Interim Results
Hammerson PLC
28 August 2002
Hammerson Half Year Results
Hammerson plc announces unaudited results for the six months to 30 June 2002.
Financial:
2002 2001 Change
Net rental income £83.5m £81.2m +2.8%
Profit before tax(1) £37.3m £39.2m -4.8%
Adjusted profit before tax £40.6m £36.3m +11.8%
Earnings per share 10.0p 15.7p -36.3%
Adjusted earnings per share (diluted)(2) 14.0p 11.2p +25.0%
Dividend per share 4.81p 4.58p +5.0%
30 June 2002 31 Dec 2001
Shareholders' funds £2,058m £2,041m +0.8%
Adjusted net asset value per share 743p 731p +1.6%
(diluted)
Notes:
(1) Profit before tax of £37.3 million is after deducting a loss of £3.3
million (2001 - profit of £2.9 million) on the sale of investment
properties for a total of £326 million.
(2) Hammerson has adopted the new accounting standard for deferred tax,
FRS 19, and therefore now makes provision for tax on capital
allowances claimed in the UK and depreciation in France and Germany.
In the first half of 2002 there was a deferred tax charge of £7.9
million (2001 - credit of £9.5 million). The directors believe that
these provisions should be excluded in order to give a clear view of
the underlying performance of the business. Excluding exceptional
items and deferred tax, adjusted earnings per share rose by 25% to
14.0 pence.
Key Points:
• Underlying rental growth of 9.6%. Portfolio reversionary by 15%
providing good potential for future increases in income.
• Office portfolio value decrease of 2.4% was partially offset by a 1.0%
increase in the retail portfolio valuation.
• Total capital investment of £292 million, included the acquisition of
interests in two regional shopping centres, The Shires, in Leicester and
Parinor, near Paris.
• Over £325 million raised from property disposals, including £220
million from 280 Bishopsgate, London EC2.
• Conditional heads of terms agreed for the pre-letting of a proposed
70,000 m(2) office building in the City of London.
• Since 30 June contracts exchanged for the acquisition of Fforestfach
Retail Park, Swansea for £58.5 million.
The Chairman, Ronald Spinney, said today:
'Hammerson continued to make good progress in the first six months of
the year with the combination of rent reviews, income from recently
completed developments and acquisitions contributing to a healthy
increase in underlying earnings. The first half also saw continued
recycling of the group's capital into the development programme and
properties offering the potential for attractive returns.
With volatile equity markets, the attractions of property investment are
apparent, leading to continued demand from investors for prime property.
Continuing retail sales growth in the UK and France has sustained demand
for space from retailers. However, reflecting the more uncertain
economic conditions, demand for office space in central London and Paris
has reduced.
Hammerson has a strong balance sheet and substantial financial resources
to complete the current development programme and pursue further
opportunities. Above all, the group's £3.5 billion portfolio, which has
an average unexpired lease term of ten years and is 15% reversionary,
provides both a robust income stream and excellent growth potential.'
For further information:
John Richards Tel: 020 7887 1000
Chief Executive Fax: 020 7887 1010
Simon Melliss
Group Finance Director
Christopher Smith
Director of Corporate Affairs
CHAIRMAN'S STATEMENT
Results and Dividend
Hammerson continued to make good progress in the first six months of the year.
Net rental income for the six months to 30 June 2002 was £84 million compared
with £81 million for the corresponding period in 2001. On a like-for-like basis,
the increase was 9.6% reflecting additional income in respect of rent reviews,
the renewal of expiring leases and new lettings.
The net cost of finance charged in the profit and loss account fell by £3.0
million to £32.8 million, reflecting lower sterling and euro interest rates.
Administration costs rose by 11% to £10.1 million, principally as a result of
increased staff overheads.
Profit before tax was £37.3 million, compared with £39.2 million in the first
half of 2001. In 2002 profit before tax included exceptional losses on property
disposals of £3.3 million in respect of properties sold for a total of £326
million, whilst 2001 benefited from exceptional profits on property disposals of
£2.9 million. Adjusted profit before tax, which excludes these exceptional
items, increased by £4.3 million, or 11.8%, to £40.6 million.
The group has adopted the new accounting standard FRS 19, 'Deferred tax', which
requires provision to be made for tax on capital allowances claimed in the UK
and depreciation in France and Germany. This has introduced a high degree of
volatility into the figure for headline earnings per share. For the first half
of 2002, earnings per share reflect a deferred tax charge of £7.9 million, while
the corresponding period in 2001 benefited from a credit of £9.5 million,
equivalent to a 40% reduction in earnings per share. Deferred tax provided in
respect of capital allowances and depreciation can only become a real liability
if a property were to be sold. Even then, there are circumstances when the
provision may not become an actual liability since capital allowances claimed
are rarely passed on to a purchaser. Accordingly, deferred tax has been excluded
from adjusted earnings per share and adjusted net asset value per share.
