Wrap Text
Audited Results for the year ended 31 December 2017
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 26 February 2018
HAMMERSON plc – AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017
WELL POSITIONED PORTFOLIO AND RECORD LEASING DRIVES STRONG PERFORMANCE
David Atkins, Chief Executive of Hammerson, said: “In recent years we have actively rebalanced the weighting
of our portfolio towards high footfall destinations in major cities across the UK and Europe and this has
underpinned our strong financial success at a time of on-going structural change in retail. By creating the space
that today’s retailers need to showcase their brands, we achieved the highest level of lettings this year than in any
other in Hammerson’s 75-year history and group occupancy is at a 17-year high at 98.3%. This activity
contributed to a 6.5% uplift in Earnings Per Share, which has risen on average by 8.3% per annum over the past
five years.
“Not all retail is equal and not all locations are well placed to support the future needs of brands. But with 440
million visitors a year, our unrivalled consumer insight and relationship with retailers ensures that we target the
next generation of brands, as we proactively rotate retailers and expand winning formats. In this evolving retail
marketplace, winning retailers increasingly choose our exceptional destinations to achieve their growth potential
and so, our role as an expert operator of retail property is more significant than ever before.
“The highlight of 2017 was the announcement of our proposed acquisition of intu. In line with our strategy, the
transaction will further enhance our portfolio and operating platform, providing further opportunity to expand in
higher growth markets. We are on track with our acquisition timetable and integration planning.
“Our disciplined approach to capital recycling ensures we continually lift the overall quality of our portfolio and we
are seeing clear investment demand for our well-managed properties. We have achieved £1.2bn of disposals over
the last three years including £400m in 2017. Consumer confidence in France and Ireland is strong and our unique
position in the premium outlets sector continues to deliver impressive growth, and today we announce further
investment by increasing our economic interest in the internationally renowned Bicester Village to over 50%.
Overall, we are in a strong position to respond to the current consumer conditions in the UK and our rigorous
approach to the capital and asset management of our properties supports our confidence in generating future
returns for our shareholders.”
31 December 31 December
Year ended: 2017 2016 Change
Net rental income (1) £370.4m £346.5m +6.9%
Adjusted profit (2) £246.3m £230.7m +6.8%
Adjusted earnings per share (2) 31.1p 29.2p +6.5%
IFRS profit (including non-cash valuation changes) (3) £388.4m £317.3m +22.4%
Basic earnings per share (3) 49.0p 40.2p +21.9%
Final dividend per share 14.8p 13.9p +6.5%
31 December 31 December
As at: 2017 2016
Portfolio value (4) £10,560m £9,971m +5.9%
Equity shareholders’ funds £6,024m £5,776m +4.3%
EPRA net asset value per share (2) £7.76 £7.39 +5.0%
Gearing (5) 58% 59% -1p.p.
Loan to value (5) 36% 36%
1. On a proportionally consolidated basis, excluding interests in premium outlets. See page 23 of the Financial Review for a description of the
presentation of financial information.
2. Calculations for adjusted and EPRA figures are shown in note 7 to the financial statements on pages 46 and 47.
3. Attributable to equity shareholders, includes portfolio non-cash revaluation gains of £246.5m (2016: £125.0m).
4. Proportionally consolidated, including premium outlets. See page 23 of the Financial Review for a description of the presentation of financial
information.
5. See Table 18 on page 70 for supporting calculations for gearing and loan to value.
FOCUS ON GROWING CONSUMER MARKETS – DELIVERING STRONG TOTAL RETURNS
– New £76m acquisition in Value Retail taking economic interest in Bicester Village to over 50%; total investment in
premium outlets in 2017 of £130m including Oslo outlet acquisition. Our premium outlets delivered impressive sales
growth of +9%
– Focused capital recycling in France, selling £295m of shopping centres and reinvesting into larger destinations
including acquisition of Cergy 3, adjoining Les 3 Fontaines, Paris, where our planned extension starts in March
– Important milestones achieved at major developments including the appointment of a contractor at Brent Cross,
planning approval at Croydon and a supportive Court of Appeal ruling for Dublin Central
– Announced proposed acquisition of intu to create a £21bn portfolio with more leading UK shopping centres and
enlarged presence in Spain’s fast-growing market as well as a disposal programme designed to enhance future
returns
– Targeting £500m of disposals in 2018, over £90m achieved to date
CREATE DIFFERENTIATED DESTINATIONS – RECORD LEASING ACTIVITY
– Highest ever group leasing volumes up 34% on 2016 with increases across all segments. Securing income of
£33.3m (2016: £24.9m) and delivering record occupancy of 98.3% (2016: 97.5%)
– Leases signed 8% ahead of ERV and 7% ahead of previous passing rent, with stable tenant incentives
– LfL NRI growth strong in Ireland 7.4%, France 2.6% and premium outlets15.3% and 1.8% in UK shopping centres
– Shopper footfall strongly outperforming benchmarks in UK and France
PROMOTE FINANCIAL EFFICIENCY AND PARTNERSHIPS – ATTRACTING LONG-TERM CAPITAL
– Further progress in reducing weighted average cost of debt, falling to 2.9% (2016: 3.1%)
– LTV consistent at 36% (2016: 36%)
– New £1.5bn three year credit facility agreed, subject to documentation, with relationship banks to support refinancing
of intu near term debt
Contents: Page Page
Introduction 3-4 Statement of Directors’ Responsibilities 33
Key Performance Indicators 5 Financial Statements 34
Business Review 7 Notes to the Financial Statements 40
Property Portfolio Review 19 Additional Disclosures 62
Financial Review 23 Development Pipeline 72
Risks and Uncertainties 30 Glossary 73
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) 330 336 9105. Please quote confirmation code 5306825.
Financial calendar:
Ex-dividend date (SA) 14 March 2018
Ex-dividend date (UK) 15 March 2018
Record date (UK and SA) 16 March 2018
Final dividend payable (UK and SA) 26 April 2018
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
rebecca.patton@hammerson.com
Catrin Sharp, Head of Corporate Communications Tel: +44 (0)20 7887 1063
catrin.sharp@hammerson.com
John Waples, Dido Laurimore and Tom Gough, FTI Consulting Tel: +44 (0)20 3727 1000
Index to key data
Unless otherwise stated, figures have been prepared on a proportionally consolidated basis, excluding premium outlets
31 December 31 December
Income and operational – Year ended: 2017 2016 Page
Total property return (including share of premium outlets portfolio) 6.8% 5.7% 5
Capital return (including share of premium outlets portfolio) 2.2% 1.1% 21
Occupancy 98.3% 97.5% 6
Like-for-like NRI growth 1.7% 2.2% 5
Adjusted earnings per share 31.1p 29.2p 5
Leasing activity £33.3m £24.9m 6
Leasing v ERV +8% +5% 6
Like-for-like ERV growth +0.9% +0.0% 21
Retail sales growth – UK shopping centres - 2.7% - 1.1% 7
Footfall growth – UK shopping centres +0.4% - 0.5% 7
Retail sales growth – France +0.1% +3.1% 12
Footfall growth – France +1.6% +2.8% 12
Cost ratio 21.6% 22.6% 5
Final dividend per share 14.8p 13.9p 26
31 December 31 December
Capital and financing – As at: 2017 2016
Property portfolio value (including premium outlets) £10.6bn £10.0bn 19
Net debt £3.5bn £3.4bn 28
Gearing 58% 59% 28
Loan to value 36% 36% 28
Liquidity £958m £592m 28
Weighted average interest rate 2.9% 3.1% 28
Interest cover 3.4 times 3.5 times 28
Net debt/EBITDA 9.3 times 9.5 times 28
Fixed rate debt 78% 70% 28
Portfolio currency hedge 78% 79% 28
Equity shareholders’ funds £6.0bn £5.8bn 27
EPRA net asset value per share £7.76 £7.39 27
INTRODUCTION
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 own, operate and develop retail and leisure destinations where more
happens, that interact seamlessly with digital and bring together the very best brands. We seek to deliver value for all our
stakeholders, and to create a positive and sustainable impact for generations to come. Our properties are located in significant,
growing cities in selected European countries. We focus on retail property aligned to consumer requirements in a multichannel
world. The portfolio includes high-quality shopping centres in the UK, France and Ireland, convenient retail parks in the UK and
premium outlets across Europe.
INTU ACQUISITION
The recently announced acquisition of intu will create a £21bn pan-European portfolio of high-quality retail destinations, in line
with our strategy to focus on growing consumer markets. Both businesses have now published their financial results and we
are in a position to seek shareholder approval. We anticipate publishing our shareholder documentation in the coming weeks
with the EGM scheduled for April. If shareholder approval is obtained, the only remaining condition will be competition
regulatory approval and following receipt of that approval, the transaction is anticipated to complete in Q4 2018.
MARKET TRENDS
The retail property market is affected by a number of structural trends which influence our strategy, drive priorities and guide
performance.
Multichannel retail: Consumers increasingly use instore and online channels in various combinations for their retail journey,
leading to ‘multichannel’ retail journeys. The store remains the cornerstone of the retail journey. Our survey confirms that
retailers measure the productivity of stores based on ‘total sales’ combining instore and online. Therefore, the role of the store
is evolving with an emphasis on showcasing products, providing service and fulfilling click & collect.
Retailer and brand preferences: There is growing demand from retailers for stores in large, higher-footfall locations. Retailers
prefer to be clustered together in the same locations to optimise their interaction with customers. Consumer brands are taking
space to directly control the brand experience with their end customers. This drives a convergence by retailers and brands
towards the same leading locations driving higher rental growth.
Enhanced consumer experience: Successful retail destinations provide customers with a mix of shopping, dining and leisure;
retail may not be the primary driver for a visit. These destinations create an experience which attracts more customers and
encourages them to stay longer.
Frictionless retail: Time-short lifestyles and multichannel retail increase expectations for faster access to goods and services.
Retail locations which are well-connected to transport links, make it easy to identify and locate items, and offer convenience are
performing well.
Global shopping tourism: The level of global tourism is increasing, driven by growth of the middle-income demographic in
emerging economies and falling travel costs. Shopping is increasingly being enjoyed by these international tourists as part of a
travel experience.
OUR STRATEGY
To align our portfolio to benefit from these market trends we:
– Focus on growing consumer markets
– Create differentiated destinations
– Promote financial efficiency and partnerships
DIFFERENTIATED BY OUR PRODUCT EXPERIENCE FRAMEWORK
Our Product Experience Framework is embedded across everything we do and ensures we constantly challenge ourselves
to apply best practice in retail design and digital solutions, customer engagement and sustainability. The framework
incorporates:
– Iconic destinations: We create outstanding, architecturally significant destinations where brands and shoppers want to
be.
– Retail specialism: We build strong relationships with our retailers and support their multichannel strategies.
– Experience led: Adding leisure, events and dining to our centres to create additional ways for shoppers to spend time.
– Customer first: Focus on customer service and exceptional reasons for shoppers to visit.
Our sustainability vision is to create retail destinations that deliver positive impacts economically, socially and environmentally.
Positive Places is our strategy for making that happen. In 2017, our sustainability vision became even more ambitious, with a
bold new objective to become Net Positive for carbon, resource use, water and socio-economic impacts by 2030.
OUR MARKETS IN 2017
Our end-markets are influenced by a range of consumer and economic trends.
UK: The consumer backdrop was softer than the previous year. Higher inflation caused low growth in real disposable income
and retail spend in the UK was down 3% in 2017 (ONS). Although inflation is easing, consumer confidence has eroded through
the year (GfK) and there is uncertainty over the UK’s arrangements after it leaves the EU, therefore consumer spending growth
is expected to remain muted. In combination with weaker sales, retailers are experiencing cost pressures from currency
fluctuations, adjustments to business rates and higher minimum wages. Nonetheless we are seeing strong levels of leasing
activity with stable tenant incentives, confirming that retailers are prioritising high quality retail venues to support their
multichannel sales platforms (see Market Trends above), albeit some of these leasing discussions are taking longer to
conclude.
France: The Eurozone and France continue to enjoy strong economic growth at historic-high levels and low unemployment.
Confidence has been improving through the year, also supported by more political stability. Whilst retailers are facing some of
the same structural changes with increasing online sales, they are not facing the UK-specific consumer issues and we continue
to see strong demand for our space from retailers.
Ireland: The Irish economy is outperforming in Europe. Unemployment is at its lowest since 2008 and retail sales rose by 3.9%
in 2017. GDP growth of 3.1% is expected in 2018. We expect a continued positive outlook for consumers and retailers.
Premium outlets: More retailers are recognising the attraction of the outlet channel and working with skilled operators who
provide outlet space which supports their brand proposition and attracts growing footfall, in particular from international tourists.
We therefore anticipate sales in premium outlets to increase as the retail mix improves and as international tourist numbers to
Europe continue to increase.
Investment markets: There has been a lower volume of transactions in European retail property with a noticeable divergence
between high quality and secondary due to the shifting consumer and retailer behaviour. Investment markets in premium
outlets are seeing increased activity and further yield compression as the market consolidates and attracts more institutional
investors.
KEY PERFORMANCE INDICATORS
Monitoring our performance
We monitor Key Performance Indicators, or KPIs, to ensure we are achieving our strategic priorities and delivering value for our stakeholders.
The KPIs comprise financial and operational measures and each links to the three elements of our strategy.
Financial KPIs
Growth in adjusted EPS
6.5% Description
Adjusted earnings per share (EPS) is the Group’s primary profit measure and reflects underlying
profit divided by the average number of shares in issue and is calculated in line with EPRA
guidelines as explained on page 23.
Performance
In 2017, adjusted EPS increased by 1.9 pence, or 6.5%, to 31.1p. This was driven by increased
net rental income, particularly from our Irish shopping centres, higher earnings from our premium
outlets and favourable foreign exchange movements. This was partly offset by income foregone
from property disposals during 2016 and 2017.
Growth in like-for-like NRI*
1.7%
Description
Net rental income (NRI) is the Group’s primary revenue measure. Like-for-like NRI growth is key to
growing earnings and dividends. Growth is achieved through the implementation of our Product
Experience Framework which helps us enliven and enhance our properties.
Performance
Like-for-like NRI grew by 1.7% in 2017, slightly below our target of 2.0%. Income at our UK and
French shopping centres grew by 1.8% and 2.6% respectively, whilst NRI at our UK retail parks
fell by 2.5%.
The Group performance of 1.7% includes growth of 7.4% from our Irish centres. Prior to the
conversion of our secured loans the underlying property income was classified as finance income.
Total property return
6.8%
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 All Retail benchmark.
Performance
During 2017, the Group’s properties produced a total return of 6.8%. The Group’s investment and
development portfolios produced total returns of 4.3% and 6.9% respectively. Premium outlets
produced the highest return of 16.9%.
At the date of this report, our IPD benchmark is unavailable.
Cost ratio*
21.6%
Description
The EPRA cost ratio is the measure by which we monitor the operational efficiency of our
business. It is calculated as total operating costs, being property outgoings and net administration
costs, as a percentage of gross rental income for our property portfolio.
Performance
During 2017, the ratio has reduced by 100bp to 21.6%. The reduction is principally due to lower
property costs, which, as a percentage of the gross rental income denominator, have fallen from
10.7% to 9.7%. The administration costs proportion of the ratio is unchanged at 11.9%.
* Proportionally consolidated excluding premium outlets. See the Financial Review on page 23 for further explanation.
Operational KPIs
Occupancy*
98.3%
Description
Keeping our properties occupied ensures we generate rental income and enlivens our
destinations. The occupancy ratio measures the amount of space which is currently let. The ratio
is calculated in line with EPRA guidance using the estimated rental value (ERV) of occupied
space.
Performance
Occupancy remains above our 97.0% target, with the portfolio 98.3% occupied at the end of 2017.
This was higher than the prior year due to the strong leasing performance during 2017. The most
significant increase was in France, where the level of occupancy increased from 96.5% to 97.9%.
Leasing activity*
£33.3 million
Description
Our leasing strategy is designed to improve brand mix and differentiate our destinations. This KPI
shows the amount of income secured across the investment portfolio including new lettings and
lease renewals.
Performance
2017 was a record year for leasing, with increased volumes at each of our sectors. During the year
we secured £33.3 million of income, which is £8.4 million, or 34%, higher than 2016.
In total we signed 460 leases representing 167,400m2 of space. For principal leases, the rent was
8% higher than December 2016 ERVs and 7% higher than the previous passing rent.
Global emissions intensity ratio
150mtCO2e/£m
Description
Reducing carbon emissions is a key sustainability target. This ratio measures 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 for the
same period.
Performance
The ratio has reduced by 3% to 150 mtCO2e/£m during 2017 due to an increase in the Group's
adjusted profit before tax and lower emissions in the UK. These factors were partly offset by
increased emissions from gas for heating our French assets and newly acquired Irish properties
where property ownership was secured during 2016 and 2017.
Voluntary staff turnover
12.0%
Description
Our talented people are a key resource and we strive to retain, engage and develop them. Since
2014 we have monitored voluntary staff turnover to highlight any potential signs of demotivation or
other people-related issues and include both corporate and shopping centre-based employees in
this measure.
Performance
In 2017, voluntary staff turnover remained low at 12.0%. The slight increase compared with 2016
was due to nine additional leavers from our London and Reading offices when compared to the
prior year. However, the turnover remains low compared to wider industry averages.
BUSINESS REVIEW
This Business Review provides an overview of the performance of our portfolio sectors. Consistent with internal management
reporting as described on page 23 of the Financial Review, the operational metrics in this section are presented on a proportionally
consolidated basis. Further portfolio analysis is provided in the Additional Disclosures section on pages 63 to 66.
UK shopping centres
Our high-quality centres have had a strong year in 2017 with record leasing volumes.
Operational summary
Like-for-like Leasing Leasing vs Retail sales Footfall
NRI growth Occupancy activity ERV growth growth
Key metrics % % £m % % %
31 December 2017 1.8 98.1 13.4 +8 (2.7) 0.4
31 December 2016 2.4 97.8 9.0 +6 (1.1) (0.5)
Sector overview
Our high-quality centres are differentiated by their scale, catchment size and superior brand mix. The latter includes large anchor tenants
and flagship stores for international brands.
Not all retail is equal and not all locations are well placed to support the future needs of brands. The role of expert operators is more significant
than ever before to successfully differentiate venues with a mix of retail formats, events, dining and leisure. Therefore occupiers are
increasingly choosing our type of well-invested, high-footfall locations to support their growth and multichannel strategies.
Information on market trends, our strategy and our markets in 2017 and how they impact the UK shopping centre portfolios are set out in the
Introduction on page 4.
Our portfolio
Our UK shopping centres are within, or close to, highly populated city centres in England and Scotland and together the portfolio
accommodates more than 1,000 tenants in 820,000m2 of space. Catering and leisure brands occupy around 13% of the space at our centres,
an increase of a third over the last five years.
Net rental income
In 2017, like-for-like net rental income increased by 1.8%. All UK centres generated growth with the exception of Bullring, Cabot Circus and
Union Square, for which 2016 income was boosted principally by turnover rent, surrender premiums and backdated rent reviews respectively.
Net income from car parks fell on a like-for-like basis due to a combination of the partial closure at some centres to facilitate refurbishment
works, a more general fall in transaction volumes and increased business rates.
Occupancy and leasing
Occupancy levels continued to be high at 98.1% with the majority of centres showing a reduction in vacancy over the year. At 31 December
2017, tenants in administration accounted for only 16 units in the portfolio, representing 0.3% of the Group’s passing rents, and 12 of those
units continued to trade. Administrations provide the opportunity to improve the tenant mix at our centres through the introduction of new
brands.
Strong demand from tenants underpinned significant leasing progress in 2017, with 181 leases contracted, representing £13.4 million of annual
rental income and 52,400m2. In respect of principal leases, rents were secured at 8% above December 2016 ERVs and 6% above previous
passing rents.
Leases signed in 2017 with international brands, premium operators and new food and beverage providers have broadened the offer at our
centres. Key leasing deals concluded during the year included:
– New brands secured at Bullring, including Russell & Bromley, Coach and Volkswagen’s first UK shopping centre store;
– Flannels and Tim Hortons opened their first Scottish stores at Silverburn;
– At Cabot Circus, an upsized Oliver Bonas and the first Department of Coffee and Social Affairs outside London;
– The trend at Brent Cross for retailers to seek additional space has continued, with major operators, including Zara and JD Sports, upsizing
their stores; and
– Lettings to restaurant operators Mowgli, Tasty Plaice and Comptoir Libanais at Grand Central include some portfolio firsts.
Our creative approach to asset management is illustrated by the reconfiguration of the former department store at Highcross, Leicester where
over 10,000m2 of upgraded space is being created over three floors. International fashion brand Zara will anchor the refurbished space and JD
Sports will upsize its unit. The project will also accommodate a new leisure offer, Treetop Adventure Golf.
Since the year end we also announced that Next and River Island have chosen to relocate from Broad Street, Reading and significantly
increase their physical presence at The Oracle as part of a major enhancement of the centre.
Product Experience initiatives
The customer experience at our centres is continually enhanced by a range of initiatives, developed through our Product Experience
Framework, which was designed to deliver a unique point of differentiation to our operating model. From best-in-class retail design in our iconic
destinations, to cutting edge digital solutions like our Style Seeker AI-driven product search tool. Delivering experience is at the heart to what
we do, exemplified by exciting events like the immersive light show at Westquay. This is all underpinned by a commitment to customer service
demonstrated by initiatives like handsfree shopping.
Sales and footfall and occupancy cost
Despite the market backdrop and its impact on consumer spending, Hammerson centres have proved to be relatively resilient retail
destinations. On a same-centre basis, retail sales at the UK shopping centre portfolio as a whole fell by 2.7%, but increased by 3.0% when the
new extensions at Westquay, Southampton and Victoria Gate, Leeds are taken into account. Benchmark UK retail market sales fell by 3.0%
over the year. Performance by centre and retail category has been mixed. Stronger performances from men’s fashion, sound, picture &
technology, sports & outdoors and leisure were offset by weaker results posted by some of the larger mid-range fashion retailers. It should be
noted that our till-based sales analysis does not reflect the significant additional online sales generated through the halo effect of our flagship
destinations. This aspect of the multichannel experience continues to grow strongly.
The Tyco (ShopperTrak) footfall benchmark for 2017 was -2.8%, but our centres continued to outperform the index, with the addition of new
space driving positive growth of 0.4% for the portfolio overall. Reflecting lower sales and increased business rates, the occupational cost ratio
for the portfolio increased from 20.1% at the end of 2016 to 21.7% at 31 December 2017. Again, it should be noted that this ratio is calculated
from till-based sales and takes no account of the online transactions supported by the stores including click & collect and instore online
ordering.
UK retail parks
Our record low vacancy, strong retailer demand and positive visitor feedback demonstrate the attractiveness of
our modern parks portfolio.
Operational summary
Like-for-like Leasing Leasing vs Footfall
NRI growth Occupancy activity ERV growth
Key metrics % % £m % %
31 December 2017 (2.5) 99.4 6.3 +11 (0.4)
31 December 2016 2.4 98.6 4.9 +4 2.2
Sector overview
Retail parks tend to be situated in out-of-town locations and offer efficient and flexible space formats with units generally larger and rents per
square metre lower than those in shopping centres. Better-located parks are adjacent to major trunk roads, making them easily accessible by
car, and offer free parking. We have chosen to operate shopping parks, hybrid parks and key homeware parks where occupational demand is
strongest.
Retailer demand for space remains high, particularly in respect of the DIY, homeware and furnishing sectors. Retailers with expansion plans
include Fabb Sofas, Oak Furniture Land, Sofology, ScS, Tapi Carpets and Wren Kitchens. Discounters including B&M, Iceland Food
Warehouse, Aldi and Lidl are rapidly increasing their presence at retail parks.
Fashion retailers are also keen to establish new stores at retail parks to benefit from a cost-effective way of filling gaps in their store footprint
between city centres and large regional shopping centres. This trend is leading to improved tenant fit-outs, greater interaction with retailers’
multichannel strategies to support click & collect sales and also helps to drive a wider food and beverage offer. Similar to other formats, some
clothing brands which suffered profit declines in 2017 have moderated their expansion plans.
Our portfolio
Hammerson is one of the largest direct owners of retail parks in the UK and our portfolio comprises 15 convenient retail parks providing
360,000m2 and accommodating nearly 300 tenants. Our parks are intentionally located on the edge of town centres with ample free car parking
and are let to a wide spectrum of retailers including homewares, fashion and bulky goods.
