Final Results
Hammerson PLC
28 February 2005
Hammerson plc - Results for the year ended 31 December 2004
2004 2003 Change
Net rental income £188.4m £189.5m -0.6%
Profit before tax £127.2m £67.1m +89.6%
Exceptional profits/(losses)(1) £40.3m £(18.8)m
Adjusted profit before tax(1) £86.9m £85.9m +1.2%
Basic earnings per share 42.1p 18.3p +130.1%
Adjusted earnings per share(2) 30.0p 29.8p +0.7%
Total dividend for the year 17.92p 16.83p +6.5%
Adjusted net asset value per share(3) 936p 803p +16.6%
Return on shareholders' equity(4) 22.1% 9.3%
Gearing 68% 73%
Recommended final dividend of 12.47 pence (2003: 11.71 pence) making a total for
the year of 17.92 pence, an increase of 6.5%.
Notes:
(1) Exceptional profits of £40.3 million in 2004 related primarily to the sale of properties and these
have been excluded from adjusted profit before tax.
(2) Excluding exceptional profits, deferred tax and the one-off tax charge for entry into the Societes
d'Investissements Immobiliers Cotees ('SIIC') regime in France.
(3) Excluding deferred tax.
(4) Excluding deferred tax and the one-off tax charge for entry into the SIIC regime.
(5) The 2004 results have been prepared under existing UK accounting rules. The group will be
restating the 2004 results under IFRS before the announcement of its 2005 interim results.
Copies of the Chairman's statement, preliminary results statement, profit & loss
account, balance sheet, statement of total recognised gains and losses, cash
flow statement and notes are attached. The terms in the commentary that follows
are defined in the glossary at the end of this document.
Highlights
• Adjusted net asset value per share increased by 16.6% to 936 pence,
principally as a result of an underlying increase in property valuations of 8.8%
overall.
• Return on shareholders' equity in 2004 was 22.1%, reflecting the
strong valuation performance.
• Net rental income increased by 5.4% on a like-for-like basis. Property
disposals reduced rental income by £26 million compared with 2003.
• During the year, the group invested over £540 million, including £203
million in acquiring a further 50% interest in WestQuay shopping centre,
Southampton.
• The group sold eight properties for £399 million, more than 10% above
their book value at 31 December 2003.
• Hammerson elected for tax exempt status for its French
business, following its listing in March on Euronext Paris.
• John Nelson will become Chairman on 1 October 2005, on the
retirement of Ronald Spinney.
Ronald Spinney, Chairman, said:
' In this, my last annual statement to shareholders, I am very pleased to report
on an excellent set of results for Hammerson in 2004. Adjusted net asset value
per share increased by 16.6% to 936 pence and the group achieved a return on
equity of 22.1%. The policy of progressive growth in dividends has been
maintained with a proposed increase of 6.5% this year.
The current strong property investment markets have made it more difficult to
acquire income-producing assets that meet the group's target financial returns,
but Hammerson is benefiting from its development programme, which provides a
source of high quality new properties. During 2004, the group invested a total
of £544 million in the development programme, in improvements to existing
properties, in increasing its interests in joint ventures, and in securing
future development opportunities.
The group's retail portfolio offers good potential for growth, notwithstanding
some uncertainties over growth in consumer expenditure in the short term.
Encouragingly, demand for office accommodation, both in central London and
Paris, has improved in the last few months, and this should enable Hammerson to
achieve further lettings in its office portfolio and increase rental income.
I am delighted that John Nelson will succeed me as Chairman on my retirement at
the end of September. He has broad commercial experience and I believe he will
make a valuable contribution in his role as Chairman.
I have every confidence in Hammerson's future success.'
For further information:
John Richards, Chief Executive Tel: 020 7887 1000
Simon Melliss, Group Finance Director Tel: 020 7887 1000
Christopher Smith, Director of Corporate Affairs Tel: 020 7887 1019
Fax: 020 7887 1010
csmith@hammerson.co.uk
Presentation
Hammerson is making a presentation to investors and analysts at 9.30 a.m. today
at the offices of Dresdner Kleinwort Wasserstein, 20 Fenchurch Street, London
EC3. A conference call facility is available for those unable to attend the
presentation by dialling + 44 (0) 20 8322 2055. A copy of the slide presentation
will be posted simultaneously on the Company's website (www.hammerson.co.uk).
Calendar
Ex dividend date 13 April 2005
Record date 15 April 2005
Dividend payable 12 May 2005
Interim results August 2005
CHAIRMAN'S STATEMENT
Overview
In this, my last annual statement to shareholders, I am very pleased to report
on an excellent set of results for Hammerson in 2004. The group achieved a
return on equity of 22.1%, with adjusted net asset value per share increasing by
16.6% to 936 pence.
Hammerson has consistently achieved year on year growth in both net asset value
per share and adjusted earnings per share. We have concentrated on markets we
know well in the UK and France and benefit from operating both in the office and
retail markets.
In 2004, Hammerson continued its policy of recycling capital from mature
investment properties into assets with better growth potential. The group took
advantage of the strong investment markets to sell eight properties and realised
a total of £399 million, leading to exceptional profits of £40.3 million.
These strong property investment markets have made it more difficult to acquire
income-producing assets that meet the group's target financial returns, but
Hammerson is benefiting from its development programme, which provides a source
of high quality new properties. During 2004, the group invested a total of £544
million in the development programme, in improvements to existing properties, in
increasing its interests in joint ventures, and in securing future development
opportunities.
The group's portfolio showed an underlying valuation increase of 8.8%,
reflecting strong demand from investors for property in the UK and France. There
was continuing good demand from retailers for space in Hammerson's shopping
centres and retail parks. Conditions in the office occupational market were more
challenging. Despite this, the group made considerable progress in letting space
at three office schemes in London and Paris.
The directors are recommending a final dividend of 12.47 pence, compared with
11.71 pence in 2003. This makes a total dividend for the year of 17.92 pence, an
increase of 6.5%.
Financial
Net rental income for the year to 31 December 2004 was £188.4 million, compared
with £189.5 million in 2003. On a like-for-like basis, net rental income
increased by 5.4%, following rent reviews, lease renewals and, in France,
indexation.
Profit before tax increased by £60.1 million to £127.2 million. In 2004,
exceptional profits of £40.3 million arose on property disposals, whilst in 2003
disposals gave rise to exceptional losses of £18.8 million. Excluding
exceptional items, adjusted profit before tax increased by 1.2% to £86.9 million
and adjusted earnings per share by 0.7% to 30.0 pence.
In March 2004, Hammerson plc obtained a secondary listing for its shares on
Euronext Paris, the French Stock Exchange, enabling the group to elect into the
new Societes d'Investissements Immobiliers Cotees ('SIIC') tax regime. Under
this, the group's income and capital gains in its French subsidiaries are now
tax exempt. However, intercompany dividends receivable in the UK from France are
taxable.
Full provision has been made for the £71 million SIIC regime entry charge,
payable in four annual instalments, the first of which was made in December
2004. This provision was partly offset by the write back of deferred tax of £45
million, giving rise to a net tax charge of £26 million. In addition, the
contingent tax liability in respect of Hammerson's French business was largely
eliminated, with a reduction of £120 million to £3 million at the end of 2004.
Adjusted net asset value per share increased by 133 pence, or 16.6%, to 936
pence. The return on equity was 22.1% in 2004, compared with 9.3% in 2003.
During 2004, Hammerson issued £300 million 6% unsecured bonds maturing in 2026
and signed a £230 million five year revolving credit facility, further
strengthening the group's financing structure. The average maturity of the
group's debt has now increased to nearly 11 years.
Hammerson's liquidity is strong with cash, short term deposits and unutilised
committed bank facilities of £529 million at 31 December 2004. Gearing at 31
December 2004 was 68% compared with 73% at the end of 2003.
A placing of nearly 20% of Hammerson's existing equity with a wide variety of
investment institutions was successfully carried out by the group's brokers in
January 2004, which I believe has improved liquidity in the Company's shares.
Markets and Outlook
Retail Property
In the UK, economic growth in recent years has been supported by strong activity
in the housing market and increased consumer spending. However, towards the end
of 2004, the housing market showed signs of a downturn, particularly in London
and the South East, affecting consumer confidence and retail sales growth.
The medium term outlook for the retail property sector remains attractive.
Although retailing is competitive in the UK, with supermarkets growing their
market share and margins under pressure, supply of new space is limited by tight
planning restrictions. It is anticipated that dominant shopping centres and
retail parks, which provide good tenant risk diversification and have low
vacancy rates, will continue to win market share and show increases in rental
values.
In France, consumer spending and retail sales improved in 2004, although the
overall retail environment remains competitive. Given the Government's policy of
reducing taxation, the growth in retail sales is expected to continue into 2005.
Rental values for shopping centres increased slightly in 2004 and further modest
growth is anticipated in 2005.
Both in the UK and France, investor sentiment towards retail property remained
strong, leading to a further increase in values. With few investors wishing to
dispose of assets, particularly prime shopping centres, and an increased number
of potential investors, investment yields could reduce further in 2005,
particularly in France.
In Germany, the domestic economy remained weak during 2004, with retail sales
continuing to fall. Whilst a gradual recovery in the economy is expected over
the medium term, the outlook for the property investment market remains
uncertain.
Office Property
In London, occupational demand for prime offices showed some improvement during
2004, reducing the overall market vacancy rate from 14% to 12%. However, there
was a marked increase in demand towards the end of 2004 and, with a limited
supply of new London office space coming to the market during 2005 and 2006,
this should lead to higher rental levels. It is expected that 2005 will see
shorter rent free periods being granted to tenants, followed by an increase in
headline rents in 2006.
