Hammerson plc
10 Grosvenor Street,
London, W1K 4BJ
www.hammerson.com
Annual Report 2013
H
a
m
m
e
r
s
o
n
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
3
CREATING
RETAIL
DESTINATIONS
This report is printed on Magno Silk paper which is FSC® Certified
and was manufactured at a mill that is certified to the ISO14001
and EMAS environmental standards.
Printed by Principal Colour.
Principal Colour are ISO 14001 certified, Alcohol Free and
FSC© Chain of Custody certified.
The inks used are vegetable oil based.
Designed and produced by Black Sun Plc
CONTENTS
STRATEGIC REPORT
Who we are
Where we operate
Chairman’s statement
Chief Executive’s report
Our markets
Business model
Strategy in action:
Investing to upgrade venues
Consumer insight and digital expertise
Strong retailer relationships
Development pipeline
Key performance indicators
Our people
Sustainability
Business review
Financial and property returns
Financial review
Property portfolio information
Principal risks and uncertainties
GOVERNANCE REPORT
Chairman’s introduction
Your Board
Your Board’s year
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Policy
2013 Annual Remuneration report
UK Corporate Governance Code
Compliance
Directors’ report
FINANCIAL STATEMENTS
Directors’ responsibilities
Independent auditor’s report
Primary financial statements
Notes to the accounts
Company balance sheet
Notes to the Company accounts
Ten-year financial summary
OTHER INFORMATION
Property portfolio
Glossary
Index
Shareholder information
01
02
04
06
08
12
14
16
18
20
22
24
26
32
44
46
51
55
60
62
64
67
68
72
74
87
100
104
106
107
110
117
153
154
157
158
164
166
167
REPORT HIGHLIGHTS
CHIEF EXECUTIVE’S REPORT
page 6
FINANCIAL CALENDAR AND SHARE ANALYSIS
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 23 April 2014 at 10 Grosvenor Street, London, W1K 4BJ. Details of the Meeting and
the resolutions to be voted upon can be found in the Notice of Meeting which is available at: www.hammerson.com.
Full-year results announced
Recommended final dividend
Ex-dividend date
Record date
17 February 2014
12 March 2014
14 March 2014
Election (or cancellation) date for Dividend Reinvestment Plan
5.00 pm on 31 March 2014
GOVERNANCE AT HAMMERSON
page 64
Annual General Meeting
Anticipated 2014 interim dividend Payable
Payable on
ANALYSIS OF SHARES HELD AS AT 31 DECEMBER 2013
Number of shares held
0-500
501-1,000
1,001-2,000
2,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001 and above
Total
25 April 2014
23 April 2014
October 2014
Number of
shareholders
% of total
shareholders
Holding
% of total capital
872
373
392
411
163
286
103
185
43
102
29.76
12.73
13.38
14.03
5.56
9.76
3.52
6.31
1.47
3.48
163,154
291,261
580,501
1,312,316
1,134,192
6,898,425
7,501,752
45,134,709
31,116,264
618,744,296
2,930
100.00
712,876,870
0.02
0.04
0.08
0.18
0.16
0.97
1.05
6.33
4.37
86.80
100.00
FIVE YEAR DIVIDEND HISTORY (pence per share)
14
12
10
8
6
4
2
0
8.5
8.5
6.95
6.95
8.8
8.8
7.15
7.15
9.3
2.3
7.0
7.3
1.8
5.5
7.7
7.7
10.0
6.0
4.0
8.3
8.3
10.8
7.2
3.6
2009†
2010
2011
2012
2013**
Interim dividend (non PID) Interim dividend (PID) Final dividend (non PID) Final dividend (PID)
†
In 2009, a second interim dividend was paid in place of a final dividend.
** The 2013 final dividend is subject to approval by shareholders at the 2014 Annual General Meeting.
The PID element of the dividend is paid net of a 20% withholding tax unless a shareholder is eligible to receive the payment gross.
Where a shareholder previously elected to receive the scrip alternative, the dividend was treated as a non-PID.
www.hammerson.com
169
PROPERTY PORTFOLIO
page 158
2013 PERFORMANCE HIGHLIGHTS
97.7%
OCCUPANCY
+2.1%
LFL NET RENTAL
INCOME GROWTH
8.5%
TOTAL PROPERTY
RETURN
£341.2m*
PROFIT BEFORE TAX
* Includes valuation changes
+10.5%
ADJUSTED EARNINGS
PER SHARE
WE ARE HAMMERSON
Our vision is to be the best owner-manager
and developer of retail property within Europe.
To help us achieve this vision, we have a clear
strategy which guides our capital deployment,
operating model and financial management
through three strategic priorities:
1 CREATING HIGH-QUALITY PROPERTY
2 MAXIMISING INCOME
3 CAPITAL STRENGTH
We create compelling retail venues in successful
locations with services and experiences tailored
to the local consumer demographic.
We never stand still and we are always on the look
out for opportunities to enhance our portfolio.
1
3
2
Read about our
business model
on page 12.
WE RETAIL
Visit our website for further information
@ www.hammerson.com
OUR PORTFOLIO
CREATING EUROPE’S
LEADING RETAIL DESTINATIONS
We have a high-quality portfolio in the UK and France
valued at £5.9 billion – with investments in 20 major shopping
centres, 22 retail parks and 9 premium designer outlets.
PORTFOLIO VALUE
£5.9bn
Details of our portfolio
can be found on
page 158
EXPERIENCE
20
SHOPPING CENTRES
Our shopping centres in the
UK and France attract 250 million visitors each
year and include internationally recognised
schemes such as: Bullring, Birmingham;
Brent Cross, London; and Italie Deux, Paris.
LUXURY
9
PREMIUM DESIGNER OUTLETS
We are a significant investor in
Value Retail’s highly successful luxury outlet
Villages which serve tourism capitals
throughout Europe.
CONVENIENCE
22
RETAIL PARKS
Our retail parks provide over 500,000m2
of convenient retail space. We are the
largest owner of retail parks in the UK.
2
Hammerson plc Annual Report 2013
9
13
4
8
5
11
10
8
12
21 18
11
9
6
10
5
7
1
9
3
17
15
1
14
2
16
7
6
1
3 2
19
4
20
5
7
17
16
15
4
12
19
13
22
14
18
20
8
6
21
2
3
SHOPPING CENTRES
1 Brent Cross, London
2 The Oracle, Reading
3 Centrale, Croydon
4 WestQuay, Southampton
5 Bullring, Birmingham
6 Highcross, Leicester
7 Cabot Circus, Bristol
8 Silverburn, Glasgow
9 Union Square, Aberdeen
10 Monument Mall, Newcastle
11 Victoria Quarter, Leeds
12 Bercy 2, Charenton-le-Pont
13 Espace Saint Quentin,
Saint Quentin-en-Yvelines
14 Grand Maine, Angers
15 Italie Deux, Paris 13ème
16 Les 3 Fontaines, Cergy Pontoise
17 O’Parinor, Aulnay-sous-Bois
18 Place des Halles, Strasbourg
19 SQY Ouest, Saint Quentin-en-Yvelines
20 San Sébastien, Nancy*
21 Les Terrasses du Port, Marseille†
RETAIL PARKS
1 Abbey Retail Park, Belfast
2 Brent South Shopping Park, London
3 Cyfarthfa Retail Park, Merthyr Tydfil
4 Abbotsinch Retail Park, Paisley
5 Central Retail Park, Falkirk
6 Dallow Road, Luton
7 Battery Retail Park, Birmingham
8 Cleveland Retail Park, Middlesbrough
9 Drakehouse Retail Park, Sheffield
10 Elliott’s Field, Rugby
11 Manor Walks, Cramlington
12 Ravenhead Retail Park, St Helens
13 Fife Central Retail Park, Kirkcaldy
14 The Orchard Centre, Didcot
15 St Oswald’s Retail Park, Gloucester
16 Imperial Retail Park, Bristol
17 Parc Tawe Retail Park, Swansea
18 Telford Forge Shopping Park, Telford
19 Thurrock Shopping Park, Thurrock
20 Westwood & Westwood Gateway, Thanet
21 Wrekin Retail Park, Telford
22 Villebon 2, Villebon-sur-Yvette
PREMIUM DESIGNER OUTLETS
1 Bicester Village, Oxford
2 La Roca Village, Barcelona
3 Las Rozas Village, Madrid
4 La Vallée Village, Paris
5 Maasmechelen Village, Brussels
6 Fidenza Village, Milan
7 Wertheim Village, Frankfurt
Ingolstadt Village, Munich
8
9 Kildare Village, Dublin
* Purchased February 2014
† Opening May 2014
‡ Shopping Centres and Retail Parks only
250m
ANNUAL SHOPPING
CENTRE VISITS
1.7million m2
SPACE ‡
£634 million
INVESTMENT IN
VALUE RETAIL
www.hammerson.com 3
CHAIRMAN’S STATEMENT
WELCOME TO THE
ANNUAL REPORT FOR 2013,
MY FIRST AS CHAIRMAN
Hammerson is in the business of creating retail destinations. Whether that is
through development, extension, refurbishment or investment, our aim is to
deliver venues to our customers, the retailers and restaurateurs, where their
consumers want to shop, eat and socialise.
During the year we have progressed many of our major retail developments,
to help ensure we create the retail destinations of the future. We have
implemented measures to ensure that we maximise the income from our
existing portfolio, and put the Company in a strong financial position which
gives us the flexibility to capture future opportunities.
4
Hammerson plc Annual Report 2013 INTRODUCTION
I was delighted to join Hammerson in January 2013 and
to take over from John Nelson as Chairman in May. The
Company has a strong record for generating shareholder
value based on its success in providing destinations for our
customers and their consumers. We owe John a debt of
gratitude for his contribution over the last nine years, in
particular providing confident leadership and guidance to
the business during his tenure as Chairman. My objective
is to build on the Company’s robust position to add further
to shareholder value in the years ahead.
I have spent much of my first year getting to know the
business, primarily its people and its assets. I want to thank
all our people for delivering a good performance in the
year, and helping me quickly to learn about the detail
of the business.
RESULTS
We have grown income from the portfolio in 2013,
allowing us to deliver growth in adjusted earnings of over
10% to 23.1 pence per share. In conjunction with the
visibility we have on future earnings this gives us the
confidence to propose an increase in the full-year
dividend of almost 8% to 19.1 pence per share. At the year
end the portfolio was worth £5.9 billion, resulting in a net
asset value of £5.73 per share, a 6% increase on 2012.
BOARD CHANGES
After ten years on the Board, it is planned that John Hirst
will stand down as a Non-Executive Director and as
Chairman of the Audit Committee at the AGM in April.
I would like to pay tribute to his contribution to
Hammerson. The business has benefited greatly from
his wisdom and judgment around the board room table.
We anticipate making a new Non-Executive Director
appointment to the Board during the course of 2014.
Following the AGM, Jacques Espinasse will take over as
Chairman of the Audit Committee from John. In addition,
at the same time Gwyn Burr will take over as Chairman of
the Remuneration Committee from Anthony Watson, who
plans to stand down from the Board in April 2015 after
nine years with us.
SHAREHOLDER ENGAGEMENT
We seek engagement with our shareholders. During 2013
Hammerson undertook a programme of regular investor
relations activities for both our institutional and private
shareholders. These include investor roadshows following
results, participation at investor conferences and
attending ad hoc events where investors have the
opportunity to meet and question Executive Directors
and senior management. Investors are encouraged to
attend our AGM.
Through our focus on the three areas of retail which
are structurally well placed to benefit from technological
and consumer trends, Hammerson is in a good position
to capture future retail spending.
SUSTAINABILITY
Our connected reporting standards were once again
recognised with a Gold Award by EPRA in 2013. Robust
and well-established data management systems enable
us to report beyond compliance, including emissions
resulting from business travel and waste.
We have again driven down our environmental impacts.
These achievements continue to generate year-on-year
cost savings for the business and for our occupiers,
while mitigating the risks of carbon penalties and
rising energy prices.
OUTLOOK
We have reported a good set of results in a year when we
saw the beginning of economic and consumer recovery
in the UK. In France the economic picture is less clear cut,
although personal debt levels remain low, providing the
opportunity for a rebound in consumer spending when
growth returns.
We are seeing improving demand from retailers, and
Hammerson is creating the right product to meet their
future requirements, which provides the conditions for
selected growth in rental values. We have clear visibility
on a number of major development projects which
will create the destination venues of the future, and
drive returns to our shareholders. The first of these,
Les Terrasses du Port in Marseille, will open in May this
year. We remain on course to deliver strong growth in
earnings and dividends over the medium term.
David Tyler / Chairman
Introduction to the
Governance Report
page 60
www.hammerson.com 5
CHIEF EXECUTIVE’S REPORT
CREATING RETAIL
DESTINATIONS
2013 was something of a landmark year – our first as a specialised
retail REIT.
Over the course of the year we have witnessed the start of economic
recovery and seen growth returning to our core markets of the UK
and France. This has driven increased demand for retail floorspace,
especially in those locations where physical retail still adds value –
prime shopping centres which cater to the customer demand for
experience, convenient retail parks and premium designer outlets.
We have three strategic priorities which guide our capital deployment,
operating model and financial management:
1
2
3
CREATING HIGH-QUALITY PROPERTY
MAXIMISING INCOME
CAPITAL STRENGTH
We achieve these objectives by creating compelling retail venues in successful
locations with services and experiences tailored to the local demographic.
1
3
2
Read about our
business model to
understand how
we create winning
retail destinations
on page 12.
1
CREATING HIGH-QUALITY PROPERTY
We continue to invest to upgrade our venues through:
• development – creating vibrant modern retail destinations
• extensions – meeting increased demand from tenants and
consumers at successful retail locations
• refurbishment – refreshing or repositioning existing assets
to increase their appeal
• investment – recycling capital from mature assets into
properties offering the potential to generate higher returns
Development
We will open Les Terrasses du Port, our 61,000m2 shopping
and leisure destination in Marseille, in May. The centre which
is anchored by Printemps and comprises 190 shops, has an
impressive mix of brands and a restaurant terrace with
stunning views over the Mediterranean Sea.
In Beauvais, 90km North of Paris, we have started construction
on the 24,000m2 Le Jeu de Paume scheme. Carrefour, Le Furet
du Nord, H&M, Sephora and Foot Locker are among the retailers
that have committed to the project.
We have also made significant advances with three major
UK developments. In Leeds, we have commenced work at
Victoria Gate, the £135 million John Lewis anchored retail
development which adjoins Victoria Quarter. In Croydon,
London, our joint venture with Westfield continues to make
good progress and in November we achieved planning
approval for the retail-led scheme. At Brent Cross, London we
received approval for a planning amendment in early 2014
moving us closer to start on site for this exciting scheme.
6
Hammerson plc Annual Report 2013
Extensions
2
We are also making good progress with extensions and
redevelopments across the retail parks portfolio. At
Cramlington, following our successful completion of the
catering and leisure scheme in the summer, the extension
to Manor Walks Retail Park was completed in September. At
Abbotsinch Retail Park, Paisley, which was acquired as part
of the Junction Fund transaction, works have begun on the
extension project. In April, we secured planning approval for
the redevelopment of Elliott’s Field Retail Park, Rugby, which
will be anchored by a 5,500m2 Debenhams store.
Refurbishment
We continue to attract quality leisure and catering operators
to our venues which add vibrancy, increase dwell times and
ensure we meet consumers’ demands for a special experience.
At WestQuay, our recently re-launched “Dining at WestQuay”
was awarded the highest 3-star rating by the Sustainable
Restaurant Association and, in July, we received planning
approval for a leisure-led extension to this successful venue.
Works are progressing on schedule at the leisure extension
at Silverburn, Glasgow. The scheme will be anchored by a
14-screen Cineworld multiplex cinema, and include new
restaurants such as Zizzi and Pizza Express.
In France, the program of renovation at our French centres
continues on schedule. In September, we completed
refurbishment works at: Italie Deux, Paris; Grand Maine,
Angers; and Place Des Halles, Strasbourg. The refurbishment
and extension of O’Parinor, Paris to create a new cinema and
a significantly enhanced catering offer, will complete in 2014.
Investment
In May, we acquired an additional stake in Bullring, taking our
ownership of this iconic retail venue to 50%. Developed by
Hammerson in 2003, Bullring remains one of Europe’s most
successful retail venues. It is anchored by Selfridges and
Debenhams, is over 99% let and has welcomed over
400 million shoppers since its opening.
During 2013, we continued to increase our investment in
Value Retail – Europe’s premier owner of luxury outlet Villages.
In June and July we invested a further £78 million, acquiring
for the first time a direct investment in La Vallée Village (Paris)
and increasing our investments in Las Rozas Village (Madrid)
and La Roca Village (Barcelona).
In February 2014 we acquired the Saint Sébastien shopping
centre in Nancy, France, which provides the opportunity to
create value through a number of asset management initiatives.
We continue to raise the quality of the portfolio by recycling
capital out of mature assets, disposing of Queensgate,
Peterborough, at the end of the year.
Focus on sustainability
Sustainability remains very much at the heart of our business.
We maintained our focus on this area during the downturn
and were rewarded with operational cost savings and
reputational benefits. Examples of how sustainability is
delivering added value for the different areas of the business
are detailed throughout the report.
MAXIMISING INCOME
In 2013 we signed 364 leases in respect of 154,000m2,
at levels above both the estimated rental values (ERV), and
previous passing rent. Like-for-like net rental income for the
year was 2.1% higher than in 2012. We maintained high
occupancy of 97.7%, an excellent platform from which to
drive rental income higher in the year ahead.
The completion of a number of on-site developments will
add a further £30 million per annum to our income from 2014.
Strong retailer relationships
We continue to bring new retailers and new formats to ensure
our portfolio remains fresh and vibrant. In 2013, over 200 retail
fascias were changed representing about 7% of our total
portfolio. We have used our strong retailer relationships to
bring exciting brands such as Printemps, Hugo Boss, and
Ted Baker to Les Terrasses du Port.
Consumer insight and digital expertise
Multi-channel retailing and digital marketing continue to grow
in importance as consumers increasingly use mobile devices
to research, inform and make purchases. During 2013 we
completed the roll-out of free wi-fi to all UK centres and
successfully trialled our integrated mobile app – KUDOS – at
Highcross and The Oracle.
3
CAPITAL STRENGTH
Operating within a prudent and flexible capital structure
remains a key priority for the Company. Throughout 2013 we
have maintained our strong financial position and, as at the
year-end, LTV and gearing remained low at 38% and 56%
respectively. Throughout the year we actively managed our
liabilities to ensure that we reduce borrowing costs whilst
maintaining substantial liquidity. In May, we repurchased
£28 million of our high coupon 2013 sterling bonds, and
in November we raised £277 million through a US Private
Placement. These activities helped to reduce our average
interest cost to 4.8% and we finished the period with
substantial liquidity of £716 million.
In 2012 we relocated our Paris head office and intend to
do the same in London in 2015, with substantial cost savings.
We remain committed to improving our cost:income ratio,
and will implement further efficiency measures in 2014.
SUMMARY
In summary, 2013 has brought the first signs of economic
recovery in our markets. We have seen improvements in both
our customers’ and consumers’ confidence that is generating
increased demand for our assets. Our KPIs, which are set out in
detail on page 13, indicate that we are delivering against our
strategic objectives. Our portfolio of modern, well-located
prime shopping centres, convenient retail parks and luxury
outlet Villages continues to attract successful retailers and I
remain upbeat about the future for the Company.
David Atkins / CEO
www.hammerson.com 7
OUR MARKETS
A UNIQUE UNDERSTANDING
OF THE MARKET
The Company’s business strategy is grounded in a focus on prime retail locations,
defined as those which are set to benefit from the structural trends currently
impacting the consumer economy and retail sector. As shopping patterns change,
consumers are selecting only special locations and retailers continue to focus on
locations where physical retail adds value to their overall proposition.
Add to that the increasing trend of shopping as a leisure activity and it is our view
that the physical shop will retain its central position in the retail landscape.
RETAIL PROPERTY MARKET CHARACTERISTICS
The retail environment is changing more quickly than ever
with the use of digital technology having a profound effect on
the way people shop and how retailers operate. With a greater
number of available buying alternatives, consumers are
selecting physical retail only in locations that satisfy their need
for convenience or desire for a special experience.
Consequently, we believe that retailers will continue to
rationalise store portfolios, requiring fewer stores to access
their consumers. However those stores that remain will need
to be larger, better ranged, better supported by multi-channel
and digital capabilities and situated only in the best locations.
These stores are often the most productive for retailers,
delivering the highest sales densities and the greatest
contributions to group profitability.
While sub-scale and poorly located retail locations face
income and occupancy challenges, those venues which
provide shoppers with true convenience and a diverse
experience will continue to capture market share and prosper.
RETAIL TOTAL PROPERTY RETURNS
2010
(%)
2011
2012
2013 Average
Prime shopping centres
Secondary shopping centres
19.7
15.7
7.7
-1.0
4.7
-9.5
7.5
0.2
9.9
1.4
Source: IPD
In the UK and France, planning regimes impose restrictions on new
retail developments that limit the supply of new space, underpin value
and provide unique opportunities for retail property owners to grow
rental and capital values. Therefore, retail property has some
fundamental attractions:
• Sustainable and predictable long term returns with low volatility
• Scale can be achieved through ownership of large, dominant,
management-intensive properties
• Granular and diverse tenant base mitigates specific risks
• Barriers to entry in the form of specialist management skills and
high capital requirements
• International capital increasingly drawn to dominant and high
profile retail assets
This polarisation has resulted in a marked differential in
performance between the best and poorest retail assets.
• Retail property is more resistant to the real estate cycle and has
delivered the highest historic risk-adjusted property returns
8
Hammerson plc Annual Report 2013
MARKET SUB-SECTOR DESCRIPTION
Hammerson operates in three sub-sectors of the retail
property market that cater to consumer preferences for:
• Experience; prime shopping centres that are located in
urban areas and which offer exciting brands, full line stores,
high-quality catering and leisure facilities in a safe, mobile
enabled environment.
• Convenience; retail parks located in out of town locations
that are easily accessible by car, offer free parking and are
increasingly popular due to the growth of “click and
collect” retail.
• Luxury; premium designer outlets located in Europe’s largest
cities. They are often located away from the city centre
and provide an appealing environment selling premium
branded products at a discount to their full price.
Designer outlets appeal to their domestic catchment
but are also popular with international tourists and
international consumers.
Experience – Prime Shopping Centres
The total shopping centre floor space in the UK is
approximately 16.8 million m2 spread across 710 centres.
In the UK, Hammerson owns stakes in 11 shopping centres
that in aggregate accommodate 1,300 retail and catering
occupiers. The Company’s centres attract over 180 million
shoppers each year that spend in excess of £2 billion and
generate annual rents of £145 million. The portfolio comprises
nine of the UK’s top 40 shopping centres. Major tenants
include John Lewis, House of Fraser, Marks & Spencer, H&M
and National Amusements.
High tenant demand, high investor demand and constrained
supply combine to ensure occupancy remains high and rental
and capital values grow.
The UK shopping centre development pipeline is expected to
add only 62,700m2 (0.4% of total floorspace) of gross lettable
area to the market in 2014 and income yields for prime
shopping centres are stable at 5.25%. The largest transaction
in 2013 was the sale of a 33% ownership stake in The Bullring,
Birmingham by Future Fund to a joint venture of Hammerson
and CPPIB. The total consideration was £307 million.
OWNERSHIP OF TOP 40 UK SHOPPING CENTRES
(including joint ventures)
14
9
15
12
9
6
3
0
5
4
3
3
3
2
2
INTU Hammerson
Land
Securities
Source: Company
Henderson
PruPIM
Aviva Westfield Standard
Life
British
Land
Hammerson’s French portfolio is one of the largest in the
country. The Company owns nine shopping centres,
concentrated in the greater Paris region and attracting over
70 million shoppers per annum, which spend over £1 billion
per annum. The portfolio comprises approximately 300,000m2
and its 900 occupiers generate annual rents of £70 million
per annum.
OWNERSHIP OF TOP 40 FRENCH SHOPPING CENTRES
(including joint ventures)
12
12
15
12
9
6
3
0
4
4
2
2
2
1
1
Unibail-
Rodamco
Klepierre
Hammerson
Corio
SCC
Immochan
Altarea
MAB
Carrefour
Source: Company
Key occupiers in the French portfolio include Carrefour,
Monoprix, Inditex, H&M, Sephora and Printemps.
Investors continue to show a keen interest for French assets,
most notably for prime and city centre locations. A key factor
that underpins investor demand is the annual indexation of
rents in French leases. Future supply is mostly concentrated in
the Greater Paris area and recent notable completions have
been limited to Aeroville (80,000m2), Beaugrenelle (50,000m2)
and Villeneuve La Garenne (86,000m2). Prime shopping centre
yields have remained stable at c. 4.90%.
www.hammerson.com 9
Hammerson is a major investor in Value Retail, the only
company in Western Europe that specialises exclusively in the
development and operation of luxury outlet shopping Villages.
Value Retail owns and operates nine luxury designer outlets
across Europe, which provide guests with an outlet shopping
experience unrivalled anywhere in the world. Value Retail’s
portfolio is valued over at £3 billion and represents the largest
single collection of outlet Villages in Europe.
MAP OF VALUE RETAIL ASSETS
The portfolio is home to a high concentration of luxury and
aspirational brands such as Gucci, Prada, Salvatore Ferragamo,
Mulberry, Burberry and Giorgio Armani. The Villages have
become must-visit shopping destinations for domestic
shoppers and international tourists. They benefit from
increasing prosperity in emerging markets and represent one
of the fastest growing sectors of the retail property market.
Since 2007, brand sales at Value Retail Villages have grown at
an average annual rate of 17% and the Villages are among
some of the most successful retail locations in the world. Brand
sales at Bicester Village now exceed £25,000 per m2.
OUR MARKETS CONTINUED
Convenience – Retail Parks
The retail park market is highly fragmented and benefits from
convenient locations that suit time-poor consumers. These
retail locations succeed by meeting consumers’ needs for
convenience as well as retailers’ requirements for accessible
locations to support the fulfillment of multi-channel sales, an
increasingly important driver of store traffic and incremental
sales. Often situated in out-of-town locations, prevailing rents
at retail parks are lower than those in shopping centres which
supports profitability and underpins demand.
The Company owns 21 of the UK’s leading retail parks,
accommodating 440 retail tenants. Major occupiers include
B&Q, Boots, Next and Curry’s, as well as catering operators such
as Costa, Frankie and Benny’s and Pizza Hut. Following the
acquisition of The Junction Fund in November 2012,
Hammerson became the largest direct owner of retail parks
in the UK. The Company utilises this strong market position to
secure favorable terms with occupiers and other counterparties.
TOP DIRECT OWNERS OF UK RETAIL PARKS
(’000m2)
502
500
400
300
200
100
0
327
312
276
239
227
213
Hammerson Hercules
Unit Trust
British
Land
Land
Securities
Henderson
UK Retail
Warehouse
Fund
Prudential
Assurance
Company
The Crown
Estate
Source: Company
As of December 2013 retail park net initial yields stood
at 5.25% for fashion parks and 6.25% for traditional parks.
A fundamental attraction of retail parks are their modest
relative lot size that provides excellent liquidity.
Luxury – Premium Designer Outlets
We estimate that there are now around 205 outlets across
Europe with a combined total area of 3.3 million m2.
Sales growth at designer outlet centres in Europe has
substantially outperformed the region’s non-food retail
industry average. This strong performance has encouraged
continued investment in the sector. Recent outlet openings
were concentrated in Poland, Russia and Germany which
accounted for 65% of new floor space. In 2012 and 2013 only
four schemes opened in mature Western European markets,
specifically in Austria, Italy and Sweden. Most of the new
supply is concentrated in the mass market segment of
this sector.
10
Hammerson plc Annual Report 2013
LEADING TO MARKET ERV GROWTH
FORECAST UK RETAIL ERV GROWTH PER ANNUM
%
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
2.9
2.5
2.0 1.9
1.8
1.6
0.8
1.3
1.1
-0.2
-0.9
-1.2
- 0.1
- 0.2
-0.1
-0.8
2010
2011
2012
2013
2014
2015
2016
2017
Prime shopping centres
Retail warehouses
Source: PMA
Against this improving market background we are confident
our portfolio of prime retail assets, in “winning” locations, that
are actively and professionally managed will continue to
attract consumers and gain market share. This is driving
occupier demand that, combined with low levels of supply, is
shifting the balance of pricing power in our favour and points
to an environment of improving rental and capital values.
LEAD INDICATORS AND OUTLOOK
In recent years, general economic weakness has impacted
household budgets and constrained consumer spending.
Consequently, rental value growth for retail property has been
relatively weak in both the UK and France.
However, as the UK economy continues to improve and lead
indicators such as employment growth, disposable income
and consumer confidence turn positive, the outlook for
retail property also improves. We continue to see good
demand from retailers in response to these improving
economic indicators.
Since 1985 there has been a strong connection between
consumer confidence and retail rents. A two-year lag has
been applied to shopping centre rents, demonstrating
how improving consumer confidence drives higher retail
rents, over time.
UK CONSUMER CONFIDENCE VS
SHOPPING CENTRE RENTS
£ ft2 zone A
10
5
0
-5
-10
-15
-20
-25
-30
-35
Q1
1983
Q1
1985
Q1
1988
Q1
1991
Q1
1994
Q1
1997
Q1
2000
Q1
2003
Q1
2006
Q1
2009
Q1
2012
UK Consumer Confidence Indicator (LHS)
Shopping Centre Rents (RHS)
Source: JP Morgan Cazenove equity research
350
300
250
200
150
100
Given the increasing polarisation of consumer spending, it is
anticipated that the improvement in consumer sentiment and
increase in discretionary spending will be concentrated in the
best retail venues.
www.hammerson.com 11
OUR BUSINESS MODEL
HOW WE CREATE VALUE
We have three strategic priorities which guide our capital deployment, operating
model and financial management:
1 CREATING HIGH-QUALITY PROPERTY
2 MAXIMISING INCOME
3 CAPITAL STRENGTH
Our strategy is underpinned by high-quality real estate. We create compelling
retail venues in successful locations with services and experiences tailored to the
local consumer demographic.
t y
a b il i
Focus o n s u s t a i n
Consumer insight & digital e
x
1
CREATING
HIGH-QUALITY
PROPERTY
3
2
CAPITAL
STRENGTH
MAXIMISING
INCOME
p
e
r
ti
s
e
M
a
x
i
m
i
s
e
c
o
n
t
r
i
b
u
t
i
o
n
o
f o
ur p
e
o
ple
KPIs
es
u
n
e
v
e
d
a
r
g
p
u
o
t
g
n
i
t
s
e
v
n
I
P
r
u
d
e
a il e r relatio nships
t
e
S t r o n g r
n
t & fl e
xible fi nancial structure
12
Hammerson plc Annual Report 2013
OUR KEY STRENGTHS
1
CREATING HIGH-
QUALITY PROPERTY
INVESTING TO UPGRADE VENUES
We develop or acquire to create compelling
retail venues in successful locations. We have
a high-quality portfolio and market leading
positions in our chosen sectors of the retail
market: large pre-eminent shopping centres
that meet consumers’ wish for a special
experience; convenient retail parks; and
luxury designer outlets.
The quality of our portfolio is enhanced
through:
• DEVELOPMENT
• EXTENSIONS
• REFURBISHMENT
• INVESTMENT ACTIVITY
More within our case study section
on page 14
FOCUS ON SUSTAINABILITY
Our focus on sustainability drives resource
efficiencies throughout our portfolio and
ensures we create assets fit for the future
through our development pipeline.
More on sustainability on page 26
2
MAXIMISING
INCOME
CONSUMER INSIGHT AND
DIGITAL EXPERTISE
We are leading change in the way we engage
with our customers and consumers. We use
social media, mobile applications, augmented
reality and tailored marketing campaigns to
maximise footfall and sales at each
destination. We constantly refresh and
enhance the consumer experience at our
properties to ensure they remain vibrant.
More within our case study section
on page 16
MAXIMISE CONTRIBUTION
OF OUR PEOPLE
Our people create value for shareholders
through their skills, knowledge and
commitment in acquiring, managing,
developing and adding value to our assets.
More within our people section
on page 24
STRONG RETAILER RELATIONSHIPS
We foster close, long standing relationships
with retailers across the globe – working
together to deliver innovative commercial
solutions to changing retailer requirements.
More within our case study section
on page 18
DELIVERING HIGH PERFORMANCE
CREATING HIGH-QUALITY
PROPERTY
Total property return relative to IPD
8.5% (IPD 8.3%)
(2012: 5.0% (IPD 3.7%))
We compare the total return achieved from
the portfolio, including our interest in the
Value Retail portfolio, against the relevant
IPD index.
MAXIMISING INCOME
Occupancy
97.7% (2012: 97.7%)
The ERV of the space in the portfolio
which is currently let, as a percentage
of the total portfolio.
Growth in like-for-like NRI
2.1% (2012: 2.1%)
The percentage change in net rental
income for completed investment
properties owned throughout both current
and prior periods, after taking account of
exchange rate movements.
3
CAPITAL
STRENGTH
PRUDENT AND FLEXIBLE
FINANCIAL STRUCTURE
We operate within a prudent and flexible
financial structure. Our low gearing provides
financial stability whilst giving capacity and
flexibility to progress future investment.
More within our Business Review
on page 42
CAPITAL STRENGTH
Growth in adjusted EPS
10.5% (2012: 8.3%)
The increase in adjusted EPS expressed
as a percentage of the prior year figure.
13
www.hammerson.com
INVESTING TO
UPGRADE VENUES
VICTORIA QUARTER AND VICTORIA GATE, LEEDS
Our portfolio is tailored to meet the needs of the local consumer.
In Leeds, we own Victoria Quarter – Leeds’ premier upmarket retail
venue anchored by a Harvey Nichols department store. The centre
comprises 18,900m2 of floorspace and provides 72 boutiques and
restaurants all set within a stunning Victorian arcade. It is home to
high-end retailers such as Louis Vuitton, Mulberry, Vivienne
Westwood and Oliver Sweeney. It has successfully established
itself as the leading retail destination in Leeds and attracts over
8 million visitors each year. The asset reinforces our interest in the
fast growing luxury retail sector.
To capitalise on local demand and build on the strong profile
already established by Victoria Quarter, we are progressing
Victoria Gate, the 34,300m2 retail development adjacent to the
existing arcade. In September, we secured planning permission
for the development. This project will be anchored by a new
21,000m2 John Lewis department store and provide over 30 new
boutiques and restaurants, as well as a new 800 space car park.
We have commenced work on site in 2014, with the scheme
opening to the public in 2016.
KEY STATISTICS
• Leeds is the 3rd largest city in the UK, with
a population over 750,000
• Victoria Quarter occupancy is 99.6%, with
annual rents of more than £7.3m
• Victoria Gate development to provide an
additional 34,300m2
• Pre-letting agreement exchanged with John Lewis
for a 21,000m2 anchor store
• Anticipated annual rents of £10m from Victoria Gate
14
Hammerson plc Annual Report 2013
www.hammerson.com 15
CONSUMER INSIGHT
AND DIGITAL EXPERTISE
CONSUMER INSIGHT + DIGITAL =
KUDOS
The retail environment is changing more
quickly than ever. The digital revolution
and ubiquity of smart phones is having a
profound effect on how people shop,
and how retailers operate, with 50% of all
purchases influenced by the internet, in
some form.
Consumers are now constantly
connected – often on a mobile device.
We need to be at the forefront of
multi-channel retailing and are
working with our customers to trial
new technologies and innovate
different formats.
In October we successfully launched our
loyalty app in Highcross, Leicester and
The Oracle, Reading, which enables
consumers to receive exclusive offers
tailored to their preferences, and allows
us to gain greater insight into the way
our consumers shop. Usage of the app
has been above our expectations, with
an average of 1,500 downloads per week
at the two centres.
KEY STATISTICS – KUDOS
• 1,500 downloads per week
• 75% of users are female
• 15% average voucher redemption rate
• 2.5 times app is used by shoppers on each visit
16
Hammerson plc Annual Report 2013
CONSUMER INSIGHT
AND DIGITAL EXPERTISE
www.hammerson.com 17
STRONG RETAILER
RELATIONSHIPS
We keep our centres compelling and
vibrant by constantly refreshing the
tenant mix. Since 2009, we have
introduced 221 premium brands to
our retail assets in the UK and France.
We seek out expanding international
retailers to bring in retail firsts such as
Apple, Hollister and Forever 21.
At Les Terrasses du Port, our 61,000m2
shopping centre development in
Marseille, we have secured a number
of retail firsts: the first Printemps store
in Marseille and its first opening for
20 years; the first Citadium outside
Paris; Ted Baker’s first French store
outside Paris; and Michael Kors’ first
French shopping centre store. All in
one centre.
Les Terrasses du Port is 93% pre-let and
is on schedule to open in May 2014.
KEY BRANDS INTRODUCED
TO LES TERRASSES DU PORT
KEY STATISTICS
• Lettable area 61,000m2
• 93% pre-let
• Opening May 2014
18
Hammerson plc Annual Report 2013
M
o
n
u
m
e
n
t
M
a
l
l
Hig
h
cro
ss
Cabot Circus
B
r
e
n
t
C
r
o
s
s
e
l
c
a
r
e O
h
T
uare
n Sq
nio
U
B
g
ullrin
L e s T e r
t
s e s d u P o r
r a s
Les Terrasses du Port
Italie Deux
Les Terrasses du Port
Cabot Circus
Victoria Quarter
www.hammerson.com 19
OUR DEVELOPMENT
PIPELINE
93%
Pre let
Estimated cost to
complete: £80m
Value: £386m
Estimated annual
income: £28m
SILVERBURN
EXTENSION
GLASGOW
LES TERRASSES
DU PORT
MARSEILLE
61,000m2
Lettable area
Estimated cost to
complete: £8m
Estimated annual
income: £1m
84%
Pre let
10,900m2
Lettable area
2014
2015
CYFARTHFA
RETAIL PARK
MERTHYR TYDFIL
LE JEU DE PAUME
BEAUVAIS
14,500m2
Lettable area
23,800m2
Lettable area
42%
Pre let
Estimated cost to
complete: £60m
Estimated annual
income: £5m
46%
Pre let
Estimated cost to
complete: £19m
Estimated annual
income: £2m
* All figures are Hammerson share
20
Hammerson plc Annual Report 2013
Hammerson’s development programme will create the vibrant retail
destinations of the future. The Company’s track record of managing
complex development projects and urban regeneration schemes has
earned it a reputation as a leading real estate developer in the UK and
France. We have a substantial pipeline of future developments and
have forged strong relationships with the local authorities and major
retail groups that have interests in these schemes.
Estimated cost to
complete: £70m
Estimated annual
income: £5m
WATERMARK
SOUTHAMPTON
Estimated cost to
complete: £500m
Estimated annual
income: £35m
CROYDON
TOWN CENTRE
• Estimated cost to complete: £500m
LONDON
• Estimated annual income: £35m
18,000m2
Lettable area
200,000m2
Lettable area
2016
2018
VICTORIA GATE
LEEDS
BRENT CROSS
EXTENSION
LONDON
34,300m2
Lettable area
90,000m2
Lettable area
Estimated cost to
complete: £135m
Estimated annual
income: £10m
Estimated cost to
complete: £350m
Estimated annual
income: £26m
www.hammerson.com 21
KEY PERFORMANCE INDICATORS
DELIVERING
HIGH PERFORMANCE
We monitor the performance of our business using four
principal measures and appropriate benchmarks:
total property returns; occupancy; growth in like-for-like net
rental income; and growth in adjusted earnings per share.
These Key Performance Indicators, or KPIs, illustrate the relative
success of the implementation of our strategic priorities. The
KPIs are calculated using data from management reporting
systems and IPD.
The Company’s Annual Incentive Plan (AIP)
and Long Term Incentive Plan (LTIP) for
Executive Directors contain performance
measures, set out on page 76, that align
closely with these KPIs. Total property return
relative to IPD is a specific measure in both
the AIP and the LTIP and high occupancy and
income growth drive increased earnings per
share, total shareholder return and net asset
value, which are performance measures in
either the AIP or the LTIP.
1
CREATING
HIGH-QUALITY
PROPERTY
3
2
CAPITAL
STRENGTH
MAXIMISING
INCOME
KPIs
• Total property return
• Occupancy
• Like-for-like NRI
• Growth in EPS
The impact of the KPIs on
remuneration is set out in the
Remuneration Report on pages
73 and 89.
Definitions for occupancy,
like-for-like NRI, EPS and total return
are provided in the glossary on
pages 164 and 165.
STRATEGIC PRIORITY
CREATING HIGH-QUALITY
PROPERTY
We invest in high-quality retail real estate which
is attractive to customers and consumers and
provides a platform from which to grow income
and value, generating good returns.
KPI
TOTAL PROPERTY RETURN
RELATIVE TO IPD
We compare the total return achieved from the
portfolio against the IPD Retail Property Universe.
The return includes the Group’s share of the Value
Retail portfolio for 2013.
BENCHMARK: IPD
TOTAL PROPERTY RETURNS
%
15
15.0
13.7
8.9
8.2
8.3 8.5
5.0
3.7
10
5
0
-5
1.3
-4.1
2009
2010
2011
2012
2013
IPD Universe
IPD Universe 2013
Total property return
Total property return 2013
Detail on our development
refurbishment and extensions can
be found on page 32.
PERFORMANCE
8.5% (IPD 8.3%)
(2012: 5.0% (IPD 3.7%))
From 2013, we have included the total return
generated by the Group’s interests in Value
Retail in the Group’s total property return. This
better represents the exposure which the
Group has to its three areas of focus:
experience; convenience; and luxury.
The return for 2013 at 8.5% outperformed the
benchmark, based on the quarterly index, of
8.3%. As would be expected from
Hammerson’s prime assets, the income return
of 5.3% was below the IPD equivalent of 5.8%.
The IPD capital return was 2.4% whereas our
portfolio generated capital growth of 3.1%.
The IPD Retail Property Universe includes all
types of UK retail property and the 2013 index
reflected, in particular,high returns from retail
unit shops in and around London.
FOCUS ON 2014
We believe that prime shopping centres,
well-located retail parks and luxury outlet Villages
of the type to which Hammerson is exposed will
outperform other classes of retail real estate over
the longer term.
22
Hammerson plc Annual Report 2013
STRATEGIC PRIORITY
MAXIMISING INCOME
We aim to maximise the occupancy of our properties
as income lost through vacancy has a direct impact
on profitability. However, we believe that a low level
of structural vacancy is appropriate in our retail
portfolio as it allows us to flex the mix and location
of customers within a property, which should in turn
increase rental income and provide capital growth.
PERFORMANCE
97.7% (2012: 97.7%)
The portfolio was 97.7% occupied at the end
of 2013, unchanged compared with a year
ago. Our prime retail portfolio has proved
resilient in the face of the pressures on
retailers from the economic environment and
occupancy has been maintained above our
target of 97.0%.
KPI
OCCUPANCY
The ERV of the space in the portfolio which is
currently let, as a percentage of the total portfolio.
BENCHMARK: 97%
FOCUS ON 2014
Although growth has returned to the UK
economy, retailers continue to face challenging
operating environments in both the UK and
France. This may result in further administrations
which would increase vacancy. However, we
expect the portfolio to remain attractive to
potential occupiers, which would continue
to support high occupancy.
OCCUPANCY
%
99
97.9
97.7
97.7
97.3
98
97
96
95
94
93
95.4
2009
2010
2011
2012
2013
Target
Further analysis of occupancy can be
found on page 39.
STRATEGIC PRIORITY
MAXIMISING INCOME
Net rental income (NRI) from the property portfolio
is the primary source of the Group’s operating
cashflow and the main contributor to earnings. We
aim to grow NRI organically through leasing vacant
space, capturing uplifts from rent reviews, tenant
engineering and other ‘value adding’ initiatives.
KPI
GROWTH IN LIKE-FOR-LIKE NRI
The percentage change in net rental income
for completed investment properties owned
throughout both current and prior periods, after
taking account of exchange rate movements.
BENCHMARK: >2%
PERFORMANCE
2.1% (2012: 2.1%)
On a like-for-like basis, net rental income grew
by 2.1% for the continuing portfolio in 2013,
slightly above our target of 2%. Income from
UK and French shopping centres grew by
3.2% and 2.6% respectively. UK retail park
income increased by 0.2% reflecting
significant tenant administrations in the first
half of the year.
FOCUS ON 2014
Sustaining strong like-for-like NRI growth in the
present environment continues to be challenging.
However, the portfolios in both the UK and France
provide opportunities to increase rental income by
managing lease expiries, breaks and reviews.
GROWTH IN LIKE-FOR-LIKE NRI
%
4.0
3.8
3.5
2.1
2.1
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
0.9
2009
2010
2011
2012
2013
Target
See pages 40 and 41 for detail on
net rental income.
STRATEGIC PRIORITY
CAPITAL STRENGTH
Adjusted earnings per share (EPS) is the Group’s
principal profit measure and is an indicator of the
level of recurring profit available for distribution
to shareholders as dividends. Steady growth in
adjusted EPS reflects the sound capital structure
of the Group and will support a progressive
dividend policy and increased shareholder returns.
PERFORMANCE
10.5% (2012: 8.3%)
Adjusted EPS increased by 2.2 pence, or
10.5%, to 23.1 pence. This resulted principally
from a full year’s impact from our increased
investment in Value Retail and growth in net
rental income. We benchmark this KPI against
the Retail Prices Index (RPI) and in 2013 this
hurdle was 2.9%.
KPI
GROWTH IN ADJUSTED EPS
The increase in adjusted EPS expressed as a
percentage of the prior year figure.
BENCHMARK: RPI
FOCUS ON 2014
We are confident that net rental income will
increase through organic growth, particularly as a
result of the opening of Les Terrasses du Port. We
have announced cost saving measures which will
benefit earnings in 2015, 2016 and beyond, but
which will require a one-off restructuring charge
in 2014.
GROWTH IN ADJUSTED EPS
%
15
10
5
0
-5
-10
-15
-20
-25
-30
10.5
8.3
3.1
2.9
2.4
4.8
4.8
1.0
-3.0
-23.6
2009
2010
2011
2012
2013
RPI
RPI 2013
Growth in adjusted EPS
Growth in adjusted EPS 2013
See page 46 for more information on
financial performance.
www.hammerson.com 23
PEOPLE
1
3
2
MAXIMISING THE
CONTRIBUTION
OF OUR PEOPLE
Creating value through our people is
one of the core components of our
business model and is fundamental to the
achievement of our strategic objectives.
Throughout 2013 I have had the opportunity to work on a
wide range of assets and developments, to take on more
responsibility and to start to manage a small team.
Vincent Sadé / Portfolio Manager / Investment Manager
CULTURE AND VALUES
During 2013 we focused on culture and values within
Hammerson as a way of engaging, aligning and maximising
the contribution of our people, in order to support our
strategic objective of creating successful retail destinations.
A highly-inclusive approach was adopted, inviting every one
of our employees to participate in workshops to create the
values for our business: ambition, responsibility, collaboration
and respect.
Embedding our values has been coordinated both through
managers and ‘culture champions’, who have acted as
advocates for the values across the business. Various activities
have been implemented, including values-based 360-degree
feedback, staff events, job shadowing to build collaboration
across teams and interactive workshops to build local
action plans.
24
Hammerson plc Annual Report 2013
AMBITION
Hammerson Future
To implement our vision of being the best owner, manager
and developer of retail property in Europe, we have launched
the Hammerson Future programme.
Through Hammerson Future, we have established cross-
functional teams to drive improvements across our business,
focusing on four key areas: People, Product, Customer
and Performance.
By working collaboratively we are sharing best practices and
developing improvements that can benefit the whole of
Hammerson. These improvements cover our multi-channel
approach, shopping centre design, operational and financial
performance, organisational culture, retailer relationships and
management capability.
RESPONSIBILITY
Organisation
Through greater alignment of our organisational structure, we
have sought to bring increased coordination and collaboration
to our teams.
In particular, the increasing importance of multi-channel retail
has led to the creation of a Group-wide marketing function,
combining our UK and French teams. This important change
enables a more cost-effective and coordinated approach to
delivering our multi-channel strategy, as well as coordinating
local and central marketing activities.
Opportunities for progression and increased responsibility for
some of our talented asset managers were also implemented
during the year following a management restructure in our
French business.
Performance management
We have amended our performance management process
to specifically reflect on assessment against values and
management capability, in addition to the achievement of
personal objectives.
It continues to be important that we deliver operational and
financial results but also that we do this in a way that is aligned
to our new values.
COLLABORATION
Community engagement
This year over 200 people participated in Hammerson’s fifth
annual Community Day. We organised activities in 15 locations
and worked with 12 different charities. Activities ranged from
providing business skills workshops through to weeding,
entirely based on what each charity would find most helpful.
Community Day provides an opportunity for staff from
different areas of the business to meet and work together on
something out of the ordinary. This provides valuable team
and relationship building opportunities both internally and
within our local communities.
AT A GLANCE
• Hammerson currently
employs 300 people in the
UK and 109 in France
• As at 31 December 2013,
204 employees owned
shares or participated in
the Group’s share plans
• Hammerson is formally
accredited as an ‘Investor
in People’
• Hammerson reports on a
number of performance
indicators relating to
employees as part of the
Global Reporting Initiative
• The remuneration of the
Directors is set out on
pages 72 to 99
RESPECT
Diversity and equality
Our approach to equal opportunities is based on a belief that
having an inclusive culture and diverse workforce is good for
our business. Our policy reflects our commitment to
objectively assess, recruit and reward based on merit.
We have created a number of new roles and brought new
skills into the business to reflect the dynamic retail environment.
We have been successful in recruiting senior female talent to
Hammerson into roles including Head of Multi-Channel, Head
of Shopping Centre Management, and Head of Sustainability.
During 2014 we will refine and implement a clear diversity and
inclusion action plan focused on increasing diversity within key
areas of the business.
Being a Culture Champion has enabled me to engage
with others across different parts of the business. Together
we focus on bringing our values to life through fun and
informative projects including workshops and job
shadowing; we have lots of ideas in the pipeline too!
Katie Pattison / B2B Marketing Manager
GENDER
DIVERSITY
(%)
56%
54%
55%
44%
46%
45%
2011 /12 /13
All Employees
17%
11%
11%
89%
89%
83%
2011 /12 /13
Group Executive
Committee
11%
20%
18%
89%
80%
82%
2011 /12 /13
Board
Members
Female
Male
www.hammerson.com 25
SUSTAINABILITY
1
3
2
FOCUS ON
SUSTAINABILITY
Our creation of world class retail destinations is supported throughout the business
by Positive Places, our sustainability framework. Positive Places is built around our
five key stakeholder groups: communities, customers, employees, investors and
suppliers, and provides strategic direction for all our sustainability activities.
It enables us to focus on activities that create value for our customers and
preferred destinations for our consumers, supporting the value of our assets.
Our material environmental impacts flow from the energy
consumed and waste generated at our assets. As our
development activity increases, so will the impact of our
on-site activities, but the environmental performance of the
completed assets will remain our most significant
environmental impact. Our environmental legacy is a
fundamental sustainability issue for the business.
Understanding our material impacts enables us to focus on
activities which generate the most significant change. This
year these have included:
• The continued roll out of energy efficient lighting across our
car parks and non-retail areas
• Removal of mall air conditioning at The Oracle, Reading
• Achieving BREEAM Excellent at design stage for Les Terrasses
du Port, Marseille
• The introduction of the Positive Growth Awards, piloted at
WestQuay, as a means of engaging with our retail customers
• The delivery of a further major research project,
Demonstrating the True Value of Shopping Centres,
examining the social and economic return generated by
shopping centres
• Our Sustainable Supply Chain survey and report, enabling
us to identify and encourage good practice and provide
feedback to our suppliers.
Our performance against our twelve sustainability indicators
is set out in the table below. We have achieved or are on track
with 7 out of the 12 targets set in 2010. New targets will be
set in 2014.
SUSTAINABILITY PERFORMANCE INDICATORS
Measure (target end date)
Reduce carbon emissions by 20% against 2010 baseline (2015)*
Reduce water consumption by 12% against 2010 baseline (2015)
Increase waste recycling to 75% (2013)
Biodiversity action plans at all assets (2015)
Community plans for all developments and managed assets (2014)
Progress
On target
Achieved in France,
Not in UK
Achieved in UK,
Not in France
Ahead of target
Ahead of target
75% of community activity to be long term community investment (2014)
Not achieved
50% of suppliers with contracts >£100k to be engaged with
on sustainability (2015)
Engage with top 20 shareholders (2013)
Complete full life cycle assessment for 2 assets (2012)
Not achieved
Ahead of target
Not achieved
Not achieved
Performance
-9%
-22% France
+21% UK
79% UK
41% France
34 UK 5 France
30
52% UK
66% France
71%
10 engaged
1 complete,
1 commissioned
100% of top 75 customers engaged with on sustainability (2013)
Not achieved
32%
Complete 6 research papers, including 2 with a partner
All employees to complete CR training
Achieved
On target
6 complete
90% UK trained
* Our absolute carbon emissions have fallen by 40% since 2010. The reported figure relates to the retail portfolios only.
26
Hammerson plc Annual Report 2013
OUR PEOPLE
Positive sustainability outcomes require close collaboration
with many parts of the business. The sustainability, operations
and centre-based teams work closely to set sustainability
targets at asset level. In support of this approach dedicated
Environmental Co-ordinators (ECs) at six of our centres
monitor environmental performance and implement
initiatives to drive improvements. Working closely with the
operational and sustainability teams, the ECs have achieved
significant resource efficiencies and cost reductions.
Our sustainability initiatives in 2013 have delivered estimated
savings of £400,000 in energy costs. The most effective
changes have been achieved through the roll out of energy
efficient lighting. This has generated savings of 1,045 tonnes of
CO2e. Lighting remains the biggest source of carbon emissions
from retail property. We will therefore continue to focus
attention on reducing demand in the areas we control and
working with retailers to reduce emissions in their areas.
The different lighting requirements of retail and non-retail
areas within the centres, along with rapid changes in
technology led to our commissioning of a review of lighting
needs and potential solutions. The objective is to deliver a
standard brief that will provide state-of-the-art lighting for
our retail customers and consumers whilst reducing carbon
emissions and saving money.
CUSTOMERS
Lighting within the retail units, which we do not directly
control, generates the majority of electricity demand and
OUR SUSTAINABILITY TEAM STRUCTURE
Director Retail
Management
(France)
Head of
Sustainability
carbon emissions. We therefore continue to set standards
and provide support and guidance to help our customers
improve the environmental performance of their in-store
lighting systems.
Working closely with B&Q on the delivery of a new eco-
learning store at Merthyr Tydfil has demonstrated how much
can be achieved when property owners and occupiers work
together. By responding to a brief to deliver a low-carbon,
highly efficient new store we are expecting the development
to achieve energy performance substantially in excess of that
required to achieve BREEAM Outstanding and a 50% reduction
in carbon emissions against Building Regulations Part L. This is
an excellent example of the benefits of collaboration which
we intend to replicate through Positive Places.
SUPPLIERS
Positive Places recognises our suppliers as a key stakeholder
and fundamental to the delivery of our business objectives.
This group has been an area of focus during 2013, which
saw the expansion of our Sustainable Supplier Survey. In
December we published our first Sustainable Supply Chain
report, recognising the excellent practices that our online
survey revealed. In 2014 we will continue to ensure we work
with companies who share our understanding of, and
commitment to, sustainability and are able to support us
fully in achieving our targets.
Please see our website for our full GRI compliant sustainability
report: www.hammerson.com
CEO
Director UK
shopping
centres
Operations
Director
Energy
Manager
Head of CR
(France)
Environmental
Data
Manager
Community
Manager
Environmental
Manager
(Developments)
Environmental
Coordinators
(x6)
Environmental
Manager
(Operations)
www.hammerson.com 27
SUSTAINABILITY CONTINUED
COMMUNITIES
Our latest research report, Understanding the True Value of
Shopping Centres, threw new light on the impact our assets
have in their local communities. The investment brought by
a shopping centre generates positive local economic value.
However, this research identified, with much greater
granularity, the real local impacts. The centres are seen as an
integral part of the visitor experience in towns and cities. In
addition to the economic contribution, the qualitative research
highlighted that local people see their shopping centres as
improving the quality of the public realm, providing space
for social activities and improving perceptions of safety
and accessibility.
We will be building on this sense of community ownership
through the community engagement plans that have been
established for each centre as we continue to create retail
destinations, supporting footfall and retailer demand.
Human rights
Hammerson has a very clear policy on Human Rights
which is part of our Code of Conduct and available on our
website at www.hammerson.com. This includes our Legal
requirements, Labour standards, Health and Safety and
environmental responsibility.
As a major client to a significant number of suppliers we work
to encourage high standards of behaviour throughout our
supply chain. We require all our suppliers with contracts in
excess of £100,000p.a. to complete our supply chain survey
and sign up to our Code of Conduct.
LOOKING FORWARD
As our development activity increases, on-site work will
become more material to our environmental impacts. Whilst
we will retain our focus on environmental and social
performance at our existing assets we will increase our focus
on resource efficient construction and the delivery of new
assets that are fit for the socio-economic and environmental
climates into which they will be delivered. This includes
designing to be low in both embodied and operational
carbon and reflective of the changing expectations and needs
of the communities which they serve. Our Positive Places focus
for 2014 will therefore be on:
• suppliers – making sure those we are working with can
support this vision
• people – building further knowledge within our teams
• communities – ensuring our development programme
creates retail destinations that drive both social and
economic returns for the areas they serve.
ECONOMIC CONTRIBUTION
Some 87% of people employed within our shopping
centres are from the local area. A well run shopping
centre brings employment, reduces crime and
contributes substantially to the public purse.
30,940
87%
CURRENT JOBS
LOCAL EMPLOYEES
93.5%
£421m
RETAIL JOBS
TOTAL WAGES GENERATED
ONE
FTE JOB IS SUPPORTED BY EVERY
36M2 OF RETAIL SPACE
MANDATORY GHG EMISSIONS REPORTING
Reporting period and methodology
In line with new requirements set out in the Companies Act
2006 (Strategic Report and Directors’ Report) Regulations 2013,
this statement reports the Company’s GHG emissions for the
reporting period 1 October 2012 to 30 September 2013. A
different reporting period from our financial reporting year has
been selected, in accordance with the DEFRA Environmental
Reporting Guidance, to avoid the use of estimated utility
consumption data. The data has been calculated and recorded
in accordance with the GHG Protocol and ISO 14064.
Reporting boundaries
We have adopted operational control as our reporting
approach. GHG emissions data is provided for those assets
where we have authority to introduce and implement
operating policies. This includes properties held in joint
ventures where JV Board approval is required. We have
reported 100% of emissions data for all reported assets.
A more detailed basis of reporting statement and a full list of
operating entities and assets included within the reporting
boundary can be found on our website www.hammerson.com.
In addition to our mandatory GHG reporting our
connected reporting framework on pages 30-31
contains further details of our sustainability
performance in 2013.
28
Hammerson plc Annual Report 2013
GHG EMISSIONS TABLE
Baseline year
Boundary summary
1/10/12 – 30/09/13
All assets and facilities under Hammerson direct operational control are included
Consistency with Financial Statements Variations from the financial statements are set out on page 28
Emissions factor data source
2013 DEFRA GHG Conversion Factors for Company Reporting for UK assets for all emissions excluding
electricity and Combined Heat and Power at WestQuay, Southampton.
IEA GHG Emissions Factors for electricity
Cofely data for the Combined Heat and Power plant at WestQuay, Southampton
Assessment methodology
GHG Protocol and ISO 14064 (2006)
Materiality threshold
Intensity ratio
Target
Independent verification
Activities generating emissions of <5% relative to total group emissions have been excluded
Adjusted profit before tax 1/10/12 – 30/09/13*
20% reduction in carbon emissions against 2010 baseline by 2015
Scope 1, 2 & 3 GHG Emissions data has been independently verified by Deloitte LLP. The independent
assurance statement can be seen here: http://www.hammerson.com/about/responsibility/our-reports/
*
Profit before tax derived from unaudited management accounts.
EMISSIONS
EMISSIONS DISAGGREGATED BY COUNTRY
Source
Total GHG emissions metric tonnes (mt)
SCOPE 1:
Direct emissions from owned/controlled operations
Country
Global
emissions
(mtCO2e)
36,163
UK
emissions
(mtCO2e)
29,834
France
emissions
(mtCO2e)
6,329
Global
emissions
(mtCO2e/£m)
221
a. Direct emissions from stationery combustion
4,342
1,926
2,416
b. Direct emissions from mobile combustion
c. Direct emissions from process sources
d. Direct emissions from fugitive sources
Totals
SCOPE 2:
Indirect emissions from the use of purchased electricity,
steam, heating and cooling
120
0
1,077
5,539
41
0
474
2,441
79
0
603
3,098
Indirect emissions from purchased/acquired electricity
28,541
26,835
1,706
Indirect emissions from purchased/acquired steam
Indirect emissions from purchased/acquired heating
d.
Indirect emissions from purchased/acquired cooling
Totals
SCOPE 3:
Upstream emissions
a. Business travel
Totals
0
1,577
44
0
292
44
0
1,285
0
30,162
27,171
2,991
462
462
222
222
240
240
a.
b.
c.
26
1
0
7
34
175
0
10
0
185
3
3
SCOPE 1
54%
SCOPE 2
10%
SCOPE 3
52%
46%
90%
48%
1 UK
2 France
www.hammerson.com 29
SUSTAINABILITY CONTINUED
CONNECTED REPORTING FRAMEWORK
CARBON AND ENERGY
YEAR ON YEAR GREENHOUSE GAS EMISSIONS
BUILDING INTENSITY BY PORTFOLIO
(kgCO2 per m2/year)
150
102
100
96
97
84
79
71
99
90
100
50
0
2011
UK shopping centres*
2012
UK retail parks
2013
French shopping centres^
ENERGY
(£000)
Estimated energy savings
Energy Efficiency Investment
2011
2012
1,231
1,157
1,032
3,616
2013
407
1,854
* Restated following data validation in 2011 and 2012
^ Restated based on re-measured areas
WASTE
WASTE
(tonnes)
Percentage diverted from landfill Global
Percentage diverted from landfill French SC
Percentage diverted from landfill UK SC
Total Waste France
Total Waste UK
WASTE
(£000)
PERCENTAGE CHANGE IN EMISSION CO2e
(Absolute like-for-like)
UK shopping centres (%)
UK retail parks (%)
French shopping centres (%)
2011
12.2
2012
-2.2
10
-12.9
-28.6
0.1
2013
-4.5
17.5
14.3
COST OF ENERGY
(Global, £000)
10,000
8,000
6,000
4,000
2,000
0
9,707 9,404
7,025
2011 2012 2013
2011
2012
2013
74
62
76
96
79
91
92
60
98
3637
5567
5593
21645
19208 17772
2100
1400
700
0
2,031
1,852
190
527
2011
1,129
2012
176
1,506
1,535
187
2013
Total waste cost
Amount saved in landfill
Income from sale of waste
30
Hammerson plc Annual Report 2013
WATER
WATER
(£000)
Cost of water
Investment in water management
improvements
Estimated water savings
2011
1,896
2012
2013
1,751
1,305
16
218
312
275
27
n/aB
B Under review for 2013
BUILDING WATER INTENSITY
(Litres per visit)
5
4
3
2
1
0
2.6
1.2
4.7
2.5
4.6
2011
French shopping centres
(tenant only)
2012
UK shopping centres
5.0
0.46
2.7
2013
French shopping centres
(landlord only)
SUPPLIERS
Percentage of total suppliers by value engaged on sustainability (%)
Number of suppliers over £100k by contract value
Value of contracts with suppliers we engaged on sustainability (£m)
COMMUNITIES
Community plans created at developments and assets (%)
Percentage of community investment that is long term
Direct contributions
Indirect contributions
Number of organisations that benefited from Hammerson’s direct and
indirect contributions
CUSTOMERS
Top 75 customers engaged on sustainability (%)
Number of green leases in portfolio
INVESTORS
Engage top 20 investors
Direct number of investors with whom we had collective or individual meetings
2011
2012
2013
n/a
107
86
n/a
n/a
100
302
193
1
63
71
165
87
30
59
931,569
365,788
598,795
446,352
431,200
298,996
389
n/a
896
n/a
25
347
398
24
1,250
32
1,401
24
13
3
1
Total number of shares held by the top 20 investors (m)
417,375
395,220
406,980
Total number of shares held by those top 20 investors with whom Hammerson engaged on
sustainability (m)
147,690
169,862
108,121
EMPLOYEES
All employees to complete relevant CR training bi annually depending on department/position
Total expenditure on training
Total hours spent on training (hrs)
481,791
357,401
212,196
7,386
5,081
6,018
www.hammerson.com 31
BUSINESS REVIEW
BUSINESS REVIEW
Our ambition is to drive financial performance by creating exciting retail
destinations through focusing on three strategic priorities:
1 CREATING HIGH-QUALITY PROPERTY
2 MAXIMISING INCOME
3 CAPITAL STRENGTH
Our activities in the year in support of these priorities are detailed in the
following pages.
1
CREATING HIGH-QUALITY PROPERTY
We develop or acquire to create compelling retail venues in successful locations.
The quality of our portfolio is enhanced through: development; extensions;
refurbishment; and investment activity.
DEVELOPMENTS AND EXTENSIONS
Hammerson’s development programme will create vibrant retail destinations by delivering high-quality properties. We have made
good progress in advancing these schemes over the course of 2013 and early 2014. Key milestones are noted in the table below.
OVERVIEW OF RECENT PROGRESS IN ADVANCING THE DEVELOPMENT PROGRAMME
Site assembly
Planning
Letting
Construction
• Entered into a 50:50 joint
• Achieved planning approval for:
• Signed lettings for:
• Completed works at:
venture with Westfield for the
retail-led regeneration of
central Croydon
• Acquired:
• the site for Le Jeu de
Paume, Beauvais
• a 25% interest in
Whitgift, Croydon
• Silverburn extension,
• Les Terrasses du Port,
• Monument Mall,
Glasgow
Marseille
Newcastle
• Cyfarthfa Retail Park,
Merthyr Tydfil
• Elliott’s Field Retail Park,
Rugby
• Watermark WestQuay,
Southampton
• Victoria Gate, Leeds
• Whitgift, Croydon
• Brent Cross, Cricklewood
• Manor Walks shopping
centre and retail park,
Cramlington
• Manor Walks shopping
centre and retail park
extension, Cramlington
• Monument Mall,
• Progressed construction at:
Newcastle
• Cyfarthfa Retail Park,
Merthyr Tydfil
• Silverburn extension,
Glasgow
• Le Jeu de Paume, Beauvais
• Abbotsinch, Paisley
• Les Terrasses du Port,
Marseille
• Started on-site at:
• Silverburn extension,
Glasgow
• Cyfarthfa Retail Park,
Merthyr Tydfil
Go online to see more of our exciting, vibrant portfolio
www.hammerson.com
• Le Jeu de Paume, Beauvais
• Abbotsinch, Paisley
• Victoria Gate, Leeds
32
Hammerson plc Annual Report 2013
CURRENT AND FUTURE DEVELOPMENTS
Scheme
On-site
Les Terrasses du Port, Marseille
Abbotsinch Retail Park extension, Paisley
O’Parinor extension, Aulnay-sous-bois, Paris
Cyfarthfa Retail Park extension, Merthyr Tydfil
Silverburn extension, Glasgow
Le Jeu de Paume, Beauvais
Victoria Gate, Leeds (Phase 1)
Major developments (>30,000m2)
Croydon town centre
The Goodsyard, London E14
Brent Cross extension, London
Extensions/redevelopments
(<30,000m2)
Elliott’s Field Retail Park, Rugby
Watermark WestQuay, Southampton
Brent Cross Leisure, London
Pipeline
SQY Ouest, Saint Quentin-en-Yvelines
Halle en Ville, Mantes
Italie Deux, Paris 13ème
Victoria Gate, Leeds (Phase 2)
Total
Notes
Ownership
%
Lettable area
m2
Earliest start
Potential
completion
Value at
31/12/13
£m
Estimated
cost to
complete1
£m
Estimated
annual
income2
£m
100
100
25
100
50
100
100
50
50
41
100
100
41
50
100
100
100
61,000
Commenced
Commenced
Commenced
Commenced
Commenced
Commenced
Commenced
2015
2016
2016
2014
2014
2016
2014
2015
2015
2018
5,000
7,200
14,500
10,900
23,800
34,300
156,700
200,000
260,000
90,000
550,000
16,000
18,000
9,000
43,000
31,700
32,000
4,800
73,000
141,500
891,200
Q2 2014
Q2 2014
Q4 2014
Q1 2015
Q1 2015
Q3 2015
Q3 2016
2018
Phased
2019
2015
2016
2018
2015
2017
2017
2021
386
n/a
n/a
n/a
n/a
9
10
80
7
2
19
8
60
135
311
500
140
350
990
36
70
20
126
11
120
25
480
636
28
1
1
2
1
5
10
48
35
–
26
61
3
5
2
10
2
9
2
40
53
2,063
172
1.
2.
Incremental capital cost including capitalised interest.
Incremental income net of head rents and after expiry of rent-free periods.
3. Let or in solicitors’ hands by income at 31 January 2014.
4. Cost reflects phase 1 only. Due to residential component of scheme, area is gross external and income is not applicable.
5. € converted at £1 = €1.202. Value, costs and income represent Hammerson’s share for joint ventures.
Let3
%
93
87
100
46
84
42
28
–
–
–
13
29
–
–
30
–
–
www.hammerson.com 33
BUSINESS REVIEW CONTINUED
1
Completed developments
The redevelopment of Monument Mall in Newcastle is now
complete and 83% of the anticipated rental income from the
£20 million scheme has been secured. TK Maxx occupy a
3,300m2 flagship store and Jack Wills, Reiss and Rox have also
recently opened at the scheme.
At Manor Walks, Cramlington, the 5,400m2 shopping centre
extension opened in July. Vue Cinema is operating its
2,600m² state-of-the-art nine-screen cinema and Prezzo and
Frankie & Benny’s have signed as part of the family restaurant
line-up. The retail park extension completed in December.
Currys and Dunelm were trading before Christmas and a
Marks & Spencer Simply Food store will open in the spring.
On-site developments
Work is on schedule to complete construction of Les Terrasses
du Port, Marseille, which will open in May. The 61,000m²
shopping and leisure destination is part of the impressive
regeneration of the wider port area of Marseille. The city was
the European Capital of Culture in 2013, leading to increased
tourism. Anchored by Printemps and comprising 190 shops
and 2,600 car parking spaces, the centre was valued at
£386 million at December 2013, £77 million above cost.
Michael Kors and Gant are opening their first shops in France’s
second city with Bose and G-Star taking flagship stores. French
fashion operator Groupe SMCP (Sandro, Maje and Claudine
Pierlot) will open three stores within the scheme and Monoprix,
Zara, Levi’s, Agatha and Fossil are also in the tenant line-up. The
top floor of the centre is dedicated to high-end and designer
brands and has stunning views over the Mediterranean Sea.
Vinci Park will operate the car park, and the scheme as a whole
is now 93% let or in solicitors’ hands. We are selectively targeting
a number of well-known international retailers to lease the
remaining space.
At Abbotsinch Retail Park, Paisley, which was acquired as
part of the Junction Fund portfolio in October 2012, works
have begun on the extension, which is 87% pre-let to Maplin,
Wren, Dunelm and ScS. The 5,000m2 terrace will provide
five new units.
Primark will anchor the 7,200m2 extension of O’Parinor, with
one of its first stores in Paris. The space is now fully pre-let or
in solicitors’ hands and scheduled to complete towards the
end of 2014.
We are on-site at the 14,500m2 extension to Cyfarthfa Retail
Park, Merthyr Tydfil. Marks & Spencer will anchor the scheme
with a 4,300m2 full-line store offering clothing, homeware and
a food hall. The project will also provide 9,900m2 of additional
retail space, to which B&Q will be relocated and which will
accommodate up to six new fashion brands. The scheme
will provide approximately 200 jobs during the construction
phase and create the equivalent of up to 230 full-time jobs
when complete.