Adjusted earnings per share rose by 2.8 pence, or 25%, to 14.0 pence, reflecting
the underlying increase in operating profit, a lower current tax charge and the
reduction in the number of shares in issue following the Company's purchase of
its own shares at the end of 2001. Adjusted net asset value per share, excluding
the effects of FRS 19, increased by 12 pence, or 1.6%, to 743 pence.
The directors have declared an interim dividend of 4.81 pence per share payable
on 1 November 2002, an increase of 5.0%.
Strategy
Hammerson's strategy is to generate shareholder value through property
investment, management and development in two sectors, shopping centres and
offices, in key European markets. This strategy provides the group with a range
of attractive investment opportunities, enabling it to achieve higher returns by
taking advantage of different market cycles whilst, at the same time,
diversifying risk.
Management carries out rigorous reviews of each property in its portfolio,
selling properties when the proceeds can be redeployed in new investments or
developments to generate higher returns. The return of capital to shareholders,
including the purchase of the Company's own shares, is evaluated both against
Hammerson's cost of equity and its share price in relation to net asset value
per share.
Markets and Outlook
In the UK retail sales growth remained strong in the first half of 2002. There
was continuing healthy demand from retailers for space in the group's centres
and rental levels showed some increase. Improved sentiment towards the retail
sector led to stronger investment demand. The outlook is for continued modest
rental growth in the second half of the year, although growth in retail sales is
anticipated to be below the high levels seen over the past few years.
In France consumer spending was less robust, leading to somewhat weaker
occupational demand from retailers. Nevertheless, rental levels showed little
change and investment demand remained strong. It is anticipated that consumer
spending will continue to polarise towards the larger centres of the type owned
by Hammerson.
In Germany the continued weakness in the economy, coupled with low consumer
confidence, resulted in rental levels showing little change and shopping centre
values decreased slightly. Without a sustained economic recovery, the German
market is likely to remain difficult in the immediate future.
Demand for office space in central London reduced in the first half of the year
with occupiers cautious about entering into new commitments and some businesses
seeking to sublet space, particularly in the light of the continued weakness in
many financial markets. This led to a fall in rental values of around 10% from
their levels at the end of 2001. In contrast, investment demand remained strong
with little change in yields. The short term market remains uncertain with any
improvement dependent on a recovery in demand from the financial sector.
In central Paris, although there was a slowdown in occupier demand for offices
in the first six months of 2002, the outlook appears attractive, with a
restricted supply pipeline and broad based occupier demand.
Balance Sheet and Cash Flow
The group's operating cash flow totalled £83 million in the first six months of
2002. Financing outflows amounted to £54 million, tax paid was £2 million and
dividends of £29 million were paid. Capital expenditure was £292 million, more
than offset by £326 million realised from property disposals. As a result, there
was a net cash inflow into the business of £32 million.
Net assets increased by £17 million to £2,058 million in the six months to 30
June 2002. The principal components were retained profits of £15 million and
exchange translation movements of £16 million, partly offset by a valuation
deficit of £8 million and other movements of £6 million.
In June, Hammerson arranged a £215 million, five year unsecured financing
facility with a syndicate of leading banks. At 30 June 2002, the group had cash
and unutilised committed bank facilities of £670 million. Gearing was 66%,
compared with 65% at year end 2001.
Portfolio
Hammerson's property portfolio had a value of £3,542 million at 30 June 2002,
including development properties valued at £445 million. The average unexpired
lease term was ten years, 7% of income was in respect of leases expiring in the
next 18 months and the portfolio was 15% reversionary overall. The portfolio
therefore provides a high quality income stream with good growth potential.
During the first six months, the retail weighting increased by six percentage
points to 63%. The principal additions were interests in two regional shopping
centres, The Shires, in Leicester and Parinor, near Paris.
Hammerson acquired a 60% interest in The Shires for £110 million in March. The
55,000 m(2) centre, which is 17% reversionary, offers potential for an extension
of up to 35,000 m(2) in due course. The group's 57.5% interest in Parinor was
purchased for £85 million, also in March. Located 15 km to the north east of
Paris, it benefits from a strong catchment area, and is 32% reversionary.
The group raised £326 million from disposals in the first six months of 2002.
The sale of 54 boulevard Haussmann, Paris was completed in January raising £106
million to show a profit on cost of over 50%. In April, the group realised £220
million from the disposal of 280 Bishopsgate, London EC2 achieving a surplus
over cost of £119 million. At the end of June, the group exchanged contracts for
the sale of Freshney Place, Grimsby for £99 million.
During the first six months of the year, there was a 0.3% underlying decline in
the value of the group's portfolio overall, with an increase of 1.0% in the
value of the shopping centres largely offsetting a 2.4% decline in the value of
the offices.
In the UK, which accounts for 64% of the total portfolio, values increased by
0.2% overall. There was an improvement in the value of the group's shopping
centres of 2.3% offsetting the decline of 2.9% in the value of the office
properties.
The group's French properties, which represent 28% of the total portfolio,
showed an underlying valuation decrease of 0.2%, with the retail portfolio
increasing by 0.6% and offices falling by 1.3%. In Germany, which accounts for
8% of the group's portfolio, there was an underlying decrease in value of 3.4%.
