Share Name Share Symbol Market Type Share ISIN Share Description
Intu Properties 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
  +1.50p +0.75% 201.50p 201.80p 202.00p 202.30p 199.00p 200.00p 7,581,859 16:35:24
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Real Estate Investment Trusts 616.0 227.2 16.1 12.5 2,731.68

Intu Properties PLC Final Results

23/02/2017 7:00am

UK Regulatory (RNS & others)


Intu Properties (LSE:INTU)
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2 Years : From Oct 2016 to Oct 2018

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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:

 
 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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