Net rental income
Like-for-like net rental income decreased by 2.5% in 2017, the reduction principally reflecting surrender premiums received in the prior year
totalling £3.2 million. The surrenders resulted from proactive tenant rotation which has improved the brand mix at a number of parks including
Ravenhead Retail Park in St. Helens and Imperial Retail Park in Bristol. No such premiums have been received in 2017. If the 2016 premiums
were excluded from the calculation, the underlying like-for-like net rental income would have grown by 2.4%.
Occupancy and leasing
Strong retailer demand has continued to support high occupancy which stood at 99.4% at the end of 2017. ERVs were largely unchanged over
the year, with a marginal fall of 0.1%. Three units are in administration in the portfolio, and one of those continues to trade.
Annual rental income of £6.3 million has been secured from 34 contracted leases across the portfolio which represented 33,500m2 of space.
For principal leases, rents were contracted at 11% above December 2016 ERV and 9% above their previous passing rent. Key leasing deals in
2017 include Fabb Sofas at Abbotsinch Retail Park in Paisley, Oak Furniture Land at Cyfarthfa Retail Park in Merthyr Tydfil and Mothercare at
Parc Tawe.
In June we completed the final letting of the £10 million, 8,000m2 extension of Fife Central Retail Park, Kirkcaldy to Oak Furniture Land. The
project involved the creation of four new units by reconfiguring the former Homebase unit. All of the new units were pre-let at rental levels more
than double those of the previous tenant, and 100 new jobs have been created as a result of the extension.
At Rugby, we completed the second phase of the development of the successful Elliott’s Field Shopping Park. Further details are provided in
the Developments review on page 14.
Product Experience initiatives
Most of our parks now have dedicated customer-facing websites, the content of which has been enhanced to include, for example, retailer
offers. For the next phase of innovation we are reviewing the potential to further heighten the customer experience through the provision of
uniformed customer service representatives and rest room facilities, along with improved seating areas.
Footfall
In 2017, there were an estimated 70 million customer visits to our retail parks, representing a marginal 0.4% reduction on the prior year, but an
outperformance of the Springboard Retail Parks index of -0.8%. Our shopping parks performed particularly strongly with footfall up 1.4%.
We optimise the tenant mix and prioritise investment in our retail parks with the aid of in-depth customer surveys, which also confirm the
relative success of these strategies. Our investment in the portfolio is providing a more rounded shopping experience for customers as
demonstrated by the change in the Net Promoter Score from 15% in 2015 to 28% this year. Our consumer research shows that when overall
experience is rated as 4+, a customer will spend 81% more and dwell at the park for 11% longer than customers awarding a lower experience
score. The current average rating for our portfolio is 4.3.
Ireland
We have made good progress in 2017 with implementing our acquisition strategy, including the completion of
the final loan conversion at Pavilions, Swords.
Operational summary
Like-for-like Leasing Leasing vs
NRI growth1 Occupancy activity ERV
Key metrics % % £m %
31 December 2017 7.4 99.7 1.9 +10
31 December 2016 n/a 99.5 0.82 n/a
1. Proforma figure assuming properties owned throughout 2016 and 2017.
2. Since acquisition of properties.
3. Footfall and sales data not available for Ireland portfolio.
Sector overview
The Irish economy continues to prosper, with GDP growth in Q3 2017 of 4.2% on the previous quarter and 10.5% compared with Q3 2016.
Growing employment, driven by inward foreign investment, remains a key driver of economic productivity. Consumer sentiment continued its
upward trajectory in 2017 reflecting the dissolution of fears that emerged following the UK's EU referendum in 2016. Confidence levels, as
measured by ESRI, were 7.3% higher in December 2017 than at the beginning of the year.
Dublin’s urban population of 1.3 million and significant tourism industry (9.6 million visitors in 2016) underpin demand for retail space in the city
which accounts for over 70% of Ireland’s total retail expenditure and 50% of national GDP. Grafton Street and Henry Street in the centre of
Dublin are the focus for Ireland’s prime retail offer and there are also a number of high-quality shopping centres along the M50 motorway which
borders the city. The wider economy and the property market continue to grow strongly, although prime retail rents remain comfortably below
their peak in 2006/7. A number of new retailers have recently entered the Irish market, including COS, Victoria’s Secret, & Other Stories, Hotel
Chocolat and Smiggle while numerous other international retailers and catering operators have space requirements in Dublin.
Our portfolio
The portfolio was secured through the 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. The assets have
been acquired over the following timeframe:
– July 2016
– Dundrum Town Centre ('Dundrum’), Ireland’s pre-eminent shopping and leisure destination, acquired in a 50:50 joint venture with Allianz;
– The Dublin Central development site, which is wholly owned by Hammerson; and
– Land adjoining the Pavilions shopping centre in Swords, north Dublin, also wholly owned by Hammerson.
– December 2016
– A 50% co-ownership with Irish Life of the Ilac Centre, located on Henry Street, one of Dublin’s busiest retail thoroughfares.
– September 2017
– A 50% co-ownership with IPUT and Irish Life of Pavilions shopping centre in Swords, north Dublin.
The portfolio provides 220,000m2 of high-quality shopping centre space, with over 300 tenants and annual footfall of nearly 50 million. It also
includes 27 acres of development land. Our share of the total passing rent for the portfolio is €46.9 million (£41.6 million).
In addition to the centre-based staff who transferred to the Group when we secured ownership of Dundrum, we now have a new office at the
shopping centre itself which accommodates a team of 12, including three colleagues who joined from the previous Dundrum asset manager,
Chartered Land. We are integrating the Dundrum assets into our existing UK operating structure to maximise efficiencies and implement our
asset management strategy.
As part of the integration process we have upgraded the IT infrastructure at Dundrum to improve the footfall and sales data collection
processes which has paved the way for the introduction in 2018 of the Group’s Plus app. This will align the centre with the Hammerson
standard and provide new insight into the behaviour of our Dublin shoppers.
Net rental income
In 2017, the Ireland portfolio generated net rental income of £34.8 million. Income from the portfolio in the prior year comprised a combination
of finance income, derived from the property assets secured against the debt, and net rental income for the period for which the relevant assets
were owned directly. On a pro-forma basis, the like-for-like net rental income growth from 2016 to 2017 would be 7.4%. This strong
performance was primarily driven by Dundrum, where additional income arose from the settlement of rent reviews and new lettings as well as
active asset management and increased car park and commercialisation revenue.
Occupancy and leasing
Tenant demand for space continues to be strong, and the portfolio is virtually fully occupied at 99.7%.
The high occupancy rate can act to limit fulfilment of demand; nevertheless we have a clear leasing strategy to deliver rental growth and
enhance the tenant mix and overall experience at each of the centres. During 2017 we signed leases representing £1.9 million of annual rental
income and 7,100m2 of space, at 4% above previous passing rents and 10% above ERV at 31 December 2016.
At Dundrum, key leasing transactions included first Irish stores for Smiggle and Hotel Chocolat and Moss Bros’s second store in Ireland. Since
the year end, a lease has been signed with Fallon & Byrne as part of the repositioning of the catering and leisure offer at the Pembroke district
at Dundrum.
At Pavilions, despite taking ownership only in September, we signed Superdrug and Butlers Chocolate Cafe. Since the year end, River Island
has committed to a store upsize and we have also contracted with Smiggle.
The Moor Mall South redevelopment at the Ilac Centre was completed, revitalising that part of the scheme. Five new brands have been
introduced to the centre including Regatta, The Works and BBs Coffee. The project was fully let on opening and generated a rental uplift of
£146,000 per annum for Hammerson, more than doubling the previous passing rent. Since the year end, Smiggle has also signed at the Ilac
Centre for its first store in central Dublin.
Product Experience initiatives
Applying our Group-wide commercialisation and Product Experience Framework strategies to Ireland will generate additional income, enliven
the customer experience and drive footfall. In 2017, initiatives at Dundrum included Volvo’s Irish launch of its new XC60, pop-up stores for
Pippa O’Connor’s POCO Jeans and Nespresso, the ‘Garden of Pure Imagination’ designed by celebrity gardener Diarmuid Gavin and the
Grotto and German Market during the Christmas period.
The food and beverage market in Ireland lags that in the UK and presents opportunities to increase the provision and introduce fresh catering
brands to Dublin.
France
In addition to our active tenant engineering strategy, the return of indexation will help drive future income
growth at our French centres
Operational summary
Like-for-like Leasing Leasing vs Retail sales Footfall
NRI growth Occupancy activity ERV growth growth
Key metrics % % £m % % %
31 December 2017 2.6 97.9 9.8 +5 0.1 1.6
31 December 2016 2.2 96.5 9.0 +5 3.1 2.8
Sector overview
Shopping centres in France have similar characteristics to those in the UK and Ireland. Online retailing is not as advanced in France when
compared to the UK. Nonetheless it is growing rapidly and retailers are beginning to focus on their multichannel strategies in a similar way to
retailers operating in the UK.
French leases differ from those in the UK and Ireland. They are subject to annual indexation changes instead of five-yearly rent reviews and
have three or six year break clauses, although in practice these are seldom exercised.
The retail environment has strengthened during 2017, particularly in the second half of the year, as the outlook for GDP and employment has
improved.
Our portfolio
We own and manage eight high-quality shopping centres in France which accommodate over 900 tenants and attract over 80 million visitors
each year. At 31 December 2017, the three largest centres, Les Terrasses du Port in Marseille, Italie Deux and Les 3 Fontaines in Paris,
account for over 85% of the value of the portfolio.
Stronger French economic confidence, political stability and indexation forecasts will all help to enhance future income growth.
Net rental income
Net rental income totalled £95.3 million in 2017 and on a like-for-like basis increased by 2.6%. Les 3 Fontaines and Les Terrasses du Port were
the two strongest performing centres with higher gross rental income associated with recent leasing activity.
Following four years of being flat or negative, indexation has improved in 2017. In the first quarter of 2018, 70% of leases, by rental income, will
benefit from an indexation increase of 1.6%.
Occupancy and leasing
At 97.9%, occupancy levels were 140 basis points higher than in December 2016. Occupancy improved at six of our eight centres, with
occupancy above 99% at Les Terrasses du Port, Italie Deux and Nicetoile.
Our retenanting strategy continued during 2017 as we signed 155 leases, representing £9.8 million of annual rental income and 49,400m2 of
space. The strategy is designed to improve tenant mix, increase the number of flagship stores, reduce vacancy and deliver rental growth.
For principal leases, the new rents were 5% above December 2016 ERVs and 8% above the previous passing rents. Key leasing transactions
included:
– strong letting activity at Les Terrasses du Port with 23 new leases signed representing £1.5 million of rent. This included first lettings in the
French portfolio for Coach, Nespresso, Dim and Benetton and a combined Micromania/Zing store, the latter being their second store in
France
– two new Pandora stores at Italie Deux and Les 3 Fontaines
– an upsized 2,355m2 flagship H&M unit at O’Parinor
– the renewal of the UGC cinema lease and the opening of Furet du Nord at SQY Ouest to anchor the refurbishment of the centre
– Kusmi Tea at Nicetoile
Administrations have reduced and at 31 December 2017 a total of 27 units were in administration. All of these units continue to trade and
represent only 0.5% of the Group’s passing rent.
Sales, footfall and occupancy cost
Retail sales, calculated on a same-centre basis, have increased by 0.1%, which is 110 basis points higher than the CNCC Index which fell by
1.0%. Footfall in our centres increased by 1.6% in 2017, compared with a 1.8% decline in the CNCC Index.
Les Terrasses du Port has again traded strongly, whilst the Paris centres continue to experience a more subdued performance as security,
political and macro-economic concerns have hindered growth, although their performance improved in the second half of the year.
The occupational cost ratio decreased from 15.2% at the beginning of the year to 13.8% at 31 December 2017. The reduction is due to the
increase in sales and also the disposals of Saint Sébastien, Nancy and Place des Halles, Strasbourg (see page 20).
Product experience initiatives
As part of our Product Experience Framework we continue to develop a Group-wide approach to enhancing our digital and customer
innovation offer, whilst ensuring initiatives are optimised for individual centres. In 2017, we have:
– introduced a digital children’s play area in Les Terrasses du Port
– deployed the ‘Short Edition’ short story machines in a further five centres
– worked with the University of Paris Dauphine on a handsfree shopping initiative
– worked with L’Ecole Bleue, an architecture and design school, to model initiatives for the ‘shopping centre of the future’
We are also due to launch our 'Style Seeker' visual search app at Italie Deux in the spring. With further expansion across our portfolio planned
during 2018.
Developments
In 2017 we have progressed our major schemes, whilst completing a number of smaller-scale retail park
projects. 2018 will be an exciting year with Les 3 Fontaines, Cergy extension now on-site and Brent Cross due
to start in H2.
On-site developments
Value Estimated cost to Estimated annual
Lettable area Expected 31 December 20172 complete3 income4 Let5
Scheme1 m2 completion £m £m £m %
Parc Tawe, Swansea 21,400 Q1 2018 n/a 3 2 91
Orchard Centre, Didcot 8,700 Q1 2018 29 12 3 62
Les 3 Fontaines extension, Cergy, Paris 33,000 Q2 2021 n/a 201 16 22
Total 63,100 216 21
1. Group ownership 100% for on-site schemes.
2. 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 22 February 2018.
Our pipeline
Our development opportunities include retail park schemes, major developments in London and Paris and a number of other potential projects
across the portfolio. This pipeline provides the opportunity to significantly grow the business, enhance our assets and create new destinations
to meet the future demands of retailers and customers.
Expenditure is carefully controlled and we will commit to projects only when the level of risk is acceptable. This will vary for each project and is
dependent on a variety of factors including general market conditions, pre-letting, construction cost and programme certainty, funding and
financial viability.
At £89 million, calculated on a proportionally consolidated basis, committed capital expenditure was relatively low at the end of 2017, and
represented the cost to complete the on-site retail park schemes, land acquisitions relating to our major developments and smaller capital
projects within our investment portfolio. Together with our ongoing capital recycling strategy, this position allows the Group to retain flexibility
over the commitment to development and provides liquidity to fund future schemes.
Completed developments
In November the 7,900m2 second phase of development at Elliott’s Field, Rugby, was completed. Built on land adjacent to the 17,000m2
shopping park which we opened in 2015, the new phase fills a gap in the catchment for homewares and is now fully let to retailers including
DFS, Dwell, Furniture Village, Oak Furniture Land and Sofology. Contributing to the Group’s Net Positive commitment referred to on page 4,
this new development has demonstrated its best-in-class sustainability credentials.
On-site developments
The £16 million redevelopment of Parc Tawe in Swansea is due to complete in February 2018. Having started on-site in December 2016, the
21,400m2 project has created a modern, mixed retail and leisure park with new public realm and improved pedestrian links to the city centre.
The scheme is 91% pre-let with lettings secured including Iceland Food Warehouse, Office Outlet, Tenpin bowling, Mothercare, Toys R Us and
Lidl. The redevelopment also features Hammerson’s second carbon neutral Costa Eco Pod and the first Denny’s American Diner in the UK.
Construction of the 8,700m2, £44 million extension of the Orchard Centre, Didcot, is on target to complete in March 2018. Didcot’s affluent and
rapidly growing catchment will be served by retailers including Boots, Costa, H&M, River Island, Starbucks and TK Maxx. The scheme is
anchored by Marks & Spencer, and is 62% pre-let.
Good progress has been made on the development strategy at Les 3 Fontaines, Cergy, Paris. The existing centre has been refurbished and,
following the acquisition of the adjoining Cergy 3 centre, enabling works commenced in January 2018, and the main works are due to start on
site in March. When complete, the project will extend the retail area to over 100,000m² and create one of the leading shopping centres in the
Paris region. As part of the wider development of the centre of Cergy, the project will add 33,000m² to the existing shopping centre and has a
total development cost of £225 million. The scheme is expected to open in Q2 2021 and is currently 22% pre-let to tenants including Pret A
Manger and Vapiano.
Future developments
In each of the Group’s portfolio sectors, there are several opportunities, including major developments, with the potential to significantly grow
the business and create modern, iconic retail destinations. We have continued to progress a number of these schemes over the course of
2017, although we must achieve further milestones before we are in a position to start on-site.
Brent Cross extension
Substantive progress has been made on the proposed extension and refurbishment of Brent Cross shopping centre in north-west London, in
conjunction with our joint venture partner, Aberdeen Standard Investments. Doubling the size of the existing centre, the project will deliver an
extended 175,000m2 shopping destination for north London with a modern and vibrant retail, catering and leisure offer, a key component of the
regeneration of the Brent Cross Cricklewood district.
The detailed reserved matters planning application was approved in October and in December, the compulsory purchase order was confirmed.
Agreements have been reached with John Lewis and Marks & Spencer to anchor the expanded centre, and further pre-lettings are under
negotiation. The extension will also include up to 150 new retail stores, 50 new restaurants, state of the art cinema and leisure offers, hotel
accommodation and improved public spaces. Following a competitive tender process, Laing O’Rourke has been selected as the preferred
contractor for the retail extension and, under a pre-construction services agreement, will work with the partners to finalise the design and
procurement for the project. Tender returns from potential main contractors for the highway works have been received and it is anticipated that
an appointment will be made in April 2018. Assuming Development Agreement staging conditions are satisfied, construction could commence
in 2018 with completion in 2022. The London Borough of Barnet and Network Rail are bringing forward the new Brent Cross railway station on
the Thameslink line which is expected to open at the same time and provide a new rail connection for the regeneration scheme. The Group’s
estimated development cost to complete the project is in the region of £475-550 million.
Croydon town centre
In November, the Croydon Partnership, a 50:50 joint venture with Westfield, secured a resolution to grant outline planning consent for the
revised plans for the redevelopment of the Whitgift Centre. The Greater London Authority (GLA) has also approved the scheme which now
includes a new Marks & Spencer anchor store incorporated within three levels of retail with over 300 shops, restaurants and cafes, a multiplex
cinema and up to 1,000 homes. The scheme is part of the wider large-scale regeneration already underway in the town and will establish
Croydon as the major retail and leisure destination for south London. The partnership already holds 75% of the Whitgift Centre and the whole
of Centrale, the other covered shopping centre in Croydon, which is anchored by Debenhams and House of Fraser. It is intended that the
remaining land interests required to implement the scheme will be secured later in 2018, utilising the local council’s compulsory purchase
powers as necessary. The earliest start on-site could be during 2019, subject to finalising detailed design and completing agreements with
anchor tenants. Hammerson’s total future costs for the development will be around £650-700 million.
Italie Deux extension
Having obtained planning consent and agreement with our co-owners, we anticipate starting work on the Italik project, a 6,400m2 extension to
Italie Deux in the spring. The £38 million project will generate additional annual rental income of £2 million, is 56% pre-let to tenants including
Pret A Manger and M&S Simply Food and is expected to open at the end of 2019.
The Goodsyard
The Goodsyard in Bishopsgate, on the edge of the City of London, is a 4.2ha site owned 50:50 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 and then deferred in April
2016 to allow for further consultation with the GLA’s planning officers and potential redesign of some elements of the proposed scheme. This
work is progressing and we are now targeting a submission to the GLA of the amendments necessary by the end of 2018 to allow the Mayor to
determine the scheme.
Other schemes
The Group has a number of pipeline schemes which will enhance the overall quality of our portfolio. These include potential projects in the UK
adjacent to existing assets in Aberdeen, Bristol, Glasgow and Leeds. Our Irish portfolio provides exciting opportunities at the Dundrum estate,
Dublin Central and Pavilions in Swords.
The nature and design of these schemes are fluid and they are at different stages of development. Progress to delivery is dependent on a
variety of factors including: planning permission; retailer demand; anchor tenant negotiations; scheme design; funding; and financial viability.
Further details of these schemes are included in the Development Pipeline table on page 72.
Premium outlets
During 2017 both of our premium outlets portfolios have achieved strong sales growth and completed a
number of significant improvement projects to enhance the visitor experience.
Operational summary
Value Retail1 VIA Outlets1
Year ended Year ended Year ended Year ended
31 December 2017 31 December 31 December 2017 31 December
2016 2016
Brand sales (€m)2 2,701 2,504 948 436
Brand sales growth (%)3 8 8 13 7
Footfall (millions)2 35.4 34.6 29.4 12.7
Average spend per visit (€)2 76 72 32 34
Average sales densities growth (%)4 5 6 9 18
Like-for-like net rental income growth (%)5 16 8 14 4
Occupancy (%) 95 96 90 92
1. Figures reflect overall portfolio performance, not Hammerson’s ownership share and 2016 figures have been restated at 31 December 2017 exchange rates.
2. Figures include acquired assets from the date of acquisition.
3. Sales growth at VIA Outlets in 2017 includes sales at Mallorca Fashion Outlet for the second half of the year and excludes all other assets acquired in 2016 and 2017.
4. Average sales density growth excludes assets acquired in 2017 and 2016.
5. Like-for-like NRI growth includes the impact of extensions due to multiple tenant relocations from the existing schemes into the new phases. We estimate that the extensions
have contributed approximately 1-2% to like-for-like NRI growth.
Sector 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 in an upscale shopping environment, 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 retailer demand. The market for discounted
luxury and fashion items is attractive for international tourists, in particular from China, Russia, South East Asia and the USA. Spending
patterns of wealthy tourists can be influenced by security concerns and currency movements. The latter factor particularly has encouraged
visitors to the UK in 2016 and 2017.
There are a limited number of specialist outlet operators in Europe, and planning consents for new schemes are often difficult to achieve.
Growth of new space therefore tends to be delivered through extensions to existing schemes and brands are attracted to well-managed
centres where they can be confident of strong footfall and sales.
Our portfolio
Our exposure to the sector, which has increased over recent years to be 20% of the Group's property portfolio, is gained through our
investments in Value Retail (VR) and VIA Outlets (VIA). The sector has many similarities with our directly managed properties and we utilise
the knowledge gained from the sector to enhance the brand experience across our other portfolios.
We hold interests in the VR holding companies as well as direct investments in the Villages. Details of our investment are shown in note 10 of
the financial statements.
Since the year end, we increased our investment in Value Retail through the acquisition of a number of direct investor interests in Villages
including Bicester Village and La Vallée Village, Paris for a total cost of £76 million. Following this acquisition we have an economic interest in
Bicester Village, the largest asset within VR, of 50%.
VIA is an outlets joint venture formed in 2014 in partnership with APG, Value Retail and Meyer Bergman in which we have a 47% stake.
Both investments are externally managed, although we have a strong relationship with both management teams. Timon Drakesmith is a Board
member of Value Retail and is Chairman of the VIA Outlets Advisory Committee.
Value Retail (VR)
Portfolio overview
Value Retail operates nine high-end Villages in the UK and Western Europe which provide over 189,000m2 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, La Vallée Village, Paris and La Roca Village, Barcelona, are ranked among the best outlet
centres in Europe.
In 2017, the Villages had an average sales density of €15,700/m2 and generated total sales of €2.7 billion, placing them in the top echelons of
the premium outlets sector. The Villages actively target the growing shopping-tourism market as well as attracting footfall from affluent domestic
catchments. This strategy has been very successful and VR has delivered annual compound brand sales growth in excess of 13% over the
last ten years.
Income
Brand sales growth at 8% has again been strong in 2017. Bicester Village achieved the highest growth rate as it benefited from increased
overseas visitors, attracted by the weak sterling exchange rate, as well as new domestic marketing initiatives. Performance was further
enhanced with the opening of a 5,800m2 extension in October (see Developments and extensions section below).
Average sales densities increased by 5%, the strongest performances being at Bicester Village and the two Spanish Villages: La Roca Village,
Barcelona and Las Rozas Village, Madrid. Kildare Village, Dublin suffered the weakest sales density growth as the extension which opened in
late 2016 has marginally diluted densities in 2017.
The strong sales performance resulted in like-for-like net rental income growth of 16%, with the strongest contributions from Bicester Village
and Las Rozas Village.
Occupancy and leasing
VR’s success is driven by a forensic leasing and asset management strategy which acts to enhance and refresh the Villages and fulfil the
customer experience. This strategy drives sales and recurring footfall. During 2017, 254 leases were signed, with a total of 125 new brands
introduced to the Villages. Key new stores included five Prada stores including the first store in Ireland at Kildare Village; Polo Ralph Lauren at
Inglostadt Village; Chloé at La Vallée Village and the only Clarins outlet store in Europe at Kildare Village.
