Final Results

27 FEBRUARY 2015

INTU PROPERTIES PLC

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

David Fischel, Chief Executive of Intu Properties plc, commented:

"Intu's improved 2014 results demonstrate we are well positioned to benefit further from rising consumer confidence and strengthening demand from retailers for quality space. As the UK's leading owner and manager of prime regional shopping centres, we welcome over 400 million customer visits through our centres each year and our clear focus on delivering outstanding customer experience under the intu brand is proving a powerful factor in the successful performance of our centres. Following excellent acquisitions both in the UK and Spain in the last few years, we also look to the organic growth opportunity from driving forward our £1.9 billion development programme".

Enquiries:

A presentation to analysts and investors will take place at UBS, 1 Finsbury Avenue, London EC2 at 9.30GMT on 27 February 2015. 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.

2014 HIGHLIGHTS

Delivering improved returns

· property valuations increased 8.2 per cent (£648 million), outperforming the IPD monthly retail index which increased 7.3 per cent

· total property return, as calculated by IPD, 13.1 per cent (2013 - 7.3 per cent)

· net asset value per share (diluted, adjusted) of 379 pence, giving a total financial return for the year of 17 per cent on the pro forma opening net asset value per share of 335 pence

· underlying earnings per share 13.3 pence (H1 6.4 pence; H2 6.9 pence) (2013 - 13.7 pence1) reflecting a reduction in like-for-like net rental income of 3.2 per cent in the year

· signed 210 long-term leases for £34 million new annual rent at an average 5 per cent above previous passing rent

Significant corporate activity

· acquired two UK top 20 shopping centres, intu Merry Hill and intu Derby, along with Sprucefield retail park in Northern Ireland in May 2014 for £855 million

· exchanged contracts in December 2014 to acquire a top 10 Spanish shopping centre Puerto Venecia, Zaragoza for €451 million. Acquisition completed in January 2015

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

· debt financing activity of £2 billion; weighted average maturity over eight years

· cash and committed facilities of £671 million at 31 December 2014

Making the brand count

· active retailers on our transactional website, intu.co.uk, include John Lewis, Next and Topshop

· almost 40 per cent year-on-year increase in website visits in December 2014 to nearly three million, with an active marketing database of almost two million individuals

· introduced Tell intu and customer service measurement, with the average Net Promoter Score increasing in the year

Development momentum

· development pipeline of £1.9 billion, £1.3 billion in the UK and £0.6 billion in Spain

· completed the remodelled food court at intu Lakeside, on site with the leisure extension at intu Potteries and mall refurbishment and catering quarter at intu Victoria Centre

· on target to commence a major £110 million extension at intu Watford in 2015

Financial highlights 2

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

STRATEGIC REVIEW

Our Strategic review shows how we have performed in the year and how we are positioning ourselves to deliver on our strategy in the future. Four key themes have shaped our performance in 2014. They are:

· delivering improved returns

· significant corporate activity

· making the brand count

· development momentum

Delivering improved returns

Total property return has increased in 2014 as yields compressed and rental values started to improve.

Valuation

The aggregate like-for-like market value of our investment property increased by 8.2 per cent in the year, outperforming the IPD monthly retail index (up 7.3 per cent) as we have in each of the last five years. This contributed to a total property return of 13.1 per cent. To view Chart 1, which shows Intu's capital value movements, please paste the following URL into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf

The weighted average nominal equivalent yield at 31 December 2014 was 5.32per cent, a reduction of 47 basis points in the year, reflecting market conditions and our ongoing asset management initiatives maintaining the prime and resilient nature of our assets. Based on the gross portfolio value, the net initial yield 'topped-up' for the expiry of rent free periods was 4.60 per cent.

The like-for-like change in ERV was in line with the IPD benchmark with a further marginal increase in the second half of 2014.

* IPD monthly index, retail.

In general the super-regional centres continue to outperform with stronger valuation surpluses from yield compression and improvement in rental values. In the case of Intu, yield compression was mostly seen in the first six months of 2014 based on transactional evidence. The larger city centre locations have seen smaller positive movements, but there has been limited read-across to date in the smaller centres. Notable changes in individual valuations include:

1 Since acquisition on 1 May 2014; 2 Treated as subsidiary at 31 December 2013; 3 Based on local currency.

· intu Trafford Centre has benefited from the strong yield improvement seen on super-regional centres and an increase in the headline rents as a result of evidence from new lettings

· intu Lakeside has benefited from the strong yield improvements on super-regional centres and the completion of the food court development

· intu Metrocentre has benefited from the strong yield improvement on super-regional centres, but short-term income reductions in parts of the centre about to undergo redevelopment have affected the overall valuation

· intu Merry Hill has benefited from increases in rental tone evidenced by new lettings since acquisition

· St David's, Cardiff and Manchester Arndale have both benefited from the yield improvement seen in larger city centre shopping centres with small improvements in rental tone

· intu Derby has benefited from increases in the rental tone, with some yield improvement

· intu Milton Keynes has benefited from the yield improvement seen in larger city centre shopping centres

· intu Victoria Centre has been affected by the short-term income reduction and accrued development expenditure of the ongoing refurbishment work, with the improvement in yield partially offsetting this reduction

· Parque Principado, Oviedo, has benefited from improvements in yield as investor interest for the best Spanish assets has increased

Operating metrics

· Occupancy remains firm at the 95 per cent level at which we have operated for most of the year and compares favourably to PMA's vacancy measure for 'big shopping centres' of 11 per cent

