REG - Hammerson PLC - Half-year Report
27/07/2023 07:15
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RNS Number : 3273H Hammerson PLC 27 July 2023
Thursday 27 July 2023
HAMMERSON plc - UNAUDITED HALF YEAR 2023 RESULTS
Strong first half, return to cash dividend, confident in the future
Rita-Rose Gagné, Chief Executive of Hammerson, said:
"We are pleased to have delivered a strong first half and announce a return to
a cash dividend as we look to the future with confidence. Our leasing
momentum in 2022 has continued into the first half of 2023 and we have a
strong pipeline for the second half. Our core portfolio continues to attract
the best occupiers which, combined with our emphasis on commercialisation and
placemaking, is creating exceptional destinations for customers. At the same
time, we continue to transform our operating model and platform, bringing more
integrated and efficient ways of working while reducing costs.
We have further simplified our portfolio with the exit from minority stakes in
France, our standalone development interests in Croydon, and other non-core
land, generating £215m in disposal proceeds, further strengthening the
balance sheet whilst bringing a sharper focus to investment opportunities in
the core portfolio.
Our strategy is driven by the repositioning of our unique city centre
destinations in some of Europe's fastest-growing cities from traditional
retail-anchored footprints to a broader mix of uses. Today we are a more
agile, market facing, asset-centric Hammerson that continues to reshape our
urban destinations to be fit for future lifestyles."
Operational momentum continues
· Footfall and like-for-like sales remain strong, with the former up
+4% year-on-year (UK +2%, France and Ireland +7%) and the latter up +3% in the
UK, +7% in France, and +2% in Ireland
· 134 leasing deals concluded in the period representing £18.3m of
headline rent (£10.7m at our share, ) (+13% LFL)
− Principal leasing +20% ahead of previous passing rent (HY 22:
+31%)
− Net effective rent +8% vs ERV (HY 22: +1%)
− WAULB 7.1 years; 9.4 years WAULT
− Strong leasing pipeline for the second half, with a further
£15m deals in solicitors' hands
· Flagship occupancy up +1% point year-on-year to 95%
· Rent collection: FY 22 now at 98%; HY 23 95%
· Value Retail GRI up +13%, 156 leases signed and 55 new openings,
footfall and sales up +13% and +14% year-on-year respectively
Robust financial performance
· Adjusted earnings up +15% to £56m (HY 22: £48m) benefitting from:
− Like-for-like GRI up +3% reflecting the continuation of strong
leasing trends; like-for-like NRI up +2% YoY
− Gross administration costs down -12% year-on-year to £26m, on
track to meet target of reducing costs by -20% by FY 24, which will bring
cumulative savings of 30% since FY 20
− Net finance costs -13% reflecting debt retirement and increased
interest receipts from cash
· Adjusted earnings per share up 0.1p to 1.1p; basic loss per share of
0.0p (HY 22 earnings per share: 1.0p)
· Value Retail adjusted earnings of £13.4m (HY 22: £13.7m): GRI
growth offset by higher finance and operational costs
· Value Retail cash distribution of £43m received
· Interim cash dividend per share of 0.72p per share, to be paid
entirely as a PID, new dividend policy announced
· Group portfolio value of £4.7bn (FY 22: £5.1bn), values broadly
stable, reduction principally due to disposals
− Capital return -0.3% (HY 22 -0.4%); Total return +2.5% (HY 22:
2.1%)
· IFRS loss of £1m (HY 22: £50m profit)
· EPRA NTA per share 52p (FY 22: 53p)
Stronger balance sheet
· Net debt down 24% to £1,318m (FY 22: £1,732m):
− Completed £215m disposals in the first half, bringing total
since start of FY 22 to £410m. Remain on track to complete £500m programme
by end of FY 23
− Derecognition of £125m of secured debt following exit from
Highcross and O'Parinor joint ventures
· Headline LTV 33% (FY 22: 39%), fully proportionally consolidated
(FPC) LTV 43% (FY 22: 47%)
· Net debt to EBITDA of 7.7x (FY 22: 10.4x)
· Ample liquidity of £1.2bn (FY 22: £1.0bn), including undrawn
committed facilities and £563m of cash
Outlook
Whilst the macroeconomic outlook remains uncertain, we have strong leasing and operational momentum and are well placed to deliver another year of robust adjusted earnings and cash flow. We have maintained our strong operational grip on the business and are on track for both our cost reduction and disposals targets. Given our progress of the last few years, we are returning to a cash dividend.
Results presentation today:
Hammerson will hold a virtual presentation for analysts and investors to
present its half year financial results for the six months ended 30 June 2023,
followed by a Q&A session.
Date & time: Thursday 27 July at 10.00 am (BST)
Webcast link: https://kvgo.com/IJLO/Hammerson_2023_Half_Year_Results
(https://kvgo.com/IJLO/Hammerson_2023_Half_Year_Results)
Conference call: Quote Hammerson when prompted by the operator
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 (0) 17037 7166
Ireland: +353 (0) 1 436 0959
Netherlands: +31 (0) 20 708 5073
South Africa: +27 (0) 800 980 512
UK: +44 (0) 33 0551 0200
USA: +1 786 697 3501
The presentation and press release will be available on:
www.hammerson.com/investors/reports-results-presentations/2023-half-year-results
(http://www.hammerson.com/investors/reports-results-presentations/2023-half-year-results)
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, Communications Director 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.
Six months ended 30 June 2023 30 June 2022 Note/Ref
Income
Gross rental income † £106.3m £107.4m 2
Adjusted earnings - Value Retail a £13.4m £13.7m 2
Adjusted finance costs a £25.1m £29.0m 2
Adjusted earnings † a £55.9m £48.4m 2
Revaluation losses - Managed portfolio † £43.8m £40.6m 2
Revaluation losses - Group portfolio, including Value Retail † £17.8m £7.6m Table 9
(Loss)/Profit for the period (IFRS) £(1.2)m £50.3m 2
Adjusted earnings per share † a, b 1.1p 1.0p 10B
Basic (loss)/earnings per share b (0.0)p 1.0p 10B
Interim dividend per share (cash/enhanced scrip) 0.72p 0.2p/2.0p 17
Operational
Like-for-like gross rental income † 3.1% 16.2% Financial Review
Like-for-like net rental income † 2.3% 74.5% Table 6
Occupancy - flagships 95.1% 93.8% Table 4
Leasing activity £10.7m £10.5m n/a
Leasing v ERV (principal leases) +8% +1% n/a
Leasing v Passing rent (principal leases) +20% +31% n/a
Passing rent £184.5m £201.6m Table 2
Like-for-like passing rent change 4.2% 1.2% n/a
ERV £183.0m £212.7m Table 2
Like-for-like ERV change 0.1% (0.3)% Financial Review
EPRA cost ratio (including vacancy costs) † 36.6% 38.5% Table 8
Capital and financing
As at 30 June 2023 31 December 2022
Managed portfolio value £2,805m £3,220m 3B
Group portfolio value (including Value Retail) £4,694m £5,107m 3B
Total property return (including Value Retail) † 2.5% (0.7)% Table 9
Capital return (including Value Retail) † (0.3)% (5.8)% Table 9
Net debt c £1,318m £1,732m Table 13
Gearing 51.8% 67.8% Table 19
Loan to value - headline 33.1% 39.3% Table 18
Loan to value - fully proportionally consolidated 42.9% 47.1% Table 18
Liquidity £1,217m £996m Financial Review
Interest cover † 3.59x 3.24x Table 17
Net debt : EBITDA † 7.7x 10.4x Table 16
Net assets £2,569m £2,586m Balance sheet
EPRA net tangible assets (NTA) per share 52p 53p 10C
† HY 22 income statement figures have been restated to reflect
the IFRIC Decision on Concessions with further information set out in notes 1B
and 5 to the interim financial statements.
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 interim financial statements and reconciliations
for earnings and net assets measures to their IFRS equivalents are set out in
note 9 to the interim financial statements.
b Adjusted earnings per share and basic loss per share for 2022
have been restated to reflect the bonus element of scrip dividends as set out
in note 10 to the interim financial statements.
c Proportionally consolidated basis as set out in the Financial
Review.
Chief Executive's REVIEW
We have delivered another half year of operational and strategic progress.
We have a strong operational grip, positive momentum, and a clear strategy to
grow our business. Footfall and like-for-like sales remain resilient,
despite the volatile macroeconomic environment. Footfall is up 4%
year-on-year, whilst like-for-like sales are up 3% year-on-year in the UK, 7%
in France, and 2% in Ireland.
At 95%, flagship occupancy remains strong with occupier flight to quality
evident - fewer, better stores in prime locations. By leveraging our unique
city centre locations and increasing our focus on placemaking, intelligent
marketing and commercialisation we continue to harness this shift to create
exceptional environments for customers and occupiers and deliver another
strong leasing performance. We have signed 134 leases representing £18m
of headline rent, £11m at our share, also introducing numerous new entrants
and concepts, with best-in-class occupiers making significant investments in
their physical footprint.
Since 2020, we have undertaken a transformation of our operating model, and
reshaped our organisation bringing in new skills and talent in asset
management, leasing, commercialisation and placemaking, which means we can
focus our energies on occupiers and customers. Property management and
associated accounting services in the UK and France are being consolidated
with proven scale operators. Today we are a more agile and market facing
asset-centric organisation that is continuing to reshape our destinations to
be fit for the future.
We have further simplified our portfolio with the exit from minority stakes in
Italie Deux in France, standalone development assets in Croydon, and other
non-core land generating £215m in disposal proceeds. At the same time, we
have been disciplined in not allocating capital to assets with secured debt
where these were non-core, with £125m of secured borrowing derecognised in
the period following exits from Highcross and O'Parinor, whilst bringing a
sharper focus to investment opportunities in the core portfolio.
Our resulting financial position is significantly strengthened. We have ample
liquidity in cash and undrawn committed facilities of £1.2bn. 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 debt reduction and distributions for
shareholders.
Our strategy is underpinned by the quality of our city centre destinations in
some of Europe's fastest growing cities, and their evolution from traditional
retail-anchored footprints to a broader mix of uses, alongside the
transformation of our platform and cost base. Together, this has delivered
further growth in adjusted earnings, broadened our opportunity set, and
provided the confidence to return to a cash dividend.
DIVIDEND POLICY
The Board recognises the importance of cash dividends for shareholders and has
previously stated its intention to return to a cash dividend from HY 23. The
Group's financial position has strengthened in recent years following the
disposals of non-core assets, strong operational performance, and the rebasing
of income and earnings.
The Board today announces a new sustainable dividend policy of 60-70% of
annual adjusted earnings. Dividends will be paid semi-annually.
This policy is based on a disciplined approach to capital allocation balancing
returns to shareholders whilst continuing to invest in our core assets, as
well as the impact of disposals, acquisitions, loan to value and changes in
financing operating conditions. The Board will continue to keep the policy
under review over the coming years as the Group continues to execute on its
strategy.
The Board today declares an interim dividend in respect of 2023 of 0.72p pence
per share, which will be paid as a PID. There will be no scrip alternative
although the dividend reinvestment plan (DRIP) remains available to
shareholders.
FINANCIAL AND OPERATIONAL REVIEW
Adjusted earnings were up 15% to £56m or 1.1p per share, reflecting 3% growth
in like-for-like GRI and 2% in like-for-like NRI, and 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 12% reduction year on year. 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 are well on track to deliver our 2024 target, which will
bring cumulative savings of 30% since FY 20.
Net debt was down 24% to £1,318m, headline LTV was 33% (FY 22: 39%) and fully
proportionally consolidated LTV including the Group's proportionate share of
Value Retail debt was 43% (FY 22: 47%). Our net debt to EBITDA improved to
7.7x from 10.4x at FY 22, reflecting both lower debt and the improved
operating performance.
EPRA NTA was 52p per share at 30 June 2023 (FY 22: 53p), with earnings largely
offsetting disposal and impairment losses. Yields were broadly stable other
than some marginal expansion in Ireland and ERVs were also broadly flat in all
geographies.
Overall, the Group recorded an IFRS loss of £1m (HY 22: £50m profit).
Sales and footfall
Footfall and sales performance is reflective of our proactive asset management
to create exceptional destinations and a more relevant mix. The recovery in
footfall that we saw across our assets in FY 22 continued into HY 23 with
consumers also increasingly returning to city centres, both for leisure and
work. Footfall to-date is +4% year-on-year (UK+2%, France and Ireland +7%).
Our largest city centre estates have benefitted significantly from this
continued return (Birmingham +6%, Marseille +8%, Dublin +13%).
Consumer spending continues to be resilient, with sales positive vs HY 22 (UK
+3%, France +7%, and Ireland +2%), reflecting an inflationary environment,
although we have seen some change in spend patterns with consumers trading
down in certain categories (e.g. fashion accessories outperforming jewellery).
In-store footfall and sales have also been supported by a more cautious
consumer, focusing on value (price vs. quality) which is easier to do
in-person. In addition, the increasing number of occupiers charging for
online deliveries and returns continues to drive store visits.
Occupancy
Our core portfolio is also benefitting from the increasing polarisation in the
market and the flight to quality with a number of new key openings. These
flagship openings are part of a wider repositioning and ongoing improvement of
adjacencies to create relevant placemaking. Flagship portfolio occupancy
increased 1% point year-on-year to 95% with vacancy levels remaining low
across our assets with the UK 5%, France 6% and Ireland at only 3%.
Collections
Collections have normalised. For FY 22, collection now stands at 98% and HY
23 95% (UK 95%, France 94%, Ireland 96%).
Value Retail
Value Retail saw operational performance exceed both HY 22 and HY 19 levels;
Brand sales increased by 14% year-on-year and were 6% above FY 19 levels.
Footfall across the Villages continued to bounce back to pre pandemic levels,
with a 13% year-on-year increase and only 2% down on HY 19.
In line with expectations, Value Retail have begun to see the benefits from a
recovery of the affluent international traveller, reflected in an increase in
spend per visit of 8%. Overall, Value Retail signed 156 leases during the
first half of the year, with many brands choosing to re-fit units with their
latest flagship concept. Year-to-date average occupancy for the six months was
at 94%.
There have been 55 new openings in HY 23. Palm Angels opened its first
off-price boutique in Bicester Village, Burberry implemented a new flagship
store design in their upsized unit in Ingolstadt and Bollicine Ruinart
Champagne Bar opened in Wertheim Village in February. At La Vallée, Monogram,
a pre-loved boutique will be taking permanent space in the second half of the
year following a series of successful pop ups.
The Group's share of adjusted earnings was £13.4m. GRI has increased by 13%
year-on-year, however this continued growth was partially offset in the half
by rising finance costs reflecting the refinancing activity in FY 22 at
Bicester and La Vallée, and the phasing of investment for growth.
Year-to-date, Hammerson has received £43m of cash distributions from Value
Retail, in part reflecting catch up payments from FY 22.
At 30 June 2023, the Group's interest in Value Retail's property portfolio was
£1.9bn and the net assets were £1.2bn; the difference 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 37%.
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 urban locations and the opportunities to leverage our experience
and capabilities to create and manage exceptional multi-use city centre
destinations 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 total
returns for shareholders through consistent execution against our strategic
goals. As we focus on investing in our portfolio of core assets, we are
combining targeted leasing and placemaking with integral and complementary
repurposing and redevelopment opportunities, and directing capital expenditure
to our core estates. This asset focus is underpinned by the continuing
transformation of our agile platform, by maintaining a sustainable and
resilient capital structure and by our commitment to ESG.
In the first six months of FY 23, we have made significant progress towards
all our goals as follows:
Investing in our assets
The quality and location of our destinations in growing cites is a key source
of competitive advantage for Hammerson. 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.
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; education; workspace, and leisure -living spaces. At the same
time, consumers demand top quality environments and experiences. We continue
to reinvest in our assets to partner with best-in-class occupiers to cater to
the communities and catchments in which we operate, whether this be the
repurposing of obsolete department store space into leisure and modern retail,
or redevelopment to residential, workspace, healthcare and lifestyle uses.
Our leasing strategy has evolved from an emphasis on filling space and
increasing occupancy as we emerged from the COVID-19 pandemic to now focus
more proactively on the quality of the complementary mix and offer for both
occupiers and customers, which in turn will underpin a higher quality of
earnings.
Following our best year since FY 18 in FY 22, our leasing momentum has
continued into the first half of 2023, with 134 leases signed on a more
focused portfolio (HY 22: 143), representing £18.3m of headline rent at 100%,
or £10.7m at share (HY 22: £10.5m), and +13% on a like-for-like basis.
Whilst demand continued through the period, June was particularly strong, with
46 leases signed. For principal deals, headline rent was 20% ahead of
previous passing rent. On a net effective basis, principal deals were 8%
ahead of ERV. 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.
