REG - Hammerson PLC - Final Results
29/02/2024 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240229:nRSc8728Ea&default-theme=true
RNS Number : 8728E Hammerson PLC 29 February 2024
29 February 2024
HAMMERSON plc - FULL YEAR 2023 RESULTS
Strong 2023: rental growth and earnings up, more to come
Rita-Rose Gagné, Chief Executive of Hammerson, said:
"Our city centre destinations are in high demand. This year we delivered a
positive performance across our key strategic, operational and financial
metrics. Like-for-like gross rental income was up 6%, following another
record year of leasing. Occupancy remains strong and footfall and sales were
up again. We've strengthened our operational platform, whilst reducing costs
by 14%. As a result, adjusted earnings rose 11% to £116m, whilst net debt
was down 23%, with ample liquidity.
Over the last three years, we have delivered against all strategic
milestones. We now have a core portfolio focused on urban locations which
are evolving into my vision: vibrant, 24/7 multi-use estates. These
destinations are fast growing, and part of the fabric and infrastructure of
the cities in which we operate.
Whilst our eyes are open to the current macro-economic environment, our
occupiers are thriving and our visitor numbers are on the rise in our
realigned portfolio. We are reaping the rewards of the investments we are
making in our core portfolio alongside best-in-class occupiers, which
underpins the high levels of demand for our space. We expect this trajectory
to continue in the year ahead. We have a strong pipeline of leasing and
repurposing opportunities. There is still more for us to do, but we are now
entering a time where having the capability to invest and operate with
discipline and conviction will be rewarded."
Positive performance across our key operational and financial metrics:
· Another record year of leasing with 306 deals, representing £46m of
headline rent, £29m at our share, up +23% LFL
· Permanent deals signed +37% vs previous passing; net effective rent
+12% vs ERV
· Footfall up +3% year-on-year; dwell time +5%; LFL sales +1% UK, +3%
France
· Adjusted earnings growth of +11% to £116m, or 2.3p per share (+10%),
driven by like-for-like GRI up +6%, NRI +4%
· Continued cost reduction outperformance: gross administration cost
-14% year-on-year bringing total cost reduction since FY 20 to -24%; guiding
to a further -10% cost reduction in 2024
· Value Retail adjusted earnings of £32m (FY 22: £27m), and £74m of
catch-up cash distributions received
· Group portfolio value of £4.7bn (FY 22: £5.1bn), mainly due to
disposals and derecognitions; capital return -2.6%
· IFRS loss of £51m (FY 22: £164m loss), basic loss per share of
-1.0p (FY 22: -3.3p)
· EPRA NTA per share 51p (FY 22: 53p)
· Execution of disposal programme has strengthened balance sheet: net
debt down 23% to £1,326m; LTV 34% (FY 22: 39%), FPC LTV 44% (FY 22: 47%); Net
debt to EBITDA of 8.0x (FY 22: 10.4x); liquidity of £1.2bn (FY 22: £1.0bn)
· Balance sheet further strengthened since the year-end with the
exchange for the sale of USQ for £111m
Dividend
· In July 2023, the Board reinstated a cash dividend as guided and
announced a new dividend policy of 60-70% of annual adjusted earnings,
balancing distributions to shareholders with our focus on reinvesting in our
core portfolio to deliver further growth and value.
· Today, the Board has recommended a final cash dividend of 0.78p per
share subject to shareholder approval, which will be paid as an ordinary
dividend, bringing the full year cash dividend to 1.50p per share,
representing a 64% payout, commensurate with the half year payment. The
dividend declaration will be released as a separate announcement.
Outlook
We had a strong 2023. City centres remain the dominant locations for
commerce and lifestyle. Our destinations are in high demand by occupiers and
visitors. The importance of a physical presence in a digitally-integrated
strategy for best-in-class operators is undeniable. Over time, we have a
unique opportunity to complement our retail core with a broader mix of uses by
repurposing existing space and unlocking value on adjacent land.
We have a strong platform with long term visibility of income. We remain
operationally disciplined and expect further cost reductions in 2024. We are
confident in our ability to grow top line and earnings off a new base, and
therefore create value for shareholders.
Results presentation today:
Hammerson will hold a presentation for analysts and investors at its Marble
Arch House office to present its full year financial results for the 12 months
ended 31 December 2023, followed by a Q&A session.
Date & time: Thursday 29 February 2024 at 09.45 am (GMT)
Webcast link: https://hammerson-fy-results-2023.open-exchange.net/
Conference call: Quote Hammerson when prompted by the operator, access code 329183
Please join the call 5 minutes before the booked start time to allow the
operator to transfer you into the call by the scheduled start time
France: +33 9 7073 3958
Ireland: +353 1 691 7842
Netherlands: +31 85 888 7233
South Africa: +27 87 550 8441
UK: +44 20 3936 2999
USA: +1 646 787 9445
The presentation and press release will be available at:
https://www.hammerson.com/investors/reports-results-presentations on the
morning of results
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.hammerson.com%2Finvestors%2Freports-results-presentations&data=04%7C01%7CCatrin.Sharp%40hammerson.com%7Ca8ef032d9e274070a57408d95598709b%7C22f66ba69d6948fb9f4e2f3259a62519%7C1%7C0%7C637634935469893159%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=xzz%2BF53VOmeqc36lDgae3M6RODXGzuT7Gqt0q1cZiX8%3D&reserved=0)
.
Enquiries:
Rita-Rose Gagné, Chief Executive Officer Tel: +44 (0)20 7887 1000
Himanshu Raja, Chief Financial Officer Tel: +44 (0)20 7887 1000
Josh Warren, Director of Strategy, Commercial Finance and IR Tel: +44 (0)20 7887 1053 josh.warren@hammerson.com (mailto:josh.warren@hammerson.com)
Natalie Gunson, Group Director of Communications Tel: +44 (0)20 7887 4672 natalie.gunson@hammerson.com (mailto:natalie.gunson@hammerson.com)
Oliver Hughes, Ollie Hoare and Charles Hirst, MHP Tel: +44 (0)20 3128 8100 Hammerson@mhpgroup.com (mailto:Hammerson@mhpgroup.com)
Disclaimer
Certain statements made in this document are forward looking and are based on
current expectations concerning future events which are subject to a number of
assumptions, risks and uncertainties. Many of these assumptions, risks and
uncertainties relate to factors that are beyond the Group's control and which
could cause actual results to differ materially from any expected future
events or results referred to or implied by these forward-looking statements.
Any forward-looking statements made are based on the knowledge and information
available to Directors on the date of publication of this announcement. Unless
otherwise required by applicable laws, regulations or accounting standards,
the Group does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
developments or otherwise. Accordingly, no assurance can be given that any
particular expectation will be met, and reliance should not be placed on any
forward-looking statement. Nothing in this announcement should be regarded as
a profit estimate or forecast.
This announcement does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to subscribe for or purchase any
shares or other securities in the Company or any of its group members, nor
shall it or any part of it or the fact of its distribution form the basis of,
or be relied on in connection with, any contract or commitment or investment
decisions relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the Company or any of its group members.
Statements in this announcement reflect the knowledge and information
available at the time of its preparation. Liability arising from anything in
this announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
Index to key data
Unless otherwise stated, figures have been prepared on a proportionally
consolidated basis, excluding Value Retail as outlined in the presentation of
information section of the Financial Review.
Year ended 2023 2022 Note/Ref
Income
Gross rental income £208m £215m 2
Adjusted earnings - Value Retail a £32m £27m 2
Adjusted finance costs a £46m £54m 2
Adjusted earnings a £116m £105m 2
Revaluation losses - Managed portfolio £(119)m £(221)m 2
Revaluation losses - Group portfolio, including Value Retail £(127)m £(282)m 3B
Loss for the year (IFRS) £(51)m £(164)m 2
Adjusted earnings per share a 2.3p 2.1p 10B
Basic loss per share (1.0)p (3.3)p 10B
Final cash dividend per share 0.78p - 18
Dividend per share for the year (cash/enhanced scrip) 1.50p/- 0.2p/2.0p 18
Operational
Like-for-like gross rental income change +5.5% +8.3% Financial Review
Like-for-like adjusted net rental income change +3.6% +29.2% Table 3
Occupancy - flagships 95% 96% Table 5
Leasing activity £29m £25m n/a
Leasing v ERV (principal leases) +12% +2% n/a
Leasing v Passing rent (principal leases) +37% +34% n/a
Passing rent £188m £210m Table 4
Like-for-like passing rent change +2.5% +1.4% n/a
ERV £193m £218m Table 4
Like-for-like ERV change - flagships +1.7% (2.2)% Financial Review
Capital and financing
Managed portfolio value £2,776m £3,220m 3B
Group portfolio value (including Value Retail) £4,662m £5,107m 3B
Total accounting return (2.1)% (6.8)% Table 15
Total property return (including Value Retail) 3.2% (0.7)% Table 9
Capital return (including Value Retail) (2.6)% (5.8)% Table 9
Net debt £1,326m £1,732m Table 13
Gearing 55% 68% Table 18
Loan to value - headline 34% 39% Table 19
Loan to value - fully proportionally consolidated 44% 47% Table 19
Liquidity £1,225m £996m Financial Review
Interest cover 3.91x 3.24x Table 17
Net debt : EBITDA 8.0x 10.4x Table 16
Net assets £2,463m £2,586m Balance sheet
EPRA net tangible assets (NTA) per share 51p 53p 10C
a These results include discussion of alternative performance
measures (APMs) which include those described as Adjusted, EPRA and Headline
as well as constant currency (where current period exchange rates are applied
to the prior period's results). Adjusted, EPRA and Headline measures are
described in note 1C to the financial statements and reconciliations for
earnings and net assets measures to their IFRS equivalents are set out in note
9 to the financial statements.
CHIEF EXECUTIVE'S REVIEW
In 2023, we delivered another year of significant strategic, operational and
financial progress and growth, reflecting three years of transformational
change for the business. We are now well positioned to invest for growth and
value creation. Today, the Group is focused on a core portfolio of city
centre destinations in some of the fastest growing cities in Europe that are
evolving to my vision: 24/7, urban 'living spaces'. Occupier flight to quality
- fewer, better stores in prime locations - is undeniable, with high flagship
occupancy at 95% following another year of record leasing in our uniquely
located city centre destinations.
We signed 306 leases representing £46m of headline rent, £29m at our share,
split roughly evenly between: new to portfolio brands, new concepts, social
and entertainment offers; and renewals with our current occupiers, including
new concepts and upsizes. We attract best-in-class occupiers who in turn make
significant investments in their physical footprint. Rental levels have
rebased and we are driving growth with permanent deals signed 12% ahead of ERV
on a net effective basis, and 37% ahead of previous passing rent, equating to
additional annualised passing rent of £7m on our £179m flagship rent roll.
The exceptional environments we create for our occupiers and visitors is
reflected in strong operational fundamentals. Despite the volatile
macroeconomic environment, footfall and like-for-like sales continue to grow.
Notably, we have seen particularly strong operational performances at assets
where we have made significant investments in recent years, such as Bullring,
Dundrum and Les 3 Fontaines.
Since 2020, we have transformed our operating model, and reshaped our
organisation. We have brought in new skills and talent in asset management,
leasing, commercialisation and placemaking, which means we can focus our
energies on value creation. On-site property management and associated
accounting services in the UK and France have largely been consolidated with
proven scale strategic partners.
We have invested to realign and upgrade our IT and digital platform in areas
where speed and data quality is critical. Today we are a more agile, resilient
and market facing asset-centric organisation, one that continues to evolve and
reshape our destinations to be fit for the future. We have again reduced gross
administration costs, down 14% year-on-year and we are targeting a further 10%
reduction in 2024.
We have further realigned our portfolio, exiting non-controlling minority
stakes in Italie Deux in France, alongside realising value from standalone
development assets in Croydon, and other non-core land generating £216m in
disposal proceeds in 2023. At the same time, we have been disciplined in not
allocating capital to assets with secured debt where these did not meet our
location and catchment, investment or return criteria. Whilst recognising an
impairment of £22m, £125m of secured debt was derecognised in the period
following exits from Highcross and O'Parinor, also bringing a sharper focus to
investment opportunities in the core portfolio. Since the balance sheet date,
we have exchanged on the sale of Union Square, which will bring to a close our
£500m disposal programme set out at FY 21.
At 31 December 2023, our financial position was significantly strengthened,
with ample cash and undrawn committed facilities of £1.2bn, more than
covering near term maturities and providing capital for investment. We will
continue to be disciplined allocators of capital and select the best returns
for shareholders, mindful of our own cost of capital and all options for
capital deployment including maintaining balance sheet strength and
flexibility.
Dividend
As announced at the 2023 half year results and outlined in the 2022 annual
report, the Board reinstated a cash dividend in 2023, declaring an interim
cash dividend of 0.72p in July which was paid entirely as a PID.
At the same time, the Board announced a new sustainable dividend policy of 60%
to 70% of annual adjusted earnings to be paid semi-annually. This policy is
based on disciplined capital allocation seeking to balance returns to
shareholders whilst continuing to invest to drive growth and value creation in
our core assets.
Therefore, the Board recommends a final cash dividend of 0.78p per share in
respect of 2023 to be paid as an ordinary dividend subject to shareholder
approval, which would represent a full year cash dividend of 1.50p per share
and a payout ratio of 64%, commensurate with the half year.
The Board recognises dividends are an important constituent of shareholder
returns and the policy will be kept under review.
FINANCIAL AND OPERATIONAL REVIEW
Adjusted earnings were up 11% to £116m or 2.3p per share, reflecting 6%
like-for-like growth in GRI and 4% growth in like-for-like NRI, combined with
significant further reductions in gross administration and net finance costs.
At FY 22, we committed to reduce our gross administration costs by 20% by FY
24. We have delivered a 14% reduction in 2023. There are more efficiencies to
come as we pursue greater automation and digitalisation of our business, as
well as outsourcing and consolidation of supplier opportunities. We expect to
deliver a further 10% reduction in 2024 which means we are on track to exceed
our target of 20% reduction by 2024, which would bring cumulative savings of
more than 30% since FY 20.
Net debt was down 23% to £1,326m (FY 22: £1,732m). Headline LTV was 34% (FY
22: 39%) and 44% (FY 22: 47%) including the Group's proportionate share of
Value Retail net debt. Our Net debt: EBITDA improved to 8.0x from 10.4x at FY
22, reflecting both lower debt and the improved operating performance.
EPRA NTA was 51p per share at 31 December 2023 (FY 22: 53p), with higher
earnings in part offsetting disposal and impairment and revaluation losses,
totalling £167m. Having been broadly flat for the first three quarters of the
year, we saw some marginal yield expansion in the fourth quarter in all
territories, which offset incremental flagship ERV growth in the UK, Ireland
and France. Moreover, all but two of our flagship assets benefited from
positive ERV movements, and all ten in the second half of the year. We are
starting to see positive valuation movements on selected assets.
Overall, the Group recorded an IFRS loss of £51m (FY 22: £164m loss), and a
negative total accounting return of -2.1%.
Footfall and sales
Footfall and sales performance reflects the exceptional nature of our
destinations and the improving mix of uses. The recovery in footfall that we
saw across our assets in FY 22 continued through FY 23 with consumers also
increasingly returning to city centres, both for leisure and work. Footfall
was +3% year-on- year (UK+1%, France +7% and Ireland +4%), closing the gap on
2019 levels, which we are now on average less than 10% below. Average dwell
time was up 5% to 88 minutes.
Overall, total sales and sales densities have risen by mid-teens percentages
since 2019, with substantial evidence that repurposed space and new concepts
materially outperform that which it is replacing.
Consumer spending continues to be resilient, with an improving outlook for
2024. Despite the 'cost of living' crisis, savings built during the Covid-19
pandemic, high levels of employment and strong wage growth, which outpaced
inflation in the second half of 2023, have helped underpin continued consumer
spend, along with evolving lifestyle trends. Like-for-like sales were up 1% in
the UK and 3% for France.
Occupancy
Our core portfolio continues to benefit from the increasing polarisation in
the market and the flight to quality reflected in the wealth of key new
openings, leasing demand and tension, and growing footfall and sales. It is
now a fact that online/offline has balanced and occupiers have now adopted a
holistic view, understanding that a high quality physical presence is an
essential part of the supply chain.
Flagship portfolio occupancy remained strong at 95%, broadly flat
year-on-year. UK flagship occupancy stands at 95% and Ireland at 96%, with
some assets in these geographies full. France was slightly weaker at 93%
reflecting the continuing lease-up at Les 3 Fontaines extension.
Value Retail
Value Retail delivered another solid operational performance. Brand sales
increased 10% year-on-year and were 5% above 2019 levels. Footfall across the
Villages saw a 9% increase year-on-year but remained below 2019 levels. Sales
densities grew broadly in line with footfall and were marginally ahead of
2019, whilst spend per visit was up 1% year-on-year and 6% ahead of 2019.
Average occupancy was 95%, marginally up on 2022 but remaining around one
percentage point below 2019 levels. Overall, the Group's share of Adjusted
earnings was £32m (FY 22: £27m). Positive GRI growth was partially offset by
rising finance costs reflecting the refinancing in FY 22 at Bicester and La
Vallée, and higher administration costs. Year-to-date, Hammerson has received
£74m of cash distributions from Value Retail, in part reflecting catch up
payments from 2019 to 2023.
At 31 December 2023, the Group's interest in Value Retail's property portfolio
was £1.9bn, unchanged year-on-year. Net assets were £1.1bn, down 6%,
primarily due to distributions paid to the Group. The difference between
gross and net asset value is principally due to £0.7bn of net debt within the
Villages which is non-recourse to the Group. The average LTV across the
Villages is 39%.
STRATEGY UPDATE
We own city centre destinations and adjacent land around which we can reshape
entire neighbourhoods. Our strategy recognises the unique position that we
have in our locations and the opportunities to leverage our experience and
capabilities to create and manage vibrant 24/7, multi-use, urban 'living
spaces' that realise value for all our stakeholders, connects our communities
and delivers a positive impact for generations to come.
Our aim is simple and clear - to chart a path to growth that delivers strong
income and total returns for shareholders through consistent execution against
our strategic goals. Following three years of strategic and operational
progress, we are now investing for growth and value creation in our core
assets.
We are combining targeted leasing with repurposing and redevelopment
opportunities, which are integral and complementary to our destinations,
directing capital expenditure to our core estates, where we are able to
realise high returns. This asset focus is underpinned by our now increasingly
agile platform, our strong capital structure and by our commitment to ESG.
In FY 23, we made significant progress towards all our goals as follows:
Investment for growth and value creation
The key source of competitive advantage for Hammerson is the quality and
location of our destinations in some of Europe's fastest-growing cites. We
have some of the best assets in the very best prime city centre catchments and
transportation hubs, and, due to the strong ties we have in the communities in
which we operate, supportive local authorities. Additionally, our
pre-development and strategic land represent a considerable set of unrealised
long term opportunities which we can selectively draw upon.
The consumer and occupier landscape continues to evolve at pace. Occupiers are
continuing to shift to using physical space for a broad mix of uses,
including: point of sale; last mile fulfilment; returns; servicing;
experiential; marketing; brand development; education; workspace; and leisure
- 'living spaces'. At the same time, visitors demand top quality environments
and experiences. We continue to invest in our assets to partner with
best-in-class occupiers to cater to the communities and catchments in which we
operate, whether this be repurposing of obsolete department store space into
leisure and modern retail, or redevelopment to residential, workspace,
healthcare and lifestyle uses.
Our investments to date have attracted some of the very best global brands.
Our leasing strategy has evolved from an emphasis on filling space and
increasing occupancy as we emerged from the Covid-19 pandemic. We now focus
more proactively on a high quality, diverse and complementary mix and offer
for both occupiers and customers, which in turn underpins a more diverse,
resilient and higher quality income profile.
Following our best year for leasing in FY 22 since FY 18, our momentum
continued in FY 23 with another record year: 306 leases signed on a more
focused portfolio (FY 22: 317), a volume increase of 10% on a like-for-like
basis, representing £46m of headline rent at 100% (FY 22: £45m), or £29m at
share (FY 22: £25m), up 23% like-for-like. In this context, we saw much
greater competitive tension with occupiers not exercising breaks to leverage
better terms, which meant an additional £2m of rent retained.
For principal deals, headline rent was 37% ahead of previous passing rent (FY
22: +34%), continuing to reflect strong demand, the lease up of vacant space
and the conversion of temporary leases onto long term deals. On a net
effective basis, principal deals were 12% ahead of ERV (FY 22: +2%), with new
leases +14% and renewals +8%. In terms of mix, just under half of leasing was
to best-in-class and new fashion concepts, and the balance to non-fashion,
services, leisure, food, workspace and Printemps in France.
Providing the exceptional spaces with high footfall, high demand, growing
leasing tension and thereby rental levels which underpins this leasing
performance requires investment: investment to repurpose obsolete or
underutilised space; investment in time to select the right brand partners to
enhance the mix and complete works to a high standard; investment alongside
key brand partners in their offer; investment in public realm to maintain our
appeal to customers and occupiers whilst ensuring further integration with the
communities we serve; and investment in key leasing, asset management,
placemaking and marketing talent. From our investments in the last few years,
we've delivered solid returns and created value.
Looking at two key examples that came to fruition this year:
· In Dundrum, we opened Penneys (Primark) and Nike Live, to
complete the repurposing of the former House of Fraser space, with the
backfill allowing Dunnes Stores, which opened in November, to enter the
destination for the first time. Taken as a whole, the significant increase in
rents with an incremental ERV benefit to adjacent units generated an IRR in
excess of 20% from an investment of €31m (at 100%). Elsewhere in Dundrum, we
converted underutilised storage space to modern workspace and leased it to
Western Union, bringing a new use and income stream to the asset, as well as
incremental customers to the food and leisure oriented Pembroke Square area.
Dundrum has already seen an increase in footfall and sales following these
openings in the second half of the year.
· In Bullring, we handed over former Debenhams space to M&S,
which also opened in November, with an extremely strong sales performance and
establishing a further consolidation of the city centre into our estate. We
also handed over the top floor space to TOCA Social - the football themed
entertainment operator - which will become their first operation outside
London when it opens in 2024. This will strengthen the critical mass and
complement the entertainment and social operators we opened in 2023, which
included Lane 7 Bowling, and a new leisure concept, VR Sandbox. We target to
complete the repositioning of the Debenhams space - representing about 15% of
the total floorspace of the Bullring - by concluding negotiations with a
best-in-class fashion operator which will concentrate the retail pitch
alongside openings in 2023, including those to Bershka, JD Sports, Footlocker,
and Pull and Bear. Taken together we expect our investment into this
repositioning project will be around £17m (at 100%), which will not only
deliver a high double digit IRR, but also a positive halo on the performance
and presentation of the asset and the consequent rental demand and values,
which we expect to further capitalise with future lettings. Following these
openings, Bullring experienced a particularly strong Christmas period, with
sales and footfall up in stark contrast to national indices. Importantly, it
also saw an uplift in value of £35m (at 100%), reflecting a 5% increase in
ERVs year-on-year.
We have a rich set of similar opportunities in our core portfolio relating to
former department store space. Having proactively secured vacant possession,
we have already commenced the repurposing of the former House of Fraser space
in The Oracle, having agreed terms with Hollywood Bowl and TK Maxx, and are in
detailed negotiations with other key partners. At the other end of the scheme,
we await the outcome of a planning application for the major regeneration of
the eastern quarter, including the former Debenhams, with the potential to
develop c.450 residential units in phases alongside renewed landscaping and
other commercial uses, much in demand in this strong catchment.
In Birmingham, we achieved planning consent for Drum, an amenity rich
workspace led proposal, which predominantly occupies the former John Lewis
Partnership space at Grand Central and is directly served by the UK's most
connected rail station, Birmingham New Street. Strip out works have been
completed, and we are working with stakeholders to unlock the next stages of
de-risking and delivering this scheme.
In Cabot Circus, we are working up investment plans, alongside relevant
operators, to reposition and maximise the value of major spaces including the
House of Fraser department store at the gateway to the asset and to replace
the cinema operator as part of the development of a social and entertainment
quarter.