The group is in discussions regarding the possible sale of its interests in
Luisen Center, Darmstadt and City Center, Essen, in line with its strategy to
reduce its exposure in Germany.
Since 30 June, Hammerson has exchanged contracts to acquire Fforestfach Retail
Park, Swansea for £58.5 million. The centre, which will provide a total of
13,500 m(2) of retail space, is due to open shortly. This is Hammerson's first
acquisition in a sector which has shown strong returns in recent years.
Management believes the future prospects for the sector, which offers synergies
with the group's existing retail property activities, remain good.
Asset Management
The refurbishment and extension projects at Italie 2, Paris, Place des Halles in
Strasbourg and MTM rkisches Zentrum in Berlin were concluded at the end of the
first quarter, while those at Liberty Centre, Romford and Luisen Center,
Darmstadt are progressing well.
Retailers show a continuing interest in taking space in prime shopping centres
and at Brent Cross in London and The Shires in Leicester rent reviews are being
settled at the anticipated rental levels.
Vacancy within the Hammerson portfolio has increased from 4.0% at 31 December
2001 to 4.4% at 30 June 2002. This reflects a combination of space being made
vacant intentionally prior to redevelopment and difficulties experienced by a
few tenants, notably at Harbour Exchange in Docklands.
Since 30 June 2002, agreement has been reached with British American Tobacco
p.l.c. over the terms of a new lease at Globe House, London WC2, for a term of
22 years at an initial rent of £590 per square metre, and subject to a rent free
period of 21 months. This transaction will provide the group with an improved
cash flow, over a longer term than the previous lease, and a substantial
valuation uplift.
Current Developments
Hammerson maintains an active development programme with the objectives of
achieving good returns, both income and capital, and creating assets which are
not readily available on the open market. In recent years, the group has gained
an excellent reputation for its approach to urban redevelopments, its ability to
forge strong relationships with local authorities and its skills in delivering
complex development projects on time and on budget.
Currently seven major developments are underway, many of them joint ventures, at
an estimated total cost to the group of £623 million. Other projects are in the
course of evaluation and planning.
Project Ownership Size m2 Cost at 30 Estimated total Anticipated
interest June 2002 development cost £m completion date
£m
Shopping centre
Bullring, 33.3% 110,000 97 180* Sep 2003
Birmingham
Offices
53 quai d'Orsay, 100% 9,200 49 57 Sep 2002
Paris 7eme
148 rue de l'Universite, 100% 10,400 57 65 Sep 2002
Paris 7eme
14 boulevard Haussmann, 100% 26,900 134 184 Jul 2003
Paris 9eme
One London Wall, 50% 19,300 15 50* Jul 2003
London EC2
10 Grosvenor Street, 50% 6,100 8 19* Dec 2003
London W1
Moorhouse, 33.3% 29,100 28 68* Apr 2004
London EC2
* Hammerson's share of costs
Construction work is now well advanced on the redevelopment of the Bullring by
the Birmingham Alliance, in which Hammerson has a one third interest, to create
a 110,000 m2 regional shopping centre. Letting progress is encouraging with over
55% of the retail income secured 12 months ahead of opening.
In Paris, works are nearing completion on the two adjacent office developments
at 53 quai d'Orsay and 148 rue de l'Universite and negotiations with potential
tenants are well in hand. At 14 boulevard Haussmann in the financial district of
Paris, Hammerson is creating 26,900 m(2) of high quality office accommodation at
an estimated total development cost of £184 million. Work on site is progressing
to timetable with completion scheduled for summer 2003.
At One London Wall, London EC2, the group, together with its 50:50 joint venture
partner, Kajima, is making good progress on this 19,300 m(2) office building. At
10 Grosvenor Street, London W1, Hammerson is creating a 6,100 m(2) office and
retail building in a 50:50 joint venture with Grosvenor with completion now due
at the end of 2003.
Another central London development, Moorhouse in the City, is a joint venture
between Hammerson, Greycoat Estates Limited and Pearl Assurance plc. The 17
storey office building will provide 29,100 m(2) of high specification
accommodation on its completion in Spring 2004.
Development Pipeline
In March, Hammerson announced that it had agreed terms with leading
international law firm, Allen & Overy, to lease a proposed new 70,000 m2 office
building at Bishops Square, Spitalfields, London E1. The development, which is
subject to planning consent, will be carried out as a joint venture with The
Corporation of London with Hammerson having a 75% interest. Hammerson's total
development costs are estimated at £285 million.
At 9 place Vendome, Paris 1er, planning consent has been received for a 25,200
m2 office and 5,000 m2 retail scheme to be carried out as a 50:50 joint venture
with AXA. A building permit has been granted and it is anticipated that a start
on site will be made towards the end of the year.
Summary
Hammerson continued to make good progress in the first six months of the year
with the combination of rent reviews, income from recently completed
developments and acquisitions contributing to a healthy increase in underlying
earnings. The first half also saw continued recycling of the group's capital
into the development programme and properties offering the potential for
attractive returns.
With volatile equity markets, the attractions of property investment are
apparent, leading to continued demand from investors for prime property.
