Interim Results
Hammerson PLC
24 August 2004
Hammerson Half Year Results
Hammerson plc announces its unaudited results for the six months to 30 June
2004.
Six months to 30 June
2004 2003 Change
Net rental income £94.1m £97.5m -3.5%
Profit before tax(1) £64.6m £47.4m +36.3%
Adjusted profit before tax(2) £42.2m £43.7m -3.4%
Basic earnings per share 19.9p 13.7p +45.3%
Adjusted earnings per share(3) 14.4p 15.3p -5.9%
Dividend per share 5.45p 5.12p +6.4%
30 June 2004 31 Dec 2003
Shareholders' funds £2,324m £2,168m +7.2%
Adjusted net asset value per share(4) 844p 803p +5.1%
Gearing 61% 73%
Notes:
(1) In 2004 there was an exceptional profit of £22.4 million (2003: exceptional profit of £3.7 million).
(2) Excluding exceptional profits.
(3) Excluding exceptional profits and related tax, deferred tax and the tax charge on entry into the new
French tax exempt regime.
(4) Excluding deferred tax.
Key points
• The group took advantage of the strong investment market to dispose of
a number of properties for £245 million, giving rise to exceptional profits of
£22 million.
• On a like-for-like basis, net rental income increased by 5.5%.
Property disposals reduced income by £14.0 million compared with the first half
of 2003.
• The reduction in adjusted profit before tax reflected financing and
void costs at three office developments completed towards the end of 2003 and
the impact of property disposals.
• The portfolio increased in value by 4.0% overall, with the retail and
office portfolios increasing in value by 4.1% and 3.8% respectively.
• Adjusted net asset value per share increased by 5.1% to 844 pence
after making a provision equivalent to 25 pence per share for entry into the new
French tax exempt regime.
• Leases were signed in respect of 13,500 m(2) of space in the three
office developments completed towards the end of 2003.
• Gearing reduced to 61%. New medium and long term finance arranged
totalling over £500 million.
• Placing in January 2004 of a 20% shareholding in Hammerson plc,
previously owned by Standard Life Investments.
The Chairman, Ronald Spinney, said today:
' The first six months of 2004 was an active period for Hammerson. The group
took advantage of the continued buoyant conditions in the UK property investment
markets by raising over £245 million from disposals. Progress was made in
letting space in the group's office properties and in advancing the current
developments. The group also secured tax exempt status for its French
subsidiaries.
The group's high quality investment portfolio offers good potential for growth,
whilst the development programme will generate substantial new income streams.
Hammerson is well placed to take advantage of future opportunities and benefit
from the continuing demand from investors for prime properties of the type owned
by the company.'
For further information:
John Richards Tel: 020 7887 1000
Chief Executive
Simon Melliss Tel: 020 7887 1000
Group Finance Director
Christopher Smith Tel: 020 7887 1019
Director of Corporate Affairs email: csmith@hammerson.co.uk
Copies of the Chairman's statement, profit & loss account, balance sheet, cash
flow statement and notes are attached. The terms in the commentary that follows
are defined in the glossary of terms at the end of the document.
Presentation
Hammerson is making a presentation to investors and analysts at 9.30 a.m. today
at the offices of Dresdner Kleinwort Wasserstein, 20 Fenchurch Street, London
EC3. A conference call facility is available for those unable to attend the
presentation by dialling + 44 (0) 20 8322 2055. A copy of the slide presentation
will be posted simultaneously on the company's website (www.hammerson.co.uk).
Financial Calendar
Ex dividend date 22 September 2004
Record date 24 September 2004
Interim dividend payable 29 October 2004
CHAIRMAN'S STATEMENT
The first six months of 2004 was an active period for Hammerson. The group took
advantage of the continued buoyant conditions in the UK property investment
markets by raising over £245 million from disposals. Progress was made in
letting space in the group's office properties and in advancing the current
developments. The group also secured tax exempt status for its French
subsidiaries.
Results and Dividend
Net rental income for the six months to 30 June 2004 was £94.1 million, compared
with £97.5 million for the corresponding period in 2003. On a like-for-like
basis, net rental income increased by 5.5%. An analysis of net rental income is
shown below:
Six months to Six months to
30 June 2004 30 June 2003
£m £m
Properties owned throughout 79.0 74.9
Acquisitions 1.4 -
Developments 4.8 1.3
Properties sold 6.4 20.4
Exchange translation and other 2.5 0.9
94.1 97.5
Principally reflecting a reduction in borrowings, the net cost of finance
charged to the profit and loss account in the first six months decreased by £2.7
million to £39.0 million. Administration costs increased by £0.9 million to
£12.9 million, which included a one-off charge of £0.8 million in respect of the
closure of the group's Berlin office.
Profit before tax was £64.6 million, compared with £47.4 million in the first
half of 2003. In 2004, there was an exceptional profit of £22.4 million in
respect of property sales, compared with an exceptional profit of £3.7 million
in 2003. Excluding these exceptional items, adjusted profit before tax decreased
by £1.5 million to £42.2 million. Profits were reduced by £6.7 million compared
with the first half of 2003 due to finance and void costs at the three office
developments completed towards the end of 2003. Additionally, profits were
reduced by £5.2 million as a result of a number of disposals of properties with
an income yield higher than the financing costs. The proceeds are being
reinvested in assets offering better growth prospects. Adjusted earnings per
share decreased by 0.9 pence to 14.4 pence.
The directors have declared an interim dividend of 5.45 pence per share payable
on 29 October 2004, an increase of 6.4%.
Balance Sheet, Cash Flow and Financing
Shareholders' funds increased by £156 million to £2,324 million in the six
months to 30 June 2004, principally due to a valuation uplift of £155 million.