Overall, of the department store space the Group had at FY 19, roughly
two-thirds has been repurposed or is in advanced planning, and a third has
been sold.
Elsewhere, we continue to lease to high quality brand partners, enhancing the
quality of the mix and bringing new uses to our destinations. Other than those
already mentioned, key deals and openings in 2023 included:
· Renewals and new deals were secured with JD Sports, Uniqlo,
Decathlon, Olympique de Marseille, Levi's, Puma, Hugo Boss, Michael Kors and
Five Guys at Les Terrasses du Port as we approach the ten year anniversary of
the opening of Marseille's super prime destination.
· At Les 3 Fontaines, we opened H&M in March and brought in New
Yorker to an adjacent unit later in the year, whilst reconfigurations allowed
the entry of Action, Celio and a new leisure offering from Smile World. In the
extension, additions comprised increased presence from global brands including
Eden Park and Swarovski.
· In Brent Cross, we signed a deal with Social Sports Society to
bring a padel tennis and other outside sports facilities to the underutilised
Southern Lands, subject to planning, alongside reconfigurations that allowed
the renewal of Boots and the introduction of Superdrug into the scheme. We
also relocated Moorfields Eye Hospital into an underutilised area of the
scheme, after a period of testing customer appetite for alternative uses. In
2024, we expect to create a new market hall offering, where we have already
agreed terms with three occupiers.
· In Bullring, in addition to repurposing and new leasing related
to the former Debenhams unit, we opened the first Nike Rise concept outside of
London, brought Footasylum in for the first time, and saw Goldsmiths undertake
a significant refit and expansion which included the introduction of a
separate Rolex store.
· Westquay saw the delivery of new offers from premium lifestyle
and beauty brands Sweaty Betty and Space NK, and F&B from Wingstop and
Mettricks.
· Cabot Circus saw four portfolio firsts, including the
introduction of Stradivarius, bringing another sought-after Inditex brand into
the destination, alongside the debuts of Lounge, German Donor Kebab and Lids.
· Meanwhile in Ireland, in Dundrum, Space NK signed a lease to open
their second store in Ireland. Both with minimal vacancy, it was a quieter
year at Pavilions and Ilac, although the former opened a new leisure offer
from Zero Latency, whilst the latter signed a new flagship city centre store
for Liverpool FC.
Our approach to leasing works in parallel with our greater emphasis on
placemaking, which not only serves to enliven space and enhance the experience
and environment for customers and occupiers, but also increasingly contributes
meaningfully in its own right in terms of incremental footfall, income, and
engagement across all channels. Key highlights in the year included:
· Staging our first Late Night Out ticketed event, bringing the
after hours economy to Bullring
· We brought the Charity Super.Mkt, the UK's first shop space
bringing multiple charities under one roof, to Brent Cross, The Oracle and
Cabot Circus, driving incremental footfall, significant media coverage and
winning us a Revo award for Pop-up of the Year. We aim to continue working
with Charity Super.Mkt through 2024.
· We had further success bringing digitally native brands to
physical space, most notably SHEIN to Bullring and Grand Central, and UK
firsts including Trinny London's kiosk to Bullring.
· In France, we hosted a two-week pop-up store at Les Terrasses du
Port for local rapper Jul, and then 'Sunset Live' later in the year, which
showcased local and international musical artists on the seafront terrace,
attracting significant media and influencer attention, and involving 25 brand
partners.
· Meanwhile, at Les 3 Fontaines we hosted the second edition of the
3Festival which celebrates 'Art in all its forms' with local partners from
street art workshops to culinary battles.
· We continue to exploit underutilised car parking space with new
uses, occupiers and events, including the UK's largest Tesla collection point,
the Florescenza garden centre, and Big Kid Circus at Brent Cross; Skatepark
with Red Bull at Cabot Circus, and the Supercar Weekend at Dundrum.
· We enlivened our destinations with summer bars including large
external screens showing major sporting events, and created winter wonderlands
in our unique outside spaces with Apres ski bars and ice rinks plus a visit
from the much-loved Coca Cola truck in Bullring and Grand Central creating
high footfall.
· We increased our social media presence and partnerships with
local influencers, contributing to increased visibility and customer
engagement with our destinations.
Turning to other near term projects which are integral to our existing assets,
at Ironworks in Dundrum, a 122 unit residential development, construction
continued during 2023. We also agreed a long term indexed lease for the social
housing units that we have built as part of the scheme and were completed in
the year.
In France, we are considering options for incremental repurposing of
underutilised space at Cergy 3, to capitalise on strong demand, following the
opening of Les 3 Fontaines extension in March last year, and are in
discussions on heads of terms with two operators.
During 2023, we have been disciplined with our resourcing and capital
expenditure on our development projects and pre-development and strategic
lands; focusing on those initiatives which give short term routes to value,
and those integral projects which add most value to our wider estate.
The wider development market has been somewhat fractured during the course of
2023; with viability under pressure due to ongoing challenges with
construction costs, cost of capital and valuation yield movements, alongside
uncertainty of public policy and decisions. Nevertheless, structural demand
from occupiers - and therefore rental performance - remains strong across most
asset classes where we have exposure, particularly in city centre locations
for best-in-class workplace and purpose-built rental apartments.
We have continued to advance planning consents and land assembly agreements
across the portfolio, which is capital light. In Ireland, we expect the
initial planning consents to be finalised in 2024 at Dublin Central and there
are ongoing discussions with potential end users, while our planning
application for a strategic residential masterplan at Dundrum Phase II remains
in consideration with the local authority. At Martineau Galleries, part of the
wider Birmingham Estate, we have been working closely with Birmingham City
Council and other stakeholders to ensure that we have a route to prepare for
the development of this multi-use estate which will complement and benefit
from our other holdings in the city.
Lastly, in our longer term development opportunities, standing alone from
existing destinations, we exited our 50% share of all land and corporate
interests at Croydon at a narrow discount to book value, as well as some small
land interests in Clonsilla, Dublin, focusing our core portfolio and creating
additional liquidity for investment. At Eastgate, Leeds, we have agreed to
update an historical development agreement with the City Council paving the
way to unlock the value of the site. At Bishopsgate Goodsyard, we are
progressing with detailed design and feasibility, the procurement of initial
demolition and preparation works, and engagement with Network Rail.
Agile platform
We have transformed our platform and cost base to create an organisation
focused on growth and value creation. We took decisive action in 2021 and
2022, shifting from a top heavy, geographically oriented and siloed
organisation to a simplified, asset-centric operating model.
In 2023, we continued to drive efficiencies and adapt our ways of working,
both in terms of technology - systems and automation - and in terms of greater
collaboration, encouraging cross pollination of ideas and practices between
asset management, leasing, placemaking and marketing, ESG, strategy and
insights, finance and communications.
We are creating a high performance, high engagement culture with an emphasis
on strategic value creation focused on asset management and delivery,
placemaking and the repositioning of our assets. Property management and
associated accounting services have largely been consolidated to proven third
party partners of scale.
In 2023, we implemented the consolidation of our property management suppliers
in the UK in February, and similar activity in France in the second half. Our
164 colleagues are now focused on strategic tasks as a result of the overhaul
of our operations.
The actions we have taken over the last three years in realigning our
portfolio and business model as well as introducing new systems, tools and
more efficient ways of working have necessarily resulted in a reduction of
headcount of 68% since FY 20. This has delivered a gross administration cost
reduction of 24%.
By introducing these agile, more efficient and sustainable ways of working we
are increasing speed to market and productivity. Today, we deliver more
leasing and commercialisation activity than in 2019, with a leaner team, on a
more focused portfolio. Other sources of savings include reductions in work
space in the UK and France, insurance renewals, and a rigorous management of
costs in general. We have also increased our efforts on employee engagement
and talent management as part of our strategy to retain and develop key talent
and we continue to invest in and promote key talent to be fit for the future.
Sustainable and resilient capital structure
Our capital allocation framework remains the same. We will maintain a stable
and resilient capital structure, with an IG credit rating, to maintain access
to capital markets. We are committed to a sustainable and growing cash
dividend, covered by cashflow, and balanced with our total returns focus. We
are mindful of our cost of capital, but will remain opportunistic on capital
deployment. After strengthening of the balance sheet, our priority is to
invest for growth and value creation.
Today, we have a resilient balance sheet, ample liquidity, and have maintained
our IG credit rating. In 2023, in France we completed the sale of our 25%
share of Italie Deux, and 100% of the Italik extension, and our 50% share of
our interests in Croydon, together with non-core land in the UK and Ireland,
generating gross proceeds of £216m. Moreover, £125m of secured debt has
been derecognised in connection with our exits from non-core assets in
Highcross and O'Parinor.
Since the balance sheet date, we have exchanged unconditional contracts for
the disposal of Union Square to an affiliate of Lone Star Real Estate Fund VI
L.P. for gross proceeds of £111m, taking total proceeds since FY 21 to £521m
and thereby completing our targeted £500m disposals programme. In September
2023, we issued a £100m increase of our existing £200m 7.25% coupon bonds
maturing in 2028. The new issue was priced at a yield of 9.1%. In parallel, we
redeemed £100m of our 3.5% coupon bonds maturing in 2025 and 6.0% coupon
bonds maturing in 2026, at a discount of £4m.
Overall, net debt reduced 23% to £1,326m at 31 December 2023. Headline LTV
stood at 34% (FPC: 44%), down from 39% (FPC: 47%) at FY 22. Net debt to EBITDA
improved to 8.0x from 10.4x. At 31 December 2023, the Group had liquidity of
£1.2bn in the form of cash balances (£570m) and undrawn committed RCFs
(£655m), and had no significant unsecured refinancing requirements until 2026
not covered by existing cash.
Environmental, Social and Governance
Our ESG agenda grew in 2023, with a continued focus on achieving our targets,
addressing both the Climate and Nature emergencies, whilst continuing to
deliver an expanded Social Value programme.
We commenced our Net Zero Asset Plan (NZAP) programme of works focusing on
degasification in Ireland, renewable energy in France, and HVAC and lighting
design in the UK. To support this, we also undertook revised Physical Climate
Risk Assessments in the UK and Ireland. These combine with our NZAPs to ensure
a diligent, asset-centric approach to climate risk mitigation. Alongside the
delivery of the NZAP projects across our destinations, renewable energy
purchasing with true 'additionality' is a central pillar of our Net Zero
transition and we are proactively seeking a Corporate Power Purchase Agreement
(CPPA) to support our 2025 interim carbon target. Overall, our like-for-like
scope 1, 2 and landlord 3 carbon emissions are down 13% year-on-year, and 35%
since 2019.
Our climate and energy focus continues to receive external focus with
Pavilions, Swords winning a Best Energy Achievement in Retail and Best Overall
Achievement at the Business Energy Achievement Awards 2023 (Ireland) for going
gas free in 2023, four years ahead of schedule. In addition to this we have
launched a quantifiable program to deliver nature based action plans for each
asset. This recognises that globally we are experiencing two emergencies,
Nature and Climate. The rapid biodiversity loss globally not only needs to be
addressed to maintain essential ecosystems but also to ensure a low carbon
future aligned to the Paris agreement. In 2023 we took the step to gift a
woodland and natural grassland in Lowestoft to the Wildlife Trust. This land
gift recognised the natural value of the land over its commercial value and
ensure it is preserved for nature and the community for the foreseeable
future.
From a Social Value perspective, we delivered asset-centric events to support
the communities we serve whilst also continuing to support our corporate
charity partner, LandAid. We also introduced an all-colleague Giving Back Day
which coincided with volunteering week and will occur annually in the future.
We had very high participation rates of more than 90%, with 152 colleagues
taking part doing everything from CV workshops to clearing wetlands.
We continued to focus on benchmarks identified by our stakeholders as key to
their decision making. We rank as one of the top property companies in ISS ESG
with a score of C+. We maintained our low-risk rating by Sustainalytics,
making us a regional leader, and we also regained our 4-star GRESB rating with
a ten-point score improvement to 85 points. We also achieved a related GRESB
ESG public disclosure score of 96/100, scoring us an A, which ranks us first
out of our peers in our transparency surrounding our ESG practices.
CONCLUSION AND OUTLOOK
Since FY 20, we have navigated the Company through a high-risk period of
deleveraging and repositioning. We have realigned our portfolio to a core of
unique city centre destinations, started to deliver strong investment returns
in our properties, and we have ample further opportunity to invest for growth
and value creation. In the wider portfolio, we remain capital disciplined and
have realised value from our pre-development and strategic lands, most
recently with the exit from Croydon.
At the same time, we have transformed our platform. We have become leaner and
'developed muscle', with headcount and costs down by more than two-thirds and
a quarter respectively since FY 20, but with speed to market and performance
increased. We remain committed to a high performance, high engagement culture
with the right talent to be fit for the future.
Whilst our eyes are open to the current macro-economic environment, our
occupiers are thriving and our visitor numbers are on the rise in our
realigned portfolio. City centres remain the dominant locations for commerce
and lifestyle. Our destinations are in high demand by occupiers and visitors.
The importance of a physical presence in a digitally integrated strategy for
best-in-class operators is undeniable.
Over time, we have a unique opportunity to complement our core with a broader
mix of uses by repurposing existing space, consolidating, and unlocking value
on adjacent land. We have a strong platform with long term visibility of
income. We are confident in our ability to grow top line and earnings off a
new base, and therefore create value for shareholders in the years to come.
FINANCIAL REVIEW
Overview
2023 has been another year of significant financial progress.
Adjusted earnings for 2023 of £116m were 11% higher than 2022. Key drivers
were underlying rental growth; lower gross administration and net finance
costs; higher earnings from Value Retail; partly offset by income foregone
from disposals. We returned to the payment of cash dividends. In addition to
the interim dividend of 0.72p per share, the Directors have recommended a
final dividend of 0.78p per share, bringing the full year cash dividend to
1.50p per share.
IFRS reported losses decreased to £51m compared with £164m in 2022. The
reduction was due to lower revaluation losses, principally associated with
outward yield shift, of £127m in 2023 compared with £282m in 2022.
Net assets at 31 December 2023 were £2,463m (2022: £2,586m). EPRA NTA per
share was 51p (2022:53p), equivalent to a total accounting return of -2.1%
(2022: -6.8%).
Net debt reduced by £406m, or 23%, to £1,326m at 31 December 2023 benefiting
from disposal proceeds of £216m, the derecognition of £125m of secured debt,
£104m of cash generated from operations and £74m of distributions from Value
Retail. The reduction strengthened the Group's balance sheet and credit
metrics, with year end headline LTV of 34% (2022: 39%) and LTV on a fully
proportional consolidation basis of 44% (2022: 47%). Net debt:EBITDA improved
to 8.0x (2022: 10.4x). The Group also has ample liquidity in cash and undrawn
committed facilities of £1.2bn.
Presentation of financial information
IFRS vs Proportional consolidation
The Group's property portfolio comprises properties that are either wholly
owned or co-owned with third parties.
While the Group prepares its financial statements under IFRS (the 'Reported
Group'), the Group evaluates the performance of its portfolio for internal
management reporting by aggregating its wholly owned businesses together with
its share of joint ventures and associates which are under the Group's
management ('Share of Property interests') on a proportionally consolidated
basis, line-by-line (in total described as the Group's 'Managed portfolio').
The Group's investment in Value Retail is not proportionally consolidated
because it is not under the Group's management, is independently financed and
has differing operating metrics to the Group's Managed portfolio. Accordingly,
it is accounted for separately as 'Share of results of associates' as reported
under IFRS and is also excluded from the Group's proportionally consolidated
key metrics such as net debt or like-for-like net rental income growth.
However, for certain of the Group's Alternative Performance Measures (APMs),
for enhanced transparency, we do disclose certain metrics combining both the
Managed portfolio and Value Retail. These include property valuations,
property returns and certain credit metrics.
Both IFRS and Management reporting bases are presented in the Group's
financial statements with supporting analysis and reconciliations between
management and IFRS bases in the Additional Information section.
Management reporting and IFRS accounting treatment
Comprising properties which are Accounting treatment
Management reporting
Managed portfolio - Wholly owned and Share of Property interests Proportionally consolidated
Value Retail - Held as an associate Single line - results/investment in associates
IFRS
Managed portfolio:
- Reported Group - Wholly owned Fully consolidated
- Jointly owned(1) Consolidation of Group's share
- Share of Property interests - Held in joint ventures Single line - results/investment in joint ventures
- Held in associates(2) Single line - results/investment in associates
Value Retail - Held as an associate Single line - results/investment in associates
1 See note 11A to the financial statements for information on the Group's
two joint operations (Pavilions, Swords and Ilac Centre, Dublin)
2 Only includes the Group's 25% investment in Italie Deux until its disposal
on 31 March 2023.
Derecognition of Highcross and O'Parinor
During 2023, the Group derecognised its Highcross and O'Parinor joint ventures
in which it had 50% and 25% interests respectively at 31 December 2022.
These two joint ventures had a total of £125m of borrowings secured against
their individual property interests. These borrowings were non-recourse to the
Group. At 31 December 2022, both loans were in breach of certain conditions
and the Group was working constructively with the respective lenders on
options to realise 'best value' for all stakeholders.
On 9 February 2023, a receiver was appointed by the lenders to administer
Highcross for the benefit of the creditors. As a result of no longer having
joint control, the Group derecognised its share of assets and liabilities,
including the property value and £80m of secured borrowings. There was no
loss on derecognition as the Group's joint venture investment in Highcross had
been fully impaired at 31 December 2021, from which date the Group had ceased
recognising the results of this joint venture in the income statement.
On 30 June 2023, the lenders to O'Parinor took control of the joint venture
and the Group therefore impaired its joint venture investment by £22m and
derecognised its share of assets and liabilities, including the property value
and £45m of secured borrowings.
Alternative performance measures (APMs)
The Group uses a number of APMs, being financial measures not specified under
IFRS, to monitor the performance of the business. 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 the
published results of listed European real estate companies. Details on the
EPRA BPR can be found on www.epra.com and the Group's key EPRA metrics are
shown in Table 1 of the Additional information.
We present the Group's results on an IFRS basis but also on an EPRA, Headline
and Adjusted basis as explained in note 1C to the financial statements. The
Adjusted basis enables us to monitor the underlying operations of the business
on a proportionally consolidated basis as described in the basis of
preparation and excludes capital and non-recurring items such as revaluation
movements, gains or losses on the disposal of properties or investments, as
well as other items which the Directors and management do not consider to be
part of the day-to-day operations of the business. Such excluded items are in
the main reflective of those excluded for EPRA earnings, but additionally
exclude certain cash and non-cash items which we deem not to be reflective of
the normal routine operating activities of the Group. We believe that
disclosing such non-IFRS measures enables evaluation of the impact of such
items on results to facilitate a fuller understanding of performance from
period to period. These items, together with EPRA and Headline adjustments are
set out in more detail in note 9A to the financial statements.
For 2023, adjusting items additional to EPRA adjusting items comprised:
· Exclusion of a charge of £13.2m (2022: £5.1m) in respect of
business transformation costs as the Group continues its implementation of
strategic change and refining its operating model. This charge comprises
mainly non-capitalisable costs relating to digital transformation as well as
severance and other costs associated with team and operational restructuring.
· A charge of £0.3m (2022: credit of £2.4m) to reverse expected
credit losses charged to the income statement but where the related income is
deferred on the balance sheet such that the exclusion of this removes the
distortive mismatch this causes.
INCOME STATEMENT
Summary income statement
2023 2022 Change
£m
£m
£m
Gross rental income 208.4 215.2 (6.8)
Net service charge expenses and cost of sales (40.9) (40.4) (0.5)
Adjusted net rental income 167.5 174.8 (7.3)
Adjusted gross administration expenses (51.5) (59.8) 8.3
Other income 14.9 17.0 (2.1)
Profit from operating activities 130.9 132.0 (1.1)
Value Retail Adjusted earnings 32.1 27.4 4.7
Operating profit 163.0 159.4 3.6
Adjusted net finance costs (45.9) (54.0) 8.1
Tax charge (0.8) (0.5) (0.3)
Adjusted earnings 116.3 104.9 11.4
Revaluation losses - Managed portfolio (119.1) (221.0) 101.9
Revaluation losses - Value Retail (7.7) (60.7) 53.0
(Loss)/profit on sale of properties (17.8) 0.6 (18.4)
Impairment of joint venture (22.2) - (22.2)
Business transformation costs (13.2) (5.1) (8.1)
Other (see note 9A to the financial statements) 12.3 17.1 (4.8)
IFRS Loss for the year (51.4) (164.2) 112.8
pence pence
(Loss)/earnings per share pence
Basic (1.0) (3.3) 2.3
Adjusted 2.3 2.1 0.2
For the year ended 31 December 2023 the Group reported an IFRS loss of £51.4m
(2022: £164.2m loss), a reduction of £112.8m. The key factors in the reduced
loss were lower revaluation losses of £154.9m partly offset by the
year-on-year change in the loss/profit on sale of properties of £18.4m and an
impairment charge of £22.2m in 2023 in relation to the Group's O'Parinor
joint venture.
On an Adjusted basis, earnings increased by £11.4m to £116.3m (2022:
£104.9m). Adjusted net rental income was £7.3m lower, £11.2m was due to
disposals partly offset by £4.8m higher income from the like-for-like Managed
portfolio, equivalent to 3.6% growth. Gross administration costs were £8.3m,
or 14%, lower reflecting reduced headcount and corporate costs. The Group's
share of Value Retail Adjusted earnings grew by £4.7m and adjusted net
finance costs were £8.1m lower, reflecting reduced debt levels and increased
income from cash deposits benefiting from the higher interest rate
environment.
A detailed reconciliation from Reported Group to the proportionally
consolidated basis is set out in note 2 to the financial statements and
further details on reconciling items between Adjusted earnings and IFRS loss
are in note 9A to the financial statements.
Rental income
Analysis of rental income
Proportionally consolidated Gross rental income Change in like-for-like Adjusted Change in like-for-like
£m
net rental income
£m
Year ended 31 December 2022 215.2 174.8
Like-for-like Managed portfolio:
- UK 5.9 6.8% 2.3 3.2%
- France 0.4 1.4% 0.5 1.8%
- Ireland 2.2 5.7% 2.0 6.0%
8.5 5.5% 4.8 3.6%
Disposals (17.8) (11.2)
Developments and other 0.4 (2.7)
Foreign exchange 2.1 1.8
Year ended 31 December 2023 208.4 167.5
Gross rental income decreased by a net £6.8m to £208.4m. Disposals reduced
income by £17.8m, principally Silverburn and Victoria Leeds in 2022 and
Italie Deux and Croydon in 2023. This was partly offset by growth in
like-for-like income of £8.5m, or 5.5%. 60% of the growth was due to higher
base rent consistent with the Group's strong leasing performance and the
remainder was due to year-on-year increases in variable rent (turnover rent
and car park and commercialisation income).
Adjusted net rental income decreased by a net £7.3m to £167.5m. Disposals
reduced NRI by £11.2m. From a like-for-like perspective, UK adjusted NRI grew
by 3.2%, with lower void costs and the strong like-for-like GRI growth of 6.8%
partly offset by the year-on-year change in bad debt charges where 2022
benefited from credits due to the reversals of provisions associated with the
strong improvement in collections post Covid-19. Income growth in France of
1.8% was muted due to the adverse impact of a small number of tenants entering
administration. Ireland was the strongest performing country with growth of
6.0%, benefiting from the reversal of prior year bad debt charges as
collection rates improved.
Further analysis of net rental income by segment is provided in Table 3 of the
Additional information.
Analysis of rental income
Rental income is further analysed below between the Group's various
ownerships.
