2014 Interim Results

31 JULY 2014

INTU PROPERTIES PLC

INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2014

David Fischel, Chief Executive, commented:

"Intu has recorded a strong first half performance with a 7.6 per cent like-for-like valuation uplift, increasing net asset value per share to 372p and taking the overall market value of our prime UK shopping centres to £8.8 billion. The initial indications from the major centres we acquired in the period, now rebranded as intu Merry Hill and intu Derby, are very positive. The letting market is showing encouraging signs of improvement and we are gaining further momentum with our £1.2 billion active management and development pipeline."

A presentation to analysts and investors will take place at UBS, 1 Finsbury Avenue, London EC2 at 09.30BST on 31 July 2014. The presentation will also be available to international analysts and investors through a live audio call and webcast. The presentation will be available on the Group's website intugroup.co.uk. A copy of this announcement is available for download from our website intugroup.co.uk.

Enquiries:

Contents:

NOTES FOR EDITORS

For further information see intugroup.co.uk

This announcement 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 announcement. Except as required by applicable law, Intu Properties plc makes no representation or warranty in relation to them and expressly disclaims any obligation to update or revise any forward-looking statements contained herein to reflect any change in Intu Properties plc's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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

FIRST HALF 2014 HIGHLIGHTS

· NAV per share increased to 372 pence reflecting £573 million (44 pence per share) property valuation gain, 7.6 per cent like-for-like, driven by strong investment demand for prime shopping centres

· Acquired two top 20 UK shopping centres in £855 million transaction, funded by £500 million rights issue and asset-specific debt facilities; centres now rebranded as intu Merry Hill and intu Derby

· Underlying earnings per share 6.4 pence (2013 - 6.8 pence); like-for-like net rental income impacted by upcoming developments, partly offset by lower average finance costs

· Continuing improvement in retailer demand for quality space:

o 98 long term leases signed for £15 million new annual rent, 4 per cent above previous passing rent and in line with valuation assumptions

o encouraging progress stimulated by Intu's investment activity - some 140 lettings in solicitors' hands

· Formed joint venture at intu Uxbridge introducing 80 per cent partner for £175 million, a small premium to 31 December 2013 book value

· Occupancy improved at 96 per cent (31 December 2013 - 95 per cent); footfall up one per cent year on year to 30 June

· Projects completed at intu Metrocentre (new Platinum Mall to be followed by restaurants), intu Lakeside (new food court) and underway at intu Eldon Square (mall upgrade to be followed by restaurants), intu Potteries (cinema and restaurants), intu Victoria Centre (restaurants and reconfigurations) and progress with intu Watford's Charter Place extension (cinema anchor signed)

Financial highlights 1

1 Please refer to glossary for definition of terms 2 Including Group share of joint ventures  3 Adjusted for rights issue bonus factor

OPERATING AND FINANCIAL REVIEW

OPERATING REVIEW

INTRODUCTION AND OUTLOOK

Introduction

Intu has had a strong first half of 2014, with major transactions and a high level of investment activity across the whole business demonstrating tangible progress and considerable momentum.

Our long-standing focus on developing, investing in and creatively managing the very best shopping centres has resulted in strong revaluation gains as direct investors have recognised the long-term value of the asset class. As a result, the Group's NAV per share has increased notably, further enhanced by our capital structure.

The Group is now required under IFRS to account for joint ventures as a single line on each of the income statement and balance sheet. As management reviews the business including the Group's share of joint ventures on a more detailed basis, the financial analysis and information included in this Operating and Financial Review is presented for the Group, including its share of joint ventures' results and assets, on a line by line basis (refer to note 29 and the other information section of this report for more details and a reconciliation between the two bases).

Overview of first half 2014 activity

We acquired interests in two of the UK's top 20 shopping centres, on attractive terms and each with distinct and clear value creation opportunities, and our business now includes nine of the UK's top 20 shopping centres. Our increased scale and national coverage will enhance the range and quality of the experience we offer to customers, the expertise and efficiency of our asset management and the opportunities we offer to retailers and other commercial partners.

Specifically, in the period we have reached milestones in each of our key areas of focus:

· Seizing opportunities for profitable expansion

o completed major acquisitions and have teams in place to implement our asset management plans for intu Merry Hill and intu Derby - initial indications are positive and reinforce our investment case

o achieved good progress on catering and leisure-led projects, sectors which saw strong turnover growth in the period and represent an increasing proportion of our space

o completed intu Metrocentre Platinum Mall and intu Lakeside food court projects on time and on budget

· Optimising performance of existing assets through active asset management

o continuing improvement in retailer demand with good level of lettings completed and in progress

o in particular significant tenant interest stimulated by Intu's investment activity, whether in progress or planned

o increased occupancy at 96 per cent (31 December 2013 - 95 per cent)

