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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Intu Properties Plc | LSE:INTU | London | Ordinary Share | GB0006834344 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.752 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Dec 2019 to Dec 2024
TIDMINTU
RNS Number : 5722X
Intu Properties PLC
23 February 2017
23 FEBRUARY 2017
INTU PROPERTIES PLC
AUDITED RESULTS FOR THE YEARED 31 DECEMBER 2016
David Fischel, intu Chief Executive, commented:
"In a year which will be remembered for its political turbulence, intu is pleased to have recorded a strong set of results with six per cent growth in underlying earnings per share, an increased dividend and stable property values, leaving net assets per share (diluted, adjusted) unchanged at 404 pence.
We ended the year with GBP922 million of cash and available facilities, well placed to pursue our pipeline of active management projects, development and acquisition opportunities both in the UK and Spain.
The power and recognition of the intu brand is our major differentiator. With our focus on compelling customer experiences and family friendly fun day-out destinations, we are continuing to meet the demands of the changing retail world, recording increased footfall and 96 per cent occupancy.
Major retailers including Zara and New Look have upsized and upgraded existing units and rolled out more of their exciting brands in our prime regional centres. We welcomed international brands such as Victoria's Secret together with the expansion of premium fashion and lifestyle brands such as Jack Wills, Cath Kidston and Joules. In all, our tenants invested around GBP100 million in new shops and refits over the year which is a significant commitment to our centres.
While the environment for business this year is likely to be challenging as the full impact emerges of the UK's EU referendum vote, we are well positioned as we focus on top quality assets in prime locations with high occupancy and strong footfall. The dividend increase reflects the results for the year and our confidence in intu's prospects. We intend to deliver continuing growth in like-for-like net rental income over the coming years."
Enquiries:
Hot Features
Premium
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
Frédéric Cornet, Instinctif
SA: Partners +27 (0)11 447 3030
A presentation to analysts and investors will take place at UBS, 5 Broadgate, London EC2 at 9.30GMT on 23 February 2017. The presentation will also be available to international analysts and investors through a live audio call and webcast.
The presentation and a copy of this announcement will be available on the Group's website intugroup.co.uk.
Contents:
Highlights of 2016
Chief Executive's review
Operating review
Market review
Top properties
Financial review
Principal risks and uncertainties
Statement of Directors' responsibilities
Financial information
Other information:
Investment and development property
Financial covenants
Financial information including share of joint ventures
Underlying profit statement
Glossary
Dividends
NOTES TO EDITORS
intu is the UK's leading owner, manager and developer of prime regional shopping centres with a growing presence in Spain. We are passionate about creating uniquely compelling experiences, in centre and online, that attract customers, delivering enhanced footfall, dwell time and loyalty. This helps our retailers flourish, driving occupancy and income growth. A FTSE 100 company, we own many of the UK's largest and most popular retail destinations, including nine of the top 20, with super regional centres such as intu Trafford Centre and intu Lakeside and vibrant city centre locations from Newcastle to Watford. We are focused on delivering against four strategic objectives: optimising the performance of our assets to deliver attractive long term total property returns, delivering our UK development pipeline to add value to our portfolio, leveraging the strength of our brand and seizing the opportunity in Spain to create a business of scale. We are committed to our local communities - our centres support around 120,000 jobs representing about 4 per cent of the total UK retail workforce - and to operating with environmental responsibility. Our success creates value for our retailers, investors and the communities we serve.
This press release contains "forward-looking statements" regarding the belief or current expectations of intu properties plc, its Directors and other members of its senior management about intu properties plc's businesses, financial performance and results of operations. These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of intu properties plc and are difficult to predict, that may cause actual results, performance or developments to differ materially from any future results, performance or developments expressed or implied by the forward-looking statements. These forward-looking statements speak only as at the date of this press release. Except as required by applicable law, intu properties plc makes no representation or warranty in relation to them and expressly disclaims any obligation to update or revise any forward-looking statements contained herein to reflect any change in intu properties plc's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Any information contained in this press release on the price at which shares or other securities in intu properties plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.
HIGHLIGHTS OF 2016
Financial highlights (1)
Year ended 31 December
2016 2015
Net rental income (GBPm) (2) 447 428
Underlying earnings (GBPm) 200 187
Property revaluation (deficit)/surplus
(GBPm) (2) (64) 351
Profit for the year (GBPm) 172 518
Underlying EPS (pence) 15.0 14.2
Dividend per share (pence) 14.0 13.7
At 31 December
2016 2015
Market value of investment properties
(GBPm) (2) 9,985 9,602
Net external debt (GBPm) (2) 4,364 4,139
NAV per share (diluted, adjusted) (pence) 404 404
Debt to assets ratio (per cent) (2) 43.7 43.1
1 Please refer to glossary for definition of terms.
2 Including Group's share of joint ventures.
Our results show growth in net rental income and underlying earnings with net asset value per share stable:
-- strong growth in like-for-like net rental income of 3.6 per cent, in line with guidance, with an outstanding first half of the year and the second half matching the strong comparative from 2015
-- underlying earnings increased by 7 per cent to GBP200 million, primarily as a result of the growth in like-for-like net rental income
-- like-for-like property values unchanged in the year absorbing the 1 per cent increase in stamp duty and significantly outperforming the IPD monthly retail index which decreased by 4.7 per cent. Total deficit of
GBP64 million; mostly from developments with the deficit expected to reverse as the projects progress
-- profit for the year of GBP172 million has reduced by GBP346 million, impacted by property revaluations
(2015: GBP518 million including a property revaluation surplus of GBP351 million)
-- underlying earnings per share increased by 6 per cent to 15.0 pence (2015: 14.2 pence) and dividend up
2 per cent to 14.0 pence
-- net asset value per share (diluted, adjusted) of 404 pence unchanged from 2015, delivering a total financial return in the year of 3.4 per cent
-- an active year of asset recycling has enabled us to maintain a similar debt to assets ratio, acquiring the remaining 50 per cent of intu Merry Hill for GBP410 million from the proceeds of the disposals of intu Bromley and our interest in Equity One
-- cash and available facilities of GBP922 million (31 December 2015: GBP588 million)
Presentation of information
Amounts are presented including the Group's share of joint ventures.
Underlying earnings is used by management to assess the underlying performance of the business and is based on an industry standard comparable measure. It excludes valuation movements, exceptional items and related tax.
See financial review for more details on the presentation of information and alternative performance measures used.
HIGHLIGHTS OF 2016
Optimising asset performance
We aim to deliver attractive long-term total property returns from strong, stable income streams
-- like-for-like property values unchanged in the year, significantly outperforming the IPD monthly retail index which fell by 4.7 per cent
-- increased like-for-like net rental income by 3.6 per cent in the year, reflecting improving rental levels from new lettings and rent reviews
-- signed 214 long-term leases (187 in the UK and 27 in Spain) delivering GBP38 million of annual rent at an average of
4 per cent above previous passing rent and in line with valuers' assumptions
-- new lettings offset by the closure of BHS stores leaves occupancy unchanged at 96.0 per cent
-- increased footfall by 1.3 per cent, compared to a 2.0 per cent fall in the national ShopperTrak retail average
Delivering UK developments
By extending and enhancing our existing locations we aim to deliver superior returns
-- capital expenditure of GBP93 million in the year including GBP37 million on the extension of intu Watford and GBP13 million on completed restaurant developments
-- completed the casual dining developments at intu Metrocentre (nine restaurants) and intu Eldon Square
(20 restaurants)
-- good letting progress on the extension of intu Watford which is on budget and on target to open in late 2018
-- intend to commence over GBP200 million of development projects in 2017 - the Nickelodeon-anchored leisure scheme at intu Lakeside, the enclosure of Barton Square at intu Trafford Centre and the redevelopment of intu Broadmarsh
Making the brand count
We leverage the strength of our brand to create compelling experiences for our customers
-- net promoter score, our measure of customer service, consistent at 70 for the year
-- intu Experiences, our dedicated promotions business, generated income of over GBP20 million, equivalent to the rental income of our eighth largest centre
-- intu.co.uk, our online shopping platform with strong editorial content, has attracted over 480 retailers and delivered
28 million website visits in 2016, an increase of 15 per cent on 2015, with sales for retailers of GBP6 million
-- intensity reduction in carbon emissions of 47 per cent since 2010
Seizing the growth opportunity in Spain
Our strategy is to create a business of scale through acquisitions and development projects
-- occupancy remained strong in our two existing centres, with footfall and retailer sales both up by 2 per cent
-- signed 27 leases at 20 per cent above the previous passing rent
-- strong increases in the market value of both centres with intu Asturias up 14 per cent and Puerto Venecia up
10 per cent
-- commenced a EUR7 million project at intu Asturias to develop a previously under-utilised space
-- completed land assembly at intu Costa del Sol and successfully incorporated the proposed shopping resort into the general plan of Torremolinos
CHIEF EXECUTIVE'S REVIEW
intu focuses solely on regional shopping centres both here in the UK and those we are developing and improving in Spain. Our aim is to continue to advance a high-quality and sustainable business that is resilient and well-placed to create long-term value, in the face of changes in the global and national economy and structural changes in retail.
We have made considerable progress in 2016 on our strategic priorities. The core business is performing well and has strong momentum, with many projects due to start in 2017.
We have delivered 6 per cent growth in underlying earnings per share to 15.0 pence, driven by a 3.6 per cent growth in like-for-like net rental income from increased rental levels, improved occupancy and the positive outcome of our recent redevelopment work.
Net asset value per share (diluted, adjusted) has been stable at 404 pence, with overall like-for-like property values unchanged in the year. At 31 December 2016, we had cash and available facilities of GBP922 million, giving us considerable financial flexibility.
Increased focus on the best in class
With the disposal of intu Bromley and completion of our exit from the US on favourable terms, we have continued the process of recycling capital into our super prime regional centres, acquiring the remaining 50 per cent of intu Merry Hill and progressing development projects at other key centres.
Owning 100 per cent of intu Merry Hill allows us to advance the many improvement opportunities more rapidly and due to its size the returns should be meaningful. The first steps are already underway through taking back the former Sainsbury's store to facilitate sizeable re-tenanting transactions.
The intu difference
Our strategic priorities are underpinned by what we call the intu difference. This is shorthand for what differentiates us from other retail landlords. It is how we combine our scale, expertise and insight to create compelling experiences for our customers which in turn deliver good results for our retailers and value for our shareholders and other stakeholders.
Prime centres for quality retailers
The strong growth this year in like-for-like net rental income, following the positive outcome in 2015, is a reflection of our overall approach over the last few years - investing in our prime centres and focusing on getting the right tenants in the right place, paying the right rent, and removing poorer quality tenants and undesirable short-term lets.
Retailers understand the intu difference and appreciate how we deliver customers consistently to our high-footfall locations. They recognise these are locations where they really need to have a presence. The pulling power of our centres has been illustrated in 2016 with key fashion retailers upsizing and making an increased long-term investment, with the likes of Next, Primark, Inditex, H&M and New Look all increasing their store sizes and overall presence in our centres.
We are continuously improving the look of our centres for both retailers and customers. Occupancy is high, and as a result income has been growing and valuations have been stable in an uncertain investment market.
Strengthening our fortresses
We are on site with our extension of intu Watford which will transform the centre into a major regional offering and we have opened two new restaurant redevelopments at intu Eldon Square and intu Metrocentre, which give customers reasons to stay for longer. Both these restaurant developments have delivered good financial returns.
Looking forward to 2017, we have three large projects to get underway: the redevelopment of intu Broadmarsh in Nottingham, the leisure extension at intu Lakeside and the enclosure and extension of Barton Square at intu Trafford Centre.
Delivering a multichannel solution
We are seeing substantial benefits from the brand, starting with intu Experiences, which is now generating over GBP20 million of income a year, equal to our eighth biggest shopping centre. This includes promotions across multiple centres with global brands such as 20th Century Fox, Mercedes Benz and Nespresso.
Our online shopping platform has shown a marked improvement in the year with strong growth in revenue and traffic on intu.co.uk as the number of shoppable retailers has increased. We have continued to develop the website, further enhancing the experience and continually reinforcing the advantage we get from the national intu brand, something not available to our competitors.
All this is evidenced by the growing awareness of the intu brand, recognition of which, on an unprompted basis, has risen strongly in the year to over 20 per cent of UK shoppers surveyed.
Performing strongly in a recovering Spanish economy
Our two existing centres are performing well. At intu Asturias, the new restaurant terrace has been well received and with the centre effectively full we are starting a project to create more units from space not previously lettable. Puerto Venecia in Zaragoza has achieved some good lettings, including Globo and Fnac, which have pushed up occupancy to 97 per cent.
We have entered an exclusivity agreement to acquire the 153,000 sq m Xanadú shopping centre in Madrid. Should this transaction complete, we would then own three of Spain's top-10 centres.
Finally, at intu Costa del Sol we are closing in on the final piece of planning to allow us to start this project and move further forward with our aim of having the best regional centre in five or more of the top-10 shopping regions in Spain in the next five to seven years.
Being a good corporate citizen
Trust in business is vital and good corporate citizenship is engrained in our culture, in how we treat our colleagues, how we operate our centres and how we deal with our customers.
We have a diverse workforce. We have always embraced the principle of a national living wage and we do not operate zero-hours contracts.
We also believe the intu name should be a kite mark for the sort of centre you want in your city and we are very active in the communities in which we operate.
Outlook for 2017
The environment for business is likely to be challenging as the full impact emerges of the UK's EU referendum vote but we are soundly positioned as we concentrate on top-quality assets in prime locations with high occupancy and strong footfall.
Our strategy for 2017 remains unchanged in terms of relentless focus on improving our centres and overall business performance. We intend to deliver continued growth in like-for-like net rental income and we reiterate that we expect this to be in the 0 to 2 per cent range for 2017, subject to no material tenant failures, down in the first half against the strong 2016 comparative and up in the second half year. This includes an adverse impact of some 2 per cent from units being held for redevelopment and from the full year impact of BHS closures.
STRATEGIC REVIEW
OPERATING REVIEW
Our operating review analyses how we have performed in the year and sets out our strategy.
Optimising asset performance
We focus on creating vibrant environments where shoppers want to be and retailers need to be. This increases the value of our centres and provides strong, stable income streams and positive operating metrics. These elements ensure we deliver attractive long-term total property returns.
Valuation
The valuation of our like-for-like investment property portfolio was unchanged, with a small deficit of GBP4.3 million. This was signi cantly ahead of the IPD monthly retail index which reported a 4.7 per cent decrease. The outcome represents the seventh consecutive year of outperformance of the IPD index.
Excluding the negative impact of the 1 per cent increase in the year in stamp duty, from 4 per cent to 5 per cent, our like-for-like portfolio would have increased in value by around 1 per cent. This reflects the improvements in the retail and leisure mix along with the tightening supply of vacant units driving increases in expected future rental values. The strong performance is especially pronounced in centres where we have improved the mix of catering, retail and leisure and now have minimal vacancy, such as intu Chapelfield and intu Eldon Square.
In addition to the like-for-like deficit, we had a GBP60.8 million reduction in the value of redevelopments, predominantly the Charter Place extension to intu Watford. We expect this reduction to reverse as the development progresses, particularly once intu Watford and Charter Place are valued as a single asset rather than separately, as at present. The valuation of intu Watford does not, at this point in the development of Charter Place, reflect any of the anticipated positive impact of the extension on rental values of the existing centre.
The valuation of our portfolio is now spread over three valuers, Cushman & Wakefield, CBRE and Knight Frank, following a tender exercise in 2016. This has resulted in one-third of our assets being valued by a different firm of valuers. Some of the figures in the table below are therefore not fully comparable as there are differences in approach between the firms in how they look at rental value and equivalent yield components of a valuation.
On a like-for-like basis where we had no change in valuer, ERV increased by 1.2 per cent in the year (overall Group unchanged), outperforming the IPD index which indicated a 0.8 per cent increase.
The weighted average nominal equivalent yield at 31 December 2016 was 5.02 per cent, a reduction of 12 basis points in the year, re ecting our ongoing asset management initiatives, reducing vacancy and long average unexpired lease terms. Based on the gross portfolio value, the net initial yield 'topped-up' for the expiry of rent free periods was 4.45 per cent.
Valuation metrics
Full Second First
year half half
2016 2016 2016
----------------------------------------------------- ------ ------- ------
Group revaluation surplus/(deficit) (like-for-like) 0.0% -0.6% +0.6%
IPD(1) capital growth -4.7% -3.5% -1.1%
Group weighted average nominal equivalent yield 5.02% 5.02% 5.01%
Change in Group nominal equivalent yield -12bp +1bp -13bp
IPD(1) equivalent yield shift +29bp +25bp +4bp
Group 'topped-up' initial yield (EPRA) 4.45% 4.45% 4.49%
Group change in like-for-like ERV 0.0% +0.1% -0.1%
IPD(1) change in rental value index +0.8% +0.3% +0.5%
1 IPD monthly index, retail.
The table below shows the main components of the GBP63.8 million revaluation deficit:
Market value Like-for-like
31 December 31 December Surplus/ Surplus/
2016 2015 (deficit) (deficit)
GBPm GBPm GBPm %
intu Lakeside 1,375.0 1,334.0 28.6 2
intu Chapelfield 296.3 272.5 23.6 9
Puerto Venecia, Zaragoza 212.5 166.1 19.3 10
intu Asturias 118.5 89.1 14.3 14
intu Eldon Square 317.7 299.7 10.0 3
intu Potteries 169.0 175.1 (9.3) (5)
St David's, Cardiff 353.3 368.6 (14.3) (4)
intu Metrocentre 945.2 952.3 (15.3) (2)
intu Braehead 546.2 585.5 (40.8) (7)
Other like-for-like 5,047.2 5,041.0 (20.4) -
Total like-for-like 9,380.9 9,283.9 (4.3) -
intu Merry Hill acquisition
(50%) 444.6 - 3.3 n/a
Other additions 6.0 - (0.3) n/a
intu Bromley disposal - 174.1 (1.7) n/a
Redevelopments 153.2 144.4 (60.8) n/a
Total investment and development
property 9,984.7 9,602.4 (63.8)
-- intu Lakeside: completion of new leases for those that expired in 2015 adds certainty to the income streams going forward as well as providing evidence for growth in future rental levels
-- intu Chapelfield: strong demand linked with limited vacant units and improvements to the tenant mix drive rental values and have further enhanced the centre's prime status in its catchment
-- Puerto Venecia: improved occupancy and rental growth in a buoyant Spanish market
-- intu Asturias: limited vacant space and strong operating metrics increase rental growth potential
-- intu Eldon Square: benefit of improved leisure, with Grey's Quarter opening fully let, along with improved tenant mix and minimal vacancy have a favourable impact on the attractiveness of this centre
-- intu Potteries: evidence from the sale of similar assets in early 2016 has led to an adjustment in the yield profile on this centre
-- St David's, Cardiff: impact of increased car park business rates and increase in stamp duty -- intu Metrocentre: impact of increase in stamp duty, with no real increase in rental values
-- intu Braehead: continuation of the less buoyant occupier and investment market in Scotland has resulted in a reduction in value of this centre
-- intu Merry Hill: we acquired the remaining 50 per cent in 2016, which is non like-for-like. The surplus on the centre as a whole benefited from the positive letting activity in the year
-- intu Bromley: book value movement from head lease and incentives accounting
-- redevelopments: since December 2015, the previously income-producing properties of Charter Place have been demolished and the site is now valued on a risk-adjusted cash flow model leading to a deficit which we expect to reverse as the development progresses
Operating metrics
2016 2015
Occupancy 96.0% 95.8%
- of which, occupied by tenants trading in administration 0.5% 0.5%
Like-for-like change in net rental income +3.6% +1.8%
Leasing activity - number, new rent 214, GBP38m 261, GBP46m
- new rent relative to previous passing rent +4% +10%
Footfall +1.3% +0.3%
Retailer sales (like-for-like centres) +0.2% +2.1%
Rent to estimated sales (exc. anchors and major space users) 12.2% 12.5%
Occupancy is 96.0 per cent, a small increase on December 2015, with the impact of our proactive asset management and improved tenant demand offset by the closure of the BHS stores.