2023
Share of Property interests
Proportionally consolidated Reported Group Joint Associates Subtotal Total
£m
£m
£m
£m
Ventures
£m
Gross rental income 92.8 114.4 1.2 115.6 208.4
Net service charge expenses and cost of sales (17.2) (24.0) - (24.0) (41.2)
Net rental income 75.6 90.4 1.2 91.6 167.2
Change in provision for amounts not yet recognised in the income statement 0.2 0.1 - 0.1 0.3
Adjusted net rental income 75.8 90.5 1.2 91.7 167.5
2022
Share of Property interests
Proportionally consolidated Reported Group Joint Associates Subtotal Total
£m
£m
£m
£m
Ventures
£m
Gross rental income 90.2 119.4 5.6 125.0 215.2
Net service charge expenses and cost of sales (12.9) (23.9) (1.2) (25.1) (38.0)
Net rental income 77.3 95.5 4.4 99.9 177.2
Change in provision for amounts not yet recognised in the income statement (0.9) (1.5) - (1.5) (2.4)
Adjusted net rental income 76.4 94.0 4.4 98.4 174.8
Administration expenses
Proportionally consolidated 2023 2022
£m
£m
Employee costs - excluding variable costs 25.0 29.2
Variable employee costs 10.3 9.6
Other corporate costs 16.2 21.0
Adjusted gross administration costs 51.5 59.8
Property fee income (8.4) (11.5)
Joint venture and associate management fee income (6.5) (5.5)
Other income (14.9) (17.0)
Adjusted net administration expenses 36.6 42.8
Business transformation costs 13.2 5.1
Net administration expenses 49.8 47.9
During 2023, Adjusted net administration expenses decreased by £6.2m against
2022. Gross administration costs fell by £8.3m reflecting the Group's focus
on cost reduction, partly offset by a reduction in other income of £2.1m due
to disposals, principally in France. The most significant elements of the cost
reduction were:
· Employee costs, including variable costs, were £3.5m (9%) lower
reflecting the organisational restructuring and simplification of the Group's
operating model in 2023. Average headcount, excluding employees recharged to
tenants, reduced from 225 in 2022 to 175 in 2023.
· Other corporate costs, comprising mainly professional fees,
premises costs and software licences, fell by £4.8m (23%). The two most
significant areas of savings were premises costs, with downsized relocations
in both the UK and France during the year; and a decrease of £1.5m in
corporate insurances, with the most significant reduction in Directors and
Officers insurance premiums reflecting the strengthening of the Group's
financial position.
Business transformation costs of £13.2m in 2023 comprised mainly severance
costs directly associated with the simplification of the Group's operating
model and fees for contractors and consultants from the Group's digitalisation
programme, both of these matters were key outputs of the Group's strategic and
operational review undertaken in 2021 and do not reflect underlying trading.
Disposals and assets held for sale
During 2023, we realised gross proceeds of £216m, relating mainly to the
disposals of the Group's interests in Italie Deux (including the Italik
extension) and our standalone development interests in Croydon. In total,
disposals in the year resulted in a loss on disposal of £18m, and these
disposals were at an average 5% discount (based on gross proceeds) to 31
December 2022 book value.
Since the year end, we exchanged contracts for the sale of Union Square,
Aberdeen for gross proceeds of £111m, representing an 8% discount to book
value at 31 December 2023. This disposal concludes the Group's £500m non-core
disposal program commenced in 2022.
Share of results of joint ventures
A listing of our interests in joint ventures is included in note 12 to the
financial statements. On an IFRS basis, the Group's share of results in 2023
was £9.4m (2022: £41.5m loss). The £50.9m improvement was principally due
to lower revaluation losses in 2023 of £73.9m compared with losses of
£132.1m 2022.
On an Adjusted basis, our share of results from joint ventures was £85.0m
(2022: £88.1m). The £3.1m year-on-year reduction was principally due to the
disposals of the Group's investments in Croydon in 2023 and Silverburn in
2022, and the derecognition of O'Parinor in June 2023.
Given that five out of six of our UK flagship destinations and Dundrum, the
largest asset of our Ireland flagships, are held in joint ventures the
financial and operating performance of these assets is consistent with the
proportionally consolidated performance explained in this Review and shown in
the Additional Information. The two French flagship destinations are wholly
owned.
Share of results of associates
Following the sale of the Group's investment in Italie Deux in March 2023, at
31 December 2023 the Group's sole associate investment was Value Retail. On an
IFRS basis, the Group's share of results in 2023 was £16.0m compared with a
loss of £7.1m in 2022. The year-on-year increase of £23.1m was principally
due to lower revaluation losses in 2023 of £7.7m compared with losses of
£66.9m in 2022, partly offset by losses on the fair value of derivatives of
£11.1m in 2023 compared to gains of £18.1m in 2022 and a year-on-year
increase in profit from operating activities of £6.6m.
On an Adjusted basis, our share of results from associates was £33.3m (Value
Retail: £32.1m, Italie Deux: £1.2m) compared with £31.8m (Value Retail:
£27.4m, Italie Deux: £4.4m) in 2022. The £4.7m year-on-year increase in
Adjusted earnings from Value Retail was due to £14.4m higher gross rental
income reflecting stronger sales and the benefits from indexed rents. This
growth was partly offset by increased administration costs of £3.4m and
finance costs of £7.5m, this latter change relating to the refinancing of the
loans secured against La Vallée and Bicester in 2022. The reduction in Italie
Deux reflects its disposal in March 2023.
Value Retail's Adjusted earnings reflected an effective yield of 2.7% as a
percentage of the Group's investment at the start of the year (2022: 2.4%).
Net finance costs
Proportionally consolidated 2023 2022
Reported Group Share of Property interests Total Reported Group Share of Property interests Total
£m
£m
£m
£m
£m
£m
Adjusted finance income 30.9 4.1 35.0 26.4 - 26.4
Finance costs
Gross interest costs (72.0) (8.9) (80.9) (74.9) (6.7) (81.6)
Interest capitalised - - - 1.2 - 1.2
Adjusted finance costs (72.0) (8.9) (80.9) (73.7) (6.7) (80.4)
Adjusted net finance costs (41.1) (4.8) (45.9) (47.3) (6.7) (54.0)
Debt and loan facility cancellation costs - - - (1.3) - (1.3)
Discount on redemption of bonds 4.3 - 4.3 - - -
Change in fair value of derivatives 0.7 (1.8) (1.1) (14.4) 4.1 (10.3)
IFRS net finance costs (36.1) (6.6) (42.7) (63.0) (2.6) (65.6)
Adjusted net finance costs were £45.9m, a decrease of £8.1m compared with
2022. The decrease was driven by the benefits of deleveraging since the start
of 2022, early repayment of debt utilising proceeds from disposals, the
related restructuring of hedging derivatives and higher interest income from
cash deposits benefiting from the higher interest rate environment.
In the second half of 2023, we repurchased £12m of the Group's £350m 3.5%
bonds maturing in 2025 and £88m of the Group's 6.0% bonds maturing in 2026 at
£4.3m below book value. This latter amount has been recognised in finance
income in 2023, and given its one-off nature has been excluded from the
Group's Adjusted earnings.
Tax
Due to the Group having tax exempt status in its principal operating countries
the tax charge, on a proportionally consolidated basis, remained low at £0.8m
(2022: £0.5m).
The low tax charge reflects that the Group benefits from being a UK REIT and
French SIIC and its Irish assets are held in a QIAIF. The Group is committed
to remaining in these tax exempt regimes and further details on these regimes
are given in note 7 to the financial statements. In order to satisfy the REIT
conditions, the Company is required, on an annual basis, to pass certain
business tests. The Group is expected to meet all requirements for maintaining
its REIT status for the year ended 31 December 2023.
Dividends
As explained in the Chair of the Board's Statement, the Group announced a new
sustainable dividend policy of 60-70% of annual Adjusted earnings during the
year with an interim cash dividend of 0.72p per share paid in October.
The Board has proposed a final cash dividend of 0.78p per share, payable as an
ordinary dividend on 10 May 2024 to shareholders on the register on 5 April
2024. A dividend reinvestment plan ('DRIP') remains available to shareholders.
NET ASSETS
A detailed analysis of the balance sheet on a proportionally consolidated
basis is set out in Table 12 of the Additional information with a summary
reconciling to EPRA NTA set out in the table below:
2023 2022
Summary net assets Reported Group Share of Property interests EPRA EPRA NTA Total Reported Group EPRA Share of Property interests EPRA NTA
£m
£m
adjustments
£m
£m adjustments
£m
Total
£m £m
£m
Investment and trading properties 1,396 1,380 - 2,776 1,497 1,723 - 3,220
Investment in joint ventures 1,193 (1,193) - - 1,342 (1,342) - -
Investment in associates - Value Retail 1,115 - 79 1,194 1,189 - 52 1,241
- Italie Deux - - - - 108 (108) - -
Net trade receivables 28 15 - 43 23 19 - 42
Net debt(1) (1,163) (163) - (1,326) (1,458) (274) (1) (1,733)
Other net liabilities (106) (39) - (145) (115) (18) (3) (136)
Net assets 2,463 - 79 2,542 2,586 - 48 2,634
EPRA NTA per share(2) 51p 53p
1 See Table 13 in Additional Information for further details.
2 EPRA adjustments in accordance with EPRA best practice, principally in
relation to deferred tax, as shown in note 9B to the financial statements.
During 2023, net assets decreased 5% to £2,463m (2022: £2,586m). Net assets,
calculated on an EPRA Net Tangible Assets (NTA) basis, were £2,542m, or 51p
per share, a reduction of 2p compared to 31 December 2022 and is equivalent to
a total accounting return of -2.1% (see Table 15 in Additional Information).
The key components of the movement in Reported Group net assets and EPRA NTA
are shown in the table below:
Movement in net assets
Group net assets EPRA EPRA
£m adjustments NTA
£m £m
1 January 2023 2,586 48 2,634
Property revaluation - Managed portfolio (119) - (119)
- Value Retail (8) - (8)
Adjusted earnings 116 - 116
Disposal and impairment losses (40) - (40)
Change in deferred tax (2) 1 (1)
Dividends (36) - (36)
Foreign exchange and other movements (34) 30 (4)
31 December 2023 2,463 79 2,542
PROPERTY PORTFOLIO ANALYSIS
Portfolio valuation
The Group's external valuations continue to be conducted by CBRE Limited
(CBRE), Cushman and Wakefield LLP (C&W) and Jones Lang LaSalle Limited
(JLL), providing diversification of valuation expertise across the Group. At
31 December 2023 the majority of our UK flagship destinations have been valued
by JLL and CBRE, the French portfolio by JLL, and the Irish portfolio, Value
Retail and Brent Cross have been valued by C&W. This is unchanged from 31
December 2022.
There have been a limited number of comparable transactions in the Group's
investment markets during 2023, with the higher interest rate environment and
lower levels of liquidity resulting in an outward movement in valuation
yields. However, there has been a growing polarisation based on asset quality
from both an occupational and investment perspective, with the outward yield
movements being more pronounced for less prime assets. Valuers have also begun
to differentiate between properties based on future capital expenditure
requirements.
At 31 December 2023, the Group's portfolio was valued at £4,662m, a reduction
of £445m since 31 December 2022. This movement was primarily due to
disposals, including the derecognition of Highcross and O'Parinor, of £331m;
revaluation losses of £127m; adverse foreign exchange losses of £61m, partly
offset by capital expenditure of £74m. Movements in the portfolio valuation
are shown in the table below.
Movements in property valuation
Proportionally consolidated including Value Retail UK France Ireland Total flagships Develop-ments and other Managed portfolio Value Group portfolio
£m £m £m £m £m £m Retail £m
£m
At 1 January 2023 871 1,241 676 2,788 432 3,220 1,887 5,107
Capital expenditure 14 14 6 34 13 47 27 74
Disposals - (151) - (151) (55) (206) - (206)
Derecognition of Highcross and O'Parinor - (62) - (62) (63) (125) - (125)
Yield (17) (27) (36) (80) (1) (81) - (81)
Income 1 12 (1) 12 (4) 8 (4) 4
Development and other costs (6) - - (6) (40) (46) (4) (50)
Revaluation losses (22) (15) (37) (74) (45) (119) (8) (127)
Foreign exchange - (24) (15) (39) (2) (41) (20) (61)
At 31 December 2023 863 1,003 630 2,496 280 2,776 1,886 4,662
Capital expenditure
During the year, capital expenditure on the Managed portfolio was £47m, of
which £34m was on the Group's Flagship portfolio reflecting reconfiguration
works, including the repurposing of the former Debenhams at Bullring where
M&S and TOCA Social opened in the year, and lease incentives directly
related to the Group's record leasing volume in 2023. In addition, £13m was
invested in the Group's Developments and other portfolio, with £5m spent on
the on-site development of the Ironworks residential scheme at Dundrum. Other
key areas of expenditure were to advance planning at Bishopsgate Goodsyard and
Dublin Central. Table 11 of the Additional information analyses the spend
between the creation of additional area and that relating to the enhancement
of existing space.
Disposals, principally the Group's share of Italie Deux (including the Italik
extension) and Croydon in the first half of the year, reduced the portfolio by
£206m, with a further £125m reduction due to the derecognition of Highcross
and O'Parinor.
Revaluation losses
In 2023, we recognised a total revaluation loss across the Group portfolio of
£127m, comprising £119m in respect of the Managed portfolio and £8m in
Value Retail. £81m, or 64%, of these losses was due to the Group's valuers
moving out yields to reflect the higher interest rate environment and lower
levels of market liquidity. The remainder of the losses related to development
and other cost factors, principally adverse changes to residual valuations on
the Developments and other portfolio associated with outward yield shift on
end values and project cost inflation.
UK flagship destinations reported a revaluation deficit of £22m, £17m was
due to outward yield shift averaging 10 basis points ('bps'), with the
remaining £5m associated with capital expenditure, principally the
recognition of a cladding allowance at Union Square. Bullring saw a
revaluation gain in the year of £11m, the yield was stable reflecting the
recent investment to repurpose the former Debenhams and the strong leasing
performance leading to higher ERVs.
In France, yields moved out by 10bp equivalent to a revaluation deficit of
£27m, this was partly offset by income growth, with like-for-like ERVs 2.5%
higher, equivalent to a revaluation gain of £12m. While Ireland reported a
revaluation deficit of £37m, of which £36m was due to outward yield shift
averaging 30bp.
Value Retail values were broadly flat during the year, with capital
expenditure offset by a marginal revaluation loss of £8m and adverse foreign
exchange of £20m.
Further valuation analysis is included in Table 9 of the Additional
information.
Like-for-like ERV(1)
Flagship destinations 2023 2022
%
%
UK 1.8 (3.8)
France 2.5 (1.6)
Ireland 0.2 0.3
1.7 (2.2)
1 Calculated on a constant currency basis for properties owned throughout
the relevant reporting period.
Like-for-like ERVs grew by 1.7% during 2023. In the second half of the year
ERVs were marked up at all of the Group's flagship destinations, equivalent to
growth of 1.6%.
UK ERVs were 1.8% higher, reflecting the strong leasing performance and
investment to attract 'best-in-class' occupiers. Bullring had the strongest
growth at 5.0% over the year with occupiers seeking space following the
opening of the repurposed former Debenhams space. We signed 23 permanent
leases at the asset in 2023 at an average net effective rent 9% above
prevailing ERVs.
ERVs in France grew by 2.5%, driven by indexation and leasing demand at both
of our two wholly owned assets. At Les Terrasses du Port we have secured over
70% of the expected income from the expiring leases which were signed when the
destination opened in 2014. The new deals have been signed at an average of 6%
above ERV.
In Ireland, ERVs were up 0.2%, the lower vacancy levels in the Irish portfolio
meant that it was more challenging to provide multiple sources of evidence for
the valuers to mark up ERVs in 2023. However, the leasing pipeline for space
remains strong, particularly at Dundrum Town Centre where there have been a
number of major asset management initiatives, the most significant being the
opening of Brown Thomas in the former House of Fraser unit in February 2023.
Property returns analysis
The Group's managed property portfolio generated a total property return of
1.6%, comprising an income return of 5.9% offset by a capital return of -4.1%.
Incorporating the income and capital returns from the Value Retail portfolio,
this brought the Group's income return to 6.0% and the capital return to
-2.6%, to generate a total return of 3.2% (2022: -0.7%).
2023
Proportionally consolidated including Value Retail UK France Ireland Total flagships Develop-ments and other Managed portfolio Value Group portfolio
%
%
%
%
%
%
%
Retail
%
Income return 8.7 4.6 5.7 6.3 2.7 5.9 6.2 6.0
Capital return (2.4) (4.3) (5.6) (4.0) (6.2) (4.1) (0.4) (2.6)
Total return 6.1 0.1 (0.2) 2.0 (3.6) 1.6 5.8 3.2
2022
Proportionally consolidated including Value Retail UK France Ireland Total flagships Develop-ments and other Managed portfolio Value Group portfolio
%
%
%
%
%
%
%
Retail
%
Income return 7.9 4.8 5.2 6.0 2.3 5.4 5.3 5.3
Capital return (9.4) (4.6) (3.0) (5.9) (14.8) (7.3) (3.1) (5.8)
Total return (2.1) - 2.1 (0.2) (12.8) (2.3) 2.0 (0.7)
Shareholder returns analysis
Return per annum over Total shareholder return Total shareholder return Benchmark(2)
%
Cash basis(1 Scrip basis(1
) % ) %
One year 22.8 22.8 5.5
Three years 6.6 16.5 (4.6)
1 Cash and scrip bases represent the return assuming investors opted for
either cash or scrip dividends with the assumption that those opting for scrip
dividends continued to hold the additional shares issued.
2 Benchmark is the FTSE EPRA/NAREIT UK index.
The Group's total shareholder return in 2023 over one year was 22.8%,
outperforming the FTSE EPRA/NAREIT UK index of 5.5%. Over three years the
Group also outperformed the benchmark of -4.6% with shareholder returns of
6.6% and 16.5% on a cash and scrip basis, respectively.
INVESTMENT IN JOINT VENTURES AND ASSOCIATES
Details of the Group's joint ventures and associates are shown in notes 12 and
13, respectively to the financial statements.
Reported Group
Joint ventures
During the year, our investment in joint ventures decreased by £149m to
£1,193m (2022: £1,342m). £99m of the reduction related to the disposal of
Croydon and derecogntion of O'Parinor; revaluation losses totalled £74m and
cash distributions to the Group were £55m. These reductions were partly
offset by the Group's share of Adjusted earnings of £85m.
Associates
Our investment in associates decreased by £182m to £1,115m (2022: £1,297m).
£109m of the reduction was due to the disposal of Italie Deux in March, a
further £74m due to distributions from Value Retail , partly offset by the
Group's share of Adjusted earnings of £33m.
TRADE RECEIVABLES
Collection rates improved over the course of the year such that 96% of the
rental income due in 2023 (as at 23 February 2024) has been collected. As a
result we reduced the provisioning rates for amounts overdue by 3-12 months,
although this did not have a significant financial impact to property
outgoings.
On a proportionally consolidated basis, net trade receivables at 31 December
2023 were £43m (2022: £42m), reflecting gross trade receivables of £62m
(2022: £74m) against which a provision of £19m (2022: £32m) has been
applied.
PENSIONS
On 8 December 2022, the Trustees of the Group's principal defined benefit
pension scheme ('the Scheme'), with the Company's support, purchased a bulk
annuity policy ('buy-in') with Just Retirement Limited ('Just') for a premium
of £87.3m. This contract fully insured all future payments to members of the
Scheme, with the premium met from the Scheme's assets.
During 2023, a data cleansing process was completed and subsequently verified
by Just, resulting in a small balancing premium receipt to the Scheme. Given
the successful completion of the buy-in and for the Trustees to trigger the
winding-up of the Scheme, on 20 December 2023 the Company terminated its
liability to make further contributions to the Scheme. This initiated a
process for the Trustees to assign the bulk annuity policy to individual
Scheme members and to transfer the administration to Just which is expected to
take place in the first quarter of 2024, after which the final steps to wind
up the Scheme can be undertaken.
This material balance sheet de-risking exercise is in line with the Group's
long term strategy to strengthen the resilience of the Group's balance sheet.
FINANCING AND CASH FLOW
Financing strategy
Our financing strategy is to borrow predominantly on an unsecured basis to
maintain flexibility. Secured loans are occasionally used, mainly in
conjunction with joint venture partners. Value Retail also uses predominantly
secured debt in its financing strategy. All secured debt is non-recourse to
the rest of the Group.
The Group's debt is arranged to maintain access to short term liquidity and
long term financing. Short term liquidity is principally through syndicated
revolving credit facilities. Long term debt comprises the Group's fixed rate
unsecured bonds and private placement notes. At 31 December 2023, the Group
also had secured loans in the Dundrum joint venture and Value Retail.
Acquisitions may initially be financed using short term funds before being
refinanced with longer term funding depending on the Group's financing
position in terms of maturities, future commitments or disposals, and market
conditions.
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 regularly reviews the Group's financing strategy and approves
financing guidelines against which it monitors the Group's financial
structure. Where there is any non-compliance with the guidelines, this should
not be for an extended period but the Group objective is to maintain an
investment grade credit rating. The key financing metrics are set out below.
Key financial metrics
Proportionally consolidated unless otherwise stated Calculation 2023 2022
(References to Additional information)
Net debt Table 13 £1,326m £1,732m
Liquidity £1,225m £996m
Weighted average interest rate - net debt 2.4% 2.4%
Weighted average interest rate - gross debt 3.3% 2.6%
Weighted average maturity of debt 2.5 years 3.4 years
FX hedging 91% 91%
Net debt:EBITDA Table 16 8.0x 10.4x
Loan to value - Headline(1) Table 19 34% 39%
Loan to value - Full proportional consolidation (of Value Retail)(2) Table 19 44% 47%
Metrics with associated financial covenants Covenants
Interest cover ≥ 1.25x Table 17 3.91x 3.24x
Gearing - Selected bonds(3) ≤ 175% Table 18 55% 68%
- Other borrowings and facilities ≤ 150% Table 18 55% 68%
Unencumbered asset ratio ≥ 1.5x Table 20 2.04x 1.74x
Secured debt/equity shareholders' funds ≤ 50% 11% 15%
Fixed rate debt as a proportion of total debt n/a 84% 84%
1 Headline: 'Loan' excludes Value Retail net debt and 'Value' includes Value
Retail net assets.
2 Full proportional consolidation of VR: 'Loan' includes Value Retail net
debt and 'Value' includes Value Retail property values.
3 Applicable to bonds maturing in 2025 and 2027 (as set out in note 16 to
the financial statements).
Credit ratings
During the year, Moody's and Fitch's senior unsecured investment grade credit
ratings were re-affirmed as Baa3 and BBB+ respectively.
Leverage
At 31 December 2023, the Group's gearing was 55% (2022: 68%) and Headline loan
to value ratio was 34% (2022: 39%).
The Group's share of net debt in Value Retail totalled £730m (2022: £675m).
Fully proportionally consolidating Value Retail's net debt, the Group's loan
to value ratio was 44% (2022: 47%).
Calculations for gearing and loan to value are set out in Tables 18 and 19 of
the Additional information, respectively.
Borrowings and covenants
The terms of the Group's unsecured borrowings contain a number of covenants
which provide protection to the lenders and bondholders as set out in the Key
financial metrics table above. At 31 December 2023, the Group had significant
headroom against these metrics.
In addition, Dundrum and Value Retail have secured debt facilities which
include covenants specific to those properties, including covenants for loan
to value and interest cover. However, there is no recourse to the Group.
Managing foreign exchange exposure
The Group's exposure to foreign exchange translation differences on
euro-denominated assets is managed through a combination of euro borrowings
and derivatives. At 31 December 2023, the value of euro-denominated
liabilities as a proportion of the value of euro-denominated assets was 91%
the same level as at the beginning of the year. Interest on euro-denominated
debt also acts as a partial hedge against exchange differences arising on net
income from our overseas operations. Sterling strengthened against the euro
during the year by 2%.
CASH FLOW AND NET DEBT
Proportionally consolidated net debt
On a proportionally consolidated basis, net debt decreased by 23% to £1,326m
(2022: £1,732m). At 31 December 2023 the Group's net debt comprised loans of
£1,885m and the fair value of currency swaps of £11m, less cash and cash
equivalents of £570m, of which £472m is held by the Reported Group.
Disposals during the year generated proceeds of £216m. Cash generated from
operations of £104m comprised profit from operating activities of £117m less
a net £13m reduction in working capital and other non-cash items. We also
received £74m of distributions from Value Retail. These cash inflows were
partly offset by cash dividends paid of £30m, capital expenditure of £43m
and net interest of £46m.