· Continuing to improve financial flexibility

o introduction of 80 per cent joint venture partner at intu Uxbridge, releasing capital while retaining scale and the management role

o intu Trafford Centre long-dated debt structure tapped for £110 million, releasing capital as the valuation rises; attractive rate secured on €95 million local debt by joint venture on Parque Principado, Northern Spain

o net debt to assets ratio reduced by valuation gains to 44.4 per cent (31 December 2013 - 48.5 per cent)

o cash and undrawn committed facilities of £510 million at 30 June 2014

· Distinguishing Intu from competitors through brand and digital presence

o continuing to show footfall market share gains

o high quality, Intu-owned Wi-Fi now live in 11 centres, approaching four million connections by over one million individual subscribers

o intu Merry Hill and intu Derby rebranded, broader integration underway

We have generated a very strong valuation performance in the positive market for direct property investment. The on-going repositioning of several centres continues to affect earnings metrics:

· property valuations increased 7.6 per cent like-for-like, well above IPD monthly index, retail, capital increase of 3.5 per cent due to the portfolio focus on the best prime centres

· net asset value per share (diluted, adjusted) increased to 372 pence including 44 pence of revaluation gains

· underlying earnings per share 6.4 pence (2013 - 6.8 pence); like-for-like net rental income down 3.6 per cent reflecting impact of development, expiry and administration-related vacancies, partly offset by higher underlying rents on new lettings; weighted average finance costs reduced following 2013 debt restructuring. To view Chart 1, which shows Intu's asset valuations, please paste the following URL into the address bar of your browser:

Outlook and priorities

We are encouraged by the continuing improvement in consumer sentiment and gradual growth in national retail sales. Our pipeline of lettings is indicative of increased retailer appetite for a physical presence in the best shopping centres, particularly those where change and investment are under way.

As we continue to prepare for our larger projects, units held vacant or on flexible terms are now 2.5 per cent of Group ERV, excluding recently acquired centres. We anticipate that this factor, combined with the temporary friction of lease expiry concentrations and the residual impact of tenant failures, will continue into the second half year to exceed the increased passing rent on like-for-like lettings. Hence the short-term indicator of like-for-like net rental income is likely to continue to show a reduction in the second half of 2014, albeit at a lower rate than the first half.

We will maintain our focus on the four areas which we believe will deliver strong total returns over the medium term, with objectives for the second half including:

· continuing to progress profitable expansion through our £1.2 billion organic development pipeline in the UK and opportunities in Spain

· optimising the performance of our existing assets by implementing our centre-specific asset management objectives including intu Merry Hill and intu Derby and crystallising tenant interest in developments into firm pre-letting commitments

· continuing to improve our financial flexibility

· further distinguishing intu for retailers and customers through the enlarged brand presence, and from initiatives to enhance the customer experience, including upgraded digital activities to link with the physical malls

UK RETAIL PROPERTY MARKET

UK retail property investment market

The improvement in the UK economy combined with increases in consumer confidence and retail sales has boosted investor demand for shopping centres with considerable investment activity in the first half of 2014.

The increased weight of money looking to invest in the shopping centre market has led to yields compressing and capital values rising as bidding processes have become increasingly competitive. This has been most noticeable at the prime end of the market but has also spread across other shopping centre sub-sectors.

The IPD monthly index confirms this trend, with retail capital values up 3.5 per cent in the six months to June 2014. The June rise of 1.1 per cent was the highest monthly increase for over four years. IPD has shown retail rental values now beginning to increase after some years of decline, a directional change which we would expect to drive further investor appetite.

UK retail property occupational market

The UK economy has continued to grow with Q2 2014 GDP up 0.8 per cent, a sixth consecutive quarter of growth, and year on year to 30 June 2014 up 3.1 per cent. This improvement, combined with a fall in unemployment to the lowest level since 2008, has led to a significant increase in consumer confidence.

This in turn has resulted in a sustained rise in consumer spending with higher like-for-like non-food retail sales now reported by the BRC for 24 consecutive months with over 3 per cent growth shown in the year to June 2014. This improvement has come despite year on year wage growth still lagging behind inflation. To view Chart 2, which shows Intu's like-for-like non-food retail sales, please paste the following URL into the address bar of your browser:

Changing UK retail market and intu's response

In 2013, we launched our new national consumer brand, intu, in response to the changing retail landscape. Shopping is no longer just about buying things you need, today's customers demand much more and their spend is very clearly linked to dwell time in our centres.

Shopping centres are now expected to offer convenience, choice, great tenant mix, flagship stores, home delivery, click and collect, leisure activities, great dining options, entertainment, socialising, communicating and a place to meet with friends and family.

We are evolving our centres. Our brand enables us to distinguish ourselves and communicate the change. By giving our customers a great experience, they will come more often and stay longer, driving spend for the benefit of our tenants.