Continuing retail sales growth in the UK and France has sustained demand for
space from retailers. However, reflecting the more uncertain economic
conditions, demand for office space in central London and Paris has reduced.
Hammerson has a strong balance sheet and substantial financial resources to
complete the current development programme and pursue further opportunities.
Above all, the group's £3.5 billion portfolio, which has an average unexpired
lease term of ten years and is 15% reversionary, provides both a robust income
stream and excellent growth potential.
Ronald Spinney
Chairman
28 August 2002
Property Portfolio Information
for the six months ended 30 June 2002
Net True Underlying Estimated
rental Properties equivalent valuation Vacancy Rents rental
income at yield change rate passing value Reversionary
valuation
£m £m % % % £m £m %
Notes (1) (2) (3) (4)
United Kingdom
Retail: London & South 19.0 787.1 6.3 2.5 1.4 48.3 56.4 10.0
Midlands & North 11.8 585.0 7.3 1.9 1.2 24.1 26.8 8.1
30.8 1,372.1 6.7 2.3 1.3 72.4 83.2 9.3
Office: City 13.8 423.7 7.4 (3.2) 0.0 25.2 26.1 0.8
West End 7.9 314.0 7.9 0.0 1.4 18.2 23.9 29.3
Docklands & other 5.3 154.0 9.3 (7.6) 17.0 10.3 16.8 31.8
27.0 891.7 7.9 (2.9) 7.3 53.7 66.8 17.0
Total United Kingdom 57.8 2,263.8 7.2 0.2 3.5 126.1 150.0 12.6
Continental Europe
Retail: France 15.8 572.9 7.1 0.6 3.3 34.6 43.9 23.5
Germany 5.9 298.7 6.9 (3.4) 7.6 16.7 21.1 14.5
21.7 871.6 7.0 (0.8) 5.2 51.3 65.0 20.4
Office: France 4.0 406.9 7.3 (1.3) 20.2 9.9 13.5 16.7
Total Continental Europe 25.7 1,278.5 7.0 (1.0) 6.1 61.2 78.5 19.8
Group
Retail 52.5 2,243.7 6.8 1.0 3.3 123.7 148.2 13.9
Office 31.0 1,298.6 7.8 (2.4) 8.4 63.6 80.3 16.9
Total Group 83.5 3,542.3 7.1 (0.3) 4.4 187.3 228.5 15.0
Notes
(1) True equivalent yield is based on rents passing and estimated rental
values at 30 June 2002. The calculation excludes properties in the
course of development.
(2) Rents passing at 30 June 2002 after deducting head and equity rents.
(3) Estimated rental value at 30 June 2002 including vacant space and after
deducting head and equity rents.
(4) The amount by which the estimated rental value, excluding that relating
to vacant space, exceeds the rents passing at 30 June 2002.
Consolidated Profit and Loss Account
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Audited Unaudited Unaudited
£m Notes £m £m
175.6 Gross rental income, after rents payable 92.9 89.5
(15.7) Property outgoings (9.4) (8.3)
159.9 Net rental income 1 83.5 81.2
1.9 Management fees receivable 1.0 0.9
(11.4) Cost of property activities (6.7) (5.9)
(8.8) Corporate expenses (4.4) (4.1)
(18.3) Administration expenses (10.1) (9.1)
141.6 Operating profit 73.4 72.1
(4.9) Exceptional items: (Loss)/Profit on the sale of investment (3.3) 2.9
properties
136.7 Profit on ordinary activities before interest 70.1 75.0
(3.3) Exceptional cost of finance 2 - -
(64.3) Other cost of finance (net) 2 (32.8) (35.8)
69.1 Profit on ordinary activities before tax 37.3 39.2
(7.9) Current tax 3 (0.7) (4.3)
15.9 Deferred tax 3 (7.9) 9.5
8.0 Tax (8.6) 5.2
77.1 Profit on ordinary activities after tax 28.7 44.4
(0.9) Equity minority interests (0.7) (0.4)
76.2 Profit for the period 28.0 44.0
(41.5) Dividends 4 (13.5) (12.9)
34.7 Retained profit for the period 14.5 31.1
27.1p Earnings per share 5 10.0p 15.7p
27.1p Diluted earnings per share 5 10.0p 15.6p
24.3p Adjusted earnings per share 5 14.0p 11.2p
* Comparative figures have been restated for the adoption of FRS 19 (see note 16).