As described below, provision has been made for the exit tax arising on
Hammerson's election for tax exempt status in France. However, the latter was
largely offset by a release of deferred tax, profits in the period, and exchange
translation movements.
Adjusted net asset value per share increased by 41 pence, or 5.1%, to 844 pence
in the first six months of the year. The exit tax reduced adjusted net asset
value per share by 25 pence. Excluding this, the increase in adjusted net asset
value per share would be 8.2%.
During the first half of the year, capital expenditure was £118 million,
compared with £245 million realised from property disposals. Overall, there was
a net cash inflow before financing of £107 million in the first half of 2004,
after taking account of operating cash flow, interest and dividends paid.
Reflecting the net cash inflow and increase in shareholders' funds, gearing
reduced by 12 percentage points to 61% at 30 June 2004.
The group's financing structure was further strengthened in the first half of
the year by the issue of £300 million 6% unsecured bonds maturing in 2026. In
addition, Hammerson signed a £230 million five year revolving credit facility in
June. As a result of these financings, the average maturity of the group's debt
has increased to over eleven years. Hammerson's liquidity is strong, with cash,
short term deposits and unutilised committed bank facilities of £781 million at
30 June 2004, excluding a £165 million facility which expired in July.
Tax
In March, Hammerson plc obtained a secondary listing for its shares on Euronext
Paris, the French Stock Exchange, enabling the group to elect into the new
Societes d'Investissements Immobiliers Cotees ('SIIC') tax regime. The group's
income and capital gains in the French subsidiaries are now tax exempt, although
intercompany dividends receivable in the UK will be taxable.
Full provision has been made for the £71 million entry charge, which is payable
in four annual instalments. This has been partly offset by the write back of
deferred tax of £45 million, giving rise to a net charge of £26 million.
Furthermore, the contingent tax liability in respect of Hammerson's French
business was reduced by £121 million.
Earlier this year, the UK Treasury issued a consultation paper 'Promoting More
Flexible Investment In Property' regarding the introduction of tax transparent
vehicles for property ownership in this country. Hammerson welcomes this
initiative and has submitted its formal response to the Treasury. Dependent on
the detailed legislation, the introduction of UK tax transparent vehicles for
property ownership should prove beneficial to Hammerson's shareholders.
Portfolio
The group's property portfolio was valued at £4.0 billion at 30 June 2004, with
little change in the overall distribution of the portfolio, either by country or
sector, in the first six months of the year. The vacancy rate within Hammerson's
portfolio decreased from 9.2% at 31 December 2003 to 8.1% at 30 June 2004,
primarily as a result of the letting of space at the three office developments
completed towards the end of 2003.
During the first half of 2004, leases were signed in respect of a total of
13,500 m(2) of space at these completed office properties and the group's share
of the income from these leases, after the expiry of rent free periods, will
amount to £3.9 million per annum.
A table of property valuations and movements for the six months to 30 June 2004
is shown below:
Shopping Centres Retail Parks Offices Group
Value £m % change Value £m % change Value £m % change Value £m % change
UK 1,462 5.7 509 10.7 772 5.4 2,743 6.5
France 653 2.5 - - 456 1.0 1,109 1.9
Germany 157 (18.7) - - - - 157 (18.7)
Total 2,272 2.7 509 10.7 1,228 3.8 4,009 4.0
During the first six months of the year, there was an underlying increase in the
value of the group's portfolio of 4.0%, with the value of the retail and office
portfolios increasing by 4.1% and 3.8% respectively. The valuation performance
was strongest in the UK, with the retail park and shopping centre portfolios
showing underlying increases of 10.7% and 5.7% respectively, and the office
portfolio increasing by 5.4%.
The decline in value of the group's three remaining properties in Germany was
disappointing, reflecting poor market conditions and lower rental values.
Hammerson has outsourced the management of these assets, thereby reducing
overhead costs, and is working with the external managers to optimise the
returns from these properties.
During the first half of the year, the principal portfolio transactions were the
sale for a total of £195 million of three London office properties, 21
Moorfields, Euston Square and Latham House, all of which had limited growth
potential. In April, Hammerson committed part of the disposal proceeds by
exchanging contracts to acquire the freehold interest in the former London Stock
Exchange buildings in the City for £68 million. These assets offer substantial
potential for value creation.
Since 30 June 2004, the group has sold Parc Fforestfach Retail Park, Swansea,
for £88 million. The property was acquired by Hammerson in August 2002 for £58
million. In addition, the group has exchanged contracts for the sale of its one
third interest in Martineau Place, Birmingham, for £31 million.
Current Developments
Details of the group's major current developments are shown below:
Current Projects Ownership Size Cost at Estimated Amount let Anticipated
interest 30/6/04 total cost or under completion
m(2) offer by date
£m £m area
Retail Parks
Brent Cross, London NW2 40.6% 8,600 20* 31* 76% Dec 2004
Cyfarthfa, Merthyr Tydfil 100% 23,600 21 35 69% Jan 2005
St Oswald's, Gloucester (Phase 100% 20,500 15 44 70% Sept 2005
1)
Offices
Moorhouse, London EC2 33.3% 30,500 58* 67* 0% Nov 2004
Bishops Square, London E1 75% 75,000 140* 280* 95% Jun 2005
9 place Vendome, Paris 1er 50% 27,700 56* 90* 0% Apr 2006
* Hammerson's share in respect of joint ventures
At present six major developments are underway, four of them in joint ventures.
Hammerson's share of the cumulative costs of these developments at 30 June 2004
was £310 million and its estimated additional cost to complete them is £237
million. Hammerson's share of the future income from these schemes, for which
leases have already been signed or agreed, amounts to £30 million per annum.
Brent Cross Retail Park in north London is a joint venture with Standard Life
Investments. Hammerson's capital commitment for its 40.6% interest is £31
million. The scheme, where completion is due at the end of this year, is 76% let
or under offer, with tenants including Borders, DFS and Next.