Our new "tell intu" customer research programme indicates that those who rate the experience more highly spend significantly more. Positive feedback on staff interaction show us that we are on the right path with our World Class Service initiative and development of our signature customer experience programme, now accredited by the Institute of Customer Service.

Our strategy is to align more closely the physical and digital experience and intu.co.uk, with its transactional marketplace, enables us to engage with retailers' multi-channel teams and strategies. The websites will shortly be upgraded to be fully mobile responsive as over two thirds now access from mobile devices. Our first conversion of an on-line only retailer from intu.co.uk into a physical tenant opened in June, and we expect more to come.

Our strategy of increasing mobile connectivity continues with high quality Wi-Fi now available at 11 centres and 4G coming to six centres. To illustrate our focus on quality, intu's Wi-Fi has around ten times more access points than a typical installation. Total connections are now approaching four million, a million individuals, with well over half opting to receive marketing information. As well as our existing centre-specific apps we are developing a mobile wayfinding app which will provide a platform for location-based messaging of offers and events for retailers.

The reach of our centres nationally, with 400 million footfall, is facilitating high quality commercial partnerships to provide interesting installations for customers such as Elite model agency and Diet Coke combining to enhance our student nights, Samsung and Microsoft demonstrating product launches and film distributors bringing interactive workshops to our centres, directly helping drive retailer sales and providing additional revenue for Intu.

DELIVERING ON OUR STRATEGY

Performance

Valuation

The aggregate valuation gains on our investment property including the Group's share of joint ventures was £573 million, 7.6 per cent like-for-like in the period, significantly ahead of the IPD monthly index, retail, which was up 3.5 per cent.

The weighted average nominal equivalent yield at 30 June 2014 was 5.35 per cent, a like-for-like reduction of 45 basis points in the period, reflecting strong investment market conditions as well as our ongoing asset management initiatives maintaining the prime nature of our assets. Based on the gross portfolio value, the net initial yield "topped-up" for the expiry of rent free periods was 4.66 per cent.

On a like-for-like basis, ERV is broadly unchanged in the period. The most significant movement was an increase in headline rent at intu Trafford Centre to £410 ITZA.

1 Including Group share of joint ventures 2 IPD monthly index, retail

All but three of our shopping centres have increased in value during the period with 35 to 60 basis points equivalent yield compression for the most prime centres and 5 to 25 basis points for others. Other factors such as upcoming development or expiry cycles have offset this movement in some centres' overall valuations. In these cases we are confident that completion of asset management initiatives will reverse short-term earnings impacts giving scope for improved valuations without further market yield shift. 

The major super-regional centres have significantly out-performed due to clear investment demand for such assets. The larger city centre shopping centres have not seen the full impact but have continued to show growth. We have seen slight reductions in others where the rental value upside from improvement expenditure has not yet been fully reflected in prospective ERVs or where expiry cycles have increased voids. 

The table below shows the components of the £573 million overall surplus

· intu Trafford Centre has benefited from an increase in headline Zone A rent as well as a 63 bp yield improvement

· intu Lakeside has benefited from progress with planning as well as a 50 bp improvement in yield for super-regional centres

· intu Metrocentre has benefited from a 35 bp improvement in yield for super-regional centres but short term income reductions in parts of the centre earmarked for redevelopment have affected the overall valuation

· Manchester Arndale and intu Milton Keynes have benefitted from around 30 bp yield improvement

· intu Eldon Square has benefited from a 45 bp improvement in yield but the broader impact of accrued development expenditure has not yet been reflected in the valuation ERV

· intu Braehead and intu Potteries (both marginal deficits) have seen small equivalent yield contraction but this has been offset in the valuations by short term reductions to income arising from lease expiry concentrations

· intu Victoria Centre has benefitted from a 40 bp yield improvement but accrued development expenditure and short term income reductions ahead of redevelopment have affected the overall valuation

Operating metrics

* excluding impact of trading interruptions during major tenant relocations at intu Braehead and Cribbs Causeway

The Group's operating metrics for the period are largely positive:

· occupancy across our centres remains high at 96 per cent (31 December and 30 June 2013 - 95 per cent). This compares favourably to PMA's estimate of vacancy in "big" shopping centres of 11 per cent. In aggregate units amounting to one per cent of rent are currently being traded by administrators and are treated as occupied within the 96 per cent

