Intu Properties Intu plc Annual Report 2012 Report Annual intugroup.co.uk Telling our brand new story Intu Properties plc Annual Report 2012 40 Broadway, London SW1H 0BT For further information go online intugroup.co.uk Overview Accounts 01 Creating great retail experiences 94 Independent auditors’ report 08 2012 Highlights 95 Consolidated income statement 10 Chairman’s statement 96 Consolidated statement of comprehensive income 13 Governance and remuneration overview 97 Balance sheets 98 Statements of changes in equity Business model and strategy 101 Statements of cash flows 16 Business model* 102 Notes to the accounts 18 Strategy* 20 Key performance indicators* Other information 22 Our people 140 Investment and development property 26 Key risks and uncertainties* 142 Financial covenants 28 Top properties 143 Underlying profit statement 144 EPRA performance measures Business review 146 Financial record 32 Market review* 147 Management structure and advisers 34 Valuations* 148 Glossary 36 Operating review* 150 Dividends 151 Shareholder information Financial review 44 Financial review* Corporate responsibility 52 Corporate responsibility* Governance 60 Board of Directors 62 Executive management 63 Chairman’s introduction 64 Corporate governance report 74 Directors’ remuneration report 89 Directors’ report* 92 Statement of Directors’ responsibilities * These sections of the report include items required to be stated in accordance with Section 417 of the Companies Act 2006 – Business Review. On 15 February 2013 the Company changed its name from Capital Shopping Centres Group PLC to Intu Properties plc. Throughout this document the Company is referred to as Intu Properties plc. Passionate about providing Overview people with their perfect and strategy model Business shopping experience, we help retailers flourish. Business review And it’s this that powers our business, driving our Financial review long-term success. responsibility Corporate Governance Accounts Other information Intu Properties plc 2012 Annual Report 01 We own some of the very best centres in the strongest locations right across the country. Offering easy access to great places for shopping and socialising to more people than anyone else, we attract over 320 million customer visits each year. intu Eldon Square Newcastle upon Tyne intu Braehead Glasgow intu Metrocentre Gateshead Arndale Centre Manchester intu Potteries Stoke-on-Trent intu Trafford Centre Manchester intu Victoria Centre Nottingham intu Broadmarsh Cribbs Causeway Nottingham Bristol intu Chapelfield Norwich St David’s intu Watford Cardiff intu Lakeside intu Uxbridge Thurrock intu Bromley 02 Intu Properties plc 2012 Annual Report There was a time when our business was fairly straightforward. We created buildings and filled them with shops. We kept them clean, comfortable and attractive. We marketed spaces, collected rents Overview and encouraged people to visit us. and strategy model Business Business review Financial review responsibility Corporate Governance Accounts Other information Intu Properties plc 2012 Annual Report 03 But things change. These days people expect far more from their shopping centres, and the journey they take in making a purchase is more complex than ever. So, building on what we’ve always done well, we’re committed to making our centres even better. 04 Intu Properties plc 2012 Annual Report Overview Business model Business review Financial review Corporate Governance Accounts Other information and strategy responsibility 05 And by global brands our customers love. love. our customers brands global of the UK’s top 20 retailers and the iconic iconic the and retailers 20 top UK’s the of continuing to offer access to every one every to access offer to continuing meet, eat, drink and be sociable. sociable. be and drink eat, meet, continuing to provide the best places to places best the provide to continuing And how are we doing this? Certainly by Certainly this? doing we are how And Intu Properties plc 2012 Annual Report But most important, through our new brand intu, we will create uniquely compelling experiences, surprising and delighting our customers. This means providing both consistently outstanding service and the technology people need to get in touch and stay connected. 06 Intu Properties plc 2012 Annual Report Overview Business model Business review Financial review Corporate Governance Accounts Other information and strategy responsibility 07 andourselves. This will help create value for our for value create help will This our investors our communities, retailers, will want to come back again and again. again. and again back come to want will vision, we will attract more customers, who customers, more attract will we vision, With all of our staff fully energised by this this by energised fully staff our of all With Intu Properties plc 2012 Annual Report Overview 2012 Highlights Operational highlights Out-performed in challenging market background • property valuations increased 0.6 per cent, comparing favourably with benchmark index which fell 5.8 per