In central Paris, occupational demand improved in 2004, particularly in the
latter part of the year. Despite this, the vacancy rate remained little changed
at around 6%. Incentives required by occupiers increased, reducing effective
rents by around 10%. Looking ahead, continued economic growth and improved
business confidence should lead to further demand from occupiers. This, coupled
with few new development completions, should result in a recovery in rental
levels in 2006. Investment demand for well-let offices both in central London
and Paris remained buoyant throughout 2004, leading to a further reduction in
yields.
UK Tax
At the beginning of 2004, the UK Treasury issued a consultation paper, '
Promoting More Flexible Investment In Property', to consider the introduction of
tax transparent vehicles for property ownership in this country. The Government,
in its pre-Budget Statement in November 2004, announced that, whilst there will
be no legislation in this area in 2005, it will issue a further consultation
paper in Spring 2005.
Hammerson is already seeing the benefits of a tax transparent regime in France
and is supportive of the Government's efforts to introduce a tax transparent
vehicle in the UK.
The Board
I shall be standing down as Chairman on 30 September 2005. I consider it a great
privilege to have served first as Chief Executive of Hammerson and since 1999 as
Chairman. I would like to place on record my appreciation for the advice and
encouragement I have received from my colleagues during the 12 years I have
spent with Hammerson.
I am delighted that John Nelson has agreed to succeed me as Chairman. He joined
the Board in May 2004. John is a Chartered Accountant and a former senior
investment banker with broad commercial experience. He is Deputy Chairman of
Kingfisher plc and a non-executive director of BT Group plc. I am confident that
he will make a valuable contribution as Chairman of Hammerson.
In 2004, we also welcomed John Hirst to the Board and he has assumed the role of
Chairman of the Audit Committee. He is Group Chief Executive of Premier Farnell
plc.
The Board has also announced today that Graham Pimlott will be standing down
from the Board on 31 December 2005. Graham joined the Board as a non-executive
director in 1993 and was appointed Deputy Chairman in 2000. I would like to
thank him for his major contribution to Hammerson over many years.
Summary
Hammerson showed a further strong performance in 2004. The policy of progressive
growth in dividends has been maintained with a proposed increase of 6.5% this
year.
The group's retail portfolio offers good potential for growth, notwithstanding
some uncertainties over growth in consumer expenditure in the short term.
Encouragingly, demand for office accommodation, both in central London and
Paris, has improved in the last few months, and this should enable Hammerson to
achieve further lettings in its office portfolio and increase rental income.
Five developments, with an anticipated total cost of £470 million, will be
completed this year and next. These have an estimated total annual rent roll of
£40 million, of which £33 million has been secured. Seven further schemes are
expected to start during 2005 and 2006.
I have every confidence in Hammerson's future success.
Ronald Spinney
Chairman
28 February 2005
FINANCIAL REVIEW
The financial information contained in this review is extracted or calculated
from the attached profit and loss account, balance sheet, cashflow statement,
notes and glossary of terms.
Profit and Loss Account
• Net rental income was £188.4 million in 2004 compared
with £189.5 million in 2003. An increase in rents from properties owned
throughout the year, from completed developments and from acquisitions was more
than offset by a reduction in rents in respect of property disposals.
Net rental income reconciliation 2004 2003
£m £m
Properties owned throughout 2004 and 2003 153.3 145.4
Acquisitions 7.3 0.8
Developments 15.7 5.0
Properties sold 11.5 37.9
Exchange translation and other 0.6 0.4
Net rental income 188.4 189.5
• Net rental income in 2004 included £4.3 million in
respect of turnover rent and £2.4 million in respect of accrued rent receivable,
which has been allocated to rent free periods.
• Administration expenses in 2004 rose by £1.9 million to
£26.7 million, which included a one-off charge of £0.8 million in respect of the
closure of the group's Berlin office. Increases in staff costs and professional
fees relating to tax restructuring in France were offset to some extent by
increased management fees receivable from joint venture partners.
• The group's net financing costs were £74.8 million in
2004 compared with £78.7 million in 2003. Following the completion of several
developments, less interest was capitalised during 2004. However, this was more
than offset by a higher level of interest receivable, reflecting cash received
from property disposals. The average cost of borrowing was 6.3%, compared with
6.0% in 2003. Interest cover was 2.0 times, compared with 1.8 times in 2003.
• Profit before tax was £127.2 million, after including
exceptional profits of £40.3 million on the sale of properties. These profits
arose principally on the sale of office properties and a retail park in the UK.
Adjusted profit before tax, excluding exceptional items, was £86.9 million, an
increase of 1.2% over 2003.
• The tax charge in 2004 was £8.7 million, reflecting a
current tax charge of £49.0 million largely offset by a deferred tax credit of
£40.3 million. The election into the SIIC regime accounted for £43.6 million of
the current tax charge and £45.0 million of the deferred tax credit, being the
exit tax payable and the release of deferred tax respectively. Excluding the
effects of the SIIC regime, the low tax rate arose principally due to low tax on
foreign earnings, UK capital allowances and relief for interest capitalised.
• Adjusted earnings per share, after excluding profits on
property disposals, deferred tax and the SIIC exit charge, were 30.0 pence,
compared with 29.8 pence in 2003, an increase of 0.7%.
• A final dividend of 12.47 pence per share is proposed
which, together with the interim dividend of 5.45 pence per share, makes a total
of 17.92 pence per share for the year. This represents an increase of 6.5% over
the total dividend for 2003.
Cash Flow
• Cash flow from operating activities was £164 million,
compared with £174 million in 2003. The decrease was principally due to the
timing of working capital receipts and payments.
• The cash outflow in respect of acquisitions and other
capital expenditure of £544 million was £106 million less than capital additions
of £650 million. The difference was due to:
£m
Borrowings assumed on acquisition 32
Negative goodwill on acquisitions 28
Payments deferred until 2005 34
Interest capitalised 21
Working capital and other movements (9)
Total 106
• Property disposals realised £399 million and, after
paying tax, interest and dividends, there was a cash outflow, before financing,
of £129 million during the year.
Balance Sheet
• At 31 December 2004, Hammerson's property portfolio was
valued at £4,608 million, compared with £3,956 million at the end of 2003. The
increase arose from capital additions of £650 million, a revaluation surplus of
£344 million and exchange translation gains of £6 million, partly offset by the
disposal of properties with a book value of £348 million.
• Adjusted net asset value per share increased by 133
pence, or 16.6%, to 936 pence at the year end. The portfolio revaluation
accounted for 124 pence of the increase, with the balance principally reflecting
retained profits and the negative goodwill arising on the acquisitions of the
additional interests in WestQuay shopping centre and the Moorhouse office
scheme. Provision was made in the year for the tax cost of entering the SIIC
regime in France, which reduced net assets per share by 25 pence.
Borrowings
• In February 2004, Hammerson issued £300 million 6%
unsecured bonds maturing in 2026. In addition, the group signed a new £230
million five year revolving credit facility in June 2004, refinancing a £250
million facility that expired at that time.
• At 31 December 2004, Hammerson's borrowings totalled
£1,800 million and it had undrawn committed facilities of £475 million. The
weighted average maturity of borrowings at 31 December 2004 was approximately 11
years.
• Unsecured borrowing represented 96% of total debt at 31
December 2004, compared with 99% at the end of 2003. Secured borrowings of £65
million principally comprised the group's share of the facility relating to
Moorhouse.
• Net debt amounted to £1,746 million at 31 December 2004
after taking into account cash and deposits of £54 million. Gearing was 68%
compared with 73% at the end of 2003, whilst the loan to value ratio was 38%.
• The market value of borrowings and interest rate swaps at
the year end was £1,974 million, some £175 million greater than the book value,
equivalent, after tax relief, to 44 pence per share.
Return on Shareholders' Equity
• Hammerson's return on shareholders' equity for the year
ended 31 December 2004 was 22.1%, excluding deferred tax and the effects of
entry into the SIIC regime. This compares with the group's estimated cost of
equity of 7.8%. Over the last three years the group has achieved an average
return on shareholders' equity of 11.9%.
Tax
• In March 2004, Hammerson plc obtained a secondary listing
for its shares on Euronext Paris, the French Stock Exchange, enabling the group
to elect into the new Societes d'Investissements Immobiliers Cotees ('SIIC') tax
regime. The group's income and capital gains in the French subsidiaries are now
tax exempt, although intercompany dividends receivable in the UK are taxable.
• Full provision has been made for the £71 million SIIC
regime entry charge, payable in four annual instalments, the first of which was
made in December 2004. This provision was partly offset by the write back of
deferred tax of £45 million, giving rise to a net charge of £26 million. In
addition, the contingent tax liability in respect of Hammerson's French business
was largely eliminated, with a reduction of £120 million to £3 million at the
end of 2004.
International Financial Reporting Standards ('IFRS')
• With effect from 1 January 2005, all companies quoted in
the European Union are required to adopt IFRS. Hammerson will report its interim
and final results for 2005 under the new accounting regime.
• The main changes to Hammerson's financial statements will
be the recognition of property revaluation surpluses and deficits in the income
statement, rather than the statement of recognised gains and losses, and the
inclusion in the balance sheet of contingent tax that may arise on the disposal
of all properties in the portfolio. In addition, the movements in the fair value
of interest rate derivatives will be recognised in the income statement and
lease incentives capitalised and amortised through the income statement over the
lease term, rather than the period to the first rent review.
