Final Results - Part 2

Hammerson PLC 5 March 2001 PART 2 Unaudited Consolidated Profit and Loss Account for the year ended 31 December 2000 2000 1999 Notes £m £m Net rental income 1 141.1 123.3 Administration expenses (15.7) (14.3) Operating profit 125.4 109.0 Exceptional items 2 17.2 21.3 Profit on ordinary activities before interest 142.6 130.3 Cost of finance (net) 3 (53.4) (35.8) Profit on ordinary activities before taxation 89.2 94.5 Taxation 4 (8.2) 0.1 Profit on ordinary activities after taxation 81.0 94.6 Equity minority interests (1.3) (6.1) Profit for the financial year 79.7 88.5 Dividends 5 (39.4) (38.4) Retained profit for the financial year 40.3 50.1 Earnings per share 6 28.0p 30.7p Diluted earnings per share 6 27.8p 30.2p Adjusted earnings per share 6 22.0p 21.6p All results derive from continuing operations. Unaudited Consolidated Balance Sheet as at 31 December 2000 2000 1999 Restated* Notes £m £m Fixed assets Land and buildings 7 3,337.8 2,688.5 Fixtures, fittings and equipment 0.8 0.6 Tangible assets 3,338.6 2,689.1 Investments 8 15.2 13.0 3,353.8 2,702.1 Current assets Debtors 9 71.0 94.7 Cash and short term deposits 10 150.4 146.2 221.4 240.9 Creditors falling due within one year Borrowings 11 (11.2) (28.9) Other 12 (146.7) (175.6) Net current assets 63.5 36.4 Total assets less current liabilities 3,417.3 2,738.5 Creditors falling due after more than one year 11 (1,428.7) (975.8) Borrowings, including convertible bonds 12 (18.3) (11.1) Other (33.0) (25.9) Equity minority interests 1,937.3 1,725.7 Capital and reserves Called up share capital 70.3 72.2 Share premium account 529.2 528.1 Revaluation reserve 939.6 748.8 Capital redemption reserve 2.0 - Other reserves 1.5 1.5 Profit and loss account 394.7 375.1 Equity shareholders' funds 1,937.3 1,725.7 Net asset value per share Diluted net asset value per share 6 689p 597p 6 667p 583p * Comparative figures have been restated as explained in note 18, 'Other Information'. Unaudited Statement of Total Recognised Gains and Losses for the year ended 31 December 2000 2000 1999 Restated* £m £m Profit for the financial year 79.7 88.5 Unrealised surplus on revaluation of properties 199.8 229.8 Taxation credit on realisation of previous years' - 13.3 revaluation gains 1.6 (10.8) Exchange translation movements Total recognised gains and losses for the year 281.1 320.8 Unaudited Note of Historical Cost Profits and Losses for the year ended 31 December 2000 2000 1999 £m £m Profit on ordinary activities before taxation 89.2 94.5 Realisation of previous years' revaluation gains 10.4 8.8 Historical cost profit on ordinary activities before 99.6 103.3 taxation Historical cost profit for the financial year after taxation, 50.7 72.2 Equity minority interests and dividends Unaudited Reconciliation of Movements in Shareholders' Funds for the year ended 31 December 2000 2000 1999 Restated* £m £m Retained profit for the financial year 40.3 50.1 Other recognised gains and losses 201.4 232.3 Purchase and cancellation of own shares (31.3) - Issue of shares 1.2 2.3 Net increase in shareholders' funds 211.6 284.7 Shareholders' funds at 1 January 1,725.7 1,441.0 Shareholders' funds at 31 December 1,937.3 1,725.7 * Comparative figures have been restated as explained in note 18, 'Other Information'. The unrealised surplus on revaluation of properties for 1999 was previously reported as £240.3m and has been reduced by £10.5m. Shareholders' funds at 1 January 2000 were previously reported as £1,693.9m and have been increased by £31.8m. Unaudited Consolidated Cash Flow Statement for the year ended 31 December 2000 2000 1999 Notes £m £m Net cash flow from operating activities 14 127.8 120.4 Returns on investment and