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Annual Report 2016
Our mission
We own, operate and develop physical
destinations where more happens – 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.
Contents
Strategic Report
01 Highlights
02 Our portfolio
04 Our strategy
06 Our business model
08 Chief Executive’s review
11 Our Product Experience Framework in action
12 Our strategy in action
18 Key performance indicators
20 Executive team
22 Business Review
34 Sustainability Review
40 Our people
43 Financial Review
53 Risks and uncertainties
Corporate Governance Report
60 Chairman’s letter
62 Your Board
64 Board activity: an insight into the year
72 Nomination Committee Report
74 Audit Committee Report
78 Directors’ Remuneration Report
80 Directors’ Remuneration Report: Policy
96 Directors’ Remuneration Report:
Implementation Report
115 Compliance with the UK Corporate
Governance Code
120 Directors’ biographies
122 Directors’ Report
Financial Statements
125 Directors’ responsibilities
126 Independent Auditor’s Report
130 Primary Financial Statements
136 Notes to the accounts
170 Company Primary Statements
172 Notes to the Company accounts
Other information
178 Additional disclosures
187 Development pipeline
188 Property listing
190 Ten-year financial summary
191 Shareholder information
194 Glossary
196 Index
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
Follow us on Instagram
Search hammerson_plc
Cover and inside front cover images:
Victoria Gate, Leeds
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HIGHLIGHTS
2016 Overview
– Good operational and financial
performance
– Iconic new retail destinations in
Leeds, Birmingham and
Southampton
– Secured ownership of Dundrum
Town Centre, Dublin
– Significant incremental investment
into premium outlets
– £635m disposals completed
– £25m income from new lettings
Portfolio value1
£10.0 billion
34%
6%
UK shopping centres
France
Ireland
UK retail parks
Premium outlets
Developments & other
17%
13%
9%
21%
1. As at 31 December 2016, including £54m Ireland loan interests (2015: £690m) and VIA Outlets acquired.
2. See note 10 on pages 148 and 149 and glossary for definitions.
Adjusted profit2
£231m
(+9%)
2015: £211 million
IFRS profit
£317m
(-56%)
2015: £727 million
Adjusted earnings per share2
29.2p
(+9%)
2015: 26.9p
Dividend per share
24.0p
(+8%)
2015: 22.3p
Shareholders’ equity
£5,776m
(+5%)
2015: £5,517 million
EPRA NAV per share2
£7.39
(+4%)
2015: £7.10
Total property return
5.7%
2015: 12.4%
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
OUR PORTFOLIO
Destinations 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, France and Ireland, convenient retail parks in the
UK and premium outlets across Europe.
– 13 countries
– 19 premium outlets
– 23 shopping centres
– 2.2 million m2 lettable area
– 18 retail parks
– 4,800 tenants
1 Bullring,
Birmingham
2 Dundrum Town Centre,
3 Les Terrasses du Port,
Dublin
Marseille
4 Brent Cross,
London
5 Bicester Village,
Oxford
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Italie Deux,
Paris
7 The Oracle,
Reading
8 Les Trois Fontaines,
Cergy Pontoise
9 Westquay,
Southampton
10 Elliott’s Field,
Rugby
11 Victoria,
Leeds
12 Cyfarthfa Retail Park,
Merthyr Tydfil
A full list of destinations in our portfolio is on pages 188 and 189 or at
hammerson.com
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HAMMERSON PLC ANNUAL REPORT 2016
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UK shopping centres
France shopping centres
Ireland shopping centres
UK retail parks
Premium outlets
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
OUR STRATEGY
Within an evolving landscape…
Trends in our markets
We lead the way in identifying trends in the retail property market. The structural trends
below influence our strategy, drive our priorities and guide our performance.
Multichannel
Consumers are digitising their lives. The
accelerating use of mobile technology and
online social interaction is driving the
growth of ‘multichannel’ retail. Within
a multichannel world, the shopping
experience remains anchored around
the physical store. The store provides
direct brand engagement and acts
as the showroom. Retailers use their
physical space and online platforms in a
complementary way to drive increased
sales across all channels.
43%
of consumers research
products online on
a smartphone while
in-store
Convenience
Urbanisation
Time-short lifestyles and
multichannel retail are raising
the expectations for convenient
retail, driving demand for easier,
faster access to goods; better and
more accurate information; and
enhanced services. The rise of
click & collect is a key indicator
of this trend and allows shoppers
to research and purchase goods
on-the-move or at home and
collect in-store or in-centre.
Successful city
economies are seeing
population growth,
drawing investment in
infrastructure, transport
and culture. City-centre
retail and leisure
destinations are a core part
of the urban environment
and benefit from the
increasing wealth of
the urban population.
Polarisation
Shoppers are becoming increasingly discerning
about their choice of retail destination and the
level of service expected (see ‘Experience’ and
‘Convenience’). As a result, retailers place a
premium on those retail destinations which deliver
shoppers’ needs. Therefore the best locations are
becoming relatively more valuable and the retail
property market is polarising.
Responsibility
Consumers, retailers and investors are more discriminating of
the way companies conduct themselves. Stakeholders recognise
their role in challenging companies and hence consumers demand
transparency from the brands they endorse. Communities
expect property owners and developers to bring a wider positive
social impact and shareholders demand best practice corporate
governance in return for investment.
1/3
of shoppers actively
choose to buy brands
they believe are having
a positive social or
environmental impact
Global markets
The internationalisation of consumer brands, retailers and capital
providers has increased in recent years, in part due to improved
communication. Property companies compete for capital,
occupiers and employees in a global marketplace, raising the
standard for success.
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HAMMERSON PLC ANNUAL REPORT 2016
23%
of online purchases are
collected from a store
Experience
3.9bn
people, 53% of the world’s
population, live in an
urban environment
There is an increasing blurring between retail and entertainment.
Shoppers expect retail destinations to provide a broader blend
of retail, entertainment and dining options and hence successful
retail destinations are evolving into social hubs.
36%
of ‘Millennials’ prioritise a shopping centre with a
good selection of coffee shops and cafés, over retail
brand mix (34%)
Retail tourism
Shopping is increasingly enjoyed by international tourists as part of
a travel experience. Discounted premium brands at attractive retail
outlets make the journey even more memorable.
#1
Shopping rated the number one activity for overseas travellers
(88%) versus sight-seeing (77%) and fine dining (39%)
For further detail on markets and trends for our property sectors
see the Business Review pages 22-33
…our strategy is designed to benefit
Our strategy
Set out below are the three elements of our strategy which are designed to benefit
from these market trends.
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Focus on growing consumer markets
Our portfolio is concentrated around retail property which is aligned to consumer requirements in a
multichannel world: the experience of large prime shopping centres; the convenience of retail parks; and the
draw of luxury-brand premium outlets. We choose locations by identifying significant, growing cities and
catchments in selected European countries, and where we can gain market share.
Response to trends
Multichannel, Polarisation, Experience, Convenience,
Urbanisation, Retail Tourism
Our vision
We create desirability
for consumers, brands,
commercial partners
and communities.
Create differentiated
destinations
Our talented people apply insight and market expertise to create
and operate destinations which offer exceptional experiences to
attract retailers and shoppers. Our Product Experience
Framework purposefully guides our asset and development
management to consistently enhance our destinations and
realise their income potential.
Response to trends
Experience, Convenience, Retail Tourism,
Multichannel, Polarisation, Responsibility
Promote financial efficiency
and partnerships
A singular retail focus, strong and efficient capital structure
and operational excellence enables us to attract valuable
partners. These include global capital providers, international
joint venture partners and expert operating collaborators who
help us broaden our market reach, increase scale and strengthen
our business.
Response to trends
Polarisation, Urbanisation,
Global Markets, Responsibility
For further information on how we are delivering on our strategy, see pages 12-17
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
OUR BUSINESS MODEL
Creating long-term value
Our vision
We create desirability for consumers, brands, commercial partners and communities.
We utilise key resources…
The success of our business depends
on a number of principal inputs.
Through clear
operational activities…
The main activities that we undertake towards
delivering our strategy.
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,
global capital providers and international joint
venture partners
Focus on growing consumer
markets
Investment management
We employ market expertise to recycle our portfolio,
taking advantage of acquisition opportunities
in growing consumer markets which enhance the
quality of our portfolio and future returns and
disposing of assets at the right time.
Create differentiated destinations
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.
Asset management
We skilfully manage our portfolio in a sustainable
way to generate income growth and to attract
tenants and shoppers.
Promote financial efficiency
and partnerships
Financing and capital providers
We manage and control our costs, both operational
and financial, and optimise our capital base to
support the delivery of our strategy. We make use
of relationships to source capital, to access growth
markets, to create a larger operated platform, as well
as generate asset management income.
For information on Our People strategy see pages 40-42 and for
information on financial capital see Financial Review pages 43-52
For information on how we are delivering on our strategy, see
pages 12-17 and for performance against our KPIs see pages 18-19
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HAMMERSON PLC ANNUAL REPORT 2016
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Uniquely differentiated by our
Product Experience Framework…
To deliver value
for our stakeholders
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.
By successfully employing our business
model we aim to deliver a positive result
for all our stakeholder groups.
Shareholders
We create consistent earnings growth which benefits
shareholders through growing dividend payments and
increased share value
Retailers
Offering our retail tenants innovative formats
that are responsive to customer demands
Shoppers
Offering our shoppers entertaining and exciting
experiences, as well as great retail destinations
Our people
Developing, recognising and rewarding our people
secures a skilled and motivated workforce
Communities
We create positive social impacts through
our activities, including the creation of local jobs
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.
For examples of our Product Experience Framework in action
see page 11 and pages 12-17
For information on delivering for shareholders see
Financial Review pages 43-52, delivering for Our People
pages 40-42 and delivering Positive Places pages 34-39
HAMMERSON.COM
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CHIEF EXECUTIVE’S REVIEW
Making more
happen
“We have successfully enlarged and enhanced
our portfolio this year adding new differentiated
retail space in faster-growth markets. We have a
strong and adaptable business with multiple
opportunities for growth which will drive
consistent, income-focused returns.”
— David Atkins, Chief Executive
2016 highlights
2016 has been an eventful and successful year,
particularly set against the backdrop of some
significant geopolitical events. We set ourselves
some stretching targets right across our business
and the whole company has worked hard to
ensure we succeeded. We increased our presence
in prime shopping destinations, cementing our
leadership with new centres in Birmingham,
Leeds, Southampton and Dublin. In the latter
we converted our Dundrum centre from loans
to direct ownership. We extended our strategic
exposure to the fast-growing premium outlets
sector. We enhanced the experience for our
shoppers, bringing flagship retailers such as
Apple to Les Terrasses du Port, Marseille, and
we delivered the UK’s largest dedicated dining
and leisure-led scheme, enhancing our existing
Westquay shopping centre in Southampton.
For shareholders, we delivered a consistently
strong financial performance. Adjusted earnings
per share grew 8.6% and we increased the dividend
per share by 7.6%. We have grown the dividend at
an average rate of 7.7% over the last five years and
we remain confident of delivering this consistent
track record as a result of our resilient business
model. Our total property return of 5.7% yet
again beat the IPD benchmark. The compelling
investment proposition for shareholders is
summarised overleaf (page 9).
Market backdrop
The defining event in 2016 for our market was the
decision, following the referendum in June, to end
the UK’s membership of the European Union. The
event triggered intense capital market volatility
and a subsequent devaluation of sterling. The
political and economic uncertainty is likely to
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HAMMERSON PLC ANNUAL REPORT 2016
Adjusted earnings per share1
+8.6%
5 year dividend per share
compound growth rate
7.7%
Like-for-like net rental
income growth2
3.2%
Disposal proceeds 2016
£635m
1. See note 10a and glossary
for definition.
2. Figure including premium outlets
(2.2% excluding premium outlets).
continue for a considerable length of time whilst
the UK renegotiates its relationships with the EU
and also whilst other European countries hold
important elections.
Despite the referendum result, it is reassuring
that in the second half of the year indicators of
economic growth and consumer health in both
the UK and rest of Europe have remained robust.
In our business, we did not see any discernible
lapse in commercial discussions with tenants and
the pattern of consumer expenditure and footfall
in our centres was consistent with the first half of
the year.
In our investment markets, the fundamentals
underpinning European property valuations
remain, including wide spreads for property yields
over long-term interest rates, lower leverage
across the property sector and well-capitalised
lending institutions. Weakness in the retail parks
market was exacerbated by temporary liquidity
pressures at some UK open-ended funds post the
referendum and has now stabilised.
Our strategy
Against this backdrop, I believe our business
is well-positioned and has a clear strategy to
succeed. Our singular retail focus means we are
not distracted by the more cyclical nature of other
commercial property sectors and our teams are
able to focus solely on our retail tenants and how
best to serve their needs.
In this report you will see we have expressed
our strategy differently (page 5). We have not
changed our strategy which is still aligned to the
recognisable outputs of ‘high-quality property’,
‘income generation’ and ‘capital strength’.
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However, we have evolved the articulation to provide a clearer
understanding and elaborate on why we select the markets we
do, how we achieve operational excellence and how we run our
business efficiently to deliver results for our stakeholders.
Positioning for growth
We focus on growing consumer markets, that is, those retail
markets which will deliver good rental growth because they match
how consumers shop in a multichannel world, and where we can
increase our market share.
Our geographical focus is on catchments and cities in Europe with
strong economic performance and our approach is ‘bottom-up’, on
an asset-by-asset basis; we do not target specific countries.
We focus on prime shopping centres because we believe, in a
polarising retail property market, high-quality, integrated, urban
destinations will win. Our compelling shopping centre portfolio
is well positioned to benefit from this polarisation, with centres
in large European cities, including Birmingham, Dublin, London,
Leeds, Marseille and Paris.
Securing the best European shopping centres is a challenge which
requires in-depth retail knowledge, specialist skill and vision. This
year we successfully converted the Dublin loan portfolio to take
ownership of Ireland’s pre-eminent shopping centre, Dundrum
Town Centre. Ireland remains the EU’s fastest growing economy
thanks to its attractive business landscape. We expect our long-
term vision for the Dublin platform to deliver some of the strongest
returns in our portfolio.
We focus on retail parks in the UK to complement the experience
of our prime shopping centres and serve time-short shoppers who
value a convenient shopping destination. Over recent years we
have invested significantly in our retail parks, introducing high-
street fashion brands, re-purposing excess space from bulky-goods
retailers and increasing the range of food and beverage.
As a result, our retail parks are seeing growth in dwell time and
customer visits are up 2.2%. Supported by a strong UK housing
market, homeware retailers are looking for more space at our large
market-leading retail parks and are also taking units at our on-site
developments, which are expected to deliver an attractive yield on
cost of 8%. This year we sold three retail parks which did not match
our required forward returns. However, we remain committed to
this market.
We focus on premium outlets for their exceptional financial
returns and they will continue to be a key part of our growth
strategy. The market drivers of rising international tourism,
greater retailer appreciation for outlets, brand management and
multi-phase extensions combine to deliver some of the strongest
income growth of any European retail property sector. Market
consolidation is occurring, driving yield compression, and this year
we added five new outlets to our VIA Outlets joint venture and
increased our ownership in Value Retail.
Today, our European portfolio is well diversified, with over 40%
outside the UK and investments in 13 countries. Our ambition
is to grow the total portfolio through carefully considered
developments and acquisitions of prime retail assets in faster-
growth consumer markets. We continuously recycle capital
to support this growth, maintain a high-quality portfolio and
maximise returns. This year we increased our disposals to
£635 million following the major acquisition in Ireland. We
anticipate disposals of at least £400 million over the next year as
we position the balance sheet for the next phase of growth from our
major developments such as Brent Cross and Croydon.
Our investment proposition
Secure income
Geographically diverse
Weighted unexpired lease term
to expiry 9.5 years
Portfolio across 13 countries,
over 40% non-UK assets
Capital recycling
Retail insight
Focus on reallocating capital
into higher-growth markets
Specialist teams with a depth
of retail experience
Strong governance
Sustainability
Recognised best-practice governance
throughout the business
Committed to sustainability at the
core of our strategy
HAMMERSON.COM
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Chief Executive’s review continued
Creating desirability
Our strategy is to create differentiated destinations that will
thrive in a multichannel environment. Two years ago we launched
our Product Experience Framework. It has been an overwhelming
success and the framework approach means it touches all parts
of our operations. Using the differentiated destinations strategy
we think about curating all elements of the consumer interaction,
from the customer service desk to pop-up retailers and community
programmes. To mark the opening of Westquay Watermark
we held a spectacular light festival which delighted the local
community in Southampton.
Light Festival, Westquay
We are often challenged by the view that physical retail will be
replaced by online. On the contrary, we are embracing technology
and the positive effects it is having on retail and the changing role
of the physical store. Shopping centres are evolving to become
social venues, retailers are becoming more creative with store fit
outs to strengthen their visual brand and attract customer loyalty,
and click & collect is making shopping less time consuming.
Visitors to our centres use digital technology to research products,
check availability, compare prices, share pictures with friends and
also purchase goods. We are constantly developing new features for
our portfolio-wide Plus app to support this trend.
Our development pipeline in the UK, France and Ireland will
deliver the next generation of differentiated destinations. These
complex projects take time. However, when completed they will
reinforce our position as a leading European operator.
Our collaborative approach
We promote financial efficiency and partnerships to ensure
we maintain a breadth of growth opportunities. As the largest UK
landlord to leading international retailers, we have deep retail
connections. With a breadth of retail formats, we can serve all of
their needs.
We also enjoy close partnerships with Value Retail and APG on
our European premium outlets platform, speaking daily, sharing
expertise, seconding team members and discussing our aligned
strategies in this market. These partnerships are a strategic
advantage and make us the only listed European REIT with
significant exposure to this attractive sector.
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We are proud that so many global capital providers choose to invest
their funds with us, including ADIA, Allianz, AXA Real Estate,
CPPIB, GIC and Standard Life. It is testament to our reputation,
high-quality assets and consistent financial returns that our total
platform extends to £17 billion of capital through partnerships
across Europe.
In September we listed our shares on the Johannesburg
Stock Exchange (JSE) though a secondary listing. This is a
further example of our approach to reaching the widest pool of
international capital. We have enjoyed good support from South
African shareholders and this listing provides them with an
additional route to invest.
Responsibility
I put a lot of our business success down to our internal culture,
which is largely driven by our company values. In our staff survey
this year we again scored highly across the London, Paris and
Dublin offices, with colleagues rating ‘culture’, ‘diversity’ and
‘corporate social responsibility’ particularly highly.
What makes me particularly proud about our culture is the mature,
open discussions around issues including flexible working patterns,
disability in the workplace and the LGBT agenda. The employee
events celebrating International Women’s Day, World Cultural Day
and National Work Life Week helped to drive meaningful change
in attitudes and behaviours, further strengthening Hammerson’s
culture and values. This year, we introduced a revised maternity
and paternity policy with a more generous pay structure for new
parents. And after two years supporting the Samaritans and
Elifar, our colleagues have now voted to select Alzheimer’s Society
and Macmillan as our new staff charities, and I look forward to
increasing our fundraising efforts together.
Our sustainability strategy, ‘Positive Places’ features in our
investment proposition and is a key pillar of our Product
Experience Framework. We have made major steps during the
year to deliver on this by creating retail destinations that deliver
positive impacts economically, socially and environmentally. At
our new developments we worked closely with local authorities,
contractors and retailers to deliver skills, training and employment
support for local people. This has been incredibly successful, with
82% of jobs generated at our Victoria Gate development awarded
to local people. We will shortly announce an updated sustainability
strategy with the level of ambition we feel necessary to mitigate
energy security and pricing risk for the business and to support the
wider response of leading businesses to climate change risk.
Outlook
I expect that global political events will continue to dominate
newsflow through 2017, and no doubt beyond. Since 2009, we
have built a more resilient business with higher-quality property
and a more diversified platform. Against this backdrop of further
uncertainty, I am confident that we have a strong and adaptable
business with multiple opportunities for growth, giving us the
ability to respond to changes in specific end-markets. We will
continue to prioritise our stronger performing sectors in order
to enhance returns, with particular focus on earnings growth and
cash flow generation, in order to continue to grow the dividend for
our shareholders.
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Our Product Experience
Framework in action
Iconic destinations
Victoria Gate, Leeds
We pushed the boundaries to create an exceptional new retail arcade in
Leeds. Victoria Gate opened in October and is already receiving expert
recognition for its impressive design. The luxury and aspirational retail
mix is housed in a naturally lit arcade embellished with curved glass,
grey granite and pendant lighting. The building structure reflects the
historic terracotta design and textile heritage of the city.
Convenient & easy
Click & collect services
Click & collect facilities are now available in all of our European
shopping centres, with lockers and fully-staffed customer service
desks for returning or sending parcels. This supports a seamless
multichannel offer allowing customers to pick up their online
purchases while visiting other shops or enjoying our leisure facilities.
Over the Christmas period we saw our highest volume of parcels
ever, proving the popularity of this convenient service.
Best at retail
LinkStreet, Birmingham
LinkStreet is a truly unique
destination outside London for
small independent businesses
to debut or expand. LinkStreet
has seen the opening of 22
independent brands, many
of them taking their first step
into retail, or opening for the
first time outside London. This
is where consumers can find
something fresh, unique and
different. Retailers range from
Cereal Killer Café to VirtualX,
a cutting-edge virtual reality
experience launched by a local
developer, and pop-ups from
e-tailers like Made.com.
Interactive & engaging
Developing the Plus app
In December we launched the
trial of a new ‘Find Similar’ app
at Brent Cross shopping centre.
Designed to inspire and help find
products, the app allows shoppers
to take a picture of a piece of
clothing, a pattern or colour and
then finds similar products from
the retailers in the centre. 92%
of shoppers who took part in the
trial said they would use the app
again and we are now working
to integrate the technology with
our Plus app, which has more
than 300,000 users.
Entertaining & exciting
Westquay Watermark development
The opening of Westquay Watermark delivers 20 new restaurants
to Southampton; many of which are firsts outside London including
Red Dog Saloon. The 10-screen Cinema de Lux is a UK first for
Showcase, with laser projection and Dolby Atmos sound technology.
The Esplanade is an outdoor space framed by the historic city walls
for events and live entertainment and Hollywood Bowl completes the
leisure mix.
Positive places
Victoria Gate community interaction
Through the Victoria Gate development, we deepened our
community investment across the city of Leeds. We supported
the Teenage Market at Kirkgate which saw 26 enthusiastic young
businesses and start-ups run their own stalls at the market. Victoria
Gate has delivered over 1,500 employment opportunities in retail,
hospitality and construction.
HAMMERSON.COM
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OUR STRATEGY IN ACTION
Focus on growing
consumer markets
Our portfolio is concentrated around retail property which is aligned to
consumer requirements in a multichannel world: the experience of large prime
shopping centres; the convenience of retail parks; and the draw of luxury brand
premium outlets. We choose locations by identifying significant, growing cities
and catchments in selected European countries, and where we can gain
market share.
Why it’s important
We specialise in retail property because it offers attractive and sustainable long-term returns, with lower volatility than
other commercial property due to a granular and diverse tenant mix.
As consumer behaviour evolves, in particular incorporating digital technology into the shopping experience, consumer
preferences are polarising. As a result, occupier demand for retail space is concentrating on selected prime locations and
specific formats. Our strategy is to align our portfolio in order to benefit from this polarisation in demand. Our investment
scope covers Western Europe. We assess new investment opportunities on a case-by-case basis influenced by the quality
of the property and the economic prospects of the city or region.
We have a strong track-record of successfully developing retail destinations. Our strategy also involves ‘rotating’
investments by selling lower-growth assets and acquiring or developing in faster-growth markets, which also ensures
the quality of the portfolio is constantly enhanced. We will grow our portfolio through further developments or selective
acquisitions; these will be part-funded by releasing capital from lower-return assets.
What we did in 2016
– Added a retail platform in Ireland, Europe’s fastest
growing economy, by converting the acquired loan
portfolio into asset ownership
Our near-term strategic priorities
– Integrate the assets added in growth-markets:
Birmingham, Dublin, Leeds
– Dispose of assets which do not meet our performance
– Sold £635 million of assets, selection based on lower
criteria; expect to be net-sellers in 2017
future returns profile
– Invest to extend selected core shopping centres in the
– Added 54,500m2 new prime space at developments
polarising French market
in Leeds and Southampton
– Enlarged our presence in Birmingham, UK’s second
city, with acquisition of Grand Central
– Acquired five outlets, significantly building the scale
of VIA Outlets, creating a leading player in the fast-
growing European outlet market
– Advance major London developments
– Deliver high-return retail park extensions
and reconfigurations
– Support premium outlet extensions and assess
opportunities to increase exposure
Key performance indicators
– Total property return
– Growth in adjusted EPS
– Growth in like-for-like NRI
– Occupancy
– Leasing activity
See pages 18 to 19 for more detail
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HAMMERSON PLC ANNUAL REPORT 2016
Delivering against strategy
Added Dundrum Town Centre, an
exceptional super-prime shopping
centre, through acquisition and
conversion of a loan portfolio.
Delivering the Product
Experience Framework
Iconic
destinations
Best
at retail
Entertaining
& exciting
Dundrum
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Strategic rationale
– Ireland is Europe’s fastest growing economy: 2016 GDP growth c.4%; retail
sales volume growth 4%
– Dundrum Town Centre is Ireland’s largest and foremost super-prime retail
and leisure scheme
Invested in Dublin
£995m
– Opportunity to realise significant value by applying our best-in-class
Dundrum ERV growth 2016
asset management
– Platform acquisition gives us a national leading market share of 220,000m2
of prime retail space
– Pipeline of development opportunities across Dublin city will deliver next
generation of differentiated destinations
+9%
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
OUR STRATEGY IN ACTION
Create differentiated
destinations
Our talented people apply insight and market expertise to create and operate
destinations which offer exceptional experiences to attract retailers and
shoppers. Our Product Experience Framework purposefully guides our asset
and development management to consistently enhance our destinations and
realise their income potential.
Why it’s important
Our strategy is to proactively manage our assets to drive consistent rental growth. Income returns are a key part of our
investment case.
We have a successful leasing strategy based on building close relationships with retailers, insight, leveraging the scale and
breadth of our platform and astute negotiation skills.
The ‘framework’ methodology ensures a consistent and rigorous approach to creating differentiated destinations across
the portfolio. Further details of the Product Experience Framework are set out on pages 7 and 11.
Over the last three years we have upgraded all of our shopping centres, adding restaurant and leisure extensions. We were
among the first to identify the trend for incorporating a critical-mass of leisure within a centre and invested to elevate our
centres to best-in-class.
We have built teams with a range of talents and experience gained beyond the property sector to ensure we understand
the latest retail trends, technological developments and design innovations.
What we did in 2016
– Launched iconic Victoria Gate development
– Developed Westquay leisure extension: 20 new
Our near-term strategic priorities
– Introduce the latest retail and leisure brands and new
store concepts across the portfolio
restaurants, cinema, bowling and outdoor events space
– Deliver value-add projects (such as kiosks, digital
– Transformed Bullring LinkStreet with pop-ups
screens, pop-up retail units)
and innovative retail concepts
– Introduced more international brands in France
(Apple, Armani Exchange, Coach, MAC)
– Introduced first-to-Ireland brands at Dundrum
– Opened first Polo Ralph Lauren store in Central and
– Build digital capabilities to support multichannel retail
– Benefit from customer data collected from the
Plus App
– Capitalise on strong occupier demand at retail parks
to drive remerchandising and income growth
Eastern Europe at Fashion Arena, Prague
– Leverage the brand relationships and tourism insights
– Click & collect kiosks in all centres
– Commercial trial for new digital app functionality
across premium outlets portfolio
– Unlock opportunities to drive environmental
improvements across the portfolio
Key performance indicators
– Total property returns
– Growth in like-for-like NRI
– Growth in adjusted EPS
– Cost ratio
– Occupancy
– Leasing activity
– Voluntary staff turnover
– Global emissions intensity ratio
See pages 18-19 for more detail
Delivering against strategy
Developed an exceptional retail arcade
at Victoria Gate, praised for its design,
enhancing the wider Leeds retail offer.
Delivering the Product
Experience Framework
Iconic
destinations
Positive
places
Interactive
& engaging
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HAMMERSON PLC ANNUAL REPORT 2016
Victoria Gate
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Strategic rationale
– Leeds is the UK’s third-largest city with an affluent catchment which
was under-served by the retail offer
– The Victoria Gate development augmented the existing Victoria Quarter
arcade to create the north of England’s hub for luxury and aspirational
retail brands
– The design is inspired by many of the existing local features
– John Lewis opened its largest full-line store outside London
– Cutting-edge restaurant operator, D&D, will open two new concepts in 2017,
and a casino opened in January 2017
New brands to Leeds
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Luxury and aspirational retail
space in UK’s most upmarket
regional catchment
56,300m2
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
OUR STRATEGY IN ACTION
Promote financial efficiency
and partnerships
A singular retail focus, strong and efficient capital structure and operational
excellence enables us to attract valuable partners. These include global capital
providers, international joint venture partners and expert operating
collaborators who help us broaden our market reach, increase scale and
strengthen our business.
Why it’s important
Prudent capital management ensures our risk profile remains conservative. We set internal guidelines well below the
levels of technical covenants. The guidelines are matched to the more resilient nature of our diversified pure retail
portfolio and are set at conservative levels, which provide headroom to comfortably grow the portfolio.
We diversify our sources of capital to limit concentration risk and provide funding flexibility. The preferred source of
debt is Group-level, unsecured funding. This provides flexibility to quickly and easily rotate assets in-line with an active
approach to capital recycling. We use a natural foreign exchange hedging policy to avoid counteracting the underlying
performance of the assets.
JV partners provide capital for the assets we operate. This is a successful strategy creating a larger operating platform
relative to invested capital and which generates asset management fee income.
We have a long-standing close relationship with Value Retail and APG and have worked alongside them to grow the
European outlets portfolio. We are the only European listed company with meaningful exposure to this fast-growing
market. High barriers to entry in the sector and access to specialist skills mean these relationships are very valuable to us.
What we did in 2016
– Over £1.2 billion of new debt capital raised
– Successfully refinanced acquisition facility and
reduced cost of debt to 3.1%
– JSE listing to access wider pool of international capital
– New JV at Grand Central with CPPIB and extended JV
with GIC at Westquay
– Negotiated £500 million off-market transaction to
enlarge VIA Outlets (£145 million Hammerson share)
Our near-term strategic priorities
– Maintain financial leverage in line with 40% loan-
to-value guidance and strong investment-grade
credit ratings
– Monitor currency hedge during period of
greater volatility
– Work with our selected JV partners and monitor our
total JV exposure
– Enhance the operating structure of VIA Outlets to
match its enlarged size
– Evaluate opportunities for refinancing in low interest
rate environment
Key performance indicators
– Growth in adjusted EPS
– Cost ratio
See pages 18-19 for more detail
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HAMMERSON PLC ANNUAL REPORT 2016
Delivering against strategy
Enlarging our premium outlets
exposure utilising our close
relationships with Value Retail
and APG.
Delivering the Product
Experience Framework
Best
at retail
Convenient
& easy
Entertaining
& exciting
VIA Outlets
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Strategic rationale
– Premium outlets is one of the highest total return European retail property
sub-sectors with consistent market sales growth around 10% p.a. and yield
compression from market consolidation
– Enhances Hammerson’s pan-European exposure
– We established VIA Outlets in 2014 with a strategy to acquire and improve
centres. It is proving successful, sales densities at existing centres grew by
19% in 2016
– In December we executed a rare opportunity to acquire four strong outlet
centres, including one of the best outlets in Germany, Zweibrücken, all with
remerchandising opportunities
– VIA Outlets team has been expanded to include specialists in leasing,
marketing and tourism
Forecast centre IRR on latest
VIA Outlets acquisitions
11%
Number of centres in
VIA Outlets
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
KEY PERFORMANCE INDICATORS
Monitoring value creation
We use our Key Performance Indicators, or KPIs, to ensure we are delivering our strategy.
They are split between financial and operational measures, and each link to our three
strategic elements. During 2016 we have included an additional KPI, Voluntary staff
turnover, to reflect the importance to the business of our talented people.
Financial KPIs
Chart 1
Total property return
5.7% (Benchmark 3.4%)
Chart 2
Growth in like-for-like NRI*
2.2%
13.6
12.5
12.4
9.5
5.7
3.4
8.5
8.2
5.0
4.6
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13
14
15
16
Weighted IPD Benchmark
Hammerson comparative performance
Link to strategy
Description
Total property return (TPR) is the
main metric we use to measure the
income and capital growth of our
property portfolio. It is calculated
on a monthly time-weighted basis
consistent with IPD’s methodology.
We judge our success in generating
superior property returns by
comparing our performance with a
weighted IPD Retail benchmark.
Performance
During 2016, the property portfolio
produced a total return of 5.7%
which was 230bp ahead of our
estimated IPD benchmark, driven
by strong outperformances
from UK shopping centres and
premium outlets.
2.1
2.1
2.1
2.3
2.2
2.0
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13
14
15
16
Target
Link to strategy
Description
Net rental income (NRI) is the
Group’s primary revenue measure
and like-for-like NRI growth is key
to supporting growing earnings and
dividend payments. The calculation
is in line with EPRA guidance, and
excludes the impact of acquisitions,
disposals, developments and
exchange rate movements. Growth
is achieved through leasing activity,
tenant engineering and other “value-
adding” initiatives.
Performance
On a like-for-like basis, NRI grew
by 2.2% in 2016, above our target of
2.0%. Income from UK shopping
centres and retail parks both grew by
2.4%, with growth of 2.2% from our
French portfolio.
More in table 100 on page 182
More in table 97 on page 180
Chart 3
Growth in adjusted EPS
8.6%
12.6
8.6
10.5
8.3
3.5
12
13
14
15
16
Link to strategy
Description
Adjusted earnings per share (EPS)
reflects the Group’s underlying profit
divided by the average number of
shares in issue and is calculated in
line with EPRA guidelines. It is the
Group’s primary profit measure,
and excludes capital items such as
unrealised valuation changes, profits
and losses on the sale of properties
and other one-off exceptional items.
Performance
In 2016, adjusted EPS increased by
2.3 pence, or 8.6%, to 29.2 pence.
This was driven by higher rental
income from our property portfolio
and higher earnings from our
premium outlet investments.
Chart 4
Cost ratio*
22.6%
26.5
24.2
23.1
22.8
22.6
12
13
14
15
16
Link to strategy
Description
The EPRA cost ratio is the measure
by which we monitor the operational
efficiency of our activities as it shows
the total operating costs, these
being property outgoings and net
administration costs, as a percentage
of gross rental income for our
property portfolio.
Performance
During 2016, our cost base has been
managed effectively and the ratio
has reduced by 50bp compared to
2015 to 22.6%. The reduction is
principally due to lower property
costs, which have fallen from 11.3%
to 10.7%.
More in the Financial Review on page 44
More in table 99 on page 181
* Proportionally consolidated excluding premium outlets. See page 43 for further explanation.
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HAMMERSON PLC ANNUAL REPORT 2016
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Link to remuneration
The remuneration of Executive Directors is aligned closely with our financial KPIs through
the Company’s Annual Incentive Plan (AIP) and Long Term Incentive Plan (LTIP).
Our strategy
Focus on growing consumer markets
For 2016, the AIP contains all four of the financial KPIs. The operational KPIs are aligned
with our strategy and the performance against all of the KPIs is taken into account when
considering the personal element of the AIP along with other specific objectives.
Total property return and growth in adjusted EPS are also two of the three LTIP
performance measures.
Details of Executive Director remuneration is included in the Directors’ Remuneration
Report on pages 78 to 114.
Create differentiated
destinations
Promote financial
efficiency and
partnerships
Operational KPIs
Chart 5
Occupancy*
97.5%
97.7
97.7
97.7
97.5
97.5
97.0
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13
14
15
16
Target
Link to strategy
Chart 6
Global emissions intensity ratio
155mtCO2e/£m
Description
Keeping our properties occupied
ensures we generate rental income
and the occupancy ratio measures
the amount of space which is
currently let. The ratio is calculated
in line with EPRA guidance on the
basis of the estimated rental value
(ERV) of occupied space.
Performance
Occupancy remains above our
97.0% target, with the portfolio
97.5% occupied at the year end.
This was marginally lower than
the prior year, principally due to a
number of unlet units at our recently
completed developments in Leeds
and Southampton.
221
180
172
155
13
14
15
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Link to strategy
Description
Reducing carbon emissions is one of
our key sustainability targets. This
ratio, which we have calculated since
2013, shows the amount of CO2e
emissions from our properties and
facilities, including corporate offices
and is calculated over the 12 months
ended 30 September with the
denominator being adjusted profit
before tax.
Performance
The ratio has improved by 10%
during 2016 due to a reduction in
emissions and the increased use of
green energy across our portfolio,
particularly in France.
More in table 94 on page 179
More in the Sustainability Review on page 37
Chart 7
Leasing activity*
£24.9 million
29.5
27.9
24.9
23.9
18.7
12
13
14
15
16
Link to strategy
Chart 8
Voluntary staff turnover
10.9%
Description
Leasing allows us to improve our
brand mix across our portfolio
and differentiate our destinations.
This measure shows the amount
of income secured across our
investment portfolio including both
new lettings and lease renewals.
Performance
Leasing momentum continued
throughout 2016 and we secured
£24.9 million of income with
volumes being broadly equal in
the two halves of the year. Whilst
total leasing was slightly lower than
2015, this was partly due to the high
level of occupancy, particularly in
UK retail parks. Across the Group,
principal leases were secured at 5%
above December 2015 ERVs.
10.9
10.3
9.8
14
15
16
Link to strategy
Description
We aim to retain, engage and develop
our talented people. Since 2014
we have monitored voluntary staff
turnover to highlight any signs
of demotivation or other people-
related issues and include both
corporate and shopping centre-
based employees in this measure.
Performance
In 2016, voluntary staff turnover
remained low at 10.9%. The small
increase compared with 2015 was
due to a slightly higher number
of leavers in our French and UK
shopping centre businesses.
However, the turnover number still
remains low compared to wider
industry averages.
More in the Business Review on pages 22 to 29
More in the Our people section on page 40
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
EXECUTIVE TEAM
Managing the business
The Group Executive Committee (GEC), formed and chaired by David Atkins, comprises the
senior management of the business. The GEC is responsible for creating long term strategic
objectives for approval by the Board and implementing the agreed strategy.
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HAMMERSON PLC ANNUAL REPORT 2016
7
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— 1 —
Jean-Philippe Mouton*
Managing Director, France
— 2 —
Timon Drakesmith*
Chief Financial Officer
— 3 —
Mark Bourgeois
Managing Director, UK and Ireland
— 4 —
David Atkins*
Chief Executive
— 5 —
Sarah Booth*
General Counsel and Company Secretary
— 6 —
Gérald Férézou
Deputy Managing Director, France
— 7 —
Peter Cole*
Chief Investment Officer
— 8 —
Andrew Berger-North
Director, UK Retail Parks
* See biographies on pages 120 to 121.
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
BUSINESS REVIEW
This Business Review provides an overview of the performance of our sectors during 2016.
UK shopping centres
2016 was a busy year for UK shopping centres with the Grand Central acquisition, the
opening of two new centres and another set of strong operating results from our existing
portfolio. We have also seen good performance in the second half of the year, with retailers
keen to take space in our prime centres.
Table 9
Operational summary
Key metrics
31 December 2016
31 December 2015
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Prime shopping centres are differentiated from
secondary or tertiary centres by their scale,
catchment size and superior brand mix. They
include large anchor tenants, flagship stores for
international brands and offer shoppers catering
and entertainment as well as retail. Prime
centres support retailers’ multichannel strategies
as they offer high sales, footfall and dwell times in
an attractive, well-managed environment which
provides a mixture of leading brands, food, leisure
and digital infrastructure. Online sales penetration
continues to grow and accounted for 15% of total
retail spend as at December 2016 according to
the ONS. Leases are generally long-term, at least
10 years duration, with upward-only market rent
reviews at five year intervals.
UK consumer spending grew by 3.8% in the final
quarter of 2016 (Source: Barclaycard). Currency
devaluation has had a favourable impact on
tourist spending, but is expected to increase
inflation in 2017 which may adversely impact real
spending power and the input costs for retailers.
Nevertheless, retailers enjoyed good Christmas
trading and UK consumer confidence has
remained resilient.
Investment volumes in 2016 totalled £2.7 billion
which was approximately 40% lower than in 2015,
with the only prime centres traded being Grand
Central, Birmingham and Merry Hill, Dudley.
However, demand for prime assets continues,
with investment yields broadly unchanged during
2016, although secondary shopping centres have
suffered outward yield shift.
We have ownership stakes in ten of the top 50 UK
shopping centres (Source: PMA). We have over
2,000 tenants across our portfolio and 14% of our
centres are let to catering and leisure brands, an
increase of a third over the last five years.
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HAMMERSON PLC ANNUAL REPORT 2016
Like-for-like
NRI growth
%
Occupancy
%
2.4
2.1
97.8
98.3
Leasing
activity
£m
9.0
11.7
Leasing vs
ERV
%
Like-for-like
ERV growth
%
Retail sales
growth
%
+6
+4
1.6
2.8
(1.1)
1.3
Footfall
growth
%
(0.5)
1.1
Portfolio highlights
Like-for-like net rental
income growth
2.4%
(2015: 2.1%)
Leasing activity
£9.0m
(2015: £11.7m)
Acquired
Grand Central,
Birmingham
Opened
Victoria Gate, Leeds
and Westquay
Watermark,
Southampton both
BREEAM Excellent
schemes
Net rental income
Net rental income totalled £148.4 million in 2016,
and on a like-for-like basis increased by 2.4%,
compared with a 2.1% increase in 2015. The growth
in 2016 is driven by rent review settlements,
income from new lettings and increased car park
income. Four of our centres achieved annual like-
for-like NRI growth of more than 5% with the best
performing centres being Bullring, Birmingham
and Union Square, Aberdeen which benefited from
recent lettings and rent review uplifts.
Leasing, occupancy and ERVs
Tenant demand for space at our centres remained
strong, with 141 leases signed representing
£9.0 million of annual rental income and 48,300m2
of space. The reduction in activity compared with
2015 was due to the timing of lease renewals and
expiries at a number of centres. For principal
leases, rents secured were 6% above December
2015 ERVs and 6% above the previous passing
rent. Despite the continued tenant demand, ERV
growth slowed to 1.6% compared with 2.8% in
2015, although growth in the second half of 2016 of
1.1% was higher than the 0.5% growth achieved in
the first six months. Occupancy levels remained
high at 97.8%, compared with 98.3% in December
2015. The decrease was principally due to Victoria
Gate, Leeds which opened in October and where
occupancy was 90.5% at the year end.
We have applied our Product Experience
Framework and have delivered a number of key
leasing deals with international brands, luxury
operators and new catering offers to enhance our
centres. Highlights include:
– Five new restaurants at Cabot Circus, Bristol
including Côte, Brasserie Blanc and the UK’s
first L’Osteria
– Also at Cabot Circus, the first COS store
in the south west and Monki’s first store
outside London
– At Silverburn, Glasgow, Smiggle and Tortilla
opened their first Scottish stores
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– At Bullring, LinkStreet which joins the centre to Grand Central
was refurbished and remodelled to appeal to contemporary and
pop-up style retailers. Lettings were completed with new niche
brands including: Made.com; Religion Clothing; and Cereal
Killer Café
– Brent Cross, London celebrated its 40th anniversary by
welcoming three international brands: Urban Decay; Tesla
Motors; and Smiggle
In October we announced plans to upgrade the Riverside at The
Oracle, Reading. The project will cost £2.9 million (Hammerson’s
share) and be anchored by a new 167m2 glass-fronted pavilion let
to Comptoir Libanais. The scheme will also create a large public
events space and enhanced public realm.
Lease expiries and rent reviews
The portfolio offers a robust income stream, with a weighted
average unexpired lease term, including tenant breaks, of seven
years, and opportunities for rental growth. Leases subject
to rent reviews, break clauses or expiries offer the prospect
to secure additional rental income. Over the three years to
31 December 2019, these leases would provide additional annual
rental income of £8.0 million, or 6%, if renewed, or if reviews are
settled at current ERVs.
At 31 December 2016, nine units were let to tenants in
administration, equating to just 0.3% of the Group’s total
passing rents.
Sales, footfall and occupancy cost
Despite the heightened level of macro-economic uncertainty in
the UK, particularly associated with the EU referendum decision,
consumers remained resilient. Footfall across our portfolio was
0.5% lower than 2015. However this was ahead of the national
index which fell by 1.9% during the year.
Retailer sales were also disappointing, with sales, calculated on a
same-centre basis, 1.1% lower than in 2015. As reported at the half
year, Union Square has been adversely affected by the weak oil
price. Excluding this centre, sales across the portfolio decreased
by 0.3%, with the strongest performances at Silverburn and
The Oracle.
The occupational cost ratio, calculated as total occupancy cost as
a percentage of sales, increased from 19.2% at the beginning of the
year to 20.1% at 31 December 2016 due to changes in occupancy
cost and the tenant mix across the portfolio.
Disposals, acquisitions and completed
developments
In January 2016, we completed the sale of Monument Mall,
Newcastle for £75 million. Following its acquisition in 2011, we
redeveloped the 9,500m2 centre in 2013, and the sale crystallised a
£24 million profit on cost.
In February 2016, we acquired Grand Central for £350 million.
The 38,400m2 shopping centre in Birmingham is anchored by
a 23,200m2 John Lewis and sits above New Street Station, the
redeveloped major railway hub. The centre includes 40 premium
stores including Kiehls, L’Occitane en Provence and MAC and also
contains 20 casual dining brands including Paul, Pho and Tortilla.
In December 2016, we completed the sale of 50% of the scheme
to CPPIB, one of the existing joint venture partners in Bullring,
for £175 million. The transaction had been contracted at the
time of the acquisition, but was delayed due to a review by the
Competition and Markets Authority (‘CMA’). We fully cooperated
with the investigation and received clearance from the CMA in
July, allowing CPPIB to obtain EU merger clearance and complete
the transaction.
We recently opened two new centres: Victoria Gate, Leeds
in October; and Westquay Watermark, Southampton in
December. Victoria Gate is adjacent to Hammerson’s existing
centre, Victoria Quarter. The combined retail offer, has
been branded “Victoria Leeds” and provides 56,300m2, of
high-end stores and restaurants with over 115 brands. The
37,300m2 development provides Leeds with a 21st century retail
destination and includes a flagship John Lewis store, a casino, a
modern take on Victorian arcades with more than 30 shops and
restaurants and an 800-space multi-storey car park. Key brands
include Anthropologie, Aspinal of London, D&D London, Gant,
Hackett, Le Pain Quotidien, Nespresso, Russell & Bromley and
Tommy Hilfiger and the scheme has introduced 17 new brands to
Leeds and 11 to our UK portfolio. Four units remain to be let, which
will provide the opportunity to deliver ERV growth and finalise the
exciting tenant mix.
Westquay Watermark, is the UK’s largest dedicated restaurant
and leisure complex at 17,200m2 and was 95% let on opening.
The scheme has over 20 restaurants, cafés and bars, a Hollywood
Bowl and is anchored by a highly anticipated Showcase Cinema
de Lux. For a number of restaurateurs this is their first move
outside London and tenants include Bill’s, Cabana, Cau, Franco
Manca, KuPP, Thaikhun, The Real Greek and Wahaca. 50% of the
scheme was sold to GIC, Hammerson’s joint venture partner at
the adjacent Westquay shopping centre, in December 2016 for
£47 million. The development further confirms Westquay as the
leading retail, dining and leisure destination on the south coast.
Cabot Circus, Bristol
Positive places
We installed energy efficient air curtains at Brent Cross which have
delivered both gas and electricity savings, whilst improving the
ambient temperature of the centre. The new air curtains provide
a seal at the entrance that keeps cool air in during the summer
and out during the winter. Being unheated, the curtains use
little electricity.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Business review continued
UK retail parks
The retail parks’ occupational market remains strong, with healthy retailer demand for
space at the best locations. Whilst the investment market has been disappointing during
2016, our modern retail parks portfolio is well placed to outperform in 2017.
Table 10
Operational summary
Key metrics
31 December 2016
31 December 2015
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Retail parks are largely situated in out-of-town
locations with units being generally larger and
rents lower than in shopping centres. The better-
located parks are easily accessible by car and offer
free parking. The market is split into a number of
sub-segments, and we have chosen to operate in a
selection of these: shopping parks; hybrid parks;
and key homeware parks, where occupational
demand is strongest.
The occupational market remains strong, with
homeware and furnishing retailers seeking space.
Retailers with expansion plans include Dunelm,
Oak Furniture Land, ScS, Tapi and Wren Kitchens.
Also, Bunnings, the Australian hardware chain,
has opened its first UK store in St. Albans and
is investing £500 million to create a network of
stores across the UK.
Fashion retailers are also taking new stores on
retail parks as they offer a cost-effective way to
fill gaps in their store footprint between large
shopping centres and town centres. This trend
is leading to improved tenant fit-outs, greater
interaction with retailers’ multichannel strategies
to support click & collect sales and also a wider
food and beverage offer.
Consistent with the UK shopping centres
investment market, transaction volumes in 2016
were approximately one-third lower than the prior
year at £2.5 billion. Sellers have outnumbered
buyers during the year, particularly in the second
half of 2016 when a number of open-ended
funds sought to sell assets to generate liquidity
following the EU referendum decision. This
situation has forced investment yields to increase
by approximately 100bp during the year, although
there have been signs of stability returning to the
market at the beginning of 2017.
We are one of the largest direct owners of retail
parks in the UK and, at 31 December 2016,
our portfolio consisted of 18 convenient retail
parks, which provide a total of 400,000m2 with
320 tenants.
24
HAMMERSON PLC ANNUAL REPORT 2016
Like-for-like
NRI growth
%
Occupancy
%
2.4
2.6
98.6
98.4
Leasing
activity
£m
4.9
8.3
Leasing vs
ERV
%
Like-for-like
ERV growth
%
+4
+4
0.2
1.3
Footfall
growth
%
2.2
n/a
Portfolio highlights
Like-for-like net rental
income growth
2.4%
(2015: 2.6%)
Occupancy
98.6%
(2015: 98.4%)
Disposals
Thurrock Shopping
Park, Essex;
Manor Walks and
Westmorland,
Cramlington
Net rental income
Net rental income totalled £79.6 million and on
a like-for-like basis increased by 2.4% in 2016,
compared to 2.6% in 2015. The growth in 2016
being due to an increase in surrender premiums
received associated with pro-active tenant rotation
at parks including Ravenhead Retail Park, St Helens
and Imperial Retail Park, Bristol. The portfolio also
suffered from a small number of administrations,
including Brantano, in the first half of the year.
Leasing, occupancy and ERVs
Across the portfolio we signed 36 leases representing
£4.9 million of annual rental income and 24,100m2
of space. Occupancy levels remained high during the
year and were 98.6% at 31 December 2016, compared
with 98.4% at the beginning of the year. This high
occupancy has resulted in a lower level of year-on-
year leasing during 2016. For principal leases, rents
were contracted at 4% above December 2015 ERVs
and 28% above the previous passing rent.
ERV growth was 0.2% in 2016, compared with
1.3% for 2015. Whilst occupier demand for space
in the right location continues, particularly from
homeware retailers, high occupancy is limiting
opportunities to demonstrate ERV growth across
the portfolio. Key leasing transactions during
2016 included:
– New leases with fashion retailers such as Fat
Face, H&M, New Look and River Island as
well as homeware retailers including DFS,
HomeSense, Sofology and Tapi
– New drive-through concepts for Costa and
Starbucks at Imperial Retail Park, Bristol and
Central Retail Park, Falkirk
– Four leases at Elliott’s Field, Rugby securing
£1.2 million of new income at an average of 4%
above the December 2015 ERV
We continue to target tenants which will enhance
the retail offer at individual parks and grow
income and have a number of tenant engineering
opportunities planned for 2017.
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Disposals and developments
As part of the Group’s £500 million disposal programme
announced to part fund the Irish portfolio acquisition in
September 2015, we sold a number of retail parks in 2016, raising
total proceeds of £217 million. Thurrock Shopping Park, Essex
was sold in June for £93 million, which was £10 million below its
December 2015 valuation but significantly above the acquisition
cost of £64 million in 2012.
We also completed the sales of a solus property in Folkestone for
£7 million in July, Manor Walks, Cramlington for £78 million in
August and Westmorland Retail Park, Cramlington in November
for £36 million.
We are currently on-site with three significant development
schemes in Didcot, Rugby and Swansea and further details are in
the Development section of this Business Review on page 30. In
addition, we are reconfiguring the former Homebase unit at Fife
Central Retail Park, Kirkcaldy with works started in December
2016. Four new units are to be constructed with three already let
to Sofology, Wren Kitchens and DW Sports. The 4,300m2 project
will be completed in June 2017 with a total development cost
of £10 million. We continue to advance other smaller-scale
development projects across our portfolio as these deliver strong
financial returns and enable us to enhance the appearance and
tenant mix of our portfolio.
Elliott’s Field Shopping Park, Rugby
Positive places
Our collaboration with Costa, under which we built a Costa Eco-pod
at Wrekin Retail Park, Telford in 2015, has been extended. The
operational performance of the Eco-pod exceeded expectations
and we are in the process of delivering a second Costa Eco-pod
at our Parc Tawe development in Swansea. The success of this
initiative has also triggered work on designing a zero-carbon retail
park at the second phase of development at Elliott’s Field, Rugby.
HAMMERSON.COM
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Telford Forge Shopping Park, Telford
Lease expiries and rent reviews
Our portfolio benefits from a secure income stream, and at
31 December 2016 had a weighted average unexpired lease term of
eight years, including tenant break options.
Leases subject to rent reviews, break clauses or approaching
their lease expiry date, offer the opportunity to secure additional
income. Over the three years to 31 December 2019, these leases
would provide additional annual rental income of £3.0 million, or
4.5%, if renewed or if reviews are settled at current market rents.
At 31 December 2016, there were just two tenants in
administration representing £0.2 million of income, both of which
continue to trade.
Customer insight and footfall
We have begun to collect footfall data across our portfolio in order
to enhance our customer insight. For the year to 31 December 2016,
visitor numbers increased by 2.2%, 290 basis points ahead of the
Springboard Retail Parks index of -0.7%.
Also during 2016, we completed the second phase of our in-depth
customer surveys to better understand consumer opinions about
our parks and existing or prospective tenants. We found that
customer satisfaction has improved by 3% across our portfolio,
dwell times and the average number of shops and restaurants
visited have both increased by 8% and catering visits have
increased by 7%.
This feedback from our shoppers has enabled us to improve our
customer services provision at a number of parks, an example
being the installation of Amazon lockers at Elliott’s Field Shopping
Park, Rugby.
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Business review continued
France
During 2016 we have continued to attract new tenants, enhanced the tenant mix across
our portfolio and delivered strong net rental income growth. The investment market has also
strengthened for prime retail destinations which has led to an increase in the portfolio’s value.
Table 11
Operational summary
Key metrics
31 December 2016
31 December 2015
Note: Figures presented on a proportionally consolidated basis.
Sector and portfolio overview
Prime shopping centres in France have similar
characteristics to those in the UK and Ireland.
Online retailing is not as advanced in France
compared with the UK, although it is growing
rapidly and retailers are beginning to focus on
their multichannel strategies in a similar way to
those operating in the UK.
French leases tend to be shorter than in the UK,
often of nine years duration, with three-year break
clauses, although in practice these are seldom
exercised. This situation enables landlords like
Hammerson to actively manage tenant mix to
enhance the brand offer. The retail environment
has been subdued during 2016 associated with the
ongoing terrorist threat, particularly in Paris, and
unsupportive wider macro-economic conditions,
such as high unemployment levels and low GDP
growth. The wider shopping centre market has
seen sales and footfall reduce.
Investment markets were strong in France,
although the total retail investment activity of
€4.4 billion was €1.2 billion lower than 2015 and
of this approximately 40% of sales were to foreign
investors. Due to a lack of assets on the market,
and the effect of quantitative easing, the strong
investor demand acted to reduce yields to around
4% for prime, successful shopping centres.
At 31 December 2016, our French portfolio
comprised 10 prime shopping centres, with five
located in or around Paris, including Italie Deux
and Les Trois Fontaines. Our other major centres
include Les Terrasses du Port, Marseille and Place
des Halles, Strasbourg. The three largest centres:
Les Terrasses du Port, Italie Deux and Les Trois
Fontaines account for two-thirds of the value
of the portfolio. There are over 1,000 tenants
across the portfolio, which attract almost
100 million visits each year.
26
HAMMERSON PLC ANNUAL REPORT 2016
Like-for-like
NRI growth
%
Occupancy
%
2.2
2.5
96.5
96.9
Leasing
activity
£m
9.0
7.2
Leasing vs
ERV
%
Like-for-like
ERV growth
%
Retail sales
growth
%
+5
+2
(2.2)
nil
3.1
0.6
Footfall
growth
%
2.8
(0.6)
Portfolio highlights
Like-for-like net rental
income growth
2.2%
(2015: 2.5%)
Retail sales growth
3.1%
(2015: 0.6%)
Disposal
Villebon 2, Paris
Net rental income
Net rental income totalled £89.3 million in 2016
and on a like-for-like basis increased by 2.2%,
compared to 2.5% in 2015. Les Terrasses du Port,
Marseille was the strongest performing centre,
with increased gross rental income and reduced
year-on-year operating costs, as the centre begins
to mature following its opening in 2014. As with
our UK shopping centres, we have been focusing
on increasing non-rental income and in 2016
this revenue stream increased to £5.4 million,
compared to £4.7 million in 2015.
Leasing, occupancy and ERVs
Our retenanting strategy has continued during
2016 and we signed 117 leases across the portfolio,
representing £9.0 million of annual rental income
and 35,500m2 of space. For principal leases, the
new income was 5% above December 2015
ERVs but 5% below the previous passing rent.
The variance to previous passing rent was due
to a number of leases signed at the beginning
of the year at Villebon 2, Paris, which we sold
in April, and the reletting of the former H&M
unit at Place des Halles, Strasbourg to Darty and
New Look. These tenants relocated within the
centre and enabled a coordinated retenanting
programme, including an upsized Zara, and helped
improve the tenant mix and footfall on the first
floor. Excluding these two factors, the figure would
have been 12% above the previous passing rent.
We signed leases with a number of international
brands, including brands new to the French
portfolio: MAC at Les Trois Fontaines; Bialetti at
Nicetoile and Espace Saint-Quentin, and Armani
Exchange and Coach, its first at a French shopping
centre, at Les Terrasses du Port. Other key leasing
deals during the year were:
– Kusmi Tea and Nyx at Italie Deux
– Veritas and Rituals at Les Terrasses du Port
– KOTON at O’Parinor, its first store in France
– ID Kids and Parfois at Place des Halles
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Consistent with the increase in sales, the occupational cost ratio
decreased during 2016 from 14.0% to 13.7% at 31 December 2016.
Lease expiries and rent reviews
Most of our French leases are subject to annual indexation, which
will be 0.1% in 2017. 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 7%. Leases expiring, or subject to tenants’
break clauses, over the three years to 31 December 2019 would
provide additional annual rental income of £2.8 million, or 11.2%,
if renewed at current market rents.
Disposals and developments
In April 2016, we completed the sale of Villebon 2 for €157 million
(£124 million). Along with the disposals of the UK retail parks
explained on page 25, this was part of the £500 million disposal
programme to part-fund the Irish loan portfolio acquisition.
In line with the Group’s strategy we are progressing extension
opportunities and other smaller-scale asset management
initiatives at our three major shopping centres, which would
significantly enhance these schemes and increase their catchment.
Further design work and leasing discussions are required
before these projects can be commenced, but they offer exciting
opportunities to strengthen our portfolio and deliver attractive
financial returns. Further details are provided on page 31 and on
page 187.
Les Terrasses du Port, Marseille
Positive places
At Italie Deux, Paris, our sustainability team established a
dedicated pop-up store, in the main mall area, to showcase the
work of new designers. 15 people, selected by Paris Initiative
Entreprise, were able to use the pop-up store for up to two weeks,
to sell their products or services. This initiative was a fantastic
opportunity for new entrepreneurs to test their offer in a low
risk, supportive environment, accessing thousands of potential
customers. Initiative Entreprise is part of Initiative France which
we have supported since 2011.
HAMMERSON.COM
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Les Trois Fontaines, Cergy-Pontoise
In May, the new Apple store at Les Terrasses du Port opened in a
striking glass unit on the terrace overlooking the Mediterranean
Sea. This is the first Apple store in our French portfolio and
welcomed over 7,000 visitors on its opening day and helped
increase footfall in the centre by 24% during 2016.
Occupancy of 96.5% was marginally lower than in 2015, principally
due to vacancies at Place des Halles associated with the retenanting
scheme and Jeu de Paume, Beauvais, which has performed below
expectations since opening in late 2015. Like-for-like ERVs fell by
2.2% in 2016, due to Jeu de Paume, where ERVs have been rebased
to reflect trading performance. Excluding Jeu de Paume, ERV
growth remains challenging and on the remainder of the portfolio
like-for-like ERVs increased by 0.2%, compared with no change in
the prior year.
At 31 December 2016 there were 29 units in administration, a
decrease of 20 during the year. These tenants all continue to
trade, represent only 0.5% of the Group’s passing rent and provide
opportunities to enhance the tenant mix.
Sales, footfall and occupancy cost
Over the course of 2016, retail sales increased by 3.1%, calculated
on a same-centre basis, significantly higher than the CNCC index
which fell by 0.1%. Footfall at our centres grew by 2.8%, and was
also above the CNCC index of -1.2%. The sales improvement came
despite our strong presence in the Paris region which has been
adversely impacted by the terrorist threat. The growth has been
achieved by our leasing strategy with new tenants boosting sales
and a strong performance from Les Terrasses du Port, which has
continued to grow since it opened in May 2014.
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Business review continued
Ireland
We are delighted to have secured the vast majority of the Dublin property assets during
2016 and have already completed a number of the asset management initiatives we anticipated
at the time of the loan acquisition. Dundrum Town Centre is Ireland’s pre-eminent shopping
and leisure destination and offers significant income growth opportunities.
Table 12
Operational summary
Key metrics
31 December 2016
Note: Figures presented on a proportionally consolidated basis and represent performance post property conversion only.
Occupancy
%
99.5
Leasing
activity
£m
0.8
ERV
growth
%
9.0
Sector and portfolio overview
Dublin accounts for over 70% of Ireland’s
total retail expenditure, 50% of national GDP
and supports retail demand due to its urban
area population of 1.3 million residents and
significant tourist traffic (9.6 million visitors in
2016). Ireland’s prime retail offer is concentrated
in the centre of Dublin around Grafton Street
and Henry Street, as well as a number of prime
shopping centres along the M50 motorway on
the outskirts of Dublin. The property market and
wider economy continues to experience strong
growth, although prime retail rents remain
comfortably below their peak levels of 2006/7.
A number of new retailers have recently entered
the Irish market, including COS, Victoria’s Secret
and & Other Stories; there are also numerous
other international retailers and food and beverage
operators seeking accommodation in Dublin.
