Final Results

Hammerson PLC 26 February 2007 Hammerson plc - Results for the year ended 31 December 2006 Financial Highlights 2006 2005 Change Net rental income Â£237.4m Â£210.3m +12.9% Profit before tax Â£792.4m Â£698.6m +13.4% Adjusted profit before tax(1) Â£94.5m Â£89.4m +5.7% Basic earnings per share 357.5p 198.0p +80.6% Adjusted earnings per share(2) 32.8p 31.2p +5.1% Dividend per share(3) 21.68p 19.71p +10.0% Equity shareholders' funds Â£4,165m Â£3,126m +33.2% Net asset value per share, EPRA basis(4) Â£15.00 Â£12.37 +21.3% Return on shareholders' equity(5) 25.3% 34.0% Notes (1) Excluding net gains on investment properties, the changes in the fair value of interest rate swaps and costs of bond redemption totalling Â£697.9 million (2005: Â£609.2 million). (2) Excluding gains on investment properties, the changes in the fair value of interest rate swaps, costs of bond redemption, the UK REIT entry charge, deferred tax and related minority interests. (3) Recommended final dividend of 15.3 p per share (2005: 13.91p) making a total for the year of 21.68p. (4) The European Public Real Estate Association ('EPRA') has issued recommended bases for the calculation of certain data. Further details of these calculations are provided in note 6 to the accounts on pages 27 and 28. (5) Excluding deferred tax and the UK REIT entry charge. Key points â€¢ Hammerson became a REIT on 1 January 2007; provision of Â£101 million made at 31 December 2006 for REIT entry tax charge â€¢ Hammerson's high quality Â£6.7 billion portfolio in the UK and France generated a total return of 18.8% in 2006 giving rise to an increase in EPRA NAV of 21.3% â€¢ Capital recycling totalled over Â£1.4 billion, with expenditure of over Â£800 million, including the acquisition of five retail parks in the UK for Â£427 million, and disposals of Â£628 million â€¢ UK office lettings totalling nearly 34,000m2 contributed to a substantial reduction in overall vacancy to 3.4% â€¢ Completion of 9 place Vendome, Paris, showing a development profit of Â£81 million â€¢ Strong projected income growth from signed leases at recent developments â€¢ Developments currently underway have an estimated total cost of over Â£900 million and include four major retail schemes and two London office projects â€¢ Development pipeline with potential investment of around Â£5 billion over the next decade Commenting on the results, John Nelson, Chairman of Hammerson, said: 'I am pleased to report on another year of outstanding progress by Hammerson. Our focus on prime real estate assets in the UK and France continues to offer shareholders attractive returns. In 2006 the Company showed an increase in net asset value per share of 21.3% to Â£15.00 and generated a return on shareholders' equity of 25.3%. 'We have demonstrated strong performance in recent years, benefiting from capital growth and a rising income stream from our investment portfolio and completed developments. 'The Company now has major tax-exempt businesses both in the UK and France. Looking ahead, our rental income is projected to show substantial growth in 2007 with continued growth thereafter enhanced by one of the most extensive development programmes in the sector. Against this background, the Board expects to be able to recommend an increase of around 25% in the total dividend for 2007 over the proposed level for 2006. 'We have a strong base from which to take Hammerson forward and I have every confidence that the Company will continue to thrive.' Enquiries: John Richards, Chief Executive Tel: 020 7887 1000 Simon Melliss, Group Finance Director Tel: 020 7887 1000 Christopher Smith, Director of Corporate Affairs Tel: 020 7887 1019 christopher.smith@hammerson.com Results presentation today: Time 9.30 a.m. Venue New Broad Street House, 35 New Broad Street, London EC2 Webcast: There will be a webcast of Hammerson's results presentation broadcast live today at 9.30 a.m. via the Company's website at www.hammerson.com. An archive version will be available to replay from 12.00 noon. Financial calendar: Ex-dividend date 11 April 2007 Record date 13 April 2007 Dividend payable 14 May 2007 Annual General Meeting 3 May 2007 Copies of the Chairman's statement, preliminary results statement, income statement, balance sheet, statement of recognised income and expense, reconciliation of equity, cash flow statement and notes are attached. The terms in the commentary that follows are defined in the glossary on page 38 of this document. CHAIRMAN'S STATEMENT I am pleased to report on another year of outstanding progress by Hammerson. Our focus on prime real estate assets in the UK and France continues to offer shareholders attractive returns. In 2006 the Company showed an increase in net asset value per share of 21.3% to Â£15.00 and generated a return on shareholders' equity of 25.3%. Adjusted earnings per share increased by 5.1% to 32.8 pence, primarily reflecting additional rental income. The Board is recommending a final dividend of 15.3 pence per share, making a total for 2006 of 21.68 pence per share, an increase of 10% on last year. Progress in 2006 Hammerson enjoyed another very active year in 2006, maintaining momentum across the business. We continued our policy of active recycling of capital to enhance returns. We invested over Â£800 million, principally on acquiring assets and on our development programme. Highlights were the acquisition in August of a portfolio of retail parks in the UK for Â£427 million and the completion in May of the redevelopment of 9 place Vendome in Paris, with the latter generating a development profit to Hammerson of Â£81 million on our cost of Â£86 million. Disposals during 2006 raised Â£628 million and included the sale of Liberty Shopping Centre, Romford, two assets in Germany and a 50% stake in 125 Old Broad Street, London EC2. Excellent progress has been made on the major city centre retail-led regeneration schemes in Leicester and Bristol, both of which are scheduled to open in Autumn 2008. I am particularly encouraged by the level of lettings we have achieved and this augurs well for the future success of both projects. During 2006 we started the redevelopments of 125 Old Broad Street, previously the London Stock Exchange, and the adjacent site, 60 Threadneedle Street. In November we sold a 50% interest in the former scheme to show a very high return. We also commenced work on a substantial retail development in Aberdeen and a major expansion and refurbishment of the group's Parinor retail centre on the outskirts of Paris. Good progress was made in advancing a number of other major retail-led city centre schemes. Planning permission was obtained for the New Retail Quarter in Sheffield in August, whilst in February 2007 a resolution to grant planning consent was passed for Eastgate & Harewood Quarters, Leeds. Both of these are medium-term projects that we shall advance over the next few years. Taxation and REITs The UK Government introduced the tax-exempt Real Estate Investment Trust ('REIT') regime in January 2007. I believe that the REIT environment will lead to greater liquidity and transparency in the real estate market and attract new capital to the industry, resulting in an improvement to the nation's commercial property stock. This is likely to benefit investors in real estate companies and the wider UK economy. Following approval by shareholders at the Extraordinary General Meeting in December 2006, Hammerson elected for REIT status. From 1 January 2007 Hammerson is exempt from corporation tax on its property income and capital gains on disposals of UK investment properties. Starting in July 2007 Hammerson will make four quarterly payments totalling Â£101 million, representing the entry charge, to the Treasury. The Company has been able to write-back deferred tax no longer required amounting to Â£457 million in respect of unrealised capital gains, thereby increasing equity shareholders' funds. Property markets and outlook Retail Property UK consumer confidence improved in 2006, following weakness in 2005. Sales for non-food retailers increased by 2.2% in 2006, compared to a fall of 0.7% the previous year. Against this backdrop, there was modest rental growth at prime shopping centres and retail parks, but retailers are looking for additional incentives, including longer rent-free periods. We expect retailers generally to see positive sales growth in 2007 at the strongest trading locations, leading to further increases in rental levels. In France non-food retail sales grew by 3.7% in 2006 compared to 3.4% the previous year. Demand from retailers for space improved at the best locations, supporting higher rents for new leases, a trend we expect to continue in 2007. Rents on existing leases in France are linked annually to a cost of construction index. The latest index, applicable from 1 January 2007, is 7.1%. Office Property Demand for office accommodation followed similar trends in the City of London and Paris, with buoyant levels of letting activity. The central London office market saw a substantial increase in the take-up of space during 2006 compared to the previous year, with a combination of sustained demand and little additional supply leading to a reduction in the overall market vacancy rate. Rent-free periods shortened dramatically and rents saw strong growth, particularly for prime office accommodation. Although there has been an increase in the level of development activity during 2006, continued demand for space and further reductions in vacancy are anticipated to lead to higher rents in 2007. In the central Paris office market, there was a substantial increase in leasing activity in 2006 over the previous year with many office occupiers seeking to consolidate their businesses into single locations offering more efficient office accommodation. This trend is expected to continue into 2007, leading to further rental growth. Investment markets During 2006 demand from investors for real estate in the UK and France was buoyant, particularly during the first half of the year, leading to further increases in capital values. We expect continued demand from a broad range of investors for prime investment properties. However, following the recent rises in interest rates in both countries, the positive differential between property investment yields and borrowing costs has been largely eliminated or reversed, reducing the attractions of property to some debt financed investors. Against this background, we believe that capital growth in 2007 will depend more on asset management initiatives and increases in rental income than a further downward movement in investment yields. In France continuing demand should lead to further capital growth. Secondary property remains potentially more vulnerable to any market weakness. Board changes I am delighted that David Atkins was appointed to the Board as an executive director in January 2007. David is a Chartered Surveyor and joined Hammerson in February 1998. He retains responsibility for the management of the group's retail property business in the UK. I am pleased to announce that Jacques Espinasse has agreed to join the Board as a non-executive director with effect from 1 May 2007. Jacques is a member of the Management Board and Chief Financial Officer of Vivendi Universal. His outstanding career in the management of major international companies means that he brings a wealth of experience and I am confident he will make a major contribution to Hammerson. John Bywater, currently Managing Director of Hammerson's UK business, will stand down from the Board in March 2007 on reaching his normal retirement age. On behalf of the Board I would like to thank John for his leadership, enthusiasm and contribution to Hammerson over the past nine years. I would also like to pay tribute to John Barton who will stand down from the Board at the AGM in May 2007. John has served as a non-executive director since 1998, latterly as Senior Independent Director, and I would like to take this opportunity to thank him for his wise counsel. I am also pleased to announce that John Clare will become Hammerson's new Senior Independent Director at the AGM in May. Summary and outlook Hammerson has a portfolio of real estate assets of the highest quality in the UK and France. We have a very experienced and entrepreneurial management team focusing on prime retail and office assets and creating value through developments. We have achieved strong returns in recent years and this is demonstrated by our outperformance in the UK of the IPD index in nine out of the last ten years, making us one of the best-performing large real estate investors. Our financing model is efficient and provides operational flexibility. The Company now has major tax-exempt businesses both in the UK and France. Looking ahead, our rental income is projected to show substantial growth in 2007 with continued growth thereafter enhanced by one of the most extensive development programmes in the sector. Against this background, the Board expects to be able to recommend an increase of around 25% in the total dividend for 2007 over the proposed level for 2006. We have a strong base from which to take Hammerson forward and I have every confidence that the Company will continue to thrive. John Nelson 26 February 2007 FINANCIAL REVIEW The financial information contained in this review is extracted or calculated from the attached income statement, balance sheet, cash flow statement, other statements, notes and glossary of terms. Profit before tax and dividend For the year ended 31 December 2006, profit before tax, which includes property revaluation gains, was Â£792.4 million, compared with Â£698.6 million in 2005. The table below shows how adjusted profit before tax, which rose by Â£5.1 million to Â£94.5 million, is calculated. Analysis of profit before tax 2006 2005 Â£m Â£m ______________________________________________________________________________________________________________ Profit before tax 792.4 698.6 Adjustments: Profit on the sale of investment properties (95.8) (32.1) Revaluation gains on investment properties (664.8) (575.5) Goodwill impairment 12.6 - Bond redemption costs 34.0 - Change in fair value of interest rate swaps 16.1 (1.6) _______________________________________________________________________________________________________________ Adjusted profit before tax 94.5 89.4 _______________________________________________________________________________________________________________ Adjusted earnings per share in 2006 increased by 1.6 pence, or 5.1%, to 32.8 pence, as the growth in net rental income more than offset increased finance and administrative costs. Details of the calculations for earnings per share are provided in note 6 to the accounts. A final dividend of 15.3 pence per share is proposed which, together with the interim dividend of 6.38 pence per share, makes a total of 21.68 pence per share for the year. This is an increase of 10.0% over the total dividend for 2005. The following paragraphs explain the