
In respect of the intu Costa del Sol development site near
Málaga, Spain, as the General Plan of Torremolinos was approved in
December 2017, with the remaining consents expected in the coming
months, the Group obtained an independent external valuation at 31
December 2017 as cost was no longer an appropriate approximation of
fair value. At 31 December 2018 the remaining consents are yet to
be finalised; however, we continue to expect these to be received.
Therefore, consistent with the 31 December 2017 valuation, the 31
December 2018 valuation is based on the assumption that planning
approval is in place at the valuation date.
11 Investment in joint ventures
The Group's principal joint ventures own and manage investment
and development property.
2018
----------- ------------ ----------- ------------ --------- ------ ------
St David's, intu intu Puerto intu intu
Cardiff Chapelfield Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----------- ------------ ----------- ------------ --------- ------ ------
At 1 January 2018 347.0 - 133.9 119.4 95.6 39.6 735.5
Acquisition of joint
venture interest (note
21) - 151.9 - - - - 151.9
Group's share of underlying
profit 13.2 5.3 2.0 5.1 3.2 0.4 29.2
Group's share of other
net (loss)/profit (49.8) (20.3) 9.8 (0.8) 0.5 (10.7) (71.3)
------------------------------- ----------- ------------ ----------- ------------ --------- ------ ------
Group's share of (loss)/profit (36.6) (15.0) 11.8 4.3 3.7 (10.3) (42.1)
Investment of capital - - - 7.7 - - 7.7
Repayment of capital - - - (7.1) - - (7.1)
Distributions - (2.2) - - - (0.7) (2.9)
Loan advances - - - - - 2.0 2.0
Loan repayments (14.0) - (2.0) - (9.3) - (25.3)
Foreign exchange movements - - 2.0 1.0 1.2 - 4.2
------------------------------- ----------- ------------ ----------- ------------ --------- ------ ------
At 31 December 2018 296.4 134.7 145.7 125.3 91.2 30.6 823.9
------------------------------- ----------- ------------ ----------- ------------ --------- ------ ------
Represented by:
Loans to joint ventures 69.6 74.0 98.3 58.5 26.0 9.6 336.0
Group's share of net
assets 226.8 60.7 47.4 66.8 65.2 21.0 487.9
------------------------------- ----------- ------------ ----------- ------------ --------- ------ ------
2017
----------- ----------- ------------ --------- ----- ------
St David's, intu Puerto intu intu
Cardiff Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------- ----------- ------------ --------- ----- ------
At 1 January 2017 355.2 119.4 - 76.0 37.0 587.6
Acquisition of joint
venture interest - - 117.1 - - 117.1
Group's share of underlying
profit 13.4 0.6 1.4 2.0 0.9 18.3
Group's share of other
net profit/(loss) (6.8) 8.9 0.4 14.7 - 17.2
---------------------------- ----------- ----------- ------------ --------- ----- ------
Group's share of profit 6.6 9.5 1.8 16.7 0.9 35.5
Investment of capital - - 0.7 - - 0.7
Distributions - - - - (1.2) (1.2)
Loan advances - - - - 3.0 3.0
Loan repayments (14.8) - - - - (14.8)
Foreign exchange movements - 5.0 (0.2) 2.9 (0.1) 7.6
---------------------------- ----------- ----------- ------------ --------- ----- ------
At 31 December 2017 347.0 133.9 119.4 95.6 39.6 735.5
---------------------------- ----------- ----------- ------------ --------- ----- ------
Represented by:
Loans to joint ventures 83.6 99.1 57.7 35.0 7.5 282.9
Group's share of net
assets 263.4 34.8 61.7 60.6 32.1 452.6
---------------------------- ----------- ----------- ------------ --------- ----- ------
At 31 December 2018, the boards of joint ventures had approved
GBP5.0 million (2017: GBP13.8 million) of future expenditure for
the purchase, construction, development and enhancement of
investment property. Of this, GBP2.7 million (2017: GBP12.7
million) is contractually committed. These amounts represent the
Group's share.
Set out below is the summarised information of the Group's joint
ventures with financial information presented at 100 per cent. The
2018 summary information and the summarised income statement of
intu Chapelfield is presented for the period from 1 February 2018,
the date at which it ceased being a 100 per cent owned subsidiary
of the Group.
2018
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
St David's, intu intu Puerto intu intu
Cardiff Chapelfield Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Summary information
Group's interest 50% 50% 50% 50% 50%
Principal place of business Wales England Spain Spain Spain
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Summarised income statement
Revenue 41.0 22.2 26.6 32.6 18.0 17.9 158.3
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Net rental income 26.6 15.1 20.3 23.0 13.5 11.4 109.9
Revaluation of investment
and development property (99.6) (40.7) 11.4 4.3 1.7 (50.0) (172.9)
Administration expenses
- underlying (0.1) (0.1) (2.0) (2.0) (1.3) (2.6) (8.1)
Administration expenses
- exceptional - - - (0.1) - - (0.1)
Finance costs - (4.4) (14.2) (9.7) (5.7) (5.9) (39.9)
Other finance income -
exceptional - - 9.4 - - - 9.4
Change in fair value of
financial instruments - - (0.5) (1.2) (0.8) 1.3 (1.2)
Taxation - - - (5.7) 0.1 - (5.6)
(Loss)/profit (73.1) (30.1) 24.4 8.6 7.5 (45.8) (108.5)
Attributable to non-controlling
interests - - (0.8) - (0.2) - (1.0)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
(Loss)/profit attributable
to owners (73.1) (30.1) 23.6 8.6 7.3 (45.8) (109.5)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Group's share of (loss)/profit (36.6) (15.0) 11.8 4.3 3.7 (10.3) (42.1)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Summarised balance sheet
Investment and development
property 592.1 266.6 480.7 485.5 288.3 221.4 2,334.6
Other non-current assets 0.2 0.4 1.1 82.0 5.1 2.5 91.3
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Total non-current assets 592.3 267.0 481.8 567.5 293.4 223.9 2,425.9
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Cash and cash equivalents 9.7 7.0 13.4 19.8 16.7 5.9 72.5
Other current assets 19.4 2.6 2.1 1.1 0.9 13.6 39.7
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Total current assets 29.1 9.6 15.5 20.9 17.6 19.5 112.2
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Current financial liabilities (0.1) (0.9) (10.4) (9.5) (4.7) (1.8) (27.4)
Other current liabilities (12.4) (6.4) (5.4) (7.0) (1.7) (7.7) (40.6)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Total current liabilities (12.5) (7.3) (15.8) (16.5) (6.4) (9.5) (68.0)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Partners' loans (139.1) (148.0) (196.6) (116.9) (52.2) (19.4) (672.2)
Non-current financial
liabilities - - (186.1) (236.1) (107.5) (130.5) (660.2)
Other non-current liabilities (16.2) - - (85.3) (11.4) - (112.9)
Total non-current liabilities (155.3) (148.0) (382.7) (438.3) (171.1) (149.9) (1,445.3)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Net assets 453.6 121.3 98.8 133.6 133.5 84.0 1,024.8
Non-controlling interests - - (4.1) - (3.2) - (7.3)
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Net assets attributable
to owners 453.6 121.3 94.7 133.6 130.3 84.0 1,017.5
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
Group's share of net assets 226.8 60.7 47.4 66.8 65.2 21.0 487.9
-------------------------------- ----------- ------------ ----------- ------------ --------- ------- ---------
The 2017 summary information and the summarised income statement
of intu Xanadú is presented for the period from 31 July 2017, the
date at which it ceased being a 100 per cent owned subsidiary of
the Group.