• Hammerson is maintaining a dialogue with other property companies to
ensure that the standards are applied as consistently as possible across the
sector. Hammerson will present its 2004 results restated under IFRS in April
2005. The presentation will be available on the Company's website.
PORTFOLIO REVIEW
Portfolio Information
For the year ended 31 December 2004
Net Properties Underlying Average
rental at valuation Total Reversionary/ unexpired
income valuation change return (Over-rented) lease term
£m £m % % % (1) Years
United Kingdom
Retail: Shopping centres 71 1,784 10.3 17.4 10.6 12
Retail parks 21 503 21.3 29.3 10.6 16
92 2,287 12.5 20.0 10.6 13
Office: City 18 640 7.0 15.7 (22.0) 7
West End 5 89 13.2 17.6 - 7
Docklands & Other 10 165 6.5 13.2 (18.3) 7
33 894 7.5 15.9 (17.9) 7
Total United Kingdom 125 3,181 11.1 18.9 3.0 11
France
Retail 41 751 10.6 17.2 18.3 6
Office 15 515 5.8 9.7 5.9 7
Total France 56 1,266 8.6 14.1 13.7 6
Germany
Retail 7 161 (21.8) (18.7) 4.4 5
Total Continental Europe 63 1,427 4.0 9.1 12.5 6
Group
Retail 140 3,199 9.7 16.3 12.3 10
Office 48 1,409 6.8 13.3 (8.2) 7
Total Group 188 4,608 8.8 15.4 6.2 9
Notes:
(1) The amount by which the estimated rental value exceeds or falls short of the rents passing
after any rent free periods, together with the estimated rental value of vacant space.
Portfolio Allocation
• Hammerson owns and manages a portfolio of 15 major
shopping centres and 11 retail parks, providing over 1,100,000 m(2) of retail
space. The group's office portfolio consists of 10 prime office buildings,
located in central London and central Paris, with a total area of over 200,000 m
(2).
• Hammerson's property portfolio was valued at £4.6 billion
at 31 December 2004, compared with £3.9 billion at the end of 2003. During the
year, capital expenditure totalled £650 million, principally on property
acquisitions and the development programme, whilst valuation increases amounted
to £344 million. Property disposals reduced the value of the portfolio by £348
million.
• During 2004, the UK component of the portfolio increased
by three percentage points to 69%, whilst there was a reduction in Germany from
5% to 3%. The retail component of the portfolio increased by one percentage
point to 69%.
• In June, Hammerson exchanged contracts to acquire the
freehold interest in the former London Stock Exchange buildings in the City for
£68 million. An initial payment of £34 million was made on completion in July
2004 and the balance is due in December 2005.
• The group increased its interest in WestQuay shopping
centre to 100% with the acquisition for £203 million in December 2004 of
Barclays Bank PLC's 50% interest in the scheme. The 76,300 m(2) shopping
centre, which is anchored by John Lewis and Marks & Spencer, produces rental
income of approximately £22 million per annum, with the first rent reviews due
this year.
• Hammerson also increased its interest in The Moor House
Limited Partnership, which owns the Moorhouse office building in the City of
London, to 66.7% following the acquisition of a further one-third interest for
approximately £51 million. The 30,100 m(2) landmark building was completed in
November 2004 at a total development cost to Hammerson of approximately £123
million.
• Brent Cross Shopping Park, a joint venture with Standard
Life Investments, was also completed during 2004. Hammerson's interest in the
8,500 m(2) retail park is 40.6% and its share of the total commitment to the
project, including the initial consideration, was £30 million.
• The group took advantage of the strong investment market
during 2004 by disposing of eight properties and raised total proceeds of £399
million. The disposal proceeds were in aggregate some £40 million above their
valuations at 31 December 2003 and £66 million above their cost.
• In Germany, the sale of Hammerson's 22% interest in City
Center shopping centre, Essen, was completed for £20 million early in 2004.
Following the reduction in the size of its business in Germany, Hammerson closed
its Berlin office in February 2004 and outsourced the property management of its
three remaining retail properties.
• Hammerson has exchanged contracts to sell its property in
Sittingbourne, Kent, for £34 million, with completion due in March 2005. The
group acquired the property in February 2003 for £17 million. Terms have also
been agreed for Hammerson to undertake the development management role for the
proposed redevelopment of the site as a mixed-use town centre scheme to be
anchored by a major food superstore.
Valuation Movements
• During 2004 the retail and office portfolios showed
underlying increases in value of 9.7% and 6.8% respectively. This resulted in an
overall valuation increase of the group's portfolio of 8.8%.
• The underlying valuation increase in the UK was 11.1%.
The strong investment market reduced yields generally and around 40% of the
increase in value of Hammerson's UK portfolio can be attributed to this factor.
A further one-quarter of the uplift arose from increased rental values, whilst
the balance reflected property specific factors and management initiatives.
• In France, the underlying valuation increase was 8.6%.
Approximately 40% of the growth in value was due to lower yields and reflected
favourable investment market conditions. The balance reflected higher rental
values at the shopping centres and progress in letting recent office
developments.
• In Germany, the weak consumer markets caused rental
values to decline and this was the main reason for the reduction in values.
Total Return
• The total return from the portfolio was 15.4% in 2004,
compared with 8.7% in 2003. The increase was attributable to the valuation
performance of the UK and French portfolios. The retail park portfolio in the UK
showed a particularly strong performance with a total return of 29.3%.
Income Quality
• Hammerson's portfolio generates a high quality secure
income stream. At 31 December 2004, the passing rent from the portfolio amounted
to £220 million and the average unexpired lease term was nine years. Within the
retail portfolio, the average unexpired lease term for shopping centres was nine
years and for retail parks 16 years. The average unexpired lease terms for the
office portfolios in London and Paris were both seven years.
• The group's five largest retail tenants, which accounted
for 8.8% of total passing rent, were: H&M Hennes (2.4%); B&Q / Comet (1.9%);
Pinault Printemps Redoute (1.9%); Arcadia (1.4%); and Next (1.2%). Given the
spread of tenants in the retail portfolio, the overall risk to Hammerson of
individual tenant default is considered low.
• The group's three largest office tenants, which accounted
for 11.9% of total passing rent, were: Deutsche Bank (6.7%); La Societe du
Figaro (4.0%); and HM Government (1.2%).
• The office development at Bishops Square, London has been
pre-let to Allen & Overy. Hammerson's share of the annual rent, which is
expected to commence in April 2007, will amount to £26 million.
• During 2004, the group renewed nearly 200 expiring leases
and carried out over 50 rent reviews, which, together with rent reviews and
renewals in the previous year, contributed to an underlying increase in income
of 5.4%.
Rent Reviews
• In 2004, UK rent reviews were agreed in respect of leases
with passing rents of £6 million, giving rise to an increase in annual rents of
£2 million, whilst reviews remaining to be settled from 2004 could increase
rents by a further £2 million.
• The first rent reviews at The Oracle, Reading, occurred
in 2004. To date, 45% of the reviews have been agreed, at levels nearly 30% in
excess of previous passing rents. In 2005, the first rent reviews at WestQuay,
Southampton, will take place. The ERV of leases subject to review at WestQuay
was approximately 28% higher than rents passing at the end of 2004.
• At 31 December 2004, the shopping centre portfolio was
12.5% reversionary and the retail parks portfolio 10.6% reversionary. The office
portfolio was over-rented by 8.2%, with the over-renting accounted for by just
two office buildings in London, 99 Bishopsgate and Exchange Tower. Hammerson's
portfolio was 6.2% reversionary overall.
• In the UK, leases subject to rent reviews in the years
2005 to 2007 have current rents passing of £73 million. Management estimates
that, on review, rents receivable in respect of these leases would increase by
£6 million to £79 million by 2007 if reviewed at current rental values. This is
not a forecast and takes no account of increases or decreases in rental values
before the relevant review dates.
Outstanding 2005 2006 2007 2005-07
£m £m £m £m £m
Rents passing from leases subject to review 14 31 30 12 73
Projected rent after review at current ERV 16 34 31 14 79
Potential rent increases 2 3 1 2 6
• Shopping centre leases in France are indexed annually
according to a construction cost index. For 2004, indexation increased rents at
Hammerson's shopping centres in France by £1.0 million. The level of indexation
for 2005 is 5.4%, which applies from 1 January 2005.
Lease Expiries and Breaks
• During 2004, leases with passing rents of £10.4 million
expired. Most of the leases were renewed or the tenants replaced and, because
the expiring leases were at rents below market levels, additional annual income
of £1.4 million was secured.
• Over the three years 2005 to 2007, leases with current
rents passing of £30 million are subject either to expiry or tenants' break
clauses. Management estimates that, assuming renewals at current rental values,
additional annual rents from this element of the portfolio would total £3
million by 2007 as shown in the table below. This is not a forecast and takes no
account of void periods, tenant incentives, or possible changes in rental values
before the relevant lease expiry dates.
2005 2006 2007 2005-07
£m £m £m £m
Rents passing from leases subject to expiries or breaks 18 6 6 30
Current ERV 19 6 8 33
Potential rent increases 1 - 2 3
Vacancy
• At the end of 2004 the overall vacancy rate within the
group's portfolio stood at 9.4%. The vacancy rate in the retail portfolio at 31
December 2004 was 4.7%, with the vacancies principally reflecting units or space
held empty pending refurbishments or reconfigurations. The vacancy rate in the
office portfolio was 28.3% and related principally to four office buildings in
central London, one of which, Moorhouse, was a development completed in November
2004.
• Good progress has been made in letting the three office
development schemes completed towards the end of 2003. In London, 10 Grosvenor
Street and One London Wall are now approximately 33% and 51% let respectively.