servicing of finance 14 (59.0) (55.3) Corporation tax received/(paid) 21.9 (52.9) Capital expenditure 14 (369.6) (366.7) Acquisitions and disposals 14 (67.0) 400.1 Equity dividends paid (38.8) (49.0) Cash outflow (384.7) (3.4) Decrease in short term deposits 4.0 14.6 Net cash inflow/(outflow) from financing 15 388.1 (15.5) Increase/(Decrease) in cash in the year 7.4 (4.3) Unaudited Reconciliation of Net Cash Flow to Movement in Net Debt for the year ended 31 December 2000 2000 1999 £m £m Increase/(Decrease) in cash in the year 7.4 (4.3) (Increase)/Decrease in debt (418.4) 17.8 Decrease in short term deposits (4.0) (14.6) Change in net debt resulting from cash flows (415.0) (1.1) Adoption of secured bank debt on acquisition (10.6) - of subsidiary (5.4) 41.2 Exchange adjustment Movement in net debt in the year (431.0) 40.1 Net debt at 1 January (858.5) (898.6) Net debt at 31 December 16 (1,289.5) (858.5) Notes to the Accounts NET RENTAL INCOME Other 2000 1999 Gross rental Rents property Net Net income payable outgoings rental rental income income Rental income £m £m £m £m £m United Kingdom Retail: London & South of 39.1 0.3 4.4 34.4 25.9 England Midlands & North 19.4 0.8 2.7 15.9 13.4 of England 58.5 1.1 7.1 50.3 39.3 Office: City 32.8 5.7 1.1 26.0 28.3 West End 16.8 0.4 0.3 16.1 19.9 Docklands & other 8.7 1.4 0.9 6.4 7.2 58.3 7.5 2.3 48.5 55.4 Total United Kingdom 116.8 8.6 9.4 98.8 94.7 Continental Europe Retail: France 22.5 - 2.4 20.1 18.8 Germany 14.6 0.3 3.4 10.9 7.9 37.1 0.3 5.8 31.0 26.7 Office: France 12.0 - 0.7 11.3 1.9 Total Continental 49.1 0.3 6.5 42.3 28.6 Europe Group Retail 95.6 1.4 12.9 81.3 66.0 Office 70.3 7.5 3.0 59.8 57.3 Total 165.9 8.9 15.9 141.1 123.3 Net rental income of £123.3m for the year ended 31 December 1999 was equivalent to £123.6m, translated at 31 December 2000 exchange rates. Included in net rental income for 2000 is £6.1m (1999: £4.7m) in respect of accrued rent receivable allocated to rent free periods. 2 EXCEPTIONAL ITEMS 2000 1999 £m £m Profit on the sale of investment properties 17.2 18.0 Profit on the sale of Canadian operations - 3.3 17.2 21.3 Included in profit on the sale of investment properties in 2000 is £4.0m received in settlement of a legal claim against a former tenant of a US property which was sold in 1995. Included in profit on the sale of investment properties in 1999 is £11.3m relating to the sale of Holborn Links Limited which was after a deduction for a premium of £3.7m on redeeming a mortgage. Notes to the Accounts 3 COST OF FINANCE (NET) 2000 1999 £m £m Interest payable on: Bank loans and overdrafts 18.5 7.8 Other loans 71.6 55.2 Interest payable and similar charges 90.1 63.0 Less: Interest payable capitalised 21.0 19.0 Interest receivable 15.7 8.2 53.4 35.8 The net cost of finance of £35.8m for the year ended 31 December 1999 was equivalent to £35.2m, translated at 31 December 2000 exchange rates. 4 TAXATION 2000 1999 £m £m United Kingdom corporation tax at 30% (1999: 30.25%) 23.2 10.5 Advance corporation tax ('ACT') written back (15.3) (4.3) Overseas tax 0.3 2.8 8.2 9.0 Tax credit on disposals - (9.1) Tax charge/(credit) on profit on ordinary activities 8.2 (0.1) Tax credit on realisation of previous years' revaluation - (13.3) gains United Kingdom corporation tax includes £23.1m (1999: £5.6m), and ACT written back includes £15.3m (1999: £3.2m), which relate to previous years. Tax payable for prior years has been increased and tax relief carried forward to reduce the 2000 corporation tax charge. This has allowed surplus ACT previously written off to be used in previous years. The tax charge also benefits from allowances for capital expenditure. 