Refinancing
During the first half of the year, £605m of revolving credit facilities were
extended by one year such that they now mature in 2026.
In the second half of 2023, we extended our debt maturity profile through the
issuance of a £100m bond tap of our existing £200m 7.25% bonds maturing in
2028 resulting in a new outstanding notional of £300m. The issuance was at a
discount of £6.7m, meaning the newly issued bonds were priced at an effective
yield of 9.1%. At the same time a matching tender was launched for the £350m
3.5% bonds maturing in 2025 and the £300m 6.0% bonds maturing in 2026 for
which we repurchased £12m and £88m at yields of 7.7% and 8.1% respectively,
in total £4.3m below book value.
Liquidity
The Group's liquidity at 31 December 2023, calculated on a proportionally
consolidated basis comprising cash of £570m and unutilised committed
facilities of £655m, was £1,225m, £229m higher than at the beginning of the
year. This was primarily due to proceeds from disposals.
Debt and facility profile
Maturity profile of loans and facilities
The Group's weighted average maturity of debt is 2.5 years (2022: 3.4 years).
The near-term unsecured maturities including the £109m of private placement
notes due in 2024 and the £337m sterling bonds due in 2025 are covered by
existing cash with the Group.
Refinancing discussions are progressing in relation to the €600m (Group's
50% share €300m) secured loan held by the Dundrum joint venture which
matures in September 2024.
Maturity analysis of loans and reconciliation to net debt
Loan Maturity(1) 2023 2022
£m
£m
Sterling bonds 2025-2028 840.6 846.4
Sustainability-linked eurobond 2027 600.8 612.3
Unamortised facility fees 2024-2026 (2.2) (3.1)
Senior notes (US private placements) 2024-2031 185.3 190.8
Total loans - Reported Group 1,624.5 1,646.4
Share of Property interests 2024 260.0 391.6
Total loans - proportionally consolidated 1,884.5 2,038.0
Cash and cash equivalents (569.6) (336.5)
Fair value of currency swaps 11.4 30.6
Net debt- proportionally consolidated 1,326.3 1,732.1
1 Maturity of loans at 31 December 2023
Risks and uncertainties
The Board continually reviews and monitors the principal risks and
uncertainties which could have a material effect on the Group's results. The
principal risks and uncertainties for 2023 are listed below with details of
each risk. Full disclosure of the risks, including the factors which mitigate
them, is set out within the Risk and uncertainties section of the Annual
Report 2023.
A. Macroeconomic Adverse changes to the geopolitical landscape and macroeconomic environment in
which the Group operates have the potential to hinder the ability to deliver
Residual risk: the strategy and financial performance.
High
B. Retail market In the context of the ever-evolving retail marketplace, the Group fails to
anticipate and address structural market changes. This could impair leasing
Residual risk: performance, result in a sub-optimal occupier mix and thus impact the ability
to attract visitors, and grow footfall/spend and income at the Group's
Medium properties.
C. Investment market and valuations Investor appetite for retail-led assets is reduced due to macroeconomic or
retail market factors including increased borrowing costs, economic downturn,
Residual risk: and consumer and occupier confidence. This could adversely impact property
valuations and risk hindering the liquidity of the Group's portfolio. This in
Medium turn would reduce the availability of funds for reinvestment in core assets
and/or refinancing of debt.
D. Climate Climate risks, particularly the reduction in carbon emissions and compliance
with ESG regulations, are not appropriately managed and communicated. This is
Residual risk: likely to adversely impact valuations and investor sentiment and may result in
an increased final year bond coupon if the Group's sustainability linked bond
Medium targets are not met. Also, extreme weather events may impact our properties.
E. Tax The Group suffers financial loss and reputational damage from new or increased
tax levies or due to non-compliance with local tax legislation.
Residual risk: Medium
F. Legal and regulatory compliance The failure to comply with a multitude of laws and regulations relevant to the
Group. These laws and regulations cover the Group's role as a
Residual risk: Medium multi-jurisdiction listed company; an owner and operator of property; an
employer; and as a developer. Failure to comply could result in the Group
suffering reputational damage and/or financial penalties. Changes or new
requirements may place administrative burden on to the Group and divert
resources away from strategic objectives.
G. Non-retail/multi-use markets The Group fails to target the optimal (non-retail) property sectors for future
repurposing or developments or has insufficient access to capital and the
Residual risk: Medium skills required to deliver its urban estates vision. Occupier or investor
demand for non-retail sectors weakens or evolves such that the Group's
repurposing or development plans are sub-optimal.
H. Cyber security The Group's information technology systems fail or are subject to an attack
which breaches their technological defences. A failure could lead to
Residual risk: Medium operational disruption, financial, or reputational damage due to assets being
brought down and/or loss of commercially sensitive data.
I. Health and safety There is a risk of serious work related injury, death and/or ill health to the
Group's colleagues, customers or contractors, and anyone else who visits the
Residual risk: Medium Group's properties or premises. This may be due to the Group's actions or
activities, or from external threats such as terrorism. In addition an
incident or public health issue, such as a pandemic, is likely to have an
adverse operational impact. Insufficient insight into health and safety risks
and mitigations or a failure to embed a strong safety culture could increase
the Group's exposure to reputational damage, fines and sanctions.
J. Capital structure Lack of access to capital on attractive terms could lead to the Group having
insufficient liquidity to enable the delivery of the Group's strategic
Residual risk: Medium objectives.
K. Partnerships A significant proportion of the Group's assets are held in conjunction with
third parties which has the potential to limit the ability to implement the
Residual risk: Group's strategy and reduces control and therefore liquidity if partners are
not strategically aligned.
High
L. Property development Property development is inherently risky due to its complexity, management
intensity and uncertain outcomes, particularly for major schemes with multiple
Residual risk: Medium phases and long delivery timescales. Unsuccessful projects result in adverse
financial and reputational outcomes.
M. Transformation The Group fails to deliver its strategic objective of creating an agile
platform due to sub-optimal transformation projects. Other issues could arise
Residual risk: Medium due to transformation initiatives being delivered late, overbudget or causing
significant disruption to business-as-usual activity.
N. People A failure to retain or recruit key management and other colleagues to build
skilled and diverse teams could adversely impact operational and corporate
Residual risk: Medium performance, culture and ultimately the delivery of the Group's strategy. As
the Group evolves its strategy it must continue to motivate and retain people,
ensure it offers the right colleague proposition and attract new skills in a
changing market.
Consolidated income statement
Year ended 31 December 2023
Note 2023 2022
£m £m
Revenue 2,4 134.3 131.4
Profit from operating activities* 2 26.2 29.7
Revaluation loss on properties 2 (45.2) (82.7)
Other net gains 2 1.2 0.6
Share of results of joint ventures 12B 9.4 (41.5)
Impairment of joint ventures 8 (22.2) -
Share of results of associates 13B 16.0 (7.1)
Operating loss (14.6) (101.0)
Finance income 6 35.2 26.1
Finance costs 6 (71.3) (89.1)
Loss before tax (50.7) (164.0)
Tax charge 7 (0.7) (0.2)
Loss for the year attributable to equity shareholders (51.4) (164.2)
-
Basic and diluted loss per share 10B (1.0)p (3.3)p
* Includes a charge of £9.4m (2022: £4.0m) and a corresponding credit of
£8.0m (2022: credit of £10.7m) relating to provisions for impairment of
trade (tenant) receivables.
Consolidated statement of COMPREHENSIVE income
Year ended 31 December 2023
2023 2022
£m £m
Loss for the year (51.4) (164.2)
Recycled through the profit or loss on disposal of overseas property interests
Exchange gain previously recognised in the translation reserve (100.3) -
Exchange loss previously recognised in the net investment hedge reserve 80.2 -
Net exchange loss relating to equity shareholders a (20.1) -
Items that may subsequently be recycled through profit or loss, net of tax
Foreign exchange translation differences (49.3) 130.6
Gain/(loss) on net investment hedge 39.3 (103.4)
Net gain/(loss) on cash flow hedge 0.2 (1.9)
Share of other comprehensive (loss)/gain of associates (8.8) 23.3
(18.6) 48.6
Items that will not subsequently be recycled through the profit or loss, net
of tax
Net actuarial losses on pension schemes (1.4) (26.7)
Total other comprehensive (loss)/income b (40.1) 21.9
Total comprehensive loss for the year (91.5) (142.3)
a Relates to the sale of Italie Deux and the derecognition of O'Parinor
as described in note 8.
b All items within total other comprehensive (loss)/income relate to
continuing operations.
Consolidated balance sheet
As at 31 December 2023
Note 2023 2022
£m £m
Non-current assets
Investment properties 11 1,396.2 1,461.0
Interests in leasehold properties 32.7 34.0
Right-of-use assets 3.9 9.5
Plant and equipment 0.9 1.4
Investment in joint ventures 12C 1,193.2 1,342.4
Investment in associates 13D 1,115.0 1,297.1
Other investments 8.8 9.8
Trade and other receivables 1.9 3.2
Derivative financial instruments - 7.0
Restricted monetary assets 15 21.4 21.4
3,774.0 4,186.8
Current assets
Trading properties 11 - 36.2
Trade and other receivables 14 74.1 85.9
Derivative financial instruments 5.2 0.1
Restricted monetary assets 15 2.2 8.6
Cash and cash equivalents 472.3 218.8
553.8 349.6
Total assets 4,327.8 4,536.4
Current liabilities
Trade and other payables (129.8) (168.3)
Obligations under head leases (0.1) (0.2)
Loans 16A (108.6) -
Tax (0.3) (0.5)
Derivative financial instruments (2.3) (16.1)
(241.1) (185.1)
Non-current liabilities
Trade and other payables (55.5) (56.3)
Obligations under head leases (37.3) (38.1)
Loans 16A (1,515.9) (1,646.4)
Deferred tax (0.4) (0.4)
Derivative financial instruments (15.0) (23.7)
(1,624.1) (1,764.9)
Total liabilities (1,865.2) (1,950.0)
Net assets 2,462.6 2,586.4
Equity
Share capital 250.1 250.1
Share premium 1,563.7 1,563.7
Other reserves 105.5 135.4
Retained earnings 549.7 646.0
Investment in own shares (6.4) (8.8)
Equity shareholders' funds 2,462.6 2,586.4
EPRA net tangible assets value per share 10C 51p 53p
These financial statements were approved by the Board on 28 February 2024 and
signed on its behalf by:
Rita-Rose Gagné Himanshu Raja
Chief Executive Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUIty
Year ended 31 December 2023
Share capital Share premium Merger reserve Capital and share-based reserves Other reserves Retained earnings Investment in own shares Equity shareholders' funds Non- controlling interests Total equity
a b c d a
£m £m £m £m £m £m £m £m £m £m
At 1 January 2022 221.0 1,593.2 374.1 198.2 110.0 252.9 (3.5) 2,745.9 0.1 2,746.2
Foreign exchange translation differences - - - - 130.7 - - 130.7 (0.1) 130.6
Loss on net investment hedge - - - - (103.4) - - (103.4) - (103.4)
Gain on cash flow hedge - - - - 6.3 - - 6.3 - 6.3
Gain on cash flow hedge recycled to net finance costs - - - - - (8.2)
(8.2) - - (8.2)
Share of other comprehensive gain of associates (see note 13D) - - - - - 23.3 - 23.3 - 23.3
Net actuarial losses on pension schemes - - - - - (26.7) - (26.7) - (26.7)
Loss for the year - - - - - (164.2) - (164.2) - (164.2)
Total comprehensive income/(loss) - - - - 25.4 (167.6) - (142.2) (0.1) (142.3)
Transfer - - (374.1) (198.2) - 572.3 - - - -
Share-based employee remuneration - - - - - 3.0 - 3.0 - 3.0
Cost of shares awarded to employees - - - - - (1.4) 1.4 - - -
Purchase of own shares - - - - - - (6.7) (6.7) - (6.7)
Dividends (see note 18) - - - - - (140.3) - (140.3) - (140.3)
Scrip dividend related share issue 29.1 (29.1) - - - 127.1 - 127.1 - 127.1
Scrip dividend related share issue costs - (0.4) - - - - - (0.4) - (0.4)
At 31 December 2022 250.1 1,563.7 - - 135.4 646.0 (8.8) 2,586.4 - 2,586.4
Recycled exchange gains on disposal of overseas property interests - - - - (20.1) - - (20.1) - (20.1)
Foreign exchange translation differences - - - - (49.3) - - (49.3) - (49.3)
Gain on net investment hedge - - - - 39.3 - - 39.3 - 39.3
Loss on cash flow hedge - - - - (3.4) - - (3.4) - (3.4)
Loss on cash flow hedge recycled to net finance costs - - - - 3.6 - - 3.6 - 3.6
Share of other comprehensive loss of associates (see note 13D) - - - - - (8.8) - (8.8) - (8.8)
Net actuarial losses on pension schemes - - - - - (1.4) - (1.4) - (1.4)
Loss for the year - - - - - (51.4) - (51.4) - (51.4)
Total comprehensive loss - - - - (29.9) (61.6) - (91.5) - (91.5)
Share-based employee remuneration - - - - - 3.6 - 3.6 - 3.6
Cost of shares awarded to employees - - - - - (2.4) 2.4 - - -
Dividends (see note 18) - - - - - (35.9) - (35.9) - (35.9)
As at 31 December 2023 250.1 1,563.7 - - 105.5 549.7 (6.4) 2,462.6 - 2,462.6
a Share capital includes shares held in treasury and shares held in an
employee share trust, which are held at cost and excluded from equity
shareholders' funds through 'Investment in own shares'.
b The merger reserve arose in September 2014 from a placing of new
shares using a structure which resulted in merger relief being taken under
Section 612 of the Companies Act 2006. Following receipt of the proceeds in
2014 and the relevant criteria enabling use of the reserve having been
satisfied, the amounts in the merger reserve are deemed distributable and
accordingly the balance of this reserve was transferred to retained earnings.
c The capital redemption reserve comprised £14.3m relating to share
buybacks which arose over a number of years up to 2019 and £183.9m resulting
from the cancellation of the Company's shares as part of the reorganisation of
share capital in 2020. Following approval by the Court on 22 November 2022,
this reserve was reclassified as available for distribution to shareholders in
accordance with ICAEW Technical Release 02/17BL section 2.8A and as a result
was transferred to retained earnings.
d Other reserves comprises Translation, Net investment hedge and Cash
flow hedge reserves.
Consolidated cash flow statement
Year ended 31 December 2023
Note 2023 2022
£m £m
Profit from operating activities 26.2 29.7
Net movements in working capital and restricted monetary assets 19A (4.7) 2.6
Non-cash items 19A 2.8 (0.8)
Cash generated from operations 24.3 31.5
Interest received 39.1 18.1
Interest paid (80.8) (69.1)
Debt and loan facility issuance and extension fees (1.0) (2.8)
Premiums on hedging derivatives - (3.9)
Tax (paid)/repaid (0.9) 0.3
Distributions and other receivables from joint ventures 57.6 89.5
Distributions from joint ventures classified as assets held for sale - 6.0
Cash flows from operating activities 38.3 69.6
Investing activities
Capital expenditure (18.7) (36.4)
Sale of properties (including trading properties) 49.0 124.0
Sale of investments in joint ventures 69.0 67.9
Sale of investments in associates 96.7 -
Advances to joint ventures (8.3) (4.0)
Distributions and capital returns received from associates 73.6 2.6
Cash flows from investing activities 261.3 154.1
Financing activities
Share issue expenses - (0.5)
Proceeds from award of own shares - 0.1
Purchase of own shares - (6.7)
Proceeds from new borrowings 96.0 -
Repayment of borrowings (111.1) (302.4)
Equity dividends paid 18 (29.9) (13.2)
Cash flows from financing activities (45.0) (322.7)
Increase/(decrease) in cash and cash equivalents 254.6 (99.0)
Opening cash and cash equivalents 19B 218.8 315.1
Exchange translation movement 19B (1.1) 2.7
Closing cash and cash equivalents 19B 472.3 218.8
Notes to the CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION, CONSOLIDATION AND PRINCIPAL ACCOUNTING POLICIES
A: BASIS OF PREPARATION AND CONSOLIDATION
Basis of preparation
The consolidated financial statements have been prepared in accordance with
both UK adopted international accounting standards and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU, (IFRS adopted by the EU as at 31 December 2020), as well as
SAICA Financial Reporting Guides as issued by the Accounting Practices
committee and those parts of the Companies Act 2006 as applicable to companies
reporting under IFRS.
New accounting standards, amendments to standards and IFRIC interpretations
which became applicable during the year or have been published but are not yet
effective, were either not relevant or had no, or are not expected to have a
material impact on the Group's results or net assets.
In addition to the above, an assessment has been undertaken on the Pillar 2
tax legislation (effective 1 January 2024), which is based around undertaxed
profits. The Group is not expected to meet the minimum threshold in place for
the legislative rules to apply.
The financial statements are prepared on the historical cost basis, except
that investment properties, other investments and derivative financial
instruments are stated at fair value. Accounting policies have been applied
consistently.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power over the investee, is exposed, or
has rights, to variable return from its involvement with the investee and has
the ability to use its power to affect its returns.
The results of subsidiaries, joint ventures or associates are included in the
consolidated income statement when control is achieved, which is usually from
the effective date of acquisition, or up to the effective date of disposal
which is usually on completion of the transaction. All intragroup
transactions, balances, income and expenses are eliminated on consolidation.
Where necessary, adjustments are made to bring the accounting policies used
into line with those used by the Group.
Business combinations are accounted for using the acquisition method where any
excess of the purchase consideration
over the fair value of the assets, liabilities and contingent liabilities
acquired and the resulting deferred tax thereon is recognised as goodwill
which is then reviewed annually for impairment. Acquisition related costs are
expensed.
B. ALTERNATIVE PERFORMANCE MEASURES (APMs)
The Group uses a number of performance measures which are non-IFRS. The key
measures comprise the following:
- Adjusted measures: Used by the Directors and management to monitor
business performance internally and exclude the same items as for EPRA
earnings, but also certain cash and non-cash items which they believe are not
reflective of the normal day-to-day operating activities of the Group.
Furthermore, the Group evaluates the performance of its portfolio by
aggregating its share of joint ventures and associates which are under the
Group's management ('Share of Property interests') on a proportionally
consolidated basis. The Directors believe that disclosing such non-IFRS
measures enables a reader to isolate and evaluate the impact of such items on
results and allows for a fuller understanding of performance from year to
year. Adjusted performance measures may not be directly comparable with other
similarly titled measures used by other companies.
- EPRA earnings and EPRA net assets: Calculated in accordance with
guidance issued by the European Public Real Estate Association recommended
bases.
- Headline earnings: Calculated in accordance with the requirements of
the Johannesburg Stock Exchange listing requirements.
A reconciliation between reported and the above alternative earnings and net
asset measures is set out in note 9.
1. BASIS OF PREPARATION, CONSOLIDATION AND PRINCIPAL ACCOUNTING POLICIES
D. GOING CONCERN
Introduction
In order to prepare the financial statements for the year ended 31 December
2023 on a going concern basis the Directors have undertaken a detailed
assessment of the Group's principal risks and current and projected financial
position over the period to 30 June 2025 ('the going concern period'). This
period has been selected as it coincides with the first six monthly covenant
test date for the Group's unsecured debt facilities falling due after the
minimum 12 months going concern period.
The assessment included the preparation of a Base scenario which contained
earnings, balance sheet, cash flow, liquidity and credit metric projections.
The Base scenario was derived from the Group's 2024 Business Plan, which was
approved by the Board in December 2023, with amendments to exclude certain
uncommitted transactions such as disposals. The Business Plan projections
assumed further improvements in the Group's near term operational performance,
supported by the Group's strong leasing pipeline; collections performance;
robust occupancy; and footfall and sales growth seen in 2023. The projections
also factored in the latest geopolitical, economic and trading outlook,
particularly the financial challenges on both consumers and businesses from
high interest rates, benign economic growth, inflation and supply chain
pressures.
Financial position
Over the course of 2023, the Group's net debt has reduced by £406m to
£1,326m. The Group also has significant liquidity of £1,225m (2022: £997m),
comprising cash of £570m and undrawn revolving credit facilities of £655m.
The net debt reduction was principally due to disposal proceeds in the year of
£216m and the derecognition of the Group's investment in Highcross and
O'Parinor which included £125m of secured debt. This reduction has led to an
improvement in the Group's credit metrics as detailed on page 21 of the
Financial Review. Over the going concern period, there is only £109m of
unsecured debt maturities, relating solely to a proportion of the Group's
£185m private placement notes.
The Group has three principal unsecured debt covenants: gearing, interest
cover and unencumbered asset ratio, with the latter covenant only applicable
to the private placement notes. It also has a covenant relating to the amount
of secured debt as a percentage of equity shareholders' funds which must
remain below 50%. This was 11% at 31 December 2023 and is forecast to remain
broadly unchanged over the going concern period. The key variables impacting
the three principal covenants are valuation movements for the gearing and
unencumbered asset ratio covenants, and changes in net rental income for the
interest cover covenant. Net interest cost also impacts the interest cover
ratio, although at 31 December 2023, 84% of the Group's gross debt is at fixed
interest rates, which limits the volatility of this element of the covenant
over the going concern period.
The Group also has secured debt in its Dundrum joint venture and its
associate, Value Retail. These secured facilities are non-recourse to the rest
of the Group and subject to covenants, principally relating to loan to value
and interest cover. The loan secured against Dundrum and three of the loans
held by Value Retail mature over the going concern period. In total the
Group's share of these maturing loans was £513m at 31 December 2023.
Assessment approach
Consistent with the Group's strong financial position, the Base scenario
projections forecast that the Group will maintain significant covenant
headroom and liquidity over the going concern period.
To further determine the Group's ability to continue as a going concern, a
reverse stress test ('stress test') was undertaken on the Base scenario to
assess the maximum level that valuations and net rental income could fall over
the going concern period before the Group reaches its key unsecured debt
covenant thresholds. The stress test adopted valuation yields and ERVs as at
31 December 2023. However, to fully assess the impact on the going concern
assessment the stress test adopted the following worse case assumptions:
- the secured loans in Dundrum and Value Retail are not refinanced and
the lenders enforce their security resulting in the Group derecognising the
full value of its equity investments totalling £508m; and
- the early repayment of £77m of the Group's unsecured private
placement notes which do not mature over the going concern period. This
assumption has been adopted as the unencumbered asset ratio, which is only
applicable to these notes, has the lowest covenant headroom to valuation falls
at 31 December 2023 of 27% and hence would breach before the gearing covenant
shown below. In practice, this potential issue can be avoided as the Group has
the right to redeem the notes for their value plus a make whole amount.
Having reviewed the results of the stress tests, current external forecasts,
recent precedents and plausible future adverse impacts to valuations and net
rental income, the Directors are satisfied that the Group has sufficient
covenant headroom over the going concern period.
The Group is also forecast to retain significant liquidity over the going
concern period, such that liquidity in the stress tests remains above £800m
over the going concern period.
1. BASIS OF PREPARATION, CONSOLIDATION AND PRINCIPAL ACCOUNTING POLICIES
D. GOING CONCERN
Mitigating actions
The going concern assessment explained above excludes the beneficial impact of
potential mitigating actions which would provide the Group with further
financial strength and covenant headroom. These include:
- Refinancing of maturing loans in the ordinary course of business,
particularly in relation to secured debt, as this avoids the modelled
derecognition of these investments in the stress test. Refinancing discussions
are progressing for the Dundrum secured loan while Value Retail management
remain confident of refinancing its maturing loans following the major
refinancing activities of £1.4bn in 2022 and 2023.
- Additional liquidity from further disposals including the recently
contracted sale of Union Square, Aberdeen for £111m which is due to complete
in March 2024.
- Curtailment of uncommitted capital expenditure plans and other
discretionary cash flows factored into the assessment.
Conclusion
The going concern assessment described above demonstrates that the Group is
forecast to remain in a robust financial position over the going concern
period with significant liquidity and debt covenant headroom. The Directors
have therefore concluded that it is appropriate to prepare the financial
statements on a going concern basis.
