Wrap Text
Audited Results for the year ended 31 December 2016
Hammerson plc
(Incorporated in England and Wales)
(Company number 360632)
LSE share code: HMSO JSE share code: HMN
ISIN: GB0004065016
(“Hammerson” or “the Company”)
Monday 20 February 2017
HAMMERSON PLC – AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016
STRONG FINANCIAL RESULTS WITH SECTOR-LEADING EARNINGS AND DIVIDEND GROWTH
31 December 31 December Like-for-like
Year ended: 2016 2015 Change increase
Net rental income (1) £346.5m £318.6m +8.8% +2.2%
Adjusted profit (2) £230.7m £210.9m +9.4%
IFRS profit (including non-cash valuation changes)(3) £317.3m £727.8m
Adjusted earnings per share (2) 29.2p 26.9p +8.6%
Final dividend per share 13.9p 12.8p +8.6%
31 December 31 December
As at: 2016 2015
Property portfolio(4) £9,971m £8,374m +19.1%
Equity shareholders’ funds £5,776m £5,517m +4.7%
EPRA net asset value per share (2) £7.39 £7.10 +4.1%
Gearing 59% 54% +5p.p.
Loan to value (5) 41% 38% +3p.p.
(1) On a proportionally consolidated basis, excluding interests in premium outlets. See page 16 of the Financial Review for description of financial information.
(2) Calculations for adjusted and EPRA figures are shown in note 7 to the accounts on pages 42 and 43.
(3) IFRS profit includes portfolio non-cash revaluation gains of £125m (2015: £542m)
(4) Proportionally consolidated, including premium outlets
(5) See table 17 on page 64 and page 24 of the Financial Review for description of loan to value.
ASSET MANAGEMENT – CREATING DIFFERENTIATED DESTINATIONS
– 142,000m2 of new space leased; over 40 new brands; leases signed at average 5% ahead of ERV
– Group LfL NRI up 2.2% (3.2% including premium outlets) demonstrating retailer demand for prime destinations
– Premium outlets continue to outperform with sales growth of 8%; LfL NRI up 7.6%
– Continued strong demand for retail park space driving high occupancy; LfL NRI up 2.4%
INVESTMENT MANAGEMENT – ADDING PRIME SPACE IN HIGH-GROWTH CATCHMENTS
– Total return 5.7% beating IPD benchmark (3.4%)
– Successfully transferred Irish loans, secured ownership of Dundrum and Ilac Centre; Ireland GDP growth continues to outperform
– Added another strategic asset to the portfolio through the acquisition of Grand Central, Birmingham
– Significantly increased investment in premium outlets; additional VR stake acquired, now 40%; 5 VIA centres added
– Successfully disposed £635m of assets across portfolio, ahead of target programme
DEVELOPING VENUES – TWO ICONIC NEW SCHEMES OPENED
– Victoria Gate, Leeds, completes the 56,300m2 aspirational retail destination for the north of England
– Watermark confirms Westquay, Southampton, as the premier retail and leisure venue of the south coast
– Continued progress on pipeline of large-scale London development projects
FINANCIAL EFFICIENCY – FURTHER REDUCED COST OF DEBT
– Over £1.2bn new debt raised, successfully refinancing acquisition facility; secured reduced weighted average cost of debt of 3.1%
– Continued active capital recycling to fund future growth
David Atkins, Chief Executive of Hammerson, said: “I am pleased to report another set of strong financial results, with sector-leading
earnings and dividend growth reflecting robust operational performance across all parts of the portfolio. During the year we have
significantly grown and enhanced the portfolio, adding new retail space in faster-growth markets including Dublin, Leeds and
Birmingham, and extending our presence in the European outlets market. To fund these growth opportunities, we successfully
refinanced over £1.2 billion of debt and executed our planned disposal programme, generating £635 million.
The strength of the results we are reporting today is a clear reflection of the success of the specialist retail strategy we set out five years
ago. Looking ahead, despite some UK retail headwinds and geopolitical uncertainty, I am confident that we have a resilient and
adaptable business with multiple opportunities to drive similar levels of growth and therefore continue to deliver sector-leading income-
focused returns.”
Contents:
Page Page
Introduction 1 Independent Auditor’s Report 28
Key performance indicators 2 Financial Statements 29
Business Review 4 Notes to the accounts 35
Financial Review 16 Additional Disclosures 56
Risks and Uncertainties 25 Development Pipeline 65
Responsibility Statement 27 Glossary 66
Results presentation today:
The results presentation is being held today at 9.00 a.m. at Deutsche Bank’s offices at 1 Great Winchester Street, London EC2N 2DB. A
live webcast of Hammerson’s results presentation will be broadcast today at 9.00 a.m. via the Company’s website,
www.hammerson.com. At the end of the presentation you will be able to participate in a question and answer session by dialling +44
(0)20 3427 1901. Please quote confirmation code 8686487.
Financial calendar:
Ex-dividend date (SA) 15 March 2017
Ex-dividend date (UK) 16 March 2017
Record date (UK and SA) 17 March 2017
Final dividend payable 27 April 2017
(UK)
Final dividend payable 28 April 2017
(SA)
Enquiries:
David Atkins, Chief Executive Tel: +44 (0)20 7887 1000
Timon Drakesmith, Chief Financial Officer
Rebecca Patton, Head of Investor Relations Tel: +44 (0)20 7887 1109
www.hammerson.com rebecca.patton@hammerson.com
Index to key data
Unless otherwise stated, figures have been prepared on a proportionally consolidated basis, excluding premium outlets
Income and operational – Year ended 31 December 2016 31 December 2015 Page
Portfolio total returns (including share of premium outlets portfolio) 5.7% 12.4% 2
Portfolio capital return (including share of premium outlets portfolio) 1.1% 7.1% 21
Occupancy 97.5% 97.7% 3
Like-for-like NRI growth 2.2% 2.3% 2
Adjusted earnings per share 29.2p 26.9p 2
Leasing activity £24.9m £27.9m 3
Leasing v ERV +5% +3% 3
Like-for-like ERV growth – UK shopping centres +1.6% +2.8% 4
Like-for-like ERV growth – France -2.2% ?% 8
Retail sales – UK shopping centres -1.1% +1.3% 4
Retail sales – France +3.1% +0.6% 8
EPRA cost ratio 22.6% 23.1% 2
Final dividend per share 13.9p 12.8p 19
Capital and financing – As at 31 December 2016 31 December 2015 Page
Property portfolio value (including premium outlets) £10.0bn £8.4bn 39
Net debt £3.4bn £3.0bn 23
Gearing 59% 54% 23
Loan to value 41% 38% 23
Liquidity £592m £931m 23
Weighted average interest rate 3.1% 3.8% 23
Interest cover 3.5 times 3.6 times 23
Net debt/EBITDA 9.5 times 9.6 times 23
Fixed rate debt 70% 61% 23
Portfolio currency hedge 79% 90% 23
Equity shareholders’ funds £5.8bn £5.5bn 20
EPRA net asset value per share £7.39 £7.10 20
WHO WE ARE
At Hammerson we create destinations that excite shoppers, attract and support retailers, reward investors and serve communities;
destinations where more happens. We are an owner, manager and developer of retail property and our portfolio includes investments in
prime shopping centres in the UK, France and Ireland, convenient retail parks in the UK and premium outlets across Europe.
OUR MARKET
The retail property market in which we operate is affected by structural trends which influence our strategy, drive our priorities and guide
our performance. The key trend is the growth of multichannel retail which leads retailers to use both physical space and online
platforms together to drive sales. As a result, the experience of the retail journey and the convenience of shopping for goods are more
important than ever. Therefore, retailers place a premium on those retail destinations which deliver shoppers’ needs and the best
locations are becoming relatively more valuable; the retail property market is polarising. Furthermore, retail tourism is increasingly
enjoyed by international tourists as part of a travel experience. Discounted premium brands at attractive retail outlets make the shopping
journey even more memorable.
OUR STRATEGY
We align our portfolio to benefit from these market trends.
– Focus on growing consumer markets: Our portfolio is concentrated around retail property which is aligned to consumer
requirements in a multichannel world: the experience of large prime shopping centres; the convenience of retail parks; and the draw
of luxury-brand premium outlets. We choose locations by identifying significant, growing cities and catchments in selected European
countries, and where we can gain market share
– Create differentiated destinations: Our talented people apply insight and market expertise to create and operate destinations
which offer exceptional experiences to attract retailers and shoppers. Our Product Experience Framework purposefully guides our
asset and development management to consistently enhance our destinations and realise their income potential
– Promote financial efficiency and partnerships: A singular retail focus, strong and efficient capital structure and operational
excellence enables us to attract valuable partners. These include global capital providers, international joint venture partners and
expert operating collaborators who help us broaden our market reach, increase scale and strengthen our business
OUR BUSINESS MODEL
Our business model delivers value for all our stakeholders.
– Shareholders: We create consistent earnings growth which benefits shareholders through growing dividend payments and
increased share value
– Retailers: Offering our retail tenants innovative formats that are responsive to customer demands
– Shoppers: Offering our shoppers entertaining and exciting experiences, as well as great retail destinations
– Our people: Developing, recognising and rewarding our people secures a skilled and motivated workforce
– Communities: We create positive social impacts through our activities, including the creation of local jobs
Our Product Experience Framework is embedded across everything we do, providing a unique point of differentiation. We constantly
challenge ourselves to apply best practice in retail design and digital solution, customer engagement and sustainability. Our Product
Experience Framework incorporates:
– Iconic destinations: We create outstanding architecture to enhance locations. We place our centres at the heart of local
communities, connected by seamless technology and transportation links
– Best at retail: We deliver the optimal retail mix, consistently refreshed and showcasing new concepts
– Convenient & easy: We make shopping simple and stress-free, with enhanced customer facilities and services, such as click &
collect, encouraging regular shopper visits
– Interactive & engaging: Our outstanding customer service and leading digital infrastructure drive engagement loyalty, and
encourage shoppers to spend longer in our destinations
– Entertaining & exciting: We constantly evaluate and refresh our food and leisure offers, and provide a local and national calendar
of events to surprise and delight our customers, and keep them coming back
– Positive Places: We create destinations that deliver positive impacts economically, socially and environmentally
Monitoring value creation
We use our Key Performance Indicators, or KPIs, to ensure we are delivering our strategy. They are split between financial and
operational measures, and each link to our three strategic elements. During 2016 we have included an additional KPI,
Voluntary staff turnover, to reflect the importance to the business of our talented people.
Financial KPIs
Total property return
5.7% (Benchmark 3.4%)
[Please refer to the company's website to view the graphic illustration]
Description
Total property return (TPR) is the main metric we use to measure the
income and capital growth of our property portfolio. It is calculated on
a monthly time-weighted basis consistent with IPD’s methodology.
We judge our success in generating superior property returns by comparing
our performance with a weighted IPD Retail benchmark.
Performance
During 2016, the property portfolio produced a total return of 5.7% which
was 230bp ahead of our estimated IPD benchmark, driven by strong
outperformances from UK shopping centres and premium outlets.
Growth in like-for-like NRI*
2.2%
[Please refer to the company's website to view the graphic illustration]
Description
Net rental income (NRI) is the Group’s primary revenue measure and like-
for-like NRI growth is key to supporting growing earnings and dividend
payments. The calculation is in line with EPRA guidance, and excludes the
impact of acquisitions, disposals, developments and exchange rate
movements. Growth is achieved through leasing activity, tenant
engineering and other “value-adding” initiatives.
Performance
On a like-for-like basis, NRI grew by 2.2% in 2016, above our target of
2.0%. Income from UK shopping centres and retail parks both grew by
2.4%, with growth of 2.2% from our French portfolio.
Growth in adjusted EPS
8.6%
[Please refer to the company's website to view the graphic illustration]
Description
Adjusted earnings per share (EPS) reflects the Group’s underlying profit
divided by the average number of shares in issue and is calculated in line
with EPRA guidelines. It is the Group’s primary profit measure, and
excludes capital items such as unrealised valuation changes, profits and
losses on the sale of properties and other one-off exceptional items.
Performance
In 2016, adjusted EPS increased by 2.3 pence, or 8.6%, to 29.2 pence.
This was driven by higher rental income from our property portfolio and
higher earnings from our premium outlet investments.
Cost ratio*
22.6%
[Please refer to the company's website to view the graphic illustration]
Description
The EPRA cost ratio is the measure by which we monitor the operational
efficiency of our activities as it shows the total operating costs, being
property outgoings and net administration costs, as a percentage of gross
rental income for our property portfolio.
Performance
During 2016, our cost base has been managed effectively and the ratio has
reduced by 50bp compared to 2015 to 22.6%. The reduction is principally
due to lower property costs, which have fallen from 11.3% to 10.7%.
* Proportionally consolidated excluding premium outlets. See page 16 for further explanation.
Operational KPIs
Occupancy*
97.5%
[Please refer to the company's website to view the graphic illustration]
Description
Keeping our properties occupied ensures we generate rental income and
the occupancy ratio measures the amount of space which is currently let.
The ratio is calculated in line with EPRA guidance on the basis of the
estimated rental value (ERV) of occupied space.
Performance
Occupancy remains above our 97.0% target, with the portfolio 97.5%
occupied at the year end. This was marginally lower than the prior year,
principally due to a number of unlet units at our recently completed
developments in Leeds and Southampton.
Global emissions intensity ratio
155mtCO2e/£m
[Please refer to the company's website to view the graphic illustration]
Description
Reducing carbon emissions is one of our key sustainability targets. This
ratio, which we have calculated since 2013, shows the amount of CO2e
emissions from our properties and facilities, including corporate offices and
is calculated over the 12 months ended 30 September with the
denominator being adjusted profit before tax.
Performance
The ratio has improved by 10% during 2016 due to a reduction in emissions
and the increased use of green energy across our portfolio, particularly in
France.
Leasing activity*
£24.9 million
[Please refer to the company's website to view the graphic illustration]
Description
Leasing allows us to improve our brand mix across our portfolio and
differentiate our destinations. This measure shows the amount of income
secured across our investment portfolio including both new lettings and
lease renewals.
Performance
Leasing momentum continued throughout 2016 and we secured £24.9
million of income with volumes being broadly equal in the two halves of the
year. Whilst total leasing was slightly lower than 2015, this was partly due
to the high level of occupancy, particularly in UK retail parks. Across the
Group, principal leases were secured at 5% above December 2015 ERVs.
Voluntary staff turnover
10.9%
[Please refer to the company's website to view the graphic illustration]
Description
We aim to retain, engage and develop our talented people. Since 2014 we
have monitored voluntary staff turnover to highlight any signs of
demotivation or other people-related issues and include both corporate and
shopping centre-based employees in this measure.
Performance
In 2016, voluntary staff turnover remained low at 10.9%. The small
increase compared with 2015 was due to a slightly higher number of
leavers in our French and UK shopping centre businesses. However, the
turnover number still remains low compared to wider industry averages.
This Business Review provides an overview of the performance of our sectors during
2016.
UK Shopping Centres
2016 was a busy year for UK shopping centres with the Grand Central acquisition, the
opening of two new centres and another set of strong operating results from our existing
portfolio. We have also seen good performance in the second half of the year, with
retailers keen to take space in our prime centres.
Operational summary
Like-for-like Leasing Leasing vs Like-for-like Retail sales Footfall
NRI growth Occupancy activity ERV ERV growth growth growth
Key metrics % % £m % % % %
31 December 2016 2.4 97.8 9.0 +6 1.6 (1.1) (0.5)
31 December 2015 2.1 98.3 11.7 +4 2.8 1.3 1.1
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Prime shopping centres are differentiated from secondary or tertiary centres by their scale, catchment size and superior brand mix.
They include large anchor tenants, flagship stores for international brands and offer shoppers catering and entertainment as well as
retail. Prime centres support retailers' multichannel strategies as they offer high sales, footfall and dwell times in an attractive, well-
managed environment which provides a mixture of leading brands, food, leisure and digital infrastructure. Online sales penetration
continues to grow and accounted for 15% of total retail spend as at December 2016 according to the ONS. Leases are generally long-
term, at least ten years duration, with upward-only market rent reviews at five year intervals.
UK consumer spending grew by 3.8% in the final quarter of 2016 (Source: Barclaycard). Currency devaluation has had a favourable
impact on tourist spending, but is expected to increase inflation in 2017 which may adversely impact real spending power and the input
costs for retailers. Nevertheless, retailers enjoyed good Christmas trading and UK consumer confidence has remained resilient.
Investment volumes in 2016 totalled £2.7 billion which was approximately 40% lower than in 2015, with the only prime centres traded
being Grand Central, Birmingham and Merry Hill, Dudley. However, demand for prime assets continues, with investment yields broadly
unchanged during 2016, although secondary shopping centres have suffered outward yield shift.
We have ownership stakes in ten of the top 50 UK shopping centres (Source: PMA). We have over 2,000 tenants across our
portfolio and 14% of our centres are let to catering and leisure brands, an increase of a third over the last five years.
Net rental income
Net rental income totalled £148.4 million in 2016, and on a like-for-like basis increased by 2.4%, compared with a 2.1% increase in
2015. The growth in 2016 is driven by rent review settlements, income from new lettings and increased car park income. Four of our
centres achieved annual like-for-like NRI growth of more than 5% with the best performing centres being Bullring and Union Square,
which benefited from recent lettings and rent review uplifts.
Leasing, occupancy and ERVs
Tenant demand for space at our centres remained strong, with 141 leases signed representing £9.0 million of annual rental income
and 48,300m2 of space. The reduction in activity compared with 2015 was due to the timing of lease renewals and expiries at a number
of centres. For principal leases, rents secured were 6% above December 2015 ERVs and 6% above the previous passing rent.
Despite the continued tenant demand, ERV growth slowed to 1.6% compared with 2.8% in 2015, although growth in the second half of
2016 of 1.1% was higher than the 0.5% growth achieved in the first six months. Occupancy levels remained high at 97.8%, compared
with 98.3% in December 2015. The decrease was principally due to Victoria Gate which opened in October and where occupancy was
90.5% at the year end.
We have applied our Product Experience Framework and have delivered a number of key leasing deals with international brands,
luxury operators and new catering offers to enhance our centres. Highlights include:
– Five new restaurants at Cabot Circus including Côte, Brasserie Blanc and the UK’s first L’Osteria
– Also at Cabot Circus, the first COS store in the south west and Monki’s first store outside London
– At Silverburn, Smiggle and Tortilla opened their first Scottish stores
– At Bullring, LinkStreet which joins the centre to Grand Central was refurbished and remodelled to appeal to contemporary and pop-
up style retailers. Lettings were completed with new niche brands including: Made.com; Religion Clothing; and Cereal Killer Café
– Brent Cross celebrated its 40th anniversary by welcoming three international brands: Urban Decay; Tesla Motors; and Smiggle
In October we announced plans to upgrade the Riverside at The Oracle. The project will cost £2.9 million (Hammerson's share) and be
anchored by a new 167m2 glass-fronted pavilion let to Comptoir Libanais. The scheme will also create a large public events space and
enhanced public realm.
Lease expiries and rent reviews
The portfolio offers a robust income stream, with a weighted average unexpired lease term, including tenant breaks, of seven years,
and opportunities for rental growth. Leases subject to rent reviews, break clauses or expiries offer the prospect to secure additional
rental income. Over the three years to 31 December 2019, these leases would provide additional annual rental income of £8.0 million,
or 6%, if renewed, or if reviews are settled at current ERVs.
At 31 December 2016, nine units were let to tenants in administration, equating to just 0.3% of the Group’s total passing rents.
Sales, footfall and occupancy cost
Despite the heightened level of macro-economic uncertainty in the UK, particularly associated with the EU referendum decision,
consumers remained resilient. Footfall across our portfolio was 0.5% lower than 2015. However this was ahead of the national index
which fell by 1.9% during the year.
Retailer sales were also disappointing, with sales, calculated on a same-centre basis, 1.1% lower than in 2015. As reported at the half
year, Union Square has been adversely affected by the weak oil price. Excluding this centre, sales across the portfolio decreased by
0.3%, with the strongest performances at Silverburn and The Oracle.
The occupational cost ratio, calculated as total occupancy cost as a percentage of sales, increased from 19.2% at the beginning of the
year to 20.1% at 31 December 2016 due to changes in occupancy cost and the tenant mix across the portfolio.
Disposals, acquisitions and completed developments
In January 2016, we completed the sale of Monument Mall, Newcastle for £75 million. Following its acquisition in 2011, we
redeveloped the 9,500m2 centre in 2013, and the sale crystallised a £24 million profit on cost.
In February 2016, we acquired Grand Central for £350 million. The 38,400m2 shopping centre in Birmingham is anchored by a
23,200m2 John Lewis and sits above New Street Station, the redeveloped major railway hub. The centre includes 40 premium stores
including Kiehls, L’Occitane en Provence and MAC and also contains 20 casual dining brands including Paul, Pho and Tortilla.
In December 2016, we completed the sale of 50% of the scheme to CPPIB, one of the existing joint venture partners in Bullring, for
£175 million. The transaction had been contracted at the time of the acquisition, but was delayed due to a review by the Competition
and Markets Authority ('CMA’). We fully cooperated with the investigation and received clearance from the CMA in July, allowing
CPPIB to obtain EU merger clearance and complete the transaction.
We recently opened two new centres: Victoria Gate, Leeds in October; and Westquay Watermark, Southampton in December. Victoria
Gate is adjacent to Hammerson’s existing centre, Victoria Quarter. The combined retail offer has been branded “Victoria Leeds” and
provides 56,300m2, of high-end stores and restaurants with over 115 brands. The 37,300m2 development provides Leeds with a 21st
century retail destination and includes a flagship John Lewis store, a casino, a modern take on Victorian arcades with more than 30
shops and restaurants and an 800-space multi-storey car park. Key brands include Anthropologie, Aspinal of London, D&D London,
Gant, Hackett, Le Pain Quotidien, Nespresso, Russell & Bromley and Tommy Hilfiger and the scheme has introduced 17 new brands
to Leeds and 11 to our UK portfolio. Four units remain to be let, which will provide the opportunity to deliver ERV growth and
finalise the exciting tenant mix.
Westquay Watermark, is the UK’s largest dedicated restaurant and leisure complex at 17,200m2 and was 95% let on opening. The
scheme has over 20 restaurants, cafes and bars, a Hollywood Bowl and is anchored by a highly anticipated Showcase Cinema de Lux.
For a number of restaurateurs this is their first move outside London and tenants include Bill's, Cabana, Cau, Franco Manca, KuPP,
Thaikhun, The Real Greek and Wahaca. 50% of the scheme was sold to GIC, Hammerson’s joint venture partner at the adjacent
Westquay shopping centre, in December 2016 for £47 million. The development further confirms Westquay as the leading retail, dining
and leisure destination on the south coast.
UK Retail Parks
The retail parks occupational market remains strong, with healthy retailer demand for
space at the best locations. Whilst the investment market has been disappointing during
2016, our modern retail parks portfolio is well placed to outperform in 2017.
Operational summary
Like-for-like Leasing Leasing vs Like-for-like Footfall
NRI growth Occupancy activity ERV ERV growth growth
Key metrics % % £m % % %
31 December 2016 2.4 98.6 4.9 +4 0.2 2.2
31 December 2015 2.6 98.4 8.3 +4 1.3 n/a
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Retail parks are largely situated in out-of-town locations with units being generally larger and rents lower than in shopping centres. The
better-located parks are easily accessible by car and offer free parking. The market is split into a number of sub-segments, and we
have chosen to operate in a selection of these: shopping parks; hybrid parks; and key homeware parks, where occupational demand is
strongest.
The occupational market remains strong, with homeware and furnishing retailers seeking space. Retailers with expansion plans
include Dunelm, Oak Furniture Land, ScS, Tapi and Wren Kitchens. Also, Bunnings, the Australian hardware chain, has opened its first
UK store in St. Albans and is investing £500 million to create a network of stores across the UK.
Fashion retailers are also taking new stores on retail parks as they offer a cost-effective way to fill gaps in their store footprint between
large shopping centres and town centres. This trend is leading to improved tenant fit-outs, greater interaction with retailers'
multichannel strategies to support click & collect sales and also a wider food and beverage offer.
Consistent with the UK shopping centres investment market, transaction volumes in 2016 were approximately one-third lower than the
prior year at £2.5 billion. Sellers have outnumbered buyers during the year, particularly in the second half of 2016 when a number of
open-ended funds sought to sell assets to generate liquidity following the EU referendum decision. This situation has forced investment
yields to increase by approximately 100bp during the year, although there have been signs of stability returning to the market at the
beginning of 2017.
We are one of the largest direct owners of retail parks in the UK and, at 31 December 2016, our portfolio consisted of 18 convenient
retail parks, which provide a total of 400,000m2 with 320 tenants.
Net rental income
Net rental income totalled £79.6 million and on a like-for-like basis increased by 2.4% in 2016, compared to 2.6% in 2015. The growth
in 2016 being due to an increase in surrender premiums received associated with pro-active tenant rotation at parks including
Ravenhead Retail Park, St Helens and Imperial Retail Park, Bristol. The portfolio also suffered from a small number of administrations,
including Brantano, in the first half of the year.