In Paris, Neo, 14 boulevard Haussmann, the 26,700 m(2) office building, is now
fully let. This followed a major letting of 20,500 m(2) to La Societe du Figaro,
the leading French newspaper, in November 2004, and a further letting to the
same company since the year end.
New Contracted Income
• Reflecting the leasing activity referred to above and
leases which have already been signed or agreed in respect of current
developments, the group has secured a substantial and rising income stream as
shown in the table below.
New contracted income 2005 2006 2007 2008
£m £m £m £m
Retail parks 3.3 7.1 8.1 8.1
Bishops Square, London E1 - - 18.4 25.8
UK completed offices - 0.9 2.4 2.8
Neo, 14 boulevard Haussmann, Paris 1.6 1.7 3.9 10.6
9 place Vendome, Paris - 0.2 0.6 0.6
Total - cash flow 4.9 9.9 33.4 47.9
- UITF28 basis 13.6 24.7 40.4 40.4
Notes:
(1) The figures include Hammerson's share of income in respect of joint ventures.
(2) Income is included according to when rent payments commence, with the total allocation to rent
free periods, as required by UITF28, also shown.
Developments
• Hammerson continues to follow a strategy of undertaking
selective developments in the retail and office sectors. Developments enable the
group to create assets showing attractive income returns and at a cost
substantially below the price of acquiring completed and income producing assets
on the open market.
• Hammerson's developments were valued at £533 million at
31 December 2004, £96 million above cost, and represented 12% of the total
portfolio. Developments are shown at a valuation that is discounted for the
estimated costs to complete them, including interest, and a profit margin that a
potential purchaser might apply. The group does not intend to dispose of any of
its developments prior to their completion, which should give rise to additional
surpluses as buildings are completed and let.
• At 31 December 2004 five projects were under
construction, the cumulative cost of which was £319 million, compared with a
valuation of £415 million. Further costs of £151 million will be incurred in
order to complete the projects.
Current projects Ownership Size Cost at Estimated total Amount let Anticipated
interest 31/12/04 development or under completion
m(2) £m cost £m offer by date
area
Retail parks
Cyfarthfa, Merthyr Tydfil 100% 23,600 29* 35* 85% Jan 2005
St Oswald's, Gloucester 100% 20,500 25* 44* 83% Jun 2005
Offices
Bishops Square, London E1 75% 75,000 184* 280* 95% Jun 2005
19 Hanover Square, London 100% 2,700 16* 21* 0% Aug 2005
W1
9 place Vendome, Paris 1er 50% 27,700 65* 90* 5% Jul 2006
*Hammerson's share of cost shown for joint ventures
• The 23,600 m(2) Cyfarthfa Retail Park at Merthyr Tydfil
has now been completed and the property is 85% let.
• Construction is underway at St. Oswald's Retail Park in
Gloucester. The first phase of the development is expected to be completed in
June 2005 at a total cost of £44 million and leases in respect of 83% of the
forecast rental income have been agreed.
• The construction of Bishops Square, London, is
progressing well with completion due in June 2005. The 71,200 m(2) of offices is
leased to Allen & Overy. Marketing of the 3,800 m(2) of retail space is now
underway and there is an encouraging level of interest from retailers and
restaurant operators.
• At 9 place Vendome, Paris, work started in January 2004
on a scheme to create 22,200 m(2) of offices and 5,500 m(2) of retail space in a
50:50 joint venture with AXA. Hammerson's share of the total cost of the project
is £90 million and completion is scheduled for July 2006. Two of the eight
retail units have now been let, representing 29% of the anticipated retail
rental income.
Future Development Programme
• Hammerson has several excellent future development opportunities on
which good progress was made during 2004. The group is using its expertise to
advance these projects although the timing of these schemes will be dependent
upon site assembly, planning and letting markets. Seven projects are currently
expected to start in 2005 and 2006 with a total development cost of £740 million
and a potential rent roll when fully let of around £60 million.
Projects Scheme outline Indicative Planning status
total
development
cost £m*
Retail schemes
Broadmead, Bristol 93,000 m(2) retail and leisure 215* Planning consent secured.
(50%) element of 140,000 m(2)
scheme.
Shires West, Leicester (60%) Extension of 60,000 m(2) and 200* Planning consent secured.
refurbishment to existing
centre.
The Avenue Retail Park, 4,500 m(2) extension and 10* Planning consent secured.
Cardiff reconfiguration.
Westwood & East Kent 7,500 m(2) extension. 15* Planning consent secured.
Retail Parks, Thanet
Offices
125 Old Broad Street, 32,000 m(2) tower building. 160* Revised planning application
London EC2 submitted.
60 Threadneedle Street, 20,000 m(2) of offices 105* Revised planning application
London EC2 2,000 m(2) of retail. to be submitted in 2005.
Opera Capucines, Paris 2e 5,800 m(2) of offices 35* Planning application
(50%) 4,600 m(2) of retail. submitted.
*Hammerson's share of costs shown for joint ventures
• Good progress has been made by the Bristol Alliance on
its planned redevelopment of Broadmead in the centre of Bristol. In June,
Hammerson and Land Securities agreed to acquire Morley Fund Management's one
third share of the Bristol Alliance and Hammerson now has a 50% interest in the
scheme. Planning consents are in place for the 140,000 m(2) mixed-use
development, which incorporates 93,000 m(2) of retail and leisure space. House
of Fraser has agreed terms to occupy the 16,250 m(2) four-storey department
store. A leasing campaign is underway and site assembly is progressing with a
view to construction starting later this year. It is anticipated that the new
scheme will open in Autumn 2008.
• In Leicester, Hammerson and Hermes received planning
consent in 2004 for a major expansion and refurbishment of the existing Shires
shopping centre, which will increase its overall size to 109,000 m(2). Shires
West will include 50,000 m(2) of retail space, 6,000 m(2) of restaurant and
leisure facilities and some 120 residential units, served by 2,000 car parking
spaces. John Lewis Partnership has agreed terms for a 20,000 m(2) department
store, which will anchor the new scheme. It is anticipated that construction of
Shires West will begin early in 2006 with completion in Autumn 2008. Hammerson
has a 60% interest in the scheme.
• In January 2004, Hammerson received planning consent for
a 7,500 m(2) expansion of its retail park in Thanet, Kent. Site assembly has now
been completed and construction should begin shortly. The group also has
planning consent for a 4,500 m(2) extension to its existing 10,500 m(2) The
Avenue Retail Park in Cardiff.
• Following the acquisition of the former London Stock
Exchange buildings in June 2004, the group intends to undertake a phased
redevelopment. The first phase, for which a revised planning application was
submitted in December 2004, involves a comprehensive refurbishment of the tower
building, 125 Old Broad Street, to provide 32,000 m(2) of high quality office
accommodation. The second phase, 60 Threadneedle Street, involves the demolition
of the former Stock Exchange market building, and the construction of a new
office building of approximately 22,000 m(2).
• In the centre of Paris, Hammerson is proposing a
mixed-use redevelopment at Opera Capucines, in a 50:50 joint venture with MAAF.
A planning application was submitted at the end of 2004 to create 5,800 m(2) of
offices and 4,600 m(2) of retail accommodation and a start on site is
anticipated in early 2006. Terms have been agreed with Esprit to take 2,500 m(2)
of the retail space for a new flagship store.
• In addition to the above schemes, Hammerson has several
other significant development opportunities. The group is working with local
authorities and landowners in several other major towns and cities, including
Aberdeen, Barnet, Birmingham, Kingston-upon-Thames, Leeds, Peterborough and
Sheffield, to advance potential retail-led development schemes or expansions to
existing centres. A number of further retail parks are also planned. In
addition, the group has several potential future London office schemes arising
from its acquisition of part of the Railtrack portfolio in 2002, including
developments at Bishopsgate Goodsyard and Shoreditch.
• In France, the group continues to advance plans for
extentions and refurbishments over the next few years at a number of its
existing retail assets, including Bercy 2 and Italie 2 in Paris, Les 3 Fontaines
in Cergy Pontoise, Espace Saint Quentin in Saint Quentin-en-Yvelines and Parinor
in Aulnay sous Bois.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2004
Notes 2004 2003
Unaudited Audited
£m £m
Gross rental income, after rents payable 1 212.3 215.3
Other property outgoings 1 (23.9) (25.8)
Net rental income 188.4 189.5
Loss on disposal of properties held for resale - (0.1)
Management fees receivable 4.0 3.3
Cost of property activities (16.3) (15.8)
Corporate expenses (14.4) (12.3)
Administration expenses (26.7) (24.8)
Operating profit 161.7 164.6
Exceptional items: Profit/(Loss) on the sale of investment 40.3 (18.8)
properties
Profit on ordinary activities before interest 202.0 145.8
Cost of finance (net) 2 (74.8) (78.7)
Profit on ordinary activities before tax 127.2 67.1
Current tax 3(a) (49.0) (1.7)
Deferred tax 3(a) 40.3 (13.1)
Tax charge on profit on ordinary activities (8.7) (14.8)
Profit on ordinary activities after tax 118.5 52.3
Equity minority interests (2.2) (2.0)
Profit for the financial year 116.3 50.3
Dividends 4 (49.6) (46.4)
Retained profit for the financial year 15 66.7 3.9
Basic earnings per share 5 42.1p 18.3p
Diluted earnings per share 5 42.0p 18.2p
Adjusted earnings per share 5 30.0p 29.8p
All results derive from continuing operations.