At the beginning of the year, Hammerson started the Cyfarthfa Retail Park
development in Merthyr Tydfil. Completion is expected in January 2005 at an
estimated cost of £35 million. Some 69% of the rental income has been secured.
St Oswald's Retail Park in Gloucester is a 35,000 m(2) mixed-use scheme,
involving a retail park, leisure facilities, business space and 450 residential
units. This scheme will be developed on a phased basis, with the initial 20,500
m(2) retail and leisure phase will start imminently. The estimated cost of this
element of the scheme, which is 70% let or under offer, is £44 million,
excluding the residential component where Hammerson envisages working with a
specialist residential partner.
Hammerson currently has three office schemes underway. At Bishops Square, a
75,000 m(2) scheme in the City of London, the letting risk has been largely
eliminated with the office space having been pre-let to leading international
lawyers, Allen & Overy. Work is progressing well and a handover to the tenant
for fitting out works is scheduled for June 2005.
Hammerson has a one third interest in Moor House Limited Partnership, which is
carrying out the major office development at Moorhouse in London EC2.
Completion is scheduled for November of this year and Hammerson's estimated
total development cost is £67 million. The partners have adopted a multi-letting
strategy and marketing of the office accommodation will begin early in 2005.
In central Paris, work started earlier this year on 9 place Vendome, where
Hammerson is in joint venture with AXA, to create 22,200 m(2) of high quality
office accommodation and 5,500 m(2) of prime retail space on the prestigious rue
Saint-Honore. Completion is scheduled for 2006.
Development Pipeline
In addition to the current developments, Hammerson has created and successfully
advanced opportunities for several other schemes, which can be progressed over
the next few years in the light of market conditions.
Retail Schemes
In Leicester, Hammerson and Hermes are involved in a joint venture to undertake
a major expansion of their existing shopping centre, The Shires. The scheme will
include 60,000 m(2) of additional retail space, leisure facilities, and a
residential component. The John Lewis Partnership has agreed terms to anchor the
centre. It is anticipated that construction of Shires West will begin during
2005, with completion in 2008. The total cost of Shires West is estimated at
£285 million, of which Hammerson's 60% share is £171 million.
Broadmead, Bristol, has detailed planning consent for a mixed-use scheme
totalling 139,000 m(2), including 84,000 m(2) of retail space. The Bristol
Alliance is now a 50:50 joint venture between Hammerson and Land Securities
Group PLC, following the acquisition by the partners of the interests previously
owned by Henderson Global Investors and Morley Fund Management. The total
development cost to Hammerson of the Broadmead redevelopment is estimated at
£210 million and a start on site could be made in the second half of 2005. In
addition, the Bristol Alliance also owns 72 retail units in Broadmead, with a
current value of approximately £107 million.
Union Square, Aberdeen, which was part of the portfolio acquired by Hammerson
from the former Railtrack, is a 50:50 joint venture with Stannifer (now part of
Chelsfield). The scheme has planning consent for 50,000 m(2) of mixed-use space,
incorporating a retail park, retail mall and leisure facilities. Leasing is
underway with heads of terms agreed with several retailers. Construction could
start in the second half of 2005 at an estimated total cost to Hammerson of £75
million.
At Westwood and East Kent Retail Parks in Thanet, Hammerson received planning
consent, in January of this year, for a 7,500 m(2) extension to its existing
16,600 m(2) retail park. The estimated development cost is £15 million and a
start on site is anticipated in December 2004. The group has let 65% of the
scheme to Homebase.
The group is also working in partnership with local authorities and councils to
advance several other major mixed-use retail schemes and retail parks. These
include developments in London, Leeds, Peterborough, Sheffield, Sittingbourne
and Southampton. In addition, in France the group is evaluating extensions to a
number of its retail schemes and exploring opportunities to enter the retail
parks sector.
Offices
In April 2004, Hammerson exchanged contracts to purchase the freehold of the
former London Stock Exchange buildings, with planning consent for 45,500 m(2) of
office and retail accommodation. Later this year, the group intends to submit a
revised planning application to expand and enhance the scheme. Depending on
market conditions, it is anticipated that a start on the first phase, the tower
building, will be made during 2005.
Opera Capucines, Paris 2e, is a 50:50 joint venture with MAAF, to create 5,800 m
(2) of office and 4,600 m(2) of retail accommodation in the centre of Paris. The
group intends to submit a planning application later this year.
Markets and Outlook
Over the past two years, demand from investors for property in the UK and France
has been strong, leading to increases in property values, notwithstanding that
the demand from occupiers for accommodation has been variable. The strong
investment demand reflects the attractions of property, which generally offers a
secure income stream and the potential for growth over the longer term. It is
also a consequence of uncertainties over the outlook for equities and bonds.
Retail Property
In the UK, retail sales growth was strong in the first half of 2004. There was
good demand from retailers for space in dominant centres and retail parks.
Investor sentiment towards the retail sector remained positive, leading to a
further increase in values. Some slowdown in the rate of retail sales growth may
occur in the second half of 2004 and in 2005. Nevertheless, rental values of
prime retail assets are expected to show continuing growth.
In France, retail sales growth improved in the first half of 2004, recovering
from the slowdown in 2003. This has led to an increase in enquiries from
retailers for space in the group's centres and is supporting current rental
levels. Investment demand remains strong. However, with existing investors
reluctant to dispose of major shopping centres, there have been few
transactions.
In Germany, retail sales have continued to decline, unemployment remains high
and confidence is low. Rents and values for retail properties have weakened.
Although there are signs of economic recovery, the German retail property market
is likely to remain difficult.
Office Property
Sentiment in the central London office markets showed a marked improvement in
the first half of the year, with an improvement in demand for office space.