· 98 new long term leases were signed in the first half, representing £15 million of new passing rent, in aggregate 4 per cent above previous passing rent where like-for-like and in line with valuation assumptions. These have generated £50 million of shopfit investment commitments from new and existing retailers. Significant themes in the period include:

o 35 new catering outlets opened or lettings now agreed, including Five Guys at intu Trafford and intu Lakeside, Patisserie Valerie at intu Lakeside and St David's, Cardiff, the first Wahaca outside the south east at St David's, Cardiff, Carluccio's in newly converted space at intu Bromley and intu's first Tortilla at intu Watford

o new brands to individual centres such as Superdry at intu Victoria Centre, one of Dutch retailer Hema's first UK stores at intu Bromley, Jack Wills and Joules at Cribbs Causeway, Samsung at intu Metrocentre and Cribbs Causeway, Fat Face at intu Watford and Van Mildert at intu Metrocentre and intu Braehead

o previously on-line only brands creating a physical presence, including a first store for an intu.co.uk retailer at intu Watford and intu's fifth Simply Be at intu Chapelfield

· the weighted average unexpired lease term at 30 June 2014 was 7.1 years (31 December 2013 - 7.5 years), with a little under ten per cent of Group income expiring each year. At the risk of short-term earnings impact, expiries do provide opportunity for tenant mix repositioning. We continue to manage carefully centre-specific clusters of expiries, most significantly this year representing a third of the passing rent at intu Braehead. Long term leases in respect of around 60 per cent of intu Braehead's 2014 expiries are now signed or in solicitors' hands, in aggregate in line with previous passing rent excluding two strategic deals. 2013 concentrations at Cribbs Causeway and intu Potteries are now largely completed with significant change and tenant investment as a result

· like-for-like net rental income was 3.6 per cent lower than the same period of 2013 as the benefit of like-for-like new lettings above previous passing rent has been more than offset by the short-term impact of development voids, lease expiry concentrations discussed above and the residual impact of 2013 tenant administrations. Altogether 2.5 per cent of existing portfolio ERV is now held for development, of which around a third is let on short term leases for flexibility. To view Chart 3, which shows the change in like-for-like net rental income, please paste the following URL into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/7747N_-2014-7-30.pdf

· footfall: the number of visitors to our centres so far this year is one per cent higher than the same period of 2013, ahead of Experian's measure of national retail footfall which is unchanged year on year

· with an improving trend in the first half of 2014, estimated retailer sales in our centres increased slightly in the year to 30 June 2014 excluding the impact of trading interruptions during major tenant relocations. The ratio of rents to estimated sales for standard units reduced marginally in the six months to 13.1 per cent from 13.5 per cent

Acquisitions and disposals

In May we completed our purchase of interests in two top 20 UK shopping centres, Merry Hill and Derby, and Sprucefield retail park, Northern Ireland, funded by a 2 for 7 rights issue raising £500 million (gross) and £424 million of new debt facilities secured on the properties. The final consideration after net asset value adjustment is expected to be £855 million (see note 25). We have been pleased to find early indications of potential for growth which reinforce our investment case.

The acquisition was in line with our strategy to focus on the UK's largest and most successful destinations and established a joint venture with QIC, a major global investor, at Merry Hill. It strengthened Intu's position as the leading owner, developer and manager of prime UK shopping centres, filled a gap in our national coverage and extended the footprint of our nationwide consumer facing brand.

Since completion we have:

· rebranded the two centres with new websites, signage and World Class Service training for the teams. Local interest in the intu brand has been positive at both

· strengthened our local asset management and operational capabilities

· started work on detailed asset management plans with preliminary leasing discussions appearing positive to acquisition valuations

· at intu Merry Hill, been encouraged by initial contact with key retailers about opportunities to upsize their presence in the centre

· at Sprucefield, Northern Ireland, started exploring the development potential of this well-located site

We were delighted last month to enter into partnership in respect of intu Uxbridge with Kumpulan Wang Persaraan (Diperbadankan) ("KWAP"), the £19 billion Malaysian pension fund. This transaction established a relationship with a significant overseas investor and demonstrated the investment demand for prime UK shopping centres under the management of a specialist operator such as Intu.

KWAP acquired an 80 per cent interest in intu Uxbridge for £175 million, representing a two per cent premium to its 31 December 2013 valuation of £213.9 million (100 per cent basis). We retain a 20 per cent interest and will continue to manage the centre under the intu brand on behalf of the joint venture. The transaction is a useful step in recycling capital into our substantial development pipeline while retaining the scale of our operations and has a deal structure which could be applicable to other assets.

International

Parque Principado, Oviedo, acquired in October 2013 with CPPIB, has generated a valuation surplus of 7 per cent in the period with 35 basis points equivalent yield contraction, taking the value to €188 million with continuing high occupancy and lettings on average well above ERV. In April the joint venture arranged a €95 million 5 year loan secured on the centre at an all-in rate some 200 basis points below the level assumed in our acquisition appraisal.

We continue with our local partner to progress pre-development activity on the three sites in Malaga, Valencia and Vigo over which we have acquisition options. We continue to investigate opportunities to attract additional third party capital to assist Intu in funding these Spanish activities without diverting significant resources from our UK development pipeline.