· Like-for-like net rental income was 3.2 per cent lower in 2014 than 2013, with a narrower 2.8 per cent decrease in the second half. Income interruption from centre redevelopments accounted for approximately one percentage point of the shortfall, in particular at intu Victoria Centre and intu Eldon Square. Tenants failing in late 2012 and early 2013 still impacted the first half of 2014, their total impact in 2014 being around one percentage point. The balance of the shortfall was around concentrations of lease expiries at intu Braehead and intu Potteries. To view Chart 2, which shows the change in Intu's like-for-like net rental income, please paste the following URL into the address bar of your address browser: http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf 

· We agreed 210 new long-term leases in the year, amounting to £34 million new annual rent, at an average of 5 per cent above previous passing rent (like-for-like units) and in line with valuers' assumptions, excluding one strategic leisure letting. Significant activity in the year includes:

· 58 catering lettings, including Five Guys at intu Trafford Centre, intu Lakeside and intu Metrocentre, Chiquito at intu Metrocentre, intu Potteries and intu Uxbridge, Coast to Coast at intu Trafford Centre, intu Metrocentre and intu Victoria Centre and Carluccio's in newly converted space at intu Bromley. Catering and leisure account for 11 per cent of the rent roll, with a significant increase in the development pipeline

· new brands to individual centres include Superdry and a full-line River Island at intu Victoria Centre, one of Dutch retailer Hema's first UK stores at intu Bromley, MAC at intu Lakeside, intu Bromley and St David's, Fat Face at intu Watford and intu Trafford Centre, and Jack Wills at intu Trafford Centre

· previously online only brands creating a physical presence, including a first store for an intu.co.uk retailer, Watch Warehouse, at intu Watford, a pop-up for Ratchet at intu Lakeside and two new Simply Be stores at intu Chapelfield and intu Merry Hill

· 275 new shops opened or refitted in our centres in 2014, around 9 per cent of our 3,100 units. Tenants have invested around £90 million in these stores, a significant demonstration of their commitment to our centres. As well as major flagship store investments, like River Island at intu Metrocentre, JD Sports introduced their new concept shopfit at intu Trafford Centre, intu Watford and intu Chapelfield

· At the property level, the total return from Intu's portfolio was 13.1 per cent (2013 - 7.3 per cent). The combination of capital value increases and broadly stable income demonstrates the strength of Intu's assets over the medium and long term

· The number of visitors to our centres has increased marginally year-on-year in 2014, representing an outperformance of Experian's measure of UK national retail footfall which declined 1 per cent

· Estimated retailer sales in our centres were up 3.1 per cent in the second half of 2014 giving a year-on-year increase of 2.5 per cent. The ratio of rents to estimated sales for standard units reduced in the year to 12.5 per cent, continuing the trend of the previous few years

· The difference between annual property income (see Glossary) of £436 million and ERV of £515 million represents £42 million from vacant units and reversion of £37 million, 8 per cent, from rent reviews and lease expiry. Of the £37 million, £5 million relates to reversions only realisable on expiry of leases with over 10 years remaining (for example anchor units), leaving £32 million, 7 per cent, from other lease expiries and rent reviews

· The lease expiry cycle can bring risk to short-term earnings depending on the volume in a specific centre and when the expiries fall in the economic cycle, but it also provides the opportunity to introduce, reposition and right-size tenants, improving the tenant mix. This year we have seen a significant concentration at intu Braehead and intu Potteries. Chart 3 shows the pattern of lease expiries across the portfolio, with a weighted average unexpired lease term of 7.4 years (31 December 2013 - 7.5 years). To view Chart 3, please paste the following URL into the address bar of your browser: http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf 

Significant corporate activity

We have undertaken significant corporate activity in 2014 and we believe that our scale and focus is key to our successful development and operation of prime regional shopping centres. This year we have further consolidated our position in the UK, acquiring two top 20 centres. In Spain, with the completion of the Puerto Venecia acquisition in January 2015, we now own two top 10 centres which along with the sites we have under option in other key locations position us well to build scale there along similar lines to our approach in the UK.

UK acquisitions

In May we completed our purchase of interests in two prime UK shopping centres, intu Merry Hill and intu Derby, and Sprucefield retail park, Northern Ireland, funded by a two for seven rights issue raising £500 million (gross) and £424 million of new debt facilities secured on the properties. The final consideration was £855 million. We have identified multiple growth opportunities which reinforce our investment case.

The acquisition was in line with our strategy to focus on the UK's most successful destinations. Such assets are rarely traded, so it is important to move decisively where opportunities arise to acquire interests, particularly where our operator skills can be applied through our specialist asset and property management teams. The transaction also established a joint venture with QIC, a major global investor, at intu 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 signage, websites and World Class Service training for the teams. The intu brand has been welcomed at both centres

· strengthened our local asset management and operational capabilities

· started work on detailed asset management plans with initial leasing activity positive to acquisition valuations

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

· at intu Derby, through our early letting activity, increased the zone A rents from £110 to £125

· at Sprucefield, started the process of unlocking the development potential of this well-located site

New joint venture

In June we entered into a partnership in respect of intu Uxbridge with Kumpulan Wang Persaraan (Diperbadankan) (KWAP), the £19 billion Malaysian pension fund. This transaction established a relationship with another 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 2 per cent premium to its 31 December 2013 valuation of £214 million (100 per cent basis). We retain a 20 per cent interest and 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.

Spanish acquisitions

In December we exchanged contracts to acquire the Puerto Venecia shopping centre and retail park in Zaragoza, Spain for €451 million. Eurofund, our development partner in Spain, was closely involved in the original development of this 200,000 sq. m. shopping resort. The centre, which opened in 2012, offers a mix of retail, leisure and restaurants and was recognised by MAPIC in 2013, winning the best worldwide retail and leisure development. This is the template for our shopping resort developments in Spain.

