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Annual Report 2015
We are Hammerson
At Hammerson, we
create destinations that
excite shoppers, attract
and support retailers,
reward investors and
serve communities;
destinations where
more happens.
CONTENTS
STRATEGIC REPORT
FINANCIAL STATEMENTS
Directors’ responsibilities
Independent Auditor’s report
Primary financial statements
Notes to the accounts
Company primary statements
Notes to the Company accounts
OTHER INFORMATION
Additional disclosures
Ten-year financial summary
Summary of Directors’
remuneration policy
Shareholder information
Glossary
Index
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114
118
124
158
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166
173
174
178
181
183
Visit our website
www.hammerson.com
for more information about us and our
business
Follow us on twitter
@hammersonplc
Watch us on youtube
Search hammerson
Follow us on LinkedIn
Search hammerson
Cover image: Taurus Geodessica installation
by Joshua Harker at Bullring September 2015
Highlights
Our business at a glance
Our business model
Our business model in action
In conversation with David Atkins,
Chief Executive
Our market
Key performance indicators
Business review
Sustainability review
Our people
Financial review
Principal risks and uncertainties
01
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04
06
08
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CORPORATE GOVERNANCE
REPORT
Chairman’s letter
In conversation with the Board
Your Board’s year
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Compliance with the UK
Corporate Governance Code
Directors’ biographies
Directors’ report
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70
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HAMMERSON PLC ANNUAL REPORT 2015
HIGHLIGHTS
2015 overview
– Significant acquisition
Profit for the year
in Ireland
– Four developments
completed of 64,900m2
– £360 million of disposals
– 400 lettings totalling
136,000m2
Portfolio value(1)
£9.1 billion
+17%
£727 million
(+4%)
2014: £699 million
Adjusted earnings per share
26.9p (+13%)
2014: 23.9p
Dividend per share
22.3p (+9%)
2014: 20.4p
Shareholders’ equity
6%
8%
14%
£5,517 million
(+11%)
34%
2014: £4,974 million
20%
18%
UK shopping centres
UK retail parks
France
Premium outlets
Ireland (loans)
Developments and other
(1) As at 31 December 2015, including cost of Irish loan portfolio.
EPRA NAV per share
£7.10 (+11%)
2014: £6.38
Total property return
12.4%
2014: 13.6%
HAMMERSON.COM
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STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION OUR BUSINESS AT A GLANCE
57 places where
more happens
We are an owner, manager and developer of retail destinations
in Europe. Our portfolio includes investments in prime shopping
centres in the UK and France, convenient retail parks in the UK
and premium outlets across Europe.
21 shopping centres
21 retail parks
15 premium outlets
2.2 million m2 lettable area
4,500 tenants
Les Terrasses du Port, Marseille
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HAMMERSON PLC ANNUAL REPORT 2015
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UK SHOPPING
CENTRES
Brent Cross, London
Bullring, Birmingham
Cabot Circus, Bristol
Centrale, Croydon
Grand Central,
Birmingham *
Highcross, Leicester
Silverburn, Glasgow
The Oracle, Reading
Union Square, Aberdeen
Victoria Quarter, Leeds
WestQuay, Southampton
UK RETAIL PARKS
Abbey Retail Park, Belfast
Abbotsinch Retail Park,
Paisley
Battery Retail Park,
Birmingham
Brent South Shopping
Park, London
Central Retail Park,
Falkirk
Cleveland Retail Park,
Middlesbrough
Cyfarthfa Retail Park,
Merthyr Tydfil
Dallow Road, Luton
Elliott’s Field, Rugby
Fife Central Retail Park,
Kirkcaldy
Imperial Retail Park,
Bristol
Manor Walks,
Cramlington
Parc Tawe, Swansea
Ravenhead Retail Park,
St Helens
St Oswald’s Retail Park,
Gloucester
Telford Forge Shopping
Park, Telford
The Orchard Centre,
Didcot
Thurrock Shopping Park,
Thurrock
Westmorland Retail Park,
Cramlington
Westwood & Westwood
Gateway Retail Parks,
Thanet
Wrekin Retail Park,
Telford
FRANCE
SHOPPING
CENTRES
Espace St Quentin, St
Quentin-en-Yvelines
Italie Deux, Paris
Le Jeu de Paume,
Beauvais
Les Trois Fontaines,
Cergy Pontoise
Les Terrasses du Port,
Marseille
Nicetoile, Nice
O’Parinor, Paris
Place des Halles,
Strasbourg
Saint Sébastien, Nancy
SQY Ouest, St
Quentin-en-Yvelines
Villebon 2, Paris**
* Acquired in 2016
** Contracts exchanged for sale in January 2016
PREMIUM OUTLETS
VIA OUTLETS
Alcochete, Lisbon
Batavia Stad, Amsterdam
Fashion Arena, Prague
Festival Park, Majorca*
Kungsbacka, Gothenburg
Landquart, Zurich
VALUE RETAIL
Bicester Village, London
Fidenza Village, Milan
Ingolstadt Village,
Munich
Kildare Village, Dublin
La Roca Village,
Barcelona
La Vallée Village, Paris
Las Rozas Village, Madrid
Maasmechelen Village,
Brussels
Wertheim Village,
Frankfurt
Note: Properties underlying Irish loans are not shown (which include Dundrum Town Centre, Dublin; Swords Pavilions, Dublin; and The Ilac Centre, Dublin)
33
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COMCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
OUR BUSINESS MODEL
How we create value
Our mission
At Hammerson our mission is to create desirability for our consumers and
commercial partners. We own, operate and develop retail destinations that
interact seamlessly with digital and bring together the very best retail, leisure
and entertainment brands. We seek to deliver value for all our stakeholders,
and to create a positive and sustainable impact for generations to come.
Key resources
The success of our business depends on
a number of principal inputs.
A clear operational model
The key actions that we undertake
towards achieving our strategic
objectives to create value.
HIGH-QUALITY PROPERTY
High-quality property in prime locations
across selected European retail markets
TALENTED PEOPLE
Skilful and motivated people and teams united
around a clear set of values
RETAIL INSIGHT
Deep retail knowledge captured through
long-standing commercial relationships,
data insight and consumer research
FINANCIAL CAPITAL
Dependable access to, and continued
trust of, international capital markets
44
HAMMERSON PLC ANNUAL REPORT 2015
ASSET MANAGEMENT
We skilfully manage our portfolio in a sustainable
way to generate income growth and to attract tenants
and shoppers
INVESTMENT MANAGEMENT
We employ market expertise to recycle our portfolio.
Taking advantage of acquisition opportunities which
enhance the quality of our portfolio and future
returns and disposing of assets at the right time
DEVELOPING VENUES
We have a proven track record in creating
sustainable retail and leisure destinations which
anticipate future consumer needs and ensure that
retailers will thrive for years to come
FINANCIAL EFFICIENCY
We manage and control our costs, both operational
and financial, and optimise the capital
base to support the delivery of our strategy
+
See pages 6 - 7 for our Strategic Priorities
under each of these areas, and the progress
achieved in 2015
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To deliver value for
our stakeholders
By successfully employing our
business model we aim to deliver
a positive result for all our
stakeholder groups.
FINANCIAL RETURNS…
For shareholders
DESTINATIONS…
For retailers and shoppers
ECONOMIC AND SOCIAL BENEFITS…
For our people and communities
Uniquely differentiated by our
Product Experience Framework
Our Product Experience Framework is embedded
across everything we do, providing a unique point
of differentiation. We constantly challenge ourselves
to apply best practice in retail design and digital
solutions, customer engagement and sustainability.
ICONIC DESTINATIONS
We create outstanding architecture to enhance locations. We place our
centres at the heart of local communities, connected by seamless
technology and transportation links
BEST AT RETAIL
We deliver the optimal retail mix, consistently refreshed and showcasing
new concepts
CONVENIENT & EASY
We make shopping simple and stress-free, with enhanced customer
facilities and services such as click & collect, encouraging regular
shopper visits
INTERACTIVE & ENGAGING
Our outstanding customer service and leading digital infrastructure
drive engagement and loyalty, and encourage shoppers to spend longer
at our destinations
ENTERTAINING & EXCITING
We constantly evaluate and refresh our food and leisure offers, and provide
a local and national calendar of events to surprise and delight our
customers, and keep them coming back
POSITIVE PLACES
We create destinations that deliver positive impacts economically, socially
and environmentally
+
See pages 6 - 7 for how the Product Experience
Framework guides our Strategic Priorities and the Chief
Executive’s letter pages 8 - 13 for examples of how the
Framework has been put into action in 2015
+ See the Chief Executive’s letter on pages
8 - 13 for how we have delivered value for
our stakeholders in 2015
HAMMERSON.COM
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STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
OUR BUSINESS MODEL IN ACTION
We successfully implemented our business model in
2015 to deliver progress against our strategic priorities
Strategic priorities
Progress in 2015
Focus in 2016
ASSET MANAGEMENT
– Deploy the Product Experience Framework across the Group
– 400 lettings totalling 136,000m2 across the portfolio
– Evaluate opportunities to introduce existing international
– Introduce the latest retail and leisure brands and new store
– New flagship stores for international brands like Victoria’s Secret,
brands across the rest of the Hammerson portfolio
concepts to the portfolio
Apple, H&M and Polo Ralph Lauren
– Continue to reinvigorate the tenant mix in France
– Remerchandise retail parks with updated homeware and
– 25 new retailers in French portfolio, of which four are firsts
– Capitalise on strong occupier demand at retail parks to drive
Bullring, Birmingham
fashion retailers
– Deliver value-add projects (such as kiosks, digital screens, pop-up
retail units, new store concepts, environmental improvements)
– Build digital capabilities to support multi-channel retail and
provide insight on consumer behaviour
– Identify and capitalise on opportunities to drive sustainability
across the portfolio
to France
– First ever Debenhams on a retail park
– 14% of space in UK shopping centres now food and beverage
– Commercialisation income up 9%
– ‘Plus’ app in all UK and French shopping centres
– 3% reduction in electricity consumption across UK assets
remerchandising and income growth
– Use customer data collected from the ‘Plus’ app to better inform
understanding of consumers’ behaviour and preferences
INVESTMENT MANAGEMENT
– Grow the portfolio and enhance overall quality
– Acquired loan portfolio to create new Irish platform
– Convert Irish loans into owned assets and integrate portfolio
– Recycle capital into higher-performing retail markets
– Focus on European countries and cities with strong
economic opportunities
– Aim for a leading position in all chosen market segments
– Dispose of assets which do not meet our investment management
criteria or are underperforming
– Complete on-site development schemes
– Advance major London developments
– Extend shopping centres, emphasising food, beverage and
leisure offers
– Deliver smaller-scale retail park extensions and reconfigurations
for next-generation retail park schemes
– Support premium outlet extension opportunities
Dundrum Town Centre, Dublin
DEVELOPING VENUES
Silverburn, Glasgow
FINANCIAL EFFICIENCY
– Maintain financial leverage in line with 40% loan-to-value (LTV)
– Relocated head office to King’s Cross, reducing operational costs
– Manage cost base whilst delivering income growth
guidance and strong investment-grade credit ratings
whilst achieving SKA Gold sustainability rating
– Uncomplicated and transparent approach to funding – primarily
– Over £1.8 billion of new capital raised
unsecured bank facilities and corporate bonds
– Effectively manage the maturity and average cost of debt
– Maintain currency hedge to limit foreign exchange exposure
– Joint ventures with a selected group of international partners
– Reduce operational and financial costs
Hammerson office, Kings Place
6
HAMMERSON PLC ANNUAL REPORT 2015
– Deployed further capital in Birmingham, the UK’s second city,
– Target further acquisitions in premium outlets, primarily
with the Grand Central acquisition
through VIA Outlets
– Acquired new VIA Outlet, Festival Park, Majorca, and increased
– Complete planned £300 million of disposals
ownership stake in Kildare Village, Dublin
– £360 million of disposals including Villebon 2 in January 2016
– Evaluate further capital recycling opportunities
– Four developments completed:
– Complete and open Victoria Gate, Leeds, and achieve
– Le Jeu de Paume, regional shopping centre in Beauvais, France
– 10,900m2 leisure and dining extension at Silverburn, Glasgow
– Next-generation retail park at Elliott’s Field, Rugby
– Reconfiguration at Cyfarthfa Retail Park, Merthyr Tydfil
– Acquired 50% interest in Whitgift, Croydon, and concluded the
CPO inquiry; acquired infrastructure consents at Brent Cross; and
submitted revised planning at The Goodsyard, London
– Delivered further pre-lets at Victoria Gate, Leeds, and WestQuay
Watermark, Southampton
BREEAM Excellent status
ahead of 2017 opening
– Progress construction and pre-lets at WestQuay Watermark
– Advance next planning steps, land acquisition and retailer
discussions at Croydon, Brent Cross and The Goodsyard
– Next-generation retail park programme continues with
The Orchard Centre, Didcot
– Start extensions at Bicester Village, London, Fidenza Village,
Milan, and Batavia Stad, Amsterdam
– £350 million bond issue at 2.5% effective coupon
debt issuance
– Redemption of £272 million 5.25% bond (due December 2016)
– Take opportunities to further reduce cost of debt
– Reduce LTV through disposals
– Acquisition facility to be refinanced by disposals and new
– Credit rating upgrade (to Baa1) from Moody’s
+ Further details on the progress against our Strategic Priorities
are available in the Chief Executive’s letter, pages 8 -13, and in
the Business Review, pages 22 - 42
Strategic priorities
Progress in 2015
Focus in 2016
ASSET MANAGEMENT
– Deploy the Product Experience Framework across the Group
– 400 lettings totalling 136,000m2 across the portfolio
– Evaluate opportunities to introduce existing international
– Introduce the latest retail and leisure brands and new store
– New flagship stores for international brands like Victoria’s Secret,
brands across the rest of the Hammerson portfolio
Apple, H&M and Polo Ralph Lauren
– Continue to reinvigorate the tenant mix in France
– Remerchandise retail parks with updated homeware and
– 25 new retailers in French portfolio, of which four are firsts
– Capitalise on strong occupier demand at retail parks to drive
to France
– First ever Debenhams on a retail park
– 14% of space in UK shopping centres now food and beverage
– Commercialisation income up 9%
– ‘Plus’ app in all UK and French shopping centres
– 3% reduction in electricity consumption across UK assets
remerchandising and income growth
– Use customer data collected from the ‘Plus’ app to better inform
understanding of consumers’ behaviour and preferences
INVESTMENT MANAGEMENT
– Grow the portfolio and enhance overall quality
– Acquired loan portfolio to create new Irish platform
– Convert Irish loans into owned assets and integrate portfolio
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– Deployed further capital in Birmingham, the UK’s second city,
– Target further acquisitions in premium outlets, primarily
with the Grand Central acquisition
through VIA Outlets
– Acquired new VIA Outlet, Festival Park, Majorca, and increased
– Complete planned £300 million of disposals
ownership stake in Kildare Village, Dublin
– £360 million of disposals including Villebon 2 in January 2016
– Evaluate further capital recycling opportunities
– Four developments completed:
– Complete and open Victoria Gate, Leeds, and achieve
– Le Jeu de Paume, regional shopping centre in Beauvais, France
– 10,900m2 leisure and dining extension at Silverburn, Glasgow
– Next-generation retail park at Elliott’s Field, Rugby
– Reconfiguration at Cyfarthfa Retail Park, Merthyr Tydfil
– Acquired 50% interest in Whitgift, Croydon, and concluded the
CPO inquiry; acquired infrastructure consents at Brent Cross; and
submitted revised planning at The Goodsyard, London
– Delivered further pre-lets at Victoria Gate, Leeds, and WestQuay
Watermark, Southampton
BREEAM Excellent status
– Progress construction and pre-lets at WestQuay Watermark
ahead of 2017 opening
– Advance next planning steps, land acquisition and retailer
discussions at Croydon, Brent Cross and The Goodsyard
– Next-generation retail park programme continues with
The Orchard Centre, Didcot
– Start extensions at Bicester Village, London, Fidenza Village,
Milan, and Batavia Stad, Amsterdam
FINANCIAL EFFICIENCY
– Maintain financial leverage in line with 40% loan-to-value (LTV)
– Relocated head office to King’s Cross, reducing operational costs
– Manage cost base whilst delivering income growth
guidance and strong investment-grade credit ratings
whilst achieving SKA Gold sustainability rating
– Uncomplicated and transparent approach to funding – primarily
– Over £1.8 billion of new capital raised
– Reduce LTV through disposals
– Acquisition facility to be refinanced by disposals and new
– £350 million bond issue at 2.5% effective coupon
debt issuance
– Redemption of £272 million 5.25% bond (due December 2016)
– Take opportunities to further reduce cost of debt
– Credit rating upgrade (to Baa1) from Moody’s
+ Further details on the progress against our Strategic Priorities
are available in the Chief Executive’s letter, pages 8 -13, and in
the Business Review, pages 22 - 42
HAMMERSON.COM
7
DEVELOPING VENUES
concepts to the portfolio
fashion retailers
– Deliver value-add projects (such as kiosks, digital screens, pop-up
retail units, new store concepts, environmental improvements)
– Build digital capabilities to support multi-channel retail and
provide insight on consumer behaviour
– Identify and capitalise on opportunities to drive sustainability
across the portfolio
– Recycle capital into higher-performing retail markets
– Focus on European countries and cities with strong
economic opportunities
– Aim for a leading position in all chosen market segments
– Dispose of assets which do not meet our investment management
criteria or are underperforming
– Complete on-site development schemes
– Advance major London developments
– Extend shopping centres, emphasising food, beverage and
leisure offers
– Deliver smaller-scale retail park extensions and reconfigurations
for next-generation retail park schemes
– Support premium outlet extension opportunities
unsecured bank facilities and corporate bonds
– Effectively manage the maturity and average cost of debt
– Maintain currency hedge to limit foreign exchange exposure
– Joint ventures with a selected group of international partners
– Reduce operational and financial costs
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
IN CONVERSATION WITH
DAVID ATKINS, CHIEF EXECUTIVE
We delivered value
for our stakeholders
“ 2015 has been a
busy and successful
year for Hammerson.
I am delighted that
the focus on our
strategic priorities
continues to deliver
positive results for
our stakeholders.”
8
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HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015HAMMERSON PLC ANNUAL REPORT 2015 More happened for shareholders
WHAT HAVE BEEN THE HIGHLIGHTS
OF 2015?
Our focus on generating sustainable income growth
continues to succeed, and we have grown EPS by 13%.
This enables us to once more increase the dividend for
our shareholders, which at 22.3p per share is up 9.3%
on last year and with compound annual growth of 7.7%
since 2011.
NAV per share was up 11% principally due to a total
property return of 12.4%, significantly beating IPD.
This strong financial performance is in part thanks to
the high quality of our portfolio. We continue to recycle
capital into those assets and developments which are
best positioned to create value for shareholders. A key
highlight of this year was our acquisition in Ireland
which provides a market-leading platform in Europe’s
fastest-growing economy. Acquiring a portfolio of loans
requires some extra steps before we own the properties
but, once the transaction is complete, we will operate
one of Europe’s leading shopping centres, Dundrum
Town Centre, Dublin. We also increased our investment
in the UK’s second city, Birmingham, through the
acquisition of Grand Central shopping centre in joint
venture with CPPIB. Birmingham offers an increasingly
wealthy catchment and improving public infrastructure
investment. To fund these transactions, we are on track
with a programme of disposals and we remain focused
on maintaining a prudent balance sheet.
Like-for-like NRI growth of 2.3% is higher than last year
as we continue to see a growing demand for prime retail
and leisure space. Against a backdrop of falling vacancy,
combined with our Product Experience Framework
initiatives, we are well-positioned to drive future rental
income growth.
Chart 1
Dividend per share (pence)
7.7% CAGR
22.3
20.4
19.1
16.6
17.7
This year we successfully relocated our UK offices
to more cost-efficient sites, moving our London
headquarters to Kings Place, King’s Cross. Costs were
tightly controlled across the business and we reduced
total administrative costs, alongside investing further in
important areas such as digital and marketing. There is
still more to be done however, especially as a result of
additional property costs from the strategic
development properties we hold.
In 2015, we completed an impressive four developments,
adding 64,900m2 of incremental retail space. This
included Le Jeu de Paume, a new regional shopping
centre in Beauvais; the Winter Garden restaurant and
leisure extension at Silverburn, Glasgow; a next-
generation fashion park in Rugby with Elliott’s Field; as
well as an M&S-anchored extension to Cyfarthfa Retail
Park, Merthyr Tydfil. We also made good progress at our
major London development schemes.
HOW IS THE INVESTMENT PROPOSITION
FOR SHAREHOLDERS IN 2016
DIFFERENTIATED VERSUS PEERS?
We are better positioned than ever to take advantage of
the improving consumer backdrop and to continue to
generate earnings growth ahead of our peers. As well as
owning prime real estate, driving rental growth requires
a thorough and hands-on approach to asset
management. This is where we are differentiated by our
embedded Product Experience Framework, which is
designed to deliver a consistently great experience for
shoppers and retailers across our portfolio.
Furthermore, we remain the only European REIT with
strategic exposure to the premium outlets market. Our
investments in Value Retail and VIA Outlets materially
boosted our portfolio returns in 2015. We aim to further
grow our exposure to this market, which is set to benefit
from strong occupational demand driven by growing
global tourism.
2016 will see the opening of Victoria Gate, Leeds which,
together with Victoria Quarter, will create the leading
aspirational retail offer in the north of England. The
next 18 months will also see us make advancements on
our major London development schemes including
moving towards starting on-site at Brent Cross and
Croydon. These schemes are set to deliver retail assets
of the future and further differentiate our long-term
investment proposition.
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In conversation with David Atkins, Chief Executive
More happened for retailers
WHAT ARE THE CURRENT TRENDS FOR
RETAILERS TAKING MORE SPACE?
The increase in occupancy across the Group to 97.7%
reflects the continued strong demand from retail and
leisure tenants for prime space. With the growth in
multichannel retailing, tenants are looking to position a
greater share of their stores in the best locations. This
trend plays well to our strategy of owning and operating
prime shopping centres in key regional destinations.
We have successfully worked with major international
tenants during 2015 to create flagship stores, including
three Victoria’s Secret stores and a new two-level
Hugo Boss at Cabot Circus.
Retailers are also creating more innovative store
designs and formats. We are delighted with the
River Island Style Studio at Bullring, a new concept for
the brand, offering customers a VIP personal-styling
service in a relaxed and contemporary setting. The store
has performed exceptionally well since opening, and is
now one of the best in River Island’s portfolio.
Increasingly discerning retailers want a portfolio of
stores to match the full range of ways in which their
customers shop. We are well-positioned to respond to
retailers’ requirements for a multi-format presence.
Fat Face is a good example of this, upsizing its footprint
at Union Square in Aberdeen in April and also taking its
first store on a retail park in England when we opened
the doors at our newly developed shopping park at
Elliott’s Field, Rugby. In fact, the trend for traditional
fashion and department store brands to bring their full
offering closer to the convenience shopper was evident
throughout the year, with names such as Debenhams,
M&S and Next all taking space across our retail parks.
Furthermore we are able to offer retailers a European
footprint covering the UK, France and now Ireland. In
France, our focus on reinvigorating the portfolio is
delivering results. The team are focused on identifying
the new and emerging international brands that will
resonate with our pan-European customers.
Occupancy
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HAMMERSON PLC ANNUAL REPORT 2015
During the year, we welcomed 25 new brands to our
French portfolio, notably including four retailers’ first
store in France.
WHAT ELSE ARE YOU DOING TO SUPPORT
RETAILERS IN YOUR CENTRES?
It is our responsibility as a landlord to drive healthy
footfall for our retail tenants and create new
experiences for shoppers to encourage greater dwell
time. We saw visitor numbers up 1.1% in UK shopping
centres this year. This result was encouraging and we
outperformed the wider market, which was down 1.9%
year-on-year (according to Springboard).
No doubt a significant factor in our success is our
Product Experience Framework, which drives a
constant and evolving programme of events, pop-ups
and interactive experiences for shoppers. We have
launched click & collect in four of our centres with
strong results. More than 85% of shoppers using the
service at Brent Cross go on to shop, drink or dine whilst
in the centre. Our investment in digital infrastructure
and technology across the shopping centre portfolio is
also demonstrating encouraging results. Our ‘Plus’ app
has now been rolled out across the entire estate of
shopping centres in the UK and France. The app, a
personalised shopping companion, enables us to
communicate in real-time with our shoppers in a
tailored way. It gives us greater insight into consumer
shopping habits which we can then analyse and share
with our retail tenants to improve the customer offer.
To date, the app has achieved over 140,000 downloads.
Bullring, Birmingham
O’Parinor, Paris
+140kdownloads S
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More happened for shoppers
WHAT DIFFERENTIATES YOUR OFFER
FOR SHOPPERS?
For us, being the Best at Retail means being at the
forefront of new retail trends and concepts. As retail
specialists we are able to draw on the strength of our
relationships to ensure we bring the right mix of leading
international brands and new, innovative concepts to
our shopping destinations across Europe. During the
year we welcomed premium British fashion brand All
Saints to Les Terrasses du Port in Marseille,
representing the brand’s debut in a French shopping
centre; and, leveraging our reputation for retail
excellence in France, we secured leases with Sandro and
Séraphine at Victoria Quarter, representing firsts for
both aspirational French boutiques in Leeds. VIA
Outlets introduced more international luxury brands,
thanks to the partnership with Value Retail, including
Brooks Brothers at Landquart, Zurich and Desigual at
Kungsbacka, Gothenburg.
To differentiate our offer and give consumers more
reasons to visit our centres with greater frequency we
are increasingly looking beyond pure retail to provide
entertaining and exciting experiences. We opened the
impressive Wintergarden at Silverburn, a £35 million
10,900m2 dining and leisure development, anchored by
a 14-screen Cineworld and featuring 11 new restaurants,
including Carluccio’s, Five Guys and Glasgow’s first
Thaikhun. In the first six months after opening the
Wintergarden the centre saw a 4% increase in customer
dwell time and a 5% increase in sales, demonstrating
the importance of creating customer experiences that
bring the whole family together.
The brands you love
We’ve added some new favourites to the
portfolio during the year
Across our UK shopping centre portfolio, leisure and
dining now accounts for 14% of space, and with trends
showing additional growth in the casual dining market
we see opportunities to increase this further in 2016.
Our restaurants and leisure team look for fresh new
brands to attract diners as well as tried and tested
favourites. Restaurants which debuted with us, such as
Wham Bam Tikka at WestQuay and Thaikhun at Union
Square, have become popular favourites and expanded
to other parts of our portfolio.
We are also responding to this trend at our retail parks,
introducing the latest food and beverage offerings.
Ed’s Easy Diner, Caffé Nero and Nando’s have all taken
space at Elliott’s Field in Rugby. Our retail parks have
seen strong footfall up 4.2%, as they become even more
popular for shoppers looking for convenience. This was
nearly double the market level of 2.3%. We are now
introducing facilities and services to our retail parks
which are similar to those found at shopping centres
including customer service suites, free wi-fi, mobile
phone charging points and Amazon lockers to leverage
the growing demand for click & collect.
Our retail venues also give shoppers a vibrant array of
entertainment. The Disco Bull Head, a sound and music
installation, at Bullring (which you can see on the front
cover of our report) was designed by leading artist Josh
Harker and was seen by nearly two million visitors. This
summer we also created a beach at Brent Cross,
complete with sandy shores and seaside entertainment!
We recognise that while these events are stimulating for
our shoppers, we also need to ensure a comfortable and
safe environment in which to spend time. This year we
have undertaken a full sensory audit of our centres to
see how light, sounds, smell and the feel of a centre
affects our shoppers. Over the course of the year we
have also made significant investment in upgrading our
customer service desks. As ever, the safety of customers
and staff in our centres is a priority and our security
procedures are constantly reviewed in close
consultation with local and national authorities.
Elliott’s Field, Rugby
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In conversation with David Atkins, Chief Executive
More happened for our people
CAN YOU OUTLINE THE PROGRESS YOU
HAVE MADE EMBEDDING YOUR VALUES?
Our values of ambition, collaboration, respect and
responsibility continue to enhance our culture and
influence the way we operate. The relocation of our
UK headquarters from Mayfair to King’s Cross not only
marked a shift in how we see ourselves as a business,
but also introduced a more agile and collaborative
culture and working environment. You can read more
about the move in the case-study below.
Our ambition is best demonstrated in the strategic
acquisition in Ireland which was the largest in our
history and broadens our European platform. I am
proud of the hard work and dedication of all employees
who came together to make the deal happen. We have
recently established a local office in Dublin and we
anticipate a number of opportunities for both current
and new colleagues.
During the year we continued to develop our diversity
and inclusion strategy, encouraging respect and
understanding within the workplace. Unconscious bias
workshops were held for senior managers in our UK and
French teams, with key messages filtering through and
embedding across our business. We are now planning to
extend the workshops to all colleagues in 2016.
Encouragingly, these initiatives are translating into
positive action at a resourcing level, with half of all new
employees recruited during the year being female, and
+
Further details of Our People are available
on pages 49 - 52
over a third of these employed in professional and
senior professional roles. By the end of 2015, 27% of
senior management roles across the Group were held
by women, well on the way to meeting our stated
aspiration of at least 30%. Irrespective of internal
targets, we are never complacent and we recognise
there is more to do in 2016.
As a FTSE 100 employer, we take seriously our
responsibility to train and nurture the talents of those
embarking on a career in the property industry. Since
the launch of our UK Graduate Programme in 2011,
I am pleased to report that three graduates have
successfully completed the two year programme and
gained RICS accreditation, becoming permanent
employees within our business.
We also recognise our responsibility to promote the
benefits of a rewarding career in retail real estate to the
next generation of retail property specialists. In my role
as President of BCSC, I was delighted to award successful
apprentices of the Retail Path scheme with certificates at
the BCSC Gold Awards evening in December. The
scheme, backed by BCSC Retail Trust and the National
Skills Academy, was piloted in shopping centres across
the UK. These included Highcross, Leicester, where five
apprentices took on 12-month placements giving them
unique exposure to a range of centre management and
retail-based skills and experiences. Two of the five have
now graduated from the scheme and won permanent
roles with retailers at Highcross.
RELOCATION OF HEADQUARTERS
TO KING’S CROSS, LONDON
In June we moved into our new London headquarters at Kings Place,
King’s Cross. The office, which overlooks Regent’s Canal, is set over
2,200m2 and offers modern, flexible workspace for more than
150 colleagues.
Moving away from the property industry’s traditional Mayfair
heartland not only allows us to benefit from significant cost savings
but also reflects our strategic focus on retail real estate. The modern
design provides colleagues with a digitally-enabled, agile workspace
which enhances collaboration across our various asset, leasing and
development projects. The Retail Showcase provides our retail leasing
teams with a state-of-the-art marketing suite which we use to
demonstrate the benefits of our portfolio to prospective tenants.
Situated close to St Pancras International rail terminal, it brings us
closer to our French business, fostering cross-border collaboration
and partnerships.
We were awarded an SKA Gold sustainability rating at Kings Place.
Hammerson office, Kings Place
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More happened for communities
Our sustainability initiative forms part of the Product
Experience Framework and underpins our operational
decisions. This is particularly the case in developments
where we look to combine thoughtful and sustainable
building techniques with iconic design, producing
destinations where customers feel proud to shop. We
were delighted to achieve BREEAM Excellent at the
design stage for Le Jeu de Paume, Beauvais, our new
shopping centre north of Paris. This was in addition to
receiving industry recognition for our sustainability
initiatives throughout the year, notably for the B&Q
Eco-learning store at Cyfarthfa Retail Park in Merthyr
Tydfil and the Costa Eco-Pod at Wrekin Retail Park in
Telford. These initiatives continue to demonstrate our
commitment to sustainable development and our
leadership of the wider sector.
During the year, we also launched the ‘Moving Towards
Net Zero Buildings’ commitment in collaboration with
The Prince of Wales’ Corporate Leaders Group and
property services company Jones Lang LaSalle.
The commitment, which seeks to drive a coordinated
approach to the delivery of nearly zero energy
buildings for new build by 2020, has already attracted
a number of leading European signatories from
across the built environment.
CREATIVE CAREERS AT BULLRING
We are increasingly aware of the importance of digital and creative
development skills for the employment market. In November,
Bullring, Birmingham, hosted ‘Creative Careers 0121’ – a careers fair
with a difference. The event, aimed at children, young people, parents
and educational providers, showcased the creative industries and
provided access to a variety of professionals already shaping our
digital world through business and enterprise. Attendees were
provided with tips, networking connections and opportunities for
young people looking to start a career in the digital and design sectors.
HOW ARE YOU DELIVERING
POSITIVE PLACES FOR THE COMMUNITIES
YOU SERVE?
The positive social impacts that our business creates
are both significant and long term.
During the year, our investment in extensions,
developments and refurbishments generated over
4,500 construction jobs alone. Over 85% of these jobs
went to local people. Once completed, these projects
are expected to deliver a further 2,600 employment
opportunities in the retail and hospitality sectors. This
can only be achieved by working closely with our supply
chain, tenants and local authority partners to ensure that
the requisite skills and training opportunities are in
place. For example, at Merthyr Tydfil, South Wales, we
worked with the local council, construction contractors
BAM, and tenants M&S and Next. We invested in skills
and training provision for the local community, resulting
in the creation of close to 500 local jobs at the recent
extension of Cyfarthfa Retail Park. These numbers
demonstrate the vital role that our industry can play
in creating sustainable careers and stimulating local
economies across our many communities.
At a corporate level, we encourage colleagues to play a
greater role in volunteering in the communities in which
we operate. In 2015, staff volunteered over 400 days, a
clear illustration of our culture and values in practice.
Hammerson’s Community Day, now well established,
saw high levels of participation with colleagues taking
part in a range of 27 activities, including a river clean-up
and mentoring young people.
HOW ARE YOU LEADING THE SECTOR
ON SUSTAINABILITY INITIATIVES?
As a founding member of the Better Buildings
Partnership (BBP), we have been instrumental in
leading the sector. The organisation, which brings
property owners and occupiers together to share new
ideas and importantly work together to reduce carbon
emissions, is chaired by our Head of Sustainability,
Louise Ellison. In 2015, members of the BBP achieved
a 5% year-on-year reduction in energy consumption
across their portfolio.
Share of job opportunities to local people
85%
Staff days volunteered to community activities
400+
+
Further details on Sustainability are available on
pages 43 - 48
Community Day
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OUR MARKET
The retail landscape
2015 was another positive year for the performance of retail real estate
across Europe, driven primarily by an improving economic backdrop.
In a dynamic and evolving retail landscape, tenants continue to enhance
their brand proposition by taking more space in prime retail destinations
that meet consumer needs.
INTRODUCTION
Chart 2
Our strategy focuses on high-quality property in prime
locations across selected European retail markets. We
operate in the retail property market because it offers
attractive and sustainable long-term returns, with
lower volatility than other commercial property
markets and a granular and diverse tenant mix which
mitigates counterparty risk. We aim to be among the
leaders in each of our market sub-sectors so as to
capitalise on the favourable market trends and exercise
scale efficiencies.
ECONOMIC BACKGROUND
Macroeconomic conditions drive consumer confidence
and spending, which translates into retailers’ appetite
for expansion and ability to finance new space. Chart 2
illustrates the relative consumer spending growth rates
for our main geographic markets.
UK GDP growth of 2.4% for 2015 was ahead of the
Eurozone (1.5%) (Source: OECD). Disposable income
currently benefits from low interest rates, low fuel and
food costs and real wage growth. Household consumer
expenditure grew by 4.2% in 2015. The GfK UK
consumer confidence index finished the year in positive
territory suggesting 2016 will see continued spending
growth by UK households.
French GDP growth of 1.1% in 2015 was higher than
last year (2014: 0.2%) and unemployment was flat.
Household consumer expenditure grew by 2.0% in 2015.
The government initiated changes to allow more Sunday
trading, which should help future sales growth. While
forward-looking consumer confidence finished 2015
higher (Source: INSEE), the medium-term impact of the
destabilising terrorist attacks in France is still uncertain.
Ireland attracts significant inward investment due to
a low corporate tax rate and skilled workforce. It is
Europe’s fastest growing economy with GDP up 5.6%
in 2015, household consumer expenditure up by 8.6%
and sharply falling unemployment. New car sales were
up 18% in 2015 indicating households’ confidence in
their financial position.
Despite some macroeconomic shocks in 2015, the
number of international tourists to Europe grew, partly
as a result of the weakness of the Euro currency,
supporting the continued structural growth of the
global tourism industry.
1414
Household consumer expenditure growth (%)
15
10
5
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-5
-10
-15
2004
2006
2008
2010
2012
2014
2016
2018
2020
United Kingdom
France
Ireland
Source: Marketline analysis (using data from Eurostat, OECD and ONS)
DEMAND FOR RETAIL REAL ESTATE
The continued economic recovery in Europe supported
attractive total returns from retail real estate in 2015.
The UK shopping centre market saw over £4bn of
investment (2014: £5.9bn). With a limited number of
prime shopping centres changing hands, investment
transactions attracted significant competition and lifted
capital valuations across this sector. Total IPD return for
UK shopping centres was 10.0%.
UK retail parks investment volumes were up on last year
at £3.6bn (2014: £2.7bn). There were signs of a divergence
in performance across different types of retail parks with
fashion parks delivering better returns and some
supermarket-anchored parks seeing values fall (see page
16 for market sub-segments). Total IPD return for the
whole UK retail parks sector was 6.9%.
French shopping centre transaction volumes were £3.9bn
(2014: £5.8bn). Investor appetite was strong, in particular
with low European interest rates, and this drove capital
value uplifts. (Total IPD returns are not yet available for
French shopping centres.)
Irish retail transactions were £0.5bn (2014: £1.1bn) and
retail property delivered a total IPD return of 20.9%,
driven by strong rental and capital growth.
An influx of capital into the premium outlets market from
international funds and private equity firms contributed
to a 15% rise in the volume of transactions (total c.£600m).
The strong demand, and a lack of new supply, drove a
sharp increase in valuations. Total property returns were
approximately 20% (source: Cushman and Wakefield).
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CONSUMER TRENDS
Our assets are in the sub-sectors of prime shopping centres, retail parks and premium outlets. We believe that these categories are best
positioned to match the latest trends in shopping habits of consumers. In a dynamic and evolving retail landscape, we see an opportunity
to outperform our competitors by selecting retail assets in these categories.
Table 3
Retail theme
Brand ‘flagships’
As a growing share of consumers’ purchases are made online, a retailer’s physical space needs
to offer the boldest brand experience to drive shopper loyalty
Catering
Restaurant operators recognise the opportunity afforded by a high footfall environment
Convenience
63% of consumers named ‘convenience’ as an important factor driving their purchase decision
in our survey by Conlumino. Retail needs to offer quick, efficient and seamless service
Global shopping-tourism
Shopping is increasingly enjoyed by international tourists as part of a global luxury
travel experience
Driving demand for space in:
Premium
Retail
Shopping
outlets
parks
centres
P
P P
P P
P
P
P
P
We have selected retail assets
that match the latest trends
driving demand for space in a
dynamic retail environment.
Cabot Circus, Bristol
Shoppers using at least two channels
86%
Shoppers spending more in store when using
click & collect
32%
HOW DOES THE GROWTH OF ONLINE SHOPPING
IMPACT RETAILERS’ DEMAND FOR PHYSICAL SPACE?
To help us better understand the topic, we carried out research with
the Investment Property Federation, CBRE and Conlumino.
Our survey found that 86% of customers use at least two channels
when shopping (eg both physical stores and online). The physical
store channel was identified as being important for more than just
making a transaction. Shoppers use the physical space to research
products, trial and compare different brands and for transaction
fulfilment (eg click & collect). In fact, despite the growing share of
sales completed online, nine out of ten shopper journeys still involve
a physical store for at least one step of the process.
Click & collect is a growing trend and over half of customers said they
would use the service if it was offered. For click & collect customers,
the store offers a fulfilment solution, however a Verdict report found
that 32% of customers went on to make additional purchases in store
when collecting a click & collect package.
Retailers also recognise the role a physical store plays in creating
brand awareness and loyalty. Our research showed that sales online
increased in the store’s catchment area by 5-6% when a new fashion
store opened.
Overall, our findings suggest that retailers with a successful
multichannel strategy are able to drive greater sales efficiency from
their physical retail space.
+
See page 23 for details of our click & collect initiatives.
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Our market continued
OCCUPIER MARKETS
PRIME SHOPPING CENTRES
Prime shopping centres are those which cover a
sizeable catchment, include large anchor stores and
offer consumers catering and entertainment as well
as retail. With the emergence of multichannel
distribution, retailers are re-evaluating the size and
efficiency of their physical store footprint. As a result,
there is a polarisation in demand for space, with
retailers prioritising stores in prime shopping centres
and reducing space in secondary centres and high street
locations. Prime shopping centres are more likely to
deliver higher footfall and dwell time given the range of
leading brands, food, beverage and leisure offering,
digital infrastructure and attractive surroundings.
With ownership stakes in 15 of the top shopping centres
(as designated by Property Market Analysis (PMA)),
and a total of 1.7 million m2 of retail and leisure space,
we are a leading European shopping centre owner and
one of the top three in both the UK and France (see
Charts 4 and 5). We have over 700 different retail and
leisure brands across our shopping centres and 14% of
our space is let to catering and leisure tenants.
Chart 4
Largest owners of top 50 UK shopping centres
(Total UK space 18.1 million m2)
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Source: PMA
Note: Number of centres (including JVs)
Chart 5
Largest owners of top 50 French shopping
centres (Total French space 17.6 million m2)
15
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Source: PMA
Note: Number of centres (including JVs)
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1616
The rents achievable at shopping centres are driven by
their size, location, demographic catchment and local
competition. High tenant demand and low vacancy
drives growth in ERV (estimated rental value). In
France, rental growth is driven by new lettings and
in-place leases are also linked to a price inflation index.
Brent Cross, London
RETAIL PARKS
Retail parks are predominantly situated in out of town
locations, which are easily accessible by car and are
well-connected to major road networks with plentiful
free parking. Units are on average larger and rents are
lower per square metre than in shopping centres.
We are the second largest direct owner of retail parks
in the UK with 500,000m2 across 21 assets. The total
UK market comprises 11 million m2 and ownership
is fragmented.
As Chart 6 below shows, the retail park market is
categorised into five sub-segments. We are primarily
focused on three of the sub-segments, being shopping
parks, hybrid parks and key homeware parks. We
choose to operate in these segments because they offer
the strongest occupational demand.
In hybrid and key homeware parks, improved economic
conditions and greater consumer confidence across the
regions in the UK are driving strong demand from
homeware and furnishings brands. Retailers such as
ScS, Oak Furniture Land and Tapi have all been
expanding their portfolios. These retailers have also
been absorbing space from DIY retailers such as B&Q
and Homebase who are reducing their store numbers.
There is also a growing trend for fashion retailers, which
traditionally locate in shopping centres, to take space
Chart 6
UK retail park market
Hammerson retail park portfolio
Shopping park
Hybrid park
Key homeware goods
Standard homeware
Solus
Source: Hammerson; PMA
Shopping park
Hybrid park
Key homeware goods
Standard homeware
Solus
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on retail parks. Retail parks offer a cost-effective way
for fashion retailers to fill in the gaps in their store
footprint between prime shopping centres in large
towns. This strategy is also leading to improved unit
fit-outs, more attractive surroundings and more food
and beverage on retail parks.
PREMIUM OUTLETS
Outlet centres offer a channel for retailers to distribute
excess inventory by selling it at a material discount to
original price. Furthermore, premium outlets are often
designed to match the store-fit of a full-price store,
hence retailers are able to retain their brand identity
even with customers shopping at premium outlets.
There are approximately 200 outlet centres across the
European market. The market can be broadly
categorised according to the type of customer it serves.
The pyramid structure in Chart 7 represents the
European premium outlets market. Value Retail and VIA
Outlets together are among the top three largest players
in Europe and operate in the upper two segments.
Premium outlets which provide international fashion
and luxury brands are at the top of the market. Value
Retail is positioned at this level, with its nine unique
shopping-tourism Villages serving the international
luxury and fashion consumer. Sales densities at Value
Retail villages can be as high as €30,000/m2.
The middle segment caters to the mainstream fashion
customer. VIA Outlets’ six centres are in this category.
The strategy of improving the tenant mix at VIA Outlets
will raise the sales densities at these centres and lift
them within this middle segment.
The third low-end segment, which offers discounted
high street clothes or factory surplus goods, is not
served by Value Retail or VIA Outlets.
Outlet centre rents are, on the whole, directly linked to
tenant sales. Tenants are on shorter leases than
shopping centres. Outlet operators also change the
brand line-up at outlets more frequently to match
supply and demand.
Sales growth has been on average 8% p.a. in the European
premium outlets market in the last three years. A key
driver of the market is the strong demand from
international tourists. International visitors, in particular
from China, the Middle East and Russia, who appreciate
luxury design, take advantage of the opportunity to buy
goods at a discount while travelling in Europe.
Chart 7
European premium outlets market
Value Retail
INTERNATIONAL
FASHION AND LUXURY
BRANDS
MAINSTREAM
FASHION BRAND OUTLETS
LOW-END DISCOUNT OUTLETS
€30,000+
€2,000–€10,000
VIA Outlets
<€2,000
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OUTLOOK
In terms of economic backdrop, the ingredients are in
place to support continued retail sales growth in the
UK, with rising wages, low interest rates and low
inflation expected to continue through 2016. In France,
consumer confidence is more muted, in particular as a
result of recent terrorist attacks. In Ireland, the
economic picture is forecast to remain strong with
continued growth in retail sales.
In occupational markets, we expect there to be greater
polarisation in demand for prime retail space as a result
of multichannel trends. This will favour Hammerson’s
portfolio, and help drive above-average rental growth.
Premium outlet sales growth is expected to continue,
supported by growth in the shopping-tourism market
from a wide mix of global travellers. This sales growth
will translate into growing rents, strong investment
volumes and higher than average returns.
However, since the start of 2016, stock markets have
been volatile, reflecting a more uncertain global
economic and political outlook. Downside risks
associated with China, Brexit and the Middle East could
impact consumer confidence and capital returns in 2016.
We expect capital value growth in commercial property
to slow in 2016. However, retail property has
traditionally lagged the cycles of other more volatile
commercial property such as office assets.
Table 8
Outlook
UK
France
Ireland
European premium outlets
Consumer
confidence
Retail sales
ERVs
Capital values
1717
Landquart, Zurich
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KEY PERFORMANCE INDICATORS
Delivering value for
our stakeholders
We have seven primary Key Performance Indicators, or KPIs. They are split
between financial and operational measures and are used to monitor the
performance of the business to ensure that we deliver value for our stakeholders.
FINANCIAL KPIs
Chart 9
TOTAL PROPERTY RETURNS (%)
8.9
8.2
8.2
8.5
4.6
5.0
13.6
12.5
12.4
9.9
Chart 10
GROWTH IN LIKE-FOR-LIKE NRI (%)*
3.8
2.1
2.1
2.1
2.3
2.0
‘11
‘12
‘13
‘14
‘15
‘11
‘12
‘13
‘14
‘15
IPD Benchmark
Total property return
IPD Benchmark 2015
Total property
return 2015
Target
+
More in the Financial Review on page 58
+
More in the Financial Review on page 54
Description
We compare the total return achieved by our property
investments on a proportionally consolidated basis, including
premium outlets, against a benchmark based on the annual IPD
Retail Property Universe. The benchmark is weighted 70:30
between the IPD UK and French indices to be comparable with
the geographical allocation of our property portfolio. As the final
2015 IPD indices are not published until after the publication of
this Annual Report, the benchmark is management’s best estimate
using available IPD data.
Principal stakeholder focus 1
We invest in, create and operate high-quality real estate which is
attractive to both retailers and shoppers and provides a platform
from which to deliver income and value growth in excess of
industry benchmarks.
Performance
12.4% (Benchmark 9.9%) (2014: 13.6% (Benchmark 12.5%))
During 2015, the property portfolio produced a total return of
12.4% which was 250bp ahead of the estimated IPD benchmark.
The outperformance was driven by premium outlets which
delivered a total return of 23.7%.
2016 outlook
In 2016, we believe our high-quality portfolio and clear business
model will continue to outperform the retail benchmark.
* Proportionally consolidated excluding premium outlets.
1818
Description
The annual growth in net rental income (NRI) for investment
properties owned throughout the current and prior periods,
excluding the impact of acquisitions, disposals, developments and
exchange rate movements.
Principal stakeholder focus 1
NRI from the property portfolio is the primary source of operating
cash flow and the main contributor to earnings. We aim to grow
like-for-like NRI through leasing vacant space, capturing uplifts
from rent reviews and indexation, tenant engineering and other
‘value-adding’ initiatives.
Performance
2.3% (2014: 2.1%)
On a like-for-like basis, NRI grew by 2.3% in 2015, above our target
of 2.0%. Income from UK shopping centres and retail parks grew
by 2.1% and 2.6% respectively. Our French shopping centres
produced income growth of 2.5%.
2016 outlook
We expect the occupational market to improve in 2016,
particularly in the UK. Lease expiries, breaks, rent reviews and
leasing vacant space provide the opportunity to increase rental
income and implement tenant rotation to improve the quality of
the retail offer across our portfolio.
HAMMERSON PLC ANNUAL REPORT 2015HAMMERSON PLC ANNUAL REPORT 2015
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ALIGNMENT TO OUR BUSINESS MODEL:
STAKEHOLDER FOCUS
1
2
3
Shareholders
Retailers and shoppers
People and communities
LINK TO REMUNERATION
The remuneration of Executive Directors is aligned closely with our
primary KPIs through the Company’s Annual Incentive Plan (AIP)
and Long Term Incentive Plan (LTIP).
For 2015, the AIP contains all four of the Financial KPIs. Total
property returns and growth in adjusted EPS are also included as
performance measures within a number of the annual LTIP awards.
The operational KPIs are consistent with our business model
and good performance in these areas should create value for
our stakeholders.
Details of Executive Director remuneration is included in the
Directors’ Remuneration Report on pages 84 to 101.
Chart 11
GROWTH IN ADJUSTED EPS (%)
10.5
8.3
Chart 12
12.6
COST RATIO (%)*
27.9
26.5
24.2
22.8
23.1
3.7
2.3
1.6
3.5
0.4
0.2
(3.0)
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CPI benchmark
Growth in adjusted
EPS
CPI benchmark
2015
Growth in adjusted EPS
2015
+
More in the Financial Review on page 54
+
More in the Financial Review on page 55
Description
The annual percentage increase in adjusted earnings per share
(EPS) compared with inflation.
Principal stakeholder focus 1
Adjusted EPS is our principal profit measure and an indicator
of the level of recurring profit available for distribution to
shareholders as dividends. Sustained growth in EPS reflects the
effective delivery of our business model and supports strong
financial returns and a progressive dividend policy.
Performance
12.6% (2014: 3.5%)
In 2015, adjusted EPS increased by 3.0 pence, or 12.6%, to
26.9 pence. This increase was driven by increased rental income
and additional earnings from our premium outlet investments.
Earnings were further enhanced by the lower average cost of
borrowing and lower administration expenses, but impacted by
the dilution associated with the 2014 share placing.
We benchmark this KPI against inflation, which for 2015 was
0.2%, resulting in an outperformance of 12.4 percentage points.
This benchmark was previously UK RPI, but has been changed in
2015 to a weighted 70:30 UK: France CPI benchmark. This is also
now reflected in the 2015 LTIP performance conditions and
comparative benchmarks in Chart 11 have been restated.
2016 outlook
2016 EPS growth will be driven by income from recent
acquisitions and completed developments, partly offset by lost
income associated with recent and planned disposals.
* Proportionally consolidated excluding premium outlets.
Description
The cost ratio shows the total operating costs, including the cost
of vacancy, as a percentage of gross rental income for our property
portfolio. We have amended the calculation methodology, in line
with EPRA best practice, to adjust for costs associated with
inclusive leases. We have restated the prior year ratios using the
same methodology. The ratio is not directly comparable between
different companies, as it is impacted by different business models
and accounting treatments.
Principal stakeholder focus 1
Maintaining an efficient operating structure supports growth in
earnings and future dividends.
Performance
23.1% (2014: 22.8%)
During 2015, our cost base has been managed effectively and the
proportion of net administration costs as a percentage of gross
rental income has reduced from 12.8% to 11.8%. This reduction
was offset by an increased proportion of property costs from 10.0%
to 11.3%. This increase is principally due to higher vacancy and
property running costs at properties awaiting redevelopment.
2016 outlook
The ratio is forecast to improve as additional income from recent
acquisitions and completed developments are expected to offset
investment in growing business areas such as digital and
development. We will continue to manage effectively property
costs associated with properties awaiting development ahead of
these projects commencing on site.
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Key Performance Indicators continued
OPERATIONAL KPIs
Chart 13
Chart 14
Chart 15
OCCUPANCY (%)*
LEASING ACTIVITY (£M)*
97.9
97.7
97.7
97.7
97.5
29.5
27.9
24.5
23.9
97.0
18.7
GLOBAL EMISSIONS INTENSITY
RATIO (MTCO2E/£M)
221
180
172
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Target
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Description
The ERV of the space in our investment
portfolio which is currently let, as a
percentage of the total ERV of the portfolio.
Principal stakeholder focus 2
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 provides an
opportunity for us to manage the mix
and location of retailers within a property.
This enhances the consumer experience,
encourages footfall and sales and is
consistent with the strategy for
generating income and capital growth.
Performance
97.7% (2014: 97.5%)
Occupancy remains above our 97.0%
target, with the portfolio being 97.7%
occupied at the year end. This was
marginally higher than the prior year,
principally due to higher occupation in
our shopping centres in both the UK
and France.
2016 outlook
We expect occupancy to remain high in
2016 as retailers in both the UK and
France seek space in the best retail venues
and we target retailers who will enhance
the desirability of our portfolio.
Description
The amount of income secured through
leasing activity during the year from both
new leases and lease renewals across our
investment portfolio. This is an absolute,
not a like-for-like, figure.
Principal stakeholder focus 2
Leasing is directly linked to rental income
growth and also enables us to enhance the
retail offer across our portfolio through
proactive tenant rotation.
Performance
£27.9 million (2014: £29.5 million)
Leasing volumes have remained high in
2015, totalling £27.9 million. Whilst
absolute volumes were slightly lower than
in 2014, demand for space in our prime
properties remained strong. On average,
principal leases signed in 2015 were
secured at 3% above December 2014 ERVs
and 10% above the previous passing rent.
Across the portfolio we signed 396 leases
(UK: 260, France: 136) representing a total
area of 136,000m2.
2016 outlook
We expect leasing volumes to remain high
in 2016 with continued retailer demand
for new space. We are focused on
delivering tenant rotation to enhance the
retail offer across our portfolio, although
the absolute volume of leasing is affected
by the timing of lease expiries.
* Proportionally consolidated excluding premium outlets.
2020
Description
Tonnes of CO2e emissions from properties
and facilities under our direct control
including corporate operations. This
metric is calculated as a ratio of adjusted
profit before tax.
The measure is calculated over the
12 months ended 30 September each year.
The ratio has been calculated since 2013
when mandatory Greenhouse Gas (GHG)
emissions reporting was introduced.
Principal stakeholder focus 3
High-quality property is increasingly
expected to be carbon efficient. We are
committed to leading the property
industry in delivering energy-efficient
retail assets, with low operational cost.
Performance
172mtCO2e/£m (2014: 180mtCO2e/£m)
The ratio has improved by 4% during 2015
reflecting greater operational efficiency
although the reduction in the ratio has
been tempered by emissions associated
with increased gas consumption.
2016 outlook
We expect to further reduce the ratio in
2016 as we implement initiatives involving
investment in renewables, energy-efficient
technology and lighting. However, the
absolute level of emissions is forecast to
increase as the portfolio grows and the
effective management of emissions at
acquired and newly-developed properties
will be a key area of focus.
HAMMERSON PLC ANNUAL REPORT 2015HAMMERSON PLC ANNUAL REPORT 2015
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EPRA MEASURES
EPRA FINANCIAL REPORTING BEST
PRACTICE RECOMMENDATIONS
EPRA BEST PRACTICE RECOMMENDATIONS
(BPR) ON SUSTAINABILITY REPORTING
Hammerson is a member of European Public Real
Estate Association (EPRA) and actively participates
in a number of EPRA committees and initiatives. This
includes working with peer group companies, real
estate investors and analysts and the large audit firms,
to improve the transparency, comparability and
relevance of the published results of listed real estate
companies in Europe.
We have adopted the EPRA Best Practice
Recommendations and the key EPRA metrics are
shown in table 16.
Absolute and intensity measures for energy and water
usage, greenhouse gas emission and waste as defined by
EPRA, are set out in the full Global Reporting Initiative
and EPRA Best Practice Recommendation compliant pack
which can be found online at www.hammerson.com. In
2015, we achieved an EPRA Gold award for achieving
exceptional compliance with the EPRA Sustainability BPR
in our reporting and disclosure.
For more information on our approach to Sustainability
see page 43.
Table 16
EPRA performance measures
Performance measure
performance
performance
Definition
2015
2014
Earnings
£213.0m
£171.3m
Earnings per share
(EPS)
27.1p
23.4p
Recurring earnings from core operational activities. In both 2015 and
2014, EPRA earnings differed from the Group’s adjusted earnings due
to adjustments to better reflect the Group’s underlying performance.
See note 10 to the accounts for further information.
EPRA earnings divided by the weighted average number of shares in
issue during the period. As for EPRA earnings above, EPRA EPS
differs from the Group’s 2015 adjusted EPS of 26.9p (2014: 23.9p) due
to adjustments as shown in note 10 to the accounts.
Net asset value (NAV)
per share
Triple net asset value
(NNNAV) per share
£7.10
£6.38
NAV excluding the fair values of financial instruments, debt and
deferred tax balances divided by the number of issued shares.
£6.74
£5.96
NAV adjusted to include the fair values of financial instruments, debt
and deferred taxes.
Net Initial Yield (NIY)
4.6%
4.7%
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.
Topped-up NIY
Vacancy
4.7%
2.3%
4.9%
EPRA NIY adjusted for the expiry of rent-free periods.
2.5%
Estimated market rental value (ERV) of vacant space divided by the
ERV of the whole portfolio. Occupancy is the inverse of vacancy.
Cost ratio
23.1%
22.8%
Total operating costs as a percentage of gross rental income, after
rents payable. The calculation is shown in table 106 on page 168 in the
Additional Disclosures section.
In 2015, we have amended the calculation methodology, in line with
EPRA best practice, to adjust for costs associated with inclusive
leases and have restated the 2014 comparative figure. Also, the 2014
ratio excluded a net one-off restructuring cost of £3.0 million.
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BUSINESS REVIEW
This Business Review provides key information on each of our
operational sectors and their performance during 2015.
UK shopping centres
“ The UK retail environment remains robust as demonstrated by
another strong operational performance. Our prime centres
are destinations that continue to excite and attract retailers
and shoppers.”
Martin Plocica, Director, UK and Ireland Shopping Centres
KEY FACTS
– 11 shopping centres
– 150 million visitors
– 755,000m2 of lettable space
with 1,000 tenants
– Portfolio valuation
£3.1 billion
PORTFOLIO HIGHLIGHTS
– Like-for-like net rental income
growth of 2.1%
– Retail sales growth of 1.3%
– Digital platform implemented
across whole portfolio
– Opened leisure-led extension
at Silverburn
– Grand Central, Birmingham
acquired in February 2016
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Table 17
Operational summary
Key metrics
31 December 2015
31 December 2014
Like-for-like
NRI growth
%
2.1
2.2
Occupancy
%
98.3
98.1
Leasing
activity
£m
11.7
13.5
Leasing vs
ERV
%
Like-for-like
ERV growth
%
Retail sales
growth
%
+4
+10
2.8
2.6
1.3
2.6
Footfall
growth
%
1.1
(1.3)
Note: Figures on a proportionally consolidated basis.
NET RENTAL INCOME
LEASE EXPIRIES AND RENT REVIEWS
On a like-for-like basis net rental income increased by
2.1% in 2015, compared with a 2.2% increase in 2014.
The growth in 2015 is driven by rent review settlements,
income from new lettings and increased car park
income. The best performing centres were Highcross,
Monument Mall, Silverburn and Union Square which
benefitted from recent lettings and uplifts associated
with rent reviews. Non-rental income, being net
income from car parks and the sale of advertising
and merchandising opportunities at our centres,
totalled £19.1 million, and grew by 10% in 2015 on a
like-for-like basis.
LEASING, OCCUPANCY AND ERVS
Tenant demand for space at our centres remained
strong, with 151 leases signed representing £11.7 million
of annual rental income and 47,800m2 of space. For
principal leases, rents secured were 4% above
December 2014 ERVs and 9% above the previous
passing rent. Associated with this occupational demand,
the portfolio achieved ERV growth of 2.8% compared
with 2.6% in 2014. Occupancy levels remained high at
98.3%, compared with 98.1% in December 2014.
We have delivered a number of key leasing deals across
our portfolio during the year. These targeted deals help
strengthen and refresh our centres, drive ERV growth
and include flagship stores for UK and international
brands and luxury operators. Highlights included three
Victoria’s Secret lettings at The Oracle, Cabot Circus
and WestQuay; upsized Topshop and River Island stores
at Bullring; and the introduction of Watchfinder and
Séraphine at Victoria Quarter. We also signed leases
with a range of exciting caterers including Cau at
The Oracle, Byron at Union Square, its first Scottish
restaurant, and TGI Friday’s restaurants at The Oracle
and Highcross.
SALES, FOOTFALL AND OCCUPANCY COST
Consumers continue to demonstrate increasing
confidence, and our centres have achieved sales growth
in 2015 of 1.3%, calculated on a same centre basis. The
strongest growth was at Silverburn and The Oracle.
Footfall increased by 1.1%, a turnaround compared with
the 1.3% reduction in 2014. This increased activity has
resulted in a reduction in the occupational cost ratio
from 20.8% at the beginning of the year to 19.2% at
31 December 2015.
The portfolio has a diverse tenant base and offers both a
robust income stream, with a weighted unexpired lease
term of six years, as well as opportunities for rental
growth. Within the portfolio, leases that are subject to
rent reviews, break clauses or expiry offer the prospect
to secure additional rental income. Over the three years
to December 2018, these leases would provide additional
annual rental income of £10.7 million if renewed, or if
reviews are settled, at current market rents.
TENANT COVENANTS AND CREDIT
CONTROL
There were only five units let to tenants in
administration at 31 December 2015, nine fewer than
at the beginning of the year. In total, these tenants
represented just 0.1% of the Group’s total passing rents.
Our credit control function oversees our collection
process and collection rates remain strong, with 97%
of billings received within 14 days of the December due
date. It also assesses the covenant strength of
prospective tenants and monitors the credit standing
of our existing tenants using a credit rating agency. The
agency has a four-point risk indicator scale, and at
31 December 2015, 87% of our shopping centre tenants
were rated within the two lowest risk categories.
COMMERCIAL INITIATIVES
In line with our Product Experience Framework, we
are enhancing the quality of customer experience and
service across our portfolio. Key initiatives include
upgrading our customer service desks, providing
electric car and mobile phone charging points, and
introducing pianos to each mall to enliven the shopping
experience. Our customer service performance was
recognised during the year with the Silverburn team
winning an unprecedented fourth BCSC Achieving
Customer Excellence award.
We are also trialling a number of new initiatives
including a pop-up programme and click & collect
provisions. Click & collect is available in four centres
with performance significantly exceeding expectations.
In Brent Cross, we are seeing an average of 400 parcels
being handled each week, and the click & collect service
at The Oracle, launched in November 2015, is already
outperforming Brent Cross at the same stage of
operation. We will be rolling out to additional sites and
trialling new formats of click & collect in 2016.
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Business review continued
UK SHOPPING CENTRES
Interactive hoardings, used on a temporary basis on
units being refurbished, are a great example of a simple,
low-cost solution to enliven the mall. Trialled in four
centres and retail parks over a six week period,
they received more than two million interactions
from shoppers.
As retail specialists, we continue to demonstrate
industry-leading insight and in 2015 we have:
– Launched the Hammerson Retail Tracker (HART),
published on a monthly basis for a national
readership in The Times, to provide insight into UK
spending habits and retail trends;
– Issued our third annual retail report ‘Shopper Tribes’
in conjunction with retail consultant Conlumino; and
– Co-authored and hosted a seminar on ‘Pricing
Retail Space’ in conjunction with the Investment
Property Forum.
Looking ahead to 2016, we are working on a wide range of
initiatives to deliver a consistent, high quality offer across
the portfolio for the benefit of both retailers and shoppers.
These initiatives are designed to extend dwell times and
encourage loyalty. We are enhancing the family
experience at our centres by improving facilities, such as
toilets, with upgrades to infant feeding and changing
rooms. We will extend our programme of events and
innovative food concepts to bring our centres to life and
drive footfall as well as providing premium services to
better support the customer experience.
A key part of many shopping journeys involves our car
parks. In 2016, we will be trialling a new design as well
as upgrading the technology across our car parks. We
will combine best in class wayfinding, lighting and
design principles to deliver an experience that is
welcoming, safe and easy to use.
DIGITAL ENGAGEMENT
Our integrated digital platform is now live across
all shopping centres. The ‘Plus’ app, a personalised
shopping companion, allows us to communicate
directly with shoppers in real-time, providing
personalised content and exclusive offers based on
their interests, redemption history and stores visited,
together with centre information such as floorplans,
events and live centre news. The app has been well
received by shoppers with a 140,000 downloads, well
ahead of our expectations. We continue to see strong
levels of customers registering their data through the
app, and more than a quarter of those registered
redeemed an offer. Version 2 of the ‘Plus’ app will go live
in the Spring, with a new look and feel and additional
functionality, including the ability to reward shoppers
for their loyalty.
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HAMMERSON PLC ANNUAL REPORT 2015
ACQUISITIONS, DISPOSALS AND
COMPLETED DEVELOPMENTS
In March, we took 100% ownership of Martineau
Galleries, Birmingham by acquiring the stakes of our
two joint venture partners. We are considering a
number of potential strategic development
opportunities for the property in the medium term and
for this reason it is classified within the UK Other
portfolio in the segmental analysis in the accounts and
the Additional Disclosures section of this report.
In June, Cineworld opened its new 14-screen cinema
completing the 10,900m2 leisure-led extension at
Silverburn. The case study on page 25 gives further
details about this exciting project.
In December, we announced the disposal of Monument
Mall, Newcastle for £75 million, some £8 million above
its value at the beginning of the year. The 9,500m2 centre
was acquired in 2011 and was redeveloped in 2013. The
sale crystallised a £24 million profit on cost and is part of
the £500 million disposal programme announced at the
time of the Irish loan portfolio acquisition.
In February 2016, we acquired Grand Central,
Birmingham, a 40,400m2 shopping centre for a total
cost of £350 million. The centre, which opened in
September 2015, is anchored by a 23,200m2 John Lewis
and provides a modern retail environment for
40 premium stores including Jo Malone, Joules,
Cath Kidston and The White Company. It also
contains 20 casual dining brands including Yo Sushi,
Caffe Concerto and Tapas Revolution. The acquisition
supports our long-term commitment to Birmingham
which is benefitting from significant inward investment.
We have contracted to sell, subject to regulatory
approval, 50% of the scheme to CPPIB, one of the
existing joint venture partners in Bullring for
£175 million.