In terms of key deals and openings:
· We secured renewals and new deals with Printemps, Olympique de
Marseille, Levi's, Puma and Five Guys at Les Terrasses du Port as we approach
the ten-year anniversary of the opening of Marseille's super prime destination
· We are bringing new Inditex brands - Bershka and Pull & Bear
- into Bullring by reconfiguring former Arcadia space. With other
reconfigurations we have facilitated Boots renewal and the introduction of
Superdrug at Brent Cross
· Also in Birmingham, we handed over former Debenhams space to
M&S in the first half, with TOCA Social anticipated in the second, let
underutilised space above Link Street to Lane 7 bowling, brought a new
leisure concept, VR Sandbox, to Grand Central, and will be opening Nike Rise
in the second half
· We opened Penneys (Primark) and Nike Live at Dundrum, completing
the repurposing of former House of Fraser space, with the backfill allowing
Dunnes Stores to enter for the first time, already handed over and opening
later this year
· Also at Dundrum we leased underutilised storage space to Western
Union converted to modern workspace, bringing a new use and income stream to
the asset, as well as incremental customers to the food and leisure-oriented
Pembroke Square area
Our approach to leasing goes hand in hand with the 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. Like-for-like commercialisation income was
up 15%. Key highlights were:
· We staged 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 and The Oracle,
driving incremental footfall and media coverage, and bringing it to Cabot
Circus in July
· We had further success bringing digitally native brands to
physical space, most notably SHEIN to Bullring and Grand Central
· In France, we hosted a two-week pop-up store at Les Terrasses du
Port for local rapper Jul, while 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 a 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 increased our social media presence and partnerships with
local influencers, contributing to increased visibility and customer
engagement with our destinations
In terms of the repurposing of department stores, which constitutes a
substantial part of our integral projects - capital light repurposing and
redevelopment on existing assets - we achieved planning consent for Drum, an
amenity rich workspace-led proposal, directly served by the UK's most
connected rail station Birmingham New Street, which predominantly occupies the
former John Lewis Partnership space at Grand Central. Strip-out works are
almost complete. In Reading, we await the outcome of a planning application
for the major regeneration of the eastern quarter of The Oracle; to demolish
obsolete department store space and develop around 450 rental apartments
alongside renewed landscaping and commercial uses. We are considering
options for the repurposing of the other department store, including new
restaurant, leisure and fashion uses. Overall, of the department store space
the Group had at FY 19, roughly a third has been repurposed or is in planning,
a third has been sold, and we see potential future opportunities for the
remainder.
Turning to other projects integral to our existing assets, at Ironworks in
Dundrum, a 122 unit residential development, structural steelwork has
commenced on schedule, with agreement reached for the long lease of the 15
affordable apartments. In France, we are considering options for an add-on
development, Cergy 3, to capitalise on strong demand, following the opening of
Les 3 Fontaines extension in March last year.
We continue to progress complementary projects in a disciplined and capital
light manner. In Ireland, we expect initial planning consents to be
finalised imminently at Dublin Central and there are ongoing discussions with
potential end users, while our planning application at Dundrum Phase II
remains in progress. At Martineau Galleries, part of the wider Birmingham
Estate, we are working with Birmingham City Council and the West Midlands
Combined Authority on phasing, grant funding and the programme for delivery.
At Brent Cross, we are engaged with key stakeholders to consider a future
masterplan.
Lastly, in our standalone projects, we exited our 50% share of all land and
corporate interests at Croydon close to book value, focusing the core
portfolio and creating additional liquidity for reinvestment. At Eastgate,
Leeds, master planning and development agreement with the City Council is
ongoing, while at The Goodsyard, Bishopsgate, we are progressing with detailed
design and feasibility, the procurement of initial demolition and preparation
works, and engagement with Network Rail. These capital light steps continue
to create value and optionality.
Environmental, Social and Governance
In the first half of 2023 we continued to deliver against our ESG strategy and
Net Zero commitments. Following the completion of our Net Zero Asset Plans
(NZAPs) in 2022, in the first half of 2023 we commenced work on multiple
projects involving renewable energy in France, removing gas from our Irish
assets and in the UK are improving building management systems, lighting,
heating and ventilation. Our ongoing commitment to energy efficiency has
resulted in a 5% year-on-year reduction in carbon emissions and a 12%
reduction in energy usage, both calculated on a like-for-like portfolio basis.
In June we held our first all-company Giving Back Day with colleagues across
the Group supporting local charities and organisations aligned with our four
key social value themes. We have also supported 96 organisations through our
social value work this year and engaged over 3,000 people in a multitude of
activities.
We also continue to improve our reporting and governance and obtained Board
approval to adopt more realistic climate change scenarios aligned to the
latest scientific research stating that more urgent climate action is needed.
We are developing a new management system to ensure we have a robust way to
process, monitor and improve our ESG performance. All of this progress in
the first half of 2023 demonstrates how our ESG strategy will ensure we
continue to increase our contribution to addressing climate change.
An agile platform
Transforming our platform and cost base, and creating more agile, responsive,
integrated and efficient ways of working with a growth mindset remains a
priority. We took early action in FY 21 and HY 22, shifting from a
top-heavy, geographically oriented and siloed organisation to a simplified,
asset-centric operating model. As a result, we achieved a 17% year-on-year
reduction in gross administration costs at FY 22, achieving our initial target
of a 15-20% reduction by FY 23.
We continue to take further steps including more efficient ways of working,
both in terms of systems, automation and digitalisation, but also in terms of
greater team integration which allows for cross pollination of ideas and
practices between asset management, leasing, placemaking and marketing, ESG,
strategy and insights, finance and communications.
Our goal is to create a high performance culture with an emphasis on the value
add work we do best - strategic asset management and delivery, placemaking and
the repositioning of our assets - whilst property management and associated
accounting services are consolidated to proven third party providers of
scale. Earlier this year, we launched the consolidation of our property
management suppliers in the UK, which formally started in February, and we
have just launched in July a similar activity in France.
The actions we have taken over the last two years have resulted in a reduction
of headcount, down almost 60% since FY 20 and 30% since FY 22, and achieved
cost reduction of about a quarter. At the same time, we continue to invest
in and promote key talent to be fit for the future. Other sources of savings
include reductions in office space in the UK and France and insurance
renewals.
Overall, we have reduced our gross administration cost by 12% year-on-year.
There is more to do, however, we remain on track to meet our goal of a further
20% reduction off the FY 22 base by FY 24, which will bring cumulative savings
of 30% since FY 20.
A sustainable and resilient capital structure
Reflective both of our operational strength, strategic progress and the
disciplined realignment of the portfolio through our disposals programme,
today we have a resilient balance sheet, ample liquidity, and have maintained
our IG credit rating.
Generating total gross proceeds of £215m, 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.
Moreover, £125m of secured borrowings have been derecognised in connection
with our exits from non-core assets in Highcross and O'Parinor.
Having now achieved disposal proceeds of £410m since the beginning of 2022,
the Group remains confident of achieving its target of £500m by FY 23. We
have completed £843m of sales over the last two years. Overall, net debt
reduced 24% in the first half of the year to £1,318m at 30 June 2023.
Headline LTV stood at 33% (FPC: 43%), down from 39% (FPC: 47%) at FY 22.
Also reflecting the increase in earnings, net debt to EBITDA improved to 7.7x
from 10.4x.
At 30 June 2023, the Group had liquidity of £1.2bn in the form of cash
balances (£563m) and undrawn committed RCFs (£654m), and had no significant
unsecured refinancing requirements until 2025 not covered by existing cash.
FINANCIAL REVIEW
OVERVIEW
We have delivered another half year of financial progress from both an
earnings and balance sheet perspective.
Adjusted earnings for the six months ended 30 June 2023 were £56m, a
year-on-year increase of 15% driven by higher rental income and reduced
operating and financing costs. On a like-for-like basis, gross rental income
increased by 3% and like-for-like net rental income improved by 2%. Our
gross administration costs reduced 12% year-on-year with more efficiencies to
come and we continue to target a 20% cost reduction compared with FY 22 by
2024. Net finance costs were 13% lower as a result of the continued balance
sheet deleveraging and increased interest income from cash held on deposit.
On an IFRS basis, the Group reported an IFRS loss of £1m compared with a
profit of £50m in the first half of 2022. The variance was principally due to
losses on disposal and impairment losses totalling £39m in 2023.
As previously committed, the Group is returning to the payment of cash
dividends and has declared an interim dividend of 0.72p per share, to be paid
entirely as a PID. The Board has also announced a new dividend policy as
explained in the Chief Executive's Review on page 4.
EPRA NTA was £2,623m at 30 June 2023, £11m lower than at the start of the
year, equating to EPRA NTA per share of 52p (2022:53p).
Net debt reduced by 24% to £1,318m at 30 June 2023 (FY 22: £1,732m)
benefitting from gross disposal proceeds of £215m, £125m from the
derecognition of secured borrowings, £51m of cash generated from operations
and £43m of distributions from Value Retail.
The significant debt reduction strengthened the Group's balance sheet and
credit metrics. At 30 June 2023 headline LTV was 33% (FY 22: 39%) and LTV on a
fully proportional consolidation basis was 43% (FY 22: 47%). Net debt:
EBITDA improved to 7.7x from 10.4x at 31 December 2022. The Group has ample
liquidity in cash and undrawn committed facilities of £1.2bn
(FY 22: £1.0bn) and has no unsecured debt maturities until 2025 not covered
by existing cash.
Since the year end results, Fitch's senior unsecured investment grade credit
rating was re-affirmed as BBB+ and Moody's Baa3 rating was retained.
PRESENTATION OF FINANCIAL INFORMATION
The Group's property portfolio comprises properties that are either wholly
owned or co-owned with third parties.
Whilst 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 metrics combining both the Managed
portfolio and Value Retail. These include property valuations, returns and
certain credit metrics.
Both the IFRS and Management reporting bases are presented in the financial
statements.
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
- Joint operations* Consolidation of Group's ownership share
- Share of Property interests - Held in joint ventures Single line - results/investment in joint ventures
- Held in associates Single line - results/investment in associates
Value Retail - Held as an associate Single line - results/investment in associates
* See note 11B to the interim financial statements for more information on
the Group's two joint operations.
Derecognition of Highcross and O'Parinor
The Group's Highcross and O'Parinor joint ventures, in which the Group had 50%
and 25% interests respectively, had a total of £125m of borrowings secured
against the individual property interests which were non-recourse to the
Group. In both cases the 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 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 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 on 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.
New accounting pronouncements resulting in restatements of the six months
ended 30 June 2022
In 2022, IFRIC issued agenda decisions which resulted in the restatement of a
number of line items in the prior period financial statements. These
restatements are explained in Note 1B to the interim financial statements and
relate to the accounting treatment of rent concessions granted to tenants
(lessors) and the classification of cash and restricted monetary assets:
• Rent concessions: Restatement of revenue, gross rental income,
cost of sales, net rental income and revaluation losses although operating
profit and income statement figures below operating profit are unaffected.
Adjusted figures are also affected including those down to adjusted earnings.
A more detailed analysis of the effects is set out in note 5 to the interim
financial statements.
• Cash: An increase in cash and cash equivalents of £5.0m, or £25.4m
on a proportionally consolidated basis, with a corresponding decrease in
restricted monetary assets at 30 June 2022. The equivalent figures at 31
December 2021 were £5.4m and £20.4m respectively. See note 19C to the
interim financial statements for further information.
Where figures in this Financial Review or interim financial statements have
been restated, they are marked †.
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 interim 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, impairment of 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 believe are not 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 interim financial statements.
For the first half of 2023, adjusting items additional to EPRA adjusting items
comprised:
• Exclusion of a charge of £3.2m (HY 22: £1.4m) in respect of
business transformation as the Group continues its implementation of strategic
change and comprises mainly non-capitalisable digital transformation costs,
and severance and other costs associated with team and operational
restructuring.
• A credit of £0.2m (HY 22: £1.6m) for 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
The Group's IFRS reported loss was £1.2m (HY 22: £50.3m profit). The
year-on-year reduction in IFRS earnings was principally due to losses on the
disposal of the Group's interests in Italie Deux and Croydon and an impairment
charge in relation to the derecognition of the Group's joint venture
investment in O'Parinor totalling £39.4m and a net reduction in IFRS earnings
from Value Retail of £30.3m. These were partly offset by the recycling of
exchange gains on the two French disposals of £20.1m.
As explained above, the Group evaluates the performance of its portfolio on a
proportionally consolidated basis. A detailed reconciliation from Reported
Group to the proportionally consolidated basis is set out in note 2 to the
interim financial statements.
On an Adjusted basis, earnings increased by £7.5m to £55.9m (HY 22: £48.4m)
and a summary reconciling adjusted earnings is set out below:
Summary income statement
Six months ended 30 June 2023 Six months ended 30 June 2022
a Proportionally consolidated Proportionally consolidated
Before adjustments Adjustments Before adjustments Adjustments
Adjusted Adjusted
£m £m £m £m £m £m
Net rental income † 85.3 (0.2) 85.1 85.4 (1.6) 83.8
Net administration expenses (20.7) 3.2 (17.5) (21.2) 1.4 (19.8)
Profit from operating activities † 64.6 3.0 67.6 64.2 (0.2) 64.0
Revaluation losses - Managed portfolio † (43.8) 43.8 - (40.6) 40.6 -
Disposals and impairments (39.4) 39.4 - 1.5 (1.5) -
Fair value changes and other items 20.4 (20.4) - (1.2) 1.2 -
Share of results of Value Retail 32.1 (18.7) 13.4 62.4 (48.7) 13.7
Operating profit † 33.9 47.1 81.0 86.3 (8.6) 77.7
Net finance costs (35.1) 10.0 (25.1) (35.7) 6.7 (29.0)
Tax charge - - - (0.3) - (0.3)
(Loss)/profit for the period † (1.2) 57.1 55.9 50.3 (1.9) 48.4
(Loss)/earnings per share Reported Group Adjusted Reported Group Adjusted
pence pence pence pence
Basic b (0.0)p 1.0p
Adjusted † b 1.1p 1.0p
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5 to the interim financial statements.
a Proportionally consolidated figures are set out in more detail in note
2 and adjustments are detailed in note 9A to the interim financial statements.
b In addition to the IFRIC Decision on Concessions, comparative figures
for 2022 have also been restated to reflect the bonus element of scrip
dividends as explained in note 10B to the interim financial statements.
Previously reported figures were: Reported Group: 1.1p; Adjusted: 1.1p.
The table below bridges adjusted earnings between the two periods:
Reconciliation of movements in adjusted earnings*
Adjusted
earnings
£m
Six months ended 30 June 2022 † 48.4
Increase in net rental income (excluding disposals) 5.8
Decrease in net finance costs 3.9
Decrease in gross administration costs 3.4
Decrease in tax charge 0.3
Decrease in Value Retail earnings (0.3)
Decrease in net rental income arising from disposals (4.5)
Decrease in property fee income and management fees receivable (1.1)
Six months ended 30 June 2023 55.9
† The figure for the six months ended 30 June 2022 has been restated
to reflect the IFRIC Decision on Concessions with further information provided
in notes 1B and 5 to the interim financial statements.
* Decreases and increases are all on an Adjusted basis and therefore
exclude adjusting items as set out in note 9A to the interim financial
statements.
Rental income
Analysis of rental income
Gross rental income decreased by £1.1m to £106.3m. Disposals reduced income
by £7.9m, including Silverburn and Victoria Leeds in 2022 and Italie Deux and
Croydon in 2023. This was partly offset by favourable foreign exchange
movements of £2.0m and income from developments and other assets which
increased by £2.4m principally relating to the Les 3 Fontaines extension
which opened in March 2022. Like-for-like GRI increased by £2.4m, or 3.1%
benefitting from increased base rent associated with the strong leasing
performance over the previous 18 months.
Net rental income increased by £1.3m compared with HY 22, with lower income
due to disposals of £4.5m offset by foreign exchange movements of £1.7m,
income from development and other assets of £2.6m and like-for-like growth of
£1.5m, or 2.3%. From a like-for-like NRI perspective, Ireland (+8.6%)
benefit from reduced year-on-year bad debt charges whilst France
(-2.5%) was the opposite with an increased charge in HY 23 following a small
number of tenants entering administration.
The above movements resulted in an improvement of the adjusted NRI:GRI (after
ground rents payable) ratio to 80.7% (HY 22: 78.5%).
Further analysis of net rental income by segment is provided in Table 6 of the
Additional information.
Proportionally consolidated Gross rental income Like-for-like change Adjusted net rental income Like-for-like change
Six months ended 30 June 2022 † 107.4 83.8
Like-for-like Managed portfolio:
- UK 1.2 2.9% 0.4 1.1%
- France 1.0 6.1% (0.3) (2.5)%
- Ireland 0.2 1.1% 1.4 8.6%
2.4 3.1% 1.5 2.3%
Developments and other 2.4 2.6
Foreign exchange 2.0 1.7
Disposals (7.9) (4.5)
Six months ended 30 June 2023 106.3 85.1
† 2022 figures have been restated to reflect the IFRIC Decision on
Concessions with further information provided in notes 1B and 5 to the interim
financial statements.
Analysis of rental income by ownership
GRI and NRI for the Group are analysed below to break out Share of Property
interests.
Six months ended 30 June 2023
Share of Property interests
Reported Group Joint Associates Subtotal Total
ventures
Proportionally consolidated £m £m £m £m £m
Gross rental income 47.9 57.2 1.2 58.4 106.3
Net service charge expenses and cost of sales (8.6) (12.4) - (12.4) (21.0)
Net rental income 39.3 44.8 1.2 46.0 85.3
Change in provision for amounts not yet recognised in the income statement - (0.2) - (0.2) (0.2)
Adjusted net rental income 39.3 44.6 1.2 45.8 85.1
Six months ended 30 June 2022
Share of Property interests
Reported Group Joint Associates Subtotal Total
ventures
Proportionally consolidated £m £m £m £m £m
Gross rental income † 45.6 58.7 3.1 61.8 107.4
Net service charge expenses and cost of sales (7.0) (14.2) (0.8) (15.0) (22.0)
Net rental income † 38.6 44.5 2.3 46.8 85.4
Change in provision for amounts not yet recognised in the income statement (0.7) (0.9) - (0.9) (1.6)
Adjusted net rental income † 37.9 43.6 2.3 45.9 83.8
† 2022 figures have been restated to reflect the IFRIC Decision on
Concessions with further information provided in notes 1B and 5 to the interim
financial statements.