Occupancy across the Villages remained high at 95%. Occupancy at premium outlets tends to be slightly lower than the Group’s other sectors
to support proactive retenanting and remerchandising.
VR management continue to develop successful marketing campaigns across the portfolio, including partnerships with brands such as the Paul
Smith Stripe pop-ups and the Disney X Coach promotion. At Fidenza in September, VR co-organised the inaugural Green Carpet Fashion
Awards during Milan Fashion week which included the identification and mentoring of new designers. Also in 2017, the ‘Privilege’ guest reward
programme was further expanded across the Villages.
Developments and extensions
The 3,300m2 extension at Fidenza Village, Milan, which opened in October 2016, has performed strongly and helped to generate double-digit
sales growth across the whole Village during 2017. The extension introduced a number of new luxury shops including Armani, Michael Kors
and Prada. A new Jimmy Choo store also opened in the existing Village in May, its first outlet store in Italy.
In October 2017, the 5,800m2 extension opened at Bicester Village. The extension is on land adjacent to the existing Village, and the scheme
has increased the existing Village by 26% and added 500 additional car parking spaces. The project also involved a new enlarged VIP suite, an
enhanced food and beverage offer, improved road access and new landscaping across the entire Village.
33 new units have been created, of which 30 were let and trading on the opening day. New brands which opened at the Village included
Christopher Kane, Cowshed and Under Armour. The extension enabled 11 existing brands to relocate within the scheme with a number
upsizing including a new Polo Ralph Lauren flagship store.
The total development cost was £100 million and the project has achieved a yield on cost in excess of 15%.
VIA Outlets (VIA)
Portfolio overview
At 31 December 2017, VIA operated eleven outlets in nine European countries, providing over 260,000m2 of floor space and 1,100 stores. The
centres include Batavia Stad Amsterdam Fashion Outlet, Fashion Arena Prague Outlet and Zweibrücken Fashion Outlet on the
Germany/France border.
VIA’s strategy is to create a significant pan-European 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. Utilising VR’s expertise and
brand relationship, the VIA management team have implemented initiatives to enhance each centre’s appearance, tenant mix, the provision of
flagship stores and international brands, the leisure and catering offers, tourism marketing and overall centre management. This strategy has
delivered strong operational and financial performance since formation and the transition from an acquisition vehicle to a leading premium
outlet operator has been successful.
During 2017, VIA acquired three outlets: Zweibrücken in Germany; Vila do Conde in Porto and Norwegian Outlet in Oslo (see page 19 for
details). These new centres enabled VIA to achieve its original €1 billion portfolio milestone. At 31 December 2017 the total portfolio was valued
at €1.4 billion, of which the Group's 47% share was £600 million.
Income
Like-for-like brand sales growth was 13% in 2017. Double-digit growth was achieved at Batavia Stad Amsterdam Fashion Outlet, Fashion
Arena Prague Outlet, Freeport Lisbon Fashion Outlet and Mallorca Fashion Outlet.
The enhancements made to the marketing strategies to increase tourist marketing have been very successful with tax free sales increasing by
over 34% in 2017 and a wider range of tourists now visiting the centres.
Like-for-like net rental income growth was 14%, with strong contributions from Landquart Fashion Outlet and Fashion Arena Prague Outlet.
Occupancy and leasing
Occupancy levels remained high at 90% during 2017.
The strong sales growth explained above reflects the benefits of VIA’s management initiatives introduced across the portfolio and 309 leases
were signed during 2017, including 115 new brands.
Key leasing transactions included Lacoste at Landquart Fashion Outlet, Coach at Zweibrücken Fashion Outlet, Hackett at Freeport Lisbon
Fashion Outlet and Polo Ralph Lauren opened a 1,100m² flagship store at Mallorca Fashion Outlet in August.
Developments and extensions
As well as enhancing the existing centres, VIA has been actively looking to extend a number of the centres to improve the tenant mix and
increase footfall. In May, a 5,500m2 extension opened at Batavia Stad Amsterdam Fashion Outlet with 45 new units and increased the area of
the centre by more than 25%. Key brands included Farinella, G-Star, Samsonite, Skechers and Tommy Hilfiger and footfall at the centre has
increased by 15% since opening.
In November, the major reconfiguration and enhancement of Freeport Lisbon Fashion Outlet completed. The project included a full
refurbishment of the centre with enhanced finishes to improve the overall ascetics of the scheme. The works also included a new information
centre, VIP lounge, children’s play area, redesigned entrances and improved car park access. The total cost of all the works was €26 million
and the yield on cost was 11%. Sales and footfall have increased by 21% and 7% respectively since the opening. New brands to the centre
include Coach, Furla, Hackett and Tumi which trade alongside the existing premium brands such as Armani and Hugo Boss.
At Mallorca Fashion Outlet a Nike flagship store and two other units opened in 2017 from space created from the reconfigured cinema. The
former Nike store is now being reconfigured to create five new units and the works are due to complete in summer 2018.
PROPERTY PORTFOLIO REVIEW
Stable investment markets
Investment markets
Investment markets for the Group’s property sectors have remained broadly stable during the year, with yields largely unchanged.
For UK shopping centres, transaction volumes totalled £1.6 billion in 2017, approximately 40% lower than 2016. The key transactions were a
7.5% stake in Bluewater, Kent and a 50% stake in intu Chapelfield, Norwich. Whilst the year was less active, there was still demand for high-
quality centres from sovereign wealth funds, REITs and institutional investors and yields were unchanged for this type of asset during 2017.
Demand for more secondary centres has been subdued and these properties have suffered outward yield movements of 25-75 basis points.
Investment transactions for the UK retail parks market totalled £2.7 billion in 2017, approximately 10% higher than in 2016. Investors have
remained selective, favouring lot sizes of less than £50 million where yields have remained stable, with some inward yield shift for the best
parks. UK funds have been the most active buyers in the market, although few large schemes have transacted during the year and a number
of these have suffered outward yield shift of 25-50 basis points.
In France, as with 2016, there were relatively few shopping centre transactions with total volumes of €1.0 billion (2016: €0.8 billion). This was
largely due to a lack of sellers in the market and demand for high-quality centres remained strong with yields at record low levels of 3.5%-4.5%.
In Ireland, investment markets remained active, and although volumes were approximately 50% lower than in 2016, they remained higher than
recent average levels. Foreign investors accounted for approximately 35% of acquisitions and yields for high-quality Dublin shopping centres
remained unchanged in 2017 at approximately 4.0%-5.0%.
The European outlets sector has again witnessed strong investor demand, with volumes of €1.1 billion in 2017 (2016: €1.6 billion). As with the
Group’s other property sectors, investment yields have remained stable, with those for the best European outlet centres ranging from 4.5%-
5.5%.
Portfolio valuation
The Group’s total portfolio, including premium outlets, was valued at £10,560 million at 31 December 2017, an increase of £589 million or 5.9%
during 2017. Movements in the portfolio valuation are shown in the table below.
Movement in portfolio value
Total Premium Total
Investment Development (excl. Outlets) outlets Group
Proportionally consolidated including premium outlets £m £m £m £m £m
Value at 1 January 2017 7,885 397 8,282 1,689 9,971
Revaluation (losses)/gains on properties (3) 24 21 225 246
Additions
Acquisitions 149 110 259 238 497
Capital expenditure 109 41 150 41 191
258 151 409 279 688
Disposals (507) (1) (508) – (508)
Capitalised interest – 1 1 – 1
Exchange 117 4 121 41 162
Value at 31 December 2017 7,750 576 8,326 2,234 10,560
Acquisitions
During 2017, acquisition expenditure totalled £497 million and the principal transactions were:
– the acquisition of a 50% co-ownership in Pavilions shopping centre, Swords in north Dublin for £123 million in September. This was the
final conversion to property ownership of the Irish loan portfolio acquired in October 2015 and required an additional cash payment of £56
million in 2017 (see note 9D to the financial statements on page 54 for further details). The 45,400m2 centre generates passing rent of £7
million (50% share) and is anchored by Dunnes Stores with a further 70 stores and restaurants, an 11-screen cinema and 2,000 car
parking spaces.
– in October we acquired Cergy 3 shopping centre which is adjacent to our existing Les 3 Fontaines centre in Cergy Pontoise in north west
Paris for a cost of €81 million (£72 million). The 11,000m2 centre is anchored by Fnac and has 46 units. A major extension project has
recently started on the existing scheme (see page 14) and we are able to manage the leasing and customer services across both centres
to enhance the overall customer experience.
– three premium outlet centres acquired by VIA Outlets: Zweibrücken Fashion Outlet on the Germany/France border in February; Vila do
Conde, Porto in March and Norwegian Outlet, Oslo in September. The Group’s share of the acquisition costs was £238 million, which
required a cash payment of £130 million with the remainder being funded from secured bank finance. The former two centres were part of
a portfolio of four properties acquired from the IRUS fund, where the acquisition of the other two centres completed in December 2016.
Norwegian Outlet in Oslo is a fully-let 13,300m2 centre with 56 units occupied by international brands including Diesel, Gant, Guess, Hugo
Boss and Superdry. Since acquisition, work has been undertaken to improve the marketing strategy, tenant mix and the centre’s
aesthetics to enhance the customer experience.
Capital expenditure
In 2017, capital expenditure totalled £191 million. The table below shows the expenditure on a sector basis and also analyses the spend
between the creation of additional area and creation of value through the enhancement of existing space.
Capital expenditure analysis
UK shopping Developments
centres UK retail parks France Ireland and UK other Premium outlets Group
Proportionally consolidated, including premium outlets £m £m £m £m £m £m £m
Capital expenditure - creating area 7 29 10 1 20 26 93
Capital expenditure - no additional area 23 19 22 1 22 10 97
Tenant incentives (2) (2) – – – 5 1
28 46 32 2 42 41 191
Capital expenditure on UK shopping centres totalled £28 million, with the most significant improvement projects including works to reconfigure
the former House of Fraser store at Highcross (see page 7 for further details) and a new 2,750m2 Next store at The Oracle.
£46 million was incurred on UK retail parks, with the main projects creating area being the second phase of development at Elliott's Field,
Rugby and an extension project at Kirkcaldy (see page 9). Expenditure classified as not creating additional area principally related to the
redevelopment of Parc Tawe, Swansea and further details are provided on page 14.
In France, the most significant projects included the creation of the theatre at Italie Deux, Paris and reconfiguration works at Place des Halles,
Strasbourg which were completed prior to the disposal of the centre in December.
Capital expenditure on Developments and the UK other portfolios totalled £42 million of which £41 million was on the Group's development
properties. In the table above, expenditure on the Orchard Centre, Didcot project is classified as creating area and costs incurred working up
the future major development projects at Brent Cross and Croydon are classified as creating no additional area until works start on-site.
Further details of these projects are included in the Business Review on pages 14 and 15.
For Premium outlets, capital expenditure totalled £41 million, of which £20 million was incurred by Value Retail and £21 million by VIA Outlets.
The schemes classified as creating area were the extensions at Bicester Village, Freeport Lisbon Fashion Outlet and Batavia Stad Amsterdam.
Other capital expenditure includes tenant incentives of £5 million with the remaining expenditure incurred across both outlet portfolios to
enhance the existing and recently acquired properties.
Disposals
Disposals totalled £508 million during 2017, or £416 million after deducting the 35.5% non-controlling interest in Place des Halles, Strasbourg.
We therefore achieved our disposal target of £400 million announced at the beginning of 2017 and the three principal disposals during the year
were:
– in July, we sold Westwood and Westwood Gateway Retail Parks in Thanet for total proceeds of £80 million reflecting a net initial yield of
6.5%. The Group acquired the Westwood Retail Park in 2002 and repositioned the asset through extensions and tenant engineering. In
2005, the adjacent Westwood Gateway was constructed and since the original acquisition, we created a total of 15,000m2 of lettable
space and increased rental income by over 200%.
– in November, we announced the disposal of Place des Halles, Strasbourg for total proceeds of €291 million (£258 million), of which the
Group’s 64.5% share was €188 million (£166 million). The disposal of the 41,600m2 centre completed in late December.
– also in December, we announced the sale of Saint Sébastien, Nancy for €162 million (£143 million) of which £129 million of the disposal
was completed and funds were received by the year-end. The Group acquired the 24,000m2 shopping centre in 2014 for €130 million
(£109 million) and repositioned the centre through a renovation project and an enhanced tenant mix.
These latter two disposals are consistent with our strategy of focusing our French portfolio on our three wholly-owned major shopping centres
being Les 3 Fontaines and Italie Deux, both in Paris, and Les Terrasses du Port in Marseille.
To support the recently announced intu acquisition we will continue with our capital recycling strategy and are targeting disposals of £500
million in 2018. We have already sold two UK retail parks: Battery Retail Park in Birmingham for £57 million and Wrekin Retail Park in Telford
for £35 million. These disposals were in line with December 2017 valuations.
Valuation change
The table below analyses the sources of the valuation change for the Group’s property portfolio, including premium outlets, during 2017.
Components of valuation change
UK shopping Developments
centres UK retail parks France Ireland and UK Other Premium outlets Group
Proportionally consolidated, including premium outlets £m £m £m £m £m £m £m
Yield 7 (32) 2 3 4 24 8
Income 37 (1) 6 36 6 198 282
Development and other (20) 6 (19) (41) 27 3 (44)
24 (27) (11) (2) 37 225 246
During 2017, the Group’s portfolio achieved a revaluation gain of £246 million, of which income growth generated an uplift of £282 million.
In the UK, shopping centres produced a gain of £24 million with increases at Bullring, Westquay and Union Square. UK retail parks incurred a
deficit of £27 million, principally due to outward yield shift at a number of parks.
The underlying value of the French portfolio decreased by £11 million, principally due to the recognition of additional purchasers’ costs at Les
Terrasses du Port.
The Irish assets recorded a valuation deficit of £2 million. This reflected a £46 million adverse movement associated with an increase in Irish
stamp duty, announced in October, from 2% to 6%. This adverse valuation change was largely offset by the impact of income growth from
leasing activity at Dundrum Town Centre and Ilac shopping centre totalling £36 million.
Developments and UK other properties produced a surplus of £37 million, of which £24 million was from the Development portfolio and was
principally associated with the progress made on the 33,000m2 Les 3 Fontaines extension. UK Other properties generated a surplus of £13
million with the most significant change at our Bristol High Street properties following a re-gear of the head lease.
Premium outlets performed strongly, achieving a surplus of £225 million, including significant income growth of £198 million. The Value Retail
Villages produced a surplus of £198 million, predominately from Bicester Village. VIA Outlets generated a revaluation surplus of £27 million with
the largest increases at Batavia Stad Amsterdam Fashion Outlet and Fashion Arena Prague Outlet. The surplus was suppressed due to the
recognition of acquisition related costs on the three acquisitions completed in the year.
Further valuation, returns and yield analysis is included in Tables 9 and 10 in the Additional Disclosures on page 66.
ERV growth
Like-for-like ERV growth
Group
UK shopping investment
centres UK retail parks France Ireland portfolio
Proportionally consolidated, excluding premium outlets % % % % %
2017 0.9 (0.1) 0.9 2.7 0.9
2016 1.6 0.2 (2.2) 9.0 –
The UK Other portfolio is not shown above and produced like-for-like ERV growth of 1.6% (2016: -1.2%).
Like-for-like ERV at the Group’s investment properties grew by 0.9% in 2017 compared with no growth in 2016.
ERV growth at UK shopping centres was 0.9%, lower than the 1.6% growth achieved in 2016. The strongest performing centres were Bullring,
The Oracle and Westquay where ERVs grew by more than 2%. ERVs at Silverburn fell by 3% associated with a number of lease expiries at
the centre.
ERV at UK retail parks reduced by 0.1%. The recognition of growth continues to be hindered by the high occupancy levels across the portfolio
which act to minimise the opportunity to prove new rental levels to the valuers.
ERVs in France increased by 0.9%, with Les Terrasses du Port achieving growth of 3.1% associated with the strong leasing performance and
enhanced tenant mix at the centre in 2017.
Ireland produced the highest level of growth at 2.7%, having generated 9.0% in 2016 following the initial loan conversions in the second half of
2016. All three shopping centres achieved like-for-like ERV increases with Dundrum Town Centre generating growth of 2.9%.
Returns
Property returns
Property returns analysis
UK shopping
centres UK retail parks France Ireland Developments Premium outlets Group
Proportionally consolidated, including premium outlets % % % % % % %
Income return 4.5 5.4 4.4 4.0 2.1 4.8 4.5
Capital return 0.7 (2.5) (1.3) 0.2 4.7 11.5 2.2
Total return 5.2 2.8 3.1 4.2 6.9 16.8 6.8
The UK Other portfolio is not shown above and produced an income return of 5.2%, a capital return of 8.8% and a total return of 14.5%.
The Group’s property portfolio generated a total return of 6.8% in 2017, reflecting a capital return of 2.2% and an income return of 4.5%. The
best performing sector was Premium outlets which generated a total return of 16.8%, principally due to the revaluation surplus of £225 million
across the two outlet portfolios.
We compare the individual portfolio returns against their respective IPD benchmarks and compare the Group's portfolio against a weighted
60:40 UK All Retail Universe:Bespoke Europe (excluding UK) All Retail Universe Index. These indices include returns from all types of retail
property.
As neither annual IPD benchmarks are available until after this Annual Report has been published, it is not yet possible to accurately estimate
the Group’s comparative performance. The UK IPD Quarterly All Retail Universe to December 2017 is available and reported a total return of
6.9%, 200 basis points higher than the Group’s UK portfolio return of 4.9%. The Quarterly IPD index included a total return of 2.9% for
Shopping centres, 8.4% for Standard shops and 7.5% for Retail warehouses. Compared to the quarterly index, the Group's shopping centres
outperformed their comparative IPD index by 230 basis points, whilst UK retail parks underperformed due to a number of the Group's larger
parks suffering outward yield shift as investors favoured smaller lot size parks in 2017.
In 2017, the Reported Group portfolio (see Financial Review on page 23 for explanation) produced a total return of 4.2%, whilst properties held
by our joint ventures and associates generated a total return of 8.8%. The performance of the latter portfolio was boosted by the strong return
from Premium outlets. An analysis of the capital and total returns by business segment is included in Table 9 on page 66.
Shareholder returns
Return % Benchmark %
Total shareholder return over one year (0.4) FTSE EPRA/NAREIT UK index over one year 12.7
Total shareholder return over three years p.a. 0.4 FTSE EPRA/NAREIT UK index over three years p.a. 4.9
Total shareholder return over five years p.a. 6.2 FTSE EPRA/NAREIT UK index over five years p.a. 11.7
For the year ended 31 December 2017, the Group’s return on shareholders’ equity was 8.3%, which compares to the Group’s estimated cost
of equity of 8.2%. The income element of the return on equity tends to be relatively low given the high-quality nature of the Group's 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 2017 was -0.4%, which represents an underperformance of the FTSE EPRA/NAREIT UK index by
13.1 percentage points as the wider index has risen relative to the Company's subdued share price performance during 2017. Over the last five
years, the Group’s average annual total shareholder return has been 6.2%, compared to 11.7% for the FTSE EPRA/NAREIT UK index.
FINANCIAL REVIEW
Delivering consistent financial
performance
The Group has again produced solid earnings and net asset growth. We have also completed significant
refinancing activity to boost liquidity, extend debt maturities and reduce the average cost of debt.
Highlights
IFRS profit for the year* Adjusted EPS1 Dividend per share
£388.4 million 31.1p 25.5p
(+22.4%) (+6.5%) (+6.3%)
Shareholders’ funds* EPRA NAV per share2
Cost ratio3
£6,024 million £7.76 21.6%
(+4.3%) (+5.0%) (2016: 22.6%)
* Attributable to equity shareholders.
1. See note 7B to the financial statements for calculation.
2. See note 7D to the financial statements for calculation.
3. See Table 8 on page 65 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 is 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 within single lines in the income statement and balance sheet.
The Group has property interests in a number of sectors and management reviews the performance of the Group’s property interests in
Shopping centres, Retail parks, UK Other properties and Developments on a proportionally consolidated basis to reflect the Group’s different
ownership shares. Management does not proportionally consolidate the Group’s premium outlet investments in Value Retail and VIA Outlets,
which are externally managed by experienced outlet operators, independently financed and have operating metrics which differ from the
Group’s other sectors. Except for property valuation and returns, we review the performance of our premium outlet investments separately from
the proportionally consolidated portfolio. The key financial metrics for our premium outlets are: income growth; earnings contribution; property
valuations and returns; and capital growth.
Within the Financial Review, the Group Financial Statements and the Additional Disclosures, properties which are wholly owned or where the
Group’s share is in a joint operation, are defined as being held by the ‘Reported Group’, whilst those in joint ventures and associates are
defined as ‘Share of Property interests’.
Further explanation of the accounting treatments of the Group’s different types of ownership is provided in the Glossary on pages 73 and 74.
Alternative Performance Measures (APMs)
The Group uses a number of APMs, being financial measures not specified under IFRS, to monitor the performance of the business. These
include a number of the Group’s key performance indicators on pages 5 and 6. 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 the published results of
listed European real estate companies. The Group’s key EPRA metrics are shown in Table 2 within the Additional Disclosures section on page
62.
For other APMs, the Financial Review and Additional Disclosures sections contain supporting information, including reconciliations to the IFRS
financial statements. Definitions for APMs are also included in the Glossary.
Profit for the year
The Group’s IFRS profit for the year, attributable to equity shareholders, was £388.4 million, £71.1 million higher than for the prior year. This
was principally due to higher revaluation gains on the Group’s premium outlets portfolio which generated a net revaluation gain of £225.2
million in 2017 compared with £138.4 million in 2016.
Management principally reviews 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, gains or losses on the disposal of properties and other one-off exceptional items. This
approach is consistent with other property companies and we follow EPRA guidance to calculate adjusted figures. A reconciliation of IFRS
profit to adjusted profit for the year is shown in the table below.
Reconciliation of IFRS profit for the year to adjusted profit for the year
Year ended Year ended
31 December 31 December
2017 2016
Proportionally consolidated, including premium outlets £m £m
IFRS profit for the year attributable to equity shareholders 388.4 317.3
Adjustments:
Loss on sale of properties* 15.5 24.0
Recycling of net exchange gain on disposal of foreign operations, net of non-controlling interests (8.2) –
Net revaluation (gains)/losses on property portfolio* (21.3) 13.4
Net revaluation gains on Premium outlet properties (225.2) (138.4)
Debt and loan facility cancellation costs* 41.5 0.4
Change in fair value of derivatives* 21.3 2.7
Deferred tax on Premium outlets 35.0 14.3
Other adjustments (0.7) (3.0)
Adjusted profit for the year (note 7B) 246.3 230.7
Adjusted EPS, pence 31.1 29.2
* Proportionally consolidated.
Analysis of the Group’s IFRS income statement split between underlying ‘Adjusted’ profit and ‘Capital and other’ profit is shown in note 2 of the
financial statements on page 41 and further details of the EPRA adjustments are provided in note 7B of the financial statements on page 46.
Adjusted profit
The Group’s adjusted profit for 2017 was £246.3 million, £15.6 million or 6.8%, higher than in 2016. The table below bridges adjusted profit and
adjusted EPS between the two years. The movements in each line are shown at constant exchange rates with the impact of foreign exchange
movements included in ‘Foreign exchange and other’. Explanations of the movements are provided later in this Financial Review.
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 2016 62.6 143.2 24.9 230.7 29.2
Net rental income:
Acquisitions 2.8 19.8 – 22.6 2.9
Disposals (15.3) – – (15.3) (1.9)
Development and other 5.3 1.1 – 6.4 0.8
Like-for-like portfolio 1.7 1.0 – 2.7 0.3
(5.5) 21.9 – 16.4 2.1
Increase in net administration expenses (1.9) (0.1) – (2.0) (0.2)
Decrease/(Increase) in net finance costs 4.1 (15.0) – (10.9) (1.4)
Increase in Premium outlets earnings – 6.7 0.9 7.6 1.0
Tax and non-controlling interests 0.2 0.8 – 1.0 0.1
Foreign exchange and other 0.1 3.2 0.2 3.5 0.3
Adjusted profit – Year ended 31 December 2017 59.6 160.7 26.0 246.3 31.1
Net rental income
Analysis of net rental income
Share of Year ended Year ended
Reported Property 31 December 31 December
Group interests* 2017 2016 Change
Proportionally consolidated, excluding premium outlets £m £m £m £m £m
Like-for-like investment properties 179.4 101.8 281.2 278.5 2.7
Acquisitions 9.0 33.4 42.4 19.8 22.6
Disposals 21.9 0.1 22.0 37.3 (15.3)
Developments and other 12.3 12.5 24.8 18.4 6.4
Foreign exchange – – – (7.5) 7.5
Net rental income 222.6 147.8 370.4 346.5 23.9
* Share of Property interests includes £1.4 million of like-for-like net rental income from Nicetoile which is accounted for as an associate (see note 10 of the financial
statements).