CONSOLIDATED BALANCE SHEET
as at 31 December 2004
2004 2003
Unaudited Audited
Notes £m £m
Fixed assets
Land and buildings 6 4,607.8 3,955.5
Fixtures, fittings and equipment 1.1 1.3
Tangible assets 4,608.9 3,956.8
Investments 8 46.4 40.7
4,655.3 3,997.5
Current assets
Debtors - Due within one year 9 86.1 109.7
- Due after more than one year 9 23.3 32.8
Cash and short term deposits 10 53.7 187.0
163.1 329.5
Creditors falling due within one year
Borrowings 11 (0.7) (249.0)
Other 12 (307.2) (253.8)
Net current liabilities (144.8) (173.3)
Total assets less current liabilities 4,510.5 3,824.2
Creditors falling due after more than one year
Borrowings 11 (1,798.8) (1,523.2)
Other 12 (72.1) (36.0)
Provisions for liabilities and charges
Deferred tax 3(d) (17.3) (58.7)
Equity minority interests (41.6) (38.1)
2,580.7 2,168.2
Capital and reserves
Called up share capital 14 69.3 69.1
Share premium account 15 597.8 594.1
Revaluation reserve 15 1,086.8 764.7
Capital redemption reserve 15 7.2 7.2
Other reserves 15 35.9 8.4
Profit and loss account 15 785.6 726.9
Investment in own shares 16 (1.9) (2.2)
Equity shareholders' funds 2,580.7 2,168.2
Diluted net asset value per share 5 930p 784p
Adjusted net asset value per share 5 936p 803p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2004
2004 2003
Unaudited Audited
Note £m £m
Profit for the financial year 116.3 50.3
Unrealised surplus on revaluation of properties 344.4 110.8
Unrealised surplus on revaluation of investments and minority 2.9 0.5
interests
Unrealised surplus on acquisition of minority interest - 1.5
Negative goodwill 15 27.5 -
Current tax on property disposals relating to prior year revaluations (4.7) (0.3)
Deferred tax on property disposals relating to prior year - (4.7)
revaluations
French exit tax payable on election for SIIC status relating to prior
year revaluations (27.2) -
Exchange translation movements (1.3) 16.4
Total recognised gains and losses for the year 457.9 174.5
NOTE OF HISTORICAL COST PROFITS AND LOSSES
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£m £m
Profit on ordinary activities before tax 127.2 67.1
Realisation of previous years' revaluation gains 25.8 145.2
Historical cost profit on ordinary activities before tax 153.0 212.3
Historical cost profit for the financial year after tax, equity minority
interests and dividends 60.6 144.1
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£m £m
Retained profit for the financial year 66.7 3.9
Amortisation of investment in own shares 0.3 -
Other recognised gains and losses 341.6 124.2
Issue of shares 3.9 1.9
Net increase in shareholders' funds 412.5 130.0
Equity shareholders' funds at 1 January 2,168.2 2,038.2
Equity shareholders' funds at 31 December 2,580.7 2,168.2
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2004
2004 2003
Unaudited Audited
Notes £m £m
Net cash flow from operating activities 17 163.6 173.5
Returns on investment and servicing of finance 17 (77.2) (104.6)
Tax paid (22.0) (0.5)
Capital expenditure and investment 17 75.5 176.1
Acquisitions and disposals 17 (221.1) (60.9)
Equity dividends paid (47.4) (44.4)
Cash (outflow)/inflow (128.6) 139.2
Decrease in short term deposits 19 128.6 50.9
Net cash outflow from financing 18 (5.7) (195.2)
Decrease in cash in the year (5.7) (5.1)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 31 December 2004
2004 2003
Unaudited Audited
Notes £m £m
Decrease in cash in the year (5.7) (5.1)
Net decrease in debt 9.6 197.1
Decrease in short term deposits (128.6) (50.9)
Change in net debt resulting from cash flows (124.7) 141.1
Short term deposits acquired on acquisition of interests in joint
ventures 1.0 -
Debt acquired on acquisition of interests in joint ventures (32.1) -
Exchange adjustment (4.8) (84.9)
Movement in net debt in the year (160.6) 56.2
Net debt at 1 January (1,585.2) (1,641.4)
Net debt at 31 December 19 (1,745.8) (1,585.2)
NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS
Gross Other 2004 2003
rental Rents property Net rental Net rental
income payable outgoings income income
£m £m £m £m £m
Rental income
United Kingdom
Retail: Shopping centres 84.7 (1.7) (11.6) 71.4 62.2
Retail parks 21.2 - (0.6) 20.6 16.3
105.9 (1.7) (12.2) 92.0 78.5
Office: City 24.2 (4.6) (0.9) 18.7 25.1
West End 5.5 (0.4) (0.1) 5.0 12.1
Docklands & other 11.6 (0.4) (1.5) 9.7 8.9
41.3 (5.4) (2.5) 33.4 46.1
Total United Kingdom 147.2 (7.1) (14.7) 125.4 124.6
France
Retail 46.1 - (4.8) 41.3 37.8
Office 15.0 - (0.6) 14.4 15.3
Total France 61.1 - (5.4) 55.7 53.1
Germany
Retail 11.2 (0.1) (3.8) 7.3 11.8
Total Continental Europe 72.3 (0.1) (9.2) 63.0 64.9
Group
Retail 163.2 (1.8) (20.8) 140.6 128.1
Office 56.3 (5.4) (3.1) 47.8 61.4
Total Group 219.5 (7.2) (23.9) 188.4 189.5
Included in net rental income for 2004 is £2.4m (2003: £8.8m) in respect of
accrued rent receivable allocated to rent free periods and a deduction of £0.5m
(2003: £0.8m) in respect of amortisation of lease incentives.
2004 2003
Assets Net Net Net
employed debt assets assets
£m £m £m £m
Net assets
United Kingdom 3,001.8 (949.7) 2,052.1 2,005.7
Continental Europe 1,324.7 (796.1) 528.6 162.5
4,326.5 (1,745.8) 2,580.7 2,168.2
Net assets have not been analysed by retail and office sectors as net debt
cannot be allocated to these sectors.
As part of the group's foreign currency hedging programme, at 31 December 2004
the group had sold €446.0m forward against sterling for value on 4 January 2005,
at a spot rate of £1 = €1.41.
Notes to the Accounts
2 COST OF FINANCE (NET)
2004 2003
£m £m
Interest payable on:
Bank loans and overdrafts 11.7 22.9
Other loans 98.6 85.6
Other interest payable 3.4 5.2
Interest payable and similar charges 113.7 113.7
Less:
Interest payable capitalised (20.9) (25.1)
Interest receivable (18.0) (9.9)
Cost of finance (net) 74.8 78.7
3 TAX
(a) Tax charge
2004 2003
Current tax £m £m
UK corporation tax on profits before exceptional items 0.5 1.1
Foreign tax on profits before exceptional items 1.2 0.6
UK corporation tax on exceptional items 3.7 -
French exit tax payable on election for SIIC status 43.6 -
49.0 1.7
Deferred tax
Deferred tax on profits before exceptional items 4.7 13.1
Deferred tax released on election for SIIC status (45.0) -
(40.3) 13.1
Tax charge on profits on ordinary activities 8.7 14.8
(b) Current tax reconciliation
2004 2003
£m £m
Profit on ordinary activities before tax 127.2 67.1
Profit multiplied by UK corporation tax rate of 30% 38.2 20.1
Effects of:
French exit tax payable on election for SIIC status 43.6 -
Lower effective tax on foreign profits (14.3) (3.4)
Lower effective tax under capital gains rules on property disposal (surpluses)/
deficits (8.4) 5.6
Tax relief for capitalised interest (6.0) (6.7)
Capital allowances for the year (5.8) (6.4)
Utilisation of UK tax losses (1.5) (10.9)
Pre-acquisition surpluses in subsidiaries - 2.7
Other items 3.2 0.7
Current tax charge for the year 49.0 1.7
(c) Factors which may affect future tax charges
It is anticipated that in future years the group will benefit from the
tax-exempt status in France and from brought forward UK tax losses.
NOTES TO THE ACCOUNTS
3 TAX (continued)
(d) Deferred tax
2004 2003
Movement in year £m £m
Opening provision 54.8 34.8
(Credit)/Charge in profit and loss account (40.3) 13.1
Charge on realisation of revaluation gains on property disposals - 4.7
Corporate acquisitions and disposals 2.6 (0.5)
Exchange differences 0.2 2.7
Closing provision 17.3 54.8
2004 2003
Net deferred tax provision Note £m £m
UK
Capital allowances 25.5 27.1
Other timing differences 4.7 1.5
Dividends receivable from France 3.7 -
Tax losses (16.6) (18.6)
Net UK deferred tax provision 17.3 10.0
France
Tax depreciation - 35.9
Other timing differences - 8.9
France deferred tax provision - 44.8
Net deferred tax provision 17.3 54.8
Analysed as:
Deferred tax asset 9 - (3.9)
Deferred tax provision 17.3 58.7
17.3 54.8
(e) Contingent tax
Should the group's properties and investments be sold at book value, it is
estimated that the maximum tax liabilities arising, in addition to the deferred
tax provided in the balance sheet, would be:
2004 2003
£m £m
UK 181.0 99.0
UK tax on dividends receivable from France following property disposals 15.0 -
France 3.0 123.0
199.0 222.0
The tax arising may be reduced depending on how sales are structured. In
particular, if the group retains all capital allowances on disposals, the
liability would be £45.0m (2003: £45.0m) less than the total disclosed deferred
and contingent tax.