However, due to the amount of space available in the City of London, rental
values showed a marginal decrease. In the West End, good demand for office space
has led to an increase in rents of between 5% and 10% from their levels at the
end of 2003. Investment demand for central London offices remained buoyant,
leading to an improvement in values. Looking ahead, sustained occupational
demand and a reduction in development completions should lead to a gradual
recovery in net effective rents in the City and further increases in the West
End.
In central Paris, although there was an increase in the level of enquiries from
potential occupiers in the first six months of 2004, the overall vacancy rate
rose slightly and prime rents softened. Nevertheless, in central Paris the
vacancy rate is still relatively low at around 6%, offering the prospect of a
recovery in rents towards the end of 2005. Good investment demand continues to
support yields on well-let offices.
International Financial Reporting Standards
In 2005, Hammerson will be reporting its interim financial results under
International Financial Reporting Standards (IFRS). These will require property
revaluation surpluses and deficits to be included in the income statement;
contingent tax to be deducted from shareholders' funds; and certain leasehold
properties to be accounted for as finance leases, increasing both the group's
assets and liabilities. There will be other changes of less significance to
Hammerson. The company will provide additional information during 2005 on the
effects of these changes.
Conclusion
The group's high quality investment portfolio offers good potential for growth,
whilst the development programme will generate substantial new income streams.
Hammerson is well placed to take advantage of future opportunities and benefit
from the continuing demand from investors for prime properties of the type owned
by the company.
Ronald Spinney
Chairman
24 August 2004
Property Portfolio Information
For the six months ended 30 June 2004
Net True Underlying Estimated
rental Properties equivalent valuation Vacancy Rents rental Reversionary/
income at yield change rate passing value (Over-rented)
valuation
£m £m % % % £m £m %
Notes (1) (2) (3) (4)
United Kingdom
Retail: Shopping 33.6 1,461.6 5.8 5.7 2.3 77.5 85.8 8.4
centres
Retail parks 10.6 509.2 5.9 10.7 5.4 18.8 25.4 19.8
44.2 1,970.8 5.8 7.0 3.2 96.3 111.2 10.8
Office: City 10.1 540.8 6.6 4.8 17.0 18.9 16.1 (32.6)
West End 4.6 81.7 6.2 12.8 44.8 2.4 3.8 (6.0)
Docklands & 5.7 148.8 7.8 4.0 18.4 10.0 10.8 (16.9)
other
20.4 771.3 7.0 5.4 19.4 31.3 30.7 (23.8)
Total United Kingdom 64.6 2,742.1 6.1 6.5 6.3 127.6 141.9 2.6
Continental Europe
Retail: France 19.2 653.0 6.5 2.5 2.7 40.5 47.3 15.1
Germany 3.5 157.4 6.5 (18.7) 12.4 9.6 12.5 (0.5)
22.7 810.4 6.5 (2.4) 5.8 50.1 59.8 11.9
Office: France 6.8 456.2 6.3 1.0 47.3 17.3 27.7 1.0
Total Continental 29.5 1,266.6 6.4 (1.2) 12.7 67.4 87.5 8.1
Europe
Group
Retail 66.9 2,781.2 6.0 4.1 4.0 146.4 171.0 11.2
Office 27.2 1,227.5 6.6 3.8 26.8 48.6 58.4 (12.0)
Total Group 94.1 4,008.7 6.2 4.0 8.1 195.0 229.4 4.6
Selected information at 31 December 2003
Group
Retail 2,704.4 6.3 4.6 146.7 173.8 13.9
Office 1,251.1 7.2 26.8 63.7 77.2 (11.9)
Total Group 3,955.5 6.5 9.2 210.4 251.0 5.0
Notes
(1) True equivalent yield is based on rents passing and estimated rental values. The calculation excludes
properties in the course of development.
(2) Rents passing after deducting head and equity rents post any rent free periods.
(3) Estimated rental value including vacant space and after deducting head and equity rents.
(4) The amount by which the estimated rental value exceeds or falls short of the rents passing, together
with the estimated rental value of vacant space, after any rent free period.