The macro-economy has continued to perform
well with GDP growth of 4% expected in 2016,
again making Ireland the fastest-growing economy
within the EU. Growing employment, driven
by inward foreign investment, remains a key
driver of economic productivity. This growth
has underpinned the Irish property investment
market that remains strong. In 2016, shopping
centre investment volume was £2.0 billion,
although this was skewed by a small number of
large transactions including Blanchardstown and
Liffey Valley shopping centres which were both
sold to international investors.
Our portfolio has been secured through a joint
acquisition of a loan portfolio from the National
Asset Management Agency (NAMA) in October
2015, and the subsequent consensual agreement
to acquire the secured property assets from the
borrowers during 2016. At 31 December 2016,
the Group owned Dundrum Town Centre
(‘Dundrum’), Ireland’s pre-eminent shopping and
leisure destination in a 50:50 joint venture with
Allianz, having acquired ownership of the property
28
HAMMERSON PLC ANNUAL REPORT 2016
Portfolio highlights
Secured ownership
Dundrum Town
Centre and Dublin
Central in July.
Ilac Centre in
December
ERV growth
+9.0%
Occupancy
99.5%
in July 2016. We also wholly own the Dublin
Central development site and land adjoining
the Swords Pavilions shopping centre in north
Dublin. In December 2016, we secured a 50%
co-ownership with Irish Life, of the Ilac Centre
located on Henry Street, one of Dublin’s busiest
retail thoroughfares.
We are working towards securing the 50%
co-ownership with IPUT and Irish Life of
Pavilions shopping centre in Swords in north
Dublin and expect this final loan conversion to
complete by summer 2017.
Our total portfolio of Dublin assets will
encompass 220,000m2 of high-quality shopping
centre space, with over 300 tenants and annual
footfall of nearly 50 million. It also provides
27 acres of development land. Our share of the
total contracted rent for the portfolio will be
€45 million (£38 million).
In addition to the centre-based staff who
transferred to the Group when we secured
ownership of Dundrum, we opened a new office
in Dublin and we have recruited a team of 10,
with four individuals joining from the previous
Dundrum asset manager, Chartered Land. We will
continue to integrate the assets into our existing
UK operating structure to maximise efficiencies
and deliver our asset management strategy.
Net rental income
Net rental income totalled £14.0 million in
2016, with £1.5 million generated from Dublin
Central and the other development sites, with the
remainder from Dundrum. As ownership of the
property portfolio was secured during the year, the
net rental income only relates to the second half
of 2016, prior to which the Group received interest
income from the loan portfolio. During 2016, 10
rent reviews were settled, of which half were after
the property ownership was transferred. These
settlements were with tenants including Aldo,
Boots, BT2, Clarks, Coast and Dune. In total these
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Lease expiries and rent reviews
At 31 December 2016, the portfolio offered the Group’s longest
weighted unexpired lease term of 12 years, including tenant break
options, as well as significant opportunities for rental growth. The
portfolio was 8.3% reversionary and leases subject to rent reviews,
break clauses or expiries offer the prospect of securing additional
rental income. Over the three years to 31 December 2019,
these leases would provide additional annual rental income of
£2.5 million, or 10.4%, if renewed, or reviews are settled, at current
ERVs. This time period falls short of the most significant batch of
rent reviews in 2020, which, based on current ERVs, would deliver
a rental uplift of £1.9 million.
In addition to rent review and lease renewal uplifts, we have
identified a number of tenant engineering opportunities to both
enhance the tenant mix and generate increased rental income
and ERV. At 31 December 2016, there were no units let to tenants
in examinership.
Sales and footfall
Overall consumer sentiment has recovered strongly in January
2017 following some uncertainty in the latter half of 2016 and
confidence levels, as measured by ESRI, are at their highest level in
seven years and national retail sales grew by 3.4% in 2016.
As part of our integration activities we are upgrading the IT
infrastructure at Dundrum to improve the footfall and sales
data collection processes as well as introducing the Plus app
in 2017. This will bring the centre in line with the Hammerson
standard and provide new insight into the behaviours of our
Dublin shoppers.
Future developments
The portfolio contains a number of future development
opportunities at the Dundrum estate, Dublin Central and Swords
Pavilions. Further details of these potential schemes are on
page 187.
In addition, the redevelopment of Moore Mall South at the Ilac
Centre commenced in January 2017 and is due for completion in
May. The project involves the refurbishment of the mall area and
the reconfiguration of 10 units into five larger flagship stores. Four
of the new units have already been pre-let representing 78% of the
target income.
FaulknerBrowns has been appointed as the masterplan architect
for the Dundrum estate and work on the scheme design
has commenced.
Positive places
Since we took ownership of Dundrum Town Centre in July we have
supported the on-site team to deliver a 55% year-on-year increase
in mixed dry recycling, an increase of over 70 tonnes. No waste is
sent to landfill and waste to energy is being managed down with all
food waste now being composted.
HAMMERSON.COM
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Ilac Centre, Dublin
reviews delivered annual rental uplifts of 8%. In January 2017, we
have settled a further 21 reviews achieving rent uplifts of 7% on
£5.4 million (Hammerson’s share) of passing rent.
Non-rental income from car parks and the sale of advertising and
merchandising opportunities is a significant source of income
growth and has generated £2.3 million since we secured ownership
of the properties. In August, the car park tariffs at Dundrum were
increased by €1, however remain at a sizeable discount to parking
in the city centre. The tariff change has resulted in a significant
increase in car park revenue.
Leasing, occupancy and ERVs
Occupancy levels are high at 99.5% at 31 December 2016. Tenant
demand for space is strong, although the high occupancy levels
are currently limiting the fulfilment of all of the demand. We have
a clear leasing strategy to deliver rental growth and enhance the
tenant mix and overall experience at our new centres, and during
the second half of the year we signed six leases representing
£0.8 million of annual rental income and 3,300m2 of space. Key
leasing transactions included: Ecco; Five Guys; Gamestop; and
Oaxaca, a Mexican restaurant.
In November 2016, the refurbishment of Dundrum’s food court
was completed. The enhanced offering includes brands such
as: Chopped; Costa; Kanoodle; and Poulet Bonne Femme and
broadens the catering offer at the centre.
Also at Dundrum, ERVs grew by 9% in the second half of 2016.
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Business review continued
Developments
We are proud of the two new shopping centre developments in Leeds and Southampton
which opened in 2016. They align perfectly with our strategy of creating differentiated
destinations and add to the attraction of existing assets in both major cities.
On-site developments
Table 13
Scheme1
Parc Tawe, Swansea
Elliott’s Field Shopping Park (Phase 2), Rugby
Orchard Centre, Didcot
Total
Lettable area
m2
Expected
completion
Current
value2
£m
Estimated cost
to complete3
£m
21,200
7,900
8,700
37,800
Q4 2017
Q4 2017
Q1 2018
n/a
10
11
14
23
31
68
Estimated
annual income4
£m
2
3
3
8
Let5
%
53
44
39
Notes
1. Group ownership 100% for on-site schemes.
2. Valuation at 31 December 2016. Values are not included for extension projects
which are incorporated into the value of the existing property.
3. Incremental capital cost including capitalised interest.
4. Incremental income net of head rents and after expiry of rent-free periods.
5. Let or in solicitors’ hands by income at 17 February 2017.
Introduction
The Group has a pipeline of development
opportunities in the UK, France and Ireland,
including three on-site retail park schemes, three
major London developments and a number of
potential future projects across the portfolio.
These schemes provide the opportunity to
significantly grow the business and enhance
the quality of the Group’s existing portfolio
over the medium term. We carefully control
expenditure and will only commit to projects
when the risk level is acceptable. This will vary
for each project and is dependent on a variety
of factors including general market conditions,
pre-letting, construction and programme
certainty, and funding and financial viability. At
31 December 2016, committed capital expenditure
was low at £68 million, of which the majority
represented the remaining expenditure at Leeds
and Southampton and land acquisitions relating
to our major developments. This position means
the Group retains flexibility over the future
commitment of its development opportunities.
Completed developments
We completed two UK shopping centre
developments during 2016: Victoria Gate,
Leeds; and Westquay Watermark, Southampton.
These successful developments add two new
destinations to our portfolio and further details
are in the UK shopping centres section of this
Business Review on page 23.
On-site developments
In Swansea, we started on-site in December 2016
on a 21,200m2 £16 million redevelopment of Parc
Tawe which is due to complete at the end of 2017.
The scheme will create a modern, mixed retail and
leisure park with new public realm and improved
city centre pedestrian links. The scheme is 53%
pre-let with new leases signed with existing
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HAMMERSON PLC ANNUAL REPORT 2016
Portfolio highlights
Two schemes completed
during 2016
Victoria Gate,
Leeds and Westquay
Watermark,
Southampton
New on-site
retail park projects
in Didcot, Rugby and
Swansea
Good progress
made with three
major London
development
schemes
retailers: Odeon; Costa; Mothercare; and Toys
“R” Us, leaving the remaining eight new retail and
restaurant units to be let during 2017.
Elliott’s Field, Phase I opened in October
2015, providing 16,900m2 of high-quality retail
space anchored by a 5,600m2 Debenhams and
a 4,700m2 M&S general merchandise store.
Capitalising on the success of Phase I and the
strong demand from furniture and flooring
retailers, planning consent was granted for a
7,900m2 second phase on land adjacent to the
existing shopping park and construction started
in February 2017. The scheme is due to complete
by the end of the year and is currently 44% pre-let
including anchor retailers DFS and Sofology. We
plan for this to be our first carbon-neutral retail
park for building energy consumption.
In January 2017, we started on-site with the
£42 million expansion of the existing Orchard
Centre in Didcot. The scheme will create
8,700m2 of new retail space, increasing the size of
the total scheme to 30,000m2 and leases for 39%
of the estimated income have been exchanged
with M&S Food, H&M, River Island, TK Maxx,
Costa and Starbucks. Didcot has an affluent and
growing catchment and is located between Oxford,
Reading, Newbury and High Wycombe. The
scheme is scheduled to complete in early 2018 and
will deliver £3 million additional rental income.
Future developments
Our future development opportunities include
schemes in all of the Group’s portfolios, including
three major London developments. These have
the potential to significantly grow the business
and create modern iconic retail destinations.
During 2016 we have progressed a number of these
schemes, although there are further milestones to
achieve before we are in a position to commence
these projects.
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Brent Cross extension
In conjunction with our joint venture partner, Standard Life,
we have continued to advance plans for the extension and
refurbishment of Brent Cross shopping centre in north-west
London. This project forms part of the wider Brent Cross
Cricklewood regeneration plans with the extended shopping
centre comprising 175,000m2 of retail, catering and leisure use and
will be the principal retail destination for north London. Following
completion of the development agreement and the CPO Inquiry
in 2016, the next steps are to submit a reserved matters planning
application in spring 2017, receive confirmation of CPO powers,
sign lease agreements with key tenants ahead of a decision to
commence construction in summer 2018 with completion due in
2022. The Group’s estimated remaining development cost is in the
region of £475-550 million.
Brent Cross extension (architect’s impression)
Croydon town centre
The Croydon Partnership, a 50:50 joint venture with Westfield,
is progressing a scheme to redevelop the Whitgift Centre and
refurbish Centrale shopping centre, with the Group’s total future
costs in the region of £650-700 million. The scheme will establish
Croydon as the principal retail and leisure hub for south London
and is part of wider large-scale regeneration already underway
in the area. The Partnership owns key interests in the site and
controls 100% of Centrale and 75% of the Whitgift Centre. A new
outline planning application was submitted in October 2016. The
enhanced application included scheme revisions which were
outside the scope of the existing outline planning permission,
principally a new M&S anchor store and a redesign of the northern
end of the scheme. The revised design incorporates three levels
of retail with over 300 shops, restaurants and cafés, as well as
improved leisure facilities, public realm improvements and
residential homes. The decision on the new planning application is
expected by summer 2017 and, subject to finalising detailed design
and completing agreements with key anchor tenants, the earliest
start on site could be during 2018, allowing retailers to trade
through the busy Christmas period in 2017.
The Goodsyard
Bishopsgate Goodsyard is a 4.2ha site on the edge of the City
of London which is owned in joint venture with our partner,
Ballymore Properties. The planning application for a large
mixed-use development was called-in by the Mayor of London
in September 2015. In April 2016, following the GLA’s planning
officers’ recommendation to refuse the application, the Mayor
agreed to defer the application to allow further consultation
with the GLA’s planning officers and redesign elements of the
proposed scheme. This work is underway and we aim to submit the
necessary amendments and obtain determination by the Mayor
later this year.
Les Trois Fontaines extension
The extension of Les Trois Fontaines is part of a wider city centre
project in Cergy Pontoise. This project will add 28,000m² to the
existing shopping centre and has an estimated cost to complete of
£200 million. The project has been validated by the co-ownership,
Auchan and the City. Building permits and retail consent have been
obtained and pre-letting is progressing well.
Other schemes
We have a number of potential pipeline schemes in each of our
sectors which will enhance the overall quality of the Group’s
portfolio. During 2016 we submitted a planning application for an
extension to Union Square, Aberdeen and in Paris we progressed
a potential extension scheme at Italie Deux. Also, our new Irish
portfolio contains a number of exciting future projects at the
Dundrum estate, Dublin Central and Swords Pavilions.
The precise nature and design of these schemes are fluid and they
are at different stages of development. The speed of delivery for
these pipeline schemes will be dependent on a variety of factors
including: planning permission; retailer demand; anchor tenant
negotiations; land assembly; scheme design; funding; and financial
viability. Further details of these schemes are included on page 187.
Positive places
We were delighted to work in partnership with
Sir Robert McAlpine during 2016 on a project exploring the
Natural Capital implications of different technologies being
incorporated into two of our developments. The concept of Natural
Capital is not new but the work of the Natural Capital Coalition
and the publication of related protocols is bringing the debate to
the wider business community. The project produced fascinating
insight on how we might reflect capital other than financial in our
decision-making. The output from this work is available on our
sustainability website, www.sustainability.hammerson.com.
Our “True value of shopping centres” research demonstrated
the wider benefits of retail development with employment
generation having a positive impact way beyond the individuals
employed. We are in the process of updating this work and the
original reports are available on our corporate website,
www.hammerson.com.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Business review continued
Premium outlets
During 2016, we increased our two premium outlets investments in Value Retail and VIA
Outlets. They continue to deliver excellent income and capital growth and align with our
strategy of allocating capital to growing consumer markets.
Table 14
Operational summary
Brand sales (€m)2
Brand sales growth (%)3
Footfall (millions)2
Average spend per visit (€)2
Average sales densities (€000/m2)
Average sales densities growth (%)4
Occupancy (%)
Value Retail1
VIA Outlets1
Year ended
31 December 2016
Year ended
31 December 2015
Year ended
31 December 2016
Year ended
31 December 2015
2,562
8
34.6
74
15.1
6
96
2,380
11
33.3
71
14.3
8
96
437
7
12.7
34
3.9
19
92
374
10
10.2
37
3.3
6
87
1. Figures reflect overall portfolio performance, not Hammerson’s ownership share
and 2015 figures have been restated at 2016 exchange rates.
2. 2016 VIA Outlets figures include Festival Park since July 2016.
3. VIA Outlet figures include six months of Festival Park sales for both 2016 and 2015
4. Average sales densities have been calculated as a weighted average based on the
average occupied GLA. Festival Park has been excluded for both 2016 and 2015
due to information being unavailable.
Sector and portfolio overview
Outlets offer a distribution channel for brands to
sell excess inventory at a material discount to the
original price. Premium outlets are at the top of this
sector, providing international fashion and luxury
brands with an environment similar to a full priced
store, where retailers are able to maintain and
protect their brand identity.
Over recent years, the European outlets sector
has seen both strong sales growth and increasing
investor demand, and investment yields have
reduced during 2016. However, transactions are
relatively infrequent with many traded off-market,
particularly at the higher end of the outlets sector,
where our portfolios have chosen to operate.
The market has strong demand for discounted
luxury and fashion items from international tourists,
in particular from China, India, Russia and the
Middle East. In 2016, spending patterns of wealthy
tourists have been influenced by security concerns
and currency movements. Reduced spending by
Chinese visitors has been mitigated by growing
demand from other international travellers.
Our exposure to the sector, which has increased
over recent years, is gained through our long-term
partnership with Value Retail and also through
VIA Outlets, a joint venture established in 2014.
Both portfolios are externally managed, although
the Group has a strong relationship with both
management teams and Timon Drakesmith is a
Board member of Value Retail and is Chairman of
the VIA Outlets advisory committee. The sector
has many similarities with our directly managed
properties and we utilise the knowledge gained
to enhance the brand experience across our
other portfolios.
32
HAMMERSON PLC ANNUAL REPORT 2016
Portfolio highlights
Strong brand sales growth
Value Retail
+8%
VIA Outlets
+7%
Developments
Fidenza extension
opened and
Bicester Phase 4
commenced
Acquisitions
Additional sponsor
stakes acquired in
Value Retail.
VIA Outlets acquired
five outlets
Value Retail (“VR”)
Strategic overview
VR operates nine high-end shopping-tourism
Villages in the UK and Western Europe which
provide over 182,000m2 of floor space and more
than 1,000 stores. VR focuses on international
fashion and luxury brands and attracts long-haul
tourists and wealthy domestic customers. The
Villages, which include Bicester Village outside
London and La Vallée Village near Paris, are among
the most successful outlet centres in Europe.
The average sales density for the Villages is
€15,100/m2 with densities at Bicester Village
around €38,400/m2 representing growth of 7.9% in
2016. The Villages have been intentionally located
close to Europe’s wealthiest cities and major
tourist attractions and targeted marketing enables
VR to benefit from the growing shopping-tourism
market. In total, over 160 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. This strategy has
enabled VR to deliver annual compound brand
sales growth of over 15% since 2006 and during
2016 VR enhanced their management team through
external recruitment.
We hold interests in the VR holding companies as
well as direct investments in the Villages. When
these holdings are combined, at 31 December 2016,
the Group had an economic interest in the net
assets of VR of 40%.
Acquisitions and disposals
In December 2016, we acquired additional
sponsor stakes in VR holding companies for
£41 million, increasing our sponsor interest to
25%. We also sold our minority stake in VR China
for £8 million, crystallising a profit of £1.3 million.
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Performance in 2016
Against a more challenging macro-economic environment and a
slowdown in long-haul tourism growth, particularly from China,
sales growth is slightly lower in 2016 at 8%, compared with 11%
in 2015. Performance has varied across the Villages, with strong
growth at Bicester, Oxford, La Roca, Barcelona, and Kildare,
Dublin, the latter Village benefiting from the opening of a major
extension in late 2015. However, La Vallée Village, Paris has seen a
more subdued performance, with reduced tourist visits associated
with the continuing terrorist threat in Paris.
VR have redirected promotional activities towards both a more
diverse tourist market and high-end domestic customers. They
are also proactively evolving and improving the brand mix at
the Villages and enhancing the customer experience through
refurbishment, enhanced customer services and extensions. This
strategy boosted sales growth in the second half of 2016 with
growth of 10%, compared to 5% in the first half of the year.
Developments and extensions
At Fidenza Village, Milan a new 3,300m2 extension opened in
October 2016. Leasing demand has been strong with new boutiques
opened by Dsquared2, Jil Sander, Nike, Roberto Cavalli and a new
restaurant, Villano. At 31 December 2016, the Village occupancy
rate is 91% with only seven units to let.
At Bicester Village, the demolition of the former Tesco store was
completed and construction on the 5,800m2 extension commenced
in the second half of 2016. The project, due to open in October 2017,
will introduce 34 new brands, over 500 new car parking spaces and
enhanced road access.
VIA Outlets (“VIA”)
Strategic overview
VIA is an outlets joint venture formed in 2014 in partnership with
APG, Value Retail and Meyer Bergman in which Hammerson
has a 47% stake. VIA’s strategy has been 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 through active asset and development
management. It reached this target in late 2016 through the
acquisition of four outlets and management intend to focus on
the integration and improvement of the operational efficiency
and performance of the portfolio in 2017. At 31 December 2016,
VIA operated eight centres providing 148,000m2 of floor
space and 680 stores across seven European countries.
Major centres included Freeport, near Lisbon, Batavia Stad,
near Amsterdam, Fashion Arena, near Prague, and Festival
Park, Majorca.
With some oversight from VR, the VIA team enhances 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 and total footfall.
Acquisitions
In July 2016, VIA completed the acquisition of Festival Park,
Majorca with the Group’s share of the acquisition price being
€44 million. The 33,000m2 centre includes an 8,000m2 cinema and
attracted 4.4 million visitors in 2016. VIA management has already
commenced work to improve the brand mix and enhance the food
and beverage offer at the centre.
In November 2016, VIA agreed to acquire four outlet centres from
the IRUS fund, with the Group’s share of the acquisition cost being
€170 million. All of the centres are located close to major cities,
with the largest centre at 29,000m2 in Zweibrücken, Germany with
114 tenants and a sales density of €6,000/m2. The second largest
at 28,000m2 is in Porto, Portugal with the other centres in Seville,
Spain and Wroclaw, Poland. The latter centres have sales densities
ranging from €3,300/m2 to €4,000/m2. At 31 December 2016, we
had completed the acquisition of two of the assets, Seville and
Wroclaw with Zweibrücken completing in February 2017. The
acquisition of Porto is expected to be finalised in the spring. The
transaction increases VIA’s portfolio value to €1.2 billion, achieving
the original acquisition strategy.
Performance in 2016
VIA’s portfolio has performed strongly during 2016, particularly
Batavia Stad and Fashion Arena, and sales densities have increased
by 19% year-on-year. At Batavia Stad, significant upgrades have
been implemented in 2016 including 30 remerchandising projects
impacting almost a quarter of the scheme.
Occupancy at 92% was 5% higher than at the beginning of the
year following new lettings at a number of the outlet centres
during the year. Occupancy at premium outlets tends to be
lower than for shopping centres and retail parks due to the
greater remerchandising and retenanting activity.
Developments and extensions
At Batavia Stad, a 6,900m2 extension is due to open in early 2017
and will introduce 41 new units and increase space by 28%. Further
upgrades are being implemented including new façades and 40
remerchandising projects, including new brands Gant and Falke.
The tourist marketing strategy implemented in 2015 has delivered
a 37% increase in tax free sales during 2016.
The enhancement works at the food court at Fashion Arena
have now finished and 22 remerchandising projects have been
completed during 2016, including the opening of the first Polo
Ralph Lauren outlet store in central and eastern Europe. Tax free
sales were 37% higher in 2016 than 2015.
Work has started at Freeport, Lisbon on a major reconfiguration
and enhancement of the centre. The total lettable space will be
reduced through the closure of large warehouse-type units and
new smaller units will be let to premium retailers and restaurants.
This reconfiguration is accompanied by a refurbishment of the
existing space and works are due to complete in September 2017.
Positive places
VIA Outlets have completed a sustainability review in 2016
and will be implementing a work plan for the portfolio in 2017.
The centres vary in terms of configuration, construction
and age, and operate under a range of local regulations, making
current sustainability performance inconsistent. Nevertheless,
there are examples of excellence such as Landquart, Zurich which
provides renewable electricity to all tenants from an off-site
photovoltaic system.
HAMMERSON.COM
33
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
SUSTAINABILITY REVIEW
Positive Places
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. During 2016 we continued to deliver excellent sustainability outcomes. Our focus on
those issues most material to the business has produced significant achievements in both
environmental performance and social impact.
Table 15
Key metrics
2016
2015
Our sustainability strategy
Our five Positive Places Commitments provide a
clear and consistent framework for delivering our
sustainability strategy:
Challenge and Innovate
Challenging the status quo and trialling new
approaches and solutions to support the transition
to a more sustainable business model
Protect and Enhance
Protecting and enhancing our natural
environment by minimising resource
consumption and delivering restorative projects
Upskill and Inspire
Investing in our people, and recognising and
rewarding those that deliver change with
sustainability related objectives
Partner and Collaborate
Taking a stakeholder-led approach to create
collaborative projects and evolve from client
to partner
Serve and Invest
Delivering social value to the communities
we serve, measured in jobs, skills, civic pride
and investment
Each Positive Places initiative has outcomes that
link directly to at least one of the five Positive
Places Commitments. This structure ensures
our resources remain focused on the areas and
activities within the business where we can drive
real change. Examples of our activities in each of
these areas can be seen throughout the report.
See the Positive Places pages of
our website for more details of our
performance against our sustainability
targets.
1. Includes assets in England and Wales.
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HAMMERSON PLC ANNUAL REPORT 2016
CO2 intensity
(tonnes/
£m profit)
155
172
Electricity
consumption
-4%
-6%
Recycling
F and G EPCs1
68%
69%
11%
13%
Sustainability
highlights
Agreed
100%
renewable
electricity contracts across
the UK shopping centre
portfolio
Installed
130 kWp
photovoltaic array at
Westquay, generating
an average
6.4 mWh
clean electricity per month
Opened
2
BREEAM Excellent
shopping centres
1,000 people
supported into permanent
employment at our Leeds
Victoria development
9%
reduction in Carbon
emissions
How we deliver it
The selection of Positive Places projects and
initiatives is guided by the findings of our
materiality reviews. Working with both internal
and external stakeholders these regular reviews
ensure we remain focused on sustainability issues
that are business relevant.
Energy security and
demand
Waste management
Investment in our local
communities
Data on the above areas plus our overall carbon
emissions are provided in this section. Our full set
of material issues along with data and reporting on
all our other initiatives and projects can be found
on the Positive Places pages of our website.
Climate change and carbon
emissions
We have set carbon emissions reduction targets
for the business since 2006 and are pleased to
report further significant progress in reducing
our emissions. We have exceeded our 2016 target
of 3% year-on-year reduction in CO2 emissions,
achieving a 9% reduction across the managed
assets. A key contributing factor this year has been
the reduction in electricity consumption across
the UK portfolio but, we have also seen reductions
in gas consumption in France. Factoring in the
clean electricity contracts placed across our
shopping centres in the UK and Ireland brings
this saving up to 56% year-on-year, a saving of
20,000 metric tonnes of CO2.
Chart 17
Like-for-like landlord electricity consumption (mWh)
80,000
70,000
2,620
60,000
27,546
2,494
28,513
2,426
28,801
37,753
39,808
36,690
50,000
40,000
30,000
20,000
10,000
0
2014
2015
2016
UK Retail Parks
UK Shopping Centres
French Shopping Centres
Purchasing renewable electricity
Rising demand for clean energy from major purchasers will drive
electricity suppliers to continue increasing supply, contributing to
the decarbonisation of the grid. We have agreed 100% renewable
electricity contracts across the UK and Ireland shopping centre
portfolios. This has reduced carbon emissions by 20,000 tonnes for
our UK shopping centre portfolio and contributed significantly to
our being ahead of target in our reduction of carbon emissions.
Generating renewable electricity on site
In addition to purchasing renewable electricity, we are also looking
to increase our capacity for generating renewable energy on site.
We have achieved our 2016 renewables target by successfully
installing 130 kWp of photovoltaic panels in the UK. This is
currently generating an average 6.4 mWh of clean electricity
per month, all of which is used on site. We plan to extend our
renewable installations in 2017 both on the shopping centres and
retail parks.
Energy security and demand
Ensuring a stable and secure energy supply to our assets in the
face of rising pressure on network infrastructure is an increasing
business risk. A number of our sustainability initiatives focus
particularly on projects that look to reduce this risk through:
– reducing demand for energy
– purchasing renewable electricity
– generating renewable electricity on site
Reducing demand for energy
Electricity is the biggest contributor to our total carbon emissions
so is an important area for us to focus on. Our 2016 target was to
reduce operational electricity consumption from the like-for-like
managed portfolio by 6%. We have achieved 4% savings across the
year. The UK shopping centre assets have performed extremely
well, achieving 8% savings in consumption. Our investment in LED
at Bullring, Birmingham reduced electricity consumption by 20%
year-on-year. This generated savings of approximately £180,000
over the year to December.
Our retail parks and the French shopping centres have performed
less well in terms of demand reduction, although with notable
exceptions. Once adjusted for weather, the French shopping centre
portfolio achieved a reduction of 2% in electricity demand.
Gas is a significant contributor to GHG emissions from our French
portfolio because the electricity supply is largely nuclear and low
carbon. We have successfully reduced our gas consumption by 1%
in France on a like-for-like basis. Gas consumption has also fallen
by 11% in the UK but this is affected by weather patterns.
Chart 16
Total CO2e by Portfolio (mtCO2e)
40,000
34,157
35,336
31,727
30,000
20,000
10,000
14,144
0
2014
2015
2016
Location
based
2016
Market
based
UK shopping centres
UK retail parks
French shopping centres
Irish shopping centres
Westquay photovoltaic array
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Waste management
Resource use and waste generation are two key contributors
to climate change, depletion of scarce resources and loss of
biodiversity and habitat. Waste management is also a significant
cost for the business and for our retailers.
Waste management performance across the portfolios is variable,
with traditionally much better performance in the UK than
in France. This remains the case but we have seen significant
improvements at our French assets as the standards set at
Terrasses du Port are implemented at other sites.
We set a stretching recycling target for the managed assets at
85%, but some of our UK assets are achieving this, notably Cabot
Circus. Success can be affected by how much recyclable waste is
backhauled by our retailers but we will maintain this target for
the assets.
Our continued focus on recycling has significant cost benefits.
The avoidance of Landfill Tax produced savings of £2.3m for our
tenants in 2016. This was further supported by £582k in income
generated from sale of waste.
The increase in restaurants across the portfolios generates
significantly more organic waste which is costly to manage. We
have trialled two new waste management technologies specifically
to address this issue. Biowhale – a system for more effective storage
of organic waste, has been trialled at Westquay and Westquay
South. This has reduced the number of lorry trips to and from site
and had co-benefits of improving waste separation by tenants.
A waste digester has been installed at Victoria Gate which turns
organic waste into water with the use of enzymes.
Waste management is also a material issue for our development
schemes. We set ambitious targets for our development teams
and this year all our schemes have achieved well in excess of 90%
diversion from landfill for construction and demolition waste.
GHG emissions 2016
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 2015 to 30 September 2016. 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 and
location-based methods.
Independent assurance
Total Scope 1, Total Scope 2, Total Scope 3, and Total GHG
emissions 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.
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 Places pages of our website
at www.sustainability.hammerson.com.
Chart 18
Group waste management savings (£000)
3,000
2,500
130
269
2,000
2,130
2,039
582
2,333
1,500
1,000
500
0
2014
2015
2016
Income from sale of waste
Savings from averted landfill tax
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HAMMERSON PLC ANNUAL REPORT 2016
GHG emissions 2016
Table 19
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
Variations from the financial statements are set out above.
Emissions factor data
source
We have sourced our emissions factors from 2016 DEFRA GHG Conversion Factors for Company Reporting,
and additional sources including, but not limited, to IEA and Engie.
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 1/10/15 – 30/09/16*.
Target
18% reduction in like-for-like carbon emissions by 2020 against 2015 baseline using location-based
approach.
* Profit before tax derived from unaudited management accounts.
Table 20
GHG emissions disaggregated by country
Source
Total GHG emissions metric tonnes (Market-based factors)1
Total GHG emissions metric tonnes (Location-based factors)1
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
5,253
Totals
Scope 2: Indirect emissions from the use of purchased electricity, steam, heating and cooling
a. Indirect emissions from purchased/acquired electricity (Market-based)1
a. Indirect emissions from purchased/acquired electricity (Location-based)1
b. Indirect emissions from purchased/acquired heating
c. Indirect emissions from purchased/acquired cooling
Totals (Market-based emissions factors)1
Totals (Location-based emissions factors)1
Scope 3:
Business travel
Waste
Water
7,258
24,964
1,260
27
1,016
1,143
378
8,545
26,251
Global
emissions
(mtCO2e)
16,335
34,041
UK emissions
(mtCO2e)
9,907
26,065
France
emissions
(mtCO2e)
6,336
6,336
Ireland
emissions
(mtCO2e)
92
1,640
Global
emissions
(mtCO2e/£m)
74
155
5,136
100
17
2,962
14
17
2,993
5,349
21,507
16
27
5,392
21,550
738
554
230
2,139
86
0
2,225
1,909
1,909
1,244
0
3,153
3,153
267
564
127
958
35
0
0
35
0
1,548
0
0
0
1,548
11
25
21
57
23
0
0
23
33
114
6
0
39
120
5
5
2
12
Totals
2,537
1,522
1. Market-based emissions factors reflect the contracts we have in place for energy supplies. Our UK and Ireland shopping centre portfolio electricity contract is 100%
certified renewable energy with an emissions factor of zero.
Location-based emissions factors are national factors reflecting the emissions from all energy sources within the national grid network. We are reporting both for
transparency and to aid analysis with previous reporting years.
HAMMERSON.COM
37
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTSUSTAINABILITY REVIEW Sustainability Review continued
Investment in our local communities
Building and maintaining strong links within our local
communities directly supports the long-term success of our
assets. The local economic benefits of the investment that
accompanies a well-run shopping centre are significant and
our activities reinforce a positive circle of benefit generated by
additional employment and business opportunities. Thriving local
communities are a direct benefit to our business.
We have an extensive programme of community engagement
running at our managed assets and through our developments.
Our focus is on four key issues: employment and skills,
entrepreneurship, young people and health and well-being. All our
activities support one of these areas. Our financial contribution
has increased along with the number of charitable organisations
and community groups with which we engaged but we are clear
that it is the impact of our activities that really matters. This is
brought to life in the projects set out here and through the rest of
the report. More detail on these and other activities is set out in our
Community Engagement report and on the Positive Places pages
on our website.
Table 21
Community contributions (Hammerson Group)
Direct contributions (£000)
Indirect contributions (£000)
Total beneficiaries (number)
2016
2,197
629
434
2015
2,158
383
276
Our community engagement team has been very busy in 2016 with
the completion of Victoria Gate, Watermark and Merthyr Tydfil.
Extensive work with local authorities, our contractors and our
retailers has enabled us to reach some of the most disadvantaged
people, supporting them into employment. 82% of jobs generated
at Victoria Gate went to local people.
Let’s Talk Shop, our collaboration with Department for Work and
Pensions and Barnet Council at Brent Cross, has supported 200
local people into employment in retail and hospitality at Brent
Cross in the last two years. The model of providing a single point
of contact for retailers and local people along with skills training
38
HAMMERSON PLC ANNUAL REPORT 2016
Teenage Market
Over 100 young people
experienced trading through
our partnership with Teenage
Market in 2016
has proved so successful for our retailers that we are introducing it
across our other centres.
In France our entrepreneurship partnership with Initiative France
is still generating great outcomes supporting small businesses
through start-up. The success rate after three years for businesses
supported through the programme is 88%. This compares very well
with a national average of 66%.
Two new partnerships that have created impressive results in 2016
are Pop-Up Business and Teenage Market. Pop-Up Business runs
two-week, free to access training programmes for entrepreneurs
needing support to get their business ideas off the ground, hosted
in our shopping centres. We then provide space for these small
businesses to start trading in a low risk, supported environment.
Pop-Up Business has run in four of our assets in 2016 and we are
looking to run a programme across the whole portfolio with them
in 2017-18. 472 people have participated in the programme at our
assets so far with over 200 businesses started.
Pop-Up Business
School
472 people attended Pop-Up
Business training at our centres
and over 200 businesses were
started as a result.
Teenage Market offers young people an opportunity to trade from
a market stall for a day. Our initial event at Kirkgate Market, Leeds
in July was so successful we were asked to run a second one in
December. The Croydon Partnership ran a Teenage Market at
Whitgift and we plan to run these events more widely across our
portfolio in 2017.
Engaging our people
As part of our commitment to Serve and Invest in the communities
in which we operate, we have continued to invest in supporting our
employees to do just that.
Through volunteering
We have found that providing volunteering opportunities and
supporting employees in identifying their own volunteering
activities provides a range of benefits for our communities, our
employees and the business.
2016 was the 10th year for our annual Community Day in the UK
and our fourth year in France. Once again, the range of activities
available was wide, from introducing primary school children to
the world of shopping centre design to refurbishing the garden
of a community centre for adults with disabilities. Our aim with
Community Day is for as many people as possible across the
business to participate and benefit from getting to know colleagues
they do not normally work with and strengthening the bonds with
those they do. This year 60% of employees across the UK and 88%
in France took part in Community Day.
Beyond Community Day, we have developed local and national
relationships to ensure that volunteering opportunities are
available to our employees throughout the year. This year people
have participated in a range of activities including mentoring
with Urban Plan and Enabling Enterprise and a number of sports
challenges including the North Downs Walk for Alzheimer’s
Society and the Land Aid 10k.
We have continued to use the Butterfly Bank employee
engagement platform to manage and support activities, extending
the scope of the platform to include on-site contractors as well as
direct employees. The platform enables us to create and promote
volunteering opportunities centrally and allows our shopping
centre teams to create their own localised opportunities.
This has been very effective in driving engagement and
volunteering activity and we are delighted with the results in terms
of volunteering hours and participation. Leveraging a competitive
streak in our teams in a fun way has had a very positive impact for
local initiatives.
Across the Group, at least 499 volunteer days were delivered in
2016. Community Day represented 300 of those days with a further
199 days contributed in addition to the centrally organised event.
499 volunteering days delivered by
Hammerson employees in 2016
– 137 charities supported
– £200,000 donated to charitable causes
– Almost 2,000 actions taken by Hammerson employees
to support our communities
Through fundraising
As well as a local charity bursary run by each of our shopping
centres, we have two national charity partners selected by
our employees. We are currently supporting Macmillan and
Alzheimer’s Society. In our first year of this two-year partnership,
Hammerson staff have supported a number of activities and
raised £36,080, with an additional £16,889 match funding from
Hammerson. This brings total voluntary cash charity donations
from Hammerson to £216,000 for the year.
In addition to this, our teams have found ways to work more
strategically with our charity partners, looking at how we can
work together to support their charitable causes more directly.
With Macmillan we have run drop-in centres at our assets.
With Alzheimers Society we have developed our Dementia
Friendly Charter for our shopping centres and begun to provide
Dementia Friendly training across the portfolio. Highcross in
Leicester became the first UK shopping centre to be officially
recognised by the Alzheimer’s Society for its work in becoming
Dementia Friendly.
ESG Benchmarking scores
Table 22
Vigeo (2014/15 Biannual survey)
FTSE4Good/Sustainalytics
GRESB
DJSI
Oekom
CDP
Carbon Clear FTSE 100
EPRA CR Reporting
2016
2015
Robust
82
Green Star 68 6/16 in European
Listed Real Estate sector
69
C Prime
B
14/99
Gold Award
Robust
74
Green Star 76 6/13 in European
Listed Real Estate sector
67
C Prime
C
15/99
Gold Award
HAMMERSON.COM
39
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTSUSTAINABILITY REVIEW OUR PEOPLE
Our people
Talented people are crucial to the delivery of our commercial success. They apply their
specialist insight and expertise to creating and operating differentiated destinations that
deliver value for stakeholders. They negotiate and manage the partnerships that support an
efficient capital structure and strong operational base. Our people strategy ensures that we
recruit, nurture and retain the right people. We closely monitor our performance, with a
particular focus on creating the right culture, driving engagement, talent management and
diversity and have seen positive movement across all key metrics in 2016.
Delivering our business strategy
Our people strategies and activities are designed to
support the delivery of our business strategy.
They help us to attract talented people to our
organisation. They drive high levels of employee
retention, engagement and development; enabling
colleagues to grow and fulfil their potential. They
ensure that we remain focused on nurturing
industry leading leadership and management skills
and leveraging this capability every day. And they
create a dynamic and collaborative culture where
diversity is encouraged and embraced.
Culture
By value and scale of activity Hammerson is a large
organisation and yet we directly employ less than
600 people across the UK, France and Ireland.
This enables us to get closer to our people, to
understand what is important to them and where
we need to focus our energies in order to improve
performance, wellbeing and culture.
Our values – ambition, respect, collaboration,
and responsibility – underpin how we operate
on a day-to-day basis. They are embedded within
the organisation and drive our resourcing,
induction, development and performance
management processes.
As well as our values, we are focused on how we
can enrich our culture still further and, during
the course of 2016, this was achieved by the
ongoing implementation of our diversity and
inclusion strategy.
As part of our ambition to promote greater
diversity, and nurture an ever more inclusive
working environment, we delivered a series of
all employee events during the course of the
year celebrating International Women’s Day,
World Cultural Day, London Pride, National
Work Life Week and International Day of
Persons with Disabilities. Supported by a host of
external speakers, the impact of these events was
considerable, driving meaningful and sustainable
changes in attitudes and behaviours, further
strengthening the already positive culture that
exists within the business.
40
HAMMERSON PLC ANNUAL REPORT 2016
Our people
highlights
Headcount
572
UK 358
France 135
Ireland 79
Voluntary staff turnover
10.9%
UK 11.2%
France 10.1%
New joiners
87
UK 72
France 15
Internal moves and
promotions
26
The Company’s acquisition of the Dundrum
shopping centre in Ireland required us to establish
a new team in Dublin, many of whom transferred
to Hammerson from the previous owner. The task
was significant, requiring us to on-board a large
number of people within a short period of time.
More challenging was the need to implement the
change in a way that positively engaged our new
colleagues; welcoming them to the Company and
our ways of working.
On 7 July 2016, 131 new, Ireland based employees
joined Hammerson. The transition was smooth,
supported by an intensive induction and on-
boarding programme which focused heavily on
our values and ambition to drive an engaging and
inclusive culture.
Talent management
and succession planning
Talented people are critical to the success of
Hammerson. They enable the Company to deliver
its business strategy, to grow and to deliver the
financial returns sought by our stakeholders and
investors. Whilst we will always take opportunities
to strengthen the organisation with key external
appointments, we are committed to developing our
own talent pipeline, ultimately growing our future
managers and senior business leaders from within.
In 2016, our now well established UK Graduate
Programme once again delivered new talent to
the organisation. During the course of the year,
three of our Graduates gained RICS accreditation
and took up positions within the business.
Danielle Moyles, who joined the Programme in
2013, is currently on secondment to Value Retail;
thus gaining further exposure to the broader
Hammerson organisation.
Whilst recognising that everyone has a vital role to
play within our business, we continued to invest
significant time and energy in nurturing our high
potential employees during the course of 2016;
finalising personal development plans and potential
career paths for the vast majority. Our ongoing focus
in this area, which resulted in the Company filling
all of its senior management vacancies internally in
2015, yielded similar results in 2016.
Employee engagement and retention
Maintaining a highly motivated and engaged workforce with high
levels of retention drives commercial advantage. These are key
objectives for Hammerson.
We monitor employee turnover on a rolling 12 month basis. This
allows us to identify trends at an early stage and to take appropriate
actions when needed. In 2016 voluntary staff turnover within our
Group/UK corporate headquarters was 6.7% and churn within
our UK shopping centre management teams was 18.3%. In France,
turnover for the period was 10.1%. Stability within our Ireland
team will be vitally important as we grow our business there and
we will monitor data from this territory during 2017.
Having a consistent approach towards measuring employee
engagement within the Company has proved to be highly beneficial
and, in 2016, we continued to utilise the ‘Great Place to Work’
employee survey. The survey gives us a significant amount of
meaningful and objective management information which we then
share with our employees via a series of detailed presentations.
Employee survey highlights
– 81% employee participation rate
– 73% Trust Index Score in UK and France
– Less than 5% gender gap in employee engagement
– Highly engaged new Ireland team
– Exceptional scores for Corporate Social Responsibility,
Diversity and Culture
Within the UK our positive engagement score improved from just
under 70% in 2015 to 73% in 2016. We were also encouraged by the
progress made in nearly all areas of the business. Furthermore, we
achieved scores in excess of 80% in the areas of Culture, Diversity
and Corporate Social Responsibility; the latter two scoring 89%.
Our Irish team were new additions to Hammerson in 2016. We
wanted to assess their levels of engagement and to get an initial
sense of how well they had integrated into the business. Therefore,
we were encouraged to achieve a positive engagement score of 76%
within our Dublin headquarters and an impressive 81% with the
Dundrum shopping centre management team.
Whilst the results of our survey in France showed similarly high
levels of engagement, we were slightly disappointed that the overall
score dropped from 79% to 73%; albeit that 79% of employees
responded positively to the key engagement question “taking
everything into account I would say this is a great place to work”.
In 2014 we publicly stated a number of key diversity and
inclusion related targets for the business. One of these related to
employee engagement and the requirement for the gender gap,
as measured by the Great Place to Work survey, to be no greater
than 5%. In 2016 the gap was 3.4% in the UK and 5.4% in France,
demonstrating that our employee proposition and culture are
resonating positively with both our male and female employees.
HAMMERSON.COM
41
Danielle Moyles
A highlight was the appointment of Aurélie Siha to the position
of Finance Director in France in November 2016. Aurelie had
previously been identified on our senior management succession
plan and was promoted from her role as Investment Director.
This promotion also gave the Company female representation
on the France senior management committee.
Aurélie Siha
In looking to strengthen its strategic capability at the most senior
levels within the business, Hammerson created a new role in
2016; Managing Director UK and Ireland. As well as assuming
responsibility for the Company’s £5.9 billion retail portfolio in
these territories, the appointment of Mark Bourgeois, currently
Chairman of Revo (formerly the British Council of Shopping
Centres), will enhance our already experienced and capable Group
Executive Committee whilst also enabling the future growth of our
retail senior management team.
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOUR PEOPLE Our people continued
Learning and development
In addition to implementing our talent management and
succession strategies, we continue to invest heavily in a broad suite
of learning and development solutions; all designed to enable our
employees to grow and fulfil their potential.
Supporting our management population continues to be a key
priority for Hammerson and, during the course of 2016, a further
65 managers attended our in-house Management Development
Programme. Now in its third year, this modular programme – built
around the Company’s management competence model – has
been hugely successful and work has already begun to improve the
content and raise the bar still further from 2017.
As part of our commitment to upskill and inspire our people in
sustainability, a further three of our senior leaders attended the
Cambridge Institute for Sustainability Leadership course in 2016.
This programme gives senior executives the knowledge, confidence
and commitment to reconcile profitability and sustainability
and to lead the charge needed to create ever more desirable and
sustainable places.
Our ambition to become an ever more inclusive employer was
supported by our learning and development activities during
2016; a year in which all of our employees attended unconscious
bias training workshops. These sessions, which followed similar
programmes attended by senior management in 2015, were
designed to help everyone recognise the potentially negative
impacts of bias and how these can be overcome through broader
thought and actions. Such is the importance of the topic to
Hammerson, it will form the basis of our Learning Management
System pilot in 2017, becoming a key component of our e-learning
offering to employees later in the year.
Diversity and inclusion
During the last 12 months we have continued to implement our
Diversity and Inclusion strategy whilst undertaking a number
of additional activities; all designed to deliver an ever more
inclusive culture.
Our commitment to competency based selection and promotion
techniques continued to provide an encouraging gender mix
of appointments. Of the 33 professional and management
appointments made during the year 40% were filled by
female candidates.
When considering our senior management population, our
objective for at least 30% of such roles to be held by women has not
changed. By the end of 2016 this figure stood at 26.2%, with women
occupying 11 of the Group’s 42 senior management positions.
Within the UK and Ireland woman occupy ten of the 30 senior
management roles.
Our ambition to improve female representation at senior levels
within the business will continue, despite the challenge of the Real
Estate talent pool being dominated by men. To this end, we are
proud to be a founding member of the Future Boards Scheme. The
purpose of this initiative is to develop senior female executives and
help prepare them for full board and/or non executive roles. We are
currently progressing the implementation plans with our partners,
with the intention that one of our senior, female executives will
participate in the programme and that Hammerson will act as a
hosting board for a yet to be determined female executive from
another organisation.
We are mindful that much good work can be undone in the area
of diversity and inclusion if it is not underpinned by fair pay and
reward. For some years, we have undertaken a Group internal pay
audit where we compare the salaries, benefits and bonus payments
made to our male and female employees. The results of our 2016
audit showed a gender pay gap of 32% when comparing the mean
basic salaries of our UK and Ireland employees. In France, the
figure stood at just under 23%. The variances reflect the relative
over representation of male incumbents in our Board and senior
management roles. However, when we consider the salaries paid
to employees in similar roles, the mean for female employees was
higher in 50% of cases; a similar position to that we experienced
in 2015.
From 2018 we will publish our UK gender pay gap in line with the
government’s guidelines; a requirement we welcome as it should
help improve fairness and transparency across UK commerce
and industry.
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 23
All employees
Chart 24
Board
Chart 25
Senior management
(excluding Board)
Chart 26
Shopping Centre
Managers
296 276
8
2
31
11
13
7
Male
Female
Figures as at 31 December 2016
42
HAMMERSON PLC ANNUAL REPORT 2016
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FINANCIAL REVIEW
Another strong financial
performance
The Group has again delivered a strong financial performance, demonstrating our ability to
generate income and value growth. 2016 has also been a busy year with over £1.2 billion of
refinancing completed to enhance the Group’s financial position.
Highlights
IFRS Profit for the year*
£317.3 million
(-56.3%)
Shareholders’ funds*
£5,776 million
Adjusted EPS1
29.2p
(+8.6%)
EPRA NAV per share2
£7.39
Dividend per share
24.0p
(+7.6%)
Total property return3
5.7%
(+4.7%)
(+4.1%)
(2015: 12.4%)
* Attributable to equity shareholders.
1. See note 10B to the accounts for calculation.
2. See note 10D to the accounts for calculation.
3. See table 100 on page 182 for further analysis.
Presentation of financial information
The information presented in this Financial Review is derived
from the Group’s financial statements, prepared under IFRS.
A significant proportion of the Group’s property interests are held
in conjunction with third parties in joint ventures and associates.
Under IFRS, the results and net investment in these holdings
are equity accounted and presented on single lines in the income
statement and balance sheet.
Management principally review the performance of the Group’s
shopping centres, retail parks, other strategic and development
properties on a proportionally consolidated basis, to reflect the
Group’s different ownership shares.
Management do not proportionally consolidate the Group’s
premium outlet investments, which are externally managed by
experienced outlet operators, independently financed and have
operating metrics which differ from the Group’s other properties.
We review the performance of our premium outlet investments
separately from the rest of the proportionally consolidated
portfolio, with the key financial metrics for the Group being:
earnings contribution; property valuations and returns; and net
asset growth.
Within the Financial Review, the Financial statements and the
Additional Disclosures, the Group’s properties which are wholly
owned or held in joint operations are defined as being held by
the “Reported Group”, whilst those held in joint ventures and
associates are defined as “Share of Property interests”.
Further explanations of the distinction between the Group’s
different holdings is provided in note 1 to the accounts on page 137
and also in the Glossary on pages 194 and 195.
Alternative Performance Measures (“APMs”)
The Group uses a number of APMs, being financial measures which
are not specified under IFRS, to monitor the performance of the
business. These include a number of the Group’s key performance
indicators on pages 18 and 19 and many of these measures are
based on the EPRA Best Practice Recommendations (BPR)
reporting framework which aims to improve the transparency,
comparability and relevance of published results of listed
European real estate companies. The Group’s key EPRA metrics
are shown in table 93 within the Additional Disclosures section on
page 178.
For other APMs, the Financial Review and Additional Disclosures
sections contain supporting information, including a number
of reconciliations. Definitions for APMs are also included in
the Glossary.
HAMMERSON.COM
43
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Financial review continued
Profit for the year
The Group’s profit for the year, attributable to equity shareholders, under IFRS was £317.3 million, £409.5 million lower than 2015. This
was principally due to lower revaluation gains on the Group’s shopping centres and retail parks which suffered a net revaluation loss of
£13.4 million in 2016 compared with a net gain of £367.5 million in 2015.
Management principally review the Group’s profit on an “adjusted” basis to monitor the Group’s underlying earnings as it excludes capital
and non-recurring items such as valuation movements, profits or losses on disposal and other one-off exceptional items. This approach is
consistent with other property companies and we follow EPRA guidance to calculate adjusted profit. A reconciliation of IFRS profit to adjusted
profit for the year is shown in table 27.
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 140 and further details of the EPRA adjustments are provided in note 10 on page 148 to the accounts.
Table 27
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:
Loss/(gain) on the sale of properties and joint venture interests*
Net revaluation (losses)/gains on property portfolio*
Net revaluation gains on premium outlet properties
Debt and loan facility cancellation costs*
Change in fair value of derivatives*
Deferred tax on premium outlets
Other adjustments
Adjusted profit for the year (note 10B)
Adjusted EPS, pence
* Proportionally consolidated.
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
317.3
726.8
24.0
13.4
(138.4)
0.4
2.7
14.3
(3.0)
230.7
29.2
(14.9)
(367.5)
(174.1)
13.9
0.1
27.6
(1.0)
210.9
26.9
The Group’s adjusted profit in 2016 was £230.7 million, £19.8 million higher than in 2015. The table below bridges adjusted profit and adjusted
EPS between the two years and the movements are shown at constant exchange rates.
Table 28
Reconciliation of adjusted profit for the year
Including premium outlets
Adjusted profit – Year ended 31 December 2015
Net rental income:
Acquisitions
Disposals
Development and other
Like-for-like portfolio
Net administration expenses
Net finance costs
Value Retail and VIA Outlets earnings
Tax and non-controlling interests
Dilution impact of new shares
Exchange
Adjusted profit – Year ended 31 December 2016
44
HAMMERSON PLC ANNUAL REPORT 2016
Reported
Group
£m
76.1
11.5
(18.5)
4.7
6.4
4.1
(2.9)
(13.1)
–
(0.3)
–
(1.3)
62.6
Share of
joint ventures
Share of
associates
Adjusted profit
for the year
£m
116.7
12.8
–
0.4
0.1
13.3
(0.1)
12.8
(0.7)
(0.5)
–
1.7
£m
18.1
0.1
–
–
–
0.1
–
–
6.6
–
–
0.1
143.2
24.9
£m
210.9
24.4
(18.5)
5.1
6.5
17.5
(3.0)
(0.3)
5.9
(0.8)
–
0.5
230.7
Adjusted EPS
pence
26.9
3.1
(2.3)
0.6
0.8
2.2
(0.4)
–
0.7
(0.1)
(0.2)
0.1
29.2
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The increase in adjusted profit was driven by additional net rental income of £17.5 million. The like-for-like portfolio produced £6.5 million
higher rental income, acquisitions and disposals added £5.9 million and the Group’s developments delivered new income of £5.1 million. The
Group’s premium outlet investments in Value Retail and VIA Outlets contributed an additional £5.9 million of earnings associated with further
sales growth, particularly from Bicester Village. There was an increase of £3.0 million in administration expenses and finance costs increased
marginally by £0.3 million. The impact of higher debt levels was offset by the benefit of recent refinancing activity, which has reduced the
Group’s average cost of debt to 3.1%, and £12.1 million of additional interest income (at constant exchange rates) was received from the Irish
loans acquired in October 2015. The change in the £:€ exchange rate increased earnings by £0.5 million as the sterling value of the Group’s
overseas net rental income increased by more than the value of the euro-denominated administration and finance costs. In total, these
movements resulted in a 9.4% increase in adjusted profit and a 8.6% uplift in adjusted EPS.
Net rental income
Table 29
Analysis of net rental income
Proportionally consolidated, excluding premium outlets
Like-for-like investment properties
Acquisitions
Disposals
Developments and other
Exchange
Net rental income
Reported
Group
£m
194.7
11.2
8.6
7.8
–
222.3
Share of Property
joint ventures
Share of
associates
£m
102.1
12.8
–
8.0
–
122.9
£m
–
1.3
–
–
–
1.3
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
296.8
25.3
8.6
15.8
–
346.5
290.3
0.9
27.1
10.7
(10.4)
318.6
Change
£m
6.5
24.4
(18.5)
5.1
10.4
27.9
In 2016, net rental income grew by £27.9 million to £346.5 million, or £17.5 million at constant exchange rates. Net rental income from the like-
for-like portfolio increased by 2.2% during the year, with the most significant contributions being rent reviews at Union Square, Aberdeen and
Bullring, Birmingham and strong trading at Les Terrasses du Port, Marseille. 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, growth was 0.1%.
Further analysis of net rental income is provided in table 97 of the Additional Disclosures on page 180.
Acquisitions contributed £24.4 million of new income, principally from Grand Central, Birmingham in February 2016 and Dundrum Town
Centre, Dublin, associated with the conversion of the majority of the Irish loan portfolio in July 2016.
Disposals reduced income in 2016 by £18.5 million, reflecting the 2015 sales of Drakehouse Retail Park, Sheffield; Bercy 2, Paris and Grand
Maine, Angers and the sales in 2016 of Monument Mall, Newcastle; Villebon 2, Paris; Manor Walks, Cramlington and Thurrock Shopping Park,
Essex. Additional income from developments of £5.1 million is principally from those completed in 2015 including Elliott’s Field Shopping
Park, Rugby, Cyfarthfa Retail Park, Merthyr Tydfil and Jeu de Paume, Beauvais.
Administration expenses
Table 30
Administration expenses analysis
Proportionally consolidated, excluding premium outlets
Employee and corporate costs
Management fees receivable
Net administration expenses*
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
54.6
(8.5)
46.1
48.3
(6.0)
42.3
* In 2016, £0.4 million (2015: £0.3 million) of the Group’s proportionally consolidated administration expenses related to the Group’s share of Property interests.
Net administration expenses in 2016 were £46.1 million, an increase of £3.8 million, or £3.0 million at constant exchange rates, compared to
2015. This increase was associated with additional staff costs due to higher headcount to support our new acquisitions and Irish operations
which were partly offset by additional management fee income from Ireland.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Financial review continued
Cost ratio
The EPRA cost ratio for the year ended 31 December 2016 was 22.6%, a decrease of 50bp compared to 2015. The ratio is calculated on
a proportionally consolidated basis, excluding premium outlets, in line with EPRA best practice, and reflects total operating costs as a
percentage of gross rental income. The ratio is not necessarily comparable between different real estate companies as business models and
expense accounting and classification practices vary. The cost ratio calculation is included as table 99 of the Additional Disclosures on page 181.
The ratio of property costs fell from 11.3% to 10.7% reflecting lower vacancy costs, whilst the ratio of net administration costs to gross
rental income was 10bp higher in 2016 at 11.9%, associated with increased headcount to support the recent acquisitions and forthcoming
development projects.
Loss on the sale of properties
During 2016, we sold eight properties raising proceeds of £635 million, after deducting selling costs. Compared to their valuation at
31 December 2015, these sales resulted in a loss of £24.0 million, 85% of which related to three retail parks: Thurrock Shopping Park, Essex;
Manor Walks, Cramlington; and Westmorland, Cramlington. The losses were consistent with the impact of the outward yield shift suffered
across the rest of the UK retail parks portfolio during 2016 explained in the “Valuation change” section of this Review on page 48.
Share of results of joint ventures and associates, including investments in premium outlets
As explained on page 43, for management reporting purposes we review the Group’s premium outlet investments separately from the rest
of the Group’s other properties. Due to the nature of the Group’s control, VIA Outlets is accounted for as a joint venture and Value Retail is
accounted for as an associate.
The operating performance of our premium outlet investments is described on pages 32 and 33 of the Business Review and the aggregated
financial contribution to the Group is shown in table 104 of the Additional Disclosures section on page 184.
Share of results of joint ventures, including VIA Outlets
The Group has interests in 15 joint ventures and the share of the results of joint ventures under IFRS for the year ended 31 December 2016 was
£169.2 million (2015: £246.8 million) as analysed in table 31. Further details are provided in note 12 to the accounts.
Table 31
Analysis of share of results of joint ventures
Group’s share of results including premium outlets
Net rental income
Net administration expenses
Loss on sale of properties
Revaluation gains on properties
Net finance income/(costs)
Tax charge
Share of results (IFRS)
Adjustments (note 12B to the accounts)
Adjusted profit
Property joint
ventures
VIA Outlets
£m
122.9
(0.4)
–
10.7
16.1
(0.8)
148.5
(11.5)
137.0
£m
11.2
(2.3)
(0.1)
18.4
(1.3)
(5.2)
20.7
(14.5)
6.2
Year ended
31 December
2016
Total
£m
134.1
(2.7)
(0.1)
29.1
14.8
(6.0)
169.2
(26.0)
143.2
Property joint
ventures
VIA Outlets
£m
108.8
(0.3)
–
122.1
3.1
–
233.7
(123.1)
110.6
£m
9.8
(1.7)
(0.8)
10.4
(2.0)
(2.6)
13.1
(7.0)
6.1
Year ended
31 December
2015
Total
£m
118.6
(2.0)
(0.8)
132.5
1.1
(2.6)
246.8
(130.1)
116.7
The reduction in the share of results of joint ventures under IFRS of £77.6 million during 2016 was principally due to revaluation gains being
£103.4 million lower than in the prior year. The lower gains on these properties are consistent with the year-on-year change in revaluation
movements on the Group’s wholly-owned property portfolio. Net rental income from the Group’s share of Property joint ventures was
£14.1 million higher than in 2015, principally due to the conversion to property ownership of Dundrum Town Centre, Dublin in July 2016
which is held jointly with Allianz. On an adjusted earnings basis, profit from the Group’s joint ventures was £26.5 million higher in 2016.
46
HAMMERSON PLC ANNUAL REPORT 2016
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Share of results of associates, including Value Retail
The Group has two associates: Value Retail (“VR”), and a 10% interest in Nicetoile, Nice, where the Group is the asset manager and which
is proportionally consolidated for management reporting purposes. On an IFRS basis, the share of results of associates for the year ended
31 December 2016 was £137.1 million (2015: £160.6 million), of which £135.2 million related to VR and principally related to the property
valuation uplift of £120.0 million.
On an adjusted earnings basis the results of associates were £24.9 million (2015: £18.1 million), of which £23.6 million related to VR. The year-
on-year increase resulted from strong trading, particularly at Bicester, Oxford; Kildare, Dublin; and the two Spanish Villages, La Roca and Las
Rozas. See note 13 of the accounts on page 157 for further details on the Group’s associates.
Total adjusted earnings contribution from premium outlets
In 2016, the Group’s two investments in premium outlets contributed £29.8 million to adjusted profit, £6.6 million higher than in 2015
(£5.9 million at constant exchange rates), of which £6.5 million related to increased earnings at Value Retail. In addition, the Group has
advanced loans to Value Retail, from which the Group received £4.2 million (2015: £5.3 million) of interest income in 2016.
Further details of the aggregated profit contribution from our premium outlets investments is provided in table 104 of the Additional
Disclosures section on page 184.
Finance costs
Net finance costs on a proportionally consolidated basis, as shown in note 2 to the accounts, totalled £96.6 million in 2016, compared with
£98.1 million in 2015. Adjusted finance costs, which exclude items such as debt cancellation costs and the change in the fair value of derivatives
which are not included in adjusted earnings, totalled £93.5 million in 2016, an increase of £9.4 million in 2015, or £0.3 million at constant
exchange rates. The calculation of adjusted finance costs in shown in table 110 on page 186.
In 2016, interest received from our Irish loan assets of £17.4 million was largely offset by the additional interest expense associated with the
increased level of borrowing to support the acquisitions in Birmingham and Ireland.