2017
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
St David's, intu Puerto intu intu
Cardiff Venecia Xanadú Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Summary information
Group's interest 50% 50% 50% 50%
Principal place of business Wales Spain Spain Spain
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Summarised income statement
Revenue 39.6 25.1 13.0 17.0 18.8 113.5
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Net rental income 26.7 19.2 8.6 12.5 12.9 79.9
Revaluation of investment
and development property (13.6) 18.1 2.0 26.6 - 33.1
Loss on sale of other investments - (0.4) - (0.3) - (0.7)
Administration expenses -
underlying - (1.9) (1.1) (1.0) (2.3) (6.3)
Administration expenses -
exceptional - - (1.0) - - (1.0)
Finance costs - (15.9) (4.4) (7.5) (5.0) (32.8)
Change in fair value of financial
instruments - 0.6 0.4 0.6 0.7 2.3
Taxation - (0.1) (0.9) 3.2 - 2.2
Profit 13.1 19.6 3.6 34.1 6.3 76.7
Attributable to non-controlling
interests - (0.6) - (0.7) - (1.3)
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Profit attributable to owners 13.1 19.0 3.6 33.4 6.3 75.4
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Group's share of profit 6.6 9.5 1.8 16.7 0.9 35.5
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Summarised balance sheet
Investment and development
property 692.0 460.4 470.5 281.0 265.3 2,169.2
Other non-current assets 14.0 0.8 81.2 5.3 3.7 105.0
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Total non-current assets 706.0 461.2 551.7 286.3 269.0 2,274.2
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Cash and cash equivalents 8.9 38.2 18.9 31.2 6.0 103.2
Other current assets 7.7 2.5 - 1.5 9.4 21.1
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Total current assets 16.6 40.7 18.9 32.7 15.4 124.3
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Current financial liabilities - (17.0) (6.1) (6.2) (0.5) (29.8)
Other current liabilities (12.6) (13.9) (15.2) (1.9) (5.8) (49.4)
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Total current liabilities (12.6) (30.9) (21.3) (8.1) (6.3) (79.2)
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Partners' loans (167.2) (198.3) (115.4) (70.0) (15.0) (565.9)
Non-current financial liabilities - (199.6) (230.9) (105.2) (131.6) (667.3)
Other non-current liabilities (16.1) - (79.7) (11.4) - (107.2)
Total non-current liabilities (183.3) (397.9) (426.0) (186.6) (146.6) (1,340.4)
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Net assets 526.7 73.1 123.3 124.3 131.5 978.9
Non-controlling interests - (3.4) - (3.1) - (6.5)
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Net assets attributable to
owners 526.7 69.7 123.3 121.2 131.5 972.4
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
Group's share of net assets 263.4 34.8 61.7 60.6 32.1 452.6
---------------------------------- ----------- ----------- ------------ --------- ------- ---------
12 Investment in associates
2018 2017
GBPm GBPm
--------------------------------------- ----- -----
At 1 January 64.8 65.2
Share of post-tax profit of associates 2.3 1.3
Foreign exchange movements (1.5) (1.7)
--------------------------------------- ----- -----
At 31 December 65.6 64.8
--------------------------------------- ----- -----
Investment in associates comprises a 32.4 per cent holding in
the ordinary shares of Prozone Intu Properties Limited (Prozone), a
listed Indian shopping centre developer, and a 26.8 per cent
holding in the ordinary shares of Empire Mall Private Limited
(Empire). Both companies are incorporated in India.
The equity method of accounting is applied to the Group's
investments in Prozone and Empire in line with the requirements of
IAS 28 Investments in Associates and Joint Ventures. The results
for the year to 30 September have been used as 31 December
information is not available in time for these financial
statements. Those results are adjusted to be in line with the
Group's accounting policies and include the most recent property
valuations, determined at 30 September 2018, by independent
professionally qualified external valuers in line with the
valuation methodology described in note 10.
The market price per share of Prozone at 31 December 2018 was
INR29 (31 December 2017: INR72), valuing the Group's interest at
GBP16.4 million (31 December 2017: GBP41.1 million) compared to the
carrying value of GBP45.1 million (31 December 2017: GBP45.1
million). As the share price of Prozone is lower than its carrying
value, a review of the carrying value has been undertaken. The net
assets of Prozone principally comprise investment property which is
held at fair value within the investment in associates line. As
with other Group investment property, it is subject to independent
valuation to fair value and that valuation reflects the future cash
flows expected to be generated from those assets. As such the net
asset carrying value recorded in the financial statements is deemed
to be a reasonable approximation of the value in use of the
business and so no adjustment to that carrying value is considered
necessary.
13 Trade and other receivables
2018 2017
GBPm GBPm
------------------------------------------ ----- -----
Current
Trade receivables 35.8 26.4
Amounts owed by joint ventures 8.5 13.6
Other receivables 16.3 17.2
Net investment in finance leases 0.4 0.4
Prepayments and accrued income 94.2 84.3
------------------------------------------ ----- -----
Trade and other receivables - current 155.2 141.9
------------------------------------------ ----- -----
Non-current
Amounts owed by associates 5.0 4.7
Other receivables 0.4 -
Net investment in finance leases 0.8 1.2
Prepayments and accrued income 99.3 96.6
------------------------------------------ ----- -----
Trade and other receivables - non-current 105.5 102.5
------------------------------------------ ----- -----
Included within prepayments and accrued income for the Group of
GBP193.5 million (2017: GBP180.9 million) are tenant lease
incentives of GBP116.5 million (2017: GBP109.2 million), of which
GBP17.2 million are classified as current (2017: GBP12.6 million)
and GBP99.3 million as non-current (2017: GBP96.6 million).
14 Cash and cash equivalents
2018 2017
GBPm GBPm
-------------------------- ----- ------
Unrestricted cash 238.4 225.1
Restricted cash 1.1 2.9
-------------------------- ----- ------
Cash and cash equivalents 239.5 228.0
-------------------------- ----- ------
A number of the Group's borrowing arrangements place certain
restrictions on the rent received each quarter. These do not
prevent access to or use of this funding within the borrowing
entities, however they do place certain restrictions on moving
those funds around the wider group, typically requiring debt
servicing costs to be paid before restrictions are lifted.