Consolidated Profit and Loss Account
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
Audited Unaudited Unaudited
£m Notes £m £m
215.3 Gross rental income, after rents payable 104.5 108.3
(25.8) Property outgoings (10.4) (10.8)
189.5 Net rental income 1 94.1 97.5
(0.1) Loss on disposal of properties held for - (0.1)
resale
3.3 Management fees receivable 2.1 1.5
(15.8) Cost of property activities (8.6) (8.1)
(12.3) Corporate expenses (6.4) (5.4)
(24.8) Administration expenses (12.9) (12.0)
164.6 Operating profit 81.2 85.4
Exceptional items: Profit/(Loss) on the sale
(18.8) of investment properties 22.4 3.7
145.8 Profit on ordinary activities before interest 103.6 89.1
(78.7) Cost of finance (net) 2 (39.0) (41.7)
67.1 Profit on ordinary activities before tax 64.6 47.4
(1.7) Current tax 3(a) (49.7) (0.7)
(13.1) Deferred tax 3(a) 41.1 (8.3)
(14.8) Tax charge on profit on ordinary activities (8.6) (9.0)
52.3 Profit on ordinary activities after tax 56.0 38.4
(2.0) Equity minority interests (1.1) (0.8)
50.3 Profit for the period 54.9 37.6
(46.4) Dividends 4 (15.1) (14.1)
3.9 Retained profit for the period 13 39.8 23.5
18.3p Basic earnings per share 5 19.9p 13.7p
18.2p Diluted earnings per share 5 19.9p 13.7p
29.8p Adjusted earnings per share 5 14.4p 15.3p
Consolidated Balance Sheet
31 December 2003 30 June 2004 30 June 2003
Audited Unaudited Unaudited
Restated*
£m Notes £m £m
Fixed assets
3,955.5 Land and buildings 6 4,008.7 3,908.8
1.3 Fixtures, fittings and equipment 1.2 1.2
3,956.8 Tangible assets 4,009.9 3,910.0
40.7 Investments 7 42.7 39.0
3,997.5 4,052.6 3,949.0
Current assets
109.7 Debtors: Due within one year 8 89.9 119.8
32.8 Due after more than one year 8 29.5 15.2
187.0 Cash and short term deposits 9 230.4 319.4
329.5 349.8 454.4
Creditors falling due within one year
(249.0) Borrowings 10 (156.2) (75.3)
(253.8) Other 11 (285.0) (270.8)
(173.3) Net current (liabilities)/assets (91.4) 108.3
3,824.2 Total assets less current liabilities 3,961.2 4,057.3
Creditors falling due after more than one
year
(1,523.2) Borrowings 10 (1,497.8) (1,826.8)
(36.0) Other 11 (86.2) (32.3)
Provisions for liabilities and charges
(58.7) Deferred tax 3(b) (15.8) (51.4)
(38.1) Equity minority interests (37.0) (42.4)
2,168.2 2,324.4 2,104.4
Capital and reserves
69.1 Called up share capital 69.2 69.0
594.1 Share premium account 13 595.6 592.9
764.7 Revaluation reserve 13 897.0 747.7
7.2 Capital redemption reserve 13 7.2 7.2
8.4 Other reserves 13 8.2 8.4
726.9 Profit and loss account 13 748.9 681.0
(2.2) Investment in own shares 14 (1.7) (1.8)
2,168.2 Equity shareholders' funds 2,324.4 2,104.4
784p Diluted net asset value per share 5 839p 761p
803p Adjusted net asset value per share 5 844p 778p
* UITF 38 was adopted at 31 December 2003. Comparative figures at 30 June 2003
have been restated (see note 14).
Statement of Total Recognised Gains and Losses
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
Audited Unaudited Unaudited
£m £m £m
50.3 Profit for the period 54.9 37.6
110.8 Unrealised surplus on revaluation of properties 152.1 30.2
Unrealised surplus/(deficit) on revaluation of
0.5 investments and minority interests 2.4 (1.1)
1.5 Unrealised surplus on acquisition of minority interest - 1.5
Current tax on property disposals relating to prior year
(0.3) revaluations (3.7) (0.3)
Deferred tax on property disposals relating to prior
(4.7) year revaluations - (2.6)
French exit tax payable on election for SIIC status
- relating to prior year revaluations (27.2) -
16.4 Exchange translation movements (9.3) 14.0
174.5 Total recognised gains and losses for the period 169.2 79.3
Note of Historical Cost Profits and Losses
Six months Six months
ended ended
Year ended 30 June 30 June 2003
31 December 2003 2004
Audited Unaudited Unaudited
£m £m £m
67.1 Profit on ordinary activities before tax 64.6 47.4
145.2 Realisation of previous years' revaluation gains 15.3 78.1
212.3 Historical cost profit on ordinary activities before tax 79.9 125.5
Historical cost profit for the period after tax, equity
144.1 minority interests and dividends 24.2 98.7
Reconciliation of Movements in Shareholders' Funds
Six months Six months
ended ended
Year ended 30 June 30 June 2003
31 December 2003 2004 Unaudited
Audited Unaudited Restated*
£m £m £m
3.9 Retained profit for the period 39.8 23.5
- Amortisation of investment in own shares 0.5 0.4
124.2 Other recognised gains and losses 114.3 41.7
1.9 Issue of shares 1.6 0.6
130.0 Net increase in shareholders' funds 156.2 66.2
2,038.2 Shareholders' funds at 1 January (restated*) 2,168.2 2,038.2
2,168.2 Closing shareholders' funds 2,324.4 2,104.4
* UITF 38 was adopted at 31 December 2003. Comparative figures at 30 June 2003
have been restated (see note 14).
Consolidated Cash Flow Statement
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
Audited Unaudited Unaudited
£m Notes £m £m
173.5 Net cash flow from operating activities 15 74.1 124.6
(104.6) Returns on investment and servicing of 15 (60.4) (75.0)
finance
(0.5) Tax paid (2.2) (0.1)
176.1 Capital expenditure and investment 15 127.6 170.6
(60.9) Acquisitions and disposals 15 - (60.9)
(44.4) Equity dividends paid (32.3) (30.3)
139.2 Cash inflow 106.8 128.9
50.9 (Increase)/Decrease in short term deposits (36.4) 25.6
(195.2) Net cash outflow from financing 16 (62.6) (52.3)
(5.1) Increase/(Decrease) in cash in the period 7.8 102.2
Reconciliation of Net Cash Flow to Movement in Net Debt
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
Audited Unaudited Unaudited
£m £m £m
(5.1) Increase/(Decrease) in cash in the period 7.8 102.2
197.1 Net decrease in debt 64.2 52.9
(50.9) Increase/(Decrease) in short term deposits 36.4 (25.6)
141.1 Change in net debt resulting from cash flows 108.4 129.5
(84.9) Exchange adjustment 53.2 (70.8)
56.2 Movement in net debt in the period 161.6 58.7
(1,641.4) Net debt at 1 January (1,585.2) (1,641.4)
(1,585.2) Closing net debt (1,423.6) (1,582.7)
Notes to the Accounts
1 NET RENTAL INCOME
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
£m £m £m
124.6 United Kingdom 64.6 64.9
53.1 France 26.0 26.8
11.8 Germany 3.5 5.8
189.5 94.1 97.5
2 COST OF FINANCE (NET)
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
£m £m £m
Interest payable on:
22.9 Bank loans and overdrafts 7.5 14.2
85.6 Other loans 46.1 45.2
5.2 Other interest payable 2.7 -
113.7 Interest payable and similar charges 56.3 59.4
Less:
(25.1) Interest payable capitalised (8.6) (13.1)
(9.9) Interest receivable (8.7) (4.6)
78.7 Cost of finance (net) 39.0 41.7
3 TAX
(a) Tax charge
Six months Six months
Year ended ended ended
31 December 2003 30 June 2004 30 June 2003
£m £m £m
Current tax
1.1 UK corporation tax on profits before exceptional 0.5 0.2
items
0.6 Foreign tax on profits before exceptional items 0.8 0.5
- UK corporation tax on exceptional items 5.0 -
- French exit tax payable on election for SIIC status 43.4 -
1.7 49.7 0.7
Deferred tax
13.1 Deferred tax on profits before exceptional items 3.7 8.3
- Deferred tax released on election for SIIC status (44.8) -
13.1 (41.1) 8.3
14.8 Tax charge on profits on ordinary activities 8.6 9.0
The current tax charge on profits before exceptional items for the six months
ended 30 June 2004 is based on the projected effective tax rate for the full
year. Current tax is reduced by the French tax exemption and by capital
allowances and tax relief for capitalised interest.