POSITIVE PLACES
Our sustainability initiatives also have financial benefits
for the Group and its tenants. During 2015, we saved
£2.0 million in landfill tax through recycling and diversion
of waste from landfill and have reduced like-for-like
electricity consumption by 3% across our centres.
At Bullring, we upgraded the lighting with over 4,000
new LED lights. As the most energy-hungry asset within
the portfolio this has been a key focus area and we are
already seeing reductions in energy consumption. The
project won Energy Demand Reduction funding from
the Department of Energy and Climate Change. At a
cost of £1.5 million this has been a significant
investment, but payback is expected within 4.5 years.
The works on Bullring multi-storey car parks were
completed in early October, and electricity
consumption has fallen by almost 50%.
OUR PROPOSITION IN ACTION
Silverburn Extension
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SIZE
10,900m2
NEW CINEMA
5,000m2
OWNERSHIP
50%
NEW JOBS CREATED
350
FULLY OPENED
June 2015
BREEAM RATING
Very good
TOTAL COST*
£35 million
PROFIT ON COST*
£6 million
*Figures at 100%.
STRATEGIC RATIONALE
KEY OBJECTIVES ACHIEVED
– Silverburn benefits from Scotland’s largest standalone shopping
– 11 new restaurants and state-of-the-art 14-screen Cineworld
destination catchment
cinema fully opened by June 2015
– Existing 90,000m2 centre was underprovided from a food and
beverage perspective
– Positive impact on footfall and sales across whole centre since
opening, with footfall +6% and sales +5%
– Upgraded leisure and dining to differentiate from
competing locations
– Scheme to capitalise on growing casual dining market to extend
centre catchment and improve visitor profile
– Extended average customer dwell times by 4%
– 350 permanent retail and leisure jobs created for
local community
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The Ilac Centre is in the heart of central Dublin on
Henry Street and is a 50% co-ownership with Irish Life.
The 15,000m2 centre has annual footfall of 18 million
and generates passing rent of £7 million (100% figure).
The portfolio also includes a 5.3 acre city centre
development site, adjacent to the Ilac Centre. We
believe this is one of the largest and best-positioned
urban development sites in Europe and has taken over
a decade to assemble. The site comprises multiple
buildings along Henry Street, O’Connell Street and
Moore Street. With its strategic location and mix of
current tenants, the site offers the flexibility to pursue
numerous development scenarios and deliver a modern
landmark of international importance that is
sympathetic to the neighbourhood’s history.
STRUCTURE
Under the terms of the joint venture, when the property
assets are acquired from the borrowers, the Group will
own 50% of Dundrum Town Centre and Dundrum
Phase 2 in joint venture with Allianz and act as asset
and development manager. We will also own 50%
co-ownership shares in the Ilac Centre and in Swords
Pavilions shopping centre, and 100% of the two
remaining development sites: Dublin Central and
Swords Pavilions. The total consideration for the
Group’s share of the acquisition is £0.91 billion of which
£0.69 billion had been incurred at 31 December 2015.
We have established a new Irish team to manage the
transition from loans to property assets and expect to
own the properties by the summer of 2016.
Dundrum shopping centre
Business review continued
Ireland
INTRODUCTION
In September we announced the acquisition, in a 50:50
joint venture with Allianz, of a €1.85 billion loan
portfolio secured against prime Dublin retail property.
The face value of the loans acquired was €2.6 billion and
following completion of the transaction in October, the
joint venture has been negotiating with the borrower
group to take ownership of the secured real estate.
RATIONALE
This acquisition provides the Group with a new Irish
operation to broaden our European platform and the
opportunity to become Ireland’s leading retail property
owner. The portfolio is located in Dublin, Ireland’s
strongest retail centre, and, in addition to the
population of 1.3 million, the city welcomes significant
numbers of tourists (8.6 million in 2015).
The Irish economy had the fastest GDP growth in the
Eurozone in 2014 and has achieved further GDP growth
of 6.9% in 2015. Retail sales have risen by 6% in the year
to December 2015 and the portfolio offers significant
value upside through asset management and
development opportunities. The acquisition is consistent
with our corporate strategy and there are significant
synergies with our existing UK and French operations
which will enable a swift management transition when
the assets are acquired from the borrowers.
PROPERTY ASSETS
The transaction represents a rare opportunity to
acquire a portfolio of quality assets in a single
transaction. The principal property asset is Dundrum
Town Centre which is 5km south of the city centre and
was opened in 2005. The property is anchored by
Harvey Nichols, House of Fraser, M&S and Penney’s
and has 120 shops, 38 restaurants, a 12-screen VIP
cinema and 3,400 car parking spaces. The property has
an annual footfall of 18 million, generates £44 million
of passing rent (100% figure) and has an average
unexpired lease term of 12 years. Adjacent to
Dundrum Town Centre is a six acre development
site (Dundrum Phase 2) which previously benefitted
from a 100,000m2 retail consent to extend the existing
centre. We believe this site offers a better opportunity
to bring forward a mixed-use development.
The Swords Pavilions shopping centre is a 50%
co-ownership with IPUT and Irish Life situated in
the north of Dublin. The 45,500m2 centre has annual
footfall of 12 million and generates passing rent of
£11 million (100% figure). A 16 acre development
site adjacent to the centre offers scope for future
mixed-use development.
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HAMMERSON PLC ANNUAL REPORT 2015 UK retail parks
“ New and existing retailers are demanding space at the best
trading locations. Our portfolio of modern retail parks is
ideally placed to benefit from this increasing strength in
occupational markets.”
Andrew Berger-North, Director UK Retail Parks
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KEY FACTS
– 21 retail parks
– 500,000m2 of lettable space
with 460 tenants
– 2nd largest direct owner in UK
– Portfolio valuation £1.7 billion
PORTFOLIO HIGHLIGHTS
– Like-for-like net rental income
growth of 2.6%
– Completion of developments
at Elliott’s Field, Rugby and
Cyfarthfa, Merthyr Tydfil
– Drakehouse, Sheffield sold for
£62 million, ahead of book
value, in April
HAMMERSON.COM
HAMMERSON.COM 27
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Business review continued
UK RETAIL PARKS
Table 18
Operational summary
Key metrics
31 December 2015
31 December 2014
Like-for-like
NRI growth
%
2.6
2.4
Occupancy
%
98.4
98.5
Leasing
activity
£m
8.3
7.2
Leasing vs
ERV
%
Like-for-like
ERV growth
%
+4
+7
1.3
0.5
Note: Figures on a proportionally consolidated basis.
NET RENTAL INCOME
COMMERCIAL INITIATIVES
Like-for-like net rental income increased by 2.6% in
2015, compared to 2.4% in 2014. The growth is due to a
year-on-year increase in surrender premiums received
associated with proactive tenant rotation at Imperial
Retail Park, Bristol and Fife Central Retail Park,
Kirkcaldy. These were partly offset by vacancy costs
ahead of the redevelopments at Battery Retail Park,
Birmingham and Parc Tawe, Swansea.
LEASING, OCCUPANCY AND ERVS
Across the portfolio we signed 79 leases representing
£8.3 million of annual rental income and 43,300m2 of
space. For principal leases, rents were contracted at 4%
above the December 2014 ERVs and 8% above the
previous passing rent. Occupancy levels remained high
at 98.4%, almost unchanged from the position at
31 December 2014.
ERV growth was 1.3% in 2015, compared with 0.5%
for 2014. The occupational markets are improving,
particularly homewares and we are targeting tenants
which will enhance the retail offer at individual parks
and grow income. Key leasing transactions during the
year included a new 1,850m2 TK Maxx at Westmorland
Retail Park, Cramlington, a 1,900m2 Next at Telford
Forge Shopping Park, Telford and a 900m2 Tapi at
St Oswald’s Retail Park, Gloucester.
LEASE EXPIRIES AND RENT REVIEWS
One of the sector’s strengths is security of income.
As at 31 December 2015, the portfolio had the longest
weighted unexpired lease term, compared to the
Group’s other portfolios, at nine years.
As with the UK shopping centre portfolio, a proportion
of the leases are subject to rent reviews, break clauses
or expiry and offer the opportunity to secure additional
income. Over the three years to December 2018, these
leases would provide additional annual rental income
of £3.5 million if renewed, or if reviews are settled at
current market rents.
TENANT COVENANTS AND CREDIT
CONTROL
At 31 December 2015, there was just one tenant in
administration representing £0.4 million of income.
96% of billings were collected within 14 days of the
December due date and 90% of our retail parks tenants
were rated by the credit agency in the two lowest
risk categories.
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As part of the Group’s Product Experience Framework,
we are reducing the amount of space let to DIY
operators and reconfiguring this to enhance the retail
offer at our parks. An example of this is at Fife Central
Retail Park, Kirkcaldy where we are reconfiguring a
former Homebase unit to create four new units and
increase the passing rent from this space by 150%.
We are also keen to collect more insightful information
about the portfolio and are undertaking a series of
in-depth customer surveys to better understand
consumer opinions about facilities and existing or
prospective tenants. Consistent with our strategy at
shopping centres, we are introducing mobile phone
chargers, wi-fi and click & collect lockers at a number
of our parks to enhance the customer experience.
DISPOSALS AND COMPLETED
DEVELOPMENTS
In April, we sold Drakehouse Retail Park, Sheffield for
gross proceeds of £62 million, generating a £2 million
profit compared with the 31 December 2014 valuation.
At Cyfarthfa Retail Park, Merthyr Tydfil we completed
a £30 million, 14,500m2 extension in August. The
extension includes B&Q’s first Eco-learning store, a
full-line 4,600m2 M&S store and five fashion units
including Next and River Island. The scheme has a yield
on cost of 7% and generated a profit on cost of 34%.
The redevelopment of Elliott’s Field, Rugby opened at
the end of November. The scheme accommodates
16 fashion, homeware and catering brands and is
anchored by a 5,600m2 Debenhams and a 4,600m2
M&S. The scheme includes new retailers to the Group’s
retail park portfolio including H&M, Fat Face and
Ed’s Easy Diner. The scheme has a BREEAM Excellent
rating and generated a profit on cost of 24%. Further
details about the project are provided on page 29.
POSITIVE PLACES
Working with our contractor and retailers at the
extension project at Cyfarthfa Retail Park in Merthyr
Tydfil, we have created substantial training and
employment opportunities for local residents. In total,
722 jobs were created which saw 19 unemployed
individuals supported into work and two
apprenticeships. 50% of contractors employed on-site
lived locally and eight local businesses have received
training in digital skills.
OUR PROPOSITION IN ACTION
Elliott’s Field, Rugby
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SIZE
16,100m2
TOTAL STORES
18
NEW BRANDS
7
CAR PARKING
746 spaces
FULLY OPENED
November 2015
BREEAM RATING
Excellent
TOTAL COST
£76 million
PROFIT ON COST
£18 million
STRATEGIC RATIONALE
KEY OBJECTIVES ACHIEVED
– Rugby offers the ideal ‘in-fill’ location for retailers situated
between core regional cities of Leicester, Milton Keynes
and Birmingham
– Delivered modern shopping park with enhanced
customer experience
– New fashion and dining tenants, including 5,600m2 full-line
– Opportunity to deliver a next generation retail park in a growth
town with strong demographics and a catchment of 440,000
Debenhams department store and Fat Face’s first English retail
park store
– Ambition to attract new retailers and restaurateurs to an
– New customer facilities include free mobile phone charging
out-of-town location
and a centre management suite
– Development capitalised on strong occupational demand
– Captured local spend with right mix of shops and restaurants
– Successful launch in November, with strong trading and
footfall since opening
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Business review continued
France
“ By delivering an improved retailer and shopper experience
across our prime portfolio, we will drive steady income
growth while managing cost.”
Jean-Philippe Mouton, Managing Director, France
Gérald Ferezou, Deputy Managing Director, France
KEY FACTS
– 10 shopping centres
– 90 million visitors
– 360,000m2 of lettable space
with 1,100 tenants
– Portfolio valuation £1.9 billion
PORTFOLIO HIGHLIGHTS
– Like-for-like net rental income
of 2.5%
– Retail sales growth of 0.6%
– Opened 23,800m2 Beauvais
scheme in November
– Disposals of Bercy 2, Paris and
Grand Maine, Angers completed
in October, 13% ahead of the
December 2014 valuations
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HAMMERSON PLC ANNUAL REPORT 2015
Table 19
Operational summary
Key metrics
31 December 2015
31 December 2014
Like-for-like
NRI growth
%
2.5
2.0
Occupancy
%
96.9
96.6
Leasing
activity
£m
7.2
8.0
Leasing vs
ERV
%
Like-for-like
ERV growth
%
Retail sales
growth
%
+2
+2
–
0.2
0.6
(1.0)
Footfall
growth
%
(0.6)
1.5
Note: Figures on a proportionally consolidated basis.
NET RENTAL INCOME
SALES, FOOTFALL AND OCCUPANCY COST
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On a like-for-like basis net rental income increased
by 2.5% in 2015, compared to 2.0% in 2014. Tenant
rotation undertaken over the past 24 months has
helped increase income. Les Trois Fontaines,
Cergy Pontoise was the strongest performing centre
with new tenants including Free, Levi’s and André.
As with our UK shopping centres, we have been
focusing on increasing non-rental income and
in 2015 this revenue stream has increased to
£4.7 million, compared to £3.1 million in 2014.
LEASING, OCCUPANCY AND ERVS
Against an unfavourable macroeconomic backdrop, we
continue to sign new leases across the portfolio. In 2015,
we contracted 136 leases, representing £7.2 million of
annual rental income and 37,600m2 of space. For
principal leases, the new income was 2% above
December 2014 ERVs and 10% above the previous
passing rent.
ERV growth remains challenging, particularly given
the low level of indexation growth. In 2015 like-for-like
ERVs were unchanged. Occupancy levels at 96.9% were
marginally higher than in 2014.
One of the key objectives for the French portfolio is to
rotate tenants, enabling us to introduce new leisure and
catering brands to enliven the retail offer at our centres.
Key leasing deals during the year include All Saints and
Tiger at Les Terrasses du Port, Marseille and seven new
international brands taking their first stores in France
including Tuc Tuc and Punt Roma.
TENANT COVENANT AND CREDIT CONTROL
Associated with the more challenging economic
environment in France, at 31 December 2015 there
were 49 units in administration across the portfolio,
an increase of 16 during the year. All of these units
continue to trade and represent only 0.8% of the
Group’s passing rent. These units provide opportunities
to introduce new tenants to enhance the tenant mix.
86% of billings were collected within 14 days of the
December due date and 83% of the tenants are deemed
low risk, using ratings from an external credit agency.
Over the course of 2015, retail sales increased by 0.6%,
calculated on a same centre basis, but footfall was 0.6%
lower. The sales improvement has been driven by our
leasing strategy with new tenants boosting sales as well
as a strong performance from Les Terrasses du Port,
Marseille (see case study on page 33) which opened in
May 2014. The sales and footfall performance was
adversely impacted by the terrorist attacks in Paris in
November. Prior to this, sales and footfall growth were
1.6% and 0.4% respectively for the ten months to
October 2015.
Consistent with the increase in sales, the occupational
cost ratio decreased during 2015 from 14.4% to 14.0%
at 31 December 2015.
LEASE EXPIRIES AND RENT REVIEWS
Leases in France tend to be shorter than in the UK retail
market, and across our portfolio the average unexpired
lease term is three years, or six years excluding tenant
break options. The portfolio offers opportunities for
rental growth with an average reversion of 10%. Leases
expiring, or subject to tenants’ break clauses, over the
three years to December 2018 would provide additional
annual rental income of £2.5 million if renewed at
current market rents. Most of our French leases are
subject to annual indexation, which will be nil in 2016.
Nicetoile, Nice
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In November, we opened Le Jeu de Paume, a 23,800m2
scheme in the centre of Beauvais, 60km north of Paris.
The new centre, which is anchored by a Carrefour
Market, has attracted high-quality tenants, the majority
of which are new to Beauvais or the Oise region. Key
retailers include H&M, Sephora, Superdry, New Yorker,
iSwitch and G-Star Raw. The centre incorporates a
number of new initiatives including car park guidance
technology, interactive kiosks, mobile phone charging,
a dedicated welcome desk and a children’s play area.
Initial trading is positive and the scheme welcomed
over 200,000 shoppers in the first two weeks of trading.
In January 2016, we exchanged contracts for the sale
of Villebon 2 retail park for €159 million (£117 million).
The disposal was the final part of the £200 million
initial tranche of the £500 million disposal programme
announced to part-fund the Irish loan portfolio
acquisition and the disposal is expected to complete
in the Spring.
POSITIVE PLACES
63% of leases in our French portfolio include
environmental clauses.
The development at Beauvais created 500 construction
jobs and 27 apprenticeships, with 73% of roles being
taken by local people.
Our cradle-to-grave carbon lifecycle assessment of
Les Terrasses du Port has helped our development
teams to remove carbon from projects during the design
process. Embodied carbon, from concrete and steel,
can be reduced by up to 50% through optimised design.
Business review continued
FRANCE SHOPPING CENTRES
COMMERCIAL INITIATIVES
In addition to the tenant rotation initiatives, we are
applying our Product Experience Framework to the
French portfolio, in order to enhance the retail and
customer experience. We approach this from a Group
perspective with an ambition to deliver a more
consistent retailer and shopper experience across our
entire shopping centre portfolio. However, we recognise
the importance of providing tailored facilities and
services which are particularly relevant to each
centre’s catchment.
We are in the process of rolling out mobile phone
charging units across all our French assets, and are
trialling click & collect lockers in two of our shopping
centres. We are also developing retail design guidelines
for each of our centres, and have been using interactive
hoardings to enliven empty units and create an
engaging experience for our shoppers.
Our recent acquisitions of Saint Sébastien, Nancy, and
Nicetoile, Nice, acquired in February 2014 and January
2015 respectively, have benefitted from our Product
Experience strategy. At Saint Sébastien, works have
started to enhance the interior of the centre and are
expected to complete in May 2016.
At Nicetoile, we have introduced a new management
structure, implemented a range of Hammerson
marketing tools including an upgraded website, and
launched our portfolio-wide ‘Plus’ app. The centre is
currently fully let although we are in discussion with a
number of aspirational retailers to further enhance the
tenant mix.
We are also negotiating with local authorities to enable
year-round Sunday trading across the portfolio. During
2015 we were granted permission to trade on Sundays
at O’Parinor and Italie Deux. In total, five of our centres
can now trade throughout the week.
ACQUISITIONS, DISPOSALS AND
COMPLETED DEVELOPMENTS
In line with our strategy of actively managing our
portfolio and focusing on leading retail destinations,
in January 2015 we acquired a 10% interest in Nicetoile
shopping centre in Nice, in conjunction with our
partner, Allianz. The 17,600m2 centre attracts 13 million
visitors each year and generates passing rent of
£14 million. We manage the centre and our share
of the acquisition cost was €31 million (£24 million).
In October, we completed the disposal of two smaller
shopping centres, Bercy 2, Paris for €64 million
(£47 million) and Grand Maine, Angers for €63 million
(£46 million). Both disposals were ahead of the
31 December 2014 valuations and resulted in a
combined profit on disposal of £11 million.
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OUR PROPOSITION IN ACTION
Les Terrasses Du Port,
Marseille
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63,000m²
TOTAL STORES
190
RESTAURANT SPACE
Unique 260m
terrace
FOOTFALL
13 million
OPENED
May 2014
BREEAM RATING
Excellent
TOTAL COST
£355 million
VALUATION SURPLUS
£143 million
STRATEGIC RATIONALE
KEY OBJECTIVES ACHIEVED
– Creation of a new prime regional retail, dining and leisure
– Les Terrasses du Port has rapidly established itself as the
destination in France’s second city
region’s leading retail destination
– Opportunity to capitalise on the success of Euroméditerranée,
Southern Europe’s largest urban regeneration project. The
€7 billion investment has been the catalyst for the regeneration
of Marseille
– Scheme designed to offer a new retail destination, providing
space for new international brands to debut in France and
capture increasing tourist demand
– Provide employment opportunities
– Outperformed expectations having welcomed 21 million
visitors since launch in May 2014 and 2015 footfall +22%
and sales +15%
– First Printemps store to open in 32 years
– Received industry accreditation, winning awards for its
innovative architecture and design
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Developments
“ The Group has been an active developer over the last 15
years with a track record of delivering iconic retail projects
including Bullring and Les Terrasses du Port. This track record
is to continue as we deliver our pipeline of schemes.”
Peter Cole, Chief Investment Officer
KEY FACTS
– £1.5 billion development
pipeline
– Development valuation
£389 million, representing
5% of the portfolio
– Potential to create major
destinations and generate
£95 million of new income
PORTFOLIO HIGHLIGHTS
– Four schemes completed
during 2015:
– Silverburn extension, Glasgow
– Cyfarthfa extension, Merthyr Tydfil
– Elliott’s Field, Rugby
– Beauvais, near Paris
– Two projects on-site in Leeds
and Southampton
– Good progress made
with three major London
development schemes
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HAMMERSON PLC ANNUAL REPORT 2015
INTRODUCTION
The Group has a large number of development opportunities in both the UK and France, including two on-site
schemes and three major London developments. These would require expenditure of approximately £1.5 billion and
have the potential to significantly grow the business and create iconic retail destinations. In addition, we are working
to bring forward a number of potential future development projects, but maintain a tight control of expenditure
while these opportunities are fully assessed.
COMPLETED DEVELOPMENTS
We completed four developments during 2015 in Beauvais, Glasgow, Merthyr Tydfil and Rugby. For further details
see the UK Shopping Centres, UK Retail Parks and France sections of this Business Review. The teams which
delivered these schemes have been redeployed to the Group’s on-site and pipeline schemes. This approach provides
new challenges for our people and ensures the experience gained and lessons learnt are retained by the Group.
ON-SITE DEVELOPMENTS
Table 20
Scheme1
Victoria Gate, Leeds (Phase 1)
WestQuay Watermark, Southampton
Total
Notes
Lettable area
m2
Expected
completion
35,400 Q3 2016
Q1 2017
17,000
52,400
Current
value2
£m
116
38
Estimated
cost to
complete3
£m
Estimated
annual
income4
£m
68
56
124
11
5
16
Let5
%
68
80
1. Group ownership 100% for on-site schemes.
2. Valuation at 31 December 2015.
3. Incremental capital cost including capitalised interest.
4. Incremental income net of head rents and after expiry of rent-free periods.
5. Let or in solicitors’ hands by income at 12 February 2016.
Victoria Gate, Leeds is a £165 million scheme adjacent
to Victoria Quarter arcade. The 35,400m2 development
is anchored by a 24,200m2 flagship John Lewis store,
the first in Leeds and largest outside London. The
scheme includes more than 30 high-end retailers and
restaurants to complement the offer at Victoria Quarter
as well as an 850-space multi-storey car park. The
scheme is 68% pre-let to brands including Maje, Cos,
Anthropologie, The White Company, & Other Stories
and Hackett and is due to open in Autumn 2016. We are
targeting BREEAM Excellent for the development
and have managed to divert 98% of construction and
demolition waste from landfill. When combined
with Victoria Quarter the new scheme will create
the largest premium retail and leisure destination
in Northern England.
WestQuay Watermark is a 17,000m2 leisure and catering
scheme next to our jointly-owned WestQuay shopping
centre. The scheme includes 23 new restaurants, which
will open in late 2016, and a 10-screen Showcase
Cinema de Lux which will open in early 2017. The
project will create a new city centre leisure and dining
destination for Southampton. Leasing continues to
progress well, and the scheme is 80% pre-let. Key
tenants already secured include Wahaca, Byron, Bill’s,
Cabana, Cau, Five Guys and Red Dog Saloon. We are
targeting BREEAM Excellent when the scheme fully
opens next year. Further details about the development
are on page 38.
MAJOR DEVELOPMENTS
We have made further progress with our three major
London developments. These are forecast to deliver
attractive financial returns for the Group and create
new iconic destinations. These complex, long-term
projects have the potential to deliver significant
benefits for their localities and catalyse wider
urban regeneration.
Victoria Gate, Leeds
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DEVELOPMENTS
Table 21
Scheme
Croydon town centre, South London
The Goodsyard, London E12
Brent Cross extension, London NW4
Total
Notes
Ownership
%
Lettable area
m2
Earliest start
50
50
41
200,000
270,000
90,000
560,000
2017
2017
2017
Potential
completion
2020/21
Phased
2021
Estimated cost to
complete1
£m
650-700
140-160
475-550
1,265-1,410
1. Hammerson’s share of incremental capital cost including capitalised interest. These costs are indicative as full scheme details are yet to be finalised.
2. Cost reflects phase 1 only. Due to residential component of scheme, area is gross external.
In June, a revised planning application was submitted
which reduced the residential provision on the 4.2ha
site by 100 homes and increased the office element of
the scheme to more than 76,000m2. We welcomed the
decision in September by the Mayor of London to call
in the scheme due to non-determination by the local
authorities and are working to achieve the planning
consent by Spring 2016 enabling a potential start
on-site in 2017.
In conjunction with our joint venture partner, Standard
Life, work continues on the regeneration of Brent Cross
Cricklewood in north-west London. Following
extensive local consultation, consent was granted by
Barnet Council in September for a major investment in
the local transport infrastructure and the first section
of a new riverside park.
An outline masterplan planning permission for the
regeneration scheme was granted in 2010 and amended
in 2014. A key element of the new town centre
masterplan is a 90,000m2 extension to Brent Cross
shopping centre. The extension and refurbished
existing centre will result in a retail-led, dining and
leisure destination for North London.
The new retail destination will form an integral part
of the wider regeneration of the area and will provide
offices, 7,500 homes, schools, new parks, sports and
other community facilities. As announced in the UK
Government’s March budget a commitment was made
by the Treasury to support a new Brent Cross
Overground station. Barnet Council has approved the
use of CPO powers to acquire the remaining land to
deliver the extension. The CPO inquiry will be held
in May 2016 and subject to the confirmation of CPO
powers and agreements with key tenants, works could
start on-site towards the end of 2017 with potential
completion in 2021.
The redevelopment of Croydon town centre is an
opportunity to deliver a major destination fulfilling
the current and future retail, leisure and social
requirements of the local community and wider
catchment. The scheme involves the redevelopment
of the Whitgift Centre and refurbishment of Centrale
shopping centre by the Croydon Partnership, a 50:50
joint venture with Westfield, which will establish
Croydon as the principal retail and leisure hub for
South London. The new Whitgift Centre will underpin
a fundamental shift in the perception of Croydon,
attracting new residents and businesses and fuelling
further investment. Croydon town centre is a strategic
growth area in the GLA London plan. A growth fund was
announced in the Autumn Statement to enable the
London Borough of Croydon, in partnership with the
GLA, to deliver key infrastructure projects to
regenerate the wider town centre.
In 2015, significant progress has been made in
advancing the scheme. In September, the Secretary
of State confirmed Croydon Council CPO powers to
purchase the land required to undertake the project.
This followed the CPO inquiry which concluded in
March. Also in March, the Croydon Partnership
acquired a further 50% long leasehold interest in the
Whitgift shopping centre and assumed operational
control of the centre. The partnership now owns or
controls the majority of the land interests required for
the 200,000m2 scheme. Given the extended planning
process and discussions with a number of potential
anchor tenants, the scheme timetable has been revised.
Works are now expected to start in 2017 with potential
completion in 2020/21.
In 2015, we continued to discuss the planning
application for redevelopment of The Goodsyard,
London E1 with the local authorities of Hackney and
Tower Hamlets.
The scheme, being advanced in conjunction with our
joint venture partner, Ballymore Properties, is a
270,000m² mixed-use development, which includes
a 20,000m² retail ‘village’, 1,350 residential units and
substantial public realm including a new park. The
development will cater for the growing Tech City media
and technology start-ups attracted to the local area
with the provision of 80,000m2 of workspace.
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DEVELOPMENT PIPELINE OPPORTUNITIES
We have a number of potential pipeline schemes which we continue to advance. The nature and design of these projects are fluid and the
speed of delivery will be dependent on a variety of factors including planning permission, retailer demand, anchor tenant negotiations,
land assembly and scheme design. The Group’s principal opportunities are shown in table 22.
Table 22
Scheme
UK shopping centres
Lettable area m2
Key facts
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Silverburn (Phase 4), Glasgow
50,000
– Consent granted in October 2015 for a masterplan for a future extension of existing centre
– Masterplan includes retail, hotel and leisure uses
Union Square, Aberdeen
27,800
– Extension of existing shopping centre for retail, leisure and catering. Including
additional car parking and a hotel and reconfiguration of part of existing centre
– Planning application submitted in February 2016
Victoria Gate, Leeds (Phase 2)
73,000
– Planning consent for retail-led scheme, including up to 2,700 car park spaces
WestQuay Watermark,
Southampton (Phase 2)
UK retail parks
Oldbury, Dudley
– Freehold control of site obtained
58,000
– Outline planning consent for mixed-use scheme
– Council-owned land, with joint review of scheme under way
10,900
– Planning submitted in January 2016 for new development
Orchard Centre, Didcot
10,000
– £50 million expansion of existing centre with M&S Food Hall anchor
– Planning approved in July 2015
Parc Tawe, Swansea
21,000
– Refurbishment and modernisation of existing retail park
– Planning dispute successfully appealed in September 2015
France
Italie Deux, Paris 13ème
6,900
– Retail extension of existing shopping centre
Les Trois Fontaines, Cergy
Pontoise
SQY Ouest,
Saint Quentin-en-Yvelines
– Progressing necessary consents to enable start on-site
24,800
– Retail and leisure extension as part of wider city centre project
– Submission of a number of consent applications and agreement with a number of
co-owners achieved in 2015
– Awaiting confirmation of consents and final co-ownership agreements
32,000
– Opportunity to reposition existing shopping centre, creating a leisure-led destination
Total
314,400
POSITIVE PLACES
To reduce the number of heavy goods vehicles at our
Victoria Gate development, the demolition team
re-used 99% of demolition waste for the piling mat. This
avoided 650 vehicle journeys, cut traffic congestion,
prevented 14 tonnes of carbon emissions and an adverse
impact on air quality and saved £247,000 on disposal
and materials costs. We also reduced mains water
consumption by 900,000 litres during dust suppression
works by reusing on-site ground water.
We are working with Leeds City Council and John Lewis to
provide employee opportunities in Leeds. In October 2015,
the Hammerson Employment and Skills Charter was
established to provide skills training for local residents and
access to jobs being created by the new scheme.
At Brent Cross, in collaboration with the London
Borough of Barnet, we operate the Brent Cross Retail
Job Shop, which engages with over 40 potential
employers and has placed over 90 previously
unemployed applicants into new jobs during 2015.
In Croydon, with our joint venture partner, Westfield,
we operate a number of community initiatives in
conjunction with local organisations. During 2015 we
ran five community roadshows engaging with local
residents, businesses and community groups about the
regeneration plans. We also provided local funding
through a Youth Opportunity Grants Fund and Crystal
Palace Football Foundation to encourage local residents
to undertake skills training and find employment.
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OUR PROPOSITION IN ACTION
WestQuay Watermark,
Southampton
SIZE
17,000m2
NEW CINEMA
5,800m2
OPENING
Q1 2017
PRE-LET
80%
TOTAL RESTAURANTS
23
NEW JOBS CREATED
1,200
TOTAL COST
£85 million
TOTAL INCOME
£5 million
STRATEGIC RATIONALE
KEY OBJECTIVES ACHIEVED
– Current underprovision of quality dining offers in Southampton
– Iconic design to create new city centre leisure and
city centre
dining destination
– Enhance food and beverage offer to capture enhanced affluent
– Scheme will create new public piazza in front of city’s
catchment area
historic walls
– Complementary offer to existing jointly-owned shopping centre
to increase dwell time and enhance overall customer experience
– Strong pre-letting interest will bring new range of catering
brands to Southampton
– Construction progressing for full opening by Spring 2017
– Targeting BREEAM Excellent on completion
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Business review continued
Premium outlets
“We are the only European REIT with a strategic exposure
to the premium outlets market. This growing sector is a
critical distribution channel for international fashion and
luxury brands.”
Timon Drakesmith, Chief Financial Officer and Managing Director, Premium Outlets
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KEY FACTS
– Our Premium outlets interests
are through investments in
Value Retail and VIA Outlets
– Nine high-end Value
Retail Villages and six
VIA Outlets centres in
12 European countries
– Lettable area of 370,000 m2
with 1,700 stores
– Portfolio valuation of
£1.2 billion (Hammerson’s share)
PORTFOLIO HIGHLIGHTS
– Strong brand sales growth:
Value Retail +11%, VIA +10%
– Kildare extension opened and
additional 21% stake acquired
in December
– Acquired new VIA centre in
Majorca, Spain in 2016
HAMMERSON.COM
HAMMERSON.COM 39
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Business review continued
PREMIUM OUTLETS
INTRODUCTION
As part of our strategy, the Group has been increasing
its exposure to the premium outlets sector over recent
years. Our exposure is gained through our long-term
partnership with Value Retail and also through VIA
Outlets, a joint venture established in 2014.
The Outlet sector has many similarities with our
directly-managed properties and we benefit from the
relationship with Value Retail management. We utilise
the knowledge gained to enhance the brand experience
across our portfolio, for example the inclusion of key
aspirational brands at Victoria Gate, Leeds.
The Financial Review, on pages 53 to 61, provides
further information on how our investments in Value
Retail and VIA Outlets have benefitted the Group’s
financial performance during 2015.
VALUE RETAIL (“VR”)
Overview
VR operates nine high-end shopping tourism Villages
in the UK and Western Europe which provide over
180,000m2 of floor space and more than 1,000 stores.
VR focuses on international fashion and luxury brands
and on long-haul tourism. The Villages, which include
Bicester Village outside London and La Vallée Village
near Paris, are among the most successful outlet
centres in Europe. The average sales density for the
Villages is €15,000/m2 with densities at Bicester Village
around €30,000/m2.
The Villages are close to Europe’s wealthiest cities
and major tourist attractions and targeted marketing
enables VR to benefit from the rapidly-growing
shopping-tourism market. In total, 163 million
residents live within a 120 minute drive of a Village,
and the major cities served by the Villages attract 100
million tourists each year. The total footfall across the
Villages in 2015 was 33.3 million (2014: 32.5 million).
This strategy has enabled VR to deliver annual
compound brand sales growth of 17% since 2006.
VR manages the Villages and controls their operations,
but through our board representation and financing
agreements we have significant influence and treat
our investment as an associate.
Table 23
Value Retail – 2015 performance
Brand sales (€m)
Brand sales growth (%)
Footfall (millions)
Average spend per visit (€)
Average sales densities (€000/m2)
Occupancy (%)
In December, we acquired an additional 21% interest
in Kildare Village, Dublin for £12 million. We expect
the Village to perform strongly, supported by the
expansion of the Irish economy and the recently
completed extension.
Performance in 2015
The Villages have continued to perform strongly during
2015 with brand sales growth of 11% and year-end
occupancy at 95%, which was unchanged from the
beginning of the year. Future growth is expected to be
supported by global tourism, new emerging brands,
consumers’ more considered approach to shopping and
the importance of perceived value. Trends in tourism
show that visitor numbers continue to grow with a
widening spread of nationalities visiting Europe.
Chinese visitors continue to represent the largest share
of overseas retail spending in Europe, with growth of
32% in 2015 (source: Global Blue). Spending by Middle
Eastern tourists has been resilient despite the
reduction in the oil price, although there has been
a fall in spending by visitors from Russia and Brazil.
Developments and extensions
The €50 million extension at Kildare Village, Dublin,
opened in November 2015. The 6,100m2 new phase has
introduced 33 new boutiques and two restaurants to
the Village as well as a new visitor centre and 400 extra
parking spaces. Initial trading has significantly
exceeded expectations. Further details about the
extension are on page 42.
At Bicester Village, the approved planning permission
for a major extension was revised in April to increase the
car parking provision to 519 new spaces. The 5,600m2
extension will include 33 new boutiques and enhanced
road access to reduce congestion. Construction is
expected to begin in the second half of this year, with the
extension completed in late 2017. A new rail station also
opened adjacent to the Village in October bringing
shoppers directly from London Marylebone.
At Fidenza Village, Milan, work has started on a 3,300m2
extension which will add 26 units and is due to open in
October 2016.
Year ended
31 December
2015
Year ended
31 December
2014
2,458
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33.3
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15.0
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2,214
11
32.5
68
13.8
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Note: The above figures reflect overall portfolio performance, not Hammerson’s ownership share.
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VR is continuing to expand in China following the
opening of Suzhou Village in May 2014. The
construction of Shanghai Village, a 50,000m2 scheme
adjacent to Shanghai Disney Resort, is underway with
the Village due to open this summer. We have an
investment of £5 million in these Chinese Villages.
POSITIVE PLACES
VR has been working hard to enhance its sustainability
performance in many of the same key areas that the
Group focuses on. As a result, over recent years, VR has
achieved a significant improvement in its GRESB score
to reach Green Star status in 2015.
VIA OUTLETS (“VIA”)
Overview
VIA is an outlets joint venture formed in 2014 in
partnership with APG, Value Retail and Meyer
Bergman. VIA’s strategy is to create a c.€1 billion
portfolio by acquiring existing European outlet centres
with strong catchments focused on mainstream fashion
brands and with potential for growth. Under the
partnership agreement, we are able to exercise joint
control in the partnership and account for our interest
as a joint venture.
Once acquired, VIA utilises the outlet expertise from
VR to enhance the overall centre management, physical
appearance, leisure and catering offers and tenant mix
of the centres to deliver sales, income and value growth.
The strategy also involves work to right-size units, the
introduction of more flagship stores and targeted
marketing to increase tourist visits.
At 31 December 2015, VIA had five outlet centres
providing 160,000m2 of floor space and over 500 stores
across five European countries. The major assets are
Alcochete, near Lisbon, Batavia Stad, near Amsterdam,
Fashion Arena, near Prague, and Landquart, near Zurich.
Table 24
VIA Outlets – 2015 performance
Brand sales (€m)
Brand sales growth (%)
Footfall (millions)
Average spend per visit (€)
Average sales densities (€000/m2)
Occupancy (%)
Performance and investment activity
VIA’s portfolio has performed strongly during 2015,
particularly Batavia Stad and Fashion Arena, and
sales densities in the VIA centres have increased
by 11% year-on-year. Significant upgrades are
being implemented at Batavia Stad including
38 remerchandising projects in 2015, upgraded façades,
a new information centre and a new tourist marketing
strategy. VIA has recently started a 5,500m2 extension
to the centre which will introduce 45 new units,
increase space by 22% and which will open in early 2017.
Occupancy at 87% was 5% lower than at the
beginning of the year as a result of the phasing of
remerchandising initiatives.
In late 2015, VIA sold Excalibur, in the Czech Republic
near the Austrian border, for €10 million (Hammerson’s
share). In January 2016, VIA exchanged a conditional
contract to acquire Festival Park, Majorca for
€44 million (Hammerson’s share). The 32,000m2 centre
includes a 8,000m2 cinema and attracts 3.8 million
visitors each year. VIA intends to enhance the brand
mix and reinvigorate the food and beverage offer.
Festival Park, Majorca
Year ended
31 December
2015
Year ended
31 December
2014
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10
10.7
38
3.3
87
386
13
11.7
33
2.9
92
Note: The above figures reflect overall portfolio performance, not Hammerson’s ownership share. 2015 reflects the disposal of Excalibur in
late 2015 and the 31 December 2014 figures include pre-acquisition performance.
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OUR PROPOSITION IN ACTION
Kildare Village
Extension, Dublin
OPENED
November 2015
NEW JOBS CREATED
400
TOTAL COST
€50 million
SIZE
6,100m2
NEW STORES
35
CAR PARKING
Additional 400
spaces
FOOTFALL
3 million
STRATEGIC RATIONALE
KEY OBJECTIVES ACHIEVED
– Opportunity to increase the footprint of Ireland’s
best-performing outlet shopping destination
– 60% of the new international luxury brands making their debut
in Ireland. 80% of brands also represented at Bicester Village
– Kildare Village is a key destination for luxury retailers wanting
– Confirmed Kildare as a unique retail tourism destination,
a presence in Ireland
attracting over three million guests in 2015
– Well-placed to capitalise on expected double-digit growth
– Average four-hour dwell with 30% of visitors from
of international visitors to Ireland
outside Ireland
– Excellently situated only 60 minutes from central Dublin
– Further enhanced customer experience services including valet
parking, personal stylists and a VIP suite
– Exceptional trading and sales performance, with footfall +20%
and sales +26% in 2015
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HAMMERSON PLC ANNUAL REPORT 2015
SUSTAINABILITY REVIEW
We create
positive places
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Our sustainability vision is to create retail destinations that
deliver positive impacts economically, socially and environmentally.
Positive Places is our strategy for making that happen.
OUR APPROACH TO SUSTAINABILITY
KEY FACTS 2015
The environmental and social impacts of our business
operations are significant, presenting both risks and
opportunities. We work consistently through our
Positive Places framework to ensure we manage and
mitigate the risks and capitalise on the opportunities.
The outcome is a consistently strong track record for
sustainability that makes us attractive to investors,
particularly those with a sustainability mandate.
– 4% reduction in Group CO2 emissions
intensity
– Four Sustainability awards
– £2 million saved through waste
management
Our business has five major sustainability impact areas:
– 3% reduction in UK electricity demand
energy security and demand
– Retained GRESB Green Star and improved
scores in all sustainability benchmarks
waste management
water consumption
investment in our local communities
materials use and procurement
Our sustainability initiatives reflect these issues and go
beyond them. Our stakeholders expect us to maintain
our leadership position as a sustainability innovator by,
for example, working collaboratively with our retailers
and suppliers, driving high sustainability standards
with our on-site teams and contractors and ensuring
our employees have the right sustainability skills and
knowledge for each role. By taking a collaborative
approach, assets across the business have benefitted
from sustainability initiatives, as illustrated through
the report.
The strength of this approach can be seen in the
activities and achievements we are able to report for
2015. Our scores against all key industry benchmarks
have improved and we have made significant progress
against our corporate targets, with particular successes
in supplier engagement. Waste management has been
more challenging, particularly in France, as has water
management in the UK. The influence of weather
on carbon emissions is also becoming increasingly
important as we face more extreme conditions. These
will all be areas of particular attention in 2016.
New annual and five-year targets have been set, an
overview of which are in the following pages. More
extensive information on these and our portfolio and
asset level sustainability projects and initiatives can be
seen on the sustainability pages on our website via this
link: www.sustainability.hammerson.com.
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Sustainability Review continued
POSITIVE PLACES STRATEGY IN ACTION...
Each sustainability project or activity links directly to at least one of our five Positive Places commitments. This ensures we focus our
attention, engagement and resources on activities that address our major impact areas and are relevant to our business activities.
CHALLENGE AND INNOVATE
UPSKILL AND INSPIRE
Challenging the status quo and trialling new
approaches and solutions to support the transition
to a more sustainable business model
Our achievements under this commitment in 2015
supported our position as industry leaders and
addressed energy security and demand, resource
use, waste management and water consumption.
Outcomes included:
– Delivery of the net zero energy (NZE) EcoPod
with Costa
– A Ska Gold rated fit out on both new office HQs
– Our work with leading companies from other sectors
to develop the NZE Building commitment launched
at COP21
– Delivery of BREEAM Excellent developments at
Beauvais and at Elliott’s Field, Rugby where we have
installed 890m2 of solar panels
Plans for 2016 include:
– The delivery of BREEAM Excellent developments
at Victoria Gate, Leeds and WestQuay Watermark,
Southampton
– Installation of 0.5 megawatts of renewable energy
in the UK
Investing in our people, and recognising and
rewarding those that deliver change
Effective delivery of our sustainability strategy requires
all our staff to understand our ambitions and their role
in achieving them.
To support them during 2015 we:
– Extended role-focused sustainability training to
all new starters
– Enabled three of our senior management team to
attend the Cambridge Institute for Sustainability
Leadership (CISL) training programme
– Launched an updated environmental training
package for all our on-site teams
– Implemented a new software platform in the UK
to support volunteering activity and community
engagement work, leading to a significant increase
in the number of volunteering days delivered by
our staff
We were delighted that in our 2015 staff survey 89%
of staff considered Hammerson to be serious in its
commitment to sustainability. This score exceeds the
survey benchmarks and is indicative of success in
embedding sustainability across our teams.
– To apply knowledge gained from the EcoPod project
Plans for 2016 include:
to further sites
PROTECT AND ENHANCE
Protecting and enhancing our natural
environment by minimising resource consumption
and delivering restorative projects
Key achievements in energy demand, waste and
water management:
– 3% year-on-year reduction in electricity
consumption across the like-for-like UK portfolio
– Further senior leaders attending the CISL programme
– Extending the sustainability training programme
to all staff to ensure all teams are sufficiently skilled
to support delivery of Positive Places
– Implementing our volunteering software in France
Table 25
OUR SUSTAINABILITY BENCHMARK SCORES
2015
Trend
– Stable CO2e emissions intensity regardless of
weather impacts on cooling and heating demand
Vigeo
– Investment of £1.5 million in LED lighting at Bullring
FTSE4good/Sustainalytics (2014)
GRESB
DJSI
Oekom
CDP
Carbon Clear FTSE 100
Robust
74
Green Star/76
67
C Prime
77C
15/99
EPRA Best Practice
Gold Award
– 100% diversion from landfill across the UK
managed portfolio
– 5,200m3 construction waste reused onsite and
900,000 litres of water saved at Victoria Gate, Leeds
Plans for 2016 include:
– 6% year-on-year reduction in electricity
consumption across the managed portfolio
– Extending LED lighting within the UK Shopping
Centre and Retail Parks portfolios
– Investment in water metering and management
– Focus on understanding weather and non-weather
related gas consumption
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SERVE AND INVEST
Delivering social value to the communities
we serve, measured in jobs, skills, civic pride
and investment
Our properties are significant elements of local physical
and social infrastructure and the catalyst for important
investment in our local communities. Over 30,000
people are employed across the portfolio.
In 2015 we:
– Supported over 4,500 people into employment
through investment in developments, extensions and
refurbishments. These projects are expected to
deliver a further 2,500+ jobs post opening
– Successfully piloted a new, retail-focused
apprenticeship scheme at Highcross, Leicester
(see Page 51)
– Made direct community investments of £2.2 million
– Made indirect community investments of £350,000
During 2016 we will update and expand our True Value
of Shopping Centres research, originally published in
2013. This will be used to establish employment and
skills baseline data against which we will measure the
positive impacts of our investment in local
communities on an ongoing basis.
COSTA ECOPOD, WREKIN RETAIL PARK, TELFORD
– Net zero energy building
– EPC rating A+ (-5).
– Circa 50% more energy efficient than a comparable unit
The combination of enhanced insulation within the shell, natural
ventilation, roof lights and energy efficient lighting, reduce the energy
consumption of the unit significantly. Sufficient clean energy is
generated by photovoltaic panels on the roof to supply the remaining
regulated electricity demand.
We plan to take knowledge gained from this project and use it more
widely. We are already in talks with Costa to deliver a second EcoPod.
REDUCING EXPOSURE TO ENERGY
PERFORMANCE CERTIFICATE RISK
As minimum energy efficiency standards
approach we are working to remove the
associated risk from the portfolio. With over
1,000 EPCs across our UK assets this is an
extensive project. Our ‘at risk’ units have been
identified and a programme of work has been
put in place to utilise appropriate points in the
management cycle to ensure they are upgraded
at minimum additional cost. We are targeting a
minimum EPC rating of D for all units as this has
been identified as providing protection against
early obsolescence of systems and more
cost-effective energy savings for occupiers
than a rating of E.
PARTNER AND COLLABORATE
Taking a stakeholder-led approach to create
collaborative projects and evolve from client
to partner
Collaboration with key stakeholders is fundamental to
delivering ambitious, innovative sustainability outputs.
In 2015 we:
– Engaged with 54 new suppliers through our Supply
Chain survey and published our 2nd Annual
Supplier Report
– Worked closely with key retailers through our retailer
forum, the Hospitality Forum, and through our
Positive Growth awards
– Successfully expanded our investor engagement
programme
– Engaged with 276 local community groups with
connections to our assets
In 2016 we will:
– Continue to work with retailers through our retailer
forum and our retail delivery process to address
in-store environmental impacts
– Review and update our Supply Chain survey and
publish our 3rd Annual Supplier Report
– Deliver at least one innovation project with
a key supplier
– Continue to deliver market-leading community
engagement activity for all our sites
EcoPod, Wrekin Retail Park, Telford
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Sustainability Review continued
OUR JOURNEY IN NUMBERS: 2010 – 2020
Table 26
Our 2010 – 2015 targets
Our performance
Our 2015 – 2020 ambitions
Reduce like-for-like carbon emissions by
20% v. 2010 baseline by 2015
-20% 20% reduction in carbon emissions v 2015 baseline
45% of suppliers by value to be engaged with
on sustainability, annually
88% Introduce refreshed sustainable supplier survey in 2016 in the
UK and France and continue to improve supplier engagement
Increase waste recycling to 85% by 2015
76% UK
100% diversion from landfill in the UK, 98% in France
Biodiversity action plans at all retail assets by
2015
46% France
28 UK
5 France
Work with partners to trial pioneering, restorative
approaches to biodiversity at six managed assets
All employees to complete CR training
biennially
59% trained (2015)
100% of Hammerson employees employed for 12 months
or more to receive sustainability training
Reduce water consumption from 2010 by 12%
by 2015
+28% UK
Reduce landlord water intensity by 10%
-29% France
Chart 27
Like-for-like portfolios’ electricity
consumption (000mWh)
Chart 28
Group waste management savings
(£000)
Chart 29
Like-for-like portfolios’ GHG emissions
(000mtCO2e)
35
70
60
50
40
30
20
10
0
36.7
35.1
33.8
24.3
24.9
28.2
3.4
‘13
4.1
‘14
3.9
‘15
UK Shopping Centres
France
UK Retail Parks
2,130
2,039
2,500
2,000
1,500
1,540
1,000
500
0
190
‘13
130
‘14
269
‘15
Savings from averted landfill tax
Income from sale of waste
30
25
20
15
10
5
0
18.5
19.4
17.8
4.8
1.8
‘13
3.8
1.8
‘14
4.5
1.6
‘15
UK Shopping Centres
France
UK Retail Parks
MAJOR CHALLENGES IN 2015
Two key areas have been a significant challenge in 2015:
water consumption and heating and cooling related
energy consumption, particularly in France.
Low water costs challenge the business case for
extensive metering. However, the increase in
restaurants across the portfolio drives up water
demand. In 2016 we will extend the water sub-metering
and monitoring programme to address this.
Gas consumption in the UK and electricity in France
is impacted substantially by weather. Intelligence from
our energy audits combined with better understanding
of weather-related demand fluctuations will be used
to prioritise work in this area in 2016.
2016 POSITIVE PLACES TARGETS FOR
THE MANAGED PORTFOLIOS
6% reduction in electricity consumption
5% reduction in water consumption
3% reduction in CO2e emissions
98% diversion of waste from landfill
85% recycling of waste
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GREENHOUSE GAS (GHG) EMISSIONS 2015
REPORTING PERIOD AND METHODOLOGY
In line with 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 2014 to 30 September 2015. 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.
We are required by the new Scope 2 GHG Protocol to report our Scope 2 emissions using both market-based and location-based methods.
However, our utility provider has been unable to provide specific emissions factors for our renewable energy contract to calculate
emissions using the market-based approach.
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INDEPENDENT ASSURANCE
Total Scope 1, Total Scope 2, Total Scope 3 and Total GHG emisssions intensity data have been independently assured by Deloitte LLP
who have carried out Limited Assurance in accordance with the International Standards on Assurance Engagements 3000. Their
Assurance Statement is available on the sustainability pages of our website at www.sustainability.hammerson.com.
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 GHG emissions data for these reported assets.
A detailed basis of reporting statement and full list of operating entities and assets included within the reporting boundary can be found
on the Positive Place pages of our website at www.sustainability.hammerson.com.
Table 30
Baseline year
1/10/12 – 30/09/13
Boundary summary
All assets and facilities under Hammerson direct operational control are included
Consistency with financial
statements
Emissions factor data source
Variations from the financial statements are set out above
We have sourced our emissions factors from 2015 DEFRA GHG Conversion Factors for Company
Reporting, and additional sources including, but not limited to, IEA and Cofely
Assessment methodology
GHG Protocol and ISO 14064 (2006)
Materiality threshold
Activities generating emissions of <5% relative to total Group emissions have been excluded
Intensity ratio
Adjusted profit before tax 1/10/14 – 30/09/15*
Target
20% reduction in like-for-like carbon emissions against 2010 baseline by 2015
Group emissions
(mtCO2e)
36,667
UK emissions
(mtCO2e)
28,739
France emissions
(mtCO2e)
7,928
Group emissions
(mtCO2e/£m)
172
* Profit before tax derived from unaudited management accounts.
GHG EMISSIONS ANALYSIS
Table 31
Total GHG emissions metric tonnes (mt)
Scope 1: Direct emissions from owned/controlled operations
a. Direct emissions from stationary operations
b. Direct emissions from mobile combustion
c. Direct emissions from fugitive sources
6,032
134
0
3,342
46
0
3,388
24,203
0
77
13
6,166
Totals
Scope 2: Indirect emissions from the use of purchased electricity, steam, heating and cooling
27,447
a. Indirect emissions from purchased/acquired electricity
0
b. Indirect emissions from purchased/acquired steam
1,070
c. Indirect emissions from purchased/acquired heating
13
d. Indirect emissions from purchased/acquired cooling
Totals
Scope 3:
Business travel
Waste
Water
Totals
28,530
24,293
412
1,177
382
1,971
215
600
243
1,058
2,690
88
0
2,778
3,244
0
993
0
4,237
197
577
139
913
28
1
0
29
129
0
5
0
134
2
5
2
9
4747
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COMCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability performance data continued
CARBON EMISSION INTENSITY (2013 - 2015 LIKE-FOR-LIKE PORTFOLIOS)
Calculated in accordance with EPRA Sustainability Best Practice Reporting Standards (see page 21)
Table 32
UK shopping centres
UK retail parks
French shopping centres
kgCO2e per m2 common parts/year
kgCO2e per car parking space/year
kgCO2e per m2 common parts/year
WATER (HAMMERSON GROUP)
Table 33
Cost of water for Landlord services
Investment in water management improvements
Estimated water savings
WASTE (HAMMERSON GROUP)
Table 34
Operational costs from waste management
Savings from averted landfill tax
Income from sale of waste
Percentage recycled UK shopping centres
Percentage recycled French shopping centres
Percentage diverted from landfill UK
Percentage diverted from landfill France
Percentage diverted from landfill Global
COMMUNITIES (HAMMERSON GROUP)
Table 35
Direct contributions
Indirect contributions
Number of organisations that benefited from
Hammerson’s direct and indirect contributions
£000
£000
£000
£m
£m
£000
%
%
%
%
%
£000
£000
#
2015
102
88
70
2015
1,617
2
(535)
2015
2.7
2.0
269
76
50
100
49
86
2013
108
94
74
2011
1,896
16
218
2012
1,751
312
191
2013
1,305
27
290
2014
111
94
59
2014
717
30
588
2012
2013
2014
2.1
2.1
155
75
31
95
49
84
2011
2.0
0.5
190
59
42
70
67
70
2011
932
366
389
1.8
0.9
176
64
27
83
40
71
2012
599
446
347
2.0
1.5
197
77
40
89
67
86
2013
431
299
398
2014
2015
1,700
407
2,158
383
332
276
INVESTMENT IN EMPLOYEE TRAINING (HAMMERSON GROUP)
Table 36
Total expenditure on training
Total number of hours spent on training
CUSTOMERS
Table 37
£000
Hours
2011
482
7,400
2012
2013
2014
2015
357
5,000
212
6,000
179
4,000
289
4,850
Number of retail clients we engaged with on sustainability
Number of green leases in portfolio
UK
UK/FR
SUPPLIERS
Table 38
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
UK%
UK #
UK £m
INVESTORS (HAMMERSON GROUP)
Table 39
Direct number of investors with whom we had collective or individual meetings
Total number of shares held by the top 20 investors (31.12.15)
Total number of shares held by those top 20 investors with whom
Hammerson engaged on sustainability (31.12.15)
million
million
2011
n/a
896
2011
n/a
107
86
2011
25
417
148
2012
24
1,250
2013
32
1,401
2014
28
1,637
2015
78
1,909
2012
100
302
193
2012
13
395
170
2013
71
165
87
2013
1
407
108
2014
71
148
87
2014
12
451
184
2015
88
143
150
2015
67
475
82
4848
HAMMERSON PLC ANNUAL REPORT 2015HAMMERSON PLC ANNUAL REPORT 2015 OUR PEOPLE
Talented people
Our people are one of our most important assets, enabling us
to deliver our strategy and create value for our stakeholders.
Through our engaging culture, common values and ongoing
investment in nurturing talent we create an environment where
everybody is able to develop and maximise their contribution.
O
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CULTURE AND VALUES
Our values continued to enhance our culture and
influence our actions during 2015.
The most significant event was June’s relocation of our
UK headquarters to King’s Cross. This gave us the
opportunity to introduce a more agile and collaborative
working environment enabling our London, Reading
and Paris based teams to work more closely together
than ever before.
Hammerson office, Kings Place
One of our core values is ambition, and this was evident
throughout the year as we continued to grow in size,
productivity and efficiency. The scale of our ambition
was best demonstrated by our acquisition of the Irish
loan portfolio which will require a new operating
platform to be established in Dublin as well as being
integrated into the wider Group.
On a more operational level, we insourced the
management of our shopping centres in France,
enabling a more aligned management approach and
greater financial efficiencies across the portfolio.
We also improved our approach to portfolio based
procurement during the year, which allowed us to
leverage our purchasing power more effectively and
to deliver greater consistency across the organisation.
On a day-to-day basis, we embedded our values ever more
deeply within the business. They are a core component
of our performance-management processes and the two
day Corporate Induction Programme attended by all
new employees. The values continue to drive positive
behaviours and outcomes across the Group.
LEADERSHIP AND MANAGEMENT
CAPABILITY
During 2015 we continued to invest heavily in
developing our managers. Our Management
Development Programme, launched in the autumn
of 2014, was a major part of this effort, with 74 managers
across the UK and France participating during the
course of the year.
We also continued to focus on management skills when
recruiting new managers, most notably via our
competency-based selection processes. We successfully
recruited 14 new managers in the UK, all of whom
completed one of our management assessment centres.
Executive coaching and 360-degree appraisals
remained constant features throughout the year. To
further enhance our training and development offering
we entered a partnership arrangement with Capita
Learning and Development which gives us access to
their extensive suite of management development
programmes and materials.
To help meet our Diversity and Inclusion objectives,
our senior management teams in the UK and France
attended workshops on unconscious bias. The knowledge
and insight gained is already helping us to achieve our
ambition of creating a more diverse workforce.
Chart 40
Our people – Key Facts*
France: 144
France: 63
France: 63
UK: 72
UK: 72
France: 6.2%
UK: 11.5%
Headcount 9.8%
473
Voluntary staff turnover
UK: 329
*Headcount figures as at 31 December 2015
37
Internal moves and promotions
4949
135New joinersSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COMCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COM
Our people continued
RESOURCING, TALENT MANAGEMENT
AND SUCCESSION PLANNING
As in previous years, we successfully retained and
developed our talent during 2015 whilst strengthening
our teams with the appointment of many experienced
and talented individuals.
Voluntary staff turnover in both the UK and France
remained low at 11.5% and 6.2% respectively. However,
with a number of people leaving the business as a result
of us relocating our UK headquarters, the progression of
our development projects and further investments in our
multichannel and IT teams, resourcing requirements
were high. 135 new people joined the Group during the
course of the year, many of whom successfully completed
a competency based assessment centre.
All senior management
vacancies filled via internal
promotions in 2015
Our improved approach to senior management
succession planning started to pay dividends in 2015.
This involves using job evaluation to help identify
possible career paths for high potential employees and
engaging with them about their own aspirations and
development needs. As a result, we started the process
of mapping out structured development plans for all
concerned. We filled all of our senior management
vacancies via internal promotion during the year,
including our new Director of Retail for Ireland.
Launched in 2011, our established UK Graduate
Programme continued to flourish in 2015. One highlight
saw Tom Webster, who joined the Company in 2012,
gain RICS accreditation and move into an asset
management role in our UK Retail Parks team.
Tom Webster, Asset Manager
EMPLOYEE ENGAGEMENT
The Company recognises the benefits of having highly
engaged teams as we strive to achieve our business
goals. Our positive culture, clarity of strategy and
ongoing focus on improving management capability
all contribute towards this objective.
5050
HAMMERSON PLC ANNUAL REPORT 2015
We conducted our employee survey during 2015
using the globally established ‘Great Place to Work’
programme. In the UK, we achieved a positive
engagement score of just under 70% which is 13%
higher than the average for organisations with a
similar headcount.
Further analysis showed particularly high levels of
engagement in the areas of Strategy and Direction,
Diversity and Corporate Social Responsibility; the
latter score exceeding the average of similarly sized
organisations by an impressive 34%.
In France, employee engagement was even higher and
we achieved a positive engagement score of 79%. In
addition, 89% of employees responded positively to the
statement “Taking everything into account, I would say
this is a great place to work”.
In our 2014 Annual Report we stated the clear objective
that any gender gap in employee engagement should be
no greater than 5%. This was one of three Diversity and
Inclusion targets that we set ourselves to achieve on an
ongoing basis. When considering our combined UK and
France results, the gender gap in our 2015 employee
survey was 4.5%.
80% employee participation in
the survey
Highly engaged teams in the
UK and France
UK employee engagement far
exceeds average of similar
sized companies (by headcount)
Engagement scores in France
are amongst the highest of
companies surveyed
Less than 5% gender gap in
employee engagement levels
Our collaborative and inclusive approach to internal
communications was ever present during the course of
2015, enhanced by the greater use of audio visual
technology. Briefings were held regularly throughout
the year in order to keep employees updated on key
business issues and results. In addition, we further
embedded the Group intranet as a key communication
tool and developed a new, internally branded
communication channel: Hammerson Inside.
From a reward perspective, we continue to offer
employees the opportunity to share in the growth and
profitability of the Company as we believe this further
engages our people. This is evidenced by the inclusion
of the organisation’s key KPIs in our annual incentive
plan and the availability of a number of all employee
and restricted share plan schemes.
DIVERSITY AND INCLUSION
We have long understood and embraced the benefits
of maintaining and nurturing a diverse workforce. It is
therefore not surprising that 2015 was a year during
which we continued to develop our strategy and build
on the good practices already in place. In addition, we
implemented a number of key initiatives designed to
drive meaningful and sustainable change.
Following the success of the unconscious bias
workshops attended by our Group Executive
Committee in 2014, similar sessions were held for our
entire UK and France senior management teams during
the first half of the year. These had the objective of
further broadening diversity awareness within the
workplace, while further engaging senior management
in the process of enhancing inclusion. Diversity training
for all employees will be introduced in 2016.
When appointing new talent, we continue to base
our recruitment decisions on our long established
competency based approach to selection. Of the 135
new employees recruited in 2015, 66 were female. Of
these, over a third were employed in professional or
senior professional roles. In addition, we wrote to all
of our recruitment partners stating our diversity and
inclusion related aspirations. In doing so, we challenged
them to submit more diverse candidate shortlists for all
roles, including people from ethnic minorities and from
backgrounds that are not always associated with the
property industry.
In recognising the benefits of gender diversity the
Company has previously stated the aspiration that at
least 30% of our senior managers should be women.
By the end of 2015, this figure stood at 27%.
Within the UK, women occupy 37% of such roles and
three of our ten Shopping Centre General Managers
are female.
Female representation in senior management roles
in France currently stands at just over 7%. While we
are looking to improve this figure over time, with the
introduction of assessment centres in 2016 anticipated
to contribute towards this, we are pleased that four of
our nine French Shopping Centre General Managers
are female.
We have also stated the objective that women should be
represented in at least 30% of the roles identified in the
Company’s senior management succession plan. The
plan considers the key senior management positions
across the entire organisation, including all Executive
Director and Group Executive Committee roles. By the
end of 2015, this figure stood at just over 30%, a fact
that we find extremely encouraging.
We welcome and fully consider all suitable applications
for employment, irrespective of gender, race, ethnicity,
religion, age, sexual orientation or disability. All
employees are eligible to participate in career
development and promotion opportunities. Support
also exists for employees who become disabled to
continue in their employment or to be retrained for
other suitable roles.
Chart 41
All employees
Chart 42
Senior management
(excluding Board)
Chart 43
Shopping Centre
Managers
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R
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G
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P
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217
256
30
11
12
7
Chart 44
UK Graduate
Programme
Chart 45
Board
1
2
9
2
Figures as at 31 December 2015
Male
Female
HIGHCROSS APPRENTICES
To attract young people
into the property
industry from a more
diverse range of
backgrounds, we piloted
the British Council of
Shopping Centres Retail
Trust and National Skills
Academy Retail Path
apprenticeship scheme at Highcross Shopping Centre in Leicester
during 2015.
BCSC Retail Path graduation
Five apprentices won 12 month placements, giving them shopping
centre management experience as well as front of house retail
exposure and college based training. Three of our retailers
participated in the pilot scheme: TM Lewin, Love Aroma and
Goldsmiths. Each provided valuable training and insight for the
apprentices, two of whom have now graduated from the scheme,
winning permanent roles with TM Lewin and Hotel Chocolat. The
three who remain will graduate from the scheme in early 2016.
Everyone involved has been delighted with the success of this
initiative in its first year and we intend to run the programme again
in 2016 with an extended group of retailers.
Joe Creasey, who was an apprentice on the scheme, is now a
permanent employee at TM Lewin and he said:
“Working as an apprentice has given me more of an insight into the
retail business and this has helped me build a greater foundation for
a future in Retail Management.”
Holly Furnival, who is an apprentice with Goldsmiths, added:
“The application process was very hard, but I’m really glad I stuck at it
and I love working here. I never thought it would be as enjoyable, but
it’s great being able to help customers, and everybody has made me
feel really welcome.”
5151
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COMCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our people continued
COMMUNITY ENGAGEMENT
In line with our corporate values and our commitment
to Serve and Invest the communities in which we are
located, we offer employees three days of paid
volunteering a year. We believe that having the
opportunity to participate in voluntary activity
generates positive outcomes; from team building
through to wellbeing and corporate pride.
In 2015 we launched a new approach to volunteering,
using our own bespoke version of The Butterfly Bank
Engagement Platform. Designed to inspire and reward
volunteering, this was actively promoted throughout
the year in addition to our annual Community Day.
2015 saw our ninth annual Community Day in the UK
while our French team ran their third. In a continued
effort to collaborate for greater impact, we were joined
by colleagues from the British Council of Shopping
Centres (BCSC) and from our waste, facilities and
security teams across the UK.
In the UK a total of 27 activities were available for
employees to choose from, ranging from river clean-ups
to organising a fashion show. In France, nine activities
were offered. 63% of employees across the UK and an
impressive 82% in France took part in Community Day
and, as always, feedback was extremely positive
from both our own people and the organisations
we worked with.
As one Hammerson team member said:
“It was a really successful and worthwhile day.
Everyone pulled their weight and was motivated to get
the job done in the allotted time but also to do more
than anticipated at the start of the day. It also struck me
that this is an environment where teamwork and
Hammerson’s culture and values come to the fore.
Importantly, it was also great fun.”