Leasing, occupancy and ERVs
Across the portfolio we signed 36 leases representing £4.9 million of annual rental income and 24,100m2 of space. Occupancy levels
remained high during the year and were 98.6% at 31 December 2016, compared with 98.4% at the beginning of the year. This high
occupancy has resulted in a lower level of year-on-year leasing during 2016. For principal leases, rents were contracted at 4% above
December 2015 ERVs and 28% above the previous passing rent.
ERV growth was 0.2% in 2016, compared with 1.3% for 2015. Whilst occupier demand for space in the right location continues,
particularly from homeware retailers, high occupancy is limiting opportunities to demonstrate ERV growth across the portfolio. Key
leasing transactions during 2016 included:
– New leases with fashion retailers such as Fat Face, H&M, New Look and River Island as well as homeware retailers including DFS,
HomeSense, Sofology and Tapi
– New drive-through concepts for Costa and Starbucks at Imperial Retail Park, Bristol and Central Retail Park, Falkirk
– Four leases at Elliott’s Field, Rugby securing £1.2 million of new income at an average of 4% above the December 2015 ERV
We continue to target tenants which will enhance the retail offer at individual parks and grow income and have a number of tenant
engineering opportunities planned for 2017.
Lease expiries and rent reviews
Our portfolio benefits from a secure income stream, and at 31 December 2016 had a weighted average unexpired lease term of eight
years, including tenant break options.
Leases subject to rent reviews, break clauses or approaching their lease expiry date, offer the opportunity to secure additional income.
Over the three years to 31 December 2019, these leases would provide additional annual rental income of £3.0 million, or 4.5%, if
renewed or if reviews are settled at current market rents.
At 31 December 2016, there were just two tenants in administration representing £0.2 million of income, both of which continue to
trade.
Customer insight and footfall
We have begun to collect footfall data across our portfolio in order to enhance our customer insight. For the year to 31 December
2016, visitor numbers increased by 2.2%, 290 basis points ahead of the Springboard Retail Parks index of -0.7%.
Also during 2016, we completed the second phase of our in-depth customer surveys to better understand consumer opinions about
our parks and existing or prospective tenants. We found that customer satisfaction has improved by 3% across our portfolio, dwell
times and the average number of shops and restaurants visited have both increased by 8% and catering visits have increased by 7%.
This feedback from our shoppers has enabled us to improve our customer services provision at a number of parks, an example being
the installation of Amazon lockers at Elliott’s Field Shopping Park, Rugby.
Disposals and developments
As part of the Group’s £500 million disposal programme announced to part fund the Irish portfolio acquisition in September 2015, we
sold a number of retail parks in 2016, raising total proceeds of £217 million. Thurrock Shopping Park, Essex was sold in June for £93
million, which was £10 million below its December 2015 valuation but significantly above the acquisition cost of £64 million in 2012.
We also completed the sales of a solus property in Folkestone for £7 million in July, Manor Walks, Cramlington for £78 million in
August and Westmorland Retail Park, Cramlington in November for £36 million.
We are currently on-site with three significant development schemes in Didcot, Rugby and Swansea and further details are in the
Development section of this Business Review on page 12. In addition, we are reconfiguring the former Homebase unit at Fife Central
Retail Park, Kirkcaldy with works started in December 2016. Four new units are to be constructed with three already let to Sofology,
Wren Kitchens and DW Sports. The 4,300m2 project will be completed in June 2017 with a total development cost of £10 million. We
continue to advance other smaller-scale development projects across our portfolio as these deliver strong financial returns and enable
us to enhance the appearance and tenant mix of our portfolio.
France
During 2016 we have continued to attract new tenants, enhanced the tenant mix across
our portfolio and delivered strong net rental income growth. The investment market has
also strengthened for prime retail destinations which has led to an increase in the
portfolio’s value.
Operational summary
Like-for-like Leasing Leasing vs Like-for-like Retail sales Footfall
NRI growth Occupancy activity ERV ERV growth growth growth
Key metrics % % £m % % % %
31 December 2016 2.2 96.5 9.0 +5 (2.2) 3.1 2.8
31 December 2015 2.5 96.9 7.2 +2 nil 0.6 (0.6)
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Prime shopping centres in France have similar characteristics to those in the UK and Ireland. Online retailing is not as advanced in
France compared with the UK, although it is growing rapidly and retailers are beginning to focus on their multichannel strategies in a
similar way to those operating in the UK.
French leases tend to be shorter than in the UK, often of nine years duration, with three-year break clauses, although in practice these
are seldom exercised. This situation enables landlords like Hammerson to actively manage tenant mix to enhance the brand offer. The
retail environment has been subdued during 2016 associated with the ongoing terrorist threat, particularly in Paris, and unsupportive
wider macro-economic conditions, such as high unemployment levels and low GDP growth. The wider shopping centre market has
seen sales and footfall reduce.
Investment markets were strong in France, although the total retail investment activity of €4.4 billion was €1.2 billion lower than 2015
and of this approximately 40% of sales were to foreign investors. Due to a lack of assets on the market, and the effect of quantitative
easing, the strong investor demand acted to reduce yields to around 4% for prime, successful shopping centres.
At 31 December 2016, our French portfolio comprised 10 prime shopping centres, with five located in or around Paris, including Italie
Deux and Les Trois Fontaines. Our other major centres include Les Terrasses du Port, Marseille and Places des Halles, Strasbourg.
The three largest centres: Les Terrasses du Port, Italie Deux and Les Trois Fontaines account for two-thirds of the value of the
portfolio. There are over 1,000 tenants across the portfolio, which attract almost 100 million visits each year.
Net rental income
Net rental income totalled £89.3 million in 2016 and on a like-for-like basis increased by 2.2%, compared to 2.5% in 2015. Les
Terrasses du Port, Marseille was the strongest performing centre, with increased gross rental income and reduced year-on-year
operating costs, as the centre begins to mature following its opening in 2014. As with our UK shopping centres, we have been focusing
on increasing non-rental income and in 2016 this revenue stream increased to £5.4 million, compared to £4.7 million in 2015.
Leasing, occupancy and ERVs
Our retenanting strategy has continued during 2016 and we signed 117 leases across the portfolio, representing £9.0 million of annual
rental income and 35,500m2 of space. For principal leases, the new income was 5% above December 2015 ERVs but 5% below the
previous passing rent. The variance to previous passing rent was due to a number of leases signed at the beginning of the year at
Villebon 2, which we sold in April, and the reletting of the former H&M unit at Place des Halles, Strasbourg to Darty and New Look.
These tenants relocated within the centre and enabled a coordinated retenanting programme, including an upsized Zara, and helped
improve the tenant mix and footfall on the first floor. Excluding these two factors, the figure would have been 12% above the previous
passing rent.
We signed leases with a number of international brands, including brands new to the French portfolio: MAC at Les Trois Fontaines;
Bialetti at Nicetoile and Espace Saint-Quentin, and Armani Exchange and Coach, its first at a French shopping centre, at Les
Terrasses du Port. Other key leasing deals during the year were:
– Kusmi Tea and Nyx at Italie Deux
– Veritas and Rituals at Les Terrasses du Port
– KOTON at O’Parinor, its first store in France
– ID Kids and Parfois at Places des Halles
In May, the new Apple store at Les Terrasses du Port opened in a striking glass unit on the terrace overlooking the Mediterranean Sea.
This is the first Apple store in our French portfolio and welcomed over 7,000 visitors and helped increase footfall in the centre by 24%
during 2016.
Occupancy of 96.5% was marginally lower than in 2015, principally due to vacancies at Places des Halles associated with the
retenanting scheme and Jeu de Paume, which has performed below expectations since opening in late 2015. Like-for-like ERVs fell by
2.2% in 2016, due to Jeu de Paume, where ERVs have been rebased to reflect trading performance. Excluding Jeu de Paume, ERV
growth remains challenging and on the remainder of the portfolio like-for-like ERVs increased by 0.2%, compared with no change in
the prior year.
At 31 December 2016 there were 29 units in administration, a decrease of 20 during the year. These tenants all continue to trade,
represent only 0.5% of the Group’s passing rent and provide opportunities to enhance the tenant mix.
Sales, footfall and occupancy cost
Over the course of 2016, retail sales increased by 3.1%, calculated on a same-centre basis, significantly higher than the CNCC index
which fell by 0.1%. Footfall at our centres grew by 2.8%, and was also above the CNCC index of -1.2%. The sales improvement came
despite our strong presence in the Paris region which has been adversely impacted by the terrorist threat. The growth has been
achieved by our leasing strategy with new tenants boosting sales and a strong performance from Les Terrasses du Port, which has
continued to grow since it opened in May 2014.
Consistent with the increase in sales, the occupational cost ratio decreased during 2016 from 14.0% to 13.7% at 31 December 2016.
Lease expiries and rent reviews
Most of our French leases are subject to annual indexation, which will be 0.1% in 2017. Across our portfolio the average unexpired
lease term is three years, or six years excluding tenant break options. The portfolio offers opportunities for rental growth with an
average reversion of 7%. Leases expiring, or subject to tenants’ break clauses, over the three years to 31 December 2019 would
provide additional annual rental income of £2.8 million, or 11.2%, if renewed at current market rents.
Disposals and developments
In April 2016, we completed the sale of Villebon 2 for €157 million (£124 million). Along with the disposals of the UK retail parks
explained on page 7, this was part of the £500 million disposal programme to part-fund the Irish loan portfolio acquisition.
In line with the Group’s strategy we are progressing extension opportunities and other smaller-scale asset management initiatives at
our three major shopping centres, which would significantly enhance these schemes and increase their catchment. Further design
work and leasing discussions are required before these projects can be commenced, but they offer exciting opportunities to strengthen
our portfolio and deliver attractive financial returns. Further details are provided on pages 13 and 65.
Ireland
We are delighted to have secured the vast majority of the Dublin property assets during
2016 and have already completed a number of the asset management initiatives we
anticipated at the time of the loan acquisition. Dundrum Town Centre is Ireland’s pre-
eminent shopping and leisure destination and offers significant income growth
opportunities.
Operational summary
Leasing ERV
Occupancy activity growth
Key metrics % £m %
31 December 2016 99.5 0.8 9.0
Note: Figures presented on a proportionally consolidated basis and represent performance post property conversion only.
Sector and portfolio overview
Dublin accounts for over 70% of Ireland’s total retail expenditure, 50% of national GDP and supports retail demand due to its urban
area population of 1.3 million residents and significant tourist traffic (9.6 million visitors in 2016). Ireland’s prime retail offer is
concentrated in the centre of Dublin around Grafton Street and Henry Street, as well as a number of prime shopping centres along the
M50 motorway on the outskirts of Dublin. The property market and wider economy continues to experience strong growth, although
prime retail rents remain comfortably below their peak levels of 2006/7. A number of new retailers have recently entered the Irish
market, including COS, Victoria's Secret and & Other Stories; there are also numerous other international retailers and food and
beverage operators seeking accommodation in Dublin.
The macro-economy has continued to perform well with GDP growth of 4% expected in 2016, again making Ireland the fastest-growing
economy within the EU. Growing employment, driven by inward foreign investment, remains a key driver of economic productivity. This
growth has underpinned the Irish property investment market that remains strong. In 2016, shopping centre investment volume was
£2.0 billion, although this was skewed by a small number of large transactions including Blanchardstown and Liffey Valley shopping
centres which were both sold to international investors.
Our portfolio has been secured through a joint acquisition of a loan portfolio from the National Asset Management Agency (NAMA) in
October 2015, and the subsequent consensual agreement to acquire the secured property assets from the borrowers during 2016. At
31 December 2016, the Group owned Dundrum Town Centre ('Dundrum’), Ireland’s pre-eminent shopping and leisure destination in a
50:50 joint venture with Allianz, having acquired ownership of the property in July 2016. We also wholly own the Dublin Central
development site and land adjoining the Swords Pavilions shopping centre in north Dublin. In December 2016, we secured a 50% co-
ownership with Irish Life, of the Ilac Centre located on Henry Street, one of Dublin’s busiest retail thoroughfares.
We are working towards securing the 50% co-ownership with IPUT and Irish Life of Pavilions shopping centre in Swords in north
Dublin and expect this final loan conversion to complete by summer 2017.
Our total portfolio of Dublin assets will encompass 220,000m2 of high-quality shopping centre space, with over 300 tenants and annual
footfall of nearly 50 million. It also provides 27 acres of development land. Our share of the total contracted rent for the portfolio will be
€45 million (£38 million).
In addition to the centre-based staff who transferred to the Group when we secured ownership of Dundrum, we opened a new office in
Dublin and we have recruited a team of 10, with four individuals joining from the previous Dundrum asset manager, Chartered Land.
We will continue to integrate the assets into our existing UK operating structure to maximise efficiencies and deliver our asset
management strategy.
Net rental income
Net rental income totalled £14.0 million in 2016, with £1.5 million generated from Dublin Central development site and the
remainder from Dundrum. As ownership of the property portfolio was secured during the year, the net rental income only relates to the
second half of 2016, prior to which the Group received interest income from the loan portfolio. During 2016, 10 rent reviews were
settled, of which half were after the property ownership was transferred. These settlements were with tenants including Aldo, Boots,
BT2, Clarks, Coast and Dune. In total these reviews delivered annual rental uplifts of 8%. In January 2017, we have settled a further 21
reviews achieving rent uplifts of 7% on £5.4 million (Hammerson’s share) of passing rent.
Non-rental income from car parks and the sale of advertising and merchandising opportunities is a significant source of income growth
and has generated £2.3 million since we secured ownership of the properties. In August, the car park tariffs at Dundrum were
increased by €1; however remain at a sizeable discount to parking in the city centre. The tariff change has resulted in a significant
increase in car park revenue.
Leasing, occupancy and ERVs
Occupancy levels are high at 99.5% at 31 December 2016. Tenant demand for space is strong, although the high occupancy levels
are currently limiting the fulfilment of all of the demand. We have a clear leasing strategy to deliver rental growth and enhance the
tenant mix and overall experience at our new centres, and during the second half of the year we signed six leases representing £0.8
million of annual rental income and 3,300m2 of space. Key leasing transactions included: Ecco; Five Guys; Gamestop; and Oaxaca, a
Mexican restaurant. In November 2016, the refurbishment of Dundrum’s food court was completed. The enhanced offering includes
brands such as: Chopped; Costa; Kanoodle; and Poulet Bonne Femme and broadens the catering offer at the centre. Also at
Dundrum, ERVs grew by 9% in the second half of 2016.
Lease expiries and rent reviews
At 31 December 2016, the portfolio offered the Group’s longest weighted unexpired lease term of 12 years, including tenant break
options, as well as significant opportunities for rental growth. The portfolio was 8.3% reversionary and leases subject to rent reviews,
break clauses or expiries offer the prospect of securing additional rental income. Over the three years to 31 December 2019, these
leases would provide additional annual rental income of £2.5 million, or 10.4%, if renewed, or reviews are settled, at current ERVs. This
time period falls short of the most significant batch of rent reviews in 2020, which, based on current ERVs, would deliver a rental uplift
of £1.9 million.
In addition to rent review and lease renewal uplifts, we have identified a number of tenant engineering opportunities to both enhance
the tenant mix and generate increased rental income and ERV. At 31 December 2016, there were no units let to tenants in
examinership.
Sales and footfall
Overall consumer sentiment has recovered strongly in January 2017 following some uncertainty in the latter half of 2016 and
confidence levels, as measured by ESRI, are at their highest level in seven years and national retail sales grew by 3.4% in 2016.
As part of our integration activities we are upgrading the IT infrastructure at Dundrum to improve the footfall and sales data collection
processes as well as introducing the Plus app in 2017. This will bring the centre in line with the Hammerson standard and provide new
insight into the behaviours of our Dublin shoppers.
Future developments
The portfolio contains a number of future development opportunities at with the Dundrum estate, Dublin Central and Swords Pavilions.
Further details of these potential schemes are on page 65.
In addition, the redevelopment of Moore Mall South at the Ilac Centre commenced in January 2017 and is due for completion in May.
The project involves the refurbishment of the mall area and the reconfiguration of 10 units into five larger flagship stores. Four of the
new units have already been pre-let representing 78% of the target income.
FaulknerBrowns has been appointed as the masterplan architect for the Dundrum Estate and work on the scheme design has
commenced.
Developments
We are proud of the two new shopping centre developments in Leeds and Southampton
which opened in 2016. They align perfectly with our strategy of creating differentiated
destinations and add to the attraction of existing assets in both major cities.
On-site developments
Current Estimated cost Estimated
Lettable area Expected value2 to complete3 annual income4 Let5
1
Scheme m2 completion £m £m £m %
Parc Tawe, Swansea 21,200 Q4 2017 n/a 14 2 53
Elliott’s Field Shopping Park (Phase 2), Rugby 7,900 Q4 2017 10 23 3 44
Orchard Centre, Didcot 8,700 Q1 2018 11 31 3 39
Total 37,800 68 8
Notes
1. Group ownership 100% for on-site schemes.
2. Valuation at 31 December 2016. Values are not included for extension projects which are incorporated into the value of the existing property.
3. Incremental capital cost including capitalised interest.
4. Incremental income net of head rents and after expiry of rent-free periods.
5. Let or in solicitors’ hands by income at 17 February 2017.
Introduction
The Group has a pipeline of development opportunities in the UK, France and Ireland, including three on-site retail park schemes,
three major London developments and a number of potential future projects across the portfolio. These schemes provide the
opportunity to significantly grow the business and enhance the quality of the Group’s existing portfolio over the medium term. We
carefully control expenditure and will only commit to projects when the risk level is acceptable. This will vary for each project and is
dependent on a variety of factors including general market conditions, pre-letting, construction and programme certainty, and funding
and financial viability. At 31 December 2016, committed capital expenditure was low at £68 million, of which the majority represented
the remaining expenditure at Leeds and Southampton and land acquisitions relating to our major developments. This position means
the Group retains flexibility over the future commitment of its development opportunities.
Completed developments
We completed two UK shopping centre developments during 2016: Victoria Gate, Leeds; and Westquay Watermark, Southampton.
These successful developments add two new destinations to our portfolio and further details are in the UK shopping centres section of
this Business Review on page 5.
On-site developments
In Swansea, we started on-site in December 2016 on a 21,200m2 £16 million redevelopment of Parc Tawe which is due to complete at
the end of 2017. The scheme will create a modern, mixed retail and leisure park with new public realm and improved city centre
pedestrian links. The scheme is 53% pre-let with new leases signed with existing retailers: Odeon; Costa; Mothercare; and Toys R Us,
leaving the remaining eight new retail and restaurant units to be let during 2017.
Elliott’s Field, Phase I opened in October 2015, providing 16,900m2 of high-quality retail space anchored by a 5,600m2 Debenhams
and a 4,700m2 M&S general merchandise store. Capitalising on the success of Phase I and the strong demand from furniture and
flooring retailers, planning consent was granted for a 7,900m2 second phase on land adjacent to the existing shopping park and
construction started in February 2017. The scheme is due to complete by the end of the year and is currently 44% pre-let including
anchor retailers DFS and Sofology. We plan for this to be our first carbon-neutral retail park for building energy consumption.
In January 2017, we started on-site with the £42 million expansion of the existing Orchard Centre in Didcot. The scheme will create
8,700m2 of new retail space, increasing the size of the total scheme to 30,000m2 and leases for 39% of the estimated income have
been exchanged with M&S Food, H&M, River Island, TK Maxx, Costa and Starbucks. Didcot has an affluent and growing catchment
and is located between Oxford, Reading, Newbury and High Wycombe. The scheme is scheduled to complete in early 2018 and will
deliver £3 million additional rental income.
Future developments
Our future development opportunities include schemes in all of the Group’s portfolios, including three major London developments.
These have the potential to significantly grow the business and create modern iconic retail destinations. During 2016 we have
progressed a number of these schemes, although there are further milestones to achieve before we are in a position to commence
these projects.
Brent Cross extension
In conjunction with our joint venture partner, Standard Life, we have continued to advance plans for the extension and refurbishment of
Brent Cross shopping centre in north-west London. This project forms part of the wider Brent Cross Cricklewood regeneration plans
with the extended shopping centre comprising 175,000m2 of retail, catering and leisure use and will be the principal retail destination
for north London. Following completion of the development agreement and the CPO Inquiry in 2016, the next steps are to submit a
reserved matters planning application in spring 2017, receive confirmation of CPO powers, sign lease agreements with key tenants
ahead of a decision to commence construction in summer 2018 with completion due in 2022. The Group’s estimated remaining
development cost is in the region of £475-550 million.
Croydon town centre
The Croydon Partnership, a 50:50 joint venture with Westfield, is progressing a scheme to redevelop the Whitgift Centre and refurbish
Centrale shopping centre, with the Group's total future costs in the region of £650-700 million. The scheme will establish Croydon as
the principal retail and leisure hub for south London and is part of wider large-scale regeneration already underway in the area. The
Partnership owns key interests in the site and controls 100% of Centrale and 75% of the Whitgift Centre. A new outline planning
application was submitted in October 2016. The enhanced application included scheme revisions which were outside the scope of the
existing outline planning permission, principally a new M&S anchor store and a redesign of the northern end of the scheme. The
revised design incorporates three levels of retail with over 300 shops, restaurants and cafes, as well as improved leisure facilities,
public realm improvements and residential homes. The decision on the new planning application is expected by summer 2017 and,
subject to finalising detailed design and completing agreements with key anchor tenants, the earliest start on site could be during 2018,
allowing retailers to trade through the busy Christmas period in 2017.
The Goodsyard
Bishopsgate Goodsyard is a 4.2ha site on the edge of the City of London which is owned in joint venture with our partner, Ballymore
Properties. The planning application for a large mixed-use development was called-in by the Mayor of London in September 2015. In
April 2016, following the GLA’s planning officers’ recommendation to refuse the application, the Mayor agreed to defer the application
to allow further consultation with the GLA’s planning officers and redesign elements of the proposed scheme. This work is underway
and we aim to submit the necessary amendments and obtain determination by the Mayor later this year.
Les Trois Fontaines extension
The extension of Les Trois Fontaines is part of a wider city centre project in Cergy Pontoise. This project will add 28,000m² to the
existing shopping centre and has an estimated cost to complete of £200 million. The project has been validated by the co-ownership,
Auchan and the City. Building permits and retail consent have been obtained and pre-letting is progressing well.
Other schemes
We have a number of potential pipeline schemes in each of our sectors which will enhance the overall quality of the Group’s portfolio.
During 2016 we we submitted a planning application for an extension to Union Square and in Paris we progressed a potential
extension scheme at Italie Deux. Also, our new Irish portfolio contains a number of exciting future projects at the Dundrum estate,
Dublin Central and Swords Pavilions Phase III.
The precise nature and design of these schemes are fluid and they are at different stages of development. The speed of delivery for
these pipeline schemes will be dependent on a variety of factors including: planning permission; retailer demand; anchor tenant
negotiations; land assembly; scheme design; funding; and financial viability. Further details of these schemes are included on page 65.
Premium Outlets
During 2016, we increased our two premium outlets investments in Value Retail and VIA
Outlets. They continue to deliver excellent income and capital growth and align with our
strategy of allocating capital to growing consumer markets.
Operational summary
Value Retail1 VIA Outlets1
Year ended Year ended 31 Year ended 31 Year ended 31
31 December 2016 December 2015 December 2016 December 2015
Brand sales (€m)2 2,562 2,380 437 374
Brand sales growth (%)3 8 11 7 10
2
Footfall (millions) 34.6 33.3 12.7 10.2
Average spend per visit (€)2 74 71 34 37
Average sales densities (€000/m2) 15.1 14.3 3.9 3.3
Average sales densities growth (%)4 6 8 19 6
Occupancy (%) 96 96 92 87
1 Figures reflect overall portfolio performance, not Hammerson’s ownership share and 2015 figures have been restated at 2016 exchange rates.
2 2016 VIA Outlets figures include Festival Park since July 2016.
3 VIA Outlets figures include six months of Festival Park sales for both 2016 and 2015.
4 Average sales densities have been calculated as a weighted average based on the average occupied GLA. Festival Park has been excluded for both 2016 and
2015 due to information being unavailable.
Sector and portfolio overview
Outlets offer a distribution channel for brands to sell excess inventory at a material discount to the original price. Premium outlets are at
the top of this sector, providing international fashion and luxury brands with an environment similar to a full priced store, where retailers
are able to maintain and protect their brand identity.
Over recent years, the European outlets sector has seen both strong sales growth and increasing investor demand, and investment
yields have reduced during 2016. However, transactions are relatively infrequent with many traded off-market, particularly at the higher
end of the outlets sector, where our portfolios have chosen to operate.
The market has strong demand for discounted luxury and fashion items from international tourists, in particular from China, India,
Russia and the Middle East. In 2016, spending patterns of wealthy tourists have been influenced by security concerns and currency
movements. Reduced spending by Chinese visitors has been mitigated by growing demand from other international travellers.