Notes to the Accounts
3 TAX (continued)
(b) Deferred tax
31 December 2003 30 June 2004 30 June 2003
£m Movement in year Notes £m £m
34.8 Opening provision 54.8 34.8
13.1 (Credit)/ Charge in profit and loss account (41.1) 8.3
Charge on realisation of revaluation gains on
4.7 property disposals - 2.6
(0.5) Corporate acquisitions and disposals 0.1 (0.6)
2.7 Exchange differences - 2.3
54.8 Closing provision 13.8 47.4
31 December 2003 30 June 2004 30 June 2003
£m Net deferred tax provision £m £m
UK
27.1 Capital allowances 27.1 27.2
1.5 Other timing differences 3.4 2.6
- Dividends receivable from France 2.2 -
(18.6) Tax losses (18.9) (23.0)
10.0 Net UK deferred tax provision 13.8 6.8
France
35.9 Tax depreciation - 33.4
8.9 Other timing differences - 7.2
44.8 France deferred tax provision - 40.6
54.8 Net deferred tax provision 13.8 47.4
Analysed as:
(3.9) Deferred tax asset 8 (2.0) (4.0)
58.7 Deferred tax provision 15.8 51.4
54.8 Net deferred tax provision 13.8 47.4
(c) Contingent tax
Should the group's properties and investments be sold at book value, it is
estimated that the maximum tax liabilities arising, in addition to the deferred
tax provided in the balance sheet, would be:
31 December 2003 30 June 2004 30 June 2003
£m £m £m
99.0 UK 120.0 88.0
- UK tax on dividends receivable from France 4.0 -
123.0 France 3.0 124.0
222.0 127.0 212.0
The tax arising may be reduced depending on how sales are structured. In
particular, if the group retains all capital allowances on disposals the
liability would be £42.0m (31 December 2003: £45.0m) less than the total
disclosed deferred and contingent tax.
Notes to the Accounts
3 TAX (continued)
(d) Effects of French SIIC elections
In April 2004 the group elected for the whole of its French business, with the
exception of 9 place Vendome, to enter the French SIIC tax exempt regime with
effect from 1 January 2004. Exit taxes totalling £70.6m, equivalent to 25 pence
per share on an adjusted net asset value basis, arose on the conversion and will
be payable in four equal annual instalments starting in December 2004. The part
of the exit taxes relating to prior year revaluations (£27.2m) is included in
the statement of total recognised gains and losses with the balance of £43.4m
dealt with in the profit and loss account. Deferred tax of £44.8m has been
written back and £121.0m of contingent tax released. The SIIC rules require
Hammerson's French subsidiaries to distribute a proportion of their profits to
Hammerson plc and allowance is made within deferred tax and contingent tax for
the UK tax that may arise when dividends are received.
4 DIVIDENDS
The directors have declared an interim dividend of 5.45 pence per share (30 June
2003: 5.12 pence per share) payable on 29 October 2004 to shareholders on the
register at the close of business on 24 September 2004.
5 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculations for earnings per share, diluted earnings per share and adjusted
earnings per share, based on the weighted average number of shares, are shown in
the table below. The weighted average number of shares shown exclude those
shares held in the Hammerson Employee Share Ownership Plan (note 14) which are
treated as cancelled.
Year ended 31 December 2003 Six months ended 30 June 2004 Six months ended 30 June 2003
Pence Pence Pence
Earnings Shares per Earnings Shares per Earnings Shares per
£m million share £m million share £m million share
50.3 275.4 18.3 Basic 54.9 275.9 19.9 37.6 275.3 13.7
Adjustments:
Dilutive share
- 0.3 (0.1) options - 0.6 - - 0.2 -
50.3 275.7 18.2 Diluted 54.9 276.5 19.9 37.6 275.5 13.7
Adjustments:
18.8 - 6.8 Exceptional items (22.4) - (8.1) (3.7) - (1.4)
Tax on
- - - exceptional items 5.0 - 1.8 - - -
- - - SIIC exit tax 43.4 - 15.7 - - -
13.1 - 4.8 Deferred tax (41.1) - (14.9) 8.3 - 3.0
82.2 275.7 29.8 Adjusted 39.8 276.5 14.4 42.2 275.5 15.3
Notes to the Accounts
5 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE (continued)
The calculations for basic, diluted and adjusted net asset value per share are
shown in the table below:
30 June 2004
Net asset
Shareholders' value
funds Shares per share
£m million pence
Basic 2,324.4 276.7 840
Company's own shares held in Employee Share Ownership Plan - (0.6) n/a
Unexercised share options 11.3 2.3 n/a
Diluted 2,335.7 278.4 839
Deferred tax 13.8 - n/a
Adjusted 2,349.5 278.4 844
6 LAND AND BUILDINGS
Properties held for
or in
Fully developed the course of
properties development
Total
Valuation Cost Valuation Cost Valuation Cost
£m £m £m £m £m £m
Movements in the period
Balance at 1 January 2004 3,627.7 2,882.1 327.8 302.3 3,955.5 3,184.4
Exchange adjustment (62.6) (55.5) (2.9) (2.6) (65.5) (58.1)
Additions 27.5 27.5 149.0 149.0 176.5 176.5
Disposals (218.5) (203.2) - - (218.5) (203.2)
Transfers (3.7) (3.8) 3.7 3.8 - -
Capitalised interest 0.6 0.6 8.0 8.0 8.6 8.6
Revaluation surplus 133.9 - 18.2 - 152.1 -
Balance at 30 June 2004 3,504.9 2,647.7 503.8 460.5 4,008.7 3,108.2
All properties are stated at market value as at 30 June 2004, 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 Healey &
Baker, Chartered Surveyors. The valuations have been prepared in accordance
with the Appraisal and Valuation Standards of the Royal Institution of Chartered
Surveyors.