Foreign currency
Exchange rates
The principal foreign currency denominated balances are in euro where the
translation exchange rates used are:
Consolidated income statement:
Average rate Year ended Year ended
31 December 2023 31 December 2022
Quarter 1 €1.133 €1.195
Quarter 2 €1.150 €1.179
Quarter 3 €1.163 €1.168
Quarter 4 €1.154 €1.150
Consolidated balance sheet:
31 December 2023 31 December 2022
Year end rate €1.153 €1.128
2. PROFIT/(LOSS) FOR THE YEAR
As described in note 3, the Group evaluates the performance of its portfolio
by aggregating its share of joint ventures (see note 12) and associates (see
note 13) which are under the Group's management ('Share of Property
interests') on a proportionally consolidated basis with its wholly owned
portfolio in its 'Reported Group'.
Adjusted earnings, which are also calculated on a proportionally consolidated
basis, is the Group's primary profit measure and this is the basis of
information which is reported to the Board. The following table sets out a
reconciliation from Reported earnings to Adjusted earnings.
2023
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other Adjusted
a
Note £m £m £m £m £m
Revenue 134.3 132.4 266.7 - 266.7
Gross rental income(b) 3A, 4 92.8 115.6 208.4 - 208.4
Service charge income 4 26.6 17.1 43.7 - 43.7
119.4 132.7 252.1 - 252.1
Service charge expenses (29.1) (20.4) (49.5) - (49.5)
Cost of sales 5 (14.7) (20.7) (35.4) 0.3 (35.1)
Net rental income 75.6 91.6 167.2 0.3 167.5
Gross administration costs 5 (64.3) (0.4) (64.7) 13.2 (51.5)
Other income 4 14.9 - 14.9 - 14.9
Net administration expenses (49.4) (0.4) (49.8) 13.2 (36.6)
Profit from operating activities 26.2 91.2 117.4 13.5 130.9
Revaluation losses on properties (45.2) (73.9) (119.1) 119.1 -
Disposals
- Profit/(loss) on sale of properties ( ) 8A 1.3 (19.1) (17.8) 17.8 -
- Recycled exchange gains on disposal of overseas interests 20.1 - 20.1 (20.1) -
Change in fair value of other investments (1.1) - (1.1) 1.1 -
Loss on sale of joint ventures and associates ( ) (19.1) 19.1 - - -
Other net gains 1.2 - 1.2 (1.2) -
Share of results of joint ventures 12B 9.4 (9.4) - - -
Impairment of joint venture (22.2) - (22.2) 22.2 -
Share of results of associates 13B 16.0 (1.2) 14.8 17.3 32.1
Operating (loss)/profit (14.6) 6.7 (7.9) 170.9 163.0
Net finance costs 6 (36.1) (6.6) (42.7) (3.2) (45.9)
(Loss)/profit before tax (50.7) 0.1 (50.6) 167.7 117.1
Tax charge 7 (0.7) (0.1) (0.8) - (0.8)
(Loss)/profit for the year attributable to equity shareholders (51.4) - (51.4) 167.7 116.3
a Adjusting items, described above as 'Capital and other', are set out
in note 9A.
b Proportionally consolidated figure includes £13.6m (2022: £13.7m) of
contingent rents calculated by reference to tenants' turnover.
2022
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other Adjusted
a
Note £m £m £m £m £m
Revenue 131.4 143.6 275.0 - 275.0
Gross rental income(b) 3A, 4 90.2 125.0 215.2 - 215.2
Service charge income 4 24.2 18.6 42.8 - 42.8
114.4 143.6 258.0 - 258.0
Service charge expenses (27.8) (22.5) (50.3) - (50.3)
Cost of sales 5 (9.3) (21.2) (30.5) (2.4) (32.9)
Net rental income 77.3 99.9 177.2 (2.4) 174.8
Gross administration costs 5 (64.6) (0.3) (64.9) 5.1 (59.8)
Other income 4 17.0 - 17.0 - 17.0
Net administration expenses (47.6) (0.3) (47.9) 5.1 (42.8)
Profit from operating activities 29.7 99.6 129.3 2.7 132.0
Revaluation losses on properties (82.7) (138.3) (221.0) 221.0 -
Disposals and assets held for sale
- Profit/(loss) on sale of properties ( ) 8A 0.7 (0.1) 0.6 (0.6) -
- Income from assets held for sale ( ) 8A, 9A - (1.6) (1.6) 1.6 -
Change in fair value of other investments (0.1) - (0.1) 0.1 -
Other net gains/(losses) 0.6 (1.7) (1.1) 1.1 -
Share of results of joint ventures 12B (41.5) 41.5 - - -
Share of results of associates 13B (7.1) 1.8 (5.3) 32.7 27.4
Operating (loss)/profit (101.0) 2.9 (98.1) 257.5 159.4
Net finance costs 6 (63.0) (2.6) (65.6) 11.6 (54.0)
(Loss)/profit before tax (164.0) 0.3 (163.7) 269.1 105.4
Tax charge 7 (0.2) (0.3) (0.5) - (0.5)
(Loss)/profit for the year attributable to equity shareholders (164.2) - (164.2) 269.1 104.9
3. SEGMENTAL ANALYSIS
The Group's reportable segments are determined by the internal performance
reported to the Chief Operating Decision Makers which has been determined to
be the Chief Executive Officer and the Group Executive Committee. Such
reporting is both by sector and geographic location as these demonstrate
different characteristics and risks, are managed by separate teams and are the
basis on which resources are allocated.
The Group evaluates the performance of its portfolio by aggregating its wholly
owned properties and joint operations in the 'Reported Group' with share of
joint ventures and associates which are under the Group's management ('Share
of Property interests') on a proportionally consolidated line-by-line basis.
The Group does not proportionally consolidate the Group's investment in Value
Retail as this is not under the Group's management, and instead monitors the
performance of this investment separately as its share of results of
associates as reported under IFRS.
The Group's activities presented on a proportionally consolidated basis
including Share of Property interests are:
· Flagship destinations
· Developments and other
Total assets are not monitored by segment and resource allocation is based on
the distribution of property assets between segments.
A. INCOME BY SEGMENT
Gross rental income Adjusted net rental income
2023 2022 2023 2022
£m £m £m £m
Flagship destinations
UK 92.8 90.5 72.9 74.3
France 58.6 61.8 49.4 53.8
Ireland 40.0 37.3 36.3 33.6
191.4 189.6 158.6 161.7
Developments and other 17.0 25.6 8.9 13.1
Managed portfolio - proportionally consolidated 208.4 215.2 167.5 174.8
Less Share of Property interests (115.6) (125.0)
Reported Group 92.8 90.2
B. INVESTMENT AND DEVELOPMENT PROPERTY ASSETS BY SEGMENT
2023 2022
Property valuation Capital expenditure Revaluation losses Property valuation Capital expenditure Revaluation
losses
Note £m £m £m £m £m £m
Flagship destinations
UK 863.1 13.9 (21.8) 871.0 12.8 (90.2)
France 1,003.3 14.3 (15.2) 1,241.0 33.3 (57.2)
Ireland 629.7 5.4 (37.5) 676.4 4.9 (20.1)
2,496.1 33.6 (74.5) 2,788.4 51.0 (167.5)
Developments and other 280.0 13.3 (44.6) 431.7 21.9 (53.5)
Managed portfolio - proportionally consolidated 2,776.1 46.9 (119.1) 3,220.1 72.9 (221.0)
Value Retail 1,885.7 27.5 (7.7) 1,887.0 6.6 (60.7)
Group portfolio 4,661.8 74.4 (126.8) 5,107.1 79.5 (281.7)
Less Value Retail 13C (1,885.7) (27.5) 7.7 (1,887.0) (6.6) 60.7
Less Share of Property interests(a) 12C (1,379.9) (27.3) 73.9 (1,722.9) (35.2) 138.3
Less trading properties(b) - - - (36.2) - -
Reported Group 11 1,396.2 19.6 (45.2) 1,461.0 37.7 (82.7)
a The property valuation of Share of Property interests comprises UK
Flagship destinations: £741.8m (2022: £738.6m); France flagship
destinations: £nil (2022: £166.8m), Ireland flagship destinations: £485.2m
(2022: £525.0m) and Developments and other £152.9m (2022: £292.5m).
b In December 2019, the Group exchanged contracts for the forward sale
of Italik, subject to completion of the development which was opened in 2021,
resulting in the sale becoming unconditional although in accordance with a
contractually allowed option and subsequent agreement, the purchaser deferred
completion to 2023. At 31 December 2022, the 75% of Italik contracted for sale
was included within Trading properties at the agreed sale price less forecast
costs to complete with final completion occurring on 11 March 2023 as
explained in note 8.
4. REVENUE
2023 2022
Note £m £m
Base rent 69.6 68.2
Turnover rent 4.7 5.5
Car park income(*) 10.9 10.8
Lease incentive recognition 3.2 2.7
Other rental income 4.4 3.0
Gross rental income 2 92.8 90.2
Service charge income(*) 2 26.6 24.2
Other income
- Property fee income(*) 2 8.4 11.5
- Joint venture and associate management fees(*) 2 6.5 5.5
14.9 17.0
Total 134.3 131.4
* Revenue for those categories marked * amounted to £52.4m (2022: £52.0m)
and is recognised under IFRS 15 'Revenue from Contracts with Customers'. All
other revenue is recognised in accordance with IFRS 16 'Leases'.
5. COSTS
Profit from operating activities is stated after charging:
2023 2022
Cost of sales £m £m
Ground and equity rents payable 1.1 0.7
Inclusive lease costs recovered through rent 2.8 3.1
Other property outgoings(a) 10.6 6.4
Change in provision for amounts not yet recognised in the income statement 0.2 (0.9)
14.7 9.3
2023 2022
Gross administration costs Note £m £m
Employee costs 35.2 42.0
Depreciation of plant and equipment 0.6 1.0
Depreciation of right-of-use assets 2.4 3.1
Other costs(b) 12.9 13.4
Business transformation costs 9A 13.2 5.1
64.3 64.6
a Includes charges and credits in respect of expected credit losses as
set out in note 14A.
b Comprises predominantly professional fees (mainly audit, valuation and
legal), Corporate office costs and insurances and IT related costs.
6. NET FINANCE COSTS
2023 2022
Note £m £m
Discount on redemption of bonds 4.3 -
Interest receivable on derivatives 12.8 21.4
Bank and other interest receivable 18.1 4.7
Finance income 35.2 26.1
Interest on bank loans and overdrafts (4.5) (4.6)
Interest on bonds and related charges (59.2) (61.4)
Interest on senior notes and related charges (5.4) (6.0)
Interest on obligations under head leases (2.1) (2.1)
Interest on other lease obligations (0.1) (0.1)
Other interest payable (0.7) (0.4)
Gross interest costs (72.0) (74.6)
Interest capitalised in respect of properties under development - 1.2
(72.0) (73.4)
Debt and loan facility cancellation costs 9A - (1.3)
Fair value gains/(losses) on derivatives 9A 0.7 (14.4)
Finance costs (71.3) (89.1)
Net finance costs (36.1) (63.0)
7. TAX CHARGE
2023 2022
£m £m
Foreign current tax 0.7 0.2
Tax charge 0.7 0.2
The Group's tax charge remains low because it has tax exempt status in its
principal operating countries. The Group has been a REIT in the UK 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. These conditions include, but are
not limited to, distributing at least 90% of the Group's UK tax exempt profits
as property income distributions (PID) with equivalent tests of 95% on French
tax exempt property profits and 70% of tax exempt property gains. Based on
preliminary calculations, the Group has met the REIT and SIIC conditions for
2023. The residual businesses in both the UK and France are subject to
corporation tax as normal. The Irish assets are held in a QIAIF which provides
similar tax benefits to those of a UK REIT but which subjects dividends and
certain excessive interest payments to a 20% withholding tax. The Group is
committed to remaining in these tax exempt regimes.
The Group operates in a number of jurisdictions and is subject to periodic
reviews and challenges by local tax authorities on a range of tax matters
during its normal course of business. Tax impacts can be uncertain until a
conclusion is reached with the relevant tax authority or through a legal
process. The Group uses in-house expertise when assessing uncertain tax
positions and seeks the advice of external professional advisors where
appropriate. The Group believes that its tax liability accruals are adequate
for all open tax years based on its assessment of many factors, including tax
laws and prior experience.
8. DISPOSALS AND IMPAIRMENT
A. DISPOSALS
Year ended 31 December 2023
On 31 March 2023, the Group raised gross proceeds of €164m (£144m) from the
disposal of its 25% associate stake in Italie Deux in Paris and the wholly
owned Italik extension. 75% of the Italik extension had been classified as a
trading property up to the point of disposal.
On 21 April 2023, the Group completed the sale of its 50% joint venture
investment in Centrale and Whitgift in Croydon for gross proceeds of £70m.
Also during the year the Group raised further gross proceeds of £2m from the
sale of ancillary non-core land.
In total these disposals resulted in a net loss on disposal of £17.8m, of
which a profit of £1.3m related to the Reported Group.
Year ended 31 December 2022
The profit on the sale of properties of £0.7m includes the disposal of
Victoria, Leeds which was sold on 25 February 2022 for gross proceeds of
£120m and several post completion adjustments arising mainly from historical
disposals in prior periods.
Also, on 15 March 2022, the Group completed the sale of its joint venture
investment in Silverburn for gross proceeds of £70m. The Group had exchanged
contracts for this sale on 14 December 2021 such that this investment was
classified as assets held for sale at 31 December 2021 at £71.4m. In 2022,
£nil gain/loss on disposal was recognised. However, income generated during
the period of £1.6m was included in Adjusted earnings as shown in note 9A.
B. IMPAIRMENT ON DERECOGNITION OF JOINT VENTURES
Year ended 31 December 2023
At 31 December 2022, the Group's Highcross and O'Parinor joint ventures, in
which the Group had 50% and 25% interests respectively had £125m of debt
secured against the property interests which was non-recourse to the Group. In
both cases the loans were in breach of certain conditions and the Group had
been working constructively with the respective lenders on options to realise
"best value" for all stakeholders.
On 9 February 2023, a receiver was appointed to administer Highcross for the
benefit of the creditors and, as a result of no longer having joint control
the Group derecognised its share of assets and liabilities, including the
property value and £80m of debt. There was no loss on derecognition as the
Group's joint venture investment in Highcross had been fully impaired at 31
December 2021, from which date the Group had ceased recognising the results of
this joint venture in the consolidated income statement.
On 30 June 2023, the lenders on O'Parinor took control of the joint venture.
The Group therefore fully impaired its joint venture investment by £22.2m and
derecognised its share of assets and liabilities, including the property value
of £61m and £45m of secured debt. The impairment has increased by £0.1m
from 30 June 2023 due to additional costs of disposal.
9. KEY ALTERNATIVE PERFORMANCE MEASURES
Headline earnings has been calculated in accordance with the requirements of
the Johannesburg Stock Exchange listing requirements. EPRA earnings and EPRA
net assets are calculated in accordance with guidance issued by the European
Public Real Estate recommended bases. Reconciliations from Reported Group
(IFRS) earnings after tax and Net assets attributable to equity shareholders
to these measures are set out below.
A. ALTERNATIVE EARNINGS MEASURES
Footnote 2023 2022
£m £m
Reported Group
Loss after tax (51.4) (164.2)
Adjustments:
Revaluation losses on managed portfolio 119.1 221.0
Disposals
- Loss/(profit) on sale of properties a 17.8 (0.6)
- Recycled exchange gains on disposal of overseas property interests b (20.1) -
Joint venture related
- Impairment of investment c 22.2 -
Associates (Value Retail):
- Revaluation losses d 7.7 60.7
- Deferred tax d, e 7.4 0.1
- Change in fair value of financial assets d 0.2 (0.2)
Sub-total: Adjustments for Headline earnings 154.3 281.0
Associates (Value Retail):
- Change in fair value of derivatives d, f 11.1 (18.1)
- Change in fair value of participative loans d, f (9.1) (9.8)
Included in Financing:
- Discount on redemption of bonds g (4.3) -
- Debt and loan facility cancellation costs g - 1.3
- Change in fair value of derivatives g 1.1 10.3
Change in fair value of other investments h 1.1 0.1
Sub-total: Adjustments for EPRA earnings 154.2 264.8
Included in profit from operating activities:
- Business transformation costs i 13.2 5.1
- Change in provision for amounts not yet recognised in the income statement j 0.3 (2.4)
- Income from assets held for sale k - 1.6
Total: Adjustments for Adjusted earnings 167.7 269.1
Headline earnings 102.9 116.8
EPRA earnings 102.8 100.6
Adjusted earnings 116.3 104.9
a As shown in note 2, includes profit on the sale of properties of
£1.3m (2022: loss of £0.6m) and losses on the sale of joint venture and
associates of £19.1m (2022: £nil) principally relating to the sales of
Italie Deux and Croydon. See note 8 for further details.
b Exchange gains previously recognised in equity until disposal,
principally in relation to Italie Deux and O'Parinor.
c Impairment resulting from derecognition of O'Parinor joint venture,
see note 8 for details.
d Adjustments in respect of associates. Total for 2023 is £17.3m (2022:
£32.7m).
e In accordance with EPRA guidance, the tax effects of EPRA adjustments
(including those for disposals) are excluded.
f Change in fair value of derivatives and participative loans: such
items are excluded because they represent gains and losses arising from market
rather than settlement revaluation methodologies which differ from the
accruals basis upon which all other non-investment property related assets and
liabilities are measured. Such a treatment is a form of revaluation gain or
loss created by an assumption that the derivatives or loans will be settled
before their maturity. Such gains and losses are excluded from Adjusted
earnings as they are unrealised and conflict with the commercial reasons for
entering into such arrangements and are expected to be held to maturity.
g Financing items comprise:
2023 2022
Reported Group Share of Property interests Total Reported Group Share of Property interests Total
£m £m £m £m £m £m
Discount on redemption of bonds (4.3) - (4.3) - - -
Debt and loan facility cancellation costs - - - 1.3 - 1.3
Change in fair value of derivatives(f) (0.7) 1.8 1.1 14.4 (4.1) 10.3
(5.0) 1.8 (3.2) 15.7 (4.1) 11.6
The write off of up-front fees arising on early cancellation or early
repayment redemption premiums are considered outside of day-to-day financing
activities and are accordingly excluded from Adjusted earnings.
h Relates to the fair value movement in a small residual investment in
VIA Outlets.
i Business transformation costs comprise:
2023 2022
£m £m
Employee severance 6.3 3.4
System related costs 2.9 1.7
Consultancy costs 4.0 -
13.2 5.1
Such costs relate to the strategic and operational review undertaken by the
new management team and which is an integral part of the Group's strategy
announced during 2021. The related costs are incremental and do not form part
of underlying trading. These costs have been incurred since the announcement
of the strategy and further transformation activities will take place in 2024.
j The Group makes a charge for expected credit losses in accordance
with the technical interpretation of IFRS 9 irrespective of whether the income
to which the provision relates has been recognised in the income statement or
is deferred on the balance sheet. Because of the mismatch this causes between
the cost of provision being recognised in one accounting period and the
related revenue being recognised in a different accounting period, the
adjustment eradicates this distortion. For 2023 the adjustment of £0.3m
(2022: £(2.4m)) is split £0.2m (2022: £(0.9m)) for the Reported Group and
£0.1m (2022: (£1.5m)) for Share of Property interests.
k Income from assets held for sale in 2022 relates to the Group's
joint venture investment in Silverburn, which was transferred to assets held
for sale as at 31 December 2021 and where the sale completed in March 2022. A
£nil gain/loss was generated on the sale which comprised certain additional
costs and accruals of £1.6m which were offset by net income generated in the
period up to the point of disposal (after taking account of distributions) of
£1.6m. The Group excludes losses on disposal from its EPRA and Adjusted
earnings, and because this offset of income generated in the period against
the loss causes the income to be excluded, the income is added back as an
adjusting item in order to reflect the fact that the property remained under
the Group's ownership and management up until completion of the disposal and
is therefore considered to form part of underlying earnings. There were no
assets held for sale as at 31 December 2023.
B. ALTERNATIVE NET ASSET MEASURES
The Group uses the EPRA best practice guidelines incorporating three measures
of net asset value: EPRA Net Tangible Assets (NTA), Net Reinstatement Value
(NRV) and Net Disposal Value (NDV). EPRA NTA is considered to be the most
relevant measure for the Group.
A reconciliation between IFRS net assets and the three EPRA net asset
valuation metrics is set out below.
2023
Footnote Reported Group Share of Property interests Value Retail Total
£m £m £m £m
Reported balance sheet net assets (equity shareholders' funds) 2,462.6 - - 2,462.6
Change in fair value of borrowings a 36.7 (0.2) - 36.5
EPRA NDV 2,499.1
Deduct change in fair value of borrowings a (36.7) 0.2 - (36.5)
Deferred tax - 50% share b 0.2 0.1 100.7 101.0
Fair value of currency swaps as a result of interest rates c 1.0 - - 1.0
Fair value of interest rate swaps 0.7 (1.3) (22.0) (22.6)
EPRA NTA 2,542.0
Deferred tax - remaining 50% share b 0.2 - 100.7 100.9
Purchasers' costs d 302.9 - - 302.9
EPRA NRV 2,945.8
2022
Footnote Reported Group Share of Property interests Value Retail Total
£m £m £m £m
Reported balance sheet net assets (equity shareholders' funds) 2,586.4 - - 2,586.4
Change in fair value of borrowings a 216.2 (0.7) - 215.5
EPRA NDV 2,801.9
Deduct change in fair value of borrowings a (216.2) 0.7 - (215.5)
Deferred tax - 50% share b 0.2 0.1 99.4 99.7
Fair value of currency swaps as a result of interest rates c (0.9) - - (0.9)
Fair value of interest rate swaps 2.1 (6.3) (47.3) (51.5)
EPRA NTA 2,633.7
Deferred tax - remaining 50% share b 0.2 - 99.4 99.6
Purchasers' costs d 330.0 - - 330.0
EPRA NRV 3,063.3
a Applicable for EPRA NDV calculation only and hence the adjustment is
reversed for EPRA NTA and EPRA NRV.
b EPRA guidance stipulates exclusion of 50% of deferred tax for EPRA NTA
purposes.
c Excludes impact of foreign exchange.
d Represents property transfer taxes and fees payable should the Group's
entire property portfolio, (including Value Retail), be acquired at year end
market values.
10. (LOSS)/EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculations of the (loss)/earnings per share (EPS) measures set out below
are based on (loss)/profit after tax, Headline profit after tax, EPRA profit
after tax and Adjusted profit after tax attributable to owners of the parent
and the weighted average number of shares in issue during the year.
Headline earnings per share has been calculated in accordance with the
requirements of the Johannesburg Stock Exchange listing requirements. EPRA has
issued recommended bases for the calculation of certain per share information
which includes net asset value per share as well as earnings per share. The
calculation of Headline, EPRA and Adjusted earnings which includes a
reconciliation to Reported IFRS earnings is set out in note 9A.
Basic EPS measures are calculated by dividing the earnings attributable to the
equity shareholders of the Company by the weighted average number of shares
outstanding during the year. Diluted EPS measures are calculated on the same
basis as basic EPS but with a further adjustment to the weighted average
number of shares outstanding to assume conversion of all potentially dilutive
ordinary shares. Such potentially dilutive ordinary shares comprise share
options and awards granted to colleagues where the exercise price is less than
the average market price of the Company's ordinary shares during the year and
any unvested shares which have met, or are expected to meet, the performance
conditions at the end of the year. To the extent that there is no dilution,
this arises due to the anti-dilutive effect of all such shares.
Net assets per share comprise net assets calculated in accordance with EPRA
guidelines, as set out in note 9B, divided by the number of shares in issue.