Like-for-like net rental income was up 3.6 per cent against 2015 due to the better rental values from strong retailer demand, development units coming back on stream and improved occupancy partially offset by the closure of the BHS stores in August 2016. The outturn was in line with our guidance with the second half of the year matching the strong comparative for 2015 following an outstanding first half-year performance.
We agreed 214 long-term leases in the year, with retailers continuing to focus on increasing their space in prime, high-footfall retail destinations. This amounted to GBP38 million annual rent, at an average of 4 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. Signi cant activity in the year includes:
-- new international brands continuing to expand in the UK. Australian accessories retailer Lovisa signed two of its first five UK leases at intu centres and Victoria's Secret continued its roll out at St David's, Cardiff
-- premium fashion and lifestyle brands expanding with Joules, Jack Wills, Cath Kidston, Calvin Klein, Kuoni and Nespresso all taking space in the year
-- established fashion retailers upsizing and rolling out more of their brands. New Look are increasing their space at intu Trafford Centre as well as continuing the roll out of New Look Men with their largest store to date to open at intu Metrocentre. Inditex have opened a new larger Zara store at intu Trafford Centre as well as introducing Stradivarius, Pull&Bear and Zara Home and at intu Merry Hill, River Island and JD Sports have both upsized
225 shops opened or refitted in our UK centres in 2016, around 8 per cent of our 2,700 units. Tenants have invested GBP96 million in these stores, a significant demonstration of their commitment to our centres.
We settled 297 rent reviews in the year for new rents totalling GBP60 million, an average uplift of 8 per cent on the previous rents.
Our footfall increased by 1.3 per cent in the year as we delivered a compelling mix of retail, catering and leisure along with using the intu brand to promote well-targeted customer-focused events, such as a virtual reality booth at intu Victoria Centre and a beach at intu Lakeside. This compares with the ShopperTrak measure of UK national retail footfall which fell by 2.0 per cent in the year.
Estimated retailer sales in our centres were up 0.2 per cent in 2016, impacted by the closure of BHS. Excluding this, the increase would be 0.5 per cent and similar to the British Retail Consortium trends. The ratio of rents to estimated sales for standard units reduced slightly in the year to 12.2 per cent.
The difference between annual property income of GBP467 million and ERV of GBP543 million represents GBP31 million from vacant units, reversion from lease expiry and rent reviews of GBP40 million and the impact of rents subject to a rent free period of GBP27 million less non-recoverable costs of GBP22 million. Of the GBP40 million reversion, GBP32 million, 7 per cent, is realisable in the next 10 years.
The weighted average unexpired lease term is 7.7 years (31 December 2015: 7.9 years).
Delivering UK developments
In 2016 we spent GBP93 million on capital expenditure including GBP37 million on the extension of intu Watford and GBP13 million on completed casual dining developments.
Looking ahead, we are progressing our near-term pipeline in the UK of GBP655 million which, along with a further GBP1.2 billion of opportunities over the next 10 years, provides a robust platform for organic growth delivering value-enhancing returns.
Near-term pipeline
Our UK development pipeline over the next three years amounts to GBP655 million.
Cost to completion (GBPm)
--------------------------------
Total 2017 2018 2019
------------------------------------- -------- ------ ------ ------
Committed 249 120 119 10
Active asset management pipeline 262 88 90 84
Major extensions and redevelopments 144 38 72 34
Total UK 655 246 281 128
Spain* 231 51 86 94
Total 886 297 367 222
* intu Costa del Sol assumes 50 per cent joint venture partner.
We are committed to spending GBP249 million over the next three years:
-- at intu Watford we are on target and on budget with the 400,000 sq ft extension due to be completed in late 2018. This project has GBP143 million cost to completion. The extension will be anchored by Debenhams and Cineworld and is around two-thirds pre-let, by space, which significantly de-risks the project. As previously stated, the project is expected to deliver a return on cost of 6 to 7 per cent, including 1 to 2 per cent generated through the existing centre
-- other active asset management projects total GBP106 million and include the GBP56 million enclosure and extension of Barton Square and the GBP7 million redevelopment of Halle Square at Manchester Arndale to create a casual dining destination in the heart of Manchester
Our pipeline of planned active asset management projects over the next three years amounts to GBP262 million and we would expect these to generate a stabilised initial yield on cost of 6 to 10 per cent. We have projects at every centre and the flexibility to start these projects when we have the required level of pre-lets. Projects include:
-- at intu Merry Hill we have several projects expected to cost around GBP110 million to deliver our strategy for the centre. These include right-sizing a number of anchors and major space users, which in turn will reduce the number of smaller units, and repositioning the catering and leisure offering
-- mall refurbishment and right-sizing of units at intu Metrocentre costing around GBP26 million
We have progressed the next wave of major extensions and redevelopments and expect to invest an estimated GBP144 million:
-- at intu Lakeside we have signed Nickelodeon to anchor the leisure extension. We continue to progress the other leisure and catering lettings and should be on site in 2017, with the project expected to cost GBP73 million and deliver a stabilised initial yield on cost of around 6 per cent
-- at intu Broadmarsh we are working towards the required level of pre-lets to commence this GBP100 million project, of which our share will be GBP71 million
Future opportunities
Beyond 2019, we have a GBP1.2 billion pipeline of opportunities across several centres with major extensions planned at intu Lakeside, intu Victoria Centre, intu Braehead and Cribbs Causeway, and an upgrade and remodelling of intu Milton Keynes. The rst three projects have planning approvals and we are in the planning process on the other two. We expect these projects to generate a stabilised initial yield on cost of around 7 per cent and we will bring these projects forward in line with tenant demand.
Funding
We will fund our near-term pipeline from cash and available facilities and from recycling capital to deliver superior returns. Cash and available facilities at 31 December 2016 were GBP922 million.
Further recycling potential lies in the introduction of partners into some of our centres. In addition, to fund the future opportunities we expect to raise finance on near-term projects as they complete.
Making the brand count
By combining our scale, expertise and insight to create compelling experiences we are seeing the bene t of the brand grow year-on-year. Our in-house teams ensure we offer the best customer service and experience in a multichannel world.
Customer service
Our focus on putting the customer first is embedded in the business, with our net promoter score, our measure of customer service, consistent at 70.
intu Experiences
We delivered nationwide immersive brand partnerships, mall commercialisation and advertising, which generated income of over GBP20 million in 2016, our in-house team ensuring all promotional activity meets our quality standards. A greater share of this revenue is now from media and promotional activity rather than traditional mall kiosks, thereby enhancing the customer experience.
With over half of the UK's population visiting an intu centre at some point through the year in person or online, we are increasingly working with global brands on a national basis to provide high-quality promotional events, both physically and digitally across multiple centres. One example of this is Playmobil, who sponsored our Christmas grottos across the portfolio.
We also introduce new concepts to our shopping centres, blurring the lines between short- and long-term lettings, including car showroom pop-ups, such as Mercedes Benz, across the portfolio.
intu Digital
In 2016, we generated improved sales for retailers of GBP6 million transacted through intu.co.uk, our premium content publisher and shopping platform, demonstrating the rising attraction of our digital offering. The commission on these sales was further augmented by income from retailers using the intu platform for online marketing campaigns.
We recorded 28 million website visits in 2016, an increase of 15 per cent on the previous year. Key to driving customers to the 480 affiliate retailers on the website is the 2.5 million individuals on our active marketing database delivering above industry average open and click-through rates from online marketing campaigns.
Seizing the growth opportunity in Spain
Our Spanish strategy is to create a business of scale through the acquisitions to date and our pipeline of development projects. Concentrating on the top-10 key catchments, we aim to establish a market-leading position in the country through ownership and management of prime shopping resorts. We own and manage two top-10 Spanish centres and have four development sites with the most advanced being intu Costa del Sol.
Operational performance
Our two centres, intu Asturias and Puerto Venecia, Zaragoza, are bene ting from our active asset management approach and the improving Spanish economy, with footfall and retailer sales both increasing by 2 per cent.
Occupancy is 99 per cent at intu Asturias and 97 per cent at Puerto Venecia where we have reduced the vacancy level in the retail park in the year.
We agreed 27 new long-term lettings in the year, amounting to EUR3 million new annual rent, at an average of 20 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. New names to our Spanish centres included Snipes, Joma Sport and Globo.
intu's 50 per cent share of Puerto Venecia was valued at EUR249 million at 31 December 2016, an increase of EUR24 million (10 per cent). intu's share of intu Asturias increased by EUR18 million (14 per cent) in the year to EUR139 million.
Potential acquisition
We have entered into an exclusivity agreement to acquire the 153,000 sq m Xanadú shopping centre in Madrid. It has footfall of 13 million, 210 stores and Spain's only indoor ski slope. The transaction will initially be funded from a combination of bank financing and existing facilities whilst we look to introduce a joint venture partner at a later date. Should this transaction complete, we would own three of Spain's top-10 centres.
Near-term pipeline
We have committed capital expenditure of EUR10 million and a pipeline of projects costing a further EUR29 million. The committed expenditure is primarily focused on intu Asturias where we have commenced the redevelopment of a previously underutilised area, to be anchored by supermarket retailer, masymas, and have plans to further improve the catering.
We are continuing with our plans for the much anticipated shopping resort development, intu Costa del Sol, just outside Málaga. In 2016 we completed the land assembly and successfully incorporated the proposed resort into the general plan of Torremolinos. With our further design enhancements, the reaction from the occupier market has exceeded expectations. We anticipate being on site in 2017, once we have received the required final regional planning approval, with the total cost expected to be around EUR700 million, including the EUR78 million already incurred by intu, at a stabilised initial yield of around 7 per cent.
Future opportunities
We continue to develop plans at the three other sites in Valencia, Vigo and Palma, with the next development likely to be intu Valencia, following on from intu Costa del Sol.
Acquisitions and disposals
In line with our strategy, we have recycled GBP400 million of capital in the year from non-core assets to focus on our prime centres where we have the opportunity to deliver superior returns.
Acquisitions
In June 2016 we completed the acquisition of the remaining 50 per cent of intu Merry Hill from QIC for GBP410 million. We believe the centre presents a significant opportunity to re-engineer and update the tenant mix. Encouraging large flagship formats and reducing the number of smaller units will make the centre more attractive to retailers and customers, and improve the rental tone. This strategy is similar to that which has been successfully implemented at intu Trafford Centre and intu Lakeside.
Disposals
In January 2016 we disposed of our interest in Equity One for GBP202 million to complete our exit from the US allowing us to focus on our core shopping centres, realising a gain on disposal of GBP74 million. The disposal price was $26 per share.
In December 2016 we completed the disposal of our share of intu Bromley valued at GBP178 million, a small premium to the June 2016 market value and realising initial consideration of GBP82 million.
Corporate responsibility
Making a meaningful difference is important to us. We work closely with our stakeholders to keep communities thriving, to create strong community partnerships and to care for the environment.
Our progress in 2016
Pillar Impact Commitment 2016 performance
-------------- ------------------------ --------------------------------- ---------------------------
Communities Community Support relevant community GBP1.5m charitable
and economy initiatives donations
(2015: GBP1.8m)
Extend employability programmes New retail employability
to all centres by 2025 programme at intu Watford
Economic contribution Demonstrate total economic GBP4.9bn GVA (2015:
impact GBP4.2bn)
Environment Energy and carbon 50% intensity reduction 21% intensity reduction
in carbon emissions by (47% reduction since
2020 against 2010 baseline 2010)
Waste management 99% of waste diverted from 100% diverted (2015:
landfill by 2020 against 100%)
2010 baseline
74% recycled (2015:
75% of waste generated 72%)
recycled by 2020 against
2010 baseline
Water management 10% intensity reduction 2% intensity increase
of m(3) /million customers (14% reduction since
by 2020 against 2010 baseline 2010)
Relationships Customers Improve customer experience 70 average net promoter
score score (2015: 69)
Our people Increase employee volunteering 354 volunteers (2015:
101)
Increase employee awareness 64% staff aware of
of CR CR programmes
MARKET REVIEW
UK investment market
The uncertainty from the outcome of the EU referendum vote has intensified investor caution, but has led to a flight to quality. This is illustrated by prime yields remaining stable, whereas the yield on secondary assets is starting to drift outwards, principally due to lack of demand.
Our top-quality prime shopping centres remain attractive to global investors as demonstrated by our disposal of intu Bromley, with many investors generally attracted to the UK's well regulated, liquid and transparent market.
Development of prime retail property remains low, resulting in limited supply for occupiers and potential upward pressure on rental values in destination centres such as ours.
UK consumer market
Whilst the majority of economic indicators relating to the UK consumer remain strong, uncertainty has increased because of the unknown impact of the EU referendum vote.
Unemployment remains at record low levels, and with wage growth still rising faster than inflation shoppers have increased levels of disposable income. The Asda benchmark index shows their measure of household income 5 per cent higher than the previous year.
Retail spending, as shown by the British Retail Consortium like-for-like non-food retail sales, continues to show an average growth rate of around 1 per cent for 2016 year-on-year.
Consumer confidence, as measured by GfK, shows consumers remain relatively confident about their personal finance situation, but confidence in the general economic situation for the UK has reduced since the EU referendum vote.
Retailer administrations in 2016 were around 50 per cent of the 10-year average, according to the Centre for Retail Research, but higher than 2015, with BHS being the largest casualty. This was the only significant failure in the intu portfolio and accounted for around 1 per cent of our rent roll.
Occupier market
Retail is one of the UK's most dynamic and flexible industries which has shown itself able to adapt quickly to what is a fast-changing environment. 2017 will see retailers facing both structural and economic challenges - the winners will be those with the right stores in the right places, who align their online and in store strategies and who give customers an experience they cannot get elsewhere.
Economic pressures include the impact on retailers' cost bases from the weakness of sterling, business rates revaluations and increases in the national living wage. A potential squeeze on disposable income from higher inflation may be realised and add more pressure. Structurally, retailers are still coming to terms with the opportunities and costs of internet shopping.
On the plus side, going into 2017 consumer confidence has held up since the EU referendum and there is evidence that where customers are offered an enticing mix of retail, catering, leisure and experiences, they come in large numbers, as our raised footfall over the Christmas period shows. Retailers are responding to this trend by focusing on fewer, often larger, stores in the best locations. More retailers are taking an integrated multichannel approach and previously online-only retailers are now looking at physical space to deliver growth.
With our prime portfolio of shopping centres, our focus on compelling customer experiences and our sophisticated online offer we are well positioned to meet the demands of this changing world.
Seven retail trends for 2017:
-- upsizing: top retailers, such as Topshop, Zara, New Look and JD Sports, are increasing their space to create flagship stores in our centres
-- portfolio of brands: as well as upsizing, larger retailers are bringing in new brands. Inditex are adding Stradivarius and Pull&Bear, and New Look Men is becoming a standalone fascia
-- new international retailers: in the last few years we have seen Smiggle, Tiger and Kiko enter the UK market and expand rapidly. This year accessories retailer Lovisa from Australia has opened its first stores
-- aspirational: lifestyle brands are seeing the benefits of shopping centres which offer high ABC1 demographics. Brands such as Jack Wills, Joules and Cath Kidston are all expanding
-- miniaturisation: traditional large-format retailers, car manufacturers like SEAT for example, are taking smaller stores at intu centres to get access to a higher footfall of their core customers
-- reinvention: retailers previously expected to disappear from the high street are reinventing their offer with a focus on customer service. Travel agencies, such as Kuoni and Virgin Holidays are expanding in this market
-- the rise of the day out: with prime shopping centres now seen by customers as a day out destination, new catering and leisure operators are increasing their presence throughout our portfolio
Spanish market
In recent years, the Spanish economy has had significant growth making it one of Europe's fastest growing economies. Forecasts suggest that this is expected to continue into 2017. For the consumer, unemployment is at its lowest level for several years and household spending remains solid. This in turn benefits retail sales which are further enhanced by record levels of tourists.
The investment market remains strong with continuing investor confidence in Spanish real estate supported by an economy that is growing. With the return of bank financing, there is a weight of money in the market looking to invest in quality assets. Due to lack of development in recent years, this is a scarce asset class. All these factors are driving yields lower.