The acquisition, which completed in January 2015, is funded by a 50 per cent loan to value bridging loan which we can exchange for a five-year term loan secured on the asset. The balance of the consideration has been met from our existing resources. In 2015 we will be looking to introduce an investment partner into Puerto Venecia.

The acquisition is expected to be earnings accretive and, following last year's successful acquisition of Parque Principado, Oviedo, is another high-quality addition for the Group, taking our ownership to two of the top 10 shopping centres in Spain. The transaction substantially accelerates our activities in Spain, which is a country where we see major opportunities for the type of genuinely regional destination centre in which Intu specialises.

As we highlighted in October 2013, when we acquired Parque Principado, the Spanish shopping centre market offers opportunities to create a quality business of scale which has the potential to generate superior total returns over the medium term.

Similar to our approach in the UK, our aim is to be the leading owner, developer and manager of regionally pre-eminent shopping centre destinations for the major trade areas of Spain. Eighty per cent of the country's retail expenditure comes from 10 key catchment areas.

Ownership of the largest Spanish shopping centres is fragmented and many regions do not have a pre-eminent retail and leisure destination. The committed pipeline of prime shopping centre developments across Spain is at a low level and we believe the opportunity exists to develop and build new schemes in a number of key regions of Spain.

We also have development options on sites in Malaga, Palma, Valencia and Vigo. It is our intention, subject to shareholder approval, to exercise the Malaga option in March 2015. We are working to bring the other developments forward to the point where we can consider exercising the options. We believe such expansion will be beneficial to the Group's overall brand and digital positioning.

Refinancing activity

Throughout 2014 we have continued to take advantage of the favourable debt markets to refinance the Group's near-term debt. Through a mix of term loans and long-dated bonds, financed in the last two years, we have, since 2012, increased the tenor of the debt by two years to eight years whilst reducing the cost of debt to 4.7 per cent. With debt to assets at 44 per cent and available facilities of £671 million we are well positioned to continue with our strategy in Spain and our UK development pipeline.

See Financial review for more details.

Making the brand count

Scale is important and the establishment of the intu brand further enhances our competitive advantage. Our customers are at the heart of everything we do and providing them with compelling experiences that surprise and delight drives loyalty and in turn dwell time and spend. This customer focus also ensures that we establish enduring relationships with our retailers.

Brand

When we rebranded in early 2013 we orientated every aspect of our business around the customer experience in our centres. Since then we have brought more services in-house to ensure we manage every step of the customer experience. A customer visit may start by looking on intu.co.uk, followed by visiting the centre which offers top-quality retail, with all the major brands present in our centres, dining and leisure options and national promotional activities. All our staff are trained to the same high standards in customer service, with the commitment of the intu brand ensuring equivalent standards across all of our centres.

Over half of the UK's population visit an intu centre at some point through the year on or offline.

We have seen an increase in brand recognition which allows us to deliver events and promotions on a national basis. Events in 2014 included Elephant Parade, Everyone's Invited and Student Night. Elephant Parade's national tour visited all intu centres and raised awareness for The Asian Elephant Foundation as well as entertaining shoppers. Everyone's Invited brought a festival of family fun to the centres, increasing footfall by 13 per cent year-on-year for that weekend. Promotional partners and commercialisation clients now recognise our national proposition combined with a multichannel approach and we are seeing a growth in multicentre campaigns including the use of our intu.co.uk website.

All staff continue to take part in our World Class Service training which is the only national shopping centre programme accredited by the Institute of Customer Service. To measure the impact of our brand approach we launched Tell intu this year which provides the Net Promoter Score of centres monthly. The average score has increased from 46 when we launched it in March to 60 over the Christmas period. Our research, which confirms that happy customers stay longer and spend more, has given considerable impetus to delivering a number of service improvements.

On the digital side, we have now introduced free Wi-Fi into nearly all of our centres, investing in our own infrastructure rather than outsourcing. Over 1.5 million people have registered with around 60 per cent opting in to receive marketing information. Along with registrants on the website, our marketing database now has almost two million active users. Owning the infrastructure allows us to control this marketing and manage the customer experience.

We enhanced intu.co.uk in September 2014. It is now fully mobile responsive with improved content and an expanded shopping proposition. Through our affiliates programme most of our major retailers are now on our transactional website, including for example, John Lewis, Next and Topshop, allowing us to offer shoppers their centre online 24 hours a day. The benefits of these changes can be seen in the website traffic, with a year-on-year increase of almost 40 per cent in website visits in December 2014, to nearly 3 million.

Scale

As we discuss in the Market review, the face of retail continues to change with retailers needing to be in the best shopping locations. Our scale positions us as a key landlord to retailers with nine of the top 20 shopping centres in the UK.

Over the past four years we have expanded significantly with the portfolio now valued at £9.0 billion, almost doubling over the period through the addition of some of the top centres in the UK as well as value creation in our existing centres.

Our scale allows us to benefit from a wealth of experience and knowledge and apply best practice across all the centres. With one website, intu.co.uk, we can market all the centres more efficiently to a national audience and attract customers to stay for longer and visit more often.

All of our 18 UK centres exceed 10 million visits each year and the busiest exceeds 40 million.

Over the last few years we have demonstrated that we will not compromise on quality for the sake of improvements in the short-term occupancy level. This gives retailers confidence in the long-term attractiveness of the centres. We aim to ensure that our mix of tenants is what the customer wants and that the retailers are appropriately located to maximise their returns.