Administration expenses
Proportionally consolidated Six months ended Six months ended 30 June 2022
30 June 2023
£m
£m
Employee costs - excluding variable costs 13.1 15.6
Variable employee costs 4.0 3.5
Other corporate costs 8.6 10.0
Gross administration costs 25.7 29.1
Property fee income (4.8) (6.4)
Joint venture and associate management fee income (3.4) (2.9)
Other income (8.2) (9.3)
Adjusted net administration expenses 17.5 19.8
Business transformation costs 3.2 1.4
Net administration expenses 20.7 21.2
Gross administration costs decreased by £3.4m or 12% compared to the first
half of 2022 reflecting the Group's continuing focus on cost reduction and
principally relates to:
• Employee costs, including variable costs, reduced by £2.0m or 10%
as we continued to reshape our organisation to an asset-centric structure.
Headcount at 30 June 2023 was 224, 40% lower than at 30 June 2022 (371) and
30% lower than at 31 December 2022 (320).
• Other corporate costs (comprising mainly professional fees, office
and IT costs) fell by £1.4m or 14%. Office costs were £0.6m lower following
the UK head office relocation to Marble Arch House and Directors and Officers
insurance premiums were £0.8m lower year-on-year reflecting the strengthening
of the Group's financial position.
Other income decreased by £1.1m against 2022 due to disposals.
Business transformation costs of £3.2m comprised mainly fees for contractors
and consultants working on the Group's digitalisation and automation
programme, which were not eligible for capitalisation, and severance costs.
Disposals
During the first half of 2023, we raised gross proceeds of £215m, 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 period resulted in an overall loss on disposal of
£17m, reflecting an 8% discount to book value at 31 December 2022.
Share of results of associates - Value Retail
On an Adjusted basis, the Group's share of results of joint ventures and
associates comprises solely the Group's investment in Value Retail which
generated adjusted earnings of £13.4m (HY 22: £13.7m).
Year-on-year GRI increased by £8.7m, or 13% due to increased sales across the
Villages. This was offset by higher property and administration costs
totalling £6.4m and increased finance costs of £3.0m following the
refinancing of La Vallée and Bicester Villages in 2022. The Group received
cash distributions of £43m from Value Retail in the first half of 2023 (HY
22: £nil).
Net finance costs
Proportionally consolidated Six months ended 30 June 2023 Six months ended 30 June 2022
£m
£m
Adjusted finance income 14.7 11.5
Finance costs
Gross interest costs (39.8) (41.7)
Interest capitalised - 1.2
Adjusted finance costs (39.8) (40.5)
Adjusted net finance costs (25.1) (29.0)
Debt and loan facility cancellation costs - (1.2)
Change in fair value of derivatives (10.0) (5.5)
Net finance costs (35.1) (35.7)
Adjusted net finance costs were £25.1m, a decrease of £3.9m, or 13%,
compared with 2022. This was predominately due to higher interest income of
£3.2m due to increased cash balances following disposals and higher interest
rates in HY 23 compared with HY 22.
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 £nil
(HY 22: £0.3m).
The tax charge remains low as 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 interim financial statements. In order to satisfy
the REIT conditions, the Company is required, on an annual basis, to pass
certain business tests. The Group expects to meet all requirements for
maintaining its REIT status for the year ending 31 December 2023 and to
continue doing so for the foreseeable future.
Dividends
The Group has announced a new dividend policy as set out in the Chief
Executive's review on page 4.
The Board has declared an interim dividend of 0.72p pence per share, payable
as a PID on 2 October 2023 to shareholders on the register on 25 September
2023. There will be no scrip alternative although the 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:
Summary net assets
30 June 2023 31 December 2022
Share of Property interests EPRA EPRA NTA Share of Property interests EPRA EPRA NTA
£m
£m
Reported Group £m adjustments Reported Group £m adjustments
£m £m £m £m
Investment and trading properties 1,406 1,399 - 2,805 1,497 1,723 - 3,220
Investment in joint ventures 1,198 (1,198) - - 1,342 (1,342) - -
Investment in associates - Value Retail 1,172 - 45 1,217 1,189 - 52 1,241
- - - - 108 (108) - -
- Italie Deux
Net trade receivables 26 15 - 41 24 18 - 42
Net debt a (1,144) (174) 8 (1,310) (1,458) (274) (1) (1,733)
Other net liabilities (89) (42) 1 (130) (116) (17) (3) (136)
Net assets 2,569 - 54 2,623 2,586 - 48 2,634
EPRA NTA per share b 52p 53p
a Comprises cash and cash equivalents, loans, fair value of currency
swaps.
b EPRA adjustments in accordance with EPRA best practice, principally in
relation to deferred tax, as shown in note 9B to the interim financial
statements.
During the first half of 2023, net assets decreased by £17m to £2,569m
(2022: £2,586m). Net assets, calculated on an EPRA Net Tangible Assets (NTA)
basis, were £2,623m, or 52 pence per share, a reduction of 1 pence compared
to 31 December 2022. The reduction in NTA was principally due to disposal and
impairment losses of £39m, portfolio revaluation losses of £18m, these were
largely offset by adjusted earnings of £56m. This is equivalent to a total
accounting return of -0.4% (FY 22 -6.8%).
The key components of the movement in Reported Group net assets and EPRA NTA
are as follows:
Movement in net assets
Proportionally consolidated including Value Retail Reported EPRA EPRA NTA
£m
Group adjustments
£m
£m
1 January 2023 2,586 48 2,634
Property revaluation - Managed portfolio (44) - (44)
26 - 26
- Value Retail
Adjusted earnings 56 - 56
Disposal and impairment losses (39) - (39)
Change in deferred tax (8) 4 (4)
Foreign exchange and other movements (8) 2 (6)
30 June 2023 2,569 54 2,623
PROPERTY PORTFOLIO ANALYSIS
Portfolio valuation
The Group's external valuations continue to be conducted by CBRE Limited
(CBRE), Cushman & Wakefield (C&W) and Jones Lang LaSalle Limited
(JLL), providing diversification of valuation expertise across the Group. At
30 June 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.
In the first half of the year the Group's investment markets have been largely
stable, with relatively few transactions as potential investors wait for
greater certainty and liquidity in debt markets. Across all markets there has
been a growing polarisation based on asset quality from both an occupational
and investment perspective, with values for the highest quality assets
outperforming less prime assets. Market yields for prime shopping centres
have remained unchanged in the UK in the six months to 30 June 2023 (source:
JLL, CBRE), in France market yields have increased slightly (source: JLL),
while in Ireland yields have increased by c. 15-25bps (source: C&W).
At 30 June 2023, the Group's portfolio was valued at £4,694m, a reduction of
£413m (8%) since 31 December 2022. This movement was primarily due to
disposals totalling £331m comprising the sales of Italie Deux (including
Italik) and Croydon and the derecogntion of Highcross and O'Parinor. Adverse
foreign exchange movement also reduced the portfolio value by £89m. Movements
in the portfolio valuation are shown in the table below.
Movements in property valuation
Proportionally consolidated - including Value Retail Flagships Developments and other Managed portfolio Value Retail Group portfolio
£m £m £m £m £m
At 1 January 2023 2,788 432 3,220 1,887 5,107
Revaluation (losses)/gains (28) (16) (44) 26 (18)
Capital expenditure 12 6 18 7 25
Disposals * (213) (118) (331) - (331)
Foreign exchange (55) (3) (58) (31) (89)
At 30 June 2023 2,504 301 2,805 1,889 4,694
* Includes the derecognition of Highcross and O'Parinor.
During the year, capital expenditure on the Managed portfolio was £18m
principally reflecting costs directly related to the high leasing volume in
terms of reconfiguration works and incentives across the portfolio; works to
repurpose the former Debenhams units at Bullring where M&S recently began
fitting out, and development costs at the on-site Ironworks residential
scheme. Costs on the Group's remaining land bank schemes were modest at £3m.
Table 11 of the Additional information analyses the spend between the creation
of additional area and that relating to the enhancement of existing space.
Revaluation (losses)/gains
In the first half of 2023 we recognised a total net revaluation loss of £18m
across the Group portfolio, comprising a loss of £44m in respect of the
Managed portfolio partly offset by a gain of £26m in Value Retail. For the
Managed portfolio, outward yield shift, principally in Ireland, caused half
(£22m) of the revaluation loss of £44m. £16m related to reductions on
development schemes and the recognition a £4m cladding cost allowance, with
the remaining loss of £2m associated with lower ERVs at selected assets.
UK flagship destinations reported a revaluation deficit of £10m, £8m of
which was at Union Square relating to an allowance for cladding costs and
lower ERVs, the remaining deficit of £2m across the portfolio was due to
expenditure directly relating to leasing such as unit reconfiguration and
incentives. Excluding Union Square, ERVs grew by 0.8% in the first six months
of the year.
France reported a revaluation gain of £2m, a £1m adverse yield shift impact
offset by increased income.
Ireland recorded a revaluation loss of £19m, with average outward yield shift
of 17bp resulting in a loss of £21m, this was partly offset by a £2m gain in
relation to increased income from leasing activity.
There was a revaluation loss of £16m on the Developments and other portfolio
with the valuers reflecting weaker values in the office market which adversely
impacted the residual valuation of The Goodsyard scheme.
Yields were unchanged across the Value Retail Villages, with the revaluation
gain of £26m solely due to strong trading in 2023.
Further valuation analysis is included in Table 9 of the Additional
information.
Like-for-like ERV*
Flagship destinations Six months ended Year ended Six months ended
30 June 2023 31 December 2022 30 June 2022
%
%
%
UK - (3.8) (1.4)
France 0.2 (1.6) 0.8
Ireland 0.1 0.3 0.5
0.1 (2.2) (0.3)
* Calculated on a constant currency basis for properties owned throughout the
relevant reporting period.
Like-for-like ERVs were broadly unchanged in the first half of the year with
an overall increase of 0.1%. As reported in the valuation section,
excluding Union Square, like-for-like ERV across the UK flagship portfolio was
0.8% higher driven by the strong leasing performance in 2023.
Property returns analysis
The Group's managed property portfolio generated a total property return of
+1.4%, comprising an income return of +2.8% offset by a capital return of
-1.4%. Incorporating the income and capital returns from the Value Retail
portfolio, the Group's income return was +2.8% and the capital return -0.3%,
to generate a total return of +2.5% (FY 22: -0.7%).
Six months ended
30 June 2023
Proportionally consolidated UK France Ireland Flagship Developments and other Managed portfolio Value Retail Group portfolio
% % % Destinations % % % %
%
Income return 4.0 2.4 2.8 3.0 1.7 2.8 2.9 2.8
Capital return (1.2) (2.6) (2.9) (2.2) 3.4 (1.4) 1.4 (0.3)
Total return 2.8 (0.3) (0.1) 0.8 5.1 1.4 4.3 2.5
Year ended
31 December 2022
UK France Ireland Flagship Developments and other Managed portfolio Value Retail Group portfolio
% % % Destinations% % % % %
%
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)
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 interim financial statements.
Reported Group
Joint ventures
During the year, our investment in joint ventures decreased by £144m to
£1,198m (FY 22: £1,342m) where the most significant movements were £99m
relating to the disposal of the Group's 50% interest in Croydon in April and
the derecognition of the Group's 25% interest in O'Parinor in June. £40m of
the reduction also related to a cash distributions paid to the Group.
Associates
Our investment in associates decreased by £125m to £1,172m (FY 22:
£1,297m). £109m of the reduction was due to the disposal of Italie Deux in
March with a further £43m relating to Value Retail distributions.
TRADE RECEIVABLES
On a proportionally consolidated basis, gross trade (tenant) receivables
totalled £61.0m at 30 June 2023 (FY 22: £74.1m) against which a provision of
£20.4m (FY 22: £32.3m) has been applied. This provision represents 44% (FY
22: 60%) of trade receivables of £45.9m (FY 22: £53.9m) after excluding
tenant deposits, guarantees and VAT. The reduction in the provision
percentage is principally due to the disposal of Croydon. See note 14 to the
interim financial statements for further information.
30 June 2023 31 December 2022
Proportionally consolidated Gross trade receivables Trade receivables Provision Net trade receivables Gross trade receivables Trade receivables Provision Net trade receivables
£m net of deposits, guarantees £m £m £m net of deposits, guarantees £m £m
and VAT and VAT
£m £m
UK 28.0 23.5 (7.1) 20.9 29.1 25.0 (12.5) 16.6
France 28.0 18.2 (11.3) 16.7 40.0 24.6 (17.2) 22.8
Ireland 5.0 4.2 (2.0) 3.0 5.0 4.3 (2.6) 2.4
Managed portfolio 61.0 45.9 (20.4) 40.6 74.1 53.9 (32.3) 41.8
Share of Property interests (19.5) (17.5) 5.2 (14.3) (33.1) (27.3) 14.7 (18.4)
Reported Group 41.5 28.4 (15.2) 26.3 41.0 26.6 (17.6) 23.4
FINANCING AND CASH FLOW
Financing strategy
Our financing strategy is to borrow predominantly on an unsecured basis.
Secured borrowings 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 borrowings are 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 30 June 2023, the
Group also had secured borrowings 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 capital structure.
Where there is any non-compliance with the guidelines, this should not be for
an extended period but the Group always strives to maintain an investment
grade credit rating. The key financing metrics are set out below.
Key financial metrics
Proportionally consolidated unless otherwise stated Calculation 30 June 2023 31 December 2022
(References to Additional information)
Net debt Table 13 £1,318m £1,732m
Liquidity £1,217m £996m
Weighted average interest rate 2.6% 2.4%
Weighted average maturity of debt 2.9 years 3.4 years
FX hedging 90% 91%
Net debt : EBITDA Table 16 7.7x 10.4x
Loan to value - Headline a Table 18 33% 39%
Loan to value - Full proportional consolidation of Value Retail b Table 18 43% 47%
Metrics with associated Group unsecured financial covenants Covenant
Interest cover ≥ 1.25x Table 17 3.59x 3.24x
Gearing - Selected bonds c ≤ 175% Table 19 52% 68%
- Other borrowings and facilities ≤ 150% Table 19 52% 68%
Unencumbered asset ratio ≥ 1.5x Table 20 2.07x 1.74x
Secured borrowings/equity shareholders' funds ≤ 50% 10% 15%
Fixed rate debt as a proportion of total debt n/a 84% 84%
a Headline: Loan excludes Value Retail net debt and Value includes Value
Retail net assets.
b Full proportional consolidation of Value Retail ('VR'): Loan includes
Group's share of VR net debt and Value includes share of VR's values.
c Applicable to bonds maturing in 2025 and 2027 (as set out in note 15
to the interim financial statements).
Credit ratings
Following the year end results and in recognition of the Group's strengthened
financial position, Fitch's senior unsecured investment grade credit rating
was re-affirmed as BBB+. Moody's rating of Baa3 was retained.
Outlooks from both rating agencies were changed from negative to stable in
2022 following the recovery from the COVID-19 pandemic.
Leverage
At 30 June 2023, the Group's gearing was 52% (FY 22: 68%) and Headline loan to
value ratio was 33% (FY 22: 39%).
The Group's share of net debt in Value Retail totalled £698m (FY 22: £675m).
Fully proportionally consolidating Value Retail's net debt, the Group's loan
to value ratio was 43% (FY 22: 47%).
Calculations for loan to value and gearing 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 30 June 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 30 June 2023, the value of euro-denominated liabilities as
a proportion of the value of euro-denominated assets was 90% compared with 91%
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
3%.
CASH FLOW AND NET DEBT
Movement in proportionally consolidated net debt (£m)
http://www.rns-pdf.londonstockexchange.com/rns/3273H_1-2023-7-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3273H_1-2023-7-26.pdf)
On a proportionally consolidated basis, in the first half of 2023 net debt
decreased by 24% to £1,318m (FY 22: £1,732m). At 30 June 2023, net debt
comprised loans of £1,879m and the fair value of currency swaps of £2m, less
cash and cash equivalents of £563m, of which £479m is held by the Reported
Group. Disposals during the year generated net cash proceeds of £215m with
£125m of secured borrowings removed with the derecognition of Highcross and
O'Parinor. Further reductions were due to cash generated from operations of
£60m, £43m of distributions received from Value Retail and favourable
foreign exchange and other movements of £26m. These items were partly
offset by net interest of £39m and capital expenditure in the first half of
the year of £16m.
Further information on the movement in proportionally consolidated net debt is
in Table 14 of the Additional information.
Liquidity
The Group's liquidity at 30 June 2023, calculated on a proportionally
consolidated basis comprising cash of £563m and unutilised committed
facilities of £654m, was £1,217m, £221m higher than at the beginning of the
year. This was primarily due to the retention of cash proceeds from
disposals.
During the first six months of the year, we obtained lender consent to extend
£605m of the Group's revolving credit facilities by one year such that they
now mature in 2026 as shown on the chart below.
Debt and facility profile
Maturity profile of loans and facilities (£m)
Proportionally consolidated
http://www.rns-pdf.londonstockexchange.com/rns/3273H_2-2023-7-26.pdf
The Group's weighted average maturity is 2.9 years (FY 22: 3.4 years). The
maturity of 2024 private placements are covered by existing cash with the
Group having no further unsecured debt maturities until 2025.