Following Community Day we have continued to bring
employees opportunities to support local and national
organisations. In October we celebrated volunteering
achievements across the Group with the Hammerson
Butterfly Banking awards bringing together all our
shopping centre teams.
Our employees are enthusiastic about supporting
charities and voluntary organisations. As well as a local
charity bursary run by each of our shopping centres, we
also have national charity partners. Every two years our
employees select two charity partners, giving them a
real sense of engagement with the chosen charities.
The selected charities receive a cash donation and,
more importantly, the opportunity to develop a
relationship with Hammerson, our employees and our
shopping centre teams. We feel two years gives us an
excellent chance to establish a productive working
relationship and provides a great platform for the
charities to work from.
The charities selected for 2014 – 2016 were Samaritans
and Elifar; the latter of which helps to improve the lives
of children and adults with severe learning difficulties
and associated physical disabilities. Samaritans was a
new relationship for us, which is very exciting. Elifar is
a continuing relationship, employees having elected to
continue supporting this small but highly impactful
charity for a further two years.
Over the course of 2015 the Group contributed more
than £150,000 to charitable causes, £34,000 of which
went to our two main partners.
Over 400 volunteer days
delivered by Hammerson
employees in 2015
Continued success and high
levels of participation in
Community Days
More than 20 charities
supported by Hammerson
during 2015
More than £150,000 donated
to charitable causes
Community Day
5252
HAMMERSON PLC ANNUAL REPORT 2015 FINANCIAL REVIEW
A strong set of results
2015 has been another successful year with strong financial results,
demonstrating our ability to create value from our strategy.
F
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HIGHLIGHTS
PROFIT FOR THE YEAR*
£726.8 million
(+4.0%)
SHAREHOLDERS’ FUNDS*
£5,517 million
(+10.9%)
* Attributable to equity shareholders.
ADJUSTED EPS
26.9p
(+12.6%)
EPRA NAV PER SHARE
£7.10
(+11.3%)
DIVIDEND PER SHARE
22.3p
(+9.3%)
TOTAL PROPERTY RETURN
12.4%
(2014: 13.6%)
PRESENTATION OF FINANCIAL INFORMATION
The information presented in this Financial Review is derived from the Group’s financial statements, prepared under IFRS. However,
management principally reviews the performance of the business on a proportionally consolidated basis, including the Group’s share
of joint ventures and associates, but not proportionally consolidating our investments in premium outlets. We classify the Group’s
proportionally consolidated joint ventures and associates as “Share of Property interests”. Further explanations of terms used in this
section are in the Glossary on pages 181 and 182.
To provide a clear explanation of the performance of the business during 2015, the tables in this Financial Review state whether the
information has been presented on a proportionally consolidated basis and whether it includes the premium outlet investments.
At 31 December 2015, the property ownership associated with the Irish loan portfolio, acquired in October 2015 in a 50:50 joint venture, had
yet to be transferred from the borrowers and these loans are accounted for as current receivables of the joint venture, and included within the
Group’s investment in joint ventures. Details of the movement in the Group’s investment in joint ventures are shown in table 55 on page 59.
PROFIT FOR THE YEAR
The Group’s profit for the year, attributable to equity shareholders, under IFRS was £726.8 million, £27.7 million higher than 2014.
This includes income from operations and financing costs as well as one-off gains realised on the sale of properties and unrealised
property valuation changes. As with other property companies, and in line with EPRA guidance, we review the Group’s profit on an
adjusted basis, which best reflects underlying earnings and table 46 shows a reconciliation of IFRS profit to adjusted profit for the year.
Analysis of the Group’s income statement under IFRS split between underlying “Adjusted” profit and “Capital and other” profit is shown
in note 2 to the accounts on page 128 and further details of the EPRA adjustments are provided in note 10A on page 136 to the accounts.
Table 46
Reconciliation of IFRS profit for the year to adjusted profit for the year
Proportionally consolidated, including premium outlets
IFRS profit for the year attributable to equity shareholders
Adjustments:
(Gain)/Loss on the sale of properties and joint ventures interests
Net revaluation gains on property portfolio *
Net revaluation gains on premium outlet property portfolio
Debt and loan facility cancellation costs
Change in fair value of derivatives*
Net one-off restructuring charge
Deferred tax – premium outlets
Other adjustments
Adjusted profit for the year (note 10A)
Adjusted EPS, pence
* Proportionally consolidated.
Year ended
31 December
2015
£m
Year ended
31 December
2014
£m
726.8
699.1
(14.9)
(367.5)
(174.1)
13.9
0.1
–
27.6
(1.0)
210.9
26.9
3.4
(436.8)
(109.8)
8.7
(13.7)
3.0
12.3
8.1
174.3
23.9
53
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONHAMMERSON.COMCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Financial review continued
The Group’s adjusted profit for the year in 2015 was £210.9 million, £36.6 million higher than in 2014. Table 47 bridges adjusted profit and
adjusted EPS between 2014 and 2015 and the movements are shown at constant exchange rates.
Table 47
Reconciliation of adjusted profit for the year
Including premium outlets
Adjusted profit – Year ended 31 December 2014
Net rental income increase/(decrease):
Acquisitions
Disposals
Development and other
Like-for-like portfolio
Acquisition of joint venture interest by Reported Group
Decrease/(Increase) in net administration costs
Decrease in net finance costs
Increase in Value Retail and VIA Outlets earnings
Tax and non-controlling interests
Dilution impact of share placing
Exchange
Adjusted profit – Year ended 31 December 2015
Reported
Group
£m
43.5
Share of
joint ventures
£m
114.8
Share of
associates
£m
Adjusted profit
for the year
£m
Adjusted EPS
pence
16.0
174.3
23.9
9.3
(4.1)
6.0
5.5
9.3
26.0
0.7
8.6
–
(1.1)
–
(1.6)
76.1
–
(0.7)
3.7
0.5
(9.3)
(5.8)
(0.5)
3.7
5.3
0.4
–
(1.2)
1.0
–
–
–
–
1.0
–
–
0.6
–
–
0.5
116.7
18.1
10.3
(4.8)
9.7
6.0
–
21.2
0.2
12.3
5.9
(0.7)
–
(2.3)
210.9
1.3
(0.6)
1.2
0.8
–
2.7
–
1.6
0.8
(0.1)
(1.7)
(0.3)
26.9
The increase in adjusted profit was driven by additional net rental income, principally from the acquisition of the additional 40% stake in
Highcross in September 2014 and income from Les Terrasses du Port which opened in May 2014. The Group’s premium outlet
investments in Value Retail and VIA Outlets, the latter acquired in July 2014, contributed an additional £5.9 million of earnings. Lower
finance costs, reflecting the refinancing activity undertaken to reduce the Group’s average cost of debt to 3.8%, increased earnings by £12.3
million. These positive factors were partly offset by the impact of the euro depreciating against sterling during 2015 which reduced
earnings by £2.3 million, although the Group’s hedging strategy provided an approximate two-thirds hedge against the adverse currency
movement. Overall, the 21.0% increase in adjusted profit resulted in a 12.6% increase in adjusted EPS, after taking account of the dilutive
effect of the September 2014 share placing.
NET RENTAL INCOME
Table 48
Analysis of net rental income
Proportionally consolidated, excluding premium outlets
Like-for-like investment properties
Developments and other
Acquisitions
Disposals
Exchange
Net rental income
Reported
Group
£m
164.2
23.4
15.7
5.5
–
208.8
Share of
Property
joint ventures
£m
Share of
associates
£m
Year ended
31 December
2015
£m
Year ended
31 December
2014
£m
102.2
6.6
–
–
–
108.8
–
–
1.0
–
–
1.0
266.4
30.0
16.7
5.5
–
318.6
260.4
20.3
6.4
10.3
8.2
305.6
Change
£m
6.0
9.7
10.3
(4.8)
(8.2)
13.0
In 2015, net rental income increased by £13.0 million, or 4.3%, to £318.6 million. Acquisitions contributed £10.3 million of additional
income, principally relating to the £180 million acquisition in September 2014 of our former joint venture partner’s 40% stake in
Highcross, Leicester. Disposals reduced net rental income in 2015 by £4.8 million, reflecting the 2015 sales of Drakehouse Retail Park,
Sheffield, Bercy 2, Paris and Grand Maine, Angers.
Additional net rental income from developments of £9.7 million mainly relates to Les Terrasses du Port in Marseille, which opened in
May 2014 and has traded strongly during 2015. Development income also came from our joint venture property interests in Croydon
whilst the major regeneration scheme is progressed. Net rental income from the like-for-like portfolio increased by 2.3% during the year,
with the most significant contributions made by rent reviews at Union Square and tenant rotation at Les Trois Fontaines. Like-for-like
income also benefitted from the growth in car park and commercialisation net income which increased by 5% and 24% respectively on a
like-for-like basis. Like-for-like net rental income growth on the Reported Group properties was 3.4%, whilst for properties held by the
Group’s proportionally consolidated joint ventures and associates, like-for-like net rental income growth was 0.6%. Further analysis of
net rental income is provided in tables 103 and 104 of the Additional Disclosures on page 167.
54
HAMMERSON PLC ANNUAL REPORT 2015 ADMINISTRATION EXPENSES
Table 49
Administration expenses analysis
Proportionally consolidated, excluding premium outlets
Employee and corporate costs
Management fees receivable
Administration expenses
Less:
Restructuring cost
Pension curtailment gain
One-off administration expenses
Underlying administration expenses*
F
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P
O
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Year ended
31 December
2015
£m
Year ended
31 December
2014
£m
48.3
(6.0)
42.3
–
–
–
42.3
52.1
(5.6)
46.5
(5.5)
2.5
(3.0)
43.5
* In 2015, £0.3 million (2014: £0.9 million) of the Group’s proportionally consolidated underlying administration expenses related to the Group’s share of Property interests.
In 2015, underlying administration expenses, net of management fees receivable, were £42.3 million, a decrease of £1.2 million, or 2.7%,
compared to 2014. This reduction was associated with cost-saving initiatives undertaken since the beginning of 2014 including relocating
our London headquarters to King’s Cross, additional management fee income, principally from the Nicetoile joint venture, and
favourable foreign exchange movements.
COST RATIO
The EPRA cost ratio for the year ended 31 December 2015 was 23.1%, an increase of 30bp compared to 2014. The ratio is calculated
on a proportionally consolidated basis excluding premium outlets, and reflects total operating costs, including the cost of vacancy, 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. The calculation methodology has been amended in 2015 to adjust for inclusive lease costs
recovered through rent, this is in line with EPRA best practice and comparative ratios have been restated. The cost ratio calculation is
included as table 106 of the Additional Disclosures on page 168.
Whilst the ratio of net administration costs to gross rental income fell from 12.8% to 11.8% associated with the cost saving initiatives noted
above, the ratio of property costs increased from 10.0% to 11.3%. This reflects additional expenditure associated with vacancy and running
costs at properties awaiting redevelopment such as in Croydon, as well as the impact of an increased portfolio weighting to shopping
centres which have higher running costs than retail parks.
SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES, INCLUDING INVESTMENTS IN
PREMIUM OUTLETS
As explained on page 53, for management reporting purposes we proportionally consolidate the results of our investments in joint
ventures and associates, except for our premium outlet investments in Value Retail and VIA Outlets. The nature of the control over our
premium outlet investments means that VIA Outlets is accounted for as a joint venture, whilst Value Retail is accounted for as an
associate. We refer to the Group’s proportionally consolidated share of its joint ventures as “Share of Property joint ventures”.
The operating performance of our investments in Value Retail and VIA Outlets is described on pages 39 to 42 of the Business Review
and the aggregated financial contribution to the Group is shown in table 109 of the Additional Disclosures section on page 170.
Share of results of joint ventures, including VIA Outlets
The Group has interests in 12 joint ventures and the share of results of joint ventures for the year ended 31 December 2015 was
£246.8 million (2014: £279.0 million) as summarised in table 50. Further details are provided in note 12 to the accounts.
Table 50
Analysis of share of results of joint ventures
Group’s share of results including premium outlets
Net rental income
Net administration expenses
Revaluation gains/(losses) on properties
Loss on sale of properties
Net finance income/(costs)
Tax charge
Share of results of joint ventures
EPRA adjustments
Adjusted profit
Share of
Property
joint ventures
£m
VIA Outlets
£m
Year ended
31 December
2015
£m
Share of
Property
joint ventures
£m
VIA Outlets
£m
Year ended
31 December
2014
£m
108.8
(0.3)
122.1
–
3.1
–
233.7
(123.1)
110.6
9.8
(1.7)
10.4
(0.8)
(2.0)
(2.6)
13.1
(7.0)
6.1
118.6
(2.0)
132.5
(0.8)
1.1
(2.6)
246.8
(130.1)
116.7
117.5
(0.9)
165.6
–
(2.1)
–
280.1
(166.2)
113.9
2.7
(0.6)
(1.3)
–
(1.4)
(0.5)
(1.1)
2.0
0.9
120.2
(1.5)
164.3
–
(3.5)
(0.5)
279.0
(164.2)
114.8
55
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Financial review continued
The reduction in the share of results of joint ventures of £32.2 million during 2015 was principally due to property revaluation gains from
the Group’s share of Property joint ventures which were £31.8 million lower in 2015, this is consistent with the year-on-year revaluation
gains on the Group’s wholly-owned property portfolio. Net rental income from the Group’s share of Property joint ventures was
£8.7 million lower than in 2014, associated with the acquisition by the Group of the former joint venture partner’s 40% stake in Highcross,
Leicester in September 2014. This was offset by an increase in profit of £14.2 million from VIA Outlets, which was acquired in July 2014,
of which £11.7 million related to property revaluation gains. On an adjusted basis, profit was £1.9 million higher in 2015.
Share of results of associates, including Value Retail
The Group has two associates: Value Retail PLC and its group entities (‘VR’), and a 10% interest in Nicetoile, which was acquired in
January 2015 and where the Group is the asset manager. The share of results of associates for the year ended 31 December 2015 was
£160.6 million (2014: £109.9 million), of which £159.3 million related to VR and principally related to the property valuation uplift of
£163.7 million.
On an adjusted profit basis the results of associates were £18.1 million (2014: £16.0 million), of which £17.1 million related to VR.
The additional adjusted profit was due to strong trading, particularly at La Vallée, Paris and the two Spanish Villages, La Roca and
Las Rozas. See note 13 of the accounts for further details on the Group’s associates.
The Group also provides loans to Value Retail from which the Group received £5.3 million (2014: £5.8 million) of interest receivable
in 2015.
Total investment in premium outlets
In 2015, the Group’s two investments in premium outlets contributed £28.5 million to adjusted profit, £5.8 million higher than 2014
principally due to a full year’s profit contribution from VIA Outlets and the continued strong underlying trading performance from Value
Retail. Further details of the aggregated profit contribution from our premium outlets investment is provided in table 109 of the
Additional Disclosures section on page 170.
FINANCE COSTS
Underlying net finance costs, comprising gross interest costs less finance income, including the Group’s share of Property interests,
were £89.4 million compared with £108.9 million in 2014, a reduction of £19.5 million.
During 2015, the Group’s weighted average interest rate was reduced to 3.8%, compared to 4.7% for 2014. This was primarily due to the
refinancing of the €480 million 4.875% bond, redeemed in December 2014, with the issue of the €500 million 2% bond in
July 2014. Finance costs have also reduced due to a new £415 million revolving credit facility (“RCF”), signed in April 2015, having an
initial margin of 80 basis points, which is 70 basis points lower than the previous £505 million facility it replaced. Finally, the increased
use of floating rate debt at low rates of interest has also acted to reduce the weighted average cost of borrowing.
There was a £13.9 million (2014: £8.7 million) exceptional finance cost, principally associated with the early redemption of a £272 million
5.25% bond which was due to mature in December 2016. This is excluded from adjusted profit.
Interest capitalised during the year was £5.3 million and principally related to the Group’s developments in Beauvais, Leeds, Rugby and
Southampton. This is £3.5 million lower than in 2014 when interest was capitalised on the development of Les Terrasses du Port, Marseille.
TAX
The Group is a UK REIT and French SIIC for tax purposes and is exempt from corporation tax on rental income and gains arising on
property sales. The tax charge for 2015 remained low at £1.6 million (2014: £1.0 million).
DIVIDEND
The Directors have proposed a final dividend of 12.8 pence per share. Together with the interim dividend of 9.5 pence, the total for 2015 is
22.3 pence, representing an increase of 9.3% compared with the prior year. The final dividend is payable on 29 April 2016 to shareholders
on the register at the close of business on 18 March 2016. 6.4 pence will be paid as a PID, net of withholding tax where appropriate, with the
balance of 6.4 pence paid as a normal dividend.
The Company will be offering a scrip dividend alternative, and for shareholders who elect to receive this, the entire dividend will be
treated as a normal (non-PID) dividend. As the Company is offering a scrip dividend alternative, the Dividend Reinvestment Plan (DRIP)
will be suspended.
56
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NET ASSETS
During 2015, equity shareholders’ funds increased by £543 million, or 10.9%, to £5,517 million at 31 December 2015.
Net assets, calculated on an EPRA basis, were £5,573 million, an increase of 11.5% during the year. On a per share basis, net assets
increased by 72 pence to £7.10, and the movement during the year is shown in table 51.
Table 51
Movement in net assets
Proportionally consolidated, including premium outlets
31 December 2014
Property revaluation
Proportionally consolidated property portfolio
Premium outlet properties
Adjusted profit for the year
Change in fair value of derivatives
Change in deferred tax
Dividends
Exchange and other
31 December 2015
Equity
shareholders’
funds
£m
4,974
368
174
542
211
(2)
(29)
(165)
(14)
5,517
EPRA net asset
adjustments*
£m
25
–
–
–
–
2
29
–
–
56
EPRA
net assets
£m
4,999
EPRA NAV
pence
per share
638
368
174
542
211
–
–
(165)
(14)
5,573
47
22
69
27
–
–
(21)
(3)
710
* Adjustments in accordance with EPRA best practice as shown in note 10B to the accounts on page 137.
The increase in EPRA net asset value was principally due to the valuation surplus on the Group’s property portfolio, including those held
in joint ventures and associates, due to yield and income improvements. Further analysis of valuation movements is provided in table 53
on page 58. Adjusted profit contributed £211 million, although this was largely offset by dividend payments totalling £165 million.
INVESTMENT AND DEVELOPMENT PROPERTIES
Portfolio Valuation Analysis
Table 52
Movement in portfolio value
Proportionally consolidated, excluding premium outlets
Portfolio value at 1 January 2015
Valuation increase
Capital expenditure
Acquisitions
Developments
Existing portfolio
Other*
Capitalised interest
Disposals
Transfers
Exchange
Reported
Group
£m
Share of
Property interests
£m
4,427
246
2,279
122
44
162
13
(1)
218
5
(170)
11
(85)
70
14
12
(1)
95
–
–
(11)
(7)
Portfolio value at 31 December 2015
4,652
2,478
* Includes capitalised tenant incentives and letting fees.
Total
£m
6,706
368
114
176
25
(2)
313
5
(170)
–
(92)
7,130
Investment
£m
Development
£m
6,498
332
58
61
25
(2)
142
–
(169)
28
(90)
208
36
56
115
–
–
171
5
(1)
(28)
(2)
6,741
389
57
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Financial review continued
Valuation change
Chart 53
Components of valuation change in 2015 (£m)
Proportionally consolidated, excluding premium outlets
400
300
200
100
0
(100)
368
287
195
127
67
161
117
1
24
19
(3)
(2)
(15)
(29)
34
37
2
1
77
4
UK shopping centres
UK retail parks
France
Development and UK other
Total portfolio
Yield
Income
Development and other
Total
Chart 53 analyses the sources of the valuation change for the property portfolio, on a proportionally consolidated basis, during 2015.
During 2015, the Group’s portfolio, excluding premium outlets, achieved a revaluation gain of £368 million, of which £195 million was
from the UK shopping centres and £117 million from our French portfolio. Improvements in investment yields accounted for 78% of this
gain, with the remainder of the valuation uplift principally associated with leasing and ERV changes.
For UK shopping centres, investment yields fell by an average of 25 basis points, contributing £127 million, or 65% of the revaluation gain.
The benefit of leasing and market income growth produced a valuation increase of £67 million. The UK retail parks valuations increased
by £19 million associated with an uplift from leasing and ERV changes as yields were virtually unchanged.
In France, investment yields reduced by an average of 40 basis points during 2015, generating a £161 million valuation increase. This uplift
was partly offset by a valuation reduction of £15 million associated with reductions in ERVs and £29 million associated with local taxation
changes and refurbishment expenditure ahead of retenanting at a number of centres.
Developments and the UK Other portfolio achieved a revaluation gain of £37 million, following letting and construction progress at
Victoria Gate, Leeds and Watermark WestQuay, Southampton.
Further valuation and yield analysis is included in tables 107 and 108 in the Additional Disclosures section on page 169.
RETURNS
Table 54
Returns summary
Proportionally consolidated, including premium outlets
Return
% Benchmark
UK portfolio income return
UK portfolio capital return
UK portfolio total return
Group income return
Group capital return
Group total return
Total shareholder return over one year
Total shareholder return over three years p.a.
Total shareholder return over five years p.a.
4.8 UK IPD All Retail Universe income return*
5.2 UK IPD All Retail Universe capital return*
10.2 UK IPD All Retail Universe total return*
4.9 Group weighted IPD All Retail Universe income return*
7.1 Group weighted IPD All Retail Universe capital return*
12.4 Group weighted IPD All Retail Universe total return*
2.4 FTSE EPRA/NAREIT UK index over one year
10.9 FTSE EPRA/NAREIT UK index over three years p.a.
11.4 FTSE EPRA/NAREIT UK index over five years p.a.
* As Annual IPD indices have yet to be published, the benchmark IPD returns shown above have been estimated. See page 59 for further explanation.
%
5.1
3.8
9.0
4.9
4.8
9.9
12.1
19.0
15.0
58
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Property returns
Table 54 compares the financial returns generated in 2015 with benchmark IPD indices. The returns include development properties and
the Group’s returns include those from the properties held through its investments in Value Retail and VIA Outlets. The Group’s weighted
IPD All Retail Universe total return benchmark of 9.9% is weighted 70:30 between the UK and French indices. The All Retail Universe
indices includes returns from all types of retail property.
As the Annual IPD benchmarks for both countries are not available until after this Annual Report has been published, the benchmarks
have been estimated and are subject to revision. The UK IPD data is based on the Quarterly All Retail Universe to December 2015. As
there is less data available for France, for the purposes of calculating the Group IPD benchmarks, we have assumed that the French
benchmark is equal to the returns generated by our French portfolio.
The Group’s total return was 12.4%, 250 basis points higher than the estimated benchmark. The Group’s outperformance was driven
by the property portfolio held by our premium outlet investments which produced a total return of 23.7%. The total return for the UK
portfolio was 10.2% which was higher than the UK IPD index, although the income return was 30 basis points lower, reflecting the prime
nature of the Group’s UK portfolio. The French portfolio generated a total return of 12.0%.
In 2015, the Reported Group portfolio generated a total return of 10.6%, whilst properties held by our joint ventures and associates
generated a total return of 14.3%. Both portfolios exceeded the estimated benchmark, the performance of the latter portfolio being
boosted by the strong return from premium outlets.
+ An analysis of the capital and total returns by business segment is included in table 107 on page 169
Shareholder returns
For the year ended 31 December 2015, the Group’s return on shareholders’ equity was 14.3%, which compares to the Group’s estimated
cost of equity of 8%. The income element of the return on equity tends to be relatively low given the prime nature of the property
portfolio. The capital element of the return was driven by the portfolio’s strong valuation performance during the year.
Hammerson’s total shareholder return for 2015 was 2.4%, which represents an underperformance of the FTSE EPRA/NAREIT UK index
by 970 basis points. Over the last five years, the Group’s average annual total shareholder return has been 11.4%, compared to 15.0% for the
FTSE EPRA/NAREIT UK index.
INVESTMENT IN JOINT VENTURES AND ASSOCIATES, INCLUDING INVESTMENTS IN PREMIUM OUTLETS
Investment in joint ventures, including VIA Outlets
At 31 December 2015, the Group’s investment in joint ventures totalled £3,214 million compared with £2,341 million at the beginning
of the year, an increase of £873 million. The key change during 2015 was the acquisition of the Irish loan portfolio in a new 50:50 joint
venture with Allianz for a cost of £690 million, further details of this transaction are given on page 26 of the Business Review.
The movement in investments in joint ventures during 2015 is shown in table 55 and further analysis is provided in note 12D
of the accounts.
Table 55
Analysis of movements in investment in joint ventures
Group’s share of investment including premium outlets
Balance at 1 January 2015
Acquisitions
Capital advances
Transfer to Reported Group
Share of results of joint ventures:
Adjusted earnings
Property revaluation
Other results
Distributions and other receivables
Foreign exchange and other movements
Balance at 31 December 2015
Share of Property
joint ventures
£m
2,237
690
41
(11)
111
122
1
234
(85)
(3)
3,103
VIA
Outlets
£m
104
–
5
–
6
10
(3)
13
(7)
(4)
111
Total
£m
2,341
690
46
(11)
117
132
(2)
247
(92)
(7)
3,214
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Financial review continued
Investment in associates, including Value Retail
The Group’s investment in associates principally relates to the Group’s investment in Value Retail PLC and its group entities (‘VR’)
and totalled £768 million at 31 December 2015, an increase of £139 million during 2015. The increase was largely due to the revaluation
gain on VR’s property portfolio which totalled £164 million, of which 42% was due to yield movements and the balance associated with
income growth.
During the year, acquisitions increased the investment by £37 million, of which £24 million related to the acquisition in January of a 10%
interest in Nicetoile, and the remainder related to an additional VR stake in Kildare Village acquired in December. Distributions totalled
£45 million, which principally related to funds received by the Group in December, following a debt refinancing by VR in relation to
Bicester Village. Further analysis is provided in note 13 to the accounts on pages 145 and 146.
Total investment in premium outlets
At 31 December 2015, on an EPRA adjusted basis, the Group’s total investment in premium outlets, representing our share of VR and
VIA, and including the Group’s loans to VR and the investment in VR China, totalled £1,003 million (2014: £832 million). The property
portfolios produced a combined valuation surplus of £174 million and produced a combined capital return of 16.4% and a total return
of 23.7%. Further details of the Group’s aggregated investment are provided in table 110 of the Additional Disclosures on page 170.
FINANCING AND CASH FLOW
Our financing strategy is to generally borrow on an unsecured basis on the strength of the Group’s covenant to maintain operational
flexibility. Borrowings are arranged to 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 which we
maintain strong working relationships. Long-term debt mainly comprises the Group’s fixed rate unsecured bonds. Derivative financial
instruments are used to manage exposure to fluctuations in foreign currency exchange rates and interest rates, but are not employed for
speculative purposes.
The Board approves financing guidelines against which it monitors the Group’s financial structure. These guidelines, together with the
relevant metrics, are summarised in table 56 which illustrates the Group’s robust financial condition.
Table 56
Key financing metrics
Proportionally consolidated, excluding premium outlets
Guideline
Net debt (£m)
Gearing (%)
Loan to value* (%)
Liquidity (£m)
Weighted average interest rate (%)
Weighted average maturity of debt (years)
Interest cover (times)
Net debt/EBITDA (times)
FX hedging (%)
Debt fixed (%)
Maximum 85% for an extended period
No more than 40% for an extended period
At least 2.0
Less than 10.0
80-90%
At least 50%
31 December
2015
31 December
2014
2,968
54
38
931
3.8
5.7
3.6
9.6
90
61
2,265
46
34
648
4.7
6.5
2.8
8.0
88
79
* Includes the Irish loan assets of £690 million within the denominator.
On a proportionally consolidated basis, net debt at 31 December 2015 was £2,968 million (2014: £2,265 million), reflecting borrowings
of £3,038 million and cash of £70 million. During 2015, net debt increased by £703 million and the movement is shown in table 57.
Table 57
Movement in net debt
Proportionally consolidated, excluding premium outlets
Net debt at 1 January 2015
Net cash inflow from operations
Acquisitions
Disposals
Development and other capital expenditure
Equity dividends paid
Advances and distributions
Exchange and other
Net debt at 31 December 2015
60
Total
£m
2,265
(191)
822
(185)
200
164
(47)
(60)
2,968
HAMMERSON PLC ANNUAL REPORT 2015 Through active treasury management, we have continued to reduce the Group’s average cost of debt as well as ensuring a solid funding
platform. Key transactions during 2015 included the signing of a new £415 million unsecured revolving credit facility in April, at an initial
margin of 80 basis points with a syndicate of nine banks. The facility has a maturity of five years which may be extended to a maximum of
seven years at the Group’s request and on each bank’s approval of their participation. The new facility replaced the existing £505 million
revolving credit facility with an initial margin of 150 basis points which would have matured in April 2016. The cancellation of this existing
facility resulted in a one-off exceptional interest charge of £1.0 million associated with the write-off of unamortised fees.
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In the second half of the year we undertook a number of financing transactions, principally to support the acquisition of the Irish loan
portfolio. To fund the acquisition we raised a new €1.5 billion revolving credit facility, of which €1.0 billion matures in March 2017 and
€0.5 billion in September 2017. This is expected to be refinanced through a £500 million disposal programme, of which £200 million has
already been contracted. In October, we issued a ten-year £350 million bond at a coupon of 3.5%. This bond was subsequently swapped
into euros resulting in a net coupon cost of 2.5%. In December, we redeemed an outstanding £272 million bond due to mature in
December 2016 with a coupon of 5.25% for a total consideration of £284.6 million. This resulted in a one-off exceptional finance cost of
£12.9 million.
Exposure to exchange translation differences on euro-denominated assets is managed through a combination of euro borrowings and
derivatives. At 31 December 2015, the value of euro-denominated liabilities compared to the value of euro-denominated assets was 90%,
an increase of 2% from the position at the beginning of the year. Interest on euro debt also acts as a hedge against exchange differences
arising on rental income from our French business. Approximately two-thirds of the relevant income was hedged in this way during 2015,
compared to an average of 82% during 2014. Whilst the overall level of euro-denominated debt grew during 2015 to increase the hedge
of assets, the reduction in the hedge of income was due to increased rental income from our French business, predominantly due to the
opening of Les Terrasses du Port in May 2014.
The Group’s unsecured bank facilities and the US private placement senior notes contain financial covenants that the Group’s gearing,
defined as the ratio of net debt to shareholders’ equity, should not exceed 150% and that interest cover, defined as net rental income
divided by net interest payable, should not be less than 1.25 times. The same gearing covenant applies to three of the Company’s
unsecured bonds, whilst the remaining bonds contain a covenant that gearing should not exceed 175%. These figures are on a
proportionally consolidated basis and the bonds have no covenant for interest cover. Hammerson’s financial ratios are comfortably within
these covenants. Fitch and Moody’s rate Hammerson’s unsecured credit as A- and Baa1 respectively. Moody’s upgraded its rating from
Baa2 in February 2015 to recognise “Hammerson’s high-quality retail portfolio with a strong focus on outlet retail, its progress in reducing
leverage and improving fixed charge coverage, and the expectation of continued stable performance of its core UK assets”, and reaffirmed
this rating in October following the Irish loan portfolio acquisition.
As explained at the beginning of this Financial Review, we do not proportionally consolidate our two premium outlet investments for
reporting purposes. These are financed independently from the rest of the Group and both Value Retail and VIA Outlets utilise a
combination of secured borrowings and partner loans as funding. At 31 December 2015, the Group’s share of net debt in VR and VIA
totalled £362 million. Including the Group’s share of the net assets of VR and VIA on a proforma basis would increase the Group’s gearing
from 54% to 60%, whilst the loan to value would reduce from 38% to 37%.
Chart 58
Debt maturity profile at 31 December 2015 (£m)
Proportionally consolidated, excluding premium outlets
800
600
400
200
0
690
40
249
366
365
246
128
135
345
22
298
198
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Bank debt drawn
Secured debt
Euro bonds
Sterling bonds
US Private Placement
61
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PRINCIPAL RISKS AND UNCERTAINTIES
Managing uncertainty
The assessment and management of risk underpins our operating,
financial and governance activities.
Effective risk management underpins our business model. Our risk management policies are designed to reduce the chances of financial
loss, protect our reputation and optimise performance when opportunities arise. The Board assesses and controls the Group’s risk
appetite and regularly monitors our Risk Management Framework to ensure risks are being appropriately mitigated and new risks
identified. The framework is reviewed by our management teams and communicated to all our staff.
RISK MANAGEMENT RESPONSIBILITIES
The responsibility for risk management rests ultimately with the Board. However, the foundations of our approach are instilled in our
culture and values. The relatively low number of personnel across the Group encourages effective collaboration and the flat management
structure means that the senior team is actively involved in ensuring adherence to the Group’s risk management policies and procedures,
including risk identification and mitigation.
Chart 59 summarises the key roles and responsibilities for the Group’s risk management strategy and demonstrates the interaction
between the Board and management teams in ensuring effective risk management is applied across the Group’s activities.
Chart 59
Key roles and responsibilities for the Group’s risk management strategy
BOARD
– Overall responsibility for corporate strategy, governance, performance,
internal controls and risk management
– Defines the Group’s appetite for risk and monitors risks to ensure these
are effectively managed, including agreeing actions where necessary
AUDIT COMMITTEE
– Reviews effectiveness of the Risk Management Framework and
internal controls on behalf of the Board
– Ensures compliance with relevant legislation, rules and regulations
– Oversees effectiveness of the Group’s internal audit arrangements
GROUP EXECUTIVE
COMMITTEE
– Management of the business and delivery of strategy
– Formally reviews the Risk Management Framework including
monitoring key risk indicators
RISK AND CONTROLS
COMMITTEE
– Responsible for integration of the Risk Management Framework
throughout the business
DIVISIONAL MANAGEMENT:
UK, FRANCE AND IRELAND
– Monitors compliance with the Group’s internal control systems
– Management of the internal audit arrangements
– Responsible for implementation of risk mitigation actions and
monitoring compliance with internal controls and procedures at the
operational level of the business
– Formal reviews of the Risk Management Framework to identify risk
trends
– Oversight of project level risk management activities
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RISK MANAGEMENT FRAMEWORK
Our Risk Management Framework is structured around eight principal risk areas, contains mitigating actions and allocates management
responsibility for each individual risk. The framework is subject to regular management review, including at each Risk and Controls
Committee and Audit Committee meeting. The framework designates a level of residual risk to each principal risk area, taking account
of mitigation actions, and this residual risk is considered in the context of our risk appetite. During 2015, the Board carried out a robust
assessment of the principal risks and determined that the level of residual risk associated with our principal risk areas has generally
increased, although each remains within our risk appetite. An assessment of the potential impact and probability associated with each
of our principal risks is shown on chart 60.
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Chart 60
Principal Risks: Potential impact and probability assessment
1 Business strategy
2 Property and corporate investment
3 Property development
4 Treasury
5 Ownership structures
6 Tax and regulatory
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Catastrophic event
Business organisation and human resources
Low
Medium
High
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LOW
PROBABILITY
HIGH
Note: Arrow indicates change in risk assessment during 2015.
CASE STUDY – HEALTH AND SAFETY IN ACTION
CRISIS MANAGEMENT
We are committed to managing health and safety risks
throughout our operations. The Board approves the health and
safety strategy which is administered by the Health and Safety
Committee, chaired by the Chief Financial Officer. It is our goal
to ensure that we cause no harm to our staff or to visitors to our
properties. We achieve and measure this through maintaining
high safety and welfare standards which include:
The risk of a catastrophic event, such as a terrorist incident
at one of our properties, has increased during 2015. We have
comprehensive emergency plans in place including the
formation of a Core Crisis Group (CCG) to react to a range
of major incidents. During an incident, the CCG would provide
direction to our property-based teams as well as managing
customer and media relations.
– The employment of a Chartered Professional Health and
Safety Practitioner and specialist team to provide strategic
and operational support to all areas of the business;
– Developing a comprehensive safety and emergency
preparedness training programme;
– Regular reporting and monitoring of adherence to the
Group’s health and safety policies including the use of
external and internal audits; and
– Accreditation of the Hammerson Health and Safety
management system against ISO18001.
This continual focus on health and safety has helped ensure that
during 2015 we have maintained a 100% compliance record with
all regulatory requirements and had no major injuries to our
employees. We have also reduced the number of visitor accidents
at our portfolio by 16% to 486, which is very low compared to
footfall levels, and only 32 were RIDDOR reportable incidents.
The CCG includes the Executive Directors who are responsible
for key decisions within previously agreed strategic principles
which place the protection of life above any other
consideration. This team must be properly equipped to address
any major incident.
In October, we organised an externally-facilitated exercise
to simulate a plausible incident at one of our shopping centres
which involved life safety issues, disruptions to normal
operations and extensive media coverage. The CCG worked
through the scenario, whilst receiving additional updates from
key external organisations and the media, to determine
response priorities and organise the responses needed for
a full recovery and resumption of business. The event affirmed
the strength of the Group’s plans, although a number of
improvements were identified which are being implemented.
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Principal risks and uncertainties continued
PRINCIPAL RISKS
Further details of the key risks within each of the Group’s principal risk areas is shown below.
Risk and impact
Mitigation
Change during 2015 and outlook
1. BUSINESS STRATEGY
Executive responsibility: David Atkins
– Our retail strategy of investing in
shopping centres, retail parks and
premium outlets in selected European
countries results in underperformance
relative to other sectors or markets,
eroding shareholder value.
– The macro-economic environment
declines, impacting consumer
spending and property values,
adversely impacting earnings and net
asset value.
– Failure to anticipate and address
developments in consumer and
occupational markets, such as
multichannel retailing and digital
technology results in obsolescence and
financial underperformance.
Link to business model
1
2
3
Impact
Probability
– We focus on prime shopping centres in the best
locations, convenient retail parks and premium
outlets, all with experienced management.
The UK economy has seen solid growth during
2015, although the recovery in France has been
less pronounced.
– We commission and evaluate research into the
economy and investment and occupational markets
and use this when preparing our annual Business
Plan and regular financial forecasts.
– Within our Business Plan we stress-test our
projections against a severe downside economic
scenario. This has confirmed that our current and
projected financial position is robust. We have low
gearing, effective foreign currency hedging,
long-term secure income streams, a good spread of
debt maturities and the flexibility to phase or halt
our development programme, all of which point to
resilience to market shocks.
– We monitor closely developments in the retail
environment and apply our Product Experience
Framework to ensure our portfolio remains
attractive to both retailers and consumers.
Stock markets have been volatile, especially in the
second half of 2015 and beginning of 2016 due to a range
of conflicting economic data and external shocks.
Whilst growth is forecast in the UK, France and Ireland
there are downside risks associated with China, Brexit
and the Middle East which could adversely impact
economic stability.
UK and French retail sales have grown during 2015
which has strengthened the occupational retail market.
Retailers continue to seek new space, and physical real
estate remains central to their plans. Retailers are
concentrating their requirements on properties which
can support their multichannel sales offer and are able
to attract consumers.
+
See Our market section on page 14
2. PROPERTY AND CORPORATE INVESTMENT
Executive responsibility: David Atkins/Peter Cole
– Investment decisions result in
– Acquisitions are thoroughly evaluated and are
inadequate returns or the adoption of
unforeseen liabilities.
– Opportunities to divest of properties
are missed, or are limited by market
constraints, which reduces potential
returns and adversely impacts the
Group’s funding strategy.
Link to business model
2
supported by detailed review, financial appraisals,
due diligence and a risk assessment prior to
Board approval.
– The performance of individual properties is
benchmarked against target returns.
– Properties are held in a ‘ready for sale’ state,
with documentation supporting leases, rights
and obligations readily accessible.
– Our property portfolio is high-quality, and
diversified by market sector and geography,
reducing the impact of a downturn in a single
market.
Impact
Probability
We have recently completed a number of significant
acquisitions, principally the Irish loan portfolio and
Grand Central in Birmingham. The performance of
these large transactions will be closely scrutinised.
Borrowing levels are forecast to reduce in 2016 through
the completion of the major disposals programme
announced in September.
Real estate investment demand, particularly for prime
assets, remains strong in the UK, France and Ireland.
This is further supported by the continuing low interest
rate and inflation environment. These factors have
contributed to a rise in real estate values during 2015.
Future valuation growth is forecast to be more subdued
and be driven more by income growth than inward yield
movements. Also, any macroeconomic uncertainty
could adversely impact investment markets.
+
See Our market section on page 14
KEY TO PRINCIPAL RISKS TABLE: ALIGNMENT TO BUSINESS MODEL
Operational activities
Change in risk assessment in 2015
Asset management
Impact
Probability
Investment management
Developing venues
Financial efficiency
See pages 4 and 5 for Our Business Model
Higher
No change
Lower
1
2
3
4
+
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Risk and impact
Mitigation
Change during 2015 and outlook
3. PROPERTY DEVELOPMENT
Executive responsibility: Peter Cole
– Over-exposure to developments,
particularly major long-term schemes,
increases the impact of an economic
downturn which would adversely
affect scheme viability and increase
financing and cash flow pressures.
– Poor development management and
inadequate resourcing leads to failed
or sub-optimal projects.
– Increasing construction activity and
raw material prices result in
construction price inflation adversely
impacting the viability and financial
returns of projects.
– Failure to achieve key project
milestones, such as planning consents,
land acquisitions and leasing targets,
on a timely basis damages project
viability and corporate reputation.
– Our exposure to developments and the phasing
of projects is considered as part of our annual
Business Plan and reviewed throughout the year.
This process also considers future resourcing
requirements.
– We produce regular management reporting,
including risk reporting, to enable effective
monitoring of development projects.
– Multi-disciplinary teams are assembled for each
development under a designated ‘project owner’,
and these are supported by external expertise.
– Detailed analysis, including market research, is
undertaken prior to the approval of expenditure
for each key milestone for development projects.
– Where possible, guaranteed maximum price
contracts are agreed with building contractors and
fixed prices agreed for other advisers.
– Constructive relationships are maintained with
local councils and government.
Links to business model
– Post-completion reviews are undertaken for all
3
significant projects and presented to management,
including the Audit Committee. These ensure
potential improvements to processes are identified
and considered for future projects.
Impact
Probability
During 2015 we have reduced the level of risk associated
with developments by progressing the development
pipeline and have successfully completed four
developments. At 31 December 2015, two further
schemes are on-site and the development portfolio
represents only 5% of our property portfolio.
As we approach the commencement of our major
development schemes we will only commit when sound
financial and risk analysis demonstrates scheme
viability and good returns. The progress made with our
three major London schemes during the year coincides
with improving demand from retailers for new prime
trading locations. However, a number of key milestones
including further planning consents, anchor tenants
agreements and leasing targets are required to bring
these schemes to fruition.
We have allowed appropriate cost inflation
contingencies within the scheme appraisals and to lock
in competitive pricing we will look to secure
construction contracts well ahead of schemes going
on-site. Cost inflation should be tempered by the
reduction in the oil price and lower global demand for
raw materials.
+
See Business Review on page 34
4. TREASURY
Executive responsibility: Timon Drakesmith
– Poor treasury 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.
– The Board approves our treasury strategy and
regularly monitors guidelines for financial ratios.
These guidelines include ensuring we maintain an
appropriate debt maturity profile, and manage the
exposure to fixed and floating interest rates and the
level of foreign exchange hedging.
– Credit ratings are set and monitored for lending
– Adverse currency or interest rate
movements result in financial losses.
counterparties and we use diverse sources
of funding.
– Deterioration in our financial position
may result in a breach of borrowing
covenants which triggers default and/
or repayment of facilities or bonds and
inhibits corporate strategy.
Links to business model
4
– The Board approves all major investment decisions
which are supported by a financing plan and takes a
proactive approach to refinancing.
– Our annual Business Plan includes stress tests
considering the impact of a significant
deterioration in the markets in which we operate.
– The high quality and diversification of our portfolio
should help to protect our financial position,
particularly from falling property values. At
31 December 2015, gearing stood at 54%,
significantly lower than the Group’s most stringent
borrowing covenant that gearing should not exceed
150%. We estimate that property values (including
premium outlets) could fall by 42% from their
December 2015 levels before covenants would
be endangered.
Impact
Probability
Our borrowing levels and near-term refinancing
requirements have increased during 2015, principally
associated with the Irish loan portfolio acquisition.
However, at 31 December 2015, our balance sheet and
financial ratios remain robust. We have access to a wide
range of funding sources including bank lending, bond
and equity market, and private placements and we
completed a number of significant financing
transactions during 2015. We expect to maintain a
strong financial position during 2016 and credit rating
agencies have recently reaffirmed our ratings.
The macro-economic environment has continued to
provide historically low interest rates and the financial
markets have good levels of liquidity for companies in a
strong financial position. However, macro-economic
uncertainties could adversely impact future liquidity
and pricing.
Whilst there is an expectation, particularly in the UK, of
future interest rates increases, these are forecast to be
gradual and dependent on the underlying strength of
the wider economy.
Sterling has strengthened by 5% against the euro during
2015 and remains volatile with continued challenges
within the eurozone and the current wider global market
uncertainties. However, we mitigate our foreign exchange
risk by maintaining a high level of currency hedge.
+
See Financial Review on page 60
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Principal risks and uncertainties continued
Risk and impact
Mitigation
Change during 2015 and outlook
5. OWNERSHIP STRUCTURES
Executive responsibility: Peter Cole
– Joint control reduces liquidity
and could impact operational
effectiveness, especially if joint
venture partners are not
strategically aligned.
– Lack of direct control over externally
managed premium outlet interests
reduces transparency of performance
and governance and may result in
inconsistent strategies.
Links to business model
1
2
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– We undertake an annual liquidity review of all our
properties. We have a diverse range of joint venture
partners and documentation is drafted to ensure
strategic alignment and to provide liquidity for
partners whilst protecting our ownership.
– We maintain strong working relationships and hold
regular meetings with our partners to proactively
manage any issues. Annual business plans are used
to ensure operational and strategic alignment.
– We have an increasingly close working relationship
and have formal influence over strategy and
governance through board representation for both
Value Retail and VIA Outlets. Our investment in
VIA Outlets contains provisions to enable effective
joint governance and control.
– Our premium outlet investments are both subject
to external audit and the properties are
independently valued for us by Cushman and
Wakefield with the valuations reviewed by
management and the Audit Committee.
Impact
Probability
Joint ventures reduce the exposure risk associated
with owning major shopping centres and we have a
long and successful track record of working effectively
with a variety of partners.
During 2015, the proportion of properties held within
joint ventures or associates has increased to 45%
(by value) at 31 December 2015, principally due to
the sales of wholly-owned properties: Drakehouse,
Bercy 2 and Grand Maine. This figure will increase
further in 2016 when the Irish properties are secured
and with the completion of the acquisition of Grand
Central, Birmingham.
We are confident that joint venture ownership
structures do not adversely impact liquidity with
a number of joint venture stakes successfully traded
in the investment market during 2015.
+
See notes 12 and 13 to the accounts
6. TAX AND REGULATORY
Executive responsibility: Timon Drakesmith
– Loss of tax-exempt status due
to change in legislation or
non-compliance.
– EU/UK regulation, including
environmental matters, acts as a brake
on growth and an administrative
burden for the real estate sector.
Links to business model
4
– Compliance with rules for maintaining tax-exempt
status monitored by in-house tax specialist and
external advisers.
– Speculation and comment relating to changes in
tax regimes in the UK and Europe is monitored
with the help of external advisers.
– Developments in regulation are monitored and
governments and regulators lobbied through
representation by UK and European real estate
trade bodies.
– Monitoring of exposure to key regulations and
mitigation planning is undertaken at a portfolio
level. We also undertake active participation in
policy consultations and in industry-led dialogue
with policy makers.
7. CATASTROPHIC EVENT
Executive responsibility: David Atkins
– Our operations, reputation or financial
security could be significantly affected
by a major event such as a terrorist or
cyber attack, power shortage or civil
unrest.
– Climate change could adversely
impact our operations, through an
environmental incident such as
flooding or changes in consumer or
investor behaviour.
Links to business model
1
66
– We have continuity plans at both corporate and
individual property levels and have established a
Core Crisis Group for dealing with a major incident.
– We have enhanced the physical security measures
at our properties and maintain an on-going
dialogue with security agencies to assess threat
levels and best practice.
– Our insurance policies include cover for property
damage, including from terrorism and climate
change, such as flooding.
– We have a clear sustainability strategy which is
integrated within our business model and
addresses on-going climate change matters.
Impact
Probability
No significant changes during 2015, although
governments continue to seek to reduce fiscal deficits.
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, such as the
proposed OECD BEPS project.
Changes in the UK associated with the living wage,
apprenticeships and business rates, whilst not having a
significant direct impact on us, may have an adverse
financial impact in the wider retail sector. Negotiations
associated with Brexit are also likely to impact existing
legislation.
+
See Financial Review on page 56 and note 8
to the accounts
Impact
Probability
Whilst the overall probability of a major incident at one
of the Group’s properties remains low, the threat level
has increased during 2015. Also the wider use of digital
technology across the Group increases the risks
associated with cyber security.
We have thoroughly reviewed and improved our
processes and procedures to counter the threat of a
major incident. However, it is not possible to fully
mitigate the risk and impact if an incident were to occur.
+
See Health and Safety case study on page 63
HAMMERSON PLC ANNUAL REPORT 2015
Risk and impact
Mitigation
Change during 2015 and outlook
8. BUSINESS ORGANISATION AND HUMAN RESOURCES
Executive responsibility: David Atkins
– Management structures or resourcing
levels are inappropriate for achieving
business objectives.
– Failure to recruit and retain key
executives and staff with appropriate
skills and calibre undermines
corporate strategy.
Links to business model
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2
3
– A human resources plan is included within
the annual Business Plan. This considers
team structures, training requirements and
talent management.
– The Nomination Committee approves succession
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.
– We have established a management competency
framework and management skills are formally
assessed within the annual appraisal process.
Impact
Probability
During 2015, we have successfully completed the
relocation of our London headquarters and established
our new operations centre in Reading.
We recognise the importance of motivating and
developing our staff and have plans in action to help to
mitigate the impact of third party recruitment
approaches in a strong recruitment market. We have
had improved employee engagement scores from our
employee surveys undertaken during the year and will
implement a number of enhancements based on the
feedback received.
2016 will require significant effort to establish and
integrate our new Irish platform with our existing
Group structures and processes.
+
See Our people section on page 49
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GOING CONCERN
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in
the Business Review, the Financial Review and the Principal Risks and Uncertainties sections of the Annual Report. The financial position
of the Group, its liquidity position and borrowing facilities are also described on pages 60 and 61 and in notes 17, 19 and 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.
VIABILITY STATEMENT
In accordance with provision C.2.2 of the 2014 revision of the Code, the Directors have assessed the viability of the Group over a longer
period than the 12 months required by the ‘Going Concern’ provision. The Board conducted this review, taking account of the Group’s
current position, future plans and the potential impact of the Principal Risks documented within this section. Based on this review, the
Directors have concluded that they have a reasonable expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over a five-year period to 31 December 2020. This period was selected for the following key reasons:
i) The Group’s annual Business Plan covers a five-year period and considers the Group’s cash flows and key financial metrics and
includes sensitivity analysis to validate the Group’s resilience and mitigation options to adverse events.
ii) The Group has a stable, secure income stream with five-year, upward only, rent reviews and has an average unexpired lease term of six
years at 31 December 2015.
iii) The time-scale for the delivery of the Group’s major development schemes is approximately five years and currently extends
beyond 2020.
iv) Whilst £1.6 billion of the Group’s borrowings are due to mature within the five-year period, the Directors have a reasonable
expectation, and have assumed, that these can be refinanced on normal market terms during that period, and as at 31 December 2015
the Group’s weighted average debt maturity was six years.
v) Most leases contain a five-year rent review pattern and therefore five years allows for the forecasts to include the reversion arising
from those reviews. The five-year strategic review considers the Group’s cash flows, dividend cover, REIT compliance and other key
financial ratios over the period.
2015 STRATEGIC REPORT
Pages 1 to 67 of this Annual Report constitute the Strategic Report. It has been approved and signed on behalf of the Board on
12 February 2016.
DAVID ATKINS
TIMON DRAKESMITH
Director
Director
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CHAIRMAN’S LETTER
Setting Hammerson’s
values and standards
“ I believe that strong
corporate governance,
underpinned by a sound
culture, is fundamental
to our success and our
ability to meet our
business goals and
generate value over
the longer term.”
David Tyler
Chairman
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Dear Shareholders,
On behalf of the Board, I am pleased to present Hammerson’s Corporate
Governance Report which aims to provide an insight into how the Board spent
its time during 2015. As in previous years, details of how we discharged our
governance duties and applied the principles of the UK Corporate Governance
Code (the Code) are contained in a separate section from page 102.
We have recently seen a much greater recognition among the
investor community of the importance of corporate culture in
how businesses manage risk and secure a strong performance. In
part, this is being driven by the Financial Reporting Council which
has a major initiative under way on this topic.
I believe that strong corporate governance, underpinned by a
sound culture, is fundamental to our success and helps ensure we
can meet our business goals and generate value over the longer
term. Your Board plays a key role in shaping Hammerson’s culture
both in the boardroom and across the wider organisation.
During the year, the Board considered as part of the 2015 Board
effectiveness review how effectively it sets the tone from the top.
You can read more about this in the Board’s roundtable discussion
on page 70. The Board also had a number of opportunities during
the year to engage with colleagues across the business, both
formally and informally. These meetings gave Directors further
insight into how Hammerson’s values are embedded in the
business and you can read more about this on page 75.
CHANGES TO THE BOARD
Effective boards need directors who bring the right balance of
skills, experience and knowledge, enhanced by a range of diverse
backgrounds. During the year, we welcomed two new Non-
Executive Directors to the Board, Pierre Bouchut and Andrew
Formica. The work associated with making changes to the Board
and monitoring succession planning across the business were
important elements of the Nomination Committee’s activity –
further details can be found on page 78.
Jacques Espinasse will retire from the Board at the conclusion
of this year’s Annual General Meeting, after nine years of service
as a Non-Executive Director. He has also been a member of the
Audit Committee since 2007, and chaired that Committee since
April 2014. I would like to record my thanks to Jacques for the
significant and valuable contribution he has made to the Board
and the Company.
BOARD EFFECTIVENESS REVIEW
Our General Counsel and Company Secretary, Sarah Booth,
facilitated the 2015 Board effectiveness review. In it, Directors
discussed various topics focused on themes drawn from the Code.
These included how the Board works together, influences
Hammerson’s culture and values, sets the Company’s strategic
aims and assesses risk. She reviewed the responses and discussed
them with me before tabling a report and recommendations to the
Board. Actions were agreed and incorporated where appropriate
into the 2016 Board work plan. These included:
– Further enhancements to our strategic planning process;
– Continued focus on the talent-development aspects of
succession planning;
– A presentation by external advisers to the Board on culture
and ethics;
– An on-going programme of engagement and site visits; and
– Preparation of a list of discussion topics for Board dinners.
Progress on the actions arising from the 2014 Board effectiveness
review was also considered as part of the 2015 review. Further
details can be found in this report as set out below:
– Succession planning – see Nomination Committee Report,
page 79.
– Improving the structure of the Board strategy day – see page 76.
– Further engagement with colleagues – see page 76.
The next Board effectiveness review will take place in 2016 and
will be conducted by an external facilitator.
I would like to conclude by thanking my colleagues on the Board,
the management team and all our colleagues in the Group for
delivering yet another strong performance in 2015.
David Tyler
Chairman
COMPLIANCE STATEMENT
The Company complied in full with the provisions of the
UK Corporate Governance Code published in September
2014 which applied throughout the financial year ended
31 December 2015.
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CORPORATE GOVERNANCE REPORT
In conversation with
the Board
Sarah Booth, the General Counsel and Company Secretary, talks to the Directors about
their views on several aspects of the Board’s activities. These include how the Board works
together and achieves effective decision-making, its role in promoting Hammerson’s culture
and values, how effectively risk is managed and strategy is set, and the Board’s input into
succession planning.
Gwyn Burr/David Tyler/Timon Drakesmith
Sarah Booth
Let’s start by considering how well you think the Board works
together and achieves consensus.
Pierre Bouchut
During my first year on the Board I have found the dialogue and
debate open and constructive. Board members bring diversity of
talents, backgrounds and style but all approach meetings ready to
contribute to and challenge the debate. There is also a balance of
interaction between all the Directors and our relationship with
management is healthy.
Peter Cole
David Tyler encourages a collaborative and collegiate
environment on the Board which fosters open discussion. I find
discussion about key risks facing the business, the economic
environment and the changing nature of occupier and investment
demand is very helpful in shaping the Company’s investment and
development activities.
Andrew Formica
I have also recently joined the Board. During the interview process
and in my initial meetings with fellow Directors, I was impressed
by everybody’s collegiate, friendly but professional attitude. The
Board is clearly unified in its thinking around strategy and
direction but each Director brings their own experiences and
perspectives to the Board table.
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Gwyn Burr
The Board’s diversity helps inform our debates and we have a wide
range of experience to draw on. As newer members of the Board,
Pierre and Andrew will both add to its capability, bringing
financial and real estate experience to complement further our
existing skills.
David Atkins
Discussions are positive, transparent and open. We also use
informal Board dinners to discuss wider business topics and
we hope to have more opportunities to do so in 2016.
Terry Duddy
I agree. The recent Board discussion on Ireland and the
opportunities there was underpinned by very informative papers
prepared by management which enabled us to consider the risks
involved in what I thought was a well-balanced way. This resulted
in clear decision-making. The Chairman is skilled at encouraging
all members to contribute to the debate and at bringing the
discussion to a timely conclusion.
Judy Gibbons
Yes, that is a good example. It required the Board to absorb a
considerable amount of background information and understand
the implications of a major acquisition in a new market. The
Board’s discussion was robust and sufficient time was allowed for
everyone to become fully-briefed and have the confidence
individually to give their approval to the project.
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Sarah Booth
The UK Corporate Governance Code states that one of the key
roles for the Board is to establish the culture, values and ethics of
the Company and to set the tone from the top. How well does the
Board do in this area?
David Tyler
Hammerson’s values are central to the way we run the business.
We make a point of setting them out clearly: ambition,
responsibility, collaboration and respect. However, I recognise
that the way we live these values and our behaviours are even
more important than the statement of our values. Hammerson’s
financial success must continue to be built on ethical behaviours.
We deal with our business partners with respect and treat them as
we would hope and expect to be treated ourselves.
Andrew Formica
As Chief Executive, David Atkins provides strong leadership and
instils the culture that makes Hammerson such an attractive place
to work. He is ably supported by David Tyler and the rest of the
Board, who all share his vision.
Timon Drakesmith
I agree. Given his long experience in the property industry and in
the Company itself, David Atkins is a key culture champion at
Hammerson. I am particularly encouraged by the opportunities
we have for Non-Executive Directors to interact with colleagues
and set the tone from the top when they visit our assets, such as
the recent Board visit to Reading.
David Atkins
I think we are doing well but there is more work to do to get our
values fully embedded through every part of the business.
Engagement between the Board and colleagues throughout the
organisation is important and allows everybody to see how the
Board works. For example, when colleagues attend Board
meetings, they are encouraged to explain any problems
encountered, to take responsibility for outcomes and to share
lessons learnt with the Board.
Pierre Bouchut
An example of our ethical stance came at a recent Board meeting
where we debated an opportunity to accelerate a deal. There were
aspects of the proposed scheme which didn’t fit with the Company’s
values and ethics, so we all agreed not to proceed. This is a good
example of where the Company’s values influenced our decision.
Terry Duddy
The Executive Directors have worked hard and successfully on
establishing the vision, mission and objectives of the business and
the values that underpin our strategy. The recent office moves in
Reading and London have been important in that process and the
work involved has been done with substantial and overt
encouragement from the Board.
Jacques Espinasse
The head office move to Kings Place has enabled a significant
shift in culture. As we look ahead to a more geographically
diverse business in the future, it will become more important
to have a single aligned Hammerson culture and values system.
We will stay vigilant to monitor how well-aligned we are across
the whole Group.
Judy Gibbons
Yes, we have many opportunities to hold informal meetings with
management that help us assess the underlying perceptions of our
culture and values.
Gwyn Burr
I agree – getting out and about more as a Board acts as a cultural
barometer and that is a good thing. The annual colleague survey also
gives us a good insight into the tone and culture of the organisation.
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Corporate Governance Report continued
Sarah Booth/Jean-Philippe Mouton/Pierre Bouchut
Sarah Booth
Turning to strategy and long-term thinking, how well do you think
the Board performs in these areas?
David Atkins
The annual strategy day in October included a good balance of
opportunities to think in the long and short term as we considered
what the retail environment of the future will look like. We also
discussed the development pipeline and opportunities in this area.
We have a clear strategy which is measured by clear targets and
KPIs. We ensure that new Non-Executive Directors have a
sufficiently full understanding of our business, assets and
competitors to enable them to make a full contribution in
all meetings.
Andrew Formica
As a new Director, I see a consistent message from the Board
around Group strategy and direction. It is apparent that much
debate and discussion goes into the formulation of strategy and
that every Director is fully committed to its delivery.
David Tyler
The Board’s thinking on long-term strategy doesn’t happen in
isolation. It is influenced by the changing economic backdrop
both in the UK and Europe and the fast evolving nature of retail
and customer behaviour. Recently we have also looked at what the
impact might be of an exit by the UK from the European Union.
This year, we are planning to make a number of disposals from
our property portfolio and our programme will, of course, be
influenced by our view of property investment markets in
2016 and beyond.
Peter Cole
Setting, evolving and changing the Company’s strategy is clearly a
critical area for Hammerson’s success. I find the Board works well
in delivering in this area. As well as the process during formal
Board meetings, strategy and long-term thinking result from a
process of less formal discussion during visits to the Group’s
offices in Reading and Paris, our shopping centres and the focused
review and challenge during the course of the Board’s annual
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strategy day. The introduction of new Directors to the Board
ensures that there is fresh thinking and challenge in our
discussions. It is particularly in areas like strategy where the
individual experience and specialist skills of the Non-Executives
allow them to make a significant contribution.
Pierre Bouchut
We are focused on the longer term and consider key questions that
will affect the long-term sustainability of the business model – the
impact of online and e-commerce development and the
digitalisation of retail, for example. The Group is developing
digital tools which are being implemented in our centres. I am
sure there will be a further comprehensive review of digital
developments to assess future opportunities.
Gwyn Burr
The nature of the business is long-term investment and I think we
do take a long-term view. Our developments in Croydon and Brent
Cross are good examples of this. We have extended opportunities
to assess our strategic aims at our annual strategy day where there
is usually a vigorous debate including senior managers who
also attend.
Judy Gibbons
Yes, we have a well-articulated strategy which is well understood
by the Board. I think we are effective at discerning whether a
proposal is aligned with our strategy and then moving to review
the proposal.
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Sarah Booth
In terms of risk management, how well does the Board assess the
risks we are taking ? To what extent do we apply sufficient
challenge to major proposals?
Timon Drakesmith
This is a positive area for management reporting and Board
engagement. I feel that we do a good job of highlighting the issues
and debating the range of outcomes. In this year’s Annual Report
we have enhanced our risk reporting by introducing a risk heat
map to show how risks changed during 2015.
Peter Cole
In our capital allocation and particularly when considering major
developments or investment acquisitions, the risks involved are a
key area of challenge and debate. For example, the acquisition of
the Irish loan portfolio in 2015 was preceded by a number of
strategic discussions, involving both internal and external input,
relating to the assessment of the risks involved. These included
moving into a new territory, the loan structure, the assets
themselves and the potential impact on the Company of
financing decisions.
Jacques Espinasse
We take a robust approach to all aspects of risk management,
giving it an appropriate level of weight when making major
decisions. The process is well-framed and quantified and it
is regularly updated as the business evolves and develops.
David Atkins
While we always do a thorough evaluation, we naturally recognise
that we cannot eliminate all risk, although we hope we always
identify the risks we take and are confident these are within our
risk appetite.
Sarah Booth
Let’s move on to succession planning. How confident are we that
we have identified a talent pipeline below the Board?
David Tyler
As Chairman, there is nothing more important to me than the
people agenda. Our aim is for Hammerson to have the most
talented people in the sector. I make a point of frequently meeting
senior members of the management team and I know my fellow
Directors do so as well. With my colleagues, I ensure that we
review the performance of the whole management cadre regularly
to ensure that we identify and give our many talented people an
opportunity to develop within the business.
Terry Duddy
Yes, we have a very solid and detailed succession planning and
talent review discussion at the Nomination Committee. All
Non-Executive Directors attend this, giving them the opportunity
to voice their views and air any concerns.
Judy Gibbons
I think the process for identifying talent below Board level is a
solid one. In 2016 we will work on reviewing progress on the
development of key individuals and their ability to move into their
next roles. At the entry level, it’s good to see the investment in the
graduate programme is giving such a positive outcome.
Gwyn Burr
We are seeing much more evidence than in the past of deep
thinking about our colleagues and their development needs and
opportunities. We should maintain a good level of visibility in this
area to facilitate continued informed debate.
Jean-Philippe Mouton
The annual review of succession planning down to senior
managers is thorough. Identifying gaps is positive as it encourages
talented individuals across the Group to consider new
opportunities in the Company.
Jacques Espinasse
The size of the Company is such that we cannot always have ready
successors for every role, but we do focus on a couple of levels
below the Board. I feel that succession planning is carried out in
an appropriate manner for the size of our Company.
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Corporate Governance Report continued
Your Board’s year
This section of the Corporate Governance Report focuses on the activities of
the Board during the year, highlighting key activities and events. It should be
read in conjunction with the section on the UK Corporate Governance Code
on pages 102 to 105 which explains how the Board complied with the Code
during the year.
THE ACQUISITION OF A LOAN PORTFOLIO SECURED
AGAINST RETAIL ASSETS IN DUBLIN, IRELAND
The Board regularly reviews potential acquisition opportunities. In April,
following early monitoring by the UK New Business team, the Board began
considering a potential opportunity to acquire a portfolio of loans secured
against prime Dublin retail property. These included Dundrum Town
Centre. The portfolio offered a compelling blend of best-in-class shopping
centres with opportunities for asset improvement and development.
The Board considered the investment opportunity in June and reviewed
key considerations including:
– The quality of the retail assets connected with the potential acquisition;
– The strategic fit of the potential acquisition within the Group;
– The Irish economy and real estate investment market;
– The likely sale process; and
– Potential joint venture partners.
Dundrum Town Centre, Dublin
Management produced a number of detailed papers to help the Board consider the various aspects of the acquisition opportunity.
In particular the Board assessed various options for funding the acquisition, a risk analysis, how the assets would be integrated into
the Group’s portfolio, and expected returns.
A number of Board meetings were held to discuss and review the progress of the acquisition project and to approve the next steps.
In between meetings, the Chief Executive and other members of senior management kept the Board fully informed of
developments. The Board challenged and scrutinised the rationale for the acquisition and whether it was a good strategic fit,
considered investor views, reviewed pricing and financing, assessed the likely approach from other potential bidders, and assessed
the potential financing and resourcing impact of the transaction on the Group as a whole. The Board had oversight of the work
carried out by the project teams. This enabled them to ensure to their satisfaction that the underlying assumptions relating to due
diligence, market conditions and taxation were robust.
The Board approved the recommendation that the Company should acquire the loan portfolio. During the project, Hammerson’s
UK New Business team was supported by the Group’s property and operational colleagues as well as internal legal, tax, treasury
and finance functions. Hammerson’s external legal team, valuer, tax advisors and corporate brokers also provided advice
and guidance.