15 Trade and other payables
2018 2017
GBPm GBPm
-------------------------------- ----- ------
Current
Rents received in advance 103.4 102.1
Trade payables 3.2 6.1
Amounts owed to joint ventures 0.4 0.3
Accruals and deferred income 141.2 137.9
Other payables 2.5 10.9
Other taxes and social security 27.7 31.2
---------------------------------- ----- ------
Trade and other payables 278.4 288.5
---------------------------------- ----- ------
16 Borrowings
2018
-------- ------- ---------- ------- -------- -------
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------ -------- ------- ---------- ------- -------- -------
Current
Commercial mortgage backed securities
(CMBS) notes 46.7 46.7 - 46.7 - 51.1
Current borrowings, excluding finance
leases 46.7 46.7 - 46.7 - 51.1
Finance lease obligations 4.4 4.4 - 4.4 - 4.4
------------------------------------------ -------- ------- ---------- ------- -------- -------
51.1 51.1 - 51.1 - 55.5
------------------------------------------ -------- ------- ---------- ------- -------- -------
Non-current
Revolving credit facility 2021 (including
GBP89.9 million drawn in euros) 393.9 393.9 - - 393.9 393.9
CMBS notes 2022 33.4 33.4 - 33.4 - 37.1
CMBS notes 2024 88.3 88.3 - 88.3 - 96.8
CMBS notes 2029 67.5 67.5 - 67.5 - 77.0
CMBS notes 2033 296.3 296.3 - 296.3 - 364.7
CMBS notes 2035 195.1 195.1 - - 195.1 201.9
Bank loan 2020 25.0 25.0 - - 25.0 25.0
Bank loans 2021 668.7 668.7 - - 668.7 668.7
Bank loan 2022 247.5 247.5 - 247.5 - 282.8
Bank loan 2023 73.1 73.1 - - 73.1 73.1
Bank loan 2024 473.8 473.8 - - 473.8 473.8
3.875% bonds 2023 444.6 444.6 - 444.6 - 454.7
4.125% bonds 2023 479.5 479.5 - 479.5 - 496.9
4.625% bonds 2028 342.9 342.9 - 342.9 - 363.0
4.250% bonds 2030 345.3 345.3 - 345.3 - 349.7
Debenture 2027 229.1 229.1 - 229.1 - 247.2
2.875% convertible bonds 2022 (note
17) 314.9 - 314.9 314.9 - 314.9
------------------------------------------ -------- ------- ---------- ------- -------- -------
Non-current borrowings, excluding
finance leases and Metrocentre compound
financial instrument 4,718.9 4,404.0 314.9 2,889.3 1,829.6 4,921.2
Metrocentre compound financial instrument 189.5 - 189.5 189.5 - 189.5
Finance lease obligations 75.8 75.8 - 75.8 - 75.8
------------------------------------------ -------- ------- ---------- ------- -------- -------
4,984.2 4,479.8 504.4 3,154.6 1,829.6 5,186.5
------------------------------------------ -------- ------- ---------- ------- -------- -------
Total borrowings 5,035.3 4,530.9 504.4 3,205.7 1,829.6 5,242.0
------- ---------- ------- -------- -------
Cash and cash equivalents (note
14) (239.5)
------------------------------------------ --------
Net debt 4,795.8
------------------------------------------ --------
Analysis of the Group's net external debt is provided in the
other information section.
The fair values of fixed rate borrowings and CMBS are assessed
based on quoted market prices, and as such are categorised as Level
1 in the fair value hierarchy (see note 28 of the Group's annual
report and financial statements for definition). The fair values of
unlisted floating rate borrowings are equal to their carrying
values.
2017
-------- ------- ---------- ------- -------- -------
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------ -------- ------- ---------- ------- -------- -------
Current
Commercial mortgage backed securities
(CMBS) notes 23.3 23.3 - 23.3 - 28.1
2.5% convertible bonds 2018 (note
17) 161.0 - 161.0 161.0 - 161.0
------------------------------------------ -------- ------- ---------- ------- -------- -------
Current borrowings, excluding finance
leases 184.3 23.3 161.0 184.3 - 189.1
Finance lease obligations 2.4 2.4 - 2.4 - 2.4
------------------------------------------ -------- ------- ---------- ------- -------- -------
186.7 25.7 161.0 186.7 - 191.5
------------------------------------------ -------- ------- ---------- ------- -------- -------
Non-current
Revolving credit facility 2021 (including
GBP88.8 million drawn in euros) 233.8 233.8 - - 233.8 233.8
CMBS notes 2019 19.9 19.9 - 19.9 - 20.4
CMBS notes 2022 43.0 43.0 - 43.0 - 49.5
CMBS notes 2024 88.0 88.0 - 88.0 - 98.6
CMBS notes 2029 73.2 73.2 - 73.2 - 85.9
CMBS notes 2033 311.2 311.2 - 311.2 - 393.1
CMBS notes 2035 192.8 192.8 - - 192.8 212.1
Bank loan 2019 139.7 139.7 - - 139.7 139.7
Bank loan 2020 32.9 32.9 - - 32.9 32.9
Bank loans 2021 470.2 470.2 - - 470.2 470.2
Bank loan 2022 246.8 246.8 - 246.8 - 277.3
Bank loan 2024 482.7 482.7 - - 482.7 482.7
3.875% bonds 2023 443.5 443.5 - 443.5 - 486.2
4.125% bonds 2023 478.5 478.5 - 478.5 - 535.7
4.625% bonds 2028 342.3 342.3 - 342.3 - 410.0
4.250% bonds 2030 345.0 345.0 - 345.0 - 402.3
Debenture 2027 228.8 228.8 - 228.8 - 267.9
2.875% convertible bonds 2022 (note
17) 377.3 - 377.3 377.3 - 377.3
------------------------------------------ -------- ------- ---------- ------- -------- -------
Non-current borrowings, excluding
finance leases and Metrocentre compound
financial instrument 4,549.6 4,172.3 377.3 2,997.5 1,552.1 4,975.6
Metrocentre compound financial instrument 183.7 - 183.7 183.7 - 183.7
Finance lease obligations 77.8 77.8 - 77.8 - 77.8
------------------------------------------ -------- ------- ---------- ------- -------- -------
4,811.1 4,250.1 561.0 3,259.0 1,552.1 5,237.1
------------------------------------------ -------- ------- ---------- ------- -------- -------
Total borrowings 4,997.8 4,275.8 722.0 3,445.7 1,552.1 5,428.6
------- ---------- ------- -------- -------
Cash and cash equivalents (note
14) (228.0)
------------------------------------------ --------
Net debt 4,769.8
------------------------------------------ --------
The maturity profile of debt (excluding finance leases) is as
follows:
2018 2017
GBPm GBPm
-------------------------------------------------------- ------- -------
Repayable within one year 46.7 184.3
Repayable in more than one year but not more than two
years 30.5 175.5
Repayable in more than two years but not more than five
years 2,722.0 1,445.9
Repayable in more than five years 2,155.9 3,111.9
-------------------------------------------------------- ------- -------
4,955.1 4,917.6
-------------------------------------------------------- ------- -------
Certain borrowing agreements contain financial and other
conditions that, if contravened, could alter the repayment profile.
During the year there were no breaches of these conditions (see
financial covenants in the other information section).
At 31 December 2018 the Group had committed undrawn borrowing
facilities of GBP274.2 million (2017: GBP406.9 million), maturing
in 2021 and 2022.
Finance lease disclosures:
2018 2017
GBPm GBPm
------------------------------------------------------ ------ ------
Minimum lease payments under finance leases fall due:
Not later than one year 4.4 2.4
Later than one year and not later than five years 17.8 9.5
Later than five years 104.8 115.1
------------------------------------------------------ ------ ------
127.0 127.0
Future finance charges on finance leases (46.8) (46.8)
------------------------------------------------------ ------ ------
Present value of finance lease liabilities 80.2 80.2
------------------------------------------------------ ------ ------
Present value of finance lease liabilities:
Not later than one year 4.4 2.4
Later than one year and not later than five years 17.8 9.5
Later than five years 58.0 68.3
------------------------------------------------------ ------ ------
80.2 80.2
------------------------------------------------------ ------ ------
Finance lease liabilities are in respect of head leases on
investment and development property. A number of these leases
provide for payment of contingent rent, usually a proportion of net
rental income, in addition to the rents above.
17 Convertible bonds
2.875 per cent convertible bonds (the 2.875 per cent bonds)
In 2016 the Group issued GBP375.0 million 2.875 per cent
Guaranteed Convertible Bonds due 2022 at par, all of which remain
outstanding at 31 December 2018. Under the terms of the 2.875 per
cent bonds, the exchange price is adjusted upon certain events
including the payment of dividends by the Company over a certain
threshold. At 31 December 2018 the exchange price was GBP3.7506 per
ordinary share (2017: GBP3.7506).
The 2.875 per cent bonds are designated as at fair value through
profit or loss and so are presented on the balance sheet at fair
value. Gains and losses in respect of own credit risk are
recognised in other comprehensive income and all other gains and
losses are recognised in the income statement through the change in
fair value of financial instruments line.
At 31 December 2018, the fair value of the 2.875 per cent bonds
was GBP314.9 million (2017: GBP377.3 million). During the year
interest of GBP10.8 million (2017: GBP10.8 million) in respect of
these bonds has been recognised within finance costs.
