Final Results - Year Ended 31 Dec 1999, Part 1

Hammerson PLC 6 March 2000 PART ONE HAMMERSON plc- RESULTS FOR YEAR ENDED 31 DECEMBER 1999 - AND ACQUISITION IN PARIS Results Percentage changes - Net asset value per share 586 pence (1998: 485 pence) +20.8% Diluted net asset value per share 573 pence (1998: 481 pence) +19.1% - Net rental income £123.3 million (1998: £127.9 million) -3.6% - Profit before taxation (FRS 3 basis) £94.5 million (1998: £88.9 million) +6.3% Adjusted profit before taxation* £73.2 million (1998: £68.8 million) +6.4% - Earnings per share (FRS 3 basis) 30.7 pence (1998: 23.1 pence) +32.9% Adjusted earnings per share* 21.6 pence (1998: 21.1 pence) +2.4% - Recommended final dividend of 9.11 pence (1998: 8.68 pence) making a total for the year of 13.3 pence, an underlying increase of5.0% - Gearing 51% (1998: 64%) * Excluding exceptional items Acquisition in Paris - Hammerson has exchanged contracts to acquire Les Trois Quartiers, 21 boulevard de la Madeleine, Paris 1er for £122 million. Built in 1991, the 28,500 sq m mixed use retail and office property occupies a prime location in central Paris. Ronald Spinney, Chairman, said: 'I am very pleased to report on a particularly strong performance from the group's portfolio, the successful completion of two major development projects, the acquisition of several properties offering excellent growth potential and a number of disposals. The group entered 2000 with a high quality investment portfolio offering good growth prospects. In addition it has an exciting development programme. The successful completion of several major developments in the last few years is evidence of Hammerson's expertise in this area and the current programme provides considerable potential. The outlook for the markets in which Hammerson operates remains healthy and I am confident that the momentum achieved in recent years will be maintained in 2000.' For further information: John Richards Tel: 020 7887 1000 Chief Executive Fax: 020 7887 1010 Simon Melliss Group Finance Director Christopher Smith Director of Corporate Affairs Copies of the preliminary results statement, profit & loss account, balance sheet and cash flow statement are attached. CHAIRMAN'S STATEMENT Results and Dividend In this my first statement to you since becoming Chairman, I am very pleased to report on a particularly strong performance from the group's portfolio, the successful completion of two major development projects, the acquisition of several properties offering excellent growth potential and a number of disposals. Adjusted profit before taxation increased by 6.4% to £73.2 million, whilst adjusted earnings per share increased by 2.4% to 21.6 pence. There was an underlying increase of 9.1% in the value of the group's investment portfolio and this, coupled with development surpluses, was the principal reason for an increase of 92 pence, or 19.1%, in diluted net asset value per share to 573 pence. The directors are recommending a final dividend of 9.11 pence, compared with 8.68 pence last year. This makes a total dividend for the year of 13.3 pence and represents an effective increase of 5.0%, as last year's interim dividend included 0.14 pence to allow for its deferral until April 1999. Portfolio and Balance Sheet At 31 December 1999, Hammerson's portfolio had a book value of £2,657 million, compared with £2,163 million at the end of 1998. Properties in the UK accounted for 73% of the total and the French and German portfolios for 21% and 6% respectively. Retail properties represented 59% of the portfolio and offices the balance. Gearing at the year end was 51%, compared with 64% at the end of 1998 (or 41% after taking into account the proceeds from the sale of the Canadian business which were received in January 1999) and the group had cash and undrawn committed borrowing facilities of some £377 million. Hammerson's financial position remains strong and it has the resources both to complete the existing development programme and make further investments. Since the year end, Hammerson has completed the purchase of Forum Steglitz, a major shopping centre in a prime retail location in Berlin, for £80 million and exchanged contracts to buy a mixed use retail and office property, Les Trois Quartiers, in central Paris for £122 million. Markets and Outlook The competitive pressures facing many retailers have been well publicised. Nevertheless, retailers recognise the attractions of well managed shopping centres which give consumers a wide choice and which dominate their catchment areas. Hammerson's retail portfolio is weighted towards this category of property. In the UK, rents for prime shopping centres increased in 1999 and have continued to do so since the year end. Investment demand remains buoyant. In France, retail rents rose strongly in 1999 and the outlook is for continued growth in both rents and values. In Germany, an increase in demand in some prime retail areas is now apparent. The outlook is improving in line with better economic forecasts and in the context of a relatively limited supply of large retail units. Investor interest in shopping centres remains strong, particularly from domestic institutions. Demand for office accommodation in central London remained healthy with take up maintained at the high level seen in