At 30 June 2004 the total amount of interest included in development properties
was £16.6m (31 December 2003: £8.6m) and is calculated based on the group's
average cost of borrowings.
Notes to the Accounts
7 INVESTMENTS
31 December 2003 30 June 2004 30 June 2003
Restated*
£m £m £m
25.3 Value Retail Investors Limited Partnerships 27.5 23.6
14.0 Interests in Value Retail plc and related companies 13.8 13.9
1.4 Other investments 1.4 1.5
40.7 42.7 39.0
* UITF 38 was adopted at 31 December 2003. Comparative figures at 30 June 2003
have been restated (see note 14). The shares of Hammerson plc, which were
included in investments at an unamortised cost of £1.8m at 30 June 2003, are now
shown as a deduction from equity shareholders' funds.
8 DEBTORS
31 December 2003 30 June 2004 30 June 2003
£m Notes £m £m
Due within one year
39.5 Trade debtors 17.4 38.9
66.5 Other debtors 70.6 78.0
0.7 Corporation tax 0.4 0.7
3.0 Prepayments 1.5 2.2
109.7 89.9 119.8
Due after more than one year
28.9 Other debtors 27.5 11.2
3.9 Deferred tax 3(b) 2.0 4.0
32.8 29.5 15.2
Other debtors due after more than one year comprises a loan of €11.0m (31
December 2003: €11.0m) advanced to Value Retail European Holdings BV bearing
interest at 13% and maturing on 31 July 2005 and a loan of €30.0m (31 December
2003: €30.0m) to Value Retail plc bearing interest based on EURIBOR and maturing
on 10 October 2006.
9 CASH AND SHORT TERM DEPOSITS
31 December 2003 30 June 2004 30 June 2003
£m £m £m
29.6 Cash at bank 37.1 136.8
157.4 Short term deposits 193.3 182.6
187.0 230.4 319.4
Analysis by currency
169.9 Sterling 220.1 228.8
17.1 Euro 10.3 90.6
187.0 230.4 319.4
At 30 June 2004 short term deposits mainly comprised deposits placed on money
markets with rates linked to LIBOR.
Notes to the Accounts
10 BORROWINGS
31 December 2003 30 June 2004 30 June 2003
£m £m £m
556.7 Bank loans and Unsecured 156.0 627.8
overdrafts:
16.5 Secured 28.5 12.2
1,199.0 Other loans: Unsecured 1,469.2 1,269.9
1,772.2 1,653.7 1,909.9
- Exchange difference on currency swaps 0.3 (7.8)
1,772.2 1,654.0 1,902.1
Analysis by currency
31 December 2003 30 June 30 June
2004 2003
£m £m £m
654.6 Sterling 962.9 657.5
1,117.6 Euro 691.1 1,244.6
1,772.2 1,654.0 1,902.1
As part of the group's foreign currency hedging programme, at 30 June 2004 the
group had also sold €545.0m forward against sterling for value on 1 July 2004,
at a spot rate of £1 = €1.49.
Undrawn committed facilities
31 December 2003 30 June 30 June
2004 2003
£m £m £m
0.5 Expiring within 1 year 9.0 -
- Expiring within 1- 2 years 250.0 -
181.7 Expiring after more than 2 years 457.0 121.0
182.2 716.0 121.0
11 CREDITORS - OTHER
31 December 2003 30 June 30 June
2004 2003
£m £m £m
Falling due within one year
64.7 Trade creditors 37.7 54.0
39.6 Tax 63.9 38.8
104.9 Other creditors 153.8 147.3
12.3 Accruals 14.5 16.6
32.3 Dividends payable 15.1 14.1
253.8 285.0 270.8
Falling due after more than one year
- Tax 50.3 -
36.0 Other creditors 35.9 32.3
36.0 86.2 32.3
Notes to the Accounts
12 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
31 December 2003 30 June 2004 30 June 2003
Book value Fair value Book value Fair value Book value Fair
value
£m £m £m £m £m £m
Overdrafts and short term
(250.6) (250.6) borrowings (157.6) (157.6) (84.7) (85.6)
(1,536.9) (1,704.4) Gross long term borrowings (1,514.8) (1,624.6) (1,841.3) (2,018.0)
15.3 15.3 Unamortised borrowing costs 18.7 18.7 16.1 16.1
- (0.5) Interest rate swaps - (5.7) - 7.6
- - Currency swaps (0.3) (0.3) 7.8 12.0
(1,772.2) (1,940.2) Total borrowings (1,654.0) (1,769.5) (1,902.1) (2,067.9)
The fair values of the group's long term borrowings have been estimated on the
basis of quoted market prices. The fair values of the group's outstanding
interest rate swaps have been estimated by calculating the present value of
future cash flows, using appropriate market discount rates. The adjustment on
interest rate swaps is a liability of £5.7m (31 December 2003: £0.5m), which
includes a gain of £0.1m (31 December 2003: liability of £0.5m) relating to
swaps maturing in less than one year.