5 DIVIDENDS 2000 1999 £m £m Interim 4.40p (1999: 4.19p) per share 12.5 12.1 Final proposed 9.60p (1999: 9.11p) per share 26.9 26.3 39.4 38.4 The directors have declared a final dividend of 9.60p per share payable on 24 May 2001 to shareholders on the register at the close of business on 16 March 2001. Notes to the Accounts 6 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the Hammerson Deferred Share Plan (note 8) which are treated as cancelled. Net asset value per share is calculated from the value of equity shareholders' funds at 31 December 2000 of £1,937.3m (1999: £1,725.7m) and the number of shares in issue at that date of 280.7m (1999: 288.9m), again excluding shares held under the Hammerson Deferred Share Plan. Earnings per 2000 1999 share Weighted Weighted average average number of number Earnings shares Pence Earnings of shares Pence £m million per £m million per share share Basic 79.7 284.5 28.0 88.5 288.7 30.7 Adjustments: Dilutive - 0.2 n/a - 0.3 n/a share options 6.5 25.2 n/a 6.5 25.2 n/a Convertible bonds Diluted 86.2 309.9 27.8 95.0 314.2 30.2 Adjusted earnings per share 2000 1999 £m £m Profit for the financial year 79.7 88.5 Adjustments: Exceptional items (17.2) (21.3) Tax on property disposals - (9.1) Minority interest in exceptional items - 4.1 Adjusted profit for the financial year 62.5 62.2 Weighted average number of shares (million) 284.5 288.7 Adjusted earnings per share (pence) 22.0 21.6 Net asset value per share Net asset Shareholders' value per funds Shares share £m million pence Basic 1,937.3 281.1 689 Company's own shares held for n/a (0.4) n/a Deferred Share Plan Unexercised share options 11.3 2.8 n/a Unexercised convertible bonds 110.0 25.2 n/a Diluted 2,058.6 308.7 667 Notes to the Accounts 7 LAND AND BUILDINGS Book value Cost 2000 1999 2000 1999 Restated* £m £m £m £m Investment Properties Fully developed properties 3,040.0 2,288.6 2,175.8 1,568.9 Properties held for or in the 297.8 399.9 214.5 368.1 course of development 3,337.8 2,688.5 2,390.3 1,937.0 * Comparative figures have been restated as explained in note 18, 'Other Information'. Investment properties are stated at market value as at 31 December 2000, valued by professionally qualified external valuers. With the exception of the properties shown below they have been valued by Jones Lang LaSalle, Chartered Surveyors. In the United Kingdom the valuation was performed jointly with Donaldsons, Chartered Surveyors. The group's interests in The Birmingham Alliance properties were valued by DTZ Debenham Tie Lueng, Chartered Surveyors and the group's interests in The Oracle Shopping Centre were valued by Donaldsons. The valuations have been prepared in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The total amount of interest included in the cost of development properties at 31 December 2000 was £6.6m (1999: £13.2m). Should the group's properties be sold at their book value, a tax liability of approximately £151m (1999: £113m) would arise. No provision for this contingent liability has been made as it is not expected that any liability will arise in the foreseeable future. Long Short Freeholds leaseholds leaseholds Total £m £m £m £m Movements in the year Balance at 1 January 2000 1,263.4 1,417.1 8.0 2,688.5 (restated*) 7.4 0.4 - 7.8 Exchange adjustment 311.2 163.3 0.3 474.8 Additions at cost (22.8) (33.5) - (56.3) Disposals at valuation 5.6 15.4 - 21.0 Development outgoings 74.2 126.6 1.2 202.0 capitalised Revaluation surplus Balance at 31 December 1,639.0 1,689.3 9.5 3,337.8 2000 *The balances at 1 January 2000 have been restated to include development properties at market value. The previously reported amounts were £1,248.8m and £1,399.9m for freehold and long leasehold properties respectively. Notes