Our exposure to the sector, which has increased over recent years, is gained through our long-term partnership with Value Retail and
also through VIA Outlets, a joint venture established in 2014. Both portfolios are externally managed, although the Group has a strong
relationship with both management teams and Timon Drakesmith is a Board member of Value Retail and is Chairman of the VIA
Outlets advisory committee. The sector has many similarities with our directly managed properties and we utilise the knowledge gained
to enhance the brand experience across our other portfolios.
Value Retail ('VR')
Strategic overview
VR operates nine high-end shopping-tourism Villages in the UK and Western Europe which provide over 182,000m2 of floor space and
more than 1,000 stores. VR focuses on international fashion and luxury brands and attracts long-haul tourists and wealthy domestic
customers. The Villages, which include Bicester Village outside London and La Vallée Village near Paris, are among the most
successful outlet centres in Europe.
The average sales density for the Villages is €15,100/m2 with densities at Bicester Village around €38,400/m2 representing growth of
7.9% in 2016. The Villages have been intentionally located close to Europe’s wealthiest cities and major tourist attractions and targeted
marketing enables VR to benefit from the growing shopping-tourism market. In total, over 160 million residents live within a 120 minute
drive of a Village, and the major cities served by the Villages attract 100 million tourists each year. This strategy has enabled VR to
deliver annual compound brand sales growth of over 15% since 2006 and during 2016 VR enhanced their management team through
external recruitment.
We hold interests in the VR holding companies as well as direct investments in the Villages. When these holdings are combined, at 31
December 2016, the Group had an economic interest in the net assets of VR of 40%.
Acquisitions and disposals
In December 2016, we acquired additional sponsor stakes in VR holding companies for £41 million, increasing our sponsor interest to
25%. We also sold our minority stake in VR China for £8 million, crystallising a profit of £1.3 million.
Performance in 2016
Against a more challenging macro-economic environment and a slowdown in long-haul tourism growth, particularly from China, sales
growth is slightly lower in 2016 at 8%, compared with 11% in 2015. Performance has varied across the Villages, with strong growth at
Bicester, Oxford, La Roca, Barcelona, and Kildare, Dublin, the latter Village benefiting from the opening of a major extension in late
2015. However, La Vallée Village, Paris has seen a more subdued performance, with reduced tourist visits associated with the
continuing terrorist threat in Paris.
VR have redirected promotional activities towards both a more diverse tourist market and high-end domestic customers. They are also
proactively evolving and improving the brand mix at the Villages and enhancing the customer experience through refurbishment,
enhanced customer services and extensions. This strategy boosted sales growth in the second half of 2016 with growth of 10%,
compared to 5% in the first half of the year.
Developments and extensions
At Fidenza Village, Milan a new 3,300m2 extension opened in October 2016. Leasing demand has been strong with new boutiques
opened by Dsquared2, Jil Sander, Nike, Roberto Cavalli and a new restaurant, Villano. At 31 December 2016, the Village occupancy
rate is 91% with only seven units to let.
At Bicester Village, the demolition of the former Tesco store was completed and construction on the 5,800m2 extension commenced in
the second half of 2016. The project, due to open in October 2017, will introduce 34 new brands, over 500 new car parking spaces and
enhanced road access.
VIA Outlets ('VIA')
Strategic overview
VIA is an outlets joint venture formed in 2014 in partnership with APG, Value Retail and Meyer Bergman in which Hammerson has a
47% stake. VIA’s strategy has been to create a c.€1 billion portfolio by acquiring existing European outlet centres with strong
catchments, focused on mainstream fashion brands and with potential for growth through active asset and development management.
It reached this target in late 2016 through the acquisition of four outlets and management intend to focus on the integration and
improvement of the operational efficiency and performance of the portfolio in 2017. At 31 December 2016, VIA operated eight centres
providing 148,000m2 of floor space and 680 stores across seven European countries. Major centres included Freeport, near Lisbon,
Batavia Stad, near Amsterdam, Fashion Arena, near Prague, and Festival Park, Majorca.
With some oversight from VR, the VIA team enhances the overall centre management, physical appearance, leisure and catering
offers and tenant mix of the centres to deliver sales, income and value growth. The strategy also involves work to right-size units, the
introduction of more flagship stores and targeted marketing to increase tourist visits and total footfall.
Acquisitions
In July 2016, VIA completed the acquisition of Festival Park, Majorca with the Group’s share of the acquisition price being €44 million.
The 33,000m2 centre includes an 8,000m2 cinema and attracted 4.4 million visitors in 2016. VIA management has already commenced
work to improve the brand mix and enhance the food and beverage offer at the centre.
In November 2016, VIA agreed to acquire four outlet centres from the IRUS fund, with the Group’s share of the acquisition cost being
€170 million. All of the centres are located close to major cities, with the largest centre at 29,000m2 in Zweibrücken, Germany with 114
tenants and a sales density of €6,000/m2. The second largest at 28,000m2 is in Porto, Portugal with the other centres in Seville, Spain
and Wroclaw, Poland. The latter centres have sales densities ranging from €3,300/m2 to €4,000/m2. At 31 December 2016, we had
completed the acquisition of two of the assets, Seville and Wroclaw with Zweibrücken completing in February 2017. The acquisition of
Porto is expected to be finalised in the spring. The transaction increases VIA’s portfolio value to €1.2 billion, achieving the original
acquisition strategy.
Performance in 2016
VIA’s portfolio has performed strongly during 2016, particularly Batavia Stad and Fashion Arena, and sales densities have increased
by 19% year-on-year. At Batavia Stad, significant upgrades have been implemented in 2016 including 30 remerchandising projects
impacting almost a quarter of the scheme.
Occupancy at 92% was 5% higher than at the beginning of the year following new lettings at a number of the outlet centres during the
year. Occupancy at premium outlets tends to be lower than for shopping centres and retail parks due to the greater remerchandising
and retenanting activity.
Developments and extensions
At Batavia Stad, a 6,900m2 extension is due to open in early 2017 and will introduce 41 new units and increase space by 28%. Further
upgrades are being implemented including new façades and 40 remerchandising projects, including new brands Gant and Falke. The
tourist marketing strategy implemented in 2015 has delivered a 37% increase in tax free sales during 2016.
The enhancement works at the food court at Fashion Arena have now finished and 22 remerchandising projects have been completed
during 2016, including the opening of the first Polo Ralph Lauren outlet store in central and eastern Europe. Tax free sales were 37%
higher in 2016 than 2015.
Work has started at Freeport on a major reconfiguration and enhancement of the centre. The total lettable space will be reduced
through the closure of large warehouse-type units and new smaller units will be let to premium retailers and restaurants. This
reconfiguration is accompanied by a refurbishment of the existing space and works are due to complete in September 2017.
Another strong financial performance
The Group has again delivered a strong financial performance, demonstrating our ability
to generate income and value growth. 2016 has also been a busy year with over £1.2
billion of refinancing completed to enhance the Group's financial position.
Highlights
1
IFRS Profit for the year* Adjusted EPS Dividend per share
£317.3 million 29.2p 24.0p
(-56.3%) (+8.6%) (+7.6%)
2 3
Shareholders’ funds* EPRA NAV per share Total property return
£5,776 million £7.39 5.7%
(+4.7%) (+4.1%) (2015: 12.4%)
* attributable to equity shareholders
1. See Note 7B to the accounts for calculation
2. See Note 7D to the accounts for calculation
3. See table 8 on page 60 for further analysis
Presentation of financial information
The information presented in this Financial Review is derived from the Group’s financial statements, prepared under IFRS. A significant
proportion of the Group’s property interests are held in conjunction with third parties in joint ventures and associates. Under IFRS, the
results and net investment in these holdings are equity accounted and presented on single lines in the income statement and balance
sheet.
Management principally review the performance of the Group's shopping centres, retail parks, other strategic and development
properties on a proportionally consolidated basis, to reflect the Group's different ownership shares. Management do not proportionally
consolidate the Group's premium outlet investments, which are externally managed by experienced outlet operators, independently
financed and have operating metrics which differ from the Group’s other properties. We review the performance of our premium outlet
investments separately from the rest of the proportionally consolidated portfolio, with the key financial metrics for the Group being:
earnings contribution; property valuations and returns; and net asset growth.
Within the Financial Review, the Financial statements and the Additional Disclosures, the Group's properties which are wholly owned
or held in joint operations are defined as being held by the “Reported Group”, whilst those held in joint ventures and associates are
defined as “Share of Property interests”.
Further explanations of the distinction between the Group’s different holdings is provided in the Glossary on pages 66 and 67.
Alternative Performance Measures ('APMs')
The Group uses a number of APMs, being financial measures which are not specified under IFRS, to monitor the performance of the
business. These include a number of the Group's key performance indicators on pages 2 and 3 and many of these measures are
based on the EPRA Best Practice Recommendations (BPR) reporting framework which aims to improve the transparency,
comparability and relevance of published results of listed European real estate companies. The Group's key EPRA metrics are shown
in table 1 within the Additional Disclosures section on page 56.
For other APMs, the Financial Review and Additional Disclosures sections contain supporting information, including a number of
reconciliations. Definitions for APMs are also included in the Glossary.
Profit for the year
The Group’s profit for the year, attributable to equity shareholders, under IFRS was £317.3 million, £409.5 million lower than 2015. This
was principally due to lower revaluation gains on the Group's shopping centres and retail parks which suffered a net revaluation loss of
£13.4 million in 2016 compared with a net gain of £367.5 million in 2015.
Management principally review the Group's profit on an "adjusted" basis to monitor the Group's underlying earnings as it excludes
capital and non-recurring items such as valuation movements, profits or losses on disposal and other one-off exceptional items. This
approach is consistent with other property companies and we follow EPRA guidance to calculate adjusted profit. A reconciliation of
IFRS profit to adjusted profit for the year is shown in the table on page 17.
Analysis of the Group’s income statement under IFRS split between underlying “Adjusted” profit and “Capital and other” profit is shown
in note 2 to the accounts on page 36 and further details of the EPRA adjustments are provided in note 7 on page 42 to the accounts.
Reconciliation of IFRS profit for the year to adjusted profit for the year
Year ended Year ended
31 December 31 December
2016 2015
Proportionally consolidated, including premium outlets £m £m
IFRS profit for the year attributable to equity shareholders 317.3 726.8
Adjustments:
Loss/(gain) on the sale of properties and joint venture interests* 24.0 (14.9)
Net revaluation (losses)/gains on property portfolio* 13.4 (367.5)
Net revaluation gains on premium outlet properties (138.4) (174.1)
Debt and loan facility cancellation costs* 0.4 13.9
Change in fair value of derivatives* 2.7 0.1
Deferred tax on premium outlets 14.3 27.6
Other adjustments (3.0) (1.0)
Adjusted profit for the year (note 7A) 230.7 210.9
Adjusted EPS, pence 29.2 26.9
* Proportionally consolidated
The Group’s adjusted profit in 2016 was £230.7 million, £19.8 million higher than in 2015. The table below bridges adjusted profit and
adjusted EPS between the two years and the movements are shown at constant exchange rates.
Reconciliation of adjusted profit for the year
Reported Share of Share of Adjusted profit
Group joint ventures associates for the year Adjusted EPS
Including premium outlets £m £m £m £m pence
Adjusted profit – Year ended 31 December 2015 76.1 116.7 18.1 210.9 26.9
Net rental income:
Acquisitions 11.5 12.8 0.1 24.4 3.1
Disposals (18.5) – – (18.5) (2.3)
Development and other 4.7 0.4 – 5.1 0.6
Like-for-like portfolio 6.4 0.1 – 6.5 0.8
4.1 13.3 0.1 17.5 2.2
Net administration expenses (2.9) (0.1) – (3.0) (0.4)
Net finance costs (13.1) 12.8 – (0.3) –
Value Retail and VIA Outlets earnings – (0.7) 6.6 5.9 0.7
Tax and non-controlling interests (0.3) (0.5) – (0.8) (0.1)
Dilution impact of new shares – – – – (0.2)
Exchange (1.3) 1.7 0.1 0.5 0.1
Adjusted profit – Year ended 31 December 2016 62.6 143.2 24.9 230.7 29.2
The increase in adjusted profit was driven by additional net rental income of £17.5 million. The like-for-like portfolio produced £6.5
million higher rental income, acquisitions and disposals added £5.9 million and the Group's developments delivered new income of
£5.1 million. The Group’s premium outlet investments in Value Retail and VIA Outlets contributed an additional £5.9 million of earnings
associated with further sales growth, particularly from Bicester Village. There was an increase of £3.0 million in administration
expenses and finance costs increased marginally by £0.3 million. The impact of higher debt levels was offset by the benefit of recent
refinancing activity, which has reduced the Group’s average cost of debt to 3.1%, and £12.1 million of additional interest income (at
constant exchange rates) was received from the Irish loans acquired in October 2015. The change in the GBP:€ exchange rate
increased earnings by £0.5 million as the sterling value of the Group's overseas net rental income increased by more than the value of
the euro-denominated administration and finance costs. In total, these movements resulted in a 9.4% increase in adjusted profit and a
8.6% uplift in adjusted EPS.
Net rental income
Analysis of net rental income
Year ended Year ended
Reported Share of property Share of 31 December 31 December
Proportionally consolidated, excluding premium Group joint ventures associates 2016 2015 Change
outlets £m £m £m £m £m £m
Like-for-like investment properties 194.7 102.1 – 296.8 290.3 6.5
Acquisitions 11.2 12.8 1.3 25.3 0.9 24.4
Disposals 8.6 – – 8.6 27.1 (18.5)
Developments and other 7.8 8.0 – 15.8 10.7 5.1
Exchange – – – – (10.4) 10.4
Net rental income 222.3 122.9 1.3 346.5 318.6 27.9
In 2016, net rental income grew by £27.9 million to £346.5 million, or £17.5 million at constant exchange rates. Net rental income from
the like-for-like portfolio increased by 2.2% during the year, with the most significant contributions being rent reviews at Union Square
and Bullring and strong trading at Les Terrasses du Port. Like-for-like net rental income growth on the Reported Group properties was
3.4%, whilst for properties held by the Group’s proportionally consolidated joint ventures and associates, growth was 0.1%. Further
analysis of net rental income is provided in table 5 of the Additional Disclosures on page 58.
Acquisitions contributed £24.4 million of new income, principally from Grand Central, Birmingham in February 2016 and Dundrum Town
Centre, Dublin, associated with the conversion of the majority of the Irish loan portfolio in July 2016.
Disposals reduced income in 2016 by £18.5 million, reflecting the 2015 sales of Drakehouse Retail Park, Sheffield; Bercy 2, Paris and
Grand Maine, Angers and the sales in 2016 of Monument Mall, Newcastle; Villebon 2, Paris; Manor Walks, Cramlington and Thurrock
Shopping Park, Essex. Additional income from developments of £5.1 million is principally from those completed in 2015 including Elliott's
Field Shopping Park, Rugby, Cyfarthfa Retail Park, Merthyr Tydfil and Jeu de Paume, Beauvais.
Administration expenses
Administration expenses analysis
Year ended
Year ended 31 December
31 December 2016 2015
Proportionally consolidated, excluding premium outlets £m £m
Employee and corporate costs 54.6 48.3
Management fees receivable (8.5) (6.0)
Net administration expenses* 46.1 42.3
* In 2016, £0.4 million (2015: £0.3 million) of the Group’s proportionally consolidated underlying administration expenses related to the Group’s share of Property
interests.
Net administration expenses in 2016 were £46.1 million, an increase of £3.8 million, or £3.0 million at constant exchange rates,
compared to 2015. This increase was associated with additional staff costs due to higher headcount to support our new acquisitions
and Irish operations which were partly offset by additional management fee income from Ireland.
Cost ratio
The EPRA cost ratio for the year ended 31 December 2016 was 22.6%, a decrease of 50bp compared to 2015. The ratio is calculated
on a proportionally consolidated basis, excluding premium outlets, in line with EPRA best practice, and reflects total operating costs as
a percentage of gross rental income. The ratio is not necessarily comparable between different real estate companies as business
models and expense accounting and classification practices vary. The cost ratio calculation is included as table 7 of the Additional
Disclosures on page 59.
The ratio of property costs fell from 11.3% to 10.7% reflecting lower vacancy costs, whilst the ratio of net administration costs to gross
rental income was 10bp higher in 2016 at 11.9%, associated with increased headcount to support the recent acquisitions and
forthcoming development projects.
Loss on the sale of properties
During 2016, we sold eight properties raising proceeds of £635 million, after deducting selling costs. Compared to their valuation at 31
December 2015, these sales resulted in a loss of £24.0 million, 85% of which related to three retail parks: Thurrock Shopping Park,
Essex; Manor Walks, Cramlington; and Westmorland, Cramlington. The losses were consistent with the impact of the outward yield
shift suffered across the rest of the UK retail parks portfolio during 2016 explained in the "Valuation change" section of this Review on
page 21.
Share of results of joint ventures and associates, including investments in premium outlets
As explained on page 16, for management reporting purposes we review the Group’s premium outlet investments separately from the
rest of the Group's other properties. Due to the nature of the Group’s control, VIA Outlets is accounted for as a joint venture and Value
Retail is accounted for as an associate.
The operating performance of our premium outlet investments is described on pages 14 and 15 of the Business Review and the
aggregated financial contribution to the Group is shown in table 12 of the Additional Disclosures section on page 62.
Share of results of joint ventures, including VIA Outlets
The Group has interests in 15 joint ventures and the share of the results of joint ventures under IFRS for the year ended 31 December
2016 was £169.2 million (2015: £246.8 million) as analysed in the table below. Further details are provided in note 9 to the accounts.
Analysis of share of results of joint ventures
Year ended Year ended
31 December 31 December
Property joint 2016 Property joint 2015
ventures VIA Outlets Total ventures VIA Outlets Total
Group’s share of results including premium outlets £m £m £m £m £m £m
Net rental income 122.9 11.2 134.1 108.8 9.8 118.6
Net administration expenses (0.4) (2.3) (2.7) (0.3) (1.7) (2.0)
Loss on sale of properties – (0.1) (0.1) – (0.8) (0.8)
Revaluation gains on properties 10.7 18.4 29.1 122.1 10.4 132.5
Net finance income/(costs) 16.1 (1.3) 14.8 3.1 (2.0) 1.1
Tax charge (0.8) (5.2) (6.0) – (2.6) (2.6)
Share of results (IFRS) 148.5 20.7 169.2 233.7 13.1 246.8
Adjustments (note 9B to the accounts) (11.5) (14.5) (26.0) (123.1) (7.0) (130.1)
Adjusted profit 137.0 6.2 143.2 110.6 6.1 116.7
The reduction in the share of results of joint ventures under IFRS of £77.6 million during 2016 was principally due to revaluation gains
being £103.4 million lower than in the prior year. The lower gains on these properties are consistent with the year-on-year change in
revaluation movements on the Group’s wholly owned property portfolio. Net rental income from the Group’s share of property joint
ventures was £14.1 million higher than in 2015, principally due to the conversion to property ownership of Dundrum Town Centre,
Dublin in July 2016 which is held jointly with Allianz. On an adjusted earnings basis, profit from the Group's joint ventures was £26.5
million higher in 2016.
Share of results of associates, including Value Retail
The Group has two associates: Value Retail (‘VR’), and a 10% interest in Nicetoile, where the Group is the asset manager and which is
proportionally consolidated for management reporting purposes. On an IFRS basis, the share of results of associates under IFRS for
the year ended 31 December 2016 was £137.1 million (2015: £160.6 million), of which £135.2 million related to VR and principally
related to the property valuation uplift of £120.0 million.
On an adjusted earnings basis the results of associates were £24.9 million (2015: £18.1 million), of which £23.6 million related to VR.
The year-on-year increase resulted from strong trading, particularly at Bicester, Oxford; Kildare, Dublin; and the two Spanish Villages,
La Roca and Las Rozas. See note 13 of the accounts for further details on the Group’s associates.
Total adjusted earnings contribution from premium outlets
In 2016, the Group’s two investments in premium outlets contributed £29.8 million to adjusted profit, £6.6 million higher than in 2015
(£5.9 million at constant exchange rates), of which £6.5 million related to increased earnings at Value Retail. In addition, the Group has
advanced loans to Value Retail, from which the Group received £4.2 million (2015: £5.3 million) of interest income in 2016.
Further details of the aggregated profit contribution from our premium outlets investments is provided in table 12 of the Additional
Disclosures section on page 62.
Finance costs
Net finance costs on a proportionally consolidated basis, as shown in note 2 to the accounts, totalled £96.6 million in 2016, compared
with £98.1 million in 2015. Adjusted finance costs, which exclude items such as debt cancellation costs and the change in the fair value
of derivatives which are not included in adjusted earnings, totalled £93.5 million in 2016, an increase of £9.4 million in 2015, or £0.3
million at constant exchange rates. The calculation of adjusted finance costs in shown in table 18 on page 64.
In 2016, interest received from our Irish loan assets of £17.4 million was largely offset by the additional interest expense associated
with the increased level of borrowing to support the acquisitions in Birmingham and Ireland.
During 2016, the Group’s weighted average interest rate reduced to 3.1%, compared to 3.8% for 2015. This reflected refinancing
activity which is explained in the "Financing and cash flow" section of this Review on page 23.
Interest capitalised during the year was £5.1 million (2015: £5.3 million) and principally related to the Group’s developments in Leeds
and Southampton which both opened in the final quarter of 2016.
Tax
The Group has tax exempt status in the UK, France and Ireland and is exempt from corporation tax on rental income and gains arising
on property sales. On a proportionally consolidated basis, the tax charge for 2016 remained low at £2.7 million (2015: £1.6 million), the
increase being due to restrictions on the use of tax losses across the Group and increased tax in France. We have published
"Hammerson's Approach to Tax for the year ending 31 December 2017" on the Group's website www.hammerson.com which provides
further information about the Group's tax strategy.
Dividend
The Directors have proposed a final dividend of 13.9 pence per share. Together with the interim dividend of 10.1 pence, the total for
2016 is 24.0 pence, representing an increase of 7.6% compared with the prior year. The final dividend is payable on 27 April 2017 in
the UK and 28 April 2017 for South African investors, to shareholders on the register at the close of business on 17 March 2017. 4.9
pence will be paid as a PID, net of withholding tax where appropriate, with the balance of 9.0 pence paid as a normal dividend
The Company will not be offering a scrip dividend alternative, but for shareholders who wish to receive their dividend in the form of
shares, the Dividend Reinvestment Plan (DRIP) will be available.
South African secondary listing
To ensure Hammerson is accessing the widest pool of international capital, the Company completed a secondary listing of its shares
on the Johannesburg Stock Exchange (“JSE”) in September 2016. Hammerson’s register already included a highly diversified global
shareholder base, including a number of South African funds, and the listing further extended the depth and variety of investors and
improved liquidity for existing shareholders. The calculation of headline earnings per share as required by the JSE is in note 7C to the
accounts on page 43.
Net assets
During 2016, equity shareholders’ funds increased by £259 million, or 4.7%, to £5,776 million at 31 December 2016. Net assets,
calculated on an EPRA basis, were £5,865 million and on a per share basis, net assets increased by 29 pence to £7.39. The
movement during the year is shown in the table below.
Movement in net assets Equity Adjustments1 EPRA EPRA NAV
shareholders’ £m net assets pence
funds £m per share
Proportionally consolidated, including premium outlets £m
31 December 2015 5,517 56 5,573 710
Property revaluation
Proportionally consolidated property portfolio (13) – (13) (2)
Premium outlet properties 138 – 138 18
125 – 125 16
Adjusted profit for the year 231 – 231 29
Loss on the sale of properties (24) – (24) (3)
Net actuarial losses on pension schemes (16) – (16) (2)
Change in deferred tax (14) 14 – –
Dividends2 (136) – (136) (25)
Exchange and other 93 19 112 14
31 December 2016 5,776 89 5,865 739
1. Adjustments in accordance with EPRA best practice shown in note 7D to the accounts on page 43.
2. Dividends include the scrip dividend payment of £44.1 million which reduced EPRA NAV per share by 8 pence.
The increase in EPRA net asset value was principally due to the valuation surplus on the Group’s premium outlets which totalled £138
million. Adjusted profit increased NAV by 29 pence, although this was largely offset by dividends, which reduced NAV by 25 pence.
Exchange and other principally includes foreign exchange movements associated with the strengthening of the euro during the year
which increased EPRA NAV per share by 14 pence. Further details of the reconciliation between IFRS and EPRA net assets are in
note 7D to the accounts on page 43.
Investment and development properties
Portfolio valuation analysis
Movement in portfolio value Share of
Reported Property
Group interests Total Investment Development
Proportionally consolidated, excluding premium outlets £m £m £m £m £m
Portfolio value at 1 January 2016 4,652 2,478 7,130 6,741 389
Valuation (decrease)/increase (25) 12 (13) (45) 32
Capital expenditure
Acquisitions 574 749 1,323 1,182 141
Developments 137 1 138 20 118
Other 31 24 55 40 15
Letting costs 12 5 17 16 1
754 779 1,533 1,258 275
Capitalised interest 5 – 5 – 5
Disposals (669) – (669) (669) –
Transfers (222) 222 – 304 (304)
Exchange 269 27 296 296 –
Portfolio value at 31 December 2016 4,764 3,518 8,282 7,885 397
Valuation change
The chart below analyses the sources of the valuation change during 2016 for the property portfolio, on a proportionally consolidated
basis excluding premium outlets.
