Final Results

26 FEBRUARY 2016

INTU PROPERTIES PLC

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

David Fischel, Chief Executive of intu properties plc, commented:

"We are pleased to report a strong set of results for 2015 with a 7 per cent increase in underlying earnings per share and a 4 per cent revaluation surplus taking investment properties to £9.6 billion. Particularly encouraging was the return to like-for-like growth in net rental income, the result of quality lettings in aggregate 10 per cent ahead of previous passing rent, improved occupancy at 96 per cent and benefits from our investment programme with projects successfully concluded in 2015 in Nottingham, Newcastle and Stoke-on-Trent.

As economic recovery spreads out from London and the south east to the regions, consumer confidence is positive, driving improved retailer demand for space in our centres at a time when new supply of quality retail space is very limited. Investor interest for prime regional shopping centres remains keen.

These factors provide a favourable background for our development programme as we look to introduce the next level of leisure concepts. We expect to undertake around £600 million of mixed retail and leisure projects in the next three years in the UK, in particular the intu Watford extension, and commence our major Spanish shopping resort development, intu Costa del Sol.

Our top shopping destinations help deliver high footfall and long dwell times for our retailers and restaurateurs. We attract some 400 million shopper visits a year and focus on delivering a great customer experience. We are continuing to make the intu brand really count through digital initiatives, including our transactional website, and multichannel promotional events, reflected in very positive customer feedback via our Tell intu programme.

While financial markets are volatile, the improved economic environment and tenant demand, together with the returns we are achieving from our investment in development, active management, technology and branding mean we are well positioned to achieve further organic growth in 2016".

Enquiries:

A presentation to analysts and investors will take place at UBS, 100 Liverpool Street, London EC2 at 9.30GMT on 26 February 2016. 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.

NOTES TO EDITORS

KEY HIGHLIGHTS OF 2015

Key financial highlights 1

1 Please refer to glossary for definition of terms.

2 Including Group's share of joint ventures.

3 Pro forma of 41.0 per cent after cash realised from disposal of Equity One investment in January 2016.

Our results for the year show growth in net rental income, underlying earnings, property valuation and net asset value:

· net rental income increased by 8 per cent, due to a return to like-for-like growth of 1.8 per cent and the full-year impact of acquisitions

· property revaluation surplus of £351 million represents a like-for-like increase in capital values of 4.0 per cent in the year, outperforming the IPD monthly retail index which increased by 2.8 per cent

· profit for the year of £518 million included £351 million property revaluation surplus (2014: £600 million included £648 million property revaluation surplus)

· underlying earnings per share increased by 7 per cent to 14.2 pence (2014: 13.3 pence)

· net asset value per share (diluted, adjusted) increased to 404 pence, an increase of 25 pence, delivering a total financial return in the year of 10 per cent including dividend

· debt to assets ratio improved to 43.1 per cent and on a pro forma basis to 41.0 per cent, after the disposal of the Equity One investment in January 2016

· cash and available facilities of £588 million at 31 December 2015 with a further £202 million received from the disposal of Equity One shares in January 2016

Presentation of information

Amounts are presented including the Group's share of joint ventures. See financial review for details.

KEY HIGHLIGHTS OF 2015

Optimising asset performance

Our focus is to deliver attractive long-term total property returns from strong, stable income streams and capital appreciation

· increased like-for-like net rental income by 1.8 per cent in the year, a return to growth, reflecting the benefits of active asset management over the last few years

· signed 261 long-term leases for £46 million new annual rent at an average 10 per cent above previous passing rent

· increased occupancy to 96 per cent from strong levels of new lettings (December 2014: 95 per cent)

· increased retailer sales by 2 per cent and footfall remained robust across the portfolio

UK development momentum

By extending and enhancing our existing locations we aim to deliver superior returns

· completed the £42 million mall refreshment and restaurant quarter at intu Victoria Centre and the £19 million leisure extension at intu Potteries, generating a combined £3.6 million of new annual rent

· on site with three restaurant projects costing £30 million (intu share) at intu Eldon Square (20 units), intu Metrocentre (11 units) and intu Bromley (five units). All are due to complete in 2016 and are substantially let

· on site with the £178 million leisure and retail extension of intu Watford anchored by Cineworld and Debenhams

· due to commence redevelopment of intu Broadmarsh and the leisure extension at intu Lakeside in 2016

Making the brand count

We aim to leverage the strength of our brand to create compelling experiences that deliver results

· over 24 million website visits in 2015, a year-on-year increase of over 30 per cent

· delivered strong metrics on marketing campaigns from an active marketing database of over two million subscribers

· continued improvement in net promoter score, up 20 per cent year-on-year, and driving dwell times

· delivered nationwide, immersive multichannel events with global brands, such as Mastercard and 20th Century Fox

Seizing the growth opportunity in Spain

Our Spanish strategy is to create a business of national scale through acquisitions and development projects

· completed the €451 million acquisition of Puerto Venecia, Zaragoza and brought in CPPIB as our 50 per cent joint venture partner

· introduced the intu brand to Spain, rebranding Parque Principado, Oviedo, as intu Asturias

· delivered positive operating metrics from these two top-10 centres with footfall and sales up 3 per cent and 10 per cent respectively, both outperforming the Spanish benchmarks

· exercised option to take ownership of development site and furthered tenant demand for the planned shopping resort development, intu Costa del Sol, near Málaga. We anticipate being on site before the end of 2016

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 gain on our investment property, including the Group's share of joint ventures, was £350.7 million, up 4.0 per cent like-for-like in the year. This was significantly ahead of the IPD monthly retail index which reported a 2.8 per cent increase, a sixth consecutive year of outperformance.