34
Hammerson plc Annual Report 2013
Work on the leisure-led extension of Silverburn, Glasgow
started in July. Cineworld will operate the 14-screen cinema
and the scheme will also feature nine new restaurants. To date,
84% of the anticipated rental income of £1 million has been
secured. The restaurants are expected to operate from autumn
2014 with the remainder of the 10,900m2 scheme open for
business in early 2015.
The construction of Le Jeu de Paume, Beauvais commenced
in December and leases signed or in solicitors’ hands already
represent 42% of the expected income. The tenant line-up
includes H&M and Furet du Nord, and Carrefour Market will
anchor the centre with a 3,000m2 store. A further 83 retail units
and 37 residential apartments will complete the 23,800m2
city centre scheme, 80km to the north of Paris. Discussions
continue with retailers interested in the remaining larger units.
The £150 million development of Victoria Gate, Leeds
received planning approval from the city council in
September. The 34,300m2 first phase of the scheme is set to
generate 1,000 construction jobs and a further 1,000 retail
and hospitality jobs when it opens in autumn 2016. Housing
more than 30 retailers, six restaurants and new leisure space,
the development will be anchored by a 21,000m2 flagship
John Lewis store, will link to our existing Victoria Quarter centre
and include an 800-space multi-storey car park. The estimated
annual income from the scheme is £10 million, of which
28% has been let or is in solicitors’ hands. Work has
commenced on-site.
Major developments (> 30,000m2)
To ensure that our capital and human resources are
appropriately focused on completion of schemes which offer
the most attractive returns over the medium to long term, the
focus of our strategic UK development projects will be on the
major retail schemes in Leeds and London. Including Croydon
and Brent Cross, these projects will deliver circa 333,000m²
of new retail space over the coming years, in addition to the
refurbishment programme of existing centres and retail park
extensions. Consequently, in 2013 Hammerson reached
mutual agreement with Sheffield City Council not to
progress Sevenstone, the proposed new retail quarter for
Sheffield city centre.
We formed a 50:50 joint venture with Westfield in January
2013 to regenerate the retail heart of Croydon, south London
and restore the town as one of the UK’s leading shopping
destinations. Hammerson contributed Centrale shopping
centre to the joint venture at a valuation of £115 million, and
ownership of the centre is now shared with Westfield. The
joint venture went on to acquire in March a 25% interest in
the 155-year headlease of the Whitgift Centre for £65 million.
We intend to redevelop the Whitgift Centre and Centrale to
create a 200,000m2 mixed-use scheme to include retail, leisure
and residential space, with the potential for hotels and offices.
Over 5,000 new jobs will be created when the new centre
opens. Planning permission for the scheme was granted
in November.
MONUMENT MALL,
NEWCASTLE
£20M
RE-DEVELOPMENT
COMPLETED 2013
3,300m2
FLAGSHIP STORE
www.hammerson.com
35
Focus on sustainability
As we bring forward developments to create the retail
destinations of the future, sustainability is an integral part
of the process. The Venue, a digital youth project at Manor
Walks, has set a new benchmark for intergenerational
community engagement. Praised by Downing Street, the
project has received the Northumberland High Sheriff
Award for ‘Services to the Community’ as well as Newcastle
Building Society’s ‘Community Team Award’. In contributing
a retail outlet space and offices, Hammerson enabled social
enterprise company Digital Community Youth to grow far
beyond its original purpose of providing a place for young
people to develop creative skills. It is a focus for all age
groups in the community, and its popularity has led to a
second-floor expansion. The Venue’s positive impact on
the wider community has seen youth crime and antisocial
behaviour fall by 30%, while private sector businesses keen
to engage with the project have contributed over £40,000
in funding. This has turned the risk of rising levels of
antisocial behaviour, into a positive outcome for the
scheme, encouraging footfall and ensuring the local
community feel positively connected with our asset now
and into the future.
We are working closely with B&Q to deliver an Eco Learning
store at Cyfarthfa retail park in Merthyr Tydfil. The ambition
is for the environmental performance of the store to be
50% better than the industry benchmark (2010 Part L),
achieve an EPC A rating, and contain 23% less embodied
carbon relative to similar buildings of its type.
Terrasses du Port, Marseille, achieved BREEAM Excellent at
its design stage, a significant achievement for an enclosed
retail scheme. We are confident that it will maintain this
rating on completion.
BUSINESS REVIEW CONTINUED
1
The Goodsyard, London E1, is a 4.3ha site in Shoreditch held in
a 50:50 joint venture with Ballymore Properties. The site has the
potential to deliver a 260,000m² mixed-use development that
will include 19,000m² of retail, 60,000m² of offices and more
than 1,400 homes. The regeneration will also provide
substantial public realm including a new park. A planning
application is due to be submitted in spring 2014.
In January 2014, Barnet Council approved a revised planning
application for three improvements to our proposals for the
regeneration of Brent Cross, Cricklewood in north-west
London. The submission, made with our partner Standard Life
Investments, followed extensive consultation with local
stakeholders and amended the outline planning permission
granted for the scheme in 2010. The updated scheme will
deliver a world-class retail, dining and leisure environment
and some of the proposed transport improvements will be
accelerated. It includes a new network of covered streets and
spaces in and around Brent Cross as part of a 90,000m2
extension costing £350 million. The complete regeneration
will support 27,000 full-time jobs, of which retail and leisure
will account for 5,500 in the first phase. Local residents will also
benefit from new parks and community facilities as well as
much improved transport connections. We expect to be able
to start work on the first phase of the regeneration in 2016.
Extensions/redevelopments (< 30,000m2)
In May, Rugby Borough Council approved plans for the
redevelopment of Elliott’s Field Retail Park. The £36 million
extension will include a new retail terrace accommodating
15 new fashion and homeware brands and be anchored by
Debenhams operating a 5,600m2 full-line store including a
cafe/restaurant. New catering space, improved car parking
facilities and improvements to the external environment also
feature in the scheme. Subject to letting progress, work is
expected to start on-site in autumn 2014, with expected
completion a year later. We have secured 13% of the
estimated annual income from the project.
Southampton City Council approved in July proposals for the
leisure-led development at Watermark WestQuay. The 4ha
brownfield site in the centre of Southampton is next to our
jointly owned WestQuay Shopping Centre. The mixed-use
scheme will be delivered in two phases, with the first phase
of 18,000m2 comprising a landmark cinema building, up to
15 restaurants, retail space and new public realm. The second
phase has the potential to include a residential tower, hotel,
offices, restaurants and additional public space. Estimated
income from the first phase is £5 million per annum and
development costs are £70 million.
Work on the 9,000m2 leisure and catering extension at Brent
Cross is expected to start on-site in 2016. The cost of the project
is estimated at £20 million.
36
Hammerson plc Annual Report 2013
Value Retail
Our investment in Value Retail (VR), which develops and
operates luxury outlet Villages in the UK and Western Europe,
is the principal route through which we gain exposure to the
luxury retail sector. We have a 22% interest in the VR holding
companies and investments in the Villages themselves,
including Bicester Village, Oxfordshire and La Vallée Village
near Paris.
In June, at an aggregate cost of £56 million, we acquired for
the first time a direct investment in La Vallée Village and
increased our investments in Las Rozas and La Roca Villages,
which are located close to Madrid and Barcelona respectively.
In July, we also took a €25 million (£22 million) participation in
the refinancing of the senior loan facility at Fidenza Village,
near Milan.
VR’s financial performance has been impressive over the year
to December 2013. The nine European Villages were valued for
Hammerson at a total of €3.1 billion at 31 December, reflecting
an underlying valuation increase of 11.8% during 2013, and
the portfolio’s brand sales exhibited double-digit growth over
the same period. EBITDA, as prepared under IFRS, was
€111 million, an increase of 12% over the year ended
31 December 2012.
During 2013, around 21% of the selling space in the Villages
was remerchandised, with 57% of that resulting from the
introduction of new brands, and the balance reflecting unit
refitting or the relocation of existing brands. Construction work
on the extension of La Roca Village is on schedule and the
project will increase the gross lettable area of the Village by
about a third. The extension will be open for trading in
summer 2014. At Kildare Village, Dublin, VR have planning
consent for a 6,177m² extension.
External debt increased by 8.6% to €1.3 billion or 40% of
the property portfolio value at 31 December 2013. Page 48
in the Financial Review provides further information on how
our investment in VR has impacted Hammerson’s
financial performance.
REFURBISHMENT
We relaunched three of our French shopping centres in
September as part of a €100 million refurbishment
programme: Italie Deux, Paris 13ème; Grand Maine, Angers;
and Place des Halles, Strasbourg feature renovated interiors,
new services and improved leisure provision. Renovations are
also underway at O’Parinor, Espace Saint Quentin and Bercy 2
and being planned for Les Trois Fontaines.
INVESTMENT
We have rebalanced our portfolio to focus exclusively on the
retail sector by completing the sales of the remaining office
properties and acquiring further interests in two of our
chosen retail sub-sectors: ‘experience’, in the form of Bullring,
Birmingham; and ‘luxury’, represented by Value Retail.
The Group’s ownership of Bullring now stands at 50%
following the acquisition in May of an additional 16.7% stake.
A new 50:50 joint venture with Canada Pension Plan
Investment Board (CPPIB) acquired Future Fund’s 33.3% stake
for £307 million, with Hammerson’s share being £153.5 million.
Taking into account transaction costs, the net initial yield on
the purchase was 5.7%. Bullring is one of Europe’s leading
shopping centres, attracting 40 million visitors per annum,
and is almost fully occupied. Passing rents at the centre have
grown at an annual compound rate of 5.5% since opening in
2003, to £52 million per annum. Following the successful
Spiceal Street restaurant extension in 2011, there remain a
number of asset management and development
opportunities to drive future growth at the centre, including
the introduction of a cinema and additional catering.
Hammerson continues as asset and development manager
for the centre.
Since the year end, we have acquired Saint Sébastien
shopping centre in Nancy, north-east France. The city has
an affluent population and Saint Sébastien, with an annual
footfall of eight million, is its only shopping centre. The
purchase price of £109 million and passing rents of £7 million
imply a 6% yield, after transaction costs. We have opportunities
to refurbish, reconfigure and extend the 24,000m2 centre to
improve the retail and catering offers and improve the
external environment.
In January 2014, together with our 50% partner Aviva
Investors, we sold Queensgate, Peterborough. Hammerson’s
share of net rental income from the asset in 2013 was
£6 million. Our share of the net proceeds, amounting to
£101 million, will be reinvested to generate higher returns
in the development programme.
We completed in June 2013 the sales to Brookfield of the
Group’s 50% interest in 125 Old Broad Street, London EC2 and
1 Leadenhall Court, London EC3. The aggregate proceeds
were £189 million and net rental income generated by the
properties in the year to the date of disposal was £6 million.
www.hammerson.com 37
BUSINESS REVIEW CONTINUED
2
MAXIMISING INCOME
Retailers are focusing their space
requirements on high-quality, prime
shopping centres, conveniently located
retail parks and premium designer outlets
of the types invested in by Hammerson. Our
response is to exploit developing trends and
technologies to maximise income growth
from the portfolio by optimising occupancy
and footfall at our properties. A stronger
economic position in the UK is driving
consumer confidence, supporting retail sales
and leading to increased space requirements.
This recovery is happening against a limited
delivery of new retail space, creating the
conditions for selected market ERV growth.
STRONG RELATIONSHIPS WITH
MAJOR RETAILERS
The globalisation of brands, combined with the ability to
research product availability and provenance online, means that
consumers increasingly know what they want before visiting a
centre. This is evidenced by our own consumer research which
shows that consumers are spending more time researching
products before committing to a purchase. Consequently,
retailers use flagship stores as brand support. We continually
refresh the tenant mix by bringing new, relevant, exciting brands
to an area. This not only helps support tenants’ sales, but
enhances vibrancy and footfall, adding to the overall experience.
We have introduced more than 200 premium retailers into our
shopping centres since 2009.
CONSUMER INSIGHT AND DIGITAL EXPERTISE
Last year Hammerson completed the roll-out of free wi-fi and
mobile-enabled websites for our UK shopping centres. This was
in addition to the bespoke social media promotional activity
already being undertaken for each site. The project has proved
highly successful with social media followers growing by 64%
year-on-year. Our strategy is to use multi-channel initiatives to
support the core rental business. We use digital technologies to
drive footfall, improve the customer experience and increase
dwell time, all of which support retail sales.
In 2013 we launched the KUDOS loyalty app, which delivers
tailored, real-time offers to consumers and provides us with
a greater understanding of their preferences. The KUDOS
38
Hammerson plc Annual Report 2013
performance has been encouraging, with over 12,000
downloads at just two centres to date, and a high voucher
redemption rate. Our next initiative is an integrated digital
platform which will provide a consistent consumer experience
across the loyalty app, centre website and the physical
environment. It is our ambition to launch this product at the
opening of Les Terrasses du Port in May.
The consumer desire for a wider experience at shopping centres
is evidenced by the increasing demand for catering and leisure
facilities. Leisure and catering now accounts for 10% of our
portfolio floorspace, and a third of all shoppers visit our cinemas
or restaurants. We have leisure extensions completed in Manor
Walks, Cramlington and underway at O’Parinor, Paris and
Silverburn, Glasgow to capitalise on this trend. Further similar
extensions are scheduled to start on-site next year.
Focus on sustainability
We are always looking at ways to create new interest and
provide wider benefits to the community through our
centres. At Centrale we have supported Croydon Voluntary
Action by allowing them to take a vacant unit within the
shopping centre. Offering them a base both in the middle
of the shopping centre, and the centre of the town itself,
has provided a perfect location to capture passing footfall
and as a result their first few months have seen a steady
increase in the numbers of people visiting to find out more
and registering to volunteer. Apprentices from Croydon
College fitted out the store which was opened by the
Mayor of Croydon, Yvette Hopley, and attended by a
number of local representatives such as Gavin Barwell MP,
and retailers.
Our student ‘lock-ins’ are always popular and are
guaranteed to be busy, so this year we encouraged some
of our charity partners to attend and use the opportunity
to promote their work. At Highcross, Leicester, 35,000
people attended the lock-in which lasted until midnight.
Delete Blood Cancer used the evening to promote stem
cell donorship. The key ages for donating are 18-30 years
old so the event provided a good opportunity to talk with
potential donors. A partnership between the Rick Basra
Foundation, Delete Blood Cancer, the Square Mile Project
and Somewhereto_Leicester, the initiative saw a record
907 people sign up on the night.
Victoria Quarter supported Wool Week in October. This
annual event provided students with an opportunity to
showcase fashion, textile design and other wool products
from the local area. Harvey Nichols supported the Wool
School initiative, selling an exclusive woollen garment
designed by a fashion student. The additional interest in
the event contributed to a week-on-week rise of 8% in the
centre’s footfall.
OPERATIONAL PERFORMANCE
Strong letting and vacancy data for 2013 shown in the table below belie the challenging economic conditions faced by
consumers. This supports the premise that retailers continue to seek representation in winning locations to complement their
online and multi-channel strategies. The poor French sales and footfall figures reflect the weakness in the French economy
relative to that in the UK and also the impact of the shopping centre refurbishment programme.
Operational performance – continuing operations
Occupancy (%)
Net rental income growth – like-for-like (%)
Leasing activity – new rent from units leased (£m)
Area of new lettings (000m2)
Leasing v ERV (% above 31 December 2012/2011 ERV)
Retail sales change (%)
UK shopping centres
France shopping centres
Footfall change (%)
UK shopping centres
France shopping centres
Non-rental income (£m)
UK
France
2013
97.7
2.1
23.9
153.9
2
(0.4)
(2.7)
(1.0)
(4.9)
20.4
1.4
2012
97.7
2.1
18.7
123.3
4
0.4
(3.0)
(2.3)
(3.4)
18.6
1.6
OCCUPANCY
At 31 December 2013, occupancy remained ahead of our 97.0% target at 97.7% as a strong letting performance compensated
for the impact of tenant administrations. Tenants in administration represent a small proportion of the Group’s total income, as
noted in Security and Quality of Income on page 51.
Occupancy (%)
31 December 2013
30 June 2013
31 December 2012
UK shopping centres
France retail
UK retail parks
Other UK
98.1
97.5
98.1
97.4
97.3
97.5
98.4
98.6
98.2
91.3
90.6
90.9
Total continuing
portfolio
97.7
97.4
97.7
www.hammerson.com 39
BUSINESS REVIEW CONTINUED
2
Like-for-like net rental income
On a like-for-like basis, net rental income generated by the
continuing portfolio grew by 2.1% during 2013. Strong UK
shopping centre growth of 3.2% was driven by leasing activity,
rent reviews and increased turnover and commercial income,
notably at Union Square and Brent Cross, although these
positives were partially offset by the impact of retailer
Net rental income for the year ended 31 December 2013
administrations. Indexation was the principal factor in
French shopping centre net rental income growth of 2.6%.
The benefit of strong leasing activity was largely offset by
administrations at UK retail parks, and like-for-like rental
income was marginally up in that portfolio.
Properties
owned
throughout
2012/13
£m
111.7
63.7
7.2
182.6
Increase/
(Decrease)
for properties
owned
throughout
2012/13
%
Acquisitions
£m
Disposals
£m
Developments
£m
Total net
rental income
£m
3.2
0.2
(4.0)
1.9
12.6
18.2
1.1
31.9
–
0.2
3.8
4.0
0.4
–
1.2
1.6
124.7
82.1
13.3
220.1
63.1
2.6
0.1
–
(0.5)
62.7
238.5
7.2
245.7
0.3
246.0
2.3
(4.0)
2.1
(1.5)
2.1
30.9
1.1
32.0
–
32.0
0.2
3.8
4.0
7.1
11.1
(0.1)
1.2
1.1
–
1.1
269.5
13.3
282.8
7.4
290.2
United Kingdom
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France retail
Group
Retail
Other UK
Total continuing operations
Discontinued operations
Total
40
Hammerson plc Annual Report 2013
Net rental income for the year ended 31 December 2012
United Kingdom
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France retail
Group
Retail
Other UK
Total continuing operations
Discontinued operations
Total
Properties
owned
throughout
2012/13
£m
108.2
63.6
7.6
179.4
Exchange
£m
Acquisitions
£m
Disposals
£m
Developments
£m
Total net
rental income
£m
–
–
–
–
1.3
3.4
–
4.7
–
–
12.3
12.3
(0.1)
–
1.5
1.4
109.4
67.0
21.4
197.8
61.4
(2.7)
0.4
2.2
(0.3)
61.0
233.2
7.6
240.8
0.3
241.1
(2.7)
–
(2.7)
–
(2.7)
5.1
–
5.1
–
5.1
2.2
12.3
14.5
23.8
38.3
(0.4)
1.5
1.1
–
1.1
237.4
21.4
258.8
24.1
282.9
For the purposes of this analysis Centrale, Croydon, has been
reclassified from ‘Shopping centres’ to ‘Other UK’ to reflect
the intention to redevelop this property as part of the
regeneration of Croydon town centre.
LEASING ACTIVITY
During 2013, 364 leases were signed representing annual
rental income of £23.9 million and 154,000m2 of space. For
principal leases in the Group as a whole, rents secured were
approximately 2% greater than previous passing rents and
December 2012 ERVs. Average ERVs were broadly unchanged
over the year.
RETAILER SALES
The picture for UK sales at our shopping centres was slightly
down over 2013, with the negative impact of poor weather at
the start of the year partly offset by encouraging growth in the
last quarter. A strong performance from department stores
compensated for sales declines in electricals and media. In
France, sales fell 2.7% partly due to the impact of our
€100 million refurbishment programme, and the additional
two days’ trading in the prior year.
NON-RENTAL INCOME
Net income from car parks and the sale of advertising and
merchandising opportunities at our shopping centres is a
growing supplement to the rental income from our portfolio.
This is included within ‘net rental income’. The increase of
£1.6 million in total non-rental income to £21.8 million
principally reflected an uplift at Union Square and the
acquisition of the additional interest in Bullring.
www.hammerson.com 41
BUSINESS REVIEW CONTINUED
3
CAPITAL STRENGTH
Our prudent and flexible financial structure provides financial security with the flexibility
to act swiftly and decisively when opportunities arise.
PORTFOLIO OVERVIEW
In this overview, ‘the portfolio’ refers to the continuing
portfolio, excluding the office properties sold during 2013 and
also excluding our investment in the Value Retail portfolio. At
the end of the year, the portfolio included 20 prime shopping
centres in the UK and France and 22 conveniently located
retail parks, provided 1.7 million m2 of space and was valued
at £5.9 billion.
At 31 December 2013, 72% of the portfolio by value was
located in the UK, with the balance in France, whilst
developments comprised 8%. Joint ventures accounted for
42% of the portfolio, including eight major shopping centres
in the UK and two in France. The average lot size for the
portfolio as a whole was £87 million and the ten most valuable
properties represented 49% of the portfolio value. The
movement in portfolio value during 2013 is set out below.
MOVEMENT IN PORTFOLIO VALUE IN THE YEAR TO 31 DECEMBER 2013
Portfolio value at 1 January
Valuation increase
Capital expenditure
Developments
Expenditure on existing portfolio
Acquisitions
Capitalised interest
Disposals
Exchange
Transfer from assets held for sale
Portfolio value at 31 December*
*
Includes developments
£m
5,458
89
128
69
192
13
(62)
37
7
5,931
Income yields for the portfolio are low relative to other property classes and reflect the prime nature of the assets. Net and gross
valuations, income and yields for the investment portfolio are analysed in the table opposite.
42
Hammerson plc Annual Report 2013
CONTINUING INVESTMENT PORTFOLIO
AT 31 DECEMBER 2013
Portfolio value (net of cost to complete)
Purchasers’ costs1
Net investment portfolio valuation as reported in the financial statements
Income and yields
Rent for valuers’ initial yield (equivalent to EPRA Net Initial Yield)
Rent-free periods (including pre-lets)
Rent for ‘topped-up’ initial yield2
Non-recoverable costs (net of outstanding rent reviews)
Passing rents
ERV of vacant space
Reversions
Total ERV/Reversionary yield
True equivalent yield
Nominal equivalent yield
Notes
Income
£m
Gross value
£m
Net book value
£m
5,736
(302)
5,434
5.5%
0.3%
5.8%
0.1%
5.9%
0.1%
0.1%
6.1%
5,736
5.2%
0.3%
5.5%
0.1%
5.6%
0.1%
0.1%
5.8%
5.9%
5.7%
299.2
13.7
312.9
7.1
320.0
7.3
6.0
333.3
1. Purchasers’ costs equate to 5.6% of the net portfolio value.
2. The yield of 5.5% based on passing rents and the gross portfolio value is equivalent to EPRA’s ‘topped-up’ Net Initial Yield.
CAPITAL RETURNS
For the calendar year 2013, the total return of the portfolio as a whole, excluding Value Retail, was 7.2%, with capital and income
returns of 2.0% and 5.1% respectively. For the continuing portfolio, total, capital and income returns were 7.0%, 1.8% and 5.1%.
Returns are shown for each of the portfolio segments in the valuation data table on page 53.
The chart below analyses the sources of the valuation change for the continuing portfolio. During the course of 2013, and
principally in the second half of the year, investment yields fell and increased valuations for the UK shopping centres, UK retail
parks and French retail properties. Rising rental values at shopping centres in the UK and France boosted valuations, but declined
marginally for UK retail park assets. The positive effect of yields, rents and the development progress at Les Terrasses du Port on
the valuation of the continuing portfolio was offset to some extent by capital expenditure including that to progress the
development pipeline.
COMPONENTS OF VALUATION CHANGE IN 2013 CONTINUING PORTFOLIO
(£m)
100
80
60
40
20
0
-20
52.0
54.5
11.3
(8.8)
92.0
88.8
21.2
34.0
32.8
26.0
13.1
12.4
8.5
(2.7)
(4.1)
(0.5)
(1.3)
UK shopping centres
France retail
UK retail parks
UK other
Total continuing portfolio
(23.9)(25.7)
(24.4)
Yield
Income
Development and other
Total
www.hammerson.com 43
FINANCIAL AND PROPERTY RETURNS
FINANCIAL AND PROPERTY
RETURNS
We aim to generate a return on equity which is greater than our
cost of equity, with the objective of providing good shareholder
returns. To achieve this, we set hurdle rates for investment, based
on a minimum five-year internal rate of return and adjusted
according to the risk associated with each project.
The table overleaf compares the financial returns of 2013 with
benchmark indices. The IPD data shown for the UK portfolio
are based on the quarterly All Retail Universe. There is no
benchmark for total portfolio returns which is comparable
with Hammerson’s geographical portfolio allocation.
IPD data relating to the returns of the French property sector
in 2013 will be available only after this Annual Report has
been published.
An analysis of capital and total returns by business segment is
provided in the Property portfolio information on page 51.
The IPD Universe includes returns for all types of retail property
in the UK. Hammerson’s UK capital return was lower than the
IPD Universe capital return principally reflecting a strong
performance by retail shop units in and around London which
pushed up the index. Prime shopping centres provide low
initial yields, reflecting their high quality. Consequently, the
income returns for our portfolio are lower than the index.
The Group capital and total returns, including the Group’s
share of the return from the Value Retail portfolio,
outperformed the index.
For the year ended 31 December 2013, Hammerson’s return
on shareholders’ equity was 8.8%. The income element of the
return on shareholders’ equity tends to be relatively low given
the quality of the property portfolio, as described above. The
capital element of the return on equity in 2013 reflected the
increase in the portfolio value during the year.
Hammerson’s total shareholder return for 2013
underperformed the FTSE EPRA/NAREIT UK index,
principally reflecting the strong share price performance
of companies in the index with an exposure to the London
property sector, which performed well in 2013. Over the last
five years, Hammerson’s average annual total shareholder
return has been 11.4% compared with 12.3% for the
EPRA/NAREIT UK index.
EPRA FINANCIAL REPORTING BEST PRACTICE
RECOMMENDATIONS
EPRA (European Public Real Estate Association) has established
best practice recommendations for the calculation and
presentation of certain performance measures for the listed
property sector in Europe. Definitions and references to where
the measures can be found in this Annual Report are shown in
the table overleaf.
EPRA BEST PRACTICE RECOMMENDATIONS
(BPR) ON SUSTAINABILITY REPORTING
Absolute measures for energy and water usage, greenhouse
gas emissions and waste, together with intensity measures for
energy and water usage and greenhouse gas emissions, as
defined by EPRA, are set out in the full Global Reporting
Initiative (GRI) and EPRA BPR compliance pack which can be
found online at www.hammerson.com.
44
Hammerson plc Annual Report 2013
RETURNS DATA FOR 2013
Return*
UK portfolio capital return
UK portfolio income return
UK portfolio total return
Group capital return
Group income return
Group total return
Return on shareholders’ equity
Total shareholder return over one year
Total shareholder return over three years p.a.
Total shareholder return over five years p.a.
%
Benchmark
1.7
5.5
7.2
3.1
5.3
8.5
8.8
6.7
10.4
11.4
UK IPD All Retail Universe – capital
UK IPD All Retail Universe – income
UK IPD All Retail Universe – total
n/a
n/a
n/a
Estimated cost of equity
FTSE EPRA/NAREIT UK index over one year
FTSE EPRA/NAREIT UK index over three years p.a.
FTSE EPRA/NAREIT UK index over five years p.a.
%
2.4
5.8
8.3
8.0
23.8
14.0
12.3
*
Portfolio returns include developments, continuing and discontinued operations. Group returns include those of the Group’s share of the Value Retail portfolio.
EPRA PERFORMANCE MEASURES
Performance measure
2013 Performance
Definition
EPRA Earnings
23.1p per share
Recurring earnings from core
operational activities
EPRA NAV
£5.73 per share Net Asset Value (NAV) adjusted to include
properties and other investment interests
at fair value and to exclude certain items
not expected to crystallise in a long-term
investment property business model
Page
132
132
Purpose
A key measure of a company’s underlying
operating results from its property rental
business and an indication of the extent to
which current dividend payments are
supported by earnings
Adjusts IFRS NAV to provide stakeholders with
relevant information on the fair value of the
assets and liabilities of a real estate investment
company with a long-term investment strategy
EPRA NNNAV
(triple net)
£5.41 per share
EPRA NAV adjusted to include the fair
values of financial instruments, debt and
deferred taxes
132
Adjusts EPRA NAV to provide stakeholders
with relevant information on the current fair
value of the assets and liabilities of a real
estate company
EPRA Net Initial
Yield (NIY)
5.5%
Annualised rental income based on cash
rents passing at the balance sheet date,
less non-recoverable property operating
expenses, divided by the market value of
the property, including estimated
purchasers’ costs
43
Comparable measure for portfolio valuations
EPRA ‘topped-up’
NIY
5.6%
EPRA NIY adjusted for the expiry of
rent-free periods
Vacancy
97.7%
Estimated market rental value (ERV) of
vacant space divided by the ERV of the
whole portfolio (occupancy is the
inverse of vacancy)
43
39
Comparable measure for portfolio valuations
A measure of investment property space that
is vacant, based on ERV
www.hammerson.com 45
FINANCIAL REVIEW
FINANCIAL REVIEW
INTRODUCTION
In compliance with IFRS, the income and expenditure directly attributable to discontinued operations, principally the Group’s former office
portfolio, the remainder of which was sold during 2013, has been disclosed separately in the consolidated income statement. The assets and
liabilities related to discontinued operations, are described as ‘held for sale’ in the comparative figures for the consolidated balance sheet. Note 9B
on page 130 analyses the components of the net profit related to discontinued operations. With the exception of Hammerson’s former share of
the secured loan on 125 Old Broad Street, assets held for sale at 31 December 2012 were funded from the Group’s unsecured debt, so no finance
costs have been attributed to these assets within the profit related to discontinued operations.
PROFIT BEFORE TAX
The Group’s profit before tax for 2013, including discontinued operations, was £341.2 million compared with £142.2 million in 2012. As analysed
in the table below, the year-on-year increase reflected a full year’s contribution from revaluations within Value Retail, for which we have equity
accounted since August 2012, and portfolio revaluation gains of £90.3 million. Property revaluation losses in 2012 amounted to £49.9 million.
The majority of the office portfolio was sold in 2012, and this explains the lower gain on sale of investment properties in 2013. A good
operational performance also contributed to the increase in profit. Losses on derivative revaluations were partly offset by lower costs
relating to bond redemptions.
Analysis of profit before tax
Adjusted profit before tax – continuing and discontinued operations
Adjustments:
Gain on the sale of investment properties
Net revaluation gains/(losses) on property portfolio
Net revaluation and other gains in associate – Value Retail
Premium and costs on redemption of bonds
Change in fair value of derivatives
Profit before tax – continuing and discontinued operations
Year ended
31 December
2013
£m
Year ended
31 December
2012
£m
168.9
152.5
11.7
90.3
88.1
(3.9)
(13.9)
341.2
42.6
(49.9)
43.2
(55.5)
9.3
142.2
Notes
2, 9B
2, 9B
2, 9B
2
7
7, 9B
2, 9B
At £168.9 million, adjusted profit before tax was £16.4 million up on 2012, an increase of 10.8%. The table below bridges adjusted profit before tax
between the current and prior years. The principal contributors to the increase were the positive impact from acquisitions, income growth at the
like-for-like portfolio and a combination of a strong operating performance at Value Retail and equity accounting for that investment for a full year.
Higher financing costs partly offset these increases.
Reconciliation of adjusted profit before tax
Adjusted profit before tax 2012
Net financing expense
Net administration expenses decrease
Net investment and development activity
Like-for-like net rental income increase
Additional income from Value Retail
Exchange and other
Adjusted profit before tax 2013
Adjusted profit
before tax
£m
EPRA EPS
pence
152.5
(3.4)
1.5
8.0
4.9
4.0
1.4
168.9
20.9
(0.5)
0.2
1.0
0.7
0.6
0.2
23.1
EPRA earnings per share increased by 10.5% to 23.1 pence in the year, principally reflecting the changes noted above. Calculations for earnings
per share are set out in note 11A to the accounts on page 132.
NET RENTAL INCOME
An analysis of net rental income is set out on page 40. In 2013, the portfolio as a whole generated net rental income of £290.2 million, to which
continuing operations contributed £282.8 million compared with £258.8 million in the prior year. Growth of 2.1% in income from the like-for-like
portfolio and the impact from acquisitions more than offset the income lost from disposals.
46
Hammerson plc Annual Report 2013
ADMINISTRATION EXPENSES
Administration expenses are analysed in the following table.
Administration expenses
Continuing operations
Cost of property activities
Corporate expenses
Management fees receivable
Discontinued operations
Cost of property activities
Management fees receivable
Total administration expenses
Notes
2
9B
Year ended
31 December
2013
£m
Year ended
31 December
2012
£m
33.2
15.6
48.8
(6.7)
42.1
0.4
(0.2)
0.2
42.3
31.4
17.4
48.8
(5.9)
42.9
1.1
(0.7)
0.4
43.3
In 2013 administration expenses, net of management fees receivable, for continuing operations were £42.1 million, a reduction of £0.8 million
over the year, as a result of higher management fees. Administration expenses for discontinued operations represent the costs of staff made
redundant as a result of the sale of the office portfolio, and fees receivable relate to the joint ventures for 125 Old Broad Street and
10 Gresham Street.
COST RATIO
The table below follows the guidance published by EPRA in respect of a standard cost ratio, calculated as total operating costs as a percentage
of gross rental income. The ratio is not necessarily comparable between different companies as business models and expense accounting and
classification practices vary. Hammerson’s ratio for continuing operations, including the cost of vacancy, has dropped by 240 bp from 27.0%
in 2012 to 24.6% in 2013, principally reflecting increased management fees and additional rental income. As refurbishments, extensions and
completed developments come on stream, we expect the ratio to decline further over time.
Cost ratio – continuing operations
Net service charge expenses – non-vacancy
Net service charge expenses – vacancy
Net service charge expenses – total
Other property outgoings
Cost of property activities
Corporate expenses
Management fees receivable
Total operating costs
Gross rental income (after rents payable)
Cost ratio including net service charge expenses – vacancy (%)
Cost ratio excluding net service charge expenses – vacancy (%)
Year ended
31 December
2013
£m
Year ended
31 December
2012
£m
Notes
2
2
2
2
2
2
2.0
7.9
9.9
26.6
33.2
15.6
(6.7)
78.6
2.3
5.9
8.2
28.7
31.4
17.4
(5.9)
79.8
319.3
295.7
24.6
22.1
27.0
25.0
Staff costs amounting to £1.5 million (2012: £0.8 million) have been capitalised as development costs and are excluded from the table above. Our business model for developments is to use a
combination of in-house staff and external advisers. The cost of external advisers is capitalised to the cost of developments. The cost of staff working on developments is generally expensed,
but may be capitalised subject to meeting certain criteria related to the degree of time spent on and the stage of progress of specific projects.
www.hammerson.com 47
FINANCIAL REVIEW CONTINUED
We are taking measures to improve efficiency and to increase resources deployed to our development pipeline and digital marketing. Gross
savings of £6 million per annum are targeted, derived from: consolidating senior positions in London and Paris; relocating our London head office
to more cost effective premises and transferring some roles to a larger operations centre in Reading; lowering share benefits; reviewing pension
benefits; and integrating activities between London and Paris. The savings will be invested to boost our development capabilities and enhance
our digital services to retailers and shoppers, both of which are sources of growth for our business. This rebalancing of our cost base will result in
a £5 million implementation charge in 2014.
SHARE OF RESULTS AND NET ASSETS OF ASSOCIATE – VALUE RETAIL (VR)
Since August 2012 we have equity accounted for the Group’s investment in VR. Prior to that date, our interests were treated as investments and
distributions received were recognised as income. VR’s contribution to the Group’s income statement and balance sheet is set out in the table
below. EPRA net income from our investment in 2013 was £19.0 million, or 2.7 pence per share, compared with £12.6 million, or 1.8 pence per
share, in 2012. Including the Group’s loan to VR, our net interest at the end of 2013 was valued at £633.8 million on an EPRA basis, equivalent
to 89.0 pence per share. The changes reflect the revised accounting basis as well as the acquisition of additional interests in VR over the last
18 months. Excluding our share of VR’s income for the period, this investment contributed £82 million, or 11 pence per share, to the increase
in the Group’s EPRA net asset value in 2013, principally through property valuation increases.
The operating performance of VR is described on page 37 of the Business review.
Value Retail
Income statement
Share of results of associate
Less: EPRA adjustments
EPRA adjusted earnings of associate
Distributions received
Interest receivable
Total impact of VR on income statement – EPRA basis
Balance sheet
Investment in associate
Add: EPRA adjustments
EPRA adjusted investment in associate
Loan to VR
Total impact of VR on balance sheet – EPRA basis
Notes
14A
14A
Within net rental income
Within net finance costs
Year ended
31 December
2013
£m
Year ended
31 December
2012
£m
101.5
(88.1)
13.4
–
5.6
19.0
47.5
(43.2)
4.3
4.9
3.4
12.6
Notes
14B
14B
16
Year ended
31 December
2013
£m
Year ended
31 December
2012
£m
545.4
19.7
565.1
68.7
633.8
428.4
16.2
444.6
47.0
491.6
FINANCE COSTS
We have successfully reduced the average cost of borrowings for the Group to 4.8% during 2013 from 5.0% in the prior year. We remain alert to
the capital markets for further opportunities for savings. Underlying finance costs, comprising gross interest costs less finance income as shown in
note 7 to the accounts, were £103.6 million compared with £96.3 million in 2012.
Interest capitalised during the year was £13.1 million and related principally to the development of Les Terrasses du Port. The finance costs for
discontinued activities shown in note 9B are in respect of the Group’s share of the secured debt and related derivatives of the 125 Old Broad Street
joint venture, for which the sale was completed in June 2013. No finance charges have been allocated to discontinued operations as the other
office properties which had been held for sale were financed from the Group’s pooled unsecured borrowings.
TAX
The Group is a UK REIT and French SIIC for tax purposes.
48
Hammerson plc Annual Report 2013
DIVIDEND
The Directors have proposed a final dividend of 10.8 pence per share. Together with the interim dividend of 8.3 pence, the total for 2013 is
19.1 pence, representing an increase of 7.9% on the prior year. The final dividend is payable on 25 April 2014 to shareholders on the register at the
close of business on 14 March and 3.6 pence will be paid as a PID, net of withholding tax where appropriate, with the balance of 7.2 pence paid as
a normal dividend. As has been the case in recent years, there will be no scrip alternative although the dividend reinvestment plan continues to
be available to shareholders.
BALANCE SHEET
Equity shareholders’ funds were £4.1 billion at 31 December 2013, having increased by £209 million during the year. Net assets, calculated on an
EPRA basis, increased by £223 million during 2013 and the movement over the year is shown in the table below. There was a corresponding
5.7% rise in EPRA net asset value per share to £5.73 at 31 December 2013. The valuation surplus on the investment property portfolio was
augmented by the gains from our Value Retail investment, developments and retained earnings.
Movement in net asset value
31 December 2012
Revaluation – investment portfolio
Revaluation – developments
Revaluation – investment in Value Retail
Profit on disposals
Premium and costs on redemption of bonds
Adjusted profit for the year
Dividends
Exchange and other
31 December 2013
Net assets*
£m
3,860
63
27
82
12
(4)
165
(130)
8
4,083
EPRA NAV*
£ per share
5.42
0.09
0.04
0.11
0.02
(0.01)
0.23
(0.18)
0.01
5.73
*
Excluding deferred tax and the fair value of derivatives, calculated in accordance with EPRA best practice as shown in note 11B.
FINANCING AND CASHFLOW
At 31 December 2013, net debt was £2.3 billion and comprised borrowings of £2.3 billion and cash and deposits of £57 million. Over the year
net debt increased by £216 million, principally a reflection that development expenditure, dividends and the impact of exchange exceeded the
net proceeds from investment activity, retained earnings and distributions from Value Retail. Cash and deposits closed approximately £10 million
lower on the year following a £129 million cash inflow from operating activities, capital expenditure of £202 million, net outflows from investment
activity of £11 million, £45 million of distributions received from Value Retail and a £28 million net inflow from financing activities. Liquidity,
comprising cash and undrawn committed facilities, was £716 million at the end of 2013.
Our policy for interest rate hedging is to fix the rate of at least 50% of debt, although we may increase this at higher gearing levels. At
31 December 2013 70% of debt was fixed, compared with 80% at the beginning of the year. Increased exposure to floating rate debt enables
us to benefit from the continuing low interest rate environment whilst maintaining the security offered by fixed rates of interest on the majority
of debt. Recent market pricing indicates that interest rates may increase in the medium to long term and our fixed/floating profile will partly
mitigate that risk. Furthermore, debt that will be drawn in respect of the private placement noted below will be at rates that have already been
fixed, reducing the Group’s exposure to interest rate fluctuations.
Exposure to exchange translation differences on euro denominated assets is managed through a combination of euro borrowings and
derivatives, and at the end of 2013, 79% of the value of euro denominated assets was hedged, consistent with our policy. Interest on euro debt
also acts as a hedge against exchange differences arising on rental income from our French business and during the year, all of the relevant
income was hedged in this way.
The maturity profile of the Group’s borrowings is shown in the chart overleaf. At 31 December 2013, the average maturity of the Group’s debt
was more than five years. We monitor the capital markets with a view to managing short-term maturities. In May we completed a tender offer for
£28 million of the Group’s £300 million 5.25% unsecured bonds due in 2016. The premium and costs paid on the repurchased bonds resulted in
an exceptional charge of £3.9 million. The interest cost of the bond was 5.25% and the debt was refinanced at an incremental finance cost of
1.4%, so we secured a lower running cost of debt. We expect this to result in a saving of approximately £1.0 million per annum.
www.hammerson.com 49
FINANCIAL REVIEW CONTINUED
DEBT MATURITY PROFILE AT 31 DECEMBER 2013
£m
900
800
700
600
500
400
300
200
100
0
382
271
47
119
399
250
412
248
150
-1
129
46
297
198
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Bank debt drawn
Sterling bonds
Secured debt
Undrawn facilities
Euro bonds
Two new credit facilities became available during the year: in April a £175 million syndicated five-year revolving credit facility, carrying a margin
of 150 basis points over LIBOR which matures in 2018 and which was used to refinance an existing £150 million facility maturing at the same time;
and a £250 million loan, maturing in June 2014, became effective which increased our access to low floating rates of interest. In addition, an
existing £125 million facility maturing in 2017 was increased to £150 million in April.
In November we signed an agreement with nine US institutions for the placement of $443 million fixed rate notes, which will fund in two
tranches in 2014. These notes mature in seven, 10 and 12 years and are denominated in US Dollar, British Pound Sterling and Euro, with the
US Dollar portion swapped to fixed Euro. The resultant weighted average coupon is fixed at 3.6%, with a weighted average maturity of nine years.
The attractiveness of this transaction was enhanced by the ability of the US investors to defer closing, enabling Hammerson to maximise the
benefit from low floating rates on its banking facilities. By final drawdown in June 2014, the placement will repay existing floating rate debt and
increase the proportion of the Group’s fixed rate debt by approximately 12% and extend the weighted average debt maturity by approximately
0.4 years. We believe that the sterling and euro bond markets will be available in the medium term to replace existing bank borrowings and
bonds as they mature. We will access these markets as appropriate.
The Board approves financing guidelines against which it monitors the Group’s financial structure. These guidelines, together with the relevant
metrics, are summarised in the table below which illustrates the Group’s robust financial condition as at the end of 2013.
The Group’s unsecured bank facilities, and the recently issued Private Placement loan notes, contain financial covenants that the Group’s gearing,
defined as the ratio of net debt to shareholders’ equity, should not exceed 150% and that interest cover, defined as net rental income divided by
net interest payable, should not be less than 1.25 times. The same gearing covenant applies to three of the Company’s unsecured bonds, whilst
the remaining bonds contain a covenant that gearing should not exceed 175%. The bonds have no covenant for interest cover. Hammerson’s
financial ratios are comfortably within these covenants. Principal Risks and Uncertainties on pages 55 to 59 provide further context for
financing risk.
Fitch and Moody’s rate Hammerson’s unsecured credit as A- and Baa2 respectively.
Key Financing Metrics
Net debt (£m)
Gearing (%)
Loan to value (%)
Liquidity (£m)
Weighted average cost of finance (%)
Interest cover (times)
Net debt/EBITDA (times)
Debt fixed (%)
Guideline
maximum 85% for an extended period
up to 40%
at least 2.0
less than 10.0
31 December
2013
31 December
2012
2,252
2,036
56
38
716
4.8
2.8
8.2
70
53
36
696
5.0
2.8
7.9
80
50
Hammerson plc Annual Report 2013
PROPERTY PORTFOLIO INFORMATION
SECURITY AND
QUALITY OF INCOME
Our portfolio provides a secure income stream, with a weighted average
unexpired lease term of eight years, and opportunities for growth. The portfolio
was 1.8% reversionary at 31 December 2013, with the UK and French portfolios
1.0% and 4.9% reversionary respectively. Assuming that leases are renewed or
re-let and rent reviews are agreed at current ERVs an estimated £12.6 million of
additional annual income could be secured from the portfolio by 2016.
LEASE EXPIRIES AND BREAKS
The table below shows that leases with current rents passing of £84.6 million will expire, or are subject to tenants’ break clauses, during the period
from 2014 to 2016. Additional annual rental income of £3.7 million could be secured in respect of expiries, on the assumption that renewals take
place at current rental value levels. This estimate excludes tenant break options, as we think there is a low probability that these will be exercised.
This is not a forecast and takes no account of void periods, lease incentives or potential changes to rental values.
LEASE EXPIRIES AND BREAKS AS AT 31 DECEMBER 2013
Notes
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Rents passing that expire/break in
ERV of leases that expire/break in
2014
£m
1
17.9
8.0
25.9
3.5
29.4
2015
£m
1
12.4
4.7
17.1
2.7
19.8
2016
£m
1
8.5
2.3
10.8
0.7
11.5
2014
£m
2
23.6
9.2
32.8
3.7
36.5
2015
£m
2
12.6
4.4
17.0
3.3
20.3
2016
£m
2
8.2
2.2
10.4
0.6
11.0
France: Retail
16.4
3.6
3.9
17.4
3.8
4.0
Group
Retail
Other UK
Total Group
Notes
42.3
3.5
45.8
20.7
2.7
23.4
14.7
0.7
15.4
50.2
3.7
53.9
20.8
3.3
24.1
14.4
0.6
15.0
Weighted average
unexpired lease term
to break
years
to expiry
years
6.6
8.9
7.6
7.2
7.5
1.3
6.0
7.2
6.1
8.2
9.8
8.9
8.9
8.9
5.0
7.9
8.9
8.0
1. The amount by which rental income, based on rents passing at 31 December 2013, 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, it is based on the date of lease expiry.
2. The ERV at 31 December 2013 for leases that expire or break in each year and ignoring the impact of rental growth and any rent-free periods.
www.hammerson.com 51
PROPERTY PORTFOLIO INFORMATION CONTINUED
RENT REVIEWS
Rent reviews as at
31 December 2013
Notes
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Notes
Outstanding
£m
1
40.8
19.5
60.3
4.1
64.4
Rents passing subject to review in
Projected rents at current ERV of leases subject to review in
2014
£m
1
15.8
9.4
25.2
1.9
27.1
2015
£m
1
9.3
24.5
33.8
3.3
37.1
2016
£m
1
Outstanding
£m
2
9.9
15.9
25.8
0.9
26.7
43.7
20.2
63.9
4.2
68.1
2014
£m
2
17.1
9.8
26.9
2.1
29.0
2015
£m
2
10.4
25.1
35.5
3.7
39.2
2016
£m
2
10.8
16.2
27.0
0.9
27.9
1. Rents passing at 31 December 2013, after deducting head and equity rents, which are subject to review in each year.
2. Projected rents for space that are subject to review in each year, based on the higher of the current rental income and the ERV as at 31 December 2013 and ignoring the impact
of changes in rental values before the review date.
The UK portfolio could provide additional rental income of £3.7 million per annum, assuming that outstanding rent review negotiations are
concluded at rental values prevailing at the time of review. Over the period to 2016, leases with rents passing of £90.9 million are subject to review
and if reviewed to current rental values, would generate additional £5.2 million per annum. This is not a forecast and takes no account of potential
changes in rental values before the relevant review dates.
Rents in our French portfolio are subject to annual indexation, which is 0.8% in 2014 for the majority of leases.
TENANT COVENANT STRENGTH
At 31 December 2013, our ten most significant retailers, listed in the table below, accounted for £64.4 million, or 20%, of rents passing.
Tenant
B&Q
Home Retail Group
H&M
Arcadia
DSG Retail
Next
Boots
New Look
TK Maxx
SportsDirect
Total
% of total passing rent
3.9
2.3
2.2
2.1
2.0
1.9
1.7
1.5
1.3
1.2
20.1
We assess the covenant strength of prospective tenants and monitor the credit standing of our key retailers using a credit rating agency. The
agency has a five-point risk indicator scale which runs from one (‘low’) to five (‘high’). All of the top ten retail tenants were rated at ‘low’ or ‘lower
than average’ risk at the end of 2013. For the UK portfolio as a whole, tenants rated within these lowest risk categories represented 83% of the
passing rents of the UK retail portfolio and 1.6 was the average score.
In the French portfolio, 80% of tenants scored ‘lower risk’ and the average score was also 1.6.
At 31 December 2013, 49 UK retail units were let to tenants in administration, of which 27 continued to trade. In our French portfolio, all of the
21 units let to tenants in administration continued to trade. For the portfolio as a whole income equating to 1.2% of the Group’s total passing rents
was derived from tenants in administration. The equivalent figure for tenants in administration and no longer trading, however, was just 0.5%.
COLLECTION RATES
Our rent collection rates demonstrate the underlying strength of the Group’s income stream. In the UK and France 99% and 87% of the respective
rents were collected within 14 days of the December 2013 due date.
52
Hammerson plc Annual Report 2013
INVESTMENT PORTFOLIO – VALUATION DATA
Valuation data for investment portfolio
for the year ended 31 December 2013
Notes
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total investment portfolio
Developments5
Total continuing operations
Discontinued operations
Total portfolio
Value Retail4
Total Group
Notes
Properties
at valuation
£m
Revaluation
in the year
£m
Capital
return
%
Total
return
%
Initial
yield
%
True equivalent
yield
%
Nominal
equivalent
yield
%
1
5.1
5.4
5.2
6.3
5.2
5.0
5.1
6.3
5.2
2
5.8
6.1
5.9
7.4
6.0
5.5
5.8
7.4
5.9
3
5.6
5.9
5.7
7.0
5.8
5.3
5.6
7.0
5.7
2,523.5
1,471.1
3,994.6
199.4
4,194.0
58.0
25.1
83.1
(17.7)
65.4
1,240.2
(4.1)
5,234.8
199.4
5,434.2
497.0
5,931.2
–
5,931.2
79.0
(17.7)
61.3
27.5
88.8
1.5
90.3
2.4
1.7
2.1
(6.5)
1.9
(0.3)
1.6
(6.5)
1.4
10.4
1.8
3.7
2.0
12.6
3.1
7.8
7.8
7.8
(1.0)
7.6
4.9
7.1
(1.0)
7.0
10.5
7.0
10.8
7.2
19.3
8.5
1. Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of gross property value, as provided by the Group’s external valuers. Rents
receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.
2. The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows reflect the timing of future rents resulting from lettings, lease renewals and
rent reviews based on current ERVs and assuming rents are received quarterly in advance. The property true equivalent yields are determined by the Group’s external valuers.
3. Nominal equivalent yields, which are similar to the true equivalent yields but assume rents are received annually in arrears, are included within the unobservable inputs to the
portfolio valuations as defined by IFRS 13.
4.
Represents the returns for the Group’s share of the Value Retail portfolio.
5. Further analysis of development properties by segment is provided in note 3B on page 123.
6. The weighted average remaining rent-free period is 0.7 years.
www.hammerson.com 53
PROPERTY PORTFOLIO INFORMATION CONTINUED
INVESTMENT PORTFOLIO – RENTAL DATA
Rental data for investment portfolio
for the year ended 31 December 2013
Notes
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total continuing investment portfolio
Developments
Total continuing operations
Discontinued operations
Total Group – as disclosed in note 3A to
the accounts
Selected data for the year ended 31 December 2012
Group
Retail
Other UK
Total continuing investment portfolio
Notes
Gross rental
income
£m
Net rental
income
£m
Vacancy rate
%
Average rents
passing
£/m²
Rents
passing
£m
Estimated
rental value
£m
Reversion/
(over-rented)
%
1
1.9
1.6
1.8
8.7
2.2
2.6
2.0
8.7
2.3
2
3
4
510
185
340
210
330
148.4
87.5
235.9
14.4
250.3
152.9
89.5
242.4
15.8
258.2
335
69.7
75.1
340
210
330
305.6
14.4
320.0
317.5
15.8
333.3
5
1.3
0.6
1.0
0.4
1.0
4.9
1.9
0.4
1.8
145.1
86.6
231.7
14.9
246.6
124.3
82.1
206.4
12.1
218.5
71.6
63.2
303.3
14.9
318.2
3.0
269.6
12.1
281.7
1.1
321.2
282.8
7.4
7.4
328.6
290.2
281.2
16.2
297.4
245.1
13.9
259.0
2.0
9.1
2.3
340
175
325
300.6
11.1
311.7
312.5
12.6
325.1
1.9
2.6
2.0
1. The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the ERV of that property or portfolio.
2. Average rents passing at 31 December 2013 before deducting head and equity rents and excluding rents passing from anchor units and car parks.
3. The annual rental income receivable from an investment property at 31 December 2013, after any rent-free periods and after deducting head and equity rents.
4. The estimated market rental value of the total lettable space in a property at 31 December 2013, after deducting head and equity rents, calculated by the Group’s valuers. ERVs in
the above table are included within the unobservable inputs to the portfolio valuations as defined by IFRS 13.
5. The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space, all at 31 December 2013.
54
Hammerson plc Annual Report 2013
PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING UNCERTAINTY
The management of risk is integrated with our operating, financial and governance activities.
The policies for risk management are designed to reduce the chances of financial loss, protect
our reputation and optimise performance when opportunities arise. We identify, control and
communicate risk management throughout the organisation using a framework which is
regularly reviewed by our management team.
The six principal areas of risk in that framework, together
with the related mitigations, are shown in the table opposite.
Macroeconomics and government policies continue to
dominate the risk landscape. Although there is now a sense
of stability, and growth has returned to some Western
economies, including the UK, the recovery is slow and
downside risks remain. We have also included references in
the table to the pages in this Annual Report where the risks,
or the elements of the business affected by them, are
discussed further, and where relevant linked the risks with
our strategic priorities.
Responsibility for risk management rests ultimately with the
Board. However, the foundations of our approach are the
mindset of our people, their integrity and the culture we foster
at Hammerson. Short reporting lines and a flat management
structure mean that the senior team is involved in all key
decision making, and risk identification and mitigation.
OUR RISK MANAGEMENT MODEL
Board
oversight
Audit Committee
Nomination Committee
Remuneration Committee
Group Executive Committee
UK Executive
Hammerson French Management Board
Risk and Controls Committee
Policies and Procedures
Internal Audit
Behaviour and Culture
Business Risk
www.hammerson.com 55
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk, impact and
related strategic priority
Mitigation
Further
commentary
Change from 2012
BUSINESS STRATEGY
Property and financial markets
• Implementation of a strategy
inconsistent with the market
environment, risking poor
investment decisions and
inadequate returns.
• Shopping centre, retail parks or
premium designer outlet markets
in UK or France underperform
relative to other sectors or markets,
eroding shareholder value.
Related strategic priorities
1
2
• We commission and evaluate research into the
economy and investment and occupational markets
and use this to prepare an annual Business Plan and
regular financial forecasts.
• Hammerson’s portfolio is diversified by sub-sector and
its allocation, including exposure to the eurozone, is
reviewed regularly.
• We focus on prime shopping centres in the best
locations, convenient retail parks and premium
designer outlets, all with experienced management.
• Stress-testing of our business model against a severe
downside economic scenario has confirmed that the
Group is robust. Low gearing, long-term secure
income streams from our leases, the currency hedging
of the value of and income from our French portfolio,
a good spread of debt maturities and the flexibility to
phase or halt our development programme all point
to resilience to market shocks.
• We monitor closely developments in multi-channel
retailing and introduce innovative new concepts to
our portfolio when appropriate.
Chairman’s
statement
(page 4)
Chief Executive’s
report
(page 7)
Our markets
(page 8)
Business review
(page 32)
Financial review
(page 49)
Financial markets have
stabilised over the last year.
Growth has returned to some
Western economies, in part
thanks to continued fiscal
stimuli, stock markets have
performed strongly and
uncertainty over the future of
the eurozone has diminished.
However, levels of growth
remain subdued and the risk
of market shocks remains.
Retailers are continuing to
ensure that their sales
channels remain relevant in
the digital age and provide
consumers with the flexibility
and convenience they require.
Real estate remains a
cornerstone of their plans.
PROPERTY AND CORPORATE INVESTMENT
Property valuations
• Investment decisions result in
inadequate returns or the
adoption of unforeseen liabilities.
• Acquisitions are thoroughly evaluated, supported by
detailed review, financial appraisals, due diligence and
detailed risk assessment prior to Board approval.
• Opportunities to divest of
• The performance of individual properties is
properties are missed, or limited
by market constraints, reducing
potential returns.
Related strategic priorities
1
3
benchmarked against target returns.
• Properties are held in a ‘ready for sale’ state, with
documentation supporting leases, rights and
obligations readily accessible.
• The Group’s property portfolio is of high quality,
geographically diversified and let to a large number
of tenants.
Our markets
(page 8)
Business review
(page 37)
Property portfolio
information
(page 51)
As noted above, the economic
environment has become
more benign with a
corresponding increase in
investor demand for real
estate, reinforced by an
appetite by overseas investors
for ‘safer’ returns from prime
assets in the UK and France.
The result is that values for
such properties have risen
over the year. However, in the
event that there is further
instability in the eurozone,
significant volatility could
return to financial markets in
the short to medium terms,
which could have a knock-on
effect on real estate values.
Key to the principal risks table
Strategic priority
Change in risk from 2012
1 Creating high-quality property
Increased
2 Maximising income
3 Capital strength
Same
Reduced
56
Hammerson plc Annual Report 2013
Risk, impact and
related strategic priority
Mitigation
Further
commentary
Change from 2012
PROPERTY AND CORPORATE INVESTMENT CONTINUED
Tenant default
• Financial loss arises through
tenant default.
Related strategic priorities
1
2
• We regularly monitor the credit status of tenants
and adopt a flexible approach to tenant requests
for changes to payment terms.
• Arrears are reported monthly and we report
six-monthly on Group-wide tenant exposures.
• The Group’s geographical diversity and its large
number of tenants mean the impact of individual
tenant default for Hammerson is low.
• Our occupational leases are generally long-term
contracts, making the income stream
relatively secure.
Security and
quality of income
(page 51)
Tenant covenant
strength and
collection rates
(page 52)
The rate of tenant
administrations has fallen as
economic conditions have
improved. Some retailers are
now planning to expand their
representation, but are
expected to concentrate on
prime retail sites.
As retailers’ plans for expansion
have gathered pace, so has
their interest in our planned
and potential developments.
However, we are seeing
inflationary pressures building
in the construction sector,
fuelled by growing demand for
skills and raw materials as
economic growth returns.
PROPERTY DEVELOPMENT
Development and letting
• Over-exposure to developments
within a short timeframe
increases exposure to market risk
and puts pressure on financing
and cashflow.
• The Group’s exposure to developments and the
phasing of projects is considered as part of our
annual Business Plan and reviewed throughout
the year.
• We monitor and report on development
Creating
high-quality
property
(page 32)
• Poor control of the development
projects monthly.
programme and failure to
address investment and
occupational market risks or
inflationary pressures results in
inadequate returns.
• Poor management and
inadequate resourcing leads to
failed projects.
Related strategic priorities
1
3
2
• Detailed analysis, including market research, is
undertaken prior to the approval of each
development project.
• Where possible, guaranteed maximum price
contracts are agreed with building contractors and
fixed prices agreed for other advisers.
• Multi-disciplinary teams are assembled for each
development under a project ‘owner’.
• A programme of post-completion reviews ensures
potential improvements to processes are identified.
• We have a substantial pipeline but will progress
developments only when the relevant markets are
sufficiently robust, when we have the right level of
interest from occupiers and on the basis that sound
financial analysis demonstrates good returns.
• We currently have a limited number of developments
underway. At the largest, Les Terrasses du Port in
Marseille, 93% of the income has been contracted or
is in solicitors’ hands.
www.hammerson.com 57
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk, impact and
related strategic priority
Mitigation
TREASURY, TAX AND REGULATORY
Property valuations
• Breach of borrowing covenants
• We set guidelines for financial ratios which are
triggers default and/or repayment
of facilities or bonds.
Related strategic priorities
1
3
monitored regularly by the Board.
• Our annual Business Plan includes stress tests
considering the impact of a significant deterioration
in the markets in which we operate.
• Gearing stood at 56% at 31 December 2013,
significantly lower than the Group’s most stringent
borrowing covenant that gearing should not exceed
150%. We estimate that values could fall by 43% from
their December 2013 levels before covenants would
be endangered.
Further
commentary
Change from 2012
Financial review
(page 49)
Notes 20 and 21
to the accounts
(pages 142 to
149)
The improved economic
picture has supported
property valuations for
prime assets and hence
maintained the safety margin
for borrowing covenants.
Liquidity risk
• Poor planning or external factors,
including failures in the banking
system, lead to a liquidity squeeze
preventing the refinancing of
maturing debt or leading to
insufficient liquidity to progress
the development programme.
• Companies with short-term
financing requirements may
continue to find it difficult to
secure sufficient funding, in
particular from banks, at costs
comparable with their
existing facilities.
Related strategic priorities
3
Interest rate and exchange risk
• Adverse currency or interest
rate movements result in
financial losses.
Related strategic priorities
3
Lenders have continued to
be selective in their choice
of counterparty and the
corporate bond market is
open to borrowers with an
appropriate risk profile.
Alternatives to the traditional
bank lending and bond
markets, such as private
placement, remain open.
• The Board approves future investment requirements
and sufficient facilities are put in place with an
appropriate maturity profile.
Financial review
(page 49)
• We monitor the maturity profile of debt and take an
opportunistic approach to refinancing.
• Credit ratings are set for lending counterparties and
monitored. We use diverse sources of funding.
• The high quality and diversification of our portfolio
should help to protect values from the negative
impacts which may arise from changes in the
financial and property markets.
• While credit conditions during 2013 have been
favourable for debt issuers, there is a risk that this
could change. The Group’s recent funding strategy
has therefore sought to refinance near-term
maturities early to minimise refinancing risk. In
November we entered into a private placement for
$443 million (£275 million) with funding deferred to
February and June 2014. Combined with our high
liquidity of £716 million, we are therefore well
positioned for the Group’s nearest bank debt maturity
of £250 million in 2014 and the €480 million
(£399 million) bond which matures in 2015.
Financial review
(page 49)
• We set guidelines for our exposure to fixed and
floating interest rates, using interest rate and currency
swaps as appropriate. At 31 December 2013, 70% of
the Group’s gross debt was at fixed rates of interest.
• Exchange risk is managed principally by matching
foreign currency assets with foreign currency
borrowings or derivatives. At the end of 2013, 79% of
the value of the Group’s French portfolio was hedged
in this way.
Interest rates have remained
low over the last 12 months, but
there is a growing expectation
that they will rise in the medium
term as economic growth and
inflation return.
The sterling/euro exchange
rate has stabilised, but
continues to be susceptible to
volatility at times of heightened
uncertainty in the eurozone.
58
Hammerson plc Annual Report 2013
Risk, impact and
related strategic priority
Mitigation
Further
commentary
Change from 2012
TREASURY, TAX AND REGULATORY CONTINUED
Tax and regulatory
• Loss of tax exempt status due to
change in legislation.
• EU/UK regulation acts as a brake
on growth and administrative
burden for the real estate sector.
Related strategic priorities
• Speculation and comment relating to changes in tax
regimes in the UK and Europe is monitored with the
help of specialist advisers.
• Developments in regulation are monitored and
governments and regulators lobbied through
representation by UK and European real estate
trade bodies.
3
BUSINESS ORGANISATION AND HUMAN RESOURCES
• Inappropriate management
• A Human Resources plan features as part of the
structure or resourcing levels for
achieving business objectives.
annual Business Plan.
• The Nomination Committee approves succession
• Failure to recruit and retain key
plans for senior roles.
• Significant changes to the management structure are
approved by the Board.
• We periodically review the remuneration structure,
including an annual review by the Remuneration
Committee and benchmarking against industry, or
other relevant, comparatives.
executives and staff with
appropriate skills and calibre.
Related strategic priorities
1
3
2
CATASTROPHIC EVENT
Maximising the
contribution of
our people
(page 24)
Governance
(pages 60 to 71)
Remuneration
Report
(pages 72 to 99)
Governments are seeking to
reduce fiscal deficits and
regulators are examining
mechanisms which would
make financial markets more
resilient. Increased taxation
may be a risk for the broader
business sector, but an
asset-based industry such as
real estate, which currently
benefits from tax-efficient
regimes throughout Europe,
could become a specific target.
The real estate sector is
sometimes perceived by
regulators to be part of the
financial services sector rather
than as an operating business
and the industry could be
adversely affected by
misdirected regulation designed
to stabilise financial markets.
As conditions have improved,
the recruitment market has
become more active with
rising demand for good
people. This will put upward
pressure on salaries for the
best candidates.
• The Group’s operations or
• Continuity plans established at both corporate and
financial security are significantly
affected by disruption to financial
markets following a wide-scale
event such as a power shortage,
extreme weather, environmental
incident, civil unrest or terrorist or
cyber attack.
Related strategic priorities
1
3
2
individual property levels.
• Crisis management group established with
predetermined processes and escalation.
• Physical security measures in place at properties.
• Senior management, including crisis management
group, receive media training for crisis events.
• Security threat assessed regularly through links with
security agencies.
• Insurance policies include terrorism cover.
Risk assessments for terrorist
and cyber risks remain
elevated.
The Strategic Report is approved
and signed on behalf of the Board on
14 February 2014
David Atkins
Director
Timon Drakesmith
Director
www.hammerson.com 59
GOVERNANCE REPORT
CHAIRMAN’S INTRODUCTION
I am very pleased to introduce my first Governance Report as Chairman
of the Board of Hammerson plc. I joined the Board in January 2013 and
succeeded John Nelson as Chairman in May 2013.
The Company’s objective is to create retail destinations by
developing high-quality property, maximising income and
ensuring capital strength. Therefore, during my first year on
the Board I have taken the opportunity to gain insight into
the business and understand how the Company delivers its
objectives by meeting our people throughout the Company
and visiting our retail destinations in the UK and France. I look
forward very much to leading the Board through the next
phase of the Company’s evolution and achievement of its
strategic priorities. Further details of my induction are
provided on page 65.
The business is in very good shape, focused wholly on retail
property. The management team has huge expertise in this
sector and has forged close relationships with its retail and
other customers in the UK and France. With a high-quality
development pipeline and a strong balance sheet, we have
the opportunity to provide very satisfactory returns to
shareholders in the years ahead.
OPERATION OF THE BOARD
My main responsibility is to lead the Board and ensure
its effectiveness in everything it does. During my initial
discussions with the Directors it became apparent that the
operation and structure of Board and Committee meetings
should be reviewed. With this in mind, I have considered ways
in which the Board timetable might operate more effectively
with my fellow Directors. As a result, I have proposed a trial
period with meetings being longer than previously, allowing
deeper focus on strategy while also ensuring sufficient time to
conduct all the other Board business required. The number of
formal meetings has been reduced from 10 to six per year with
meetings taking place approximately every two months.
Board conference calls are scheduled in the intervening
months between Board meetings to allow for matters
requiring attention at that time. Later this year the Board will
evaluate whether this approach works and I will report on
our conclusions next year. Regular Board dinners are also now
held on the evening preceding the Board meetings with all
Directors and the Company Secretary normally invited to
attend. These provide an invaluable opportunity for the Board
to discuss topics in an informal and constructive environment
outside the more formal setting of the Board meeting. I believe
that this fosters openness and effective debate between
Directors while developing strong working relationships.
BOARD EFFECTIVENESS
The Board appreciates the insights gained from an independent
external evaluation of its effectiveness and that of its
Committees. During the autumn such an evaluation was
facilitated by IDDAS. The process and outcome of the external
evaluation of the Board is discussed in greater detail on page 66.
1
3
2
THE BOARD
1. David Tyler, Chairman
7. Judy Gibbons, Non-Executive Director
2. David Atkins, Chief Executive
8. John Hirst, Non-Executive Director
3. Gwyn Burr, Non-Executive Director
9. Anthony Watson, Non-Executive Director
4. Terry Duddy, Non-Executive Director
5. Jean-Philippe Mouton, Executive Director
6. Jacques Espinasse, Non-Executive Director
and Senior Independent Director
10. Peter Cole, Chief Investment Officer
11. Timon Drakesmith, Chief Financial Officer
60
60
Hammerson plc Annual Report 2013
CHANGES TO CORPORATE REPORTING
The Board continues to keep abreast of changes to company
reporting regulations. This year has seen the culmination of
several years of policy development with the finalisation of
legislation affecting the structure and contents of the Annual
Report. The new Strategic Report on pages 1 to 59 includes,
amongst other matters, the Group’s strategy, progress and
performance for the year. Disclosures in the Governance Report
comply with changes to the UK Corporate Governance Code
(Code) which came into force for the financial year and includes
expanded disclosures on the work of the Audit Committee
on pages 68 to 71. Changes to remuneration reporting in
particular are significant and these are fully covered in the
Directors’ Remuneration Report on pages 72 to 99.
STRUCTURE OF THE GOVERNANCE REPORT
In the Governance Report we have provided an overview of
how the Board operated during the year, focusing specifically
on the Board’s activities during 2013. A separate section of the
Governance Report on pages 100 to 103 provides a detailed
description of how the Company has complied with the
Principles set out in the Code. We hope that this new layout
will assist readers to navigate this section of the Annual Report
with greater ease.
SHAREHOLDER ENGAGEMENT
We actively seek channels through which to engage with
investors and during 2013 the Company undertook a wide
variety of investor relations activities which were organised for
both institutional and private shareholders. The formal
programme of events was accompanied by additional
meetings as requested.
Institutional shareholders represent the largest group of
shareholders and much of the activity is focused on this group.
During 2013, over 20 events were either attended or hosted by
the Company. These included investor road shows in the UK,
Europe, America and Asia, four round-table events and six
investor conferences. Visits to Place des Halles in Strasbourg,
Italie 2 and O’Parinor in Paris were also arranged for investors
and analysts. Wherever possible the Company is represented
by the Executive Directors. The Chief Executive and Chief
Financial Officer host or attend the majority of the events held.
Key senior executives also participate in meetings and
activities with institutional shareholders.
During late autumn the Company Secretary held conference
calls with a number of investors’ governance teams to discuss
corporate governance issues generally. The outcome of those
discussions has provided useful insights which have informed
our approach to corporate reporting this year.
Your Board is fully committed to supporting both the
principles and application of best practice in corporate
governance. I believe we maintained effective corporate
governance procedures during 2013. These underpin the
continued success of the Group.
David Tyler / Chairman
5
6
8
9
11
10
4
7
www.hammerson.com 61
61
GOVERNANCE REPORT CONTINUED
YOUR BOARD
DAVID TYLER
Non-Executive Director and Chairman (Age 61)
Appointed to the Board: 12 January 2013 and appointed Chairman
on 9 May 2013.
Committee membership: Remuneration Committee and Chairman
of the Nomination Committee.
Skills and experience: David Tyler is an experienced chairman having
served in that role previously at Logica plc and 3i Quoted Private
Equity plc and currently at J Sainsbury plc. He has considerable
experience of both retail and finance. David is a Fellow of the
Chartered Institute of Management Accountants and a member
of the Association of Corporate Treasurers.
Other appointments: Non-executive director of Burberry plc.
TIMON DRAKESMITH
Chief Financial Officer (Age 48)
Appointed to the Board: 30 June 2011.
Skills and experience: Timon Drakesmith is a Chartered Accountant
who joined the Company in 2011 as Chief Financial Officer. He has
experience of working in commercial property having spent six years
as finance director at Great Portland Estates plc.