During 2016, the Group’s weighted average interest rate reduced to 3.1%, compared to 3.8% for 2015. This reflected refinancing activity which
is explained in the “Financing and cash flow” section of this Financial Review on page 51.
Interest capitalised during the year was £5.1 million (2015: £5.3 million) and principally related to the Group’s developments in Leeds and
Southampton which both opened in the final quarter of 2016.
Tax
The Group has tax exempt status in the UK, France and Ireland and is exempt from corporation tax on rental income and gains arising on
property sales. On a proportionally consolidated basis, the tax charge for 2016 remained low at £2.7 million (2015: £1.6 million), the increase
being due to restrictions on the use of tax losses across the Group and increased tax in France. We have published “Hammerson’s Approach
to Tax for the year ending 31 December 2017” on the Group’s website www.hammerson.com which provides further information about the
Group’s tax strategy.
Dividend
The Directors have proposed a final dividend of 13.9 pence per share. Together with the interim dividend of 10.1 pence, the total for 2016
is 24.0 pence, representing an increase of 7.6% compared with the prior year. The final dividend is payable on 27 April 2017 in the UK and
28 April 2017 for South African investors, to shareholders on the register at the close of business on 17 March 2017. 4.9 pence will be paid as a
PID, net of withholding tax where appropriate, with the balance of 9.0 pence paid as a normal dividend.
The Company will not be offering a scrip dividend alternative, but for shareholders who wish to receive their dividend in the form of shares, the
Dividend Reinvestment Plan (DRIP) will be available.
South African secondary listing
To ensure Hammerson is accessing the widest pool of international capital, the Company completed a secondary listing of its shares on the
Johannesburg Stock Exchange (“JSE”) in September 2016. Hammerson’s register already included a highly diversified global shareholder
base, including a number of South African funds, and the listing further extended the depth and variety of investors and improved liquidity for
existing shareholders. The calculation of headline earnings per share as required by the JSE is in note 10C to the accounts on page 149.
HAMMERSON.COM
47
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Financial review continued
Net assets
During 2016, equity shareholders’ funds increased by £259 million, or 4.7%, to £5,776 million at 31 December 2016. Net assets, calculated on an
EPRA basis, were £5,865 million and on a per share basis, net assets increased by 29 pence to £7.39. The movement during the year is shown in
table 32.
Table 32
Movement in net assets
Proportionally consolidated, including premium outlets
31 December 2015
Property revaluation
Proportionally consolidated property portfolio
Premium outlet properties
Adjusted profit for the year
Loss on the sale of properties
Net actuarial losses on pension schemes
Change in deferred tax
Dividends2
Exchange and other
31 December 2016
Equity
shareholders’
funds
£m
5,517
(13)
138
125
231
(24)
(16)
(14)
(136)
93
5,776
Adjustments1
£m
56
–
–
–
–
–
–
14
–
19
89
EPRA
net assets
£m
5,573
(13)
138
125
231
(24)
(16)
–
(136)
112
5,865
EPRA NAV
pence
per share
710
(2)
18
16
29
(3)
(2)
–
(25)
14
739
1. Adjustments in accordance with EPRA best practice shown in note 10D to the accounts on page 149.
2. Dividends include the scrip dividend payment of £44.1 million which reduced EPRA NAV per share by 8 pence.
The increase in EPRA net asset value was principally due to the valuation surplus on the Group’s premium outlets which totalled £138 million.
Adjusted profit increased NAV by 29 pence, although this was largely offset by dividends, which reduced NAV by 25 pence. Exchange and other
principally includes foreign exchange movements associated with the strengthening of the euro during the year which increased EPRA NAV
per share by 14 pence. Further details of the reconciliation between IFRS and EPRA net assets are in note 10D to the accounts on page 149.
Investment and development properties
Portfolio valuation analysis
Table 33
Movement in portfolio value
Proportionally consolidated, excluding premium outlets
Portfolio value at 1 January 2016
Valuation (decrease)/increase
Capital expenditure
Acquisitions
Developments
Other
Letting costs
Capitalised interest
Disposals
Transfers
Exchange
Portfolio value at 31 December 2016
Reported
Group
£m
4,652
(25)
574
137
31
12
754
5
(669)
(222)
269
4,764
Share of
Property
interests
£m
2,478
12
749
1
24
5
779
–
–
222
27
3,518
Total
£m
7,130
(13)
1,323
138
55
17
1,533
5
(669)
–
296
8,282
Investment
Development
£m
6,741
(45)
1,182
20
40
16
1,258
–
(669)
304
296
7,885
£m
389
32
141
118
15
1
275
5
–
(304)
–
397
Valuation change
Chart 34 analyses the sources of the valuation change during 2016 for the property portfolio, on a proportionally consolidated basis excluding
premium outlets.
During 2016, the Group’s proportionally consolidated portfolio suffered a net decrease in valuation of £13 million. In the UK, shopping centre
values fell by £6 million and retail parks by £118 million. £39 million of this adverse movement was due to the increase in stamp duty land tax in
April 2016 and represents the majority of the adverse “Development and other” movement for both portfolios.
48
HAMMERSON PLC ANNUAL REPORT 2016
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Chart 34
Components of valuation change in 2016 (£m)
Proportionally consolidated, excluding premium outlets
114
120
60
0
(60)
(120)
42
10
(9)
(6)
(8)
(39)
(14)
(27)
73
62
85
35
34
3
1
(2)
(59)
(14)
(13)
(84)
UK shopping centres
UK retail parks
France
Ireland
(120)
(118)
UK Other and
developments
Total portfolio
Yield
Income
Development and other
Total
Investment yields were broadly unchanged for UK shopping centres, with income growth offsetting the impact of the stamp duty increase.
Equivalent yields increased by an average of 45bp for the UK retail parks portfolio, resulting in a valuation reduction of £120 million.
In France, investor demand for prime assets continues to be strong and yields for our portfolio have reduced by an average of 30bp during the
year, equivalent to a valuation increase of £114 million. This increase was partly offset by the rebasing of ERVs at Jeu de Paume, Beauvais which
accounts for the portfolio’s adverse income change of £27 million. The centre opened in late 2015 and has suffered from weak trading and
letting in 2016. The £14 million “Development and other” adverse valuation movement includes £6 million reflecting increased transfer taxes
in Paris which were introduced at the beginning of the 2016.
In Ireland, there was a £3 million valuation gain, representing income growth of £62 million being largely offset by the recognition of
£59 million of purchasers’ costs to secure the properties. There was also a £8 million gain in relation to the Irish development sites, principally
Dublin Central, included within the UK Other and developments portfolio. The remainder of the £34 million gain in this latter portfolio was
principally in relation to the recently completed schemes in Leeds and Southampton.
In addition to the Group’s proportionally consolidated portfolio, the premium outlets portfolio produced a revaluation surplus of £138 million,
of which Value Retail contributed £120 million and VIA Outlets £18 million. Investor demand continues to strengthen for the sector and the
valuation performance was driven by income growth, which accounted for two-thirds of the surplus, the remainder principally being due to
inward yield shift.
Further valuation and yield analysis is included in tables 100 and 101 in the Additional Disclosures section on page 182.
Capital expenditure
Capital expenditure totalled £1,533 million in 2016, although included the conversion to property assets of the Irish loans which were acquired
in October 2015 for £690 million and further details are in note 12D to the accounts. Acquisitions also included the purchase of Grand
Central, Birmingham for £350 million. Development expenditure totalled £138 million, principally on the completion of the developments
in Leeds and Southampton. Other capital expenditure of £55 million included refurbishment and asset management initiatives including the
reconfiguration of Place des Halles, the new Apple store at Les Terrasses du Port and a number of smaller scale UK retail park projects.
Returns
Table 36
Returns summary
Proportionally consolidated, including premium outlets
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.
%
Benchmark
4.6
1.1
5.7
(0.7)
8.3
13.8
Income return1
Capital return1
Total return1
FTSE EPRA/NAREIT UK index over one year
FTSE EPRA/NAREIT UK index over three years p.a.
FTSE EPRA/NAREIT UK index over five years p.a.
%
5.0
(1.6)
3.4
(8.5)
7.5
14.9
1. As the annual IPD indices have yet to be published, the benchmark returns shown above have been estimated and are calculated on a weighted 75:25 UK:France basis.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Financial review continued
Property returns
Table 36 compares the financial returns generated in 2016 with benchmark IPD indices. The Group’s benchmark is the IPD All Retail Universe
total return weighted 75:25 between the UK and French indices. The All Retail Universe indices include 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 2016. 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 of 8.3%.
The Group’s total return was 5.7%, 230 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 15.1%. The total return for the UK investment
portfolio was 1.9%, which was 20 basis points higher than the UK benchmark. The Ireland investment portfolio, which was included from the
date of property acquisition in July, generated a total return of 2.3% and reflects the impact of recognising the acquisition-related costs, such as
stamp duty and advisor fees.
In 2016, the Reported Group portfolio generated a total return of 3.8%, whilst properties held by our joint ventures and associates generated
a total return of 7.5%. Both portfolios exceeded the estimated Group 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 100 on page 182.
Shareholder returns
For the year ended 31 December 2016, the Group’s return on shareholders’ equity was 7.8%, which compares to the Group’s estimated cost of
equity of 7.6%. 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 valuation performance during the year.
Hammerson’s total shareholder return for 2016 was -0.7%, which represents an outperformance of the FTSE EPRA/NAREIT UK index by 780
basis points as the wider index has suffered larger share price reductions than the Company. Over the last five years, the Group’s average annual
total shareholder return has been 13.8%, compared to 14.9% 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 2016, the Group’s investment in joint ventures totalled £3,737 million compared with £3,214 million at the beginning of the
year, an increase of £523 million. Key changes during 2016 were the part disposals by the Group of 50% stakes in Grand Central, Birmingham
and Westquay Watermark, Southampton and the conversion to property of Dundrum Town Centre. We also made an additional investment in
VIA Outlets associated with its acquisition of three outlet centres in the second half of 2016.
The movement in investments in joint ventures during 2016 is shown in table 37 and further analysis is provided in note 12D of the accounts.
Table 37
Analysis of movements in investment in joint ventures
Group’s share of investment, including premium outlets
Balance at 1 January 2016
Irish loan portfolio transferred to Reported Group
Capital advances on conversion of Irish loan portfolio to property assets
Transfer from Reported Group
Share of results of joint ventures:
Adjusted earnings
Property revaluation
Other results
Distributions and other receivables
Capital advances/(repayments)
Foreign exchange and other movements
Balance at 31 December 2016
Share of Property
joint ventures
VIA Outlets
£m
3,103
(83)
92
222
137
11
–
148
(90)
(8)
131
£m
111
–
–
–
6
18
(3)
21
–
71
19
3,515
222
Total
£m
3,214
(83)
92
222
143
29
(3)
169
(90)
63
150
3,737
Investment in associates, including Value Retail
The Group’s investment in associates totalled £988 million at 31 December 2016, an increase of £220 million during the year. The increase was
principally due to foreign exchange translation gains of £60 million, the acquisition of additional sponsor interests in VR for £41 million and
revaluation gains on VR’s property portfolio which totalled £120 million. Two-thirds of the revaluation gains related to income growth with the
balance being due to yield compression and development profits. Further analysis is provided in note 13 to the accounts on page 158.
50
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Total investment in premium outlets
At 31 December 2016, the Group’s total investment in premium outlets, representing our share of VR and VIA, calculated on a consistent basis
with EPRA NAV and including the Group’s loans to VR, totalled £1,309 million (2015: £1,003 million). The increased investment in the year was
due to a combined valuation surplus of £138 million, additional investment of £112 million and foreign exchange gains of £76 million. These were
partly offset by VR repaying £55 million of loans to the Group. Further details of the Group’s aggregated investment in the sector are provided in
table 105 of the Additional Disclosures on page 184.
Financing and cash flow
Our financing strategy is to generally borrow on an unsecured basis on the strength of the Group’s covenant to maintain operational flexibility.
Borrowings are arranged to maintain short-term liquidity and to ensure an appropriate maturity profile. Acquisitions may 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 38 which illustrates the Group’s robust financial position.
Table 38
Key financing metrics
Proportionally consolidated, excluding premium outlets
Guideline1
Net debt (£m)
Gearing (%)
Loan to value2 (%) – old methodology
Loan to value2 (%) – new methodology
Liquidity (£m)
Weighted average interest rate (%)
Weighted average maturity of debt (years)
Interest cover (times)
Net debt/EBITDA (times)3
FX hedging (%)
Debt fixed (%)
Maximum 85%
No more than 40%
No more than 40%
At least 2.0
Less than 10.0
80-90%
At least 50%
31 December
31 December
2016
3,413
59
41
36
592
3.1
5.5
3.5
9.5
79
70
2015
2,968
54
38
34
931
3.8
5.7
3.6
9.6
90
61
1. Guidelines should not be exceeded for an extended period of time.
2. See page 52 for further explanation and table 109 on page 186 for supporting calculation.
3. EBITDA includes the interest received from the Irish loan assets. See table 107 on page 185 for supporting calculation.
Net debt position
On a proportionally consolidated basis, net debt at 31 December 2016 was £3,413 million. This comprised borrowings of £3,543 million and cash
and deposits of £130 million and a supporting calculation is included in table 108 on page 186. During the year, net debt increased by £445 million
and the movement is analysed in table 39.
Table 39
Movement in net debt
Net debt at 1 January 2016
Net cash inflow from operations
Acquisitions
Disposals
Development and other capital expenditure
Equity dividends paid
Value Retail distributions and repayment of loans and other cash flows
Exchange and other cash flows
Net debt at 31 December 2016
Total
£m
2,968
(232)
654
(639)
215
136
(85)
396
3,413
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Financial review continued
We have continued to reduce the Group’s average cost of debt with new issuance at low rates of interest whilst ensuring a solid funding
platform. The weighted average cost of debt for 2016 was 3.1%, a reduction of 70 basis points compared with 2015. Key financing transactions
during 2016 included:
– a seven-year €500 million bond was issued in March at a coupon of 1.75%, the Group’s lowest ever bond coupon
– a £420 million unsecured revolving credit facility was signed in April with a syndicate of eight banks for a maturity of five years and may be
extended by a further two years. The facility has an initial margin of 90 basis points and replaced a £150 million revolving credit facility due
to mature in April 2017 which featured an initial margin of 150 basis points
– a £400 million private placement signed in November with funding received in January 2017. This consists of senior notes denominated in
euro, sterling and US dollar and have a weighted average coupon of 1.7% and maturities of seven, nine, 11 and 14 years.
During the year we have benefited from low floating rates on the €1.5 billion facility used to fund the acquisitions in Ireland and Birmingham.
The financing activity noted above will enable the Group to cancel the remaining commitments on this facility in early 2017. At 31 December 2016,
liquidity, comprising cash and undrawn committed facilities, was £592 million, compared with £931 million at the end of 2015.
Exposure to exchange translation differences on euro-denominated assets is managed through a combination of euro borrowings and
derivatives. At 31 December 2016, the value of euro-denominated liabilities as a proportion of the value of euro-denominated assets was 79%,
compared with 90% at the beginning of the year. Interest on euro debt also acts as a hedge against exchange differences arising on net income
from our overseas businesses. The strengthening of the euro against sterling during 2016 has resulted in modest gains to net asset value
and earnings.
The Group’s unsecured bank facilities and the private placement senior notes contain financial covenants that the Group’s gearing, 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 changed its outlook from stable to negative in
June 2016 following the UK’s EU referendum decision, stating that the heightened economic uncertainty could dampen prospects for the UK
real estate sector. This was consistent with Moody’s change in outlook for the UK sovereign rating from stable to negative.
Loan to value (“LTV”) – New calculation methodology
The calculation of the Group’s LTV has been amended to include the Group’s share of net assets from our premium outlet investments in VR and
VIA Outlets within the “value” denominator. These assets were previously excluded from the calculation. The Group has been acquiring interests
in these investments over recent years and at 31 December 2016 our combined interest was £1.2 billion. The omission of these investments has
become more significant and the change in methodology provides better comparability with our peer group. The amendment is consistent with
our gearing calculation and the proportionally consolidated basis of the Group’s financial information as explained on page 43. Under the new
methodology, the Group’s LTV ratio at 31 December 2016 was 36% (2015: 34%), compared to 41% at 31 December 2016 (2015: 38%) under the
previous methodology. The supporting calculations for both bases are in table 109 of the Additional Disclosures on page 186.
At 31 December 2016 the Group’s share of net debt in VR and VIA Outlets was £468 million. On a proforma basis, proportionally consolidating
this with the Group’s share of the VR and VIA Outlets property valuations, would increase the Group’s gearing from 59% to 67%, whilst the
LTV would be 39%.
Chart 40
Debt maturity profile at 31 December 2016 (£m)
Proportionally consolidated, excluding premium outlets
800
600
400
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508
425
423
424
2471
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2017
2018
2019
2020
2021
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2023
2024
2025
2026
2027
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Revolving credit facilities
Secured debt
Euro bonds
Sterling bonds
Private placement
The above analysis excludes cash and deposits, the fair value of currency swaps and unamortised bank facility fees.
1. Debt maturing in 2017 has been refinanced by the £400 million private placement funds which were received in January 2017.
52
HAMMERSON PLC ANNUAL REPORT 2016
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RISKS AND UNCERTAINTIES
Effective risk management
The assessment and management of risk underpins our operating, financial and governance
activities. This activity is becoming ever more important to ensure the effective management
of the business during periods of heightened uncertainty.
Risk overview
Effective risk management is integral to the delivery of our strategy
and underpins our business model. Our risk management policies
are designed to reduce the chances of financial loss, protect our
reputation whilst supporting the growth of the wider business and
acting on opportunities when they arise.
The Board determines the Group’s risk appetite and assesses
the residual risk for each of the Group’s nine principal risks
using the Group’s Risk Management Framework document and
Risk Dashboard. The risk review and assessment process is further
explained on page 54 and the Risk Management Framework
is summarised on pages 55 to 58. The Board is able to confirm
that it carried out a robust assessment of the Group’s principal
risks during 2016, which are presented in this section of the
Annual Report.
Risk management responsibilities
The responsibility for risk management rests ultimately with the
Board. However, the foundations of our approach are instilled in
the Group’s culture and values (see Our People section on page 40).
The relatively low number of personnel across the Group supports
and 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 actions.
Chart 41 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 41
Key roles and responsibilities for the Group’s risk management strategy
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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
– Reviews the Risk Management Framework and prioritises actions and
allocates resources to effectively manage risk
Risk and Controls
Committee
– Responsible for integration of the Risk Management Framework
throughout the business
– Monitors compliance with the Group’s internal control systems
– Management of the internal audit arrangements
– Oversight of Health and Safety
Divisional management:
UK, France, Ireland and
Premium outlets
– Responsible for implementation of risk mitigation actions and
monitoring compliance with internal controls and procedures at the
operational level of the business
– Reviews the Risk Management Framework to identify risk trends and
recommend actions
– Oversight of project level risk management activities
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Risks and uncertainties continued
Risk review process
The Risk Management Framework (RMF) document is structured
around the Group’s nine principal risks, although it also contains a
number of other less material operational risks. The RMF sets out
mitigating actions, management responsibility and recent internal
and external audit reviews for each risk area and is summarised on
pages 55 to 58. To further aid risk assessment we produce a Risk
Dashboard which contains both current and forward-looking risk
metrics for each of the principal risk areas and which is updated
quarterly. As well as being regularly reviewed by management, the
RMF is available to all staff via the Group’s intranet.
As in 2015, we undertook a formal six-monthly management
review of the RMF, with comments and proposed changes from
each Committee being reported to the July and November Audit
Committee meetings. A key change to our risk reporting during
2016 was to increase the number of principal risks from eight
to nine, by splitting the “Business strategy” risk into “Macro-
economic” and “Retail market” risks to better reflect the nature of
the individual risks previously within “Business strategy”. Key risk
topics discussed during 2016 included:
– The impact on the business, both before and after the EU
referendum in June, particularly in respect of Macro-economic,
Property investment and Treasury risks.
– Catastrophic events such as terrorism or a cyber security attack.
– Risks associated with the conversion of the Irish loan portfolio
and recent Irish tax changes.
The RMF is also used to determine the annual internal audit
plan (see page 76), which is structured to ensure an appropriate
coverage of the Group’s principal risks, as well as review areas of
change within the wider business and risks which have not been
subjected to recent audit review.
Chart 42
Risk Heat Map
1 Macro-economic
6 Partnerships
2 Retail market
3 Property investment
4 Property development
7
8
9
Tax and regulatory
Catastrophic event
People
5 Treasury
Risk appetite
Exceeds Group’s risk appetite
In line with Group’s risk appetite
Lower than Group’s risk appetite
54
HAMMERSON PLC ANNUAL REPORT 2016
Risk appetite and assessment
As part of its risk management activities, the Board assesses
the residual risk for each of the Group’s nine principal risks. This
is done by assessing both the overall level of risk and impact of
specified mitigation actions. The level of residual risk is then
considered within the context of the Board’s risk appetite, which
reflects its combined attitude to financial, operational and
reputational risks across the business.
The residual risk levels at 31 December 2016 are shown on the
“Risk Heat Map” on chart 42, with the red-coloured area in the
top right-hand corner of the diagram being an assessment which
would exceed the Board’s risk appetite. The heat map also shows
the movement in the residual risk level during 2016. This shows
that the general risk environment in which the Group operates
has increased during the year, with a number of the Group’s
principal risks moving towards the red area on the heat map. This
trend is due to the heightened level of uncertainty associated
with major political events in the countries in which the Group
operates including the future impact of the UK’s exit from the EU,
election results and political developments in the rest of Europe,
and the associated volatility in financial markets. Not all of the
Group’s risks have increased during 2016. “Property development”
and “People” risks having reduced in line with the low level
of committed development expenditure and the successful
integration of the new Irish operations.
As adverse risk events rarely occur in isolation, this increased
general level of risk was discussed at the 2016 Board Strategy Day
in October and factored into the Group’s 2017 five-year Business
Plan. Additional mitigation steps introduced in 2016 include asset
disposals to control leverage and tighter senior management
approval processes over capital expenditure commitments
and recruitment.
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Link to our strategy
Change in residual risk assessment in 2016
Focus on growing consumer markets
Impact
Probability
Higher
No change
Lower
Create differentiated
destinations
Promote financial efficiency
and partnerships
Risk Management Framework
Further details of the Group’s nine principal risks as summarised in our Risk Management Framework are shown below.
Risk
Mitigation actions
Change during 2016 and outlook
1. Macro-economic
Executive responsibility: David Atkins
– We own and operate retail
– Our strategy of investing across a number
property in a number of property
sectors and European countries.
– Our financial performance is
directly impacted by the macro-
economic environment in these
countries. Key factors impacting
our retailers and shoppers are
disposable income growth,
unemployment levels, business
and consumer confidence,
interest rates and foreign
exchange movements.
Link to strategy
of property sectors and European countries
provides diversification which limits the
impact of adverse macro-economic trends in a
single market.
– We commission and evaluate research into
macro-economic trends and evaluate this
at the annual Board Strategy Day and when
preparing our annual Business Plan.
– We stress test our Business Plan projections
against a severe downside economic scenario
to verify that our current and projected
financial position is sufficiently flexible and
robust to cope with these scenarios.
– We have a resilient business model, with
modest gearing, effective foreign currency
hedging, long-term secure income streams,
a spread of debt maturities and the flexibility
to phase or halt our future expenditure
commitments, which provide protection
against market shocks.
2. Retail market
Executive responsibility: David Atkins
– We own and operate physical
– We believe our prime retail portfolio is best-
property in a dynamic
retail marketplace. Failure
to anticipate and address
developments in consumer and
occupational markets, such
as multichannel retailing and
digital technology, would result
in financial underperformance
and future obsolescence.
– Retailer profitability is under
pressure, particularly in the
UK due to increased costs
associated with business
rate changes, adverse foreign
exchange movements, the
introduction of the living wage
and apprenticeship levy.
Link to strategy
placed to continue to attract both retailers and
consumers as the retail marketplace evolves.
– We differentiate our destinations by applying
our Product Experience Framework to ensure
our portfolio remains attractive to both
retailers and consumers.
– We actively retenant our portfolio to introduce
relevant brands and increase the amount and
quality of catering, leisure and events available
to our shoppers.
– Favourable tourist trends across Europe
stimulate growth in premium outlet revenues.
– Our people have a wealth of retail experience
which benefits our internal teams and
enables us to understand and address retail
market trends.
– Through our Plus app we are able to
communicate directly with our shoppers and
gain detailed consumer insight.
Impact
Probability
Residual risk assessment: Medium/High
Economic growth has been mixed in 2016, with
a strong performance in Ireland, and a good
performance in the UK. The French economy
has remained more subdued.
There is heightened uncertainty associated with
the UK’s future exit from the EU, the outcome
of a number of major European elections and
the impact of the change in the US presidency.
This has resulted in a wide spectrum of opinion
about future economic performance.
Stock and foreign exchange markets have been
volatile and are highly sensitive to a range of
conflicting economic data and external shocks.
Interest rates are forecast to remain low for
the foreseeable future, although following the
reduction in sterling in 2016, UK inflation is
forecast to increase in 2017.
Against this backdrop we believe that we can
continue to generate stakeholder value by
focusing on our business model. We will also
ensure we retain operational and financial
flexibility and remain vigilant to any significant
macro-economic events.
See Business Review on pages 22 to 33
Impact
Probability
Residual risk assessment: Medium
We delivered strong like-for-like NRI growth of
2.2% in 2016, and have a proven track record in
growing rental income over the past decade.
Leasing volumes have remained stable across
our portfolios throughout the year and we have
been encouraged by the continued retailer
demand after the UK’s EU referendum decision.
Each of our portfolios is able to support retailers’
multichannel strategies, for example through
accommodating flagship stores in our shopping
centres and click & collect at our retail parks.
We continue to enhance our properties to
ensure they are able to offer and fulfil both
shopping and leisure requirements with an
increased focus on catering and events.
This strategy is key to continuing to attract
both retailers and shoppers in an evolving
retail market.
See Our strategy on page 4
HAMMERSON.COM
55
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Risks and uncertainties continued
Risk
Mitigation actions
Change during 2016 and outlook
3. Property investment
Executive responsibility: David Atkins/Peter Cole
– Poor investment decisions
involving acquisitions
and disposals result in
suboptimal returns.
– Opportunities to divest of
properties are missed, or are
limited by market constraints,
which reduces financial returns
and adversely impacts the
Group’s funding strategy.
– Property valuations fall due
to poor market conditions
adversely impacting the Group’s
financial position and delivery of
future plans.
Link to strategy
4. Property development
Executive responsibility: Peter Cole
– Property development is
inherently risky, with long
delivery times, high levels
of complexity with multiple
milestones and is management
intensive. Unsuccessful projects
result in adverse financial and
reputational outcomes. These
risks are heightened for major
retail schemes which often
involve wider area regeneration.
– Over-exposure to developments
increases the potential financial
impact of an economic downturn
and construction price inflation
which could overstretch the
Group’s financial capacity.
Link to strategy
– All significant investment decisions are
approved by the Board.
– Acquisitions are thoroughly evaluated and
supported by detailed research, financial
appraisals, due diligence and risk assessment.
– We commission and evaluate research into
investment and occupational markets and also
benchmark the performance of our properties
against both industry and target returns.
– Properties are held “ready for sale”, which
enables swift transaction execution.
– Our portfolio is high-quality and diversified by
market sector and geography which reduces
the impact on the Group of a downturn in a
single market or sector.
– Independent valuations are completed
twice yearly and thoroughly reviewed
by management.
– Management monitor valuation performance
and the annual Business Plan includes stress
tests to verify the Group’s ability to withstand
adverse valuation changes.
– We have a proven track record of successful
development delivery.
– Development exposure is included in annual
business planning approval and all major
commitments are approved by the Board.
– There are regular reviews of development
projects by management, including project
risk reporting.
– Clear project ownership and resourcing plans
with multi-disciplinary teams are agreed in
advance and supported by external expertise.
– An enhanced expenditure approval process
has been introduced in 2016, including
increased pre-letting thresholds.
– Detailed analysis is undertaken prior to the
project approval with clear milestones agreed.
– Cost risk is managed through fixed
price contracts, cost benchmarking and
appropriate contingencies.
– Post-completion reviews are undertaken to
capture key lessons for future projects.
Impact
Residual risk assessment: Medium
Probability
We have continued to recycle our portfolio
during 2016, with acquisitions of Grand Central,
Birmingham and a number of centres in VIA
Outlets towards the end of the year. We have
also completed £635 million of disposals.
Our Irish loan portfolio acquisition is currently
performing in line with our initial expectations
with future ERV growth forecast.
Real estate investment volumes have reduced in
2016, influenced by the uncertainty associated
with the EU referendum, with some sectors
such as UK retail parks having suffered falling
valuations. However, demand in the Group’s
other sectors: prime shopping centres in the
UK, France and Ireland and European premium
outlets, remains strong.
Property valuations are forecast to be broadly
stable in 2017. Valuations should be supported
by the continuing low interest rate environment
and investor demand for the secure income
yield provided by prime retail property.
See Business Review on pages 22 to 33
Impact
Residual risk assessment: Low
Probability
The completion of our two shopping centre
schemes in Leeds and Southampton in late
2016 has reduced our short-term development
exposure. At 31 December 2016 committed
capital expenditure was £68 million (2015:
£108 million) and our development portfolio
represented only 5% (2015: 5%) of our total
property portfolio.
During the year we continued to progress with
our major development schemes. There are
still a number of further milestones to achieve
in terms of planning and leasing before we can
commence on-site. We also need to ensure the
financial viability of the schemes is appropriate
to reflect the risks associated with the macro-
economic and retail market conditions at the
time of commitment.
See Business Review on pages 30 and 31
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HAMMERSON PLC ANNUAL REPORT 2016
Risk
Mitigation actions
Change during 2016 and outlook
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5. Treasury
Executive responsibility: Timon Drakesmith
– Poor treasury planning or
external factors, including
failures in the banking system,
may lead to the Group having
insufficient liquidity.
– The Group’s financial position
is unable to support the delivery
of our strategy, particularly
major developments.
– Deterioration in our financial
position due to property
valuation declines could result in
a breach of borrowing covenants.
– Significant fluctuations in
sterling or euro or a significant
increase in interest rates could
result in financial losses.
Link to strategy
– The Board regularly monitors financial ratios,
debt maturity, liquidity, interest rate exposure
and our hedging strategy.
– The annual Business Plan includes a financing
plan and stress tests to assess the Group’s
ability to withstand market shocks.
– Capital is provided by a diverse range of
counterparties, including banks, bond
investors and joint venture partners.
– All major investment approvals are supported
by a financing plan.
– Our high-quality and diversified portfolio
provides protection against valuation changes
in single countries or sectors.
– At 31 December 2016 we estimate that
property values (including premium outlets)
could fall by 35% and net rental income by
64% before our most stringent borrowing
covenants would be exceeded.
– We operate a hedging programme to mitigate
the impact of currency changes.
6. Partnerships
Executive responsibility: Peter Cole/Timon Drakesmith
– A significant proportion of
the Group’s portfolio is held
jointly with third parties. These
structures can limit the Group’s
control and may reduce liquidity.
– Operational effectiveness may
also be adversely impacted if
joint venture partners are not
strategically aligned.
– Our premium outlet investments
are externally managed and
this reduces control and
transparency over performance
and governance.
Link to strategy
– We have a diverse range of joint venture
partners and maintain strong working
relationships to ensure strategic alignment.
– Joint venture contracts provide liquidity for
partners whilst protecting ownership.
– Annual joint venture business plans 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 by Cushman
and Wakefield.
1. Includes Irish loan assets held in joint venture.
Impact
Residual risk assessment: Medium/high
Probability
Our borrowing levels have increased during
2016 to £3.4 billion, principally due to the
acquisition of Grand Central, Birmingham, the
conversion of the Irish loans to property assets
and adverse foreign currency movements.
However, at 31 December 2016, our balance
sheet and financial ratios remain robust, with
gearing of 59% and liquidity of £592 million.
We have access to a wide range of funding
sources including bank lending, bond and
equity markets and private placements. During
2016 we refinanced £1.2 billion which has
reduced future refinancing risk.
We expect to maintain a strong financial
position during 2017 and reduce debt levels
through further property disposals.
Interest rates are forecast to stay low and
the financial markets remain supportive for
companies in a strong financial position.
However, the weaker macro-economic outlook
could adversely impact future liquidity
and pricing.
See Financial Review on pages 51and 52
Impact
Residual risk assessment: Low
Probability
We continue to have a long and successful track
record of working effectively with a variety
of partners. Joint ventures provide capital to
support our strategy of owning prime property,
particularly major shopping centres.
At 31 December 2016, the proportion of
properties held within joint ventures or
associates(1) was 53%, compared with 49% at the
beginning of the year. The key change during
2016 was the formation of the Grand Central
joint venture in December.
We are confident that our joint venture
ownership structures do not adversely impact
liquidity with a number of joint venture stakes
successfully traded in the investment market
over recent years.
See notes 12 and 13 to the accounts on pages
151 to 158
HAMMERSON.COM
57
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Risks and uncertainties continued
Risk
Mitigation actions
Change during 2016 and outlook
7. Tax and regulatory
Executive responsibility: Timon Drakesmith
– There is an increasing burden
from compliance and regulatory
requirements which can act to
impede performance.
– There is a rising tax burden
aimed at the real estate sector
which adversely impacts
financial performance and
may threaten the Group’s tax
exempt status.
– The UK’s future exit from
the EU creates uncertainty
over the future UK tax and
regulatory environment.
Link to strategy
8. Catastrophic event
Executive responsibility: David Atkins
– Our operations, reputation or
financial performance could
be significantly affected by a
major event such as a terrorist
or cyber attack, power shortage
or civil unrest.
– Also, climate change could
adversely impact our operations,
through an environmental
incident such as flooding.
Link to strategy
9. People
Executive responsibility: David Atkins
– The Group has a relatively
small headcount which could
act to curtail the achievement
of business objectives,
particularly in times of
significant activity.
– A failure to recruit and
retain key executives and
staff with appropriate skills
would also adversely impact
corporate performance.
Link to strategy
– We maintain a low-risk tax status in the UK
and have regular meetings with HMRC.
– We have held a number of meetings with Irish
officials and advisors to discuss the potential
impact of future Irish tax changes.
– Regular monitoring of compliance with tax-
exemption rules.
– Planning undertaken ahead of future
regulatory and tax changes in conjunction
with expert advisors.
– We participate in policy consultations and in
industry-led dialogue with policy makers.
– Continuity plans at both corporate and
individual property levels are in place,
including a core crisis group for dealing with a
major incident.
– Enhanced physical security measures have
been implemented at our properties.
– We have regular dialogue with security
agencies to assess threat levels and best
practice.
– Internal audits were conducted in 2016 on
Business Continuity and Cyber Security with
improvement plans being implemented.
– Insurance cover is in place for property
damage, including from terrorism and flooding.
– Our sustainability strategy addresses
environmental risks. See www.sustainability.
hammerson.com for further details.
– The annual Business Plan contains a human
resources plan, covering team structures,
training and talent management initiatives.
– We have widened our succession planning
activities across the Group with plans for all
senior roles.
– Significant changes to the management
structure are approved by the Board.
– The annual appraisal process assesses
management capabilities and recommends
future training plans.
– We monitor staff turnover and employee
engagement across the Group and act on
trends and feedback.
Impact
Residual risk assessment: Medium
Probability
In addition to the regulatory and tax
uncertainty associated with the UK’s exit from
the EU, there are a number of tax changes which
have adversely impacted the Group. These
include increases in UK and French stamp duty
in 2016, the implementation of the Base Erosion
and Profit Shifting (BEPS) legislation and
amendments to Irish real estate tax in 2017. We
believe the Group is appropriately structured to
mitigate the impact of these future tax changes,
although continue to review the detailed
legislation.
Also, changes in the UK associated with the
living wage, apprenticeships and business rates,
whilst not having a significant direct impact
on the Group, are predicted to have an adverse
financial impact on the wider retail sector.
See Financial Review on page 47
Impact
Residual risk assessment: Medium
Probability
The threat level of a major incident at one of the
Group’s properties has increased during 2016.
Also, the wider use of digital technology across
the Group increases the risks associated with
cyber security.
We regularly review and continue to implement
improvements to our processes and procedures
to counter the threat of a major incident.
However, it is not possible to fully mitigate
these risks and the related impacts.
Impact
Residual risk assessment: Low
Probability
During 2016, we have successfully integrated
our new Irish platform with our existing
structures and processes.
We recognise the importance of motivating
and developing our staff and have introduced
a number of new initiatives during the year,
including a diversity and inclusion programme.
Also, towards the end of the year we have
repeated the “Great Place to Work” survey
and the results show high levels of employee
engagement and satisfaction.
See Our people section on page 40 to 42
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HAMMERSON PLC ANNUAL REPORT 2016
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Viability statement
The Directors have considered the future viability of the Group
taking into account its current position, principal risks and future
prospects. As explained on pages 4 to 7, the Group’s strategy
and business model are designed to adapt to structural trends
in property and retail markets and create long-term value for
our stakeholders.
Assessment of prospects
As explained on page 64, the Board held its annual Strategy
Day in October 2016 at which it reviewed the Group’s strategy,
performance and principal risks, taking into account macro-
economic and retail market projections from a number of external
commentators including Oxford Economics, OECD, PMA and
the Company’s banking advisors. The output from this event
was incorporated into the Group’s 2017 Business Plan which was
reviewed and approved by the Board in December 2016.
The five-year Plan is structured around the Group’s strategy
and includes financial projections, funding plans and portfolio
strategies, including acquisitions, disposals and developments. It
is compiled on a property-by-property basis and the key base case
assumptions included:
– Forecast economic conditions, including broadly stable GDP
growth and future interest and foreign exchange rates
– Stable property market conditions, including modest yield and
ERV movements
– Financial markets remaining available to the Group to refinance
maturing facilities and bonds
Assessment of period
There are a number of factors which influence the period
of assessment:
– The Group’s annual Business Plan covers a five-year period
– The Group has a stable, diverse, secure income stream with
the majority of leases containing five-year, upward only, rent
reviews with an average unexpired lease term of six years at
31 December 2016
In addition, the Plan contained more severe stress tests to
understand how far values and rental income would have to decline
to breach the tightest financial covenants and force the Company
to negotiate with its lenders. The calculations for the 2016 year-end
position are disclosed in the explanation of the Group’s Treasury
principal risk on page 57.
Conclusion
Based on the assessment of the prospects and viability of the
Group, 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 2021. This five-year period is unchanged from
the period adopted for the 2015 Viability Statement.
Going Concern Statement
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about
future trading performance, property valuations and capital
expenditure plans. The review considered the Group’s current
liquidity position, its debt maturity profile, future commitments
and forecast cash flows. Based on this review the Directors are
able to conclude that they have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for at least the next 12 months and continue
to adopt the going concern basis in preparing the financial
statements for the year ended 31 December 2016.
2016 Strategic Report
Pages 1 to 59 of this Annual Report constitute the Strategic
Report. It has been approved and signed on behalf of the Board on
17 February 2017.
David Atkins
Director
Timon Drakesmith
– The time-scale for the delivery of the Group’s major
Director
development schemes is approximately five years and currently
extends beyond 2021
– The Group’s has diverse sources of funding with an average
maturity of 5.5 years
Assessment of viability
The Plan contains downside scenarios, including modelling
significant reductions in property values and rental income. These
are consistent with adverse changes to the Group’s principal
risks which are most likely to impact the viability of the Group,
being: Macro-economic, Retail market, Property investment and
Treasury risks. These scenarios, when combined with mitigation
actions available to management associated with flexibility over
future capital expenditure and disposals plans, demonstrated the
Group’s expected ability to overcome these adverse economic and
property market conditions over the forecast period.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
CORPORATE GOVERNANCE REPORT
Governance structures:
supporting the strategy
“Our portfolio is diversified and broadly spread which
enables us to manage effectively the impact of risk
and uncertainties on the business.”
— David Tyler, Chairman
Dear Shareholders
I am pleased to present the Corporate Governance report for
2016 which highlights the work undertaken during the year by
the Board. As in previous years, this report should be read in
conjunction with our report on how we have complied with the UK
Corporate Governance Code on pages 115 and 119.
Business performance in 2016
As you will have read in the Strategic Report, the business has
performed well during the year and delivered strong financial
results, despite the economic backdrop and uncertainties triggered
by the referendum decision to leave the European Union. Our
portfolio is diversified and broadly spread which enables us to
manage effectively the impact of risks and uncertainties on the
business. We continue to focus on our strategy of ensuring our
portfolio contains the best assets for future growth.
Hammerson’s culture
During the year we have sought to ensure that our governance
structures at Board and Committee level remain appropriate for
our business while supporting the delivery of our overall strategy
and culture. The Company’s success depends on our continual
commitment to high standards of corporate governance and a
strong, positive culture both in the boardroom and across the
business. To see how far values endorsed in the boardroom are
embedded in the business, it is vital that we, as Directors, visit
our different locations and engage with colleagues at all levels.
You can read how Terry Duddy, the Senior Independent Director,
has done this during 2016 on page 68. It is important that our
approach reflects our values: ambition, respect, collaboration and
responsibility, and that the Board continues to take decisions that
are consistent with the values and strategy Hammerson has set.
Board composition and succession planning
During the year, Jacques Espinasse retired from the Board after
the Annual General Meeting (AGM), following nine years’ service.
I would like to record my thanks to Jacques for his valuable
contribution to the Board during this time. Jacques was succeeded
by Pierre Bouchut as Chairman of the Audit Committee. During
the year the Nomination Committee reviewed the composition
of the Board and succession planning at Board and senior
management level was also discussed. A requirement for a senior
strategic role with responsibility for the UK and Irish portfolios
was identified. The Nomination Committee was kept abreast of
the recruitment process for this role, which culminated in the
appointment of Mark Bourgeois, who joined the Company on
1 February 2017. You can read more about the Committee’s work in
the Nomination Committee report on page 72.
“During the year we have sought to ensure
that our governance structures at Board
and Committee level remain appropriate
for our business while supporting our
overall strategy and culture.”
Board effectiveness
In my role as Chairman, my responsibility is to provide leadership
and ensure that it is possible to make high quality decisions and
that the Board operates effectively. In this, I am supported by
all the Directors and by Terry Duddy, the Senior Independent
Director, who meets independently with the other Directors and
with shareholders, if required.
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HAMMERSON PLC ANNUAL REPORT 2016
The annual Board effectiveness reviews continue to provide a
valuable opportunity for the Board to reflect on how it operates
and to propose any improvements. This year, in accordance with
the Board’s programme of undertaking an external review every
three years, the review was externally facilitated by Clare Chalmers
of Independent Audit. Ms Chalmers’ findings have provided some
ideas for us to continue to improve the way the Board works.
Further information on the process and outcomes, together with
progress against objectives set during 2015, is provided on page 66.
Appointment of External Auditor
In last year’s Annual Report the Company confirmed that it
would undertake a selection and appointment process for a new
External Auditor during 2016. As part of its work this year, the
Audit Committee has undertaken this exercise which resulted
in the appointment of PricewaterhouseCoopers LLP (PwC) in
October, subject to final approval by the shareholders at the next
AGM in April 2017. The selection and appointment process is fully
described on page 75.
Remuneration Policy
The Company’s Remuneration Policy was approved in 2014
and has been operating for three years. During the year, the
Remuneration Committee has spent time discussing a new
Remuneration Policy. The Chairman of the Remuneration
Committee has canvassed shareholders’ views and these have
provided the Remuneration Committee with alternative
perspectives to consider when finalising their proposals. In
accordance with the regulations, shareholders will be asked to
approve the new policy at the AGM in April 2017. You can read full
details about this in the Directors’ Remuneration Report from
page 78.
Engagement with shareholders
An important area of focus for the Board during the year was the
consideration of a secondary listing on the Johannesburg Stock
Exchange. We consulted with major shareholders as part of
that process, before the decision was made to go ahead. Further
explanation of the process and rationale is give on page 69.
I met with a number of our top shareholders during the year to
discuss key strategy and governance matters. The General Counsel
and Company Secretary also arranged a number of conference
calls with shareholders to discuss governance topics. During those
calls shareholders were asked if they were satisfied with the level
of engagement and were offered an opportunity for a meeting
with the Senior Independent Director or the other Non-Executive
Directors if required.
“I am satisfied that shareholder dialogue
and engagement has been broad-ranging
during the year and that the Board is in
touch with the opinions of major
shareholders.”
A shareholder perception study in which views were canvassed
from a number of Hammerson’s major shareholders and other
investors was undertaken for the Board by Investor Perceptions
Limited in 2016. The Board reviewed the results of the study
in January 2017. Twenty-one institutions representing 47% of
the issued share capital participated in the exercise. The Board
considered feedback particularly on the retail real estate sector,
the Group’s strategy, risks to the business, the senior management
team and overall investor relations.
As described above, the Chairman of the Remuneration Committee
engaged with major shareholders on remuneration matters. I
am satisfied that shareholder dialogue and engagement has been
broad-ranging during the year and that the Board is in touch with
the opinions of major shareholders. My fellow Directors and I also
look forward to having further opportunities for such engagement
and discussion with shareholders at the Annual General Meeting
and at other times in 2017.
David Tyler
Chairman
Compliance statement
The Company has complied in full during 2016 with
the provisions of the UK Corporate Governance Code
published in April 2016.
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT Corporate Governance report continued
YOUR BOARD
A balance of skills, experience,
independence and knowledge
1
4
3
2
5
6
62
HAMMERSON PLC ANNUAL REPORT 2016
7
8
9
11
10
— 1 —
Sarah Booth
General Counsel
and Company
Secretary
— 2 —
Pierre Bouchut
Non-Executive
Director
— 3 —
Peter Cole
Chief Investment
Officer
— 4 —
Terry Duddy
Non-Executive
Director and Senior
Independent
Director
— 5 —
Timon
Drakesmith
Chief Financial
Officer
— 6 —
David Atkins
Chief Executive
— 7 —
Gwyn Burr
Non-Executive
Director
— 8 —
David Tyler
Chairman
— 9 —
Andrew Formica
Non-Executive
Director
— 10 —
Judy Gibbons
Non-Executive
Director
— 11 —
Jean-Philippe
Mouton
Executive Director
The Directors’
biographies are
found on pages
120-121
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT Corporate Governance report continued
Board activity:
an insight into the year
In order to ensure good quality decision-making the Directors need to keep up to date with
what is happening in the business, shareholder views, changing governance requirements
and the economic environment in which the business operates.
Around the business
The Non-Executive Directors are encouraged to visit the
Company’s assets and meet colleagues to provide additional
information and insight into the business. During the year Board
meetings were held in Paris and Dublin to enable presentations
from local management, tours of assets and informal opportunities
to meet with local teams. Non-Executive Directors also take
opportunities to visit the business themselves. Terry Duddy’s
account of his programme of informal visits around the business is
on page 68.
One-to-one
The Non-Executive Directors are able to meet any colleagues
to provide additional information. The Chairman and all Board
members are regularly in touch between meetings to keep abreast
of developments in the business. A number of Board dinners were
held throughout the year which enabled Board discussion on a
range of topics.
Board Strategy Day
The Board holds a Strategy Day each year in the autumn. The
strategy of the business is always at the forefront of the Board’s
thinking and discussion throughout the year. However, the
Strategy Day allows the Board to spend extended time reflecting
on the future direction of the business in the context of progress
against strategy to date. It is also an opportunity to debate and
refine ideas which will inform the Business Plan and strategy.
How the Board kept up to date
during the year
In the boardroom
During the year the Board received a number of regular internal
reports which helped to keep the Directors well informed
about the business generally. Regular reports from the Chief
Executive provided an overview of progress in the business, the
current economic environment and the market in which the
Company operates, including competitor activity. The Chief
Financial Officer reported regularly on the Group’s financial
performance, current treasury financing projects and updates on
net debt and liquidity. There were also regular reports from him on
the performance of the premium outlets sector. Portfolio reports
throughout the year updated the Board on progress with letting
activity and asset management at shopping centres and retail parks
in the UK, Ireland and France. A regular investment report kept
the Board abreast of current activity concerning acquisitions and
disposals. The trading and marketing update provided the Board
with regular information on retailers’ trading performance in the
Group’s assets. The General Counsel and Company Secretary’s
Governance Report updated the Board periodically on regulatory
changes and, in particular, the implementation of the Market
Abuse Regulations which necessitated a review of policies on
confidential and inside information and a refreshed Share
Dealing Policy. Internal presentations were also given by senior
management on Health and Safety, Information Technology,
Human Resources, Marketing and Investor Relations.
The Board had opportunities to engage with experts outside the
Company to help the Directors shape their views and provide
exposure to a range of opinions and expertise to aid better-
informed decision-making. There was a presentation from the
Company’s brokers. The Group’s Valuer, Cushman & Wakefield,
also presented twice during the year at an Audit Committee
meeting to which all the Board were invited. Their presentations
covered the valuation of the property portfolio including a wider
review of the investment market in which the Company operates.
The Board received analysts’ reports on a regular basis.
External presentations
The Institute of Business Ethics gave the Board a talk on culture
and ethics as part of the Board’s consideration of culture within
Hammerson. The Board met senior executives from Value Retail,
in which the Company has a very significant investment, to discuss
the progress of the premium outlets sector.
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HAMMERSON PLC ANNUAL REPORT 2016
Dundrum Town Centre, Dublin
Prior to the day the Board received a background reading pack
containing amongst others, financial data on Hammerson,
comments from institutional investor meetings held with the
Chairman and Chief Executive, economic data on Ireland and
a review of the economic environment and outlook for 2017.
The background reading helped the Directors prepare for the
discussions on the day. This year’s agenda included:
– A review of progress against strategic goals;
– Benchmarking Hammerson against its peers;
– Review of the markets in which Hammerson operates;
– Review of risk factors;
– Trends in retail behaviour;
– Economic outlook; and
– Potential strategic options.
Each section was accompanied by key questions for the Board to
debate which focused on different areas of strategy, including:
– Are any refinements needed to the strategy?
– What opportunities and constraints are created by the current
economic backdrop?
– What can be learnt from the Company’s peers?
– What is the impact of the EU referendum?
– What is the appetite for risk against the current
economic backdrop?
The Strategy Day allowed the Board time to reflect in depth on
current strategy and discuss and reflect on ideas for the future.
Ideas and suggestions were further discussed following the day
and incorporated into the Company’s Business Plan. Peter Cole’s
reflections on the day are below.
My view on the Board Strategy Day – Peter Cole, Chief Investment Officer
very useful. The participation of third parties stimulates new
ideas in our debate and helps the Directors to reflect on their
perspective of the business. The wide range of views expressed
by the Non-Executive Directors, stemming from their own
experiences and business sectors, also adds greatly to the
debate. In addition to considering potential future scenarios
in the light of the EU referendum decision, we also debated
macro-economic indicators, internal risk factors and the retail
market. Our discussion also covered the continuing evolution
of retail in a multichannel environment and a comparison of
the retail investment areas and territories in which the Group
operates. We also reviewed strategic priorities for asset and
investment management, developing our people and our
corporate culture and values.
Being in Dublin allowed the Board to see first-hand the
successful integration of the new Irish business and to reflect
on the Company’s acquisition of Dundrum Town Centre in
the context of the Group’s strategy. It was useful to consider
the progress the business has made over the last six years
with gross assets nearly doubling to around £10bn. With that
in mind, future potential key developments and options for
growing the business further were debated extensively with
all Directors contributing their views.
I find Strategy Days are an excellent opportunity for the Board
to review, challenge and debate the strategy, and consider the
risk environment in which the Company operates. We have
the freedom to explore ideas in depth which enhances our
formal Board meeting discussions.
HAMMERSON.COM
65
This year’s Strategy Day in Dublin allowed the Board to reflect
on the strategic position of the Company and debate a wide
range of issues. Background information sent to the Board
prior to the session was helpful in providing a framework
for discussion.
The Strategy Day included a presentation by Lazard, the
Company’s investment bank. I found their detailed review
of peer benchmarking and commentary on key risks such
as those posed by the result of the EU referendum decision
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT Corporate Governance report continued
External Board effectiveness review
The 2016 Board effectiveness review was externally facilitated
by Clare Chalmers of Independent Audit Limited. Ms Chalmers,
who undertook the previous external review in 2013, has no
other business relationship with the Company or any member
of the Board. Following an initial planning meeting with the
Chairman and the General Counsel and Company Secretary,
Ms Chalmers interviewed each Board member, the General
Counsel and Company Secretary, the External Auditor and
Remuneration Consultant and several members of senior
management who regularly interact with the Committees.
Ms Chalmers also conducted a review of Board minutes and Board
and Committee papers from the year. Observations from the
interviews, together with Ms Chalmers’ findings, were compiled
into a report which was circulated to the Board and she attended to
present her findings and contribute to the discussion on actions.
Ms Chalmers concluded that the Board is functioning well.
The Directors enjoy serving on the Board and are proud to be
associated with Hammerson. Diversity in professional skills
and backgrounds is good and the culturally different approaches
brought by the Directors of French and Australian nationality are
Table 43
Board effectiveness review
helpful. The reduction of meeting frequency to six meetings per
year, supplemented by Board conference calls as required, which
was introduced following the last external effectiveness review,
has ensured a more strategic focus in meetings. The Board felt well
served by the Secretariat, led by the General Counsel and Company
Secretary. The quality of Board papers is high and the Board portal
is used effectively. The induction process for Directors is thorough
and involves understanding the culture and values of the business
as well as asset visits. There is scope however, to revisit the annual
meetings programme and consider its scheduling and the use of
Board conference calls. The Board has made significant progress in
executive succession planning since the last external effectiveness
review. However, there is more work to be done on talent
development within the business. Relationships on the Board are
very positive and the Chairman achieves a good balance in debate.
Following discussion the Board agreed a number of proposed
actions for 2017, which are set out in the table below.
The 2015 Board effectiveness review was conducted internally
and recommendations from that exercise were agreed and
incorporated where appropriate into the 2016 Board work plan.
The outcome of these recommendations is also detailed below.
Recommendation from 2015 review
Progress against 2015 recommendations
Further enhancements to the strategic planning process
See the reports on the Board Strategy Day on pages 64 to 65
Continued focus on the talent-development aspects of succession planning
See the Nomination Committee report on page 72
An ongoing programme of engagement and site visits
See Terry Duddy’s account on page 68
Preparation of a list of discussion topics for Board dinners
Discussion topics were identified on a rolling basis to
ensure focus on topical issues. These included, for example,
discussions on the EU referendum
Recommendation from 2016 review
Agreed actions for 2017
Review the annual Board and Committee meetings calendar and schedule
of Board calls
Keep monitoring the culture of the business
Review the Board papers to ensure they continue to be forward looking and
avoid duplication between reports
Non-Executive Directors’ visibility around the Company
Following discussion with the Directors and General
Counsel and Company Secretary to canvass views, the
Chairman will propose a revised schedule of meetings. An
additional Board call will be scheduled in August
Continued focus on annual visits to assets. In 2017 visits
to Victoria Gate, Leeds and Westquay, Southampton are
planned
The General Counsel and Company Secretary will work
with colleagues on guidance to help achieve this and greater
consistency in Board papers
The Non-Executive Directors will identify opportunities for
visiting the business for themselves during the year
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HAMMERSON PLC ANNUAL REPORT 2016
Reflections on my first year – Andrew Formica, Non-Executive Director
for me to spend time looking at the potential development
opportunities, especially Brent Cross and Croydon, as these
become a greater focus for the Board in the years ahead.
The segment of the business which has surprised me most
is retail parks. Many have had the wrong impression of this
retail format. Having visited a number of Hammerson’s assets
I can see how they serve a critical role for consumers who
want a convenient shop. Furthermore, Hammerson’s parks in
particular are large and modern, featuring leading retailers as
tenants. Retail parks have been a huge success and continue to
do well for shareholders.
I have been impressed by the robustness of the audit
tender process conducted by a sub-committee of the Audit
Committee and assisted by the finance team. I was invited to
be a member of the sub-committee and it has been interesting
to be involved in the selection process. Discussions to arrive
at the final choice of PricewaterhouseCoopers LLP as the
preferred candidate for recommendation to the Board were
thorough and I felt that the sub-committee was provided with
ample high-quality evidence and information on which to
base its decision.
Finally, I have been extremely impressed with the associated
investments Hammerson has made in the premium outlets
sector through both Value Retail and VIA Outlets. As a
business Hammerson understands the needs of the consumer
and has positioned itself well to be the destination of choice in
its key locations.
“I have been extremely impressed with
the associated investments
Hammerson has made in the premium
outlets sector through both Value
Retail and VIA Outlets.”
I would also like to extend a thank you to David Tyler and all
my fellow Directors who have made me extremely welcome
in my first year, tolerated my naïve questions and encouraged
me both to bring my experience to bear and to learn from their
experience in equal measure.
HAMMERSON.COM
67
It has been a great pleasure to work with the Hammerson
Board and other colleagues in the business this past
year. From my initial conversations about joining the Board
I was impressed with the strong culture that has been
developed, from Board level right the way down.
“From my initial conversations about
joining the Board I was impressed with
the strong culture that has been
developed, from Board level right the
way down.”
Having been working with the business for over a year
now, my early impressions have only been reinforced and
strengthened. The Board is in the enviable position of having
significant interactions with a large part of the business.
This is both at the regular Board meetings and also on the
various trips and training sessions organised for Directors.
Each of these interactions shows how deeply passionate all
the Hammerson colleagues are about the business and its
focus on the retailers and customers they represent as well
as shareholders.
As a new Board member I have had the opportunity to
visit much of the Hammerson portfolio, ranging from the
retail parks to the operations in France and the recently
acquired Irish portfolio. Looking at Hammerson’s prime
shopping centres (for example Bullring and Grand Central,
Birmingham) it is really impressive to see how the team’s
vision has been made into reality. It has been important
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT Corporate Governance report continued
Getting around the business – Terry Duddy, Senior Independent Director
In June I visited three of Hammerson’s retail parks. At
Elliott’s Field, Rugby I saw how Hammerson is developing its
vision of out of town retailing. It was inspiring to experience
first-hand the results of one of Hammerson’s objectives
with this development project, to create a high-quality retail
park with an innovative mix of retailers. It was interesting to
compare this development with St Oswald’s, Gloucester and
the Orchard Centre, Didcot. The Director, UK Retail Parks
who accompanied me, helped me gain further insight into how
these businesses are managed. It was also interesting to look
at potential development opportunities at these assets and
to learn more about how these businesses are developed in
coordination with the local community.
“Through meeting colleagues informally
across the business I have seen how
Hammerson’s culture and values:
ambition, respect, collaboration,
responsibility, influence what we do.”
My visit to Bullring, Birmingham allowed me to spend some
time with the Centre Manager there and to gain insight into
the challenges of running an asset from an operational point
of view. I also took the opportunity to visit Grand Central and
experience the shopping environment there.
My informal visits this year have given me greater insight into
the geographical context and retail environment in which we
operate, including what our competitors are doing. Through
meeting colleagues informally across the business I have seen
how Hammerson’s culture and values: ambition, respect,
collaboration, responsibility, influence what we do. In terms of
succession planning, it is invaluable to engage with colleagues
across the business below boardroom level and appreciate
first-hand the talent, energy and commitment that exists
in Hammerson.
March
2016
April
2016
June
2016
July
2016
Visits to Italie Deux, Paris; SQY Ouest, Saint
Quentin-en-Yvelines and Les Trois Fontaines,
Cergy Pontoise with the Managing Director
of Hammerson France
Visits to Victoria Gate and Victoria Quarter,
Leeds with the Development Manager
Visits to retail parks at Elliott’s Field, Rugby; St
Oswald’s, Gloucester and the Orchard Centre,
Didcot with the Director, UK Retail Parks
Visits to Bullring and Grand Central,
Birmingham with the Bullring Centre Manager
I was appointed to the Board in 2009 and since then, through
my role as a Non-Executive Director of Hammerson, I have
built up my knowledge of the business through both the
formal programme of Board business and events and regular
Board visits to the Company’s assets.
When I was appointed as Senior Independent Director in
2015, one of the objectives I set myself was to get out and
about in Hammerson as much as I could outside the formal
Board schedule. This would enable me to refresh my personal
perspective on the business and better understand the local
context of our shopping centres and retail parks. Meeting
colleagues informally, who work at different levels in the
business, is also invaluable. This year I have made a number
of such visits.
“…it is invaluable to engage with
colleagues across the business …
and appreciate first-hand the talent,
energy and commitment that exists
in Hammerson.”
For example, I spent a very informative day at our Victoria
Gate, Leeds development, accompanied by the Development
Manager. I was able to understand the Development
Manager’s perspective of the development, witness his
enthusiasm and learn about the frustrations of the role. We
also toured other development opportunities for Hammerson
in Leeds. I was particularly interested to see the work being
done to provide local retailers with opportunities in the
centre. This is a good example of our strategy in action –
creating destinations which involve the local community.
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HAMMERSON PLC ANNUAL REPORT 2016
Secondary listing on the
Johannesburg Stock Exchange
The Board monitors investor relations closely through regular
updates from the Investor Relations team. In April the Board
began considering the potential opportunity for a secondary listing
on the Johannesburg Stock Exchange (JSE). The Company’s South
African shareholders and potential investors were constrained
by foreign exchange controls which limited them to investing no
more than 25% of the funds they managed in overseas companies.
They had shown considerable interest in investing further in
Hammerson. A secondary listing on the JSE would remove any
constraint on South African investors and enable them to invest up
to 100% of their funds under management in Hammerson’s shares.
The Board considered the advantages of a secondary listing on the
JSE, which included:
– Greater shareholder diversity, which would increase liquidity
and demand for Hammerson’s shares;
– Accessing a wider pool of international capital;
– Supporting the Company’s existing and prospective South
African shareholders by providing an additional market for
trading the Company’s shares;
– Providing South African investors, both institutional and
private, with an opportunity to participate over the long term in
the future growth and capital performance of the Company;
– Providing the Company with an additional opportunity to raise
equity funding to pursue growth and investment opportunities
in the future; and
– Enhancing the global public profile of Hammerson with its
stakeholders, including investors, retailers and consumers
and especially those based in South Africa and on the
African continent.
Management consulted with the Company’s major shareholders
and the investment community more widely, who were supportive
of the proposition. The Board considered the political risk of the
removal of exchange controls in South Africa and concluded that
any potential risk was outweighed by the benefits of proceeding
with the listing. The Board approved the recommendations to:
– Approach existing South African shareholders to discuss their
shareholding structure and willingness to transfer to the JSE;
– Appoint a South African Sponsor to advise and assist with the
implementation of the transaction; and
– Liaise with the JSE and the South African Reserve Bank on the
Company’s behalf regarding the application process.
In June and July the Board received progress reports from the
Investor Relations team, as well as an update from the Company’s
lawyers regarding the legal implications of the listing and the
ongoing obligations placed on the Company by the JSE. The Board
also considered the impact of the referendum decision to leave the
European Union on the future viability of the listing.