2.5 per cent convertible bonds (the 2.5 per cent bonds)
In 2012 the Group issued GBP300.0 million 2.5 per cent
Guaranteed Convertible Bonds due 2018 at par, GBP160.4 million of
which were outstanding at 31 December 2017. The outstanding 2.5 per
cent bonds were settled in cash on 4 October 2018, the Final
Maturity Date.
During the year interest of GBP3.0 million (2017: GBP6.7
million) in respect of these bonds has been recognised within
finance costs.
18 Deferred tax
Under IAS 12 Income Taxes, provision is made for the deferred
tax assets and liabilities associated with the revaluation of
assets and liabilities at the corporate tax rate expected to apply
to the Group at the time the temporary differences are expected to
reverse. For those UK assets and liabilities benefitting from REIT
exemption the relevant tax rate will be 0 per cent (2017: 0 per
cent), and for other UK assets and liabilities the relevant rate
will be 19 per cent if the temporary difference is expected to be
realised before 1 April 2020 and 17 per cent if it is expected to
be realised on or after 1 April 2020 (2017: 19 per cent before 1
April 2020, 17 per cent thereafter). For Spanish assets and
liabilities the relevant tax rate will be 25 per cent (2017: 25 per
cent).
Movements in the provision for deferred tax:
Investment Other
and development Other temporary
property investments differences Total
GBPm GBPm GBPm GBPm
----------------------------------------- ---------------- ------------ ------------ ------
Provided deferred tax provision/(asset):
At 1 January 2017 - 0.1 (0.1) -
Acquisition of intu Xanadú 84.5 - (6.8) 77.7
Recognised in the income statement 24.8 - (0.8) 24.0
Recognised in other comprehensive
income - (0.1) - (0.1)
Foreign exchange movements 1.8 - (0.1) 1.7
Disposal of subsidiaries (86.5) - 6.9 (79.6)
At 31 December 2017 24.6 - (0.9) 23.7
Recognised in the income statement (5.5) - (0.3) (5.8)
Foreign exchange movements 0.1 - - 0.1
At 31 December 2018 19.2 - (1.2) 18.0
------------------------------------------ ---------------- ------------ ------------ ------
The net deferred tax provision of GBP18.0 million arises in
respect of the revaluation of development property at intu Costa
del Sol, partially offset by tax losses in the same company.
At 31 December 2018, the Group had unrecognised deferred tax
assets calculated at a tax rate of 17 per cent (2017: 17 per cent)
of GBP51.1 million (2017: GBP43.1 million) for surplus UK revenue
tax losses carried forward, GBP31.4 million (2017: GBP45.6 million)
for temporary differences on derivative financial instruments,
GBP0.5 million (2017: GBP0.5 million) for temporary differences on
capital allowances, GBP1.2 million (2017: nil) for other
investments and GBP5.8 million (2017: GBP5.8 million) for capital
losses.
In accordance with the requirements of IAS 12 Income Taxes, the
deferred tax asset has not been recognised on the Group's balance
sheet due to uncertainty over the level of profits that will be
available in the non-REIT elements of the Group in future
periods.
19 Share capital and share premium
Share Share
capital premium
GBPm GBPm
-------------------------------------------------------- -------- --------
Issued and fully paid:
At 31 December 2018 and 31 December 2017: 1,355,040,243
ordinary shares of 50 pence each 677.5 1,327.4
-------------------------------------------------------- -------- --------
At 20 February 2019 the Company had an unexpired authority to
repurchase shares up to a maximum of 135,504,024 shares with a
nominal value of GBP67.8 million, and the Directors have an
unexpired authority to allot up to a maximum of 451,608,081 shares
with a nominal value of GBP225.8 million.
Included within the issued share capital at 31 December 2018 are
11,216,115 ordinary shares (2017: 11,633,680) held by the Trustee
of the ESOP which is operated by the Company (see note 20). The
nominal value of these shares at 31 December 2018 is GBP5.6 million
(2017: GBP5.8 million).
20 Employee Share Ownership Plan (ESOP)
The cost of shares in intu properties plc held by the Trustee of
the Employee Share Ownership Plan operated by the Company is
accounted for as a deduction from equity.
The purpose of the ESOP is to acquire and hold shares which will
be transferred to employees in the future under the Group's
employee incentive arrangements, including joint ownership of
shares in its role as Trustee of the Joint Share Ownership Plan.
Dividends of GBP1.6 million (2017: GBP1.7 million) in respect of
these shares have been waived by agreement.
2018 2017
--------------- ---------------
Shares Shares
million GBPm million GBPm
--------------- -------- ----- -------- -----
At 1 January 11.6 39.1 12.1 40.8
Acquisitions 0.6 0.9 0.4 1.3
Disposals (1.0) (3.0) (0.9) (3.0)
--------------- -------- ----- -------- -----
At 31 December 11.2 37.0 11.6 39.1
--------------- -------- ----- -------- -----
21 Disposal of intu Chapelfield
On 31 January 2018 the Group sold 50 per cent of its interest in
intu Chapelfield, a wholly owned subsidiary, to LaSalle Investment
Management (acting on behalf of Greater Manchester Pension Fund and
West Yorkshire Pension Fund) for final cash consideration of
GBP145.1 million before expenses of GBP1.6 million. Following this
transaction intu Chapelfield ceased to be accounted for as a
subsidiary and is now a joint venture. Therefore the assets and
liabilities of intu Chapelfield are no longer recorded at 100 per
cent in the Group's balance sheet but the remaining 50 per cent
interest is included in investment in joint ventures at an initial
value of GBP151.9 million. As a result of this transaction the
Group has recorded a loss on disposal of GBP9.0 million in the
income statement. The cash flow statement records a net inflow of
GBP143.2 million comprising the net consideration received of
GBP143.5 million less cash in the business of GBP0.8 million
reclassified to investment in joint venture, net of cash classified
as held for sale at 31 December 2017 of GBP0.5 million.
The assets and liabilities of the subsidiaries disposed of, at
100 per cent, are set out below:
GBPm
Assets
Investment and development property 302.0
Cash and cash equivalents 0.8
Trade and other receivables 6.6
----------------------------------------------------------- -----
Total assets 309.4
----------------------------------------------------------- -----
Liabilities
Trade and other payables (5.0)
Total liabilities (5.0)
----------------------------------------------------------- -----
Net assets 304.4
----------------------------------------------------------- -----
Net assets (at 50 per cent) 152.2
----------------------------------------------------------- -----
Fair value of consideration received (including fair value
adjustments of GBP0.3 million) 143.2
----------------------------------------------------------- -----
Loss on disposal of subsidiaries 9.0
----------------------------------------------------------- -----
22 Capital commitments
At 31 December 2018 the Board had approved GBP233.0 million
(2017: GBP253.8 million) of future expenditure for the purchase,
construction, development and enhancement of investment property.
Of this, GBP188.5 million (2017: GBP145.9 million) is contractually
committed. The majority of this is expected to be spent during 2019
and 2020.
23 Cash generated from operations
2018 2017
Notes GBPm GBPm
---------------------------------------------------- ----- --------- ------
(Loss)/profit before tax, joint ventures and
associates (1,139.6) 190.4
Adjusted for:
Revaluation of investment and development property 10 1,332.8 (30.8)
Loss on disposal of subsidiaries 3 8.5 1.8
Gain on sale of investment and development property (1.4) -
Depreciation 4.3 2.9
Share-based payments 2.8 2.3
Lease incentives and letting costs (9.3) (4.1)
Net finance costs 5 147.5 218.2
Changes in working capital:
Change in trade and other receivables (5.3) (0.6)
Change in trade and other payables (20.6) (14.5)
---------------------------------------------------- ----- --------- ------
Cash generated from operations 319.7 365.6
---------------------------------------------------- ----- --------- ------
24 Related party transactions
Key management1 compensation is analysed below:
2018 2017
GBPm GBPm
-------------------------------------------- ----- -----
Salaries and short-term employee benefits 4.9 5.4
Pensions and other post-employment benefits 0.8 0.7
Share-based payments 1.7 2.0
7.4 8.1
-------------------------------------------- ----- -----
1 Key management comprises the Directors of intu properties plc
and the Executive Committee who have been designated as persons
discharging managerial responsibility (PDMR).