In 2017, net rental income (NRI) increased by £23.9 million to £370.4 million, or by £16.4 million at constant exchange rates. The like-for-like
portfolio produced additional income of £2.7 million, with the most significant contributions from The Oracle, Silverburn, Les Terrasses du Port
and Les 3 Fontaines. UK retail parks suffered a £1.6 million, or 2.5%, like-for-like NRI reduction associated with £3.2 million of surrender
premiums received in 2016. Like-for-like growth on the Reported Group properties was 0.9%, whilst for properties held by the Group’s
proportionally consolidated joint ventures and associates, growth was 1.1%.
In 2017 the Group's growth in like-for-like NRI KPI on page 5 of 1.7% includes the performance of our Irish shopping centres where the
underlying net rental income received in 2016 prior to the conversion to property ownership of the secured loans was treated as finance
income. The like-for-like NRI performance by sector is further explained in the Business Review on pages 7 to 18.
Acquisitions generated £22.6 million of additional income which relates to the conversion of the Irish loan portfolio to real estate in 2016 and
2017. Disposals reduced income in 2017 by £15.3 million, reflecting the sales in 2016 of 50% of Grand Central, Birmingham; Villebon 2, Paris
and a number of UK retail parks (Manor Walks and Westmorland, Cramlington; Thurrock Shopping Park, Essex) and Westwood and
Westwood Gateway Retail Parks in July 2017. Developments increased net rental income by £6.4 million following the completion of the
development of Victoria Gate, Leeds and the leisure extension at Westquay South, Southampton towards the end of 2016. Further analysis of
net rental income is provided in Tables 3 and 6 of the Additional Disclosures on pages 63 and 64 respectively.
Administration expenses
Administration expenses analysis
Year ended Year ended
31 December 31 December
2017 2016
Proportionally consolidated, excluding premium outlets £m £m
Employee and corporate costs 61.0 54.6
Management fees receivable (12.1) (8.5)
Net administration expenses* 48.9 46.1
* In 2017, £0.5 million (2016: £0.4 million) of the Group’s proportionally consolidated administration expenses related to the Group’s Share of Property interests.
At £48.9 million, net administration expenses increased by £2.8 million, or £2.0 million at constant exchange rates. This resulted from higher
staff costs to support our new Irish operations and the delivery of the major developments in London and Paris. Whilst headcount numbers
were broadly unchanged during 2017, average staff costs increased as head office recruitment was offset by the transfer, to a third party car
park operator, of a team of operational staff at Dundrum Town Centre in the first half of 2017. The increase in employee and corporate costs of
£6.4 million was partly offset by £3.6 million higher management fee income, principally from our Irish and UK shopping centre joint ventures.
Our accounting policy is to capitalise the cost of staff working directly on on-site development projects. In 2017 only £0.1 million of staff costs
were capitalised on the Group’s on-site retail park development schemes, compared with £1.6 million in 2016 when both Victoria Gate, Leeds
and Westquay South, Southampton were completed.
Cost ratio
The EPRA cost ratio for the year ended 31 December 2017 was 21.6%, 100 basis points lower than 2016. Compared with the prior year ratio,
the administration expenses element of the ratio remained unchanged at 11.9%, whilst the property costs element has fallen from 10.7% to
9.7%. The reduction in the property costs ratio is associated with lower vacancy and bad debt costs in 2017. The downward trend in the ratio
reflects management’s continued focus on delivering operating efficiencies across the Group. The calculation of the cost ratio is included as
Table 8 of the Additional Disclosures on page 65.
Loss on sale of properties and recycling of net exchange gains
During 2017, we sold five properties raising proceeds, after deducting selling costs, of £399 million, and 74% of the proceeds related to the
sales of Place des Halles, Strasbourg and Saint Sébastien, Nancy. Compared to their valuations at 31 December 2016, these five disposals
resulted in a loss of £15.5 million, or 3.7%. The losses principally related to Westwood and Westwood Gateway Retail Parks, Thanet and Saint
Sébastien, Nancy.
Following the sale of Place des Halles, Strasbourg and Saint Sébastien, Nancy in late 2017, £27.8 million of net exchange gains previously
recognised in equity have been recycled in the income statement. The majority of this figure related to the sale of Place des Halles, Strasbourg
where there was a 35.5% non-controlling interest. After taking account of the non-controlling interest, the recycled net exchange gains
attributable to equity shareholders was £8.2 million and this has been excluded from the Group's adjusted earnings.
Potential business acquisition costs
The Group recognised £6.5 million of costs in relation to professional advisor fees to support the acquisition of intu properties plc which was
announced on 6 December 2017. These costs have been excluded from the Group's adjusted earnings.
Share of results of joint ventures and associates, including investments in premium 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 2017
was £180.5 million (2016: £169.2 million). Further details are provided in note 9 to the financial statements.
As explained at the beginning of the Financial Review on page 23, for management reporting purposes we review the Group’s property
portfolio on a proportionally consolidated basis, to reflect the Group’s different ownership shares. We do not proportionally consolidate the
Group’s premium outlet investments in Value Retail (VR) and VIA Outlets (VIA). These are externally managed by experienced outlet
operators, independently financed and have operating metrics which differ from the Group’s other properties. Due to the differing nature of the
Group’s control, VIA is accounted for as a joint venture and VR is accounted for as an associate.
The table below shows the contribution to the Group’s adjusted profit from joint ventures and associates, split between the proportionally
consolidated properties and the investments in premium outlets.
Contribution to adjusted profit
Year ended Year ended
31 December 31 December
Joint ventures Associates Joint ventures Associates
2017 2016
(incl. VIA) (incl. VR) Total (incl. VIA) (incl. VR) Total
£m £m £m £m £m £m
Share of results – IFRS 180.5 223.0 403.5 169.2 137.1 306.3
Revaluation gains on properties (46.3) (198.3) (244.6) (29.1) (120.6) (149.7)
Other adjustments 26.5 1.3 27.8 3.1 8.4 11.5
Total adjustments (19.8) (197.0) (216.8) (26.0) (112.2) (138.2)
Adjusted earnings contribution 160.7 26.0 186.7 143.2 24.9 168.1
Analysed as:
Share of Property interests 147.5 1.4 148.9 137.0 1.3 138.3
Premium outlets 13.2 24.6 37.8 6.2 23.6 29.8
Adjusted earnings from the Share of Property interests increased by £10.6 million primarily due to increased income from Dundrum Town
Centre and Grand Central, in which the Group sold a 50% interest in December 2016.
Adjusted earnings from Premium outlets of £37.8 million were £8.0 million higher than in 2016, or £7.6 million at constant exchange rates. The
Group’s share of VIA earnings increased by £7.0 million due principally to acquisitions including Zweibrücken Fashion Outlet and Vila do
Conde Porto Fashion Outlet in the first half of 2017 and the Wroclaw, Seville and Mallorca Fashion Outlets in the second half of 2016. VR’s
earnings increased by £1.0 million as strong net rental income growth was partly offset by higher finance and administration costs, the latter
associated with the enhanced management structure implemented in 2016.
Further details of the Group’s joint ventures and associates are shown in notes 9 and 10 to the financial statements respectively. The operating
performance of our Premium outlets is described in the Business Review on pages 16 to 18 and the combined profit contribution is in Table 13
of the Additional Disclosures on page 68.
Finance costs
Net finance costs, calculated on a proportionally consolidated basis, as shown in note 2 to the financial statements, totalled £170.4 million in
2017, compared with £96.6 million in 2016. The increase is principally due to the exceptional cost of £41.1 million to redeem the £250 million
2020 6.875% bonds in October 2017 which is included in the Debt and loan facility cancellation costs of £41.5 million (2016: £0.4 million).
Adjusted finance costs, which excludes items such as the change in fair value of derivatives and debt cancellation costs, totalled £107.6 million
in 2017, an increase of £14.1 million, or £10.9 million at constant exchange rates. The increase principally arose from reduced finance income
following the conversion of the Irish loans to property in 2016 and 2017 and the reduction in loans to Value Retail in the second half of 2016.
Interest capitalised on a number of retail park development schemes totalled £0.8 million in 2017, which was £4.3 million lower than in 2016
when both Victoria Gate, Leeds and Westquay South, Southampton were completed.
The supporting calculation for adjusted finance costs is shown in Table 16 of the Additional Disclosures on page 70.
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. The current tax charge in 2017 was £1.8 million, £0.9 million lower than 2016, as the prior year included a number of one-off
charges.
We publish guidance explaining the Group’s tax strategy and have updated this for 2018 and ‘Hammerson’s Approach to Tax for the year
ending 31 December 2018’ is on the Group’s website www.hammerson.com.
Dividends
The Directors have proposed a final dividend of 14.8 pence per share. Together with the interim dividend of 10.7 pence, the total for 2017 is 25.5
pence, representing an increase of 6.25% compared with the prior year. The final dividend is payable on 26 April 2018 to shareholders on the
register at the close of business on 16 March 2018. 7.4 pence will be paid as a PID, net of withholding tax where appropriate, with the balance of
7.4 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.
Net assets
During 2017, equity shareholders’ funds increased by £248 million, or 4.3%, to £6,024 million at 31 December 2017. Net assets, calculated on
an EPRA basis, were £6,164 million and on a per share basis increased by 37 pence to £7.76. The movement during the year is shown in the
table below.
Movement in net assets
Equity
shareholders’ EPRA EPRA NAV
funds Adjustments1 net assets pence
Proportionally consolidated, including premium outlets £m £m £m per share
31 December 2016 5,776 89 5,865 739
Property revaluation
Proportionally consolidated property portfolio 21 – 21 2
Premium outlet properties 225 – 225 28
246 – 246 30
Adjusted profit for the year 246 – 246 31
Loss on sale of properties (16) – (16) (2)
Debt and loan facility cancellation costs (42) – (42) (5)
Change in deferred tax (35) 35 – –
Dividends (194) – (194) (24)
Foreign exchange and other movements 43 16 59 7
31 December 2017 6,024 140 6,164 776
1. Adjustments in accordance with EPRA best practice shown in note 7D to the financial statements on page 47.
The increase in EPRA net assets was principally due to property revaluation gains of £246 million, mainly in the UK shopping centres,
Developments and Premium outlets portfolios as explained in the Property Portfolio Review on page 19. Adjusted profit also increased net
assets by £246 million, although this was offset by dividends of £194 million. Foreign exchange and other movements totalled £59 million,
mainly reflecting the weakening of sterling against the euro over the course of 2017.
Investment and development properties
The valuation of investment and development properties in the Reported Group at 31 December 2017 was £4,686 million, £78 million lower
than the prior year. The movement in investment and development properties is shown in note 8 to the financial statements.
Details of the Group's property portfolio valuation calculated on a proportionally consolidated basis plus the Group's premium outlets is
provided in the Property Portfolio Review on page 19.
Investment in joint ventures and associates, including investments in premium outlets
Details of the Group’s joint ventures and associates are shown in notes 9 and 10 to the financial statements respectively. The table below
shows the Group's investment in joint ventures and associates on both IFRS and Adjusted bases, split between the proportionally consolidated
Share of Property interests and investments in Premium outlets.
Adjusted investment
31 December 2017 31 December 2016
Joint ventures Associates Joint ventures Associates
(incl. VIA) (incl. VR) Total (incl. VIA) (incl. VR) Total
£m £m £m £m £m £m
IFRS investment in joint ventures/associates 3,674 1,099 4,773 3,737 988 4,725
Adjustments (see notes 9C/10D) 57 88 145 19 87 106
Adjusted investment in joint ventures/associates 3,731 1,187 4,918 3,756 1,075 4,831
Analysed as:
Share of Property interests 3,312 31 3,343 3,514 29 3,543
Premium outlets 419 1,156 1,575 242 1,046 1,288
During 2017, the total adjusted investment in the Group’s Share of Property interests decreased by £200 million to £3,343 million due primarily
to a £275 million capital repayment following the secured financing of Dundrum Town Centre in September 2017. This was partly offset by
property revaluation gains of £19 million and profits retained by the joint ventures.
The Group’s total adjusted investment in Premium outlets increased by £287 million in 2017 to £1,575 million. Property revaluation gains
contributed £225 million to the uplift with further capital advances of £130 million to VIA Outlets to fund the three outlet acquisitions completed
during 2017. These were partly offset by £130 million of cash distributions received from VR associated with earnings and surplus cash
generated from a refinancing of Bicester Village in December 2017.
An analysis of the Group’s combined investment in premium outlets is shown in Table 14 in the Additional Disclosures on page 67.
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 initially be financed
using short term funds before being refinanced with longer term funding 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, private placements and secured bank borrowing
within certain joint ventures. 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 regularly reviews the Group’s financing strategy and plans and
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 2017 2016
Net debt (£m) 3,501 3,413
Gearing (%)2 Maximum 85% 58 59
Loan to value (%)2 No more than 40% 36 36
Liquidity (£m) 958 592
Weighted average interest rate (%) 2.9 3.1
Weighted average maturity of debt (years) 5.6 5.5
Interest cover (times) At least 2.0 3.4 3.5
Net debt/EBITDA (times)3 Less than 10.0 9.3 9.5
FX hedging (%) 70-90% 78 79
Debt fixed (%) At least 50% 78 70
1. Guidelines should not be exceeded for an extended period of time.
2. See Table 18 on page 70 for supporting calculation.
3. EBITDA includes the interest received from the Irish loan assets. See Table 19 on page 71 for supporting calculation.
Net debt position
On a proportionally consolidated basis, net debt at 31 December 2017 was £3,501 million, an increase of £88 million during the year. This
comprises loans and other borrowings of £3,676 million, the fair value of currency swaps of £90 million less cash and deposits of £266 million.
Cash and deposits were £135 million higher than at 31 December 2016 due to the receipt of the sale proceeds from Place des Halles,
Strasbourg at the end of the year which were used to repay floating rate debt facilities in January 2018. The movement in proportionally
consolidated net debt is analysed in the table below.
Movement in proportionally consolidated net debt
Total
£m
Net debt at 1 January 2017 3,413
Net cash inflow from operations (166)
Acquisitions 179
Disposals (net of Place des Halles dividend and non-controlling interests' share of retained cash) (399)
Development and other capital expenditure 158
Equity dividends paid 192
VIA Outlets acquisition funding and distributions 115
Value Retail acquisitions, loan repayments and distributions (110)
Exchange and other cash flows 119
Net debt at 31 December 2017 3,501
The Group’s weighted average interest rate was 2.9% for 2017, 20 basis points lower than the 3.1% average rate in 2016.
2017 has been another active year from a financing perspective and the following activities were completed:
– in January, funds were received from our £400 million private placement signed in November 2016. The fixed rate notes were
denominated, post swaps, in sterling (£50 million) and euro (€387 million), had maturities of seven, nine, 11 and 14 years and a weighted
average coupon of 1.7%.
– in April, a new £360 million unsecured revolving credit facility was signed with a syndicate of fourteen banks at an initial margin of 90 basis
points. The facility has a maturity of five years and may be extended by a further two years. This refinanced an existing £175 million facility
which was due to mature in April 2018 and had an initial margin of 150 basis points.
– the two other revolving credit facilities of £415 million and £420 million were extended by one year and now mature in April 2022 and we
repaid and cancelled the €1.5 billion short-term facility used to fund acquisitions in Ireland and Birmingham.
– in September, together with our 50% joint venture partner, Allianz, we arranged a €625 million seven-year loan secured on Dundrum
Town Centre, Dublin. At the date of the borrowing, the loan to value was below 40% and the all-in interest cost was fixed at 1.9%.
– in October, we redeemed the Group’s £250 million 6.875% unsecured 20-year bonds which were due to mature in 2020. We incurred a
one-off redemption premium of £41 million which has been treated as an exceptional financing cost. The redemption was funded using
liquidity from recent refinancing activity and contributed to the weighted average cost of debt.
Following this refinancing activity the Group’s liquidity at 31 December 2017, comprising cash and undrawn committed facilities, was £958
million, £366 million higher than at the beginning of the year. Also, the Group’s weighted average maturity of debt was maintained at 5.6
years (2016: 5.5 years).
We manage exposure to foreign exchange translation differences on euro-denominated assets through a combination of euro borrowings and
derivatives. At 31 December 2017, the value of euro-denominated liabilities as a proportion of the value of euro-denominated assets was 78%,
compared with 79% 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 4% strengthening of the euro against sterling during 2017 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 should not
exceed 150% and that interest cover should be not less than 1.25 times. Two of our unsecured bonds contain a covenant that gearing should
not exceed 150%, whilst the covenant on the remaining bonds is that gearing should not exceed 175%. The bonds have no covenant for
interest cover. The Group’s financial ratios are comfortably within these covenants.
Fitch and Moody’s rate Hammerson’s unsecured credit as A– and Baa1 respectively. In May, Moody’s changed its outlook from negative to
stable, citing the Group’s financial discipline and stable operating performance since the UK’s EU referendum decision in June 2016 and also
reaffirmed the Group’s rating in December following the announcement of the all-share offer to acquire intu properties plc. Fitch reaffirmed the
Group’s long-term rating in November, and following the intu acquisition announcement in December placed the rating on ‘rating watch
negative’ (RWN). This indicates that the rating could stay at its present level or potentially be downgraded as a result of the transaction. Fitch
expect to resolve the RWN once the transaction has closed or upon confirmation of the new capital structure.
At 31 December 2017, the Group’s loan to value was 36% and gearing was 58%, compared with 36% and 59% respectively at the beginning
of the year. Supporting calculations are in Table 18 in the Additional Disclosures on page 69.
At 31 December 2017, the Group’s share of net debt in VR and VIA totalled £686 million (2016: £468 million). On a proforma basis,
proportionally consolidating this net debt with the Group’s share of property values held by VR and VIA Outlets, the Group’s gearing would be
69% and loan to value would be 40%.
Debt maturity profile at 31 December 2017 (£m)
Proportionally consolidated, excluding premium outlets
The graph can be viewed on the company's website
The above analysis excludes cash and deposits and the fair value of currency swaps.
RISKS AND UNCERTAINTIES
Our risk management processes are designed to reduce the chances of financial loss, protect our reputation and improve efficiency across the
business. Our Risk Management Framework (RMF) is structured around eleven principal risks, contains mitigating factors and actions and the
Board’s residual risk assessment for each principal risk is summarised in the table below.
On 6 December 2017, we announced an all-share offer for intu properties plc. The significant scale and effort required to integrate and complete
the acquisition impacts a number of the Group’s principal risks. The key risks impacted are: Macro-economic, Property investment, Treasury and
People. In addition to the integration impact of the acquisition on the Group’s existing risks, we have created a new principal risk ‘Acquisition
completion’ solely associated with the completion of the transaction, this is explained below.
A more comprehensive explanation of the Group’s approach to risk management is included in the 2017 Annual Report.
Risk and impact Key mitigating factors/actions Change during 2017 and outlook
1. Macro-economic (Residual risk assessment: Medium/High) Impact <-> Probability ^
Our financial performance is directly We invest across a number of property sectors Economic growth prospects have generally improved
impacted by the macro-economic and European countries and have a diverse across Europe during 2017. However, uncertainty
performance in the countries in which we variety of tenants. This limits the impact of around the UK’s exit of the EU has led to subdued
operate. growth forecasts.
Our retailers and shoppers are impacted adverse macro-economic trends in a single Inflationary pressures have increased and interest
by factors such as GDP and disposable market. rates may rise in 2018 which could have a dampening
income growth, employment levels, impact on economic growth.
We monitor economic research and undertook
business and consumer confidence,
a macro-economic review at the Board The intu acquisition will increase the Group’s
interest rates and foreign exchange
Strategy Day. exposure to the UK but we believe the combination of
movements.
our high-quality property portfolio and management
We have a resilient, stress tested business
expertise will act to deliver value for stakeholders. We
plan and a robust financial position which
are also committed to retaining operational and
provides protection from future market shocks.
financial flexibility in case of macro-economic
weakness.
2. Retail market (Residual risk assessment: Medium/High) Impact <-> Probability ^
We own and operate retail property in a We own high-quality retail properties which 2017 has been a record year for leasing across the
dynamic marketplace. Failure to appeal to both retailers and consumers and business. This demand demonstrates that our
anticipate and address developments in apply our Product Experience Framework to portfolios are able to support retailer’s evolving
consumer and occupational markets, ensure the relevance of our portfolio. multichannel strategies.
such as multichannel retailing and digital
Our bespoke leasing strategy enhances our We continue to enhance our properties to ensure they
technology challenges will result in
tenant mix and we have increased our meet customer requirements and offer both a
financial underperformance and future
catering, leisure and events offer. shopping and leisure experience.
obsolescence.
Our digital strategy also allows us to gain This strategy, delivered through our Product
Retailer profitability is under pressure Experience Framework, is key to continuing to
consumer insight and communicate with our
due to increased costs and weak retail attract both retailers and shoppers in an evolving
shoppers.
sales. retail market.
3. Property investment (Residual risk assessment: Medium/High) Impact ^ Probability ^
Poor investment decisions involving All significant investment decisions are Property investment markets have remained
acquisitions and disposals may result in approved by the Board and are thoroughly broadly
suboptimal returns. evaluated. stable in 2017 and whilst investors remain selective
we have successfully completed our planned
Property valuations fall, adversely Our diversified portfolio limits the impact of a £400 million disposal programme.
impacting the Group’s financial position downturn in a single market. Valuations should be supported by the low interest
and delivery of future plans. rate environment and investor demand for the
We undertake twice yearly independent
Opportunities to divest of properties are valuations and stress test our investment secure income yield provided by high-quality retail
property.
missed, or are limited by adverse market projections within our annual Business Plan.
conditions. Associated with the intu acquisition we plan to
dispose of at least £2 billion of property in the short
to medium term to strengthen the enlarged group's
balance sheet and provide liquidity for
reinvestment opportunities.
4. Property development (Residual risk assessment: Low) Impact ^ Probability ^
Property development is complex and We have a proven track record of developing The completion of our two shopping centre schemes
inherently risky. Major projects have long iconic destinations. Development plans and in Leeds and Southampton in late 2016 reduced our
delivery times with multiple milestones exposure are included in our business short term development exposure.
and are management intensive. planning process and all major commitments
As at 31 December 2017 committed capital
Unsuccessful projects result in adverse are approved by the Board.
expenditure was £89 million (2016: £68 million) and
financial and reputational outcomes.
We undertake regular project reviews, our development portfolio represented only 5% (2016:
Over-exposure to developments including risk reporting and have clear project 4%) of our total property portfolio.
increases the potential financial impact of ownership and resourcing plans.
We have progressed our major development
an economic downturn which could
We regularly use fixed price contracts and schemes and have recently commenced the
overstretch the Group’s financial
projects have appropriate contingencies and extension to Les 3 Fontaines in Paris. There are still a
capacity.
post-completion reviews are performed to number of project milestones to be achieved before
identify future improvements. we can commence our other schemes.
5. Treasury (Residual risk assessment: Medium/High) Impact <-> Probability <->
Poor treasury planning or external factors We undertake treasury planning to ensure As at 31 December 2017 our balance sheet and key
may lead to the Group having insufficient appropriate liquidity levels are maintained. financing metrics remained robust, with liquidity of
liquidity and unable to support the Capital is provided by a diverse range of £958 million, loan to value of 36% and gearing of
delivery of our strategy. counterparties (banks, bond investors and JV 58%.
partners).
A fall in property values would adversely During 2017 we completed significant refinancing and
impact our financial position and could The Board monitors and approves key have reduced the average cost of debt to 2.9%. The
financing metrics and the annual business
result in a breach of borrowing plan includes a financing plan and associated average debt maturity was 5.6 years and we have no
covenants. stress tests. significant debt maturities in the next two years.