The Board approved the decision to progress the secondary listing
in July and on 1 September 2016 trading commenced on the JSE.
The Board has continued to monitor the progress of the listing
since September and as at December 2016 it was pleased with
the success of the listing and considered that it had achieved
its objectives.
Rebecca Patton, Head of Investor Relations, David Atkins, Chief Executive, and Timon Drakesmith, Chief Financial Officer, holding a kudo horn at the Listing Ceremony
for Hammerson at the Johannesburg Stock Exchange
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Shareholder engagement in 2016
Hammerson’s approach to shareholder
engagement
The Board is committed to engaging closely with the Company’s
shareholders and keeping abreast of their views and those of other
key market participants.
Hammerson has a comprehensive investor relations programme
through which the Chief Executive, Chief Financial Officer and
Head of Investor Relations meet regularly with the Company’s
shareholders to discuss strategic issues as well as present the
Company’s results. The Company also provides shareholders
with opportunities to meet members of the Board and members
of the operational management team at salesforce briefings and
the annual Capital Markets Day. Further shareholder engagement
activities are also discussed in the Chairman’s introduction on
page 60.
Investor relations programme
The Company has continued to maintain full and transparent
disclosure throughout 2016; as well as the full-year and half-year
results Hammerson has published more than 100 regulatory
RNS announcements, and continued a comprehensive investor
relations programme which included this year:
– Bi-annual investor road shows following the full-year and half-
year results;
– Industry conferences in the United Kingdom, Europe, America
and South Africa;
– One-to-one meetings with management at the request of
institutional shareholders;
– Salesforce briefings at leading equities brokers;
– Ad hoc investor tours around the Company’s assets,
accompanied by centre general managers;
– Panel discussions with executive management at investor
conferences and events;
– Annual Capital Markets Day; and
– Annual sustainability report supported by one-to-one meetings
and attendance at industry conferences.
During the Company’s annual Capital Markets Day in 2016
Hammerson hosted a site visit to Dublin, which also included a
tour of Dundrum Town Centre and other retail assets secured by a
loan portfolio held in joint venture with Allianz, presentations on
the economic backdrop, property markets and Hammerson’s plans
for the Ireland portfolio. The feedback from attendees was very
positive and reinforced the market’s understanding of the rental
growth prospects in Dublin and Hammerson’s ability to deliver
financial returns.
Following the Company’s secondary listing on the Johannesburg
Stock Exchange in September 2016, the Company is committed to
fostering relationships with existing South African shareholders
while attracting new investment in South Africa. In 2016 the
Company held road shows in Johannesburg and Cape Town,
hosted one-to-one meetings with senior management and
facilitated tours of Hammerson’s assets in the United Kingdom,
France and Ireland.
70
HAMMERSON PLC ANNUAL REPORT 2016
This year the Company increased its engagement with the
environmental, social and governance (ESG) investment
community by attending dedicated conferences and organising
one-to-one meetings with socially responsible investing (SRI) fund
managers, attended by the Investor Relations team and the Head
of Sustainability.
Hammerson’s corporate website remains one of the key ways of
communicating with existing shareholders and informing new
or potential investors about the Company. The website contains
the regulatory RNS announcements and an archive of published
results and reports, press releases, factual details about the
Company’s assets and contact information for the operational
teams within the Company.
Calendar of events
JPM conference (London)
January
2016
February
2016
March
2016
April
2016
May
2016
June
2016
July
2016
Sep
2016
Nov
2016
Dec
2016
2016 full-year results
Investor roadshows (London, Paris,
Amsterdam, Edinburgh, Zurich)
Citi conference (United States)
HSBC conference (Frankfurt)
JPM SRI conference (Paris)
Chairman’s meetings with investors
(London, Amsterdam)
Kempen conference (Amsterdam)
Investor roundtable event
VIA Outlets investor site visit (Prague)
ODDO SRI conference (Paris)
2016 half-year results
Investor roadshows (London, Amsterdam)
Investor roadshows (South Africa)
UBS conference (London)
HSBC conference (South Africa)
Table 44
Analysis of shares held as at 31 December 2016
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
Number of
shareholders
% of total
shareholders
Holding
% of total capital
823
324
323
331
137
295
109
168
63
92
30.89
12.15
12.12
12.42
5.14
11.07
4.10
6.30
2.36
3.45
146,745
251,941
475,724
1,055,711
959,140
7,032,766
7,875,223
39,706,203
46,390,736
689,294,262
2,665
100
793,188,451
0.02
0.03
0.06
0.13
0.12
0.89
0.99
5.01
5.85
86.90
100
Table 45
Share capital and substantial shareholders
APG Algemene Pensioen Groep N.V.
Rockcastle Global Real Estate Company Limited1
BlackRock Inc.
Merrill Lynch International
Morgan Stanley (International Securities Group and Global Wealth Management)2
Legal & General Investment Management Ltd
Coronation Asset Management (Pty) Ltd
Ordinary shares
of 25p each
68,228,094
56,221,139
50,223,602
52,216,411
42,021,951
25,717,804
23,820,417
At 31 December
2016 percentage of
total voting rights
9.57%
7.10%
7.05%
6.66%
5.30%
3.61%
3.00%
1. On 27 January 2017 Rockcastle Global Securities Limited notified the Company that it had decreased its shareholding to 6.82%.
2. On 24 January 2017 Morgan Stanley (Institutional Securities Group and Global Wealth Management) notified the Company that it had decreased its shareholding to
below 3%.
No other changes to table 45 have been disclosed to the Company between 31 December 2016 and 17 February 2017.
HAMMERSON.COM
71
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT NOMINATION COMMITTEE REPORT
Ensuring diversity
and succession
Nomination Committee members
– David Tyler (Chairman)
– Pierre Bouchut
– Gwyn Burr
– Terry Duddy
– Andrew Formica
– Judy Gibbons
Dear Shareholders
I am pleased to present the Nomination Committee report
covering our work in 2016. This report should be read in
conjunction with the separate report on our compliance with the
UK Corporate Governance Code, which can be found on pages 115
to 119.
Changes to the Board
Following a number of changes to the Board last year, this year
has been relatively quiet and has allowed newer Board members
to become fully established. Andrew Formica was appointed as a
Non-Executive Director in late 2015, and 2016 has been his first full
year on the Board. Pierre Bouchut succeeded Jacques Espinasse as
Chairman of the Audit Committee, following Jacques’ retirement
at the 2016 AGM. Both Directors received an induction, tailored to
their respective role. Details are described further on the opposite
page. You can also read Andrew’s reflections on his first year on
page 67.
Board balance of skills and knowledge
A key responsibility of the Committee is to ensure that the
Board maintains a balance of skills, knowledge and experience
appropriate to the operation of the business and required to
deliver the strategy. As in past years, the Committee has reviewed
the composition of the Board and as part of this review the
Committee considered:
– The number and balance of Executive and Non-
Executive Directors;
– Committee membership;
– Background professions, core skills and experience;
– Independence; and
– Diversity, including age, gender and ethnicity.
Following this review the Committee is satisfied that the Board
continues to have an appropriate mix of skills, knowledge and
experience to operate effectively. In addition to their professional
72
HAMMERSON PLC ANNUAL REPORT 2016
skills, the Directors have collectively many years of experience
gained in a wide range of businesses and excellent track records
in a range of sectors, as illustrated by the table below. Skills on the
Board cover retail, property, finance, marketing, human resources,
international and general corporate experience. Two Non-
Executive Directors are serving executives. Two of the Executive
Directors serve as non-executive directors on external boards.
These appointments provide invaluable experience and enable the
Directors to see other corporate models and governance processes
which, in turn, enrich debate on the Board. Further information on
the biographies of the Directors is on pages 120 to 121.
Chart 46
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 20% of its composition. The Board recognises the
benefits of diversity in its widest sense, which remains central
to the Committee’s thinking about diversity on the Board. The
Committee has noted the recommendation in the Hampton-
Alexander Review for a new voluntary target of a third of all
Chart 47
Diversity
Chart 48
Board balance
2
8
4
6
Male
Female
Executive
Non-Executive
Figures as at 31 December 2016
Board members in FTSE 350 companies to be women by 2020.
The Committee has also considered the findings of The Parker
Report on the Ethnic Diversity of UK Boards and is aware of the
likely target for FTSE 100 companies to have at least one person of
colour on the Board by 2021. When vacancies arise, consideration
of diversity in its widest sense will be taken into account during
the recruitment process while future appointments will always be
made on merit. For further information on progress on diversity
within the business, see Our people on page 40.
Succession planning
The Committee has continued to focus on this important area
in 2016. The Committee received an update paper on succession
planning for the Executive Directors. Individual Executive Directors
discuss their career aspirations with the Chief Executive, who keeps
the Committee appraised of those discussions. As part of my job, I
also keep closely in touch with the Executive Directors and other
senior members of the management team.
Following the acquisition of the loan portfolio in Ireland in 2015,
a review of the management structure was carried out and a
requirement for a senior strategic role to support the Company’s
strategy and drive business performance across the UK and Ireland
portfolios was identified. The Committee was kept up to date on
progress to identify external candidates for the role of Managing
Director, UK and Ireland and was kept abreast of progress of the
interview process, which culminated in the appointment of Mark
Bourgeois to the role who started on 1 February 2017.
The Nomination Committee continues to take a keen interest
in the succession plan, which includes Executive Directors, the
Group Executive Committee members and senior management
roles across the business. Short to medium-term plans have been
reviewed to ensure that key roles can be filled on an interim basis
as well as longer term. The Committee continues to receive reports
on the talent pipeline for the future which identifies high calibre
individuals as potential successors for senior management roles.
The Committee acknowledges however, the size of the organisation
means that there are not obvious successors for every senior role.
The Committee will continue to focus on this area as part of
its remit.
David Tyler
Chairman of the Nomination Committee
Directors’ induction and
development
New Directors or Directors who take on a new role on
the Board receive a tailored induction facilitated by
the General Counsel and Company Secretary. During
the year Andrew Formica’s induction followed his
appointment to the Board in late 2015. He had a meeting
with the General Counsel and Company Secretary to
discuss the legal and regulatory framework in which
directors operate, the Group’s policies including the
Share Dealing Policy and the work plan for the Board
and its Committees. Andrew had meetings with senior
management and his fellow Directors. He visited a
number of the Group’s assets and met colleagues and
local management in the business. Andrew’s reflections
on his first year as a Non-Executive Director are on
page 67.
Pierre Bouchut succeeded Jacques Espinasse as
Chairman of the Audit Committee following the
2016 Annual General Meeting. His induction focused
on the requirements and responsibility of his new role.
A comprehensive pack of briefing papers provided
background information for the briefing meetings.
The meetings covered, amongst other matters:
– A discussion with the External Auditor, Deloitte LLP
(Deloitte), covering corporate governance matters
and an update on the role and responsibilities of the
Audit Committee;
– A meeting with the Group’s external valuer, Cushman
& Wakefield, to discuss the valuation process and the
role of the Audit Committee Chairman in that process;
– A discussion on the Companies Act and
directors’ duties;
– A private meeting with Deloitte with whom the Audit
Committee Chairman engages separately outside the
Committee timetable; and
– A session with the Group Financial Controller
and the Risk and Controls Manager to discuss risk
management and internal control.
HAMMERSON.COM
73
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT AUDIT COMMITTEE REPORT
Overseeing robust
risk management
Audit Committee members
– Pierre Bouchut (Chairman)
– Gwyn Burr
– Andrew Formica
– Judy Gibbons
Dear Shareholders
I am pleased to present my first report on behalf of the Audit
Committee, having succeeded Jacques Espinasse who retired after
the 2016 Annual General Meeting. This report should be read in
conjunction with the section on how we have complied with the
UK Corporate Governance Code (the Code) which is on pages 115
to 119.
I fulfil the Code requirement of having recent and relevant
financial experience, and my fellow Committee members bring
a wide knowledge of financial matters, financial reporting, risk
management and internal controls and sector knowledge.
External risk landscape
Throughout the year the Committee has monitored broader
market conditions and property and consumer market trends. In
particular the Committee has debated the risks and challenges
arising from the referendum decision to leave the European Union
in relation to the valuation of the Group’s property portfolio. Other
risks have been considered such as cyber risk and the increased risk
of terrorist activity at our shopping centres. The Committee uses
the Risk Management Framework as a basis for such discussions.
It is kept under regular review by management and the Committee
to ensure that risks are appropriately identified and categorised
and that their potential impact on the Group is understood and
appropriate resources are allocated to mitigate them. See page 53
for further discussion of the Group’s approach to risk management.
External Auditor
We announced in last year’s Annual Report that we had started the
process to appoint a new External Auditor. I chaired the selection
sub-committee and the outcome of the process in October was
the decision to appoint PricewaterhouseCoopers LLP (PwC)
as the Company’s External Auditor subject to final approval of
shareholders at the 2017 Annual General Meeting. Further details
about the process are on page 75.
74
HAMMERSON PLC ANNUAL REPORT 2016
Risk management and internal controls
We reported last year that the Committee had approved a proposal
to adopt a new co-sourcing internal audit provision, overseen by
a newly appointed Risk and Controls Manager. Further details
on the new arrangements which combine internal and external
resource are provided on page 76.
Having monitored the Group’s risk management and internal
controls system, and having reviewed the effectiveness of material
controls, I confirm on behalf of the Committee that no significant
failings or weaknesses in the Group’s control structure were
identified during the year.
The Committee’s work also included the consideration of Cushman
& Wakefield’s (the Valuer) valuation of the Group’s portfolio for
2016, which is key to determining the Group’s overall business
performance and year end results. The Committee scrutinised
and discussed the valuation process and was satisfied with the
conclusions reached by the Valuer. The Committee also spent
time reviewing the appropriateness of the significant financial
judgements and these are set out in more detail on page 77.
Audit Committee effectiveness
The externally facilitated Board effectiveness review in 2016
concluded that the Committee was fulfilling its duties effectively.
This confirms my view that the Committee continues to operate
effectively and plays a key role in ensuring appropriate risk
management throughout the Group. The regular discussion and
challenge, which the Committee has had with senior management,
the External Auditor, the Risk and Controls Manager and the
Valuer, together with the high quality of reports and information
provided to the Committee has enabled us to discharge our
duties effectively.
I would like to commend Deloitte for the continuing high quality
of the audit services they have provided to the Company over
many years.
Pierre Bouchut
Chairman of the Audit Committee
External audit tender
Deloitte or its predecessor firms have been the Company’s External
Auditor since the Company was founded in the 1940s. In last
year’s Annual Report the Company stated that it had considered
tendering and rotation options in advance of the required rotation
date of 2021 under the new regulations. After consideration,
the Committee recommended that a tender process should be
undertaken in 2016 to align with the current auditor partner
rotation and priorities of the Group. The Committee decided that
Deloitte would not be included in the process in the interests of
best practice.
Audit tender timetable
Dec 15 –
Apr 16
May
2016
June
2016
Sept
2016
Oct
2016
Meetings held between management and
sub-committee members and audit firms to
determine their capabilities and prospective
audit partners.
Agreement of short list of audit firms by the
selection sub-committee. Confirmation of
participation by audit firms.
Issue of tender documents and supporting
information to the participating firms. Series of
management meetings and site visits in the UK,
Ireland and France with prospective firms.
Receipt and evaluation of tender documents by
the sub-committee.
Separate presentations to the sub-committee
from prospective firms. Recommendation of
the new auditor by the sub-committee to the
Audit Committee.
Recommendation of appointment of the
new auditor to the Board for approval.
Announcement of the appointment via RNS.
Initial planning with PwC. Induction period
commenced with PwC shadowing Deloitte
during 2016 year-end process.
Selection criteria and timetable
A proposed timetable for the tender process was agreed. Key
factors in determining the timetable were the ability to identify a
new External Auditor in time to allow an induction period with the
successful firm shadowing Deloitte during the year end process.
It was also important that the tender timetable should fit around
existing work patterns to ensure a thorough process.
In accordance with the audit tender timetable approved by the
Committee in November 2015, the Committee established a
sub-committee, chaired by Pierre Bouchut and including Andrew
Formica, and supported by the Chief Financial Officer and other
senior managers. The sub-committee had a number of meetings with
management and prospective firms to establish firm credentials and
lead audit firm partner selection.
A range of candidates was considered, including audit firms outside
the four largest public accounting firms. The sub-committee,
supported by senior management, prepared a list of key selection
criteria and decided which firms would be invited to take part. Key
selection criteria in relation to the potential candidate firms were
discussed and agreed by the sub-committee and included:
– Approach to client service and audit quality;
– Quality and cultural fit of the lead partner and key
team members;
– The extent to which wider real estate and retail industry
experience and knowledge would influence the delivery of
the audit;
– Technical expertise and a pragmatic, commercial approach to
resolving issues;
– Proposed audit approach including delivery and management of
the audit across the Group;
– Areas of audit innovation and use of technology which would
benefit the Group;
– Proposed audit transition plan; and
– Value for money.
Invitation to tender
PricewaterhouseCoopers LLP, Ernst & Young LLP and KPMG
LLP and were short listed and invited to tender. They were each
asked to prepare a detailed proposal document. The proposal
document included two special assignments designed to test the
quality and scope of technical expertise. A formal presentation was
also prepared by each candidate firm which included presentation
of the audit approach to the valuation of one of Hammerson’s
developments. This was intended to demonstrate practical audit
approach and judgement and presentation and reporting skills.
The firms were invited to a series of meetings at Hammerson’s
offices to meet the UK, France and Ireland financial teams and
members of the tax and treasury teams. They also met the General
Counsel and Company Secretary, the Chief Executive, the Chief
Financial Officer, members of the Audit Committee and senior
management. The process was supported by the establishment of
a data room to allow access to consistent information to support
the candidate firms’ tender proposals. A guided tour of one of the
Group’s assets, The Oracle, Reading, was also provided.
Formal presentations
In early September proposal documents were submitted and
considered by the selection sub-committee and in late September
the three firms each made a formal presentation to the selection
sub-committee at which each was given the opportunity to discuss
their presentation and answer questions.
Selection of new External Auditor
Following consideration of the proposal documents and the
presentations and taking into account the views of colleagues
who met with each firm, the sub-committee identified
PricewaterhouseCoopers LLP (PwC) as the proposed new External
Auditor. The Audit Committee recommended to the Board that
following the resignation of Deloitte after the completion of the
December 2016 year end audit, PwC be appointed by the Board
as External Auditor, subject to shareholder approval at the 2017
AGM. The Board accepted the recommendation.
HAMMERSON.COM
75
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT
Audit Committee report continued
Effectiveness of the External Auditor
The Committee considered the effectiveness of the External
Auditor as part of the 2016 year end process. The Committee
sought the views of key members of the finance team and their
feedback confirmed that Deloitte continued to perform well
and provided the appropriate level of challenge to management.
During the year the Committee also monitored progress against
the external audit plan at each meeting and considered the
Financial Reporting Council’s (FRC) Audit Quality Review (AQR)
findings for Deloitte. The AQR team selected the audit of the
2015 Hammerson plc financial statements as part of their 2016
annual inspection of audit firms. The focus of the review and their
reporting is on identifying areas where improvements are required
rather than highlighting areas performed to or above the expected
level. The Chairman of the Committee received a full copy of the
report of the AQR team and has discussed these with Deloitte. The
Committee confirms that there were no areas for improvement
identified in the report and is satisfied that there is nothing in the
report which might have a bearing on the audit appointment.
Overall, the Committee concluded that Deloitte had carried out its
audit for 2016 effectively and efficiently.
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 by the
External Auditor. During the year the Committee considered the
extent of the non-audit services provided by Deloitte. Details of
the policy on the provision of non-audit services are included in
the Annual Report on page 118 and the full policy is available at
www.hammerson.com. Details of the fees paid to Deloitte for non-
audit work in 2016 are also on page 118. Full details of Deloitte’s fees
are shown in note 4 to the accounts on page 144.
Viability statement
The Committee reviewed management’s work on assessing
potential risks to the business and the appropriateness of the
Company’s choice of a five-year assessment period. Following
this review, the Committee was satisfied that management had
conducted a robust assessment and recommended to the Board
that it could approve and make the Viability Statement on page 59.
Internal audit
Following a review of the Group’s internal audit arrangements
in late 2015, during the year new internal audit arrangements
have been implemented which use a combination of internal and
external resources to enhance and monitor the Group’s internal
audit procedures. The internal audit co-sourcing arrangements
enable the Risk and Controls Manager, who leads internal audit
activities, to draw on expertise in specific areas from outside the
Company where a high degree of specialist technical knowledge
is required.
To determine the Internal Audit Programme for 2016, key
risk areas in the Group’s Risk Management Framework were
considered, in particular, key risks which had not been subject
to recent internal audit, areas of change within the business and
heightened business risk areas. Having satisfied itself that the
programme was based on a thorough review of the Group’s key
business activities and addressed a number of related risk areas,
the Committee approved the programme.
During 2016 audits were carried out on:
– UK retail parks operations;
– Cyber security;
– Business continuity management; and
– Follow up reviews of 2015 audits.
In addition to the approved plan, reviews were also undertaken
on other areas including a review of the Health and Safety
management system and head office suppliers.
The Committee received an internal controls update at each
meeting and reviewed the results of the internal audit reports.
Each of the audits confirmed that these areas were appropriately
controlled. Some recommendations for improvements were
identified which were agreed by management and responsibility
assigned. The Committee also regularly reviewed progress
on any outstanding actions and the expected timetable for
their completion.
In 2017 the Committee will continue to follow a risk-based
approach to internal audit. Risk areas scheduled for future audits
include shopping centre operations, sustainability reporting,
lease management, internal controls for VIA Outlets and
treasury processes.
To allow the new internal audit arrangements to become better
established before reviewing their effectiveness, the next review
of the effectiveness of the internal audit will be undertaken
during 2017.
Fair, balanced, understandable
The Committee adopted the same approach as in previous years
to ensuring that the 2016 Annual Report is fair, balanced and
understandable. The process was led by an internal editorial team
consisting of members drawn from Group Finance, the Company
Secretariat, Corporate Communications, Investor Relations
and Marketing. The editorial team met regularly to review work
and ensure balanced reporting with appropriate links between
key messages and sections of the Annual Report. A paper was
presented to the Committee to help them challenge and test its
assessment that the report was fair, balanced and understandable.
The Committee, together with senior management, reviewed the
report in its final stages and the Committee and then the Board
were able to confirm that the Annual Report, taken as a whole,
is fair, balanced and understandable and provides the necessary
information for shareholders to assess the Company’s position,
performance, business model and strategy.
76
HAMMERSON PLC ANNUAL REPORT 2016
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 49
Significant financial judgement considered
How the Committee addressed the issue
Valuation of the Group’s property portfolio
The valuation of the Group’s property portfolio is a key risk due
to its significance in the context of the Group’s net asset value.
All valuations are thoroughly reviewed by management and the
Group’s auditors.
i. Shopping centres and retail parks
The shopping centres and retail parks valuations are undertaken
by the Group’s external valuer, Cushman & Wakefield (Valuer).
The valuations are based on inputs such as capitalisation yields and
market rental income (ERV) and hence are inherently subjective.
ii. Premium outlets
The premium outlet valuations are also undertaken by the Group’s
Valuer and include judgements on capitalisation yields and income.
However, the valuations are more subjective than for the Group’s
shopping centres and retail parks as the sector has fewer comparable
transactions and the valuation methodology requires judgement
about future performance and discount rates.
Accounting for significant transactions
i. Conversion of previously acquired Irish loan portfolio into
the underlying property assets
One of the key transactions during the year has been the conversion
of the previously acquired Irish loan portfolio into the underlying
property assets, including Dundrum Town Centre, Dublin, the Ilac
Centre, Dublin and a number of development sites. The accounting
for this conversion is material to the Group’s financial statements
and was complex as the assets had different ownership interests and
control provisions.
ii. Other transactions
During the year the Group made a number of acquisitions and
disposals, including transactions between the Group and its joint
ventures. There are risks in the accounting processes for these
complex transactions.
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 Valuer.
The Committee received presentations from the Valuer in July
and January to review the outcomes of the Valuer’s valuations. The
Committee challenged the Valuer’s assumptions and was satisfied
that the procedures and methodologies used were appropriate.
Current market conditions and recent transactions were also
reviewed to provide context.
The Valuer was asked to highlight any significant judgements and
disagreements with management and the Committee satisfied itself
of the Valuer’s independence.
The Committee was satisfied that the valuation of the Group’s
portfolio was prudent and reasonably based.
The Committee reviewed management’s paper explaining the
proposed accounting treatment for the Irish loan acquisition and
subsequent conversion to the underlying property assets. It also
explained the accounting treatment associated with the various
ownership structures and control provisions, Dundrum Town Centre,
Dublin is equity-accounted as a joint venture, the Ilac Centre, Dublin
is treated as a joint operation, whilst Dublin Central, Dublin is a
wholly-owned development property.
At 31 December 2016, the loan secured against the Pavilions shopping
centre, Swords had not been converted into property and it is equity-
accounted within the Allianz joint venture.
For other significant transactions including the acquisition and part
disposal of Grand Central, Birmingham, the Committee reviewed and
challenged management’s accounting proposals and judgements. The
Committee was satisfied that the approach adopted was appropriate.
The description of the significant financial judgements above should be read in conjunction with the Auditor’s Report on page 126 and the significant accounting policies
disclosed in note 1 to the accounts on pages 136 to 139.
HAMMERSON.COM
77
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECORPORATE GOVERNANCE REPORTSTRATEGIC REPORT DIRECTORS’ REMUNERATION REPORT
Reflecting
performance
in remuneration
Remuneration Committee members
– Gwyn Burr (Chairman)
– Terry Duddy
– Judy Gibbons
– David Tyler
Dear Shareholders
On behalf of the Remuneration Committee I am pleased to
present the Directors’ Remuneration Report for the year ended
31 December 2016.
Remuneration outcome: AIP
You will have read elsewhere in the Annual Report that the
Company has delivered another strong financial performance
in 2016. Earnings Per Share (EPS) has grown to 29.2p, up 9% on
the prior year. The Company’s Total Property Return (TPR) of
5.7% is again expected to exceed the benchmark industry returns
by 2.3%. EPS and TPR form the main components of the annual
bonus (AIP), although no AIP payments for TPR are made until
the actual external benchmark data becomes available and, on that
basis, estimated information has been used for reporting purposes.
AIP is also payable in respect of the growth in like-for-like net
rental income and reduction in the cost income ratio. The final
component of AIP is personal performance and the average payout
for this will lead to a final estimated AIP payout level of 70%.
This is lower than the average payout for 2015 which, following
confirmation of the TPR information for that year, showed a
payout level of 77%. The Committee did not exercise any discretion
to adjust performance targets.
Remuneration outcome: LTIP
In April 2016, the 2012 Long Term Incentive Plan (LTIP) award
vested and details of this are in table 81 on page 108. There was a
partial vesting under the absolute Net Asset Value performance
measure although there was no vesting under the TPR or Total
Shareholder Return (TSR) measures. The 2013 LTIP which will
vest in April 2017 is expected to vest partially under both the TPR
and EPS measures and you can read details of the expected level
of vesting in table 67 on page 100, as both of these measures are
estimated for inclusion in the single figure table 62 on page 97.
78
HAMMERSON PLC ANNUAL REPORT 2016
Remuneration review in 2016
The Committee kept abreast of governance and wider stakeholder
views on executive pay and followed closely the deliberations of
the Executive Remuneration Working Group on opportunities
for reform of long-term incentives. The Committee consulted
with a number of its major shareholders on a proposal to
introduce a restricted stock plan in place of the LTIP. Such a plan
would simplify the Company’s remuneration structure, reduce
the maximum earnings of top management from long-term
remuneration and move away from the LTIP with its inherent
difficulties of setting appropriate targets. No performance
measures would have attached to grants or vestings of such awards.
Although the proposal received support from a number of
shareholders, others were not convinced of the arguments for
change. The Committee considered other options for restructuring
the long-term incentive arrangements but concluded that, it
would not introduce such a scheme at this time. Consequently,
the long-term incentive awards that will be made in 2017 will be
issued under the Company’s existing LTIP rules and at the Annual
General Meeting (AGM) in April, a new set of plan rules will be
presented to shareholders for approval. These new rules are largely
consistent with the current rules but include some updates to
reflect best practice developments in this area. Further details
of the plan rules are set out in the Notice of Meeting of AGM. Of
particular note is the introduction of a one-year holding period on
top of the four-year performance period.
A further resolution will be presented to shareholders at the
AGM seeking approval of the Remuneration Policy which starts
at page 80. The previous policy was reviewed in light of the latest
Remuneration Reporting Guidance from the GC 100 and Investor
Group and the table at the bottom of this letter summarises the
main changes. The Policy remains largely unchanged and simply
reflects developments in best practice and clarifies the Policy’s
operation in some areas.
2017 Pay approach
Over recent years, the Premium Outlets business has become
increasingly significant in the Company’s portfolio. We have
made significant additional investments in both Value Retail
and invested in the VIA Outlets Fund. Responsibility for these
investments and for the management of the Company’s investment
in the Premium Outlets business has been taken on by our Chief
Financial Officer, Timon Drakesmith. The Committee reviewed
his responsibilities and considered whether an appropriate
salary increase to reflect those extra responsibilities should be
implemented. Following that review, the Committee has decided to
increase Timon Drakesmith’s salary by £39,000 to £457,000. Even
with this increase, the Committee is satisfied that his package is no
higher than median against comparative Chief Financial Officer
data even with no uplift for those additional responsibilities.
With effect from 1 April 2017, the other three Executive Director
base salaries will increase by approximately 2.5%, which is slightly
below those of colleagues generally.
The Committee spent some time reviewing the performance
measures to apply to the LTIP awards that will be made in 2017 and
made a number of adjustments, details of which you can find on
pages 113 to 114.
Conclusion
I hope that you will agree with the Committee that the outturn for
Executive Directors reflects the performance of the Company and
that the new Remuneration Policy, which is largely consistent with
the Policy that has been operating in the Company for many years,
remains the right one for your Company.
I look forward to your support at our AGM in April.
Gwyn Burr
Chairman of the Remuneration Committee
‘What has changed?’
The following is a summary of the changes made to the current Remuneration Policy approved in 2014 which form part of the new
Remuneration Policy to be voted on at the 2017 AGM.
– Salary and benefits: No change to the maximum limits payable to Executive Directors but the maximum limits will now increase
annually in line with UK CPI
– Pension: the Company’s defined benefit pension scheme is now closed to further accruals and therefore the only future pension
benefit available to Executive Directors is the pension allowance
– AIP: The discretion for the Remuneration Committee to increase the maximum potential bonus payable under the AIP
to 300% has been removed. Changes to AIP and DBSS rules to extend malus and clawback provisions to apply in cases of
reputational damage.
– LTIP: New LTIP rules include the introduction of a one-year holding period for shares vesting following the four-year performance
period, delays to vesting during any ongoing disciplinary investigation and malus and clawback provisions extended to apply in
cases of reputational damage.
– Share Ownership Guidelines: Share Ownership Guidelines for the Executive Directors increased to 250% of base salary
– Commitment given to disclose on a timely basis the remuneration package agreed with a new Executive Director
– The notice period for a new Executive Director amended so that the period can be less than 12 months’ notice (but generally no
more than) on either side
– Clarification of when the Company may pay legal fees in connection with an Executive Director’s employment or remuneration
– The addition of a maximum total payment of £5,000 for ancillary or non-material benefits in connection with the termination of
employment of an Executive Director (to cover such items as a computer or mobile phone)
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Considerations taken into account when
setting Remuneration Policy
Chart 51
Institutional investors’ and shareholders’ views
Changing market practice
Business objectives
Risk policies
Executive motivation
Remuneration
Policy
Employment conditions in the Group
Recruitment market conditions
Legislation and regulation
Culture, values and governance
Sustainability strategy including
environmental and social factors
DIRECTORS’ REMUNERATION REPORT: POLICY
Voting on remuneration at the AGM
Three votes on remuneration matters will be presented
at the 2017 Annual General Meeting (AGM): a binding
vote on the Directors’ Remuneration Policy as set out
in the policy section of this report, an advisory vote
on the Implementation Report section of this report
and a binding vote on new rules for the Long Term
Incentive Plan.
Explanation of our remuneration approach
The overall objectives of the Remuneration Committee
(Committee) are to determine an appropriate remuneration
policy that:
– aligns remuneration with strategy to drive the long-term success
of the Company;
– ensures that the Company can continue to attract, retain and
motivate quality leaders;
– avoids paying more than the Committee considers necessary.
The Directors’ Remuneration Policy is shaped by the following
underlying principles:
Chart 50
Alignment with strategy and business objectives
Alignment with shareholder interests
Long-term success of the Company
Consistency and transparency
Reward performance with competitive remuneration
Support Company values
Remuneration Policy
Fixed remuneration
Short-term incentives
Long-term incentives
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Directors’ Remuneration Policy
The Directors’ Remuneration Policy as set out below (Policy) will take effect from the conclusion of the AGM to be held on 25 April 2017,
subject to approval by the shareholders at that meeting. It is intended that this Policy will remain applicable for the following three years.
However, the Committee will keep a watching brief to ensure that it remains appropriate in the broader remuneration landscape.
The Committee has received clear advice that formal limits are required in the Policy and has retained sufficient flexibility to enable it to
continue to act in the interests of the Company and its shareholders. The limits will not lead to pressure on reward levels and the Committee
is satisfied that it has adopted a suitably conservative approach to date and will continue to do so.
Table 52
Remuneration Policy for Executive Directors
Fixed remuneration
Salary
Purpose and link to strategy
– Ensure the Company continues to attract and retain quality
Performance measures
– Not applicable.
Maximum limit
– The base salary for any existing Executive Director shall
not exceed £850,000 (or the equivalent if denominated in a
different currency) with this limit increasing annually at the
rate of UK CPI.
leaders.
– To recognise accountabilities, skills, experience and value.
Operation
– Paid monthly in cash.
– Reviewed but not necessarily increased annually by the Committee.
– In undertaking reviews, the Committee will take into account a
variety of factors including Company and individual performance,
market conditions, the level of salary increases awarded to other
employees of the Group, and a comparison against both a relevant
property peer group and a group of entities of comparable size
selected by the Committee (currently the largest REITs and an
appropriate pan-sector group of companies with a comparable
market capitalisation).
– The Committee is aware of the limitations of benchmarking
and of the need to avoid inflationary upward trends. However,
benchmarking is considered at both base salary and total
remuneration level, and the Committee generally considers that
pay will be within a range of +/- 10% of median benchmark but also
takes into account such other factors as it considers appropriate
and is not constrained by this default.
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Policy continued
Table 52 continued
Remuneration Policy Table continued
Fixed remuneration continued
Benefits
Purpose and link to strategy
– Provide a range of benefits in line with general practice.
– Ensure the Company continues to attract and retain quality
leaders.
Performance measures
– Not applicable.
Operation
– Executive Directors may receive such contractual and non-
Maximum limit
– The aggregate value of such benefits received by each
Executive Director (based on the value included in the
individual’s annual P11D tax calculation or a broadly
equivalent basis for a non-UK based Executive Director)
shall not exceed £100,000 or the equivalent if denominated
in a different currency (with this maximum increasing
annually at the rate of UK CPI).
– In addition to the benefits outlined, where Executive
Directors are relocated to work in a different country
the Company may pay global relocation support (up to a
maximum of £400,000) or the equivalent if denominated
in a different currency; and/or provide tax equalisation
arrangements in relation to all elements of remuneration.
contractual benefits as the Committee considers to be appropriate
and consistent with market practice in the relevant market in
which the Executive Director is based.
– These benefits currently include a car allowance, enhanced sick
pay, private medical insurance (for the Executive Director and
their spouse/life partner), permanent health insurance and life
assurance. In the case of employees of Hammerson France, health
and life assurance (mutuelle and prévoyance) are provided under a
French collective scheme and financed by employee and employer
social contributions.
– Benefits additionally available to employees of Hammerson
France currently include a seniority allowance and an employer’s
contribution of up to €2,000 per annum to an employee savings
scheme.
– Whilst the Committee does not consider it to form part of benefits
in the normal sense, Executive Directors can participate in
corporate hospitality (including travel and, where appropriate, with
a family member), whether paid for by the Company or another,
within its agreed policies with any tax liability met on the Executive
Directors’ behalf.
– In addition, Executive Directors will be paid any statutory
entitlements.
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HAMMERSON PLC ANNUAL REPORT 2016
Performance measures
– Not applicable.
Maximum limit
– Pension Choice is limited to an aggregate limit of 30% of base
salary. No elements of remuneration other than base salary
are pensionable.
Table 52 continued
Remuneration Policy Table continued
Fixed remuneration continued
Pension
Purpose and link to strategy
– Provide market competitive retirement benefits.
– Ensure the Company continues to attract and retain quality
leaders.
Operation
– Executive Directors may receive a non-contributory allowance
(Pension Choice) to be paid as, or as a combination of: (i) an
employer contribution to the Company’s defined contribution
pension plan; (ii) a payment to a personal pension plan; or (iii) a
salary supplement.
– The Company keeps the pension arrangements for Executive
Directors under review to ensure that they remain appropriate
and may decide to amend the way in which pension benefits are
provided (but subject to the stated maximum limit).
– The Company will also provide any additional pension benefit
required by local legal obligations or implemented pursuant to
collective employment arrangements in any relevant jurisdiction,
up to applicable statutory limits. This currently includes
participation by Jean-Philippe Mouton in a legacy collective
pension arrangement.
– The percentage of base salary as a pension allowance may differ
between Executive Directors. Specifically, David Atkins and Peter
Cole receive 30% of base salary which was agreed to ensure that
they were not materially adversely affected by closure of the defined
benefit scheme in which they participated. Timon Drakesmith
receives 20% of base salary.
– Since the previous Policy was approved, the Company’s defined
benefit scheme has closed to further accrual. The participation of
David Atkins and Peter Cole in this scheme is therefore now to the
extent of accrued benefits only.
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Table 52 continued
Remuneration Policy Table continued
Variable, performance-related remuneration
Annual Bonus (Annual Incentive Plan or AIP)
Purpose and link to strategy
– Align Executive Director remuneration with annual financial
and Company strategic targets as determined by the Company’s
Business Plan for the relevant financial year.
– To differentiate appropriately, in the view of the Committee, on
the basis of performance.
– Partial award in shares aligns interests with shareholders and
supports retention.
Operation
– Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for loss of office section
of this Policy.
– Awards are paid in a mix of cash and deferred shares, with the
deferred shares element being at least 40% of the total award.
Recovery or withholding
– Subject to clawback and malus provisions in situations of personal
misconduct and/or where accounts or information relevant to
performance are shown to be materially wrong and the bonus
paid was higher than should have been the case and/or where the
individual’s actions contributed to a significant adverse impact on
the reputation of the Company or Group.
– The recovery and withholding provisions also apply to the
deferred element of the AIP delivered under the DBSS.
Performance measures
– The annual bonus operates by reference to financial and
personal performance measures assessed over one year. The
weighting of the financial measures will be at least 60% of the
total opportunity. It is expected that the financial performance
measures will be:
– Adjusted Earnings Per Share.
– Total Property Return.
– Growth in like-for-like Net Rental Income.
These measures are aligned to the Company’s financial KPIs,
as explained in the Company’s Strategic Report, and reflect
effective delivery of the business model. The Committee
reserves the right to change, remove or include these or such
other measures as it considers to be an appropriate means of
assessing the performance of the Executive Directors.
– The level of vesting at entry/threshold performance for each
performance measure is set annually, but will be between 0%
and 25% of maximum (with vesting normally then being on
a straight-line or stepped basis to the target level set for full
vesting). On-target and maximum performance levels will also
be set.
– The Committee retains discretion to amend the vesting level
(up or down) where it considers it to be appropriate, but not
so as to exceed the maximum bonus potential and will fully
disclose the exercise of any discretion in the Implementation
Report that follows such exercise of discretion.
– Once set, performance measures and targets will generally
remain unchanged for the year, except targets may be adjusted
by the Committee to take account of significant transactions
such as acquisitions and/or disposals or in other exceptional
circumstances such as timing of transactions that have a
material impact on Business Plan.
Maximum limit
– The maximum bonus opportunity is 200% of base salary.
Deferred element of AIP
Purpose and link to strategy
– The AIP award is split between cash and a substantial deferred
award of shares which aligns interests with shareholders and
supports retention.
Performance measures
– No further performance targets apply to the deferred shares
element of the AIP as these represent previously earned
bonuses.
Maximum limit
– Awards under the DBSS are granted to deliver the deferred
element of the annual bonus, and so no separate maximum
applies.
Operation
– The deferred shares element is currently awarded under the
Deferred Bonus Share Scheme (DBSS) (but may be delivered
under a different plan with equivalent terms).
– The deferral period is currently two years, and may not be shorter.
– The deferred shares are subject to the leaver conditions as set out
in the Payment for loss of office section of this Policy.
– The awards are typically structured as nil-cost share options but
can take other forms such as a conditional award of shares.
– Participants are entitled to a dividend equivalent for the period
from grant until the vesting date, delivered as additional shares
when the shares are transferred to the participant.
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Table 52 continued
Remuneration Policy Table continued
Variable, performance-related remuneration continued
Long-Term Incentive Plan (LTIP)
Purpose and link to strategy
– Incentivise the creation of long-term returns for shareholders. Choice of
Performance measures
– Performance measures may consist of a combination
performance measures is determined by those drivers that deliver value to
shareholders in the longer term.
– Align interests of Executive Directors with shareholders and support
retention.
of financial and non-financial measures to align
with strategic priorities. It is expected that the
performance measures will be:
– Adjusted Earnings Per Share
– Total Property Return
– Total Shareholder Return
– The level of vesting at entry/threshold performance
for each performance measure will be set at between
0-25% of maximum with no more than 25% vesting
at threshold performance. Vesting between entry,
threshold and maximum levels will be on a linear or
stepped basis.
– Minimum performance period of four years.
– A one-year holding period for awards to be made
under the new LTIP rules.
– The Committee retains the discretion prior to
making the award to amend the performance
measures, conditions used, weighting, and
performance measurement periods.
– Once set the Committee may only amend the
performance conditions in respect of outstanding
awards in the event that exceptional circumstances
occur which make it appropriate to do so, provided
that the amended condition is not, in the view of the
Committee, materially less difficult to satisfy.
Operation
– Executive Directors are eligible to participate in an annual award under
Maximum limit
– A discretionary annual award up to a value of 200%
of base salary.
– The Committee reserves the power to increase
the maximum award to 300% of base salary in
exceptional circumstances. The extent of vesting is
determined by the performance conditions.
the LTIP. If the Remuneration Policy and new LTIP rules are approved by
shareholders at the 2017 AGM, future awards will be made under the new
LTIP rules.
– Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for loss of office section of
this Policy.
– Awards are typically structured as nil-cost share options but can take other
forms such as a conditional award of shares.
– Participants are entitled to a dividend equivalent for the period from
grant until the vesting date or where a holding period applies, to the end
of the holding period, delivered as additional shares when the shares are
transferred to the participant.
– The Committee has discretion to settle awards as a cash payment in place of
the transfer of shares.
Recovery or withholding
– Subject to clawback and malus provisions in situations of personal
misconduct and/or where accounts or information relevant to performance
are shown to be materially wrong and vesting was higher than should have
been the case and/or where the individual has contributed to a significant
adverse impact on the reputation of the Company or Group.
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Policy continued
Table 52 continued
Remuneration Policy Table continued
Variable, performance-related remuneration continued
All-employee arrangements
Purpose
– In order to be able to offer participation in these plans to employees
generally, the Company is either required by the relevant UK and French
legislation to allow Executive Directors to participate on the same terms, or
chooses so to do.
Performance measures
– Not generally applicable. An award of free shares
under the SIP can be made to all participants and
may be subject to a Company performance target.
Operation
– Executive Directors are eligible to participate in all-employee incentive
arrangements on the same terms as other employees. This currently
comprises the following arrangements:
– Eligible UK employees may participate in the Sharesave and Share
Maximum limit
– Maximum participation levels for Executive
Directors are the same as apply to all employees
(being, under the current arrangements, as set by
relevant UK and French legislation).
Incentive Plan (SIP).
– All employees of Hammerson France are eligible to participate in a profit
share plan, which rewards performance against such measures as the
Committee considers to be appropriate.
Notes
1. For details regarding remuneration of other Company employees, please refer to the Employee pay and conditions elsewhere in the Group section of this Policy.
2. The Payment for loss of office section of this Policy contains details of the impact of a change of control on awards made under AIP, the DBSS and the LTIP.
3. The Committee will determine components of remuneration for new Executive Directors, as outlined in the Recruitment section of this Policy.
4. Performance targets for the AIP and LTIP are set by the Committee taking into consideration a number of factors including alignment to strategy, the Business Plan,
need for consistency between years, changes to the Group’s portfolio, market conditions and need to ensure that measures are sufficiently challenging but also provide
motivation to succeed.
5. It is a provision of this Policy that all pre-existing obligations and commitments that were entered into prior to this Policy taking effect and/or prior to an individual
joining the Board will continue and can be honoured on their existing terms. In particular, these may include continued participation in legacy defined benefit pension
arrangements and the retention of outstanding awards under the LTIP together with other obligations and commitments under service contracts, incentive schemes,
pension and benefit plans. This includes payments from any outstanding awards under the LTIP or other incentive plans provided they were consistent with the Policy at
the time they were awarded.
6. If the new rules of the Long Term Incentive Plan are not approved by shareholders at the 2017 AGM, the Company will consult with shareholders about appropriate alternatives.
7. A summary of key changes to the Policy is included in the Committee Chairman’s letter.
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HAMMERSON PLC ANNUAL REPORT 2016
Share ownership guidelines
The Chief Executive and all other Executive Directors are expected
to accumulate and maintain a holding in ordinary shares in the
Company equivalent to no less than 250% of base salary (increased
from 150% for the Chief Executive and 100% for other Executive
Directors). Executive Directors are normally required to achieve
the minimum shareholding requirement within seven years of the
date of appointment.
Shares to be included in the calculation are:
– Shares held beneficially by the Executive Director and the
Executive Director’s spouse/life partner.
– Shares held under the DBSS or LTIP that are exercisable (on a
net of tax/NI basis).
– Shares held under the LTIP that have vested but are subject to
the one-year holding period (on a net of tax/NI basis).
– Shares held by the Executive Director under the Share
Incentive Plan.
An annual calculation as a percentage of salary is made against
the guidelines for each Executive Director as at 31 December each
year based on the closing middle market quotation of a share price
on the last business day in December. The closing exchange rate
as at 31 December is used for Executive Directors whose salary
is denominated in a currency other than sterling. No formal
sanctions exist for non-compliance.
Recruitment
Statement of Principles
The Company will pay total remuneration for new
Executive Directors that enables the Company to attract
appropriately skilled and experienced individuals, but is
not, in the opinion of the Committee, excessive.
The Company will not pay new Executive Directors
any inducements to join the Company over and above
buy-outs of existing forfeited awards, as outlined in this
section of the Policy.
The Company will disclose to the market/on its website
in a timely manner the basis of a package agreed with a
new Executive Director.
Approach and limits
Annual salary, pension, contractual and non-contractual benefits,
annual bonus and long-term incentive arrangements (including
performance measures and/or conditions and maximum award
levels) as described in the Remuneration Policy Table will be the
starting point for the structure of any package. The level of variable
remuneration that may be awarded to a new Executive Director
will not exceed the maximum AIP and LTIP limits that can be
awarded in line with the principles set out in the Remuneration
Policy Table, with the exception of any compensation for
variable remuneration forfeited. The limits contained within the
Remuneration Policy Table for base salary do not apply to a new
Executive Director either on joining or for any subsequent salary
review within the period of this Policy, although the Committee
would seek to avoid exceeding those limits in practice.
The Company may provide a new Executive Director with global
relocation support and/or tax equalisation arrangements as set out
in the Remuneration Policy Table although, to date, the Company
has not had occasion to do so.
For a new Executive Director who is an internal appointment,
the Company may also continue to honour commitments made
prior to the appointment as Executive Director even if those
commitments are otherwise inconsistent with the Policy in force
when the commitments are honoured. Any relevant existing
incentive plan participation may either continue on its original
terms or the performance conditions and/or measures may be
amended to reflect the individual’s new role, as the Committee
considers appropriate.
Compensation for variable remuneration forfeited
by a new Executive Director
The Company may, where appropriate, compensate a new
Executive Director for variable remuneration that has been
forfeited as a result of accepting the appointment with the
Company. Where the Company compensates a new Executive
Director in this way, it will seek to do so under the terms of the
Company’s existing variable remuneration arrangements as set out
in the Remuneration Policy Table. The Company may compensate
on terms that are more bespoke than the existing arrangements
where the Committee considers that to be appropriate. The
Committee may also make awards under a long-term incentive
scheme that does not require shareholder approval if it falls within
Listing Rule 9.4.2 (an arrangement established for a director
specifically to facilitate, in unusual circumstances, the recruitment
of an individual). In such instances, the Company will disclose a
full explanation of the detail and rationale for such recruitment-
related compensation. In making such awards the Committee
will seek to take into account the nature (including whether
awards are cash or share-based), vesting period and performance
measures and/or conditions for any remuneration forfeited by the
individual when leaving a previous employer. Where such awards
had outstanding performance or service conditions (which are
not substantially completed) the Company will generally impose
equivalent conditions. In exceptional cases, the Committee
may relax those requirements where it considers this to be in
the interests of shareholders, for example through a significant
discount to the face value of the replacement awards.
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Service agreements for a new Executive Director
The Committee’s approach is for the service agreements of new Executive Directors to have due regard to market practice at the date
of appointment, the Company’s current Policy and the service agreements in place for existing Executive Directors.
Table 53
The key termination provisions for service agreements for newly appointed Executive Directors will be:
Notice period
No greater than 12 months’ notice (either notice to or from the Executive Director) for UK-based Directors. For
non UK-based Directors, contracts are designed to meet local laws and have a similar overall effect in terms of
the potential cost to the Group.
A longer period of notice from the Company may apply to new appointments for a limited time if the Committee
considers this is appropriate, but would then reduce to no more than 12 months.
Post-termination
restrictions
Compensation in respect of restrictive covenants will be paid as required for enforceability reasons under
applicable local statutory (or collective bargaining) requirements. Appropriate post-termination restrictions to
protect the Group’s confidential information, its customer and supplier connections and/or to prevent poaching
of its senior workforce will be included.
Payment in lieu of
notice (PILON)
Employment can be terminated by the Company with immediate effect (for any reason) by making a payment
in lieu of the outstanding period of notice (PILON). The PILON comprises base pay, and the value of employer’s
pension contributions, medical insurance and car allowance.
The Company will have discretion to make any PILON on a phased basis, subject to mitigation.
No PILON will be made in the event of gross misconduct.
Expiry date
There will be no fixed expiry date. The appointment of new Executive Directors will be terminable in accordance
with the notice period.
Change of control and
liquidated damages
The Executive Director will not have a right to liquidated damages, whether triggered by a change of control of
the Company or otherwise.
The terms summarised above will be subject to any local statutory (or collective bargaining) requirements where applicable. For treatment of
incentive awards in connection with termination please see the Payment for loss of office section of this Policy.
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HAMMERSON PLC ANNUAL REPORT 2016
Payment for loss of office
Committee considerations on leaving office
The Committee considers the circumstances under which an Executive Director is leaving the Company’s employment. In
circumstances where a Director is terminated for cause, the Committee typically has limited discretion in connection with
remuneration payments. In other circumstances a range of discretions is available to the Committee
The following tables set out a summary of obligations contained in the Executive Directors’ service agreements which could give rise to, or
impact on, remuneration payments for loss of office.
Table 54
Service agreements and notice periods for current Executive Directors
Date of service contract
28 February 2002
Peter Cole
David Atkins
11 January 2008
Timon Drakesmith
18 January 2011
Expiry date
Notice period
Termination payments:
Payment in lieu of notice
(PILON)
Liquidated damages/Change
of control
Rolling service contracts with no fixed expiry date.
12 months’ notice to the Executive Director and 6 months’ notice
from the Executive Director.
12 months’ notice (both from
and to the Executive Director).
Employment can be terminated by the Company with immediate
effect by making a lump sum PILON in respect of the outstanding
notice period comprising base salary, the value of contractual
benefits and a bonus based on the Executive Director’s average
bonus over the previous three years (but pro-rated to reflect the part
of the bonus year actually worked).
Employment can be terminated
by the Company with immediate
effect by making a PILON in
respect of the outstanding
notice period comprising base
salary and the value of benefits
in respect of pension, private
medical insurance and car
allowance.
No PILON will be made in the event of gross misconduct.
The Company has discretion to make any PILON on a phased basis,
subject to mitigation.
Entitlement to liquidated damages calculated on the same basis as calculated for the Executive
Director’s PILON if (i) the Company terminates the employment in breach of the service agreement
or (ii) the Executive Director terminates the employment because of a fundamental breach by the
Company or (iii) within 12 months after a change of control, the Company terminates the employment
(in each case save where such termination is for gross misconduct or long-term sickness or incapacity).
Liquidated damages are subject to deductions for new earnings.
The service agreements of David Atkins and Peter Cole provide that the relevant Executive Director will be eligible to be considered for
payment of an award under the AIP provided that the Director has been employed through the entirety of the bonus year, even if no longer
employed at the payment date. Where the Executive Director has been employed for only part of the bonus year, he will be eligible for
consideration for payment of a discretionary bonus, but on a pro-rata basis. Other than in this respect, the treatment of leavers under the AIP,
DBSS and LTIP arrangements is set out in table 56. The Company will pay any additional statutory entitlements where applicable.
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Jean-Philippe Mouton has been employed by Hammerson Asset Management SAS (HAM) since 14 April 2003 as Divisional Director (France).
Mr Mouton also holds French corporate offices in various Hammerson France entities.
He is based and works in France and, as a result, upon his appointment as an Executive Director, it was considered appropriate for him to
continue to be employed under a French law-governed employment contract with HAM. His employment contract with HAM means that
French law applies to his terms and conditions of employment as Divisional Director (France). Mr Mouton entered into a separate English law
letter of appointment, which governs his directorship of the Company.
His aggregate global base salary in respect of his directorship of the Company, his role as Divisional Director (France) and his French corporate
offices is reflected in the Single Figure Table in the Implementation Report.
Table 55
Jean-Philippe Mouton
Date of service agreement
and appointments
Expiry date
Notice period
Termination payments
– French employment: 25 March 2013.
– UK directorship: 25 March 2013.
– French corporate offices (as part of his role as Divisional Director (France): various.
French employment: rolling service contract with no fixed expiry date.
UK directorship: rolling service period with no fixed expiry date. If Mr Mouton is not re-elected at the
Company’s Annual General Meeting, the appointment will cease automatically.
French employment: 3 months’ notice in the case of dismissal or resignation (both notice to and from
the Executive). No notice is applicable where there is an agreed termination.
UK directorship: 3 months’ notice (both notice to and from the Executive Director).
Notice (in respect of
French employment,
UK directorship and
French corporate
offices)
Severance payment
Restrictive covenants
Entitlement to 3 months’ fixed and variable global remuneration. Any PILON
would be based on the fixed and variable global remuneration that he would
have received had he continued to be actively employed during the putative
notice period and would not be subject to mitigation.
In the case of dismissal or agreed termination under collective bargaining
arrangements, an entitlement to a severance payment equal to 25% of
average global monthly contractual remuneration per year of service
(capped at 6 months if terminated on grounds of collective redundancy). No
severance is payable if the Executive Director resigns.
Entitlement to a monthly compensation payment equal to 30% of the
basic monthly salary received in respect of his French employment for the
duration of the 12-month non-competition covenant (to the extent such
covenant is enforced).
Notes:
Global in this context refers to the remuneration for Mr Mouton from all his positions of employment within the Group.
The Company will pay any additional statutory entitlements where applicable.
90
HAMMERSON PLC ANNUAL REPORT 2016
Table 56
Annual bonus and long-term incentives
The following table describes the provisions which apply to leavers who are Executive Directors and the discretions available under the AIP,
DBSS and the LTIP. Further detail as to the potential exercise of discretion by the Committee is set out in the Use of discretion section of
this Policy.
Leaving reason
Redundancy,
sale of Company
or business
Retirement
Voluntary
resignation3
Termination
for cause
Change of
control2
Remains eligible for full
payment of the bonus for a
completed performance period.
In addition, the Committee has
discretion to make payments
for any performance period not
completed.
Ill-health, injury,
disability
Death
Remains eligible for bonus.
Any bonus payable will be time
pro-rated unless the Committee
decides otherwise.
AIP1
In all cases, any
bonus payable
is subject to the
normal deferral
arrangements,
unless the
Committee
determines
otherwise
DBSS
(deferred share
element of AIP)
Full vesting on normal vesting date.
Committee may accelerate vesting.
No bonus
payable.
Bonuses may
be awarded
under the AIP
at the time of
the change of
control. Unless
the Committee
determines
otherwise, a
bonus will be
time pro-rated.
Awards lapse.
Awards vest in
full.
Awards lapse.
Awards vest,
subject to the
performance
conditions
and, unless the
Committee
determines
otherwise,
will be time
pro-rated.
No right to
receive any
bonus.
Committee
has discretion
to pay a bonus
provided the
Executive
Director is in
employment
at the bonus
payment date.
Awards lapse,
save that the
Committee has
discretion to
allow up to full
vesting on the
normal vesting
date or the
Committee
may accelerate
vesting.
Awards lapse,
save that the
Committee
has discretion
for awards to
remain capable
of vesting
(subject to
performance
conditions)
on a time pro-
rated basis and
may accelerate
vesting.
LTIP
Awards remain capable of vesting, subject to the performance conditions
being met.
Awards will vest on normal vesting date, save that the Committee may
accelerate vesting.
Unless the Committee determines otherwise, vesting will be time
pro-rated.
In respect of all-employee plans, including the Company’s HMRC-approved, all-employee share plans, the Sharesave and the SIP,
and the profit share plan for employees of Hammerson France, the Executive Directors are subject to the same leaver provisions as
all other participants.
Notes:
1. Where the date of notice and the date of cessation fall in different performance periods, the provisions relating to AIP as stated above apply in respect of the AIP award for
each performance period separately.
2. On a corporate event affecting the Company, bonuses and awards under AIP, DBSS and the LTIP will be governed by the rules of these plans. The information given here is
for summary purposes.
3. Specific arrangements apply under the service agreements of David Atkins and Peter Cole as set out on page 89.
HAMMERSON.COM
91
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT
Legal fees
Consistent with market practice, the Company may pay reasonable
legal fees (and any associated tax costs) on behalf of the Executive
Director for entering into a statutory settlement agreement and
may pay a contribution of up to £50,000, plus VAT, towards fees for
outplacement services as part of a negotiated settlement.
In the case of a corporate transaction, the Company may agree to
pay reasonable legal fees (and any associated tax costs) on behalf
of the Executive Director for advice on the effect of the corporate
transaction on the Executive Director’s personal position as a
director (including, where appropriate, as to the terms of their
employment).
The Company may agree to pay reasonable legal fees (and any
associated tax costs) on behalf of the Executive Director for advice
related to any proposed changes to their terms and conditions of
employment during their period of employment.
On recruitment of an Executive Director, the Company may make
a contribution towards legal fees in connection with agreeing
employment terms and drawing up a service contract.
Other appointments: new and existing
Executive Directors
Executive Directors are able to accept, with the consent of the
Company’s Board of Directors, non-executive appointments
outside the Company (provided that such appointments do not
lead to a conflict of interests) on the basis that such external
appointments can enhance their experience and skills and
add value to the Company. Any fees received by an Executive
Director for such external appointments can be retained by the
individual (except where the Executive Director is appointed as the
Company’s representative).
Directors’ Remuneration Report: Policy continued
Use of discretion
In exercising discretion in respect of the AIP or under the LTIP,
the Committee will take into account all factors it determines to
be appropriate at the relevant time including but not limited to
the duration of the Executive Director’s service and its assessment
of the contribution towards the success of the Company during
that period; whether the Executive Director has worked any
notice period or whether (and if so, the extent that) a PILON is
being made; the need to ensure an orderly handover of duties and
continuity in the business operations of the Company; and the
need to settle any claims which the Executive Director may have.
In exercising any discretion the members of the Committee will
take account of their duties as Directors.
Other
If the Company terminates an Executive Director’s employment
by reason of redundancy, the Company will make a redundancy
payment to the Executive Director in line with any applicable
Company redundancy policy (which includes any entitlement
to statutory redundancy pay) and any applicable collective
bargaining agreement.
Payment to a departing Executive Director may be made in respect
of accrued benefits and accrued untaken holiday.
In connection with an Executive Director ceasing employment,
the Company may, if the Committee determines it is in the
best interests of the Company, enter into new contractual
arrangements with the departing Executive Director including
(but not limited to) settlement, confidentiality, restrictive
covenants and/or consultancy arrangements on such terms as
it considers appropriate. In such case, the Company will make
appropriate disclosures of such terms. If a settlement agreement is
entered into with the Executive Director, the Company may make
payments that it considers reasonable in settlement of potential
legal claims, for example unfair dismissal, or where agreed under
the settlement agreement. This may include any entitlement to
compensation in respect of statutory rights under employment
protection legislation in the UK or in other jurisdictions.
A departing gift may be provided (and any tax liability met on
the Executive Director’s behalf ) up to a value of £5,000 (plus
the related taxes) per Executive Director on termination of
office. The Company may agree to provide other ancillary or
non-material benefits in connection with (including in a defined
period following) termination, not exceeding a value of £5,000
in aggregate.
92
HAMMERSON PLC ANNUAL REPORT 2016
Chairman and Non-Executive Directors’ remuneration
Table 57
Remuneration Policy for Non-Executive Directors
Fees
Purpose and link to strategy
– Ensure the Company continues to attract and retain high-quality
Chairman and Non-Executive Directors by offering market-
competitive fees.
Operation
– The Chairman’s fee is determined by the Committee. Other Non-
Executive Directors’ fees are determined by the Board on the
recommendation of the Executive Directors.
– Fee levels are reviewed periodically taking into account
independent advice and the time commitment required of Non-
Executive Directors.
– Fees paid aim to be competitive with other listed companies which
the Committee (in the case of the Chairman) and the Board (in
respect of Non-Executive Directors) consider to be of equivalent
size and complexity but are not set by reference to a prescribed
benchmark.
– Fees are paid monthly in arrears.
– The Chairman does not receive any additional fee in respect of
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. There is also an additional fee for the Senior
Independent Director. The level of additional fees is set to reflect
the responsibilities of the role.
Other benefits
– There are no other benefits currently available to any of the
Non-Executive Directors. Whilst the Company does not consider
that reimbursing travel and accommodation expense (including
to the Company’s London office) is a benefit in the normal sense,
should any assessment to tax be made on such reimbursement, the
Company reserves the ability to settle such liability on behalf of the
Non-Executive Director.
– Non-Executive Directors are not eligible for performance-related
bonuses or participation in the Company’s share plans, nor do Non-
Executive Directors receive any pension benefits.