Consolidated Balance Sheet
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Audited Unaudited Unaudited
£m Notes £m £m
Fixed assets
3,487.5 Land and buildings 6 3,542.3 3,266.5
1.0 Fixtures, fittings and equipment 0.9 0.8
3,488.5 Tangible assets 3,543.2 3,267.3
31.4 Investments 7 33.5 16.6
3,519.9 3,576.7 3,283.9
Current assets
87.8 Debtors: Due within one year 8 87.6 80.8
14.4 Due after more than one year 8 20.4 -
218.4 Cash and short term deposits 9 279.1 232.6
320.6 387.1 313.4
Creditors falling due within one year
(24.2) Borrowings 10 (29.6) (0.2)
(173.2) Other 11 (169.7) (133.4)
123.2 Net current assets 187.8 179.8
3,643.1 Total assets less current liabilities 3,764.5 3,463.7
Creditors falling due after more than one year
(1,528.7) Borrowings 10 (1,601.0) (1,422.3)
(22.1) Other 11 (34.0) (15.5)
Provisions for liabilities and charges
(14.0) Deferred tax 3 (32.7) (14.0)
(37.1) Equity minority interests (38.8) (33.0)
2,041.2 2,058.0 1,978.9
Capital and reserves
70.0 Called up share capital 70.2 70.3
588.6 Share premium account 13 592.2 530.3
978.0 Revaluation reserve 13 826.1 927.4
5.9 Capital redemption reserve 13 5.9 2.0
1.5 Other reserves 13 7.2 1.5
397.2 Profit and loss account 13 556.4 447.4
2,041.2 Equity shareholders' funds 2,058.0 1,978.9
728p Diluted net asset value per share 5 732p 680p
731p Adjusted net asset value per share 5 743p 685p
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
Statement of Total Recognised Gains and Losses
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Audited Unaudited Unaudited
£m £m £m
76.2 Profit for the period 28.0 44.0
106.5 Unrealised (deficit)/surplus on revaluation of properties (8.4) 44.7
- Negative goodwill 5.7 -
- Tax on property disposals (1.8) -
(11.5) Deferred tax on property disposals (note 3) (13.0) (11.5)
(6.3) Exchange translation movements 16.0 (11.8)
164.9 Total recognised gains and losses for the period 26.5 65.4
Note of Historical Cost Profits and Losses
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Audited Unaudited Unaudited
£m £m £m
69.1 Profit on ordinary activities before tax 37.3 39.2
62.7 Realisation of previous years' revaluation gains 154.8 48.5
131.8 Historical cost profit on ordinary activities before tax 192.1 87.7
85.9 Historical cost profit for the period after tax, equity 154.5 68.1
minority interests and dividends
Reconciliation of Movements in Shareholders' Funds
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Audited Unaudited Unaudited
£m £m £m
34.7 Retained profit for the period 14.5 31.1
88.7 Other recognised gains and losses (1.5) 21.4
(70.5) Purchase and cancellation of own shares - -
63.0 Issue of shares 3.8 1.1
115.9 Net increase in shareholders' funds 16.8 53.6
1,925.3 Shareholders' funds at 1 January 2,041.2 1,925.3
2,041.2 Closing shareholders' funds 2,058.0 1,978.9
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
Consolidated Cash Flow Statement
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Audited Unaudited Unaudited
£m Notes £m £m
134.8 Net cash flow from operating activities 14 82.7 65.1
(77.8) Returns on investment and servicing of 14 (54.2) (54.6)
finance
(2.9) Tax paid (2.0) -
(72.9) Capital expenditure and investment 14 34.1 81.6
(39.7) Equity dividends paid (28.7) (26.9)
(58.5) Cash inflow/(outflow) 31.9 65.2
(78.1) Increase in short term deposits (59.9) (91.5)
126.5 Net cash inflow from financing 15 28.4 17.3
(10.1) Increase/(Decrease) in cash in the period 0.4 (9.0)
Reconciliation of Net Cash Flow to Movement in Net Debt
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Audited Unaudited Unaudited
£m £m £m
(10.1) Increase/(Decrease) in cash in the period 0.4 (9.0)
(133.9) Net increase in debt (24.6) (16.2)
78.1 Increase in short term deposits 59.9 91.5
(65.9) Change in net debt resulting from cash flows 35.7 66.3
20.9 Exchange adjustment (52.7) 33.3
(45.0) Movement in net debt in the period (17.0) 99.6
(1,289.5) Net debt at 1 January (1,334.5) (1,289.5)
(1,334.5) Closing net debt (1,351.5) (1,189.9)
Notes to the Accounts
1. NET RENTAL INCOME
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
£m £m £m
112.1 United Kingdom 57.8 57.6
37.1 France 19.8 18.5
10.7 Germany 5.9 5.1
159.9 83.5 81.2
2 COST OF FINANCE (NET)
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
£m £m £m
Interest payable on:
25.2 Bank loans and overdrafts 6.7 10.7
71.0 Other loans 43.2 37.6
96.2 Interest payable and similar charges 49.9 48.3
Less:
(19.1) Interest payable capitalised (12.0) (7.6)
(12.8) Interest receivable (5.1) (4.9)
64.3 Other cost of finance (net) 32.8 35.8
3.3 Exceptional cost of finance on redemption of convertible - -
bonds
67.6 Cost of finance (net) 32.8 35.8
3. TAX
(a) Tax charge
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
£m £m £m
7.7 United Kingdom corporation tax at 30% 0.3 4.2
0.2 Foreign tax 0.4 0.1
7.9 Current tax charge 0.7 4.3
(15.9) Deferred tax charge/(credit) 7.9 (9.5)
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
The tax charge for the six months ended 30 June 2002 is based on the projected
effective tax rate for the full year. Current tax is reduced by brought forward
UK tax losses which arose from the group's programme to use surplus Advance
Corporation Tax.