the previous two years. In the City there was a modest increase in prime rents, whilst in the West End and Docklands rents continued to advance strongly. Since the year end, there has been a noticeable increase in demand for good quality accommodation in central London, which together with a limited supply of new space, should lead to further rises in rental values. Investment demand for prime UK offices remains healthy. Prospects are also good for prime modern office space in central Paris, where take up in 1999 was very strong. Investment demand for such properties is at a record level and the outlook remains encouraging. Direct property is performing well in all our markets. I am confident that we can manage Hammerson's business in a way which will continue to generate attractive returns on shareholders' equity and produce real growth in the value of the business. At present, the UK publicly-quoted property sector is amongst those out of favour with investors. Nevertheless, over time, I believe that Hammerson's enhanced performance will be reflected in its share price. Board Changes and Management Geoffrey Maitland Smith, who was appointed a non-executive director in 1990 and Chairman in 1993, retired from the Board on 30 September 1999. Under his Chairmanship, Hammerson has been transformed into the successful company it is today and I would like to thank him for his major contribution. John Richards succeeded me as Chief Executive on 1 October 1999. John joined Hammerson in 1981 and was appointed to the Board in 1990. He has considerable experience of all aspects of Hammerson's business. Two other Board appointments also came into effect on 1 October. Peter Cole and Gerard Devaux, who each have over ten years experience with the group, became Development Director and Managing Director for continental Europe respectively. I am very pleased that Graham Pimlott, a non-executive director since 1993, was appointed non-executive Deputy Chairman on 1 January 2000. With the new Board structure and strong management teams in place throughout the group, I am confident that Hammerson has the skills necessary both to realise the potential in the existing portfolio and secure new opportunities. Conclusion Hammerson is a focused business which operates in two sectors - shopping centres and offices - in the UK, France and Germany. The group entered 2000 with a high quality investment portfolio offering good growth prospects. In addition it has an exciting development programme. The successful completion of several major developments in the last few years is evidence of Hammerson's expertise in this area and the current programme provides considerable potential. The outlook for the markets in which Hammerson operates remains healthy and I am confident that the momentum achieved in recent years will be maintained in 2000. Ronald Spinney Chairman 6 March 2000 CHIEF EXECUTIVE'S REVIEW Becoming Hammerson's Chief Executive is an exciting challenge. It has been a privilege to work with Ron Spinney in reshaping Hammerson's business over the last few years. The strategy, on which the substantial improvement in Hammerson's recent performance has been based, remains unchanged. Objectives and Strategy Our objective is to achieve good income and capital growth with a strategy of focusing on high quality shopping centres and offices in a small number of major European markets where we have considerable expertise. The principles that Hammerson will continue to follow, which should deliver strong performance in the years ahead, are fourfold. - To monitor the performance of all properties in the portfolio against clear financial targets. As part of this process, research is used extensively to monitor markets and anticipate future trends, both in rents and values. This enables us to make appropriate decisions regarding the overall portfolio structure, acquisitions and disposals. - To deliver attractive income and capital returns from the portfolio by creative management of each individual property and by carrying out programmes of improvements, where appropriate, to ensure that properties continue to meet the specification and requirements of occupiers. - To create high quality properties through development, thereby generating valuation surpluses and increasing rental income. Development usually carries higher risks than investment in income-producing properties. We evaluate and control these risks by rigorous management and by phasing the programme. - To ensure that Hammerson has the financial resources to meet its commitments and the flexibility to pursue attractive new opportunities, whilst optimising its cost of capital. Progress in 1999 Our success in each of these areas is demonstrable. The total returns from our portfolio in 1999 were 17.5%. We invested £362 million in acquiring new assets and received £511 million from disposals, of which £320 million related to the sale of Hammerson Canada. We continued to invest in the existing portfolio and programmes of improvements or refurbishment were initiated at several of the group's properties. Excellent progress was also made with the development programme on which capital expenditure totalled £159 million in 1999. Two major projects were completed, The Oracle, a 65,000 sq m regional shopping centre in Reading