Other appointments: Non-executive director of Value Retail PLC and
chairman of the British Property Federation’s finance committee.
Past appointments: Finance director of the MK Electric division of
Novar plc and group director of financial operations of Novar plc.
Other financial roles at Credit Suisse, Barclays and Deloitte Haskins
and Sells.
Past appointments: Finance director of GUS plc and has held senior
financial and general management roles with Christie’s International
plc, County NatWest Limited and Unilever PLC. Non-executive director
of Experian plc and Reckitt Benckiser Group plc.
JEAN-PHILIPPE MOUTON
Executive Director (Age 52)
Appointed to the Board: 1 January 2013.
DAVID ATKINS
Chief Executive (Age 47)
Appointed to the Board: 1 January 2007 and appointed Chief
Executive on 1 October 2009.
Skills and experience: David Atkins is a Chartered Surveyor who joined
the Company in 1998. His career at Hammerson began as Group
Property Executive, responsible for strategy and investment
performance, where he worked on a number of overseas transactions,
particularly in France. In 2002 he took responsibility for the UK retail
parks portfolio and in 2006 he became responsible for the wider UK
retail portfolio.
Other appointments: Chairman of the European Public Real Estate
Association. Director and junior vice president of the British Council of
Shopping Centres. Member of the policy committee of the British
Property Federation and the advisory committee of the British Council
of Shopping Centres. Member of the Royal Institution of Chartered
Surveyors – Commercial Property Market Forum.
PETER COLE
Chief Investment Officer (Age 55)
Appointed to the Board: 1 October 1999.
Skills and experience: Peter Cole is a Chartered Surveyor who has
considerable knowledge of, and experience in the property sector. He
joined the Company in 1989 as a Senior Development Surveyor and
was appointed to the board of the Company’s UK business in 1992.
In 1999, Peter assumed responsibility for Hammerson’s development,
acquisition and disposal programme. He implemented the disposal
of the London offices in 2012. Peter has led the Company’s major
regeneration and investment projects including retail schemes in
Reading (Oracle) and Birmingham (Bullring) and currently Croydon
(Centrale and Whitgift Centre) and Les Terrasses du Port, Marseille.
Past appointments: President and general council member of the City
Property Association.
Skills and experience: Jean-Philippe Mouton joined Hammerson in
2003 with responsibility for property leasing, development and asset
management in France. In 2006, he assumed responsibility for
managing the French portfolio as Director of Operations and in 2009
became the Managing Director of Hammerson’s French business.
Jean-Philippe’s in-depth experience of the French business
strengthens the Board’s integrated approach across the UK and France.
He also has Board responsibility for marketing where he can draw on
years of experience working for Disneyland Paris.
Past appointments: Director of strategic planning at Disneyland Paris
and roles at The Walt Disney Company and Standard Chartered Bank.
ANTHONY WATSON CBE
Non-Executive Director and Senior Independent Director
(Age 68)
Appointed to the Board: 1 February 2006.
Committee membership: Audit Committee, Nomination Committee
and Chairman of Remuneration Committee.
Skills and experience: Anthony Watson has a strong financial and legal
background. He is a frequent speaker and contributor to corporate
governance debates and is well placed to understand shareholders’
requirements, essential for his role as Senior Independent Director.
Other appointments: Non-executive director of Vodafone Group plc
and senior independent director of both Witan Investment Trust plc
and Lloyds Banking Group plc. Member of the Norges Bank
Investment Management corporate governance advisory board.
Chairman of Lincoln’s Inn investment committee. Director of the
Queen’s University of Belfast foundation board. Member of the
advisory board of the Association of Corporate Treasurers.
Past appointments: Chairman of Marks and Spencer Pension Trust
Limited, Asian Infrastructure Fund Limited and Strategic Investment
Board (Northern Ireland).
62
62
Hammerson plc Annual Report 2013
GWYN BURR
Non-Executive Director (Age 51)
Appointed to the Board: 21 May 2012.
JUDY GIBBONS
Non-Executive Director (Age 57)
Appointed to the Board: 1 May 2011.
Committee membership: Audit Committee and (from 14 February
2014) Remuneration Committee.
Committee membership: Audit Committee and
Remuneration Committee.
Skills and experience: Judy Gibbons has a background in software,
internet technologies, digital media, mobile applications and
e-commerce. She also has extensive experience in marketing and
international business.
Other appointments: Non-executive director of Guardian Media Group
plc, Michael Kors Holdings Limited and Virgin Money Giving and
chairman of Refresh Mobile Limited.
Past appointments: Non-executive director of O2 plc. Corporate vice
president of Microsoft Corporation. Venture partner of Accel Partners.
Senior roles in marketing and product development at Apple Inc.
and Hewlett-Packard.
JOHN HIRST CBE
Non-Executive Director (Age 61)
Appointed to the Board: 1 March 2004.
Committee membership: Chairman of Audit Committee.
Skills and experience: John Hirst is a Chartered Accountant. He has
extensive corporate and financial experience having held senior
positions at ICI plc and Premier Farnell plc where he successfully led a
repositioning of the business.
Other appointments: Chief executive of the Met Office and chairman
of the audit committee of the World Meteorological Organization.
Director of Epilepsy Research UK and a trustee of Epilepsy Bereaved.
Member of Exeter University Business School’s advisory board.
Past appointments: Group chief executive of Premier Farnell plc and
chairman of ASBISC Enterprises plc.
BOARD COMPOSITION
1
Chairman
Executive Directors
Independent
Non-Executive Directors
6
4
Skills and experience: Gwyn Burr has expertise in marketing and
leading customer service processes for major retail brands which
supports Hammerson’s focus on retail.
Other appointments: Member of board, remuneration committee
and chairman of nominations committee of Sainsbury’s Bank plc.
Non-executive director of the Financial Ombudsman Service.
Non-executive director of Wembley Stadium.
Past appointments: Senior roles in marketing, customer service
and financial services at Asda plc. Customer service and colleague
director at J Sainsbury plc. Non-executive director of the
Principality Building Society. Director of the Incorporated Society
of British Advertisers. Chair of Business in the Community
community investment board.
TERRY DUDDY
Non-Executive Director (Age 57)
Appointed to the Board: 3 December 2009.
Committee membership: Nomination Committee and
Remuneration Committee.
Skills and experience: Terry Duddy is chief executive of Home Retail
Group plc. In addition to the capabilities and experience related to
managing a large public company, he brings specific insight into
customer behaviour and retail markets, which is a major focus for
Hammerson’s strategy.
Other appointments: Trustee of Education and Employers Taskforce.
Past appointments: Director of DSG Retail Limited.
JACQUES ESPINASSE
Non-Executive Director (Age 70)
Appointed to the Board: 1 May 2007.
Committee membership: Audit Committee.
Skills and experience: Jacques Espinasse has a BBA and MBA, which
complement his long business career in many different sectors, based
in Brussels, London and Paris. He has extensive knowledge of and
insight into the French market.
Other appointments: Non-executive director and chairman of the
audit committee of AXA (Holdings) Belgium, AXA Bank Europe and
AXA Belgium. Non-executive director and member of the audit and
remuneration committees of La Banque Postale Asset Management
and SES. Chairman and chief executive officer of the Foundation
JED-Belgique.
Past appointments: Chief financial officer of Vivendi. Non-executive
director of Canal+ France, Maroc Telecom, SFR and Universal
Music Group.
www.hammerson.com 63
63
BOARD VISIT TO MARSEILLE
In May 2013 the Board visited the Group’s development at Les
Terrasses du Port, Marseille. The visit provided an opportunity for the
Board to meet with local management and stakeholders and review
progress on the construction.
During the visit, the Board toured the Company’s development. The
project management team gave a presentation covering the project
background and investment rationale; background details on Marseille
and the region; key aspects of the development including the retail
mix and target customers; and an update on pre-letting progress in
comparison to other recent Hammerson developments. The main risks
of the project were identified as on-time and on-budget completion
and the letting targets. The Board satisfied itself that plans were in
place to mitigate these risks. The Board also considered the financial
performance expected from the development. Board visits provide
invaluable insight into the business for Directors.
VIEW FROM GWYN BURR
This was my first visit to Les Terrasses du Port. Arriving on the
bus with the Board and project team, I was struck by the scale
of our project. The site is right in the heart of an exciting larger
redevelopment of Marseille, and there was a real energy around
the city. It’s much easier to feel properly connected to the
project and the teams delivering it wearing a hard hat, high viz
vest and boots, than from the distance of a Board room. I had
plenty of opportunity to talk to the teams about the challenges
they have faced in getting to this stage. I was impressed by their
commitment and determination to succeed, and to tackle and
resolve the many challenges they have faced. I am really excited
about visiting again in 2014 to see Les Terrasses du Port opened
for consumers.
Gwyn Burr / Non-Executive Director
GOVERNANCE REPORT CONTINUED
YOUR BOARD’S YEAR
BOARD FOCUS DURING 2013
The Board concentrated on the following key areas in support of the
Company’s strategic priorities:
• Conclusion of a 50:50 joint venture with Westfield to combine and
redevelop the Whitgift Centre and Centrale in Croydon;
• Approval of the acquisition of a further 16.7% stake in the Bullring,
Birmingham for £153.5 million and the investment of a further
£78 million in Value Retail’s premium designer outlet villages;
• Acquisition of Saint Sébastien shopping centre in Nancy, France,
for £109 million;
• Disposal of Queensgate shopping centre in Peterborough for
£101 million;
• Review of the Group’s development pipeline. This led to decisions
on developments at Leeds, Brent Cross, Sheffield and Croydon and
was the basis for carrying out future strategic, financial and human
resource planning across the Group;
• Regular review of the Group’s capital structure, funding options and
requirements. This included the approval of a tender offer of the
Group’s £300 million 5.25% bonds and approval of terms for the
issuance of US$443 million (£275 million) seven, 10 and 12 year
notes in a US private placement transaction;
• Approval of the Group’s Culture and Values project, to embed a
positive culture to support the Group’s strategy;
• Annual review of the Group’s health and safety arrangements
including the Group’s response to civil unrest and terrorism threats;
• Review of succession planning for senior roles within the Group;
• Update on the Group’s insurance arrangements and a review of
progress towards the consolidation and standardisation of the
Group’s information technology infrastructure.
AREAS OF BOARD FOCUS DURING 2013
Chief
Executive and
property
portfolio
reports
BOARD
FOCUS
Financial
reporting
review and
capital
structure
Corporate
operations
(IT, HR,
pensions)
reports
Strategy
Investment and
developments
Risk,
governance
and corporate
responsibility
Board balance,
succession
and diversity
64
64
Hammerson plc Annual Report 2013
BOARD STRATEGY DAY
In October 2013 the Board held its annual Strategy Day in order to
test, refine and set the Company’s strategy. The focus of the day was
operational and capital efficiency. Members of senior management
joined the Board for discussions on three key areas: financial
performance and capital structure of the Group; creating winning
retail destinations; and capturing and improving retail spend. The
agenda for the Strategy Day included, amongst other matters,
the following:
• Review of progress against 2013 Business Plan objectives;
• Assessment of Hammerson’s current strategic positioning;
• Discussion on the global economic outlook;
• Presentation on creating successful mixed use and leisure destinations;
• Debate on the Group’s portfolio mix, strategic opportunities and
asset allocation, both geographically and between different
classes of asset;
• Consideration of strategies for working even better with
Hammerson’s customers (retailers, leisure providers and caterers)
and the delivery of improved service levels and experience to
consumers in Hammerson’s shopping centres and retail parks;
• Review of progress and future plans for ‘Hammerson Future’, a
programme to identify and implement improvements throughout
the business in a number of key operational areas.
Initiatives identified as a result of the Strategy Day have been incorporated
into the Business Plan for 2014. They also influence the objectives set for
the Executive Directors and throughout the business for 2014.
Directors were asked to comment on the Strategy Day during the
Board evaluation exercise. Comments received indicated that they
found the event useful and that it plays an important part in debating
initiatives and refining strategy.
BOARD VISIT TO CROYDON
The December Board meeting was held in the Almshouses of the
Whitgift Foundation, Croydon to enable the Board to see the Croydon
redevelopment project and receive an update on progress from the
project team. During the day’s visit the Board received presentations on
the local history of Croydon, the opportunities presented by the
development and the progress of the joint venture between
Hammerson and Westfield. In particular the Board discussed the
challenges of combining and redeveloping the two existing centres,
the profitability and viability of the project and opportunities to
enhance the consumer experience of the future. The Board also visited
the Whitgift Centre and Centrale during a tour of Croydon town centre.
INDUCTION PROGRAMME FOR NEW DIRECTORS
The induction programme for Non-Executive Directors is based on
the guidelines issued by the Institute of Chartered Secretaries and
Administrators and is tailored to the specific needs of newly appointed
external directors. An induction programme was planned for
David Tyler who joined the Board in January 2013. Following his
appointment to the Board, David had a number of meetings with
John Nelson, the outgoing Chairman, which covered a comprehensive
agenda of matters. He also held discussions with the Chief Executive,
the Chief Financial Officer, the other Directors and the Company
Secretary. He was briefed on the Company’s strategy, finances,
operations, risks, and procedures. In addition, David met with senior
executives, other employees and key advisors. A wide programme of
site visits in France and the UK enabled David to gain further insight
into the Group’s activities.
On appointment, Executive Directors receive an induction programme
appropriate to their needs. At the time of his appointment to the
Board in January 2013, Jean-Philippe Mouton already had considerable
knowledge of the Company, having joined Hammerson in 2003.
Jean-Philippe received an overview of relevant legislation and
regulation about which he needed to be aware as a director of a listed
company. Further personal and professional development needs for all
Directors are considered as part of their annual performance
development reviews.
As part of the continuing development of the Directors, the Company
Secretary ensures that the Board is kept up to date with key
governance developments throughout the business.
DAVID TYLER’S FIRST YEAR
For me, the first 12 months of a job have often proved some of
the most challenging and fulfilling. That may well be the case at
Hammerson, a business I knew relatively little about before I
joined the Board in January 2013. I wanted to understand the
key aspects of the business model of the Company – what
really makes it tick – as soon as possible.
My induction programme gave me that opportunity, allowing
me to engage quickly with management and employees in
many of our retail destinations in the UK and in France, and in
our corporate functions in London and Paris. I also took the
opportunity to meet individuals at other key relationships, for
example, Value Retail and retailers, to understand their attitudes
to their relationships with Hammerson.
At the end of my first year in the Company, I am particularly
struck by the capabilities of the management team, their
energy and their vision. I believe that all this will pay dividends
for shareholders in the years ahead.
David Tyler / Chairman
www.hammerson.com 65
65
GOVERNANCE REPORT CONTINUED
BOARD EFFECTIVENESS
The 2012 internal Board effectiveness review was facilitated by the Company Secretary. Actions carried out in 2013 as a result of the
recommendations arising from the 2012 evaluation are reported below:
Recommendation
Review the composition of the Board.
Review the division of responsibilities between the Chief Executive
and Chairman.
Action
This was carried out by the Nomination Committee following David
Tyler’s appointment and succession requirements were identified.
Following David Tyler’s appointment as Chairman and the outcome
of the 2013 external Board evaluation, the division of responsibilities
has been updated.
Include additional property visits in the Board calendar.
The Board visited Marseille and Croydon in 2013.
BOARD EFFECTIVENESS REVIEW 2013
In the autumn of 2013 an external evaluation of the effectiveness of the Board and its Committees was undertaken. Four potential providers were
interviewed by the Chairman and Company Secretary and their different approaches and methodologies were considered. IDDAS, an
independent board effectiveness consultancy, was appointed and as this is its only connection with the Company, it is considered independent.
IDDAS met with the Chairman and Company Secretary to discuss and agree issues to be explored during the evaluation. The Financial Reporting
Council’s Framework on Board Effectiveness and Principles of the Code were borne in mind while agreeing the process. The review also
specifically sought to explore a number of areas for feedback and to identify opportunities to improve the effectiveness of the Board and its
Committees. IDDAS met the Board at a subsequent Board meeting to brief it on the agreed process. Each Director and the Company Secretary
had an individual interview, based on structured questioning to ensure consistency. IDDAS also reviewed a year’s worth of Board and Committee
papers. A summary of the interviews, together with analysis and recommendations from IDDAS, were presented to the Board in December. The
Board then discussed and agreed the action plan set out below:
Recommendation
Action
Clearly identify optimum mix of skills that the Board needs.
The Nomination Committee debated this in December 2013 and the
Board has approved the recruitment requirements.
Identify the internal talent pool of new executives with high
potential and create development plans for them.
The Chief Executive will lead this work and progress will be reviewed
during 2014.
Board agendas should be revised to ensure adequate focus on the
development projects and marketing. The layout of Board papers
should also be reviewed.
The 2014 Board work plan has been revised to reflect the
recommendation. The layout and content of Board papers will be
reviewed during 2014.
Reduced use of printed Board papers should be considered.
Options for electronic Board paper portals will be explored.
Effectiveness of reduced number of formal Board meetings should
be reviewed once a full calendar cycle has been completed.
The Company Secretary will arrange for this review to be
undertaken.
Additional engagement between Non-Executive Directors and
management should be arranged.
The 2014 Board work plan envisages that a number of senior
managers will attend Board meetings from time to time. Other
opportunities will be arranged.
Full details of Code compliance are provided on pages 100 to 103.
66
66
Hammerson plc Annual Report 2013
NOMINATION COMMITTEE REPORT
David Tyler
Chairman of the
Nomination Committee
COMMITTEE MEMBERS
Terry Duddy
Anthony Watson
DEAR SHAREHOLDER
During 2013 the Committee considered succession planning for the Executive Directors
and management’s succession plans for the identification and development of senior
employees. As part of these reviews, the Committee also explored ways of providing better
integration of functions across the Group.
During the year the Committee reviewed the composition of the Board and the balance of
Executive and Non-Executive Directors. As reported in last year’s Annual Report, it is planned
that John Hirst will retire from the Board at the conclusion of the 2014 Annual General Meeting
(AGM) and will be succeeded as Chairman of the Audit Committee by Jacques Espinasse. I am
very pleased that Jacques has agreed to take on the role of Chairman of the Audit Committee
following the AGM.
Anthony Watson and Jacques Espinasse will have each served on the Board for nine years
in the spring of 2015 and 2016 respectively. Discussions on a successor for each were
undertaken as part of the review of succession plans for the Non-Executive Directors held
during the year. Anthony Watson will stand down in his capacity as Chairman of the
Remuneration Committee following the AGM and will be succeeded by Gwyn Burr. I am
delighted that Gwyn has agreed to take over as Chairman of the Remuneration Committee
following the AGM.
Diversity
The Board has continued to follow the important debate on gender diversity. The Board
believes that a diverse workforce and management team improve the culture of the
organisation and add value to the business as a whole. The Board’s stated aim is to reach
20% female representation as soon as practicable. After the AGM and John Hirst’s retirement
from the Board, female representation will rise to 20%. The Committee will continue to
consider gender diversity when recommending any future Board appointments. Final
appointments will always be made on merit.
In December, the Committee considered a report on progress on diversity in the business.
The Company recognises that in some areas of the Group women are under-represented
including at the most senior management levels. Further details on diversity and equality
are found on page 25 and we will report on progress in this area next year.
David Tyler / Chairman of the Nomination Committee
www.hammerson.com 67
67
GOVERNANCE REPORT CONTINUED
AUDIT COMMITTEE REPORT
John Hirst CBE
Chairman of the
Audit Committee
COMMITTEE MEMBERS
Gwyn Burr
Jacques Espinasse
Judy Gibbons
Anthony Watson
DEAR SHAREHOLDER
This is my final report as Chairman of the Audit Committee (Committee) as I will step down
as a Non-Executive Director following the 2014 Annual General Meeting (AGM). It has
been a great privilege to serve on the Board of Hammerson and as Chairman of the
Committee. Jacques Espinasse, a fellow Non-Executive Director and current member of the
Committee will succeed me as Chairman. Jacques has served as chief financial officer of
Vivendi and has extensive experience of serving on the audit committees of a number of
European companies.
One of the significant requirements of the UK Corporate Governance Code (Code)
is that the Board confirms the Annual Report presents a fair, balanced and understandable
assessment of the Company’s performance, business model and strategy. The Committee
assists the Board in this task. The relatively simple and transparent nature of the real estate
business, the high standard of reporting fostered by EPRA and the maturity of Hammerson’s
reporting and accounting processes enable us to convey our message clearly to
shareholders. With this in mind, the Committee considered management’s analysis
supporting the assertion that the Annual Report is fair, balanced and understandable,
and confirmed and recommended to the Board that it is.
An essential element of the Committee’s work during the year has been to consider the
appropriateness of significant judgements made in connection with the financial
statements and further details are provided in this Committee Report. A key area of
judgement on which the Committee focused its scrutiny related to the valuation of the
Group’s property portfolio. The Company’s external valuer, DTZ (DTZ), presented the
conclusions of their half-year and year end valuations to the Committee. Their presentation
is always the subject of serious and full discussion between DTZ, management and the
Committee. The valuation is a significant measurement of the Group’s performance and
determinant of Executive Directors’ remuneration. In addition to meetings held by the
Committee with the external auditor Deloitte LLP (Deloitte) and DTZ, I met with both as
part of the full and half-year valuation process to ensure that each was satisfied that there
had been a full and open exchange of views.
The Committee’s work will continue to evolve in the light of guidance issued by the
Financial Reporting Council (FRC) as a result of its latest consultations on risk management
and internal control and the implementation of the Sharman Inquiry’s recommendations
on going concern.
David Tyler refers to changes to the structure of the Governance Report in his introduction
on page 61 and consequently, we have concentrated here on the activities of the
Committee during 2013. Further details of our compliance with the Code can be found
on pages 100 to 103. This Report should therefore be read in conjunction with that section
of the Governance Report. We hope that this new layout will help inform readers whilst
still providing full details of our compliance with the Code.
We stated in last year’s Annual Report that the Committee’s intention is to review the
requirement to tender the appointment of the external auditor closer to the time when
the Deloitte audit partner next rotates and our reasons are more fully explained on page 69.
On behalf of the Board I would like to thank Deloitte for the continuing high quality of the
audit services they have provided to the Group.
John Hirst / Chairman of the Audit Committee
68
68
Hammerson plc Annual Report 2013
MAIN ACTIVITIES DURING THE YEAR
The agendas for the four scheduled meetings of the Committee
during 2013 were organised around the Company’s reporting
schedule. To help the Committee review and challenge the integrity
of the Company’s financial reporting, representatives from Deloitte
attended appropriate parts of each meeting. During the year the
Committee considered amongst other matters:
• Deloitte’s conclusions for the 2012 audit and the audit plan for 2013;
• Risks to the Group identified in the 2013 audit plan and monitoring
those risks;
• The half-year results and the Annual Report;
• Property valuation reports from DTZ;
• Proposed changes to the risk management framework and
management’s mitigation of identified risks;
• The re-appointment of Deloitte for recommendation to the Board;
• A report on the Company’s approach to tax risk;
• A number of standing items including the Company’s
Whistleblowing policy and anti-fraud procedures; and
• Compliance and regulatory developments.
SIGNIFICANT FINANCIAL JUDGEMENTS
Before recommending the half-year and annual financial statements
to the Board for approval, the Committee reviewed, amongst other
things, the following matters:
Valuation of the Property Portfolio
The Committee has a robust process through which it satisfies itself
that the external valuation of the Group’s property portfolio, including
developments, is appropriate. The Committee recognises that the
Group operates in two liquid and mature property markets, the UK
and France, in which there are well established and respected
valuation professionals. The Committee is also familiar with the
processes surrounding the provision of information by management
to DTZ. Current conditions and recent transactions in the market were
discussed with both management and DTZ as a means of providing
context for the valuations, after which assumptions and judgements
made by both parties were challenged by the Committee. Deloitte
also presented its findings on the valuation. The Committee was
satisfied that there were no significant areas of contention and that
the valuation procedures and methodologies used and the valuations
themselves were appropriate.
Investment in Value Retail
The Committee discussed with management the proposed accounting
treatment for the Group’s investment in Value Retail and the process by
which the Group’s share of Value Retail was recognised in the Group’s
accounts. The Committee discussed, in particular, the valuation
performance of Value Retail’s property portfolio in the context of their
operational performance and concluded that the investment was
appropriately recognised in the Group’s financial statements.
Going Concern
Management’s assessment of the appropriateness of the Group
preparing its half-year and annual financial statements on a going
concern basis was evaluated by the Committee. Corporate liquidity,
including undrawn facilities and the financial covenants in the Group’s
borrowing facilities were reviewed in particular. The Committee
considered reports on the renewal and maturity profile of debt,
forecast cash flows, funding requirements and contingent liabilities. The
Committee also recognised the contractual long-term nature of tenant
leases and concluded that the going concern basis was appropriate.
Accounting for Property Transactions
During the year there were several sales and purchases of property
and corporate interests, including interests in joint ventures.
Management explained to the Committee how transactions were to
be accounted for, particularly in respect of the timing at which the
transactions were recognised. The Committee concurred with
these judgements.
APPOINTMENT OF THE EXTERNAL AUDITOR
Deloitte or its predecessor firms have been the Company’s external
auditor since the Company was founded in 1942. In accordance with
professional and regulatory standards the lead audit partner is rotated
at least every five years in order to protect auditor independence and
objectivity. The current lead audit partner, Ian Waller, has been in place
since April 2012 and will continue until the conclusion of the audit of
the financial statements for 2016.
The Committee considers the re-appointment of the external auditor
each year. Early in 2013 the Committee assessed whether the Group
should consider tendering the appointment of the external auditor.
The Committee concluded that Deloitte was effective and
independent and provides an appropriate level of service delivered
by a team with an in-depth understanding of Hammerson’s business
and the broader real estate sector. In forming its opinion on the
independence and objectivity of the external auditor, the
Committee reviewed:
• The independence safeguards operating within Deloitte;
• A report from Deloitte describing its arrangements to ensure
objectivity and to identify, report and manage any conflicts of
interest; and
• The extent of non-audit services provided by Deloitte.
To assess Deloitte’s effectiveness the Committee monitored the firm’s
fulfilment of the agreed audit plan and its reports on the significant
matters and judgements that arose from the audit plan. The FRC’s
Audit Quality Report on Deloitte issued in May 2013 was also
reviewed. An independent client service assessment was performed
by Deloitte during the year which included interviews with
appropriate Hammerson senior management and the Chairman of
the Committee. The initial results of the assessment, which were
presented to the Committee in December, supported the overall
satisfaction rating of Deloitte’s services. The Committee has
recommended to the Board that Deloitte be re-appointed at
the 2014 AGM.
www.hammerson.com 69
69
GOVERNANCE REPORT CONTINUED
While the Committee is mindful of the Code requirement to re-tender
the external audit contract at least every 10 years, the exact timing
remains a matter for the Company’s discretion. The Committee’s
present intention is to review the requirement to tender the external
audit closer to the time when the audit partner next rotates, as was
noted in last year’s Annual Report. However, the Committee will
continue to review this position annually.
NON-AUDIT SERVICES
The Committee is responsible for the development, implementation
and monitoring of the Group’s policy on the engagement of the
external auditor to supply non-audit services to the Group, the
principal requirements of which are that:
• The external auditor may not provide a service which places it in
a position where it may be required to audit its own work, such as
book keeping or valuation services; and
• Some services may be provided in specific and exceptional
circumstances and may include tax compliance work, due diligence
and property-related consultancy. Each occasion is specifically
assessed and authorised by an Executive Director up to a limit of
£50,000 and above that limit by the Chairman of the Committee.
The full policy is available at www.hammerson.com.
Deloitte’s remuneration for the year ended 31 December 2013 was
£563,000 (2012: £754,000) for half-year review and year end audit work.
Consideration is given to the nature of and remuneration received for
other services provided by Deloitte to the Company and confirmation
is sought that the fee payable for the annual audit is sufficient to
enable Deloitte to perform its obligations in accordance with the
scope of the audit.
During 2013, non-audit services provided by Deloitte to the Company
included acting as reporting accountants for intra-Group distributions,
assistance with the electronic filing of accounts, tax returns and
bond compliance work. Fees for non-audit services are based on the
work undertaken and are not success-related.
The total fees paid for non-audit services provided by Deloitte for the
year ended 31 December 2013 were £61,000 (2012: £375,000).
RISK MANAGEMENT AND INTERNAL CONTROL
The Board has ultimate responsibility for determining the nature
and extent of the significant risks it is willing to take in achieving its
strategic objectives of creating high-quality retail property, maximising
income and maintaining capital strength. It is also responsible for
establishing sound risk management and internal control systems and
for reviewing their effectiveness. The Group’s risk management and
internal control systems are designed to:
• Safeguard assets against unauthorised use or disposition;
• Ensure the maintenance of proper accounting records;
• Provide reliable financial information;
• Identify and, as far as possible, mitigate potential impediments to
the Group achieving its objectives; and
EFFECTIVENESS OF THE CONTROL ENVIRONMENT
The Committee assists the Board to fulfil its responsibilities relating to
the adequacy and effectiveness of the control environment and the
Group’s compliance with the Code. To this end, during the year the
Committee’s review included:
• Deloitte’s management letters;
• Internal audit reports, including recommendations arising therein
and the review of progress in implementing previous
recommendations;
• Reports on the systems of internal controls and the risk
management framework;
• The Company’s approach to compliance with legislation and
regulations and to the prevention of fraud including
whistleblowing arrangements;
• Business continuity risk and cyber risk;
• Gifts and entertainment and expenses registers; and
• Deloitte’s audit planning reports.
There is a regular on-going review of the effectiveness of the Group’s
systems of risk management and internal control, including financial,
operational and compliance controls. However, it must be recognised
that any such systems can only provide reasonable and not absolute
assurance against material misstatement or loss.
Management has established a risk management framework and
sufficient procedures necessary to enable the Directors to report on
internal controls in compliance with the Code. These involve the
analysis, evaluation and management of the key risks to the Group
and include plans for the continuity of the Company’s business in the
event of unforeseen interruption. Reports on the key risks to the Group
are made regularly to the Board via the Committee. The Board
allocates responsibility for the management of each key risk to
Executive Directors and senior executives within the Group. A more
detailed explanation of the Company’s approach to risk management
is set out on pages 55 to 59.
INTERNAL AUDIT
The Committee considers annually the requirement for an internal
audit function. BDO LLP had fulfilled the function of internal auditor
since August 2006, directed by Hammerson’s management and the
Committee. Following a review in 2013, the Committee decided to
re-tender the appointment. Four firms were invited to present their
credentials, including the incumbent auditor, BDO. Ernst & Young LLP
was subsequently appointed on 6 August 2013.
A programme of reviews of the controls established to mitigate the
risk areas identified in the risk management framework is undertaken
to ensure they are operating correctly. During the year internal audits
were carried out on a number of business processes, including:
• Treasury policies and procedures;
• IT business interruption testing in France;
• Financial controls at managing agents; and
• Ensure compliance with relevant legislation, rules and regulations.
• Controls and procedures implemented in the French business for
the prevention of bribery.
These reviews and the implementation of recommendations arising
from them are overseen and coordinated by a Risk and Controls
70
70
Hammerson plc Annual Report 2013
RISK AND CONTROLS COMMITTEE
This committee comprises executives from across
the business, including the UK shopping centres,
retail parks, French shopping centres and finance
and project management teams, and is chaired by
the Chief Financial Officer.
The role of the Risk and Controls Committee is to:
• Promote the application of the risk management
framework throughout the business;
• Agree the annual internal control review
programme; and
• Consider the results and recommendations of
reviews and monitor the implementation of those
recommendations.
In 2013 the committee met four times with
meetings scheduled in advance of each Audit
Committee meeting.
Committee (see further details in the box to the right) to ensure that
internal control is integrated into Hammerson’s daily operations. The
Committee is satisfied that these arrangements continue to provide
an appropriate overview of the Company’s internal control procedures.
Other key elements of the Group’s systems of risk management and
internal control include:
• Regular meetings of the Board and the Committee whose overall
responsibilities are set out in this Committee Report and elsewhere
in the Annual Report;
• A management structure that is designed to enable effective
decision-making with clearly defined responsibilities and
limits of authority;
• The maintenance of operational control manuals setting out a
control framework for management to operate within and
containing guidance and procedures for the Group’s operations; and
• The measurement of the Group’s financial performance on a regular
basis against budgets and long-term financial plans.
The systems of risk management and internal control and their
effectiveness have been reviewed by the Board for the year under
review and during the period up to the date of this Annual Report and
the process accords with the Turnbull guidance.
CODE OF CONDUCT
The Group has a Code of Conduct which explains how employees are
expected to fulfil their responsibilities by acting in the best interests of
the Group and in line with its corporate and financial objectives. This
includes compliance with laws and regulations; acting fairly in dealing
with customers, suppliers and other stakeholders; maintaining
integrity in financial reporting; treating people with respect and
operating within a control framework which includes environmental
and health and safety policies. A summary of the Code of Conduct is
available on the Company’s website.
WHISTLEBLOWING
The Group has a whistleblowing procedure by which employees may
report suspicion of fraud, financial irregularity or other malpractice. No
reports of any such matters have been received for the year under
review. The Company subscribes to the independent charity, Public
Concern at Work, so that employees may have free access to its
helpline. The whistleblowing procedure is reviewed and if necessary
updated annually to ensure it remains appropriate.
www.hammerson.com 71
71
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION
REPORT
DEAR SHAREHOLDER
The Remuneration Committee (Committee) is conscious of the need to have a
remuneration policy with a structure and level of reward that will incentivise the Executive
Directors to deliver the Company’s strategy and annual targets as approved by the Board.
In 2013, overall performance was good with adjusted earnings per share growing
by 10.5% to 23.1p, Group like-for-like NRI increasing by 2.1% to £290.2 million and
controllable overheads reducing to £37.8 million. The Company did not outperform
the relevant IPD Indexes. This level of financial performance, combined with the
achievement of a number of significant personal objectives, suggested an average of
54% of maximum bonus for 2013 for the Executive Directors. The Committee considered
that this appropriately reflected the Company’s performance whilst achieving a fair
balance between the interests of shareholders and those of Executive Directors.
More about the detailed financial targets and personal objectives upon which
Executive Directors were measured can be found on page 89.
During the year the Committee reviewed the remuneration policy and as a result a number
of small adjustments have been made in order to clarify and align certain areas of the
reward structure. The arrangements for 2014 follow the same approach as for 2013 other
than in one material respect. While the policy of granting to each Executive Director an
annual Long Term Incentive Plan (LTIP) award of shares worth twice their salary remains
unaffected, the Executive Directors made a request to the Committee that their 2014
awards be reduced to one times salary only. This reflects their wish to set an example
given the environment in which other cost control steps are being introduced within
the Company. The Committee will be making the 2014 awards at this lower level. It is
anticipated that awards in 2015 will, subject to any further review of the long-term
incentive arrangements more generally, return to the policy level.
The Committee approved modest base pay increases of between 2% and 3.6% for the
Executive Directors, effective from 1 April 2014, and consistent with the budget for employees
generally. This was the first inflationary increase in Executive Director base pay since 2011.
As reported last year, on 1 January 2013, Jean-Philippe Mouton was appointed to the Board,
having joined Hammerson in 2003. The Committee is satisfied that his reward structure is
broadly in line with that of other Executive Directors.
In May 2013, the Committee considered the vesting of the LTIP awards which had been
made in 2009. For the first time in a number of years as a consequence of a good long-term
sustained level of performance by the Company, the Executive Directors benefitted from a
partial vesting. Further details of this can also be found on page 90.
Like many other companies, the Company has kept a close watch on the debate on
remuneration disclosure. The GC100 and Investor Group Guidance has proved helpful
in this regard and the Directors’ Remuneration Report has been prepared with those
guidelines in mind.
Having served for a number of years as Chairman of the Committee, I am delighted that Gwyn
Burr, a fellow Non-Executive Director joined the Committee on 14 February 2014 and will
succeed me as Committee Chairman at the Annual General Meeting (AGM) in April 2014.
I hope that shareholders will find the remuneration policy, upon which they will be asked to
vote separately for the first time at the AGM in April 2014, appropriate in light of both the
Company’s strategy and its key performance indicators for 2014 and the longer term.
Anthony Watson / Chairman of the Remuneration Committee
Anthony Watson CBE
Chairman of the
Remuneration Committee
COMMITTEE MEMBERS
Terry Duddy
Judy Gibbons
David Tyler
72
72
Hammerson plc Annual Report 2013
2013 EXECUTIVE DIRECTORS’ REMUNERATION: AT A GLANCE
TOTAL REMUNERATION
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Salary
£000
585
420
400
340
Benefits
£000
16
16
19
28
Annual
bonus
£000
Long Term
Incentive
£000
657
472
449
351
651
521
–
–
Pension
£000
160
90
80
78
Total
£000
2,069
1,519
948
797
AIP BONUS STRUCTURE
AIP (BONUS) OUTCOME: FINANCIAL TARGETS
Total bonus
Financial targets breakdown
Performance measure
2013: target to
achieve 100% bonus
2013 closing
measurement
Level of
payout
30%
10%
10%
10%
EPS
23.2p
23.1p
TPR relative to IPD
IPD +2.5% IPD +0.2%
60%
Growth in NRI
3.5%
2.1%
95%
0%
30%
60%
60%
Overhead control
£36.6m
£37.8m
42.8%
Personal objectives weighting 30%
Group financial targets weighting 70%:
Group financial element
Group operational element
% Salary: Earnings Per Share
% Salary: TPR relative to IPD
% Salary: Growth in NRI
% Salary: Overhead control
See page 89 for full details
2013 DIRECTORS’ REMUNERATION REPORT: INDEX
Fixed
Variable
Scenarios and other
y
c
i
l
o
P
n
o
i
t
a
r
e
n
u
m
e
R
Executive Directors’ Remuneration
Variable
Other information
t
r
o
p
e
R
n
o
i
t
a
t
n
e
m
e
p
m
l
I
Base salary
Pension
Benefits
Annual Incentive Plan
Long term Incentive Plan
Scenarios and assumptions
Recruitment
Service agreements: Executive Directors
Payment for loss of office
Employee pay and conditions elsewhere in the Group
Chairman and Non-Executive Directors’ remuneration
Shareholder views
Executive Directors: single figure remuneration table
Base salary
Annual Incentive Plan
Long term Incentive Plan
Pension
Payments to past directors
Relative importance of spend on pay
TSR Index
Chief Executive remuneration history
Chief Executive remuneration changes compared
with all employees
Non-Executive Directors: single figure remuneration table
Executive Directors’ share plan interests
Directors’ shareholdings
Committee: composition and advisors
2013 AGM: statement of voting
74
74
76
76
76
79
80
82
84
85
86
86
87
88
88
90
92
93
93
94
94
94
95
96
98
99
99
www.hammerson.com 73
73
DIRECTORS’ REMUNERATION REPORT: POLICY
POLICY
DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration Report (Report) is presented to reflect
the recent changes in reporting requirements on remuneration
matters, particularly the UK’s new Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013. The Report and pages 100 to 103 also describe
how the Board has complied with the provisions set out in the
UK Corporate Governance Code relating to remuneration matters.
Two votes on remuneration matters will be presented at the
2014 Annual General Meeting (AGM): a binding vote on the
Directors’ Remuneration Policy as set out in the policy section
of this Report, and an advisory vote on the 2013 Annual
Remuneration Report section of this Report.
The auditors have reported on certain parts of the Report and stated
whether, in their opinion, those parts of the Report have been properly
prepared. Those sections which have been subject to audit are clearly
indicated with an asterisk (*).
DIRECTORS’ REMUNERATION POLICY
The Directors’ Remuneration Policy as set out below (Policy) will
take effect for all payments made to Directors with effect from the
conclusion of the AGM to be held on 23 April 2014, subject to
approval by the shareholders at that meeting. The table below
must be read alongside its footnotes which together set out and
explain the Policy.
FIXED REMUNERATION
Element
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
Base salary
• Ensure the Company continues to attract
• Paid monthly in cash.
and retain quality leaders.
• Recognise:
• Accountabilities
• Skills
• Experience
• Value
For 2013 and 2014
see pages 87 and 88.
• Benchmarked against the main markets in
which Hammerson competes for talent.
Pension
• Ensure the Company continues to attract
and retain quality leaders.
• Provide market-competitive retirement
benefits.
For 2013
see pages 87 and
92 to 93.
• Pensionable.
• Reviewed annually by the Committee.
• Executive Directors may receive an allowance (Pension Choice) to
be paid either (i) as an employer contribution to the Company’s
defined contribution pension plan or (ii) as a payment to a SIPP
personal pension plan or (iii) as a salary supplement or (iv) a
combination of all three. The Pension Choice is up to an aggregate
limit of 30% of base salary.
• The salary supplement is non-pensionable and does not qualify for
AIP or LTIP entitlements.
• No compensation for public policy or tax changes.
• Non-contributory for Executive Directors.
• The Company keeps the pension arrangements for Executive
Directors under review to ensure they remain appropriate.
74
74
Hammerson plc Annual Report 2013
• In undertaking reviews, the Committee will take into account
• Benchmarking considered at both base salary and total remuneration
factors including market conditions and the level of salary
level, and the Committee generally considers that pay will be within
increases awarded to other employees of the Group, and a
a range of +/- 10% of median benchmark but also takes into account
comparison against both a relevant property peer group and
such other factors as it considers appropriate and is not constrained
a market cap group as selected by the Committee (currently
by this default.
the largest REITs and an appropriate pan-sector group of
companies with a comparable market capitalisation).
• The base salary for any Executive Director shall not exceed £850,000
per annum (or the equivalent if denominated in a different currency).
Arrangements for Executive Directors who participate in the
Other
Hammerson Group Management Pension and Life Assurance
• In addition to receiving a salary supplement, Jean-Philippe Mouton
Scheme (Scheme)
The Scheme closed to new joiners at the start of 2003.
participates in the collective supplementary defined contributions
retirement plan operated by his French employing company, and
Peter Cole and David Atkins participate in the Scheme instead
employer contributions are made at the annual statutory limit.
of the arrangements described on page 74.
• Scheme members affected by the UK annual allowance may
choose to limit their benefit and receive a salary supplement
on pages 82 and 83.
• The contractual pension entitlements of existing Executive Directors
are set out in the summary of Executive Directors’ service agreements
of the actuarially assessed balance, which is paid shortly after
• The Company will comply with any local legal obligations in respect
the end of the relevant tax year.
of pensions.
• The maximum benefit (including in respect of any salary
supplement in lieu of accrual) will remain 2/3 of final
pensionable salary although the costs of such provision will
change depending on, for example, actuarial assumptions.
• Entitlement to receive Pension Choice of 30% of base salary
if the Executive Director chooses to cease accruing service in
the Scheme, payable only whilst employment continues.
FIXED REMUNERATION
Element
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
Base salary
• Ensure the Company continues to attract
• Paid monthly in cash.
• Pensionable.
• Reviewed annually by the Committee.
and retain quality leaders.
• Recognise:
• Accountabilities
• Skills
• Experience
• Value
• Benchmarked against the main markets in
which Hammerson competes for talent.
Pension
• Ensure the Company continues to attract
• Executive Directors may receive an allowance (Pension Choice) to
and retain quality leaders.
• Provide market-competitive retirement
benefits.
be paid either (i) as an employer contribution to the Company’s
defined contribution pension plan or (ii) as a payment to a SIPP
personal pension plan or (iii) as a salary supplement or (iv) a
combination of all three. The Pension Choice is up to an aggregate
For 2013 and 2014
see pages 87 and 88.
For 2013
see pages 87 and
92 to 93.
limit of 30% of base salary.
AIP or LTIP entitlements.
• The salary supplement is non-pensionable and does not qualify for
• No compensation for public policy or tax changes.
• Non-contributory for Executive Directors.
• The Company keeps the pension arrangements for Executive
Directors under review to ensure they remain appropriate.
APPROACH TO REMUNERATION POLICY
The overall objective of the Remuneration Committee (Committee)
is to determine an appropriate remuneration policy for
recommendation to the Board that ensures that the Company can
continue to attract, retain and motivate quality leaders who are
capable of making a major contribution to the Company’s success
whilst avoiding paying more than the Committee considers necessary.
In implementing the Policy, the Committee takes into account various
factors, including remuneration packages available within other
comparable companies, the Company’s overall performance, internal
relativities, achievement of corporate objectives, individual
performance and experience, published views of institutional investors
and general market trends/performance.
Generally, two-thirds of the Executive Directors’ total target
remuneration (excluding pension and benefits) is performance
related, through an annual performance-related bonus plan
(Annual Incentive Plan or AIP) and a long term incentive plan
(Long Term Incentive Plan or LTIP), and this is considered
to be appropriate.
The Committee has received clear advice that formal limits are
required in the Policy and has retained sufficient flexibility to
enable it to continue to act in the interests of the Company and its
shareholders. The limits will not lead to pressure on reward levels
and the Committee is satisfied that it has adopted a suitably
conservative approach to date and will continue to do so.
• In undertaking reviews, the Committee will take into account
factors including market conditions and the level of salary
increases awarded to other employees of the Group, and a
comparison against both a relevant property peer group and
a market cap group as selected by the Committee (currently
the largest REITs and an appropriate pan-sector group of
companies with a comparable market capitalisation).
• Benchmarking considered at both base salary and total remuneration
level, and the Committee generally considers that pay will be within
a range of +/- 10% of median benchmark but also takes into account
such other factors as it considers appropriate and is not constrained
by this default.
• The base salary for any Executive Director shall not exceed £850,000
per annum (or the equivalent if denominated in a different currency).
Other
• In addition to receiving a salary supplement, Jean-Philippe Mouton
participates in the collective supplementary defined contributions
retirement plan operated by his French employing company, and
employer contributions are made at the annual statutory limit.
• The contractual pension entitlements of existing Executive Directors
are set out in the summary of Executive Directors’ service agreements
on pages 82 and 83.
• The Company will comply with any local legal obligations in respect
of pensions.
Arrangements for Executive Directors who participate in the
Hammerson Group Management Pension and Life Assurance
Scheme (Scheme)
The Scheme closed to new joiners at the start of 2003.
Peter Cole and David Atkins participate in the Scheme instead
of the arrangements described on page 74.
• Scheme members affected by the UK annual allowance may
choose to limit their benefit and receive a salary supplement
of the actuarially assessed balance, which is paid shortly after
the end of the relevant tax year.
• The maximum benefit (including in respect of any salary
supplement in lieu of accrual) will remain 2/3 of final
pensionable salary although the costs of such provision will
change depending on, for example, actuarial assumptions.
• Entitlement to receive Pension Choice of 30% of base salary
if the Executive Director chooses to cease accruing service in
the Scheme, payable only whilst employment continues.
www.hammerson.com 75
75
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
FIXED REMUNERATION CONTINUED
Element
Benefits
For 2013
see page 87.
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
• Provide a range of benefits in line with
• Executive Directors may receive such contractual and non-
• Benefits are non-pensionable.
In addition to the benefits outlined:
general practice.
• Ensure the Company continues to attract
and retain quality leaders.
contractual benefits as the Committee considers to be appropriate
and consistent with market practice in the relevant market in
which the Executive Director is based.
• These benefits currently include a car allowance or a company car,
private medical insurance (for the Executive Director and their
spouse/life partner), and permanent health insurance and
life assurance.
• Where benefits are provided by a third-party provider, the
• Where Executive Directors are relocated to work in a different country
Company covers the cost at market rates.
• The aggregate value of contractual and non-contractual
benefits received by each Executive Director (based on the
the Company may (i) pay global relocation support (up to a maximum of
£400,000); and/or (ii) provide tax equalisation arrangements in relation to
all elements of remuneration.
value included in the individual’s annual P11D tax calculation
• While the Committee does not consider it to form part of benefits in the
or a broadly equivalent basis for a non-UK based Executive
normal sense, Executive Directors can participate in corporate hospitality
Director) shall not exceed £100,000 per annum (with this
(including travel and where appropriate, with a family member), whether
• Benefits additionally available to employees of Hammerson France
maximum increasing annually at the rate of RPI).
paid for by the Company or another, within its agreed policies.
VARIABLE, PERFORMANCE RELATED REMUNERATION
currently include seniority allowance and an employer’s
contribution of up to €2,000 per annum to an employee
savings scheme.
Element
Annual Incentive
Plan (AIP), with
deferral under the
Deferred Bonus
Share Scheme
(DBSS)
For 2013
see pages 87 and
88 to 89.
Long Term
Incentive Plan
(LTIP)
For outstanding
awards and 2014
awards see pages
90 to 91.
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
Performance
• Align Executive Director remuneration
with annual financial and Company
strategic targets as determined by the
Company’s Business Plan for the relevant
financial year.
• In the view of the Committee, to
differentiate appropriately on the basis
of performance.
• Partial award in shares aligns interests
with shareholders and supports retention.
• The current maximum bonus opportunity is 200% of base salary.
Deferred shares element
• The performance measures and conditions will be set by the Committee
• The Committee reserves the power to increase the maximum
bonus opportunity to up to 300% of base salary, although there is
no current intention to do so. The Committee would only increase
the maximum bonus level above the current 200% of base salary
after appropriate consultation with shareholders.
• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
of this Policy.
• Awards are paid in a mix of cash and deferred shares, with the
deferred shares element being at least 40% of the total award.
• Subject to clawback and malus provisions in situations of personal
misconduct and/or where accounts or information relevant to
performance are shown to be materially wrong and the bonus
paid was higher than should have been the case.
• Non-pensionable.
• Incentivise the creation of long-term
• A discretionary annual award up to a value of 200% of base salary.
• Participants are entitled to a dividend equivalent for the
• The performance measures may consist of a combination of financial
returns for shareholders.
• Align interests of Executive Directors with
shareholders.
• Support retention.
• The performance period is set to reflect
the capital intensive and cyclical nature
of Hammerson’s business.
• The choice of performance measures is
determined by those drivers which deliver
value to shareholders in the longer term.
The Committee reserves the power to increase the maximum award
to 300% of base salary in exceptional circumstances, although there
is no current intention to do so. The extent of vesting is determined
by the performance conditions.
• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
of this Policy.
• Awards are normally structured as nil-cost share options but can
take other forms – for example, awards made to France-based
employees may be made in the form of a conditional award
of shares.
• The deferred shares element is currently awarded under the
on an annual basis.
DBSS (but may be delivered under a different plan with
equivalent terms).
be shorter.
• The deferral period is currently two years, and may not
• The deferred shares are subject to the leaver conditions as
set out in the Payment for Loss of Office section of this Policy.
• No further performance targets apply to the deferred shares
as these represent previously earned bonuses.
• The awards are structured as nil-cost share options.
• Participants are entitled to a dividend equivalent for the
period from grant until the vesting date, delivered as
additional shares when the shares are transferred
to the participant.
• The performance conditions will be assessed over a period of one year,
and may consist of a combination of:
• Financial measures (at the group or divisional level);
• Operational measures; and
• Individual performance objectives.
• The Committee reserves the right to include such other measures as it
considers to be an appropriate means of assessing the performance of
the Executive Directors.
• The Committee retains discretion to amend the vesting level (up or down)
where it considers it to be appropriate, but not so as to exceed the
maximum bonus potential.
• Once set, performance measures and conditions will generally remain
unchanged for the year, except in exceptional circumstances.
period from grant until the vesting date, delivered as
and non-financial measures.
additional shares when the shares are transferred
to the participant.
• The Committee has discretion to settle awards as a cash
payment in place of the transfer of shares.
• Vesting under each condition is on a straight line basis with no more
than 25% vesting at threshold performance.
• The LTIP rules impose a minimum performance period of three years.
However, the Committee has determined that the performance period
• Non-pensionable.
should be four years.
• Subject to clawback and malus provisions in situations of
• The Committee retains the discretion to amend the performance measures
personal misconduct and/or where accounts or information
and/or conditions used, and/or the weighting of each for future awards and/
relevant to performance are shown to be materially wrong
or the performance measurement periods. It is the current intention of the
and vesting was higher than should have been the case.
Committee that future awards be granted with the same performance
measures and conditions as for the 2014 awards detailed on page 90 to 91.
• Once set, the Committee may only amend the performance conditions in
respect of outstanding awards in the event that exceptional circumstances
occur which make it appropriate to do so, provided that the amended
condition is not, in the view of the Committee, materially less difficult to satisfy.
76
76
Hammerson plc Annual Report 2013
Element
Benefits
For 2013
see page 87.
Element
Annual Incentive
Plan (AIP), with
deferral under the
Deferred Bonus
Share Scheme
(DBSS)
For 2013
see pages 87 and
88 to 89.
FIXED REMUNERATION CONTINUED
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
general practice.
• Ensure the Company continues to attract
and retain quality leaders.
contractual benefits as the Committee considers to be appropriate
and consistent with market practice in the relevant market in
which the Executive Director is based.
• These benefits currently include a car allowance or a company car,
private medical insurance (for the Executive Director and their
spouse/life partner), and permanent health insurance and
life assurance.
• Benefits additionally available to employees of Hammerson France
currently include seniority allowance and an employer’s
contribution of up to €2,000 per annum to an employee
savings scheme.
VARIABLE, PERFORMANCE RELATED REMUNERATION
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
• Align Executive Director remuneration
• The current maximum bonus opportunity is 200% of base salary.
with annual financial and Company
strategic targets as determined by the
Company’s Business Plan for the relevant
financial year.
• The Committee reserves the power to increase the maximum
bonus opportunity to up to 300% of base salary, although there is
no current intention to do so. The Committee would only increase
the maximum bonus level above the current 200% of base salary
• In the view of the Committee, to
after appropriate consultation with shareholders.
differentiate appropriately on the basis
of performance.
• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
• Partial award in shares aligns interests
of this Policy.
with shareholders and supports retention.
• Awards are paid in a mix of cash and deferred shares, with the
deferred shares element being at least 40% of the total award.
• Subject to clawback and malus provisions in situations of personal
misconduct and/or where accounts or information relevant to
performance are shown to be materially wrong and the bonus
paid was higher than should have been the case.
• Non-pensionable.
• Provide a range of benefits in line with
• Executive Directors may receive such contractual and non-
• Benefits are non-pensionable.
In addition to the benefits outlined:
• Where benefits are provided by a third-party provider, the
• Where Executive Directors are relocated to work in a different country
Company covers the cost at market rates.
• The aggregate value of contractual and non-contractual
benefits received by each Executive Director (based on the
value included in the individual’s annual P11D tax calculation
or a broadly equivalent basis for a non-UK based Executive
Director) shall not exceed £100,000 per annum (with this
maximum increasing annually at the rate of RPI).
the Company may (i) pay global relocation support (up to a maximum of
£400,000); and/or (ii) provide tax equalisation arrangements in relation to
all elements of remuneration.
• While the Committee does not consider it to form part of benefits in the
normal sense, Executive Directors can participate in corporate hospitality
(including travel and where appropriate, with a family member), whether
paid for by the Company or another, within its agreed policies.
Deferred shares element
• The deferred shares element is currently awarded under the
DBSS (but may be delivered under a different plan with
equivalent terms).
• The deferral period is currently two years, and may not
be shorter.
• The deferred shares are subject to the leaver conditions as
set out in the Payment for Loss of Office section of this Policy.
• No further performance targets apply to the deferred shares
as these represent previously earned bonuses.
• The awards are structured as nil-cost share options.
• Participants are entitled to a dividend equivalent for the
period from grant until the vesting date, delivered as
additional shares when the shares are transferred
to the participant.
Performance
• The performance measures and conditions will be set by the Committee
on an annual basis.
• The performance conditions will be assessed over a period of one year,
and may consist of a combination of:
• Financial measures (at the group or divisional level);
• Operational measures; and
• Individual performance objectives.
• The Committee reserves the right to include such other measures as it
considers to be an appropriate means of assessing the performance of
the Executive Directors.
• The Committee retains discretion to amend the vesting level (up or down)
where it considers it to be appropriate, but not so as to exceed the
maximum bonus potential.
• Once set, performance measures and conditions will generally remain
unchanged for the year, except in exceptional circumstances.
Long Term
Incentive Plan
(LTIP)
For outstanding
awards and 2014
awards see pages
90 to 91.
• Incentivise the creation of long-term
• A discretionary annual award up to a value of 200% of base salary.
returns for shareholders.
• Align interests of Executive Directors with
shareholders.
• Support retention.
• The performance period is set to reflect
the capital intensive and cyclical nature
of Hammerson’s business.
• The choice of performance measures is
determined by those drivers which deliver
value to shareholders in the longer term.
The Committee reserves the power to increase the maximum award
to 300% of base salary in exceptional circumstances, although there
is no current intention to do so. The extent of vesting is determined
by the performance conditions.
• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
of this Policy.
of shares.
• Awards are normally structured as nil-cost share options but can
take other forms – for example, awards made to France-based
employees may be made in the form of a conditional award
• Participants are entitled to a dividend equivalent for the
period from grant until the vesting date, delivered as
additional shares when the shares are transferred
to the participant.
• The Committee has discretion to settle awards as a cash
payment in place of the transfer of shares.
• Non-pensionable.
• Subject to clawback and malus provisions in situations of
personal misconduct and/or where accounts or information
relevant to performance are shown to be materially wrong
and vesting was higher than should have been the case.
• The performance measures may consist of a combination of financial
and non-financial measures.
• Vesting under each condition is on a straight line basis with no more
than 25% vesting at threshold performance.
• The LTIP rules impose a minimum performance period of three years.
However, the Committee has determined that the performance period
should be four years.
• The Committee retains the discretion to amend the performance measures
and/or conditions used, and/or the weighting of each for future awards and/
or the performance measurement periods. It is the current intention of the
Committee that future awards be granted with the same performance
measures and conditions as for the 2014 awards detailed on page 90 to 91.
• Once set, the Committee may only amend the performance conditions in
respect of outstanding awards in the event that exceptional circumstances
occur which make it appropriate to do so, provided that the amended
condition is not, in the view of the Committee, materially less difficult to satisfy.
www.hammerson.com 77
77
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
OTHER
Element
Purpose, policy and role in supporting
the Company’s strategic objectives
Operation and opportunity
Share ownership
guidelines
• To encourage share ownership by the
Executive Directors, in order to ensure
alignment with shareholders.
• The Chief Executive is expected to accumulate and maintain a
holding in ordinary shares in the Company equivalent to no less
than 150% of base salary.
Details of all Directors’
shareholdings are
set out in the table
on page 98.
All-employee
arrangements
For 2013 see page 87.
• In order to be able to offer participation
in these plans to employees generally,
the Company is either required by the
relevant UK and French legislation to
allow Executive Directors to participate
on the same terms, or chooses so to do.
• Other Executive Directors are expected to accumulate and
maintain a holding in ordinary shares in the Company equivalent
in value to no less than 100% of base salary.
• Shares to be included in the calculation are:
• Shares held beneficially by the Executive Director and the
Executive Director’s spouse/life partner.
• Shares held by the Executive Director under the Share
Incentive Plan.
• Executive Directors are normally required to achieve the
minimum shareholding requirement within five years of the date
of appointment.
• The share price to be used for annual calculation of shareholdings
as a percentage of salary is the closing middle market quotation
on the last business day in December.
• No formal sanctions exist for non-compliance.
UK based Executive Directors
• Eligible UK employees may participate in the Sharesave and Share
Incentive Plan, and the Executive Directors will be entitled to
participate on those same terms. Maximum participation levels
for all staff, including Executive Directors are set by relevant
UK legislation.
France based Executive Director
• All employees of Hammerson France are eligible to participate in
a profit share plan, which rewards performance against such
measures as the Committee considers to be appropriate.
• Awards are subject to an annual limit determined by
French legislation.
Notes
1. The Committee considers the performance measures currently applied to the AIP and LTIP to be appropriate measures of performance. It recognises the need to balance
the enhancement of the portfolio (including increasing net rental income) and the efficient management of capital and, over the longer term, should be aligned to the
interests of shareholders.
2. For details regarding remuneration of other Company employees, please refer to the section on Employee Pay and Conditions elsewhere in the Group on page 85.
3. Details of outstanding LTIP and DBSS awards granted to the Executive Directors prior to this Policy coming into force, including awards granted in 2013, and details of the
performance targets are set out on pages 88 to 91 and 96 to 97. All awards granted prior to this Policy coming into force, together with any awards outstanding on the
appointment of an existing employee as a new Executive Director, will continue on their existing terms, including as to the exercise of discretion to amend such awards.
Those Awards granted as nil cost options prior to this Policy coming into force entitle participants to a dividend equivalent for the period from grant until exercise of the
option, rather than only until vesting as is the Company’s future policy.
4. Please refer to the section on Payment for Loss of Office on pages 84 to 85 for details regarding impact on the AIP, the DBSS and the LTIP following a change of control.
5. The Committee will determine components of remuneration for new Executive Directors, as outlined in the section on Recruitment on page 80.
6. For the AIP, DBSS and LTIP, clawback and malus provisions were introduced for awards made from 2012 onwards.
78
78
Hammerson plc Annual Report 2013
SCENARIOS
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£2,563
23%
47%
£1,519
10%
39%
£773
100% 51%
30%
£1,846
24%
47%
£1,085
10%
40%
£541
100% 50%
29%
£1,731
24%
47%
£1,017
10%
40%
£507
100%
50% 29%
£1,491
23%
48%
£877
10%
40%
£436
100% 50%
29%
Fixed
On-Target Maximum
Fixed
On-Target Maximum
Fixed
On-Target Maximum
Fixed On-Target Maximum
Fixed remuneration
Annual variable remuneration
Long-term incentives
ASSUMPTIONS
Fixed
• Consists of base salary, benefits, pension and participation in the UK all-employee share plans.
• Base salary is that to be paid in 2014.
• Benefits are as shown in the Single Figure Remuneration Table for 2013 on page 87 (except for Jean-Philippe Mouton where
the amount he received under the profit sharing plan has been excluded from his 2013 benefits figure for these purposes. See
On-Target and Maximum below).
• Pensions are as shown in the Single Figure Remuneration Table for 2013.
• Jean-Philippe Mouton’s data has been converted at a rate of £1: €1.178.
David Atkins
Peter Cole
Timon Drakesmtih
Jean-Philippe Mouton
Base Salary
£000
Benefits
£000
597
435
408
346
16
16
19
12
Pension
£000
160
90
80
78
Total Fixed
£000
773
541
507
436
On-Target
Based on what the Executive Director would receive if performance was in line with expectation (excluding share price
appreciation and dividends):
• AIP: consists of on-target levels (equal to 50% of bonus maximum).
• LTIP: consists of the threshold level of vesting, being 25% of the face value of the award.
• France profit sharing (Jean-Philippe Mouton only): consists of on-target levels (equal to 50% of the current capped
vesting level of €18,186).
Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• AIP: consists of the maximum bonus (200% of base salary).
• LTIP: assumes maximum vesting of awards (100% of base salary for 2014 only).
• France profit sharing (Jean-Philippe Mouton only): assumes maximum vesting at the current capped vesting level of €18,186.
www.hammerson.com 79
79
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
RECRUITMENT
Approach to recruitment for Executive Directors
Statement of Principles
The Company will pay total remuneration for new Executive Directors that enables the Company to attract appropriately skilled and experienced
individuals, but is not, in the opinion of the Committee, excessive.
The Company will not pay new Executive Directors any inducements to join the Company over and above buy-outs of existing forfeited awards,
as outlined below.
The Company may provide a new Executive Director with global relocation support and/or tax equalisation arrangements as set out in the Policy
on page 77 although, to date, the Company has not had occasion to do so. Additionally, the Company may make a contribution towards legal
fees in connection with agreeing employment terms.
Approach and limits
Annual salary, pension, benefits, annual bonus and long-term incentive arrangements (including performance measures and/or conditions and
maximum award levels) as described in the Policy will be the starting point for the structure of any package. The level of variable remuneration
that may be awarded to a new Executive Director will not exceed the maximum AIP and LTIP limits that can be awarded in line with the principles
set out in the Policy, with the exception of any compensation for variable remuneration forfeited. The limits contained within the Policy for base
salary do not apply to a new Executive Director either on joining or for any subsequent salary review within the period of this Policy, although the
Committee would seek to avoid exceeding those limits in practice.
For a new Executive Director who is an internal appointment, the Company may also continue to honour contractual commitments made prior
to the internal appointment even if those commitments are otherwise inconsistent with the Policy in force when the commitments are satisfied.
Any relevant incentive plan participation may either continue on its original terms or the performance conditions and/or measures may be
amended to reflect the individual’s new role, as the Committee considers appropriate.
Compensation for variable remuneration forfeited by a new Executive Director
The Company may, where appropriate, compensate a new Executive Director for variable remuneration that has been forfeited as a result of
accepting the appointment with the Company. Where the Company compensates a new Executive Director in this way, it will seek to do so
under the terms of the Company’s existing variable remuneration arrangements, but may compensate on terms that are more bespoke than the
existing arrangements where the Committee considers that to be appropriate. In such instances, the Company will disclose a full explanation of
the detail and rationale for such recruitment related compensation. In making such awards the Committee will seek to take into account the
nature (including whether awards are cash or share-based), vesting period and performance measures and/or conditions for any remuneration
forfeited by the individual when leaving a previous employer. Where such awards had outstanding performance or service conditions (which are
not significantly completed) the Company will generally impose equivalent conditions. In exceptional cases, the Committee may relax those
requirements where it considers this to be in the interests of shareholders, for example through a significant discount to the face value of the
replacement awards.
80
80
Hammerson plc Annual Report 2013
SERVICE AGREEMENTS
Service agreements: New Executive Director appointments from 23 April 2014
The Committee’s approach is for new Executive Directors to have service agreements that have regard to market practice at the
date of appointment.
The key elements for service agreements for newly appointed Executive Directors will be:
Notice period
12 months’ notice (both notice to and from the Executive Director).
A longer period of notice from the Company may apply to new appointments for a limited time if the
Committee considers this is appropriate, but would then reduce to no more than 12 months.
Retirement date
There is no default retirement age. Requests for retirement are considered on a case-by-case basis.
At Executive Director level, it is anticipated that 12 months’ notice will be provided.
Post-termination restrictions
To protect the Group’s confidential information for an appropriate period for that information, and to
prevent poaching of its senior workforce and its customer and supplier connections for 12 months
after termination.
Payment in lieu of notice
(PILON)
Employment can be terminated with immediate effect by paying a PILON comprising base pay, pension,
medical insurance and car allowance. A PILON will not apply on termination for gross misconduct, in
which situation no compensation will be due. The Company will have discretion to pay on a phased basis,
subject to mitigation.
Expiry date
There will be no fixed expiry date. The appointment of new Executive Directors will be terminable in
accordance with the notice period.
Change of control and
liquidated damages
The Executive Director will not have a right to liquidated damages.
The terms summarised above will be subject to any local statutory (or collective bargaining) requirements where applicable.
OTHER APPOINTMENTS
Executive Directors are able to accept, with the consent of the Company’s Board of Directors, non-executive appointments outside the Company
(provided that such appointments do not lead to a conflict of interests) on the basis that such external appointments can enhance their
experience and skills and add value to the Company. Any fees received by an Executive Director for such external appointments can be retained
by the individual (except where the Executive Director is appointed as the Company’s representative).
www.hammerson.com 81
81
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
SERVICE AGREEMENTS CONTINUED
Service agreements: Executive Directors in office as at 31 December 2013
The following table sets out a description of any obligations contained in the UK Executive Directors’ service agreements which could give rise to,
or impact upon, remuneration payments or payments for loss of office.
Date of service contract
28 February 2002
11 January 2008
Peter Cole
David Atkins
Timon Drakesmith
18 January 2011
Expiry date
Notice period
Rolling service contracts with no fixed expiry date.
12 months’ notice to the
Executive Director and six
months’ notice from the
Executive Director.
12 months’ notice (both notice to and from the Executive Director).
Base salary/fee
Base salary, subject to annual review (save where the Executive Director is under notice of termination).
There is no obligation to increase base salary following a review.
Incentive plans
Participation in the annual bonus arrangements and the LTIP.
The rules of the annual bonus arrangements and the LTIP that apply on cessation of employment are
set out in the Payment for Loss of Office section of this Policy on page 84. In addition, Timon
Drakesmith’s service agreement provides that he will be treated as a good leaver in respect of the
bonus arrangements in the event of a successful claim for constructive dismissal.
Pension contributions
Entitled to participate in the Scheme, subject to its rules.1
Entitled to have benefits of the Scheme maintained or, on three
months’ notice, to be provided with alternative arrangements
which are actuarially no worse.
Entitled to a Pension Choice2 of
20% of base salary.
Contractual
benefits
Insurance
• Permanent disability insurance.
• Personal accident and life insurance.
Termination
payments
Car
Sick pay
Notice
Payment in lieu
of notice
(PILON)
• Private medical insurance (for the Executive Director and his spouse/life partner).
Each Executive Director receives a car allowance.
Base salary plus contractual benefits for up to 26 weeks in any 12 month period.
Entitled to 12 months’ base pay and contractual benefits.
Employment can be terminated with immediate effect by paying a
lump sum PILON comprising base salary, contractual benefits and a
bonus based on the Executive Director’s average bonus over the
previous three years (but pro-rated to reflect the part of the bonus
year actually worked).
PILON will not apply on termination for gross misconduct.
The Company has discretion to
pay on a phased basis, subject
to mitigation.
Employment can be terminated
with immediate effect by
paying a PILON comprising
base salary, pension, medical
insurance and car allowance.
PILON will not apply on
termination for
gross misconduct.
The Company has discretion to
pay on a phased basis, subject
to mitigation.
Liquidated
damages/
Change of
Control
Entitlement to liquidated damages calculated by reference to PILON if the Company terminates the
employment in breach of the service agreement or if, within 12 months after a change of control, the
Company terminates the employment or the Executive Director terminates the employment because of
a fundamental breach by the Company.
Liquidated damages are subject to deductions for new earnings.
Notes
1. For details of Scheme participation please see Pension disclosures on pages 92-93 for further details.
2.
Pension Choice is explained on page 74.
82
82
Hammerson plc Annual Report 2013
Jean-Philippe Mouton has been employed by Hammerson Asset Management SAS (HAM) since 14 April 2003 as Divisional Director (France).
He is based and works in France and, as a result, it was considered appropriate for him to continue to be employed under a French law governed
employment contract with HAM upon his appointment as Executive Director. His employment contract with HAM means that French law applies
to his terms and conditions of employment as Divisional Director (France). Jean-Philippe Mouton entered into a separate English law letter of
appointment, which governs his directorship of the Company. Jean-Philippe Mouton also holds French corporate offices, including Chairman and
Unique General Director of Hammerson France SAS and General Manager of Hammerson SAS, to which he was appointed by written resolution
of the board of Hammerson France SAS.
As at 1 January 2013, his aggregate “global” gross base salary in respect of his directorship of the Company, his role as Divisional Director (France)
and his French corporate offices is €400,000 per annum. In addition, he is paid a supplementary pension benefit. While, of necessity, to comply
with French law, his termination provisions are more complex than the UK based Executive Directors and split between three distinct parts as
summarised below, the overall financial implications, before the impact of any collective bargaining agreements, are very similar and in
aggregate the outcome would broadly equate to one times his global base salary.
Jean-Philippe Mouton
Date of service agreement and
appointments
• French employment: 25 March 2013.
• UK directorship: 25 March 2013.
• French corporate offices: 9 February 2014
Expiry date
Notice period
Base salary/fee
Rolling service contract (French employment) with no fixed expiry date.
Three months’ notice (both notice to and from the Executive).
• French employment: base salary.
• UK directorship: basic annual fee, subject to annual review.
• French corporate offices: basic annual fee.
Incentive plans
Participation in the annual bonus arrangements and the LTIP.
Pension contributions
Eligibility to benefit from the statutory retirement regimes in force from time to time in France, and the
collective supplementary defined contributions retirement plan, which was put in place at HAM level
(subject to the annual statutory limits on contributions).
Entitlement to receive an annual salary supplement of €80,000 per annum in lieu of any other
supplementary pension benefit.
Contractual
benefits
Termination
payments
Notes
Insurance
Insurance benefits are provided under a French collective scheme applicable to all employees of HAM.
Car
Sick pay
Receives a company car.