TOP PROPERTIES
Annual Headline
Market Size Number property rent ABC1
value (sq ft Ownership of stores income ITZA customers Key tenants
000)
Super-regional centres
Debenhams,
Topshop,
Selfridges, John
Lewis, Next,
Apple,
Ted Baker,
Victoria's
Secret, Odeon,
Legoland
Discovery
Centre, H&M,
Hamleys,
intu Trafford Marks & Spencer,
Centre GBP2,312m 1,973 100% 233 GBP89.3m GBP433 66% Zara, Sea Life
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
House of Fraser,
Debenhams, Marks
& Spencer,
Topshop,
Zara, Primark,
Vue, Hamleys,
Victoria's
intu Lakeside GBP1,375m 1,435 100% 249 GBP56.9m GBP355 66% Secret
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
House of Fraser,
Marks & Spencer,
Debenhams, Apple,
H&M, Topshop,
Zara,
Primark, River
intu Metrocentre GBP945m 2,108 90% 316 GBP51.6m GBP280 52% Island, Odeon
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
Marks & Spencer,
Debenhams,
Primark,
Next, Topshop,
Asda, Boots, H&M,
intu Merry Hill GBP899m 1,671 100% 213 GBP39.1m GBP195 48% Odeon
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
Marks & Spencer,
Primark, Apple,
Next, H&M,
Topshop,
Hollister,
Superdry,
Sainsbury's,
David's
intu Braehead GBP546m 1,127 100% 122 GBP27.2m GBP250* 57% Bridal
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
John Lewis, Marks
& Spencer, Apple,
Next, Topshop,
Timberland,
Jigsaw,
Hobbs, Hugo Boss,
Cribbs Causeway GBP239m 1,075 33% 152 GBP12.2m GBP305 77% H&M
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
In-town centres
Marks & Spencer,
Debenhams,
Sainsbury's,
Next, Boots,
Topshop,
Cinema de Lux,
intu Derby GBP450m 1,300 100% 200 GBP29.7m GBP110 47% Zara, H&M
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
Harvey Nichols,
Apple, Burberry,
LK Bennett,
Topshop,
Next, Ugg, Hugo
Boss, Superdry,
Manchester Arndale GBP446m 1,600 48% 252 GBP22.2m GBP275 61% Zara, Hollister
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
House of Fraser,
John Lewis, Next,
Topshop, River
Island, Boots,
intu Victoria Urban Outfitters,
Centre GBP361m 976 100% 113 GBP19.0m GBP250 56% Superdry, Office
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
John Lewis,
Debenhams,
Marks & Spencer,
Apple, Hollister,
Hugo Boss, H&M,
River Island,
St David's, Hamleys,
Cardiff GBP353m 1,391 50% 203 GBP16.2m GBP212 71% Primark
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
John Lewis, Marks
& Spencer, Apple,
Zara, Primark,
Next, Lakeland,
Phase Eight,
Lego,
H&M, Topshop, New
intu Watford GBP336m 726 93% 137 GBP18.8m GBP220 83% Look, MAC
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
John Lewis,
Fenwick,
Debenhams,
Waitrose,
Apple, Hollister,
Topshop, Boots,
River Island,
Next,
intu Eldon Square GBP318m 1,350 60% 140 GBP15.0m GBP308 63% Marks & Spencer
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
Annual
Market Size Number property
value (sq m Ownership of stores income Key tenants
000)
Spanish centres
El Corte
Inglés,
Primark, Ikea,
Apple, Decathlon,
Cinesa, H&M,
Mediamarkt,
Puerto Venecia, Zara, Hollister,
Zaragoza EUR249m 119 50% 202 EUR11.6m Toys R Us, Fnac
------------------- ---------- ------- ---------- ---------- --------- --------- ---------- ------------------
Primark, Zara,
H&M, Cinesa,
Eroski,
Mango,
Springfield,
Fnac, Mediamarkt,
intu Asturias EUR139m 75 50% 137 EUR7.7m Desigual
* The amount presented is on the Scottish ITZA basis; the English equivalent is GBP335.
FINANCIAL REVIEW
Presentation of information
We account for our interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements. This means that the income statement and the balance sheet include single lines for the Group's total share of post-tax profit and the net investment in joint ventures respectively.
Management review and monitor the business primarily on a proportionally consolidated basis. This includes the Group's share of joint ventures on an individual line-by-line basis rather than a post-tax profit or net investment basis. The figures and commentary presented are consistent with our management approach as we believe this provides a more meaningful analysis of the Group's performance. The other information section gives reconciliations of the income statement and balance sheet between the two bases.
Alternative performance measures are also used to assess the Group's performance. The significant measures are summarised as follows:
Alternative performance Rationale
measure used
Like-for-like Like-for-like amounts are presented as they indicate
amounts operating performance as distinct from the impact of
acquisitions or disposals. In respect of property, the
like-for-like measure relates to property which has
been owned throughout both periods without significant
capital expenditure in either period, so that income
can be compared on a like-for-like basis. For the purposes
of comparison of capital values, this will also include
assets owned at the previous reporting period end but
not throughout the prior period. Further analysis is
presented in the other information section and in the
operating review.
Net asset value NAV (diluted, adjusted) has been included as it is considered
('NAV') (diluted, to be a key measure of the Group's performance. The
adjusted) key difference from EPRA NAV is interest rate swaps
not currently used for economic hedges of debt. These
are excluded as, in our view, this provides a more meaningful
measure of the Group's performance. A reconciliation
of NAV (diluted, adjusted) to NAV attributable to owners
of intu properties plc is provided in note 13(a) as
well as below.
Underlying earnings Underlying earnings is used to measure the Group's income
performance. It excludes property and derivative valuation
movements, exceptional items and related tax. We present
these figures as they are considered to be a key measure
of the Group's performance, an industry standard comparable
measure and an indication of the extent to which dividend
payments are supported by underlying operations. A reconciliation
of underlying earnings to profit for the year attributable
to owners of intu properties plc is provided in note
12(c) as well as below. The underlying profit statement
is also presented in full in the other information section.
Overview
Underlying earnings increased by 7 per cent from GBP186.6 million last year to GBP200.0 million for the year ended 31 December 2016. This reflects our strong growth in like-for-like net rental income and the positive impact from our acquisition of the remaining 50 per cent of intu Merry Hill in June. Underlying earnings per share of 15.0 pence is an increase of 6 per cent on the prior year.
Profit for the year of GBP171.8 million has reduced by GBP345.8 million, impacted by property revaluations (2015: GBP517.6 million including a property revaluation surplus of GBP350.7 million).
NAV per share of 404 pence is unchanged from 2015, which when taking account of the dividends of 13.7 pence paid delivers a total financial return for the year of 3.4 per cent.
Our financing metrics remain strong mainly due to our recent refinancing activity. We have a debt to assets ratio of 43.7 per cent (31 December 2015: 43.1 per cent) which remains below our target maximum level of 50 per cent. Our interest cover ratio of 1.97x has increased in the year (31 December 2015: 1.91x) with satisfactory headroom above our target minimum level of 1.60x.
In the year, we issued and refinanced around GBP1 billion of debt, extending the maturity profile and reducing the margin where possible. We extended the GBP351.8 million term loan within the Secured Group Structure ('SGS') in June by one year to March 2021. In September we agreed a one-year extension to the GBP600 million revolving credit facility ('RCF') which is now in place until 2021 and in November we issued GBP375 million 2.875 per cent convertible bonds, maturing in 2022. Finally, in Spain we agreed a new EUR121 million facility for intu Asturias, drawn down in November and replacing the existing facility.
At 31 December 2016 we had cash and available facilities of GBP922.3 million which have increased in the year due to the convertible bond proceeds received (31 December 2015: GBP588.4 million).
We have also undergone several major transactions in the year, recycling capital into our super prime portfolio. In January we disposed of our interest in Equity One, a US venture, receiving GBP201.9 million and in December we disposed of intu Bromley, receiving initial consideration, net of debt repayment, of GBP81.5 million. In June we increased our focus on prime shopping centres, acquiring the remaining 50 per cent of intu Merry Hill for GBP409.7 million. As part of this we arranged a GBP500 million loan, with a 2018 maturity, replacing the GBP191 million facility that was secured on the 50 per cent originally held.
Income statement
2016 2015
Group Group
Share
of including including
share of share of
joint joint joint
Group ventures ventures ventures
GBPm GBPm GBPm GBPm
Underlying earnings 200.0 n/a 200.0 186.6
Adjusted for:
Revaluation of investment
and development property (78.0) 14.2 (63.8) 350.7
Gain/(loss) on acquisition
of businesses 34.6 - 34.6 (0.8)
(Loss)/gain on disposal of
subsidiaries (0.3) - (0.3) 2.2
Gain on sale of other investments 74.1 - 74.1 0.9
Administration expenses -
exceptional (2.5) (0.4) (2.9) (1.5)
Exceptional finance costs (32.0) (0.9) (32.9) (31.4)
Change in fair value of financial
instruments (16.3) (0.6) (16.9) 5.3
Tax on the above (16.5) - (16.5) 4.4
Share of joint ventures'
items 12.3 (12.3) - -
Share of associates' items 1.1 - 1.1 5.8
Non-controlling interests
in respect of the above 6.2 - 6.2 (3.8)
Profit for the year attributable
to owners of
intu properties plc 182.7 n/a 182.7 518.4
Underlying earnings per share
(pence) 15.0p n/a 15.0p 14.2p
Underlying earnings increased to GBP200.0 million from GBP186.6 million at 31 December 2015, the key movements of which are shown in the chart below. Underlying earnings per share increased by 6 per cent to 15.0 pence.
Underlying earnings (GBPm) - Chart 1
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Net rental income increased GBP19.2 million primarily due to like-for-like growth and the acquisition of the remaining 50 per cent of intu Merry Hill in June, partially offset by the impact of the disposal of 50 per cent of Puerto Venecia in September 2015.
Like-for-like net rental income increased by GBP14.7 million, 3.6 per cent driven by improving rental levels from new lettings and rent reviews, increased occupancy and the benefits of unit reconfigurations (see operating review).
Net other income includes a reduction of GBP6.7 million in dividend income following the sale of our interest in Equity One in January 2016.
Net finance costs are relatively unchanged reflecting the acquisition of the remaining 50 per cent of intu Merry Hill, offset by revised terms agreed on the SGS term loan and reduced drawdown on the RCF.
The profit attributable to owners of intu properties plc is GBP182.7 million, a reduction on the GBP518.4 million reported for the year ended 31 December 2015. This was primarily due to a deficit on property valuations of GBP63.8 million (2015: surplus of GBP350.7 million), as discussed in the operating review, as well as the change in fair value of financial instruments, a charge of GBP16.9 million (2015: credit of GBP5.3 million), partially offset by gains of GBP74.1 million on the sale of Equity One and GBP34.6 million on the acquisition of the remaining 50 per cent of intu Merry Hill.
Our investments in joint ventures contributed GBP32.1 million to the profit of the Group (2015: GBP108.6 million) including GBP19.8 million to underlying earnings (2015: GBP24.7 million) and a gain on property valuations of GBP14.2 million (2015: GBP85.8 million).
As detailed in the table below, our net rental income margin has improved to 88.1 per cent due to lower void costs, lower bad debts and reduced lease incentive write-offs. Property operating expenses largely comprise car park operating costs and the Group's contribution to shopping centre marketing programmes. Our ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 15.0 per cent (see other information).
Year ended Year ended
31 December 31 December
2016 2015
GBPm GBPm
Gross rental income 532.6 514.0
Head rent payable (25.4) (22.4)
507.2 491.6
Net service charge expense and void rates (26.0) (27.0)
Bad debt and lease incentive write-offs (2.5) (3.9)
Property operating expense (31.7) (32.9)
Net rental income 447.0 427.8
Net rental income margin 88.1% 87.0%
EPRA cost ratio (excluding direct vacancy
costs) 15.0% 16.0%
Balance sheet
2016 2015
Group Group
Share
Group of including including
share of share of
balance joint joint joint
sheet ventures ventures ventures
GBPm GBPm GBPm GBPm
Investment and development
property 9,212.1 732.4 9,944.5 9,523.7
Investment in joint ventures 587.6 (587.6) - -
Investment in associates
and other investments 80.7 - 80.7 265.0
Net external debt (4,230.1) (134.0) (4,364.1) (4,139.1)
Derivative financial instruments (377.7) (2.3) (380.0) (340.5)
Other assets and liabilities (226.2) (8.5) (234.7) (254.2)
Net assets 5,046.4 - 5,046.4 5,054.9
Non-controlling interest (67.6) - (67.6) (78.5)
Attributable to shareholders 4,978.8 - 4,978.8 4,976.4
Fair value of derivative
financial instruments
(net of tax) 377.7 2.3 380.0 322.1
Other adjustments 78.6 (2.3) 76.3 96.5
Effect of dilution 2.6 - 2.6 16.2
Net assets (diluted, adjusted) 5,437.7 - 5,437.7 5,411.2
----------------------------------- ---------- --------- ---------- ----------
NAV per share (diluted, adjusted)
(pence) 404p - 404p 404p
The Group's net assets attributable to shareholders is relatively unchanged from 31 December 2015 at GBP4,978.8 million, while net assets (diluted, adjusted) have increased by GBP26.5 million from 31 December 2015 to GBP5,437.7 million.
NAV per share (diluted, adjusted) at 31 December 2016 is unchanged from the prior year at 404 pence, the key movements are shown in the chart below. This was driven principally by a 15 pence increase due to underlying earnings and a 3 pence increase due to the intu Merry Hill acquisition, offset by a deficit on revaluation of 4 pence and 14 pence from dividends paid in the year.
Net asset value per share (pence) - Chart 2
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Investment and development property has increased by GBP420.8 million primarily due to our acquisition of the remaining 50 per cent of intu Merry Hill of GBP444.6 million, capital expenditure of GBP114.8 million, recognition of the leasehold on Charter Place of GBP55.9 million and a GBP49.8 million favourable foreign exchange movement, partially offset by the sale of intu Bromley of GBP179.4 million and a GBP63.8 million valuation deficit.
Investments in associates and other investments of GBP80.7 million primarily represent our interests in India, which comprises a 32 per cent interest in Prozone (GBP45.5 million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (GBP19.7 million), owner and operator of a shopping centre in Aurangabad. See notes 16 and 17 for further details.
Net external debt of GBP4,364.1 million has increased by GBP225.0 million primarily from funding our acquisition of the remaining 50 per cent of intu Merry Hill. Cash including the Group's share of joint ventures has reduced by GBP9.8 million to GBP291.6 million and gross debt has increased by GBP215.2 million to GBP4,655.7 million.
Derivative financial instruments comprise the fair value of the Group's interest rate swaps. The net liability at 31 December 2016 is GBP380.0 million, an increase of GBP39.5 million in the year, with the UK 10-year bond yield reducing from 1.951 per cent to 1.235 per cent. Cash payments in the year totalled GBP41.8 million, GBP27.1 million of which has been classified as an exceptional finance cost as it relates to payments in respect of unallocated interest rate swaps. The balance of the payments has been included as underlying finance costs as it relates to ongoing interest rate swaps used to hedge debt.
As previously detailed, we have a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders' practice. At 31 December 2016 these interest rate swaps have a market value liability of GBP253.2 million (31 December 2015: GBP239.1 million). It is estimated that we will be required to make cash payments on these interest rate swaps of around GBP28 million in 2017, reducing to below GBP20 million per annum in 2021.
Our net investment in joint ventures is GBP587.6 million at 31 December 2016 (31 December 2015: GBP991.9 million), which includes the Group's share of net assets, on an equity accounted basis, of GBP355.4 million (31 December 2015: GBP380.8 million) and loans to joint ventures of GBP232.2 million (31 December 2015: GBP611.1 million). The movement in the year primarily reflects the acquisition of the remaining 50 per cent of intu Merry Hill, which from the acquisition date is accounted for as a 100 per cent owned subsidiary rather than as a joint venture.
The non-controlling interest at 31 December 2016 relates primarily to our partner's 40 per cent stake in intu Metrocentre.
We are exposed to foreign exchange movements on our overseas investments and our policy is to ensure that the net exposure to foreign currency is less than 10 per cent of the Group's net assets attributable to shareholders. At 31 December 2016 the exposure was 7 per cent, lower than the 8 per cent at 31 December 2015 due to our disposal of Equity One in January partially offset by the reduced drawdown on the Euro component of the RCF.
Cash flow
Year ended Year ended
31 December 31 December
2016 2015
GBPm GBPm
Group cash flow as reported
Cash flows from operating activities 131.4 160.2
Cash flows from investing activities (243.4) (175.0)
Cash flows from financing activities 88.7 76.2
Foreign currency movements 1.4 (0.3)
Net (decrease)/increase in Group cash and
cash equivalents (21.9) 61.1
During 2016 cash and cash equivalents decreased by GBP21.9 million.
Cash flows from operating activities of GBP131.4 million is GBP28.8 million lower than 2015, primarily due to negative working capital movements from the timing of payments.
Cash flows from investing activities reflect cash outflows for our acquisition of the remaining 50 per cent of intu Merry Hill and capital expenditure during the year of GBP120.9 million. This is offset by cash inflows of GBP201.9 million received for the sale of our interest in Equity One and GBP80.5 million cash inflow from the sale of intu Bromley.
Cash flows from financing activities include net debt drawdowns of GBP242.5 million primarily to fund our acquisition of the remaining 50 per cent of intu Merry Hill and also includes the proceeds of the GBP375 million convertible bonds issued in November. We paid dividends in cash during the year of GBP152.6 million.
Financing
Debt structure
We have carried out significant refinancing activity in recent years which has resulted in diversified sources of funding, including secured bonds plus syndicated bank debt secured on individual or pools of assets, with limited or no recourse from the borrowing entities to other Group companies outside of these arrangements. Our corporate-level debt remains limited to the RCF as well as the GBP375 million and GBP300 million convertible bonds.
During 2016 we undertook the following financing activities:
-- arranged a GBP500 million loan secured on intu Merry Hill, with a 2018 maturity, replacing the GBP191 million facility that was secured on the 50 per cent originally held
-- extended our GBP351.8 million SGS term loan maturity by one year to March 2021 -- agreed a one-year extension to the RCF which is now in place until 2021 -- issued GBP375 million 2.875 per cent convertible bonds, maturing in 2022
-- agreed a new EUR121 million facility secured against intu Asturias; intu's share is EUR60.5 million
Since the year end, we have refinanced the intu Milton Keynes bank loan, with a new GBP140 million loan now maturing in 2019.
Debt maturity (GBPm) - Chart 3
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The chart above illustrates that we have no major refinancing requirement due until the autumn of 2018 when we have two key maturities. We intend to refinance the GBP500 million intu Merry Hill bridging loan this summer and the GBP300 million convertible bonds will either be repaid or convert into equity.
Debt measures
31 December 31 December
2016 2015
Debt to assets 43.7% 43.1%
Interest cover 1.97x 1.91x
Weighted average debt maturity 7.1 years(1) 7.8 years
Weighted average cost of gross debt 4.3% 4.6%
Proportion of gross debt with interest rate
protection 88% 86%
Cash and available facilities GBP922.3m GBP588.4m
1 Pro forma for the refinancing of intu Milton Keynes, completed February 2017.
Our debt to assets ratio has increased to 43.7 per cent since 31 December 2015 due to the acquisition of the remaining 50 per cent of intu Merry Hill partially offset by the sale of Equity One and the disposal of intu Bromley. The debt to assets ratio remains below our target maximum level of 50 per cent.
Interest cover of 1.97x has increased slightly during the year reflecting the growth in like-for-like net rental income and lower interest rates following recent debt refinancing and remains above our targeted minimum level of 1.60x.
The weighted average debt maturity decreased to 7.1 years, pro forma for the refinancing of intu Milton Keynes, with the benefit from the extension of the SGS term loan being offset by shorter-dated refinancing secured on intu Merry Hill. The weighted average cost of gross debt has decreased to 4.3 per cent (excluding the RCF) reflecting the rates achieved on recent refinancing activity and the cost on any unhedged debt.
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 increased slightly in the year to 88 per cent within our policy range of between 75 per cent and 100 per cent.
Covenants
Full details of the debt financial covenants are included in the other information section of this report. We are in compliance with all of our covenants and regularly stress test them for changes in capital values and income. A 25 per cent fall in property values and a 10 per cent reduction in income would only require a GBP64 million equity cure.