Our effective 9 per cent interest in Equity One, a US retail REIT, has increased in value in the first half by £3 million to around £160 million ($269 million) with the underlying share price movement of 5 per cent partly offset by currency movements.

Our associate company in India, Prozone, (£37 million book value) has seen encouraging rises in footfall and retailer sales at its first mall in Aurangabad and has made progress with its next phase of mixed-use developments.

Dividends

As described in note 12 following the rights issue the 2013 dividend of 15.0 pence per share has been adjusted by the bonus factor. This takes account of the bonus issue element of the new shares issued to shareholders as part of the rights issue and gives a restated dividend of 13.7 pence per share. The prospectus dated 20 March 2014 stated that, subject to performance and available resources, the Company would seek to maintain that level of dividend.

The Directors have resolved to pay an unchanged interim dividend of 4.6 pence per share on 25 November 2014 to

shareholders on the register on 24 October 2014 and will offer a scrip dividend alternative. Details of the apportionment between the PID and non-PID elements per share will be confirmed on 3 October 2014 as the cash dividend is likely to be wholly PID and the scrip alternative is likely to be part PID and part non-PID. Scrip dividend take up of the £144 million dividend declared in respect of 2013 was 46 per cent, amounting to £67 million.

Looking to the future - organic development

Our organic development pipeline of £1.2 billion, 2.6 million sq ft, includes projects at all of our centres which are focused on increasing the overall draw of the destination, extending dwell time and increasing spend. 1.8 million sq ft has planning consent. We now have over 450 leisure and catering outlets trading across our centres, currently representing over ten per cent of space and projected to rise to over 15 per cent as we build out our development pipeline.

We have made significant progress in the first half of the year:

· we have completed our major project at intu Metrocentre's Platinum Mall. Investments at intu Eldon Square and intu Victoria Centre are well underway and generating encouraging levels of new retailer interest. The upgraded lighting, ceilings and flooring give the perception of much larger structural change, transforming the feel of the malls. The planned catering quarters in all three centres are drawing significant new operators to the regions with good pre-letting progress

· refurbishment works to the food court at intu Lakeside including the creation of eight new restaurants have been completed. The wider range of dining options in defined clusters and contemporary environment is expected to double dwell times from the traditional fast food offer

· Cineworld are to anchor the £100 million leisure and catering led redevelopment at intu Watford with a nine-screen cinema including IMAX. Subject to pre-letting, the project is on course for construction to start in 2015.

· construction of the nine-screen Cineworld and six restaurants at intu Potteries is underway

· we have received a planning consent at intu Bromley for a cinema and further restaurants

· we have demonstrated our financial flexibility to progress our pipeline to the optimum development timeline by recycling capital while retaining our operational scale at intu Uxbridge, increasing the level of borrowing secured on intu Trafford Centre and introducing debt secured on Parque Principado, Spain. Cash and undrawn facilities amounted to £510 million at 30 June 2014

Priorities for the second half of 2014 include progressing our restaurant redevelopment projects at intu Metrocentre, intu Eldon Square and intu Victoria Centre, the preparation of planning applications for redevelopment works at intu Broadmarsh and Cribbs Causeway, and pre-development activities at intu Watford as well as Barton Square, intu Trafford Centre.

The table below sets out a summary of the project pipeline. To progress in line with the indicative timing, we would seek to secure pre-letting of around two thirds of projects by space and the majority of the rent.

In the case of expansionary projects which create additional space for which direct incremental rent can be identified, we would expect most projects to generate a stabilised initial yield on cost in the range of six to ten per cent and at least seven per cent for major projects. Where no significant additional space is created, we assess project return in the context of an internal rate of return based on the overall impact of the expenditure on centre performance through enhancing the ambience, the tenant mix and the rental tone.

1 Represents net additional floor space of retail, catering and leisure

2 Indicative earliest start date - timing subject to change due to a number of internal and external factors

3 Total project cost £9 million of which £6 million has already been spent

4 Total project cost £42 million of which £8 million has already been spent

5 Total project cost £20 million of which £2 million has already been spent

6 Approved subject to conditions including partner commitment and pre-letting

7 Smaller committed and pipeline projects do not necessarily involve the creation of additional floor space

8 Total project £114 million of which £14 million approved, included in "Approved"

9 Size excludes arena and hotel

10 Intu share 33 per cent of total project cost £90 million

FINANCIAL REVIEW

Presentation of information

The Group has adopted IFRS 11 'Joint Arrangements' in 2014. This new standard requires that all joint ventures, which the Group previously chose to account for on a proportional consolidation basis, are equity accounted. This means that the income statement and the balance sheet now include single lines with the Group's total share of post-tax profit and the net investment in joint ventures respectively. The Group's profit for the period and total equity are unaffected by these changes. Further details of the impact of adopting this accounting policy are given in note 29 to the financial statements.