Significant fluctuations in sterling or euro We use interest rate and currency hedging to Whilst the intu acquisition will initially act to increase
exchange rates or significant interest mitigate the impact of market volatility. leverage, a £2 billion disposal programme in the short
rates could result in financial losses. to medium term will support our commitment to
maintaining a strong financial position.
6. Partnerships (Residual risk assessment: Low) Impact ^ Probability ^
A significant proportion of the Group’s We have a proven track record of working At 31 December 2017, 58% (2016: 53%) of our
properties are held in conjunction with successfully with a diverse range of partners portfolio is held jointly with third parties. The increase
third parties. These structures can limit and our contracts enable appropriate liquidity. during 2017 was due to strong valuation growth from
the Group’s control and liquidity. our Premium outlets and the £400 million disposals
Annual joint venture business plans are
which were all wholly-owned.
Operational effectiveness may also be approved to ensure operational and strategic
adversely impacted if partners are not alignment. We remain comfortable that our third-party ownership
strategically aligned. structures do not adversely impact performance or
We have a close working relationship with our
liquidity.
Our premium outlets are externally premium outlet partners including board
managed and this reduces control and representation. Both investments are subject The intu acquisition will act to reduce the proportion of
transparency over performance and to external audit and independent property the portfolio held with third parties to approximately
governance. valuations. 35%.
7. Tax and regulatory (Residual risk assessment: Medium) Impact <-> Probability <->
There is an increasing burden from We act to maintain a low-risk tax status in the There continues to be uncertainty associated with the
compliance and regulatory requirements UK and have regular meetings with HMRC. UK’s exit from the EU.
which can act to impede operational and
We participate in policy consultations and in The recent 4% increase in Irish stamp duty reduced
financial performance.
industry-wide dialogue with policy makers the valuation of our portfolio by £46 million.
The real estate sector has suffered a through bodies such as REVO, BPF, EPRA
We believe the Group is appropriately structured to
rising tax burden through increases in etc.
mitigate the impact of future tax changes and continue
stamp duty and business rates. These
We also undertake regular tax compliance to review all new legislation.
adversely impact financial performance.
reviews and advanced planning for future
The implementation in the UK of the living wage, the
The UK’s future exit from the EU creates regulatory and tax changes.
apprenticeship levy and increases in business rates,
uncertainty around the future of UK tax
whilst not having a significant direct impact on the
and regulatory environment.
Group, have an adverse financial impact on the wider
retail sector.
8. Catastrophic event (Residual risk assessment: Medium/High) Impact <-> Probability ^
Our operations, shopper safety, We have continuity plans at a corporate and There have been a number of terrorist incidents at
reputation or financial performance could operational level, including a core crisis group public venues during 2017 and the current threat level
be significantly impacted by a major for dealing with major incidents. across Europe remains very high.
event such as a terrorist or cyber-attack,
We have enhanced our physical security The wider use of digital technology across the Group
power outage or civil unrest.
measures at our properties and maintain increases the risks associated with cyber security.
regular dialogue with security agencies.
We regularly review and continue to implement
We have appropriate insurance cover and improvements to our processes and procedures to
have engaged third party support and testing counter the threat of a major incident. However, it is
for IT security. not possible to fully mitigate these risks and the
related impacts.
9. People (Residual risk assessment: Low) Impact ^ Probability ^
The Group has a relatively small Our annual business plan contains a human During 2017, staff turnover has remained low at
headcount which can act to curtail the resources plan, covering team structures, 12.0% and we have again undertaken an all-staff
achievement of business objectives, training and talent management initiatives. ‘Great Place to Work’ survey. The results show high
particularly in times of significant activity. levels of employee engagement and satisfaction.
Succession planning has been undertaken
A failure to recruit or retain key across the senior management team and we We have also launched a new e-learning platform to
executives and staff with appropriate continue to support and encourage staff support training and development.
skills would also adversely impact training and development.
We are acutely aware the intu acquisition may
corporate performance.
We also monitor staff turnover and employee adversely impact staff motivation and heighten job
engagement. security concerns. We are planning revised team
structures which will provide new opportunities and
we will ensure staff are treated fairly throughout the
integration process.
10. Environmental NEW (Residual risk assessment: Low) Impact n/a Probability n/a
The Group’s operations could be We have an experienced sustainability team In March 2017 we launched our Net Positive targets
adversely impacted by an environmental that are empowered to design and implement within the existing Positive Places sustainability
incident such as extreme weather, the Group’s environmental and corporate framework.
flooding or energy supply issues. responsibility strategy which is reviewed and
To achieve these targets we need to collaborate with
endorsed by the Board.
The Group’s reputation and financial our retailers to reduce the environmental impact of our
performance are impacted by the failure We have green energy contracts in place existing portfolio. We also need to design our new
to achieve our Net Positive targets or across the portfolio and maintain a detailed developments to deliver environmental excellence to
other environmental objectives. environmental risk framework. reduce the Group’s future carbon footprint.
Emerging environmental regulation or Our environmental reporting is subject to We made further progress to reduce our
legislation may act to increase costs or external assurance. environmental impact during 2017. Key achievements
make properties obsolete. were a 9% like-for-like emissions reduction and the
installation of new clean energy generation.
11. Acquisition completion NEW (Residual risk assessment: Medium/High) Impact n/a Probability n/a
The acquisition fails to obtain There was significant Board involvement and The all-share intu acquisition was announced in
shareholder or regulatory approval. oversight throughout the acquisition process December 2017. Work to support the approval
The enlarged group’s reputation and which included due diligence, financial process and integration has commenced. See page 3
financial position are adversely modelling and sensitivity analysis. for further details.
impacted by the failure to achieve the
forecast financial performance or We completed a comprehensive investor Management are committed to maximising the
deliver the identified synergies. opportunities from the acquisition whilst effectively
roadshow with over 60 individual meetings.
managing the risk associated with the transaction.
There is significant organisational The synergies assessment was supported by
2018 will involve significant work to complete the
stress associated with completing the a PwC opinion.
transaction and to plan and implement the effective
transaction and integrating the two
businesses. Competition clearance work has commenced integration of the two businesses.
and we are supported by experienced
The acquisition may result in staff advisory teams.
retention and motivational issues for
key employees and teams.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Directors’ responsibilities in respect of the preparation of the financial statements
The Group’s Annual Report for the year ended 31 December 2017
contains the following Statement of Directors’ Responsibilities. Certain
parts of the Annual Report are not included within this announcement.
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and
Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period. In preparing the financial statements, the Directors are required to:
– Select suitable accounting policies and then apply them consistently;
– State whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material
departures disclosed and explained in the financial statements;
– Make judgements and accounting estimates that are reasonable and prudent; and
– Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure
that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group and Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Corporate Governance Report confirm that, to the best of their knowledge:
– The Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law), give a true and fair
view of the assets, liabilities, financial position and profit of the Company;
– The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit of the Group; and
– The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and
Company, together with a description of the principal risks and uncertainties that they face.
In the case of each Director in office at the date of the Directors’ Report is approved:
– So far as the Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and
– They have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s auditors are aware of that information.
By order of the Board
David Atkins
Chief Executive
Timon Drakesmith
Chief Financial Officer
23 February 2018
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Notes £m £m
Gross rental income 2 248.9 251.3
Operating profit before other net gains/(losses) and share of results of joint ventures
and associates 2 174.2 176.6
Loss on sale of properties (15.5) (24.0)
Net exchange gain previously recognised in equity, recycled on disposal of foreign operations 27.8 –
Gain on sale of other investments – 1.3
Potential business acquisition costs (6.5) –
Revaluation gains/(losses) on properties 1.9 (24.7)
Other net gains/(losses) 2 7.7 (47.4)
Share of results of joint ventures 9A 180.5 169.2
Share of results of associates 10A 223.0 137.1
Operating profit 2 585.4 435.5
Finance costs (125.3) (121.2)
Debt and loan facility cancellation costs (41.5) (0.4)
Change in fair value of derivatives (21.3) (3.5)
Finance income 16.1 12.4
Net finance costs 4 (172.0) (112.7)
Profit before tax 413.4 322.8
Tax charge 5A (1.8) (1.9)
Profit for the year 411.6 320.9
Attributable to:
Equity shareholders 388.4 317.3
Non-controlling interests 23 23.2 3.6
Profit for the year 411.6 320.9
Basic earnings per share 7B 49.0p 40.2p
Diluted earnings per share 7B 48.9p 40.1p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
£m £m
Items recycled through the income statement on disposal of foreign operations
Exchange gain previously recognised in the translation reserve (54.4) –
Exchange loss previously recognised in the hedging reserve 46.2 –
Net exchange gain relating to equity shareholders (8.2) –
Exchange gain relating to non-controlling interests (19.6) –
(27.8) –
Items that may subsequently be recycled through the income statement
Foreign exchange translation differences 161.1 535.6
Net loss on hedging activities (99.6) (437.3)
61.5 98.3
Items that may not subsequently be recycled through the income statement
Change in fair value of participative loans within investment in associates (0.5) (0.3)
Net actuarial losses on pension schemes (0.3) (15.9)
(0.8) (16.2)
Total other comprehensive income 32.9 82.1
Profit for the year 411.6 320.9
Total comprehensive income for the year 444.5 403.0
Attributable to:
Equity shareholders 437.7 388.3
Non-controlling interests 6.8 14.7
Total comprehensive income for the year 444.5 403.0
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2017
2017 2016
Notes £m £m
Non-current assets
Investment and development properties 8 4,686.1 4,763.9
Interests in leasehold properties 37.2 36.4
Plant and equipment 5.1 6.2
Investment in joint ventures 9A 3,673.7 3,736.7
Investment in associates 10C 1,099.5 988.1
Receivables 11 20.4 44.9
9,522.0 9,576.2
Current assets
Receivables 12 110.5 105.9
Restricted monetary assets 13 37.3 35.1
Cash and deposits 14 205.9 74.3
353.7 215.3
Total assets 9,875.7 9,791.5
Current liabilities
Payables 15 (261.1) (303.8)
Tax (0.5) (0.4)
Loans and other borrowings 16A (1.7) (211.1)
(263.3) (515.3)
Non-current liabilities
Loans and other borrowings 16A (3,451.3) (3,285.2)
Deferred tax (0.5) (0.5)
Obligations under finance leases (38.9) (37.5)
Payables 18 (84.2) (96.0)
(3,574.9) (3,419.2)
Total liabilities (3,838.2) (3,934.5)
Net assets 6,037.5 5,857.0
Equity
Share capital 19 198.6 198.3
Share premium 1,265.9 1,265.7
Translation reserve 763.1 659.6
Hedging reserve (616.3) (562.9)
Merger reserve 374.1 374.1
Other reserves 22.0 23.7
Retained earnings 4,016.4 3,817.3
Investment in own shares (0.3) (0.2)
Equity shareholders’ funds 6,023.5 5,775.6
Non-controlling interests 23 14.0 81.4
Total equity 6,037.5 5,857.0
EPRA net asset value per share 7D £7.76 £7.39
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
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 2017 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
Issue of shares 0.3 0.2 – – – – – (0.3) 0.2 – 0.2
Share-based employee
remuneration – – – – – 5.4 – – 5.4 – 5.4
Cost of shares awarded
to employees – – – – – (2.2) – 2.2 – – –
Transfer on award of own
shares to employees – – – – – (4.9) 4.9 – – – –
Proceeds on award of own
shares to employees – – – – – – 0.2 – 0.2 – 0.2
Purchase of own shares – – – – – – – (2.0) (2.0) – (2.0)
Dividends (note 6) – – – – – – (193.6) – (193.6) (74.2) (267.8)
Exchange gain previously
recognised in equity recycled on
disposal of foreign operation – – (54.4) – – – – – (54.4) (19.6) (74.0)
Exchange loss previously
recognised in the hedging
reserve recycled on disposal of
foreign operation – – – 46.2 – – – – 46.2 – 46.2
Foreign exchange translation
differences – – 157.9 – – – – – 157.9 3.2 161.1
Net loss on hedging activities – – – (99.6) – – – – (99.6) – (99.6)
Change in fair value of
participative loans within
investment in associates
(note 10E) – – – – – – (0.5) – (0.5) – (0.5)
Net actuarial losses on pension
schemes – – – – – – (0.3) – (0.3) – (0.3)
Profit for the year – – – – – – 388.4 – 388.4 23.2 411.6
Total comprehensive
income/(loss) for the year – – 103.5 (53.4) – – 387.6 – 437.7 6.8 444.5
Balance at 31 December 2017 198.6 1,265.9 763.1 (616.3) 374.1 22.0 4,016.4 (0.3) 6,023.5 14.0 6,037.5
* Investment in own shares is stated at cost.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Investment Equity Non-
Share Share Translation Hedging Merger Other Retained in own shareholders’ controlling Total
capital premium reserve reserve reserve reserves earnings shares* funds interests equity
£m £m £m £m £m £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 (note 6) 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)
Change in fair value of
participative loans within
investment in associates
(note 10E) – – – – – – (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 CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Notes £m £m
Operating activities
Operating profit before other net gains/(losses) and share of results of joint ventures and associates 2 174.2 176.6
Decrease in receivables 6.6 2.0
(Increase)/Decrease in restricted monetary assets (1.5) 2.2
(Decrease)/Increase in payables (14.5) 11.9
Adjustment for non-cash items 21 9.1 11.6
Cash generated from operations 173.9 204.3
Interest received 12.9 20.0
Interest paid (129.9) (125.1)
Debt and loan facility cancellation costs 4 (41.5) (0.4)
Tax paid (1.1) (2.9)
Distributions and other receivables from joint ventures 125.0 84.0
Cash flows from operating activities 139.3 179.9
Investing activities
Property acquisitions (122.5) (499.7)
Developments and major refurbishments (46.7) (127.2)
Other capital expenditure (66.7) (55.2)
Sale of properties 490.8 639.0
Advances to joint ventures 9D (165.6) (63.1)
Return of equity from joint ventures 9D 275.0 –
Acquisition of additional interest in Irish loan portfolio 9D (56.2) –
Advances to joint ventures on conversion of Irish loan portfolio to property assets 9D – (91.9)
Acquisition of interest in associates (39.3) (2.4)
Distributions from associates 130.9 18.0
Acquisition of other investments – (1.9)
Sale of other investments – 8.0
Repayment of loans receivable 19.9 65.8
Cash flows from investing activities 419.6 (110.6)
Financing activities
Issue of shares 0.2 0.2
Proceeds from award of own shares 0.2 0.2
Purchase of own shares (2.0) –
Proceeds from new borrowings 526.9 949.8
Repayment of borrowings (687.7) (847.5)
Net (decrease)/increase in borrowings 20 (160.8) 102.3
Dividends paid to non-controlling interests (74.2) (2.3)
Equity dividends paid 6 (191.7) (135.7)
Cash flows from financing activities (428.3) (35.3)
Net increase in cash and deposits 130.6 34.0
Opening cash and deposits 74.3 37.0
Exchange translation movement 1.0 3.3
Closing cash and deposits 14 205.9 74.3
An analysis of the movement in net debt is provided in note 20.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
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 2017. 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 2017 or 2016, but is derived from those financial statements. Those financial statements 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 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's
Annual General Meeting. The auditor’s reports on both the 2017 and 2016 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 2017, the following new and revised Standards and Interpretations have been adopted but these have not had a material impact on the
amounts reported in these financial statements:
– Amendments to IAS 7 Statement of Cash Flows
– Amendments to IAS Income Taxes
– IFRS 12 Disclosure of interests in other entities.
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
= €1.127 (2016: £1 = €1.171). The principal exchange rate used for the income statement is the average rate, £1 = €1.141 (2016: £1 = €1.224).
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 ‘Property Portfolio 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 Financial
Statements.
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
As stated in the Financial Review on page 23 and in note 3, management reviews the performance of the Group’s property portfolio on a
proportionally consolidated basis. Management does not proportionally consolidate the Group’s premium outlet investments in Value Retail and
VIA Outlets, and reviews the performance of these investments separately from the rest of the proportionally consolidated portfolio.
The following tables have been prepared on a basis consistent with how management reviews the performance of the business and show the
Group’s profit for the year on a proportionally consolidated basis in column C, 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 proportionally consolidated and hence these have not
been reallocated to the relevant financial statement lines, but are shown within ‘Share of results of joint ventures’ and ‘Share of results of
associates’ in column C.
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.
2017
Proportionally consolidated
Reported Share of Property Proportionally Capital
Group interests consolidated Adjusted and other
Notes £m £m £m £m £m
Notes (see page 42) A B C D D
Gross rental incomeE 3A 248.9 173.0 421.9 421.9 –
Ground and equity rents payable (1.4) (2.7) (4.1) (4.1) –
Gross rental income, after rents payable 247.5 170.3 417.8 417.8 –
Service charge income 45.9 31.9 77.8 77.8 –
Service charge expenses (55.0) (38.1) (93.1) (93.1) –
Net service charge expenses (9.1) (6.2) (15.3) (15.3) –
Other property outgoings (15.8) (16.3) (32.1) (32.1) –
Property outgoings (24.9) (22.5) (47.4) (47.4) –
Net rental income 3A 222.6 147.8 370.4 370.4 –
Employee and corporate costs (60.5) (0.5) (61.0) (61.0) –
Management fees receivable 12.1 – 12.1 12.1 –
Administration expenses (48.4) (0.5) (48.9) (48.9) –
Operating profit before other net gains/(losses) and share of
results of joint ventures and associates 174.2 147.3 321.5 321.5 –
Loss on sale of properties (15.5) – (15.5) – (15.5)
Net exchange gain previously recognised in equity,
recycled on disposal of foreign operations 27.8 – 27.8 – 27.8
Potential business acquisition costsF (6.5) – (6.5) – (6.5)
Revaluation gains on properties 1.9 19.4 21.3 – 21.3
Other net gains/(losses) 7.7 19.4 27.1 – 27.1
Share of results of joint ventures 9A, 9B 180.5 (166.9) 13.6 13.2 0.4
Share of results of associates 10A, 10B 223.0 (1.4) 221.6 24.6 197.0
Operating profit 585.4 (1.6) 583.8 359.3 224.5
Net finance (costs)/incomeG 4 (172.0) 1.6 (170.4) (107.6) (62.8)
Profit before tax 413.4 – 413.4 251.7 161.7
Current tax charge 5A (1.8) – (1.8) (1.8) –
Profit for the year 411.6 – 411.6 249.9 161.7
Non-controlling interests (23.2) – (23.2) (3.6) (19.6)
Profit for the year attributable to equity shareholders 7B 388.4 – 388.4 246.3 142.1
2016
Proportionally consolidated
Reported Share of Property Proportionally Capital
Group interests consolidated Adjusted and other
Notes £m £m £m £m £m
Notes (see below) 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 –
Employee and corporate costs (54.3) (0.3) (54.6) (54.6) –
Management fees receivable/(payable) 8.6 (0.1) 8.5 8.5 –
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 sale of properties (24.0) – (24.0) – (24.0)
Gain on 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
Share of results of associates 10A 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)/incomeG 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 34.
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 7A.
E Included in gross rental income on a proportionally consolidated basis in Column C is £7.9 million (2016: £7.2 million) of contingent rents calculated by reference to tenants’
turnover.
F. Costs of £6.5 million have been recognised in respect of the potential acquisition of intu properties plc, as announced on 6 December 2017.
G. Adjusted finance costs presented on a proportionally consolidated basis are shown in Table 16 on page 70.
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. As
stated in the Financial Review on page 23, the Group has property interests in a number of sectors and management reviews the performance
of the Group’s property interests in Shopping centres, Retail parks, Other UK properties and Developments on a proportionally consolidated
basis to reflect the Group’s different ownership shares. Management does not proportionally consolidate the Group’s premium outlet
investments in Value Retail and VIA Outlets, which are externally managed by experienced outlet operators, independently financed and have
operating metrics which differ from the Group’s other sectors. Except for property valuation and returns, we review the performance of our
premium outlet investments separately from the proportionally consolidated portfolio.
The segmental analysis has been prepared on the same 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 properties either wholly-owned or held within joint
operations, are shown in the following tables.
Gross rental income represents the Group’s revenue from its tenants and customers. As stated in the Key Performance Indicators section on
page 5, net rental income is the Group’s primary revenue measure and is used to determine the performance of each sector, except Premium
outlets. Total assets are not monitored by segment and resource allocation is based on the distribution of property assets between segments.
A: Revenue and profit by segment
2017 2016
Gross rental Net rental Gross rental Net rental
income income income income
£m £m £m £m
United Kingdom
Shopping centres 180.2 152.9 174.2 148.4
Retail parks 72.4 69.3 84.0 79.6
Other 12.3 8.8 13.8 9.3
264.9 231.0 272.0 237.3
France 104.6 95.3 101.1 89.3
Ireland 37.9 34.8 13.7 12.5
Investment portfolio 407.4 361.1 386.8 339.1
Developments 14.5 9.3 11.9 7.4
Property portfolio 421.9 370.4 398.7 346.5
Less share of Property interests (173.0) (147.8) (147.4) (124.2)
Reported Group 248.9 222.6 251.3 222.3
B: Investment and development property assets by segment
2017 2016
Property Property Revaluation Property Property Revaluation
valuation additions gains/(losses) valuation additions gains/(losses)
£m £m £m £m £m £m
United Kingdom
Shopping centres 3,488.9 28.4 23.9 3,436.5 369.8 (5.8)
Retail parks 1,234.1 46.7 (27.2) 1,320.0 19.8 (118.3)
Other 180.1 3.4 13.4 163.5 0.8 2.2
4,903.1 78.5 10.1 4,920.0 390.4 (121.9)
France 1,887.0 55.4 (11.4) 2,159.6 65.6 73.3
Ireland 959.6 124.5 (1.5) 805.1 801.9 3.2
Investment portfolio 7,749.7 258.4 (2.8) 7,884.7 1,257.9 (45.4)
Developments 576.6 150.8 24.1 397.0 274.9 32.0
Property portfolio – excluding premium outlets 8,326.3 409.2 21.3 8,281.7 1,532.8 (13.4)
Premium outlets 2,234.1 278.9 225.2 1,689.4 200.5 138.4
Total Group 10,560.4 688.1 246.5 9,971.1 1,733.3 125.0
Less premium outlets (2,234.1) (278.9) (225.2) (1,689.4) (200.5) (138.4)
Less share of Property interests (3,640.2) (65.7) (19.4) (3,517.8) (778.9) (11.3)
Reported Group 4,686.1 343.5 1.9 4,763.9 753.9 (24.7)
C: Analysis of non-current assets employed
2017 2016
Non-current assets employed £m £m
United Kingdom 5,255.5 5,210.7
Continental Europe 3,433.6 3,357.8
Ireland 832.9 1,007.7
9,522.0 9,576.2
Included in the above table are investments in joint ventures of £3,673.7 million (2016: £3,736.7 million), which are further analysed in note 9 on
pages 49 to 54. The Group’s share of the property valuations held within Property interests of £3,640.2 million (2016: £3,517.8 million) has
been included in note 3B above, of which £2,650.2 million (2016: £2,562.6 million) relates to the United Kingdom, £211.5 million (2016: £205.1
million) relates to Continental Europe and £778.5 million (2016: £750.1 million) relates to Ireland.
4: Net finance costs
2017 2016
£m £m
Interest on bank loans and overdrafts 12.3 19.7
Interest on other borrowings 109.8 102.0
Interest on obligations under finance leases 2.2 2.1
Other interest payable 1.8 2.5
Gross interest costs 126.1 126.3
Less: Interest capitalised (0.8) (5.1)
Finance costs 125.3 121.2
Debt and loan facility cancellation costs1 41.5 0.4
Change in fair value of derivatives 21.3 3.5
Finance income (16.1) (12.4)
172.0 112.7
1. Includes costs of £41.1 million (2016: £nil) to cancel the £250 million 6.875% sterling bonds due 2020 and other loan facility cancellation costs of £0.4 million (2016: £0.4
million).
5: Tax
A: Tax charge
2017 2016
£m £m
UK current tax 0.2 0.2
Foreign current tax 1.6 1.7
Tax charge 1.8 1.9
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 (PID). The residual business in both the UK and France are subject to corporation tax as normal.
The Irish properties are held in a QIAIF which provides similar tax benefits to those of a UK REIT but which subject distributions from Ireland to
the UK to a 20% withholding tax.