The weighted average nominal equivalent yield at 31 December 2015 was 5.14 per cent, a reduction of 18 basis points in the year, reflecting our ongoing asset management initiatives and favourable investment market conditions. Based on the gross portfolio value, the net initial yield 'topped-up' for the expiry of rent-free periods was 4.52 per cent.

On a like-for-like basis, ERV increased by 1.5 per cent in the year, outperforming the IPD index which indicated a 0.7 per cent increase.

1 Including Group's share of joint ventures.

2 IPD monthly index, retail.

There were three main drivers of the increase in property values across the portfolio in 2015:

· strong new lettings demonstrate improvement in the occupier market with rental values increasing across most of our centres

· investment in improvements and reconfigurations at centres have driven above-average increases in rental values. In particular this can be seen at intu Eldon Square, intu Victoria Centre and intu Potteries where our investment programme has not only added new rental income but also in each case proved highly beneficial in attracting new tenants to the existing centre

· enhancements to the overall market positioning of centres through developments and improved tenant mix along with continued investor demand for top destination centres has led to the 18 basis point yield compression 

The table below shows the main components of the £350.7 million revaluation surplus:

· intu Trafford Centre: new lettings have increased rental values and provided evidence for future growth

· intu Lakeside: strengthening of the tenant mix and the upgraded dining offer has had a favourable impact on the attractiveness of this centre and demand from tenants

· St David's, Cardiff: improved tenant mix has seen the centre achieve super prime status as it becomes ever more established in its market. Rental uplifts from new lettings and the first series of rent reviews have further driven an exceptionally strong performance

· intu Victoria Centre: the benefits of the mall refreshment work can now be seen through competitive letting activity driving Zone A rents from £230 per sq ft to £250 per sq ft

· intu Derby: increased demand for space has moved rental values forward. In our first 18 months of ownership, the value of this centre has increased by over 13 per cent

· intu Eldon Square: the substantial programme of investment we have undertaken has provided an enhanced environment with key new lettings improving rental tone and heightened tenant demand

· intu Braehead: the less buoyant occupier and investment market in Scotland has resulted in a reduction in value of the centre

· intu Asturias: our proactive asset management both in terms of tenant mix and developments has seen a continuation in the strong growth of the centre, a third year of increased values and a total increase of 36 per cent since acquisition

Operating metrics

Customer metrics

Occupancy is 96 per cent, an increase of 1 per cent on December 2014 due to proactive asset management and improved tenant demand. The 4 per cent vacancy rate outperforms the PMA's unit vacancy measure for 'big shopping centres' of 10 per cent.

Like-for-like net rental income was up 1.8 per cent against 2014 due to the better rental values from strong retailer demand, improved occupancy, fewer tenants going into administration and development units coming back on stream, in particular in the second half of the year.

http://www.rns-pdf.londonstockexchange.com/rns/2304Q_1-2016-2-25.pdf 

We agreed 261 new long-term leases in the year, amounting to £46 million new annual rent, at an average of 10 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. Significant activity in the year includes:

· continued strong demand from catering operators, with 63 new lettings across the portfolio. Restaurant brands opening at multiple centres in the year included Byron, YO! Sushi, Thaikhun and Barburrito. We also saw new brands expanding into shopping centres, for example Red Dog Saloon opened its first restaurant outside central London at intu Lakeside

· retailers using intu's scale to assist them in getting national coverage, with Kiko and Smiggle signing leases for 10 units each, taking their UK portfolios to 25 and 42 stores respectively

· intu Eldon Square where we saw a total of 25 new lettings in response to the refreshed malls (16 retail lettings) and catering redevelopment (nine restaurant lettings). Occupancy now stands at 99 per cent

· intu Lakeside where tenant mix improvements and several lease renewals resulted in 26 lettings, including Kurt Geiger and Victoria's Secret

· 350 shops opened or refitted in our centres in 2015, 11 per cent of our 3,300 units. Tenants have invested approximately £105 million in these stores, a significant demonstration of their commitment to our centres

We settled 147 rent reviews in the year for new rents totalling £38 million, an average uplift of 8 per cent on the previous rents.

Footfall outperformed the Experian measure of UK national retail footfall by 170 basis points with our customer-focused events programme and world class customer service delivering the outperformance.

Estimated retailer sales in our centres were up 2.1 per cent in 2015 against the same period in 2014, continuing the trend we saw in 2014 and in line with the British Retail Consortium trends. The ratio of rents to estimated sales for standard units remained stable in the year at 12.5 per cent. This ratio has reduced from 14.6 per cent four years ago but, given the current increased market demand and low vacancy, we see good prospects of the ratio reverting to higher levels from growing rents.