During 2016, the Group’s proportionally consolidated portfolio suffered a net decrease in valuation of £13 million. In the UK, shopping
centre values fell by £6 million and retail parks by £118 million. £39 million of this adverse movement was due to the increase in stamp
duty land tax in April 2016 and represents the majority of the adverse "Development and other" movement for both portfolios.
Components of valuation change in 2016 (£m)
Proportionally consolidated, excluding premium outlets
[Please refer to the company's website to view the graphic illustration]
Investment yields were broadly unchanged for UK shopping centres, with income growth offsetting the impact of the stamp duty
increase. Equivalent yields for our retail park portfolio increased by an average of 45bp for the UK retail parks portfolio, resulting in a
valuation reduction of £120 million.
In France, investor demand for prime assets continues to be strong and yields for our portfolio have reduced by an average of 30bp
during the year equivalent to a valuation increase of £114 million. This increase was partly offset by the rebasing of ERVs at Jeu de
Paume, Beauvais which accounts for the portfolio's adverse income change of £27 million. The centre opened in late 2015 and has
suffered from weak trading and letting in 2016. The £14 million "Development and other" adverse valuation movement includes £6
million reflecting increased transfer taxes in Paris which were introduced at the beginning of the 2016.
In Ireland, there was a £3 million valuation gain, representing income growth of £62 million being largely offset by the recognition of £59
million of purchasers' costs to secure the properties. There was also a £8 million gain in relation to the Irish development sites,
principally Dublin Central, included within the UK other and developments portfolio. The remainder of the £34 million gain in this latter
portfolio was principally in relation to the recently completed schemes in Leeds and Southampton.
In addition to the Group’s proportionally consolidated portfolio, the premium outlets portfolio produced a revaluation surplus of £138
million, of which Value Retail contributed £120 million and VIA Outlets £18 million. Investor demand continues to strengthen for the
sector and the valuation performance was driven by income growth, which accounted for two-thirds of the surplus, the remainder
principally being due to inward yield shift.
Further valuation and yield analysis is included in tables 8 and 9 in the Additional Disclosures section on page 60.
Capital expenditure
Capital expenditure totalled £1,533 million in 2016, although included the conversion to property assets of the Irish loans which were
acquired in October 2015 for £690 million and further details are in note 9D to the accounts. Acquisitions also included the purchase of
Grand Central, Birmingham for £350 million. Development expenditure totalled £138 million, principally on the completion of the
developments in Leeds and Southampton. Other capital expenditure of £55 million included refurbishment and asset management
initiatives including the reconfiguration of Place des Halles, the new Apple store at Les Terrasses du Port and a number of smaller
scale UK retail park projects.
Returns
Returns summary
Proportionally consolidated, including premium outlets
Return % Benchmark %
Group income return 4.6 Income return1 5.0
Group capital return 1.1 Capital return1 (1.6)
1
Group total return 5.7 Total return 3.4
Total shareholder return over one year (0.7) FTSE EPRA/NAREIT UK index over one year (8.5)
Total shareholder return over three years p.a. 8.3 FTSE EPRA/NAREIT UK index over three years p.a. 7.5
13. 14.
Total shareholder return over five years p.a. 8 FTSE EPRA/NAREIT UK index over five years p.a. 9
1. As the annual IPD indices have yet to be published, the benchmark returns shown above have been estimated and are calculated on a weighted 75:25
UK:France basis.
Property returns
The table on page 21 compares the financial returns generated in 2016 with benchmark IPD indices. The Group’s benchmark is the
IPD All Retail Universe total return weighted 75:25 between the UK and French indices. The All Retail Universe indices include returns
from all types of retail property.
As the annual IPD benchmarks for both countries are not available until after this Annual Report has been published, the benchmarks
have been estimated and are subject to revision. The UK IPD data is based on the Quarterly All Retail Universe to December 2016. As
there is less data available for France, for the purposes of calculating the Group IPD benchmarks, we have assumed that the French
benchmark is equal to the returns generated by our French portfolio of 8.3%.
The Group’s total return was 5.7%, 230 basis points higher than the estimated benchmark. The Group’s outperformance was driven by
the property portfolio held by our premium outlet investments which produced a total return of 15.1%. The total return for the UK
investment portfolio was 1.9%, which was 20 basis points higher than the UK benchmark. The Ireland investment portfolio, which was
included from the date of property acquisition in July, generated a total return of 2.3% and reflects the impact of recognising the
acquisition-related costs, such as stamp duty and advisor fees.
In 2016, the Reported Group portfolio generated a total return of 3.8%, whilst properties held by our joint ventures and associates
generated a total return of 7.5%. Both portfolios exceeded the estimated Group benchmark, the performance of the latter portfolio
being boosted by the strong return from premium outlets. An analysis of the capital and total returns by business segment is included in
table 8 on page 60.
Shareholder returns
For the year ended 31 December 2016, the Group’s return on shareholders’ equity was 7.8%, which compares to the Group’s
estimated cost of equity of 7.6%. The income element of the return on equity tends to be relatively low given the prime nature of the
property portfolio. The capital element of the return was driven by the portfolio’s valuation performance during the year.
Hammerson’s total shareholder return for 2016 was -0.7%, which represents an outperformance of the FTSE EPRA/NAREIT UK index
by 780 basis points as the wider index has suffered larger share price reductions than the Company. Over the last five years, the
Group’s average annual total shareholder return has been 13.8%, compared to 14.9% for the FTSE EPRA/NAREIT UK index.
Investment in joint ventures and associates, including investments in premium outlets
Investment in joint ventures, including VIA Outlets
At 31 December 2016, the Group’s investment in joint ventures totalled £3,737 million compared with £3,214 million at the beginning of
the year, an increase of £523 million. Key changes during 2016 were the part disposals by the Group of 50% stakes in Grand Central,
Birmingham and Westquay Watermark, Southampton and the conversion to property of Dundrum Town Centre. We also made an
additional investment in VIA Outlets associated with its acquisition of three outlet centres in the second half of 2016.
The movement in investments in joint ventures during 2016 is shown in the table below and further analysis is provided in note 9D of
the accounts.
Analysis of movements in investment in joint ventures
Share of Property
joint ventures VIA Outlets Total
Group’s share of investment, including premium outlets £m £m £m
Balance at 1 January 2016 3,103 111 3,214
Irish loan portfolio transferred to Reported Group (83) – (83)
Capital advances on conversion of Irish loan portfolio to property assets 92 – 92
Transfer from Reported Group 222 – 222
Share of results of joint ventures:
Adjusted earnings 137 6 143
Property revaluation 11 18 29
Other results – (3) (3)
148 21 169
Distributions and other receivables (90) – (90)
Capital advances/(repayments) (8) 71 63
Foreign exchange and other movements 131 19 150
Balance at 31 December 2016 3,515 222 3,737
Investment in associates, including Value Retail
The Group’s investment in associates totalled £988 million at 31 December 2016, an increase of £220 million during the year.
The increase was principally due to foreign exchange translation gains of £60 million, the acquisition of additional sponsor interests in
Value Retail in December 2016 for £41 million and revaluation gains on VR’s property portfolio which totalled £120 million. Two-thirds
of the revaluation gains related to income growth with the balance being due to yield compression and development profits. Further
analysis is provided in note 10 to the accounts on page 52.
Total investment in premium outlets
At 31 December 2016, the Group’s total investment in premium outlets, representing our share of VR and VIA, calculated on a
consistent basis with EPRA NAV and including the Group’s loans to VR, totalled £1,309 million (2015: £1,003 million). The increased
investment in the year was due to a combined valuation surplus of £138 million, additional investment of £112 million and foreign
exchange gains of £76 million. These were partly offset by VR repaying £55 million of loans to the Group. Further details of the Group’s
aggregated investment in the sector are provided in table 11 of the Additional Disclosures on page 61.
Financing and cash flow
Our financing strategy is to generally borrow on an unsecured basis on the strength of the Group’s covenant to maintain operational
flexibility. Borrowings are arranged to maintain short-term liquidity and to ensure an appropriate maturity profile. Acquisitions may be
financed initially using short-term funds before being refinanced for the longer term when market conditions are appropriate. Short-term
funding is raised principally through syndicated revolving credit facilities from a range of banks and financial institutions with which we
maintain strong working relationships. Long-term debt mainly comprises the Group’s fixed rate unsecured bonds. Derivative financial
instruments are used to manage exposure to fluctuations in foreign currency exchange rates and interest rates, but are not employed
for speculative purposes.
The Board approves financing guidelines against which it monitors the Group’s financial structure. These guidelines, together with the
relevant metrics, are summarised in the table below which illustrates the Group’s robust financial position.
Key financing metrics
31 December 31 December
Proportionally consolidated, excluding premium outlets Guideline1 2016 2015
Net debt (£m) 3,413 2,968
Gearing (%) Maximum 85% 59 54
Loan to value2 (%) – old methodology No more than 40% 41 38
Loan to value2 (%) – new methodology No more than 40% 36 34
Liquidity (£m) 592 931
Weighted average interest rate (%) 3.1 3.8
Weighted average maturity of debt (years) 5.5 5.7
Interest cover (times) At least 2.0 3.5 3.6
Net debt/EBITDA (times)3 Less than 10.0 9.5 9.6
FX hedging (%) 80-90% 79 90
Debt fixed (%) At least 50% 70 61
1. Guidelines should not be exceeded for an extended period of time.
2. See page 24 for further explanation and table 17 on page 64 for supporting calculation.
3. EBITDA includes the interest received from the Irish loan assets. See table 15 on page 63 for supporting calculation.
Net debt position
On a proportionally consolidated basis, net debt at 31 December 2016 was £3,413 million. This comprised borrowings of £3,543 million
and cash and deposits of £130 million and a supporting calculation is included in table 16 on page 64. During the year, net debt
increased by £445 million and the movement is analysed in the table below.
Movement in net debt
Total
£m
Net debt at 1 January 2016 2,968
Net cash inflow from operations (232)
Acquisitions 654
Disposals (639)
Development and other capital expenditure 215
Equity dividends paid 136
Value Retail distributions and repayment of loans and other cash flows (85)
Exchange and other cash flows 396
Net debt at 31 December 2016 3,413
We have continued to reduce the Group’s average cost of debt with new issuance at low rates of interest whilst ensuring a solid funding
platform. The weighted average cost of debt for 2016 was 3.1%, a reduction of 70 basis points compared with 2015. Key financing
transactions during 2016 included:
– a seven-year €500 million bond was issued in March at a coupon of 1.75%, the Group’s lowest ever bond coupon
– a £420 million unsecured revolving credit facility was signed in April with a syndicate of eight banks for a maturity of five years and
may be extended by a further two years. The facility has an initial margin of 90 basis points and replaced a £150 million revolving
credit facility due to mature in April 2017 which featured an initial margin of 150 basis points
– a £400 million private placement signed in November with funding received in January 2017. This consists of senior notes
denominated in euro, sterling and US dollar and have a weighted average coupon of 1.7% and maturities of seven, nine, 11 and 14
years.
During the year we have benefited from low floating rates on the €1.5 billion facility used to fund the acquisitions in Ireland and
Birmingham. The financing activity noted above will enable the Group to cancel the remaining commitments on this facility in early
2017. At 31 December 2016, liquidity, comprising cash and undrawn committed facilities, was £592 million, compared with £931 million
at the end of 2015.
Exposure to exchange translation differences on euro-denominated assets is managed through a combination of euro borrowings and
derivatives. At 31 December 2016, the value of euro-denominated liabilities as a proportion of the value of euro-denominated assets
was 79%, compared with 90% at the beginning of the year. Interest on euro debt also acts as a hedge against exchange differences
arising on net income from our overseas businesses. The strengthening of the euro against sterling during 2016 has resulted in modest
gains to net asset value and earnings.
The Group’s unsecured bank facilities and the private placement senior notes contain financial covenants that the Group’s gearing,
defined as the ratio of net debt to shareholders’ equity, should not exceed 150% and that interest cover, defined as net rental income
divided by net interest payable, should not be less than 1.25 times. The same gearing covenant applies to three of the Company’s
unsecured bonds, whilst the remaining bonds contain a covenant that gearing should not exceed 175%. These figures are on a
proportionally consolidated basis and the bonds have no covenant for interest cover. Hammerson’s financial ratios are comfortably
within these covenants.
Fitch and Moody’s rate Hammerson’s unsecured credit as A– and Baa1 respectively. Moody’s changed its outlook from stable to
negative in June 2016 following the UK’s EU referendum decision, stating that the heightened economic uncertainty could dampen
prospects for the UK real estate sector. This was consistent with Moody’s change in outlook for the UK sovereign rating from stable to
negative.
Loan to value (“LTV”) – New calculation methodology
The calculation of the Group’s LTV has been amended to include the Group’s share of net assets from our premium outlet investments
in VR and VIA Outlets within the “value” denominator. These assets were previously excluded from the calculation. The Group has
been acquiring interests in these investments over recent years and at 31 December 2016 our combined investment was £1.2 billion.
The omission of these investments has become more significant and the change in methodology provides better comparability with our
peer group. The amendment is consistent with our gearing calculation and the proportionally consolidated basis of the Group’s
financial information as explained on page 16.
Under the new methodology, the Group’s LTV ratio at 31 December 2016 was 36% (2015: 34%), compared with 41% at 31 December
2016 (2015: 38%) under the previous methodology. The supporting calculations for both bases are in table 17 of the Additional
Disclosures on page 64.
At 31 December 2016 the Group’s share of net debt in VR and VIA Outlets was £468 million. On a proforma basis, proportionally
consolidating this with the Group’s share of VR and VIA Outlets property valuations, would increase the Group’s gearing from 59% to
67%, whilst the LTV would be 39%.
Debt maturity profile at 31 December 2016 (£m)
Proportionally consolidated, excluding premium outlets
[Please refer to the company's website to view the graphic illustration]
The above analysis excludes cash and deposits, the fair value of currency swaps and unamortised bank facility fees.
1. Debt maturing in 2017 has been refinanced by the £400 million private placement funds which were received in January 2017.
RISKS AND UNCERTAINTIES
Our risk management processes are designed to reduce the chances of financial loss, protect our reputation whilst supporting the growth of the
wider business and acting on opportunities when they arise. Our Risk Management Framework (‘RMF’) is structured around nine principal risks,
contains mitigating actions and the residual risk assessment for each risk is summarised in the table below. A more comprehensive explanation
of the Group’s approach to risk management is included in the 2016 Annual Report.
Risk and impact Key mitigating actions Change during 2016 and outlook
Impact ? Probability ?
1. Macro-economic (Residual risk assessment: Medium/High)
Our financial performance is directly impacted by We invest across a number of property sectors There is heightened macro-economic uncertainty
the macro-economic performance in the and European countries which limits the impact of following the UK’s decision to leave the EU with a
countries in which we operate. Our retailers and any adverse macro-economic trends in a single wide spectrum of opinion about future economic
shoppers are impacted by factors such as market. We have a resilient business model and a performance. Stock and foreign exchange markets
disposable income growth, employment levels, robust financial position which provides protection have been volatile and remain sensitive to
business and consumer confidence, interest from future market shocks. conflicting economic data and external shocks.
rates and foreign exchange movements.
Impact ? Probability ?
2. Retail market (Residual risk assessment: Medium)
We own and operate physical property in a We own high-quality, prime properties which Leasing volumes have remained stable during the
dynamic retail marketplace with continued support retailers’ multichannel strategies and year and we have delivered 2.2% like-for-like NRI
multichannel and digital technology challenges. actively retenant our portfolio to introduce relevant growth. We continue to enhance our properties to
Retailer profitability is under pressure, brands. Our Product Experience Framework help ensure they fulfil both shopping and leisure
particularly in the UK (living wage, business us to differentiate our destinations and attract both requirements with an increased focus on catering
rates, adverse foreign exchange movements). retailers and shoppers. and events.
Impact ? Probability ?
3. Property investment (Residual risk assessment: Medium)
Acquisitions may underperform forecasts, or All significant investment decisions are approved In 2016, we completed £635 million of disposals
opportunities to divest of properties are missed by the Board and are thoroughly evaluated. We and completed acquisitions in Birmingham, Ireland
or are limited by adverse market conditions. undertake independent valuations twice yearly and VIA Outlets. Whilst values at UK retail parks
and include investment plans in our annual have fallen during 2016, values in other sectors are
Property valuations falls adversely impacting the
Business Plan. forecast to be broadly stable in 2017 supported by
Group’s financial position and delivery of future
continued low interest rates.
plans.
Impact ? Probability ?
4. Property development (Residual risk assessment: Low)
Property development is inherently risky, with We have a proven track record of successful During 2016 we completed two shopping centre
long delivery times, high levels of complexity with development activity. Development exposure schemes in Leeds and Southampton which has
multiple milestones and is management included in business planning process and reduced development exposure. We continue to
intensive. Over-exposure to developments development projects are regularly reviewed by progress future schemes although there are further
increases the financial impact of an economic management. Major commitments are approved milestone to achieve before we can commit to
downturn. by the Board. these projects.
Impact ? Probability ?
5. Treasury (Residual risk assessment: Medium/High)
Poor treasury planning or external factors may We regularly monitor our financial ratios, debt During 2016 we have completed £1.2 billion of
lead to insufficient liquidity which could limit our maturity, liquidity, interest rate exposure and refinancing although debt levels have increased to
ability to deliver our strategy, particularly for hedging strategy. Capital is provided by a diverse £3.4 billion. In 2017, we expect to maintain a
major developments. A fall in property values range of funding sources including bank lending, strong financial position and reduce debt levels
would adversely impact our financial position private placement debt, bond and equity markets. through further property disposals.
and could result in a breach of borrowing We have significant headroom above our
covenants. borrowing covenants.
Impact ? Probability ?
6. Partnerships (Residual risk assessment: Low)
A significant proportion of our portfolio is held We have a diverse range of joint venture partners We maintain strong working relationships with our
jointly with third parties and our premium outlet and act to ensure strategic alignment through joint venture partners. The proportion of the
investments are externally managed. These regular contact and annual business plans. We portfolio held with third parties has increased
structures can act to limit our control and reduce have a close working relationship and board slightly during 2016. We are confident that our
operation effectiveness. representation for both Value Retail and VIA ownership structures remain liquid with a number
Outlets. of joint venture stakes traded over recent years.
Impact ? Probability ?
7. Tax and regulatory (Residual risk assessment: Medium)
There is an increasing burden from compliance We maintain a low-risk tax status in the UK and In addition to the uncertainty associated with the
and regulatory requirements as well as have regular meetings with HMRC and monitor UK’s exit from the EU, there are several tax
increased uncertainty around the future of UK compliance with tax exemption rules. We changes which have adversely impacted the Group
tax and regulatory environment following the participate in policy consultations and in industry- in 2016. These include increases in stamp duty,
UK’s decision to exit from the EU. wide dialogue with policy makers. implementation of the BEPS legislation and
changes to Irish real estate tax.
Risk and impact Key mitigating actions Change during 2016 and outlook
Impact ? Probability ?
8. Catastrophic event (Residual risk assessment: Medium)
A catastrophic event, such as a terrorist or We have continuity plans at a corporate and The threat level of a major incident at one of the
cyber-attack, power outage or civil unrest, could operational level, including a core crisis group for Group’s properties has increased during 2016.
cause significant operational and reputational dealing with major incidents. We have enhanced Also, the wider use of digital technology across the
issues as could the impact of an environmental our physical security measures at our properties Group increases the risks associated with cyber
related event such as flooding. and maintain appropriate insurance cover. security.
Impact ? Probability ?
9. People (Residual risk assessment: Low)
The Group has a relatively small headcount We have widened our succession planning During 2016, we successfully integrated our new
which could act to curtail the achievement of activities and the annual Business Plan contains a Irish platform. We introduced several new people
business objectives, especially if we fail to retain human resources plan. We monitor staff turnover initiatives, including a diversity and inclusion
key executives and staff. and employee engagement and act on trends and programme and repeated the “Great Place to
feedback. Work” survey with encouraging results.
RESPONSIBILITY STATEMENT OF THE DIRECTORS ON THE ANNUAL REPORT
The Responsibility Statement has been prepared in connection with the Company’s full Annual Report for the year ended 31 December
2016. Certain parts of the Annual Report are not included in this announcement.
We confirm that to the best of our knowledge:
– The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a
whole;
– The Strategic Report includes a fair review of the development and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face; and
– The Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance, business model and strategy.
By order of the Board
David Atkins
Chief Executive
Timon Drakesmith
Chief Financial Officer
17 February 2017
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF HAMMERSON PLC ON THE
AUDITED FINANCIAL RESULTS OF HAMMERSON PLC
We confirm that we have issued an unqualified opinion on the full financial statements of Hammerson plc. Our audit report on the full
financial statements sets out the following risks of material misstatement which had the greatest effect on our audit strategy; the
allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those
risks and the key observations arising from our work:
Valuation of the property portfolio (including Premium Outlets held by Value Retail)
Risk description How the scope of our audit responded to the risk
– Hammerson plc ("Hammerson") owns a portfolio of retail – We assessed management's review of the work of the
property assets valued at £8,282 million at 31 December external valuers;
2016 (31 December 2015: £7,130 million) of which £4,764
– We met with the external valuers of the portfolios (including
million are held by subsidiaries (31 December 2015: £4,652
those held by Value Retail) to discuss and challenge the
million) and £3,518 million by joint ventures (31 December
valuation process, performance of the portfolio and
2015:
significant assumptions and critical judgement areas,
£2,478 million).
including estimated rental values, yields, future net operating
– The Group has further investments in Premium Outlets income and discount rates. We benchmarked these
through the investment in Value Retail (“VR”). The total value assumptions to relevant market evidence including specific
of the Premium Outlets held by Value Retail at 31 December property transactions and other external data;
2016 was £4,096 million (31 December 2015: £3,333 million)
– We assessed the competence, independence and integrity
of which Hammerson’s share is £1,387 million (31 December
of the external valuers;
2015:
£1,095 million). – We performed audit procedures to assess the integrity of
information provided to the external valuers including
– The valuation of the property portfolio is a significant
agreement on a sample basis back to underlying lease
judgement area and is underpinned by a number of
agreement; and
assumptions including estimated rental values and yields and
for Premium Outlets, future net operating income and – Under our direction, the component auditors assessed the
discount rates. The Group uses professionally qualified integrity of the information provided to the external valuers
external valuers to fair value the Group's portfolio at six- and through use of their valuation specialists challenged the
monthly intervals. assumptions used in the valuations.
– Please see notes 8, 9 and 10 to the financial statements.
Key observations
We concluded that the assumptions applied in the arriving at the fair value of the Group’s property portfolio, (including Premium
Outlets held by Value Retail), by the external valuers were appropriate.
Property transactions, specifically the acquisition of the Irish property portfolio
Risk description How the scope of our audit responded to the risk
– During 2016 the Group continued its asset disposal – We have reviewed the legal agreements for the acquisition of
programme recycling the proceeds into high-quality retail each Irish asset, paying specific attention to the ownership
property including the acquisition of the Irish property portfolio interests acquired;
(primarily Dundrum Town Centre and the Ilac Centre).
– We have determined whether the acquisition for each
– We focussed the risk around property transactions to the property is accounted for in accordance with IFRS and that
acquisition of the Irish property portfolio due to its size with a each property is appropriately recorded in the financial
cost in excess of £1 billion and the fact that the transaction is statements depending on the ownership interests acquired;
inherently complex, reflecting a number of steps to secure the
consensual conversion of the loans acquired in 2015 into the and
underlying investment properties. The transaction was further
– We have considered the presentation and disclosure of the
complicated by the fact that each property has different
transaction in the financial statements.
ownership interests resulting in increased risk of inaccurate
presentation as a joint venture or a joint operation in the
financial statements.
Key observations
We concluded that the acquisition of the Irish property portfolio has been appropriately accounted for and disclosed within the
financial statements.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we did not provide a separate opinion on these matters.
Our liability for this report, and for our full audit report on the financial statements is to the Company’s members as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit
work, for our audit report or this report, or for the opinions we have formed.