B: Tax charge reconciliation
2017 2016
Notes £m £m
Profit before tax 2 413.4 322.8
Less: Profit after tax of joint ventures 9A (180.5) (169.2)
Less: Profit after tax of associates 10A (223.0) (137.1)
Profit on ordinary activities before tax 9.9 16.5
Profit multiplied by the UK corporation tax rate of 19.25% (2016: 20%) 1.9 3.3
UK REIT tax exemption (4.5) 17.6
French SIIC tax exemption (14.3) (23.6)
Irish QIAIF tax exemption 6.6 2.0
Losses for the year not utilised 9.5 1.8
Non-deductible and other items 2.6 0.8
Tax charge 1.8 1.9
C: Unrecognised deferred tax
A deferred tax asset is not recognised for UK revenue losses and UK capital losses where their future utilisation is uncertain. At 31 December
2017, the total of such losses was £440 million (2016: £330 million) and £460 million (2016: £465 million) respectively, and the potential tax
effect of these was £75 million (2016: £53 million) and £78 million (2016: £79 million) respectively.
Deferred tax is not provided on potential gains on investments in subsidiaries when the Group can control whether gains crystallise and it is
probable that gains will not arise in the foreseeable future. At 31 December 2017, the total of such gains was £690 million (2016: £640 million)
and the potential tax effect before the offset of losses was £117 million (2016: £109 million).
If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2017 the
value of such completed properties was £269 million (2016: £258 million). If these properties were to be sold without the benefit of the tax
exemption the tax arising would be £nil (2016: £nil) due to the availability of capital losses.
6: Dividends
The proposed final dividend of 14.8 pence per share was recommended by the Board on 23 February 2018 and, subject to approval by
shareholders, is payable on 26 April 2018 to shareholders on the register at the close of business on 16 March 2018. 7.4 pence per share will
be paid as a PID, net of withholding tax at the basic rate (currently 20%) if applicable, and 7.4 pence per share will be paid as a normal
dividend. There will be no scrip alternative although the dividend reinvestment plan (DRIP) remains available to shareholders. The aggregate
amount of the 2017 final dividend is £117.5 million. This has been calculated using the total number of eligible shares outstanding at 31
December 2017.
The interim dividend of 10.7 pence per share was paid on 9 October 2017 as a PID, net of withholding tax where appropriate. The total
dividend for the year ended 31 December 2017 would be 25.5 pence per share (2016: 24.0 pence per share).
Equity Equity
PID Non-PID Total dividends dividends
pence pence pence 2017 2016
per share per share per share £m £m
Current year
2017 final dividend 7.4 7.4 14.8 – –
2017 interim dividend 10.7 – 10.7 84.2 –
18.1 7.4 25.5
Prior years
2016 final dividend 4.9 9.0 13.9 109.4 –
2016 interim dividend 10.11 – 10.1 – 79.8
15.0 9.0 24.0
2015 final dividend – 100.3
Dividends as reported in the consolidated statement of changes in equity 193.6 180.1
2015 interim dividend withholding tax (paid 2016) – 11.2
2015 final dividend non-PID scrip alternative – (36.7)
2016 interim dividend withholding tax (paid 2017) 11.5 (11.5)
2016 interim dividend PID scrip alternative – (7.4)
2017 interim dividend withholding tax (paid 2018) (13.4) –
Dividends paid as reported in the consolidated cash flow statement 191.7 135.7
1. A PID scrip alternative was offered to shareholders.
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 23 to 27. 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
2017 2016
Shares Shares
million million
Basic, EPRA and Adjusted 792.9 789.0
Diluted 794.0 790.7
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
2017 2016
Earnings Pence Earnings Pence
Notes £m per share £m per share
Basic 2 388.4 49.0 317.3 40.2
Dilutive share schemes – (0.1) – (0.1)
Diluted 388.4 48.9 317.3 40.1
Basic 388.4 49.0 317.3 40.2
Adjustments:
Revaluation (gains)/losses on Reported Group 2 (1.9) (0.2) 24.7 3.1
properties: Share of Property interests 2 (19.4) (2.5) (11.3) (1.4)
(21.3) (2.7) 13.4 1.7
Loss on sale of properties: Reported Group 2 15.5 2.0 24.0 3.0
Net exchange gain previously
recognised in equity, recycled on
disposal of foreign operations: Reported Group 2 (27.8) (3.5) – –
Debt and loan facility cancellation
costs: Reported Group 4 41.5 5.2 0.4 0.1
Change in fair value Reported Group 4 21.3 2.7 3.5 0.4
of derivatives:
Share of Property interests 9B – – (0.8) (0.1)
21.3 2.7 2.7 0.3
Other adjustments: Reported Group
Gain on sale of other investments 2 – – (1.3) (0.1)
Potential business acquisition costs 2 6.5 0.8 – –
Non-controlling interests 2 19.6 2.5 0.3 –
26.1 3.3 (1.0) (0.1)
Premium outlets: Revaluation gains on properties 9B, 10B (225.2) (28.4) (138.4) (17.5)
Deferred tax (including on acquisition) 9B, 10B 35.0 4.4 14.3 1.8
Other adjustments 9B, 10B (6.2) (0.8) (1.8) (0.3)
(196.4) (24.8) (125.9) (16.0)
Total adjustments (141.1) (17.8) (86.4) (11.0)
EPRA 247.3 31.2 230.9 29.2
Other adjustments: Translation movement on intragroup
funding loan: Premium outlets 9B (1.0) (0.1) (0.2) –
Adjusted 246.3 31.1 230.7 29.2
C: Headline earnings per share
2017 2016
Earnings Earnings
Notes £m £m
Profit for the year attributable to equity shareholders 2 388.4 317.3
Revaluation (gains)/losses on properties: Reported Group and Share of Property interests 7B (21.3) 13.4
Loss on sale of properties: Reported Group 7B 15.5 24.0
Net exchange gain previously recognised in equity, recycled on disposal of foreign operations:
Reported Group 7B (27.8) –
Gain on sale of other investments: Reported Group 7B – (1.3)
Non-controlling interests 7B 19.6 0.3
Revaluation gains on properties: Premium outlets 7B (225.2) (138.4)
Deferred tax (including on acquisition): Premium outlets 7B 35.0 14.3
Loss on sale of properties: Premium outlets 9B – 0.1
Translation movements on intragroup funding loan: Premium outlets 9B (1.0) (0.2)
Headline earnings 183.2 229.5
Basic headline earnings per share (pence) 23.1p 29.1p
Diluted headline earnings per share (pence) 23.1p 29.0p
2017 2016
Earnings Earnings
Reconciliation of headline earnings to adjusted earnings £m £m
Headline earnings as above 183.2 229.5
Debt and loan facility cancellation costs: Reported Group 7B 41.5 0.4
Change in fair value of derivatives: Reported Group and Share of Property interests 7B 21.3 2.7
Potential business acquisition costs: Reported Group 7B 6.5 –
Change in fair value of derivatives: Premium outlets 9B, 10B 3.6 14.5
Change in fair value of participative loans – revaluation movement: Premium outlets 10B (11.8) (16.6)
Loan facility costs written off: Premium outlets 10B 2.0 0.2
Adjusted earnings 246.3 230.7
D: Net asset value per share
2017 2016
Equity Net asset Equity Net asset
shareholders’ value shareholders’ value
funds Shares per share funds Shares per share
Notes £m million £ £m million £
Basic 6,023.5 794.2 7.58 5,775.6 793.2 7.28
Company’s own shares held in Employee Share
Ownership Plan – (1.0) n/a – (0.9) n/a
Dilutive share schemes 1.4 1.2 n/a 1.1 1.7 n/a
Diluted 6,024.9 794.4 7.58 5,776.7 794.0 7.28
Fair value adjustment to borrowings
– Reported Group 17 (262.0) (0.33) (316.1) (0.40)
– Share of Property interests (2.3) – – –
(264.3) (0.33) (316.1) (0.40)
EPRA NNNAV 5,760.6 7.25 5,460.6 6.88
Fair value adjustment to borrowings 264.3 0.33 316.1 0.40
Deferred tax: Reported Group 0.5 – 0.5 –
Fair value of interest rate swaps – Reported Group 17 (6.3) (0.01) (19.3) (0.02)
Premium outlets
– Fair value of derivatives 9C, 10D (9.7) (0.01) 3.2 –
– Deferred tax 9C, 10D 212.0 0.27 160.4 0.20
– Goodwill as a result of deferred tax 9C, 10D (57.1) (0.07) (57.0) (0.07)
145.2 0.19 106.6 0.13
EPRA NAV 6,164.3 794.4 7.76 5,864.5 794.0 7.39
8: Investment and development properties
2017 2016
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 4,561.8 202.1 4,763.9 4,418.9 233.2 4,652.1
Exchange adjustment 79.3 4.5 83.8 268.0 0.3 268.3
Additions – Asset acquisitions 162.9 72.0 234.9 465.2 108.8 574.0
– Capital expenditure 73.1 35.5 108.6 57.9 122.0 179.9
236.0 107.5 343.5 523.1 230.8 753.9
Transfer to investment in joint ventures – – – (221.7) – (221.7)
Disposals (506.6) (1.2) (507.8) (669.1) – (669.1)
Reclassification on completion of developments – – – 303.9 (303.9) –
Capitalised interest 0.3 0.5 0.8 – 5.1 5.1
Revaluation (losses)/gains (21.9) 23.8 1.9 (61.3) 36.6 (24.7)
Balance at 31 December 4,348.9 337.2 4,686.1 4,561.8 202.1 4,763.9
Properties are stated at fair value as at 31 December 2017, valued by professionally qualified external valuers. Cushman & Wakefield 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 2017 was £0.5 million (2016: £nil). Capitalised interest is
calculated using the cost of secured debt or the Group’s weighted average cost of borrowings, as appropriate, and the effective rate applied in
2017 was 2.9% (2016: 3.1%). At 31 December 2017 the historic cost of investment and development properties was £3,912.8 million (2016:
£3,852.6 million).
At 31 December 2017, investment properties included two properties with a total value of £92.5 million. A sale contract was exchanged in January
2018 and completed on 9 February 2018 for one property, and exchanged in February 2018 for the other property, with completion expected in
March 2018.
Joint operations
At 31 December 2017, investment properties included properties with a value of £202.4 million (2016: £75.6 million) held within joint operations
which are jointly controlled and proportionally consolidated. The Hammerson ICAV acquired a 50% interest in the Ilac Centre, Dublin in
December 2016 and a Co-Ownership agreement is in place with Irish Life Assurance plc, the holders of the remaining 50% interest. The
Hammerson ICAV also holds a 50% interest in Pavilions Swords, Dublin, acquired in September 2017 and a Co-Ownership agreement is in
place with Irish Life Assurance plc and IPUT plc, both of which hold a 25% interest in the property. See note 9D on page 54 for further details.
9: Investment in joint ventures
The Group has investments in a number of jointly controlled property and corporate interests, which have been equity accounted.
As explained the Financial Review on page 23, management reviews the business principally on a proportionally consolidated basis, except for
its premium outlet investments. The Group’s share of assets and liabilities 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 Aberdeen Standard Investments Brent Cross 41.2
Brent South Shopping Park Aberdeen Standard Investments Brent South 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
Silverburn Unit Trust2 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 Partnership2 APG, Meyer Bergman, Value VIA Outlets 47
Retail
Ireland
Dundrum Retail Limited Partnership /Dundrum Car Park Limited
Partnership Allianz Dundrum 50
Triskelion Property Holding Designated Activity Company
(‘Triskelion’) Allianz n/a 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 12A. Brent Cross and
Brent South are presented together as Brent Cross. Triskelion and the two Dundrum partnerships are presented together as the ‘Irish portfolio’. The Goodsyard, Espace
Saint-Quentin and O’Parinor are presented together as ‘Other’
2. Registered in Jersey.
The Reported Group’s investment in joint ventures at 31 December 2017 was £3,673.7 million (2016: £3,736.7 million). An analysis of the
movements in the year is provided in note 9D on page 54.
The summarised income statements and balance sheets in note 9A show 100% of the results, assets and liabilities of joint ventures, and where
appropriate have been restated to the Group’s accounting policies and exclude all balances which are eliminated on consolidation.
A. Summary financial statements of joint ventures
Share of results of joint ventures for the year ended 31 December 2017
See pages 52 and 53 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 47.7 37.5 57.4 10.3 34.9 35.4
Net rental income 43.1 31.5 50.8 7.8 29.5 28.0
Administration expenses – – – – – –
Operating profit before other net gains/(losses) 43.1 31.5 50.8 7.8 29.5 28.0
Revaluation (losses)/gains on properties1 (3.3) 9.2 33.5 (3.0) 1.6 38.2
Operating profit/(loss) 39.8 40.7 84.3 4.8 31.1 66.2
Change in fair value of derivatives – – – – – –
Translation movement on intragroup funding loan – – – – – –
Other finance (costs)/income – (0.8) – (0.2) – (0.4)
Net finance (costs)/income – (0.8) – (0.2) – (0.4)
Profit/(Loss) before tax 39.8 39.9 84.3 4.6 31.1 65.8
Current tax charge – – – – – –
Deferred tax charge – – – – 0.1 –
Profit/(Loss) for the year 39.8 39.9 84.3 4.6 31.2 65.8
Hammerson share of profit/(loss) for the year 16.4 19.9 42.2 2.3 15.6 32.9
Hammerson share of distributions payable 2
– 8.3 22.3 1.2 7.8 –
Share of assets and liabilities of joint ventures as at 31 December 2017
Brent Cross Cabot Circus Bullring Grand Central The Oracle Westquay
£m £m £m £m £m £m
Non-current assets
Investment and development properties 1,040.6 646.3 1,267.9 344.7 678.0 702.5
Goodwill – – – – – –
Other non-current assets – 13.9 – 2.8 0.1 4.2
1,040.6 660.2 1,267.9 347.5 678.1 706.7
Current assets
Other current assets3 11.8 7.1 10.6 8.6 7.0 8.8
Cash and deposits 0.7 10.9 20.4 4.0 10.4 9.9
12.5 18.0 31.0 12.6 17.4 18.7
Current liabilities
Other payables (18.3) (14.8) (20.8) (10.2) (11.4) (13.9)
Tax – – – – – –
Loans and other borrowings – secured – – – – – –
(18.3) (14.8) (20.8) (10.2) (11.4) (13.9)
Non-current liabilities
Loans and other borrowings – secured – – – – – –
Obligations under finance leases – (13.9) – (2.8) – (4.2)
Other payables (1.2) (0.6) (1.4) (0.3) (1.0) (697.9)
Deferred tax – – – – (0.2) –
(1.2) (14.5) (1.4) (3.1) (1.2) (702.1)
Net assets 1,033.6 648.9 1,276.7 346.8 682.9 9.4
Hammerson share of net assets 421.1 324.5 638.4 173.4 341.4 4.7
Balance due to Hammerson4 – – – – – 348.2
Total investment in joint ventures4 421.1 324.5 638.4 173.4 341.4 352.9
100% Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio VIA Outlets Other 2017 ventures VIA Outlets 2017
£m £m £m £m £m £m £m £m £m
50 50 50 47 various
22.1 24.4 64.5 77.1 33.6 444.9 171.4 36.2 207.6
20.1 15.2 59.2 54.7 29.8 369.7 146.4 25.6 172.0
(0.1) (0.1) (0.6) (9.5) (0.2) (10.5) (0.5) (4.4) (4.9)
20.0 15.1 58.6 45.2 29.6 359.2 145.9 21.2 167.1
(24.0) (1.4) (3.3) 29.5 (19.1) 57.9 19.4 14.0 33.4
(4.0) 13.7 55.3 74.7 10.5 417.1 165.3 35.2 200.5
– – – 3.5 – 3.5 – 1.6 1.6
– – – 2.1 – 2.1 – 1.0 1.0
– – 5.9 (13.5) (2.9) (11.9) 1.6 (6.4) (4.8)
– – 5.9 (7.9) (2.9) (6.3) 1.6 (3.8) (2.2)
(4.0) 13.7 61.2 66.8 7.6 410.8 166.9 31.4 198.3
– – – (3.4) – (3.4) – (1.6) (1.6)
– – – (34.5) – (34.4) – (16.2) (16.2)
(4.0) 13.7 61.2 28.9 7.6 373.0
(2.0) 6.9 30.6 13.6 2.1 180.5 166.9 13.6 180.5
7.1 – 22.8 14.5 0.6 84.6
100% Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio VIA Outlets Other 2017 ventures VIA Outlets 2017
£m £m £m £m £m £m £m £m £m
334.5 363.9 1,557.0 1,278.8 835.9 9,050.1 3,611.1 600.3 4,211.4
– – – – – – – 3.6 3.6
– – – 0.5 – 21.5 10.5 0.2 10.7
334.5 363.9 1,557.0 1,279.3 835.9 9,071.6 3,621.6 604.1 4,225.7
2.8 5.7 24.0 30.4 14.3 131.1 52.7 14.5 67.2
15.4 22.6 17.9 44.6 7.9 164.7 58.5 20.9 79.4
18.2 28.3 41.9 75.0 22.2 295.8 111.2 35.4 146.6
(6.3) (24.6) (17.9) (43.0) (4.7) (185.9) (79.6) (20.2) (99.8)
(1.4) – – – – (1.4) (0.7) – (0.7)
– – – (58.8) (194.3) (253.1) (48.6) (27.7) (76.3)
(7.7) (24.6) (17.9) (101.8) (199.0) (440.4) (128.9) (47.9) (176.8)
– – (550.0) (355.8) – (905.8) (275.0) (166.8) (441.8)
– – – – – (20.9) (10.4) – (10.4)
– (104.9) (0.8) (8.2) (196.3) (1,012.6) (6.1) (3.8) (9.9)
– – – (127.2) – (127.4) – (59.7) (59.7)
– (104.9) (550.8) (491.2) (196.3) (2,066.7) (291.5) (230.3) (521.8)
345.0 262.7 1,030.2 761.3 462.8 6,860.3
172.5 131.3 515.1 361.3 125.1 3,208.8
– 52.4 – – 64.3 464.9
172.5 183.7 515.1 361.3 189.4 3,673.7 3,312.4 361.3 3,673.7
Share of results of joint ventures for the year ended 31 December 2016
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 (losses)/gains on properties1 (4.2) 7.9 24.6 (3.1) 2.3 (0.3)
Operating profit/(loss) 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 (costs)/income – (0.8) – – – (0.3)
Net finance (costs)/income – (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
Hammerson share of distributions payable 2
– 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 – – – – – –
Other non-current assets – 14.5 – 2.8 – 4.2
1,002.4 644.2 1,229.8 349.0 667.4 664.8
Current assets
Other current assets3 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)
Loans and other borrowings – secured – – – – – –
(19.3) (13.8) (20.4) (9.8) (242.1) (14.1)
Non-current liabilities
Loans and other 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)
Balance due to Hammerson 4
– – – – 115.6 339.7
Total investment in joint ventures4 409.1 313.3 618.4 174.0 337.0 330.9
1. The Hammerson share of revaluation gains within VIA Outlets of £14.0 million (2016: £18.4 million) includes revaluation gains on properties of £26.9 million (2016: £18.4
million) and deferred tax acquired of £12.9 million (2016: £nil).
2. In addition to the distributions payable, the Group received interest from its joint ventures of £17.4 million (2016: £38.6 million).
100% Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio VIA Outlets Other 2016 ventures VIA Outlets 2016
£m £m £m £m £m £m £m £m £m
50 50 50 47 various
21.3 26.0 27.9 34.4 34.1 351.4 145.9 16.1 162.0
18.8 15.6 25.4 23.7 29.4 291.5 122.9 11.2 134.1
(0.1) (0.1) (0.3) (4.5) (0.4) (5.5) (0.4) (2.3) (2.7)
18.7 15.5 25.1 19.2 29.0 286.0 122.5 8.9 131.4
– – – – – – – (0.1) (0.1)
(17.1) (0.2) 5.1 39.4 11.0 65.4 10.7 18.4 29.1
1.6 15.3 30.2 58.6 40.0 351.4 133.2 27.2 160.4
– – – 1.5 3.1 4.6 0.8 0.7 1.5
– – – 0.4 – 0.4 – 0.2 0.2
– – 34.6 (5.3) (6.0) 22.2 15.3 (2.2) 13.1
– – 34.6 (3.4) (2.9) 27.2 16.1 (1.3) 14.8
1.6 15.3 64.8 55.2 37.1 378.6 149.3 25.9 175.2
(1.4) – – (0.9) (0.3) (2.6) (0.8) (0.5) (1.3)
– – – (10.0) – (10.0) – (4.7) (4.7)
0.2 15.3 64.8 44.3 36.8 366.0
0.1 7.6 32.4 20.7 9.4 169.2 148.5 20.7 169.2
– – 8.2 – 0.6 47.8
100% Hammerson share
Irish Total Property joint Total
Silverburn Centrale/Whitgift portfolio VIA Outlets Other 2016 ventures VIA Outlets 2016
£m £m £m £m £m £m £m £m £m
356.2 304.2 1,500.2 644.5 815.6 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 1,500.2 644.5 815.6 8,178.3 3,500.9 305.6 3,806.5
5.1 4.2 119.6 18.1 14.3 211.2 100.2 8.5 108.7
9.9 13.0 25.0 39.9 11.0 152.4 54.8 18.7 73.5
15.0 17.2 144.6 58.0 25.3 363.6 155.0 27.2 182.2
(9.4) (22.2) (120.9) (27.4) (9.7) (509.1) (78.4) (12.9) (91.3)
– – – (4.5) (187.0) (191.5) (46.7) (2.1) (48.8)
(9.4) (22.2) (120.9) (31.9) (196.7) (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) (11.5) (197.5) (1,122.9) (5.3) (5.4) (10.7)
– – – (41.7) – (41.8) – (19.5) (19.5)
– (229.0) (0.5) (204.4) (197.5) (1,337.4) (16.1) (95.8) (111.9)
361.8 70.2 1,523.4 466.2 446.7 6,503.9
180.9 35.1 761.7 222.0 121.3 3,048.4
– 114.5 54.1 – 64.4 688.3
180.9 149.6 815.8 222.0 185.7 3,736.7 3,514.7 222.0 3,736.7
3. At 31 December 2016, the Hammerson share of other current assets of the Property joint ventures include loans of £54.1 million which were secured on retail properties
located in Dublin. These loans were converted into property assets in 2017.
4. 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.
B. Reconciliation to adjusted earnings
Property joint Total Property joint Total
ventures VIA Outlets 2017 ventures VIA Outlets 2016
£m £m £m £m £m £m
Profit for the year 166.9 13.6 180.5 148.5 20.7 169.2
Revaluation gains on properties (19.4) (26.9) (46.3) (10.7) (18.4) (29.1)
Deferred tax acquired – 12.9 12.9 – – –
Revaluation gains (19.4) (14.0) (33.4) (10.7) (18.4) (29.1)
Loss on sale of properties – – – – 0.1 0.1
Change in fair value of derivatives – (1.6) (1.6) (0.8) (0.7) (1.5)
Translation movements on intragroup funding loan1 – (1.0) (1.0) – (0.2) (0.2)
Deferred tax charge – 16.2 16.2 – 4.7 4.7
Total adjustments (19.4) (0.4) (19.8) (11.5) (14.5) (26.0)
Adjusted earnings of joint ventures 147.5 13.2 160.7 137.0 6.2 143.2
1. Foreign exchange differences on intragroup loan balances which are either commercially hedged or arise upon retranslation of euro-denominated loans between entities with
different functional currencies from the euro-denominated VIA Outlets group. These exchange differences do not give rise to any cash flow exposures in the VIA Outlets group.