to the Accounts LAND AND BUILDINGS (CONTINUED) Certain property and corporate interests have been accounted for as joint arrangements. These are set out in the following table: Group share % Partner(s) Investment portfolio B5 Designer Outlet Center 50 Morrison GmbH, Demex Systembau GmbH Brent Cross Shopping Centre 41.2 The Standard Life Assurance Company Essen Shopping Center BV 22 Algemeen Burgerlijk Pensioenfonds The Martineau Galleries 33.33 Henderson Investors Ltd, Limited Partnership Land Securities PLC The Oracle Limited 50 Akaria Investments Limited Partnership West Quay Shopping Centre 50 Barclays Bank plc Limited Development portfolio The Bull Ring Limited 33.33 Henderson Investors Ltd, Partnership Land Securities PLC The London Wall Limited 50 Kajima London Wall Limited Partnership The Martineau Limited 33.33 Henderson Investors Ltd, Partnership Land Securities PLC Spitalfields Development 66.66 Balfour Beatty Property Group Investments Limited 2000 1999 £m £m Capital commitments 235.1 170.5 8 INVESTMENTS 2000 1999 £m £m Value Retail Investors Limited Partnership 13.8 13.0 Ordinary shares of Hammerson plc (Deferred Share Plan) 1.4 - 15.2 13.0 The group has a 57.2% interest in Value Retail Investors Limited Partnership which has an interest in a designer outlet centre in Bicester, United Kingdom. The interest was acquired during 1999 at a cost of £11.3m. The investment is included at its market value at 31 December 2000 of £13.8m, the property element of which has been reviewed by Donaldsons, Chartered Surveyors. The Company's own shares were acquired by the trustees of the Hammerson Deferred Share Plan at a cost of £1.7m (nominal value £0.1m) and may be awarded to participants in accordance with the terms of the Plan. The cost of the shares is being amortised over the anticipated vesting period, taking account of the group's financial performance. Notes to the Accounts 9 DEBTORS 2000 1999 £m £m Due within one year Trade debtors 20.4 20.9 Other debtors 38.6 34.7 Corporation tax 7.3 37.8 Prepayments 4.7 1.3 71.0 94.7 10 CASH AND SHORT TERM DEPOSITS 2000 1999 £m £m Cash at bank 19.5 12.1 Short term deposits 130.9 134.1 150.4 146.2 Analysis by currency Sterling 144.2 69.9 Euro currencies 6.2 76.3 150.4 146.2 At 31 December 2000 short term deposits mainly comprised deposits placed on money markets with rates linked to LIBOR for maturities of not more than 1 month, at an average interest rate of 5.1% (1999: 5.3%). Notes to the Accounts 11 BORROWINGS 2000 1999 £m £m Unsecured £200 million 7.25% Sterling bonds due 2028 197.2 197.1 £200 million 6.875% Sterling bonds due 2020 198.6 - £200 million 10.75% Sterling bonds due 2013 194.2 193.9 euro300 million 5% Euro bonds due 2007 186.6 184.3 £110 million 6.5% Sterling convertible bonds due 2006 108.2 107.9 £86.4 million 7.875% Sterling bonds due 2003 85.0 84.6 Bank loans and overdrafts 459.4 238.1 1,429.2 1005.9 Exchange difference on currency swaps (26.4) (27.5) 1,402.8 978.4 Secured Deutschemark mortgages 5.24%-6.95% due between 2001 34.8 24.0 and 2023 2.3 2.3 Deutschemark other loans 3.749%-7.25% due between 2011 and 2019 37.1 26.3 1,439.9 1,004.7 The group's borrowings at 31 December 1999 of £1,004.7m were equivalent to £1,010.9m translated at 31 December 2000 exchange rates. Security for secured borrowings as at 31 December 2000 is provided by charges on property. In June 1996, the Company issued £110m 6.5% convertible bonds. These bonds are convertible, at the option of the holder, into fully paid ordinary shares of 25 pence each at a price of 435.6 pence per share at any time up to 5 June 2006. If the conversion rights attaching to the bonds outstanding at 31 December 2000 were exercised, up