During 2017 the Group's joint ventures in intu Puerto Venecia
and intu Asturias sold shares in subsidiaries, previously wholly
owned by the respective joint ventures, listed on the Spanish MaB
to PDMR's of the Group. The total value of the shares at 31
December 2018 is EUR1.3 million for each joint venture,
representing 1 per cent of the respective outstanding share
capital. The sale of shares in these entities was required to
comply with Spanish MaB free float listing requirements. The Group
provided an interest-free loan to PDMR's to enable them to purchase
the shares. The loans are treated as a taxable benefit which
accordingly is included in the above table.
As John Whittaker, Deputy Chairman and Non-Executive Director of
intu properties plc, is the Chairman of the Peel Group (Peel),
members of Peel are considered to be related parties. Total
transactions between the Group and members of Peel are shown
below:
2018 2017
GBPm GBPm
------------ ----- -----
Income 1.3 1.3
Expenditure (0.7) (0.6)
------------ ----- -----
Income predominantly relates to leases of office space and
contracts to provide advertising services. Expenditure
predominantly relates to costs incurred under a management services
agreement, travel costs and the supply of utilities. All contracts
are on an arm's length basis at commercial rates.
Balances outstanding between the Group and members of Peel at 31
December 2018 and 31 December 2017 are shown below:
2018 2017
GBPm GBPm
-------------------------------- ----- -----
Net investment in finance lease 1.2 1.6
Amounts owed by members of Peel 0.3 1.0
Amounts owed to members of Peel (0.1) -
-------------------------------- ----- -----
Under the terms of the Group's acquisition of intu Trafford
Centre from Peel in 2011, Peel have provided a guarantee in respect
of Section 106 planning obligation liabilities at Barton Square
which at 31 December 2018 totalled GBP12.4 million (2017: GBP12.4
million).
During 2016, the Group agreed terms on three advertising
services agreements related to digital screens with Peel
Advertising Limited (a member of Peel) under which Peel will
procure advertising on behalf of the Group. The minimum fixed
payments in these agreements have been classified as a finance
lease (see net investment in finance lease above).
25 General information
The Company is a public limited company incorporated in England
and Wales and domiciled in the UK. The address of its registered
office is 40 Broadway, London SW1H 0BT.
The Company has its primary listing on the London Stock
Exchange. The Company has a secondary listing on the Johannesburg
Stock Exchange, South Africa.
Investment and development property (unaudited)
1 Property data
Market Net initial 'Topped-up' Nominal
value Revaluation yield NIY equivalent Occupancy
GBPm (deficit)/surplus (EPRA) (EPRA) yield (EPRA)
---------------------------- -------- ------------------ ----------- ----------- ----------- ---------
At 31 December 2018
Subsidiaries
intu Trafford Centre 2,098.0 -10% 4.4% 4.4% 4.7% 98%
intu Lakeside 1,250.0 -15% 3.9% 4.5% 4.9% 97%
intu Metrocentre 841.8 -10% 4.8% 5.4% 5.7% 95%
intu Merry Hill 777.2 -16% 4.5% 4.8% 5.6% 93%
intu Braehead 429.9 -20% 6.1% 6.2% 6.3% 99%
Manchester Arndale 409.9 -12% 4.6% 4.9% 5.6% 98%
intu Watford 407.4 -11% 3.7% 3.8% 5.3% 96%
intu Derby 372.5 -19% 6.6% 6.7% 7.2% 95%
intu Eldon Square 280.7 -13% 5.4% 5.4% 5.5% 99%
intu Victoria Centre 261.0 -28% 6.1% 6.3% 6.5% 98%
intu Milton Keynes 256.5 -11% 5.0% 5.0% 5.3% 98%
Cribbs Causeway 216.7 -10% 5.3% 5.5% 5.6% 97%
OtherB 456.5
---------------------------- -------- ------------------ ----------- ----------- ----------- ---------
Investment and development
property excluding Group's
share of joint ventures 8,058.1
Joint ventures
St David's, Cardiff 294.6 -14% 4.9% 5.2% 5.2% 92%
intu Xanadú 243.1 +1%A 4.4% 4.7% 5.4% 98%
intu Puerto Venecia 241.1 +3%A 4.5% 4.7% 5.7% 100%
intu Asturias 144.6 +1%A 4.6% 4.7% 5.3% 99%
intu Chapelfield 133.6 -13% 5.5% 5.5% 5.8% 99%
OtherC 52.3
---------------------------- -------- ------------------ ----------- ----------- ----------- ---------
Investment and development
property including Group's
share of joint ventures 9,167.4 4.75%D 4.98%D 5.44%D 97%
---------------------------- -------- ------------------ ----------- ----------- ----------- ---------
At 31 December 2017
including Group's share
of joint ventures 10,222.7 4.20%D 4.36%D 5.03%D 97%
---------------------------- -------- ------------------ ----------- ----------- ----------- ---------
A Calculated in local currency.
B Includes the Group's interests in intu Potteries, intu
Broadmarsh, Soar at intu Braehead, development land in Spain and
Sprucefield, Northern Ireland.
C Includes the Group's interest in intu Uxbridge.
D Weighted average yields exclude developments.
31 December 31 December
2018 2017
GBPm GBPm
-------------------------------------- ----------- -----------
Passing rent 428.9 426.9
Annual property income 474.1 462.2
ERV1 566.3 572.6
Weighted average unexpired lease term 7.2 years 7.5 years
-------------------------------------- ----------- -----------
1 ERV is presented excluding the net impact of non-recoverable
charges. The 31 December 2017 figure has been adjusted to the same
basis.
Please refer to the glossary for definitions of terms.
2 Analysis of capital return in the year - including Group's
share of joint ventures
Market value Revaluation (deficit)/surplus
----------------- -------------------------------
2018 2017 2018 2018
GBPm GBPm GBPm %
------------------------------------------ ------- -------- ------------------ -----------
Like-for-like property 8,117.6 9,203.8 (1,178.9) (11.8)
50% retained interest in intu Chapelfield
(classified as held for sale
at 31 December 2017) 133.6 - (20.6) (13.4)
Spain developments 232.3 212.8 (7.2) (3.4)
UK other including developments1 683.9 806.1 (198.3) (21.5)
------------------------------------------ ------- -------- ------------------ -----------
Total investment and development property 9,167.4 10,222.7 (1,405.0) (13.3)
------------------------------------------ ------- -------- ------------------ -----------
1 UK other including developments represents valuation movements
on investment and development property valued below GBP200 million
each. This category also includes
intu Watford (non like-for-like).