The difference between annual property income (see glossary) of £449 million and ERV of £531 million represents £40 million from vacant units and reversion of £42 million from rent reviews and lease expiry. Of the £42 million, £8 million relates to reversions only realisable on expiry of leases with over 10 years remaining (for example anchor units), leaving £34 million, 7 per cent, from other lease expiries and rent reviews.

The weighted average unexpired lease term is 7.9 years (31 December 2014: 7.4 years).

UK development momentum

We are advanced in our planning for near-term developments in the UK, and expect to spend £578 million over the next three years. These will deliver value-enhancing returns which, along with a further £1.1 billion of opportunities over the next 10 years, provide a robust platform for organic growth.

In 2015 we invested £78 million on active asset management projects, including:

· at intu Victoria Centre we completed the £42 million project adding new restaurants, which opened in time for Christmas, remodelled several units at the northern end of the scheme and fully refurbished the interiors. The incremental rent on reconfigured units was £2.4 million, with the impact of the refurbished malls and improved tenant demand increasing Zone A rents in other parts of the centre. New retailers in the year include Kiko, Tiger, Swatch and Smiggle

· at intu Potteries we opened the £19 million fully-let leisure extension. The stand-alone project added £1.2 million of new rent and we are already seeing increased demand in the centre with H&M signing a lease to open its first store in the city and JD Sports and Pandora upsizing their existing units

Near-term pipeline

Our UK development pipeline over the next three years amounts to £578 million.

* Assumes 50 per cent joint venture partner.

We have £230 million of active asset management projects either committed or planned:

· committed capital expenditure of £45 million includes intu Metrocentre, intu Bromley and intu Eldon Square where we are nearing completion of three catering developments adding 36 new restaurants and costing around £30 million in total (intu share). We anticipate that all three schemes will open fully let by summer 2016 and deliver returns, on average, of around 8 per cent

· we have £185 million of active asset management projects with every centre having proposed projects, including right sizing tenants at intu Merry Hill and a catering development at Manchester Arndale

We have progressed the next wave of major extensions and redevelopments and expect to invest an estimated £348 million:

· at intu Watford we have commenced site clearance for the £178 million extension. Pre-lets stand at over 50 per cent with Cineworld and Debenhams anchoring the leisure-led extension. This project is expected to deliver a return on costs of 6-7 per cent, including 1-2 per cent generated through the existing centre

· we are finalising pre-lets before commencing the £75 million (intu share) redevelopment of intu Broadmarsh and £95 million leisure extension at intu Lakeside

Future opportunities

Beyond 2018, we have a £1.1 billion pipeline of opportunities across several centres with major extensions planned at intu Lakeside, intu Victoria Centre, Cribbs Causeway and intu Braehead, and an upgrade and remodelling of intu Milton Keynes. The first two projects have planning approvals and we are in the planning process on the latter three. We will bring these projects forward in line with tenant demand.

For active asset management projects we expect to generate a stabilised initial yield of 6 to 10 per cent and around 7 per cent on major projects. Where no significant additional space is created we assess project returns in the context of an internal rate of return based on the anticipated impact on overall centre performance.

Funding

We will fund our near-term pipeline from cash and available facilities and from recycling capital to deliver superior returns. On a pro forma basis, including the £202 million realised from the disposal of our investment in Equity One in January 2016, cash and available facilities would have been £790 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

Over the last three years we have created a national brand that our shoppers and retailers know and understand. By combining our scale, expertise and insight to create compelling experiences we are seeing the benefit of the brand grow year-on-year.

Digital connectivity

Wifi registrations at our centres have continued to grow steadily to over 2.5 million individuals. We are still seeing approximately 60 per cent of registrants opt in to marketing communications and offers which, along with sign ups through other channels, has increased our active marketing database to over two million individuals. Our targeted marketing campaigns are achieving well above the industry standards for email performance, including open and click-through rates.

Traffic to intu.co.uk continues to grow with over 24 million website visits in the last 12 months, an increase of over 30 per cent on the previous year. We now have more than 350 affiliate retailers trading on our transactional website, giving customers access to the majority of our retailers online and in centre and our retailers an additional sales channel.

The power of our digital offering is producing increased sales through intu.co.uk and demand from retailers for email marketing campaigns using the intu platform.

In September 2015 we previewed our new app before its national launch in early 2016. The app provides in centre blue dot Apple wayfinding, personalised special offers and centre information in one easy-to-use service. It was developed by our in-house digital innovation team, working with Apple to map all intu centres, and takes advantage of our own high-quality wifi infrastructure which allows accurate location-based services.

Events with a difference

Our national events programme gives customers reasons to come more often and stay longer which in turn provides retailers with enhanced footfall and sales opportunities. In early summer, our third annual 'Everyone's Invited' festival, focusing heavily on the family audience, showed net promoter scores increasing by around 25 per cent for the weekend. The start of the new university year saw 128,000 students, an increase of over 20 per cent on the 2014 event, attending the student nights at 16 of our centres.