Fee levels
Current fees (per annum) are:
Chairman
Non-Executive Director
Senior Independent Director
Chair of Audit Committee
Audit Committee member
Chair of Remuneration Committee
Remuneration Committee member
Chair of Nomination Committee
£000
330
58
10
15
5
10
5
0
Maximum limit
– Aggregate total fees payable annually to all Non-Executive
Directors are subject to the limit as stated in the Company’s
Articles of Association (currently £1,000,000). The
Committee reserves the right to provide additional fees
within the stated limit including for membership of any
additional Committee the Board may establish.
– Whilst the Company does not consider it to form part of
benefits in the normal sense, Non-Executive Directors can
participate in corporate hospitality (including travel and,
where appropriate, with a family member), whether paid for
by the Company or another, within its agreed policies.
– A departing gift may be provided (and any tax liability met
on the Non-Executive Director’s behalf ) up to a value of
£5,000 (plus the related taxes) per Non-Executive Director
on termination of office.
HAMMERSON.COM
93
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Policy continued
The Chairman and the Non-Executive Directors do not have
service agreements with the Company. Their appointments
are governed by letters of appointment, which are available
for inspection on request. The letters of appointment of Non-
Executive Directors are reviewed by the Chairman and the
Executive Directors every three years.
Appointments of Non-Executive Directors are for a term of
three years, subject to the right of either party to terminate the
appointment on not less than three months’ notice or immediately
should a conflict of interest arise. If any Non-Executive Director
is not re-elected at the Company’s Annual General Meeting, the
appointment will cease automatically.
On termination of an appointment, a Non-Executive Director
is only entitled to such fees as may have accrued to the date of
termination, together with the reimbursement in the normal way
of any expenses properly incurred prior to that date.
The dates of the appointments of the Non-Executive Directors in
office as at 31 December 2016 are set out below.
Table 58
Date of original
appointment
to Board
Pierre Bouchut 13 February
Gwyn Burr
Terry Duddy
Andrew
Formica
Judy Gibbons1
David Tyler
2015
21 May 2012
3 December
2009
26 November
2015
1 May 2011
12 January
2013
Commencement
date of current term
Unexpired
term as at April 2017
13 February
2015
21 May 2015
3 December
2015
26 November
2015
1 May 2014
12 January
2016
10 months
1 year, 1 month
1 year, 8
months
1 year, 7
months
1 month
1 year, 9
months
Notes
1. Judy Gibbons’ appointment has been extended for three years with effect from
1 May 2017.
Considerations in setting this
Remuneration Policy
When setting Executive Director remuneration,
the Committee takes into account Group-wide pay
and employment conditions, along with market and
commercial factors.
Employee pay and conditions elsewhere
in the Group
Remuneration packages for all Company employees may comprise
both fixed and variable elements. The more senior the individual,
the greater their general opportunity to impact directly upon
Company performance, and therefore the remuneration packages
of senior managers and Executive Directors have a greater
emphasis on variable pay than those of more junior employees.
94
HAMMERSON PLC ANNUAL REPORT 2016
Executive Directors are eligible to participate in the full range
of Company benefits offered to employees. In addition, they are
eligible for certain remuneration to which other employees are
not eligible.
Executive Directors may opt to receive a salary supplement in lieu
of employer pension contributions. Employees may participate
in one of a number of pension schemes across the UK, France
and Ireland.
Executive Directors are eligible to participate in an LTIP whereas
senior managers across the Group participate in other share and
incentive plans. Eligible employees, including Executive Directors,
may participate in the relevant all-employee share plans (namely
UK plans for employees in the UK and French plans for employees
in France).
One of the aims of the Policy is to pay competitively and to
ensure its reward structures recognise superior performance.
The Company therefore undertakes external benchmarking to
ensure that, in its view, at all levels the Company’s remuneration
approach reflects the appropriate market rates. The Remuneration
Committee is cognisant of the limitations and potential
inflationary impacts of benchmarking and uses the results as
context rather than as the main driver for its decisions. When
determining base salary increases for Executive Directors, the
Committee reviews the average Group-wide increase, paying
particular attention to the senior manager population.
The Committee reviews Company performance against the
AIP performance measures. Personal performance rating
impacts bonus calculations for all employees and these ratings
are calibrated internally to ensure consistency. Executive
Director performance ratings are also calibrated annually by
the Committee. Having reviewed both Company and personal
performance, and considering payments being made to
shareholders, the Committee makes a judgement as to what
level of bonus payment, if any, is reasonable. The Committee
retains discretion to review bonus payments upwards as well as
downwards (subject to the over-riding limits).
In accordance with prevailing commercial practice, the Committee
did not consult with employees in preparing the Policy or the
implementation thereof but is kept informed of remuneration
developments for the employee population in the wider Group.
Shareholder views
The Company welcomes dialogue with its significant shareholders
and seeks their views when major changes are being made to
remuneration policy. Consultation was undertaken with major
shareholders and institutional investor bodies in formulating
the changes to the Policy in particular to the long-term incentive
structure. The Committee considered a number of scenarios for
long-term incentives and, taking into account investor feedback,
took the decision to remain with the current long-term incentive
structure as set out in this Policy. The Remuneration Committee
Chairman’s letter provides further details of the consultation
exercise and subsequent changes made to the Policy.
Illustration of application of the Policy
Set out below is an illustration of the reward mix for the Executive Directors at minimum, on-target and maximum performance under
the Policy.
Chart 59
Scenarios: 2017 Implementation
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
£3,344
38%
37%
£1,777
18%
35%
£836
100%
47%
25%
£2,444
38%
£2,395
38%
37%
£1,302
18%
35%
47%
25%
£616
100%
38%
£1,253
18%
37%
45%
24%
£567
100%
£1,853
37%
39%
£970
18%
37%
45%
24%
£437
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
£000’s
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Table 60
Assumptions: Executive Director remuneration scenarios 2017
Fixed
– Consists of base salary, contractual and non-contractual benefits, pension and participation in the UK all-
employee share plans.
– Base salary is the salary to apply after salary increases take effect on 1 April 2017.
– Benefits are as shown in the Single Figure Table for 2016 in the Implementation Report (except for Jean-Philippe
Mouton where the amount he received under the profit sharing plan has been excluded from his 2016 benefits
figure for these purposes. See On-target and Maximum below).
– Pension contributions are based on salary after salary increases take effect on 1 April 2017.
– Jean-Philippe Mouton’s data has been converted at a rate of £1: €1.224.
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Base Salary
£000
Benefits
£000
627
457
457
350
21
22
19
12
Pension
£000
188
137
91
75
Total Fixed
£000
836
616
567
437
Based on what the Executive Director would receive if performance was in line with expectation (excluding share
price appreciation and accrual of dividend equivalent payments):
– AIP: consists of on-target levels (50% of bonus maximum).
– LTIP: consists of the threshold level of vesting (25% of the face value of the award).
– France profit sharing (Jean-Philippe Mouton only): consists of on-target levels (50% of the current capped
vesting level of €19,614).
Based on the maximum remuneration receivable (excluding share price appreciation and accrual of dividend
equivalent payments):
– AIP: consists of the maximum bonus (200% of base salary).
– LTIP: assumes maximum vesting of awards (200% of 2017 base salary).
– France profit sharing (Jean-Philippe Mouton only): assumes maximum vesting at the current capped vesting
level of €19,614.
HAMMERSON.COM
95
On-target
Maximum
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT DIRECTORS’ REMUNERATION REPORT: IMPLEMENTATION REPORT
The auditors have reported on certain sections of this Report and stated whether, in their opinion, those sections have been properly prepared.
Those sections which have been subject to audit are clearly indicated with an asterisk (*).
The Implementation Report sets out how the Directors’ Remuneration Policy was put into practice in 2016 and how it will be implemented in
2017. It is divided into three sections:
Section 1: Single Figure Tables
Section 2: Further information on 2016 remuneration
Section 3: Implementation of Remuneration Policy in 2017
Chart 61
How much Executive Directors earned in 2016
As per Single Figure Table (table 62)
£000
David Atkins
Peter Cole
30% Fixed
70% Variable
31% Fixed
69% Variable
1
2
£811
£833
£980
Total
£2,624
25% Fixed
75% Variable
£811
£1,216
£1,216
Total
£3,243
1
2
£598
£607
£704
Total
£1,909
25% Fixed
75% Variable
£598
£886
£886
Total
£2,370
Timon Drakesmith
Jean-Philippe Mouton
29% Fixed
71% Variable
31% Fixed
69% Variable
1
2
£518
£594
£670
Total
£1,782
24% Fixed
76% Variable
£518
£832
£832
Total
£2,182
1
2
£441
£465
£500
Total
£1,406
25% Fixed
75% Variable
£441
£676
£676
Total
£1,793
Fixed
AIP
LTIP
1 Actual
2 Potential Maximum
“I hope that you will agree with the Committee that the outturn for Executive Directors
reflects the performance of the Company.”
— Gwyn Burr, Chairman of the Remuneration Committee
96
HAMMERSON PLC ANNUAL REPORT 2016
Section 1: Single Figure Tables
This section contains the single figure tables showing 2016 remuneration for the Executive Directors and Non-Executive Directors and
information that relates directly to the composition of these figures. All figures highlighted in GREEN in the Implementation Report relate
directly to a figure that is found in the Single Figure Table, table 62.
Executive Directors’ remuneration: Single Figure Table*
Table 62 below shows the remuneration of the Executive Directors for the year ended 31 December 2016, and the comparative figures for the
year ended 31 December 2015.
Table 62
Executive Directors’ remuneration: Single Figure Table
Salary
Benefits
Annual bonus (AIP)
Long-Term
Incentive Plan (LTIP)
Pension
Total
2016
£000
2015
£000
2016
£000
2015
£000
2016
£000
2015
£000
2016
£000
2015
£000
2016
£000
2015
£000
2016
£000
2015
£000
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Total
608
443
416
338
1,805
597
435
408
296
1,736
21
22
19
27
89
15
13
15
23
66
833
607
594
465
2,499
922
672
630
457
2,681
980
704
670
500
2,854
434
312
393
115
1,254
182
133
83
76
474
179
131
82
67
459
2,624
1,909
1,782
1,406
7,721
2,147
1,563
1,528
958
6,196
For further information see:
Page 98
Page 100
Page 101
Commentary on the Single Figure Table
Truing up of 2015 Single Figure Table numbers
Each year the outcome of AIP and LTIP elements dependent on Total Property Return (TPR) is estimated because the data regarding TPR
performance of the relevant index is not available at the date of the annual report. In the 2015 Annual Report, the TPR element of AIP was
estimated at IPD +2.5%, resulting in an estimated payout level at 100% for that measure. The final closing measurement for TPR during 2015
was IPD +2.9%, resulting in a final payout level of 100%. The final payout levels were therefore the same as the estimated levels reported
last year.
The estimated TPR outcome for the 2015 LTIP figure was ‘nil’, and the actual outcome was ‘nil’. In addition, the 2015 LTIP figure contained a
value for the Absolute Net Asset Value (Absolute NAV) portion of the 2012 LTIP where the performance period ended on 31 December 2015
and was calculated based on the average share price over the three months to 31 December 2015. This measure was calculated to vest in last
year’s report at 70.40%. The actual Absolute NAV performance condition vested at 70.74%. The 2015 LTIP figure reflects the actual outcome of
the TPR and Absolute NAV performance conditions and has been adjusted to reflect the actual share price of 577.5p on the vesting date.
Sterling:Euro exchange rates
Jean-Philippe Mouton’s salary, benefits, annual bonus and pension contributions are paid in euro. When converted, the sterling equivalent will
vary with currency movements. The amounts paid are shown in the Single Figure Table converted into sterling using the average exchange rate
for 2016 (£1:€1.224). The LTIP is calculated in sterling and converted to euro at the same conversion rate. Equivalent data for 2015 has been
converted at the average exchange rate for that year (£1:€1.378). The euro amounts are shown below in table 63.
Table 63
Jean-Philippe Mouton
Salary
Benefits
Annual bonus (AIP)
Long Term
Incentive Plan (LTIP)
Pension
Total
2016
€
000
414
2015
€
000
408
2016
€
000
33
2015
€
000
32
2016
€
000
569
2015
€
000
630
2016
€
000
612
2015
€
000
141
2016
€
000
92
2015
€
000
92
2016
€
000
2015
€
000
1,720
1,303
Benefits paid in 2016
Taxable benefits include a car allowance, private health insurance and permanent health insurance. Jean-Philippe Mouton receives a seniority
allowance and welfare contribution. UK Executive Directors participated in the Company’s all-employee share plan arrangements (SIP and
Sharesave). All participants in the SIP received an award of free shares during 2016. This included the UK Executive Directors (page 109) and
is reflected in the increased benefits figure this year. Jean-Philippe Mouton participated in a profit-sharing scheme in France and receives an
employer’s contribution to a French employee saving scheme.
Annual bonus (AIP) for 2016
The Annual Incentive Plan (AIP) is the Company’s annual bonus scheme. 60% of the bonus achieved is paid in cash and the deferred element
of 40% is granted as an award under the Deferred Bonus Share Scheme (DBSS).
Details of the Remuneration Policy in relation to the AIP and DBSS are
on page 84 in the Remuneration Policy.
HAMMERSON.COM
97
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
The following tables (tables 64, 65 and 66) show the AIP bonus outcomes and achievement against AIP performance targets for 2016.
Table 64
Total AIP outcomes for 2016
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Financial
measures
(% of bonus
achieved,
max 70%)
Personal
measures
(% of bonus
achieved,
max 30%)
Total vesting
percentage
(%, max
100%)
Vesting
amount
as %
of salary
(max 200%)
AIP amount
(£000) (Shown
in Single
Figure Table)
44
44
44
44
24
24
27
24
68
68
71
68
136
136
142
136
833
607
594
465
The bonus awards shown above are based on the performance conditions that were set in advance of the financial year. The targets were
not disclosed in advance of the year, as they were considered by the Board to be commercially sensitive information, but full details of the
conditions and performance against them are now set out below.
Achievement against financial measures (70% weighting)
Details of the AIP outcome for 2016 are provided in table 65 below.
Table 65
AIP Outcome
Performance
measure
Entry threshold
(% vesting at threshold)
Adjusted EPS1
26.9p (20%)
Performance against targets
Bonus achieved
On-target
30.0p
Full vesting target
Result achieved
Vesting
percentage
against target
Weighting (%
of max bonus
available)
% of max
bonus
achieved
31.0p
29.2p
42.3%
25%
10%
TPR
(estimated
outcome)2
IPD +0.0% (25%)
IPD+0.7%
IPD+2.0%
IPD+2.3%
100%
25%
25%
NRI3
1.5% (0%)
2.5%
3.5%
2.2%
35%
10%
4%
Cost Ratio4
23.1% (0%)
22.6%
22.1%
22.6%
50%
10%
5%
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 target to achieve full vesting.
Notes
1. Adjusted EPS is the Group’s underlying profit divided by the average number of shares in issue.
2. The TPR performance is measured relative to the IPD UK Retail Property (75%) and IPD France Retail Property (25%) indices. The annual data for these indices is not
available at the date of this report. Accordingly, the closing measurement for TPR for the year to 31 December 2016 is based on management’s best estimate using available
data (see page 50 for property returns data). The AIP is not paid until the confirmed data for these indices is available. The actual outcome will be disclosed in the 2017
Annual Report.
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.
44% out
of 70%
98
HAMMERSON PLC ANNUAL REPORT 2016
Achievement against personal objectives (30% weighting)
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 elements for 2016 (refer to ‘Our Strategy’ on page 5), 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.
Table 66 sets out the key 2016 personal objectives for the Executive Directors and how these support the Company’s three strategic elements.
Table 66
2016 Key personal objectives
Personal objectives
David Atkins
Link to Strategic Elements
,
y
t
i
l
i
i
b
a
n
a
t
s
u
S
d
n
a
e
r
u
t
l
u
c
s % of max bonus
e
achieved
u
a
v
(max 30%)
l
– Provide strategic leadership for culture, values, diversity and inclusion plans and establish
Net Positive sustainability strategy
– Ensure top level performance against Business Plan with particular focus on monitoring
√
portfolio performance, cost control and income growth
– Maintain strong communication of investment proposition
– Integration of Ireland portfolio
Peter Cole
– Embed Product Experience Framework and roll out initiatives
– Progress key developments and initiatives
at Croydon, Brent Cross, Leeds and The Goodsyard
– Promote disposal strategy
Timon Drakesmith
– Maintain focus on costs whilst delivering Business Plan
– Monitor FX hedging, maintain credit rating, consider refinancing opportunities and
review South Africa listing
– Complete expansion of VIA Outlet fund and promote appropriate VIA organisational
structure
Jean-Philippe Mouton
– Maximise top level France performance
– Progress major refurbishments and retenanting
– Review gender diversity within the French management team and address imbalance
√
√
√
√
√
√
√
√
√
√
√
√
√
√
24%
24%
27%
24%
√
√
√
√
√
Strategic elements
Progress against these strategic elements is on pages 12 to 17.
Focus on growing consumer markets
Create differentiated
destinations
Promote financial efficiency
and partnerships
HAMMERSON.COM
99
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT
Directors’ Remuneration Report: Implementation Report continued
Committee’s consideration of 2016 AIP vesting level
Every year the Committee considers the overall vesting AIP outcome as determined by achievement against the financial and personal targets
to check that the bonus level is appropriate given the Company’s performance during the year.
The Committee reported in the 2015 Annual Report on the possible consequences for remuneration performance measures of the acquisition
of a portfolio of loans secured on various Irish retail properties. In setting the 2016 AIP performance measures the Committee considered how
it could measure property returns for assets in Ireland and decided that there was no appropriate Irish benchmark. It decided to measure the
performance of Irish assets against the same index used for UK assets, but review and, if considered appropriate, exercise its discretion if it
considered that comparison of Irish assets against a UK index led to an unintended outcome. The Committee reviewed the 2016 AIP results
early in 2017. In light of its review, the Committee concluded that no adjustments to performance targets were necessary.
In addition, in assessing payout levels against personal objectives, the Committee took into account progress made and remaining challenges
against the objectives set. Its conclusion was that all four of the Executive Directors contributed significantly to the Company’s performance
with excellent progress against objectives. Key objectives achieved were the launch of the listing in South Africa, good progress on integration
of the Ireland portfolio, progress in developing the wider management group and succession planning, delivery of a successful disposals
programme and progress and completion of several development projects in the UK and France.
Bonus deferral
The AIP amounts earned for 2016 will be paid 60% in cash and 40% in the form of a deferred share award granted under the DBSS. The
deferred share award is granted in two tranches: the DBSS (A) award relates to the bonus achieved against the EPS, NRI, Cost Ratio and
personal objectives measures; and the DBSS (B) award relates to the TPR measure and so is only granted once the TPR result is known and
at the same time as the cash element is paid. Each award is granted with a face value equal to 40% of the bonus achieved against the relevant
measures, over a number of shares calculated based on the average mid-market closing share price of a share over the five dealing days prior
to the date of grant. Details of the DBSS (A) and (B) awards granted in 2017 will be included in next year’s Annual Report.
Long-Term Incentive Plan
Performance under the LTIP is assessed over differing performance periods. TSR is assessed over a period of four years from the date
of grant, and TPR and EPS are assessed over a period of four financial years commencing with the financial year in which the award is
granted. The Single Figure Table for 2016 is required to report the value of the LTIP element for which the performance period ends during
2016. Consequently, the LTIP values shown in the Single Figure Table comprise the value of the TSR element of the 2012 award (where
the performance period ended 1 April 2016) and the TPR and EPS elements of the 2013 award (where the performance period ended
31 December 2016).
Achievement against targets
The following table shows the level of performance achieved against the targets set for the three performance components that drive the 2016
LTIP vesting value as shown in the Single Figure Table.
Table 67
LTIP Outcome
Performance against targets
Performance measure
and period
Entry threshold target
(25% vesting at threshold)
Median
Full vesting target
Upper Quartile
TSR1 (2/4/12
– 2/4/16)
TPR2 (estimated
outcome)
(1/1/13 – 31/12/16)
EPS3 (1/1/13
– 31/12/16)
IPD+0%
IPD+1.5%
RPI+3%
RPI+7%
Vesting
percentage
against target
0%
100%
94.80%
Result
achieved
Below
median
rank
IPD
+2.04%
RPI +
6.72%
TSR element of the LTIP award
granted in 2012. No vesting.
TPR element of the LTIP award
granted in 2013. Award is scheduled to
vest in April 2017.
EPS element of the LTIP award
granted in 2013. Award is scheduled to
vest in April 2017.
Notes
1. TSR performance is measured over the four-year period from date of grant against a comparator group which for the 2012 LTIP award was British Land, Capital and
Regional, Intu Properties, Corio (Corio merged with Klépierre and delisted in 2015 – Corio was retained with performance measured to date of delisting; EPRA NAREIT
Developed Europe Index was substituted for Corio from date of delisting until end of the performance period), Derwent London, Great Portland Estates, IVG, Klépierre,
Land Securities, Quintain Estates, SEGRO, Shaftesbury, St Mowden Properties, Unibail-Rodamco and the FTSE 100 Index.
2. For the 2013 LTIP award, TPR performance is measured over the four financial years commencing with the year of grant and in comparison with the Investment Property
Databank’s UK Annual Retail Property Index and France Annual Retail Property Index.
3. For the 2013 LTIP award, EPS is calculated with reference to the European Public Real Estate Association (EPRA) Best Practices recommendations.
100
HAMMERSON PLC ANNUAL REPORT 2016
Vesting value achieved
Table 68 shows the level of vesting outcome for the three components that drive the 2016 LTIP vesting as shown in the Single Figure Table.
Table 68
TSR
Performance period: 2/4/12-2/4/16
(TSR component of the 2012 LTIP)
TPR1
Performance period: 1/1/13-31/12/16
(TPR component of the 2013 LTIP)
EPS
Performance period: 1/1/13-31/12/16
(EPS component of the 2013 LTIP)
Shares
available
Vesting %
against
target
Number
of shares
that
vested
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
106,299
76,317
72,683
28,142
0
0
0
0
0
0
0
0
Value
£000
Shares
available2
0
0
0
0
90,607
65,051
61,953
46,239
Vesting %
against
target
(estimated)
Number of
shares due
to vest
Value3
£000
Shares
available2
Vesting %
against
target
Number of
shares due
to vest
100
100
100
100
90,607
65,051
61,953
46,239
503
361
344
257
90,607
65,051
61,953
46,239
94.80
94.80
94.80
94.80
85,895
61,668
58,731
43,834
Value3
£000
477
343
326
243
Total
value
(shown
in Single
Figure
Table)
980
704
670
500
Notes
1. The element dependent on TPR is estimated as the IPD data regarding TPR performance is not available at the date of the Annual Report.
2. The number of shares includes any notional dividend shares awarded to date. The actual number of shares that vest may increase by the amount of any notional dividend
shares awarded up to the date of transfer of the award.
3. The value shown is based on the average of the mid-market closing price of a share for each dealing day in the three-month period to 31 December 2016 (555.4p).
The actual value that vests, based on the closing share price on the vesting date, will be disclosed in next year’s Annual Report.
Pension
Executive Directors receive a salary supplement in lieu of pension benefits. Salary supplements for the year ended 31 December 2016 are
detailed in table 69 below and are reflected in the Single Figure Table on page 97 (table 62). 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.
Information on the accrued pension benefits for David Atkins and Peter Cole under the Company’s closed defined benefit scheme is
on page 109.
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 69
Salary supplements in lieu of pension benefits1
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
2016
£000
(shown in
Single Figure
Table)
182
133
83
76
2015
£000
179
131
82
67
Note
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 (2015: €80,000) and a legacy collective supplementary defined benefit scheme contribution of €12,449 (2015: €12,264)
which is included in his total shown above.
HAMMERSON.COM
101
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
Non-Executive Directors’ remuneration: Single Figure Table*
Table 70 below shows the remuneration of Non-Executive Directors for the year ended 31 December 2016, and the comparative figures for the
year ended 31 December 2015.
The benefits disclosed in table 70 below relate to the reimbursement of travel and accommodation expenses incurred in attending Board
meetings at the Company’s Head Office. The grossed-up value has been disclosed. In accordance with the Policy, the tax arising will be settled
by the Company.
Table 70
Non-Executive Directors’ remuneration for the year ended 31 December 2016
Committee membership and other responsibilities
Fees
Benefits
Total
David Tyler
Pierre Bouchut1
Gwyn Burr
Terry Duddy2
Audit
Committee
Chairman
Member
Nomination
Committee
Chairman
Member
Member
Member
Jacques Espinasse3
Andrew Formica
Judy Gibbons
Anthony Watson4
Chairman
Member
Member
Member
Member
Member
Member
Member
Remuneration
Committee
Other
Member
Chairman
Chairman
Member
Member
Chairman
Senior
Independent
Director
Senior
Independent
Director
2016
£000
325
68
72
72
22
62
67
–
2015
£000
320
53
70
67
70
6
65
23
2016
£000
2015
£000
2016
£000
–
11
–
–
6
–
2
–
2
5
2
–
5
–
1
8
325
79
72
72
28
62
69
–
2015
£000
322
58
72
67
75
6
66
31
Total
688
674
19
23
707
697
Notes
1. Replaced Jacques Espinasse as Audit Committee Chairman from 25 April 2016.
2. Replaced Anthony Watson as Senior Independent Director from 22 April 2015.
3. Jacques Espinasse retired from the Board on 25 April 2016 and received a departing gift which cost £895 within the limits of the Policy. The value above is the gross value.
4. Anthony Watson retired from the Board on 22 April 2015 and received a departing gift which cost £4,150 within the limits of the Policy. The value above is the gross value.
Fees payable to Non-Executive Directors
Prior to 2016, Non-Executive Directors’ fees were last increased in July 2013. A review of the Non-Executive Directors’ fees, including a
benchmark exercise, was carried out in 2016. Following the review the Board approved an increase in the Non-Executive base fee of £3,000 to
take effect from 1 July 2016, representing an increase in line with median. A review of the Chairman’s fee was also undertaken and a proposal to
increase the Chairman’s fee by £10,000, a smaller percentage increase than for the Non-Executive Directors, was approved to take effect from
1 July 2016. These increases are reflected in the Single Figure Table (table 70) above.
Details of the current annual fees payable to Non-Executive Directors are on page 114.
102
HAMMERSON PLC ANNUAL REPORT 2016
Section 2: Further information on 2016 remuneration
This section contains other required information such as voting on remuneration matters at the Annual General Meeting (AGM), Directors’
shareholdings, share plan interests, information on pensions, the Chief Executive’s remuneration compared to employees and relative
importance of spend on pay.
Statement of voting at Annual General Meetings
Table 71 below shows votes cast by proxy at the AGM held on 25 April 2016 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 AGM.
Table 71
Statement of voting on remuneration: 2014 AGM and 2016 AGM
Resolution
To receive and approve the 2015 Directors’
Annual Remuneration Report (2016 AGM)
To receive and approve the Directors’
Remuneration Policy (2014 AGM)
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
537,967,633
98.36%
8,975,267
1.64%
69.72%
2,061,292
534,234,020
97.11%
15,898,048
2.89%
77.17%
175,583
Notes
1. Based on issued share capital of 784,432,706 ordinary shares on 21 April 2016, which was the record date for the 2016 AGM and 712,902,066 ordinary shares on
17 April 2014, which was the record date for the 2014 AGM.
2. Represents 0.26% of the issued share capital on the record date for the 2016 AGM and 0.02% of the issued share capital on the record date for the 2014 AGM.
Directors’ shareholdings and share plan interests
Table 72
Summary of all Directors’ shareholdings and share plan interests
Interests in shares at 31/12/16
Executive Directors
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Non-Executive Directors
David Tyler
Pierre Bouchut
Gwyn Burr
Terry Duddy
Andrew Formica
Judy Gibbons
Outstanding scheme interests 31/12/16
Unvested scheme
interests (subject to
performance measures)1
Unvested scheme
interests (not subject to
performance measures)2
Vested but
unexercised
scheme interests3
Total shares subject
to outstanding
scheme interests
Total of all share
interests and
outstanding
scheme interests,
at 31/12/164
735,898
533,297
503,016
387,456
118,740
86,032
87,344
60,337
76,254
173,601
52,138
0
930,892
792,930
642,498
447,793
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,395,049
1,132,598
951,572
713,495
60,000
20,000
5,182
50,000
22,000
4,115
Notes
1. LTIP awards still subject to performance measures.
2. DBSS and Sharesave awards that have not vested.
3. LTIP and DBSS awards that have vested but remain unexercised, and notional dividend shares are included.
4. All share plan interests, vested, unvested and unexercised together with SIP shares and any holdings of ordinary shares.
HAMMERSON.COM
103
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
Directors’ shareholdings*
Tables 73 and 74 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 2016. For Executive Directors, the table also shows actual share ownership compared with the current share ownership
guidelines. Non-Executive Directors are encouraged to acquire a shareholding in the Company.
Details of new share ownership guidelines are in the Policy on page 87.
Table 73
Executive Directors’ shareholdings1
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Shares held as at
1 January
2016
Shares held as
at 31 December
2016
Vested but
unexercised share
scheme interests2
Guideline on
share ownership
as % of salary
Actual beneficial
share ownership
as % of salary3
Guideline met
367,056
277,461
280,080
240,891
450,085
324,185
302,125
265,702
40,415
92,009
27,633
0
150%
100%
100%
100%
459%
535%
452%
427%
Yes
Yes
Yes
Yes
Notes
1. Between 1 January 2017 and 17 February 2017, the Executive Directors’ beneficial interests above remained unchanged.
2. The number of shares shown is on a net of tax and NI basis in accordance with the share ownership guidelines.
3. As at and based on the share price of 573 pence on 31 December 2016.
Table 74
Non-Executive Directors’ shareholdings1
David Tyler
Pierre Bouchut
Gwyn Burr
Terry Duddy
Jacques Espinasse2
Andrew Formica
Judy Gibbons
1 January
2016
31 December
2016
25,000
–
5,000
40,000
17,884
15,000
4,115
60,000
20,000
5,182
50,000
n/a
22,000
4,115
Notes
1. Between 1 January 2017 and 17 February 2017, the serving Non-Executive Directors’ beneficial interests above remained unchanged.
2. Jacques Espinasse retired on 25 April 2016. His beneficial interest at that time was 17,884 shares.
Executive Directors’ share plan interests (including share options)*
Tables 75 to 78 set out the Executive Directors’ interests under the Deferred Bonus 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 are in tables 79 and 80.
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.
Awards to UK Executive Directors under the LTIP and DBSS are made in the form of nil-cost share options. For French tax reasons, LTIP and
DBSS awards granted to Jean-Philippe Mouton are in the form of conditional awards of free shares.
104
HAMMERSON PLC ANNUAL REPORT 2016
Executive Directors’ share plan interests *
Table 75
Date of
original
award
Date from
which options
exercisable
Expiry date
Held at
1 January
2016
Granted
during 2016
Notional
dividend
shares
accrued
during 20161
Exercised
during 20162
Lapsed
or forfeited
during 2016
Awards
held at 31
December
2016
Grant price
in pence
(exercise
price for
Sharesave)
Face value
of awards
granted
during 2016
£0003
David Atkins
DBSS
DBSS
DBSS (A)
DBSS (B)
DBSS (A)
DBSS (B)
11/03/2013 Mar-15 Mar-20
03/03/2014 Mar-16 Mar-21
03/03/2015 Mar-17 Mar-22
Apr-22
28/04/2015
01/03/2016 Mar-18 Mar-23
Apr-23
27/04/2016
Apr-18
Apr-17
88,019
48,288
38,417
8,534
-
-
–
–
–
–
45,593
20,618
LTIP
LTIP
LTIP
LTIP
LTIP
Apr-16
Apr-17
Apr-18
Apr-19
02/04/2012
Apr-20
02/04/2013
01/04/2014
Apr-21
26/03/2015 Mar-19 Mar-22
24/03/2016 Mar-20 Mar-23
312,623
262,773
111,903
132,416
–
–
–
–
–
208,413
–
–
1,323
294
1,569
290
7,333
9,048
3,853
4,559
2,933
Sharesave
Sharesave
27/03/2015 May-18
24/03/2016 May-19
Oct-18
Oct-10
1,665
–
–
2,102
–
–
Table 76
Peter Cole
DBSS
DBSS
DBSS
DBSS (A)
DBSS (B)
DBSS (A)
DBSS (B)
LTIP
LTIP
LTIP
LTIP
LTIP
12/03/2012 Mar-14 Mar-19
11/03/2013 Mar-15 Mar-20
03/03/2014 Mar-16 Mar-21
03/03/2015 Mar-17 Mar-22
Apr-22
Apr-17
28/04/2015
Apr-23
01/03/2016 Mar-18
Apr-23
Apr-18
27/04/2016
49,573
65,326
34,668
25,615
6,219
–
–
–
–
–
–
–
33,221
15,023
Apr-16
Apr-17
Apr-18
Apr-19
02/04/2012
Apr-20
02/04/2013
01/04/2014
Apr-21
26/03/2015 Mar-19 Mar-22
24/03/2016 Mar-20 Mar-23
224,447
188,657
81,537
96,484
–
–
–
–
–
151,858
1,707
2,249
-
822
214
1,143
211
5,265
6,495
2,807
3,322
2,137
Sharesave
24/03/2016 May-21
Oct-21
–
3,504
–
88,019
48,288
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
243,702
–
–
–
–
1,665
–
–
–
34,668
–
–
-
-
–
–
–
–
–
-
-
–
–
–
–
–
–
174,966
–
–
–
–
–
–
–
39,740
8,828
47,162
20,908
116,638
76,254
271,821
115,756
136,975
211,346
812,152
–
2,102
51,280
67,575
–
26,497
6,433
34,364
15,234
201,383
54,746
195,152
84,344
99,806
153,995
588,043
3,504
–
–
–
–
547.33
579.08
–
–
–
–
572.90
540.40
428.00
–
–
–
–
–
547.33
579.08
–
–
–
–
572.90
428.00
–
–
–
–
249
119
368
–
–
–
–
1,194
1,194
–
9
–
–
–
–
–
182
87
269
–
–
–
–
870
870
15
HAMMERSON.COM
105
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
Table 77
Date of
original
award
Date from
which options
exercisable
Expiry date
Held at
1 January
2016
Granted
during 2016
Notional
dividend
shares
accrued
during 20161
Exercised
during 20162
Lapsed
or forfeited
during 2016
Awards
held at 31
December
2016
Grant price
in pence
(exercise
price for
Sharesave)
Face value
of awards
granted
during 2016
£0003
Timon Drakesmith
DBSS
DBSS (A)
DBSS (B)
DBSS (A)
DBSS (B)
03/03/2014 Mar-16 Mar-21
03/03/2015 Mar-17 Mar-22
Apr-22
28/04/2015
Apr-17
Apr-23
01/03/2016 Mar-18
Apr-23
Apr-18
27/04/2016
33,017
29,227
5,832
–
–
–
–
–
31,159
14,091
LTIP
LTIP
LTIP
LTIP
LTIP
Apr-16
Apr-17
Apr-18
Apr-19
02/04/2012
Apr-20
02/04/2013
01/04/2014
Apr-21
26/03/2015 Mar-19 Mar-22
24/03/2016 Mar-20 Mar-23
213,758
179,673
76,476
90,495
–
–
–
–
–
142,433
–
1,006
201
1,072
198
5,014
6,186
2,633
3,116
2,004
Sharesave
05/04/2012 May-17
Oct-17
4,588
–
–
Table 78
Jean-Philippe Mouton4
DBSS
DBSS (A)
DBSS (A)5
DBSS (B)
DBSS (A)
DBSS (B)
03/03/2014 Mar-16 Mar-21
03/03/2015 Mar-17 Mar-22
12/03/2015 Mar-17 Mar-22
Apr-22
Apr-17
28/04/2015
Apr-23
01/03/2016 Mar-18
Apr-23
Apr-18
27/04/2016
25,037
12,634
6,520
4,172
–
–
–
–
–
–
24,293
10,925
–
435
225
144
836
153
LTIP
LTIP
LTIP
LTIP
LTIP
Apr-16
Apr-17
Apr-18
Apr-19
02/04/2012
Apr-20
02/04/2013
01/04/2014
Apr-21
26/03/2015 Mar-19 Mar-22
24/03/2016 Mar-20 Mar-23
84,426
138,717
63,203
66,667
–
–
–
–
–
112,809
–
–
2,177
2,296
1,587
33,017
–
–
–
–
–
–
–
–
–
–
30,233
6,033
32,231
14,289
82,786
52,138
185,859
79,109
93,611
144,437
166,634
–
–
–
–
555,154
4,558
–
–
–
–
–
–
–
64,519
–
–
–
–
–
13,069
6,745
4,316
25,129
11,078
60,337
–
138,717
65,380
68,963
114,396
387,456
–
–
–
547.33
579.08
–
–
–
–
572.90
329.04
–
–
–
–
547.33
579.08
–
–
–
–
572.90
–
–
–
170
82
252
–
–
–
–
816
816
–
–
–
–
–
133
63
196
–
–
–
–
646
646
–
–
–
–
–
–
25,037
–
–
–
–
–
19,907
–
–
–
–
Notes
1. Awards to UK Executive Directors under the DBSS and LTIP up to and including the 2013 awards 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 Jean-Philippe Mouton
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.
2. In the case of Jean-Philippe Mouton this is the number of shares that vested during 2016.
3. Face values are calculated by multiplying the number of shares granted during 2016 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 2016.
4. 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.
5. 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.
106
HAMMERSON PLC ANNUAL REPORT 2016
Long-term incentive awards
Tables 79 and 80 set out a summary of the LTIP structure and details of the LTIP performance measures and conditions.
Table 79
LTIP structure summary
Level of award
Performance measures
Performance period
Weighting of performance measures
TPR: Measured over four financial years
commencing with year of grant in comparison
with composite index
EPS: Measured over four financial years
commencing with year of grant. Calculated
with reference to EPRA Best Practice
recommendations
TSR: Measured over four-year period from
date of grant.
TSR Comparator Group:
Altarea
British Land
Capital and Regional
Intu Properties
Corio1
Eurocommercial
IVG
Klépierre
Land Securities
London Metric
SEGRO
Shaftesbury
Unibail-Rodamco
Wereldhave
New River Retail
FTSE 100 Index
All years
2013
2014
2015
2016
200% of salary
100% of salary
150% of salary
200% of salary
TSR, TPR, EPS
Four years
33.33%
IPD UK Annual
Retail Property
Index and France
Annual Retail Index
Benchmark:
RPI
Benchmark:
RPI
Benchmark:
Blend of UK/
French CPI
Benchmark:
Blend of UK/
French CPI
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Note
1. Corio merged with Klépierre on 31 March 2015 and delisted from Euronext Amsterdam. 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.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
Table 80
LTIP performance conditions 2012 to 2016
TSR
Vesting threshold
0%
25%
100%
All award years
Less than TSR of
median-ranked entity in
comparator group
Equal to TSR of
median-ranked entity in
comparator group
Equal to TSR of upper
quartile-ranked entity in
comparator group
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 Committee’s satisfaction that the Company’s
underlying performance has been satisfactory in comparison with that of the FTSE Real Estate sector.
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 linear basis between 25% and
100%.
TPR
EPS/Absolute NAV
Vesting threshold
0%
25%
100%
2015 and 2016 awards
(EPS measure)
Less than a UK and
French CPI blend
+ 3.0% p.a. growth
Equal to or more than a
UK and French CPI blend
+3.0% p.a. growth
Equal to or more than a
UK and French CPI blend
+7.0% p.a. growth
2013 and 2014 awards
(EPS measure)
Less than RPI
+ 3.0% p.a. growth
Equal to or more than RPI
+3.0% p.a. growth
Equal to or more than RPI
+7.0% p.a. growth
2012 award
(Absolute NAV measure)
Less than RPI
+ 3.0% p.a. growth
Equal to or more than RPI
+3.0% p.a. growth
Equal to or more than RPI
+7.0% p.a. growth
Vesting for intermediate performance between these levels will be pro-rated on a straight-line basis between 25%
and 100%.
Details of 2012 LTIP (which vested during 2016)
The following table shows the number of shares delivered on vesting of the 2012 LTIP (which vested on 2 April 2016):
Table 81
David Atkins
Peter Cole
Timon
Drakesmith
Jean-Philippe
Mouton
Shares
available
106,299
76,317
0%
0%
72,683
0%
28,142
0%
TSR
Performance period: 2/4/12-2/4/16
TPR
Performance period:1/1/12-31/12/15
Absolute NAV
Performance period: 1/1/12-31/12/15
Vesting %
against
target
Number
of shares
delivered
Value of
shares
delivered
Shares
available
Vesting %
against
target
Number
of shares
delivered
Value of
shares
delivered
Shares
available
Vesting %
against
target
Number
of shares
delivered
Value of
shares
delivered
£000
Total
shares
delivered
0
0
0
0
0 106,299
76,317
0
0%
0%
0
0
72,683
0%
28,142
0%
0
0
0
0
0 106,299 70.74% 75,196
76,317 70.74% 53,986
0
434 75,196
312 53,986
0
0
72,683 70.74% 51,416
297 51,415
28,142 70.74% 19,907
115 19,907
Total
value of
shares
delivered
£000
434
312
297
115
Notes:
1. The value shown is based on the share price on the date on which the awards vested of 577.5p.
2. Details of the TPR and NAV performance conditions were shown as estimates in the 2015 Annual Report (as the value of those components was reflected in the Single
Figure Table for 2015 as the performance period for those components ended during 2015). The table above shows the final outcome.
3. Details of the assessment of the TSR performance condition are shown in table 67.
4. The number of shares vested includes any notional dividend shares awarded to the date of transfer.
108
HAMMERSON PLC ANNUAL REPORT 2016
LTIP awards granted during 2016
All 2016 LTIP awards were granted to a value of 200% of base salary as at date of grant.
Table 82
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Date of grant
24 March 2016
24 March 2016
24 March 2016
24 March 2016
Number
of shares
208,413
151,858
142,433
112,809
Normal
vesting date
Face value
on grant
£000
24 March 2020
24 March 2020
24 March 2020
24 March 2020
1,194
870
816
646
Notes:
1. The face value on grant is calculated based on a share price of 572.9p being the average of the middle market quotation on the previous five working days prior to the date
of grant.
2. Details of the performance targets applicable to the above awards are shown in table 80.
Executive Directors’ SIP interests
The Executive Directors’ interests in ordinary shares of the Company under the Share Incentive Plan (SIP) at 31 December 2016 are shown in
table 83 below. The shares are held under a SIP trust. Jean-Philippe Mouton is not eligible to participate in the SIP.
Table 83
Executive Directors’ SIP interests
David Atkins
Peter Cole
Timon Drakesmith
Total SIP shares
1 January 2016
Partnership shares
purchased1
Matching shares
awarded
Free shares
awarded
Dividend shares
purchased
12,507
13,871
5,381
312
312
432
312
312
432
497
497
497
444
491
207
Total
SIP shares
31 December
2016
14,072
15,483
6,949
Note
1. Partnership shares may be purchased by means of a lump sum or by regular monthly investment.
Detail of Executive Directors’ accrued 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 is in note 6 to the accounts on page 145.
Table 84 below shows the total accrued benefit at 31 December 2016 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 in
the Scheme.
Table 84 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 84
Executive Directors’ accrued pension benefits and transfer values
David Atkins
Peter Cole
Total accrued benefit
at 31 December
Transfer value at 31 December
of total accrued benefit
2016
£000
83
248
2015
£000
83
248
2016
£000
1,734
6,088
2015
£000
1,497
5,342
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
External board appointments
Where Board approval is given for an Executive Director to accept an outside non-executive directorship, the individual is entitled to
retain any fees received. Timon Drakesmith was appointed as a non-executive director of The Merchants Trust PLC with effect from
1 November 2016 for which he will receive an annual fee of £30,500. David Atkins was appointed as a non-executive director of Whitbread PLC
with effect from 1 January 2017 for which he will receive an annual fee of £62,000.
Total Shareholder Return
Chart 85 below shows the total shareholder return in respect of the Company’s ordinary shares of 25 pence each for the eight years ended
31 December 2016 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 85
Total Shareholder Return Index
(31 December 2008 = 100)
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
31 Dec 2016
Hammerson
FTSE EPRA/NAREIT UK
Source: Thomson Reuters
Remuneration of the Chief Executive over the last eight years
Table 86 shows the remuneration of the holder of the office of Chief Executive for the period from 1 January 2009 to 31 December 2016.
Table 86
Chief Executive’s remuneration history
Year
2016
2015
2014
2013
2012
2011
2010
2009 (David Atkins)
2009 (John Richards)
Total
remuneration
£000
Annual bonus5
LTIP vesting5
2,625
2,147
1,568
2,216
2,451
1,515
1,594
242
895
68.5%
77.3%
65.3%
56.2%
88.9%
51.7%
68.2%
55.0%
48.8%
23.58%
–
–
51.6%
52.6%
–
–
–
49.4%
Notes
1
2
3
4
Notes
1. The total remuneration and annual bonus figures for 2016 include certain estimated values for the LTIP and AIP vesting. See the Single Figure Table (table 62) on page 97
for details.
2. The total remuneration reported in the 2015 Annual Report contained estimates; the numbers given here are the actual values. See the Single Figure Table (table 62) on
page 97.
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.
110
HAMMERSON PLC ANNUAL REPORT 2016
Remuneration for the Chief Executive compared with all other employees of the Hammerson group
Table 87 shows the percentage change from 31 December 2015 to 31 December 2016 in base salary, taxable benefits and bonus for the Chief
Executive compared with all other employees of the Hammerson group.
Table 87
Percentage change in the Chief Executive’s base salary, taxable benefits and bonus
David Atkins
Total Group
Notes
1,2
1,2,3,4
Salary
1.9%
-2.8%
Change %
Benefits
Annual bonus
0.3%
2.3%
-9.7%
-13.6%
Total1
-5.1%
-4.9%
Notes
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:€1.224.
3. The Group calculation uses a weighted average headcount for the year. Employees received an average salary increase of 3% during 2016.
4. Approximately 60 employees transferred into the Group as part of the loan conversion in Ireland, mostly employed in roles that Hammerson does not directly employ in
the UK. These roles are paid at a lower base salary level than most roles in the UK and therefore decreased the total Group percentage change in salary.
5. Performance measures for centre based employees include some operational measures that do not apply to other Group employees or to the Executive Directors. The
outturn of these measures was lower than in prior years and therefore impacted adversely on the total Group percentage change in bonus.
Relative importance of spend on pay
Table 88 below shows the Company’s total employee costs compared with dividends paid. The Company did not buy back any of its own shares
during 2016.
Table 88
Total employee costs compared with dividends paid
Employee
costs1
£53.6m
£48.8m
9.8%
Dividends2
£180.1m
£165.2m
9.0%
2016
2015
Difference
Notes
1. These figures have been extracted from note 4 (Administration expenses) to the accounts on page 144.
2. These figures have been extracted from note 9 (Dividends) to the accounts on page 147.
Payments to past Directors*
There were no payments to past Directors in 2016.
Payments for loss of office*
There were no payments for loss of office to past Directors in 2016.
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. Fees for advice provided by FIT in 2016, which were charged on their standard terms, were £64,712
(excluding VAT) (2015: £68,127, excluding VAT). FIT did not provide any other services to the Company during 2016. 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. 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. No-one is present during discussions concerning their own remuneration.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT Directors’ Remuneration Report: Implementation Report continued
Section 3: Implementation of Remuneration Policy in 2017
This section sets out information on how the Remuneration Policy will be implemented in 2017 if approved by shareholders at the 2017 Annual
General Meeting.
Shareholder approval for the Remuneration Policy was last received at the 2014 Annual General Meeting. The Company has proposed changes
to the Remuneration Policy, and will present the revised Policy (set out on pages 80-95) to shareholders for approval at the 2017 Annual
General Meeting. If the new Remuneration Policy is approved by shareholders, the Company intends to implement the new Policy in 2017 as
shown below. If the new Remuneration Policy is not approved by shareholders then the existing Remuneration Policy would instead remain in
place and continue to operate.
In implementing the Remuneration Policy, the 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 89
Summary of planned implementation of the Remuneration Policy during 2017
Policy element
Commentary
Base Salary
Normally reviewed annually to take effect from 1 April 2017.
In February 2017, the Remuneration Committee determined that an
increase in base salaries of 2.5% was appropriate for David Atkins, Peter
Cole and Jean-Philippe Mouton. This increase is slightly less than
increases in salaries awarded across the Group which were generally in
the region of 3%. A number of factors influenced this decision, including
the effect of inflation and evidence of salaries within the real estate sector.
Executive benchmarking was also considered. An exceptional pay increase
of 9.33% was approved by the Committee for Timon Drakesmith. The
Committee Chairman’s letter on pages 78 to 79 sets out the reasons for this
increase. The increases take effect from 1 April 2017.
Implementation of the Remuneration
Policy during 2017
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Base salary
2017
000
£627
£457
£457
€428
Pension
Benefits
Annual Incentive
Plan (AIP) and
deferral under the
Deferred Bonus
Share Scheme
(DBSS)
All Executive Directors receive a salary supplement by way of pension
provision.
No change to current arrangements is
proposed for 2017.
Details on benefits received by Executive Directors are on page 97.
No change to current arrangements is
proposed for 2017.
The AIP maximum for Executive Directors in 2017 will remain at 200% of
base salary.
No change to current arrangements is
proposed for 2017.
Performance measures for the AIP in 2017 remain weighted 70% towards
Group financial targets and 30% towards personal objectives.
Group financial targets comprise:
– 30% Adjusted earnings per share
– 30% Total Property Return relative to IPD
– 10% Growth in like-for-like Net Rental Income
As is demonstrated in this report in respect of previous years, the
Committee designs the financial targets and personal objectives to align
closely to the Company’s strategy as well as to the Business Plan and the
priorities for the coming year. It is therefore felt that the specific financial
targets and important personal objectives are commercially sensitive such
that, having considered this carefully, the Committee is of the view that it
is in the Company’s interests not to disclose this information in advance.
Full details of the specific targets and key personal objectives set will be
disclosed in the 2017 Annual Report.
40% of the 2017 AIP vesting will be deferred by making an award of shares
under the DBSS, with a deferral period of two years.
112
HAMMERSON PLC ANNUAL REPORT 2016
Implementation of the Remuneration
Policy during 2017
Awards will be made during 2017
under the existing LTIP rules. From
2018 onwards awards will be made
under the new LTIP rules if these are
approved by shareholders at the 2017
AGM.
Table 89 continued
Summary of planned implementation of the Remuneration Policy during 2017 continued
Policy element
Commentary
Long-Term
Incentive Plan
Annual award of 200% of base salary. Vesting of the award is subject to the
following performance measures weighted 33.33% and measured over a
four-year performance period:
Adjusted Earnings Per Share: calculated with reference to the European
Public Real Estate Association Best Practice recommendations. CPI is a
65:25:10 weighted blend of UK, France and Ireland.
Vesting under the EPS performance measure is as follows:
Performance
Percentage of award vesting
Less than CPI +3.0% p.a. growth
Equal to CPI +3.0% p.a. growth
Equal to or more than CPI +7.0% p.a. growth
0%
25%
100%
Total Property Return: measured against a composite index comprising the
Investment Property Databank Annual Retail Property Indices for the UK
and a bespoke Europe Index (weighted on a 60:40 basis)
Performance compared to the Index
Less than index
Equal to index
Index + 0.5% (average) p.a.
Index + 1.0% (average) p.a.
Index +1.5% (average) p.a.
Percentage of Award vesting
0%
25%
55%
85%
100%
Vesting for EPS and TPR targets for intermediate performance between levels is pro-rated
on a linear basis between the specified award levels
Total Shareholder Return: measured against a comparator group
comprising British Land, Intu Properties, Klépierre, Unibail-Rodamco and
Land Securities.
Performance compared to the comparator group
Percentage of Award vesting
Less than TSR of median-ranked entity in
comparator group
Equal to TSR of median-ranked entity in
comparator group
Equal to TSR of upper quartile-ranked entity
in comparator group
0%
25%
100%
Vesting for intermediate performance between median and upper quartile-ranked entities
is on a linear scale between 25% and 100%. Vesting is subject to the Committee’s satisfaction
that underlying performance has been satisfactory in comparison with that of the FTSE Real
Estate sector.
A comparison against a group of five major REITs is likely to provide
a more objective measure of success at Hammerson relative to other
closely comparable companies. Each of these companies will manage their
portfolios primarily in the currency of their listing (with Hammerson
alone having significant assets in two currencies). A local currency basis
for determining relative TSR will be used as this better reflects the likely
interaction between the performance of the underlying portfolio’s TSR and
minimises the distortion of the relative currency movements.
HAMMERSON.COM
113
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REMUNERATION REPORTSTRATEGIC REPORT
Directors’ Remuneration Report: Implementation Report continued
Table 89 continued
Summary of planned implementation of the Remuneration Policy during 2017 continued
Policy element
Commentary
Implementation of the Remuneration
Policy during 2017
All-employee
arrangements
The opportunity to participate in all-employee arrangements continues on
the same basis as all staff in the UK or France as appropriate.
No change to current arrangements is
proposed for 2017.
Share Ownership
Guidelines
250% of base salary for the Chief Executive and all other Executive
Directors.
Chairman’s and
Non-Executive
Directors’ fees
Non-Executive Directors’ fees were reviewed by the Company in 2016 and
will be reviewed again in 2017. The 2016 increase in fees was effective from
1 July 2016.
The Share Ownership Guidelines have
been increased from 150% of base
salary for the Chief Executive and 100%
of base salary for all other Executive
Directors to 250% of base salary.
Current 2017 Fee Levels (per annum)
£000
Chairman
Non-Executive Director
Senior Independent
Director
Chair of Audit Committee
Chair of Remuneration
Committee
Audit/Remuneration
Committee Member
330
58
10
15
10
5
By order of the Board
Sarah Booth
General Counsel and Company Secretary
17 February 2017
114
HAMMERSON PLC ANNUAL REPORT 2016
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
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 27 April 2016
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 60 to 71.
The Company has complied in full with the requirements of the
Code during 2016.
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 are on
pages 53 to 58 and 117.
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 meetings throughout the year. It held
six of these in 2016. Additional Board conference calls are held
between the formal Board meetings as required. The table below
includes details of attendance at Board meetings and scheduled
Board conference calls during 2016. Non-Executive Directors are
encouraged to communicate directly with Executive Directors and
senior management between Board meetings.
Table 90
Board and Committee meetings attendance
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 Chairman encourages a collegiate
environment on the Board which facilitates open discussion.
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.
The Chairman ensures that he engages regularly with
major shareholders.
Further details of shareholder engagement are on page 70.
A.4 Non-Executive Directors
The Non-Executive Directors challenge and help develop
proposals on strategy. The annual Board Strategy Day is dedicated
to considering the future direction of the Company at the start of
the business-planning process.
Board
Audit Remuneration Nomination
Further details of the 2016 Board Strategy Day are
on pages 64 to 65.
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David Tyler1
David Atkins
Peter Cole2
Timon Drakesmith
Jean-Philippe Mouton
Gwyn Burr
Pierre Bouchut3
Terry Duddy
Jacques Espinasse4
Andrew Formica5
Judy Gibbons6
8/8
8/8
7/8
8/8
8/8
8/8
7/8
8/8
3/3
8/8
7/8
–
–
–
–
–
4/4
4/4
2/2
3/4
4/4
4/5
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–
–
–
5/5
–
5/5
–
–
5/5
3/3
–
–
–
–
3/3
3/3
3/3
–
3/3
3/3
1. David Tyler was unable to attend one Remuneration Committee meeting due
to a prior commitment.
2. Peter Cole was unable to attend one Board meeting due to a clash of
Board meetings.
3. Pierre Bouchut was unable to attend one Board meeting due to a clash of
meetings with another board.
4. Jacques Espinasse resigned following the Annual General Meeting on
25 April 2016.
5. Andrew Formica was unable to attend one Audit Committee meeting due to
travel disruption.
6. Judy Gibbons was unable to attend one Board meeting due to family
commitments.
A.4.1 Senior Independent Director
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. 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 2016.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSSTRATEGIC REPORT
Compliance with the UK Corporate Governance Code continued
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. It was satisfied that the Board was of an
appropriate size and that the requirements of the business can
be met.
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.
There are currently six Non-Executive Directors (including the
Chairman) and four Executive Directors on the Board.
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, which are made on merit, against
objective criteria, and makes recommendations to the Board.
The Committee’s terms of reference can be found at
www.hammerson.com.
Non-Executive Directors are appointed for three-year terms and
stand for re-election at each AGM. Any term beyond six years
is subject to a rigorous review, taking into account the need for
progressive refreshment of the Board.
Further details of the work of the Nomination Committee are on
pages 72 to 73.
Disclosures on diversity are on pages 42 and 73.
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 120 and 121.
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.
Non-Executive Director positions held by Executive Directors are
set out on page 120.
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HAMMERSON PLC ANNUAL REPORT 2016
B.4 Development
All Directors receive an induction programme when appointed
to the Board, which takes into account their qualifications and
experience. Where appropriate Non-Executive Directors are
offered opportunities to meet major shareholders. 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.
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
An externally facilitated performance evaluation of the Board was
carried out by Independent Audit in 2016. The General Counsel
and Company Secretary will undertake an internal performance
evaluation of the Board and its Committees in 2017.
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 2016 was carried out in early 2017 and the Board was
subsequently updated.
Following the external Board effectiveness review in 2016, 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 external Board effectiveness review are
on page 66.
B.7 Election and re-election
All Directors are subject to election at the first AGM following
their appointment and annual re-election at each AGM thereafter.
Directors who are subject to annual re-election are submitting
themselves for re-election at the 2017 AGM.
Directors’ biographies are on pages 120 and 121 and also in the
Notice of Meeting for the 2017 AGM.
Further discussion on the balance of skills and experience on the
Board is on page 72.
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 on
pages 4 to 7.
A statement of the Directors’ responsibilities regarding the
financial statements is on page 125.
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 Board has established processes to ensure the Company’s
position and prospects and all reports and information which it is
required to present in accordance with regulatory requirements
are fair, balanced and understandable.
Further details about the fair, balanced and understandable
process for the Annual Report are on page 76.
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.
The Viability Statement and Going Concern Statement are on
page 59.
An assessment of the principal risks facing the Company is on
pages 55 to 58 and Key Performance Indicators are on pages
18 to 19.
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:
– Promote the application of the risk management framework
throughout the business;
– Encourage proactive 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 Audit Committee monitored the
effectiveness of the Group’s risk management and internal control
systems, including material financial, operational and compliance
controls. In particular the Audit 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.
The Group’s risk management and internal control systems are
designed to:
Further explanation of the Company’s approach to risk
management is on pages 53 to 58.
– 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.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECOMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODESTRATEGIC REPORT Compliance with the UK Corporate Governance Code continued
C.3 Audit Committee and Auditor
The Audit Committee comprises four independent Non-Executive
Directors. It holds four meetings per year, organised around the
Company’s reporting schedule.
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.
The terms of reference for the Audit Committee are available at
www.hammerson.com
Pierre Bouchut, the Chairman of the Audit Committee, has been
determined by the Board to have recent and relevant financial
experience as required by the Code. The Audit Committee as
a whole has competence relevant to the sector in which the
Company operates.
Details of the composition of the Audit Committee are on page
74. The biographies of members of the Audit Committee are on
pages 120 to 121.
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 the
Company’s External Auditor, 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 head of the internal audit function which undertakes
the majority of the Company’s internal audit reviews, with no
Company management present.
Cushman & Wakefield LLP (the Valuer) and Deloitte have full
access to one another and the Chairman of the Committee meets
with the Valuer 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.
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
– Reviewing the effectiveness, objectivity and independence
of Deloitte including the scope of work and the fees paid
to Deloitte.
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HAMMERSON PLC ANNUAL REPORT 2016
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.
Further details are in the terms of reference for the Audit
Committee and the full policy on non-audit services is available
at www.hammerson.com.
Deloitte’s remuneration as External Auditor for the year ended
31 December 2016 was £0.6 million. 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.
During 2016 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 2016 were £0.2 million.
Further information on Deloitte’s remuneration is in note 4 to the
accounts on page 144.
Following a tender process for the appointment of the External
Auditor, the Audit Committee recommended to the Board the
appointment of PricewaterhouseCoopers LLP (PwC). Deloitte has
tendered its resignation with effect from the date of the 2017 AGM,
at which a resolution to appoint PwC will be proposed.
Further details about the tender process for the External Auditor
are on page 75.
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.
Details of how the Audit Committee has discharged its
responsibilities during the year are in the Audit Committee
Report on pages 74 to 77.
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 is on pages 78 to 114.
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;
– Associated guidance; and
– Views of principal shareholders.
Further details are 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 78.
Details of advisors who provided services to the Remuneration
Committee during the year are on page 111.
During 2016 no individual was present when his or her own
remuneration was being determined.
E. Relations with shareholders
E.1 Dialogue with shareholders
The Company actively engages with its shareholders.
Throughout 2016 the Company attended a wide variety of
meetings, presentations and road shows. The Chairman and the
Executives meet regularly with institutional shareholders. Views
are communicated to the Board as a whole. Major shareholders are
offered the opportunity to attend shareholder meetings, with the
Senior Independent Director or other Non-Executive Directors,
or may request such meetings. 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.
Hammerson’s website contains information of interest to both
institutional and private shareholders.
Further details about relations with shareholders are in
the Corporate Governance Report on page 70 and in the
Directors’ Remuneration Policy on page 112 and 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.
HAMMERSON.COM
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OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCECOMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODESTRATEGIC REPORT DIRECTORS’ BIOGRAPHIES
David Tyler
Chairman (age 64)
Appointed to the Board: 12 January 2013 and appointed
Chairman on 9 May 2013.
Committee membership: Remuneration Committee and
Chairman of the Nomination Committee.
Skills and experience:
David Tyler is an experienced chairman having served in that
role previously at Logica plc and 3i Quoted Private Equity plc and
currently at J Sainsbury plc and Domestic & General Insurance
plc. He has over 40 years’ experience in both executive and non-
executive roles in a variety of businesses spanning the consumer,
retail, business services and financial services sectors. He is the
Co-Chair of the Parker Review Committee.
His previous roles include finance director of GUS plc and of
Christie’s International plc, and senior financial and general
management roles with County NatWest Limited and Unilever
PLC. He has also been a non-executive director of Burberry Group
plc, Experian plc and Reckitt Benckiser Group plc.
David Atkins
Chief Executive (age 50)
Appointed to the Board: 1 January 2007 and appointed Chief
Executive on 1 October 2009.
Skills and experience:
David Atkins is a Chartered Surveyor who joined the Company
in 1998. His career at Hammerson began as Group Property
Executive, responsible for strategy and investment performance,
where he worked on a number of overseas transactions,
particularly in France. In 2002 he took responsibility for the UK
retail parks portfolio and, in 2006, for the wider UK retail portfolio.
In 2016 he was appointed as a non-executive director of Whitbread
PLC. He is a member of the policy committee of the British
Property Federation, a director and trustee of the Reading Real
Estate Foundation and a governor and trustee of Berkhamsted
Schools Group.
Previously he was a member of the executive boards of the
European Public Real Estate Association and Revo (previously
known as BCSC) and a member of the Revo Educational Trust.