to 25,246,786 ordinary shares would be issued. The Company has the right to redeem the bonds in whole or in part at any time after 26 June 2001. Unless previously redeemed or converted, the bonds will be redeemed at par on 12 June 2006. Maturity Bank loans Other 2000 1999 and overdrafts loans Total Total £m £m £m £m After 5 years - 908.0 908.0 679.7 From 2-5 years 445.3 68.7 514.0 295.6 From 1-2 years (0.2) 6.9 6.7 0.5 Due after more than 1 year 445.1 983.6 1,428.7 975.8 Due within 1 year 14.3 (3.1) 11.2 28.9 459.4 980.5 1,439.9 1,004.7 At 31 December 2000 loans repayable by instalments due after five years totalled £1.6m (1999: £8.0m). Notes to the Accounts 11 BORROWINGS (CONTINUED) Undrawn committed facilities 2000 1999 £m £m Expiring in one year or less - 2.1 Expiring between one and two years - - Expiring after more than two years 65.2 228.7 65.2 230.8 Interest 31 December 2000 rate and currency profile Fixed rate borrowings Floating rate Total borrowings % Years £m £m £m Sterling 8.28 20 607.7 42.8 650.5 Euro 4.81 2 480.3 309.1 789.4 currencies 6.75 12 1,088.0 351.9 1,439.9 Interest rate 31 December 1999 and currency profile Fixed rate borrowings Floating rate Total borrowings % Years £m £m £m Sterling 8.34 21 415.3 33.9 449.2 Euro currencies 6.26 2 336.7 218.8 555.5 6.68 12 752.0 252.7 1,004.7 Floating rate borrowings bear interest based on LIBOR, with the exception of certain Euro currency borrowings whose interest costs are linked to EURIBOR. The above analysis reflects the effect of currency and interest rate swap agreements in place at 31 December 2000. Sterling borrowings of £134m were covered by currency swap agreements, expiring between 2001 and 2003, converting £63m into variable rate foreign currency borrowings and £71m into fixed rate foreign currency borrowings. Rates at which interest is charged on borrowings due 2000 1999 after one year £m £m Up to 7% 696.5 486.1 7% to 10% 205.2 201.7 Over 10% 200.6 59.6 1,102.3 747.4 Variable rates 326.4 228.4 1,428.7 975.8 Notes to the Accounts 12 CREDITORS - OTHER 2000 1999 £m £m Falling due within one year Trade creditors 39.5 32.8 Taxation 6.1 5.9 Other creditors 63.8 72.6 Accruals 10.4 38.0 Dividends payable 26.9 26.3 146.7 175.6 Falling due after more than one year Other creditors 18.3 11.1 13 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 31 December 2000 31 December 1999 Book value Fair value Book value Fair value £m £m £m £m Financial Assets Cash at bank 19.5 19.5 12.1 12.1 Short term 130.9 130.9 134.1 134.1 deposits 150.4 150.4 146.2 146.2 Financial Liabilities Overdrafts and (13.1) (13.1) (30.6) (30.6) short term (1,359.1) (1,404.0) (908.5) (973.3) borrowings (110.0) (121.3) (110.0) (107.6) Gross long term 15.9 15.9 16.9 16.9 borrowings - (10.7) - (14.7) Gross 26.4 29.4 27.5 26.7 convertible bonds Unamortised borrowing costs Interest rate swaps Currency swaps (1,439.9) (1,503.8) (1,004.7) (1,082.6) The fair values of long term borrowings and the group's convertible bonds have been estimated on the basis of quoted market prices. The fair values of long term other creditors approximate to their book values. The fair value of the group's outstanding interest rate and foreign currency swaps has been estimated by calculating the present value of future cash flows, using appropriate market discount rates. The adjustment on interest rate swaps of £10.7m includes £0.1m relating to swaps maturing during 2001. Short term debtors and creditors have been excluded from these disclosures as permitted by Financial Reporting Standard 13. Notes to the Accounts 14 ANALYSIS OF CASH FLOWS 2000 1999 £m £m Reconciliation of operating profit to net cash inflow from operating activities Operating