Maturity analysis of loans
30 June 2023 31 December 2022
Proportionally consolidated Maturity - 30 June 2023 £m £m
Sterling bonds 2025 - 2028 846.9 846.4
Sustainability linked euro bond 2027 593.7 612.3
Bank loans and overdrafts * (3.0) (3.1)
Senior notes (US Private Placements) 2024 - 2031 184.5 190.8
Total loans - Reported Group 1,622.1 1,646.4
Share of Property interests 2024 257.2 391.6
Total loans - proportionally consolidated 1,879.3 2,038.0
Cash and cash equivalents (563.3) (336.5)
Fair value of currency swaps 1.6 30.6
Net debt 1,317.6 1,732.1
* Debit balance comprises unamortised fees for RCFs against which no
funds had been drawn at the period ends.
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
Directors have considered the principal risks and uncertainties disclosed in
the Annual Report for the year ended 31 December 2022, which are summarised
below, and do not consider these to have changed significantly. Full
disclosure of these risks, including the factors which mitigate them, is set
out within the Risk and uncertainties section of the Annual Report 2022.
A. Macroeconomic Adverse changes to the macroeconomic environment in which we operate have the
potential to hinder our financial performance and our ability to deliver our
Residual risk: strategy.
High
B. Retail market In the context of the ever evolving retail market place, the Group fails to
anticipate and address structural market changes. This will impair leasing
Residual risk: performance, result in a sub-optimal occupier mix and thus impact our ability
to attract visitors, maximise footfall/spend, and grow income at our
Medium properties.
C. Investment market and valuations Investor appetite for retail assets is reduced due to macroeconomic or retail
market factors including increased borrowing costs, economic downturn,
Residual risk: consumer and occupier confidence. This will adversely impact property
valuations and also risk hindering the Group's in-flight disposal plans. This
Medium in turn would reduce the availability of funds for re-investment in our core
assets and/or refinancing 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 a new or
increased tax levy or due to non-compliance with local tax legislation.
Residual risk: Medium
F. Legal and regulatory compliance The failure to comply with existing laws and regulations relevant to the
Group, or to adapt to changes in these requirements in a timely fashion, could
Residual risk: Medium result in Group suffering reputational damage and/or financial penalties.
These laws and regulations cover the Group's role as a multi-jurisdiction
listed company; an owner and operator of property; an employer; and as a
developer.
G. Non-retail/multi-use markets The Group fails to target the optimal (non-retail) property sectors for future
developments or repurposing, or has insufficient access to capital and the
Residual risk: Medium skills required to deliver its urban estates vision. Occupier demand for
non-retail sectors weakens or evolves such that the Group's development and
repurposing 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 demands or reputational damage due to assets
being brought down and/or loss of commercially sensitive data.
I. Health and safety There is a serious work related injury, death and/or ill health to our
colleagues, customers or contractors, and anyone else who visits our
Residual risk: Medium 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.
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 properties are held in conjunction
with third parties which has the potential to limit our ability to implement
Residual risk: our strategy and reduces our 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.
Independent review report to Hammerson plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Hammerson plc's condensed consolidated interim financial
statements (the 'interim financial statements') in the Half-year Report of
Hammerson plc for the six month period ended 30 June 2023 (the 'period').
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting', International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union, the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority, and the Transparency (Directive 2004/109/EC)
Regulations 2007.
The interim financial statements comprise:
· the Consolidated Balance Sheet as at 30 June 2023;
· the Consolidated Income Statement and Consolidated Statement of
Comprehensive Income for the period then ended;
· the Consolidated Cash Flow Statement for the period then ended;
· the Consolidated Statement of Changes in Equity for the period then
ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-year Report of Hammerson
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting', International Accounting Standard
34, 'Interim Financial Reporting' as adopted by the European Union, the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority, and the Transparency (Directive 2004/109/EC)
Regulations 2007.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half-year Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the Group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the Directors
The Half-year Report, including the interim financial statements, is the
responsibility of, and has been approved by the Directors. The Directors are
responsible for preparing the Half-year Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007. In preparing the Half-year Report, including
the interim financial statements, the Directors are responsible for assessing
the Group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half-year Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007 and for no other purpose. We do not,
in giving this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2023
statement OF DIRECTORS' RESPONSIBILITIES
The Directors' confirm that, to the best of their knowledge, the condensed
consolidated interim financial statements (the 'interim financial statements')
in the Half-year Report have been prepared in accordance with UK adopted
International Accounting Standard 34 (IAS 34), IAS 34 as adopted by the
European Union, the Transparency (Directive 2004/109/EC) Regulations 2007, the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and that the Half-year Report includes a fair review of the
information required by the Disclosure Guidance and Transparency Rules (DTR)
4.2.7R and DTR 4.2.8R, namely:
The interim financial statements comprise:
· An indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· Any material related party transactions that have taken place in the
first six months of the financial year and any material changes in the related
party transactions described in the Company's last Annual Report.
A list of the current Directors is maintained on the Hammerson plc website:
www.hammerson.com. The maintenance and integrity of the Hammerson plc website
is the responsibility of the Directors. The work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that might have occurred to the
interim financial statements since they were initially presented on the
website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Signed on behalf of the Board on 26 July 2023
Rita-Rose Gagné Himanshu Raja
Director Director
Consolidated income statement
Note Six months ended Six months ended
30 June 2023 30 June 2022
(Restated)
Unaudited Unaudited
£m £m
Revenue † 4 69.1 63.7
Profit from operating activities † a 2 18.7 17.7
Revaluation loss on properties † (10.3) (13.0)
Other net gains b 3.1 1.9
Share of results of joint ventures 12B 7.6 16.3
Impairment of joint ventures 8 (22.1) -
Share of results of associates 13B 33.3 61.9
Operating profit 30.3 84.8
Finance income 6 13.5 11.5
Finance costs 6 (45.0) (45.7)
(Loss)/Profit before tax (1.2) 50.6
Tax charge 7 - (0.3)
(Loss)/Profit for the period attributable to equity shareholders (1.2) 50.3
Basic and diluted (loss)/earnings per share c 10B -(0.0)p 1.0p
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
a Includes a net credit of £1.7m (six months ended 30 June 2022:
nil) relating to provisions for impairment of trade (tenant) receivables as
set out in note 14.
b Other net gains comprise gains/(losses) and recycled exchange
gains arising on disposals and changes in fair value of other investments.
Such items are set out in more detail in note 2.
c The comparative earnings per share figures have been restated to
incorporate the bonus element of scrip dividends. Further details are provided
in note 10B.
Consolidated statement of COMPREHENSIVE income
Six months ended Six months ended
30 June 2023 30 June 2022
Unaudited Unaudited
£m £m
(Loss)/Profit for the period (1.2) 50.3
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 gain relating to equity shareholders a (20.1) -
Items that may subsequently be recycled through profit or loss
Foreign exchange translation differences (65.1) 62.3
Gain/(Loss) on net investment hedge 57.4 (48.5)
Net gain/(loss) on cash flow hedge 0.3 (1.9)
Share of other comprehensive gain of associates 9.4 7.3
2.0 19.2
Items that will not subsequently be recycled through profit or loss
Net actuarial (losses)/gains on pension schemes (0.2) 2.1
Total other comprehensive (loss)/income b (18.3) 21.3
Total comprehensive (loss)/income for the period (19.5) 71.6
a Relates to the sale of Italie Deux and Italik and derecognition of
O'Parinor as described in note 8.
b All items within total other comprehensive income/(loss) relate to
continuing operations.
Consolidated balance sheet
As at 30 June 2023
Note 30 June 2023 31 December 2022
Unaudited Audited
£m £m
Non-current assets
Investment properties 11 1,406.4 1,461.0
Interests in leasehold properties 32.7 34.0
Right-of-use assets 7.3 9.5
Plant and equipment 1.3 1.4
Investment in joint ventures 12C 1,198.2 1,342.4
Investment in associates 13C 1,172.0 1,297.1
Other investments 9.8 9.8
Trade and other receivables 3.2 3.2
Derivative financial instruments - 7.0
Restricted monetary assets 21.4 21.4
3,852.3 4,186.8
Current assets
Trading properties 11 - 36.2
Trade and other receivables 14 68.8 85.9
Derivative financial instruments 16.8 0.1
Restricted monetary assets 12.7 8.6
Cash and cash equivalents 479.6 218.8
577.9 349.6
Total assets 4,430.2 4,536.4
Current liabilities
Trade and other payables (132.8) (168.3)
Obligations under head leases (0.2) (0.2)
Loans 15A (108.5) -
Tax (0.4) (0.5)
Derivative financial instruments (3.9) (16.1)
(245.8) (185.1)
Non-current liabilities
Trade and other payables (46.4) (56.3)
Obligations under head leases (36.8) (38.1)
Loans 15A (1,513.6) (1,646.4)
Deferred tax (0.4) (0.4)
Derivative financial instruments (18.5) (23.7)
(1,615.7) (1,764.9)
Total liabilities (1,861.5) (1,950.0)
Net assets 2,568.7 2,586.4
Equity
Share capital 250.1 250.1
Share premium 1,563.7 1,563.7
Other reserves 18 107.9 135.4
Retained earnings 655.6 646.0
Investment in own shares (8.6) (8.8)
Equity shareholders' funds 2,568.7 2,586.4
EPRA net tangible assets value per share 10C 52p 53p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2023
Share capital Share premium Other reserves Retained earnings Investment in own shares Equity shareholders' funds
a b a
Unaudited £m £m £m £m £m £m
At 1 January 2023 250.1 1,563.7 135.4 646.0 (8.8) 2,586.4
Recycled exchange gains on disposal of overseas property interests - - (20.1) - - (20.1)
Foreign exchange translation differences - - (65.1) - - (65.1)
Gain on net investment hedge - - 57.4 - - 57.4
Loss on cash flow hedge - - (3.1) - - (3.1)
Loss on cash flow hedge recycled to net finance costs - - 3.4 - - 3.4
Share of other comprehensive gain of associates - - - 9.4 - 9.4
Net actuarial losses on pension schemes - - - (0.2) - (0.2)
Loss for the period - - - (1.2) - (1.2)
Total comprehensive (loss)/income - - (27.5) 8.0 - (19.5)
Share-based employee remuneration - - - 1.7 - 1.7
Cost of shares awarded to employees - - - (0.2) 0.2 -
Proceeds on award of own shares to employees - - - 0.1 - 0.1
At 30 June 2023 250.1 1,563.7 107.9 655.6 (8.6) 2,568.7
Six months ended 30 June 2022
Note Share capital Share premium Other reserves Merger reserve Capital redemp- Retained earnings Investment in own shares Equity share- Non controlling interests Total equity
tion
holders' funds
reserve
a b c d a
Unaudited £m £m £m £m £m £m £m £m £m £m
At 1 January 2022 221.0 1,593.2 110.0 374.1 198.2 252.9 (3.5) 2,745.9 0.1 2,746.0
Foreign exchange translation differences - - 62.3 - - - - 62.3 - 62.3
Loss on net investment hedge - - (48.5) - - - - (48.5) - (48.5)
Gain on cash flow hedge - - 5.6 - - - - 5.6 - 5.6
Gain on cash flow hedge recycled to net finance costs - - (7.5) - - - - (7.5) - (7.5)
Share of other comprehensive gain of associates - - - - 7.3 - 7.3 - 7.3
-
Net actuarial gains on pension schemes - - - - - 2.1 - 2.1 - 2.1
Profit for the period - - - - - 50.3 - 50.3 - 50.3
Total comprehensive income - - 11.9 - - 59.7 - 71.6 - 71.6
Transfer c - - - (374.1) - 374.1 - - - -
Share-based employee remuneration - - - - - 1.2 - 1.2 - 1.2
Cost of shares awarded to employees - - - - - (0.7) 0.7 - - -
Purchase of own shares - - - - - - (6.0) (6.0) - (6.0)
Dividends 17 - - - - - (63.2) - (63.2) - (63.2)
Scrip dividend related share issue 9.7 (9.7) - - - 51.4 - 51.4 - 51.4
Scrip dividend related share issue costs - (0.2) - - - - - (0.2) - (0.2)
At 30 June 2022 230.7 1,583.3 121.9 - 198.2 675.4 (8.8) 2,800.7 0.1 2,800.8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2022
Note Share capital Share premium Merger reserve Capital redemp- Other reserves Retained earnings Invest- Equity share- Non- con- Total equity
tion ment in own shares holders' funds trolling interests
reserve
a c d b a
Audited £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 2,746.0
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 - - - - 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 c, d - - (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 - - - - - (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
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 Other reserves comprise Translation, Net investment and Cash flow
hedge reserves as set out in note 18.
c 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
in the first half of 2022.
d 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 High Court of England and
Wales 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.
Consolidated cash flow statement
Six months ended 30 June 2023
Note Six months ended Six months ended
30 June 2023 30 June 2022
(Restated)
Unaudited Unaudited
£m £m
Profit from operating activities † 18.7 17.7
Net movements in working capital and restricted monetary assets † 19A (2.1) (10.7)
Non-cash items † 19A 5.1 (1.4)
Cash generated from operations † 21.7 5.6
Interest received 11.7 11.7
Interest paid (47.6) (53.2)
Debt and loan facility issuance and extension fees (0.6) (2.7)
Premiums on hedging derivatives - (3.9)
Tax (paid)/repaid (0.1) 0.1
Distributions and other receivables from joint ventures 48.9 50.6
Distributions from joint ventures reclassified as assets held for sale - 6.0
Cash flows from operating activities † 34.0 14.2
Investing activities
Capital expenditure (10.2) (16.0)
Sale of properties (including trading properties) 47.8 124.9
Sale of investments in joint ventures 69.0 67.5
Sale of investments in associates 96.7 -
Advances to joint ventures (5.9) (0.3)
Distributions and capital returns received from associates 42.7 0.7
Cash flows from investing activities 240.1 176.8
Financing activities
Share issue expenses - (0.2)
Proceeds from award of own shares 0.1 0.1
Purchase of own shares - (6.0)
Repayment of borrowings (11.9) (96.2)
Equity dividends paid 17 - (1.2)
Cash flows from financing activities (11.8) (103.5)
Increase in cash and cash equivalents † 262.3 87.5
Opening cash and cash equivalents † 19C 218.8 315.1
Exchange translation movement 19C (1.5) 1.2
Closing cash and cash equivalents † 19C 479.6 403.8
† Figures for the six months ended 30 June 2022 figures have been
restated to reflect the IFRIC Decision on Concessions with further information
provided in notes 1B and 5 and the IFRIC Decision on Deposits with further
information provided in note 1B.
Notes to the CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION, CONSOLIDATION AND PRINCIPAL ACCOUNTING POLICIES
A. GENERAL INFORMATION
The condensed consolidated interim financial statements for the six months
ended 30 June 2023 are unaudited and do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006, but have been
reviewed by the auditor. Statutory accounts for the year ended 31 December
2022, which have been prepared in accordance with both 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, were approved by the Directors on 8 March 2023
and have been delivered to the Registrar of Companies. The report of the
auditor on those accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain any statement under section
498(2) or (3) of the Companies Act 2006.
B. BASIS OF PREPARATION
These condensed consolidated interim financial statements for the six months
ended 30 June 2023 have been prepared on a going concern basis and in
accordance with International Accounting Standards 34, 'Interim Financial
Reporting' (IAS 34) contained in UK and EU adopted IFRS and the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct Authority as well
as SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee.
New accounting standards, amendments to standards and IFRIC interpretations
which became applicable during the period or have been published but are not
yet effective, were either not relevant or had no material impact on the
Group's results or net assets.
The accounting policies adopted are those set out in the Group's Annual Report
and Accounts for the year ended 31 December 2022 which were prepared in
accordance with IFRS as adopted by the UK. The accounting policies have been
applied consistently year on year. The financial information has been prepared
using accounting policies and methods of computation consistent with those
applied in the financial statements for the year ended 31 December 2022. Those
financial statements included the impact of the following IFRIC agenda
decisions that were issued in 2022 and which resulted in accounting policy
changes which impacted the results for the six months ended 30 June 2022 as
follows:
· In April 2022, the IFRIC issued an agenda decision in respect of
the presentation of 'Demand deposits with restrictions on use arising from a
contract with a third party' (the 'IFRIC Decision on Deposits'). The
conclusions were that restrictions on use which arise from a contract with a
third party do not alone change the nature of amounts being classified as cash
and cash equivalents. The impact, which is reflected in the audited financial
statements for the year ended 31 December 2022, was to change the
classification of certain amounts held by third party managing agents in
respect of tenant deposits and service charges such that they have been
reclassified from restricted monetary assets to cash and cash equivalents.
The effects are that the cash flow statement for the six months ended 30 June
2022 has been restated as set out in note 19C to the interim financial
statements.
· In October 2022, the IFRIC finalised an agenda decision in
respect of 'Lessor forgiveness of lease payments (IFRS 9 and IFRS 16)' (the
'IFRIC Decision on Concessions'). This concluded that where forgiven amounts
are already past due and recognised as operating lease receivables, these
should be accounted for by charging to the income statement on the date that
the legal rights are conceded. Historically, the Group's treatment of such
concessions, which arose as a result of the COVID-19 pandemic, was to
recognise these as lease modifications such that the impact was initially held
on the balance sheet and then spread forward into the income statement over
the lease term or period to first break. Incentives classified within
investment properties resulted in movements in tenant incentives which were
recognised with an equal and opposite offset in revaluation losses. As a
result of implementing the change, figures for the six months ended 30 June
2022 have been restated whereby Reported Group revenue, gross rental income,
net rental income and revaluation losses are affected although operating
profit and income statement figures below are unaffected. The equivalent
Adjusted figures are also affected including those down to adjusted earnings.