principal movements for each of the components of adjusted profit before tax, and the profit for the year. Net rental income Net rental income for the year ended 31 December 2006 was Â£237.4 million, compared with Â£210.3 million in 2005. Approximately half of the increase was the result of lettings at recently completed developments. The balance principally reflected the contributions from properties acquired over the last two years, in particular the LxB portfolio, and a full year's rent from Queensgate Shopping Centre, Peterborough, all of which more than offset the rent foregone from properties sold. During 2006 net rental income related to retail tenants' turnover accounted for Â£3.2 million of the total, which also included net income of Â£7.7 million from shopping centre car parks. Rent receivable of Â£17.5 million has been accrued and allocated to rent-free periods in 2006, including Â£6.6 million for Bishops Square, which was transferred to the investment portfolio following completion of the tenant's fit out. The investment portfolio showed a like-for-like increase in net rental income of 3.9% which is analysed on the following page. Like-for-like net rental income: investment property For the year ended 31 December 2006 Current year net rental income Prior year net rental income Proper- Proper- ties ties Ex- owned Total owned change Total through- Acquisi- Dis- Develop- net through- Acquisit- Dis- Develop- trans- net out tions posals ments rental out ions posals ments lation ren- 2005/ income 2005/ differ- tal 06 06 ence income Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________ United Kingdom Retail 97.6 17.6 8.1 7.9 131.2 89.6 3.5 11.7 7.1 - 111.9 Office 29.2 0.8 1.4 6.8 38.2 27.6 0.7 (0.2) 0.2 - 28.3 _______________________________________________________________________________________________________ Total United 126.8 18.4 9.5 14.7 169.4 117.2 4.2 11.5 7.3 - 140.2 Kingdom _______________________________________________________________________________________________________ Continental Europe France 56.1 6.6 0.1 2.3 65.1 58.9 2.4 1.7 (0.1) (0.2) 62.7 Germany - - 0.9 (0.1) 0.8 - - 2.9 2.3 - 5.2 _______________________________________________________________________________________________________ Total 56.1 6.6 1.0 2.2 65.9 58.9 2.4 4.6 2.2 (0.2) 67.9 Continental Europe _______________________________________________________________________________________________________ Group Retail 141.2 24.2 9.0 7.8 182.2 134.0 5.9 14.4 9.5 (0.2) 163.6 Office 41.7 0.8 1.5 9.1 53.1 42.1 0.7 1.7 - - 44.5 _______________________________________________________________________________________________________ Total 182.9 25.0 10.5 16.9 235.3 176.1 6.6 16.1 9.5 (0.2) 208.1 Investment Portfolio _______________________________________________________________________________________________________ Income on 2.4 - (0.9) 0.6 2.1 3.5 (0.1) (0.4) (0.8) - 2.2 developments and other sources not analysed above _______________________________________________________________________________________________________ Total portfolio 185.3 25.0 9.6 17.5 237.4 179.6 6.5 15.7 8.7 (0.2) 210.3 _______________________________________________________________________________________________________ Administration expenses Administration expenses in 2006 rose by Â£4.7 million to Â£36.1 million. Increases in staff costs and the costs of relocating our head office to 10 Grosvenor Street, were partially offset by increased asset management and development management fees receivable. Net finance costs Excluding the change in fair value of interest rate swaps and the bond redemption costs, net finance costs increased in 2006 by Â£17.3 million to Â£106.8 million. This was primarily a result of increased borrowings drawn to fund acquisitions and the development programme. The average cost of borrowing in 2006 was 5.6% and interest cover was 1.8 times in 2006 compared with 1.9 times the previous year. Tax In 2006 we have provided for the effects of our adoption of REIT status. The current tax charge includes the one-off entry charge of Â£101 million, representing approximately 2% of the value of the UK property portfolio at 31 December 2006, which will be paid in four equal quarterly instalments, the first in July of this year. We have released to the income statement deferred tax of Â£449 million, relating to unrealised UK capital gains and capital allowances, as this is no longer required. Excluding the REIT impacts, there was a current tax credit of Â£1.1 million in 2006 which resulted principally from a write-back of foreign tax from prior years. The French tax exemption, capital allowances and capitalised interest continued to shelter profits from tax. Cash flow There was a cash inflow from operating activities of Â£6 million in 2006, compared with Â£45 million in the previous year. The reduction arose principally from the premium and costs paid for the bond redemption. Disposals in 2006 raised Â£628 million, whilst acquisitions and capital expenditure amounted to Â£501 million. After the net cash outflow of Â£130 million from financing activities, there was a net decrease in cash and short-term deposits over the year of Â£6 million. Balance sheet and financing At 31 December 2006, the group's net asset value per share, calculated in line with the recommendations of EPRA, was Â£15.00, representing an increase of Â£2.63, or 21.3% over 2005. In 2006, provision has been made for the one-off entry charge of Â£101 million on adoption of REIT status and bond redemption costs of Â£34 million were incurred. Together these reduced adjusted net asset value per share by 47 pence. Excluding these the increase in adjusted net assets per share would have been 25.1%. The tables below and on the following page show how the EPRA measure is calculated and give a breakdown of the increase. Analysis of net asset value 2006 2005 ________________________________________________ Â£ per share Â£ per share Â£m Â£m ___________________________________________________________________________________________________________ Basic 4,165.1 14.60 3,125.8 10.97 Effect of dilution: On exercise of share options 8.7 n/a 8.5 n/a ___________________________________________________________________________________________________________ Diluted 4,173.8 14.61 3,134.3 10.97 Adjustments: Fair value of interest rate swaps 8.8 0.03 (7.3) (0.02) Deferred tax on revaluation surpluses and other items 103.1 0.36 370.3 1.30 Deferred tax on capital allowances 0.2 - 36.1 0.12 ___________________________________________________________________________________________________________ EPRA, diluted 4,285.9 15.00 3,533.4 12.37 ___________________________________________________________________________________________________________ Basic shares in issue used for calculation (million) 285.2 285.0 Diluted shares used for calculation (million) 285.7 285.7 ___________________________________________________________________________________________________________ Equity shareholders' Movement in net asset value funds* EPRA NAV* Â£m Â£ per share _____________________________________________________________________________________________________________ 31 December 2005 3,533.4 12.37 Revaluation gains - equity changes 89.0 0.31 - income changes 664.8 2.33 Retained profit (excluding revaluation gains and bond redemption costs) 168.9 0.59 Costs of bond redemption (34.0) (0.12) UK REIT entry charge (100.5) (0.35) Dividend (57.7) (0.20) Exchange loss and other movements 22.0 0.07 _____________________________________________________________________________________________________________ 31 December 2006 4,285.9 15.00 _____________________________________________________________________________________________________________ * Excluding deferred tax and fair value of interest rate swaps Borrowings Hammerson's financial position remains strong. During 2006 we continued to manage our borrowings with three major new financings: - Â£300 million 5.25% unsecured bonds due 2016 - Â£330 million five-year sterling bank facility - â‚¬700 million 4.875% unsecured bonds due 2015 In addition we made a tender offer in May for the 10.75% 2013 sterling bonds, following which almost half their nominal value, or Â£93.8 million, was redeemed and cancelled at a premium, including costs, of Â£34.0 million. At the year-end, we had undrawn committed facilities of Â£845 million which, when added to cash and deposits, provided liquidity of Â£884 million. This may be compared with bonds that mature in 2007 totalling Â£202 million. The weighted average maturity of debt at the year-end was ten years, 82% of borrowings were at fixed rates of interest and virtually all debt was unsecured. With borrowings of Â£2,282 million and cash and deposits of Â£39 million, net debt amounted to Â£2,243 million at 31 December 2006. Gearing was 54% compared with 66% at the end of 2005 and the loan to value ratio was 38%. The balance sheet at 31 December 2006 included a deferred tax liability of Â£103 million. If deferred tax is added back to equity shareholders' funds, gearing would have been 53%. The market value of borrowings at 31 December 2006 of Â£2,373 million was Â£91 million greater than the book value, equivalent, after tax relief, to a reduction in net asset value of 22 pence per share. Total shareholder returns Total shareholder return for 2006 exceeded the FTSE 350 real estate index by nearly eight percentage points. Over the last five years, Hammerson's average annual total shareholder return has been 32.3% compared with 27.0% for the real estate index. Return % Benchmark % _______________________________________________________________________________________________________________ Total shareholder return over one year 56.9 FTSE 350 real estate index over one year 49.2 Total shareholder return over three years 37.4 FTSE 350 real estate index over three years 37.4 (p.a.) (p.a.) Total shareholder return over five years 32.3 FTSE 350 real estate index over five years 27.0 (p.a.) (p.a.) _______________________________________________________________________________________________________________ BUSINESS REVIEW PROPERTY PORTFOLIO Hammerson owns and manages 14 major shopping centres and 18 retail parks, principally in the UK and France, providing a total of 1.3 million m2 of retail space. The office portfolio consists of nine prime buildings, mostly located in and around the City of London and in central Paris, and provides 275,000m2 of accommodation. At 31 December 2006 the value of our property portfolio was Â£6.7 billion. The investment portfolio was valued at Â£6.2 billion and developments at Â£0.5 billion. Joint ventures accounted for 34% of the portfolio value, including five major shopping centre investments in the UK which represented 21% of the total portfolio. Valuation increases in 2006 amounted to Â£732 million and capital expenditure including capitalised interest totalled Â£810 million, principally on acquisitions and the development programme. During 2006 the weighting of the portfolio to the UK increased by three percentage points to 74%. The retail and office weightings remained unchanged at 72% and 28% respectively. The table below shows the capital returns for the portfolio during the year ended 31 December 2006. Shopping Centres Retail Parks Offices Total ___________________________________________________________________________________________________________ Capital Capital Capital Value return Value return Value return Value Capital return Â£m % Â£m % Â£m % Â£m % ___________________________________________________________________________________________________________ UK 2,350 10.9 1,203 7.8 1,384 26.0 4,937 14.5 ___________________________________________________________________________________________________________ France 1,100 17.4 118 9.3 489 16.9 1,707 16.7 ___________________________________________________________________________________________________________ Germany 72 (5.8) - - - - 72 (5.8) ___________________________________________________________________________________________________________ Total 3,522 12.1 1,321 8.0 1,873 23.6 6,716 14.6 ___________________________________________________________________________________________________________ The property portfolio generated a capital return of 14.6%, with the investment and development portfolios showing capital returns of 13.5% and 31.5% respectively. Approximately two thirds of the valuation uplift in the UK portfolio was the result of a reduction in investment yields, whilst the balance reflected increases in rental values, development surpluses and asset management initiatives. In France, the capital return was 16.7%. The majority of the increase was accounted for by lower valuation yields and the balance from rising rental values and completed developments. In August we completed the acquisition for Â£427 million of LxB Holdings Limited, which owns five retail assets in the UK providing total floor space of 123,600m2. Each of the properties has an open A1 planning consent and there are excellent opportunities to expand the schemes to increase the floorspace and enhance rental values. The portfolio generates annual rental income of Â£14.7 million compared to its current ERV of Â£19.1 million, demonstrating its reversionary growth potential. Bishops Square, a major office building in the City, was transferred to the investment portfolio in 2006 following the completion of the tenant's fit out works. At 31 December, Hammerson's share of the property was valued at Â£511 million, some Â£223 million above the cost of redevelopment. During 2006 we completed the redevelopment of 9 place Vendome, Paris 1er, our 50:50 joint venture office development with AXA and this was transferred to the investment portfolio. The property provides 22,200m2 of high quality office accommodation and 5,500m2 of prime retail space and its principal office occupier is international law firm Clifford Chance. The property is now 91% let and Hammerson's share of the income will amount to Â£6.2 million after the initial rent-free periods. At 31 December our interest in the property was valued at Â£167 million, a surplus of Â£81 million over the group's cost of Â£86 million. In line with our strategy of recycling assets we sold 11 properties, or interests in properties, raising Â£628 million in 2006. In aggregate, the proceeds from these sales were Â£96 million in excess of the book value of the assets at 31 December 2005, of which Â£52 million related to the Liberty Shopping Centre, Romford. The sales of two properties in Germany leave Forum Steglitz as our sole German asset, the refurbishment of which was completed in December. Valuation data: investment property For the year ended 31 December 2006 True Properties Revaluation Capital Total Initial equivalent at valuation in the year return return yield yield Â£m Â£m % % % % __________________________________________________________________________________________________________ Notes (1) (2) __________________________________________________________________________________________________________ United Kingdom Retail: Shopping centres 2,090 169 10.5 15.4 4.4 4.8 Retail parks 1,131 66 7.8 12.0 3.7 4.8 __________________________________________________________________________________________________________ 3,221 235 9.9 14.6 4.2 4.8 __________________________________________________________________________________________________________ Office: City 997 162 22.0 25.3 2.2 5.1 Other 212 42 24.9 30.6 4.5 5.4 __________________________________________________________________________________________________________ 1,209 204 22.5 26.4 2.7 5.2 __________________________________________________________________________________________________________ Total United Kingdom 4,430 439 13.2 17.7 3.8 4.9 __________________________________________________________________________________________________________ Continental Europe France Retail 1,190 161 15.8 21.1 4.4 5.0 Office 489 73 16.9 20.7 3.0 4.7 __________________________________________________________________________________________________________ Total France 1,679 234 16.2 21.0 4.0 4.9 __________________________________________________________________________________________________________ Germany Retail 72 (8) (5.8) (5.5) 3.5 6.5 __________________________________________________________________________________________________________ Total Continental Europe 1,751 226 14.5 19.0 4.0 4.9 __________________________________________________________________________________________________________ Group Retail 4,483 388 10.8 15.5 4.2 4.9 Office 1,698 277 20.9 24.7 2.8 5.0 __________________________________________________________________________________________________________ Total Investment Portfolio 6,181 665 13.5 18.0 3.8 4.9 __________________________________________________________________________________________________________ Developments 535 67 31.5 31.4 _________________________________________________________________________________ Total Group including 6,716 732 14.6 18.8 developments _________________________________________________________________________________ Notes (1) Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of property value. (2) The average income return, reflecting the timing of future rental increases, based on current ERV, resulting from lettings, lease renewals and rent reviews, assuming rents are received quarterly in advance. Rental income Hammerson's property portfolio generates a secure, high quality income stream. In 2006 net rental income totalled Â£237.4 million, whilst at the year end rents passing from the investment portfolio amounted to Â£288.6 million. Rental data: investment property For the year ended 31 December 2006 Gross Net Estimated rental rental Vacancy Rents rental Reversionary/ income income rate passing value (Over-rented) Â£m Â£m % Â£m Â£m % _______________________________________________________________________________________________________________ Notes (1) (2) (3) (4) _______________________________________________________________________________________________________________ United Kingdom Retail: Shopping centres 112.6 96.8 1.1 95.8 104.3 7.7 Retail parks 35.9 34.4 2.7 43.5 52.7 16.7 _______________________________________________________________________________________________________________ 148.5 131.2 1.7 139.3 157.0 10.6 _______________________________________________________________________________________________________________ Office: City 32.3 27.0 3.3 50.9 52.7 (4.8) Other 13.9 11.2 8.3 14.8 15.3 (3.7) _______________________________________________________________________________________________________________ 46.2 38.2 4.4 65.7 68.0 (4.5) _______________________________________________________________________________________________________________ Total United Kingdom 194.7 169.4 2.6 205.0 225.0 5.6 _______________________________________________________________________________________________________________ Continental Europe France Retail 57.0 50.2 2.4 58.6 64.0 6.7 Office 16.7 14.9 11.0 22.0 23.7 (2.1) _______________________________________________________________________________________________________________ Total France 73.7 65.1 4.2 80.6 87.7 4.2 _______________________________________________________________________________________________________________ Germany Retail 4.4 0.8 26.4 3.0 4.9 3.3 _______________________________________________________________________________________________________________ Total Continental Europe 78.1 65.9 5.4 83.6 92.6 4.1 _______________________________________________________________________________________________________________ Group Retail 209.9 182.2 2.4 200.9 225.9 9.3 Office 62.9 53.1 5.6 87.7 91.7 (3.9) _______________________________________________________________________________________________________________ Total Investment Portfolio 272.8 235.3 3.4 288.6 317.6 5.2 _______________________________________________________________________________________________________________ Income on developments and other sources not analysed above 5.4 2.1 ___________________________________________________________ As disclosed in note 1 to the accounts 278.2 237.4 ___________________________________________________________ Notes (1) The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the total ERV of the property or portfolio. (2) The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. (3) The estimated market rental value of the total lettable space in a property after deducting head and equity rents, calculated by the group's valuers. (4) The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space. During 2006 we agreed over 140 rent reviews in the UK. We agreed rent reviews in respect of leases with passing rents of Â£15.6 million, giving rise to an increase in rents of Â£4.5 million per annum. We anticipate that reviews remaining to be settled from 2006 could increase annual rents by a further Â£5.4 million. Rents for shopping centre leases in France are indexed annually according to a construction cost index. The index applicable during 2006 was 0.7%, whilst the comparable figure from 1 January 2007 is 7.1%. Almost 120 leases with rents passing of Â£12.4 million were renewed following expiries in 2006. On renewal, additional annual income of Â£0.2 million was secured. During 2006, 49 units became vacant within the UK shopping centre portfolio and a further eight units were occupied by retailers which entered administration. Of these units, new leases have been signed in respect of 52, resulting in an increase in annual rents of Â£0.1 million. Occupancy At 31 December 2006, the occupancy rate in the investment portfolio as a whole was 96.6%, an increase of 3.4 percentage points in the year. The increase resulted primarily from lettings at the London office buildings and the inclusion of Bishops Square, which is fully let, following its transfer to the investment portfolio during the year. Following the surrender in 2005 of the top five floors of 99 Bishopsgate, we refurbished the space vacated. Three of the floors were let during 2006 and the remaining two floors have been let since the year end. Income security and quality Hammerson's investment portfolio provides both a secure income stream and substantial growth potential. The weighted average unexpired lease term is 11 years and the overall risk to Hammerson of individual tenant default is low as we have a large number of tenants, generally of good financial standing, with diverse businesses. The group's five largest retail tenants by rental income accounted for 10.3% of the passing rent from the investment portfolio at the year end as follows: B&Q 2.8%; Pinault Printemps Redoute 2.2%; Arcadia 2.1%; H&M 1.9%; and DSG Retail 1.3%. Rents passing from our three largest office tenants accounted for 13.8% of the total passing rent from the investment portfolio at 31 December 2006 as follows: Allen & Overy 9.0%; Deutsche Bank 3.6%; and Clifford Chance 1.2%. Lease expiries and breaks Leases with current rents passing of Â£40 million are subject to expiry or tenants' break clauses during the period from 2007 to 2009 as shown in the table below. Nevertheless, these expiries are spread throughout the portfolio and there are no instances where the current rent is significantly above market rent. We estimate that, assuming renewals take place at current rental values, additional rents of Â£5 million per annum would be secured. This is not a forecast and takes no account of void periods, lease incentives or possible changes in rental values before the relevant expiry or break dates. Lease expiries and breaks As at 31 December 2006 Rents passing that expire/ ERV of leases that expire/break Weighted average break in in unexpired lease term 2007 2008 2009 2007 2008 2009 to break to expiry Â£m Â£m Â£m Â£m Â£m Â£m years years __________________________________________________________________________________________________________________ Notes (1) (1) (1) (2) (2) (2) __________________________________________________________________________________________________________________ United Kingdom Retail: Shopping 7.9 2.5 2.1 9.0 2.7 2.4 9.9 10.6 centres Retail parks 1.0 0.3 0.3 1.3 0.3 0.4 15.3 15.5 __________________________________________________________________________________________________________________ 8.9 2.8 2.4 10.3 3.0 2.8 11.8 12.3 __________________________________________________________________________________________________________________ Office: City 0.4 2.4 - 0.3 2.2 - 13.9 16.7 Other 2.0 1.4 1.5 2.0 1.5 1.6 6.7 8.9 __________________________________________________________________________________________________________________ 2.4 3.8 1.5 2.3 3.7 1.6 12.4 15.0 __________________________________________________________________________________________________________________ Total United Kingdom 11.3 6.6 3.9 12.6 6.7 4.4 12.0 13.3 __________________________________________________________________________________________________________________ Continental Europe France: Retail 5.7 1.9 4.2 7.6 2.3 4.7 1.5 4.9 Office 5.2 1.0 - 5.4 1.0 - 4.4 6.5 __________________________________________________________________________________________________________________ Total France 10.9 2.9 4.2 13.0 3.3 4.7 2.3 5.3 __________________________________________________________________________________________________________________ Germany: Retail 0.2 0.1 0.1 0.2 0.1 0.1 6.9 8.4 __________________________________________________________________________________________________________________ Total Continental Europe 11.1 3.0 4.3 13.2 3.4 4.8 2.4 5.4 __________________________________________________________________________________________________________________ Group Retail 14.8 4.8 6.7 18.1 5.4 7.6 8.5 10.0 Office 7.6 4.8 1.5 7.7 4.7 1.6 10.5 13.0 __________________________________________________________________________________________________________________ Total Group 22.4 9.6 8.2 25.8 10.1 9.2 9.2 11.0 __________________________________________________________________________________________________________________ Notes (1) The amount by which rental income, based on rents passing at 31 December 2006, could fall in the event that occupational leases due to expire are not renewed or replaced by new leases. For the UK it includes tenants' break options. For France and Germany, it is based on the earliest date of lease expiry. (2) The ERV at 31 December 2006 for space that expires or breaks in each year, after deducting head and equity rents and ignoring the impact of rental growth and any rent free periods. Rent reviews The UK shopping centre portfolio was 7.7% reversionary at 31 December 2006 and the retail park assets 16.7% reversionary. The office portfolio in the UK was 4.5% over-rented, principally accounted for by two office buildings, 99 Bishopsgate and Exchange Tower. The retail portfolio in France was 6.7% reversionary and the office portfolio 2.1% over-rented. In the UK, leases subject to rent review in the three years from 2007 to 2009 have current rents passing of Â£59 million. We estimate that, on review, rents receivable in respect of these leases would increase by Â£6 million by 2009 if reviewed at current rental values. This is not a forecast and takes no account of increases or decreases in rental values before the relevant review dates. Rent reviews As at 31 December 2006 Projected rent at current ERV of leases Rents passing subject to review in subject to review in Outstanding 2007 2008 2009 Outstanding 2007 2008 2009 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m __________________________________________________________________________________________________________ Notes (1) (1) (1) (1) (2) (2) (2) (2) __________________________________________________________________________________________________________ United Kingdom Retail: Shopping 15.8 3.3 15.0 13.3 18.7 3.8 16.0 13.8 centres Retail parks 8.5 8.5 5.8 4.8 10.9 9.9 6.9 5.4 __________________________________________________________________________________________________________ 24.3 11.8 20.8 18.1 29.6 13.7 22.9 19.2 __________________________________________________________________________________________________________ Office: City 10.4 0.6 - 3.2 10.4 0.6 - 3.2 Other 5.4 0.3 1.0 2.9 5.5 0.3 1.1 3.3 __________________________________________________________________________________________________________ 15.8 0.9 1.0 6.1 15.9 0.9 1.1 6.5 __________________________________________________________________________________________________________ Total United Kingdom 40.1 12.7 21.8 24.2 45.5 14.6 24.0 25.7 __________________________________________________________________________________________________________ The majority of rents in France and Germany are subject to annual indexation. Notes (1) The rental income passing at 31 December 2006, after deducting head and equity rents, which is subject to review in each year. (2) The projected rents for space that is subject to review in each year and are based on the higher of the current rental income and the ERV as at 31 December 2006, after deducting head and equity rents and ignoring the impact of changes in rental values before the review date. Additional contracted income Hammerson's cash flow will increase substantially in 2007 and 2008 from leases and contracts that have already been signed. The table below shows additional contracted income on both cash and accounting bases. Rents Passing 2006 2007 2008 2009 Â£m Â£m Â£m Â£m ___________________________________________________________________________________________________ Bishops Square, London E1 0.4 13.4 25.6 25.6 ___________________________________________________________________________________________________ Other completed offices - UK 0.8 4.1 11.8 13.7 ___________________________________________________________________________________________________ Retail parks 0.8 2.1 3.5 5.1 ___________________________________________________________________________________________________ 9 place Vendome, Paris 0.4 2.4 5.2 5.9 ___________________________________________________________________________________________________ Current retail developments - UK - - 1.0 8.7 ___________________________________________________________________________________________________ Current developments - France - 0.3 1.0 1.3 ___________________________________________________________________________________________________ Total - cash flow 2.4 22.3 48.1 60.3 - accounting basis 18.9 44.1 50.4 60.1 ___________________________________________________________________________________________________ Note: Figures show Hammerson's share of the income in respect of joint ventures. The increase in rental income in 2007 of Â£25.2 million to Â£44.1 million for those assets shown in the above table, should result in an increase in profit before tax of approximately Â£10 million after taking account of the associated cost of finance. The income contracted in respect of the current developments included in the table above for 2009 is Â£10 million. On full letting we estimate that passing rents on these schemes will be Â£71 million, as shown in the table below. Current developments Our objective from the development programme is to create assets that generate attractive returns at a cost substantially below the price of acquiring completed income-producing assets on the open market. To achieve this we exploit our excellent reputation for managing complex urban regeneration schemes and forging strong links with local authorities. At 31 December 2006 six developments were underway with an estimated total development cost of Â£915 million. The value of our development portfolio at 31 December 2006 was Â£535 million, compared with its cost of Â£423 million. Cost to Forecast Estimated Ownership Lettable Forecast 31 Dec Costs to total passing Property interest area completion 2006 complete cost rent % sq.m date Â£m Â£m Â£m % Let Â£m ________________________________________________________________________________________________________________ Notes (1) (1) (1) (2) ________________________________________________________________________________________________________________ Retail Cabot Circus, Bristol 50 92,000 Sep 2008 95 150 245 51 18 Highcross Quarter, Leicester 60 60,000 Sep 2008 71 139 210 42 12 Union Square, Aberdeen 100 49,000 Sep 2009 40 175 215 28 14 Parinor extension, 100 24,100 Apr 2008 17 58 75 21 6 Aulnay-sous-Bois Office 125 Old Broad Street, London 50 31,000 Dec 2007 (3) 48 45 - 9 EC2 (3) 60 Threadneedle Street, 100 20,400 Nov 2008 32 93 125 - 12 London EC2 ________________________________________________________________________________________________________________ Total development properties 252 663 915 71 ________________________________________________________________________________________________________________ Costs to date of other development 125 properties Add: Profit realised on 50% disposal of 125 Old 46 Broad Street Add: Revaluation surplus 112 _________________________________________________________________________ Total development properties (note 7 to the 535 accounts) _________________________________________________________________________ Notes: (1) Capital costs including capitalised interest. (2) Amount let or under offer by income at 26 February 2007. (3) 125 Old Broad Street cost to 31 December 2006 and forecast total cost shown net of disposal profit of Â£46 million. We are making good progress at Cabot Circus, Bristol, the 92,000m2 retail-led mixed-use scheme being developed in a 50:50 joint venture with Land Securities Group PLC. Over 50% of the forecast rental income has been secured. Hammerson's share of the estimated rental income is Â£18 million and its total development cost Â£245 million. When complete Cabot Circus will provide a new retail heart to Bristol. The Highcross Quarter development in Leicester, a 60:40 joint venture with Hermes, started on site in January 2006 and over 40% of the target income has been secured or is in solicitors' hands. Work is progressing well, with opening scheduled for September 2008 at an estimated total development cost to Hammerson of Â£210 million. When complete, the project will more than double the size of the existing Shires shopping centre to over 105,000m2. In July we acquired for Â£20 million a further 50% interest in the Union Square development in Aberdeen, taking our interest to 100%. The scheme, on a nine-hectare site adjacent to Aberdeen railway station, is a hybrid of a traditional shopping mall and retail park, providing 49,000m2 of space including retail units, leisure and catering and 1,700 parking spaces. The first phase of development started in December and 28% of the development is let or in solicitors' hands. The estimated total development cost of the scheme, which is expected to be completed in September 2009, is Â£215 million and the projected rental income is Â£14 million per annum. A major extension to the Parinor shopping centre to the north of Paris commenced in October and is expected to be completed in two phases in April and November 2008 at an estimated total development cost of Â£75 million. The works will increase the area of the scheme to over 90,000m2, benefit retailers in the existing malls and make it the largest shopping centre serving the north of Paris. Just over 20% of the forecast annual rental income of Â£6 million has been secured. The extension will be anchored by Planete Saturn and Toys 'R' Us. Construction started in February 2006 on the redevelopment of the former London Stock Exchange at 125 Old Broad Street to provide 29,400m2 of prime office space and 1,600m2 of retail accommodation. Completion is scheduled for December 2007. In November 2006 Hammerson sold a 50% interest in the scheme to two co-investors and the project will now go forward as a joint venture with those investors. The sale raised Â£75 million before costs and Hammerson is managing the development and will be retained as the asset manager when the building is completed. In August 2006 demolition work began on the adjacent site at 60 Threadneedle Street and construction work is now underway to create an 18,800m2 nine-storey office building and 1,600m2 of retail space. When completed in November 2008 it will provide excellent modern accommodation in one of the best locations in the City of London. Future developments We have an excellent pipeline of future development opportunities, which are summarised in the table below. These cover all areas of our business and include: major retail-led city centre regeneration schemes; extensions to existing retail centres; retail parks; and offices. We made good progress in 2006 in advancing many of these schemes through the various feasibility, site assembly and planning stages. Future development pipeline Major retail-led schemes Retail Parks ________________________ ____________ New Retail Quarter, Sheffield Fife Central Retail Park, Kirkcaldy Eastgate & Harewood Quarters, Leeds Abbey Retail Park, Belfast Queensgate, Peterborough The Orchard Centre, Didcot Eden Quarter, Kingston-upon-Thames Manor Walks, Newcastle Brent Cross and Cricklewood, London NW Nice Lingostiere, Nice Central Area, Milton Keynes Berkshire Retail Park, Theale Retail extensions Offices Espace St Quentin, St Quentin-en-Yvelines Northgate, London E1 Italie 2, Paris Shoreditch High Street, London E1 Les 3 Fontaines, Cergy Pontoise Bishopsgate Goodsyard, London E1 WestQuay III, Southampton Paddington Triangle, London W2 Harbour Quay, London E14 It is anticipated that at least four of these schemes could start in the next three years, dependent on site assembly, planning and letting markets. The indicative total development cost of these four projects is Â£1.6 billion, with a projected yield on cost of approximately 7%. We received planning consent in August for our proposed 105,000m2 mixed-use regeneration of Sheffield city centre. The scheme will be anchored by a John Lewis department store and will also include 100 smaller retail units, up to 200 apartments and 2,200 car parking spaces. Construction of the first phase could start in 2008. In February 2007 a resolution to grant planning consent was passed for our 100,000m2 retail-led regeneration in Leeds city centre. The scheme is centred around the Eastgate & Harewood Quarters of the city, and is to be developed in a 90:10 joint venture between Hammerson and Leeds-based Town Centre Securities. It will be anchored by a 24,000m2 John Lewis store and include over 100 retail units, restaurants and bars, a hotel, office accommodation, up to 600 new homes and 2,700 car parking spaces. The group is currently progressing the Northgate project in Bishopsgate, London E1, having acquired an option to purchase a development site adjoining its existing Norton Folgate site. Hammerson intends to submit a planning application during 2007 for a mixed-use development totalling 100,000m2 incorporating approximately 65,000m2 of offices. In France, plans are being worked up for the expansion of our shopping centre at Les 3 Fontaines in Cergy-Pontoise. The scheme will create an additional 30,000m2 of space, of which Hammerson's ownership would be 18,000m2, encompassing 15 stores, 50 shop units and 2,200 car parking spaces. CONSOLIDATED INCOME STATEMENT 2006 2005 For the year ended 31 December 2006 Notes Â£m Â£m ________________________________________________________________________________________________________ Gross rental income 278.2 249.2 ________________________________________________________________________________________________________ Operating profit before gains on investment properties 1 201.3 178.9 Gains on investment properties 1 748.0 607.6 ________________________________________________________________________________________________________ Operating profit 1 949.3 786.5 __________ _________ Finance costs (118.0) (102.1) Bond redemption costs (34.0) - Change in fair value of interest rate swaps (16.1) 1.6 Finance income 11.2 12.6 __________ _________ Net finance costs 3 (156.9) (87.9) ________________________________________________________________________________________________________ Profit before tax 792.4 698.6 __________ _________ Current tax (99.4) 1.0 Deferred tax 333.8 (133.9) __________ _________ Tax credit/(charge) 4(a) 234.4 (132.9) ________________________________________________________________________________________________________ Profit for the year 1,026.8 565.7 ________________________________________________________________________________________________________ Attributable to: Equity shareholders 1,016.9 554.4 Minority interests 9.9 11.3 ________________________________________________________________________________________________________ Profit for the year 1,026.8 565.7 ________________________________________________________________________________________________________ Basic earnings per share 6 357.5p 198.0p Diluted earnings per share 6 356.9p 197.6p ________________________________________________________________________________________________________ Adjusted earnings per share are shown in note 6. All results derive from continuing operations. CONSOLIDATED BALANCE SHEET 2006 2005 As at 31 December 2006 Notes Â£m Â£m ______________________________________________________________________________________________________________________ Non-current assets Investment and development properties 7 6,716.0 5,731.7 Interests in leasehold properties 32.4 35.6 Plant, equipment and owner-occupied property 8 42.2 44.3 Investments 10 64.9 49.5 Receivables 11 13.6 4.5 ______________________________________________________________________________________________________________________ 6,869.1 5,865.6 Current assets Receivables 12 148.0 144.2 Cash and deposits 13 39.4 45.5 ______________________________________________________________________________________________________________________ 187.4 189.7 ______________________________________________________________________________________________________________________ Total assets 7,056.5 6,055.3 ______________________________________________________________________________________________________________________ Current liabilities Payables 14 218.2 220.7 Tax liabilities 111.1 60.5 Borrowings 15 210.2 0.5 ______________________________________________________________________________________________________________________ 539.5 281.7 Non-current liabilities Borrowings 15 2,072.4 2,094.3 Deferred tax 4(d) 103.3 406.4 Tax liabilities 55.1 25.5 Obligations under finance leases 32.3 35.9 Net pension liability 11.2 16.9 Other payables 21.0 18.9 ______________________________________________________________________________________________________________________ 2,295.3 2,597.9 ______________________________________________________________________________________________________________________ Total liabilities 2,834.8 2,879.6 ______________________________________________________________________________________________________________________ Net assets 4,221.7 3,175.7 ______________________________________________________________________________________________________________________ Equity Share capital 17 71.3 71.2 Share premium account 18 660.5 659.5 Translation reserve 18 (62.9) (32.8) Hedging reserve 18 59.9 32.9 Capital redemption reserve 18 7.2 7.2 Other reserves 18 8.9 6.7 Revaluation reserve 18 78.9 221.8 Retained earnings 18 3,348.3 2,163.7 Investment in own shares 19 (7.0) (4.4) ______________________________________________________________________________________________________________________ Equity shareholders' funds 4,165.1 3,125.8 Equity minority interests 56.6 49.9 ______________________________________________________________________________________________________________________ Total equity 4,221.7 3,175.7 ______________________________________________________________________________________________________________________ Diluted net asset value per share 6 Â£14.61 Â£10.97 EPRA net asset value per share 6 Â£15.00 Â£12.37 ______________________________________________________________________________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 2006 2005 For the year ended 31 December 2006 Notes Â£m Â£m _____________________________________________________________________________________________________________ Foreign exchange translation differences (31.1) (39.3) Net gain on hedge of net investment in foreign subsidiaries 18 27.0 32.9 Revaluation gains on development properties 18 67.0 197.5 Revaluation gains on owner-occupied property 18 7.6 11.6 Revaluation gains on investments 18 14.4 2.7 Acquisition of minority interests (2.2) - Actuarial losses on pension schemes 18 (0.9) (6.3) Tax on items taken directly to equity 4(c) (4.0) (55.5) _____________________________________________________________________________________________________________ Net gain recognised directly in equity 77.8 143.6 Profit for the year 1,026.8 565.7 _____________________________________________________________________________________________________________ Total recognised