cent • high occupancy at 96 per cent; successful relettings partly offsetting impact 96% Occupancy of tenant failures which represented 6 per cent of rent roll • signed 169 long-term leases for £44 million new annual rent at an average 7 per cent above previous passing rent and in line with valuation assumptions • underlying earnings per share 16.1 pence (2011 – 16.5 pence) 169 new long-term leases signed Progressed active management and major extension projects • pipeline now amounts to £1 billion programme over 10 years • represents some 2,300,000 sq. ft. of new retail, restaurants and leisure of which 650,000 sq. ft. consented • acquired strategic sites at Metrocentre, Cribbs Causeway, Braehead and Manchester Arndale £1bn 10-year pipeline of projects Improved financial flexibility • £300 million 2.5 per cent convertible bonds due 2018 issued in October • cash and committed facilities of £563 million at 31 December 2012 Launched nationwide consumer-facing brand and transformed digital proposition • announced January 2013, corporate name change effective 18 February 2013, consumer launch in May 2013 320 million customer visits • installing high capacity fibre optic networks enabling free WiFi and other digital services from March 2013 • transactional website from spring 2013 08 Intu Properties plc 2012 Annual Report Overview Financial highlights1 Twelve months ended 31 December Net rental income 2012 £363m 2012 20112 2011 £364m and strategy model Business Net rental income (£m) 363 364 2010 £277m Underlying earnings (£m) 138 139 20093 £267m Property revaluation surplus (£m) 41 63 Underlying EPS Profit for the year (£m) 159 34 2012 16.1p 2011 16.5p Business review 2010 15.4p Underlying EPS (pence) 16.1 16.5 20093 15.1p Dividend per share (pence) 15.0 15.0 Dividend per share 2012 15.0p As at 31 December 2011 15.0p Financial review 2012 2011 2010 15.0p Market value of investment properties (£m) 7,073 6,960 20093 15.0p Net external debt (£m) 3,504 3,374 NAV per share 2012 392p 2011 391p responsibility Corporate NAV per share (diluted, adjusted) (pence) 392 391 2010 390p Debt to asset ratio (per cent) 49.5 48.5 20093 339p 1 Please refer to glossary for definition of terms. 2 2011 earnings data includes Trafford Centre results for the 11 months from its acquisition. 3 2009 figures have been re-stated to remove the impact of the Capco business following the demerger in May 2010. Governance Accounts Other information Intu Properties plc 2012 Annual Report 09 Overview continued Chairman’s statement We are now seeing tremendous benefits from focusing exclusively on prime regional shopping centres 2012 has been another year of considerable progress for the Group. It is still under three years since we completed the demerger of Capital & Counties and two years since the completion of the Trafford Centre transaction, which is now fully integrated into the overall business. Both of these moves have been very positive for shareholders and we are now seeing tremendous benefits from focusing exclusively on prime regional shopping centres. Patrick Burgess We are by some margin the largest owner of regional shopping Chairman centres in the UK with ten of the UK’s top 25 centres and the largest landlord to many retailers. We estimate some 30 million unique visitors, around half the UK’s population, enter our centres every year. Shopping habits and technology have of course moved on quite a way over the last two years. Much has been written about the changing world of retail, with statistics such as half of UK internet users now making use of the internet at some stage in the shopping process and by mid 2012 over half of fashion consumers having used a mobile device to make purchases. In our case last year 9 million unique devices accessed our shopping centre websites, half of which were mobiles. Through our focus on the prime centres in the UK, we have in our view been a beneficiary of these changes. Consumer activity and retailer investment have been focusing increasingly on the top centres such as ours. Further, our tenant mix has changed positively, with the rise of Apple as a retailer being one of the most obvious examples. Generally retailers have performed well where they have successfully combined the website and physical experience. We have also seen a surge in demand for food and beverage outlets as lifestyles have changed. 10 Intu Properties plc 2012 Annual Report “ The virtuous circle of improved customer experience driven by motivated customer service attracting leading retailers is a powerful force.” But one thing is for sure, as a major landlord in this fast Customer service has been a priority for many years. Overview changing arena, we have to keep raising our game and The experience of a visitor to a shopping centre of course doing so entails some radical changes throughout the whole starts long before the visitor actually arrives at a shop and organisation. It is this comprehensive approach on which the our guiding principle has been that every shopper should feel management team and your Board have been focused.