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HAMMERSON PLC ANNUAL REPORT 2016
Peter Cole
Chief Investment Officer (age 58)
Appointed to the Board: 1 October 1999.
Skills and experience:
Peter Cole is a Chartered Surveyor who joined the Company in
1989 as a Senior Development Surveyor. He was appointed to the
board of the Company’s UK business in 1992. In 1999 he assumed
responsibility for Hammerson’s development, acquisition and
disposal programme. He implemented the disposal of the London
offices in 2012 and he has led the Company’s major regeneration
and investment projects.
Previously he was president and general council member of the
City Property Association.
Timon Drakesmith
Chief Financial Officer (age 51)
Appointed to the Board: 30 June 2011.
Skills and experience:
Timon Drakesmith is a Chartered Accountant who joined
the Company in 2011 as Chief Financial Officer. He has
experience of working in commercial property having spent
six years as finance director at Great Portland Estates plc. He is
currently a non-executive director of Value Retail PLC and The
Merchants Trust plc, and chairman of VIA Outlets’ advisory and
investment committees.
His previous roles include finance director of the MK Electric
division of Novar plc, group director of financial operations of
Novar plc, chairman of the British Property Federation’s finance
committee and other financial roles at Credit Suisse, Barclays and
Deloitte Haskins and Sells.
Jean-Philippe Mouton
Executive Director (age 55)
Appointed to the Board: 1 January 2013.
Skills and experience:
Jean-Philippe Mouton joined Hammerson in 2003 with
responsibility for property leasing, development and asset
management in France. In 2006, he assumed responsibility for
managing the French portfolio as Director of Operations and in
2009 became the Managing Director of Hammerson’s French
business. He also has Board responsibility for marketing where he
can draw on years of experience working for Disneyland Paris.
His previous roles include director of strategic planning at
Disneyland Paris and positions at The Walt Disney Company and
Standard Chartered Bank.
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Pierre Bouchut
Non-Executive Director (age 61)
Andrew Formica
Non-Executive Director (age 45)
Appointed to the Board: 13 February 2015.
Appointed to the Board: 26 November 2015.
Committee membership: Nomination Committee and Chairman
of the Audit Committee.
Committee membership: Audit Committee and
Nomination Committee.
Skills and experience:
Pierre Bouchut has considerable senior management experience
in finance, European retail and European property. He is currently
the chief operating officer, Europe and Indonesia for Ahold
Delhaize and a non-executive director and chairman of the audit
committee of Firmenich SA.
His previous roles include executive vice president and chief
financial officer of Delhaize Group SA, 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 and chief executive officer and member of
the Board of Casino Guichard-Perrachon SA. He has also been a
non-executive director of La Rinascente SpA and a non-executive
member of the advisory boards of Qualium Investissement and
Lombard Odier Asset Management (Switzerland) SA.
Gwyn Burr
Non-Executive Director (age 54)
Appointed to the Board: 1 May 2012.
Committee membership: Audit Committee, Nomination
Committee and Chairman of the Remuneration Committee.
Skills and experience:
Gwyn Burr has expertise in marketing and leading customer
service processes for major retail brands. She is currently a member
of the board and the remuneration committee, and chairman of the
nominations committee of Sainsbury’s Bank plc. She is also a non-
executive director of Just Eat plc, Metro AG, DFS Trading Limited
and Ingleby Farms and Forrests ApS.
Previously she held senior roles in marketing, customer service and
financial services at Asda plc. She was also 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 and chair of Business in the Community,
community investment board.
Terry Duddy
Non-Executive Director and
Senior Independent Director (age 60)
Appointed to the Board: 3 December 2009.
Committee membership: Nomination Committee and
Remuneration Committee.
Skills and experience:
In addition to the capabilities and experience related to managing
a large public company, Terry Duddy brings specific insight into
customer behaviour and retail markets. He is currently the chairman
of Retail Trust and a non-executive director of Debenhams plc.
His previous roles include chief executive of Home Retail Group
plc, director of DSG Retail Limited and trustee of Education and
Employers Taskforce.
Skills and experience:
Andrew Formica is an Actuary, having qualified in Australia and the
UK. He has considerable experience in capital markets and fund
management, including property management, and has managed
portfolios and businesses across Europe and globally. In 1993 he
joined the Henderson Group, where he has held various senior
positions, and in 2008 became the chief executive of Henderson
Group plc. He is also a director of the Investment Association.
Previously he was non-executive director of TIAA Henderson Real
Estate Limited.
Judy Gibbons
Non-Executive Director (age 60)
Appointed to the Board: 1 May 2011.
Committee membership: Audit Committee, Nomination
Committee and Remuneration Committee.
Skills and experience:
Judy Gibbons has a background in e-commerce, software, internet
technologies, digital media and mobile applications. She also has
extensive experience in marketing and international business. She
is currently a non-executive director of Guardian Media Group plc,
Michael Kors Holdings Limited and Virgin Money Giving Limited.
Her previous roles include non-executive director of O2 plc,
corporate vice-president of Microsoft Corporation, venture
partner of Accel Partners and senior roles in marketing and
product development at Apple Inc. and Hewlett-Packard.
Sarah Booth
General Counsel and Company Secretary (age 50)
Appointed: as General Counsel on 29 March 2010 and as
Company Secretary on 22 September 2011.
Sarah Booth’s previous appointments include general counsel at
Sodexo and legal and corporate development director at Christian
Salvesen PLC. She began her career at Dickson Minto WS where
she trained as a solicitor.
HAMMERSON.COM
121
OTHER INFORMATIONFINANCIAL STATEMENTSSTRATEGIC REPORT
DIRECTORS’ REPORT
This report (Directors’ Report) forms part of the management
report as required under the Disclosure Guidance and
Transparency Rules. The Strategic Report on pages 1 to 59 includes
an indication of future likely developments in the Company, details
of important events since the year ended 31 December 2016,
the Company’s business model and strategy. The Corporate
Governance Report on pages 60 to 121 is incorporated in this
Directors’ 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 and Irish branches are provided
on page 191.
Directors
Details of the Directors who served during the year are set out on
pages 120 to 121. Jacques Espinasse served as a Non-Executive
Director until 25 April 2016 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.
Directors’ interests
Details of the Directors’ share interests can be found on page 104.
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 pages
47 and 147.
Employees
Details of the Company’s policies regarding the employment of
disabled persons are provided on pages 40 and 42. The Company
places considerable importance on good internal communications
with its employees and invests time in consulting on matters
which affect them including: reward practices, work/life balance
initiatives, corporate responsibility activities and approaches to
internal communications. Consultation predominantly takes the
form of facilitated discussion groups and employee involvement on
relevant committees. The Company provides regular updates on its
performance through presentations and announcements.
Financial instruments
Details of the Group’s financial risk management in relation to its
financial instruments are available on pages 161 to 167.
122
HAMMERSON PLC ANNUAL REPORT 2016
Going Concern and Viability Statements
The Company’s Going Concern Statement and Viability Statement
can be found on page 59.
Greenhouse gas emissions reporting
Information regarding the Company’s greenhouse gas emissions
can be found on page 37.
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 accordance with best practice. Directors
are indemnified under the Articles.
Listing Rule 9.8.4R disclosures
Table 91 sets out where disclosures required in compliance with
Listing Rule 9.8.4R are located.
Table 91
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
146
n/a
78 – 114
n/a
n/a
n/a
n/a
n/a
n/a
n/a
123
123
n/a
Provisions on change of control
Six of the seven 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 2016 Annual General Meeting (AGM), the Company was
granted authority by shareholders to purchase up to 78,443,270
ordinary shares (10% of the Company’s issued ordinary share
capital as at 24 February 2016). This authority will expire at the
conclusion of the 2017 AGM, at which a resolution will be proposed
for its renewal, or, if earlier, 25 July 2017.
Appointment of External Auditor
Details of the appointment of the External Auditor are provided on
page 75.
Responsibility statement
The Directors’ responsibility statement is set out on page 125.
Share capital and substantial shareholders
Details of the Company’s capital structure are set out on pages 167
to 168. 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.
Interests in voting rights over the issued share capital of the
Company disclosed in accordance with DTR 5 can be found on
page 71.
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. As at
31 December 2016 1,558,212 shares were held in trust for employee
share plans purposes.
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
17 February 2017
HAMMERSON.COM
123
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEDIRECTORS’ REPORTSTRATEGIC 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
Development pipeline
Property listing
Ten-year financial summary
Shareholder information
Glossary
Index
125
126
130
136
170
172
178
187
188
190
191
194
196
124
HAMMERSON PLC ANNUAL REPORT 2016
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 (FRS 101)
“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 (FRS 101)
“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
Timon Drakesmith
Chief Financial Officer
17 February 2017
HAMMERSON.COM
HAMMERSON.COM 125
125
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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 2016
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
(FRS 101) “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
(FRS 101) “Reduced Disclosure Framework”.
Summary of our audit approach
Key risks
– Valuation of the property portfolio (including premium outlets
held by Value Retail); and
– Property transactions, specifically the acquisition of the Irish
property portfolio.
Materiality
– The materiality that we used in the current year was £50 million
(December 2015: £40 million) which is less than 1% of
Shareholders’ Equity.
Scoping
– We performed a full scope audit on the UK and French components.
– Following the acquisition of the Irish property portfolio (resulting
from the conversion of the loans acquired in 2015 into the
underlying investment properties this year), Ireland was included
as a separate component in our audit for the first time.
– We performed an audit of specified account balances for the Irish
component, Value Retail and VIA Outlets.
– Together these five components account for 99% of the Group’s
net assets and 100% of profit before tax.
HAMMERSON PLC ANNUAL REPORT 2016
126
126 HAMMERSON PLC ANNUAL REPORT 2016
Significant changes to our approach
– The only significant change to our audit approach in 2016 was the
inclusion of Ireland as a separate component. The ownership
interests in a portfolio of loans secured against a number of Irish
property assets had been acquired in 2015. During 2016, the Group
acquired the interests in these underlying investment properties,
thereby creating the new component of the Group. We also:
– Focussed our property transactions significant risk to the
acquisition of the Irish property portfolio; and
– Broadened the risk around the valuation of the property portfolio
to include the valuation of premium outlets held by Value Retail.
The accounting for the investment in Value Retail is therefore not
separately included within our audit report as a key risk this year.
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 136 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 59.
We have nothing material to add or draw attention to in relation to:
– The Directors’ confirmation on page 54 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 55 to 58 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 59 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.
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.
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 2016
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
(FRS 101) “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
(FRS 101) “Reduced Disclosure Framework”.
Summary of our audit approach
Key risks
– Valuation of the property portfolio (including premium outlets
held by Value Retail); and
– Property transactions, specifically the acquisition of the Irish
– The materiality that we used in the current year was £50 million
(December 2015: £40 million) which is less than 1% of
property portfolio.
Materiality
Shareholders’ Equity.
Scoping
Significant changes to our approach
– The only significant change to our audit approach in 2016 was the
inclusion of Ireland as a separate component. The ownership
interests in a portfolio of loans secured against a number of Irish
property assets had been acquired in 2015. During 2016, the Group
acquired the interests in these underlying investment properties,
thereby creating the new component of the Group. We also:
– Focussed our property transactions significant risk to the
acquisition of the Irish property portfolio; and
– Broadened the risk around the valuation of the property portfolio
to include the valuation of premium outlets held by Value Retail.
The accounting for the investment in Value Retail is therefore not
separately included within our audit report as a key risk this year.
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 136 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 59.
We have nothing material to add or draw attention to in relation to:
– The Directors’ confirmation on page 54 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 55 to 58 that describe those risks and
explain how they are being managed or mitigated;
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 59 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.
– We performed a full scope audit on the UK and French components.
– Following the acquisition of the Irish property portfolio (resulting
However, because not all future events or conditions can be
from the conversion of the loans acquired in 2015 into the
predicted, this statement is not a guarantee as to the Group’s ability to
underlying investment properties this year), Ireland was included
continue as a going concern.
as a separate component in our audit for the first time.
– We performed an audit of specified account balances for the Irish
Independence
component, Value Retail and VIA Outlets.
We are required to comply with the Financial Reporting Council’s
– Together these five components account for 99% of the Group’s
Ethical Standards for Auditors and we confirm that we are independent
net assets and 100% of profit before tax.
Accounting Practice), including Financial Reporting Standard 101
– The Directors’ statement in note 1 to the financial statements
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.
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 assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team. There has been no significant change in the Group’s operations however
we note the inclusion of Ireland as a separate component in our audit following the conversion in the year of the loans acquired in 2015 into the
underlying investment properties including Dundrum Town Centre and the Ilac Centre. Due to the complex nature if this transaction we have
refocused our property transaction risk to the acquisition in the year of the Irish property portfolio. Furthermore, as the nature of the investment
in Value Retail has not changed during the year, we have focussed this risk to the valuation of the investment which is primarily driven by the
valuation of the underlying property portfolio and has been incorporated in to the valuation of the property portfolio risk.
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.
Risk
How the scope of our audit responded to the risk
Valuation of the property portfolio (including premium outlets
held by Value Retail)
– Hammerson plc ("Hammerson") owns a portfolio of retail property
assets valued at £8,282 million at 31 December 2016 (31 December
2015: £7,130 million) of which £4,764 million are held by subsidiaries
(31 December 2015: £4,652 million) and £3,518 million by joint
ventures and associates (31 December 2015: £2,478 million).
– The Group has further investments in premium outlets through the
investment in Value Retail (“VR”). The total value of the premium
outlets held by Value Retail at 31 December 2016 was £4,096 million
(31 December 2015: £3,333 million) of which Hammerson’s share is
£1,387 million (31 December 2015: £1,095 million).
– The valuation of the property portfolio is a significant judgement
area and is underpinned by a number of assumptions including
estimated rental values and yields and for premium outlets, future net
operating income and discount rates. The Group uses professionally
qualified external valuers to fair value the Group’s portfolio at six-
monthly intervals.
– Please see notes 11, 12 and 13 to the financial statements and
discussion in the report of the Audit Committee on page 77.
– We assessed management’s review of the work of the external valuers;
– We met with the external valuers of the portfolios (including those
held by Value Retail) to discuss and challenge the valuation process,
performance of the portfolio and significant assumptions and critical
judgement areas, including estimated rental values, yields, future net
operating income and discount rates. We benchmarked these
assumptions to relevant market evidence including specific property
transactions and other external data;
– We assessed the competence, independence and integrity of the
external valuers;
– We performed audit procedures to assess the integrity of information
provided to the external valuers including agreement on a sample
basis back to underlying lease agreement; and
– Under our direction, the component auditors assessed the integrity
of the information provided to the external valuers and through use
of their valuation specialists challenged the assumptions used in
the valuations.
Key observations
We concluded that the assumptions applied in the arriving at the fair value of the Group’s property portfolio, (including premium outlets held by
Value Retail), by the external valuers were appropriate.
– We have reviewed the legal agreements for the acquisition of
each Irish asset, paying specific attention to the ownership
interests acquired;
– We have determined whether the acquisition for each property
is accounted for in accordance with IFRS and that each property
is appropriately recorded in the financial statements depending on
the ownership interests acquired; and
– We have considered the presentation and disclosure of the
transaction in the financial statements.
Property transactions, specifically the acquisition of the Irish
property portfolio
– During 2016 the Group continued its asset disposal programme
recycling the proceeds into high-quality retail property including the
acquisition of the Irish property portfolio (primarily Dundrum Town
Centre and the Ilac Centre).
– We focussed the risk around property transactions to the acquisition
of the Irish property portfolio due to its size with a cost in excess of
£1 billion and the fact that the transaction is inherently complex,
reflecting a number of steps to secure the consensual conversion of
the loans acquired in 2015 into the underlying investment properties.
The transaction was further complicated by the fact that each
property has different ownership interests resulting in increased risk
of inaccurate presentation as a joint venture or a joint operation in
the financial statements.
– Hammerson’s accounting policy in respect of the transaction is
detailed in note 1 on page 137 which includes the accounting
treatment of each investment property acquired and discussion
in the report of the Audit Committee on page 77.
Key observations
We concluded that the acquisition of the Irish property portfolio has been appropriately accounted for and disclosed within the financial
statements.
126 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
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127
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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 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.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Group materiality
£50 million (2015: £40 million)
Basis for determining
materiality
We determined materiality for the Group
to be £50 million (2015: £40 million),
which is below 1% (2015: below 1%) of
shareholders’ equity.
Rationale for the
benchmark applied
We determined materiality based on
shareholders’ equity as net asset value is a
key performance indicator as it takes into
consideration the valuation of
Hammerson’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 £11.2 million (2015: £10.9 million) which equates to 4.8 %
(2015: 5.1%) of that measure for testing all balances impacting
that measure.
Group and component materiality
Group materiality £50m
Component materiality
£22.5m to £37.5m
Audit Committee
reporting threshold £2.5m
£5,857m
Group net assets
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £2.5 million (2015:
£0.8 million), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We increased our
threshold for reporting audit differences in line with market
practice. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation
of the financial statements.
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 five significant components being
the UK, France, Ireland, Value Retail and VIA Outlets (VIA)
(2015: four) with the additional component reflecting the
acquisition in the year of the Irish property portfolio. Together these
components comprise 99% (2015: 99%) of the Group’s net assets
and 100% (2015: 100%) of profit before tax.
The UK and French components were subject to a full scope audit,
whilst Ireland, Value Retail (accounted for as an associate) 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.
Our audit work at the five locations was executed at levels of
materiality applicable to each individual entity which were
lower than group materiality and ranged from £22.5 million to
£37.5 million (2015: £10 million to £22 million). For those balances
impacting EPRA Adjusted Profit before Tax the materiality range
was £5 million to £8.4 million (2015: £2.6 million to £6 million).
The group audit team are responsible for the work performed on the
UK and Irish components with component teams performing the
work for France, VR and VIA. We discuss our component team’s risk
assessment with them, review documentation of the findings from
their work and attend their key meetings, including close meetings.
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.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
– The part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006;
– 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; and
– The Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have not
identified any material misstatements in the Strategic Report and
the Directors’ Report.
HAMMERSON PLC ANNUAL REPORT 2016
128
128 HAMMERSON PLC ANNUAL REPORT 2016
Independent Auditor’s report to the members of Hammerson plc continued
Our application of materiality
An overview of the scope of our audit
We define materiality as the magnitude of misstatement in the
Our group audit was scoped by obtaining an understanding of the
financial statements that makes it probable that the economic
Group and its environment, including group-wide controls, and
decisions of a reasonably knowledgeable person would be changed
assessing the risks of material misstatement at the group level.
or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on that assessment, we focused our group audit scope
primarily on the audit work at five significant components being
Based on our professional judgement, we determined materiality
the UK, France, Ireland, Value Retail and VIA Outlets (VIA)
for the financial statements as a whole as follows:
(2015: four) with the additional component reflecting the
Group materiality
£50 million (2015: £40 million)
We determined materiality for the Group
Basis for determining
to be £50 million (2015: £40 million),
materiality
which is below 1% (2015: below 1%) of
shareholders’ equity.
We determined materiality based on
shareholders’ equity as net asset value is a
Rationale for the
key performance indicator as it takes into
benchmark applied
consideration the valuation of
Hammerson’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 £11.2 million (2015: £10.9 million) which equates to 4.8 %
(2015: 5.1%) of that measure for testing all balances impacting
that measure.
Group and component materiality
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £2.5 million (2015:
£0.8 million), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We increased our
threshold for reporting audit differences in line with market
practice. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation
of the financial statements.
acquisition in the year of the Irish property portfolio. Together these
components comprise 99% (2015: 99%) of the Group’s net assets
and 100% (2015: 100%) of profit before tax.
The UK and French components were subject to a full scope audit,
whilst Ireland, Value Retail (accounted for as an associate) 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.
Our audit work at the five locations was executed at levels of
materiality applicable to each individual entity which were
lower than group materiality and ranged from £22.5 million to
£37.5 million (2015: £10 million to £22 million). For those balances
impacting EPRA Adjusted Profit before Tax the materiality range
was £5 million to £8.4 million (2015: £2.6 million to £6 million).
The group audit team are responsible for the work performed on the
UK and Irish components with component teams performing the
work for France, VR and VIA. We discuss our component team’s risk
assessment with them, review documentation of the findings from
their work and attend their key meetings, including close meetings.
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.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
– The part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006;
– 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; and
– The Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have not
identified any material misstatements in the Strategic Report and
the Directors’ Report.
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.
Respective responsibilities of directors and
auditor
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors. 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
17 February 2017
128 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 129
129
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes
2
2
2
12A
13A
2
7
8A
28C
10B
10B
10B
2016
£m
251.3
2015
£m
236.0
176.6
166.8
(24.0)
1.3
(24.7)
(47.4)
169.2
137.1
435.5
(121.2)
(0.4)
(3.5)
12.4
(112.7)
322.8
(1.9)
320.9
317.3
3.6
320.9
40.2p
40.1p
29.2p
14.9
(1.4)
245.1
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
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
Gross rental income
Operating profit before other net (losses)/gains and share of results of joint ventures
and associates
(Loss)/Gain on sale of properties
Gain/(Loss) on other investments
Revaluation (losses)/gains on properties
Other net (losses)/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
HAMMERSON PLC ANNUAL REPORT 2016
130
130 HAMMERSON PLC ANNUAL REPORT 2016
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Operating profit before other net (losses)/gains and share of results of joint ventures
Gross rental income
and associates
(Loss)/Gain on sale of properties
Gain/(Loss) on other investments
Revaluation (losses)/gains on properties
Other net (losses)/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
10B
10B
10B
2016
£m
251.3
2015
£m
236.0
176.6
166.8
(24.0)
1.3
(24.7)
(47.4)
169.2
137.1
435.5
(121.2)
(0.4)
(3.5)
12.4
(112.7)
322.8
(1.9)
320.9
317.3
3.6
320.9
40.2p
40.1p
29.2p
14.9
(1.4)
245.1
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
Items that may subsequently be recycled through the income statement
Foreign exchange translation differences
Net (loss)/gain on hedging activities
Items that may not subsequently be recycled through the income statement
Revaluation losses 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
2016
£m
2015
£m
535.6
(437.3)
98.3
(0.3)
(15.9)
82.1
320.9
403.0
388.3
14.7
403.0
(107.5)
81.9
(25.6)
(1.0)
(0.3)
(26.9)
730.0
703.1
703.5
(0.4)
703.1
130 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 131
131
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
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
Borrowings
Non-current liabilities
Borrowings
Deferred tax
Obligations under finance leases
Payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
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 17 February 2017.
Signed on behalf of the Board
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
HAMMERSON PLC ANNUAL REPORT 2016
132
132 HAMMERSON PLC ANNUAL REPORT 2016
Notes
11
12A
13C
14
15
16
17
18
19A
2016
£m
2015
£m
4,763.9
36.4
6.2
3,736.7
988.1
–
44.9
4,652.1
32.1
7.6
3,213.6
768.0
4.8
92.1
9,576.2
8,770.3
105.9
35.1
74.3
215.3
118.0
34.0
37.0
189.0
9,791.5
8,959.3
303.8
0.4
211.1
515.3
235.5
0.7
–
236.2
19A
3,285.2
3,028.1
21
22
23
0.5
37.5
96.0
3,419.2
3,934.5
5,857.0
198.3
1,265.7
659.6
(562.9)
374.1
23.7
3,817.3
(0.2)
5,775.6
28C
81.4
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
3,696.5
(3.9)
5,517.3
69.0
5,857.0
5,586.3
10D
10D
£7.28
£7.39
£7.03
£7.10
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
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
Borrowings
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 17 February 2017.
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
132 HAMMERSON PLC ANNUAL REPORT 2016
Notes
2016
£m
2015
£m
11
4,763.9
4,652.1
9,576.2
8,770.3
9,791.5
8,959.3
12A
13C
14
15
16
17
18
19A
21
22
23
36.4
6.2
3,736.7
988.1
–
44.9
105.9
35.1
74.3
215.3
303.8
0.4
211.1
515.3
0.5
37.5
96.0
3,419.2
3,934.5
5,857.0
198.3
1,265.7
659.6
(562.9)
374.1
23.7
32.1
7.6
3,213.6
768.0
4.8
92.1
118.0
34.0
37.0
189.0
235.5
0.7
–
236.2
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
5,517.3
69.0
5,586.3
£7.03
£7.10
3,817.3
3,696.5
(0.2)
(3.9)
5,775.6
81.4
5,857.0
£7.28
£7.39
28C
10D
10D
19A
3,285.2
3,028.1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
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 2016
196.1 1,223.3
135.1
(125.6)
374.1
21.7 3,696.5
Issue of shares
Share-based employee
remuneration
Cost of shares awarded
to employees
Transfer on award of own
shares to employees
Proceeds on award of own
shares to employees
0.3
0.2
–
–
–
–
–
–
–
–
Dividends
1.9
42.2
Foreign exchange translation
differences
Net loss 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
2016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
524.5
–
–
–
–
–
–
–
–
(437.3)
–
–
–
–
–
–
524.5 (437.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
5.6
(4.0)
–
–
–
0.4
(0.4)
–
–
–
–
–
–
–
–
0.2
(180.1)
–
–
(0.3)
(15.9)
317.3
301.1
(3.9)
(0.3)
–
4.0
–
–
–
–
–
–
–
–
–
5,517.3
69.0 5,586.3
0.2
5.6
–
–
0.2
–
–
–
–
–
0.2
5.6
–
–
0.2
(136.0)
(2.3)
(138.3)
524.5
(437.3)
11.1
535.6
–
(437.3)
(0.3)
(15.9)
317.3
–
–
(0.3)
(15.9)
3.6
320.9
388.3
14.7
403.0
198.3 1,265.7
659.6 (562.9)
374.1
23.7 3,817.3
(0.2)
5,775.6
81.4 5,857.0
* Investment in own shares is stated at cost.
HAMMERSON.COM
HAMMERSON.COM 133
133
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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
–
–
–
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
–
–
–
–
–
Balance at 31 December 2015
196.1
1,223.3
135.1
(125.6)
374.1
21.7 3,696.5
(3.9)
* Investment in own shares is stated at cost.
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
5,517.3
(0.4)
703.1
69.0 5,586.3
HAMMERSON PLC ANNUAL REPORT 2016
134
134 HAMMERSON PLC ANNUAL REPORT 2016
Share
capital
£m
Share
Translation
premium
£m
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Other
reserves
£m
Retained
earnings
£m
in own
shares*
£m
funds
£m
interests
£m
Investment
Equity
Non-
shareholders’
controlling
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
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(103.9)
81.9
–
–
–
–
–
–
–
–
–
–
–
(0.1)
–
–
4.8
–
–
–
–
–
–
–
–
–
–
–
–
(2.9)
2.9
0.2
(0.2)
0.2
(165.2)
–
–
–
–
–
–
(1.0)
(0.3)
726.8
725.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
(0.1)
4.8
–
–
0.2
81.9
(1.0)
(0.3)
726.8
Total
equity
£m
0.4
(0.1)
4.8
–
–
0.2
81.9
(1.0)
(0.3)
–
–
–
–
–
–
–
–
–
(165.2)
(2.0)
(167.2)
(103.9)
(3.6)
(107.5)
3.2
730.0
703.5
5,517.3
(0.4)
703.1
69.0 5,586.3
Balance at 31 December 2015
196.1
1,223.3
135.1
(125.6)
374.1
21.7 3,696.5
(3.9)
(103.9)
81.9
* Investment in own shares is stated at cost.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
FOR THE YEAR ENDED 31 DECEMBER 2016
Notes
2016
£m
2015
£m
Operating activities
Operating profit before other net (losses)/gains and share of results of joint ventures and
associates
2
176.6
Decrease/(Increase) in receivables
Decrease/(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
Developments and major refurbishments
Other capital expenditure
Sale of properties
Acquisition of Irish loan portfolio
Advances to joint ventures on conversion of Irish loan portfolio to property assets
Increase in advances to joint ventures
Acquisition of interest in associates
Acquisition of other investments
Distribution received from associates
Sale of other investments
Decrease/(Increase) in non-current receivables
Cash flows from investing activities
Financing activities
Issue of shares
Proceeds from award of own shares
Debt and loan facility cancellation costs
Proceeds from new borrowings
Repayment of borrowings
Net increase in 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.
3.0
2.2
11.9
11.6
205.3
(125.1)
20.0
(2.9)
84.0
181.3
(499.7)
(127.2)
(55.2)
639.0
–
(91.9)
(63.1)
(2.4)
(1.9)
18.0
8.0
64.8
(111.6)
0.2
0.2
(0.4)
949.8
(847.5)
102.3
(2.3)
(135.7)
(35.7)
34.0
37.0
3.3
74.3
25
12D
12D
12D
7
24
9
17
166.8
(0.3)
(22.7)
27.2
6.3
177.3
(104.0)
8.6
(1.1)
90.4
171.2
(43.7)
(137.2)
(45.1)
185.2
(690.2)
–
(45.4)
(36.6)
(4.8)
44.5
–
(17.1)
(790.4)
0.4
0.2
(13.9)
1,319.0
(511.4)
807.6
(2.0)
(163.8)
628.5
9.3
28.6
(0.9)
37.0
134 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 135
135
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 2016, 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 IFRS 10 Consolidated Financial Statements,
IFRS 12 Disclosure of Interests in Other Entities and IAS 28
Investments in Associates and Joint Ventures – amendments
regarding the consolidation exemption
– Amendments to IFRS 11 Joint Arrangements – amendments
regarding the accounting for acquisitions of an interest in a
joint operation
– Amendments to IAS 1 ‘Presentation of Financial Statements’ –
Disclosure Initiative
Issued and endorsed by the European Union
– 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.
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 IFRS 2 Share Based Payments – amendments to
clarify the classification and measurement of share-based
payment transactions; effective for accounting periods beginning
on or after 1 January 2018
– IFRS 16 Leases; effective for accounting periods beginning on or
after 1 January 2018
– Amendments to IAS 7 Statement of Cash Flows – amendments as
a result of the Disclosure; effective for accounting periods
beginning on or after 1 January 2017
– Amendments to IAS 12 Income Taxes – amendments regarding
the recognition of deferred tax assets for unrealised losses;
effective for accounting periods beginning on or after
1 January 2017
– Amendments to IFRS (Annual Improvements cycle 2014-2016)
With particular reference to IFRS 15 and IFRS 16, as the Group is
primarily a lessor of property, and lease income is outside the scope
of IFRS 15, these pronouncements and the others referred to above
are not expected to have a material impact on the financial
statements. There may be limited changes in presentation and
disclosure.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Risks and Uncertainties section of the Strategic
Report on page 59.
HAMMERSON PLC ANNUAL REPORT 2016
136
136 HAMMERSON PLC ANNUAL REPORT 2015
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.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1: Significant accounting policies
Statement of compliance
The consolidated financial statements have been prepared in
accordance with IFRS and interpretations adopted by the European
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.
Union. During 2016, the following new and revised Standards and
The accounting policies have been applied consistently to the
Interpretations have been adopted but these have not affected the
results, other gains and losses, assets, liabilities and cash flows of
– Amendments to IAS 1 ‘Presentation of Financial Statements’ –
application of accounting policies and the reported amounts of
Issued and endorsed by the European Union
– IFRS 9 Financial Instruments; effective for accounting periods
Property valuations
amounts reported in these financial statements:
– Amendments to IFRS 10 Consolidated Financial Statements,
IFRS 12 Disclosure of Interests in Other Entities and IAS 28
Investments in Associates and Joint Ventures – amendments
regarding the consolidation exemption
– Amendments to IFRS 11 Joint Arrangements – amendments
regarding the accounting for acquisitions of an interest in a
joint operation
Disclosure Initiative
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.
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 IFRS 2 Share Based Payments – amendments to
clarify the classification and measurement of share-based
payment transactions; effective for accounting periods beginning
– IFRS 16 Leases; effective for accounting periods beginning on or
on or after 1 January 2018
after 1 January 2018
– Amendments to IAS 7 Statement of Cash Flows – amendments as
a result of the Disclosure; effective for accounting periods
beginning on or after 1 January 2017
– Amendments to IAS 12 Income Taxes – amendments regarding
the recognition of deferred tax assets for unrealised losses;
effective for accounting periods beginning on or after
1 January 2017
With particular reference to IFRS 15 and IFRS 16, as the Group is
primarily a lessor of property, and lease income is outside the scope
of IFRS 15, these pronouncements and the others referred to above
are not expected to have a material impact on the financial
statements. There may be limited changes in presentation and
disclosure.
Basis of preparation
The financial statements are prepared on a going concern basis, as
explained in the Risks and Uncertainties section of the Strategic
Report on page 59.
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
assets, liabilities, income and expenses. The following accounting
policies are the critical accounting policies of the Group.
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.
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.
– Amendments to IFRS (Annual Improvements cycle 2014-2016)
Accounting for acquisitions
Conversion of previously acquired Irish loan portfolio into the
underlying property assets
During the year, the Group converted the majority of the Irish loan
portfolio including Dundrum Town Centre, the Ilac Centre and a
number of development sites into property assets. The accounting
for this conversion is material to the Group’s financial statements
and is complex as the assets have different ownership interests and
control provisions.
The Group has accounted for its investment in Dundrum Town
Centre as an equity accounted joint venture. The Group’s interest in
the Ilac Centre has been accounted for as a joint operation with the
Group’s 50% share proportionally consolidated. The Group’s
interest in Dublin Central and the development sites, all of which
are wholly owned, have been fully consolidated into the Group
financial statements. Further details are given in notes 11 and 12.
Other transactions
The Group made a number of acquisitions and disposals during the
year, including transactions between the wholly-owned Group and
the Group’s joint ventures, which were complex in nature.
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 interests in its joint ventures are 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.
Tax exempt status
The Company has elected for UK REIT, French SIIC and Irish
QIAIF 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, a French SIIC and an Irish QIAIF 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 operations, joint ventures and associates
The Group’s share of interests in joint operations is proportionally
consolidated into the Group financial statements. 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 = €1.171 (2015: £1 = €1.357). The principal
exchange rate used for the income statement is the average rate,
£1 = €1.224 (2015: £1 = €1.378).
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.
Cash, receivables, payables and borrowings
Cash and cash equivalents and restricted monetary assets
Cash and deposits comprise cash and short-term bank deposits
with an original maturity of three months or less which are readily
accessible. Restricted monetary assets relate to cash balances which
legally belong to the Group but which the Group cannot readily
access. These do not meet the definition of cash and cash equivalents
and consequently are presented separately from cash and deposits
in the Group balance sheet.
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.
136 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON.COM
HAMMERSON.COM 137
137
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
1: Significant accounting policies (continued)
Cash, receivables, payables and borrowings
(continued)
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.
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.
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.
HAMMERSON PLC ANNUAL REPORT 2016
138
138 HAMMERSON PLC ANNUAL REPORT 2016
Notes to the accounts continued
1: Significant accounting policies (continued)
Leasehold properties
Cash, receivables, payables and borrowings
(continued)
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.
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
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 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.
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 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.
valuers. Changes in fair value are included in the income statement.
Plant and equipment
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.
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.
138 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 139
139
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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
2016
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
251.3
(1.3)
250.0
43.8
(52.1)
(8.3)
(19.4)
(27.7)
B
147.4
(2.8)
144.6
24.8
(31.0)
(6.2)
(14.2)
(20.4)
C
398.7
(4.1)
394.6
68.6
(83.1)
(14.5)
(33.6)
(48.1)
D
398.7
(4.1)
394.6
68.6
(83.1)
(14.5)
(33.6)
(48.1)
Net rental income
3A
222.3
124.2
346.5
346.5
Management fees receivable/(payable)
Employee and corporate costs
Administration expenses
Operating profit before other net (losses)/gains and
share of results of joint ventures and associates
Loss on the sale of properties
Gain on the sale of other investments
Revaluation (losses)/gains on properties
Other net (losses)/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
10B
8.6
(54.3)
(45.7)
176.6
(24.0)
1.3
(24.7)
(47.4)
169.2
137.1
435.5
(112.7)
322.8
(1.9)
320.9
(3.6)
317.3
(0.1)
(0.3)
(0.4)
123.8
–
–
11.3
11.3
(148.5)
(1.9)
(15.3)
16.1
0.8
(0.8)
–
–
–
8.5
(54.6)
(46.1)
300.4
(24.0)
1.3
(13.4)
(36.1)
20.7
135.2
420.2
(96.6)
323.6
(2.7)
320.9
(3.6)
317.3
8.5
(54.6)
(46.1)
300.4
–
–
–
–
6.2
23.6
330.2
(93.5)
236.7
(2.7)
234.0
(3.3)
230.7
D
–
–
–
–
–
–
–
–
–
–
–
–
–
(24.0)
1.3
(13.4)
(36.1)
14.5
111.6
90.0
(3.1)
86.9
–
86.9
(0.3)
86.6
Notes
A Reported Group results as shown in the consolidated income statement on page 130.
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 £7.2 million (2015: £6.6 million) of contingent rents calculated by reference to tenants’ turnover.
HAMMERSON PLC ANNUAL REPORT 2016
140
140 HAMMERSON PLC ANNUAL REPORT 2016
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
222.3
124.2
346.5
346.5
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 (losses)/gains and
share of results of joint ventures and associates
Loss on the sale of properties
Gain on the sale of other investments
Revaluation (losses)/gains on properties
Other net (losses)/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
2016
Capital
and other
£m
D
Group
£m
A
251.3
(1.3)
250.0
43.8
(52.1)
(8.3)
(19.4)
(27.7)
8.6
(54.3)
(45.7)
176.6
(24.0)
1.3
(24.7)
(47.4)
169.2
137.1
435.5
(112.7)
322.8
(1.9)
320.9
(3.6)
317.3
interests
£m
B
147.4
(2.8)
144.6
24.8
(31.0)
(6.2)
(14.2)
(20.4)
(0.1)
(0.3)
(0.4)
123.8
–
–
11.3
11.3
(148.5)
(1.9)
(15.3)
16.1
0.8
(0.8)
–
–
–
£m
C
398.7
(4.1)
394.6
68.6
(83.1)
(14.5)
(33.6)
(48.1)
8.5
(54.6)
(46.1)
300.4
(24.0)
1.3
(13.4)
(36.1)
20.7
135.2
420.2
(96.6)
323.6
(2.7)
320.9
(3.6)
317.3
Adjusted
£m
D
398.7
(4.1)
394.6
68.6
(83.1)
(14.5)
(33.6)
(48.1)
8.5
(54.6)
(46.1)
300.4
–
–
–
–
6.2
23.6
330.2
(93.5)
236.7
(2.7)
234.0
(3.3)
230.7
–
–
–
–
–
–
–
–
–
–
–
–
–
(24.0)
1.3
(13.4)
(36.1)
14.5
111.6
90.0
(3.1)
86.9
–
86.9
(0.3)
86.6
12A, 12B
13A, 13B
7
8A
Profit for the year attributable to equity shareholders
10B
A Reported Group results as shown in the consolidated income statement on page 130.
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 £7.2 million (2015: £6.6 million) of contingent rents calculated by reference to tenants’ turnover.
2015
Proportionally consolidated
Notes (see page 140)
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
Proportionally
consolidated
£m
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)
Adjusted
£m
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
Other 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
7
8A
Profit for the year attributable to equity shareholders
10B
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
Capital
and other
£m
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
140 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 141
141
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
3: Segmental analysis
The factors used to determine the Group’s reportable segments are the geographic locations (UK, France and Ireland) and sectors in which
it operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated.
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 43, 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 from 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.
In October 2015, the Group acquired an interest in a loan portfolio secured on retail properties located in Ireland in a 50:50 joint venture. The
majority of these loans were converted into property in 2016 and these are included in note 3B. Rental income has been included in note 3A from
the date of conversion. The Group’s investment in the Irish joint venture is included within note 3C.
A: Revenue and profit by segment
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Ireland
Total investment portfolio
Developments
Total property portfolio
Premium outlets
Total Group
Less premium outlets
Less share of Property interests
Reported Group
2016
Gross rental
income
£m
Net rental
income
£m
Gross rental
income
£m
2015
Net rental
income
£m
174.2
84.0
13.8
272.0
101.1
13.7
386.8
11.9
398.7
100.7
499.4
148.4
79.6
9.3
237.3
89.3
12.5
339.1
7.4
346.5
67.7
414.2
162.0
86.2
13.8
262.0
95.9
–
357.9
8.5
366.4
86.5
452.9
138.8
82.0
9.6
230.4
83.0
–
313.4
5.2
318.6
65.6
384.2
(100.7)
(147.4)
251.3
(67.7)
(124.2)
222.3
(86.5)
(130.4)
236.0
(65.6)
(109.8)
208.8
HAMMERSON PLC ANNUAL REPORT 2016
142
142 HAMMERSON PLC ANNUAL REPORT 2016
Notes to the accounts continued
3: Segmental analysis
The factors used to determine the Group’s reportable segments are the geographic locations (UK, France and Ireland) and sectors in which
it operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated.
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 43, 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 from 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.
In October 2015, the Group acquired an interest in a loan portfolio secured on retail properties located in Ireland in a 50:50 joint venture. The
majority of these loans were converted into property in 2016 and these are included in note 3B. Rental income has been included in note 3A from
the date of conversion. The Group’s investment in the Irish joint venture is included within note 3C.
A: Revenue and profit by segment
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Ireland
Total investment portfolio
Developments
Total property portfolio
Premium outlets
Total Group
Less premium outlets
Less share of Property interests
Reported Group
Gross rental
Net rental
Gross rental
income
£m
income
£m
income
£m
2016
148.4
79.6
9.3
237.3
89.3
12.5
339.1
7.4
346.5
67.7
414.2
2015
Net rental
income
£m
138.8
82.0
9.6
230.4
83.0
–
313.4
5.2
318.6
65.6
384.2
162.0
86.2
13.8
262.0
95.9
–
357.9
8.5
366.4
86.5
452.9
174.2
84.0
13.8
272.0
101.1
13.7
386.8
11.9
398.7
100.7
499.4
(100.7)
(147.4)
251.3
(67.7)
(124.2)
222.3
(86.5)
(130.4)
236.0
(65.6)
(109.8)
208.8
B: Investment and development property assets by segment
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Ireland
Total investment portfolio
Developments
Total property portfolio
Premium outlets
Total Group
Less premium outlets
Less share of Property interests
Reported Group
C: Analysis of non-current assets employed
United Kingdom
Continental Europe
Ireland
Property
valuation
£m
Property
additions
£m
Revaluation
gains/(losses)
£m
Property
valuation
£m
Property
additions
£m
2016
3,436.5
1,320.0
163.5
4,920.0
2,159.6
805.1
7,884.7
397.0
8,281.7
1,689.4
9,971.1
(1,689.4)
(3,517.8)
4,763.9
369.8
19.8
0.8
390.4
65.6
801.9
1,257.9
274.9
1,532.8
200.5
1,733.3
(200.5)
(778.9)
753.9
(5.8)
(118.3)
2.2
(121.9)
73.3
3.2
(45.4)
32.0
(13.4)
138.4
125.0
(138.4)
(11.3)
(24.7)
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
(1,243.6)
(2,478.4)
4,652.1
10.7
54.2
23.5
88.4
54.8
–
143.2
169.8
313.0
25.3
338.3
(25.3)
(95.1)
217.9
2015
Revaluation
gains
£m
194.9
19.0
1.4
215.3
116.6
–
331.9
35.6
367.5
174.1
541.6
(174.1)
(122.4)
245.1
Non-current assets employed
2016
£m
5,210.7
3,357.8
1,007.7
9,576.2
2015
£m
5,283.9
2,792.9
693.5
8,770.3
Included in the above table are investments in joint ventures of £3,736.7 million (2015: £3,213.6 million), which are further analysed in note 12 on
pages 151 to 156. The Group’s share of the property valuations held within Property interests of £3,517.8 million (2015: £2,478.4 million) has been
included in note 3B above, of which £2,562.6 million (2015: £2,304.7 million) relates to the United Kingdom, £205.1 million (2015: £173.7 million)
relates to Continental Europe and £750.1 million (2015: £nil) relates to Ireland.
142 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 143
143
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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
Total
Note
6A
2016
£m
30.8
7.0
1.2
8.2
4.4
7.5
2.7
2015
£m
26.5
7.3
1.2
8.5
3.6
7.6
2.6
53.6
48.8
Of the above amount, £20.1 million (2015: £16.6 million) was recharged to tenants through service charges and £1.6 million (2015: £1.9 million)
capitalised in respect of development projects.
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 78 to 114.
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
1. Other fees payable to the Company’s auditor are principally for tax related work and a review of the Group’s sustainability reporting.
2016
Number
565
219
2015
Number
468
224
2016
£m
0.3
0.3
0.1
0.7
0.1
0.8
2.0
2015
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.7
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 78 to 114.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the current and preceding years.
HAMMERSON PLC ANNUAL REPORT 2016
144
144 HAMMERSON PLC ANNUAL REPORT 2016
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
Net pension expense
– defined contribution scheme
Social security
Total
Note
6A
2016
£m
30.8
7.0
1.2
8.2
4.4
7.5
2.7
2016
£m
0.3
0.3
0.1
0.7
0.1
0.8
2.0
2015
£m
26.5
7.3
1.2
8.5
3.6
7.6
2.6
2015
£m
0.2
0.3
0.1
0.6
0.1
0.7
1.7
2016
Number
565
219
2015
Number
468
224
Of the above amount, £20.1 million (2015: £16.6 million) was recharged to tenants through service charges and £1.6 million (2015: £1.9 million)
capitalised in respect of development projects.
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 78 to 114.
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
1. Other fees payable to the Company’s auditor are principally for tax related work and a review of the Group’s sustainability reporting.
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 £2.7 million (2015: £2.6 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 meets pension commitment obligations to former US employees.
53.6
48.8
C: Changes in present value of defined benefit pension schemes
At 1 January
Amounts recognised in the income statement
– interest (cost)/income1
Amounts recognised in equity
– actuarial experience gains/(losses)
– actuarial (losses)/gains from changes in financial
assumptions
– actuarial gains/(losses) from changes in demographic
assumptions
Contributions by employer2
Benefits
Exchange (losses)/gains
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
(100.7)
Assets
£m
62.7
2016
Net
£m
Obligations
£m
(38.0)
(101.7)
Assets
£m
61.9
2015
Net
£m
(39.8)
(3.7)
2.4
(1.3)
(3.5)
2.2
(1.3)
2.6
0.9
3.5
(19.9)
0.5
(16.8)
–
3.2
(2.0)
(120.0)
(106.2)
(13.8)
(120.0)
–
–
0.9
1.5
(2.2)
–
65.3
65.3
–
65.3
1.5
2.4
(2.6)
1.3
–
3.1
0.1
(100.7)
(19.9)
0.5
(15.9)
1.5
1.0
(2.0)
(54.7)
(40.9)
(13.8)
(54.7)
(88.8)
(11.9)
(100.7)
(0.9)
(53.8)
(54.7)
(1.6)
(0.1)
–
–
(1.6)
2.5
(2.3)
–
62.7
62.7
–
62.7
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)
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 78 to 114.
The Company did not grant any credits, advances or guarantees of any kind to its Directors during the current and preceding years.
Notes
1. Included in Other interest payable (note 7).
2. The Group expects to make contributions totalling £3.5 million to the Scheme in the next financial year.
144 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 145
145
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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
2016
%
2.9
3.3
3.3
Age
88.1
89.9
2015
%
3.8
3.1
3.1
Age
88.5
90.1
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 credit 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
Tax charge
2016
£m
19.7
102.0
2.1
2.5
126.3
(5.1)
121.2
0.4
3.5
(12.4)
112.7
2016
£m
0.2
1.7
1.9
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
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 residual business in both the UK and France are subject to corporation tax as normal. The
Irish properties acquired in 2016 are held in a QIAIF which provides similar tax benefits to those of a UK REIT but which will subject future
distributions from Ireland to the UK to a 20% withholding tax.
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% (2015: 20.25%)
UK REIT tax exemption
French SIIC tax exemption
Irish QIAIF tax exemption
Non-deductible and other items
Tax charge
HAMMERSON PLC ANNUAL REPORT 2016
146
146 HAMMERSON PLC ANNUAL REPORT 2016
Notes
2
12A
13A
2016
£m
322.8
(169.2)
(137.1)
16.5
3.3
17.6
(23.6)
2.0
2.6
1.9
2015
£m
731.6
(246.8)
(160.6)
324.2
65.7
(31.2)
(33.1)
–
0.2
1.6
6: Pensions (continued)
D: Principal actuarial assumptions used for defined benefit pension schemes
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 credit method. All defined benefit pension scheme assets are investments
Male aged 60 at 31 December
Male aged 40 at 31 December
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:
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
Tax charge
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 residual business in both the UK and France are subject to corporation tax as normal. The
Irish properties acquired in 2016 are held in a QIAIF which provides similar tax benefits to those of a UK REIT but which will subject future
distributions from Ireland to the UK to a 20% withholding tax.
B: Tax charge reconciliation
Profit multiplied by the UK corporation tax rate of 20% (2015: 20.25%)
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
Irish QIAIF tax exemption
Non-deductible and other items
Tax charge
146 HAMMERSON PLC ANNUAL REPORT 2016
2016
%
2.9
3.3
3.3
Age
88.1
89.9
2016
£m
19.7
102.0
2.1
2.5
126.3
(5.1)
121.2
0.4
3.5
(12.4)
112.7
2016
£m
0.2
1.7
1.9
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
Notes
2
12A
13A
2016
£m
322.8
(169.2)
(137.1)
16.5
3.3
17.6
(23.6)
2.0
2.6
1.9
2015
£m
731.6
(246.8)
(160.6)
324.2
65.7
(31.2)
(33.1)
–
0.2
1.6
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 2016, the total of such losses was £330 million (2015: £315 million) and £465 million (2015: £480 million) respectively, and
the potential tax effect of these was £53 million (2015: £57 million) and £79 million (2015: £86 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 2016, the total of such gains was £640 million
(2015: £290 million) and the potential tax effect before the offset of losses was £109 million (2015: £52 million).
If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2016 the value
of such completed properties was £258 million (2015: £nil). If these properties were to be sold without the benefit of the tax exemption the tax
arising would be £nil (2015: £nil).
9: Dividends
The proposed final dividend of 13.9 pence per share was recommended by the Board on 17 February 2017 and, subject to approval by
shareholders, is payable on 27 April 2017 in the UK and on 28 April 2017 for South African shareholders, to shareholders on the register at the
close of business on 17 March 2017. 4.9 pence per share will be paid as a PID, net of withholding tax at the basic rate (currently 20%) if applicable,
and 9.0 pence per share will be paid as a normal dividend. There will be no scrip alternative. The aggregate amount of the 2016 final dividend is
£110.3 million. This has been calculated using the total number of eligible shares outstanding at 31 December 2016.
The interim dividend of 10.1 pence per share was paid on 10 October 2016 as a PID, net of withholding tax where appropriate.
The total dividend for the year ended 31 December 2016 would be 24.0 pence per share (2015: 22.3 pence per share).
PID
pence
per share
Non-PID
pence
per share
Total
pence
per share
Equity
dividends
2016
£m
Equity
dividends
2015
£m
Current year
2016 final dividend
2016 interim dividend
Prior years
2015 final dividend
2015 interim dividend
2014 final dividend
4.9
10.1
15.0
6.41
9.5
15.9
9.0
–
9.0
6.4
–
6.4
13.9
10.1
24.0
12.8
9.5
22.3
Dividends as reported in the consolidated statement of changes in equity
2014 interim dividend withholding tax (paid 2015)
2015 interim dividend withholding tax (paid 2016)
2015 final dividend non-PID scrip alternative
2016 interim dividend withholding tax (paid 2017)
2016 interim dividend PID scrip alternative
Dividends paid as reported in the consolidated cash flow statement
1. If shareholders elected to receive the scrip alternative, this element of the dividend ceased to qualify as a PID.
–
79.8
–
–
100.3
–
–
180.1
–
11.2
(36.7)
(11.5)
(7.4)
135.7
–
74.4
90.8
165.2
9.8
(11.2)
–
–
–
163.8
HAMMERSON.COM
HAMMERSON.COM 147
147
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
10: Earnings and headline earnings per share and net asset value per share
The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and
these are included in the following tables B and D. Commentary on earnings and net asset value per share is provided in the Financial Review
on pages 43 to 52. Headline earnings per share has been calculated and presented in note 10C as required by the Johannesburg Stock Exchange
listing requirements.
A: Number of shares for earnings and headline earnings per share calculations
Basic, EPRA and Adjusted
Diluted
2016
Shares
million
789.0
790.7
2015
Shares
million
783.6
784.7
The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson
Employee Share Ownership Plan, which are treated as cancelled.
B: Earnings per share
Basic
Dilutive share options
Diluted
Basic
Adjustments:
Notes
2
Earnings
£m
317.3
–
317.3
2016
Pence
per share
40.2
(0.1)
40.1
Earnings
£m
726.8
–
726.8
2015
Pence
per share
92.8
(0.2)
92.6
317.3
40.2
726.8
92.8
Revaluation losses/(gains)
on properties:
Reported Group
Share of Property interests
Loss/(Gain) on the sale
of properties:
Debt and loan facility
cancellation costs:
Reported Group
Reported Group
Change in fair value
of derivatives:
Reported Group
Share of Property interests
Other adjustments:
Reported Group
(Gain)/Loss on other investments
Non-controlling interests
Premium outlets:
Revaluation gains on properties
Deferred tax
Other adjustments
2
2
2
7
7
12B
2
2
12B, 13B
12B, 13B
12B, 13B
Total adjustments
EPRA
Other adjustments:
Translation movement on intragroup funding loan
12B
Adjusted
24.7
(11.3)
13.4
24.0
0.4
3.5
(0.8)
2.7
(1.3)
0.3
(1.0)
(138.4)
14.3
(1.8)
(125.9)
(86.4)
230.9
(0.2)
230.7
3.1
(1.4)
1.7
3.0
0.1
0.4
(0.1)
0.3
(0.1)
–
(0.1)
(17.5)
1.8
(0.3)
(16.0)
(11.0)
29.2
–
29.2
(245.1)
(122.4)
(367.5)
(31.3)
(15.6)
(46.9)
(14.9)
(1.9)
13.9
1.8
1.1
(1.0)
0.1
1.4
0.3
1.7
0.1
(0.1)
–
0.2
–
0.2
(174.1)
(22.2)
27.6
(0.6)
(147.1)
(513.8)
213.0
(2.1)
210.9
3.5
(0.1)
(18.8)
(65.6)
27.2
(0.3)
26.9
HAMMERSON PLC ANNUAL REPORT 2016
148
148 HAMMERSON PLC ANNUAL REPORT 2016
Notes to the accounts continued
10: Earnings and headline earnings per share and net asset value per share
The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and
these are included in the following tables B and D. Commentary on earnings and net asset value per share is provided in the Financial Review
on pages 43 to 52. Headline earnings per share has been calculated and presented in note 10C as required by the Johannesburg Stock Exchange
A: Number of shares for earnings and headline earnings per share calculations
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.
listing requirements.
Basic, EPRA and Adjusted
Diluted
B: Earnings per share
Dilutive share options
Basic
Diluted
Basic
Adjustments:
Earnings
£m
per share
Notes
2
317.3
40.2
726.8
92.8
2016
Shares
million
789.0
790.7
2015
Shares
million
783.6
784.7
Earnings
£m
726.8
–
726.8
2015
Pence
per share
92.8
(0.2)
92.6
(245.1)
(122.4)
(367.5)
(31.3)
(15.6)
(46.9)
(14.9)
(1.9)
13.9
1.8
1.1
(1.0)
0.1
1.4
0.3
1.7
27.6
(0.6)
(147.1)
(513.8)
213.0
(2.1)
210.9
0.1
(0.1)
–
0.2
–
0.2
3.5
(0.1)
(18.8)
(65.6)
27.2
(0.3)
26.9
2016
Pence
40.2
(0.1)
40.1
3.1
(1.4)
1.7
3.0
0.1
0.4
(0.1)
0.3
(0.1)
–
(0.1)
(17.5)
1.8
(0.3)
(16.0)
(11.0)
29.2
–
29.2
2
2
2
7
7
2
2
12B
12B, 13B
12B, 13B
12B, 13B
317.3
–
317.3
24.7
(11.3)
13.4
24.0
0.4
3.5
(0.8)
2.7
(1.3)
0.3
(1.0)
(138.4)
14.3
(1.8)
(125.9)
(86.4)
230.9
(0.2)
230.7
Revaluation losses/(gains)
Reported Group
on properties:
Share of Property interests
Loss/(Gain) on the sale
of properties:
Reported Group
Debt and loan facility
cancellation costs:
Reported Group
Change in fair value
of derivatives:
Reported Group
Share of Property interests
Other adjustments:
Reported Group
(Gain)/Loss on other investments
Non-controlling interests
Deferred tax
Other adjustments
Total adjustments
EPRA
Adjusted
Other adjustments:
Translation movement on intragroup funding loan
12B
Premium outlets:
Revaluation gains on properties
(174.1)
(22.2)
C: Headline earnings per share
Profit for the year attributable to equity shareholders
Revaluation losses/(gains) on properties: Reported Group and share of Property interests
Loss/(Gain) on sale of properties: Reported Group
(Gain)/Loss on other investments: Reported Group
Non-controlling interests
Revaluation gains on properties: Premium outlets
Deferred tax: Premium outlets
Loss on sale of properties: Premium outlets
Translation movements on intragroup funding loan
Headline earnings
Reconciliation of headline earnings to adjusted earnings
Headline earnings as above
Debt and loan facility cancellation costs: Reported Group
Change in fair value of derivatives: Reported Group and share of Property interests
Change in fair value of derivatives: Premium outlets
Change in fair value of participative loans – revaluation movement: Premium outlets
Loan facility costs written off: Premium outlets
Adjusted earnings
Basic headline earnings per share (pence)
Diluted headline earnings per share (pence)
D: 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
– Share of Property interests
EPRA NNNAV
Fair value adjustment to borrowings
Deferred tax
Fair value of derivatives
– Reported Group
– Share of Property interests
Premium outlets
– Fair value of derivatives
– Deferred tax
– Goodwill as a result of deferred tax
Equity
shareholders’
funds
£m
5,775.6
Notes
–
1.1
Shares
million
793.2
(0.9)
1.7
5,776.7
794.0
20I
(316.1)
–
(316.1)
5,460.6
316.1
0.5
20I
(19.3)
–
(19.3)
3.2
160.4
(57.0)
106.6
12C, 13D
12C, 13D
12C, 13D
EPRA NAV
5,864.5
794.0
Notes
2
10B
10B
10B
10B
10B
10B
12B
12B
10B
10B
12B, 13B
13B
13B
10B
2016
Net asset
value
per share
£
Equity
shareholders’
funds
£m
7.28
5,517.3
2016
Earnings
£m
317.3
13.4
24.0
(1.3)
0.3
(138.4)
14.3
0.1
(0.2)
229.5
229.5
0.4
2.7
14.5
(16.6)
0.2
230.7
29.1p
29.0p
Shares
million
784.4
(0.6)
1.0
n/a
n/a
7.28
–
1.1
5,518.4
784.8
(0.40)
(225.4)
–
(0.1)
(0.40)
(225.5)
6.88
0.40
–
(0.02)
–
(0.02)
–
0.20
(0.07)
0.13
7.39
5,292.9
225.5
0.5
(13.8)
0.9
(12.9)
3.1
113.6
(50.0)
66.7
5,572.7
784.8
2015
Earnings
£m
726.8
(367.5)
(14.9)
1.4
0.3
(174.1)
27.6
0.8
(2.1)
198.3
198.3
13.9
0.1
9.7
(12.6)
1.5
210.9
25.3p
25.3p
2015
Net asset
value
per share
£
7.03
n/a
n/a
7.03
(0.29)
–
(0.29)
6.74
0.29
–
(0.02)
–
(0.02)
–
0.14
(0.05)
0.09
7.10
148 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 149
149
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
11: Investment and development properties
Balance at 1 January
Exchange adjustment
Additions
– Capital expenditure
– Asset acquisitions
Transfer (to)/from investment in joint ventures
Disposals
Transfers
Capitalised interest
Revaluation
Balance at 31 December
Investment
properties
Valuation
£m
Development
properties
Valuation
£m
2016
Total
Valuation
£m
4,418.9
268.0
233.2
4,652.1
0.3
268.3
57.9
465.2
523.1
(221.7)
(669.1)
303.9
–
(61.3)
122.0
108.8
230.8
–
–
(303.9)
5.1
36.6
179.9
574.0
753.9
(221.7)
(669.1)
–
5.1
(24.7)
Investment
properties
Valuation
£m
4,273.2
(82.9)
73.3
35.2
108.5
11.0
(169.5)
59.7
0.4
218.5
4,561.8
202.1
4,763.9
4,418.9
Development
properties
Valuation
£m
154.1
(1.7)
100.9
8.5
109.4
–
(0.5)
(59.7)
5.0
26.6
233.2
2015
Total
Valuation
£m
4,427.3
(84.6)
174.2
43.7
217.9
11.0
(170.0)
–
5.4
245.1
4,652.1
Properties are stated at fair value as at 31 December 2016, 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. Valuations have been prepared in accordance with the RICS Valuation – Professional
Standards 2014 based on certain assumptions as set out in note 1. 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.
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 138.
As noted in ‘Significant judgements and key estimates’ on page 136, 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 rental and valuation data tables on pages 179 and 182 and the valuation change analysis in the Financial Review on pages 48 and 49. 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 valuation of 5% change
in estimated rental value (ERV)
Investment
properties
valuation
£m
4,561.8
Decrease
£m
347.4
Increase
£m
(150.0)
Increase
£m
327.6
Decrease
£m
(155.8)
The total amount of interest included in development properties at 31 December 2016 was £nil (2015: £4.9 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 2016 was 3.1% (2015: 3.8%). At 31 December 2016 the historic cost of investment and development properties was £3,841.9 million
(2015: £3,830.0 million).
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 acquired a 50% interest in the property for £175 million in December 2016. On 30 December 2016 the Group sold its
interest in Westquay Watermark, Southampton to The West Quay Limited Partnership, a joint venture in which the Group has a 50% interest.
At 31 December 2016, the investment properties shown above included property with a value of £75.6 million (2015: £nil) held within a joint
operation which is proportionally consolidated. See note 12D on page 156 for further details.