(f) Effects of French SIIC elections
In April 2004 the group elected for all its French business, with the exception
of 9 place Vendome, to enter the French SIIC tax-exempt regime with effect from
1 January 2004. Exit taxes totalling £70.8m, equivalent to 25 pence per share on
an adjusted net asset value basis, arose on the conversion and will be payable
in four equal annual instalments with £17.7m being paid in December 2004. The
part of the exit taxes relating to prior year revaluations, £27.2m, is included
in the statement of total recognised gains and losses with the balance of £43.6m
dealt with in the profit and loss account. Deferred tax of £45.0m has been
written back and £121.0m of contingent tax released. The SIIC rules require
Hammerson's French subsidiaries to distribute a proportion of their profits to
Hammerson plc and allowance is made within deferred tax and contingent tax for
the UK tax that may arise when dividends are received.
NOTES TO THE ACCOUNTS
4 DIVIDENDS
2004 2003
£m £m
Interim paid 5.45p (2003: 5.12p) per share 15.1 14.1
Final proposed 12.47p (2003: 11.71p) per share 34.5 32.3
49.6 46.4
The directors have declared a final dividend of 12.47p per share payable on 12
May 2005 to shareholders on the register at the close of business on 15 April
2005.
5 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculations for earnings per share, diluted earnings per share and adjusted
earnings per share, based on the weighted average number of shares, are shown in
the table below. The weighted average numbers of shares exclude those shares
held in the Hammerson Employee Share Ownership Plan (note 16) which are treated
as cancelled.
2004 2003
Earnings Shares Pence Earnings Shares Pence
£m million per share £m million per share
Basic 116.3 276.1 42.1 50.3 275.4 18.3
Adjustments:
Dilutive share options - 0.6 (0.1) - 0.3 (0.1)
Diluted 116.3 276.7 42.0 50.3 275.7 18.2
Adjustments:
Exceptional items (40.3) - (14.5) 18.8 - 6.8
Tax on exceptional items 3.7 - 1.3 - - -
SIIC exit tax 43.6 - 15.7 - - -
Deferred tax (40.3) - (14.5) 13.1 - 4.8
Adjusted 83.0 276.7 30.0 82.2 275.7 29.8
The calculations for basic, diluted and adjusted net asset value per share are
shown in the table below:
Net asset value
per share
Shareholders'
funds
Shares
£m million pence
Basic 2,580.7 277.3 931
Company's own shares held in Deferred Share Plan - (0.6) n/a
Unexercised share options 8.8 1.8 n/a
Diluted 2,589.5 278.5 930
Deferred tax 17.3 - n/a
Adjusted 2,606.8 278.5 936
NOTES TO THE ACCOUNTS
6 LAND AND BUILDINGS
Valuation Cost
2004 2003 2004 2003
£m £m £m £m
Investment properties
Fully developed properties 4,074.8 3,627.7 3,080.0 2,882.1
Properties held for or in the course of 533.0 327.8 437.3 302.3
development
4,607.8 3,955.5 3,517.3 3,184.4
All properties are stated at market value as at 31 December 2004, valued by
professionally qualified external valuers. In the United Kingdom, office
properties and the group's interests in the Birmingham Alliance properties were
valued by DTZ Debenham Tie Leung, Chartered Surveyors, and all other retail
properties were valued by Donaldsons, Chartered Surveyors. In France and
Germany the group's properties were valued by Cushman & Wakefield Healey &
Baker, Chartered Surveyors. The valuations have been prepared in accordance with
the Appraisal and Valuation Standards of the Royal Institution of Chartered
Surveyors.
At 31 December 2004 the total amount of capitalised interest included in
development properties was £18.2m (2003: £8.6m) and is calculated based on the
group's average cost of borrowings.
Long Short
Freeholds leaseholds leaseholds Total
£m £m £m £m
Movements in the year
Balance at 1 January 2004 2,179.3 1,769.8 6.4 3,955.5
Exchange adjustment 5.8 - - 5.8
Additions 249.9 379.5 - 629.4
Disposals (50.9) (295.7) (1.6) (348.2)
Capitalised interest 10.3 10.6 - 20.9
Revaluation surplus 184.5 159.9 - 344.4
Balance at 31 December 2004 2,578.9 2,024.1 4.8 4,607.8
2004 2003
£m £m
Capital commitments 287.8 362.4
NOTES TO THE ACCOUNTS
7 JOINT INVESTMENTS AND DEVELOPMENTS
As at 31 December 2004 the principal property and corporate interests which have
been proportionally consolidated are set out in the following table:
Group share % Partner(s)
Investments
Brent Cross Shopping Centre 41.2 Standard Life Investments
Brent Cross Shopping Park 40.6 Standard Life Investments
Bristol Alliance Limited Partnership 50 Land Securities PLC
Opera Capucines SCI 50 MAAF Assurances
Shires Limited Partnership 60 Hermes
The Bull Ring Limited Partnership 33.33 Land Securities PLC, Pearl Assurance plc
The Grosvenor Street Limited Partnership 50 Grosvenor West End Properties
The London Wall Limited Partnership 50 Kajima London Wall Limited
The Martineau Galleries Limited 33.33 Land Securities PLC, Pearl Assurance plc
Partnership
The Moor House Limited Partnership 66.67 Pearl Assurance plc
The Oracle Limited Partnership 50 Akaria Investments Limited
Developments
9 place Vendome SCI 50 AXA REIM France
The group's interests in Shires Limited Partnership and The Moor House Limited
Partnership do not confer the majority of voting rights nor the right to
exercise dominant influence over the partnerships. Instead the partnerships are
under the joint control of Hammerson and its respective partners. Consequently,
the group's interests are accounted for by proportional consolidation and are
not treated as subsidiaries.
The following summarised profit and loss account and balance sheet show the
proportion of the group's results, assets and liabilities which are derived from
its joint investments and developments:
Profit and loss account
2004 2003
£m £m
Net rental income 57.0 46.2
Administration expenses (0.1) (0.2)
Operating profit 56.9 46.0
Exceptional items: Loss on the sale of investment properties (2.8) -
Cost of finance (net) 0.1 0.3
Profit on ordinary activities before taxation 54.2 46.3
Balance sheet
2004 2003
£m £m
Fixed assets - Land and buildings at valuation 1,382.9 1,339.0
Other current assets 11.6 12.3
Cash and short term deposits 16.9 22.2
28.5 34.5
Borrowings falling due within one year (0.5) -
Other creditors falling due within one year (28.1) (35.3)
Net current liabilities (0.1) (0.8)
Total assets less current liabilities 1,382.8 1,338.2
Borrowings falling due after more than one year (64.3) (15.9)
Other creditors falling due after more than one year (7.2) (15.0)
Provisions for liabilities and charges - (0.6)
Net assets 1,311.3 1,306.7
The borrowings falling due after more than one year of £64.3m (2003: £15.9m)
arise in The Moor House Limited Partnership. The other joint investments and
developments are funded by the Company and the relevant partner. During 2004,
the group acquired additional interests in West Quay Shopping Centre Limited and
The Moor House Limited Partnership. Further details of these acquisitions are
given in note 20.
NOTES TO THE ACCOUNTS
8 INVESTMENTS
2004 2003
£m £m
Value Retail Investors Limited Partnerships 31.4 25.3
Interests in Value Retail plc and related companies 13.8 14.0
Other investments 1.2 1.4
46.4 40.7
9 DEBTORS
2004 2003
Note £m £m
Due within one year
Trade debtors 27.8 39.5
Other debtors 55.6 66.5
Corporation tax 0.4 0.7
Prepayments 2.3 3.0
86.1 109.7
Due after more than one year
Other debtors 23.3 28.9
Deferred tax 3(d) - 3.9
23.3 32.8
Other debtors due after more than one year at 31 December 2004, included a loan
of €30.0m (2003: €30.0m) to Value Retail plc bearing interest based on EURIBOR
and maturing on 10 October 2006. At 31 December 2004, other debtors due within
one year included a loan of €11.0m advanced to Value Retail European Holdings
BV, which bears interest at 13%. The loan matures on 31 July 2005 and €4.0m was
repaid in January 2005.
10 CASH AND SHORT TERM DEPOSITS
2004 2003
£m £m
Cash at bank 23.9 29.6
Short term deposits 29.8 157.4
53.7 187.0
Analysis by currency
Sterling 49.7 169.9
Euro 4.0 17.1
53.7 187.0
At 31 December 2004 short term deposits mainly comprised deposits placed on
money markets with rates linked to LIBOR for maturities of not more than one
month, at an average interest rate of 4.4% (2003: 3.5%).
NOTES TO THE ACCOUNTS
11 BORROWINGS
2004 2003
£m £m
Unsecured
£200 million 7.25% Sterling bonds due 2028 197.4 197.3
£300 million 6% Sterling bonds due 2026 296.3 -
£250 million 6.875% Sterling bonds due 2020 246.7 246.6
£200 million 10.75% Sterling bonds due 2013 195.2 194.9
€500 million 6.25% Euro bonds due 2008 352.2 350.1
€300 million 5% Euro bonds due 2007 211.5 210.1
Bank loans and overdrafts 235.2 556.7
1,734.5 1,755.7
Exchange difference on currency swaps 0.2 -
1,734.7 1,755.7
Secured
Sterling variable rate mortgages due 2007 64.3 16.0
Sterling variable rate loans due within one year 0.5 0.5
64.8 16.5
1,799.5 1,772.2
Security for secured borrowings as at 31 December 2004 is provided by charges on
property.