Notes to the Accounts
3. TAX (continued)
(b) Deferred tax
31 December 2001 30 June 2002 30 June 2001
£m £m £m
UK
24.1 Capital allowances 25.0 26.3
0.9 Other timing differences (1.3) (1.1)
(31.4) Tax losses (26.0) (23.6)
(6.4) UK deferred tax (asset)/provision (2.3) 1.6
FRANCE
21.8 Tax depreciation 26.4 19.6
8.1 Other timing differences 6.3 7.1
(15.9) Tax losses - (14.3)
14.0 France deferred tax provision 32.7 12.4
7.6 Net deferred tax provision 30.4 14.0
Analysed as:
(6.4) Deferred tax asset (note 8) (2.3) -
14.0 Deferred tax provision 32.7 14.0
7.6 30.4 14.0
Movement in period
Opening provision 7.6
Charge in profit and loss account 7.9
Charge on realisation of revaluation gains on property 13.0
disposals
Corporate acquisitions 1.9
Closing provision 30.4
The deferred tax provisions will not crystallise to the extent that capital
allowances are retained by the group on UK property disposals and French
disposals are made by selling subsidiary companies. There is no deferred tax
provision in respect of Germany due to surplus tax losses. Note 16 gives details
of the impact of the adoption of FRS 19 on previously reported figures.
The charge on the realisation of revaluation gains on property disposals relates
to disposals in France which used French tax losses.
(c) Contingent tax
Should the group's properties and investments be sold at book value a tax
liability would arise. If the properties are sold individually and no capital
allowances are retained by Hammerson the liability would be £171m (31 December
2001: £196m) in addition to the deferred tax provided in the balance sheet.
If account is taken of the likelihood that certain properties would be sold
through the sale of shares in subsidiaries, and it is assumed that capital
allowances will be retained by the group on all other property sales, then the
deferred tax provisions would be written back and the tax liability would be
£55m (31 December 2001: £49m).
4 DIVIDENDS
The directors have declared an interim dividend of 4.81 pence per share (30 June
2001: 4.58 pence per share) payable on 1 November 2002 to shareholders on the
register at the close of business on 27 September 2002.
Notes to the Accounts
5 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculations for earnings per share, diluted earnings per share and adjusted
earnings per share are shown in the table below:
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
Weighted Weighted Weighted
average average average
Earnings number of Pence per Earnings £m number of Pence per Earnings number of Pence per
£m shares share shares share £m shares share
million million million
76.2 281.4 27.1 Basic 28.0 279.7 10.0 44.0 280.7 15.7
Adjustments:
- 0.2 n/a Dilutive share options - 0.4 n/a - 0.6 n/a
76.2 281.6 27.1 Diluted 28.0 280.1 10.0 44.0 281.3 15.6
Adjustments:
8.2 n/a n/a Exceptional items 3.3 n/a n/a (2.9) n/a n/a
(15.9) n/a n/a Deferred tax 7.9 n/a n/a (9.5) n/a n/a
68.5 281.6 24.3 Adjusted 39.2 280.1 14.0 31.6 281.3 11.2
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
The weighted average number of shares shown above exclude those shares held in
the Hammerson Deferred Share Plan (note 7) which are treated as cancelled.
The calculations for basic, diluted and adjusted net asset value per share are
shown in the table below:
30 June 2002
Net asset
Shareholders' value
funds Shares per share
£m million pence
Basic 2,058.0 280.9 733
Company's own shares held for Deferred Share Plan - (0.7) n/a
Unexercised share options 10.0 2.2 n/a
Diluted 2,068.0 282.4 732
Deferred tax 30.4 n/a n/a
Adjusted 2,098.4 282.4 743
Notes to the Accounts
6. LAND AND BUILDINGS
Properties held for or
in
Fully developed the course of Total
properties development
Valuation Cost Valuation Cost Valuation Cost
£m £m £m £m £m £m
Movements in the period
Balance at 1 January 2002 3,117.4 2,165.9 370.1 337.7 3,487.5 2,503.6
Exchange adjustment 58.4 47.1 12.4 11.8 70.8 58.9
Additions at cost 255.5 255.5 58.0 58.0 313.5 313.5
Disposals at valuation (331.3) (176.6) (1.2) (1.0) (332.5) (177.6)
Capitalised interest 1.8 1.8 10.2 10.2 12.0 12.0
Revaluation deficit (4.0) - (5.0) - (9.0) -
Balance at 30 June 2002 3,097.8 2,293.7 444.5 416.7 3,542.3 2,710.4
All properties are stated at open market value as at 30 June 2002, valued by
professionally qualified external valuers. In the United Kingdom, office
properties and the group's interests in the Birmingham Alliance properties were
valued by DTZ Debenham Tie Leung, Chartered Surveyors, and all other retail
properties were valued by Donaldsons, Chartered Surveyors. In France and Germany
the group's properties were valued by Cushman & Wakefield Healey & Baker,
Chartered Surveyors. The valuations have been prepared in accordance with the
Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors.