Development momentum

We have made significant progress in the year with our pipeline of development opportunities:

· completed the active management projects at intu Lakeside (food court), intu Eldon Square (mall upgrade) and intu Metrocentre (Platinum Mall)

· on site at intu Victoria Centre (mall refurbishment and creation of 12 new restaurants) and intu Potteries (cinema and catering extension), with both projects due to be completed in the second half of 2015

· about to commence work on catering developments at intu Eldon Square, intu Metrocentre and intu Bromley

· engaged the main contractor at Charter Place, Watford and expect to be on site later in 2015

· received town centre status and planning approval for an extension at intu Braehead

We can finance our £1.9 billion pipeline through three main routes:

· available facilities within the business as we have further improved our financial flexibility in 2014 by refinancing much of the debt which was due to mature in the next few years. At the end of 2014 we had cash and available facilities of £0.7 billion

· the major developments are likely to be spread over a number of years. We intend to raise development finance where appropriate and additional finance from the value created by completed developments to reinvest in the next project

· recycling capital from other assets to reinvest into these growth opportunities at the point where they will deliver superior returns. This may include introducing partners as we did at intu Uxbridge in 2014

In the case of major extensions and creation of significant new or reconfigured space, we aim to have agreed terms with a sufficient level of tenants including strategic pre-lets before proceeding with construction.

For 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 6 to 10 per cent and a minimum of 7 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 anticipated 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 Timing subject to change due to a number of internal and external factors.

3 Represents Intu's share of costs.

4 Total project costs of £42 million of which £29 million has already been spent.

5 Total project costs of £19 million of which £6 million has already been spent.

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

7 Represents Intu's share of costs assuming a joint venture partner introduced.

Principal projects include:

· intu Victoria Centre: £42 million development of a restaurant quarter and significant refurbishment of intu Victoria Centre is underway. This project has already reignited interest from retailers, with new lettings to Urban Outfitters, Superdry and River Island. Pre-lets on the restaurant quarter are approaching 50 per cent, including Tortilla, Ed's Easy Diner, Coast to Coast and Handmade Burger Co.

· intu Potteries: £19 million, 60,000 sq. ft. leisure extension is under construction and due to open in the second half of 2015. The leases for the nine screen Cineworld cinema and six new restaurants are all exchanged, bringing Nando's, Frankie & Benny's, Pizza Express, GBK, Coast to Coast and Chiquito to the centre's line up

· intu Metrocentre: £18 million extension to the 'Qube' dining area adjacent to the Imax Odeon cinema, creating 11 new restaurants. Pre-lets at over 50 per cent including Five Guys, Chiquito, T.G.I. Friday's and Coast to Coast, with another 25 per cent in solicitors' hands. We have commenced work for openings in early 2016

· intu Eldon Square: £25 million dedicated catering destination 'Grey's Quarter', reconfiguring 80,000 sq. ft. of outdated retail space to over 20 restaurants. Over 50 per cent is exchanged or in solicitors' hands and we anticipate work to commence on the project in the first half of 2015

· intu Watford: £110 million, 380,000 sq. ft. extension to create a new shopping, dining and entertainment hub for Watford. Cineworld have exchanged contracts to be the anchor cinema operator and we now have offers on over 50 per cent of the units by rent. We have engaged the main contractor and, subject to pre-letting, we anticipate that works will be under way this year with a target for completion in 2017. We project stabilised initial yield on cost of 7.1 per cent

· Malaga: €425 million, 175,000 sq. m. shopping resort development situated on the main Costa del Sol highway. Engagement with key retailers has indicated a strong interest in the development. We intend, subject to shareholder approval, to exercise the option in March 2015. The expected stabilised initial yield on costs for the project is over 7 per cent

CORPORATE RESPONSIBILITY

Our corporate responsibility approach is based on three pillars of communities and economic contribution, environmental efficiency and relationships with our stakeholders.

In 2014 we reached the target of reducing our carbon emissions by 30 per cent compared with 2011 (like-for-like portfolio adjusted for occupancy). We also diverted over 97 per cent of waste away from landfill, recycled 69 per cent of waste and reduced water use by 2 per cent compared with 2011.

Our outstanding and sustained performance in energy efficiency was recognised by the Carbon Trust, which awarded us the 'Best in continuing carbon reduction' award at the Standard Bearers Awards. The award recognises the challenging 30 per cent reduction target we set ourselves and the work we have done to achieve this since 2011.

Once again in 2014 we were accredited with the BitC CommunityMark, one of only 52 UK companies to receive the award. The CommunityMark is a national standard that publicly recognises leadership and excellence in the community.

In our joint community projects we work with local partners to help disadvantaged young people into work. During 2014, we worked with nine community partners delivering 21 projects at our centres. These projects have directly reached over 1,200 people.

We continue to be included in FTSE4Good and the Dow Jones Sustainability Global Index and we were awarded the Green Star by GRESB. We have also received a gold ranking in the Mayor of London's Business Energy Challenge for our two centres in Greater London and our head office.

INTERVIEW WITH THE CHIEF EXECUTIVE

You have a £1.3 billion pipeline of developments in the UK. How fast can we expect to see these developments and how will you fund them?

The development pipeline can be split into active management projects and major extensions. We have several ongoing active management projects, such as the leisure extension at intu Potteries and the refurbishment and restaurant quarter at intu Victoria Centre, both of which will be completed in the second half of 2015. We will also be commencing three other restaurant projects in the next few months. All these projects can be funded from our existing facilities.

intu Watford is our most advanced major extension with planning approved, the anchor cinema let and over 50 per cent of the expected rent under offer. We anticipate beginning construction this year. The catalyst for our other extensions, the majority of which have planning approved, will be the required level of tenant interest.

We should not need additional equity to finance these projects. We can finance the extensions from existing available facilities, raising debt against the value created from completed developments and recycling capital from other assets to reinvest into these growth opportunities, including introducing partners into existing assets. The major developments are likely to be spread over a number of years so the proceeds from financing a completed project can be used to help finance the next one.