Capital commitments
We have an aggregate commitment to capital projects of GBP257.0 million at 31 December 2016 (31 December 2015: GBP65.2 million).
In addition to the committed expenditure, we have an identified uncommitted pipeline of active management projects, major extensions and developments that may become committed over the next three years (see operating review).
Other information
Tax policy position
Like all Real Estate Investment Trusts ('REIT's), tax on property operating profits is paid at shareholder level to the UK Government rather than by the Group. REIT status brings with it the requirement to operate within the rules of the REIT regime (see glossary for further information).
The Group's principle of good governance extends to our responsible approach to tax. We look to minimise the level of tax risk and at all times seek to comply fully with our regulatory and other tax obligations and to act in a way which upholds intu's reputation as a responsible corporate citizen by regularly carrying out risk reviews, seeking pre-clearance from HMRC in complex areas and actively engaging in discussions regarding proposed changes in the taxation system that might affect the Group. It remains important to our stakeholders that our approach to tax is aligned to the long-term values and strategy of the Group. As Chief Financial Officer, I am the Executive Committee member with executive responsibility for tax matters, with close involvement of executive and senior management.
We pay tax directly on overseas earnings, any UK non-property income under the REIT rules, business rates and transaction taxes such as stamp duty land tax. In the year ended 31 December 2016 the total of such payments to tax authorities was GBP16.3 million, of which GBP15.7 million was in the UK and GBP0.6 million in Spain. In addition, we also collect VAT, employment taxes and withholding tax on dividends for HMRC and the Spanish tax authorities. Business rates, principally paid by tenants, in respect of the Group's UK properties amounted to around GBP292.2 million in 2016 (2015: GBP297.2 million).
Dividends
The Directors are recommending a final dividend of 9.4 pence per share bringing the amount paid and payable in respect of 2016 to 14.0 pence, an increase of 0.3 pence from 2015. A scrip dividend alternative may be offered. Details of the apportionment between the PID and non-PID elements per share will be confirmed in due course.
At 31 December 2016 the Company has distributable reserves in excess of GBP1.1 billion, sufficient to cover around six years of dividends at the 2016 level. The Company typically pays dividends which are covered by the current year earnings of the Group and does not anticipate that the Group's level of distributable reserves will create any restrictions on this approach in the foreseeable future.
Matthew Roberts
Chief Financial Officer
23 February 2017
PRINCIPAL RISKS AND UNCERTAINTIES
Fully integrated and thorough risk analysis underpins our ability to achieve strategic objectives. The Board has undertaken a robust assessment of the principal risks we face, including those that would impact the business model, future performance, solvency or liquidity.
We have identified principal risks and uncertainties under five key headings: property market; operations; financing; developments and acquisitions; and brand. These are discussed in detail below. 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 mitigated in line with the Group's risk appetite.
The risk profile for 2016 has remained broadly in line with 2015 with no significant new risks identified nor substantial changes in existing risks. The main change from 2015 is the increased uncertainty in the UK economy and real estate markets following the EU referendum vote. Prior to the vote we reviewed the potential impacts in the context of our long-term funding, long-term lease structures and flexibility to adjust uncommitted investment. The period of uncertainty is likely to increase financial market volatility and may affect sentiment in the investment and occupier markets in which we operate, the range of funding sources available to us and broader consumer confidence and expenditure.
Key to strategic objectives: Change in level of risk:
1) Optimising asset performance + Increased
2) Delivering UK developments
3) Making the brand count = Remained the same
4) Seizing the growth opportunity in Spain
Risk and Mitigation 2016 commentary
impact
--------------- ------------------------------------------------------------ -----------------------------------------------------------
Strategic objectives affected:
Property market 1,2,3,4
Macro-economic + Likelihood of macro-economic
Weakness in * focus on prime assets and upgrading assets weakness has increased
the with the outcome of the
macro-economic UK's EU referendum vote.
environment * covenant headroom monitored and stress-tested There is increased uncertainty
could in relation to many factors
undermine that impact the property
rental * make representation on key policies, for example investment and occupier
income levels business rates markets which has increased
and property investor caution
values, * like-for-like property values unchanged in the year
reducing
return
on investment * substantial covenant headroom
and covenant
headroom
* no significant near-term debt maturities and average
unexpired term of 7.1 years
* long-term lease structures with average unexpired
term of 7.7 years
Retail = Likelihood and severity
environment * active management of tenant mix of potential impact are
Failure to unchanged in 2016 with
react intu's strategy continuing
to changes in * regular monitoring of tenant strength and diversity to deliver strong footfall
the retail numbers and occupancy
environment * signi cant progress on planning and pre-letting of
could * upgrading assets to meet demand, for example, near-term pipeline with a focus on leisure and
undermine increased leisure offering catering
intu's ability
to attract
customers * Tell intu customer feedback programme helps identify * digital investment to improve relevance as shopping
and tenants changes in customer preferences habits change
* work closely with retailers * occupancy remains strong at 96 per cent
* digital strategy that embraces technology and digital * footfall growth which continues to be ahead of
customer engagement. This enables intu to engage in benchmark
and support multichannel retailing, and to take the
opportunities offered by ecommerce
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Risk and Mitigation 2016 commentary
impact
-------------- ------------------------------------------------------------- --- ------------------------------------------------------------
Strategic objectives affected:
Operations 1,3
Health and = Likelihood of potential
safety * strong business process and procedures, including impact has not changed
Accidents or compliance with OHSAS 18001, supported by regular signi cantly during 2016,
system training and exercises however severity impacted
failure by new enforcement structure
leading * maintenance of OHSAS 18001 certi cation,
to financial * annual audits of operational standards carried out demonstrating consistent health and safety management
and/or internally and by external consultants process and procedures across the portfolio
reputational
loss
* culture of visitor, staff and contractor safety * work continuing towards achieving ISO 9001, 14001 and
55001 accreditation
* crisis management and business continuity plans in
place and tested
* retailer liaison and briefings
* appropriate levels of insurance
* staff succession planning and development in place to
ensure continued delivery of world class service
* health and safety managers or coordinators in all
centres
Cybersecurity = Likelihood slightly increased
Loss of data * data and cybersecurity strategies with a number of recent
and high profile hacks, but
information severity of potential impact
or * regular testing programme and cyber scenario exercise has reduced by significant
failure of and benchmarking development of tools and
key controls in 2016
systems * ongoing Group-wide cybersecurity project with
resulting * appropriate levels of insurance investment in tools, consultancy and staff to
in financial mitigate impact of threats from evolving
and/or cybersecurity landscape
reputational * crisis management and business continuity plans in
loss place and tested
* external benchmarking of cybersecurity landscape
* data committee
* monitoring of regulatory environment and best
practice
Terrorism = Overall likelihood and
Terrorist * strong business process and procedures, supported by severity of potential impact
incident regular training and exercises, designed to adapt and unchanged
at an intu respond to changes in risk levels * national threat level remains at Severe
centre
or another
major * annual audits of operational standards carried out * major scenario exercises held at three intu shopping
shopping internally and by external agencies centres with involvement of multiple external
centre agencies
resulting in
loss * culture of visitor, staff and contractor safety
of consumer * operating procedures in place for the introduction of
confidence further security measures if required
with * crisis management and business continuity plans in
consequent place and tested
impact on
lettings
and rental * retailer liaison and briefings
growth
* appropriate levels of insurance
* strong relationships and frequent liaison with police,
NaCTSO and other agencies
* NaCTSO approved to train staff in counter-terrorism
awareness program
Financing Strategic objectives affected:
2,4
Availability Macro-economic events during
of * funding strategy regularly reported to the Board with + 2016 and the uncertainty
funds current and projected funding position caused by them mean the
Reduced increased risk of reduced
availability availability remains, however,
of funds * effective treasury management aimed at balancing long severity of potential impact
could debt maturity profile and diversification of sources unchanged from 2015. Regular
limit of finance re nancing activity continuing
liquidity, to evidence the availability
leading to of funding
restriction * consideration of financing plans including potential * new GBP500 million loan secured on intu Merry Hill
of investing for recycling of capital before commitment to
and transactions and developments
operating * disposal of intu Bromley for GBP82 million
activities
and/or * strong relationships with lenders, shareholders and
increase partners * new GBP375 million convertible debt issue
in funding
cost
* focus on prime assets * sale of Equity One for GBP202 million
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Risk and Mitigation 2016 commentary
impact
Strategic objectives affected:
Developments and acquisitions 2,4
Developments = Likelihood and severity
Developments * Capital Projects Committee reviews detailed of potential impact have
fail appraisals before and monitors progress during remained unchanged in 2016
to create significant projects as the Group has progressed
shareholder work on its development
value pipeline
* fixed price construction contracts for developments * signed fixed price contract for the substantial
agreed with clear apportionment of risk portion of the GBP180 million extension of intu
Watford
* significant levels of pre-lets exchanged prior to
scheme development * completed fully-let restaurant projects at intu
Metrocentre and intu Eldon Square
* detailed appraisal work and signi cant pre-lets ahead
of starting major development projects
Acquisitions = Likelihood and severity
Acquisitions * research and third party due diligence undertaken for of potential impact have
fail transactions remained unchanged
to create * detailed understanding of intu Merry Hill prior to
shareholder acquisition of remaining 50 per cent as existing
value * local partner and advisors in Spain with specialist part-owner and asset manager
market knowledge
* where appropriate, investment risk reduced through
financing and joint venture investments
Strategic objectives affected:
Brand 1,2,3,4
Integrity of = Likelihood and severity
the * intellectual property protection of potential impact unchanged
brand in 2016 as the brand became
The more established in the
integrity * strong guidelines for use of brand UK and Spain
of the brand * continuing media interest in intu and our opinions
is
damaged * strong underlying operational controls and crisis
leading management procedures * strengthened team following establishment of Madrid
to financial office has increased in-house capacity
and/or
reputational * ongoing training programme and reward and recognition
loss schemes designed to embed brand values and culture * net promoter score consistent with 2015
throughout the organisation
* traditional and digital media monitoring and analysis
* Tell intu and shopper view customer feedback
programmes
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Group's annual report for the year ended 31 December 2016 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, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.
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 ('IFRS's) 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 these financial statements, the Directors are required to:
(a) select suitable accounting policies and then apply them consistently (b) make judgements and accounting estimates that are reasonable and prudent
(c) state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements
(d) prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group 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. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's and the Group'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 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 profit of the Group
(b) the Directors' report contained in the governance section of the annual report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces
Signed on behalf of the Board on 23 February 2017
David Fischel
Chief Executive
Matthew Roberts
Chief Financial Officer
Consolidated income statement
for the year ended 31 December 2016
2016 2015
Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Revenue 2 594.3 571.6
Net rental income 2 406.1 381.8
Net other income 3 0.6 6.9
Revaluation of investment and development property 14 (78.0) 264.9
(0.8)
Gain/(loss) on acquisition of businesses 4 34.6 (0.8)
(Loss)/gain on disposal of subsidiaries 27 (0.3) 2.2
Gain on sale of other investments 17 74.1 0.9
Administration expenses - ongoing (37.8) (37.3)
Administration expenses - exceptional 5 (2.5) (1.0)
Operating profit 396.8 617.6
Finance costs 6 (202.9) (206.6)
Finance income 7 14.9 18.7
Other finance costs 8 (37.9) (37.3)
Change in fair value of financial instruments 9 (16.3) 6.0
Net finance costs (242.2) (219.2)
Profit before tax, joint ventures and associates 154.6 398.4
Share of post-tax profit of joint ventures 15 32.1 108.6
Share of post-tax profit of associates 16 1.6 6.0
Profit before tax 188.3 513.0
Current tax 10 - (0.4)
Deferred tax 10 (16.5) 5.0
Taxation 10 (16.5) 4.6
Profit for the year 171.8 517.6
Attributable to:
Owners of intu properties plc 182.7 518.4
Non-controlling interests (10.9) (0.8)
171.8 517.6
Basic earnings per share 12 13.7p 39.3p
Diluted earnings per share 12 11.2p 37.5p
Details of underlying earnings are presented in the underlying profit statement in the other information section. Underlying earnings per share are shown in note 12(c).
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015
Notes GBPm GBPm
---------------------------------------------------- ------ ------- ------
Profit for the year 171.8 517.6
Other comprehensive income
Items that may be reclassified subsequently
to the income statement:
Revaluation of other investments 17 0.4 12.8
Exchange differences 31.6 7.6
Tax relating to components of other comprehensive
income 10 (0.2) (5.0)
Total items that may be reclassified subsequently
to the income statement 31.8 15.4
Transferred to the income statement:
On sale of other investments 17 (77.0) (0.6)
Tax on sale of other investments 10 16.7 -
Total transferred to the income statement (60.3) (0.6)
Other comprehensive (loss)/income for the year (28.5) 14.8
Total comprehensive income for the year 143.3 532.4
Attributable to:
Owners of intu properties plc 154.2 533.2
Non-controlling interests (10.9) (0.8)
143.3 532.4
Consolidated balance sheet
as at 31 December 2016
2016 2015
Notes GBPm GBPm
----------------------------------------------- ------ ----------
Non-current assets
Investment and development property 14 9,212.1 8,403.9
Plant and equipment 7.6 5.0
Investment in joint ventures 15 587.6 991.9
Investment in associates 16 65.2 54.7
Other investments 17 15.5 210.3
Goodwill 4.0 4.0
Trade and other receivables 18 99.1 89.3
9,991.1 9,759.1
Current assets
Trade and other receivables 18 123.4 108.8
Derivative financial instruments - 3.2
Cash and cash equivalents 19 254.7 275.8
378.1 387.8
Total assets 10,369.2 10,146.9
Current liabilities
Trade and other payables 20 (281.0) (275.5)
Current tax liabilities (0.3) (0.4)
Borrowings 21 (142.4) (139.3)
Derivative financial instruments (37.0) (12.0)
(460.7) (427.2)
Non-current liabilities
Borrowings 21 (4,520.2) (4,332.3)
Derivative financial instruments (340.7) (329.7)
Other payables (1.2) (2.8)
(4,862.1) (4,664.8)
Total liabilities (5,322.8) (5,092.0)
Net assets 5,046.4 5,054.9
Equity
Share capital 24 677.5 672.3
Share premium 24 1,327.4 1,303.1
Treasury shares 25 (40.8) (43.3)
Other reserves 344.3 372.8
Retained earnings 2,670.4 2,671.5
Attributable to owners of intu properties plc 4,978.8 4,976.4
Non-controlling interests 67.6 78.5
Total equity 5,046.4 5,054.9
Consolidated statements of changes in equity
for the year ended 31 December 2016
Attributable to owners of intu properties
plc
-------------------------------------------------------------
Non-
Share Share Treasury Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- -------- --------- --------- --------- -------- ------------ --------
At 1 January 2016 672.3 1,303.1 (43.3) 372.8 2,671.5 4,976.4 78.5 5,054.9
Profit/(loss) for
the year - - - - 182.7 182.7 (10.9) 171.8
Other comprehensive
income:
Revaluation of other
investments (note
17) - - - 0.4 - 0.4 - 0.4
Exchange differences - - - 31.6 - 31.6 - 31.6
Tax relating to
components
of other comprehensive
income (note 10) - - - 16.5 - 16.5 - 16.5
Transferred to income
statement on sale
of other
investments - - - (77.0) - (77.0) - (77.0)
Total comprehensive
income for the year - - - (28.5) 182.7 154.2 (10.9) 143.3
Ordinary shares
issued
(note 24) 5.2 24.3 - - - 29.5 - 29.5
Dividends (note
11) - - - - (182.5) (182.5) - (182.5)
Share-based payments - - - - 1.9 1.9 - 1.9
Acquisition of treasury
shares - - (0.7) - - (0.7) - (0.7)
Disposal of treasury
shares - - 3.2 - (3.2) - - -
5.2 24.3 2.5 - (183.8) (151.8) - (151.8)
At 31 December 2016 677.5 1,327.4 (40.8) 344.3 2,670.4 4,978.8 67.6 5,046.4
Consolidated statements of changes in equity (continued)
for the year ended 31 December 2016
Attributable to owners of intu properties
plc
-------------------------------------------------------------
Non-
Share Share Treasury Other Retained controlling Total
capital premium shares reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- -------- --------- --------- --------- -------- ------------ --------
At 1 January 2015 658.4 1,222.0 (45.1) 358.0 2,330.7 4,524.0 72.8 4,596.8
Profit/(loss) for
the year - - - - 518.4 518.4 (0.8) 517.6
Other comprehensive
income:
Revaluation of other
investments (note
17) - - - 12.8 - 12.8 - 12.8
Exchange differences - - - 7.6 - 7.6 - 7.6
Tax relating to
components
of other comprehensive
income (note 10) - - - (5.0) - (5.0) - (5.0)
Transferred to income
statement on sale
of other
investments - - - (0.6) - (0.6) - (0.6)
Total comprehensive
income for the year - - - 14.8 518.4 533.2 (0.8) 532.4
Ordinary shares
issued 13.9 81.1 - - - 95.0 - 95.0
Dividends (note
11) - - - - (179.4) (179.4) - (179.4)
Share-based payments - - - - 4.8 4.8 - 4.8
Acquisition of treasury
shares - - (1.6) - - (1.6) - (1.6)
Disposal of treasury
shares - - 3.4 - (3.0) 0.4 - 0.4
Non-controlling
interest
additions - - - - - - 6.5 6.5
13.9 81.1 1.8 - (177.6) (80.8) 6.5 (74.3)
At 31 December 2015 672.3 1,303.1 (43.3) 372.8 2,671.5 4,976.4 78.5 5,054.9
Consolidated statement of cash flows
for the year ended 31 December 2016
2016 2015
Notes GBPm GBPm
------------------------------------------------------ ------ -------- --------
Cash generated from operations 29 355.9 366.5
Interest paid (233.0) (222.5)
Interest received 8.5 16.6
Taxation - (0.4)
Cash flows from operating activities 131.4 160.2
Cash flows from investing activities
Purchase and development of property, plant and
equipment (120.9) (100.8)
Sale of property - 1.8
Acquisition of businesses net of cash acquired 26 (405.5) (203.1)
Sale of other investments 201.9 4.7 Additions to other investments (14.1) - Additions to investment in associates - (10.0) Disposal of subsidiaries net of cash sold with business 27 80.5 81.0 Repayment of capital by joint ventures 15 - 25.6 Loan advances to joint ventures 15 (1.2) (0.8) Loan repayments by joint ventures 15 12.7 17.6 Distributions from joint ventures 15 3.2 9.0 Cash flows from investing activities (243.4) (175.0) Cash flows from financing activities Issue of ordinary shares 0.3 22.0 Acquisition of treasury shares (0.7) (1.6) Sale of treasury shares - 0.4 Non-controlling interest funding received - 6.5 Cash transferred (to)/from restricted accounts (0.8) 14.9 Borrowings drawn 962.9 329.2 Borrowings repaid (720.4) (190.3) Equity dividends paid (152.6) (104.9) Cash flows from financing activities 88.7 76.2 Effects of exchange rate changes on cash and cash equivalents 1.4 (0.3) Net (decrease)/increase in cash and cash equivalents (21.9) 61.1 Cash and cash equivalents at 1 January 19 273.6 212.5 Cash and cash equivalents at 31 December 19 251.7 273.6
Notes
1 Accounting convention and basis of preparation
The financial information presented does not constitute the Group's consolidated financial statements for either the year ended 31 December 2016 or the year ended 31 December 2015, but is derived from those financial statements. The Group's statutory financial statements for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's annual general meeting. The auditors' reports on both the 2015 and 2016 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.