A. NUMBER OF ORDINARY SHARES FOR PER SHARE CALCULATIONS
2023 2022
million million
Shares in issue (for purposes of net asset per share calculations) 5,002.3 5,002.3
Weighted average number of shares:
For purposes of basic EPS 4,971.4 4,938.9
Effect of potentially dilutive shares (share options) 10.6 10.3
For purposes of diluted EPS (excluding Reported Group) 4,982.0 4,949.2
B. (LOSS)/EARNINGS PER SHARE
(Loss)/earnings (Loss)/earnings per share
Basic Diluted
2023 2022 2023 2022 2023 2022
Note £m £m pence pence pence pence
Reported Group (51.4) (164.2) (1.0)p (3.3)p (1.0)p (3.3)p
Headline 9A 102.9 116.8 2.1p 2.4p 2.1p 2.4p
EPRA 9A 102.8 100.6 2.1p 2.0p 2.1p 2.0p
Adjusted 9A 116.3 104.9 2.3p 2.1p 2.3p 2.1p
C. NET ASSET VALUE PER SHARE
Net asset value Net asset value per share
2023 2022 2023 2022
Note £m £m pence pence
EPRA NDV 9B 2,499.1 2,801.9 50p 56p
EPRA NTA 9B 2,542.0 2,633.7 51p 53p
EPRA NRV 9B 2,945.8 3,063.3 59p 61p
11. PROPERTIES
2023 2022
Investment properties Trading properties Total Investment properties Trading Total
properties
£m £m £m £m £m £m
At 1 January 1,461.0 36.2 1,497.2 1,561.4 34.3 1,595.7
Revaluation losses (45.2) - (45.2) (82.7) - (82.7)
Capital expenditure 19.6 - 19.6 37.7 - 37.7
Capitalised interest - - - 1.2 - 1.2
Disposals (see note 8) (11.9) (36.2) (48.1) (125.3) - (125.3)
Exchange adjustment (27.3) - (27.3) 68.7 1.9 70.6
At 31 December 1,396.2 - 1,396.2 1,461.0 36.2 1,497.2
2023 2022
Freehold Long leasehold Total Freehold Long leasehold Total
£m £m £m £m £m £m
Valuation analysis by tenure 734.0 662.2 1,396.2 805.3 691.9 1,497.2
Properties are stated at fair value, valued by professionally qualified
external valuers in accordance with RICS Valuation - Global Standards as
follows:
Valuer Properties
CBRE UK flagships, Developments and other properties
Jones Lang LaSalle UK flagships, French flagships, Developments and other properties
Cushman and Wakefield Brent Cross, Irish flagships, Development and other, Value Retail (not
included in the table above)
The estimation and judgement required in the valuations which are derived from
data that is not publicly available, consistent with EPRA's guidance, these
valuations are classified as Level 3 in the IFRS 13 fair value hierarchy. A
reconciliation of the Group portfolio valuation to Reported Group is shown in
note 3B. A listing of properties is in Table 22 of the Additional Information.
A. JOINT OPERATIONS
Investment properties included a 50% interest in the Ilac Centre, Dublin and a
50% interest in Pavilions, Swords totalling £144.5m (2022: £151.4m). These
properties are jointly controlled in co-ownership with Irish Life Assurance
plc.
12. INVESTMENT IN JOINT VENTURES
The Group's investments in joint ventures form part of the Share of Property
interests to arrive at management's analysis of the Group on a proportionally
consolidated basis as explained in note 3 and set out in note 2.
The Group and its partners invest principally by way of equity investment.
However, where applicable, non-equity (loan) balances have been included
within non-current other payables as a liability of the joint venture. Joint
ventures comprise prime urban real estate consisting of Flagship destinations
and Developments and other properties.
A. INVESTMENTS AT 31 DECEMBER 2023
Joint venture Partner Principal property Share
United Kingdom
Bishopsgate Goodsyard Regeneration Limited Ballymore Properties The Goodsyard 50%
Brent Cross Partnership Aberdeen Standard Investments Brent Cross 41%
Bristol Alliance Limited Partnership AXA Real Estate Cabot Circus 50%
Grand Central Limited Partnership CPP Investments Grand Central 50%
The Bull Ring Limited Partnership CPP Investments Bullring 50%
The Oracle Limited Partnership ADIA The Oracle 50%
The West Quay Limited Partnership GIC Westquay 50%
Ireland
Dundrum Retail Limited Partnership/Dundrum Car Park Limited PIMCO Dundrum 50%
The results of disposals of interests in joint ventures are included up to the
point of disposal except for where such disposals form part of assets held for
sale whereby they are excluded for the whole year.
During the year, and as explained in note 8, the Group disposed of its 50%
interest in Croydon and also derecognised its 50% investment in Highcross and
25% investment in O'Parinor.
Figures in the following tables include, where applicable, adjustments to
align to the Group's accounting policies and exclude balances which are
eliminated on consolidation. For 2023, Goodsyard, Croydon (up to its disposal
in April 2023), Highcross (up to date of derecognition in February 2023) and
O'Parinor (up to date of derecognition in June 2023) are included in 'Other'.
Croydon is separately disclosed in 2022.
B. RESULTS
2023
100% share
Brent Cross Cabot Circus Bullring Grand Central The Oracle West Quay
£m £m £m £m £m £m
Gross rental income 28.6 29.4 48.5 8.0 23.5 28.9
Net rental income 24.1 22.8 39.7 4.4 14.7 23.2
Administration expenses (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
Profit from operating activities 24.0 22.7 39.6 4.3 14.6 23.1
Revaluation (losses)/gains on properties (9.6) (6.1) 21.3 (13.8) (22.3) (2.8)
Operating profit/(loss) 14.4 16.6 60.9 (9.5) (7.7) 20.3
Finance income 0.4 0.4 0.5 - 0.2 0.7
Finance costs (0.4) (0.7) - (0.1) - (0.4)
Profit/(loss) before tax 14.4 16.3 61.4 (9.6) (7.5) 20.6
Tax charge - - - - (0.1) -
Profit/(loss) for the year a 14.4 16.3 61.4 (9.6) (7.6) 20.6
Share of distributions received by the Group 9.8 7.5 10.0 14.9 2.0 -
C. ASSETS AND LIABILITIES
2023
100% share
Brent Cross Cabot Circus Bullring Grand Central The Oracle West Quay
£m £m £m £m £m £m
Non-current assets
Investment properties 388.0 234.9 575.0 67.0 184.1 283.5
Other non-current assets 12.8 13.6 0.3 2.6 - 4.2
400.8 248.5 575.3 69.6 184.1 287.7
Current assets
Cash and cash equivalents 16.9 18.8 28.8 9.0 14.8 31.3
Other current assets 5.4 6.0 7.5 9.9 4.3 7.9
22.3 24.8 36.3 18.9 19.1 39.2
Current liabilities
Loans - secured - - - - - -
Other payables (14.9) (13.1) (22.0) (10.8) (8.9) (17.0)
(14.9) (13.1) (22.0) (10.8) (8.9) (17.0)
Non-current liabilities
Obligations under head leases (12.8) (14.1) - (2.8) - (4.2)
Other payables - due to Group companies b - - - - - (348.2)
- other parties and (0.9) (0.2) (0.6) (0.4) (0.4) (348.9)
deferred tax
(13.7) (14.3) (0.6) (3.2) (0.4) (701.3)
Net assets/(liabilities) b 394.5 245.9 589.0 74.5 193.9 (391.4)
a Following the impairment of Highcross to £nil in 2021, the Group
ceased to equity account for its investment in this joint venture such that
although gross balance sheet items on a proportionally consolidated basis
remain included in the Group's figures, it was excluded from all income
statement metrics including revaluation losses. The effect of this is that the
Group's share of results was £nil and the cumulative losses restricted shown
on the balance sheet therefore represents the Group's share of losses which
exceed the Group's investment of £nil.
b The Group's long term loan due from Westquay of £348.2m (2022:
£348.2m) has been impaired by its share of the net liabilities of Westquay of
£195.7m (2022: £201.1m).
c Comprises income in respect of Silverburn as described in note 9A.
d Other current assets in Croydon included restricted monetary assets of
£41.8m relating to cash held in escrow for specified development costs.
e Dundrum loans of £42.6m at 100%, previously included in 'other
payables' were reclassified to equity.
2023
100%
Dundrum Other Total Group Share
£m £m £m £m
Gross rental income 59.2 17.5 243.6 114.4
Net rental income 52.6 13.7 195.2 90.4
Administration expenses (0.3) - (0.9) (0.4)
Profit from operating activities 52.3 13.7 194.3 90.0
Revaluation (losses)/gains on properties (74.4) (41.8) (149.5) (73.9)
Operating (loss)/profit (22.1) (28.1) 44.8 16.1
Finance income 4.6 2.9 9.7 4.1
Finance costs (17.1) (7.4) (26.1) (10.7)
Profit/(loss) before tax (34.6) (32.6) 28.4 9.5
Tax charge - - (0.1) (0.1)
Profit/(loss) for the year a (34.6) (32.6) 28.3 9.4
Share of distributions received by the Group 3.5 - 47.7 47.7
2023
100% share
Dundrum Other Total Group
Share
£m £m £m £m
Non-current assets
Investment properties 1,011.0 89.0 2,832.5 1,379.9
Other non-current assets 2.2 - 35.7 16.7
1,013.2 89.0 2,868.2 1,396.6
Current assets
Cash and cash equivalents 77.8 0.6 198.0 97.3
Other current assets 8.0 0.1 49.1 23.6
85.8 0.7 247.1 120.9
Current liabilities
Loans - secured (520.0) - (520.0) (260.0)
Other payables (9.1) (0.5) (96.3) (46.0)
(529.1) (0.5) (616.3) (306.0)
Non-current liabilities
Obligations under head leases - - (33.9) (15.8)
Other payables - due to Group companies b - (49.3) (397.5) -
- other parties and (1.0) (49.5) (401.9) (2.5)
deferred tax
(1.0) (98.8) (833.3) (18.3)
Net assets/(liabilities) b 568.9 (9.6) 1,665.7 1,193.2
B. RESULTS
2022
100% share
Brent Cross Cabot Circus Bullring Grand Central The Oracle West Quay
£m £m £m £m £m £m
Gross rental income 28.0 27.8 45.2 9.9 22.1 29.1
Net rental income 26.5 23.9 37.2 6.4 15.7 24.5
Administration expenses - - 0.1 (0.1) - -
Profit from operating activities 26.5 23.9 37.3 6.3 15.7 24.5
Revaluation losses on properties (35.8) (30.0) (35.0) (4.6) (44.1) (29.3)
Adjustment for income from assets held for sale c - - - - - -
Operating (loss)/profit (9.3) (6.1) 2.3 1.7 (28.4) (4.8)
Finance income - - 0.3 - 0.1 -
Finance costs (0.3) (0.5) - (0.1) - (0.2)
(Loss)/profit before tax (9.6) (6.6) 2.6 1.6 (28.3) (5.0)
Tax charge - - - - - -
(Loss)/profit for the year (9.6) (6.6) 2.6 1.6 (28.3) (5.0)
Share of distributions received by the Group 11.8 15.8 23.9 - 9.3 -
C. ASSETS AND LIABILITIES
2022
100% share
Brent Cross Cabot Circus Bullring Grand Central The Oracle West Quay
e
£m £m £m £m £m £m
Non-current assets
Investment properties 396.6 237.3 540.5 78.5 201.1 285.3
Other non-current assets 12.8 13.5 2.7 2.6 - 4.2
409.4 250.8 543.2 81.1 201.1 289.5
Current assets
Cash and cash equivalents 13.0 24.1 18.0 24.7 11.6 16.5
Other current assets d 4.2 7.1 9.8 19.0 3.6 3.9
17.2 31.2 27.8 43.7 15.2 20.4
Current liabilities
Loans - secured - - - - - -
Other payables (13.6) (21.3) (20.9) (7.3) (9.7) (10.9)
(13.6) (21.3) (20.9) (7.3) (9.7) (10.9)
Non-current liabilities
Loans - secured - - - - - -
Obligations under head leases (12.8) (14.1) - (2.8) - (4.2)
Other payables - due to Group companies b,e - - - - - (348.2)
- other parties and e (0.8) (0.6) (1.0) (0.6) (0.7) (348.8)
deferred tax
(13.6) (14.7) (1.0) (3.4) (0.7) (701.2)
Cumulative losses restricted a - - - - - -
Net assets/(liabilities) b 399.4 246.0 549.1 114.1 205.9 (402.2)
2022
100% share
Croydon Highcross Dundrum Other Total Group Share
£m £m £m £m £m £m
Gross rental income 14.3 20.6 55.0 21.4 273.4 119.4
Net rental income 0.5 14.3 48.1 22.6 219.7 95.5
Administration expenses (0.2) (0.3) (0.4) (0.1) (1.0) (0.3)
Profit from operating activities 0.3 14.0 47.7 22.5 218.7 95.2
Revaluation losses on properties (54.2) (52.1) (34.2) (12.5) (331.8) (132.1)
Adjustment for income from assets held for sale c - - - (3.2) (3.2) (1.6)
Operating (loss)/profit (53.9) (38.1) 13.5 6.8 (116.3) (38.5)
Finance income 0.2 7.4 - - 8.0 0.3
Finance costs - (5.0) (1.9) (5.7) (13.7) (3.0)
(Loss)/profit before tax (53.7) (35.7) 11.6 1.1 (122.0) (41.2)
Tax charge (0.5) - - - (0.5) (0.3)
(Loss)/profit for the year (54.2) (35.7) 11.6 1.1 (122.5) (41.5)
Share of distributions received by the Group - - 2.6 - 63.4 63.4
2022
100% share
Croydon Highcross Dundrum Other Total Group Share
£m £m £m £m £m £m
Non-current assets
Investment properties 108.9 125.7 1,088.9 379.3 3,442.1 1,620.0
Other non-current assets 0.6 6.1 8.9 - 51.4 26.7
109.5 131.8 1,097.8 379.3 3,493.5 1,646.7
Current assets
Cash and cash equivalents 13.9 22.2 73.3 13.9 231.2 110.9
Other current assets d 65.4 5.0 3.7 19.5 141.2 61.3
79.3 27.2 77.0 33.4 372.4 172.2
Current liabilities
Loans - secured - (158.8) - (186.4) (345.2) (126.1)
Other payables (16.0) (35.7) (14.9) (11.8) (162.1) (80.7)
(16.0) (194.5) (14.9) (198.2) (507.3) (206.8)
Non-current liabilities
Loans - secured - - (530.9) - (530.9) (265.5)
Obligations under head leases - - - - (33.9) (15.8)
Other payables - due to Group companies b,e (25.3) - - (45.4) (418.9) -
- other parties and deferred e (43.3) (0.2) (0.9) (55.8) (452.7) (6.3)
tax
(68.6) (0.2) (531.8) (101.2) (1,436.4) (287.6)
Cumulative losses restricted a - 35.7 - - 35.7 17.9
Net assets/(liabilities) b 104.2 - 628.1 113.3 1,957.9 1,342.4
D. RECONCILIATION OF MOVEMENTS IN INVESTMENT IN JOINT VENTURES
2023 2022
Footnote £m £m
At 1 January 1,342.4 1,451.8
Share of results of joint ventures 9.4 (41.5)
Advances 8.3 4.0
Cash distributions (including interest) a (55.0) (84.0)
Other receivables (6.8) (5.3)
Disposals (see note 8) (98.9) -
Exchange and other movements (6.2) 17.4
At 31 December 1,193.2 1,342.4
a Comprises distributions of £47.7m (2022: £63.4m) and interest
previously accrued of £7.3m (2022: £20.6m).
13. INVESTMENT IN ASSOCIATES
A. PERCENTAGE SHARE
2023 2022
Principal property Footnote Share Share
Value Retail Various Villages across Europe a 40% 40%
Italie Deux Italie Deux, Paris b - 25%
a Interest is calculated based on the share of profits to which the
Group is entitled and excludes individual interests which are loss making.
b The Group disposed of its 25% interest in Italie Deux on 31 March
2023. See note 8 for further details.
Analysis of the results and assets and liabilities of the Group's investment
in associates is set out below and with the exception of Value Retail, these
results form part of the Share of Property interests to arrive at management's
analysis of the Group on a proportionally consolidated basis as explained in
note 3 and set out in note 2.
B. RESULTS
2023
Value Retail Italie Deux Total
100% share Group share 100% share Group share 100% share Group share
£m £m £m £m £m £m
Gross rental income 482.7 162.4 4.8 1.2 487.5 163.6
Net rental income 330.6 114.5 4.6 1.2 335.2 115.7
Administration expenses (156.9) (51.4) - - (156.9) (51.4)
Profit from operating activities 173.7 63.1 4.6 1.2 178.3 64.3
Revaluation gains/(losses) on properties 15.8 (7.7) - - 15.8 (7.7)
Operating profit 189.5 55.4 4.6 1.2 194.1 56.6
Interest costs (97.0) (35.2) - - (97.0) (35.2)
Fair value losses on derivatives (47.5) (11.1) - - (47.5) (11.1)
Fair value gain on participative loans - 15.6 - - - 15.6
Net finance costs (144.5) (30.7) - - (144.5) (30.7)
Profit before tax 45.0 24.7 4.6 1.2 49.6 25.9
Current tax charge (12.9) (2.5) - - (12.9) (2.5)
Deferred tax charge (28.9) (7.4) - - (28.9) (7.4)
Profit for the year 3.2 14.8 4.6 1.2 7.8 16.0
Adjusted earnings - Value Retail 32.1
Adjusted earnings - Italie Deux 1.2
Adjusted earnings - Total 33.3
2022
Value Retail Italie Deux Total
100% share Group share 100% share Group share 100% Group
share
share
£m £m £m £m £m £m
Gross rental income 434.1 148.0 22.4 5.6 456.5 153.6
Net rental income 288.5 101.3 17.8 4.4 306.3 105.7
Administration expenses (144.3) (48.0) (0.1) - (144.4) (48.0)
Profit from operating activities 144.2 53.3 17.7 4.4 161.9 57.7
Revaluation losses on properties (98.1) (60.7) (24.8) (6.2) (122.9) (66.9)
Operating profit/(loss) 46.1 (7.4) (7.1) (1.8) 39.0 (9.2)
Interest costs (79.6) (27.7) (0.1) - (79.7) (27.7)
Fair value gain on derivatives 57.0 18.1 - - 57.0 18.1
Fair value gain on participative loans - 15.0 - - - 15.0
Net finance (costs)/income (22.6) 5.4 (0.1) - (22.7) 5.4
Profit/(loss) before tax 23.5 (2.0) (7.2) (1.8) 16.3 (3.8)
Current tax charge (15.3) (3.2) - - (15.3) (3.2)
Deferred tax charge (8.8) (0.1) - - (8.8) (0.1)
Loss for the year (0.6) (5.3) (7.2) (1.8) (7.8) (7.1)
Adjusted earnings - Value Retail 27.4
Adjusted earnings - Italie Deux 4.4
Adjusted earnings - Total 31.8
C. ASSETS AND LIABILITIES
2023 2022
100% share 100% share
Value Group Value Italie Total Group share
Retail
share
Retail
Deux
£m £m £m £m £m £m
Non-current assets
Investment properties 5,142.1 1,885.7 5,151.0 411.6 5,562.6 1,989.9
Other non-current assets 321.3 93.0 370.7 - 370.7 114.2
5,463.4 1,978.7 5,521.7 411.6 5,933.3 2,104.1
Current assets
Cash and cash equivalents 193.8 64.4 288.6 27.4 316.0 93.6
Other current assets 116.0 43.2 98.9 11.8 110.7 40.7
309.8 107.6 387.5 39.2 426.7 134.3
Total assets 5,773.2 2,086.3 5,909.2 450.8 6,360.0 2,238.4
Current liabilities
Loans (159.3) (87.8) (314.7) - (314.7) (108.1)
Other payables (143.2) (103.2) (148.4) (17.0) (165.4) (104.6)
(302.5) (191.0) (463.1) (17.0) (480.1) (212.7)
Non-current liabilities
Loans (1,973.1) (706.1) (1,787.1) - (1,787.1) (653.6)
(1,787.1) - (1,787.1) (653.6)
Participative loans (398.5) (98.5) (387.1) - (387.1) (95.7)
Other payables, including deferred tax (665.7) (188.1) (650.7) (3.1) (653.8) (185.2)
(3.037.3) (992.7) (2,824.9) (3.1) (2,828.0) (934.5)
Total liabilities (3,339.8) (1,183.7) (3,288.0) (20.1) (3,308.1) (1,147.2)
Net assets 2,433.4 902.6 2,621.2 430.7 3,051.9 1,091.2
Reverse participative loans 398.5 212.4 387.1 - 387.1 205.9
2,831.9 1,115.0 3,008.3 430.7 3,439.0 1,297.1
D. RECONCILIATION OF MOVEMENTS IN INVESTMENT IN ASSOCIATES
2023 2022
Value Italie Total Value Retail Italie Deux Total
Deux
Retail
£m £m £m £m £m £m
At 1 January 1,189.4 107.7 1,297.1 1,140.8 106.2 1,247.0
Share of results of associates 14.8 1.2 16.0 (5.3) (1.8) (7.1)
Capital return - - - - (2.0) (2.0)
Distributions (66.3) - (66.3) (4.4) (0.6) (5.0)
Share of other comprehensive (loss)/gain of associate a (8.8) - (8.8) 23.3 - 23.3
Disposals - (108.6) (108.6) - - -
Exchange and other movements (14.1) (0.3) (14.4) 35.0 5.9 40.9
At 31 December b 1,115.0 - 1,115.0 1,189.4 107.7 1,297.1
a Relates to the change in fair value of derivative financial
instruments in an effective hedge relationship within Value Retail.
b Includes accumulated impairment to the investment in Value Retail of
£94.3m (2022: £94.3m) which was recognised in the year ended 31 December
2020 and is equivalent to the notional goodwill on this investment.
14. TRADE AND OTHER RECEIVABLES
A: TRADE (TENANT) RECEIVABLES - AGEING ANALYSIS AND PROVISIONING
2023 2022
Gross trade receivables Provision Net trade receivables Gross receivables Provision Net trade receivables
£m £m £m £m £m £m
Not yet due 11.9 (1.2) 10.7 3.2 (0.6) 2.6
0 - 3 months overdue 5.5 (1.0) 4.5 4.0 (0.8) 3.2
3 - 12 months overdue 8.1 (2.6) 5.5 8.1 (2.3) 5.8
More than 12 months overdue 16.1 (9.2) 6.9 25.7 (13.9) 11.8
41.6 (14.0) 27.6 41.0 (17.6) 23.4
Provisions against trade receivables includes £0.9m (2022: £0.2m) against
receivables whereby the income has been deferred on the balance sheet. On a
proportionally consolidated basis, a further £1.0m (2022: £1.4m) relates to
Share of Property interests. The charge made for making these provisions is
excluded from Adjusted earnings as described in note 9A.
B: ANALYSIS OF MOVEMENTS IN PROVISIONS
2023 2022
Loss allowance £m £m
At 1 January 17.6 27.4
Additions to provisions 9.4 4.0
Disposals - (1.3)
Release of provisions (8.0) (10.7)
Utilisation (5.4) (2.8)
Exchange 0.4 1.0
At 31 December 14.0 17.6
15. RESTRICTED MONETARY ASSETS
2023 2022
Current Non-current Current Non-current
(restated)
Footnote £m £m £m £m
Cash held in respect of tenants and co-owners a 2.2 - 8.6 -
Cash held in escrow b - 21.4 - 21.4
2.2 21.4 8.6 21.4
a Comprises amounts held to meet future services charge costs and
related expenditure such as marketing expenditure, where local laws or
regulations restrict the use of such cash.
b Comprises funds placed in escrow in 2020 by Hammerson plc to satisfy
potential obligations under indemnities granted in favour of Directors and
officers to the extent that such obligations are not already satisfied by the
Company or covered by Directors' and Officers' liability insurance. The funds
will remain in trust until the later of December 2026, or, if there are
outstanding claims at that date, the date on which all claims are resolved.