You have recently acquired a second centre in Spain. Why is Spain such an attractive market for you and why do you think you can replicate your strategy there?

Spain has very attractive market dynamics with an economy moving out of recession and a sophisticated consumer and retail market, but a retail sector where ownership of the regional shopping centre market remains highly fragmented and without a large committed pipeline of new centres. It is a country where we see major opportunities for us to broaden our presence and further strengthen our position in the market. We believe such expansion will be beneficial to our overall brand and digital positioning.

The country holds huge potential for the creation of genuinely regional destination centres in which we specialise. Eighty per cent of Spain's retail expenditure comes from 10 key catchments and we aim to be the leading owner, developer and manager of regionally pre-eminent shopping centre destinations for a significant number of those key areas.

The acquisition of Puerto Venecia in early 2015, after the successful acquisition of Parque Principado in 2013, substantially accelerates our activities in Spain.

We also have development options on sites in Malaga, Palma, Valencia and Vigo. It is our intention, subject to shareholder approval, to exercise the Malaga option in March 2015. We are advancing the other sites to the point where we can consider exercising the options.

You have had a year of negative like-for-like net rental income. What specific actions are you taking to address this and when can we expect to see a turnaround?

Over the last three years we have successfully repositioned the Group so that we are now well placed to benefit from the improved confidence of shoppers and retailers. Rather than chasing a target level of occupancy throughout this period, we have instead concentrated on being selective and ensuring that we have the right tenants in the right space. This means we have not compromised on the quality of the tenant mix and have maintained or improved the tone of the rents in our prime centres.

While our results still reflect a lingering impact from the administrations of late 2012 and early 2013, it is clear that this active asset management strategy is starting to pay off. For example, in the case of Republic, we took back all the units rather than let them at potentially lower rents to tenants who did not fit our desired retail mix. It took a year, but all of these units are now relet to top-quality brands, such as Hugo Boss, White Stuff, Superdry and Footasylum, at rents in line with the previous passing rent.

The remaining elements of the like-for-like net rental income shortfall in 2014 can be split into two areas. First, with our ongoing active management projects, in particular at intu Victoria Centre, we had to remove units from generating income while we reconfigured the centre to maximise rental potential on completion of the project. Secondly, there was a concentration of lease expiries at intu Braehead and intu Potteries this year. We repositioned key tenants, as we illustrated last year, and have now addressed the majority of the expiries but have operated with a higher vacancy level in these centres as a result.

Like-for-like net rental income is an important measure, but total property return, the combined income and capital return, encompasses everything we do and is the overall measure on which we focus. Over the past five years, our annualised total property return of 9.9 per cent per annum outperformed the IPD UK quarterly retail benchmark of 9.2 per cent.

intu is the only national shopping centre brand. What value does this bring and what evidence of success do you have two years after the brand was launched?

Intu is one of the UK's biggest retail landlords, and focused on providing a great experience for millions of UK shoppers with, according to our estimates, over half of the UK's population visiting an intu centre every year.

Our shoppers are at the heart of everything we do and providing them with compelling experiences also ensures that we establish enduring relationships with our retailers. Our brand enables us to offer scalability to retailers and the size of the Group also helps to support the brand. Our national brand enables us to deliver experiences and events for the customer that ownership of a single centre could not, such as the Everyone's Invited family-friendly weekend of events in all our centres which increased footfall for the weekend year-on-year by around 13 per cent.

Our staff offer an unparalleled service and our digital platform gives customers access to brands in our centres 24 hours a day. Our online presence is growing rapidly with nearly three million visits to intu.co.uk in December 2014, a year-on-year increase of almost 40 per cent. Our active marketing database is almost two million strong and in 2015 we will focus on developing opportunities for more regular engagement and, importantly, increased monetisation.

Our scale as owner of nearly half of the top 20 shopping centres in the UK means that we have a strong presence offering key entry points in the areas where retailers need to be. We recognise that we are competing with other attractions, not just shopping, for our customers' time and money and need to offer an attractive product on a national basis.

What are your strategic priorities for 2015?

Our focus in 2015 will be on four main goals which we believe will result in strong total returns over the medium term:

· optimising performance of existing assets with the delivery of like-for-like net rental income growth in 2015 and attractive total property returns

· driving forward the £1.3 billion investment programme in UK assets

· making the brand count and demonstrating the benefits of scale

· seizing the growth opportunity in Spain, building on the progress in the last three years

MARKET REVIEW

The investment market is the strongest it has been for some years and we are seeing an upturn in the occupier market, but we are constantly aware of the evolving demands of the retail market.

Investment market

The weight of money in the retail property market has remained strong and, with the increased availability of debt, has heightened demand and resulted in downward pressure on yields. The value of UK shopping centre investment transactions in 2014 was the highest for eight years and well above the long-term yearly average.

Shopping centre development is at low levels offering limited new supply. The majority of activity is focused on extensions and reconfigurations. The UK supply of new space in the year has declined by 75 per cent, from the peak in 2008, setting the stage for increased occupancy and robust rental growth.

Occupier market

The UK economy showed signs of continued improvement in 2014, with two full years of quarterly GDP growth and consumer confidence increasing through the year. This has been supported by an increase in the UK average household disposable income with the Asda benchmark index showing a rise of 9 per cent over the year. The economy is starting to see year-on-year wage growth outpacing inflation and a lower oil price, which should give consumers a greater level of disposable income going into 2015.

Consumer spending has also continued to increase with higher like-for-like non-food retail sales reported by the BRC throughout 2014, aggregating to 2.7 per cent for the year.