C. Reconciliation to adjusted investment in joint ventures
Property joint Total Property joint Total
ventures VIA Outlets 2017 ventures VIA Outlets 2016
£m £m £m £m £m £m
Investment in joint ventures 3,312.4 361.3 3,673.7 3,514.7 222.0 3,736.7
Fair value of derivatives – 1.2 1.2 – 3.5 3.5
Deferred tax – 59.7 59.7 – 19.5 19.5
Goodwill as a result of deferred tax – (3.6) (3.6) – (3.5) (3.5)
Total adjustments – 57.3 57.3 – 19.5 19.5
Adjusted investment in joint ventures 3,312.4 418.6 3,731.0 3,514.7 241.5 3,756.2
D. Reconciliation of movements in investment in joint ventures
Property joint Total Property joint Total
ventures VIA Outlets 2017 ventures VIA Outlets 2016
£m £m £m £m £m £m
Balance at 1 January 3,514.7 222.0 3,736.7 3,102.8 110.8 3,213.6
Share of results of joint ventures 166.9 13.6 180.5 148.5 20.7 169.2
Advances/(Repayments) 35.7 129.9 165.6 (7.5) 70.6 63.1
Distributions and other receivables (111.9) (14.5) (126.4) (89.6) – (89.6)
Return of equity1 (275.0) – (275.0) – – –
Acquisition of additional interest in Irish loan portfolio2 56.2 – 56.2 – – –
Irish loan portfolio transferred to Reported Group3 (112.5) – (112.5) (82.8) – (82.8)
Advances on conversion of Irish loan portfolio to
property assets4 – – – 91.9 – 91.9
Transfer of investment property from Reported Group5 – – – 221.7 – 221.7
Other movements 1.0 – 1.0 4.6 – 4.6
Foreign exchange translation differences 37.3 10.3 47.6 125.1 19.9 145.0
Balance at 31 December 3,312.4 361.3 3,673.7 3,514.7 222.0 3,736.7
1. Finance raised in 2017, and secured on Dundrum Town Centre, was used to return £275 million of equity to each of the 50% joint venture partners. This finance is classified
as ‘loans and other borrowings - secured’ and included in non-current liabilities within the 100% results for the Irish portfolio in note 9A on pages 50 and 51.
2. In 2017, the Reported Group acquired a further interest in the interest-bearing loan secured on the Pavilions Swords property held within the Irish portfolio. This loan was
converted into property assets in September 2017. (See footnote 3 below).
3. In 2017, the element of the loan portfolio relating to Pavilions Swords was transferred to the Reported Group prior to conversion to property assets. Similarly in 2016, the
element of the loan portfolio relating to the Ilac Centre, Dublin Central and the Irish development sites were transferred to the Reported Group prior to conversion to property
assets. These properties are included within asset acquisitions for 2017 and 2016 in note 8 on page 48. The Reported Group has a 50% interest in Pavilions Swords and the
Ilac Centre which are held within joint operations and proportionally consolidated. Dublin Central and the Irish development sites are wholly owned by the Reported Group.
4. In 2016, further advances were made by the Reported Group to the Irish joint venture 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.
5. In 2016, the Group sold 50% stakes in Grand Central, Birmingham and Westquay North, Southampton for £175 million and £47 million respectively. The total is shown
separately in the comparative figures in note 8 on page 48 as a transfer to investment in joint ventures.
10: Investment in associates
At 31 December 2017, the Group had two associates: Value Retail PLC and its group entities (‘VR’) and a 10% interest in Nicetoile 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. Further details are provided in the
Financial Review on page 23.
Summaries of aggregated income and investment for the interest in Premium outlets, which includes VR and the Group’s investment in VIA
Outlets, which is accounted for as a joint venture (see note 9), are provided in Tables 13 and 14 of the Additional Disclosures on page 68.
A: Share of results of associates
2017
VR Nicetoile Total
Hammerson Hammerson Hammerson
100% share 100% share 100% share
£m £m £m £m £m £m
Gross rental income 341.5 103.1 15.9 1.6 357.4 104.7
Net rental income 236.0 72.0 14.1 1.4 250.1 73.4
Administration expenses (115.8) (33.8) – – (115.8) (33.8)
Operating profit before other net gains 120.2 38.2 14.1 1.4 134.3 39.6
Revaluation gains on properties 490.2 198.3 0.6 – 490.8 198.3
Operating profit 610.4 236.5 14.7 1.4 625.1 237.9
Net finance costs (56.0) (15.8) – – (56.0) (15.8)
Change in fair value of derivatives (25.5) (5.2) – – (25.5) (5.2)
Change in fair value of participative loans – revaluation
movement – 11.8 – – – 11.8
Change in fair value of participative loans – other movement – 2.9 – – – 2.9
Profit before tax 528.9 230.2 14.7 1.4 543.6 231.6
Current tax charge (15.0) (2.7) – – (15.0) (2.7)
Deferred tax charge (26.9) (5.9) – – (26.9) (5.9)
Profit for the year 487.0 221.6 14.7 1.4 501.7 223.0
2016
VR Nicetoile Total
Hammerson Hammerson Hammerson
100% share 100% share 100% share
£m £m £m £m £m £m
Gross rental income 295.7 84.6 14.8 1.5 310.5 86.1
Net rental income 201.4 56.5 13.2 1.3 214.6 57.8
Administration expenses (90.1) (22.4) – – (90.1) (22.4)
Operating profit before other net gains 111.3 34.1 13.2 1.3 124.5 35.4
Revaluation gains on properties 349.6 120.0 6.4 0.6 356.0 120.6
Operating profit 460.9 154.1 19.6 1.9 480.5 156.0
Net finance costs (49.5) (12.3) – – (49.5) (12.3)
Change in fair value of derivatives (61.5) (15.2) – – (61.5) (15.2)
Change in fair value of participative loans – revaluation
movement – 16.6 – – – 16.6
Change in fair value of participative loans – other movement – 4.7 – – – 4.7
Profit before tax 349.9 147.9 19.6 1.9 369.5 149.8
Current tax charge (13.7) (3.1) – – (13.7) (3.1)
Deferred tax charge (36.7) (9.6) – – (36.7) (9.6)
Profit for the year 299.5 135.2 19.6 1.9 319.1 137.1
B: Reconciliation to adjusted earnings
Total Total
VR Nicetoile 2017 VR Nicetoile 2016
£m £m £m £m £m £m
Profit for the year 221.6 1.4 223.0 135.2 1.9 137.1
Revaluation gains on properties (198.3) – (198.3) (120.0) (0.6) (120.6)
Change in fair value of derivatives 5.2 – 5.2 15.2 – 15.2
Change in fair value of participative loans – revaluation
movement (11.8) – (11.8) (16.6) – (16.6)
Loan facility costs written off 2.0 – 2.0 0.2 – 0.2
Deferred tax charge 5.9 – 5.9 9.6 – 9.6
Total adjustments (197.0) – (197.0) (111.6) (0.6) (112.2)
Adjusted earnings of associates 24.6 1.4 26.0 23.6 1.3 24.9
When aggregated, the Group’s share of VR’s adjusted earnings for the year ended 31 December 2017 amounted to 45.7% (2016: 47.1%).
C: Share of assets and liabilities of associates
2017
VR Nicetoile Total
Hammerson Hammerson Hammerson
100% share 100% share 100% share
£m £m £m £m £m £m
Goodwill on acquisition – 80.4 – – – 80.4
Investment properties 4,760.4 1,633.8 291.0 29.1 5,051.4 1,662.9
Other non-current assets 213.9 52.0 – – 213.9 52.0
Non-current assets 4,974.3 1,766.2 291.0 29.1 5,265.3 1,795.3
Other current assets 71.8 22.5 8.0 0.8 79.8 23.3
Cash and deposits 294.2 113.4 14.1 1.4 308.3 114.8
Current assets 366.0 135.9 22.1 2.2 388.1 138.1
Total assets 5,340.3 1,902.1 313.1 31.3 5,653.4 1,933.4
Other payables (188.1) (94.3) (2.1) (0.2) (190.2) (94.5)
Loans and other borrowings (4.4) (1.1) – – (4.4) (1.1)
Current liabilities (192.5) (95.4) (2.1) (0.2) (194.6) (95.6)
Loans and other borrowings (1,765.4) (624.2) – – (1,765.4) (624.2)
Other payables (336.0) (90.4) (2.5) (0.2) (338.5) (90.6)
Deferred tax (594.1) (152.3) – – (594.1) (152.3)
Non-current liabilities (2,695.5) (866.9) (2.5) (0.2) (2,698.0) (867.1)
Total liabilities (2,888.0) (962.3) (4.6) (0.4) (2,892.6) (962.7)
Net assets 2,452.3 939.8 308.5 30.9 2,760.8 970.7
Participative loans 1
128.8 – 128.8
Investment in associates 1,068.6 30.9 1,099.5
2016
VR Nicetoile Total
Hammerson Hammerson Hammerson
100% share 100% share 100% share
£m £m £m £m £m £m
Goodwill on acquisition – 77.0 – – – 77.0
Investment properties 4,095.9 1,387.3 277.3 27.7 4,373.2 1,415.0
Other non-current assets 182.0 44.2 – – 182.0 44.2
Non-current assets 4,277.9 1,508.5 277.3 27.7 4,555.2 1,536.2
Other current assets 52.6 16.7 3.8 0.4 56.4 17.1
Cash and deposits 169.4 53.0 13.6 1.4 183.0 54.4
Current assets 222.0 69.7 17.4 1.8 239.4 71.5
Total assets 4,499.9 1,578.2 294.7 29.5 4,794.6 1,607.7
Other payables (70.0) (43.3) (2.1) (0.2) (72.1) (43.5)
Loans and other borrowings (4.3) (1.0) – – (4.3) (1.0)
Current liabilities (74.3) (44.3) (2.1) (0.2) (76.4) (44.5)
Loans and other borrowings (1,382.6) (465.3) – – (1,382.6) (465.3)
Other payables (305.5) (82.3) (2.4) (0.3) (307.9) (82.6)
Deferred tax (545.6) (140.9) – – (545.6) (140.9)
Non-current liabilities (2,233.7) (688.5) (2.4) (0.3) (2,236.1) (688.8)
Total liabilities (2,308.0) (732.8) (4.5) (0.5) (2,312.5) (733.3)
Net assets 2,191.9 845.4 290.2 29.0 2,482.1 874.4
Participative loans1 113.7 – 113.7
Investment in associates 959.1 29.0 988.1
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. Included within the participative loan of £128.8 million
(2016: £113.7 million) is an embedded derivative of £121.9 million (2016: £106.6 million) which is classified as a ‘fair value through profit and loss’ financial asset. The fair
value movement on this embedded derivative of £14.7 million (2016: £21.3 million) is included within the Group's share of the profit from associates within the income
statement. The value of the underlying host participative loan is £6.9 million (2016: £7.1 million) which is treated as an ‘available for sale’ financial asset, with the fair
value movement of £0.5 million (2016: £0.3 million) being recognised within other comprehensive income.
2. The analysis in the tables above excludes liabilities in respect of distributions received in advance from VR amounting to £16.6 million (2016: £18.9 million) which are
included within non-current liabilities in note 18.
At 31 December 2017, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 40.3% (2016: 40.2%).
Adjusting for the Participative Loans, which at 100% are included within other payables in non-current liabilities, Hammerson’s economic share
is calculated as 35.5 % (2016: 35.5%).
D: Reconciliation to adjusted investment in associates
Total Total
VR Nicetoile 2017 VR Nicetoile 2016
£m £m £m £m £m £m
Investment in associates 1,068.6 30.9 1,099.5 959.1 29.0 988.1
Fair value of derivatives (10.9) – (10.9) (0.3) – (0.3)
Deferred tax 152.3 – 152.3 140.9 – 140.9
Goodwill as a result of deferred tax (53.5) – (53.5) (53.5) – (53.5)
Total adjustments 87.9 – 87.9 87.1 – 87.1
Adjusted investment in associates 1,156.5 30.9 1,187.4 1,046.2 29.0 1,075.2
E: Reconciliation of movements in investment in associates
Total Total
VR Nicetoile 2017 VR Nicetoile 2016
£m £m £m £m £m £m
Balance at 1 January 959.1 29.0 988.1 743.8 24.2 768.0
Acquisitions 0.9 – 0.9 40.8 – 40.8
Share of results of associates 221.6 1.4 223.0 135.2 1.9 137.1
Distributions (129.8) (1.1) (130.9) (17.0) – (17.0)
Change in fair value of participative loans (note 10C) (0.5) – (0.5) (0.3) – (0.3)
Exchange and other movements 17.3 1.6 18.9 56.6 2.9 59.5
Balance at 31 December 1,068.6 30.9 1,099.5 959.1 29.0 988.1
11: Receivables: non-current assets
2017 2016
£m £m
Loans receivable 1.8 21.6
Other receivables 2.0 4.0
Fair value of interest rate swaps 6.3 19.3
Fair value of currency swaps 10.3 –
20.4 44.9
All loans receivable are classified as available for sale and held at fair value and are analysed below:
2017 2016
£m £m
Value Retail European Holdings BV: €2.0 million (2016: €2.0 million) maturing 30 November 2043 1.8 1.7
VR Milan S.R.L.: €nil (2016: €23.3 million) maturing 13 December 2018 – 19.9
1.8 21.6
12: Receivables: current assets
2017 2016
£m £m
Trade receivables 52.3 52.4
Other receivables 54.2 50.0
Corporation tax – 0.6
Prepayments 4.0 2.9
110.5 105.9
Trade receivables are shown after deducting a provision for bad and doubtful debts of £14.2 million (2016: £17.0 million). The level of provision
required is determined after taking account of rent deposits and personal or corporate guarantees held.
13: Restricted monetary assets
2017 2016
£m £m
Cash held on behalf of third parties 37.3 35.1
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
2017 2016
£m £m
Cash at bank 205.9 74.1
Short-term deposits – 0.2
205.9 74.3
Currency profile
Sterling 133.5 48.0
Euro 72.4 26.3
205.9 74.3
15: Payables: current liabilities
2017 2016
£m £m
Trade payables 26.5 33.9
Net pension liability 0.8 0.9
Withholding tax on interim dividends (note 6) 13.4 11.5
Capital expenditure payables 34.2 38.4
Other payables 75.4 72.4
Accruals 85.5 121.9
Deferred income 25.3 24.8
261.1 303.8
16: Loans and other borrowings
A: Analysis
2017 2016
£m £m
Unsecured
£200 million 7.25% sterling bonds due 2028 198.3 198.2
£300 million 6% sterling bonds due 2026 297.9 297.8
£350 million 3.5% sterling bonds due 2025 345.8 345.3
€500 million 1.75% euro bonds due 2023 441.3 424.3
€500 million 2% euro bonds due 2022 440.4 423.2
£250 million 6.875% sterling bonds due 2020 – 248.9
€500 million 2.75% euro bonds due 2019 442.4 425.1
Bank loans and overdrafts 496.6 800.0
Senior notes due 20311 21.3 –
Senior notes due 20281 89.9 –
Senior notes due 20261 87.3 25.6
Senior notes due 20241 350.0 153.4
Senior notes due 20211 141.2 151.8
3,352.4 3,493.6
Fair value of currency swaps2 100.6 2.7
3,453.0 3,496.3
Analysed as:
Current liabilities 1.7 211.1
Non-current liabilities 3,451.3 3,285.2
3,453.0 3,496.3
At 31 December 2017 and 2016 no loans and other borrowings were repayable by instalments.
1. The Senior notes comprise £386.6 million (2016: £234.6 million) denominated in US dollar, £208.1 million (2016: £51.2 million) denominated in euro and £95.0 million
(2016: £45.0 million) denominated in sterling.
2. In addition, currency swap assets of £10.3 million (2016: £nil) are included in non-current receivables in note 11.
B: Financing strategy
The Group generally borrows on an unsecured basis on the strength of its covenant in order to maintain operational flexibility. Borrowings are
arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. Acquisitions may be financed initially using short-term
funds before being refinanced for the longer term when market conditions are appropriate. Long-term debt mainly comprises the Group’s fixed
rate unsecured bonds. Short-term funding is raised principally through syndicated revolving credit facilities from a range of banks and financial
institutions with which the Group maintains strong working relationships. An analysis of the maturity of the undrawn element of these revolving
credit facilities is shown in note 16C.
The Group’s borrowing position at 31 December 2017 is summarised below:
Receivables: Loans and other Loans and other 2017 2016
Non-current assets borrowings <1year borrowings >1year Total Total
£m £m £m £m £m
Notes 11 16A 16A 20 20
Borrowings
Bonds – – 2,166.1 2,166.1 2,362.8
Bank loans and overdrafts – – 496.6 496.6 800.0
Senior notes – – 689.7 689.7 330.8
Fair value of currency swaps (10.3) 1.7 98.9 90.3 2.7
(10.3) 1.7 3,451.3 3,442.7 3,496.3
C: Undrawn committed facilities
The maturity analysis of the undrawn element of the revolving credit facilities at 31 December 2017 is summarised below:
2017 2016
£m £m
Expiry
Within two to five years 692.6 327.0
Within one to two years – 125.0
Within one year – 9.2
692.6 461.2
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:
2017 2016
Book value Fair value Variance Book value Fair value Variance
£m £m £m £m £m £m
Unsecured bonds 2,166.1 2,420.4 254.3 2,362.8 2,657.7 294.9
Senior notes 689.7 691.6 1.9 330.8 347.0 16.2
Unsecured bank loans and overdrafts 496.6 502.4 5.8 800.0 805.0 5.0
Fair value of currency swaps 90.3 90.3 – 2.7 2.7 –
Borrowings 3,442.7 3,704.7 262.0 3,496.3 3,812.4 316.1
Interest rate swaps (6.3) (6.3) – (19.3) (19.3) –
18: Payables: non-current liabilities
2017 2016
£m £m
Net pension liability 50.6 53.8
Other payables 33.6 42.2
84.2 96.0
19: Share capital
2017 2016
Called-up, allotted and fully paid £m £m
Ordinary shares of 25p each 198.6 198.3
Number
Movements in number of shares in issue
Number of shares in issue at 1 January 2017 793,188,451
New share issue – transferred to investment in own shares 1,000,000
Share options exercised – Savings-Related Share Option Scheme 37,967
Number of shares in issue at 31 December 2017 794,226,418
20: Analysis of movement in net debt
2017 2016
Cash and Cash and
deposits Borrowings Net debt deposits Borrowings Net debt
£m £m £m £m £m £m
Notes 14 16B 14 16B
At 1 January 74.3 (3,496.3) (3,422.0) 37.0 (2,998.1) (2,961.1)
Cash flow 130.6 160.8 291.4 34.0 (102.3) (68.3)
Change in fair value of currency swaps – 9.0 9.0 – (6.7) (6.7)
Exchange 1.0 (116.2) (115.2) 3.3 (389.2) (385.9)
At 31 December 205.9 (3,442.7) (3,236.8) 74.3 (3,496.3) (3,422.0)
Borrowings comprise loans and other borrowings of £3,453.0 million (2016: £3,496.3 million), as shown in note 16A, less the fair value of
currency swap assets of £10.3 million (2016: £nil), included in non-current receivables in note 11.
21: Adjustment for non-cash items in the cash flow statement
2017 2016
£m £m
Amortisation of lease incentives and other costs 7.7 6.8
Increase in provision for bad and doubtful debts 0.5 5.2
Increase in accrued rents receivable (4.9) (6.4)
Depreciation 2.1 2.0
Share-based employee remuneration 5.4 5.6
Other items (1.7) (1.6)
9.1 11.6
22: Contingent liabilities and capital commitments
There are contingent liabilities of £65.6 million (2016: £68.6 million) relating to guarantees given by the Reported Group and a further £14.2
million (2016: £15.0 million) relating to claims against the Reported Group arising in the normal course of business, which are considered to be
unlikely to crystallise. In addition, Hammerson’s share of contingent liabilities arising within joint ventures is £18.3 million (2016: £18.7 million).
The Reported Group also had capital commitments of £62.4 million (2016: £20.7 million) in relation to future capital expenditure on investment
and development properties. Hammerson’s share of the capital commitments arising within joint ventures is £26.6 million (2016: £174.9
million).
The risks and uncertainties facing the Group are detailed on pages 30 to 32.
23: Non-controlling interests
The Group’s non-controlling interest represents a 35.5% interest held by Assurbail in Société Civile de Développement du Centre Commercial
de la Place des Halles SDPH SC, which owned Place des Halles, Strasbourg. The entity disposed of its interest in this property in December
2017, with the exception of a residual unit which will be sold later this year.
As a result of the property disposal, exchange gains previously recognised in equity have been recycled to the income statement in 2017. The
non-controlling interest’s share of these exchange gains was £19.6 million (2016: £nil) and is included in its share of the profit for the year of
£23.2 million (2016: £3.6 million).
A distribution of £74.2 million (2016: £2.3 million) was paid to Assurbail during the year. At 31 December 2017, the non-controlling interests of
£14.0 million (2016: £81.4 million) principally represents remaining cash from the sale of the property held within the entity at the balance sheet
date, which will be distributed in 2018.
The balances and movements during the year associated with the non-controlling interests are shown on the Consolidated Statement of
Changes in Equity on pages 37 and 38.
ADDITIONAL DISCLOSURES
UNAUDITED
Table 1
Table Page Table Page
EPRA measures Share of Property interests
EPRA performance measures 2 62 Income statement 11 67
Portfolio analysis Balance sheet 12 67
Rental information 3 63 Premium outlets
Rent reviews 4 63 Income statement 13 68
Lease expiries and breaks 5 64 Balance sheet 14 68
Net rental income 6 64 Proportionally consolidated
Top ten tenants 7 65 information
Cost ratio 8 65 Balance sheet 15 69
Valuation analysis 9 66 Adjusted finance costs 16 70
Yield analysis 10 66 Net debt 17 70
Loan to value and gearing 18 70
Net debt:EBITDA 19 71
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 2016 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 2.
Table 2
EPRA performance measures
2017 2016
Performance measure performance performance Definition Page
Earnings £247.3m £230.9m Recurring earnings from core operational activities. In 2017, EPRA 46
earnings differed by £1.0 million (2016: £0.2 million) from the Group’s
adjusted earnings due to the inclusion of a ‘Company specific adjustment’
in relation to foreign exchange translation movements on an intragroup
funding loan in VIA Outlets which has no cash flow impact (see note 7B of
the financial statements) and which management believe distorts the
underlying earnings of the Group.
Earnings per share (EPS) 31.2p 29.2p EPRA earnings divided by the weighted average number of shares in 46
issue during the period. As stated in ‘Earnings’ above, the EPRA EPS is
0.1p higher than the Group’s adjusted EPS of 31.1p due to the VIA
Outlets intragroup funding loan adjustment.
Net asset value (NAV) £7.76 £7.39 Equity shareholders' funds excluding the fair values of certain financial 47
per share derivatives, deferred tax balances and any associated goodwill divided by
the diluted number of shares in issue.
Triple net asset value £7.25 £6.88 Equity shareholders' funds adjusted to include the fair values of 47
(NNNAV) per share borrowings.
Net Initial Yield (NIY) 4.4% 4.4% Annual cash rents receivable, less head and equity rents and any non- 66
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% 4.6% EPRA NIY adjusted for the expiry of rent-free periods. 66
Vacancy rate 1.7% 2.5% The estimated market rental value (ERV) of vacant space divided by the 63
ERV of the whole portfolio. Occupancy is the inverse of vacancy.
Cost ratio 21.6% 22.6% Total operating costs as a percentage of gross rental income, after rents 65
payable. Both operating costs and gross rental income are adjusted for
costs associated with inclusive leases.
Portfolio analysis
Rental information
Table 3
Rental data for the year ended 31 December 2017
Average
Gross rental Net rental rents Rents Estimated Reversion/
income income Vacancy rate passing1 passing rental value2 (over-rented)
Proportionally consolidated excluding premium outlets £m £m % £/m² £m £m %
United Kingdom
Shopping centres 180.2 152.9 1.9 540 175.7 186.7 4.5
Retail parks 72.4 69.3 0.6 215 77.5 75.4 (3.4)
Other 12.3 8.8 8.1 155 12.9 14.1 0.2
264.9 231.0 1.8 365 266.1 276.2 2.1
France 104.6 95.3 2.1 470 83.1 91.7 7.8
Ireland 37.9 34.8 0.3 455 41.6 43.3 3.9
Investment portfolio 407.4 361.1 1.7 395 390.8 411.2 3.5
Developments3 14.5 9.3
Property portfolio (note 2) 421.9 370.4
Selected data for the year ended 31 December 2016
Group
UK 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
Investment portfolio 386.8 339.1 2.5 390 392.5 420.0 4.4
Developments 11.9 7.4
Property portfolio (note 2) 398.7 346.5
Notes
1. Average rents passing at the year end before deducting head and equity rents and excluding rents passing from anchor units and car parks.
2. 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. The total ERV for the Reported Group at 31 December 2017 was £239.8 million (2016: £251.2
million).
3. Rental income for Developments is principally in relation to the Whitgift Centre, Croydon; Dublin Central and ancillary properties associated with our development pipeline in
Dublin and Leeds.