The 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.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of property, available-for-sale investments, and certain other financial 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 consolidated 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. These amendments have not had an 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. The most significant of these are set out below, all of which are not expected to have a material impact on the financial statements:
- IFRS 9 Financial Instruments (effective from 1 January 2018) - The standard applies to classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge accounting. The main area of impact for the Group is considered to relate to impairment provisioning which may affect measurement and presentation of trade receivables. We believe that the current provisioning approach to trade receivables is expected to be materially similar to the revised guidance
- IFRS 15 Revenue from Contracts with Customers (effective from 1 January 2018) - The standard is applicable to service charge income and facilities management income, but excludes rent receivable. This is not expected to have a material impact on the financial statements, but may result in changes to presentation and disclosure
- IFRS 16 Leases (effective 1 January 2019) - This standard does not significantly affect the current accounting for rental income earned. The Group holds a number of small operating leases as lessee which are affected by this standard; however, these are not material to the financial statements
Use of estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. In particular, significant judgement is required in the use of estimates and assumptions in the valuation and accounting for investment and development property and derivative financial instruments. Additional detail on these two areas is provided in the relevant accounting policy in note 2 and in notes 18 and 33 to the Group's consolidated financial statements.
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 review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review. In addition, note 33 to the Group's consolidated financial statements includes the Group's risk management objectives, details of its financial instruments and hedging activities, its exposures 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.
In preparing the most recent projections, factors taken into account include GBP291.6 million of cash (including the Group's share of cash in joint ventures of GBP36.9 million) and GBP630.7 million of undrawn facilities at 31 December 2016. The Group's weighted average debt maturity of over seven 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.
Notes (continued)
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 United Kingdom and Spain. Although management review and monitor the performance of the business principally on a centre-by-centre basis, the operating segments are consistent with the strategic and operational management of the Group.
As mentioned in the financial review, management review and monitor the business primarily on a proportionately consolidated basis. As such, the segmental analysis has been prepared on a proportionately consolidated basis.
The key driver of underlying earnings which is used to measure performance is net rental income. An analysis of net rental income is given below:
2016
Group including
Less share
share of joint ventures of Group
-----------------------------
UK Spain Total joint ventures total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- -------- ------ ----------- --------------- -------
Rent receivable 516.7 15.9 532.6 (48.1) 484.5
Service charge income 107.6 3.5 111.1 (9.5) 101.6
Facilities management income from joint
ventures 5.1 - 5.1 3.1 8.2
Revenue 629.4 19.4 648.8 (54.5) 594.3
Rent payable (25.4) - (25.4) 1.1 (24.3)
Service charge costs (123.5) (3.7) (127.2) 10.6 (116.6)
Facilities management costs recharged
to joint ventures (5.1) - (5.1) (3.1) (8.2)
Other non-recoverable costs (42.3) (1.8) (44.1) 5.0 (39.1)
Net rental income 433.1 13.9 447.0 (40.9) 406.1
2015
Group including
Less share
share of joint ventures of Group
-----------------------------
UK Spain Total joint ventures total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- -------- ------ ----------- --------------- -------
Rent receivable 492.5 21.5 514.0 (53.0) 461.0
Service charge income 103.0 4.5 107.5 (10.6) 96.9
Facilities management income from joint
ventures 7.9 - 7.9 5.8 13.7
Revenue 603.4 26.0 629.4 (57.8) 571.6
Rent payable (22.4) - (22.4) 1.1 (21.3)
Service charge costs (116.7) (4.8) (121.5) 11.7 (109.8)
Facilities management costs recharged
to joint ventures (7.9) - (7.9) (5.8) (13.7)
Other non-recoverable costs (48.0) (1.8) (49.8) 4.8 (45.0)
Net rental income 408.4 19.4 427.8 (46.0) 381.8
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 is presented below:
Investment and Revaluation
development property Capital expenditure (deficit)/surplus
---------------------- ---------------------- --------------------
2016 2015 2016 2015 2016 2015
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- ----------- ---------- ---------- --------- ---------
United Kingdom 9,537.5 9,222.3 92.5 75.6 (97.4) 342.2
Spain 407.0 301.4 22.3 47.9 33.6 8.5
Group including share of joint ventures 9,944.5 9,523.7 114.8 123.5 (63.8) 350.7
Less share of joint ventures (732.4) (1,119.8) (1.2) (2.5) (14.2) (85.8)
Group 9,212.1 8,403.9 113.6 121.0 (78.0) 264.9
Notes (continued)
2 Segmental reporting (continued)
The Group's geographical analysis of non-current assets is set out below. This represents where the Group's assets reside and, where relevant, where revenues are generated. In the case of investments this reflects where the investee is located.
Re-presented(1)
2016 2015
GBPm GBPm
---------------- -------- ----------------
United Kingdom 9,648.6 9,305.3
Spain 276.7 188.8
United States - 209.4
India 65.8 55.6
9,991.1 9,759.1
(1 The comparative has been re-presented to show investment in Spanish joint ventures of GBP141.9 million under Spain, previously under United Kingdom.)
3 Net other income
2016 2015
GBPm GBPm
------------------------------------------- ------ ------
Dividends received from other investments - 6.7
Management fees 3.3 3.0
intu Digital (2.7) (2.8)
Net other income 0.6 6.9
4 Gain/(loss) on acquisition of businesses
The gain on acquisition of businesses in the year of GBP34.6 million relates to the acquisition of the remaining 50 per cent of intu Merry Hill (see note 26). The 2015 loss consisted of a gain on the acquisition of Puerto Venecia, Zaragoza of GBP0.8 million and an adjustment increasing the contingent consideration relating to the 2012 acquisition of StyleMeTV Limited (renamed IntuDigital Limited) resulting in the recognition of a loss of GBP1.6 million.
5 Administration expenses - exceptional
Exceptional administration expenses (see glossary for definition of exceptional items) in the year totalled GBP2.5 million (2015: GBP1.0 million). 2016 costs relate to fees on corporate transactions, principally the acquisition of the remaining 50 per cent of intu Merry Hill. 2015 costs related principally to fees on the acquisition of Puerto Venecia, Zaragoza.
6 Finance costs
2016 2015
GBPm GBPm
------------------------------------- ------ ------
On bank loans and overdrafts 189.2 195.4
On convertible bonds (note 22) 9.3 7.5
On obligations under finance leases 4.4 3.7
Finance costs 202.9 206.6
Finance costs of GBP2.1 million were capitalised in the year ended 31 December 2016 (2015: GBP2.1 million).
7 Finance income
2016 2015
GBPm GBPm
------------------------------------------------ ----- -----
Interest receivable on loans to joint ventures 13.4 17.1
Other finance income 1.5 1.6
Finance income 14.9 18.7
Notes (continued)
8 Other finance costs
2016 2015
GBPm GBPm
----------------------------------------------------------- ------ -----
Amortisation of Metrocentre compound financial instrument 5.9 5.9
Payments on unallocated interest rate swaps and other
costs(1) 34.7 28.6
Foreign currency movements(1) (2.7) 2.8
Other finance costs 37.9 37.3
1 Amounts totalling GBP32.0 million in the year ended 31 December 2016 (2015: GBP31.4 million) are treated as exceptional items, as defined in the glossary, due to their nature and therefore excluded from underlying earnings (see note 12(c)). These finance costs include termination of interest rate swaps on repayment of debt, payments on unallocated interest rate swaps, foreign currency movements and other fees.
9 Change in fair value of financial instruments
2016 2015
GBPm GBPm
-------------------------------------------------------- ------- ------
Loss/(gain) on derivative financial instruments 47.2 (6.8)
(Gain)/loss on convertible bonds designated as at fair
value through profit or loss (note 22) (30.9) 0.8
Change in fair value of financial instruments 16.3 (6.0)
Included within the change in fair value of derivative financial instruments are gains totalling GBP41.8 million (2015: GBP44.1 million) resulting from the payment of obligations under derivative financial instruments during the year. Of these GBP27.1 million related to unallocated swaps and GBP0.8 million to the termination of swaps. In 2015 GBP26.5 million related to unallocated swaps.
10 Taxation
Taxation for the year:
2016 2015
GBPm GBPm
---------------------------------------------------- ------ ------
Overseas taxation 0.1 0.6
UK taxation - adjustment in respect of prior years (0.1) (0.2)
Current tax - 0.4
Deferred tax:
On investment and development property - (0.8)
On other investments (2.3) (0.2)
On derivative financial instruments 16.4 (2.8)
On other temporary differences 2.4 (1.2)
Deferred tax 16.5 (5.0)
Total tax charge/(credit) 16.5 (4.6)
The tax credit relating to components of other comprehensive income of GBP16.5 million (2015: charge of GBP5.0 million) relates entirely to deferred tax in respect of other investments.
The tax charge/(credit) for 2016 and 2015 are lower than the standard rate of corporation tax in the UK. The differences are explained below:
2016 2015
GBPm GBPm
------------------------------------------------------ ------- -------
Profit before tax, joint ventures and associates 154.6 398.4
Profit before tax multiplied by the standard rate in
the UK of 20% (2015: 20.25%) 30.9 80.7
Exempt property rental profits and revaluations (20.1) (90.3)
10.8 (9.6)
Additions and disposals of property and investments (6.8) (0.2)
Prior year corporation tax items (0.1) (0.2)
Non-deductible and other items 0.5 (0.4)
Overseas taxation (0.6) 0.6
Unprovided deferred tax 12.7 5.2
Total tax charge/(credit) 16.5 (4.6)
Details of deferred tax balances are given in note 23.
Notes (continued)
11 Dividends
2016 2015
GBPm GBPm
------------------------------------------------------- ------ ------
Ordinary shares:
Prior year final dividend paid of 9.1 pence per share
(2015: 9.1 pence per share) 121.1 118.3
Interim dividend paid of 4.6 pence per share (2015:
4.6 pence per share) 61.4 61.1
Dividends declared 182.5 179.4
Proposed final dividend of 9.4 pence per share 127.4
In 2016, the Company offered shareholders the option to receive ordinary shares instead of cash for the 2016 interim dividend of 4.6 pence under the Scrip Dividend Scheme. As a result of elections made by shareholders 10,268,341 new ordinary shares of 50 pence each were issued on 22 November 2016 in lieu of dividends otherwise payable. This resulted in GBP29.2 million of cash being retained in the business.
In 2015, the Scrip Dividend Scheme resulted in 21,491,924 new ordinary shares of 50 pence each being issued and GBP73.0 million of cash being retained in the business.
Details of the shares in issue and dividends waived are given in notes 24 and 25 respectively.
12 Earnings per share
(a) Earnings per share
Basic and diluted earnings per share as calculated in accordance with IAS 33 Earnings Per Share:
2016 2015
Pence Pence
Earnings Shares per Earnings Shares per
GBPm million share GBPm million share
----------------------------------- --------- -------- ------ --------- -------- ------
Profit for the year attributable
to owners
of intu properties plc 182.7 518.4
Basic earnings per share(1) 182.7 1,333.5 13.7p 518.4 1,318.1 39.3p
Dilutive convertible bonds, share
options and share awards (21.6) 107.9 8.4 87.3
Diluted earnings per share 161.1 1,441.4 11.2p 526.8 1,405.4 37.5p
1 The weighted average number of shares used for the calculation of basic earnings per share has been adjusted to remove shares held in the Employee Share Ownership Plan ('ESOP').
Notes (continued)
12 Earnings per share (continued)
(b) Headline earnings per share
Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing requirements.
2016 2015
Gross Net(1) Gross Net(1)
GBPm GBPm GBPm GBPm
----------------------------------------------------- ------- -------- -------- --------
Basic earnings 182.7 518.4
Adjusted for:
Revaluation of investment and development property
(note 14) 78.0 71.8 (264.9) (261.9)
Gain on acquisition of businesses (34.6) (34.6) (0.8) (0.8)
Loss/(gain) on disposal of subsidiaries (note
27) 0.3 0.3 (2.2) (2.2)
Gain on sale of other investments (note 17) (74.1) (74.1) (0.9) (0.9)
Share of joint ventures' items (14.2) (14.2) (85.8) (85.1)
Share of associates' items (1.1) (1.1) (0.3) (0.3)
Headline earnings 130.8 167.2
Dilution(2) (21.6) 8.4
Diluted headline earnings 109.2 175.6
Weighted average number of shares (million) 1,333.5 1,318.1
Dilution(2) 107.9 87.3
Diluted weighted average number of shares (million) 1,441.4 1,405.4
Headline earnings per share (pence) 9.8p 12.7p
Diluted headline earnings per share (pence) 7.6p 12.5p
1 Net of tax and non-controlling interests.
2 The dilution impact is required to be included as calculated in note 12(a) even where this is not dilutive for headline earnings per share.
(c) Underlying earnings per share
Underlying earnings per share is a non-GAAP measure but has been included as it is considered to be a key measure of the Group's performance and an indication of the extent to which dividend payments are supported by underlying earnings (see underlying profit statement in the other information section). Underlying earnings is defined as an alternative performance measure in the financial review.
2016 2015
Pence Pence
Earnings Shares per Earnings Shares per
GBPm million share GBPm million share
----------------------------------------- --------- -------- ------- --------- -------- --------
Basic earnings per share (per
note 12(a)) 182.7 1,333.5 13.7p 518.4 1,318.1 39.3p
Adjusted for:
Revaluation of investment and
development
property (note 14) 78.0 5.9p (264.9) (20.1)p
(Gain)/loss on acquisition of
businesses (note 26) (34.6) (2.6)p 0.8 0.1p
Loss/(gain) on disposal of subsidiaries
(note 27) 0.3 - (2.2) (0.2)p
Gain on sale of other investments
(note 17) (74.1) (5.6)p (0.9) (0.1)p
Administration expenses - exceptional
(note 5) 2.5 0.2p 1.0 0.1p
Exceptional finance costs (note
8) 32.0 2.4p 31.4 2.4p
Change in fair value of financial
instruments (note 9) 16.3 1.2p (6.0) (0.4)p
Tax on the above 16.5 1.3p (5.1) (0.4)p
Share of joint ventures' items (12.3) (0.9)p (83.9) (6.4)p
Share of associates' items (1.1) (0.1)p (5.8) (0.4)p
Non-controlling interests in respect
of the above (6.2) (0.5)p 3.8 0.3p
Underlying earnings per share 200.0 1,333.5 15.0p 186.6 1,318.1 14.2p
Dilutive convertible bonds, share
options and share awards 9.3 107.9 7.5 87.3
Underlying, diluted earnings per
share 209.3 1,441.4 14.5p 194.1 1,405.4 13.8p
Notes (continued)
13 Net asset value per share
(a) NAV per share (diluted, adjusted)
NAV per share (diluted, adjusted) is a non-GAAP measure but has been included as it is considered to be a key measure of the Group's performance. The key difference from EPRA NAV is interest rate swaps not currently used for economic hedges of debt. These are excluded as, in our view, this provides a more meaningful measure of the Group's performance. NAV (diluted, adjusted) is defined as an alternative performance measure in the financial review.
2016 2015
---------------------------- ----------------------------
Net NAV per Net NAV per
assets Shares share assets Shares share
GBPm million pence GBPm million pence
-------------------------------------- -------- -------- -------- -------- -------- --------
NAV per share attributable to
owners of
intu properties plc (1) 4,978.8 1,343.0 371p 4,976.4 1,331.9 374p
Dilutive convertible bonds, share
options and awards 2.6 3.5 16.2 6.4
Diluted NAV per share 4,981.4 1,346.5 370p 4,992.6 1,338.3 373p
Adjusted for:
Fair value of derivative financial
instruments (net of tax) 377.7 28p 322.1 24p
Deferred tax on investment and
development
property and other investments 0.1 - 18.9 1p
Share of joint ventures' items 7.2 1p 6.3 1p
Non-controlling interest recoverable
balance not
recognised 71.3 5p 71.3 5p
NAV per share (diluted, adjusted) 5,437.7 1,346.5 404p 5,411.2 1,338.3 404p
1 The number of shares used has been adjusted to remove shares held in the ESOP.
(b) NNNAV per share (diluted, adjusted)
NNNAV per share (diluted, adjusted) is a non-GAAP measure but has been included as it is considered to be an industry standard comparable measure and is equal to EPRA NNNAV.
2016 2015
Net NAV per Net NAV per
assets Shares share assets Shares share
GBPm million pence GBPm million pence
-------------------------------------- -------- -------- -------- -------- -------- --------
NAV per share (diluted, adjusted) 5,437.7 1,346.5 404p 5,411.2 1,338.3 404p
Fair value of derivative financial
instruments (net of tax) (377.7) (28)p (322.1) (24)p
Excess of fair value of borrowings
over carrying value (375.0) (28)p (194.4) (14)p
Deferred tax on investment and
development
property and other investments (0.1) - (18.9) (1)p
Share of joint ventures' items (9.4) (1)p (8.1) (1)p
Non-controlling interests in respect
of the above 23.4 2p 11.0 1p
NNNAV per share (diluted, adjusted) 4,698.9 1,346.5 349p 4,878.7 1,338.3 365p
Notes (continued)
14 Investment and development property
Freehold Leasehold Total
GBPm GBPm GBPm
----------------------------------------- --------- ---------- --------
At 1 January 2015 5,662.6 2,357.0 8,019.6
Acquisition of Puerto Venecia, Zaragoza 344.2 - 344.2
Additions 84.4 36.6 121.0
Disposals (1.5) (0.3) (1.8)
Disposal of subsidiaries(1) (331.7) - (331.7)
Surplus on revaluation 223.6 41.3 264.9
Foreign exchange movements (12.3) - (12.3)
At 31 December 2015 5,969.3 2,434.6 8,403.9
Acquisition of intu Merry Hill (note
26) 889.3 - 889.3
Additions 47.6 66.0 113.6
Recognition of leasehold on Charter
Place - 55.9 55.9
Disposals (2.0) - (2.0)
Disposal of intu Bromley (note 27) - (179.4) (179.4)
Deficit on revaluation (21.6) (56.4) (78.0)
Foreign exchange movements 8.8 - 8.8
At 31 December 2016 6,891.4 2,320.7 9,212.1
1 Relates to Puerto Venecia, Zaragoza.
A reconciliation to market value is given in the table below:
2016 2015
GBPm GBPm
--------------------------------------------------------------- -------- --------
Balance sheet carrying value of investment and development
property 9,212.1 8,403.9
Tenant incentives included within trade and other receivables
(note 18) 109.9 101.0
Head leases included within finance leases in borrowings
(note 21) (80.2) (34.2)
Market value of investment and development property 9,241.8 8,470.7
The fair value of the Group's investment and development property at 31 December 2016 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 - Professional Standards 2014 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. The main assumptions underlying the valuations are in relation to rent profile and yields. In respect of development valuations, deductions are then made for anticipated costs, including an allowance for developer's profit before arriving at a valuation.