Retailer administrations in 2014 were at the lowest level since 2010, according to the Centre for Retail Research, with Phones 4U and La Senza being the largest. They both closed all stores and accounted for approximately 1 per cent of Intu's rent roll. Since the year end, two multibrand fashion retailers, Bank and USC, have entered administration, but continue to trade and account for approximately 1 per cent of the rent roll.

Changing face of UK retail

Online sales continue to grow, with the Office of National Statistics estimating that, on average, 11.2 per cent of sales were conducted online in 2014, an increase from 10.4 per cent in 2013. Retailers need to offer a multichannel approach with shoppers now expecting consistent pricing and service across the physical store and online.

The UK's most successful brands have generally developed a multichannel offer and understand the power of the physical store in their strategy. As well as a profitable location in its own right, the store can also function as a showroom for the product or a distribution location for their online sales. More and more, retailers note that online customers are opting to click and collect, allowing the retailer to minimise their distribution costs and enhance sales through further purchases once in store.

As well as established physical retailers reviewing their portfolios to have space in the best retail locations, several online retailers are now seeing the need for a physical presence to improve their sales and marketing, with the likes of Simply Be building up a store network in key locations. Retailers need fewer stores to cover the UK population than 20 years ago but increasingly need to focus on prime destinations.

Our focus has been to further enhance our centres as day-out family-friendly destinations offering unrivalled shopping, leisure and catering, supported by intu.co.uk and other digital and marketing opportunities. This has positioned us well to benefit from these changes.

Outlook

The retail sector has been changing at a rapid pace and change is likely to continue in 2015 as the UK economy continues to strengthen. The outlook for retail spending in 2015 is positive due to a combination of low inflation, reviving growth in earnings and resilience in the labour market, indicating that households' real disposable income should increase over the course of the year.

We are strongly positioned to take advantage of increased demand from retailers. The supply of new space is limited. In 2008, a record year, over 8 million sq. ft. of new shopping centre space was built in the UK. Levels fell with an all-time low in 2014 and even by 2019 the supply is only expected to have reached around 3 million sq. ft.

Across the sector we are expecting to see a focus in 2015 on improving the customer experience, with seamless multichannel engagement and an increasing sense of personalisation, showrooming and convenience. We believe that our active asset management and unique focus on creating the best possible customer experience will enable us to emerge as the leader of this trend among retail landlords.

We recognise that the influence of digital technology will continue to dominate tactical and strategic decision-making across the industry. At Intu, we see the rise of multichannel retail - online, in-store, click and collect - as an opportunity rather than a threat. We have always striven to be at the forefront of technological advances and 2015 will be no different as we begin to develop further ways to utilise data gathered from our digital network.

TOP PROPERTIES

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

** The Group completed the acquisition of Puerto Venecia on 19 January 2015.

FINANCIAL REVIEW

Presentation of information

Joint ventures

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 year and total equity are unaffected by these changes. Further details of the impact of adopting this accounting policy are given in note 32.

The new standard has a greater impact following the transactions in the year which created joint ventures in respect of intu Merry Hill, Parque Principado and intu Uxbridge. Further details of these transactions are given in notes 26 and 27.

Management both review and monitor 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 presented are consistent with this management approach. Note 32 and the Other information section give reconciliations between the two bases.

Rights issue

In April 2014 the Company issued 278.2 million shares by way of a rights issue. Further details are included in note 24. 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.

Overview

· Strong growth in property valuations has resulted in a substantial increase in the profit for the year. This valuation increase has not yet been reflected in net rental income as the Group holds units to facilitate future development plans and completes reletting units from 2013 administrations and lease expiries:

o underlying earnings of £162 million, up 15 per cent on 2013 reflecting the acquisitions in the year, with earnings per share of 13.3 pence, down 3 per cent on 2013, impacted by the reduction in like-for-like net rental income

o NAV per share at 379 pence; total financial return for the year of 14 per cent based on the bonus factor adjusted opening NAV per share of 346 pence and 17 per cent based on the pro forma opening NAV of 335 pence

· Financing metrics improved due to higher property valuations and refinancing activity:

o debt to assets ratio at 44.2 per cent (2013 - 48.5 per cent), below the Group's target maximum level of 50 per cent

o interest cover ratio at 1.82x (2013 - 1.71x), above the Group's target minimum level of 1.60x

o cash and available facilities increased to £671 million (2013 - £325 million)

· Major transactions:

o in May the Group completed the acquisition of intu Merry Hill, intu Derby and Sprucefield for £855 million. Exceptional costs related to the acquisition totalled £12 million. The acquisition contributed £27 million to the underlying earnings of the Group

o in June 2014 the Group sold 80 per cent of its interest in intu Uxbridge for consideration of £175 million, before expenses. The Group retains a 20 per cent interest which has been accounted for as a joint venture from 20 June 2014

o in December the Group exchanged contracts to acquire Puerto Venecia, Zaragoza with the acquisition completing in January 2015. The 31 December 2014 balance sheet includes the deposit paid of €22.5 million within restricted cash. The acquisition will be consolidated from the date of completion. See Strategic review for further details

RESULTS FOR THE YEAR

Income statement

1 Including Group share of joint ventures

2 Adjusted for the rights issue bonus factor

The Group recorded a profit for the year of £600 million, a substantial increase on the £364 million reported for the year ended 31 December 2013. This increase was primarily due to:

· an increase in the revaluation gain on property valuations to £648 million including the Group's share of joint ventures (2013 - £126 million)

· lower exceptional finance costs of £51 million (2013 - £158 million), largely due to the lower level of interest rate swap terminations in connection with debt refinancing

These positive factors were partially offset by:

· negative movement of £431 million in the change in fair value of the Group's financial instruments. 2014's results include a charge of £157 million including the Group's share of joint ventures whereas 2013 benefited from a £274 million credit