Deloitte LLP
Chartered Accountants and Statutory Auditor
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015
Notes £m £m
Gross rental income 2 251.3 236.0
Operating profit before other net (losses)/gains and share of results of joint ventures and
associates 2 176.6 166.8
(Loss)/Gain on sale of properties (24.0) 14.9
Gain/(Loss) on other investments 1.3 (1.4)
Revaluation (losses)/gains on properties (24.7) 245.1
Other net (losses)/gains 2 (47.4) 258.6
Share of results of joint ventures 9A 169.2 246.8
Share of results of associates 10A 137.1 160.6
Operating profit 2 435.5 832.8
Finance costs (121.2) (101.9)
Debt and loan facility cancellation costs (0.4) (13.9)
Change in fair value of derivatives (3.5) (1.1)
Finance income 12.4 15.7
Net finance costs 4 (112.7) (101.2)
Profit before tax 322.8 731.6
Tax charge 5A (1.9) (1.6)
Profit for the year 320.9 730.0
Attributable to:
Equity shareholders 317.3 726.8
Non-controlling interests 3.6 3.2
Profit for the year 320.9 730.0
Basic earnings per share 7B 40.2p 92.8p
Diluted earnings per share 7B 40.1p 92.6p
Adjusted earnings per share 7B 29.2p 26.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015
£m £m
Items that may subsequently be recycled through the income statement
Foreign exchange translation differences 535.6 (107.5)
Net (loss)/gain on hedging activities (437.3) 81.9
98.3 (25.6)
Items that may not subsequently be recycled through the income statement
Revaluation losses on participative loans within investment in associates (0.3) (1.0)
Net actuarial losses on pension schemes (15.9) (0.3)
Total other comprehensive income 82.1 (26.9)
Profit for the year 320.9 730.0
Total comprehensive income for the year 403.0 703.1
Attributable to:
Equity shareholders 388.3 703.5
Non-controlling interests 14.7 (0.4)
Total comprehensive income for the year 403.0 703.1
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
2016 2015
Notes £m £m
Non-current assets
Investment and development properties 8 4,763.9 4,652.1
Interests in leasehold properties 36.4 32.1
Plant and equipment 6.2 7.6
Investment in joint ventures 9A 3,736.7 3,213.6
Investment in associates 10C 988.1 768.0
Other investments – 4.8
Receivables 11 44.9 92.1
9,576.2 8,770.3
Current assets
Receivables 12 105.9 118.0
Restricted monetary assets 13 35.1 34.0
Cash and deposits 14 74.3 37.0
215.3 189.0
Total assets 9,791.5 8,959.3
Current liabilities
Payables 15 303.8 235.5
Tax 0.4 0.7
Borrowings 16A 211.1 –
515.3 236.2
Non-current liabilities
Borrowings 16A 3,285.2 3,028.1
Deferred tax 0.5 0.5
Obligations under finance leases 37.5 32.5
Payables 18 96.0 75.7
3,419.2 3,136.8
Total liabilities 3,934.5 3,373.0
Net assets 5,857.0 5,586.3
Equity
Share capital 19 198.3 196.1
Share premium 1,265.7 1,223.3
Translation reserve 659.6 135.1
Hedging reserve (562.9) (125.6)
Merger reserve 374.1 374.1
Other reserves 23.7 21.7
Retained earnings 3,817.3 3,696.5
Investment in own shares (0.2) (3.9)
Equity shareholders’ funds 5,775.6 5,517.3
Non-controlling interests 81.4 69.0
Total equity 5,857.0 5,586.3
Diluted net asset value per share 7D £7.28 £7.03
EPRA net asset value per share 7D £7.39 £7.10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Investment?????? Equity Non-
Share Share Translation Hedging Merger Retained in own??? shareholders’ controlling
capital premium reserve reserve reserve Other earnings shares* funds interests Total equity
£m £m £m £m £m reserves £m £m £m??? £m £m £m
Balance at 1 January
2016 196.1 1,223.3 135.1 (125.6) 374.1 21.7 3,696.5 (3.9) 5,517.3 69.0 5,586.3
Issue of shares 0.3 0.2 – – – – – (0.3) 0.2 – 0.2
Share-based employee
remuneration – – – – – 5.6 – – 5.6 – 5.6
Cost of shares awarded
to employees – – – – – (4.0) – 4.0 – – –
Transfer on award of own
shares to employees – – – – – 0.4 (0.4) – – – –
Proceeds on award of
own shares to employees – – – – – – 0.2 – 0.2 – 0.2
Dividends 1.9 42.2 – – – – (180.1) – (136.0) (2.3) (138.3)
Foreign exchange
translation differences – – 524.5 – – – – – 524.5 11.1 535.6
Net loss on hedging
activities – – – (437.3) – – – – (437.3) – (437.3)
Revaluation losses on
participative loans within
investment in associates – – – – – – (0.3) – (0.3) – (0.3)
Net actuarial losses on
pension schemes – – – – – – (15.9) – (15.9) – (15.9)
Profit for the year – – – – – – 317.3 – 317.3 3.6 320.9
Total comprehensive
income/(loss) for the year – – 524.5 (437.3) – – 301.1 – 388.3 14.7 403.0
Balance at 31 December
2016 198.3 1,265.7 659.6 (562.9) 374.1 23.7 3,817.3 (0.2) 5,775.6 81.4 5,857.0
* Investment in own shares is stated at cost.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Investment???? Equity Non-
Share Share Translation Hedging Merger in own??? shareholders’ controlling
capital premium reserve reserve reserve Other Retained shares* funds interests Total equity
£m £m £m £m £m reserves £m earnings £m £m??? £m £m £m
Balance at 1 January
2015 196.1 1,222.9 239.0 (207.5) 374.2 19.6 3,136.2 (6.8) 4,973.7 71.4 5,045.1
Issue of shares – 0.4 – – – – – – 0.4 – 0.4
Share issue costs – – – – (0.1) – – – (0.1) – (0.1)
Share-based employee
remuneration – – – – – 4.8 – – 4.8 – 4.8
Cost of shares awarded
to employees – – – – – (2.9) – 2.9 – – –
Transfer on award of own
shares to employees – – – – – 0.2 (0.2) – – – –
Proceeds on award of
own shares to employees – – – – – – 0.2 – 0.2 – 0.2
Dividends – – – – – – (165.2) – (165.2) (2.0) (167.2)
Foreign exchange
translation differences – – (103.9) – – – – – (103.9) (3.6) (107.5)
Net gain on hedging
activities – – – 81.9 – – – – 81.9 – 81.9
Revaluation losses on
participative loans within
investment in associates – – – – – – (1.0) – (1.0) – (1.0)
Net actuarial losses on
pension schemes – – – – – – (0.3) – (0.3) – (0.3)
Profit for the year – – – – – – 726.8 – 726.8 3.2 730.0
Total comprehensive
income/(loss) for the year – – (103.9) 81.9 – – 725.5 – 703.5 (0.4) 703.1
Balance at 31 December
2015 196.1 1,223.3 135.1 (125.6) 374.1 21.7 3,696.5 (3.9) 5,517.3 69.0 5,586.3
* Investment in own shares is stated at cost.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015
Notes £m £m
Operating activities
Operating profit before other net (losses)/gains and share of results of joint ventures and
associates 2 176.6 166.8
Decrease/(Increase) in receivables 3.0 (0.3)
Decrease/(Increase) in restricted monetary assets 2.2 (22.7)
Increase in payables 11.9 27.2
Adjustment for non-cash items 21 11.6 6.3
Cash generated from operations 205.3 177.3
Interest paid (125.1) (104.0)
Interest received 20.0 8.6
Tax paid (2.9) (1.1)
Distributions and other receivables from joint ventures 84.0 90.4
Cash flows from operating activities 181.3 171.2
Investing activities
Property acquisitions (499.7) (43.7)
Developments and major refurbishments (127.2) (137.2)
Other capital expenditure (55.2) (45.1)
Sale of properties 639.0 185.2
Acquisition of Irish loan portfolio 9D – (690.2)
Advances to joint ventures on conversion of Irish loan portfolio to property assets 9D (91.9) –
Increase in advances to joint ventures 9D (63.1) (45.4)
Acquisition of interest in associates (2.4) (36.6)
Acquisition of other investments (1.9) (4.8)
Distributions received from associates 18.0 44.5
Sale of other investments 8.0 –
Decrease/(Increase) in non-current receivables 64.8 (17.1)
Cash flows from investing activities (111.6) (790.4)
Financing activities
Issue of shares 0.2 0.4
Proceeds from award of own shares 0.2 0.2
Debt and loan facility cancellation costs 4 (0.4) (13.9)
Proceeds from new borrowings 949.8 1,319.0
Repayment of borrowings (847.5) (511.4)
Net increase in borrowings 20 102.3 807.6
Dividends paid to non-controlling interests (2.3) (2.0)
Equity dividends paid 6 (135.7) (163.8)
Cash flows from financing activities (35.7) 628.5
Net increase in cash and deposits 34.0 9.3
Opening cash and deposits 37.0 28.6
Exchange translation movement 3.3 (0.9)
Closing cash and deposits 14 74.3 37.0
An analysis of the movement in net debt is provided in note 20.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1: Financial information
Statement of compliance
The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the
financial statements for the year ended 31 December 2016. Whilst the financial information included in this announcement has been
computed in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, this
announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the
Company's financial statements for the years ended 31 December 2016 or 2015, but is derived from those financial statements. Those
accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings
included in the consolidation taken as a whole. Financial statements for 2015 have been delivered to the Registrar of Companies and
those for 2016 will be delivered following the Company's Annual General Meeting. The auditor’s reports on both the 2016 and 2015
financial statements were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under
s498(2) or (3) of the Companies Act 2006 or preceding legislation.
Transactions with joint ventures including distributions, interest and management fees are eliminated on a proportionate basis.
During 2016, the following new and revised Standards and Interpretations have been adopted but these have not affected the amounts
reported in these financial statements:
– Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS28
Investments in Associates and Joint Ventures – amendments regarding the consolidation exemption
– Amendments to IFRS 11 Joint Arrangements – amendments regarding the accounting for acquisitions of an interest in a joint
operation
– Amendments to IAS 1 ‘Presentation of Financial Statements’ – Disclosure Initiative
The principal exchange rate used to translate foreign currency denominated amounts in the balance sheet is the rate at the end of the
year, £1 = €1.171 (2015: £1 = €1.357). The principal exchange rate used for the income statement is the average rate, £1 = €1.224
(2015: £1 = €1.378).
Going Concern
The Group’s business activities, together with factors likely to affect its future development, performance, and position are set out in the
‘Business Review’, the ‘Financial Review’ and the ‘Risks and Uncertainties’. The financial position of the Group, its liquidity position and
borrowing facilities are described in the ‘Business Review’, the ‘Financial Review’ and in the Notes to the Accounts.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future
trading performance. As part of the review, the Directors considered the Group’s cash balances, its debt maturity profile, including
undrawn facilities, and the long-term nature of tenant leases. After making enquiries, the Directors have a reasonable expectation that
the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the Annual Report.
2: Profit for the year
The following tables show the Group’s profit for the year on a proportionally consolidated basis by aggregating the Reported Group
results (shown in column A) with those from its share of Property interests (shown in column B), the latter being reallocated to the
relevant financial statement lines. The Group’s share of results arising from its interests in premium outlets has not been reallocated as
management does not review these interests on a proportionally consolidated basis (see note 3) and these are therefore not included in
the Group’s share of Property interests. The Group’s proportionally consolidated profit for the year in column C is then allocated between
‘Adjusted’ and ‘Capital and other’ for the purposes of calculating figures in accordance with EPRA best practice.
2016
Proportionally consolidated
Notes Reported Share of Property Proportionally Adjusted Capital
Group interests consolidated £m and other
£m £m £m £m
Notes A B C D D
Gross rental incomeE 3A 251.3 147.4 398.7 398.7 –
Ground and equity rents payable (1.3) (2.8) (4.1) (4.1) –
Gross rental income, after rents payable 250.0 144.6 394.6 394.6 –
Service charge income 43.8 24.8 68.6 68.6 –
Service charge expenses (52.1) (31.0) (83.1) (83.1) –
Net service charge expenses (8.3) (6.2) (14.5) (14.5) –
Other property outgoings (19.4) (14.2) (33.6) (33.6) –
Property outgoings (27.7) (20.4) (48.1) (48.1) –
Net rental income 3A 222.3 124.2 346.5 346.5 –
Management fees receivable/(payable) 8.6 (0.1) 8.5 8.5 –
Employee and corporate costs (54.3) (0.3) (54.6) (54.6) –
Administration expenses (45.7) (0.4) (46.1) (46.1) –
Operating profit before other net (losses)/gains and
share of results of joint ventures and associates 176.6 123.8 300.4 300.4 –
Loss on the sale of properties (24.0) – (24.0) – (24.0)
Gain on the sale of other investments 1.3 – 1.3 – 1.3
Revaluation (losses)/gains on properties (24.7) 11.3 (13.4) – (13.4)
Other net (losses)/gains (47.4) 11.3 (36.1) – (36.1)
Share of results of joint ventures 9A, 9B 169.2 (148.5) 20.7 6.2 14.5
10A,
Share of results of associates 10B 137.1 (1.9) 135.2 23.6 111.6
Operating profit 435.5 (15.3) 420.2 330.2 90.0
Net finance (costs)/income 4 (112.7) 16.1 (96.6) (93.5) (3.1)
Profit before tax 322.8 0.8 323.6 236.7 86.9
Current tax charge 5A (1.9) (0.8) (2.7) (2.7) –
Profit for the year 320.9 – 320.9 234.0 86.9
Non-controlling interests (3.6) – (3.6) (3.3) (0.3)
Profit for the year attributable to equity shareholders 7B 317.3 – 317.3 230.7 86.6
Notes
A Reported Group results as shown in the consolidated income statement on page 29.
B Property interests reflect the Group’s share of results of Property joint ventures as shown in note 9A and Nicetoile included within note 10A.
C Aggregated results on a proportionally consolidated basis showing Reported Group together with share of Property interests.
D Aggregated results on a proportionally consolidated basis allocated between ‘Adjusted’ and ‘Capital and other’ for the purposes of calculating adjusted earnings per
share as shown in note 7B.
E Included in gross rental income on a proportionally consolidated basis is £7.2 million (2015: £6.6 million) of contingent rents calculated by reference to tenants’
turnover.
2015
Proportionally consolidated
Reported Share of Property Proportionally Capital
Group interests consolidated Adjusted and other
Notes £m £m £m £m £m
Notes (see page 36) A B C D D
Gross rental incomeE 3A 236.0 130.4 366.4 366.4 –
Ground and equity rents payable (1.3) (2.4) (3.7) (3.7) –
Gross rental income, after rents payable 234.7 128.0 362.7 362.7 –
Service charge income 41.4 21.7 63.1 63.1 –
Service charge expenses (49.8) (26.6) (76.4) (76.4) –
Net service charge expenses (8.4) (4.9) (13.3) (13.3) –
Other property outgoings (17.5) (13.3) (30.8) (30.8) –
Property outgoings (25.9) (18.2) (44.1) (44.1) –
Net rental income 3A 208.8 109.8 318.6 318.6 –
Management fees receivable/(payable) 6.1 (0.1) 6.0 6.0 –
Employee and corporate costs (48.1) (0.2) (48.3) (48.3) –
Administration expenses (42.0) (0.3) (42.3) (42.3) –
Operating profit before other net gains/(losses) and
share of results of joint ventures and associates 166.8 109.5 276.3 276.3 –
Gain on the sale of properties 14.9 – 14.9 – 14.9
Other investment costs written off (1.4) – (1.4) – (1.4)
Revaluation gains on properties 245.1 122.4 367.5 – 367.5
Other net gains 258.6 122.4 381.0 – 381.0
Share of results of joint ventures 9A, 9B 246.8 (233.7) 13.1 6.1 7.0
Share of results of associates 10A 160.6 (1.3) 159.3 17.1 142.2
Operating profit 832.8 (3.1) 829.7 299.5 530.2
Net finance (costs)/income 4 (101.2) 3.1 (98.1) (84.1) (14.0)
Profit before tax 731.6 – 731.6 215.4 516.2
Current tax charge 5A (1.6) – (1.6) (1.6) –
Profit for the year 730.0 – 730.0 213.8 516.2
Non-controlling interests (3.2) – (3.2) (2.9) (0.3)
Profit for the year attributable to equity shareholders 7B 726.8 – 726.8 210.9 515.9
3: Segmental analysis
The factors used to determine the Group’s reportable segments are the geographic locations (UK, France and Ireland) and sectors in
which it operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources
allocated. Gross rental income represents the Group’s revenue from its tenants and customers. Net rental income is the principal profit
measure used to determine the performance of each sector. Total assets are not monitored by segment and resource allocation is based
on the distribution of property assets between segments.
As stated in the Financial Review on page 16, management reviews the business principally on a proportionally consolidated basis,
except for its interests in premium outlets held through its investments in Value Retail and VIA Outlets, where the Group has less day-to-
day involvement in the financial performance and which have different operational characteristics from the Group’s property portfolio. The
segmental analysis has been prepared on the basis that management uses to review the business, rather than on a statutory basis.
Property interests represent the Group’s non-wholly owned properties which management proportionally consolidate when reviewing the
performance of the business. For reconciliation purposes the Reported Group figures, being wholly-owned properties, are shown in the
following tables.
In October 2015, the Group acquired an interest in a loan portfolio secured on retail properties located in Ireland in a 50:50 joint venture.
The majority of these loans were converted into property in 2016 and these are included in note 3B. Rental income has been included in
note 3A from the date of conversion. The Group’s investment in the Irish joint venture is included in note 3C.
A: Revenue and profit by segment
2016 2015
Gross rental Net rental Gross rental Net rental
income income income income
£m £m £m £m
United Kingdom
Shopping centres 174.2 148.4 162.0 138.8
Retail parks 84.0 79.6 86.2 82.0
Other 13.8 9.3 13.8 9.6
Total 272.0 237.3 262.0 230.4
France 101.1 89.3 95.9 83.0
Ireland 13.7 12.5 – –
Total investment portfolio 386.8 339.1 357.9 313.4
Developments 11.9 7.4 8.5 5.2
Total property portfolio 398.7 346.5 366.4 318.6
Premium outlets 100.7 67.7 86.5 65.6
Total Group 499.4 414.2 452.9 384.2
Less premium outlets (100.7) (67.7) (86.5) (65.6)
Less share of Property interests (147.4) (124.2) (130.4) (109.8)
Reported Group 251.3 222.3 236.0 208.8
B: Investment and development property assets by segment
2016 2015
Property Property Revaluation Property Property Revaluation
valuation additions gains/(losses) valuation additions gains
£m £m £m £m £m £m
United Kingdom
Shopping centres 3,436.5 369.8 (5.8) 3,064.9 10.7 194.9
Retail parks 1,320.0 19.8 (118.3) 1,656.0 54.2 19.0
Other 163.5 0.8 2.2 160.3 23.5 1.4
Total 4,920.0 390.4 (121.9) 4,881.2 88.4 215.3
France 2,159.6 65.6 73.3 1,860.5 54.8 116.6
Ireland 805.1 801.9 3.2 – – –
Total investment portfolio 7,884.7 1,257.9 (45.4) 6,741.7 143.2 331.9
Developments 397.0 274.9 32.0 388.8 169.8 35.6
Total property portfolio 8,281.7 1,532.8 (13.4) 7,130.5 313.0 367.5
Premium outlets 1,689.4 200.5 138.4 1,243.6 25.3 174.1
Total Group 9,971.1 1,733.3 125.0 8,374.1 338.3 541.6
Less premium outlets (1,689.4) (200.5) (138.4) (1,243.6) (25.3) (174.1)
Less share of Property interests (3,517.8) (778.9) (11.3) (2,478.4) (95.1) (122.4)
Reported Group 4,763.9 753.9 (24.7) 4,652.1 217.9 245.1
C: Analysis of non-current assets employed
Non-current assets employed
2016 2015
£m £m
United Kingdom 5,210.7 5,283.9
Continental Europe 3,357.8 2,792.9
Ireland 1,007.7 693.5
9,576.2 8,770.3
Included in the above table are investments in joint ventures of £3,736.7 million (2015: £3,213.6 million), which are further analysed in
note 9 on pages 45 to 50. The Group’s share of the property valuations held within Property interests of £3,517.8 million (2015: £2,478.4
million) has been included in note 3B above, of which £2,562.6 million (2015: £2,304.7 million) relates to the United Kingdom, £205.1
million (2015: £173.7 million) relates to Continental Europe and £750.1 million (2015: £nil) relates to Ireland.
4: Net finance costs
2016 2015
£m £m
Interest on bank loans and overdrafts 19.7 10.6
Interest on other borrowings 102.0 93.2
Interest on obligations under finance leases 2.1 1.8
Other interest payable 2.5 1.6
Gross interest costs 126.3 107.2
Less: Interest capitalised (5.1) (5.3)
Finance costs 121.2 101.9
Debt and loan facility cancellation costs 0.4 13.9
Change in fair value of derivatives 3.5 1.1
Finance income (12.4) (15.7)
112.7 101.2
5: Tax
A: Tax charge
2016 2015
£m £m
UK current tax 0.2 –
Foreign current tax 1.7 1.6
Tax charge 1.9 1.6
The Group’s tax charge remains low because it has tax exempt status in its principal operating countries. In the UK, the Group has been
a REIT since 2007 and a SIIC in France since 2004. These tax regimes exempt the Group’s property income and gains from corporate
taxes provided a number of conditions in relation to the Group’s activities are met including, but not limited to, distributing at least 90% of
the Group’s UK tax exempt profit as property income distributions. The residual business in both the UK and France are subject to
corporation tax as normal. The Irish properties acquired in 2016 are held in a QIAIF which provides similar tax benefits to those of a UK
REIT but which will subject future distributions from Ireland to the UK to a 20% withholding tax.
B: Tax charge reconciliation
2016 2015
Notes £m £m
Profit before tax 2 322.8 731.6
Less: Profit after tax of joint ventures 9A (169.2) (246.8)
Less: Profit after tax of associates 10A (137.1) (160.6)
Profit on ordinary activities before tax 16.5 324.2
Profit multiplied by the UK corporation tax rate of 20% (2015: 20.25%) 3.3 65.7
UK REIT tax exemption 17.6 (31.2)
French SIIC tax exemption (23.6) (33.1)
Irish QIAIF tax exemption 2.0 –
Non-deductible and other items 2.6 0.2
Tax charge 1.9 1.6
C: Unrecognised deferred tax
A deferred tax asset is not recognised for UK revenue tax losses and UK capital losses where their future utilisation is uncertain. At 31
December 2016, the total of such losses was £330 million (2015: £315 million) and £465 million (2015: £480 million) respectively, and
the potential tax effect of these was £53 million (2015: £57 million) and £79 million (2015: £86 million) respectively.
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 2016, the total of such gains was
£640 million (2015: £290 million) and the potential tax effect before the offset of losses was £109 million (2015: £52 million).
If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2016
the value of such completed properties was £258 million (2015: £nil). If these properties were to be sold without the benefit of the tax
exemption the tax arising would be £nil (2015: £nil).
6: Dividends
The proposed final dividend of 13.9 pence per share was recommended by the Board on 17 February 2017 and, subject to approval by
shareholders, is payable on 27 April 2017 in the UK and on 28 April 2017 for South African shareholders, to shareholders on the register
at the close of business on 17 March 2017. 4.9 pence per share will be paid as a PID, net of withholding tax at the basic rate (currently
20%) if applicable, and 9.0 pence per share will be paid as a normal dividend. There will be no scrip alternative. The aggregate amount
of the 2016 final dividend is £110.3 million. This has been calculated using the total number of eligible shares outstanding at 31
December 2016.
The interim dividend of 10.1 pence per share was paid on 10 October 2016 as a PID, net of withholding tax where appropriate.
The total dividend for the year ended 31 December 2016 would be 24.0 pence per share (2015: 22.3 pence per share).
Equity Equity
PID Non-PID Total dividends dividends
pence pence pence 2016 2015
per share per share per share £m £m
Current year
2016 final dividend 4.9 9.0 13.9 – –
2016 interim dividend 10.1 – 10.1 79.8 –
15.0 9.0 24.0
Prior years
2015 final dividend 6.41 6.4 12.8 100.3 –
2015 interim dividend 9.5 – 9.5 – 74.4
15.9 6.4 22.3
2014 final dividend – 90.8
Dividends as reported in the consolidated statement of changes in equity 180.1 165.2
2014 interim dividend withholding tax (paid 2015) – 9.8
2015 interim dividend withholding tax (paid 2016) 11.2 (11.2)
2015 final dividend non-PID scrip alternative (36.7) –
2016 interim dividend withholding tax (paid 2017) (11.5) –
2016 interim dividend PID scrip alternative (7.4) –
Dividends paid as reported in the consolidated cash flow statement 135.7 163.8
1. If shareholders elected to receive the scrip alternative, this element of the dividend ceased to qualify as a PID.
7: Earnings and headline earnings per share and net asset value per share
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 B and D. Commentary on earnings and net asset value per share is provided in
the Financial Review on pages 16 to 20. Headline earnings per share has been calculated and presented in note 7C as required by the
Johannesburg Stock Exchange listing requirements.
A: Number of shares for earnings and headline earnings per share calculations
2016 2015
Shares Shares
million million
Basic, EPRA and Adjusted 789.0 783.6
Diluted 790.7 784.7
The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the
Hammerson Employee Share Ownership Plan, which are treated as cancelled.