A more detailed analysis of the financial statement effects is set out in note
5.
Where figures have been restated, these are marked †.
C: 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
and period to period. 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.
D. SIGNIFICANT JUDGEMENTS AND ESTIMATES
The Group's key sources of estimation uncertainty are consistent with those
disclosed in the Group's latest audited financial statements. Judgements and
estimates are evaluated regularly and are based on historical experience and
other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Any revisions to accounting estimates are
recognised in the period in which the estimate is revised.
Significant judgements:
Impairment of non-financial assets
Most of the Group's non-financial assets are investment properties and are
already carried at their fair value under IAS 40. Investments in joint
ventures and associates fall within the scope of IAS 28 and are therefore only
assessed for impairment where one or more events cause an indicator of
impairment versus the original investment.
Joint ventures and associates are accounted for under the equity method, which
equates to the Group's share of the entity's Net Asset Value (NAV). NAV is
based on the fair value of the assets and liabilities where the principal
asset, the investment property, is already carried at fair value being the
higher of value in use and fair value less cost of disposal and as such, NAV
is a reasonable approximation for the recoverable amount of the investment. As
explained in note 8, in the first half of 2023 following actions by secured
lenders the Group no longer had control of two of its joint venture
investments, Highcross and O'Parinor. Given this change the Group fully
impaired the O'Parinor joint venture investment and recognised a £22.1m
charge in the consolidated income statement. The Group's investment in
Highcross had been fully impaired in December 2021. The Group's share of
assets and liabilities in both joint ventures have also been derecognised in
the period. For the Group's other joint venture and associate investments
there are no indicators falling outside of NAV which are considered to be
grounds for further impairment review.
Significant estimates:
Property valuations
The valuation of the Group's portfolio of properties is the most material area
of estimation due to its inherent subjectivity, reliance on assumptions and
sensitivity to market fluctuations. The property portfolio is valued by
external valuers in accordance with RICS Valuation - Global Standards.
The 30 June 2023 reports include a general commentary on wider issues
including uncertainty caused by the war in Ukraine and associated cost, supply
chain, rising interest rates and inflationary pressures. Key areas of estimate
highlighted in the external valuers' reports included:
- Estimation of market rents based on an increased level of activity
- Consideration of appropriate levels of void costs and rent-free period
- The impact of shortening lease lengths
- The basis of yield assumptions recognising the selective return of
investor appetite towards the retail sector
Inputs to the valuations, some of which are 'unobservable' as defined by
IFRS13, include capitalisation yields (nominal equivalent yield) and market
rental income (ERV). These are dependent on individual market characteristics.
With other factors remaining constant, an increase in rental income would
increase valuations, whilst increases in capitalisation yields and discount
rates would reduce values and vice versa. However, there are
interrelationships between unobservable inputs as they are determined by
market conditions. For example, an increase in rent may be offset by an
increase in yield, resulting in no net impact on the valuation. A sensitivity
analysis, showing the impact on valuations of changes in yields and market
rental income is set out in note 11A.
Significant estimates:
Impairment of trade receivables
Estimates made in assessing the provisions for impairment of trade (tenant)
receivables require consideration of future events which therefore make the
provisions inherently subjective. The Group applies the simplified approach
under IFRS 9 by adopting a provisioning matrix to determine the Expected
Credit Loss (ECL), grouping receivables dependent on risk level. In making
these assessments, key factors the Group takes into account include:
- Credit ratings
- Latest information on occupiers' financial standing including the
relative risk of the retail subsector in which they operate
- Historical default rates
- Ageing
- Rent deposits (included as part of trade and other payables)
- Guarantees held
- The probability that tenants will serve out the remainder of the
contractual terms of their leases
Specific higher provisioning levels may be applied where information is
available which requires this. The methodology used is consistent with that
used in the Group's Annual Report and Accounts for the year ended 31 December
2022.
Over the first half of 2023, collections and conditions have continued to
improve and as a result the Group has reduced its provisioning rates for
arrears 3-12 months overdue and aligned these rates across the Group. This
change did not have a significant impact on the Group's financial results.
ECL provisions against trade receivables are set out in note 14.
E. GOING CONCERN
Introduction
In order to prepare the interim financial statements for the period ended 30
June 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 31 December 2024 ('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 borrowing facilities falling due
after the minimum 12 months going concern period.
The assessment was based on a reforecast of the Group's 2023 Business Plan and
contained earnings, balance sheet, cash flow and liquidity projections. The
reforecast took account of the latest geopolitical, economic and trading
outlook, particularly the financial challenges on both consumers and
businesses from high inflation, rising interest rates and supply chain
pressures. Nonetheless, the reforecast assumed a stable near term operational
performance supported by the Group's strong leasing pipeline and continued
trend of improving collections and footfall seen in the first half of the
year.
Financial position
In the first half of 2023, the Group's net debt, on a proportionally
consolidated basis, has reduced by £414m to £1,318m with liquidity
increasing from £996m to £1,217m over the same period. The net debt
reduction was principally due to disposal proceeds in the period of £215m and
the derecognition of £125m of borrowings secured on Highcross and O'Parinor.
This reduction has led to an improvement in the Group's credit metrics as
detailed on page 17 of the Financial Review. The Group has £109m of
unsecured debt, relating solely to private placement notes, which matures over
the going concern period.
The Group has three principal unsecured borrowing debt covenants: gearing,
interest cover and unencumbered asset ratio, with the latter covenant only
applicable to the Group's £185m private placement notes.
The key variables impacting these 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. As at 30 June 2023, 84% of the Group's gross debt is at
fixed interest rates, which limits the near term volatility of this element of
the covenant. The percentage of fixed debt is forecast to remain broadly
unchanged over the going concern period.
The Group also has exposure to secured borrowings 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 loans secured against Dundrum and four loans
held by Value Retail mature over the going concern period. In total the
Group's share of these maturing loans was £435m at 30 June 2023.
Assessment approach
To determine the Group's resilience, the assessment forecast the levels of
liquidity and covenant headroom over the going concern period based on 30 June
2023 valuation yields. As the assessment does not allow refinancing
assumptions it factored in a full impairment of the Group's equity investments
totalling £471m in respect of the entities which have secured debt maturing
over the going concern period.
Based on these above assumptions and approach, and in the absence of
mitigating actions (see below), a reverse stress test has been undertaken to
assess the maximum level that valuations and net rental income could fall
before the Group reaches its key unsecured debt covenant thresholds over the
going concern period. The results of the reverse stress test are shown below:
Fall in financial measure to reach covenant threshold
Financial measure Covenant
30 June 2023 31 December 2024
Valuations (incl. Value Retail) Gearing 36% 22%
Valuations (unencumbered assets only) Unencumbered asset ratio(*) 27% 18%
Net rental income Interest cover 65% 67%
* The Group has the right to redeem the private placement notes for their
outstanding value plus a make-whole amount.
The Directors consider that these levels of valuation and net rental income
reductions over the going concern period are remote.
The Group is also forecast to retain significant liquidity over the going
concern period, with a minimum level of more than £800m by the end of the
going concern period.
Mitigating actions
The successful delivery of the Group's strategy will continue to strengthen
its financial position. From a going concern perspective, a key element of
this is to deliver a resilient and sustainable capital structure. Additional
actions which have not been factored into the assessment and which would
provide further assurance over the Group's going concern evaluation are:
· Additional £90m liquidity from the completion of the Group's
disciplined £500m disposals programme of which £410m has been raised to
date.
· Refinancing of maturing loans in the ordinary course of business,
particularly on secured debt as this avoids the modelled impairment of these
investments. Refinancing discussions are underway for the Dundrum secured
loan and for the Value Retail loans which all mature over the going concern
period. Value Retail management remain confident of refinancing its maturing
loans following the successful refinancing activities of over £1.0bn
completed in 2022.
· Curtailment of 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 unsecured borrowing covenant headroom.
The Directors have therefore concluded that it is appropriate to prepare the
interim financial statements on a going concern basis.
F. FOREIGN CURRENCY
The principal foreign currency denominated balances are in euro where the
translation exchange rates used are:
Consolidated income statement:
Average rate Six months ended Six months ended
30 June 2023 30 June 2022
Quarter 1 €1.133 €1.195
Quarter 2 €1.150 €1.179
Consolidated balance sheet:
30 June 2023 31 December 2022
Period end rate €1.165 €1.128
2. PROFIT/(LOSS) FOR THE PERIOD
As described in the Financial Review and note 3, 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.
Adjusted earnings, which is also calculated on a proportionally consolidated
basis, is the Group's primary profit measure and is the basis of information
which is reported to the Board. The following table sets out a reconciliation
from Reported Group (IFRS) earnings to adjusted earnings.
Six months ended 30 June 2023
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other adjustments Adjusted
a
Note £m £m £m £m £m
Revenue 4 69.1 67.6 136.7 - 136.7
Gross rental income b 3A, 4 47.9 58.4 106.3 - 106.3
Service charge income 4 13.0 9.1 22.1 - 22.1
60.9 67.5 128.4 - 128.4
Service charge expenses (14.0) (11.1) (25.1) - (25.1)
Cost of sales (7.6) (10.4) (18.0) (0.2) (18.2)
Net rental income 39.3 46.0 85.3 (0.2) 85.1
Gross administration costs (28.8) (0.1) (28.9) 3.2 (25.7)
Other income 4 8.2 - 8.2 - 8.2
Net administration expenses (20.6) (0.1) (20.7) 3.2 (17.5)
Profit from operating activities 18.7 45.9 64.6 3.0 67.6
Revaluation losses on properties 11 (10.3) (33.5) (43.8) 43.8 -
Disposals
- Profit/(loss) on sale of properties ( ) 8 0.3 (17.6) (17.3) 17.3 -
- Recycled exchange gains on disposal of overseas interests 20.1 - 20.1 (20.1) -
Change in fair value of other investments 0.3 - 0.3 (0.3) -
Loss on sale of joint ventures and associates (17.6) 17.6 - - -
Other net gains 3.1 - 3.1 (3.1) -
Share of results of joint ventures 12B 7.6 (7.6) - - -
Impairment of joint venture (22.1) - (22.1) 22.1 -
Share of results of associates 13B 33.3 (1.2) 32.1 (18.7) 13.4
Operating profit 30.3 3.6 33.9 47.1 81.0
Net finance costs 6 (31.5) (3.6) (35.1) 10.0 (25.1)
(Loss)/profit before tax (1.2) - (1.2) 57.1 55.9
Tax charge 7 - - - - -
(Loss)/profit for the period attributable to equity shareholders (1.2) - (1.2) 57.1 55.9
Six months ended 30 June 2022
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other adjustments Adjusted
a
Note £m £m £m £m £m
Revenue † 4 63.7 72.9 136.6 - 136.6
Gross rental income † b 3A, 4 45.6 61.8 107.4 - 107.4
Service charge income 4 8.8 11.2 20.0 - 20.0
† 54.4 73.0 127.4 - 127.4
Service charge expenses (10.4) (13.4) (23.8) - (23.8)
Cost of sales † (5.4) (12.8) (18.2) (1.6) (19.8)
Net rental income † 38.6 46.8 85.4 (1.6) 83.8
Gross administration costs (30.2) (0.3) (30.5) 1.4 (29.1)
Other income 4 9.3 - 9.3 - 9.3
Net administration expenses (20.9) (0.3) (21.2) 1.4 (19.8)
Profit from operating activities † 17.7 46.5 64.2 (0.2) 64.0
Revaluation losses on properties † (13.0) (27.6) (40.6) 40.6 -
Disposals and assets held for sale
- Profit on sale of properties ( ) ( ) 8 1.5 - 1.5 (1.5) -
- Income from assets held for sale ( ) ( ) 9A - (1.6) (1.6) 1.6 -
Change in fair value of other investments 0.4 - 0.4 (0.4) -
Other net gains/(losses) † 1.9 (1.6) 0.3 (0.3) -
Share of results of joint ventures 12B 16.3 (16.3) - - -
Share of results of associates 13B 61.9 0.5 62.4 (48.7) 13.7
Operating profit † 84.8 1.5 86.3 (8.6) 77.7
Net finance costs 6 (34.2) (1.5) (35.7) 6.7 (29.0)
Profit before tax † 50.6 - 50.6 (1.9) 48.7
Tax charge 7 (0.3) - (0.3) - (0.3)
Profit for the period attributable to equity shareholders † 50.3 - 50.3 (1.9) 48.4
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
a Adjusting items, described above as 'Capital and other adjustments',
are set out in note 9A.
b Proportionally consolidated figure includes £6.2m (six months ended
30 June 2022: £7.1m) of contingent rents calculated by reference to tenants'
turnover.
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 (together,
the Chief Operating Decision Makers). 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 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.
A. Income and profit by segment
Gross rental income Adjusted net rental income
Six months ended Six months ended Six months ended Six months ended
30 June 2023 30 June 2022 30 June 2023 30 June 2022
£m £m £m £m
Flagship destinations
UK † 43.5 45.8 33.9 36.5
France † 32.4 29.6 26.9 25.0
Ireland † 20.0 19.0 18.3 16.2
† 95.9 94.4 79.1 77.7
Developments and other 10.4 13.0 6.0 6.1
Managed portfolio - proportionally consolidated † 106.3 107.4 85.1 83.8
Less Share of Property interests † (58.4) (61.8)
Reported Group 47.9 45.6
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
B. Investment and development property assets by segment
30 June 2023 31 December 2022
Property valuation Capital expenditure Revaluation (losses)/gains Property valuation Capital expenditure Revaluation
losses
£m £m £m £m £m £m
Flagship destinations
UK 865.7 5.0 (10.4) 871.0 12.8 (90.2)
France 999.4 4.3 1.5 1,241.0 33.3 (57.2)
Ireland 638.4 2.4 (19.2) 676.4 4.9 (20.1)
2,503.5 11.7 (28.1) 2,788.4 51.0 (167.5)
Developments and other 301.0 5.8 (15.7) 431.7 21.9 (53.5)
Managed portfolio 2,804.5 17.5 (43.8) 3,220.1 72.9 (221.0)
Value Retail 1,889.8 7.7 26.0 1,887.0 6.6 (60.7)
Group portfolio 4,694.3 25.2 (17.8) 5,107.1 79.5 (281.7)
Less Value Retail ( ) ( ) (1,889.8) (7.7) (26.0) (1,887.0) (6.6) 60.7
Less Share of Property interests (1,398.1) (10.4) 33.5 (1,722.9) (35.2) 138.3
Less trading properties * - - - (36.2) - -
Reported Group 1,406.4 7.1 (10.3) 1,461.0 37.7 (82.7)
* In December 2019, the Group exchanged contracts for the forward sale
of the Group's 75% share in Italik, subject to completion of the development,
which was opened in 2021, and contractually agreed options to defer 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 having occurred on 31 March 2023 as
described in note 8.
4. REVENUE
Six months ended Six months ended
30 June 2023 30 June 2022
Note £m £m
Base rent 36.4 32.5
Turnover rent 2.0 2.6
Car park income * 5.3 5.2
Lease incentive recognition † 1.3 3.7
Other rental income 2.9 1.6
Gross rental income † 2 47.9 45.6
Service charge income * 13.0 8.8
Other income
- Property fee income * 4.8 6.4
- Joint venture and associate management fees * 3.4 2.9
8.2 9.3
Total † 69.1 63.7
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
* Revenue for those categories marked * amounted to £26.5m (six
months ended 30 June 2022: £23.3m) and is recognised under IFRS 15 'Revenue
from Contracts with Customers'. All other revenue is recognised in accordance
with IFRS 16 'Leases'.
5. RESTATEMENT IN RESPECT OF THE IFRIC DECISION ON CONCESSIONS
As described in note 1B, the IFRIC Decision on Concessions has resulted in a
restatement of 30 June 2022 results. IAS 8 'Accounting policies, changes in
accounting estimates and errors' requires that for current and prior periods,
to the extent practicable, the amount of adjustment relating to a restatement
should be disclosed for each financial line item affected. Whilst those
financial line items which have been restated are marked †, owing to the
very significant number of line items affected, it has not been considered
practicable to disclose the effects for each one because such presentation
would become misleading and thus conflict with the objective of financial
statements as set out in IAS 1 'Presentation of financial statements'.
Accordingly, only the adjustments which affect key financial line items are
presented below:
A: Key income statement items
Six months ended 30 June 2022 Six months ended 30 June 2022
Proportionally consolidated
Reported Group Adjusted
As originally reported Adjustment As restated As originally reported Adjustment As restated
£m £m £m £m £m £m
Revenue 62.0 1.7 63.7 133.0 3.6 136.6
Gross rental income 43.9 1.7 45.6 103.8 3.6 107.4
Cost of sales (2.2) (3.2) (5.4) (13.5) (6.3) (19.8)
Net rental income 40.1 (1.5) 38.6 86.5 (2.7) 83.8
Profit from operating activities 19.2 (1.5) 17.7 66.7 (2.7) 64.0
Revaluation losses on properties (14.5) 1.5 (13.0) - - -
Operating profit 84.8 - 84.8 80.4 (2.7) 77.7
Profit for the period attributable to equity shareholders * 50.3 - 50.3 51.1 (2.7) 48.4
* EPRA earnings and Headline earnings have been restated by the same
amount.