Intu Experiences, our in-house team which delivers immersive brand partnerships, mall commercialisation and advertising, generated net income exceeding £15 million in 2015, around 4 per cent of our rent roll. A greater share of this revenue is now from media and promotional activity rather than the 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, to our customers. We partnered with Mastercard to deliver a multichannel campaign for the Rugby World Cup 2015 and, following the success of the launch of their film Home at intu centres, 20th Century Fox again teamed up with us to promote the new Snoopy film over the autumn half term holiday.

World class service

The Tell intu measure of net promoter score continues to improve as we constantly aim to enhance the customer experience in our centres. Net promoter score for 2015, where we have like-for-like figures, is running at over 20 per cent higher than the same period in 2014.

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 have consolidated this position in 2015.

Acquisitions

In January 2015 we completed the €451 million acquisition of Puerto Venecia shopping resort in Zaragoza. In September 2015 we introduced CPPIB as our 50 per cent joint venture partner, extending our partnership, which started with the purchase of intu Asturias, to cover two of Spain's top-10 shopping centres.

We also exercised the option for the prime development site for a shopping resort near Málaga, now referred to as intu Costa del Sol. The total cost to date of the land and predevelopment expenditure is €60 million.

Operational performance

Our two centres, intu Asturias and Puerto Venecia, Zaragoza, are benefitting from our active asset management approach and the improving Spanish economy, with footfall and retailer sales up by 3 per cent and 10 per cent respectively.

Occupancy is 100 per cent at intu Asturias and 95 per cent at Puerto Venecia.

We agreed 22 new long-term lettings in the year, amounting to €2 million new annual rent, at an average of 12 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions. New names to our Spanish centres included Adidas, Levi's, Fnac and Décimas.

Intu's 50 per cent share of Puerto Venecia was valued at €225 million at 31 December 2015, in line with the acquisition price. Intu's share of intu Asturias increased by €14 million (13 per cent) in the year to €121 million, an increase of 36 per cent since acquisition.

Development pipeline

Our development pipeline in Spain consists of the intu Costa del Sol project on the site we acquired in 2015 near Málaga and three future development opportunities - we have options on sites in Valencia, Vigo and Palma.

Our plan for intu Costa del Sol is a 175,000 sq m shopping resort positioned on the main Costa del Sol highway with access to a catchment of around three million residents and 10 million tourists annually. Discussions are progressing well with the key retail and leisure anchors who have shown strong interest in the development.

We continue to develop plans at the three other sites, with the next development, likely to be intu Valencia, following on from intu Costa del Sol.

Outlook

As discussed in the interview with the Chief Executive, we intend to deliver continued growth in like-for-like net rental income which we expect to be in the 2 per cent to 3 per cent range for 2016 subject to no material tenant failures. This will offset the dilution in earnings from the disposals of the Equity One shares and a 50 per cent stake in Puerto Venecia, Zaragoza as we recycle capital into other developments.

INTERVIEW WITH THE CHIEF EXECUTIVE

David Fischel, Chief Executive, answers questions on intu's results demonstrating how the business expects to benefit further from rising consumer confidence and strengthening demand from retailers for quality space.

Q: How was 2015 for intu?

We are pleased to report a strong set of results for 2015 with a 7 per cent increase in underlying earnings per share and a 4 per cent revaluation surplus taking investment properties to £9.6 billion. Particularly encouraging was the return to like-for-like growth in net rental income, the result of quality lettings in aggregate 10 per cent ahead of previous passing rent, improved occupancy at 96 per cent and benefits from our investment programme with projects successfully concluded in 2015 in Nottingham, Newcastle and Stoke-on-Trent.

As economic recovery spreads out from London and the south east to the regions, consumer confidence is positive, driving improved retailer demand for space in our centres at a time when new supply of quality retail space is very limited. Investor interest for prime regional shopping centres remains keen.

These factors provide a favourable background for our development programme as we look to introduce the next level of leisure concepts. We expect to undertake around £600 million of mixed retail and leisure projects in the next three years in the UK, in particular the intu Watford extension, and commence our major Spanish shopping resort development, intu Costa del Sol.

Our top shopping destinations help deliver high footfall and long dwell times for our retailers and restaurateurs. We attract some 400 million shopper visits a year and focus on delivering a great customer experience. We are continuing to make the intu brand really count through digital initiatives, including our transactional website, and multichannel promotional events, reflected in very positive customer feedback via our Tell intu programme.

While financial markets are volatile, the improved economic environment and tenant demand, together with the returns we are achieving from our investment in development, active management, technology and branding mean we are well positioned to achieve further organic growth in 2016.

Q: Can you explain the 'intu difference'?

It is shorthand for what differentiates intu from other retail landlords. It means combining our scale, expertise and insight to create compelling experiences for our customers that deliver results for our retailers and value for our investors.

In practical terms it is how we bring the five elements of our brand proposition to life - digital connectivity, events with a difference, world class service, moments of surprise and delight and our commitment to the community.

The whole business is centred around our end customers. We want them to be happier when they leave our centres than when they walked through the door. Our net promoter scores prove that happy shoppers spend more which means happy retailers. We are a people business and everything our people do is underpinned by our values of creative, bold and genuine.