Analysis of properties by tenure
Balance at 31 December 2016
Balance at 31 December 2015
HAMMERSON PLC ANNUAL REPORT 2016
150
150 HAMMERSON PLC ANNUAL REPORT 2016
Freehold
£m
Long leasehold
£m
3,499.2
3,443.1
1,264.7
1,209.0
Total
£m
4,763.9
4,652.1
Notes to the accounts continued
11: Investment and development properties
Balance at 1 January
Exchange adjustment
Additions
– Capital expenditure
– Asset acquisitions
Disposals
Transfers
Capitalised interest
Revaluation
Balance at 31 December
Transfer (to)/from investment in joint ventures
Investment
Development
properties
Valuation
properties
Valuation
£m
£m
2016
Total
Valuation
£m
4,418.9
268.0
233.2
4,652.1
0.3
268.3
57.9
465.2
523.1
(221.7)
(669.1)
303.9
–
(61.3)
122.0
108.8
230.8
–
–
(303.9)
5.1
36.6
179.9
574.0
753.9
(221.7)
(669.1)
–
5.1
(24.7)
Investment
properties
Valuation
£m
4,273.2
(82.9)
73.3
35.2
108.5
11.0
(169.5)
59.7
0.4
218.5
Development
properties
Valuation
£m
154.1
(1.7)
100.9
8.5
109.4
–
(0.5)
(59.7)
5.0
26.6
233.2
2015
Total
Valuation
£m
4,427.3
(84.6)
174.2
43.7
217.9
11.0
(170.0)
–
5.4
245.1
4,652.1
4,561.8
202.1
4,763.9
4,418.9
Properties are stated at fair value as at 31 December 2016, 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. Valuations have been prepared in accordance with the RICS Valuation – Professional
Standards 2014 based on certain assumptions as set out in note 1. 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.
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 138.
As noted in ‘Significant judgements and key estimates’ on page 136, 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 rental and valuation data tables on pages 179 and 182 and the valuation change analysis in the Financial Review on pages 48 and 49. 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
Impact on valuation of 5% change
in nominal equivalent yield
in estimated rental value (ERV)
Investment
properties
valuation
£m
4,561.8
Decrease
£m
347.4
Increase
£m
(150.0)
Increase
£m
327.6
Decrease
£m
(155.8)
The total amount of interest included in development properties at 31 December 2016 was £nil (2015: £4.9 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 2016 was 3.1% (2015: 3.8%). At 31 December 2016 the historic cost of investment and development properties was £3,841.9 million
(2015: £3,830.0 million).
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 acquired a 50% interest in the property for £175 million in December 2016. On 30 December 2016 the Group sold its
interest in Westquay Watermark, Southampton to The West Quay Limited Partnership, a joint venture in which the Group has a 50% interest.
At 31 December 2016, the investment properties shown above included property with a value of £75.6 million (2015: £nil) held within a joint
operation which is proportionally consolidated. See note 12D on page 156 for further details.
Analysis of properties by tenure
Balance at 31 December 2016
Balance at 31 December 2015
150 HAMMERSON PLC ANNUAL REPORT 2016
Freehold
Long leasehold
£m
£m
3,499.2
3,443.1
1,264.7
1,209.0
Total
£m
4,763.9
4,652.1
12: Investment in joint ventures
As at 31 December 2016, 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
176 and 177.
United Kingdom
Bishopsgate Goodsyard Regeneration Limited
Brent Cross Shopping Centre/ Brent South Shopping Park
Bristol Alliance Limited Partnership
Partner
Principal property1
Group share
%
Ballymore Properties
The Goodsyard
50
Standard Life
AXA Real Estate
Brent Cross
41.2/40.6
Cabot Circus
Croydon Limited Partnership/Whitgift Limited Partnership
Westfield
Centrale/Whitgift
Grand Central Limited Partnership
Retail Property Holdings Limited/The Silverburn Unit Trust
The Bull Ring Limited Partnership
The Oracle Limited Partnership
The West Quay Limited Partnership
VIA Limited Partnership
Ireland
Triskelion Property Holding Designated Activity Company
Dundrum Retail Limited Partnership
Dundrum Car Park Limited Partnership
France
SCI ESQ
SCI RC Aulnay 1 and SCI RC Aulnay 2
CPPIB
CPPIB
TH Real Estate, CPPIB
ADIA
GIC
Grand Central
Silverburn
Bullring
The Oracle
Westquay
APG, Meyer Bergman, Value Retail
European outlet centres
Allianz
Allianz
Allianz
Loan portfolio
Dundrum
Dundrum
Allianz
Espace Saint-Quentin
Client of Rockspring Property
Investment Managers
O’Parinor
50
50
50
50
50
50
50
47
50
50
50
25
25
1. The names of the principal properties operated by each partnership have been used in the summary income statements and balance sheets in note 12A. The Irish loan
portfolio and the Dundrum properties are presented together as the ‘Irish portfolio’. The Goodsyard, European outlet centres and Espace Saint-Quentin are presented
together as ‘Other’.
The Reported Group’s investment in joint ventures at 31 December 2016 was £3,736.7 million (2015: £3,213.6 million). An analysis of the
movements in the year is provided in note 12D on page 156.
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.
HAMMERSON.COM
HAMMERSON.COM 151
151
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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 2016
See page 154 for footnotes.
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 payable1
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
Grand
Central
£m
The Oracle
£m
Westquay
£m
41.2/40.6
46.5
42.2
–
42.2
–
(4.2)
38.0
–
–
–
–
38.0
–
–
38.0
15.6
–
50
38.7
32.7
–
32.7
–
7.9
40.6
–
–
(0.8)
(0.8)
39.8
–
–
39.8
19.9
11.8
50
59.4
52.7
(0.1)
52.6
–
24.6
77.2
–
–
–
–
50
0.6
0.2
–
0.2
–
(3.1)
(2.9)
–
–
–
–
50
32.8
27.5
–
27.5
–
2.3
29.8
–
–
–
–
77.2
(2.9)
29.8
–
–
77.2
38.6
23.2
–
–
(2.9)
(1.4)
–
–
–
29.8
14.9
3.5
50
29.7
23.3
–
23.3
–
(0.3)
23.0
–
–
(0.3)
(0.3)
22.7
–
–
22.7
11.4
0.5
Share of assets and liabilities of joint ventures as at 31 December 2016
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 Hammerson2
Total investment in joint ventures2
HAMMERSON PLC ANNUAL REPORT 2016
152
152 HAMMERSON PLC ANNUAL REPORT 2016
Brent Cross
£m
Cabot Circus
£m
Bullring
£m
Grand
Central
£m
The Oracle
£m
Westquay
£m
1,002.4
629.7
1,229.8
346.2
667.4
660.6
–
–
–
14.5
–
–
–
2.8
–
–
–
4.2
1,002.4
644.2
1,229.8
349.0
667.4
664.8
16.4
0.7
17.1
5.4
5.9
11.3
7.9
20.9
28.8
8.4
3.2
11.6
5.6
13.0
18.6
6.2
9.9
16.1
(19.3)
(13.8)
(20.4)
(9.8)
(242.1)
(14.1)
–
–
–
–
–
–
(19.3)
(13.8)
(20.4)
(9.8)
(242.1)
(14.1)
–
–
(1.2)
–
(1.2)
999.0
409.1
–
–
(14.5)
(0.6)
–
(15.1)
–
–
(1.4)
–
(1.4)
626.6
1,236.8
313.3
618.4
–
–
–
(2.8)
–
–
(2.8)
348.0
174.0
–
409.1
313.3
618.4
174.0
–
–
(1.0)
(0.1)
(1.1)
442.8
221.4
115.6
337.0
–
(4.2)
(680.2)
–
(684.4)
(17.6)
(8.8)
339.7
330.9
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 2016
Hammerson share of profit for the year
Hammerson share of distributions payable1
Share of assets and liabilities of joint ventures as at 31 December 2016
Operating profit before other net gains/(losses)
42.2
32.7
27.5
23.3
(4.2)
38.0
7.9
40.6
(3.1)
(2.9)
2.3
29.8
(0.3)
23.0
See page 154 for footnotes.
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
Non-current assets
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 Hammerson2
Total investment in joint ventures2
152 HAMMERSON PLC ANNUAL REPORT 2016
£m
41.2/40.6
46.5
42.2
38.0
38.0
15.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
50
38.7
32.7
–
–
–
–
–
–
(0.8)
(0.8)
39.8
39.8
19.9
11.8
–
14.5
5.4
5.9
11.3
–
–
–
–
£m
50
32.8
27.5
Grand
Central
£m
50
0.6
0.2
0.2
–
–
£m
50
59.4
52.7
(0.1)
52.6
24.6
77.2
77.2
(2.9)
29.8
77.2
38.6
23.2
(2.9)
(1.4)
29.8
14.9
3.5
–
–
–
–
–
–
–
–
–
–
–
–
2.8
8.4
3.2
11.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
50
29.7
23.3
–
–
–
–
–
–
(0.3)
(0.3)
22.7
22.7
11.4
0.5
–
4.2
6.2
9.9
16.1
–
–
–
(4.2)
(680.2)
(684.4)
(17.6)
(8.8)
339.7
330.9
16.4
0.7
17.1
7.9
20.9
28.8
5.6
13.0
18.6
(19.3)
(13.8)
(20.4)
(9.8)
(242.1)
(14.1)
(19.3)
(13.8)
(20.4)
(9.8)
(242.1)
(14.1)
(1.2)
(1.4)
(14.5)
(0.6)
(2.8)
(1.2)
(15.1)
(1.4)
(2.8)
999.0
409.1
626.6
1,236.8
313.3
618.4
348.0
174.0
–
409.1
313.3
618.4
174.0
(1.0)
(0.1)
(1.1)
442.8
221.4
115.6
337.0
Brent Cross
Cabot Circus
Bullring
The Oracle
Westquay
Silverburn
£m
Centrale/Whitgift
£m
Irish
portfolio
£m
O‘Parinor
£m
50
21.3
18.8
(0.1)
18.7
–
(17.1)
1.6
–
–
–
–
1.6
(1.4)
–
0.2
0.1
–
50
26.0
15.6
(0.1)
15.5
–
(0.2)
15.3
–
–
–
–
15.3
–
–
15.3
7.6
–
50
27.9
25.4
(0.3)
25.1
–
5.1
30.2
–
–
34.6
34.6
64.8
–
–
64.8
32.4
8.2
25
21.2
18.0
(0.1)
17.9
–
9.3
27.2
3.1
–
(6.0)
(2.9)
24.3
(0.2)
–
24.1
6.0
–
Other
£m
n/a
47.3
35.1
(4.8)
30.3
–
41.1
71.4
1.5
–
(4.9)
(3.4)
68.0
(1.0)
(10.0)
57.0
24.1
0.6
351.4
291.5
(5.5)
286.0
–
65.4
351.4
4.6
–
22.6
27.2
378.6
(2.6)
(10.0)
366.0
169.2
47.8
Total
2016
£m
Property joint
ventures
£m
VIA Outlets
£m
Hammerson share
145.9
122.9
(0.4)
122.5
–
10.7
133.2
0.8
–
15.3
16.1
149.3
(0.8)
–
47
16.1
11.2
(2.3)
8.9
(0.1)
18.4
27.2
0.7
0.2
(2.2)
(1.3)
25.9
(0.5)
(4.7)
Total
2016
£m
162.0
134.1
(2.7)
131.4
(0.1)
29.1
160.4
1.5
0.2
13.1
14.8
175.2
(1.3)
(4.7)
148.5
20.7
169.2
Hammerson share
Brent Cross
Cabot Circus
£m
£m
Bullring
£m
The Oracle
Westquay
£m
£m
Grand
Central
£m
Silverburn
£m
Centrale/Whitgift
£m
Irish
portfolio
£m
O‘Parinor
£m
Other
£m
Total
2016
£m
Property joint
ventures
£m
VIA Outlets
£m
Total
2016
£m
Investment and development properties
1,002.4
629.7
1,229.8
346.2
667.4
660.6
356.2
304.2
1,500.2
456.0
1,004.1
8,156.8
3,490.1
302.1
3,792.2
1,002.4
644.2
1,229.8
349.0
667.4
664.8
356.2
304.2
1,500.2
456.0
1,004.1
8,178.3
3,500.9
305.6
3,806.5
–
–
–
–
–
–
–
–
–
–
–
21.5
–
10.8
3.5
–
3.5
10.8
5.1
9.9
15.0
(9.4)
–
(9.4)
–
–
–
–
–
361.8
180.9
–
180.9
4.2
13.0
17.2
119.6
25.0
144.6
(22.2)
(120.9)
–
–
(22.2)
(120.9)
–
–
(229.0)
–
(229.0)
70.2
35.1
114.5
149.6
–
–
(0.5)
–
(0.5)
1,523.4
761.7
54.1
815.8
11.1
3.7
14.8
(6.5)
(187.0)
(193.5)
–
–
(31.3)
–
(31.3)
246.0
61.5
6.7
68.2
21.3
47.2
68.5
(30.6)
(4.5)
(35.1)
(151.2)
–
(177.7)
(41.7)
211.2
152.4
363.6
(509.1)
(191.5)
(700.6)
(151.2)
(21.5)
(1,122.9)
(41.8)
(370.6)
(1,337.4)
666.9
281.8
57.7
339.5
6,503.9
3,048.4
688.3
3,736.7
100.2
54.8
155.0
(78.4)
(46.7)
(125.1)
–
(10.8)
(5.3)
–
(16.1)
8.5
18.7
27.2
(12.9)
(2.1)
(15.0)
(70.9)
–
(5.4)
(19.5)
(95.8)
108.7
73.5
182.2
(91.3)
(48.8)
(140.1)
(70.9)
(10.8)
(10.7)
(19.5)
(111.9)
3,514.7
222.0
3,736.7
HAMMERSON.COM
HAMMERSON.COM 153
153
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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 2015
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 payable1
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)
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
(21.7)
–
(21.7)
–
–
(1.0)
–
(1.0)
972.5
–
14.6
632.6
5.8
2.2
8.0
(13.3)
–
(13.3)
–
(14.6)
(0.3)
–
(14.9)
612.4
–
–
–
–
–
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
(19.7)
(241.4)
(10.7)
–
–
–
(19.7)
(241.4)
(10.7)
–
–
(1.3)
–
(1.3)
–
–
(0.6)
(0.1)
(0.7)
1,201.4
430.5
–
(4.2)
(597.5)
–
(601.7)
(34.8)
(17.4)
298.4
281.0
Hammerson share of net assets/(liabilities)
Balance due to Hammerson2
Total investment in joint ventures2
1. In addition to the distributions payable, the Group received interest from its joint ventures of £38.6 million (2015: £29.3 million). See note 28A.
2. 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
–
600.7
–
306.2
115.6
330.8
–
395.6
600.7
306.2
395.6
215.2
equity have been included within other payables as a liability of the joint venture, and Hammerson’s interest has been shown separately.
HAMMERSON PLC ANNUAL REPORT 2016
154
154 HAMMERSON PLC ANNUAL REPORT 2016
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 2015
Hammerson share of profit for the year
Hammerson share of distributions payable1
Share of assets and liabilities of joint ventures as at 31 December 2015
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
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 Hammerson2
Total investment in joint ventures2
154 HAMMERSON PLC ANNUAL REPORT 2016
Brent Cross
Cabot Circus
Bullring
The Oracle
Westquay
41.2/40.6
£m
50
56.6
49.6
(0.1)
49.5
107.2
156.7
156.7
156.7
78.3
20.3
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
47.6
44.1
44.1
(6.1)
38.0
38.0
38.0
15.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
980.8
13.7
0.7
14.4
(1.0)
(1.0)
972.5
395.6
–
395.6
£m
50
37.9
32.5
32.5
43.3
75.8
–
–
–
–
–
–
(0.8)
(0.8)
75.0
75.0
37.5
19.2
–
14.6
632.6
5.8
2.2
8.0
–
–
–
(14.6)
(0.3)
(14.9)
612.4
306.2
–
306.2
£m
50
32.3
26.1
26.1
41.9
68.0
(0.1)
(0.1)
67.9
67.9
34.0
3.0
–
–
–
–
–
–
–
–
–
–
–
£m
50
30.7
25.0
25.0
20.1
45.1
–
–
–
–
–
–
(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
£m
£m
£m
£m
£m
980.8
618.0
1,201.8
658.8
555.4
1,201.8
658.8
559.6
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)
(1.3)
(1.3)
1,201.4
600.7
–
600.7
(0.6)
(0.1)
(0.7)
430.5
215.2
115.6
330.8
1. In addition to the distributions payable, the Group received interest from its joint ventures of £38.6 million (2015: £29.3 million). See note 28A.
2. 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.
Silverburn
£m
Centrale/Whitgift
£m
Irish
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
Silverburn
£m
Centrale/Whitgift
£m
Irish
portfolio
£m
O‘Parinor
£m
Other
£m
Total
2015
£m
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
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)
Hammerson share
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)
233.7
13.1
246.8
Hammerson share
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)
–
–
(194.8)
(223.2)
(1,365.6)
–
–
–
(194.8)
(223.2)
(1,365.6)
184.6
92.3
97.4
189.7
61.4
30.7
111.6
142.3
6.6
3.3
690.2
693.5
8.6
2.6
11.2
(5.2)
(161.0)
(166.2)
–
–
(33.0)
–
(33.0)
197.2
49.3
6.6
55.9
12.0
21.2
33.2
(19.5)
–
(19.5)
(72.9)
–
(162.0)
(13.5)
(248.4)
403.8
164.1
53.8
217.9
1,442.1
84.3
1,526.4
(365.7)
(161.0)
(526.7)
(72.9)
(18.8)
(2,579.3)
(13.6)
(2,684.6)
4,035.6
1,840.0
1,373.6
3,213.6
726.8
32.4
759.2
(67.2)
(40.2)
(107.4)
–
(9.4)
(4.1)
–
(13.5)
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)
148.6
3.0
–
151.6
3.8
7.9
11.7
(7.7)
–
(7.7)
(34.2)
–
(4.3)
(6.3)
(44.8)
3,102.8
110.8
3,213.6
HAMMERSON.COM
HAMMERSON.COM 155
155
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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 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
£m
VIA Outlets
£m
148.5
–
(10.7)
(0.8)
–
–
(11.5)
137.0
20.7
0.1
(18.4)
(0.7)
(0.2)
4.7
(14.5)
6.2
Total
2016
£m
169.2
0.1
(29.1)
(1.5)
(0.2)
4.7
(26.0)
143.2
Property joint
ventures
£m
VIA Outlets
£m
233.7
–
(122.1)
(1.0)
–
–
(123.1)
110.6
13.1
0.8
(10.4)
2.2
(2.1)
2.5
(7.0)
6.1
Total
2015
£m
246.8
0.8
(132.5)
1.2
(2.1)
2.5
(130.1)
116.7
C. Reconciliation to adjusted investment in joint ventures
Investment in joint ventures
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
Total adjustments
Property joint
ventures
£m
VIA Outlets
£m
Total
2016
£m
Property joint
ventures
£m
VIA Outlets
£m
Total
2015
£m
3,514.7
222.0
3,736.7
3,102.8
110.8
3,213.6
–
–
–
–
3.5
19.5
(3.5)
19.5
3.5
19.5
(3.5)
19.5
0.9
–
–
0.9
Adjusted investment in joint ventures
3,514.7
241.5
3,756.2
3,103.7
D. Reconciliation of movements in investment in joint ventures
Balance at 1 January
Acquisitions1
Irish loan portfolio transferred to Reported Group2
Advances on conversion of Irish loan portfolio to property assets3
Transfer of investment property from/(to) Reported Group4
Share of results of joint ventures
Distributions and other receivables
Advances
Other movements
Foreign exchange translation differences
Balance at 31 December
3.5
6.3
(3.0)
6.8
117.6
2016
£m
3,213.6
–
(82.8)
91.9
221.7
169.2
(89.6)
63.1
4.6
145.0
3,736.7
4.4
6.3
(3.0)
7.7
3,221.3
2015
£m
2,341.5
690.2
–
–
(11.0)
246.8
(92.0)
45.4
1.6
(8.9)
3,213.6
1. 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 consisted primarily of interest-bearing loans which at 31 December 2015 were included within other current assets in note 12A on page
155. The majority of these loans were converted into property assets in 2016. It is anticipated that the remaining loans of £54.1 million, which are included within other current
assets in note 12A on page 153, will be converted to property assets in 2017.
2. In 2016, the element of the loan portfolio relating to the Ilac Centre, Dublin Central and the Irish development sites was transferred to the Reported Group prior to conversion
to property assets. These properties are included within asset acquisitions in note 11 on page 150. The Reported Group has a 50% interest in the Ilac Centre which is held within
a joint operation and proportionally consolidated, the other assets are wholly owned by the Reported Group.
3. Further advances were made by the Reported Group to the Irish joint venture in 2016 to fund the conversion of the loan portfolio relating to Dundrum Town Centre, which is
now owned by Dundrum Retail Limited Partnership and Dundrum Car Park Limited Partnership.
4. In 2016, the Group sold 50% stakes in Grand Central, Birmingham and Westquay Watermark, Southampton for £175 million and £47 million respectively. The total is shown
separately in note 11 on page 150 as a transfer to investment in joint ventures.
HAMMERSON PLC ANNUAL REPORT 2016
156
156 HAMMERSON PLC ANNUAL REPORT 2016
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 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
£m
148.5
(10.7)
(0.8)
–
–
–
(11.5)
137.0
£m
20.7
0.1
(18.4)
(0.7)
(0.2)
4.7
(14.5)
6.2
Total
2016
£m
169.2
0.1
(29.1)
(1.5)
(0.2)
4.7
(26.0)
143.2
Property joint
ventures
£m
233.7
(122.1)
(1.0)
–
–
–
(123.1)
110.6
C. Reconciliation to adjusted investment in joint ventures
Investment in joint ventures
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
Total adjustments
3,514.7
222.0
3,736.7
110.8
3,213.6
Property joint
ventures
VIA Outlets
£m
£m
–
–
–
–
3.5
19.5
(3.5)
19.5
Total
2016
£m
3.5
19.5
(3.5)
19.5
Property joint
ventures
£m
3,102.8
0.9
–
–
0.9
Adjusted investment in joint ventures
3,514.7
241.5
3,756.2
3,103.7
3,221.3
D. Reconciliation of movements in investment in joint ventures
Balance at 1 January
Acquisitions1
Irish loan portfolio transferred to Reported Group2
Advances on conversion of Irish loan portfolio to property assets3
Transfer of investment property from/(to) Reported Group4
Share of results of joint ventures
Distributions and other receivables
Advances
Other movements
Foreign exchange translation differences
Balance at 31 December
1. 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 consisted primarily of interest-bearing loans which at 31 December 2015 were included within other current assets in note 12A on page
155. The majority of these loans were converted into property assets in 2016. It is anticipated that the remaining loans of £54.1 million, which are included within other current
assets in note 12A on page 153, will be converted to property assets in 2017.
2. In 2016, the element of the loan portfolio relating to the Ilac Centre, Dublin Central and the Irish development sites was transferred to the Reported Group prior to conversion
to property assets. These properties are included within asset acquisitions in note 11 on page 150. The Reported Group has a 50% interest in the Ilac Centre which is held within
a joint operation and proportionally consolidated, the other assets are wholly owned by the Reported Group.
3. Further advances were made by the Reported Group to the Irish joint venture in 2016 to fund the conversion of the loan portfolio relating to Dundrum Town Centre, which is
now owned by Dundrum Retail Limited Partnership and Dundrum Car Park Limited Partnership.
4. In 2016, the Group sold 50% stakes in Grand Central, Birmingham and Westquay Watermark, Southampton for £175 million and £47 million respectively. The total is shown
separately in note 11 on page 150 as a transfer to investment in joint ventures.
VIA Outlets
£m
13.1
0.8
(10.4)
2.2
(2.1)
2.5
(7.0)
6.1
VIA Outlets
£m
3.5
6.3
(3.0)
6.8
117.6
2016
£m
3,213.6
–
(82.8)
91.9
221.7
169.2
(89.6)
63.1
4.6
145.0
3,736.7
Total
2015
£m
246.8
0.8
(132.5)
1.2
(2.1)
2.5
(130.1)
116.7
Total
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
13: Investment in associates
At 31 December 2016, 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 is included with the Group’s share of Property interests when presenting figures on a proportionally consolidated basis.
Aggregated income and investment summaries of our interest in premium outlets, which includes VR and Hammerson’s investment in VIA
Outlets, which is accounted for as a joint venture (see note 11), are provided in tables 104 and 105 of the Additional Disclosures on page 184.
A: Share of results of associates
Gross rental income
Net rental income
Administration and other expenses
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
2016
Total
Hammerson
share
£m
86.1
57.8
100%
£m
310.5
214.6
(90.1)
(22.4)
VR
Hammerson
share
£m
84.6
56.5
100%
£m
295.7
201.4
(90.1)
(22.4)
111.3
349.6
460.9
(49.5)
(61.5)
–
–
349.9
(13.7)
(36.7)
299.5
34.1
120.0
154.1
(12.3)
(15.2)
16.6
4.7
147.9
(3.1)
(9.6)
100%
£m
14.8
13.2
–
13.2
6.4
19.6
–
–
–
–
19.6
–
–
Nicetoile
Hammerson
share
£m
1.5
1.3
–
1.3
0.6
1.9
–
–
–
–
124.5
356.0
480.5
(49.5)
(61.5)
–
–
1.9
369.5
–
–
1.9
(13.7)
(36.7)
319.1
135.2
19.6
35.4
120.6
156.0
(12.3)
(15.2)
16.6
4.7
149.8
(3.1)
(9.6)
137.1
2016
Total
B: Reconciliation to adjusted earnings
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
Adjusted earnings of associates
VR
Hammerson
share
£m
135.2
(120.0)
15.2
(16.6)
0.2
9.6
(111.6)
23.6
100%
£m
299.5
(349.6)
61.5
–
2.0
36.7
(249.4)
50.1
100%
£m
19.6
(6.4)
–
–
–
–
(6.4)
13.2
Nicetoile
Hammerson
share
£m
1.9
100%
£m
319.1
Hammerson
share
£m
137.1
100%
£m
440.4
(0.6)
(356.0)
(120.6)
(536.9)
15.2
34.3
–
–
–
–
61.5
–
2.0
36.7
(16.6)
0.2
9.6
–
3.7
106.3
(12.6)
1.5
25.1
(0.6)
(255.8)
(112.2)
(392.6)
(142.5)
1.3
63.3
24.9
47.8
18.1
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
2015
Total
Hammerson
share
£m
74.0
56.8
(27.4)
29.4
164.0
193.4
(13.1)
(7.5)
12.6
2.6
188.0
(2.3)
(25.1)
160.6
2015
Total
Hammerson
share
£m
160.6
(164.0)
7.5
When aggregated, the Group’s share of VR’s adjusted earnings for the year ended 31 December 2016 amounted to 47.1% (2015: 46.3%).
156 HAMMERSON PLC ANNUAL REPORT 2016
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HAMMERSON.COM 157
157
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
13: Investment in associates (continued)
C: Share of assets and liabilities of associates
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 loans1
Investment in associates
VR
Hammerson
share
£m
77.0
100%
£m
–
Nicetoile
Hammerson
share
£m
–
100%
£m
–
2016
Total
Hammerson
share
£m
77.0
100%
£m
–
4,095.9
1,387.3
277.3
27.7
4,373.2
1,415.0
182.0
44.2
–
–
182.0
44.2
100%
£m
–
3,566.1
134.7
4,277.9
1,508.5
277.3
27.7
4,555.2
1,536.2
3,700.8
52.6
169.4
222.0
16.7
53.0
69.7
3.8
13.6
17.4
0.4
1.4
1.8
56.4
183.0
239.4
17.1
54.4
71.5
187.5
193.6
381.1
2015
Total
Hammerson
share
£m
65.4
1,118.3
30.3
1,214.0
12.7
53.5
66.2
4,499.9
1,578.2
294.7
29.5
4,794.6
1,607.7
4,081.9
1,280.2
(74.3)
(1,382.6)
(305.5)
(545.6)
(2,233.7)
(2,308.0)
2,191.9
(44.3)
(465.3)
(82.3)
(140.9)
(688.5)
(732.8)
845.4
113.7
959.1
(2.1)
–
(2.4)
–
(2.4)
(4.5)
(0.2)
(76.4)
(44.5)
(132.7)
–
(1,382.6)
(465.3)
(1,092.6)
(0.3)
(307.9)
–
(545.6)
(82.6)
(140.9)
(400.3)
(438.8)
(0.3)
(2,236.1)
(688.8)
(1,931.7)
(0.5)
(2,312.5)
(733.3)
(2,064.4)
290.2
29.0
2,482.1
–
29.0
2,017.5
874.4
113.7
988.1
(52.9)
(339.5)
(92.8)
(107.3)
(539.6)
(592.5)
687.7
80.3
768.0
1. The Group’s total investment in associates includes long-term debt which in substance forms part of the Group’s investment. These ‘participative loans’ are not repayable
in the foreseeable future and represent the Group’s investor share of La Roca Village and Las Rozas Village.
The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £18.9 million
(2015: £19.0 million) which are included within non-current liabilities in note 22.
At 31 December 2016, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 40.2% (2015: 38.2%).
D: Reconciliation to adjusted investment in associates
Investment in associates
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
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
959.1
(0.3)
140.9
(53.5)
87.1
Nicetoile
£m
29.0
–
–
–
–
2016
£m
988.1
(0.3)
140.9
(53.5)
87.1
1,046.2
29.0
1,075.2
VR
£m
743.8
40.8
135.2
(17.0)
(0.3)
56.6
959.1
Nicetoile
£m
24.2
–
1.9
–
–
2.9
29.0
2016
£m
768.0
40.8
137.1
(17.0)
(0.3)
59.5
988.1
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
HAMMERSON PLC ANNUAL REPORT 2016
158
158 HAMMERSON PLC ANNUAL REPORT 2016
Notes to the accounts continued
13: Investment in associates (continued)
C: Share of assets and liabilities of associates
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 loans1
Investment in associates
Hammerson
VR
share
£m
77.0
100%
£m
–
Nicetoile
Hammerson
share
£m
100%
£m
100%
£m
–
Hammerson
Hammerson
4,095.9
1,387.3
277.3
27.7
4,373.2
1,415.0
182.0
44.2
182.0
44.2
4,277.9
1,508.5
277.3
27.7
4,555.2
1,536.2
3,700.8
2016
Total
share
£m
77.0
17.1
54.4
71.5
100%
£m
–
3,566.1
134.7
187.5
193.6
381.1
3.8
13.6
17.4
–
–
–
–
0.4
1.4
1.8
56.4
183.0
239.4
–
–
–
–
–
29.0
(2.1)
(0.2)
(76.4)
(44.5)
(132.7)
(2.4)
(0.3)
(307.9)
(1,382.6)
(465.3)
(1,092.6)
(545.6)
(82.6)
(140.9)
(400.3)
(438.8)
(2.4)
(4.5)
(0.3)
(2,236.1)
(688.8)
(1,931.7)
(0.5)
(2,312.5)
(733.3)
(2,064.4)
290.2
29.0
2,482.1
2,017.5
874.4
113.7
988.1
52.6
169.4
222.0
(74.3)
(1,382.6)
(305.5)
(545.6)
(2,233.7)
(2,308.0)
2,191.9
16.7
53.0
69.7
(44.3)
(465.3)
(82.3)
(140.9)
(688.5)
(732.8)
845.4
113.7
959.1
4,499.9
1,578.2
294.7
29.5
4,794.6
1,607.7
4,081.9
1,280.2
1. The Group’s total investment in associates includes long-term debt which in substance forms part of the Group’s investment. These ‘participative loans’ are not repayable
in the foreseeable future and represent the Group’s investor share of La Roca Village and Las Rozas Village.
The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £18.9 million
(2015: £19.0 million) which are included within non-current liabilities in note 22.
At 31 December 2016, Hammerson’s investment in VR, excluding goodwill, as a proportion of VR’s net assets was 40.2% (2015: 38.2%).
D: Reconciliation to adjusted investment in associates
Investment in associates
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
EPRA adjustments
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
1,046.2
29.0
1,075.2
VR
£m
959.1
(0.3)
140.9
(53.5)
87.1
VR
£m
743.8
40.8
135.2
(17.0)
(0.3)
56.6
959.1
Nicetoile
£m
29.0
–
–
–
–
Nicetoile
£m
24.2
1.9
–
–
–
2.9
29.0
2016
£m
988.1
(0.3)
140.9
(53.5)
87.1
2016
£m
768.0
40.8
137.1
(17.0)
(0.3)
59.5
988.1
2015
Total
share
£m
65.4
1,118.3
30.3
1,214.0
12.7
53.5
66.2
(52.9)
(339.5)
(92.8)
(107.3)
(539.6)
(592.5)
687.7
80.3
768.0
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
14: Receivables: non-current assets
Loans receivable
Other receivables
Fair value of interest rate swaps
All loans receivable are classified as available for sale and held at fair value and are analysed below:
Value Retail European Holdings BV: €2.0 million (2015: €2.0 million) maturing 30 November 2043
VR Dublin Limited and Kildare Retail Services Limited: €nil (2015: €22.4 million)
Value Retail European Holdings BV: €nil (2015: €56.0 million)
VR Milan S.R.L.: €23.3 million (2015: €23.3 million) maturing 13 December 2018
15: Receivables: current assets
Trade receivables
Other receivables
Corporation tax
Prepayments
Fair value of currency swaps
2016
£m
21.6
4.0
19.3
44.9
2016
£m
1.7
–
–
19.9
21.6
2016
£m
52.4
50.0
0.6
2.9
–
105.9
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
Trade receivables are shown after deducting a provision for bad and doubtful debts of £17.0 million (2015: £11.8 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.
E: Reconciliation of movements in investment in associates
16: Restricted monetary assets
Cash held on behalf of third parties
Not yet due
1-30 days overdue
31-60 days overdue
61-90 days overdue
91-120 days overdue
More than 120 days overdue
Gross
receivable
£m
Provision
£m
2016
Net
receivable
£m
28.5
5.8
2.7
–
3.7
28.7
69.4
–
0.4
0.1
–
0.4
16.1
17.0
28.5
5.4
2.6
–
3.3
12.6
52.4
Gross
receivable
£m
24.8
7.4
2.2
0.8
2.5
20.8
58.5
Provision
£m
–
0.1
–
–
0.2
11.5
11.8
2016
£m
35.1
2015
Net
receivable
£m
24.8
7.3
2.2
0.8
2.3
9.3
46.7
2015
£m
34.0
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’.
158 HAMMERSON PLC ANNUAL REPORT 2016
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FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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
Due within one year
Current assets: Fair value of currency swaps
2016
£m
74.1
0.2
74.3
48.0
26.3
74.3
2016
£m
33.9
178.5
66.6
24.8
303.8
Other
borrowings
£m
1,478.2
614.7
–
2,092.9
–
Bank loans and
overdrafts
£m
Other
borrowings
£m
Total
2016
£m
Bank loans and
overdrafts
£m
1,928.1
803.7
–
1,928.1
1,307.6
49.5
2,731.8
3,285.2
(35.5)
211.1
–
245.1
690.1
935.2
–
–
503.9
49.5
553.4
246.6
800.0
–
2,696.3
3,496.3
935.2
2,092.9
–
–
–
(30.0)
800.0
2,696.3
3,496.3
935.2
2,062.9
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
Total
2015
£m
1,478.2
859.8
690.1
3,028.1
–
3,028.1
(30.0)
2,998.1
At 31 December 2016 and 2015 no borrowings due after five years were repayable by instalments. At 31 December 2016, the fair value of currency
swaps was a liability of £2.7 million (2015: £42.8 million asset) of which £nil (2015: £30.0 million) was 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 1.75% euro bonds due 2023
€500 million 2% euro bonds due 2022
£250 million 6.875% sterling bonds due 2020
€500 million 2.75% euro bonds due 2019
Bank loans and overdrafts
Senior notes due 20261
Senior notes due 20241
Senior notes due 20211
Fair value of currency swaps
1. The currency denomination of senior notes is analysed in note 20G.
HAMMERSON PLC ANNUAL REPORT 2016
160
160 HAMMERSON PLC ANNUAL REPORT 2016
2016
£m
198.2
297.8
345.3
424.3
423.2
248.9
425.1
800.0
25.6
153.4
151.8
2015
£m
198.1
297.6
345.0
–
364.6
248.6
366.1
935.2
22.0
135.6
128.1
3,493.6
2.7
3,496.3
3,040.9
(42.8)
2,998.1
C: Undrawn committed facilities
Expiry
Within two to five years
Within one to two years
Within one year
D: Interest rate and currency profile
Sterling
Euro
US Dollar
Sterling
Euro
US Dollar
%
6.3
2.4
–
3.3
%
6.3
2.6
–
3.7
2016
£m
327.0
125.0
9.2
461.2
Fixed rate borrowings
Floating rate
borrowings
Years
10
6
–
7
£m
565.7
1,916.9
–
£m
109.0
913.4
(8.7)
2015
£m
342.0
518.5
–
860.5
2016
Total
£m
674.7
2,830.3
(8.7)
2,482.6
1,013.7
3,496.3
Fixed rate borrowings
Years
11
7
–
8
£m
552.0
1,286.7
–
1,838.7
Floating rate
borrowings
£m
(115.7)
1,282.1
(7.0)
1,159.4
2015
Total
£m
436.3
2,568.8
(7.0)
2,998.1
The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2016 and 2015, 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.
Financing activities during the year are detailed in the Financial Review on pages 51 and 52.
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 Risks and Uncertainties section of the Strategic Report on page 57. 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 2016, the Group had interest rate swaps of £250.0 million (2015: £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 2016, the fair value of interest rate swaps was an asset of
£19.3 million (2015: £13.8 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.
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FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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, 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 against 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.
2016
Euro notional1 (note 19D)
Carrying amount2 (note 20G)
2015
Euro notional1 (note 19D)
Carrying amount2 (note 20G)
Bonds3
£m
Senior notes
£m
1,272.6
1,272.6
51.2
51.2
Bank
loans
£m
Cross currency
swaps
£m
Foreign
exchange
swaps
£m
Total
2016
£m
–
–
593.2
38.2
913.3
(35.5)
2,830.3
1,326.5
Bonds3
£m
730.7
730.7
Senior notes
£m
44.2
44.2
Bank
loans
£m
Cross currency
swaps
£m
690.5
690.5
986.8
(43.0)
Foreign
exchange
swaps
£m
116.6
0.2
Total
2015
£m
2,568.8
1,422.6
Notes
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 2016 was £1,327.8 million (2015: £767.6 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 page 51.
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 table 98 of the Additional Disclosures on page 181.
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 2016, the Group’s
maximum exposure to credit risk was £316.4 million (2015: £335.8 million) which excludes those balances supported by investment properties.
HAMMERSON PLC ANNUAL REPORT 2016
162
162 HAMMERSON PLC ANNUAL REPORT 2016
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, 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 against 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.
2016
Euro notional1 (note 19D)
Carrying amount2 (note 20G)
Euro notional1 (note 19D)
Carrying amount2 (note 20G)
2015
Notes
Bonds3
£m
1,272.6
1,272.6
Senior notes
£m
51.2
51.2
Bank
Cross currency
loans
£m
–
–
swaps
£m
593.2
38.2
Bonds3
£m
730.7
730.7
Senior notes
£m
44.2
44.2
Bank
loans
£m
690.5
690.5
Cross currency
swaps
£m
986.8
(43.0)
Foreign
exchange
swaps
£m
913.3
(35.5)
Foreign
exchange
swaps
£m
116.6
0.2
Total
2016
£m
2,830.3
1,326.5
Total
2015
£m
2,568.8
1,422.6
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 2016 was £1,327.8 million (2015: £767.6 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 page 51.
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 table 98 of the Additional Disclosures on page 181.
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 2016, the Group’s
maximum exposure to credit risk was £316.4 million (2015: £335.8 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.
Cash and deposits (note 17)
Unsecured sterling fixed rate bonds
Unsecured euro fixed rate bonds
Senior notes
– Sterling
– Euro
– US Dollar
Interest rate swaps (floating)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of cross currency swaps
Fair value of foreign exchange swaps
Net debt
Loans receivable (note 14)
Cash and deposits (note 17)
Unsecured sterling fixed rate bonds
Unsecured euro fixed rate bonds
Senior notes
– Sterling
– Euro
– US Dollar
Interest rate swaps (floating)
Interest rate swaps (fixed)
Unsecured bank loans and overdrafts
Fair value of cross currency swaps
Fair value of foreign exchange swaps
Net debt
Loans receivable (note 14)
Less than
one year
£m
(74.3)
–
–
–
–
–
–
–
246.6
–
(35.5)
136.8
–
136.8
Less than
one year
£m
(37.0)
–
–
–
–
–
–
–
–
(30.2)
0.2
(67.0)
–
(67.0)
One to two
years
£m
Two to five
years
£m
More than five
years
£m
2016 Maturity
Total
£m
(74.3)
1,090.2
1,272.6
45.0
51.2
234.6
250.0
(250.0)
800.0
38.2
(35.5)
–
248.9
425.1
–
19.2
132.6
250.0
(250.0)
503.9
(22.1)
–
–
841.3
847.5
45.0
32.0
102.0
–
–
–
60.3
–
1,307.6
1,928.1
3,422.0
–
(1.7)
(21.6)
1,307.6
1,926.4
3,400.4
–
–
–
–
–
–
–
–
49.5
–
–
49.5
(19.9)
29.6
One to two
years
£m
Two to five
years
£m
More than five
years
£m
–
–
–
–
–
–
–
–
690.1
–
–
690.1
(17.2)
672.9
–
248.6
366.1
–
–
–
250.0
(250.0)
245.1
–
–
859.8
(59.2)
800.6
–
840.7
364.6
45.0
44.2
196.5
–
–
–
(12.8)
–
1,478.2
–
1,478.2
2015 Maturity
Total
£m
(37.0)
1,089.3
730.7
45.0
44.2
196.5
250.0
(250.0)
935.2
(43.0)
0.2
2,961.1
(76.4)
2,884.7
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. Changes
in foreign exchange and interest rates may have an impact on consolidated earnings over the longer term. The tables below provide indicative
sensitivity data.
Effect on profit before tax:
(Decrease)/Increase
2016
Increase in
interest rates
by 1%
£m
Decrease in
interest rates
by 1%
£m
Increase in
interest rates
by 1%
£m
2015
Decrease in
interest rates
by 1%
£m
(17.6)
17.4
(20.5)
20.9
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.
162 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 163
163
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
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
2016
Weakening
of sterling
against euro
by 10%
£m
Strengthening
of sterling
against euro
by 10%
£m
2015
Weakening
of sterling
against euro
by 10%
£m
273.8
(334.6)
330.8
(409.3)
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
2016
Fair value
£m
3,493.6
3,809.7
2.7
2.7
3,496.3
3,812.4
(19.3)
(19.3)
Book value
£m
3,040.9
(42.8)
2,998.1
(13.8)
2015
Fair value
£m
3,266.3
(42.8)
3,223.5
(13.8)
At 31 December 2016, the fair value of financial instruments exceeded their book value by £316.1 million (2015: £225.4 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, which are analysed further in note 20J.
Available for sale loans and investments
Balance at 1 January
Total gains/(losses)
– in income
– in other comprehensive income
Other movements
– acquisition of other investments
– settlement of interest
– loan (repayment)/issue
– sale of other investments
Net movements in participative loans to associates recognised as available for sale
Balance at 31 December
2016
£m
161.5
37.2
13.4
1.9
(4.2)
(65.2)
(8.0)
(1.3)
135.3
2015
£m
136.1
16.5
(4.4)
4.8
(5.3)
15.5
–
(1.7)
161.5
HAMMERSON PLC ANNUAL REPORT 2016
164
164 HAMMERSON PLC ANNUAL REPORT 2016
Notes to the accounts continued
20: Financial instruments and risk management (continued)
H: Sensitivity analysis (continued)
2016
Strengthening
of sterling
Weakening
of sterling
against euro
against euro
Strengthening
of sterling
against euro
by 10%
£m
273.8
by 10%
£m
(334.6)
by 10%
£m
330.8
2015
Weakening
of sterling
against euro
by 10%
£m
(409.3)
Effect on financial instruments:
Increase/(Decrease) in net gain taken to equity
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
2016
£m
2.7
£m
2.7
3,493.6
3,809.7
3,496.3
3,812.4
(19.3)
(19.3)
£m
3,040.9
(42.8)
2,998.1
(13.8)
2015
Fair value
£m
3,266.3
(42.8)
3,223.5
(13.8)
At 31 December 2016, the fair value of financial instruments exceeded their book value by £316.1 million (2015: £225.4 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, which are analysed further in note 20J.
Available for sale loans and investments
Balance at 1 January
Total gains/(losses)
– in income
– in other comprehensive income
Other movements
– acquisition of other investments
– settlement of interest
– loan (repayment)/issue
– sale of other investments
Balance at 31 December
Net movements in participative loans to associates recognised as available for sale
2016
£m
161.5
37.2
13.4
1.9
(4.2)
(65.2)
(8.0)
(1.3)
135.3
2015
£m
136.1
16.5
(4.4)
4.8
(5.3)
15.5
–
(1.7)
161.5
J: Carrying amounts, gains and losses of financial instruments
Trade receivables
Restricted monetary assets
Cash and deposits
Cash and receivables
Other investments
Loans receivable
Participative loans to associates
Available for sale investments and loans
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
Carrying
amount
£m
Gain/
(Loss) to
income
£m
2016
Gain/
(Loss) to
equity
£m
Carrying
amount
£m
Notes
15
16
17
14
13C
14
19B
12A
52.4
35.1
74.3
161.8
–
21.6
113.7
135.3
19.3
19.3
(2.7)
(2.7)
688.3
688.3
(5.2)
–
0.1
(5.1)
1.3
14.6
21.3
37.2
8.5
8.5
7.8
7.8
–
–
–
–
–
–
–
–
–
13.4
13.4
–
–
(132.0)
(132.0)
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
(285.0)
Gain/
(Loss) to
income
£m
(0.2)
–
0.1
(0.1)
(1.4)
2.7
15.2
16.5
2.0
2.0
10.3
10.3
–
–
–
18, 22
(375.0)
19B
21
(3,493.6)
(146.6)
(305.3)
(3,040.9)
(37.5)
(3,906.1)
(2,904.1)
(2.2)
(148.8)
(100.4)
–
(32.5)
(305.3)
(3,358.4)
(423.9)
(1,649.0)
(119.8)
(1.8)
(121.6)
(92.9)
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
(Gain)/Loss on other investments
Deduct:
Change in participative loans to associates shown in share of results of associates
Net finance costs
Notes
7
2
7
2016
£m
(100.4)
5.2
5.1
(1.3)
(21.3)
(112.7)
2015
Gain/
(Loss) to
equity
£m
–
–
–
–
–
–
(4.4)
(4.4)
–
–
54.6
54.6
–
–
–
27.3
–
27.3
77.5
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 losses in relation to currency swaps of £132.0 million and borrowings of £305.3 million is £437.3 million and is shown
as a movement in the hedging reserve in the Consolidated Statement of Changes in Equity on page 133. In 2015, the total of the equity gains of
£54.6 million in relation to currency swaps and £27.3 million for borrowings was £81.9 million and is shown as a movement in the hedging reserve
on page 134. The movements in the hedging reserve are offset by foreign exchange translation gains of £524.5 million (2015: £103.9 million losses)
which arise from the retranslation of the net investment in foreign operations. These are shown in the Consolidated Statement of Changes in
Equity as a movement in the translation reserve on pages 133 and 134.
164 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 165
165
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC 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:
2016
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
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
5.6
5.2
42.2
279.0
321.2
Payables
£m
–
31.4
1.9
5.0
38.3
209.5
247.8
–
(25.8)
(45.1)
(5.9)
(76.8)
(5.9)
(82.7)
20L
–
2,172.9
1,631.7
162.2
3,966.8
361.6
4,328.4
Derivative
financial
liability
cash flows
£m
Non-derivative
financial
liability
cash flows
£m
–
(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
Finance
leases
£m
21
85.1
43.0
6.5
2.2
136.8
2.2
139.0
Finance
leases
£m
21
72.5
38.8
5.8
1.9
119.0
1.9
120.9
Total
2016
£m
85.1
2,221.5
1,598.7
163.7
4,069.0
636.9
4,705.9
Total
2015
£m
72.5
1,814.2
1,117.6
790.1
3,794.4
277.4
4,071.8
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.
2016
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
1,928.1
1,307.6
49.5
3,285.2
211.1
3,496.3
(60.3)
22.1
–
(38.2)
35.5
(2.7)
1,867.8
1,329.7
49.5
3,247.0
246.6
3,493.6
15.2
8.0
0.4
23.6
0.4
24.0
289.9
294.0
112.3
696.2
114.6
810.8
20K
2,172.9
1,631.7
162.2
3,966.8
361.6
4,328.4
HAMMERSON PLC ANNUAL REPORT 2016
166
166 HAMMERSON PLC ANNUAL REPORT 2016
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:
2016
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
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
2016
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
–
2,172.9
1,631.7
162.2
3,966.8
361.6
4,328.4
£m
20L
–
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
–
(25.8)
(45.1)
(5.9)
(76.8)
(5.9)
(82.7)
–
(58.5)
(19.5)
(6.5)
(84.5)
(36.5)
(121.0)
Derivative
financial
liability
cash flows
£m
Non-derivative
financial
liability
cash flows
–
31.4
5.6
5.2
42.2
279.0
321.2
Payables
£m
–
31.4
1.9
5.0
38.3
209.5
247.8
Finance
leases
£m
21
85.1
43.0
6.5
2.2
136.8
2.2
139.0
Finance
leases
£m
21
72.5
38.8
5.8
1.9
119.0
1.9
120.9
Total
2016
£m
85.1
2,221.5
1,598.7
163.7
4,069.0
636.9
4,705.9
Total
2015
£m
72.5
1,814.2
1,117.6
790.1
3,794.4
277.4
4,071.8
Derivative
Non-derivative
unamortised
Non-derivative
Non-derivative
Borrowings
borrowings
borrowings
borrowing costs
£m
£m
£m
£m
19A
1,928.1
1,307.6
49.5
3,285.2
211.1
3,496.3
(60.3)
22.1
–
(38.2)
35.5
(2.7)
1,867.8
1,329.7
49.5
3,247.0
246.6
3,493.6
15.2
8.0
0.4
23.6
0.4
24.0
Non-derivative
financial
liability
cash flows
£m
20K
2,172.9
1,631.7
162.2
3,966.8
361.6
4,328.4
interest
£m
289.9
294.0
112.3
696.2
114.6
810.8
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
19A
1,478.2
859.8
690.1
3,028.1
(30.0)
2,998.1
Derivative
borrowings
£m
Non-derivative
borrowings
£m
Non-derivative
unamortised
borrowing costs
£m
Non-derivative
interest
£m
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
Non-derivative
financial
liability
cash flows
£m
20K
1,802.5
1,129.4
789.7
3,721.6
102.5
3,824.1
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 51 and 52 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 pages 133 and 134.
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
85.1
43.0
6.5
2.2
2.2
Interest
£m
(51.7)
(39.4)
(6.2)
(2.1)
(2.1)
139.0
(101.5)
2016
Present value
of minimum
lease
payments
£m
33.4
3.6
0.3
0.1
0.1
37.5
Minimum
lease
payments
£m
72.5
38.8
5.8
1.9
1.9
120.9
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 2016
New share issue – transferred to investment in own shares
New share issue – settlement of scrip dividends
Share options exercised – Savings-Related Share Option Scheme
Number of shares in issue at 31 December 2016
2015
Present value
of minimum
lease
payments
£m
29.2
2.9
0.2
0.1
0.1
32.5
2015
£m
37.2
38.5
75.7
Interest
£m
(43.3)
(35.9)
(5.6)
(1.8)
(1.8)
(88.4)
2016
£m
53.8
42.2
96.0
Called up, allotted and fully paid
2016
£m
198.3
2015
£m
196.1
Number
784,431,255
1,000,000
7,698,192
59,004
793,188,451
166 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 167
167
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the accounts continued
23: Share capital (continued)
Share options
At 31 December 2016, the Company had three 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.
Number
Year of expiry
Weighted
average
exercise price
Exercise price
(pence)
Number
Year of grant
Share options
Ordinary shares of 25p each
2016
Savings-Related Share Option Scheme
260,450
2017-2021
£4.39
312.2-540.4
–
–
Restricted Share Plan
Long-Term Incentive Plan
–
–
–
–
–
–
–
–
667,371
2014-2016
2,456,928
2012-2016
Executive Share Option Scheme
Savings-Related Share Option Scheme
Restricted Share Plan
Long-Term Incentive Plan
Share options
Ordinary shares of 25p each
2015
Exercise price
(pence)
839
217.2 – 540.4
Number
Year of grant
–
–
–
–
–
–
614,879
2013-2015
2,496,879
2012-2015
Weighted
average
exercise price
£8.39
£4.55
–
–
Number
Year of expiry
88,486
216,426
2016
2016-2020
–
–
–
–
24: Analysis of movement in net debt
At 1 January 2016
Cash flow
Exchange and non-cash items
Balance at 31 December 2016
At 1 January 2015
Cash flow
Exchange and non-cash items
Balance at 31 December 2015
Short-term
deposits
£m
Cash at bank
£m
Current
borrowings
including
currency swaps
£m
Non-current
borrowings
£m
Total
borrowings
including
currency
swaps
£m
Net debt
£m
0.1
0.1
–
0.2
36.9
33.9
3.3
74.1
30.0
(3,028.1)
(2,998.1)
(2,961.1)
(212.9)
(28.2)
(211.1)
110.6
(367.7)
(102.3)
(395.9)
(68.3)
(392.6)
(3,285.2)
(3,496.3)
(3,422.0)
Short-term
deposits
£m
Cash at bank
£m
Current
borrowings
including
currency swaps
£m
Non-current
borrowings
£m
Total
borrowings
including
currency
swaps
£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)
(2,282.0)
(2,253.4)
(806.1)
65.1
(807.6)
91.5
(798.3)
90.6
(3,028.1)
(2,998.1)
(2,961.1)
25: Adjustment for non-cash items in the cash flow statement
Amortisation of lease incentives and other costs
Increase in provision for bad and doubtful debts
Increase in accrued rents receivable
Non-cash items included within net rental income
Depreciation
Share-based employee remuneration
Other items
HAMMERSON PLC ANNUAL REPORT 2016
168
168 HAMMERSON PLC ANNUAL REPORT 2016
2016
£m
6.8
5.2
(6.4)
5.6
2.0
5.6
(1.6)
11.6
2015
£m
5.9
0.2
(5.0)
1.1
1.7
4.8
(1.3)
6.3
Notes to the accounts continued
23: Share capital (continued)
Share options
At 31 December 2016, the Company had three 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.
Savings-Related Share Option Scheme
260,450
2017-2021
£4.39
312.2-540.4
–
–
Restricted Share Plan
Long-Term Incentive Plan
–
–
–
–
667,371
2014-2016
2,456,928
2012-2016
Executive Share Option Scheme
Savings-Related Share Option Scheme
88,486
216,426
2016
2016-2020
Restricted Share Plan
Long-Term Incentive Plan
24: Analysis of movement in net debt
Number
Year of expiry
exercise price
Number
Year of grant
Share options
Ordinary shares of 25p each
Exercise price
(pence)
839
217.2 – 540.4
–
–
–
–
614,879
2013-2015
2,496,879
2012-2015
2015
–
–
Short-term
deposits
Cash at bank
currency swaps
Non-current
borrowings
£m
Net debt
£m
Total
borrowings
including
currency
swaps
£m
–
–
–
–
£m
0.1
0.1
–
0.2
£m
0.1
–
–
0.1
–
–
–
–
£m
36.9
33.9
3.3
74.1
£m
28.5
9.3
(0.9)
36.9
Weighted
average
£8.39
£4.55
–
–
Current
borrowings
including
£m
30.0
(212.9)
(28.2)
(211.1)
Current
borrowings
including
£m
5.1
(1.5)
26.4
30.0
Short-term
deposits
Cash at bank
currency swaps
Non-current
borrowings
£m
At 1 January 2016
Cash flow
Exchange and non-cash items
Balance at 31 December 2016
At 1 January 2015
Cash flow
Exchange and non-cash items
Balance at 31 December 2015
25: Adjustment for non-cash items in the cash flow statement
(3,028.1)
(2,998.1)
(2,961.1)
110.6
(367.7)
(102.3)
(395.9)
(68.3)
(392.6)
(3,285.2)
(3,496.3)
(3,422.0)
Total
borrowings
including
currency
swaps
£m
(2,287.1)
(2,282.0)
(2,253.4)
(806.1)
65.1
(807.6)
91.5
(3,028.1)
(2,998.1)
(2,961.1)
Net debt
£m
(798.3)
90.6
2016
£m
6.8
5.2
(6.4)
5.6
2.0
5.6
(1.6)
11.6
2015
£m
5.9
0.2
(5.0)
1.1
1.7
4.8
(1.3)
6.3
Amortisation of lease incentives and other costs
Increase in provision for bad and doubtful debts
Increase in accrued rents receivable
Non-cash items included within net rental income
Depreciation
Other items
Share-based employee remuneration
Number
Year of expiry
exercise price
(pence)
Number
Year of grant
Weighted
average
Exercise price
Share options
Ordinary shares of 25p each
2016
Within one year
From one to two years
From two to five years
After five years
2016
£m
127.3
116.0
304.2
743.6
2015
£m
129.5
123.1
321.9
793.3
1,291.1
1,367.8
26: The Reported Group as lessor – operating lease receipts
At the balance sheet date, the Reported 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 179 and 180 and credit risk relating to the trade receivables is discussed in note 20F.
27: Contingent liabilities and capital commitments
There are contingent liabilities of £68.6 million (2015: £49.8 million) relating to guarantees given by the Reported Group and a further
£21.6 million (2015: £16.0 million) relating to claims against the Reported Group arising in the normal course of business, which are considered
to be unlikely to crystallise. The Reported Group also had capital commitments of £20.7 million (2015: £101.7 million).
In addition, Hammerson’s share of contingent liabilities arising within joint ventures is £2.1 million (2015: £2.1 million). Hammerson’s share
of the capital commitments arising within joint ventures is £174.9 million (2015: £6.0 million), principally VIA Outlet’s costs of £127.8 million
to acquire the two centres from the IRUS fund which did not complete by 31 December 2016.
The risks and uncertainties facing the Group are detailed on pages 53 to 58.
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)
2016
£m
6.5
0.1
38.6
4.2
688.3
113.7
21.6
2015
£m
4.2
0.1
29.3
5.3
1,373.6
80.3
76.4
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 78 to 114.
Salaries and short-term benefits
Post-employment benefits
Share-based payments
Total remuneration
2016
£m
4.1
0.5
3.3
7.9
2015
£m
4.1
0.4
3.4
7.9
C. Non-controlling interests
The Group’s non-controlling interest represents a 35.5% interest in Place des Halles, Strasbourg held by Assurbail. During 2016, the property
generated gross rental income of £12.0 million (2015: £10.5 million) and the property valuation at 31 December 2016 was £239.2 million
(2015: £199.0 million). The non-controlling interest’s share of the gross rental income was £4.3 million (2015: £3.5 million) and of the property
valuation was £84.9 million (2015: £70.6 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 133 and 134.
168 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 169
169
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2016
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
Borrowings
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 17 February 2017.
Signed on behalf of the Board
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
Notes
2016
£m
2015
£m
C
D
E
F
G
G
23
4,824.3
6,041.1
10,865.4
10.6
42.1
52.7
4,141.3
5,677.7
9,819.0
38.6
7.4
46.0
10,918.1
9,865.0
1,564.8
211.1
1,775.9
3,285.2
5,061.1
5,857.0
198.3
1,265.7
374.1
7.3
3,228.7
783.1
(0.2)
5,857.0
1,250.6
–
1,250.6
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
HAMMERSON PLC ANNUAL REPORT 2016
170
170 HAMMERSON PLC ANNUAL REPORT 2016
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2016
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Notes
2016
£m
2015
£m
10,918.1
9,865.0
C
D
E
F
G
G
23
4,824.3
6,041.1
10,865.4
10.6
42.1
52.7
1,564.8
211.1
1,775.9
3,285.2
5,061.1
5,857.0
198.3
1,265.7
374.1
7.3
3,228.7
783.1
(0.2)
5,857.0
4,141.3
5,677.7
9,819.0
38.6
7.4
46.0
1,250.6
–
1,250.6
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
Investments in subsidiary companies and other related undertakings
Non-current assets
Receivables
Current assets
Receivables
Cash and short-term deposits
Total assets
Current liabilities
Payables
Borrowings
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Called up share capital
Share premium
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 17 February 2017.
David Atkins
Director
Timon Drakesmith
Director
Registered in England No. 360632
Balance at 31 December 2016
198.3 1,265.7
374.1
7.3
3,228.7
783.1
(0.2)
5,857.0
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
196.1
1,223.3
374.1
7.3
2,545.7 1,243.7
Investment
in own
shares*
£m
Equity
shareholders’
funds
£m
(3.9)
(0.3)
4.0
–
5,586.3
0.2
4.0
(136.0)
–
–
–
–
–
(180.1)
683.0
–
–
(280.5)
683.0
(280.5)
–
–
–
683.0
(280.5)
402.5
Balance at 1 January 2016
Issue of shares
Cost of shares awarded to employees
Dividends
Revaluation gains on investments in subsidiary
companies and other related undertakings
Loss for the year attributable to equity shareholders
Total comprehensive income/(loss) for the year
0.3
–
1.9
–
–
–
0.2
–
42.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
* Investment in own shares is stated at cost.
FOR THE YEAR ENDED 31 DECEMBER 2015
Balance at 1 January 2015
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
Share
capital
£m
Share
premium
£m
196.1
1,222.9
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
Merger
reserve
£m
374.2
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
Other
reserves
£m
Revaluation
reserve
£m
Retained
earnings
£m
7.3
1,981.1
1,270.3
Investment
in own
shares*
£m
(6.8)
–
–
2.9
–
Equity
shareholders’
funds
£m
5,045.1
0.4
(0.1)
2.9
(165.2)
–
–
–
–
–
–
–
(165.2)
564.6
–
–
564.6
138.6
138.6
–
–
–
564.6
138.6
703.2
Balance at 31 December 2015
196.1
1,223.3
374.1
7.3
2,545.7
1,243.7
(3.9)
5,586.3
* Investment in own shares is stated at cost.
The capacity of the Company to make dividend payments is primarily determined by the availability of retained distributable reserves and
cash resources. As at 31 December 2016 the Company had distributable reserves of £783.1 million (2015: £1,243.7 million) and the total external
dividends declared in 2016 amounted to £180.1 million. The Company’s distributable reserves support over four times this annual dividend.
When required the Company can receive dividends from its subsidiaries to further increase distributable reserves.
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.
170 HAMMERSON PLC ANNUAL REPORT 2016
HAMMERSON.COM
HAMMERSON.COM 171
171
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
NOTES TO THE COMPANY ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial
Reporting Council.
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 FRS 101. 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: Result 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 loss for the year attributable to equity shareholders dealt with in the financial statements of the Company was £280.5 million
(2015: £138.6 million profit) and includes a net loss of £280.9 million (2015: £49.3 million gain) in respect of foreign exchange translation
movements on the Company’s euro and US dollar denominated receivables and borrowings.
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
2016
2015
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
Valuation
£m
4,141.3
683.0
1,561.7
4,824.3
1,561.7
Valuation
£m
3,576.7
564.6
4,141.3
Investments are stated at Directors’ valuation. A list of the subsidiary companies and other related undertakings at 31 December 2016 is included
in note H.