Entitlement to receive the minimum benefits set out in the collective bargaining agreement – currently
90% of his global base salary, contractual remuneration and benefits (less statutory sick pay) for a
duration determined by the length of his continuity of service. Thereafter any global base salary,
contractural remuneration and benefits are payable under the health insurance (prévoyance) scheme.1
Notice
• French employment: entitlement to three months’ fixed and variable remuneration.
• UK directorship: entitlement to three months’ fees.
• French corporate offices: no notice.
Severance
payment
Entitlement to a severance payment equal to 25% of average global base salary and contractual
remuneration over the 12 months preceding termination multiplied by years of service (capped at
six months if terminated on grounds of redundancy and if in excess of the legal minimum
termination payment).
Restrictive
covenants
Entitlement to 30% of global base salary for the duration of the 12 month non-competition covenant
(to the extent such covenant is enforced).
1. As a senior executive, Jean-Philippe Mouton may also be entitled to receive enhanced benefits under the prévoyance, which applies on a mandatory basis to executive level
employees pursuant to the terms of the collective bargaining agreement.
www.hammerson.com 83
83
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
PAYMENT FOR LOSS OF OFFICE
Notice periods and contractual rights
The notice periods and contractual rights on termination of each of the Executive Directors, and the key terms that will apply under service
agreements for new recruits, are set out in the section on Service Agreements on pages 81-83.
Annual bonus and long-term incentives
The following table describes the provisions which apply to leavers and the discretions available under the annual bonus arrangements and the
LTIP. Further detail as to the potential exercise of discretion by the Committee is set out below the table.
Arrangements
Leaver provisions
AIP
Under the rules of the AIP, where prior to the end of the performance period an Executive Director gives or
receives notice, or ceases to be employed by the Group, due to death, ill-health, injury or disability, then the
Executive Director remains entitled to a bonus, subject to the performance conditions. Any bonus payable will,
unless the Committee determines otherwise, be time pro-rated.
Where the date of cessation or notice is after the end of the performance period but prior to payment, the
Executive Director will remain entitled to payment if the cessation is for any of the reasons above, or in addition
if the cessation is due to retirement, redundancy or the sale of the company or business for which he works.
Where the cessation or notice does not fall within the above provisions, the bonus shall not be payable, unless
the Committee determines otherwise which it may do at its discretion. Payment will be on the normal payment
date, unless the Committee decides to accelerate payment.
DBSS (deferred share
element of AIP)
Share awards, which represent deferrals of previously earned bonus, lapse on the Executive Director resigning
or giving notice of resignation, provided that the Committee may exercise its discretion to treat the Executive
Director as a good leaver. Share awards will also lapse on the Executive Director being dismissed for cause.
LTIP
In any other case the share award will continue and will vest in full on the normal vesting date, unless the
Committee decides to accelerate vesting.
An Executive Director who ceases to be a Director or employee of the Group by reason of death, retirement,
ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a
good leaver.
Where the cessation is on any other grounds, awards will lapse, provided that the Committee has a discretion
to treat the Executive Director as a good leaver.
Awards held by good leavers will continue and will vest on the normal vesting date, unless the Committee
decides to accelerate vesting.
Awards will remain subject to the performance conditions and, unless the Committee determines otherwise,
be time pro-rated.
In exercising discretion in respect of the annual bonus arrangements or under the LTIP, the Committee will take into account all factors it
determines to be appropriate at the relevant time including, but not limited to the duration of the Executive Directors’ service and its assessment
of the contribution towards to the success of the Company during that period; whether the Executive Director has worked any notice period or
whether a PILON payment is being made; the need to ensure an orderly handover of duties and continuity in the business operations of the
Company and the need to compromise any claims which the Executive Director may have. In exercising any discretion the members of the
Committee will take account of their duties as Directors.
No discretion will be exercisable to treat an Executive Director as a good leaver where he is dismissed summarily for cause or following a formal
disciplinary process.
In respect of the Company’s HMRC-approved, all-employee share plans, the Sharesave and the SIP, and the profit share plan for employees of
Hammerson France, the Executive Directors are subject to the same leaver provisions as all other participants.
84
84
Hammerson plc Annual Report 2013
Other
If the Company terminates an Executive Director’s employment by reason of redundancy, the Company will make a redundancy payment to the
Executive Director in line with his service agreement, any applicable collective bargaining agreement and under statute, and reserves the right to
adjust for unfair dismissal.
In addition, and consistent with market practice, the Company may pay a contribution towards the Executive Director’s legal fees for entering
into a statutory settlement agreement and may pay a contribution of up to £50,000, plus VAT, towards fees for outplacement services as part of
a negotiated settlement.
Payment to a departing Executive Director may be made in respect of accrued benefit and untaken holiday.
In connection with an Executive Director ceasing employment, the Company may, if the Committee believes it necessary and in the best interests
of the Company, enter into appropriate new contractual arrangements with the departing Executive Director including (but not limited to)
settlement, confidentiality, restrictive covenants and/or consultancy arrangements on such terms as it considers appropriate. In such case, the
Company will make appropriate disclosures of such terms.
A departing gift may be provided up to a value of £5,000 (plus related taxes) per Executive Director on termination of office.
Change of control
On a corporate action affecting the Company, the rules of the AIP, DBSS and the LTIP will apply. In summary, on a change of control of the
Company awards under the LTIP will vest, subject to the performance conditions and, unless the Committee determines otherwise, be time
pro-rated. Bonuses may be awarded under the AIP, based on performance to the date of the change of control and, unless the Committee
determines otherwise, be time pro-rated. Awards under the DBSS, which represented deferrals of previously earned bonus, will vest in full. Under
the LTIP, the Committee may also determine that a demerger or similar event shall constitute a corporate action. On a variation of share capital
or similar event, the Committee may make such adjustment to awards under the LTIP and DBSS as the Committee considers appropriate.
EMPLOYEE PAY AND CONDITIONS ELSEWHERE IN THE GROUP
Employee remuneration packages
Remuneration packages for all Company employees may comprise both fixed and variable elements. The more senior the individual, the greater
their general opportunity to impact directly upon Company performance, and therefore the remuneration packages of senior managers and
Executive Directors have a greater emphasis on variable pay than those of more junior employees.
Executive Directors are eligible to participate in the full range of Company benefits offered to employees. In addition, they are eligible for certain
remuneration to which other employees are not eligible. Executive Directors may opt to receive a salary supplement in lieu of pension, which is
not available to other employees. Executive Directors are eligible to participate in an LTIP, whereas senior managers across the Group participate
in other share and incentive plans. Eligible employees, including Executive Directors, may participate in the relevant all-employee share plans
(namely UK plans for employees in the UK and French plans for employees in France).
Considerations in setting Executive Director remuneration
When setting Executive Director remuneration, the Committee takes into account Group-wide pay and employment conditions, along
with market and commercial factors.
The Company strives to pay competitively and to ensure its reward structures recognise superior performance. The Company therefore
undertakes external benchmarking and internal moderation to ensure that, in its view, at all levels the Company’s remuneration approach
reflects the appropriate market rate position. When determining base salary increases for Executive Directors, the Committee reviews the
average Group-wide increase, paying particular attention to the senior manager population.
The Committee reviews performance against the AIP’s performance measures. Personal performance rating impacts bonus calculations for all
employees and these ratings are calibrated internally to ensure consistency. Executive Director performance ratings are calibrated annually by the
Committee. Having reviewed both Company and personal performance, and considering payments being made to shareholders, the Committee
makes a judgement as to what level of bonus payment, if any, is reasonable. The Committee retains discretion to review bonus payments
upwards as well as downwards (subject to the over-riding limits).
In accordance with prevailing commercial practice, the Committee did not consult with employees in preparing the Policy or the
implementation thereof.
www.hammerson.com 85
85
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ REMUNERATION
Policy as relates to Non-Executive Directors
Element
Fees
Approach to determining element of fees and operation
The Chairman’s fee is determined by the Committee and those of the other Non-Executive Directors are determined by
the Board on the recommendation of the Executive Directors.
Fee levels are reviewed periodically taking into account independent advice and the time commitment required of
Non-Executive Directors. Aggregate total fees payable annually to all Non-Executive Directors is subject to the limit as
stated in the Company’s Articles of Association from time to time. The Committee reserves the right to provide additional
fees within the stated limit including for membership of any additional committee the Board may establish.
The fees paid to the Chairman and the fees of the other Non-Executive Directors aim to be competitive with other fully
listed companies which the Committee (in the case of the Chairman) and the Board (in respect of the Non-Executive
Directors) consider to be of equivalent size and complexity but are not set by reference to a prescribed benchmark.
Fees are paid monthly in cash in arrears and are not pensionable.
Additional fees
The Chairman does not receive any additional fee in respect of membership of any of the Committees.
Other benefits
Other Non-Executive Directors may receive additional fees for membership and/or chairmanship of the Remuneration
and Audit Committees. There is also an additional fee for the Senior Independent Director. The level of additional fees is
set to reflect the responsibilities of the role.
There are no other benefits currently available to any of the Non-Executive Directors. Whilst the Company does not
consider that reimbursing travel and accommodation expense (including to the Company’s London office) is a benefit in
the normal sense, should any assessment to tax be made on such reimbursement, the Company reserves the ability to
settle such liability on behalf of the Non-Executive Director.
Non-Executive Directors are not eligible for performance-related bonuses or participation in the Company’s share plans.
While the Committee does not consider it to form part of benefits in the normal sense, Non-Executive Directors can
participate in corporate hospitality (including travel and, where appropriate, with a family member), whether paid for by
the Company or another, within its agreed policies.
A departing gift may be provided up to a value of £5,000 (plus related taxes) per Non-Executive Director on termination
of office.
The Chairman and the Non-Executive Directors do not have service agreements with the Company. Their appointments are governed by letters
of appointment, which are available for inspection on request. The letters of appointment of Non-Executive Directors are reviewed by the
Chairman and the Executive Directors every three years.
Appointments of Non-Executive Directors are for a term of three years, subject to the right of either party to terminate the appointment on not
less than three months’ notice or immediately should a conflict of interest arise. If any Non-Executive Director is not re-elected at the Company’s
Annual General Meeting, the appointment will cease automatically.
On termination of an appointment, a Non-Executive Director is only entitled to such fees as may have accrued to the date of termination,
together with the reimbursement in the normal way of any expenses properly incurred prior to that date.
The dates of the appointments of the Non-Executive Directors in office as at 31 December 2013 are set out below.
Date of original appointment to Board
Commencement date of current term
Unexpired term as at April 2014
Gwyn Burr
Terry Duddy
Jacques Espinasse
Judy Gibbons1
John Hirst2
David Tyler
21 May 2012
3 December 2009
1 May 2007
1 May 2011
1 March 2004
12 January 2013
Anthony Watson
1 February 2006
Notes
21 May 2012
3 December 2012
1 May 2013
1 May 2011
1 May 2013
12 January 2013
1 February 2012
1 year, 1 month
1 year, 8 months
2 years, 1 month
1 month
Retiring at the end of 2014 AGM
1 year, 10 months
10 months
1.
2.
Judy Gibbons’ appointment has been extended for three years with effect from 1 May 2014.
John Hirst’s appointment was renewed for a further period to expire at the end of the 2014 AGM.
SHAREHOLDER VIEWS
The Company welcomes dialogue with its significant shareholders and seeks their views when major changes are being made to remuneration
policy. Recently, following feedback from representatives of shareholders, the accumulation period for dividends on shares held in the LTIP and
DBSS schemes was shortened to cover only the period from the date of grant of the award to vesting for awards from 2014 onwards.
86
86
Hammerson plc Annual Report 2013
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT
2013 ANNUAL
REMUNERATION REPORT
2013: DIRECTORS’ REMUNERATION
The table below demonstrates the remuneration of the Executive Directors for the year ended 31 December 2013, and the comparative figures
for the year ended 31 December 2012. During the year, no payments were made to Executive Directors for expenses other than those incurred
wholly and directly in the course of their employment.
EXECUTIVE DIRECTORS: SINGLE FIGURE REMUNERATION TABLE*
Benefits
Annual bonus
Long Term Incentive
Pension
Note
1, 5 – 8
2, 5 – 8
Salary
2012
£000
585
420
2013
£000
585
420
3, 5 – 8
400
400
4, 5 – 8
340
–
1,745
1,405
David Atkins
Peter Cole
Timon
Drakesmith
Jean-Philippe
Mouton
Total
Notes
2013
£000
2012
£000
16
16
19
28
79
21
17
26
–
64
2013
£000
657
472
2012
£000
1,040
772
449
711
351
–
2013
£000
651
521
–
–
2012
£000
672
538
–
–
1,929
2,523 1,172
1,210
2013
£000
160
90
2012
£000
133
2013
£000
2,069
0 1,519
Total
2012
£000
2,451
1,747
80
80
948
1,217
78
408
–
797
–
213 5,333
5,415
1. Details of David Atkins’ external non-executive appointments are disclosed in the Your Board section on page 62. He does not receive a fee for any of his external appointments.
The pension figures disclosed in the above table incorporate a cash supplement of £97,829 (2012: £69,744) plus the increase in accrued pension over the year (net of inflation)
multiplied by a factor of 20.
2. The pension figures disclosed in the above table represent the increase in accrued pension over the year (net of inflation) multiplied by a factor of 20. For 2012, this produces a nil
answer reflecting that Peter Cole’s accrued pension increased by less than inflation over 2012.
3.
Timon Drakesmith acts as the Company’s representative as a non-executive director of Value Retail PLC. He does not receive a fee for this appointment.
4. For the purposes of consistency and to facilitate comparison against other Executive Directors, Jean-Philippe Mouton’s remuneration has been converted from euros into sterling
in the above table. The exchange rate that has been used is £1: €1.178 Jean-Philippe Mouton was appointed as an Executive Director on 1 January 2013 and so only his 2013
remuneration has been disclosed in the above table.
5.
Benefits include taxable benefits (company car or car allowance and private medical health and for Jean-Philippe Mouton, a seniority allowance and welfare contribution) and
all-employee arrangements (for UK Executive Directors, SIP and Sharesave; for France Executive Director, profit sharing scheme and employer’s contribution to an employee
saving scheme).
6. The Company financial targets together with individual achievement against personal objectives resulted in an average payout to Executive Directors represents approximately
54% (2012:90%) of the maximum opportunity. Details of annual bonus outcomes are on page 89.
7. Full Pension details are on pages 92 and 93.
8. The table below sets out the values attributable to each performance measure for the LTIP for all Executive Directors and, for Timon Drakesmith only for the second tranche of his
Recruitment Share Award that is scheduled to vest in June 2014.
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Notes
TSR1
2012
£000
–
–
n/a
–
2013
£000
–
–
–
–
TPR2
2012
£000
672
538
n/a
–
Absolute NAV3
2013
£000
–
–
–
–
2012
£000
n/a
n/a
n/a
n/a
2013
£000
651
521
–
–
Total
2012
£000
672
538
n/a
n/a
2013
£000
651
521
n/a
–
1. The 2013 figure for TSR is shown for the LTIP award that vested in 2013. The performance period ended on 29 April 2013 (for awards for David Atkins and Peter Cole) and
13 December 2013 (for the award for Jean-Philippe Mouton). There was no LTIP vesting in 2012.
2. The 2013 figure for TPR is an estimated value for the awards that are scheduled to vest in 2014 (where the performance period ended on 31 December 2013 as the relevant
IPD data is not available at 14 February 2014). The estimated vesting value is nil. The 2012 figure for TPR is the actual value for the awards that vested in 2013 (but where the
performance period ended on 31 December 2012).
3. The 2013 figure for Absolute NAV is an actual value for the awards that are scheduled to vest in 2014 (where the performance period ended on 31 December 2013).
Absolute NAV was not a performance measure for the LTIP awards that vested in 2013.
4. For outcomes of the LTIP award that vested in 2013, please see page 90.
www.hammerson.com 87
87
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
BASE SALARY
• During 2013, no salary increases were awarded to Executive Directors who were in office as at 31 December 2012, which was consistent
with the approach for most senior managers across the Group.
• Jean-Philippe Mouton was appointed as an Executive Director with effect from 1 January 2013 and received a salary increase to €400,000
(inclusive of directorship fees as summarised in the section on service agreements on page 83) upon appointment. His salary (and the
other elements of his remuneration) is denominated in euros. When converted, the sterling equivalent will vary with currency movements.
• In respect of 2014, the Committee reviewed benchmark data, the personal contributions of Executive Directors, and Group-wide salary
increases for all employees. The Committee determined the revised base salaries as set out on page 79, all to take effect from 1 April 2014,
and which represent a range of between a 2% and 3.6% increase on 2013 base salaries.
ANNUAL INCENTIVE PLAN
The following table details the performance conditions and composition of financial targets for the AIP.
Maximum award
potential
Proportion of
award paid in cash
Proportion of award
paid in shares
Weighting of performance measures
Composition of financial targets
Year of award
2014 award
(to be paid
in 2015)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
70% for Group financial targets1
2013 award
(to be paid
in 2014)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
2012 award
(paid in 2013)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
30% for personal objectives1
70% for Group financial targets2
30% for personal objectives2
70% for Group financial targets
30% for personal objectives
30% based on adjusted Group
earnings per share
30% based on Total Property Return
relative to IPD3
10% for Group operational targets
30% based on adjusted Group
earnings per share
30% based on Total Property Return
relative to IPD4
10% for Group operational targets2
30% based on adjusted Group
earnings per share
30% based on Total Property Return
relative to IPD4
10% for Group operational targets
Notes
1.
In the opinion of the Board AIP performance conditions and personal objectives for 2014 are commercially sensitive and accordingly are not disclosed. These will be reported
upon with disclosure next year.
2. Details of the AIP outcome for 2013 are on page 89.
3.
IPD is the Investment Property Databank’s aggregate full-year UK Retail Property (70%) and France Retail Property (30%) indexes.
4.
IPD is the Investment Property Databank’s UK Quarterly Property Index, annualised. From 2013, the metric has been adjusted from All Property to Retail Property only, to reflect the
Company’s new retail focus.
88
88
Hammerson plc Annual Report 2013
The following table shows how the Executive Directors’ AIP structure works.
AIP BONUS STRUCTURE
AIP (BONUS) OUTCOME: FINANCIAL TARGETS
Total bonus
Financial targets breakdown
Performance measure
2013: target to
achieve 100% bonus
2013 closing
measurement
Level of
payout
30%
10%
10%
10%
EPS
23.2p
23.1p
TPR relative to IPD
IPD +2.5% IPD +0.2%
60%
Growth in NRI
3.5%
2.1%
95%
0%
30%
60%
60%
Overhead control
£36.6m
£37.8m
42.8%
Personal objectives weighting 30%
Group financial targets weighting 70%:
Group financial element
Group operational element
% Salary: Earnings Per Share
% Salary: TPR relative to IPD Index
% Salary: Growth in NRI
% Salary: Overhead control
The targets for each performance measure to achieve any bonus payout, and the percentage of maximum for the measure that such
performance would achieve were:
• for EPS, 21.1p would pay 10%;
• for TPR, IPD +0.5% would pay 25%;
• for Growth in NRI, no bonus is payable until growth is greater than 1.5% from which point payment is pro-rated;
• for Overhead Control, no bonus is payable until the overheads are less than £38.7m from which point payment is pro-rated.
EXECUTIVE DIRECTORS’ PERSONAL OBJECTIVES
Executive Directors are able to earn up to 30% of the maximum award for achieving personal objectives. All Executive Directors’ personal objectives
were designed to focus not only on the delivery of the Business Plan for 2013, but also on the strategic objectives of creating high-quality
property, maximising income and maintaining capital strength. Targets addressed the areas of investing to upgrade venues; focusing on
sustainability; improving consumer insight and digital expertise; maximising the contribution of our people; strengthening our retailer
relationships; and maintaining a prudent and flexible financial structure. Payout levels for David Atkins, Peter Cole and Timon Drakesmith were 80%,
and for Jean-Philippe Mouton, it was 65%.
The table below provides detail of some of the significant personal objectives for each of the Executive Directors.
David Atkins
Develop and lead the retail strategy of the business to create best in class retail destinations.
Maximise the financial performance of the business and its standing with all key stakeholders. Particular focus
on EPS and TPR growth.
Review of capital and human resources with a particular focus on key developments, multi-channel and
marketing.
Peter Cole
Progress the key developments including Leeds, Brent Cross, Croydon and Bishopsgate Goodsyard.
Effect capital recycling in order to boost portfolio returns.
Complete the sale of the residue of the London Office portfolio.
Timon Drakesmith
Improve the Company’s rating from an equity and capital markets view point.
Maintain a strong focus on cost management, including restructuring many of the Company’s financial
instruments in order to reduce the Company’s interest payments.
Further develop the Company’s relationship with Value Retail.
Jean-Philippe Mouton
Drive operational and financial performance in the French portfolio and target selective accretive acquisitions.
Progress key developments at Marseille and Beauvais.
Review group marketing and accelerate multi-channel proposition.
www.hammerson.com 89
89
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
LONG TERM INCENTIVE PLAN
The Committee reviews the structure of the LTIP awards, as well as the performance measures and conditions attached to the awards, on an
annual basis to ensure that they continue to align closely with the business’ strategic focus. Since 2011, the awards have incorporated a balance
of relative and absolute measures, and the Committee believes that this balance is still appropriate.
The structure of the 2014 awards remains the same as the 2013 awards. In 2013, the relative performance measures were adjusted to reflect the
Company’s change in strategy to focus on the retail property sector: the comparator group for the Total Shareholder Return (TSR) measure now
focuses on major European retail real estate companies and the Total Property Return (TPR) measure compares performance against a retail only
property index.
With regard to the absolute performance measure, Absolute Net Asset Value (Absolute NAV) was replaced in 2013 with Earnings per Share (EPS)
to align further the interests of Executive Directors and shareholders. Details of the LTIP structure are as set out below:
Year of grant
Level of award
Performance
period
Performance
measures
Weighting of
performance
measures
TSR comparator group
2014
100% of salary
Four years
2013
200% of salary
Four years
2012
200% of salary
Four years
TSR
TPR
EPS
TSR
TPR
EPS
TSR
TPR
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
Absolute NAV
33.33%
Altarea, British Land, Capital and Regional, Intu Properties
(previously called Capital Shopping Centres), Corio,
Eurocommercial, IVG, Klepierre, Land Securities, London Metric,
SEGRO, Shaftesbury, Unibail-Rodamco, Wereldhave and the
FTSE 100 Index
As for 2014
British Land, Capital and Regional, Capital Shopping Centres,
Corio, Derwent London, Great Portland Estates, IVG, Klepierre,
Land Securities, Quintain Estates, SEGRO, Shaftesbury, St
Modwen Properties, Unibail-Rodamco and the FTSE 100 Index
20111
300% of salary
50% of award:
three years
50% of award:
four years
TSR
TPR
33.33%
33.33%
Absolute NAV
33.33%
As for 2012
20102
200% of salary
Three years
TSR
TPR
50%
50%
British Land, Capital and Regional, Corio, Derwent London,
Great Portland Estates, IVG, Klepierre, Land Securities, Liberty
International, Quintain Estates, SEGRO, Shaftesbury, St Modwen
Properties, Unibail-Rodamco and the FTSE 100 Index
Notes
1.
In order to smooth the transition from a three-year performance period to a four-year performance period, an enhanced award of 300% of salary was made, with half of the award
subject to a three-year performance period (vesting in 2014) and half subject to a four-year performance period (vesting in 2015). This will ensure there is no vesting ‘gap’ in 2014
and, overall, will result in only a modest reduction in potential awards vesting to Executive Directors in the three-year period from 2014 to 2016 (assuming a consistent level of
performance is achieved).
2. This award vested during 2013, in the amounts as set out below:
TSR1
TPR2
Vesting date
09/05/2013
09/05/2013
19/12/2013
Share price
on vesting
Vesting
level
Number of
shares vested
534.00
534.00
498.55
85.1%
85.1%
00.0%
121,904
97,523
–
Value of award
that vested
£000
651
521
–
Number of
shares vested
Value of award
that vested
£000
125,843
100,674
37,010
672
538
185
Vesting level
87.85%
87.85%
87.85%
David Atkins
Peter Cole
Jean-Philippe Mouton
Notes
1. The performance period for TSR for the awards made to David Atkins and Peter Cole ended on 29 April 2013 and for the award made to Jean-Philippe Mouton ended on
13 December 2013. Therefore, the value of the award that vested under this performance measure is included in the Single Figure Remuneration Table for 2013 on page 87.
2. The performance period for TPR for all awards ended on 31 December 2012. Therefore the value of the award that vested under this performance measure is included in the Single
Figure Remuneration Table for 2012 on page 87 (except for Jean-Philippe Mouton who became an Executive Director on 1 January 2013.
*
The value of the award that vested under this performance measure.
90
90
Hammerson plc Annual Report 2013
THE PERFORMANCE MEASURES
TSR
TPR
Performance is measured over the
three/four-year period from the date of
grant, in comparison with a comparator
group, including some European
real estate companies.
Performance is measured over the three/
four financial years commencing with the
year of grant and in comparison with a
composite index comprising:
• For awards to be granted from 2013
onwards: Investment Property Databank’s
UK Annual Retail Property Index and
France Annual Retail Property Index.
• For awards granted from 2009 to 2012:
Investment Property Databank’s UK Annual
All Property Index and France Annual All
Property Index.
• The relative composition of the indices may
vary with each grant to ensure that it
reflects the Company’s portfolio.
EPS/Absolute NAV
EPS (For awards granted from 2013).
Performance is measured over the four-year
period from1 January in the year of grant,
and is calculated with reference to the
EPRA Best Practices recommendations.
Absolute NAV (For awards granted in 2011
and 2012).
Performance is measured over the three/
four financial years commencing with the
year of grant, and is calculated with
reference to the Best Practices
recommendations of EPRA, being the
adjusted shareholders’ funds divided by
the adjusted number of shares in issue.
THE PERFORMANCE CONDITIONS
TSR
TPR
EPS/Absolute NAV
Vesting under the TSR performance measure
is as follows:
Vesting under the TPR performance measure
is as follows:
Vesting under the EPS performance measure
for the 2013 and 2014 awards is as follows:
Less than TSR of median-ranked
entity in comparator group
Equal to TSR of median-ranked
entity in comparator group
Equal to TSR of upper quartile-
ranked entity in comparator group
0%
25%
100%
Less than Index
Equal to Index
Index + 0.5% (average) p.a.
Index + 1.0% (average) p.a.
Index + 1.5% (average) p.a.
0%
25%
55%
85%
100%
Vesting for intermediate performance
between these levels will be pro-rated on a
linear basis between 25% and 100%.
Vesting for intermediate performance
between median and upper quartile-ranked
entities is on a linear scale between 25% and
100%. For awards prior to 2014, this was
calculated by interpolating by ranking. For
awards made from 2014 onwards
interpolation is between the TSR of the
median and upper quartile-ranked
companies on a straight line basis on
performance of those positions between
25% and 100% .
Vesting under the TSR performance measure
is subject to the Committee’s satisfaction that
the Company’s underlying performance has
been satisfactory in comparison with that of
the FTSE Real Estate sector.
Less than RPI +3.0% p.a. growth
Equal to RPI +3.0% p.a. growth
Equal to or more than RPI +7.0%
p.a. growth
0%
25%
100%
Vesting under the Absolute NAV
performance measure for the 2012 award is
as follows:
Less than RPI +3.0% p.a. growth
Equal to RPI +3.0% p.a. growth
Equal to or more than RPI +7.0%
p.a. growth
0%
25%
100%
Vesting under the Absolute NAV
performance measure for the 2011 award is
as follows:
Less than 7.5% p.a. growth
Equal to 7.5% p.a. growth
Equal to or more than 15.0%
p.a. growth
0%
25%
100%
Vesting for intermediate performance for all
awards will be pro-rated on a linear basis
between 25% and 100%.
www.hammerson.com 91
91
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
PENSION*
In accordance with his service agreement Timon Drakesmith receives a Pension Choice of 20% of base salary. He has elected not to participate in
the Company’s defined contribution pension scheme. Part of his Pension Choice is paid by way of an employer contribution into an approved
SIPP and the balance as a salary supplement subject to Income Tax and National Insurance Contributions (NIC). The amount paid by the Company
for the year ended 31 December 2013 was £80,000.
Jean-Philippe Mouton was appointed as an Executive Director with effect from 1 January 2013. In accordance with his service agreement, he
receives a salary supplement of €80,000 in lieu of any supplementary pension benefit. He participates in a legacy collective supplementary
defined contribution pension scheme operated by his French employing company where the contributions are subject to statutory limits.
For 2013, the benefit he received under this plan was €11,939.
Neither the salary supplements paid to Timon Drakesmith and to Jean-Philippe Mouton, nor the pension benefit received by
Jean-Philippe Mouton, qualify for AIP purposes or entitlements under the LTIP.
David Atkins and Peter Cole currently participate in the Scheme, the Company’s defined benefit pension scheme, as outlined in the table
on page 75 and more fully described in note 6 to the accounts on pages 125 to 127. The normal retirement age is 60; members may retire
from age 55 subject to actuarial reduction and the Company’s consent. Members may draw their pension from age 55 whilst remaining
in employment.
Pension entitlements are based on base salary. The Scheme is non-contributory for members, therefore neither David Atkins nor Peter Cole
have made any contributions during the year.
The Finance Act 2004 resulted in various changes to the taxation of pension benefits, including the introduction of the annual allowance, which
is the maximum amount of an individual’s pension savings that can benefit from tax relief each year.
David Atkins’ pension in the Scheme is based on a 1/60th accrual rate. This is the rate of accrual received by all members of the Scheme who
joined after 1 July 1994. David Atkins elects to restrict the value of the pension benefits he accrues each year to the annual allowance (currently
£50,000). In return, the Company pays David Atkins a cash supplement during his employment in respect of the pension benefits above the
annual allowance that he would otherwise have accrued each year. For the year ended 31 December 2013, David Atkins will receive a cash
supplement of £97,829 (2012: £69,744). This supplement will be subject to Income Tax and NIC and will not qualify for AIP purposes or
entitlements under the LTIP.
Peter Cole joined the Scheme before 1 July 1994. His pension has been accruing at a rate which would provide him with a pension of two-thirds
of final salary at retirement should he continue to work for the Company until age 60. This is equivalent to an accrual rate of approximately 1/45th.
The Company has agreed that if either David Atkins or Peter Cole chooses to cease accruing service in the Scheme and continues to be employed
by the Company, they will be entitled to a Pension Choice of 30% of base salary. Any part of the Pension Choice paid as a salary supplement will
be subject to deductions for Income Tax and NIC and will not qualify for AIP purposes or entitlements under the LTIP.
The following tables set out information on Executive Directors’ entitlements under the scheme.
In the table below, for each Executive Director, the total accrued benefit at 31 December 2013 represents the annual pension that is expected
to be payable on eventual retirement, given the length of service and salary of each Executive Director at 31 December 2013. The increase in
accrued benefit earned during the year represents the increase in this expected pension, including the effect of inflation, when compared with
the position at 31 December 2012. The increase in accrued benefit during the year excluding the effect of inflation over the year is also shown.
David Atkins
Peter Cole
Age at
31 December
2013
Years’ service at
31 December
2013
Normal
retirement age
Total accrued
benefit at
31 December 2013
(£000)
Increase in
accrued benefit
during the year
(£000)
Increase in
accrued benefit
during the year
excluding inflation
(£000)
47
54
15
24
60
60
82
232
4
9
3
5
92
92
Hammerson plc Annual Report 2013
In the table below, the transfer values have been calculated in accordance with regulations 7 to 7E of the Occupational Pensions Schemes
(Transfer Values) Regulations 1996 and subsequent amendments. For each Executive Director, the transfer value of the increase in
accrued benefits under the Listing Rules is the transfer value at 31 December 2013 of the increase in accrued benefits during the period
(excluding inflation).
Transfer values of accrued entitlement represent the value of assets that the Scheme would need to transfer to another pension provider on
transferring the Scheme’s liability in respect of the Executive Director’s pension benefits. They do not represent sums paid or payable to individual
Executive Directors and therefore cannot be added meaningfully to annual remuneration. Instead, they represent a potential liability of the
Scheme. The statutory disclosures are based on required assumptions; from the perspective of the participants, it is generally felt that the
economic benefit of final salary pension promise is higher than indicated above.
David Atkins
Peter Cole
Transfer value at 31 December 2013 of increase in accrued benefit over 2013 (net of inflation)
£000
The Listing Rules
35
66
Whilst the calculation of transfer values under the Companies Act 2006 is not required to be disclosed, it is believed that these are still meaningful
and so details of these calculations are included in the table below:
David Atkins
Peter Cole
Companies Act 2006
Transfer value at
31 December 2012
of total accrued
benefit
£000
Transfer value at
31 December 2013
of total
accrued benefit
£000
Value of increase in
accrued benefit
during the year
£000
834
3,150
920
3,411
86
261
PAYMENTS TO PAST DIRECTORS*
Simon Melliss retired as an Executive Director in June 2011 and retained a pro-rated interest in share awards granted to him prior to his retirement.
During 2013, the LTIP award granted to Simon Melliss on 30 April 2010 vested in the amounts shown in the table below:
LTIP
Award date
30 April 2010
Awards held at
1 January 2013
92,015
Notional dividend
shares accrued
during 2013
1,739
Vested on
9 May 2013
81,067
Lapsed/
forfeited on
9 May 2013
12,687
Share price
on vesting on
9 May 2013
£5.34
PAYMENTS FOR LOSS OF OFFICE
There were no payments for loss of office to any former Directors in 2013.
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below demonstrates the Company’s total employee costs compared with dividends paid. The Company did not buy back any of its
own shares during 2013.
2013
2012
Difference
Notes
1. These figures have been extracted from Note 4 (Administration Expenses) to the accounts on page 124.
2. These figures have been extracted from Note 10 (Dividends) to the accounts on page 131.
Employee
Remuneration1
Shareholder
Distributions2
£44.0m
£44.9m
-2.0%
£130.1m
£120.9m
7.6%
www.hammerson.com 93
93
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
TOTAL SHAREHOLDER RETURN INDEX
31 December 2008 = 100
180
170
160
150
140
130
120
110
100
90
80
31 Dec 2008
31 Dec 2009
31 Dec 2010
31 Dec 2011
31 Dec 2012
31 Dec 2013
Hammerson plc
FTSE EPRA/NAREIT UK
Source: Thomson Reuters
The graph above shows the total shareholder return in respect of the Company’s ordinary shares of 25 pence each for the five years ended
31 December 2013 relative to the return of the FTSE EPRA/NAREIT UK Index which comprises shares of the Company’s peers. The total
shareholder return is rebased to 100 at 31 December 2008. The other points plotted are the values at intervening financial year ends.
REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST FIVE YEARS*
The table below demonstrates the remuneration of the holder of the office of Chief Executive for the last five years for the period from
1 January 2009 to 31 December 2013.
Year
2013
2012
2011
2010
2009 (John Richards)1
2009 (David Atkins)2
Notes
Total
remuneration
£000
Annual bonus
(as % age of
maximum
opportunity)
LTI vesting
(as % age of
maximum
opportunity)
2,068
2,451
1,515
1,594
895
242
56.2%
88.9%
51.7%
68.2%
48.8%
55.0%
43.1%
52.6%
–
–
49.4%
–
1.
John Richards retired as Chief Executive on 30 September 2009.
2. David Atkins became Chief Executive on 1 October 2009, having been an Executive Director since 2007. The figure shown in the above table for 2009 has been
pro-rated accordingly.
REMUNERATION FOR CHIEF EXECUTIVE COMPARED WITH ALL OTHER EMPLOYEES OF THE HAMMERSON GROUP
The table below demonstrates the percentage change from 31 December 2012 to 31 December 2013 in base salary, taxable benefits and bonus
for the Chief Executive compared to all employees of the Hammerson group.
David Atkins
Total Group
Notes
Salary
–
3.00%
Benefits
Annual bonus
0.3%
7.8%
-36.8%
-9.74%
Movement %
Total
-23.4%
-0.4%
1. David Atkins is excluded from the Group calculation.
2. London Group employees who have left the Company have been excluded.
3. The exchange rates used to convert data for French employees is £1: €1.178 for 31 December 2013 and £1:1233 for 31 December 2012.
94
94
Hammerson plc Annual Report 2013
NON-EXECUTIVE DIRECTORS: SINGLE FIGURE REMUNERATION TABLE*
The table below sets out the remuneration of Non-Executive Directors for the year ended 31 December 2013, and the comparative figures for
the year ended 31 December 2012. During the year, no payments were made to Non-Executive Directors for expenses other than those incurred
wholly and directly in the course of their appointments.
Additional responsibilities
David Tyler
Chairman
Remuneration Committee member
Audit Committee member
Remuneration Committee member
Audit Committee member
Gwyn Burr
Terry Duddy
Jacques
Espinasse
Judy Gibbons Audit Committee member
Remuneration Committee member
Audit Committee Chairman
Chairman
Remuneration Committee member
Senior Independent Director
Remuneration Committee Chairman
John Hirst
John Nelson
Anthony
Watson
Notes
Notes
1
2
2013
£000
226
58
58
58
63
68
108
78
717
Fees
2012
£000
–
34
55
55
60
65
270
75
614
2013
£000
Benefits
2012
£000
–
–
–
–
–
–
14
–
14
–
–
–
–
–
–
–
–
–
2013
£000
226
58
58
58
63
68
122
78
731
Total
2012
£000
–
34
55
55
60
65
270
75
614
1. David Tyler was appointed as a Non-Executive Director on 12 January 2013. On the same date, he was appointed as a member of the Remuneration Committee. For the period
from 12 January 2013 to 8 May 2013 inclusive, he received fees of £50,000 (pro-rated) as a Non-Executive Director and £5,000 (pro-rated) as a member of the Remuneration
Committee. When he became Chairman of the Company on 9 May 2013, he received the Chairman’s fee of £320,000 (pro-rated). He does not receive any additional fees for his
membership of the Remuneration Committee.
John Nelson received the Chairman’s fee of £300,000 (pro-rated) for the period from 1 January 2013 to 9 May 2013 inclusive when he retired from the Board. He did not receive any
additional fee for his membership of the Remuneration Committee. On his retirement, John Nelson received a leaving gift to the value of £7,366 (post-tax) prior to a formal policy
on leaving gifts being set. The gross value has been disclosed in the above table.
2.
3. The figures shown in the Single Figure Remuneration Tables for Executive Directors on page 87 and for Non-Executive Directors above have been rounded to the nearest thousand.
The actual aggregate total remuneration emoluments (being salary/fees, benefits and bonus) for all Executive and Non-Executive Directors for 2013 was £4,480,432 (2012: £4,604,126).
FEES PAYABLE TO NON-EXECUTIVE DIRECTORS
In 2013, annual fees payable to the Chairman and Non-Executive Directors were increased as follows:
Chairman1 (John Nelson)
Chairman1 (David Tyler)
Non-Executive Director: base fee2
Notes
Previous fee
£000
Revised fee
£000
Increase
effective from
270
–
50
300
320
55
1 January 2013
9 May 2013
1 July 2013
1. As disclosed last year, prior to 2013, the Chairman’s fee was last increased to £270,000 in April 2010. The Chairman’s fee was reviewed in 2012 and it was determined that the
appropriate fee for the Chairmanship of the Company was £320,000. It was decided that David Tyler would receive this fee when he assumed Chairmanship of the Company in
May 2013. In light of the review, it was determined that John Nelson’s fee should also be increased from £270,000 to £300,000 with effect from 1 January 2013.
2. The Non-Executive Directors’ base fee was last increased in April 2010.
Further fees payable to the Senior Independent Director, and Chairmen and members of the Audit and Remuneration Committees have not
been increased and remain as follows:
Senior Independent Director
Audit Committee chairmanship
Audit Committee membership
Remuneration Committee chairmanship
Remuneration Committee membership
Notes
Additional fee
£000
10
15
5
10
5
1. The Company Chairman does not receive any additional fee in respect of membership of any Committees. No additional fees are payable for Chairmanship or membership of the
Nomination Committee.
2. At the 2013 Annual General Meeting, the limit as stated in the Company’s Articles of Association for aggregate total fees payable annually to all Non-Executive Directors was
increased from £750,000 to £1,000,000.
3. No fee increases are planned for 2014.
www.hammerson.com 95
95
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
EXECUTIVE DIRECTORS’ SHARE PLAN INTERESTS (INCLUDING SHARE OPTIONS)*
The table below sets out the Executive Directors’ interests under the Annual Bonus Scheme (ABS) (which preceded the AIP), the DBSS, the LTIP
and the Sharesave. Awards under the ABS, the DBSS and the Sharesave are not subject to any performance conditions (other than continued
employment as at the vesting date). The LTIP awards are subject to performance conditions, details of which can be found on page 91. The table
also shows details of the second tranche of Timon Drakesmith’s Recruitment Share Award (RSA) which is scheduled to vest in June 2014. The
award has been made on materially the same terms as the 2011 LTIP award.
Awards
held at
1 January
2013
Notional
dividend shares
accrued in
2013
Granted in
2013
Exercised/
vested in
2013
Lapsed/
forfeited in
2013
Awards
held at
31 December
2013
Face value
of awards
granted in
2013 (£000)
Exercise
price
(in pence)
If share
options, date
from which
exercisable
Expiry date
Award date
David Atkins
ABS
DBSS
DBSS
03/03/2011
12/03/2012
11/03/2013
44,324
61,577
–
–
–
80,391
LTIP
LTIP
LTIP
LTIP
LTIP
30/04/2010
281,189
01/04/2011
202,982
01/04/2011
202,982
02/04/2012
285,529
–
–
–
–
02/04/2013
–
240,000
Sharesave
05/04/2012
2,735
Peter Cole
ABS
DBSS
DBSS
03/03/2011
12/03/2012
11/03/2013
39,620
45,277
–
59,665
–
–
–
LTIP
LTIP
LTIP
LTIP
LTIP
30/04/2010
224,951
01/04/2011
145,730
01/04/2011
145,730
02/04/2012
204,995
–
–
–
–
02/04/2013
–
172,307
2,017
2,633
5,314
6,650
6,650
9,354
7,862
–
–
1,483
1,954
4,252
4,774
4,774
6,715
5,644
–
44,324
–
–
–
–
–
–
63,594
83,024
146,618
247,747
38,756
–
–
–
–
–
–
39,620
–
–
–
–
–
–
–
–
–
–
198,197
31,006
–
–
–
–
–
–
–
–
–
–
209,632
209,632
294,883
247,862
962,009
2,735
–
46,760
61,619
108,379
–
150,504
150,504
211,710
177,951
690,669
4,980
416
1,170
309
840
n/a
0.00
0.00
n/a
n/a
n/a
0.00
0.00
n/a
n/a
Mar-14 Mar-19
Mar-15 Mar-20
n/a
n/a
n/a
n/a
n/a
n/a
Apr-16
Apr-19
Apr-17
Apr-20
329.04 May-15
Oct-15
n/a
0.00
0.00
n/a
n/a
n/a
0.00
0.00
n/a
n/a
Mar-14 Mar-19
Mar-15 Mar-20
n/a
n/a
n/a
n/a
n/a
n/a
Apr-16
Apr-19
Apr-17
Apr-20
312.24 May-15
Oct-15
Sharesave
01/04/2010
4,980
–
–
96
96
Hammerson plc Annual Report 2013
Awards
held at
1 January
2013
Notional
dividend shares
accrued in
2013
Granted in
2013
Exercised/
vested in
2013
Lapsed/
forfeited in
2013
Awards
held at
31 December
2013
Face value
of awards
granted in
2013 (£000)
Exercise
price
(in pence)
If share
options, date
from which
exercisable
Expiry date
Award date
Timon Drakesmith
DBSS
DBSS
12/03/2012
11/03/2013
36,163
–
–
54,968
LTIP
LTIP
LTIP
LTIP
06/06/2011
131,532
06/06/2011
131,532
02/04/2012
195,233
–
–
–
02/04/2013
–
164,102
–
–
–
–
RSA
06/06/2011
87,688
Sharesave
05/04/2012
4,558
Jean-Philippe Mouton
ABS
DBSS
DBSS
LTIP
LTIP
LTIP
LTIP
LTIP
03/03/2011
7,139
12/03/2012
14,161
11/03/2013
–
17,513
16/12/2010
01/04/2011
01/04/2011
02/04/2012
02/04/2013
84,259
61,483
61,483
84,426
–
–
–
–
–
138,717
1,185
1,800
4,309
4,309
6,395
5,375
2,873
–
–
–
–
–
–
–
–
–
–
464
573
7,139
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,010
55,571
–
–
–
–
–
–
–
–
0.00
0.00
n/a
n/a
0.00
0.00
Mar-14 Mar-19
Mar-15 Mar-20
n/a
n/a
n/a
n/a
Apr-16
Apr-19
Apr-17
Apr-20
284
400
37,348
56,768
94,116
135,841
135,841
201,628
169,477
642,787
90,561
4,558
329.04 May-17
Oct-17
–
14,625
18,086
32,711
–
61,483
61,483
84,426
138,717
346,109
n/a
0.00
0.00
n/a
n/a
n/a
0.00
0.00
n/a
n/a
Mar-14 Mar-19
Mar-15 Mar-20
n/a
n/a
n/a
n/a
n/a
n/a
Apr-16
Apr-19
Apr-17
Apr-20
91
676
Indicates awards granted in the form of share options.
Notes
1. Face value of DBSS and LTIP awards made in 2013 have been calculated using the grant price in accordance with the respective plan rules:
• For the DBSS, the grant price was £5.173, which was the average share price over the three business days immediately preceding the award date; and
• For the LTIP, the grant price was £4.8750, which was the average share price over the five business days immediately preceding the award date.
2. The threshold vesting percentage for the LTIP awards made in 2013 was 25% for each performance measure. Details of the performance measures can be found on page 91.
3. The aggregate gain of Directors from share awards that vested during 2013 was £3,025,252 (2012: £257,339). The higher gain in 2013 was attributable to the vesting of the LTIP
award that was granted in 2010. Details can be found on page 90.
4. For LTIP awards made to Jean-Philippe Mouton prior to 2014, there is no accrual of notional dividend shares.
The Executive Directors’ interests in ordinary shares of the Company under the SIP as at 31 December 2013 are shown in the table below. The
shares are held under a SIP trust. Jean-Philippe Mouton is not eligible to participate in the SIP.
David Atkins
Peter Cole
Timon Drakesmith
Note
Total SIP shares
1 January 2013
Partnership shares
purchased
Matching shares
awarded
Free shares1
awarded1
Dividend shares
purchased
Total SIP shares
31 December 2013
9,006
10,239
1,795
–
–
297
–
–
594
588
588
588
280
317
74
9,874
11,144
3,348
1. The free shares were awarded on 19 April 2013 at a price of 510.00 pence per share.
www.hammerson.com 97
97
DIRECTORS’ REMUNERATION REPORT: 2013 ANNUAL REMUNERATION REPORT CONTINUED
DIRECTORS’ SHAREHOLDINGS*
The beneficial interests in the ordinary shares of the Company held by Directors who were in office during the year ended 31 December 2013
are set out below. For Executive Directors, the table also shows actual share ownership against guidelines (full details of which can be found on
page 78). The Company does not operate a share ownership policy for Non-Executive Directors, although they are encouraged to acquire a
shareholding in the Company.
Executive Directors’ shareholdings
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Notes
1 January 2013
31 December 2013
14 February 2014
177,938
246,200
175,594
171,474
296,414
247,105
177,147
215,623
296,414
247,105
177,2912
215,623
Guideline on share
ownership as
% of salary
Actual beneficial1
share ownership as1
% of salary1
Guideline met
150%
100%
100%
100%
254%
295%
222%
318%
Yes
Yes
Yes
Yes
1. As at and based on the share price of 502.00p on 31 December 2013. The exchange rate that has been used to convert Jean-Philippe Mouton’s global base salary from euros to
sterling is £1: €1.178.
2. The change in share interests for Timon Drakesmith from 31 December 2013 to 14 February 2014 is due to share purchases/awards made under the SIP on 14 January 2014
(72 shares) and 4 February 2014 (72 shares).
Non-Executive Directors’ shareholdings
David Tyler1
Gwyn Burr
Terry Duddy
Jacques Espinasse
Judy Gibbons
John Hirst
John Nelson2
Anthony Watson
Notes
1 January 2013
31 December 2013
–1
–
40,000
12,235
4,000
13,495
49,000
12,000
20,000
5,000
40,000
12,235
4,000
13,495
49,0002
12,000
1. Shareholding shown as at 12 January 2013, this being the date of David Tyler’s appointment to the Board.
2. Shareholding shown as at 9 May 2013, this being the date of John Nelson’s retirement from the Board.
Between 1 January 2014 and 14 February 2014, the Non-Executive Directors’ beneficial interests above have remained unchanged.
At 31 December 2013, in addition to the interests in shares disclosed in the table above, Anthony Watson also had an interest in £60,000 nominal
6.875% sterling bonds due 2020.
98
98
Hammerson plc Annual Report 2013
THE REMUNERATION COMMITTEE AND ITS COMPOSITION
The Committee’s responsibilities are set out in its terms of reference which are available on request to shareholders and on the Company’s website.
The terms of reference are reviewed annually by the Board, and if necessary updated. They were most recently reviewed in December 2013.
Member
Anthony Watson (Chairman)
Terry Duddy
Judy Gibbons
John Nelson1
David Tyler
Notes
Date of appointment to the Committee
Meetings attended during 2013
01/02/2006
18/02/2011
03/02/2012
21/07/2006
12/01/2013
5/5
5/5
5/5
2/2
5/5
1.
John Nelson retired as a Director immediately following the end of the Annual General Meeting on 9 May 2013.
2. Gwyn Burr was appointed as a member of the Remuneration Committee with effect from 14 February 2014.
The Chairman of the Committee reports on the Committee’s activities to the Board at the meeting immediately following the
Committee meeting.
ADVISORS
The following advisors provided services to the Committee during the year:
• FIT Remuneration Consultants LLP (FIT) (which is a member of the Remuneration Consultants Group, the professional association for
remuneration consultants, and complies with its code of conduct) were appointed by the Committee as advisors on 17 August 2011. Since
then, they have provided advice on reward structures and levels and aspects of the Company’s future remuneration policy. FIT’s terms of
engagement are available on request to shareholders and on the Company’s website. These terms specify that, in order to avoid any conflict of
interest, FIT will only provide advice expressly authorised by or on behalf of the Committee. Where instructions are taken on behalf of the
Committee from employees of the Company, FIT will ensure that the Committee is kept informed of the broad scope of such matters. The fees
paid to FIT during 2013 were £98,852 (excluding VAT) (2012: £62,625 (excluding VAT)). FIT did not provide any other services to the Company
during 2013, and the Committee was therefore satisfied that all advice was objective and independent.
• Herbert Smith Freehills LLP (HSF) provided legal advice to the Company throughout the year which was available to be considered by the
Committee. In particular during 2013, HSF provided advice on aspects of the Company’s future remuneration policy and Jean-Philippe
Mouton’s service agreement.
• The Chief Executive and Group HR Director attend all meetings of the Committee by invitation, except when their own remuneration is being
discussed. The Company Secretary is the Secretary to the Committee. The Chief Executive, Group HR Director and the Company Secretary
provided advice to the Committee on matters relating to remuneration policy and also Company practices.
2013 AGM: STATEMENT OF VOTING
At the Company’s Annual General Meeting held on 9 May 2013, votes cast by proxy at the meeting in respect of the Directors’ Remuneration
Report were as follows:
Resolution
No. of shares
% of shares voted
No. of shares
% of shares voted
% of issued1
share capital1
No. of shares
Votes For
Votes Against
Total votes cast
Votes withheld
To receive and approve the 2012
remuneration report
Notes
525,502,119
98.40%
8,546,335
1.60%
74.92%
5,377,2342
1.
Issued share capital as at 9 May 2013 was 712,855,554 ordinary shares.
2. Represents less than 1% of the issued share capital.
By order of the Board
Sarah Booth / General Counsel and Company Secretary
14 February 2014
www.hammerson.com 99
99
GOVERNANCE REPORT CONTINUED
COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE
This section of the Governance Report details the Company’s compliance with the Principles set out in the UK Corporate Governance Code
(Code) which is available at www.frc.org. This section should be read in conjunction with the Governance Report as a whole as set out on
pages 60 to 99.
Hammerson is fully committed to operating in accordance with the requirements of the Code and has complied in full with the Code
throughout the year ended 31 December 2013.
A.2 Division of Responsibilities
The roles and responsibilities of the Chairman and Chief Executive are
separate. They are clearly defined and documented and approved by
the Board. The Chairman, David Tyler, is responsible for the operation
of the Board. The Chief Executive, David Atkins, is responsible for
leading and managing the business within the authorities delegated
by the Board.
A.3 The Chairman
The Chairman sets the Board’s agenda and ensures that important
matters and in particular strategic issues, receive adequate time and
attention at meetings. The annual Board Strategy Day is dedicated to
considering the future direction of the Company at the start of the
business planning process.
Further details of the 2013 Board Strategy Day can be found on page 65.
At the time he succeeded John Nelson as Chairman at the conclusion
of the 2013 AGM, David Tyler was considered independent. In
accordance with the Code, the continuing test of independence for
the Chairman is not appropriate.
A.4 Non-Executive Directors
Anthony Watson is the Senior Independent Director. He is available to
address shareholders’ concerns on governance and, if necessary, other
issues that have not been resolved through the normal channels of
communication with the Chairman, Chief Executive or Chief Financial
Officer, or in cases when such communications would be
inappropriate. The Senior Independent Director can also deputise for
the Chairman in his absence, act as a sounding board for the Chairman
and be available to advise and counsel all Board colleagues.
The Senior Independent Director chairs an annual meeting of
Executive and Non-Executive Directors without the Chairman present
to appraise the Chairman’s performance and to address any other
matters which the Directors might wish to raise. The outcome of
these discussions is conveyed by the Senior Independent Director
to the Chairman.
The Chairman meets with the Non-Executive Directors as necessary,
but at least twice each year without the Executive Directors present.
During the year there were no unresolved concerns about the running
of the Company.
A. LEADERSHIP
A.1 The Role of the Board
The Board is collectively responsible to the Company’s shareholders for
the long-term success of the Group and the delivery of the long-term
strategic and operational objectives of the Group. The Board sets the
strategic direction, governance and values of the Group and has
ultimate responsibility for the management, direction and
performance of the Group.
The Board operates through a sound risk management and
internal control system, details of which can be found on
pages 55 to 59 and 70 to 71.
The Board has a formal schedule of matters specifically reserved for its
decision which can be accessed at www.hammerson.com.
The Board has regular scheduled meetings throughout the year and
met nine times in 2013. Additional telephone meetings are held as
required. Non-Executive Directors are encouraged to communicate
directly with Executive Directors and senior management between
formal Board meetings. All Directors are expected to attend all
meetings of the Board, and of those Committees on which they serve
and the Annual General Meeting (AGM), and to devote sufficient time
to the Company’s affairs to enable them to fulfil their duties as
Directors. Details of Directors’ attendance at each of the Board and
Committee meetings during 2013 are set out in the table below.
BOARD AND COMMITTEE MEETINGS ATTENDANCE
John Nelson1
David Tyler2
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Gwyn Burr
Terry Duddy
Jacques Espinasse3
Judy Gibbons
John Hirst
Anthony Watson4
Board
3/3
9/9
9/9
9/9
9/9
9/9
9/9
9/9
8/9
9/9
9/9
8/9
Audit Remuneration
1/1
–
5/5
–
–
–
–
–
–
–
–
–
–
4/4
5/5
–
3/4
–
5/5
4/4
–
4/4
5/5
4/4
Nomination
–
2/2
–
–
–
–
–
2/2
–
–
–
2/2
1.
John Nelson retired as a Director and Chairman of the Company, Chairman of the
Nomination Committee and Member of the Remuneration Committee on 9 May 2013.
2. David Tyler was appointed as a Non-Executive Director and a member of the
Remuneration Committee on 12 January 2013. On 9 May 2013 he became Chairman
of the Company and Chairman of the Nomination Committee.
Jacques Espinasse was unable to attend the Board meeting held on 25 July 2013 as
he was attending the Board and Audit Committee meetings of SES in Luxembourg.
3.
4. Anthony Watson was unable to attend the Board meeting held on 28 March 2013
due to family commitments.
100
100
Hammerson plc Annual Report 2013
B. EFFECTIVENESS
B.1 The Composition of the Board
During the year the Board reviewed the overall balance of skills,
experience, independence and knowledge of the Board and
Committee members.
The Board is satisfied that the Non-Executive Directors, each of
whom is independent from management and has no material
or other connection with the Company, are able to exercise
independent judgement.
The Board undertakes an annual review of the independence of its
Non-Executive Directors in accordance with the criteria set out within
the Code.
The Nomination Committee considered the fact that at the 2013
AGM, John Hirst had served on the Board for more than nine years.
In accordance with the Code the Board determined that John Hirst
continued to be independent in judgement, notwithstanding his
length of service. It is planned that John Hirst will retire from the Board
following the 2014 AGM.
There are currently seven Non-Executive Directors (including the
Chairman) and four Executive Directors on the Board.
B.2 Appointments to the Board
The Nomination Committee, chaired by the Chairman, leads the
process for Board appointments and makes recommendations to
the Board. The Committee’s terms of reference can be found at
www.hammerson.com.
Jean-Philippe Mouton was appointed as an Executive Director on
1 January 2013. David Tyler was appointed to the Board on
12 January 2013. He became Chairman of the Board on John Nelson’s
retirement at the 2013 AGM. The process for the appointment
of Jean-Philippe Mouton and David Tyler was overseen by the
Nomination Committee. Details of the recruitment process for
David Tyler were fully disclosed in last year’s Annual Report.
Further details of the work of the Nomination Committee can
be found on page 67.
Disclosures on diversity can be found on pages 25 and 67.
B.3 Commitment
The Board is satisfied that each of the Non-Executive Directors is able
to devote sufficient time to the Company’s business. Non-Executive
Directors are advised on appointment of the time required to fulfil
the role and asked to confirm that they can make the required
commitment. Their commitment to their role is reviewed annually
as part of their annual appraisal. Letters of appointment for the
Non-Executive Directors are available for inspection at the AGM.
Positions held by Non-Executive Directors are set out on
pages 62 and 63.
Executive Directors are encouraged to take non-executive positions
in other companies and organisations. The appointment to such
positions is subject to the approval of the Board which considers,
in particular, the time commitment required.
B.4 Development
All Directors appointed to the Board receive an induction programme
which takes into account their qualifications and experience. All
Directors are kept informed of changes in relevant legislation and
regulations and changing financial and commercial risks, with the
assistance of the Company’s legal advisors and external auditor, where
appropriate. Executive Directors are subject to the Company’s annual
performance development review process through which their
performance against pre-determined objectives is reviewed and their
personal and professional development needs are considered.
Details of the induction programmes for David Tyler, and
Jean-Philippe Mouton can be found on page 65.
Non-Executive Directors’ training and personal development
requirements are reviewed and agreed as part of the annual appraisal
of their performance, conducted by the Chairman. Non-Executive
Directors are encouraged to attend seminars and undertake external
training at the Company’s expense in areas considered appropriate for
their professional development including on issues relevant to the
Board and Committees to which they belong.
B.5 Information and Support
The Directors have access to independent professional advice at the
Company’s expense and to the advice and services of the Company
Secretary who advises the Board on corporate governance matters
and ensures that Board procedures are followed and that the
Company and the Board operate within applicable legislation.
The Company Secretary is also responsible for facilitating Directors’
induction and assisting with identifying and enabling appropriate
training and for Board performance evaluation.
The appointment and removal of the Company Secretary is a matter
requiring approval of the Board.
B.6 Evaluation
In 2013 an external performance evaluation of the Board and its
Committees was facilitated by IDDAS, which had no other connection
with the Company. The evaluation considered the balance of skills of
the Board, diversity, independence, knowledge of the Company and
the Board’s effectiveness.
Further details of the evaluation are provided on page 66.
The Chairman carries out a formal annual performance evaluation
individually with each Non-Executive Director to review whether the
Non-Executive Director continues to contribute effectively and
demonstrates commitment to the role.
The Non-Executive Directors, led by the Senior Independent Director
are responsible for the annual performance evaluation of the
Chairman. The Chairman’s evaluation was carried out in January 2014
and the Board was updated subsequently.
The Directors concluded that following the Board effectiveness
evaluation in 2013 the Board and its Committees operate effectively
and that each Director continues to contribute effectively and
demonstrates commitment to the role.
www.hammerson.com 101
101
GOVERNANCE REPORT CONTINUED
B.7 Election and Re-Election
All Directors are subject to election at the first AGM following their
appointment. It is planned that John Hirst will retire from the Board
at the conclusion of the AGM in April 2014. With that exception, all
Directors are submitting themselves for re-election at the 2014 AGM
and are subject to annual re-election. The Board unanimously
recommends their re-election.
Full biographical details for all Directors are on pages 62 and 63.
C. ACCOUNTABILITY
C.1 Financial and Business Reporting
The Board considers that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s performance, business
model and strategy.
A statement of the Directors responsibilities regarding the financial
statements is set out on page 106. A statement on the status of the
Company as a going concern is set out on page 104.
An explanation of the Group’s strategy and business model together
with relevant risks and performance metrics, is set out on pages 8 to 23.
C.2 Risk Management and Internal Control
The Board has established processes for maintaining sound risk
management and internal control which allow it to assess the
effectiveness of the systems in place within the Group.
Further details are on pages 55 and 70 to 71.
It must be recognised that the Group’s internal controls provide
reasonable and not absolute assurance against material
misstatement or loss.
C.3 Audit Committee and Auditors
Details of the composition of the Audit Committee are set
out on page 68.
The experience and background of members are on
pages 62 and 63.
The Audit Committee assists the Board to fulfil its responsibility in
relation to: ensuring that management has systems and procedures in
place to ensure the integrity of financial information; maintaining an
appropriate relationship with the Group’s external auditor Deloitte LLP
(Deloitte); reviewing the effectiveness, objectivity and independence
of Deloitte including the scope of work and the fees paid to Deloitte;
and reviewing the Company’s internal audit arrangements. Further
details are provided in the terms of reference for the Audit Committee
which are available at www.hammerson.com.
The Audit Committee Chairman regularly reports to the Board details
of the work carried out by the Audit Committee in accordance with its
terms of reference.
The Audit Committee comprises five independent Non-Executive
Directors. During 2013 the Chairman of the Board agreed a trial period
for a revised Board and Committee meeting structure, as described on
page 60. As a result, the Audit Committee now has three scheduled
meetings per year, organised around the Company’s reporting
schedule. During 2013 the Audit Committee met four times.
John Hirst, the Chairman of the Audit Committee, as a Chartered
Accountant, has been determined by the Board to have recent and
relevant financial experience as required by the Code. With effect from
the conclusion of the 2014 AGM John Hirst will be retiring as Chairman
of the Audit Committee and will be succeeded by Jacques Espinasse.
The Chairman of the Board, the Chief Executive, the Chief Financial
Officer and other members of the senior finance management team
together with senior representatives of Deloitte are invited to attend all
or part of meetings as appropriate. In order to fulfil its duties as defined
in its terms of reference, the Audit Committee receives presentations
and reviews reports from the Group’s senior management, consulting
as necessary with Deloitte.
The Audit Committee meets with Deloitte and with the internal
auditor (which undertakes the majority of the Company’s internal
audit reviews), in the absence of management at least once each year.
During the year the appointment of the internal auditor was
re-tendered and Ernst and Young LLP was appointed in place of BDO
LLP on 6 August 2013, as described more fully
on page 70.
DTZ, the external valuer (DTZ) and Deloitte have full access to each
other and the Chairman of the Committee meets with DTZ and
Deloitte as part of the half-year and year end valuations to ensure that
they are each satisfied that there has been a full and open exchange of
information and views.
The Audit Committee has regard to the recommendations of the
Auditing Practices Board on effective communication between audit
committees and external auditors and has concluded that the
relationship with Deloitte meets these recommendations.
Details of how the Audit Committee has discharged its responsibilities
during the year are provided in the Audit Committee Report on page 68.
102
102
Hammerson plc Annual Report 2013
E.2 Constructive use of the Annual General Meeting
The Annual General Meeting will be held on 23 April 2014 and is
an opportunity for shareholders to attend and vote on the
resolutions proposed.
The Notice of Annual General Meeting is available at
www.hammerson.com and is despatched to shareholders who
have requested a hard copy of the documentation from the Company,
together with explanatory notes, at least 20 working days before the
AGM. Separate resolutions are proposed on each substantially
separate issue, including a resolution to approve the Annual Report.
All Directors normally attend the AGM as well as the Company
Secretary. The Chairmen of the Audit, Remuneration and Nomination
Committees are available to answer questions.
The Board welcomes questions from shareholders. They have an
opportunity to raise issues formally at the AGM or informally with
Directors before or after the meeting.
For each resolution, the proxy appointment form provides
shareholders with the option to direct their proxy vote either for or
against the resolution or to withhold their vote. The Company will
ensure that the proxy appointment form and any announcement of
the results of a vote will make it clear that a ‘vote withheld’ is not a vote
in law and will not be counted in the calculation of the proportion of
the votes for and against the resolution. All valid proxy appointment
forms are properly recorded and counted. For each resolution, after
the vote has been taken, information on the number of proxy votes for
and against the resolution and the number of shares in respect of
which the vote was withheld, is given at the AGM and is made
available on the Company’s website.
D. REMUNERATION
D.1 The level and components of Remuneration
The principal responsibilities of the Remuneration Committee are
determining and agreeing with the Board the overall remuneration
principles and framework for the remuneration of the Executive
Directors, the Company Secretary and the other members of the
Group Executive Committee. The terms of reference for the
Committee are available at www.hammerson.com.
Full details of the Committee’s activities during the year are set out in
the Directors’ Remuneration Report on pages 72 to 99.
D.2 Procedure
In determining policy on executive remuneration the Remuneration
Committee takes into account all factors which it deems necessary
including relevant legal and regulatory requirements, the provisions of
the Code and associated guidance. Further details are provided in the
terms of reference for the Remuneration Committee which are available
at www.hammerson.com.
Details of the composition of the Remuneration Committee
are on page 99.
Details of advisors who provided services to the Remuneration
Committee during the year are on page 99.
During 2013 no individual was present when his or her own
remuneration was being determined.
E. RELATIONS WITH SHAREHOLDERS
E.1 Dialogue with Shareholders
The Company actively engages with shareholders.
Throughout the year the Company has undertaken a wide variety of
meetings, presentations and road shows.
The Board receives reports of meetings with institutional shareholders
together with regular market reports and brokers’ reports which
enable the Directors to understand the views of shareholders.
The Board takes account of corporate governance guidelines of
institutional shareholders and their representative bodies such as the
Association of British Insurers and the National Association of
Pension Funds.
Hammerson’s website contains information of interest to both
institutional and private shareholders.
Further details about relations with shareholders can be
found in the Chairman’s Statement on page 5, the Chairman’s
Introduction to the Governance Report on page 61 and in the Directors’
Remuneration Report on page 86.
www.hammerson.com 103
103
DIRECTORS’ REPORT
FINANCIAL AND BUSINESS REPORTING
This Annual Report aims to tell a cohesive story, with the narrative
section giving a consistent presentation and a fair, balanced and
understandable assessment of the Company’s performance, business
model and strategy. A description of the Company’s business model
and strategy is set out in the Chief Executive’s Report on pages 6 and 7.
The Going Concern Statement is presented below, and the Directors’
and Auditor’s responsibility statements are on pages 106 to 109.
The Directors’ Report and other sections of this Annual Report contain
forward-looking statements. The extent to which the Company’s
shareholders or anyone may rely on these forward-looking statements
is set out in the glossary on page 165.
This Directors’ Report encompasses the Strategic Report on pages
1 to 59 and the Governance Report on pages 60 to 103.
DIVIDENDS
The Directors recommend a final dividend of 10.8 pence per share
which, together with the interim dividend paid on 3 October 2013, will
make a total dividend for the year of 19.1 pence (2012: 17.7 pence).
It is intended that the final dividend will be paid on 25 April 2014 to
shareholders on the register at the close of business on 14 March 2014.
It is intended that 3.6 pence per share will be paid as a Property
Income Distribution, net of withholding tax where appropriate, and
the remainder of 7.2 pence per share paid as a normal dividend.
Details of the Company’s dividends can be found on the Company’s
website: www.hammerson.com.
FIXED ASSETS AND CAPITALISED INTEREST
Changes in tangible fixed assets and capitalised interest during the
year are set out in notes 12 and 13 to the accounts on pages 133 to
135, whilst details of Hammerson’s property portfolio are provided on
pages 158 to 163.
SHARE CAPITAL
Changes to the Company’s share capital during the year are set out in
note 24 to the accounts on pages 149 to 151.
On 31 December 2013 there were 712,876,870 ordinary shares of
25 pence in issue each with one vote. There are no shares held in
treasury. The total number of voting rights in Hammerson plc at
31 December 2013 was therefore 712,876,870.
There are no specific restrictions on the size of a holding nor on the
transfer of shares except UK REIT restrictions. No person has any special
rights of control over the Company’s share capital and all issued shares
are fully paid.
PURCHASE OF OWN SHARES
The Company was granted authority at the Annual General Meeting
(AGM) in 2013 to purchase up to 10% of its issued ordinary share
capital. That authority will expire at the conclusion of the 2014 AGM at
which a resolution will be proposed for its renewal.
104
104
Hammerson plc Annual Report 2013
GOING CONCERN
The current economic conditions have created a number of
uncertainties as set out on pages 55 to 59. The Group’s business
activities, together with the factors likely to affect its future development,
performance and position are set out on pages 32 to 43. The financial
position of the Group, its liquidity position and borrowing facilities are
described on pages 49 and 50 and in notes 18 to 20 to the accounts.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about future
trading performance. As part of the review, the Directors considered
the Group’s cash balances, its debt maturity profile, including undrawn
facilities, and the long-term nature of tenant leases. After making
enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
financial statements.
PROVISIONS ON CHANGE OF CONTROL
Five of the six outstanding bonds issued by the Company contain
covenants specifying that, if the Company’s credit rating is
downgraded to below investment grade due to a change of control,
and the rating remains below investment grade for a period of six
months thereafter, the bondholders may require repayment at par.
In addition, under the Company’s credit facilities, the lending banks
may require repayment of outstanding amounts within 30 days of any
change of control.
EMPLOYEES
It is the Group’s policy to give full consideration to suitable applications
for employment from disabled persons. Disabled employees are
eligible to participate in all career development opportunities available
to employees. Opportunities also exist for employees of the Group
who become disabled to continue in their employment or to be
retrained for other positions in the Group.
The Company places considerable importance on good internal
communications with its employees and invests time in consulting on
a wide range of matters which affect them as employees including:
reward practices, work/life balance initiatives, corporate responsibility
activities and approaches to internal communications. Consultation
predominantly takes the form of facilitated discussion groups and
employee involvement on relevant committees. The Company also
provides very regular internal updates on business news and
performance through formal and informal meetings, intranet
announcements and special employee briefings and question and
answer sessions on the half-year and annual results.
PENSION SCHEME
The Company’s defined benefit pension scheme was closed to new
entrants on 31 December 2002 following which a Group personal
pension plan was established for new employees.
The defined benefit pension scheme, The Hammerson Group
Management Limited Pension and Life Assurance Scheme (Scheme),
is administered by two corporate trustees, one of which is an
independent trustee. The other company, Hammerson Pension
Scheme Trustees Limited (HPST) is a subsidiary of the Company.
The chairman of HPST, David Edmonds, will be stepping down on
27 April 2014 and will be succeeded by John Hirst. The Scheme’s funds
are invested and managed independently of the Company.
SUBSTANTIAL SHAREHOLDERS
At 31 December 2013 the following interests in voting rights over the
issued share capital of the Company had been notified:
Ordinary shares
of 25p each
At 31 December
2013 percentage of
total voting rights
APG Algemene Pensioen Groep N.V.
68,227,094
BlackRock Inc.
Norges Bank Investment
Management
Legal & General Investment
Management Ltd
50,223,602
28,351,479
25,717,804
9.57%
7.05%
3.98%
3.61%
On 16 January 2014 Norges Bank Investment Management disclosed
a decrease in shareholding to 2.62% (18,703,515 shares). No other
changes to the above have been disclosed to the Company in
accordance with Rule 5 of the Disclosure and Transparency Rules
between 31 December 2013 and 14 February 2014.