B: Earnings per share
2016 2015
Earnings Pence Earnings Pence
Notes £m per share £m per share
Basic 2 317.3 40.2 726.8 92.8
Dilutive share options – (0.1) – (0.2)
Diluted 317.3 40.1 726.8 92.6
Basic 317.3 40.2 726.8 92.8
Adjustments:
Revaluation losses/(gains) Reported Group 2 24.7 3.1 (245.1) (31.3)
on properties: Share of Property interests 2 (11.3) (1.4) (122.4) (15.6)
13.4 1.7 (367.5) (46.9)
Loss/(Gain) on the sale of
properties: Reported Group 2 24.0 3.0 (14.9) (1.9)
Debt and loan facility
cancellation costs: Reported Group 4 0.4 0.1 13.9 1.8
Change in fair value Reported Group 4 3.5 0.4 1.1 0.1
of derivatives:
Share of Property interests 9B (0.8) (0.1) (1.0) (0.1)
2.7 0.3 0.1 –
Other adjustments: Reported Group
(Gain)/Loss on other investments 2 (1.3) (0.1) 1.4 0.2
Non-controlling interests 2 0.3 – 0.3 –
(1.0) (0.1) 1.7 0.2
Premium outlets: Revaluation gains on properties 9B, 10B (138.4) (17.5) (174.1) (22.2)
Deferred tax 9B, 10B 14.3 1.8 27.6 3.5
Other adjustments 9B, 10B (1.8) (0.3) (0.6) (0.1)
(125.9) (16.0) (147.1) (18.8)
Total adjustments (86.4) (11.0) (513.8) (65.6)
EPRA 230.9 29.2 213.0 27.2
Other adjustments: Translation movements on intragroup funding loan 9B (0.2) – (2.1) (0.3)
Adjusted 230.7 29.2 210.9 26.9
C: Headline earnings per share
2016 2015
Earnings Earnings
Notes £m £m
Profit for the year attributable to equity shareholders 2 317.3 726.8
Revaluation losses/(gains) on properties: Reported Group and share of Property interests 7B 13.4 (367.5)
Loss/(Gain) on sale of properties: Reported Group 7B 24.0 (14.9)
(Gain)/Loss on other investments: Reported Group 7B (1.3) 1.4
Non-controlling interests 7B 0.3 0.3
Revaluation gains on properties: Premium outlets 7B (138.4) (174.1)
Deferred tax: Premium outlets 7B 14.3 27.6
Loss on sale of properties: Premium outlets 9B 0.1 0.8
Translation movements on intragroup funding loan 9B (0.2) (2.1)
Headline earnings 229.5 198.3
Reconciliation of headline earnings to adjusted earnings
Headline earnings as above 229.5 198.3
Debt and loan facility cancellation costs: Reported Group 7B 0.4 13.9
Change in fair value of derivatives: Reported Group and share of Property interests 7B 2.7 0.1
Change in fair value of derivatives: Premium outlets 9B, 10B 14.5 9.7
Change in fair value of participative loans – revaluation movement: Premium outlets 10B (16.6) (12.6)
Loan facility costs written off: Premium outlets 10B 0.2 1.5
Adjusted earnings 7B 230.7 210.9
Basic headline earnings per share (pence) 29.1p 25.3p
Diluted headline earnings per share (pence) 29.0p 25.3p
D: Net asset value per share
2016 2015
Equity Net asset Equity Net asset
shareholders’ value shareholders’ value
funds Shares per share funds Shares per share
Notes £m million £ £m million £
Basic 5,775.6 793.2 7.28 5,517.3 784.4 7.03
Company’s own shares held in Employee Share
Ownership Plan – (0.9) n/a – (0.6) n/a
Dilutive share schemes 1.1 1.7 n/a 1.1 1.0 n/a
Diluted 5,776.7 794.0 7.28 5,518.4 784.8 7.03
Fair value adjustment to borrowings
– Reported Group 17 (316.1) (0.40) (225.4) (0.29)
– Share of Property interests – – (0.1) –
(316.1) (0.40) (225.5) (0.29)
EPRA NNNAV 5,460.6 6.88 5,292.9 6.74
Fair value adjustment to borrowings 316.1 0.40 225.5 0.29
Deferred tax 0.5 – 0.5 –
Fair value of derivatives
– Reported Group 17 (19.3) (0.02) (13.8) (0.02)
– Share of Property interests – – 0.9 –
(19.3) (0.02) (12.9) (0.02)
Premium outlets
– Fair value of derivatives 9C, 10D 3.2 – 3.1 –
– Deferred tax 9C, 10D 160.4 0.20 113.6 0.14
– Goodwill as a result of deferred tax 9C, 10D (57.0) (0.07) (50.0) (0.05)
106.6 0.13 66.7 0.09
EPRA NAV 5,864.5 7.39 5,572.7 784.8 7.10
8: Investment and development properties
2016 2015
Investment Development Investment Development
properties properties Total properties properties Total
Valuation Valuation Valuation Valuation Valuation Valuation
£m £m £m £m £m £m
Balance at 1 January 4,418.9 233.2 4,652.1 4,273.2 154.1 4,427.3
Exchange adjustment 268.0 0.3 268.3 (82.9) (1.7) (84.6)
Additions
– Capital expenditure 57.9 122.0 179.9 73.3 100.9 174.2
– Asset acquisitions 465.2 108.8 574.0 35.2 8.5 43.7
523.1 230.8 753.9 108.5 109.4 217.9
Transfer (to)/from investment in joint ventures (221.7) – (221.7) 11.0 – 11.0
Disposals (669.1) – (669.1) (169.5) (0.5) (170.0)
Transfers 303.9 (303.9) – 59.7 (59.7) –
Capitalised interest – 5.1 5.1 0.4 5.0 5.4
Revaluation (61.3) 36.6 (24.7) 218.5 26.6 245.1
Balance at 31 December 4,561.8 202.1 4,763.9 4,418.9 233.2 4,652.1
Properties are stated at fair value as at 31 December 2016, valued by professionally qualified external valuers. DTZ Debenham Tie
Leung Limited, Chartered Surveyors have valued the Group’s properties, excluding those held by the Group’s premium outlet
investments which have been valued by Cushman & Wakefield LLP, Chartered Surveyors. Valuations have been prepared in
accordance with the RICS Valuation – Professional Standards 2014. Valuation fees are based on a fixed amount agreed between the
Group and the valuers and are independent of the portfolio value.
The total amount of interest included in development properties at 31 December 2016 was £nil (2015: £4.9 million). Capitalised interest is
calculated using the cost of secured debt or the Group’s average cost of borrowings, as appropriate, and the effective rate applied in
2016 was 3.1% (2015: 3.8%). At 31 December 2016 the historic cost of investment and development properties was £3,841.9 million
(2015: £3,830.0 million).
On 11 February 2016 the Group completed the purchase of Grand Central, Birmingham for £350 million and entered into a new joint
venture agreement with CPPIB who acquired a 50% interest in the property for £175 million in December 2016. On 30 December 2016 the
Group sold its interest in Westquay Watermark, Southampton to The West Quay Limited Partnership, a joint venture in which the Group
has a 50% interest.
At 31 December 2016, the investment properties shown above included property with a value of £75.6 million (2015: £nil) held within a
joint operation which is proportionally consolidated. See note 9D on page 50 for further details.
9: Investment in joint ventures
As at 31 December 2016, the Group had investments in a number of jointly controlled property and corporate interests which have been
equity accounted.
As explained in note 3, management reviews the business principally on a proportionally consolidated basis, except for its premium
outlet investments. The Group’s total proportional share of joint ventures is split between Property joint ventures, being joint ventures
which are proportionally consolidated, and VIA Outlets, a premium outlets investment, which is not proportionally consolidated. The
Group’s significant joint venture interests are set out in the table below.
Group share
Partner Principal property1 %
United Kingdom
Bishopsgate Goodsyard Regeneration Limited Ballymore Properties The Goodsyard 50
Brent Cross Shopping Centre/ Brent South Shopping Park Standard Life Brent Cross 41.2/40.6
Bristol Alliance Limited Partnership AXA Real Estate Cabot Circus 50
Croydon Limited Partnership/Whitgift Limited Partnership Westfield Centrale/Whitgift 50
Grand Central Limited Partnership CPPIB Grand Central 50
Retail Property Holdings Limited/The Silverburn Unit Trust CPPIB Silverburn 50
The Bull Ring Limited Partnership TH Real Estate, CPPIB Bullring 50
The Oracle Limited Partnership ADIA The Oracle 50
The West Quay Limited Partnership GIC Westquay 50
VIA Limited Partnership APG, Meyer Bergman, Value European outlet centres 47
Retail
Ireland
Triskelion Property Holding Designated Activity Company Allianz Loan portfolio 50
Dundrum Retail Limited Partnership Allianz Dundrum 50
Dundrum Car Park Limited Partnership Allianz Dundrum 50
France
SCI ESQ Allianz Espace Saint-Quentin 25
SCI RC Aulnay 1 and SCI RC Aulnay 2 Client of Rockspring Property O’Parinor 25
Investment Managers
1. The names of the principal properties operated by each partnership have been used in the summary income statements and balance sheets in note 9A. The Irish
loan portfolio and the Dundrum properties are presented together as the ‘Irish portfolio’. The Goodsyard, European outlet centres and Espace Saint-Quentin are
presented together as ‘Other’.
The Reported Group’s investment in joint ventures at 31 December 2016 was £3,736.7 million (2015: £3,213.6 million). An analysis of
the movements in the year is provided in note 9D on page 50.
The summarised income statements and balance sheets in note 9A show 100% of the results, assets and liabilities of joint ventures, and
where necessary have been restated to the Group’s accounting policies and exclude all balances which are eliminated on consolidation.
9: Investment in joint ventures
A. Summary financial statements of joint ventures
Share of results of joint ventures for the year ended 31 December 2016
See page 48 for footnotes.
Brent Cross Cabot Circus Bullring Grand Central The Oracle Westquay
£m £m £m £m £m £m
Ownership (%) 41.2/40.6 50 50 50 50 50
Gross rental income 46.5 38.7 59.4 0.6 32.8 29.7
Net rental income 42.2 32.7 52.7 0.2 27.5 23.3
Administration expenses – – (0.1) – – –
Operating profit before other net gains/(losses) 42.2 32.7 52.6 0.2 27.5 23.3
Loss on sale of properties – – – – – –
Revaluation gains/(losses) on properties (4.2) 7.9 24.6 (3.1) 2.3 (0.3)
Operating profit 38.0 40.6 77.2 (2.9) 29.8 23.0
Change in fair value of derivatives – – – – – –
Translation movement on intragroup funding loan – – – – – –
Other finance income/(costs) – (0.8) – – – (0.3)
Net finance income/(costs) – (0.8) – – – (0.3)
Profit before tax 38.0 39.8 77.2 (2.9) 29.8 22.7
Current tax charge – – – – – –
Deferred tax charge – – – – – –
Profit for the year 38.0 39.8 77.2 (2.9) 29.8 22.7
Hammerson share of profit for the year 15.6 19.9 38.6 (1.4) 14.9 11.4
1
Hammerson share of distributions payable – 11.8 23.2 – 3.5 0.5
Share of assets and liabilities of joint ventures as at 31 December 2016
Brent Cross Cabot Circus Bullring Grand Central The Oracle Westquay
£m £m £m £m £m £m
Non-current assets
Investment and development properties 1,002.4 629.7 1,229.8 346.2 667.4 660.6
Goodwill – – – – – –
Interests in leasehold properties – 14.5 – 2.8 – 4.2
1,002.4 644.2 1,229.8 349.0 667.4 664.8
Current assets
Other current assets 16.4 5.4 7.9 8.4 5.6 6.2
Cash and deposits 0.7 5.9 20.9 3.2 13.0 9.9
17.1 11.3 28.8 11.6 18.6 16.1
Current liabilities
Other payables (19.3) (13.8) (20.4) (9.8) (242.1) (14.1)
Borrowings – secured – – – – – –
(19.3) (13.8) (20.4) (9.8) (242.1) (14.1)
Non-current liabilities
Borrowings – secured – – – – – –
Obligations under finance leases – (14.5) – (2.8) – (4.2)
Other payables (1.2) (0.6) (1.4) – (1.0) (680.2)
Deferred tax – – – – (0.1) –
(1.2) (15.1) (1.4) (2.8) (1.1) (684.4)
Net assets/(liabilities) 999.0 626.6 1,236.8 348.0 442.8 (17.6)
Hammerson share of net assets/(liabilities) 409.1 313.3 618.4 174.0 221.4 (8.8)
2
Balance due to Hammerson – – – – 115.6 339.7
Total investment in joint ventures2 409.1 313.3 618.4 174.0 337.0 330.9
Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio O‘Parinor Other 2016 ventures VIA Outlets 2016
£m £m £m £m £m £m £m £m £m
50 50 50 25 n/a 47
21.3 26.0 27.9 21.2 47.3 351.4 145.9 16.1 162.0
18.8 15.6 25.4 18.0 35.1 291.5 122.9 11.2 134.1
(0.1) (0.1) (0.3) (0.1) (4.8) (5.5) (0.4) (2.3) (2.7)
18.7 15.5 25.1 17.9 30.3 286.0 122.5 8.9 131.4
– – – – – – – (0.1) (0.1)
(17.1) (0.2) 5.1 9.3 41.1 65.4 10.7 18.4 29.1
1.6 15.3 30.2 27.2 71.4 351.4 133.2 27.2 160.4
– – – 3.1 1.5 4.6 0.8 0.7 1.5
– – – – – – – 0.2 0.2
– – 34.6 (6.0) (4.9) 22.6 15.3 (2.2) 13.1
– – 34.6 (2.9) (3.4) 27.2 16.1 (1.3) 14.8
1.6 15.3 64.8 24.3 68.0 378.6 149.3 25.9 175.2
(1.4) – – (0.2) (1.0) (2.6) (0.8) (0.5) (1.3)
– – – – (10.0) (10.0) – (4.7) (4.7)
0.2 15.3 64.8 24.1 57.0 366.0
0.1 7.6 32.4 6.0 24.1 169.2 148.5 20.7 169.2
– – 8.2 – 0.6 47.8
Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio O‘Parinor Other 2016 ventures VIA Outlets 2016
£m £m £m £m £m £m £m £m £m
356.2 304.2 1,500.2 456.0 1,004.1 8,156.8 3,490.1 302.1 3,792.2
– – – – – – – 3.5 3.5
– – – – – 21.5 10.8 – 10.8
356.2 304.2 1,500.2 456.0 1,004.1 8,178.3 3,500.9 305.6 3,806.5
5.1 4.2 119.6 11.1 21.3 211.2 100.2 8.5 108.7
9.9 13.0 25.0 3.7 47.2 152.4 54.8 18.7 73.5
15.0 17.2 144.6 14.8 68.5 363.6 155.0 27.2 182.2
(9.4) (22.2) (120.9) (6.5) (30.6) (509.1) (78.4) (12.9) (91.3)
– – – (187.0) (4.5) (191.5) (46.7) (2.1) (48.8)
(9.4) (22.2) (120.9) (193.5) (35.1) (700.6) (125.1) (15.0) (140.1)
– – – – (151.2) (151.2) – (70.9) (70.9)
– – – – – (21.5) (10.8) – (10.8)
– (229.0) (0.5) (31.3) (177.7) (1,122.9) (5.3) (5.4) (10.7)
– – – – (41.7) (41.8) – (19.5) (19.5)
– (229.0) (0.5) (31.3) (370.6) (1,337.4) (16.1) (95.8) (111.9)
361.8 70.2 1,523.4 246.0 666.9 6,503.9
180.9 35.1 761.7 61.5 281.8 3,048.4
– 114.5 54.1 6.7 57.7 688.3
180.9 149.6 815.8 68.2 339.5 3,736.7 3,514.7 222.0 3,736.7
9: Investment in joint ventures
A. Summary financial statements of joint ventures
Share of results of joint ventures for the year ended 31 December 2015
Brent Cross Cabot Circus Bullring The Oracle Westquay
£m £m £m £m £m
Ownership (%) 41.2/40.6 50 50 50 50
Gross rental income 47.6 37.9 56.6 32.3 30.7
Net rental income 44.1 32.5 49.6 26.1 25.0
Administration expenses – – (0.1) – –
Operating profit before other net gains/(losses) 44.1 32.5 49.5 26.1 25.0
Loss on sale of properties – – – – –
Revaluation gains/(losses) on properties (6.1) 43.3 107.2 41.9 20.1
Operating profit 38.0 75.8 156.7 68.0 45.1
Change in fair value of derivatives – – – – –
Translation movement on intragroup funding loan – – – – –
Other finance income/(costs) – (0.8) – (0.1) (0.4)
Net finance income/(costs) – (0.8) – (0.1) (0.4)
Profit before tax 38.0 75.0 156.7 67.9 44.7
Current tax charge – – – – –
Deferred tax charge – – – – –
Profit for the year 38.0 75.0 156.7 67.9 44.7
Hammerson share of profit for the year 15.6 37.5 78.3 34.0 22.4
1
Hammerson share of distributions payable – 19.2 20.3 3.0 0.2
Share of assets and liabilities of joint ventures as at 31 December 2015
Brent Cross Cabot Circus Bullring The Oracle Westquay
£m £m £m £m £m
Non-current assets
Investment and development properties 980.8 618.0 1,201.8 658.8 555.4
Goodwill – – – – –
Interests in leasehold properties – 14.6 – – 4.2
980.8 632.6 1,201.8 658.8 559.6
Current assets
Other current assets 13.7 5.8 11.4 4.3 6.0
Cash and deposits 0.7 2.2 9.2 9.5 12.0
14.4 8.0 20.6 13.8 18.0
Current liabilities
Other payables (21.7) (13.3) (19.7) (241.4) (10.7)
Borrowings – secured – – – – –
(21.7) (13.3) (19.7) (241.4) (10.7)
Non-current liabilities
Borrowings – secured – – – – –
Obligations under finance leases – (14.6) – – (4.2)
Other payables (1.0) (0.3) (1.3) (0.6) (597.5)
Deferred tax – – – (0.1) –
(1.0) (14.9) (1.3) (0.7) (601.7)
Net assets/(liabilities) 972.5 612.4 1,201.4 430.5 (34.8)
Hammerson share of net assets/(liabilities) 395.6
395.6 395.6
306.2 600.7
600.7 215.2 (17.4)
Balance due to Hammerson2 – – – 115.6 298.4
Total investment in joint ventures2 395.6 306.2 600.7 330.8 281.0
1. In addition to the distributions payable, the Group received interest from its joint ventures of £38.6 million (2015: £29.3 million).
2. The Group and its partners invest in joint ventures principally by way of equity investment. To provide further clarity of this investment, those balances which are not
equity have been included within other payables as a liability of the joint venture, and Hammerson’s interest has been shown separately.
Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio O‘Parinor Other 2015 ventures VIA Outlets 2015
£m £m £m £m £m £m £m £m £m
50 50 50 25 n/a 47
22.6 23.9 – 17.3 41.6 310.5 129.2 13.7 142.9
20.2 14.9 – 15.0 31.6 259.0 108.8 9.8 118.6
(0.1) – (0.1) (0.1) (3.8) (4.2) (0.3) (1.7) (2.0)
20.1 14.9 (0.1) 14.9 27.8 254.8 108.5 8.1 116.6
– – – – (1.7) (1.7) – (0.8) (0.8)
(10.4) 2.0 – 43.6 51.3 292.9 122.1 10.4 132.5
9.7 16.9 (0.1) 58.5 77.4 546.0 230.6 17.7 248.3
– – – 4.0 (4.6) (0.6) 1.0 (2.2) (1.2)
– – – – 4.4 4.4 – 2.1 2.1
– – 9.2 (7.8) (4.0) (3.9) 2.1 (1.9) 0.2
– – 9.2 (3.8) (4.2) (0.1) 3.1 (2.0) 1.1
9.7 16.9 9.1 54.7 73.2 545.9 233.7 15.7 249.4
– – – 0.1 (0.3) (0.2) – (0.1) (0.1)
– – – – (5.4) (5.4) – (2.5) (2.5)
9.7 16.9 9.1 54.8 67.5 540.3
4.8 8.4 4.5 13.7 27.6 246.8 233.7 13.1 246.8
– – – – 8.1 50.8
Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio O‘Parinor Other 2015 ventures VIA Outlets 2015
£m £m £m £m £m £m £m £m £m
372.0 291.2 – 385.2 638.5 5,701.7 2,455.1 148.6 2,603.7
– – – – – – – 3.0 3.0
– – – – – 18.8 9.4 – 9.4
372.0 291.2 – 385.2 638.5 5,720.5 2,464.5 151.6 2,616.1
6.2 4.7 1,369.4 8.6 12.0 1,442.1 726.8 3.8 730.6
10.4 13.6 2.9 2.6 21.2 84.3 32.4 7.9 40.3
16.6 18.3 1,372.3 11.2 33.2 1,526.4 759.2 11.7 770.9
(9.2) (24.9) (0.1) (5.2) (19.5) (365.7) (67.2) (7.7) (74.9)
– – – (161.0) – (161.0) (40.2) – (40.2)
(9.2) (24.9) (0.1) (166.2) (19.5) (526.7) (107.4) (7.7) (115.1)
– – – – (72.9) (72.9) – (34.2) (34.2)
– – – – – (18.8) (9.4) – (9.4)
(194.8) (223.2) (1,365.6) (33.0) (162.0) (2,579.3) (4.1) (4.3) (8.4)
– – – – (13.5) (13.6) – (6.3) (6.3)
(194.8) (223.2) (1,365.6) (33.0) (248.4) (2,684.6) (13.5) (44.8) (58.3)
184.6 61.4 6.6 197.2 403.8 4,035.6
92.3 30.7 3.3 49.3 164.1 1,840.0
97.4 111.6 690.2 6.6 53.8 1,373.6
189.7 142.3 693.5 55.9 217.9 3,213.6 3,102.8 110.8 3,213.6
9: Investment in joint ventures
B. Reconciliation to adjusted earnings
Property joint Total Property joint Total
ventures VIA Outlets 2016 ventures VIA Outlets 2015
£m £m £m £m £m £m
Profit for the year 148.5 20.7 169.2 233.7 13.1 246.8
Loss on sale of properties – 0.1 0.1 – 0.8 0.8
Revaluation gains on properties (10.7) (18.4) (29.1) (122.1) (10.4) (132.5)
Change in fair value of derivatives (0.8) (0.7) (1.5) (1.0) 2.2 1.2
Translation movements on intragroup funding loan – (0.2) (0.2) – (2.1) (2.1)
Deferred tax charge – 4.7 4.7 – 2.5 2.5
Total adjustments (11.5) (14.5) (26.0) (123.1) (7.0) (130.1)
Adjusted earnings of joint ventures 137.0 6.2 143.2 110.6 6.1 116.7
C. Reconciliation to adjusted investment in joint ventures
Property joint VIA Outlets Total Property joint VIA Outlets Total
ventures £m 2016 ventures £m 2015
£m £m £m £m
Investment in joint ventures 3,514.7 222.0 3,736.7 3,102.8 110.8 3,213.6
Fair value of derivatives – 3.5 3.5 0.9 3.5 4.4
Deferred tax – 19.5 19.5 – 6.3 6.3
Goodwill as a result of deferred tax – (3.5) (3.5) – (3.0) (3.0)
Total adjustments – 19.5 19.5 0.9 6.8 7.7
Adjusted investment in joint ventures 3,514.7 241.5 3,756.2 3,103.7 117.6 3,221.3
D. Reconciliation of movements in investment in joint ventures
2016 2015
£m £m
Balance at 1 January 3,213.6 2,341.5
1
Acquisitions – 690.2
Irish loan portfolio transferred to Reported Group2 (82.8) –
Advances on conversion of Irish loan portfolio to property assets3 91.9 –
Transfer of investment property from/(to) Reported Group4 221.7 (11.0)
Share of results of joint ventures 169.2 246.8
Distributions and other receivables (89.6) (92.0)
Advances 63.1 45.4
Other movements 4.6 1.6
Foreign exchange translation differences 145.0 (8.9)
Balance at 31 December 3,736.7 3,213.6
1. In October 2015, the Group acquired an interest in a loan portfolio secured on retail properties located in Dublin, Ireland in a 50% joint venture for £690.2 million.
The Irish loan portfolio held by the joint venture consisted primarily of interest-bearing loans which at 31 December 2015 were included within other current assets
in note 9A on page 49. The majority of these loans were converted into property assets in 2016. It is anticipated that the remaining loans of £54.1 million, which are
included within other current assets in note 9A on page 47, will be converted to property assets in 2017.
2. In 2016, the element of the loan portfolio relating to the Ilac Centre, Dublin Central and the Irish development sites was transferred to the Reported Group prior to
conversion to property assets. These properties are included within asset acquisitions in note 8 on page 44. The Reported Group has a 50% interest in the Ilac
Centre which is held within a joint operation and proportionally consolidated, the other assets are wholly owned by the Reported Group.
3. Further advances were made by the Reported Group to the Irish joint venture in 2016 to fund the conversion of the loan portfolio relating to Dundrum Town Centre,
which is now owned by Dundrum Retail Limited Partnership and Dundrum Car Park Limited Partnership.
4. In 2016, the Group sold 50% stakes in Grand Central, Birmingham and Westquay Watermark, Southampton for £175 million and £47 million respectively. The total
is shown separately in note 8 on page 44 as a transfer to investment in joint ventures.
10: Investment in associates
At 31 December 2016, the Group had two associates: Value Retail PLC and its group entities ("VR") and a 10% interest in Nicetoile,
which was acquired in January 2015 and where Hammerson is the asset manager. Both investments are equity accounted under IFRS,
although the share of results in Nicetoile is included with the Group’s share of Property interests when presenting figures on a
proportionally consolidated basis.