On 29 September 2015, the Company announced
the joint-venture acquisition together with Allianz Real Estate
of the Irish loan portfolio for
€1.23 billion
74
HAMMERSON PLC ANNUAL REPORT 2015 BOARD VISITS
As an important part of the Board’s work plan in 2015, two Board
meetings were scheduled at locations away from the Company’s
head office in London – in Leeds in June and in Reading in October.
Such meetings provide an important opportunity for the Board
to see the Group’s portfolio first-hand and to engage formally
and informally with colleagues. They help the Non-Executive
Directors in particular to deepen their knowledge of the
Group’s operations.
In Leeds, the Directors began their visit with a tour of Victoria
Quarter and the Victoria Gate development project. At the
meeting the Board received a project update from the project’s
asset management and development teams. The background to
the project was explained in the presentation, providing context
and detailing how the strategic decision to create a premium
destination influences all design and leasing decisions. The Board
reviewed the timetable and key risks concerning the targeted
completion date and letting. As well as the asset’s brand plans,
they also reviewed further opportunities to enhance the
development and ensure that the centre opens with an experience
for retailers and consumers in line with the Product Experience
Framework. The day ended with a dinner where the Board and
wider team were able to engage informally.
In October, the Board held its meeting at the Company’s new
offices at Aquis House in Reading, followed the next day by the
annual Board strategy day. The visit included a tour of the Oracle
shopping centre, a presentation from the asset and leasing team
and centre manager covering the centre’s history and the vision
for its future, Product Experience Framework initiatives and
sustainability plans, marketing opportunities and operations.
The Board also saw a presentation on the project to relocate
the head office finance and IT teams to Aquis House in Reading,
covering how the project was planned and executed, and how
effectively risks were managed and lessons learnt.
A lunch at the new Reading offices enabled local colleagues to
meet and talk to the Board informally. The Group Executive
Committee and a number of senior managers attended a Board
dinner in the evening where the Board was able to meet
colleagues informally.
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NON-EXECUTIVE DIRECTOR ENGAGEMENT
Following the Board effectiveness review in 2014, it was agreed that there should be as many opportunities as possible for
colleagues at all management levels in the Group to meet the Non-Executive Directors.
During 2015, a number of such opportunities allowed the Non-Executive Directors to meet with management and colleagues both
formally and informally. In June, the Non-Executive Directors joined the head office team at a celebratory event to mark the
opening of the new head office at Kings
Place. The entire Leeds project team
attended the Board dinner and site visit
during the Board’s visit to Leeds in June.
The Oracle shopping centre team attended
the Board’s site visit when it visited
Reading in October and the Board also met
the full Reading team at a buffet lunch.
Colleagues from management have also
attended and presented at Board meetings,
enabling the Non-Executive Directors to
engage with colleagues across the
business. Overall, getting out and about in
the business and listening to colleagues
talking outside the Board room has given
the Non-Executive Directors a useful
cultural barometer and an insight into the
business that they could get no other way.
The Board’s site visit to Victoria Gate, Leeds
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BOARD STRATEGY DAY
– A market overview and latest forecasts for the investment and
Ensuring that the Company delivers its mission to create
desirability for its consumers and commercial partners and
positive value for all stakeholders, depends on the successful
implementation of the strategy set by the Board. While the
Group’s strategy is continuously discussed and refined throughout
the year, the Board takes time out of its regular schedule every
year to debate and reflect on broader strategic issues.
The objective of the 2015 strategy day was to discuss and evaluate
the key decisions which will be required to be made during 2016 in
order for the Group to deliver on its stated strategic objectives
over the next three to five years. The agenda for the day included:
– A review of progress against strategy over the last year;
consumer markets;
– Opportunities arising from emerging trends and technologies;
– Priorities and opportunities for deploying capital and likely
challenges; and
– An overview of the Irish market.
In response to comments received in last year’s Board
effectiveness review, the structure of the day was refined. In
addition a number of key questions were posed to enable the
Board to focus its thinking on specific areas and encourage active
discussion. Insights and ideas generated in this way were further
debated and refined and incorporated into the Business Plan for
2016. Positive feedback was received from the Directors on the
structure of the day’s activities.
DAVID ATKINS’ PERSPECTIVE
My aim in preparing for this year’s annual Board strategy day was to get the Board prepared and thinking in advance about key
topics for discussion by providing targeted reading material focusing particularly on performance to date and options and trends
for the business.
This year’s strategy day was held in our new offices at Aquis House, Reading which gave the Board and especially the Non-Executive
Directors an opportunity to meet new colleagues, see the style of the new offices and similarities with our London headquarters
and get an opportunity to see one of our centres. Visiting the Oracle shopping centre added an important dimension to the day’s
activities and allowed the Directors to see strategy in action including marketing, digital initiatives and new retailer formats and
simply experiencing a busy shopping centre first-hand.
Our discussions were structured with pauses for reflection and focused questions to prompt and guide the Directors and provide
further support and challenge to the debate.
Important elements of the day’s debate were an opportunity to look into the future and consider the Irish business environment.
‘What if’ scenarios were discussed and we were able to consider the possible consequences of future technological advances on our
business and the risks of major disruption to our business model. In light of our recent Irish acquisition, we had a very fruitful
discussion led by an invited speaker with expertise
in the political, economic and business environment
in Ireland.
The feedback on the format of this year’s strategy day
was favourable and all the Directors found it useful.
Exploring and challenging different options for the
business can be quite tactical but also allows
strategic thinking about what could or might happen
and how we could orientate the business accordingly.
I think we were all energised by the opportunity to
discuss ideas together and, importantly, the day also
helped support working relationships on the Board.
It provided an opportunity for Directors to work
together which is harder to replicate in a routine
Board meeting.
The Oracle, Reading
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HAMMERSON PLC ANNUAL REPORT 2015 HAMMERSON’S APPROACH TO SHAREHOLDER
ENGAGEMENT
Hammerson’s investor relations programme includes the
following activities:
The Company has a comprehensive investor relations
programme. The Chief Executive, the Chief Financial Officer and
the Head of Investor Relations meet regularly with institutional
shareholders to discuss strategic issues and present the
Company’s results. The Company also engages with all
shareholders through regular communications, the Annual
General Meeting and investor relations activities. The Chairman
and the General Counsel and Company Secretary also each have
an annual engagement with major shareholders.
BOARD OVERSIGHT
The Board is committed to ensuring that the Company engages
with shareholders and other key market participants, such as
research analysts, to learn and understand their views. The Board
reviews an investor relations report at each Board meeting. The
Group Executive Committee also reviews these matters at its
monthly meetings. The investor relations report includes
details of:
– The latest share price performance, benchmarked against peers;
– Recently published analyst research, including analyst views,
and any changes in analyst forecasts for the Company;
– Any significant changes to the shareholder register;
– Recent investor relations activity, such as road shows and
conferences; and
– Feedback from institutional investors.
The Chairman also meets with shareholders independently
of the Executive Directors. In April 2015, he met institutional
shareholders in London and Amsterdam. Topics discussed
included strategic goals, the geographical focus of the Company’s
portfolio, the appropriate size of the Company and governance
topics such as the composition of the Board. Shareholder feedback
from these meetings was positive.
The General Counsel and Company Secretary also acts as a focal
point for communications on corporate governance matters. She
met or spoke with a number of major shareholders during 2015 to
discuss corporate reporting and governance matters.
INVESTOR RELATIONS PROGRAMME
The Company continues to make full and transparent disclosure
despite the decision taken in 2015 to cease publishing quarterly
Interim Management Statements. As well as the full-year and
half-year results, the Company publishes Regulatory News Service
(RNS) announcements and continues to run a comprehensive
investor relations programme. The Company believes the new
approach has worked well and will continue it in 2016.
– Bi-annual investor roadshows after full-year and half-year
results;
– Industry conferences in UK, Europe and US;
– One-to-one meetings with management at the request
of institutional shareholders;
– Meetings on sustainability with Socially Responsible
Investment fund managers;
– Salesforce briefings at leading equities brokers;
– Investor tours of assets, organised as necessary, accompanied
by centre managers and other colleagues;
– Panel discussions with executive management at investor
conferences and events;
– An annual Capital Markets Day;
– An annual sustainability report and investor webinar; and
– Bespoke research into themes and trends in the retail sector.
In 2015, the annual Capital Markets Day involved a trip to
Elliott’s Field, Rugby, and Victoria Gate, Leeds. It included
presentations on how the Company is performing against strategy
and progress on-site at Victoria Gate, as well as a thorough
discussion of the dynamics in the UK retail parks market. Investor
feedback was positive with investors commenting that they found
it useful to see two key schemes under development and meet
operational colleagues.
The Company’s website is an important means of communication
and a key source of information for shareholders and prospective
investors. It contains RNS announcements, a live share price feed
and other information including an archive of published results
and reports, press releases, details about the Group’s assets and
contact information for the Company’s operational teams.
Webinars, which include the full-year and half-year results, are
streamed live to shareholders and analysts and are available for
playback on the website.
In October, the Company launched a dividend reunification
programme with its registrar, Capita. The programme has
successfully reunited a number of shareholders with their
unclaimed dividends. The Company plans to launch a sale and
purchase programme during 2016 for shareholders holding small
numbers of shares.
The Annual General Meeting provides all shareholders with an
important forum where they can put questions to the Board. The
proxy voting results are available shortly after the meeting and are
published at www.hammerson.com.
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Ensuring balance
and diversity
NOMINATION COMMITTEE MEMBERS
David Tyler (Chairman)
Pierre Bouchut (appointed 13 February 2015)
Gwyn Burr
Terry Duddy
Jacques Espinasse
Andrew Formica (appointed 26 November 2015 )
Judy Gibbons
Anthony Watson (retired 22 April 2015)
DEAR SHAREHOLDERS
I am pleased to present the Nomination Committee Report which
summarises our work during the year. This report should be read in
conjunction with the separate report on page 102 which describes
our compliance with the UK Corporate Governance Code.
and decided that Pierre Bouchut has the right mix of skills and
experience for the role and recommended Pierre’s appointment
to the Board. Pierre has confirmed that he is able to make the time
commitment required as Audit Committee Chairman and will
assume the role following the Annual General Meeting.
BOARD BALANCE AND ARRAY OF SKILLS
This year, as it does annually, the Committee has also reviewed the
composition of the Board. As part of this review, the Committee:
– Considered the number of Executive and Non-Executive
Directors on the Board and whether the balance is appropriate;
– Reviewed the membership of the Committees;
– Considered the background professions and core skills and
experience of the Directors to ensure the right mix of skills;
– Considered and confirmed that all the Non-Executives remain
independent; and
– Considered diversity, including gender.
Following this review the Committee has concluded that the
Board continues to have an appropriate mix of skills and
experience to operate effectively. The Directors collectively bring
a range of expertise and experience of different business sectors
to Board deliberations which helps to ensure constructive and
challenging debate around the boardroom table. This array of
skills is illustrated in chart 61 on the next page.
CHANGES TO THE BOARD
A number of Board changes took place during the year. Pierre
Bouchut was appointed to the Board as a Non-Executive Director
in February 2015. His appointment process, led by the Committee,
was described in last year’s Annual Report. Following the Annual
General Meeting, Tony Watson stepped down after nine years on
the Board. Terry Duddy took on Tony’s former role as Senior
Independent Director.
In November 2015, the Board was further strengthened by the
appointment of Andrew Formica as a Non-Executive Director and
he also joined the Audit and Nomination Committees. The
Committee led the process which resulted in Andrew Formica’s
appointment. Spencer Stuart was appointed to facilitate and
advise in the process. Spencer Stuart has no other connection
with the Group and is a signatory to the Voluntary Code of
Conduct of Executive Search Firms. Andrew’s appointment was
the culmination of a process which began following the 2013
Board external effectiveness review when the Board concluded
that the next two Board appointments should bring further
European experience and investment and banking skills to the
Board. The Committee believes this has been achieved with the
appointments of Pierre Bouchut and Andrew Formica who bring
a range of skills including financial experience to strengthen
existing expertise on the Board.
Jacques Espinasse will retire from the Board following the 2016
Annual General Meeting. The Committee has considered a
successor for Jacques’ role as Chairman of the Audit Committee
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Chart 61
Board experience by sector
Finance, banking, fund management
Property, regeneration projects
French market, international business
Customer service, customer behaviours
Retail
Digital technology, marketing
Non-Executive Director
Executive Director
DIVERSITY
There are currently two female Directors on the Board
representing 18% of its composition. This will increase to 20%
when Jacques Espinasse steps down at the Annual General
Meeting. As previously stated, our aim is to maintain at least this
level of female representation on the Board. However, the
paramount consideration is to maintain the right mix of skills,
knowledge, independence and experience on the Board. For that
reason, recommendations for any future appointments will
always be made on merit. You can read more about the Company’s
diversity and inclusion strategy on page 51 of the Our People
section of the Strategic Report.
Chart 62
Diversity
Female: 2
GENDER
Male: 9
Chart 63
Board balance
Executive: 4
BOARD
BALANCE
SUCCESSION PLANNING
Succession planning was a particular area of focus for the
Committee during 2015. The Committee reviewed a formal report
on the subject in respect of the Executive Directors and senior
colleagues, subsequently receiving an update on progress during
the year. Considerations included a review of the Company’s plans
aiming to ensure that key roles at Board and Group Executive
Committee level can be filled by other colleagues on an interim
basis. A review of the talent in the Company was also considered
to identify those individuals with the potential to fill more senior
roles over the medium and long term. The Committee
acknowledges the size of the organisation means there are not
obvious successors for every senior role. Discussions were also
held about more junior individuals with high potential and plans
were reviewed to help with their development. The Committee
will continue to focus on this area during 2016.
Chart 64
Annual succession planning process
An annual review of Executive Director and Group
Executive Committee (GEC) roles is undertaken to ensure
interim short-term cover is available in the business for
these roles. Medium and longer-term successors are identified
for roles, where possible.
Executive Directors discuss their longer-term career
aspirations with the Chief Executive. Further opportunities
for expanded roles and responsibilities are explored,
if appropriate.
The Chief Executive presents a discussion paper to
the Committee on the longer-term career aspirations of
the Executive Directors.
A review of talent in the wider business is undertaken
and GEC members engage with high potential individuals
to discuss their career aspirations. Personal development
plans are drawn up.
The Committee reviews succession plans. High potential
individuals are noted and the Committee takes opportunities
to get to know these individuals.
The Committee receives updates on progress during the year.
Non-Executive: 7
Note: As at 31 December 2015
David Tyler
Chairman of the Nomination Committee
79
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AUDIT COMMITTEE REPORT
Overseeing effective
controls
AUDIT COMMITTEE MEMBERS
Jacques Espinasse (Chairman)
Pierre Bouchut (appointed 13 February 2015)
Gwyn Burr
Andrew Formica (appointed 26 November 2015)
Judy Gibbons
Anthony Watson (retired 22 April 2015)
DEAR SHAREHOLDERS
I am pleased to present this report on behalf of the Audit Committee
for the year ended 31 December 2015. This should be read in
conjunction with the report on how we have complied with the
UK Corporate Governance Code (the Code) which is on page 102.
This is my last report as Chairman of the Committee as I shall be
stepping down from the Board at the conclusion of the Annual
General Meeting on 25 April 2016. Pierre Bouchut, who fulfils the
Code requirement of having recent and relevant financial
experience, will succeed me as Chairman of the Committee. He
has also confirmed that he is able to make the necessary time
commitment to the role. In addition, the other members of the
Committee also combine knowledge and experience of financial
matters, financial reporting, risk management and internal controls.
The Committee met four times in the year with the meetings at
appropriate times in the Company’s financial and regulatory
reporting cycle. As I mentioned in the 2014 Annual Report, an
additional meeting was included in January to allow the
Committee extra time to scrutinise and debate the valuation
process by the Company’s external valuers, DTZ Debenham Tie
Leung Limited and Cushman & Wakefield LLP (the Valuers).
The Committee met privately with the Company’s internal and
external auditors during the year. I also met privately with the
Valuers to ensure that they were comfortable with the 2015 year
end valuation process. The Executive Directors and other senior
managers were invited to attend as appropriate to provide updates
on various matters, participate in debate and answer questions
posed by the Committee.
During the year the Committee paid particular attention to the
significant financial judgements in relation to the financial
statements and how they were addressed. Their impact on the
Group’s results and the remuneration of senior management
makes the significant financial judgements particularly important.
The main areas of focus and how the Committee addressed those
issues are set out in table 64 on page 81.
Another important aspect of the Committee’s work during 2015
was to approve an approach and management’s plan for tendering
for the external auditor, which will not include the incumbent
auditor, Deloitte LLP (Deloitte) as a participating firm in the
process. Further details of the approach and timetable are
provided on page 83 of this report.
The Company is mindful of the Code’s new requirements in
relation to risk and the monitoring of internal control systems.
During 2015, the Committee and the Board reviewed the Group’s
Risk Management Framework thoroughly at each Committee
meeting. Having monitored the Group’s risk management and
internal controls system, and having reviewed the effectiveness of
material controls, the Committee has not identified any significant
failings or weaknesses in the Group’s control structure during
the year.
A further new reporting requirement for 2015 is the Viability
Statement. During the year the Committee considered and
discussed the requirements for the statement and further details
are provided on page 67 in the Strategic Report and on page 83
of this report.
The Committee undertook its annual performance and
effectiveness review, based on a questionnaire which was
completed by the Committee and regular attendees. The results
indicated that the Committee was effective and carrying out its
duties. I am confident that the Committee continues to play a key
role in ensuring that the appropriate governance and challenge
around risk and assurance is embedded throughout the Group.
I would like to extend my personal thanks to my fellow Committee
members for their support. I would also like to thank Deloitte, on
behalf of the Board, for the continuing high quality of the audit
services they have provided to the Group during the year.
Jacques Espinasse
Chairman of the Audit Committee
80
HAMMERSON PLC ANNUAL REPORT 2015 A
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SIGNIFICANT FINANCIAL JUDGEMENTS
During the year the Committee considered the appropriateness of significant financial judgements made in connection with the financial
statements as set out below:
Table 64
Significant financial judgement considered
How the Committee addressed the issue
Valuation of the Group’s property portfolio
(including properties held by joint ventures
and associates)
The valuation of the Group’s property portfolio,
including properties held in the Group’s joint ventures
or associates, is a key risk due to its significance in the
context of the Group’s net asset value. Although
valuations are conducted by the Valuers, and
thoroughly reviewed by the auditor, the valuation
process requires a number of key judgements which
are inherently subjective.
The Valuers also value the Group’s development
properties and these are subject to the same level
of review as the investment portfolio.
Accounting for acquisitions and disposals
During the year the Group made a number of
acquisitions and disposals, including interests in joint
ventures and associates. There are risks in the
accounting process for these complex transactions.
Accounting for premium outlet investments
(Value Retail and VIA Outlets)
The Group’s premium outlet interests are through
investments in Value Retail and VIA Outlets. These
investments are externally managed and due to the
complexity of the underlying structures, there is a risk
of inaccurate and inconsistent reporting.
Accounting for the acquisition of the Irish loan
portfolio
In October 2015, the Group acquired a portfolio of
Irish loans. The loans were acquired in a 50:50 joint
venture with Allianz with the Group’s total cost being
£690 million. The accounting for this large transaction
required consideration of both the Group level and
joint venture level accounting for incorporation into
the Group accounts.
The Committee has a robust process to satisfy itself that the external
valuation of the Group’s property portfolio is appropriate. The Committee
recognises that the Group operates in liquid and mature markets, in which
there are well-established valuation practices. The Committee is also familiar
with the processes by which management provides information to the
Valuers. The Committee reviewed the outcomes of the Valuers’ valuations,
challenged their assumptions and was satisfied that the procedures and
methodologies used were appropriate. Current market conditions and recent
transactions were reviewed to provide context. The Valuers were asked to
highlight any significant judgements and disagreements with management
and the Committee satisfied itself of the Valuers’ independence. The
Committee was satisfied that the valuation of the Group’s portfolio was
prudent and reasonably-based.
The Committee reviewed and challenged management’s accounting
proposals and key judgements in relation to acquisitions and disposals, in
particular, the acquisition of the Irish loan portfolio (see below). The
Committee was satisfied that the approach adopted was appropriate.
The Committee reviewed management’s paper explaining the accounting
treatment for the two investments which is based on the nature of the Group’s
control over those investments. For Value Retail (VR), the Group is able to
exert significant influence through its VR Board representation and through
the terms of its loan agreements to VR and hence accounts for the investment
as an associate. VIA Outlets is accounted for as a joint venture as the terms of
the partnership agreement provide the Group with joint control. The paper
explained management’s approach to consolidating the financial information
received and the complexities and judgements required to produce the
information to incorporate into the Group accounts. The Committee also
reviewed the valuations (see above) and results of the two investments and
was satisfied that the investments had been recognised appropriately.
The Committee reviewed management’s paper explaining the proposed
accounting treatment for the transaction. For Group accounting purposes,
given the control provisions in the joint venture agreement, the acquisition
is to be equity-accounted as an investment in a joint venture. The value at
31 December 2015 would be based on the Group’s share of the net asset value
of the joint venture.
For joint venture accounting purposes, the loans are accounted in accordance
with IAS39 “Financial Instruments – Recognition and Measurement” being
initially recognised at fair value, equating to the cost of the acquisition, and
subsequently measured at amortised cost. The Valuers provided a valuation
of the secured property assets and the Committee was satisfied with the
proposed accounting treatment, and in particular that there were no
indicators of impairment requiring a full impairment test.
+
The description of the significant financial judgements above should be read in conjunction with the Auditor’s Report on page 114
and the significant accounting policies disclosed in note 1 to the accounts on pages 124 to 127
81
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
Audit Committee Report continued
AUDIT COMMITTEE REPORT CONTINUED
The Risk and Controls committee sets the internal audit
programme by reviewing potential audit topics before they are
presented to the Audit Committee for approval. The Risk and
Controls committee supports the Audit Committee as part of the
Group’s risk management strategy and more information on this
committee can be found in the Strategic Report on page 62 and on
page 105 in the Code compliance section of this Annual Report.
The internal audit programme for 2015 was compiled by reviewing
key risk areas in the Group’s risk management framework to
determine which would most benefit from a review. Proposals were
debated at the November 2014 Risk and Controls committee and it
was agreed that particular attention in 2015 should be focused on
areas of change and key business areas. The Committee then
approved the internal audit programme. The Committee was
satisfied that the programme resulted from a thorough review of
the Group’s key business activities and addressed a number of
related topical risk areas.
During the year, the Committee monitored the internal audit
process through management updates and reviewing reports
prepared by the internal auditor, Ernst & Young LLP (EY).
During 2015, audits were carried out on:
– The effectiveness of governance, risk management and reporting
controls in relation to UK and French development projects;
– The effectiveness of key controls for UK shopping
centre operations;
– The controls within the new in-house property management
function in France;
– The effectiveness of key financial controls following the
relocation of head office finance and IT functions to
Reading; and
– Activities in relation to the Group’s digital engagement activities.
Each of these audits confirmed that appropriate controls were in
place in these areas. Recommendations for improvement were
agreed by management and assigned for implementation. When
EY’s experience of best practice enabled the identification of
potential enhancements to existing processes or procedures, these
were reviewed by the Risk and Controls committee before being
approved by the Audit Committee.
REVIEW OF EFFECTIVENESS OF THE INTERNAL
AUDIT PROCESS
As noted in last year’s Annual Report, the Committee
determined to carry out a formal review of the effectiveness
of the internal auditor EY during 2015. The internal audit
function has been outsourced since 2006 with EY providing
internal audit services to the Group for the past two years.
In the second half of 2015, a detailed questionnaire was
issued to members of the Committee, senior management
and those other managers involved in the internal audit
procedure. As part of this review, EY and Deloitte were also
asked to provide feedback on the Group’s current internal
audit arrangements.
Questions covered the following areas:
– Understanding and experience;
– Planning and communications; and
– Audit work and reporting.
Responses to the questionnaire were collated and reviewed
at the Risk and Controls committee and at the Audit
Committee. While the outcome of the review was positive,
given the increasing scale of the Group, the Committee
approved a proposal to adopt a new hybrid internal audit
provision, overseen by a new Risk and Compliance
manager. The new internal audit arrangements will utilise a
combination of internal and external resource to enhance
and monitor the Group’s internal audit procedures.
FAIR, BALANCED AND UNDERSTANDABLE
One of the key compliance requirements of a group’s financial statements is for the Annual Report to be fair, balanced and
understandable. The process for the 2015 Annual Report was enhanced with the establishment of an editorial team made up of
members drawn from Group Finance, the Company Secretariat, Corporate Communications and Marketing, all responsible for
reviewing the Report. Regular meetings were held during the preparation and compilation period to ensure balanced reporting
and that there were appropriate links between the various sections of the Annual Report. Extensive verification was carried out to
ensure accuracy. Drafts were reviewed by senior management, followed by reviews by the Audit Committee in both January and
February 2016. This provided an opportunity to challenge the fair, balanced and understandable assessment and test whether
there was an appropriate balance throughout the Annual Report. Following further discussion the Committee and then the Board
were able to confirm that the Annual Report taken as a whole is fair, balanced and understandable.
82
HAMMERSON PLC ANNUAL REPORT 2015 EFFECTIVENESS OF THE EXTERNAL
AUDIT PROCESS
EXTERNAL AUDIT TENDERING –
APPROACH AND PLAN
The Committee recognises the importance of having a high
calibre external audit. It therefore assessed the effectiveness of
the external audit process during the year, monitoring Deloitte’s
fulfilment of the agreed audit plan and its reports on the
conclusions of the arising significant financial judgements. The
Committee received regular feedback from management on the
level of support provided by Deloitte and it determined that
Deloitte provides an appropriate level of service.
In forming its opinion of the independence and objectivity of
Deloitte the Committee reviewed:
– The independence safeguards operating within Deloitte;
– Deloitte’s Audit Transparency Report for the year ended
31 May 2015; and
– The extent of non-audit services provided by Deloitte.
The Committee has concluded that the external audit was carried
out effectively and efficiently with the necessary objectivity and
independent challenge in respect of the 2015 financial year and it
has recommended to the Board the reappointment of Deloitte at
the 2016 Annual General Meeting.
NON-AUDIT SERVICES
The Committee recognises the need for objective and independent
auditors and how such objectivity might be, or appear to be,
compromised through the provision of non-audit services. Details
of the policy on the provision of non-audit services are included in
the section of the Annual Report on compliance with the Code on
page 106 and the full policy is available at www.hammerson.com.
Details of Deloitte’s remuneration, including remuneration for
non-audit services, are also on page 106.
Over recent years there has been a significant change to the
rules regarding the provision of external audit services for listed
companies. In the new regulations, under the transitional
arrangements, the latest date by which the Company is required
to tender and appoint a new external auditor is for the financial
year beginning 1 January 2021.
Deloitte or its predecessor firms have been the Company’s
external auditor since the Company was founded in 1942. In last
year’s Annual Report the Company stated that management and
the Committee were satisfied with both Deloitte’s quality of
service and their independence and objectivity. During 2015, the
Committee considered tendering and rotation options in advance
of the required rotation date of 2021. Following a decision to
undertake a tender process in 2016, management presented a
proposed plan which the Committee approved and recommended
to the Board. The Committee recommended that a tender process
should be undertaken in 2016, to align with the current Deloitte
audit partner rotation and strategic priorities of the Group. The
new appointment would be effective for the 2017 audit. Having
complied with the requirement to undertake a tender process for
the provision of the external audit, the Company’s statement of
compliance with the Competition and Markets Authority Order
can be found on page 111.
AUDIT TENDER PROCESS – TIMELINE
During the Committee meeting in November, key steps in the
timetable for the audit tender plan were agreed and approved
including the appointment of a selection sub-committee of the
Audit Committee to lead the process, chaired by Pierre Bouchut.
The key steps in the timetable are set out below.
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THE VIABILITY STATEMENT
The UK Corporate Governance Code has introduced a new
requirement for the Board to consider the period over
which it is able to conclude that the Company will remain
viable. In developing the Viability Statement, the
Committee reviewed with management the
appropriateness of the Company’s choice of, and reasons
for, a five-year assessment period. The Group’s current
position, future plans and potential impact of risks to the
business were reviewed, including the rationale for the
Viability Statement assessment period which was based on:
– The Company’s five-year planning period;
– A clear, strategic focus on retail which has traditionally
been less volatile than other property sectors;
– The geographical diversity of the Group’s property
portfolio;
– Five-year timescales which support major developments;
– A stable income stream;
– A strong capital base; and
– Leases which contain a five-year rent review pattern.
Having reviewed and considered the proposed draft
Viability Statement, the Committee approved it for
inclusion in the 2015 Annual Report.
The Viability Statement, together with further details of
the Group’s approach and the Going Concern statement,
appear on page 67 of the Strategic Report.
December 2015 – April 2016
Meetings with audit firms to determine their
capabilities and prospective audit partners.
May 2016
Confirmation of participation by audit firms.
Agreement of short list of audit firms by the
selection sub-committee.
June 2016
Issue of tender documents and supporting
information to the participating firms. Management
meetings and site visits in the UK and France with
prospective firms.
August – September 2016
The selection sub-committee to evaluate tender
documents and receive presentations from
prospective firms. Recommendation of the new
auditor by the sub-committee to the Audit Committee.
October 2016
Recommendation for appointment of the new
auditor to the Board for approval. Induction period
commences with successful firm shadowing Deloitte
during 2016 year end process.
83
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT
Rewarding long-term
performance
REMUNERATION COMMITTEE MEMBERS
Gwyn Burr (Chairman)
Terry Duddy
Judy Gibbons
David Tyler
Anthony Watson (retired 22 April 2015)
DEAR SHAREHOLDERS
I am pleased to present the Directors’ Remuneration Report for
the year ending 31 December 2015.
REMUNERATION OUTCOME: AIP
You will have read earlier in this Annual Report that the Company
delivered another strong performance in 2015 with adjusted
earnings per share growing to 26.9 pence, up 13% on the prior
year. Although the Company has final information on its own
Total Property Return (TPR), the Remuneration Committee
(Committee) uses estimated information regarding benchmark
performance for the purposes of reporting the likely bonus (AIP)
payment, and based on these estimates TPR is showing a strong
performance against that benchmark. No AIP payments for TPR
are made until the actual benchmark data becomes available and
we have included in the implementation report the final outturn
on this measure for 2014 AIP. AIP is also payable in respect of the
Group operational targets of growth in like-for-like net rental
income and reduction in the cost to income ratio. The final
component of AIP is personal performance, which is assessed not
only for specific personal objectives, but also includes an
assessment of behaviours based on the Company’s values as well
as how each Executive Director has led and maximised the
contribution of colleagues. The average pay out for AIP for 2014
was 66%, and using estimated information for TPR, the strong
financial performance of the Company in 2015 is reflected in a
higher average pay out of 77%.
84
One of the responsibilities of the Committee is to ensure that
Executive Directors’ remuneration reflects achievements against
long-term strategic success. Table 65 at the end of this letter shows
the aggregate of short and long-term variable reward taken home
by each Executive Director in 2015. This consists of the AIP for
2014 that was paid in 2015 and the 2011 Long Term Incentive Plan
(LTIP) awards that vested in 2015. These amounts differ from the
statutory disclosure in table 66 which includes within it elements
earned but not paid in 2015. Also shown in table 65 is the on-target
and maximum opportunity for each of these areas of variable
reward. Although Executive Directors had an opportunity to earn
substantial variable reward in 2015, the actual amount earned
generally represented approximately 88% of on target and 32% of
maximum. It is worth noting that table 87 on page 97 shows the
remuneration of the Chief Executive over the last seven years. In
the last four years, the average amount earned represented 72% of
maximum for AIP and 26% of maximum for LTIP.
REMUNERATION OUTCOME: LTIP
It was disappointing to note that, yet again, there was no material
vesting of the LTIP in 2015. One of the reasons for this was that the
LTIP awards made in 2011 measure TPR relative to an All
Property Index, although the Company disposed of its non-retail
assets in 2012. The Committee debated in April 2015 whether it
was appropriate to amend the TPR performance measures for the
2011 and 2012 LTIP awards to reflect this but concluded that there
should be no change to those performance measures. It is likely
that the 2012 LTIP also will not vest under the TPR performance
measure, although there will be a partial vesting under the
Absolute Net Asset Value performance measure. The TPR
performance measure was changed for awards made from 2013
onwards and the Committee is hopeful that LTIPs will start to vest
under the TPR performance measure, reflecting the steady
performance of the Company in delivering total property returns
to shareholders.
HAMMERSON PLC ANNUAL REPORT 2015 2016 PAY APPROACH
With effect from 1 April 2016, and after no increases in 2015,
Executive Director base salaries will increase by 2.5%, in line with
that of colleagues generally.
One particular point to note is that you will have read in the
Strategic Report that during 2015 the Company acquired a
portfolio of loans secured on various Irish retail properties. At the
time of this report the timetable to convert these loans to direct
ownership and management of the real estate was not agreed. The
Committee considered how it could measure property returns for
assets in Ireland and decided that there was no appropriate Irish
benchmark. As such it has decided to measure the performance of
Irish assets against the same index used for UK assets, but will
review and, if it considers appropriate, exercise its discretion in
the 2016 AIP and 2016 LTIP if it considers that comparison of
Irish assets against a UK index has led to an unintended outcome.
REMUNERATION REVIEW IN 2016
institutional groups have provided greater and more specific
insight into their views on appropriate structures for overall
executive reward.
During 2016, the Committee will review the rules of the LTIP
scheme and prepare a new scheme for approval by shareholders
at the Annual General Meeting (AGM) in 2017. The Remuneration
Policy is in the third year of its operation and will also be reviewed
and will require to be presented for approval by shareholders at
the AGM in 2017. In both cases we will consult with major
shareholders and appropriate institutional groups.
I hope that you will agree with the Committee that the outturn
for Executive Directors reflects the performance of the Company
and that you will support the Directors’ Remuneration Report at
the AGM.
The current LTIP was approved by shareholders in 2007 and
expires in May 2017. In the period since its approval, the Company
has changed its focus to retail property, and shareholders and
Gwyn Burr
Chairman of the Remuneration Committee
Table 65
Variable reward taken home by Executive Directors in 2015
The table below shows the total variable remuneration received by Executive Directors during 2015. It compares this with the on-target
and maximum opportunities for the Annual Incentive Plan (AIP) that was paid in 2015 and the Long Term Incentive Plan (LTIP) that
vested in 2015. The table is provided for illustrative purposes only and should be considered in conjunction with the explanatory footnotes.
AIP
On-target opportunity
Maximum opportunity
Actual
LTIP
On-target opportunity
Maximum opportunity
Actual
TOTAL
On-target opportunity
Maximum opportunity
Actual
Explanatory footnotes:
David Atkins
£000
Peter Cole
£000
Timon
Drakesmith
£000
Jean-Philippe
Mouton
£000
597
1,194
775
370
1,478
–
967
2,672
775
435
870
526
265
1,061
–
700
1,931
526
408
816
579
233
932
96
641
1,748
675
329
658
427
103
414
–
432
1,072
427
Actual AIP corresponds to the Executive Directors’ single figure remuneration table for 2014, table 66 on page 86. Actual LTIP corresponds to the LTIP that vested in
2015, table 72 on page 90, and is different to the numbers shown in table 66, which shows some elements earned but not paid in 2015.
The AIP maximum opportunity has been calculated as 200% of 2014 base salary. The on-target opportunity is calculated as 50% of the maximum.
The LTIP maximum opportunity has been calculated by multiplying the aggregate of the shares that vested and lapsed in 2015 (refer to tables 80 to 83 from page 94) by
the relevant share price. The relevant share prices used in the calculation are 672.80 pence for David Atkins, Peter Cole and Jean-Philippe Mouton and 654.40 pence
for Timon Drakesmith. The on-target opportunity is calculated as 25% of the maximum.
85
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 DIRECTORS’ REMUNERATION: IMPLEMENTATION REPORT
(*) denotes audited information
EXECUTIVE DIRECTORS’ SINGLE FIGURE REMUNERATION TABLE
Table 66 below shows the remuneration of the Executive Directors for the year ended 31 December 2015, and the comparative figures for
the year ended 31 December 2014.
Table 66
Executive Directors: single figure remuneration table*
Salary
Benefits
Annual bonus AIP
Long Term Incentive
Plan LTIP
Pension
Total
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Total
597
435
408
296
1,736
594
431
406
329
1,760
15
13
15
23
66
22
22
19
25
88
922
672
630
457
2,681
775
526
579
427
2,307
449
322
403
121
1,295
–
–
177
–
177
179
131
82
67
459
177
203
81
74
535
2,162
1,573
1,538
964
6,237
1,568
1,182
1,262
855
4,867
Salary
Benefits Taxable benefits available to all Executive Directors include a company car or a car allowance and private medical health
Jean-Philippe Mouton’s base salary for 2014 and 2015 was €408,000.
insurance. Jean-Philippe Mouton receives a seniority allowance and welfare contribution.
UK Executive Directors are entitled to participate in the Company’s all-employee share plan arrangements (SIP and
Sharesave). Jean-Philippe Mouton participates in a profit-sharing scheme in France and receives an employer’s contribution
to a French employee savings scheme.
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.
Achievements against Company financial targets and personal objectives for 2015 resulted in an average entitlement for
Executive Directors of approximately 77% of the maximum bonus opportunity. However, the data above estimates the Total
Property Return (TPR) outcome because not all relevant data was available for that measure at the date of this report.
Further information concerning the annual bonus outcomes for 2015 can be found on page 89.
In the 2014 Annual Report, the TPR element was estimated at IPD+1.1%, resulting in a payout level estimated at 40% for that
measure. The final closing measurement for TPR during 2014 was IPD+1.09%, resulting in a final payout level of 39.75%. The
data for 2014 has therefore been updated to reflect the actual TPR outcomes.
2014 figures in the 2014 Annual Report included estimated numbers for the TPR performance measure as final data was not
available at the date of that report. The estimated value was ‘nil’. The 2014 figures reflect the actual outcome using final TPR
data. The actual outcome was ‘nil’.
AIP
LTIP
The basis for calculating the values attributable to the 2014 and 2015 LTIP figures above is set out in table 67 on page 87.
Estimates are for reporting purposes only. Final figures for 2015 will be presented in the 2016 Annual Report.
Pension Details of pension provision and the method for calculating the pension figures above can be found on page 92.
Other
David Atkins has external non-executive appointments, disclosed in the Directors’ Biographies on page 108. He does not
receive a fee for any of these appointments.
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.
Jean-Philippe Mouton’s salary, benefits, annual bonus and pension contributions are paid in euro. This data has been
converted into sterling using the average exchange rate for 2015 (£1: €1.378). Equivalent data for 2014 has been converted
at the exchange rate for that year (£1: €1.241). For further details, see note 1 to the accounts on page 125.
86
HAMMERSON PLC ANNUAL REPORT 2015
Basis for calculating the values attributable to each performance measure for the LTIP
Table 67 provides a breakdown of the values attributable to each of the performance measures that when aggregated produce the single
figure for the LTIP column in the Executive Directors’ single figure remuneration table on page 86. The basis for each assumption used is
also detailed. Details of the LTIP award that vested in 2015 can be found in table 72 on page 90.
Table 67
Values attributable to each performance measure in the LTIP
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Total Shareholder Return
(TSR)
Total Property Return
(TPR)
Absolute Net Asset Value
(Absolute NAV)
Total
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
2015
£000
2014
£000
–
–
96
–
–
–
177
–
–
–
–
–
–
–
–
–
449
322
307
121
–
–
–
–
449
322
403
121
–
–
177
–
TSR
TPR
The 2015 figure for Total Shareholder Return (TSR) is for the 2011 LTIP awards that vested in 2015. The performance period
for awards to David Atkins, Peter Cole and Jean-Philippe Mouton ended on 1 April 2015. Performance conditions for this
measure were not satisfied, resulting in a ‘nil’ vesting.
For Timon Drakesmith, the performance period for the 2011 LTIP award ended on 6 June 2015 and vested on 8 June 2015.
Performance conditions for this measure were partially satisfied. The value is calculated using actual performance and the
share price on the date of vesting.
The 2015 figures for Total Property Return (TPR) are estimated values for the 2012 LTIP awards scheduled to vest in 2016,
where the performance period ended on 31 December 2015, as final IPD data was not available at the date of this report. The
estimate compares the Company’s actual TPR figures with the best available information. The estimated vesting for TPR is
0%. Final IPD data will be available in April 2016 and the award will vest in that month. The actual 2015 TPR figure will be
reported in the 2016 Annual Report.
The 2014 figures for TPR where the performance period ended on 31 December 2014 were estimated ‘nil’ in the 2014 Annual
Report, as some IPD data was not available at the date of that report. When IPD data became available, the performance
conditions for this measure resulted in a ‘nil’ vesting.
The 2015 figures for Absolute Net Asset Value (Absolute NAV) are the values for the 2012 LTIP awards that are scheduled to
vest in 2016 where the performance period ended on 31 December 2015. This measure is calculated to vest at 70.4%. The 2015
figure has been estimated using the average share price over the three months prior to 31 December 2015.
Absolute
NAV
BASE SALARY
In February 2016, the Remuneration Committee determined that an increase in base salaries of 2.5% was appropriate for Executive
Directors. This increase is broadly in line with increases in salaries awarded across the Group. A number of factors influenced this
decision, including the effect of inflation and evidence of salaries within the real estate sector. Executive remuneration benchmarking
data was also considered in making the decision to approve the increase, which takes effect from 1 April 2016.
Table 68
Executive Directors’ base salary 2016 and 2015
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
2016
£000
612
446
418
303
2015
£000
597
435
408
296
87
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
ANNUAL INCENTIVE PLAN (AIP)
Table 69 details the performance measures and composition of financial targets for the AIP. This is the Company’s annual bonus scheme,
which is awarded as a mixture of cash and deferred shares. The deferred shares element of the AIP is granted as an award under the
Deferred Bonus Share Scheme (DBSS), which is not subject to further performance conditions. Further details on the AIP and the DBSS
are in the Remuneration Policy summary on page 174.
AIP awards partly reflect the Company’s performance with reference to a number of financial Key Performance Indicators (KPIs).
Further detail on the KPIs can be found in the section ‘Delivering value for our stakeholders’ on page 18.
Table 69
AIP targets: performance measures and composition of financial targets
Maximum award
potential1
Proportion of award
paid in cash
Proportion of award paid as
deferred shares
Weighting of performance
measures
Composition of
financial targets
Year of award
2016 award
(to be paid
in 2017)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
2015 award
(to be paid
in 2016)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
2014 award
(paid in 2015)
Up to 200%
of salary
60%
40% subject
to a two-year
vesting period
70% for Group
financial targets
25% based on adjusted Group earnings
per share
25% based on Total Property Return
relative to IPD2
10% based on growth in Net Rental Income3
10% based on Cost ratio4
30% for personal objectives5
70% for Group
financial targets
25% based on adjusted Group earnings
per share
25% based on Total Property Return
relative to IPD6
10% based on growth in Net Rental
Income3
10% based on Cost ratio4
30% for personal objectives5
70% for Group
financial targets
30% based on adjusted Group earnings
per share
30% based on Total Property Return
relative to IPD6
5% based on growth in Net Rental
Income3
5% based on Cost ratio4
30% for personal objectives
Notes
1. On-target opportunity is 50% of the maximum opportunity.
2. For awards made in 2016, IPD is the Investment Property Databank’s aggregate full-year UK Retail Property (75%) and France Retail Property (25%) indices.
3. Net Rental Income (NRI) is the percentage growth in the Group net rental income, calculated on a like-for-like basis.
4. Cost ratio is the Group’s total operating costs as a percentage of gross rental income.
5. In the opinion of the Board, AIP performance conditions and personal objectives for 2016 are commercially sensitive. They are therefore not disclosed here, but will
be described in the 2016 Annual Report. The 2015 performance conditions and personal objectives are not considered commercially sensitive and are set out in
tables 70 and 71 on page 89.
6. For awards made in 2014 and 2015, IPD is the Investment Property Databank’s aggregate full-year UK Retail Property (70%) and France Retail Property (30%) indices.
88
HAMMERSON PLC ANNUAL REPORT 2015 AIP (BONUS) OUTCOME: PERFORMANCE CONDITIONS FOR 2015
Details of the AIP outcome for 2015 are provided in table 70 below. The TPR performance is measured relative to the IPD UK Retail
Property (70%) and France Retail Property (30%) indices. Annual data for the IPD UK Retail Property and IPD France Retail Property
index is not available at the date of this report. Accordingly, the closing measurement for TPR for the year to 31 December 2015 is based
on management’s best estimate using available data (see pages 58 and 59 for property returns data).
Table 70
AIP outcomes for 2015
Performance measure and description
Adjusted EPS
TPR (estimated outcome)
NRI
Cost ratio
Entry threshold
condition to earn
any bonus
% of vesting for that
condition achieved at
entry threshold
2015 target to achieve
full vesting for
that condition
23.9p
IPD+0.5%
1.5%
22.0%
20%
25%
0%
0%
27.2p
IPD+2.5%
3.5%
21.4%
2015
closing
performance
26.9p
IPD+2.5%
2.3%
23.1%
2015
payout
level
85%
100%
40%
0%
The element of bonus determined for each performance measure is calculated by interpolating the actual performance achieved for each
measure against the scale between entry threshold for vesting and the target to achieve full vesting.
AIP: EXECUTIVE DIRECTORS’ PERSONAL OBJECTIVES
Executive Directors are able to earn up to 30% of the maximum award for achieving personal objectives. These are designed to focus not
only on the delivery of the Business Plan and strategic priorities for 2015 (refer to ‘Our business model in action’ on pages 6 and 7), but
also include an assessment of behaviours based on the Company’s values as well as each Executive Director’s capability in managing
colleagues to maximise their contribution. Where it is possible to apply a meaningful measurement, personal objectives incorporate
environmental, social and governance parameters.
The personal objectives for each Executive Director during 2015 were not disclosed in the 2014 Annual Report as the Board considered
them to be commercially sensitive. Payout levels were 90% for David Atkins, 90% for Peter Cole, 90% for Timon Drakesmith and 90%
for Jean-Philippe Mouton.
Table 71
Executive Directors’ personal objectives
The Executive Directors are responsible for the leadership of the Company and management of colleagues to ensure that the actual
financial performance of the Group meets the expectations of the Board set at the start of the year. Executive Directors were responsible
in 2015 for the following significant strategic priorities:
– Identifying and executing opportunities for acquisition, including in relevant new territories and premium outlets;
– Recycling capital by disposal of identified assets;
– Completing four developments, and progressing key London pipeline developments;
– Continuing focus on asset management and developing venues in line with Product Experience Framework;
– Reinforcing Culture and Values; and finalisation and roll out of rebrand exercise;
– Optimising the funding structure to support the growth plans; and
– Ensuring that the portfolio is managed in a sustainable manner consistent with the Sustainability Strategy.
89
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
LONG TERM INCENTIVE PLAN (LTIP)
The structure of the LTIP awards, as well as the performance measures and conditions attached to them, is closely aligned with the
Company’s strategic focus. The awards incorporate a balance of relative and absolute measures, and the Remuneration Committee
believes that this balance remains appropriate. Table 72 below provides a breakdown of the value of the LTIP awards that vested in 2015.
The number of shares vested includes notional dividend shares accruing to the date of vesting. Further details on the LTIP structure are
set out in tables 73 to 75 below.
Table 72
LTIP awards vested in 2015
TSR1
TPR2
NAV2
Vesting date
Share price
on vesting
Vesting
level
Number of
shares
vested
Value of
award that
vested
£000
Vesting
level
Number of
shares
vested
Value of
award that
vested
£000
Vesting
level
Number of
shares
vested
Value of
award that
vested
£000
Total
value of
award
vested
£000
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton 01/04/2015
–
01/04/2015
01/04/2015
–
08/06/2015 642.00
–
Notes
–
–
–
–
31.4% 14,896
–
–
–
–
96
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96
–
1. The performance period for TSR for David Atkins, Peter Cole and Jean-Philippe Mouton ended on 1 April 2015 and for Timon Drakesmith on 6 June 2015. The value
of the TSR measure in respect of 2015 is included in the single figure remuneration table for 2015 (table 66 on page 86).
2. The performance period for TPR and Absolute NAV ended on 31 December 2014. The value of these measures is included in the single figure remuneration table for
2014 (table 66 on page 86).
LTIP structure: summary and details of performance measures and conditions
The structure of the 2016 awards remains the same as in 2015 with awards returning to the normal level of 200% of salary as specified in the
Remuneration Policy. The comparator group for the Total Shareholder Return (TSR) measure focuses on major European retail real estate
companies. The Total Property Return (TPR) measure compares performance against a retail-only property index. With regard to the
absolute performance measure, earnings per share (EPS) continues to align the interests of Executive Directors with those of shareholders.
Table 73
LTIP structure summary
Level of
award
Performance
period
Performance
measures
Weighting of
performance
measures
TSR comparator group
200% of
salary
Four
years
150% of
salary
Four
years
100% of
salary
Four
years
200% of
salary
Four
years
200% of
salary
Four
years
TSR
TPR
EPS
TSR
TPR
EPS
TSR
TPR
EPS
TSR
TPR
EPS
TSR
TPR
Absolute NAV
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
33.33%
Altarea, British Land, Capital and Regional, Intu Properties, Eurocommercial,
Klépierre, Land Securities, London Metric, Segro, Shaftesbury, Unibail-
Rodamco, New River Retail, Wereldhave and the FTSE 100 Index
Altarea, British Land, Capital and Regional, Intu Properties, Eurocommercial,
Klépierre, Land Securities, London Metric, Segro, Shaftesbury, Unibail-
Rodamco, New River Retail and the FTSE 100 Index
Altarea, British Land, Capital and Regional, Intu Properties, Corio1,
Eurocommercial, Klépierre, Land Securities, London Metric, Segro, Shaftesbury,
Unibail-Rodamco, Wereldhave and the FTSE 100 Index
Altarea, British Land, Capital and Regional, Intu Properties, Corio1,
Eurocommercial, IVG, Klépierre, Land Securities, London Metric, Segro,
Shaftesbury, Unibail-Rodamco, Wereldhave and the FTSE 100 Index
British Land, Capital and Regional, Intu Properties, Corio1, Derwent London,
Great Portland Estates, IVG, Klépierre, Land Securities, Quintain Estates, Segro,
Shaftesbury, St Modwen Properties, Unibail-Rodamco and the FTSE 100 Index
Year of
grant
2016
2015
2014
2013
2012
Note
1. Corio merged with Klépierre on 31 March 2015 and delisted from Euronext Amsterdam. For the purposes of the TSR comparator group, Corio is retained, with
performance measured to the date of delisting. The EPRA NAREIT Developed Europe Index is substituted for Corio from the date of its delisting to the end of the
performance period.
90
HAMMERSON PLC ANNUAL REPORT 2015 Table 74
LTIP performance measures
TSR
TPR
Performance is measured over the four-year period from the date of grant in comparison with a comparator group,
including some European real estate companies. See table 73 on page 90 for details.
Performance is measured over the four financial years commencing with the year of grant and in comparison with a
composite index:
– For awards granted from 2013: Investment Property Databank’s UK Annual Retail Property Index and France Annual
Retail Property Index.
– For awards granted in 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 Group’s portfolio.
EPS /
Absolute
NAV
Performance is measured over the four financial years commencing with the year of grant. It is calculated with reference
to the European Public Real Estate Association (EPRA) Best Practices recommendations:
– For awards granted from 2013, the performance measure is EPS growth above the benchmark. From 2015, the
benchmark is a blend of UK and French Consumer Price Inflation (CPI), whereas in 2012 to 2014 the benchmark was
Retail Price Inflation (RPI).
– For awards granted in 2012, the performance measure is Absolute NAV growth above the benchmark. Absolute NAV
is calculated as adjusted shareholders’ funds divided by the adjusted number of shares in issue.
The relative composition of the indices may vary with each grant to ensure that it reflects the Group’s portfolio.
Table 75
LTIP performance conditions
TSR
Vesting threshold
All award years
0%
Less than TSR of
median-ranked entity
in comparator group
25%
Equal to TSR of
median-ranked entity
in comparator group
100%
Equal to TSR of upper
quartile-ranked entity
in comparator group
Vesting for intermediate performance between median and upper quartile-ranked entities is on a linear scale between 25%
and 100%. 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 condition is subject to the Remuneration Committee’s satisfaction that the Company’s
underlying performance has been satisfactory in comparison with that of the FTSE Real Estate sector.
TPR
Vesting threshold
All award years
0%
Less than
Index
25%
Equal to
Index
55%
Index +0.5%
(average) p.a.
85%
Index +1.0%
(average) p.a.
100%
Index +1.5%
(average) p.a.
Vesting for intermediate performance between these levels will be pro-rated on a straight-line basis between 25% and 100%.
EPS/
Absolute
NAV
2015 and 2016 awards
(EPS measure)
Vesting threshold
0%
25%
100%
2013 and 2014 awards
(EPS measure)
2012 award
(Absolute NAV measure)
Vesting for intermediate performance between these levels will be pro-rated on a straight-line basis between 25% and 100%.
Equal to or more than
a UK and French CPI blend
+3.0% p.a. growth
Equal to or more than RPI
+3.0% p.a. growth
Equal to or more than RPI
+3.0% p.a. growth
Equal to or more than
a UK and French CPI blend
+7.0% p.a. growth
Equal to or more than RPI
+7.0% p.a. growth
Equal to or more than RPI
+7.0% p.a. growth
Less than a UK and
French CPI blend
+ 3.0% p.a. growth
Less than RPI
+ 3.0% p.a. growth
Less than RPI
+ 3.0% p.a. growth
91
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
PENSION*
Executive Directors receive a salary supplement in lieu of pension benefits. Salary supplements for the year ended 31 December 2015 are
detailed in table 76 below and are reflected in the single figure remuneration table on page 86 (table 66). All salary supplements paid to
Executive Directors in lieu of pension benefits are subject to deductions as required for income tax and social security contributions in
the UK and France.
Jean-Philippe Mouton also participates in a legacy collective supplementary defined contribution pension scheme, operated by
Hammerson Asset Management, France, which is the French company that employs him and which makes employer contributions at the
annual statutory limit.
Salary supplements received by all Executive Directors and the pension benefit received by Jean-Philippe Mouton do not qualify for AIP
purposes or entitlements under the LTIP.
Table 76
Salary supplements in lieu of pension benefits1
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Note
2015
£000
179
131
82
67
2014
£000
177
203
81
74
1. David Atkins and Peter Cole each receive a salary supplement of 30% of base salary. Timon Drakesmith receives a salary supplement of 20% of base salary.
Jean-Philippe Mouton receives a salary supplement of €80,000 (2014: €80,000) and a legacy collective supplementary defined benefit scheme contribution
of €12,264 (2014: €12,105), which is included in his total shown above.
Executive Directors’ deferred pension benefits
Following the closure of the Company’s defined benefit pension scheme (Scheme) in 2014, David Atkins and Peter Cole remain eligible
for a deferred pension based on their pensionable salary and service at the point they ceased to accrue further benefits in the Scheme. The
normal retirement age under the Scheme is 60; members may draw their pension from the age of 55, subject to actuarial reduction and
the Trustees’ consent. Further information concerning the Scheme can be found in note 6 to the accounts on page 133.
Table 77 below shows the total accrued benefit at 31 December 2015 representing the annual pension that is expected to be payable on
retirement, given the length of pensionable service and salary of each Executive Director at the date each ceased to accrue further benefits
under the Scheme. The increase in accrued benefit earned during the year represents the statutory increase applied as a result of changes
in the Consumer Price Index (CPI). Such increases are subject to statutory limits.
Table 77 also shows the transfer values of Executive Directors’ accrued entitlements under the Scheme calculated under the Companies
Act 2006. The figures 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 each Executive Director’s pension benefits. The figures do not represent sums paid or payable to
individual Executive Directors but represent a potential liability of the Scheme. The statutory disclosures are based on required
assumptions. Any increase or decrease in transfer value over the year represents a change in the transfer value assumptions that the
Scheme applies.
Table 77
Executive Directors’ accrued pension benefits and transfer values
Total accrued benefit
at 31 December
Transfer value at 31 December
of total accrued benefit
2015
£000
83
248
2014
£000
82
245
2015
£000
1,497
5,342
2014
£000
984
3,744
David Atkins
Peter Cole
92
HAMMERSON PLC ANNUAL REPORT 2015 NON-EXECUTIVE DIRECTORS: SINGLE FIGURE REMUNERATION TABLE*
Table 78 below shows the remuneration of Non-Executive Directors for the year ended 31 December 2015, and the comparative figures
for the year ended 31 December 2014.
No payments were made during the year to Non-Executive Directors for expenses other than those incurred wholly and directly in the
course of their appointment. The benefits disclosed in table 78 below relate to the reimbursement of travel and accommodation expenses
incurred in attending Board meetings. The gross value has been disclosed. In accordance with the Remuneration Policy, the tax arising
will be settled by the Company.
Table 78
Non-Executive Directors’ remuneration for the year ended 31 December 2015
Committee Membership and other responsibilities
Fees
Benefits
Total
David Tyler
Pierre Bouchut1
Gwyn Burr
Terry Duddy2
Audit Committee
Nomination
Committee
Remuneration
Committee
Other
Chairman Member
Chairman
Member Member
Member Member
Chairman
Member Member
Senior Independent
Director
Jacques Espinasse Chairman Member
Andrew Formica3 Member Member
Judy Gibbons
John Hirst4
Anthony Watson5 Member Member
Member Member Member
Chairman Senior Independent
Director
Total
Notes
1. Appointed 13 February 2015.
2. Replaced Anthony Watson as Senior Independent Director from 22 April 2015.
3. Appointed 26 November 2015.
4. Retired 23 April 2014.
2015
£000
320
53
70
67
70
6
65
–
2014
£000
320
–
68
60
67
–
65
22
2015
£000
2014
£000
2015
£000
2
5
2
–
5
–
1
–
–
–
2
–
8
–
1
4
322
58
72
67
75
6
66
–
2014
£000
320
–
70
60
75
–
66
26
23
674
77
679
8
23
1
16
32
697
77
694
5. Anthony Watson retired from the Board on 22 April 2015 and received a departing gift which cost £4,150 within the limits of the Remuneration Policy. The value
above is the gross value.
FEES PAYABLE TO NON-EXECUTIVE DIRECTORS
Table 79 below shows the annual fees payable to Non-Executive Directors. No additional fees are payable for chairing or becoming a
member of the Nomination Committee. The Chairman does not receive any additional fee for being a member of any of the Committees.
Where changes occur to a Non-Executive Director’s appointment, status or responsibility, fees are pro-rated. This is reflected in the
single figure remuneration table.
Non-Executive Directors’ fees were last increased in July 2013. It is anticipated that the Company will review Chairman and Non-Executive
Director fees during 2016.
Table 79
Non-Executive Director fees for 2015 and 2016
Base fees £000
Additional fees £000
Year
2015 and 2016
Chairman
320
Non-Executive
Director: base fee
55
Senior
Independent
Director
10
Chair of
Audit
Committee
15
Audit
Committee
member
5
Chair of
Remuneration
Committee
10
Remuneration
Committee
member
5
ACTUAL AGGREGATE TOTAL REMUNERATION: ALL DIRECTORS
The figures shown in the single figure remuneration table for Executive Directors in table 66 on page 86 and for Non-Executive Directors
in table 78 above, have been rounded to the nearest thousand. The actual aggregate total remuneration (being salary/fees, benefits and
bonus) for all Executive Directors and Non-Executive Directors during 2015 was £5,180,388 (2014: £4,844,153).
93
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
EXECUTIVE DIRECTORS’ SHARE PLAN INTERESTS (INCLUDING SHARE OPTIONS)*
Tables 80 to 83 below set out the Executive Directors’ interests under the Deferred Benefit Share Scheme (DBSS), the Long Term
Incentive Plan (LTIP) and the Sharesave scheme. Awards under the DBSS and Sharesave scheme are not subject to any performance
conditions (other than continued employment on the vesting date). The LTIP awards are subject to performance conditions, details of
which can be found on page 91.
The TPR element of any bonus payment to Executive Directors (including the deferred shares element awarded under the DBSS) is made
only when all IPD index data is available for calculation of actual performance against the TPR performance measure. The DBSS ‘B’ award
below is that part of the award payable when final TPR data is available.
Face values shown in tables 80 to 83 below are calculated by multiplying the number of shares granted during 2015 by the relevant share
price. For the DBSS, the average share price for the three business days preceding the award is used. For the LTIP, the average share price
for the five business days preceding the award is used. Notional dividend shares accruing are not included in the face value calculations for
either scheme. Face value for the Sharesave scheme is calculated by reference to the exercise price of options granted in 2015.
Awards to UK Executive Directors under the DBSS and since 2012 for the LTIP are made in the form of nil cost share options. All awards
up to and including those made in 2013 accrue notional dividend shares to the date of transfer. Awards made from 2014 onwards accrue
notional dividend shares to the date of vesting. The Sharesave scheme does not accrue notional dividend shares.
For French tax reasons, LTIP awards granted to Jean-Philippe Mouton are in the form of conditional awards of free shares. Notional
dividend shares accrue to the date of vesting in respect of 2014 LTIP awards and subsequent awards. For the DBSS, notional dividend
shares accrue to the date of transfer in respect of 2013 awards and to the date of vesting for subsequent awards.
Table 80
Date from
which
options
Held at
1 January
Granted
Notional
dividend
shares
accrued
Exercised
or vested
Lapsed
or forfeited
Awards
held at 31
December
Grant price
in pence
(exercise
price for
Face value
of awards
granted
during 2015
exercisable
Expiry date
2015
during 2015
during 2015
during 2015
during 2015
2015
Sharesave)
£000
Date of
original
award
David Atkins
DBSS
DBSS
DBSS (A)
DBSS (B)
11/03/2013
03/03/2014
03/03/2015
28/04/2015
LTIP
LTIP1
LTIP
LTIP
LTIP
01/04/2011
02/04/2012
02/04/2013
01/04/2014
26/03/2015
Mar-15
Mar-16
Mar-17
Apr-17
n/a
Apr-16
Apr-17
Apr-18
Mar-19
Mar-20
Mar-21
Mar-22
Apr-22
85,537
46,926
–
–
–
–
37,334
8,437
n/a
215,976
Apr-19 303,807
Apr-20 255,363
108,748
Apr-21
–
Mar-22
–
–
–
–
130,901
2,482
1,362
1,083
97
3,724
8,816
7,410
3,155
1,515
–
–
–
–
–
–
–
–
88,019
48,288
38,417
8,534
– 219,700
–
–
–
–
183,258
–
– 312,623
– 262,773
111,903
–
132,416
–
Sharesave
Sharesave
05/04/2012
27/03/2015
May-15
May -18
Oct-15
Oct-18
2,735
–
–
1,665
–
–
2,735
–
Table 81
Peter Cole
DBSS
DBSS1
DBSS
DBSS (A)
DBSS (B)
LTIP
LTIP
LTIP
LTIP
LTIP
12/03/2012
11/03/2013
03/03/2014
03/03/2015
28/04/2015
01/04/2011
02/04/2012
02/04/2013
01/04/2014
26/03/2015
Mar-15
Mar-15
Mar-16
Mar-17
Apr-17
n/a
Apr-16
Apr-17
Apr-18
Mar-19
Mar-20
Mar-20
Mar-21
Mar-22
Apr-22
48,175
63,485
33,690
–
–
155,059
n/a
Apr-19
218,117
Apr-20 183,336
79,237
Apr-21
–
Mar-22
–
–
–
24,893
6,148
–
–
–
–
95,380
1,398
1,842
978
722
71
2,674
6,330
5,321
2,300
1,104
–
–
–
–
–
–
–
–
–
–
Sharesave
10/04/2010
May-15
Oct-15
4,980
–
–
4,980
819,715
–
1,665
–
–
–
–
–
–
–
49,573
65,326
34,668
25,615
6,219
157,733
181,401
–
– 224,447
188,657
–
81,537
–
96,484
–
591,125
–
–
–
–
678.00
675.00
–
–
–
–
684.10
–
540.40
–
–
–
678.00
675.00
–
–
–
–
684.10
–
–
–
253
57
310
–
–
–
–
895
895
–
9
–
–
–
169
41
210
–
–
–
–
652
652
–
94
HAMMERSON PLC ANNUAL REPORT 2015
Table 82
Date from
which
options
Held at
1 January
Granted
Notional
dividend
shares
accrued
Exercised
or vested
Lapsed
or forfeited
Awards
held at 31
December
Grant price
in pence
(exercise
price for
Face value
of awards
granted
during 2015
exercisable
Expiry date
2015
during 2015
during 2015
during 2015
during 2015
2015
Sharesave)
£000
Date of
original
award
Timon Drakesmith
DBSS2
DBSS1
DBSS
DBSS (A)
DBSS (B)
12/03/2012
11/03/2013
03/03/2014
03/03/2015
28/04/2015
LTIP
LTIP
LTIP
LTIP
LTIP
06/06/2011
02/04/2012
02/04/2013
01/04/2014
26/03/2015
n/a
Mar-15
Mar-16
Mar-17
Apr-17
n/a
Apr-16
Apr-17
Apr-18
Mar-19
n/a
Mar-20
Mar-21
Mar-22
Apr-22
38,478
58,486
32,086
–
–
–
–
–
28,403
5,766
n/a
139,952
Apr-19 207,730
Apr-20 174,606
74,319
Apr-21
–
Mar-22
–
–
–
–
89,460
663
1,009
931
824
66
2,413
6,028
5,067
2,157
1,035
39,141
59,495
–
–
–
14,896
–
–
–
–
–
–
–
–
–
127,469
–
–
–
–
–
–
33,017
29,227
5,832
68,076
–
213,758
179,673
76,476
90,495
Sharesave
05/04/2012
May-17
Oct-17
4,588
–
–
–
560,402
4,558
–
Table 83
Jean-Philippe Mouton3
DBSS
DBSS
DBSS (A)
DBSS (A)4
DBSS (B)
11/03/2013
03/03/2014
03/03/2015
12/03/2015
28/04/2015
01/04/2011
02/04/2012
02/04/2013
01/04/2014
26/03/2015
LTIP
LTIP
LTIP
LTIP5
LTIP
Notes
Mar-15
Mar-16
Mar-17
Mar-17
Apr-17
n/a
Apr-16
Apr-17
Apr-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-22
Apr-22
18,633
24,331
–
–
–
n/a
Apr-19
Apr-20
Apr-21
Mar-22
61,483
84,426
138,717
61,421
–
–
–
12,278
6,337
4,125
–
–
–
–
65,905
322
706
356
183
47
–
–
–
1,782
762
18,955
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61,483
–
–
–
–
–
25,037
12,634
6,520
4,172
48,363
–
84,426
138,717
63,203
66,667
353,013
–
–
–
678.00
675.00
–
–
–
–
684.10
–
–
–
678.00
678.00
675.00
–
–
–
–
684.10
–
–
–
193
39
231
–
–
–
–
612
612
–
–
–
83
42
28
153
–
–
–
–
450
450
1. The opening balance for awards held at 1 January 2015 has been adjusted to account for a rounding error in calculating the number of notional dividend shares that
accrued during 2014.
2. The opening balance for awards held at 1 January 2015 has been adjusted to reflect an administrative error whereby notional dividend shares were not accrued
during 2014 in respect of the dividend paid in August 2014.