DIRECTORS
The biographical details of the Directors are shown on pages
62 and 63. David Tyler was appointed as a Non-Executive Director
on 12 January 2013 and became Chairman on 9 May 2013 following
John Nelson’s retirement. John Hirst will be retiring as a Non-Executive
Director following the AGM on 23 April 2014.
In accordance with the UK Corporate Governance Code, all of the
Directors (other than John Hirst) will retire and offer themselves for
re-election at the forthcoming AGM.
David Atkins, Peter Cole, Timon Drakesmith and Jean-Philippe Mouton
have service agreements with the Company.
The appointments of the Non-Executive Directors, including the
Chairman, are governed by letters of appointment. Details of the
service agreements and letters of appointment are set out in the
Directors’ Remuneration Report on pages 81, 82 and 86. Details of the
Directors’ interests in the share capital of the Company are set out in
the Directors’ Remuneration Report on page 98.
DIRECTORS’ REMUNERATION REPORT
Details of the remuneration of each of the Directors are set out in the
Directors’ Remuneration Report on pages 72 to 99.
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
The Company maintains directors’ and officers’ liability insurance,
which is reviewed annually. The Company’s directors and officers are
adequately insured in line with the guidelines produced by the
Institute of Chartered Secretaries and Administrators.
FINANCIAL INSTRUMENTS
Details of the financial instruments used by the Group and the
Company are set out in note 21 to the accounts on pages 143 to 149.
EXTERNAL AUDITOR
Deloitte LLP (Deloitte) is willing to be re-appointed as the external
auditor to the Company. Their re-appointment has been considered
and recommended by the Audit Committee to the Board and a
resolution concerning Deloitte’s re-appointment will be proposed
at the AGM.
DISCLOSURE OF INFORMATION TO THE
EXTERNAL AUDITOR
Each of the persons who is a Director at the date of approval of the
Directors’ Report has confirmed that:
• So far as she or he is aware, there is no relevant audit information
of which the Company’s external auditor is unaware; and
• She or he has taken all the steps that she or he ought to have taken
as a Director in order to make herself or himself aware of any
relevant audit information and to establish that the Company’s
external auditor is aware of that information.
This confirmation has been given and should be interpreted in
accordance with the provisions of section 418(2) of the
Companies Act 2006.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 23 April 2014 at
10 Grosvenor Street, London, W1K 4BJ at 11.00 am. The Notice of
Meeting and the explanatory notes will be available separately on the
Company’s website and paper copies will be posted to shareholders
who have elected to receive the documents in that format.
GREENHOUSE GAS (GHG) EMISSIONS REPORTING
In accordance with Schedule 7 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008,
information regarding the Company’s greenhouse gas emissions can
be found on pages 28 and 29.
By Order of the Board
Sarah Booth / General Counsel and Company Secretary
14 February 2014
www.hammerson.com 105
105
FINANCIAL STATEMENTS
DIRECTORS’ RESPONSIBILITIES STATEMENT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC
DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
PREPARATION OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS Regulation and have elected
to prepare the parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company
law the directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
• The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and
• The Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance,
business model and strategy.
In preparing the parent company financial statements, the Directors
are required to:
By order of the Board
David Atkins / Chief Executive Officer
14 February 2014
Timon Drakesmith / Chief Financial Officer
14 February 2014
• Select suitable accounting policies and then apply them consistently;
• Make judgments and accounting estimates that are reasonable
and prudent;
• State whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained
in the financial statements; and
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
In preparing the group financial statements, International Accounting
Standard 1 requires that Directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• Provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance; and
• Make an assessment of the Company's ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
OPINION ON FINANCIAL STATEMENTS OF
HAMMERSON PLC
In our opinion:
notes A to L for the parent company financial statements. The financial
reporting framework that has been applied in the preparation of the
Group financial statements is applicable law and IFRSs as adopted by
the European Union. The financial reporting framework that has been
• The financial statements give a true and fair view of the state of the
applied in the preparation of the parent company financial statements
Group’s and of the parent company’s affairs as at 31 December 2013
is applicable law and United Kingdom Accounting Standards (United
and of the Group’s profit for the year then ended;
Kingdom Generally Accepted Accounting Practice).
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
GOING CONCERN
as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income,
As required by the Listing Rules we have reviewed the Directors’
Responsibilities Statement contained on page 106 that the Group
is a going concern. We confirm that:
• we have concluded that the Directors’ use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate; and
• we have not identified material uncertainties related to events or
conditions that may cast significant doubt on the Group’s ability to
continue as a going concern.
the Consolidated and Company Balance Sheets, the Consolidated
However, because not all future events or conditions can be predicted,
Statement of Changes in Equity, the Consolidated Cash Flow
this statement is not a guarantee as to the Group’s ability to continue
Statement, the Analysis of Movement in Net Debt and the related
as a going concern.
notes 1 to 28 for the consolidated financial statements and the related
OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team:
Risk
How the scope of our audit responded to the risk
• Hammerson plc (“Hammerson”) owns a portfolio of retail property
• We assessed management’s process for reviewing and challenging the work of the external
assets. The valuation of the portfolio (including a number of
valuer and development appraisals;
development properties) is a significant judgement area and is
underpinned by a number of assumptions.
• We met with the external valuers of the portfolio to discuss and challenge the valuation
process, performance of the portfolio and significant assumptions and critical judgement
• The Group uses professionally qualified external valuers to fair
areas, including future lease income and yields;
value the Group’s portfolio at six-monthly intervals. The portfolio
(excluding development properties) is valued by the investment
method of valuation with development properties valued by the
same methodology with a deduction for all costs necessary to
complete the development together with an allowance for
remaining risk.
• We assessed the competence, independence and integrity of the external valuer; and
• We performed audit procedures to assess the integrity of information provided to the
independent valuer including agreement on a sample basis back to actual leases.
Please see note 12 of the Financial Statements.
• Hammerson plc has undertaken a number of acquisitions and
• We challenged the fair value of consideration by reference to acquisition or disposal
disposals during the year including acquiring an additional share in
agreements and other external evidence;
the Bullring shopping centre. The Group also completed the
disposal of its office property portfolio.
• We considered the date at which the transactions completed based on the acquisition
or disposal agreements and considered the impact of these transactions on
revenue recognition;
• We considered the adequacy of the disclosure of the transactions in the financial statements.
• Hammerson’s interest in Value Retail is equity accounted as an
• We planned the scope of the audit and instructed the auditors of Value Retail accordingly.
associate. There is a risk in relation to the valuation attributed to
We met with the auditors, challenged the audit work undertaken and reviewed the reporting
the Company’s investment in Value Retail.
received, requesting additional information as necessary;
• We audited equity and debt injections made by Hammerson during the year via agreement
to original documentation;
• We met with Value Retail management and the external valuers of the Value Retail property
portfolio to discuss and challenge the valuation assumptions and critical judgement areas.
We also challenged the judgements taken by Hammerson.
Please see note 14 of the Financial Statements.
The Audit Committee’s consideration of these risks is set out on page 69. Our audit procedures relating to these matters were designed in the context
of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial
statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.
106106
106 Hammerson plc Annual Report 2013
www.hammerson.com
107
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
DIRECTORS’ RESPONSIBILITIES STATEMENT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC
DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
RESPONSIBILITY STATEMENT
PREPARATION OF THE FINANCIAL STATEMENTS
We confirm that to the best of our knowledge:
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS Regulation and have elected
to prepare the parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company
law the directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
In preparing the parent company financial statements, the Directors
are required to:
and prudent;
• Select suitable accounting policies and then apply them consistently;
• Make judgments and accounting estimates that are reasonable
• State whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained
• The financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
• The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and
• The Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance,
business model and strategy.
By order of the Board
David Atkins / Chief Executive Officer
14 February 2014
in the financial statements; and
Timon Drakesmith / Chief Financial Officer
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
14 February 2014
continue in business.
In preparing the group financial statements, International Accounting
Standard 1 requires that Directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• Provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance; and
• Make an assessment of the Company's ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
OPINION ON FINANCIAL STATEMENTS OF
HAMMERSON PLC
In our opinion:
• The financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 December 2013
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income,
the Consolidated and Company Balance Sheets, the Consolidated
Statement of Changes in Equity, the Consolidated Cash Flow
Statement, the Analysis of Movement in Net Debt and the related
notes 1 to 28 for the consolidated financial statements and the related
notes A to L for the parent company financial statements. The financial
reporting framework that has been applied in the preparation of the
Group financial statements is applicable law and IFRSs as adopted by
the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial statements
is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
GOING CONCERN
As required by the Listing Rules we have reviewed the Directors’
Responsibilities Statement contained on page 106 that the Group
is a going concern. We confirm that:
• we have concluded that the Directors’ use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate; and
• we have not identified material uncertainties related to events or
conditions that may cast significant doubt on the Group’s ability to
continue as a going concern.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team:
Risk
How the scope of our audit responded to the risk
• Hammerson plc (“Hammerson”) owns a portfolio of retail property
• We assessed management’s process for reviewing and challenging the work of the external
assets. The valuation of the portfolio (including a number of
development properties) is a significant judgement area and is
underpinned by a number of assumptions.
• The Group uses professionally qualified external valuers to fair
value the Group’s portfolio at six-monthly intervals. The portfolio
(excluding development properties) is valued by the investment
method of valuation with development properties valued by the
same methodology with a deduction for all costs necessary to
complete the development together with an allowance for
remaining risk.
valuer and development appraisals;
• We met with the external valuers of the portfolio to discuss and challenge the valuation
process, performance of the portfolio and significant assumptions and critical judgement
areas, including future lease income and yields;
• We assessed the competence, independence and integrity of the external valuer; and
• We performed audit procedures to assess the integrity of information provided to the
independent valuer including agreement on a sample basis back to actual leases.
Please see note 12 of the Financial Statements.
• Hammerson plc has undertaken a number of acquisitions and
• We challenged the fair value of consideration by reference to acquisition or disposal
disposals during the year including acquiring an additional share in
the Bullring shopping centre. The Group also completed the
disposal of its office property portfolio.
agreements and other external evidence;
• We considered the date at which the transactions completed based on the acquisition
or disposal agreements and considered the impact of these transactions on
revenue recognition;
• We considered the adequacy of the disclosure of the transactions in the financial statements.
• Hammerson’s interest in Value Retail is equity accounted as an
associate. There is a risk in relation to the valuation attributed to
the Company’s investment in Value Retail.
• We planned the scope of the audit and instructed the auditors of Value Retail accordingly.
We met with the auditors, challenged the audit work undertaken and reviewed the reporting
received, requesting additional information as necessary;
• We audited equity and debt injections made by Hammerson during the year via agreement
to original documentation;
• We met with Value Retail management and the external valuers of the Value Retail property
portfolio to discuss and challenge the valuation assumptions and critical judgement areas.
We also challenged the judgements taken by Hammerson.
Please see note 14 of the Financial Statements.
The Audit Committee’s consideration of these risks is set out on page 69. Our audit procedures relating to these matters were designed in the context
of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial
statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.
106 Hammerson plc Annual Report 2013
www.hammerson.com
107107
107
www.hammerson.com
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC CONTINUED
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality for the Group to be £30 million which
is below 1% of shareholders equity.
In addition to net assets, we consider EPRA Adjusted Profit Before Tax
as a critical performance measure for the Group and we applied a
lower threshold of £6.5 million based on 5% of that measure for testing
of all balances impacting that measure, primarily being income
statement balances with the exception of fair value movements
on investment and development property.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.6 million, as well as
differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified when assessing the overall
presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit scope focused primarily on the audit work of three
significant components being the UK, France and Value Retail. These
three components together comprise c99% of total group net assets.
The UK and French components were subject to a full scope audit,
while Value Retail is subject to an audit of specified account balances.
Our audit work at each of these components was executed at levels
of materiality applicable to each component, which in all instances
was lower than Group materiality. The group audit team conduct a
programme of planned visits designed so that the Senior Statutory
Auditor visits each of the key components at least once a year, in
order that appropriate oversight and guidance is provided to
component auditors.
We have obtained an understanding of the Group’s system of internal
controls and undertaken a combination of procedures, all of which are
designed to target the Group’s identified risks of material misstatement
in the most effective manner possible.
OPINION ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not received all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been
made or the part of the Directors’ Remuneration Report to be audited
is not in agreement with the accounting records and returns. We have
nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of the
Corporate Governance Statement relating to the Company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
OUR DUTY TO READ OTHER INFORMATION IN THE
ANNUAL REPORT
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in the
Annual Report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group acquired in the course of
performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified
any inconsistencies between our knowledge acquired during the audit
and the Directors’ statement that they consider the Annual Report is
fair, balanced and understandable and whether the Annual Report
appropriately discloses those matters that we communicated to the
Audit Committee which we consider should have been disclosed.
We confirm that we have not identified any such inconsistencies
or misleading statements.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND
AUDITOR
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we read
all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.
Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
14 February 2014
108108
108 Hammerson plc Annual Report 2013
www.hammerson.com
109
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC CONTINUED
OUR APPLICATION OF MATERIALITY
OPINION ON OTHER MATTERS PRESCRIBED BY THE
differences below that threshold that, in our view, warranted reporting
require for our audit; or
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality for the Group to be £30 million which
is below 1% of shareholders equity.
In addition to net assets, we consider EPRA Adjusted Profit Before Tax
as a critical performance measure for the Group and we applied a
lower threshold of £6.5 million based on 5% of that measure for testing
of all balances impacting that measure, primarily being income
statement balances with the exception of fair value movements
on investment and development property.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.6 million, as well as
on qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified when assessing the overall
presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit scope focused primarily on the audit work of three
significant components being the UK, France and Value Retail. These
three components together comprise c99% of total group net assets.
The UK and French components were subject to a full scope audit,
while Value Retail is subject to an audit of specified account balances.
Our audit work at each of these components was executed at levels
of materiality applicable to each component, which in all instances
was lower than Group materiality. The group audit team conduct a
programme of planned visits designed so that the Senior Statutory
Auditor visits each of the key components at least once a year, in
order that appropriate oversight and guidance is provided to
component auditors.
We have obtained an understanding of the Group’s system of internal
controls and undertaken a combination of procedures, all of which are
designed to target the Group’s identified risks of material misstatement
in the most effective manner possible.
COMPANIES ACT 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
our opinion:
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
• we have not received all the information and explanations we
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been
made or the part of the Directors’ Remuneration Report to be audited
is not in agreement with the accounting records and returns. We have
nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of the
Corporate Governance Statement relating to the Company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
OUR DUTY TO READ OTHER INFORMATION IN THE
ANNUAL REPORT
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in the
• materially inconsistent with the information in the audited financial
Annual Report is:
statements; or
performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified
any inconsistencies between our knowledge acquired during the audit
and the Directors’ statement that they consider the Annual Report is
fair, balanced and understandable and whether the Annual Report
appropriately discloses those matters that we communicated to the
Audit Committee which we consider should have been disclosed.
We confirm that we have not identified any such inconsistencies
or misleading statements.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND
AUDITOR
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we read
all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.
Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
• apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group acquired in the course of
14 February 2014
108 Hammerson plc Annual Report 2013
www.hammerson.com
109109
109
www.hammerson.com
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2013
Continuing operations
Gross rental income
Operating profit before other net gains/(losses) and share of results of associate
Other net gains/(losses)
Share of results of associate
Operating profit
Finance costs
Bond redemption – premium and costs
Floating rate reset bonds redemption – premium and costs
Change in fair value of derivatives
Finance income
Net finance costs
Profit before tax
Tax charge
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Attributable to:
Equity shareholders
Non-controlling interests*
Profit for the year
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Total
EPRA earnings per share
* Non-controlling interests relate to continuing operations.
Notes
2
2
2
14A
2
7
8A
9B
11A
11A
2013
£m
321.2
240.7
93.0
101.5
435.2
(97.0)
(3.9)
–
(14.5)
6.5
(108.9)
326.3
(0.7)
325.6
14.9
340.5
337.4
3.1
340.5
45.3p
2.1p
47.4p
2012
£m
297.6
215.9
(36.3)
47.5
227.1
(94.0)
(13.8)
(41.7)
9.4
6.5
(133.6)
93.5
(0.4)
93.1
48.7
141.8
138.4
3.4
141.8
12.6p
6.8p
19.4p
23.1p
20.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
Continuing and discontinued operations
Foreign exchange translation differences*
Net (loss)/gain on hedging activities*
Revaluation gains on owner-occupied property
Revaluation gains on investment in associate
Revaluation gains on other investments
Actuarial losses on pension schemes
Net gain recognised directly in equity
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Total comprehensive income for the year
Attributable to:
Equity shareholders
Non-controlling interests
Total comprehensive income for the year
2013
£m
32.2
(31.9)
3.2
2.9
–
(2.4)
4.0
325.6
14.9
340.5
344.5
339.6
4.9
344.5
2012
£m
(43.6)
27.3
0.1
–
74.4
(0.7)
57.5
93.1
48.7
141.8
199.3
198.1
1.2
199.3
* Foreign exchange translation differences and net losses or gains on hedging activities would be recycled through the income statement in the event that foreign operations were disposed.
110110
110 Hammerson plc Annual Report 2013
www.hammerson.com
111
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2013
Operating profit before other net gains/(losses) and share of results of associate
Finance costs
Bond redemption – premium and costs
Floating rate reset bonds redemption – premium and costs
Change in fair value of derivatives
Continuing operations
Gross rental income
Other net gains/(losses)
Share of results of associate
Operating profit
Finance income
Net finance costs
Profit before tax
Tax charge
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Attributable to:
Equity shareholders
Non-controlling interests*
Profit for the year
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Total
EPRA earnings per share
2013
£m
321.2
240.7
93.0
101.5
435.2
(97.0)
(3.9)
–
(14.5)
6.5
(108.9)
326.3
(0.7)
325.6
14.9
340.5
337.4
3.1
340.5
45.3p
2.1p
47.4p
2012
£m
297.6
215.9
(36.3)
47.5
227.1
(94.0)
(13.8)
(41.7)
9.4
6.5
(133.6)
93.5
(0.4)
93.1
48.7
141.8
138.4
3.4
141.8
12.6p
6.8p
19.4p
Notes
2
2
2
2
14A
7
8A
9B
11A
11A
* Non-controlling interests relate to continuing operations.
23.1p
20.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
Continuing and discontinued operations
Foreign exchange translation differences*
Net (loss)/gain on hedging activities*
Revaluation gains on owner-occupied property
Revaluation gains on investment in associate
Revaluation gains on other investments
Actuarial losses on pension schemes
Net gain recognised directly in equity
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Total comprehensive income for the year
Attributable to:
Equity shareholders
Non-controlling interests
Total comprehensive income for the year
2013
£m
32.2
(31.9)
3.2
2.9
–
(2.4)
4.0
325.6
14.9
340.5
344.5
339.6
4.9
344.5
2012
£m
(43.6)
27.3
0.1
–
74.4
(0.7)
57.5
93.1
48.7
141.8
199.3
198.1
1.2
199.3
* Foreign exchange translation differences and net losses or gains on hedging activities would be recycled through the income statement in the event that foreign operations were disposed.
110 Hammerson plc Annual Report 2013
www.hammerson.com
111111
111
www.hammerson.com
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
As at 31 December 2013
Non-current assets
Investment and development properties
Interests in leasehold properties
Plant, equipment and owner-occupied property
Investment in associate
Other investments
Receivables
Current assets
Assets held for sale
Receivables
Cash and deposits
Total assets
Current liabilities
Liabilities associated with assets held for sale
Payables
Tax
Borrowings
Non-current liabilities
Borrowings
Deferred tax
Obligations under finance leases
Payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Capital redemption reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Equity shareholders’ funds
Non-controlling interests*
Total equity
Diluted net asset value per share
EPRA net asset value per share
Notes
12
13
14B
16
9D
17
18
9D
19
8C
20A
20A
8C
22
23
24
25
11B
11B
2013
£m
5,931.2
44.9
39.5
545.4
1.4
72.3
6,634.7
–
113.1
56.7
169.8
6,804.5
–
240.5
1.0
246.2
487.7
2,062.8
0.4
44.7
72.3
2,180.2
2,667.9
4,136.6
178.2
1,222.4
370.1
(311.3)
7.2
10.0
21.2
2,567.0
(4.9)
4,059.9
76.7
4,136.6
£5.70
£5.73
2012
£m
5,458.4
42.3
36.7
428.4
1.4
66.6
6,033.8
212.6
102.7
57.1
372.4
6,406.2
90.4
243.7
1.4
158.0
493.5
1,880.1
0.5
42.3
64.1
1,987.0
2,480.5
3,925.7
178.2
1,222.3
339.7
(279.4)
7.2
10.9
18.0
2,360.3
(6.0)
3,851.2
74.5
3,925.7
£5.41
£5.42
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
Share
Share
Translation
Hedging
redemption
Other
Revaluation
capital
premium
reserve
reserve
reserve
reserves
£m
£m
£m
£m
reserve
£m
Retained
earnings
£m
Investment
Equity
Non-
in own
shareholders’
controlling
shares
£m
funds
£m
interests
£m
Total
equity
£m
Capital
£m
7.2
Balance at 1 January 2013 178.2 1,222.3
339.7
(279.4)
18.0 2,360.3
(6.0) 3,851.2
74.5 3,925.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Issue of shares
Share-based employee
remuneration
Cost of shares awarded
to employees
Transfer on award of own
shares to employees
Proceeds on award of own
shares to employees
Purchase of own shares
Dividends
Foreign exchange
translation differences
Net loss on hedging
activities
Revaluation gains on
owner-occupied property
Revaluation gains on
investment in associate
Actuarial losses on pension
schemes
Profit for the year
attributable to equity
shareholders
Total comprehensive
income/(loss) for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes
24
Investment in own shares is stated at cost.
0.1
(4.9)
(4.9)
– (130.1)
–
(130.1)
(2.7)
(132.8)
30.4
(31.9)
30.4
1.8
32.2
(31.9)
(31.9)
0.1
3.9
–
–
3.2
2.9
0.1
3.9
–
–
0.1
(4.9)
3.2
2.9
–
–
–
–
–
–
–
–
–
–
£m
10.9
–
3.9
(6.0)
1.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.2
(1.2)
0.1
–
–
–
–
–
–
–
2.9
(2.4)
6.0
–
–
–
–
–
–
–
–
–
–
–
25
(2.4)
(2.4)
–
337.4
337.4
3.1
340.5
Balance at 31 December 2013 178.2 1,222.4
370.1
(311.3)
7.2
10.0
21.2 2,567.0
(4.9) 4,059.9
76.7 4,136.6
30.4
(31.9)
3.2
337.9
339.6
4.9
344.5
* Non-controlling interests relate to continuing operations..
These financial statements were approved by the Board of Directors on 14 February 2014. Signed on behalf of the Board
David Atkins / Director
Timon Drakesmith / Director
Registered in England No. 360632
112112
112 Hammerson plc Annual Report 2013
www.hammerson.com
113
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
As at 31 December 2013
Non-current assets
Investment and development properties
Interests in leasehold properties
Plant, equipment and owner-occupied property
Liabilities associated with assets held for sale
Investment in associate
Other investments
Receivables
Current assets
Assets held for sale
Receivables
Cash and deposits
Total assets
Current liabilities
Non-current liabilities
Payables
Tax
Borrowings
Borrowings
Deferred tax
Payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Capital redemption reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Equity shareholders’ funds
Non-controlling interests*
Total equity
Obligations under finance leases
Diluted net asset value per share
EPRA net asset value per share
* Non-controlling interests relate to continuing operations..
These financial statements were approved by the Board of Directors on 14 February 2014. Signed on behalf of the Board
David Atkins / Director
Timon Drakesmith / Director
Registered in England No. 360632
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
5,931.2
5,458.4
Balance at 1 January 2013 178.2 1,222.3
339.7
(279.4)
7.2
10.9
18.0 2,360.3
(6.0) 3,851.2
74.5 3,925.7
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
Investment
in own
shares
£m
Equity
shareholders’
funds
£m
Non-
controlling
interests
£m
Total
equity
£m
Issue of shares
Share-based employee
remuneration
Cost of shares awarded
to employees
Transfer on award of own
shares to employees
Proceeds on award of own
shares to employees
Purchase of own shares
Dividends
Foreign exchange
translation differences
Net loss on hedging
activities
Revaluation gains on
owner-occupied property
Revaluation gains on
investment in associate
Actuarial losses on pension
schemes
Profit for the year
attributable to equity
shareholders
Total comprehensive
income/(loss) for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30.4
–
–
–
–
–
–
–
–
–
–
–
–
–
(31.9)
–
–
–
–
30.4
(31.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.9
(6.0)
1.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.2)
0.1
–
–
–
6.0
–
–
(4.9)
0.1
3.9
–
–
0.1
(4.9)
–
–
–
–
–
–
0.1
3.9
–
–
0.1
(4.9)
– (130.1)
–
(130.1)
(2.7)
(132.8)
–
–
3.2
–
–
–
–
–
2.9
(2.4)
–
337.4
3.2
337.9
–
–
–
–
–
–
–
30.4
1.8
32.2
(31.9)
3.2
2.9
(2.4)
–
–
–
–
(31.9)
3.2
2.9
(2.4)
337.4
3.1
340.5
339.6
4.9
344.5
Balance at 31 December 2013 178.2 1,222.4
370.1
(311.3)
7.2
10.0
21.2 2,567.0
(4.9) 4,059.9
76.7 4,136.6
Notes
24
Investment in own shares is stated at cost.
25
Notes
12
13
14B
16
9D
17
18
9D
19
8C
20A
20A
8C
22
23
24
25
11B
11B
6,634.7
6,033.8
6,804.5
6,406.2
2,062.8
1,880.1
2013
£m
44.9
39.5
545.4
1.4
72.3
–
113.1
56.7
169.8
–
240.5
1.0
246.2
487.7
0.4
44.7
72.3
2,180.2
2,667.9
4,136.6
178.2
1,222.4
370.1
(311.3)
7.2
10.0
21.2
2,567.0
(4.9)
4,059.9
76.7
4,136.6
£5.70
£5.73
2012
£m
42.3
36.7
428.4
1.4
66.6
212.6
102.7
57.1
372.4
90.4
243.7
1.4
158.0
493.5
0.5
42.3
64.1
1,987.0
2,480.5
3,925.7
178.2
1,222.3
339.7
(279.4)
7.2
10.9
18.0
2,360.3
(6.0)
3,851.2
74.5
3,925.7
£5.41
£5.42
112 Hammerson plc Annual Report 2013
www.hammerson.com
113113
113
www.hammerson.com
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2012
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
Investment
in own
shares
£m
Treasury
shares
£m
Equity
shareholders’
funds
£m
Non-
controlling
interests
£m
Total
equity
£m
Notes
2013
£m
2012
£m
161.7 2,125.7
(1.8)
(4.7) 3,771.9
76.5 3,848.4
Operating profit before other net gains/(losses) and share of results of associate
Balance at
1 January 2012
Issue of shares
Share-based
employee
remuneration
Cost of shares
awarded to
employees
Transfer on award
of own shares to
employees
Proceeds on
award of own
shares to
employees
Transfer from
treasury shares
Purchase of own
shares
Dividends
Foreign exchange
translation
differences
Net gain on
hedging activities
Revaluation gains
on owner-
occupied property
Revaluation gains
on other
investments
Actuarial losses on
pension schemes
Transfer on
recognition of
investment as an
associate
Profit for the year
attributable to
equity
shareholders
Total comprehensive
income/(loss) for
the year
178.2 1,221.9
381.1
(306.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(41.4)
–
–
27.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(41.4)
27.3
7.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.3
–
4.9
(3.9)
0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
74.4
–
–
–
(0.6)
0.2
–
–
(120.9)
–
–
–
–
–
(0.7)
–
(218.2)
218.2
–
–
–
138.4
(143.7)
355.9
Balance at
31 December 2012 178.2 1,222.3
Notes
24
339.7
(279.4)
7.2
10.9
18.0 2,360.3
Investment in own shares and treasury shares are stated at cost.
–
–
3.9
–
–
–
–
–
–
0.4
4.9
–
–
–
0.2
(4.7)
4.7
–
–
–
–
–
–
–
–
0.4
4.9
–
–
0.2
–
(3.4)
–
–
–
–
–
–
–
–
(3.4)
(120.9)
(3.2)
(124.1)
(41.4)
(2.2)
(43.6)
27.3
0.1
74.4
(0.7)
–
–
–
–
–
–
27.3
0.1
74.4
(0.7)
–
–
138.4
3.4
141.8
–
198.1
1.2
199.3
–
3,851.2
74.5 3,925.7
(3.4)
–
–
–
–
–
–
–
–
–
(6.0)
25
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2013
Operating activities
– continuing operations
– discontinued operations
Increase in receivables
(Decrease)/Increase in payables
Adjustment for non-cash items
Cash generated from operations
Interest paid
Interest received
Tax paid
Cash flows from operating activities
Investing activities
Property acquisitions
Development and major refurbishments
Other capital expenditure
Sale of properties
Acquisition of interest in associate
Distribution received from associate
(Increase)/Decrease in non-current receivables
Cash flows from investing activities
Financing activities
Issue of shares
Proceeds from award of own shares
Purchase of own shares
Interest rate swap cancellation costs paid
Bond redemption premium and costs paid
Floating rate reset bonds redemption premium and costs paid
Increase/(Decrease) in non-current borrowings
Increase in current borrowings
Dividends paid to non-controlling interests
Equity dividends paid
Cash flows from financing activities
Net decrease in cash and deposits
Opening cash and deposits
Exchange translation movement
Closing cash and deposits
Cash and deposits classified as assets held for sale
Cash and deposits as stated on balance sheet
The cash flows above relate to continuing and discontinued operations. See note 9 for information on discontinued operations.
2
9B
26
8C
7
7
10
18
9D
18
240.7
7.2
247.9
(6.0)
(22.4)
14.3
233.8
(109.9)
6.5
(1.0)
129.4
(191.1)
(184.4)
(17.5)
256.3
(54.7)
45.0
(21.1)
(167.5)
0.2
0.1
(4.9)
(3.9)
–
–
83.0
85.7
(2.7)
(129.4)
28.1
(10.0)
66.4
0.3
56.7
–
56.7
215.9
23.7
239.6
(14.5)
13.5
14.0
252.6
(117.6)
5.7
(0.8)
139.9
(397.3)
(122.9)
(48.0)
585.0
(80.0)
2.4
5.2
(55.6)
0.5
0.2
(3.4)
(5.2)
(13.8)
(41.7)
(20.0)
87.1
(3.2)
(118.4)
(117.9)
(33.6)
100.7
(0.7)
66.4
(9.3)
57.1
114114
114 Hammerson plc Annual Report 2013
www.hammerson.com
115
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2012
Share
Share
Translation
Hedging
redemption
Other
Revaluation
capital
premium
reserve
reserve
reserve
reserves
£m
£m
£m
£m
£m
£m
reserve
£m
Retained
earnings
£m
in own
shares
£m
Treasury
shareholders’
controlling
shares
£m
funds
£m
interests
£m
Total
equity
£m
Capital
Investment
Equity
Non-
1 January 2012
178.2 1,221.9
381.1
(306.7)
161.7 2,125.7
(1.8)
(4.7) 3,771.9
76.5 3,848.4
0.4
7.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(41.4)
–
–
27.3
–
–
–
–
–
–
–
–
–
–
–
–
Balance at
Issue of shares
Share-based
employee
remuneration
Cost of shares
awarded to
employees
Transfer on award
of own shares to
employees
Proceeds on
award of own
shares to
employees
Transfer from
treasury shares
Purchase of own
shares
Dividends
Foreign exchange
translation
differences
Net gain on
hedging activities
Revaluation gains
on owner-
occupied property
Revaluation gains
on other
investments
Actuarial losses on
pension schemes
Transfer on
recognition of
investment as an
associate
Profit for the year
attributable to
equity
shareholders
Total comprehensive
income/(loss) for
the year
Balance at
Notes
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
9.3
–
4.9
(3.9)
0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.6)
0.2
–
–
–
–
–
–
–
–
–
0.1
74.4
–
(0.7)
–
0.2
(4.7)
4.7
–
(120.9)
(120.9)
(3.2)
(124.1)
(41.4)
(2.2)
(43.6)
0.4
4.9
–
–
(3.4)
27.3
0.1
74.4
(0.7)
–
–
–
–
–
–
–
–
–
–
–
–
0.4
4.9
–
–
0.2
–
(3.4)
27.3
0.1
74.4
(0.7)
–
–
–
–
–
–
–
–
–
–
–
–
3.9
(3.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
(6.0)
25
–
–
–
–
–
(218.2)
218.2
–
–
–
–
–
–
138.4
–
138.4
3.4
141.8
31 December 2012 178.2 1,222.3
339.7
(279.4)
7.2
10.9
18.0 2,360.3
–
3,851.2
74.5 3,925.7
Investment in own shares and treasury shares are stated at cost.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2013
Operating activities
Operating profit before other net gains/(losses) and share of results of associate
Notes
2013
£m
2012
£m
– continuing operations
– discontinued operations
Increase in receivables
(Decrease)/Increase in payables
Adjustment for non-cash items
Cash generated from operations
Interest paid
Interest received
Tax paid
Cash flows from operating activities
Investing activities
Property acquisitions
Development and major refurbishments
Other capital expenditure
Sale of properties
Acquisition of interest in associate
Distribution received from associate
(Increase)/Decrease in non-current receivables
Cash flows from investing activities
Financing activities
Issue of shares
Proceeds from award of own shares
Purchase of own shares
Interest rate swap cancellation costs paid
Bond redemption premium and costs paid
Floating rate reset bonds redemption premium and costs paid
Increase/(Decrease) in non-current borrowings
Increase in current borrowings
Dividends paid to non-controlling interests
Equity dividends paid
Cash flows from financing activities
Net decrease in cash and deposits
Opening cash and deposits
Exchange translation movement
Closing cash and deposits
Cash and deposits classified as assets held for sale
Cash and deposits as stated on balance sheet
2
9B
26
8C
7
7
10
18
9D
18
240.7
7.2
247.9
(6.0)
(22.4)
14.3
233.8
(109.9)
6.5
(1.0)
129.4
(191.1)
(184.4)
(17.5)
256.3
(54.7)
45.0
(21.1)
(167.5)
0.2
0.1
(4.9)
–
(3.9)
–
83.0
85.7
(2.7)
(129.4)
28.1
(10.0)
66.4
0.3
56.7
–
56.7
215.9
23.7
239.6
(14.5)
13.5
14.0
252.6
(117.6)
5.7
(0.8)
139.9
(397.3)
(122.9)
(48.0)
585.0
(80.0)
2.4
5.2
(55.6)
0.5
0.2
(3.4)
(5.2)
(13.8)
(41.7)
(20.0)
87.1
(3.2)
(118.4)
(117.9)
(33.6)
100.7
(0.7)
66.4
(9.3)
57.1
–
(41.4)
27.3
(143.7)
355.9
–
198.1
1.2
199.3
The cash flows above relate to continuing and discontinued operations. See note 9 for information on discontinued operations.
114 Hammerson plc Annual Report 2013
www.hammerson.com
115115
115
www.hammerson.com
FINANCIAL STATEMENTS
ANALYSIS OF MOVEMENT IN NET DEBT
For the year ended 31 December 2013
Short-term
deposits
£m
Cash at bank
£m
Current
borrowings
including
currency swaps
£m
Non-current
borrowings
£m
Net debt
£m
As stated on balance sheet at 1 January 2013
Cash and deposits and borrowings classified as held for
sale (note 9D)
Balance at 1 January 2013
Cash flow
Exchange
Balance at 31 December 2013
12.0
–
12.0
(0.8)
–
11.2
45.1
(158.0)
(1,880.1)
(1,981.0)
9.3
54.4
(9.2)
0.3
45.5
(1.3)
(159.3)
(85.7)
(1.2)
(63.3)
(55.3)
(1,943.4)
(2,036.3)
(83.0)
(36.4)
(178.7)
(37.3)
(246.2)
(2,062.8)
(2,252.3)
and Financial Liabilities
NOTES TO THE ACCOUNTS
1: SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements have been prepared in
accordance with IFRS and interpretations adopted by the European
Union. During 2013, the following new and revised Standards and
Interpretations have been adopted and have affected the amounts
reported in these financial statements:
• Revised IAS 19 Employee Benefits
• IFRS 13 Fair value measurement
• Amendments to IFRS 7 Disclosures – Offsetting Financial Assets
• Amendments to IAS 1 Presentation of items of other
comprehensive income
• Amendments resulting from Annual improvements to
IFRS (2009-2011).
At the date of approval of these financial statements the following
Standards and Interpretations relevant to the Group were in issue but
not yet effective and in some cases had not been adopted for use in
the European Union:
European Union
Issued, not yet effective and not yet endorsed for use in the
• IFRS 9 Financial Instruments; effective for accounting periods
beginning on or after 31 December 2017.
Endorsed by the European Union in December 2013
• Amendments to IAS 36 ‘Impairment of assets’ regarding recoverable
amount disclosures for non-financial assets; effective for accounting
periods beginning on or after 1 January 2014
• IAS 39 ‘Financial instruments; Recognition and Measurement’
Novation of Derivatives and Continuation of Hedge Accounting;
effective for accounting periods beginning on or after
1 January 2014
effective
Issued and endorsed for use in the European Union but not yet
• IFRS 10 Consolidated Financial Statements; effective for accounting
periods beginning on or after 1 January 2014
• IFRS 11 Joint Arrangements; effective for accounting periods
beginning on or after 1 January 2014
• IFRS 12 Disclosure of Interests in Other Entities; effective for
accounting periods beginning on or after 1 January 2014
The Directors have assessed the impact that the adoption of IFRS 11
will have on the financial statements of the Group in future periods.
Joint arrangements which are currently proportionally consolidated
will be classified as joint ventures as defined by IFRS 11 and equity
accounted from 1 January 2014. The Group’s share of joint ventures’
net assets will be presented on a separate line on the face of the
Balance Sheet as ‘Investment in joint ventures’ and the Group’s share
of joint ventures’ profit or loss will be presented on the face of the
Income Statement as ‘Share of results of joint ventures’. The Group’s
profit for the year and equity shareholders’ funds will be unaffected by
the change, but other income statement and balance sheet line items
in the consolidated financial statements, such as net rental income and
investment and development properties, will decrease reflecting the
reclassification of the amounts relating to joint ventures from those line
items. Group balances due to and from joint ventures will be included
in payables or receivables as appropriate.
IFRS 9 will impact the measurement and classification of the Group’s
financial assets and financial liabilities. The Group has not yet
completed its evaluation of the effect of adoption.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Directors’ Report on page 104.
The financial statements are presented in sterling. They are prepared
on the historical cost basis, except that investment and development
properties, owner-occupied properties, other investments and
derivative financial instruments are stated at fair value.
The accounting policies have been applied consistently to the results,
other gains and losses, assets, liabilities and cash flows of entities
included in the consolidated financial statements. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. If the revision
affects both current and future periods, the change is recognised over
those periods.
As part of the Group’s strategy to focus on the retail sector, the Group
completed the disposal of the majority of its office portfolio between
July 2012 and June 2013. Consequently, the relevant assets and
liabilities were classified as held for sale. The income and expenditure
of these properties are classified as discontinued operations in both
the current and comparative periods to reflect the discontinuation of
the Group’s office property activities, which was considered to be a
major line of business. At 31 December 2013 the residual office
• IAS 27 Separate Financial Statements; effective for accounting
properties, with a value of £7.4 million, were reclassified to continuing
periods beginning on or after 1 January 2014
• IAS 28 Investments in Associates and Joint Ventures; effective
for periods commencing on or after 1 January 2014
operations as they form a minor proportion of the Group’s portfolio.
Details of discontinued operations and assets and liabilities previously
classified as held for sale are set out in note 9.
• Amendments to IFRS 10, IFRS 12 and IAS 27 Investment entities;
Significant judgements and key estimates
effective for accounting periods beginning on or after
The preparation of the financial statements requires management to
make judgements, estimates and assumptions that may affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses.
1 January 2014
1 January 2014
• Amendments to IAS 32 Offsetting Financial Assets and Financial
Liabilities; effective for accounting periods beginning on or after
With the exception of IFRS 11 and IFRS 9, these pronouncements,
when applied, will either result in changes in presentation and
disclosure, or are not expected to have a material impact on the
financial statements.
116116
116 Hammerson plc Annual Report 2013
www.hammerson.com
117
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
ANALYSIS OF MOVEMENT IN NET DEBT
For the year ended 31 December 2013
As stated on balance sheet at 1 January 2013
Cash and deposits and borrowings classified as held for
sale (note 9D)
Balance at 1 January 2013
Cash flow
Exchange
Balance at 31 December 2013
Short-term
deposits
Cash at bank
currency swaps
Non-current
borrowings
£m
Net debt
£m
Current
borrowings
including
£m
£m
12.0
12.0
(0.8)
–
–
11.2
£m
45.1
9.3
54.4
(9.2)
0.3
45.5
(158.0)
(1,880.1)
(1,981.0)
(1.3)
(159.3)
(85.7)
(1.2)
(63.3)
(55.3)
(1,943.4)
(2,036.3)
(83.0)
(36.4)
(178.7)
(37.3)
NOTES TO THE ACCOUNTS
1: SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements have been prepared in
accordance with IFRS and interpretations adopted by the European
Union. During 2013, the following new and revised Standards and
Interpretations have been adopted and have affected the amounts
reported in these financial statements:
• Revised IAS 19 Employee Benefits
• IFRS 13 Fair value measurement
• Amendments to IFRS 7 Disclosures – Offsetting Financial Assets
(246.2)
(2,062.8)
(2,252.3)
and Financial Liabilities
• Amendments to IAS 1 Presentation of items of other
comprehensive income
• Amendments resulting from Annual improvements to
IFRS (2009-2011).
At the date of approval of these financial statements the following
Standards and Interpretations relevant to the Group were in issue but
not yet effective and in some cases had not been adopted for use in
the European Union:
Issued, not yet effective and not yet endorsed for use in the
European Union
• IFRS 9 Financial Instruments; effective for accounting periods
beginning on or after 31 December 2017.
Endorsed by the European Union in December 2013
• Amendments to IAS 36 ‘Impairment of assets’ regarding recoverable
amount disclosures for non-financial assets; effective for accounting
periods beginning on or after 1 January 2014
• IAS 39 ‘Financial instruments; Recognition and Measurement’
Novation of Derivatives and Continuation of Hedge Accounting;
effective for accounting periods beginning on or after
1 January 2014
Issued and endorsed for use in the European Union but not yet
effective
• IFRS 10 Consolidated Financial Statements; effective for accounting
periods beginning on or after 1 January 2014
• IFRS 11 Joint Arrangements; effective for accounting periods
beginning on or after 1 January 2014
• IFRS 12 Disclosure of Interests in Other Entities; effective for
accounting periods beginning on or after 1 January 2014
• IAS 27 Separate Financial Statements; effective for accounting
periods beginning on or after 1 January 2014
• IAS 28 Investments in Associates and Joint Ventures; effective
for periods commencing on or after 1 January 2014
• Amendments to IFRS 10, IFRS 12 and IAS 27 Investment entities;
effective for accounting periods beginning on or after
1 January 2014
• Amendments to IAS 32 Offsetting Financial Assets and Financial
Liabilities; effective for accounting periods beginning on or after
1 January 2014
With the exception of IFRS 11 and IFRS 9, these pronouncements,
when applied, will either result in changes in presentation and
disclosure, or are not expected to have a material impact on the
financial statements.
The Directors have assessed the impact that the adoption of IFRS 11
will have on the financial statements of the Group in future periods.
Joint arrangements which are currently proportionally consolidated
will be classified as joint ventures as defined by IFRS 11 and equity
accounted from 1 January 2014. The Group’s share of joint ventures’
net assets will be presented on a separate line on the face of the
Balance Sheet as ‘Investment in joint ventures’ and the Group’s share
of joint ventures’ profit or loss will be presented on the face of the
Income Statement as ‘Share of results of joint ventures’. The Group’s
profit for the year and equity shareholders’ funds will be unaffected by
the change, but other income statement and balance sheet line items
in the consolidated financial statements, such as net rental income and
investment and development properties, will decrease reflecting the
reclassification of the amounts relating to joint ventures from those line
items. Group balances due to and from joint ventures will be included
in payables or receivables as appropriate.
IFRS 9 will impact the measurement and classification of the Group’s
financial assets and financial liabilities. The Group has not yet
completed its evaluation of the effect of adoption.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Directors’ Report on page 104.
The financial statements are presented in sterling. They are prepared
on the historical cost basis, except that investment and development
properties, owner-occupied properties, other investments and
derivative financial instruments are stated at fair value.
The accounting policies have been applied consistently to the results,
other gains and losses, assets, liabilities and cash flows of entities
included in the consolidated financial statements. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. If the revision
affects both current and future periods, the change is recognised over
those periods.
As part of the Group’s strategy to focus on the retail sector, the Group
completed the disposal of the majority of its office portfolio between
July 2012 and June 2013. Consequently, the relevant assets and
liabilities were classified as held for sale. The income and expenditure
of these properties are classified as discontinued operations in both
the current and comparative periods to reflect the discontinuation of
the Group’s office property activities, which was considered to be a
major line of business. At 31 December 2013 the residual office
properties, with a value of £7.4 million, were reclassified to continuing
operations as they form a minor proportion of the Group’s portfolio.
Details of discontinued operations and assets and liabilities previously
classified as held for sale are set out in note 9.
Significant judgements and key estimates
The preparation of the financial statements requires management to
make judgements, estimates and assumptions that may affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses.
116 Hammerson plc Annual Report 2013
www.hammerson.com
117117
117
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property valuations
The property portfolio, which is carried in the balance sheet at fair
value, is valued six-monthly by professionally qualified external valuers
and the Directors must ensure that they are satisfied that the valuation
of the Group’s properties is appropriate for the accounts. Investment
properties, excluding properties held for development, are valued
by adopting the ‘investment method’ of valuation. This approach
involves applying market-derived capitalisation yields to current and
market-derived future income streams with appropriate adjustments
for income voids arising from vacancies or rent-free periods. These
capitalisation yields and future income streams are derived from
comparable property and leasing transactions and are considered
to be the key inputs in the valuation. Other factors that are taken into
account in the valuations include the tenure of the property, tenancy
details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the
‘residual method’ of valuation, which is the investment method of
valuation as described above with a deduction for all costs necessary
to complete the development, together with a further allowance for
remaining risk. Properties held for future development are generally
valued by adopting the higher of the residual method of valuation
allowing for all associated risks, or the investment method of valuation
for the existing asset. The impact of changes to property valuations is
a principal uncertainty of the Group, as noted on page 134.
Tenant leases
Management has exercised judgement in considering the potential
transfer of the risks and rewards of ownership, in accordance with IAS
17, Leases for properties leased to tenants and has determined that
such leases are operating leases.
Accounting for acquisitions
Management must assess whether the acquisition of property through
the purchase of a corporate vehicle should be accounted for as an
asset purchase or a business combination. As noted in the accounting
policy below, where the acquired company contains significant assets
or liabilities in addition to property, the transaction is accounted for as a
business combination. Where there are no such items, the transaction
is treated as an asset purchase.
Accounting for joint ventures
The accounting treatment for our joint ventures requires an
assessment to determine the degree of control or influence that the
Group may exercise over them and the form of any control.
Hammerson’s interest in its joint ventures is commonly driven by the
terms of partnership agreements, which ensure that control is shared
between the partners. As a result, these are accounted for as jointly
controlled entities and are included in the financial statements on a
proportionate consolidation basis in accordance with IAS 31. As noted
on page 117, joint ventures will be equity accounted under IFRS 11
with effect from 1 January 2014.
Accounting for associates
Associates are those entities over which the Group is in a position to
exercise significant influence, but not control or joint control. The
Directors must exercise judgement in determining whether the Group
is in a position to exercise significant influence.
REIT and SIIC status
The Company has elected for UK REIT and French SIIC status. To
continue to benefit from these tax regimes, the Group is required to
comply with certain conditions as outlined in notes 8E and 8F to the
accounts. Management intends that the Group should continue as a
UK REIT and French SIIC for the foreseeable future.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control is
assumed when the Group has the power to govern the financial
and operating policies of an entity, or business, to benefit from its
activities. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control
commences until the date that control ceases. All intragroup
transactions, balances, income and expenses are eliminated
on consolidation.
Where properties are acquired through corporate acquisitions but
there are no significant assets or liabilities other than property, the
acquisition is treated as an asset acquisition. In other cases, particularly
where there is an integrated set of activities and assets, capable of
being conducted and managed for the purpose of providing a return,
the business combination approach method is used.
Joint ventures
Joint ventures are those entities over whose activities the Group has
joint control, established by contractual agreement. The consolidated
financial statements include the Group’s proportionate share of assets,
liabilities, results and cash flows of joint ventures.
Associates
The results, assets and liabilities of associates are accounted for using
the equity method. Investments in associates are carried in the balance
sheet at cost as adjusted for post-acquisition changes in the Group’s
share of the net assets of the associate, less any impairment. Losses of
an associate in excess of the Group’s interest in that associate are
recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate.
Goodwill
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the acquired entity
over the Group’s interest in the fair value of the assets, liabilities and
contingent liabilities acquired. Goodwill that is recognised as an
asset is reviewed for impairment at least annually. Any impairment
is recognised immediately in the income statement and is not
subsequently reversed. Where the fair value of the assets, liabilities
and contingent liabilities acquired is greater than the cost, the
excess, known as negative goodwill, is recognised immediately
in the income statement.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into sterling at
exchange rates approximating to the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated to sterling
at the exchange rate ruling at that date and, unless they relate to the
hedging of the net investment in foreign operations, differences
arising on translation are recognised in the income statement.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on consolidation, are translated
into sterling at the exchange rates ruling at the balance sheet date.
Property portfolio
Investment properties
Investment properties are stated at fair value, being market value
determined by professionally qualified external valuers, and changes
The operating income and expenses of foreign operations are translated
in fair value are included in the income statement.
into sterling at the average exchange rates for the year. Significant
transactions, such as property sales, are translated at the foreign
exchange rate ruling at the date of each transaction. The principal
exchange rate used to translate foreign currency-denominated amounts
in the balance sheet is the rate at the end of the year, £1 = €1.202 (2012:
£1 = €1.233). The principal exchange rate used for the income statement
is the average rate, £1 = €1.178 (2012: £1 = €1.233).
Net investment in foreign operations
Exchange differences arising from the translation of the net
investment in foreign operations are taken to the translation reserve.
They are released to the income statement upon disposal of the
foreign operation.
Borrowings, interest and derivatives
Borrowings
Development properties
Properties acquired with the intention of redevelopment are classified
as development properties and stated at fair value, being market value
determined by professionally qualified external valuers. Changes in fair
value are included in the income statement. All costs directly
associated with the purchase and construction of a development
property are capitalised. When development properties are
completed, they are reclassified as investment properties.
Leasehold properties
Leasehold properties that are leased out to tenants under operating
leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair
value. The obligation to the freeholder or superior leaseholder for the
buildings element of the leasehold is included in the balance sheet at
Borrowings are recognised initially at fair value, after taking account of
the present value of the minimum lease payments at inception.
any discount on issue and attributable transaction costs. Subsequently,
Payments to the freeholder or superior leaseholder are apportioned
borrowings are held at amortised cost, such that discounts and costs
between a finance charge and a reduction of the outstanding liability.
are charged to the income statement over the term of the borrowing
The finance charge is allocated to each period during the lease term
at a constant return on the carrying amount of the liability.
Derivative financial instruments
The Group uses derivative financial instruments to economically
hedge its exposure to foreign currency movements and interest rate
risks. Hedge accounting is applied in respect of net investments in
foreign operations and of debt raised in non-functional currencies.
so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Contingent rents payable, such as rent reviews
or those related to rental income, are charged as an expense in the
periods in which they are incurred. An asset equivalent to the
leasehold obligation is recorded in the balance sheet within ‘interests
in leasehold properties’, and is amortised over the lease term.
Derivative financial instruments are recognised initially at fair value,
Depreciation
which equates to cost and subsequently remeasured at fair value, with
In accordance with IAS 40 Investment Property, no depreciation
changes in fair value being included in the income statement, except
is provided in respect of investment and development properties,
that a gain or loss on the portion of an instrument that is an effective
which are carried at fair value. Leasehold property occupied by the
hedge is recognised in the hedging reserve.
Group (‘owner-occupied property’) is depreciated where material
over its expected useful life, giving due consideration to its estimated
Trade receivables and payables
Trade receivables and payables are initially measured at fair value,
residual value.
subsequently measured at amortised cost and, where the effect is
Net rental income
material, discounted to reflect the time value of money.
Rental income from investment property leased out under an
Net finance costs
Net finance costs include interest payable on borrowings, net of
interest capitalised, interest receivable on funds invested, and changes
in the fair value of derivative financial instruments.
Capitalisation of interest
Interest is capitalised if it is directly attributable to the acquisition,
construction or production of development properties or the
redevelopment of investment properties. Capitalisation commences
when the activities to develop the property start and continues until
the property is substantially ready for its intended use. Capitalised
interest is calculated with reference to the actual rate payable on
borrowings for development purposes or, for that part of the
development cost financed out of general funds, to the average rate.
operating lease is recognised in the income statement on a straight-
line basis over the lease term. Contingent rents, such as turnover rents,
rent reviews and indexation, are recorded as income in the periods
in which they are earned. Rent reviews are recognised when such
reviews have been agreed with tenants. Lease incentives and costs
associated with entering into tenant leases are amortised over the
period to the first break option or, if the probability that the break
option will be exercised is considered low, over the lease term.
Property operating expenses are expensed as incurred and any
property operating expenditure not recovered from tenants through
service charges is charged to the income statement.
Gains on sale of properties
Gains on sale of properties are taken into account on the completion
of contract, and are calculated by reference to the carrying value at the
end of the previous year, adjusted for subsequent capital expenditure.
118118
118 Hammerson plc Annual Report 2013
www.hammerson.com
119
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REIT and SIIC status
Property valuations
The property portfolio, which is carried in the balance sheet at fair
value, is valued six-monthly by professionally qualified external valuers
and the Directors must ensure that they are satisfied that the valuation
of the Group’s properties is appropriate for the accounts. Investment
The Company has elected for UK REIT and French SIIC status. To
continue to benefit from these tax regimes, the Group is required to
comply with certain conditions as outlined in notes 8E and 8F to the
accounts. Management intends that the Group should continue as a
UK REIT and French SIIC for the foreseeable future.
properties, excluding properties held for development, are valued
Basis of consolidation
by adopting the ‘investment method’ of valuation. This approach
Subsidiaries
involves applying market-derived capitalisation yields to current and
Subsidiaries are those entities controlled by the Group. Control is
market-derived future income streams with appropriate adjustments
assumed when the Group has the power to govern the financial
for income voids arising from vacancies or rent-free periods. These
and operating policies of an entity, or business, to benefit from its
capitalisation yields and future income streams are derived from
activities. The financial statements of subsidiaries are included in
comparable property and leasing transactions and are considered
the consolidated financial statements from the date that control
to be the key inputs in the valuation. Other factors that are taken into
commences until the date that control ceases. All intragroup
account in the valuations include the tenure of the property, tenancy
transactions, balances, income and expenses are eliminated
details and ground and structural conditions.
on consolidation.
In the case of ongoing developments, the approach applied is the
Where properties are acquired through corporate acquisitions but
‘residual method’ of valuation, which is the investment method of
there are no significant assets or liabilities other than property, the
valuation as described above with a deduction for all costs necessary
acquisition is treated as an asset acquisition. In other cases, particularly
to complete the development, together with a further allowance for
where there is an integrated set of activities and assets, capable of
remaining risk. Properties held for future development are generally
being conducted and managed for the purpose of providing a return,
valued by adopting the higher of the residual method of valuation
the business combination approach method is used.
allowing for all associated risks, or the investment method of valuation
for the existing asset. The impact of changes to property valuations is
a principal uncertainty of the Group, as noted on page 134.
Joint ventures
Joint ventures are those entities over whose activities the Group has
joint control, established by contractual agreement. The consolidated
financial statements include the Group’s proportionate share of assets,
Tenant leases
Management has exercised judgement in considering the potential
liabilities, results and cash flows of joint ventures.
transfer of the risks and rewards of ownership, in accordance with IAS
17, Leases for properties leased to tenants and has determined that
Associates
such leases are operating leases.
Accounting for acquisitions
The results, assets and liabilities of associates are accounted for using
the equity method. Investments in associates are carried in the balance
sheet at cost as adjusted for post-acquisition changes in the Group’s
Management must assess whether the acquisition of property through
share of the net assets of the associate, less any impairment. Losses of
the purchase of a corporate vehicle should be accounted for as an
an associate in excess of the Group’s interest in that associate are
asset purchase or a business combination. As noted in the accounting
recognised only to the extent that the Group has incurred legal or
policy below, where the acquired company contains significant assets
constructive obligations or made payments on behalf of the associate.
or liabilities in addition to property, the transaction is accounted for as a
business combination. Where there are no such items, the transaction
Goodwill
is treated as an asset purchase.
Accounting for joint ventures
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the acquired entity
over the Group’s interest in the fair value of the assets, liabilities and
The accounting treatment for our joint ventures requires an
contingent liabilities acquired. Goodwill that is recognised as an
assessment to determine the degree of control or influence that the
asset is reviewed for impairment at least annually. Any impairment
Group may exercise over them and the form of any control.
is recognised immediately in the income statement and is not
Hammerson’s interest in its joint ventures is commonly driven by the
subsequently reversed. Where the fair value of the assets, liabilities
terms of partnership agreements, which ensure that control is shared
and contingent liabilities acquired is greater than the cost, the
between the partners. As a result, these are accounted for as jointly
excess, known as negative goodwill, is recognised immediately
controlled entities and are included in the financial statements on a
in the income statement.
proportionate consolidation basis in accordance with IAS 31. As noted
on page 117, joint ventures will be equity accounted under IFRS 11
Foreign currency
Foreign currency transactions
with effect from 1 January 2014.
Accounting for associates
Associates are those entities over which the Group is in a position to
exercise significant influence, but not control or joint control. The
Directors must exercise judgement in determining whether the Group
is in a position to exercise significant influence.
Transactions in foreign currencies are translated into sterling at
exchange rates approximating to the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated to sterling
at the exchange rate ruling at that date and, unless they relate to the
hedging of the net investment in foreign operations, differences
arising on translation are recognised in the income statement.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on consolidation, are translated
into sterling at the exchange rates ruling at the balance sheet date.
The operating income and expenses of foreign operations are translated
into sterling at the average exchange rates for the year. Significant
transactions, such as property sales, are translated at the foreign
exchange rate ruling at the date of each transaction. The principal
exchange rate used to translate foreign currency-denominated amounts
in the balance sheet is the rate at the end of the year, £1 = €1.202 (2012:
£1 = €1.233). The principal exchange rate used for the income statement
is the average rate, £1 = €1.178 (2012: £1 = €1.233).
Net investment in foreign operations
Exchange differences arising from the translation of the net
investment in foreign operations are taken to the translation reserve.
They are released to the income statement upon disposal of the
foreign operation.
Borrowings, interest and derivatives
Borrowings
Borrowings are recognised initially at fair value, after taking account of
any discount on issue and attributable transaction costs. Subsequently,
borrowings are held at amortised cost, such that discounts and costs
are charged to the income statement over the term of the borrowing
at a constant return on the carrying amount of the liability.
Derivative financial instruments
The Group uses derivative financial instruments to economically
hedge its exposure to foreign currency movements and interest rate
risks. Hedge accounting is applied in respect of net investments in
foreign operations and of debt raised in non-functional currencies.
Derivative financial instruments are recognised initially at fair value,
which equates to cost and subsequently remeasured at fair value, with
changes in fair value being included in the income statement, except
that a gain or loss on the portion of an instrument that is an effective
hedge is recognised in the hedging reserve.
Trade receivables and payables
Trade receivables and payables are initially measured at fair value,
subsequently measured at amortised cost and, where the effect is
material, discounted to reflect the time value of money.
Net finance costs
Net finance costs include interest payable on borrowings, net of
interest capitalised, interest receivable on funds invested, and changes
in the fair value of derivative financial instruments.
Capitalisation of interest
Interest is capitalised if it is directly attributable to the acquisition,
construction or production of development properties or the
redevelopment of investment properties. Capitalisation commences
when the activities to develop the property start and continues until
the property is substantially ready for its intended use. Capitalised
interest is calculated with reference to the actual rate payable on
borrowings for development purposes or, for that part of the
development cost financed out of general funds, to the average rate.
Property portfolio
Investment properties
Investment properties are stated at fair value, being market value
determined by professionally qualified external valuers, and changes
in fair value are included in the income statement.
Development properties
Properties acquired with the intention of redevelopment are classified
as development properties and stated at fair value, being market value
determined by professionally qualified external valuers. Changes in fair
value are included in the income statement. All costs directly
associated with the purchase and construction of a development
property are capitalised. When development properties are
completed, they are reclassified as investment properties.
Leasehold properties
Leasehold properties that are leased out to tenants under operating
leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair
value. The obligation to the freeholder or superior leaseholder for the
buildings element of the leasehold is included in the balance sheet at
the present value of the minimum lease payments at inception.
Payments to the freeholder or superior leaseholder are apportioned
between a finance charge and a reduction of the outstanding liability.
The finance charge is allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Contingent rents payable, such as rent reviews
or those related to rental income, are charged as an expense in the
periods in which they are incurred. An asset equivalent to the
leasehold obligation is recorded in the balance sheet within ‘interests
in leasehold properties’, and is amortised over the lease term.
Depreciation
In accordance with IAS 40 Investment Property, no depreciation
is provided in respect of investment and development properties,
which are carried at fair value. Leasehold property occupied by the
Group (‘owner-occupied property’) is depreciated where material
over its expected useful life, giving due consideration to its estimated
residual value.
Net rental income
Rental income from investment property leased out under an
operating lease is recognised in the income statement on a straight-
line basis over the lease term. Contingent rents, such as turnover rents,
rent reviews and indexation, are recorded as income in the periods
in which they are earned. Rent reviews are recognised when such
reviews have been agreed with tenants. Lease incentives and costs
associated with entering into tenant leases are amortised over the
period to the first break option or, if the probability that the break
option will be exercised is considered low, over the lease term.
Property operating expenses are expensed as incurred and any
property operating expenditure not recovered from tenants through
service charges is charged to the income statement.
Gains on sale of properties
Gains on sale of properties are taken into account on the completion
of contract, and are calculated by reference to the carrying value at the
end of the previous year, adjusted for subsequent capital expenditure.
118 Hammerson plc Annual Report 2013
www.hammerson.com
119119
119
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Plant, equipment and owner-occupied property
Owner-occupied property held under a finance lease is stated at fair
value with changes in fair value recognised directly in equity. Plant
and equipment are stated at cost less accumulated depreciation.
Depreciation is charged to the income statement on a straight-line basis
over the estimated useful life, which is generally between three and five
years, or in the case of leasehold improvements, the lease term.
Employee benefits
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans
are charged to the income statement as incurred.
Defined benefit pension plans
The Group’s net obligation in respect of defined benefit pension plans
comprises the amount of future benefit that employees have earned,
discounted to determine a present value, less the fair value of the
pension plan assets. The discount rate used is the yield on AA credit-
rated bonds that have maturity dates approximating to the terms of
the Group’s obligations. The calculation is performed by a qualified
external actuary using the projected unit credit method. Actuarial
gains and losses are recognised in equity. Where the assets of a plan
are greater than its obligation, the asset included in the balance sheet
is limited to the present value of any future refunds from the plan or
reduction in future contributions to the plan.
Share-based employee remuneration
Share-based employee remuneration is determined with reference to
the fair value of the equity instruments at the date at which they are
granted and charged to the income statement over the vesting period
on a straight-line basis. The fair value of share options is calculated
using the binomial option pricing model and is dependent on factors
including the exercise price, expected volatility, option life and risk-free
interest rate. The fair value of the market-based element of the Long-
Term Incentive Plans is calculated using the Monte Carlo Model and is
dependent on factors including the expected volatility, vesting period
and risk-free interest rate.
Tax
Tax is included in the income statement except to the extent that it
relates to items recognised directly in equity, in which case the related
tax is recognised in equity.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates applicable at the balance sheet date, together with
any adjustment in respect of previous years.
Deferred tax is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for tax purposes. The following temporary differences are not
provided for: goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates that are expected to apply in the period
when the liability is settled or the asset is realised.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can
be utilised.
2: PROFIT FOR THE YEAR
Gross rental income
Ground and equity rents payable
Gross rental income, after rents payable
Notes
3A
Service charge income
Service charge expenses
Net service charge expenses
Other property outgoings
Property outgoings
Net rental income
Management fees receivable
Cost of property activities
Corporate expenses
Administration expenses
Operating profit before other net
gains/(losses) and share of results of associate
Gain on the sale of investment properties
Revaluation gains/(losses) on investment
properties
properties
Revaluation gains on development
Other net gains/(losses)
Share of results of associate
Operating profit
Net finance costs
Profit before tax
Current tax charge
Deferred tax credit
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Non-controlling interests – continuing
operations
shareholders
Profit for the year attributable to equity
Profit for the year attributable to equity
shareholders
Continuing operations
Discontinued operations
3A
14A
7
8A
8A
9B
11A
11A
11A
11A
Adjusted
£m
Capital and
other
£m
Adjusted
£m
Capital and
other
£m
321.2
(1.9)
319.3
58.1
(68.0)
(9.9)
(26.6)
(36.5)
282.8
6.7
(33.2)
(15.6)
(42.1)
240.7
–
–
–
–
13.4
254.1
(90.5)
163.6
(0.8)
–
162.8
5.3
168.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.2
61.3
27.5
93.0
88.1
181.1
(18.4)
162.7
–
0.1
162.8
9.6
172.4
Total
2013
£m
321.2
(1.9)
319.3
58.1
(68.0)
(9.9)
(26.6)
(36.5)
282.8
6.7
(33.2)
(15.6)
(42.1)
240.7
4.2
61.3
27.5
93.0
101.5
435.2
(108.9)
326.3
(0.8)
0.1
325.6
14.9
340.5
297.6
(1.9)
295.7
54.5
(62.7)
(8.2)
(28.7)
(36.9)
258.8
5.9
(31.4)
(17.4)
(42.9)
215.9
–
–
–
–
4.3
220.2
(87.5)
132.7
(0.4)
–
132.3
19.8
152.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.2
19.8
(36.3)
43.2
6.9
(46.1)
(39.2)
–
–
(39.2)
28.9
(10.3)
Total
2012
£m
297.6
(1.9)
295.7
54.5
(62.7)
(8.2)
(28.7)
(36.9)
258.8
5.9
(31.4)
(17.4)
(42.9)
215.9
12.2
19.8
(36.3)
47.5
227.1
(133.6)
93.5
(0.4)
–
93.1
48.7
141.8
(68.3)
(68.3)
(3.6)
0.5
(3.1)
(3.3)
(0.1)
(3.4)
164.5
172.9
337.4
148.8
(10.4)
138.4
159.2
5.3
164.5
163.3
9.6
172.9
322.5
14.9
337.4
129.0
19.8
148.8
(39.3)
28.9
(10.4)
89.7
48.7
138.4
Included in gross rental income is £8.0 million (2012: £6.3 million) of contingent rents calculated by reference to tenants’ turnover.
The management fees receivable in notes 2 and 9B include fees paid to Hammerson in respect of joint ventures for investment and development
management services. Except for the transaction with a Non-Executive Director noted in the 2012 annual report, and in relation to Directors’
remuneration, all other related party transactions are eliminated on consolidation.
The Group’s revenue includes gross rental income, service charge income, management fees receivable and finance income. See table above and
note 7 on page 127.
120120
120 Hammerson plc Annual Report 2013
www.hammerson.com
121
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
Plant, equipment and owner-occupied property
Owner-occupied property held under a finance lease is stated at fair
value with changes in fair value recognised directly in equity. Plant
and equipment are stated at cost less accumulated depreciation.
Depreciation is charged to the income statement on a straight-line basis
over the estimated useful life, which is generally between three and five
years, or in the case of leasehold improvements, the lease term.
Employee benefits
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans
are charged to the income statement as incurred.
Defined benefit pension plans
The Group’s net obligation in respect of defined benefit pension plans
comprises the amount of future benefit that employees have earned,
discounted to determine a present value, less the fair value of the
pension plan assets. The discount rate used is the yield on AA credit-
rated bonds that have maturity dates approximating to the terms of
the Group’s obligations. The calculation is performed by a qualified
external actuary using the projected unit credit method. Actuarial
gains and losses are recognised in equity. Where the assets of a plan
are greater than its obligation, the asset included in the balance sheet
is limited to the present value of any future refunds from the plan or
reduction in future contributions to the plan.
Share-based employee remuneration
Share-based employee remuneration is determined with reference to
the fair value of the equity instruments at the date at which they are
granted and charged to the income statement over the vesting period
on a straight-line basis. The fair value of share options is calculated
using the binomial option pricing model and is dependent on factors
including the exercise price, expected volatility, option life and risk-free
interest rate. The fair value of the market-based element of the Long-
Term Incentive Plans is calculated using the Monte Carlo Model and is
dependent on factors including the expected volatility, vesting period
and risk-free interest rate.
Tax is included in the income statement except to the extent that it
relates to items recognised directly in equity, in which case the related
tax is recognised in equity.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates applicable at the balance sheet date, together with
any adjustment in respect of previous years.
Deferred tax is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for tax purposes. The following temporary differences are not
provided for: goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates that are expected to apply in the period
when the liability is settled or the asset is realised.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can
be utilised.
1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tax
2: PROFIT FOR THE YEAR
Gross rental income
Ground and equity rents payable
Gross rental income, after rents payable
Notes
3A
Service charge income
Service charge expenses
Net service charge expenses
Other property outgoings
Property outgoings
Net rental income
Management fees receivable
Cost of property activities
Corporate expenses
Administration expenses
Operating profit before other net
gains/(losses) and share of results of associate
Gain on the sale of investment properties
Revaluation gains/(losses) on investment
properties
Revaluation gains on development
properties
Other net gains/(losses)
Share of results of associate
Operating profit
Net finance costs
Profit before tax
Current tax charge
Deferred tax credit
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Non-controlling interests – continuing
operations
Profit for the year attributable to equity
shareholders
Profit for the year attributable to equity
shareholders
Continuing operations
Discontinued operations
3A
14A
7
8A
8A
9B
11A
11A
11A
11A
Adjusted
£m
Capital and
other
£m
321.2
(1.9)
319.3
58.1
(68.0)
(9.9)
(26.6)
(36.5)
282.8
6.7
(33.2)
(15.6)
(42.1)
240.7
–
–
–
–
13.4
254.1
(90.5)
163.6
(0.8)
–
162.8
5.3
168.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.2
61.3
27.5
93.0
88.1
181.1
(18.4)
162.7
–
0.1
162.8
9.6
172.4
Total
2013
£m
321.2
(1.9)
319.3
58.1
(68.0)
(9.9)
(26.6)
(36.5)
282.8
6.7
(33.2)
(15.6)
(42.1)
240.7
4.2
61.3
27.5
93.0
101.5
435.2
(108.9)
326.3
(0.8)
0.1
325.6
14.9
340.5
Adjusted
£m
Capital and
other
£m
Total
2012
£m
297.6
(1.9)
295.7
54.5
(62.7)
(8.2)
(28.7)
(36.9)
258.8
5.9
(31.4)
(17.4)
(42.9)
215.9
12.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.2
(68.3)
(68.3)
19.8
(36.3)
43.2
6.9
(46.1)
(39.2)
–
–
(39.2)
28.9
(10.3)
19.8
(36.3)
47.5
227.1
(133.6)
93.5
(0.4)
–
93.1
48.7
141.8
297.6
(1.9)
295.7
54.5
(62.7)
(8.2)
(28.7)
(36.9)
258.8
5.9
(31.4)
(17.4)
(42.9)
215.9
–
–
–
–
4.3
220.2
(87.5)
132.7
(0.4)
–
132.3
19.8
152.1
(3.6)
0.5
(3.1)
(3.3)
(0.1)
(3.4)
164.5
172.9
337.4
148.8
(10.4)
138.4
159.2
5.3
164.5
163.3
9.6
172.9
322.5
14.9
337.4
129.0
19.8
148.8
(39.3)
28.9
(10.4)
89.7
48.7
138.4
120 Hammerson plc Annual Report 2013
www.hammerson.com
121121
121
Included in gross rental income is £8.0 million (2012: £6.3 million) of contingent rents calculated by reference to tenants’ turnover.