Aggregated income and investment summaries of our interest in premium outlets, which includes VR and Hammerson’s investments in
VIA Outlets, which is accounted for as a joint venture (see note 9), are provided in tables 12 and 13 of the Additional Disclosures on
page 62.
A: Share of results of associates
2016 2015
VR Nicetoile Total Total
Hammerson Hammerson Hammerson Hammerson
100% share 100% share 100% share 100% share
£m £m £m £m £m £m £m £m
Gross rental income 295.7 84.6 14.8 1.5 310.5 86.1 248.9 74.0
Net rental income 201.4 56.5 13.2 1.3 214.6 57.8 188.8 56.8
Administration and other
expenses (90.1) (22.4) – – (90.1) (22.4) (99.4) (27.4)
Operating profit before other
net gains 111.3 34.1 13.2 1.3 124.5 35.4 89.4 29.4
Revaluation gains on properties 349.6 120.0 6.4 0.6 356.0 120.6 536.9 164.0
Operating profit 460.9 154.1 19.6 1.9 480.5 156.0 626.3 193.4
Net finance costs (49.5) (12.3) – – (49.5) (12.3) (35.0) (13.1)
Change in fair value of derivatives (61.5) (15.2) – – (61.5) (15.2) (34.3) (7.5)
Change in fair value of
participative loans – revaluation
movement – 16.6 – – – 16.6 – 12.6
Change in fair value of
participative loans – other
movement – 4.7 – – – 4.7 – 2.6
Profit before tax 349.9 147.9 19.6 1.9 369.5 149.8 557.0 188.0
Current tax charge (13.7) (3.1) – – (13.7) (3.1) (10.3) (2.3)
Deferred tax charge (36.7) (9.6) – – (36.7) (9.6) (106.3) (25.1)
Profit for the year 299.5 135.2 19.6 1.9 319.1 137.1 440.4 160.6
B: Reconciliation to adjusted earnings
2016 2015
VR Nicetoile Total Total
Hammerson Hammerson Hammerson Hammerson
100% share 100% share 100% share 100% share
£m £m £m £m £m £m £m £m
Profit for the year 299.5 135.2 19.6 1.9 319.1 137.1 440.4 160.6
Revaluation gains on properties (349.6) (120.0) (6.4) (0.6) (356.0) (120.6) (536.9) (164.0)
Change in fair value of derivatives 61.5 15.2 – – 61.5 15.2 34.3 7.5
Change in fair value of
participative loans – revaluation
movement – (16.6) – – – (16.6) – (12.6)
Loan facility costs written off 2.0 0.2 – – 2.0 0.2 3.7 1.5
Deferred tax charge 36.7 9.6 – – 36.7 9.6 106.3 25.1
Total adjustments (249.4) (111.6) (6.4) (0.6) (255.8) (112.2) (392.6) (142.5)
Adjusted earnings of associates 50.1 23.6 13.2 1.3 63.3 24.9 47.8 18.1
When aggregated, the Group’s share of VR’s adjusted earnings for the year ended 31 December 2016 amounted to 47.1% (2015:
46.3%).
10: Investment in associates
C: Share of assets and liabilities of associates
2016 2015
VR Nicetoile Total Total
Hammerson Hammerson Hammerson Hammerson
100% share 100% share 100% share 100% share
£m £m £m £m £m £m £m £m
Goodwill on acquisition – 77.0 – – – 77.0 – 65.4
Investment properties 4,095.9 1,387.3 277.3 27.7 4,373.2 1,415.0 3,566.1 1,118.3
Other non-current assets 182.0 44.2 – – 182.0 44.2 134.7 30.3
Non-current assets 4,277.9 1,508.5 277.3 27.7 4,555.2 1,536.2 3,700.8 1,214.0
Other current assets 52.6 16.7 3.8 0.4 56.4 17.1 187.5 12.7
Cash and deposits 169.4 53.0 13.6 1.4 183.0 54.4 193.6 53.5
Current assets 222.0 69.7 17.4 1.8 239.4 71.5 381.1 66.2
Total assets 4,499.9 1,578.2 294.7 29.5 4,794.6 1,607.7 4,081.9 1,280.2
Current liabilities (74.3) (44.3) (2.1) (0.2) (76.4) (44.5) (132.7) (52.9)
Borrowings (1,382.6) (465.3) – – (1,382.6) (465.3) (1,092.6) (339.5)
Other liabilities (305.5) (82.3) (2.4) (0.3) (307.9) (82.6) (400.3) (92.8)
Deferred tax (545.6) (140.9) – – (545.6) (140.9) (438.8) (107.3)
Non-current liabilities (2,233.7) (688.5) (2.4) (0.3) (2,236.1) (688.8) (1,931.7) (539.6)
Total liabilities (2,308.0) (732.8) (4.5) (0.5) (2,312.5) (733.3) (2,064.4) (592.5)
Net assets 2,191.9 845.4 290.2 29.0 2,482.1 874.4 2,017.5 687.7
Participative loans1 113.7 – 113.7 80.3
Investment in associates 959.1 29.0 988.1 768.0
1. The Group’s total investment in associates includes long-term debt which in substance forms part of the Group’s investment. These ‘participative loans’ are not
repayable in the foreseeable future, and represent the Group’s investor share of La Roca Village and Las Rozas Village.
The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £18.9 million
(2015: £19.0 million) which are included within non-current liabilities in note 18.
At 31 December 2016, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 40.2% (2015:
38.2%).
D: Reconciliation to adjusted investment in associates
VR Nicetoile 2016 2015
£m £m £m £m
Investment in associates 959.1 29.0 988.1 768.0
Fair value of derivatives (0.3) – (0.3) (0.4)
Deferred tax 140.9 – 140.9 107.3
Goodwill as a result of deferred tax (53.5) – (53.5) (47.0)
EPRA adjustments 87.1 – 87.1 59.9
Adjusted investment in associates 1,046.2 29.0 1,075.2 827.9
E: Reconciliation of movements in investment in associates
VR Nicetoile 2016 2015
£m £m £m £m
Balance at 1 January 743.8 24.2 768.0 628.8
Acquisitions 40.8 – 40.8 36.6
Share of results of associates 135.2 1.9 137.1 160.6
Distributions (17.0) – (17.0) (44.5)
Revaluation movement on participative loan (0.3) – (0.3) (1.0)
Foreign exchange translation differences 56.6 2.9 59.5 (12.5)
Balance at 31 December 959.1 29.0 988.1 768.0
11: Receivables: non-current assets
2016 2015
£m £m
Loans receivable 21.6 76.4
Other receivables 4.0 1.9
Fair value of interest rate swaps 19.3 13.8
44.9 92.1
All loans receivable are classified as available for sale and held at fair value and are analysed below:
2016 2015
£m £m
Value Retail European Holdings BV: €2.0 million (2015: €2.0 million) maturing 30 November 2043 1.7 1.4
VR Dublin Limited and Kildare Retail Services Limited: €nil (2015: €22.4 million) – 16.5
Value Retail European Holdings BV: €nil (2015: €56.0 million) – 41.3
VR Milan S.R.L.: €23.3 million (2015: €23.3 million) maturing 13 December 2018 19.9 17.2
21.6 76.4
12: Receivables: current assets
2016 2015
£m £m
Trade receivables 52.4 46.7
Other receivables 50.0 37.6
Corporation tax 0.6 –
Prepayments 2.9 3.7
Fair value of currency swaps – 30.0
105.9 118.0
Trade receivables are shown after deducting a provision for bad and doubtful debts of £17.0 million (2015: £11.8 million). The movement
in the provision during the year was recognised entirely in income. The level of provision required is determined after taking account of
rent deposits and personal or corporate guarantees held.
13: Restricted monetary assets
2016 2015
£m £m
Cash held on behalf of third parties 35.1 34.0
The Group and its managing agents hold cash on behalf of its tenants and co-owners to meet future service charge costs and related
expenditure. The cash has restricted use and, as such, does not meet the definition of cash and cash equivalents as defined in IAS 7
‘Statement of Cash Flows’.
14: Cash and deposits
2016 2015
£m £m
Cash at bank 74.1 36.9
Short-term deposits 0.2 0.1
74.3 37.0
Currency profile
Sterling 48.0 14.4
Euro 26.3 22.6
74.3 37.0
15: Payables: current liabilities
2016 2015
£m £m
Trade payables 33.9 23.9
Other payables 178.5 153.8
Accruals 66.6 31.6
Deferred income 24.8 26.2
303.8 235.5
16: Borrowings
A: Maturity
Bank loans and Other Total Bank loans and Other Total
overdrafts borrowings 2016 overdrafts borrowings 2015
£m £m £m £m £m £m
After five years – 1,928.1 1,928.1 – 1,478.2 1,478.2
From two to five years 503.9 803.7 1,307.6 245.1 614.7 859.8
From one to two years 49.5 – 49.5 690.1 – 690.1
Due after more than one year 553.4 2,731.8 3,285.2 935.2 2,092.9 3,028.1
Due within one year 246.6 (35.5) 211.1 – – –
800.0 2,696.3 3,496.3 935.2 2,092.9 3,028.1
Current assets: Fair value of currency swaps – – – – (30.0) (30.0)
800.0 2,696.3 3,496.3 935.2 2,062.9 2,998.1
At 31 December 2016 and 2015 no borrowings due after five years were repayable by instalments. At 31 December 2016, the fair value
of currency swaps was a liability of £2.7 million (2015: £42.8 million asset) of which £nil (2015: £30.0 million) was included in current
receivables (see note 12).
B: Analysis
2016 2015
£m £m
Unsecured
£200 million 7.25% sterling bonds due 2028 198.2 198.1
£300 million 6% sterling bonds due 2026 297.8 297.6
£350 million 3.5% sterling bonds due 2025 345.3 345.0
€500 million 1.75% euro bonds due 2023 424.3 –
€500 million 2% euro bonds due 2022 423.2 364.6
£250 million 6.875% sterling bonds due 2020 248.9 248.6
€500 million 2.75% euro bonds due 2019 425.1 366.1
Bank loans and overdrafts 800.0 935.2
Senior notes due 2026 25.6 22.0
Senior notes due 2024 153.4 135.6
Senior notes due 2021 151.8 128.1
3,493.6 3,040.9
Fair value of currency swaps 2.7 (42.8)
3,496.3 2,998.1
Senior notes comprise £234.6 million (2015: £196.5 million) denominated in US dollars, £51.2 million (2015: £44.2 million) in euro and
£45.0 million (2015: £45.0 million) in sterling.
C: Undrawn committed facilities
2016 2015
£m £m
Expiry
Within two to five years 327.0 342.0
Within one to two years 125.0 518.5
Within one year 9.2 –
461.2 860.5
Financing activities during the year are detailed in the Financial Review on pages 23 and 24.
17: Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their book value included in the balance sheet, are as
follows:
2016 2015
Book value Fair value Book value Fair value
£m £m £m £m
Borrowings, excluding currency swaps 3,493.6 3,809.7 3,040.9 3,266.3
Currency swaps 2.7 2.7 (42.8) (42.8)
Total 3,496.3 3,812.4 2,998.1 3,223.5
Interest rate swaps (19.3) (19.3) (13.8) (13.8)
At 31 December 2016, the fair value of financial instruments exceeded their book value by £316.1 million (2015: £225.4 million).
18: Payables: non-current liabilities
2016 2015
£m £m
Net pension liability 53.8 37.2
Other payables 42.2 38.5
96.0 75.7
19: Share capital
Called up, allotted and fully paid
2016 2015
£m £m
Ordinary shares of 25p each 198.3 196.1
Number
Movements in number of shares in issue
Number of shares in issue at 1 January 2016 784,431,255
New share issue – transferred to investment in own shares 1,000,000
New share issue – settlement of scrip dividends 7,698,192
Share options exercised – Savings-Related Share Option Scheme 59,004
Number of shares in issue at 31 December 2016 793,188,451
20: Analysis of movement in net debt
Current
borrowings Total borrowings
Short-term including currency Non-current including currency
deposits Cash at bank swaps borrowings swaps Net debt
£m £m £m £m £m £m
At 1 January 2016 0.1 36.9 30.0 (3,028.1) (2,998.1) (2,961.1)
Cash flow 0.1 33.9 (212.9) 110.6 (102.3) (68.3)
Exchange and non-cash items – 3.3 (28.2) (367.7) (395.9) (392.6)
Balance at 31 December 2016 0.2 74.1 (211.1) (3,285.2) (3,496.3) (3,422.0)
Current Total borrowings
borrowings including
Short-term including Non-current currency
deposits Cash at bank currency swaps borrowings swaps Net debt
£m £m £m £m £m £m
At 1 January 2015 0.1 28.5 5.1 (2,287.1) (2,282.0) (2,253.4)
Cash flow – 9.3 (1.5) (806.1) (807.6) (798.3)
Exchange and non-cash items – (0.9) 26.4 65.1 91.5 90.6
Balance at 31 December 2015 0.1 36.9 30.0 (3,028.1) (2,998.1) (2,961.1)
21: Adjustment for non-cash items in the cash flow statement
2016 2015
£m £m
Amortisation of lease incentives and other costs 6.8 5.9
Increase in provision for bad and doubtful debts 5.2 0.2
Increase in accrued rents receivable (6.4) (5.0)
Non-cash items included within net rental income 5.6 1.1
Depreciation 2.0 1.7
Share-based employee remuneration 5.6 4.8
Other items (1.6) (1.3)
11.6 6.3
22: Contingent liabilities and capital commitments
There are contingent liabilities of £68.6 million (2015: £49.8 million) relating to guarantees given by the Reported Group and a further
£21.6 million (2015: £16.0 million) relating to claims against the Reported Group arising in the normal course of business, which are
considered to be unlikely to crystallise. The Reported Group also had capital commitments of £20.7 million (2015: £101.7 million).
In addition, Hammerson’s share of contingent liabilities arising within joint ventures is £2.1 million (2015: £2.1 million). Hammerson’s
share of the capital commitments arising within joint ventures is £174.9 million (2015: £6.0 million), principally VIA Outlet’s costs of
£127.8 million to acquire the two centres from the IRUS fund which did not complete by 31 December 2016.
The risks and uncertainties facing the Group are detailed on pages 25 and 26.
ADDITIONAL DISCLOSURES
UNAUDITED
Table Page Table Page
EPRA measures Share of Property interests
EPRA performance measures 1 56 Income statement 10 61
Portfolio analysis Balance sheet 11 61
Rental information 2 57 Premium outlets
Rent reviews 3 57 Income statement 12 62
Lease expiries and breaks 4 58 Balance sheet 13 62
Net rental income 5 58 Proportionally consolidated information
Top ten tenants 6 59 Balance sheet 14 63
Cost ratio 7 59 EBITDA 15 63
Valuation analysis 8 60 Net debt analysis 16 64
Yield analysis 9 60 Loan to value 17 64
Net underlying finance costs 18 64
EPRA measures
Hammerson is a member of European Public Real Estate Association (EPRA) and has representatives who actively participate in a
number of EPRA committees and initiatives. This includes working with peer group companies, real estate investors and analysts and
the large audit firms, to improve the transparency, comparability and relevance of the published results of listed real estate companies
in Europe. .
As with other real estate companies, we have adopted the EPRA Best Practice Recommendations (BPR) and were again awarded an
EPRA Gold Award for compliance with the EPRA BPR for our 2015 Annual Report. Further information on EPRA and the EPRA BPR
can be found on their website www.epra.com. Our key EPRA metrics are described and shown in table below.
Table 1: EPRA performance measures
2016 2015
Performance measure performance performance Definition Page
Earnings £230.9m £213.0m Recurring earnings from core operational activities. In both 2016 and 42
2015, EPRA earnings differed marginally from the Group’s adjusted
earnings due to the inclusion of a "Company specific adjustment" in
relation to translation movements on an intragroup funding loan in VIA
Outlets (see note 9B of the accounts) which management believe
distorts the underlying earnings of the Group.
Earnings per share (EPS) 29.2p 27.2p EPRA earnings divided by the weighted average number of shares in 42
issue during the period.
Net asset value (NAV) per £7.39 £7.10 NAV excluding the fair values of financial instruments, debt and 43
share deferred tax balances divided by the number of issued shares.
Triple net asset value £6.88 £6.74 NAV adjusted to include the fair values of financial instruments, debt 43
(NNNAV) per share and deferred taxes.
Net Initial Yield (NIY) 4.4% 4.6% Annual cash rents receivable, less head and equity rents and any non- 60
recoverable property operating expenses, as a percentage of the gross
market value of the property, including estimated purchasers’ costs as
provided by the Group’s external valuers.
Topped-up NIY 4.6% 4.7% EPRA NIY adjusted for the expiry of rent-free periods. 60
Vacancy rate 2.5% 2.3% The estimated market rental value (ERV) of vacant space divided by 57
the ERV of the whole portfolio. Occupancy is the inverse of vacancy.
Cost ratio 22.6% 23.1% Total operating costs as a percentage of gross rental income, after 59
rents payable. Both operating costs and gross rental income are
adjusted for costs associated with inclusive leases.
Portfolio analysis
Table 2: Rental information
Rental data for the year ended 31 December 2016
Gross rental Net rental Average rents Rents Estimated Reversion/
Proportionally consolidated excluding income income Vacancy rate passingA passing rental valueB (over-rented)
premium outlets £m £m % £/m² £m £m %
United Kingdom
Shopping centres 174.2 148.4 2.2 540 174.4 186.8 4.9
Retail parks 84.0 79.6 1.4 205 77.3 77.1 (1.5)
Other 13.8 9.3 10.1 155 11.9 13.4 1.7
Total 272.0 237.3 2.4 365 263.6 277.3 2.9
France 101.1 89.3 3.5 455 97.0 107.9 7.1
Ireland 13.7 12.5 0.5 495 31.9 34.8 8.3
Total investment portfolio 386.8 339.1 2.5 390 392.5 420.0 4.4
Developments 11.9 7.4
Total property portfolio (note 2) 398.7 346.5
Selected data for the year ended 31 December 2015
Group
UK 262.0 230.4 2.0 345 261.1 270.7 1.7
France 95.9 83.0 3.1 355 88.8 101.0 9.8
Total investment portfolio 357.9 313.4 2.3 345 349.9 371.7 3.8
Developments 8.5 5.2
Total property portfolio 366.4 318.6
Notes
A. Average rents passing at the period end before deducting head and equity rents and excluding rents passing from anchor units and car parks.
B. The estimated market rental value at the year end calculated by the Group’s valuers. ERVs in the above table are included within the unobservable inputs to the
portfolio valuations as defined by IFRS 13. This information has been subject to audit.
Table 3: Rent reviews
Rent reviews as at 31 December 2016
Rents passing subject to review inA Current ERV of leases subject to review inB
Proportionally consolidated excluding premium Outstanding 2017 2018 2019 Total Outstanding 2017 2018 2019 Total
outlets £m £m £m £m £m £m £m £m £m £m
United Kingdom
Shopping centres 20.6 13.0 19.1 23.1 75.8 22.3 13.8 20.4 24.3 80.8
Retail parks 28.6 8.2 7.0 12.5 56.3 29.6 8.8 7.4 13.1 58.9
Other 3.7 0.9 1.5 1.5 7.6 3.9 0.9 1.3 1.8 7.9
52.9 22.1 27.6 37.1 139.7 55.8 23.5 29.1 39.2 147.6
Ireland 14.1 1.0 1.4 1.0 17.5 16.1 1.3 1.4 1.1 19.9
Total 67.0 23.1 29.0 38.1 157.2 71.9 24.8 30.5 40.3 167.5
Notes
A. The amount of rental income, based on rents passing at 31 December 2016, for leases which are subject to review in each year.
B. Projected rental income for leases that are subject to review in each year, based on the higher of the current rental income and the ERV at 31 December 2016
and ignoring the impact of changes in rental values before the review date.
Table 4: Lease expiries and breaks
Lease expiries and breaks as at 31 December 2016
Weighted average
Rents passing that expire/break inA ERV of leases that expire/break inB unexpired lease term
Proportionally consolidated excluding premium 2017 2018 2019 Total 2017 2018 2019 Total to break to expiry
outlets £m £m £m £m £m £m £m £m years years
United Kingdom
Shopping centres 20.4 22.9 13.6 56.9 23.4 21.8 14.7 59.9 6.8 11.4
Retail parks 5.0 2.6 3.4 11.0 5.2 2.6 3.6 11.4 8.1 9.1
Other 2.6 1.8 0.6 5.0 3.2 1.3 0.7 5.2 7.9 9.1
Total 28.0 27.3 17.6 72.9 31.8 25.7 19.0 76.5 7.3 10.5
France 17.5 3.6 3.8 24.9 19.4 4.1 4.2 27.7 2.8 5.7
Ireland 2.4 2.5 1.7 6.6 2.5 2.4 1.8 6.7 12.1 15.5
Total investment portfolio 47.9 33.4 23.1 104.4 53.7 32.2 25.0 110.9 6.4 9.5
Notes
A. The amount of rental income, based on rents passing at 31 December 2016, for leases which expire or, for the UK only, are subject to tenant break options,
which fall due in each year.
B. The ERV at 31 December 2016 for leases that expire or, for the UK and Ireland only, are subject to tenant break options which fall due in each year and
ignoring the impact of rental growth and any rent-free periods.
Table 5: Net rental income
Net rental income for the year ended 31 December 2016
Increase
Properties for properties
owned owned
throughout throughout Developments Total net
2015/16 2015/16 Acquisitions Disposals and other rental income
Proportionally consolidated excluding premium outlets £m % £m £m £m £m
United Kingdom
Shopping centres 139.7 2.4 8.4 0.1 0.2 148.4
Retail parks 69.2 2.4 – 6.8 3.6 79.6
Other 5.5 (3.5) 0.7 – 9.0 15.2
Total 214.4 2.3 9.1 6.9 12.8 243.2
France 82.4 2.2 2.2 1.7 3.0 89.3
Ireland – n/a 14.0 – – 14.0
Total property portfolio 296.8 2.2 25.3 8.6 15.8 346.5
Net rental income for the year ended 31 December 2015
Properties
owned
throughout Developments Total net
2015/16 Exchange Acquisitions Disposals and other rental income
Proportionally consolidated excluding premium outlets £m £m £m £m £m £m
United Kingdom
Shopping centres 136.4 – (0.1) 2.5 (0.1) 138.7
Retail parks 67.6 – – 13.1 1.3 82.0
Other 5.7 – – 0.8 8.5 15.0
Total 209.7 – (0.1) 16.4 9.7 235.7
France 80.6 (10.4) 1.0 10.7 1.0 82.9
Total property portfolio 290.3 (10.4) 0.9 27.1 10.7 318.6
Table 6: Top ten tenants
Ranked by passing rent at 31 December 2016
Passing rent % of total
Proportionally consolidated excluding premium outlets £m passing rent
B&Q 12.6 3.2
H&M 9.1 2.3
Next 8.9 2.3
Inditex 8.7 2.2
Dixons Carphone 5.8 1.5
Marks&Spencer 5.7 1.4
Home Retail Group 5.6 1.4
Boots 5.5 1.4
Arcadia 5.3 1.4
Debenhams 5.1 1.3
Total 72.3 18.4
Table 7: EPRA Cost ratio
Cost ratio analysis
Year ended Year ended
31 December 31 December
2016 2015
Proportionally consolidated excluding premium outlets £m £m
Net service charge expenses – non-vacancy 6.5 3.8
Net service charge expenses – vacancy 8.0 9.5
Net service charge expenses – total 14.5 13.3
Other property outgoings 33.6 30.8
Less inclusive lease costs recovered through rent (6.6) (3.4)
Total property costs (for cost ratio) 41.5 40.7
Employee and corporate costs 54.6 48.3
Management fees receivable (8.5) (6.0)
Total operating costs (for cost ratio) 87.6 83.0
Gross rental income 398.7 366.4
Ground and equity rents payable (4.1) (3.7)
Less inclusive lease costs recovered through rent (6.6) (3.4)
Gross rental income (for cost ratio) 388.0 359.3
EPRA cost ratio including net service charge expenses – vacancy (%) 22.6 23.1
EPRA cost ratio excluding net service charge expenses – vacancy (%) 20.5 20.5
Staff costs amounting to £1.6 million (2015: £1.9 million) have been capitalised as development costs and are excluded from table 7. Our
business model for developments is to use a combination of in-house staff and external advisers. The cost of external advisers is
capitalised to the cost of developments. The cost of staff working on developments is generally expensed, but is capitalised subject to
meeting certain criteria related to the degree of time spent on and the stage of progress of specific projects.