Q: What can we expect in terms of developments to your UK centres over the next 12 months?

2016 will be another significant year for our UK development pipeline following a successful 2015 which saw us complete over £60 million worth of high impact developments at intu Victoria Centre and intu Potteries. These are already yielding results in the form of increased asset values and tenant demand.

This year our focus is on three major projects as part of our near-term, £580 million development pipeline: transformational developments at intu Watford and intu Broadmarsh and an innovative leisure extension at intu Lakeside, each of which is fully funded from existing resources.

At intu Watford we have begun our £178 million extension, demolishing Charter Place to replace it with a substantial retail and leisure offering anchored by a nine-screen Cineworld IMAX cinema and Debenhams. CACI predict that Watford will be promoted to a top-20 retail destination as a result of the development and interest is high with 50 per cent already let or in solicitors' hands.

With the refurbishment of intu Victoria Centre complete, we are ready to turn our attention to the second phase of our Nottingham vision - the redevelopment of intu Broadmarsh. This project will bring a cinema, leisure uses and convenience retail to the southern end of the city.

At intu Lakeside, we are in advanced talks with an international brand to introduce a new type of leisure offer to the shopping centre experience. This will be the first phase of a £95 million, 225,000 sq ft leisure extension designed to increase dwell time and the overall catchment of the centre.

Q: It has now been over two years since you bought your first centre in Spain. Has Spain delivered on its promise so far and where will the next two years take you?

Yes, investing in Spain in 2013 has proven to be a timely move for intu. We now have a strong foothold in a rapidly improving market that has just seen its 17th successive quarter of retail sales growth. Intu Asturias and Puerto Venecia are performing strongly with positive sales growth, dwell and footfall above the benchmarks. Our management team has introduced exciting new retailers at both centres, driving rental growth. Pleasingly the rebrand of Parque Principado to intu Asturias was very well-received and validated through substantially improved net promoter scores. We will look to repeat this success when Puerto Venecia goes through the rebranding process later this year.

From a development point of view, our new concept retail resorts are being well received. At intu Costa del Sol, our first iteration of the concept, tenant demand is strong and the planning is well advanced. When we have secured full planning approval and our target level of exchanged pre-lets, we expect to be on site in the latter part of 2016. In tandem with this, we will continue to advance plans on the other development sites in Valencia, Vigo and Palma.

Q: You have stated your ambition to stay at the forefront of shopping centre innovation - what does this look like in practical terms?

There are five elements of our brand proposition but let's look at just one as an example - digital connectivity. We are the only landlord with an in-house digital innovation team, and we were the first in our industry to introduce a transactional website to offer 24/7 shopping for our customers and importantly give our retailers another route to market. Intu.co.uk is already a top-10 affiliate website with 350 'shoppable' retailers.

However we are not standing still. With the introduction of new technologies our offering will continue to evolve. We are running a number of innovation projects and website enhancement trials that, once proven, we can quickly and efficiently roll out. In 2015 we worked with Apple who digitally mapped our centres, another industry first. This along with our high quality wifi infrastructure has allowed us to build a uniquely personalised wayfinding and offers app that was piloted last year and is now being rolled out across intu branded centres.

Q: Can you summarise what 2016 has in store for intu?

We are now well positioned to reap the benefits of our single-minded focus and brand strategy. 2016 is about building on that solid foundation while continuing to innovate to strengthen our market leading position.

Our four strategic priorities remain: optimising our assets to create essential destinations for both our shoppers and retailers; delivering the near-term pipeline of UK development opportunities that will add real value to our portfolio; leveraging the strength and differentiation of our brand across all proposition areas; and building our Spanish presence.

We intend to deliver continued growth in like-for-like net rental income which we expect to be in the 2 per cent to 3 per cent range for 2016 subject to no material tenant failures. This will offset the dilution in earnings from the disposals of the Equity One shares and a 50 per cent stake in Puerto Venecia, Zaragoza as we recycle capital into other developments.

MARKET REVIEW

UK investment market

Investment demand remains strong for prime regional shopping centres. Global institutions perceive this asset class as having reliable growth characteristics and are prepared to invest beyond London and the south east.

Shopping centre development remains at low levels with the majority of activity focused on extensions and reconfigurations. The combination of strong investor demand, limited supply and the improving underlying economy has seen continued strengthening in valuations.

UK occupier market

The majority of economic indicators show improving markets, in particular those that impact on retail. We continue to see wage growth rising faster than inflation, providing the customer with more disposable income. The Asda benchmark index indicates household income 7 per cent higher than the previous year.

Consumer confidence continues to rise and was strong throughout 2015. The proportion of consumers feeling positive about their job prospects and willing to spend money are both at their highest levels for over seven years.

Retail spending, as shown by the British Retail Consortium like-for-like non-food retail sales, continues to show an average growth rate of above 2 per cent year-on-year.

Retailer administrations in 2015 were at the lowest levels since 2007, according to the Centre for Retail Research, with USC and Bank being the largest. These were the only two significant failures in the intu portfolio and accounted for just over 1 per cent of our rent roll. Since the year end, Blue Inc. has put some of its units into administration (around 0.1 per cent of intu's rent roll), but the majority continue to trade.