B: Income analysis by segment - proportionally consolidated
Six months ended 30 June 2022 Six months ended 30 June 2022
Gross rental income Adjusted net rental income
As originally reported Adjustment As restated As originally reported Adjustment As restated
£m £m £m £m £m £m
Flagship destinations
UK 44.1 1.7 45.8 38.0 (1.5) 36.5
France 28.4 1.2 29.6 25.1 (0.1) 25.0
Ireland 18.3 0.7 19.0 17.3 (1.1) 16.2
90.8 3.6 94.4 80.4 (2.7) 77.7
Developments and other 13.0 - 13.0 6.1 - 6.1
Managed portfolio 103.8 3.6 107.4 86.5 (2.7) 83.8
Less Share of Property interests (59.9) (1.9) (61.8)
Reported Group 43.9 1.7 45.6
C: Income analysis of joint ventures and associates
Six months ended 30 June 2022 Six months ended 30 June 2022
Gross rental income Net rental income
As originally reported Adjustment As restated As originally reported Adjustment As restated
£m £m £m £m £m £m
Joint ventures 56.8 1.9 58.7 45.7 (1.2) 44.5
Associates 68.2 - 68.2 47.7 - 47.7
6. NET FINANCE COSTS
Six months ended Six months ended
30 June 2023 30 June 2022
Note £m £m
Finance income
Bank and other interest receivable 13.5 11.5
Finance costs
Interest on bank loans and overdrafts (2.1) (2.5)
Interest on bonds and related charges (29.1) (30.5)
Interest on senior notes and related charges (2.7) (3.1)
Interest on obligations under head leases (1.1) (1.0)
Interest on other lease obligations (0.1) (0.1)
Other interest payable (0.1) (0.8)
Gross interest costs (35.2) (38.0)
Interest capitalised in respect of properties under development - 1.2
(35.2) (36.8)
Debt and loan facility cancellation costs * 9A - (1.2)
Fair value losses on derivatives 9A (9.8) (7.7)
(45.0) (45.7)
Net finance costs (31.5) (34.2)
* Comprising redemption premiums and fees from early repayment of debt
or cancellation of facilities.
Further analysis on a proportionally consolidated basis is set out below:
Six months ended 30 June 2023
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other Adjusted
Note £m £m £m £m £m
Finance income 13.5 1.2 14.7 - 14.7
Gross interest costs (35.2) (4.6) (39.8) - (39.8)
Fair value losses on derivatives 9A (9.8) (0.2) (10.0) 10.0 -
Finance costs (45.0) (4.8) (49.8) 10.0 (39.8)
Net finance costs (31.5) (3.6) (35.1) 10.0 (25.1)
Six months ended 30 June 2022
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other Adjusted
Note £m £m £m £m £m
Finance income 11.5 - 11.5 - 11.5
Gross interest costs (38.0) (3.7) (41.7) - (41.7)
Interest capitalised in respect of properties under development 1.2 - 1.2 - 1.2
(36.8) (3.7) (40.5) - (40.5)
Debt and loan facility cancellation costs 9A (1.2) - (1.2) 1.2 -
Fair value (losses)/gains on derivatives 9A (7.7) 2.2 (5.5) 5.5 -
Finance costs (45.7) (1.5) (47.2) 6.7 (40.5)
Net finance costs (34.2) (1.5) (35.7) 6.7 (29.0)
7. TAX CHARGE
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Foreign current tax - 0.3
Total - 0.3
The Group's tax charge remains low because it has tax exempt status in its
principal operating countries.
In the UK, the Group has been a REIT since 2007 and a SIIC in France since
2004. These tax regimes exempt the Group's property income and gains from
corporate taxes, provided a number of conditions in relation to the Group's
activities are met. 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. 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 where it is within the Group's control.
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 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.
8. DISPOSALS AND IMPAIRMENT
Six months ended 30 June 2023
A. Disposals
On 31 March 2023, the Group completed the disposal of its 25% associate stake
in Italie Deux in Paris and 100% of the Italik extension, 75% of which had
been held as a trading property up to the point of disposal, for gross
proceeds of €164m (£144m).
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 period the Group raised proceeds of £1m from the sale of
ancillary non-core land.
In total, these disposals resulted in a loss on disposal in the first half of
the year of £17.3m.
B. Impairment on derecognition of joint ventures
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
borrowings secured against the property interests which were 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 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 consolidated income statement.
On 30 June 2023, the lenders on O'Parinor took control of the joint venture.
The Group has therefore fully impaired its joint venture investment by £22.1m
and derecognised its share of assets and liabilities, including the property
value and £45m of secured borrowings.
Six months ended 30 June 2022
C. Disposals
The profit on sale of properties of £1.5m includes several post completion
adjustments arising mainly from historical disposals in prior periods and the
disposal of Victoria which was sold on 25 February 2022, when the Group
exchanged and completed the sale for gross proceeds of £120m.
In addition, on 15 March 2022, the Group completed the sale of its joint
venture investment in Silverburn for gross proceeds of £140m (the Group's
share being £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. A £nil gain/loss on disposal was recognised
in the first half of 2022, however, income generated during the period of
£1.6m was included in adjusted earnings as explained further in note 9A.
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
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Reported Group
(Loss)/Profit after tax for the period (1.2) 50.3
Adjustments:
Revaluation losses on managed portfolio † 43.8 40.6
Disposals
- Loss/(Profit) on sale of properties a 17.3 (1.5)
- Recycled exchange gains on disposal of overseas property interests b (20.1) -
Joint venture related
- Impairment of joint venture c 22.1 -
Associates (Value Retail):
- Revaluation gains j (26.0) (33.0)
- Deferred tax d, j 12.8 1.6
Sub-total: Adjustments for Headline earnings † 49.9 7.7
Associates (Value Retail):
- Change in fair value of derivatives e, j 4.9 (8.5)
- Change in fair value of participative loans - revaluation movement e, j (10.4) (8.8)
Included in Financing:
- Debt and loan facility cancellation costs f - 1.2
- Change in fair value of derivatives f 10.0 5.5
Change in fair value of other investments g (0.3) (0.4)
Sub-total: Adjustments for EPRA earnings † 54.1 (3.3)
Included in profit from operating activities:
- Business transformation costs h 3.2 1.4
- Change in provision for amounts not yet recognised in the income statement i (0.2) (1.6)
- Income from assets held for sale k - 1.6
Total: Adjustments for adjusted earnings † 57.1 (1.9)
Headline earnings † 48.7 58.0
EPRA earnings † 52.9 47.0
Adjusted earnings † 55.9 48.4
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
a As shown in note 2, includes profit on sale of properties of £0.3m
(HY 22: £1.5m) and losses on sale of joint ventures and associates of £17.6m
(HY 22: £nil) principally losses on the sales of Italie Deux and Croydon.
Also see note 8 for further details.
b Exchange gains previously recognised in equity until disposal in
relation to Italie Deux and O'Parinor .
c Impairment resulting from derecognition of the O'Parinor joint
venture, see note 8 for details.
d In accordance with EPRA guidance, the tax effects of EPRA adjustments
(including those for disposals) is excluded .
e 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.
f Financing items comprise
Six months ended 30 June 2023 Six months ended 30 June 2022
Reported Group Share of Property interests Total Reported Group Share of Property interests Total
£m £m £m £m £m £m
Debt and loan facility cancellation costs - - - 1.2 - 1.2
Change in fair value of derivatives e 9.8 0.2 10.0 7.7 (2.2) 5.5
9.8 0.2 10.0 8.9 (2.2) 6.7
The write off of up-front fees arising on early cancellation of loan
facilities are considered outside of day-to-day financing activities and are
accordingly excluded from adjusted earnings.
g Relates to the fair value movement in a small residual investment.
h Business transformation costs comprise employee severance costs of
£0.8m (2022: £0.8m), system related costs of £1.5m (2022: £0.6m) and other
costs, principally onerous lease costs, of £0.9m (2022: £nil). Such costs
relate to the actions associated with the strategic and operational review
undertaken by the new management team and which are an integral part of the
Group's new strategy announced during 2021. The related costs are incremental
and do not form part of underlying trading. Whilst a significant proportion of
the expected costs were incurred in 2021 and 2022, further transformation
activities will take place in the second half of 2023 and beyond.
i 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.
j Adjustments in respect of associates
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Total in respect of associates (Value Retail) (18.7) (48.7)
k 2022: Income from assets held for sale 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.
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.
30 June 2023
Reported Group Share of Property interests Value Retail Total
£m £m £m £m
Reported balance sheet net assets (equity shareholders' funds) 2,568.7 - - 2,568.7
Change in fair value of borrowings a 198.1 (0.3) - 197.8
EPRA NDV 2,766.5
Deduct change in fair value of borrowings a (198.1) 0.3 - (197.8)
Deferred tax - 50% share b 0.2 0.1 103.1 103.4
Fair value of currency swaps as a result of interest rates c 8.0 - - 8.0
Fair value of interest rate swaps 3.9 (2.9) (58.5) (57.5)
EPRA NTA 2,622.6
Deferred tax - remaining 50% share b 0.2 - 103.1 103.3
Purchasers' costs d 304.0 - - 304.0
EPRA NRV 3,029.9
31 December 2022
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 As per the EPRA guidance we have chosen to exclude 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 period end
market rates .
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 period.
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 period. 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 period
and any unvested shares which have met, or are expected to meet, the
performance conditions at the end of the period. 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 10B, divided by the number of shares in issue.
A. Number of ordinary shares for per share calculations
31 December 2022
30 June 2023
million million
Shares in issue (for purposes of net asset per share calculations) 5,002.3 5,002.3
Six months ended Six months ended
30 June 2022
30 June 2023
million million
Weighted average number of shares
For purposes of basic EPS - as previously reported n/a 4,586.5
Adjustment relating to scrip dividends a n/a 349.3
For purposes of basic EPS a 4,969.5 4,935.8
Effect of potentially dilutive shares (share options) 13.4 8.5
For purposes of diluted EPS (excluding Reported Group) a, b 4,982.9 4,944.3
a 2022 weighted average number of shares have been restated to reflect
the adjustment required to incorporate the bonus element of scrip dividends
following confirmation of the level of take up.
b There were no potentially dilutive ordinary shares for the purposes of
calculating EPS for the Reported Group (2022: none).
B. (Loss)/earnings per share
(Loss)/earnings (Loss)/earnings per share
Basic Diluted
Six months ended Six months ended Six months ended Six months ended Six months ended Six months ended
Note 30 June 2023 30 June 2022 30 June 2023 30 June 2022 pence 30 June 2023 30 June 2022 pence
£m £m pence pence
Reported Group † (1.2) 50.3 (0.0)p 1.0p (0.0)p 1.0p
Headline † 9A 48.7 58.0 1.0p 1.2p 1.0p 1.2p
EPRA † 9A 52.9 47.0 1.1p 1.0p 1.1p 1.0p
Adjusted † 9A 55.9 48.4 1.1p 1.0p 1.1p 1.0p
† (Loss)/earnings per share figures for the six months ended 30 June
2022 have been restated to reflect the adjustment described above to the
weighted average number of shares. In addition, 2022 figures have been
restated to reflect the IFRIC Decision on Concessions with further information
provided in notes 1B and 5. Previously reported basic and diluted figures
were: Reported Group: 1.1p, Headline: 1.3, EPRA: 1.1p and Adjusted: 1.1p.
C. Net Asset Value per share
Net asset value Net asset value per share
30 June 2023 31 December 2022 30 June 2023 31 December 2022
Note £m £m pence pence
EPRA NDV 9B 2,766.5 2,801.9 55p 56p
EPRA NTA 9B 2,622.6 2,633.7 52p 53p
EPRA NRV 9B 3,029.9 3,063.3 61p 61p
11. PROPERTIES
30 June 2023 31 December 2022
Investment properties Trading properties Total Investment properties Trading Total
properties
£m £m £m £m £m £m
At beginning of period 1,461.0 36.2 1,497.2 1,561.4 34.3 1,595.7
Revaluation losses (10.3) - (10.3) (82.7) - (82.7)
Capital expenditure 7.1 - 7.1 37.7 - 37.7
Capitalised interest - - - 1.2 - 1.2
Disposals (see note 8) (11.6) (36.2) (47.8) (125.3) - (125.3)
Exchange adjustment (39.8) - (39.8) 68.7 1.9 70.6
At end of period 1,406.4 - 1,406.4 1,461.0 36.2 1,497.2
Properties are stated at fair value, valued by professionally qualified
external valuers in accordance with RICS Valuation - Global Standards as
follows:
CBRE UK flagships, Developments and other properties
Jones Lang LaSalle (JLL) UK and French flagships, Developments and other properties,
Cushman and Wakefield (C&W) Brent Cross, Irish portfolio, Value Retail (not included in the table above)
Due to 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. Investment properties - sensitivity analysis on valuations
Valuation Nominal equivalent yield Estimated rental value (ERV)
Proportionally consolidated £m -100bp +100bp +10% -10%
£m £m £m £m
Flagship destinations
- UK 866 124 (96) 87 (87)
- France 999 252 (168) 100 (100)
- Ireland 638 138 (96) 64 (64)
Value Retail * 1,890 306 (212) 189 (189)
Developments and other 301
Group portfolio 4,694
* For Value Retail, nominal equivalent yield and ERV are not key observable
inputs. Exit yields and net operating income have therefore been used as
proxies. Valuations are performed on a discounted cash flow basis with
discount rates ranging from 8.5% to 11.0% (average of 9.7%).
B. Joint operations
Investment properties included a 50% interest in the Ilac Centre and a 50%
interest in Pavilions, totalling £146.1m (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.
During the first six months of the year the Group disposed of its 50% joint
venture interests in Croydon. It also derecognised its 50% investment in
Highcross and 25% investment in O'Parinor, see note 8 for further details.
A. Investments at 30 June 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 Partnership PIMCO Dundrum 50%
The results of disposals of interests in joint ventures have been 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 period. Disposals in the
period are set out in note 8.
B. Results
Group share Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Gross rental income † 57.2 58.7
Net rental income † 44.8 44.5
Administration expenses (0.1) (0.3)
Profit from operating activities † 44.7 44.2
Revaluation losses on properties † (33.5) (24.8)
Adjustment for income from assets held for sale a - (1.6)
Operating profit 11.2 17.8
Finance income 1.2 2.2
Finance costs (4.8) (3.7)
Profit before tax 7.6 16.3
Tax charge - -
Profit for the period 7.6 16.3
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5.
a 2022: Comprised income in respect of Silverburn, as described in note
8C.
C. Assets and liabilities
30 June 2023 31 December 2022
Group share £m £m
Non-current assets
Investment properties 1,398.1 1,620.0
Other non-current assets 21.8 26.7
1,419.9 1,646.7
Current assets
Cash and cash equivalents 83.7 110.9
Other current assets a 20.6 61.3
104.3 172.2
Current liabilities
Loans - secured - (126.1)
Other payables (48.3) (80.7)
(48.3) (206.8)
Non-current liabilities
Loans - secured (257.2) (265.5)
Obligations under head leases (15.8) (15.8)
Other payables (4.7) (6.3)
(277.7) (287.6)
Cumulative losses restricted b - 17.9
Net assets 1,198.2 1,342.4
a At 31 December 2022 included restricted monetary assets held in escrow
for specified development costs.
b 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
remained included in the Group's figures, it was excluded from all income
statement metrics including revaluation losses. This amount therefore
represented the Group's share of losses which exceed the Group's investment of
£nil. On 9 February 2023, it was agreed that it was in the best interests of
the lenders in the longer term to appoint a receiver to administer the asset
for the benefit of the creditors, accordingly the investment was derecognised.
D. Reconciliation of movements in investment in joint ventures
30 June 2023 31 December 2022
Note £m £m
At beginning of period 1,342.4 1,451.8
Share of results of joint ventures 7.6 (41.5)
Advances 5.9 4.0
Cash distributions (including interest) * (36.7) (84.0)
Other receivables (12.2) (5.3)
Disposals 8 (98.9) -
Exchange and other movements (9.9) 17.4
At end of period 1,198.2 1,342.4
* Comprises distributions of £29.6m (2022: £63.4m) and interest of
£7.1m (2022: £20.6m).
13. INVESTMENT IN ASSOCIATES
A. Percentage share
30 June 2023 31 December 2022
Principal property Share Share
Value Retail Various Villages across Europe a 40% 40%
Italie Deux Italie Deux, France b - 25%
a Calculated on a net asset basis, adjusting for participative loans.
b The Group disposed of its 25% stake in Italie Deux on 31 March 2023 as
set out in note 8.