Underlying earnings increased by £22 million to £162 million with underlying earnings per share, which takes into account the shares issued to part-fund the acquisition of intu Merry Hill and intu Derby, decreasing by 3 per cent to 13.3 pence. Underlying earnings 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 earnings. The underlying profit statement is presented in full in the Other information section. To view Chart 4, which shows Intu's underlying earnings bridge 2013-2014, please paste the following link into the address bar of your browser: http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf

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

· net rental income increases due to acquisitions totalled £43 million reflecting the acquisitions of intu Merry Hill and intu Derby in 2014 and a full year contribution of intu Milton Keynes and Parque Principado acquired part way through 2013. This is offset by a £5 million reduction due to the sale of 80 per cent of intu Uxbridge

· like-for-like net rental income reduced by £11 million, 3.2 per cent (see Strategic review)

· underlying net finance costs increased by £3 million with the cost of debt drawn in the year to part-fund the acquisitions of intu Merry Hill and intu Derby partially offset by the favourable impact of lower interest rates following debt refinancings, in particular on the intu Metrocentre facility that was concluded at the end of 2013

· ongoing administration expenses increased by £3 million, largely due to costs related to 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 £3 million compared to 2013

As detailed in the table below, the Group's net rental income margin including share of joint ventures is in line with 2013 at 87 per cent with higher void costs offset by lower bad debts. Property operating expense in the year ended 31 December 2014 includes £11 million (2013 - £10 million) in respect of car park operating costs and the Group's contribution to shopping centre marketing of £8 million (2013 - £8 million). The Group's ratio of total costs to income, as calculated in accordance with EPRA guidelines, remains low at 19 per cent.

Balance sheet

The Group's net assets attributable to shareholders have increased by £1.0 billion to £4.5 billion at the end of 2014 due to equity raised in the year to fund the acquisition of the intu Merry Hill and intu Derby shopping centres and the retained profit for the year including the £648 million gain on the revaluation of the Group's properties.

As detailed in the table below, net assets (diluted, adjusted) have increased by £1,165 million from 31 December 2013 to £4,969 million as at 31 December 2014.

Investment and development property has increased by £1,338 million primarily due to the acquisition of intu Merry Hill, intu Derby and Sprucefield, valued at £866 million on acquisition, and the £648 million valuation gain in the year.

Investments of £228 million as at 31 December 2014 principally comprise the Group's interests in the US and India. The US investment of 11.4 million shares in a joint venture with Equity One, a listed US REIT, is valued at £185 million based on the 31 December 2014 Equity One share price. The India investment largely comprises a 32 per cent interest in Prozone, a shopping centre developer listed on the Indian stock market, included at £38 million on the Group's balance sheet at 31 December 2014.

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

Derivative financial instruments comprises the fair value of the Group's interest rate swaps. The net liability at 31 December 2014 is £347 million, an increase of £141 million in the year. This can be largely attributed to a movement in the interest rate yield curve. Cash payments in the year totalled £70 million, £44 million of which has been classified as an exceptional finance cost as it relates to the termination of swaps (£17 million) or payments in respect of unallocated swaps (£27 million). The balance of the payments has 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, entered into some years ago, which are unallocated as, due to a change in lenders' practice, they cannot be used for hedging the Group's borrowings. At 31 December 2014 these swaps have a market value liability of £242 million (2013 - £143 million). It is estimated the Group will be required to make cash payments on these swaps of £25 million in 2015 in line with the level of payments made in 2014. The balance sheet shows £73 million of these as current liabilities reflecting mutual options to break during 2015. Since the year end we have confirmed that no cash outflows will be required in respect of these breaks.

Non-controlling interests at 31 December 2014 relate to our partner's 40 per cent stake in intu Metrocentre and increased during the year due to its share of profit and additional investment in capital projects. The net reduction in the overall non-controlling interest balance reflects Parque Principado moving from being a subsidiary with a non-controlling interest to a joint venture. See note 27 for further details.

The Group is exposed to foreign exchange movements on its overseas investments in Spain, the US and India. The Group's policy is to ensure that the net exposure to foreign currency is less than 10 per cent of the Group's equity attributable to owners of the Company. At 31 December 2014 the exposure was 6 per cent, lower than at 31 December 2013, because during the year the Group's Parque Principado joint venture borrowed Euro denominated debt secured on the centre. The Group's acquisition of Puerto Venecia in January will increase the Group's exposure to around 8 per cent after the mitigating impact of Euro denominated debt drawn to fund the acquisition.

Adjusted net assets per share

As illustrated in Chart 5, diluted, adjusted net assets per share after the bonus factor adjustment were 346 pence at 31 December 2013. Taking into account the full impact of the rights issue, the pro forma opening position for 2014 was 335 pence per share. The increase from the pro forma figure to the 31 December 2014 value of 379 pence per share was driven by the property valuation gain of 50 pence per share. To view Chart 5, please paste the following link into the address bar of your browser: 

http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf

Cash flow and net external debt

During 2014 the Group has recorded an increase in cash of £61 million. Cash flow from operating activities of £56 million is £91 million better than 2013, primarily due to the lower level of exceptional swap termination costs compared to 2013.

Cash flow from investing activities reflects the cash outflows for the acquisition of intu Merry Hill, intu Derby and Sprucefield of £855 million, net of £175 million cash received on disposal of 80 per cent of intu Uxbridge.

Cash flow from financing activities includes an inflow of £492 million from the rights issue undertaken to part-fund the acquisitions in May and an inflow from net borrowings drawn of £314 million. This includes £424 million of facilities to part-fund the acquisitions in the year and the repayment of £146 million as part of the disposal of 80 per cent of the Group's interest in intu Uxbridge. Dividends paid in cash during the year were £90 million.