profit 125.4 109.0 Depreciation and amortisation 0.5 0.4 Increase in accrued rents receivable (6.1) (4.7) (Increase)/Decrease in debtors (4.0) 12.6 Increase in creditors 12.0 3.1 127.8 120.4 Returns on investment and servicing of finance Interest received 15.5 8.6 Interest paid (74.0) (54.2) Dividends paid to minorities (0.5) (9.7) (59.0) (55.3) Capital expenditure Purchase and development of property (444.4) (477.5) Sale of property 74.8 110.8 (369.6) (366.7) Acquisitions and disposals Disposal of subsidiary companies (0.2) 400.1 Purchase of subsidiary company (67.6) - Cash acquired with subsidiary company 0.8 - (67.0) 400.1 15 ANALYSIS OF CASH FLOW FROM FINANCING 2000 1999 £m £m Issue of bonds 198.6 193.7 Issue of shares 1.0 2.3 Purchase of own shares for cancellation (31.3) - Increase/(Decrease) in medium and long term borrowings 248.4 (213.0) (Decrease)/Increase in short term borrowings (28.6) 1.5 Net cash inflow/(outflow) from financing 388.1 (15.5) Notes to the Accounts 16 ANALYSIS OF MOVEMENT IN NET DEBT Borrowings Borrowings Short term Cash at due within due after deposits bank one year one year Net debt £m £m £m £m £m Balance 1 134.1 12.1 (28.9) (975.8) (858.5) January 2000 Adoption of - - (10.6) - (10.6) secured bank debt Cash flow (4.0) 7.4 28.6 (447.0) (415.0) Exchange 0.8 - (0.3) (5.9) (5.4) Balance 31 130.9 19.5 (11.2) (1,428.7) (1,289.5) December 2000 17 FINANCIAL STATEMENTS The consolidated profit and loss account and balance sheet set out above are not statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2000 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information for the year ended 31 December 1999 is derived from the statutory accounts for that year which have been reported on by the Company's auditors and delivered to the Registrar of Companies. The audit report on the 31 December 1999 financial statements was unqualified and did not contain a statement under Section 237(2) or Section 237(3) of the Companies Act 1985. OTHER INFORMATION The accounting policy for the valuation of properties has been changed. Previously, development properties were included in the balance sheet at cost. Under the revised policy, they are included at market value. Comparative figures have been restated in accordance with the revised policy, the effect of which is to increase land and buildings and shareholders' funds by £83.3m at 31 December 2000 and £38.1m at 31 December 1999. The group has adopted Financial Reporting Standard ('FRS') No.15, 'Tangible Fixed Assets' with effect from 1 January 2000. Comparative figures have not been restated as any adjustment is not material to the financial statements. Previously, the group capitalised the interest cost attributable to each development property until the property was substantially let and income producing or until income exceeded outgoings. Under the revised policy, interest will be capitalised only until a property is ready for its intended use. Where the development is substantially let at completion this change is unlikely to have a material effect on the financial statements. However, for developments that are not let at completion, the group will now charge the costs of unlet space against its profit for the year. Subject to the change in accounting policy on valuation of properties and the adoption of FRS 15, both referred to above, the unaudited financial information in this report has been prepared on the basis of accounting policies set out in the full accounts for the year ended 31 December 1999. 19 NOTICE OF MEETING The Annual General Meeting will be held at 10.30 am on Thursday, 10 May 2001 at 100 Park Lane, London W1K 7AR.

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