At 30 June 2004 the fair value of financial liabilities exceeded their book
value by £115.5m (31 December 2003: £168.0m), equivalent to 41 pence per share
(31 December 2003: 60 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 29 pence per share (31 December 2003: 42 pence per share).
13 RESERVES
Share Capital Profit
premium Revaluation redemption Other and loss
account reserve reserve reserves account
£m £m £m £m £m
Balance at 1 January 2004 594.1 764.7 7.2 8.4 726.9
Exchange adjustment - (6.9) - (0.2) (2.2)
Premium on issue of shares 1.5 - - - -
Surplus arising on revaluation of
investments and minority interests - 2.4 - - -
Surplus arising on revaluation of properties - 152.1 - - -
Current tax on property disposals relating
to prior year revaluations - - - - (3.7)
French exit tax payable on election for SIIC
status relating to prior year revaluations - - - - (27.2)
Transfer to profit and loss account on - (15.3) - - 15.3
disposal
Retained profit for the period - - - - 39.8
Balance at 30 June 2004 595.6 897.0 7.2 8.2 748.9
Notes to the Accounts
14 INVESTMENT IN OWN SHARES
31 December 2003 30 June 2004 30 June
2003
Restated*
£m £m £m
2.2 Ordinary shares of Hammerson plc 1.7 1.8
* Comparative figures have been restated following the adoption of UITF Abstract
38 ('UITF 38') 'Accounting for ESOP trusts', which requires that a company's own
shares held through an ESOP trust be shown as a deduction from shareholders'
funds. UITF 38 was adopted in preparing the financial statements of the Company
for the year ended 31 December 2003. The impact of the adoption of UITF 38 on
the previously reported shareholders' funds at 30 June 2003 is shown below.
There is no effect on the profit and loss account.
Shareholders'
funds
£m
As at 30 June 2003
As previously stated 2,106.2
Adjustment (1.8)
As restated 2,104.4
15 ANALYSIS OF CASH FLOWS
Six months Six months
ended ended
Year ended
31 December 2003 30 June 2004 30 June 2003
£m £m £m
Reconciliation of operating profit to net cash
inflow
from operating activities
164.6 Operating profit 81.2 85.4
1.3 Depreciation and amortisation 1.1 0.7
(8.8) Increase in accrued rents receivable (0.9) (5.3)
11.8 Decrease in debtors 12.8 20.6
4.6 (Decrease)/Increase in creditors (20.1) 23.2
173.5 74.1 124.6
Returns on investment and servicing of finance
7.4 Interest received 8.4 4.4
(110.8) Interest paid (68.8) (79.4)
(1.2) Dividends paid to minorities - -
(104.6) (60.4) (75.0)
Capital expenditure and investment
(363.8) Purchase and development of property (117.7) (147.2)
(16.3) Purchase of investments - (16.7)
556.2 Sale of property 245.3 334.5
176.1 127.6 170.6
Acquisitions and disposals
(60.9) Purchase of subsidiary companies - (60.9)
Notes to the Accounts
16 ANALYSIS OF CASH FLOW FROM FINANCING
Six months Six months
ended ended
Year ended
31 December 2003 30 June 2004 30 June 2003
£m £m £m
1.9 Issue of shares 1.6 0.6
(354.0) Increase/(Decrease) in medium and long term borrowings 16.5 (37.2)
156.9 (Decrease)/Increase in short term borrowings (80.7) (15.7)
(195.2) Net cash outflow from financing (62.6) (52.3)
17 OTHER INFORMATION
The financial information contained in this report does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
results for the year ended 31 December 2003 are an abridged version of the full
accounts for that year which received an unqualified report from the auditors
and did not contain a statement under s237(2) or (3) of the Companies Act 1985.
The full accounts for the year ended 31 December 2003 have been filed with the
Registrar of Companies.
The unaudited financial information contained in this report has been prepared
on the basis of the accounting policies set out in the full accounts for the
year ended 31 December 2003.
The exchange rate used to translate euro denominated amounts is that prevailing
on 30 June 2004, £1 = €1.49.
The interim report was approved by the Board on 24 August 2004.
Glossary of Terms
Adjusted figures Reported amount adjusted to exclude where applicable exceptional items and
deferred tax.
Average cost of borrowing The cost of finance expressed as a percentage of the weighted average of
borrowings during the period.
Earnings per share Profit for the period divided by the average number of shares in issue
during the period.
ERV The estimated market rental value of accommodation in a property.
Gearing Net debt expressed as a percentage of shareholders' funds.
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 properties owned
rental income throughout both periods, after taking account of exchange translation
movements.
Like-for-like / underlying The percentage change, since the previous balance sheet date, in property
property valuations valuations, after taking account of capital expenditure and exchange
translation movements.
Net asset value per share Shareholders' funds divided by the number of shares in issue at the
balance sheet date.
Over-rented Accommodation that is let at a rent above its ERV.
Passing rent The annual rental income receivable from a property at the balance sheet
date.
Pre-let A lease signed with a tenant prior to completion of a development.
Reversionary or under-rented Accommodation where passing rent is below the ERV.
SIIC Societes d'Investissements Immobiliers Cotees. A French tax exempt regime
available to property companies listed in France.
Vacancy rate Represents the area in a property, or the portfolio, which is currently
available for letting, expressed as a percentage of the total area of the
property or portfolio.
This information is provided by RNS
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