16. LOANS
A. LOAN PROFILE
2023 2022
Footnote £m £m
Unsecured
£300.0m (2022: £200m) 7.25% sterling bonds due 2028 a 292.2 199.0
€700.0m 1.75% eurobonds due 2027 b 600.8 612.3
£211.2m (2022: £300.0m) 6% sterling bonds due 2026 a 211.1 299.1
£338.3m (2022: £350.0m) 3.5% sterling bonds due 2025 a 337.3 348.3
Unamortised facility fees (2.2) (3.1)
Senior notes due 2031 5.0 5.1
Senior notes due 2028 11.0 11.3
Senior notes due 2026 60.7 62.0
Senior notes due 2024 - 112.4
1,515.9 1,646.4
Senior notes due 2024 - shown in current liabilities 108.6 -
1,624.5 1,646.4
a On 31 August 2023 the Group issued £100m of bonds (at a discount of
£6.7m), adding to the existing £200m, 7.25% sterling bond issue due 2028.
The newly issued bonds therefore having an effective interest rate of 9.1%.
The proceeds were used to redeem £88.8m of the 6% sterling bonds due in 2026,
and £11.7m of the 3.5% sterling bonds due in 2025 by way of a tender. The
tendered bonds were redeemed at a discount, and after associated costs, the
Group recognised a net gain of £4.3m which is shown in finance income in note
6, this discount has been excluded from the Group's Adjusted earnings as shown
in note 9A.
b The coupon is linked to two sustainability performance targets, both
of which will be tested in December 2025 against a 2019 benchmark. If the
targets are not met, a total of 37.5 basis points per annum, or €2.625m
(£2.3m) per target, will be payable in addition to the final year's coupon.
The Group has made certain assumptions which support not increasing the
effective interest rate, as a result of the possibility of failing to meet the
targets. Planned future initiatives which will assist the Group in achieving
the targets include the introduction of energy efficient projects, the
generation of additional on or offsite energy and driving compliance with
relevant energy performance legislation. The Group continues to make steady
progress against both targets.
B. UNDRAWN COMMITTED FACILITIES
The Group has the following revolving credit facilities (RCF), which are all
in sterling unless otherwise indicated, expiring as follows:
2023 2022
Footnote £m £m
2021 RCF expiring 2024 50.0 150.0
2021 JPY7.7bn RCF expiring 2026 a 43.2 48.9
2021/22 RCF expiring 2026 a 563.0 463.0
b 656.2 661.9
a On 29 April 2023, the Group exercised its option to extend the
maturity of these RCFs by one year from 2025 to 2026.
b £0.8m (2022: £2.1m) of RCFs have been utilised (although not drawn)
to support ancillary facilities leaving £655.4m (2022: £659.8m) available to
the Group.
C. MATURITY ANALYSIS OF UNDRAWN COMMITTED FACILITIES
2023 2022
Expiry £m £m
Within one year 50.0 -
Within one to two years - 50.0
Within two to five years 606.2 611.9
656.2 661.9
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A: FINANCIAL RISK MANAGEMENT AND STRATEGY
The Group's financial risk management strategy seeks to set financial limits
for treasury activity to ensure they are in line with the risk appetite of the
Group. The Group's activities expose it to certain financial risks comprising
liquidity risk, market risk (comprising interest rate and foreign currency
risk), credit risk and capital risk.
The Group's treasury function, which operates under treasury policies approved
by the Board, maintains internal guidelines for interest cover, gearing,
unencumbered assets and other credit ratios and both the current and projected
financial position against these guidelines is monitored regularly.
To manage the risks set out above, the Group uses certain derivative financial
instruments to mitigate potentially adverse effects on the Group's financial
performance. 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.
B. FINANCIAL INSTRUMENTS HELD AT FAIR VALUE
Definitions
The Group's financial instruments are categorised by level of fair value
hierarchy prescribed by accounting standards. The different levels are defined
as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (actual prices) or
indirectly (derived from actual prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (from unobservable inputs).
Fair value valuation technique
Financial instrument Valuation technique for determining fair value
Unsecured bonds Quoted market prices
Senior notes Present value of cash flows discounted using prevailing market interest rates
Unsecured bank loans and overdrafts Present value of cash flows discounted using prevailing market interest rates
Fair value of currency swaps and interest rate swaps Present value of cash flows discounted using prevailing market interest rates
Other investments including participative loans to Value Retail Underlying net asset values of the interests in Villages/centre *
* The assets of the Villages/centre comprise mainly investment
properties held at fair value determined by professional valuers.
Fair value hierarchy analysis
2023 2022
Hierarchy Carrying amount Fair value Carrying amount Fair value
£m £m £m £m
Unsecured bonds Level 1 1,441.4 1,407.4 1,458.7 1,249.5
Senior notes Level 2 185.3 180.4 190.8 180.7
Unsecured facility fees Level 2 (2.2) - (3.1) -
Fair value of currency swaps Level 2 11.4 11.4 30.6 30.6
Borrowings 1,635.9 1,599.2 1,677.0 1,460.8
Fair value of interest rate swaps Level 2 0.7 0.7 2.1 2.1
Participative loans to Value Retail Level 3 212.4 212.4 205.9 205.9
Fair value of other investments Level 3 8.8 8.8 9.8 9.8
18. DIVIDENDS
Cash dividend per share Enhanced scrip alternative Footnote 2023 2022
per share £m £m
Prior period dividends
2021 final dividend - Cash 0.2p a - 11.8
- Enhanced scrip alternative 2.0p b - 51.4
2022 interim dividend - Cash 0.2p - 1.4
- Enhanced scrip alternative 2.0p b - 75.7
2023 interim dividend - Cash 0.72p a,c 35.9 -
( ) 35.9 140.3
Cash flow analysis:
Cash dividend d 29.9 2.6
Withholding tax - 2021 final dividend a - 10.6
29.9 13.2
Total cash dividends per share in respect of the year 0.72p 0.2p
a Dividends paid as a PID are subject to withholding tax which is paid
approximately two months after the dividend itself is paid.
b Calculated as the market value of shares issued to satisfy the
enhanced scrip dividend alternative.
c 2023 interim dividend paid on 2 October 2023 less £6.0m of
withholding tax which was paid in January 2024. No final 2022 dividend was
paid as the Group had satisfied its 2022 PID obligations.
d Comprises cash payments after deduction of withholding tax (see note c
above), where applicable.
A final 2023 dividend of 0.78 pence per share payable in cash, was recommended
by the Board on 28 February 2024 and, subject to approval by shareholders at
the 2024 AGM, is payable on 10 May 2024 to shareholders on the register at the
close of business on 5 April 2024. The dividend will be paid entirely as a
non-PID, and treated as an ordinary company dividend.
19. NOTES TO THE CASH FLOW STATEMENT
A. ANALYSIS OF ITEMS INCLUDED IN OPERATING CASH FLOWS
Footnote 2023 2022
£m £m
Net movements in working capital and restricted monetary assets
Movements in working capital:
- Decrease/(increase) in receivables 8.8 (6.0)
- Decrease in payables (19.8) (17.4)
(11.0) (23.4)
Decrease in restricted monetary assets 6.3 26.0
(4.7) 2.6
Non-cash items
Increase in accrued rents receivable (3.2) (3.5)
Increase/(decrease) in loss allowance provisions a 1.0 (2.6)
Amortisation of lease incentives and other costs 0.6 1.2
Depreciation (note 5) 3.0 4.1
Other non-cash items including share-based payment charge 1.4 -
2.8 (0.8)
a Comprises movement in provisions against trade (tenant) receivables and
unamortised tenant incentives.
B. ANALYSIS OF MOVEMENTS IN NET DEBT
2023 2022
Cash and cash equivalents Borrowings Net debt Cash and cash equivalents Borrowings Net debt
£m £m £m £m £m £m
At 1 January 218.8 (1,677.0) (1,458.2) 315.1 (1,878.9) (1,563.8)
Cash flow 254.6 (15.1) 239.5 (99.0) 302.4 203.4
Change in fair value of currency swaps - (1.9) (1.9) - 8.4 8.4
Exchange and other non-cash movements (1.1) 58.1 57.0 2.7 (108.9) (106.2)
At 31 December 472.3 (1,635.9) (1,163.6) 218.8 (1,677.0) (1,458.2)
Borrowings at 31 December 2023 reflects loans of £1,624.5m (2022: £1,646.4m)
and fair value of currency swaps of £11.4m (2022: £30.6m).
20. CONTINGENT LIABILITIES AND COMMITMENTS
A: CONTINGENT LIABILITIES
2023 2022
£m £m
Reported Group:
- guarantees given 23.1 45.3
- claims arising in the normal course of business 15.6 34.0
Share of Property interests - claims arising in the normal course of business 12.4 6.5
51.1 85.8
In addition, the Group operates in a number of jurisdictions and is subject to
periodic challenges by local tax authorities on a range of tax matters during
the normal course of business. The tax impact can be uncertain until a
conclusion is reached with the relevant tax authority or through a legal
process. The Group addresses this by closely monitoring these potential
instances, seeking independent advice and maintaining transparency with the
authorities it deals with as and when any enquiries are made. As a result, the
Group has identified a potential tax exposure attributable to the ongoing
applicability of tax treatments adopted in respect of certain tax structures
within the Group. The range of potential outcomes is a possible outflow of
minimum £nil and maximum £122m (2022: minimum £nil and maximum £145m). The
Directors have not provided for this amount because they do not believe an
outflow is probable.
B: CAPITAL COMMITMENTS ON INVESTMENT PROPERTIES
2023 2022
£m £m
Reported Group 0.4 0.4
Share of Property interests 45.5 51.4
45.9 51.8
21. POST BALANCE SHEET EVENTS
On 23 February 2024, the Group exchanged contracts for the sale of Union
Square, Aberdeen for gross proceeds of £111m, with completion due in March
2024. At the balance sheet date this asset did not meet the criteria for
reclassification to assets held for sale under IFRS 5 as it was not being
actively marketed and substantive terms had yet to be agreed such that a sale
was not considered highly probable. Consequently as at 31 December 2023 it was
included within investment properties at its fair value of £121m.
ADDITIONAL INFORMATION - UnAudited
Table Table
Summary EPRA performance measures 1 Balance sheet information
Balance sheet 12
Portfolio analysis Net debt 13
Adjusted net rental income 2 Movement in net debt 14
Net rental income 3 Total accounting return 15
Rental data 4 Financing metrics
Vacancy 5 Net debt : EBITDA 16
Lease expiries and breaks 6 Interest cover 17
Top ten tenants 7 Gearing 18
Cost ratio 8 Loan to value 19
Valuation analysis 9 Unencumbered asset ratio 20
Net initial yield 10 EPRA loan to value 21
Capital expenditure 11 Key properties 22
Hammerson is a member of the 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 a Gold Award for compliance with
the EPRA BPR for our 2022 Annual Report. Further information on EPRA and the
EPRA BPR can be found on their website www.epra.com. Details of our key EPRA
metrics are shown in Table 1.
SUMMARY EPRA PERFORMANCE MEASURES
Table 1
Performance measure Note/
Table 2023 2022
Earnings 9A £102.8m £100.6m
Earnings per share (EPS) 10B 2.1p 2.0p
Cost ratio (including vacancy costs) Table 8 41.2% 38.0%
2023 2022
Net Disposal Value (NDV) per share 10C 50p 56p
Net Tangible Assets value (NTA) per share 10C 51p 53p
Net Reinstatement Value (NRV) per share 10C 59p 61p
Net Initial Yield (NIY) Table 10 5.9% 5.8%
Topped-up Net Initial Yield Table 10 6.3% 6.0%
Vacancy rate Table 5 5.8% 4.8%
Loan to value Table 21 48.1% 49.2%
PORTFOLIO ANALYSIS
Where applicable, the information presented within the 'Development and other'
segment only reflects available data in relation to the investment properties
within this segment.
Adjusted net rental income
Table 2
Proportionally consolidated 2023 2022
£m
£m
Base rent 149.8 159.2
Turnover rent 13.6 13.7
Car park income 28.1 27.9
Commercialisation income 9.8 9.5
Surrender premiums 0.4 0.8
Lease incentive recognition 4.3 0.9
Other rental income 2.4 3.2
Gross rental income 208.4 215.2
Ground rents payable (1.8) (1.3)
Inclusive lease costs recovered through rent (6.4) (9.1)
Other property outgoings (32.7) (30.0)
Cost of Sales (40.9) (40.4)
Adjusted net rental income 167.5 174.8
Net rental income
Table 3
Like-for-like net rental income (NRI) is calculated as the percentage change
in NRI for investment properties owned throughout both the current and prior
year, after taking account of exchange translation movements. Properties
undergoing a significant extension project are excluded from this calculation
during the period of the works.
2023
Proportionally consolidated Properties Change in Disposals Developments Total Change in provision Total
owned throughout 2022/23
like-for-like NRI
£m
and other
£m
%
£m Adjusted NRI
£m
£m
NRI
£m
UK 73.5 3.2 - (0.6) 72.9 (0.3) 72.6
France 28.1 1.8 3.4 17.9 49.4 - 49.4
Ireland 36.3 6.0 - - 36.3 - 36.3
Flagship destinations 137.9 3.6 3.4 17.3 158.6 (0.3) 158.3
Developments and other - n/a - 8.9 8.9 - 8.9
Managed portfolio 137.9 3.6 3.4 26.2 167.5 (0.3) 167.2
2022
Proportionally consolidated Properties Exchange Disposals Developments Total Change in provision Total
owned throughout 2022/23
£m
and other
£m
£m
£m Adjusted NRI
£m
£m
NRI
£m
UK 71.2 - 3.7 (0.6) 74.3 1.7 76.0
France 27.6 (1.0) 10.6 16.6 53.8 - 53.8
Ireland 34.3 (0.7) - - 33.6 0.2 33.8
Flagship destinations 133.1 (1.7) 14.3 16.0 161.7 1.9 163.6
Developments and other - (0.1) 0.3 12.9 13.1 0.5 13.6
Managed portfolio 133.1 (1.8) 14.6 28.9 174.8 2.4 177.2
The Managed portfolio value on which like-for-like growth is based was
£2,008m (2022: £2,244m).
Rental data
Table 4
2023
Proportionally consolidated Gross rental Adjusted net rental Vacancy Average Rents Estimated rental value Rents passing for reversion Reversion/
income
income
rate
rents
passing ( )
£m
£m
(over-rented)
£m
£m
%
passing
£m
%
£/m(2)
a b c d e f
UK 92.8 72.9 4.9 400 87.3 82.3 83.7 (1.8)
France 58.6 49.4 6.9 450 53.0 61.3 54.2 13.2
Ireland 40.0 36.3 3.8 480 39.0 39.5 37.1 6.4
Flagship destinations 191.4 158.6 5.4 430 179.3 183.1 175.0 4.6
Developments and other 17.0 8.9 13.6 190 8.5 10.0 9.2 8.9
Managed portfolio 208.4 167.5 5.8 400 187.8 193.1 184.2 4.8
2022
UK 90.5 74.3 3.6 420 84.0 80.8 80.6 0.4
France 61.8 53.8 4.4 430 65.9 75.5 67.0 12.5
Ireland 37.3 33.6 2.3 500 38.8 39.9 36.9 8.1
Flagship destinations 189.6 161.7 3.7 440 188.7 196.2 184.5 6.3
Developments and other 25.6 13.1 16.0 170 21.6 21.6 21.8 (1.4)
Managed portfolio 215.2 174.8 4.8 380 210.3 217.8 206.3 5.5
a See Table 5 for analysis of vacancy.
b Average rents passing at the year end before deducting head rents and
excluding rents passing from anchor units, car parks and commercialisation.
c Rents passing are the annual rental income receivable at the year
end from an investment property, after any rent-free periods and after
deducting head rents and car parking and commercialisation running costs
totalling £12.6m (2022: £14.2m).
d The estimated rental value (ERV) at the year end calculated by the
Group's valuers. At 31 December 2023, includes ERV for vacant space of £9.9m
(2022: £9.2m) as per Table 5 and ERV for space undergoing reconfiguration of
£2.6m - UK £2.3m, Ireland £0.3m (2022: £2.6m - UK £2.2m, Ireland £0.4m).
ERVs in the above table are included within the unobservable inputs to the
portfolio valuations as defined by IFRS 13.
e Rents passing for reversion is rents passing adjusted for tenant
incentives and inclusive costs, to give a better comparison with ERV which is
on a net effective basis.
f We have amended the reversion/(over-rented) figures (and
restated 2022 figures) to show a direct comparison between the valuers' ERV
and rents passing for reversion, with both sets of figures being on a net
effective basis. The reversion/(over-rented) figures therefore show the future
change in the Group's rental income from the settlement of review rents or a
combination of letting:
- units at prevailing ERVs at the next lease event i.e. break or expiry (see
Table 6)
- vacant units (see Table 5)
- units undergoing reconfiguration (see noted above).
Vacancy
Table 5
2023 2022
Proportionally consolidated ERV of vacant space Total ERV for vacancy Vacancy ERV of vacant space Total ERV for vacancy Vacancy
£m
£m
rate
£m
£m
rate
%
%
a
a a
UK 3.2 65.9 4.9 2.3 64.2 3.6
France 4.2 60.6 6.9 3.2 72.5 4.4
Ireland 1.3 35.2 3.8 0.8 35.7 2.3
Flagship destinations 8.7 161.7 5.4 6.3 172.4 3.7
Developments and other 1.2 8.5 13.6 2.9 17.9 16.0
Managed portfolio 9.9 170.2 5.8 9.2 190.3 4.8
a Total ERV for vacancy differs from Table 4 due to the exclusion of car
park ERV and head rents payable which distort the vacancy metric.
Lease expiries and breaks
Table 6
Rental income based on passing rents that expire/break in ERV of leases that expire/break in Weighted average unexpired
lease term
Proportionally consolidated Outstanding 2024 2025 2026 Total Outstanding 2024 2025 2026 Total to break years to expiry years
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
UK 2.7 14.4 8.6 10.5 36.2 3.8 12.9 7.2 8.8 32.7 5.8 7.9
France 3.6 6.2 1.7 1.6 13.1 3.4 6.2 2.0 1.8 13.4 2.6 5.9
Ireland 0.9 5.0 1.6 3.0 10.5 1.3 5.1 1.4 2.8 10.6 5.4 6.9
Flagship destinations 7.2 25.6 11.9 15.1 59.8 8.5 24.2 10.6 13.4 56.7 4.6 6.9
Developments and other 1.3 1.0 2.2 0.7 5.2 1.0 0.9 1.5 0.6 4.0 6.1 7.6
Managed portfolio 8.5 26.6 14.1 15.8 65.0 9.5 25.1 12.1 14.0 60.7 4.6 7.0
The table above compares rents passing (as per Table 4) on a headline basis for those units with leases expiring or subject to a tenant break in each year compared to the ERV of those units determined by the Group's valuers on a net effective basis (as per Table 4).
Top ten tenants
Table 7
Ranked by passing rent
Proportionally consolidated Passing rent % of total
£m
passing rent
Inditex 9.6 5.1
H&M 3.8 2.0
Next 3.4 1.8
Selfridges 3.2 1.7
River Island 2.8 1.5
CK Hutchison Holdings 2.6 1.4
JD Sports 2.5 1.4
Boots 2.3 1.2
Watches of Switzerland 2.2 1.2
Signet 2.1 1.1
34.5 18.4
Cost ratio
Table 8
Proportionally consolidated 2023 2022
£m
£m
Adjusted gross administration costs 51.5 59.8
Business transformation costs A 13.2 5.1
Gross administration costs 64.7 64.9
Property fee income (8.4) (11.5)
Management fee receivable (6.5) (5.5)
Property outgoings 39.1 39.1
Less inclusive lease costs recovered through rent (6.4) (9.1)
Total operating costs B 82.5 77.9
Less vacancy costs (8.6) (12.3)
Total operating costs excluding vacancy costs C 73.9 65.6
Gross rental income 208.4 215.2
Ground rents payable (1.8) (1.3)
Less inclusive lease costs recovered through rent (6.4) (9.1)
Gross rental income D 200.2 204.8
Cost ratio including vacancy costs B/D 41.2% 38.0%
Cost ratio excluding vacancy costs C/D 36.9% 32.0%
Cost ratio including vacancy costs (excluding business transformation costs) (B-A)/D 34.6% 35.5%
The Group's business model for developments is to use a combination of
in-house resource and external advisors. The cost of external advisors is
capitalised to the cost of developments. The cost of employees working on
developments is generally expensed, but capitalised subject to meeting certain
criteria related to the degree of time spent on and the stage of progress of
specific projects. Employee costs of £0.1 (2022: £0.8m) were capitalised as
development costs and are not included within 'Gross administration costs'.
Valuation analysis
Table 9
2023
Proportionally consolidated - including Value Retail Properties Revaluation losses Income Capital Total Initial True Nominal
at valuation
in the year
return
return
return
yield
equivalent
equivalent
yield
yield
( ) £m a a,b a,b %
£m
%
%
% % c
%
UK 863.1 (21.8) 8.7 (2.4) 6.1 7.8 8.5 8.1
France 1,003.3 (15.2) 4.6 (4.3) 0.1 4.4 5.3 5.1
Ireland 629.7 (37.5) 5.7 (5.6) (0.2) 5.4 6.0 5.8
Flagship destinations 2,496.1 (74.5) 6.3 (4.0) 2.0 5.8 6.6 6.3
Developments and other 280.0 (44.6) 2.7 (6.2) (3.6) 8.2 10.2 9.6
Managed portfolio 2,776.1 (119.1) 5.9 (4.1) 1.6 5.9 6.7 6.4
Value Retail 1,885.7 (7.7) 6.2 (0.4) 5.8
Group portfolio 4,661.8 (126.8) 6.0 (2.6) 3.2
2022
Properties Revaluation losses Income Capital Total Initial True Nominal
at valuation
in the year
return
return
return
yield
equivalent
equivalent
a
a,b
a,b
yield
yield
£m £m
%
c
% % % %
%
UK 871.0 (90.2) 7.9 (9.4) (2.1) 7.7 8.4 8.0
France 1,241.0 (57.2) 4.8 (4.6) - 4.4 5.2 5.0
Ireland 676.4 (20.1) 5.2 (3.0) 2.1 5.3 5.7 5.5
Flagship destinations 2,788.4 (167.5) 6.0 (5.9) (0.2) 5.7 6.3 6.1
Developments and other 431.7 (53.5) 2.3 (14.8) (12.8) 7.0 10.3 9.7
Managed portfolio 3,220.1 (221.0) 5.4 (7.3) (2.3) 5.8 6.6 6.3
Value Retail 1,887.0 (60.7) 5.3 (3.1) 2.0
Group portfolio 5,107.1 (281.7) 5.3 (5.8) (0.7)
a Returns included 100% of Italik, 75% of which was classified as a
trading property until its sale in March 2023.
b Capital and Total return figures include the losses on disposal and
impairment charges on derecognised assets (Highcross and O'Parinor)
c Nominal equivalent yields are included within the unobservable
inputs to the portfolio valuations as defined by IFRS 13. The nominal
equivalent yield for the Reported Group was 5.7% (2022: 5.7%).
Net Initial Yield
Table 10
Investment portfolio
Proportionally consolidated Note 2023 2022
£m
£m
Wholly owned a 3B 1,396.2 1,461.0
Share of Property interests 3B 1,379.9 1,722.9
Trading properties 3B - 36.2
Net investment portfolio valuation on a proportionally consolidated basis 3B 2,776.1 3,220.1
Less: Developments b (192.3) (249.0)
Completed investment portfolio 2,583.8 2,971.1
Purchasers' costs c 171.9 197.2
Grossed up completed investment portfolio A 2,755.7 3,168.3
Annualised cash passing rental income 182.4 207.1
Non recoverable costs (15.5) (21.1)
Rents payable (4.1) (3.8)
Annualised net rent B 162.8 182.2
Add:
Notional rent expiration of rent-free periods and other lease incentives d 7.8 3.2
Future rent on signed leases 1.7 3.8
Topped-up annualised net rent C 172.3 189.2
Add back: Non recoverable costs 15.5 21.1
Passing rents Table 4 187.8 210.3
Net initial yield B/A 5.9% 5.8%
'Topped-up' net initial yield C/A 6.3% 6.0%
a 31 December 2022 figure included 100% of Italik, 75% of which is part
of trading properties. The Group's 100% interest was sold in March 2023.
b Included within the Developments and other portfolio.
c Purchasers' costs equate to 6.7% (2022: 6.7%) of the value of the
completed investment portfolio.
d Weighted average remaining rent-free period is 0.5 years (2022: 0.7
years).