Following the sale of the Group's 25% stake in Italie Deux in March 2023, at
30 June 2023, associates comprise the premium outlets of Value Retail.
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
Six months ended 30 June 2023 Six months ended 30 June 2022
Group share Value Retail Italie Deux Total Value Retail Italie Deux Total
£m £m
£m
£m £m
£m
Gross rental income 73.8 1.2 75.0 65.1 3.1 68.2
Net rental income 52.7 1.2 53.9 45.4 2.3 47.7
Administration expenses (25.8) - (25.8) (20.8) - (20.8)
Profit from operating activities 26.9 1.2 28.1 24.6 2.3 26.9
Revaluation gains/(losses) on properties 26.0 - 26.0 33.0 (2.8) 30.2
Operating profit/(loss) 52.9 1.2 54.1 57.6 (0.5) 57.1
Interest costs (16.3) - (16.3) (12.6) - (12.6)
Fair value (losses)/gains on derivatives (4.9) - (4.9) 8.5 - 8.5
Fair value gains on participative loans - other movement 3.4 - 3.4 2.7 - 2.7
Fair value gains on participative loans - revaluation movement 10.4 - 10.4 8.8 - 8.8
Net finance (costs)/income (7.4) - (7.4) 7.4 - 7.4
Profit/(Loss) before tax 45.5 1.2 46.7 65.0 (0.5) 64.5
Current tax charge (0.6) - (0.6) (1.0) - (1.0)
Deferred tax charge (12.8) - (12.8) (1.6) - (1.6)
Profit/(Loss) for the period 32.1 1.2 33.3 62.4 (0.5) 61.9
Adjusted earnings 13.4 1.2 14.6 13.7 2.3 16.0
C. Assets and liabilities
30 June 2023 31 December 2022
Group share Value Retail Value Retail Italie Deux Total
£m
£m
£m
£m
Non-current assets
Investment properties 1,889.8 1,887.0 102.9 1,989.9
Other non-current assets 121.5 114.2 - 114.2
2,011.3 2,001.2 102.9 2,104.1
Current assets
Cash and cash equivalents 87.4 86.8 6.8 93.6
Other current assets 28.8 37.7 3.0 40.7
116.2 124.5 9.8 134.3
Total assets 2,127.5 2,125.7 112.7 2,238.4
Current liabilities
Loans (104.0) (108.1) - (108.1)
Other payables (90.7) (100.4) (4.2) (104.6)
(194.7) (208.5) (4.2) (212.7)
Non-current liabilities
Loans (681.2) (653.6) - (653.6)
Participative loan (97.8) (95.7) - (95.7)
Other payables, including deferred tax (192.6) (184.4) (0.8) (185.2)
(971.6) (933.7) (0.8) (934.5)
Total liabilities (1,166.3) (1,142.2) (5.0) (1,147.2)
Net assets 961.2 983.5 107.7 1,091.2
Participative loans 210.8 205.9 - 205.9
1,172.0 1,189.4 107.7 1,297.1
D. Reconciliation of movements in investment in associates
30 June 2023 31 December 2022
Value Retail Italie Deux Total Value Retail Italie Deux Total
£m
£m
£m
£m
£m
£m
At beginning of period 1,189.4 107.7 1,297.1 1,140.8 106.2 1,247.0
Share of results of associates 32.1 1.2 33.3 (5.3) (1.8) (7.1)
Capital return - - - - (2.0) (2.0)
Distributions (42.7) - (42.7) (4.4) (0.6) (5.0)
Share of other comprehensive gain of associate a 9.4 - 9.4 23.3 - 23.3
Disposals - (108.6) (108.6) - - -
Exchange and other movements (16.2) (0.3) (16.5) 35.0 5.9 40.9
At end of period b 1,172.0 - 1,172.0 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
Included in the current trade and other receivables balance of £68.8m (31
December 2022: £85.9m) are the following amounts in respect of trade (tenant)
receivables, together with the respective provisions calculated in accordance
with the expected credit loss methodology set out in IFRS 9:
Trade (tenant) receivables analysis
30 June 2023 31 December 2022
Gross trade receivables Provision Net trade receivables Gross trade receivables Provision Net trade receivables
Proportionally consolidated £m £m £m £m £m £m
UK 28.0 (7.1) 20.9 29.1 (12.5) 16.6
France 28.0 (11.3) 16.7 40.0 (17.2) 22.8
Ireland 5.0 (2.0) 3.0 5.0 (2.6) 2.4
Managed portfolio 61.0 (20.4) 40.6 74.1 (32.3) 41.8
Less Share of Property interests (19.5) 5.2 (14.3) (33.1) 14.7 (18.4)
Reported Group 41.5 (15.2) 26.3 41.0 (17.6) 23.4
Provisions against trade receivables includes £0.2m (31 December 2022:
£0.2m) against receivables whereby the income has been deferred on the
balance sheet. On a proportionally consolidated basis, a further £0.5m (31
December 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. Net trade receivables as presented do not include deposits, which
are included in trade and other payables, but taken together with VAT, do form
part of the assessment of the required provision.
A 10-percentage point increase in the provision rates would increase the
provision and hence reduce Reported Group earnings by £1.5m and adjusted
earnings by £2.7m.
15. LOANS
A. Loan profile
Unsecured debt Maturity 30 June 2023 £m 31 December 2022 £m
£200.0m 7.25% sterling bonds 2028 199.1 199.0
€700.0m 1.75% euro bonds 2027 a 593.7 612.3
£300.0m 6% sterling bonds 2026 299.2 299.1
£350.0m 3.5% sterling bonds 2025 348.6 348.3
Bank loans and overdrafts b (3.0) (3.1)
Senior notes 2031 5.0 5.1
Senior notes 2028 10.9 11.3
Senior notes 2026 60.1 62.0
Senior notes 2024 - 112.4
Total - shown in non-current liabilities 1,513.6 1,646.4
Senior notes - shown in current liabilities 2024 108.5 -
1,622.1 1,646.4
a 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 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 Debit balance comprises unamortised fees for revolving credit
facilities against which no funds had been drawn at the period ends.
B. Undrawn committed facilities
The Group has the following revolving credit facilities (RCF), which are in
sterling unless otherwise indicated, expiring as follows:
Expiry 30 June 2023 31 December 2022
£m £m
2021 RCF 2024 50.0 50.0
2021 RCF 2026 a 100.0 100.0
2021 JPY7.7bn RCF 2026 a 42.2 48.9
2022 RCF 2026 a 463.0 463.0
b 655.2 661.9
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 £0.7m (2022: £2.1m) of RCFs have been utilised (although not drawn)
to support ancillary facilities leaving £654.5m (2022: £659.8m) available to
the Group.
16. 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 associates Underlying net asset values of the interests in Villages/property *
* Mainly comprise investment properties held at fair value as determined by a
professional valuer.
Fair value hierarchy analysis
30 June 2023 31 December 2022
Hierarchy Carrying amount Fair value £m Carrying amount Fair value £m
£m £m
Unsecured bonds Level 1 1,440.6 1,248.7 1,458.7 1,249.5
Unsecured bank loans and overdrafts Level 2 (3.0) - (3.1) -
Senior notes Level 2 184.5 175.3 190.8 180.7
Fair value of currency swaps Level 2 1.6 1.6 30.6 30.6
Borrowings 1,623.7 1,425.6 1,677.0 1,460.8
Fair value of interest rate swaps Level 2 3.9 3.9 2.1 2.1
Participative loans to associates Level 3 210.8 210.8 205.9 205.9
Fair value of other investments Level 3 9.8 9.8 9.8 9.8
C: Analysis of movements in Level 3 financial instruments
30 June 2023 31 December 2022
Level 3 financial instruments Participative loans Other investments £m Total Participative loans Other investments £m Total
£m £m £m £m
Balance at beginning of period 205.9 9.8 215.7 184.8 9.5 194.3
Total gains/(losses)
- in share of results of associates 13.8 - 13.8 15.0 - 15.0
- in the consolidated income statement - 0.3 0.3 - - -
- in other comprehensive income (6.6) (0.3) (6.9) 10.5 0.3 10.8
Other movements - advances (2.3) - (2.3) (4.4) - (4.4)
Balance at end of period 210.8 9.8 220.6 205.9 9.8 215.7
17. DIVIDENDS
The Directors have declared an interim dividend of 0.72 pence per share,
payable on 2 October 2023 to shareholders on the register at the close of
business on 25 August 2023. The dividend will be paid entirely as a cash PID,
net of withholding tax where appropriate. There will be no scrip alternative
although the dividend reinvestment plan (DRIP) remains available to
shareholders.
The Group has also announced a new dividend policy as explained on page 4 of
the Chief Executive's Review.
Cash dividend per share Enhanced scrip alternative Six months ended 30 June 2023 Six months ended 30 June 2022
per share £m £m
Prior periods
2021 final dividend - Cash a 0.2p - 11.8
- Enhanced scrip alternative b 2.0p - 51.4
( ) ( ) ( ) ( ) - 63.2
Cash flow analysis:
Cash dividend c - 1.2
- 1.2
2023 interim dividend d 0.72p - 36.0 -
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 Comprises cash payments after deduction of withholding tax, where
applicable.
d The 2023 interim dividend was declared on 26 July 2023 and has
therefore not been included as a liability as at 30 June 2023.
18. OTHER RESERVES
30 June 2023 31 December 2022 £m
£m
Translation reserve 436.4 601.8
Net investment hedge reserve (328.6) (466.2)
Cash flow hedge reserve 0.1 (0.2)
107.9 135.4
19. NOTES TO THE CASH FLOW STATEMENT
A. Analysis of items included in operating cash flows
Six months ended 30 June 2023 Six months ended 30 June 2022
£m £m
Net movements in working capital and restricted monetary assets
Movements in working capital:
- Decrease/(increase) in receivables 12.3 (4.9)
- Decrease in payables (10.0) (23.3)
2.3 (28.2)
(Increase)/decrease in restricted monetary assets † (4.4) 17.5
† (2.1) (10.7)
† 2022 figures have been restated to reflect the IFRIC Decision on
Deposits with further information provided in note 1B.
Six months ended 30 June 2023 Six months ended 30 June 2022
£m £m
Non-cash items
Increase in accrued rents receivable † (1.3) (0.8)
Decrease in loss allowance provisions † * 1.8 (2.6)
Amortisation of lease incentives and other costs 0.5 0.7
Depreciation 2.3 2.0
Other non-cash items including share-based payment charge 1.8 (0.7)
† 5.1 (1.4)
† 2022 figures have been restated to reflect the IFRIC Decision on
Concessions with further information provided in notes 1B and 5.
* Comprises movement in provisions against trade (tenant) receivables and
unamortised tenant incentives.
B. Analysis of movements in net debt
30 June 2023 31 December 2022
Cash and cash equivalents £m Borrowings £m Net debt Cash and cash equivalents £m Borrowings £m Net debt
£m £m
At 1 January 218.8 (1,677.0) (1,458.2) 315.1 (1,878.9) (1,563.8)
Cash flow 262.3 11.9 274.2 (99.0) 302.4 203.4
Change in fair value of currency swaps - (8.9) (8.9) - 8.4 8.4
Exchange (1.5) 50.3 48.8 2.7 (108.9) (106.2)
At end of period 479.6 (1,623.7) (1,144.1) 218.8 (1,677.0) (1,458.2)
C. Restatement of six months ended 30 June 2022 in respect of the IFRIC
Decision on Deposits
Cash and cash equivalents at 31 December 2021 were restated to increase by
£5.4m (with an equivalent reduction to restricted monetary assets) to reflect
the IFRIC Decision on Deposits as described in note 1B. The equivalent cash
and cash equivalents balance at 30 June 2022 has also been restated to
increase by £5.0m to £403.8m. The resulting movement of £0.4m is reflected
in the cash flow statement for the six months ended 30 June 2022 which has
been restated accordingly.
20. CONTINGENT LIABILITIES AND COMMITMENTS
A. Contingent liabilities
30 June 2023 31 December 2022
£m £m
The Group excluding joint ventures:
- guarantees given 24 45
- claims arising in the normal course of business 20 34
Group's share arising in joint ventures 2 7
46 86
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 £146m (31 December 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
30 June 2023 31 December 2022
£m £m
Group's share arising in joint ventures 45 52
ADDITIONAL INFORMATION
Table Table
Summary EPRA performance measures 1 Balance sheet information
Balance sheet 12
Portfolio analysis Net debt 13
Rental data 2 Movement in net debt 14
Gross rental income 3 Total accounting return 15
Vacancy 4 Financing metrics
Lease expiries and breaks 5 Net debt : EBITDA 16
Net rental income 6 Interest cover 17
Top ten tenants 7 Loan to value 18
Cost ratio 8 Gearing 19
Valuation analysis 9 Unencumbered asset ratio 20
Net initial yield 10 Key properties 21
Capital expenditure 11
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 awarded a Gold Award for compliance with the
EPRA BPR in the EPRA Annual Report Survey 2022. 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 Six months ended Six months ended
30 June 2022
30 June 2023
Earnings † 9A £52.9m £47.0m
Earnings per share (EPS) † * 10B 1.1p 1.0p
Cost ratio (including vacancy costs) † Table 8 36.6% 38.5%
30 June 2023 31 December 2022
Net Disposal Value (NDV) per share 10C 55p 56p
Net Tangible Assets value (NTA) per share 10C 52p 53p
Net Reinstatement Value (NRV) per share 10C 61p 61p
Net Initial Yield (NIY) Table 10 5.8% 5.8%
Topped-up Net Initial Yield Table 10 6.1% 6.0%
Vacancy rate Table 4 5.5% 4.8%
Loan to value Table 18 45.8% 50.5%
† Figures for the six months ended 30 June 2022 have been
restated to reflect the IFRIC Decision on Concessions with further information
provided in notes 1B and 5 to the interim financial statements.
* 2022 restated to reflect the bonus element of scrip dividends.
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. See Table 21 for the key properties in this segment.
Rental data
Table 2
Six months ended 30 June 2023 30 June 2023
Proportionally consolidated Gross rental Adjusted net rental Average Rents Estimated rental value of vacant space Estimated Reversion/
income
income
rents
passing ( )
£m
rental value
(over-rented)
£m
£m
passing
£m
£m
%
£/m(2)
a b c c d
UK 43.5 33.9 400 84.5 3.5 77.9 (12.9)
France 32.4 26.9 430 52.2 3.2 56.8 2.3
Ireland 20.0 18.3 480 38.5 1.1 38.6 (2.4)
Flagship destinations 95.9 79.1 430 175.2 7.8 173.3 (5.6)
Developments and other 10.4 6.0 190 9.3 1.4 9.7 (11.5)
Managed portfolio 106.3 85.1 400 184.5 9.2 183.0 (5.9)
Six months ended 30 June 2022 31 December 2022
UK † 45.9 36.5 420 84.0 2.3 77.6 (11.3)
France † 29.7 25.0 430 65.9 3.2 71.3 3.1
Ireland † 18.8 16.2 500 38.8 0.8 39.5 (0.3)
Flagship destinations † 94.4 77.7 440 188.7 6.3 188.4 (3.6)
Developments and other 13.0 6.1 170 21.6 2.9 20.8 (17.7)
Managed portfolio † 107.4 83.8 380 210.3 9.2 209.2 (5.0)
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5 to the interim financial statements.
a Average rents passing at the period end before deducting head
rents and excluding rents passing from anchor units, car parks and
commercialisation.
b Rents passing are the annual rental income receivable at the
period end from an investment property, after any rent-free periods and after
deducting head rents and car parking and commercialisation running costs
totalling £14.0m.
c The estimated rental value (ERV) at the period end calculated by
the Group's valuers. ERVs in the above table are included within the
unobservable inputs to the portfolio valuations as defined by IFRS 13.
d The total of rents passing and ERV of vacant space compared to
ERV.
Gross rental income
Table 3
Proportionally consolidated Six months ended Six months ended 30 June 2022
£m
30 June 2023
£m
Base rent 78.8 76.6
Turnover rent 6.2 7.1
Car park income 12.9 13.0
Commercialisation income 4.8 4.6
Surrender premiums 0.1 0.7
Lease incentive recognition † 1.5 4.7
Other rental income 2.0 0.7
Gross rental income † 106.3 107.4
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5 to the interim financial statements.
Vacancy
Table 4
30 June 2023 31 December 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
%
%
* *
UK 3.4 64.9 5.3 2.3 64.2 3.6
France 3.2 58.5 5.5 3.2 72.5 4.4
Ireland 1.1 34.8 3.1 0.8 35.7 2.3
Flagship destinations 7.7 158.2 4.9 6.3 172.4 3.7
Developments and other 1.5 9.0 16.5 2.9 17.9 16.0
Managed portfolio 9.2 167.2 5.5 9.2 190.3 4.8
* Total ERV differs from Table 2 due to the exclusion of car park ERV
and head rents payable which distort the vacancy metric.
Lease expiries and breaks at 30 June 2023
Table 5
Rental income based on ERV of leases that expire/break in Weighted average unexpired
lease term
passing rents that expire/break in
Proportionally consolidated Holding over 2023 2024 2025 Total Holding over 2023 2024 2025 Total to break years to expiry years
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
UK 4.2 6.1 13.8 8.6 32.7 4.6 5.5 11.1 7.1 28.3 5.8 7.7
France 2.5 1.8 8.5 1.4 14.2 2.8 1.8 7.6 2.0 14.2 2.0 4.9
Ireland 0.6 2.0 4.7 1.6 8.9 1.0 2.5 4.2 1.5 9.2 5.5 7.1
Flagship destinations 7.3 9.9 27.0 11.6 55.8 8.4 9.8 22.9 10.6 51.7 4.5 6.6
Developments and other 1.6 0.4 0.8 2.2 5.0 1.3 0.4 0.7 1.4 3.8 6.2 7.5
Managed portfolio 8.9 10.3 27.8 13.8 60.8 9.7 10.2 23.6 12.0 55.5 4.5 6.7
Net rental income
Table 6
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
periods and at constant exchange rates. Properties undergoing a significant
extension project are excluded from this calculation until the works have been
completed for both the current and prior periods.
Six months ended 30 June 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 34.2 1.1 - (0.3) 33.9 0.1 34.0
France 13.6 (2.5) 3.3 10.0 26.9 - 26.9
Ireland 18.3 8.6 - - 18.3 - 18.3
Flagship destinations 66.1 2.3 3.3 9.7 79.1 0.1 79.2
Developments and other - n/a (0.1) 6.1 6.0 0.1 6.1
Managed portfolio * 66.1 2.3 3.2 15.8 85.1 0.2 85.3
Six months ended 30 June 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 † 33.8 - 2.6 0.1 36.5 1.1 37.6
France † 13.9 (0.9) 5.2 6.8 25.0 - 25.0
Ireland † 16.9 (0.7) - - 16.2 0.1 16.3
Flagship destinations † 64.6 (1.6) 7.8 6.9 77.7 1.2 78.9
Developments and other - (0.1) (0.1) 6.3 6.1 0.4 6.5
Managed portfolio † * 64.6 (1.7) 7.7 13.2 83.8 1.6 85.4
† Figures for the six months ended 30 June 2022 have been restated
to reflect the IFRIC Decision on Concessions with further information provided
in notes 1B and 5 to the interim financial statements.