D: Receivables: non-current assets
Amounts owed by subsidiaries and other related undertakings
Loans receivable from associate
Fair value of interest rate swaps
HAMMERSON PLC ANNUAL REPORT 2016
172
172 HAMMERSON PLC ANNUAL REPORT 2015
2016
£m
2015
£m
6,000.2
5,604.0
21.6
19.3
59.9
13.8
6,041.1
5,677.7
NOTES TO THE COMPANY ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2016
A: Accounting policies
Basis of accounting
Reporting Council.
in exchange for the goods and services.
Disclosure exemptions adopted
financial statements do not include:
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 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial
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 preparing these financial statements Hammerson plc has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore these
– 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.
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: Result 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 loss for the year attributable to equity shareholders dealt with in the financial statements of the Company was £280.5 million
(2015: £138.6 million profit) and includes a net loss of £280.9 million (2015: £49.3 million gain) in respect of foreign exchange translation
movements on the Company’s euro and US dollar denominated receivables and borrowings.
Dividend information is provided in note 9 to the consolidated accounts.
C: Investments in subsidiary companies and other related undertakings
Investments are stated at Directors’ valuation. A list of the subsidiary companies and other related undertakings at 31 December 2016 is included
Balance at 1 January
Revaluation adjustment
Balance at 31 December
in note H.
Loans receivable from associate
Fair value of interest rate swaps
D: Receivables: non-current assets
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
Cost less
provision for
permanent
diminution in
value
£m
1,561.7
–
Valuation
£m
4,141.3
683.0
1,561.7
4,824.3
1,561.7
Valuation
£m
3,576.7
564.6
4,141.3
2016
£m
21.6
19.3
2015
£m
59.9
13.8
6,041.1
5,677.7
D: Receivables: non-current assets (continued)
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 2017.
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
2016
£m
10.6
–
10.6
2016
£m
1,498.0
66.8
1,564.8
2015
£m
8.6
30.0
38.6
2015
£m
1,191.6
59.0
1,250.6
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts into which
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
Due within a year
Current assets: Fair value of currency swaps (note E)
Bank loans
and overdrafts
£m
Other
borrowings
£m
2016
Total
£m
1,928.1
1,307.6
49.5
1,928.1
803.7
–
2,731.8
3,285.2
(35.5)
211.1
2,696.3
3,496.3
–
–
–
503.9
49.5
553.4
246.6
800.0
–
800.0
2,696.3
3,496.3
2015
Total
£m
1,478.2
859.8
690.1
3,028.1
–
3,028.1
(30.0)
2,998.1
2016
2015
H: Subsidiaries and other related undertakings
Details of the Group’s borrowings and financial instruments are given in notes 19 and 20 to the consolidated accounts. The fair value of the
Company’s financial instruments is equal to that of the Reported Group as shown in note 20I.
The Company’s subsidiaries and other related undertakings at 31 December 2016 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 and Wales
Registered office: Kings Place, 90 York Way, London N1 9GE
Grantchester Holdings Limited
Hammerson Company Secretarial Limited
Hammerson International Holdings Limited
Hammerson Pension Scheme Trustees Limited
Hammerson Employee Share Plan Trustees Limited
Hammerson Share Option Scheme Trustees Limited
Hammerson Group Limited
Hammerson Group Management Limited
Amounts owed by subsidiaries and other related undertakings
6,000.2
5,604.0
France
Registered office: 40/48 rue Cambon – 23 rue des Capucines 75001 Paris
Hammerson Holding France SAS
172 HAMMERSON PLC ANNUAL REPORT 2015
HAMMERSON.COM
HAMMERSON.COM 173
173
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the company accounts continued
H: Subsidiaries and other related undertakings (continued)
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 and Wales
Registered office: Kings Place, 90 York Way, London N1 9GE
280 Bishopsgate Investments Limited
Abbey Retail Park Limited (Northern Ireland) 1
Christchurch UK Limited
Cricklewood Regeneration Limited
Crocusford Limited
Dublin Central GP Limited 2
Dundrum R&O Park Management Limited 2
Dundrum Town Centre Management Limited 2
Dundrum Village Management Company Limited 2
Governeffect Limited
Hammerson (Leeds) Limited
Hammerson (Leicester) Limited
Hammerson (Leicester GP) Limited
Hammerson (Lichfield) Limited
Hammerson (Merthyr) Limited
Hammerson (Milton Keynes) Limited
Hammerson (Moor House) Properties Limited
Hammerson (Newcastle) Limited
Hammerson (Newtownabbey) Limited
Hammerson (Oldbury) Limited
Grantchester Developments (Birmingham) Limited
Hammerson (Paddington) Limited
Grantchester Developments (Falkirk) Limited
Grantchester Group Limited
Grantchester Investments Limited
Grantchester Limited
Grantchester Properties (Gloucester) Limited
Grantchester Properties (Luton) Limited
Grantchester Properties (Middlesbrough) Limited
Hammerson (Parc Tawe I) Limited
Hammerson (Renfrew) Limited
Hammerson (Rugby) Limited
Hammerson (Silverburn) Limited (Isle of Man) 3
Hammerson (Staines) Limited
Hammerson (Telford) Limited
Hammerson (Thanet) Limited
Grantchester Properties (Nottingham) Limited
Hammerson (Value Retail Investments) Limited
Grantchester Properties (Port Talbot) Limited
Hammerson (Victoria Gate) Limited
Grantchester Properties (Sunderland) Limited
Hammerson (Victoria Investments) Limited
Grantchester Property Management Limited
Hammerson (Victoria Quarter) 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 (Cramlington I) Limited
Hammerson (Cricklewood) Limited
Hammerson (Croydon) Limited
Hammerson (Didcot) Limited
Hammerson (Didcot II) Limited
Hammerson (Euston Square) Limited
Hammerson (Folkestone) Limited
Hammerson (Glasgow) Limited
Hammerson (Grosvenor Street) Limited
Hammerson (Kingston) Limited
Hammerson (Kirkcaldy) Limited
Hammerson (Leeds Developments) Limited
Hammerson (Leeds GP) Limited
Hammerson (Leeds Investments) Limited
HAMMERSON PLC ANNUAL REPORT 2016
174
174 HAMMERSON PLC ANNUAL REPORT 2016
Hammerson (Watermark) Limited
Hammerson (Whitgift) Limited
Hammerson Birmingham Properties Limited
Hammerson Bull Ring Limited
Hammerson Croydon (GP1) Limited
Hammerson Croydon (GP2) 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 Ireland Investments Limited 2
Hammerson Junction (No 3) Limited
Hammerson Junction (No 4) Limited
Hammerson LLC (United States) 4
Hammerson Martineau Galleries Limited
Hammerson MGLP Limited
Hammerson MGLP 2 Limited
Hammerson MLP Limited
Hammerson Moor House (LP) Limited
Hammerson Operations Limited
H: Subsidiaries and other related undertakings (continued)
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
Grantchester Developments (Birmingham) Limited
Hammerson (Paddington) Limited
Grantchester Developments (Falkirk) Limited
Hammerson (Parc Tawe I) Limited
Grantchester Group Limited
Grantchester Investments Limited
Grantchester Limited
Hammerson (Renfrew) Limited
Hammerson (Rugby) Limited
Hammerson (Silverburn) Limited (Isle of Man) 3
Grantchester Properties (Gloucester) Limited
Grantchester Properties (Luton) Limited
Grantchester Properties (Middlesbrough) Limited
Hammerson (Staines) Limited
Hammerson (Telford) Limited
Hammerson (Thanet) Limited
Grantchester Properties (Nottingham) Limited
Hammerson (Value Retail Investments) Limited
Grantchester Properties (Port Talbot) Limited
Hammerson (Victoria Gate) Limited
Grantchester Properties (Sunderland) Limited
Hammerson (Victoria Investments) Limited
Grantchester Property Management Limited
Hammerson (Victoria Quarter) Limited
Notes to the company accounts continued
registered/operate in the countries as shown:
England and Wales
Registered office: Kings Place, 90 York Way, London N1 9GE
280 Bishopsgate Investments Limited
Abbey Retail Park Limited (Northern Ireland) 1
Christchurch UK Limited
Cricklewood Regeneration Limited
Crocusford Limited
Dublin Central GP Limited 2
Dundrum R&O Park Management Limited 2
Dundrum Town Centre Management Limited 2
Dundrum Village Management Company Limited 2
Governeffect 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 (Cramlington I) Limited
Hammerson (Cricklewood) Limited
Hammerson (Croydon) Limited
Hammerson (Didcot) Limited
Hammerson (Didcot II) Limited
Hammerson (Euston Square) Limited
Hammerson (Folkestone) Limited
Hammerson (Glasgow) Limited
Hammerson (Kingston) Limited
Hammerson (Kirkcaldy) Limited
Hammerson (Leeds Developments) Limited
Hammerson (Leeds GP) Limited
Hammerson (Leeds Investments) Limited
174 HAMMERSON PLC ANNUAL REPORT 2016
Hammerson (Leeds) Limited
Hammerson (Leicester) Limited
Hammerson (Leicester GP) Limited
Hammerson (Lichfield) Limited
Hammerson (Merthyr) Limited
Hammerson (Milton Keynes) Limited
Hammerson (Moor House) Properties Limited
Hammerson (Newcastle) Limited
Hammerson (Newtownabbey) Limited
Hammerson (Oldbury) Limited
Hammerson (Watermark) Limited
Hammerson (Whitgift) Limited
Hammerson Birmingham Properties Limited
Hammerson Bull Ring Limited
Hammerson Croydon (GP1) Limited
Hammerson Croydon (GP2) 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 Ireland Investments Limited 2
Hammerson Junction (No 3) Limited
Hammerson Junction (No 4) Limited
Hammerson LLC (United States) 4
Hammerson MGLP Limited
Hammerson MGLP 2 Limited
Hammerson MLP Limited
Hammerson Moor House (LP) Limited
Hammerson Operations Limited
Hammerson (Grosvenor Street) Limited
Hammerson Martineau Galleries Limited
Indirect subsidiaries and other wholly-owned entities (continued)
England and Wales (continued)
Registered office: Kings Place, 90 York Way, London N1 9GE
Hammerson Operations (Ireland) Limited 2
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
Hammerson Retail Parks Holdings Limited
Hammerson Sheffield (NRQ) Limited
Hammerson Shelf Co 6 Limited
Hammerson Shelf Co 7 Limited
Hammerson Shelf Co 8 Limited
Hammerson Shelf Co 9 Limited
Hammerson Shelf Co 10 Limited
Hammerson UK Properties plc
Hammerson Wrekin LLP 7
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
Leeds (GP2) Limited
London & Metropolitan Northern
LWP Limited Partnership 7
Martineau Galleries (GP) Limited
Martineau Galleries No. 1 Limited
Martineau Galleries No. 2 Limited
Mentboost Limited
Monesan Limited (Northern Ireland) 1
New Southgate Limited
Precis (1474) Limited (Ordinary and Deferred)
RT Group Developments Limited
RT Group Property Investments Limited
SEVCO 5025 Limited 5
Spitalfields Developments Limited
Spitalfields Holdings Limited (Ordinary and Preference)
The Hammerson ICAV (Ireland) 2
The Highcross Limited Partnership 7
The Junction (General Partner) Limited
The Junction (Thurrock Shareholder GP) Limited
The Junction Limited Partnership 7
The Junction Thurrock (General Partner) Limited
The Junction Thurrock Limited Partnership 7
The Martineau Galleries Limited Partnership 7
Thurrock Shares 1 Limited
Thurrock Shares 2 Limited
Union Square Developments Limited (Scotland) 6
West Quay (No.1) Limited
West Quay (No.2) Limited
West Quay Shopping Centre Limited
Westchester Holdings Limited
Westchester Property Holdings Limited
Westchester Properties (Thanet) Limited
Registered offices: (1) Cleaver Fulton Rankin, 50 Bedford Street, Belfast, BT2 7FW; (2) 6th Floor, 2 Grand Canal Square, Dublin 2. Ireland; (3) Fort Anne, Douglas, IM1 5PD,
Isle of Man; (4) 2711 Centerville Road, Suite 400, Wilmington 19808, United States; country of operation is the United Kingdom; (5) c/o Stillwell Gray, 14-30 City Business Centre,
Hyde Street, Winchester, Hampshire, SO23 7TA ; (6) 1 George Square, Glasgow, G2 1AL; (7) No shares in issue for Unit Trusts or Limited Partnerships.
France
Registered office: 40/48 rue Cambon – 23 rue des Capucines 75001 Paris (See page 176 for footnotes)
BFN10 GmbH (Germany) 1
Cergy Expansion 1 SAS
Hammerson Mantes SCI
Hammerson Marignan SAS
Espace Plus SC1
Hammerson SAS
Hammerson Asset Management SAS
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) 2
Hammerson Fontaine SCI
Hammerson France SAS
Hammerson Marketing et Communication SAS
Hammerson Marseille SC
Hammerson Nancy SCI
Hammerson Property Management SAS
Hammerson Saint-Sébastien SAS
Hammerson Troyes SCI
Les Pressing Réunis SARL
Retail Park Nice Lingostière SAS
RC Aulnay 3 SCI
SCI Cergy Cambon SCI
SCI Cergy Capucine SCI
SCI Cergy Expansion 2 SCI
SCI Cergy Honoré SCI
SCI Cergy Lynx SCI
HAMMERSON.COM
HAMMERSON.COM 175
175
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
Notes to the company accounts continued
H: Subsidiaries and other related undertakings (continued)
Indirect subsidiaries and other wholly-owned entities (continued)
France (continued)
Registered office: 40/48 rue Cambon – 23 rue des Capucines 75001 Paris
SCI Cergy Madeleine 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 Paix SCI
SCI Cergy Royale SCI
SCI Cergy Trois SCI
SCI Cergy Tuileries SCI
SCI Cergy Vendôme SCI
SCI Hammerson Thiebaut SCI
SCI Nevis SCI
SCI Paris Italik SCI
Sebastien Expansion SNC
Société de gestion des parkings Hammerson (SOGEPH) SARL
Teycpac-H-Italie SAS
Registered offices: (1) c/o Forum Steglitz, Schlossstraße 1, 12163 Berlin, Germany; (2) Spoorsinge, 2871 TT, Schoonhoven, Netherlands.
Jersey
Registered office: 47 Esplanade, St Helier, JE1 0BD, 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
Hammerson VRC (Jersey) Limited
Hammerson Whitgift Investments Limited
Highcross (No.1) Limited
Highcross (No.2) Limited
Highcross Leicester Limited
Junction Thurrock Unit Trust 1
Telford Forge Retail Park Unit Trust 1
The Junction Unit Trust 1
(1) No shares in issue for Unit Trusts. The registered office address is that of the appropriate trustee.
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 Joint Venture Trust
Bull Ring No.1 Limited
Bull Ring No.2 Limited
Croydon (GP1) Limited
Croydon (GP2) Limited
Croydon Car Park Limited
Croydon Jersey Unit Trust
Croydon Limited Partnership
Croydon Management Services Limited
Croydon Property Investments Limited
Dundrum Car Park GP Limited
Dundrum Car Park Limited Partnership
HAMMERSON PLC ANNUAL REPORT 2016
176
176 HAMMERSON PLC ANNUAL REPORT 2016
Country of registration
or operation
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
Jersey 2
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
Jersey 2
England and Wales 1
England and Wales 1
England and Wales 1
Ireland 3
Ireland 3
Class of share held
Ownership %
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
Ordinary
Ordinary
Ordinary
N/A
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Notes to the company accounts continued
H: Subsidiaries and other related undertakings (continued)
Indirect subsidiaries and other wholly-owned entities (continued)
France (continued)
Registered office: 40/48 rue Cambon – 23 rue des Capucines 75001 Paris
(1) No shares in issue for Unit Trusts. The registered office address is that of the appropriate trustee.
Registered offices: (1) c/o Forum Steglitz, Schlossstraße 1, 12163 Berlin, Germany; (2) Spoorsinge, 2871 TT, Schoonhoven, Netherlands.
SCI Cergy Madeleine 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 Paix SCI
SCI Cergy Royale SCI
Jersey
Registered office: 47 Esplanade, St Helier, JE1 0BD, 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
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 Joint Venture Trust
Bull Ring No.1 Limited
Bull Ring No.2 Limited
Croydon (GP1) Limited
Croydon (GP2) Limited
Croydon Car Park Limited
Croydon Jersey Unit Trust
Croydon Limited Partnership
Croydon Management Services Limited
Croydon Property Investments Limited
Dundrum Car Park GP Limited
Dundrum Car Park Limited Partnership
176 HAMMERSON PLC ANNUAL REPORT 2016
SCI Cergy Trois SCI
SCI Cergy Tuileries SCI
SCI Cergy Vendôme SCI
SCI Hammerson Thiebaut SCI
SCI Nevis SCI
SCI Paris Italik SCI
Sebastien Expansion SNC
Société de gestion des parkings Hammerson (SOGEPH) SARL
Teycpac-H-Italie SAS
Hammerson VIA (Jersey) Limited
Hammerson VRC (Jersey) Limited
Hammerson Whitgift Investments Limited
Highcross (No.1) Limited
Highcross (No.2) Limited
Highcross Leicester Limited
Junction Thurrock Unit Trust 1
Telford Forge Retail Park Unit Trust 1
The Junction Unit Trust 1
Class of share held
Ownership %
Country of registration
or operation
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
Jersey 2
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
Jersey 2
England and Wales 1
England and Wales 1
England and Wales 1
Ireland 3
Ireland 3
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
Ordinary
Ordinary
Ordinary
N/A
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Indirectly held joint venture entities (continued)
Dundrum Retail GP Designated Activity Company
Dundrum Retail Limited Partnership
Grand Central (GP) Limited
Grand Central Limited Partnership
Grand Central No. 1 Limited
Grand Central No. 2 Limited
Hammerson (Silverburn) JV Investment Advisor Limited
Moor House General Partner Limited
Oracle Nominees (No. 1) Limited
Oracle Nominees (No. 2) Limited
Oracle Nominees Limited
Oracle Shopping Centre Limited
RC Aulnay 1 SCI
RC Aulnay 2 SCI
Reading Residential Properties Limited
Retail Property Holdings Limited
Retail Property Holdings (SE) Limited
SAS Angel Shopping Centre SAS
SCI ESQ SCI
Société Civile de Développement du Centre Commercial
de la Place des Halles SDPH SC
The Bull Ring Limited Partnership
The Grand Central Unit Trust
The Moor House Limited Partnership
The Oracle Limited Partnership
The Silverburn Unit Trust
The West Quay Limited Partnership
Triskelion Property Holding Designated Activity Company
VIA Limited Partnership
Whitgift Limited Partnership
Country of registration
or operation
Ireland 3
Ireland 3
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
England and Wales 1
France 4
France 4
England and Wales 1
Isle of Man 5
Guernsey 6
France 7
France 7
France 8
England and Wales 1
Jersey 2
England and Wales 1
England and Wales 1
Jersey 2
England and Wales 1
Ireland 3
Jersey 2
England and Wales 1
Class of share held
Ownership %
Ordinary
N/A
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
N/A
N/A
50
50
50
50
50
50
50
67
50
50
50
50
25
25
50
50
50
10
25
65
50
50
67
50
50
50
50
47
50
Registered offices: (1) Kings Place, 90 York Way, London N1 9GE ; (2) 47 Esplanade, St Helier, JE1 0BD, Jersey ; (3) 6th Floor, 2 Grand Canal Square, Dublin 2, Ireland;
(4) 129 rue Turenne 75003 Paris; (5) Fort Anne, Douglas, IM1 5PD, Isle of Man; (6) Firman House, St. George’s Place, St. Peter Port, GY1 2BH, Guernsey;
(7) 1 cours Michelet – CS 30051 92076 Paris La Defense; (8) 40/48 rue Cambon – 23 rue des Capucines 75001 Paris.
Indirectly held associate entities
Bicester Investors Limited Partnership
Bicester Investors II Limited Partnership
Master Holding BV
US Paris LLC
Value Retail Investors Limited Partnership
Value Retail Investors II Limited Partnership
Value Retail PLC
VR Franconia GmbH
VR Ireland BV
VR Maasmechelen Tourist Outlets Comm. VA
Country of registration
or operation
Bermuda 1
Bermuda 1
Netherlands 2
USA 3
Bermuda 1
Bermuda 1
UK 4
Germany 5
Netherlands 2
Belgium 6
Class of share held
Ownership %
N/A
N/A
Ordinary
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
B-shares
25
25
12
42
71
80
24
15
12
25
Registered offices: (1) Victoria Place, 31 Victoria Street, Hamilton, HM10, Bermuda; (2) TMF, Luna Arena, Herikerbergweg 238, 1101 CM Amsterdam, Netherlands;
(3) 35 Mason Street, Greenwich CT 06830 USA; (4) 19 Berkley Street, London W1J 8ED; (5) Almosenberg, 97877, Wertheim, Germany;
(6) Zetellaan 100, 3630 Maasmechelen, Belgium.
HAMMERSON.COM
HAMMERSON.COM 177
177
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSTRATEGIC REPORT
ADDITIONAL DISCLOSURES
UNAUDITED
Table 92
EPRA measures
EPRA performance measures
Portfolio analysis
Rental information
Rent reviews
Lease expiries and breaks
Net rental income
Top ten tenants
Cost ratio
Valuation analysis
Yield analysis
Table
Page
Table
Page
93
94
95
96
97
98
99
100
101
178
179
179
180
180
181
181
182
182
Share of Property interests
Income statement
Balance sheet
Premium outlets
Income statement
Balance sheet
Proportionally consolidated
information
Balance sheet
EBITDA
Net debt
Loan to value
Net underlying finance costs
102
103
104
105
106
107
108
109
110
183
183
184
184
185
185
186
186
186
EPRA measures
Hammerson is a member of European Public Real Estate Association (EPRA) and has representatives who actively participate in a number
of EPRA committees and initiatives. This includes working with peer group companies, real estate investors and analysts and the large audit
firms, to improve the transparency, comparability and relevance of the published results of listed real estate companies in Europe.
As with other real estate companies, we have adopted the EPRA Best Practice Recommendations (BPR) and were again awarded an EPRA Gold
Award for compliance with the EPRA BPR for our 2015 Annual Report. Further information on EPRA and the EPRA BPR can be found on their
website www.epra.com. Our key EPRA metrics are described and shown in table 93.
Definition
Recurring earnings from core operational activities. In both 2016 and 2015,
EPRA earnings differed marginally from the Group’s adjusted earnings due
to the inclusion of a “Company specific adjustment” in relation to translation
movements on an intragroup funding loan in VIA Outlets (see note 12B of the
accounts) which management believe distorts the underlying earnings of the
Group.
EPRA earnings divided by the weighted average number of shares in issue during
the period.
NAV excluding the fair values of financial instruments, debt and deferred tax
balances divided by the number of issued shares.
NAV adjusted to include the fair values of financial instruments, debt and deferred
taxes.
Annual cash rents receivable, less head and equity rents and any non-recoverable
property operating expenses, as a percentage of the gross market value of the
property, including estimated purchasers’ costs as provided by the Group’s
external valuers.
EPRA NIY adjusted for the expiry of rent-free periods.
The estimated market rental value (ERV) of vacant space divided by the ERV of
the whole portfolio. Occupancy is the inverse of vacancy.
Total operating costs 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.
Page
148
148
149
149
182
182
179
181
Table 93
EPRA performance measures
Performance measure
Earnings
2016
performance
2015
performance
£230.9m £213.0m
29.2p
Earnings per share
(EPS)
Net asset value (NAV)
per share
Triple net asset value
(NNNAV) per share
Net Initial Yield (NIY) 4.4%
£7.39
£6.88
27.2p
£7.10
£6.74
4.6%
Topped-up NIY
Vacancy rate
4.6%
2.5%
4.7%
2.3%
Cost ratio
22.6%
23.1%
178
HAMMERSON PLC ANNUAL REPORT 2016
Portfolio analysis
Rental information
Table 94
Rental data for the year ended 31 December 2016
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
Ireland
Total investment portfolio
Developments
174.2
84.0
13.8
272.0
101.1
13.7
386.8
11.9
148.4
79.6
9.3
237.3
89.3
12.5
339.1
7.4
Total property portfolio (note 2)
398.7
346.5
Selected data for the year ended 31 December 2015
Group
UK
France
Total investment portfolio
Developments
262.0
95.9
357.9
8.5
230.4
83.0
313.4
5.2
2.2
1.4
10.1
2.4
3.5
0.5
2.5
2.0
3.1
2.3
540
205
155
365
455
495
390
174.4
77.3
11.9
263.6
97.0
31.9
392.5
186.8
77.1
13.4
277.3
107.9
34.8
420.0
4.9
(1.5)
1.7
2.9
7.1
8.3
4.4
345
355
345
261.1
88.8
349.9
270.7
101.0
371.7
1.7
9.8
3.8
Total property portfolio
Notes
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
366.4
318.6
valuations as defined by IFRS 13. This information has been subject to audit.
Rent reviews
Table 95
Rent reviews as at 31 December 2016
Proportionally consolidated excluding premium
outlets
Outstanding
£m
2017
£m
2018
£m
2019
£m
Total
£m
Outstanding
£m
2017
£m
2018
£m
2019
£m
Total
£m
Rents passing subject to review inA
Current ERV of leases subject to review inB
United Kingdom
Shopping centres
Retail parks
Other
Ireland
Total
20.6
28.6
3.7
52.9
14.1
67.0
13.0
8.2
0.9
22.1
1.0
23.1
19.1
7.0
1.5
27.6
1.4
29.0
23.1
12.5
1.5
37.1
1.0
38.1
75.8
56.3
7.6
139.7
17.5
157.2
22.3
29.6
3.9
55.8
16.1
71.9
13.8
8.8
0.9
23.5
1.3
24.8
20.4
7.4
1.3
29.1
1.4
30.5
24.3
13.1
1.8
39.2
1.1
40.3
80.8
58.9
7.9
147.6
19.9
167.5
Notes
A. The amount of rental income, based on rents passing at 31 December 2016, 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 2016 and ignoring
the impact of changes in rental values before the review date.
HAMMERSON.COM
179
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONADDITIONAL DISCLOSURESSTRATEGIC REPORT Additional disclosures continued
UNAUDITED
Lease expiries and breaks
Table 96
Lease expiries and breaks as at 31 December 2016
Proportionally consolidated excluding premium outlets
2017
£m
2018
£m
2019
£m
Total
£m
2017
£m
2018
£m
2019
£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
Ireland
Total investment portfolio
20.4
5.0
2.6
28.0
17.5
2.4
47.9
22.9
2.6
1.8
27.3
3.6
2.5
33.4
13.6
3.4
0.6
17.6
3.8
1.7
23.1
56.9
11.0
5.0
72.9
24.9
6.6
104.4
23.4
5.2
3.2
31.8
19.4
2.5
53.7
21.8
2.6
1.3
25.7
4.1
2.4
32.2
14.7
3.6
0.7
19.0
4.2
1.8
25.0
59.9
11.4
5.2
76.5
27.7
6.7
110.9
6.8
8.1
7.9
7.3
2.8
12.1
6.4
11.4
9.1
9.1
10.5
5.7
15.5
9.5
Notes
A. The amount of rental income, based on rents passing at 31 December 2016, for leases which expire or, for the UK and Ireland only, are subject to tenant break options,
which fall due in each year.
B. The ERV at 31 December 2016 for leases that expire or, for the UK and Ireland only, are subject to tenant break options which fall due in each year and ignoring the impact
of rental growth and any rent-free periods.
Net rental income
Table 97
Net rental income for the year ended 31 December 2016
Proportionally consolidated excluding premium outlets
United Kingdom
Shopping centres
Retail parks
Other
Total
France
Ireland
Total property portfolio
Properties
owned
throughout
2015/16
£m
Increase
for properties
owned
throughout
2015/16
%
Acquisitions
£m
Disposals
£m
Developments
and other
£m
Total net
rental income
£m
139.7
69.2
5.5
214.4
82.4
–
296.8
2.4
2.4
(3.5)
2.3
2.2
n/a
2.2
8.4
–
0.7
9.1
2.2
14.0
25.3
0.1
6.8
–
6.9
1.7
–
8.6
0.2
3.6
9.0
12.8
3.0
–
15.8
148.4
79.6
15.2
243.2
89.3
14.0
346.5
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
2015/16
£m
136.4
67.6
5.7
209.7
80.6
290.3
Exchange
£m
Acquisitions
£m
Disposals
£m
Developments
and other
£m
Total net
rental income
£m
–
–
–
–
(10.4)
(10.4)
(0.1)
–
–
(0.1)
1.0
0.9
2.5
13.1
0.8
16.4
10.7
27.1
(0.1)
1.3
8.5
9.7
1.0
10.7
138.7
82.0
15.0
235.7
82.9
318.6
180
HAMMERSON PLC ANNUAL REPORT 2016
Top ten tenants
Table 98
Ranked by passing rent at 31 December 2016
Proportionally consolidated excluding premium outlets
B&Q
H&M
Next
Inditex
Dixons Carphone
Marks&Spencer
Home Retail Group
Boots
Arcadia
Debenhams
Total
Cost ratio
Table 99
EPRA 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
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
12.6
9.1
8.9
8.7
5.8
5.7
5.6
5.5
5.3
5.1
3.2
2.3
2.3
2.2
1.5
1.4
1.4
1.4
1.4
1.3
72.3
18.4
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
6.5
8.0
14.5
33.6
(6.6)
41.5
54.6
(8.5)
87.6
398.7
(4.1)
(6.6)
388.0
22.6
20.5
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
Staff costs amounting to £1.6 million (2015: £1.9 million) have been capitalised as development costs and are excluded from table 99. Our
business model for developments is to use a combination of in-house staff and external advisors. The cost of external advisors 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.
HAMMERSON.COM
181
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONADDITIONAL DISCLOSURESSTRATEGIC REPORT Additional disclosures continued
UNAUDITED
Valuation analysis
Table 100
Valuation analysis at 31 December 2016
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
Ireland
Total investment portfolio
Developments
Total property portfolio
Premium outletsB
Total Group
Selected data for the year ended 31 December 2015
Group
UK
France
Total investment portfolio
Developments
Total property portfolio
Premium outletsB
Total Group
3,436.5
1,320.0
163.5
(5.8)
(118.3)
2.2
4,920.0
(121.9)
2,159.6
805.1
7,884.7
397.0
8,281.7
1,689.4
9,971.1
4,881.2
1,860.5
6,741.7
388.8
7,130.5
1,243.6
8,374.1
73.3
3.2
(45.4)
32.0
(13.4)
138.4
125.0
215.3
116.6
331.9
35.6
367.5
174.1
541.6
(0.2)
(8.9)
2.5
(2.8)
3.6
0.4
(1.0)
7.2
(0.4)
9.6
1.1
4.7
7.1
5.4
12.3
5.7
16.4
7.1
4.3
(4.0)
8.6
1.9
8.3
2.3
3.7
8.6
4.1
15.1
5.7
9.9
12.0
10.5
14.1
10.7
23.7
12.4
4.4
5.3
5.8
4.7
3.9
3.9
4.4
5.1
6.1
7.4
5.5
4.4
4.3
5.1
5.0
5.8
7.1
5.3
4.3
4.2
4.9
4.8
4.1
4.6
5.4
4.7
5.2
5.2
4.6
5.1
Notes
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 101
Investment portfolio as at 31 December 2016
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 5.7% of the net portfolio value.
B. The weighted average remaining rent-free period is 0.5 years.
C. The yield of 4.6% based on passing rents and gross portfolio value is equivalent to EPRA’s ‘topped-up” Net Initial Yield.
182
HAMMERSON PLC ANNUAL REPORT 2016
Net book
value
£m
8,337
(452)
7,885
4.6%
0.2%
4.8%
0.2%
5.0%
0.1%
0.2%
5.3%
Income
£m
Gross value
£m
8,337
365.8
14.0
379.8
12.7
392.5
9.8
17.7
420.0
4.4%
0.2%
4.6%
0.1%
4.7%
0.1%
0.2%
5.0%
5.1%
4.9%
Share of Property interests
The Group’s share of Property interests reflects the Group’s share of Property joint ventures as shown in note 12 to the accounts on pages
151 to 156 and the Group’s interest in Nicetoile, which is accounted for as an associate, included within note 13 to the accounts on pages 157
and 158.
Table 102
Aggregated Property interests income statements
Gross rental income
Net rental income
Administration expenses
Operating profit before other net gains
Revaluation gains on properties
Operating profit
Change in fair value of derivatives
Other finance income
Net finance income
Profit before tax
Current tax charge
Profit for the year
Table 103
Aggregated Property interests balance sheets
Non-current assets
Investment and development properties
Interests in leasehold properties
Current assets
Other current assets
Cash and deposits
Total assets
Current liabilities
Other payables
Borrowings
Non-current liabilities
Obligations under finance leases
Other payables
Total liabilities
Net assets
Property
joint
ventures
£m
Nicetoile
£m
145.9
122.9
(0.4)
122.5
10.7
133.2
0.8
15.3
16.1
149.3
(0.8)
148.5
Property
joint
ventures
£m
3,490.1
10.8
3,500.9
100.2
54.8
155.0
3,655.9
(78.4)
(46.7)
(125.1)
(10.8)
(5.3)
(16.1)
(141.2)
1.5
1.3
–
1.3
0.6
1.9
–
–
–
1.9
–
1.9
Nicetoile
£m
27.7
–
27.7
0.4
1.4
1.8
29.5
(0.2)
–
(0.2)
–
(0.3)
(0.3)
(0.5)
2016
Share of
Property
interests
£m
147.4
124.2
(0.4)
123.8
11.3
135.1
0.8
15.3
16.1
151.2
(0.8)
150.4
2016
Share of
Property
interests
£m
3,517.8
10.8
3,528.6
100.6
56.2
156.8
3,685.4
(78.6)
(46.7)
(125.3)
(10.8)
(5.6)
(16.4)
(141.7)
Property
joint
ventures
£m
129.2
108.8
(0.3)
108.5
122.1
230.6
1.0
2.1
3.1
233.7
–
233.7
Nicetoile
£m
1.2
1.0
–
1.0
0.3
1.3
–
–
–
1.3
–
1.3
Property
joint
ventures
£m
Nicetoile
£m
2,455.1
9.4
2,464.5
726.8
32.4
759.2
23.3
–
23.3
0.2
1.1
1.3
2015
Share of
Property
interests
£m
130.4
109.8
(0.3)
109.5
122.4
231.9
1.0
2.1
3.1
235.0
235.0
2015
Share of
Property
interests
£m
2,478.4
9.4
2,487.8
727.0
33.5
760.5
3,223.7
24.6
3,248.3
(67.2)
(40.2)
(107.4)
(9.4)
(4.1)
(13.5)
(120.9)
(0.2)
–
(0.2)
–
(0.2)
(0.2)
(0.4)
(67.4)
(40.2)
(107.6)
(9.4)
(4.3)
(13.7)
(121.3)
3,514.7
29.0
3,543.7
3,102.8
24.2
3,127.0
HAMMERSON.COM
183
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONADDITIONAL DISCLOSURESSTRATEGIC 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 accounted for as a joint venture. Tables
104 and 105 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 pages 157 and 158 and for VIA Outlets in note 12 to the accounts on pages 151 to 156.
Income statement
Table 104
Aggregated premium outlets income summary
Share of results (IFRS)
Less adjustments:
Revaluation gains on properties
Change in fair value of derivatives
Deferred tax
Other adjustments
Adjusted earnings of premium outlets
Interest receivable from Value Retail loans*
Total contribution to adjusted profit
Balance sheet
Table 105
Aggregated premium outlets investment summary
Investment properties
Net debt
Other net liabilities
Share of net assets (IFRS)
Less adjustments:
Fair value of derivatives
Deferred tax
Goodwill as a result of deferred tax
Adjusted investment
Investment in VR China – within other investments
Loans to Value Retail*
Total investment
Value Retail
£m
135.2
VIA Outlets
£m
20.7
(120.0)
15.2
9.6
(16.4)
(111.6)
23.6
4.2
27.8
(18.4)
(0.7)
4.7
(0.1)
(14.5)
6.2
–
6.2
Value Retail
£m
VIA Outlets
£m
1,387.3
(413.3)
(14.9)
959.1
(0.3)
140.9
(53.5)
87.1
1,046.2
–
21.6
1,067.8
302.1
(54.3)
(25.8)
222.0
3.5
19.5
(3.5)
19.5
241.5
–
–
241.5
2016
Total
£m
155.9
(138.4)
14.5
14.3
(16.5)
(126.1)
29.8
4.2
34.0
2016
Total
£m
1,689.4
(467.6)
(40.7)
1,181.1
3.2
160.4
(57.0)
106.6
1,287.7
–
21.6
1,309.3
Value Retail
£m
VIA Outlets
£m
159.3
13.1
(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
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
172.4
(174.1)
9.7
27.6
(12.4)
(149.2)
23.2
5.3
28.5
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
* At 31 December 2016 the Group had provided loans of £21.6 million (2015: £76.4 million) to Value Retail for which the Group received interest of £4.2 million in 2016
(2015: £5.3 million) which is included within finance income in note 7 to the accounts on page 146.
184
HAMMERSON PLC ANNUAL REPORT 2016
Proportionally consolidated information
Note 2 to the accounts on page 140 shows the proportionally consolidated income statement. The proportionally consolidated balance sheet,
net debt and net underlying finance costs are shown in the tables 106, 108 and 110.
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 pages 151 to 156 and Nicetoile
as shown in note 13 to the accounts on pages 157 and 158. 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 106
Balance sheet as at 31 December 2016
2016
Reported
Group
£m
Share of
Property
interests
£m
Proportionally
consolidated
£m
A
B
C
Reported
Group
£m
A
Share of
Property
interests
£m
B
2015
Proportionally
consolidated
£m
C
4,763.9
36.4
6.2
3,736.7
988.1
–
44.9
9,576.2
105.9
35.1
74.3
215.3
9,791.5
303.8
0.4
211.1
515.3
3,285.2
0.5
37.5
96.0
3,419.2
3,934.5
5,857.0
3,517.8
10.8
–
(3,514.7)
(29.0)
–
–
(15.1)
84.8
15.8
56.2
156.8
141.7
78.6
–
46.7
125.3
–
–
10.8
5.6
16.4
141.7
–
8,281.7
47.2
6.2
222.0
959.1
–
44.9
9,561.1
190.7
50.9
130.5
372.1
9,933.2
382.4
0.4
257.8
640.6
3,285.2
0.5
48.3
101.6
3,435.6
4,076.2
5,857.0
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
EBITDA
Table 107
EBITDA for the year ended 31 December 2016
Adjusted operating profit (note 2)
Interest income from Irish loans
Tenant incentive amortisation
Share-based remuneration
Depreciation
Total
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
–
2016
£m
330.2
17.4
2.6
5.6
2.0
357.8
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
2015
£m
299.5
4.7
1.8
4.8
1.7
312.5
HAMMERSON.COM
185
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONADDITIONAL DISCLOSURESSTRATEGIC REPORT Additional disclosures continued
UNAUDITED
Proportionally consolidated net debt
Table 108
Net debt as at 31 December 2016
Notes
Cash at bank
Short-term deposits
Cash and deposits
Current borrowings including currency swaps
Non-current borrowings
Net debt
Loan to value
Table 109
Loan to value as at 31 December 2016
Loan – Net debt (Table 108)
Total property portfolio (Table 100)
Irish loan assets
Investment in VIA Outlets (note 12A)
Investment in Value Retail (note 13C)
Less non-controlling interest
Value
Loan to value (%)
Reported
Group
£m
A
74.1
0.2
74.3
(211.1)
(3,285.2)
(3,422.0)
Share of
Property
interests
£m
B
53.7
2.5
56.2
(46.7)
–
9.5
2016
Total
£m
C
127.8
2.7
130.5
(257.8)
(3,285.2)
(3,412.5)
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)
2016
New
methodology
Old
methodology
New
methodology
2015
Old
methodology
3,412.5
3,412.5
2,967.8
2,967.8
8,281.7
54.1
222.0
959.1
(81.4)
9,435.5
8,281.7
54.1
n/a
n/a
n/a
8,335.8
7,130.5
690.2
110.8
743.8
(69.0)
8,606.3
7,130.5
690.2
n/a
n/a
n/a
7,820.7
36.2
40.9
34.5
37.9
Proportionally consolidated net underlying finance costs
Table 110
Underlying finance costs for the year ended 31 December 2016
Notes
Finance costs
Finance income
Adjusted finance costs/(income) (note 2)
Capitalised interest
Net underlying finance costs/(income)
Reported
Group
£m
Share of
Property
interests
£m
A
121.2
(12.4)
108.8
5.1
113.9
B
2.1
(17.4)
(15.3)
–
(15.3)
2016
Total
£m
C
123.3
(29.8)
93.5
5.1
98.6
Reported
Group
£m
A
101.9
(15.7)
86.2
5.3
91.5
Share of
Property
interests
£m
B
2.5
(4.6)
(2.1)
–
(2.1)
2015
Total
£m
C
104.4
(20.3)
84.1
5.3
89.4
186
HAMMERSON PLC ANNUAL REPORT 2016
DEVELOPMENT PIPELINE
UNAUDITED
Scheme
Area m2
Key facts
UK shopping centres
Brent Cross extension
90,000
- Extension and refurbishment of Brent Cross shopping centre forming part of wider Brent
Cross Cricklewood regeneration plans totalling 175,000m2 of retail, catering and leisure.
Bristol Investment Properties*
74,000
- Reserved matters planning application to be submitted in spring 2017.
- New planning application in the name of Callowhill Court submitted in December 2016
for a 3.5ha site of joint venture owned land relating to part of the existing retail properties
adjoining Cabot Circus.
- Masterplan includes up to 74,000m2 retail and leisure, 900 car parking spaces, the potential
for 150 residential units and a 150 room hotel.
Croydon Town Centre
200,000
- Redevelopment of Whitgift Centre and refurbishment of Centrale shopping centre by
Silverburn (Phase 4), Glasgow*
50,000
Union Square, Aberdeen*
27,800
Victoria Gate (Phase 2), Leeds* 73,000
Westquay Watermark (Phase 2),
Southampton
58,000
Croydon Partnership, a 50:50 joint venture between Hammerson and Westfield.
- New outline planning application submitted in October 2016, with decision expected in
summer 2017.
- Consent granted in October 2015 for a masterplan for a future extension of existing centre.
- Masterplan includes 31,250m2 retail, 8,500m2 leisure, plus a hotel.
- Extension of existing shopping centre for up to 11,000m2 of retail, 12,000m2 of leisure and
catering, plus up to 435 car parking spaces and a hotel.
- Planning application due for determination by summer 2017.
- Phase 1 completed October 2016. Phase 2 masterplanning underway to deliver a phased
retail/leisure mixed-use scheme to complement Victoria Gate. Revised planning
application submission anticipated end of 2017
- Freehold control of site obtained
- Council-owned land, with outline planning consent for 8,000m2 of retail and leisure, 260
residential units and one or more hotels, achieved in 2014.
- A joint review of scheme is under way including a proposed development agreement to
bring the scheme forward.
UK retail parks
Oldbury, Dudley*
UK Other
The Goodsyard, London E1
France
Italie Deux, Paris 13ème
10,900
- Planning secured in May 2016 for new development of up to 11 retail and catering uses.
- Leasing underway.
270,000
- 4.2ha site on edge of the City of London.
- Planning application for major mixed-use development was deferred in April 2016 to allow
further consultation.
- Work ongoing to submit amended application during 2017.
6,500
- Extension of the existing shopping centre offering a new façade in addition to retail, leisure
Les Trois Fontaines, Cergy
Pontoise
SQY Ouest,
Saint Quentin-en-Yvelines*
Ireland
Dundrum Phase II, Dublin*
28,000
32,000
100,000
Dublin Central, Dublin*
158,000
Swords Pavilions Phase III,
Dublin*
272,000
Total
1,450,200
and innovative concepts.
- Land disposal approved by the City of Paris. Consents submitted.
- Retail and catering extension as part of a wider city centre project.
- Co-ownership agreement, building permit and retail consent obtained.
- Pre-letting and contractor discussions ongoing.
- Opportunity to reposition existing shopping centre, creating a leisure-led destination.
- Six acre site located adjacent to Dundrum Town Centre.
- Opportunity to create a retail-led mixed-use scheme; master planning process underway.
- Extension of duration of planning consent granted until May 2022 to create a retail-led city
centre scheme.
- Irish Government have appealed a High Court decision to designate part of the site as a
National Monument. The Group is supporting the process and a hearing is expected in
December 2017.
- Extension of duration of planning consent granted to August 2021.
- Consent in place to create 124,000m2 retail-led scheme with additional residential.
- Pending completion of loan-to-own process for Phases I and II.
D
E
V
E
L
O
P
M
E
N
T
P
I
P
E
L
I
N
E
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
* Schemes are on existing Hammerson owned land. No additional land acquisitions are required. This excludes occupational and long leaseholds.
HAMMERSON.COM
187
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
PROPERTY LISTING
UNAUDITED
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, Leeds
Westquay, Southampton
UK retail parks
Abbey Retail Park, Belfast
Abbotsinch Retail Park, Glasgow
Battery Retail Park, Birmingham
Brent South Retail Park, London
Central Retail Park, Falkirk
Cleveland Retail Park, Middlesbrough
Cyfarthfa Retail Park, Methyr Tydfil
Dallow Road, Luton
Elliott’s Field Shopping Park, Rugby
Fife Central Retail Park, Kirkcaldy
Imperial Retail Park, Bristol
Parc Tawe Retail Park, Swansea
Ravenhead Retail Park, St. Helens
St. Oswald’s Retail Park, Gloucester
Telford Forge Retail Park, Telford
The Orchard Centre, Didcot
Westwood and Westwood Gateway Retail Parks, Thanet
Wrekin Retail Park, Telford
France
Espace Saint-Quentin, Saint Quentin-En-Yvelines
Italie Deux, Paris
Jeu de Paume, Beauvais
Les Trois Fontaines, Cergy Pontoise
Les Terrasses du Port, Marseille
Nicetoile, Nice
O’Parinor, Aulnay-Sous-Bois
Place des Halles, Strasbourg*
Saint Sébastien, Nancy
SQY Ouest, Saint Quentin-En-Yvelines
Ireland
Dublin Central, Dublin
Dundrum Town Centre, Dublin
Ilac Centre, Dublin
* 35.5% non-controlling interest held by Assurbail. See page 169.
188
HAMMERSON PLC ANNUAL REPORT 2016
Ownership
Area, m2
No. of tenants
Passing rent, £m
41%
50%
50%
50%
50%
100%
50%
50%
100%
100%
50%
100%
100%
100%
41%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
25%
100%
100%
100%
100%
10%
25%
100%
100%
100%
100%
50%
50%
85,200
126,900
109,900
64,800
38,400
105,700
100,300
70,300
51,800
56,300
95,100
20,200
22,800
11,000
8,700
37,300
27,800
29,200
10,100
16,900
24,900
32,200
17,800
27,600
20,900
29,100
21,200
24,900
13,700
29,500
61,500
24,100
30,100
62,700
17,300
68,600
40,200
18,600
17,600
23,800
123,800
27,100
115
158
121
46
67
140
104
110
79
95
115
4
13
11
10
30
19
22
2
18
17
18
8
18
14
20
53
20
14
120
132
61
111
171
99
174
113
75
13
18
158
75
17.4
27.8
15.1
4.8
6.2
29.4
11.4
15.5
18.6
16.9
16.2
3.4
4.7
3.5
1.8
6.3
4.6
6.6
2.0
4.6
5.7
5.5
1.3
4.4
4.7
5.2
4.0
4.6
2.8
3.2
22.2
3.0
14.4
26.2
1.4
5.8
12.0
6.7
2.2
2.3
27.4
4.1
Premium outlets
i. 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
ii. VIA Outlets
Batavia Stad, Amsterdam
Fashion Arena, Prague
Festival Park, Majorca
Freeport, Lisbon
Hede, Gothenburg
Landquart, Zurich
Seville, Seville
Style Outlets, Zweibrücken2
Wroclaw, Wroclaw
Vila de Conde, Porto2
1. Figures represent total turnover for each outlet, not Hammerson’s ownership share.
2. Acquired in 2017.
Ownership
Area, m2
No. of tenants
Total turnover1, £m
46%
33%
12%
40%
36%
23%
32%
26%
44%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
22,700
20,900
20,600
16,800
23,400
21,400
16,500
19,500
21,200
24,600
24,200
33,100
29,300
16,300
20,700
16,400
28,900
15,800
27,900
131
115
116
88
137
111
102
97
115
111
98
71
132
49
69
64
114
86
129
90.5
13.5
19.6
15.7
34.9
62.2
23.5
18.3
19.0
9.2
6.1
6.6
6.2
3.0
6.5
3.8
14.4
3.3
8.2
P
R
O
P
E
R
T
Y
L
I
S
T
I
N
G
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
HAMMERSON.COM
189
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
TEN-YEAR FINANCIAL SUMMARY
TEN-YEAR FINANCIAL SUMMARY
Unaudited
UNAUDITED
Income statement
Net rental income
Operating profit before other net
gains/(losses)
Other net (losses)/gains
Share of results of joint ventures
Share of results of associates
Cost of finance (net)
Profit/(Loss) before tax
Current tax
Deferred tax
2016
£m
2015
£m
2014
£m
2013*
£m
2012*
£m
2011
£m
2010
£m
2009
£m
2008
£m
2007
£m
346.5
318.6
305.6
290.2
282.9
296.0
284.7
293.6
299.8
275.7
300.4
(36.1)
20.7
135.2
(96.6)
323.6
(2.7)
–
276.3
381.0
13.1
159.3
(98.1)
731.6
(1.6)
–
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
252.6
257.5
469.9
(590.4) (1,698.3)
–
1.5
–
(0.8)
–
–
234.5
25.2
–
–
(95.1)
(110.2)
(137.6)
(112.6)
(100.0)
(114.5)
(170.7)
(149.3)
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
(0.6)
38.3
1.2
110.4
(16.4)
17.6
(10.6)
Non-controlling interests
(3.6)
(3.2)
Profit/(Loss) for the year attributable
to equity shareholders
317.3
726.8
699.1
337.4
138.4
335.7
615.4
(344.5) (1,572.6)
101.0
Balance sheet
Investment and development
properties
Investment in joint ventures
Investment in associates
Cash and short-term deposits
Borrowings
Other assets
Other liabilities
8,281.7
7,130.5
6,706.5
5,931.2
5,458.4
5,719.6
5,331.1
5,141.5 6,456.8
7,275.0
222.0
959.1
130.5
110.8
743.8
70.5
104.2
628.8
59.4
–
545.4
56.7
–
428.4
57.1
–
–
–
–
100.7
126.2
–
10.4
182.9
–
–
–
–
119.9
28.6
(3,543.0) (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)
318.7
1,025.0
331.6
462.3
323.1
268.6
435.6
319.5
271.2
339.9
(532.7)
(425.5)
(392.6)
(358.5)
(441.9)
(327.1)
(307.6)
(323.9)
(425.3)
(573.5)
Net deferred tax provision
Non-controlling interests
(0.5)
(81.4)
(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)
Equity shareholders’ funds
5,775.6
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
Cash flow
Operating cash flow after tax
Dividends
Property and corporate acquisitions
Developments and major
refurbishments
Other capital expenditure
Disposals
181.3
(135.7)
(499.7)
171.2
128.1
129.4
139.9
(163.8)
(139.1)
(129.4)
(118.4)
147.8
(86.1)
132.7
105.3
29.8
(95.4)
(64.5)
(86.7)
(29.2)
(73.1)
(43.7)
(302.7)
(191.1)
(397.3)
(374.1)
(218.6)
(39.5)
(123.5)
(163.3)
(44.6)
537.2
–
(10.9)
(127.2)
(137.2)
(164.0)
(184.4)
(122.9)
(55.2)
639.0
(45.1)
185.2
(39.8)
155.4
(17.5)
(48.0)
256.3
585.0
(60.8)
(164.1)
(376.7)
(335.5)
(25.5)
(23.7)
(13.9)
554.6
394.2
245.3
(91.2)
(23.6)
271.8
–
Investments in joint ventures
(155.0)
(735.6)
(118.9)
–
–
–
Other cash flows
86.5
(14.0)
12.4
(30.8)
(72.4)
(34.9)
(0.8)
–
–
–
–
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
(66.0)
(783.0)
(468.6)
(167.5)
(34.1)
(190.3)
286.2
207.7
(325.7)
(119.4)
40.2p
29.2p
24.0p
£7.28
£7.39
92.8p
26.9p
22.3p
£7.03
£7.10
95.7p
23.9p
20.4p
£6.35
£6.38
7.8%
14.3%
16.3%
59%
3.5x
1.2x
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
87.2p
(54.1)p (368.9)p
19.4p
20.9p
17.7p
£5.41
£5.42
47.3p
19.3p
16.6p
£5.30
£5.30
19.9p
19.7p
15.95p
15.45p
£4.93
£4.95
£4.20
£4.21
23.7p
27.3p
18.5p
£10.22
25.8p
18.9p
£6.61
£7.03
£10.49
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
*
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 2016, 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.
190
HAMMERSON PLC ANNUAL REPORT 2016
SHAREHOLDER INFORMATION
Key contact details
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 Ireland
Hammerson Group Management Limited
Regus Dublin
Harcourt Centre
Harcourt Street
Dublin
D02 HW77
Tel: + 353 (0)1695 0550
In July 2017 the principal Irish address will move to:
Hammerson Group Management Limited
Pembroke District
Dundrum Town Centre
Dublin 14
Principal address in France
Hammerson France SAS
40 – 48 rue Cambon
75001 Paris
Tel: +33 (0)156 69 30 00
Advisors
Valuers: Cushman & Wakefield LLP
Auditor: Deloitte LLP (resigning at the Annual General Meeting),
PricewaterhouseCoopers LLP (to be appointed at the Annual
General Meeting)
Solicitor: Herbert Smith Freehills LLP
Joint Brokers and Financial Advisors: J. P. Morgan Cazenove and
Deutsche Bank AG
Financial Advisor: Lazard Ltd.
Joint South African Sponsors: Deutsche Securities (SA)
(Proprietary) Limited and Java Capital Proprietary Limited
Shareholder administration
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
relevant Registrar or transfer secretaries.
Registrar in the United Kingdom
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 +44 371 664 0300 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.
Transfer Secretaries in South Africa
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank 2196
South Africa or
PO Box 61051
Marshalltown 2107
South Africa
Tel: 0861 100 950 (local in South Africa)
Email: web.queries@computershare.co.za
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on
25 April 2017 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.
Payment of dividends to mandated accounts
UK 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 register their mandate 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.
HAMMERSON.COM
191
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSHAREHOLDER INFORMATIONSTRATEGIC REPORT Shareholder Information continued
UK Dividend Reinvestment Plan (DRIP)
Shareholders can reinvest dividend payments in additional
shares in the Company under the DRIP operated by the
Registrar by completing an application form online at:
www.capitashareportal.com.
Elections to participate in the DRIP (or cancellation of previous
instructions) in respect of the final dividend must be received
by the Company’s Registrar no later than 25 days before the
dividend payment date. The DRIP will continue to be available to
shareholders who have already completed an application form.
Such shareholders should take no action unless they wish to
receive their dividend in cash, in which case they should contact
the Registrar to cancel their instruction.
South African DRIP
Shareholders registered on the South African branch register
who hold their shares through the Strate system and who wish to
participate in the DRIP should contact their Central Securities
Depository Participants.
Scrip Dividend Alternative (Scrip)
The Board has decided not to offer shareholders a Scrip for the final
dividend for the year ended 31 December 2016.
International payment service
The UK Registrar facilitates a service to convert sterling dividends
payable to shareholders on the UK share register into certain local
currencies. For further information, please contact the Registrar
(address listed above) or call +44 (0) 371 664 0300. 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 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
Capita share dealing services
An online and telephone dealing facility is available to shareholders
wishing to deal in shares on the UK share register, 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
192
HAMMERSON PLC ANNUAL REPORT 2016
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.
Strate Charity Shares
South African shareholders for whom the cost of selling their
shares would exceed the market value of such shares may wish
to consider donating them to charity. An independent non-profit
organisation called Strate Charity Shares has been established
to administer this process. For further details, queries and/or
donations contact the Strate Share Care toll free help line on
0800 202 363 (if calling from South Africa) or +27 11 870 8207
(if calling from outside South Africa).
Email: charityshares@computershare.co.za
Website: www.strate.co.za.
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 UK
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.
PIDs paid to overseas shareholders are subject to withholding tax
at 20%. South African shareholders may apply to Her Majesty’s
Revenue and Customs after payment of the PID for a refund
of the difference between the 20% withholding tax and the
prevailing UK/South African double tax treaty rate. South African
shareholders will have no further liability to dividends tax in
South Africa. Other overseas shareholders may be eligible to apply
for similar refunds of UK withholding tax under the terms of the
relevant tax treaties.
Normal dividends paid to overseas shareholders are paid gross
but may be subject to taxation in the shareholder’s country of
residence. For South African shareholders, dividends tax at 15%
will be withheld and paid over to the South African Revenue
Service on the shareholders’ behalf. Certain shareholders,
including South African tax resident companies, retirement
funds and approved public benefit organisations are exempt from
dividends tax but it is the responsibility of each shareholder to seek
their own advice. Dividends tax does not apply to scrip dividends,
whether paid as a PID or a normal dividend.
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
UK 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.
Primary and Secondary Listing
The Company has its primary listing on the London Stock
Exchange and a secondary inward listing on the Johannesburg
Stock Exchange.
Financial Calendar
Table 111
Recommended final dividend
Last day to effect removal of shares between the United Kingdom (UK) and South
African (SA) registers
Currency conversion announcement released
Last day to trade on the Johannesburg Stock Exchange (JSE) to qualify for
the dividend
Ex-dividend on the JSE from commencement of trading on
Ex-dividend on the London Stock Exchange from the commencement of
trading on
Record date (applicable to both the UK principal register and the SA
branch register)
Removal of shares between the UK and SA registers permissible from
Last day for receipt of Dividend Reinvestment Plan (DRIP) mandates by Central
Securities Depository Participants (CSDPs)
Last day for receipt of DRIP elections to SA Transfer Secretaries
Annual General Meeting
Last day for receipt of DRIP elections by UK Registrars
Final dividend payable (UK)
Final dividend payable (SA)
DRIP purchases settlement date (subject to market conditions and the purchase of
shares in the open market)
Anticipated 2017 interim dividend
6 March 2017
7 March 2017
14 March 2017
15 March 2017
16 March 2017
17 March 2017
20 March 2017
24 March 2017
27 March 2017
by 1.00pm (SA time)
2 April 2017
25 April 2017
27 April 2017
28 April 2017
5 May 2017
October 2017
HAMMERSON.COM
193
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONSHAREHOLDER INFORMATIONSTRATEGIC REPORT GLOSSARY
Adjusted figures (per share)
Anchor store
Reported amounts adjusted in accordance with EPRA guidelines to exclude certain items as set out in
note 10 to the accounts.
An major store, usually a department, variety or DIY store or supermarket, occupying a large unit
within a shopping centre or retail park, which serves as a draw to other retailers and consumers.
Average cost of borrowing or
weighted average interest rate
(WAIR)
BCSC
BREEAM
CAGR
Capital return
Compulsory Purchase Order
(CPO)
Cost ratio (or EPRA cost ratio)
CPI
Dividend cover
Earnings per share (EPS)
EBITDA
EPRA
Equivalent yield (true and
nominal)
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
Interest rate or currency swap
(or derivatives)
IPD
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.
An environmental rating assessed under the Building Research Establishment’s Environmental
Assessment Method.
Compound annual growth rate.
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 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.
The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows
reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on
current ERVs. The true equivalent yield (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.
Proportionally consolidated 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.
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.
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.
194
HAMMERSON PLC ANNUAL REPORT 2016
Like-for-like (LFL) NRI
LTV (Loan to value)
Net asset value (NAV) per share
Net rental income (NRI)
Occupancy rate
Occupational cost ratio (OCR)
Over-rented
Passing rents or rents passing
Principal lease
Pre-let
Property Income Distribution
(PID)
Property interests
Property joint ventures
QIAIF
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
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 proportion of a retailer’s sales compared with the total cost of occupation being: rent, business
rates, service charge and insurance. Calculated excluding anchor stores.
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 with a secure term greater than three years and where the unit is not
reconfigured. This enables letting metrics to be stated on a comparable basis.
A lease signed with a tenant prior to the completion of a development.
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.
Qualifying Investor Alternative Investment Fund. A regulated tax regime in the Republic of Ireland
which exempts participants from Irish tax on property income and chargeable gains subject to
certain requirements.
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
and joint operations, transactions and balances and equity accounted 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.
HAMMERSON.COM
195
FINANCIAL STATEMENTSGOVERNANCEOTHER INFORMATIONGLOSSARYSTRATEGIC REPORT INDEX
136, 172
45, 144
51, 168
74
126
51, 160, 173
6
22
51, 160
60
8
170
Accounting policies
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
Chief Executive’s review
Company balance sheet
Compliance with the UK Corporate Governance Code 61, 115
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:
Implementation report
Directors’ remuneration report: policy
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
Headline earnings
132
135
130
133
131
169
60
30
120
96
80
78
122
125
42, 72
47, 122, 147
132, 170
76
161
43
194
59
37
149
Investment and development properties
Investment in associates
Investments in subsidiary companies
Joint ventures
Key performance indicators (KPIs)
Net finance costs
Nomination Committee report
Notes to the accounts
Obligations under finance leases
Operating lease receipts
Our people
Our strategy
Payables
Pensions
Per share data
Principal Group addresses
Profit before tax
Property portfolio information
Property returns
Real Estate Investment Trusts (REITs)
Receivables
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
Sustainability review
Tax
Ten-year financial summary
Value Retail
Viability statement
VIA Outlets
30, 48, 138, 142
50, 157
172
151
18
51, 146
72
136
167
169
40
4, 12
167, 173
83, 109
43, 147, 148
191
130, 140
178
49
47, 146, 192
159, 173
140
53, 117
142
167
191
50
77
47, 146
173
34
47, 146, 192
190
32, 51, 157
59
33, 50, 151
Disclaimer
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in
nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks
and uncertainties relate to factors that are beyond Hammerson’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the
behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company’s ability to continue to obtain financing to
meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions,
including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon
as a guide to future performance.
196
HAMMERSON PLC ANNUAL REPORT 2016
We’d like to thank
everyone who has helped
to produce this report:
Michael Ashton, Warren Austin, Sarah Booth,
Michelle Boswell, Steve Brown, Jenny Casson,
Oliver Choppin, Doug Cleary, Julia Collier,
Natassja Dellemann, Paul Denby, Mark Duhig,
Lindsay Dunford, Abi Dunning, Louise Ellison,
Sali-Anne Evans, Linda Garner-Winship,
Karen Green, Sam Henton, Thibaut Joyeux,
Barbara Lees, Sophie Léoti, Vanessa Mitchell,
Chirag Morjaria, Mike Pasmore, Rebecca Patton,
Antony Primic, Fay Rajaratnam, Hannah Risk,
Louise Romain, Richard Sharp, Richard Shaw,
Aurélie Siha, Rachel Swan, Philip Watt
T
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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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