3 Analysis of net rental income in the year - including Group's
share of joint ventures
Year ended 31 December Movement
------------------------ ------------
2018 2017
GBPm GBPm GBPm %
------------------------------------------------ ----------- ----------- ----- -----
Like-for-like property 420.1 417.8 2.3 0.6
Acquisition and part disposal: intu Xanadú 11.5 13.0 (1.5) n/a
Part disposal: intu Chapelfield (50%) - 7.0 (7.0) n/a
Developments 18.9 22.2 (3.3) n/a
------------------------------------------------ ----------- ----------- ----- -----
Net rental income 450.5 460.0 (9.5) (2.1)
------------------------------------------------ ----------- ----------- ----- -----
Financial covenants (unaudited)
Intu (SGS) Finance plc and Intu (SGS) Finco Limited (Secured
Group Structure)
Interest Interest
Loan LTV LTV cover cover
GBPm Maturity covenant actual covenant actual
--------------------- ------- -------- --------- ------- --------- --------
Term loan 351.8 2021
3.875 per cent bonds 450.0 2023
4.625 per cent bonds 350.0 2028
4.250 per cent bonds 350.0 2030
--------------------- ------- -------- --------- ------- --------- --------
1,501.8 80% 57% 125% 228%
--------------------- ------- -------- --------- ------- --------- --------
Covenants are tested on the Security Group, the principal assets
of which are intu Lakeside, intu Braehead, intu Watford, intu Derby
and intu Victoria Centre.
The structure has a tiered operating covenant regime giving the
Group a significant degree of flexibility when the covenants are
below certain levels. In higher tiers the level of flexibility is
reduced. The Group retains operating control at loan to value below
72.5 per cent and interest cover above 1.4x. No financial covenant
default occurs unless the loan to value exceeds 80 per cent or the
interest cover falls below 1.25x.
The Trafford Centre Finance Limited
There are no financial covenants on the intu Trafford Centre
debt of GBP744.4 million at 31 December 2018. However, a debt
service cover ratio is assessed quarterly and where this falls
below specified levels restrictions come into force. The loan to 31
December 2018 market value ratio is 37 per cent. No restrictions
are in place at present.
Intu Metrocentre Finance plc
Interest Interest
Loan LTV LTV cover cover
GBPm Maturity covenant actual covenant actual
--------------------- ----- -------- --------- ------- --------- --------
4.125 per cent bonds 485.0 2023 100% 58% 125% 217%
--------------------- ----- -------- --------- ------- --------- --------
The structure's covenant regime gives the Group a significant
degree of flexibility when the covenants are below certain levels.
The Group retains operating control at loan to value below 70 per
cent and interest cover above 1.4x. No financial covenant default
occurs unless loan to value exceeds 100 per cent or the interest
cover falls below 1.25x.
Other asset-specific debt
Loan to
Loan outstanding 31 December
at 31 December 2018 Interest Interest
20181 LTV market cover cover
GBPm Maturity covenant value2 covenant actual3
------------------------ ---------------- -------- --------- ------------ --------- --------
Sprucefield 25.2 2020 65% 57% 150% 332%
intu Uxbridge4 26.0 2020 70% 65% 125% 244%
St David's, Cardiff 163.2 2021 65% 55% 150% 230%
intu Milton Keynes 140.5 2021 65% 55% 150% 280%
intu Trafford Centre,
Barton Square5 25.0 2021 65% 38% 150% 432%
intu Trafford Centre 250.0 2022 65% 49% 103%6 119%6
intu Chapelfield 74.0 2023 65% 55% 150% 266%
intu Merry Hill 478.1 2024 75% 62% 150% 262%
intu Asturias4 (EUR) 60.5 2021 65% 38% 150% 653%
intu Xanadú4 (EUR) 131.5 2022 65% 49% 150% 433%
intu Puerto Venecia4
(EUR) 112.5 2025 65% 42% 150% 441%
------------------------ ---------------- -------- --------- ------------ --------- --------
1 The loan values are the actual principal balances outstanding
at 31 December 2018, which take into account any principal
repayments made up to 31 December 2018. The balance sheet value of
the loans includes unamortised fees.
2 The loan to 31 December 2018 market value provides an
indication of the impact the 31 December 2018 property valuations
could have on the LTV covenants. The actual timing and manner of
testing LTV covenants varies and is loan specific.
3 Based on latest certified figures, calculated in accordance
with loan agreements, which have been submitted between 31 December
2018 and 7 February 2019. The calculations are loan specific and
include a variety of historical, forecast and in certain instances
a combined historical and forecast basis.
4 Debt shown is consistent with the Group's economic interest.
5 In addition to this term facility, we have a committed
development funding facility of GBP25 million of which GBP3.3
million was drawn at 31 December 2018.
6 Covenant is a debt service cover ratio (includes interest and scheduled debt repayments).
Intu Debenture plc
Capital Capital Interest Interest
Loan cover cover cover cover
GBPm Maturity covenant actual covenant actual
----- -------- --------- ------- --------- --------
231.4 2027 150% 186% 100% 111%
----- -------- --------- ------- --------- --------
The debenture is currently secured on a number of the Group's
properties including intu Eldon Square, intu Potteries and Soar at
intu Braehead. During the year, intu Broadmarsh was withdrawn from
the debenture.
Should the capital cover or interest cover test be breached,
Intu Debenture plc (the 'Issuer') has three months from the date of
delivery of the valuation or the latest certificate to the Trustees
to make good any deficiencies. The Issuer may withdraw property
secured on the debenture by paying a sum of money or through the
substitution of alternative property provided that the capital
cover and interest cover tests are satisfied immediately following
the substitution.
Financial covenants on corporate facilities
Interest Interest Borrowings/net
Net worth Net worth cover cover worth Borrowings/net
covenant actual covenant actual covenant worth actual
--------------------------- ---------- ---------- --------- -------- -------------- --------------
GBP600m facility, maturing
in 2021* GBP1,200m GBP2,174m 120% 194% 125% 84%
GBP375m 2.875 per cent
convertible
bonds, due in 2022 (note
17)** n/a n/a n/a n/a 175% 15%
--------------------------- ---------- ---------- --------- -------- -------------- --------------
* Tested on the Borrower Group which excludes, at the Group's
election, certain subsidiaries with asset-specific finance. The
facility is secured on the Group's investments in Manchester
Arndale 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 Average
amount rate
GBPm %
----------------------- ------- -------
In effect on or after:
1 year 1,838.4 2.85
2 years 1,787.2 2.89
5 years 1,268.2 3.11
10 years 670.1 4.90
15 years 457.8 4.64
----------------------- ------- -------
Financial information including share of joint ventures
(unaudited)
For the year ended 31 December 2018
The information in this section is presented to show the Group
including share of joint ventures. A reconciliation from the
amounts shown in the Group's income statement and balance sheet is
provided as follows.
Underlying earnings
2018 2017
---------------- --------- --------------- ---------------- --------- ---------------
Group including
Share Group including Share share
Group underlying of joint share of Group underlying of joint of joint
profit ventures joint ventures profit ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Rent receivable 467.3 60.7 528.0 503.4 42.8 546.2
Service charge income 107.0 13.5 120.5 109.1 8.7 117.8
Facilities management
income
from joint ventures 6.8 (2.3) 4.5 3.5 (0.7) 2.8
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Revenue 581.1 71.9 653.0 616.0 50.8 666.8
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Net rental income 398.5 52.0 450.5 423.4 36.6 460.0
Net other income 5.3 (2.4) 2.9 3.0 (2.1) 0.9
Administration expenses (42.9) (1.1) (44.0) (40.9) (0.7) (41.6)
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Underlying operating
profit 360.9 48.5 409.4 385.5 33.8 419.3
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Finance costs (210.8) (6.3) (217.1) (213.9) (6.0) (219.9)
Finance income 14.8 (12.2) 2.6 12.6 (9.3) 3.3
Other finance costs (5.9) - (5.9) (5.9) - (5.9)
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Underlying net finance
costs (201.9) (18.5) (220.4) (207.2) (15.3) (222.5)
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
Underlying profit before
tax, joint ventures
and associates 159.0 30.0 189.0 178.3 18.5 196.8
Tax on underlying profit (0.1) (0.6) (0.7) 0.1 (0.2) (0.1)
Share of underlying profit
of joint ventures 29.2 (29.2) - 18.3 (18.3) -
Share of underlying profit
of associates 1.2 - 1.2 0.9 - 0.9
Remove amounts
attributable
to non-controlling
interests 3.8 (0.2) 3.6 3.4 - 3.4
Underlying earnings 193.1 - 193.1 201.0 - 201.0
-------------------------- ---------------- --------- --------------- ---------------- --------- ---------------
A reconciliation from the Group's (loss)/profit attributable to
owners of intu properties plc to underlying earnings is provided in
note 8(b).