The management fees receivable in notes 2 and 9B include fees paid to Hammerson in respect of joint ventures for investment and development
management services. Except for the transaction with a Non-Executive Director noted in the 2012 annual report, and in relation to Directors’
remuneration, all other related party transactions are eliminated on consolidation.
The Group’s revenue includes gross rental income, service charge income, management fees receivable and finance income. See table above and
note 7 on page 127.
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
3: SEGMENTAL ANALYSIS
The factors used to determine the Group’s reportable segments are the geographic locations (UK and Continental Europe) and sectors in which it
operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross
rental income represents the Group’s revenue from its ‘customers’ or tenants. Net rental income is the principal profit measure used to determine
the performance of each sector. Total assets are not monitored by segment and resource allocation is based on the distribution of property assets
between segments.
A: Revenue and profit by segment
Gross rental
income
£m
Net rental
income
£m
Within net
rental income
£m
2013
Non-cash items
Revaluation
gains/(losses)
on properties
£m
Gross rental
income
£m
Net rental
income
£m
Within net
rental income
£m
2012
Non-cash items
Revaluation
gains/(losses)
on properties
£m
145.1
86.6
231.7
14.9
246.6
124.3
82.1
206.4
12.1
218.5
(7.5)
0.2
(7.3)
(0.1)
(7.4)
58.0
25.1
83.1
(17.7)
65.4
141.2
70.9
212.1
16.2
228.3
117.0
66.8
183.8
13.9
197.7
(7.2)
(0.9)
(8.1)
(0.2)
(8.3)
(21.2)
(30.6)
(51.8)
(17.3)
(69.1)
71.6
63.2
(0.1)
(4.1)
69.1
61.3
–
0.8
Continuing operations
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total investment portfolio
303.3
14.9
318.2
269.6
12.1
281.7
Developments and other
sources not analysed above
Total continuing operations
3.0
321.2
1.1
282.8
As disclosed in note
Discontinued operations
Other UK
2
7.4
2
26
7.4
(0.8)
(7.4)
(0.1)
(7.5)
–
(7.5)
79.0
(17.7)
61.3
27.5
88.8
2, 12
1.5
281.2
16.2
297.4
0.2
297.6
245.1
13.9
259.0
(0.2)
258.8
2
2
28.0
24.1
(8.1)
(0.2)
(8.3)
–
(8.3)
26
1.5
(51.0)
(17.3)
(68.3)
19.8
(48.5)
2, 12
(1.4)
B:
Investment and development property assets by segment
Investment
Development
properties
properties
£m
£m
2013
Capital
expenditure
£m
Total
£m
Investment
properties
Development
properties
£m
£m
2012
Capital
Total
£m
expenditure
£m
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total non-current assets
Assets held for sale
Total property assets
United Kingdom
Continental Europe
C: Analysis of equity shareholders’ funds
2,523.5
1,471.1
3,994.6
199.4
4,194.0
10.9
7.4
18.3
81.4
99.7
2,534.4
1,478.5
4,012.9
280.8
4,293.7
169.7
24.3
194.0
56.0
250.0
2,412.9
1,422.6
3,835.5
158.9
3,994.4
11.5
5.2
16.7
27.5
44.2
2,424.4
1,427.8
3,852.2
186.4
4,038.6
1,240.2
397.3
1,637.5
138.6
1,188.3
231.5
1,419.8
104.5
5,234.8
199.4
5,434.2
–
415.6
81.4
497.0
–
5,650.4
280.8
5,931.2
–
5,434.2
497.0
5,931.2
332.6
56.0
388.6
(0.6)
388.0
5,023.8
158.9
5,182.7
194.5
5,377.2
248.2
27.5
275.7
–
275.7
5,272.0
186.4
5,458.4
194.5
5,652.9
159.2
273.0
432.2
3.7
435.9
536.7
3.7
540.4
18.7
559.1
Assets employed
Net debt
Equity shareholders’ funds
2013
£m
4,481.1
1,831.1
6,312.2
2012
£m
4,514.4
1,373.1
5,887.5
2013
£m
(838.3)
(1,414.0)
(2,252.3)
2012
£m
2013
£m
(861.1)
3,642.8
(1,175.2)
(2,036.3)
417.1
4,059.9
2012
£m
3,653.3
197.9
3,851.2
As part of the Group’s foreign currency hedging programme, at 31 December 2013 the Group had currency swaps outstanding, which are
included in the analysis above. Further details are set out in note 21C.
As disclosed in note
9B
9B
26
9B, 12
9B
9B
26
9B, 12
Total portfolio
328.6
290.2
(8.3)
90.3
325.6
282.9
(6.8)
(49.9)
The non-cash items included within net rental income relate to the amortisation of lease incentives and other costs and movements in accrued
rents receivable.
122122
122 Hammerson plc Annual Report 2013
www.hammerson.com
123
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
3: SEGMENTAL ANALYSIS
The factors used to determine the Group’s reportable segments are the geographic locations (UK and Continental Europe) and sectors in which it
operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross
rental income represents the Group’s revenue from its ‘customers’ or tenants. Net rental income is the principal profit measure used to determine
the performance of each sector. Total assets are not monitored by segment and resource allocation is based on the distribution of property assets
between segments.
A: Revenue and profit by segment
Gross rental
Net rental
Within net
income
£m
income
rental income
£m
£m
Gross rental
income
£m
Net rental
Within net
income
rental income
£m
£m
2013
Non-cash items
Revaluation
gains/(losses)
on properties
£m
2012
Non-cash items
Revaluation
gains/(losses)
on properties
£m
Continuing operations
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total investment portfolio
145.1
86.6
231.7
14.9
246.6
124.3
82.1
206.4
12.1
218.5
303.3
14.9
318.2
269.6
12.1
281.7
Developments and other
sources not analysed above
Total continuing operations
3.0
321.2
1.1
282.8
71.6
63.2
(0.1)
(4.1)
69.1
61.3
–
0.8
141.2
70.9
212.1
16.2
228.3
281.2
16.2
297.4
0.2
297.6
117.0
66.8
183.8
13.9
197.7
245.1
13.9
259.0
(0.2)
258.8
(7.5)
0.2
(7.3)
(0.1)
(7.4)
(7.4)
(0.1)
(7.5)
–
(7.5)
58.0
25.1
83.1
(17.7)
65.4
79.0
(17.7)
61.3
27.5
88.8
2, 12
1.5
(7.2)
(0.9)
(8.1)
(0.2)
(8.3)
(8.1)
(0.2)
(8.3)
–
(8.3)
26
1.5
(21.2)
(30.6)
(51.8)
(17.3)
(69.1)
(51.0)
(17.3)
(68.3)
19.8
(48.5)
2, 12
(1.4)
As disclosed in note
Discontinued operations
Other UK
2
7.4
2
26
2
2
7.4
(0.8)
28.0
24.1
As disclosed in note
9B
9B
26
9B, 12
9B
9B
26
9B, 12
Total portfolio
328.6
290.2
(8.3)
90.3
325.6
282.9
(6.8)
(49.9)
The non-cash items included within net rental income relate to the amortisation of lease incentives and other costs and movements in accrued
rents receivable.
B:
Investment and development property assets by segment
Investment
properties
£m
Development
properties
£m
2013
Capital
expenditure
£m
Total
£m
Investment
properties
£m
Development
properties
£m
2,523.5
1,471.1
3,994.6
199.4
4,194.0
10.9
7.4
18.3
81.4
99.7
2,534.4
1,478.5
4,012.9
280.8
4,293.7
169.7
24.3
194.0
56.0
250.0
2,412.9
1,422.6
3,835.5
158.9
3,994.4
11.5
5.2
16.7
27.5
44.2
2012
Capital
expenditure
£m
159.2
273.0
432.2
3.7
435.9
Total
£m
2,424.4
1,427.8
3,852.2
186.4
4,038.6
1,240.2
397.3
1,637.5
138.6
1,188.3
231.5
1,419.8
104.5
5,234.8
199.4
5,434.2
–
415.6
81.4
497.0
–
5,650.4
280.8
5,931.2
–
5,434.2
497.0
5,931.2
332.6
56.0
388.6
(0.6)
388.0
5,023.8
158.9
5,182.7
194.5
5,377.2
248.2
27.5
275.7
–
275.7
5,272.0
186.4
5,458.4
194.5
5,652.9
536.7
3.7
540.4
18.7
559.1
United Kingdom
Retail:
Shopping centres
Retail parks
Other UK
Total United Kingdom
Continental Europe
France: Retail
Group
Retail
Other UK
Total non-current assets
Assets held for sale
Total property assets
C: Analysis of equity shareholders’ funds
United Kingdom
Continental Europe
Assets employed
Net debt
Equity shareholders’ funds
2013
£m
4,481.1
1,831.1
6,312.2
2012
£m
4,514.4
1,373.1
5,887.5
2013
£m
(838.3)
(1,414.0)
(2,252.3)
2012
£m
2013
£m
(861.1)
3,642.8
(1,175.2)
(2,036.3)
417.1
4,059.9
2012
£m
3,653.3
197.9
3,851.2
As part of the Group’s foreign currency hedging programme, at 31 December 2013 the Group had currency swaps outstanding, which are
included in the analysis above. Further details are set out in note 21C.
122 Hammerson plc Annual Report 2013
www.hammerson.com
123123
123
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
4: ADMINISTRATION EXPENSES
Administration expenses include the following items:
Staff costs, including Directors
Salaries and wages
Performance-related bonuses – payable in cash
– payable in shares
Other share-based employee remuneration
Social security
Net pension expense
– defined contribution scheme
– defined benefit schemes
Continuing operations
Discontinued operations*
Total
Note
6
6
9B
2013
£m
24.4
5.7
0.8
6.5
3.0
6.5
2.0
1.2
3.2
43.6
0.4
44.0
2012
£m
22.7
7.2
1.1
8.3
3.7
5.8
2.0
1.3
3.3
43.8
1.1
44.9
*
Includes £0.1 million (2012: £0.1 million) in respect of share-based employee remuneration.
Of the above amount, £10.6 million (2012: £10.8 million) was recharged to tenants through service charges and £1.5 million (2012: £0.8 million)
capitalised in respect of development projects. Further details of share-based payment arrangements, some of which have performance
conditions, are provided in the Directors’ Remuneration Report on pages 72 to 86. In addition to the figures above, redundancy related costs of
£0.6 million (2012: £0.1 million) were incurred during the year.
Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme, part payable in cash and part
payable in shares. The Company also operates a number of share plans under which employees, including Executive Directors, are eligible to
participate. Details of these schemes are set out in the Directors’ Remuneration Report on pages 76 to 78. In addition, the Company operates the
following share plans in which Directors do not participate:
Restricted Share Plan
Certain UK employees receive awards under a Restricted Share Plan, which provides an opportunity for these employees to build up a
shareholding in the Company. Under the Restricted Share Plan, share awards vest, subject to continued employment, on the third anniversary
of grant.
French Share Plan
For French employees, who are not able to participate in the Share Incentive Plan referred to on page 78 or the Restricted Share Plan referred to
above, there is a share plan under which conditional awards of shares are made. The number of shares that will vest after a two-year period is
dependent on a combination of the performance of the Company’s investment portfolio in France and the Group’s performance.
Staff numbers
Average number of staff
Staff recharged to tenants, included above
2013
Number
410
174
2012
Number
405
161
Other information
Auditor’s remuneration:
Audit of the Company’s annual accounts
Audit of subsidiaries, pursuant to legislation
Other services
Other auditor’s remuneration: Audit of subsidiaries, pursuant to legislation, and other services
Depreciation of plant, equipment and owner-occupied property
2013
£m
0.2
0.4
0.1
0.1
1.5
2012
£m
0.3
0.4
0.4
0.2
1.5
Auditor’s remuneration: Other services in 2012 included £0.2 million for due diligence services in relation to the acquisition of additional interests
in Value Retail, and £0.2 million payable to Drivers Jonas Deloitte in respect of advice for the acquisition of The Junction Fund.
5: DIRECTORS’ EMOLUMENTS
Full details of the Directors’ emoluments, as required by the Companies Act 2006, are disclosed in the audited sections of the Directors’ Remuneration
Report on pages 87 to 99. The Executive Directors are considered to be ‘Key Management’ for the purposes of IAS 24 ‘Related party transactions’.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the year.
6: PENSIONS
Defined contribution pension scheme
in respect of discontinued operations.
Defined benefit pension schemes
The Company operates the UK funded approved Group Personal Pension Plan which is a defined contribution pension scheme. The Group’s cost
for the year was £2.0 million (2012: £2.1 million), being £2.0 million (2012: £2.0 million) relating to continuing operations and £nil (2012: £0.1 million)
Hammerson Group Management Limited Pension & Life Assurance Scheme (the ‘Scheme’).
The Scheme is funded and the funds, which are administered by trustees, are independent of the Group’s finances. The Scheme, which was closed
to new entrants on 31 December 2002, provides a pension linked to final salary at retirement.
Unfunded Unapproved Retirement Scheme
The unfunded scheme provides pension benefits to two former Executive Directors; one in the UK and one in France. The amount of pension is
linked to final salary at retirement. The accrued benefits in respect of the former Executive Directors remain within the scheme and are now paid
directly by the Group.
US Unfunded Unapproved Retirement Scheme
The US unfunded pension commitment relates to obligations to four former employees and their spouses.
Principal actuarial assumptions used for defined benefit pension schemes
Discount rate for scheme liabilities
Increase in pensionable salaries
Increase in retail price index
Increase in pensions in payment
Mortality table
2013
%
4.6
3.9
3.4
3.4
2012
%
4.5
3.5
3.0
3.0
SAPS Light
SAPS Light
CMI 1.0%
CMI 0.5%
124124
124 Hammerson plc Annual Report 2013
www.hammerson.com
125
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
4: ADMINISTRATION EXPENSES
Administration expenses include the following items:
Staff costs, including Directors
Salaries and wages
Performance-related bonuses – payable in cash
– payable in shares
Other share-based employee remuneration
Social security
Net pension expense
– defined contribution scheme
– defined benefit schemes
Continuing operations
Discontinued operations*
Total
Note
6
6
9B
2013
£m
24.4
5.7
0.8
6.5
3.0
6.5
2.0
1.2
3.2
43.6
0.4
44.0
2012
£m
22.7
7.2
1.1
8.3
3.7
5.8
2.0
1.3
3.3
43.8
1.1
44.9
*
Includes £0.1 million (2012: £0.1 million) in respect of share-based employee remuneration.
Of the above amount, £10.6 million (2012: £10.8 million) was recharged to tenants through service charges and £1.5 million (2012: £0.8 million)
capitalised in respect of development projects. Further details of share-based payment arrangements, some of which have performance
conditions, are provided in the Directors’ Remuneration Report on pages 72 to 86. In addition to the figures above, redundancy related costs of
£0.6 million (2012: £0.1 million) were incurred during the year.
Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme, part payable in cash and part
payable in shares. The Company also operates a number of share plans under which employees, including Executive Directors, are eligible to
participate. Details of these schemes are set out in the Directors’ Remuneration Report on pages 76 to 78. In addition, the Company operates the
following share plans in which Directors do not participate:
Certain UK employees receive awards under a Restricted Share Plan, which provides an opportunity for these employees to build up a
shareholding in the Company. Under the Restricted Share Plan, share awards vest, subject to continued employment, on the third anniversary
For French employees, who are not able to participate in the Share Incentive Plan referred to on page 78 or the Restricted Share Plan referred to
above, there is a share plan under which conditional awards of shares are made. The number of shares that will vest after a two-year period is
dependent on a combination of the performance of the Company’s investment portfolio in France and the Group’s performance.
Restricted Share Plan
of grant.
French Share Plan
Staff numbers
Average number of staff
Staff recharged to tenants, included above
2013
Number
410
174
2012
Number
405
161
Other information
Auditor’s remuneration:
Audit of the Company’s annual accounts
Audit of subsidiaries, pursuant to legislation
Other services
Other auditor’s remuneration: Audit of subsidiaries, pursuant to legislation, and other services
Depreciation of plant, equipment and owner-occupied property
2013
£m
0.2
0.4
0.1
0.1
1.5
2012
£m
0.3
0.4
0.4
0.2
1.5
Auditor’s remuneration: Other services in 2012 included £0.2 million for due diligence services in relation to the acquisition of additional interests
in Value Retail, and £0.2 million payable to Drivers Jonas Deloitte in respect of advice for the acquisition of The Junction Fund.
5: DIRECTORS’ EMOLUMENTS
Full details of the Directors’ emoluments, as required by the Companies Act 2006, are disclosed in the audited sections of the Directors’ Remuneration
Report on pages 87 to 99. The Executive Directors are considered to be ‘Key Management’ for the purposes of IAS 24 ‘Related party transactions’.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the year.
6: PENSIONS
Defined contribution pension scheme
The Company operates the UK funded approved Group Personal Pension Plan which is a defined contribution pension scheme. The Group’s cost
for the year was £2.0 million (2012: £2.1 million), being £2.0 million (2012: £2.0 million) relating to continuing operations and £nil (2012: £0.1 million)
in respect of discontinued operations.
Defined benefit pension schemes
Hammerson Group Management Limited Pension & Life Assurance Scheme (the ‘Scheme’).
The Scheme is funded and the funds, which are administered by trustees, are independent of the Group’s finances. The Scheme, which was closed
to new entrants on 31 December 2002, provides a pension linked to final salary at retirement.
Unfunded Unapproved Retirement Scheme
The unfunded scheme provides pension benefits to two former Executive Directors; one in the UK and one in France. The amount of pension is
linked to final salary at retirement. The accrued benefits in respect of the former Executive Directors remain within the scheme and are now paid
directly by the Group.
US Unfunded Unapproved Retirement Scheme
The US unfunded pension commitment relates to obligations to four former employees and their spouses.
Principal actuarial assumptions used for defined benefit pension schemes
Discount rate for scheme liabilities
Increase in pensionable salaries
Increase in retail price index
Increase in pensions in payment
Mortality table
2013
%
4.6
3.9
3.4
3.4
2012
%
4.5
3.5
3.0
3.0
SAPS Light
SAPS Light
CMI 1.0%
CMI 0.5%
124 Hammerson plc Annual Report 2013
www.hammerson.com
125125
125
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
6: PENSIONS (CONTINUED)
Amounts recognised in the income statement in respect of defined benefit pension schemes
Included in income statement line
Current service cost
Administration expenses
Net interest cost
Other interest payable
Total pension expense
The Group expects to make regular contributions totalling £3.5 million to the Scheme in the next financial year.
Amounts recognised in the balance sheet in respect of defined benefit pension schemes
Fair value of Scheme assets
Present value of Scheme obligations
Present value of unfunded defined benefit obligations
Present value of US unfunded defined benefit obligations
Net pension liability
Analysed as:
Current liabilities: Other payables
Non-current liabilities
2013
£m
1.2
1.1
2.3
2013
£m
58.4
(79.6)
(21.2)
(5.1)
(6.6)
(32.9)
(0.7)
(32.2)
(32.9)
The present value of defined benefit obligations has been calculated by an external actuary. This was taken as the present value of accrued
benefits and pensions in payment calculated using the projected unit method and allowing for projected compensation.
All defined benefit pension scheme assets are investments with target returns linked to LIBOR.
Experience gains and losses for current and prior years
Experience (losses)/gains on plan liabilities
Experience (losses)/gains on plan assets
2013
£m
(0.5)
1.1
2012
£m
1.3
0.4
1.7
2012
£m
55.0
(72.9)
(17.9)
(5.1)
(7.5)
(30.5)
(0.8)
(29.7)
(30.5)
2012
£m
0.6
0.4
Changes in the present value of defined benefit pension scheme obligations
Actuarial losses – experience on plan liabilities
– changes in financial assumptions
– changes in demographic assumptions
At 1 January
Service cost
Interest cost
Benefits
Exchange gains
At 31 December
Changes in the fair value of defined benefit pension scheme assets
At 1 January
Interest on assets
Actuarial gains
Benefits
At 31 December
Contributions by employer
7: NET FINANCE COSTS
Interest on bank loans and overdrafts
Interest on other borrowings
Interest on obligations under finance leases
Other interest payable
Gross interest costs
Less: Interest capitalised
Finance costs
Bond redemption – premium and costs*
Floating rate reset bonds redemption – premium and costs*
Change in fair value of interest rate swaps
Change in fair value of currency swaps outside hedge accounting designation
Change in fair value of derivatives*
Finance income
Net finance costs
Underlying finance costs
Gross interest costs
Finance income
Net underlying finance costs
*
Total of £18.4 million (2012: £46.1 million) included in ‘Capital and other’ in note 2.
2013
£m
85.5
1.2
3.6
0.5
1.4
1.6
3.5
(2.5)
–
91.3
2013
£m
55.0
2.5
1.1
1.5
(1.7)
58.4
2013
£m
12.3
94.8
0.6
2.4
110.1
(13.1)
97.0
3.9
–
14.5
–
14.5
(6.5)
108.9
110.1
(6.5)
103.6
2012
£m
82.2
1.3
3.7
(0.6)
1.7
–
1.1
(2.4)
(0.4)
85.5
2012
£m
51.5
3.3
0.4
1.5
(1.7)
55.0
2012
£m
11.6
89.2
0.6
1.4
102.8
(8.8)
94.0
13.8
41.7
(8.3)
(1.1)
(9.4)
(6.5)
133.6
102.8
(6.5)
96.3
126126
126 Hammerson plc Annual Report 2013
www.hammerson.com
127
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
6: PENSIONS (CONTINUED)
Amounts recognised in the income statement in respect of defined benefit pension schemes
Included in income statement line
Current service cost
Administration expenses
Net interest cost
Other interest payable
Total pension expense
The Group expects to make regular contributions totalling £3.5 million to the Scheme in the next financial year.
Amounts recognised in the balance sheet in respect of defined benefit pension schemes
Fair value of Scheme assets
Present value of Scheme obligations
Present value of unfunded defined benefit obligations
Present value of US unfunded defined benefit obligations
Net pension liability
Analysed as:
Current liabilities: Other payables
Non-current liabilities
The present value of defined benefit obligations has been calculated by an external actuary. This was taken as the present value of accrued
benefits and pensions in payment calculated using the projected unit method and allowing for projected compensation.
All defined benefit pension scheme assets are investments with target returns linked to LIBOR.
Experience gains and losses for current and prior years
Experience (losses)/gains on plan liabilities
Experience (losses)/gains on plan assets
2013
£m
1.2
1.1
2.3
2013
£m
58.4
(79.6)
(21.2)
(5.1)
(6.6)
(32.9)
(0.7)
(32.2)
(32.9)
2013
£m
(0.5)
1.1
2012
£m
1.3
0.4
1.7
2012
£m
55.0
(72.9)
(17.9)
(5.1)
(7.5)
(30.5)
(0.8)
(29.7)
(30.5)
2012
£m
0.6
0.4
Changes in the present value of defined benefit pension scheme obligations
At 1 January
Service cost
Interest cost
Actuarial losses – experience on plan liabilities
– changes in financial assumptions
– changes in demographic assumptions
Benefits
Exchange gains
At 31 December
Changes in the fair value of defined benefit pension scheme assets
At 1 January
Interest on assets
Actuarial gains
Contributions by employer
Benefits
At 31 December
7: NET FINANCE COSTS
Interest on bank loans and overdrafts
Interest on other borrowings
Interest on obligations under finance leases
Other interest payable
Gross interest costs
Less: Interest capitalised
Finance costs
Bond redemption – premium and costs*
Floating rate reset bonds redemption – premium and costs*
Change in fair value of interest rate swaps
Change in fair value of currency swaps outside hedge accounting designation
Change in fair value of derivatives*
Finance income
Net finance costs
Underlying finance costs
Gross interest costs
Finance income
Net underlying finance costs
*
Total of £18.4 million (2012: £46.1 million) included in ‘Capital and other’ in note 2.
2013
£m
85.5
1.2
3.6
0.5
1.4
1.6
3.5
(2.5)
–
91.3
2013
£m
55.0
2.5
1.1
1.5
(1.7)
58.4
2013
£m
12.3
94.8
0.6
2.4
110.1
(13.1)
97.0
3.9
–
14.5
–
14.5
(6.5)
108.9
110.1
(6.5)
103.6
2012
£m
82.2
1.3
3.7
(0.6)
1.7
–
1.1
(2.4)
(0.4)
85.5
2012
£m
51.5
3.3
0.4
1.5
(1.7)
55.0
2012
£m
11.6
89.2
0.6
1.4
102.8
(8.8)
94.0
13.8
41.7
(8.3)
(1.1)
(9.4)
(6.5)
133.6
102.8
(6.5)
96.3
126 Hammerson plc Annual Report 2013
www.hammerson.com
127127
127
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
8: TAX
A: Tax charge
UK current tax
Foreign current tax
Current tax charge
Deferred tax credit
Tax charge
Current tax is reduced by the UK REIT and French SIIC tax exemptions.
B: Tax charge reconciliation
Profit before tax – continuing operations
Profit before tax – discontinued operations
Profit before tax
Less: Profit after tax of associate
Profit on ordinary activities before tax
Profit multiplied by the UK corporation tax rate of 23.25% (2012: 24.5%)
UK REIT tax exemption on net income before revaluations and disposals
UK REIT tax exemption on revaluations and disposals
SIIC tax exemption
Non-deductible and other items
Tax charge
C: Current and deferred tax movements
Notes
2
9B
2013
£m
0.3
0.5
0.8
(0.1)
0.7
2013
£m
326.3
14.9
341.2
(101.5)
239.7
55.7
(19.3)
(15.2)
(22.7)
2.2
0.7
2012
£m
0.3
0.1
0.4
–
0.4
2012
£m
93.5
48.7
142.2
(47.5)
94.7
23.2
(21.1)
7.9
(19.9)
10.3
0.4
Current tax
Deferred tax
Analysed as:
Current assets: Corporation tax
Current liabilities: Tax
Non-current liabilities: Deferred tax
1 January
2013
£m
Recognised in
income
£m
Tax paid
£m
Acquisitions
£m
31 December
2013
£m
1.2
0.5
1.7
(0.2)
1.4
0.5
1.7
0.8
(0.1)
0.7
(1.0)
–
(1.0)
(0.2)
–
(0.2)
0.8
0.4
1.2
(0.2)
1.0
0.4
1.2
D: Unrecognised deferred tax
At 31 December 2013, the Group had unrecognised deferred tax assets as calculated at a tax rate of 20% (2012: 23%) of £68 million
(2012: £69 million) for surplus UK revenue tax losses carried forward and £90 million (2012: £63 million) for UK capital losses.
Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the Group can control whether gains
crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2013 the total of such gains was £235 million
(2012: £175 million) and the potential tax effect before the offset of losses was £47 million (2012: £40 million). If a UK REIT sells a property within
three years of completion of development, the REIT exemption will not apply. There were no such properties at 31 December 2012 or 2013.
E: UK REIT status
The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the Group’s UK property
rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three
years after completion of development. The Group is otherwise subject to UK corporation tax.
As a REIT, Hammerson plc is required to pay Property Income Distributions equal to at least 90% of the Group’s exempted net income. To remain
a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group’s qualifying activity and its
balance of business. The Group continues to meet these conditions.
F: French SIIC status
Hammerson plc has been a French SIIC since 1 January 2004 and all the major French properties are covered by the SIIC tax-exempt regime.
Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson
plc, which then designates UK dividends paid to its shareholders as SIIC distributions. Dividend obligations will arise principally after property
disposals but for the Hammerson Group there will be a period of around four years after a disposal for dividends to be paid to shareholders.
Outstanding SIIC dividend obligations arising on disposals and earnings prior to 31 December 2013 amount to £30 million (2012: £80 million) and
are expected to be settled within dividends paid by Hammerson plc over the following four years. A further £300 million (2012: £265 million) of
dividends would be payable if the properties were realised at their 31 December 2013 values. Since 1 July 2009, qualifying foreign dividends have
been exempt from UK tax and therefore no deferred tax provision is recognised.
At 31 December 2013, Hammerson had been a SIIC for 10 years so the period during which penalties may be imposed for leaving the regime has
ended. To remain a SIIC, at least 80% of assets must be employed in property investment and, with limited temporary exceptions, no shareholder
may hold 60% or more of the shares. The Group continues to meet these conditions.
9: DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
A: Disposals
As part of the Group’s strategy to focus on the retail sector, the following entities and office properties were disposed of between July 2012 and
June 2013. Further information is included in the Business Review on page 37:
Entity
Hammerson (99 Bishopsgate) Limited
Hammerson Bishopsgate LLP
99 Bishopsgate Management Limited
10 Gresham Street LLP
Hammerson Gresham Street Unit Trust
Hammerson (Victoria) Limited
125 OBS Limited Partnership
Hammerson 125 OBS Unit Trust
125 OBS (General Partner) Limited
Hammerson (125 OBS LP) Limited
Hammerson (Leadenhall Court) Limited
Property
Principal Place, London EC2
London Wall Place, London EC2
Harbour Quay, London E14
Puddledock, London EC4
a minor proportion of the Group’s portfolio.
and prior years.
At 31 December 2013, the residual properties Victoria Station, SW1 and Spitalfields, E1 were reclassified to continuing operations as they form
The income and expenditure of the entities and properties shown above have been classified as discontinued operations in both the current
128128
128 Hammerson plc Annual Report 2013
www.hammerson.com
129
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
8: TAX
A: Tax charge
UK current tax
Foreign current tax
Current tax charge
Deferred tax credit
Tax charge
Current tax is reduced by the UK REIT and French SIIC tax exemptions.
B: Tax charge reconciliation
Profit before tax – continuing operations
Profit before tax – discontinued operations
Profit before tax
Less: Profit after tax of associate
Profit on ordinary activities before tax
Profit multiplied by the UK corporation tax rate of 23.25% (2012: 24.5%)
UK REIT tax exemption on net income before revaluations and disposals
UK REIT tax exemption on revaluations and disposals
SIIC tax exemption
Non-deductible and other items
Tax charge
C: Current and deferred tax movements
Current tax
Deferred tax
Analysed as:
Current assets: Corporation tax
Current liabilities: Tax
Non-current liabilities: Deferred tax
D: Unrecognised deferred tax
Notes
2
9B
2013
£m
0.3
0.5
0.8
(0.1)
0.7
2013
£m
326.3
14.9
341.2
(101.5)
239.7
55.7
(19.3)
(15.2)
(22.7)
2.2
0.7
£m
(0.2)
–
(0.2)
2012
£m
0.3
0.1
0.4
–
0.4
2012
£m
93.5
48.7
142.2
(47.5)
94.7
23.2
(21.1)
7.9
(19.9)
10.3
0.4
2013
£m
0.8
0.4
1.2
(0.2)
1.0
0.4
1.2
1 January
Recognised in
31 December
income
Tax paid
Acquisitions
£m
0.8
(0.1)
0.7
£m
(1.0)
–
(1.0)
2013
£m
1.2
0.5
1.7
(0.2)
1.4
0.5
1.7
At 31 December 2013, the Group had unrecognised deferred tax assets as calculated at a tax rate of 20% (2012: 23%) of £68 million
(2012: £69 million) for surplus UK revenue tax losses carried forward and £90 million (2012: £63 million) for UK capital losses.
Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the Group can control whether gains
crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2013 the total of such gains was £235 million
(2012: £175 million) and the potential tax effect before the offset of losses was £47 million (2012: £40 million). If a UK REIT sells a property within
three years of completion of development, the REIT exemption will not apply. There were no such properties at 31 December 2012 or 2013.
E: UK REIT status
The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the Group’s UK property
rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three
years after completion of development. The Group is otherwise subject to UK corporation tax.
As a REIT, Hammerson plc is required to pay Property Income Distributions equal to at least 90% of the Group’s exempted net income. To remain
a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group’s qualifying activity and its
balance of business. The Group continues to meet these conditions.
F: French SIIC status
Hammerson plc has been a French SIIC since 1 January 2004 and all the major French properties are covered by the SIIC tax-exempt regime.
Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson
plc, which then designates UK dividends paid to its shareholders as SIIC distributions. Dividend obligations will arise principally after property
disposals but for the Hammerson Group there will be a period of around four years after a disposal for dividends to be paid to shareholders.
Outstanding SIIC dividend obligations arising on disposals and earnings prior to 31 December 2013 amount to £30 million (2012: £80 million) and
are expected to be settled within dividends paid by Hammerson plc over the following four years. A further £300 million (2012: £265 million) of
dividends would be payable if the properties were realised at their 31 December 2013 values. Since 1 July 2009, qualifying foreign dividends have
been exempt from UK tax and therefore no deferred tax provision is recognised.
At 31 December 2013, Hammerson had been a SIIC for 10 years so the period during which penalties may be imposed for leaving the regime has
ended. To remain a SIIC, at least 80% of assets must be employed in property investment and, with limited temporary exceptions, no shareholder
may hold 60% or more of the shares. The Group continues to meet these conditions.
9: DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
A: Disposals
As part of the Group’s strategy to focus on the retail sector, the following entities and office properties were disposed of between July 2012 and
June 2013. Further information is included in the Business Review on page 37:
Entity
Hammerson (99 Bishopsgate) Limited
Hammerson Bishopsgate LLP
99 Bishopsgate Management Limited
10 Gresham Street LLP
Hammerson Gresham Street Unit Trust
Hammerson (Victoria) Limited
125 OBS Limited Partnership
Hammerson 125 OBS Unit Trust
125 OBS (General Partner) Limited
Hammerson (125 OBS LP) Limited
Hammerson (Leadenhall Court) Limited
Property
Principal Place, London EC2
London Wall Place, London EC2
Harbour Quay, London E14
Puddledock, London EC4
At 31 December 2013, the residual properties Victoria Station, SW1 and Spitalfields, E1 were reclassified to continuing operations as they form
a minor proportion of the Group’s portfolio.
The income and expenditure of the entities and properties shown above have been classified as discontinued operations in both the current
and prior years.
128 Hammerson plc Annual Report 2013
www.hammerson.com
129129
129
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
9: DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE (CONTINUED)
D: Summary of assets and liabilities associated with assets held for sale
Adjusted
£m
Capital and
other
£m
7.4
–
7.4
0.9
(0.9)
–
–
–
7.4
0.2
(0.4)
(0.2)
7.2
–
–
–
7.2
(1.9)
5.3
–
–
–
–
–
–
–
–
–
–
–
–
–
7.5
1.5
9.0
9.0
0.6
9.6
2013
Total
£m
7.4
–
7.4
0.9
(0.9)
–
–
–
7.4
0.2
(0.4)
(0.2)
7.2
7.5
1.5
9.0
16.2
(1.3)
14.9
B: Profit for the year
Gross rental income
Ground and equity rents payable
Gross rental income, after rents payable
Service charge income
Service charge expenses
Net service charge expenses
Other property outgoings
Property outgoings
Net rental income
Management fees receivable
Cost of property activities
Administration expenses
Notes
3A
3A
4
Operating profit before other net gains
Gain on the sale of investment properties
Revaluation gains/(losses) on investment properties
Other net gains
Operating profit
Net finance costs
Profit before and after tax and profit for the year
attributable to equity shareholders
2, 11A
C: Cashflows from discontinued operations
Cash flows from operating activities
Cash flows from investing activities
Cash flows used in financing activities
Net cash inflow from discontinued operations
Adjusted
£m
Capital and
other
£m
28.0
(0.3)
27.7
4.0
(6.7)
(2.7)
(0.9)
(3.6)
24.1
0.7
(1.1)
(0.4)
23.7
–
–
–
23.7
(3.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
30.4
(1.4)
29.0
29.0
(0.1)
19.8
28.9
2013
£m
(8.6)
195.2
(64.6)
122.0
2012
Total
£m
28.0
(0.3)
27.7
4.0
(6.7)
(2.7)
(0.9)
(3.6)
24.1
0.7
(1.1)
(0.4)
23.7
30.4
(1.4)
29.0
52.7
(4.0)
48.7
2012
£m
26.5
352.5
(0.7)
378.3
2013
£m
–
–
–
–
–
–
–
–
–
–
–
–
2012
£m
194.5
7.0
1.8
9.3
212.6
63.3
6.9
3.7
15.2
1.3
90.4
122.2
Investment properties
Interests in leasehold properties
Current receivables
Cash and deposits
Assets held for sale
Non-current borrowings
Obligations under finance leases
Payables
Current payables
Current borrowings
Liabilities associated with assets held for sale
Net assets associated with assets held for sale
10: DIVIDENDS
Current year
2013 final dividend
2013 interim dividend
Prior years
2012 final dividend
2012 interim dividend
2011 final dividend
The proposed final dividend of 10.8 pence per share was recommended by the Board on 14 February 2014 and, subject to approval by
shareholders, is payable on 25 April 2014 to shareholders on the register at the close of business on 14 March 2014. 3.6 pence per share will be
paid as a PID, net of withholding tax if applicable, and the remainder of 7.2 pence per share will be paid as a normal dividend. There will be no scrip
alternative. The aggregate amount of the 2013 final dividend is £77.0 million. This has been calculated using the total number of eligible shares
outstanding at 31 December 2013.
The interim dividend of 8.3 pence per share was paid on 3 October 2013, as a PID, net of withholding tax where appropriate.
The total dividend for the year ended 31 December 2013 would be 19.1 pence per share (2012: 17.7 pence per share).
PID
pence
per share
Non-PID
pence
per share
Total
pence
per share
Equity
dividends
2013
£m
Equity
dividends
2012
£m
3.6
8.3
11.9
4.0
7.7
11.7
7.0
7.2
–
7.2
6.0
–
6.0
2.3
10.8
8.3
19.1
10.0
7.7
17.7
9.3
–
59.0
–
–
71.1
–
–
–
130.1
8.7
(9.4)
–
54.8
66.1
120.9
6.2
(8.7)
–
Dividends as reported in the consolidated statement of changes in equity
2011 interim dividend withholding tax (paid January 2012)
2012 interim dividend withholding tax (paid January 2013)
2013 interim dividend withholding tax (paid January 2014)
Dividends paid as reported in the consolidated cash flow statement
129.4
118.4
130130
130 Hammerson plc Annual Report 2013
www.hammerson.com
131
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
B: Profit for the year
Gross rental income
Ground and equity rents payable
Gross rental income, after rents payable
Service charge income
Service charge expenses
Net service charge expenses
Other property outgoings
Property outgoings
Net rental income
Management fees receivable
Cost of property activities
Administration expenses
Notes
3A
3A
4
Operating profit before other net gains
Gain on the sale of investment properties
Revaluation gains/(losses) on investment properties
Other net gains
Operating profit
Net finance costs
Profit before and after tax and profit for the year
attributable to equity shareholders
2, 11A
C: Cashflows from discontinued operations
Cash flows from operating activities
Cash flows from investing activities
Cash flows used in financing activities
Net cash inflow from discontinued operations
Adjusted
Capital and
other
£m
Adjusted
Capital and
other
£m
£m
7.4
–
7.4
0.9
(0.9)
7.4
0.2
(0.4)
(0.2)
7.2
–
–
–
–
–
–
7.2
(1.9)
5.3
–
–
–
–
–
–
–
–
–
–
–
–
–
7.5
1.5
9.0
9.0
0.6
9.6
2013
Total
£m
7.4
–
7.4
0.9
(0.9)
–
–
–
7.4
0.2
(0.4)
(0.2)
7.2
7.5
1.5
9.0
16.2
(1.3)
14.9
£m
28.0
(0.3)
27.7
4.0
(6.7)
(2.7)
(0.9)
(3.6)
24.1
0.7
(1.1)
(0.4)
23.7
–
–
–
23.7
(3.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
30.4
(1.4)
29.0
29.0
(0.1)
2013
£m
(8.6)
195.2
(64.6)
122.0
2012
Total
£m
28.0
(0.3)
27.7
4.0
(6.7)
(2.7)
(0.9)
(3.6)
24.1
0.7
(1.1)
(0.4)
23.7
30.4
(1.4)
29.0
52.7
(4.0)
48.7
2012
£m
26.5
352.5
(0.7)
378.3
9: DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE (CONTINUED)
D: Summary of assets and liabilities associated with assets held for sale
Investment properties
Interests in leasehold properties
Current receivables
Cash and deposits
Assets held for sale
Non-current borrowings
Obligations under finance leases
Payables
Current payables
Current borrowings
Liabilities associated with assets held for sale
Net assets associated with assets held for sale
2013
£m
–
–
–
–
–
–
–
–
–
–
–
–
2012
£m
194.5
7.0
1.8
9.3
212.6
63.3
6.9
3.7
15.2
1.3
90.4
122.2
10: DIVIDENDS
The proposed final dividend of 10.8 pence per share was recommended by the Board on 14 February 2014 and, subject to approval by
shareholders, is payable on 25 April 2014 to shareholders on the register at the close of business on 14 March 2014. 3.6 pence per share will be
paid as a PID, net of withholding tax if applicable, and the remainder of 7.2 pence per share will be paid as a normal dividend. There will be no scrip
alternative. The aggregate amount of the 2013 final dividend is £77.0 million. This has been calculated using the total number of eligible shares
outstanding at 31 December 2013.
The interim dividend of 8.3 pence per share was paid on 3 October 2013, as a PID, net of withholding tax where appropriate.
19.8
28.9
The total dividend for the year ended 31 December 2013 would be 19.1 pence per share (2012: 17.7 pence per share).
Current year
2013 final dividend
2013 interim dividend
Prior years
2012 final dividend
2012 interim dividend
2011 final dividend
Dividends as reported in the consolidated statement of changes in equity
2011 interim dividend withholding tax (paid January 2012)
2012 interim dividend withholding tax (paid January 2013)
2013 interim dividend withholding tax (paid January 2014)
PID
pence
per share
Non-PID
pence
per share
Total
pence
per share
Equity
dividends
2013
£m
Equity
dividends
2012
£m
3.6
8.3
11.9
4.0
7.7
11.7
7.0
7.2
–
7.2
6.0
–
6.0
2.3
10.8
8.3
19.1
10.0
7.7
17.7
9.3
–
59.0
–
–
71.1
–
–
130.1
–
8.7
(9.4)
–
54.8
66.1
120.9
6.2
(8.7)
–
Dividends paid as reported in the consolidated cash flow statement
129.4
118.4
130 Hammerson plc Annual Report 2013
www.hammerson.com
131131
131
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
11: EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and these
are included in the following tables.
A: Earnings per share
The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson
Employee Share Ownership Plan (note 25), which are treated as cancelled.
Basic – continuing operations
Basic – discontinued operations
Basic – total
Dilutive share options
Diluted
Adjustments:
Other net (gains)/losses
– continuing operations
– discontinued operations
Adjustment for associate
Change in fair value of derivatives
– continuing operations
– discontinued operations
Bond redemption – premium and costs
Floating rate reset bonds redemption – premium
and costs
Deferred tax credit
Non-controlling interests in respect of the above1
EPRA
1. Non-controlling interests relate to continuing operations.
Notes
Earnings
£m
2
2
2
2
9B
14A
7
9B
7
7
8A
2
322.5
14.9
337.4
–
337.4
(93.0)
(9.0)
(102.0)
(88.1)
14.5
(0.6)
13.9
3.9
–
(0.1)
(0.5)
164.5
Shares
million
711.8
0.2
712.0
2013
Pence
per share
45.3
2.1
47.4
–
47.4
(13.1)
(1.2)
(14.3)
(12.3)
2.0
(0.1)
1.9
0.5
–
–
(0.1)
23.1
Earnings
£m
89.7
48.7
138.4
–
138.4
36.3
(29.0)
7.3
(43.2)
(9.4)
0.1
(9.3)
13.8
41.7
–
0.1
148.8
Further commentary on earnings and net asset value per share is provided in the Financial Review on pages 46 to 50.
B: Net asset value per share
Basic
Company’s own shares held in Employee Share
Ownership Plan
Unexercised share options
Diluted
Fair value adjustment to borrowings
EPRA triple net
Fair value of derivatives
Fair value adjustment to borrowings
Adjustment for associate
Deferred tax
EPRA
Equity
shareholders’
funds
£m
4,059.9
Notes
–
2.3
4,062.2
(210.9)
3,851.3
0.8
210.9
19.7
0.4
4,083.1
21I
21I
21I
14B
8C
Shares
million
712.9
(1.0)
0.5
712.4
2013
Net asset
value
per share
£
Equity
shareholders’
funds
£m
5.70
3,851.2
n/a
n/a
5.70
(0.29)
5.41
–
0.29
0.03
–
5.73
–
3.7
3,854.9
(289.5)
3,565.4
(11.6)
289.5
16.2
0.5
3,860.0
Shares
million
711.7
0.2
711.9
Shares
million
712.8
(1.3)
0.7
712.2
2012
Pence
per share
12.6
6.8
19.4
–
19.4
5.1
(4.1)
1.0
(6.1)
(1.3)
–
(1.3)
2.0
5.9
–
–
20.9
2012
Net asset
value
per share
£
5.40
n/a
n/a
5.41
(0.41)
5.00
(0.02)
0.41
0.03
–
5.42
12: INVESTMENT AND DEVELOPMENT PROPERTIES
Continuing operations
Cost
£m
4,546.3
17.2
68.4
192.0
260.4
(59.1)
(95.4)
1.1
–
6.3
Investment
properties
Valuation
£m
5,182.7
30.7
68.4
192.0
260.4
(60.9)
(48.5)
1.1
61.3
7.4
Development
properties
Valuation
£m
275.7
6.0
128.2
–
128.2
(0.6)
48.5
11.7
27.5
–
Cost
£m
266.5
5.0
128.2
–
128.2
(0.6)
95.4
11.7
–
–
Balance at 31 December 2013
4,676.8
5,434.2
506.2
497.0
5,183.0
5,931.2
Cost
£m
4,812.8
22.2
196.6
192.0
388.6
(59.7)
12.8
–
–
6.3
Cost
£m
176.6
(0.6)
(169.7)
(6.3)
–
–
Cost
£m
4,915.9
(25.2)
142.5
397.9
540.4
18.7
559.1
(80.0)
(389.2)
(469.2)
8.8
–
–
–
(176.6)
4,812.8
Total
Valuation
£m
5,458.4
36.7
196.6
192.0
388.6
(61.5)
–
12.8
88.8
7.4
Investment
properties
Valuation
£m
194.5
(0.6)
(188.0)
1.5
(7.4)
–
Total
Valuation
£m
5,719.6
(42.6)
142.5
397.9
540.4
18.7
559.1
(139.5)
(402.6)
(542.1)
8.8
(48.5)
(1.4)
(49.9)
(194.5)
5,458.4
Cost
£m
4,665.0
(21.6)
70.8
397.3
468.1
14.4
482.5
(76.0)
(328.3)
(404.3)
1.3
–
–
–
(176.6)
4,546.3
Investment
properties
Valuation
£m
5,478.4
(38.6)
70.8
397.3
468.1
14.4
482.5
(126.5)
(350.2)
(476.7)
1.3
(68.3)
(1.4)
(69.7)
(194.5)
5,182.7
Development
properties
Valuation
£m
241.2
(4.0)
71.7
0.6
72.3
4.3
76.6
(13.0)
(52.4)
(65.4)
7.5
19.8
19.8
–
–
275.7
Cost
£m
250.9
(3.6)
71.7
0.6
72.3
4.3
76.6
(4.0)
(60.9)
(64.9)
7.5
–
–
–
–
266.5
Balance at 1 January 2013
Exchange adjustment
Additions
– capital expenditure
– asset acquisitions
Disposals
Transfers
Capitalised interest
Revaluation
Transfer from assets held for sale
Discontinued operations
Balance at 1 January 2013
Additions
Disposals
Revaluation
Transfer to continuing operations
Balance at 31 December 2013
Balance at 1 January 2012
Exchange adjustment
Additions – continuing operations
– capital expenditure
– asset acquisitions
Additions – discontinued operations
Total additions
Disposals
– continuing operations
– discontinued operations
Capitalised interest
Revaluation
– continuing operations
– discontinued operations
Transfer to assets held for sale
Balance at 31 December 2012
132132
132 Hammerson plc Annual Report 2013
www.hammerson.com
133
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson
Employee Share Ownership Plan (note 25), which are treated as cancelled.
Notes
Earnings
£m
Shares
million
711.8
0.2
712.0
2013
Pence
per share
45.3
2.1
47.4
–
47.4
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
are included in the following tables.
A: Earnings per share
Basic – continuing operations
Basic – discontinued operations
Basic – total
Dilutive share options
Diluted
Adjustments:
Other net (gains)/losses
– continuing operations
– discontinued operations
Adjustment for associate
Change in fair value of derivatives
– continuing operations
– discontinued operations
Bond redemption – premium and costs
Floating rate reset bonds redemption – premium
and costs
Deferred tax credit
EPRA
Non-controlling interests in respect of the above1
1. Non-controlling interests relate to continuing operations.
B: Net asset value per share
Basic
Company’s own shares held in Employee Share
Ownership Plan
Unexercised share options
Diluted
Fair value adjustment to borrowings
EPRA triple net
Fair value of derivatives
Fair value adjustment to borrowings
Adjustment for associate
Deferred tax
EPRA
2
2
2
2
9B
14A
7
9B
7
7
8A
2
21I
21I
21I
14B
8C
322.5
14.9
337.4
–
337.4
(93.0)
(9.0)
(102.0)
(88.1)
14.5
(0.6)
13.9
3.9
–
(0.1)
(0.5)
164.5
–
2.3
4,062.2
(210.9)
3,851.3
0.8
210.9
19.7
0.4
4,083.1
Further commentary on earnings and net asset value per share is provided in the Financial Review on pages 46 to 50.
Equity
shareholders’
funds
£m
4,059.9
Notes
value
shareholders’
Shares
million
712.9
(1.0)
0.5
712.4
Earnings
£m
89.7
48.7
138.4
–
138.4
36.3
(29.0)
7.3
(43.2)
(9.4)
0.1
(9.3)
13.8
41.7
–
0.1
148.8
Equity
funds
£m
3,851.2
–
3.7
3,854.9
(289.5)
3,565.4
(11.6)
289.5
16.2
0.5
Shares
million
711.7
0.2
711.9
Shares
million
712.8
(1.3)
0.7
712.2
2012
Pence
per share
12.6
6.8
19.4
–
19.4
5.1
(4.1)
1.0
(6.1)
(1.3)
–
(1.3)
2.0
5.9
–
–
20.9
2012
Net asset
value
per share
£
5.40
n/a
n/a
5.41
(0.41)
5.00
(0.02)
0.41
0.03
–
5.42
(13.1)
(1.2)
(14.3)
(12.3)
2.0
(0.1)
1.9
0.5
–
–
(0.1)
23.1
2013
Net asset
per share
£
5.70
n/a
n/a
5.70
(0.29)
5.41
0.29
0.03
–
–
5.73
3,860.0
11: EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
12: INVESTMENT AND DEVELOPMENT PROPERTIES
The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and these
Continuing operations
Balance at 1 January 2013
Exchange adjustment
Additions
– capital expenditure
– asset acquisitions
Disposals
Transfers
Capitalised interest
Revaluation
Transfer from assets held for sale
Cost
£m
4,546.3
17.2
68.4
192.0
260.4
(59.1)
(95.4)
1.1
–
6.3
Investment
properties
Valuation
£m
5,182.7
30.7
68.4
192.0
260.4
(60.9)
(48.5)
1.1
61.3
7.4
Development
properties
Valuation
£m
275.7
6.0
128.2
–
128.2
(0.6)
48.5
11.7
27.5
–
Cost
£m
266.5
5.0
128.2
–
128.2
(0.6)
95.4
11.7
–
–
Cost
£m
4,812.8
22.2
196.6
192.0
388.6
(59.7)
–
12.8
–
6.3
Total
Valuation
£m
5,458.4
36.7
196.6
192.0
388.6
(61.5)
–
12.8
88.8
7.4
Balance at 31 December 2013
4,676.8
5,434.2
506.2
497.0
5,183.0
5,931.2
Discontinued operations
Balance at 1 January 2013
Additions
Disposals
Revaluation
Transfer to continuing operations
Balance at 31 December 2013
Balance at 1 January 2012
Exchange adjustment
Additions – continuing operations
– capital expenditure
– asset acquisitions
Additions – discontinued operations
Total additions
Disposals
– continuing operations
– discontinued operations
Capitalised interest
Revaluation
– continuing operations
– discontinued operations
Transfer to assets held for sale
Balance at 31 December 2012
Cost
£m
176.6
(0.6)
(169.7)
–
(6.3)
–
Cost
£m
4,915.9
(25.2)
142.5
397.9
540.4
18.7
559.1
(80.0)
(389.2)
(469.2)
8.8
–
–
–
(176.6)
4,812.8
Investment
properties
Valuation
£m
194.5
(0.6)
(188.0)
1.5
(7.4)
–
Total
Valuation
£m
5,719.6
(42.6)
142.5
397.9
540.4
18.7
559.1
(139.5)
(402.6)
(542.1)
8.8
(48.5)
(1.4)
(49.9)
(194.5)
5,458.4
Cost
£m
4,665.0
(21.6)
70.8
397.3
468.1
14.4
482.5
(76.0)
(328.3)
(404.3)
1.3
–
–
–
(176.6)
4,546.3
Investment
properties
Valuation
£m
5,478.4
(38.6)
70.8
397.3
468.1
14.4
482.5
(126.5)
(350.2)
(476.7)
1.3
(68.3)
(1.4)
(69.7)
(194.5)
5,182.7
Development
properties
Valuation
£m
241.2
(4.0)
71.7
0.6
72.3
4.3
76.6
(13.0)
(52.4)
(65.4)
7.5
19.8
–
19.8
–
275.7
Cost
£m
250.9
(3.6)
71.7
0.6
72.3
4.3
76.6
(4.0)
(60.9)
(64.9)
7.5
–
–
–
–
266.5
132 Hammerson plc Annual Report 2013
www.hammerson.com
133133
133
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
12: INVESTMENT AND DEVELOPMENT PROPERTIES (CONTINUED)
13: PLANT, EQUIPMENT AND OWNER-OCCUPIED PROPERTY
Properties are stated at fair value as at 31 December 2013, valued by professionally qualified external valuers, DTZ Debenham Tie Leung, Chartered
Surveyors. The valuations have been prepared in accordance with the RICS Valuation – Professional Standards (Incorporating the International
Valuation Standards) March 2012 based on certain assumptions as set out in note 1.
In the case of leasehold properties, valuations are net of any obligation to freeholders or superior leaseholders. To comply with IAS 40 and IAS 17
these obligations and the related leasehold assets are included in the balance sheet within ‘Obligations under finance leases’ (note 22) and
‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 119.
Valuation fees are based on a fixed amount agreed between the Group and the valuers and are independent of the portfolio value. Summaries
of the valuers’ reports are available on the Company’s website: www.hammerson.com
As noted in ‘Significant judgements and key estimates’ on pages 117 and 118, real estate valuations are complex, derived from data which is not
widely publicly available and involve a degree of judgement. For these reasons, and consistent with EPRA’s guidance, we have classified the
valuations of our property portfolio as Level 3 as defined by IFRS 13. Inputs to the valuations, some of which are ‘unobservable’ as defined by IFRS
13, include nominal equivalent yield and rental income. These inputs to the valuations are analysed by segment in the valuation and rental data
tables on pages 53 and 54. All other factors remaining constant, an increase in rental income would increase valuations, whilst increases in nominal
equivalent yield and discount rate would result in a fall in values and vice versa. However, there are interrelationships between unobservable
inputs as they are determined by market conditions. The existence of an increase of more than one unobservable input would augment the
impact on valuation. The impact on the valuation would be mitigated by the interrelationship between unobservable inputs moving in opposite
directions. For example, an increase in rents may be offset by an increase in yield, resulting in no net impact on the valuation.
At 31 December 2013, investment properties included a property held for sale with a value of £100.6 million (2012: £nil). The property sale
completed in January 2014.
The total amount of interest included in development properties at 31 December 2013 was £24.6 million (2012: £12.5 million). Capitalised interest
is calculated using the cost of secured debt or the Group’s average cost of borrowings, as appropriate, and the effective rate applied in 2013 was
4.8% (2012: 5.2%).
Analysis of properties by tenure
Balance at 31 December 2013
Balance at 31 December 2012
Capital commitments
Freehold
£m
3,377.1
3,282.3
Long leasehold
£m
2,554.1
2,176.1
2013
£m
156.9
Total
£m
5,931.2
5,458.4
2012
£m
158.1
Cost or valuation
Balance at 1 January 2012
Exchange adjustment
Additions
Disposals
Revaluation
Additions
Disposals
Revaluation
Balance at 31 December 2012/1 January 2013
Exchange adjustment
Depreciation charge for the year
Balance at 31 December 2012/1 January 2013
Balance at 31 December 2013
Depreciation
Balance at 1 January 2012
Exchange adjustment
Disposals
Exchange adjustment
Disposals
Depreciation charge for the year
Balance at 31 December 2013
Book value at 31 December 2013
Book value at 31 December 2012
Owner-occupied
property
£m
Plant and
equipment
£m
29.9
0.1
30.0
3.2
33.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33.2
30.0
15.2
(0.2)
2.8
(3.1)
–
14.7
0.2
1.1
(1.1)
–
14.9
(9.7)
0.2
3.0
(1.5)
(8.0)
(0.2)
1.1
(1.5)
(8.6)
6.3
6.7
Total
£m
45.1
(0.2)
2.8
(3.1)
0.1
44.7
0.2
1.1
(1.1)
3.2
48.1
(9.7)
0.2
3.0
(1.5)
(8.0)
(0.2)
1.1
(1.5)
(8.6)
39.5
36.7
At 31 December 2013 Hammerson’s share of the capital commitments in respect of joint ventures, which is included in the table above, was
£14.8 million (2012: £4.2 million).
The Group occupies part of 10 Grosvenor Street, London W1, in which it holds a 50% joint venture interest. This property was valued as part of the
portfolio valuation referred to in note 12. The fair value of owner-occupied property represents a nominal apportionment of the fair value of the
property as a whole. The cost of owner-occupied property at 31 December 2013 was £12.0 million (2012: £12.0 million).
134134
134 Hammerson plc Annual Report 2013
www.hammerson.com
135
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
Properties are stated at fair value as at 31 December 2013, valued by professionally qualified external valuers, DTZ Debenham Tie Leung, Chartered
Surveyors. The valuations have been prepared in accordance with the RICS Valuation – Professional Standards (Incorporating the International
Valuation Standards) March 2012 based on certain assumptions as set out in note 1.
In the case of leasehold properties, valuations are net of any obligation to freeholders or superior leaseholders. To comply with IAS 40 and IAS 17
these obligations and the related leasehold assets are included in the balance sheet within ‘Obligations under finance leases’ (note 22) and
‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 119.
Valuation fees are based on a fixed amount agreed between the Group and the valuers and are independent of the portfolio value. Summaries
of the valuers’ reports are available on the Company’s website: www.hammerson.com
As noted in ‘Significant judgements and key estimates’ on pages 117 and 118, real estate valuations are complex, derived from data which is not
widely publicly available and involve a degree of judgement. For these reasons, and consistent with EPRA’s guidance, we have classified the
valuations of our property portfolio as Level 3 as defined by IFRS 13. Inputs to the valuations, some of which are ‘unobservable’ as defined by IFRS
13, include nominal equivalent yield and rental income. These inputs to the valuations are analysed by segment in the valuation and rental data
tables on pages 53 and 54. All other factors remaining constant, an increase in rental income would increase valuations, whilst increases in nominal
equivalent yield and discount rate would result in a fall in values and vice versa. However, there are interrelationships between unobservable
inputs as they are determined by market conditions. The existence of an increase of more than one unobservable input would augment the
impact on valuation. The impact on the valuation would be mitigated by the interrelationship between unobservable inputs moving in opposite
directions. For example, an increase in rents may be offset by an increase in yield, resulting in no net impact on the valuation.
At 31 December 2013, investment properties included a property held for sale with a value of £100.6 million (2012: £nil). The property sale
The total amount of interest included in development properties at 31 December 2013 was £24.6 million (2012: £12.5 million). Capitalised interest
is calculated using the cost of secured debt or the Group’s average cost of borrowings, as appropriate, and the effective rate applied in 2013 was
Freehold
Long leasehold
£m
3,377.1
3,282.3
£m
2,554.1
2,176.1
2013
£m
156.9
Total
£m
5,931.2
5,458.4
2012
£m
158.1
completed in January 2014.
4.8% (2012: 5.2%).
Analysis of properties by tenure
Balance at 31 December 2013
Balance at 31 December 2012
Capital commitments
£14.8 million (2012: £4.2 million).
12: INVESTMENT AND DEVELOPMENT PROPERTIES (CONTINUED)
13: PLANT, EQUIPMENT AND OWNER-OCCUPIED PROPERTY
Cost or valuation
Balance at 1 January 2012
Exchange adjustment
Additions
Disposals
Revaluation
Balance at 31 December 2012/1 January 2013
Exchange adjustment
Additions
Disposals
Revaluation
Balance at 31 December 2013
Depreciation
Balance at 1 January 2012
Exchange adjustment
Disposals
Depreciation charge for the year
Balance at 31 December 2012/1 January 2013
Exchange adjustment
Disposals
Depreciation charge for the year
Balance at 31 December 2013
Book value at 31 December 2013
Book value at 31 December 2012
Owner-occupied
property
£m
Plant and
equipment
£m
29.9
–
–
–
0.1
30.0
–
–
–
3.2
33.2
–
–
–
–
–
–
–
–
–
33.2
30.0
15.2
(0.2)
2.8
(3.1)
–
14.7
0.2
1.1
(1.1)
–
14.9
(9.7)
0.2
3.0
(1.5)
(8.0)
(0.2)
1.1
(1.5)
(8.6)
6.3
6.7
Total
£m
45.1
(0.2)
2.8
(3.1)
0.1
44.7
0.2
1.1
(1.1)
3.2
48.1
(9.7)
0.2
3.0
(1.5)
(8.0)
(0.2)
1.1
(1.5)
(8.6)
39.5
36.7
At 31 December 2013 Hammerson’s share of the capital commitments in respect of joint ventures, which is included in the table above, was
The Group occupies part of 10 Grosvenor Street, London W1, in which it holds a 50% joint venture interest. This property was valued as part of the
portfolio valuation referred to in note 12. The fair value of owner-occupied property represents a nominal apportionment of the fair value of the
property as a whole. The cost of owner-occupied property at 31 December 2013 was £12.0 million (2012: £12.0 million).
134 Hammerson plc Annual Report 2013
www.hammerson.com
135135
135
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
14: INVESTMENT IN ASSOCIATE
On 21 August 2012 the Group gained significant influence over Value Retail PLC and associated entities (“VR”) and equity accounted for its
investment from that date. See also note 16.
A: Share of results of associate
B: Share of assets and liabilities of associate
Hammerson
Hammerson
Revenue
Depreciation and amortisation
Operating profit before other net gains
Revaluation gains on investment properties
Other net operating costs
Operating profit
Interest income
Interest expense
Change in fair value of financial instruments
Change in fair value of participative loans – revaluation movement
Change in fair value of participative loans – other movement
Profit before tax
Current tax charge
Deferred tax charge
Profit for the period
Foreign exchange translation differences
Total comprehensive income
Reconciliation to note 14A
Profit for the period
Revaluation gains on investment properties
Change in fair value of financial instruments
Change in fair value of participate loans – revaluation movement
Capitalised loan finance fees written off
Deferred tax charge
Adjustment for associate
EPRA adjusted earnings of associate
2013
Hammerson
share
£m
66.5
(1.1)
65.4
85.5
(39.7)
111.2
1.0
(13.0)
5.0
7.1
0.8
112.1
(1.6)
(9.0)
101.5
(0.4)
101.1
101.5
(85.5)
(5.0)
(7.1)
0.5
9.0
(88.1)
13.4
100%
£m
231.4
(3.8)
227.6
273.6
(151.6)
349.6
3.6
(47.8)
8.3
–
–
313.7
(7.3)
(43.8)
262.6
8.6
271.2
262.6
(273.6)
(8.3)
–
–
43.8
(238.1)
24.5
2012
(21 August to 31 December)
100%
£m
61.9
(1.7)
60.2
124.3
(35.9)
148.6
1.3
(15.7)
(17.6)
–
–
116.6
(1.7)
(23.3)
91.6
12.7
104.3
91.6
(124.3)
17.6
–
–
23.3
(83.4)
8.2
Hammerson
share
£m
18.1
(0.6)
17.5
38.1
(9.1)
46.5
0.4
(4.2)
(3.4)
12.0
–
51.3
(0.3)
(3.5)
47.5
1.6
49.1
47.5
(38.1)
3.4
(12.0)
–
3.5
(43.2)
4.3
When aggregated, the Group’s share of VR’s operating profit before other net gains amounted to 28.7% for the year ended 31 December 2013
(29.1% for the period ended 31 December 2012).
C: Reconciliation of movements in investment in associate
Goodwill on acquisition of associate
Other non-current assets
Non-current assets
Other current assets
Cash and deposits
Current assets
Total assets
Current liabilities
Other liabilities
Deferred tax
Non-current liabilities
Total liabilities
Net assets
Participative loans*
Investment in associate
Fair value of financial instruments
foreseeable future.
Reconciliation to note 14B
Total investment in associate
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
Adjustment for associate
EPRA adjusted investment in associate
Balance at 1 January
Transfer from other investments on 21 August 2012
Acquisitions
Distributions
Share of results of associate
Revaluation movement on participative loan
Foreign exchange translation differences
Balance at 31 December
100%
£m
–
2,546.8
2,546.8
169.6
110.3
279.9
2,826.7
(132.5)
(976.5)
(126.9)
(322.6)
(1,426.0)
(1,558.5)
1,268.2
2013
share
£m
65.7
777.0
842.7
33.4
30.0
63.4
906.1
(32.7)
(297.0)
(27.0)
(75.0)
(399.0)
(431.7)
474.4
71.0
545.4
Note
14B
100%
£m
–
2,224.6
2,224.6
140.3
87.3
227.6
2,452.2
(40.8)
(944.3)
(132.8)
(273.6)
(1,350.7)
(1,391.5)
1,060.7
2013
£m
545.4
(8.3)
75.0
(47.0)
19.7
565.1
2013
£m
428.4
–
59.4
101.5
(46.4)
2.9
(0.4)
545.4
2012
share
£m
58.5
579.1
637.6
43.5
21.7
65.2
702.8
(9.8)
(235.2)
(33.0)
(39.2)
(307.4)
(317.2)
385.6
42.8
428.4
2012
£m
428.4
5.7
39.2
(28.7)
16.2
444.6
2012
£m
381.7
–
–
47.5
(2.4)
–
1.6
428.4
The table above excludes liabilities in respect of distributions received in advance from VR amounting to £13.4 million (2012: £10.2 million) which
are included within non-current liabilities in note 23.
When aggregated, the Group’s share of VR’s net assets amounted to 37.4% at 31 December 2013 (2012: 36.4%).
*
The Group’s total investment in associate includes long-term debt which in substance forms part of the Group’s investment. These participative loans are not repayable in the
Hammerson share
Hammerson share
136136
136 Hammerson plc Annual Report 2013
www.hammerson.com
137
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
14: INVESTMENT IN ASSOCIATE
investment from that date. See also note 16.
A: Share of results of associate
Revenue
Depreciation and amortisation
Operating profit before other net gains
Revaluation gains on investment properties
Other net operating costs
Operating profit
Interest income
Interest expense
Profit before tax
Current tax charge
Deferred tax charge
Profit for the period
Change in fair value of financial instruments
Change in fair value of participative loans – revaluation movement
Change in fair value of participative loans – other movement
Foreign exchange translation differences
Total comprehensive income
Reconciliation to note 14A
Profit for the period
Revaluation gains on investment properties
Change in fair value of financial instruments
Capitalised loan finance fees written off
Deferred tax charge
Adjustment for associate
EPRA adjusted earnings of associate
Change in fair value of participate loans – revaluation movement
2013
(21 August to 31 December)
Hammerson
Hammerson
100%
£m
231.4
(3.8)
227.6
273.6
(151.6)
349.6
3.6
(47.8)
8.3
–
–
313.7
(7.3)
(43.8)
262.6
8.6
271.2
262.6
(273.6)
(8.3)
–
–
43.8
(238.1)
24.5
share
£m
66.5
(1.1)
65.4
85.5
(39.7)
111.2
1.0
(13.0)
5.0
7.1
0.8
112.1
(1.6)
(9.0)
101.5
(0.4)
101.1
101.5
(85.5)
(5.0)
(7.1)
0.5
9.0
(88.1)
13.4
100%
£m
61.9
(1.7)
60.2
124.3
(35.9)
148.6
1.3
(15.7)
(17.6)
–
–
116.6
(1.7)
(23.3)
91.6
12.7
104.3
91.6
(124.3)
17.6
–
–
23.3
(83.4)
8.2
2012
share
£m
18.1
(0.6)
17.5
38.1
(9.1)
46.5
0.4
(4.2)
(3.4)
12.0
–
51.3
(0.3)
(3.5)
47.5
1.6
49.1
47.5
(38.1)
3.4
(12.0)
–
3.5
(43.2)
4.3
On 21 August 2012 the Group gained significant influence over Value Retail PLC and associated entities (“VR”) and equity accounted for its
B: Share of assets and liabilities of associate
Goodwill on acquisition of associate
Other non-current assets
Non-current assets
Other current assets
Cash and deposits
Current assets
Total assets
Current liabilities
Other liabilities
Fair value of financial instruments
Deferred tax
Non-current liabilities
Total liabilities
Net assets
Participative loans*
Investment in associate
100%
£m
–
2,546.8
2,546.8
169.6
110.3
279.9
2,826.7
(132.5)
(976.5)
(126.9)
(322.6)
(1,426.0)
(1,558.5)
1,268.2
2013
Hammerson
share
£m
65.7
777.0
842.7
33.4
30.0
63.4
906.1
(32.7)
(297.0)
(27.0)
(75.0)
(399.0)
(431.7)
474.4
71.0
545.4
100%
£m
–
2,224.6
2,224.6
140.3
87.3
227.6
2,452.2
(40.8)
(944.3)
(132.8)
(273.6)
(1,350.7)
(1,391.5)
1,060.7
2012
Hammerson
share
£m
58.5
579.1
637.6
43.5
21.7
65.2
702.8
(9.8)
(235.2)
(33.0)
(39.2)
(307.4)
(317.2)
385.6
42.8
428.4
The table above excludes liabilities in respect of distributions received in advance from VR amounting to £13.4 million (2012: £10.2 million) which
are included within non-current liabilities in note 23.
When aggregated, the Group’s share of VR’s net assets amounted to 37.4% at 31 December 2013 (2012: 36.4%).
*
The Group’s total investment in associate includes long-term debt which in substance forms part of the Group’s investment. These participative loans are not repayable in the
foreseeable future.
Reconciliation to note 14B
Total investment in associate
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
Adjustment for associate
EPRA adjusted investment in associate
When aggregated, the Group’s share of VR’s operating profit before other net gains amounted to 28.7% for the year ended 31 December 2013
(29.1% for the period ended 31 December 2012).