3. Jean-Philippe Mouton’s entitlement to awards arising under the LTIP and DBSS is calculated in euro. The prevailing exchange rate at grant is used to determine the
number of shares to award.
4. On 12 March 2015, Jean-Philippe Mouton was granted an additional award under 2015 DBSS (A) award to correct an administrative error made in the original award.
5. The opening balance for the award held at 1 January 2015 has been adjusted to reflect an administrative error whereby notional dividend shares were not accrued
during 2014.
95
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
2015 Directors’ remuneration: implementation report continued
Executive Directors’ SIP interests at 31 December 2015
The Executive Directors’ interests in ordinary shares of the Company under the Share Incentive Plan (SIP) at 31 December 2015 are
shown in table 84 below. The shares are held under a SIP trust. Jean-Philippe Mouton is not eligible to participate in the SIP.
Table 84
Executive Directors’ SIP interests
David Atkins
Peter Cole1
Timon Drakesmith2
Notes
Total SIP shares
1 January 2015
Partnership
shares
purchased
Matching
shares
awarded
Free shares
awarded
12,154
13,480
4,678
–
–
280
–
–
280
–
–
–
Dividend
shares
Total SIP shares
31 December
purchased
353
391
143
2015
12,507
13,871
5,381
1. Due to an administrative error, the number of Peter Cole’s SIP interests at 31 December 2014 was understated in the 2014 Annual Report. The reconciliation
resulted in a restatement of SIP shares accruing to Peter Cole. Accordingly, the opening figure for 1 January 2015 has been corrected.
2. Partnership shares may be purchased by means of a lump sum or by regular monthly investment during 2015. Timon Drakesmith purchased partnership shares
through regular monthly investment.
DIRECTORS’ SHAREHOLDINGS*
Tables 85 and 86 show the beneficial interests in the ordinary shares of the Company held by all Directors who were in office during the
year ended 31 December 2015. For Executive Directors, the table also shows actual share ownership compared with the share ownership
guidelines (full details of which can be found in the Remuneration Policy summary on page 174). Non-Executive Directors are encouraged
to acquire a shareholding in the Company.
Table 85
Executive Directors’ shareholdings
David Atkins
Peter Cole
Timon Drakesmith2
Jean-Philippe Mouton
Notes
1 January
2015
31 December
2015
12 February
2016
Guideline on
share ownership
as % of salary
Actual beneficial
share ownership
as % of salary1
Guideline met
363,968
272,072
219,313
249,767
367,056
277,461
280,080
240,891
367,056
277,461
280,184
240,891
150%
100%
100%
100%
369%
383%
412%
488%
Yes
Yes
Yes
Yes
1. As at and based on the share price of 600 pence on 31 December 2015.
2. The change in share interests for Timon Drakesmith from 31 December 2015 to 12 February 2016 is due to share purchases/awards made under the SIP on
4 January 2016 (52 shares) and 4 February 2016 (52 shares).
Table 86
Non-Executive Directors’ shareholdings1
David Tyler
Pierre Bouchut
Gwyn Burr
Terry Duddy
Jacques Espinasse
Andrew Formica2
Judy Gibbons
Anthony Watson3
Notes
1 January
2015
31 December
2015
25,000
n/a
5,000
40,000
17,235
n/a
4,000
12,000
25,000
–
5,000
40,000
17,884
15,000
4,115
n/a
1. Between 1 January 2015 and 12 February 2016, the serving Non-Executive Directors’ beneficial interests above remained unchanged.
2. Andrew Formica’s holding was purchased on 24 November 2015, prior to his appointment as a Director.
3. Anthony Watson retired on 22 April 2015. His beneficial interest at that time was 12,000 shares. In addition, he had an interest as at 22 April 2015 of £60,000
nominal 6.875% sterling bonds due 2020.
96
HAMMERSON PLC ANNUAL REPORT 2015 OTHER DISCLOSURES CONCERNING REMUNERATION
Remuneration of the Chief Executive over the last seven years
Table 87 shows the remuneration of the holder of the office of Chief Executive for the period from 1 January 2009 to 31 December 2015.
Table 87
Chief Executive’s remuneration history
Year
2015
2014
2013
2012
2011
2010
2009 (David Atkins)
2009 (John Richards)
Notes
Notes
1
2
3
4
Total remuneration
£000
2,162
1,568
2,216
2,451
1,515
1,594
242
895
Annual
bonus5
LTIP
vesting5
77.3%
65.3%
56.2%
88.9%
51.7%
68.2%
55.0%
48.8%
–
–
51.6%
52.6%
–
–
–
49.4%
1. The total remuneration and annual bonus figures for 2015 include certain estimated values for the LTIP and AIP vesting. See the Executive Directors’ single figure
remuneration table 66 on page 86 for details.
2. The total remuneration reported in the 2014 Annual Report contained estimates; the numbers given here are the actual values. See table 66 on page 86.
3. David Atkins became Chief Executive on 1 October 2009, having been an Executive Director since 2007. The figure for 2009 has been pro-rated accordingly.
4. John Richards retired as Chief Executive on 30 September 2009.
5. All numbers are expressed as a percentage of the maximum that could have vested in that year.
Remuneration for the Chief Executive compared with all other employees of the Hammerson group
Table 88 shows the percentage change from 31 December 2014 to 31 December 2015 in base salary, taxable benefits and bonus for the
Chief Executive compared with all other employees of the Hammerson group.
Table 88
Percentage change in the Chief Executive’s base salary, taxable benefits and bonus
David Atkins
Total Group
Notes
Notes
1,2
1,2,3
Salary
0.5%
-3.7%
Change %
Benefits
-0.2%
-0.6%
Annual bonus
19.0%
5.4%
Total1
10.9%
-1.8%
1. The percentage movement in annual bonus is based on calculations that incorporate an estimated value for the TPR performance measure within the AIP. The
calculation of the percentage change in total remuneration excludes pensions and LTIP.
2. David Atkins has been excluded from the Group calculation. Data for the Group calculation includes all employee bonuses. Payments in euro have been converted at
a constant exchange rate of £1:€1.378.
3. The Group calculation uses a weighted average headcount for the year. Employees received an average salary increase of 2% during 2015.
Total Shareholder Return
Chart 89 below shows the total shareholder return in respect of the Company’s ordinary shares of 25 pence each for the seven years ended
31 December 2015 against 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.
Chart 89
Total Shareholder Return
250
200
150
100
50
0
31 Dec 2008
31 Dec 2009
31 Dec 2010
31 Dec 2011
31 Dec 2012
31 Dec 2013
31 Dec 2014
31 Dec 2015
Hammerson plc
FTSE EPRA/NAREIT UK
31 December 2008 = 100
Source: Thomson Reuters
97
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
Relative importance of spend on pay
Table 90 below shows the Company’s total employee costs compared with dividends paid. The Company did not buy back any of its own
shares during 2015.
Table 90
Total employee costs compared with dividends paid
2015
2014
Difference
Notes
Employee costs1
Dividends2
£48.8m
£44.7m
9.2%
£165.2m
£139.5m
18.4%
1. These figures have been extracted from note 4 (Administration expenses) to the accounts on page 132.
2. These figures have been extracted from note 9 (Dividends) to the accounts on page 135.
Payments to past Directors*
There were no payments to past Directors in 2015.
Payments for loss of office*
There were no payments for loss of office to past Directors in 2015. Anthony Watson received a discretionary gift on retiring as a Director
as detailed in the Non-Executive Directors’ single figure remuneration table 78 on page 93.
Directors’ service agreements and letters of appointment
Executive Directors’ service agreements are terminable on 12 months’ notice by either party. Dates of service agreements for UK
Directors are: David Atkins (11 January 2008), Peter Cole (28 February 2002) and Timon Drakesmith (18 January 2011). Jean-Philippe
Mouton was appointed as an Executive Director on 1 January 2013. His service agreement is dated 25 March 2013. Further details on the
terms of the Executive Directors’ service agreements can be found in the Remuneration Policy, which was approved by shareholders at
the 2014 Annual General Meeting. A copy of the Remuneration Policy is available on the Company’s website at www.hammerson.com.
Non-Executive Directors are appointed by letters of appointment. Appointments are terminable on three months’ notice by either party.
Jacques Espinasse has announced his intention to retire at the 2016 AGM. All Directors are subject to election or re-election at the
Annual General Meeting.
Table 91
Non-Executive Directors’ letters of appointment
Date of original appointment
to the Board
Commencement date
of current term
Unexpired term as
at April 2016
12 January 2013
13 February 2015
21 May 2012
3 December 2009
1 May 2007
26 November 2015
1 May 2011
12 January 2016
13 February 2015
21 May 2015
3 December 2015
1 May 2013
26 November 2015
1 May 2014
2 years, 8 months
1 year, 9 months
2 years
2 years, 7 months
<1 month
2 years, 7 months
1 year
Non-Executive Director
David Tyler
Pierre Bouchut
Gwyn Burr
Terry Duddy
Jacques Espinasse
Andrew Formica
Judy Gibbons
98
HAMMERSON PLC ANNUAL REPORT 2015 ADVISORS
A number of advisors provided services to the Remuneration Committee during the year.
FIT Remuneration Consultants LLP (FIT) was appointed by the Remuneration Committee on 17 August 2011. FIT provides advice on
reward structures and levels and other aspects of the Company’s remuneration policy. FIT is a member of the Remuneration Consultants
Group and complies with their code of conduct. However, to avoid any conflict of interest, the terms of engagement (available on request
to shareholders) specify that FIT will only provide advice expressly authorised by or on behalf of the Remuneration Committee.
Additionally, where instructions are taken from Company employees on behalf of the Remuneration Committee, FIT ensures that the
Remuneration Committee is kept informed of their broad scope. The fees paid to FIT during 2015, which were charged on their standard
terms, were £68,127 (excluding VAT) (2014: £84,277, excluding VAT). FIT did not provide any other services to the Company during 2015.
The Remuneration Committee remains satisfied that all advice was objective and independent.
Herbert Smith Freehills LLP (HSF) provides the Company with legal advice and Lane Clark & Peacock LLP (LCP) provides actuarial advice
to the Company. Advice from both firms is made available to the Remuneration Committee, where it relates to matters within its remit.
The Chief Executive, Chief Financial Officer and Human Resources Director attend meetings by invitation. They are not present during
discussions concerning their own remuneration. The General Counsel and Company Secretary is the Secretary to the Remuneration
Committee. The Chief Executive, senior Human Resources staff and the General Counsel and Company Secretary provided advice to the
Remuneration Committee on matters relating to the Remuneration Policy and Company practices.
STATEMENT OF VOTING AT ANNUAL GENERAL MEETINGS
Table 92 below shows votes cast by proxy at the Annual General Meetings (AGM) held on 22 April 2015 in respect of the Directors’
Remuneration Report and on 23 April 2014 in respect of the Directors’ Remuneration Policy. Shareholders raised no issues concerning
remuneration during either Annual General Meeting.
Table 92
Statement of voting on remuneration: 2014 AGM and 2015 AGM
Resolution
To receive and approve the 2014 Directors’ Annual
Remuneration Report (2015 AGM)
To receive and approve the Directors’ Remuneration
Policy (2014 AGM)
Notes
Votes For
Votes Against
Total votes cast Votes withheld
Number
of shares
% of shares
voted
Number
of shares
% of shares
voted
% of issued
share capital1
Number
of shares2
580,955,686
98.98% 5,957,192
1.02%
74.83% 2,481,061
534,234,020
97.11% 15,898,048
2.89%
77.17%
175,583
1. Based on issued share capital of 784,311,111 ordinary shares on 20 April 2015, which was the record date for the 2015 AGM and 712,902,066 ordinary shares on
17 April 2014, which was the record date for the 2014 AGM.
2. Represents 0.32% of the issued share capital on the record date for the 2015 AGM and 0.02% of the issued share capital on the record date for the 2014 AGM.
99
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS 2015 Directors’ remuneration: implementation report continued
IMPLEMENTATION OF REMUNERATION POLICY IN 2016
Shareholder approval for the Remuneration Policy was received at the 2014 Annual General Meeting and the Company is not making
changes to the Remuneration Policy that require shareholder approval at the 2016 Annual General Meeting.
A statement on the implementation of the Remuneration Policy during 2016 is presented in table 93. The remuneration scenarios shown
in the Remuneration Policy have been updated on page 101 of this Annual Report to reflect planned implementation for 2016. For ease of
reference, a summary of the main provisions of the Remuneration Policy can be found on pages 174 to 177.
The objective of the Remuneration Committee in implementing the Remuneration Policy during 2016 is to ensure that the design of
Executive Directors’ remuneration promotes the long-term success of the Company and that all performance-related elements are
transparent, stretching and rigorously applied. This is in line with Main Principle D.1 of the UK Corporate Governance Code. The variable
pay arrangements reflect the Company’s strategic priorities, taking suitable account of environmental, social and governance risk and
corporate social responsibility factors. Variable pay structures include provision for malus and claw-back.
In implementing the Remuneration Policy, the Remuneration Committee will continue to take into account factors such as remuneration
packages available within 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 and performance.
Table 93
Summary of planned implementation of the Remuneration Policy during 2016
Policy element
Base Salary
Details on page 87
Pension
Details on page 92
Benefits
Annual Incentive Plan
(AIP) and deferral under
the Deferred Bonus
Share Scheme (DBSS)
Details on page 88
Long Term
Incentive Plan
Details on page 90
All-employee
arrangements
Share Ownership
Guidelines
Chairman’s and
Non-Executive
Directors’ fees
Implementation of the Remuneration Policy during 2016
Increases to current salaries for the Executive Directors will take effect from 1 April 2016.
All Executive Directors will receive a salary supplement by way of pension provision.
No changes to current arrangements are proposed for 2016.
The AIP maximum for Executive Directors in 2016 will remain at 200% of base salary.
Performance measures for the AIP in 2016 remain weighted 70% towards Group financial targets and 30%
towards personal objectives.
Group financial targets comprise: 25% adjusted Group earnings per share; 25% Total Property Return
relative to IPD; 10% the percentage growth in like-for-like Group Net Rental Income; and 10% Cost ratio.
40% of AIP vesting for 2016 will be deferred by making an award of shares under the DBSS, with a deferral
period of 2 years.
Award levels for Executive Directors for 2016 will reflect the normal Remuneration Policy level of 200% of
base salary.
Performance measures for LTIP awards to be granted in 2016 are unchanged.
The opportunity to participate in all-employee arrangements continues on the same basis as all staff in the
UK or France as appropriate.
Remain at 150% of base salary for the Chief Executive and 100% of base salary for all other
Executive Directors.
Chairman’s fee – £320,000 p.a.
Non-Executive Director’s fees – £55,000 p.a. There are additional fees paid to the Senior Independent
Director, the Chairmen of the Audit and Remuneration Committees and to the members of these
Committees. It is anticipated that the Company will review Chairman and Non-Executive Director fees
during 2016.
100
HAMMERSON PLC ANNUAL REPORT 2015 Chart 94
Scenarios: 2016 Implementation
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
£000’s
3,500
3,000
2,500
2,000
1,500
1,000
500
0
£3,238
38%
37%
£1,718
18%
35%
£805
100%
47%
25%
£2,363
38%
37%
£1,255
18%
35%
47%
25%
£589
100%
£2,176
38%
38%
£1,137
18%
37%
£514
100%
45%
24%
£1,598
37%
39%
24%
£837
18%
37%
45%
£380
100%
Fixed
On target Maximum
Fixed
On target Maximum
Fixed
On target Maximum
Fixed
On target Maximum
Fixed remuneration
Annual variable remuneration
Long-term incentives
Table 95
Assumptions: 2016 Executive Director remuneration scenario
Assumptions
Fixed
On-Target
Maximum
– Compares base salary, benefits, pension and participation in the UK all-employee share plans.
– Base salary is pro-rated for 2016, incorporating the increase to be applied from 1 April 2016.
– Benefits are as shown in the single figure remuneration table for 2015 (table 66) on page 86. However, the
amount received by Jean-Philippe Mouton under the profit sharing plan has been excluded from his 2015
benefits figure for these purposes (see ‘On-Target’ and ‘Maximum’ below).
– Pensions reflect salary supplements in lieu of pensions, based on pro-rated 2016 base salary for UK Executive
Directors. The pension figure for Jean-Philippe Mouton is as shown on the single figure remuneration table
on page 86.
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Base Salary
£000
Benefits
£000
Pension
£000
Total Fixed
£000
608
443
416
303
15
13
15
10
182
133
83
67
805
589
514
380
Based on the reward that 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 €18,774).
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 (200% of base salary for 2016).
– France profit sharing (Jean-Philippe Mouton only): assumes maximum vesting at the current capped vesting
level of €18,774.
By order of the Board
Sarah Booth
General Counsel and Company Secretary
12 February 2016
101
HAMMERSON.COMCORPORATE GOVERNANCEDIRECTORS’ REMUNERATIONSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
All Directors are expected to:
– Attend all meetings of the Board, and of those Committees on
which they serve;
– Attend the Annual General Meeting (AGM); and
– Devote sufficient time to the Company’s affairs to enable them
to fulfil their duties as Directors.
A.2 Division of responsibilities
The Chairman and Chief Executive have separate roles and
responsibilities which are clearly defined, 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 – strategic issues in particular – 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 2015 Board strategy day can be found
on page 76
When he became Chairman in 2013, David Tyler was considered
independent. In accordance with the Code, the continuing test of
independence for the Chairman is not necessary.
This section of the Corporate Governance Report details the
Company’s compliance with the Principles set out in the
UK Corporate Governance Code (the Code) published on 17
September 2014 which is available at www.frc.org.uk. This section
should be read in conjunction with the Corporate Governance
Report as a whole, which is set out on pages 69 to 111.
The Company has complied in full with the requirements of the
Code during 2015.
A. LEADERSHIP
A.1 The role of the Board
The Board is collectively responsible to the Company’s
shareholders for the Company’s long-term success and the
delivery of its long-term strategic and operational objectives.
The Board sets the strategic direction, governance and values
of the Group and has ultimate responsibility for its management,
direction and performance.
+ The Board operates through a sound risk management and
internal control system, details of which can be found on
pages 62 to 63 and 104 to 105
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.
It held six of these in 2015. Additional Board conference calls are
held between the formal Board meetings as required. The table
below includes details of attendance at formal Board meetings
and three scheduled Board conference calls during 2015.
Non-Executive Directors are encouraged to communicate directly
with Executive Directors and senior management between formal
Board meetings.
Table 96
Board and Committee meetings attendance
David Tyler
David Atkins
Peter Cole1
Timon Drakesmith
Jean-Philippe Mouton2
Gwyn Burr
Pierre Bouchut3
Terry Duddy
Jacques Espinasse
Andrew Formica4
Judy Gibbons5
Anthony Watson6
Board
Audit
Remuneration
Nomination
9/9
9/9
8/9
9/9
8/9
9/9
7/8
9/9
9/9
1/1
9/9
1/1
–
–
–
–
–
4/4
2/2
4/4
4/4
0/1
3/4
2/2
5/5
–
–
–
–
5/5
–
5/5
–
–
5/5
2/2
2/2
–
–
–
–
2/2
2/2
2/2
2/2
0/1
2/2
–
1. Peter Cole was unable to attend one Board conference call, due to a clash of meetings.
2. Jean-Philippe Mouton was unable to attend one Board meeting due to family commitments.
3. Pierre Bouchut was appointed to the Board on 13 February 2015. He was unable to attend one Board meeting due to prior business commitments.
4. Andrew Formica was appointed to the Board on 26 November 2015. He was unable to attend one Audit Committee and one Nomination Committee meeting due to
travel disruption.
5. Judy Gibbons was unable to attend one Audit Committee meeting due to a conflicting prior commitment.
6. Anthony Watson resigned following the AGM on 22 April 2015.
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HAMMERSON PLC ANNUAL REPORT 2015 A.4 Non-Executive Directors
The Senior Independent Director, Terry Duddy, is available to
address shareholders’ concerns on governance. When and if
necessary, he can also address concerns on 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. He can
also deputise for the Chairman in his absence, act as a sounding
board for the Chairman and advise and counsel all Board colleagues.
The Senior Independent Director also chairs an annual meeting
of Executive and Non-Executive Directors without the Chairman
to appraise the Chairman’s performance and address any other
matters which the Directors might wish to raise. The Senior
Independent Director conveys the outcome of these discussions
to the Chairman.
Anthony Watson retired from the Board following the 2015 AGM
when Terry Duddy succeeded him as Senior Independent Director.
The Chairman meets with the Non-Executive Directors as
necessary, but at least twice a year without the Executive
Directors present.
If any Director has concerns about the running of the Company or
a proposed action which cannot be resolved, these will be recorded
in the Board minutes. No such concerns arose in 2015.
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 reviews the independence of its Non-Executive
Directors each year in accordance with the criteria set out within
the Code.
Jacques Espinasse will retire following the 2016 AGM. There are
currently seven Non-Executive Directors (including the
Chairman) and four Executive Directors on the Board.
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B.2 Appointments to the Board
The Nomination Committee, which is chaired by the Chairman
and comprises all Non-Executive Directors, 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.
+ Further details of the work of the Nomination Committee can
be found on pages 78 to 79
+ Disclosures on diversity can be found on pages 51 and 79
During the year the Nomination Committee appointed an
independent executive search firm, Spencer Stuart, which has no
other connection with the Company, to identify non-executive
director candidates. Following a thorough search and interview
process, Pierre Bouchut and Andrew Formica were identified as
potential candidates and recommended to the Board by the
Committee. Pierre Bouchut was appointed as a Non-Executive
Director and member of the Audit and Nomination Committees
on 13 February 2015. Andrew Formica was appointed as a
Non-Executive Director and member of the Audit and
Nomination Committees on 26 November 2015.
B.3 Commitment
The Board is satisfied that all the Non-Executive Directors are
able to devote sufficient time to the Company’s business.
Non-Executive Directors are advised when appointed of the time
required to fulfil the role and asked to confirm that they can make
the required commitment. Each individual’s 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 108 and 109
All Executive Directors are encouraged to take a non-executive
position in another company or organisation. These appointments
are subject to the approval of the Board which considers
particularly the time commitment required.
B.4 Development
All Directors receive an induction programme when appointed
to the Board, which takes into account their qualifications and
experience. All Directors are kept informed of changes in relevant
legislation and regulations and of changing financial and
commercial risks. Where appropriate the Company’s legal
advisors and external auditor assist in this regard. Executive
Directors are also subject to the Company’s annual performance
development review process in which their performance is
reviewed against pre-determined objectives and their personal
and professional development needs are considered.
The Chairman undertakes an annual appraisal of Non-Executive
Directors’ performance, in which their training and personal
development requirements are reviewed and agreed.
Non-Executive Directors are also encouraged to attend seminars
and undertake external training at the Company’s expense in
areas considered appropriate for their professional development.
These include issues relevant to the Board and the Committees
to which they belong.
103
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
Compliance with the UK Corporate Governance Code continued
B.5 Information and support
The Directors have access to independent professional advice at
the Company’s expense, as well as to the advice and services of the
General Counsel and Company Secretary who advises the Board
on corporate governance matters. The Board and its Committees
receive high-quality, up-to-date information for them to review
in good time before each meeting. The General Counsel and
Company Secretary ensures that Board procedures are followed
and that the Company and the Board operate within applicable
legislation. The General Counsel and Company Secretary is also
responsible for facilitating Directors’ induction, assisting with
identifying and enabling appropriate training and Board
performance evaluation.
The appointment and removal of the General Counsel and
Company Secretary is a matter requiring Board approval.
B.6 Evaluation
The General Counsel and Company Secretary undertook an
internal performance evaluation of the Board and its Committees
in 2015. The next externally facilitated performance evaluation
of the Board and its Committees will take place in 2016.
The Chairman carries out a formal performance evaluation
individually with each Non-Executive Director every year 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 evaluation of the
Chairman’s performance. The Chairman’s performance
evaluation for 2015 was carried out in early 2016 and the Board
was subsequently updated.
Following the internal Board effectiveness review in 2015, the
Directors concluded that the Board and its Committees operate
effectively and that each Director continues to contribute
effectively and demonstrates commitment to the role.
+ More details of the internal Board effectiveness review are
provided on page 69
B.7 Election and re-election
All Directors are subject to election at the first AGM following
their appointment. Andrew Formica will stand for election at the
AGM in April 2016 and the Board recommends his election. It is
planned that Jacques Espinasse will retire from the Board at the
conclusion of the AGM in April 2016. All other Directors who are
subject to annual re-election are submitting themselves for
re-election at the 2016 AGM.
+ Biographical details for all Directors are on pages 108 and
109 and also in the Notice of Meeting for the 2016 AGM
+ Further discussion on the balance of skills and experience
on the Board is provided on page 78
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 position and
performance, business model and strategy.
+ An explanation of the Group’s strategy and business model
is available on pages 1 to 48
+ A statement of the Directors’ responsibilities regarding the
financial statements is set out on page 113
C.2 Risk management and internal control
The Board has established processes for monitoring sound risk
management and internal control which allow it to review the
effectiveness of the systems in place within the Group. A robust
assessment of the principal risks facing the Company has been
carried out during the year.
The Directors have assessed the prospects of the Company over
a five-year period and have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of this assessment.
+ Further details about the Viability Statement can be found
on pages 67 and 83
+ The Going Concern Statement is on page 67
+ An assessment of the principal risks facing the Company is
set out on pages 64 to 67 and performance metrics are set
out on pages 18 to 20
104
HAMMERSON PLC ANNUAL REPORT 2015 The Group’s risk management and internal control systems are
designed to:
– Promote the application of the risk management framework
throughout the business;
– Safeguard assets against unauthorised use or disposition;
– Ensure the maintenance of proper accounting records;
– Provide reliable information;
– Identify and, as far as possible, mitigate potential impediments
to the Group achieving its objectives; and
– Ensure compliance with relevant legislation, rules and
regulations.
It must be recognised that the Group’s internal controls provide
reasonable but not absolute assurance against material
misstatement or loss.
Management has established a risk management framework
and put in place sufficient procedures necessary to enable the
Directors to report in compliance with the Code on internal
controls. These involve the analysis, evaluation and management
of the key risks to the Group, including a review of all material
controls. They also include plans for the continuity of the
Company’s business in the event of unforeseen interruption.
Having monitored the Group’s risk management and internal
controls, and having reviewed the effectiveness of material
controls, the Audit Committee has not identified any significant
failings or weaknesses in the Group’s internal control structure
during the year.
The Risk and Controls committee supports the Audit Committee.
It is not a committee of the Board but of executives from across
the business and is chaired by the Chief Financial Officer. The
committee reports its activities to the Group Executive
Committee. The committee’s role is to:
– Encourage pro-active discussion of risk around the business;
– Manage the annual internal audit programme;
– Consider the results and recommendations of reviews; and
– Monitor the implementation of recommendations.
The Audit Committee regularly reports to the Board on key risks
to the Group. The Board allocates responsibility for the
management of each key risk to the Executive Directors and
senior executives across the Group.
The Audit Committee assists the Board in fulfilling its
responsibilities relating to the adequacy and effectiveness of the
control environment and the Group’s compliance.
Throughout the year the Committee monitored the effectiveness
of the Group’s risk management and internal control systems,
including material financial, operational and compliance controls.
In particular the Committee reviewed:
– The external auditor’s management letters;
– Internal Audit reports including monitoring the
implementation of recommendations arising from them;
– Reports on the system of internal controls and the risk
management framework;
– The Company’s approach to compliance with legislation and
the prevention of fraud;
– Business continuity and cyber risk; and
– Gifts and entertainment and expenses registers.
+ Further explanation of the Company’s approach to risk
management is on pages 62 to 67
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105
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
Compliance with the UK Corporate Governance Code continued
C.3 Audit Committee and Auditors
The Audit Committee comprises five independent Non-Executive
Directors. It holds four scheduled meetings per year, organised
around the Company’s reporting schedule. During 2015 the Audit
Committee met four times.
The Audit Committee Chairman regularly reports details of the
work carried out by the Audit Committee to the Board in
accordance with its terms of reference.
Jacques Espinasse, the Chairman of the Audit Committee,
has been determined by the Board to have recent and relevant
financial experience as required by the Code. Jacques Espinasse
will retire as Chairman of the Audit Committee and as a Non-
Executive Director at the conclusion of the 2016 AGM. He will
be succeeded by Pierre Bouchut.
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 LLP (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 at least once a year with Deloitte
and with the internal auditor, Ernst & Young LLP (EY), which
undertakes the majority of the Company’s internal audit reviews,
with no Company management present.
DTZ Debenham Tie Leung Limited and Cushman & Wakefield
LLP (the Valuers) and Deloitte have full access to one another and
the Chairman of the Committee meets with the Valuers and
Deloitte as part of the half-year and year-end valuations to ensure
each is satisfied that there has been a full and open exchange of
information and views.
The Audit Committee has regard to the recommendations
of the Financial Reporting Council on regular and open
communications between audit committees and external auditors
and it has concluded that the relationship with Deloitte meets
these recommendations.
+ Details of the composition of the Audit Committee are
set out on page 80
+ The experience and background of members of the
Audit Committee are on pages 108 to 109
The Audit Committee assists the Board in fulfilling its
responsibilities in relation to:
– Ensuring that management has systems and procedures in
place to ensure the integrity of financial information;
– Reviewing the Company’s internal audit arrangements;
– Maintaining an appropriate relationship with the Group’s
external auditor Deloitte; and
The Committee is responsible for developing, implementing and
monitoring the Group’s policy on the engagement of the external
auditor to supply non-audit services. The principal requirements
of the policy 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 or 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 level by the Chairman
of the Audit Committee.
Deloitte’s remuneration for the year ended 31 December 2015 was
£0.6m. Consideration is given to the nature of and remuneration
received for other services provided by Deloitte to the Company.
Confirmation is also 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.
+ See note 4 to the accounts on page 132 for further
information on Deloitte’s remuneration
During 2015 non-audit services provided by Deloitte to the
Company included acting as reporting accountants for tax-related
work and reviewing the Group’s sustainability reporting. Fees for
non-audit services provided to the Company by Deloitte for the
year ended 31 December 2015 were £0.1m.
The Audit Committee considered the reappointment of Deloitte
and recommended it to the Board. Deloitte is willing to be
reappointed as the external auditor to the Company and a
resolution concerning Deloitte’s reappointment will be proposed
at the 2016 AGM.
+ Further details are provided in the terms of reference for the
Audit Committee and the full policy on non-audit services,
available at www.hammerson.com
The Committee oversees and monitors the policies and
procedures which form the core components of the Group’s
adequate procedures under the Bribery Act including the Code
of Conduct and Whistleblowing policy. The Code of Conduct
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.
+ A summary of the Code of Conduct is available at
www.hammerson.com
The Whistleblowing policy sets out the procedures for employees
to report any suspicions of fraud, financial irregularity or other
malpractice. No reports of any such matters were received during
the year. The Company subscribes to the independent charity
Public Concern at Work so that employees may have free access to
its helpline.
– Reviewing the effectiveness, objectivity and independence of
Deloitte including the scope of work and the fees paid to Deloitte.
+ Details of how the Audit Committee has discharged its
responsibilities during the year are provided in the
Audit Committee Report on pages 80 to 83
106
HAMMERSON PLC ANNUAL REPORT 2015 D. REMUNERATION
D.1 The level and components of remuneration
The principal responsibility of the Remuneration Committee is
to determine and agree with the Board the overall remuneration
principles and the framework for remuneration of the Executive
Directors, the General Counsel and Company Secretary and the
other members of the Group Executive Committee. The terms
of reference for the Committee are reviewed annually.
The Chairman of the Committee reports regularly on the
Committee’s activities at Board meetings.
+ The Directors’ Remuneration Report can be found
on pages 84 to 101
D.2 Procedure
When determining policy on executive remuneration the
Remuneration Committee takes into account all factors which it
deems necessary. These include:
– 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 84
+ Details of advisors who provided services to the
Remuneration Committee during the year are on page 99
During 2015 no individual was present when his or her own
remuneration was being determined.
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E. RELATIONS WITH SHAREHOLDERS
E.1 Dialogue with shareholders
The Company actively engages with shareholders.
Throughout 2015 the Company attended 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 Investment Association and the Pensions and
Life Savings Association (formerly National Association of
Pension Funds or NAPF).
Hammerson’s website contains information of interest to both
institutional and private shareholders.
+ Further details about relations with shareholders can be
found in the Corporate Governance Report on page 77
and in the Directors’ Remuneration Policy available at
www.hammerson.com
E.2 Constructive use of general meetings
At general meetings, the proxy appointment form gives
shareholders options either to direct their proxy vote for each
resolution 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; it will therefore not be counted
when calculating the proportions of votes that were for and
against the resolution. All valid proxy appointment forms are
properly recorded and counted. After the vote has been counted,
information is given on the number of proxy votes for and against
each resolution (and the number of shares representing withheld
votes), both at the general meeting and on the Company’s website.
Notice of a general meeting is despatched to shareholders at least
14 days in advance.
Separate resolutions are proposed on each substantially
separate issue.
When the Board is of the opinion that a significant proportion
of the votes at any general meeting is cast against a resolution,
the Company will explain when announcing the results of the
vote, the actions it intends to take to gain an understanding
of the reasons behind the result.
107
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
Jean-Philippe Mouton
Executive Director (age 54)
Appointed to the Board: 1 January 2013.
Past appointments: Director of strategic planning at Disneyland
Paris and roles at The Walt Disney Company and Standard
Chartered Bank.
Pierre Bouchut
Non-Executive Director (age 60)
Appointed to the Board: 13 February 2015.
Committee membership: Audit Committee and Nomination
Committee.
Other appointments: Executive vice president and chief
financial officer of Delhaize Group SA. Non-executive director
of La Rinascente SpA. Non-executive member of the advisory
boards of Qualium Investissement and Lombard Odier Asset
Management (Switzerland) SA.
Past appointments: Executive director growth markets zone
and chief financial officer of Carrefour SA. Chief financial officer
and member of the management board of Schneider Electric SA.
Chief executive officer and member of the Board of Casino
Guichard-Perrachon SA.
Gwyn Burr
Non-Executive Director (age 53)
Appointed to the Board: 1 May 2012.
Committee membership: Audit Committee, Nomination
Committee and Chairman of the Remuneration Committee.
Other appointments: Member of board, remuneration
committee and chairman of nominations committee of
Sainsbury’s Bank plc. Non-executive director of Just Eat plc,
Metro AG and DFS Trading Limited.
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.
DIRECTORS’ BIOGRAPHIES
David Tyler
Chairman (age 63)
Appointed to the Board: 12 January 2013 and appointed
Chairman on 9 May 2013.
Committee membership: Remuneration Committee and
Chairman of the Nomination Committee.
Other appointments: Chairman of J Sainsbury plc and Domestic
& General Insurance plc.
Past appointments: Finance director of GUS plc and senior
financial and general management roles with Christie’s
International plc, County NatWest Limited and Unilever PLC.
Chairman of 3i Quoted Private Equity plc and Logica plc.
Non-executive director of Burberry Group plc, Experian plc
and Reckitt Benckiser Group plc.
David Atkins
Chief Executive (age 49)
Appointed to the Board: 1 January 2007 and appointed Chief
Executive on 1 October 2009.
Other appointments: Member of the executive board of the
European Public Real Estate Association. Member of the British
Council of Shopping Centres (BCSC) executive board and trustee
of the BCSC Educational Trust. Member of the policy committee
of the British Property Federation. Director and Trustee of the
Reading Real Estate Foundation.
Peter Cole
Chief Investment Officer (age 57)
Appointed to the Board: 1 October 1999.
Past appointments: President and general council member
of the City Property Association.
Timon Drakesmith
Chief Financial Officer (age 50)
Appointed to the Board: 30 June 2011.
Other appointments: Non-executive director of Value Retail
PLC. Chairman of VIA Outlets advisory and investment
committees, and of the British Property Federation’s finance
committee.
Past appointments: Finance director of Great Portland Estates
plc and 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.
108
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Terry Duddy
Non-Executive Director and Senior
Independent Director (age 59)
Appointed to the Board: 3 December 2009.
Committee membership: Nomination Committee and
Remuneration Committee.
Other appointments: Chairman of Retail Trust and
non-executive director of Debenhams plc.
Past appointments: Chief executive of Home Retail Group plc.
Director of DSG Retail Limited and trustee of Education and
Employers Taskforce.
Judy Gibbons
Non-Executive Director (age 59)
Appointed to the Board: 1 May 2011.
Committee membership: Audit Committee, Nomination
Committee and Remuneration Committee.
Other appointments: Non-executive director of Guardian Media
Group plc, Michael Kors Holdings Limited and Virgin Money
Giving Limited. 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.
Jacques Espinasse
Non-Executive Director (age 72)
Appointed to the Board: 1 May 2007.
Sarah Booth
General Counsel and Company Secretary
(age 49)
Committee membership: Nomination Committee and
Chairman of the Audit Committee.
Appointed: March 2010.
Past appointments: General counsel at Sodexo, legal and
corporate development director at Christian Salvesen PLC and
trained as a solicitor at Dickson Minto WS.
+ See the Nomination Committee Report on page 79 for
further details on Directors’ skills and expertise
Other appointments: Non-executive director and member
of the audit and remuneration committees of SES. Non-executive
director and chairman of the audit committee of AXA Belgium.
Chairman of the Fondation JED-Belgique.
Past appointments: Chief financial officer of Vivendi. Non-
executive director of Canal+ France, Maroc Telecom, SFR and
Universal Music Group. Non-executive director and member of the
audit and remuneration committees of La Banque Postale Asset
Management. Non-executive director and chairman of the audit
committee of AXA (Holdings) Belgium and AXA Bank Europe.
Andrew Formica
Non-Executive Director (age 44)
Appointed to the Board: 26 November 2015.
Committee membership: Audit Committee and Nomination
Committee.
Other appointments: Chief executive of Henderson Group plc
and director of The Investment Association.
Past appointments: Non-executive director of TIAA Henderson
Real Estate Limited.
109
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
DIRECTORS’ REPORT
This report (Report) forms part of the management report as
required under Disclosure and Transparency Rule (DTR) 4. The
Strategic Report on pages 1 to 67 includes an indication of future
likely developments in the Company, details of important events
since the year ended 31 December 2015, the Company’s business
model and strategy. The Corporate Governance Report on
pages 68 to 109 is incorporated in this Report by reference.
COMPANY’S ARTICLES OF ASSOCIATION
(ARTICLES)
The Articles may be amended by special resolution in accordance
with the Companies Act 2006 (Act) and are available at
www.hammerson.com.
BRANCHES
Details of the Company’s French branch are provided on page 178.
DIRECTORS
Details of the Directors who served during the year are set out on
pages 108 to 109. Anthony Watson served as a Non-Executive
Director until 22 April 2015 when he retired. Directors are
appointed and replaced in accordance with the Articles, the Act
and the UK Corporate Governance Code. The powers of the
Directors are set out in the Articles and the Act.
DISCLOSURE OF INFORMATION TO AUDITORS
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 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.
DIVIDEND
Details of the recommended final dividend can be found on page 56.
EMPLOYEES
Details of the Company’s policies regarding the employment of
disabled persons and its engagement with employees are provided
on pages 50 and 51.
FINANCIAL INSTRUMENTS
Details of the Group’s financial risk management in relation to its
financial instruments are available on pages 149 to 155.
GOING CONCERN AND VIABILITY STATEMENTS
The Company’s Going Concern statement and Viability statement
are on page 67.
GREENHOUSE GAS EMISSIONS REPORTING
Information regarding the Company’s greenhouse gas emissions
can be found on page 47.
INDEMNIFICATION OF AND INSURANCE
FOR DIRECTORS AND OFFICERS
The Company maintains directors’ and officers’ liability
insurance, which is reviewed annually. The Company’s Directors
and officers are adequately insured in line with best practice.
Directors are indemnified under the Articles.
LISTING RULE 9.8.4R DISCLOSURES
Table 97 sets out where disclosures required in compliance with
Listing Rule 9.8.4R are located.
Table 97
Interest capitalised and tax relief
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by major
subsidiary undertakings
Parent company participation in a placing by a listed
subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Page
134
n/a
84 - 101 and
174 - 177
n/a
n/a
n/a
n/a
n/a
n/a
n/a
111
111
n/a
POST BALANCE SHEET EVENTS
Details of the post balance sheet events can be found in note 11 on
page 138.
PROVISIONS ON CHANGE OF CONTROL
Five of the six outstanding bonds issued by the Company contain
covenants specifying that the bondholders may request
repayment at par, 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.
In addition, under the Company’s credit facilities and private
placement notes, the lending banks or holders may request
repayment of outstanding amounts within 30 and 52 days
respectively, of any change of control.
PURCHASE OF OWN SHARES
At the 2015 Annual General Meeting (AGM), the Company was
granted authority by shareholders to purchase up to 78,430,004
ordinary shares (10% of the Company’s issued ordinary share
capital as at 20 February 2015). This authority will expire at the
conclusion of the 2016 AGM, at which a resolution will be
proposed for its renewal, or, if earlier, 22 June 2016.
110
HAMMERSON PLC ANNUAL REPORT 2015 RE-APPOINTMENT OF EXTERNAL AUDITOR
Details of the re-appointment of the external auditor and
disclosure of information are provided on page 106.
RESPONSIBILITY STATEMENT
The Directors’ responsibility statement is set out on page 113.
SHARE CAPITAL AND SUBSTANTIAL
SHAREHOLDERS
Details of the Company’s capital structure are set out on pages 155 to
156. The rights and obligations attached to the Company’s shares are
set out in the Articles. There are no restrictions on the transfer of
shares except the UK Real Estate Investment Trust restrictions.
At 31 December 2015 the following interests in voting rights over
the issued share capital of the Company had been notified in
accordance with DTR 5:
Table 98
APG Algemene Pensioen Groep
N.V.
BlackRock Inc.
Merrill Lynch International
Rockcastle Global Real Estate
Company Limited
Legal & General Investment
Management Ltd
Ordinary shares
of 25p each
At 31 December
2015 percentage of
total voting rights
68,227,094
50,223,602
52,216,411
9.57%
7.05%
6.66%
39,300,000
5.01%
25,717,804
3.61%
On 22 January 2016, Merrill Lynch International notified the
Company that it had decreased its share holding to below 3% of
the total voting rights. No other changes to table 98 have been
disclosed to the Company between 31 December 2015 and 12
February 2016.
SHARES HELD IN THE EMPLOYEE SHARE
OWNERSHIP PLAN
The Trustees of the Hammerson Employee Share Ownership Plan
hold Hammerson plc shares in trust to satisfy awards under the
Company’s employee share plans. The Trustees have waived their
right to receive dividends on shares held in the Company.
STATEMENT OF COMPLIANCE WITH THE
COMPETITION AND MARKETS AUTHORITY (CMA)
ORDER
The Company confirms that it has complied with The Statutory
Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Processes and Audit Committee
Responsibilities) Order 2014 (Article 7.1), published by the CMA
on 26 September 2014.
Sarah Booth
General Counsel and Company Secretary
12 February 2016
C
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111
HAMMERSON.COMSTRATEGIC REPORTOTHER INFORMATIONFINANCIAL STATEMENTS
Financial statements
Directors’ responsibilities
Independent auditor’s report
Primary financial statements
Notes to the accounts
Company primary statements
Notes to the Company accounts
OTHER INFORMATION
Additional disclosures
Ten-year financial summary
Summary of Directors’ remuneration policy
Shareholder information
Glossary
Index
113
114
118
124
158
160
166
173
174
178
181
183
112
HAMMERSON PLC ANNUAL REPORT 2015 DIRECTORS’ RESPONSIBILITIES STATEMENT
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 Financial Reporting Standard 101 (FRS101)
“Reduced Disclosure Framework”. 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:
– Select suitable accounting policies and then apply
them consistently;
– Make judgements and accounting estimates that are reasonable
and prudent;
– State whether Financial Reporting Standard 101 (FRS101)
“Reduced Disclosure Framework” has 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.
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.
By order of the Board
David Atkins
Chief Executive
12 February 2016
Timon Drakesmith
Chief Financial Officer
12 February 2016
113
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HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC
OPINION ON THE 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
2015 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, including Financial Reporting
Standard 101 (FRS101) “Reduced Disclosure Framework”; 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
and Company Statement of Changes in Equity, the Consolidated
Cash Flow Statement and the related notes 1 to 28 for the
consolidated financial statements and the related notes A to H
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), including Financial Reporting
Standard 101 (FRS101) “Reduced Disclosure Framework”.
GOING CONCERN AND THE DIRECTORS’
ASSESSMENT OF THE PRINCIPAL RISKS THAT
WOULD THREATEN THE SOLVENCY OR LIQUIDITY
OF THE GROUP
As required by the Listing Rules we have reviewed the Directors’
Statement contained on page 124 regarding the appropriateness of
the going concern basis of accounting contained within note 1 to the
financial statements and the Directors’ statement on the longer-
term viability of the Group contained within the Strategic Report
on page 67.
We have nothing material to add or draw attention to in relation to:
– The Directors’ confirmation on page 63 that they have carried out
a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity;
– The disclosures on pages 62 to 67 that describe those risks and
explain how they are being managed or mitigated;
– The Directors’ statement in note 1 to the financial statements
about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s ability
to continue to do so over a period of at least 12 months from the
date of approval of the financial statements;
– The Director’s explanation on page 67 as to how they have
assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We agreed with the Directors’ adoption of the going concern basis of
accounting and we did not identify any such material uncertainties.
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.
INDEPENDENCE
We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and we confirm that we are
independent of the Group and we have fulfilled our other ethical
responsibilities in accordance with those standards. We also
confirm we have not provided any of the prohibited non-audit
services referred to in those standards.
OUR ASSESSMENT OF RISKS OF MATERIAL
MISSTATEMENT
The key risks we identified were:
– Valuation of the property portfolio
– Accounting for the acquisition of the Irish loan portfolio
– Accounting for the investment in Value Retail
There has been no significant change in the Group’s operations and
our assessed risks of material misstatement described on page 115,
which are those that had the greatest effect on the audit strategy, the
allocation of resources in the audit and directing the efforts of the
engagement team. We do however note the complex nature of the
transaction to acquire the 50% interest in the Irish loan portfolio
and have included detail on how the scope of our audit addressed the
specific risks relevant to that transaction within the ‘Accounting for
the acquisition of the Irish loan portfolio’ risk on page 115. All other
risks are the same as the prior year.
The description of risks on page 115 should be read in conjunction
with the significant issues considered by the Audit Committee
discussed on page 81 and the significant accounting policies
disclosed in note 1 of the financial statements. These matters were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
114
114 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC
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
2015 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, including Financial Reporting
Standard 101 (FRS101) “Reduced Disclosure Framework”; 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
and Company Statement of Changes in Equity, the Consolidated
Cash Flow Statement and the related notes 1 to 28 for the
consolidated financial statements and the related notes A to H
for the parent company financial statements.
The financial reporting framework that has been applied in the
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), including Financial Reporting
Standard 101 (FRS101) “Reduced Disclosure Framework”.
GOING CONCERN AND THE DIRECTORS’
ASSESSMENT OF THE PRINCIPAL RISKS THAT
WOULD THREATEN THE SOLVENCY OR LIQUIDITY
OF THE GROUP
about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s ability
to continue to do so over a period of at least 12 months from the
date of approval of the financial statements;
– The Director’s explanation on page 67 as to how they have
assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We agreed with the Directors’ adoption of the going concern basis of
accounting and we did not identify any such material uncertainties.
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.
INDEPENDENCE
We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and we confirm that we are
independent of the Group and we have fulfilled our other ethical
responsibilities in accordance with those standards. We also
confirm we have not provided any of the prohibited non-audit
OUR ASSESSMENT OF RISKS OF MATERIAL
MISSTATEMENT
The key risks we identified were:
– Valuation of the property portfolio
– Accounting for the acquisition of the Irish loan portfolio
– Accounting for the investment in Value Retail
There has been no significant change in the Group’s operations and
our assessed risks of material misstatement described on page 115,
preparation of the Group financial statements is applicable law and
services referred to in those standards.
As required by the Listing Rules we have reviewed the Directors’
which are those that had the greatest effect on the audit strategy, the
Statement contained on page 124 regarding the appropriateness of
allocation of resources in the audit and directing the efforts of the
the going concern basis of accounting contained within note 1 to the
engagement team. We do however note the complex nature of the
financial statements and the Directors’ statement on the longer-
transaction to acquire the 50% interest in the Irish loan portfolio
term viability of the Group contained within the Strategic Report
and have included detail on how the scope of our audit addressed the
on page 67.
We have nothing material to add or draw attention to in relation to:
– The Directors’ confirmation on page 63 that they have carried out
a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity;
– The disclosures on pages 62 to 67 that describe those risks and
explain how they are being managed or mitigated;
specific risks relevant to that transaction within the ‘Accounting for
the acquisition of the Irish loan portfolio’ risk on page 115. All other
risks are the same as the prior year.
The description of risks on page 115 should be read in conjunction
with the significant issues considered by the Audit Committee
discussed on page 81 and the significant accounting policies
disclosed in note 1 of the financial statements. These matters were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
OPINION ON THE FINANCIAL STATEMENTS OF
– The Directors’ statement in note 1 to the financial statements
OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT (CONTINUED)
Risk
How the scope of our audit responded to the risk
Valuation of the property portfolio
– Hammerson plc ("Hammerson") owns a portfolio of retail
property assets valued at £7,255.8 million at 31 December 2015
(31 December 2014: £6,849.4 million) of which £4,652.1 million
are held by subsidiaries (31 December 2014: £4,427.3 million)
and £2,603.7 million by joint ventures (31 December 2014:
£2,422.1 million). 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 using the ‘investment
method’ of valuation, in which the principal assumptions are
estimated rental values and capitalisation yields. Development
properties are valued by applying the same methodology, but with a
deduction for all future costs necessary to complete the
development together with an allowance for remaining risk,
developers’ profit and purchasers’ costs (‘the residual method’).
– Please see notes 11 and 12 to the financial statements.
– We assessed management’s review of the work of the external
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
estimated rental values and capitalisation yields. We benchmarked
these assumptions to relevant market evidence including specific
property sales and other external data;
– For development properties we assessed future costs to complete
on a sample of development properties based on development
appraisals. We assessed the classification of development
properties and whether the methodology applied (i.e. investment or
residual method) was appropriate. We also challenged the
allowances in the valuation for developers’ profit;
– 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 underlying lease agreement.
Accounting for the acquisition of the Irish loan portfolio
– Hammerson continued to implement its strategy of capital
recycling, with a number of acquisitions and disposals completing
during the year, the most significant of which was the acquisition of
a 50% interest in an Irish loan portfolio at a cost of £690.2 million.
The loan portfolio, which is in default, is secured on a number of
prime Irish retail properties. Negotiations to secure the consensual
conversion of the loan portfolio into the retail properties are
ongoing. The acquisition was undertaken by a joint venture set up
by Hammerson and Allianz to acquire the Irish loan portfolio. The
Group funded the acquisition through a loan provided to the joint
venture of £690.2 million.
– In respect of the acquisition of the Irish loan portfolio, we have
reviewed the terms of the loan instruments acquired and assessed
whether the Group’s accounting policy for the acquisition of the
loans is in accordance with IAS39 ‘Financial Instruments
Recognition and Measurement’. This included assessing, on
acquisition, the initial fair value of the loans of the Irish loan
portfolio and the loan provided to fund the acquisition. We also
assessed the loan provided by the Group to the joint venture for
credit risk and impairment indicators based on the valuation of the
underlying properties; and
– We tested the accuracy and completeness of the disclosures in the
– Hammerson’s accounting policy in respect of the transaction is
financial statements.
detailed in note 1 on page 125. The complexity of the transaction,
together with the unique nature of the asset from the Group’s
perspective, result in increased risk of inaccurate presentation
of the transaction. This includes initial recognition of the loans
(including interest and transaction costs) at fair value together with
accounting for credit risk and impairment indicators.
Accounting for the investment in Value Retail
– Hammerson’s interest in Value Retail (carrying value of
£743.8 million) (31 December 2014: £628.8 million) is equity
accounted as an associate.
– The valuation of the Group’s investment in Value Retail is primarily
driven by the valuation of the Value Retail property portfolio of
£3,333.1 million (31 December 2014: £2,835.4 million) of which
Hammerson’s share is £1,095.0 million
(31 December 2014: £884.7 million). This is subject to similar
judgements to those of the Group’s property portfolio above,
including future net operating income and capitalisation yields.
– Other key balances which impact the valuation of the Group’s
investment in Value Retail include borrowings, deferred tax and
derivative financial instruments.
– Please see note 13 to the financial statements.
– We planned the scope of the audit and instructed the auditor
of Value Retail accordingly;
– We met with the auditor, Value Retail management and the
external valuer of the Value Retail property portfolio to discuss and
challenge the valuation assumptions including future net operating
income and capitalisation yields;
– We assessed the competence, independence and integrity of the
external valuer; and
– We assessed the quality of the work performed by the auditor
of Value Retail in the areas of borrowings, deferred tax and
derivative financial instruments.
114 HAMMERSON PLC ANNUAL REPORT 2015
115
HAMMERSON.COM 115
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Independent Auditor’s report to the members of Hammerson plc continued
OUR APPLICATION OF MATERIALITY
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
– We determined materiality for the Group to be £40 million
– We performed a full scope audit on the UK and French
(2014: £30 million)
– We reported all audit differences in excess of £0.8 million
(2014: £0.6 million)
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 £40 million (2014:
£30 million), which is below 1% (2014: below 1%) of shareholders’
equity. We determined materiality based on shareholders’ equity
as net asset value is a key performance indicator as it takes into
consideration the valuation of the Group’s property portfolio and
the investment in premium outlets.
In addition to net assets, we consider EPRA Adjusted Profit Before
Tax as a critical performance measure for the Group and a measure
used within the Real Estate industry. We applied a lower threshold of
£10.9 million (2014: £7.8 million) which equates to 5.1% (2014: 4.5%)
of that measure for testing all balances impacting that measure.
Group and component materiality
Group materiality £40m
Component materiality
£10m to £22m
Audit Committee
reporting threshold £0.8m
£5,586m
Group net assets
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.8 million (2014:
£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.
components. Value Retail and VIA Outlets were subject
to audit of specific account balances. There is no change
from 2014
– All components were audited to component materiality
which ranged from £10 million to £22 million
(December 2014: £12.6 million to £16.5 million)
– Together these four components account for 99% of the
Group’s net assets and 100% of profit before tax
Our group audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level.
Based on that assessment, we focused our group audit scope
primarily on the audit work at four significant components being
the UK, France, Value Retail and VIA Outlets (VIA) (2014: four).
Together these components comprise 99% (2014: 99%) of the
Group’s net assets and 100% (2014: 100%) of profit before tax.
The UK and French components were subject to a full scope audit,
whilst Value Retail (accounted for as an associate and audited by EY)
and VIA (accounted for as a joint venture) were subject to an audit of
specified account balances, where the extent of our testing was based
on our assessment of the risks of material misstatement and of the
materiality of the Group’s operations at those components. The UK
and French components account for 85% of net assets. Our audit
work on Value Retail is specified in the assessment of the risks of
material misstatement section above.
Our audit work at the four locations was executed at levels of
materiality applicable to each individual entity which were lower
than group materiality and ranged from £10 million to £22 million
(2014: £12.6 million to £16.5 million). For those balances impacting
Adjusted Profit Before Tax the materiality range was £2.6 million to
£6.0 million (2014: £3.2 million to £4.35 million).
The group audit team continued to follow a programme of planned
visits that has been designed so that the Senior Statutory Auditor
or a senior member of the group audit team visits each of the
locations where the group audit scope is focused at least once every
two years. In years when we do not visit a significant component we
will include the component audit team in our team briefing, discuss
their risk assessment, and review documentation of the findings
from their work.
At the parent entity level we also tested the consolidation process
and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the
aggregated financial information of the remaining components not
subject to audit or audit of specified account balances. 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.
116
116 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Independent Auditor’s report to the members of Hammerson plc continued
OUR APPLICATION OF MATERIALITY
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
– We determined materiality for the Group to be £40 million
– We performed a full scope audit on the UK and French
(2014: £30 million)
(2014: £0.6 million)
– We reported all audit differences in excess of £0.8 million
from 2014
components. Value Retail and VIA Outlets were subject
to audit of specific account balances. There is no change
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
– All components were audited to component materiality
which ranged from £10 million to £22 million
(December 2014: £12.6 million to £16.5 million)
or influenced. We use materiality both in planning the scope of our
– Together these four components account for 99% of the
audit work and in evaluating the results of our work.
Group’s net assets and 100% of profit before tax
We determined materiality for the Group to be £40 million (2014:
Our group audit was scoped by obtaining an understanding of the
£30 million), which is below 1% (2014: below 1%) of shareholders’
Group and its environment, including group-wide controls, and
equity. We determined materiality based on shareholders’ equity
assessing the risks of material misstatement at the group level.
as net asset value is a key performance indicator as it takes into
consideration the valuation of the Group’s property portfolio and
the investment in premium outlets.
Based on that assessment, we focused our group audit scope
primarily on the audit work at four significant components being
the UK, France, Value Retail and VIA Outlets (VIA) (2014: four).
In addition to net assets, we consider EPRA Adjusted Profit Before
Together these components comprise 99% (2014: 99%) of the
Tax as a critical performance measure for the Group and a measure
Group’s net assets and 100% (2014: 100%) of profit before tax.
used within the Real Estate industry. We applied a lower threshold of
£10.9 million (2014: £7.8 million) which equates to 5.1% (2014: 4.5%)
of that measure for testing all balances impacting that measure.
Group and component materiality
The UK and French components were subject to a full scope audit,
whilst Value Retail (accounted for as an associate and audited by EY)
and VIA (accounted for as a joint venture) were subject to an audit of
specified account balances, where the extent of our testing was based
on our assessment of the risks of material misstatement and of the
materiality of the Group’s operations at those components. The UK
and French components account for 85% of net assets. Our audit
work on Value Retail is specified in the assessment of the risks of
material misstatement section above.
Our audit work at the four locations was executed at levels of
materiality applicable to each individual entity which were lower
than group materiality and ranged from £10 million to £22 million
(2014: £12.6 million to £16.5 million). For those balances impacting
Adjusted Profit Before Tax the materiality range was £2.6 million to
£6.0 million (2014: £3.2 million to £4.35 million).
The group audit team continued to follow a programme of planned
visits that has been designed so that the Senior Statutory Auditor
or a senior member of the group audit team visits each of the
locations where the group audit scope is focused at least once every
two years. In years when we do not visit a significant component we
will include the component audit team in our team briefing, discuss
their risk assessment, and review documentation of the findings
from their work.
At the parent entity level we also tested the consolidation process
and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the
aggregated financial information of the remaining components not
subject to audit or audit of specified account balances. 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.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.8 million (2014:
£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.
OPINION ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND
AUDITOR
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 certain 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.
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. We also comply with International Standard on Quality
Control 1 (UK and Ireland). Our audit methodology and tools aim
to ensure that our quality control procedures are effective,
understood and applied. Our quality controls and systems include
our dedicated professional standards review team and independent
partner reviews.
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
12 February 2016
116 HAMMERSON PLC ANNUAL REPORT 2015
117
HAMMERSON.COM 117
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
Gross rental income
Operating profit before other net gains and share of results of joint ventures and associates
Other net gains
Share of results of joint ventures
Share of results of associates
Operating profit
Finance costs
Debt and loan facility cancellation costs
Change in fair value of derivatives
Finance income
Net finance costs
Profit before tax
Tax charge
Profit for the year
Attributable to:
Equity shareholders
Non-controlling interests
Profit for the year
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Notes
2
2
2
12A
13A
2
7
8A
28C
10A
10A
10A
2015
£m
236.0
166.8
258.6
246.8
160.6
832.8
(101.9)
(13.9)
(1.1)
15.7
(101.2)
731.6
(1.6)
730.0
726.8
3.2
730.0
92.8p
92.6p
26.9p
2014
£m
206.5
142.5
264.7
279.0
109.9
796.1
(106.4)
(8.7)
13.1
9.0
(93.0)
703.1
(1.0)
702.1
699.1
3.0
702.1
95.7p
95.7p
23.9p
118
118 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
Operating profit before other net gains and share of results of joint ventures and associates
Gross rental income
Other net gains
Share of results of joint ventures
Share of results of associates
Operating profit
Finance costs
Debt and loan facility cancellation costs
Change in fair value of derivatives
Finance income
Net finance costs
Profit before tax
Tax charge
Profit for the year
Attributable to:
Equity shareholders
Non-controlling interests
Profit for the year
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Notes
2
2
2
12A
13A
2
7
8A
28C
10A
10A
10A
2015
£m
236.0
166.8
258.6
246.8
160.6
832.8
(101.9)
(13.9)
(1.1)
15.7
(101.2)
731.6
(1.6)
730.0
726.8
3.2
730.0
92.8p
92.6p
26.9p
2014
£m
206.5
142.5
264.7
279.0
109.9
796.1
(106.4)
(8.7)
13.1
9.0
(93.0)
703.1
(1.0)
702.1
699.1
3.0
702.1
95.7p
95.7p
23.9p
Items that may subsequently be recycled through the income statement
Foreign exchange translation differences
Net gain on hedging activities
Items that may not subsequently be recycled through the income statement
Revaluation (losses)/gains on participative loans within investment in associates
Net actuarial losses on pension schemes
Total other comprehensive income
Profit for the year
Total comprehensive income for the year
Attributable to:
Equity shareholders
Non-controlling interests
Total comprehensive income for the year
2015
£m
2014
£m
(107.5)
81.9
(25.6)
(1.0)
(0.3)
(26.9)
730.0
703.1
703.5
(0.4)
703.1
(136.4)
103.8
(32.6)
0.6
(11.5)
(43.5)
702.1
658.6
660.9
(2.3)
658.6
118 HAMMERSON PLC ANNUAL REPORT 2015
119
HAMMERSON.COM 119
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2015
Non-current assets
Investment and development properties
Interests in leasehold properties
Plant and equipment
Investment in joint ventures
Investment in associates
Other investments
Receivables
Current assets
Receivables
Restricted monetary assets
Cash and deposits
Total assets
Current liabilities
Payables
Tax
Non-current liabilities
Borrowings
Deferred tax
Obligations under finance leases
Payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Merger reserve
Other reserves
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
These financial statements were approved by the Board of Directors on 12 February 2016.
Signed on behalf of the Board
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
120
120 HAMMERSON PLC ANNUAL REPORT 2015
Notes
2015
£m
2014
£m
11
4,652.1
4,427.3
12A
13C
14
15
16
17
18
32.1
7.6
3,213.6
768.0
4.8
92.1
33.2
5.0
2,341.5
628.8
1.4
79.3
8,770.3
7,516.5
118.0
34.0
37.0
189.0
8,959.3
86.5
11.3
28.6
126.4
7,642.9
235.5
0.7
236.2
204.4
0.3
204.7
19A
3,028.1
2,287.1
21
22
23
0.5
32.5
75.7
3,136.8
3,373.0
5,586.3
196.1
1,223.3
135.1
(125.6)
374.1
21.7
0.5
33.0
72.5
2,393.1
2,597.8
5,045.1
196.1
1,222.9
239.0
(207.5)
374.2
19.6
3,696.5
3,136.2
(3.9)
(6.8)
5,517.3
4,973.7
28C
69.0
71.4
5,586.3
5,045.1
10B
10B
£7.03
£7.10
£6.35
£6.38
HAMMERSON PLC ANNUAL REPORT 2015
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2015
Non-current assets
Investment and development properties
Interests in leasehold properties
Plant and equipment
Investment in joint ventures
Investment in associates
Other investments
Receivables
Current assets
Receivables
Restricted monetary assets
Cash and deposits
Total assets
Current liabilities
Payables
Tax
Non-current liabilities
Borrowings
Deferred tax
Payables
Obligations under finance leases
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Merger reserve
Other reserves
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
Signed on behalf of the Board
These financial statements were approved by the Board of Directors on 12 February 2016.
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
12A
13C
14
15
16
17
18
21
22
23
Notes
2015
£m
2014
£m
11
4,652.1
4,427.3
8,770.3
7,516.5
32.1
7.6
3,213.6
768.0
4.8
92.1
118.0
34.0
37.0
189.0
8,959.3
33.2
5.0
2,341.5
628.8
1.4
79.3
86.5
11.3
28.6
126.4
7,642.9
235.5
0.7
236.2
204.4
0.3
204.7
19A
3,028.1
2,287.1
0.5
32.5
75.7
3,136.8
3,373.0
5,586.3
196.1
1,223.3
135.1
(125.6)
374.1
21.7
0.5
33.0
72.5
2,393.1
2,597.8
5,045.1
196.1
1,222.9
239.0
(207.5)
374.2
19.6
3,696.5
3,136.2
(3.9)
(6.8)
5,517.3
4,973.7
28C
69.0
71.4
5,586.3
5,045.1
10B
10B
£7.03
£7.10
£6.35
£6.38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Investment
in own
shares*
£m
Equity
shareholders’
funds
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 1 January 2015
196.1 1,222.9
239.0 (207.5) 374.2
19.6 3,136.2
(6.8)
4,973.7
71.4 5,045.1
Issue of shares
Share issue costs
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
Dividends
Foreign exchange
translation differences
Net gain on hedging
activities
Revaluation losses on
participative loans within
investment in associates
Net actuarial losses on
pension schemes
Profit for the year
Total comprehensive
income/(loss) for the year
Balance at 31 December
2015
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(103.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81.9
–
–
–
–
(103.9)
81.9
–
(0.1)
–
–
4.8
(2.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
(0.2)
–
–
–
–
–
–
–
–
0.2
(165.2)
–
–
(1.0)
(0.3)
726.8
725.5
–
–
–
2.9
–
–
–
–
–
–
–
–
–
0.4
(0.1)
4.8
–
–
0.2
–
–
–
–
–
–
0.4
(0.1)
4.8
–
–
0.2
(165.2)
(2.0)
(167.2)
(103.9)
(3.6)
(107.5)
81.9
(1.0)
(0.3)
726.8
–
–
–
81.9
(1.0)
(0.3)
3.2
730.0
703.5
(0.4)
703.1
196.1 1,223.3
135.1
(125.6)
374.1
21.7 3,696.5
(3.9)
5,517.3
69.0 5,586.3
* Investment in own shares is stated at cost.
120 HAMMERSON PLC ANNUAL REPORT 2015
121
HAMMERSON.COM 121
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Investment
in own
shares*
£m
Equity
shareholders’
funds
£m
Non-
controlling
interests
£m
Total equity
£m
Balance at 1 January 2014
178.2
1,222.4
370.1
(311.3)
–
17.2 2,588.2
(4.9)
4,059.9
76.7
4,136.6
Issue of shares
Share issue costs
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 gain on hedging activities
Revaluation gains on
participative loans within
investment in associates
Net actuarial losses on
pension schemes
Profit for the year
Total comprehensive
income/(loss) for the year
17.9
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(131.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
103.8
–
–
–
(131.1)
103.8
381.4
(7.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.1
(3.6)
–
–
–
–
0.9
(0.9)
0.2
–
–
–
–
3.6
–
–
(5.5)
399.8
(7.2)
5.1
–
–
0.2
(5.5)
–
–
–
–
–
–
–
399.8
(7.2)
5.1
–
–
0.2
(5.5)
(139.5)
–
(139.5)
(3.0)
(142.5)
–
–
0.6
(11.5)
699.1
688.2
–
–
–
–
–
–
(131.1)
103.8
0.6
(11.5)
699.1
(5.3)
(136.4)
–
–
–
103.8
0.6
(11.5)
3.0
702.1
660.9
(2.3)
658.6
–
–
–
–
–
–
–
–
–
Balance at 31 December 2014
196.1
1,222.9
239.0
(207.5)
374.2
19.6
3,136.2
(6.8)
4,973.7
71.4 5,045.1
* Investment in own shares is stated at cost.