income and expense 1,104.6 709.3 _____________________________________________________________________________________________________________ Attributable to: Equity shareholders 1,095.7 699.2 Minority interests 8.9 10.1 _____________________________________________________________________________________________________________ Total recognised income and expense 1,104.6 709.3 _____________________________________________________________________________________________________________ RECONCILIATION OF EQUITY 2006 2005 For the year ended 31 December 2006 Notes Â£m Â£m _____________________________________________________________________________________________________________ Opening equity shareholders' funds 3,125.8 2,414.2 Issue of shares 1.1 63.6 Purchase of own shares 19 (4.0) (2.3) Share-based employee remuneration 18 3.8 2.1 Gain on award of own shares to employees 18 0.4 - _____________________________________________________________________________________________________________ 3,127.1 2,477.6 Total recognised income and expense 1,095.7 699.2 _____________________________________________________________________________________________________________ 4,222.8 3,176.8 Dividends 5 (57.7) (51.0) _____________________________________________________________________________________________________________ Closing equity shareholders' funds 4,165.1 3,125.8 _____________________________________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT 2006 2005 For the year ended 31 December 2006 Notes Â£m Â£m _____________________________________________________________________________________________________________ Operating activities Operating profit before gains on investment properties 201.3 178.9 Adjustment for non-cash items 20 (12.7) 1.8 Decrease/(Increase) in receivables 14.1 (44.4) (Decrease)/Increase in payables (31.9) 38.9 _____________________________________________________________________________________________________________ Cash generated from operations 170.8 175.2 Interest and bond redemption costs paid (155.2) (123.6) Interest received 11.0 13.1 Tax paid (21.1) (19.8) _____________________________________________________________________________________________________________ Cash flows from operating activities 5.5 44.9 _____________________________________________________________________________________________________________ Investing activities Purchase of property and capital expenditure (116.4) (314.9) Development of property (250.5) (223.2) Sale of property 628.0 224.4 Purchase of interests in joint ventures and subsidiary companies (132.7) 6.8 Purchase of investments (1.0) (0.5) (Increase)/Decrease in long term receivables (9.2) 18.2 _____________________________________________________________________________________________________________ Cash flows from investing activities 118.2 (289.2) _____________________________________________________________________________________________________________ Financing activities Issue of shares 1.1 3.0 Purchase of own shares (4.0) (2.3) Proceeds from award of own shares 0.2 - (Decrease)/Increase in medium and long term borrowings (277.7) 318.6 Increase/(Decrease) in short term borrowings 211.0 (30.3) Dividends paid to minorities (2.4) (1.8) Equity dividends paid (57.7) (51.0) _____________________________________________________________________________________________________________ Cash flows from financing activities (129.5) 236.2 _____________________________________________________________________________________________________________ _____________________________________________________________________________________________________________ Net decrease in cash and deposits (5.8) (8.1) Opening cash and deposits 45.5 53.7 Exchange translation movement (0.3) (0.1) _____________________________________________________________________________________________________________ Closing cash and deposits 13 39.4 45.5 _____________________________________________________________________________________________________________ ANALYSIS OF MOVEMENT IN NET DEBT Short term Cash at Current Non-current deposits bank borrowings borrowings Net debt For the year ended 31 December 2006 Â£m Â£m Â£m Â£m Â£m _____________________________________________________________________________________________________________ Balance at 1 January 2006 22.4 23.1 (0.5) (2,094.3) (2,049.3) Unamortised bond issue costs written off - - - (2.0) (2.0) Acquisition of subsidiaries, including loan notes issued 40.8 3.7 - (275.1) (230.6) Cash flow (49.9) (0.4) (211.0) 277.7 16.4 Exchange (0.2) (0.1) 1.3 21.3 22.3 _____________________________________________________________________________________________________________ Balance at 31 December 2006 13.1 26.3 (210.2) (2,072.4) (2,243.2) _____________________________________________________________________________________________________________ NOTES TO THE ACCOUNTS 1 OPERATING PROFIT 2006 2005 Notes Â£m Â£m _____________________________________________________________________________________________________________ Gross rental income 278.2 249.2 Rents payable (5.1) (4.0) _____________________________________________________________________________________________________________ Gross rental income, after rents payable 273.1 245.2 _____ ______ Service charge income 45.4 43.2 Service charge expenses (53.0) (52.3) _____ ______ Net service charge expenses (7.6) (9.1) Other property outgoings (28.1) (25.8) _____________________________________________________________________________________________________________ Property outgoings (35.7) (34.9) _____________________________________________________________________________________________________________ Net rental income 2 237.4 210.3 _____ ______ Management fees receivable 4.1 3.0 Cost of property activities (20.9) (17.5) Corporate expenses (19.3) (16.9) _____ ______ Administration expenses (36.1) (31.4) _____________________________________________________________________________________________________________ Operating profit before gains on investment properties 201.3 178.9 Profit on the sale of investment properties 95.8 32.1 Revaluation gains on investment properties 664.8 575.5 Goodwill impairment 22 (12.6) - _____________________________________________________________________________________________________________ Gains on investment properties 748.0 607.6 _____________________________________________________________________________________________________________ Operating profit 949.3 786.5 _____________________________________________________________________________________________________________ Included in gross rental income is Â£3.2 million (2005: Â£4.8 million) calculated by reference to tenants' turnover. 2 SEGMENTAL ANALYSIS Primary and Secondary Segments The group's primary reporting segments are the geographic locations of its properties. The secondary reporting segments are the business sectors in which the group operates. Other Net Liabilities Other net liabilities include all operating assets and liabilities that can be allocated to the segment on a reasonable basis but exclude net debt. (a) Totals by Geographic Segment United Kingdom France Germany Unallocated Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Gross rental income 200.9 170.2 73.6 69.0 3.7 10.0 - - 278.2 249.2 Rents payable (5.1) (4.0) - - - - - - (5.1) (4.0) Property outgoings (22.8) (24.1) (9.3) (5.8) (3.6) (5.0) - - (35.7) (34.9) ________________________________________________________________________________________________________________________ Net rental income 173.0 142.1 64.3 63.2 0.1 5.0 - - 237.4 210.3 Administration expenses (10.7) (11.7) (5.5) (5.2) (0.6) (0.5) (19.3) (14.0) (36.1) (31.4) ________________________________________________________________________________________________________________________ Operating profit before gains on investment properties 162.3 130.4 58.8 58.0 (0.5) 4.5 (19.3) (14.0) 201.3 178.9 Gains on investment properties 527.0 401.8 231.4 230.3 (10.4) (24.5) - - 748.0 607.6 ________________________________________________________________________________________________________________________ Operating profit 689.3 532.2 290.2 288.3 (10.9) (20.0) (19.3) (14.0) 949.3 786.5 Net finance costs - - - - - - (156.9) (87.9) (156.9) (87.9) ________________________________________________________________________________________________________________________ Segment result 689.3 532.2 290.2 288.3 (10.9) (20.0) (176.2) (101.9) 792.4 698.6 ________________________________________________________________________________________________________________________ 4,937.2 4,093.1 1,707.0 1,494.7 71.8 143.9 - - 6,716.0 5,731.7 Property assets Net debt - - - - - - (2,243.2) (2,049.3) (2,243.2) (2,049.3) Other net liabilities (187.7) (431.3) (113.8) (121.4) (6.2) (3.9) - - (307.7) (556.6) ________________________________________________________________________________________________________________________ Equity shareholders' funds 4,749.5 3,661.8 1,593.2 1,373.3 65.6 140.0 (2,243.2) (2,049.3) 4,165.1 3,125.8 ________________________________________________________________________________________________________________________ Capital expenditure 746.1 401.9 25.4 181.5 11.6 11.3 - - 783.1 594.7 ________________________________________________________________________________________________________________________ (b) Totals by Business Segment Shopping centres Retail parks Offices Total 2006 2005 2006 2005 2006 2005 2006 2005 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Gross rental income 173.0 163.1 41.8 29.3 63.4 56.8 278.2 249.2 Rents payable (1.8) (0.4) (0.1) - (3.2) (3.6) (5.1) (4.0) Property outgoings (26.2) (24.9) (2.4) (1.2) (7.1) (8.8) (35.7) (34.9) ________________________________________________________________________________________________________________________ Net rental income 145.0 137.8 39.3 28.1 53.1 44.4 237.4 210.3 ________________________________________________________________________________________________________________________ Property assets 3,521.5 3,312.7 1,321.1 807.0 1,873.4 1,612.0 6,716.0 5,731.7 ________________________________________________________________________________________________________________________ Capital expenditure 178.6 265.2 493.5 235.5 111.0 94.0 783.1 594.7 ________________________________________________________________________________________________________________________ (c) Analysis of Equity Shareholders' Funds Equity shareholders' Assets employed Net debt funds 2006 2005 2006 2005 2006 2005 Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ United Kingdom 4,749.5 3,661.8 (1,246.8) (975.1) 3,502.7 2,686.7 Continental Europe 1,658.8 1,513.3 (996.4) (1,074.2) 662.4 439.1 ________________________________________________________________________________________________________________________ 6,408.3 5,175.1 (2,243.2) (2,049.3) 4,165.1 3,125.8 ________________________________________________________________________________________________________________________ As part of the group's foreign currency hedging programme, at 31 December 2006 the group had sold â‚¬369.2 million (2005: â‚¬100.0 million) forward against sterling for value on 3 January 2007, at a spot rate of Â£1 = â‚¬1.490. Net debt cannot be allocated between countries within continental Europe. 3 NET FINANCE COSTS 2006 2005 Â£m Â£m ________________________________________________________________________________________________________________________ Interest on bank loans and overdrafts 13.7 16.8 Interest on other loans 121.5 102.0 Interest on obligations under finance leases 3.1 3.2 Other interest payable 6.3 1.3 ________________________________________________________________________________________________________________________ Gross interest costs 144.6 123.3 Less: Interest capitalised (26.6) (21.2) ________________________________________________________________________________________________________________________ Finance costs 118.0 102.1 Bond redemption costs 34.0 - Change in fair value of interest rate swaps 16.1 (1.6) Finance income (11.2) (12.6) ________________________________________________________________________________________________________________________ Net finance costs 156.9 87.9 ________________________________________________________________________________________________________________________ In May 2006, Â£93.8 million of the Â£200 million 10.75% sterling bonds 2013 were redeemed. Bond redemption costs include a redemption premium of Â£32.0 million and unamortised issue costs of Â£2.0 million. 4 TAX (a) Tax (Credit)/Charge 2006 2005 Â£m Â£m ________________________________________________________________________________________________________________________ UK current tax On net income before revaluations and disposals 0.2 1.0 Credit in respect of prior years (0.5) - Entry charge payable on election for UK REIT status 100.5 - ________________________________________________________________________________________________________________________ 100.2 1.0 ________________________________________________________________________________________________________________________ Foreign current tax On net income before revaluations and disposals 1.1 2.0 Credit in respect of prior years (1.9) (4.0) ________________________________________________________________________________________________________________________ (0.8) (2.0) ________________________________________________________________________________________________________________________ Total current tax charge/(credit) 99.4 (1.0) ________________________________________________________________________________________________________________________ Deferred tax On net income before revaluations and disposals 17.9 21.0 On revaluations and disposals 127.6 129.6 On bond redemption costs (10.2) - On movements in fair values of interest rate swaps (4.8) 0.5 Credit in respect of prior years (15.7) (17.2) Released on election for UK REIT status (448.6) - ________________________________________________________________________________________________________________________ (333.8) 133.9 ________________________________________________________________________________________________________________________ Tax (credit)/charge (234.4) 132.9 ________________________________________________________________________________________________________________________ (b) Tax Charge Reconciliation 2006 2005 Â£m Â£m ________________________________________________________________________________________________________________________ Profit before tax 792.4 698.6 ________________________________________________________________________________________________________________________ Profit multiplied by the UK corporation tax rate of 30% 237.7 209.6 Deferred tax released in excess of entry charge payable on election for UK REIT status (348.1) - Non-taxable surpluses on UK investment properties (53.5) (3.6) Benefit of SIIC tax exemption net of deferred tax on SIIC