Maturity
Bank loans Other 2004 2003
and overdrafts loans Total Total
£m £m £m £m
After 5 years - 935.6 935.6 641.7
From 2-5 years 299.5 563.7 863.2 628.5
From 1-2 years - - - 253.0
Due after more than one year 299.5 1,499.3 1,798.8 1,523.2
Due within one year 0.5 0.2 0.7 249.0
300.0 1,499.5 1,799.5 1,772.2
At 31 December 2003 and 2004 no loans due after five years were repayable by
instalments.
Undrawn committed facilities
2004 2003
£m £m
Expiring within 1 year 250.0 0.5
Expiring after more than 2 years 225.4 181.7
475.4 182.2
NOTES TO THE ACCOUNTS
11 BORROWINGS (continued)
Interest rate and currency profile
2004
Floating rate
borrowings
Fixed rate borrowings Total
% Years £m £m £m
Sterling 7.66 15 822.6 176.8 999.4
Euro 5.78 3 563.7 236.4 800.1
6.90 10 1,386.3 413.2 1,799.5
2003
Floating
rate
Fixed rate borrowings borrowings Total
% Years £m £m £m
Sterling 8.09 17 655.4 (0.8) 654.6
Euro 5.78 4 560.4 557.2 1,117.6
7.03 11 1,215.8 556.4 1,772.2
Floating rate borrowings bear interest based on LIBOR, with the exception of
certain euro borrowings whose interest costs are linked to EURIBOR. The above
analysis reflects the effect of currency and interest rate swaps in place at 31
December 2003 and 2004.
As part of the group's foreign currency hedging programme, at 31 December 2004
the group had also sold €446.0m forward against sterling for value on 4 January
2005, at a spot rate of £1 = €1.41.
The Company has interest rate swaps of £176.4m maturing in 2026. Under these
swaps the Company receives interest at a fixed rate of 6.0% and pays interest at
variable rates linked to LIBOR. At 31 December 2004, the fair value of these
swaps was a net asset of £6.1m. In addition the group has a two-third share of
£95.0m of fixed rate sterling swaps maturing in September 2005. The fair value
of Hammerson's share of these swaps at 31 December 2004 was a net liability of
£0.4m.
12 CREDITORS - OTHER
2004 2003
£m £m
Falling due within one year
Trade creditors 45.7 64.7
Tax 63.0 39.6
Other creditors 147.5 104.9
Accruals 16.5 12.3
Dividends payable 34.5 32.3
307.2 253.8
Falling due after more than one year
Tax 35.4 -
Other creditors 36.7 36.0
72.1 36.0
NOTES TO THE ACCOUNTS
13 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
2004 2003
Book value Fair value Book value Fair value
£m £m £m £m
Overdrafts and short term borrowings (0.5) (0.5) (250.6) (250.6)
Gross long term borrowings (1,816.8) (1,997.0) (1,536.9) (1,704.4)
Unamortised borrowing costs 18.0 18.0 15.3 15.3
Interest rate swaps - 5.7 - (0.5)
Currency swaps (0.2) (0.2) - -
Total borrowings (1,799.5) (1,974.0) (1,772.2) (1,940.2)
The fair values of the group's long term borrowings have been estimated on the
basis of quoted market prices. The fair values of the group's outstanding
interest rate swaps have been estimated by calculating the present value of
future cash flows, using appropriate market discount rates. The adjustment on
interest rate swaps is an asset of £5.7m (2003: liability of £0.5m), which
includes a liability of £0.4m (2003: £0.5m) relating to swaps maturing in less
than one year.
Details of the group's cash and short term deposits are set out in note 10.
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 31 December 2004 the fair value of financial liabilities exceeded their book
value by £174.5m (2003: £168.0m), equivalent to 63 pence per share (2003: 60
pence per share) on a diluted net asset value per share basis (see note 5). On
a post tax basis, the difference was equivalent to 44 pence per share (2003: 42
pence per share).
14 SHARE CAPITAL
Called up,
allotted
Authorised and fully paid
2004 2003 2004 2003
£m £m £m £m
Ordinary shares of 25p each 94.8 94.8 69.3 69.1
Number
Movements in issued share capital
Number of shares in issue at 1 January 2004 276,421,668
Exercise of share options - Share option scheme 815,084
- Save As You Earn 15,841
Number of shares in issue at 31 December 2004 277,252,593
NOTES TO THE ACCOUNTS
15 RESERVES
Share Capital Profit
redemption
premium Revaluation reserve Other and loss
account reserve reserves account
£m £m £m £m £m
Balance at 1 January 2004 594.1 764.7 7.2 8.4 726.9
Exchange adjustment - 0.6 - - (1.9)
Premium on issue of shares 3.7 - - - -
Unrealised surplus arising on
revaluation of properties - 344.4 - - -
Unrealised surplus arising on
revaluation of investments and
minority interests - 2.9 - - -
Negative goodwill - - - 27.5 -
Current tax on property disposals
relating to prior year revaluations - - - - (4.7)
French exit tax payable on election
for SIIC status relating to prior
year revaluations - - - - (27.2)
Transfer to profit and loss account
on disposal of properties - (25.8) - - 25.8
Retained profit for the year - - - - 66.7
Balance at 31 December 2004 597.8 1,086.8 7.2 35.9 785.6
The negative goodwill credited to other reserves is the discount received on the
purchase by the group of the remaining 50% of West Quay Shopping Centre Limited
and a further one-third interest in The Moor House Limited Partnership. The
discount on West Quay Shopping Centre Limited relates principally to contingent
tax. This accounting treatment does not comply with Financial Reporting Standard
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
ruling made in February 2002 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.
16 INVESTMENT IN OWN SHARES
2004 2003
£m £m
Ordinary shares of Hammerson plc 1.9 2.2
The Trustees of the Hammerson Employee Share Ownership Plan acquired 700,000 of
the Company's own shares at a cost of £3.2m (nominal value £0.2m). The shares
may be awarded to participants in accordance with the terms of the Plan. The
number of shares held as at 31 December 2004 was 605,408 (2003: 642,414)
following awards to participants during the year of 37,006 shares (2003:
57,586).
The cost of the shares is being amortised over the anticipated vesting periods,
taking account of the group's financial performance. The amortisation is
included in staff costs within administration expenses.
NOTES TO THE ACCOUNTS
17 ANALYSIS OF CASH FLOWS
2004 2003
£m £m
Reconciliation of operating profit to net cash inflow from operating
activities
Operating profit 161.7 164.6
Depreciation and amortisation 1.4 1.3
Increase in accrued rents receivable (2.4) (8.8)
Decrease in debtors 19.9 11.8
(Decrease)/Increase in creditors (17.0) 4.6
163.6 173.5
Returns on investment and servicing of finance
Interest received 21.0 7.4
Interest paid (96.5) (110.8)
Dividends paid to minorities (1.7) (1.2)
(77.2) (104.6)
Capital expenditure and investment
Purchase and development of property (323.2) (363.8)
Purchase of investments - (16.3)
Sale of property 398.7 556.2
75.5 176.1
Acquisitions and disposals
Purchase of interests in joint ventures and subsidiary companies (221.5) (60.9)
Cash acquired with interests in joint ventures 0.4 -
(221.1) (60.9)
18 ANALYSIS OF CASH FLOW FROM FINANCING
2004 2003
£m £m
Issue of shares 3.9 1.9
Increase/(Decrease) in medium and long term borrowings 239.8 (354.0)
(Decrease)/Increase in short term borrowings (249.4) 156.9
Net cash outflow from financing (5.7) (195.2)
19 ANALYSIS OF MOVEMENT IN NET DEBT
Borrowings Borrowings
Short term Cash at due within due after
deposits bank one year one year Net debt
£m £m £m £m £m
Balance at 1 January 2004 157.4 29.6 (249.0) (1,523.2) (1,585.2)
Purchase of interests in joint 1.0 0.4 - (32.1) (30.7)
ventures
Cash flow (128.6) (6.1) 249.4 (239.8) (125.1)
Exchange - - (1.1) (3.7) (4.8)
Balance at 31 December 2004 29.8 23.9 (0.7) (1,798.8) (1,745.8)
NOTES TO THE ACCOUNTS
20 ACQUISITIONS
Book value Adjustments Fair value
West Quay Moor
House
Total Fair value
£m £m £m £m £m
Investment properties 207.8 43.9 251.7 33.4 285.1
Debtors 0.1 0.1 0.2 - 0.2
Short term deposits 1.0 - 1.0 - 1.0
Cash 0.3 0.1 0.4 - 0.4
Creditors (1.4) (0.3) (1.7) - (1.7)
Borrowings due after more than one year - (32.1) (32.1) - (32.1)
Provisions for charges - deferred tax (2.0) - (2.0) (1.3) (3.3)
Net assets acquired 205.8 11.7 217.5 32.1 249.6
Satisfied by:
Cash 221.0
Costs paid 0.5
221.5
Costs accrued 0.6
Negative goodwill 27.5
249.6
On 13 December 2004 the group acquired the remaining 50% interest in West Quay
Shopping Centre Limited ('West Quay') for consideration of £203.0m, in respect
of which acquisition accounting has been adopted. On 23 November 2004 the group
acquired a further one-third interest in The Moor House Limited Partnership ('
Moor House') for consideration of £18.0m.
The summarised profit and loss account for the group's joint investments and
developments in note 7, includes the group's existing 50% share of West Quay's
results until 12 December 2004 and the group's share of the results for Moor
House. In addition the summarised balance sheet in note 7 includes the group's
share of the assets and liabilities of Moor House.
The fair value adjustments adjust the values of the net assets acquired to their
fair values.
21 CONTINGENT LIABILITIES
There are contingent liabilities of £11.9m (2003: £16.8m) relating to guarantees
given by the group.