122
122 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Issue of shares
Share issue costs
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 gain on hedging activities
Revaluation gains on
participative loans within
investment in associates
Net actuarial losses on
pension schemes
Profit for the year
Total comprehensive
income/(loss) for the year
17.9
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(131.1)
103.8
Merger
reserve
£m
–
381.4
(7.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.6)
3.6
0.9
(0.9)
0.2
–
(139.5)
(5.5)
–
–
5.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
(11.5)
699.1
688.2
–
–
–
–
–
–
–
–
–
–
–
–
399.8
(7.2)
5.1
–
–
0.2
(5.5)
399.8
(7.2)
5.1
–
–
0.2
(5.5)
(139.5)
(3.0)
(142.5)
(131.1)
103.8
(5.3)
(136.4)
103.8
0.6
(11.5)
699.1
0.6
(11.5)
3.0
702.1
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2014
196.1
1,222.9
239.0
(207.5)
374.2
19.6
3,136.2
(6.8)
4,973.7
71.4 5,045.1
(131.1)
103.8
660.9
(2.3)
658.6
* Investment in own shares is stated at cost.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
FOR THE YEAR ENDED 31 DECEMBER 2015
Share
capital
£m
Share
Translation
premium
reserve
£m
£m
Hedging
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Investment
Equity
Non-
in own
shareholders’
controlling
shares*
£m
funds
£m
interests
Total equity
£m
£m
Balance at 1 January 2014
178.2
1,222.4
370.1
(311.3)
17.2 2,588.2
(4.9)
4,059.9
76.7
4,136.6
Operating activities
Operating profit before other net gains and share of results of joint ventures and associates
Increase in receivables
Increase in restricted monetary assets
Increase in payables
Adjustment for non-cash items
Cash generated from operations
Interest paid
Interest received
Tax paid
Distributions and other receivables from joint ventures
Cash flows from operating activities
Investing activities
Property acquisitions
Development and major refurbishments
Other capital expenditure
Sale of properties
Acquisition of Irish loan portfolio
Acquisition of interest in associates
Acquisition of other investments
Distribution received from associates
Investment in joint ventures
Sale of interests in joint ventures
Increase in advances to joint ventures
(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
Debt and loan facility cancellation costs
Proceeds from new borrowings
Repayment of borrowings
Dividends paid to non-controlling interests
Equity dividends paid
Cash flows from financing activities
Net increase in cash and deposits
Opening cash and deposits
Exchange translation movement
Closing cash and deposits
An analysis of the movement in net debt is provided in note 24.
Notes
2
25
2015
£m
166.8
(0.3)
(22.7)
27.2
6.3
177.3
2014
£m
142.5
(16.0)
(5.1)
23.5
12.2
157.1
(104.0)
(122.2)
8.6
(1.1)
90.4
171.2
(43.7)
(137.2)
(45.1)
185.2
(690.2)
(36.6)
(4.8)
44.5
–
–
(45.4)
(17.1)
(790.4)
0.4
0.2
–
(13.9)
1,319.0
(511.4)
(2.0)
(163.8)
628.5
9.3
28.6
(0.9)
37.0
9.1
(1.5)
85.6
128.1
(302.7)
(164.0)
(39.8)
5.8
–
–
–
11.5
(110.8)
149.6
(8.1)
0.9
(457.6)
392.6
0.2
(5.5)
(8.7)
736.6
(630.2)
(3.0)
(139.1)
342.9
13.4
15.7
(0.5)
28.6
7
9
17
122 HAMMERSON PLC ANNUAL REPORT 2015
123
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HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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 2015, the following new and revised Standards and
Interpretations have been adopted but these have not affected the
amounts reported in these financial statements:
– Amendments to IAS19 Employee Benefits – Contributions from
employees or third parties that are linked to service
– Amendments to IFRS (Annual Improvements cycle 2010-2012)
– Amendments to IFRS (Annual Improvements cycle 2011-2013)
Issued, not yet effective and not yet endorsed for use in the
European Union
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:
– Amendments to IAS 1 Disclosure Initiatives; effective for
accounting periods beginning on or after 1 January 2016
– IFRS 9 Financial Instruments; effective for accounting periods
beginning on or after 1 January 2018
– IFRS 15 Revenue from Contracts with Customers; effective for
accounting periods beginning on or after 1 January 2018.
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.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Principal Risks and Uncertainties section of the
Strategic Report on page 67.
The financial statements are presented in sterling. They are prepared
on the historical cost basis, except that investment and development
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.
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. The following accounting
policies are the critical accounting policies of the Group.
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 on-site 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, developers’ profit and purchasers’ costs. 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.
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. Where the acquired
corporate vehicle contains significant assets or liabilities in addition
to property, the transaction is accounted for as a business
combination. Where there are no such significant items, the
transaction is treated as an asset purchase.
Business combinations are accounted for using the acquisition
method. Any excess of the purchase consideration over the fair value
of the net assets acquired is recognised as goodwill, and reviewed
annually for impairment. Any discount received or acquisition
related costs are recognised in the income statement.
124
124 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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 2015, the following new and revised Standards and
Interpretations have been adopted but these have not affected the
amounts reported in these financial statements:
– Amendments to IAS19 Employee Benefits – Contributions from
employees or third parties that are linked to service
– Amendments to IFRS (Annual Improvements cycle 2010-2012)
– Amendments to IFRS (Annual Improvements cycle 2011-2013)
Issued, not yet effective and not yet endorsed for use in the
European Union
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:
– Amendments to IAS 1 Disclosure Initiatives; effective for
accounting periods beginning on or after 1 January 2016
– IFRS 9 Financial Instruments; effective for accounting periods
beginning on or after 1 January 2018
– IFRS 15 Revenue from Contracts with Customers; effective for
accounting periods beginning on or after 1 January 2018.
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.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Principal Risks and Uncertainties section of the
Strategic Report on page 67.
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. The following accounting
policies are the critical accounting policies of the Group.
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 on-site 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, developers’ profit and purchasers’ costs. 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.
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. Where the acquired
corporate vehicle contains significant assets or liabilities in addition
The financial statements are presented in sterling. They are prepared
on the historical cost basis, except that investment and development
to property, the transaction is accounted for as a business
combination. Where there are no such significant items, the
properties, other investments and derivative financial instruments
transaction is treated as an asset purchase.
are stated at fair value.
The accounting policies have been applied consistently to the results,
method. Any excess of the purchase consideration over the fair value
Business combinations are accounted for using the acquisition
of the net assets acquired is recognised as goodwill, and reviewed
annually for impairment. Any discount received or acquisition
related costs are recognised in the income statement.
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.
Accounting for acquisition of Irish loan portfolio
During the year, the Group acquired a joint venture interest in a
portfolio of loans (“Irish loan portfolio”) which are secured on Irish
retail assets. The Group funded the acquisition of the Irish loan
portfolio by providing the joint venture with loans of £690.2 million.
The loans were initially measured at fair value and have subsequently
been measured at amortised cost, using the effective interest method,
less any impairment.
Accounting for joint ventures and associates
The accounting treatment for joint ventures and associates requires
an assessment to determine the degree of control or influence that
the Group may exercise over them and the form of any control. The
Group’s interest in its joint ventures is commonly driven by the
terms of partnership agreements, which ensure that control is shared
between the partners.
Associates are those entities over which the Group is in a position
to exercise significant influence, but not control or joint control.
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 note 8A 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.
Joint ventures and associates
The results, assets and liabilities of joint ventures and associates
are accounted for using the equity method. Investments in joint
ventures and 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 joint venture or associate, less any impairment. Losses
of a joint venture or associate in excess of the Group’s interest in that
entity are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of
the entity. Loans to joint ventures and associates are separately
presented from equity interests within the notes to the accounts.
The Group eliminates upstream and downstream transactions with
its joint ventures, including interest and management fees.
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 into
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 = €1.357 (2014: £1 = €1.289). The principal exchange rate
used for the income statement is the average rate, £1 = €1.378 (2014:
£1 = €1.241).
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.
Receivables, payables and borrowings
Trade and other receivables and payables
Trade and other 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.
Loans receivable
Loans receivable are financial assets which are initially measured
at fair value, plus acquisition costs and are subsequently measured
at amortised cost, using the effective interest method, less
any impairment.
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.
124 HAMMERSON PLC ANNUAL REPORT 2015
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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
period 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 lease term or, if the probability that the break option will be
exercised is considered high, over the period to the first break option.
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 or losses on the sale of properties
Gains or losses on the 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.
Plant and equipment
Plant and equipment is 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 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.
Notes to the accounts continued
1: SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Finance costs
Net finance costs
Net finance costs include interest payable on borrowings, debt and
loan facility cancellation costs, 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, at the average rate.
Property portfolio
Investment and development 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.
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. Further details are given in note 11.
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 period 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.
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.
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.
126
126 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Management fees
Management fees are recognised in the period to which they relate.
Performance fee related elements are recognised at the end of the
performance period when the fee can be reliably estimated and is
due for payment.
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
period, using tax rates applicable at the balance sheet date, together
with any adjustment in respect of previous periods.
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.
Notes to the accounts continued
1: SIGNIFICANT ACCOUNTING POLICIES
Net rental income
(CONTINUED)
Finance costs
Net finance costs
Net finance costs include interest payable on borrowings, debt and
loan facility cancellation costs, net of interest capitalised, interest
receivable on funds invested, and changes in the fair value of
derivative financial instruments.
Capitalisation of interest
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
period 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 lease term or, if the probability that the break option will be
exercised is considered high, over the period to the first break option.
Interest is capitalised if it is directly attributable to the acquisition,
Property operating expenses are expensed as incurred and any
construction or production of development properties or the
property operating expenditure not recovered from tenants through
redevelopment of investment properties. Capitalisation commences
service charges is charged to the income statement.
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, at the average rate.
Property portfolio
Investment and development 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.
Gains or losses on the sale of properties
Gains or losses on the 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.
Plant and equipment
Plant and equipment is 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
Properties acquired with the intention of redevelopment are
lease term.
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.
Employee benefits
Defined contribution pension plans
All costs directly associated with the purchase and construction
Obligations for contributions to defined contribution pension plans
of a development property are capitalised. When development
properties are completed, they are reclassified as investment
properties. Further details are given in note 11.
Leasehold properties
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
Leasehold properties that are leased out to tenants under operating
earned, discounted to determine a present value, less the fair value
leases are classified as investment properties or development
of the pension plan assets. The calculation is performed by a qualified
properties, as appropriate, and included in the balance sheet at fair
external actuary using the projected unit credit method. Actuarial
value. The obligation to the freeholder or superior leaseholder for the
gains and losses are recognised in equity. Where the assets of a plan
buildings element of the leasehold is included in the balance sheet
are greater than its obligation, the asset included in the balance sheet
at the present value of the minimum lease payments at inception.
is limited to the present value of any future refunds from the plan or
Payments to the freeholder or superior leaseholder are apportioned
reduction in future contributions to the plan.
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 period 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.
Tenant leases
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
Management has exercised judgement in considering the potential
Monte Carlo Model and is dependent on factors including the
transfer of the risks and rewards of ownership, in accordance with
expected volatility, vesting period and risk-free interest rate.
IAS 17 Leases, for properties leased to tenants and has determined
that such leases are operating leases.
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.
126 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the accounts continued
2: PROFIT FOR THE YEAR
The following tables show the Group’s profit for the year on a proportionally consolidated basis by aggregating the Reported Group results
(shown in column A) with those from its share of Property interests (shown in column B), the latter being reallocated to the relevant financial
statement lines. The Group’s share of results arising from its interests in premium outlets has not been reallocated as management does not
review these interests on a proportionally consolidated basis (see note 3) and these are therefore not included in the Group’s share of Property
interests. The Group’s proportionally consolidated profit for the year in column C is then allocated between ‘Adjusted’ and ‘Capital and other’
for the purposes of calculating figures in accordance with EPRA best practice.
Reported
Group
£m
Share of Property
interests
£m
Proportionally
consolidated
£m
Adjusted
£m
Capital
and other
£m
Proportionally consolidated
2015
Notes
3A
Notes
Gross rental incomeE
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
A
236.0
(1.3)
234.7
41.4
(49.8)
(8.4)
(17.5)
(25.9)
B
130.4
(2.4)
128.0
21.7
(26.6)
(4.9)
(13.3)
(18.2)
C
366.4
(3.7)
362.7
63.1
(76.4)
(13.3)
(30.8)
(44.1)
D
366.4
(3.7)
362.7
63.1
(76.4)
(13.3)
(30.8)
(44.1)
Net rental income
3A
208.8
109.8
318.6
318.6
Management fees receivable/(payable)
Employee and corporate costs
Administration expenses
Operating profit before other net gains/(losses) and
share of results of joint ventures and associates
Gain on the sale of properties
Investment costs written off
Revaluation gains on properties
Other net gains
Share of results of joint ventures
Share of results of associates
Operating profit
Net finance (costs)/income
Profit before tax
Current tax charge
Profit for the year
Non-controlling interests
12A, 12B
13A, 13B
7
8A
Profit for the year attributable to equity shareholders
10A
Notes
A Reported Group results as shown in the consolidated income statement on page 118.
6.1
(48.1)
(42.0)
166.8
14.9
(1.4)
245.1
258.6
246.8
160.6
832.8
(101.2)
731.6
(1.6)
730.0
(3.2)
726.8
(0.1)
(0.2)
(0.3)
109.5
–
–
122.4
122.4
(233.7)
(1.3)
(3.1)
3.1
–
–
–
–
–
6.0
(48.3)
(42.3)
276.3
14.9
(1.4)
367.5
381.0
13.1
159.3
829.7
(98.1)
731.6
(1.6)
730.0
(3.2)
726.8
6.0
(48.3)
(42.3)
276.3
–
–
–
–
6.1
17.1
299.5
(84.1)
215.4
(1.6)
213.8
(2.9)
210.9
D
–
–
–
–
–
–
–
–
–
–
–
–
–
14.9
(1.4)
367.5
381.0
7.0
142.2
530.2
(14.0)
516.2
–
516.2
(0.3)
515.9
B Property interests reflect the Group’s share of results of Property joint ventures as shown in note 12A and Nicetoile included within note 13A.
C Aggregated results on a proportionally consolidated basis showing Reported Group together with share of Property interests.
D Aggregated results on a proportionally consolidated basis allocated between ‘Adjusted’ and ‘Capital and other’ for the purposes of calculating adjusted earnings per share as
shown in note 10A.
E Included in gross rental income on a proportionally consolidated basis is £6.6 million (2014: £6.9 million) of contingent rents calculated by reference to tenants’ turnover.
128
128 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
2: PROFIT FOR THE YEAR
The following tables show the Group’s profit for the year on a proportionally consolidated basis by aggregating the Reported Group results
(shown in column A) with those from its share of Property interests (shown in column B), the latter being reallocated to the relevant financial
statement lines. The Group’s share of results arising from its interests in premium outlets has not been reallocated as management does not
review these interests on a proportionally consolidated basis (see note 3) and these are therefore not included in the Group’s share of Property
interests. The Group’s proportionally consolidated profit for the year in column C is then allocated between ‘Adjusted’ and ‘Capital and other’
for the purposes of calculating figures in accordance with EPRA best practice.
Net rental income
3A
208.8
109.8
318.6
318.6
Notes
Gross rental incomeE
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
Management fees receivable/(payable)
Employee and corporate costs
Administration expenses
Operating profit before other net gains/(losses) and
share of results of joint ventures and associates
Gain on the sale of properties
Investment costs written off
Revaluation gains on properties
Other net gains
Share of results of joint ventures
Share of results of associates
Operating profit
Net finance (costs)/income
Profit before tax
Current tax charge
Profit for the year
Non-controlling interests
Notes
Reported
Share of Property
Proportionally
consolidated
Notes
3A
Proportionally consolidated
2015
Capital
and other
£m
D
Group
£m
A
236.0
(1.3)
234.7
41.4
(49.8)
(8.4)
(17.5)
(25.9)
6.1
(48.1)
(42.0)
166.8
14.9
(1.4)
245.1
258.6
246.8
160.6
832.8
(101.2)
731.6
(1.6)
730.0
(3.2)
726.8
interests
£m
B
130.4
(2.4)
128.0
21.7
(26.6)
(4.9)
(13.3)
(18.2)
(0.1)
(0.2)
(0.3)
109.5
–
–
122.4
122.4
(233.7)
(1.3)
(3.1)
3.1
–
–
–
–
–
£m
C
366.4
(3.7)
362.7
63.1
(76.4)
(13.3)
(30.8)
(44.1)
6.0
(48.3)
(42.3)
276.3
14.9
(1.4)
367.5
381.0
13.1
159.3
829.7
(98.1)
731.6
(1.6)
730.0
(3.2)
726.8
Adjusted
£m
D
366.4
(3.7)
362.7
63.1
(76.4)
(13.3)
(30.8)
(44.1)
6.0
(48.3)
(42.3)
276.3
–
–
–
–
6.1
17.1
299.5
(84.1)
215.4
(1.6)
213.8
(2.9)
210.9
–
–
–
–
–
–
–
–
–
–
–
–
–
14.9
(1.4)
367.5
381.0
7.0
142.2
530.2
(14.0)
516.2
–
516.2
(0.3)
515.9
12A, 12B
13A, 13B
7
8A
Profit for the year attributable to equity shareholders
10A
A Reported Group results as shown in the consolidated income statement on page 118.
B Property interests reflect the Group’s share of results of Property joint ventures as shown in note 12A and Nicetoile included within note 13A.
C Aggregated results on a proportionally consolidated basis showing Reported Group together with share of Property interests.
D Aggregated results on a proportionally consolidated basis allocated between ‘Adjusted’ and ‘Capital and other’ for the purposes of calculating adjusted earnings per share as
shown in note 10A.
E Included in gross rental income on a proportionally consolidated basis is £6.6 million (2014: £6.9 million) of contingent rents calculated by reference to tenants’ turnover.
2014
Proportionally consolidated
Notes (see page 128)
Gross rental incomeE
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
Notes
3A
Reported
Group
£m
Share of
Property interests
£m
A
206.5
(0.6)
205.9
34.6
(40.0)
(5.4)
(12.4)
(17.8)
B
137.6
(1.3)
136.3
25.1
(30.1)
(5.0)
(13.8)
(18.8)
Total
£m
C
344.1
(1.9)
342.2
59.7
(70.1)
(10.4)
(26.2)
(36.6)
Adjusted
£m
D
344.1
(1.9)
342.2
59.7
(70.1)
(10.4)
(26.2)
(36.6)
Net rental income
3A
188.1
117.5
305.6
305.6
Management fees receivable/(payable)
Employee and corporate costs
Net one-off restructuring costs
Administration expenses
Operating profit before other net gains/(losses) and
share of results of joint ventures and associates
Profit on the sale of properties
Loss on the sale of joint ventures
Joint venture formation costs written off
Revaluation gains on properties
Other net gains
Share of results of joint ventures
Share of results of associates
Operating profit
Net finance (costs)/income
Profit before tax
Current tax charge
Deferred tax charge
Profit for the year
Non-controlling interests
12A, 12B
13A, 13B
7
8A
8A
Profit for the year attributable to equity shareholders
10A
6.3
(48.9)
(3.0)
(45.6)
(0.7)
(0.2)
–
(0.9)
5.6
(49.1)
(3.0)
(46.5)
5.6
(49.1)
–
(43.5)
142.5
116.6
259.1
262.1
0.6
(4.0)
(3.1)
271.2
264.7
279.0
109.9
796.1
(93.0)
703.1
(0.9)
(0.1)
702.1
(3.0)
699.1
–
–
–
165.6
165.6
(280.1)
–
2.1
(2.1)
–
–
–
–
–
–
0.6
(4.0)
(3.1)
436.8
430.3
(1.1)
109.9
798.2
(95.1)
703.1
(0.9)
(0.1)
702.1
(3.0)
699.1
–
–
–
–
–
0.9
16.0
279.0
(100.1)
178.9
(0.9)
–
178.0
(3.7)
174.3
Capital
and other
£m
D
–
–
–
–
–
–
–
–
–
–
–
(3.0)
(3.0)
(3.0)
0.6
(4.0)
(3.1)
436.8
430.3
(2.0)
93.9
519.2
5.0
524.2
–
(0.1)
524.1
0.7
524.8
128 HAMMERSON PLC ANNUAL REPORT 2015
129
HAMMERSON.COM 129
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
3: SEGMENTAL ANALYSIS
The factors used to determine the Group’s reportable segments are the geographic locations, UK and France, and sectors in which it operates,
which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross rental
income represents the Group’s revenue from its tenants and customers. Net rental income is the principal profit measure used to determine
the performance of each sector. Total assets are not monitored by segment and resource allocation is based on the distribution of property
assets between segments.
As stated in the Financial Review on page 53, management reviews the business principally on a proportionally consolidated basis, except
for its interests in premium outlets held through its investments in Value Retail and VIA Outlets, where the Group has less day-to-day
involvement in the financial performance and which have different operational characteristics compared with the Group’s property portfolio.
The segmental analysis has been prepared on the basis that management uses to review the business, rather than on a statutory basis.
Property interests represent the Group’s non-wholly owned properties which management proportionally consolidate when reviewing the
performance of the business. For reconciliation purposes the Reported Group figures, being wholly-owned properties, are shown in the
following tables.
During the year, the Group acquired an interest in a loan portfolio secured on retail properties located in Ireland in a 50% joint venture. The
loans did not generate any rental income in 2015, and at the balance sheet date the loan portfolio was included within current receivables on a
proportionally consolidated basis, and is therefore not included in notes 3A and 3B. Note 3C includes the Group’s investment in the new Irish
joint venture at 31 December 2015.
A: Revenue and profit by segment
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Developments
Total property portfolio
Less share of Property interests
Reported Group
Gross rental
income
£m
Net rental
income
£m
2015
Non-cash
items
within net
rental income
£m
Gross rental
income
£m
Net rental
income
£m
2014
Non-cash
items
within net
rental income
£m
162.0
86.2
13.8
262.0
95.9
357.9
8.5
366.4
138.8
82.0
9.6
230.4
83.0
313.4
5.2
318.6
(130.4)
(109.8)
236.0
208.8
(3.8)
–
–
(3.8)
2.0
(1.8)
–
(1.8)
0.9
(0.9)
149.4
86.2
14.5
250.1
91.8
341.9
2.2
344.1
(137.6)
206.5
127.9
83.0
11.3
222.2
82.4
304.6
1.0
305.6
(117.5)
188.1
(4.2)
1.1
(0.1)
(3.2)
2.5
(0.7)
–
(0.7)
2.3
1.6
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.
130
130 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
3: SEGMENTAL ANALYSIS
The factors used to determine the Group’s reportable segments are the geographic locations, UK and France, and sectors in which it operates,
which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross rental
income represents the Group’s revenue from its tenants and customers. Net rental income is the principal profit measure used to determine
the performance of each sector. Total assets are not monitored by segment and resource allocation is based on the distribution of property
assets between segments.
As stated in the Financial Review on page 53, management reviews the business principally on a proportionally consolidated basis, except
for its interests in premium outlets held through its investments in Value Retail and VIA Outlets, where the Group has less day-to-day
involvement in the financial performance and which have different operational characteristics compared with the Group’s property portfolio.
The segmental analysis has been prepared on the basis that management uses to review the business, rather than on a statutory basis.
Property interests represent the Group’s non-wholly owned properties which management proportionally consolidate when reviewing the
performance of the business. For reconciliation purposes the Reported Group figures, being wholly-owned properties, are shown in the
following tables.
During the year, the Group acquired an interest in a loan portfolio secured on retail properties located in Ireland in a 50% joint venture. The
loans did not generate any rental income in 2015, and at the balance sheet date the loan portfolio was included within current receivables on a
proportionally consolidated basis, and is therefore not included in notes 3A and 3B. Note 3C includes the Group’s investment in the new Irish
joint venture at 31 December 2015.
A: Revenue and profit by segment
2015
Non-cash
items
Gross rental
Net rental
within net
Gross rental
Net rental
income
£m
income
rental income
£m
£m
income
£m
income
rental income
£m
£m
162.0
86.2
13.8
262.0
95.9
357.9
8.5
366.4
138.8
82.0
9.6
230.4
83.0
313.4
5.2
318.6
(130.4)
(109.8)
236.0
208.8
(3.8)
–
–
(3.8)
2.0
(1.8)
–
(1.8)
0.9
(0.9)
149.4
86.2
14.5
250.1
91.8
341.9
2.2
344.1
(137.6)
206.5
127.9
83.0
11.3
222.2
82.4
304.6
1.0
305.6
(117.5)
188.1
2014
Non-cash
items
within net
(4.2)
1.1
(0.1)
(3.2)
2.5
(0.7)
–
(0.7)
2.3
1.6
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Developments
Total property portfolio
Less share of Property interests
Reported Group
accrued rents receivable.
The non-cash items included within net rental income relate to the amortisation of lease incentives and other costs and movements in
B: Investment and development property assets by segment
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Developments
Total property portfolio
Less share of Property interests
Reported Group
Property
valuation
£m
Capital
expenditure
£m
Revaluation
gains
£m
Property
valuation
£m
Capital
expenditure
£m
2015
3,064.9
1,656.0
160.3
4,881.2
1,860.5
6,741.7
388.8
7,130.5
(2,478.4)
4,652.1
10.7
54.2
23.5
88.4
54.8
143.2
169.8
313.0
(95.1)
217.9
194.9
19.0
1.4
215.3
116.6
331.9
35.6
367.5
(122.4)
245.1
2,863.9
1,644.1
192.7
4,700.7
1,797.7
6,498.4
208.1
6,706.5
(2,279.2)
4,427.3
201.5
43.7
6.9
252.1
223.9
476.0
90.3
566.3
(40.1)
526.2
2014
Revaluation
gains
£m
237.4
134.9
5.1
377.4
41.1
418.5
18.3
436.8
(165.6)
271.2
C: Analysis of non-current assets employed
United Kingdom
Continental Europe
Ireland
Non-current assets employed
2015
£m
5,283.9
2,792.9
693.5
8,770.3
2014
£m
4,895.0
2,621.5
–
7,516.5
Included in the above table are investments in joint ventures of £3,213.6 million (2014: £2,341.5 million), which are further analysed in note 12
on pages 139 to 144. The Group’s share of the property valuations held within Property joint interests of £2,478.4 million (2014: £2,279.2 million)
has been included in note 3B above, of which £2,304.7 million (2014: £2,134.9 million) relates to the United Kingdom and
£173.7 million (2014: £144.3 million) relates to Continental Europe.
130 HAMMERSON PLC ANNUAL REPORT 2015
131
HAMMERSON.COM 131
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
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
Total
Note
6A
6C
2015
£m
26.5
7.3
1.2
8.5
3.6
7.6
2.6
–
2.6
48.8
2014
£m
25.6
6.7
1.2
7.9
3.9
6.3
3.0
(2.0)
1.0
44.7
Of the above amount, £16.6 million (2014: £11.6 million) was recharged to tenants through service charges and £1.9 million (2014: £1.5 million)
capitalised in respect of development projects. Redundancy related costs of £1.7 million were incurred during 2014.
Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme which, for certain senior
employees, is 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. Further details of share-based payment arrangements, some of which have
performance conditions, are provided in the Directors’ Remuneration Report on pages 84 to 101.
Staff numbers
Average number of staff
Staff recharged to tenants, included above
Other information
Auditor’s remuneration:
Audit of the Company’s annual accounts
Audit of subsidiaries, pursuant to legislation
Audit-related assurance services
Audit and audit-related assurance services
Other fees1
Total auditor’s remuneration
Depreciation of plant and equipment
Note
2015
Number
468
224
2014
Number
419
181
2015
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.7
2014
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.4
1. Other fees payable to the Company’s auditor are principally for tax related work and a review of the Group’s sustainability reporting.
5: DIRECTORS’ EMOLUMENTS
The total remuneration of the Directors is set out in aggregate in note 28B. 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 84 to 101.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the current and preceding years.
132
132 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
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
Total
Staff numbers
Average number of staff
Staff recharged to tenants, included above
Other information
Auditor’s remuneration:
Audit of the Company’s annual accounts
Audit of subsidiaries, pursuant to legislation
Audit-related assurance services
Audit and audit-related assurance services
Other fees1
Total auditor’s remuneration
Depreciation of plant and equipment
Note
5: DIRECTORS’ EMOLUMENTS
Of the above amount, £16.6 million (2014: £11.6 million) was recharged to tenants through service charges and £1.9 million (2014: £1.5 million)
capitalised in respect of development projects. Redundancy related costs of £1.7 million were incurred during 2014.
Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme which, for certain senior
employees, is 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. Further details of share-based payment arrangements, some of which have
performance conditions, are provided in the Directors’ Remuneration Report on pages 84 to 101.
Note
6A
6C
2015
£m
26.5
7.3
1.2
8.5
3.6
7.6
2.6
–
2.6
48.8
2015
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.7
2014
£m
25.6
6.7
1.2
7.9
3.9
6.3
3.0
(2.0)
1.0
44.7
2014
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.4
2015
Number
468
224
2014
Number
419
181
6: PENSIONS
A: 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 £2.6 million (2014: £3.0 million).
B: 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 was closed to
new entrants on 31 December 2002 and was closed to future accrual for all participating employees on 30 June 2014.
Unfunded Unapproved Retirement Schemes
The Company also operates two Unfunded Unapproved Retirement Schemes. One scheme provides pension benefits to two former Executive
Directors, the other scheme meets pension commitment obligations to former US employees.
C: Changes in present value of defined benefit pension schemes
At 1 January
Amounts recognised in the income statement
– current service cost1
– curtailment gain1
– interest (cost)/income2
Amounts recognised in equity
– actuarial experience gains/(losses)
– actuarial gains/(losses) from changes in financial assumptions
– actuarial losses from changes in demographic assumptions
Contributions by employer3
Benefits
Exchange gains/(losses)
At 31 December
Analysed as:
Present Value of the Scheme
Present Value of Unfunded Retirement Schemes
Analysed as:
Current liabilities: Other payables
Non-current liabilities (note 22)
Obligations
£m
(91.3)
Assets
£m
58.4
(0.5)
2.5
2.0
(4.0)
0.9
(12.4)
–
(11.5)
–
3.2
(0.1)
(101.7)
(89.4)
(12.3)
(101.7)
–
–
–
2.7
–
–
–
–
3.2
(2.4)
–
61.9
61.9
–
61.9
Obligations
£m
(101.7)
Assets
£m
61.9
–
–
–
–
–
–
2015
Net
£m
(39.8)
–
–
–
(3.5)
2.2
(1.3)
1.5
2.4
(2.6)
1.3
–
3.1
0.1
(100.7)
(88.8)
(11.9)
(100.7)
(1.6)
–
–
(1.6)
2.5
(2.3)
–
62.7
62.7
–
62.7
(0.1)
2.4
(2.6)
(0.3)
2.5
0.8
0.1
(38.0)
(26.1)
(11.9)
(38.0)
(0.8)
(37.2)
(38.0)
2014
Net
£m
(32.9)
(0.5)
2.5
2.0
(1.3)
0.9
(12.4)
–
(11.5)
3.2
0.8
(0.1)
(39.8)
(27.5)
(12.3)
(39.8)
(0.8)
(39.0)
(39.8)
1. Other fees payable to the Company’s auditor are principally for tax related work and a review of the Group’s sustainability reporting.
Notes
1. Included in Administration expenses (note 4). The curtailment gain in 2014 is shown after the deduction of past service costs of £0.3 million.
2. Included in Other interest payable (note 7).
3. The Group expects to make contributions totalling £1.5 million to the Scheme in the next financial year.
The total remuneration of the Directors is set out in aggregate in note 28B. 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 84 to 101.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the current and preceding years.
132 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the accounts continued
6: PENSIONS (CONTINUED)
D: Principal actuarial assumptions used for defined benefit pension schemes
Discount rate for scheme liabilities
Increase in retail price index
Increase in pensions in payment
Life expectancy for Scheme members:
Male aged 60 at 31 December
Male aged 40 at 31 December
2015
%
3.8
3.1
3.1
Age
88.5
90.1
2014
%
3.6
3.1
3.1
Age
88.5
90.0
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. All defined benefit pension scheme assets are investments with
target returns linked to LIBOR.
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
Debt and loan facility cancellation costs
Change in fair value of derivatives
Finance income
8: TAX
A: Tax charge
UK current tax
Foreign current tax
Current tax charge
Deferred tax charge
Tax charge
2015
£m
10.6
93.2
1.8
1.6
107.2
(5.3)
101.9
13.9
1.1
(15.7)
101.2
2015
£m
–
1.6
1.6
–
1.6
2014
£m
9.5
103.3
1.1
1.3
115.2
(8.8)
106.4
8.7
(13.1)
(9.0)
93.0
2014
£m
0.1
0.8
0.9
0.1
1.0
The Group’s tax charge remains low because it has tax exempt status in its principal operating countries. In the UK, the Group has been a
REIT since 2007 and a SIIC in France since 2004. These tax regimes exempt the Group’s property income and gains from corporate taxes
provided a number of conditions in relation to the Group’s activities are met including, but not limited to, distributing at least 90% of the
Group’s UK tax exempt profit as property income distributions. The Group continues to meet these conditions.
B: Tax charge reconciliation
Profit before tax
Less: Profit after tax of joint ventures
Less: Profit after tax of associates
Profit on ordinary activities before tax
Profit multiplied by the UK corporation tax rate of 20.25% (2014: 21.5%)
UK REIT tax exemption
French SIIC tax exemption
Non-deductible and other items
Tax charge
134
134 HAMMERSON PLC ANNUAL REPORT 2015
Notes
2
12A
13A
2015
£m
731.6
(246.8)
(160.6)
324.2
65.7
(31.2)
(33.1)
0.2
1.6
2014
£m
703.1
(279.0)
(109.9)
314.2
67.6
(42.8)
(24.0)
0.2
1.0
HAMMERSON PLC ANNUAL REPORT 2015
6: PENSIONS (CONTINUED)
D: Principal actuarial assumptions used for defined benefit pension schemes
Male aged 60 at 31 December
Male aged 40 at 31 December
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. All defined benefit pension scheme assets are investments with
The Group’s tax charge remains low because it has tax exempt status in its principal operating countries. In the UK, the Group has been a
REIT since 2007 and a SIIC in France since 2004. These tax regimes exempt the Group’s property income and gains from corporate taxes
provided a number of conditions in relation to the Group’s activities are met including, but not limited to, distributing at least 90% of the
Group’s UK tax exempt profit as property income distributions. The Group continues to meet these conditions.
Profit multiplied by the UK corporation tax rate of 20.25% (2014: 21.5%)
Notes to the accounts continued
Discount rate for scheme liabilities
Increase in retail price index
Increase in pensions in payment
Life expectancy for Scheme members:
target returns linked to LIBOR.
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
Debt and loan facility cancellation costs
Change in fair value of derivatives
Finance income
8: TAX
A: Tax charge
UK current tax
Foreign current tax
Current tax charge
Deferred tax charge
Tax charge
B: Tax charge reconciliation
Profit before tax
Less: Profit after tax of joint ventures
Less: Profit after tax of associates
Profit on ordinary activities before tax
UK REIT tax exemption
French SIIC tax exemption
Non-deductible and other items
Tax charge
2015
%
3.8
3.1
3.1
Age
88.5
90.1
2015
£m
10.6
93.2
1.8
1.6
107.2
(5.3)
101.9
13.9
1.1
(15.7)
101.2
2015
£m
–
1.6
1.6
–
1.6
2014
%
3.6
3.1
3.1
Age
88.5
90.0
2014
£m
9.5
103.3
1.1
1.3
115.2
(8.8)
106.4
8.7
(13.1)
(9.0)
93.0
2014
£m
0.1
0.8
0.9
0.1
1.0
Notes
2
12A
13A
2015
£m
731.6
(246.8)
(160.6)
324.2
65.7
(31.2)
(33.1)
0.2
1.6
2014
£m
703.1
(279.0)
(109.9)
314.2
67.6
(42.8)
(24.0)
0.2
1.0
C: Unrecognised deferred tax
A deferred tax asset is not recognised for UK revenue tax losses and UK capital losses where their future utilisation is uncertain. At
31 December 2015, the total of such losses was £315 million (2014: £320 million) and £480 million (2014: £450 million) respectively, and
the potential tax effect of these was £57 million (2014: £64 million) and £86 million (2014: £90 million) respectively.
Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the Group can control whether gains
crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2015, the total of such gains was £290 million
(2014: £250 million) and the potential tax effect before the offset of losses was £52 million (2014: £50 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 2015 or 2014.
9: DIVIDENDS
The proposed final dividend of 12.8 pence per share was recommended by the Board on 12 February 2016 and, subject to approval by
shareholders, is payable on 29 April 2016 to shareholders on the register at the close of business on 18 March 2016. 6.4 pence per share will
be paid as a PID, net of withholding tax at the basic rate (currently 20%) if applicable, and 6.4 pence per share will be paid as a normal dividend.
The Company will be offering a scrip dividend alternative and for shareholders who elect to receive this, the dividend will be treated entirely
as a normal dividend. The aggregate amount of the 2015 final dividend is £100.4 million. This assumes no shareholders elect to receive the
scrip dividend alternative and has been calculated using the total number of eligible shares outstanding at 31 December 2015.
The interim dividend of 9.5 pence per share was paid on 1 October 2015 as a PID, net of withholding tax where appropriate.
The total dividend for the year ended 31 December 2015 would be 22.3 pence per share (2014: 20.4 pence per share).
PID
pence
per share
Non-PID
pence
per share
Total
pence
per share
Equity
dividends
2015
£m
Equity
dividends
2014
£m
Current year
2015 final dividend
2015 interim dividend
Prior years
2014 final dividend
2014 interim dividend
2013 final dividend
6.41
9.5
15.9
2.0
8.8
10.8
6.4
–
6.4
9.6
–
9.6
12.8
9.5
22.3
11.6
8.8
20.4
Dividends as reported in the consolidated statement of changes in
equity
2013 interim dividend withholding tax (paid January 2014)
2014 interim dividend withholding tax (paid January 2015)
2015 interim dividend withholding tax (paid January 2016)
Dividends paid as reported in the consolidated cash flow statement
Note
1. If shareholders elect to receive the scrip alternative, this element of the dividend will cease to qualify as a PID.
–
74.4
90.8
–
165.2
–
9.8
(11.2)
163.8
–
–
–
62.7
76.8
139.5
9.4
(9.8)
–
139.1
134 HAMMERSON PLC ANNUAL REPORT 2015
135
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HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
10: 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 and B. Commentary on earnings and net asset value per share is provided in the Financial Review
on pages 53 to 61.
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, which are treated as cancelled.
Basic
Dilutive share schemes
Diluted
Adjustments:
Revaluation gains on
properties:
Reported Group
Property interests
(Gain)/Loss on sale of
properties and joint
venture interests:
Reported Group
Gain on sale of properties
Loss on sale of joint ventures
Debt and loan facility
cancellation costs:
Reported Group
Change in fair value
of derivatives:
Reported Group
Property interests
Other adjustments:
Reported Group
Investment costs written off
Joint venture formation costs written off
Deferred tax
Non-controlling interests
2015
Notes
Earnings
£m
Shares
million
Pence
per share
2
726.8
783.6
–
1.1
726.8
784.7
92.8
(0.2)
92.6
Earnings
£m
699.1
–
Shares
million
730.6
0.2
699.1
730.8
2
2
2
2
7
7
12B
2
2
2
2
(245.1)
(122.4)
(367.5)
(14.9)
–
(14.9)
13.9
1.1
(1.0)
0.1
1.4
–
–
0.3
1.7
(174.1)
27.6
(0.6)
(147.1)
(513.8)
(31.2)
(15.6)
(271.2)
(165.6)
(46.8)
(436.8)
(1.9)
(0.6)
–
(1.9)
1.8
0.1
(0.1)
–
0.2
–
–
–
0.2
4.0
3.4
8.7
(13.1)
(0.6)
(13.7)
–
3.1
0.1
(0.7)
2.5
(22.2)
(109.8)
3.5
(0.1)
12.3
5.6
(18.8)
(91.9)
(65.5)
(527.8)
2014
Pence
per share
95.7
–
95.7
(37.1)
(22.7)
(59.8)
(0.1)
0.6
0.5
1.2
(1.8)
(0.1)
(1.9)
–
0.4
–
(0.1)
0.3
(15.0)
1.6
0.8
(12.6)
(72.3)
23.4
0.5
–
23.9
Premium outlets*:
Revaluation gains on properties
Deferred tax
Other adjustments
12B, 13B
12B, 13B
12B, 13B
Total adjustments
EPRA
Net one-off
restructuring charge: Reported Group
Other adjustments:
Premium outlets*
Adjusted
213.0
784.7
27.1
171.3
730.8
2
12B
–
(2.1)
210.9
784.7
–
(0.2)
26.9
3.0
–
174.3
730.8
* Adjustments in respect of Premium outlets include VIA Outlets (note 12B) and Value Retail (note 13B).
136
136 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
–
1.9
n/a
n/a
7.03
Shares
million
784.3
(1.2)
0.4
2015
Net asset
value
per share
£
Equity
shareholders’
funds
£m
7.03
4,973.7
Equity
shareholders’
funds
£m
5,517.3
Notes
–
1.1
Shares
million
784.4
(0.6)
1.0
5,518.4
784.8
Notes to the accounts continued
10: 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 and B. Commentary on earnings and net asset value per share is provided in the Financial Review
B: Net asset value per share
Basic
Company’s own shares held in Employee Share
Ownership Plan
Dilutive share schemes
Diluted
Fair value adjustment to borrowings
– Reported Group
– Property interests
EPRA triple net
Fair value adjustment to borrowings
Deferred tax
Fair value of derivatives
– Reported Group
– Property interests
Premium outlets*
– Fair value of derivatives
– Deferred tax
– Goodwill as a result of deferred tax
on pages 53 to 61.
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, which are treated as cancelled.
Notes
Earnings
£m
2
726.8
–
Shares
million
783.6
1.1
Pence
Earnings
per share
£m
699.1
–
Shares
million
730.6
0.2
726.8
784.7
699.1
730.8
2015
92.8
(0.2)
92.6
Basic
Dilutive share schemes
Diluted
Adjustments:
Revaluation gains on
Reported Group
properties:
Property interests
(Gain)/Loss on sale of
Reported Group
properties and joint
venture interests:
Gain on sale of properties
Loss on sale of joint ventures
Debt and loan facility
cancellation costs:
Reported Group
Change in fair value
Reported Group
of derivatives:
Property interests
12B
Other adjustments:
Reported Group
Investment costs written off
Joint venture formation costs written off
Deferred tax
Non-controlling interests
Premium outlets*:
Revaluation gains on properties
Deferred tax
Other adjustments
12B, 13B
12B, 13B
12B, 13B
2
2
2
2
7
7
2
2
2
2
(245.1)
(122.4)
(367.5)
(14.9)
–
(14.9)
13.9
1.1
(1.0)
0.1
1.4
–
–
0.3
1.7
(174.1)
27.6
(0.6)
(147.1)
(513.8)
2014
Pence
per share
95.7
–
95.7
(37.1)
(22.7)
(59.8)
(0.1)
0.6
0.5
1.2
(1.8)
(0.1)
(1.9)
0.4
–
–
(0.1)
0.3
(15.0)
1.6
0.8
(12.6)
(72.3)
23.4
0.5
–
23.9
(31.2)
(15.6)
(271.2)
(165.6)
(46.8)
(436.8)
(1.9)
(0.6)
–
(1.9)
1.8
0.1
(0.1)
0.2
–
–
–
–
0.2
4.0
3.4
8.7
(13.1)
(0.6)
(13.7)
–
3.1
0.1
(0.7)
2.5
(22.2)
(109.8)
3.5
(0.1)
12.3
5.6
(18.8)
(91.9)
(65.5)
(527.8)
–
(0.2)
26.9
3.0
–
Total adjustments
EPRA
Net one-off
restructuring charge: Reported Group
Other adjustments:
Premium outlets*
Adjusted
* Adjustments in respect of Premium outlets include VIA Outlets (note 12B) and Value Retail (note 13B).
2
12B
–
(2.1)
210.9
784.7
174.3
730.8
213.0
784.7
27.1
171.3
730.8
Transfer from investment in joint ventures
Disposals
Transfers
Capitalised interest
Revaluation
Balance at 31 December
Balance at 1 January
Exchange adjustment
Additions
– Capital expenditure
– Asset acquisitions
Investment
properties
Valuation
£m
Development
properties
Valuation
£m
2015
Total
Valuation
£m
4,273.2
154.1
4,427.3
(82.9)
(1.7)
(84.6)
Investment
properties
Valuation
£m
2,988.7
(72.1)
Development
properties
Valuation
£m
459.1
(27.1)
73.3
35.2
108.5
11.0
(169.5)
59.7
0.4
218.5
100.9
8.5
109.4
–
(0.5)
(59.7)
5.0
26.6
174.2
43.7
217.9
11.0
(170.0)
–
5.4
245.1
70.0
302.7
372.7
279.1
(6.6)
453.4
0.5
257.5
4,418.9
233.2
4,652.1
4,273.2
153.5
–
153.5
–
–
(453.4)
8.3
13.7
154.1
–
(0.29)
6.74
0.29
–
(0.02)
–
(0.02)
–
0.14
(0.05)
0.09
7.10
(0.3)
(306.3)
4,669.3
306.3
0.5
(15.0)
1.9
(13.1)
1.2
84.8
(50.1)
35.9
4,998.9
783.5
EPRA
5,572.7
784.8
* Adjustments in respect of Premium outlets include VIA Outlets (note 12C) and Value Retail (note 13D).
11: INVESTMENT AND DEVELOPMENT PROPERTIES
(0.1)
(225.5)
5,292.9
225.5
0.5
(13.8)
0.9
(12.9)
3.1
113.6
(50.0)
66.7
20I
12C, 13D
12C, 13D
12C, 13D
20I
(225.4)
(0.29)
(306.0)
4,975.6
783.5
2014
Net asset
value
per share
£
6.34
n/a
n/a
6.35
(0.39)
–
(0.39)
5.96
0.39
–
(0.02)
–
(0.02)
–
0.11
(0.06)
0.05
6.38
2014
Total
Valuation
£m
3,447.8
(99.2)
223.5
302.7
526.2
279.1
(6.6)
–
8.8
271.2
4,427.3
Properties are stated at fair value as at 31 December 2015, valued by professionally qualified external valuers. DTZ Debenham Tie Leung
Limited, Chartered Surveyors have valued the Group’s properties, excluding those held by the Group’s premium outlet investments which
have been valued by Cushman & Wakefield LLP, Chartered Surveyors. All valuations have been prepared in accordance with the RICS
Valuation – Professional Standards 2014 based on certain assumptions as set out in note 1.
136 HAMMERSON PLC ANNUAL REPORT 2015
137
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HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
11: INVESTMENT AND DEVELOPMENT PROPERTIES (CONTINUED)
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 21)
and ‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 126.
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 page 124, 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 capitalisation yields (nominal equivalent yield) and market rental income (ERV). These inputs to the valuations are analysed
by segment in the valuation and rental data tables on pages 166 and 169 and the valuation change analysis in the Financial Review on page 58.
All other factors remaining constant, an increase in rental income would increase valuations, whilst increases in capitalisation yields and
discount rates 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. A sensitivity analysis showing
the impact on valuations of changes in yields and rental income is shown below.
Key unobservable inputs sensitivity analysis
Reported Group
Impact on valuation of 25bp change
in nominal equivalent yield
Impact on valuations of 5% change
in estimated rental value (ERV)
Investment
properties
valuation
£m
4,418.9
Decrease
£m
236.4
Increase
£m
(213.9)
Increase
£m
183.8
Decrease
£m
(169.3)
The total amount of interest included in development properties at 31 December 2015 was £4.9 million (2014: £2.4 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 2015 was 3.8% (2014: 4.7%). At 31 December 2014 the historic cost of investment and development properties was £3,830.0 million
(2014: £3,930.1 million).
At 31 December 2015, the investment properties shown above included Monument Mall, Newcastle where a sale contract for a total value
of £75 million had been exchanged in December 2015 and which completed in January 2016. In addition, a sale contract was exchanged in
January 2016 for the sale of Villebon 2, Paris for a value of £117 million, with completion expected in March 2016.
On 11 February 2016 the Group completed the purchase of Grand Central, Birmingham for £350 million and entered into a new joint venture
agreement with CPPIB who will acquire a 50% interest in the property for £175 million, subject to regulatory approval.
Analysis of properties by tenure
Balance at 31 December 2015
Balance at 31 December 2014
Capital commitments
Freehold
£m
Long leasehold
£m
3,443.1
3,365.0
1,209.0
1,062.3
2015
£m
107.7
Total
£m
4,652.1
4,427.3
2014
£m
196.1
138
138 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
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 21)
and ‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 126.
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 page 124, 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 capitalisation yields (nominal equivalent yield) and market rental income (ERV). These inputs to the valuations are analysed
by segment in the valuation and rental data tables on pages 166 and 169 and the valuation change analysis in the Financial Review on page 58.
All other factors remaining constant, an increase in rental income would increase valuations, whilst increases in capitalisation yields and
discount rates would result in a fall in values and vice versa. However, there are interrelationships between unobservable inputs as they are
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. A sensitivity analysis showing
the impact on valuations of changes in yields and rental income is shown below.
Key unobservable inputs sensitivity analysis
Reported Group
Impact on valuation of 25bp change
Impact on valuations of 5% change
in nominal equivalent yield
in estimated rental value (ERV)
Investment
properties
valuation
£m
4,418.9
Decrease
£m
236.4
Increase
£m
(213.9)
Increase
£m
183.8
Decrease
£m
(169.3)
The total amount of interest included in development properties at 31 December 2015 was £4.9 million (2014: £2.4 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 2015 was 3.8% (2014: 4.7%). At 31 December 2014 the historic cost of investment and development properties was £3,830.0 million
(2014: £3,930.1 million).
At 31 December 2015, the investment properties shown above included Monument Mall, Newcastle where a sale contract for a total value
of £75 million had been exchanged in December 2015 and which completed in January 2016. In addition, a sale contract was exchanged in
January 2016 for the sale of Villebon 2, Paris for a value of £117 million, with completion expected in March 2016.
On 11 February 2016 the Group completed the purchase of Grand Central, Birmingham for £350 million and entered into a new joint venture
agreement with CPPIB who will acquire a 50% interest in the property for £175 million, subject to regulatory approval.
Analysis of properties by tenure
Balance at 31 December 2015
Balance at 31 December 2014
Capital commitments
Freehold
Long leasehold
£m
£m
3,443.1
3,365.0
1,209.0
1,062.3
2015
£m
107.7
Total
£m
4,652.1
4,427.3
2014
£m
196.1
11: INVESTMENT AND DEVELOPMENT PROPERTIES (CONTINUED)
12: INVESTMENT IN JOINT VENTURES
As at 31 December 2015, the Group had investments in a number of jointly controlled property and corporate interests which have been equity
accounted. As explained in note 3, management reviews the business principally on a proportionally consolidated basis, except for its
premium outlet investments. The Group’s total proportional share of joint ventures is split between Property joint ventures, being joint
ventures which are proportionally consolidated, and VIA outlets, a premium outlets investment, which is not proportionally consolidated.
The Group’s significant joint venture interests are set out in the table below. Further details of the Group’s interests in joint ventures are
shown in note H on pages 164 and 165.
determined by market conditions. The existence of an increase of more than one unobservable input would augment the impact on valuation.
Croydon Limited Partnership/Whitgift Limited Partnership
United Kingdom
Bishopsgate Goodsyard Regeneration Limited
Brent Cross Shopping Centre/ Brent South Shopping Park
Bristol Alliance Limited Partnership
Retail Property Holdings Limited
The Bull Ring Limited Partnership
The Oracle Limited Partnership
VIA Limited Partnership
West Quay Limited Partnership
Partner
Principal property1
Group share
%
Ballymore Properties
The Goodsyard
50
Brent Cross
41.2/40.6
Standard Life
AXA Real Estate
Westfield
CPPIB
TH Real Estate, CPPIB
ADIA
Cabot Circus
Centrale/Whitgift
Silverburn
Bullring
The Oracle
APG, Meyer Bergman, Value Retail
European outlet centres
GIC
WestQuay
Ireland
Triskelion Property Holding Designated Activity Company
Allianz
Irish loan portfolio
France
SCI ESQ
SCI RC Aulnay 1 and SCI RC Aulnay 2
Allianz
Espace Saint Quentin
Client of Rockspring Property
Investment Managers
O’Parinor
50
50
50
50
50
47
50
50
25
25
1. The names of the principal property operated by each partnership have been used in the summary income statements and balance sheets in note 12A.
In March 2015, the Group acquired an additional 66.7% stake in The Martineau Galleries Limited Partnership, increasing the Group’s interest
in the partnership to 100%. The revaluation gain during the year up to the date the Group acquired the additional stake in this entity totalled
£2.2 million, and has been treated as a property revaluation gain in the summarised income statement in note 12A.
In October 2015, the Group acquired an interest in a loan portfolio secured on retail properties located in Dublin, Ireland in a 50% joint
venture for £690.2 million. The Irish loan portfolio held by the joint venture consists primarily of interest-bearing loans of £1,363.6 million
and is included within other current assets in note 12A. It is anticipated that these loans will be converted into owned property assets in
2016. See page 26 of the Business Review for further details.
The summarised income statements and balance sheets in note 12A show 100% of the results, assets and liabilities of joint ventures, and
where necessary have been restated to the Group’s accounting policies and exclude all balances which are eliminated on consolidation.
138 HAMMERSON PLC ANNUAL REPORT 2015
139
HAMMERSON.COM 139
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
A. Summary financial statements of joint ventures
Share of results of joint ventures for the year ended 31 December 2015
See page 142 for notes.
Ownership (%)
Gross rental income
Net rental income
Administration expenses
Operating profit before other net gains/(losses)
Loss on sale of properties
Revaluation gains/(losses) on properties
Operating profit
Change in fair value of derivatives
Translation movement on intragroup funding loan
Other finance income/(costs)
Net finance income/(costs)
Profit before tax
Current tax charge
Deferred tax charge
Profit for the year
Hammerson share of profit for the year
Hammerson share of distributions payable
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
The Oracle
£m
WestQuay
£m
41.2/40.6
47.6
44.1
–
44.1
–
(6.1)
38.0
–
–
–
–
38.0
–
–
38.0
15.6
–
50
37.9
32.5
–
32.5
–
43.3
75.8
–
–
(0.8)
(0.8)
75.0
–
–
75.0
37.5
19.2
50
56.6
49.6
(0.1)
49.5
–
107.2
156.7
–
–
–
–
156.7
–
–
156.7
78.3
20.3
50
32.3
26.1
–
26.1
–
41.9
68.0
–
–
(0.1)
(0.1)
67.9
–
–
67.9
34.0
3.0
50
30.7
25.0
–
25.0
–
20.1
45.1
–
–
(0.4)
(0.4)
44.7
–
–
44.7
22.4
0.2
Share of assets and liabilities of joint ventures as at 31 December 2015
Non-current assets
Investment and development properties
Goodwill
Interests in leasehold properties
Current assets
Other current assets
Cash and deposits
Current liabilities
Other payables
Borrowings – secured
Non-current liabilities
Borrowings – secured
Obligations under finance leases
Other payables
Deferred tax
Net assets/(liabilities)
Hammerson share of net assets/(liabilities)
Balance due to Hammerson1
Total investment in joint ventures1
140
140 HAMMERSON PLC ANNUAL REPORT 2015
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
The Oracle
£m
WestQuay
£m
980.8
618.0
1,201.8
658.8
555.4
–
–
980.8
13.7
0.7
14.4
–
14.6
632.6
5.8
2.2
8.0
–
–
–
–
–
4.2
1,201.8
658.8
559.6
11.4
9.2
20.6
4.3
9.5
13.8
6.0
12.0
18.0
(21.7)
(13.3)
(19.7)
(241.4)
(10.7)
–
–
–
–
–
(21.7)
(13.3)
(19.7)
(241.4)
(10.7)
–
–
(1.0)
–
(1.0)
972.5
395.6
–
–
(14.6)
(0.3)
–
(14.9)
612.4
–
–
(1.3)
–
(1.3)
1,201.4
306.2
600.7
–
–
395.6
306.2
600.7
–
–
(0.6)
(0.1)
(0.7)
430.5
215.2
115.6
330.8
–
(4.2)
(597.5)
–
(601.7)
(34.8)
(17.4)
298.4
281.0
HAMMERSON PLC ANNUAL REPORT 2015
Share of assets and liabilities of joint ventures as at 31 December 2015
Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
A. Summary financial statements of joint ventures
Share of results of joint ventures for the year ended 31 December 2015
Operating profit before other net gains/(losses)
44.1
32.5
26.1
25.0
See page 142 for notes.
Ownership (%)
Gross rental income
Net rental income
Administration expenses
Loss on sale of properties
Revaluation gains/(losses) on properties
Operating profit
Change in fair value of derivatives
Translation movement on intragroup funding loan
Other finance income/(costs)
Net finance income/(costs)
Profit before tax
Current tax charge
Deferred tax charge
Profit for the year
Hammerson share of profit for the year
Hammerson share of distributions payable
Non-current assets
Investment and development properties
Goodwill
Interests in leasehold properties
Current assets
Other current assets
Cash and deposits
Current liabilities
Other payables
Borrowings – secured
Non-current liabilities
Borrowings – secured
Obligations under finance leases
Other payables
Deferred tax
Net assets/(liabilities)
Hammerson share of net assets/(liabilities)
Balance due to Hammerson1
Total investment in joint ventures1
140 HAMMERSON PLC ANNUAL REPORT 2015
(6.1)
38.0
43.3
75.8
107.2
156.7
41.9
68.0
20.1
45.1
£m
41.2/40.6
47.6
44.1
38.0
38.0
15.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
50
37.9
32.5
–
–
–
–
–
–
(0.8)
(0.8)
75.0
75.0
37.5
19.2
–
14.6
632.6
5.8
2.2
8.0
–
–
–
–
£m
50
56.6
49.6
(0.1)
49.5
156.7
156.7
78.3
20.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Brent Cross
Cabot Circus
Bullring
The Oracle
WestQuay
£m
£m
£m
£m
£m
980.8
618.0
1,201.8
658.8
555.4
980.8
1,201.8
658.8
559.6
13.7
0.7
14.4
11.4
9.2
20.6
4.3
9.5
13.8
(21.7)
(13.3)
(19.7)
(241.4)
(10.7)
(21.7)
(13.3)
(19.7)
(241.4)
(10.7)
(1.0)
(1.0)
972.5
395.6
(14.6)
(0.3)
(1.3)
(14.9)
612.4
(1.3)
1,201.4
306.2
600.7
395.6
306.2
600.7
(0.6)
(0.1)
(0.7)
430.5
215.2
115.6
330.8
£m
50
32.3
26.1
(0.1)
(0.1)
67.9
67.9
34.0
3.0
–
–
–
–
–
–
–
–
–
–
–
£m
50
30.7
25.0
–
–
–
–
–
–
(0.4)
(0.4)
44.7
44.7
22.4
0.2
–
4.2
6.0
12.0
18.0
–
–
–
(4.2)
(597.5)
(601.7)
(34.8)
(17.4)
298.4
281.0
Brent Cross
Cabot Circus
Bullring
The Oracle
WestQuay
Silverburn
£m
Centrale/Whitgift
£m
Irish loan
portfolio
£m
O‘Parinor
£m
50
22.6
20.2
(0.1)
20.1
–
(10.4)
9.7
–
–
–
–
9.7
–
–
9.7
4.8
–
50
23.9
14.9
–
14.9
–
2.0
16.9
–
–
–
–
16.9
–
–
16.9
8.4
–
50
–
–
(0.1)
(0.1)
–
–
(0.1)
–
–
9.2
9.2
9.1
–
–
9.1
4.5
–
25
17.3
15.0
(0.1)
14.9
–
43.6
58.5
4.0
–
(7.8)
(3.8)
54.7
0.1
–
54.8
13.7
–
Other
£m
n/a
41.6
31.6
(3.8)
27.8
(1.7)
51.3
77.4
(4.6)
4.4
(4.0)
(4.2)
73.2
(0.3)
(5.4)
67.5
27.6
8.1
310.5
259.0
(4.2)
254.8
(1.7)
292.9
546.0
(0.6)
4.4
(3.9)
(0.1)
545.9
(0.2)
(5.4)
540.3
246.8
50.8
Total
2015
£m
Property joint
ventures
£m
VIA Outlets
£m
Hammerson share
233.7
13.1
246.8
Hammerson share
129.2
108.8
(0.3)
108.5
–
122.1
230.6
1.0
–
2.1
3.1
233.7
–
–
47
13.7
9.8
(1.7)
8.1
(0.8)
10.4
17.7
(2.2)
2.1
(1.9)
(2.0)
15.7
(0.1)
(2.5)
148.6
3.0
–
151.6
3.8
7.9
11.7
(7.7)
–
(7.7)
(34.2)
–
(4.3)
(6.3)
(44.8)
726.8
32.4
759.2
(67.2)
(40.2)
(107.4)
–
(9.4)
(4.1)
–
(13.5)
Total
2015
£m
142.9
118.6
(2.0)
116.6
(0.8)
132.5
248.3
(1.2)
2.1
0.2
1.1
249.4
(0.1)
(2.5)
Total
2015
£m
2,603.7
3.0
9.4
2,616.1
730.6
40.3
770.9
(74.9)
(40.2)
(115.1)
(34.2)
(9.4)
(8.4)
(6.3)
(58.3)
3,102.8
110.8
3,213.6
141
HAMMERSON.COM 141
Silverburn
£m
Centrale/Whitgift
£m
Irish loan
portfolio
£m
O‘Parinor
£m
Other
£m
Total
2015
£m
Property joint
ventures
£m
VIA Outlets
£m
372.0
291.2
–
–
–
–
372.0
291.2
–
–
–
–
385.2
638.5
5,701.7
2,455.1
–
–
–
–
–
18.8
–
9.4
385.2
638.5
5,720.5
2,464.5
6.2
10.4
16.6
(9.2)
–
(9.2)
–
–
4.7
13.6
18.3
(24.9)
–
(24.9)
–
–
1,369.4
2.9
1,372.3
(0.1)
–
(0.1)
–
–
8.6
2.6
11.2
(5.2)
(161.0)
(166.2)
–
–
12.0
21.2
33.2
(19.5)
–
(19.5)
(72.9)
–
1,442.1
84.3
1,526.4
(365.7)
(161.0)
(526.7)
(72.9)
(18.8)
(194.8)
(223.2)
(1,365.6)
(33.0)
(162.0)
(2,579.3)
–
(194.8)
184.6
92.3
97.4
189.7
–
–
(223.2)
(1,365.6)
61.4
30.7
111.6
142.3
6.6
3.3
690.2
693.5
–
(33.0)
197.2
49.3
6.6
55.9
(13.5)
(13.6)
(248.4)
(2,684.6)
403.8
4,035.6
164.1
53.8
217.9
1,840.0
1,373.6
3,213.6
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
A. Summary financial statements of joint ventures (continued)
Share of results of joint ventures for the year ended 31 December 2014
Ownership (%)
Gross rental income
Net rental income
Administration expenses
Operating profit before other net gains/(losses)
Revaluation gains/(losses) on properties
Operating profit
Change in fair value of derivatives
Other finance costs
Net finance costs
Profit before tax
Current tax charge
Deferred tax charge
Profit for the year
Hammerson share of profit for the year
Hammerson share of distributions payable
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
The Oracle
£m
WestQuay
£m
41.2/40.6
47.5
43.9
–
43.9
43.6
87.5
–
–
–
87.5
–
–
87.5
36.1
–
50
37.7
32.0
(0.7)
31.3
39.5
70.8
–
(0.8)
(0.8)
70.0
–
–
70.0
35.0
15.8
50
56.5
50.3
(0.2)
50.1
125.7
175.8
–
–
–
50
31.4
26.2
–
26.2
55.3
81.5
–
–
–
175.8
81.5
–
–
175.8
87.9
23.0
–
–
81.5
40.7
5.9
50
31.3
25.2
–
25.2
25.2
50.4
–
(0.4)
(0.4)
50.0
–
–
50.0
25.0
0.6
Share of assets and liabilities of joint ventures as at 31 December 2014
Non-current assets
Investment and development properties
Goodwill
Interests in leasehold properties
Receivables
Current assets
Other current assets
Cash and deposits
Current liabilities
Other payables
Non-current liabilities
Borrowings – secured
Obligations under finance leases
Other payables
Deferred tax
Net assets/(liabilities)
Hammerson share of net assets/(liabilities)
Balance due to Hammerson1
Total investment in joint ventures1
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
The Oracle
£m
WestQuay
£m
967.2
575.6
1,085.0
612.6
532.7
–
–
–
–
14.6
–
–
–
–
–
–
–
–
4.2
–
967.2
590.2
1,085.0
612.6
536.9
33.2
4.0
37.2
5.7
9.6
15.3
4.2
18.9
23.1
7.2
5.7
12.9
4.2
5.0
9.2
(47.6)
(13.3)
(14.9)
(13.5)
(10.4)
–
–
(2.4)
–
(2.4)
954.4
–
(14.6)
(0.5)
–
(15.1)
577.1
–
–
(1.1)
–
(1.1)
1,092.1
393.2
288.6
546.0
–
–
–
393.2
288.6
546.0
–
–
–
(4.2)
(231.6)
(597.6)
–
(231.6)
380.4
190.2
115.6
305.8
–
(601.8)
(66.1)
(33.0)
298.4
265.4
1. The Group and its partners invest in joint ventures principally by way of equity investment. To provide further clarity of this investment, those balances which are not
equity have been included within other payables as a liability of the joint venture, and Hammerson’s interest has been shown separately. The comparative table has been
prepared on the same basis.