dividends (33.9) (34.6) Indexation relief on UK investment properties (30.8) (18.4) Prior year adjustments (18.1) (21.2) Other items 12.3 1.1 ________________________________________________________________________________________________________________________ Tax (credit)/charge (234.4) 132.9 ________________________________________________________________________________________________________________________ 4 TAX (continued) (c) Tax Recognised Directly in Equity 2006 2005 Â£m Â£m ________________________________________________________________________________________________________________________ Deferred tax charge on revaluations 12.1 57.0 Deferred tax released on election for UK REIT status (8.5) - Deferred tax charge/(credit) on actuarial gains/(losses) on pension 0.4 (1.5) schemes ________________________________________________________________________________________________________________________ Tax recognised directly in equity 4.0 55.5 ________________________________________________________________________________________________________________________ (d) Deferred Tax Movements 1 January Recognised Recognised Corporate Foreign 31 December 2006 in income in equity acquisitions exchange 2006 Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ UK Capital gains net of capital 328.7 (335.2) 2.1 7.0 - 2.6 losses Capital allowances 36.1 (35.9) - - - 0.2 Surpluses in trading 0.4 (3.6) - 20.9 - 17.7 subsidiaries Other timing differences (2.3) (4.1) 0.4 - - (6.0) Dividends receivable from 62.0 34.9 1.5 - (1.2) 97.2 France Revenue tax losses (33.1) (4.1) - - - (37.2) ________________________________________________________________________________________________________________________ 391.8 (348.0) 4.0 27.9 (1.2) 74.5 ________________________________________________________________________________________________________________________ France 14.6 14.2 - - - 28.8 ________________________________________________________________________________________________________________________ Net deferred tax provision 406.4 (333.8) 4.0 27.9 (1.2) 103.3 ________________________________________________________________________________________________________________________ (e) Unrecognised Deferred Tax Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the group can control whether gains crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2006 the total of such gains was Â£900 million and the potential tax effect Â£270 million (2005: Â£490 million, potential tax effect Â£150 million). If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. When such properties are expected to be retained past the three year period, provision is not made for the tax that could arise on an early disposal. The properties concerned had an aggregate value at 31 December 2006 of Â£1,570 million and the unprovided deferred tax was Â£130 million. A deferred tax asset of Â£8.2 million (2005: Â£nil), for carried forward UK tax losses that may not be utilised, was not recognised because it is uncertain whether appropriate taxable profits will arise. (f) UK REIT Status The group has elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the group's UK property rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold within three years of development. The group is otherwise subject to UK corporation tax. As a REIT, Hammerson plc is required to pay property income dividends equal to at least 90% of the group's exempted net income. On entering the REIT regime, an entry charge is payable equal to 2% of the market value of the group's qualifying UK properties at 31 December 2006. The financial statements for the year ended 31 December 2006 provide for this entry charge in current tax and show a release of deferred tax relating to UK capital gains and UK capital allowances. The total entry charge is Â£100.5 million and this will be paid in quarterly instalments between July 2007 and April 2008. The total deferred tax release, including an amount recognised directly in equity, is Â£457.1 million. To qualify as a UK REIT there are a number of conditions to be met in respect of the principal company of the group, the group's qualifying activity and its balance of business which are set out in the UK REIT legislation in Finance Act 2006. 4 TAX (continued) (g) French SIIC Status Hammerson plc has been a French SIIC since 1 January 2004 and all the French properties with the exception of 9 place Vendome are within the SIIC tax exempt regime. Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson plc, which will then pay UK dividends to its shareholders. Hammerson plc will be taxed in the UK on dividends received from France, subject to available UK tax losses. If all the properties were realised at the 31 December 2006 values, a total of Â£324 million of dividends would arise (2005: Â£207 million), and deferred tax is provided for the potential UK tax thereon. Dividend obligations will arise after property disposals but there will be a period of approximately four years after a sale before dividends are required to be received in the UK. Under the SIIC qualifying conditions, Hammerson plc must continue to be listed in France and at least 80% of assets must be employed in property investment. If the conditions are breached before 2014, the original conversion charge would be recalculated at full rates giving an additional Â£74 million tax cost. (h) Commentary Unless tax exemptions apply, UK corporation tax and deferred tax is calculated at a rate of 30% (2005: 30%) and foreign tax is calculated using appropriate local rates. Current tax in the year, before the UK REIT entry charge, was reduced by the French tax exemption, capital allowances and tax relief for capitalised interest. Current tax in the future should generally be low because of UK REIT and French SIIC status and carried forward UK tax losses. The principal taxable property is 9 place Vendome. 5 DIVIDENDS The proposed final dividend of 15.3 pence per share (2005: 13.91 pence per share) was approved by the Board on 26 February 2007 and is payable on 14 May 2007 to shareholders on the register at the close of business on 13 April 2007. The dividend has not been included as a liability at 31 December 2006. The total dividend for the year ended 31 December 2006 will be 21.68 pence per share (2005: 19.71 pence per share). The Â£57.7 million dividend included in the Reconciliation of Equity statement comprises the 2005 final dividend of Â£39.6 million, which was paid on 17 May 2006 along with the 2006 interim dividend of Â£18.1 million paid on 20 October 2006. 6 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE The calculations for earnings per share, based on the weighted average number of shares, are shown in the table below. The weighted average number of shares excludes those shares held in the Hammerson Employee Share Ownership Plan, which are treated as cancelled. The European Public Real Estate Association ('EPRA') has issued recommended bases for the calculation of certain per share information and these are included in the following tables. 2006 2005 Pence Pence Earnings Shares per Earnings Shares per Â£m million share Â£m million share ________________________________________________________________________________________________________________________ Basic 1,016.9 284.4 357.5 554.4 280.0 198.0 Adjustments: Dilutive share options - 0.5 (0.6) - 0.5 (0.4) ________________________________________________________________________________________________________________________ Diluted 1,016.9 284.9 356.9 554.4 280.5 197.6 ________________________________________________________________________________________________________________________ Adjustments: Revaluation gains on investment (664.8) (233.3) (575.5) (205.1) properties Profit on the sale of investment (95.8) (33.6) (32.1) (11.4) properties Goodwill impairment 12.6 4.4 - - Change in fair value of interest rate 16.1 5.7 (1.6) (0.6) swaps Deferred tax (credit)/charge (333.8) (117.2) 133.9 47.7 UK REIT entry tax charge 100.5 35.3 - - Minority interests in respect of the 7.8 2.7 8.4 3.0 above ________________________________________________________________________________________________________________________ EPRA, diluted 59.5 20.9 87.5 31.2 ________________________________________________________________________________________________________________________ Bond redemption costs 34.0 11.9 - - ________________________________________________________________________________________________________________________ Adjusted, diluted 93.5 32.8 87.5 31.2 ________________________________________________________________________________________________________________________ 6 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE (continued) The calculations for net asset value per share are shown in the table below: 2006 2005 Equity Net asset Equity Net shareholders' value shareholders' asset funds Shares per share funds Shares value per share Â£m million Â£ Â£m million Â£ ________________________________________________________________________________________________________________________ Basic 4,165.1 285.2 14.60 3,125.8 285.0 10.97 Company's own shares held in Employee Share Ownership Plan - (0.7) n/a - (0.7) n/a Unexercised share options 8.7 1.2 n/a 8.5 1.4 n/a ________________________________________________________________________________________________________________________ Diluted 4,173.8 285.7 14.61 3,134.3 285.7 10.97 ________________________________________________________________________________________________________________________ Fair value adjustment to borrowings (net of tax) (63.5) (0.22) (144.6) (0.51) ________________________________________________________________________________________________________________________ EPRA triple net, diluted 4,110.3 14.39 2,989.7 10.46 ________________________________________________________________________________________________________________________ Fair value of interest rate 8.8 0.03 (7.3) (0.02) swaps Fair value adjustment to borrowings (net of tax) 63.5 0.22 144.6 0.51 Deferred tax 103.3 0.36 406.4 1.42 ________________________________________________________________________________________________________________________ EPRA, diluted 4,285.9 15.00 3,533.4 12.37 ________________________________________________________________________________________________________________________ 7 INVESTMENT AND DEVELOPMENT PROPERTIES Investment Development Total properties properties Valuation Cost Valuation Cost Valuation Cost Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Balance at 1 January 2006 4,958.0 3,348.2 773.7 512.4 5,731.7 3,860.6 Exchange adjustment (30.2) (21.2) (1.8) (1.8) (32.0) (23.0) ____________________________________________________________________ Additions - Capital expenditure 79.7 79.7 200.9 200.9 280.6 280.6 - Asset acquisitions 22.9 22.9 53.1 53.1 76.0 76.0 - Corporate acquisitions 400.9 400.9 25.6 25.6 426.5 426.5 ____________________________________________________________________ 503.5 503.5 279.6 279.6 783.1 783.1 Disposals (482.5) (375.5) (42.7) (28.0) (525.2) (403.5) Transfers 567.0 364.9 (567.0) (364.9) - - Capitalised interest 0.6 0.6 26.0 26.0 26.6 26.6 Revaluation adjustment 664.8 - 67.0 - 731.8 - ________________________________________________________________________________________________________________________ Balance at 31 December 2006 6,181.2 3,820.5 534.8 423.3 6,716.0 4,243.8 ________________________________________________________________________________________________________________________ Investment Development Total properties properties Valuation Cost Valuation Cost Valuation Cost Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Balance at 1 January 2005 4,082.5 3,085.7 520.5 420.5 4,603.0 3,506.2 Exchange adjustment (39.0) (32.6) (2.3) (2.2) (41.3) (34.8) ____________________________________________________________________ Additions - Capital expenditure 77.9 77.9 130.8 130.8 208.7 208.7 - Asset acquisitions 279.6 279.6 2.1 2.1 281.7 281.7 - Corporate acquisitions 104.3 104.3 - - 104.3 104.3 ____________________________________________________________________ 461.8 461.8 132.9 132.9 594.7 594.7 Disposals (193.3) (214.9) - - (193.3) (214.9) Transfers 95.9 59.8 (95.9) (59.8) - - Transfer to owner-occupied (25.6) (11.8) - - (25.6) (11.8) properties Capitalised interest 0.2 0.2 21.0 21.0 21.2 21.2 Revaluation adjustment 575.5 - 197.5 - 773.0 - ________________________________________________________________________________________________________________________ Balance at 31 December 2005 4,958.0 3,348.2 773.7 512.4 5,731.7 3,860.6 ________________________________________________________________________________________________________________________ Properties are stated at market value as at 31 December 2006, valued by professionally qualified external valuers. In the United Kingdom, office properties and the group's interests in the Birmingham Alliance properties were valued by DTZ Debenham Tie Leung, Chartered Surveyors, and all other retail properties were valued by Donaldsons, Chartered Surveyors. In France and Germany, the group's properties were valued by Cushman & Wakefield, Chartered Surveyors. The valuations have been prepared in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuation Standards. 7 INVESTMENT AND DEVELOPMENT PROPERTIES (continued) At 31 December 2006 the total amount of interest included in development properties was Â£12.1 million (2005: Â£34.7 million) calculated using the group's average cost of borrowings. 2006 2005 Â£m Â£m _________________________________________________________________________________________________________ Capital commitments 746.6 540.1 _________________________________________________________________________________________________________ At 31 December 2006, Hammerson's share of the capital commitments in respect of joint ventures, which is included in the table above, was Â£334.7 million (2005: Â£356.1 million). 8 PLANT, EQUIPMENT AND OWNER-OCCUPIED PROPERTY Owner-occupied Plant and property equipment Total Â£m Â£m Â£m ___________________________________________________________________________________________________________ Book value at 31 December 2006 34.9 7.3 42.2 ___________________________________________________________________________________________________________ Book value at 31 December 2005 42.4 1.9 44.3 ___________________________________________________________________________________________________________ 9 JOINT VENTURES As at 31 December 2006 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated, and these are set out in the following table: Group share % ___________________________________________________________________________________________________________ Investments Brent Cross Shopping Centre 41.2 Brent South Retail Park 40.6 Bristol Alliance Limited Partnership 50 Cricklewood Regeneration Limited 50 Queensgate Limited Partnership 50 Shires Limited Partnership 60 The Bull Ring Limited Partnership 33.33 The Grosvenor Street Limited Partnership 50 The London Wall Limited Partnership 50 The Martineau Galleries Limited Partnership 33.33 The Moor House Limited Partnership 66.67 The Oracle Limited Partnership 50 9 place Vendome SCI 50 Developments 125 Old Broad Street Unit Trust 50 Bishopsgate Goodsyard Regeneration Limited 50 Paddington Triangle 50 Wensum Developments Limited 50 ___________________________________________________________________________________________________________ The group's interest in Shires Limited Partnership and The Moor House Limited Partnership do not confer the majority of voting rights nor the right to exercise dominant influence over the partnerships. Instead the partnerships are under the joint control of Hammerson and its respective partners. Consequently, the group's interests are accounted for by proportional consolidation and not treated as subsidiaries. 