Capital expenditure
Table 11
2023 2022
Proportionally consolidated Note Reported Share of Proportionally Reported Share of Proportionally
Group
Property
consolidated
Group
Property
consolidated
£m
interests
£m
£m
interests
£m
£m
£m
Developments 3 10 13 5 10 15
Capital expenditure - creating area 1 - 1 14 - 14
Capital expenditure - no additional area 12 13 25 3 24 27
Tenant incentives 4 4 8 16 1 17
Total 3B 20 27 47 38 35 73
Conversion from accruals to cash basis (1) (3) (4) (2) 5 3
Total on cash basis 19 24 43 36 40 76
BALANCE SHEET INFORMATION
Note 2 to the financial statements shows the Group's proportionally
consolidated income statement. The Group's proportionally consolidated balance
sheet and net debt are shown in Tables 12 and 13 respectively. As explained in
note 3 to the financial information, the Group's interest in Value Retail is
not proportionally consolidated as it is not under the Group's management.
Balance sheet
Table 12
2023 2022
Note Reported Share of Proportionally Reported Share of Proportionally
Group
Property
consolidated
Group
Property
consolidated
£m
interests
£m
£m
interests
£m
£m
£m
Non-current assets
Investment properties 1,396.2 1,379.9 2,776.1 1,461.0 1,722.9 3,183.9
Interests in leasehold properties 32.7 15.4 48.1 34.0 15.4 49.4
Right-of-use assets 3.9 - 3.9 9.5 - 9.5
Plant and equipment 0.9 - 0.9 1.4 - 1.4
Investment in joint ventures 1,193.2 (1,193.2) - 1,342.4 (1,342.4) -
Investment in associates 1,115.0 - 1,115.0 1,297.1 (107.7) 1,189.4
Other investments 8.8 - 8.8 9.8 - 9.8
Trade and other receivables 1.9 1.3 3.2 3.2 5.0 8.2
Derivative financial instruments - - - 7.0 6.3 13.3
Restricted monetary assets 21.4 - 21.4 21.4 - 21.4
3,774.0 203.4 3,977.4 4,186.8 299.5 4,486.3
Current assets
Trading properties - - - 36.2 - 36.2
Trade and other receivables 74.1 22.0 96.1 85.9 43.4 129.3
Derivative financial instruments 5.2 1.4 6.6 0.1 - 0.1
Restricted monetary assets 2.2 0.2 2.4 8.6 21.0 29.6
Cash and cash equivalents 472.3 97.3 569.6 218.8 117.7 336.5
553.8 120.9 674.7 349.6 182.1 531.7
Total assets 4,327.8 324.3 4,652.1 4,536.4 481.6 5,018.0
Current liabilities
Trade and other payables (129.9) (46.0) (175.9) (168.5) (66.8) (235.3)
Loans (108.6) (260.0) (368.6) - (126.1) (126.1)
Tax (0.3) - (0.3) (0.5) (0.3) (0.8)
Derivative financial instruments (2.3) - (2.3) (16.1) - (16.1)
(241.1) (306.0) (547.1) (185.1) (193.2) (378.3)
Non-current liabilities
Trade and other payables (55.5) (2.4) (57.9) (56.3) (7.0) (63.3)
Obligations under head leases (37.3) (15.8) (53.1) (38.1) (15.8) (53.9)
Loans (1,515.9) - (1,515.9) (1,646.4) (265.5) (1,911.9)
Deferred tax (0.4) (0.1) (0.5) (0.4) (0.1) (0.5)
Derivative financial instruments (15.0) - (15.0) (23.7) - (23.7)
(1,624.1) (18.3) (1,642.4) (1,764.9) (288.4) (2,053.3)
Total liabilities (1,865.2) (324.3) (2,189.5) (1,950.0) (481.6) (2,431.6)
Net assets 2,462.6 - 2,462.6 2,586.4 - 2,586.4
EPRA adjustment 9B 79.4 47.3
EPRA NTA 10C 2,542.0 2,633.7
EPRA NTA per share 10C 51p 53p
Net debt
Table 13
2023 2022
Proportionally consolidated Reported Share of Total Reported Share of Total
Group
Property
£m
Group
Property
£m
£m
interests
£m
interests
£m
£m
Cash and cash equivalents ( ) ( ) 472.3 97.3 569.6 218.8 117.7 336.5
Loans (1,624.5) (260.0) (1,884.5) (1,646.4) (391.6) (2,038.0)
Fair value of currency swaps (11.4) - (11.4) (30.6) - (30.6)
Net debt (1,163.6) (162.7) (1,326.3) (1,458.2) (273.9) (1,732.1)
Movement in net debt
Table 14
Proportionally consolidated 2023 2022
£m
£m
Opening net debt (1,732.1) (1,798.8)
Profit from operating activities 117.3 129.3
Decrease in receivables and restricted monetary assets 16.5 27.5
(Decrease)/increase in payables (31.0) 8.2
Adjustment for non-cash items 0.7 0.7
Cash generated from operations 103.5 165.7
Interest received 43.6 16.8
Interest paid (93.5) (73.5)
Redemption premiums and fees from early repayment of debt 4.3 -
Debt and loan facility issuance and extension fees (0.6) (2.8)
Bond issue costs 73.6 -
Premiums on hedging activities - (3.9)
Tax repaid/(paid) (0.4) 0.1
Cash flows from operating activities 130.5 102.4
Investing activities
Capital expenditure (42.9) (76.3)
Derecognition of JV cash (15.6) -
Derecognition of JV secured debt 125.0 -
Cash held within sold or derecognised entities (8.4) -
Sale of properties 216.4 191.9
Cash flows from investing activities 274.5 115.6
Financing activities
Share issue expenses - (0.5)
Purchase of own shares - (6.7)
Proceeds from awards of own shares 0.1 0.1
Equity dividends paid (30.0) (13.2)
Cash flows from financing activities (29.9) (20.3)
Exchange translation movement 30.7 (131.0)
Closing net debt (1,326.3) (1,732.1)
Total accounting return
Table 15
2023 2022
NTA NTA per share NTA NTA per share
£m p £m p
EPRA NTA at 1 January 2,633.7 52.7 2,840.1 64.3
Scrip dividend dilution in NTA per share in the year - - - (7.5)
EPRA NTA at 1 January rebased to reflect scrip dividends in the year A 2,633.7 52.7 2,840.1 56.8
EPRA NTA at 31 December 2,542.0 50.8 2,633.7 52.7
Movement in NTA (91.7) (1.9) (206.4) (4.1)
Cash dividends in the year 35.9 0.7 13.2 0.3
B (55.8) (1.2) (193.2) (3.8)
Total accounting return B/A (2.1)% (6.8)%
FINANCING METRICS
Net debt : EBITDA
Table 16
Proportionally consolidated Note 2023 2022
£m
£m
Adjusted operating profit 163.0 159.4
Amortisation of tenant incentives and other items within net rental income (3.6) (0.1)
Share-based remuneration 3.6 3.0
Depreciation 3.0 4.1
EBITDA - rolling 12 month basis A 166.0 166.4
Net debt B Table 13 1,326.3 1,732.1
Net debt : EBITDA B/A 8.0x 10.4x
Interest cover
Table 17
Proportionally consolidated Note 2023 2022
£m
£m
Adjusted net rental income 2 167.5 174.8
Less net rental income in associates: Italie Deux 13B (1.1) (4.4)
A 166.4 170.4
Adjusted net finance costs 2 45.9 54.0
Less interest on lease obligations and pensions (3.3) (2.6)
Add capitalised interest 6 - 1.2
B 42.6 52.6
Interest cover A/B 3.91x 3.24x
Gearing
Table 18
Proportionally consolidated Note 2023 2022
£m
£m
Net debt Table 13 1,326.3 1,732.1
Unamortised borrowing costs -- 18.4 15.9
Cash held within investments in associates: Italie Deux - 6.8
Net debt for gearing A 1,344.7 1,754.8
Equity shareholders' funds - Consolidated net tangible worth B 2,462.6 2,586.4
Gearing A/B 54.6% 67.8%
Loan to value
Table 19
Proportionally consolidated Note 2023 2022
£m
£m
Net debt - 'Loan' A Table 13 1,326.3 1,732.1
Managed property portfolio B 3B 2,776.1 3,220.1
Investment in Value Retail 1,115.0 1,189.4
'Value' C 3,891.1 4,409.5
Loan to value - Headline A/C 34.1% 39.3%
Net debt - Value Retail D 729.6 674.9
Property portfolio - Value Retail E 3B 1,885.7 1,887.0
Loan to value - Full proportional consolidation of Value Retail (A+D)/(B+E) 44.1% 47.1%
110.9 160.3
Net payables - Managed Portfolio
Net payables - Value Retail 76.4 14.2
Net payables - Group F 187.3 174.5
(A+D+F)/(B+E) 48.1% 49.2%
Loan to value - EPRA
Unencumbered asset ratio
Table 20
Proportionally consolidated Note 2023 2022
£m
£m
Managed property portfolio 3B 2,776.1 3,220.1
Adjustments:
- Properties held in associates: Italie Deux - (102.9)
- Encumbered assets * (487.7) (651.0)
Total unencumbered assets A 2,288.4 2,466.2
Net debt - proportionally consolidated Table 13 1,326.3 1,732.1
Adjustments:
- Cash held within investments in associates: Italie Deux - 6.8
- Cash held within investments in encumbered joint ventures * 39.4 50.8
- Unamortised borrowing costs - Group 18.4 15.9
- Encumbered debt * (260.2) (392.3)
Total unsecured debt B 1,123.9 1,413.3
Unencumbered asset ratio A/B 2.04x 1.74x
* At 31 December 2023 encumbered assets and debt relate to Dundrum. At
31 December 2022 they also included Highcross and O'Parinor where the lenders
took control of the secured properties in 2023 at which point the derecognised
the assets and liabilities of these entities.
EPRA LTV Metric
Table 21
2023
Proportionally consolidated Reported Share of Total
Group
joint ventures
£m
£m
£m Share of associates £m Non-controlling interests £m
Include: ( ) ( )
Loans ( ) ( ) 1,624.5 260.0 793.9 - 2,678.4
Foreign currency derivatives 11.4 - - - 11.4
Net payables(a) 87.0 23.9 76.4 - 187.3
Exclude:
Cash and cash equivalents (472.3) (97.3) (64.4) - (634.0)
Net Debt A 1,250.6 186.6 805.9 - 2,243.1
Include:
Investment properties at fair value 1,396.2 1,379.9 1,885.7 - 4,661.8
Total property value B 1,396.2 1,379.9 1,885.7 - 4,661.8
EPRA LTV A/B 48.1%
2022
Proportionally consolidated Reported Share of Total
Group
joint ventures
£m
£m
£m Share of associates £m Non-controlling interests £m
Include: ( ) ( )
Loans ( ) ( ) 1,646.4 391.6 674.9 - 2,712.9
Foreign currency derivatives 30.6 - - - 30.6
Net payables(a) 101.0 14.7 82.8 - 198.5
Exclude:
Cash and cash equivalents (218.8) (117.7) (93.6) - (430.1)
Net Debt A 1,559.2 288.6 664.1 - 2,511.9
Include:
Investment properties at fair value 1,461.0 1,722.8 1,887.0 - 5,070.8
Properties held for sale - 36.2 - - 36.2
Total property value B 1,461.0 1,759.0 1,887.0 - 5,107.0
EPRA LTV A/B 49.2%
Rows with zero balances have intentionally been excluded from the EPRA
specified format in the above tables.
a Net payables includes the following balance sheet accounts:
interests in leasehold properties, right-of-use assets, trade and other
receivables (current and non-current), restricted monetary assets (current and
non-current), trade and other payables (current and non-current), obligations
under head leases (current and non-current), tax and deferred tax (at 50%).
KEY PROPERTIES
Table 22
Managed portfolio Location Accounting classification where not wholly-owned Ownership Area, m(2) No. of tenants Passing rent £m
Flagship destinations
UK
Brent Cross London Joint venture 41% 94,000 114 12.8
Bullring Birmingham Joint venture a 50% 117,000 152 23.9
Cabot Circus Bristol Joint venture b 50% 106,300 109 10.8
The Oracle Reading Joint venture 50% 72,100 98 10.4
Union Square Aberdeen 100% 51,800 72 15.9
Westquay Southampton Joint venture 50% 94,400 110 13.6
France
Les 3 Fontaines Cergy c 100% 76,600 197 21.9
Les Terrasses du Port Marseille 100% 62,800 166 30.3
Ireland
Dundrum Town Centre Dublin Joint venture 50% 125,600 152 27.5
Ilac Centre Dublin Joint operation 50% 27,900 64 4.1
Pavilions Swords Joint operation 50% 44,400 94 7.2
Developments and other (key properties)
Bristol Broadmead Bristol Joint venture b 50% 34,800 62 2.9
Dublin Central Dublin 100% n/a n/a n/a
Dundrum Phase II Dublin Joint venture 50% n/a n/a n/a
Grand Central Birmingham Joint venture a 50% 39,000 53 3.7
Eastgate Leeds 100% n/a n/a n/a
Martineau Galleries Birmingham a 100% 35,200 41 2.0
Pavilions land Swords 100% n/a n/a n/a
The Goodsyard London Joint venture 50% n/a n/a n/a
Ownership Area, m(2) No. of tenants Income
£m
Value Retail Associate d
Bicester Village Bicester 50% 28,000 159 77.9
La Roca Village Barcelona 41% 25,900 146 23.5
Las Rozas Village Madrid 38% 15,600 99 14.8
La Vallée Village Paris 26% 21,600 109 25.5
Maasmechelen Village Brussels 27% 20,000 106 6.3
Fidenza Village Milan 34% 21,100 117 7.3
Wertheim Village Frankfurt 45% 20,900 116 11.0
Ingolstadt Village Munich 15% 21,000 112 3.9
Kildare Village Dublin 41% 21,600 117 11.7
a Collectively known as the Birmingham Estate.
b Collectively known as the Bristol Estate.
c Property includes areas held under co-ownership; figures above
reflect the Group's ownership interests only.
d Passing rent for Value Retail represents annualised base and turnover
rent at the Group's ownership share.
Responsibility Statement
The Annual Report 2023 which will be issued in March 2024, contains a
responsibility statement in compliance with DTR 4.1.12 of the Listing Rules
which sets out that as at the date of approval on 28 February 2024, the
Directors confirm to the best of their knowledge:
· The Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards and
International Financial Reporting Standards (IFRS) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union, give a true
and fair view of the assets, liabilities, financial position and loss of the
Group
· The Company financial statements, which have been prepared in
accordance with UK Accounting Standards, comprising FRS 101, give a true and
fair view of the assets, liabilities and financial position of the Company
· The Strategic Report includes a fair review of the development and
performance of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties that it
faces
The financial statements were approved by the Directors and signed on their
behalf by:
Rita-Rose Gagné Himanshu Raja
Director Director
28 February 2024
Glossary
Adjusted earnings Reported amounts excluding certain items in accordance with EPRA guidelines
and also certain cash and non-cash items which the Directors believe are not
reflective of the normal day-to-day operating activities of the Group.
Annual Incentive Plan (AIP) Annual bonus plan for all employees, including Executive Directors.
Average cost of debt or weighted average interest rate (WAIR) The cost of finance expressed as a percentage of the weighted average debt
(can be calculated on both a net and gross debt basis) during the period.
Borrowings The aggregate of loans and currency swaps but excluding the fair value of the
interest rate swaps, as the fair value crystallises over the life of the
instruments rather than at maturity.
BREEAM An environmental rating assessed under the Building Research Establishment
Environmental Assessment Method.
Capital return The change in property value during the period after taking account of capital
expenditure, calculated on a monthly time-weighted and constant currency
basis.
Compulsory Voluntary Arrangement (CVA) A legally binding agreement with creditors to restructure liabilities,
including future lease liabilities.
Corporate Sustainability Reporting Directive (CSRD) A new directive requiring large companies to disclose ESG information based on
the European Sustainability Reporting Standards (ESRS). The Group is expecting
to report under CSRD in 2025.
Dividend cover Adjusted earnings per share divided by dividend per share.
EBITDA Earnings before interest, tax, depreciation and amortisation.
EPRA The European Public Real Estate Association, a real estate industry body, of
which the Company is a member. This organisation has issued Best Practice
Recommendations with the intention of improving the transparency,
comparability and relevance of the published results of listed real estate
companies in Europe.
Equivalent yield (true and nominal) The capitalisation rate applied to future cash flows to calculate the gross
property value. The cash flows reflect 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, while the nominal
equivalent yield (NEY) assumes rents are received annually in arrears. These
yields are determined by the Group's external valuers.
ERV The estimated market rental value of the total lettable space in a property
calculated by the Group's external valuers on a net effective basis.
ESG Using environmental, social and governance factors to evaluate companies and
countries on how far advanced they are with sustainability.
F&B Food and beverage.
Gearing Net debt expressed as a percentage of equity shareholders' funds calculated as
per the covenant definition in the Group's unsecured bank loans and facilities
and private placements.
Gross property value or Gross asset value (GAV) Property value before deduction of purchasers' costs, as provided by the
Group's external valuers.
Gross rental income (GRI) Income from leases, car parks and commercialisation, after amortising lease
incentives.
Headline rent The annual rental income derived from a lease, including base and turnover
rent but after rent-free periods.
Inclusive lease A lease, often for a short period, under which the rent includes costs such as
service charge, rates and utilities. Instead, the landlord incurs these costs
as part of the overall commercial arrangement.
Income return Income derived from property taken as a percentage of the property value on a
time-weighted and constant currency basis after taking account of capital
expenditure.
Initial yield (or Net initial yield (NIY)) Annual cash rents receivable (net of head 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.
Interest cover Adjusted net rental income excluding associates, divided by Adjusted net
finance costs before capitalised interest and interest charges on lease
obligations and pensions.
Interest rate or currency swap (or derivatives) An agreement with another party to exchange an interest or currency rate
obligation for a pre-determined period.
Joint venture and associate management fees Fees charged to joint ventures and associates for accounting, secretarial,
asset and development management services.
Leasing Comprises new lettings and renewals.
Leasing vs Passing rent A comparison of Headline rent from new leases and renewals to the Passing rent
at the most recent balance sheet date.
Like-for-like (LFL) GRI/NRI The percentage change in GRI/NRI for flagship properties owned throughout both
current and prior periods, calculated on a constant currency basis. Properties
undergoing a significant extension project are excluded from this calculation
during the period of the works. For interim reporting periods properties sold
between the balance sheet date and the date of the announcement are also
excluded from this metric.
Loan to value (LTV) Net debt expressed as a percentage of property portfolio value. The Group has
three measures of LTV: Headline, which includes the Group's investment in
Value Retail; Full proportional consolidation of Value Retail (FPC), which
incorporates the Group's share of Value Retail's net debt and property values;
and EPRA, which includes an adjustment for net payables.
Net effective rent (NER) Annual rent from a unit calculated by taking the total rent payable over the
term of the lease to the earliest termination date and deducting all tenant
incentives.
Net rental income (NRI) GRI less net service charge expenses and cost of sales. Additionally, the
change in provision for amounts not yet recognised in the income statement is
also excluded to calculate Adjusted NRI.
NTA (EPRA) EPRA Net Tangible Assets: An EPRA net asset per share measure calculated as
equity shareholders' funds with adjustments made for the fair values of
certain financial derivatives, deferred tax and any goodwill balances.
Occupancy rate The ERV of the area in a property or portfolio, excluding developments, which
is let, expressed as a percentage of the total ERV, excluding the ERV for car
parks, of that property or portfolio.
Occupational cost ratio (OCR) The proportion of retailer's sales compared with the total cost of occupation,
including rent, local taxes (i.e. business rates) and service charge.
Calculated excluding department stores.
Over-rented The amount, or percentage, by which the ERV falls short of rent passing for
reversion.
Passing rents or rents passing The annual rental income receivable from an investment property after
rent-free periods, head rents, car park costs and commercialisation costs.
Pre-let A lease signed with a tenant prior to the completion of a development or other
major project.
Principal lease A lease signed with a tenant with a secure term of greater than one year.
Property fee income Amounts recharged to tenants or co-owners for property management services
including, but not limited to service charge management and rent collection
fees.
Property Income Distribution (PID) A dividend, generally subject to withholding tax, that a UK REIT is required
to pay from its tax-exempt property rental business and which is taxable for
UK-resident shareholders at their marginal tax rate.
Property interests (Share of) The Group's non-wholly owned properties which management proportionally
consolidate when reviewing the performance of the business. These exclude
Value Retail which is not proportionally consolidated.
Property outgoings The direct operational costs and expenses incurred by the landlord relating to
property ownership and management. This typically comprises void costs, net
service charge expenses, letting related costs, marketing expenditure, repairs
and maintenance, tenant incentive impairment, bad debt expense relating to
items recognised in the income statement and other direct irrecoverable
property expenses. These costs are included within the Group's calculation of
like-for-like NRI and the cost ratio.
Proportional consolidation The aggregation of the financial results of the Reported Group and the Group's
Share of Property interests under management (i.e. excluding Value Retail) as
set out in note 2 to the financial statements.
QIAIF 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.
REIT 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.
Rent collection Rent collected as a percentage of rent due for a particular period after
taking account of any rent concessions granted for the relevant period.
Rent passing for reversion Passing rent adjusted for tenant incentives and inclusive costs to be on a net
effective basis. This will increase or decrease due to changes to rents
passing at rent review or the next lease event (i.e. expiry or break), or by
leasing vacant space or space undergoing reconfiguration.
Reported Group The financial results as presented under IFRS.
Reversionary or under-rented The amount, or percentage, by which the ERV exceeds the rent passing for
reversion.
RIDDOR A health and safety reporting obligation to report deaths, injuries, diseases
and 'dangerous occurrences' at work, including near misses, under the
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013.
Scope 1 emissions Direct emissions from owned or controlled sources.
Scope 2 emissions Indirect emissions from the generation of purchased energy.
Scope 3 emissions All indirect emissions (not included in Scope 2) that occur in the value chain
of the reporting company, including both upstream and downstream emissions.
SAICA South African Institute of Chartered Accountants.
SIIC 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.
SONIA Sterling Overnight Index Average.
Task Force on Climate-related Financial Disclosures (TCFD) An organisation established with the goal of developing a set of voluntary
climate-related financial risk disclosures to be adopted by companies to
inform investors and the public about the risks they face relating to climate
change.
Temporary lease A lease with a period of one year or less, measured to the earlier of lease
expiry or tenant break.
Total accounting return (TAR) The growth in EPRA NTA per share plus dividends paid, expressed as a
percentage of EPRA NTA per share at the beginning of the period. The return
excludes the dilution impact from scrip dividends.
Total development cost All capital expenditure on a development or other major project, including
capitalised interest.
Total property return (TPR) (or total return) NRI, excluding the change in provision for amounts not yet recognised in the
income statement, and capital growth expressed as a percentage of the opening
book value of property adjusted for capital expenditure, calculated on a
monthly time-weighted and constant currency basis.
Total shareholder return (TSR) Dividends and capital growth in a Company's share price, expressed as a
percentage of the share price at the beginning of the period.
Transitional risk Business risk posed by regulatory and policy changes implemented to tackle
climate change.
Turnover rent Rental income which is linked to an occupier's revenues.
Vacancy rate 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.
WAULB/WAULT Weighted Average Unexpired Lease to Break/Term.
Yield on cost Passing rents expressed as a percentage of the total development cost of a
property.
This announcement has also been released on the SENS system of the
Johannesburg Stock Exchange and on Euronext Dublin.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DBGDDLUDDGSIRecent news on Hammerson
See all newsREG - Hammerson PLC - Total Voting Rights
AnnouncementREG - Hammerson PLC - Transaction in Own Shares
AnnouncementREG - Hammerson PLC - Director/PDMR Shareholding
AnnouncementREG - Hammerson PLC - Transaction in Own Shares
AnnouncementREG - Hammerson PLC - Transaction in Own Shares
Announcement