142
142 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
A. Summary financial statements of joint ventures (continued)
Share of results of joint ventures for the year ended 31 December 2014
Hammerson share of profit for the year
Hammerson share of distributions payable
Share of assets and liabilities of joint ventures as at 31 December 2014
Ownership (%)
Gross rental income
Net rental income
Administration expenses
Operating profit before other net gains/(losses)
Revaluation gains/(losses) on properties
Operating profit
Change in fair value of derivatives
Other finance costs
Net finance costs
Profit before tax
Current tax charge
Deferred tax charge
Profit for the year
Non-current assets
Investment and development properties
Goodwill
Receivables
Interests in leasehold properties
Current assets
Other current assets
Cash and deposits
Current liabilities
Other payables
Non-current liabilities
Borrowings – secured
Obligations under finance leases
Other payables
Deferred tax
Net assets/(liabilities)
Balance due to Hammerson1
Total investment in joint ventures1
Brent Cross
Cabot Circus
Bullring
The Oracle
WestQuay
£m
41.2/40.6
175.8
81.5
£m
50
37.7
32.0
(0.7)
31.3
39.5
70.8
–
(0.8)
(0.8)
70.0
–
–
70.0
35.0
15.8
14.6
–
–
5.7
9.6
15.3
(14.6)
(0.5)
(15.1)
577.1
–
–
–
£m
50
56.5
50.3
(0.2)
50.1
125.7
175.8
175.8
87.9
23.0
–
–
–
–
–
–
–
–
–
–
–
–
47.5
43.9
–
43.9
43.6
87.5
–
–
–
–
–
87.5
87.5
36.1
–
–
–
–
33.2
4.0
37.2
(2.4)
(2.4)
954.4
–
–
–
–
£m
50
31.4
26.2
–
26.2
55.3
81.5
–
–
–
–
–
81.5
40.7
5.9
–
–
–
–
–
–
£m
50
31.3
25.2
–
25.2
25.2
50.4
–
(0.4)
(0.4)
50.0
–
–
50.0
25.0
0.6
4.2
–
–
4.2
5.0
9.2
(4.2)
–
–
(601.8)
(66.1)
(33.0)
298.4
265.4
Silverburn
£m
Centrale/Whitgift
£m
O‘Parinor
£m
50
20.8
18.5
(0.1)
18.4
8.4
26.8
–
–
–
26.8
–
–
26.8
13.4
–
50
12.4
8.3
(0.6)
7.7
1.8
9.5
–
–
–
9.5
–
–
9.5
4.8
–
25
19.0
17.9
(0.1)
17.8
3.6
21.4
2.4
(7.9)
(5.5)
15.9
–
–
15.9
4.0
–
Other
£m
n/a
56.0
39.7
(3.0)
36.7
17.4
54.1
–
(7.2)
(7.2)
46.9
(1.1)
–
45.8
32.1
13.9
Total
2014
£m
312.6
262.0
(4.7)
257.3
320.5
577.8
2.4
(16.3)
(13.9)
563.9
(1.1)
–
562.8
279.0
59.2
Property joint
ventures
£m
VIA Outlets
£m
137.6
117.5
(0.9)
116.6
165.6
282.2
0.6
(2.7)
(2.1)
280.1
–
–
47
4.4
2.7
(0.6)
2.1
(1.3)
0.8
(0.3)
(1.1)
(1.4)
(0.6)
(0.1)
(0.4)
Hammerson share
Total
2014
£m
142.0
120.2
(1.5)
118.7
164.3
283.0
0.3
(3.8)
(3.5)
279.5
(0.1)
(0.4)
280.1
(1.1)
279.0
Brent Cross
Cabot Circus
Bullring
The Oracle
WestQuay
£m
£m
£m
£m
£m
Silverburn
£m
Centrale/Whitgift
£m
O‘Parinor
£m
Other
£m
Total
2014
£m
Property joint
ventures
£m
VIA Outlets
£m
Hammerson share
Total
2014
£m
967.2
575.6
1,085.0
612.6
532.7
379.3
183.0
356.9
638.8
5,331.1
2,279.2
142.9
2,422.1
967.2
590.2
1,085.0
612.6
536.9
379.3
183.0
356.9
640.1
5,351.2
2,289.0
146.1
2,435.1
–
–
–
–
–
–
–
–
–
–
1.2
0.1
–
20.0
0.1
–
9.8
–
3.1
–
0.1
3.1
9.8
0.1
4.2
18.9
23.1
7.2
5.7
12.9
6.0
6.1
12.1
21.9
9.0
30.9
11.0
2.9
13.9
7.3
23.8
31.1
100.7
85.0
185.7
42.1
30.8
72.9
1.4
7.0
8.4
43.5
37.8
81.3
(47.6)
(13.3)
(14.9)
(13.5)
(10.4)
(9.5)
(25.8)
(7.7)
(18.1)
(160.8)
(66.5)
(5.1)
(71.6)
Hammerson share of net assets/(liabilities)
393.2
288.6
546.0
1. The Group and its partners invest in joint ventures principally by way of equity investment. To provide further clarity of this investment, those balances which are not
equity have been included within other payables as a liability of the joint venture, and Hammerson’s interest has been shown separately. The comparative table has been
prepared on the same basis.
(1.1)
(231.6)
(597.6)
(1.1)
1,092.1
(231.6)
380.4
190.2
115.6
305.8
393.2
288.6
546.0
–
–
(199.8)
–
(199.8)
182.1
91.0
99.9
190.9
–
–
(134.0)
–
(134.0)
54.1
27.1
67.0
94.1
(168.7)
–
(39.8)
–
(208.5)
154.6
38.6
7.0
45.6
(79.4)
(1.2)
(168.7)
(11.1)
(260.4)
392.7
157.7
54.2
211.9
(248.1)
(20.0)
(1,375.5)
(11.1)
(1,654.7)
3,721.4
1,699.4
642.1
2,341.5
(42.2)
(9.8)
(6.1)
–
(58.1)
(37.2)
–
(4.0)
(4.0)
(45.2)
(79.4)
(9.8)
(10.1)
(4.0)
(103.3)
2,237.3
104.2
2,341.5
142 HAMMERSON PLC ANNUAL REPORT 2015
143
HAMMERSON.COM 143
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Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
B. Reconciliation to adjusted earnings
Property joint
ventures
£m
VIA Outlets
£m
Profit for the year
Loss on sale of properties
Revaluation (gains)/losses on properties
Change in fair value of derivatives
Translation movements on intragroup funding loan
Deferred tax charge
Total adjustments
Adjusted earnings of joint ventures
233.7
–
(122.1)
(1.0)
–
–
(123.1)
110.6
Total
2015
£m
246.8
0.8
13.1
0.8
(10.4)
(132.5)
2.2
(2.1)
2.5
(7.0)
6.1
1.2
(2.1)
2.5
(130.1)
116.7
Property joint
ventures
£m
VIA Outlets
£m
280.1
–
(165.6)
(0.6)
–
–
(166.2)
113.9
(1.1)
–
1.3
0.3
–
0.4
2.0
0.9
Total
2014
£m
279.0
–
(164.3)
(0.3)
–
0.4
(164.2)
114.8
C. Reconciliation to EPRA adjusted investment in joint ventures
Investment in joint ventures
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
Property joint
ventures
£m
VIA Outlets
£m
2015
£m
2014
£m
3,102.8
110.8
3,213.6
2,341.5
0.9
–
–
0.9
3.5
6.3
(3.0)
6.8
4.4
6.3
(3.0)
7.7
3.1
4.0
(3.1)
4.0
EPRA adjusted investment in joint ventures
3,103.7
117.6
3,221.3
2,345.5
D. Reconciliation of movements in investment in joint ventures
Balance at 1 January
Acquisitions
Joint venture formation costs written off
Transfer of investment property on acquisition by Reported Group
Disposals
Share of results of joint ventures
Distributions and other receivables
Advances
Other movements
Foreign exchange translation differences
Balance at 31 December
2015
£m
2,341.5
690.2
–
(11.0)
–
246.8
(92.0)
45.4
1.6
(8.9)
3,213.6
2014
£m
2,470.8
110.8
(3.1)
(279.1)
(151.8)
279.0
(100.4)
8.1
17.8
(10.6)
2,341.5
144
144 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
12: INVESTMENT IN JOINT VENTURES (CONTINUED)
B. Reconciliation to adjusted earnings
Profit for the year
Loss on sale of properties
Revaluation (gains)/losses on properties
Change in fair value of derivatives
Translation movements on intragroup funding loan
Deferred tax charge
Total adjustments
Adjusted earnings of joint ventures
Property joint
ventures
VIA Outlets
VIA Outlets
£m
233.7
(122.1)
(1.0)
–
–
–
(123.1)
110.6
(10.4)
(132.5)
Total
2015
£m
246.8
0.8
1.2
(2.1)
2.5
(130.1)
116.7
Property joint
ventures
£m
280.1
(165.6)
(0.6)
–
–
–
(166.2)
113.9
£m
13.1
0.8
2.2
(2.1)
2.5
(7.0)
6.1
C. Reconciliation to EPRA adjusted investment in joint ventures
Investment in joint ventures
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
Property joint
ventures
VIA Outlets
£m
£m
3,102.8
110.8
3,213.6
2,341.5
0.9
–
–
0.9
3.5
6.3
(3.0)
6.8
EPRA adjusted investment in joint ventures
3,103.7
117.6
3,221.3
2,345.5
D. Reconciliation of movements in investment in joint ventures
Balance at 1 January
Acquisitions
Joint venture formation costs written off
Transfer of investment property on acquisition by Reported Group
Disposals
Share of results of joint ventures
Distributions and other receivables
Advances
Other movements
Foreign exchange translation differences
Balance at 31 December
£m
(1.1)
–
1.3
0.3
–
0.4
2.0
0.9
2015
£m
4.4
6.3
(3.0)
7.7
2015
£m
2,341.5
690.2
(11.0)
–
–
246.8
(92.0)
45.4
1.6
(8.9)
3,213.6
Total
2014
£m
279.0
–
(164.3)
(0.3)
–
0.4
(164.2)
114.8
2014
£m
3.1
4.0
(3.1)
4.0
2014
£m
2,470.8
110.8
(3.1)
(279.1)
(151.8)
279.0
(100.4)
8.1
17.8
(10.6)
2,341.5
13: INVESTMENT IN ASSOCIATES
At 31 December 2015, the Group had two associates: Value Retail PLC and its group entities ("VR") and a 10% interest in Nicetoile, which was
acquired in January 2015 and where Hammerson is the asset manager. Both investments are equity accounted under IFRS, although the share
of results in Nicetoile are included with the Group’s Property interests when presenting figures on a proportionally consolidated basis.
A: Share of results of associates
Gross rental income
Net rental income
VR
Hammerson
share
£m
72.8
55.8
100%
£m
236.5
177.8
100%
£m
12.4
11.0
Administration and other expenses
(99.3)
(27.4)
(0.1)
Operating profit before other
net gains
Revaluation gains on properties
Operating profit
Net finance costs
Change in fair value of derivatives
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 year
78.5
533.9
612.4
(35.0)
(34.3)
–
–
543.1
(10.3)
(106.3)
426.5
B: Reconciliation to adjusted earnings
28.4
163.7
192.1
(13.1)
(7.5)
12.6
2.6
186.7
(2.3)
(25.1)
159.3
Profit for the year
Revaluation gains on properties
Change in fair value of derivatives
Change in fair value of participative
loans – revaluation movement
Loan facility costs written off
Deferred tax charge
Total adjustments
VR
Hammerson
share
£m
159.3
(163.7)
7.5
(12.6)
1.5
25.1
100%
£m
426.5
(533.9)
34.3
–
3.7
106.3
(389.6)
(142.2)
Adjusted earnings of associates
36.9
17.1
10.9
3.0
13.9
–
–
–
–
13.9
–
–
13.9
100%
£m
13.9
(3.0)
–
–
–
–
100%
£m
248.9
188.8
(99.4)
89.4
536.9
626.3
(35.0)
(34.3)
–
–
557.0
(10.3)
(106.3)
440.4
Nicetoile
Hammerson
share
£m
1.2
1.0
–
1.0
0.3
1.3
–
–
–
–
1.3
–
–
1.3
Nicetoile
Hammerson
share
£m
2015
Total
Hammerson
share
£m
74.0
56.8
2014
Total
Hammerson
share
£m
67.1
49.6
100%
£m
216.0
157.3
(27.4)
(73.1)
(20.0)
29.4
164.0
193.4
(13.1)
(7.5)
12.6
2.6
188.0
(2.3)
(25.1)
160.6
2015
Total
84.2
314.2
398.4
(39.2)
(34.8)
–
–
324.4
(7.4)
(47.4)
269.6
100%
£m
269.6
(314.2)
34.8
–
–
47.4
29.6
111.1
140.7
(14.0)
(9.9)
4.6
2.1
123.5
(1.7)
(11.9)
109.9
2014
Total
Hammerson
share
£m
109.9
(111.1)
9.9
(4.6)
–
11.9
(93.9)
16.0
100%
£m
Hammerson
share
£m
1.3
440.4
(0.3)
(536.9)
–
–
–
–
34.3
3.7
106.3
160.6
(164.0)
7.5
(12.6)
1.5
25.1
(3.0)
10.9
(0.3)
(392.6)
(142.5)
(232.0)
1.0
47.8
18.1
37.6
When aggregated, the Group’s share of VR’s operating profit before other net gains for the year ended 31 December 2015 amounted to 36.2%
(2014: 35.2%).
144 HAMMERSON PLC ANNUAL REPORT 2015
145
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Notes to the accounts continued
13: INVESTMENT IN ASSOCIATES (CONTINUED)
C: Share of assets and liabilities of associates
VR
Hammerson
share
£m
65.4
100%
£m
–
Nicetoile
Hammerson
share
£m
–
100%
£m
–
2015
Total
100%
£m
–
Hammerson
share
£m
65.4
100%
£m
–
3,333.1
1,095.0
233.0
23.3
3,566.1
1,118.3
2,835.4
134.7
30.3
–
–
134.7
30.3
81.3
3,467.8
1,190.7
233.0
23.3
3,700.8
1,214.0
2,916.7
185.5
182.1
367.6
12.5
52.4
64.9
2.0
11.5
13.5
0.2
1.1
1.3
187.5
193.6
381.1
12.7
53.5
66.2
164.8
103.9
268.7
2014
Total
Hammerson
share
£m
65.7
884.7
18.6
969.0
30.2
28.4
58.6
3,835.4
1,255.6
246.5
24.6
4,081.9
1,280.2
3,185.4
1,027.6
(131.5)
(1,092.6)
(398.2)
(438.8)
(1,929.6)
(2,061.1)
1,774.3
(52.7)
(339.5)
(92.6)
(107.3)
(539.4)
(592.1)
663.5
80.3
743.8
(1.2)
–
(2.1)
–
(2.1)
(3.3)
(0.2)
(132.7)
–
(1,092.6)
(0.2)
(400.3)
–
(438.8)
(52.9)
(339.5)
(92.8)
(107.3)
(214.1)
(789.5)
(359.9)
(346.6)
(0.2)
(1,931.7)
(539.6)
(1,496.0)
(0.4)
(2,064.4)
(592.5)
(1,710.1)
243.2
24.2
2,017.5
–
24.2
1,475.3
687.7
80.3
768.0
(52.0)
(253.6)
(83.6)
(80.8)
(418.0)
(470.0)
557.6
71.2
628.8
Goodwill on acquisition
Investment properties
Other non-current assets
Non-current assets
Other current assets
Cash and deposits
Current assets
Total assets
Current liabilities
Borrowings
Other liabilities
Deferred tax
Non-current liabilities
Total liabilities
Net assets
Participative loans*
Investment in associates
The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £19.0 million
(2014: £12.6 million) which are included within non-current liabilities in note 22.
At 31 December 2015, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 38.2% (2014: 38.2%).
* The Group’s total investment in associates includes long-term debt which in substance forms part of the Group’s investment. These ‘participative loans’ are not repayable
in the foreseeable future.
D: Reconciliation to EPRA adjusted investment in associates
Investment in associates
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
EPRA adjusted investment in associates
E: Reconciliation of movements in investment in associates
Balance at 1 January
Acquisitions
Share of results of associates
Distributions
Revaluation movement on participative loan
Foreign exchange translation differences
Balance at 31 December
VR
£m
743.8
(0.4)
107.3
(47.0)
59.9
803.7
Nicetoile
£m
24.2
–
–
–
–
24.2
VR
£m
Nicetoile
£m
628.8
12.4
159.3
(44.5)
(1.0)
(11.2)
743.8
–
24.2
1.3
–
–
(1.3)
24.2
2015
£m
768.0
(0.4)
107.3
(47.0)
59.9
827.9
2015
£m
628.8
36.6
160.6
(44.5)
(1.0)
(12.5)
768.0
2014
£m
628.8
(1.9)
80.8
(47.0)
31.9
660.7
2014
£m
545.4
–
109.9
(11.5)
0.6
(15.6)
628.8
146
146 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
13: INVESTMENT IN ASSOCIATES (CONTINUED)
C: Share of assets and liabilities of associates
Hammerson
VR
share
£m
65.4
100%
£m
–
Nicetoile
Hammerson
share
£m
100%
£m
100%
£m
–
Hammerson
Hammerson
3,333.1
1,095.0
233.0
23.3
3,566.1
1,118.3
2,835.4
134.7
30.3
134.7
30.3
81.3
3,467.8
1,190.7
233.0
23.3
3,700.8
1,214.0
2,916.7
Goodwill on acquisition
Investment properties
Other non-current assets
Non-current assets
Other current assets
Cash and deposits
Current assets
Total assets
Current liabilities
Borrowings
Other liabilities
Deferred tax
Non-current liabilities
Total liabilities
Net assets
Participative loans*
Investment in associates
2.0
11.5
13.5
–
–
–
–
0.2
1.1
1.3
187.5
193.6
381.1
(1.2)
(0.2)
(132.7)
(2.1)
(0.2)
(400.3)
(1,092.6)
(438.8)
–
–
–
–
–
24.2
185.5
182.1
367.6
(131.5)
(1,092.6)
(398.2)
(438.8)
(1,929.6)
(2,061.1)
1,774.3
12.5
52.4
64.9
(52.7)
(339.5)
(92.6)
(107.3)
(539.4)
(592.1)
663.5
80.3
743.8
(2.1)
(3.3)
(0.2)
(1,931.7)
(539.6)
(1,496.0)
(0.4)
(2,064.4)
(592.5)
(1,710.1)
243.2
24.2
2,017.5
1,475.3
100%
£m
–
164.8
103.9
268.7
(214.1)
(789.5)
(359.9)
(346.6)
2015
Total
share
£m
65.4
12.7
53.5
66.2
(52.9)
(339.5)
(92.8)
(107.3)
687.7
80.3
768.0
The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £19.0 million
(2014: £12.6 million) which are included within non-current liabilities in note 22.
At 31 December 2015, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 38.2% (2014: 38.2%).
* The Group’s total investment in associates includes long-term debt which in substance forms part of the Group’s investment. These ‘participative loans’ are not repayable
in the foreseeable future.
D: Reconciliation to EPRA adjusted investment in associates
E: Reconciliation of movements in investment in associates
Investment in associates
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
EPRA adjusted investment in associates
Balance at 1 January
Acquisitions
Share of results of associates
Distributions
Revaluation movement on participative loan
Foreign exchange translation differences
Balance at 31 December
VR
£m
743.8
(0.4)
107.3
(47.0)
59.9
803.7
VR
£m
628.8
12.4
159.3
(44.5)
(1.0)
(11.2)
743.8
Nicetoile
£m
24.2
–
–
–
–
24.2
Nicetoile
£m
–
24.2
1.3
–
–
(1.3)
24.2
2015
£m
768.0
(0.4)
107.3
(47.0)
59.9
827.9
2015
£m
628.8
36.6
160.6
(44.5)
(1.0)
(12.5)
768.0
2014
Total
share
£m
65.7
884.7
18.6
969.0
30.2
28.4
58.6
(52.0)
(253.6)
(83.6)
(80.8)
(418.0)
(470.0)
557.6
71.2
628.8
2014
£m
628.8
(1.9)
80.8
(47.0)
31.9
660.7
2014
£m
545.4
–
109.9
(11.5)
0.6
(15.6)
628.8
14: RECEIVABLES: NON-CURRENT ASSETS
Loans receivable
Other receivables
Fair value of interest rate swaps
All loans are classified as available for sale and held at fair value and are analysed below:
Value Retail European Holdings BV: €2.0 million (2014: €2.0 million) maturing 30 November 2043
VR Dublin Limited and Kildare Retail Services Limited: €22.4 million (2014: €nil) maturing 30 September 2019
Value Retail European Holdings BV: €56.0 million (2014: €56.0 million) maturing 11 September 2019
3,835.4
1,255.6
246.5
24.6
4,081.9
1,280.2
3,185.4
1,027.6
VR Milan S.R.L.: €23.3 million (2014: €23.9 million) maturing 13 December 2017
15: RECEIVABLES: CURRENT ASSETS
Trade receivables
Other receivables
Corporation tax
Prepayments
Fair value of currency swaps
2015
£m
76.4
1.9
13.8
92.1
2015
£m
1.4
16.5
41.3
17.2
76.4
2015
£m
46.7
37.6
–
3.7
30.0
118.0
2014
£m
63.5
0.8
15.0
79.3
2014
£m
1.6
–
43.4
18.5
63.5
2014
£m
36.4
41.1
0.1
3.8
5.1
86.5
Trade receivables are shown after deducting a provision for bad and doubtful debts of £11.8 million (2014: £11.6 million), as set out in the table
below. The movement in the provision during the year was recognised entirely in income. The level of provision required is determined after
taking account of rent deposits and personal or corporate guarantees held. Credit risk is discussed further in note 20F.
Not yet due
1-30 days overdue
31-60 days overdue
61-90 days overdue
91-120 days overdue
More than 120 days overdue
16: RESTRICTED MONETARY ASSETS
Cash held on behalf of third parties
Gross
receivable
£m
Provision
£m
24.8
7.4
2.2
0.8
2.5
20.8
58.5
–
0.1
–
–
0.2
11.5
11.8
2015
Net
receivable
£m
24.8
7.3
2.2
0.8
2.3
9.3
46.7
Gross
receivable
£m
Provision
£m
2014
Net
receivable
£m
19.8
10.0
0.2
0.9
3.1
14.0
48.0
–
0.3
–
0.2
0.5
10.6
11.6
2015
£m
34.0
19.8
9.7
0.2
0.7
2.6
3.4
36.4
2014
£m
11.3
The Group and its managing agents hold cash on behalf of its tenants and co-owners to meet future service charge costs and related
expenditure. The cash has restricted use and, as such, does not meet the definition of cash and cash equivalents as defined in IAS 7 ‘Statement
of Cash Flows’. The balance of £11.3 million held at 31 December 2014 had previously been included within trade receivables, and classified as
‘Not yet due’. This has been reclassified to restricted monetary assets in the current year.
146 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the accounts continued
17: CASH AND DEPOSITS
Cash at bank
Short-term deposits
Currency profile
Sterling
Euro
18: PAYABLES: CURRENT LIABILITIES
Trade payables
Other payables
Accruals
Deferred income
19: BORROWINGS
A: Maturity
After five years
From two to five years
From one to two years
Due after more than one year
Current assets: Fair value of currency swaps
2015
£m
36.9
0.1
37.0
14.4
22.6
37.0
2015
£m
23.9
153.8
31.6
26.2
235.5
2014
£m
28.5
0.1
28.6
10.1
18.5
28.6
2014
£m
18.3
133.4
27.5
25.2
204.4
Bank loans and
overdrafts
£m
Other
borrowings
£m
Total
2015
£m
Bank loans and
overdrafts
£m
–
245.1
690.1
935.2
–
1,478.2
614.7
–
1,478.2
859.8
690.1
2,092.9
3,028.1
(30.0)
(30.0)
–
72.9
164.6
237.5
–
Other
borrowings
£m
1,399.0
384.8
265.8
2,049.6
(5.1)
Total
2014
£m
1,399.0
457.7
430.4
2,287.1
(5.1)
935.2
2,062.9
2,998.1
237.5
2,044.5
2,282.0
At 31 December 2015 and 2014 no borrowings due after five years were repayable by instalments. At 31 December 2015, the fair value of
currency swaps was an asset of £42.8 million (2014: £16.1 million) of which £30.0 million (2014: £5.1 million) is due within one year and is
included in current receivables (see note 15).
B: Analysis
Unsecured
£200 million 7.25% sterling bonds due 2028
£300 million 6% sterling bonds due 2026
£350 million 3.5% sterling bonds due 2025
€500 million 2% euro bonds due 2022
£250 million 6.875% sterling bonds due 2020
€500 million 2.75% euro bonds due 2019
£272 million 5.25% sterling bonds due 2016
Bank loans and overdrafts
Senior notes due 2026
Senior notes due 2024
Senior notes due 2021
Fair value of currency swaps
2015
£m
198.1
297.6
345.0
364.6
248.6
366.1
–
935.2
22.0
135.6
128.1
2014
£m
198.0
297.4
–
383.4
248.4
384.8
271.5
237.5
23.2
131.1
122.8
3,040.9
(42.8)
2,998.1
2,298.1
(16.1)
2,282.0
Financing activities during the year are detailed in the Financial Review on pages 60 and 61. Senior notes comprise £196.5 million (2014:
£185.6 million) denominated in US dollars, £44.2 million (2014: £46.5 million) in euro and £45.0 million (2014: £45.0 million) in sterling.
148
148 HAMMERSON PLC ANNUAL REPORT 2015
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18: PAYABLES: CURRENT LIABILITIES
Notes to the accounts continued
17: CASH AND DEPOSITS
Cash at bank
Short-term deposits
Currency profile
Sterling
Euro
Trade payables
Other payables
Accruals
Deferred income
19: BORROWINGS
A: Maturity
After five years
From two to five years
From one to two years
Due after more than one year
Current assets: Fair value of currency swaps
B: Analysis
Unsecured
£200 million 7.25% sterling bonds due 2028
£300 million 6% sterling bonds due 2026
£350 million 3.5% sterling bonds due 2025
€500 million 2% euro bonds due 2022
£250 million 6.875% sterling bonds due 2020
€500 million 2.75% euro bonds due 2019
£272 million 5.25% sterling bonds due 2016
Bank loans and overdrafts
Senior notes due 2026
Senior notes due 2024
Senior notes due 2021
Fair value of currency swaps
Bank loans and
overdrafts
borrowings
Bank loans and
overdrafts
£m
–
245.1
690.1
935.2
–
Other
£m
1,478.2
614.7
–
Total
2015
£m
1,478.2
859.8
690.1
2,092.9
3,028.1
(30.0)
(30.0)
£m
–
72.9
164.6
237.5
–
Other
borrowings
£m
1,399.0
384.8
265.8
2,049.6
(5.1)
Total
2014
£m
1,399.0
457.7
430.4
2,287.1
(5.1)
935.2
2,062.9
2,998.1
237.5
2,044.5
2,282.0
At 31 December 2015 and 2014 no borrowings due after five years were repayable by instalments. At 31 December 2015, the fair value of
currency swaps was an asset of £42.8 million (2014: £16.1 million) of which £30.0 million (2014: £5.1 million) is due within one year and is
included in current receivables (see note 15).
2015
£m
36.9
0.1
37.0
14.4
22.6
37.0
2015
£m
23.9
153.8
31.6
26.2
235.5
2015
£m
198.1
297.6
345.0
364.6
248.6
366.1
–
935.2
22.0
135.6
128.1
2014
£m
28.5
0.1
28.6
10.1
18.5
28.6
2014
£m
18.3
133.4
27.5
25.2
204.4
2014
£m
198.0
297.4
–
383.4
248.4
384.8
271.5
237.5
23.2
131.1
122.8
3,040.9
(42.8)
2,998.1
2,298.1
(16.1)
2,282.0
C: Undrawn committed facilities
Expiry
Within two to five years
Within one to two years
D: Interest rate and currency profile
Sterling
Euro
US Dollar
Sterling
Euro
US Dollar
%
6.3
2.6
–
3.7
%
6.2
3.3
–
4.0
2014
£m
250.0
339.0
589.0
2015
Total
£m
436.3
2,568.8
(7.0)
2015
£m
342.0
518.5
860.5
Fixed rate borrowings
Floating rate
borrowings
Years
£m
£m
552.0
1,286.7
–
(115.7)
1,282.1
(7.0)
11
7
–
8
1,838.7
1,159.4
2,998.1
Fixed rate borrowings
Floating rate
borrowings
Years
12
6
–
7
£m
425.4
1,375.3
–
1,800.7
£m
74.8
413.3
(6.8)
481.3
2014
Total
£m
500.2
1,788.6
(6.8)
2,282.0
The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2015 and 2014, further details of which are
set out in note 20. The interest rates shown are the weighted average for fixed rate borrowings. Floating rate borrowings bear interest based on
LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.
20: 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 Treasury risks is set out in the Principal Risks and Uncertainties section of the Strategic Report on page 65. 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 which the Group maintains
strong working relationships. Long-term debt mainly comprises the Group’s fixed rate unsecured bonds.
B: Interest rate management
Interest rate swaps are used to manage the interest rate basis of the Group’s debt, allowing changes from fixed to floating rates or vice versa.
Clear guidelines exist for the Group’s ratio of fixed to floating rate debt and management regularly reviews the interest rate profile against
these guidelines.
At 31 December 2015, the Group had interest rate swaps of £250.0 million (2014: £250.0 million), maturing in 2020 under which the Group
pays interest at a rate linked to LIBOR and receives interest at 6.875%. At 31 December 2015, the fair value of interest rate swaps was an asset
of £13.8 million (2014: £15.0 million). 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 euro-denominated assets with euro borrowings. The Group borrows in
euro 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 euro.
Financing activities during the year are detailed in the Financial Review on pages 60 and 61. Senior notes comprise £196.5 million (2014:
£185.6 million) denominated in US dollars, £44.2 million (2014: £46.5 million) in euro and £45.0 million (2014: £45.0 million) in sterling.
148 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
C: Foreign currency management (continued)
To manage the foreign currency exposure on its net investments in euro-denominated entities, the Group has designated all euro borrowings,
including euro-denominated bonds, senior notes (USPP), bank loans and currency swaps, as net investment hedges. This designation allows
exchange differences on hedging instruments to be recognised directly in equity and offset the exchange differences on net investments in
euro-denominated entities also recognised in equity. The notional and carrying amount of these euro-denominated liabilities is shown below.
2015
Euro notional1 (note 19D)
Carrying amount2
2014
Euro notional1 (note 19D)
Carrying amount2
Notes
Bonds3
£m
730.7
730.7
Bonds3
£m
768.2
768.2
Senior notes
(USPP)
£m
Bank
loans
£m
Cross currency
swaps
£m
44.2
44.2
690.5
690.5
986.8
(43.0)
Senior notes
(USPP)
£m
46.5
46.5
Bank
loans
£m
Cross currency
swaps
£m
–
–
560.5
(11.0)
Foreign
exchange
swaps
£m
116.6
0.2
Foreign
exchange
swaps
£m
413.4
(5.1)
Total
2015
£m
2,568.8
1,422.6
Total
2014
£m
1,788.6
798.6
1. The euro notional is the amount due at maturity without netting any receivable of different currency under the same instrument.
2. The carrying amount is the book value at which euro denominated financial instruments are recognised within borrowings.
3. The fair value of euro-denominated bonds at 31 December 2015 was £767.6 million (2014: £829.8 million).
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 53 to 61.
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 20A.
F: Credit risk
The Group’s principal financial assets are trade receivables, restricted monetary assets, cash and deposits, balances due from joint ventures,
other investments, loans receivable, participative loans to associates and derivative financial instruments. The Group’s credit risk is
attributable to its trade receivables, restricted monetary assets, cash and deposits and derivative financial instruments. The credit risk on
balances due from joint ventures, other investments, loans receivable and participative loans is limited as they are supported by investment
properties held within the joint ventures and associates.
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. 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.
Trade receivables are presented net of allowances for doubtful receivables and allowances for impairment are made where appropriate, as set
out in note 15. The Group’s most significant tenants are set out in the Additional Disclosures section on page 168.
The credit risk on cash and 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. The credit risk on restricted monetary assets,
being cash held by the Group and its managing agents on behalf of third parties, is similarly considered low. At 31 December 2015, the Group’s
maximum exposure to credit risk was £335.8 million (2014: £243.5 million) which excludes those balances supported by investment properties.
150
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HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
C: Foreign currency management (continued)
To manage the foreign currency exposure on its net investments in euro-denominated entities, the Group has designated all euro borrowings,
including euro-denominated bonds, senior notes (USPP), bank loans and currency swaps, as net investment hedges. This designation allows
exchange differences on hedging instruments to be recognised directly in equity and offset the exchange differences on net investments in
euro-denominated entities also recognised in equity. The notional and carrying amount of these euro-denominated liabilities is shown below.
2015
Euro notional1 (note 19D)
Carrying amount2
Euro notional1 (note 19D)
Carrying amount2
2014
Notes
Senior notes
Bank
Cross currency
Bonds3
£m
730.7
730.7
Bonds3
£m
768.2
768.2
(USPP)
£m
44.2
44.2
(USPP)
£m
46.5
46.5
loans
£m
690.5
690.5
Bank
loans
£m
–
–
Senior notes
Cross currency
swaps
£m
986.8
(43.0)
swaps
£m
560.5
(11.0)
Foreign
exchange
swaps
£m
116.6
0.2
Foreign
exchange
swaps
£m
413.4
(5.1)
Total
2015
£m
2,568.8
1,422.6
Total
2014
£m
1,788.6
798.6
1. The euro notional is the amount due at maturity without netting any receivable of different currency under the same instrument.
2. The carrying amount is the book value at which euro denominated financial instruments are recognised within borrowings.
3. The fair value of euro-denominated bonds at 31 December 2015 was £767.6 million (2014: £829.8 million).
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 53 to 61.
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 20A.
F: Credit risk
The Group’s principal financial assets are trade receivables, restricted monetary assets, cash and deposits, balances due from joint ventures,
other investments, loans receivable, participative loans to associates and derivative financial instruments. The Group’s credit risk is
attributable to its trade receivables, restricted monetary assets, cash and deposits and derivative financial instruments. The credit risk on
balances due from joint ventures, other investments, loans receivable and participative loans is limited as they are supported by investment
properties held within the joint ventures and associates.
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. 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.
Trade receivables are presented net of allowances for doubtful receivables and allowances for impairment are made where appropriate, as set
out in note 15. The Group’s most significant tenants are set out in the Additional Disclosures section on page 168.
The credit risk on cash and 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. The credit risk on restricted monetary assets,
being cash held by the Group and its managing agents on behalf of third parties, is similarly considered low. At 31 December 2015, the Group’s
maximum exposure to credit risk was £335.8 million (2014: £243.5 million) which excludes those balances supported by investment properties.
G: Financial maturity analysis
The following table is a maturity analysis for income-earning financial assets and interest-bearing financial liabilities. Borrowings are stated
net of unamortised fees.
One to two
years
£m
Two to five
years
£m
More than five
years
£m
Cash and deposits
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Senior notes
Interest rate swaps (floating)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable (note 14)
Cash and deposits
Unsecured bonds
– Sterling fixed rate bonds
– Euro fixed rate bonds
Senior notes
Interest rate swaps (floating)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of currency swaps
Net debt
Loans receivable (note 14)
Less than
one year
£m
(37.0)
–
–
–
–
–
–
(30.0)
(67.0)
–
(67.0)
Less than
one year
£m
(28.6)
–
–
–
–
–
–
(5.1)
(33.7)
–
(33.7)
–
–
–
–
–
–
690.1
–
690.1
(17.2)
672.9
One to two
years
£m
–
271.5
–
–
–
–
164.6
(5.7)
430.4
(45.0)
385.4
2015 Maturity
Total
£m
(37.0)
1,089.3
730.7
285.7
250.0
(250.0)
935.2
(42.8)
–
–
248.6
366.1
–
250.0
(250.0)
245.1
840.7
364.6
285.7
–
–
–
–
(12.8)
859.8
(59.2)
800.6
1,478.2
2,961.1
–
(76.4)
1,478.2
2,884.7
Two to five
years
£m
More than five
years
£m
–
–
384.8
–
–
–
72.9
–
457.7
(18.5)
439.2
–
743.8
383.4
277.1
250.0
(250.0)
–
(5.3)
1,399.0
–
1,399.0
2014 Maturity
Total
£m
(28.6)
1,015.3
768.2
277.1
250.0
(250.0)
237.5
(16.1)
2,253.4
(63.5)
2,189.9
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
2015
Increase in
interest rates
by 1%
£m
Decrease in
interest rates
by 1%
£m
Increase in
interest rates
by 1%
£m
2014
Decrease in
interest rates
by 1%
£m
(20.5)
20.9
(17.2)
17.9
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 floating rate borrowings, net of interest rate swaps, at the year end.
150 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
H: Sensitivity analysis (continued)
Effect on financial instruments:
Increase/(Decrease) in net gain taken to equity
Strengthening
of sterling
against euro
by 10%
£m
2015
Weakening
of sterling
against euro
by 10%
£m
Strengthening
of sterling
against euro
by 10%
£m
2014
Weakening
of sterling
against euro
by 10%
£m
330.8
(409.3)
166.9
(204.0)
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.
I: Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their book value included in the balance sheet, are as follows:
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
Book value
£m
2015
Fair value
£m
3,040.9
3,266.3
Book value
£m
2,298.1
2014
Fair value
£m
2,604.1
(42.8)
(42.8)
(16.1)
(16.1)
2,998.1
3,223.5
2,282.0
2,588.0
(13.8)
(13.8)
(15.0)
(15.0)
At 31 December 2015, the fair value of financial instruments exceeded their book value by £225.4 million (2014: £306.0 million).
The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 and Level 2 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 17. 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 14 and 15. The amounts are presented net of allowances for
doubtful receivables and allowances for impairment are made where appropriate. 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/(losses)
– in income
– in other comprehensive income
Other movements
– acquisition of investment
– settlement of interest
– loan issue/(repayment)
Net movements in participative loans to associates recognised as available for sale
Balance at 31 December
2015
£m
136.1
16.5
(4.4)
4.8
(5.3)
15.5
(1.7)
161.5
2014
£m
141.1
7.9
(4.4)
–
(5.8)
(0.6)
(2.1)
136.1
152
152 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
H: Sensitivity analysis (continued)
Effect on financial instruments:
Increase/(Decrease) in net gain taken to equity
2015
Strengthening
of sterling
Weakening
of sterling
against euro
against euro
Strengthening
of sterling
against euro
by 10%
£m
330.8
by 10%
£m
(409.3)
by 10%
£m
166.9
2014
Weakening
of sterling
against euro
by 10%
£m
(204.0)
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.
I: Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their book value included in the balance sheet, are as follows:
Borrowings, excluding currency swaps
Currency swaps
Total
Interest rate swaps
Book value
Fair value
Book value
£m
2015
£m
3,040.9
3,266.3
(42.8)
(42.8)
2,998.1
3,223.5
(13.8)
(13.8)
£m
2,298.1
(16.1)
2,282.0
(15.0)
2014
Fair value
£m
2,604.1
(16.1)
2,588.0
(15.0)
At 31 December 2015, the fair value of financial instruments exceeded their book value by £225.4 million (2014: £306.0 million).
The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 and Level 2 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 17. 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 14 and 15. The amounts are presented net of allowances for
doubtful receivables and allowances for impairment are made where appropriate. 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/(losses)
– in income
– in other comprehensive income
Other movements
– acquisition of investment
– settlement of interest
– loan issue/(repayment)
Balance at 31 December
Net movements in participative loans to associates recognised as available for sale
2015
£m
136.1
16.5
(4.4)
4.8
(5.3)
15.5
(1.7)
161.5
2014
£m
141.1
7.9
(4.4)
–
(5.8)
(0.6)
(2.1)
136.1
J: Carrying amounts, gains and losses of financial instruments
Carrying
amount
£m
Gain/
(Loss) to
income
£m
2015
Gain/
(Loss) to
equity
£m
Carrying
amount
£m
Trade receivables
Restricted monetary assets
Cash and deposits
Cash and receivables
Other investments
Loans receivable
Participative loans to associates
Available for sale loans and investments
Interest rate swaps
Assets at fair value (held for trading)
Currency swaps
Derivatives in effective hedging relationships
Balances due from joint ventures
Other loans and receivables
Payables
Borrowings, excluding currency swaps
Obligations under finance leases
Liabilities at amortised cost
Total for financial instruments
Notes
15
16
17
14
13C
14
19B
12A
46.7
34.0
37.0
117.7
4.8
76.4
80.3
161.5
13.8
13.8
42.8
42.8
1,373.6
1,373.6
(0.2)
–
0.1
(0.1)
(1.4)
2.7
15.2
16.5
2.0
2.0
10.3
10.3
–
–
–
–
–
–
–
–
–
(4.4)
(4.4)
–
–
54.6
54.6
–
–
–
36.4
11.3
28.6
76.3
1.4
63.5
71.2
136.1
15.0
15.0
16.1
16.1
642.1
642.1
(251.7)
Gain/
(Loss) to
income
£m
(3.2)
–
0.5
(2.7)
–
1.2
6.7
7.9
16.4
16.4
3.5
3.5
–
–
–
18, 22
(285.0)
19B
21
(3,040.9)
(119.8)
27.3
(2,298.1)
(122.3)
(32.5)
(3,358.4)
(1,649.0)
(1.8)
(121.6)
(92.9)
–
27.3
77.5
(33.0)
(2,582.8)
(1,697.2)
(1.1)
(123.4)
(98.3)
The table below reconciles the net gain or loss taken through income to net finance costs:
Total loss on financial instruments to income
Trade receivables loss
Add back:
Interest capitalised
Investment costs written off
Deduct:
Change in participative loans to associates shown in share of results of associates
Net finance costs
Notes
7
2
7
2015
£m
(92.9)
0.2
5.3
1.4
(15.2)
(101.2)
Financial instruments classified as held for trading are hedging instruments that are not designated for hedge accounting. No financial
instruments were designated as at fair value through income on initial recognition, nor classified as held to maturity.
The total of the equity gains in relation to currency swaps of £54.6 million (2014: £55.4 million) and borrowings of £27.3 million (2014:
£48.4 million) is £81.9 million (2014: £103.8 million) and is shown in the movement in the hedging reserve in the consolidated statement
of changes in equity.
2014
Gain/
(Loss) to
equity
£m
–
–
–
–
–
–
(4.4)
(4.4)
–
–
55.4
55.4
–
–
–
48.4
–
48.4
99.4
2014
£m
(98.3)
3.2
8.8
–
(6.7)
(93.0)
152 HAMMERSON PLC ANNUAL REPORT 2015
153
HAMMERSON.COM 153
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
K: Maturity analysis of financial liabilities
The remaining contractual non-discounted cash flows for financial liabilities are as follows:
2015
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
2014
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
Derivative
financial
liability
cash flows
£m
Non-derivative
financial
liability
cash flows
£m
Payables
£m
–
31.4
1.9
5.0
38.3
209.5
247.8
Payables
£m
–
25.2
3.3
5.1
33.6
179.1
212.7
–
(58.5)
(19.5)
(6.5)
(84.5)
(36.5)
(121.0)
20L
–
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
Derivative
financial
liability
cash flows
£m
Non-derivative
financial
liability
cash flows
£m
–
(26.3)
(7.1)
(12.6)
(46.0)
(8.9)
(54.9)
20L
–
1,710.7
700.8
534.2
2,945.7
99.2
3,044.9
Finance
leases
£m
21
72.5
38.8
5.8
1.9
119.0
1.9
120.9
Finance
leases
£m
21
69.7
37.3
5.6
1.9
114.5
1.9
116.4
Total
2015
£m
72.5
1,814.2
1,117.6
790.1
3,794.4
277.4
4,071.8
Total
2014
£m
69.7
1,746.9
702.6
528.6
3,047.8
271.3
3,319.1
L: Reconciliation of maturity analyses in notes 19A and 20K
The maturity analysis in note 20K shows contractual non-discounted cash flows for financial liabilities. The following table reconciles the
total borrowings column in note 19A with the financial maturity analysis in note 20K.
2015
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
Derivative
borrowings
£m
Non-derivative
borrowings
£m
Non-derivative
unamortised
borrowing costs
£m
Non-derivative
interest
£m
Non-derivative
financial
liability
cash flows
£m
19A
1,478.2
859.8
690.1
3,028.1
(30.0)
2,998.1
12.8
–
–
12.8
30.0
42.8
1,491.0
859.8
690.1
3,040.9
–
3,040.9
14.2
6.6
1.1
21.9
–
21.9
297.3
263.0
98.5
658.8
102.5
761.3
20K
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
154
154 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
20: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
K: Maturity analysis of financial liabilities
The remaining contractual non-discounted cash flows for financial liabilities are as follows:
2015
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
2014
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
2015
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
Derivative
Non-derivative
Payables
£m
financial
liability
cash flows
£m
financial
liability
cash flows
£m
20L
–
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
Non-derivative
financial
liability
cash flows
£m
20L
–
1,710.7
700.8
534.2
2,945.7
99.2
3,044.9
Finance
leases
£m
21
72.5
38.8
5.8
1.9
119.0
1.9
120.9
Finance
leases
£m
21
69.7
37.3
5.6
1.9
114.5
1.9
116.4
Total
2015
£m
72.5
1,814.2
1,117.6
790.1
3,794.4
277.4
4,071.8
Total
2014
£m
69.7
1,746.9
702.6
528.6
3,047.8
271.3
3,319.1
–
31.4
1.9
5.0
38.3
209.5
247.8
Payables
£m
–
25.2
3.3
5.1
33.6
179.1
212.7
–
(58.5)
(19.5)
(6.5)
(84.5)
(36.5)
(121.0)
Derivative
financial
liability
cash flows
£m
–
(26.3)
(7.1)
(12.6)
(46.0)
(8.9)
(54.9)
Derivative
Non-derivative
unamortised
Non-derivative
Non-derivative
Borrowings
borrowings
borrowings
borrowing costs
£m
£m
£m
£m
19A
1,478.2
859.8
690.1
3,028.1
(30.0)
2,998.1
12.8
–
–
12.8
30.0
42.8
1,491.0
859.8
690.1
3,040.9
–
3,040.9
14.2
6.6
1.1
21.9
–
21.9
Non-derivative
financial
liability
cash flows
£m
20K
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
interest
£m
297.3
263.0
98.5
658.8
102.5
761.3
2014
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
19A
1,399.0
457.7
430.4
2,287.1
(5.1)
2,282.0
Derivative
borrowings
£m
Non-derivative
borrowings
£m
Non-derivative
unamortised
borrowing costs
£m
Non-derivative
interest
£m
5.3
–
5.7
11.0
5.1
16.1
1,404.3
457.7
436.1
2,298.1
–
2,298.1
11.9
5.2
1.7
18.8
–
18.8
294.5
237.9
96.4
628.8
99.2
728.0
Non-derivative
financial
liability
cash flows
£m
20K
1,710.7
700.8
534.2
2,945.7
99.2
3,044.9
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 pages 60 and 61 and information on share capital
and changes therein is set out in note 23 below and in the Consolidated Statement of Changes in Equity on page 121.
21: OBLIGATIONS UNDER FINANCE LEASES
Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:
L: Reconciliation of maturity analyses in notes 19A and 20K
The maturity analysis in note 20K shows contractual non-discounted cash flows for financial liabilities. The following table reconciles the
total borrowings column in note 19A with the financial maturity analysis in note 20K.
22: PAYABLES: NON-CURRENT LIABILITIES
After 25 years
From five to 25 years
From two to five years
From one to two years
Within one year
Minimum
lease
payments
£m
72.5
38.8
5.8
1.9
1.9
2015
Present value
of minimum
lease
payments
£m
29.2
2.9
0.2
0.1
0.1
Interest
£m
(43.3)
(35.9)
(5.6)
(1.8)
(1.8)
120.9
(88.4)
32.5
Minimum
lease
payments
£m
69.7
37.3
5.6
1.9
1.9
116.4
Net pension liability (note 6C)
Other payables
23: SHARE CAPITAL
Ordinary shares of 25p each
The authorised share capital was removed from the Company’s Articles of Association in 2010.
Movements in number of shares in issue
Number of shares in issue at 1 January 2015
Share options exercised – Executive Share Option Scheme
Share options exercised – Savings-Related Share Option Scheme
Number of shares in issue at 31 December 2015
2014
Present value
of minimum
lease
payments
£m
29.6
3.0
0.2
0.1
0.1
33.0
2014
£m
39.0
33.5
72.5
Interest
£m
(40.1)
(34.3)
(5.4)
(1.8)
(1.8)
(83.4)
2015
£m
37.2
38.5
75.7
Called up, allotted and fully paid
2015
£m
196.1
2014
£m
196.1
Number
784,295,248
14,449
121,558
784,431,255
154 HAMMERSON PLC ANNUAL REPORT 2015
155
HAMMERSON.COM 155
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the accounts continued
23: SHARE CAPITAL (CONTINUED)
Share options
At 31 December 2015, the Company had four share option schemes in operation. The number and weighted average exercise price of share
options which remain outstanding in respect of the Executive Share Option Scheme and Savings-Related Share Option Scheme are shown in
the tables below, together with details of expiry periods and range of exercise price. The number of ordinary shares which remain outstanding
in respect of the Restricted Share Plan and Long-Term Incentive Plan are shown, together with their year of grant.
Executive Share Option Scheme
Savings-Related Share Option Scheme
Restricted Share Plan
Long-Term Incentive Plan
Executive Share Option Scheme
Savings-Related Share Option Scheme
Restricted Share Plan
Long-Term Incentive Plan
Share options
Ordinary shares of 25p each
2015
Number
Year of expiry
88,486
2016
216,426
2016-2020
–
–
–
–
Weighted
average
exercise price
£8.39
£4.55
–
–
Exercise price
(pence)
839
217.2 – 540.4
Number
Year of grant
–
–
–
–
–
–
614,879
2013-2015
2,496,879
2012-2015
Share options
Ordinary shares of 25p each
2014
Exercise price
(pence)
583 – 839
217.2 – 462.4
Number
Year of grant
–
–
–
–
–
–
723,157
2012-2014
2,657,858
2011-2014
Weighted
average
exercise price
£8.03
£3.78
–
–
Number
Year of expiry
102,935
281,320
2015-2016
2015-2019
–
–
–
–
24: ANALYSIS OF MOVEMENT IN NET DEBT
At 1 January 2015
Cash flow
Exchange
Balance at 31 December 2015
At 1 January 2014
Cash flow
Exchange
Balance at 31 December 2014
Short-term
deposits
£m
Cash at bank
£m
Current
borrowings
including
currency swaps
£m
Non-current
borrowings
£m
Net debt
£m
0.1
–
–
0.1
28.5
9.3
(0.9)
36.9
5.1
(1.5)
26.4
30.0
(2,287.1)
(2,253.4)
(806.1)
(798.3)
65.1
90.6
(3,028.1)
(2,961.1)
Short-term
deposits
£m
Cash at bank
£m
Current
borrowings
including
currency swaps
£m
Non-current
borrowings
£m
Net debt
£m
–
0.1
–
0.1
15.7
13.3
(0.5)
28.5
(246.2)
(2,017.8)
(2,248.3)
234.3
17.0
5.1
(340.7)
71.4
(93.0)
87.9
(2,287.1)
(2,253.4)
25: 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
156
156 HAMMERSON PLC ANNUAL REPORT 2015
2015
£m
5.9
(5.0)
0.9
1.7
4.8
(1.1)
6.3
2014
£m
4.7
(6.3)
(1.6)
1.4
5.1
7.3
12.2
HAMMERSON PLC ANNUAL REPORT 2015
Notes to the accounts continued
23: SHARE CAPITAL (CONTINUED)
Share options
At 31 December 2015, the Company had four share option schemes in operation. The number and weighted average exercise price of share
options which remain outstanding in respect of the Executive Share Option Scheme and Savings-Related Share Option Scheme are shown in
the tables below, together with details of expiry periods and range of exercise price. The number of ordinary shares which remain outstanding
in respect of the Restricted Share Plan and Long-Term Incentive Plan are shown, together with their year of grant.
Executive Share Option Scheme
Savings-Related Share Option Scheme
88,486
2016
216,426
2016-2020
839
217.2 – 540.4
Restricted Share Plan
Long-Term Incentive Plan
–
–
–
–
£8.39
£4.55
–
–
Weighted
average
£8.03
£3.78
–
–
–
–
–
–
–
–
614,879
2013-2015
2,496,879
2012-2015
Share options
Ordinary shares of 25p each
2014
Exercise price
(pence)
583 – 839
217.2 – 462.4
–
–
723,157
2012-2014
2,657,858
2011-2014
–
–
–
–
Number
Year of expiry
exercise price
Number
Year of grant
Executive Share Option Scheme
Savings-Related Share Option Scheme
102,935
281,320
2015-2016
2015-2019
Restricted Share Plan
Long-Term Incentive Plan
24: ANALYSIS OF MOVEMENT IN NET DEBT
–
–
–
–
£m
0.1
–
–
0.1
£m
–
0.1
–
0.1
Short-term
deposits
Cash at bank
currency swaps
Current
borrowings
including
Non-current
borrowings
£m
Net debt
£m
(2,287.1)
(2,253.4)
(806.1)
(798.3)
65.1
90.6
(3,028.1)
(2,961.1)
£m
5.1
(1.5)
26.4
30.0
Current
borrowings
including
£m
234.3
17.0
5.1
(246.2)
(2,017.8)
(2,248.3)
Non-current
borrowings
£m
(340.7)
71.4
Net debt
£m
(93.0)
87.9
(2,287.1)
(2,253.4)
£m
28.5
9.3
(0.9)
36.9
£m
15.7
13.3
(0.5)
28.5
Short-term
deposits
Cash at bank
currency swaps
2015
£m
5.9
(5.0)
0.9
1.7
4.8
(1.1)
6.3
2014
£m
4.7
(6.3)
(1.6)
1.4
5.1
7.3
12.2
At 1 January 2015
Cash flow
Exchange
Balance at 31 December 2015
At 1 January 2014
Cash flow
Exchange
Balance at 31 December 2014
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
25: ADJUSTMENT FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT
Number
Year of expiry
exercise price
(pence)
Number
Year of grant
Weighted
average
Exercise price
Share options
Ordinary shares of 25p each
2015
Within one year
From one to two years
From two to five years
After five years
2015
£m
129.5
123.1
321.9
793.3
2014
£m
131.5
129.6
315.2
861.4
1,367.8
1,437.7
26: 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 Additional Disclosures
section on pages 166 and 167 and credit risk relating to the trade receivables is discussed in note 20F.
27: CONTINGENT LIABILITIES
There are contingent liabilities of £49.8 million (2014: £31.6 million) relating to guarantees given by the Group and a further £16.0 million
(2014: £12.3 million) relating to claims against the Group arising in the normal course of business, which are considered to be unlikely to
crystallise.
In addition, Hammerson’s share of contingent liabilities arising within Property interests, which is not included in the figures shown above,
is £2.1 million (2014: £16.2 million). Principal risks and uncertainties facing the Group are detailed on pages 62 to 67.
28: RELATED PARTY TRANSACTIONS AND NON-CONTROLLING INTERESTS
A. Joint ventures and associates
Related party transactions with the Group’s joint ventures and associates primarily comprise management fees, interest receivable and loan
balances. The amounts shown below represent the Group’s transactions and balances with its related parties and are shown before any
consolidation adjustments.
Management fees from joint ventures
Management fees from associates
Interest receivable from joint ventures
Interest receivable from associates
Balances due from joint ventures (note 12A)
Participative loans to associates (note 13C)
Loans to associates (note 14)
2015
£m
4.2
0.1
29.3
5.3
1,373.6
80.3
76.4
2014
£m
4.1
–
24.5
5.8
642.1
71.2
63.5
B. Key management
The remuneration of the Directors, who are the key management of the Group, is set out below in aggregate. Further information about the
Directors’ remuneration, as required by the Companies Act 2006, is disclosed in the audited sections of the Directors’ Remuneration Report
on pages 84 to 101.
Salaries and short-term benefits
Post-employment benefits
Share-based payments
Total remuneration
2015
£m
4.1
0.4
3.4
7.9
2014
£m
3.9
0.1
2.8
6.8
C. Non-controlling interests
The Group’s non-controlling interest represents a 35.5% interest in Place des Halles, Strasbourg held by Assurbail. During 2015, the property
generated gross rental income of £10.5 million (2014: £12.4 million) and the property valuation at 31 December 2015 was £199.0 million
(2014: £206.4 million). The non-controlling interests’ share of the gross rental income was £3.5 million (2014: £4.4 million) and of the
property valuation was £70.6 million (2014: £73.3 million). The balances and movements during the year associated with the non-controlling
interest are shown on the Consolidated Statement of Changes in Equity on pages 121 and 122.
156 HAMMERSON PLC ANNUAL REPORT 2015
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COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2015
Non-current assets
Investments in subsidiary companies and other related undertakings
Receivables
Current assets
Receivables
Cash and short-term deposits
Total assets
Current liabilities
Payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Merger 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 12 February 2016.
Signed on behalf of the Board
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
Notes
2015
£m
2014
£m
C
D
E
F
G
23
4,141.3
5,677.7
9,819.0
38.6
7.4
46.0
3,576.7
5,180.2
8,756.9
8.6
1.5
10.1
9,865.0
8,767.0
1,250.6
1,434.8
3,028.1
4,278.7
5,586.3
196.1
1,223.3
374.1
7.3
2,545.7
1,243.7
(3.9)
5,586.3
2,287.1
3,721.9
5,045.1
196.1
1,222.9
374.2
7.3
1,981.1
1,270.3
(6.8)
5,045.1
158
158 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
Notes
2015
£m
2014
£m
C
D
E
F
G
23
4,141.3
5,677.7
9,819.0
38.6
7.4
46.0
3,576.7
5,180.2
8,756.9
8.6
1.5
10.1
9,865.0
8,767.0
1,250.6
1,434.8
3,028.1
4,278.7
5,586.3
196.1
1,223.3
374.1
7.3
2,545.7
1,243.7
(3.9)
5,586.3
2,287.1
3,721.9
5,045.1
196.1
1,222.9
374.2
7.3
1,981.1
1,270.3
(6.8)
5,045.1
Non-current assets
Receivables
Current assets
Receivables
Cash and short-term deposits
Total assets
Current liabilities
Payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Merger reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Equity shareholders’ funds
Signed on behalf of the Board
These financial statements were approved by the Board of Directors on 12 February 2016.
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2015
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Investments in subsidiary companies and other related undertakings
Balance at 1 January 2015
196.1 1,222.9
374.2
7.3
1,981.1
1,270.3
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
Issue of shares
Share issue costs
Cost of shares awarded to employees
Dividends
Revaluation gains on investments in subsidiary
companies and other related undertakings
Profit for the year attributable to equity
shareholders
Total comprehensive income for the year
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2015
196.1 1,223.3
374.1
7.3
2,545.7
1,243.7
* Investment in own shares is stated at cost.
FOR THE YEAR ENDED 31 DECEMBER 2014
Investment
in own
shares*
£m
Equity
shareholders’
funds
£m
(6.8)
–
–
2.9
–
5,045.1
0.4
(0.1)
2.9
(165.2)
–
–
–
–
–
–
–
(165.2)
564.6
–
564.6
–
–
564.6
138.6
138.6
–
–
(3.9)
138.6
703.2
5,586.3
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
Investment
in own
shares*
£m
Balance at 1 January 2014
178.2
1,222.4
–
7.3
1,353.0
1,303.9
Issue of shares
Share issue costs
Cost of shares awarded to employees
Purchase of own shares
Dividends
Revaluation gains on investments in subsidiary
companies and other related undertakings
Profit for the year attributable to equity
shareholders
Total comprehensive income for the year
17.9
0.5
381.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2014
196.1
1,222.9
374.2
7.3
* Investment in own shares is stated at cost.
–
–
–
–
–
–
–
–
–
(139.5)
628.1
–
–
628.1
1,981.1
105.9
105.9
Equity
shareholders’
funds
£m
4,059.9
399.8
(7.2)
3.6
(5.5)
(139.5)
628.1
105.9
734.0
(4.9)
–
–
3.6
(5.5)
–
–
–
–
1,270.3
(6.8)
5,045.1
The merger reserve comprises the premium on the share placing in September 2014. With regard to this transaction, no share premium is
recorded in the Company’s financial statements, through the operation of the merger relief provisions of the Companies Act 2006.
158 HAMMERSON PLC ANNUAL REPORT 2015
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NOTES TO THE COMPANY ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
A: ACCOUNTING POLICIES
Basis of accounting
Although the consolidated Group accounts are prepared under IFRS, the Hammerson plc company accounts presented in this section are
prepared in accordance with Financial Reporting Standard 101 (FRS101) “Reduced Disclosure Framework” as issued by the Financial
Reporting Council. The prior year financial statements were prepared in accordance with UK GAAP and have been restated for material
adjustments on adoption of FRS101 in the current year. The last financial statements under a previous GAAP (UK GAAP) were for the year
ended 31 December 2014 and the date of transition to FRS101 was therefore 1 January 2014.
There has been no movement in total equity due to the change in accounting framework from UK GAAP to FRS101. Movements in equity are
detailed within the statement of changes in equity on page 159. Previously under UK GAAP the Company’s derivatives were held at fair value
and the investments in subsidiary companies and other related undertakings at valuation. Consequently there has been no effect on the
balance sheet as a result of the change in accounting framework.
The financial statements are presented in sterling. They are prepared on the historical cost basis, except that the investments in subsidiary
companies and other related undertakings are included at valuation. Historical cost is generally based on the fair value of the consideration
given in exchange for the goods and services.
Disclosure exemptions adopted
In preparing these financial statements Hammerson plc has taken advantage of all disclosure exemptions conferred by FRS101. Therefore
these financial statements do not include:
– certain comparative information as otherwise required by EU endorsed IFRS;
– certain disclosures regarding the Company’s capital;
– a statement of cash flows;
– certain disclosures in respect of financial instruments;
– the effect of future accounting standards not yet adopted; and
– disclosure of related party transactions with wholly-owned members of the Group.
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts into
which Hammerson plc is consolidated.
Accounting policies
The significant judgements and key estimates and accounting policies relevant to the Company are the same as those set out in the accounting
policies for the Group in note 1, except for investments in subsidiary companies and other related undertakings which are included at
valuation. The Directors determine the valuations with reference to the underlying net assets of the entities, which consist primarily of
investment properties. In calculating the underlying net asset values, no deduction is made for deferred tax relating to revaluation surpluses
on investment properties. The investment properties are valued by professionally qualified external valuers. Further details are set out in
note 11 to the consolidated accounts.
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
£138.6 million (2014: £105.9 million).
Dividend information is provided in note 9 to the consolidated accounts.
160
160 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON PLC ANNUAL REPORT 2015
NOTES TO THE COMPANY ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
A: ACCOUNTING POLICIES
Basis of accounting
Although the consolidated Group accounts are prepared under IFRS, the Hammerson plc company accounts presented in this section are
prepared in accordance with Financial Reporting Standard 101 (FRS101) “Reduced Disclosure Framework” as issued by the Financial
Reporting Council. The prior year financial statements were prepared in accordance with UK GAAP and have been restated for material
adjustments on adoption of FRS101 in the current year. The last financial statements under a previous GAAP (UK GAAP) were for the year
ended 31 December 2014 and the date of transition to FRS101 was therefore 1 January 2014.
There has been no movement in total equity due to the change in accounting framework from UK GAAP to FRS101. Movements in equity are
detailed within the statement of changes in equity on page 159. Previously under UK GAAP the Company’s derivatives were held at fair value
and the investments in subsidiary companies and other related undertakings at valuation. Consequently there has been no effect on the
balance sheet as a result of the change in accounting framework.
The financial statements are presented in sterling. They are prepared on the historical cost basis, except that the investments in subsidiary
companies and other related undertakings are included at valuation. Historical cost is generally based on the fair value of the consideration
In preparing these financial statements Hammerson plc has taken advantage of all disclosure exemptions conferred by FRS101. Therefore
given in exchange for the goods and services.
Disclosure exemptions adopted
these financial statements do not include:
– certain comparative information as otherwise required by EU endorsed IFRS;
– certain disclosures regarding the Company’s capital;
– a statement of cash flows;
– certain disclosures in respect of financial instruments;
– the effect of future accounting standards not yet adopted; and
– disclosure of related party transactions with wholly-owned members of the Group.
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts into
which Hammerson plc is consolidated.
Accounting policies
The significant judgements and key estimates and accounting policies relevant to the Company are the same as those set out in the accounting
policies for the Group in note 1, except for investments in subsidiary companies and other related undertakings which are included at
valuation. The Directors determine the valuations with reference to the underlying net assets of the entities, which consist primarily of
investment properties. In calculating the underlying net asset values, no deduction is made for deferred tax relating to revaluation surpluses
on investment properties. The investment properties are valued by professionally qualified external valuers. Further details are set out in
note 11 to the consolidated accounts.
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
£138.6 million (2014: £105.9 million).
Dividend information is provided in note 9 to the consolidated accounts.
C: INVESTMENTS IN SUBSIDIARY COMPANIES AND OTHER RELATED UNDERTAKINGS
Balance at 1 January
Revaluation adjustment
Balance at 31 December
2015
2014
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
1,561.7
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
1,561.7
Valuation
£m
3,576.7
564.6
4,141.3
Valuation
£m
2,948.6
628.1
3,576.7
Investments are stated at Directors’ valuation. A list of the subsidiary companies and other related undertakings at 31 December 2015 is
included in note H.
D: RECEIVABLES: NON-CURRENT ASSETS
Amounts owed by subsidiaries and other related undertakings
Loans receivable
Fair value of interest rate swaps
2015
£m
5,604.0
59.9
13.8
2014
£m
5,101.7
63.5
15.0
5,677.7
5,180.2
Amounts owed by subsidiaries and other related undertakings are unsecured and interest-bearing at floating rates based on LIBOR. This
includes amounts which are repayable on demand; however, it is the Company’s current intention not to seek repayment of these amounts
before 31 December 2016.
E: RECEIVABLES: CURRENT ASSETS
Other receivables
Fair value of currency swaps
F: PAYABLES
Amounts owed to subsidiaries and other related undertakings
Other payables and accruals
2015
£m
8.6
30.0
38.6
2015
£m
1,191.6
59.0
1,250.6
2014
£m
3.5
5.1
8.6
2014
£m
1,377.9
56.9
1,434.8
The amounts owed to subsidiaries and other related undertakings are unsecured, repayable on demand and interest bearing at floating rates
based on LIBOR.
G:
BORROWINGS
After five years
From two to five years
From one to two years
Due after more than one year
Current assets: Fair value of currency swaps (note E)
Bank loans
and overdrafts
£m
Other
borrowings
£m
2015
Total
£m
–
1,478.2
1,478.2
245.1
690.1
935.2
–
614.7
–
859.8
690.1
2,092.9
3,028.1
(30.0)
(30.0)
935.2
2,062.9
2,998.1
2014
Total
£m
1,399.0
457.7
430.4
2,287.1
(5.1)
2,282.0
Details of the Group’s borrowings and financial instruments are given in notes 19 and 20 to the consolidated accounts. The Company’s
borrowings are unsecured and comprise sterling and euro-denominated bonds, bank loans and overdrafts. The fair value of the Company’s
financial instruments is equal to that of the Reported Group as shown in note 20I.
160 HAMMERSON PLC ANNUAL REPORT 2015
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Notes to the company accounts continued
H: SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS
The Company’s subsidiaries and other related undertakings at 31 December 2015 are listed below. No Group entities have been excluded from
the consolidated financial results.