What are the major trends impacting our market?

Spanish market

The Spanish economy continues to recover with improving labour market conditions, customer confidence at the highest level since 2000, increasing retailer sales and GDP growth.

Occupiers, in particular major fashion retailers, are looking to consolidate their positions in the best locations as the economy improves. Coupled with new international entrants this is driving strong leasing activity in prime locations.

The investment market remains vibrant with intense competition from international buyers and large SOCIMIs (Spanish equivalent of a REIT) for the best assets.

TOP PROPERTIES

* The amount presented is on the Scottish ITZA basis, the English equivalent is £335.

FINANCIAL REVIEW

Presentation of information

The Group accounts for its interests in joint ventures using the equity method as required by IFRS 11 Joint Arrangements which applied for the first time in the 2014 consolidated financial statements. 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 both review and monitor the business, including the Group's share of joint ventures, on an individual line basis rather than a post-tax profit or net investment basis and therefore the figures and commentary presented are consistent with this management approach. The other information section gives reconciliations between the two bases.

OVERVIEW

Recent acquisitions, positive like-for-like net rental income and continued increases in asset values have resulted in increases to both underlying earnings and NAV per share:

· underlying earnings of £186.6 million, up 15 per cent on 2014, reflecting the acquisition of Puerto Venecia, Zaragoza in January 2015 and a full year's impact from the acquisitions and disposals in the first half of 2014

· underlying earnings per share of 14.2 pence, up 7 per cent on 2014

· NAV per share of 404 pence; total financial return for the year of 10 per cent

Financing metrics remain strong due to property valuation increases and recent refinancing activity:

· debt to assets ratio at 43.1 per cent (31 December 2014: 44.2 per cent), below the Group's target maximum level of 50 per cent; debt to assets ratio pro forma for the sale of the Group's interest in Equity One shares in January 2016 of 41.0 per cent

· interest cover ratio of 1.91x (31 December 2014: 1.82x), above the Group's target minimum level of 1.60x

· cash and available facilities of £588.4 million (31 December 2014: £670.8 million) remains high but has reduced due to acquisitions and capital expenditure in the year; cash and available facilities pro forma for the sale of our interest in Equity One shares of £790.3 million

Major transactions:

· in January the Group completed the acquisition of Puerto Venecia, Zaragoza for €450.8 million. The acquired debt was refinanced on acquisition with €225.0 million of debt raised. In September the Group introduced CPPIB as a 50 per cent joint venture partner

· in June the Group renegotiated the £351.8 million term loan within the Secured Group Structure (SGS), extending this by two years to March 2020 and reducing the interest rate margin by 1.5 per cent

· in September the Group agreed a one year extension to the £600 million revolving credit facility (RCF) which is now in place until 2020

· in December the Group agreed a new facility of £95.8 million for intu Bromley, drawn down in January 2016, replacing the existing facility

RESULTS FOR THE YEAR

Income statement

1 Including Group share of joint ventures.

The Group recorded a profit for the year of £517.6 million, a reduction on the £599.8 million reported for the year ended 31 December 2014. This was primarily due to a lower gain on property valuations of £350.7 million including the Group's share of joint ventures (2014: £648.2 million), offset by:

· a positive movement in the fair value of the Group's financial instruments. 2015 includes a credit of £5.3 million (2014: charge of £157.0 million)

· lower exceptional finance costs of £31.4 million (2014: £50.7 million) largely due to the lower level of interest rate swap terminations in connection with debt refinancing

· lower exceptional administration costs of £1.5 million (2014: £13.9 million). 2014 included costs in relation to the acquisition of intu Merry Hill, intu Derby and Sprucefield

The Group's investments in joint ventures contributed £108.6 million to the profit of the Group in 2015 (2014: £99.7 million) including £24.7 million of underlying earnings (2014: £18.6 million) and a gain on property valuations of £85.8 million (2014: £80.4 million).

Underlying earnings increased by £24.9 million to £186.6 million with underlying earnings per share increasing by 7 per cent to 14.2 pence. Underlying amounts exclude valuation movements, exceptional items and related tax and are presented as they are 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 operations. The underlying profit statement is presented in full in the other information section.

http://www.rns-pdf.londonstockexchange.com/rns/2304Q_1-2016-2-25.pdf

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

· net rental income increase of £25.1 million due to the acquisition of Puerto Venecia, Zaragoza in 2015, a full year's impact from 2014 acquisitions and disposals and property held for development

· like-for-like net rental income increased by £6.1 million, 1.8 per cent (see operating review)

· underlying net finance costs increased by £7.1 million reflecting the full impact of funding 2014 acquisitions and the acquisition of Puerto Venecia, Zaragoza in 2015. These are partially offset by the favourable impact of lower interest rates following debt refinancings

· ongoing administration expenses increased by £6.9 million, largely due to the costs of managing recently acquired properties and the administration of the Spanish properties and developments

· other includes a saving of £2.9 million following the conversion of the 3.75 per cent convertible bonds in July 2014

As detailed in the table below, the Group's net rental income margin including share of joint ventures is in line with 2014 at 87.0 per cent. Property operating expenses largely comprise car park operating costs and the Group's contribution to shopping centre marketing programmes. The Group's ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 16.0 per cent.