22 FINANCIAL STATEMENTS
The consolidated profit and loss account and balance sheet set out above are not
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 December 2004 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The financial information for the year ended 31 December 2003 is derived from
the statutory accounts for that year which have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The audit report
on the 31 December 2003 financial statements was unqualified and did not contain
a statement under Section 237(2) or Section 237(3) of the Companies Act 1985.
The unaudited financial information in this report has been prepared on the
basis of the accounting policies set out in the full statutory accounts for the
year ended 31 December 2003.
23 NOTICE OF MEETING
The Annual General Meeting will be held at 10.30am on Thursday, 5 May 2005 at
100 Park Lane, London W1K 7AR.
PORTFOLIO REVIEW
PROPERTY PORTFOLIO INFORMATION
for the year ended 31 December 2004
Reversionary/
Net Properties True Underlying Estimated (Over-rented)
rental at equivalent valuation rental
income valuation yield change Total Vacancy Rents value
return rate passing
£m £m % % % % £m £m %
Notes (1) (2) (3) (4)
United Kingdom
Retail: Shopping centres 71.4 1,784.1 5.7 10.3 17.4 2.9 92.3 103.8 10.6
Retail parks 20.6 503.2 5.7 21.3 29.3 7.8 18.5 22.3 10.6
92.0 2,287.3 5.7 12.5 20.0 4.2 110.8 126.1 10.6
Office: City 18.7 639.7 6.5 7.0 15.7 47.6 16.6 24.1 (22.0)
West End 5.0 89.1 6.6 13.2 17.6 66.3 1.9 5.6 -
Docklands & other 9.7 164.7 7.5 6.5 13.2 14.5 10.7 10.6 (18.3)
33.4 893.5 6.8 7.5 15.9 33.3 29.2 40.3 (17.9)
Total United Kingdom 125.4 3,180.8 5.9 11.1 18.9 10.3 140.0 166.4 3.0
France
Retail 41.3 750.7 6.5 10.6 17.2 2.4 44.8 53.7 18.3
Office 14.4 515.6 6.1 5.8 9.7 11.3 25.7 28.6 5.9
Total France 55.7 1,266.3 6.3 8.6 14.1 4.4 70.5 82.3 13.7
Germany
Retail 7.3 160.7 6.6 (21.8) (18.7) 14.0 9.6 11.1 4.4
Total Continental Europe 63.0 1,427.0 6.4 4.0 9.1 6.9 80.1 93.4 12.5
Group
Retail 140.6 3,198.7 5.9 9.7 16.3 4.7 165.2 190.9 12.3
Office 47.8 1,409.1 6.5 6.8 13.3 28.3 54.9 68.9 (8.2)
Total Group 188.4 4,607.8 6.1 8.8 15.4 9.4 220.1 259.8 6.2
Notes:
(1) True equivalent yield is based on rents passing and estimated rental values. The calculation excludes
properties in the course of development.
(2) Rents passing after deducting head and equity rents post any rent free periods.
(3) Estimated rental value including vacant space and after deducting head and equity rents.
(4) The amount by which the estimated rental value exceeds or falls short of the rents passing, after any rent
free period, together with the estimated rental value of vacant space.
PORTFOLIO REVIEW
SECURITY OF INCOME/REVERSION
as at 31 December 2004
Rents passing Average
unexpired
that expire/break in ERV of leases that expire/break in
2005 2006 2007 2005 2006 2007 lease term
£m £m £m £m £m £m years
Notes (1) (1) (1) (2) (2) (2)
United Kingdom
Retail: Shopping centres 4.7 2.0 2.2 4.9 2.4 3.0 12
Retail parks 0.5 - - 0.6 - - 16
5.2 2.0 2.2 5.5 2.4 3.0 13
Office: City 4.3 - - 3.2 - - 7
West End 0.8 - - 0.7 - - 7
Docklands & other 0.9 1.0 0.9 0.9 0.7 0.7 7
6.0 1.0 0.9 4.8 0.7 0.7 7
Total United Kingdom 11.2 3.0 3.1 10.3 3.1 3.7 11
France
Retail 4.3 1.4 2.7 5.6 1.8 3.3 6
Office 1.4 1.0 0.2 1.6 1.1 0.5 7
Total France 5.7 2.4 2.9 7.2 2.9 3.8 6
Germany
Retail 1.0 0.2 0.2 1.1 0.2 0.2 5
Total Continental Europe 6.7 2.6 3.1 8.3 3.1 4.0 6
Group
Retail 10.5 3.6 5.1 12.2 4.4 6.5 10
Office 7.4 2.0 1.1 6.4 1.8 1.2 7
Total Group 17.9 5.6 6.2 18.6 6.2 7.7 9
Notes:
(1) These figures show the amount by which rental income, based on rents passing at 31 December 2004, could
fall in the event that occupational leases due to expire are not renewed or replaced by new leases. For
the UK it includes tenants' break options. For France and Germany, it is based on the earliest date of
lease expiry.
(2) The estimated rental value at 31 December 2004 for space that expires or breaks in each year, after
deducting head and equity rents and ignoring the impact of rental growth and any rent free periods.
PORTFOLIO REVIEW
RENT REVIEWS
as at 31 December 2004
Projected rent at current ERV of
leases
Rents passing subject to review in subject to review in
Outstanding 2005 2006 2007 Outstanding 2005 2006 2007
£m £m £m £m £m £m £m £m
Notes (3) (3) (3) (3) (4) (4) (4) (4)
United Kingdom
Retail: Shopping centres 9.7 19.8 13.6 7.2 11.2 22.8 14.4 7.7
Retail parks 1.7 4.3 0.4 4.4 2.2 5.1 0.4 5.0
11.4 24.1 14.0 11.6 13.4 27.9 14.8 12.7
Office: City 1.5 1.1 14.9 0.6 1.5 1.1 14.9 0.6
West End - 1.3 - - - 1.3 - -
Docklands & other 1.4 4.0 1.5 0.2 1.5 4.0 1.5 0.2
2.9 6.4 16.4 0.8 3.0 6.4 16.4 0.8
Total United Kingdom 14.3 30.5 30.4 12.4 16.4 34.3 31.2 13.5
The majority of rents in France and Germany are subject to annual indexation.
Notes:
(3) These figures show the rents passing at 31 December 2004, after deducting head and equity rents, which is
subject to review in each year.
(4) These figures are the projected rents for space that is subject to review in each year and are based on the
higher of the current rental income and the estimated rental value as at 31 December 2004, after deducting
head and equity rents and ignoring the impact of changes in rental values before the review date.
CURRENT DEVELOPMENTS
Ownership Cost at Retail/ Estimated total Size Anticipated
development cost*
interest 31 December 2004* Office m2 completion
£m
Project £m date
Cyfarthfa Retail Park, 100% 29 Retail 35 23,600 Jan 2005
Merthyr Tydfil
St Oswalds Retail Park, 100% 25 Retail 44 20,500 Jun 2005
Gloucester
Bishops Square, 75% 184 Office 280 75,000 Jun 2005
London E1
19 Hanover Square, 100% 16 Office 21 2,700 Aug 2005
London W1
9, place Vendome, 50% 65 Office 90 27,700 Jul 2006
Paris 1er
* Hammerson share
GLOSSARY OF TERMS
Adjusted figures Reported amount adjusted to exclude, where applicable, exceptional items and
deferred tax.
Average cost of borrowing The cost of finance expressed as a percentage of the weighted average of
borrowings during the period.
Dividend cover Adjusted earnings per share divided by dividend per share.
Earnings per share Profit for the year divided by the average number of shares in issue during the
year.
ERV The estimated market rental value of accommodation in a property.
Gearing Net debt expressed as a percentage of shareholders' funds.
IFRS International Financial Reporting Standards.
Interest cover Net rental income divided by net cost of finance before capitalised interest.
Interest rate and currency swap An agreement with another party to exchange an interest or currency rate
obligation for a pre-determined period of time.
Like-for-like or underlying net The percentage change in net rental income for completed properties owned
rental income throughout both current and prior years, after taking account of exchange
translation movements.
Like-for-like or underlying The change in value during the year for properties held at the current year
property valuations end, after taking account of capital expenditure and exchange translation
movements.
Loan to value ratio Net debt expressed as a percentage of the total value of the group's
properties.
Net asset value per share or NAV Shareholders' funds divided by the number of shares in issue at the balance
sheet date.
Over-rented The amount by which the estimated rental value falls short of the rents
passing, after any rent free period, together with the estimated rental value
of vacant space.
Pre-let A lease signed with a tenant prior to completion of a development.
Rents passing The annual rental income receivable from a property, after deducting head and
equity rents, which may be more or less than the estimated rental value (see
over-rented and reversionary or under-rented).
Return on shareholders' equity Capital growth and profit for the year expressed as a percentage of
shareholders' funds at the beginning of the year, all excluding deferred tax.
For 2004, the calculation also excludes the effects of entry into the SIIC
regime.
Reversionary or under-rented The amount by which the estimated rental value exceeds the rents passing, after
any rent free periods, together with the estimated rental value of vacant
space.
SIIC Societes d'Investissements Immobiliers Cotees. A French tax exempt regime
available to property companies listed in France.
Total return Net rental income and capital growth expressed as a percentage of opening book
value of property adjusted for capital expenditure during the year.
Turnover rent Rental income which is related to a tenant's turnover.
UITF28 A statement of accounting practice which requires certain lease incentives to
be amortised through the profit and loss account.
Vacancy rate The area in a property, or portfolio, excluding developments, which is
currently available for letting, expressed as a percentage of the total area of
the property or portfolio.
This information is provided by RNS
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