Table 8: Valuation analysis
Valuation analysis at 31 December 2016
True Nominal
Properties Revaluation Capital Total Initial equivalent equivalent
at valuation in the year return return yield yield yieldA
Proportionally consolidated including premium outlets £m £m % % % % %
United Kingdom
Shopping centres 3,436.5 (5.8) (0.2) 4.3 4.4 5.1 5.0
Retail parks 1,320.0 (118.3) (8.9) (4.0) 5.3 6.1 5.8
Other 163.5 2.2 2.5 8.6 5.8 7.4 7.1
Total 4,920.0 (121.9) (2.8) 1.9 4.7 5.5 5.3
France 2,159.6 73.3 3.6 8.3 3.9 4.4 4.3
Ireland 805.1 3.2 0.4 2.3 3.9 4.3 4.2
Total investment portfolio 7,884.7 (45.4) (1.0) 3.7 4.4 5.1 4.9
Developments 397.0 32.0 7.2 8.6
Total property portfolio 8,281.7 (13.4) (0.4) 4.1
B
Premium outlets 1,689.4 138.4 9.6 15.1
Total Group 9,971.1 125.0 1.1 5.7
Selected data for the year ended 31 December 2015
Group
UK 4,881.2 215.3 4.7 9.9 4.8 5.4 5.2
France 1,860.5 116.6 7.1 12.0 4.1 4.7 4.6
Total investment portfolio 6,741.7 331.9 5.4 10.5 4.6 5.2 5.1
Developments 388.8 35.6 12.3 14.1
Total property portfolio 7,130.5 367.5 5.7 10.7
Premium outletsB 1,243.6 174.1 16.4 23.7
Total Group 8,374.1 541.6 7.1 12.4
Notes
A. Nominal equivalent yields are included within the unobservable inputs to the portfolio valuations as defined by IFRS 13. This information has been subject to
audit.
B. Represents the property returns for the Group’s share of premium outlets through its investments in Value Retail and VIA Outlets.
Table 9: Yield analysis
Investment portfolio as at 31 December 2016
Income Gross value Net book value
Proportionally consolidated excluding premium outlets £m £m £m
Portfolio value (net of cost to complete) 8,337 8,337
Purchasers’ costsA (452)
Net investment portfolio valuation on a proportionally consolidated basis 7,885
Income and yields
Rent for valuers’ initial yield (equivalent to EPRA Net Initial Yield) 365.8 4.4% 4.6%
B
Rent-free periods (including pre-lets) 14.0 0.2% 0.2%
C
Rent for ‘topped-up’ initial yield 379.8 4.6% 4.8%
Non-recoverable costs (net of outstanding rent reviews) 12.7 0.1% 0.2%
Passing rents 392.5 4.7% 5.0%
ERV of vacant space 9.8 0.1% 0.1%
Reversions 17.7 0.2% 0.2%
Total ERV/Reversionary yield 420.0 5.0% 5.3%
True equivalent yield 5.1%
Nominal equivalent yield 4.9%
Notes
A. Purchasers’ costs equate to 5.7% of the net portfolio value.
B. The weighted average remaining rent-free period is 0.5 years.
C. The yield of 4.6% based on passing rents and gross portfolio value is equivalent to EPRA’s ‘topped-up” Net Initial Yield.
Share of Property interests
The Group’s share of Property interests reflects the Group’s share of Property joint ventures as shown in note 9 to the accounts on
pages 45 to 50 and the Group’s interest in Nicetoile, which is accounted for as an associate, included within note 10 to the accounts on
pages 51 and 52.
Table 10: Income statement
Aggregated Property interests income statements
Year ended 31 December 2016 Year ended 31 December 2015
Share of Property Share of
Property joint Property joint Property
ventures Nicetoile interests ventures Nicetoile interests
£m £m £m £m £m £m
Gross rental income 145.9 1.5 147.4 129.2 1.2 130.4
Net rental income 122.9 1.3 124.2 108.8 1.0 109.8
Administration expenses (0.4) – (0.4) (0.3) – (0.3)
Operating profit before other net gains 122.5 1.3 123.8 108.5 1.0 109.5
Revaluation gains on properties 10.7 0.6 11.3 122.1 0.3 122.4
Operating profit 133.2 1.9 135.1 230.6 1.3 231.9
Change in fair value of derivatives 0.8 – 0.8 1.0 – 1.0
Other finance income 15.3 – 15.3 2.1 – 2.1
Net finance income 16.1 – 16.1 3.1 – 3.1
Profit before tax 149.3 1.9 151.2 233.7 1.3 235.0
Current tax charge (0.8) – (0.8) – – –
Profit for the year 148.5 1.9 150.4 233.7 1.3 235.0
Table 11: Balance sheet
Aggregated Property interests balance sheets
Year ended 31 December 2016 Year ended 31 December 2015
Share of Property Share of
Property joint Property joint Property
ventures Nicetoile interests ventures Nicetoile interests
£m £m £m £m £m £m
Non-current assets
Investment and development properties 3,490.1 27.7 3,517.8 2,455.1 23.3 2,478.4
Interests in leasehold properties 10.8 – 10.8 9.4 – 9.4
3,500.9 27.7 3,528.6 2,464.5 23.3 2,487.8
Current assets
Other current assets 100.2 0.4 100.6 726.8 0.2 727.0
Cash and deposits 54.8 1.4 56.2 32.4 1.1 33.5
155.0 1.8 156.8 759.2 1.3 760.5
Total assets 3,655.9 29.5 3,685.4 3,223.7 24.6 3,248.3
Current liabilities
Other payables (78.4) (0.2) (78.6) (67.2) (0.2) (67.4)
Borrowings (46.7) – (46.7) (40.2) – (40.2)
(125.1) (0.2) (125.3) (107.4) (0.2) (107.6)
Non-current liabilities
Obligations under finance leases (10.8) – (10.8) (9.4) – (9.4)
Other payables (5.3) (0.3) (5.6) (4.1) (0.2) (4.3)
(16.1) (0.3) (16.4) (13.5) (0.2) (13.7)
Total liabilities (141.2) (0.5) (141.7) (120.9) (0.4) (121.3)
Net assets 3,514.7 29.0 3,543.7 3,102.8 24.2 3,127.0
Premium outlets
The Group’s investment in premium outlets is through interests in Value Retail and VIA Outlets. Due to the nature of the Group’s
control over these externally-managed investments, Value Retail is accounted for as an associate and VIA Outlets is accounted for as
a joint venture. Tables 12 and 13 provide analysis of the impact of the two premium outlet investments on the Group’s financial
statements. Further information on Value Retail is provided in note 10 to the accounts on pages 51 and 52 and for VIA Outlets in note
9 to the accounts on pages 45 to 50.
Table 12: Income statement
Aggregated premium outlets income summary
2016 2015
Value Retail VIA Outlets Total Value Retail VIA Outlets Total
£m £m £m £m £m £m
Share of results (IFRS) 135.2 20.7 155.9 159.3 13.1 172.4
Less adjustments:
Revaluation gains on properties (120.0) (18.4) (138.4) (163.7) (10.4) (174.1)
Change in fair value of derivatives 15.2 (0.7) 14.5 7.5 2.2 9.7
Deferred tax 9.6 4.7 14.3 25.1 2.5 27.6
Other adjustments (16.4) (0.1) (16.5) (11.1) (1.3) (12.4)
(111.6) (14.5) (126.1) (142.2) (7.0) (149.2)
Adjusted earnings of premium outlets 23.6 6.2 29.8 17.1 6.1 23.2
Interest receivable from Value Retail loans* 4.2 – 4.2 5.3 – 5.3
Total contribution to adjusted profit 27.8 6.2 34.0 22.4 6.1 28.5
Table 13: Balance sheet
Aggregated premium outlets investment summary
2016 2015
Value Retail VIA Outlets Total Value Retail VIA Outlets Total
£m £m £m £m £m £m
Investment properties 1,387.3 302.1 1,689.4 1,095.0 148.6 1,243.6
Net debt (413.3) (54.3) (467.6) (335.3) (27.1) (362.4)
Other net liabilities (14.9) (25.8) (40.7) (15.9) (10.7) (26.6)
Share of net assets (IFRS) 959.1 222.0 1,181.1 743.8 110.8 854.6
Less adjustments:
Fair value of derivatives (0.3) 3.5 3.2 (0.4) 3.5 3.1
Deferred tax 140.9 19.5 160.4 107.3 6.3 113.6
Goodwill as a result of deferred tax (53.5) (3.5) (57.0) (47.0) (3.0) (50.0)
87.1 19.5 106.6 59.9 6.8 66.7
Adjusted investment 1,046.2 241.5 1,287.7 803.7 117.6 921.3
Investment in VR China – within other investments – – – 4.8 – 4.8
Loans to Value Retail* 21.6 – 21.6 76.4 – 76.4
Total investment 1,067.8 241.5 1,309.3 884.9 117.6 1,002.5
* At 31 December 2016 the Group had provided loans of £21.6 million (2015: £76.4 million) to Value Retail for which the Group received interest of £4.2 million in
2016 (2015: £5.3 million) which is included within finance income in note 4 to the accounts on page 39.
Proportionally consolidated information
Note 2 to the accounts on page 36 shows the proportionally consolidated income statement. The proportionally consolidated balance
sheet, net debt and net underlying finance costs are shown in the tables 14, 16 and 18.
In each of the tables, column A represents the Reported Group figures as shown in the financial statements; column B shows the
Group’s share of Property interests being the Group’s share of Property joint ventures as shown in note 9 to the accounts on page 45
and Nicetoile as shown in note 10 to the accounts on page 51. Column C shows the Group’s proportionally consolidated figures by
aggregating the Reported Group and Share of Property interests figures. The Group’s interests in premium outlets are not
proportionally consolidated as management does not review these interests on this basis.
Table 14: Proportionally consolidated balance sheet
Balance sheet as at 31 December 2016
2016 2015
Share of Share of
Reported Property Proportionally Reported Property Proportionally
Group interests consolidated Group interests consolidated
£m £m £m £m £m £m
A B C A B C
Non-current assets
Investment and development properties 4,763.9 3,517.8 8,281.7 4,652.1 2,478.4 7,130.5
Interests in leasehold properties 36.4 10.8 47.2 32.1 9.4 41.5
Plant and equipment 6.2 – 6.2 7.6 – 7.6
Investment in joint ventures 3,736.7 (3,514.7) 222.0 3,213.6 (3,102.8) 110.8
Investment in associate 988.1 (29.0) 959.1 768.0 (24.2) 743.8
Other investments – – – 4.8 – 4.8
Receivables 44.9 – 44.9 92.1 – 92.1
9,576.2 (15.1) 9,561.1 8,770.3 (639.2) 8,131.1
Current assets
Receivables 105.9 84.8 190.7 118.0 710.7 828.7
Restricted monetary assets 35.1 15.8 50.9 34.0 16.3 50.3
Cash and deposits 74.3 56.2 130.5 37.0 33.5 70.5
215.3 156.8 372.1 189.0 760.5 949.5
Total assets 9,791.5 141.7 9,933.2 8,959.3 121.3 9,080.6
Current liabilities
Payables 303.8 78.6 382.4 235.5 67.4 302.9
Tax 0.4 – 0.4 0.7 – 0.7
Borrowings 211.1 46.7 257.8 – 40.2 40.2
515.3 125.3 640.6 236.2 107.6 343.8
Non-current liabilities
Borrowings 3,285.2 – 3,285.2 3,028.1 – 3,028.1
Deferred tax 0.5 – 0.5 0.5 – 0.5
Obligations under finance leases 37.5 10.8 48.3 32.5 9.4 41.9
Payables 96.0 5.6 101.6 75.7 4.3 80.0
3,419.2 16.4 3,435.6 3,136.8 13.7 3,150.5
Total liabilities 3,934.5 141.7 4,076.2 3,373.0 121.3 3,494.3
Net assets 5,857.0 – 5,857.0 5,586.3 – 5,586.3
Table 15: EBITDA
2016 2015
£m £m
Adjusted operating profit (note 2) 330.2 299.5
Interest income from Irish loans 17.4 4.7
Tenant incentive amortisation 2.6 1.8
Share-based remuneration 5.6 4.8
Depreciation 2.0 1.7
Total 357.8 312.5
Table 16: Proportionally consolidated net debt analysis
Net debt as at 31 December 2016
2016 2015
Share of Share of
Reported Property Reported Property
Group interests Total Group interests Total
£m £m £m £m £m £m
Notes A B C A B C
Cash at bank 74.1 53.7 127.8 36.9 32.6 69.5
Short-term deposits 0.2 2.5 2.7 0.1 0.9 1.0
Cash and deposits 74.3 56.2 130.5 37.0 33.5 70.5
Current borrowings including currency swaps (211.1) (46.7) (257.8) 30.0 (40.2) (10.2)
Non-current borrowings (3,285.2) – (3,285.2) (3,028.1) – (3,028.1)
Net debt (3,422.0) 9.5 (3,412.5) (2,961.1) (6.7) (2,967.8)
Table 17: Loan to value analysis
Loan to value as at 31 December 2016
31 December 2016 31 December 2015
New New Old
methodology Old methodology methodology methodology
Loan – Net debt (Table 16) 3,412.5 3,412.5 2,967.8 2,967.8
Total property portfolio (Table 14) 8,281.7 8,281.7 7,130.5 7,130.5
Irish loan assets 54.1 54.1 690.2 690.2
Investment in VIA Outlets (note 9A) 222.0 n/a 110.8 n/a
Investment in Value Retail (note 10C) 959.1 n/a 743.8 n/a
Less non-controlling interests (81.4) n/a (69.0) n/a
Value 9,435.5 8,335.8 8,606.3 7,820.7
Loan to value (%) 36.2 40.9 34.5 37.9
Table 18: Proportionally consolidated net underlying finance costs
Underlying finance costs for the year ended 31 December 2016
2016 2015
Share of Share of
Reported Property Reported Property
Group interests Total Group interests Total
£m £m £m £m £m £m
Notes A B C A B C
Finance costs 121.2 2.1 123.3 101.9 2.5 104.4
Finance income (12.4) (17.4) (29.8) (15.7) (4.6) (20.3)
Adjusted finance costs/(income) (note 2) 108.8 (15.3) 93.5 86.2 (2.1) 84.1
Capitalised interest 5.1 – 5.1 5.3 – 5.3
Net underlying finance costs/(income) 113.9 (15.3) 98.6 91.5 (2.1) 89.4
DEVELOPMENT PIPELINE
UNAUDITED
Scheme Area m2 Key facts
UK shopping centres
Brent Cross extension 90,000 – Extension and refurbishment of Brent Cross Shopping Centre forming part of wider Brent
Cross Cricklewood regeneration plans totalling 175,000m2 of retail, catering and leisure.
– Reserved matters planning application to be submitted in spring 2017.
Bristol Investment 74,000 – New planning application in the name of Callowhill Court submitted in December 2016
Properties* for a 3.5ha site of joint venture owned land relating to part of the existing retail properties
adjoining Cabot Circus.
– Masterplan includes up to 74,000m2 retail and leisure, 900 car parking spaces, and the
potential for 150 residential units, and a 150 room hotel.
Croydon Town Centre 200,000 – Redevelopment of Whitgift Centre and refurbishment of Centrale shopping centre by
Croydon Partnership, a 50:50 joint venture between Hammerson and Westfield.
– New outline planning application submitted in October 2016, with decision expected in
summer 2017.
Silverburn (Phase 4), 50,000 – Consent granted in October 2015 for a masterplan for a future extension of existing
Glasgow* centre.
– Masterplan includes 31,250m2 retail, 8,500m2 leisure, plus a hotel.
Union Square, Aberdeen* 27,800 – Extension of existing shopping centre for up to 11,000m2 of retail, 12,000m2 of leisure
and catering, plus up to 435 car parking spaces and a hotel.
– Planning application due for determination by summer 2017.
Victoria Gate, Leeds (Phase 73,000 – Phase 1 completed October 2016. Phase 2 masterplanning underway to deliver a
2)* phased retail/leisure mixed use scheme to complement Victoria Gate. Revised planning
application submission anticipated end of 2017.
– Freehold control of site obtained.
Westquay Watermark, 58,000 – Council-owned land, with outline planning consent for 8,000m2 of retail and leisure, 260
Southampton (Phase 2) residential units and one or more hotels, achieved in 2014.
– A joint review of scheme is under way including a proposed development agreement to
bring the scheme forward.
UK retail parks
Oldbury, Dudley* 10,900 – Planning secured in May 2016 for new development of up to 11 retail and catering uses.
Leasing underway.
UK Other
The Goodsyard, London E1 270,000 – 4.2ha site on edge of the City of London.
– Planning application for major mixed-use development was deferred in April 2016 to
allow further consultation.
– Work ongoing to submit amended application during 2017.
France
Italie Deux, Paris 13ème 6,500 – Extension of the existing shopping centre offering a new façade in addition to retail,
leisure and innovative concepts.
– Land disposal approved by the City of Paris. Consents submitted.
Les Trois Fontaines, Cergy 28,000 – Retail and catering extension as part of a wider city centre project.
Pontoise – Co-ownership agreement, building permit and retail consent obtained.
– Pre-letting and contractor discussions ongoing.
SQY Ouest, 32,000 – Opportunity to reposition existing shopping centre, creating a leisure-led destination.
Saint Quentin-en-Yvelines*
Ireland
Dundrum Phase II, Dublin* 100,000 – Six acre site located adjacent to Dundrum Town Centre.
– Opportunity to create a retail-led mixed use scheme; master planning process underway.
Dublin Central, Dublin* 158,000 – Extension of duration of planning consent granted until May 2022 to create a retail-led
city centre scheme.
– Irish Government have appealed a High Court decision to designate part of the site as a
National Monument. The Group is supporting the process and a hearing is expected in
December 2017.
Swords Pavilions Phase III, 272,000 – Extension of duration of planning consent granted to August 2021.
Dublin* – Consent in place to create 124,000m2 retail-led scheme with additional residential.
– Pending completion of loan-to-own process for Phases I and II.
Total 1,450,200
* Schemes are on existing Hammerson owned land. No additional land acquisitions are required. This excludes occupational and long leaseholds.
GLOSSARY
Adjusted figures (per share) Reported amounts adjusted in accordance with EPRA guidelines to exclude certain items as set out in note 7 to the accounts.
Anchor store A major store, usually a department, variety or DIY 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 or The cost of finance expressed as a percentage of the weighted average of borrowings during the period.
weighted average interest rate
(WAIR)
BCSC British Council of Shopping Centres. A not-for-profit professional body supporting the retail property industry which undertakes
research and lobbies government on behalf of its members.
BREEAM An environmental rating assessed under the Building Research Establishment’s Environmental Assessment Method.
CAGR Compound annual growth rate.
Capital return The change in property value during the period after taking account of capital expenditure and exchange translation movements,
calculated on a monthly time-weighted basis.
Compulsory Purchase Order A Compulsory Purchase Order is a legal function in the UK by which land or property can be obtained to enable a development or
(CPO) infrastructure scheme without the consent of the owner where there is a “compelling case in the public interest”.
Cost ratio (or EPRA cost ratio) Total operating costs (being property costs, administration costs less management fees) as a percentage of gross rental income,
after rents payable. Both operating costs and gross rental income are adjusted for costs associated with inclusive leases.
CPI Consumer Price Index. A measure of inflation based on the weighted average of prices of consumer goods and services.
Dividend cover Adjusted earnings per share divided by dividend per share.
Earnings per share (EPS) Profit for the period attributable to equity shareholders divided by the average number of shares in issue during the period.
EBITDA Earnings before interest, tax, depreciation and amortisation.
EPRA The European Public Real Estate Association, a real estate industry body. This organisation has issued Best Practice
Recommendations with the intention of improving the transparency, comparability and relevance of the published results of listed real
estate companies in Europe.
Equivalent yield (true and The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows reflect the timing of future
nominal) rents resulting from lettings, lease renewals and rent reviews based on current ERVs. The true equivalent yield (TEY) assumes rents
are received quarterly in advance. The nominal equivalent yield (NEY) assumes rents are received annually in arrears. The property
true and nominal equivalent yields are determined by the Group’s external valuers.
ERV The estimated market rental value of the total lettable space in a property calculated by the Group’s external valuers. It is calculated
after deducting head and equity rents, and car parking and commercialisation running costs.
Gearing Proportionally consolidated net debt expressed as a percentage of equity shareholders’ funds.
Gross property value or Gross Property value before deduction of purchasers’ costs, as provided by the Group’s external valuers.
asset value (GAV)
Gross rental income (GRI) Income from rents, car parks and commercial income, after accounting for the net effect of the amortisation of lease incentives.
IAS/IFRS International Accounting Standard/International Financial Reporting Standard.
Inclusive lease A lease, often for a short period of time, under which the rent is inclusive of costs such as service charge, rates, utilities etc. Instead,
the landlord incurs these costs as part of the overall commercial arrangement.
Income return The income derived from a property as a percentage of the property value, taking account of capital expenditure and exchange
translation movements, calculated on a time-weighted basis.
Initial yield (or Net initial Annual cash rents receivable (net of head and equity rents and the cost of vacancy, and, in the case of France, net of an allowance
yield (NIY)) for costs of approximately 5%, primarily for management fees), as a percentage of gross property value, as provided by the Group’s
external valuers. Rents receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been
settled at the contractual review date at ERV.
Interest cover Net rental income divided by net cost of finance before exceptional finance costs, capitalised interest and change in fair value of
derivatives.
Interest rate or currency swap An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time.
(or derivatives)
IPD Investment Property Databank. An organisation supplying independent market indices and portfolio benchmarks to the property
industry.
Like-for-like (LFL) NRI The percentage change in net rental income for completed investment properties owned throughout both current and prior periods,
after taking account of exchange translation movements.
LTV (Loan to value) Net debt expressed as a percentage of the property portfolio value calculated on a proportionally consolidated basis.
Net asset value (NAV) per Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.
share
Net rental income (NRI) Income from rents, car parks and commercial income, after deducting head and equity rents payable, and other property related
costs.
Occupancy rate The ERV of the area in a property, or portfolio, excluding developments, which is let, expressed as a percentage of the total ERV of
that property or portfolio.
Occupational cost ratio (OCR) The proportion of a retailers' sales compared with the total cost of occupation being: rent, business rates, service charge and
insurance. Calculated excluding anchor stores.
Over-rented The amount, or percentage, by which the ERV falls short of rents passing, together with the estimated rental value of vacant space.
Passing rents or rents passing The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity
rents and car parking and commercialisation running costs. This may be more or less than the ERV (see over-rented and
reversionary or under-rented).
Principal lease A lease signed with a tenant with a secure term greater than three years and where the unit is not reconfigured. This enables letting
metrics to be stated on a comparable basis.
Pre-let A lease signed with a tenant prior to the completion of a development.
Property Income Distribution A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax-exempt property rental business and
(PID) which is taxable for UK-resident shareholders at their marginal tax rate.
Property interests The Group’s non-wholly owned properties which management proportionally consolidates when reviewing the performance of the
business. These exclude the Group’s premium outlet interests in Value Retail and VIA Outlets which are not proportionally
consolidated.
Property joint ventures The Group’s shopping centre and retail park joint ventures which management proportionally consolidate when reviewing the
performance of the business, but exclude the Group’s interests in the VIA Outlets joint venture.
QIAIF Qualifying Investor Alternative Investment Fund. A regulated tax regime in the Republic of Ireland which exempts participants from
Irish tax on property income and chargeable gains subject to certain requirements.
REIT Real Estate Investment Trust. 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.
Reported Group The financial results as presented under IFRS which represent the Group’s 100% owned properties and joint operations,
transactions and balances and equity accounted Group’s interests in joint ventures and associates.
Return on shareholders’ equity Capital growth and profit for the period expressed as a percentage of equity shareholders’ funds at the beginning of the year, all
(ROE) excluding deferred tax and certain non-recurring items.
Reversionary or under-rented The amount, or percentage, by which the ERV exceeds the rents passing, together with the estimated rental value of vacant space.
RPI Retail Prices Index. A measure of inflation based on the change in the cost of a representative sample of retail goods and services.
SIIC Sociétés d’Investissements Immobiliers Côtées. A tax regime in France which exempts participants from the French tax on property
income and gains subject to certain requirements.
Total development cost (TDC) All capital expenditure on a development project, including capitalised interest.
Total property return (TPR) Net rental income and capital growth expressed as a percentage of the opening book value of property adjusted for capital
(or total return) expenditure and exchange translation movements, calculated on a monthly time-weighted basis.
Total shareholder return (TSR) Dividends and capital growth in a Company’s share price, expressed as a percentage of the share price at the beginning of the year.
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 ERV of that property or portfolio.
Value Retail (VR) Owner and operator of luxury outlet Villages in Europe in which the Group has an investment.
VIA Outlets (VIA) A premium outlets joint venture, in which the Group has an investment. VIA owns and operates premium outlet centres in Europe.
Yield on cost Passing rents expressed as a percentage of the total development cost of a property.
Disclaimer
This document contains certain statements that are neither reported financial results nor other historical information. These statements
are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed
in or implied by these statements.
Many of these risks and uncertainties relate to factors that are beyond Hammerson’s ability to control or estimate precisely, such as
future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and
other risk factors such as the Company’s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social
and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and
consumer confidence, on a global, regional or national basis.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this
document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should
not be relied upon as a guide to future performance.
Hammerson has its primary listing on the London Stock Exchange and a secondary inward listing on the Johannesburg Stock
Exchange.
Joint Sponsors:
Deutsche Securities (SA) Proprietary Limited
Java Capital
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