Balance sheet

The Group's net assets attributable to shareholders have increased by £452.4 million to £4,976.4 million at 31 December 2015 reflecting the retained profit for the year.

As detailed in the table, net assets (diluted, adjusted) have increased by £442.3 million from 31 December 2014 to £5,411.2 million at 31 December 2015.

Investment and development property has increased by £634.9 million primarily due to the £350.7 million valuation gain in the year, capital expenditure of over £120 million (including the exercise of the option over land in Málaga) and the acquisition of Puerto Venecia, Zaragoza, with intu's 50 per cent holding valued at £166.1 million at 31 December 2015.

Investments of £265.0 million principally comprise the Group's interests in the US and India. The US investment of 11.4 million shares in a US venture controlled by Equity One, a listed US REIT, is valued at £209.4 million based on the 31 December 2015 Equity One share price. The Group subsequently sold this investment on 19 January 2016 for proceeds of £201.9 million. The India investment largely comprises a 32 per cent interest in Prozone (£36.4 million), a shopping centre developer listed on the Indian stock market, and a direct interest in Empire (£18.3 million), owner and operator of a shopping centre in Aurangabad. See notes 16 and 17 for further details.

Net external debt is discussed in the cash flow and net external debt section below.

Derivative financial instruments comprise the fair value of the Group's interest rate swaps. The net liability at 31 December 2015 is £340.5 million, a reduction of £6.7 million in the year. Cash payments in the year totalled £44.1 million, £26.5 million of which has been classified as an exceptional finance cost as it relates to payments in respect of unallocated 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, the Group has a number of interest rate swaps, entered into some years ago, which are unallocated due to a change in lenders' practice. At 31 December 2015 these swaps have a market value liability of £239.1 million (31 December 2014: £242.5 million). It is estimated the Group will be required to make cash payments on these swaps of around £24 million in 2016.

The Group's investment in joint ventures, on an equity accounted basis, is £991.9 million as at 31 December 2015 (2014: £851.5 million). The movement in the year reflects increases from the net investment in Puerto Venecia, Zaragoza of £86.1 million and intu's share of property valuation gains of £85.8 million. At 31 December 2015 the investment in joint ventures reflects investment property of £1,119.8 million (2014: £869.2 million) and net debt of £115.3 million (2014: £5.5 million).

The non-controlling interest at 31 December 2015 relates to our partner's 40 per cent stake in intu Metrocentre.

The Group is exposed to foreign exchange movements on its overseas investments. The Group's 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 2015 the exposure was 8 per cent, higher than the 6 per cent at 31 December 2014 due to the Group's acquisition of Puerto Venecia, Zaragoza in January and the exercise of the Málaga option in May. This exposure reduces to less than 4 per cent pro forma for the sale of our interest in Equity One shares in January 2016.

Adjusted net assets per share

As illustrated in the chart below, diluted, adjusted net assets per share have increased from 379 pence per share at 31 December 2014 to 404 pence per share at 31 December 2015. The increase was driven by the property valuation gain of 26 pence per share.

http://www.rns-pdf.londonstockexchange.com/rns/2304Q_1-2016-2-25.pdf

Cash flow and net external debt

During 2015 the Group generated an increase in cash of £61.1 million. Cash flow from operating activities of £160.2 million is £103.7 million higher than 2014, primarily due to the lower level of exceptional swap termination costs compared to 2014 and working capital movements.

Cash flows from investing activities reflect the cash outflow for the acquisition of Puerto Venecia, Zaragoza of £203.1 million and an inflow of £81.0 million from the subsequent sale of a 50 per cent interest to CPPIB net of new debt issued. Capital expenditure of £100.8 million was incurred in the year. 2014 reflected a cash outflow on the acquisition of intu Merry Hill, intu Derby and Sprucefield of £851.3 million and an inflow from the disposal of 80 per cent of intu Uxbridge of £174.1 million.

Cash flows from financing activities include net debt drawdowns of £138.9 million primarily to fund the acquisition of Puerto Venecia, Zaragoza. Dividends paid in cash during the year were £104.9 million. 2014 included an inflow of £492.0 million from the rights issue undertaken to part-fund acquisitions and net borrowings raised of £314.3 million.

Net external debt (including Group share of joint ventures) has increased by £175.7 million. Cash has increased by £41.3 million. Debt has increased by £217.0 million reflecting the key cash flows above.

FINANCING

Debt structure

As a result of the significant refinancing activity in recent years, the Group has diversified its sources of funding. We now have a range of debt instruments including CMBS and other secured bonds plus syndicated bank debt secured on individual or pools of assets, with limited or non-recourse from the borrowing entities to other Group companies outside of these arrangements. Corporate-level debt remains limited to the revolving credit facility and the £300 million convertible bond.