Notes (continued)
15 Joint ventures
The Group's principal joint ventures own and manage investment and development property.
2016
----------- ------------ -------- --------- ------ --------
intu St David's, Puerto intu
Merry Hill Cardiff Venecia Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- ------------ -------- --------- ------ --------
At 1 January 2016 447.0 368.5 85.9 53.4 37.1 991.9
Group's share of underlying
profit 3.3 13.7 0.7 0.8 1.3 19.8
Group's share of other
net profit/(loss) (4.3) (14.3) 19.4 12.9 (1.4) 12.3
Group's share of profit/(loss) (1.0) (0.6) 20.1 13.7 (0.1) 32.1
Distributions (1.0) - - - (2.2) (3.2)
Loan advances - - - - 1.2 1.2
Loan repayments - (12.7) - - - (12.7)
Disposal of joint venture
interest (445.0) - - - - (445.0)
Foreign exchange movements - - 13.4 8.9 1.0 23.3
At 31 December 2016 - 355.2 119.4 76.0 37.0 587.6
Represented by:
Loans to joint ventures - 98.4 95.3 33.9 4.6 232.2
Group's share of net assets - 256.8 24.1 42.1 32.4 355.4
2015
----------- ------------ -------- --------- ------- -------
intu St David's, Puerto intu
Merry Hill Cardiff Venecia Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- ------------ -------- --------- ------- -------
At 1 January 2015 433.0 310.9 - 47.3 60.3 851.5
Puerto Venecia, Zaragoza - - 86.1 - - 86.1
Group's share of underlying
profit 7.5 13.8 0.6 0.6 2.2 24.7
Group's share of other
net profit/(loss) 12.2 61.4 (0.8) 8.4 2.7 83.9
Group's share of profit/(loss) 19.7 75.2 (0.2) 9.0 4.9 108.6 Distributions (5.7) - - - (3.3) (9.0) Repayment of capital - - - - (25.6) (25.6) Loan advances - - - - 0.8 0.8 Loan repayments - (17.6) - - - (17.6) Foreign exchange movements - - - (2.9) - (2.9) At 31 December 2015 447.0 368.5 85.9 53.4 37.1 991.9 Represented by: Loans to joint ventures 386.2 111.0 82.3 29.3 2.3 611.1 Group's share of net assets 60.8 257.5 3.6 24.1 34.8 380.8 -------------------------------- ----------- ------------ -------- --------- ------- -------
At 31 December 2016, the boards of joint ventures had approved GBP15.7 million (2015: GBP5.3 million) of future expenditure for the purchase, construction, development and enhancement of investment property. Of this, nil (2015: GBP2.0 million) is contractually committed. These amounts represent the Group's share.
Notes (continued)
15 Joint ventures (continued)
Set out below is the summarised information of the Group's joint ventures with financial information presented at 100 per cent. The 2016 summary information and the summarised income statement of intu Merry Hill is presented for the period to 22 June 2016, after which it became a 100 per cent owned subsidiary of the Group.
2016
----------- ------------ ---------------------------------------
intu St David's, Puerto intu
Merry Hill Cardiff Venecia Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- ------------ -------- --------- -------- --------
Summary information
Group's interest 50% 50% 50% 50%
Principal place of business England Wales Spain Spain
Summarised income statement
Revenue 27.0 40.4 24.2 15.0 19.1 125.7
Net rental income 20.2 27.4 17.8 10.1 13.3 88.8
Revaluation of investment
and development
property (8.5) (28.6) 38.6 28.6 1.7 31.8
Administration expenses
- underlying (0.5) (0.1) (1.4) (1.0) (1.9) (4.9)
Administration expenses
- exceptional - - - (0.8) - (0.8)
Finance costs (13.1) - (14.9) (9.3) (4.3) (41.6)
Change in fair value of
financial instruments - - 0.2 (0.2) (3.2) (3.2)
Taxation - underlying - - (0.1) - - (0.1)
Profit/(loss) (1.9) (1.3) 40.2 27.4 5.6 70.0
Group's share of profit/(loss) (1.0) (0.6) 20.1 13.7 (0.1) 32.1
Summarised balance sheet
Investment and development
property - 689.5 424.0 236.6 254.5 1,604.6
Other non-current assets - 13.5 0.5 4.8 8.6 27.4
Total non-current assets - 703.0 424.5 241.4 263.1 1,632.0
Cash and cash equivalents - 9.4 25.2 35.4 5.9 75.9
Other current assets - 11.5 2.9 1.7 2.4 18.5
Total current assets - 20.9 28.1 37.1 8.3 94.4
Current financial liabilities - (0.2) (12.1) (6.0) (0.5) (18.8)
Other current liabilities - (13.3) (9.9) (4.6) (5.4) (33.2)
Total current liabilities - (13.5) (22.0) (10.6) (5.9) (52.0)
Partners' loans - (196.8) (190.6) (67.8) (4.6) (459.8)
Non-current financial liabilities - - (191.8) (101.5) (131.8) (425.1)
Other non-current liabilities - - - (14.4) - (14.4)
Total non-current liabilities - (196.8) (382.4) (183.7) (136.4) (899.3)
Net assets - 513.6 48.2 84.2 129.1 775.1
Group's share of net assets - 256.8 24.1 42.1 32.4 355.4
Notes (continued)
15 Joint ventures (continued)
2015
----------- ------------ -----------------------------------------
intu St David's, Puerto intu
Merry Hill Cardiff Venecia Asturias Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- ------------ -------- --------- -------- ----------
Summary information
Group's interest 50% 50% 50% 50%
Principal place of business England Wales Spain Spain
Summarised income statement
Revenue 58.8 41.0 5.4 13.2 19.6 138.0
Net rental income 43.3 27.6 4.5 9.9 13.4 98.7
Net other income - 0.1 - - - 0.1
Revaluation of investment
and development
property 24.4 122.7 (0.9) 20.0 13.9 180.1
Administration expenses
- underlying (1.2) - (0.3) (0.7) (2.1) (4.3)
Administration expenses
- exceptional - - (0.2) (0.7) - (0.9)
Finance costs (27.2) - (3.0) (8.0) (0.5) (38.7)
Finance income 0.1 - - - - 0.1
Change in fair value of
financial instruments - - (0.5) (0.9) - (1.4)
Taxation - underlying - - - (0.1) - (0.1)
Taxation - exceptional - - - (1.5) - (1.5)
Profit/(loss) 39.4 150.4 (0.4) 18.0 24.7 232.1
Group's share of profit/(loss) 19.7 75.2 (0.2) 9.0 4.9 108.6
Summarised balance sheet
Investment and development
property 895.8 718.1 331.5 177.8 252.2 2,375.4
Other non-current assets 1.1 2.8 0.4 4.0 4.4 12.7
Total non-current assets 896.9 720.9 331.9 181.8 256.6 2,388.1
Cash and cash equivalents 18.6 7.7 13.0 8.5 7.3 55.1
Other current assets 4.9 23.7 2.3 2.6 6.1 39.6
Total current assets 23.5 31.4 15.3 11.1 13.4 94.7
Current financial liabilities (5.3) (1.2) (3.9) (3.6) (2.4) (16.4)
Other current liabilities (21.1) (14.1) (7.4) (0.3) (3.7) (46.6)
Total current liabilities (26.4) (15.3) (11.3) (3.9) (6.1) (63.0)
Partners' loans (772.4) (222.0) (164.6) (58.6) (131.1) (1,348.7)
Non-current financial liabilities - - (164.1) (70.0) - (234.1)
Other non-current liabilities - - - (12.2) - (12.2)
Total non-current liabilities (772.4) (222.0) (328.7) (140.8) (131.1) (1,595.0)
Net assets 121.6 515.0 7.2 48.2 132.8 824.8
Group's share of net assets 60.8 257.5 3.6 24.1 34.8 380.8
Notes (continued)
16 Investment in associates
2016 2015
GBPm GBPm
------------------------------- ----- -----
At 1 January 54.7 38.0
Additions - 10.0
Share of profit of associates 1.6 6.0
Foreign exchange movements 8.9 0.7
At 31 December 65.2 54.7
Investment in associates comprises a 32.4 per cent holding in the ordinary shares of Prozone Intu Properties Limited ('Prozone') and a 26.8 per cent holding in the ordinary shares of Empire Mall Private Limited ('Empire'). Both companies are incorporated in India.
17 Other investments
2016 2015
GBPm GBPm
---------------------------- -------- ------
At 1 January 210.3 189.7
Additions 14.1 -
Disposals (209.4) (4.5)
Revaluation 0.4 12.8
Foreign exchange movements 0.1 12.3
At 31 December 15.5 210.3
These investments are available-for-sale investments and are analysed by type as follows:
2016 2015
GBPm GBPm
------------------------------ ----- ------
Listed securities - equity 15.5 0.9
Unlisted securities - equity - 209.4
15.5 210.3
Listed investments are accounted for at fair value using the bid market value at the reporting date.
On 19 January 2016, the Group disposed of its interest of 11.4 million units in a US venture controlled by Equity One, receiving GBP201.9 million. The transaction resulted in a gain of GBP74.1 million recognised in the income statement, after transfer from reserves of GBP77.0 million and settlement costs.
Notes (continued)
18 Trade and other receivables
2016 2015
GBPm GBPm
------------------------------------------- ------ ------
Current
Trade receivables 22.1 23.5
Amounts owed by joint ventures 9.9 8.5
Other receivables 15.4 17.5
Net investment in finance lease 0.5 -
Prepayments and accrued income 75.5 59.3
Trade and other receivables - current 123.4 108.8
Non-current
Other receivables - 0.1
Net investment in finance lease 1.5 -
Prepayments and accrued income 97.6 89.2
Trade and other receivables - non-current 99.1 89.3
Included within prepayments and accrued income for the Group of GBP173.1 million (2015: GBP148.5 million) are tenant lease incentives of GBP109.9 million (2015: GBP101.0 million), of which GBP12.3 million are classified as current (2015: GBP11.8 million) and GBP97.6 million as non-current (2015: GBP89.2 million).
19 Cash and cash equivalents
2016 2015
GBPm GBPm
--------------------------- ------ ------
Unrestricted cash 251.7 273.6
Restricted cash 3.0 2.2
Cash and cash equivalents 254.7 275.8
Restricted cash primarily represents cash deposits to fund compulsory purchase orders related to the intu Watford extension.
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.
20 Trade and other payables
2016 2015
GBPm GBPm
--------------------------------- ------ ------
Current
Rents received in advance 105.2 99.3
Trade payables 6.9 4.6
Amounts owed to joint ventures 0.1 0.4
Accruals and deferred income 128.8 132.0
Other payables 10.3 12.1
Other taxes and social security 29.7 27.1
Trade and other payables 281.0 275.5
Notes (continued)
21 Borrowings
2016
--------------------------------------------------------------
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- -------- ---------- -------- --------- --------
Current
Bank loans and overdrafts 125.1 125.1 - - 125.1 125.1
Commercial mortgage backed securities
('CMBS') notes 14.9 14.9 - 14.9 - 18.3
Current borrowings, excluding
finance leases 140.0 140.0 - 14.9 125.1 143.4
Finance lease obligations 2.4 2.4 - 2.4 - 2.4
142.4 142.4 - 17.3 125.1 145.8
Non-current
Revolving credit facility 2021 10.0 10.0 - - 10.0 10.0
CMBS notes 2019 19.8 19.8 - 19.8 - 20.8
CMBS notes 2022 50.5 50.5 - 50.5 - 60.6
CMBS notes 2024 87.8 87.8 - 87.8 - 98.6
CMBS notes 2029 78.7 78.7 - 78.7 - 92.3
CMBS notes 2033 325.4 325.4 - 325.4 - 406.4
CMBS notes 2035 190.6 190.6 - - 190.6 196.5
Bank loan 2018 494.8 494.8 - - 494.8 494.8
Bank loan 2020 32.8 32.8 - - 32.8 32.8
Bank loans 2021 468.9 468.9 - - 468.9 468.9
3.875% bonds 2023 442.4 442.4 - 442.4 - 486.8
4.125% bonds 2023 477.5 477.5 - 477.5 - 536.1
4.625% bonds 2028 341.7 341.7 - 341.7 - 402.4
4.250% bonds 2030 344.8 344.8 - 344.8 - 389.4
Debenture 2027 228.4 228.4 - 228.4 - 269.3
2.5% convertible bonds 2018 (note
22) 308.1 - 308.1 308.1 - 308.1
2.875% convertible bonds 2022
(note 22) 362.4 - 362.4 362.4 - 362.4
Non-current borrowings, excluding
finance leases
and Metrocentre compound financial
instrument 4,264.6 3,594.1 670.5 3,067.5 1,197.1 4,636.2
Metrocentre compound financial
instrument 177.8 - 177.8 177.8 - 177.8
Finance lease obligations 77.8 77.8 - 77.8 - 77.8
4,520.2 3,671.9 848.3 3,323.1 1,197.1 4,891.8
Total borrowings 4,662.6 3,814.3 848.3 3,340.4 1,322.2 5,037.6
Cash and cash equivalents (note
19) (254.7)
Net debt 4,407.9
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. The fair values of unlisted floating rate borrowings are equal to their carrying value.
Notes (continued)
21 Borrowings (continued)
2015
--------------------------------------------------------------
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- -------- ---------- -------- --------- --------
Current
Bank loans and overdrafts 122.8 122.8 - - 122.8 122.8
Commercial mortgage backed securities
('CMBS') notes 14.1 14.1 - 14.1 - 16.4
Current borrowings, excluding
finance leases 136.9 136.9 - 14.1 122.8 139.2
Finance lease obligations 2.4 2.4 - 2.4 - 2.4
139.3 139.3 - 16.5 122.8 141.6
Non-current
Revolving credit facility 2020 353.7 353.7 - - 353.7 353.7
CMBS notes 2019 19.6 19.6 - 19.6 - 20.2
CMBS notes 2022 50.9 50.9 - 50.9 - 60.6
CMBS notes 2024 87.5 87.5 - 87.5 - 91.4
CMBS notes 2029 83.7 83.7 - 83.7 - 94.1
CMBS notes 2033 339.0 339.0 - 339.0 - 400.1
CMBS notes 2035 188.4 188.4 - - 188.4 194.7
Bank loans 2017 346.9 346.9 - - 346.9 346.9
Bank loans 2020 380.0 380.0 - - 380.0 380.0
Bank loan 2021 120.6 120.6 - - 120.6 120.6
3.875% bonds 2023 441.3 441.3 - 441.3 - 461.3
4.125% bonds 2023 476.6 476.6 - 476.6 - 504.0
4.625% bonds 2028 341.2 341.2 - 341.2 - 380.8
4.250% bonds 2030 344.5 344.5 - 344.5 - 358.1
Debenture 2027 228.2 228.2 - 228.2 - 227.7
2.5% convertible bonds 2018 (note
22) 326.4 - 326.4 326.4 - 326.4
Non-current borrowings, excluding
finance leases
and Metrocentre compound financial
instrument 4,128.5 3,802.1 326.4 2,738.9 1,389.6 4,320.6
Metrocentre compound financial
instrument 172.0 - 172.0 172.0 - 172.0
Finance lease obligations 31.8 31.8 - 31.8 - 31.8
4,332.3 3,833.9 498.4 2,942.7 1,389.6 4,524.4
Total borrowings 4,471.6 3,973.2 498.4 2,959.2 1,512.4 4,666.0
Cash and cash equivalents (note
19) (275.8)
Net debt 4,195.8
The maturity profile of debt (excluding finance leases) is as follows:
2016 2015
GBPm GBPm
--------------------------------------------------------- -------- --------
Repayable within one year 140.0 136.9
Repayable in more than one year but not more than two
years 804.8 346.6
Repayable in more than two years but not more than five
years 620.6 1,150.5
Repayable in more than five years 3,017.0 2,803.4
4,582.4 4,437.4
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 other information section).
At 31 December 2016 the Group had committed borrowing facilities of GBP640.7 million, expiring in 2021, GBP630.7 million of which was undrawn (2015: facilities GBP640.7 million, undrawn GBP287.0 million).
Notes (continued)
21 Borrowings (continued)
Finance lease disclosures:
2016 2015
GBPm GBPm
Minimum lease payments under finance leases
fall due:
Not later than one year 2.4 4.2
Later than one year and not later than five
years 9.5 17.0
Later than five years 112.7 62.5
124.6 83.7
Future finance charges on finance leases (44.4) (49.5)
Present value of finance lease liabilities 80.2 34.2
Present value of finance lease liabilities:
Not later than one year 2.4 2.4
Later than one year and not later than five
years 9.5 13.9
Later than five years 68.3 17.9
80.2 34.2
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.
22 Convertible bonds
2.875 per cent convertible bonds ('the 2.875 per cent bonds')
On 1 November 2016 Intu (Jersey) 2 Limited (the 'Issuer') issued GBP375.0 million 2.875 per cent Guaranteed Convertible Bonds due 2022 at par, all of which remain outstanding at 31 December 2016. At 31 December 2016 the exchange price was GBP3.7506 per ordinary share. intu properties plc has unconditionally and irrevocably guaranteed the due and punctual performance by the Issuer of all of its obligations (including payments) in respect of the 2.875 per cent bonds and the obligations of the Company, as guarantor, constitute direct, unsubordinated and unsecured obligations of the Company.
Subject to certain conditions, the 2.875 per cent bonds are convertible into preference shares of the Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or (at the Company's election) any combination of ordinary shares and cash. The 2.875 per cent bonds can be converted at any time from the date which is 180 days prior to the Final Maturity Date of 1 November 2022, to the 20th dealing date prior to the Final Maturity Date.
The initial exchange price was GBP3.7506 per ordinary share, a conversion rate of approximately 26,662 ordinary shares for every GBP100,000 nominal of the 2.875 per cent bonds. 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.
The 2.875 per cent bonds may be redeemed at par at the Company's option subject to the Company's ordinary share price having traded at 30 per cent above the conversion price for a specified period, or at any time once 85 per cent by nominal value of the 2.875 per cent bonds originally issued have been converted or cancelled. If not previously converted, redeemed or purchased and cancelled, the 2.875 per cent bonds will be redeemed at par on 1 November 2022.