Consolidated income statement
2018 2017
------------ --------------- --------------- ------------ --------------- ---------------
Group including
Group including share
Group income Share of share of Group income Share of of joint
statement joint ventures joint ventures statement joint ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Revenue 581.1 71.9 653.0 616.0 50.8 666.8
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Net rental income 398.5 52.0 450.5 423.4 36.6 460.0
Net other income 5.3 (2.4) 2.9 3.0 (2.1) 0.9
Revaluation of
investment
and development
property (1,332.8) (72.2) (1,405.0) 30.8 16.5 47.3
Loss on disposal of
subsidiaries (8.5) - (8.5) (1.8) - (1.8)
Gain on sale of
investment
and development
property 1.4 - 1.4 - - -
Loss on sale of other
investments - - - - (0.3) (0.3)
Administration
expenses
- ongoing (42.9) (1.1) (44.0) (40.9) (0.7) (41.6)
Administration
expenses
- exceptional (13.1) (0.1) (13.2) (5.9) (0.7) (6.6)
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Operating
(loss)/profit (992.1) (23.8) (1,015.9) 408.6 49.3 457.9
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Finance costs (210.8) (6.3) (217.1) (213.9) (6.0) (219.9)
Finance income 14.8 (12.2) 2.6 12.6 (9.3) 3.3
Other finance costs (38.8) 4.5 (34.3) (38.9) - (38.9)
Change in fair value
of financial
instruments 87.3 (1.0) 86.3 22.0 1.0 23.0
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Net finance costs (147.5) (15.0) (162.5) (218.2) (14.3) (232.5)
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
(Loss)/profit before
tax, joint ventures
and associates (1,139.6) (38.8) (1,178.4) 190.4 35.0 225.4
Share of post-tax
(loss)/profit
of joint ventures (42.1) 42.1 - 35.5 (35.5) -
Share of post-tax
profit
of associates 2.3 - 2.3 1.3 - 1.3
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
(Loss)/profit before
tax (1,179.4) 3.3 (1,176.1) 227.2 (0.5) 226.7
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Current tax (0.1) (0.6) (0.7) 0.1 (0.2) (0.1)
Deferred tax 5.8 (2.2) 3.6 (24.0) 1.3 (22.7)
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Taxation 5.7 (2.8) 2.9 (23.9) 1.1 (22.8)
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
(Loss)/profit for the
year (1,173.7) 0.5 (1,173.2) 203.3 0.6 203.9
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Non-controlling
interests 41.5 (0.5) 41.0 13.4 (0.6) 12.8
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
(Loss)/profit for the
year attributable to
owners of intu
properties
plc (1,132.2) - (1,132.2) 216.7 - 216.7
---------------------- ------------ --------------- --------------- ------------ --------------- ---------------
Consolidated balance sheet
2018 2017
------------- --------------- --------------- ------------- --------------- ---------------
Group including
Group including share
Group balance Share of share of Group balance Share of of joint
sheet joint ventures joint ventures sheet joint ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Assets
Investment and
development
property 8,021.8 1,108.3 9,130.1 9,179.4 1,013.1 10,192.5
Investment in joint
ventures 823.9 (823.9) - 735.5 (735.5) -
Derivative financial
instruments 4.7 - 4.7 0.3 0.2 0.5
Assets classified as
held for sale - - - 309.1 - 309.1
Cash and cash
equivalents 239.5 34.8 274.3 228.0 50.2 278.2
Other assets 352.6 59.9 412.5 342.2 54.3 396.5
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Total assets 9,442.5 379.1 9,821.6 10,794.5 382.3 11,176.8
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Liabilities
Borrowings (5,035.3) (295.7) (5,331.0) (4,997.8) (300.1) (5,297.9)
Derivative financial
instruments (285.2) (3.5) (288.7) (347.8) (2.5) (350.3)
Liabilities
associated
with assets
classified as held
for
sale - - - (6.2) - (6.2)
Other liabilities (297.6) (76.2) (373.8) (313.5) (76.5) (390.0)
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Total liabilities (5,618.1) (375.4) (5,993.5) (5,665.3) (379.1) (6,044.4)
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Net assets 3,824.4 3.7 3,828.1 5,129.2 3.2 5,132.4
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Non-controlling
interests (12.7) (3.7) (16.4) (54.2) (3.2) (57.4)
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Net assets
attributable
to owners of
intu properties plc 3,811.7 - 3,811.7 5,075.0 - 5,075.0
-------------------- ------------- --------------- --------------- ------------- --------------- ---------------
Investment and development property
2018 2017
GBPm GBPm
-------------------------------------------------------------- ------- --------
Balance sheet carrying value of investment and development
property 9,130.1 10,192.5
Tenant incentives included within trade and other receivables 125.6 118.5
Head leases included within finance leases in borrowings (88.3) (88.3)
-------------------------------------------------------------- ------- --------
Market value of investment and development property 9,167.4 10,222.7
-------------------------------------------------------------- ------- --------
Net external debt
The table below provides a reconciliation between the components
of net debt included on the Group's balance sheet and net external
debt including the Group's share of joint ventures' debt and
cash.
2018 2017
GBPm GBPm
----------------------------------------------------------- ------- -------
Total borrowings 5,035.3 4,997.8
Cash and cash equivalents (239.5) (228.0)
----------------------------------------------------------- ------- -------
Net debt 4,795.8 4,769.8
Less Metrocentre compound financial instrument (189.5) (183.7)
Less cash and cash equivalents within assets classified
as held for sale - (0.5)
----------------------------------------------------------- ------- -------
Net external debt - before Group's share of joint ventures 4,606.3 4,585.6
Add share of borrowings of joint ventures 295.7 300.1
Less share of cash of joint ventures (34.8) (50.2)
----------------------------------------------------------- ------- -------
Net external debt - including Group's share of joint
ventures 4,867.2 4,835.5
----------------------------------------------------------- ------- -------
Analysed as:
Debt including Group's share of joint ventures 5,141.5 5,113.7
Cash including Group's share of joint ventures (274.3) (278.2)
----------------------------------------------------------- ------- -------
Net external debt - including Group's share of joint
ventures 4,867.2 4,835.5
----------------------------------------------------------- ------- -------
Debt to assets ratio
2018 2017
GBPm GBPm
-------------------------------------------------------- --------- ---------
Market value of investment and development property 9,167.4 10,222.7
Add market value of investment and development property
classified as assets held for sale - 306.5
-------------------------------------------------------- --------- ---------
9,167.4 10,529.2
Net external debt (4,867.2) (4,835.5)
-------------------------------------------------------- --------- ---------
Debt to assets ratio 53.1% 45.9%
-------------------------------------------------------- --------- ---------
Interest cover
2018 2017
GBPm GBPm
---------------------------- ------- -------
Finance costs (217.1) (219.9)
Finance income 2.6 3.3
---------------------------- ------- -------
(214.5) (216.6)
---------------------------- ------- -------
Underlying operating profit 409.4 419.3
Interest cover 1.91x 1.94x
---------------------------- ------- -------
Underlying profit statement (unaudited)
For the year ended 31 December 2018
The underlying profit information in the table below shows the
Group including share of joint ventures on a line-by-line
basis.