C: Reconciliation of movements in investment in associate
Balance at 1 January
Transfer from other investments on 21 August 2012
Acquisitions
Share of results of associate
Distributions
Revaluation movement on participative loan
Foreign exchange translation differences
Balance at 31 December
2013
Hammerson share
£m
2012
Hammerson share
£m
545.4
(8.3)
75.0
(47.0)
19.7
565.1
2013
£m
428.4
–
59.4
101.5
(46.4)
2.9
(0.4)
545.4
428.4
5.7
39.2
(28.7)
16.2
444.6
2012
£m
–
381.7
–
47.5
(2.4)
–
1.6
428.4
Note
14B
136 Hammerson plc Annual Report 2013
www.hammerson.com
137137
137
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
15: JOINT VENTURES
As at 31 December 2013 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated, and
the significant interests are set out in the following table:
Investments
Brent Cross Shopping Centre
Brent South Shopping Park
Bristol Alliance Limited Partnership
Croydon Limited Partnership
Queensgate Limited Partnership
Retail Property Holdings Limited (Silverburn)
SCI Espace Plus
SCI ESQ (Espace Saint Quentin)
SCI RC Aulnay 1 and SCI RC Aulnay 2 (O’Parinor)
The Bull Ring Limited Partnership
The Grosvenor Street Limited Partnership
The Martineau Galleries Limited Partnership
The Oracle Limited Partnership
The Highcross Limited Partnership
The West Quay Limited Partnership
Whitgift Limited Partnership
125 OBS Limited Partnership (sold June 2013)
Developments
Bishopsgate Goodsyard Regeneration Limited
Group share
%
41.2
40.6
50
50
50
50
50
25
25
50
50
33.33
50
60
50
50
50
50
In May 2013 the Group acquired an additional 16.7% stake in The Bull Ring Limited Partnership, increasing Hammerson’s interest to 50%.
366.0
276.5
477.6
276.1
101.0
260.0
255.3 176.5
84.0
92.1 161.8 2,526.9
The Group’s interest in The Highcross Limited Partnership does not confer the majority of voting rights nor the right to exercise dominant
influence over the partnership. Instead the partnership is under the joint control of Hammerson and its respective partner. Consequently, the
Group’s interest is not treated as a subsidiary, but is accounted for by proportional consolidation.
The summarised income statements and balance sheets on pages 139 and 140, show the proportion of the Group’s results, assets and liabilities
that are derived from its joint ventures.
Bristol Alliance
Bullring
Limited
Limited
Oracle Limited
Queensgate
Limited
Highcross
Limited
West Quay
Limited
Property
Holdings
Whitgift
Limited
Partnership
Partnership2
Partnership
Partnership
Partnership
Partnership
Limited
Partnerships
Retail
Croydon and
Income statements for the year ended 31 December 2013
Net rental income
Administration expenses
–
Operating profit before
other net gains/(losses)
18.8
Other net gains/(losses)
(0.9)
Brent
Cross1
£m
18.8
–
Net finance costs
Profit before tax –
Profit before tax –
£m
£m
14.5
(0.4)
14.1
1.9
(0.4)
22.0
–
22.0
16.3
–
£m
13.3
13.3
9.7
–
–
–
£m
6.2
(0.1)
6.1
(9.2)
–
–
–
–
–
£m
13.3
£m
12.3
£m
9.0
£m
4.0
–
(0.1)
(0.4)
SCI RC
Aulnay
£m
4.6
–
Other
£m
Total
2013
£m
4.6 122.6
–
(1.0)
13.3
(3.3)
12.3
8.7
(0.2)
8.9
4.6
–
3.6
4.6
4.6 121.6
(12.0)
(5.3)
(0.6)
–
0.9
0.1
9.9
0.4
continuing operations
17.9
15.6
38.3
23.0
(3.1)
10.0
20.8
13.5
(8.4)
0.2
4.1 131.9
discontinued operations
–
–
–
–
–
–
–
9.5
9.5
Profit before tax
17.9
15.6
38.3
23.0
(3.1)
10.0
20.8
13.5
(8.4)
0.2
13.6 141.4
Balance sheets as at 31 December 2013
Bristol Alliance
Limited
Bullring
Limited
Oracle
Limited
Queensgate
Limited
Highcross
Limited
West Quay
Limited
Property
Holdings
Whitgift
Limited
Partnership
Partnership2
Partnership
Partnership
Partnership
Partnership
Limited
Partnerships
£m
£m
£m
£m
£m
£m
£m
£m
Brent
Cross1
£m
SCI RC
Aulnay
£m
Other
£m
Total
2013
£m
Retail
Croydon and
Non-current assets
Investment and
development properties
Interests in leasehold
properties
Receivables
Current assets
Other current assets
Cash and deposits
Current liabilities
Other liabilities
Non-current liabilities
Borrowings
Other liabilities
at valuation
366.0
269.2
477.6
276.1
101.0
259.5
253.2 176.5
84.0
92.1 161.4 2,516.6
–
–
11.1
0.6
11.7
7.3
–
1.7
5.6
7.3
–
–
3.1
7.8
10.9
–
–
1.5
3.9
5.4
–
–
1.8
2.5
4.3
–
0.5
2.9
5.4
8.3
2.1
–
1.9
4.9
6.8
–
–
–
–
1.0
3.2
4.2
2.9
1.9
4.8
0.4
–
4.9
2.0
6.9
9.8
0.5
35.0
41.0
76.0
(21.4)
(7.4)
(8.8)
(4.6)
(2.9)
(5.9)
(4.9)
(3.9)
(4.1)
(1.7)
(5.4)
(71.0)
–
(0.2)
(0.2)
–
(7.4)
(7.4)
–
(0.4)
(0.4)
–
(0.1)
(0.1)
–
(0.1)
(0.1)
–
(0.2)
(0.2)
–
(2.4)
(2.4)
–
–
–
(45.0)
(3.9)
(48.9)
–
(1.4)
(1.4)
(45.0)
(16.1)
(61.1)
Net assets
356.1
269.0
479.3
276.8
102.3
262.2
254.8 178.0
84.1
46.3 161.9 2,470.8
1.
Includes Brent Cross Shopping Centre and Brent South Shopping Park.
2. Reflects the Group’s acquisition in May 2013 of an additional 16.7% stake in The Bull Ring Limited Partnership, increasing Hammerson’s interest to 50%.
Other than as shown above, the joint ventures are funded by the Company and the relevant partners. ‘Other net gains/(losses)’ principally
represent valuation changes on investment properties.
2.2
3.2
5.4
–
–
–
–
–
138138
138 Hammerson plc Annual Report 2013
www.hammerson.com
139
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
13.3
12.3
9.0
–
–
(0.1)
4.0
(0.4)
SCI RC
Aulnay
£m
4.6
–
Other
£m
Total
2013
£m
4.6 122.6
–
(1.0)
Administration expenses
–
Operating profit before
other net gains/(losses)
18.8
Other net gains/(losses)
(0.9)
Net finance costs
–
13.3
(3.3)
–
12.3
8.7
(0.2)
8.9
4.6
–
3.6
4.6
4.6 121.6
(12.0)
(5.3)
(0.6)
–
0.9
0.1
9.9
0.4
15: JOINT VENTURES
Income statements for the year ended 31 December 2013
14.5
(0.4)
14.1
1.9
(0.4)
22.0
13.3
–
–
22.0
16.3
–
13.3
9.7
–
6.2
(0.1)
6.1
(9.2)
–
Bristol Alliance
Limited
Partnership
£m
Bullring
Limited
Partnership2
£m
Oracle Limited
Partnership
£m
Queensgate
Limited
Partnership
£m
Highcross
Limited
Partnership
£m
West Quay
Limited
Partnership
£m
Retail
Property
Holdings
Limited
£m
Croydon and
Whitgift
Limited
Partnerships
£m
As at 31 December 2013 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated, and
the significant interests are set out in the following table:
Net rental income
Brent
Cross1
£m
18.8
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
Investments
Brent Cross Shopping Centre
Brent South Shopping Park
Bristol Alliance Limited Partnership
Croydon Limited Partnership
Queensgate Limited Partnership
Retail Property Holdings Limited (Silverburn)
SCI Espace Plus
SCI ESQ (Espace Saint Quentin)
SCI RC Aulnay 1 and SCI RC Aulnay 2 (O’Parinor)
The Bull Ring Limited Partnership
The Grosvenor Street Limited Partnership
The Martineau Galleries Limited Partnership
The Oracle Limited Partnership
The Highcross Limited Partnership
The West Quay Limited Partnership
Whitgift Limited Partnership
125 OBS Limited Partnership (sold June 2013)
Developments
Bishopsgate Goodsyard Regeneration Limited
Group share
%
41.2
40.6
50
50
50
50
50
25
25
50
50
50
60
50
50
50
50
33.33
In May 2013 the Group acquired an additional 16.7% stake in The Bull Ring Limited Partnership, increasing Hammerson’s interest to 50%.
The Group’s interest in The Highcross Limited Partnership does not confer the majority of voting rights nor the right to exercise dominant
influence over the partnership. Instead the partnership is under the joint control of Hammerson and its respective partner. Consequently, the
Group’s interest is not treated as a subsidiary, but is accounted for by proportional consolidation.
The summarised income statements and balance sheets on pages 139 and 140, show the proportion of the Group’s results, assets and liabilities
that are derived from its joint ventures.
Profit before tax –
continuing operations
Profit before tax –
discontinued operations
17.9
15.6
38.3
23.0
(3.1)
10.0
20.8
13.5
(8.4)
0.2
4.1 131.9
–
–
–
–
–
–
–
–
–
–
9.5
9.5
Profit before tax
17.9
15.6
38.3
23.0
(3.1)
10.0
20.8
13.5
(8.4)
0.2
13.6 141.4
Balance sheets as at 31 December 2013
Bristol Alliance
Limited
Partnership
£m
Bullring
Limited
Partnership2
£m
Brent
Cross1
£m
Oracle
Limited
Partnership
£m
Queensgate
Limited
Partnership
£m
Highcross
Limited
Partnership
£m
West Quay
Limited
Partnership
£m
Retail
Property
Holdings
Limited
£m
Croydon and
Whitgift
Limited
Partnerships
£m
SCI RC
Aulnay
£m
Other
£m
Total
2013
£m
Non-current assets
Investment and
development properties
at valuation
Interests in leasehold
properties
Receivables
Current assets
Other current assets
Cash and deposits
Current liabilities
Other liabilities
Non-current liabilities
Borrowings
Other liabilities
366.0
269.2
477.6
276.1
101.0
259.5
253.2 176.5
84.0
92.1 161.4 2,516.6
–
–
7.3
–
–
–
–
–
–
–
–
0.5
2.1
–
–
–
–
–
–
–
0.4
–
9.8
0.5
366.0
276.5
477.6
276.1
101.0
260.0
255.3 176.5
84.0
92.1 161.8 2,526.9
11.1
0.6
11.7
1.7
5.6
7.3
3.1
7.8
10.9
1.5
3.9
5.4
1.8
2.5
4.3
2.9
5.4
8.3
1.9
4.9
6.8
2.2
3.2
5.4
1.0
3.2
4.2
2.9
1.9
4.8
4.9
2.0
6.9
35.0
41.0
76.0
(21.4)
(7.4)
(8.8)
(4.6)
(2.9)
(5.9)
(4.9)
(3.9)
(4.1)
(1.7)
(5.4)
(71.0)
–
(0.2)
(0.2)
–
(7.4)
(7.4)
–
(0.4)
(0.4)
–
(0.1)
(0.1)
–
(0.1)
(0.1)
–
(0.2)
(0.2)
–
(2.4)
(2.4)
–
–
–
–
–
–
(45.0)
(3.9)
(48.9)
–
(1.4)
(1.4)
(45.0)
(16.1)
(61.1)
Net assets
356.1
269.0
479.3
276.8
102.3
262.2
254.8 178.0
84.1
46.3 161.9 2,470.8
1.
Includes Brent Cross Shopping Centre and Brent South Shopping Park.
2. Reflects the Group’s acquisition in May 2013 of an additional 16.7% stake in The Bull Ring Limited Partnership, increasing Hammerson’s interest to 50%.
Other than as shown above, the joint ventures are funded by the Company and the relevant partners. ‘Other net gains/(losses)’ principally
represent valuation changes on investment properties.
138 Hammerson plc Annual Report 2013
www.hammerson.com
139139
139
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
15: JOINT VENTURES (CONTINUED)
Income statements for the year ended 31 December 2012
Net rental income
Brent
Cross1
£m
17.8
Administration expenses
–
Operating profit before
other net gains/(losses)
Other net gains/(losses)
Net finance costs
Profit before tax –
continuing operations
Profit before tax –
discontinued
operations
Profit before tax
Bristol
Alliance
Limited
Partnership
£m
15.1
(0.4)
14.7
(27.6)
(0.4)
Bullring
Limited
Partnership2
£m
Oracle
Limited
Partnership
£m
Queensgate
Limited
Partnership
£m
Highcross
Limited
Partnership
£m
West Quay
Limited
Partnership
£m
16.5
–
16.5
3.4
–
14.0
–
14.0
3.3
–
5.8
(0.1)
5.7
(6.0)
–
13.5
–
13.5
(11.9)
–
13.1
–
13.1
(0.1)
(0.2)
Retail
Property
Holdings
Limited
£m
8.7
–
8.7
(0.5)
–
17.8
2.0
–
19.8
(13.3)
19.9
17.3
(0.3)
1.6
12.8
8.2
–
–
19.8
(13.3)
–
19.9
–
17.3
–
(0.3)
–
1.6
–
12.8
–
8.2
SCI RC
Aulnay
£m
4.3
–
4.3
(0.9)
(3.4)
–
–
–
SCI ESQ
£m
Other
£m
2.9
–
2.9
2.5
–
5.4
–
5.4
3.6
(0.1)
3.5
3.6
0.1
7.2
5.8
13.0
Balance sheets as at 31 December 2012
Bristol
Alliance
Limited
Partnership
£m
Brent
Cross1
£m
Bullring
Limited
Partnership2
£m
Oracle
Limited
Partnership
£m
Queensgate
Limited
Partnership
£m
Highcross
Limited
Partnership
£m
West Quay
Limited
Partnership
£m
Retail
Property
Holdings
Limited
£m
SCI RC
Aulnay
£m
SCI ESQ
£m
Other
£m
Total
2012
£m
115.3
(0.6)
114.7
(32.2)
(3.9)
78.6
5.8
84.4
Total
2012
£m
Non-current assets
Investment and
development
properties at valuation
Interests in leasehold
properties
Receivables
Current assets
Assets held for sale
Other current assets
Cash and deposits
Current liabilities
Liabilities associated
with assets held for sale
Other liabilities
Non-current liabilities
Borrowings
Other liabilities
361.7
269.2
307.6
265.7
107.8
262.3
244.8
169.2
88.7
53.4
102.5
2,232.9
–
–
7.3
–
–
–
–
–
–
–
–
–
2.1
–
–
0.1
–
–
–
–
0.4
–
9.8
0.1
361.7
276.5
307.6
265.7
107.8
262.3
246.9
169.3
88.7
53.4
102.9
2,242.8
–
14.2
0.1
14.3
–
(23.9)
(23.9)
–
(0.2)
(0.2)
–
1.6
6.9
8.5
–
(7.3)
(7.3)
–
(7.4)
(7.4)
–
2.0
4.6
6.6
–
(5.9)
(5.9)
–
–
–
–
1.8
4.3
6.1
–
(4.7)
(4.7)
–
(0.1)
(0.1)
–
1.8
2.2
4.0
–
(2.0)
(2.0)
–
(0.1)
(0.1)
–
3.1
5.3
8.4
–
(8.3)
(8.3)
–
(0.2)
(0.2)
–
1.6
5.5
7.1
–
(5.3)
(5.3)
–
(2.2)
(2.2)
–
2.3
1.1
3.4
–
(4.3)
(4.3)
–
–
–
–
1.2
1.1
2.3
–
138.8
138.8
0.5
1.4
1.9
4.2
1.5
34.3
34.0
144.5
207.1
–
(1.3)
(1.3)
(43.7)
(5.0)
(48.7)
–
(71.7)
(3.8)
(71.7)
(67.1)
(0.3)
(0.3)
–
(0.7)
(0.7)
(75.5)
(138.8)
–
(0.6)
(0.6)
(43.7)
(16.5)
(60.2)
Net assets
351.9
270.3
308.3
267.0
109.7
262.2
246.5
168.4
41.0
54.3
171.3
2,250.9
1.
Includes Brent Cross Shopping Centre and Brent South Shopping Park.
2. Reflects the Group’s interest of 33.33% during 2012.
Other than as shown above, the joint ventures are funded by the Company and the relevant partners. ‘Other net gains/(losses)’ principally
represent valuation changes on investment properties.
Short-term deposits principally comprise deposits placed on money markets with rates linked to LIBOR for maturities of not more than one month,
at an average rate of 0.5% (2012: 0.3%). Such deposits are considered to be cash equivalents. Included in the cash balance is £nil (2012: £1.9 million)
that may be used only in relation to certain development projects or in respect of secured borrowings.
140140
140 Hammerson plc Annual Report 2013
www.hammerson.com
141
16: RECEIVABLES: NON-CURRENT ASSETS
Loans receivable
Other receivables
Fair value of interest rate swaps
Loans receivable includes a loan of €58.0 million (£48.2 million) (2012: €58.0 million, £47.0 million) to Value Retail European Holdings BV bearing
interest at 10% and maturing on 11 September 2016, except a residual €2 million tranche which matures on 30 November 2043.
Loans receivable also includes a loan to VR Milan S.R.L of €25.0 million granted on 30 July 2013 bearing interest at Euribor plus a 5% margin and
maturing on 13 December 2017. This loan is repayable in quarterly instalments and the balance outstanding at 31 December 2013 is €24.6 million
(£20.5 million). Both loans are classified as available for sale.
17: RECEIVABLES: CURRENT ASSETS
Trade receivables are shown after deducting a provision for bad and doubtful debts of £13.8 million (2012: £13.2 million), as set out in the table
below. The movement in the provision during the year was recognised entirely in income. Credit risk is discussed in note 21F.
Gross
receivable
Provision
Net receivable
Provision
Net receivable
Gross
receivable
113.1
102.7
2013
£m
68.7
1.6
2.0
72.3
2013
£m
48.1
61.1
0.2
3.7
£m
–
0.7
0.7
0.1
0.6
11.1
13.2
£m
(9.3)
–
(9.3)
(9.3)
–
(9.3)
2012
£m
47.0
1.1
18.5
66.6
2012
£m
53.2
38.6
0.2
10.7
2012
£m
36.4
10.8
0.7
0.3
1.7
3.3
53.2
£m
45.1
12.0
57.1
43.3
13.8
57.1
Associated with
assets held for sale
2012
As stated on
balance sheet
2013
£m
28.5
9.5
1.2
0.8
1.2
6.9
48.1
2013
£m
45.5
11.2
56.7
47.3
9.4
56.7
£m
36.4
11.5
1.4
0.4
2.3
14.4
66.4
2012
Total
£m
54.4
12.0
66.4
52.6
13.8
66.4
Trade receivables
Other receivables
Corporation tax
Prepayments
Not yet due
1-30 days overdue
31-60 days overdue
61-90 days overdue
91-120 days overdue
More than 120 days overdue
18: CASH AND DEPOSITS
Cash at bank
Short-term deposits
Currency profile
Sterling
Euro
£m
28.5
10.3
1.7
1.0
2.1
18.3
61.9
£m
–
0.8
0.5
0.2
0.9
11.4
13.8
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
15: JOINT VENTURES (CONTINUED)
Income statements for the year ended 31 December 2012
Bristol
Alliance
Limited
£m
15.1
(0.4)
14.7
(27.6)
(0.4)
Brent
Cross1
£m
17.8
2.0
–
Net rental income
Administration expenses
–
Operating profit before
other net gains/(losses)
17.8
Other net gains/(losses)
Net finance costs
Profit before tax –
Profit before tax –
discontinued
operations
Balance sheets as at 31 December 2012
Bullring
Limited
Oracle
Queensgate
Highcross
West Quay
Property
Limited
Limited
Limited
Limited
Holdings
Partnership
Partnership2
Partnership
Partnership
Partnership
Partnership
Limited
SCI ESQ
£m
16.5
–
16.5
3.4
–
£m
14.0
–
14.0
3.3
–
£m
5.8
(0.1)
5.7
(6.0)
–
£m
13.5
–
13.5
(11.9)
–
£m
13.1
–
13.1
(0.1)
(0.2)
Retail
£m
8.7
–
8.7
(0.5)
–
SCI RC
Aulnay
£m
4.3
–
4.3
(0.9)
(3.4)
–
–
–
£m
2.9
–
2.9
2.5
–
5.4
–
5.4
Other
£m
3.6
(0.1)
3.5
3.6
0.1
7.2
5.8
13.0
Total
2012
£m
115.3
(0.6)
114.7
(32.2)
(3.9)
78.6
5.8
84.4
Total
2012
£m
Profit before tax
19.8
(13.3)
–
–
–
19.9
–
17.3
–
(0.3)
–
1.6
–
12.8
–
8.2
Bristol
Alliance
Limited
Brent
Cross1
£m
Bullring
Limited
Oracle
Queensgate
Highcross
West Quay
Property
Limited
Limited
Limited
Limited
Holdings
Partnership
Partnership2
Partnership
Partnership
Partnership
Partnership
Limited
£m
£m
£m
£m
£m
£m
£m
SCI ESQ
£m
Other
£m
Retail
SCI RC
Aulnay
£m
properties at valuation
361.7
269.2
307.6
265.7
107.8
262.3
244.8
169.2
88.7
53.4
102.5
2,232.9
Non-current assets
Investment and
development
Interests in leasehold
properties
Receivables
Current assets
Assets held for sale
Other current assets
Cash and deposits
Current liabilities
Liabilities associated
with assets held for sale
Other liabilities
Non-current liabilities
Borrowings
Other liabilities
361.7
276.5
307.6
265.7
107.8
262.3
246.9
169.3
88.7
53.4
102.9
2,242.8
–
–
–
14.2
0.1
14.3
–
(23.9)
(23.9)
–
(0.2)
(0.2)
7.3
–
–
1.6
6.9
8.5
–
(7.3)
(7.3)
–
(7.4)
(7.4)
–
–
–
2.0
4.6
6.6
–
(5.9)
(5.9)
–
–
–
–
–
–
1.8
4.3
6.1
–
(4.7)
(4.7)
–
(0.1)
(0.1)
–
–
–
1.8
2.2
4.0
–
(2.0)
(2.0)
–
(0.1)
(0.1)
–
–
–
3.1
5.3
8.4
–
(8.3)
(8.3)
–
(0.2)
(0.2)
2.1
–
–
1.6
5.5
7.1
–
(5.3)
(5.3)
–
(2.2)
(2.2)
–
0.1
–
2.3
1.1
3.4
–
(4.3)
(4.3)
–
–
–
–
–
–
1.2
1.1
2.3
–
(1.3)
(1.3)
(43.7)
(5.0)
(48.7)
–
–
0.4
–
9.8
0.1
–
138.8
138.8
0.5
1.4
1.9
4.2
1.5
34.3
34.0
144.5
207.1
–
(71.7)
(3.8)
(71.7)
(67.1)
(75.5)
(138.8)
–
(0.6)
(0.6)
(43.7)
(16.5)
(60.2)
(0.3)
(0.3)
–
(0.7)
(0.7)
Net assets
351.9
270.3
308.3
267.0
109.7
262.2
246.5
168.4
41.0
54.3
171.3
2,250.9
1.
Includes Brent Cross Shopping Centre and Brent South Shopping Park.
2. Reflects the Group’s interest of 33.33% during 2012.
represent valuation changes on investment properties.
Other than as shown above, the joint ventures are funded by the Company and the relevant partners. ‘Other net gains/(losses)’ principally
continuing operations
19.8
(13.3)
19.9
17.3
(0.3)
1.6
12.8
8.2
17: RECEIVABLES: CURRENT ASSETS
16: RECEIVABLES: NON-CURRENT ASSETS
Loans receivable
Other receivables
Fair value of interest rate swaps
2013
£m
68.7
1.6
2.0
72.3
2012
£m
47.0
1.1
18.5
66.6
Loans receivable includes a loan of €58.0 million (£48.2 million) (2012: €58.0 million, £47.0 million) to Value Retail European Holdings BV bearing
interest at 10% and maturing on 11 September 2016, except a residual €2 million tranche which matures on 30 November 2043.
Loans receivable also includes a loan to VR Milan S.R.L of €25.0 million granted on 30 July 2013 bearing interest at Euribor plus a 5% margin and
maturing on 13 December 2017. This loan is repayable in quarterly instalments and the balance outstanding at 31 December 2013 is €24.6 million
(£20.5 million). Both loans are classified as available for sale.
Trade receivables
Other receivables
Corporation tax
Prepayments
2013
£m
48.1
61.1
0.2
3.7
2012
£m
53.2
38.6
0.2
10.7
113.1
102.7
Trade receivables are shown after deducting a provision for bad and doubtful debts of £13.8 million (2012: £13.2 million), as set out in the table
below. The movement in the provision during the year was recognised entirely in income. Credit risk is discussed in note 21F.
Gross
receivable
£m
Provision
£m
2013
Net receivable
£m
Gross
receivable
£m
Provision
£m
2012
Net receivable
£m
Not yet due
1-30 days overdue
31-60 days overdue
61-90 days overdue
91-120 days overdue
More than 120 days overdue
18: CASH AND DEPOSITS
Cash at bank
Short-term deposits
Currency profile
Sterling
Euro
28.5
10.3
1.7
1.0
2.1
18.3
61.9
–
0.8
0.5
0.2
0.9
11.4
13.8
28.5
9.5
1.2
0.8
1.2
6.9
48.1
2013
£m
45.5
11.2
56.7
47.3
9.4
56.7
36.4
11.5
1.4
0.4
2.3
14.4
66.4
–
0.7
0.7
0.1
0.6
11.1
13.2
36.4
10.8
0.7
0.3
1.7
3.3
53.2
2012
Total
£m
Associated with
assets held for sale
£m
2012
As stated on
balance sheet
£m
54.4
12.0
66.4
52.6
13.8
66.4
(9.3)
–
(9.3)
(9.3)
–
(9.3)
45.1
12.0
57.1
43.3
13.8
57.1
Short-term deposits principally comprise deposits placed on money markets with rates linked to LIBOR for maturities of not more than one month,
at an average rate of 0.5% (2012: 0.3%). Such deposits are considered to be cash equivalents. Included in the cash balance is £nil (2012: £1.9 million)
that may be used only in relation to certain development projects or in respect of secured borrowings.
140 Hammerson plc Annual Report 2013
www.hammerson.com
141141
141
www.hammerson.com
2013
£m
26.9
137.2
25.9
50.5
240.5
2012
£m
36.3
132.3
25.3
49.8
243.7
C: Undrawn committed facilities
Expiring after more than two years
D:
Interest rate and currency profile
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
19: PAYABLES: CURRENT LIABILITIES
Trade payables
Other payables
Accruals
Deferred income
20: BORROWINGS
A: Maturity
After five years
From two to five years
From one to two years
Due after more than one year
Due within one year
Bank loans and
overdrafts
£m
Other
borrowings
£m
Total
2013
£m
Total
2012
£m
Associated with
assets held for sale
£m
2012
As stated on
balance sheet
£m
–
1,160.1
1,160.1
1,142.4
210.8
–
210.8
249.9
460.7
292.8
399.1
503.6
399.1
1,852.0
2,062.8
(3.7)
246.2
1,848.3
2,309.0
799.7
1.3
1,943.4
159.3
2,102.7
–
(62.0)
(1.3)
(63.3)
(1.3)
(64.6)
2013
£m
197.9
297.2
248.2
412.2
271.1
399.1
415.7
2,241.4
22.6
2,264.0
45.0
–
1,142.4
737.7
–
1,880.1
158.0
2,038.1
2012
£m
197.9
297.1
247.9
401.2
298.7
388.9
151.6
1,983.3
11.1
1,994.4
43.7
64.6
2,309.0
2,102.7
At 31 December 2012 and 2013 no borrowings due after five years were repayable by instalments.
B: Analysis
Unsecured
£200 million 7.25% sterling bonds due 2028
£300 million 6% sterling bonds due 2026
£250 million 6.875% sterling bonds due 2020
€500 million 2.75% euro bonds due 2019
£272 million (2012: £300 million) 5.25% sterling bonds due 2016
€480 million 4.875% euro bonds due 2015
Bank loans and overdrafts
Fair value of currency swaps
Secured
Euro variable rate mortgage due 2016
Sterling variable rate mortgage due 2015*
* Associated with assets previously held for sale.
Security for secured euro borrowings as at 31 December 2013 is provided by a first legal charge on one property, for which the Group’s share
of the carrying value was £103.7 million.
142142
142 Hammerson plc Annual Report 2013
www.hammerson.com
143
Sterling
Euro
Sterling
Euro
out in note 21.
Fixed rate borrowings
rate borrowings
Other variable
%
6.5
4.1
4.8
%
6.4
4.1
4.8
Years
13
3
6
Years
13
4
7
£m
475.0
1,168.0
1,643.0
£m
555.8
1,137.8
1,693.6
Fixed rate borrowings
borrowings
Other variable rate
2013
£m
659.0
£m
410.5
255.5
666.0
£m
357.9
51.2
409.1
2012
£m
630.0
2013
Total
£m
885.5
1,423.5
2,309.0
2012
Total
£m
913.7
1,189.0
2,102.7
The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2012 and 2013, further details of which are set
Variable rate borrowings bear interest based on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial instruments are used to
manage exposure to fluctuations in foreign currency exchange rates and interest rates, but are not employed for speculative purposes. Further
discussion of these issues is set out in Principle Risks and Uncertainties on page 58.
The Group’s risk management policies and practices with regard to financial instruments are as follows:
A: Debt management
The Group generally borrows on an unsecured basis on the strength of its covenant in order to maintain operational flexibility. Borrowings are
arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. Acquisitions may be financed initially using short-term
funds before being refinanced for the longer term when market conditions are appropriate. Short-term funding is raised principally through
syndicated revolving credit facilities from a range of banks and financial institutions with whom Hammerson maintains strong working
relationships. Long-term debt mainly comprises the Group’s fixed rate unsecured bonds.
Interest rate swaps are used to alter the interest rate basis of the Group’s debt, allowing changes from fixed to variable rates or vice versa.
Clear guidelines exist for the Group’s ratio of fixed to variable rate debt and management regularly reviews the interest rate profile against
B:
Interest rate management
these guidelines.
At 31 December 2013, the Group had interest rate swaps of £41.0 million (2012: £40.0 million), maturing in 2016. Under this swap the Group
pays interest at a fixed rate of 3.075% and receives interest linked to EURIBOR. In addition, the Group had interest rate swaps of £250.0 million
(2012: £250.0 million) maturing in 2020 under which the Group pays interest linked to LIBOR and receives interest at 6.875%. At 31 December 2012,
the Group also had an interest rate swap of £60.7 million maturing in 2015 which was associated with assets previously held for sale. Under this
swap the Group paid interest at a fixed rate and received interest linked to LIBOR.
At 31 December 2013, the fair value of interest rate swaps was a liability of £0.8 million (2012: £11.6 million asset). The Group does not hedge
account for its interest rate swaps and states them at fair value with changes in fair value included in the income statement.
C: Foreign currency management
The impact of foreign exchange movements is managed by financing the cost of acquiring euro denominated assets with euro borrowings. The
Group borrows in euros and uses currency swaps to match foreign currency assets with foreign currency liabilities. The Group also hedges the
impact of foreign exchange movements in debt raised in foreign currencies through the use of derivatives to swap the cash flows back to either
sterling or euros.
To manage the foreign currency exposure on its net investments in subsidiaries in Continental Europe, the Group has designated all euro
borrowings, including euro denominated bonds and currency swaps, as hedges. The carrying amount of the bonds at 31 December 2013 was
£811.3 million (2012: £790.1 million) and their fair value was £845.7 million (2012: £841.4 million).
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
Associated with
assets held for sale
2012
As stated on
balance sheet
£m
Bank loans and
Other
overdrafts
borrowings
1,160.1
1,160.1
1,142.4
£m
292.8
399.1
Total
2013
£m
503.6
399.1
1,852.0
2,062.8
(3.7)
246.2
1,848.3
2,309.0
Total
2012
£m
799.7
1.3
1,943.4
159.3
2,102.7
£m
–
–
210.8
210.8
249.9
460.7
At 31 December 2012 and 2013 no borrowings due after five years were repayable by instalments.
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
19: PAYABLES: CURRENT LIABILITIES
Trade payables
Other payables
Accruals
Deferred income
20: BORROWINGS
A: Maturity
After five years
From two to five years
From one to two years
Due after more than one year
Due within one year
B: Analysis
Unsecured
£200 million 7.25% sterling bonds due 2028
£300 million 6% sterling bonds due 2026
£250 million 6.875% sterling bonds due 2020
€500 million 2.75% euro bonds due 2019
£272 million (2012: £300 million) 5.25% sterling bonds due 2016
€480 million 4.875% euro bonds due 2015
Bank loans and overdrafts
Fair value of currency swaps
Secured
Euro variable rate mortgage due 2016
Sterling variable rate mortgage due 2015*
* Associated with assets previously held for sale.
of the carrying value was £103.7 million.
Security for secured euro borrowings as at 31 December 2013 is provided by a first legal charge on one property, for which the Group’s share
2013
£m
26.9
137.2
25.9
50.5
240.5
£m
–
(62.0)
(1.3)
(63.3)
(1.3)
(64.6)
2013
£m
197.9
297.2
248.2
412.2
271.1
399.1
415.7
2,241.4
22.6
2,264.0
45.0
–
2012
£m
36.3
132.3
25.3
49.8
243.7
1,142.4
737.7
–
1,880.1
158.0
2,038.1
2012
£m
197.9
297.1
247.9
401.2
298.7
388.9
151.6
1,983.3
11.1
1,994.4
43.7
64.6
2,309.0
2,102.7
C: Undrawn committed facilities
Expiring after more than two years
D:
Interest rate and currency profile
Sterling
Euro
Sterling
Euro
2013
£m
659.0
Fixed rate borrowings
Other variable
rate borrowings
Years
13
3
6
£m
475.0
1,168.0
1,643.0
£m
410.5
255.5
666.0
Fixed rate borrowings
Other variable rate
borrowings
Years
13
4
7
£m
555.8
1,137.8
1,693.6
£m
357.9
51.2
409.1
2012
£m
630.0
2013
Total
£m
885.5
1,423.5
2,309.0
2012
Total
£m
913.7
1,189.0
2,102.7
%
6.5
4.1
4.8
%
6.4
4.1
4.8
The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2012 and 2013, further details of which are set
out in note 21.
Variable rate borrowings bear interest based on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial instruments are used to
manage exposure to fluctuations in foreign currency exchange rates and interest rates, but are not employed for speculative purposes. Further
discussion of these issues is set out in Principle Risks and Uncertainties on page 58.
The Group’s risk management policies and practices with regard to financial instruments are as follows:
A: Debt management
The Group generally borrows on an unsecured basis on the strength of its covenant in order to maintain operational flexibility. Borrowings are
arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. Acquisitions may be financed initially using short-term
funds before being refinanced for the longer term when market conditions are appropriate. Short-term funding is raised principally through
syndicated revolving credit facilities from a range of banks and financial institutions with whom Hammerson maintains strong working
relationships. Long-term debt mainly comprises the Group’s fixed rate unsecured bonds.
Interest rate management
B:
Interest rate swaps are used to alter the interest rate basis of the Group’s debt, allowing changes from fixed to variable rates or vice versa.
Clear guidelines exist for the Group’s ratio of fixed to variable rate debt and management regularly reviews the interest rate profile against
these guidelines.
At 31 December 2013, the Group had interest rate swaps of £41.0 million (2012: £40.0 million), maturing in 2016. Under this swap the Group
pays interest at a fixed rate of 3.075% and receives interest linked to EURIBOR. In addition, the Group had interest rate swaps of £250.0 million
(2012: £250.0 million) maturing in 2020 under which the Group pays interest linked to LIBOR and receives interest at 6.875%. At 31 December 2012,
the Group also had an interest rate swap of £60.7 million maturing in 2015 which was associated with assets previously held for sale. Under this
swap the Group paid interest at a fixed rate and received interest linked to LIBOR.
At 31 December 2013, the fair value of interest rate swaps was a liability of £0.8 million (2012: £11.6 million asset). The Group does not hedge
account for its interest rate swaps and states them at fair value with changes in fair value included in the income statement.
C: Foreign currency management
The impact of foreign exchange movements is managed by financing the cost of acquiring euro denominated assets with euro borrowings. The
Group borrows in euros and uses currency swaps to match foreign currency assets with foreign currency liabilities. The Group also hedges the
impact of foreign exchange movements in debt raised in foreign currencies through the use of derivatives to swap the cash flows back to either
sterling or euros.
To manage the foreign currency exposure on its net investments in subsidiaries in Continental Europe, the Group has designated all euro
borrowings, including euro denominated bonds and currency swaps, as hedges. The carrying amount of the bonds at 31 December 2013 was
£811.3 million (2012: £790.1 million) and their fair value was £845.7 million (2012: £841.4 million).
142 Hammerson plc Annual Report 2013
www.hammerson.com
143143
143
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
At 31 December 2013, the Group had currency swaps of £735.9 million, being €302.5 million sold forward against sterling for value in February
2014 at a rate of £1 = €1.184, €379.6 million of cross currency swaps to swap the £300.0 million, 5.25% sterling bond maturing in 2016 into euro at
a rate of £1 = €1.265 and a coupon of 4.76%, and cross currency swaps to swap $291 million of USPP notes commencing in February and June
2014 and maturing in June 2021 and 2024, into euro at a rate of €1 = $1.3415. At 31 December 2012, the Group had currency swaps of £347.7
million, being €58.5 million sold forward against sterling for value in January 2013, at a rate of £1 = €1.227 and the €379.6 million of cross currency
swaps as described above. The fair value of currency swaps is shown in note 21I.
The exchange differences on hedging instruments and on net investments in foreign subsidiaries are recognised in equity.
D: Profit and loss account and balance sheet management
The Group maintains internal guidelines for interest cover, gearing and other ratios. Management monitors the Group’s current and projected
financial position against these guidelines. Further details of these ratios are provided in the Financial Review on pages 46 to 50.
E: Cash management and liquidity
Cash levels are monitored to ensure sufficient resources are available to meet the Group’s operational requirements. Short-term money market
deposits are used to manage liquidity while maximising the rate of return on cash resources, giving due consideration to risk.
Longer-term liquidity requirements are met with an appropriate mix of short and longer-term debt as explained in note 21A above.
F: Credit risk
The Group’s principal financial assets are bank and cash balances, short-term deposits, trade and other receivables and investments.
The Group’s credit risk is attributable to its trade and other receivables, cash and short-term deposits and derivative financial instruments.
Trade receivables consist principally of rents due from tenants. The balance is low relative to the scale of the balance sheet and the Group’s tenant
base is diversified geographically, with tenants generally of good financial standing. The majority of tenant leases are long-term contracts with
rents payable quarterly in advance and the average unexpired lease term at 31 December 2013 was 8.0 years (2012: 8.2 years). Rent deposits and
personal or corporate guarantees are held in respect of some leases. Taking these factors into account, the risk to the Group of individual tenant
default and the credit risk of trade receivables are considered low. The Group’s most significant tenants are set out in the Financial review
on page 52.
Loans receivable and other receivables include balances due from joint venture partners, available for sale investments and VAT receivables.
These items do not give rise to significant credit risk.
The receivables in notes 16 and 17 are presented net of allowances for doubtful receivables and allowances for impairment are made where
appropriate. An analysis of trade receivables and the related provisions is shown in note 17.
The credit risk on short-term deposits and derivative financial instruments is limited because the counterparties are banks, who are committed
lenders to the Group, with high credit ratings assigned by international credit-rating agencies.
At 31 December 2013, the Group’s maximum exposure to credit risk was £242.1 million (2012: £237.5 million).
Effect on financial instruments:
G: Financial maturity analysis
The following table is a maturity analysis for income-earning financial assets and interest-bearing financial liabilities.
Cash and deposits
Euro variable rate secured bank loan
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Interest rate swaps (variable)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable
Total
£m
(56.7)
45.0
1,014.4
811.3
209.0
(209.0)
415.7
22.6
2,252.3
(68.7)
2,183.6
Less than
one year
£m
(56.7)
–
–
–
–
–
249.9
(3.7)
189.5
–
189.5
One to two
years
£m
Two to five
years
£m
2013 Maturity
More than five
years
£m
–
–
–
399.1
–
–
–
–
399.1
–
399.1
–
45.0
271.1
–
(41.0)
41.0
165.8
21.7
503.6
(68.7)
434.9
–
–
743.3
412.2
250.0
(250.0)
–
4.6
1,160.1
–
1,160.1
Borrowings are stated net of unamortised fees. Where facilities are undrawn, unamortised fees appear in the analysis above as negative amounts
in the period in which the facility matures.
Cash and deposits
Sterling variable rate secured bank loan
Euro variable rate secured bank loan
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Interest rate swaps (variable)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable
H: Sensitivity analysis
provide indicative sensitivity data.
Effect on profit before tax:
(Decrease)/Increase (£m)
Total
£m
(66.4)
64.6
43.7
1,041.6
790.1
149.3
(149.3)
151.6
11.1
2,036.3
(47.0)
1,989.3
Less than
one year
£m
(66.4)
1.3
–
–
–
–
–
158.2
(0.2)
92.9
–
92.9
One to
two years
Two to
five years
2012 Maturity
More than
five years
£m
£m
–
1.3
–
–
–
–
–
–
–
1.3
–
1.3
£m
–
62.0
43.7
298.7
388.9
(100.7)
100.7
(4.9)
11.3
799.7
(47.0)
752.7
–
–
–
–
–
742.9
401.2
250.0
(250.0)
(1.7)
1,142.4
1,142.4
2013
2012
Increase in interest
Decrease in interest
Increase in interest
Decrease in interest
rates by 1%
rates by 1%
rates by 1%
rates by 1%
(17.3)
18.1
(15.3)
16.3
2013
2012
Strengthening of
Weakening of
Strengthening of
sterling against
sterling against
euro by 10%
euro by 10%
sterling against
euro by 10%
Weakening of
sterling against
euro by 10%
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the
longer term, however, permanent changes in foreign exchange and interest rates may have an impact on consolidated earnings. The tables below
There would have been no effect on amounts recognised directly in equity. The sensitivity has been calculated by applying the interest rate
change to the variable rate borrowings, net of interest rate swaps, at the year end.
Increase/(Decrease) in net gain taken to equity (£m)
129.4
(158.1)
109.4
(133.8)
These effects would be more than offset by the effect of exchange rate changes on the euro denominated net assets included in the Group’s
financial statements.
In relation to financial instruments alone, there would have been no impact on the Group’s profit before tax. This has been calculated by
retranslating the year end euro denominated financial instruments at the year end foreign exchange rate changed by 10%. Forward foreign
exchange contracts have been included in this estimate.
144144
144 Hammerson plc Annual Report 2013
www.hammerson.com
145
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
At 31 December 2013, the Group had currency swaps of £735.9 million, being €302.5 million sold forward against sterling for value in February
2014 at a rate of £1 = €1.184, €379.6 million of cross currency swaps to swap the £300.0 million, 5.25% sterling bond maturing in 2016 into euro at
a rate of £1 = €1.265 and a coupon of 4.76%, and cross currency swaps to swap $291 million of USPP notes commencing in February and June
2014 and maturing in June 2021 and 2024, into euro at a rate of €1 = $1.3415. At 31 December 2012, the Group had currency swaps of £347.7
million, being €58.5 million sold forward against sterling for value in January 2013, at a rate of £1 = €1.227 and the €379.6 million of cross currency
swaps as described above. The fair value of currency swaps is shown in note 21I.
The exchange differences on hedging instruments and on net investments in foreign subsidiaries are recognised in equity.
D: Profit and loss account and balance sheet management
The Group maintains internal guidelines for interest cover, gearing and other ratios. Management monitors the Group’s current and projected
financial position against these guidelines. Further details of these ratios are provided in the Financial Review on pages 46 to 50.
E: Cash management and liquidity
Cash levels are monitored to ensure sufficient resources are available to meet the Group’s operational requirements. Short-term money market
deposits are used to manage liquidity while maximising the rate of return on cash resources, giving due consideration to risk.
Longer-term liquidity requirements are met with an appropriate mix of short and longer-term debt as explained in note 21A above.
F: Credit risk
The Group’s principal financial assets are bank and cash balances, short-term deposits, trade and other receivables and investments.
The Group’s credit risk is attributable to its trade and other receivables, cash and short-term deposits and derivative financial instruments.
Trade receivables consist principally of rents due from tenants. The balance is low relative to the scale of the balance sheet and the Group’s tenant
base is diversified geographically, with tenants generally of good financial standing. The majority of tenant leases are long-term contracts with
rents payable quarterly in advance and the average unexpired lease term at 31 December 2013 was 8.0 years (2012: 8.2 years). Rent deposits and
personal or corporate guarantees are held in respect of some leases. Taking these factors into account, the risk to the Group of individual tenant
default and the credit risk of trade receivables are considered low. The Group’s most significant tenants are set out in the Financial review
on page 52.
Loans receivable and other receivables include balances due from joint venture partners, available for sale investments and VAT receivables.
These items do not give rise to significant credit risk.
The receivables in notes 16 and 17 are presented net of allowances for doubtful receivables and allowances for impairment are made where
appropriate. An analysis of trade receivables and the related provisions is shown in note 17.
The credit risk on short-term deposits and derivative financial instruments is limited because the counterparties are banks, who are committed
lenders to the Group, with high credit ratings assigned by international credit-rating agencies.
G: Financial maturity analysis
The following table is a maturity analysis for income-earning financial assets and interest-bearing financial liabilities.
Cash and deposits
Euro variable rate secured bank loan
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Interest rate swaps (variable)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable
Less than
one year
£m
(56.7)
–
–
–
–
–
–
249.9
(3.7)
189.5
Total
£m
(56.7)
45.0
1,014.4
811.3
209.0
(209.0)
415.7
22.6
2,252.3
(68.7)
2,183.6
One to two
Two to five
More than five
2013 Maturity
years
£m
–
–
–
–
–
–
–
–
399.1
399.1
years
£m
–
45.0
271.1
–
(41.0)
41.0
165.8
21.7
503.6
(68.7)
434.9
years
£m
–
–
743.3
412.2
250.0
(250.0)
–
4.6
–
1,160.1
1,160.1
189.5
399.1
Borrowings are stated net of unamortised fees. Where facilities are undrawn, unamortised fees appear in the analysis above as negative amounts
in the period in which the facility matures.
Cash and deposits
Sterling variable rate secured bank loan
Euro variable rate secured bank loan
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Interest rate swaps (variable)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable
Total
£m
(66.4)
64.6
43.7
1,041.6
790.1
149.3
(149.3)
151.6
11.1
2,036.3
(47.0)
1,989.3
Less than
one year
£m
(66.4)
1.3
–
–
–
–
–
158.2
(0.2)
92.9
–
92.9
One to
two years
£m
–
1.3
–
–
–
–
–
–
–
1.3
–
1.3
Two to
five years
£m
–
62.0
43.7
298.7
388.9
(100.7)
100.7
(4.9)
11.3
799.7
(47.0)
752.7
2012 Maturity
More than
five years
£m
–
–
–
742.9
401.2
250.0
(250.0)
(1.7)
–
1,142.4
–
1,142.4
H: Sensitivity analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the
longer term, however, permanent changes in foreign exchange and interest rates may have an impact on consolidated earnings. The tables below
provide indicative sensitivity data.
Effect on profit before tax:
(Decrease)/Increase (£m)
2013
2012
Increase in interest
rates by 1%
Decrease in interest
rates by 1%
Increase in interest
rates by 1%
Decrease in interest
rates by 1%
(17.3)
18.1
(15.3)
16.3
There would have been no effect on amounts recognised directly in equity. The sensitivity has been calculated by applying the interest rate
change to the variable rate borrowings, net of interest rate swaps, at the year end.
At 31 December 2013, the Group’s maximum exposure to credit risk was £242.1 million (2012: £237.5 million).
Effect on financial instruments:
2013
2012
Strengthening of
sterling against
euro by 10%
Weakening of
sterling against
euro by 10%
Strengthening of
sterling against
euro by 10%
Weakening of
sterling against
euro by 10%
Increase/(Decrease) in net gain taken to equity (£m)
129.4
(158.1)
109.4
(133.8)
These effects would be more than offset by the effect of exchange rate changes on the euro denominated net assets included in the Group’s
financial statements.
In relation to financial instruments alone, there would have been no impact on the Group’s profit before tax. This has been calculated by
retranslating the year end euro denominated financial instruments at the year end foreign exchange rate changed by 10%. Forward foreign
exchange contracts have been included in this estimate.
144 Hammerson plc Annual Report 2013
www.hammerson.com
145145
145
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
J: Carrying amounts, gains and losses of financial instruments
Fair values of financial instruments
I:
The fair values of borrowings, currency and interest rate swaps, together with their carrying amounts included in the balance sheet, are as follows:
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
Book value
£m
2,286.4
22.6
2,309.0
0.8
2013
Fair value
£m
2,497.3
22.6
2,519.9
0.8
Book value
£m
2,091.6
11.1
2,102.7
(11.6)
2012
Fair value
£m
2,381.1
11.1
2,392.2
(11.6)
Financial instruments associated with assets held for sale included in above table
Borrowings, excluding currency swaps
Interest rate swaps
–
–
–
–
64.6
3.0
64.6
3.0
At 31 December 2013, the fair value of financial instruments exceeded their book value by £210.9 million (2012: £289.5 million), equivalent to 29
pence per share (2012: 41 pence per share) on an EPRA net asset value per share basis.
The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 fair value measurements
as defined by IFRS 7 Financial Instruments: Disclosures. 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, representing Level 2 fair value measurements as
defined by IFRS 7. The fair value of the Group’s currency swaps has been estimated on the basis of the prevailing forward rates at the year end,
representing Level 2 fair value measurements as defined by IFRS 7.
Details of the Group’s cash and short-term deposits are set out in note 18. Their fair values and those of other financial assets and liabilities equate
to their book values. Details of the Group’s receivables are set out in notes 16 and 17. The amounts are presented net of allowances for doubtful
receivables and allowances for impairment are made where appropriate. Details of the Group’s investments, stated at fair value, are set out in note
14. The table below reconciles the opening and closing balances for Level 3 fair value measurements of available for sale investments and loans.
Available for sale loans and investments
Balance at 1 January
Total gains
– in profit and loss
– in other comprehensive income
Other movements
– acquisitions
– settlement of interest
– loan issue/(repayment)
Net additions to participative loan to associate recognised as available for sale
Transfer to investment in associate
Balance at 31 December
2013
£m
91.2
13.8
3.4
–
(5.6)
21.4
16.9
–
141.1
2012
£m
267.7
16.0
72.8
95.2
(4.3)
(5.3)
30.8
(381.7)
91.2
Available for sale loans and investments
141.1
13.8
Trade receivables
Cash and deposits
Discontinued operations
Loans and receivables
Other investments
Loans receivable
Participative loan to associate
Interest rate swaps
Discontinued operations
Assets/(Liabilities) at fair value (held for trading)
Currency swaps
Derivatives in effective hedging relationships
Payables
Borrowings, excluding currency swaps
Obligations under finance leases
Discontinued operations
Liabilities at amortised cost
Total for financial instruments
Gain/
(Loss) to
income
£m
2013
Gain/
(Loss) to
equity
£m
Gain/
(Loss) to
income
2012
Gain/
(Loss) to
equity
£m
Carrying
amount
£m
48.1
56.7
–
104.8
1.4
68.7
71.0
(0.8)
–
(0.8)
(22.6)
(22.6)
Notes
17
18
16
14B
16, 23
21I
20B
20
22
(0.6)
0.1
–
(0.5)
–
5.9
7.9
(12.4)
–
(12.4)
0.7
0.7
–
(44.7)
–
(2,558.1)
(2,335.6)
(0.6)
(1.3)
(117.6)
(116.0)
Carrying
amount
£m
53.2
57.1
10.7
121.0
1.4
47.0
42.8
91.2
14.6
(3.0)
11.6
(11.1)
(11.1)
(224.1)
(42.3)
(83.6)
(2,377.0)
(2,164.3)
3.4
3.4
–
–
–
–
–
–
–
–
–
–
–
–
(11.8)
(11.8)
(20.1)
(28.5)
£m
(0.8)
0.6
–
(0.2)
–
4.0
12.0
16.0
9.2
(1.0)
8.2
1.4
1.4
–
(0.7)
(3.0)
(161.9)
(136.5)
19, 23
(227.0)
(2,286.4)
(115.7)
(20.1)
(2,027.0)
(158.2)
11.6
The total loss to income for the year ended 31 December 2013 in respect of interest rate swaps shown above includes the loss arising from the
change in fair value of £14.5 million (2012: £8.3 million gain), included within net finance costs in note 7, and a gain of £0.6 million
(2012: £0.1 million loss) in respect of discontinued operations included in note 9B.
The table below reconciles the net gain or loss taken through income to net finance costs:
Total loss on financial instruments to income
Add back:
Trade receivables loss
Other interest income
Interest capitalised
Discontinued operations
Loss to income on currency swaps outside hedge accounting designation
Deduct:
Change in participative loan to associate shown in share of results of associate
Net finance costs
Notes
7
7
9B
7
2013
£m
(116.0)
0.6
–
–
13.1
1.3
(7.9)
(108.9)
No financial instruments were designated as at fair value through profit and loss on initial recognition, nor classified as held to maturity. Financial
instruments classified as held for trading are hedging instruments that are not designated for hedge accounting.
The total of the equity losses in relation to currency swaps of £11.8 million (2012: £15.7 million gain) and borrowings of £20.1 million
(2012: £11.6 million gain) is £31.9 million (2012: £27.3 million gain) is shown in the movement in the hedging reserve in the consolidated
statement of changes in equity.
72.8
72.8
15.7
15.7
–
–
–
–
–
–
–
–
–
–
–
–
11.6
100.1
2012
£m
(136.5)
0.8
0.2
1.1
8.8
4.0
(12.0)
(133.6)
146146
146 Hammerson plc Annual Report 2013
www.hammerson.com
147
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
Book value
£m
2,286.4
22.6
2,309.0
0.8
2013
Fair value
£m
2,497.3
22.6
2,519.9
0.8
Book value
£m
2,091.6
11.1
2,102.7
(11.6)
2012
Fair value
£m
2,381.1
11.1
2,392.2
(11.6)
Financial instruments associated with assets held for sale included in above table
Borrowings, excluding currency swaps
Interest rate swaps
–
–
–
–
64.6
3.0
64.6
3.0
At 31 December 2013, the fair value of financial instruments exceeded their book value by £210.9 million (2012: £289.5 million), equivalent to 29
pence per share (2012: 41 pence per share) on an EPRA net asset value per share basis.
The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 fair value measurements
as defined by IFRS 7 Financial Instruments: Disclosures. 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, representing Level 2 fair value measurements as
defined by IFRS 7. The fair value of the Group’s currency swaps has been estimated on the basis of the prevailing forward rates at the year end,
representing Level 2 fair value measurements as defined by IFRS 7.
Details of the Group’s cash and short-term deposits are set out in note 18. Their fair values and those of other financial assets and liabilities equate
to their book values. Details of the Group’s receivables are set out in notes 16 and 17. The amounts are presented net of allowances for doubtful
receivables and allowances for impairment are made where appropriate. Details of the Group’s investments, stated at fair value, are set out in note
14. The table below reconciles the opening and closing balances for Level 3 fair value measurements of available for sale investments and loans.
Available for sale loans and investments
Balance at 1 January
Total gains
– in profit and loss
– in other comprehensive income
Other movements
– acquisitions
– settlement of interest
– loan issue/(repayment)
Transfer to investment in associate
Balance at 31 December
Net additions to participative loan to associate recognised as available for sale
2013
£m
91.2
13.8
3.4
–
(5.6)
21.4
16.9
–
141.1
2012
£m
267.7
16.0
72.8
95.2
(4.3)
(5.3)
30.8
(381.7)
91.2
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
I:
Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their carrying amounts included in the balance sheet, are as follows:
J: Carrying amounts, gains and losses of financial instruments
Trade receivables
Cash and deposits
Discontinued operations
Loans and receivables
Other investments
Loans receivable
Participative loan to associate
Available for sale loans and investments
Interest rate swaps
Discontinued operations
Assets/(Liabilities) at fair value (held for trading)
Currency swaps
Derivatives in effective hedging relationships
Payables
Borrowings, excluding currency swaps
Obligations under finance leases
Discontinued operations
Liabilities at amortised cost
Total for financial instruments
Gain/
(Loss) to
income
£m
2013
Gain/
(Loss) to
equity
£m
Gain/
(Loss) to
income
£m
2012
Gain/
(Loss) to
equity
£m
Notes
17
18
16
14B
16, 23
21I
20B
Carrying
amount
£m
48.1
56.7
–
104.8
1.4
68.7
71.0
(0.8)
–
(0.8)
(22.6)
(22.6)
(0.6)
0.1
–
(0.5)
–
5.9
7.9
(12.4)
–
(12.4)
0.7
0.7
–
141.1
13.8
Carrying
amount
£m
53.2
57.1
10.7
121.0
1.4
47.0
42.8
91.2
14.6
(3.0)
11.6
(11.1)
(11.1)
–
–
–
–
–
–
3.4
3.4
–
–
–
(11.8)
(11.8)
(0.8)
0.6
–
(0.2)
–
4.0
12.0
16.0
9.2
(1.0)
8.2
1.4
1.4
–
19, 23
(227.0)
–
(224.1)
20
22
(2,286.4)
(115.7)
(20.1)
(2,027.0)
(158.2)
(44.7)
–
(2,558.1)
(2,335.6)
(0.6)
(1.3)
(117.6)
(116.0)
–
–
(20.1)
(28.5)
(42.3)
(83.6)
(2,377.0)
(2,164.3)
(0.7)
(3.0)
(161.9)
(136.5)
–
–
–
–
72.8
–
–
72.8
–
–
–
15.7
15.7
–
11.6
–
–
11.6
100.1
The total loss to income for the year ended 31 December 2013 in respect of interest rate swaps shown above includes the loss arising from the
change in fair value of £14.5 million (2012: £8.3 million gain), included within net finance costs in note 7, and a gain of £0.6 million
(2012: £0.1 million loss) in respect of discontinued operations included in note 9B.
The table below reconciles the net gain or loss taken through income to net finance costs:
Total loss on financial instruments to income
Add back:
Trade receivables loss
Other interest income
Loss to income on currency swaps outside hedge accounting designation
Interest capitalised
Discontinued operations
Deduct:
Change in participative loan to associate shown in share of results of associate
Net finance costs
Notes
7
7
9B
7
2013
£m
(116.0)
0.6
–
–
13.1
1.3
(7.9)
(108.9)
2012
£m
(136.5)
0.8
0.2
1.1
8.8
4.0
(12.0)
(133.6)
No financial instruments were designated as at fair value through profit and loss on initial recognition, nor classified as held to maturity. Financial
instruments classified as held for trading are hedging instruments that are not designated for hedge accounting.
The total of the equity losses in relation to currency swaps of £11.8 million (2012: £15.7 million gain) and borrowings of £20.1 million
(2012: £11.6 million gain) is £31.9 million (2012: £27.3 million gain) is shown in the movement in the hedging reserve in the consolidated
statement of changes in equity.
146 Hammerson plc Annual Report 2013
www.hammerson.com
147147
147
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
K: Maturity analysis of financial liabilities
The remaining contractual maturities are as follows:
2013
Notes
After 25 years
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
2012
Notes
After 25 years
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
Payables
£m
–
25.6
4.9
6.7
37.2
189.8
227.0
Interest
rate
swaps
£m
Currency
swaps
£m
–
–
2.8
–
2.8
–
2.8
–
–
315.8
–
315.8
251.6
567.4
Payables*
£m
Interest rate
swaps
£m
Currency
swaps
£m
–
21.2
4.7
5.0
30.9
205.3
236.2
–
–
6.9
–
6.9
–
6.9
–
–
307.8
–
307.8
47.4
355.2
Financial
liability
cash flows
£m
21L
–
1,519.9
713.2
499.6
2,732.7
349.8
3,082.5
Financial
liability
cash flows
£m
21L
–
1,565.4
1,045.9
101.8
2,713.1
260.2
2,973.3
Finance leases
Continuing
£m
Discontinued
£m
22
331.6
52.7
7.9
2.6
394.8
2.0
396.8
–
–
–
–
–
–
Finance leases
Continuing
£m
Discontinued
£m
22
332.2
51.7
7.8
2.0
393.7
3.1
396.8
38.0
7.5
1.1
0.4
47.0
0.3
47.3
Total
2013
£m
331.6
1,598.2
1,044.6
508.9
3,483.3
793.2
4,276.5
Total
2012
£m
370.2
1,645.8
1,374.2
109.2
3,499.4
516.3
4,015.7
*
Payables comprise £224.1 million relating to continuing operations and £12.1 million relating to discontinued operations.
At 31 December 2013, the currency swap liability is offset by an asset of £544.8 million (2012: £344.1 million), so that the fair value of the currency
swaps is a liability of £22.6 million (2012: £11.1 million), as reported in note 20B.
L: Reconciliation of maturity analyses in notes 20 and 21K
The maturity analysis in note 21K shows contractual non-discounted cash flows for all financial liabilities, including interest payments, but
excluding the fair value of the currency swaps, which is not a cash flow item. The following table reconciles the borrowings column in note 20 with
the financial maturity analysis in note 21K.
2013
Notes
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
Borrowings
£m
Interest
£m
20A
1,160.1
503.6
399.1
2,062.8
246.2
2,309.0
349.3
203.1
100.2
652.6
103.5
756.1
Unamortised
borrowing
costs
£m
Financial
liability
cash flows
£m
21K
10.5
1,519.9
6.5
0.3
17.3
0.1
17.4
713.2
499.6
2,732.7
349.8
3,082.5
Borrowings
£m
20A
1,142.4
799.7
1.3
1,943.4
159.3
2,102.7
Unamortised
borrowing
costs
£m
13.1
8.2
21.3
–
–
21.3
Interest
£m
409.9
238.0
100.5
748.4
100.9
849.3
Financial
liability
cash flows
£m
21K
1,565.4
1,045.9
101.8
2,713.1
260.2
2,973.3
The Group’s financing policy is to optimise the weighted average cost of capital by using an appropriate mix of debt and equity, the latter in the
form of share capital. Further information on debt is provided in the Financial Review on page 49 and information on share capital and changes
therein is set out in note 24 below and in the Statement of Changes in Equity on page 113.
22: OBLIGATIONS UNDER FINANCE LEASES
Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:
2012
Present value
of minimum
Minimum
lease payments
Interest
lease payments
lease payments
Interest
lease payments
£m
331.6
52.7
7.9
2.6
2.0
£m
(289.7)
(49.6)
(7.7)
(2.5)
(2.6)
2013
Present value
of minimum
£m
41.9
3.1
0.2
0.1
(0.6)
44.7
Minimum
£m
332.2
51.7
7.8
2.0
3.1
396.8
(352.1)
396.8
(354.5)
23: PAYABLES: NON-CURRENT LIABILITIES
2012
Notes
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
M: Capital structure
After 25 years
From five to 25 years
From two to five years
From one to two years
Within one year
Net pension liability
Other payables
Fair value of interest rate swaps
24: SHARE CAPITAL
Ordinary shares of 25p each
£m
41.2
2.9
0.3
(0.5)
(1.6)
42.3
2012
£m
29.7
30.5
3.9
64.1
£m
(291.0)
(48.8)
(7.5)
(2.5)
(4.7)
2013
£m
32.2
37.3
2.8
72.3
2013
£m
178.2
Called up, allotted and fully paid
2012
£m
178.2
Number
712,830,959
18,700
27,211
712,876,870
Movements in number of shares in issue
Number of shares in issue at 1 January 2013
Share options exercised – Executive Share Option Scheme
Share options exercised – Savings-related Share Option Scheme
Number of shares in issue at 31 December 2013
148148
148 Hammerson plc Annual Report 2013
www.hammerson.com
149
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
21: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
K: Maturity analysis of financial liabilities
The remaining contractual maturities are as follows:
Interest
rate
swaps
£m
Currency
swaps
£m
Finance leases
Continuing
Discontinued
£m
Financial
liability
cash flows
£m
21L
–
1,519.9
713.2
499.6
2,732.7
349.8
3,082.5
Financial
liability
cash flows
£m
21L
–
1,565.4
1,045.9
101.8
2,713.1
260.2
2,973.3
–
–
–
315.8
315.8
251.6
567.4
–
–
–
307.8
307.8
47.4
355.2
£m
22
331.6
52.7
7.9
2.6
394.8
2.0
396.8
£m
22
332.2
51.7
7.8
2.0
393.7
3.1
396.8
–
–
–
–
2.8
2.8
2.8
–
–
–
–
6.9
6.9
6.9
Total
2013
£m
331.6
1,598.2
1,044.6
508.9
3,483.3
793.2
4,276.5
Total
2012
£m
370.2
1,645.8
1,374.2
109.2
3,499.4
516.3
4,015.7
–
–
–
–
–
–
£m
38.0
7.5
1.1
0.4
47.0
0.3
47.3
Payables*
£m
Interest rate
swaps
£m
Currency
swaps
£m
Finance leases
Continuing
Discontinued
Payables
£m
–
25.6
4.9
6.7
37.2
189.8
227.0
–
21.2
4.7
5.0
30.9
205.3
236.2
*
Payables comprise £224.1 million relating to continuing operations and £12.1 million relating to discontinued operations.
At 31 December 2013, the currency swap liability is offset by an asset of £544.8 million (2012: £344.1 million), so that the fair value of the currency
swaps is a liability of £22.6 million (2012: £11.1 million), as reported in note 20B.
L: Reconciliation of maturity analyses in notes 20 and 21K
The maturity analysis in note 21K shows contractual non-discounted cash flows for all financial liabilities, including interest payments, but
excluding the fair value of the currency swaps, which is not a cash flow item. The following table reconciles the borrowings column in note 20 with
the financial maturity analysis in note 21K.
Borrowings
£m
20A
1,160.1
503.6
399.1
2,062.8
246.2
2,309.0
Unamortised
borrowing
costs
£m
6.5
0.3
17.3
0.1
17.4
Interest
£m
349.3
203.1
100.2
652.6
103.5
756.1
Financial
liability
cash flows
£m
21K
713.2
499.6
2,732.7
349.8
3,082.5
10.5
1,519.9
2013
Notes
After 25 years
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
2012
Notes
After 25 years
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
2013
Notes
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
2012
Notes
From five to 25 years
From two to five years
From one to two years
Due after more than one year
Due within one year
Borrowings
£m
Interest
£m
Unamortised
borrowing
costs
£m
Financial
liability
cash flows
£m
20A
1,142.4
799.7
1.3
1,943.4
159.3
2,102.7
409.9
238.0
100.5
748.4
100.9
849.3
13.1
8.2
–
21.3
–
21.3
21K
1,565.4
1,045.9
101.8
2,713.1
260.2
2,973.3
M: Capital structure
The Group’s financing policy is to optimise the weighted average cost of capital by using an appropriate mix of debt and equity, the latter in the
form of share capital. Further information on debt is provided in the Financial Review on page 49 and information on share capital and changes
therein is set out in note 24 below and in the Statement of Changes in Equity on page 113.
22: OBLIGATIONS UNDER FINANCE LEASES
Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:
After 25 years
From five to 25 years
From two to five years
From one to two years
Within one year
23: PAYABLES: NON-CURRENT LIABILITIES
Minimum
lease payments
£m
331.6
52.7
7.9
2.6
2.0
Interest
£m
(289.7)
(49.6)
(7.7)
(2.5)
(2.6)
396.8
(352.1)
Net pension liability
Other payables
Fair value of interest rate swaps
24: SHARE CAPITAL
Ordinary shares of 25p each
Movements in number of shares in issue
Number of shares in issue at 1 January 2013
Share options exercised – Executive Share Option Scheme
Share options exercised – Savings-related Share Option Scheme
Number of shares in issue at 31 December 2013
2013
Present value
of minimum
lease payments
£m
Minimum
lease payments
£m
41.9
3.1
0.2
0.1
(0.6)
44.7
332.2
51.7
7.8
2.0
3.1
Interest
£m
(291.0)
(48.8)
(7.5)
(2.5)
(4.7)
396.8
(354.5)
2013
£m
32.2
37.3
2.8
72.3
2012
Present value
of minimum
lease payments
£m
41.2
2.9
0.3
(0.5)
(1.6)
42.3
2012
£m
29.7
30.5
3.9
64.1
Called up, allotted and fully paid
2013
£m
178.2
2012
£m
178.2
Number
712,830,959
18,700
27,211
712,876,870
148 Hammerson plc Annual Report 2013
www.hammerson.com
149149
149
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24: SHARE CAPITAL (CONTINUED)
At 31 December 2013, the following shares remained outstanding under the Company’s Restricted Share Plan and Long-Term Incentive Plan.
Share options
At 31 December 2013, the following options granted to staff remained outstanding under the Company’s Executive Share Option Scheme:
Expiry year
2014
2015
2016
Exercise price
(pence)
Number
of ordinary shares
of 25p each
440
583
839
25,519
34,481
107,732
167,732
UK eligible employees may participate in the Company’s Savings-related Share Option Scheme by choosing to enter into one or more contracts
for a three or five year term and save a fixed amount from £5 to £250 each month for three years (for a three year contract) or five years (for a five
year contract). For contracts entered into prior to 2013, a seven year term, was also available. At the end of the contract, employees may exercise
an option to purchase shares in the Company at the option price, which is set at the beginning of the contract at a discount of up to 20% of the
prevailing share price at the time that invitation is launched.
At 31 December 2013, the following options granted to Executive Directors and staff remained outstanding under the Company’s Savings-related
Share Option scheme:
Expiry year
2014
2015
2016
2017
2018
2019
Exercise
price (pence)
217.2 - 368.0
312.24 - 329.04
217.2 - 420.0
312.24 - 329.04
368.0 - 420.0
329.04
Number of
ordinary shares
of 25p each
65,863
132,702
77,464
18,001
13,318
9,360
316,708
The number and weighted average exercise prices of share options under the Company’s Executive Share Option Scheme are as follows:
Outstanding at 1 January
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding and exercisable at 31 December
2013
Weighted average
exercise price
£
7.06
8.19
–
4.16
7.26
Number
of options
205,211
(18,779)
–
(18,700)
167,732
2012
Weighted average
exercise price
£
6.37
7.00
5.83
2.94
7.06
Number
of options
425,647
(13,466)
(193,322)
(13,648)
205,211
The weighted average share price at the date of exercise for share options exercised during the year was £5.26 (2012: £4.86). The options
outstanding at 31 December 2013 had a weighted average remaining contractual life of 2 years (2012: 2 years). The number and weighted
average exercise price of share options under the Company’s Savings-related Share Option Scheme are as follows:
Notional dividend shares accrued during the year
Outstanding at 1 January
Awarded during the year
Vested during the year
Forfeited during the year
Lapsed during the year
Outstanding at 31 December
Year of grant
2010
2011
2012
2013
25: INVESTMENT IN OWN SHARES
At cost
Balance at 1 January
Transfer from treasury shares
Purchase of own shares
Cost of shares awarded to employees
Balance at 31 December
The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance with
the terms of the Plan. The expense related to share-based employee remuneration is calculated in accordance with IFRS 2 and the terms of the
Plan and is recognised in the income statement within administration expenses. The corresponding credit is included in other reserves. When the
Company’s shares are awarded to employees as part of their remuneration, the cost of the shares is transferred to other reserves. Should this not
equal the credit previously recorded against other reserves, the balance is adjusted against retained earnings.
The number of shares held as at 31 December 2013 was 984,463 (2012: 1,337,807) following awards to participants during the year of 1,353,344
shares (2012: 975,037), and a purchase of 1,000,000 shares (2012: 700,000).
26: ADJUSTMENT FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT
Outstanding at 1 January
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding at 31 December
2013
Weighted average
exercise price
£
3.23
4.20
3.72
3.19
3.00
3.39
Number
of options
316,173
54,102
(16,575)
(9,781)
(27,211)
316,708
2012
Weighted average
exercise price
£
2.67
3.29
3.24
2.35
2.18
3.23
Number
of options
398,402
176,669
(55,729)
(1,067)
(202,102)
316,173
Amortisation of lease incentives and other costs
Increase in accrued rents receivable
Non-cash items included within net rental income*
Depreciation
Share-based employee remuneration
Exchange and other items
The weighted average share price at the date of exercise for share options exercised during the year was £5.15 (2012: £4.30). No options
outstanding under the Company’s Savings-related Share Option Scheme were exercisable at 31 December 2013 or 31 December 2012. The
weighted average fair value of options granted during the year was £1.30 (2012: £1.01).