During 2015 the main financing activities undertaken included:

· in January, €225.0 million of new debt was secured against Puerto Venecia, Zaragoza, refinancing the acquired debt

· in June the Group renegotiated its £351.8 million Secured Group Structure term loan, extending the maturity by two years to March 2020 and reducing the margin by 150 basis points

· in September the Group agreed a one year extension to the RCF which is now in place until 2020

· in December a new five year £130.0 million facility was secured against intu Uxbridge; intu's share is £26.0 million

· in December the Group agreed a new facility of £95.8 million for intu Bromley, drawn down in January 2016, replacing the existing facility which was due in April 2016

http://www.rns-pdf.londonstockexchange.com/rns/2304Q_1-2016-2-25.pdf

The chart above illustrates that there is no major refinancing requirement due until 2017.

The table below summarises the Group's main debt measures, all including the Group's share of joint ventures.

The debt to assets ratio has reduced to 43.1 per cent with the increase in property valuations offsetting the increase in net external debt resulting from the acquisition of Puerto Venecia, Zaragoza and capital expenditure in the year. The debt to assets ratio is well below the Group's target maximum level of 50 per cent. Pro forma for the sale of the Group's interest in Equity One shares in January 2016 the debt to assets ratio would reduce to 41.0 per cent.

Interest cover of 1.91x has increased reflecting the impact of recent acquisitions and lower interest rates following recent debt refinancing and remains above the Group's targeted minimum level of 1.60x.

The weighted average debt maturity has reduced to 7.8 years and includes the benefit from the extension of the SGS term loan.

The weighted average cost of gross debt has reduced to 4.6 per cent (excluding the revolving credit facility) reflecting the lower rates achieved on recent refinancing activity.

The Group uses interest rate swaps to fix interest obligations, reducing cash flow volatility caused by changes in interest rates. The proportion of debt with interest rate protection has reduced slightly in the year to 86 per cent within the Group's policy range of between 75 per cent and 100 per cent. The reduction is due to the higher level of borrowing against the Group's revolving credit facility.

Cash and available facilities have reduced to £588.4 million at 31 December 2015. This comprises cash of £301.4 million in addition to undrawn facilities of £287.0 million.

Covenants

Full details of the debt financial covenants are included in the financial covenants section of this report. The Group is in compliance with all of its covenants.

Capital commitments

The Group has an aggregate cash commitment to capital projects of £65.2 million at 31 December 2015 including the Group's share of joint ventures.

In addition to the committed expenditure, the Group has 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 (REITs), tax on property operating profits is paid at shareholder level to the UK government rather than by intu itself. REIT status brings with it the requirement to operate within the rules of the REIT regime (for further information see glossary).

As a good corporate citizen we believe that paying and collecting taxes is an important part of our role as a business and our wider contribution to society. We are committed to acting with integrity and transparency in all tax matters and have an open, up-front, and no surprises policy in dealing with HMRC, and as a result look to minimise the risk that anything that we do could be considered to be tax avoidance. In particular, the Group carries out regular risk reviews, seeks pre-clearance from HMRC in complex areas and actively engages in discussions on potential or proposed changes in the taxation system that might affect the Group.

The Group pays 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 2015 the total of such payments to tax authorities was £23 million, of which £19 million was in the UK, £0.5 million in the US and £3.5 million in Spain. In addition, the Group also collects 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 £297 million in 2015 (2014: £297 million).

Dividends

The Directors are recommending a final dividend of 9.1 pence per share bringing the amount paid and payable in respect of 2015 to 13.7 pence, unchanged from 2014. 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.

As at 31 December 2015 the Company has distributable reserves in excess of £1.3 billion, sufficient to cover around seven years of dividends at the 2015 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

26 February 2016

PRINCIPAL RISKS AND UNCERTAINTIES

intu's Board has responsibility for establishing the Group's appetite for risk based on the balance of potential risks and returns, and has overall responsibility for identifying and managing risks. The Board has undertaken a robust assessment of the principal risks facing the Group, including those that would impact the business model, future performance, solvency or liquidity.

We have identified principal risks and uncertainties under five key headings: property market; financing; operations; developments and acquisitions; and brand. These are discussed in detail on the following pages. A principal risk is one which has the potential to significantly affect the Group's 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 2015 has remained broadly in line with 2014 with no significant new risks identified nor substantial changes in existing risks. The main changes from 2014 are:

· we have started work on our development pipeline with risk around new developments such as the intu Watford extension increasing as funding is committed

· we have identified increased risk around the brand as intu continues to gain momentum with a launch in Spain and a higher UK profile

· an additional sub-category of property market risk has been identified, highlighting the risk of not reacting to changes in the retail environment such as changes in customers' preferences in light of the increased importance of multichannel retailing

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

Statement of Directors' Responsibilities

The Group's annual report for the year ended 31 December 2015 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 (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and Company for that period. In preparing 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 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 26 February 2016

David Fischel

Chief Executive

Matthew Roberts

Chief Financial Officer

Consolidated income statementfor the year ended 31 December 2015

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 2015

Consolidated balance sheet

as at 31 December 2015

Consolidated statement of changes in equity

for the year ended 31 December 2015

Consolidated statement of changes in equity

for the year ended 31 December 2014