At 30 June 2002 the total amount of interest included in development properties
was £22.7m (31 December 2001: £12.5m) and the development surplus was equivalent
to 10 pence per share (31 December 2001: 11 pence per share) on an adjusted net
asset value basis.
7. INVESTMENTS
31 December 2001 30 June 2002 30 June 2001
£m £m £m
20.9 Value Retail Investors Limited Partnerships 22.9 13.9
2.5 Ordinary shares of Hammerson plc (Deferred Share Plan) 2.1 2.6
8.0 Other investments 8.5 0.1
31.4 33.5 16.6
Notes to the Accounts
8 DEBTORS
31 December 2001 30 June 2002 30 June 2001
Restated* Restated*
£m £m £m
Due within one year
27.2 Trade debtors 25.1 25.3
48.4 Other debtors 54.1 47.4
0.8 Corporation tax 0.5 3.5
6.4 Deferred tax (note 3) 2.3 -
5.0 Prepayments 5.6 4.6
87.8 87.6 80.8
Due after more than one year
14.4 Other debtors 20.4 -
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
At 30 June 2002 other debtors due after more than one year included a £10.0m
loan to Queensmere Holdings Limited bearing interest at a fixed rate of 6.0% and
maturing on 5 October 2006 and a loan of €16.0m to Value Retail plc bearing
interest based on EURIBOR and maturing on 11 October 2006.
9. CASH AND SHORT TERM DEPOSITS
31 December 2001 30 June 2002 30 June 2001
£m £m £m
9.4 Cash at bank 9.9 10.4
209.0 Short term deposits 269.2 222.2
218.4 279.1 232.6
Analysis by currency
211.4 Sterling 267.3 187.3
7.0 Euro 11.8 45.3
218.4 279.1 232.6
At 30 June 2002 short term deposits mainly comprised deposits placed on money
markets with rates linked to LIBOR for maturities of not more than 2 months.
Notes to the Accounts
10. BORROWINGS
31 December 2001 30 June 2002 30 June 2001
£m £m £m
315.3 Bank loans and overdrafts 370.1 109.3
1,208.6 Other loans: Unsecured 1,230.2 1,200.4
44.4 Secured 42.4 35.3
- Convertible bonds - 108.4
1,568.3 1,642.7 1,453.4
(15.4) Exchange difference on currency swaps (12.1) (30.9)
1,552.9 1,630.6 1,422.5
Maturity
31 December 2001 Bank loans 30 June 2002 30 June 2001
Total and overdrafts Other loans Total Total
£m £m £m £m £m
1,155.8 After 5 years 10.6 1,176.1 1,186.7 1,246.8
293.2 From 2-5 years 353.2 (3.6) 349.6 169.0
79.7 From 1-2 years (0.3) 65.0 64.7 6.5
1,528.7 Due after more than one year 363.5 1,237.5 1,601.0 1,422.3
24.2 Due within one year 17.3 12.3 29.6 0.2
1,552.9 380.8 1,249.8 1,630.6 1,422.5
Analysis by currency
31 December 2001 30 June 2002 30 June 2001
£m £m £m
662.5 Sterling 655.0 697.3
890.4 Euro 975.6 725.2
1,552.9 1,630.6 1,422.5
Undrawn committed facilities
31 December 2001 30 June 2002 30 June 2001
£m £m £m
233.6 Expiring after more than two years 390.6 405.4
11. CREDITORS - OTHER
31 December 2001 30 June 2002 30 June 2001
£m £m £m
Falling due within one year
39.2 Trade creditors 42.3 46.9
4.9 Tax 7.2 6.6
91.1 Other creditors 96.0 59.4
9.3 Accruals 10.7 7.6
28.7 Dividends payable 13.5 12.9
173.2 169.7 133.4
Falling due after more than one year
22.1 Other creditors 34.0 15.5
Notes to the Accounts
12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
31 December 2001 30 June 2002 30 June 2001
Book Fair value Book value Fair value Book value Fair
value value
£m £m £m £m £m £m
(25.9) (25.9) Overdrafts and (31.4) (31.4) (16.7) (16.7)
short term
borrowings
(1,560.1) (1,632.2) Gross long term (1,629.0) (1,735.0) (1,346.6) (1,382.6)
borrowings
- - Convertible - - (110.0) (121.6)
bonds
17.7 17.7 Unamortised 17.7 17.7 19.9 19.9
borrowing costs
- (9.4) Interest rate - (7.7) - (11.9)
swaps
15.4 18.5 Currency swaps 12.1 17.5 30.9 38.1
(1,552.9) (1,631.3) Total (1,630.6) (1,738.9) (1,422.5) (1,474.8)
borrowings
The fair values of the group's long term borrowings have been estimated on
the basis of quoted market prices. The fair values of the group's
outstanding interest rate and currency swaps have been estimated by
calculating the present value of future cash flows, using appropriate market
discount rates. The adjustment on interest rate swaps at 30 June 2002 of
£7.7m includes £2.4m (31 December 2001: £3.0m) relating to swaps maturing in
less than one year.