* Consists of £7.5 million relating to continuing operations and £0.8 million relating to discontinued operations (see note 3A). For 2012, £8.3 million related to continuing operations offset by
£1.5 million relating to discontinued operations.
150150
150 Hammerson plc Annual Report 2013
www.hammerson.com
151
Number of ordinary shares of 25p each
Restricted Share Plan
Long-Term Incentive Plan
2013
1,002,236
303,790
36,927
(351,325)
(90,434)
2012
985,502
352,258
32,377
(285,893)
(82,008)
2013
2012
2,778,141
3,160,051
766,408
79,578
(648,466)
904,012
99,170
–
–
(156,337)
–
–
(142,922)
(1,228,755)
901,194
1,002,236
2,832,739
2,778,141
Number of ordinary shares of 25p each
Restricted Share Plan
Long-Term Incentive Plan
2013
–
311,251
301,553
288,390
901,194
2012
347,562
325,703
328,971
–
2013
–
1,179,503
866,268
786,968
2012
783,657
1,151,874
842,610
–
1,002,236
2,832,739
2,778,141
2013
£m
6.0
–
4.9
(6.0)
4.9
2013
£m
8.5
(0.2)
8.3
1.5
3.9
0.6
14.3
2012
£m
1.8
4.7
3.4
(3.9)
6.0
2012
£m
7.3
(0.5)
6.8
1.5
4.9
0.8
14.0
Note
13
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24: SHARE CAPITAL (CONTINUED)
Share options
At 31 December 2013, the following options granted to staff remained outstanding under the Company’s Executive Share Option Scheme:
UK eligible employees may participate in the Company’s Savings-related Share Option Scheme by choosing to enter into one or more contracts
for a three or five year term and save a fixed amount from £5 to £250 each month for three years (for a three year contract) or five years (for a five
year contract). For contracts entered into prior to 2013, a seven year term, was also available. At the end of the contract, employees may exercise
an option to purchase shares in the Company at the option price, which is set at the beginning of the contract at a discount of up to 20% of the
prevailing share price at the time that invitation is launched.
Expiry year
2014
2015
2016
Expiry year
2014
2015
2016
2017
2018
2019
Share Option scheme:
Outstanding at 1 January
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding and exercisable at 31 December
Outstanding at 1 January
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding at 31 December
Exercise price
of ordinary shares
(pence)
of 25p each
Number
440
583
839
25,519
34,481
107,732
167,732
Number of
Exercise
ordinary shares
price (pence)
of 25p each
217.2 - 368.0
312.24 - 329.04
217.2 - 420.0
312.24 - 329.04
368.0 - 420.0
329.04
65,863
132,702
77,464
18,001
13,318
9,360
316,708
2013
Weighted average
exercise price
2012
Weighted average
exercise price
Number
of options
205,211
(18,779)
–
(18,700)
167,732
Number
of options
316,173
54,102
(16,575)
(9,781)
(27,211)
316,708
7.06
8.19
£
–
4.16
7.26
£
3.23
4.20
3.72
3.19
3.00
3.39
Number
of options
425,647
(13,466)
(193,322)
(13,648)
205,211
Number
of options
398,402
176,669
(55,729)
(1,067)
(202,102)
316,173
2013
Weighted average
exercise price
2012
Weighted average
exercise price
£
6.37
7.00
5.83
2.94
7.06
£
2.67
3.29
3.24
2.35
2.18
3.23
The number and weighted average exercise prices of share options under the Company’s Executive Share Option Scheme are as follows:
The weighted average share price at the date of exercise for share options exercised during the year was £5.26 (2012: £4.86). The options
outstanding at 31 December 2013 had a weighted average remaining contractual life of 2 years (2012: 2 years). The number and weighted
average exercise price of share options under the Company’s Savings-related Share Option Scheme are as follows:
At 31 December 2013, the following shares remained outstanding under the Company’s Restricted Share Plan and Long-Term Incentive Plan.
At 31 December 2013, the following options granted to Executive Directors and staff remained outstanding under the Company’s Savings-related
Year of grant
Outstanding at 1 January
Awarded during the year
Notional dividend shares accrued during the year
Vested during the year
Forfeited during the year
Lapsed during the year
Outstanding at 31 December
2010
2011
2012
2013
25: INVESTMENT IN OWN SHARES
At cost
Balance at 1 January
Transfer from treasury shares
Purchase of own shares
Cost of shares awarded to employees
Balance at 31 December
Number of ordinary shares of 25p each
Restricted Share Plan
Long-Term Incentive Plan
2013
1,002,236
303,790
36,927
(351,325)
(90,434)
2012
985,502
352,258
32,377
(285,893)
(82,008)
2013
2012
2,778,141
3,160,051
766,408
79,578
(648,466)
904,012
99,170
–
–
(156,337)
–
–
(142,922)
(1,228,755)
901,194
1,002,236
2,832,739
2,778,141
Number of ordinary shares of 25p each
Restricted Share Plan
Long-Term Incentive Plan
2013
–
311,251
301,553
288,390
901,194
2012
347,562
325,703
328,971
–
2013
–
1,179,503
866,268
786,968
2012
783,657
1,151,874
842,610
–
1,002,236
2,832,739
2,778,141
2013
£m
6.0
–
4.9
(6.0)
4.9
2012
£m
1.8
4.7
3.4
(3.9)
6.0
The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance with
the terms of the Plan. The expense related to share-based employee remuneration is calculated in accordance with IFRS 2 and the terms of the
Plan and is recognised in the income statement within administration expenses. The corresponding credit is included in other reserves. When the
Company’s shares are awarded to employees as part of their remuneration, the cost of the shares is transferred to other reserves. Should this not
equal the credit previously recorded against other reserves, the balance is adjusted against retained earnings.
The number of shares held as at 31 December 2013 was 984,463 (2012: 1,337,807) following awards to participants during the year of 1,353,344
shares (2012: 975,037), and a purchase of 1,000,000 shares (2012: 700,000).
26: ADJUSTMENT FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT
Amortisation of lease incentives and other costs
Increase in accrued rents receivable
Non-cash items included within net rental income*
Depreciation
Share-based employee remuneration
Exchange and other items
Note
13
2013
£m
8.5
(0.2)
8.3
1.5
3.9
0.6
14.3
2012
£m
7.3
(0.5)
6.8
1.5
4.9
0.8
14.0
The weighted average share price at the date of exercise for share options exercised during the year was £5.15 (2012: £4.30). No options
outstanding under the Company’s Savings-related Share Option Scheme were exercisable at 31 December 2013 or 31 December 2012. The
weighted average fair value of options granted during the year was £1.30 (2012: £1.01).
* Consists of £7.5 million relating to continuing operations and £0.8 million relating to discontinued operations (see note 3A). For 2012, £8.3 million related to continuing operations offset by
£1.5 million relating to discontinued operations.
150 Hammerson plc Annual Report 2013
www.hammerson.com
151151
151
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
COMPANY BALANCE SHEET
27: THE GROUP AS LESSOR – OPERATING LEASE RECEIPTS
At the balance sheet date, the Group had contracted with tenants for the future minimum lease receipts as shown in the table below. The data is
for the period to the first tenant break option. An overview of the Group’s leasing arrangements is included in the Property Portfolio Information
on pages 51 and 52 and credit risk related to the trade receivables is discussed in note 21F.
Within one year
From one to two years
From two to five years
After five years
2013
£m
190.1
203.6
463.5
936.1
2012
£m
225.0
193.1
456.4
971.9
1,793.3
1,846.4
28: CONTINGENT LIABILITIES
There are contingent liabilities of £31.1 million (2012: £32.1 million) relating to guarantees given by the Group and a further £27.4 million (2012:
£29.2 million) relating to claims against the Group arising in the normal course of business, which are considered to be unlikely to crystallise.
Hammerson’s share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is £17.0 million (2012:
£14.0 million). Principal risks and uncertainties facing the Group are detailed on pages 55 to 59.
Non-current assets
Investments in subsidiary companies
Cash and short-term deposits
Receivables
Current assets
Receivables
Total assets
Current liabilities
Payables
Borrowings
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Equity shareholders’ funds
Signed on behalf of the Board
David Atkins / Director
Registered in England No. 360632
These financial statements were approved by the Board of Directors on 14 February 2014.
Timon Drakesmith / Director
7,500.0
6,870.7
Notes
C
D
E
F
G
G
24
H
H
H
H
H
I
J
2013
£m
2,948.6
4,545.0
7,493.6
5.6
0.8
6.4
1,176.1
246.2
1,422.3
2,017.8
3,440.1
4,059.9
178.2
1,222.4
7.2
0.1
1,353.0
1,303.9
(4.9)
4,059.9
2012
£m
2,668.1
4,195.0
6,863.1
6.2
1.4
7.6
1,025.1
158.0
1,183.1
1,836.4
3,019.5
3,851.2
178.2
1,222.3
7.2
0.1
1,072.5
1,376.9
(6.0)
3,851.2
152152
152 Hammerson plc Annual Report 2013
www.hammerson.com
153
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Within one year
From one to two years
From two to five years
After five years
27: THE GROUP AS LESSOR – OPERATING LEASE RECEIPTS
At the balance sheet date, the Group had contracted with tenants for the future minimum lease receipts as shown in the table below. The data is
for the period to the first tenant break option. An overview of the Group’s leasing arrangements is included in the Property Portfolio Information
on pages 51 and 52 and credit risk related to the trade receivables is discussed in note 21F.
2013
£m
190.1
203.6
463.5
936.1
2012
£m
225.0
193.1
456.4
971.9
1,793.3
1,846.4
28: CONTINGENT LIABILITIES
There are contingent liabilities of £31.1 million (2012: £32.1 million) relating to guarantees given by the Group and a further £27.4 million (2012:
£29.2 million) relating to claims against the Group arising in the normal course of business, which are considered to be unlikely to crystallise.
Hammerson’s share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is £17.0 million (2012:
£14.0 million). Principal risks and uncertainties facing the Group are detailed on pages 55 to 59.
NOTES TO THE ACCOUNTS CONTINUED
COMPANY BALANCE SHEET
Non-current assets
Investments in subsidiary companies
Receivables
Current assets
Receivables
Cash and short-term deposits
Total assets
Current liabilities
Payables
Borrowings
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Equity shareholders’ funds
These financial statements were approved by the Board of Directors on 14 February 2014.
Signed on behalf of the Board
David Atkins / Director
Registered in England No. 360632
Timon Drakesmith / Director
Notes
C
D
E
F
G
G
24
H
H
H
H
H
I
J
2013
£m
2,948.6
4,545.0
7,493.6
5.6
0.8
6.4
2012
£m
2,668.1
4,195.0
6,863.1
6.2
1.4
7.6
7,500.0
6,870.7
1,176.1
246.2
1,422.3
2,017.8
3,440.1
4,059.9
178.2
1,222.4
7.2
0.1
1,353.0
1,303.9
(4.9)
4,059.9
1,025.1
158.0
1,183.1
1,836.4
3,019.5
3,851.2
178.2
1,222.3
7.2
0.1
1,072.5
1,376.9
(6.0)
3,851.2
152 Hammerson plc Annual Report 2013
www.hammerson.com
153153
153
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE COMPANY ACCOUNTS
A: Accounting policies
Although the consolidated Group accounts are prepared under IFRS, the Hammerson plc company accounts presented in this section are
prepared under UK GAAP. The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group
in note 1, except as set out below.
Investments in subsidiary companies are included at valuation. The Directors determine the valuations with reference to the underlying net assets
of the subsidiaries. In accordance with UK GAAP, in calculating the underlying net asset values of the subsidiaries, no deduction is made for
deferred tax relating to revaluation surpluses on investment properties.
The Company has taken advantage of the exemption in FRS 29 Financial Instruments – Disclosure Section 2D not to present the disclosures
required in respect of the Hammerson plc company accounts as the Company is included in the consolidated Group accounts. The consolidated
accounts of Hammerson plc comply with IFRS 7 Financial Instruments – Disclosure which is materially consistent with FRS 29.
The Company does not utilise net investment hedging under FRS 26 Financial Instruments – Recognition and Measurement.
B: Profit for the year and dividend
As permitted by section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial
statements. The profit for the year attributable to equity shareholders dealt with in the financial statements of the Company was £57.1 million
(2012: £155.9 million).
Dividend information is provided in note 10 to the consolidated accounts.
C:
Investments in subsidiary companies
Balance at 1 January 2013
Revaluation adjustment
Balance at 31 December 2013
Cost less provision
for permanent
diminution in
value
£m
1,561.7
–
1,561.7
Investments are stated at Directors’ valuation. A list of the principal subsidiary companies at 31 December 2013 is included in note L.
D: Receivables: non-current assets
Amounts owed by subsidiaries
Loans receivable (see note 16)
Fair value of interest rate swaps
2013
£m
4,474.3
68.7
2.0
Valuation
£m
2,668.1
280.5
2,948.6
2012
£m
4,129.5
47.0
18.5
Amounts owed by subsidiaries are unsecured and interest-bearing at variable rates based on LIBOR. These amounts are repayable on demand;
however, it is the Company’s current intention not to seek repayment before 31 December 2014.
4,545.0
4,195.0
The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance
E:
Receivables: current assets
Other receivables
F: Payables
Amounts owed to subsidiaries
Other payables and accruals
2013
£m
5.6
2013
£m
1,112.9
63.2
1,176.1
2012
£m
6.2
2012
£m
963.4
61.7
1,025.1
The amounts owed to subsidiaries are unsecured, repayable on demand and interest bearing at variable rates based on LIBOR.
154154
154 Hammerson plc Annual Report 2013
www.hammerson.com
155
Bank loans and
overdrafts
Other
borrowings
£m
1,160.1
1,160.1
2013
Total
£m
458.6
399.1
2,017.8
246.2
2,264.0
292.8
399.1
1,852.0
(3.7)
1,848.3
£m
–
–
165.8
165.8
249.9
415.7
Capital
redemption
reserve
£m
7.2
–
–
–
–
7.2
Details of the Group’s borrowings and financial instruments are given in notes 20 and 21 to the consolidated accounts. The Company’s
borrowings are unsecured and comprise sterling and euro denominated bonds, bank loans and overdrafts.
Note
10
Share
premium
£m
1,222.3
0.1
–
–
–
Other
reserves
£m
0.1
Revaluation
reserve
£m
1,072.5
–
–
–
–
Revaluation gains on investments in subsidiary
Balance at 31 December 2013
1,222.4
0.1
1,353.0
1,303.9
G: Borrowings
After five years
From two to five years
From one to two years
Due after more than one year
Due within one year
H: Equity
Balance at 1 January 2013
Issue of shares
Dividends
companies
Profit for the year
I:
Investment in own shares
At cost
Balance at 1 January
Transfer from treasury shares
Purchase of own shares
Balance at 31 December
with the terms of the Plan.
is recognised in equity.
Transfer to employing subsidiaries – cost of shares awarded to employees
The Company has no employees. When the Company’s own shares are awarded to Group employees as part of their remuneration, the
cost of the shares is transferred by the Company through intercompany accounts to the employing subsidiaries, where the related credit
Further details of share options and the number of own shares held by the Company are set out in notes 24 and 25 to the consolidated accounts.
J: Reconciliation of movements in equity shareholders’ funds
2012
Total
£m
1,142.4
694.0
–
1,836.4
158.0
1,994.4
Retained
earnings
£m
1,376.9
(130.1)
–
–
57.1
2012
£m
1.8
4.7
3.4
(3.9)
6.0
2012
£m
3,771.9
0.4
(120.9)
43.4
3.9
(3.4)
155.9
3,851.2
–
–
–
280.5
2013
£m
6.0
–
4.9
(6.0)
4.9
2013
£m
3,851.2
0.1
(130.1)
280.5
6.0
(4.9)
57.1
4,059.9
Revaluation gains on investments in subsidiary companies
Cost of shares awarded to employees
Balance at 1 January
Issues of shares
Dividends
Purchase of own shares
Profit for the year
Balance at 31 December
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
G: Borrowings
After five years
From two to five years
From one to two years
Due after more than one year
Due within one year
Bank loans and
overdrafts
£m
Other
borrowings
£m
2013
Total
£m
–
165.8
–
165.8
249.9
415.7
1,160.1
1,160.1
292.8
399.1
1,852.0
(3.7)
1,848.3
458.6
399.1
2,017.8
246.2
2,264.0
Details of the Group’s borrowings and financial instruments are given in notes 20 and 21 to the consolidated accounts. The Company’s
borrowings are unsecured and comprise sterling and euro denominated bonds, bank loans and overdrafts.
FINANCIAL STATEMENTS
NOTES TO THE COMPANY ACCOUNTS
Although the consolidated Group accounts are prepared under IFRS, the Hammerson plc company accounts presented in this section are
prepared under UK GAAP. The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group
A: Accounting policies
in note 1, except as set out below.
Investments in subsidiary companies are included at valuation. The Directors determine the valuations with reference to the underlying net assets
of the subsidiaries. In accordance with UK GAAP, in calculating the underlying net asset values of the subsidiaries, no deduction is made for
deferred tax relating to revaluation surpluses on investment properties.
The Company has taken advantage of the exemption in FRS 29 Financial Instruments – Disclosure Section 2D not to present the disclosures
required in respect of the Hammerson plc company accounts as the Company is included in the consolidated Group accounts. The consolidated
accounts of Hammerson plc comply with IFRS 7 Financial Instruments – Disclosure which is materially consistent with FRS 29.
The Company does not utilise net investment hedging under FRS 26 Financial Instruments – Recognition and Measurement.
B: Profit for the year and dividend
(2012: £155.9 million).
Dividend information is provided in note 10 to the consolidated accounts.
C:
Investments in subsidiary companies
Investments are stated at Directors’ valuation. A list of the principal subsidiary companies at 31 December 2013 is included in note L.
Amounts owed by subsidiaries are unsecured and interest-bearing at variable rates based on LIBOR. These amounts are repayable on demand;
however, it is the Company’s current intention not to seek repayment before 31 December 2014.
Balance at 1 January 2013
Revaluation adjustment
Balance at 31 December 2013
D: Receivables: non-current assets
Amounts owed by subsidiaries
Loans receivable (see note 16)
Fair value of interest rate swaps
E:
Receivables: current assets
Other receivables
F: Payables
Amounts owed to subsidiaries
Other payables and accruals
Cost less provision
for permanent
diminution in
value
£m
1,561.7
–
1,561.7
Valuation
£m
2,668.1
280.5
2,948.6
4,474.3
4,129.5
4,545.0
4,195.0
2013
£m
68.7
2.0
2013
£m
5.6
2013
£m
1,112.9
63.2
1,176.1
2012
£m
47.0
18.5
2012
£m
6.2
2012
£m
963.4
61.7
1,025.1
The amounts owed to subsidiaries are unsecured, repayable on demand and interest bearing at variable rates based on LIBOR.
As permitted by section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial
statements. The profit for the year attributable to equity shareholders dealt with in the financial statements of the Company was £57.1 million
H: Equity
Balance at 1 January 2013
Issue of shares
Dividends
Revaluation gains on investments in subsidiary
companies
Profit for the year
Balance at 31 December 2013
I:
Investment in own shares
At cost
Balance at 1 January
Transfer from treasury shares
Purchase of own shares
Note
10
Share
premium
£m
1,222.3
0.1
–
–
–
1,222.4
Capital
redemption
reserve
£m
7.2
–
–
–
–
7.2
Transfer to employing subsidiaries – cost of shares awarded to employees
Balance at 31 December
Other
reserves
£m
0.1
Revaluation
reserve
£m
1,072.5
–
–
–
–
–
–
280.5
–
0.1
1,353.0
1,303.9
2013
£m
6.0
–
4.9
(6.0)
4.9
2012
£m
1.8
4.7
3.4
(3.9)
6.0
The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance
with the terms of the Plan.
The Company has no employees. When the Company’s own shares are awarded to Group employees as part of their remuneration, the
cost of the shares is transferred by the Company through intercompany accounts to the employing subsidiaries, where the related credit
is recognised in equity.
Further details of share options and the number of own shares held by the Company are set out in notes 24 and 25 to the consolidated accounts.
J: Reconciliation of movements in equity shareholders’ funds
Balance at 1 January
Issues of shares
Dividends
Revaluation gains on investments in subsidiary companies
Cost of shares awarded to employees
Purchase of own shares
Profit for the year
Balance at 31 December
2013
£m
3,851.2
0.1
(130.1)
280.5
6.0
(4.9)
57.1
4,059.9
2012
£m
3,771.9
0.4
(120.9)
43.4
3.9
(3.4)
155.9
3,851.2
154 Hammerson plc Annual Report 2013
www.hammerson.com
155155
155
2012
Total
£m
1,142.4
694.0
–
1,836.4
158.0
1,994.4
Retained
earnings
£m
1,376.9
–
(130.1)
–
57.1
www.hammerson.com
FINANCIAL STATEMENTS
NOTES TO THE COMPANY ACCOUNTS CONTINUED
TEN-YEAR FINANCIAL SUMMARY
K: Fair value of financial instruments
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
Book value
£m
2,241.4
22.6
2,264.0
2.0
2013
Fair value
£m
2,451.7
22.6
2,474.3
2.0
Book value
£m
1,983.3
11.1
1,994.4
18.5
2012
Fair value
£m
2,272.8
11.1
2,283.9
18.5
L: Principal subsidiary companies
All principal subsidiary companies are engaged in property investment and development, investment holding or management. Unless otherwise
stated, the companies are 100% owned subsidiaries through investment in ordinary share capital. As permitted by section 409 of the Companies
Act 2006, a complete listing of all the Group’s undertakings has not been provided. A complete list of the Group’s undertakings will be filed with
the Annual Return.
Subsidiaries are incorporated/registered and operate in the following countries:
UK
France
Hammerson International Holdings Ltd
Hammerson SAS
The Netherlands
Hammerson Europe BV
Hammerson UK Properties plc
Hammerson Holding France SAS
Hammerson Centre Commercial Italie SAS
Société Civile de Développement du Centre
Commercial de la Place des Halles SDPH (64.5%)
Grantchester Holdings Ltd
Hammerson (Brent Cross) Ltd
Hammerson (Bristol Investments) Ltd
Hammerson Bull Ring Ltd
Hammerson Bull Ring (Jersey) Ltd2
Hammerson (Cramlington 1) Ltd
Hammerson Croydon Investments Ltd2
Hammerson Group Management Ltd
Hammerson (Leicester) Ltd
Hammerson Operations Ltd
Hammerson Oracle Investments Ltd
Hammerson Peterborough (No.1) Ltd
Hammerson (Silverburn) Ltd1
Hammerson (Value Retail Investments) Ltd
Hammerson (Victoria Quarter) Limited
Hammerson Whitgift Investments Ltd2
Union Square Developments Ltd
West Quay Shopping Centre Ltd
1
2
Incorporated/registered and resident in the Isle of Man.
Incorporated/registered and resident in Jersey.
2013
£m
2012
£m
2011
£m
2010
£m
2009
£m
2008
£m
2007
£m
2006
£m
2005
£m
2004
£m
290.2
282.9
296.0
284.7
293.6
299.8
275.7
237.4
210.3
189.5
247.9
102.0
101.5
239.6
(7.3)
47.5
249.1
209.8
–
248.8
469.9
1.5
252.6
257.5
(590.4)
(1,698.3)
(0.8)
–
234.5
25.2
–
(110.2)
(137.6)
(112.6)
(100.0)
(114.5)
(170.7)
(149.3)
(156.9)
341.2
142.2
346.3
620.2
(453.1)
(1,611.5)
110.4
(0.8)
0.1
(3.1)
(0.4)
–
(3.4)
(0.7)
–
(9.9)
(0.6)
(0.1)
(4.1)
(0.9)
103.6
5.9
(0.6)
38.3
1.2
(16.4)
17.6
(10.6)
201.3
748.0
–
792.4
(99.4)
178.9
607.6
–
(87.9)
698.6
1.0
333.8
(133.9)
(9.9)
(11.3)
162.9
330.2
–
(79.7)
413.4
(80.9)
104.2
(5.3)
Income statement*
Net rental income
Operating profit before other net
gains/(losses)
Other net gains/(losses)
Share of results of associate
Cost of finance (net)
Profit/(Loss) before tax
Current tax
Deferred tax
Non-controlling interests
Profit/(Loss) for the year attributable
Balance sheet
Investment and development
properties
Investment in associate
Cash and short-term deposits
Borrowings
Other assets
Other liabilities
Net deferred tax provision
Non-controlling interests
Operating cash flow after tax
Cash flow
Dividends
Developments and major
refurbishments
Other capital expenditure
Disposals
Other cash flows
Net cash flow before financing
Per share data**
Basic earnings/(loss) per share
EPRA/Adjusted earnings per share
Dividend per share
Diluted net asset value per share
EPRA/Adjusted net asset value
per share
Financial ratios
Gearing
Interest cover
Dividend cover
to equity shareholders
337.4
138.4
335.7
615.4
(344.5)
(1,572.6)
101.0
1,016.9
554.4
431.4
5,931.2
5,458.4
5,719.6
5,331.1
5,141.5
6,456.8
7,275.0
6,716.0
5,731.7
4,603.0
545.4
56.7
428.4
57.1
–
–
100.7
126.2
10.4
182.9
–
119.9
–
28.6
–
39.4
–
45.5
–
53.7
(2,309.0)
(2,038.1)
(2,079.9)
(1,920.6)
(2,319.0)
(3,452.6)
(2,524.2)
(2,282.6)
(2,094.8)
(1,799.5)
271.2
462.3
435.6
323.1
331.6
(358.5)
(441.9)
(327.1)
(307.6)
(323.9)
(0.4)
(76.7)
(0.5)
(74.5)
(0.5)
(76.5)
(0.5)
(71.7)
(0.4)
(73.4)
319.5
(425.3)
(108.4)
(89.3)
318.7
301.1
(573.5)
(448.9)
(103.3)
(99.6)
(70.4)
(56.6)
(49.9)
278.1
(378.4)
(406.4)
194.0
(385.9)
(213.4)
(41.7)
Equity shareholders’ funds
4,059.9
3,851.2
3,771.9
3,480.0
2,949.7
2,820.6
4,354.6
4,165.1
3,125.8
2,410.2
Property and corporate acquisitions
(191.1)
129.4
(129.4)
139.9
(118.4)
(397.3)
147.8
(86.1)
132.7
(95.4)
(374.1)
(218.6)
105.3
(64.5)
(39.5)
29.8
(86.7)
(29.2)
(73.1)
5.5
(57.7)
44.9
(51.0)
60.5
(47.4)
(123.5)
(163.3)
(219.5)
(308.1)
(320.8)
(17.5)
256.3
(30.8)
(167.5)
47.4p
23.1p
19.1p
£5.70
(48.0)
585.0
(72.4)
(34.1)
19.4p
20.9p
17.7p
£5.41
(184.4)
(122.9)
(164.1)
(376.7)
(335.5)
(250.5)
(186.3)
(203.3)
(91.2)
(23.6)
271.8
(34.9)
(60.8)
(25.5)
554.6
(0.8)
(23.7)
394.2
–
(13.9)
245.3
–
(44.6)
537.2
(10.9)
(29.6)
628.0
(10.2)
(36.9)
224.4
17.7
(20.2)
398.7
5.6
(190.3)
286.2
207.7
(325.7)
(119.4)
66.0
(295.3)
(126.9)
(54.1)p
(368.9)p
242.6p
134.4p
106.0p
47.3p
19.3p
16.6p
£5.30
87.2p
19.9p
19.7p
15.95p
15.45p
£4.93
£4.20
23.7p
27.3p
18.5p
£10.22
25.8p
18.9p
£6.61
22.3p
14.7p
£9.91
21.2p
13.4p
£7.44
19.5p
12.2p
£5.90
£5.73
£5.42
£5.30
£4.95
£4.21
£7.03
£10.49
£10.18
£8.39
£6.41
Return on shareholders’ equity
11.2%
21.1%
-16.9%
-32.5%
25.3%
34.0%
21.7%
8.8%
56%
2.8x
1.2x
5.3%
53%
2.8x
1.2x
52%
2.6x
1.2x
52%
2.6x
1.2x
72%
2.2x
1.3x
118%
1.7x
1.4x
54%
1.8x
1.5x
66%
1.9x
1.6x
72%
1.9x
1.6x
4.5%
57%
1.9x
1.5x
* Comprises continuing and discontinued operations.
** Comparative per share data was restated following the rights issue in March 2009.
156156
156 Hammerson plc Annual Report 2013
www.hammerson.com
157
Hammerson plc Annual Report 2013FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
K: Fair value of financial instruments
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
L: Principal subsidiary companies
Grantchester Holdings Ltd
Hammerson (Brent Cross) Ltd
Hammerson (Bristol Investments) Ltd
Hammerson Bull Ring Ltd
Hammerson Bull Ring (Jersey) Ltd2
Hammerson (Cramlington 1) Ltd
Hammerson Croydon Investments Ltd2
Hammerson Group Management Ltd
Hammerson (Leicester) Ltd
Hammerson Operations Ltd
Hammerson Oracle Investments Ltd
Hammerson Peterborough (No.1) Ltd
Hammerson (Silverburn) Ltd1
Hammerson (Value Retail Investments) Ltd
Hammerson (Victoria Quarter) Limited
Hammerson Whitgift Investments Ltd2
Union Square Developments Ltd
West Quay Shopping Centre Ltd
1
2
Incorporated/registered and resident in the Isle of Man.
Incorporated/registered and resident in Jersey.
NOTES TO THE COMPANY ACCOUNTS CONTINUED
TEN-YEAR FINANCIAL SUMMARY
Book value
£m
2,241.4
22.6
2,264.0
2.0
2013
Fair value
£m
2,451.7
22.6
2,474.3
2.0
Book value
£m
1,983.3
11.1
1,994.4
18.5
2012
Fair value
£m
2,272.8
11.1
2,283.9
18.5
All principal subsidiary companies are engaged in property investment and development, investment holding or management. Unless otherwise
stated, the companies are 100% owned subsidiaries through investment in ordinary share capital. As permitted by section 409 of the Companies
Act 2006, a complete listing of all the Group’s undertakings has not been provided. A complete list of the Group’s undertakings will be filed with
the Annual Return.
Subsidiaries are incorporated/registered and operate in the following countries:
UK
France
Hammerson International Holdings Ltd
Hammerson SAS
The Netherlands
Hammerson Europe BV
Hammerson UK Properties plc
Hammerson Holding France SAS
Hammerson Centre Commercial Italie SAS
Société Civile de Développement du Centre
Commercial de la Place des Halles SDPH (64.5%)
Income statement*
Net rental income
Operating profit before other net
gains/(losses)
Other net gains/(losses)
Share of results of associate
Cost of finance (net)
Profit/(Loss) before tax
Current tax
Deferred tax
Non-controlling interests
Profit/(Loss) for the year attributable
to equity shareholders
Balance sheet
Investment and development
properties
Investment in associate
Cash and short-term deposits
Borrowings
Other assets
Other liabilities
Net deferred tax provision
Non-controlling interests
2013
£m
2012
£m
2011
£m
2010
£m
2009
£m
2008
£m
2007
£m
2006
£m
2005
£m
2004
£m
290.2
282.9
296.0
284.7
293.6
299.8
275.7
237.4
210.3
189.5
247.9
102.0
101.5
239.6
(7.3)
47.5
249.1
209.8
–
248.8
469.9
1.5
252.6
257.5
(590.4)
(1,698.3)
(0.8)
–
234.5
25.2
–
201.3
748.0
–
(110.2)
(137.6)
(112.6)
(100.0)
(114.5)
(170.7)
(149.3)
(156.9)
341.2
142.2
346.3
620.2
(453.1)
(1,611.5)
110.4
(0.8)
0.1
(3.1)
(0.4)
–
(3.4)
(0.7)
–
(9.9)
(0.6)
(0.1)
(4.1)
(0.9)
103.6
5.9
(0.6)
38.3
1.2
(16.4)
17.6
(10.6)
792.4
(99.4)
333.8
(133.9)
(9.9)
(11.3)
178.9
607.6
–
(87.9)
698.6
1.0
162.9
330.2
–
(79.7)
413.4
(80.9)
104.2
(5.3)
337.4
138.4
335.7
615.4
(344.5)
(1,572.6)
101.0
1,016.9
554.4
431.4
5,931.2
5,458.4
5,719.6
5,331.1
5,141.5
6,456.8
7,275.0
6,716.0
5,731.7
4,603.0
545.4
56.7
428.4
57.1
–
–
100.7
126.2
10.4
182.9
–
119.9
–
28.6
–
39.4
–
45.5
–
53.7
(2,309.0)
(2,038.1)
(2,079.9)
(1,920.6)
(2,319.0)
(3,452.6)
(2,524.2)
(2,282.6)
(2,094.8)
(1,799.5)
271.2
462.3
435.6
323.1
331.6
(358.5)
(441.9)
(327.1)
(307.6)
(323.9)
(0.4)
(76.7)
(0.5)
(74.5)
(0.5)
(76.5)
(0.5)
(71.7)
(0.4)
(73.4)
319.5
(425.3)
(108.4)
(89.3)
318.7
301.1
(573.5)
(448.9)
(103.3)
(99.6)
(70.4)
(56.6)
(49.9)
278.1
(378.4)
(406.4)
194.0
(385.9)
(213.4)
(41.7)
Equity shareholders’ funds
4,059.9
3,851.2
3,771.9
3,480.0
2,949.7
2,820.6
4,354.6
4,165.1
3,125.8
2,410.2
Cash flow
Operating cash flow after tax
Dividends
129.4
(129.4)
Property and corporate acquisitions
(191.1)
139.9
(118.4)
(397.3)
147.8
(86.1)
132.7
(95.4)
(374.1)
(218.6)
105.3
(64.5)
(39.5)
29.8
(86.7)
(29.2)
(73.1)
5.5
(57.7)
44.9
(51.0)
60.5
(47.4)
(123.5)
(163.3)
(219.5)
(308.1)
(320.8)
Developments and major
refurbishments
Other capital expenditure
Disposals
Other cash flows
Net cash flow before financing
Per share data**
Basic earnings/(loss) per share
EPRA/Adjusted earnings per share
Dividend per share
Diluted net asset value per share
EPRA/Adjusted net asset value
per share
Financial ratios
Return on shareholders’ equity
Gearing
Interest cover
Dividend cover
(184.4)
(122.9)
(17.5)
256.3
(30.8)
(167.5)
47.4p
23.1p
19.1p
£5.70
(48.0)
585.0
(72.4)
(34.1)
19.4p
20.9p
17.7p
£5.41
(91.2)
(23.6)
271.8
(34.9)
(60.8)
(25.5)
554.6
(0.8)
(164.1)
(376.7)
(335.5)
(250.5)
(186.3)
(203.3)
(23.7)
394.2
–
(13.9)
245.3
–
(44.6)
537.2
(10.9)
(29.6)
628.0
(10.2)
(36.9)
224.4
17.7
(20.2)
398.7
5.6
(190.3)
286.2
207.7
(325.7)
(119.4)
66.0
(295.3)
(126.9)
47.3p
19.3p
16.6p
£5.30
87.2p
19.9p
(54.1)p
(368.9)p
19.7p
15.95p
15.45p
£4.93
£4.20
23.7p
27.3p
18.5p
£10.22
242.6p
134.4p
106.0p
22.3p
14.7p
£9.91
21.2p
13.4p
£7.44
19.5p
12.2p
£5.90
25.8p
18.9p
£6.61
£5.73
£5.42
£5.30
£4.95
£4.21
£7.03
£10.49
£10.18
£8.39
£6.41
8.8%
56%
2.8x
1.2x
5.3%
53%
2.8x
1.2x
11.2%
21.1%
-16.9%
-32.5%
52%
2.6x
1.2x
52%
2.6x
1.2x
72%
2.2x
1.3x
118%
1.7x
1.4x
4.5%
57%
1.9x
1.5x
25.3%
34.0%
21.7%
54%
1.8x
1.5x
66%
1.9x
1.6x
72%
1.9x
1.6x
156 Hammerson plc Annual Report 2013
www.hammerson.com
157157
157
* Comprises continuing and discontinued operations.
** Comparative per share data was restated following the rights issue in March 2009.
www.hammerson.com
OTHER INFORMATION
UK SHOPPING CENTRES
Our 11 major UK shopping centres attract over 180 million visitors each year. The portfolio includes internationally recognised city centre schemes
such as Bullring, Birmingham, Brent Cross in North London and The Oracle, Reading.
BRENT CROSS, LONDON NW4
JV PARTNER:
Standard Life (59%)
CENTRALE, CROYDON
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
1976 developed,
1995 refurbished
Leasehold
Fenwick, John Lewis,
Marks & Spencer,
Waitrose
118
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
Westfield (50%)*
1988 developed,
2011 acquired
Freehold
Debenhams,
House of Fraser,
H&M, Next, Zara
48
SILVERBURN, GLASGOW
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
Canada Pension Plan
Investment Board (50%)
2007 opened,
2009 acquired
Freehold
Debenhams, Marks &
Spencer, Tesco Extra
91
UNEXPIRED LEASE TERM TO EXPIRY:
6 years
UNEXPIRED LEASE TERM TO EXPIRY:
9 years
UNEXPIRED LEASE TERM TO EXPIRY:
9 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
£18.3 million p.a.
£1,095per m2
ISO 14001
131
41%
2
84,200m
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
90.7%
£4.7 million p.a.
£230 per m2
–
169
50%
2
64,700m
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.8%
£9.3 million p.a.
£340 per m2
ISO 14001
114
50%
2
88,700m
BULLRING, BIRMINGHAM
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
CPPIB (16.7%), Henderson
Shopping Centre Fund
(33.3%)
2003 developed
Leasehold
Apple, Debenhams,
Forever 21, Selfridges
165
UNEXPIRED LEASE TERM TO EXPIRY:
6 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.6%
£26.2 million p.a.
£520 per m2
ISO 14001
133
50%
2
126,900m
• JV from January 2013
HIGHCROSS, LEICESTER
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
Royal Mail Pension Plan
(40%)
2008 developed
Freehold
Cinema de Lux, Debenhams,
House of Fraser, John Lewis
131
UNEXPIRED LEASE TERM TO EXPIRY:
13 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
95.3%
£16.6 million p.a.
£460 per m2
ISO 14001
91
60%
2
105,600m
UNION SQUARE, ABERDEEN
–
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2009 developed
Freehold
Apple, Cineworld, Marks &
Spencer, Next, Zara
80
UNEXPIRED LEASE TERM TO EXPIRY:
11 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
97.1%
£17 million p.a.
£450 per m2
ENVIRONMENTAL RATING:
BREEAM Very Good
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
119
100%
2
51,600m
CABOT CIRCUS, BRISTOL
JV PARTNER:
Land Securities (50%)
THE ORACLE, READING
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
September 2008 opened
KEY DATES:
Leasehold
Harvey Nichols,
House of Fraser,
Cinema de Lux
130
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
ADIA (50%)
1999 developed
Leasehold
Debenhams,
House of Fraser, Hugo
Boss, Vue Cinema
111
VICTORIA QUARTER, LEEDS
–
JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2012 acquired
Freehold
Harvey Nichols, Louis
Vuitton, Paul Smith,
Vivienne Westwood
72
UNEXPIRED LEASE TERM TO EXPIRY:
9 years
UNEXPIRED LEASE TERM TO EXPIRY:
6 years
UNEXPIRED LEASE TERM TO EXPIRY:
6
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENVIRONMENTAL RATING:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
95.8%
£14.5million p.a.
£365 per m2
ISO 14001
Excellent
50%
2
96,100m
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.8%
£15.2 million p.a.
£525 per m2
ISO 14001
55
50%
2
70,400m
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.6%
£7.3 million p.a.
£510 per m2
100%
2
18,900m
158
158
Hammerson plc Annual Report 2013
MONUMENT MALL, NEWCASTLE
JV PARTNER:
–
WESTQUAY, SOUTHAMPTON
JV PARTNER:
GIC (50%)
BRISTOL INVESTMENT PROPERTIES
JV PARTNER:
Land Securities (50%)
KEY DATES:
TENURE:
2011 acquired,
2013 redeveloped
Freehold
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
PRINCIPAL OCCUPIERS:
TK Maxx, Sports Direct
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
11
12
83.1
£2.6 million p.a.
£360 per m2
100%
2
9,500m
* Measured by kg/CO2e/m2 Common Parts.
2000 developed
Leasehold
John Lewis,
Marks & Spencer,
Superdry, Zara
97
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
5 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL MANAGEMENT
SYSTEM:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.1%
£14.0 million p.a.
£640 per m2
ISO 14001
65
50%
2
76,700m
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2000-2006 acquired
Leasehold
BHS, Currys, Sainsbury’s,
HMV, Superdrug
62
UNEXPIRED LEASE TERM TO EXPIRY:
10 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
92.5%
£3.6 million p.a.
£270 per m2
50%
2
33,800m
www.hammerson.com 159
159
OTHER INFORMATION
UK RETAIL PARKS
Hammerson owns 21 retail parks in the UK, which together provide over 500,000m2 of floorspace. These easily accessible parks, located on the
edge of town centres, are let to both bulky goods and fashion retailers. They offer large-format modern stores with ample parking.
ABBEY RETAIL PARK, BELFAST
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2006 acquired
Freehold
B&Q, Tesco
4
UNEXPIRED LEASE TERM TO EXPIRY:
16 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Part open A1,
part bulky goods
£3.3 million p.a.
£145 per m2
25
100%
2
20,200m
BRENT SOUTH SHOPPING PARK,
LONDON NW2
JV PARTNER:
Standard Life (59%)
CYFARTHFA RETAIL PARK,
MERTHYR TYDFIL
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2004 developed
Freehold
Arcadia, Next,
TK Maxx
10
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
UNEXPIRED LEASE TERM TO EXPIRY:
8 years
NO. OF TENANTS:
2005 developed
Freehold
Argos, B&Q, Boots, Currys,
Debenhams, DW Sports,
New Look, Next, TK Maxx
17
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Mainly open A1
£1.8 million p.a.
£505 per m2
40
41%
2
8,700m
UNEXPIRED LEASE TERM TO EXPIRY:
10 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Mixed (open A1, bulky
goods, restaurant)
£5.1 million p.a.
£215 per m2
71
100%
2
23,800m
ABBOTSINCH RETAIL PARK, PAISLEY
JV PARTNER:
–
CENTRAL RETAIL PARK, FALKIRK
JV PARTNER:
–
DALLOW ROAD, LUTON
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2012 acquired
Freehold
B&Q, Pets at Home,
Harveys, DFS
6
UNEXPIRED LEASE TERM TO EXPIRY:
13
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Bulky goods
£3.1 million p.a.
£190 per m2
65
100%
2
15,900m
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
WEIGHTED AVERAGE UNEXPIRED
LEASE TERM EXPIRY
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2002 acquired,
2003 extended
Leasehold
Boots, Homebase,
Mothercare, Next, Tesco
29
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2002 acquired,
2006 redeveloped
Freehold
Aldi, B&Q
2
UNEXPIRED LEASE TERM TO EXPIRY:
16 years
10 years
100%
Mixed
£5.7 million p.a.
£175 per m2
37
100%
2
37,400m
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Food and bulky goods
£2.0 million p.a.
£195 per m2
2
100%
2
10,100m
BATTERY RETAIL PARK, BIRMINGHAM
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
Built 1990, 2002 acquired,
2010 bought out partner
Leasehold
B&Q, Currys, Halfords,
Homebase, Next, PC World
7
UNEXPIRED LEASE TERM TO EXPIRY:
6 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
A1 and restaurants
£3.9 million p.a.
£320 per m2
57
100%
2
12,100m
CLEVELAND RETAIL PARK,
MIDDLESBROUGH
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2002 acquired,
2006 extended,
2009 reconfiguration
Freehold
Argos, Boots, B&Q,
Matalan, M&S Simply
Food, Next, Outfit
20
UNEXPIRED LEASE TERM TO EXPIRY:
11 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
99.8%
Part open A1,
part bulky goods
£4.5 million p.a.
£160 per m2
50
100%
2
27,600m
DRAKEHOUSE RETAIL PARK, SHEFFIELD
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2003 acquired
Freehold
Carpetright, Currys,
Homebase, JD Sports,
Oak Furnitureland,
Smyths Toys, Wickes
18
UNEXPIRED LEASE TERM TO EXPIRY:
10 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
95.3%
Restricted open A1
£3.8 million p.a.
£185 per m2
45
100%
2
21,000m
160
160
Hammerson plc Annual Report 2013
ELLIOTT’S FIELD, RUGBY
JV PARTNER:
–
MANOR WALKS, CRAMLINGTON
JV PARTNER:
–
RAVENHEAD RETAIL PARK, ST HELENS
KEY DATES:
2007 acquired
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2011 acquired
Freehold
Halfords, Homebase,
TK Maxx, Wickes
9
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2006 acquired
Freehold
Argos, Asda, Boots,
Next, Sainsbury’s, Vue
114
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
Freehold
Argos, B&Q, Boots, Currys,
Next, Outfit, Smyths Toys
19
UNEXPIRED LEASE TERM TO EXPIRY:
10 years
UNEXPIRED LEASE TERM TO EXPIRY:
1 years
UNEXPIRED LEASE TERM TO EXPIRY:
7 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
94.7%
Open A1
£1.9 million p.a.
£165 per m2
100%
2
12,700m
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
95.2%
Open A1
£7.6 million p.a.
£140 per m2
226
100%
2
57,600m
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Part open A1, part bulky
goods
£4.8 million p.a.
£175 per m2
80
100%
2
27,600m
FIFE CENTRAL RETAIL PARK, KIRKCALDY
JV PARTNER:
–
THE ORCHARD CENTRE, DIDCOT
JV PARTNER:
–
ST OSWALD’S RETAIL PARK, GLOUCESTER
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2005 acquired, 2009
extension
Freehold
Argos, B&Q, Boots,
Homebase, Mothercare,
Next, Sainsbury’s
19
9 years
100%
Part open A1, part bulky
goods
£5.4 million p.a.
£185 per m2
63
100%
2
28,200m
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2006 acquired
Leasehold
KEY DATES:
TENURE:
Argos, Next, Sainsbury’s
PRINCIPAL OCCUPIERS:
49
UNEXPIRED LEASE TERM TO EXPIRY:
14 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
97%
Open A1
£3.8 million p.a.
£205 per m2
200
100%
2
25,500m
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2005 developed
Leasehold
B&Q, DW Sports,
Homebase, Mothercare
13
14years
100%
Mixed (open A1, bulky
goods, restaurant)
£4.2 million p.a.
£200 per m2
59
100%
2
20,500m
IMPERIAL RETAIL PARK, BRISTOL
JV PARTNER:
–
PARC TAWE, SWANSEA
JV PARTNER:
–
TELFORD FORGE SHOPPING PARK,
TELFORD
JV PARTNER
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2012 acquired
Freehold
B&Q, Boots,
Tesco Home Plus
18
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2006 acquired
Leasehold
Mothercare, Odeon,
Toys ‘R’ Us
13
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY
11
UNEXPIRED LEASE TERM TO EXPIRY:
1
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Restricted open A1
£5.1 million p.a.
£160 per m2
37
100%
2
32,300m
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
89.2%
Open A1
£1.7 million p.a.
£85 per m2
44
100%
2
22,600m
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2012 acquired
Freehold
Sainsbury’s, Outfit,
TK Maxx, Boots, Next
19
9 years
94.9%
Open A1
£4.9 million p.a.
£225 per m2
35
100%
2
29,100m
*
Measured by kg/CO2e/car parking space.
www.hammerson.com 161
161
OTHER INFORMATION
UK RETAIL PARKS
CONTINUED
THURROCK SHOPPING PARK, THURROCK
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2012 acquired
Freehold
Marks & Spencer, Matalan,
TK Maxx, Gap, Asda Living,
Boots, Smyths Toys, Nike
21
UNEXPIRED LEASE TERM TO EXPIRY:
9 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
98.8%
Open A1
£5.7 million p.a.
£195 per m2
103
100%
2
30,600m
WESTWOOD & WESTWOOD GATEWAY
RETAIL PARKS, THANET
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
2002 acquired,
2009 extended
Freehold
Argos, Bhs, Homebase,
Matalan, Sportsworld
18
UNEXPIRED LEASE TERM TO EXPIRY:
9 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Part open A1
£5.1 million p.a.
£200 per m2
145
100%
2
24,700m
WREKIN RETAIL PARK, TELFORD
JV PARTNER:
–
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
1996 development;
2010 acquired
Freehold
Asda Living, Boots,
Homebase Matalan
12
UNEXPIRED LEASE TERM TO EXPIRY:
8 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
100%
Open A1
£2.6 million p.a.
£195 per m2
5
100%
2
13,400m
*
Measured by kg/CO2e/car parking space.
162
162
Hammerson plc Annual Report 2013
FRANCE RETAIL
In France, we own and manage some of the top shopping centres in the Ile-de-France region, including Italie Deux and O’Parinor, together with
high-quality centres in Strasbourg and Angers. Our French shopping centres attract over 70 million visitors each year.
BERCY 2, CHARENTON-LE-PONT
CO-OWNERSHIP:
Carrefour and Darty
GRAND MAINE, ANGERS
CO-OWNERSHIP:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2000 acquired
Freehold
Go Sport, H&M,
La Grande Récré
62
6 years
93.6%
£4.8 million p.a.
£315 per m2
30
2
20,200m
2
35,200m
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
Carrefour
1983 opened
2007 acquired
Freehold
Caroll, Carrefour,
Celio, Etam, Naf Naf,
Paul, Yves Rocher
57
6 years
95.9%
£2.7 million p.a.
£375 per m2
54
2
9,100m
2
22,000m
ESPACE SAINT QUENTIN,
SAINT QUENTIN-EN-YVELINES
PARTNER:
Allianz (75%)
CO-OWNERSHIP:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
(of which JV ownership is 29,400m2)
Buffalo Grill, C&A, Carrefour,
Darty, McDonalds
1994 acquired
2007 reconfigured
Freehold
C&A, Carrefour, Go Sport,
H&M, Sephora
124
5 years
98.5%
£3.2 million p.a.
£450 per m2
28
25%
2
60,200m
ITALIE DEUX AVENUE D’ITALIE, PARIS 13ÈME
JV PARTNER:
–
LES 3 FONTAINES, CERGY PONTOISE
CO-OWNERSHIP:
Auchan
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
1976 opened,
1998 acquired
2013 refurbished
Freehold
Carrefour Market,
Darty, Fnac, Go Sport,
La Grande Récré,
Printemps, Sephora
126
5 years
99.1%
£19.8 million p.a.
£420 per m2
ENERGY INTENSITY*:
107
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
2
56,800m
2
56,800m
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
1972 opened
1995 acquired
1996 refurbished
Freehold
Auchan, C&A, Darty,
H&M, Mango, New Look
78
5 years
99.3%
£12.5 million p.a.
£515 per m2
31
2
24,700m
2
60,700m
PLACE DES HALLES, STRASBOURG
MINORITY INTEREST:
Assurbail (35.5%)
SQY OUEST, SAINT QUENTIN-EN-YVELINES
JV PARTNER:
Codic France (50%)
O’PARINOR, AULNAY-SOUS-BOIS
JV PARTNER:
Client of Rockspring
Property Investment
Managers LLP (75%)
Carrefour and Redevco
1974 opened
2002 acquired
2008 redeveloped
Freehold
C&A, Carrefour, Darty,
Fnac, H&M, New Look,
Primark, UGC, Zara
189
5 years
96.8%
£5.7 million p.a.
£350 per m2
111
25%
2
93,900m
CO-OWNERSHIP:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
(of which JV ownership is 60,500m2)
VILLEBON 2, VILLEBON-SUR-YVETTE
2005 acquired
KEY DATES:
2007 extension
Freehold
TENURE:
PRINCIPAL OCCUPIERS:
C&A, Darty, Fnac, Toys ‘R’ Us
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
1979 opened
1998 acquired
2007 refurbished
Freehold
C&A, Darty, Go Sport,
Galeries Gourmandes,
H&M, New Look, Sephora,
Toys ‘R’ Us, Zara
118
4 years
97.1%
£12.5 million p.a.
£320 per m2
86
2
40,100m
2
41,400m
KEY DATES:
TENURE:
2005 opened
2011 acquired
Freehold
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNEXPIRED LEASE TERM TO EXPIRY:
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY*:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
UGC, La Grande Récré
NO. OF TENANTS:
45
15
3 years
76.2%
£1.2 million p.a.
£180 per m2
62
50%
2
18,300m
UNEXPIRED LEASE TERM TO EXPIRY:
6 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENERGY INTENSITY**:
OWNERSHIP:
PROPERTY NET INTERNAL AREA:
98%
£7.2 million p.a.
£155 per m2
4
2
47,500m
2
47,500m
* Measured in kg/CO2e/m2 Common Parts.
** Measured by kg/CO2e/car parking space.
www.hammerson.com 163
163
OTHER INFORMATION
GLOSSARY
Adjusted figures (per share)
Reported amounts adjusted to exclude certain items as set out in note 11 to the accounts.
Anchor store
A major store, usually a department, variety or DIY store or supermarket, occupying a large unit within a
shopping centre or retail park, which serves as a draw to other retailers and consumers.
Average cost of borrowing
The cost of finance expressed as a percentage of the weighted average of borrowings during the period.
Capital return
DTR
Dividend cover
The change in property value during the period after taking account of capital expenditure and
exchange translation movements, calculated on a monthly time-weighted basis.
Disclosure and Transparency Rules, issued by the United Kingdom Listing Authority.
Adjusted earnings per share divided by dividend per share.
Earnings per share (EPS)
Profit for the period attributable to equity shareholders divided by the average number of shares in issue
during the period.
EBITDA
EPRA
Equivalent yield (true and nominal)
ERV
Gearing
Gross property value
Gross rental income
IAS
IASB
IFRS
Initial yield
Interest cover
Earnings before interest, tax, depreciation and amortisation.
European Public Real Estate Association. This organisation has issued recommended bases for the
calculation of earnings per share and net asset value per share.
The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows
reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on current
ERVs. The true equivalent yield assumes rents are received quarterly in advance. The nominal equivalent
yield assumes rents are received annually in arrears. The property true and nominal equivalent yields are
determined by the Group’s external valuers.
The estimated market rental value of the total lettable space in a property, after deducting head and
equity rents, calculated by the Group’s external valuers.
Net debt expressed as a percentage of equity shareholders’ funds.
Property value before deduction of purchaser’s costs, as provided by the Group’s external valuers.
Income from rents, car parks and commercial income, after accounting for the net effect of the
amortisation of lease incentives.
International Accounting Standard.
International Accounting Standards Board.
International Financial Reporting Standard.
Annual cash rents receivable (net of head and equity rents and the cost of vacancy, and in the case
of France, net of an allowance for costs of approximately 5.2% primarily for management fees), as a
percentage of gross property value, as provided by the Group’s external valuers. Rents receivable
following the expiry of rent-free periods are not included. Rent reviews are assumed to have been
settled at the contractual review date at ERV.
Net rental income divided by net cost of finance before capitalised interest and change in fair value
of derivatives.
Interest rate or currency swap (or
derivatives)
An agreement with another party to exchange an interest or currency rate obligation for a
pre-determined period of time.
IPD
Investment Property Databank. An organisation supplying independent market indices and portfolio
benchmarks to the property industry.
Like-for-like/underlying net rental
income
The percentage change in net rental income for completed investment properties owned throughout
both current and prior periods, after taking account of exchange translation movements.
Loan to value ratio
Net debt expressed as a percentage of the total value of investment and development properties.
Net asset value per share (NAV)
Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.
Net rental income
Occupancy rate
Income from rents, car parks and commercial income, after deducting head and equity rents payable,
and other property related costs.
The ERV of the area in a property or portfolio, excluding developments, which is let, expressed as a
percentage of the total ERV of that property or portfolio.
164
164
Hammerson plc Annual Report 2013
Over-rented
Pre-let
The amount by which ERV falls short of rents passing, together with the estimated rental value of
vacant space.
A lease signed with a tenant prior to completion of a development.
Property Income Distribution (PID)
A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax-exempt
property rental business and which is taxable for UK-resident shareholders at their marginal tax rate.
REIT
Rents passing or passing rents
Real Estate Investment Trust. A tax regime that in the UK exempts participants from corporation tax both
on UK rental income and gains arising on UK investment property sales, subject to certain requirements.
The annual rental income receivable from an investment property, after any rent-free periods and after
deducting head and equity rents. This may be more or less than the ERV (see over-rented and
reversionary or under-rented).
Return on shareholders’ equity (ROE) Capital growth and profit for the year expressed as a percentage of equity shareholders’ funds at the
beginning of the year, all excluding deferred tax and certain non-recurring items.
Reversionary or under-rented
The amount by which the ERV exceeds the rents passing, together with the estimated rental value of
vacant space.
Scrip dividend
SIIC
A dividend received in the form of shares.
Sociétés d’Investissements Immobiliers Côtées. A French tax-exempt regime available to property
companies listed in France.
Total development cost
All capital expenditure on a development project, including capitalised interest.
Total return
Net rental income and capital return expressed as a percentage of the opening book value of property
adjusted for capital expenditure and exchange translation movements, calculated on a monthly
time-weighted basis.
Total shareholder return
Dividends and capital growth in the share price, expressed as a percentage of the share price at the
beginning of the year.
Turnover rent
UK GAAP
Vacancy rate
Value Retail (VR)
Yield on cost
Rental income that is related to an occupier’s turnover.
United Kingdom Generally Accepted Accounting Practice.
The ERV of the area in a property, or portfolio, excluding developments, which is currently available for
letting, expressed as a percentage of the ERV of that property or portfolio.
Owner and operator of luxury outlet Villages in Europe in which Hammerson has an investment.
Rents passing expressed as a percentage of the total development cost of a property.
Disclaimer
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and
uncertainties. Actual future results may differ materially from those expressed in or implied by these statements.
Many of these risks and uncertainties relate to factors that are beyond Hammerson’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour
of other market participants, the actions of governmental regulators and other risk factors such as the Company’s ability to continue to obtain financing to meet its liquidity needs, changes in
the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global,
regional or national basis.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the
Company should not be relied upon as a guide to future performance.
www.hammerson.com 165
165
OTHER INFORMATION
INDEX
Accounting policies
117, 154
Key performance indicators (KPIs)
Market background
Net finance costs
Notes to the accounts
Obligations under finance leases
Operating lease receipts
Payables
Pensions
Per share data
Plant, equipment and owner-occupied property
Principal Group addresses
Principal uncertainties
Principal subsidiary companies
Profit before tax
Property portfolio
Property portfolio information
Property returns
Receivables
Real Estate Investment Trusts (REITs)
Remuneration report
Result for the year
Risk management
Segmental analysis
Share capital
Shareholder information
Shareholder return
22
8
48, 127
117
149
152
149, 154
92, 105, 125
46, 49, 132
135
167
55
156
46, 110, 121
158
51
44
141, 154
48, 128
87
121
55
53, 54, 122
104, 149
167
44, 94
Sociétés d’Investissements Immobiliers Côtées (SIIC)
48, 128, 129
Strategy
Tax
Ten-year financial summary
Treasury shares
Value Retail
6, 12
48, 128
157
151
37, 48, 136
Adjustment for non-cash items in the cash
flow statement
Administration expenses
Analysis of movement in net debt
Auditor’s report
Board of Directors
Borrowings
Business model
Business review
Cash and deposits
Chairman’s Introduction to Governance
Chairman’s statement
Chief Executive’s report
Company balance sheet
Connected reporting framework
Consolidated balance sheet
Consolidated cash flow statement
Consolidated income statement
Consolidated statement of changes in equity
Consolidated statement of comprehensive income
Contingent liabilities
Corporate governance
Developments
Directors’ remuneration
Directors’ responsibilities
Dividends
Equity
Financial instruments
Financial review
Glossary of terms
Human resources
151
47, 124
49, 116
107
62
49, 142, 155
22
32
49, 141
60
4
6
153
30
112
115
110
114
111
152
60
33
72, 87
106
49, 104, 131
112, 155
143, 156
46
164
24
Investment and development properties
20, 33, 119, 123
Investment in associate
Investment in own shares
Investments in subsidiary companies
Joint ventures
136
155
154
140
166
166
Hammerson plc Annual Report 2013
SHAREHOLDER INFORMATION
SHAREHOLDER ADMINISTRATION
Payment of dividends to mandated accounts
Shareholders who do not currently have their dividends paid direct
to a bank or building society account and who wish to do so should
complete a mandate instruction available from the Registrar or can
register at: www.capitashareportal.com. Under this arrangement, tax
vouchers are sent to the shareholder’s registered address.
Multiple accounts
Shareholders who receive more than one copy of communications
from the Company may have more than one account in their name
on the Company’s register of members. Any shareholder wishing to
amalgamate such holdings should contact the Registrar.
Dividend Reinvestment Plan (DRIP)
Shareholders can reinvest dividend payments in additional
shares in the Company under the DRIP operated by the
Registrar by completing an application form online at:
www.capitashareportal.com or by calling Capita Asset Services:
Tel: 0871 664 0381 (from the UK calls cost 10p per minute plus network
extras) or +44 (0) 20 8639 3402 (from overseas)
email: shares@capita.com
Elections to participate in the DRIP (or cancellation of previous
instructions) in respect of the final dividend must be received by
the Company’s Registrar no later than 25 days before the dividend
payment date.
Further details can be found on the website at:
www.hammerson.com
The DRIP will continue to be available to those shareholders who have
already completed an application form. Such shareholders should take
no action unless they wish to receive their dividend in cash, in which
case they should contact the Registrar to cancel their instruction.
International payment service
The Registrar facilitates a service to convert sterling dividends into
certain local currencies. For further information, please contact the
Registrar (address listed above). Tel: 0871 664 0385 (calls cost 10p
per minute plus network extras, lines are open 9.00 am to 5.30 pm
Monday to Friday) or +44 (0)20 8639 3405 (from overseas).
email: ips@capita.co.uk
Further details can be found at:
http://international.capitaregistrars.com
KEY CONTACT DETAILS
Registered office
10 Grosvenor Street
London
W1K 4BJ
Registered in England No. 360632
Principal Group addresses
United Kingdom
Hammerson plc
10 Grosvenor Street
London
W1K 4BJ
Tel: +44 (0)20 7887 1000
Fax: +44 (0)20 7887 1010
France
Hammerson France SAS
48 rue Cambon
Paris 75001
France
Tel: +33 (0) 1 56 69 30 00
Fax: +33 (0) 1 56 69 30 01
Registrar
For assistance with queries about the administration of shareholdings,
such as lost share certificates, change of address, change of ownership
or dividend payments please contact the Registrar:
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300 (from the UK)
(Calls cost 10p per minute plus network
extras, lines are open 9.00 am to 5.30 pm Monday to Friday)
or +44 (0)20 8639 3399 (from overseas)
email: shareholderenquiries@capita.co.uk
website: www.capitashareportal.com
Registering on the Hammerson Share Portal website enables
shareholders to view their shareholding in the Company, including
an indicative share price and valuation, a transaction audit trail and
dividend payment history. Shareholders can also amend certain
standing data relating to their accounts.
Advisors
Valuer: DTZ Debenham Tie Leung
Auditor: Deloitte LLP
Solicitor: Herbert Smith Freehills LLP
Joint Brokers and Financial Advisors: J. P. Morgan Cazenove and
Deutsche Bank AG
Financial Advisor: Lazard Ltd
www.hammerson.com 167
167
OTHER INFORMATION
SHAREHOLDER INFORMATION
CONTINUED
Capita share dealing services
Unsolicited mail
An online and telephone dealing facility is available, providing
shareholders with an easy-to-access and simple-to-use service.
There is no need to pre-register and there are no complicated forms
to fill in. The online and telephone dealing service allows shareholders
to trade ‘real time’ at a known price that will be given to them at the
time they give their instruction. This is subject to a credit check for
shareholders dealing in shares valued at more than the sterling
equivalent of €15,000.
For further information on this service, or to buy and sell shares, please
call Capita on 0871 664 0364 (calls cost 10p per minute plus network
extras, lines are open 8.00 am to 4.30 pm Monday to Friday), or
+44 (0)20 3367 2686 (from overseas).
email: info@capitadeal.com
website: www.capitadeal.com
ShareGift
Shareholders with a small number of shares, the value of which makes
it uneconomic to sell them, may wish to consider donating them to
charity through ShareGift, a registered charity administered by
The Orr Mackintosh Foundation Limited (registered charity number:
1052686, registered company number: 3150478). Further information
about ShareGift is available at: www.sharegift.org.uk or by writing to
ShareGift, The Orr Mackintosh Foundation Limited, 17 Carlton House
Terrace, London, SW1Y 5AH or by telephone on +44 (0)20 7930 3737.
Website
The Annual Report and other information that shareholders may find
useful are available on the Company’s website: www.hammerson.com.
The Company operates a service whereby all registered users can
choose to receive via email notice of all Company announcements
which can also be viewed on the website.
UK Real Estate Investment Trust (REIT) taxation
As a UK REIT, Hammerson plc is exempt from corporation tax on rental
income and gains on UK investment properties but is required to pay
Property Income Distributions (PIDs). UK shareholders will be taxed on
PIDs received at their full marginal tax rates. A REIT may in addition pay
normal dividends.
For most shareholders, PIDs will be paid after deducting withholding
tax at the basic rate. However, certain categories of shareholder are
entitled to receive PIDs without withholding tax, principally UK
resident companies, UK public bodies, UK pension funds and
managers of ISAs, PEPs and Child Trust Funds. Further information on
UK REITs is available on the Company’s website, including a form to be
used by shareholders to certify if they qualify to receive PIDs without
withholding tax.
Hammerson is obliged by law to make its share register available
on request to other organisations. This may result in shareholders
receiving unsolicited mail. To limit the receipt of unsolicited
mail shareholders may write to the Mailing Preference Service,
an independent organisation whose services are free. Once a
shareholder’s name and address details have been registered,
it will advise the companies and other bodies that subscribe
to the service not to send unsolicited mail to the address
registered. For further details register at:
www.mpsonline.org.uk or telephone on 0845 703 4599.
Shareholder security
Share fraud includes scams where investors are called out of the blue
and offered shares that often turn out to be worthless or non-existent,
or offered an inflated price for shares they own. These calls come
from fraudsters operating in so called ‘boiler rooms’ that are mostly
based abroad.
While high profits are promised, those who buy or sell shares in this
way usually lose their money.
The Financial Conduct Authority (FCA) has found most share fraud
victims are experienced investors who lose an average of £20,000,
with around £200 million lost in the UK each year.
Shareholders offered unsolicited investment advice, discounted
shares, a premium price for shares they own, or free company or
research reports, should take these steps before handing over
any money:
• Ask for the name of the person and organisation contacting them;
• Check the FCA Register at: www.fca.org.uk/firms/systems-reporting
register to ensure they are authorised;
• Use the details on the FCA Register to contact that organisation;
• Call the FCA Consumer Helpline on 0800 111 6768 if there are no
contact details on the FCA Register or shareholders are told they
are out of date; and
• Search the FCA’s list of unauthorised firms and individuals with
whom it is recommended to avoid doing business.
If shareholders use an unauthorised firm to buy or sell shares or other
investments, they will not have access to the Financial Ombudsman
Service or Financial Services Compensation Scheme if things
go wrong.
If shareholders are approached about a share scam they should tell
the FCA using the share fraud reporting form at www.fca.org.uk/
consumers/scams/investment-scams/share-fraud-and-boiler-room-
scams, where they can find out about the latest investment scams.
They can also call the Consumer Helpline on 0800 111 6768.
If shareholders have already paid money to share fraudsters they
should contact Action Fraud on 0300 123 2040.
More detailed information on this or similar activity can be found on
the FCA website at: www.fca.org.uk/consumers/scams/investment-
scams/share-fraud-and-boiler-room-scams.
168
168
Hammerson plc Annual Report 2013
CONTENTS
STRATEGIC REPORT
Who we are
Where we operate
Chairman’s statement
Chief Executive’s report
Our markets
Business model
Strategy in action:
Investing to upgrade venues
Consumer insight and digital expertise
Strong retailer relationships
Development pipeline
Key performance indicators
Our people
Sustainability
Business review
Financial and property returns
Financial review
Property portfolio information
Principal risks and uncertainties
GOVERNANCE REPORT
Chairman’s introduction
Your Board
Your Board’s year
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Policy
2013 Annual Remuneration report
UK Corporate Governance Code
Compliance
Directors’ report
FINANCIAL STATEMENTS
Directors’ responsibilities
Independent auditor’s report
Primary financial statements
Notes to the accounts
Company balance sheet
Notes to the Company accounts
Ten-year financial summary
OTHER INFORMATION
Property portfolio
Glossary
Index
Shareholder information
01
02
04
06
08
12
14
16
18
20
22
24
26
32
44
46
51
55
60
62
64
67
68
72
74
87
100
104
106
107
110
117
153
154
157
158
164
166
167
REPORT HIGHLIGHTS
CHIEF EXECUTIVE’S REPORT
page 6
FINANCIAL CALENDAR AND SHARE ANALYSIS
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 23 April 2014 at 10 Grosvenor Street, London, W1K 4BJ. Details of the Meeting and
the resolutions to be voted upon can be found in the Notice of Meeting which is available at: www.hammerson.com.
Full-year results announced
Recommended final dividend
Ex-dividend date
Record date
17 February 2014
12 March 2014
14 March 2014
Election (or cancellation) date for Dividend Reinvestment Plan
5.00 pm on 31 March 2014
GOVERNANCE AT HAMMERSON
page 64
Annual General Meeting
Anticipated 2014 interim dividend Payable
Payable on
ANALYSIS OF SHARES HELD AS AT 31 DECEMBER 2013
Number of shares held
0-500
501-1,000
1,001-2,000
2,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001 and above
Total
25 April 2014
23 April 2014
October 2014
Number of
shareholders
% of total
shareholders
Holding
% of total capital
872
373
392
411
163
286
103
185
43
102
29.76
12.73
13.38
14.03
5.56
9.76
3.52
6.31
1.47
3.48
163,154
291,261
580,501
1,312,316
1,134,192
6,898,425
7,501,752
45,134,709
31,116,264
618,744,296
2,930
100.00
712,876,870
0.02
0.04
0.08
0.18
0.16
0.97
1.05
6.33
4.37
86.80
100.00
FIVE YEAR DIVIDEND HISTORY (pence per share)
14
12
10
8
6
4
2
0
8.5
8.5
6.95
6.95
8.8
8.8
7.15
7.15
9.3
2.3
7.0
7.3
1.8
5.5
7.7
7.7
10.0
6.0
4.0
8.3
8.3
10.8
7.2
3.6
2009†
2010
2011
2012
2013**
Interim dividend (non PID) Interim dividend (PID) Final dividend (non PID) Final dividend (PID)
†
In 2009, a second interim dividend was paid in place of a final dividend.
** The 2013 final dividend is subject to approval by shareholders at the 2014 Annual General Meeting.
The PID element of the dividend is paid net of a 20% withholding tax unless a shareholder is eligible to receive the payment gross.
Where a shareholder previously elected to receive the scrip alternative, the dividend was treated as a non-PID.
www.hammerson.com
169
PROPERTY PORTFOLIO
page 158
2013 PERFORMANCE HIGHLIGHTS
97.7%
OCCUPANCY
+2.1%
LFL NET RENTAL
INCOME GROWTH
8.5%
TOTAL PROPERTY
RETURN
£341.2m*
PROFIT BEFORE TAX
* Includes valuation changes
+10.5%
ADJUSTED EARNINGS
PER SHARE
Hammerson plc
10 Grosvenor Street,
London, W1K 4BJ
www.hammerson.com
Annual Report 2013
H
a
m
m
e
r
s
o
n
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
3
CREATING
RETAIL
DESTINATIONS
This report is printed on Magno Silk paper which is FSC® Certified
and was manufactured at a mill that is certified to the ISO14001
and EMAS environmental standards.
Printed by Principal Colour.
Principal Colour are ISO 14001 certified, Alcohol Free and
FSC© Chain of Custody certified.
The inks used are vegetable oil based.
Designed and produced by Black Sun Plc