The new standard has a greater impact following the transactions in the period which created joint ventures in respect of intu Merry Hill, Parque Principado and intu Uxbridge. Further details of these transactions are given in notes 25 and 26.

Management reviews and monitors the business, including the Group's share of joint ventures, on an individual line basis not on a post-tax profit or net investment basis and therefore the figures and commentary below are presented consistent with this management approach. Note 29 and the Other information section of this report give reconciliations between the two bases.

Rights issue

In April 2014 the company issued 278,241,628 shares by way of a rights issue. Further details are included in note 12. Following a rights issue accounting standards require an adjustment to be made to the number of shares previously used to calculate earnings per share and in the Group's case, to be consistent, an adjustment is also made to the number of shares used to calculate the dividend and net asset value per share. A bonus adjustment factor of 1.098 has been used to adjust the comparative figures in these results using the company's closing ex-div share price on 28 March 2014 of 301 pence per share and the theoretical ex-rights price of 274 pence per share.

Key points of note

· strong growth in property valuations has resulted in a substantial increase in the profit for the period. This improved market sentiment has not yet been reflected in net rental income as the Group completes re-letting units from lease expiries and 2013 administrations and holds units to facilitate future development plans:

o underlying earnings of £72 million, up 6 per cent on 2013, gives earnings per share of 6.4 pence, down 6 per cent on 2013 in part due to the higher level of shares in issue

o NAV per share at 372 pence; total financial return for the six months of 10 per cent based on the bonus factor adjusted opening NAV per share

· balance sheet position improved from higher property valuations and acquisitions completed in the period:

o debt to assets ratio at 44.4 per cent, below the Group's target maximum level of 50 per cent. Actual ratio would reduce to around 41 per cent were the convertible bonds to convert to equity

o interest cover ratio at 1.76x, above the Group's targeted minimum level 1.60x

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

Income statement

The Group recorded a profit for the period of £602 million, a substantial increase on the £200 million reported for the six months ended 30 June 2013. At an underlying level, excluding valuation and exceptional items, earnings were £4 million higher at £72 million (2013 - £68 million).

The major factors in the £402 million increase in profit to £602 million are valuation and exceptional items, including:

· an increase in the property revaluation gain to £547 million (2013 - £61 million)

· lower exceptional finance costs of £23 million (2013 - £112 million), largely due to the absence in 2014 of the high level of interest rate swap terminations in connection with the debt refinancing that occurred in the first half of 2013

· exceptional administration costs of £12 million in the period are £5 million lower than 2013. The £11 million of costs related to the acquisition are the largest element of the 2014 charge

These positive factors were partially offset by:

· negative movement of £199 million in the change in fair value of the Group's financial instruments. 2014's results include a charge of £16 million whereas 2013 benefited from a £183 million credit

Underlying earnings, which excludes valuation and exceptional items, were £4 million ahead in 2014 at £72 million as shown in Chart 4 and as set out in the Underlying Profit Statement. Taking into account additional shares issued to part fund the acquisition of intu Merry Hill and intu Derby, underlying earnings per share reduced by 6 per cent to 6.4 pence. To view Chart 4, please paste the following URL into the address bar of your browser:

The principal components of the change in underlying earnings are as follows:

· net rental income increased overall due to the £14 million contribution from the acquisitions of intu Merry Hill and intu Derby in 2014 and of intu Milton Keynes and Parque Principado, part way through 2013. Like-for-like net rental income reduced by 3.6 per cent (see Operating review above)

· as detailed in the table below the Group's net rental income margin has reduced slightly from the 87 per cent achieved in 2013 to 86 per cent in 2014. This is predominantly due to higher void costs and property operating expenses. The increased property operating expenses includes the impact of properties acquired and higher car park and employee costs

· underlying net finance costs, which exclude exceptional items, reduced by £1 million due to the favourable impact of lower average rates following debt refinancings, in particular on the intu Metrocentre facility that was concluded at the end of 2013. Offsetting this was the £2 million cost of the debt drawn in the period to part-fund the acquisitions of intu Merry Hill and intu Derby

· on-going administration expenses increased to £15 million (2013 - £14 million), largely due to costs related to on-going management of recent acquisitions, including new employees and professional fees

· our partner's share of the reduction in finance costs following the intu Metrocentre debt refinancing has been the main factor reducing the non-controlling interest credit by £4 million compared to 2013

Balance sheet

The Group's net assets attributable to shareholders have increased by £1.0 billion to £4.5 billion at the end of June 2014 due to equity raised in the year to fund the acquisition of the Merry Hill and Derby shopping centres and the retained profit for the six months including the £573 million gain on revaluation of the Group's properties.