* Managed portfolio value on which like-for-like growth is based was
£2,019m.
Top ten tenants at 30 June 2023 (ranked by passing rent)
Table 7
Proportionally consolidated Passing rent % of total
£m
passing rent
Inditex 7.6 4.1
H&M 3.7 2.0
Next 2.9 1.6
JD Sports 2.7 1.5
River Island 2.6 1.4
Boots 2.3 1.2
CK Hutchison Holdings 2.3 1.2
Superdry 2.0 1.1
Printemps 1.9 1.1
Marks & Spencer 1.9 1.0
29.9 16.2
Cost ratio
Table 8
Proportionally consolidated Six months ended Six months ended
30 June 2023 30 June 2022
£m
£m
Gross administration costs * 28.9 30.5
Property fee income (4.8) (6.4)
Management fee receivable (3.4) (2.9)
Property outgoings † 20.4 22.9
Less inclusive lease costs recovered through rent (3.9) (4.9)
Total operating costs A 37.2 39.2
Less vacancy costs (4.3) (5.8)
Total operating costs excluding vacancy costs B 32.9 33.4
Gross rental income † 106.3 107.4
Ground rents payable (0.8) (0.7)
Less inclusive lease costs recovered through rent (3.9) (4.9)
Gross rental income † C 101.6 101.8
Cost ratio including vacancy costs † A/C 36.6% 38.5%
Cost ratio excluding vacancy costs † B/C 32.4% 32.8%
† Figures for the six months ended 30 June 2022 have been restated to
reflect the IFRIC Decision on Concessions with further information provided in
notes 1B and 5 to the interim financial statements.
* Includes £3.2m (2022: £1.4m) of business transformation costs
which are excluded from adjusted earnings as set out in note 9A to the interim
financial statements. Excluding these costs, the 30 June 2023 EPRA cost ratio
including vacancy costs would reduce from 36.6% to 33.5%.
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 £nil (2022: £0.8m) were capitalised as
development costs and are not included within 'Gross administration costs'.
Valuation analysis
Table 9
30 June 2023
Proportionally consolidated - including Value Retail Properties Revaluation (losses)/gains Income Capital Total Initial True Nominal
at valuation
in the year
return
return
return
yield
equivalent
equivalent
yield
yield
£m £m % % % %
% %
a a b
UK 865.7 (10.4) 4.0 (1.2) 2.8 7.7 8.4 8.0
France 999.4 1.5 2.4 (2.6) (0.3) 4.4 5.1 5.0
Ireland 638.4 (19.2) 2.8 (2.9) (0.1) 5.5 5.9 5.6
Flagship destinations 2,503.5 (28.1) 3.0 (2.2) 0.8 5.8 6.4 6.2
Developments and other 301.0 (15.7) 1.7 3.4 5.1 6.3 10.2 9.6
Managed portfolio 2,804.5 (43.8) 2.8 (1.4) 1.4 5.8 6.5 6.3
Value Retail 1,889.8 26.0 2.9 1.4 4.3
Group portfolio 4,694.3 (17.8) 2.8 (0.3) 2.5
31 December 2022
UK 871.0 (90.2) 7.9 (9.4) (2.1) 7.7 8.4 8.0
France c 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 Capital and total return include the losses on disposals and
impairment charges on derecognised assets (Highcross and O'Parinor).
b 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 5.6% (31 December 2022: 5.7%).
c Includes Italik, 75% of which was classified as a trading property.
The Group's 100% interest was sold in March 2023.
Net Initial Yield
Table 10
Investment portfolio
Proportionally consolidated Note/Table 30 June 2023 31 December 2022
£m
£m
Reported Group a 3B 1,406.4 1,461.0
Share of Property interests 3B 1,398.1 1,722.9
Trading properties 3B - 36.2
Net investment portfolio valuation on a proportionally consolidated basis 3B 2,804.5 3,220.1
Less: Developments b (202.8) (249.0)
Completed investment portfolio 2,601.7 2,971.1
Purchasers' costs c 173.5 197.2
Grossed up completed investment portfolio A 2,775.2 3,168.3
Annualised cash passing rental income 180.5 207.1
Non recoverable costs (14.4) (21.1)
Rents payable (3.9) (3.8)
Annualised net rent B 162.2 182.2
Add:
Notional rent expiration of rent-free periods and other lease incentives d 5.1 3.2
Future rent on signed leases 2.8 3.8
Topped-up annualised net rent C 170.1 189.2
Add back: Non recoverable costs 14.4 21.1
Passing rents Table 2 184.5 210.3
Net initial yield B/A 5.8% 5.8%
'Topped-up' net initial yield C/A 6.1% 6.0%
a 31 December 2022 figure included 100% of Italik, 75% of which was
classified as a trading property. 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% (31 December 2022: 6.7%) of the value
of the completed investment portfolio.
d Weighted average remaining rent-free period is 0.6 years (31 December
2022: 0.7 years).
Capital expenditure
Table 11
Six months ended 30 June 2023 Six months ended 30 June 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 1 2 3 10 2 12
Capital expenditure - creating area 1 2 3 15 - 15
Capital expenditure - no additional area 3 7 10 1 10 11
Tenant incentives † 2 - 2 13 - 13
Total † 3B 7 11 18 39 12 51
Conversion from accruals to cash basis (1) (1) (2) (23) - (23)
Total on cash basis 6 10 16 16 12 28
† Figures for the six months ended 30 June 2022 have been restated
to reflect the IFRIC Decision on Concessions with further information provided
in notes 1B and 5 to the interim financial statements.
BALANCE SHEET INFORMATION
Note 2 to the interim 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 interim financial statements, the Group's interest in Value
Retail is not proportionally consolidated as it is not under the Group's
management.
Balance sheet
Table 12
30 June 2023 31 December 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 1,406.4 1,398.1 2,804.5 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 7.3 - 7.3 9.5 - 9.5
Plant and equipment 1.3 - 1.3 1.4 - 1.4
Investment in joint ventures 1,198.2 (1,198.2) - 1,342.4 (1,342.4) -
Investment in associates 1,172.0 - 1,172.0 1,297.1 (107.7) 1,189.4
Other investments 9.8 - 9.8 9.8 - 9.8
Trade and other receivables 3.2 3.5 6.7 3.2 5.0 8.2
Derivative financial instruments - 2.9 2.9 7.0 6.3 13.3
Restricted monetary assets 21.4 - 21.4 21.4 - 21.4
3,852.3 221.7 4,074.0 4,186.8 299.5 4,486.3
Current assets
Trading properties - - - 36.2 - 36.2
Trade and other receivables 68.8 20.6 89.4 85.9 43.4 129.3
Derivative financial instruments 16.8 - 16.8 0.1 - 0.1
Restricted monetary assets 12.7 - 12.7 8.6 21.0 29.6
Cash and cash equivalents 479.6 83.7 563.3 218.8 117.7 336.5
577.9 104.3 682.2 349.6 182.1 531.7
Total assets 4,430.2 326.0 4,756.2 4,536.4 481.6 5,018.0
Current liabilities
Trade and other payables (132.8) (48.3) (181.1) (168.3) (66.8) (235.1)
Obligations under head leases (0.2) - (0.2) (0.2) - (0.2)
Loans (108.5) - (108.5) - (126.1) (126.1)
Tax (0.4) - (0.4) (0.5) (0.3) (0.8)
Derivative financial instruments (3.9) - (3.9) (16.1) - (16.1)
(245.8) (48.3) (294.1) (185.1) (193.2) (378.3)
Non-current liabilities
Trade and other payables (46.4) (4.6) (51.0) (56.3) (7.0) (63.3)
Obligations under head leases (36.8) (15.8) (52.6) (38.1) (15.8) (53.9)
Loans (1,513.6) (257.2) (1,770.8) (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 (18.5) - (18.5) (23.7) - (23.7)
(1,615.7) (277.7) (1,893.4) (1,764.9) (288.4) (2,053.3)
Total liabilities (1,861.5) (326.0) (2,187.5) (1,950.0) (481.6) (2,431.6)
Net assets 2,568.7 - 2,568.7 2,586.4 - 2,586.4
EPRA adjustments 9B 53.9 47.3
EPRA NTA 10C 2,622.6 2,633.7
EPRA NTA per share 10C 52p 53p
Net debt
Table 13
30 June 2023 31 December 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 ( ) ( ) 479.6 83.7 563.3 218.8 117.7 336.5
Loans (1,622.1) (257.2) (1,879.3) (1,646.4) (391.6) (2,038.0)
Fair value of currency swaps (1.6) - (1.6) (30.6) - (30.6)
Net debt (1,144.1) (173.5) (1,317.6) (1,458.2) (273.9) (1,732.1)
Movement in net debt
Table 14
Proportionally consolidated Six months ended Year ended
30 June 2023 31 December 2022
£m
£m
Opening net debt (1,732.1) (1,798.8)
Profit from operating activities 64.6 129.3
Decrease in receivables and restricted monetary assets 2.1 27.5
(Decrease)/Increase in payables (8.6) 8.2
Adjustment for non-cash items 1.7 0.7
Cash generated from operations 59.8 165.7
Interest received 13.1 16.8
Interest paid (51.4) (73.5)
Debt and loan facility issuance and extension fees (0.6) (2.8)
Premiums on hedging activities - (3.9)
Tax (paid)/repaid (0.4) 0.1
Operating distributions received from Value Retail 42.7 -
Cash flows from operating activities 63.2 102.4
Capital expenditure (16.0) (76.3)
Sale of properties 215.3 191.9
Derecognition of joint venture secured debt 125.0 -
Cash held within sold or derecognised entities (24.0) -
Cash flows from investing activities 300.3 115.6
Share issue expenses - (0.5)
Purchase of own shares - (6.7)
Proceeds from awards of own shares 0.1 0.1
Equity dividends paid - (13.2)
Cash flows from financing activities 0.1 (20.3)
Exchange translation movement 50.9 (131.0)
Closing net debt (1,317.6) (1,732.1)
Total accounting return
Table 15
30 June 2023 31 December 2022
NTA NTA per share NTA NTA per share
£m pence £m pence
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 period end 2,622.6 52.4 2,633.7 52.7
Movement in NTA (11.1) (0.3) (206.4) (4.1)
Cash dividends in the year - - 13.2 0.3
B (11.1) (0.3) (193.2) (3.8)
Total accounting return B/A -0.4% -6.8%
FINANCING METRICS
Net debt : EBITDA
Table 16
Proportionally consolidated Note / Table 30 June 2023 December 2022
£m
£m
Adjusted operating profit 162.7 159.4
Amortisation of tenant incentives and other items within net rental income 0.1 (0.1)
Share-based remuneration 3.5 3.0
Depreciation 4.2 4.1
EBITDA - rolling 12 month basis A 170.5 166.4
Net debt B Table 13 1,317.6 1,732.1
Net debt : EBITDA B/A 7.7x 10.4x
Interest cover
Table 17
Proportionally consolidated Note Six months ended Year ended
30 June 2023 31 December 2022
£m
£m
Adjusted net rental income 2 85.1 174.8
Less net rental income in associates: Italie Deux 13B (1.2) (4.4)
A 83.9 170.4
Adjusted net finance costs 2 25.1 54.0
Less interest on lease obligations and pensions (1.7) (2.6)
Add back capitalised interest 6 - 1.2
B 23.4 52.6
Interest cover A/B 3.59x 3.24x
Loan to value
Table 18
Proportionally consolidated Note / Table 30 June 2023 31 December 2022
£m
£m
Net debt - 'Loan' A Table 13 1,317.6 1,732.1
Managed property portfolio B 3B 2,804.5 3,220.1
Investment in Value Retail 13D 1,172.0 1,189.4
'Value' C 3,976.5 4,409.5
Loan to value - Headline A/C 33.1% 39.3%
Net debt - Value Retail D 697.8 674.9
Property portfolio - Value Retail E 3B 1,889.8 1,887.0
Loan to value - Full proportional consolidation of Value Retail (A+D)/(B+E) 42.9% 47.1%
117.7 160.3
Net payables - Managed Portfolio
Net payables - Value Retail 18.8 14.2
Net payables - Group F 136.5 174.5
Loan to value - EPRA (A+D+F)/(B+E) 45.8% 50.5%
Gearing
Table 19
Proportionally consolidated Note / Table 30 June 2023 31 December 2022
£m
£m
Net debt Table 13 1,317.6 1,732.1
Add:
- Unamortised borrowing costs -- 14.0 15.9
- Cash held within investments in associates: Italie Deux - 6.8
Net debt for gearing A 1,331.6 1,754.8
Equity shareholders' funds - Consolidated net tangible worth B 2,568.7 2,586.4
Gearing A/B 51.8% 67.8%
Unencumbered asset ratio
Table 20
Proportionally consolidated Note / Table 30 June 2023 31 December 2022
£m
£m
Managed property portfolio 3B 2,804.5 3,220.1
Adjustments:
- Properties held in associates: Italie Deux - (102.9)
- Encumbered assets * (494.2) (651.0)
Total unencumbered assets A 2,310.3 2,466.2
Net debt - proportionally consolidated Table 13 1,317.6 1,732.1
Adjustments:
- Cash held within investments in associates: Italie Deux - 6.8
- Cash held within investments in encumbered joint ventures * 43.0 50.8
- Unamortised borrowing costs - Group 14.0 15.9
- Encumbered debt * (257.5) (392.3)
Total unsecured debt B 1,117.1 1,413.3
Unencumbered asset ratio A/B 2.07x 1.74x
* At 30 June 2023 encumbered assets, cash 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 the first half of 2023.
KEY PROPERTIES
Table 21
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% 86,700 106 11.8
Bullring Birmingham Joint venture a 50% 113,600 146 22.5
Cabot Circus Bristol Joint venture b 50% 110,300 102 11.3
The Oracle Reading Joint venture 50% 72,100 97 10.2
Union Square Aberdeen 100% 51,600 70 15.7
Westquay Southampton Joint venture 50% 94,500 109 13.0
France
Les 3 Fontaines Cergy c 100% 73,700 202 22.1
Les Terrasses du Port Marseille 100% 62,800 171 29.3
Ireland
Dundrum Town Centre Dublin Joint venture 50% 125,600 150 27.1
Ilac Centre Dublin Joint operation 50% 27,900 65 3.9
Pavilions Swords Joint operation 50% 44,100 92 7.2
Developments and other (key properties)
Bristol Broadmead Bristol Joint venture b 50% 34,800 60 3.1
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 54 3.7
Eastgate Leeds 100% n/a n/a n/a
Martineau Galleries Birmingham a 100% 35,200 44 2.4
Pavilions land Swords 100% n/a n/a n/a
The Goodsyard London Joint venture 50% n/a n/a n/a
Associate d
Value Retail
Bicester Village Bicester 50% 28,000 159 73.4
La Roca Village Barcelona 41% 25,900 146 22.1
Las Rozas Village Madrid 38% 15,600 99 13.7
La Vallée Village Paris 26% 21,600 108 25.1
Maasmechelen Village Brussels 27% 20,000 104 6.0
Fidenza Village Milan 34% 21,100 114 6.9
Wertheim Village Frankfurt 45% 20,900 116 10.4
Ingolstadt Village Munich 15% 21,000 110 3.7
Kildare Village Dublin 41% 21,600 112 11.1
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
Hammerson's ownership interests only.
d Passing rent for Value Retail represents annualised base and turnover
rent at Hammerson's ownership share.
Glossary
Adjusted earnings Reported amounts excluding certain items in accordance with EPRA guidelines
and also certain exceptional items which the Directors believe are not
reflective of the Group's normal day-to-day operating activities.
Average cost of debt or weighted average interest rate (WAIR) The cost of finance expressed as a percentage of the weighted average debt
during the period.
Borrowings The aggregate of loans and fair value of currency swaps but excluding the fair
value of the interest rate swaps, as this latter item crystallises over the
life of the instruments rather than at maturity.
Capital return The change in property value during the period after taking account of capital
expenditure, acquisitions and disposals and calculated on a monthly
time-weighted and constant currency basis.
Commercialisation Promotional activity to generate income and engage with communities including
advertising, events, kiosks, and pop-ups
Company Voluntary Arrangement (CVA) A legally binding agreement with creditors to restructure liabilities,
including future lease liabilities.
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
(after deducting head rents, and car parking and commercialisation
running costs) calculated by the Group's external valuers.
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 borrowings.
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, acquisitions and disposals.
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 divided by adjusted net finance costs before
capitalised interest and interest charges on lease obligations and pensions,
both excluding associates.
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 leasing 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.
MSCI Property market benchmark indices produced by Morgan Stanley Capital
International.
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
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 rents passing,
together with the ERV of vacant space.
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.
This may be more or less than the ERV (see over-rented and reversionary or
under-rented).
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.
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.
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.
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.
Reported Group The financial results as presented under IFRS.
Reversionary or under-rented The amount, or percentage, by which the ERV exceeds the rents passing,
together with the estimated rental value of vacant space.
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.
Temporary lease A lease with a period of one year or less, measured to the earlier of lease
expiry or tenant break.
Total development cost All capital expenditure on a development or other major project, including
capitalised interest.
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 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.
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.
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