Details of the group's cash and short term deposits are set out in note 9.
Their fair values and those of other long term debtors and creditors equate
to their book values. Short term debtors and creditors have been excluded
from these disclosures as permitted by Financial Reporting Standard 13
'Derivatives and other financial instruments: disclosures'.
At 30 June 2002 the fair value of financial liabilities exceeded their book
value by £108.3m (31 December 2001: £78.4m), equivalent to 38 pence per
share (31 December 2001: 28 pence per share) on an adjusted net asset value
per share basis. On a post tax basis, the difference was equivalent to 27
pence per share (31 December 2001: 19 pence per share).
13. RESERVES
Share Capital Profit
premium Revaluation redemption Other and loss
account reserve reserve reserves account
Restated*
£m £m £m £m £m
Balance at 1 January 2002 588.6 978.0 5.9 1.5 397.2
Exchange adjustment - 11.3 - - 4.7
Premium on issue of shares 3.6 - - - -
Deficit arising on revaluation of properties - (8.4) - - -
Negative goodwill - - - 5.7 -
Tax on property disposals - - - - (1.8)
Deferred tax on property disposals - - - - (13.0)
Transfer to profit and loss account on - (154.8) - - 154.8
disposal
Retained profit for the period - - - - 14.5
Balance at 30 June 2002 592.2 826.1 5.9 7.2 556.4
* Comparative figures have been restated for the adoption of FRS 19 (see note
16).
The negative goodwill credited to other reserves is principally the discount
received on the purchase of the company owning the Parinor shopping centre for
the underlying contingent tax in that company. This accounting treatment does
not comply with FRS 10 'Goodwill and intangible assets', which requires that
negative goodwill be recognised in the balance sheet as a fixed asset. However,
in accordance with a recent ruling by the Financial Reporting Review Panel over
a similar issue, the directors consider that the accounting treatment adopted is
necessary in order for the financial statements to give a true and fair view of
the state of affairs of the group.
Notes to the Accounts
14 ANALYSIS OF CASH FLOWS
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
£m £m £m
Reconciliation of operating profit to net cash inflow
from operating activities
141.6 Operating profit 73.4 72.1
1.6 Depreciation and amortisation 0.7 1.0
(3.8) Increase in accrued rent receivable (0.3) (1.5)
(9.1) Decrease/(Increase) in debtors 3.8 (15.7)
4.5 Increase in creditors 5.1 9.2
134.8 82.7 65.1
Returns on investment and servicing of finance
13.3 Interest received 4.4 5.0
(91.1) Interest paid (58.6) (59.6)
(77.8) (54.2) (54.6)
Capital expenditure and investment
(363.3) Purchase and development of property (286.2) (125.1)
(22.6) Purchase of investments (6.0) (1.3)
313.0 Sale of property 326.3 208.0
(72.9) 34.1 81.6
15 ANALYSIS OF CASH FLOW FROM FINANCING
Year ended Six months ended Six months ended
31 December 2001 30 June 2002 30 June 2001
£m £m £m
348.5 Issue of bonds - 347.8
(48.2) Purchase of own bonds for cancellation (8.4) -
1.3 Issue of shares 3.8 1.1
(70.5) Purchase of own shares for cancellation - -
(119.6) Increase/(Decrease) in medium and long term borrowings 29.1 (323.8)
15.0 Increase/(Decrease) in short term borrowings 3.9 (7.8)
126.5 Net cash inflow from financing 28.4 17.3
Notes to the Accounts
16 OTHER INFORMATION
The financial information contained in this report does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. Except for
the restatement for the adoption of Financial Reporting Standard No. 19
'Deferred tax' as explained below, the results for the year ended 31 December
2001 are an abridged version of the full accounts for that year which received
an unqualified report from the auditors and did not contain a statement under
s237(2) or (3) of the Companies Act 1985. The full accounts for the year ended
31 December 2001 have been filed with the Registrar of Companies.
The unaudited financial information contained in this report has been prepared
on the basis of the accounting policies set out in the full accounts for the
year ended 31 December 2001, except for the adoption of FRS 19.
Deferred tax
FRS 19 requires that companies provide for tax on timing differences between
financial statements and tax computations. For Hammerson, this principally
relates to capital allowances in the UK and depreciation in France and Germany.
The impact of the adoption of FRS 19 on the previously reported figures is shown
below:
Earnings per share Balance Net asset value
sheet per share
Profit and loss account
Tax Profit for Basic Diluted Net assets Diluted
the period
£m £m pence pence £m pence
Year ended 31 December 2001
As previously reported (7.9) 60.3 21.4 21.4 2,048.8 731
Adjustment 15.9 15.9 5.7 5.7 (7.6) (3)
Restated 8.0 76.2 27.1 27.1 2,041.2 728
Period ended 30 June 2001
As previously reported (4.3) 34.5 12.3 12.3 1,992.9 685
Adjustment 9.5 9.5 3.4 3.3 (14.0) (5)
Restated 5.2 44.0 15.7 15.6 1,978.9 680
Further details on deferred tax are given in note 3(b).
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