Net external debt (including Group's share of joint ventures) has increased by £265 million. Cash including the Group's share of joint ventures has increased by £94 million, which includes the Group's share of the proceeds from raising new finance on Parque Principado in August. Debt has increased by £290 million reflecting the key transactions above.

FINANCING

Debt structure 

A large proportion of the Group's debt has been refinanced in the last two years, as a result of which the Group has significantly diversified its sources of funding. The range of debt instruments now includes 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 the year there was a significant amount of financing activity, including:

· 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 nine years and an all-in cost of 4.6 per cent

· in April the Group's partnership with CPPIB signed a €95 million, five-year term loan secured on Parque Principado, Spain

· in May debt was raised to part-fund the acquisition of intu Merry Hill, intu Derby and Sprucefield. This involved three new two and a half year debt facilities secured on the intu Derby and Sprucefield properties and the equity interest in intu Merry Hill (£203 million, £30 million and £191 million respectively). The debt secured on intu Derby was refinanced later in 2014 (see below). 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 June the debt secured on intu Uxbridge of £146 million was repaid as part of the disposal process

· in August the facility in our St David's, Cardiff, joint venture was repaid and a new term loan of £120 million plus a revolving credit facility of £41 million was put in place, secured against the Group's interest in the joint venture

· in October the Group's revolving credit facility was extended from £375 million to £600 million bringing in a further two banks and extending the maturity to 2019 with the ability to extend this by a further two years. The margin has reduced by between 25 and 50 basis points. The combination of this and a lower commitment fee means that we expect to pay a lower all-in cost based on planned utilisation levels despite the larger facility size

· in November the debt on intu Derby and intu Chapelfield was refinanced and these assets were added into the Group's Secured Group Structure which issued £350 million 4.25 per cent bonds with maturity in 2030

Following the refinancing activity in the year, Chart 6 illustrates that there is a minimal refinancing requirement in 2015 and no major refinancing due in 2016. To view Chart 6, please paste the following URL into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf 

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

The debt to assets has reduced significantly from 2013 largely due to the property valuation gain in the year and remains below the Group's target maximum level of 50 per cent.

Interest cover of 1.82x has increased partly due to the favourable impact of lower interest rates following recent debt refinancing and remains above the Group's targeted minimum level of 1.60x.

The weighted average maturity has increased to 8.4 years with the benefit from the £350 million bonds issued in November, which mature in 2030, being partly offset by the shorter term debt related to the acquisition of intu Merry Hill.

The weighted average cost of gross debt has reduced to 4.7 per cent reflecting the lower rates achieved on refinancing activity in the year.

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 88 per cent within the Group's policy range of between 75 per cent and 100 per cent. The reduction is due to the impact of the floating rate debt secured against intu Merry Hill and Sprucefield which has not been hedged as it is short-term, partly offset by a lower level of borrowing against the Group's revolving credit facility.

Cash and available facilities have increased to £671 million at 31 December 2014. This comprises cash of £260 million in addition to undrawn facilities of £411 million. The increase on 2013 primarily reflects the increase in the Group's revolving credit facility from £375 million to £600 million.

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 covenants. Headroom over the minimum levels of LTV covenants has generally increased in the year reflecting the strong valuation increases.

Capital commitments

The Group has an aggregate cash commitment to capital projects of £81 million at 31 December 2014 (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 and major extensions that may become committed over the next five years (see Strategic review).

OTHER INFORMATION

Tax policy position

As a Real Estate Investment Trust (REIT), 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.

Intu does not employ tax avoidance strategies, or undertake transactions whose sole purpose is to abuse the tax system. 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. The Group 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 property tax and REIT legislation.

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 2014 the total of such payments to tax authorities was £26 million, of which £25 million was in the UK, £0.5 million in the US and £0.5 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 2014.

Dividends

The Directors are recommending a final dividend of 9.1 pence per share bringing the amount paid and payable in respect of 2014 to 13.7 pence, unchanged from 2013 as adjusted to reflect the 2014 rights issue (see note 11). A scrip dividend alternative will continue to be offered. Details of the apportionment between the PID and non-PID elements per share will be confirmed in due course.

Matthew Roberts

Chief Financial Officer

27 February 2015

KEY RISKS AND UNCERTAINTIES

Successful risk management underpins Intu's ability to achieve its strategic objectives

To view Chart 7, which shows Intu's business strategy, please paste the following URL into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/0235G_-2015-2-26.pdf

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 managing risks. Risk management is embedded in Intu's culture so that all employees play a part. This may be cleaners making sure that the centres are free of hazards or the construction team ensuring the right contractors are selected for developments.

Risks are considered in the day-to-day decisions made by the business and this assessment of risk is underpinned by a formal risk review process conducted by each centre, each department and the Executive team. These reviews identify risks and assess them for controllability and stability.

Risks are measured for impact and likelihood; gross risk being the worst case scenario if there were no controls in place; net risk being the risk as it stands today; and target risk being after any further planned risk reducing measures are implemented. An assessment is also made of how quickly the risks would impact the business. Impact and likelihood change as businesses and external factors evolve. Intu's ongoing risk management ensures that changes in impact and likelihood are identified and managed appropriately.

The key risks and uncertainties facing the Group are as set out in the table:

Statement of Directors' Responsibilities

The Group's Annual Report for the year ended 31 December 2014 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 financial and corporate governance information as provided on 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 27 February 2015

David Fischel

Chief Executive

Matthew Roberts

Chief Financial Officer

Consolidated income statementfor the year ended 31 December 2014

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 2014

Consolidated balance sheet

as at 31 December 2014