As detailed in the table below, net assets (diluted, adjusted) have increased by £1,049 million from December 2013 to £4,853 million as at the end of June 2014. The figures below include the Group's share of joint ventures assets and liabilities on an individual line basis. Details of the impact these items have are included in note 29.

The most significant factor in the increase in investment and development properties of £1,222 million is the acquisition of intu Merry Hill, intu Derby and Sprucefield that were valued at a combined total of £890 million at 30 June 2014. The remainder of the increase is due to the £573 million valuation gain on the Group's properties in the six months ended 30 June 2014.

The investments of £195 million at 30 June 2014 comprise the Group's interests in the US and India. The investment in the US comprises 11.4 million shares in a joint venture with Equity One, a listed US REIT, and is valued at £157 million, based on 30 June 2014 Equity One share price. The remaining investments represent the Group's interests in India, largely comprising a 32 per cent interest in Prozone, a shopping centre developer, listed on the Indian stock market. This is valued at £37 million on the Group's balance sheet at 30 June 2014. See note 16 for further details.

The increase in net external debt is discussed in the Movement in net external debt section.

Adjusted net assets per share

As illustrated in chart 5, the opening diluted, adjusted net assets per share after the bonus factor adjustment was 346 pence. The post rights issue figure taking into account the full impact of the rights issue gives a pro forma opening position for 2014 of 335 pence per share. The increase from the pro forma figure to the 30 June 2014 value of 372 pence was driven by the property valuation gain of 44 pence per share.

The dividend of 10 pence per share represents the 2013 final dividend paid in May 2014. To view Chart 5, please paste the following URL into the address bar of your browser:

FINANCIAL POSITION AT 30 JUNE 2014

At 30 June 2014 the Group had net external debt of £3,924 million, including the Group's share of joint ventures net debt. In addition to cash balances of £200 million the Group had undrawn facilities of £310 million, giving total cash and available facilities at the end of June 2014 of £510 million.

Movement in net external debt

The table below illustrates the significant movements in the increase of £226 million in the Group's net external debt in the period.

Acquisition

The acquisition cash movement in the table above of £864 million was in respect of the acquisition of intu Derby and Sprucefield and a 50 per cent joint venture interest in intu Merry Hill. This includes the initial cash consideration paid of £868 million, less £4 million of cash acquired with the business. Following finalisation of the opening balance sheet it is anticipated the Group will receive approximately £13 million from the vendor to reflect the actual net assets transferred, giving a net consideration of £855 million.

The net assets acquired totalled £856 million, largely comprised of the properties' value. The total net assets acquired exceeds the consideration therefore a gain of £1 million is recorded in the income statement in the period. Transaction costs of the acquisition amounted to £11 million and are included in the exceptional finance and other costs above. The acquisition was completed on 1 May 2014.

The main factor in the Issue of shares in the period was the 2 for 7 rights issue that raised £490 million, net of expenses, that was used to part fund the acquisition.

Disposal

In June 2014 the Group sold 80 per cent of its interest in Intu Uxbridge Limited for consideration of £175 million, before expenses. The Group retains a 20 per cent interest in the company which has been accounted for as a joint venture from 20 June 2014. A gain on disposal of £0.6 million has been recorded in the income statement. 

Debt structure

A significant proportion of the Group's debt has been refinanced in last 18 months. After this refinancing activity the majority of the Group's debt still remains arranged on an asset-specific basis, with limited or non-recourse from the borrowing entities to other Group companies.

As a result of the refinancings the Group has a wider range of funding sources. The range of debt instruments now includes CMBS and other bonds plus syndicated bank debt with corporate-level debt remaining limited to the £375 million Revolving Credit Facility and the £300 million convertible bond. To view Chart 6, which shows the Group's debt maturity profile, please paste the following URL into the address bar of your browser:

Following the recent financing activity the above chart illustrates that there is minimal refinancing required in the next two years before an increase in debt maturing in 2016.

During the period the most significant financing activity involved arranging the debt to part fund the acquisition of intu Merry Hill, intu Derby and Sprucefield. This involved three new 2½ year debt facilities secured on the Derby and Sprucefield properties and the interest in Merry Hill (£203 million, £30 million and £191 million respectively).

The plan for refinancing these short term facilities is that intu Derby will be added to the SGS later this year whilst the longer term funding solution for Sprucefield will be decided when the strategy for this property, whether to keep and develop the asset or sell, has been confirmed. At intu Merry Hill, the intention is that the Group and our partner QIC will jointly refinance at the asset level when the QIC CMBS matures in 2016.

In February the Group raised £110 million through the issuance of further notes under the intu Trafford Centre CMBS. The bonds had an average maturity of 9 years and an all-in cost of 4.6 per cent. In April the Group's partnership with CPPIB signed a €95 million, 5 year term loan secured on Parque Principado, in Northern Spain.