Six months Six months Six months Six months
Year ended Year ended ended ended ended ended
31 December 31 December 31 December 31 December 30 June 30 June
2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Net rental income 450.5 460.0 227.4 233.8 223.1 226.2
Net other income 2.9 0.9 0.9 0.8 2.0 0.1
Administration expenses (44.0) (41.6) (22.3) (21.0) (21.7) (20.6)
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Underlying operating
profit 409.4 419.3 206.0 213.6 203.4 205.7
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Finance costs (217.1) (219.9) (111.4) (112.4) (105.7) (107.5)
Finance income 2.6 3.3 1.3 2.2 1.3 1.1
Other finance costs (5.9) (5.9) (3.0) (3.0) (2.9) (2.9)
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Underlying net finance
costs (220.4) (222.5) (113.1) (113.2) (107.3) (109.3)
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Underlying profit before
tax and associates 189.0 196.8 92.9 100.4 96.1 96.4
Tax on underlying profit (0.7) (0.1) (0.3) 0.1 (0.4) (0.2)
Share of underlying profit
of associates 1.2 0.9 0.6 0.5 0.6 0.4
Remove amounts attributable
to
non-controlling interests 3.6 3.4 1.4 1.5 2.2 1.9
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Underlying earnings 193.1 201.0 94.6 102.5 98.5 98.5
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Underlying EPS (pence) 14.4p 15.0p 7.0p 7.6p 7.3p 7.3p
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
Weighted average number
of shares (million) 1,343.7 1,343.2 1,343.8 1,343.4 1,343.6 1,343.1
---------------------------- ------------ ------------ ------------ ------------ ---------- ----------
For the reconciliation from basic EPS see note 8(b).
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 APMs throughout this report which
it believes are more appropriate to the Group's current
circumstances. These EPRA measures are calculated in accordance
with the EPRA Best Practices Recommendations Guidelines.
In 2018, the Group retained its EPRA Gold Award for exceptional
compliance with the EPRA Best Practice Recommendations.
The EPRA measures are summarised below and detailed in the
tables following and notes referenced:
Table/note 2018 2017
------------------------------------------------- ----------- ----------- -----------
EPRA cost ratio (including direct vacancy costs) table 2 20.1% 19.4%
EPRA cost ratio (excluding direct vacancy costs) table 2 15.3% 15.1%
EPRA earnings note 8(b) GBP210.5m GBP184.5m
* per share note 8(b) 15.7p 13.7p
EPRA NAV note 9(b) GBP3,947.1m GBP5,287.3m
* per share note 9(b) 293p 393p
EPRA NNNAV note 9(c) GBP3,640.7m GBP4,695.8m
* per share note 9(c) 271p 349p
EPRA NIY table 3 4.8% 4.2%
EPRA 'topped-up' NIY table 3 5.0% 4.4%
EPRA vacancy rate table 4 3.3% 3.0%
------------------------------------------------- ----------- ----------- -----------
Details of the Group's performance against the EPRA Best
Practice Recommendations on Sustainability Reporting can be found
in full in the 2018 corporate responsibility report. In 2018, the
Group retained its Gold EPRA Sustainability Best Practice
Recommendations award.
2 EPRA cost ratios
2018 2017
GBPm GBPm
------------------------------------------------- ------ ------
Administration expenses - ongoing 44.0 41.6
Net service charge costs 18.5 19.1
Other non-recoverable costs 44.4 46.6
Remove:
Service charge costs recovered through rents (4.6) (6.5)
------------------------------------------------- ------ ------
EPRA costs - including direct vacancy costs 102.3 100.8
Direct vacancy costs (24.3) (22.6)
------------------------------------------------- ------ ------
EPRA costs - excluding direct vacancy costs 78.0 78.2
------------------------------------------------- ------ ------
Rent receivable 528.0 546.2
Rent payable (14.6) (20.5)
------------------------------------------------- ------ ------
Gross rental income less ground rent payable 513.4 525.7
Remove:
Service charge costs recovered through rents (4.6) (6.5)
------------------------------------------------- ------ ------
Gross rental income 508.8 519.2
------------------------------------------------- ------ ------
EPRA cost ratio (including direct vacancy costs) 20.1% 19.4%
------------------------------------------------- ------ ------
EPRA cost ratio (excluding direct vacancy costs) 15.3% 15.1%
------------------------------------------------- ------ ------
3 EPRA NIY and 'topped-up' NIY
2018 2017
GBPm GBPm
---------------------------------------------------- ----- ------
Investment and development property 9,167 10,223
Less developments (342) (379)
---------------------------------------------------- ----- ------
Completed property portfolio 8,825 9,844
Allowance for estimated purchasers' costs 609 673
---------------------------------------------------- ----- ------
Gross up completed property portfolio valuation 9,434 10,517
---------------------------------------------------- ----- ------
Annualised cash passing rental income 474 462
Property outgoings (25) (25)
---------------------------------------------------- ----- ------
Annualised net rents 449 437
Notional rent on expiration of rent-free periods or
other lease incentives 25 23
---------------------------------------------------- ----- ------
Topped-up net annualised rent 474 460
---------------------------------------------------- ----- ------
EPRA NIY 4.8% 4.2%
---------------------------------------------------- ----- ------
EPRA 'topped-up' NIY 5.0% 4.4%
---------------------------------------------------- ----- ------
EPRA NIY and 'topped-up' NIY by property is given in the
investment and development property section.
4 EPRA vacancy rate
2018 2017
% %
--------------------- ---- ----
intu Trafford Centre 2.1 1.6
intu Lakeside 2.9 5.8
intu Metrocentre 5.1 5.5
intu Merry Hill 6.6 1.8
intu Braehead 1.3 2.5
Manchester Arndale 1.7 1.8
intu Watford 3.9 2.8
intu Derby 4.8 2.1
intu Eldon Square 1.4 1.2
intu Victoria Centre 1.8 1.5
intu Milton Keynes 1.7 0.4
Cribbs Causeway 2.6 1.7
St David's, Cardiff 7.8 6.0
intu Xanadú 2.3 4.5
intu Puerto Venecia 0.5 1.9
intu Asturias 1.1 3.6
intu Chapelfield 0.7 -
3.3 3.0
--------------------- ---- ----
EPRA vacancy rate is the ERV of vacant space divided by total
ERV.
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.
APMs (alternative performance measures) Financial measures of
historical or future financial performance, position or cash flows
of the Group which are not measures defined or specified in
IFRS.
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 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.
EPS (earnings per share) Profit/loss 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 EPS adjusted to exclude valuation
movements, exceptional items and related tax, as calculated in
accordance with EPRA Best Practice Recommendations.
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.
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, derivative financial instruments and deferred tax on
revaluation of investment and development property.
EPRA 'topped-up' NIY EPRA 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.
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.
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.
MSCI Producer of an independent benchmark of property
returns.
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.
NAV (net asset value) per share Net assets attributable to
owners of intu properties plc divided by the number of ordinary
shares in issue at the year 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 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 divided by 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.
PID (Property Income Distribution) 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.
REIT (Real Estate Investment Trust) 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 order for profits of UK property rental businesses to be
exempt from corporation tax, a REIT 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 PIDs. 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.
'Topped-up' NIY Equivalent to EPRA 'topped-up' NIY (see
definition).
Total financial return The change in NAV per share (diluted,
adjusted) plus dividends per share paid in the year 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 year expressed
as a percentage of the capital employed (opening capital value plus
capital expenditure incurred) in the year as calculated by
MSCI.
Underlying EPS EPS adjusted to exclude valuation movements,
exceptional items and related tax.
Underlying figures Amounts described as underlying exclude
valuation movements, exceptional items and related tax.
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
FR BIGDDGUBBGCC
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