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 with all gains and losses taken to the income statement through the change in fair value of financial instruments line. At 31 December 2016, the fair value of the 2.875 per cent bonds was GBP362.4 million, with the change in fair value reflected in note 9. The 2.875 per cent bonds are listed on the Channel Islands Securities Exchange and the Open Market (Freiverkehr) of the Frankfurt Stock Exchange.
From the date of issue, interest of GBP1.8 million in respect of these bonds has been recognised within finance costs.
2.5 per cent convertible bonds ('the 2.5 per cent bonds')
On 4 October 2012 Intu (Jersey) Limited (the 'Issuer') issued GBP300.0 million 2.5 per cent Guaranteed Convertible Bonds due 2018 at par, all of which remain outstanding at 31 December 2016. At 31 December 2016 the exchange price was GBP3.2872 per ordinary share. intu properties plc has unconditionally and irrevocably guaranteed the due and punctual performance by the Issuer of all of its obligations (including payments) in respect of the 2.5 per cent bonds and the obligations of the Company, as guarantor, constitute direct, unsubordinated and unsecured obligations of the Company.
Subject to certain conditions, the 2.5 per cent bonds are convertible into preference shares of the Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or (at the Company's election) any combination of ordinary shares and cash. The 2.5 per cent bonds can be converted at any time from 14 November 2012 up to the 20th dealing day before the maturity date.
The initial exchange price was GBP4.3752 per ordinary share, a conversion rate of approximately 22,856 ordinary shares for every GBP100,000 nominal of the 2.5 per cent bonds. Under the terms of the 2.5 per cent bonds, the exchange price is adjusted upon certain events including the payment of dividends by the Company.
The 2.5 per cent bonds may be redeemed at par at the Company's option subject to the Company's ordinary share price having traded at 30 per cent above the conversion price for a specified period, or at any time once 85 per cent by nominal value of the 2.5 per cent bonds originally issued have been converted or cancelled. If not previously converted, redeemed or purchased and cancelled, the 2.5 per cent bonds will be redeemed at par on 4 October 2018.
Notes (continued)
22 Convertible bonds (continued)
The 2.5 per cent bonds are designated as at fair value through profit or loss and so are presented on the balance sheet at fair value with all gains and losses taken to the income statement through the change in fair value of financial instruments line. At 31 December 2016, the fair value of the 2.5 per cent bonds was GBP308.1 million (2015: GBP326.4 million), with the change in fair value reflected in note 9. The 2.5 per cent bonds are listed on the Professional Securities Market of the London Stock Exchange.
During the year interest of GBP7.5 million (2015: GBP7.5 million) in respect of these bonds has been recognised within finance costs.
23 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 (2015: 0 per cent), for other UK assets and liabilities the relevant rate will be 20 per cent if the temporary difference is expected to be realised before 1 April 2017, 19 per cent if it is expected to be realised on or after 1 April 2017 but before 1 April 2020 and 17 per cent if it is expected to be realised on or after 1 April 2020 (2015: 20 per cent, 19 per cent and 18 per cent respectively). For other assets and liabilities the tax rate will be the relevant expected corporate tax rate in the relevant country.
Movements in the provision for deferred tax:
Investment
and Derivative Other
development Other financial temporary
property investments instruments differences Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ------------ ------------ -------
Provided deferred tax provision/(asset):
At 1 January 2015 - 14.1 (13.6) (0.5) -
Acquisition of Puerto Venecia,
Zaragoza 6.1 - - (6.1) -
Recognised in the income
statement (0.8) (0.2) (2.8) (1.2) (5.0)
Recognised in other comprehensive
income - 5.0 - - 5.0
Foreign exchange movements (0.2) - - 0.2 -
Disposal of subsidiaries (5.1) - - 5.1 -
At 31 December 2015 - 18.9 (16.4) (2.5) -
Recognised in the income
statement - (2.3) 16.4 2.4 16.5
Recognised in other comprehensive
income - (16.5) - - (16.5)
At 31 December 2016 - 0.1 - (0.1) -
On its sale in 2016, the deferred tax provision in respect of the Group's investment in Equity One (2015: GBP18.9 million) was reduced to nil. The revaluation of this investment has been recognised in reserves and so the deferred tax movements relating to it have also been recognised in other comprehensive income. With the provision reduced to nil, the deferred tax asset on derivative financial instruments and other temporary differences can no longer be recognised, and GBP18.9 million has therefore been released to the income statement.
At 31 December 2016, the Group had unrecognised deferred tax assets calculated at a tax rate of 17 per cent (2015: 18 per cent) of GBP39.7 million (2015: GBP54.2 million) for surplus UK revenue tax losses carried forward, GBP45.5 million (2015: GBP31.3 million) for temporary differences on derivative financial instruments and GBP0.6 million (2015: GBP0.6 million) for temporary differences on capital allowances.
In accordance with the requirements of IAS 12 Income Taxes, the deferred tax asset has not been recognised in the Group financial statements due to uncertainty over the level of profits that will be available in the non-REIT elements of the Group in future periods.
24 Share capital and share premium
Share Share
capital premium
GBPm GBPm
------------------------------------------------------- -------- --------
Issued and fully paid:
At 31 December 2015: 1,344,661,827 ordinary shares of
50 pence each 672.3 1,303.1
Ordinary shares issued 5.2 24.3
At 31 December 2016: 1,355,040,243 ordinary shares of
50 pence each 677.5 1,327.4
During the year the Company issued a total of 110,075 ordinary shares in connection with the exercise of options by employees and former employees under the intu properties plc approved share option scheme and the intu properties plc unapproved share option scheme. As a result the Company's share capital increased by GBP0.1 million and share premium by GBP0.2 million.
Notes (continued)
24 Share capital and share premium (continued)
On 22 November 2016, the Company issued 10,268,341 new ordinary shares of 50 pence each respectively to shareholders who elected to receive their 2016 interim dividend in shares under the Scrip Dividend Scheme. The value of the Scrip Shares was calculated in accordance with the terms of the Scrip Dividend Scheme, being the average middle market quotations for each day between 4 October and 10 October 2016 inclusive less the gross amount of dividend payable. As a result the Company's share capital increased by GBP5.1 million and share premium by GBP24.1 million.
At 23 February 2017 the Company had an unexpired authority to repurchase shares up to a maximum of 134,466,182 shares with a nominal value of GBP67.2 million, and the Directors have an unexpired authority to allot up to a maximum of 437,878,478 shares with a nominal value of GBP218.9 million.
Included within the issued share capital at 31 December 2016 are 12,069,559 ordinary shares (2015: 12,712,516) held by the Trustee of the ESOP which is operated by the Company (see note 25). The nominal value of these shares at 31 December 2016 is GBP6.0 million (2015: GBP6.4 million).
25 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 GBP1.0 million (2015: GBP1.6 million) in respect of these shares have been waived by agreement.
2016 2015
---------------- ----------------
Shares Shares
million GBPm million GBPm
---------------- -------- ------ -------- ------
At 1 January 12.7 43.3 13.1 45.1
Acquisitions 0.3 0.7 0.5 1.6
Disposals (0.9) (3.2) (0.9) (3.4)
At 31 December 12.1 40.8 12.7 43.3
26 Acquisition of intu Merry Hill
On 22 June 2016 the Group acquired the remaining 50 per cent of intu Merry Hill for total consideration of GBP409.7 million. Following this transaction intu Merry Hill has ceased to be accounted for as a joint venture and is now a subsidiary of the Group. The cash flow statement outflow of GBP405.5 million reflects the GBP409.7 million less the unrestricted cash acquired of GBP4.2 million. Acquisition related costs of GBP1.0 million were incurred and recognised in the income statement in exceptional administration expenses during the year.
The fair value of assets and liabilities acquired, at 100 per cent, are set out in the table below:
Fair value
GBPm
-------------------------------------- ----------
Assets
Investment and development property 889.3
Cash and cash equivalents 4.2
Trade and other receivables 3.9
Total assets 897.4
Liabilities
Trade and other payables (8.1)
Total liabilities (8.1)
Net assets 889.3
Fair value of consideration paid 854.7
Gain on acquisition of business 34.6
The fair value of the assets and liabilities acquired exceeds the fair value of the consideration and as a result a gain of GBP34.6 million is recognised in the income statement on acquisition. With a motivated seller, we were able as manager and owner of the other 50 per cent interest to conclude the transaction at a value lower than the independent market value.
The fair value of consideration paid includes the cash consideration for the acquired 50 per cent interest of GBP409.7 million and the fair value of intu's existing interest of GBP445.0 million. There are no material differences between the carrying value and fair value of intu's existing joint venture interest at acquisition.
From 22 June 2016, the date on which the acquired entities joined the Group as subsidiaries, they contributed GBP28.5 million to the revenue of the Group (acquired 50 per cent contribution: GBP14.2 million) and contributed GBP13.5 million of profit in the period.
Had the entities been acquired on 1 January 2016, the Group would have reported revenue of GBP650.0 million and profit of GBP170.9 million for the year.
Notes (continued)
27 Disposal of intu Bromley
On 15 December 2016 the Group sold 100 per cent of its interest in Intu Bromley Limited, a wholly owned subsidiary, to Alaska Permanent Fund for initial consideration of GBP81.5 million before expenses of GBP1.3 million. Intu Bromley Limited holds a 64 per cent interest in intu Bromley. It is anticipated the Group will receive a cash payment of GBP0.8 million following final agreement of the completion balance sheet. As a result of this transaction the Group has recorded a loss on disposal of GBP0.3 million in the income statement. The cash flow statement inflow of GBP80.5 million reflects the net consideration of GBP81.0 million net of cash in the business of GBP0.5 million.
The assets and liabilities of the subsidiary disposed of, at 100 per cent, are set out below:
GBPm
-------------------------------------- --------
Assets
Investment and development property 179.4
Cash and cash equivalents 0.5
Trade and other receivables 12.7
Total assets 192.6
Liabilities
Trade and other payables (7.3)
Borrowings (104.0)
Total liabilities (111.3)
Net assets 81.3
Fair value of consideration received 81.0
Loss on disposal of subsidiaries 0.3
28 Capital commitments
At 31 December 2016 the Board had approved GBP241.3 million (2015: GBP59.9 million) of future expenditure for the purchase, construction, development and enhancement of investment property. Of this, GBP136.6 million (2015: GBP21.2 million) is contractually committed. The majority of this is expected to be spent during 2017 and 2018.
29 Cash generated from operations
2016 2015
Notes GBPm GBPm
---------------------------------------------------- ------ ------- --------
Profit before tax, joint ventures and associates 154.6 398.4
Adjusted for:
Revaluation of investment and development property 14 78.0 (264.9)
(Gain)/loss on acquisition of businesses 4 (34.6) 0.8
Loss/(gain) on disposal of subsidiaries 27 0.3 (2.2)
Gain on sale of other investments 17 (74.1) (0.9)
Depreciation 2.2 2.6
Share-based payments 1.9 4.8
Lease incentives and letting costs (16.7) (5.8)
Finance costs 6 202.9 206.6
Finance income 7 (14.9) (18.7)
Other finance costs 8 37.9 37.3
Change in fair value of financial instruments 9 16.3 (6.0)
Changes in working capital:
Change in trade and other receivables (1.0) 14.4
Change in trade and other payables 3.1 0.1
Cash generated from operations 355.9 366.5
Notes (continued)
30 Related party transactions
Key management(1) compensation is analysed below:
2016 2015
GBPm GBPm
---------------------------------------------- ---- ----
Salaries and short-term employee benefits 4.8 5.7
Pensions and other post-employment benefits 0.5 0.3
Share-based payments 3.7 3.8
Compensation for loss of office - 0.2
9.0 10.0
1 Key management comprises the Directors of intu properties plc and employees who have been designated as persons discharging managerial responsibility.
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:
2016 2015
GBPm GBPm
-------------- ----- -----
Income 1.3 1.1
Expenditure (0.9) (0.5)
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, the supply of utilities and the refund of a premium for a land option held by Peel which expired. All contracts are on an arm's length basis at commercial rates.
During the year, 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 below).
Balances outstanding between the Group and members of Peel at 31 December 2016 and 31 December 2015 are shown below:
2016 2015
GBPm GBPm
---------------------------------- ---- -----
Net investment in finance lease 2.0 -
Amounts owed by members of Peel 0.2 0.1
Amounts owed to members of Peel - (0.2)
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 2016 totalled GBP11.7 million (2015: GBP11.7 million).
31 Events after the reporting date
The Group has entered into an exclusivity agreement with entities of the Ivanhoe Cambridge Group to acquire the Xanadú shopping centre in Madrid, Spain. At the time of signing these financial statements there is no certainty that this transaction will complete.
32 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.
OTHER INFORMATION (unaudited)
INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)
Net
Market Revaluation initial 'Topped Nominal
-up'
value surplus/ yield NIY(H) equivalent
GBPm deficit Ownership (Note) (EPRA) (EPRA) yield Occupancy
-------- ---------- ---------- ----------
At 31 December 2016
Subsidiaries
intu Trafford Centre 2,312.0 - 100% 3.9% 3.9% 4.3% 98%
intu Lakeside 1,375.0 +2% 100% 3.7% 3.9% 4.5% 91%
intu Metrocentre 945.2 -2% 90% (A) 4.5% 4.8% 5.3% 95%
intu Merry Hill 898.5 +1% 100% (B) 4.0% 4.3% 5.0% 93%
intu Braehead 546.2 -7% 100% 4.5% 4.7% 6.3% 97%
intu Derby 450.0 - 100% 5.8% 6.1% 6.2% 97%
Manchester Arndale 445.8 -2% 48% (C) 4.5% 4.6% 5.2% 97%
intu Victoria Centre 360.5 +1% 100% 4.6% 5.0% 5.7% 95%
intu Watford 336.0 - 93% 5.0% 5.0% 5.1% 100%
intu Eldon Square 317.7 +3% 60% 4.3% 4.9% 5.1% 99%
intu Chapelfield 296.3 +9% 100% 5.2% 5.4% 5.5% 98%
intu Milton Keynes 281.0 - 100% 4.6% 4.6% 4.9% 100%
Cribbs Causeway 238.9 -3% 33% (D) 4.6% 5.2% 5.6% 95%
intu Potteries 169.0 -5% 100% 5.7% 5.9% 7.4% 95%
Other 269.7 (E)
Investment and development
property excluding
Group's
share of joint ventures 9,241.8
Joint ventures
St David's, Cardiff 353.3 -4% 50% 3.9% 4.3% 4.8% 95%
Puerto Venecia, Zaragoza 212.5 +10% 50% (F) 4.5% 4.8% 5.8% 97%
intu Asturias 118.5 +14% 50% (F) 4.9% 5.0% 5.4% 99%
Other 58.6 (G)
Investment and development
property including
Group's
share of joint ventures 9,984.7 4.27% 4.45% 5.02% 96%
At 31 December 2015
including
Group's share of joint
ventures 9,602.4 4.29% 4.52% 5.14% 96%
Notes
A Interest shown is that of The Metrocentre Partnership in intu Metrocentre
(90 per cent) and the Metro Retail Park (100 per cent). The Group
has a 60 per cent interest in The Metrocentre Partnership which is
consolidated
as a subsidiary of the Group.
B Revaluation surplus assessed from date of acquisition.
C The Group's interest is through a joint operation ownership of a 95 per
cent interest in Manchester Arndale, and a 90 per cent interest
in New Cathedral Street, Manchester.
D The Group's interest is through a joint operation ownership of a 66 per
cent interest in The Mall at Cribbs Causeway and a 100 per cent interest
in The Retail Park, Cribbs Causeway.
E Includes the Group's interests in intu Broadmarsh, Soar at intu Braehead,
development land in Spain, Charter Place, Watford and
Sprucefield, Northern Ireland.
F Calculated in local currency.
G Includes the Group's interest in intu Uxbridge.
H Net initial yield adjusted for the expiration of rent free periods and
other unexpired lease incentives.
31 December 31 December
2016 2015
GBPm GBPm
Passing rent 427.3 411.7
Annual property income 467.4 448.5
ERV 542.5 531.2
Weighted average unexpired
lease term 7.7 years 7.9 years
Please refer to the glossary for definitions of terms.
OTHER INFORMATION (unaudited) (continued)
INVESTMENT AND DEVELOPMENT PROPERTY (unaudited) (continued)
Analysis of capital return in the year
Revaluation
Market value (deficit)/surplus
2016 2015 2016 2016
GBPm GBPm GBPm %
-------- --------
Like-for-like property 9,380.9 9,283.9 (4.3) -
Acquisition: intu Merry Hill (50%) 444.6 - 3.3 n/a
Other additions 6.0 - (0.3) n/a
Disposal: intu Bromley - 174.1 (1.7) n/a
Developments 153.2 144.4 (60.8) n/a
Total investment and development property 9,984.7 9,602.4 (63.8) n/a
OTHER INFORMATION (continued)
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% 44% 125% 264%
Covenants are tested on the Security Group, the principal assets of which
are intu Lakeside, intu Braehead, intu Derby, intu Victoria Centre, intu
Watford and intu Chapelfield.
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 below loan to value of 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 GBP782.6
million at 31 December 2016. 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 2016 market value ratio is 35 per
cent. No restrictions are in place at present.
Intu Metrocentre Finance plc
Interest Interest
Loan LTV LTV cover cover
GBPm Maturity covenant actual covenant actual(*)
4.125 per cent
bonds 485.0 2023 100% 51% 125% 212%
The structure's covenant regime gives the Group a significant degree of flexibility when the covenants are below certain levels. The Group retains operating control below loan to value of 70 per cent and interest cover above 1.4x. No financial covenant default occurs unless loan to value exceeds 100 per cent or interest cover falls below 1.25x.
Other asset-specific debt
Loan
outstanding
at Loan to Interest Interest
31 December 31 December
2016(1) LTV 2016 cover cover
GBPm Maturity covenant market value(2) covenant actual(3)
intu Milton
Keynes 125.2 2017(5) 65% 45% 150% 205%
intu Merry Hill 500.0 2018 65% 56% 150% 245% `
Sprucefield 33.2 2020 65% 50% 150% 355%
intu Uxbridge(4) 26.0 2020 70% 55% 125% 202%
St David's,
Cardiff 122.5 2021 65% 35% 150% 321%
Puerto Venecia,
Zaragoza4 (EUR) 112.5 2019 65% 48% 150% 304%
intu Asturias4
(EUR) 60.5 2021 65% 44% 150% 542%
The loan values are the actual principal balances outstanding at 31
December 2016, which take into account any principal repayments made
1 up to
31 December 2016. The balance sheet value of the loans includes unamortised
fees.
The loan to 31 December 2016 market value provides an indication of
2 the impact the 31 December 2016 property valuations could have on the
LTV covenants. The actual timing and manner of testing LTV covenants
varies and is loan specific.