Rent reviews
Table 4
Rent reviews as at 31 December 2017
Rents passing subject to review in1 Current ERV of leases subject to review in2
Proportionally consolidated excluding premium Outstanding 2018 2019 2020 Total Outstanding 2018 2019 2020 Total
outlets £m £m £m £m £m £m £m £m £m £m
United Kingdom
Shopping centres 17.7 18.5 23.3 16.9 76.4 18.4 20.0 24.8 17.9 81.1
Retail parks 14.7 4.9 10.0 20.1 49.7 15.0 5.0 10.6 20.8 51.4
Other 3.0 0.5 1.2 0.6 5.3 3.1 0.5 1.5 0.7 5.8
35.4 23.9 34.5 37.6 131.4 36.5 25.5 36.9 39.4 138.3
Ireland 11.1 3.4 3.4 17.0 34.9 11.8 3.6 3.6 18.7 37.7
Total3 46.5 27.3 37.9 54.6 166.3 48.3 29.1 40.5 58.1 176.0
Notes
1. The amount of rental income, based on rents passing at 31 December 2017, for leases which are subject to review in each year.
2. 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 2017. For
outstanding reviews the ERV is as at the review date.
3. Leases in France are not subject to rent reviews but instead are adjusted annually based on French indexation indices.
Lease expiries and breaks
Table 5
Lease expiries and breaks as at 31 December 2017
Weighted average
Rents passing that expire/break in1 ERV of leases that expire/break in2 unexpired lease term
2018 2019 2020 Total 2018 2019 2020 Total to break to expiry
Proportionally consolidated excluding premium outlets £m £m £m £m £m £m £m £m years years
United Kingdom
Shopping centres 30.5 14.3 10.3 55.1 36.2 15.2 10.8 62.2 6.0 10.5
Retail parks 2.9 3.7 6.8 13.4 2.8 3.9 6.8 13.5 7.7 8.6
Other 3.4 0.8 1.5 5.7 3.6 1.1 1.7 6.4 7.5 8.4
36.8 18.8 18.6 74.2 42.6 20.2 19.3 82.1 6.6 9.8
France 11.0 2.2 4.3 17.5 13.3 2.5 4.7 20.5 2.8 5.6
Ireland 2.5 2.4 3.1 8.0 3.1 2.7 3.4 9.2 8.7 11.6
Investment portfolio 50.3 23.4 26.0 99.7 59.0 25.4 27.4 111.8 5.9 9.0
Notes
1. The amount of rental income, based on rents passing at 31 December 2017, for leases which expire or, for the UK and Ireland only, are subject to tenant break options,
which fall due in each year.
2. The ERV at 31 December 2017 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.
Net rental income
Table 6
Net rental income for the year ended 31 December 2017
Increase
for properties
Properties owned
owned throughout throughout Developments
2016/17 2016/17 Acquisitions Disposals and other Total
Proportionally consolidated excluding premium outlets £m % £m £m £m £m
United Kingdom
Shopping centres 140.4 1.8 3.8 0.1 8.6 152.9
Retail parks 66.0 (2.5) – 3.1 0.2 69.3
Other – – – – 14.5 14.5
206.4 0.4 3.8 3.2 23.3 236.7
France 74.8 2.6 0.7 18.8 1.5 95.8
Ireland – n/a 37.9 – – 37.9
Property portfolio 281.2 1.0 42.4 22.0 24.8 370.4
Net rental income for the year ended 31 December 2016
Properties
owned throughout Developments
2016/17 Exchange Acquisitions Disposals and other Total
Proportionally consolidated excluding premium outlets £m £m £m £m £m £m
United Kingdom
Shopping centres 137.9 – 4.3 4.3 1.7 148.2
Retail parks 67.6 – – 12.0 – 79.6
Other – – – – 15.4 15.4
205.5 – 4.3 16.3 17.1 243.2
France 73.0 (6.5) 0.5 21.0 1.3 89.3
Ireland – (1.0) 15.0 – – 14.0
Property portfolio 278.5 (7.5) 19.8 37.3 18.4 346.5
Following the acquisition of the Irish loan portfolio in October 2015, the underlying net rental income derived from the property assets secured
against the debt was in the form of finance income. Had this been treated as net rental income, the like-for-like net rental income growth for the
Irish properties in 2017 would have been 7.4%, which would have increased the Group’s like-for-like net rental income growth to 1.7%.
Top ten tenants
Table 7
Ranked by passing rent at 31 December 2017
Passing rent % of total
Proportionally consolidated excluding premium outlets £m passing rent
B&Q 12.6 3.2
Inditex 9.3 2.4
Next 9.0 2.3
H&M 8.8 2.3
Boots 5.6 1.4
Dixons Carphone 5.2 1.3
Arcadia 5.2 1.3
Marks & Spencer 5.1 1.3
Debenhams 5.1 1.3
River Island 5.1 1.3
Total 71.0 18.1
Cost ratio
Table 8
EPRA cost ratio
Year ended
Year ended 31 December
31 December 2017 2016
Proportionally consolidated excluding premium outlets £m £m
Net service charge expenses – non-vacancy 7.8 6.5
Net service charge expenses – vacancy 7.5 8.0
Net service charge expenses – total 15.3 14.5
Other property outgoings 32.1 33.6
Less inclusive lease costs recovered through rent (7.7) (6.6)
Total property costs (for cost ratio) 39.7 41.5
Employee and corporate costs 61.0 54.6
Management fees receivable (12.1) (8.5)
Total operating costs (for cost ratio) 88.6 87.6
Gross rental income 421.9 398.7
Ground and equity rents payable (4.1) (4.1)
Less inclusive lease costs recovered through rent (7.7) (6.6)
Gross rental income (for cost ratio) 410.1 388.0
EPRA cost ratio including net service charge expenses – vacancy (%) 21.6 22.6
EPRA cost ratio excluding net service charge expenses – vacancy (%) 19.8 20.5
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. During the year ended 31 December 2017,
staff costs amounting to £0.1 million (2016: £1.6 million) were capitalised as development costs and are not included within ‘Employee and
corporate costs’.
Valuation analysis
Table 9
Valuation analysis at 31 December 2017
True Nominal
Properties Revaluation Capital Total Initial equivalent equivalent
at valuation in the year return return yield yield yield1
Proportionally consolidated including premium outlets £m £m % % % % %
United Kingdom
Shopping centres 3,488.9 23.9 0.7 5.2 4.4 5.1 4.9
Retail parks 1,234.1 (27.2) (2.5) 2.8 5.5 6.2 6.0
Other 180.1 13.4 8.8 14.5 5.2 7.2 6.9
4,903.1 10.1 0.1 4.9 4.7 5.5 5.3
France 1,887.0 (11.4) (1.3) 3.1 3.9 4.4 4.3
Ireland 959.6 (1.5) 0.2 4.2 4.0 4.4 4.3
Investment portfolio 7,749.7 (2.8) (0.3) 4.3 4.4 5.0 4.9
Developments 576.6 24.1 4.7 6.9
Property portfolio – excluding premium outlets 8,326.3 21.3 0.0 4.5
Premium outlets2 2,234.1 225.2 11.5 16.8
Total Group 10,560.4 246.5 2.2 6.8
Selected data for the year ended 31 December 2016
Group
UK 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
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
Property portfolio – excluding premium outlets 8,281.7 (13.4) (0.4) 4.1
2
Premium outlets 1,689.4 138.4 9.6 15.1
Total Group 9,971.1 125.0 1.1 5.7
Notes
1. 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. The
nominal equivalent yields for the Reported Group at 31 December 2017 was 5.1% (2016: 5.1%).
2. Represents the Group’s share of premium outlets through its investments in Value Retail and VIA Outlets, and the revaluation in the year excludes acquired deferred tax.
Yield analysis
Table 10
Investment portfolio as at 31 December 2017
Income Gross value Net book value
Proportionally consolidated excluding premium outlets £m £m £m
Portfolio value (net of cost to complete) 8,226 8,226
Purchasers’ costs1 (476)
Net investment portfolio valuation on a proportionally consolidated basis 7,750
Income and yields
Rent for valuers’ initial yield (equivalent to EPRA Net Initial Yield) 364.3 4.4% 4.7%
Rent-free periods (including pre-lets)2 12.6 0.2% 0.2%
Rent for ‘topped-up’ initial yield3 376.9 4.6% 4.9%
Non-recoverable costs (net of outstanding rent reviews) 13.9 0.2% 0.2%
Passing rents 390.8 4.8% 5.1%
ERV of vacant space 6.7 0.1% 0.1%
Reversions 13.7 0.2% 0.2%
Total ERV/Reversionary yield 411.2 5.1% 5.4%
True equivalent yield 5.0%
Nominal equivalent yield 4.9%
Notes
1. Purchasers’ costs equate to 6.1% of the net portfolio value.
2. The weighted average remaining rent-free period is 0.5 years.
3. 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 Property joint ventures as shown in note 9 to the financial statements on pages
49 to 54 and the Group’s interest in Nicetoile, which is accounted for as an associate, as shown in note 10 to the financial statements on pages
55 to 57.
Table 11
Income statement
2017 2016
Property Property Share of
joint Share of Property joint Property
ventures Nicetoile interests ventures Nicetoile interests
£m £m £m £m £m £m
Gross rental income 171.4 1.6 173.0 145.9 1.5 147.4
Net rental income 146.4 1.4 147.8 122.9 1.3 124.2
Administration expenses (0.5) – (0.5) (0.4) – (0.4)
Operating profit before other net gains 145.9 1.4 147.3 122.5 1.3 123.8
Revaluation gains on properties 19.4 – 19.4 10.7 0.6 11.3
Operating profit 165.3 1.4 166.7 133.2 1.9 135.1
Change in fair value of derivatives – – – 0.8 – 0.8
Other finance income 1.6 – 1.6 15.3 – 15.3
Net finance income 1.6 – 1.6 16.1 – 16.1
Profit before tax 166.9 1.4 168.3 149.3 1.9 151.2
Current tax charge – – – (0.8) – (0.8)
Profit for the year 166.9 1.4 168.3 148.5 1.9 150.4
Table 12
Balance sheet
2017 2016
Property Property Share of
joint Share of Property joint Property
ventures Nicetoile interests ventures Nicetoile interests
£m £m £m £m £m £m
Non-current assets
Investment and development properties 3,611.1 29.1 3,640.2 3,490.1 27.7 3,517.8
Interests in leasehold properties 10.4 – 10.4 10.8 – 10.8
Other non-current assets 0.1 – 0.1 – – –
3,621.6 29.1 3,650.7 3,500.9 27.7 3,528.6
Current assets
Other current assets 52.7 0.8 53.5 100.2 0.4 100.6
Cash and deposits 58.5 1.4 59.9 54.8 1.4 56.2
111.2 2.2 113.4 155.0 1.8 156.8
Total assets 3,732.8 31.3 3,764.1 3,655.9 29.5 3,685.4
Current liabilities
Other payables (79.6) (0.2) (79.8) (78.4) (0.2) (78.6)
Tax (0.7) – (0.7) – – –
Loans and other borrowings (48.6) – (48.6) (46.7) – (46.7)
(128.9) (0.2) (129.1) (125.1) (0.2) (125.3)
Non-current liabilities
Loans and other borrowings (275.0) – (275.0) – – –
Obligations under finance leases (10.4) – (10.4) (10.8) – (10.8)
Other payables (6.1) (0.2) (6.3) (5.3) (0.3) (5.6)
(291.5) (0.2) (291.7) (16.1) (0.3) (16.4)
Total liabilities (420.4) (0.4) (420.8) (141.2) (0.5) (141.7)
Net assets 3,312.4 30.9 3,343.3 3,514.7 29.0 3,543.7
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 13 and 14 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 financial statements on pages 55 to 57 and for VIA Outlets in note 9 to the financial statements on
pages 49 to 54.
Income statement
Table 13
Aggregated premium outlets income summary
2017 2016
Value Retail VIA Outlets Total Value Retail VIA Outlets Total
£m £m £m £m £m £m
Share of results (IFRS) 221.6 13.6 235.2 135.2 20.7 155.9
Less adjustments:
Revaluation gains on properties (198.3) (26.9) (225.2) (120.0) (18.4) (138.4)
Deferred tax acquired – 12.9 12.9 – – –
Revaluation gains (198.3) (14.0) (212.3) (120.0) (18.4) (138.4)
Change in fair value of derivatives 5.2 (1.6) 3.6 15.2 (0.7) 14.5
Deferred tax charge 5.9 16.2 22.1 9.6 4.7 14.3
Other adjustments (9.8) (1.0) (10.8) (16.4) (0.1) (16.5)
(197.0) (0.4) (197.4) (111.6) (14.5) (126.1)
Adjusted earnings of premium outlets 24.6 13.2 37.8 23.6 6.2 29.8
Balance sheet
Table 14
Aggregated premium outlets investment summary
2017 2016
Value Retail VIA Outlets Total Value Retail VIA Outlets Total
£m £m £m £m £m £m
Investment properties 1,633.8 600.3 2,234.1 1,387.3 302.1 1,689.4
Net debt (511.9) (173.6) (685.5) (413.3) (54.3) (467.6)
Other net liabilities (53.3) (65.4) (118.7) (14.9) (25.8) (40.7)
Share of net assets (IFRS) 1,068.6 361.3 1,429.9 959.1 222.0 1,181.1
Less adjustments:
Fair value of derivatives (10.9) 1.2 (9.7) (0.3) 3.5 3.2
Deferred tax 152.3 59.7 212.0 140.9 19.5 160.4
Goodwill as a result of deferred tax (53.5) (3.6) (57.1) (53.5) (3.5) (57.0)
87.9 57.3 145.2 87.1 19.5 106.6
Adjusted investment 1,156.5 418.6 1,575.1 1,046.2 241.5 1,287.7
In addition to the above figures, at 31 December 2017 the Group had provided loans of £1.8 million (2016: £21.6 million) to Value Retail for
which the Group received interest of £0.3 million in 2017 (2016: £4.2 million) which is included within finance income in note 4 to the financial
statements on page 44.
Proportionally consolidated information
Note 2 to the financial statements on pages 41 and 42 shows the proportionally consolidated income statement. The proportionally
consolidated balance sheet, adjusted finance costs and net debt and are shown in Tables 15, 16 and 17 respectively.
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 Property joint ventures as shown in note 9 to the financial statements on pages 49 to 54 and
Nicetoile as shown in note 10 to the financial statements on pages 55 to 57. Column C shows the Group’s proportionally consolidated figures
by aggregating the Reported Group and Share of Property interests figures. As explained on page 23 of the Financial Review, the Group’s
interests in premium outlets are not proportionally consolidated as management does not review these interests on this basis.
Balance sheet
Table 15
Balance sheet as at 31 December 2017
2017 2016
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 4,686.1 3,640.2 8,326.3 4,763.9 3,517.8 8,281.7
Interests in leasehold properties 37.2 10.4 47.6 36.4 10.8 47.2
Plant and equipment 5.1 – 5.1 6.2 – 6.2
Investment in joint ventures 3,673.7 (3,312.4) 361.3 3,736.7 (3,514.7) 222.0
Investment in associate 1,099.5 (30.9) 1,068.6 988.1 (29.0) 959.1
Receivables 20.4 0.1 20.5 44.9 – 44.9
9,522.0 307.4 9,829.4 9,576.2 (15.1) 9,561.1
Current assets
Receivables 110.5 32.2 142.7 105.9 84.8 190.7
Restricted monetary assets 37.3 21.3 58.6 35.1 15.8 50.9
Cash and deposits 205.9 59.9 265.8 74.3 56.2 130.5
353.7 113.4 467.1 215.3 156.8 372.1
Total assets 9,875.7 420.8 10,296.5 9,791.5 141.7 9,933.2
Current liabilities
Payables (261.1) (79.8) (340.9) (303.8) (78.6) (382.4)
Tax (0.5) (0.7) (1.2) (0.4) – (0.4)
Loans and other borrowings (1.7) (48.6) (50.3) (211.1) (46.7) (257.8)
(263.3) (129.1) (392.4) (515.3) (125.3) (640.6)
Non-current liabilities
Loan and other borrowings (3,451.3) (275.0) (3,726.3) (3,285.2) – (3,285.2)
Deferred tax (0.5) – (0.5) (0.5) – (0.5)
Obligations under finance leases (38.9) (10.4) (49.3) (37.5) (10.8) (48.3)
Payables (84.2) (6.3) (90.5) (96.0) (5.6) (101.6)
(3,574.9) (291.7) (3,866.6) (3,419.2) (16.4) (3,435.6)
Total liabilities (3,838.2) (420.8) (4,259.0) (3,934.5) (141.7) (4,076.2)
Net assets 6,037.5 – 6,037.5 5,857.0 – 5,857.0
Adjusted finance costs
Table 16
Adjusted finance costs for the year ended 31 December 2017
2017 2016
Share of Share of
Reported Property Reported Property
Group interests Total Group interests Total
£m £m £m £m £m £m
Notes (see page 69) A B C A B C
Gross finance costs 126.1 3.1 129.2 126.3 2.1 128.4
Less: Interest capitalised (0.8) – (0.8) (5.1) – (5.1)
Finance costs 125.3 3.1 128.4 121.2 2.1 123.3
Finance income (16.1) (4.7) (20.8) (12.4) (17.4) (29.8)
Adjusted finance costs/(income) (note 2) 109.2 (1.6) 107.6 108.8 (15.3) 93.5
Net debt
Table 17
Net debt as at 31 December 2017
2017 2016
Share of Share of
Reported Property Reported Property
Group interests Total Group interests Total
£m £m £m £m £m £m
Notes (see page 69) A B C A B C
Cash and deposits 205.9 59.9 265.8 74.3 56.2 130.5
Fair value of currency swaps* (90.3) – (90.3) (2.7) – (2.7)
Other loans and other borrowings (3,352.4) (323.6) (3,676.0) (3,493.6) (46.7) (3,540.3)
Net debt (3,236.8) (263.7) (3,500.5) (3,422.0) 9.5 (3,412.5)
* At 31 December 2017 the fair value of currency swaps in the Reported Group included currency swaps of £10.3 million (2016: £nil) within non-current receivables.
Loan to value and gearing
Table 18
Loan to value and gearing as at 31 December 2017
2017 2016
£m £m
Net debt - ‘Loan’ (A) 3,500.5 3,412.5
Total property portfolio (Table 9) 8,326.3 8,281.7
Irish loan assets (note 9A) – 54.1
Investment in VIA Outlets (note 9A) 361.3 222.0
Investment in Value Retail (note 10C) 1,068.6 959.1
Less non-controlling interests (note 23) (14.0) (81.4)
‘Value’ (B) 9,742.2 9,435.5
Equity shareholders' funds (C) 6,023.5 5,775.6
Loan to value (%) - (A/B) 35.9 36.2
Gearing (%) - (A/C) 58.1 59.1
Net debt:EBITDA
Table 19
Net debt:EBITDA for the year ended 31 December 2017
2017 2016
£m £m
Adjusted operating profit (note 2) 359.3 330.2
Interest income from Irish loans 4.7 17.4
Tenant incentive amortisation 4.8 2.6
Share-based remuneration 5.4 5.6
Depreciation 2.1 2.0
EBITDA 376.3 357.8
Net debt (Table 17) 3,500.5 3,412.5
Net debt:EBITDA - times 9.3 9.5
DEVELOPMENT PIPELINE
UNAUDITED
Scheme
Scheme Area m2 Key facts
UK shopping centres
Brent Cross extension 90,000 - Extension and refurbishment of Brent Cross, forming part of wider Brent Cross
Cricklewood regeneration plans, totalling 175,000m2 of retail, catering and leisure.
- Reserved matters planning application approved October 2017. The compulsory
purchase order was confirmed in December 2017.
- Laing O'Rourke has been selected as the preferred contractor for the retail extension
and leasing is progressing.
Bristol Investment Properties* 74,000 - Resolution to grant planning permission subject to conclusion of a s. 106 agreement,
confirmed in January 2018 for a 3.5ha area of joint venture-owned properties forming
part of the Broadmead estate adjoining Cabot Circus.
- Masterplan includes up to 74,000m2 retail and leisure, 380 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.
- Resolution to grant outline planning permission confirmed in November 2017 for the
redevelopment of the Whitgift Centre subject to conclusion of a S106 agreement.
Silverburn (Phase 4), Glasgow* 50,000 - Variation to planning condition consented in 2017 to permit phased delivery of a
masterplan for a future extension of existing 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 294 car parking spaces and a hotel.
- Planning consent subject to conclusion of a section 75 agreement anticipated H1 2018.
Victoria, Leeds (Phase 2)* 95,000 - Phase 1 Victoria Gate completed October 2016. Operator being sought for up to 200
bed hotel adjacent to new multi-storey car park.
- Phase 2 master planning underway to deliver a phased retail/leisure mixed-use scheme
to complement Victoria Gate.
- Freehold control of 4.1ha Phase 2 site obtained.
UK retail parks
Imperial Retail Park, Bristol* 7,350 - Planning consent granted in November 2017 for retail and leisure extension to Imperial
Retail Park.
- Leasing progressing ahead of potential start on site in Autumn 2018.
Oldbury, Dudley* 10,900 - Planning consent granted in May 2016 for new development of up to 11 retail and
catering units. Leasing underway.
UK Other
The Goodsyard, London E1 270,000 - 4.2ha site on edge of the City of London.
- A planning application for a major mixed-use development of up to 270,000m2 was
deferred by the GLA in April 2016 to allow further consultation. This work is progressing
and we are now targeting a submission of the necessary amendments to the GLA by
the end of 2018 to allow the Mayor to determine the scheme.
France
SQY Ouest, 32,000 - Opportunity to reposition existing shopping centre, creating a leisure-led destination.
Saint Quentin-en-Yvelines* - Trading consent obtained.
- Construction works and pre-letting on-going, Phase 1 launched to handover first units in
first half of 2018.
Ireland
Dundrum Phase II, Dublin* 100,000 - 2.4ha site located adjacent to Dundrum Town Centre.
- Masterplan in preparation for a residential-led mixed-use scheme including retail.
Dublin Central, Dublin* 130,000 - Extension of duration of planning consent granted until May 2022 to create a retail-led
city centre scheme including 60,000m2 of retail.
- The Court of Appeal in Dublin overturned the earlier ruling relating to buildings on Moore
Street and their national monument status. Previously constrained by the court case,
Hammerson will now engage with stakeholders on the future of the site.
Swords Pavilions Phase III, 272,000 - Extension of planning consent granted to August 2021 to create a mixed use
Dublin* development including 124,000m2 of retail and commercial uses.
- Loan-to-own process complete. Masterplan for extension to be reviewed in 2018.
Total 1,359,050
* Schemes are on Group 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 financial
statements.
Anchor store A major store, usually a department or DIY store, a supermarket or leisure facility, occupying a large unit within a shopping
centre or retail park, which serves as a draw to other retailers and consumers.
Average cost of debt or weighted The cost of finance expressed as a percentage of the weighted average of debt during the period.
average interest rate
BREEAM An environmental rating assessed under the Building Research Establishment’s Environmental Assessment Method.
Capital return The change in property value during the period after taking account of capital expenditure, calculated on a monthly time-
weighted basis after taking account of exchange translation movements.
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
nominal) future 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 commercialisation 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 yield Annual cash rents receivable (net of head and equity rents and the cost of vacancy, and, in the case of France, net of an
(NIY)) allowance 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 (or An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time.
derivatives)
IPD Property market benchmark indices produced by MSCI.
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 share Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.
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 retailer’s 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).
Pre-let A lease signed with a tenant prior to the completion of a development.
Principal lease A lease signed with a tenant with a secure term of greater than three years and where the unit is not reconfigured. This
enables letting metrics to be stated on a comparable basis.
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
(PID) and 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 outlets 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.
Proportional consolidation The aggregation of the financial results of the Reported Group together with the Group’s share of Property interests being the
Group’s share of Property joint ventures as shown in note 9, and Nicetoile as shown in note 10.
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 share of 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,
(ROE) all 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.
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.
Share of 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.
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, calculated on a monthly time-weighted basis after taking account of exchange translation movements.
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 and accounts for as an
associate.
VIA Outlets (VIA) A premium outlets joint venture which owns and operates premium outlet centres in Europe, in which the Group has an
investment and accounts for as a joint venture.
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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