The debt previously secured on intu Uxbridge of £146 million was repaid as part of the disposal process.

The table above summarises the Group's main debt measures. The substantial reduction in the loan to value ratio is largely due to the property valuation gain in the period. The small movements in the other measures are predominantly due to the features of the debt taken on to fund the acquisitions which is short duration, floating rate debt.

Interest rate swaps

Just over 40 per cent of the Group's debt is floating rate. The Group uses interest rate swaps to fix short- and medium-term interest obligations, reducing cash flow volatility caused by changes in interest rates. Combining the impact of this hedging and the fixed rate debt, the Group's debt is effectively 87 per cent fixed.

The nominal value of interest rate swap contracts outstanding at 30 June 2014 is £1.9 billion. The acquisition related debt raised in the year is floating rate and has not been fixed to minimise refinancing costs.

The fair value net liability of these interest rate swaps at 31 December 2013 is £213 million, an increase of £7 million since 31 December 2013. This increase in the liability can be largely attributed to a movement in the interest rate yield curve increasing the required fair value provision for the Group's interest rate swaps. Cash payments in the six months totalled £35 million of which £21 million has been classified as an exceptional finance cost as it relates to the termination of swaps (£9 million) or payments in respect of unallocated swaps (£12 million). The balance of the payments have been included as underlying finance costs as they relate to ongoing interest rate swaps used to hedge debt.

As previously detailed, the Group has a number of interest rate swaps which are unallocated as, due to a change in lenders' practice, they cannot be used for hedging the Group's borrowings. Using the 30 June 2014 forward interest rate yields, these swaps have a market value liability of £157 million (31 December 2013 - £143 million). Based on these rates and values, it is estimated the Group will be required to make cash payments on these swaps of £12 million in the second half of 2014.

Covenants

Full details of the loan financial covenants are included in the Financial covenants section of this report. The Group is in compliance with all of its corporate and asset-specific loan covenants. As detailed in that analysis, the headroom over the minimum covenant levels has generally increased in the year.

Tax charge for the period

Being a Real Estate Investment Trust (REIT) significantly reduces the taxation costs of the Group, but brings with it the requirement to operate within the rules of the REIT regime. For the Group this has included paying REIT entry charges of £199 million and the requirement on a continuing basis to pay out 90 per cent of its REIT earnings as taxable income to its shareholders as dividends.

The tax credit in the six months of £0.3 million comprises current tax expenses on the Group's US and Spanish investments totalling £0.3 million, offset by a deferred tax credit of £0.6 million largely on the revaluation of interest rate swaps and investments.

Matthew Roberts

Chief Financial Officer

31 July 2014

KEY RISKS AND UNCERTAINTIES

Intu's Board has overall responsibility for managing risk across the Group and establishing the Group's appetite to risk based on the balance of potential returns and negative impacts.

Intu recognises that it faces a number of risks in achieving its strategic objectives. Effective identification and management of these risks is a major factor in Intu's ability to deliver these objectives. Our risk management framework targets the early identification of key risks and the formation of plans to remove or mitigate them. We apply the methodology of identify, analyse, action and implement, together with our overall culture of risk management to ensure that everyday management decisions are taken in the context of sound risk management principles as well as achieving our strategic objectives.

The key risks and uncertainties facing the Group are unchanged from those disclosed in the 2013 Annual report and are as set out in the table below:

KEY RISKS AND UNCERTAINTIES

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the interim report and condensed set of financial statements, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union; and

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

The operating and financial review refers to important events which have taken place in the period.

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

Related party transactions are set out in note 28 of the condensed set of financial statements.

A list of current Directors is maintained on the Intu Properties plc website: intugroup.co.uk.

On behalf of the Board

David Fischel

Chief Executive

Matthew Roberts

Chief Financial Officer

31 July 2014

INDEPENDENT REVIEW REPORT TO INTU PROPERTIES PLC

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed the condensed consolidated interim financial statements, defined below, in the interim report of Intu Properties plc for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The condensed consolidated interim financial statements, which are prepared by Intu Properties plc, comprise:

· the consolidated balance sheet as at 30 June 2014;

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

· the consolidated statement of cash flows for the period then ended;

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

· the explanatory notes to the condensed consolidated interim financial statements.

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

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

What a review of condensed consolidated financial statements involves

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

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

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

Responsibilities for the condensed consolidated interim financial statements and the review

Our responsibilities and those of the directors

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

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

PricewaterhouseCoopers LLPChartered AccountantsLondon31 July 2014

Notes:

(a) The maintenance and integrity of the Intu Properties plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

CONSOLIDATED INCOME STATEMENT (unaudited)

For the six months ended 30 June 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the six months ended 30 June 2014

CONSOLIDATED BALANCE SHEET (unaudited)

As at 30 June 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the six months ended 30 June 2014