Based on latest certified figures, calculated in accordance with loan
3 agreements, which have been submitted between 31 December 2016 and
31 January 2017. 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.
Since the year end, we have refinanced the intu Milton Keynes bank loan,
5 with the loan now maturing in 2019.
OTHER INFORMATION (continued)
FINANCIAL COVENANTS (unaudited) (continued)
Intu Debenture plc
Capital Capital Interest Interest
Loan cover cover cover cover
GBPm Maturity covenant actual covenant actual
231.4 2027 150% 249% 100% 119%
The debenture is currently secured on a number of the Group's properties including intu Potteries, intu Eldon Square, intu Broadmarsh and Soar at intu Braehead.
Should the capital cover or interest cover test be breached, Intu Debenture plc (the 'Issuer') has three months from the date of delivery of the valuation or the latest certificate to the Trustees to make good any deficiencies. The Issuer may withdraw property secured on the debenture by paying a sum of money or through the substitution of alternative property provided that the capital cover and interest cover tests are satisfied immediately following the substitution.
Financial covenants on corporate facilities
Interest Interest Borrowings/ Borrowings/
Net worth Net worth cover cover net worth net worth
covenant actual covenant actual covenant actual
GBP600m
facility,
maturing in
2021* GBP1,200m GBP2,104m 120% 194% 125% 54%
GBP375m due in
2022
2.875 per cent
convertible
bonds** n/a n/a n/a n/a 175% 9%
GBP300m due in
2018
2.5 per cent
convertible
bonds** n/a n/a n/a n/a 175% 9%
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.
Average
Nominal amount rate
GBPm %
In effect on or after:
1 year 1,673.4 3.02
2 years 1,323.4 3.30
5 years 791.8 4.35
10 years 672.2 5.01
15 years 610.6 4.96
20 years 116.7 5.07
OTHER INFORMATION (continued)
FINANCIAL INFORMATION INCLUDING SHARE OF JOINT VENTURES (unaudited)
The information in this section is presented to show the Group including its share of joint ventures. A reconciliation from the amounts shown in the Group's income statement and balance sheet is provided on the following page.
Underlying earnings
2016 2015
Group Group
Group Share of including Group Share of including
share of share of
underlying joint joint underlying joint joint
profit ventures ventures profit ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Rent receivable 484.5 48.1 532.6 461.0 53.0 514.0
Service charge income 101.6 9.5 111.1 96.9 10.6 107.5
Facilities management
income
from joint ventures 8.2 (3.1) 5.1 13.7 (5.8) 7.9
Revenue 594.3 54.5 648.8 571.6 57.8 629.4
Net rental income 406.1 40.9 447.0 381.8 46.0 427.8
Net other income/(expenses) 0.6 (1.3) (0.7) 6.9 (1.1) 5.8
Administration expenses (37.8) (0.8) (38.6) (37.3) (0.7) (38.0)
Underlying operating
profit 368.9 38.8 407.7 351.4 44.2 395.6
Finance costs (202.9) (5.6) (208.5) (206.6) (2.3) (208.9)
Finance income 14.9 (13.4) 1.5 18.7 (17.1) 1.6
Other finance costs (5.9) - (5.9) (5.9) - (5.9)
Underlying net finance
costs (193.9) (19.0) (212.9) (193.8) (19.4) (213.2)
Underlying profit
before tax, joint
ventures
joint ventures and
associates 175.0 19.8 194.8 157.6 24.8 182.4
Tax on underlying
profit - - - (0.5) (0.1) (0.6)
Share of underlying
profit of
joint ventures 19.8 (19.8) - 24.7 (24.7) -
Share of underlying
profit of
associates 0.5 - 0.5 0.2 - 0.2
Remove amounts attributable
to non-controlling
interests 4.7 - 4.7 4.6 - 4.6
Underlying earnings 200.0 - 200.0 186.6 - 186.6
A reconciliation from the Group's profit to underlying earnings is provided in Note 12(c).
OTHER INFORMATION (continued)
FINANCIAL INFORMATION INCLUDING SHARE OF JOINT VENTURES (unaudited) (continued)
Consolidated income statements
2016 2015
Group Group
including including
Share Share
Group of share Group of share
income joint of joint income joint of joint
statement ventures ventures statement ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 594.3 54.5 648.8 571.6 57.8 629.4
Net rental income 406.1 40.9 447.0 381.8 46.0 427.8
Net other income/(expenses) 0.6 (1.3) (0.7) 6.9 (1.1) 5.8
Revaluation of investment and
development property (78.0) 14.2 (63.8) 264.9 85.8 350.7
Gain/(loss) on acquisition
of businesses 34.6 - 34.6 (0.8) - (0.8)
(Loss)/gain on disposal of
subsidiaries (0.3) - (0.3) 2.2 - 2.2
Gain on sale of other investments 74.1 - 74.1 0.9 - 0.9
Administration expenses -
ongoing (37.8) (0.8) (38.6) (37.3) (0.7) (38.0)
Administration expenses -
exceptional (2.5) (0.4) (2.9) (1.0) (0.5) (1.5)
Operating profit 396.8 52.6 449.4 617.6 129.5 747.1
Finance costs (202.9) (5.6) (208.5) (206.6) (2.3) (208.9)
Finance income 14.9 (13.4) 1.5 18.7 (17.1) 1.6
Other finance costs (37.9) (0.9) (38.8) (37.3) - (37.3)
Change in fair value of financial
instruments (16.3) (0.6) (16.9) 6.0 (0.7) 5.3
Net finance costs (242.2) (20.5) (262.7) (219.2) (20.1) (239.3)
Profit before tax, joint ventures
and associates 154.6 32.1 186.7 398.4 109.4 507.8
Share of post-tax profit of
joint ventures 32.1 (32.1) - 108.6 (108.6) -
Share of post-tax profit of
associates 1.6 - 1.6 6.0 - 6.0
Profit before tax 188.3 - 188.3 513.0 0.8 513.8
Current tax - - - (0.4) (0.1) (0.5)
Deferred tax (16.5) - (16.5) 5.0 (0.7) 4.3
Taxation (16.5) - (16.5) 4.6 (0.8) 3.8
Profit for the year 171.8 - 171.8 517.6 - 517.6
Balance sheets
2016 2015
Group Group
including including
Share Share
Group of share Group of share
balance joint of joint balance joint of joint
sheet ventures ventures sheet ventures ventures
GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Investment and development
property 9,212.1 732.4 9,944.5 8,403.9 1,119.8 9,523.7
Investment in joint ventures 587.6 (587.6) - 991.9 (991.9) -
Derivative financial instruments - - - 3.2 - 3.2
Cash and cash equivalents 254.7 36.9 291.6 275.8 25.6 301.4
Other assets 314.8 17.8 332.6 472.1 20.9 493.0
Total assets 10,369.2 199.5 10,568.7 10,146.9 174.4 10,321.3
Liabilities
Borrowings (4,662.6) (170.9) (4,833.5) (4,471.6) (140.9) (4,612.5)
Derivative financial instruments (377.7) (2.3) (380.0) (341.7) (2.0) (343.7) Other liabilities (282.5) (26.3) (308.8) (278.7) (31.5) (310.2) Total liabilities (5,322.8) (199.5) (5,522.3) (5,092.0) (174.4) (5,266.4) Net assets 5,046.4 - 5,046.4 5,054.9 - 5,054.9
OTHER INFORMATION (continued)
FINANCIAL INFORMATION INCLUDING SHARE OF JOINT VENTURES (unaudited) (continued)
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.
2016 2015
GBPm GBPm
------------------------------------------------------------
Total borrowings 4,662.6 4,471.6
Cash and cash equivalents (254.7) (275.8)
Net debt 4,407.9 4,195.8
Metrocentre compound financial instrument (177.8) (172.0)
Net external debt - before Group's share of joint ventures 4,230.1 4,023.8
Add share of borrowings of joint ventures 170.9 140.9
Less share of cash of joint ventures (36.9) (25.6)
Net external debt - including Group's share of joint
ventures 4,364.1 4,139.1
Analysed as:
Debt including Group's share of joint ventures 4,655.7 4,440.5
Cash including Group's share of joint ventures (291.6) (301.4)
Net external debt - including Group's share of joint
ventures 4,364.1 4,139.1
Debt to assets ratio
2016 2015
GBPm GBPm
-----------------------------------------------------
Market value of investment and development property 9,984.7 9,602.4
Net external debt (4,364.1) (4,139.1)
Debt to assets ratio 43.7% 43.1%
Interest cover
2016 2015
GBPm GBPm
-----------------------------
Finance costs (208.5) (208.9)
Finance income 1.5 1.6
(207.0) (207.3)
Underlying operating profit 407.7 395.6
Interest cover 1.97x 1.91x
OTHER INFORMATION (continued)
FINANCIAL INFORMATION INCLUDING SHARE OF JOINT VENTURES (unaudited) (continued)
EPRA cost ratios
2016 2015
GBPm GBPm
Administration expenses - ongoing 38.6 38.0
Net service charge costs 16.1 14.0
Other non-recoverable costs 44.1 49.8
Remove:
Service charge costs recovered through rents (5.6) (4.8)
EPRA costs - including direct vacancy costs 93.2 97.0
Direct vacancy costs (18.0) (18.9)
EPRA costs - excluding direct vacancy costs 75.2 78.1
Rent receivable 532.6 514.0
Rent payable (25.4) (22.4)
Gross rental income less ground rent payable 507.2 491.6
Remove:
Service charge costs recovered through rents (5.6) (4.8)
Gross rental income 501.6 486.8
EPRA cost ratio (including direct vacancy costs) 18.6% 19.9%
EPRA cost ratio (excluding direct vacancy costs) 15.0% 16.0%
OTHER INFORMATION (continued)
Underlying profit statemenT (unaudited)
For the year ended 31 December 2016
The underlying profit information in the table below shows the Group including its 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
2016 2015 2016 2015 2016 2015
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ----------
Net rental income 447.0 427.8 227.6 220.2 219.4 207.6
Net other (expenses)/income (0.7) 5.8 (0.4) 3.2 (0.3) 2.6
Administration expenses (38.6) (38.0) (20.3) (21.7) (18.3) (16.3)
Underlying operating
profit 407.7 395.6 206.9 201.7 200.8 193.9
Finance costs (208.5) (208.9) (107.1) (103.8) (101.4) (105.1)
Finance income 1.5 1.6 0.8 1.1 0.7 0.5
Other finance costs (5.9) (5.9) (3.0) (3.0) (2.9) (2.9)
Underlying net finance
costs (212.9) (213.2) (109.3) (105.7) (103.6) (107.5)
Underlying profit
before
tax and associates 194.8 182.4 97.6 96.0 97.2 86.4
Tax on underlying
profit - (0.6) 0.1 (0.3) (0.1) (0.3)
Share of underlying
profit of
associates 0.5 0.2 0.2 0.1 0.3 0.1
Remove amounts attributable
to non-controlling
interests 4.7 4.6 2.6 2.1 2.1 2.5
Underlying earnings 200.0 186.6 100.5 97.9 99.5 88.7
Underlying earnings
per
share (pence) 15.0p 14.2p 7.5p 7.4p 7.5p 6.8p
Weighted average
number
of shares (million) 1,333.5 1,318.1 1,334.8 1,327.6 1,332.0 1,308.3
For the reconciliation from basic earnings per share see note 12(c).
GLOSSARY
ABC1 customers Proportion of customers within UK social groups A, B and C1, defined as members of households whose chief earner's occupation is professional, higher or intermediate management, or supervisory. Annual property income The Group's share of passing rent plus the independent external valuers' estimate of annual excess turnover rent and sundry income such as that from car parks and mall commercialisation. CACI Provide market research on intu's customers and UK-wide location analysis. Debt to assets ratio Net external debt divided by the market value of investment and development property. Diluted figures Reported amounts adjusted to include the effects of dilutive potential shares issuable under convertible bonds and employee incentive arrangements. Earnings per share Profit for the year 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. ERV (estimated rental value) The independent external valuers' estimate of the Group's share of the current annual market rent of all lettable space after expiry of concessionary periods net of any non-recoverable charges but before bad debt provisions. Exceptional items Items that in the Directors' view are required to be separately disclosed by virtue of their size, nature or incidence. Underlying earnings is considered to be a key measure in understanding the Group's financial performance, and excludes exceptional items. Headline rent ITZA Annual contracted rent per square foot after expiry of concessionary periods in terms of Zone A. Interest cover Underlying operating profit divided by the net finance cost excluding the change in fair value of financial instruments, exceptional finance costs and amortisation of the Metrocentre compound financial instrument. Interest rate swap A derivative financial instrument enabling parties to exchange interest rate obligations for a predetermined period. These are used by the Group to convert floating rate debt to fixed rates. IPD Investment Property Databank Limited, producer of an independent benchmark of property returns. Like-for-like property Investment property which has been owned throughout both periods without significant capital expenditure in either period, so that income can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also include assets owned at the previous reporting period end but not throughout the prior period. Long-term lease A lease with a term certain of at least five years. LTV (loan to value) The ratio of attributable debt to the market value of an investment property. NAV per share (diluted, adjusted) NAV per share calculated on a diluted basis and adjusted to remove the
fair value of derivatives (net of tax), goodwill resulting from
the recognition of deferred tax liabilities, and deferred tax on investment
and development property and other investments.
Net asset value ('NAV') per share
Net assets attributable to owners of intu properties plc divided by the
number of ordinary shares in issue at the
year end.
Net external debt
Net debt after removing the Metrocentre compound financial instrument.
Net initial yield (EPRA)
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, consistent with
EPRA's net initial yield, and as provided by the Group's
independent external valuers.
Net rental income
The Group's share of net rents receivable as shown in the income statement,
having taken due account of non-recoverable
costs, bad debt provisions and adjustments to comply with IFRS including
those regarding tenant lease incentives.
NNNAV per share (diluted, adjusted)
NAV per share (diluted, adjusted) adjusted to include the fair values of
derivatives, borrowings and deferred taxes.
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 passing rent of let and under-offer units expressed as a percentage
of the passing rent of let and under-offer units plus
ERV of un-let units, excluding development and recently completed properties.
Units let to tenants in administration and still
trading are treated as let and those no longer trading are treated as un-let.
Passing rent
The Group's share of contracted annual rents receivable at the balance
sheet date. This takes no account of accounting
adjustments made in respect of rent free periods or tenant incentives,
the reclassification of certain lease payments as
finance charges or any irrecoverable costs and expenses, and does not include
excess turnover rent, additional rent in
respect of unsettled rent reviews or sundry income such as from car parks
etc. Contracted annual rents in respect of
tenants in administration are excluded.
PMA
Property Market Analysis LLP, a producer of property market research and
forecasting.
Property Income Distribution ('PID')
A dividend, generally subject to UK withholding tax at the basic rate of
income tax, that a UK REIT is required to pay to its
shareholders from its qualifying rental profits. Certain classes of shareholder
may qualify to receive a PID gross,
shareholders should refer to intugroup.co.uk for further information. The
Group can also pay non-PID dividends which are
not subject to UK withholding tax.
Real Estate Investment Trust ('REIT')
REITs are internationally recognised property investment vehicles which
have now been introduced in many countries around the
world. Each country has its own rules, but the broad intention of REITs
is to encourage investment in domestic property by removing tax
distortions for investors. In the UK, REITs must meet certain ongoing rules
and regulations, including the requirement to distribute at
least 90 per cent of qualifying rental profits to shareholders. Withholding
tax of 20 per cent is deducted from these Property Income
Distributions (see definition). 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 offers 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 (EPRA)
Net initial yield ('NIY') adjusted for the expiration of rent free periods
and other unexpired lease incentives.
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 IPD.
Underlying earnings per share ('EPS')
Earnings per share adjusted to exclude valuation movements, exceptional
items and related tax.
Underlying figures
Amounts described as underlying exclude valuation movements, exceptional
items and related tax.
Vacancy rate (EPRA)
The ERV of vacant space divided by total ERV.
Yield shift
A movement (usually expressed in basis points) in the yield of a property
asset.
DIVIDENDS
The Directors of intu properties plc have proposed a final dividend per ordinary share (ISIN GB0006834344) of 9.4 pence (2015: 9.1 pence) to bring the total dividend per ordinary share for the year to 14.0 pence (2015: 13.7 pence). A scrip dividend alternative may be offered.
The dividend may be partly paid as a Property Income Distribution ('PID') and partly paid as a non-PID. The PID element will be subject to deduction of a 20 per cent withholding tax unless exemptions apply (please refer to the PID special note below). Any non-PID element will be treated as an ordinary UK company dividend. For South African shareholders, non-PID cash dividends may be subject to deduction of South African Dividends Tax at 15 per cent.
The following are the salient dates for the payment of the proposed final dividend.
Thursday 6 April 2017
Sterling/Rand exchange rate struck
Friday 7 April 2017
Sterling/Rand exchange rate and dividend amount in South African currency announced
Wednesday 19 April 2017
Ordinary shares listed ex-dividend on the Johannesburg Stock Exchange
Thursday 20 April 2017
Ordinary shares listed ex-dividend on the London Stock Exchange
Friday 21 April 2017
Record date for 2016 final dividend in London and Johannesburg
Thursday 25 May 2017
Dividend payment date for shareholders
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be Tuesday 18 April 2017 and that no dematerialisation or rematerialisation of shares will be possible from Wednesday 19 April 2017 to Friday 21 April 2017 inclusive. No transfers between the UK and South African registers may take place from Friday 7 April 2017 to Friday 21 April 2017 inclusive.
PID SPECIAL NOTE:
UK shareholders
For those who are eligible for exemption from the 20 per cent withholding tax and have not previously registered for exemption, an HM Revenue & Customs ('HMRC') Tax Exemption Declaration is available for download from the 'Investors' section of the intu properties plc website (intugroup.co.uk), or on request to our UK registrars, Capita Asset Services. Validly completed forms must be received by Capita Asset Services no later than the dividend Record Date, as advised; otherwise the dividend will be paid after deduction of tax.
South African and other non-UK shareholders
South African shareholders may apply to HMRC after payment of the dividend for a refund of the difference between the 20 per cent withholding tax and the UK/South African double taxation treaty rate of 15 per cent. Other non-UK shareholders may be able to make similar claims for a refund of UK withholding tax deducted. Refund application forms for all non-UK shareholders are available for download from the 'Investors' section of the intu properties plc website (intugroup.co.uk), or on request to our South African registrars, Trifecta, or HMRC. UK withholding tax refunds are not claimable from intu properties plc, the South African Revenue Service ('SARS') or other national authorities, only from the UK's HMRC.
Additional information on PIDs can be found at intugroup.co.uk/investors/shareholders-information/real-estate-investment-trust/.
The above does not constitute advice and shareholders should seek their own professional guidance. intu properties plc does not accept liability for any loss suffered arising from reliance on the above.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKBDQBBKDDBB
(END) Dow Jones Newswires
February 23, 2017 02:00 ET (07:00 GMT)
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