9 JOINT VENTURES (continued) The following summarised income statements and balance sheets show the proportion of the group's results, assets and liabilities which are derived from its joint ventures: Income statements for the year ended 31 December 2006 Bristol Alliance Bull Ring Oracle Queensgate Shires Moorhouse 9 place Brent Limited Limited Limited Limited Limited Limited Vendome Total Cross* Partnership Partnership Partnership Partnership Partnership Partnership SCI Other 2006 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Net rental income 17.2 3.2 14.8 11.9 8.0 7.5 5.0 2.5 7.0 77.1 Administration - (0.1) (0.1) (0.4) (0.7) (0.4) (0.3) - (0.2) (2.2) expenses ________________________________________________________________________________________________________________________ Operating profit 17.2 3.1 14.7 11.5 7.3 7.1 4.7 2.5 6.8 74.9 before gains on investment properties Gains on investment 25.9 3.1 21.7 19.3 20.6 10.8 55.1 39.7 14.6 210.8 properties Net finance costs - 0.1 0.1 0.2 0.1 0.1 (4.5) - (2.2) (6.1) ________________________________________________________________________________________________________________________ Profit before tax 43.1 6.3 36.5 31.0 28.0 18.0 55.3 42.2 19.2 279.6 ________________________________________________________________________________________________________________________ Balance sheets as at 31 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m December 2006 ________________________________________________________________________________________________________________________ Non-current assets Investment and 438.7 176.2 317.9 285.2 180.0 258.1 201.3 167.7 235.3 2,260.4 development properties at valuation Interests in leasehold - 0.3 - - - - 1.9 - 10.1 12.3 properties ________________________________________________________________________________________________________________________ 438.7 176.5 317.9 285.2 180.0 258.1 203.2 167.7 245.4 2,272.7 Current assets Other current assets 4.0 1.2 2.0 3.8 1.9 1.7 0.6 3.1 17.1 35.4 Cash and deposits - 3.3 2.6 2.8 1.9 3.0 1.2 0.2 4.2 19.2 ________________________________________________________________________________________________________________________ 4.0 4.5 4.6 6.6 3.8 4.7 1.8 3.3 21.3 54.6 Current liabilities Borrowings - - - - - - - - - - Other liabilities (11.6) (3.3) (4.8) (5.3) (3.3) (4.5) (0.9) (2.3) (9.6) (45.6) ________________________________________________________________________________________________________________________ (11.6) (3.3) (4.8) (5.3) (3.3) (4.5) (0.9) (2.3) (9.6) (45.6) ________________________________________________________________________________________________________________________ Non-current liabilities Borrowings - - - - - - - - (15.8) (15.8) Other liabilities - (0.3) - - - - (2.2) (0.2) (10.1) (12.8) ________________________________________________________________________________________________________________________ - (0.3) - - - - (2.2) (0.2) (25.9) (28.6) ________________________________________________________________________________________________________________________ Net assets 431.1 177.4 317.7 286.5 180.5 258.3 201.9 168.5 231.2 2,253.1 ________________________________________________________________________________________________________________________ Other than as shown above, the joint ventures are funded by the Company and the relevant partners. *Includes Brent Cross Shopping Centre and Brent South Retail Park. 9 JOINT VENTURES (continued) Income statements for the year ended 31 December 2005 Bristol Alliance Bull Ring Oracle Queensgate Shires Moorhouse 9 place Brent Limited Limited Limited Limited Limited Limited Vendome Total Cross* Partnership Partnership Partnership Partnership Partnership Partnership SCI Other 2005 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Net rental income 15.9 3.1 12.1 11.9 1.0 7.6 (0.5) (0.2) 2.3 53.2 Administration - (0.2) (0.1) - - - - - - (0.3) expenses ________________________________________________________________________________________________________________________ Operating profit before gains on investment 15.9 2.9 12.0 11.9 1.0 7.6 (0.5) (0.2) 2.3 52.9 properties Gains on investment 52.7 3.1 27.4 36.5 3.5 8.5 22.0 - 18.3 172.0 properties Net finance costs - 0.1 0.1 0.1 - - (4.9) - (0.4) (5.0) ________________________________________________________________________________________________________________________ Profit before tax 68.6 6.1 39.5 48.5 4.5 16.1 16.6 (0.2) 20.2 219.9 ________________________________________________________________________________________________________________________ Balance sheets as at 31 December 2005 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ________________________________________________________________________________________________________________________ Non-current assets Investment and development properties at valuation 409.3 106.0 297.0 266.4 159.6 172.9 129.3 121.2 174.1 1,835.8 Interests in leasehold - 0.3 - - - - 1.9 - 10.0 12.2 properties ________________________________________________________________________________________________________________________ 409.3 106.3 297.0 266.4 159.6 172.9 131.2 121.2 184.1 1,848.0 Current assets Other current assets 4.5 1.6 1.6 1.2 - 0.6 - 2.9 4.5 16.9 Cash and deposits - 5.9 3.7 3.2 2.6 2.4 0.3 1.8 1.7 21.6 ________________________________________________________________________________________________________________________ 4.5 7.5 5.3 4.4 2.6 3.0 0.3 4.7 6.2 38.5 Current liabilities Borrowings - - - - - - - - (0.5) (0.5) Other liabilities (12.0) (3.0) (5.0) (7.5) (2.4) (2.1) (1.4) (1.7) (2.7) (37.8) ________________________________________________________________________________________________________________________ (12.0) (3.0) (5.0) (7.5) (2.4) (2.1) (1.4) (1.7) (3.2) (38.3) ________________________________________________________________________________________________________________________ Non-current liabilities Borrowings - - - - - - (69.1) - - (69.1) Other liabilities - (0.3) - (1.3) - - (1.9) - (10.1) (13.6) ________________________________________________________________________________________________________________________ - (0.3) - (1.3) - - (71.0) - (10.1) (82.7) ________________________________________________________________________________________________________________________ Net assets 401.8 110.5 297.3 262.0 159.8 173.8 59.1 124.2 177.0 1,765.5 ________________________________________________________________________________________________________________________ Other than as shown above, the joint ventures are funded by the Company and the relevant partners. *Includes Brent Cross Shopping Centre and Brent South Retail Park. 10 INVESTMENTS 2006 2005 Available for sale investments Â£m Â£m _______________________________________________________________________________________________________________________ Value Retail Investors Limited Partnerships 47.3 34.1 Interests in Value Retail plc and related companies 16.1 14.3 Other investments 1.5 1.1 _______________________________________________________________________________________________________________________ 64.9 49.5 _______________________________________________________________________________________________________________________ The group has an effective 33.5% interest in Value Retail Investors Limited Partnership I and an effective 27.5% interest in Value Retail Investors Limited Partnership II, both of which have interests in a designer outlet centre in Bicester, in the United Kingdom. The total cost of the interests was Â£15.7 million and they are included at a total value, based on the market value of the underlying property, at 31 December 2006 of Â£47.3 million (2005: Â£34.1million), the property elements of which have been reviewed by Donaldsons, Chartered Surveyors. These investments have not been consolidated within the group accounts as the group does not have significant influence over the management of the partnerships. Investments in Value Retail plc and certain related companies are included at fair value. The cost of these investments was Â£14.9 million. Other investments include the group's 15% stake in Stonemartin plc, which was acquired for a total cost of Â£4.4 million. Stonemartin plc, which operates serviced offices under the brand name of the Institute of Directors, is listed on the Alternative Investment Market ('AIM') and at the balance sheet date the investment has been included at market value. 11 RECEIVABLES: NON-CURRENT ASSETS 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Loans receivable 10.8 - Other receivables 2.8 4.5 _______________________________________________________________________________________________________________________ 13.6 4.5 _______________________________________________________________________________________________________________________ Loans receivable comprised a loan of â‚¬16.0 million (Â£10.8 million) to Value Retail plc bearing interest based on EURIBOR and maturing on 22 August 2008. The loan is classified as 'available for sale' and is included in the balance sheet at fair value, which equates to cost. At 31 December 2005 a loan to Value Retail plc of â‚¬30.0 million (Â£20.6 million) was included in receivables within current assets. 12 RECEIVABLES: CURRENT ASSETS 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Trade receivables 57.1 34.3 Loans receivable - 20.6 Other receivables 87.0 78.6 Corporation tax 0.6 0.5 Prepayments 3.3 2.9 Fair value of interest rate swaps - 7.3 _______________________________________________________________________________________________________________________ 148.0 144.2 _______________________________________________________________________________________________________________________ The figures shown above are after deducting a provision for bad and doubtful debts of Â£4.3 million (2005: Â£2.6 million). 13 CASH AND DEPOSITS 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Cash at bank 26.3 23.1 Short term deposits 13.1 22.4 _______________________________________________________________________________________________________________________ 39.4 45.5 _______________________________________________________________________________________________________________________ Analysis by currency Sterling 27.3 29.4 Euro 12.1 16.1 _______________________________________________________________________________________________________________________ 39.4 45.5 _______________________________________________________________________________________________________________________ Short term deposits principally comprised deposits placed on money markets with rates linked to LIBOR for maturities of not more than one month, at an average rate of 4.1% (2005: 3.5%). Such deposits are considered to be cash equivalents. 14 PAYABLES: CURRENT LIABILITIES 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Trade payables 48.7 46.7 Other payables 137.3 154.3 Accruals 23.4 19.7 Fair value of interest rate swaps 8.8 - _______________________________________________________________________________________________________________________ 218.2 220.7 _______________________________________________________________________________________________________________________ 15 BORROWINGS 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Unsecured Â£200 million 7.25% Sterling bonds due 2028 197.5 197.4 Â£300 million 6% Sterling bonds due 2026 296.5 296.4 Â£250 million 6.875% Sterling bonds due 2020 247.0 246.9 Â£300 million 5.25% Sterling bonds due 2016 296.9 - â‚¬700 million 4.875% Euro bonds due 2015 469.3 - Â£106.2 million (2005: Â£200 million) 10.75% Sterling bonds due 2013 103.9 195.6 â‚¬500 million 6.25% Euro bonds due 2008 336.2 342.4 Â£26 million variable rate loan notes due 2008 26.0 - â‚¬300 million 5% Euro bonds due 2007 202.0 205.6 Bank loans and overdrafts 90.8 540.9 _______________________________________________________________________________________________________________________ 2,266.1 2,025.2 Exchange difference on currency swaps 1.0 - _______________________________________________________________________________________________________________________ 2,267.1 2,025.2 _______________________________________________________________________________________________________________________ Secured Sterling fixed rate mortgages due 2009 15.5 - Sterling variable rate mortgages due 2007 - 69.1 Sterling variable rate loans due within one year - 0.5 _______________________________________________________________________________________________________________________ 15.5 69.6 _______________________________________________________________________________________________________________________ 2,282.6 2,094.8 _______________________________________________________________________________________________________________________ Security for secured borrowings as at 31 December 2006 is provided by charges on property. 