and 40 rue de Courcelles, Paris 8eme, a 17,700 sq m prime office building. The development surpluses relating to these two schemes amounted to some £69 million, an uplift of 45% on our costs, and both now produce high quality rental income. During 1999, the group raised Euro 300 million through an eight year unsecured bond issue at an interest rate of 5.0% per annum, evidence of the group's strong financial position and its continuing ability to raise finance on attractive terms. A Changing Environment Hammerson operates in a rapidly changing environment which is being influenced by new technologies and this has implications for the way in which our customers do business and their evolving requirements for property. The development of e-commerce is receiving a high profile, although as yet, its impact on traditional forms of retailing has been limited. Indeed, it is apparent that many retailers, whilst planning to use the internet, recognise the importance of a physical shop presence to support their brands. We continue to see a good future for those centres which provide the consumer with a wide range of retailers, as part of an attractive shopping and leisure experience. We are taking advantage of the opportunities presented by new technologies to enhance the services we provide to our customers and tenants. We are incorporating information systems that support our occupiers and assist them to run their businesses more effectively. At the same time, we are providing shoppers with a broader range of services that make a visit to a Hammerson centre more enjoyable . We shall continue to work closely with all our occupiers to understand their requirements and provide them with a service of the highest quality. Achieving Our Objectives The achievement of our objectives requires a rigorous approach to risk management in all areas of our business. Hammerson has a clear and formalised approach to risk management under which the Board receives regular reports and presentations on all key aspects of the group's operations and activities. We have set ourselves demanding business objectives. To achieve them it is vital that we continue to attract and retain skilled people. The repositioning of Hammerson's portfolio over the past few years, the successful completion of several major developments and the forging of strong business links with our partners, demonstrate the expertise of the current team. We shall continue to give all our staff every opportunity to enhance their skills and provide them with the framework within which they can maximise their contributions to the business. This, I believe, will be vital to Hammerson's continuing success. John Richards Chief Executive 6 March 2000 FINANCIAL REVIEW Operating Results - Net rental income for the year was £123.3 million compared with £127.9 million in 1998. On a like-for-like basis rental income grew by 7.0%. Net rental income 1999 1998 £m £m Properties owned throughout 80.9 75.6 Properties acquired in 1998 and 1999 25.3 5.5 Properties sold in 1998 and 1999 9.6 40.2 Development properties 7.5 5.2 Exchange translation - 1.4 Total 123.3 127.9 - In the UK, net rental income increased by £14.7 million to £94.7 million. This was due to acquisitions, rental growth at the shopping centres, the first contribution from Globe House, London WC2, and the end of rent free periods at 99 Bishopsgate, London EC2. - In France, net rental income was unchanged at £20.7 million, but at constant exchange rates, it rose by £2.5 million. There was an increase of £5.4 million at the shopping centres, including the first full year of ownership of Italie 2, Paris 13eme and Place des Halles, Strasbourg. This was offset by a reduction of £2.9 million due to office disposals. - In Germany, net rental income increased by £1.2 million, or £2.0 million at constant exchange rates. This was due to the acquisition in late 1998 of the Luisen Center, Darmstadt, which more than offset the impact of the disposal of Saar Galerie, Saarbruecken. - Administration costs fell by £2.0 million to £14.3 million in 1999, mainly because of the disposal of Hammerson Canada and the consequent saving of the Canadian office costs. - Net interest was £7.0 million lower than in 1998 at £35.8 million. The average cost of borrowing in 1999 was 6.7%, compared with 7.1% the previous year. Interest capitalised increased by £7.2 million to £19.0 million in 1999 reflecting expenditure on the development programme. - Profit before tax in 1999 included a gain of £21.3 million arising on property disposals. The profit on the disposal of Holborn Links Limited amounted to £11.3 million after deducting a premium of £3.7 million which arose on the early redemption of a mortgage. - The taxation credit of £0.1 million is comprised of two elements: first, the tax charge on profits before exceptional items of £9.0 million, an effective rate of 12.3% that reflects the benefit of using surplus advance corporation tax ('ACT') previously written off; second, an exceptional credit of £9.1 million relating to the recovery of Canadian taxation. Earnings per share - Earnings per share for 1999 were 30.7 pence. After excluding profits from investment property disposals, the Canadian tax recovery and adjusting for the minority share of the profit on disposal of Holborn Links, adjusted