Direct subsidiaries
The Company has a 100% interest in the ordinary share capital of the following entities, which are registered/operate in the countries as shown:
England & Wales
Grantchester Holdings Limited
France
Hammerson Holding France SAS
Hammerson Company Secretarial Limited
Hammerson SAS
Hammerson Employee Share Plan Trustees Limited
Hammerson Group Limited
Hammerson Group Management Limited
Hammerson International Holdings Limited
Hammerson Pension Scheme Trustees Limited
Hammerson Share Option Scheme Trustees Limited
Indirect subsidiaries and other wholly-owned entities
Unless otherwise stated, the Company has an indirect 100% interest in the ordinary share capital of the following entities, which are
registered/operate in the countries as shown:
England & Wales
280 Bishopsgate Investments Limited
Abbey Retail Park Limited (Northern Ireland)
Christchurch UK Limited
Cricklewood Regeneration Limited
Crocusford Limited
Governeffect Limited
Grand Central (GP) Limited
Grand Central Limited Partnership
Grand Central No. 1 Limited
Grand Central No. 2 Limited
Hammerson (Cramlington I) Limited
Hammerson (Cricklewood) Limited
Hammerson (Croydon) Limited
Hammerson (Didcot) Limited
Hammerson (Didcot II) Limited
Hammerson (Euston Square) Limited
Hammerson (Folkestone) Limited
Hammerson (Grosvenor Street) Limited
Hammerson (Kingston) Limited
Hammerson (Kirkcaldy) Limited
Grantchester Developments (Birmingham) Limited
Hammerson (Leeds Developments) Limited
Grantchester Developments (Falkirk) Limited
Hammerson (Leeds GP) Limited
Grantchester Group Limited
Grantchester Investments Limited
Grantchester Limited
Hammerson (Leeds Investments) Limited
Hammerson (Leeds) Limited
Hammerson (Leicester) Limited
Grantchester Properties (Gloucester) Limited
Hammerson (Leicester GP) Limited
Grantchester Properties (Luton) Limited
Grantchester Properties (Middlesbrough) Limited
Hammerson (Lichfield) Limited
Hammerson (Merthyr) Limited
Grantchester Properties (Nottingham) Limited
Hammerson (Milton Keynes) Limited
Grantchester Properties (Port Talbot) Limited
Hammerson (Moor House) Properties Limited
Grantchester Properties (Sunderland) Limited
Hammerson (Newcastle) Limited
Grantchester Property Management Limited
Hammerson (Newtownabbey) Limited
Hammerson (60 Threadneedle Street) Limited
Hammerson (9-13 Grosvenor Street) Limited
Hammerson (Abbey) Limited
Hammerson (Bicester No. 2) Limited
Hammerson (Brent Cross) Limited
Hammerson (Brent South) Limited
Hammerson (Bristol Investments) Limited
Hammerson (Bristol) Limited
Hammerson (Cardiff) Limited
Hammerson (Centurion) Limited
Hammerson (Coventry) Limited
162
162 HAMMERSON PLC ANNUAL REPORT 2015
Hammerson (Oldbury) Limited
Hammerson (Paddington) Limited
Hammerson (Parc Tawe I) Limited
Hammerson (Renfrew) Limited
Hammerson (Rugby) Limited
Hammerson (Silverburn) Limited (Isle of Man)
Hammerson (Staines) Limited
Hammerson (Telford) Limited
Hammerson (Thanet) Limited
Hammerson (Value Retail Investments) Limited
Hammerson (Victoria Gate) Limited
HAMMERSON PLC ANNUAL REPORT 2015
The Company has a 100% interest in the ordinary share capital of the following entities, which are registered/operate in the countries as shown:
Hammerson Company Secretarial Limited
Hammerson SAS
France
Hammerson Holding France SAS
Notes to the company accounts continued
the consolidated financial results.
Direct subsidiaries
England & Wales
Grantchester Holdings Limited
Hammerson Employee Share Plan Trustees Limited
Hammerson Group Limited
Hammerson Group Management Limited
Hammerson International Holdings Limited
Hammerson Pension Scheme Trustees Limited
Hammerson Share Option Scheme Trustees Limited
registered/operate in the countries as shown:
England & Wales
280 Bishopsgate Investments Limited
Abbey Retail Park Limited (Northern Ireland)
Christchurch UK Limited
Cricklewood Regeneration Limited
Crocusford Limited
Governeffect Limited
Grand Central (GP) Limited
Grand Central Limited Partnership
Grand Central No. 1 Limited
Grand Central No. 2 Limited
Indirect subsidiaries and other wholly-owned entities
Unless otherwise stated, the Company has an indirect 100% interest in the ordinary share capital of the following entities, which are
Hammerson (Cramlington I) Limited
Hammerson (Cricklewood) Limited
Hammerson (Croydon) Limited
Hammerson (Didcot) Limited
Hammerson (Didcot II) Limited
Hammerson (Euston Square) Limited
Hammerson (Folkestone) Limited
Hammerson (Grosvenor Street) Limited
Hammerson (Kingston) Limited
Hammerson (Kirkcaldy) Limited
Grantchester Developments (Birmingham) Limited
Hammerson (Leeds Developments) Limited
Grantchester Developments (Falkirk) Limited
Hammerson (Leeds GP) Limited
Grantchester Group Limited
Grantchester Investments Limited
Grantchester Limited
Hammerson (Leeds Investments) Limited
Hammerson (Leeds) Limited
Hammerson (Leicester) Limited
Grantchester Properties (Gloucester) Limited
Hammerson (Leicester GP) Limited
Grantchester Properties (Luton) Limited
Grantchester Properties (Middlesbrough) Limited
Hammerson (Lichfield) Limited
Hammerson (Merthyr) Limited
Grantchester Properties (Nottingham) Limited
Hammerson (Milton Keynes) Limited
Grantchester Properties (Port Talbot) Limited
Hammerson (Moor House) Properties Limited
Grantchester Properties (Sunderland) Limited
Hammerson (Newcastle) Limited
Grantchester Property Management Limited
Hammerson (Newtownabbey) Limited
Hammerson (60 Threadneedle Street) Limited
Hammerson (9-13 Grosvenor Street) Limited
Hammerson (Abbey) Limited
Hammerson (Bicester No. 2) Limited
Hammerson (Brent Cross) Limited
Hammerson (Brent South) Limited
Hammerson (Bristol Investments) Limited
Hammerson (Bristol) Limited
Hammerson (Cardiff) Limited
Hammerson (Centurion) Limited
Hammerson (Coventry) Limited
Hammerson (Oldbury) Limited
Hammerson (Paddington) Limited
Hammerson (Parc Tawe I) Limited
Hammerson (Renfrew) Limited
Hammerson (Rugby) Limited
Hammerson (Staines) Limited
Hammerson (Telford) Limited
Hammerson (Thanet) Limited
Hammerson (Silverburn) Limited (Isle of Man)
Hammerson (Value Retail Investments) Limited
Hammerson (Victoria Gate) Limited
H: SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS
Indirect subsidiaries and other wholly-owned entities (continued)
The Company’s subsidiaries and other related undertakings at 31 December 2015 are listed below. No Group entities have been excluded from
England & Wales (continued)
Hammerson (Victoria Investments) Limited
Leeds (GP2) Limited
Hammerson (Victoria Quarter) Limited
Hammerson (Watermark) Limited
Hammerson (Whitgift) Limited
Hammerson Birmingham Properties Limited
Hammerson Bull Ring Limited
Hammerson Company Secretarial Limited
Hammerson Croydon (GP1) Limited
Hammerson Croydon (GP2) Limited
Hammerson HSF Shelf Co Limited
Hammerson Investments (No. 12) Limited
Hammerson Investments (No. 13) Limited
Hammerson Investments (No. 16) Limited
Hammerson Investments (No. 23) Limited
Hammerson Investments (No. 26) Limited
Hammerson Investments (No. 35) Limited
Hammerson Investments (No. 36) Limited
Hammerson Investments (No. 37) Limited
Hammerson Investments Limited
Hammerson Junction (No 3) Limited
Hammerson Junction (No 4) Limited
Hammerson LLC (United States) 2
Hammerson Martineau Galleries Limited
Hammerson MGLP Limited
Hammerson MGLP 2 Limited
Hammerson MLP Limited
Hammerson Moor House (LP) Limited
Hammerson Operations Limited
Hammerson Oracle Investments Limited
Hammerson Oracle Properties Limited
Hammerson Peterborough (GP) Limited
Hammerson Peterborough (No 1) Limited
Hammerson Peterborough (No 2) Limited
Hammerson Project Management Limited
Hammerson Ravenhead Limited
London & Metropolitan Northern
LWP Limited Partnership 1
Martineau Galleries (GP) Limited
Martineau Galleries No. 1 Limited
Martineau Galleries No. 2 Limited
Mentboost Limited
Monesan Limited
New Southgate Limited
Precis (1474) Limited (Ordinary & Deferred)
RT Group Developments Limited
RT Group Property Investments Limited
SEVCO 5025 Limited
Spitalfields Developments Limited
Spitalfields Holdings Limited (Ordinary & Preference)
The Hammerson ICAV (Ireland)
The Highcross Limited Partnership 1
The Junction (General Partner) Limited
The Junction (Thurrock Shareholder GP) Limited
The Junction Limited Partnership 1
The Junction Thurrock (General Partner) Limited
The Junction Thurrock Limited Partnership 1
The Martineau Galleries Limited Partnership 1
Thurrock Shares 1 Limited
Thurrock Shares 2 Limited
Union Square Developments Limited (Scotland)
West Quay Shopping Centre Limited
Westchester Holdings Limited
Westchester Property Holdings Limited
Westchester Properties (Thanet) Limited
France
BFN10 GmbH (Germany)
Cergy Expansion 1 SAS
Espace Plus SC1
Hammerson Retail Parks Holdings Limited
Hammerson Asset Management SAS
Hammerson Sheffield (NRQ) Limited
Hammerson Shelf Co 5 Limited
Hammerson UK Properties plc
Hammerson Wrekin LLP 1
Highcross (GP) Limited
Highcross Residential (Nominees 1) Limited
Highcross Residential (Nominees 2) Limited
Highcross Residential Properties Limited
Junction Nominee 1 Limited
Junction Nominee 2 Limited
Leeds (GP1) Limited
1. No shares in issue for Unit Trusts or Limited Partnerships.
2. Country of operation is the United Kingdom.
Hammerson Beauvais SNC
Hammerson Bethune SCI
Hammerson Centre Commercial Italie SAS
Hammerson Cergy 1 SCI
Hammerson Cergy 2 SCI
Hammerson Cergy 4 SCI
Hammerson Cergy 5 SCI
Hammerson Développement SCI
Hammerson Europe BV (Netherlands)
Hammerson Fontaine SCI
Hammerson France SAS
162 HAMMERSON PLC ANNUAL REPORT 2015
163
HAMMERSON.COM 163
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the company accounts continued
H: SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS (CONTINUED)
Indirect subsidiaries and other wholly-owned entities (continued)
France (continued)
Hammerson Mantes SCI
Hammerson Marignan SAS
Hammerson Marketing et Communication SAS
Hammerson Marseille SC
Hammerson Nancy SCI
Hammerson Property Management SAS
Hammerson Saint-Sébastien SAS
Hammerson Troyes SCI
Hammerson Villebon 1 SARL
Hammerson Villebon 2 SNC
Les Pressing Réunis SARL
RC Aulnay 3 SCI
Retail Park Nice Lingostière SAS
SCI Cergy Capucine SCI
SCI Cergy Expansion 2 SCI
SCI Cergy Honoré SCI
Jersey
Hammerson 60 TNS Unit Trust 1
Hammerson Birmingham Investments Limited
Hammerson Bull Ring (Jersey) Limited
Hammerson Croydon Investments Limited
Hammerson Highcross Investments Limited
Hammerson Junction (No 1) Limited
Hammerson Junction (No 2) Limited
Hammerson Leeds Unit Trust 1
Hammerson Victoria Gate Unit Trust 1
Hammerson Victoria Quarter Unit Trust 1
Hammerson VIA (Jersey) Limited
1. No shares in issue for Unit Trusts.
Indirectly held joint venture entities
Bishopsgate Goodsyard Regeneration Limited
Bristol Alliance (GP) Limited
Bristol Alliance Limited Partnership
Bristol Alliance Nominee No.1 Limited
Bristol Alliance Nominee No.2 Limited
BRLP Rotunda Limited
Bull Ring (GP) Limited
Bull Ring (GP2) Limited
Bull Ring Limited Partnership
Bull Ring No.1 Limited
Bull Ring No.2 Limited
Croydon (GP1) Limited
Croydon (GP2) Limited
Croydon Car Park Limited
Croydon Limited Partnership
Croydon Management Services Limited
164
164 HAMMERSON PLC ANNUAL REPORT 2015
SCI Cergy Lynx SCI
SCI Cergy Office 1 SCI
SCI Cergy Office 2 SCI
SCI Cergy Office 3 SCI
SCI Cergy Office 4 SCI
SCI Cergy Office 5 SCI
SCI Cergy Office 6 SCI
SCI Cergy Opéra SCI
SCI Cergy Madeleine SCI
SCI Cergy Paix SCI
SCI Cergy Royale SCI
SCI Cergy Vendôme SCI
SCI Hammerson Thiebaut SCI
SCI Nevis SC
Société de gestion des parkings Hammerson (SOGEPH) SARL
Teycpac-H-Italie SAS
Hammerson VRC (Jersey) Limited
Hammerson Whitgift Investments Limited
Highcross (No.1) Limited
Highcross (No.2) Limited
Highcross Leicester Limited
Junction Thurrock Unit Trust 1
Rhone (Jersey) Limited
Telford Forge Retail Park Unit Trust 1
The Junction Unit Trust 1
The Hammerson Grand Central Unit Trust 1
Country of registration
or operation
Class of share held
Ownership %
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
HAMMERSON PLC ANNUAL REPORT 2015
H: SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS (CONTINUED)
Indirect subsidiaries and other wholly-owned entities (continued)
Indirectly held joint venture entities (continued)
Country of registration
or operation
Class of share held
Ownership %
Croydon Property Investments Limited
Martineau (GP) Limited
Moor House General Partner Limited
Oracle Nominees (No. 1) Limited
Oracle Nominees (No. 2) Limited
Oracle Nominees Limited
Oracle Shopping Centre Limited
Reading Residential Properties Limited
The Moor House Limited Partnership
The Oracle Limited Partnership
West Quay Limited Partnership
West Quay (No.1) Limited
West Quay (No.2) Limited
Whitgift Limited Partnership
RC Aulnay 1 SCI
RC Aulnay 2 SCI
SAS Angel Shopping Centre SAS
SCI ESQ SCI
Société Civile de Développement du Centre Commercial
de la Place des Halles SDPH SC
Retail Property Holdings (SE) Limited
Jewel Limited Partnership
Maple Box Designated Activity Company
Triskelion Property Holding Designated Activity
Company
Retail Property Holdings Limited
Bull Ring Joint Venture Trust
Croydon Jersey Unit Trust
VIA Limited Partnership
Whitgift Manager Limited
Indirectly held associate entities
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
France
France
France
France
France
Guernsey
Ireland
Ireland
Ireland
Isle of Man
Jersey
Jersey
Jersey
Jersey
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
Ordinary
50
33
67
50
50
50
50
50
67
50
50
50
50
50
25
25
10
25
65
50
50
50
50
50
50
50
47
50
Country of registration
or operation
Class of share held
Ownership %
VR Maasmechelen Tourist Outlets Comm. VA
Bicester Investors Limited Partnership
Bicester Investors II Limited Partnership
Value Retail Investors Limited Partnership
Value Retail Investors II Limited Partnership
VR Franconia GmbH
Master Holding BV
VR Ireland BV
Value Retail PLC
US Paris LLC
Belgium
Bermuda
Bermuda
Bermuda
Bermuda
Germany
Netherlands
Netherlands
UK
USA
B-shares
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
N/A
25
22
22
71
80
15
12
11
22
42
Hammerson Birmingham Investments Limited
Hammerson Whitgift Investments Limited
Notes to the company accounts continued
France (continued)
Hammerson Mantes SCI
Hammerson Marignan SAS
Hammerson Marketing et Communication SAS
Hammerson Marseille SC
Hammerson Nancy SCI
Hammerson Property Management SAS
Hammerson Saint-Sébastien SAS
Hammerson Troyes SCI
Hammerson Villebon 1 SARL
Hammerson Villebon 2 SNC
Les Pressing Réunis SARL
RC Aulnay 3 SCI
Retail Park Nice Lingostière SAS
SCI Cergy Capucine SCI
SCI Cergy Expansion 2 SCI
SCI Cergy Honoré SCI
Jersey
Hammerson 60 TNS Unit Trust 1
Hammerson Bull Ring (Jersey) Limited
Hammerson Croydon Investments Limited
Hammerson Highcross Investments Limited
Hammerson Junction (No 1) Limited
Hammerson Junction (No 2) Limited
Hammerson Leeds Unit Trust 1
Hammerson Victoria Gate Unit Trust 1
Hammerson Victoria Quarter Unit Trust 1
Hammerson VIA (Jersey) Limited
1. No shares in issue for Unit Trusts.
Indirectly held joint venture entities
Bishopsgate Goodsyard Regeneration Limited
Bristol Alliance (GP) Limited
Bristol Alliance Limited Partnership
Bristol Alliance Nominee No.1 Limited
Bristol Alliance Nominee No.2 Limited
BRLP Rotunda Limited
Bull Ring (GP) Limited
Bull Ring (GP2) Limited
Bull Ring Limited Partnership
Bull Ring No.1 Limited
Bull Ring No.2 Limited
Croydon (GP1) Limited
Croydon (GP2) Limited
Croydon Car Park Limited
Croydon Limited Partnership
Croydon Management Services Limited
SCI Cergy Lynx SCI
SCI Cergy Office 1 SCI
SCI Cergy Office 2 SCI
SCI Cergy Office 3 SCI
SCI Cergy Office 4 SCI
SCI Cergy Office 5 SCI
SCI Cergy Office 6 SCI
SCI Cergy Opéra SCI
SCI Cergy Madeleine SCI
SCI Cergy Paix SCI
SCI Cergy Royale SCI
SCI Cergy Vendôme SCI
SCI Hammerson Thiebaut SCI
SCI Nevis SC
Société de gestion des parkings Hammerson (SOGEPH) SARL
Teycpac-H-Italie SAS
Hammerson VRC (Jersey) Limited
Highcross (No.1) Limited
Highcross (No.2) Limited
Highcross Leicester Limited
Junction Thurrock Unit Trust 1
Rhone (Jersey) Limited
Telford Forge Retail Park Unit Trust 1
The Junction Unit Trust 1
The Hammerson Grand Central Unit Trust 1
Country of registration
or operation
Class of share held
Ownership %
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
164 HAMMERSON PLC ANNUAL REPORT 2015
165
HAMMERSON.COM 165
HAMMERSON.COMFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
ADDITIONAL DISCLOSURES
UNAUDITED
PRESENTATION OF INFORMATION
As explained in the Financial Review on page 53 and consistent with the presentation in the Business Review, management reviews the
performance of the business on a proportionally consolidated basis, including the Group’s share of Property interests, but excluding the
Group’s interest in premium outlets held through investments in Value Retail and VIA Outlets. This is because the Group has less
day-to-day involvement in the operational activities and the premium outlets sector has different operational characteristics compared
with the Group’s other property sectors. The information in the following tables has been prepared on this basis and further details of the
definitions for information contained within this section can be found in the Glossary on pages 181 and 182.
PORTFOLIO ANALYSIS
Rental information
Table 100
Rental data for the year ended 31 December 2015
Proportionally consolidated excluding premium outlets
Gross rental
income
£m
Net rental
income
£m
Vacancy rate
%
Average rents
passingA
£/m²
Rents
passing
£m
Estimated
rental valueB
£m
Reversion/
(over-rented)
%
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Developments
Total property portfolio (note)
Selected data for the year ended 31 December 2014
Group
UK
France
Total investment portfolio
Developments
Total property portfolio
Notes
162.0
86.2
13.8
138.8
82.0
9.6
262.0
230.4
95.9
357.9
8.5
366.4
83.0
313.4
5.2
318.6
250.1
91.8
341.9
2.2
344.1
222.2
82.4
304.6
1.0
305.6
1.7
1.6
9.0
2.0
3.1
2.3
535
195
190
345
355
345
159.3
89.4
12.4
261.1
88.8
349.9
166.2
90.9
13.6
270.7
101.0
371.7
2.7
0.2
(0.1)
1.7
9.8
3.8
2.1
3.4
2.5
335
360
340
253.4
93.5
346.9
261.6
107.0
368.6
1.2
10.0
3.6
A. Average rents passing at the period end before deducting head and equity rents and excluding rents passing from anchor units and car parks.
B. The estimated market rental value at the year end calculated by the Group’s valuers. ERVs in the above table are included within the unobservable inputs to the
portfolio valuations as defined by IFRS 13. This information has been subject to audit.
Rent reviews
Table 101
Rent reviews as at 31 December 2015
Proportionally consolidated excluding premium outlets
Outstanding
£m
2016
£m
2017
£m
2018
£m
Total
£m
Outstanding
£m
2016
£m
2017
£m
2018
£m
Total
£m
Rents passing subject to review inA
Current ERV of leases subject to review inB
United Kingdom
Shopping centres
Retail parks
Other
Total
Notes
26.8
37.2
4.9
68.9
9.5
14.5
0.9
12.5
9.2
0.8
19.2
8.8
0.5
68.0
69.7
7.1
24.9
22.5
28.5
144.8
30.8
38.4
5.2
74.4
10.2
14.8
0.9
13.4
9.4
0.9
20.8
9.2
0.5
75.2
71.8
7.5
25.9
23.7
30.5
154.5
A. The amount of rental income, based on rents passing at 31 December 2015, for leases which are subject to review in each year.
B. Projected rental income for leases that are subject to review in each year, based on the higher of the current rental income and the ERV at 31 December 2015 and
ignoring the impact of changes in rental values before the review date.
166
HAMMERSON PLC ANNUAL REPORT 2015 Lease expiries and breaks
Table 102
Lease expiries and breaks as at 31 December 2015
Proportionally consolidated excluding premium
outlets
2016
£m
2017
£m
2018
£m
Total
£m
2016
£m
2017
£m
2018
£m
Total
£m
to break
years
to expiry
years
Rents passing that expire/break inA
ERV of leases that expire/break inB
Weighted average
unexpired lease term
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Notes
21.5
7.8
2.4
31.7
13.5
45.2
9.3
2.1
1.0
12.4
4.6
17.0
24.3
3.3
1.9
29.5
3.6
33.1
55.1
13.2
5.3
73.6
21.7
95.3
26.2
9.0
3.0
38.2
15.2
53.4
9.5
2.3
1.1
12.9
4.9
17.8
22.9
3.3
1.4
27.6
58.6
14.6
5.5
78.7
4.1
31.7
24.2
102.9
6.2
8.7
9.3
7.3
2.7
6.0
8.1
9.7
10.4
8.8
5.8
8.0
A. The amount of rental income, based on rents passing at 31 December 2015, for leases which expire or, for the UK only, are subject to tenant break options, which fall
due in each year.
B. The ERV at 31 December 2015 for leases that expire or, for the UK only, are subject to tenant break options which fall due in each year and ignoring the impact of
rental growth and any rent-free periods.
Net rental income
Table 103
Net rental income for the year ended 31 December 2015
Proportionally consolidated excluding premium outlets
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total property portfolio
Properties
owned
throughout
2014/15
£m
Increase
for properties
owned
throughout
2014/15
%
Acquisitions
£m
Disposals
£m
Developments
and other
£m
Total net
rental income
£m
130.7
78.9
5.1
214.7
51.7
266.4
2.1
2.6
0.6
2.2
2.5
2.3
7.7
–
0.6
8.3
8.4
16.7
0.4
1.2
0.8
2.4
3.1
5.5
(0.1)
1.9
8.5
10.3
19.7
30.0
138.7
82.0
15.0
235.7
82.9
318.6
O
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I
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F
O
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M
A
T
I
O
N
A
D
D
I
T
I
O
N
A
L
D
S
C
L
O
S
U
R
E
S
I
Table 104
Net rental income for the year ended 31 December 2014
Proportionally consolidated excluding premium outlets
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total property portfolio
Properties
owned
throughout
2014/15
£m
128.0
76.9
5.1
210.0
50.4
260.4
Exchange
£m
Acquisitions
£m
Disposals
£m
Developments
and other
£m
Total net
rental income
£m
–
–
–
–
8.2
8.2
(0.6)
–
–
(0.6)
7.0
6.4
(0.1)
3.9
1.8
5.6
4.7
10.3
0.7
2.1
5.5
8.3
12.0
20.3
128.0
82.9
12.4
223.3
82.3
305.6
167
HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Additional disclosures continued
UNAUDITED
Top Ten Tenants
Table 105
Ranked by passing rent at 31 December 2015
Proportionally consolidated excluding premium outlets
B&Q
Next
Inditex
H&M
Dixons Carphone
Arcadia
Boots
Debenhams
Home Retail Group
New Look
Total
EPRA Cost ratio
Table 106
Cost ratio analysis
Proportionally consolidated excluding premium outlets
Net service charge expenses – non-vacancy
Net service charge expenses – vacancy
Net service charge expenses – total
Other property outgoings
Less inclusive lease costs recovered through rent
Total property costs (for cost ratio)
Employee and corporate costs
Management fees receivable
Net one-off restructuring cost
Total operating costs (for cost ratio)
Gross rental income
Ground and equity rents payable
Less inclusive lease costs recovered through rent
Gross rental income (for cost ratio)
EPRA cost ratio including net service charge expenses – vacancy (%)
EPRA cost ratio excluding net service charge expenses – vacancy (%)
Passing rent
£m
% of total
passing rent
12.1
7.8
6.7
6.6
6.5
6.0
5.2
5.1
4.9
4.7
3.5
2.2
1.9
1.9
1.9
1.7
1.5
1.5
1.4
1.3
65.6
18.8
Year ended
31 December
2015
£m
Restated*
Year ended
31 December
2014
£m
3.8
9.5
13.3
30.8
(3.4)
40.7
48.3
(6.0)
–
83.0
366.4
(3.7)
(3.4)
359.3
23.1
20.5
3.0
7.4
10.4
26.2
(2.6)
34.0
52.1
(5.6)
(3.0)
77.5
344.1
(1.9)
(2.6)
339.6
22.8
20.6
* The calculation methodology has been amended to adjust for inclusive lease costs recovered through rent. This amendment is in line with EPRA best practice.
Staff costs amounting to £1.9 million (2014: £1.5 million) have been capitalised as development costs and are excluded from table 106.
Our business model for developments is to use a combination of in-house staff and external advisers. The cost of external advisers is
capitalised to the cost of developments. The cost of staff working on developments is generally expensed, but is capitalised subject to
meeting certain criteria related to the degree of time spent on and the stage of progress of specific projects.
168
HAMMERSON PLC ANNUAL REPORT 2015 Valuation analysis
Table 107
Valuation analysis at 31 December 2015
Proportionally consolidated including premium outlets
Properties
at valuation
£m
Revaluation
in the year
£m
Capital
return
%
Total
return
%
Initial
yield
%
True
equivalent
yield
%
Nominal
equivalent
yieldA
%
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Total investment portfolio
Developments
Total property portfolio
Premium outletsB
Total Group
Selected data for the year ended 31 December 2014
Group
UK
France
Total investment portfolio
Developments
Total property portfolio
Premium outletsB
Total Group
Notes
3,064.9
1,656.0
160.3
4,881.2
1,860.5
6,741.7
388.8
7,130.5
1,243.6
8,374.1
4,700.7
1,797.7
6,498.4
208.1
6,706.5
1,027.6
7,734.1
194.9
19.0
1.4
215.3
116.6
331.9
35.6
367.5
174.1
541.6
377.4
41.1
418.5
18.3
436.8
109.8
546.6
6.8
1.3
1.7
4.7
7.1
5.4
12.3
5.7
16.4
7.1
9.0
2.4
7.4
9.1
7.4
12.8
8.0
11.9
6.5
7.4
9.9
12.0
10.5
14.1
10.7
23.7
12.4
14.7
7.7
13.1
9.8
12.7
19.9
13.6
4.6
4.9
6.4
4.8
4.1
4.6
5.2
5.6
7.6
5.4
4.7
5.2
5.0
5.4
7.3
5.2
4.6
5.1
4.8
4.6
4.7
5.6
5.3
5.5
5.4
5.1
5.3
A. Nominal equivalent yields are included within the unobservable inputs to the portfolio valuations as defined by IFRS 13. This information has been subject to audit.
B. Represents the property returns for the Group’s share of premium outlets through its investments in Value Retail and VIA Outlets.
Yield analysis
Table 108
Investment portfolio as at 31 December 2015
Proportionally consolidated excluding premium outlets
Portfolio value (net of cost to complete)
Purchasers’ costsA
Net investment portfolio valuation on a proportionally consolidated basis
Income and yields
Rent for valuers’ initial yield (equivalent to EPRA Net Initial Yield)
Rent-free periods (including pre-lets)B
Rent for ‘topped-up’ initial yieldC
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
A. Purchasers’ costs equate to 5.4% of the net portfolio value.
B. The weighted average remaining rent-free period is 0.4 years.
C. The yield of 4.7% based on passing rents and gross portfolio value is equivalent to EPRA’s ‘topped-up” Net Initial Yield.
Income
£m
Gross value
£m
Net book value
£m
7,104
4.6%
0.1%
4.7%
0.2%
4.9%
0.1%
0.2%
5.2%
5.2%
5.1%
325.5
10.8
336.3
13.6
349.9
8.2
13.6
371.7
7,104
(362)
6,742
4.8%
0.2%
5.0%
0.2%
5.2%
0.1%
0.2%
5.5%
169
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L
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HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Additional disclosures continued
UNAUDITED
PREMIUM OUTLETS
The Group’s investment in premium outlets is through interests in Value Retail and VIA Outlets. Due to the nature of the Group’s control
over these externally-managed investments, Value Retail is accounted for as an associate and VIA Outlets is a joint venture. Tables 109
and 110 provide analysis of the impact of the two premium outlet investments on the Group’s financial statements. Further information
on Value Retail is provided in note 13 to the accounts on page 145 and for VIA Outlets in note 12 to the accounts on page 139.
Income statement
Table 109
Aggregated premium outlets income summary
Share of results
Less EPRA adjustments:
Revaluation (gains)/losses on properties
Change in fair value of derivatives
Deferred tax
Other adjustments
EPRA adjustments
Adjusted earnings of premium outlets
Interest receivable from Value Retail loans*
Total contribution to adjusted profit
Value Retail
£m
159.3
VIA Outlets
£m
2015
Total
£m
13.1
172.4
Value Retail
£m
109.9
VIA Outlets
£m
2014
Total
£m
(1.1)
108.8
(163.7)
7.5
25.1
(11.1)
(142.2)
17.1
5.3
22.4
(10.4)
2.2
2.5
(1.3)
(7.0)
6.1
–
6.1
(174.1)
9.7
27.6
(12.4)
(149.2)
23.2
5.3
28.5
(111.1)
9.9
11.9
(4.6)
(93.9)
16.0
5.8
21.8
1.3
0.3
0.4
–
2.0
0.9
–
0.9
Balance sheet
Table 110
Aggregated premium outlets investment summary
Investment properties
Net debt
Other net (liabilities)/assets
Share of net assets
Less EPRA adjustments:
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
EPRA adjusted investment
Investment in VR China – within other investments
Loans to Value Retail*
Total impact of balance sheet – EPRA basis
Value Retail
£m
VIA Outlets
£m
1,095.0
(335.3)
(15.9)
743.8
(0.4)
107.3
(47.0)
59.9
803.7
4.8
76.4
884.9
148.6
(27.1)
(10.7)
110.8
3.5
6.3
(3.0)
6.8
117.6
–
–
117.6
2015
Total
£m
1,243.6
(362.4)
(26.6)
854.6
3.1
113.6
(50.0)
66.7
921.3
4.8
76.4
1,002.5
Value Retail
£m
VIA Outlets
£m
884.7
(274.9)
19.0
628.8
(1.9)
80.8
(47.0)
31.9
660.7
–
63.5
724.2
142.9
(31.2)
(7.5)
104.2
3.1
4.0
(3.1)
4.0
108.2
–
–
108.2
* At 31 December 2015 the Group had provided loans of £76.4 million (2014: £63.5 million) to Value Retail for which the Group received interest of £5.3 million in 2015
(2014: £5.8 million) which is included within finance income in note 7 to the accounts on page 134.
170
(109.8)
10.2
12.3
(4.6)
(91.9)
16.9
5.8
22.7
2014
Total
£m
1,027.6
(306.1)
11.5
733.0
1.2
84.8
(50.1)
35.9
768.9
–
63.5
832.4
HAMMERSON PLC ANNUAL REPORT 2015 PROPORTIONALLY CONSOLIDATED INFORMATION
Note 2 to the accounts on page 128 shows the proportionally consolidated income statement. The proportionally consolidated balance
sheet, net debt and net underlying finance costs are shown in the tables 111, 112 and 113.
In each of the tables, column A represents the Reported Group figures as shown in the financial statements; column B shows the Group’s
share of Property interests being the Group’s share of Property joint ventures as shown in note 12 to the accounts on page 139 and
Nicetoile as shown in note 13 to the accounts on page 145. Column C shows the Group’s proportionally consolidated figures by aggregating
the Reported Group and Share of Property interests figures. The Group’s interests in premium outlets are not proportionally consolidated
as management does not review these interests on this basis.
Proportionally consolidated balance sheet
Table 111
As at 31 December 2015
2015
Share of
Property
interests
£m
Proportionally
consolidated
£m
Reported
Group
£m
A
B
C
Reported
Group
£m
A
Share of
Property
interests
£m
B
2014
Proportionally
consolidated
£m
C
Non-current assets
Investment and development properties
Interests in leasehold properties
Plant and equipment
Investment in joint ventures
Investment in associate
Other investments
Receivables
Current assets
Receivables
Restricted monetary assets
Cash and deposits
Total assets
Current liabilities
Payables
Tax
Borrowings
Non-current liabilities
Borrowings
Deferred tax
Obligations under finance leases
Payables
Total liabilities
Net assets
4,652.1
32.1
7.6
3,213.6
768.0
4.8
92.1
8,770.3
118.0
34.0
37.0
189.0
8,959.3
235.5
0.7
–
236.2
3,028.1
0.5
32.5
75.7
3,136.8
3,373.0
5,586.3
2,478.4
9.4
–
(3,102.8)
(24.2)
–
–
(639.2)
710.7
16.3
33.5
760.5
121.3
67.4
–
40.2
107.6
–
–
9.4
4.3
13.7
121.3
–
7,130.5
41.5
7.6
110.8
743.8
4.8
92.1
8,131.1
828.7
50.3
70.5
949.5
9,080.6
302.9
0.7
40.2
343.8
3,028.1
0.5
41.9
80.0
3,150.5
3,494.3
5,586.3
4,427.3
33.2
5.0
2,341.5
628.8
1.4
79.3
7,516.5
86.5
11.3
28.6
126.4
7,642.9
204.4
0.3
–
204.7
2,287.1
0.5
33.0
72.5
2,393.1
2,597.8
5,045.1
2,279.2
9.8
–
(2,237.3)
–
–
–
51.7
29.3
12.8
30.8
72.9
124.6
66.5
–
–
66.5
42.2
–
9.8
6.1
58.1
124.6
–
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
A
D
D
I
T
I
O
N
A
L
D
S
C
L
O
S
U
R
E
S
I
6,706.5
43.0
5.0
104.2
628.8
1.4
79.3
7,568.2
115.8
24.1
59.4
199.3
7,767.5
270.9
0.3
–
271.2
2,329.3
0.5
42.8
78.6
2,451.2
2,722.4
5,045.1
171
HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Additional disclosures continued
UNAUDITED
Proportionally consolidated net debt analysis
Table 112
As at 31 December 2015
Notes
Cash at bank
Short-term deposits
Cash and deposits
Current borrowings including currency swaps
Non-current borrowings
Net debt
Reported
Group
£m
A
36.9
0.1
37.0
30.0
(3,028.1)
(2,961.1)
Share of
Property
interests
£m
B
32.6
0.9
33.5
(40.2)
–
(6.7)
2015
Total
£m
C
69.5
1.0
70.5
(10.2)
(3,028.1)
(2,967.8)
Reported
Group
£m
A
28.5
0.1
28.6
5.1
(2,287.1)
(2,253.4)
Proportionally consolidated net underlying finance costs
Table 113
For the year ending 31 December 2015
Notes
Finance costs
Finance income
Adjusted finance costs/(income)
Capitalised interest
Net underlying finance costs/(income)
Reported
Group
£m
Share of
Property
interests
£m
A
101.9
(15.7)
86.2
5.3
91.5
B
2.5
(4.6)
(2.1)
–
(2.1)
2015
Total
£m
C
104.4
(20.3)
84.1
5.3
89.4
Reported
Group
£m
A
106.4
(9.0)
97.4
8.8
106.2
Share of
Property
interests
£m
B
27.7
3.1
30.8
–
(42.2)
(11.4)
Share of
Property
interests
£m
B
2.8
(0.1)
2.7
–
2.7
2014
Total
£m
C
56.2
3.2
59.4
5.1
(2,329.3)
(2,264.8)
2014
Total
£m
C
109.2
(9.1)
100.1
8.8
108.9
172
HAMMERSON PLC ANNUAL REPORT 2015 TEN-YEAR FINANCIAL SUMMARY
Unaudited
Income statement
Net rental income
Operating profit before other net
gains/(losses)
Other net gains/(losses)
Share of results of joint ventures
Share of results of associates
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 joint ventures
Investment in associates
Cash and short-term deposits
Borrowings
Other assets
Other liabilities
2015
£m
2014
£m
2013*
£m
2012*
£m
2011
£m
2010
£m
2009
£m
2008
£m
2007
£m
2006
£m
318.6
305.6
290.2
282.9
296.0
284.7
293.6
299.8
275.7
237.4
276.3
381.0
13.1
159.3
(98.1)
731.6
(1.6)
–
(3.2)
259.1
430.3
(1.1)
247.9
102.0
–
109.9
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)
234.5
25.2
201.3
748.0
–
(0.8)
–
–
–
–
–
–
(95.1)
(110.2)
(137.6)
(112.6)
(100.0)
(114.5)
(170.7)
(149.3)
(156.9)
703.1
341.2
142.2
346.3
620.2
(453.1)
(1,611.5)
(0.9)
(0.1)
(3.0)
(0.8)
0.1
(3.1)
(0.4)
(0.7)
–
–
(3.4)
(9.9)
(0.6)
(0.1)
(4.1)
(0.9)
103.6
5.9
110.4
(16.4)
17.6
(0.6)
38.3
1.2
(10.6)
792.4
(99.4)
333.8
(9.9)
726.8
699.1
337.4
138.4
335.7
615.4
(344.5) (1,572.6)
101.0
1,016.9
7,130.5 6,706.5
104.2
110.8
743.8
70.5
628.8
59.4
5,931.2
5,458.4
5,719.6
5,331.1
5,141.5 6,456.8
7,275.0
6,716.0
–
545.4
56.7
–
428.4
57.1
–
–
–
–
100.7
126.2
–
10.4
182.9
–
–
–
–
–
–
119.9
28.6
39.4
(3,068.3) (2,329.3) (2,309.0) (2,038.1) (2,079.9) (1,920.6) (2,319.0) (3,452.6) (2,524.2) (2,282.6)
301.1
331.6
462.3
319.5
435.6
268.6
323.1
271.2
318.7
1,025.0
(425.5)
(392.6)
(358.5)
(441.9)
(327.1)
(307.6)
(323.9)
(425.3)
(573.5)
(448.9)
Net deferred tax provision
Non-controlling interests
(0.5)
(69.0)
(0.5)
(71.4)
(0.4)
(76.7)
(0.5)
(74.5)
(0.5)
(76.5)
(0.5)
(71.7)
(0.4)
(108.4)
(73.4)
(89.3)
(99.6)
(70.4)
(103.3)
(56.6)
Equity shareholders’ funds
5,517.3 4,973.7
4,059.9
3,851.2
3,771.9 3,480.0
2,949.7 2,820.6 4,354.6
4,165.1
Cash flow
Operating cash flow after tax
Dividends
171.2
128.1
129.4
139.9
(163.8)
(139.1)
(129.4)
(118.4)
147.8
(86.1)
132.7
(95.4)
105.3
29.8
(64.5)
(86.7)
(29.2)
(73.1)
5.5
(57.7)
Property and corporate acquisitions
(43.7)
(302.7)
(191.1)
(397.3)
(374.1)
(218.6)
(39.5)
(123.5)
(163.3)
(219.5)
Developments and major
refurbishments
Other capital expenditure
Disposals
(137.2)
(164.0)
(184.4)
(122.9)
(45.1)
185.2
(39.8)
155.4
(17.5)
(48.0)
256.3
585.0
Investments in joint ventures
(735.6)
(118.9)
–
–
(91.2)
(23.6)
271.8
–
(60.8)
(25.5)
554.6
–
Other cash flows
(14.0)
12.4
(30.8)
(72.4)
(34.9)
(0.8)
(164.1)
(376.7)
(335.5)
(250.5)
(23.7)
(13.9)
(44.6)
(29.6)
394.2
245.3
537.2
628.0
–
–
–
–
–
–
(10.9)
(10.2)
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
-
T
E
N
Y
E
A
R
I
F
I
N
A
N
C
A
L
S
U
M
M
A
R
Y
Net cash flow before financing
Per share data**
Basic earnings/(loss) per share
Adjusted earnings per share
Dividend per share
Diluted net asset value per share
EPRA net asset value per share
Financial ratios
Return on shareholders’ equity
Gearing
Interest cover
Dividend cover
(783.0)
(468.6)
(167.5)
(34.1)
(190.3)
286.2
207.7
(325.7)
(119.4)
66.0
92.8p
26.9p
22.3p
£7.03
£7.10
95.7p
23.9p
20.4p
£6.35
£6.38
14.3%
16.3%
54%
3.6x
1.2x
46%
2.8x
1.2x
47.4p
23.1p
19.1p
£5.70
£5.73
8.8%
56%
2.8x
1.2x
19.4p
20.9p
17.7p
£5.41
£5.42
47.3p
19.3p
16.6p
£5.30
£5.30
87.2p
19.9p
(54.1)p (368.9)p
19.7p
25.8p
18.9p
23.7p
27.3p
18.5p
15.95p
15.45p
£4.93
£4.95
£4.20
£4.21
£6.61
£10.22
£7.03
£10.49
£10.18
242.6p
22.3p
14.7p
£9.91
5.3%
11.2%
21.1% -16.9%
-32.5%
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
4.5%
57%
1.9x
1.5x
25.3%
54%
1.8x
1.5x
*
Comprises continuing and discontinued operations.
** Comparative per share data was restated following the rights issue in March 2009.
The Income Statement, Balance Sheet and Financial Ratios for 2015 and 2014 have been presented on a proportionally consolidated basis, excluding the Group’s investment in
premium outlets. Cash flow information has been presented on an IFRS basis throughout.
173
HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
SUMMARY OF DIRECTORS’ REMUNERATION POLICY
The Directors’ Remuneration Policy was approved at the 2014 Annual General Meeting and the summary below is presented for ease of
reference. The Remuneration Policy is reproduced in full in the 2013 Annual Report (pages 74 to 86) and can be found on the Company’s
website www.hammerson.com. The summary below should be read in the context of the full Remuneration Policy, which contains
footnotes that form part of the Remuneration Policy and help to explain elements of the Remuneration Policy.
Summary of approach to Remuneration Policy
Objective
To attract, retain and motivate quality leaders capable of making a major contribution to the Company’s
success whilst avoiding paying more than the Remuneration Committee considers necessary.
Implementation
The Remuneration Committee considers a variety of factors, including remuneration packages available at
comparable companies, overall Company performance, internal relativities, achievement of corporate
objectives, individual performance and experience, published views of institutional investors and general
market trends and performance.
Performance-related
elements
Generally, two-thirds of Executive Director total target remuneration (excluding pension and benefits) is
considered to be appropriate.
Limits and flexibility
Sufficient flexibility is retained to act in the interests of shareholders and the Company. Limits will not lead
to pressure on reward levels and the Remuneration Committee adopts a suitably conservative approach.
Executive Directors’ Remuneration
Element and overview
Opportunity
Base Salary
Subject to a maximum of £850,000 per annum.
Reviews account for factors such as market conditions, salary increases to other Group employees and
comparison against both a relevant property peer group and a market capitalisation group selected by the
Remuneration Committee.
Benchmarking considers base salary as well as total remuneration and is generally within
(but is not constrained by) a range of +/- 10% of median.
Subject to an aggregate maximum of £100,000 per annum as measured by the individual’s P11D tax
calculation (or local equivalent for non-UK Executive Directors). The maximum is increased
annually by RPI.
Benefits include a car allowance or company car, private medical insurance (to include spouse/life partner),
permanent health insurance and life assurance.
Hammerson France employees may receive additional benefits including a seniority allowance and an
employer’s contribution of up to €2,000 per annum to an employee savings scheme.
Relocation benefits may include global relocation support (maximum £400,000) and/or tax equalisation
arrangements across all elements of remuneration.
Whilst not considered by the Remuneration Committee to be a benefit in the normal sense, Directors may
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.
An allowance (Pension Choice) paid as a combination of any or all of the following, but subject to an
aggregate limit of 30% of base salary:
– Employer contribution to the Company’s defined contribution pension plan;
– Payment to a Self-Invested Personal Pension Plan; and
– A salary supplement.
Jean-Philippe Mouton receives a salary supplement and participates in a legacy collective supplementary
defined contribution retirement plan operated by his French employing company, which makes employer
contributions at the annual statutory limit.
Pension arrangements are kept under review to ensure they remain appropriate.
– Paid monthly in cash in
arrears
– Pensionable
– Reviewed annually by
the Remuneration
Committee
Benefits
– Contractual and
non-contractual as
appropriate and
consistent with local
market practice
– Non-pensionable
– Where provided by
third parties, cost
covered by the Company
at market rates
Pension
– Non-contributory
allowance subject to a
maximum threshold
– Salary supplements are
non-pensionable and do
not qualify for AIP or
LTIP entitlements
– No compensation for
public policy or tax
changes
– Company will comply
with any local legal
obligations in respect
of pensions
174
HAMMERSON PLC ANNUAL REPORT 2015 Element and overview
Annual Incentive Plan
(AIP) with deferral
under the Deferred
Bonus Share Scheme
(DBSS)
– Annual performance-
based award paid as a
mixture of cash and
deferred shares
– Awards subject to
continued employment
save in the leaver
circumstances per the
Remuneration Policy*
– Deferred shares are
subject to leaver
conditions per the
Remuneration Policy*
Opportunity
Award:
– Maximum opportunity is currently 200% of base salary. The Remuneration Committee reserves the
power to increase this to a maximum of 300%. Increases above 200% would only occur after appropriate
consultation with shareholders.
Performance:
– Measures and conditions are set annually by the Remuneration Committee. Performance conditions are
assessed over a period of one year and may consist of a combination of financial measures (at Group or
divisional level), operational measures and individual performance objectives.
– The Remuneration Committee reserves the right to include such other measures as it considers to be an
appropriate means of assessing performance. Other than in exceptional circumstances, performance
measures and conditions, once set, will generally remain unchanged for the year.
– No further performance targets apply to the deferred shares element, as this represents previously-
earned bonuses.
– The Remuneration Committee retains discretion to amend the vesting level (up or down) where
considered appropriate but not so as to exceed the maximum bonus potential.
Deferred shares element:
– Representing at least 40% of the total award and delivered under the DBSS (but may be delivered under
– Non-pensionable
a different plan with equivalent terms).
– Deferred shares are structured as nil-cost share options with a deferral period of no less than two years.
Participants are entitled to a dividend equivalent for the period from the grant date until the vesting date,
delivered as additional shares upon transfer.
Clawback and malus:
– Provisions cover personal misconduct and/or where accounts or information relevant to performance are
shown to be materially wrong resulting in the payment of a higher bonus than should have been the case.
Long Term Incentive
Plan (LTIP)
– Discretionary annual
award
Award:
– Maximum discretionary award up to a value of 200% of base salary. In exceptional circumstances, the
Remuneration Committee can increase this to 300%. The extent of vesting is determined by the
performance conditions.
– Subject to continued
– Normally structured as nil-cost share options but can take other forms. Participants are entitled to a
employment, save in the
leaver circumstances per
the Remuneration
Policy*
– Non-pensionable
dividend equivalent for the period from the grant date to the vesting date, delivered as additional shares
upon transfer. The Remuneration Committee has discretion to settle awards as cash.
Performance:
– Minimum performance period of three years. In practice, the Remuneration Committee has determined
that the minimum period should be four years.
– Consisting of a combination of financial and non-financial measures, the Remuneration Committee has
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.
– Performance conditions in respect of outstanding awards can be amended due to exceptional
circumstances, provided that the amendment is not materially less difficult to satisfy.
Vesting:
– Vesting under each performance condition is on a straight-line basis with no more than 25% vesting at
threshold performance.
Clawback and malus:
– Provisions cover 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.
* refer to Payment for Loss of Office section of the full Remuneration Policy
175
OTHER INFORMATIONHAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT Summary of Directors’ Remuneration Policy continued
Element and overview
Opportunity
Share ownership
guidelines
– Five years to achieve
The Chief Executive is expected to accumulate and maintain a holding of ordinary shares in the Company
equivalent in value to no less than 150% of base salary. Executive Directors are expected to accumulate a
holding of ordinary shares in the Company equivalent in value to no less than 100% of base salary.
Shares held beneficially by an Executive Director and his spouse/life partner as well as those held within the
Company’s Share Incentive Plan are included in the calculation. The closing middle market quotation on
the last business day in December is used as the basis for calculation.
There is no formal sanction for non-compliance.
All-employee
arrangements
UK-based Executive Directors may participate in the Company’s Sharesave and Share Incentive Plan on the
same terms as other employee participants. The maximum participation level for all staff is set by relevant
UK legislation.
France-based Executive Directors may participate in a profit share plan, which is available to all employees
of Hammerson France and rewards performance against such measures as the Remuneration Committee
considers appropriate. Awards are subject to an annual limit determined by French legislation.
Chairman and Non-Executive Directors’ Remuneration
Element and overview
Opportunity
Fees
– Paid monthly in arrears
in cash
– Non-pensionable
– Reviewed periodically
The Chairman’s fee is determined by the Remuneration Committee. Other Non-Executive Director fees are
determined by the Board on the recommendation of the Executive Directors.
Aggregate total annual fees to Non-Executive Directors are subject to the limit in the Company’s Articles of
Association. The Remuneration Committee may provide additional fees within the stated limit including for
membership of any additional Board committees that may be established.
Fees to the Chairman and other Non-Executive Directors are intended to be competitive with other fully
listed companies of equivalent size and complexity, but are not set by reference to a prescribed benchmark.
Periodic reviews take into account independent advice and the time commitment required of Non-
Executive Directors.
Expenses
The Company may reimburse travel and accommodation expenses (including to the Company’s London
office) and may settle the liability from any assessment to tax made on such reimbursement.
Additional fees
The Chairman receives no additional fee for membership of any of the Committees.
Other Non-Executive Directors may receive additional fees for membership and/or chairmanship of the
Remuneration and Audit Committees. An additional fee is payable to the Senior Independent Director. The
level of additional fees is set to reflect the responsibilities of the role.
Other benefits
No other benefits are currently available to any of the Non-Executive Directors.
The Non-Executive Directors are not eligible for performance-related bonuses or participation in the
Company’s share plans.
The Non-Executive Directors may 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.
176
HAMMERSON PLC ANNUAL REPORT 2015 Service agreements: new Executive Directors
Overview
The Committee’s approach is for new Executive Directors to have service agreements that have regard to
market practice at the date of appointment. Terms summarised below will be subject to any local statutory
(or collective bargaining) requirements where applicable.
Expiry date and notice
period
No fixed expiry date. Either party may terminate an appointment by providing 12 months’ notice. A longer
initial notice period may be applied by the Company to new appointments for a limited time if the
Remuneration Committee considers this appropriate.
Retirement date
No default retirement date. Retirement requests are considered on a case-by-case basis and 12 months’
notice is anticipated.
Post-termination
restrictions
To protect the Group’s confidential information for an appropriate period and to prevent poaching of the
Group’s senior workforce and its customer and supplier connections for 12 months after termination.
Payment in lieu of notice
(PILON)
Employment can be terminated immediately 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 case no
compensation will be due. The Company has discretion to pay on a phased basis, subject to mitigation.
Change of control and
liquidated damages
Other appointments
No right to liquidated damages on a change of control.
External non-executive appointments that do not lead to a conflict of interest are permitted with the
consent of the Company’s Board of Directors on the basis that such appointments can enhance experience
and skills and add value to the Company. Fees for external appointments can be retained, except where the
appointment is as the Company’s representative.
Appointment terms: new Non-Executive Directors
Overview
The Chairman and Non-Executive Director appointments are governed by letters of appointment.
Appointments are for a term of three years. Letters of appointment are reviewed by the Chairman and the
Executive Directors every three years.
Notice period and
termination
No less than three months’ notice must be given by either party. Immediate termination can occur should a
conflict of interest arise and appointments will cease automatically at an Annual General Meeting where a
Non-Executive Director is not re-elected.
Fees on termination
Entitlement is limited to such fees as have accrued at the date of termination, together with the
reimbursement of expenses properly incurred prior to that date.
Payment for loss of office: Executive Directors
AIP
Where notice of termination is given by either the Company or the Executive Director prior to the end of the
performance period, or employment ceases due to death, ill-health, injury or disability; bonus entitlement
remains, subject to performance conditions. Any bonus payable is pro-rated, unless the Remuneration
Committee decides otherwise.
Where employment ceases after the end of the performance period, but prior to payment, entitlement to
any bonus payment remains if the reasons for employment ceasing are as above but also where the reason
for employment ceasing is retirement, redundancy or sale of the company or business for which the
Executive Director works.
Unless the Remuneration Committee determines otherwise at its discretion, no bonus is payable in other
circumstances.
DBSS (deferred share
element of AIP)
Deferred share awards lapse where an Executive Director resigns or gives notice; although the
Remuneration Committee has discretion to treat the Executive Director as a good leaver. Deferred share
awards lapse where dismissal is for cause. Otherwise, share awards vest in full on the normal vesting date.
The Remuneration Committee can decide to accelerate vesting.
LTIP
Good leaver status will be given where employment ceases due to death, retirement, ill-health, injury
or disability, redundancy or the sale of the company or business for which he works and awards will vest on
the normal vesting date. Awards remain subject to performance conditions and will be time pro-rated
unless the Remuneration Committee decides otherwise. The Remuneration Committee can decide to
accelerate vesting.
Where employment ceases for any other reason, the Remuneration Committee retains discretion to treat
the Executive Director as a good leaver.
177
OTHER INFORMATIONHAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT SHAREHOLDER INFORMATION
KEY CONTACT DETAILS
SHAREHOLDER ADMINISTRATION
Registered office and principal UK address
Hammerson plc
Kings Place
90 York Way
London
N1 9GE
Registered in England No. 360632
Tel: +44 (0)20 7887 1000
Principal address in France
Hammerson France SAS
40 – 48 rue Cambon
75001 Paris
Tel: +33 (0)156 69 30 00
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 (calls cost 12p per minute plus your phone
company’s access charge) or +44 (0) 20 8639 3399 from overseas
(calls outside the UK will be charged at the applicable
international rate). Lines are open 9.00 am to 5.30 pm, Monday
to Friday excluding public holidays in England and Wales.
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
Valuers: DTZ Debenham Tie Leung and Cushman & Wakefield LLP
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
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 they can register at: www.capitashareportal.com.
Under this arrangement, dividend confirmations 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.
Scrip Dividend Alternative (Scrip)
The Board has decided to offer shareholders a Scrip for the final
dividend for the year ended 31 December 2015, subject to approval
by the shareholders at the 2016 Annual General Meeting (AGM).
A Scrip enables participating shareholders to receive shares
instead of cash when a Scrip is offered for a particular dividend.
More information is available at www.hammerson.com/investors.
Dividend Reinvestment Plan (DRIP)
Subject to approval of the Scrip by shareholders at the 2016 AGM,
the DRIP will be suspended for any dividend in respect of which a
Scrip is offered. Accordingly, the DRIP has been suspended for the
2015 final dividend. The DRIP will, however, be automatically
reinstated for any dividend, whether interim or final, in respect of
which the Directors decide not to offer the Scrip.
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 12p per minute plus your phone company’s access
charge) or +44 (0) 20 8639 3405 from overseas (calls outside the
UK will be charged at the applicable international rate). Lines are
open 9.00 am to 5.30 pm, Monday to Friday excluding public
holidays in England and Wales.
Email: ips@capita.co.uk
Further details can be found at:
http://international.capitaregistrars.com
178
HAMMERSON PLC ANNUAL REPORT 2015 Capita share dealing services
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 +44 (0) 371 664 0445. Calls
are charged at the standard geographic rate and will vary by
provider. Calls outside the UK will be charged at the applicable
international rate. Lines are open 8.00 am to 4.30 pm, Monday to
Friday excluding public holidays in England and Wales.
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.
Unsolicited mail
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 register with the Mailing Preference Service, an
independent organisation whose services are free, by visiting
www.mpsonline.org.uk. 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.
Shareholder security
Share fraud includes scams where fraudsters cold-call investors
offering them overpriced, worthless or non-existent shares, or
offer to buy shares owned by investors at an inflated price. We
advise shareholders to be vigilant of unsolicited mail or telephone
calls regarding buying or selling shares. For more information
visit: www.fca.org.uk/scams or call the FCA Consumer Helpline
on 0800 111 6768.
179
OTHER INFORMATIONHAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT Shareholder information continued
FINANCIAL CALENDAR AND SHARE ANALYSIS
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 25 April 2016 at Kings Place, 90 York Way, London N1 9GE . 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/investors.
Table 114
Full-year results announced
Recommended final dividend
Ex-dividend date
Record date
Payable on
Annual General Meeting
Anticipated 2016 interim dividend
Analysis of shares held as at 31 December 2015
Table 115
15 February 2016
17 March 2016
18 March 2016
29 April 2016
25 April 2016
October 2016
Number of
shareholders
% of total
shareholders
Holding
% of total capital
819
413
435
454
160
289
121
169
57
102
3,019
27.13
13.68
14.41
15.04
5.30
9.57
4.01
5.60
1.88
3.38
100
150,471
320,537
637,543
1,450,698
1,130,394
6,893,937
8,545,394
38,362,301
41,596,057
685,343,923
784,431,255
0.02
0.04
0.08
0.19
0.14
0.88
1.09
4.89
5.30
87.37
100
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 +
Total
180
HAMMERSON PLC ANNUAL REPORT 2015 GLOSSARY
Adjusted figures (per share)
Anchor store
Average cost of borrowing or
weighted average interest rate
(WAIR)
BCSC
BREEAM
Capital return
Compulsory Purchase Order
(CPO)
Cost ratio (or EPRA cost ratio)
CPI
Dividend cover
Earnings per share (EPS)
EBITDA
EPRA
Reported amounts adjusted in accordance with EPRA guidelines to exclude certain items as set
out in note 10 to the accounts.
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.
The cost of finance expressed as a percentage of the weighted average of borrowings during
the period.
British Council of Shopping Centres. A not-for-profit professional body supporting the retail
property industry which undertakes research and lobbies government on behalf of its members.
Building Research Establishment’s Environmental Assessment Method.
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.
A Compulsory Purchase Order is a legal function in the UK by which land or property can be
obtained to enable a development or infrastructure scheme without the consent of the owner
where there is a “compelling case in the public interest”.
Total operating costs (being property costs, administration costs less management fees) as a
percentage of gross rental income, after rents payable. Both operating costs and gross rental
income are adjusted for costs associated with inclusive leases.
Consumer Price Index. A measure of inflation based on the weighted average of prices of
consumer goods and services.
Adjusted earnings per share divided by dividend per share.
Profit for the period attributable to equity shareholders divided by the average number of shares
in issue during the period.
Earnings before interest, tax, depreciation and amortisation.
The European Public Real Estate Association, a real estate industry body. This organisation has
issued Best Practice Recommendations with the intention of improving the transparency,
comparability and relevance of the published results of listed real estate companies in Europe.
Equivalent yield (true and nominal) The capitalisation rate applied to future cash flows to calculate the gross property value. The
ERV
Gearing
Gross property value or Gross
asset value (GAV)
Gross rental income (GRI)
IAS/IFRS
Inclusive lease
Income return
Initial yield (or Net initial
yield (NIY))
Interest cover
cash flows reflect the timing of future rents resulting from lettings, lease renewals and rent
reviews based on current ERVs. The true equivalent yield (TEY) assumes rents are received
quarterly in advance. The nominal equivalent yield (NEY) assumes rents are received annually
in arrears. The property true and nominal equivalent yields are determined by the Group’s
external valuers.
The estimated market rental value of the total lettable space in a property calculated by the
Group’s external valuers. It is calculated after deducting head and equity rents, and car parking
and commercialisation running costs.
Net debt expressed as a percentage of equity shareholders’ funds.
Property value before deduction of purchasers’ costs, as provided by the Group’s external valuers.
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Income from rents, car parks and commercial income, after accounting for the net effect of the
amortisation of lease incentives.
International Accounting Standard/International Financial Reporting Standard.
A lease, often for a short period of time, under which the rent is inclusive of costs such as service
charge, rates, utilities etc. Instead, the landlord incurs these costs as part of the overall
commercial arrangement.
The income derived from a property as a percentage of the property value, taking account of
capital expenditure and exchange translation movements, calculated on a time-weighted basis.
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%, 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 exceptional finance costs, capitalised
interest and change in fair value of derivatives.
181
HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Glossary continued
Interest rate or currency swap
(or derivatives)
IPD
Like-for-like (LFL) NRI
LTV (Loan to value)
Net asset value (NAV) per share
Net rental income (NRI)
Occupancy rate
Over-rented
Passing rents or rents passing
An agreement with another party to exchange an interest or currency rate obligation for a
pre-determined period of time.
Investment Property Databank. An organisation supplying independent market indices and
portfolio benchmarks to the property industry.
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.
Net debt expressed as a percentage of the property portfolio value calculated on a proportionally
consolidated basis.
Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.
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.
The amount, or percentage, by which the ERV falls short of rents passing, together with the
estimated rental value of vacant space.
The annual rental income receivable from an investment property, after any rent-free periods
and after deducting head and equity rents and car parking and commercialisation running costs.
This may be more or less than the ERV (see over-rented and reversionary or under-rented).
A lease signed with a tenant prior to the completion of a development.
Pre-let
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.
The Group’s non-wholly owned properties which management proportionally consolidates
when reviewing the performance of the business. These exclude the Group’s premium outlets
interests in Value Retail and VIA Outlets which are not proportionally consolidated.
The Group’s shopping centre and retail park joint ventures which management proportionally
consolidate when reviewing the performance of the business, but exclude the Group’s interests
in the VIA Outlets joint venture.
Real Estate Investment Trust. A tax regime which in the UK exempts participants from
corporation tax both on UK rental income and gains arising on UK investment property sales,
subject to certain requirements.
The financial results as presented under IFRS which represent the Group’s 100% owned
properties, transactions and balances and equity account for the Group’s interests in joint
ventures and associates.
Capital growth and profit for the period expressed as a percentage of equity shareholders’ funds
at the beginning of the year, all excluding deferred tax and certain non-recurring items.
The amount, or percentage, by which the ERV exceeds the rents passing, together with the
estimated rental value of vacant space.
Retail Prices Index. A measure of inflation based on the change in the cost of a representative
sample of retail goods and services.
Sociétés d’Investissements Immobiliers Côtées. A tax regime in France which exempts
participants from the French tax on property income and gains subject to certain requirements.
All capital expenditure on a development project, including capitalised interest.
Net rental income and capital growth 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.
Dividends and capital growth in a Company’s share price, expressed as a percentage of the share
price at the beginning of the year.
Rental income which is related to an occupier’s turnover.
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 the Group has an investment.
A premium outlets joint venture, in which the Group has an investment. VIA owns and operates
premium outlet centres in Europe.
Passing rents expressed as a percentage of the total development cost of a property.
Property interests
Property joint ventures
REIT
Reported Group
Return on shareholders’ equity
(ROE)
Reversionary or under-rented
RPI
SIIC
Total development cost (TDC)
Total property return (TPR)
(or total return)
Total shareholder return (TSR)
Turnover rent
Vacancy rate
Value Retail (VR)
VIA Outlets (VIA)
Yield on cost
182
HAMMERSON PLC ANNUAL REPORT 2015 INDEX
124, 160
156
55, 132
60, 156
80
114
60, 148, 161
4
22
60, 148
68
158
Accounting policies
Adjustment for non-cash items in the cash
flow statement
Administration expenses
Analysis of movement in net debt
Audit Committee report
Auditor’s report
Borrowings
Business model
Business review
Cash and deposits
Chairman’s letter
Company balance sheet
Compliance with the UK Corporate Governance Code 69, 102
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 report
Developments
Directors’ biographies
Directors’ remuneration report
Directors’ report
Directors’ responsibilities
Diversity
Dividend
Equity
Fair, balanced and understandable
Financial instruments
Financial review
Glossary of terms
Going Concern statement
Greenhouse Gas Emissions
In conversation with David Atkins, Chief Executive 8
Investment and development properties
Investment in associates
120
123
118
121
119
157
68
34
108
84
110
113
51, 79
56, 110, 135
120, 158
82
149
53
181
67
47
34, 57, 126, 131
59, 145
Investments in subsidiary companies
Joint ventures
Key performance indicators (KPIs)
Our market
Net finance costs
Nomination Committee report
Notes to the accounts
Obligations under finance leases
Our people
Operating lease receipts
Payables
Pensions
Per share data
Principal Group addresses
Principal risks and uncertainties
Profit before tax
Property portfolio information
Property returns
Receivables
Real Estate Investment Trusts (REITs)
Result for the year
Risk management
Segmental analysis
Share capital
Shareholder information
Shareholder return
Significant financial judgements
Sociétés d’Investissements Immobiliers Côtées
(SIIC)
Subsidiaries and other related undertakings
Summary of Directors’ Remuneration Policy
Sustainability review
Tax
Ten-year financial summary
Viability statement
Value Retail
VIA Outlets
161
139
18
14
60, 134
78
124
155
49
157
155, 161
92, 133
53, 135, 136
178
62
118, 128
166
58
147, 161
56, 134, 179
128
62, 104
130, 166
155
178
59
81
56, 134
162
174
43
56, 134
173
67
40, 60, 145
41, 59, 139
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HAMMERSON.COMFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
184
HAMMERSON PLC ANNUAL REPORT 2015 We’d like to thank
everyone who has helped
to produce this report:
Michael Ashton, Warren Austin, André Bentze,
Sarah Booth, Michelle Boswell, Steve Brown,
Tom Brown, Nina Cadman, Oliver Choppin,
Doug Cleary, Julia Collier, Natassja Dellemann,
Paul Denby, Mark Duhig, Abi Dunning, Louise Ellison,
Sali-Anne Evans, Linda Garner-Winship, Stef Gough,
Karen Green, Sam Henton, Thibaut Joyeux,
Barbara Lees, Sophie Leoti, Marlène M’baye,
Vanessa Mitchell, Lindsay Noton, Mike Pasmore,
Katie Pattison, Rebecca Patton, Antony Primic,
Fay Rajaratnam, Hannah Risk, Louise Romain,
Sophie Ross, Richard Sharp, Richard Shaw,
Rachel Swan, Sarah Tennant, Andrew Wallace,
Faye White
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Printed on Amadeus Offset paper which is FSC® certified
and was manufactured at a mill that is certified to the ISO14001
and EMAS environmental standards.
Printed by Pureprint Group Limited, a Carbon Neutral Printing Company.
Pureprint Group Limited is FSC certified and ISO 14001 certified showing
that it is committed to all round excellence and improving environmental
performance is an important part of this strategy.
The inks used are vegetable oil-based.
Designed and produced by Black Sun Plc.
Hammerson plc
Kings Place
90 York Way
London
N1 9GE
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