15 BORROWINGS (continued) Maturity Bank loans Other 2006 2005 and overdrafts loans Total Total Â£m Â£m Â£m Â£m _______________________________________________________________________________________________________________________ After five years (1.1) 1,611.1 1,610.0 936.3 From two to five years 100.2 - 100.2 883.3 From one to two years - 362.2 362.2 274.7 _______________________________________________________________________________________________________________________ Due after more than one year 99.1 1,973.3 2,072.4 2,094.3 Due within one year 7.2 203.0 210.2 0.5 _______________________________________________________________________________________________________________________ 106.3 2,176.3 2,282.6 2,094.8 _______________________________________________________________________________________________________________________ At 31 December 2005 and 2006 no loans due after five years were repayable by instalments. Undrawn committed facilities 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Expiring between one and two years - 225.9 Expiring after more than two years 845.0 57.7 _______________________________________________________________________________________________________________________ 845.0 283.6 _______________________________________________________________________________________________________________________ Interest rate and currency profile Floating rate 2006 Fixed rate borrowings borrowings Total % Years Â£m Â£m Â£m _______________________________________________________________________________________________________________________ Sterling 7.11 14 857.3 416.8 1,274.1 Euro 5.36 5 1,007.5 1.0 1,008.5 _______________________________________________________________________________________________________________________ 6.16 10 1,864.8 417.8 2,282.6 _______________________________________________________________________________________________________________________ Floating 2005 rate Fixed rate borrowings borrowings Total % Years Â£m Â£m Â£m _______________________________________________________________________________________________________________________ Sterling 7.83 16 759.9 244.6 1,004.5 Euro 5.78 2 548.0 542.3 1,090.3 _______________________________________________________________________________________________________________________ 6.97 11 1,307.9 786.9 2,094.8 _______________________________________________________________________________________________________________________ Rates at which interest is charged on borrowings due after more than one year 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Up to 7% 1,361.4 914.9 7% to 10% 197.5 197.4 Over 10% 103.9 195.6 _______________________________________________________________________________________________________________________ 1,662.8 1,307.9 Variable rates 409.6 786.4 _______________________________________________________________________________________________________________________ 2,072.4 2,094.3 _______________________________________________________________________________________________________________________ Variable rate borrowings bear interest based on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR. The above analysis reflects the effect of currency and interest rate swaps in place at 31 December 2005 and 2006. 16 FINANCIAL INSTRUMENTS Fair values of financial instruments The fair values of borrowings together with their carrying amounts shown in the balance sheet are as follows: 2006 2005 Book value Fair Book Fair value value value Â£m Â£m Â£m Â£m _______________________________________________________________________________________________________________________ Current borrowings (209.4) (210.4) (0.5) (0.5) Non-current borrowings (2,091.3) (2,181.0) (2,111.2) (2,317.8) Unamortised borrowing costs 19.1 19.1 16.9 16.9 Currency swaps (1.0) (1.0) - - _______________________________________________________________________________________________________________________ Total borrowings (2,282.6) (2,373.3) (2,094.8) (2,301.4) _______________________________________________________________________________________________________________________ Interest rate swaps (8.8) (8.8) 7.3 7.3 _______________________________________________________________________________________________________________________ At 31 December 2006, the fair value of financial liabilities exceeded their book value by Â£90.7 million (2005: Â£206.6 million), equivalent to 32 pence per share (2005: 72 pence per share) on an adjusted net asset value per share basis. On a post tax basis, using a tax rate of 30%, the difference was equivalent to 22 pence per share (2005: 51 pence per share). 17 SHARE CAPITAL Authorised Called up, allotted and fully paid 2006 2005 2006 2005 Â£m Â£m Â£m Â£m _______________________________________________________________________________________________________________________ Ordinary shares of 25p each 94.8 94.8 71.3 71.2 _______________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________ Movements in issued share capital Number Number of shares in issue at 1 January 2006 284,985,440 Share options exercised 216,500 _______________________________________________________________________________________________________________________ Number of shares in issue at 31 December 2006 285,201,940 _______________________________________________________________________________________________________________________ 18 RESERVES Share Capital premium Translation Hedging redemption Other account reserve reserve reserve reserves Â£m Â£m Â£m Â£m Â£m _______________________________________________________________________________________________________________________ Balance at 1 January 2006 659.5 (32.8) 32.9 7.2 6.7 Exchange adjustment - (30.1) - - - Net gain on hedging activities - - 27.0 - - Premium on issue of shares 1.0 - - - - Share-based employee remuneration - - - - 3.8 Cost of shares awarded to employees - - - - (1.4) Transfer on award of own shares to employees - - - - (0.2) _______________________________________________________________________________________________________________________ Balance at 31 December 2006 660.5 (62.9) 59.9 7.2 8.9 _______________________________________________________________________________________________________________________ Revaluation Retained reserve earnings Â£m Â£m _______________________________________________________________________________________________________________________ Balance at 1 January 2006 221.8 2,163.7 Revaluation gains on development properties 67.0 - Revaluation gains on owner-occupied property 7.6 - Revaluation gains on investments 14.4 - Transfer on completion of development properties (202.1) 202.1 Transfer on sale of development and owner-occupied property (26.2) 26.2 Acquisition of minority interest - (2.2) Actuarial losses on pension schemes - (0.9) Gain on award of own shares to employees - 0.4 Transfer on award of own shares to employees - 0.2 Dividends paid - (57.7) Deferred tax recognised directly in equity (3.6) (0.4) Profit for the year attributable to equity shareholders - 1,016.9 _______________________________________________________________________________________________________________________ Balance at 31 December 2006 78.9 3,348.3 _______________________________________________________________________________________________________________________ 19 INVESTMENT IN OWN SHARES 2006 2005 At cost Â£m Â£m _______________________________________________________________________________________________________________________ Balance at 1 January 4.4 2.8 Purchase of own shares 4.0 2.3 Cost of shares awarded to employees (1.4) (0.7) _______________________________________________________________________________________________________________________ Balance at 31 December 7.0 4.4 _______________________________________________________________________________________________________________________ 20 ADJUSTMENTS FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT 2006 2005 Â£m Â£m _______________________________________________________________________________________________________________________ Depreciation 0.8 0.5 Share-based employee remuneration 3.8 2.1 Amortisation of lease inducements and other direct costs 1.2 4.4 Increase in accrued rents receivable (17.5) (5.6) Other items (1.0) 0.4 _______________________________________________________________________________________________________________________ (12.7) 1.8 _______________________________________________________________________________________________________________________ 21 CONTINGENT LIABILITIES There are contingent liabilities of Â£27.8 million (2005: Â£12.6 million) relating to guarantees given by the group and a further Â£14.0 million (2005: Â£10.1 million) relating to claims against the group arising in the normal course of business. Hammerson's share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is Â£2.9 million (2005: Â£6.9 million). 22 ACQUISITION Name of business acquired LxB Holdings Limited Date of acquisition 11 August 2006 Proportion of shares acquired 100% Book value Fair value Â£m Â£m _______________________________________________________________________________________________________________________ Investment properties 333.5 426.5 Intangible assets 0.2 - Current receivables 6.5 6.3 Cash and deposits 44.5 44.5 Current payables (10.5) (14.0) Non-current borrowings (248.8) (249.1) Non-current deferred tax - (23.6) _______________________________________________________________________________________________________________________ Net assets acquired 125.4 190.6 ________ Goodwill on acquisition 12.6 ________ Cost of acquisition 203.2 ________ Satisfied by: Cash paid 173.3 Variable rate loan notes issued 26.0 Costs paid 3.9 ________ 203.2 ________ LxB Holdings Limited is the parent company of a group involved in property investment and development. The fair values of investment properties, intangible assets and deferred tax liabilities were determined by the directors. The goodwill arising on this acquisition is principally attributable to provisions made for deferred tax resulting from the difference between how deferred tax is calculated for accounting purposes and the way it is valued during purchase negotiations. In the opinion of the directors, the carrying amount of this goodwill cannot be justified by future cashflows and consequently it has been impaired. The impairment has been included in the income statement (see note 1). 23 OTHER INFORMATION The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 31 December 2005 but does not constitute the group's statutory accounts for the years ended 31 December 2005 or 2006. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS) this announcement does not itself contain sufficient information to comply with IFRS. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified and did not contain a statement under s.237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2006, for which the audit report has not yet been signed, will be finalised on the basis of the financial information presented by the directors in this preliminary announcement, will comply with IFRS and will be delivered to the Registrar of Companies. SHAREHOLDER INFORMATION Financial Calendar Full year results announced 26 February 2007 Annual General Meeting 3 May 2007 Recommended final dividend - Ex dividend date 11 April 2007 - Record date 13 April 2007 - Payable on 14 May 2007 Anticipated 2007 interim dividend October 2007 Website The 2006 Annual Report and other information will be available on the Company's website, www.hammerson.com, when posted to shareholders. The Company operates a service whereby all registered users of the Company's website can choose to receive, via e-mail, notice of all Company announcements which can be viewed on the website. Registered Office 10 Grosvenor Street, London W1K 4BJ. Registered in England No. 360632 Glossary of Terms Adjusted figures (per share) Reported amounts adjusted to exclude certain non-recurring items as set out in note 6 to the accounts. Anchor store A major store, usually a department store or supermarket, occupying a large unit within a shopping centre or retail park, which serves as a draw to other retailers and consumers. Average cost of borrowing The cost of finance expressed as a percentage of the weighted average of borrowings during the period. Capital return The change in value during the period for properties held at the balance sheet date, after taking account of capital expenditure and exchange translation movements, calculated on a monthly time weighted basis. Dividend cover Adjusted earnings per share divided by the dividend per share. Earnings per share (or 'EPS') Profit for the period attributable to equity shareholders divided by the average number of shares in issue during the period. EPRA European Public Real Estate Association. This organisation has issued recommended bases for the calculation of earnings per share and net asset value per share. ERV The estimated market rental value of the total lettable space in a property, after deducting head and equity rents, calculated by the group's valuers. Gearing Net debt expressed as a percentage of equity shareholders' funds. IFRS International Financial Reporting Standards. IPD Investment Property Databank. Initial yield Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of property value. Interest cover Net rental income divided by net cost of finance before capitalised interest, the change in fair value of interest rate swaps and bond redemption costs. Interest rate and currency swap An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time. Like-for-like / underlying net The percentage change in rental income for completed investment properties owned rental income throughout both current and prior periods, after taking account of exchange translation movements. Loan to value ratio Borrowings and foreign currency swaps expressed as a percentage of the total value of investment and development properties. Net asset value per share Equity shareholders' funds divided by the number of shares in issue at the (or 'NAV') balance sheet date. Over-rented The percentage by which the ERV falls short of rents passing, together with the estimated rental value of vacant space. Pre-let A lease signed with a tenant prior to completion of a development. REITs Real Estate Investment Trusts. A tax regime which in the UK exempts participants from corporation tax both on UK rental income and gains arising on UK investment property sales, subject to certain requirements. Rents passing The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. This may be more or less than the ERV (see over-rented and reversionary or under-rented). Return on shareholders' equity Capital growth and profit for the year expressed as a percentage of shareholders' funds at the beginning of the year, all excluding deferred tax. Reversionary or under-rented The percentage by which the ERV exceeds the rents passing, together with the estimated rental value of vacant space. SIIC Societes d'Investissements Immobiliers Cotees. A French tax-exempt regime available to property companies listed in France. Total development cost All capital expenditure on a development project, including capitalised interest. Total return Net rental income and capital return expressed as a percentage of opening book value of property adjusted for capital expenditure and exchange translation movements, calculated on a monthly time weighted basis. Total shareholder return Dividends and capital growth in the share price, expressed as a percentage of the share price at the beginning of the year. True equivalent yield The average income return, reflecting the timing of future rental increases, based on current ERV, resulting from lettings, lease renewals and rent reviews, assuming rents are received quarterly in advance. Turnover rent Rental income which is related to an occupier's turnover. Vacancy rate The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the total ERV of the property or portfolio. Yield on cost Rents passing expressed as a percentage of the total development cost of a property. This information is provided by RNS The company news service from the London Stock Exchange

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