earnings per share were 21.6 pence, an increase of 2.4% on the previous year. Dividend per share - The proposed final dividend of 9.11 pence per share, together with the interim dividend of 4.19 pence per share, makes a total for the year of 13.3 pence per share. This represents an underlying increase of 5.0% as last year's interim dividend included 0.14 pence per share to allow for its deferral until April 1999. Diluted net asset value per share - Diluted net asset value per share rose to 573 pence at 31 December 1999, an increase of 19.1% from 481 pence at the end of the previous year. - The increase in diluted net asset value in the second half of 1999 was 10.4%, when compared with 519 pence at 30 June 1999. - Developments in progress are included in the balance sheet at cost. Unrecognised surpluses on developments in progress amounted to 10 pence per share at the year end, compared with 15 pence per share at the end of 1998. Surpluses above cost equivalent to 22 pence per share were achieved on the developments completed during 1999. Return on shareholders' equity - The return on shareholders' equity for 1999 amounted to 23.7% compared with 13.4% achieved in 1998. The return on shareholders' equity for 1999 includes the development surpluses arising on completion of The Oracle, Reading and 40 rue de Courcelles, Paris 8eme , which together contributed 5.0% of the overall return. Balance Sheet - At the year-end, the book value of the property portfolio amounted to £2,657 million, of which £368 million represented properties held for or in the course of development. The increase in the year was £494 million and comprised valuation surpluses of £240 million, additions of £537 million, partly offset by property disposals of £205 million, and a reduction of £78 million due to foreign exchange translation movements. Included within capital expenditure is £64 million for the acquisitions of 51/53 Quai d'Orsay and 8/12 rue Surcouf, Paris 7eme, of which £58 million will become payable when the vendor vacates the property in late 2000. - Properties held for or in the course of development, are included in the balance sheet at a cost of £368 million and were valued at the year end at £400 million. The group does not intend to dispose of any of its developments and management believes that, in current market conditions, the future surpluses from these projects should be substantially in excess of £32 million. Retail Offices Total Investment Development Investment Development Properties properties £m £m £m £m £m UK 849 173 861 63 1,946 France 327 60 109 64 560 Germany 143 8 - - 151 Total 1,319 241 970 127 2,657 Cash flow - During the year, capital expenditure totalled £478 million. Property acquisitions represented £304 million, expenditure on developments £159 million, and refurbishment and other works on the investment portfolio a further £15 million. - The disposal of Hammerson Canada Inc. raised total net proceeds of £320 million. A further six properties were sold in 1999 realising proceeds of £191 million. Amongst these was the Holborn Links Estate in central London, in which Hammerson held a 65.22% interest, which was sold in September 1999 realising £81 million. - Hammerson's operating cash flow for the year was £120 million. Tax payments in 1999 of £53 million included £31 million in respect of the disposal of the Canadian business. Cash and borrowings - At 31 December 1999, the group's borrowings amounted to £1,005 million. Hammerson had cash balances of £146 million and undrawn committed facilities of £231 million. Capital commitments at the year-end were £171 million. - In June 1999 Hammerson arranged a Euro 300 million unsecured eight year bond at a coupon of 5.0% per annum. - At the year-end, the weighted average term of maturity of the group's borrowings was 11 years and 75% of borrowings were at fixed rates of interest. - Gearing at the year end stood at 51%, which compares with 64% reported at 31 December 1998. Interest cover during the year was 2.3 times. - The market value of borrowing and financial instruments at the year-end was £1,083 million, £78 million greater than the actual liability. At the end of 1998, the equivalent difference was £141 million. Year 2000 - Hammerson has experienced no disruption to any of its operations since the millennium date change. The overall cost of the group's compliance project was approximately £1.5 million. The majority of this expenditure was incurred in updating and improving Hammerson's own IT systems and management systems and equipment at its properties. Purchase of own shares - The Board currently has authority to purchase 14,413,104 of the Company's shares, representing 5.0% of the current issued share capital. The Board is keeping the exercise of that authority under review in the light of the Company's current share price. - At the forthcoming Annual General Meeting, the Board intends to seek to renew and to increase that authority to permit purchases of up to 14.9% of the then issued share capital. The Board will review the exercise of such increased authority in the context of the Company's share price at that time and the long term interest of shareholders. MORE TO FOLLOW FR UOVWRRNRORAR

Companies

Hammerson (HMSO)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today